N-CSR 1 d27922.htm N-CSR





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM N-CSR


CERTIFIED SHAREHOLDER REPORT

OF

REGISTERED MANAGEMENT INVESTMENT COMPANIES


Investment Company Act file number: 811-03599


Name of Registrant: The Royce Fund


Address of Registrant: 745 Fifth Avenue

New York, NY 10151


Name and address of agent for service:

John E. Denneen, Esquire
745 Fifth Avenue
New York, NY 10151


Registrant's telephone number, including area code: (212) 508-4500

Date of fiscal year end: December 31

Date of reporting period: January 1, 2010 - December 31, 2010



Item 1.  Reports to Shareholders.






             
             
             
             
       
             
             
  CORE

Royce Pennsylvania Mutual Fund

Royce Heritage Fund


CORE + DIVIDENDS

Royce Total Return Fund

Royce Dividend Value Fund		    

ANNUAL

    
     

REVIEW AND REPORT
     

TO SHAREHOLDERS

    
             
             
  FOCUSED          
             
  Royce Premier Fund          
             
  Royce Special Equity Fund          
             
  Royce Value Fund          
             
  Royce 100 Fund          
             
  Royce Focus Value Fund          
             
  Royce Partners Fund          
             
             
  OPPORTUNISTIC THEMES          
             
  Royce Low-Priced Stock Fund          
             
  Royce Opportunity Fund          
             
  Royce Value Plus Fund          
             
             
  MICRO-CAP          
             
  Royce Micro-Cap Fund          
             
  Royce Discovery Fund          
             
             
  MID-CAP          
             
  Royce SMid-Cap Value Fund          
             
  Royce Mid-Cap Fund          
             
     
  GLOBAL/INTERNATIONAL          
             
  Royce European          
  Smaller-Companies Fund          
             
  Royce Global Value Fund

Royce International
Smaller-Companies Fund		    
             
             
  Royce Financial Services Fund          
             
             
           
             
             
  www.roycefunds.com          
             
             


Online Update

Check out www.roycefunds.com for daily, monthly and quarterly performance information, special messages and commentary from Chuck Royce, Whitney George and other portfolio managers, news, literature and tools to help you better understand and compare our Funds.

 

eDelivery Saves! Sign Up Now.
eDelivery saves paper, time and fund expenses.* Sign up now to view statements, prospectuses, financial reports and tax forms online.
›  www.roycefunds.com/edelivery
* Any direct Royce Funds IRA investor who chooses eDelivery of prospectuses, financial reports, and RWord will be exempt from the $15 annual IRA maintenance fee. (We will continue to also waive the fee for investors with more than $20,000 invested in Royce IRAs at the time the fee is charged, and for new transfer and rollover accounts in their first year.)

 


Stay Informed
Follow The Royce Funds on Twitter, subscribe to our RSS feed and sign up for our monthly eWord newsletter to receive updates on news, commentary and other resources.

  www.roycefunds.com/twitter
  www.roycefunds.com/rss
  ›  www.roycefunds.com/eword

 

 Financial Professionals: View Our
Financial Professional Website
  Login to our Financial Professional website to access a convenient Resource Center featuring up-to-date research, insights and whitepapers including:


The Case for Active Management
Beating the market doesn’t come easy, but some managers find a way over the long term. How did Royce do?

The Case for Small-Cap (Value) Investing
The expanding universe of small companies makes this universe an evergreen source of investment opportunities.

> Visit www.roycefunds.com and click
Financial Professional Login for access

  This page is not part of the 2010 Annual Report to Shareholders

Table of Contents

Annual Review    

Fund Guide

  2
 
Performance and Expenses   4
 

Portfolio Characteristics

  5
 

Small-Cap Market Cycle Performance

   6
 

Letter to Our Shareholders

   7
 

Fund Focus: Valuable Heritage

  14
 

Postscript: Style Points

  15
 

Making Headlines

  16
 

2010: The Year in Quotes

  Inside Back Cover
 
Annual Report to Shareholders   17
 

This page is not part of the 2010 Annual Report to Shareholders   |  1

Fund Guide


Understanding How We Think About Our Portfolios
We are often asked, “If small companies are your primary area of focus, why are there so many Royce Funds?” To answer this question, we first point to the distinctive nature of the small-company universe. Small-cap is significantly larger than large-cap both in terms of names–with more than ten times the number of companies–and potential opportunities.

The universe has evolved over the last 15 years into a recognized, professional asset class with a high level of institutional acceptance. Today, there are many small-cap and micro-cap indexes, as well as style indexes and sector groupings. This is why we believe the size and diversity of the universe make it ideally suited for multiple offerings.
  companies, low-priced companies, high quality companies, etc., that go beyond classification by market cap. So while our portfolio managers share a common investment approach—one that emphasizes paying attention to risk and buying what each thinks are strong companies at attractively discounted prices—our portfolios also possess important distinctions that make each one unique.
 
Small-cap and micro-cap securities also require their own particular approach. In addition, within each universe there are significant pockets of opportunity, such as dividend-paying

  Our Fund Guide is designed to help investors better understand both the different approaches and the common ground among our portfolios.

Each Fund Category provides insight into how the respective portfolios are managed, while a closer look at our materials allows investors to see other important differences—capitalization range, volatility, other investment themes, portfolio diversification—within each category. We think that understanding these differences can be helpful in asset allocation decisions, especially when investors incorporate more than one Royce offering within their portfolios.
 

   

 

 

 
 

 

 

 

Investment Universe

 

 

Our universe consists of three markets: micro-cap, small-cap and mid-cap companies. The Funds may also invest in foreign securities to varying degrees.

 

 

 

U.S. Micro-Cap Market Caps up to $500 million

 

U.S. Mid-Cap Market Caps between $2.5 billion and $15 billion

• More than 3,100 companies

 

• More than 600 companies

• More than $300 billion in total capitalization

 

• More than $4.0 trillion in total capitalization

 

 

 

This area offers many choices, but also features limited trading volumes and higher volatility.

  

Mid-cap companies generally possess more established businesses that attract greater institutional interest and thus enjoy greater liquidity.

    


U.S. Small-Cap Market Caps between $500 million and $2.5 billion

 

Foreign Securities

• More than 1,100 companies

 

This market consists of more than 15,700 companies in developed countries, of which more than 4,300 are domiciled in Europe.

• More than $1.3 trillion in total capitalization

 


This segment is more efficient, offering greater trading volumes and narrower bid/ask spreads.

 

 

 

 

 

 

 

(Source: FactSet)
     

   2  |  This page is not part of the 2010 Annual Report to Shareholders


 
 

Multiple offerings tailored to specific investor needs.

 

CORE

Royce Pennsylvania Mutual Fund
 

Royce Heritage Fund
 

Generally invest across a wide spectrum of small companies using a diversified approach. We select stocks in these Funds using our core investment approach, which is based on attractive valuation, balance sheet quality and returns on invested capital. We developed this approach during the 1970s and ’80s in our flagship, Royce Pennsylvania Mutual Fund. These Funds may also incorporate ideas used in other portfolios, such as low-priced stocks, dividend-paying stocks, above-average growth companies and international securities.

 

CORE + DIVIDENDS

Royce Total Return Fund
 

Royce Dividend Value Fund
 

Generally invest in a diversified portfolio of dividend-paying smaller companies using our core investment approach. We believe that an investment strategy that seeks both long-term growth and current income has the potential to generate above-average absolute returns over full market cycles with less volatility. These Funds may also invest a portion of the portfolio in preferred stocks and in fixed income securities, such as convertible bonds.

 

FOCUSED

Royce Premier Fund
 

Royce Special Equity Fund
 

Royce Value Fund
 

Royce 100 Fund
 

Royce Focus Value Fund
 

Royce Partners Fund
 
 

Generally employ a more limited portfolio approach—typically holding no more than 100 positions—and whose holdings possess what we believe are attractive valuations and higher-quality characteristics. These include strong balance sheets, above-average returns on invested capital and the ability to generate free cash flow.

 

OPPORTUNISTIC THEMES

Royce Low-Priced Stock Fund
 

Royce Opportunity Fund
 

Royce Value Plus Fund
 

Generally invest in companies considered more opportunistic, with each emphasizing different themes, such as turnarounds, special situations, low-priced stocks and/or companies with high growth prospects. These portfolios are highly diversified and have the potential for higher returns, commensurate with each Fund’s higher level of risk.

 

MICRO-CAP

Royce Micro-Cap Fund
 

Royce Discovery Fund
 

Generally invest in micro-caps, those companies with market capitalizations up to $500 million, using our core investment approach. Due to the sector’s size and limited research coverage, there is more opportunity to find pricing inefficiencies. Therefore, we believe that the potential for higher returns, commensurate with a higher level of risk, is greater than for any other capitalization sector of the domestic equity marketplace.

 

MID-CAP

Royce SMid-Cap Value Fund
 

Royce Mid-Cap Fund
 

Generally invest in mid-caps, those companies with market capitalizations from $2.5 billion to $15 billion, or smid-caps, those companies with market capitalizations from $500 million to $10 billion. While not restricted by number of holdings, we typically employ a more concentrated approach when investing in these companies, holding proportionately larger positions in a relatively limited number of stocks.


 

GLOBAL/INTERNATIONAL

Royce European Smaller-Companies Fund
 

Royce Global Value Fund
 

Royce International Smaller-Companies Fund
 

Generally invest in non-U.S. based companies with what we think are attractive valuations. We use the same core investment approach, which focuses on balance sheet quality and returns on invested capital, when investing in international businesses. We have found that quality is an international concept that recognizes no borders. is universe is enormous, dwarfing the domestic smaller companies market.

 

 

>  

Go Online For More Tools To Help
You Better Understand Our Funds.

•

Online Fund Guide www.roycefunds.com/guide

 

•

Compare Funds www.roycefunds.com/compare

 

•

Prices & Performance www.roycefunds.com/prices


 
 

The Royce Funds invest primarily in micro-cap, small-cap and/or mid-cap stocks, which may involve considerably more risk than investing in larger-cap stocks. (Please see “Primary Risks for Fund Investors” in the prospectus.) Each Fund may invest a portion of its net assets in foreign securities, which may involve political, economic, currency, and other risks not encountered in U.S. investments. (Please see “Investing in International Securities” in the prospectus.) Distributor: Royce Fund Services, Inc.

This page is not part of the 2010 Annual Report to Shareholders  |  3


 

 

Performance and Expenses

Through December 31, 2010
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Annual Total Returns

 

Gross Annual

 

Net Annual

 

 

 

  

 

 

 

 

 

CATEGORY
Fund

 

1-Year

 

5-Year

 

10-Year

 

Since Inception

 

Since Inception Date

 

Operating
Expenses

 

Operating
Expenses

 
 

CORE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royce Pennsylvania Mutual Fund

 

 

23.86

%

 

5.36

%

 

10.23

%

 

n.a.

 

 

n.a.

 

 

0.92

%

 

0.92

%
 

Royce Heritage Fund

 

 

27.50

 

 

8.91

 

 

10.46

 

 

14.97

%

 

12/27/95

 

 

1.51

 

 

1.51

 
 

CORE + DIVIDENDS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royce Total Return Fund

 

 

23.47

 

 

4.70

 

 

8.91

 

 

11.27

 

 

12/15/93

 

 

1.19

 

 

1.19

 
 

Royce Dividend Value Fund

 

 

30.11

 

 

8.03

 

 

n.a.

 

 

9.08

 

 

5/3/04

 

 

2.09

 

 

1.54

 
 

FOCUSED

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royce Premier Fund

 

 

26.46

 

 

8.19

 

 

11.57

 

 

12.75

 

 

12/31/91

 

 

1.15

 

 

1.15

 
 

Royce Special Equity Fund

 

 

19.61

 

 

8.07

 

 

12.33

 

 

9.43

 

 

5/1/98

 

 

1.17

 

 

1.17

 
 

Royce Value Fund

 

 

24.97

 

 

7.59

 

 

n.a.

 

 

12.63

 

 

6/14/01

 

 

1.47

 

 

1.47

 
 

Royce 100 Fund

 

 

24.77

 

 

8.29

 

 

n.a.

 

 

12.43

 

 

6/30/03

 

 

1.54

 

 

1.49

 
 

Royce Focus Value Fund

 

 

15.16

 

 

n.a.

 

 

n.a.

 

 

36.15

 

 

2/27/09

 

 

2.98

 

 

1.50

 
 

Royce Partners Fund

 

 

18.74

 

 

n.a.

 

 

n.a.

 

 

20.76

 

 

4/27/09

 

 

5.29

 

 

1.51

 
 

OPPORTUNISTIC THEMES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royce Low-Priced Stock Fund

 

 

31.49

 

 

9.50

 

 

11.45

 

 

13.79

 

 

12/15/93

 

 

1.62

 

 

1.51

 
 

Royce Opportunity Fund

 

 

33.78

 

 

6.50

 

 

11.00

 

 

13.54

 

 

11/19/96

 

 

1.22

 

 

1.22

 
 

Royce Value Plus Fund

 

 

19.70

 

 

4.21

 

 

n.a.

 

 

13.40

 

 

6/14/01

 

 

1.47

 

 

1.47

 
 

MICRO-CAP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royce Micro-Cap Fund

 

 

30.06

 

 

9.39

 

 

12.64

 

 

13.97

 

 

12/31/91

 

 

1.60

 

 

1.60

 
 

Royce Discovery Fund

 

 

19.63

 

 

1.12

 

 

n.a.

 

 

5.46

 

 

10/3/03

 

 

3.56

 

 

1.49

 
 

MID-CAP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royce SMid-Cap Value Fund

 

 

25.99

 

 

n.a.

 

 

n.a.

 

 

4.36

 

 

9/28/07

 

 

2.04

 

 

1.50

 
 

Royce Mid-Cap Fund

 

 

18.60

 

 

n.a.

 

 

n.a.

 

 

18.60

 

 

12/31/09

 

 

1.75

 

 

1.49

 
 

GLOBAL/INTERNATIONAL

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royce European Smaller-Companies Fund

 

 

35.20

 

 

n.a.

 

 

n.a.

 

 

3.77

 

 

12/29/06

 

 

3.28

 

 

1.76

 
 

Royce Global Value Fund

 

 

35.69

 

 

n.a.

 

 

n.a.

 

 

10.80

 

 

12/29/06

 

 

2.07

 

 

1.88

 
                                             

Royce International Smaller-Companies Fund

 

 

26.45

 

 

n.a.

 

 

n.a.

 

 

12.01

 

 

6/30/08

 

 

3.12

 

 

1.80

 
                                             

Royce Financial Services Fund

 

 

18.45

 

 

3.76

 

 

n.a.

 

 

6.49

 

 

12/31/03

 

 

2.14

 

 

1.57

 
                                             

Russell 2000

 

 

26.86

 

 

4.47

 

 

6.33

 

 

n.a.

 

 

n.a.

 

 

n.a.

 

 

n.a.

 
                                             

MSCI World Small Core

 

 

26.13

 

 

4.53

 

 

9.14

 

 

n.a.

 

 

n.a.

 

 

n.a.

 

 

n.a.

 
                                             

Royce Pennsylvania Mutual Fund’s average annual total return for the 35-year period ended 12/31/10 was 14.87%.

Important Performance, Expense and Risk Information
 All performance information in this Review and Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions and does not reflect the deduction of taxes a shareholder would pay on fund distributions or the redemption of fund shares. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when redeemed. Shares redeemed within 180 days of purchase may be subject to a 1% redemption fee payable to the Fund (2% in the case of Royce European Smaller-Companies, Global Value and International Smaller-Companies Funds). Redemption fees are not reflected in the performance shown above; if they were, performance would be lower. Current performance may be higher or lower than performance quoted. Current month-end performance may be obtained at www.roycefunds.com. All performance and expense information reflects results of the Fund’s oldest share Class (Investment Class or Service Class, as the case may be). Gross annual operating expenses reflect the Fund’s gross total annual operating expenses and include management fees, any 12b-1 distribution and service fees, other expenses and any applicable acquired fund fees and expenses. Net annual operating expenses reflect contractual fee waivers and/or reimbursements. All expense information is reported as of the Fund’s most current prospectus. Royce & Associates has contractually agreed to waive fees and/ or reimburse operating expenses through April 30, 2011 to the extent necessary to limit total net annual operating expenses, other than acquired fund fee and expenses, to no more than 1.49% for the Service Class of Royce Dividend Value, 100, SMid-Cap Value, Low-Priced Stock, Discovery and Financial Services Funds and to no more than 1.69% for the Service Class of Royce European Smaller-Companies, Global Value and International Smaller-Companies Funds. Royce & Associates has contractually agreed to waive fees and/or reimburse operating expenses through April 30, 2020 to the extent necessary to limit total net annual operating expenses, other than acquired fund fees and expenses, to no more than 1.99% for the Service Class of Royce Dividend Value, Discovery, European Smaller-Companies and International Smaller-Companies Funds. Royce & Associates has contractually agreed to waive fees and/or reimburse operating expenses to the extent necessary to maintain the net annual operating expenses at or below 1.49% through April 30, 2013 for Royce Mid-Cap Fund. Royce & Associates has contractually agreed to waive fees and/or reimburse operating expenses through April 30, 2012 to the extent necessary to limit total net annual operating expenses, other than acquired fund fees and expenses, to no more than 1.49% for the Service Class of Royce Focus Value and Partners Funds. Acquired fund fees and expenses reflect the estimated amount of fees and expenses incurred indirectly by the Fund through its investments in mutual funds, hedge funds, private equity funds and other investment companies. Shares of the Fund’s Service, Consultant, R and K Classes bear an annual distribution expense that is not borne by the Fund’s Investment Class. The Royce Funds invest primarily in securities of micro-cap, small-cap and/or mid-cap companies which may involve considerably more risk than investments in securities of larger-cap companies. (Please see “Primary Risks for Fund Investors” in the respective prospectus.) Please read the prospectus carefully before investing or sending money. The Russell 2000 is an unmanaged, capitalization-weighted index of domestic small-cap stocks. It measures the performance of the 2,000 smallest publicly traded U.S. companies in the Russell 3000 index. The Morgan Stanley Capital International (MSCI) World Small Core is an unmanaged index of global small-cap stocks.


  4  |  This page is not part of the 2010 Annual Report to Shareholders

 

 

Portfolio Characteristics

As of December 31, 2010
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Portfolio Composition**

 

 

 

 

 

 

 

 

              

 

 

 

 

CATEGORY
Fund

 

Micro

 

Small

 

Mid

 

Non-U.S. Securities

Portfolio
Approach

 

Volatility

 
 

CORE

 

 

 

 

 

 

 

 

 

 

 

 

Royce Pennsylvania Mutual Fund

 

 

Micro

 

 

Small

 

 

Mid

 

 

0

%

35

%

 

Diversified

 

 

Low

 
 

Royce Heritage Fund

 

 

Micro

 

 

Small

 

 

Mid

 

 

0

%

35

%

 

Diversified

 

 

High

 
 

CORE + DIVIDENDS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royce Total Return Fund

 

 

Micro

 

 

Small

 

 

Mid

 

 

0

%

35

%

 

Diversified

 

 

Low

 
 

Royce Dividend Value Fund

 

 

Micro

 

 

Small

 

 

Mid

 

 

0

%

35

%

 

Diversified

 

 

Low

 
 

FOCUSED

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royce Premier Fund

 

 

Micro

 

 

Small

 

 

Mid

 

 

0

%

35

%

 

Limited

 

 

Low

 
 

Royce Special Equity Fund

 

 

Micro

 

 

Small

 

 

Mid

 

 

0

%

35

%

 

Limited

 

 

Low

 
 

Royce Value Fund

 

 

Micro

 

 

Small

 

 

Mid

 

 

0

%

35

%

 

Limited

 

 

High

 
 

Royce 100 Fund

 

 

Micro

 

 

Small

 

 

Mid

 

 

0

%

35

%

 

Limited

 

 

Moderate

 
 

Royce Focus Value Fund*

 

 

Micro

 

 

Small

 

 

Mid

 

 

0

%

35

%

 

Limited

 

 

—

 
 

Royce Partners Fund*

 

 

Micro

 

 

Small

 

 

Mid

 

 

0

%

35

%

 

Limited

 

 

—

 
 

OPPORTUNISTIC THEMES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royce Low-Priced Stock Fund

 

 

Micro

 

 

Small

 

 

Mid

 

 

0

%

35

%

 

Diversified

 

 

High

 
 

Royce Opportunity Fund

 

 

Micro

 

 

Small

 

 

Mid

 

 

0

%

35

%

 

Diversified

 

 

High

 
 

Royce Value Plus Fund

 

 

Micro

 

 

Small

 

 

Mid

 

 

0

%

35

%

 

Diversified

 

 

High

 
 

MICRO-CAP/OPPORTUNISTIC

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royce Micro-Cap Fund

 

 

Micro

 

 

Small

 

 

Mid

 

 

0

%

35

%

 

Diversified

 

 

Moderate

 
 

Royce Discovery Fund

 

 

Micro

 

 

Small

 

 

Mid

 

 

0

%

35

%

 

Diversified

 

 

Moderate

 
 

MID-CAP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
 

Royce SMid-Cap Value Fund

 

 

Micro

 

 

Small

 

 

Mid

 

 

0

%

35

%

 

Limited

 

 

High

 
 

Royce Mid-Cap Fund*

 

 

Micro

 

 

Small

 

 

Mid

 

 

0

%

35

%

 

Limited

 

 

—

 
 

GLOBAL/INTERNATIONAL

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royce European Smaller-Companies Fund

 

 

Micro

 

 

Small

 

 

Mid

 

 

0

%

100

%

 

Limited

 

 

High

 
 

Royce Global Value Fund

 

 

Micro

 

 

Small

 

 

Mid

 

 

0

%

100

%

 

Limited

 

 

High

 
 

Royce International Smaller-Companies Fund*

 

 

Micro

 

 

Small

 

 

Mid

 

 

0

%

100

%

 

Diversified

 

 

—

 
 

Royce Financial Services Fund

 

 

Micro

 

 

Small

 

 

Mid

 

 

0

%

35

%

 

Limited

 

 

Moderate

 
 

 

 

  *

The Fund does not have three years of history required for calculating volatility score.

**

Source: FactSet

Indicates primary portfolio composition (based on Average Market Capitalization)

Indicates secondary portfolio composition (based on exposure greater than 20%)

 

Investment Universe

Micro-Cap: Market Caps up to $500 million

Small-Cap: Market Caps between $500 million and $2.5 billion

Mid-Cap: Market Caps between $2.5 billion and $15 billion

Non-U.S. Securities: Non-U.S. securities are those securities that do not trade on a U.S. exchange, trade outside the U.S. and/or are issued by companies that are domiciled outside the U.S.

 

Portfolio Approach

Diversified: A diversified portfolio at Royce is one that generally holds more than 100 securities and whose top positions generally do not exceed 2% of net assets.

Limited: A limited portfolio at Royce is one that either (i) generally invests in no more than 100 companies, and whose top positions generally exceed 2% of net assets, or (ii) invests primarily in a single sector.

 

Volatility

Each Fund’s volatility is measured using Morningstar’s Risk Ratio, which measures variations in a fund’s monthly returns, with an

 

 

Indicates little (less than 20%) or no exposure

emphasis on downside performance. Each Royce Fund’s overall Risk Ratio is a weighted combination of its three-, five- and 10-year scores, if applicable. Each Fund’s results reflect its score compared with all small-cap objective funds tracked by Morningstar with at least three years of history (365 funds as of 12/31/10). For Royce SMid-Cap Value Fund, included are all mid-cap stock funds with weighted average market-caps between $500 million and $10 billion tracked by Morningstar with at least three years of history (26 funds as of 12/31/10). For Royce European Smaller-Companies Fund, included are all European stock funds tracked by Morningstar with at least three years of history (29 funds as of 12/31/10). For Royce Global Value Fund, included are all world stock funds tracked by Morningstar with at least three years of history (22 funds as of 12/31/10). For Royce Financial Services Fund, included are all financial funds with weighted average market caps of less than $5 billion tracked by the Morningstar with at least three years of history (35 funds as of 12/31/10). We consider funds whose results rank in the top third of the category to have relatively low volatility; those in the middle third to have moderate volatility; and those in the bottom third to have high volatility.



This page is not part of the 2010 Annual Report to Shareholders  |  5

 

 

Small-Cap Market Cycle Performance

 
 

We believe strongly in the idea that a long-term investment perspective is crucial for determining the success of a particular investment approach. Flourishing in an up market is wonderful. Surviving a bear market by losing less (or not at all) is at least as good. However, the true test of a portfolio’s mettle is performance over full market cycle periods, which include both up and down market periods.


Since the Russell 2000’s inception on 12/31/78, value—as measured by the Russell 2000 Value index—outperformed growth—as measured by the Russell 2000 Growth index—in six of the small-cap index’s eight full market cycles. The most recently concluded cycle, which ran from 3/9/00 through 7/13/07, was the longest in the index’s history, and represented what we believe was a return to more historically typical performance in that value provided a significant advantage during its downturn (3/9/00–10/9/02) and for the full cycle. The current market cycle that began on 7/13/07 has so far favored small-cap growth over small-cap value.
 
Peak-to-Peak (3/9/00-7/13/07)     
For the full cycle, value provided a sizeable margin over growth, which finished the period with a loss. All of The Royce Funds then in existence held a performance advantage over the Russell 2000. Interestingly, our most conservatively managed offering, Royce Special Equity Fund (+227.4%) was our best performer, followed by our flagship, Royce Pennsylvania Mutual Fund (+207.1%). However, each Royce Fund provided a significant edge over the Russell 2000 during the full market cycle.
 
Peak-to-Current (7/13/07-12/31/10)     
Performance since the 7/13/07 small-cap peak can be divided into two distinct periods: a difficult, volatile decline followed by a meteoric rise. During the decline that ended on 3/9/09, both small-cap growth and small-cap value posted negative returns, down close to 60%, although growth provided an advantage. From the 3/9/09 trough through 12/31/10, both indexes enjoyed significant gains, up more than 130%. Small-cap value has so far provided a modest advantage.
 
Led by our more risk-averse funds, 15 of 18 Royce Funds in this Review outperformed the Russell 2000 during the decline. Somewhat surprisingly, 10 out of 20 Royce Funds outperformed the index during the dynamic rally from the 3/9/09 low through 12/31/10. Our most opportunistic funds performed best, while our most risk-averse funds trailed the index. For the full period (7/13/07-12/31/10) 14 out of 16 Royce Funds outperformed the small-cap Russell 2000.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ROYCE U.S. EQUITY FUNDS VS. RUSSELL 2000 INDEX:
MARKET CYCLE RESULTS
 

 

 

 

Peak-to-
Peak
3/9/00-
7/13/07

 

Peak-to-
Trough
7/13/07-
3/9/09

 

Trough-to-
Current
3/9/09-
12/31/10

 

Peak-to-
Current
7/13/07-
12/31/10

 

Russell 2000

 

 

54.8

%

 

-58.9

%

 

134.0

%

 

-3.8

%
 

Russell 2000 Value

 

 

189.4

 

 

-61.1

 

 

134.2

 

 

-9.0

 
 

Russell 2000 Growth

 

 

-14.8

 

 

-56.8

 

 

133.6

 

 

1.0

 
 

CORE

 

 

 

 

 

 

 

 

 

 

 

 

 

Royce Pennsylvania Mutual

 

 

207.1

 

 

-57.0

 

 

132.4

 

 

0.0

 
 

Royce Heritage

 

 

150.4

 

 

-56.6

 

 

161.3

 

 

13.4

 
 

CORE + DIVIDENDS

 

 

 

 

 

 

 

 

 

 

 

 

 

Royce Total Return

 

 

193.9

 

 

-54.2

 

 

114.9

 

 

-1.7

 
 

Royce Dividend Value

 

 

n.a.

 

 

-53.1

 

 

139.7

 

 

12.3

 
 

FOCUSED

 

 

 

 

 

 

 

 

 

 

 

 

 

Royce Premier

 

 

198.1

 

 

-49.0

 

 

125.7

 

 

15.2

 
 

Royce Special Equity

 

 

227.4

 

 

-42.7

 

 

96.5

 

 

12.6

 
 

Royce Value

 

 

n.a.

 

 

-54.1

 

 

128.9

 

 

5.0

 
 

Royce 100

 

 

n.a.

 

 

-49.7

 

 

130.1

 

 

15.7

 
 

Royce Focus Value

 

 

n.a.

 

 

n.a.

 

 

79.0

 

 

n.a.

 
 

OPPORTUNISTIC THEMES

 

 

 

 

 

 

 

 

 

 

 

 

 

Royce Low-Priced Stock

 

 

198.9

 

 

-55.9

 

 

164.3

 

 

16.6

 
 

Royce Opportunity

 

 

191.8

 

 

-69.2

 

 

222.2

 

 

-0.9

 
 

Royce Value Plus

 

 

n.a.

 

 

-58.9

 

 

115.3

 

 

-11.5

 
 

MICRO-CAP

 

 

 

 

 

 

 

 

 

 

 

 

 

Royce Micro-Cap

 

 

197.4

 

 

-56.2

 

 

159.4

 

 

13.7

 
 

Royce Discovery

 

 

n.a.

 

 

-58.7

 

 

112.1

 

 

-12.4

 
 

MID-CAP

 

 

 

 

 

 

 

 

 

 

 

 

 

Royce SMid-Cap Value

 

 

n.a.

 

 

n.a.

 

 

117.3

 

 

n.a.

 
 

GLOBAL/INTERNATIONAL

 

 

 

 

 

 

 

 

 

 

 

 

 

Royce European

 

 

 

 

 

 

 

 

 

 

 

 

 

Smaller-Companies

 

 

n.a.

 

 

-61.2

 

 

167.9

 

 

3.9

 
 

Royce Global Value

 

 

n.a.

 

 

-53.4

 

 

167.6

 

 

24.8

 
 

Royce International

 

 

 

 

 

 

 

 

 

 

 

 

 

Smaller-Companies

 

 

n.a.

 

 

n.a.

 

 

148.3

 

 

n.a.

 
 

Royce Financial Services

 

 

n.a.

 

 

-56.6

 

 

117.4

 

 

-5.7

 
 


Past performance is no guarantee of future results. See pages 4-5 for important performance and risk information for all of the above funds.

  6  |  This page is not part of the 2010 Annual Report to Shareholders

Letter to Our Shareholders
 
 
Into The Great Wide Open
The stock market enjoyed a very good year in 2010. In a normal year, this would be an unremarkable observation, perhaps one not even worth making, at least not as a statement on its own. Twenty-ten, however, was no normal year, even applying the most generous range to that modifier. One could even argue that the mostly terrific results for equities were one of the major symptoms of the year’s glaring lack of normalcy. Consider the fact that equity markets across the globe did all right to very well in the midst of ongoing economic uncertainty not just here in the United States, but in fellow economic heavyweights China and Europe as well.
     The nature and direction of that uncertainty is also worth noting, as it took on a generally western drift and included crises—some real, others perceived and a few arguably exaggerated—in each of the aforementioned locales. It began early in 2010 with an economic slowdown in China, which hurt hard asset prices everywhere while sending a chill through most of the world’s capital markets. By spring, it had rolled into Europe in the form of the sovereign debt crisis before blowing across the Atlantic in the summer with fears of a double-dip recession in the U.S. The prospect of crisis then drifted back to China early in the autumn with attempts by the Chinese government to slow the nation’s




























One could even argue that the mostly terrific results for equities were one of  the major symptoms of the year’s glaring lack of normalcy. Consider the fact that equity markets across the globe did all right to very well in the midst of ongoing economic uncertainty not just here in the United States, but in fellow economic heavyweights China and Europe as well.



This page is not part of the 2010 Annual Report to Shareholders  |  7

   
 
Charles M. Royce, President
 
Here at Royce, we have consistently
applied a highly disciplined approach
that surveys the entire universe
of micro-cap, small-cap and mid-cap
companies, striving to uncover
mispriced and underappreciated
businesses. Our experience over nearly
four decades, a span encompassing
multiple market and economic cycles,
has given us a unique perspective
into what makes companies grow,
what can lead them to be overvalued
and what makes them undervalued.
 
Our long-term perspective involves
an attempt to understand what a
business is worth and, consequently,
what a private buyer might pay for
the entire enterprise. In other words,
we think like owners, not renters. So as
holding periods have contracted of
late, we find our thoughts more closely
aligned with private equity investors
who seek to buy entire companies
because, like them, we evaluate the
financial and business dynamics of an
enterprise as if we were purchasing
the entire company. Our goal is to buy
businesses, not just stocks.
 
This business buyer’s mentality has
served us very well over the years as
styles have gone in and out of favor,
 
Continued on page 10...

     
Letter to Our Shareholders
 
economy, before again lingering in Europe later in the fall with another sovereign debt problem, this time in Ireland.
     Interestingly, and perhaps tellingly, the world's equity markets began to shake off these events, or their possible materialization, in July. Share prices mostly climbed from that month through the end of the year, with the third and fourth quarters producing healthy, double-digit returns for most of the world's major indexes. So what happened to swing the mood of investors? While clearly concerned about a repeat of 2008, even a more muted version, investors at the same time seemed to respond a little better to the news of each impending difficulty. They may have seen some of what we saw—companies that, since the financial crisis erupted in the fall of 2008, have been managing their businesses successfully, providing many pockets of strength in a domestic economy that was slowly and, at least in our estimation, surely recovering.
     So while serious problems remain—housing, unemployment, the sorry state of national, state and municipal balance sheets—we see better times ahead. At the same time, we accept that the coming year (and perhaps longer) represents something like uncharted territory. To some, the immediate future feels like the great wide open, a place where all of the uncertainty and contradictory signals create a free-falling sensation that lacks the solid footing one might otherwise expect two years' worth of strong market returns to supply. After breaking down the year's returns for the major indexes and The Royce Funds in this Review and Report, we'll make our case that we are on more solid ground than many think.

Breakdown
While the year ended well for most major equity indexes, results through the first half of the year were fairly dismal, with all of the major domestic and non-U.S. indexes posting negative returns. Following domestic market lows in early July, however, share prices began an ascent that took them through the end of the year, making 2010 the second consecutive year of double-digit positive performance for the three major U.S. indexes. Small-caps led the way by a substantial margin. For the calendar year, the small-cap Russell 2000 gained 26.9%, the large-cap S&P 500 climbed 15.1% and the more tech-heavy Nasdaq Composite rose 16.9%. (Although returns for the Russell Midcap index were also quite healthy, they lagged those of small-cap in 2010, with the Russell Midcap index up 25.5%.)
     Each index's showing from the interim small-cap low on July 6, 2010—a period that coincided with the greatest anxiety over a double-dip recession—was particularly impressive. From that date through December 31, 2010 the Russell 2000 was up 33.6% versus respective gains of 23.6% and 26.7% for the S&P 500 and Nasdaq Composite. The advantage for small-cap stocks during both the recent bull run and the year as a whole was sealed during the fourth quarter, when the Russell 2000 was



8  |  This page is not part of the 2010 Annual Report to Shareholders

 
up 16.3% versus respective gains of 10.8% and 12.0% for the larger-cap S&P 500 and Nasdaq Composite. Better relative first-half performance was also a factor, as the small-cap index lost less than its larger siblings through the first six months of 2010. As welcome and strong as 2010's returns were, the three U.S. indexes remained shy of their respective peaks, though the Russell 2000, only 3.8% off its previous peak on July 13, 2007, came closest to setting a new market cycle high. The S&P 500 finished the year 13.6% shy of its peak on October 9, 2007, while the Nasdaq has still not surpassed its peak from March 10, 2000 and ended the year 47.5% off that high.
      Non-U.S. indexes performed in line with their U.S. counterparts, though small-cap's edge was even more pronounced in 2010 than it was here at home. For the calendar year, the MSCI World (ex U.S.) Small Core index gained 24.5%, while the MSCI EAFE index was up 7.8%. Both the small-cap and large-cap non-U.S. indexes were strong off the early July domestic small-cap low. From July 6, 2010 through December 31, 2010, the MSCI World (ex U.S.) Small Core index climbed 29.8%, and the MSCI EAFE index rose 21.3%. Three-year average annual returns for both overseas indexes were negative, as they were for the S&P 500. The Nasdaq was essentially flat for the three-year period ended December 31, 2010, while the Russell 2000 gained 2.2%. For the five-year period ended December 31, 2010, the two non-U.S. and three domestic indexes were all positive, with the Russell 2000 and MSCI World (ex U.S.) Small Core index in the lead, followed by the Nasdaq, the MSCI EAFE and the S&P 500.
     Within small-cap, growth continued its leadership, outperforming value in 2010. The Russell 2000 Value index rose 24.5% compared to a gain of 29.1% for the Russell 2000 Growth index. Small-cap growth also held an edge for the five-year period ended December 31, 2010, while annualized periods of 10 years or more saw a sizeable edge for small-cap value. Micro-cap companies performed even better in the calendar year, with the Russell Microcap index up 28.9% in 2010. As was the case with small-cap, growth provided an edge relative to value within the Russell Microcap index for the calendar-year period.

Good Enough
Accepting that there is more to portfolio management—and life—than beating a benchmark, we were very satisfied with performance as a whole for The Royce Funds featured in this Annual Review and Report. We were especially pleased with two developments: Most of our Funds performed very well on a relative basis in 2010's lone significant correction, the period from the interim small-cap high on April 23, 2010 through the interim small-cap low on July 6, 2010. More importantly, each Fund finished the year with solid-to-strong returns on an absolute basis. The two are not





Our work was showing many pockets of strength in the economy that accelerated throughout the year, businesses that were benefitting from the decline of the dollar, and renewed activity in many sectors and industries. So the market's strength through much of 2010 was not a surprise to us.

This page is not part of the 2010 Annual Report to Shareholders  |  9

   
 
 
many times driven by economic cycles.
Our analytical work centers first
on evaluating what a business is worth
today, in recognition of the fact that
it is a far more difficult proposition
to discern what a business will be worth
in the future. Once we have appro-
priate conviction on the value of
an enterprise, we then establish a share
price that we are willing to pay that
discounts a required rate of return on
our capital and adds additional margin
for our inevitable mistakes. Generally
speaking, we target a discount of at
least 30%—and preferably 50%—below
our assessment of a business’s worth.
This would translate into a 44%–100%
return on our investment in the event
that our share price objective is met.

So what differentiates a business
buyer’s analysis from the traditional
approach more concerned with
earnings growth? First and most
importantly, the business is measured
over a long-term period and not on
financial results from one quarter
or even one year. Businesses tend not
to change overnight. However, we
know from experience that their stock
prices certainly can.

Measuring the profitability of a
business is not a novel idea, but it’s
a task that we perform diligently in
an attempt to understand the quality
and sustainability of a business.
Return on Invested Capital (ROIC),
Return on Assets (ROA) and Free
Cash Flow are our favored metrics, but
they are obviously just numbers that
are readily available to everyone and,
 
Continued on page 12...



    
Letter to Our Shareholders
 
 
unrelated in our view. Key to our disciplined value ethos is the idea that not losing money is as critical as making it.
     That said, relative results for the calendar year were admittedly not as stellar. Eight portfolios, Royce Heritage, Dividend Value, Micro-Cap, Low-Priced Stock, Opportunity, European Smaller-Companies, Global Value and International Smaller-Companies Funds, outperformed their respective benchmarks. Factoring in the Funds' strong down market results, absolute calendar-year returns and generally better longer-term performance records versus their respective benchmarks, we were not terribly disappointed with overall relative returns for the calendar year. A year as strong as 2010 gave even hard-to-please value investors like ourselves little to complain about.
     Within the small-cap market as a whole, stocks in the energy and technology sectors were the top performers in 2010, according to data from Russell Investments. Although we organize our own sector and industry breakdowns a little differently than Russell,

10  |  This page is not part of the 2010 Annual Report to Shareholders

we saw strength in similar areas, namely our own Natural Resources and Technology sectors. Net gains for the former sector were driven not just by many energy services stocks in several portfolios, but also by sterling performance from several precious metals and mining companies. Taken as a whole, the portfolios had success with investments in the Industrial Products and Consumer Products sectors as well. In fact, there were net contributors in every sector and industry group, another testament to the depth and breadth of the market's recovery.
 
Long After Dark
As wonderful as it was to see a second straight year of terrific equity returns, particularly coming off the financial collapse of late 2008-early 2009, the issue remains that the market rose markedly in a period of intense economic anxiety, which has engendered a host of questions about how and why this happened. It puts us in mind of the old adage that the market climbs a wall of worry. It also dovetails nicely with the notion that the market is almost always looking ahead a few years, which, if nothing else, makes it clear that investors were more optimistic about the global economy than many others.
     In fact, both of those ideas define what happened in 2010 pretty well. Looking more closely, we think what happened was that the media focused on a narrow set of economic news, namely deficits, housing and unemployment, and missed much of what was going on elsewhere in the economy. For months, the dominant stories were budget woes, foreclosures and jobless claims. While these are undoubtedly serious problems, they also offer very narrow lenses through which to view the economy, whether that of the U.S. or the world. Our own work was showing many pockets of strength in the economy that accelerated throughout the year, businesses that were benefitting from the decline of the dollar, and renewed activity in many sectors and industries. So the market's strength through much of 2010 was not a surprise to us. If not for those worrisome problems just mentioned, the success of the market in 2010 would be a very different kind of story. However, we remain convinced that what took place in equities last year was simply the historical advantage that small-caps have typically enjoyed coming out of recessions. They are often thought of as being more nimble and thus more responsive to economic events, and 2010 represents to us the latest phase in the post-recession recovery for stocks that began after the market low in March 2009. Of course, the world is not as complacent as it was in the middle part of the decade. Much of the wariness about the recent bull market is symptomatic of the generally more cautious attitude that many people now possess. As value investors, we are always all for caution, but we see the intelligence with which so many companies have managed themselves over the last two or three years as more meaningful than the economic problems we are currently laboring to solve. This is what inspires our confidence in the economy going forward.















We suspect that the reign of high-beta, often low-quality companies is likely to end soon, usurped by companies with characteristics such as high returns on invested capital, free cash flow generation and dividends.

This page is not part of the 2010 Annual Report to Shareholders  |  11

   
 
 
on their own, only reveal so much.
While each plays an important part in
determining a company's valuation,
it is ultimately the subjective assess-
ment of an enterprise that tests our
analytical acumen.

Enterprise Conviction (EC) is a pro-
prietary methodology that we developed
at Royce to isolate our assessment of
conviction in the quality of a business
from its valuation. We have developed
core tenets designed to reveal the
structure of the company’s market,
the sustainable or competitive edge that
it possesses, its future prospects, and
the ability of the management team to
guide the business going forward.

Importantly, this combination of
Enterprise Conviction backed up by
traditional analytics has also created
a consistent approach to our inter-
actions with company management
teams. Meeting and interviewing the
key leaders of a business is a critical
part of Royce’s business evaluation
process. Using our specialized
process offers a measure of protection
against common investor pitfalls such
as “value traps,” commitment bias
allowing an interesting management
story to morph into investment convic-
tion. At Royce, our process centers on
uncovering the worth of a business,
not on what its stock may do in the
near term. By establishing conviction
about our knowledge of an entire
enterprise, we can more easily assess
the financial opportunities, weigh
the risks of investment, and determine
an appropriate price to pay.
 



          
Letter to Our Shareholders
 
 
The Waiting
Returning to the more narrow sphere of stocks, we have noticed that the world seems to have been waiting for a while now for large-cap to post a pronounced gain in performance at the expense of their small-cap counterparts. As of this writing, this grand shift to large-cap leadership has not materialized. From our somewhat biased perspective, we do not see it coming soon, though we do see what we regard as an important change in the market. As indiscriminately good as most of the last 22 months have been for stocks, we suspect that the reign of high-beta, often low-quality companies is likely to end soon, usurped by companies with characteristics such as high returns on invested capital, free cash flow generation and dividends. These elements are more likely to determine leadership than market capitalization. So while it would not be surprising to see large-cap enjoying periods of outperformance in the months to come, we do not expect the spread to be significant. We believe that the days of wide divergence between small-cap and large-cap, such as we saw in the '90s, are over, at least for the intermediate term.
     As long-established believers in reversion to the mean, we think that the decade ahead should be a positive one for stocks if for no other reason than that the previous one was so difficult. We also see the next few years as something of a reverse of the previous two—our expectation is that the economy will heat up and grow more quickly than the stock market. While we remain essentially confident about the long-term prospects for stocks, we do not see the kind of returns on an annualized basis that we saw in 2009 and 2010 and instead see annualized returns in the high single digits for the decade

12  |  This page is not part of the 2010 Annual Report to Shareholders

 
as a whole. There should be a lot of differentiation and an ample number of corrections, some of them, like 2010's spring-summer downturn, more than capable of temporarily suspending investors' confidence. We view this as a near-ideal environment for disciplined and discriminating stock pickers such as ourselves. Overall, then, our outlook is fairly positive. Corrections in the 10% or greater range should create opportunities for us on a global scale. We think that returns will remain positive and that volatility will remain a presence which we seek to use to our advantage in the months and years ahead.





Overall, our outlook is fairly positive. Corrections in the 10% or greater range should create opportunities returns will remain positive and that volatility will remain a presence which we seek to use to our advantage in the months and years ahead.


Sincerely,
 
   
Charles M. Royce
       President		   W. Whitney George
Vice President		   Jack E. Fockler, Jr.
Vice President

January 31, 2011

We dedicate this Review and Report to the memory of our beloved partner and colleague, Denis Fitzgerald, who passed away in February. Denis was a valued member of our marketing and research teams and contributed immeasurably to the production and design of our materials. He worked alongside of us for nearly 22 years. His commitment to our firm and its betterment were unsurpassed. His energy and spirit not only define our firm, but will remain with us forever.





This page is not part of the 2010 Annual Report to Shareholders  |  13

Fund Focus

Valuable Heritage

We are very proud of the long-term history of many of The Royce Funds. In 1972, we began to manage Royce Pennsylvania Mutual Fund. During the 1990s, we began to introduce other portfolios, beginning with Royce Premier and Micro-Cap Funds in 1991 and Royce Low-Priced Stock and Total Return Funds in 1993. The years that followed saw us launching Royce Heritage Fund in 1995, Royce Opportunity Fund in 1996, Royce Special Equity Fund in 1998, and Royce Value and Value Plus Funds in 2001. More came in that wake, including Royce 100, Discovery and Dividend Value Funds, as well as our first forays into portfolios devoted to international and global investing.

The Fund differs from our flagship in two significant ways: It can invest across a wider market cap range than the portfolio that inspired it... It has also made more use of its ability to invest in non-U.S. securities.

We celebrated the 15th anniversary of Royce Heritage Fund on December 27, 2010, an event that we think is well-worth commemorating. Unlike most of our portfolios, the Fund evolved slowly.
It has developed into a portfolio in the same category as our flagship, Royce Pennsylvania Mutual Fund. These Funds both utilize our core approach, one that invests across the spectrum of smaller companies selected with our tried and true criteria. We are looking for three elements—a strong balance sheet, a record of success as a business and the potential for a profitable future. Micro-cap, small-cap and even mid-cap companies can be very fragile; therefore, we look for growing businesses that produce free cash flow which we think can survive potential difficulties either in their industry or the stock market.

However, the Fund differs from our flagship in two significant ways: It can invest across a wider market cap range than the portfolio that inspired it. The Fund has no limits in terms of market capitalization, though it typically selects from micro-cap, small-cap and mid-cap companies with market caps up to $5 billion. It has also made more use of its ability to invest in non-U.S. securities.

Chuck Royce, President and Co-Chief Investment Officer of Royce, serves as the Fund's lead portfolio manager. James J. Harvey manages the Fund with him.

RHF vs Russell 2000: Performance and Expense Information

Through December 31, 2010



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AVERAGE ANNUAL TOTAL RETURNS

 

 

 

 

 

 

 

 

 

1-Year

 

5-Year

 

10-Year

 

15-Year

 

Since Inception

 

Inception Date

 

Operating Expenses

Royce Heritage Fund

 

 

27.50

%

 

8.91

%

 

10.46

%

 

14.96

%

 

14.97

%

 

12/27/95

 

 

1.51

%

                                             

Russell 2000

 

 

26.86

 

 

4.47

 

 

6.33

 

 

7.64

 

 

7.68

 

 

n.a.

 

 

n.a.

 

                                             

Important Performance, Expense and Risk Information
All performance information reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when redeemed. Shares redeemed within 180 days of purchase may be subject to a 1% redemption fee, payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current performance may be higher or lower than performance quoted. Current month-end performance information may be obtained at www.roycefunds.com. Operating expenses reflect total annual operating expenses for the Service Class as of the Fund's most current prospectus and include management fees, 12b-1 distribution and service fees, and other expenses. All performance and risk information reflects Service Class results. Shares of RHF's Consultant and R Classes bear an annual distribution expense that is higher than that of the Service Class.

The Fund generally invests in securities of micro-cap, small-cap and mid-cap companies, which may involve considerably more risk than investing in larger-cap stocks. (Please see "Primary Risks for Fund Investors" in the prospectus.) The Fund may invest up to 25% of its net assets in foreign securities, which may involve political, economic, currency and other risks not encountered in U.S. investments. (Please see "Investing in International Securities" in the prospectus.) The Russell 2000 is an unmanaged, capitalization-weighted index of domestic small-cap stocks that measures the performance of the 2,000 smallest publicly traded U.S. companies in the Russell 3000 index.

14  |  This page is not part of the 2010 Annual Report to Shareholders

 

Style Points

 

 

It is impossible to produce superior performance unless you do something different from the majority.
– Sir John Templeton

 

 

 

 

 

 

 

Every active manager needs an edge. There needs to be something dynamic and at least somewhat unique about the security selection process that sets their portfolios apart. This is especially true if their goal—as it is for us here at The Royce Funds—is to generate strong absolute long-term returns. The quote above from Sir John Templeton illustrates this perfectly. How any “superior performance” is produced, however, is another matter.

 

relate to how we look at companies. First, we use a time-tested approach that most commonly focuses on strong balance sheets, high returns on invested capital and a record of success as a business. Second, we pay very close attention to risk at multiple levels. While most managers focus chiefly on potential returns, we devote at least equal and sometimes more attention to the risk side of the equation. Our contention is that failing to do so can erode, or even destroy, long-term returns.

          After all, the world is full of ostensibly great investment approaches, seemingly sound strategies and apparently foolproof methods for making money in the stock market. Yet these techniques do not always accomplish what they set out to do. With this in mind, it seems to us that the key questions are, how does one establish a long-term performance edge? How does a manager do something differently from the majority, and do it successfully?           These questions have only grown in importance over the last three years, as the world just barely avoided a collapse of the global financial system late in 2008 and has been struggling to create a more lasting recovery ever since. The difficulties of the more recent period further validate the importance of measuring performance over full market cycles (or rolling five- and 10-year periods), spans that include both up and down phases. On those scores, a close look at page 6 will provide the market cycle returns for several Royce Funds and their showings against their respective benchmarks.
          The success that we have enjoyed over these periods is the result of three closely related elements. The first two

 

(MESSAGE)

Our Funds seek to help investors build wealth as consistently, and with as little volatility, as possible within our investment universe. Without the requisite discipline, such a goal could not be reached. Our approach and our unshakeable commitment to it are the vital things that we believe have helped us to separate our Funds from the portfolio pack.

          Combined with this is an equally important third factor: our managers’ willingness to stick to their respective approaches, regardless of market movements and trends. Adhering to the discipline is as vital to our success as the approach itself. This is especially relevant during market extremes such as those we have seen over the last several years.           For us, the security selection process and the discipline and commitment to stick with it are inextricably bound together. Our goal is always to grow capital. While we enjoy besting benchmarks as much as any active asset manager, our focus is never on beating the market. When it happens, we see it only as a happy byproduct of the successful execution of our investment discipline. Our Funds seek to help investors build wealth as consistently, and with as little volatility, as possible within our investment universe. Without the requisite discipline, such a goal could not be reached. Our approach and our unshakeable commitment to it are the vital things that we believe have helped us to separate our Funds from the portfolio pack.

 

This page is not part of the 2010 Annual Report to Shareholders  |  15

 

Making Headlines

 

At The Royce Funds, the integrity of our process and the reputation of our people are as important to us as the success of our portfolios, so it is always gratifying when the results of these three efforts are recognized in the wider world. Through the years, we have been fortunate enough to have a number of positive things written about The Royce Funds, our firm and our people. Below is a summary of what we think were among the best media mentions from the last year.

 

 

 

 

 

 

March 17, 2010
In “The King of Small Caps,” from the April issue of SmartMoney, Dyan Machan profiles Whitney George, Royce’s Co-CIO, Managing Director and

 

“Over the course of nearly four decades, Royce & Associates has demonstrated sound leadership in small-cap investing. The firm nurtures an atmosphere that encourages individuality and collaboration at the same time–while also growing the firm in terms of assets... ” Karin Anderson, Morningstar Fund Spy

Portfolio Manager. The article details George’s background in the industry, investment approach, track record, and outlook for small-cap stock investing. February 17, 2010
Jacob Wolinsky of GuruFocus.com recently interviewed David Nadel, Portfolio Manager for Royce Global Select Fund and Co-Portfolio Manager of Royce Global Value Fund. David discusses his investment approach, his influences and his thoughts on the future of emerging markets and international equities. He also details the critical importance of qualities such as a strong balance sheet and high returns on invested capital in assessing a company’s financial health in saying, “The further we get from the U.S., the more of a cushion we tend to look for in terms of strength of balance sheet, returns on capital and valuation.”

June 14, 2010
In the article, “Small-Cap Stalwart Goes Abroad,” Kiplinger’s writer Laura Cohn looks at how Royce has transitioned its stock-picking skills to bargain-priced foreign companies. “The Royce Funds have a long and distinguished record of investing in small, undervalued U.S. companies. In 2007, the firm launched Royce Global Value.”

 

April 27, 2010
In “The Royce Funds’ Jay Kaplan On Small-Caps, Value Investing, Dividends And More” gurufocus.com’s Jacob Wolinsky interviews Jay Kaplan on a range of topics, including how he got started in value investing, his investment style, his views on the small-cap asset class versus large-cap and what the future may hold following the financial crisis. In the piece, Jay discusses the attraction of dividend-paying small-cap stocks: “I think dividends are good capital allocation tools, and are a sign of good discipline. This tends to lead me to more mature companies.”

November 10, 2010
Bloomberg Businessweek’s article “Royce’s George: Searching for Unloved Stocks” looks at how Whitney George of the $3.9 billion Royce Low-Priced Stock Fund “finds shares that outpace the market.” The piece focuses on four stocks that Portfolio Manager and Co-Chief Investment Officer Whitney George believes are being ignored by investors. As George told the author of the piece, Stan Luxenberg, “Our aim is to buy stocks that can double or triple in three to five years. Make no mistake, they are risky.  They sink

 

because something’s gone wrong—earnings may have been disappointing or the industry fell out of favor. We stick with companies that have sound balance sheets and long histories of healthy returns on equity. We especially like companies that can grow for years by expanding existing operations or by making new acquisitions.”

December 1, 2010
Morningstar Fund Spy’s “How a Fund Boutique Grew Without Losing Its Soul” appeared in the Corporate Culture portion of Morningstar’s Stewardship Grade for Funds for Royce. Writer Karin Anderson summarizes that, “Over the course of nearly four decades, Royce & Associates has demonstrated sound leadership in small-cap investing. The firm nurtures an atmosphere that encourages individuality and collaboration at the same time—while also growing the firm in terms of assets... Since 1972, when Chuck Royce first began managing flagship Royce Pennsylvania Mutual Fund (PENNX), Royce & Associates has grown to offer 26 funds... and employs 38 investment professionals.”


16  |  This page is not part of the 2010 Annual Report to Shareholders

 

Table of Contents

 
  

 

Annual Report to Shareholders

   

 

Managers’ Discussions of Fund Performance

 

CORE

   

 

Royce Pennsylvania Mutual Fund

18

 

Royce Heritage Fund

20

 

CORE + DIVIDENDS

   

 

Royce Total Return Fund

22

 

Royce Dividend Value Fund

24

 

FOCUSED

   

 

Royce Premier Fund

26

 

Royce Special Equity Fund

28

 

Royce Value Fund

30

 

Royce 100 Fund

32

 

Royce Focus Value Fund

34

 

Royce Partners Fund

36

 

OPPORTUNISTIC THEMES

   

 

Royce Low-Priced Stock Fund

38

 

Royce Opportunity Fund

40

 

Royce Value Plus Fund

42

 

MICRO-CAP

   

 

Royce Micro-Cap Fund

44

 

Royce Discovery Fund

46

 

MID-CAP

   

 

Royce SMid-Cap Value Fund

48

 

Royce Mid-Cap Fund

50

 

GLOBAL/INTERNATIONAL

   

 

Royce European Smaller-Companies Fund

52

 

Royce Global Value Fund

54

 

Royce International Smaller-Companies Fund

56

   

 

Royce Financial Services Fund

58

   

 

Schedules of Investments and Financial Statements

60

 

Notes to Financial Statements

143

 

Report of Independent Registered Public Accounting Firm

159

 

Understanding Your Fund’s Expenses

160

 

Trustees and Officers

163

 

Notes to Performance and Other Important Information

164

 

The Royce Funds 2010 Annual Report to Shareholders  |  17

 


   
  CORE
 
  Core Funds generally invest across a wide spectrum of smaller companies using a diversified approach.
   
   
  AVERAGE ANNUAL TOTAL RETURNS
  Through 12/31/10
 
  July-Dec 2010*   27.09 %
 
  One-Year   23.86  
 
  Three-Year   3.25  
 
  Five-Year   5.36  
 
  10-Year   10.23  
 
  20-Year   12.09  
 
  25-Year   11.20  
 
  35-Year   14.87  
 
  ANNUAL EXPENSE RATIO
 
  Operating Expenses   0.92 %
 
  *Not annualized
 
CALENDAR YEAR TOTAL RETURNS
 
                       
  Year   PMF     Year       PMF  
 
  2010   23.9 %   2002       -9.2 %
 
  2009   36.3     2001       18.4  
 
  2008   -34.8     2000       18.3  
 
  2007   2.8     1999       6.0  
 
  2006   14.8     1998       4.2  
 
  2005   12.5     1997       25.0  
 
  2004   20.2     1996       12.8  
 
  2003   40.3     1995       18.7  
 
                       
  TOP 10 POSITIONS % of Net Assets
 
  GrafTech International   0.8 %
 
  Federated Investors Cl. B   0.8  
 
  SEI Investments   0.7  
 
  Dress Barn (The)   0.7  
 
  Nordson Corporation   0.7  
 
  Helmerich & Payne   0.7  
 
  MAXIMUS   0.7  
 
  Oil States International   0.7  
 
  CARBO Ceramics   0.7  
 
  Unit Corporation   0.7  
 
                       
  PORTFOLIO SECTOR BREAKDOWN
  % of Net Assets
 
  Industrial Products   17.9 %
 
  Technology   15.2  
 
  Industrial Services   12.6  
 
  Natural Resources   12.3  
 
  Health   7.7  
 
  Consumer Products   7.7  
 
  Financial Services   7.6  
 
  Financial Intermediaries   7.1  
 
  Consumer Services   5.9  
 
  Diversified Investment Companies   0.0  
 
  Utilities   0.0  
 
  Miscellaneous   2.5  
 
  Bonds   0.0  
 
  Cash and Cash Equivalents   3.5  
 
                       
 

Royce Pennsylvania Mutual Fund
 
Manager’s Discussion
The ongoing rally, though it suffered an interruption in the spring and early summer, swelled the tide and lifted most boats through 2010. For the calendar year, our flagship, Royce Pennsylvania Mutual Fund (PMF), gained 23.9%. Although PMF trailed its small-cap benchmark, the Russell 2000, which was up 26.9% for the same period, we were very pleased with the Fund's performance on an absolute basis. The year began with the Fund lagging in the strong first quarter, up 6.6% versus 8.9% for the small-cap index, before losing less during the distinctly bearish second quarter, down 8.5% versus a 9.9% decline for the Russell 2000. PMF's down market advantage can be seen more clearly in results from the interim small-cap high on April 23, 2010 through the interim small-cap low on July 6, 2010, when the Fund fell 17.4% versus the small-cap index's decline of 20.3%. After small-caps bottomed out for the year, they mostly kept climbing through the end of December. PMF fell behind its benchmark in the third quarter, up 10.5% versus 11.3%, a trend that continued in the year's final three months. As the rally picked up even more speed, the Fund rose 15.0% compared to a rise of 16.3% for the small-cap index.
     The spring-summer correction notwithstanding, the domestic stock market as a whole stayed well above the market low on March 9, 2009. From that date through the end of 2010, the Russell 2000 rose 134.0%, while PMF climbed 132.4%. (Please see page 6 for recent market cycle results.) Recent underperformance relative to its benchmark was not a factor in longer-term calendar-denominated results. The Fund outperformed its benchmark for the three-, five-, 10-, 15-, 20- and 25-year periods ended December 31, 2010. PMF's three- and five-year results continued to fall short of the strong absolute returns that we strive to provide investors, as the effects of the brutal bear market of late 2008-early 2009 still linger in an unwelcome fashion over returns for those periods. However, we were very pleased with results over periods beyond those spans (as well as the Fund's showings in 2009 and 2010). The Fund's average annual total return for the 35-year period ended December 31, 2010 was 14.9%, a long-term record that gives us great pride.
       In contrast to the year’s first half, each of the Fund’s equity sectors showed net gains for the calendar year, another sign of the sharp contrast between the year’s first six months and its second. The Industrial Products and Natural Resources sectors led in 2010, followed by      
       GOOD IDEAS THAT WORKED
  Top Contributors to 2010 Performance*
   
    Sotheby's 0.42%
   
    Oil States International 0.42   
   
    Ivanhoe Mines 0.41   
   
    WABCO Holdings 0.34   
   
    Agnico-Eagle Mines 0.34   
   
    *Includes dividends
         
         
         
         
         
         
         
         
         
         
         
         
Important Performance and Expense Information
All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when redeemed. Shares redeemed within 180 days of purchase may be subject to a 1% redemption fee payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current performance may be higher or lower than performance quoted. Current month-end performance may be obtained at www.roycefunds.com. All performance and risk information reflects Investment Class results. Operating expenses reflect the Fund's total annual operating expenses for the Investment Class as of the Fund's most current prospectus and include management fees and other expenses. Shares of PMF's Service, Consultant, R and K Classes bear an annual distribution expense that is not borne by the Investment Class. The sum of all contributions and detractions for all securities would approximate the Fund's performance for 2010.

18  |  The Royce Funds 2010 Annual Report to Shareholders



 
 
 
Performance and Portfolio Review

more-than-respectable contributions from Technology, Consumer Products and Industrial Services. As might be expected in such a strong year, significant net losses were scant, limited to a handful of industry groups and a comparatively small number of positions. We still retain a large measure of affection for the strong identity of the brands, including Lane Bryant and Fashion Bug, run by women's apparel retailer Charming Shoppes. Holding our shares through most of the year, we saw its still-tumbling share price as a good reason to begin adding to our stake in November. We also thought that its new management would be able to turn the firm around. Our once high hopes for private, for-profit post-secondary education company Corinthian Colleges were dashed as its share price failed to recover from the precipitous decline that began in April. We began to reduce our stake in October.
     Long familiar with its business, we have owned shares of Sotheby's, an auctioneer of fine and decorative art, jewelry, and collectibles, off and on for more than two decades. The company has a singular earnings pattern—the season-based auction business generally guarantees that it loses money every other quarter. The intervening quarters, however, have been strong and had investors bidding for shares. We made a small net trim to our position in 2010. The gushing share price of Oil States International, also one of 2009's top net gainers, saw us taking gains through much of 2010. The company provides specialized products and services to oil and gas drilling and production companies across the globe, a business that we liked along with the
company’s attractive balance sheet and steady earnings.
     
     Rising gold prices, along with renewed interest in mining companies on the part of equity investors, helped several precious metals and mining companies in 2010. Along with holdings in the energy services group, they helped to make Natural Resources one of the Fund's top-performing sectors. Our patience with Ivanhoe Mines, which endured a long wait for permission from the Mongolian government to approve mining operations in that country, was rewarded as its stock price climbed through most of the year. We reduced our stake in October. We did the same through much of the year with Agnico-Eagle Mines, a gold producer with operations in, among other places, Canada, Mexico and Finland. Higher earnings guidance announced late in the year helped to drive the stock price of WABCO Holdings, a maker of braking, stability, suspension, and transmission control parts primarily for commercial vehicles. We liked its low-debt balance sheet and its niche in a slow-growth economy.

GOOD IDEAS AT THE TIME
Top Detractors from 2010 Performance*

  
 
 
Charming Shoppes -0.23%  
 
Corinthian Colleges -0.18     
 
Comtech Telecommunications -0.16     
 
Artio Global Investors Cl. A -0.16     
 
ManTech International Cl. A -0.11      
 
*Net of dividends  
   

 
 
 
 
 
     
     
  PORTFOLIO DIAGNOSTICS  
 
 
  Average Market Capitalization* $1,658 million     
 
 
  Weighted Average P/E Ratio** 17.7x    
 
 
  Weighted Average P/B Ratio 2.1x     
 
 
  U.S. Investments
(% of Net Assets) 		92.8%     
 
 
  Non-U.S. Investments
(% of Net Assets)		 3.7%     
 
 
  Fund Net Assets $6,047 million     
 
 
  Turnover Rate 25%     
 
 
  Number of Holdings 532     
 
 
  Symbol    
      Investment Class PENNX     
      Service Class RYPFX     
      Consultant Class RYPCX     
      R Class RPMRX     
      K Class RPMKX     
 
 
   * Geometrically calculated  
 

** The Fund's P/E ratio calculation excludes companies with zero or negative earnings (7% of portfolio holdings as of 12/31/10).

  
     
  MORNINGSTAR STATISTICAL MEASURES*  
 
 
    PMF Category Median Best Quartile Breakpoint  
 
 
  Sharpe Ratio 0.25 0.20   0.28    
 
 
  Standard Deviation 22.18 22.50   21.29    
 
 
 

* Five years ended 12/31/10. Category Median and Best Quartile Breakpoint based on 338 small-cap objective funds (oldest class only) with at least five years of history.

 
   
  RISK/RETURN COMPARISON
Five-Year Period Ended 12/31/10		  
 
 
    Average Annual Total Return Standard Deviation Return Efficiency*  
 
 
  PMF 5.36% 22.18    0.24    
 
 
  Russell 2000 4.47 23.11   0.19    
 
 
 

* Return Efficiency is the average annual total return divided by the annualized standard deviation over a designated time period. Please read the prospectus for a more complete discussion of risk. 

  
     
  DOWN MARKET PERFORMANCE COMPARISON
All Down Periods of 7.5% or Greater
Over the Last 10 Years, in Percentages(%) 		  
 
 
   
     

The Royce Funds 2010 Annual Report to Shareholders  |  19                  



 

     
  CORE  
 
 
 
Core Funds generally invest across a wide spectrum of smaller companies using a diversified approach.
 
 

   

  
 

   

  
  AVERAGE ANNUAL TOTAL RETURNS
Through 12/31/10		  
 
 
  July-Dec 2010*   32.44 %  
 
 
  One-Year         27.50    
 
 
  Three-Year         7.28    
 
 
  Five-Year         8.91    
 
 
  10-Year         10.46    
 
 
  15-Year         14.96    
 
 
  Since Inception (12/27/95)         14.97    
 
 
  ANNUAL EXPENSE RATIOS  
 
 
  Operating Expenses   1.51 %  
 
 
  * Not annualized  
         
  CALENDAR YEAR TOTAL RETURNS  
 
 
  Year   RHF     Year     RHF    
 
 
  2010   27.5 %   2002     -18.9 %  
 
 
  2009   51.8     2001     20.5    
 
 
  2008   -36.2     2000     11.7    
 
 
  2007   1.2     1999     41.7    
 
 
  2006   22.6     1998     19.5    
 
 
  2005   8.7     1997     26.0    
 
 
  2004   20.4     1996     25.6    
 
 
  2003   38.1                
 
 
                       
  TOP 10 POSITIONS % of Net Assets  
 
 
  Helmerich & Payne   1.5 %  
 
 
  EMCOR Group   1.2    
 
 
  TMX Group   1.2    
 
 
  Seabridge Gold   1.1    
 
 
  Brink's Company (The)   1.1    
 
 
  Ritchie Bros. Auctioneers   1.1    
 
 
  Hochschild Mining   1.0    
 
 
  Kennametal   1.0    
 
 
  Greif Cl. A   1.0    
 
 
  Value Partners Group   1.0    
 
 
                       
  PORTFOLIO SECTOR BREAKDOWN
% of Net Assets		  
 
 
  Industrial Products   19.0 %  
 
 
  Industrial Services   14.5    
 
 
  Natural Resources   14.5    
 
 
  Technology   12.8    
 
 
  Financial Services   10.8    
 
 
  Financial Intermediaries   5.9    
 
 
  Health   5.3    
 
 
  Consumer Products   3.8    
 
 
  Consumer Services   2.7    
 
 
  Miscellaneous   4.7    
 
 
  Cash and Cash Equivalents   6.0    
 
 
     



Royce Heritage Fund

Managers’ Discussion
The second half of 2010 was as bullish as the first half was sluggish, but the upshot was a strong year for stocks of all sorts, especially the kind of micro-cap, small-cap and mid-cap issues that comprised the portfolio of Royce Heritage Fund (RHF). The Fund gained 27.5% for the calendar year versus a 26.9% showing for its small-cap benchmark, the Russell 2000, for the same period. We were pleased with the Fund's results, especially on an absolute basis. It was also gratifying to see RHF bounce back after a somewhat lackluster first half (-3.7%).
     Recent market cycle returns were also encouraging. During the year's only substantial down market period, the Fund outpaced the Russell 2000, losing 16.2% versus a decline of 20.3% for the small-cap index from the interim small-cap high on April 23, 2010 through the interim small-cap low on July 6, 2010. The stock market began to heat up with the temperature, and in the third quarter RHF rose 13.8% while its benchmark climbed 11.3%. During the fourth quarter, the Fund just managed to maintain its advantage, up 16.4% versus 16.3% for the Russell 2000. Looking at a longer-term period, RHF climbed 161.3% versus a gain of 134.0% from the market low on March 9, 2009 through December 31, 2010. (Please see page 6 for more market cycle results.)
     These results played a role in the Fund's longer-term advantage over its benchmark and thus underscore the importance of solid performance in both up and down markets. RHF outpaced the Russell 2000 for the three-, five-, 10-, 15-year and since inception (12/27/95) periods ended December 31, 2010. The Fund's average annual total return since inception was 15.0%.
     While each of the Fund's equity sectors made a positive contribution in 2010, two sectors dominated performance—Natural Resources and Industrial Products. The first of these sectors benefitted greatly from an increase in commodity prices, specifically silver, gold and oil, while the second was helped by a revival of industrial activity across the globe. Net gains in individual industrial companies were somewhat modest compared to those in the Natural Resources sector, as well as those that could be found in Financial Services and Consumer Services. Among the Fund's top-10 contributors, none came from Industrial Products, while among the top 25 only four came from that sector. Its strength came mostly from holdings in the metal fabrication and distribution group and machinery companies, where each industry's net gains were spread out among a number of businesses.      
       GOOD IDEAS THAT WORKED
  Top Contributors to 2010 Performance*
   
    Hochschild Mining   1.08%
   
    Fresnillo   0.85   
   
    Pan American Silver   0.64   
   
    Value Partners Group   0.61   
   
    Luk Fook Holdings (International)   0.55   
   
    * Includes dividends    
           
Important Performance and Expense Information
All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when redeemed. Shares redeemed within 180 days of purchase may be subject to a 1% redemption fee payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current performance may be higher or lower than performance quoted. Current month-end performance may be obtained at www.roycefunds.com. All performance and risk information reflects Service Class results. Operating expenses reflect the Fund's total annual operating expenses for the Service Class as of the Fund's most current prospectus and include management fees, 12b-1 distribution and service fees, and other expenses. Shares of RHF's Consultant and R Classes bear an annual distribution expense that is higher than that of the Service Class. The sum of all contributions and detractions for all securities would approximate the Fund's performance for 2010.

             20  |  The Royce Funds 2010 Annual Report to Shareholders



 
 
 
Performance and Portfolio Review

     With silver prices rising more than 80% and gold climbing close to 30%, precious metals and mining holdings truly shone. Top-ten position Hochschild Mining mines and processes primarily silver, as well as gold. It operates mostly in Latin America and has several mines that are producing metals. We view it as a well-managed, conservatively capitalized business that was well-positioned to benefit from the rise in precious metals prices. After building a position between February and June, we took some gains during October and November. We also took some gains in two other top-performing mining stocks. Fresnillo is the world's largest primary silver producer and Mexico's second-largest gold producer. The company boasts an attractive combination of a very high-quality asset base and low operational costs, which should allow for margins above its industry's average for the foreseeable future. Pan American Silver is a Canadian company with seven operating mines and others in development in Mexico, Peru and Bolivia that, like Hochschild and Fresnillo, has effectively managed the transition from the exploration for metals to their production.
     Elsewhere in the portfolio, we built our stake in Value Partners Group even as its share price rose owing to our affection for its growing asset management business and talented management team. It is winning what we regard as well-deserved recognition of its skills in a business we like and think we understand well. Luk Fook Holdings (International) continued to succeed in all aspects of its business designing, wholesaling and retailing a variety of gold jewelry, gem-set jewelry, gemstones and authentication services. It is now one of the best known jewelry companies in China after having been long established in Hong Kong. We took gains between April and December.
     
           Artio Global Investors is a New York City-based asset management business. We have historically liked companies in this industry and were also drawn to Artio's impressive long-term track record with non-U.S. equities. However, the performance of its two flagship international funds continued to lag in 2010, increasing fund outflows and driving down the company's share price. Along with our high regard for its core business, this led us to add to our position at various times throughout the year. FBR Capital Markets provides various investment banking services, helping firms to raise capital and other financial advisory services, such as merger and acquisition advisory, and restructuring. We reduced our stake in July because our confidence in its long-term prospects had faded.

GOOD IDEAS AT THE TIME
Top Detractors from 2010 Performance*

  
 
 
Artio Global Investors Cl. A -0.49%  
 
FBR Capital Markets -0.38     
 
Jinpan International -0.33     
 
Cowen Group Cl. A -0.27     
 
NutriSystem -0.25     
 
*Net of dividends  
   
 
 
     
     
  PORTFOLIO DIAGNOSTICS  
 
 
  Average Market Capitalization* $1,783 million     
 
 
  Weighted Average P/E Ratio** 20.4x   
 
 
  Weighted Average P/B Ratio 2.5x   
 
 
  U.S. Investments (% of Net Assets) 71.0%  
 
 
  Non-U.S. Investments (% of Net Assets) 23.0%  
 
 
  Fund Net Assets $277 million  
 
 
  Turnover Rate 66%  
 
 
  Number of Holdings 233  
 
 
  Symbol    
      Investment Class RHFHX  
      Service Class RGFAX  
      Consultant Class RYGCX  
      R Class RHFRX  
      K Class RHFKX  
 
 
   * Geometrically calculated  
 

**The Fund’s P/E ratio calculation excludes companies with zero or negative earnings (7% of portfolio holdings as of 12/31/10).

  
     
  MORNINGSTAR STATISTICAL MEASURES*  
 
 
    RHF Category Median Best Quartile Breakpoint  
 
 
  Sharpe Ratio 0.38 0.20   0.28    
 
 
  Standard Deviation 23.94 22.50   21.29    
 
 
 

*  Five years ended 12/31/10. Category Median and Best Quartile Breakpoint based on 338 small-cap objective funds (oldest class only) with at least five years of history.

  
     
   
  RISK/RETURN COMPARISON
Five-Year Period Ended 12/31/10		  
 
 
    Average Annual
Total Return 		Standard  
Deviation  		 Return
Efficiency* 		 
 
 
  RHF 8.91% 23.94   0.37    
 
 
  Russell 2000 4.47 23.11   0.19    
 
 
 

*  Return Efficiency is the average annual total return divided by the annualized standard deviation over a designated time period. Please read the prospectus for a more complete discussion of risk. 

  
     
  DOWN MARKET PERFORMANCE COMPARISON
All Down Periods of 7.5% or Greater
Over the Last 10 Years, in Percentages(%) 		  
   
     

The Royce Funds 2010 Annual Report to Shareholders  |  21                  



     
   
  CORE + DIVIDENDS  
 
 
  Core + Dividends Funds generally invest in dividend-paying smaller companies using a diversified approach.  
 

   

  
  AVERAGE ANNUAL TOTAL RETURNS
Through 12/31/10		  
 
 
  July-Dec 2010*   24.61 %  
 
 
  One-Year         23.47    
 
 
  Three-Year         2.36    
 
 
  Five-Year         4.70    
 
 
  10-Year         8.91    
 
 
  15-Year         10.76    
 
 
  Since Inception (12/15/93)         11.27    
 
 
  ANNUAL EXPENSE RATIO  
 
 
  Operating Expenses   1.19 %  
 
 
  * Not annualized  
         
  CALENDAR YEAR TOTAL RETURNS  
 
 
  Year   RTR     Year     RTR    
 
 
  2010   23.5 %   2002     -1.6 %  
 
 
  2009   26.2     2001     14.8    
 
 
  2008   -31.2     2000     19.4    
 
 
  2007   2.4     1999     1.5    
 
 
  2006   14.5     1998     4.8    
 
 
  2005   8.2     1997     23.7    
 
 
  2004   17.5     1996     25.5    
 
 
  2003   30.0     1995      26.9     
 
 
                       
  TOP 10 POSITIONS % of Net Assets  
 
 
  Energen Corporation   1.1 %  
 
 
  Federated Investors CL. B   1.0    
 
 
  Reinsurance Group of America   0.9    
 
 
  Allied World Assurance Company Holdings   0.9    
 
 
  PartnerRe   0.9    
 
 
  Family Dollar Stores   0.9    
 
 
  Wolverine World Wide   0.9    
 
 
  Erie Indemnity Cl. A   0.9    
 
 
  Chemed Corporation   0.9    
 
 
  Cato Corporation (The) Cl. A   0.8    
 
 
                       
  PORTFOLIO SECTOR BREAKDOWN
% of Net Assets		  
 
 
  Financial Intermediaries   21.4 %  
 
 
  Industrial Products   16.9    
 
 
  Natural Resources   10.9    
 
 
  Industrial Services   8.3    
 
 
  Consumer Services   8.0    
 
 
  Financial Services   7.7    
 
 
  Consumer Products   7.0    
 
 
  Technology   4.9    
 
 
  Health   3.4    
 
 
  Utilities   2.0    
 
 
  Diversified Investment Companies   0.5    
 
 
  Miscellaneous   2.1    
 
 
  Bonds and Preferred Stocks   0.7    
 
 
  Cash and Cash Equivalents   6.2    
 
 
     



Royce Total Return Fund

Manager’s Discussion
Although many higher-risk stocks did very well in 2010, especially in the dynamic fourth quarter, dividend-paying micro-cap and small-cap companies were very competitive. For the calendar year, Royce Total Return Fund (RTR) was up 23.5% versus a gain of 26.9% for its small-cap benchmark, the Russell 2000, over the same period. While RTR trailed its benchmark in 2010, we were quite pleased with its absolute performance for the year. Particularly encouraging, dividend-paying smaller companies awoke from a long period of languishing behind non-dividend payers in the lower quality rally prior to the beginning of 2010, so relative results were favorable on that more general front as well. This could be seen earlier in the year, when RTR was down 0.9% through the year's first six months, outpacing the Russell 2000, which lost 1.9% for this volatile period.
     We were also happy with the way that the calendar-year result came about. The Fund participated to a large degree when share prices were rising—periods between February and April and from early July through the end of December—while losing less than its benchmark during the second-quarter downturn, a period that encompassed most of the correction that lasted from the interim small-cap peak on April 23, 2010 through the interim small-cap low on July 6, 2010. This period, marked by uncertainty surrounding the state of the Eurozone's finances and continued malaise in the U.S. housing and unemployment sectors, disrupted what had been a relatively undisturbed move up for equities from the bear market lows of March 2009.
During this downdraft, RTR, with its inherent defensive characteristics, fell 14.8% compared to a loss of 20.3% for the small-cap index. Thus the Fund performed in 2010 almost as well as we would have liked. This included the dynamic second half of the year when increased risk taking initiated by the Fed's decision to launch a second round of quantitative easing set off a powerful rally in the more risky components of the equity market. RTR was up 11.4% in the third quarter versus 11.3% for the Russell 2000. The fourth quarter, in which the Fund trailed on a relative basis (+11.9% versus +16.3%), saw an even more spirited bull run for stocks.
      Strong down market performance often comes with a cost during up periods, but it is one that we will readily accept for the combined return over a full market cycle. To this end, the Fund was up 114.9% from the small-cap low on March 9, 2009 through December 31, 2010,

  
 		  
 		   GOOD IDEAS THAT WORKED
  Top Contributors to 2010 Performance*
   
    Family Dollar Stores   0.74%
   
    Erie Indemnity Cl. A   0.48   
   
    SEACOR Holdings   0.34   
   
    Alliance Holdings GP L.P.   0.34   
   
    A.F.P. Provida ADR   0.32   
   
    * Includes dividends    
           
           
Important Performance and Expense Information
All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when redeemed. Shares redeemed within 180 days of purchase may be subject to a 1% redemption fee payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current performance may be higher or lower than performance quoted. Current month-end performance may be obtained at www.roycefunds.com. All performance and risk information reflects Investment Class results. Operating expenses reflect the Fund's total annual operating expenses for the Investment Class as of the Fund's most current prospectus and include management fees, other expenses and acquired fund fees and expenses. Acquired fund fees and expenses reflect the estimated amount of the fees and expenses incurred indirectly by the Fund through its investments in mutual funds, hedge funds, private equity funds and other investment companies. Shares of RTR's Service, Consultant, R and K Classes bear an annual distribution expense that is not borne by the Investment Class. The sum of all contributions and detractions for all securities would approximate the Fund's performance for 2010.

             22  |  The Royce Funds 2010 Annual Report to Shareholders



 
 
 
Performance and Portfolio Review


somewhat behind the Russell 2000's 134.0% return. Importantly, however, the Fund maintained its advantage over the Russell 2000 from the prior historic peak achieved on July 13, 2007, falling a modest 1.7% compared to the index's decline of 3.8% from that high. (Please see page 6 for recent market cycle results.) Looking at calendar year spans, the Fund was ahead of the small-cap index over longer-term time periods as well. RTR outperformed its benchmark for the three-, five-, 10-, 15-year and since inception (12/15/93) periods ended December 31, 2010. The Fund's average annual total return since inception was 11.3%.
     Given the breadth of 2010's rally, we were pleased but not surprised to see all of the Fund's eleven sectors generate positive performance for the year. Industrial Products was the standout contributor, followed by Financial Intermediaries and Natural Resources. Even economically sensitive sectors such as Consumer Services and Industrial Services, which pulled the Fund lower in the first half of the year, rebounded to make a positive contribution for the full year. Leading from an industry standpoint was a perennial favorite, the insurance group, followed by retail stores. While not a clean sweep, only the leisure and entertainment group and telecommunications companies detracted from the Fund's returns at the industry level, and did so to a very modest degree.
     
     Looking at the individual companies that contributed to the year's strong gains, it is notable that no one sector or industry was particularly dominant, highlighting the benefits of our generalist approach to security selection. As was the case in the first half, Family Dollar Stores led the pack for the full year. This national discount store chain offering a wide variety of value based merchandise benefitted from solid industry trends as consumers cautiously returned to their buying ways with a decided bias toward stores offering lower-priced goods. Erie Indemnity, the year's second-place finisher, provides property and casualty insurance. The company saw a solid pickup in underwriting activity, especially in the personal lines segment of its business, leading to a re-rating of the shares. SEACOR Holdings, a leading offshore oil and gas services company offering support vessels for a range of activities, was another solid performer, as the company saw a big bump in business following the Gulf oil spill.
     Worthy of mention was the year's top loser. Wilmington Trust, a storied institution in the financial sector originally established by the du Pont family, fell victim to an ill-timed foray into commercial real estate lending and was forced to accept a low acquisition price. Usually a pleasant byproduct of our investment process, Wilmington's takeover was actually a “take under,” in which the selling price for the company was substantially below the prevailing stock price, an event giving credence to the legacy challenges still confronting the banking industry.

GOOD IDEAS AT THE TIME
Top Detractors from 2010 Performance*

  
 
 
Wilmington Trust -0.20%  
 
Atlantic Tele-Network -0.16     
 
AllianceBernstein Holding L.P. -0.14     
 
American National Insurance -0.12     
 
ManTech International Cl. A -0.12     
 
*Net of dividends  
   
 
 
 
 
     
     
  PORTFOLIO DIAGNOSTICS  
 
 
  Average Market Capitalization* $2,068 million     
 
 
  Weighted Average P/E Ratio** 15.2x    
 
 
  Weighted Average P/B Ratio 1.8x     
 
 
  U.S. Investments
(% of Net Assets)		 90.5%     
 
 
  Non-U.S. Investments
(% of Net Assets)		 3.3%     
 
 
  Fund Net Assets $4,796 million     
 
 
  Turnover Rate 15%     
 
 
  Number of Holdings 430     
 
 
  Symbol    
      Investment Class RYTRX     
      Service Class RYTFX     
      Consultant Class RYTCX     
      Institutional Class RTRIX     
      W Class RTRWX     
      R Class RTRRX     
      K Class RTRKX     
 
 
   * Geometrically calculated  
 

**The Fund’s P/E ratio calculation excludes companies with zero or negative earnings (3% of portfolio holdings as of 12/31/10).

  
     
  MORNINGSTAR STATISTICAL MEASURES*  
 
 
    RTR Category Median Best Decile Breakpoint  
 
 
  Sharpe Ratio 0.22 0.20   0.37    
 
 
  Standard Deviation 18.85   22.50   20.05    
 
 
 

* Five years ended 12/31/10. Category Median and Best Decile Breakpoint based on 338 small-cap objective funds (oldest class only) with at least five years of history.

  
     
   
  RISK/RETURN COMPARISON
Five-Year Period Ended 12/31/10		  
 
 
    Average Annual Total Return Standard Deviation Return Efficiency*  
 
 
  RTR 4.70% 18.85   0.25    
 
 
  Russell 2000 4.47 23.11   0.19    
 
 
 

* Return Efficiency is the average annual total return divided by the annualized standard deviation over a designated time period. Please read the prospectus for a more complete discussion of risk. 

  
     
  DOWN MARKET PERFORMANCE COMPARISON
All Down Periods of 7.5% or Greater
Over the Last 10 Years, in Percentages(%)		  
   
     


The Royce Funds 2010 Annual Report to Shareholders  |  23                  



 

                   
                   
  CORE + DIVIDENDS  
 
 
 
Core + Dividends Funds generally invest in dividend-paying smaller companies using a diversified approach.
 
   
  AVERAGE ANNUAL TOTAL RETURNS
Through 12/31/10		  
 
 
  July-Dec 2010*   28.34 %  
 
 
  One-Year   30.11    
 
 
  Three-Year   7.09    
 
 
  Five-Year   8.03    
 
 
  Since Inception (5/3/04)   9.08    
 
 
  ANNUAL EXPENSE RATIO  
 
 
  Gross Operating Expenses   2.09 %  
 
 
  Net Operating Expenses   1.54  
 
 
  * Not annualized        
                   
  CALENDAR YEAR TOTAL RETURNS  
 
 
  Year RDV   Year   RDV  
 
 
  2010 30.1 %   2007   0.0 %  
 
 
  2009 37.7     2006   19.9    
 
 
  2008 -31.5     2005   7.3    
 
 
                   
  TOP 10 POSITIONS % of Net Assets  
 
 
  Federated Investors CL. B   1.6 %  
 
 
  Regis Corporation   1.3    
 
 
  National health Investors   1.1    
 
 
  Landstar System   1.1    
 
 
  Energen Corporation   1.1    
 
 
  Buckle (The)   1.1    
 
 
  Allied World Assurance Company Holdings   1.0    
 
 
  Reinsurance Group of America   1.0    
 
 
  Towers Watson & Company CL. A   1.0    
 
 
  E-L Financial   1.0    
 
 
                   
  PORTFOLIO SECTOR BREAKDOWN
% of Net Assets		  
 
 
  Financial Intermediaries   20.0 %  
 
 
  Industrial Products   20.0    
 
 
  Financial Services   13.7    
 
 
  Industrial Services   9.6    
 
 
  Consumer Services   6.4    
 
 
  Natural Resources   6.2    
 
 
  Consumer Products   5.3    
 
 
  Technology   3.9    
 
 
  Health   3.0    
 
 
  Utilities   0.1    
 
 
  Miscellaneous   4.9    
 
 
  Preferred Stock   0.0    
 
 
  Cash and Cash Equivalents   6.9    
 
 
     

 
 
Royce Dividend Value Fund
 
Managers’ Discussion
Although many riskier stocks did very well in 2010, dividend-paying micro-cap, small-cap and mid-cap companies were more than competitive. For the calendar year, Royce Dividend Value Fund (RDV) was up 30.1% versus a gain of 26.9% for its small-cap benchmark, the Russell 2000, for the same period. Posting strong absolute and relative results in 2010 left us quite pleased with its performance for the year. Dividend-paying small companies came off a long period of languishing behind non-dividend payers prior to the beginning of 2010, so results were encouraging on that more general front as well. This could be seen earlier in the year, when RDV was up 1.4% through the year's first six months, handily outpacing the Russell 2000, which lost 1.9% for the same period.
    We were also happy with the way that the calendar-year result came about. The Fund participated to a large degree when share prices were rising—periods between February and April and from early July through the end of December—while losing less than its benchmark during the second-quarter downturn, a period that encompassed most of the short-term correction that lasted from the interim small-cap peak on April 23, 2010 through the interim low on July 6, 2010. Thus, the Fund performed in 2010 about as well as we could hope. This includes the dynamic second half of the year. RDV was up 13.2% in the third quarter versus 11.3% for the Russell 2000. The fourth quarter saw an even more spirited bull run in which the Fund rose 13.4% compared to 16.3% for its small-cap benchmark.
      RDV gained 139.8% from the small-cap low on March 9, 2009 through December 31, 2010, ahead of the Russell 2000's 134.0% return. (Please see page 6 for recent market cycle results.) The Fund also beat the small-cap index over longer-term time periods, outperforming its benchmark for the three-, five-year and since inception (5/3/04) periods ended December 31, 2010. The Fund's average annual total return since inception was 9.1%.
     For the calendar year period, all of the Fund's ten equity sectors were positive performers. The Fund also drew ample success from its investments in non-U.S. companies. Industrial
   
  GOOD IDEAS THAT WORKED
  Top Contributors to 2010 Performance *
Family Dollar Stores     0.88%
China Forestry Holdings     0.82   
Sprott     0.62   
Affiliated Managers Group     0.60   
Waddell & Reed Financial CL. A     0.51   
* Includes dividends      
 
 
Important Performance and Expense Information
All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when redeemed. Shares redeemed within 180 days of purchase may be subject to a 1% redemption fee payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current performance may be higher or lower than performance quoted. Current month-end performance may be obtained at www.roycefunds.com. Gross operating expenses reflect the Fund's gross total annual operating expenses for the Service Class, and include management fees, 12b-1 distribution and service fees, other expenses and acquired fund fees and expenses. Net operating expenses reflect contractual fee waivers and/or expense reimbursements. All expense information is reported as of the Fund's most current prospectus. Royce & Associates has contractually agreed to waive fees and/or reimburse expenses to the extent necessary to maintain the Service Class's net annual operating expenses, other than acquired fund fees and expenses, at or below 1.49% through April 30, 2011 and at or below 1.99% through April 30, 2020. Acquired fund fees and expenses reflect the estimated amount of the fees and expenses incurred indirectly by the Fund through its investments in mutual funds, hedge funds, private equity funds and other investment companies. The sum of all contributions and detractions for all securities would approximate the Fund's performance for 2010.


24   |   The Royce Funds 2010 Annual Report to Shareholders


   
 
Performance and Portfolio Review
 
Products dominated performance, helped by a global industrial recovery. It easily outpaced each of the Fund's other sectors, though noteworthy contributions also came from Financial Intermediaries, Financial Services and Natural Resources. Industrial Products is home to several industry groups that posted strong-to-solid net gains in 2010, most notably the machinery, metal fabrication and distribution, and specialty chemicals and materials groups. From the Financial Services sector, the investment management group was the portfolio's top-performing industry, led by Sprott, Affiliated Managers Group, Waddell & Reed Financial, and Jupiter Fund Management. The market's recovery in 2009-2010 helped each company's stock price to climb. We reduced our stake in the latter firm, while adding to our respective positions in the first three throughout the year because we anticipate growth on a global scale for well-managed investment businesses as the economy continues to recover.
     Family Dollar Stores operates retail discount stores geared to low- and middle-income consumers. It managed well during the recession by, among other things, focusing on branded consumables, improving its supply chain for goods sold under its own label, beginning to accept food stamps and undertaking a plan to renovate its stores to meet or exceed its industry's sales per square foot standard. We like what the company has been doing as much as we like its strong balance sheet. Actively trading the stock through much of the year, we ended December with a net increase in shares. China Forestry Holdings engages in the upstream management and sustainable development of forests, as well as the sale of high-quality logs. Its impressive net profits drew investors to the stock and prompted us to trim our position in March and August.

GOOD IDEAS AT THE TIME
Top Detractors to 2010 Performance*
  
      Artio Global Investors was the greatest detractor to performance in 2010. The New York-based asset manager runs various actively managed portfolios primarily for institutional and intermediary clients in numerous investment strategies. We have historically liked companies in this industry while also being drawn to Artio's impressive long-term track record with non-U.S. equities. However, the performance of its two flagship international funds continued to lag in 2010, increasing fund outflows and driving down the company's share price. Along with our high regard for its core business, this led us to add to our position at various times throughout the year. We first bought shares of Tianneng Power International in May, shortly before it warned of lower profits in fiscal 2010. The Chinese firm manufactures motive battery devices, primarily for electric bikes, a business whose long-term prospects we find attractive, so the lower profit warning did not scare us away.
Artio Global Investors Cl. A   -0.20 %
Tianneng Power International   -0.18  
Total System Services   -0.18  
Tidewater   -0.17  
Arkansas Best   -0.10  
* Net of dividends      
 
 
 
 
 
                               
                               
                               
       PORTFOLIO DIAGNOSTICS  
   
 
    Average Market Capitalization*   $1,883 million  
   
 
    Weighted Average P/E Ratio**   17.0x  
   
 
    Weighted Average P/B Ratio   2.0x  
   
 
    U.S. Investments
(% of Net Assets)		   77.3%  
   
 
    Non-U.S. Investments
(% of Net Assets)		   15.8%  
   
 
    Fund Net Assets   $153 million  
   
 
    Turnover Rate   21%  
   
 
    Number of Holdings   244  
   
 
    Symbol      
   

Investment Class

   RDVIX  
   

Service Class

   RYDVX  
   
 
   
  * Geometrically calculated
 
   
** The Fund's P/E ratio calculation excludes companies with zero or negative earnings (3% of portfolio holdings as of 12/31/10).
  
       
    MORNINGSTAR STATISTICAL MEASURES*  
   
 
            Category   Best Decile  
        RDV   Median   Breakpoint  
   
 
    Sharpe Ratio       0.38         0.20         0.37    
   
 
    Standard Deviation        19.58          22.50          20.05    
   
 
   
*   Five years ended 12/31/10. Category Median and Best Decile Breakpoint based on 338 small-cap objective funds (oldest class only) with at least five years of history.
  
       
     
    RISK/RETURN COMPARISON
Five-Year Period Ended 12/31/10		  
   
 
        Average Annual
Total Return		   Standard
Deviation		   Return
Efficiency*		  
   
 
    RDV       8.03%       19.58           0.41    
   
 
    Russell 2000       4.47       23.11         0.19    
   
 
   
* Return Efficiency is the average annual total return divided by the annualized standard deviation over a designated time period. Please read the prospectus for a more complete discussion of risk. 
  
       
    DOWN MARKET PERFORMANCE
COMPARISON
All Down Periods of 7.5% or Greater
in Percentages(%)		  
       
     
       
 



The Royce Funds 2010 Annual Report to Shareholders   |  25



 
                   
                   
                   
  FOCUSED  
 
 
 
Focused Funds generally employ a more limited portfolio approach—typically holding no more than 100 positions that we believe possess high quality.
  
     
  AVERAGE ANNUAL TOTAL RETURNS
Through 12/31/10		  
 
 
  July-Dec 2010*   30.05 %  
 
 
  One-Year   26.46    
 
 
  Three-Year   6.51    
 
 
  Five-Year   8.19    
 
 
  10-Year   11.57    
 
 
  15-Year   12.47    
 
 
  Since Inception (12/31/91)   12.75    
 
 
  ANNUAL EXPENSE RATIO  
 
 
  Operating Expenses   1.15 %  
 
 
  * Not annualized        
                   
  CALENDAR YEAR TOTAL RETURNS  
 
 
  Year RPR   Year   RPR  
 
 
  2010 26.5 %   2002   -7.8 %  
 
 
  2009 33.3     2001   9.6    
 
 
  2008 -28.3     2000   17.1    
 
 
  2007 12.7     1999   11.5    
 
 
  2006 8.8     1998   6.7    
 
 
  2005 17.1     1997   18.4    
 
 
  2004 22.8     1996   18.1    
 
 
  2003 38.7     1995   17.8    
 
 
                   
  TOP 10 POSITIONS % of Net Assets  
 
 
  Pan American Silver   2.9 %  
 
 
  Lincoln Electric Holdings   2.4    
 
 
  Dionex Corporation   2.4    
 
 
  Gartner   2.3    
 
 
  Fossil   2.2    
 
 
  Gardner Denver   2.2    
 
 
  Thor Industries   2.2    
 
 
  Woodward Governor   2.1    
 
 
  Schnitzer Steel Industries Cl. A   2.1    
 
 
  Trican Well Service   2.0    
 
 
                   
  PORTFOLIO SECTOR BREAKDOWN
% of Net Assets		  
 
 
  Industrial Products   20.7 %  
 
 
  Natural Resources   14.7    
 
 
  Technology   13.6    
 
 
  Consumer Products   11.7    
 
 
  Industrial Services   9.7    
 
 
  Financial Intermediaries   6.5    
 
 
  Health   4.2    
 
 
  Financial Services   3.9    
 
 
  Consumer Services   2.4    
 
 
  Miscellaneous   2.8    
 
 
  Cash and Cash Equivalents   9.8    
 
 
     
     

 
 
Royce Premier Fund
 
Managers’ Discussion
The limited portfolio of small-cap stocks that comprise Royce Premier Fund (RPR) recovered very nicely from a somewhat slow start in the first half of 2010. The Fund was up 26.5% for the calendar year versus a 26.9% return for its small-cap benchmark, the Russell 2000, for the same period. The Fund was down 2.8% through 2010's first six months, though it held up better than its benchmark in the bearish second quarter as well as from the interim small-cap high on April 23 through the end of December. This is primarily attributable to the Fund's edge over its benchmark during the year's only significant correction. From April 23, 2010 through the interim small-cap market low on July 6, 2010, the Fund fell 16.8% versus a decline of 20.3% for the Russell 2000. We mention this because performance in more challenging markets, even in shorter ones, has always been very important to us.
     Share prices throughout the stock market revived following the interim small-cap low on July 6, 2010, and RPR participated fully in the shift from bear to bull. During the third quarter, the Fund gained 12.5%, ahead of the 11.3% return for its benchmark. While the Fund's showing was more than satisfactory on an absolute basis, this pattern reversed itself in the even more robust fourth quarter, with RPR up 15.6% versus 16.3% for the Russell 2000.
     Although its strong second half helped it to narrow the gap somewhat, RPR remained behind its benchmark from the small-cap low on March 9, 2009 through December 31, 2010, up 125.7% versus 134.0% for the small-cap index. (Please see page 6 for recent market cycle results.) However, we were encouraged by the Fund's results over longer-term time periods, particularly because we gauge the portfolio's performance over spans that include both up and down market phases. We are thus pleased to report that RPR beat the Russell 2000 for the three-, five-, 10-, 15-year and since inception (12/31/91) periods ended December 31, 2010. The Fund's average annual total return since inception was 12.8%.
  
  GOOD IDEAS THAT WORKED
  Top Contributors to 2010 Performance*
Fossil   2.26 %
Pan American Silver   1.59  
Gartner   1.52  
Gardner Denver   1.23  
Perrigo Company   1.22  
* Includes dividends      
 
 
 
     Over the last few years, fashion accessories maker and retailer Fossil has shown that it can survive profitably through an historically difficult market for consumer goods and benefit from an economic upturn. Management's domestic repositioning of its core Fossil brand, international consumers' desire to buy recognizable brands, and an accelerated roll-out of its own retail stores have all proven to be smart, timely developments. The company also
 

Important Performance and Expense Information
All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when redeemed. Shares redeemed within 180 days of purchase may be subject to a 1% redemption fee payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current performance may be higher or lower than performance quoted. Current month-end performance may be obtained at www.roycefunds.com. All performance and risk information reflects Investment Class results. Operating expenses reflect the Fund's total annual operating expenses for the Investment Class as of the Fund's most current prospectus and include management fees, and other expenses. Shares of RPR's Service, Consultant, R and K Classes bear an annual distribution expense that is not borne by the Investment Class. The sum of all contributions and detractions for all securities would approximate the Fund's performance for 2010.


26   |   The Royce Funds 2010 Annual Report to Shareholders


 
 
Performance and Portfolio Review
 
gained from watches coming back in style in 2010. Although we took gains throughout the year, Fossil was RPR's fifth-largest holding at yearend. Not highly publicized in the financial collapse of 2008 was a dramatic decline in silver prices, which allowed us to build our stake in Pan American Silver, a Canadian company that operates seven mines in Mexico, Peru and Bolivia. The world's second-largest silver producer (and the Fund's largest holding at the end of 2010), its proven ability to make the transition from exploration to production was key in attracting our interest in the company. We built our position through August before making modest trims in November.
      Two other top-ten holdings were also among the Fund's top contributors. Gartner provides IT (information technology) research and other consulting services, non-capital intensive businesses that we have long admired for their ability to generate cash. One of the company's primary revenue generators—a subscription model research product—grew by 14% in the first quarter, which helped its share price to rise in the otherwise dismal first half. Robust revenues and earnings allowed the trend to continue through December. We think that Gardner Denver, which makes compressor, vacuum and fluid transfer products used in cleaning oil rigs, is a great example of a U.S. industrial company that successfully managed its way through the recession. Its intelligent management put the company in position to benefit from both the rebound in energy prices and the global industrial recovery.

GOOD IDEAS AT THE TIME
Top Detractors to 2010 Performance*
  
     Perrigo Company produces store-brand drugs, prescription pharmaceuticals and nutritional products. We like the way that the firm has expanded market share both with new prescription drugs and with other prescription-only products shifting to OTC. Its stock price was in good health through most of 2010, largely the result of a steadily improving earnings picture.
     Disappointed with how new federal regulations were hampering its stock price, we sold our shares of for-profit education company Corinthian Colleges in RPR. While we still like the industry, we did not think it was up to the very demanding quality standard that we set for inclusion in the portfolio. The St. Joe Company is a Florida-based real estate development business that specializes in procuring the necessary permits and zoning for others to build on the more than a half million acres it owns in the Florida Panhandle, an area devastated by the U.S. housing downturn. We still like its long-term prospects in an eventual comeback for housing prices.
Corinthian Colleges   -0.64 %
St. Joe Company (The)   -0.39  
Arkansas Best   -0.27  
Knight Capital Group Cl. A   -0.20  
Comtech Telecommunications   -0.18  
* Net of dividends      
 
 
 
 
 
 
                               
                               
                               
      PORTFOLIO DIAGNOSTICS  
   
 
    Average Market Capitalization*   $2,503 million  
   
 
    Weighted Average P/E Ratio**   19.8x  
   
 
    Weighted Average P/B Ratio   2.5x  
   
 
    U.S. Investments (% of Net Assets)   81.9%  
   
 
    Non-U.S. Investments (% of Net Assets)   8.3%  
   
 
    Fund Net Assets   $6,765 million  
   
 
    Turnover Rate   10%  
   
 
    Number of Holdings   70  
   
 
    Symbol

      
   

Investment Class

   RYPRX  
   

Service Class

   RPFFX  
   

Consultant Class

   RPRCX  
   

Institutional Class

   RPFIX  
   

W Class

   RPRWX  
   

R Class

   RPRRX  
   

K Class

   RPRKX  
   
 
   
  * Geometrically calculated
 
   
** The Fund's P/E ratio calculation excludes companies with zero or negative earnings (6% of portfolio holdings as of 12/31/10).
  
       
    MORNINGSTAR STATISTICAL MEASURES*  
   
 
            Category   Best Quartile  
        RPR   Median   Breakpoint  
   
 
    Sharpe Ratio      0.37       0.20       0.28    
   
 
    Standard Deviation     20.96        22.50        21.29    
   
 
   
* Five years ended 12/31/10. Category Median and Best Quartile Breakpoint based on 338 small-cap objective funds (lowest expense class only) with at least five years of history.
  
       
    RISK/RETURN COMPARISION
Five-Year Period Ended 12/31/10		  
       
        Average Annual
Total Return		   Standard
Deviation		   Return
Efficiency*		  
   
 
    RPR      8.19%     20.96    0.39  
   
 
    Russell 2000    4.47   23.11   0.19  
   
 
   
* Return Efficiency is the average annual total return divided by the annualized standard deviation over a designated time period. Please read the prospectus for a more complete discussion of risk.
  
       
    DOWN MARKET PERFORMANCE COMPARISON
All Down Periods of 7.5% or Greater
Over the Last 10 Years, in Percentages(%)		  
   
       
 

The Royce Funds 2010 Annual Report to Shareholders   |  27



 
                   
                   
                   
  FOCUSED  
 
 
  Focused Funds generally employ a more limited portfolio approach—typically holding no more than 100 positions that we believe possess high quality.  
     
  AVERAGE ANNUAL TOTAL RETURNS
Through 12/31/10		  
 
 
  July-Dec 2010*   23.28 %  
 
 
  One-Year   19.61    
 
 
  Three-Year   7.27    
 
 
  Five-Year   8.07    
 
 
  10-Year   12.33    
 
 
  Since Inception (5/1/98)   9.43    
 
 
  ANNUAL EXPENSE RATIO        
 
 
  Operating Expenses   1.17 %  
 
 
  *Not annualized        
                   
  CALENDAR YEAR TOTAL RETURNS  
 
 
  Year RSE   Year   RSE  
 
 
  2010 19.6 %   2004   13.9 %  
 
 
  2009 28.4     2003   27.6    
 
 
  2008 -19.6     2002   15.3    
 
 
  2007 4.7     2001   30.7    
 
 
  2006 14.0     2000   16.3    
 
 
  2005 -1.0     1999   -9.6    
 
 
                   
  TOP 10 POSITIONS % of Net Assets  
 
 
  National Presto Industries   3.5 %  
 
 
  AVX Corporation   3.3    
 
 
  Lubrizol Corporation (The)   3.2    
 
 
  Hubbell Cl. B   2.8    
 
 
  Bio-Rad Laboratories Cl. A   2.7    
 
 
  Lancaster Colony   2.6    
 
 
  Bed Bath & Beyond   2.5    
 
 
  Clearwater Paper   2.4    
 
 
  Dorman Products   2.3    
 
 
  Thomas & Betts   2.2    
 
 
                   
  PORTFOLIO SECTOR BREAKDOWN
% of Net Assets		  
 
 
  Industrial Products   29.9 %  
 
 
  Technology   13.7    
 
 
  Consumer Products   12.3    
 
 
  Consumer Services   9.9    
 
 
  Health   8.2    
 
 
  Industrial Services   7.4    
 
 
  Financial Services   1.9    
 
 
  Natural Resources   0.2    
 
 
  Miscellaneous   1.2    
 
 
  Cash and Cash Equivalents   15.3    
 
 
     
     

 
 
Royce Special Equity Fund
 
Manager’s Discussion
While the market struggled through much of 2010's first half, it rebounded solidly during the second. Worries over global debt, housing, unemployment and the specters of deflation and inflation remained on the minds of many, though not, it would appear, to the same degree that they were between January and June. In this environment, Royce Special Equity Fund (RSE) enjoyed a strong year on an absolute basis, up 19.6%, trailing its benchmark, the Russell 2000, which gained 26.9% for the same period. Lower-quality equities generally did better in 2010, especially through the dynamic upswing that encompassed nearly all of the year's second half, making the Fund's underperformance versus the small-cap index unsurprising.
     We were pleased with RSE's performance in the year's notable downdraft. Shortly after the second quarter began, the rally that had started in February sputtered, setting off a correction that lasted until early July. From the interim small-cap high on April 23, 2010 through July 6, 2010, RSE fell 16.0% versus a loss of 20.3% for the Russell 2000. (Please see page 6 for more market cycle results.) The Fund then performed more than respectably during the third quarter, up 8.1% versus 11.3% for its benchmark. The appetite for risk only seemed to grow the longer the recovery in share prices went on. The fourth quarter set a particularly torrid pace. Between October and December, RSE was up 14.1% versus a gain of 16.3% for the Russell 2000. Over longer-term periods, however, the Fund owned a performance edge over the small-cap index, outpacing its benchmark for the three-, five-, 10-year and since inception (5/1/98) periods ended December 31, 2010. RSE's average annual total return since inception was 9.4%.
     The classic value methodology that we use in the Fund means that we seek to be opportunistic and to achieve strong absolute (and, ideally, index-beating) returns over the long term, while at the same time, and with equal if not greater diligence, we try to achieve lower volatility. As has been the case since RSE's inception, capital preservation means as much to us as capital appreciation. It should also be noted that many investors have sought what they perceive to be relatively lower volatility of RSE over the potentially higher returns offered elsewhere that may also come with greater risk and volatility.
     We seek securities with decent dividend yields and stable, high free-cash flow and think that such companies should do better in an environment that is likely to feature higher
 
 
GOOD IDEAS THAT WORKED
Top Contributors to 2010 Performance*
Dorman Products   1.73 %
Lubrizol Corporation (The)   1.50  
Deckers Outdoor   1.42  
Gymboree Corporation   1.17  
National Presto Industries   1.17  
*Includes dividends      
 
Important Performance and Expense Information
All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when redeemed. Shares redeemed within 180 days of purchase may be subject to a 1% redemption fee payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current performance may be higher or lower than performance quoted. Current month-end performance may be obtained at www.roycefunds.com. All performance and risk information reflects Investment Class results. Operating expenses reflect the Fund's total annual operating expenses for the Investment Class as of the Fund's most current prospectus and include management fees, and other expenses. Shares of RSE's Service and Consultant Classes bear an annual distribution expense that is not borne by the Investment Class. The sum of all contributions and detractions for all securities would approximate the Fund's performance for 2010.


28   |   The Royce Funds 2010 Annual Report to Shareholders



 
 
Performance and Portfolio Review
 
interest rates. Perhaps investing for growing dividends may be the bridge between the popularity of bonds in the recent past and the attraction of equities in the near future. We remain committed to our very disciplined process for the selection and analysis of what we regard as high-quality, inexpensive, financially productive, cash-generating companies with attractive accounting practices. This has been, and we believe will continue to be, a way to post superior returns with less volatility. We continue to believe that companies with financial strength and flexibility will be rewarded, not only as targets for transactional activity, but also for their ability (and likelihood) to initiate or raise dividends. This should largely result from quality once again being appreciated and from continued transactional activities, including private equity, LBO (leveraged buyouts), strategic mergers, share repurchases, dividend hikes, and special dividends. We saw evidence of this in November with the acquisition of Gymboree, one the Fund's top performers in 2010. We would not be surprised to see similar events within the portfolio in the months to come.
     For the calendar-year period, all of the Fund’s eight equity sectors were positive. Industrial Products led by a large margin, more than doubling the gain of the Fund’s next-best sector, Consumer Products. At the industry level, the leading groups were retail stores, specialty chemicals and materials, and apparel, shoes and accessories companies. Dorman Products was the best-performing holding for the year. The Colmar, PA. based company is a supplier of automotive replacement parts.

GOOD IDEAS AT THE TIME
Top Detractors to 2010 Performance*
  
      Lubrizol Corporation is a specialty chemicals company that specializes in transportation and industrial lubricants, while Deckers Outdoors makes and markets footwear and related accessories under several brand names, including UGG and Teva. National Presto Industries was the largest holding within the portfolio. A significant contributor in 2009, it also enjoyed a strong second half in 2010. The Eau Claire, Wisconsin company is a diversified manufacturing firm that produces defense products, small appliances, and absorbent products. The Fund's two largest detractors were sold in 2010. Genoptix is a medical laboratory that provides medicine services to hematologists and oncologists. Sykes Enterprises is an IT services company that provides outsourced customer contact management solutions and services in the business process outsourcing arena.
Genoptix   -0.98 %
Sykes Enterprises   -0.67  
Baker (Michael)   -0.34  
Arris Group   -0.21  
Tekelec   -0.15  
*Net of dividends      
 
 
 
 
 
                             
                             
                             
  PORTFOLIO DIAGNOSTICS  
 
 
  Average Market Capitalization*   $1,385 million  
 
 
  Weighted Average P/E Ratio**   15.7x  
 
 
  Weighted Average P/B Ratio   2.1x  
 
 
  U.S. Investments (% of Net Assets)   84.7%  
 
 
  Non-U.S. Investments (% of Net Assets)   0.0%  
 
 
  Fund Net Assets   $2,132 million  
 
 
  Turnover Rate   21%  
 
 
  Number of Holdings   74  
 
 
  Symbol      
 

Investment Class

   RYSEX  
 

Service Class

   RSEFX  
 

Consultant Class

   RSQCX  
 

Institutional Class

   RSEIX  
 
 
 
 *Geometrically calculated
  
 

**The Fund’s P/E ratio calculation excludes companies with zero or negative earnings (3% of portfolio holdings as of 12/31/10).
  
     
  MORNINGSTAR STATISTICAL MEASURES*  
 
 
              Category   Best Decile  
      RSE   Median   Breakpoint  
 
 
  Sharpe Ratio     0.41       0.20       0.37    
 
 
  Standard Deviation     16.95       22.50       20.05    
 
 
 
*Five years ended 12/31/10 Category Median and Best Decile Breakpoint based on 338 small-cap objective funds (oldest class only) with at least five years of history.
  
     
  RISK/RETURN COMPARISON
Five-Year Period Ended 12/31/10 		 
 
 
                     
      Average Annual
Total Return		   Standard
Deviation		   Return
Efficiency*		  
 
 
  RSE     8.07 %     16.95       0.48    
 
 
  Russell 2000     4.47       23.11       0.19    
 
 
 
* Return Efficiency is the average annual total return divided by the annualized standard deviation over a designated time period. Please read the prospectus for a more complete discussion of risk.
 
     
  DOWN MARKET PERFORMANCE COMPARISON
All Down Periods of 7.5% or Greater Over the Last 10 Years, in Percentages(%) 		 
   
     


The Royce Funds 2010 Annual Report to Shareholders   |  29



 
     
 

   

  
  FOCUSED  
 
 
 

Focused Funds generally employ a more limited portfolio approach—typically holding no more than 100 positions that we believe possess high quality.

  
 

   

  
  AVERAGE ANNUAL TOTAL RETURNS
Through 12/31/10		  
 
 
  July-Dec 2010*   29.71 %  
 
 
  One-Year         24.97    
 
 
  Three-Year         5.96    
 
 
  Five-Year         7.59    
 
 
  Since Inception (6/14/01)         12.63    
 
 
  ANNUAL EXPENSE RATIO  
 
 
  Operating Expenses   1.47 %  
 
 
  * Not annualized  
         
  CALENDAR YEAR TOTAL RETURNS  
 
 
  Year   RVV     Year     RVV    
 
 
  2010   25.0 %   2005     17.2 %  
 
 
  2009   44.7     2004     30.9    
 
 
  2008   -34.2     2003     54.3    
 
 
  2007   3.8     2002      -23.5    
 
 
  2006   16.8                
 
 
                       
  TOP 10 POSITIONS % of Net Assets  
 
 
  Reliance Steel & Aluminum   2.9 %  
 
 
  GameStop Corporation Cl. A   2.8    
 
 
  Pan American Silver   2.7    
 
 
  Federated Investors Cl. B   2.5    
 
 
  ManTech International Cl. A   2.5    
 
 
  Schnitzer Steel Industries Cl. A   2.5    
 
 
  Helmerich & Payne   2.4    
 
 
  Buckle (The)   2.3    
 
 
  Unit Corporation   2.2    
 
 
  PartnerRe   2.1    
 
 
                       
  PORTFOLIO SECTOR BREAKDOWN
% of Net Assets		  
 
 
  Natural Resources   23.1 %  
 
 
  Technology   13.6    
 
 
  Consumer Services   12.3    
 
 
  Financial Intermediaries   12.0    
 
 
  Industrial Products   11.7    
 
 
  Financial Services   6.8    
 
 
  Consumer Products   6.1    
 
 
  Industrial Services   5.2    
 
 
  Health   5.0    
 
 
  Miscellaneous   2.5    
 
 
  Cash and Cash Equivalents   1.7    
 
 
     



Royce Value Fund

Managers’ Discussion
The strong year for stocks throughout the market, particularly for small-cap and mid-cap issues, helped the performance of Royce Value Fund (RVV) in 2010. For the calendar year, RVV gained 25.0%, trailing its small-cap benchmark, the Russell 2000, which was up 26.9% for the same period. Underperforming the index was a minor disappointment, as we were pleased with the Fund's showing on an absolute basis. After a not-so-stellar first half (-3.7%), RVV rebounded, along with much of the market, over the year's final six months. During the third quarter, the Fund was up 10.9% compared to an 11.3% return for its benchmark. The fourth quarter was even more bullish. The Fund followed suit, outpacing the small-cap index, rising 17.0%, while the Russell 2000 climbed 16.3%.
      Within a mostly positive year, the Fund was ahead of the small-cap index during the only significant downturn in 2010. From the interim small-cap high on April 23, 2010 through the interim small-cap low on July 6, 2010, RVV lost 15.5% versus a decline of 20.3% for the Russell 2000. The Fund was competitive with the small-cap index from the market low on March 9, 2009 through the end of 2010, gaining 128.9% versus 134.0% for the benchmark. (Please see page 6 for recent market cycle results.)
     Relative underperformance versus the small-cap index notwithstanding, the Fund has recently performed in line with our expectations by losing less in downdrafts and remaining close to the Russell 2000 during upswings by posting solid to strong performance on an absolute basis. These kinds of performances helped RVV to hold an advantage over the Russell 2000 over longer-term periods. The Fund beat the index for the three-, five-year and since inception (6/14/01) periods ended December 31, 2010. RVV's average annual total return since inception was 12.6%.
      Even in the most stable or dynamic economic times, we look for companies that we think are capable of managing well through difficulties. For example, we were drawn to fashion accessories maker and retailer Fossil well before the crisis that began late in 2008. The company then proved its mettle by effectively managing its way through that period, which was particularly hard for retail businesses, before enjoying even more growth when the economy began to revive. We liked the way that management repositioned its core brands, met non-U.S. consumers' desire to buy known American brands, and sped up a roll-out of its
      GOOD IDEAS THAT WORKED
  Top Contributors to 2010 Performance*
   
    Fossil   1.73%
   
    Pan American Silver   1.43   
   
    Family Dollar Stores   1.31   
   
    Fresnillo   1.05   
   
    Red Back Mining   1.04   
   
    *Includes dividends    
 
 
 
           
           
Important Performance and Expense Information
All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when redeemed. Shares redeemed within 180 days of purchase may be subject to a 1% redemption fee payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current performance may be higher or lower than performance quoted. Current month-end performance may be obtained at www.roycefunds.com. All performance and risk information reflects Service Class results. Operating expenses reflect the Fund's total annual operating expenses for the Service Class as of the Fund's most current prospectus and include management fees, 12b-1 distribution and service fees, and other expenses. Shares of RVV's Consultant and R Classes bear an annual distribution expense that is higher than that of the Service Class. The sum of all contributions and detractions for all securities would approximate the Fund's performance for 2010.

             30  |  The Royce Funds 2010 Annual Report to Shareholders



 
 
 
Performance and Portfolio Review


own retail stores, each of which helped it to grow more profitably. Fossil also benefitted from watches coming back in style in 2010. We took gains in April and again between October and December. Family Dollar Stores operates retail discount stores geared to low- and middle-income consumers. Like Fossil, it managed well during the recession, though in its own way. Among other moves, the company focused on branded consumables, improved its supply chain for goods sold under its own label, began accepting food stamps and undertook a plan to renovate its stores to meet or exceed its industry's sales per square foot standard. We like what the company has been doing as much as we like its strong balance sheet. We reduced our position in June, September and December as its share price climbed.
     Three precious metals and mining companies were top performers in 2010, largely aided by a welcome increase in gold and silver prices. Although it received little publicity at the time, the financial collapse of 2008 also triggered a precipitous drop in silver prices, which allowed us to build our stake in Pan American Silver, a Canadian firm with seven mines operating in Mexico, Peru and Bolivia and others in the exploration stage. Now the world's second-largest silver producer (and the Fund's third-largest holding at yearend), its success in moving from exploration to production was a critical factor in our decision to first buy and then build our position. Fresnillo, the world's largest primary silver producer and Mexico's second-largest gold producer, has operations in Mexico. The  stock prices of  both silver miners rose  as silver prices  climbed from a  combination of renewed
     
industrial demand and the growing appreciation of silver as an inflation hedge. Red Back Mining effectively added production capabilities to its solid exploration business and in doing so saw positive results from mines in Ghana and Mauritania, results that made it attractive to Kinross Gold, which acquired Red Back in September at a healthy premium.
     The industry group was also home to one of the Fund's most significant detractors in 2010, Gammon Gold, a gold and silver exploration company with operations in Mexico. Our experience provided a cautionary tale of the dangers of buying shares of mining businesses that have not proven they can handle the transition from exploration to production, as multiple problems in several mines have hurt results. We finished selling our shares in RVV during October. We felt a bit more confident in the turnaround prospects for mobile-data communications equipment maker Comtech Telecommunications, which late in 2010 initiated a dividend and started to buy back stock, both of which helped its stock price to bounce back to some degree.

GOOD IDEAS AT THE TIME
Top Detractors from 2010 Performance *

  
 
 
Comtech Telecommunications -0.74%     
 
Gammon Gold -0.58        
 
ManTech International Cl. A -0.50        
 
Knight Capital Group Cl. A -0.41        
 
Tidewater -0.25        
 
*Net of dividends  
   



 
 
 
 
 
     
     
  PORTFOLIO DIAGNOSTICS  
 
 
  Average Market Capitalization* $2,646 million     
 
 
  Weighted Average P/E Ratio** 13.2x    
 
 
  Weighted Average P/B Ratio 2.0x     
 
 
  U.S. Investments
(% of Net Assets)		 85.5%     
 
 
  Non-U.S. Investments
(% of Net Assets)		 12.8%     
 
 
  Fund Net Assets $1,825 million     
 
 
  Turnover Rate 35%     
 
 
  Number of Holdings 69     
 
 
  Symbol    
      Investment Class RVVHX     
      Service Class RYVFX     
      Consultant Class RVFCX     
      Institutional Class RVFIX     
      R Class RVVRX     
      K Class RVFKX     
 
 
   * Geometrically calculated  
 

**The Fund’s P/E ratio calculation excludes companies with zero or negative earnings (3% of portfolio holdings as of 12/31/10).

  
     
  MORNINGSTAR STATISTICAL MEASURES*  
 
 
    RVV Category Median Best Quartile Breakpoint  
 
 
  Sharpe Ratio 0.34 0.20   0.28    
 
 
  Standard Deviation   23.21   22.50   21.29    
 
 
 

* Five years ended 12/31/10. Category Median and Best Quartile Breakpoint based on 338 small-cap objective funds (oldest class only) with at least five years of history.

  
     
  RISK/RETURN COMPARISON
Five-Year Period Ended 12/31/10		  
 
 
    Average Annual
Total Return		 Standard Deviation Return
Efficiency*		  
 
 
  RVV 7.59% 23.21   0.33    
 
 
  Russell 2000   4.47     23.11   0.19    
 
 
 

* Return Efficiency is the average annual total return divided by the annualized standard deviation over a designated time period. Please read the prospectus for a more complete discussion of risk.

  
     
  DOWN MARKET PERFORMANCE COMPARISON
All Down Periods of 7.5% or Greater in Percentages(%) 		 
   
     

The Royce Funds 2010 Annual Report to Shareholders   |   31                  


 
     
   
 

FOCUSED  

  
 
 
 

Focused Funds generally employ a more limited portfolio approach—typically holding no more than 100 positions that we believe possess high quality.

  
 

   

  
  AVERAGE ANNUAL TOTAL RETURNS
Through 12/31/10		  
 
 
  July-Dec 2010*   28.68 %  
 
 
  One-Year         24.77    
 
 
  Three-Year         6.85    
 
 
  Five-Year         8.29    
 
 
  Since Inception (6/30/03)   12.43    
 
 
  ANNUAL EXPENSE RATIOS  
 
 
  Gross Operating Expenses   1.54 %  
 
 
  Net Operating Expenses   1.49  
 
 
  * Not annualized  
         
  CALENDAR YEAR TOTAL RETURNS  
 
 
  Year   ROH     Year     ROH    
 
 
  2010   24.8 %   2006     13.7 %  
 
 
  2009   38.0     2005     14.9    
 
 
  2008   -29.2     2004     27.2    
 
 
  2007   7.3                
 
 
                       
  TOP 10 POSITIONS % of Net Assets
 
 
  Rofin-Sinar Technologies   1.5 %  
 
 
  Oil States International   1.5    
 
 
  Kennametal   1.5    
 
 
  Helmerich & Payne   1.4    
 
 
  Manpower   1.4    
 
 
  Expeditors International of Washington   1.4    
 
 
  Major Drilling Group International   1.4    
 
 
  GrafTech International   1.4    
 
 
  Greif Cl. A   1.3    
 
 
  Sims Metal Management ADR   1.3    
 
 
                       
  PORTFOLIO SECTOR BREAKDOWN
% of Net Assets		  
 
 
  Industrial Services   20.9 %  
 
 
  Industrial Products   19.4    
 
 
  Technology   14.3    
 
 
  Natural Resources   12.1    
 
 
  Financial Services   11.4    
 
 
  Consumer Products   5.9    
 
 
  Financial Intermediaries   2.1    
 
 
  Health   1.6    
 
 
  Consumer Services   1.4    
 
 
  Miscellaneous   3.7    
 
 
  Cash and Cash Equivalents   7.2    
 
 
     



Royce 100 Fund

Managers' Discussion
After getting off to a rough start in the year's first half (-3.0%), Royce 100 Fund (ROH) managed very well through the second half of 2010. For the calendar year, the Fund was up 24.8% versus a gain of 26.9% for its small-cap benchmark, the Russell 2000 for the same period. While it was something of a letdown to underperform the small-cap index, we were otherwise very pleased with the Fund's showing on an absolute basis in 2010. In a more general sense, we were also happy to see the market rebound so dramatically in the year's final six months.
     Although ROH posted a negative return through the end of June, it lost less than its benchmark in the year's only significant correction. From the interim small-cap high on April 23, 2010 through the interim small-cap low on July 6, 2010, the Fund was down 16.6% while the Russell 2000 fell 20.3%. Our goal in general is to provide this kind of relative outperformance in more difficult markets while remaining at least close to the small-cap market's returns during dynamic up markets. This was the case from both the most recent market low in March 2009 and also through the second half of 2010. From the market low on March 9, 2009 through December 31, 2010, ROH climbed 130.1% versus 134.0% for the Russell 2000. (Please see page 6 for more market cycle results.) During 2010's third quarter, the Fund was up 11.1%, just a bit behind its benchmark's 11.3% return, while in the even more bullish fourth quarter ROH rose 15.8% versus 16.3% for the small-cap index.
     We were pleased that the Fund outperformed the Russell 2000
over longer-term periods, beating the small-cap index for the three-, five-year and since inception (6/30/03) periods ended December 31, 2010. ROH's average annual total return for the since inception period was 12.4%.
     While all but two of the Fund's equity sectors finished the year with net gains, the Fund's four largest sectors dominated. Industrial Products, Natural Resources, Technology and Industrial Services posted the largest contributions to calendar-year returns, in that order. We have been actively investing in each area since the fall of 2008. At the end of the year, ROH was overweight in each of these sectors (relative to the Russell 2000) except Technology. Precious metals and mining companies and energy services
 

GOOD IDEAS THAT WORKED
Top Contributors to 2010 Performance*
   
    Fresnillo   1.01%
   
    Cliffs Natural Resources   0.93   
   
    Gartner   0.84   
   
    Oil States International   0.82   
   
    Expeditors International of Washington   0.73   
   
    *Includes dividends    
           
           
Important Performance and Expense Information
All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when redeemed. Shares redeemed within 180 days of purchase may be subject to a 1% redemption fee payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current performance may be higher or lower than performance quoted. Current month-end performance may be obtained at www.roycefunds.com. All performance and risk information reflects Service Class results. Gross operating expenses reflect the Fund's gross total annual operating expenses for the Service Class and include management fees, 12b-1 distribution and service fees, and other expenses. Net operating expenses reflect contractual fee waivers and/or expense reimbursements. All expense information is reported as of the Fund's most current prospectus. Royce & Associates has contractually agreed to waive fees and/or reimburse operating expenses to the extent necessary to maintain the Service Class's net annual operating expenses at below 1.49% through April 30, 2011. Shares of ROH's R Class bear an annual distribution expense that is higher than that of the Service Class. The sum of all contributions and detractions for all securities would approximate the Fund's performance for 2010.

             32  |  The Royce Funds 2010 Annual Report to Shareholders



 
 
 
Performance and Portfolio Review


stocks, both from Natural Resources, led all of the Fund's industry groups. Fresnillo operates mines in Mexico and is the world's largest primary silver producer and Mexico's second-largest gold producer. Its stock price soared as silver prices rose more than 80% due to a mixture of renewed industrial demand and the growing appreciation of silver as an inflation hedge. The company has an attractive combination of a very high-quality asset base and low operational costs, which should allow for margins above its industry's average for the foreseeable future. After building our position between February and April, we took some gains in December.
     Cliffs Natural Resources is a mining and natural resources company that produces iron ore and coal in North America, South America and Australia. Its business grew as iron ore prices rose throughout the year on strengthening demand for steel in Asia. We reduced our stake in October. Oil States International provides specialized products and services to the oil and gas industry. Rising oil prices and increased demand fueled results, as did the firm's announcement of its acquisition of a leading Australian remote accommodations company that will provide it with a new geographic growth platform. Although we sold some shares in June, it was the Fund's second-largest holding at the end of December.
     
     Elsewhere in the portfolio, Gartner provides IT (information technology) research and other consulting services, non-capital intensive businesses that we have long admired for their ability to generate cash. One of the company's primary revenue generators—a subscription model research product—grew by 14% in the first quarter, which helped its share price to rise in the otherwise dismal first half. Robust revenues and earnings allowed the trend to continue through December. Expeditors International of Washington specializes in a variety of logistics services for companies in the U.S. and around the globe. It rode the rebound in international trade, particularly in Asia, which accounts for about a third of the company's business.
     Disappointed with how new federal regulations were hampering its stock price, we sold our shares of for-profit education company Corinthian Colleges in ROH during August and September. While we still like the industry, we thought that the new regulations would create potentially intractable problems for the company's business model. Artio Global Investors is a New York City-based asset management business. We have historically liked companies in this industry and were also drawn to Artio's impressive long-term track record with non-U.S. equities. However, the performance of its two flagship international funds continued to lag in 2010, increasing fund outflows and driving down the company's share price. Along with our high regard for its core business, this led us to add to our position through September.

GOOD IDEAS AT THE TIME
Top Detractors from 2010 Performance*

 
 
 
Corinthian Colleges -0.81%  
 
Artio Global Investors Cl. A -0.56     
 
ITT Educational Services -0.26     
 
Comtech Telecommunications -0.25     
 
Patriot Transportation Holding -0.20     
 
*Net of dividends  
   

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     
     
  PORTFOLIO DIAGNOSTICS  
 
 
  Average Market Capitalization* $2,142 million     
 
 
  Weighted Average P/E Ratio** 21.6x    
 
 
  Weighted Average P/B Ratio 2.4x     
 
 
  U.S. Investments
(% of Net Assets)		 86.4%     
 
 
  Non-U.S. Investments
(% of Net Assets)		 6.4%     
 
 
  Fund Net Assets $436 million     
 
 
  Turnover Rate 27%     
 
 
  Number of Holdings 100     
 
 
  Symbol    
      Investment Class ROHHX     
      Service Class RYOHX     
      R Class ROHRX     
      K Class ROHKX     
 
 
   * Geometrically calculated  
 

**The Fund’s P/E ratio calculation excludes companies with zero or negative earnings (5% of portfolio holdings as of 12/31/10).

  
     
  MORNINGSTAR STATISTICAL MEASURES*  
 
 
    ROH Category Median Best Quartile Breakpoint  
 
 
  Sharpe Ratio 0.37 0.20   0.28    
 
 
  Standard Deviation  21.45 22.50   21.29    
 
 
 

* Five years ended 12/31/10. Category Median and Best Quartile Breakpoint based on 338 small-cap objective funds (oldest class only) with at least five years of history.

  
     
  RISK/RETURN COMPARISON
Five-Year Period Ended 12/31/10		  
 
 
    Average Annual
Total Return		 Standard  
Deviation  		 Return
Efficiency*		  
 
 
  ROH 8.29% 21.45   0.39    
 
 
  Russell 2000  4.47 23.11   0.19    
 
 
 

* Return Efficiency is the average annual total return divided by the annualized standard deviation over a designated time period. Please read the prospectus for a more complete discussion of risk.

  
     
  DOWN MARKET PERFORMANCE COMPARISON
All Down Periods of 7.5% or Greater in Percentages(%)		  
   
     

 

 

 

 

 

 


The Royce Funds 2010 Annual Report to Shareholders  |   33                  


 
      
FOCUSED
 
Focused Funds generally employ a more limited portfolio approach—typically holding no more than 100 positions that we believe possess high quality.
 
AVERAGE ANNUAL TOTAL RETURNS
Through 12/31/10
July-Dec 2010*   27.55 %
One-Year   15.16  
Since Inception (2/27/09)   36.15  
ANNUAL EXPENSE RATIOS      
Gross Operating Expenses   2.98 %
Net Operating Expenses   1.50  
* Not annualized
                     
TOP 10 POSITIONS % of Net Assets
Berkshire Hathaway Cl. B   3.6 %
Mosaic Company (The)   3.4  
Franklin Resources   3.1  
Ensco ADR   3.0  
Schnitzer Steel Industries Cl. A   3.0  
Value Partners Group   2.8  
Pan American Silver   2.8  
Seabridge Gold   2.7  
GrafTech International   2.7  
Analog Devices   2.5  
                     
PORTFOLIO SECTOR BREAKDOWN
% of Net Assets
Natural Resources   27.0 %
Technology   17.8  
Financial Services   14.0  
Industrial Products   12.4  
Industrial Services   7.6  
Financial Intermediaries   7.1  
Consumer Products   6.8  
Consumer Services   2.8  
Diversified Investment Companies   1.0  
Cash and Cash Equivalents   3.5  

Royce Focus Value Fund
 
Managers’ Discussion
While stocks of all asset sizes struggled in the first half of 2010, many subsequently came back strong in the year’s second half, making the 12-month period as a whole mostly a strong one for equities. For the calendar year, Royce Focus Value Fund (RFV) gained 15.2%, underperforming its small- and mid-cap benchmark, the Russell 2500 index, which was up 26.7% over the same period. The Fund substantially underperformed its benchmark during the bullish first quarter (+1.2% versus +9.2%) before then losing slightly more than the Russell 2500 in the bearish second quarter (-10.7% versus -10.0%). This second-quarter disadvantage, however, obscures the extent to which RFV outperformed the small- and mid-cap index during what turned out to be 2010’s lone major correction. From the interim small-cap high on April 23, 2010 through the interim small-cap low on July 6, 2010, the Fund lost 15.5% versus a 18.7% loss for the Russell 2500.
     This same pattern emerged in miniature during the bullish but volatile third quarter. In July, the Fund lagged its benchmark, up 3.3% versus 7.0%; beat it in a sluggish August, down 2.6% versus a decline of 5.9%; and then fell behind again in September, up 9.1% versus 11.4%. The fourth quarter saw a more consistently bullish market, in which RFV beat its benchmark, gaining 16.3% compared to a 14.9% gain for the Russell 2500. The most serious period of underperformance, then, came prior to the interim small-cap high on April 23. From that date through the end of December, the Fund was up 9.1% versus 7.3% for the benchmark.
     Our enthusiasm for the Fund’s long-term prospects remains undiminished. So while we were somewhat disappointed with the Fund’s relative results in 2010, we also strongly believe that the Fund is well positioned for the years ahead and that performance since the April interim small-cap peak bears that out.
     The Natural Resources sector led by a considerable margin in 2010, with net gains more than double that of Technology, Financial Services and Industrial Products, in that order the Fund's next-best performing sectors. The two largest industry groups within Natural Resources—precious metals and mining stocks and energy services companies—were the portfolio's two top-gaining industries in 2010. Our interest in gold and silver miners pre-dates
          
    GOOD IDEAS THAT WORKED
    Top Contributors to 2010 Performance*
 
  Trican Well Service   1.66 %
 
  Fresnillo   1.52  
 
  Pan American Silver   1.41  
 
  Value Partners Group   1.16  
 
  Mosaic Company (The)   1.12  
 
  *Includes dividends
         
 
         
Important Performance and Expense Information
All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when redeemed. Shares redeemed within 180 days of purchase may be subject to a 1% redemption fee payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current performance may be higher or lower than performance quoted. Current month-end performance may be obtained at www.roycefunds.com. Gross operating expenses reflect total gross annual operating expenses and include management fees, 12b-1 distribution and service fees, other expenses and acquired fund fees and expenses. Net operating expenses reflect contractual fee waivers and/or reimbursements. All expense information is reported as of the Fund's most current prospectus. Royce & Associates has contractually agreed to waive its fees and/or reimburse operating expenses to the extent necessary to maintain the Fund's net annual operating expenses, other than acquired fund fees and expenses, at or below 1.49% through April 30, 2012 and at or below 1.99% through April 30, 2020. Acquired fund fees and expenses reflect the estimated amount of the fees and expenses incurred indirectly by the Fund through its investments in mutual funds, hedge funds, private equity funds and other investment companies. The sum of all contributions and detractions for all securities would approximate the Fund's performance for 2010.

34  |  The Royce Funds 2010 Annual Report to Shareholders


               
           
Performance and Portfolio Review
           
the Fund's inception, going back several years to when we began to build positions in mining companies that looked attractively undervalued in an industry that we suspected was due to rebound after a long period in the doldrums. Our conviction was actually strengthened by the financial catastrophes of late 2008-early 2009, when commodity prices went into freefall and we began to see the increasing likelihood of inflation, events that led us to build several positions in the industry. Shorty after introducing RFV, we began to populate its portfolio with some of these same holdings.
     Fresnillo is the world's largest primary silver producer and Mexico's second-largest gold producer. The company boasts an attractive combination of a very high-quality asset base and low operational costs, which should allow for margins above its industry's average for the foreseeable future. Pan American Silver is a Canadian company with seven operating mines and others in development in Mexico, Peru and Bolivia. For us as investors, a key test when looking at mining companies is to determine how well they have handled the transition from the exploration for metals to their production. Pan American Silver managed this move very effectively, which is one reason why it was a top-ten holding at the end of December. Share prices of each of these silver mining companies soared as the price of silver itself rose more than 80% during 2010 from a combination of renewed industrial demand and the growing appreciation of silver as an inflation hedge.
           
     The precious metals and mining industry was also home to the Fund's two largest detractors to performance in 2010. July saw us parting ways with Silver Standard Resources as it proved to be much better at exploration than production. Gammon Gold engages in gold and silver exploration in Mexico. Our experience with the stock provided a similar cautionary tale of the perils of buying stock in mining businesses that have not yet proven they can manage the transition from exploration to production, as multiple problems in several of its mines hurt results. We sold our position in RFV during February and April.
     In the energy services group, long-time favorite Trican Well Services, a Canadian oil well services business, saw the benefits of rising energy prices and increased demand for its services. A company that we have held in other Royce-managed portfolios for several years, the company has a growing specialty in providing pressure-pumping fluids that allow for more wide-ranging well fracturing, a service in particularly high demand in natural gas shale exploration. We see Trican as very well-positioned to compete in the post-BP disaster world, which helps to explain our decision to initiate a position in RFV's portfolio in May 2010.
  GOOD IDEAS AT THE TIME  
  Top Detractors from 2010 Performance*  
 
Silver Standard Resources   -0.81 %  
 
Gammon Gold   -0.80    
 
Artio Global Investors Cl. A   -0.77    
 
Sanderson Farms   -0.66    
 
Knight Capital Group Cl. A   -0.38    
 
* Net of dividends  
         
         
         
         
         
         
         
         
         
         
         
         
 

 
   
       
  PORTFOLIO DIAGNOSTICS
 
  Average Market Capitalization* $4,605 million  
 
  Weighted Average P/E Ratio** 14.3x  
 
  Weighted Average P/B Ratio 2.2x  
 
  U.S. Investments (% of Net Assets) 79.6 %
 
  Non-U.S. Investments (% of Net Assets) 16.9 %
 
  Fund Net Assets $9 million  
 
  Turnover Rate 31 %
 
  Number of Holdings     54  
 
  Symbol        
 

Service Class

   RYFVX  
 
    * Geometrically calculated
 
**The Fund's P/E ratio calculation excludes companies with zero or negative earnings (5% of portfolio holdings as of 12/31/10).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


The Royce Funds 2010 Annual Report to Shareholders  |   35                  



 
 
 
FOCUSED
Focused Funds generally employ a more limited portfolio approach—typically holding no more than 100 positions that we believe possess high quality.
 
AVERAGE ANNUAL TOTAL RETURNS
Through 12/31/10
July-Dec 2010*   29.01 %
One-Year   18.74  
Since Inception (4/27/09)   20.76  
ANNUAL EXPENSE RATIOS      
Gross Operating Expenses   5.29 %
Net Operating Expenses   1.51  
* Not annualized
                     
TOP 10 POSITIONS % of Net Assets
Value Partners Group   5.7 %
ProShares UltraShort 20+ Year Treasury   4.8  
NVR   3.9  
Fluor Corporation   3.0  
Northern Trust   2.8  
Nucor Corporation   2.5  
Marsh & McLennan   2.5  
Bank of New York Mellon (The)   2.4  
State Street   2.4  
AllianceBernstein Holding L.P.   2.2  
                     
PORTFOLIO SECTOR BREAKDOWN
% of Net Assets
Financial Services   30.9 %
Industrial Services   21.1  
Financial Intermediaries   15.8  
Industrial Products   9.3  
Diversified Investment Companies   4.8  
Natural Resources   2.3  
Consumer Services   2.0  
Technology   1.7  
Consumer Products   1.2  
Health   0.7  
Cash and Cash Equivalents   10.2  
                     

    
Royce Partners Fund
 
Manager’s Discussion
Royce Partners Fund (PTR) is one of a small group of Royce offerings that deploys the firm's investment discipline beyond our core smaller-company universe. Given the market dislocations of the past several years, an increasing number of larger companies are likely to periodically meet the strict criteria of our selection process. Very directional markets can be challenging given our contrarian bias. So while 2010 was a solid year for the Fund, our relative performance left a bit to be desired. Royce Partners Fund advanced 18.7% in 2010 versus a gain of 26.7% for its benchmark, the Russell 2500. Most of the underperformance occurred in the strong first quarter when the Fund still held a relatively high cash position. More fully invested for the remaining three quarters, the Fund's performance was more in line with the index. For the since inception period (4/27/09) ended December 31, 2010, the Fund still lagged its benchmark, with an average annual total return of 20.8% compared to 38.3% for the Russell 2500.
     The year's first quarter saw an advance in the benchmark of 9.2%, significantly outpacing the cash-rich Fund, which returned a more modest 2.2%. The quality of the rally left a bit to be desired, however, as lower-quality companies continued to lead the index higher, leaving our higher quality bias at a disadvantage. The second quarter ushered in another episode of risk aversion as the sovereign debt crisis in Europe surfaced and sent the market into a highly correlated decline in which both the Fund and the Russell 2500 fell by an equal 9.9%. The third and fourth quarters saw the resumption of the bull market as QE2—the second round of quantitative easing initiated by the Fed— encouraged greater risk taking and the beginning of an asset allocation shift from bonds to stocks. During the third and fourth quarters, PTR advanced, respectively, 11.7% and 15.5% versus respective rallies of 12.2% and 14.9% for its benchmark index.
     Nine of the Fund's ten equity sectors contributed positively to full-year performance. Industrial Services and Financial Services led all sectors. The first of the two benefitted as the nascent economic recovery began to translate into a pickup in order backlogs across a range of infrastructure and manufacturing businesses. At the industry level, investments from the engineering and construction group and transportation and logistics companies contributed
          
    GOOD IDEAS THAT WORKED
    Top Contributors to 2010 Performance*
 
  Sotheby's   1.32 %
 
  Potash Corporation of Saskatchewan   1.30  
 
  Value Partners Group   1.29  
 
  VZ Holding   1.15  
 
  Fluor Corporation   1.10  
 
  *Includes dividends
         
Important Performance and Expense Information
All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when redeemed. Shares redeemed within 180 days of purchase may be subject to a 1% redemption fee payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current performance may be higher or lower than performance quoted. Current month-end performance may be obtained at www.roycefunds.com. Gross operating expenses reflect total gross annual operating expenses and include management fees, 12b-1 distribution and service fees, other expenses and acquired fund fees and expenses. Net operating expenses reflect contractual fee waivers and/or reimbursements. All expense information is reported as of the Fund's most current prospectus. Royce & Associates has contractually agreed to waive its fees and/or reimburse operating expenses to the extent necessary to maintain the Fund's net annual operating expenses, other than acquired fund fees and expenses, at or below 1.49% through April 30, 2012 and at or below 1.99% through April 30, 2020. Acquired fund fees and expenses reflect the estimated amount of the fees and expenses incurred indirectly by the Fund through its investments in mutual funds, hedge funds, private equity funds and other investment companies. The sum of all contributions and detractions for all securities would approximate the Fund's performance for 2010.

 36 | The Royce Funds 2010 Annual Report to Shareholders


               
           
Performance and Portfolio Review
           
notable gains. Financial companies from two sectors were also leaders, with the most significant net coming from the less capital intensive industries of investment management, the Fund's top-performing industry, and insurance, as opposed to the still-slow-to-recover banking industry. The only detractor from performance was the Diversified Investment Companies sector, which had a modest loss generated from the Fund's ownership in a ProShares UltraShort Treasury ETF. Designed to reflect a negative view of long-term interest rates, the Fed's commitment to keep rates low by means of a second round of quantitative easing only delayed what we view as an inevitable increase in U.S. interest rates given our ever-increasing debt burden and easy monetary policies.
     Not surprisingly, given the breadth of the rally in 2010, individual contributors to the Fund's performance came from a range of sectors and industries. Sotheby's, a leading auction house focusing on fine art, antiques, and other rare collectibles, as well as high-end residential real estate properties, was the leading individual gainer for the Fund. Benefitting from a resurgence of demand from traditional markets in the U.S. and Europe, as well as an explosion of new demand from the rapidly growing Asia Pacific region, shares in this preeminent global brand doubled during the course of the year. Potash Corporation of Saskatchewan, the largest producer and provider of potash, phosphate, and nitrogen-based fertilizers to the world's agricultural industries, caught the tailwind of increasing demand for agricultural feed products. Changing consumption patterns in the world's major population centers, along with exploding prices for agricultural prices and resulting increases in planting acreage, all led to the beginning of a broad recovery in earnings for the company. Finally, from our long-treasured investment management industry, Value Partners Group, a Hong Kong-based asset manager focusing on the China and the Asia-Pacific region, was another standout performer. With a broad and growing demographic base of investors, as well as innovative and diverse product offerings with varying fee structures, the company continues to be very well positioned to benefit from the growing demand for professional asset management in this dynamic area of the world.
         
     In stark contrast, Artio Global Investors, a New York-based asset management business focusing on international equity portfolios for a mostly institutional client base, was not able to stem redemption activity as pension plans, foundations and endowments continued to reassess their asset allocations leading to very poor stock performance for the year. We remain committed to this investment as a very attractive valuation and product portfolio should lead to improved performance as asset flows revert from bonds to stocks.
  GOOD IDEAS AT THE TIME  
  Top Detractors from 2010 Performance*  
 
ProShares UltraShort 20+ Year Treasury   -1.27 %  
 
Artio Global Investors Cl. A   -0.78    
 
Popular   -0.52    
 
FBR Capital Markets   -0.39    
 
Magma Energy   -0.37    
 
*Net of dividends  
           

 
 
 
 
PORTFOLIO DIAGNOSTICS
Average Market Capitalization* $4,556 million  
Weighted Average P/E Ratio** 20.6x  
Weighted Average P/B Ratio 2.9x  
U.S. Investments (% of Net Assets) 70.8%  
Non-U.S. Investments (% of Net Assets) 19.0%  
Fund Net Assets $2 million  
Turnover Rate     38%  
Number of Holdings     51  
Symbol        
    Service Class     RPTRX  
* Geometrically calculated

** The Fund's P/E ratio calculation excludes companies with zero or negative earnings (4% of portfolio holdings as of 12/31/10).
                           
     
 
 

 

      

 

      
                           
 
 
 

The Royce Funds 2010 Annual Report to Shareholders   |   37                   



 
     
 
OPPORTUNISTIC THEMES
Opportunistic Themes Funds generally invest in micro-caps and/or those companies considered more opportunistic.
 
 
AVERAGE ANNUAL TOTAL RETURNS
Through 12/31/10		      
July-Dec 2010*   37.66 %
One-Year   31.49  
Three-Year   8.94  
Five-Year   9.50  
10-Year   11.45  
15-Year   14.01  
Since Inception (12/15/93)   13.79  
ANNUAL EXPENSE RATIOS      
Gross Operating Expenses   1.62 %
Net Operating Expenses   1.51  
*Not annualized
                     
CALENDAR YEAR TOTAL RETURNS
                     
Year   RLP     Year       RLP  
2010   31.5 %  
2002
       -16.3 %
2009   53.6    
2001
       25.1  
2008   -36.0    
2000
       24.0  
2007   2.3    
1999
       29.8  
2006   19.0    
1998
       2.4  
2005   9.7    
1997
       19.5  
2004   13.6    
1996
       22.8  
2003   44.0    
1995
       22.5  
         
         
TOP 10 POSITIONS % of Net Assets
Pan American Silver   1.9 %
Trican Well Service   1.8  
GrafTech International   1.6  
Alamos Gold   1.6  
Intrepid Potash   1.5  
Endo Pharmaceuticals Holdings   1.4  
Kennametal   1.4  
Silver Standard Resources   1.3  
Nu Skin Enterprises Cl. A   1.3  
Allied Nevada Gold   1.3  
                     
PORTFOLIO SECTOR BREAKDOWN
% of Net Assets
Natural Resources   26.0 %
Technology   17.9  
Industrial Services   9.7  
Industrial Products   9.3  
Consumer Products   7.0  
Financial Services   6.3  
Health   4.9  
Financial Intermediaries   4.3  
Consumer Services   2.3  
Miscellaneous   4.7  
Cash and Cash Equivalents   7.6  
                     

Royce Low-Priced Stock Fund
 
Manager’s Discussion
Although it stumbled out of the gate to kick off 2010, Royce Low-Priced Stock Fund (RLP) more than made up for any lost ground. The Fund gained 31.5% for the calendar year, outpacing its small-cap benchmark, the Russell 2000, which was up 26.9% for the same period. During the first quarter, RLP was up 4.5% versus an 8.9% gain for the small-cap benchmark. This underperformance made for somewhat disappointing first-half results in spite  of the  fact that  the Fund lost  less during the bearish second quarter  (-8.6% versus -9.9%). In the third quarter, particularly following the interim small-cap low on July 6, the relative advantage began to shift. RLP gained 15.1% between July and September. Stock prices rose at an even more feverish pace during the fourth quarter, a period in which the Fund rose 19.6% compared to 16.3% for the Russell 2000.
     After the travails of late 2008-early 2009, a year of mostly rising share prices was, needless to say, highly welcome. We were also very pleased with the Fund's showing from the small-cap low on March 9, 2009 through December 31, 2010, a period in which RLP was up 164.3% versus 134.0% for the Russell 2000. In addition, the Fund held a substantial edge over the benchmark from the interim small-cap peak on April 23, 2010 through the end of the calendar year. (Please see page 6 for recent market cycle results.) These market cycle results were a factor in the Fund's advantage over the Russell 2000 over longer-term periods more closely tied to the beginning and end of the calendar. The Fund outpaced its benchmark for the three-, five-, 10-, 15-year and since inception (12/15/93) periods ended December 31, 2010. RLP's average annual total return since inception was 13.8%.
     The Natural Resources sector dominated in 2010, with net gains more than double that of Technology, the Fund's second-best performing sector, which posted a sizable contribution in its own right. The former sector's two largest industry groups—precious metals and mining stocks and energy services companies—were the portfolio's two top-gaining industries in 2010. Our interest in gold and silver miners goes back several years, when we began to build positions in mining companies that looked attractively undervalued in an industry that we suspected was due to rebound after a long period in the doldrums. Our conviction was actually strengthened
          
    GOOD IDEAS THAT WORKED
    Top Contributors to 2010 Performance*
 
  Pan American Silver   1.17 %
 
  Red Back Mining   1.13  
 
  Endo Pharmaceuticals Holdings   1.08  
 
  Trican Well Service   1.03  
 
  Alamos Gold   1.03  
 
  *Includes dividends
         
 
Important Performance and Expense Information
All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when redeemed. Shares redeemed within 180 days of purchase may be subject to a 1% redemption fee payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current performance may be higher or lower than performance quoted. Current month-end performance may be obtained at www.roycefunds.com. All performance and risk information reflects Service Class results. Gross operating expenses reflect the Fund's gross total annual operating expenses for the Service Class, including management fees, 12b-1 distribution and service fees, other expenses and acquired fund fees and expenses. Net operating expenses reflect contractual fee waivers and/or expense reimbursements. All expense information is reported as of the Fund's most current prospectus. Royce & Associates has contractually agreed to waive fees and/or reimburse operating expenses to the extent necessary to maintain the Service Class's net annual operating expenses, other than acquired fund fee and expenses, at or below 1.49% through April 30, 2011. Acquired fund fees and expenses reflect the estimated amount of the fees and expenses incurred directly by the Fund through its investments in mutual funds, hedge funds, private equity funds and other investment companies. Shares of RLP's R Class bear an annual distribution expense that is higher than that of the Service Class. The sum of all contributions and detractions for all securities would approximate the Fund's performance for 2010.

38 | The Royce Funds 2010 Annual Report to Shareholders 


 
 
 
Performance and Portfolio Review


by the financial catastrophes of late 2008-early 2009, when commodity prices went into freefall and we began to see the increasing likelihood of inflation, events that led us to build several positions in the industry. As metals prices climbed through much of 2009 and 2010, the stock prices of many portfolio holdings did the same.
      Pan American Silver is a Canadian company with seven operating mines and others in development in Mexico, Peru and Bolivia. A key test for mining companies is how well they handle the transition from the exploration for metals to their production, a test Pan American handled with great aplomb. It was the Fund's largest holding at the end of December. Red Back Mining effectively added production capabilities to its solid exploration business and in doing so saw positive results from mines in Ghana and Mauritania, results that made it attractive to Kinross Gold, which acquired Red Back in September at a healthy premium. Alamos Gold has also made the move to production over the past few years and, after fruitful operations in Mexico, is exploring promising opportunities in Turkey. These successes translated into strong earnings, which no doubt helped attract investors to the stock. It was a top-ten holding at year end.
     
      In the energy services group, long-time favorite Trican Well Service, a Canadian oil well services business, saw the benefits of rising energy prices and increased demand for its services. A company that we have held in RLP's portfolio since 2006, the company has a growing specialty in providing pressure-pumping fluids that allow for more wide-ranging well fracturing, a service in particularly high demand in natural gas shale exploration. We see Trican as very well-positioned to compete in the post-BP disaster world, which helps to explain its place as the Fund's second-largest holding at the end of 2010. Between February and October, we took gains in Endo Pharmaceuticals Holdings, which has long had what we think is a terrific core specialty in pain management products. Its share price made a welcome recovery in the second half of the year.
      Corinthian Colleges is a private, for-profit post-secondary education company that has seen its business hurt and its stock price hammered due to new federal regulations. We built our stake through September as its price cratered, hopeful that its business could eventually rebound. Our disappointment lingered for long-time holding Gammon Gold, which explores for and produces gold and silver in Mexico. The company offered a valuable (though costly) lesson in the pitfalls of owning mining businesses that have not demonstrated they can handle the transition from exploration to production, as multiple problems in several mines have hurt results. We began to reduce our position in February.

GOOD IDEAS AT THE TIME
Top Detractors from 2010 Performance*

  
 
 
Corinthian Colleges -0.76%  
 
Gammon Gold -0.56     
 
NutriSystem -0.51     
 
Artio Global Investors Cl. A -0.49     
 
Charming Shoppes -0.25     
 
*Net of dividends  

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     
     
  PORTFOLIO DIAGNOSTICS  
 
 
  Average Market Capitalization* $1,416 million     
 
 
  Weighted Average P/E Ratio** 15.9x    
 
 
  Weighted Average P/B Ratio 2.2x     
 
 
  U.S. Investments
(% of Net Assets)		 69.3%     
 
 
  Non-U.S. Investments
(% of Net Assets)		 23.1%     
 
 
  Fund Net Assets $4,690 million     
 
 
  Turnover Rate 24%     
 
 
  Number of Holdings 193     
 
 
  Symbol    
      Investment Class RLPHX     
      Service Class RYLPX     
      Institutional Class RLPIX     
      R Class RLPRX     
      K Class RLPKX     
 
 
   * Geometrically calculated  
 

**The Fund’s P/E ratio calculation excludes companies with zero or negative earnings (11% of portfolio holdings as of 12/31/10).

  
     
  MORNINGSTAR STATISTICAL MEASURES*  
 
 
    RLP Category Median Best Quartile Breakpoint  
 
 
  Sharpe Ratio 0.41 0.20   0.28    
 
 
  Standard
Deviation		  24.08 22.50   21.29    
 
 
 

*  Five years ended 12/31/10 Category Median and Best Quartile Breakpoint based on 338 small-cap objective funds (oldest class only) with at least five years of history.

  
     
  RISK/RETURN COMPARISON
Five-Year Period Ended 12/31/10		  
 
 
    Average Annual
Total Return		 Standard  
Deviation  		 Return Efficiency*  
 
 
  RLP 9.50% 24.08   0.39    
 
 
  Russell 2000  4.47 23.11   0.19    
 
 
 

*  Return Efficiency is the average annual total return divided by the annualized standard deviation over a designated time period. Please read the prospectus for a more complete discussion of risk.

  
     
  DOWN MARKET PERFORMANCE COMPARISON
All Down Periods of 7.5% or Greater
Over the Last 10 Years, in Percentages(%)		  
   
     

The Royce Funds 2010 Annual Report to Shareholders   |   39                   



 
     
  OPPORTUNISTIC THEMES  
 
 
  Opportunistic Themes Funds generally invest in micro-caps and/or those companies considered more opportunistic.  
 

   

  
  AVERAGE ANNUAL TOTAL RETURNS
Through 12/31/10		  
 
 
  July-Dec 2010*   34.67 %  
 
 
  One-Year         33.78    
 
 
  Three-Year         5.59    
 
 
  Five-Year         6.50    
 
 
  10-Year         11.00    
 
 
  Since Inception (11/19/96)         13.54    
 
 
  ANNUAL EXPENSE RATIOS  
 
 
  Operating Expenses   1.22 %  
 
 
  * Not annualized  
         
  CALENDAR YEAR TOTAL RETURNS  
 
 
  Year   ROF     Year     ROF    
 
 
  2010   33.8 %   2003     72.9 %  
 
 
  2009   62.1     2002     -17.0    
 
 
  2008   -45.7     2001     17.3    
 
 
  2007   -2.0     2000     19.8    
 
 
  2006   18.8     1999     32.3    
 
 
  2005   4.8     1998     4.9    
 
 
  2004   17.5     1997     20.8    
 
 
                       
  TOP 10 POSITIONS % of Net Assets  
 
 
  Dillard's Cl. A   0.9 %  
 
 
  Haynes International   0.8    
 
 
  Century Aluminum   0.7    
 
 
  Bottomline Technologies   0.7    
 
 
  OM Group   0.7    
 
 
  Carpenter Technology   0.7    
 
 
  Kaman Corporation   0.7    
 
 
  Trinity Industries   0.7    
 
 
  Timken Company (The)   0.7    
 
 
  Stifel Financial   0.6    
 
 
                       
  PORTFOLIO SECTOR BREAKDOWN
% of Net Assets		  
 
 
  Technology   26.8 %  
 
 
  Industrial Products   24.5    
 
 
  Consumer Services   10.0    
 
 
  Industrial Services   8.6    
 
 
  Financial Intermediaries   7.7    
 
 
  Natural Resources   3.8    
 
 
  Consumer Products   3.7    
 
 
  Health   1.8    
 
 
  Financial Services   1.6    
 
 
  Miscellaneous   5.0    
 
 
  Cash and Cash Equivalents   6.5    
 
 
     



Royce Opportunity Fund

Manager’s Discussion
Although much of 2010 saw a highly correlated market, with the year's first half also demonstrating a considerable amount of volatility, Royce Opportunity Fund (ROF) was able to separate itself from the pack. For the calendar year, the Fund was up 33.8%, ahead of its small-cap benchmark, the Russell 2000, which rose 26.9% for the same period.
     The Fund's negative return in the first half of the year (-0.7%), while not ideal, was in line with small-caps in general—the Russell 2000 lost 1.9% for the same six-month period—and represented the kind of short-term result that does not make us too excited or agitated. As we wrote in the Fund's Semiannual Report, the downturn, which lasted from the interim small-cap high on April 23, 2010 through the small-cap low on July 6, 2010, also provided a chance to better position the portfolio for the months and years ahead, as buying opportunities were plentiful for us during this time.
     When the market bounced back early in July, it reignited a rally that lasted through the end of December. ROF participated fully, rising 12.9% in the third quarter, ahead of the Russell 2000's 11.3% showing. Stock prices rose even more precipitously in the fourth quarter, as investors not only rediscovered that there was much to love about equities, but also appeared increasingly comfortable with risk. The Fund was again out in front of the small-cap index, up 19.3% versus a gain of 16.3% for the Russell 2000. These strong results were a factor in ROF's outperformance over longer-term time periods. From the small-cap market low on March 9, 2009 through December 31, 2010, the Fund rose an impressive 222.2% compared to a gain of 134.0% for the small-cap index. (Please see page 6 for more market cycle results.) ROF also bested its benchmark for the three-, five-, 10-year and since inception (11/19/96) periods ended December 31, 2010. The Fund's average annual total return since inception was 13.5%.
     With a second impressive year of both absolute and relative returns, we were pleased to see the Fund erase the difficult year recorded in 2008. As important as it is to participate in markets that are in full bloom, we are very conscious of what occurs in down periods and the importance of examining returns over full market cycles. We were particularly pleased that the Fund held an advantage from the market's prior historic peak on July 13, 2007. Over this remarkably volatile period, ROF was basically flat, having lost just 0.9% compared to the Russell 2000, which declined 3.8% over the same period. Now that the U.S. economy has transitioned from recovery to stability and perhaps even expansion, the investment landscape for the Fund's favored turnarounds and other themes should continue to expand.
   

GOOD IDEAS THAT WORKED
Top Contributors to 2010 Performance*
   
    Ladish   0.83%
   
    Dillard's Cl. A   0.76   
   
    Cost Plus   0.68   
   
    Loral Space & Communications   0.65   
   
    Timken Company (The)   0.64   
   
    *Includes dividends    
           
           
Important Performance and Expense Information
All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when redeemed. Shares redeemed within 180 days of purchase may be subject to a 1% redemption fee payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current performance may be higher or lower than performance quoted. Current month-end performance may be obtained at www.roycefunds.com. All performance and risk information reflects Investment Class results. Operating expenses reflect the Fund's total annual operating expenses for the Investment Class as of the Fund's most current prospectus and include management fees, and other expenses. Shares of ROF's Service, Consultant, R and K Classes bear an annual distribution expense that is not borne by the Investment Class. The sum of all contributions and detractions for all securities would approximate the Fund's performance for 2010.

             40   |  The Royce Funds 2010 Annual Report to Shareholders



 
 
 
Performance and Portfolio Review


      The Industrial Products and Technology sectors were neck and neck for top performance honors in 2010. Accounting for two thirds of the gains in the Fund, investments in these sectors were clear beneficiaries of the improving economy, performing particularly well following the mid-year rout that was largely caused by fears of a double-dip recession. At the industry level, semiconductors and equipment, specialty chemicals and materials, and retail stores were the leading gainers.
      Ladish, a specialty metals company that engineers a range of components for aerospace and military end markets was a late performer as it agreed to be acquired in November for a healthy premium by Allegheny Technologies. Dillard's, the department store operator with locations primarily in the southern and midwestern United States, enjoyed an excellent year, benefitting from both improving fundamentals and an interesting corporate initiative. Earnings prospects improved as sales stabilized and consumer spending gradually recovered. The company also began to lay the groundwork for establishing a REIT subsidiary to more effectively monetize its underappreciated real estate assets—an initiative that we think has the potential to unlock significant shareholder value. Elsewhere in the retail space, Cost Plus, a California-based retailer of value-oriented casual home furnishings was another top contributor. Distinctly in the turnaround category, management's concerted effort to improve merchandising dovetailed with a renewed credit agreement that allowed for continued restructuring, both of which led to positive year-over-year sales growth and strong appreciation in the shares.
     
      On the negative side of the ledger, Smurfit Stone Container W was the biggest detractor from returns, although losses were modest in scale. Another restructuring story, Smurfit, an integrated manufacturer of paperboard and paper-based packaging in North America, filed for bankruptcy protection in December 2009, underwent a financial restructuring and emerged from Chapter 11 in July 2010.
     We first bought shares after the bankruptcy and held them at year-end as the Board was pursuing two distinct business initiatives, both of which could potentially create value for shareholders. The first relates to hiring a new management team to continue the rehabilitation of the business while the second entails a potential sale or merger of the company. In January 2011, its acquisition at a healthy premium was announced. In the health area, PharMerica, an institutional pharmacy services company servicing hospitals and other healthcare facilities, suffered from accelerating bed attrition in its core customer segments that led to disappointing earnings. An interesting mid-year acquisition that offers scale and accretion along with an attractive valuation kept us interested in the company.

GOOD IDEAS AT THE TIME
Top Detractors from 2010 Performance*

  
 
 
Smurfit-Stone Container W -0.24%  
 
PharMerica Corporation -0.21     
 
General Maritime -0.20     
 
Media General Cl. A -0.19     
 
New York & Company -0.19     
 
*Net of dividends  

 
 
 
 
 
 
 
 
 
     
     
  FUND CHART HEAD  
 
 
  Average Market Capitalization* $692 million     
 
 
  Weighted Average P/B Ratio 1.5x     
 
 
  U.S. Investments
(% of Net Assets)		 93.5%     
 
 
  Non-U.S. Investments
(% of Net Assets)		 0.0%     
 
 
  Fund Net Assets $2,207 million     
 
 
  Turnover Rate 47%     
 
 
  Number of Holdings 304     
 
 
  Symbol    
      Investment Class RYPNX     
      Service Class RYOFX     
      Consultant Class ROFCX     
      Institutional Class ROFIX     
      R Class ROFRX     
      K Class ROFKX     
 
 
   * Geometrically calculated  
     
  MORNINGSTAR STATISTICAL MEASURES*  
 
 
    ROF Category Median Best Quartile Breakpoint  
 
 
  Sharpe Ratio 0.28 0.20   0.28    
 
 
  Standard
Deviation		  29.53 22.50   21.29    
 
 
 

*  Five years ended 12/31/10 Category Median and Best Quartile Breakpoint based on 338 small-cap objective funds (oldest class only) with at least five years of history.

  
     
  RISK/RETURN COMPARISON
Five-Year Period Ended 12/31/10		  
 
 
    Average Annual
Total Return		 Standard  
Deviation  		 Return Efficiency*  
 
 
  ROF 6.50% 29.53   0.22    
 
 
  Russell 2000  4.47 23.11   0.19    
 
 
 

*  Return Efficiency is the average annual total return divided by the annualized standard deviation over a designated time period. Please read the prospectus for a more complete discussion of risk.

  
     
  DOWN MARKET PERFORMANCE COMPARISON
 All Down Periods of 7.5% or Greater
Over the Last 10 Years, in Percentages(%)		  
   
     

The Royce Funds 2010 Annual Report to Shareholders   |   41                   



 
     
   
  OPPORTUNISTIC THEMES  
 
 
  Opportunistic Themes Funds generally invest in micro-caps and/or those companies considered more opportunistic.  
 

   

  
  AVERAGE ANNUAL TOTAL RETURNS
Through 12/31/10		  
 
 
  July-Dec 2010*   23.66 %  
 
 
  One-Year         19.70    
 
 
  Three-Year         -0.09    
 
 
  Five-Year         4.21    
 
 
  Since Inception (6/14/01)   13.40    
 
 
  ANNUAL EXPENSE RATIO  
 
 
  Operating Expenses   1.47 %  
 
 
  * Not annualized  
         
  CALENDAR YEAR TOTAL RETURNS  
 
 
  Year   RVP     Year     RVP    
 
 
  2010   19.7 %   2005     13.2 %  
 
 
  2009   41.4     2004     28.2    
 
 
  2008   -41.1     2003     79.9    
 
 
  2007   3.2     2002     -14.7    
 
 
  2006   19.3                
 
 
                       
  TOP 10 POSITIONS % of Net Assets  
 
 
  International Rectifier   1.7 %  
 
 
  Allied Nevada Gold   1.6    
 
 
  Coach   1.6    
 
 
  IPG Photonics   1.5    
 
 
  Kennametal   1.5    
 
 
  MSC Industrial Direct Cl. A   1.5    
 
 
  Worthington Industries   1.5    
 
 
  Trimble Navigation   1.4    
 
 
  Avid Technology   1.4    
 
 
  Raymond James Financial   1.4    
 
 
                       
  PORTFOLIO SECTOR BREAKDOWN
% of Net Assets		  
 
 
  Technology   21.3 %  
 
 
  Natural Resources   15.5    
 
 
  Industrial Services   13.1    
 
 
  Industrial Products   11.7    
 
 
  Financial Intermediaries   9.2    
 
 
  Consumer Services   7.9    
 
 
  Consumer Products   5.6    
 
 
  Health   4.0    
 
 
  Financial Services   2.9    
 
 
  Miscellaneous   4.9    
 
 
  Cash and Cash Equivalents   3.9    
 
 
     



Royce Value Plus Fund

Manager’s Discussion
The second half of 2010 saw a resumption of the rally that enlivened most of 2009, but that had mostly stalled through the first half of 2010. The end result was a strong year for stocks of all asset classes and industries. In this bullish environment, Royce Value Plus Fund (RVP) was up 19.7% for the calendar year, trailing its small-cap benchmark, the Russell 2000, which climbed 26.9% for the same period. This was a somewhat disappointing result, as we would ideally always like to beat the benchmark. However, we were pleased with the Fund's showing on an absolute basis. We were equally happy to see the Fund outpace the small-cap benchmark during 2010's significant spring-summer correction. From the interim small-cap high on April 23, 2010 through the interim small-cap low on July 6, 2010, RVP fell 16.7% versus a loss of 20.3% for the Russell 2000.
     Following that early July low, the market revived with a lively rally that lasted through the end of the year. Admittedly, we wish that the Fund could have participated more fully in such an unrestrained 'go-go' environment. During the third quarter, RVP rose 7.8% compared to an 11.3% climb for the Russell 2000. In the even more bullish fourth quarter, the Fund was up 14.7% versus a gain of 16.3% for the small-cap benchmark. This pattern of strong absolute results coupled with relative underperformance was consistent with returns from the market low on March 9, 2009 through the end of 2010, another mostly bullish period in which RVP climbed 115.3% while the Russell 2000 was up 134.0%. (Please see page 6 for more market cycle results.) The Fund outpaced the small-cap index for the since inception (6/14/01) period ended December 31, 2010. RVP's average annual total return since inception was 13.4%.
     Consistent with a market that saw rising prices in nearly all corners, each of the Fund's equity sectors posted net gains for the calendar year. Natural Resources led, though the three sectors that immediately followed it—Technology, Industrial Products and Industrial Services—also posted more-than-healthy contributions to performance. Higher commodity prices, a nascent global industrial recovery and healthy signs of life in terms of corporate expenditures on technology help to explain the robust showings of all four sectors. Their strength in the portfolio could also be seen at the level of individual positions. Eight of the top-ten performing companies came from one of those four sectors.
   

GOOD IDEAS THAT WORKED
Top Contributors to 2010 Performance*
   
    Fronteer Gold   1.09%
   
    Allied Nevada Gold   0.99   
   
    IPG Photonics   0.94   
   
    Littelfuse   0.81   
   
    Kennametal   0.79   
   
    *Includes dividends    
           
           
Important Performance and Expense Information
All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when redeemed. Shares redeemed within 180 days of purchase may be subject to a 1% redemption fee payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current performance may be higher or lower than performance quoted. Current month-end performance may be obtained at www.roycefunds.com. All performance and risk information reflects Service Class results. Operating expenses reflect the Fund's total annual operating expenses for the Service Class as of the Fund's most current prospectus and include management fees, 12b-1 distribution and service fees, and other expenses. Shares of RVP's Consultant and R Classes bear an annual distribution expense that is higher than that of the Service Class. The sum of all contributions and detractions for all securities would approximate the Fund's performance for 2010.

             42   |  The Royce Funds 2010 Annual Report to Shareholders



 
 
 
Performance and Portfolio Review


     Fronteer Gold has projects in Nevada, northwestern Turkey, and Labrador region of Canada, but has been devoting most of its attention to developing its promising domestic mines, a move that, along with the rising price of gold, seemed to win over investors in 2010. Although we made small trims to our position, we think its future remains bright. Soaring precious metals prices also gave a boost to the share price of Allied Nevada Gold, which also gained attention for successfully transitioning from development to production. We bought and sold shares throughout 2010, with a net decrease in our stake, though it was the Fund's second-largest holding at the end of December.
     IPG Photonics manufactures high-performance fiber lasers and amplifiers for use in a wide range of markets. The company pioneered the development of optical fiber-based lasers that combine the advantages of semiconductor diodes with the high amplification and precise beam qualities of specialty optical fibers. The company beat quarterly earnings expectations in early August, which helped to boost its share price through the end of the year, where it finished as the Fund's fourth-largest holding. Two companies succeeded in large part because of effective cost-cutting measures instituted during the worst days of the recession. Littelfuse manufactures circuit protection devices for use in the automotive, electronic, and electrical markets worldwide. It moved production to lower-cost facilities and made an acquisition that eventually helped its business to recover with better margins. Kennametal provides specialized tooling, engineered components, and advanced materials for engineering and construction and large-scale agriculture.
     
It consolidated plants across the globe, moves that helped it to rebound in 2010.
     On the losing side, we finished selling our position in FormFactor during September. While we still like the firm's business—it manufactures semiconductor wafer probe cards that test logic and memory chips on the front end of the semiconductor manufacturing process—we grew concerned that its turnaround was taking longer than we were willing to wait. Operational problems in two mines continued to hamper the share price performance of Gammon Gold, which produces and explores for gold and silver in Mexico, leading us to begin liquidating our position in June.

GOOD IDEAS AT THE TIME
Top Detractors from 2010 Performance*

  
 
 
FormFactor -0.86%  
 
Gammon Gold -0.49     
 
Duoyuan Global Water ADR -0.48     
 
Comstock Resources -0.47     
 
NutriSystem -0.44     
 
*Net of dividends  


 
 
 
     
     
  PORTFOLIO DIAGNOSTICS  
 
 
  Average Market Capitalization* $1,750 million     
 
 
  Weighted Average P/E Ratio** 20.6x    
 
 
  Weighted Average P/B Ratio 2.2x     
 
 
  U.S. Investments
(% of Net Assets)		 88.2%     
 
 
  Non-U.S. Investments
(% of Net Assets)		 7.9%     
 
 
  Fund Net Assets $3,218 million     
 
 
  Turnover Rate 48%     
 
 
  Number of Holdings 136     
 
 
  Symbol    
      Investment Class RVPHX     
      Service Class RYVPX     
      Consultant Class RVPCX     
      Institutional Class RVPIX     
      R Class RVPRX     
      K Class RVPKX     
 
 
   * Geometrically calculated  
 

**The Fund’s P/E ratio calculation excludes companies with zero or negative earnings (16% of portfolio holdings as of 12/31/10).

  
     
  MORNINGSTAR STATISTICAL MEASURES*  
 
 
    RVP Category Median Best Quartile Breakpoint  
 
 
  Sharpe Ratio 0.20 0.20   0.28    
 
 
  Standard
Deviation		  22.62 22.50   21.29    
 
 
 

*  Five years ended 12/31/10. Category Median and Best Quartile Breakpoint based on 338 small-cap objective funds (oldest class only) with at least five years of history.

  
     
  RISK/RETURN COMPARISON
Five-Year Period Ended 12/31/10		  
 
 
    Average Annual
Total Return		 Standard  
Deviation  		 Return Efficiency*  
 
 
  RVP 4.21% 22.62   0.19    
 
 
  Russell 2000  4.47 23.11   0.19    
 
 
 

*  Return Efficiency is the average annual total return divided by the annualized standard deviation over a designated time period. Please read the prospectus for a more complete discussion of risk.

  
     
  DOWN MARKET PERFORMANCE COMPARISON
All Down Periods of 7.5% or Greater
in Percentages(%)		  
   
     

The Royce Funds 2010 Annual Report to Shareholders   |   43                   



 
     
   
  MICRO-CAP  
 
 
  Micro-Cap Funds generally invest in companies with market capitalizations up to $500 million, using our core investment approach.  
 

   

  
  AVERAGE ANNUAL TOTAL RETURNS
Through 12/31/10		  
 
 
  July-Dec 2010*   31.79 %  
 
 
  One-Year         30.06    
 
 
  Three-Year         6.14    
 
 
  Five-Year         9.39    
 
 
  10-Year         12.64    
 
 
  15-Year         12.78    
 
 
  Since Inception (12/31/91)   13.97    
 
 
  ANNUAL EXPENSE RATIO  
 
 
  Operating Expenses   1.60 %  
 
 
  * Not annualized  
         
  CALENDAR YEAR TOTAL RETURNS  
 
 
  Year   RMC     Year     RMC    
 
 
  2010   30.1 %   2002     -13.4 %  
 
 
  2009   55.7     2001     23.1    
 
 
  2008   -40.9     2000     16.7    
 
 
  2007   7.1     1999     13.7    
 
 
  2006   22.3     1998     -3.3    
 
 
  2005   11.5     1997     24.7    
 
 
  2004   15.8     1996     15.5    
 
 
  2003   52.6     1995     19.1    
 
 
                       
  TOP 10 POSITIONS % of Net Assets  
 
 
  Fronteer Gold   1.3 %  
 
 
  Total Energy Services   1.1    
 
 
  Burckhardt Compression Holding   1.1    
 
 
  Silvercorp Metals   1.0    
 
 
  Cavco Industries   1.0    
 
 
  Semperit AG Holding   1.0    
 
 
  OYO Geospace   1.0    
 
 
  Olympic Steel   1.0    
 
 
  US Gold   1.0    
 
 
  Horsehead Holding Corporation   1.0    
 
 
                       
  PORTFOLIO SECTOR BREAKDOWN
% of Net Assets		  
 
 
  Natural Resources   18.8 %  
 
 
  Industrial Products   14.2    
 
 
  Technology   12.9    
 
 
  Industrial Services   11.0    
 
 
  Health   10.2    
 
 
  Consumer Products   5.0    
 
 
  Consumer Services   4.9    
 
 
  Financial Services   3.3    
 
 
  Financial Intermediaries   3.2    
 
 
  Miscellaneous   4.7    
 
 
  Cash and Cash Equivalents   11.8    
 
 
     



Royce Micro-Cap Fund

Manager’s Discussion
Like the rest of the stock market, micro-caps enjoyed a strong year, particularly in the more bullish second half of 2010, which can be seen in the calendar-year result for Royce Micro-Cap Fund (RMC). The Fund was up 30.1% for the calendar year, ahead of both its small-cap benchmark, the Russell 2000, which rose 26.9%, and the 28.9% gain for the Russell Microcap index for the same period. The Fund was down 1.3% in the first half of the year, with a solid first-quarter return and a better relative down-market showing in the bearish second quarter. Small-cap stocks began to rally following the 2010 low on July 6, which meant strong quarterly showings in both the third and fourth quarters. Between July and September, RMC rose 12.5% compared to respective gains of 11.3% and 7.8% for the Russell 2000 and Russell Microcap indexes. In the year's final quarter, the Fund kept up its momentum, though it gave up some ground to the micro-cap index, up 17.2% versus 16.3% for the Russell 2000 and 19.4% for the Russell Microcap index.
     The Fund's relative strength during the second-quarter correction and the third-quarter rally was thus critical to its advantage over its benchmark, though its absolute results for the entire year were most pleasing to us. We were also very happy that RMC held an edge over both indexes from the market low on March 9, 2009 through the end of December, 2010, gaining 159.4% versus 134.0% for the Russell 2000 and 139.7% for the micro-cap index. (Please see page 6 for recent market cycle results.) The Fund's performance advantage also remained during calendar-based, longer-term periods, as it bested the Russell Microcap index—for which data goes back to 2000—for the three-, five- and 10-year periods ended December 31, 2010. RMC also outpaced the Russell 2000 for each of those aforementioned periods and the 15-year and since inception (12/31/91) periods ended December 31, 2010. The Fund's average annual total return since inception was 14.0%.
    

GOOD IDEAS THAT WORKED
Top Contributors to 2010 Performance*
   
    Fronteer Gold   1.51%
   
    US Gold   1.26   
   
    Luk Fook Holdings (International)   1.04   
   
    OYO Geospace   0.97   
   
    Lamprell   0.96   
   
    *Includes dividends    
           
           
     Although all of the Fund's equity sectors made positive contributions to performance in 2010, Natural Resources—its largest sector at the end of December—led by a wide margin, more than four times that of RMC's next best-performing sector, Technology. Its formidable showing was primarily attributable to terrific results from holdings in the precious metals and mining group and energy services companies. These areas received a
 
Important Performance and Expense Information
All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when redeemed. Shares redeemed within 180 days of purchase may be subject to a 1% redemption fee payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current performance may be higher or lower than performance quoted. Current month-end performance may be obtained at www.roycefunds.com. All performance and risk information reflects Investment Class results. Operating expenses reflect the Fund's total annual operating expenses for the Investment Class as of the date of the Fund's most current prospectus and include management fees, other expenses and acquired fund fees and expenses. Shares of RMC's Service and Consultant Classes bear an annual distribution expense that is not borne by the Investment Class. Acquired fund fees and expenses reflect the estimated amount of fees and expenses incurred indirectly by the Fund through its investment in mutual funds, hedge funds, private equity funds and other investment companies. The sum of all contributions and detractions for all securities would approximate the Fund's performance for 2010.

             44   |  The Royce Funds 2010 Annual Report to Shareholders



 
 
 
Performance and Portfolio Review


boost from a worldwide spike in the prices of many commodities, particularly oil, silver and gold. We have been increasingly drawn to hard asset stocks over the last seven years in large part because we expected these kinds of companies to succeed in an inflationary environment. They were among the Fund's most successful portfolio investments in 2009, and we were again pleased with how well many of these holdings performed in 2010.
      Fronteer Gold reaped a golden harvest from discoveries earlier in the year in its home base of Nevada, where it has been focusing more and more of its attention. We sold some shares between June and December. That same span saw us taking gains in shares of US Gold after disappointing results on gold deposits, though the firm also benefitted from the discovery of silver in one of its Mexican mines late in the year. Each was a top-ten position at the end of December. OYO Geospace was another top-performing top-ten holding. The company manufactures instruments and equipment used in the acquisition and processing of seismic data, as well as in the characterization and monitoring of producing oil and gas reservoirs. We like its prudent, conservative management, particularly the way that they continued to reinvest in the business through the worst days of the recession.
     Outside of the Natural Resources sector, Luk Fook Holdings (International) enjoyed success in all aspects of its business, which includes designing, wholesaling and retailing a variety of gold jewelry, gem-set jewelry, gemstones and authentication services. It is now one of the best-known jewelry companies in China after having been long established in Hong Kong. We found very little not to like about the company—it possesses a terrific franchise model, impressive margins, a solid balance sheet, high cash flow and accessible management. We sold some shares between July and October.
     
      As for those holdings that were less successful in 2010, we chose to hold a small position in Genoptix, which provides specialized laboratory services that focus on personalized, comprehensive diagnostics to cancer sufferers that are primarily sold to oncologists and hematologists. Its share price began to rebound in December on takeover rumors, which prompted us to sell some shares. Still confident in its ability to improve results enough to attract more investors, we slightly increased our stake in Atlantic Tele-Network, a company that provides wireless and other telecommunications services to rural, niche, and other under-served markets and geographies in the U.S., Bermuda and the Caribbean.

GOOD IDEAS AT THE TIME
Top Detractors from 2010 Performance*

  
 
 
Genoptix -0.58%  
 
Atlantic Tele-Network -0.46     
 
Sterling Construction -0.38     
 
Jinpan International -0.31     
 
SurModics -0.29     
 
*Net of dividends  



 
 
 
     
     
  PORTFOLIO DIAGNOSTICS  
 
 
  Average Market Capitalization* $427 million     
 
 
  Weighted Average P/E Ratio** 17.9x    
 
 
  Weighted Average P/B Ratio 1.9x     
 
 
  U.S. Investments
(% of Net Assets)		 63.6%     
 
 
  Non-U.S. Investments
(% of Net Assets)		 24.6%     
 
 
  Fund Net Assets $1,407 million     
 
 
  Turnover Rate 36%     
 
 
  Number of Holdings 211     
 
 
  Symbol    
      Investment Class RYOTX     
      Service Class RMCFX     
      Consultant Class RYMCX     
 
 
   * Geometrically calculated  
 

**The Fund’s P/E ratio calculation excludes companies with zero or negative earnings (25% of portfolio holdings as of 12/31/10).

  
     
  MORNINGSTAR STATISTICAL MEASURES*  
 
 
    RMC Category Median Best Decile Breakpoint  
 
 
  Sharpe Ratio 0.42 0.16   0.41    
 
 
  Standard
Deviation		  21.86 23.34   21.90    
 
 
 

*  Five years ended 12/31/10. Category Median and Best Decile Breakpoint based on 23 micro-cap objective funds (oldest class only) with at least five years of history.

  
     
  RISK/RETURN COMPARISON
Five-Year Period Ended 12/31/10		  
 
 
    Average Annual
Total Return		 Standard  
Deviation  		 Return Efficiency*  
 
 
  RMC 9.39% 21.86   0.43    
 
 
  Russell 2000  4.47 23.11   0.19    
 
 
 

*  Return Efficiency is the average annual total return divided by the annualized standard deviation over a designated time period. Please read the prospectus for a more complete discussion of risk.

  
     
  DOWN MARKET PERFORMANCE COMPARISON
All Down Periods of 7.5% or Greater
Over the Last 10 Years, in Percentages(%)		  
   
     

The Royce Funds 2010 Annual Report to Shareholders   |   45                   



 
     
   
  MICRO-CAP  
 
 
  Micro-Cap Funds generally invest in companies with market capitalizations up to $500 million, using our core investment approach.  
 

   

  
  AVERAGE ANNUAL TOTAL RETURNS
 Through 12/31/10		  
 
 
  July-Dec 2010*   22.43 %  
 
 
  One-Year         19.63    
 
 
  Three-Year         -0.75    
 
 
  Five-Year         1.12    
 
 
  Since Inception (10/3/03)   5.46    
 
 
  ANNUAL EXPENSE RATIOS  
 
 
  Gross Operating Expenses   3.56 %  
 
 
  Net Operating Expenses         1.49    
 
 
  * Not annualized  
         
  CALENDAR YEAR TOTAL RETURNS  
 
 
  Year   RDF     Year     RDF    
 
 
  2010   19.6 %   2006     16.8 %  
 
 
  2009   25.9     2005     7.6    
 
 
  2008   -35.1     2004     13.3    
 
 
  2007   -7.4                
 
 
                       
  TOP 10 POSITIONS % of Net Assets  
 
 
  Preformed Line Products   1.5 %  
 
 
  Continucare Corporation   1.6    
 
 
  TransGlobe Energy   1.5    
 
 
  Sierra Wireless   1.4    
 
 
  SciClone Pharmaceuticals   1.3    
 
 
  Universal Electronics   1.3    
 
 
  TTM Technologies   1.2    
 
 
  Wet Seal (The) Cl. A   1.2    
 
 
  Amedisys   1.2    
 
 
  Drew Industries   1.2    
 
 
                       
  PORTFOLIO SECTOR BREAKDOWN
% of Net Assets		  
 
 
  Technology   25.4 %  
 
 
  Industrial Products   16.5    
 
 
  Health   16.3    
 
 
  Consumer Products   9.6    
 
 
  Consumer Services   6.8    
 
 
  Industrial Services   6.7    
 
 
  Natural Resources   5.8    
 
 
  Financial Intermediaries   4.4    
 
 
  Miscellaneous   2.6    
 
 
  Cash and Cash Equivalents   5.9    
 
 
     



Royce Discovery Fund

Managers’ Discussion
While the market struggled through much of 2010's first half, it rebounded solidly during the second. Worries over global debt, housing, unemployment and the specters of deflation and inflation remained on the minds of many, though not, it would appear, to the same degree that they were between January and June. In this environment, Royce Discovery Fund (RDF) enjoyed a strong year on an absolute basis, up 19.6%, although trailing its benchmark, the Russell Microcap index, which gained 28.9% for the same period. Lower-quality equities generally did better in 2010, especially through the dynamic upswing that encompassed nearly all of the year's second half, making the Fund's underperformance versus the small-cap index unsurprising.
     We were pleased with RDF's performance in the year's notable down draft. Shortly after the second quarter began, the rally that had started in February sputtered, setting off a correction that lasted until early July. From the interim small-cap high on April 23, 2010 through the interim small-cap low on July 6, 2010, RDF fell 17.7% versus a loss of 20.9% for the Russell Microcap index. (Please see page 6 for more market cycle results.) The Fund then lost ground during the third quarter, up 6.3% versus 7.8% for its benchmark. The appetite for risk only seemed to grow the longer the recovery in share prices went on. The fourth quarter set a particularly torrid pace. Between October and December, RDF was up 15.2% versus a gain of 19.4% for the Russell Microcap index. The Fund outperformed the Russell Microcap index for the since inception period (10/3/03) ended 12/31/10.
     As we have mentioned previously, the month of August 2010 marked an important change to the Fund's principal investment strategies, which were approved by the Fund's Board of Trustees on June 10, 2010. Primarily, the changes mean that portfolio managers George Necakov and James Harvey will evaluate the purchase and sale recommendations of the Fund's proprietary model, using both quantitative and qualitative portfolio analysis before they implement investment decisions. Previously, the Fund's investment decisions were implemented solely on the basis of the recommendations of Royce's proprietary quantitative model. The Fund continues to use a disciplined value approach, which focuses on factors such as balance sheet quality, cash flow levels and various
   


GOOD IDEAS THAT WORKED
Top Contributors to 2010 Performance*
   
    TransGlobe Energy   2.11%
   
    Metropolitan Health Networks   1.15   
   
    Super Micro Computer   1.12   
   
    Sierra Wireless   0.72   
   
    Preformed Line Products   0.70   
   
    *Includes dividends    
           
           
Important Performance and Expense Information
All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when redeemed. Shares redeemed within 180 days of purchase may be subject to a 1% redemption fee payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current performance may be higher or lower than performance quoted. Current month-end performance may be obtained at www.roycefunds.com. Gross operating expenses reflect the Fund's gross total annual operating expenses for the Service Class and include management fees, 12b-1 distribution and service fees, and other expenses. Net operating expenses reflect contractual fee waivers and/ or expense reimbursements. All expense information is reported as of the Fund's most current prospectus. Royce & Associates has contractually agreed to waive fees and/or reimburse operating expenses to the extent necessary to maintain the Service Class's net annual operating expense ratio at or below 1.49% through April 30, 2011 and at or below 1.99% through April 30, 2020. The sum of all contributions and detractions for all securities would approximate the Fund's performance for 2010.

             46   |  The Royce Funds 2010 Annual Report to Shareholders



 
 
 
Performance and Portfolio Review


other measures of a company's profitability. We believe that the integration of the two portfolio managers' analysis before implementation of the model's investment recommendations should enhance the investment decision making process for the Fund.
      As might be expected in a wide and deep market rally, all of the Fund's nine equity sectors were positive contributors to performance for the calendar-year period. Technology was the top-gaining area by a comfortable margin, followed by Industrial Products, Natural Resources, and Consumer Products. At the industry level, oil and gas companies, health services businesses and the telecommunications group made the most significant positive impact. At the end of December, Technology remained by far the largest sector within the Fund, followed by Health and Industrial Products. Tech's dominance of the 2010 performance was the result of several industries and companies posting solid net gains. In addition to telecommunications, there were notable successes in semiconductors and equipment companies, components and systems stocks, and the aerospace and defense group.
     The top contributor to performance, TransGlobe Energy, came from the Natural Resources sector. The Canadian company is an oil and gas exploration, development, and production business that no doubt benefitted from the pickup in oil prices. Metropolitan Health Networks operates in southern Florida and provides comprehensive medical treatment and other patient and physician services. Its stock price spiked in the second half, in part the result of earnings that were stronger than what Wall Street was anticipating. Super Micro Computer manufactures and sells server solutions based on modular and open-standard x86 architecture. Its earnings were also higher than many seemed to be expecting, though its performance in the portfolio was helped by timely trading, a sale of shares in March when its price was riding high.
     
      In December, we sold our position in Medical Action Industries, a maker of disposable medical products primarily in the U.S. It offers patient bedside products, such as wash basins, bedpans, pitchers and carafes. Its share price fell especially hard in early August on news of disappointing results. China Sky One Medical manufactures and sells over-the-counter branded nutritional supplements and over-the-counter plant and herb-based pharmaceutical and medicinal products primarily in China. We sold our stake in September, shortly after its CFO resigned for health reasons and the company cut its revenue and profit forecast.

GOOD IDEAS AT THE TIME
Top Detractors from 2010 Performance*

  
 
 
Medical Action Industries -0.89%  
 
China Sky One Medical -0.52     
 
Willbros Group -0.47     
 
Merit Medical Systems -0.45     
 
GigaMedia -0.39     
 
*Net of dividends  



 
 
 
     
     
  PORTFOLIO DIAGNOSTICS  
 
 
  Average Market Capitalization* $342 million     
 
 
  Weighted Average P/E Ratio** 12.4x    
 
 
  Weighted Average P/B Ratio 1.5x     
 
 
  U.S. Investments
(% of Net Assets)		 94.1%     
 
 
  Non-U.S. Investments
(% of Net Assets)		 0.0%     
 
 
  Fund Net Assets $4 million     
 
 
  Turnover Rate 105%     
 
 
  Number of Holdings 106     
 
 
  Symbol    
      Service Class RYDFX     
 
 
   * Geometrically calculated  
 

**The Fund’s P/E ratio calculation excludes companies with zero or negative earnings (11% of portfolio holdings as of 12/31/10).

  
     
  MORNINGSTAR STATISTICAL MEASURES*  
 
 
    RDF Category Median Best Quartile Breakpoint  
 
 
  Sharpe Ratio 0.06 0.16   0.25    
 
 
  Standard
Deviation		  22.04 23.34   22.50    
 
 
 

*  Five years ended 12/31/10. Category Median and Best Quartile Breakpoint based on 23 micro-cap objective funds (oldest class only) with at least five years of history.

  
     
  RISK/RETURN COMPARISON
Five-Year Period Ended 12/31/10		  
 
 
    Average Annual
Total Return		 Standard  
Deviation  		 Return Efficiency*  
 
 
  RDF 1.12% 22.04   0.43    
 
 
  Russell Microcap  1.19 24.17   0.05    
 
 
 

*  Return Efficiency is the average annual total return divided by the annualized standard deviation over a designated time period. Please read the prospectus for a more complete discussion of risk.

  
     
  DOWN MARKET PERFORMANCE COMPARISON
All Down Periods of 7.5% or Greater
in Percentages(%)		  
   
     

The Royce Funds 2010 Annual Report to Shareholders   |   47                   



 
     
   
  MID-CAP  
 
 
  Mid-Cap Funds generally invest in mid-cap companies with market capitalizations from $2.5 billion to $15 billion, or smid-cap companies with market caps from $500 million to $10 billion.  
 

   

  
  AVERAGE ANNUAL TOTAL RETURNS
 Through 12/31/10		  
 
 
  July-Dec 2010*   28.40 %  
 
 
  One-Year         25.99    
 
 
  Three-Year         4.69    
 
 
  Since Inception (9/28/07)   4.36    
 
 
  ANNUAL EXPENSE RATIOS  
 
 
  Gross Operating Expenses   2.04 %  
 
 
  Net Operating Expenses   1.50    
 
 
  * Not annualized  
         
  CALENDAR YEAR TOTAL RETURNS  
 
 
  Year   RSV     Year     RSV    
 
 
  2010   26.0 %   2008     -29.3 %  
 
 
  2009   28.7                
 
 
                       
  TOP 10 POSITIONS % of Net Assets  
 
 
  Pan American Silver   3.3 %  
 
 
  Ensco ADR   3.3    
 
 
  Lubrizol Corporation (The)   3.1    
 
 
  Semperit AG Holding   2.9    
 
 
  International Rectifier   2.8    
 
 
  Varian Semiconductor Equipment Associates   2.7    
 
 
  Helmerich & Payne   2.7    
 
 
  GrafTech International   2.7    
 
 
  Value Partners Group   2.7    
 
 
  Ashmore Group   2.5    
 
 
                       
  PORTFOLIO SECTOR BREAKDOWN
% of Net Assets		  
 
 
  Industrial Products   21.8 %  
 
 
  Natural Resources   21.6    
 
 
  Technology   19.5    
 
 
  Financial Services   7.0    
 
 
  Financial Intermediaries   4.9    
 
 
  Consumer Services   4.1    
 
 
  Consumer Products   2.7    
 
 
  Industrial Services   2.4    
 
 
  Health   1.4    
 
 
  Miscellaneous   0.3    
 
 
  Cash and Cash Equivalents   14.3    
 
 
     



Royce SMid-Cap Value Fund

Managers’ Discussion
Market performance for smaller companies in 2010 largely mirrored performance in 2009; however, the results were achieved in markedly different fashion. The largely undisturbed rally of 2009, commencing off the early spring lows of that year, gave way to a market with three distinct phases in 2010. Interestingly, each phase was defined by the resurgence of macroeconomic fears and the resulting policy responses initiated to mitigate them, leading to substantial intra-year volatility. The year's final and most significant phase began in late August following the launch by the Fed of QE2 (the second round of their quantitative easing policy). Surprising the market in its scale, this initiative gave rise to a dramatic shift in risk taking that led to substantial outperformance of smaller companies relative to their larger cap peers. Royce SMid-Cap Value Fund (RSV), with its focus on an often overlooked segment of the market cap spectrum located at the larger end of the smaller company universe, performed well as investors began to shift towards equities and away from the safety of bonds. For the full year 2010, RSV rose 26.0%, largely in step with its benchmark, the Russell 2500 Index, which rallied 26.7%.
     The Fund got off to a slow start, underperforming its benchmark during the bullish first quarter (+7.1% versus +9.2%). However, the Fund's defensive positioning and bias towards higher quality companies allowed it to slightly outperform in the difficult second quarter (-8.3% versus -10.0%). We were pleased to see a gradual transition take place during this volatile period favoring higher quality companies that would then extend into the bullish second half of year. Both the third and fourth quarters were strongly positive for the market, and the Fund held its own—RSV rose 11.8% in the third quarter and 14.9% in the fourth, nearly matching the benchmark's respective moves of 12.2% and 14.9% over the comparable periods.
     Launched just over three years ago, in September 2007 at the very outset of the financial crisis, the Fund has clearly experienced a "baptism by fire." It has had to navigate one of the most vicious bear markets in history followed by a volatile and rapid recovery for stocks all within the context of an environment rife with uncertainty. Given this backdrop, we are pleased that the Fund generated
    

GOOD IDEAS THAT WORKED
Top Contributors to 2010 Performance*
   
    Hochschild Mining   2.65%
   
    Pan American Silver   2.16   
   
    Lubrizol Corporation (The)   1.41   
   
    Ashmore Group   1.36   
   
    GrafTech International   1.28   
   
    *Includes dividends    
           
           
Important Performance and Expense Information
All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when redeemed. Shares redeemed within 180 days of purchase may be subject to a 1% redemption fee payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current performance may be higher or lower than performance quoted. Current month-end performance may be obtained at www.roycefunds.com. Gross operating expenses reflect gross total annual operating expenses for the Service Class and include management fees, 12b-1 distribution and service fees, other expenses and acquired fund fees and expenses. Net operating expenses reflect contractual fee waivers and/or expense reimbursements. All expense information is reported as of the Fund's most current prospectus. Royce & Associates has contractually agreed to waive fees and/or reimburse operating expenses to the extent necessary to maintain the Service Class's net annual operating expenses, other than acquired fund fees and expenses, at or below 1.49% through April 30, 2011 and at or below 1.99% through April 30, 2020. Acquired fund fees and expenses reflect the estimated amount of the fees and expenses incurred directly by the Fund through its investments in mutual funds, hedge funds, private equity funds and other investment companies. The sum of all contributions and detractions for all securities would approximate the Fund's performance for 2010.

             48   |  The Royce Funds 2010 Annual Report to Shareholders



 
 
 
Performance and Portfolio Review


a positive absolute return—our favored measure—while at the same time outpacing the Russell 2500 on a relative basis. Since its inception (9/28/07), RSV had an average annual return of 4.4%, giving it a healthy lead over the Russell 2500, which was up 0.9% for the same period.
      Following a mixed result at mid-year, all but one of the Fund's eleven sectors contributed positively to full-year performance in 2010. The powerful rally instigated by the Fed's late summer decision to launch a second and surprisingly large program of quantitative easing elevated stocks out of the mid-year doldrums in a mostly undifferentiated fashion. That said, two sectors were particularly strong contributors to the Fund's performance—Natural Resources and Industrial Products. When combined with Technology, these three sectors accounted for over three quarters of the Fund's 2010 return. From an industry standpoint, precious metals and mining companies led, followed by semiconductors and equipment stocks and energy services businesses, each of the three from one of the two top sector groups. Banking was a disappointment, highlighting the continued difficulties plaguing this real estate dependent segment of the market.
     RSV's two top individual performers came from the inflation-sensitive precious metals and mining group. Hochschild Mining, the third largest primary silver producer in the world with five mining operations spanning the Americas, and Pan American Silver, a Mexican silver miner, performed well as silver prices rose due to a mixture of renewed industrial demand and the growing appreciation of silver as a hedge against inflationary pressures stemming from easy monetary policies around the world. Elsewhere in the portfolio, Lubrizol was a notable gainer as this specialty chemicals company serving the transportation, industrial and consumer products end markets saw a broad pickup in demand as the economy slowly picked up steam throughout the year.
     
      GameStop, the world's largest specialty retailer of electronic games and PC entertainment software, was the Fund's biggest detractor for the year. Constantly challenged by a range of potential competitors, the demise of its business model was a constant source of investor concern and led to a fall in its share price. It remains our belief that these fears of big box competition or digital disintermediation are overblown, and we continue to be enamored with the company's defensible position in the used game market, excellent customer service and very attractive valuation. Artio Global Investors, a U.S. based asset management business focusing on international equity portfolios for a predominantly institutional client base, was not able to stem redemption activity as pension plans, foundations and endowments continued to reassess their asset allocations leading to very poor stock performance for the year. Seeing better opportunities elsewhere, we sold our remaining shares in October.

GOOD IDEAS AT THE TIME
Top Detractors from 2010 Performance*

  
 
 
GameStop Corporation Cl. A -0.93%  
 
Artio Global Investors Cl. A -0.74     
 
Popular -0.65     
 
Sanderson Farms -0.57     
 
Western Digital -0.39     
 
*Net of dividends  



 
 
 
     
     
  PORTFOLIO DIAGNOSTICS  
 
 
  Average Market Capitalization* $3,116 million     
 
 
  Weighted Average P/E Ratio** 13.7x    
 
 
  Weighted Average P/B Ratio 2.3x     
 
 
  U.S. Investments
(% of Net Assets)		 68.4%     
 
 
  Non-U.S. Investments
(% of Net Assets)		 17.3%     
 
 
  Fund Net Assets $6 million     
 
 
  Turnover Rate 126%     
 
 
  Number of Holdings 53     
 
 
  Symbol    
      Service Class RMVSX     
 
 
   * Geometrically calculated  
 

**The Fund's P/E ratio calculation excludes companies with zero or negative earnings (4% of portfolio holdings as of 12/31/10).

  
     
  MORNINGSTAR STATISTICAL MEASURES*  
 
 
    RSV Category Median Best Quartile Breakpoint  
 
 
  Sharpe Ratio 0.29 0.13   0.22    
 
 
  Standard
Deviation		  24.16 25.78   24.06    
 
 
 

*  Three years ended 12/31/10. Category Median and Best Quartile Breakpoint based on 436 mid-cap objective funds (oldest class only) with at least three years of history.

  
     
  RISK/RETURN COMPARISON
Three-Year Period Ended 12/31/10		  
 
 
    Average Annual
Total Return		 Standard  
Deviation  		 Return Efficiency*  
 
 
  RSV 4.69% 24.16   0.19    
 
 
  Russell 2500  2.48 27.18   0.09    
 
 
 

*  Return Efficiency is the average annual total return divided by the annualized standard deviation over a designated time period. Please read the prospectus for a more complete discussion of risk.

  
     
     

The Royce Funds 2010 Annual Report to Shareholders   |   49                   



 
     
   
  MID-CAP
 
 
  Mid-Cap Funds generally invest in mid-cap companies with market capitalizations from $2.5 billion to $15 billion, or smid-cap companies with market caps from $500 million to $10 billion.  
 

   

  
  AVERAGE ANNUAL TOTAL RETURNS
Through 12/31/10		  
 
 
  July-Dec 2010*   26.57 %  
 
 
  One-Year         18.60  
 
 
  Since Inception (12/31/09)   18.60  
 
 
  ANNUAL EXPENSE RATIOS  
 
 
  Gross Operating Expenses   1.75 %
 
 
  Net Operating Expenses     1.49  
 
 
  * Not annualized  
       
  TOP 10 POSITIONS % of Net Assets  
 
 
  Western Digital   3.3 %
 
 
  Ensco ADR   3.1  
 
 
  Analog Devices   2.9  
 
 
  Flowserve Corporation 2.9  
 
 
  Lubrizol Corporation (The) 2.7  
 
 
  CA   2.7  
 
 
  TD AMERITRADE
Holding Corporation		 2.6  
 
 
  Biogen Idec   2.6  
 
 
  Pan American Silver 2.2  
 
 
  LSI Corporation   2.2  
 
 
                     
  PORTFOLIO SECTOR BREAKDOWN
% of Net Assets		  
 
 
  Industrial Products   21.5 %
 
 
  Technology   17.4  
 
 
  Natural Resources   13.9  
 
 
  Industrial Services   7.6  
 
 
  Health   7.2  
 
 
  Consumer Services 7.1  
 
 
  Financial Intermediaries 5.8  
 
 
  Consumer Products 3.2  
 
 
  Financial Services   2.9  
 
 
  Miscellaneous   4.2  
 
 
  Cash and Cash Equivalents 9.2  
 
 
     



Royce Mid-Cap Fund

Managers’ Discussion
Royce Mid-Cap Fund (RMM) turned in a solid year of absolute returns while lagging its benchmark index. RMM advanced 18.6% for the calendar year compared to its benchmark, the Russell Midcap index, which rose 25.5% over the same period. The strong full-year results masked a market comprised of three distinct phases in 2010, each with somewhat unique drivers that affected quarterly returns for both the Fund and equities broadly. The low-quality rally initiated off the bear market lows in the spring of 2009 continued into the first quarter of 2010. With its focus soundly on high-quality, well-capitalized and established businesses, RMM's 5.0% return could not keep pace with the benchmark's advance of 8.7%. During the highly correlated and undifferentiated decline that gripped markets during the difficult second quarter, the Fund fell 10.8%, largely in line with the benchmark, which declined 9.9%. However, market fears of destabilization within the Eurozone brought on by sovereign debt issues in the now infamous PIIGS' (Portugal, Ireland, Italy, Greece and Spain) economies soon gave way to renewed investor optimism, as the European central banks and the Fed announced new measures aimed at shoring up their respective finances. As investors shifted back into equities, we were encouraged that the Fund largely kept pace during the liquidity fueled rally that marked the final two quarters of the year. RMM added 11.2% and 13.8% for the two quarterly periods versus the Russell Midcap index, which tacked on 13.3% and 13.1%, respectively.
     With its focus on companies generally ranging in size from $2.5 billion to $15 billion in market capitalization, RMM's investment universe sits just above the threshold for the bulk of Royce's small-cap funds, putting it in the unique position of being able to extend the firm's institutional knowledge of companies as they grow out of our traditional capitalization range. Additionally, the Fund has the flexibility to capture unique opportunities in companies that were perhaps once large-cap stocks that have been sold down the cap spectrum due to some impairment or shareholder disappointment. Launched on December 31, 2009, the Fund just completed its first year in operation and, while a bit slow out
   

GOOD IDEAS THAT WORKED
Top Contributors to 2010 Performance*
   
    Dollar Tree   2.00%
   
    Agrium   1.15   
   
    Autoliv   1.06   
   
    Red Back Mining   0.99   
   
    O'Reilly Automotive   0.91   
   
    *Includes dividends    
           
           
Important Performance and Expense Information
All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when redeemed. Shares redeemed within 180 days of purchase may be subject to a 1% redemption fee payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current performance may be higher or lower than performance quoted. Current month-end performance may be obtained at www.roycefunds.com. Gross operating expenses reflect total gross annual operating expenses and include management fees, 12b-1 distribution and service fees, other expenses. Net operating expenses reflect contractual fee waivers and/or reimbursements. All expense information is reported as of the Fund's most current prospectus. Royce & Associates has contractually agreed to waive its fees and/or reimburse operating expenses to the extent necessary to maintain the Fund's net annual operating expense ratio at or below 1.49% through April 30, 2013. The sum of all contributions and detractions for all securities would approximate the Fund's performance for 2010.

             50   |  The Royce Funds 2010 Annual Report to Shareholders



 
 
 
Performance and Portfolio Review


of the gate, we are confident that our uncompromising focus on companies with low leverage, high rates of return and attractive earnings yields will serve us very well in the market cycles that lie ahead.
      The Industrial Products and Natural Resources sectors posted the most significant gains for 2010, followed by Consumer Services. Overall, nine of the Fund's ten equity sectors were positive contributors, with only Financial Intermediaries showing a shortfall. Clearly, sectors that were oriented toward the dynamic industrial and consumption trends of the emerging world had the strongest tailwinds for their businesses, but there were also pockets of strength in unlikely parts of the developed world, such as retail and healthcare. From an industry perspective, retail stores, precious metals and mining, and specialty chemicals and materials all made sizable contributions, followed by automotive companies and the drugs and biotech group.
     Playing into the theme of a revitalized U.S. consumer, Dollar Tree was the top performing investment for 2010 by a comfortable margin. A leading operator of discount variety retail stores offering everyday general merchandise at the $1 price point, their merchandising flexibility and solid business execution, combined with prudent square footage growth and strong free cash flow, led to a powerful rally in the share price. A clear beneficiary of the emerging trend of a more price-conscious consumer, the prospects for this value-oriented retailer continue to look bright. It was a top-20 holding at the end of December. Agrium, a major supplier of nitrogen, potash and phosphate based fertilizer products for the agricultural industry, benefitted handsomely from an explosion in demand for agricultural products. Changing consumption patterns in the world's major population centers, along with exploding prices for agricultural commodities, resulted in large increases in planting acreage and a resulting powerful recovery in the company's earnings prospects.
     
      Even in a good year, there are disappointments, and Western Digital was clearly one of them. A manufacturer of hard disk drives used in a broad range of computers and other media devices, the company saw its stock price decline as industry conditions became more challenging and the company ceded some market share to defend pricing. Although we sold some shares between August and October, we remain committed to the company for the long term given its strong market position, attractive valuation and solid business prospects. Apollo Group was another trouble spot as this provider of online and campus-based higher education programs fell victim to massive regulatory uncertainty and a resulting sharp decline in enrollment trends. While looking very inexpensive from a valuation standpoint, we exited the position in October for better opportunities elsewhere.

GOOD IDEAS AT THE TIME
Top Detractors from 2010 Performance*

  
 
 
Western Digital -1.36%  
 
Apollo Group Cl. A -0.81     
 
GameStop Corporation Cl. A -0.47     
 
Popular -0.41     
 
Western Union -0.33     
 
*Net of dividends  


 
 
 
     
     
  PORTFOLIO DIAGNOSTICS  
 
 
  Average Market Capitalization* $6,429 million     
 
 
  Weighted Average P/E Ratio** 16.9x     
 
 
  Weighted Average P/B Ratio 2.3x     
 
 
  U.S. Investments
(% of Net Assets)		 85.2%     
 
 
  Non-U.S. Investments
(% of Net Assets)		 5.6%     
 
 
  Fund Net Assets $5 million     
 
 
  Turnover Rate 117%     
 
 
  Number of Holdings 60     
 
 
  Symbol    
      Service Class RMIDX     
 
 
   * Geometrically calculated  
   ** The Fund's P/E ratio calculation excludes companies with
     zero or negative earnings (1% of portfolio holdings as
     of 12/31/10).		  
     
     
     
     
     
     
     
     
     
     

The Royce Funds 2010 Annual Report to Shareholders   |   51                   



 
     
   
  GLOBAL/INTERNATIONAL  
 
 
  Global/International Funds generally focus on non-U.S. based companies using our core approach to security selection.  
 

   

  
  AVERAGE ANNUAL TOTAL RETURNS
Through 12/31/10		  
 
 
  July-Dec 2010*   39.18 %  
 
 
  One-Year         35.20    
 
 
  Three-Year         4.56    
 
 
  Since Inception (12/29/06)   3.77    
 
 
  ANNUAL EXPENSE RATIOS  
 
 
  Gross Operating Expenses   3.28 %  
 
 
  Net Operating Expenses   1.76    
 
 
  * Not annualized  
         
  CALENDAR YEAR TOTAL RETURNS  
 
 
  Year   RES     Year     RES    
 
 
  2010   35.2 %   2008     -46.4 %  
 
 
  2009   57.7     2007     1.4    
 
 
                       
  TOP 10 POSITIONS % of Net Assets  
 
 
  Semperit AG Holding   2.7 %  
 
 
  Burckhardt Compression Holding   2.4    
 
 
  Mayr-Melnhof Karton   2.4    
 
 
  Hochschild Mining   2.3    
 
 
  Pfeiffer Vacuum Technology   2.1    
 
 
  Lamprell   2.1    
 
 
  TGS-NOPEC Geophysical   2.0    
 
 
  Ashmore Group   1.9    
 
 
  Carl Zeiss Meditec   1.9    
 
 
  SMA Solar Technology   1.8    
 
 
                       
  PORTFOLIO SECTOR BREAKDOWN
% of Net Assets		  
 
 
  Industrial Products   17.3 %  
 
 
  Natural Resources   16.4    
 
 
  Health   14.9    
 
 
  Technology   11.3    
 
 
  Industrial Services   8.6    
 
 
  Financial Services   8.4    
 
 
  Consumer Services   4.5    
 
 
  Financial Intermediaries   4.4    
 
 
  Consumer Products   3.8    
 
 
  Cash and Cash Equivalents   10.4    
 
 
     
  RISK/RETURN COMPARISON
Three-Year Period Ended 12/31/10		  
 
 
      Average Annual
Total Return		     Standard  
Deviation  		     Return Efficiency*  
 
 
  RES   4.56%     29.63       0.15    
 
 
  MSCI Europe Small Core    -2.91     34.29       -0.08    
 
 
 

*  Return Efficiency is the average annual total return divided by the annualized standard deviation over a designated time period. Please read the prospectus for a more complete discussion of risk.

  



Royce European Smaller-Companies Fund

Managers’ Discussion
Following a remarkable year for smaller European companies in 2009, our expectations were lower as we headed into 2010. The growing headwinds of sovereign financial distress in the peripheral countries of the Eurozone made the overall economic backdrop for the region quite uncertain and clearly ranked at the top of investor concerns for global markets. That said, there were excellent corporate fundamentals that were ignored due to undifferentiated systemic fears. True to our contrarian nature, we cast a much kinder (and longer-term) eye toward the opportunities presented, wading in just as others were fleeing for safer shores. The result was another strong year for Royce European Smaller-Companies Fund (RES). Following a rise of 57.7% in 2009, RES added an additional 35.2% in 2010 versus its benchmark index, the MSCI Europe Small Core Index, which rose 21.5% in the calendar year. While 2010 was satisfying from both an absolute and relative basis, longer-term returns were more muted, demonstrating just how challenging the period from the domestic small-cap high in July 2007 through the most recent cycle low in March 2009 really was. For the since inception period (12/29/06), the Fund gained 3.8%, compared to a 1.6% decline for the benchmark over the same period.
     During the first quarter, which saw a continuation of the powerful advance off the March 9, 2009 small-cap low, RES gained 3.7% versus an advance of 3.6% for the benchmark. The second quarter was a wholly different environment, with sovereign debt fears first in Greece and then in other European countries, which led to a vicious pullback that saw the European small-cap index fall 14.0%. RES by contrast fell only 6.3%, highlighting the importance of trying to embed a margin of safety in each investment, a practice at the core of the Royce investment discipline. The third and fourth quarters were both very strong and highly correlated, as the central banks of both Europe and the U.S. initiated measures aimed at stabilizing financial markets, reinvigorating economic activity and restoring investor confidence. RES added respective gains of 24.3% and 12.0% in 2010's third and fourth quarters, in both
   

GOOD IDEAS THAT WORKED
Top Contributors to 2010 Performance*
   
    Hochschild Mining   2.23%
   
    Lamprell   2.03   
   
    Fresnillo   1.84   
   
    Burckhardt Compression Holding   1.62   
   
    Societe Internationale de Plantations d'Heveas   1.40   
   
    *Includes dividends    
           
           
Important Performance and Expense Information
All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when redeemed. Shares redeemed within 180 days of purchase may be subject to a 2% redemption fee payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current performance may be higher or lower than performance quoted. Current month-end performance may be obtained at www.roycefunds.com. Gross operating expenses reflect total gross annual operating expenses and include management fees, 12b-1 distribution and service fees, other expenses and acquired fund fees and expenses. Net operating expenses reflect contractual fee waivers and/or expense reimbursements. All expense information is reported as of the Fund's most current prospectus. Royce & Associates has contractually agreed to waive its fees and/or reimburse operating expenses to the extent necessary to maintain the Fund's net direct annual operating expenses, other than acquired fund fees and expenses, at or below 1.69% through April 30, 2011 and at or below 1.99% through April 30, 2020. Acquired fund fees and expenses reflect the estimated amount of the fees and expenses incurred indirectly by the Fund through its investments in mutual funds, hedge funds, private equity funds and other investment companies. The sum of all contributions and detractions for all securities would approximate the Fund's performance for 2010.

             52   |  The Royce Funds 2010 Annual Report to Shareholders



 
 
 
Performance and Portfolio Review


periods outpacing its benchmark, which rose 22.4% and 11.5%, respectively. From the small-cap low on March 9, 2009 through December 31, 2010, RES rose 167.9% versus a not altogether paltry 150.5% advance for the MSCI Europe Small Core Index.
     Not surprising given the broad strength in the Fund's performance, all but one of the Fund's equity sectors contributed positively to returns, with Utilities being essentially flat for the year. One in particular, however, stood out from the rest. Natural Resources contributed nearly a third of the Fund's aggregate return for the year. A robust demand for precious metals and a sharp recovery in energy prices helped this sector to stand out. Industrial Products, Consumer Products and Financial Services rounded out the top four, each benefitting from a global economy that began to move from recovery to expansion.
     A more than 80% increase in the price of silver was the common thread in two of the Fund's top three individual performers. UK-based Hochschild Mining, the year's top performer, is the third largest primary silver producer in the world with five mining operations spanning the Americas. Fresnillo is another of the world's largest silver mining and exploration businesses. Its operations are based mainly in Mexico. Both Hochschild and Fresnillo boast the attractive combination of a very high quality asset base and low operational costs, which should allow for above-average industry margins for the foreseeable future. Lamprell, an energy services company with a leading market position in the important Arabian Gulf, upgrades, refurbishes and builds jack-up drilling units. The recession had put expansion plans for the company on hold, before the recovery in oil prices and a resumption of drilling activity allowed for a strong recovery in business activity and expansion into new services and markets led to a stellar move in the stock.
     
     The portfolio's leading miscue was Hellenic Exchanges. Positioned as the operating entity for Greece's primary national stock exchange and derivatives market, the company found itself caught in the epicenter of the financial storm that defined the first half of the year. The stock declined as the condition of the Greek economy deteriorated and the resulting austerity measures hampered trading volumes. Another disappointment was Vaisala, a Finnish technology company serving a global niche market in measurement systems for a variety of environmental sciences. The company issued a profit warning in the first half due to delivery problems in a new IT system. This disappointment, combined with investment in growth initiatives that will take some time to develop, served to depress margins. We like its strong balance sheet and healthy dividend yield. As with Hellenic, we are willing to be patient; we built our stake in both stocks during 2010.

GOOD IDEAS AT THE TIME
Top Detractors from 2010 Performance*

  
 
 
Hellenic Exchanges -0.55%  
 
Vaisala Cl. A -0.48     
 
Begbies Traynor -0.37     
 
Net 1 UEPS Technologies -0.36     
 
SMA Solar Technology -0.27     
 
*Net of dividends  



 
 
 
     
     
  PORTFOLIO DIAGNOSTICS  
 
 
  Average Market Capitalization* $1,483 million     
 
 
  Weighted Average P/E Ratio** 14.7x    
 
 
  Weighted Average P/B Ratio 2.9x     
 
 
  Fund Net Assets $15 million     
 
 
  Turnover Rate 32%     
 
 
  Number of Holdings 81     
 
 
  Symbol    
      Service Class RISCX     
 
 
   * Geometrically calculated  
 

**The Fund’s P/E ratio calculation excludes companies with zero or negative earnings (4% of portfolio holdings as of 12/31/10).

  
     
  PORTFOLIO COUNTRY BREAKDOWN*
% of Net Assets**		  
 
 
  France 13.3%   
 
 
  Germany 11.6    
 
 
  United Kingdom 10.9     
 
 
  South Africa 8.8     
 
 
  Switzerland 8.5     
 
 
  Austria 5.1     
 
 
  Norway 3.7     
 
 
  Belgium 3.1     
 
 
  Denmark 3.0     
 
 
  Finland 3.0     
 
 
   * Represents countries that are 3% or more of net assets  
 

**Securities are categorized by their country of headquarters

  
     
  MORNINGSTAR STATISTICAL MEASURES*  
 
 
    RES Category Median Best Quartile Breakpoint  
 
 
  Sharpe Ratio 0.28 -0.14   0.02    
 
 
  Standard
Deviation		  29.63 29.83   28.48    
 
 
 

*  Three years ended 12/31/10. Category Median and Best Quartile Breakpoint based on 29 European stock objective funds (oldest class only) with at least three years of history.

  
     
  DOWN MARKET PERFORMANCE COMPARISON
All Down Periods of 7.5% or Greater
in Percentages(%)		  
   
     

The Royce Funds 2010 Annual Report to Shareholders   |   53                   



 
     
   
  GLOBAL/INTERNATIONAL  
 
 
  Global/International Funds generally focus on non-U.S. based companies using our core approach to security selection.  
 

   

  
  AVERAGE ANNUAL TOTAL RETURNS
Through 12/31/10		  
 
 
  July-Dec 2010*   40.64 %  
 
 
  One-Year         35.69    
 
 
  Three-Year         9.69    
 
 
  Since Inception (12/29/06)   10.80    
 
 
  ANNUAL EXPENSE RATIOS  
 
 
  Gross Operating Expenses   2.07 %  
 
 
  Net Operating Expenses   1.88    
 
 
  * Not annualized  
         
  CALENDAR YEAR TOTAL RETURNS  
 
 
  Year   RGV     Year     RGV    
 
 
  2010   35.7 %   2008     -39.9 %  
 
 
  2009   61.9     2007     14.3    
 
 
                       
  TOP 10 POSITIONS % of Net Assets  
 
 
  Semperit AG Holding   2.5 %  
 
 
  Santen Pharmaceutical   2.5    
 
 
  Major Drilling Group International   2.4    
 
 
  Mayr-Melnhof Karton   2.4    
 
 
  Value Partners Group   2.3    
 
 
  Burckhardt Compression Holding   2.2    
 
 
  Pan American Silver   2.0    
 
 
  Hochschild Mining   2.0    
 
 
  Pfeiffer Vacuum Technology   2.0    
 
 
  Ashmore Group   1.8    
 
 
                       
  PORTFOLIO SECTOR BREAKDOWN
% of Net Assets		  
 
 
  Natural Resources   25.4 %  
 
 
  Industrial Products   13.8    
 
 
  Technology   11.6    
 
 
  Financial Services   9.7    
 
 
  Health   9.2    
 
 
  Industrial Services   6.5    
 
 
  Consumer Services   6.4    
 
 
  Consumer Products   5.0    
 
 
  Financial Intermediaries   1.7    
 
 
  Cash and Cash Equivalents   10.7    
 
 
     
  RISK/RETURN COMPARISON
Three-Year Period Ended 12/31/10		  
 
 
      Average Annual
Total Return		     Standard  
Deviation  		   Return Efficiency*
 
 
  RGV   9.69%     30.11     0.32  
 
 
  MSCI World
Small Core		  1.85     27.75     0.07  
 
 
 

*  Return Efficiency is the average annual total return divided by the annualized standard deviation over a designated time period. Please read the prospectus for a more complete discussion of risk.



Royce Global Value Fund

Managers’ Discussion
Royce Global Value (RGV) Fund made the most of the worldwide recovery for stocks in the latter half of 2010, gaining 35.7% for the calendar year, outpacing its global small-cap benchmark, the MSCI WORLD Small Core index, which rose 26.1% for the same period. The Fund was subject to the near-global correlation which blunted the rally that began in March 2009 and kept most share prices tumbling from April through early July. A host of anxieties, from a slowdown in China to European debt crises to the possibility of a double-dip recession here in the U.S. conspired in the shift from bull to bear. These headline issues, while certainly important, appeared to obscure the fact that many individual companies were managing themselves very effectively. These were the kinds of businesses that we focused on both during the crisis of late 2008-early 2009 and in the spring-summer downturn in 2010.
     After losing 3.5% in the first half of the year, RGV roared back when the markets rallied off the interim domestic small-cap low on July 6, 2010, rising 19.9% in the third quarter versus a gain of 14.6% for its global small-cap benchmark. The fourth quarter was also a strong period. Although the Fund cooled off slightly, it held its advantage over its benchmark, up 17.3% compared to a 14.3% gain for the MCSI WORLD Small Core index. This was consistent with the Fund's strong absolute showing from the domestic small-cap low on March 9, 2009 through December 31, 2010, in which RGV climbed 167.6% versus 141.9% for the global small-cap index. The Fund held a relative edge over the global small-cap index in longer-term periods tied more closely to the calendar. RGV also outpaced its benchmark for the three-year and since inception (12/29/06) periods ended December 31, 2010. We remain very pleased with the Fund's results since its launch. RGV's average annual total return since inception was 10.8%.
    The Natural Resources sector led by a wide margin in 2010. Its two largest industry groups—precious metals and mining stocks and energy services companies—were the first and third top-gaining industries for the calendar year. Our interest in gold and silver miners was sparked prior to RGV's inception. Early in the previous decade, we began to build positions in mining companies that looked attractively undervalued, in part because the industry had spent several years in the doldrums. When we
   

GOOD IDEAS THAT WORKED
Top Contributors to 2010 Performance*
   
    Luk Fook Holdings (International)   3.01%
   
    Hochschild Mining   2.24   
   
    Value Partners Group   1.98   
   
    Lamprell   1.90   
   
    Jupiter Fund Management   1.44   
   
    *Includes dividends    
           
           
Important Performance and Expense Information
All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when redeemed. Shares redeemed within 180 days of purchase may be subject to a 2% redemption fee payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current performance may be higher or lower than performance quoted. Current month-end performance may be obtained at www.roycefunds.com. Gross operating expenses reflect gross total annual operating expenses for the Service Class and include management fees, 12b-1 distribution and service fees, other expenses and acquired fund fees and expenses. Net operating expenses reflect contractual fee waivers and/or reimbursements. All expense information is reported as of the Fund's most current prospectus. Royce & Associates has contractually agreed to waive fees and/or reimburse operating expenses to the extent necessary to maintain the Fund's net direct annual operating expenses, other than acquired fund fees and expenses, at or below 1.69% through April 30, 2011. Acquired fund fees and expenses reflect the estimated amount of the fees and expenses incurred indirectly by the Fund through its investments in mutual funds, hedge funds, private equity funds and other investment companies. The sum of all contributions and detractions for all securities would approximate the Fund's performance for 2010.

             54   |  The Royce Funds 2010 Annual Report to Shareholders



 
 
 
Performance and Portfolio Review


launched the Fund in December 2006, mining businesses were among our first selections. Our conviction was then fortified by the financial collapse of late 2008-early 2009, when commodity prices cratered and we began to see the increasing likelihood of inflation, events that led us to build several positions in the industry. As the prices of precious metals rose through much of 2009 and 2010, the stock prices of many portfolio holdings, including top- 10 positions Hochschild Mining, Major Drilling Group International and Pan American Silver, began to follow suit, with each posting sterling results in 2010. The second of the three enjoyed a particularly strong second half.
      Luk Fook Holdings (International) continued to succeed in all aspects of its business designing, wholesaling and retailing gold jewelry, gem-set jewelry, gemstones and authentication services. It is now one of the best known jewelry companies in China after having been long established in Hong Kong. We built our position through May. Many asset management companies saw their stock prices soar as global equity markets continued to recover, making the investment management group the Fund's second-best performing industry. Value Partners Group is a Hong Kong-based investment management group focusing on China and the Asia Pacific region. It gained visibility during 2010 by diversifying successfully beyond hedge funds (it is the leading hedge fund manager in Asia) into ETFs while announcing plans to enter the mutual fund arena. Jupiter Fund Management is one of the UK's leading fund management groups, running portfolios for retail, private and institutional investors. In something of a departure for us, we bought into the IPO because we found Jupiter very attractively priced. The firm enjoyed solid results, with both assets under management and performance generally exceeding expectation and benchmarks. In the energy services group, Lamprell provides construction and engineering services for oil and gas rigs and is the leading contractor in the Arabian Gulf, where it has operated for more than 30 years. The company gained credibility by diversifying with contract wins in liftboats and FPSOs (floating production storage & offloading vessels) to supplement its core business of jack-up rig refurbishments.
     
     The precious metals and mining industry was also home to the Fund's two largest detractors to performance in 2010. During April, June and August, we sold our shares in Silver Standard Resources because we saw what we thought were better opportunities elsewhere. We also sold our position in long-time Royce holding Gammon Gold in April. The company, which operates gold and silver mines in Mexico, provided a lesson in the travails of owning mining businesses that have not made the transition from exploration to production, as multiple problems in several mines have hurt results.

GOOD IDEAS AT THE TIME
Top Detractors from 2010 Performance*

  
 
 
Silver Standard Resources -0.64%  
 
Gammon Gold -0.60     
 
U.S. Global Investors Cl. A -0.56     
 
Intrepid Potash -0.43     
 
Knight Capital Group Cl. A -0.42     
 
*Net of dividends  


 
 
 
     
     
  PORTFOLIO DIAGNOSTICS  
 
 
  Average Market Capitalization* $1,931 million    
 
 
  Weighted Average P/E Ratio** 14.0x    
 
 
  Weighted Average P/B Ratio 2.7x     
 
 
  Fund Net Assets $149 million     
 
 
  Turnover Rate 42%     
 
 
  Number of Holdings 68     
 
 
  Symbol    
      Investment Class RGVIX     
      Service Class RIVFX     
 
 
   * Geometrically calculated  
 

**The Fund’s P/E ratio calculation excludes companies with zero or negative earnings (4% of portfolio holdings as of 12/31/10).

  
     
  PORTFOLIO COUNTRY BREAKDOWN*
% of Net Assets**		  
 
 
  United States 14.7%   
 
 
  Canada 12.0    
 
 
  Germany 7.2     
 
 
  Japan 6.3     
 
 
  Hong Kong 6.1     
 
 
  South Africa 5.8     
 
 
  Austria 4.9     
 
 
  United Kingdom 4.6     
 
 
  Switzerland 3.4     
 
 
  Australia 3.0     
 
 
   * Represents countries that are 3% or more of net assets  
 

**Securities are categorized by their country of headquarters

  
     
  MORNINGSTAR STATISTICAL MEASURES*  
 
 
    RGV Category Median Best Quartile Breakpoint  
 
 
  Sharpe Ratio 0.44 0.09   0.25    
 
 
  Standard
Deviation		  30.11 28.44   25.91    
 
 
 

*  Three years ended 12/31/10. Category Median and Best Quartile Breakpoint based on 23 world stock small-cap objective funds (oldest class only) with at least three years of history.

  
     
  DOWN MARKET PERFORMANCE COMPARISON
 All Down Periods of 7.5% or Greater
in Percentages(%)		  
   
     

The Royce Funds 2010 Annual Report to Shareholders   |   55                   



 
     
   
  GLOBAL/INTERNATIONAL  
 
 
  Global/International Funds generally focus on non-U.S. based companies using our core approach to security selection.  
 

   

  
  AVERAGE ANNUAL TOTAL RETURNS
 Through 12/31/10		  
 
 
  July-Dec 2010*   31.99 %  
 
 
  One-Year         26.45    
 
 
  Since Inception (6/30/08)   12.01    
 
 
  ANNUAL EXPENSE RATIOS  
 
 
  Gross Operating Expenses   3.12 %  
 
 
  Net Operating Expenses   1.80    
 
 
  * Not annualized  
         
  CALENDAR YEAR TOTAL RETURNS  
 
 
  Year   RIS     Year     RIS    
 
 
  2010   26.5 %   2009     50.3 %  
 
 
                       
  TOP 10 POSITIONS % of Net Assets  
 
 
  Burckhardt Compression Holding   1.7 %  
 
 
  Semperit AG Holding   1.6    
 
 
  TGS-NOPEC Geophysical   1.5    
 
 
  Santen Pharmaceutical   1.4    
 
 
  Mayr-Melnhof Karton   1.3    
 
 
  Value Partners Group   1.3    
 
 
  Partners Group Holding   1.2    
 
 
  Ashmore Group   1.2    
 
 
  Adcock Ingram Holdings   1.1    
 
 
  Lamprell   1.1    
 
 
                       
  PORTFOLIO SECTOR BREAKDOWN
% of Net Assets		  
 
 
  Natural Resources   15.1 %  
 
 
  Industrial Products   14.2    
 
 
  Health   13.3    
 
 
  Financial Services   9.7    
 
 
  Consumer Products   9.4    
 
 
  Consumer Services   8.7    
 
 
  Technology   7.9    
 
 
  Industrial Services   6.7    
 
 
  Financial Intermediaries   6.2    
 
 
  Cash and Cash Equivalents   8.8    
 
 
     



Royce International Smaller-Companies Fund

Manager’s Discussion
Individual companies continued to heal in 2010, and the global economy slowly shifted from recovery into expansion mode. Royce International Smaller-Companies Fund (RIS), with its mandate to seek opportunities in smaller companies primarily outside the U.S., finished with a gain of 26.5% as compared to its benchmark index, the MSCI World ex-USA Small Core Index which rose 24.5%.
     In the year's first and most uneventful quarter, RIS gained 3.7% versus 5.4% for its benchmark index. Things began to get interesting in the second quarter as China's growth was called into question following an increase in interest rates that was enacted to combat an overheating housing market. A near-simultaneous implosion in Greece's sovereign finances combined with renewed fears of a double dip recession in the U.S. sent investors fleeing to the apparent safety of bonds. We were quite pleased with the Fund's downside performance—it fell only 7.6% compared to a decline of 11.1% for the MSCI index during that difficult period. The third and fourth quarters reversed gears and saw the market once again powering ahead amid continued high growth in China and strong central bank policy responses in both Europe and the U.S. RIS advanced 17.5% and 12.3% in 2010's third and fourth quarters, respectively, compared to the index, which returned 17.8% and 12.9%, respectively. The Fund also maintained a strong relative performance advantage over its benchmark in the since inception period (6/30/08) through December 31, 2010, rising 12.0% versus 3.2% for its benchmark.
     One of the most flexible portfolios at Royce from a geographic standpoint, narrowing down the field of potential investments is both intellectually challenging and labor intensive. With a growing team of investment professionals with experience and acumen in this large and diverse universe, we continue to be very excited about the prospects for uncovering high-quality, undervalued companies from what we see as a highly inefficient asset class. The core tenets of the Royce value approach continue to translate very well across a broad array of markets, while our institutional knowledge is rapidly growing as we spend more time with individual companies across a wide range of industries.
     Given the breadth of the rally, we were not surprised to see all but two of the Fund's eleven sectors make positive contributions for the year. Our low weighting in Utilities was essentially
   


GOOD IDEAS THAT WORKED
Top Contributors to 2010 Performance*
   
    Luk Fook Holdings (International)   1.55%
   
    Hochschild Mining   1.25   
   
    Lamprell   0.98   
   
    Value Partners Group   0.89   
   
    Partners Group Holding   0.85   
   
    *Includes dividends    
           
           
Important Performance and Expense Information
All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when redeemed. Shares redeemed within 180 days of purchase may be subject to a 2% redemption fee payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current performance may be higher or lower than performance quoted. Current month-end performance may be obtained at www.roycefunds.com. Gross operating expenses reflect total gross annual operating expenses for the Service Class and include management fees, 12b-1 distribution and service fees, other expenses and acquired fund fees and expenses. Net operating expenses reflect contractual fee waivers and/or expense reimbursements. All expense information is reported as of the Fund's most current prospectus. Royce & Associates has contractually agreed to waive its fees and/or reimburse operating 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, 2011 and at or below 1.99% through April 30, 2020. Acquired fund fees and expenses reflect the estimated amount of the fees and expenses incurred indirectly by the Fund through its investments in mutual funds, hedge funds, private equity funds and other investment companies. The sum of all contributions and detractions for all securities would approximate the Fund's performance for 2010.

             56   |  The Royce Funds 2010 Annual Report to Shareholders



 
 
 
Performance and Portfolio Review


flat while the Diversified Investment Companies sector (home to a single holding in a closed-end fund) posted a very modest loss. By a good-sized margin, Natural Resources emerged as the top sector performer in 2010, followed by Financial Services and Consumer Services. At the industry level, investment management companies, the precious metals and mining group and retail stores were the top contributors. Two major themes played a significant role in the Fund's results—hard asset and commodity inflation driven by strong growth in emerging markets and accommodative monetary policies from the developed world's leading central banks.
      China continues to be an important area of focus for the fund both in terms of companies domiciled there as well as the broader impact its dynamic economy has on global industrial and consumption trends. Based in Hong Kong, Luk Fook Holdings (International) was a shining example and the Fund's top performer in 2010. Established in 1991, Luk Fook is a leading jewelry designer and retailer in both Hong Kong and China, with more than 600 retail outlets. Benefitting from growing wealth accumulation, the company continues to thrive as more Chinese consumers allocate their spending power toward brand name luxury items, especially gold. Hochschild Mining is a UK-based business and is the world's third largest primary silver producer, with five mining operations spanning the Americas. Its stock price soared as silver prices rose more than 80% due to a mixture of renewed industrial demand and the growing appreciation of silver as a hedge against inflationary pressures stemming from easy monetary policies around the world. Lamprell provides construction and engineering services for oil and gas rigs and is the leading contractor in the Arabian Gulf, where it has operated for more than 30 years. The company gained credibility for diversifying with contract wins in liftboats and FPSOs (floating production storage & offloading vessels) to supplement its core business of jack-up rig refurbishments.
     
      Bank holding company Popular held the distinction of being the biggest detractor in 2010. It suffered from uncertainty around what capital ratios would be required within the complex financial regulatory bill passed by the U.S. Congress along with concerns over the interruption of a planned sale of a subsidiary. We sold our shares in December. Jinpan International manufactures cast resin transformers for voltage distribution equipment in China and also makes power distribution equipment. Its troubles included pricing pressure early in 2010 as resin prices fell and purchases were delayed until later in the year. Building our position in March, May and November, we liked its long-term prospects as a company likely to benefit from China's widening embrace of green energy.

GOOD IDEAS AT THE TIME
Top Detractors from 2010 Performance*

  
 
 
Popular -0.56%  
 
Jinpan International -0.35     
 
Duoyuan Global Water ADR -0.27     
 
Terra Nova Royalty -0.25     
 
SMA Solar Technology -0.24     
 
*Net of dividends  


 
 
 
     
     
  PORTFOLIO DIAGNOSTICS  
 
 
  Average Market
Capitalization*		 $1,486 million  
 
 
  Weighted Average P/E Ratio** 15.2x    
 
 
  Weighted Average P/B Ratio 2.4x     
 
 
  Fund Net Assets $18 million  
 
 
  Turnover Rate 55%     
 
 
  Number of Holdings 161     
 
 
  Symbol    
      Service Class RYGSX     
 
 
   * Geometrically calculated  
 

**The Fund’s P/E ratio calculation excludes companies with zero or negative earnings (4% of portfolio holdings as of 12/31/10).

  
     
  PORTFOLIO COUNTRY BREAKDOWN
% of Net Assets*		  
 
 
  Canada 9.9%   
 
 
  France 8.5     
 
 
  Japan 7.6     
 
 
  United Kingdom 7.2     
 
 
  South Africa 6.4     
 
 
  Germany 6.1     
 
 
  Switzerland 5.6     
 
 
  Hong Kong 4.7     
 
 
  South Korea 3.8     
 
 
  China 2.9     
 
 
  Austria 2.9     
 
 
  Mexico 2.5     
 
 
  Australia 2.1     
 
 
  Singapore 1.7     
 
 
  United Arab Emirates 1.7     
 
 
  Brazil 1.6     
 
 
  Belgium 1.6     
 
 
  Norway 1.5     
 
 
  India 1.5     
 
 
  Finland 1.5     
 
 
  Turkey 1.5     
 
 
  Denmark 1.0     
 
 
  Italy 1.0     
 
 
  Spain 1.0     
 
 
  Peru 0.8     
 
 
  Taiwan 0.7     
 
 
  Netherlands 0.6     
 
 
  Luxembourg 0.5     
 
 
  Greece 0.5     
 
 
  Sweden 0.5     
 
 
  Egypt 0.5     
 
 
  Cayman Islands 0.4     
 
 
  Thailand 0.3     
 
 
  United States 0.3     
 
 
  Jersey 0.3     
 
 
 

*  Securities are categorized by their country of headquarters

  
     

The Royce Funds 2010 Annual Report to Shareholders   |   57                   



 
     
   
 

   

  
  AVERAGE ANNUAL TOTAL RETURNS
 Through 12/31/10		  
 
 
  July-Dec 2010*   30.39 %  
 
 
  One-Year         18.45    
 
 
  Three-Year         0.38    
 
 
  Five-Year         3.76    
 
 
  Since Inception (12/31/03)   6.49    
 
 
  ANNUAL EXPENSE RATIOS  
 
 
  Gross Operating Expenses   2.14 %  
 
 
  Net Operating Expenses   1.57    
 
 
  * Not annualized  
         
  CALENDAR YEAR TOTAL RETURNS  
 
 
  Year   RFS     Year     RFS    
 
 
  2010   18.5 %   2006     24.8 %  
 
 
  2009   32.1 %   2005     12.2 %  
 
 
  2008   -35.4 %   2004     15.1 %  
 
 
  2007   -4.7                
 
 
                       
  TOP 10 POSITIONS % of Net Assets  
 
 
  Virtus Investment Partners   2.8 %  
 
 
  Sprott   2.4    
 
 
  VZ Holding   2.3    
 
 
  BOK Financial   2.2    
 
 
  Value Partners Group   2.1    
 
 
  Invesco   1.9    
 
 
  Cohen & Steers   1.9    
 
 
  Enstar Group   1.8    
 
 
  Ashmore Group   1.8    
 
 
  Western Union   1.8    
 
 
                       
  PORTFOLIO INDUSTRY BREAKDOWN
% of Net Assets		  
 
 
  Investment Management   36.2 %  
 
 
  Securities Brokers   17.3    
 
 
  Insurance   9.8    
 
 
  Banking   9.7    
 
 
  Information and Processing   6.9    
 
 
  Insurance Brokers   2.3    
 
 
  Diversified Financial Services   2.0    
 
 
  Other Financial Services   1.9    
 
 
  Securities Exchanges   1.6    
 
 
  Software   1.2    
 
 
  Real Estate   1.2    
 
 
  Specialty Finance   1.2    
 
 
  Other Financial Intermediaries   1.0    
 
 
  Closed-End Funds   0.4    
 
 
  Precious Metals and Mining   0.3    
 
 
  Bond and Preferred Stock   0.1    
 
 
  Cash and Cash Equivalents   6.9    
 
 
     



Royce Financial Services Fund

Manager’s Discussion
Royce Financial Services Fund (RFS) was up 18.5% for the calendar year, underperforming its benchmark, the Russell 2000, which rose 26.9%, as well as the financial services sector of the Russell 2500 index, which gained 21.2% for the same period. We were somewhat disappointed with the Fund's results on 2010. While it is not surprising for RFS to be out of sync both with its benchmark and the financial services sector of the Russell 2500 index, we were hoping for stronger relative results, though the Fund's solid absolute return went some way toward mollifying any dissatisfaction.
     The Fund underperformed in the first quarter, up 4.1% versus gains of 8.9% for the Russell 2000 and an impressive 11.3% for the financial services companies in the Russell 2500 index. This early relative disadvantage created a gap that the Fund simply could not close through the remainder of the year. During the second-quarter downturn, the Fund again underperformed, falling 12.8% compared to losses 9.9% for the Russell 2000 and 9.2% for the financial services sector in the Russell 2500 index. However, this picture is a bit deceiving because the Fund outpaced both indexes during 2010's only substantial correction. From the interim small-cap high on April 23, 2010 through the interim small-cap low on July 6, 2010, the Fund was down 18.1% versus declines of 20.3% for its benchmark and 18.9% for the financial services companies of the Russell 2500.
     The Fund at first more than held its ground against both indexes when stocks revived in the third quarter. Between July and September, RFS gained 12.5% compared to respective gains of 11.3% and 8.8% for the Russell 2000 and financial services companies in the Russell 2500. When the rally gained additional momentum in the fourth quarter, the Fund lost a bit of ground to its benchmark while outpacing the financial services component of the Russell 2500 index, up 16.0% compared to 16.3% and 10.2%, respectively. Longer term, the Fund beat its benchmark for the since inception (12/31/03) period ended December, 31, 2010. RFS also outperformed the financial services sector of the Russell 2500 index for the three-year, five-year and since inception periods.
    

GOOD IDEAS THAT WORKED
Top Contributors to 2010 Performance*
   
    Virtus Investment Partners   1.82%
   
    Sprott   1.44   
   
    VZ Holding   1.24   
   
    Value Partners Group   1.15   
   
    Jupiter Fund Management   0.92   
   
    *Includes dividends    
           
           
Important Performance and Expense Information
All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when redeemed. Shares redeemed within 180 days of purchase may be subject to a 1% redemption fee payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current performance may be higher or lower than performance quoted. Current month-end performance may be obtained at www.roycefunds.com. Gross operating expenses reflect the Fund's gross total annual operating expenses for the Service Class and include management fees, 12b-1 distribution and service fees, other expenses and acquired fund fees and expenses. Net operating expenses reflect contractual fee waivers and/ or expense reimbursements. All expense information is reported as of the Fund's most current prospectus. Royce & Associates has contractually agreed to waive fees and/or reimburse expenses to the extent necessary to maintain the Fund's net direct annual operating expenses, other than acquired fund fees and expenses, at or below 1.49% through April 30, 2011 and at or below 1.99% through April 30, 2020. Acquired fund fees and expenses reflect the estimated amount of the fees and expenses incurred indirectly by the Fund through its investments in mutual funds, hedge funds, private equity funds and other investment companies. The sum of all contributions and detractions for all securities would approximate the Fund's performance for 2010.

             58   |  The Royce Funds 2010 Annual Report to Shareholders



 
 
 
Performance and Portfolio Review


     The first half of 2010 was marked by increased anxiety about global debt, particularly in Europe, overall investment risk and the state of the economy, each of which helped to drive share prices down in a number of our most highly regarded companies. Our long-term perspective, which goes well beyond six-month periods, allowed us to stay patient. We held certain positions while in other cases we sought to use slipping stock prices to our advantage by adding shares. The Fund enjoyed the fruits of these efforts in the year's second half.
      The investment management group was the Fund's best-performing industry. The year's top contributor was also RFS's largest holding at the end of December. Virtus Investment Partners is a financial advisory and consulting firm that operates a multi-manager asset management business. Improved fiscal second-quarter earnings were announced early in August, which helped its stock to soar through much of the latter half of the year. Sprott, the Fund's second-best performer and second-largest holding at year end, is a Canadian asset manager with a particularly strong history with natural resources investments. Increased commodity prices, as well as a recovery for its own industry, helped, as did the announcement in September that it was acquiring a trio of California-based natural resource investment managers. VZ Holding is a Swiss financial advisory firm that consults on investment, tax and inheritance planning, and insurance issues. Stronger-than-expected earnings sent its stock price on the ascent in the second half. Value Partners Group is a Hong Kong-based investment management group focusing on China and the Asia Pacific region. It gained visibility during 2010 by diversifying successfully beyond hedge funds (it is the leading hedge fund manager in Asia) into ETFs, while announcing plans to enter the mutual fund arena. Jupiter Fund Management is one of the UK's leading fund management groups, running portfolios for retail, private and institutional investors. In something of a departure for us, we bought into the IPO because we found Jupiter very attractively priced. The firm enjoyed solid results, with both assets under management and performance generally exceeding expectation and benchmarks.
     
      HQ is a securities brokerage firm operating in Sweden and Norway. The company's activities include investment banking, corporate finance, and trading. Its share price collapsed in early September as potential legal problems loomed. We held our shares at year-end. U.S. Global Investors manages equity and fixed income mutual funds, investing primarily in the public equity, fixed income, gold and natural resources markets across the globe. We think its expertise in global asset management should be a key component for long-term success. Its stock began to recover in October, though not enough to erase losses from earlier in the year.

GOOD IDEAS AT THE TIME
Top Detractors from 2010 Performance*

  
 
 
HQ -1.08%  
 
U.S. Global Investors Cl. A -0.66     
 
FBR Capital Markets -0.64     
 
Popular -0.55     
 
Wilmington Trust -0.54     
 
*Net of dividends  


 
 
 
     
     
  PORTFOLIO DIAGNOSTICS  
 
 
  Average Market Capitalization* $2,042 million    
 
 
  Weighted Average P/E Ratio** 17.2x    
 
 
  Weighted Average P/B Ratio 2.0x     
 
 
  U.S. Investments
(% of Net Assets)		 63.4%     
 
 
  Non-U.S. Investments
(% of Net Assets)		 29.7%     
 
 
  Fund Net Assets $15 million     
 
 
  Turnover Rate 16%     
 
 
  Number of Holdings 95     
 
 
  Symbol    
      Service Class RYFSX     
 
 
   * Geometrically calculated  
 

**The Fund's P/E ratio calculation excludes companies with zero or negative earnings (11% of portfolio holdings as of 12/31/10).

  
     
  MORNINGSTAR STATISTICAL MEASURES*  
 
 
    RFS Category Median Best Quartile Breakpoint  
 
 
  Sharpe Ratio 0.17 -0.14   0.00    
 
 
  Standard
Deviation		  21.52 24.40   22.30    
 
 
 

*  Five years ended 12/31/10. Category Median and Best Quartile Breakpoint based on 33 financial services objective funds (oldest class only) with at least five years of history.

  
     
  RISK/RETURN COMPARISON
Five-Year Period Ended 12/31/10		  
 
 
    Average Annual
Total Return		 Standard  
Deviation  		 Return Efficiency*  
 
 
  RFS 3.76% 21.52   0.17    
 
 
  Russell 2000  4.47 23.11   0.19    
 
 
 

*  Return Efficiency is the average annual total return divided by the annualized standard deviation over a designated time period. Please read the prospectus for a more complete discussion of risk.

  
     
  DOWN MARKET PERFORMANCE COMPARISON
All Down Periods of 7.5% or Greater
in Percentages(%)		  
   
     

The Royce Funds 2010 Annual Report to Shareholders   |   59                   

 

Schedules of Investments
 

 

Royce Pennsylvania Mutual Fund


 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

COMMON STOCKS – 96.5%

 

 

 

 

 

 

 

 

Consumer Products – 7.7%

 

 

 

 

 

 

 

Apparel, Shoes and Accessories - 2.8%

 

 

 

 

 

 

 

Carter’s a

 

 

795,900

 

$

23,487,009

 

Columbia Sportswear

 

 

337,661

 

 

20,360,958

 

Fossil a

 

 

20,000

 

 

1,409,600

 

Gildan Activewear a

 

 

24,400

 

 

695,156

 

Guess?

 

 

294,507

 

 

13,936,071

 

K-Swiss Cl. A a

 

 

654,450

 

 

8,160,991

 

Movado Group a

 

 

50,000

 

 

807,000

 

Steven Madden a

 

 

681,355

 

 

28,426,131

 

Timberland Company (The) Cl. A a

 

 

232,500

 

 

5,717,175

 

True Religion Apparel a

 

 

542,800

 

 

12,082,728

 

Volcom

 

 

150,048

 

 

2,831,406

 

Warnaco Group (The) a

 

 

205,710

 

 

11,328,450

 

Weyco Group b

 

 

590,500

 

 

14,461,345

 

Wolverine World Wide

 

 

847,991

 

 

27,033,953

 

 

 

 

 

 

    

 

 

 

 

 

 

170,737,973

 

 

 

 

 

 

    

 

Consumer Electronics - 0.5%

 

 

 

 

 

 

 

Dolby Laboratories Cl. A a

 

 

223,250

 

 

14,890,775

 

Harman International Industries a

 

 

292,000

 

 

13,519,600

 

 

 

 

 

 

    

 

 

 

 

 

 

28,410,375

 

 

 

 

 

 

    

 

Food/Beverage/Tobacco - 1.1%

 

 

 

 

 

 

 

Cal-Maine Foods

 

 

391,501

 

 

12,363,602

 

Hain Celestial Group a

 

 

104,400

 

 

2,825,064

 

Industrias Bachoco ADR

 

 

90,386

 

 

2,186,437

 

J&J Snack Foods

 

 

354,294

 

 

17,091,143

 

Lancaster Colony

 

 

243,647

 

 

13,936,609

 

National Beverage

 

 

180,709

 

 

2,374,516

 

Sanderson Farms

 

 

355,600

 

 

13,921,740

 

Thai Beverage

 

 

841,600

 

 

186,898

 

 

 

 

 

 

    

 

 

 

 

 

 

64,886,009

 

 

 

 

 

 

    

 

Health, Beauty and Nutrition - 0.8%

 

 

 

 

 

 

 

Inter Parfums

 

 

1,133,750

 

 

21,371,187

 

Nu Skin Enterprises Cl. A

 

 

552,500

 

 

16,718,650

 

Nutraceutical International a,b

 

 

737,810

 

 

10,469,524

 

NutriSystem

 

 

80,200

 

 

1,686,606

 

 

 

 

 

 

    

 

 

 

 

 

 

50,245,967

 

 

 

 

 

 

    

 

Home Furnishing and Appliances - 1.6%

 

 

 

 

 

 

 

American Woodmark

 

 

645,774

 

 

15,847,294

 

Ethan Allen Interiors b

 

 

1,573,910

 

 

31,493,939

 

Furniture Brands International a

 

 

1,029,400

 

 

5,291,116

 

La-Z-Boy a

 

 

907,300

 

 

8,183,846

 

Mohawk Industries a

 

 

419,900

 

 

23,833,524

 

Natuzzi ADR a

 

 

2,096,300

 

 

6,875,864

 

Stanley Furniture a,b

 

 

912,235

 

 

2,837,051

 

Universal Electronics a

 

 

89,500

 

 

2,539,115

 

 

 

 

 

 

    

 

 

 

 

 

 

96,901,749

 

 

 

 

 

 

    

 

Household Products/Wares - 0.0%

 

 

 

 

 

 

 

Blyth

 

 

21,200

 

 

730,976

 

 

 

 

 

 

    

 

Sports and Recreation - 0.9%

 

 

 

 

 

 

 

Callaway Golf

 

 

250,000

 

 

2,017,500

 

Polaris Industries

 

 

64,500

 

 

5,032,290

 

RC2 Corporation a

 

 

182,400

 

 

3,970,848

 

Sturm, Ruger & Co.

 

 

67,200

 

 

1,027,488

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Consumer Products (continued)

 

 

 

 

 

 

 

Sports and Recreation (continued)

 

 

 

 

 

 

 

Thor Industries

 

 

580,250

 

$

19,705,290

 

Winnebago Industries a

 

 

1,374,450

 

 

20,891,640

 

 

 

 

 

 

    

 

 

 

 

 

 

52,645,056

 

 

 

 

 

 

    

 

Total (Cost $378,179,779)

 

 

 

 

464,558,105

 

 

 

 

 

 

    

 

 

Consumer Services – 5.9%

 

 

 

 

 

 

 

Leisure and Entertainment - 0.7%

 

 

 

 

 

 

 

DreamWorks Animation SKG Cl. A a

 

 

612,300

 

 

18,044,481

 

International Speedway Cl. A

 

 

479,100

 

 

12,538,047

 

World Wrestling Entertainment Cl. A

 

 

798,403

 

 

11,369,259

 

 

 

 

 

 

    

 

 

 

 

 

 

41,951,787

 

 

 

 

 

 

    

 

Restaurants and Lodgings - 0.1%

 

 

 

 

 

 

 

CEC Entertainment a

 

 

140,600

 

 

5,459,498

 

 

 

 

 

 

    

 

Retail Stores - 4.5%

 

 

 

 

 

 

 

American Eagle Outfitters

 

 

1,485,400

 

 

21,731,402

 

America’s Car-Mart a

 

 

451,600

 

 

12,229,328

 

Buckle (The)

 

 

729,458

 

 

27,551,629

 

CarMax a

 

 

495,000

 

 

15,780,600

 

Cato Corporation (The) Cl. A

 

 

1,400,802

 

 

38,395,983

 

Charming Shoppes a

 

 

3,846,800

 

 

13,656,140

 

Dress Barn (The) a

 

 

1,645,480

 

 

43,473,581

 

GameStop Corporation Cl. A a

 

 

674,600

 

 

15,434,848

 

Jos. A. Bank Clothiers a,c

 

 

905,226

 

 

36,498,712

 

Kirkland’s a

 

 

108,300

 

 

1,519,449

 

Le Chateau Cl. A

 

 

765,300

 

 

8,851,403

 

Men’s Wearhouse (The)

 

 

164,043

 

 

4,097,794

 

O’Reilly Automotive a

 

 

3,400

 

 

205,428

 

Penske Automotive Group a

 

 

389,200

 

 

6,779,864

 

Pier 1 Imports a

 

 

1,210,400

 

 

12,709,200

 

Rent-A-Center

 

 

5,900

 

 

190,452

 

Tuesday Morning a

 

 

370,000

 

 

1,953,600

 

Urban Outfitters a

 

 

200,000

 

 

7,162,000

 

Wet Seal (The) Cl. A a

 

 

332,800

 

 

1,231,360

 

 

 

 

 

 

    

 

 

 

 

 

 

269,452,773

 

 

 

 

 

 

    

 

Other Consumer Services - 0.6%

 

 

 

 

 

 

 

Sotheby’s

 

 

838,900

 

 

37,750,500

 

 

 

 

 

 

    

 

Total (Cost $256,734,991)

 

 

 

 

354,614,558

 

 

 

 

 

 

    

 

 

Diversified Investment Companies – 0.0%

 

 

 

 

 

 

 

Closed-End Funds - 0.0%

 

 

 

 

 

 

 

MVC Capital

 

 

223,600

 

 

3,264,560

 

 

 

 

 

 

    

 

Total (Cost $2,498,693)

 

 

 

 

3,264,560

 

 

 

 

 

 

    

 

 

Financial Intermediaries – 7.1%

 

 

 

 

 

 

 

Banking - 0.0%

 

 

 

 

 

 

 

†BofI Holding a,c

 

 

100,000

 

 

1,551,000

 

Comerica

 

 

29,600

 

 

1,250,304

 

 

 

 

 

 

    

 

 

 

 

 

 

2,801,304

 

 

 

 

 

 

    

 

Insurance - 5.2%

 

 

 

 

 

 

 

Alleghany Corporation a

 

 

101,399

 

 

31,065,612

 

Allied World Assurance Company

 

 

 

 

 

 

 

Holdings

 

 

484,286

 

 

28,785,960

 

Alterra Capital Holdings

 

 

759,544

 

 

16,436,532

 


 

 

 

60 | The Royce Funds 2010 Annual Report to Shareholders

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

December 31, 2010
 

 

 


 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Financial Intermediaries (continued)

 

 

 

 

 

 

 

Insurance (continued)

 

 

 

 

 

 

 

American Safety Insurance Holdings a

 

 

198,461

 

$

4,243,096

 

Amerisafe a

 

 

593,761

 

 

10,390,817

 

Aspen Insurance Holdings

 

 

583,209

 

 

16,691,442

 

Baldwin & Lyons Cl. B

 

 

306,000

 

 

7,200,180

 

CNA Surety a

 

 

264,400

 

 

6,260,992

 

E-L Financial

 

 

37,400

 

 

18,449,864

 

Endurance Specialty Holdings

 

 

118,200

 

 

5,445,474

 

Enstar Group a

 

 

175,900

 

 

14,877,622

 

Erie Indemnity Cl. A

 

 

483,180

 

 

31,633,795

 

Fidelity National Financial Cl. A

 

 

545,000

 

 

7,455,600

 

Greenlight Capital Re Cl. A a

 

 

33,500

 

 

898,135

 

HCC Insurance Holdings

 

 

449,007

 

 

12,994,262

 

Leucadia National

 

 

300,000

 

 

8,754,000

 

Markel Corporation a

 

 

5,100

 

 

1,928,463

 

Meadowbrook Insurance Group

 

 

1,368,386

 

 

14,025,956

 

Montpelier Re Holdings

 

 

609,921

 

 

12,161,825

 

ProAssurance Corporation a

 

 

276,154

 

 

16,734,932

 

Reinsurance Group of America

 

 

606,476

 

 

32,573,826

 

RLI

 

 

65,231

 

 

3,429,194

 

Stewart Information Services

 

 

116,600

 

 

1,344,398

 

Validus Holdings

 

 

410,980

 

 

12,580,098

 

 

 

 

 

 

    

 

 

 

 

 

 

316,362,075

 

 

 

 

 

 

    

 

Real Estate Investment Trusts - 0.1%

 

 

 

 

 

 

 

Colony Financial

 

 

295,383

 

 

5,913,568

 

 

 

 

 

 

    

 

Securities Brokers - 1.2%

 

 

 

 

 

 

 

Cowen Group Cl. A a

 

 

842,929

 

 

3,928,049

 

Diamond Hill Investment Group

 

 

54,500

 

 

3,942,530

 

DundeeWealth

 

 

50,000

 

 

1,078,648

 

FBR Capital Markets a

 

 

115,000

 

 

439,300

 

GFI Group

 

 

580,000

 

 

2,720,200

 

Interactive Brokers Group Cl. A

 

 

788,600

 

 

14,052,852

 

International Assets Holding Corporation a,c

 

 

78,917

 

 

1,862,441

 

Jefferies Group

 

 

685,200

 

 

18,246,876

 

Knight Capital Group Cl. A a

 

 

1,412,540

 

 

19,478,927

 

MF Global Holdings a

 

 

2,000

 

 

16,720

 

Raymond James Financial

 

 

50,000

 

 

1,635,000

 

Sanders Morris Harris Group

 

 

419,476

 

 

3,041,201

 

 

 

 

 

 

    

 

 

 

 

 

 

70,442,744

 

 

 

 

 

 

    

 

Securities Exchanges - 0.6%

 

 

 

 

 

 

 

NASDAQ OMX Group (The) a

 

 

433,800

 

 

10,285,398

 

TMX Group

 

 

684,700

 

 

25,451,586

 

 

 

 

 

 

    

 

 

 

 

 

 

35,736,984

 

 

 

 

 

 

    

 

Total (Cost $350,630,321)

 

 

 

 

431,256,675

 

 

 

 

 

 

    

 

 

Financial Services – 7.6%

 

 

 

 

 

 

 

Diversified Financial Services - 0.6%

 

 

 

 

 

 

 

Duff & Phelps Cl. A

 

 

61,300

 

 

1,033,518

 

Franco-Nevada Corporation

 

 

300,000

 

 

10,035,201

 

Lazard Cl. A

 

 

607,400

 

 

23,986,226

 

 

 

 

 

 

    

 

 

 

 

 

 

35,054,945

 

 

 

 

 

 

    

 

Information and Processing - 2.3%

 

 

 

 

 

 

 

Equifax

 

 

20,350

 

 

724,460

 

FactSet Research Systems

 

 

160,900

 

 

15,085,984

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Financial Services (continued)

 

 

 

 

 

 

 

Information and Processing (continued)

 

 

 

 

 

 

 

Fiserv a

 

 

19,900

 

$

1,165,344

 

MoneyGram International a

 

 

2,013,400

 

 

5,456,314

 

Morningstar

 

 

634,800

 

 

33,695,184

 

MSCI Cl. A a

 

 

229,500

 

 

8,941,320

 

SEI Investments

 

 

1,874,400

 

 

44,591,976

 

Total System Services

 

 

1,745,600

 

 

26,847,328

 

 

 

 

 

 

    

 

 

 

 

 

 

136,507,910

 

 

 

 

 

 

    

 

Insurance Brokers - 0.9%

 

 

 

 

 

 

 

Brown & Brown

 

 

1,409,406

 

 

33,741,180

 

Gallagher (Arthur J.) & Co.

 

 

718,900

 

 

20,905,612

 

 

 

 

 

 

    

 

 

 

 

 

 

54,646,792

 

 

 

 

 

 

    

 

Investment Management - 3.6%

 

 

 

 

 

 

 

Affiliated Managers Group a

 

 

154,265

 

 

15,306,173

 

AGF Management Cl. B

 

 

846,600

 

 

16,594,825

 

AllianceBernstein Holding L.P.

 

 

1,334,950

 

 

31,144,384

 

Artio Global Investors Cl. A

 

 

696,500

 

 

10,273,375

 

Cohen & Steers

 

 

999,970

 

 

26,099,217

 

Eaton Vance

 

 

170,500

 

 

5,154,215

 

Evercore Partners Cl. A

 

 

83,400

 

 

2,835,600

 

Federated Investors Cl. B

 

 

1,841,058

 

 

48,180,488

 

GAMCO Investors Cl. A

 

 

145,200

 

 

6,971,052

 

JZ Capital Partners

 

 

50,000

 

 

291,941

 

Sprott Resource a

 

 

2,775,600

 

 

12,757,208

 

Value Partners Group

 

 

506,300

 

 

508,072

 

Waddell & Reed Financial Cl. A

 

 

887,027

 

 

31,303,183

 

Westwood Holdings Group

 

 

256,538

 

 

10,251,258

 

 

 

 

 

 

    

 

 

 

 

 

 

217,670,991

 

 

 

 

 

 

    

 

Special Purpose Acquisition Corporation - 0.1%

 

 

 

 

 

 

 

Harbinger Group a,b

 

 

1,009,600

 

 

6,249,424

 

Westway Group a

 

 

368,500

 

 

1,381,875

 

 

 

 

 

 

    

 

 

 

 

 

 

7,631,299

 

 

 

 

 

 

    

 

Specialty Finance - 0.1%

 

 

 

 

 

 

 

First Cash Financial Services a

 

 

33,400

 

 

1,035,066

 

GATX Corporation

 

 

13,920

 

 

491,097

 

World Acceptance a,c

 

 

81,160

 

 

4,285,248

 

 

 

 

 

 

    

 

 

 

 

 

 

5,811,411

 

 

 

 

 

 

    

 

Total (Cost $456,086,082)

 

 

 

 

457,323,348

 

 

 

 

 

 

    

 

 

Health – 7.7%

 

 

 

 

 

 

 

Commercial Services - 0.1%

 

 

 

 

 

 

 

PAREXEL International a

 

 

270,000

 

 

5,732,100

 

Schein (Henry) a

 

 

29,300

 

 

1,798,727

 

 

 

 

 

 

    

 

 

 

 

 

 

7,530,827

 

 

 

 

 

 

    

 

Drugs and Biotech - 1.5%

 

 

 

 

 

 

 

Celera Corporation a

 

 

446,300

 

 

2,811,690

 

Emergent Biosolutions a

 

 

856,646

 

 

20,096,915

 

Endo Pharmaceuticals Holdings a

 

 

672,900

 

 

24,029,259

 

†Furiex Pharmaceuticals a

 

 

43,625

 

 

630,382

 

Hi-Tech Pharmacal a

 

 

530,400

 

 

13,233,480

 

Lannett Company a

 

 

115,590

 

 

646,148

 

Lexicon Pharmaceuticals a

 

 

1,522,400

 

 

2,192,256

 

Pharmaceutical Product Development

 

 

614,900

 

 

16,688,386

 

Regeneron Pharmaceuticals a

 

 

100,000

 

 

3,283,000

 

SurModics a

 

 

346,900

 

 

4,117,703

 


 

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

The Royce Funds 2010 Annual Report to Shareholders | 61

 

Schedules of Investments
 

 

Royce Pennsylvania Mutual Fund (continued)

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Health (continued)

 

 

 

 

 

 

 

Drugs and Biotech (continued)

 

 

 

 

 

 

 

†3SBio ADR a

 

 

38,800

 

$

588,984

 

 

 

 

 

 

    

 

 

 

 

 

 

88,318,203

 

 

 

 

 

 

    

 

Health Services - 3.8%

 

 

 

 

 

 

 

Advisory Board (The) a

 

 

653,379

 

 

31,120,442

 

Almost Family a,b

 

 

607,582

 

 

23,343,300

 

Chemed Corporation

 

 

218,142

 

 

13,854,198

 

Covance a

 

 

340,000

 

 

17,479,400

 

Cross Country Healthcare a

 

 

240,700

 

 

2,038,729

 

eResearchTechnology a

 

 

113,320

 

 

832,902

 

Genoptix a

 

 

50,000

 

 

951,000

 

Healthcare Services Group

 

 

652,275

 

 

10,612,514

 

HealthSouth Corporation a

 

 

915,000

 

 

18,949,650

 

Hooper Holmes a

 

 

2,392,970

 

 

1,687,044

 

ICON ADR a

 

 

635,600

 

 

13,919,640

 

†LHC Group a

 

 

657,391

 

 

19,721,730

 

Lincare Holdings

 

 

498,750

 

 

13,381,463

 

MEDNAX a

 

 

465,802

 

 

31,343,817

 

On Assignment a

 

 

85,000

 

 

692,750

 

†Transcend Services a

 

 

334,229

 

 

6,547,546

 

U.S. Physical Therapy a,b

 

 

898,675

 

 

17,811,738

 

VCA Antech a

 

 

107,000

 

 

2,492,030

 

 

 

 

 

 

    

 

 

 

 

 

 

226,779,893

 

 

 

 

 

 

    

 

Medical Products and Devices - 2.1%

 

 

 

 

 

 

 

C.R. Bard

 

 

6,320

 

 

579,986

 

IDEXX Laboratories a

 

 

499,599

 

 

34,582,243

 

Kensey Nash a

 

 

175,062

 

 

4,871,976

 

Medical Action Industries a

 

 

418,562

 

 

4,009,824

 

Merit Medical Systems a

 

 

427,669

 

 

6,770,000

 

Owens & Minor

 

 

604,000

 

 

17,775,720

 

Patterson Companies

 

 

340,335

 

 

10,424,461

 

STERIS Corporation

 

 

577,600

 

 

21,059,296

 

Techne Corporation

 

 

174,300

 

 

11,446,281

 

Teleflex

 

 

60,000

 

 

3,228,600

 

Thoratec Corporation a

 

 

366,600

 

 

10,382,112

 

Young Innovations

 

 

111,350

 

 

3,564,314

 

 

 

 

 

 

    

 

 

 

 

 

 

128,694,813

 

 

 

 

 

 

    

 

Personal Care - 0.2%

 

 

 

 

 

 

 

Obagi Medical Products a,b

 

 

1,270,715

 

 

14,676,758

 

 

 

 

 

 

    

 

Total (Cost $365,588,717)

 

 

 

 

466,000,494

 

 

 

 

 

 

    

 

 

Industrial Products – 17.9%

 

 

 

 

 

 

 

Automotive - 1.3%

 

 

 

 

 

 

 

Autoliv

 

 

4,730

 

 

373,386

 

Dorman Products a

 

 

598,447

 

 

21,687,719

 

Gentex Corporation

 

 

333,900

 

 

9,870,084

 

Hertz Global Holdings a

 

 

52,293

 

 

757,726

 

SORL Auto Parts a,c

 

 

100,552

 

 

857,709

 

Strattec Security

 

 

150,000

 

 

4,999,500

 

Superior Industries International

 

 

443,600

 

 

9,413,192

 

WABCO Holdings a

 

 

494,200

 

 

30,111,606

 

Wonder Auto Technology a,c

 

 

120,882

 

 

911,450

 

 

 

 

 

 

    

 

 

 

 

 

 

78,982,372

 

 

 

 

 

 

    

 

Building Systems and Components - 1.8%

 

 

 

 

 

 

 

AAON

 

 

767,100

 

 

21,639,891

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

     

Industrial Products (continued)

 

 

 

 

 

 

 

Building Systems and Components (continued)

 

 

 

 

 

 

 

Apogee Enterprises

 

 

74,433

 

$

1,002,612

 

Armstrong World Industries

 

 

379,300

 

 

16,309,900

 

Drew Industries

 

 

828,814

 

 

18,830,654

 

NCI Building Systems a

 

 

78,940

 

 

1,104,371

 

Preformed Line Products b

 

 

329,506

 

 

19,284,339

 

Quanex Building Products

 

 

30,000

 

 

569,100

 

Simpson Manufacturing

 

 

1,011,800

 

 

31,274,738

 

 

 

 

 

 

    

 

 

 

 

 

 

110,015,605

 

 

 

 

 

 

    

 

Construction Materials - 0.6%

 

 

 

 

 

 

 

Ash Grove Cement d

 

 

50,018

 

 

7,752,790

 

Owens Corning a

 

 

850,700

 

 

26,499,305

 

 

 

 

 

 

    

 

 

 

 

 

 

34,252,095

 

 

 

 

 

 

    

 

Industrial Components - 2.3%

 

 

 

 

 

 

 

CLARCOR

 

 

625,400

 

 

26,823,406

 

Donaldson Company

 

 

386,300

 

 

22,513,564

 

FARO Technologies a

 

 

12,100

 

 

397,364

 

GrafTech International a

 

 

2,446,676

 

 

48,542,052

 

Graham Corporation

 

 

159,648

 

 

3,192,960

 

Hubbell Cl. B

 

 

16,900

 

 

1,016,197

 

PerkinElmer

 

 

986,520

 

 

25,471,946

 

Powell Industries a

 

 

327,900

 

 

10,781,352

 

Regal-Beloit

 

 

27,500

 

 

1,835,900

 

Thomas & Betts a

 

 

16,050

 

 

775,215

 

 

 

 

 

 

    

 

 

 

 

 

 

141,349,956

 

 

 

 

 

 

    

 

Machinery - 3.7%

 

 

 

 

 

 

 

Briggs & Stratton

 

 

252,600

 

 

4,973,694

 

Cascade Corporation

 

 

228,008

 

 

10,780,218

 

Chart Industries a

 

 

20,000

 

 

675,600

 

Columbus McKinnon a

 

 

213,650

 

 

4,341,368

 

Franklin Electric

 

 

636,500

 

 

24,772,580

 

FreightCar America

 

 

78,900

 

 

2,283,366

 

Gorman-Rupp Company

 

 

39,787

 

 

1,285,916

 

Hollysys Automation Technologies a,c

 

 

45,755

 

 

693,646

 

Hurco Companies a

 

 

61,682

 

 

1,458,779

 

Jinpan International

 

 

273,380

 

 

2,878,692

 

Lincoln Electric Holdings

 

 

359,890

 

 

23,490,020

 

Lindsay Corporation

 

 

10,300

 

 

612,129

 

Nordson Corporation

 

 

472,032

 

 

43,370,300

 

Rofin-Sinar Technologies a

 

 

1,080,073

 

 

38,277,787

 

Sun Hydraulics

 

 

356,000

 

 

13,456,800

 

Tennant Company

 

 

719,300

 

 

27,628,313

 

Wabtec Corporation

 

 

433,900

 

 

22,948,971

 

 

 

 

 

 

    

 

 

 

 

 

 

223,928,179

 

 

 

 

 

 

    

 

Metal Fabrication and Distribution - 3.5%

 

 

 

 

 

 

 

Allegheny Technologies

 

 

284,700

 

 

15,709,746

 

Carpenter Technology

 

 

117,500

 

 

4,728,200

 

Castle (A.M.) & Co. a

 

 

98,900

 

 

1,820,749

 

Commercial Metals

 

 

238,700

 

 

3,960,033

 

Encore Wire

 

 

366,579

 

 

9,193,801

 

Foster (L.B.) Company Cl. A a

 

 

28,000

 

 

1,146,320

 

Fushi Copperweld a,c

 

 

282,020

 

 

2,504,338

 

Gibraltar Industries a

 

 

615,120

 

 

8,347,178

 

Haynes International

 

 

195,515

 

 

8,178,393

 

Horsehead Holding Corporation a

 

 

164,500

 

 

2,145,080

 


 

 

 

62 | The Royce Funds 2010 Annual Report to Shareholders

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

 

December 31, 2010
 

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Industrial Products (continued)

 

 

 

 

 

 

 

Metal Fabrication and Distribution (continued)

 

 

 

 

 

 

 

Insteel Industries

 

 

233,708

 

$

2,919,013

 

Kennametal

 

 

923,501

 

 

36,441,350

 

Olympic Steel

 

 

155,000

 

 

4,445,400

 

RBC Bearings a

 

 

397,400

 

 

15,530,392

 

Reliance Steel & Aluminum

 

 

732,400

 

 

37,425,640

 

Schnitzer Steel Industries Cl. A

 

 

356,410

 

 

23,662,060

 

Sims Metal Management ADR

 

 

1,080,380

 

 

23,595,499

 

Steel Dynamics

 

 

380,521

 

 

6,963,534

 

Universal Stainless & Alloy Products a

 

 

50,000

 

 

1,564,000

 

 

 

 

 

 

    

 

 

 

 

 

 

210,280,726

 

 

 

 

 

 

    

 

Miscellaneous Manufacturing - 1.8%

 

 

 

 

 

 

 

AZZ

 

 

500,091

 

 

20,008,641

 

Brady Corporation Cl. A

 

 

451,900

 

 

14,736,459

 

Crane Company

 

 

37,500

 

 

1,540,125

 

Mettler-Toledo International a

 

 

241,500

 

 

36,517,215

 

Raven Industries

 

 

407,135

 

 

19,416,268

 

Steelcase Cl. A

 

 

100,000

 

 

1,057,000

 

Valmont Industries

 

 

183,100

 

 

16,246,463

 

 

 

 

 

 

    

 

 

 

 

 

 

109,522,171

 

 

 

 

 

 

    

 

Paper and Packaging - 0.8%

 

 

 

 

 

 

 

AptarGroup

 

 

221,700

 

 

10,546,269

 

Greif Cl. A

 

 

565,168

 

 

34,983,899

 

Orchids Paper Products a

 

 

137,458

 

 

1,682,486

 

 

 

 

 

 

    

 

 

 

 

 

 

47,212,654

 

 

 

 

 

 

    

 

Pumps, Valves and Bearings - 1.1%

 

 

 

 

 

 

 

Gardner Denver

 

 

335,656

 

 

23,099,846

 

Graco

 

 

605,449

 

 

23,884,963

 

IDEX Corporation

 

 

343,500

 

 

13,437,720

 

Kaydon Corporation

 

 

148,400

 

 

6,042,848

 

Robbins & Myers

 

 

39,162

 

 

1,401,216

 

 

 

 

 

 

    

 

 

 

 

 

 

67,866,593

 

 

 

 

 

 

    

 

Specialty Chemicals and Materials - 0.9%

 

 

 

 

 

 

 

Balchem Corporation

 

 

266,237

 

 

9,001,473

 

Cabot Corporation

 

 

439,100

 

 

16,532,115

 

Calgon Carbon a

 

 

50,000

 

 

756,000

 

†Gulf Resources a,c

 

 

40,281

 

 

430,604

 

Lubrizol Corporation (The)

 

 

6,910

 

 

738,541

 

Olin Corporation

 

 

34,800

 

 

714,096

 

OM Group a

 

 

27,100

 

 

1,043,621

 

Park Electrochemical

 

 

82,200

 

 

2,466,000

 

Rogers Corporation a

 

 

37,950

 

 

1,451,587

 

Schulman (A.)

 

 

17,300

 

 

395,997

 

Sensient Technologies

 

 

50,000

 

 

1,836,500

 

Westlake Chemical

 

 

374,900

 

 

16,296,903

 

 

 

 

 

 

    

 

 

 

 

 

 

51,663,437

 

 

 

 

 

 

    

 

Other Industrial Products - 0.1%

 

 

 

 

 

 

 

MTS Systems

 

 

148,774

 

 

5,573,074

 

 

 

 

 

 

    

 

Total (Cost $740,802,561)

 

 

 

 

1,080,646,862

 

 

 

 

 

 

    

 

 

Industrial Services – 12.6%

 

 

 

 

 

 

 

Advertising and Publishing - 0.3%

 

 

 

 

 

 

 

Interpublic Group of Companies a

 

 

50,100

 

 

532,062

 

Scholastic Corporation

 

 

393,000

 

 

11,609,220

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Industrial Services (continued)

 

 

 

 

 

 

 

Advertising and Publishing (continued)

 

 

 

 

 

 

 

ValueClick a

 

 

246,800

 

$

3,956,204

 

 

 

 

 

 

    

 

 

 

 

 

 

16,097,486

 

 

 

 

 

 

    

 

Commercial Services - 6.2%

 

 

 

 

 

 

 

Barrett Business Services

 

 

146,200

 

 

2,273,410

 

Brink’s Company (The)

 

 

1,178,185

 

 

31,669,613

 

Cintas Corporation

 

 

868,800

 

 

24,291,648

 

Convergys Corporation a

 

 

86,000

 

 

1,132,620

 

Copart a

 

 

872,100

 

 

32,572,935

 

Corinthian Colleges a,c

 

 

144,000

 

 

750,240

 

Corporate Executive Board

 

 

619,700

 

 

23,269,735

 

CRA International a,b

 

 

574,643

 

 

13,509,857

 

Electro Rent

 

 

77,074

 

 

1,245,516

 

Exponent a

 

 

323,893

 

 

12,155,704

 

Forrester Research

 

 

298,200

 

 

10,523,478

 

FTI Consulting a

 

 

322,100

 

 

12,007,888

 

Gartner a

 

 

704,000

 

 

23,372,800

 

Global Sources a,c

 

 

96,605

 

 

919,680

 

Korn/Ferry International a

 

 

50,000

 

 

1,155,500

 

Landauer

 

 

184,700

 

 

11,076,459

 

LECG Corporation a

 

 

1,054,448

 

 

1,455,138

 

Lincoln Educational Services

 

 

33,800

 

 

524,238

 

Manpower

 

 

456,800

 

 

28,668,768

 

MAXIMUS

 

 

653,832

 

 

42,878,302

 

Monster Worldwide a

 

 

99,600

 

 

2,353,548

 

Navigant Consulting a

 

 

10,000

 

 

92,000

 

Rentrak Corporation a

 

 

56,100

 

 

1,691,976

 

Ritchie Bros. Auctioneers

 

 

1,288,100

 

 

29,690,705

 

Robert Half International

 

 

402,500

 

 

12,316,500

 

Team a

 

 

330,740

 

 

8,003,908

 

Towers Watson & Company Cl. A

 

 

381,400

 

 

19,855,684

 

TrueBlue a

 

 

273,200

 

 

4,914,868

 

Universal Technical Institute

 

 

812,500

 

 

17,891,250

 

Viad Corporation

 

 

203,666

 

 

5,187,373

 

 

 

 

 

 

    

 

 

 

 

 

 

377,451,341

 

 

 

 

 

 

    

 

Engineering and Construction - 2.2%

 

 

 

 

 

 

 

Baker (Michael) a

 

 

315,289

 

 

9,805,488

 

Cavco Industries a

 

 

900

 

 

42,021

 

Comfort Systems USA

 

 

662,991

 

 

8,731,592

 

Desarrolladora Homex ADR a,c

 

 

192,400

 

 

6,505,044

 

EMCOR Group a

 

 

1,002,440

 

 

29,050,711

 

Integrated Electrical Services a

 

 

679,117

 

 

2,370,118

 

Jacobs Engineering Group a

 

 

9,200

 

 

421,820

 

KBR

 

 

1,054,300

 

 

32,124,521

 

NVR a

 

 

44,551

 

 

30,785,632

 

Orion Marine Group a

 

 

551,093

 

 

6,392,679

 

Quanta Services a

 

 

25,000

 

 

498,000

 

Skyline Corporation

 

 

183,400

 

 

4,783,072

 

Sterling Construction a

 

 

267,671

 

 

3,490,430

 

 

 

 

 

 

    

 

 

 

 

 

 

135,001,128

 

 

 

 

 

 

    

 

Food, Tobacco and Agriculture - 0.3%

 

 

 

 

 

 

 

China Green (Holdings)

 

 

1,268,400

 

 

1,240,202

 

Hanfeng Evergreen a

 

 

143,400

 

 

859,563

 

Intrepid Potash a,c

 

 

343,006

 

 

12,790,694

 

 

 

 

 

 

    

 

 

 

 

 

 

14,890,459

 

 

 

 

 

 

    

 


 

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

The Royce Funds 2010 Annual Report to Shareholders | 63

 

Schedules of Investments
 

 

Royce Pennsylvania Mutual Fund (continued)

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Industrial Services (continued)

 

 

 

 

 

 

 

Industrial Distribution - 1.1%

 

 

 

 

 

 

 

Applied Industrial Technologies

 

 

472,000

 

$

15,330,560

 

Houston Wire & Cable

 

 

22,700

 

 

305,088

 

Mine Safety Appliances

 

 

332,100

 

 

10,338,273

 

MSC Industrial Direct Cl. A

 

 

511,500

 

 

33,088,935

 

Pool Corporation

 

 

261,400

 

 

5,891,956

 

 

 

 

 

 

    

 

 

 

 

 

 

64,954,812

 

 

 

 

 

 

    

 

Printing - 0.0%

 

 

 

 

 

 

 

Ennis

 

 

37,400

 

 

639,540

 

 

 

 

 

 

    

 

Transportation and Logistics - 2.5%

 

 

 

 

 

 

 

Arkansas Best

 

 

722,935

 

 

19,822,878

 

Forward Air

 

 

768,900

 

 

21,821,382

 

Hub Group Cl. A a

 

 

25,000

 

 

878,500

 

Kirby Corporation a

 

 

634,045

 

 

27,929,682

 

Landstar System

 

 

824,900

 

 

33,771,406

 

Pacer International a,c

 

 

792,040

 

 

5,417,554

 

Patriot Transportation Holding a

 

 

84,800

 

 

7,883,008

 

Universal Truckload Services a

 

 

698,243

 

 

11,116,028

 

UTi Worldwide

 

 

1,150,900

 

 

24,399,080

 

 

 

 

 

 

    

 

 

 

 

 

 

153,039,518

 

 

 

 

 

 

    

 

Total (Cost $656,004,548)

 

 

 

 

762,074,284

 

 

 

 

 

 

    

 

 

Natural Resources – 12.3%

 

 

 

 

 

 

 

Energy Services - 7.0%

 

 

 

 

 

 

 

Atwood Oceanics a

 

 

561,201

 

 

20,972,081

 

Calfrac Well Services

 

 

175,500

 

 

6,043,568

 

CARBO Ceramics

 

 

393,200

 

 

40,711,928

 

CE Franklin a

 

 

206,353

 

 

1,475,424

 

Ensco ADR

 

 

35,900

 

 

1,916,342

 

Ensign Energy Services

 

 

1,786,500

 

 

27,005,023

 

Exterran Holdings a,c

 

 

408,100

 

 

9,773,995

 

Frontier Oil a

 

 

496,407

 

 

8,940,290

 

Helmerich & Payne

 

 

888,864

 

 

43,092,127

 

ION Geophysical a

 

 

816,700

 

 

6,925,616

 

Lufkin Industries

 

 

278,600

 

 

17,381,854

 

Oil States International a

 

 

653,754

 

 

41,899,094

 

Pason Systems

 

 

2,347,000

 

 

32,951,946

 

Patterson-UTI Energy

 

 

419,800

 

 

9,046,690

 

Rowan Companies a

 

 

501,500

 

 

17,507,365

 

RPC

 

 

853,650

 

 

15,468,138

 

SEACOR Holdings

 

 

267,700

 

 

27,061,793

 

ShawCor Cl. A

 

 

309,600

 

 

10,309,621

 

T-3 Energy Services a

 

 

269,000

 

 

10,714,270

 

Tidewater

 

 

70,000

 

 

3,768,800

 

Trican Well Service

 

 

1,460,900

 

 

29,591,196

 

Unit Corporation a

 

 

867,451

 

 

40,319,123

 

Willbros Group a

 

 

180,800

 

 

1,775,456

 

 

 

 

 

 

    

 

 

 

 

 

 

424,651,740

 

 

 

 

 

 

    

 

Oil and Gas - 1.5%

 

 

 

 

 

 

 

Cimarex Energy

 

 

331,908

 

 

29,383,815

 

Energen Corporation

 

 

617,111

 

 

29,781,777

 

†Energy Partners a

 

 

27,094

 

 

402,617

 

†Gastar Exploration a

 

 

90,000

 

 

387,000

 

Gran Tierra Energy a

 

 

189,000

 

 

1,521,450

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Natural Resources (continued)

 

 

 

 

 

 

 

Oil and Gas (continued)

 

 

 

 

 

 

 

SM Energy

 

 

428,100

 

$

25,227,933

 

 

 

 

 

 

    

 

 

 

 

 

 

86,704,592

 

 

 

 

 

 

    

 

Precious Metals and Mining - 3.2%

 

 

 

 

 

 

 

Agnico-Eagle Mines

 

 

329,000

 

 

25,234,300

 

AMCOL International

 

 

4,900

 

 

151,900

 

Cliffs Natural Resources

 

 

44,000

 

 

3,432,440

 

Eldorado Gold

 

 

1,939,400

 

 

36,014,658

 

Hecla Mining a,c

 

 

2,049,000

 

 

23,071,740

 

International Coal Group a

 

 

1,109,640

 

 

8,588,614

 

Ivanhoe Mines a,c

 

 

914,700

 

 

20,964,924

 

Major Drilling Group International

 

 

179,000

 

 

7,480,086

 

Pan American Silver

 

 

671,400

 

 

27,668,394

 

Randgold Resources ADR

 

 

106,700

 

 

8,784,611

 

Seabridge Gold a,c

 

 

388,000

 

 

11,903,840

 

Silver Standard Resources a

 

 

689,000

 

 

19,443,580

 

 

 

 

 

 

    

 

 

 

 

 

 

192,739,087

 

 

 

 

 

 

    

 

Real Estate - 0.6%

 

 

 

 

 

 

 

Jones Lang LaSalle

 

 

313,300

 

 

26,292,136

 

PICO Holdings a

 

 

334,400

 

 

10,633,920

 

Tejon Ranch a,c

 

 

46,624

 

 

1,284,491

 

 

 

 

 

 

    

 

 

 

 

 

 

38,210,547

 

 

 

 

 

 

    

 

Other Natural Resources - 0.0%

 

 

 

 

 

 

 

Sino-Forest Corporation a

 

 

42,800

 

 

1,002,526

 

 

 

 

 

 

    

 

Total (Cost $394,621,611)

 

 

 

 

743,308,492

 

 

 

 

 

 

    

 

 

Technology – 15.2%

 

 

 

 

 

 

 

Aerospace and Defense - 2.1%

 

 

 

 

 

 

 

Ceradyne a

 

 

75,000

 

 

2,364,750

 

Cubic Corporation

 

 

225,505

 

 

10,632,561

 

Curtiss-Wright

 

 

255,620

 

 

8,486,584

 

FLIR Systems a

 

 

754,800

 

 

22,455,300

 

HEICO Corporation

 

 

624,275

 

 

31,856,753

 

HEICO Corporation Cl. A

 

 

97,250

 

 

3,629,370

 

Integral Systems a

 

 

203,478

 

 

2,016,467

 

ManTech International Cl. A a

 

 

938,607

 

 

38,792,627

 

Mercury Computer Systems a

 

 

56,400

 

 

1,036,632

 

Teledyne Technologies a

 

 

145,100

 

 

6,380,047

 

 

 

 

 

 

    

 

 

 

 

 

 

127,651,091

 

 

 

 

 

 

    

 

Components and Systems - 3.4%

 

 

 

 

 

 

 

AVX Corporation

 

 

1,528,821

 

 

23,589,708

 

Benchmark Electronics a

 

 

900,000

 

 

16,344,000

 

Celestica a

 

 

263,000

 

 

2,551,100

 

DDi Corporation

 

 

416,890

 

 

4,902,626

 

Diebold

 

 

651,000

 

 

20,864,550

 

Dionex Corporation a

 

 

320,526

 

 

37,825,273

 

Energy Conversion Devices a,c

 

 

478,200

 

 

2,199,720

 

Intermec a

 

 

28,000

 

 

354,480

 

Lexmark International Cl. A a

 

 

349,000

 

 

12,152,180

 

Logitech International a,c

 

 

607,100

 

 

11,261,705

 

Nam Tai Electronics

 

 

311,397

 

 

1,992,941

 

Newport Corporation a

 

 

300,069

 

 

5,212,199

 

Plexus Corporation a

 

 

788,200

 

 

24,386,908

 

Pulse Electronics b

 

 

2,095,739

 

 

11,149,332

 


 

 

 

64 | The Royce Funds 2010 Annual Report to Shareholders

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

December 31, 2010
 

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Technology (continued)

 

 

 

 

 

 

 

Components and Systems (continued)

 

 

 

 

 

 

 

Rimage Corporation a,b

 

 

645,314

 

$

9,621,632

 

SMART Modular Technologies (WWH) a

 

 

302,800

 

 

1,744,128

 

Stratasys a,c

 

 

209,335

 

 

6,832,694

 

Super Micro Computer a

 

 

150,900

 

 

1,741,386

 

Teradata Corporation a

 

 

100,000

 

 

4,116,000

 

Western Digital a

 

 

57,300

 

 

1,942,470

 

Zebra Technologies Cl. A a

 

 

53,625

 

 

2,037,214

 

 

 

 

 

 

    

 

 

 

 

 

 

202,822,246

 

 

 

 

 

 

    

 

Distribution - 0.6%

 

 

 

 

 

 

 

Anixter International

 

 

59,120

 

 

3,531,238

 

Arrow Electronics a

 

 

303,300

 

 

10,388,025

 

Cogo Group a

 

 

271,741

 

 

2,404,908

 

ScanSource a

 

 

8,724

 

 

278,295

 

Tech Data a

 

 

473,391

 

 

20,838,672

 

 

 

 

 

 

    

 

 

 

 

 

 

37,441,138

 

 

 

 

 

 

    

 

Internet Software and Services - 0.0%

 

 

 

 

 

 

 

Support.com a

 

 

15,000

 

 

97,200

 

 

 

 

 

 

    

 

IT Services - 1.3%

 

 

 

 

 

 

 

Black Box

 

 

317,502

 

 

12,157,152

 

Sapient Corporation

 

 

1,880,000

 

 

22,748,000

 

SRA International Cl. A a

 

 

1,372,505

 

 

28,067,727

 

Syntel

 

 

358,200

 

 

17,118,378

 

Virtusa Corporation a

 

 

51,625

 

 

844,585

 

Yucheng Technologies a,c

 

 

168,100

 

 

606,841

 

 

 

 

 

 

    

 

 

 

 

 

 

 

81,542,683

 

 

 

 

 

 

    

 

Semiconductors and Equipment - 4.6%

 

 

 

 

 

 

 

ADTRAN

 

 

793,815

 

 

28,744,041

 

†Aixtron ADR c

 

 

140,400

 

 

5,222,880

 

Cabot Microelectronics a

 

 

278,976

 

 

11,563,555

 

Cirrus Logic a

 

 

1,501,900

 

 

24,000,362

 

Cognex Corporation

 

 

888,835

 

 

26,149,526

 

Coherent a

 

 

685,500

 

 

30,943,470

 

Cymer a

 

 

134,000

 

 

6,039,380

 

Diodes a

 

 

1,149,900

 

 

31,035,801

 

Entegris a

 

 

9,400

 

 

70,218

 

Exar Corporation a

 

 

824,441

 

 

5,754,598

 

Fairchild Semiconductor International a

 

 

1,170,300

 

 

18,268,383

 

Himax Technologies ADR

 

 

204,800

 

 

483,328

 

International Rectifier a

 

 

786,950

 

 

23,364,545

 

IXYS Corporation a

 

 

266,600

 

 

3,097,892

 

MEMC Electronic Materials a

 

 

200,000

 

 

2,252,000

 

Micrel

 

 

1,117,600

 

 

14,517,624

 

MKS Instruments a

 

 

809,287

 

 

19,819,439

 

OmniVision Technologies a

 

 

301,700

 

 

8,933,337

 

Supertex a

 

 

334,000

 

 

8,076,120

 

Teradyne a

 

 

84,900

 

 

1,191,996

 

TTM Technologies a

 

 

300,000

 

 

4,473,000

 

Varian Semiconductor Equipment

 

 

 

 

 

 

 

Associates a

 

 

38,000

 

 

1,404,860

 

 

 

 

 

 

    

 

 

 

 

 

 

275,406,355

 

 

 

 

 

 

    

 

Software - 2.4%

 

 

 

 

 

 

 

ACI Worldwide a

 

 

427,600

 

 

11,489,612

 

Actuate Corporation a

 

 

287,700

 

 

1,639,890

 

American Software Cl. A

 

 

231,000

 

 

1,563,870

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Technology (continued)

 

 

 

 

 

 

 

Software (continued)

 

 

 

 

 

 

 

ANSYS a

 

 

615,400

 

$

32,043,878

 

Blackbaud

 

 

689,291

 

 

17,852,637

 

Blackboard a,c

 

 

335,000

 

 

13,835,500

 

Fair Isaac

 

 

506,900

 

 

11,846,253

 

Manhattan Associates a

 

 

440,000

 

 

13,437,600

 

National Instruments

 

 

928,800

 

 

34,960,032

 

Pervasive Software a,b

 

 

1,461,500

 

 

7,541,340

 

 

 

 

 

 

    

 

 

 

 

 

 

146,210,612

 

 

 

 

 

 

    

 

Telecommunications - 0.8%

 

 

 

 

 

 

 

†ADPT Corporation a,d

 

 

200,000

 

 

584,000

 

Atlantic Tele-Network

 

 

49,000

 

 

1,878,660

 

Comtech Telecommunications

 

 

597,413

 

 

16,566,263

 

Digi International a

 

 

388,644

 

 

4,313,948

 

Harmonic a

 

 

455,100

 

 

3,900,207

 

NETGEAR a

 

 

393,400

 

 

13,249,712

 

Novatel Wireless a

 

 

126,700

 

 

1,209,985

 

Plantronics

 

 

15,700

 

 

584,354

 

Premiere Global Services a

 

 

516,500

 

 

3,512,200

 

Tekelec a

 

 

195,400

 

 

2,327,214

 

Tellabs

 

 

310,900

 

 

2,107,902

 

USA Mobility

 

 

13,586

 

 

241,423

 

 

 

 

 

 

    

 

 

 

 

 

 

50,475,868

 

 

 

 

 

 

    

 

Total (Cost $720,480,133)

 

 

 

 

921,647,193

 

 

 

 

 

 

    

 

 

Utilities – 0.0%

 

 

 

 

 

 

 

UGI Corporation

 

 

21,800

 

 

688,444

 

 

 

 

 

 

    

 

Total (Cost $572,483)

 

 

 

 

688,444

 

 

 

 

 

 

    

 

 

Miscellaneouse – 2.5%

 

 

 

 

 

 

 

Total (Cost $125,700,403)

 

 

 

 

150,067,608

 

 

 

 

 

 

    

 

 

TOTAL COMMON STOCKS

 

 

 

 

 

 

 

(Cost $4,447,900,322)

 

 

 

 

5,835,450,623

 

 

 

 

 

 

    

 

 

 

 

 

PRINCIPAL

 

 

 

 

 

 

 

AMOUNT

 

 

 

 

 

CORPORATE BOND – 0.0%

 

 

 

 

 

 

 

GAMCO Investors 0.00%

 

 

 

 

 

 

 

due 12/31/15 f

 

 

 

 

 

 

 

(Cost $464,640)

 

$

4,646

 

 

315,928

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

REPURCHASE AGREEMENT – 3.5%

 

 

 

 

 

 

 

State Street Bank & Trust Company, 0.13% dated 12/31/10, due 1/3/11, maturity value $213,749,316 (collateralized by obligations of various U.S. Government Agencies, 0.48% due 4/29/11-5/5/11, valued at $219,091,938)
(Cost $213,747,000)

 

 

 

 

213,747,000

 

 

 

 

 

 

    

 


 

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

The Royce Funds 2010 Annual Report to Shareholders | 65

 

Schedules of Investments
 

 

 

 

 

Royce Pennsylvania Mutual Fund (continued)

 

 

 

 

 

 

     

VALUE

 

COLLATERAL RECEIVED FOR SECURITIES

 

 

 

 

LOANED – 1.1%

 

 

 

 

Money Market Funds

 

 

 

 

Federated Government Obligations Fund

 

 

 

 

(7 day yield-0.0154%)

 

 

 

 

(Cost $63,193,230)

 

$

63,193,230

 

 

 

    

 
 

TOTAL INVESTMENTS – 101.1%

 

 

 

 

(Cost $4,725,305,192)

 

 

6,112,706,781

 

 

 

 

 

 

LIABILITIES LESS CASH

 

 

 

 

AND OTHER ASSETS – (1.1)%

 

 

(65,366,917

)

 

 

    

 

 

NET ASSETS – 100.0%

 

$

6,047,339,864

 

 

 

    

 

 

 

 

 

 

 

Royce Micro-Cap Fund

 

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

COMMON STOCKS – 88.2%

 

 

 

 

 

 

 

Consumer Products – 5.0%

 

 

 

 

 

 

 

Apparel, Shoes and Accessories - 2.1%

 

 

 

 

 

 

 

LaCrosse Footwear b

 

 

532,669

 

$

8,735,772

 

True Religion Apparel a

 

 

198,300

 

 

4,414,158

 

Van De Velde

 

 

69,308

 

 

3,667,604

 

Volcom

 

 

658,540

 

 

12,426,650

 

 

 

 

 

 

    

 

 

 

 

 

 

29,244,184

 

 

 

 

 

 

    

 

Food/Beverage/Tobacco - 0.9%

 

 

 

 

 

 

 

Binggrae Company

 

 

90,000

 

 

4,440,920

 

Sipef

 

 

90,000

 

 

8,538,956

 

 

 

 

 

 

    

 

 

 

 

 

 

12,979,876

 

 

 

 

 

 

    

 

Health, Beauty and Nutrition - 0.3%

 

 

 

 

 

 

 

Nutraceutical International a

 

 

265,100

 

 

3,761,769

 

Vitacost.com a,f

 

 

379,400

 

 

478,044

 

 

 

 

 

 

    

 

 

 

 

 

 

4,239,813

 

 

 

 

 

 

    

 

Home Furnishing and Appliances - 0.3%

 

 

 

 

 

 

 

AS Creation Tapeten

 

 

100,000

 

 

3,843,199

 

 

 

 

 

 

    

 

Sports and Recreation - 1.2%

 

 

 

 

 

 

 

Arctic Cat a

 

 

448,316

 

 

6,563,346

 

Piscines Desjoyaux

 

 

389,613

 

 

3,618,447

 

RC2 Corporation a

 

 

320,300

 

 

6,972,931

 

 

 

 

 

 

    

 

 

 

 

 

 

17,154,724

 

 

 

 

 

 

    

 

Other Consumer Products - 0.2%

 

 

 

 

 

 

 

CSS Industries

 

 

140,700

 

 

2,899,827

 

 

 

 

 

 

    

 

Total (Cost $61,644,937)

 

 

 

 

70,361,623

 

 

 

 

 

 

    

 
 

Consumer Services – 4.9%

 

 

 

 

 

 

 

Direct Marketing - 0.4%

 

 

 

 

 

 

 

Manutan International

 

 

74,300

 

 

4,904,782

 

 

 

 

 

 

    

 

Leisure and Entertainment - 0.1%

 

 

 

 

 

 

 

Multimedia Games a

 

 

370,018

 

 

2,064,700

 

 

 

 

 

 

    

 

Online Commerce - 0.4%

 

 

 

 

 

 

 

CryptoLogic a,b,c

 

 

751,575

 

 

1,044,689

 

GS Home Shopping

 

 

50,000

 

 

4,815,402

 

 

 

 

 

 

    

 

 

 

 

 

 

5,860,091

 

 

 

 

 

 

    

 

Retail Stores - 3.6%

 

 

 

 

 

 

 

Buckle (The)

 

 

161,275

 

 

6,091,357

 

Cato Corporation (The) Cl. A

 

 

243,250

 

 

6,667,483

 

Jos. A. Bank Clothiers a

 

 

178,080

 

 

7,180,186

 

Kirkland’s a

 

 

632,675

 

 

8,876,430

 

Lewis Group

 

 

420,000

 

 

5,182,816

 

Luk Fook Holdings (International)

 

 

3,100,000

 

 

10,828,144

 

Stein Mart

 

 

637,081

 

 

5,892,999

 

 

 

 

 

 

    

 

 

 

 

 

 

50,719,415

 

 

 

 

 

 

    

 

Other Consumer Services - 0.4%

 

 

 

 

 

 

 

†Kroton Educacional (Units) a

 

 

415,000

 

 

5,462,500

 

 

 

 

 

 

    

 

Total (Cost $41,824,237)

 

 

 

 

69,011,488

 

 

 

 

 

 

    

 
 

Financial Intermediaries – 3.2%

 

 

 

 

 

 

 

Banking - 0.8%

 

 

 

 

 

 

 

Bancorp (The) a

 

 

373,567

 

 

3,799,176

 

BCB Holdings a

 

 

2,760,860

 

 

3,142,252

 


 

 

 

66 | The Royce Funds 2010 Annual Report to Shareholders

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

December 31, 2010
 

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Financial Intermediaries (continued)

 

 

 

 

 

 

 

Banking (continued)

 

 

 

 

 

 

 

Pacific Continental

 

 

356,897

 

$

3,590,384

 

 

 

 

 

 

    

 

 

 

 

 

 

10,531,812

 

 

 

 

 

 

    

 

Insurance - 1.2%

 

 

 

 

 

 

 

American Safety Insurance Holdings a

 

 

291,300

 

 

6,227,994

 

Argo Group International Holdings

 

 

103,605

 

 

3,880,007

 

Navigators Group a

 

 

75,900

 

 

3,821,565

 

United Fire & Casualty

 

 

100,000

 

 

2,232,000

 

 

 

 

 

 

    

 

 

 

 

 

 

16,161,566

 

 

 

 

 

 

    

 

Securities Brokers - 1.0%

 

 

 

 

 

 

 

FBR Capital Markets a

 

 

983,171

 

 

3,755,713

 

GMP Capital

 

 

403,800

 

 

4,913,990

 

Sanders Morris Harris Group

 

 

780,000

 

 

5,655,000

 

 

 

 

 

 

    

 

 

 

 

 

 

14,324,703

 

 

 

 

 

 

    

 

Securities Exchanges - 0.2%

 

 

 

 

 

 

 

Hellenic Exchanges

 

 

501,000

 

 

3,280,483

 

 

 

 

 

 

    

 

Total (Cost $38,440,579)

 

 

 

 

44,298,564

 

 

 

 

 

 

    

 

 

Financial Services – 3.3%

 

 

 

 

 

 

 

Investment Management - 1.9%

 

 

 

 

 

 

 

CapMan Cl. B

 

 

1,450,000

 

 

3,448,990

 

Deutsche Beteiligungs

 

 

51,900

 

 

1,456,433

 

Gluskin Sheff + Associates

 

 

360,000

 

 

7,527,305

 

Sprott Resource a

 

 

2,039,700

 

 

9,374,866

 

U.S. Global Investors Cl. A

 

 

166,000

 

 

1,349,580

 

Westwood Holdings Group

 

 

92,772

 

 

3,707,169

 

 

 

 

 

 

    

 

 

 

 

 

 

26,864,343

 

 

 

 

 

 

    

 

Special Purpose Acquisition Corporation - 0.3%

 

 

 

 

 

 

 

Harbinger Group a

 

 

634,900

 

 

3,930,031

 

Other Financial Services - 1.1%

 

 

 

 

    

 

Kennedy-Wilson Holdings a

 

 

1,080,423

 

 

10,793,426

 

†Syswin ADR a

 

 

731,500

 

 

4,381,685

 

 

 

 

 

 

    

 

 

 

 

 

 

15,175,111

 

 

 

 

 

 

    

 

Total (Cost $39,094,388)

 

 

 

 

45,969,485

 

 

 

 

 

 

    

 

 

Health – 10.2%

 

 

 

 

 

 

 

Commercial Services - 0.7%

 

 

 

 

 

 

 

PDI a,b

 

 

1,015,694

 

 

10,705,415

 

 

 

 

 

 

    

 

Drugs and Biotech - 3.2%

 

 

 

 

 

 

 

Anika Therapeutics a

 

 

435,535

 

 

2,887,597

 

Bukwang Pharmaceutical

 

 

439,000

 

 

5,164,023

 

Dyax Corporation a

 

 

1,163,784

 

 

2,490,498

 

Lexicon Pharmaceuticals a

 

 

3,209,591

 

 

4,621,811

 

Maxygen

 

 

215,800

 

 

848,094

 

Orchid Cellmark a

 

 

1,461,322

 

 

2,834,965

 

Sinovac Biotech a

 

 

880,300

 

 

3,978,956

 

SurModics a

 

 

388,454

 

 

4,610,949

 

3SBio ADR a

 

 

184,400

 

 

2,799,192

 

Vetoquinol

 

 

190,750

 

 

7,542,467

 

YM Biosciences a,c

 

 

691,800

 

 

1,611,894

 

†Zogenix a,c

 

 

1,002,900

 

 

5,686,443

 

 

 

 

 

 

    

 

 

 

 

 

 

45,076,889

 

 

 

 

 

 

    

 

Health Services - 2.6%

 

 

 

 

 

 

 

BioClinica a

 

 

569,400

 

 

2,522,442

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Health (continued)

 

 

 

 

 

 

 

Health Services (continued)

 

 

 

 

 

 

 

CorVel Corporation a

 

 

123,157

 

$

5,954,641

 

†EPS

 

 

3,000

 

 

7,342,037

 

Genoptix a

 

 

182,826

 

 

3,477,350

 

†IPC The Hospitalist a

 

 

118,200

 

 

4,610,982

 

†Transcend Services a

 

 

396,537

 

 

7,768,160

 

U.S. Physical Therapy a

 

 

231,840

 

 

4,595,069

 

 

 

 

 

 

    

 

 

 

 

 

 

36,270,681

 

 

 

 

 

 

    

 

Medical Products and Devices - 3.7%

 

 

 

 

 

 

 

ArthroCare Corporation a

 

 

89,711

 

 

2,786,424

 

Cerus Corporation a,c

 

 

862,700

 

 

2,122,242

 

Cynosure Cl. A a

 

 

447,000

 

 

4,572,810

 

Exactech a

 

 

336,378

 

 

6,330,634

 

Merit Medical Systems a

 

 

490,732

 

 

7,768,288

 

Neogen Corporation a

 

 

118,085

 

 

4,845,027

 

Solta Medical a

 

 

1,108,077

 

 

3,379,635

 

STRATEC Biomedical Systems

 

 

60,000

 

 

2,558,480

 

Syneron Medical a

 

 

1,162,674

 

 

11,847,648

 

Young Innovations

 

 

167,194

 

 

5,351,880

 

 

 

 

 

 

    

 

 

 

 

 

 

51,563,068

 

 

 

 

 

 

    

 

Total (Cost $133,443,801)

 

 

 

 

143,616,053

 

 

 

 

 

 

    

 

 

Industrial Products – 14.2%

 

 

 

 

 

 

 

Automotive - 0.4%

 

 

 

 

 

 

 

†Fuel Systems Solutions a,c

 

 

166,300

 

 

4,885,894

 

 

 

 

 

 

    

 

Building Systems and Components - 2.0%

 

 

 

 

 

 

 

AAON

 

 

267,369

 

 

7,542,479

 

Drew Industries

 

 

491,100

 

 

11,157,792

 

LSI Industries

 

 

971,936

 

 

8,222,579

 

WaterFurnace Renewable Energy

 

 

66,000

 

 

1,644,192

 

 

 

 

 

 

    

 

 

 

 

 

 

 

28,567,042

 

 

 

 

 

 

    

 

Industrial Components - 1.3%

 

 

 

 

 

 

 

Graham Corporation b

 

 

590,654

 

 

11,813,080

 

Voltamp Transformers

 

 

335,000

 

 

5,687,470

 

 

 

 

 

 

    

 

 

 

 

 

 

17,500,550

 

 

 

 

 

 

    

 

Machinery - 3.3%

 

 

 

 

 

 

 

Burckhardt Compression Holding

 

 

53,500

 

 

14,819,786

 

FreightCar America

 

 

357,209

 

 

10,337,629

 

†Global Power Equipment Group a

 

 

289,100

 

 

6,707,120

 

Kadant a

 

 

320,851

 

 

7,562,458

 

Key Technology a,b

 

 

444,814

 

 

7,566,286

 

 

 

 

 

 

    

 

 

 

 

 

 

46,993,279

 

 

 

 

 

 

    

 

Metal Fabrication and Distribution - 4.9%

 

 

 

 

 

 

 

Castle (A.M.) & Co. a

 

 

436,753

 

 

8,040,623

 

Foster (L.B.) Company Cl. A a

 

 

240,426

 

 

9,843,040

 

†Fushi Copperweld a,c

 

 

756,296

 

 

6,715,909

 

Horsehead Holding Corporation a

 

 

1,024,674

 

 

13,361,749

 

Olympic Steel

 

 

477,000

 

 

13,680,360

 

RBC Bearings a

 

 

212,821

 

 

8,317,045

 

†Sung Kwang Bend

 

 

200,000

 

 

4,150,145

 

†Universal Stainless & Alloy Products a

 

 

158,300

 

 

4,951,624

 

 

 

 

 

 

    

 

 

 

 

 

 

69,060,495

 

 

 

 

 

 

    

 

Miscellaneous Manufacturing - 1.2%

 

 

 

 

 

 

 

Semperit AG Holding

 

 

268,100

 

 

14,183,593

 


 

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

The Royce Funds 2010 Annual Report to Shareholders | 67

 

Schedules of Investments
 

 

Royce Micro-Cap Fund (continued)

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Industrial Products (continued)

 

 

 

 

 

 

 

Miscellaneous Manufacturing (continued)

 

 

 

 

 

 

 

Synalloy Corporation

 

 

211,150

 

$

2,559,138

 

 

 

 

 

 

    

 

 

 

 

 

 

16,742,731

 

 

 

 

 

 

    

 

Specialty Chemicals and Materials - 1.1%

 

 

 

 

 

 

 

†Graphite India

 

 

2,382,200

 

 

5,407,431

 

†Huchems Fine Chemical a

 

 

300,000

 

 

5,181,073

 

Phoscan Chemical a

 

 

2,968,200

 

 

1,462,756

 

Victrex

 

 

150,000

 

 

3,468,216

 

 

 

 

 

 

    

 

 

 

 

 

 

15,519,476

 

 

 

 

 

 

    

 

Total (Cost $145,105,450)

 

 

 

 

199,269,467

 

 

 

 

 

 

    

 

 

Industrial Services – 11.0%

 

 

 

 

 

 

 

Advertising and Publishing - 0.1%

 

 

 

 

 

 

 

Saraiva SA Livreiros Editores

 

 

55,000

 

 

1,460,151

 

 

 

 

 

 

    

 

Commercial Services - 3.3%

 

 

 

 

 

 

 

Begbies Traynor

 

 

1,959,000

 

 

1,832,565

 

CRA International a

 

 

366,283

 

 

8,611,313

 

Electro Rent

 

 

262,000

 

 

4,233,920

 

Exponent a

 

 

239,608

 

 

8,992,488

 

Forrester Research

 

 

78,800

 

 

2,780,852

 

GP Strategies a,b

 

 

1,123,840

 

 

11,508,122

 

Heritage-Crystal Clean a,b

 

 

847,033

 

 

8,453,390

 

 

 

 

 

 

    

 

 

 

 

 

 

46,412,650

 

 

 

 

 

 

    

 

Engineering and Construction - 2.0%

 

 

 

 

 

 

 

Cavco Industries a

 

 

307,378

 

 

14,351,479

 

Layne Christensen a

 

 

179,000

 

 

6,161,180

 

Sterling Construction a

 

 

619,386

 

 

8,076,793

 

 

 

 

 

 

    

 

 

 

 

 

 

28,589,452

 

 

 

 

 

 

    

 

Food, Tobacco and Agriculture - 2.1%

 

 

 

 

 

 

 

Asian Citrus Holdings

 

 

8,199,900

 

 

10,355,411

 

BioExx Specialty Proteins a

 

 

1,209,800

 

 

2,859,328

 

Societe Internationale de Plantations

 

 

 

 

 

 

 

d’Heveas

 

 

92,000

 

 

10,228,574

 

†Super Group

 

 

5,357,000

 

 

5,885,666

 

 

 

 

 

 

    

 

 

 

 

 

 

29,328,979

 

 

 

 

 

 

    

 

Industrial Distribution - 0.2%

 

 

 

 

 

 

 

Houston Wire & Cable

 

 

277,200

 

 

3,725,568

 

 

 

 

 

 

    

 

Printing - 0.9%

 

 

 

 

 

 

 

Courier Corporation

 

 

259,632

 

 

4,029,489

 

Domino Printing Sciences

 

 

317,600

 

 

3,218,604

 

Ennis

 

 

314,400

 

 

5,376,240

 

 

 

 

 

 

    

 

 

 

 

 

 

12,624,333

 

 

 

 

 

 

    

 

Transportation and Logistics - 2.4%

 

 

 

 

 

 

 

†Baltic Trading

 

 

375,100

 

 

3,829,771

 

Euroseas

 

 

1,511,643

 

 

5,593,079

 

Marten Transport

 

 

514,819

 

 

11,006,830

 

Patriot Transportation Holding a

 

 

138,623

 

 

12,886,394

 

 

 

 

 

 

    

 

 

 

 

 

 

33,316,074

 

 

 

 

 

 

    

 

Total (Cost $126,167,166)

 

 

 

 

155,457,207

 

 

 

 

 

 

    

 

 

Natural Resources – 18.8%

 

 

 

 

 

 

 

Energy Services - 7.3%

 

 

 

 

 

 

 

†Canadian Energy Services &

 

 

 

 

 

 

 

Technology

 

 

391,200

 

 

11,547,541

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Natural Resources (continued)

 

 

 

 

 

 

 

Energy Services (continued)

 

 

 

 

 

 

 

Dawson Geophysical a

 

 

282,733

 

$

9,019,183

 

Gulf Island Fabrication

 

 

360,644

 

 

10,162,948

 

†Imdex a

 

 

3,612,865

 

 

6,632,954

 

Lamprell

 

 

2,655,056

 

 

13,308,479

 

OYO Geospace a

 

 

140,834

 

 

13,958,058

 

Tesco Corporation a

 

 

570,800

 

 

9,064,304

 

TGC Industries a,b

 

 

1,575,202

 

 

5,985,768

 

Total Energy Services

 

 

1,131,300

 

 

16,088,285

 

Union Drilling a

 

 

623,605

 

 

4,539,844

 

World Energy Solutions a,b

 

 

709,900

 

 

2,001,918

 

 

 

 

 

 

    

 

 

 

 

 

 

102,309,282

 

 

 

 

 

 

    

 

Oil and Gas - 0.5%

 

 

 

 

 

 

 

Gran Tierra Energy a

 

 

916,700

 

 

7,379,435

 

 

 

 

 

 

    

 

Precious Metals and Mining - 10.7%

 

 

 

 

 

 

 

Alamos Gold

 

 

503,900

 

 

9,588,442

 

Allied Nevada Gold a

 

 

486,300

 

 

12,794,553

 

Bear Creek Mining a

 

 

670,800

 

 

6,409,132

 

Eldorado Gold

 

 

286,800

 

 

5,325,876

 

Endeavour Mining a,c

 

 

1,971,000

 

 

5,570,261

 

Endeavour Silver a

 

 

1,331,400

 

 

9,772,476

 

Entree Gold a

 

 

1,901,000

 

 

6,577,460

 

Fronteer Gold a

 

 

1,551,900

 

 

18,203,787

 

Gammon Gold a

 

 

430,486

 

 

3,525,680

 

Great Basin Gold a

 

 

2,648,600

 

 

7,858,162

 

†International Tower Hill Mines

 

 

569,500

 

 

5,734,865

 

Keegan Resources a

 

 

775,400

 

 

6,862,637

 

Lumina Copper a

 

 

1,608,700

 

 

7,863,102

 

Quaterra Resources a

 

 

1,885,000

 

 

3,734,737

 

Silvercorp Metals

 

 

1,124,800

 

 

14,431,184

 

Uranium Resources a,c

 

 

1,399,374

 

 

4,757,872

 

US Gold a

 

 

1,684,404

 

 

13,593,140

 

Victoria Gold a

 

 

4,195,000

 

 

4,556,571

 

Western Copper a

 

 

1,471,000

 

 

3,935,291

 

 

 

 

 

 

    

 

 

 

 

 

 

151,095,228

 

 

 

 

 

 

    

 

Other Natural Resources - 0.3%

 

 

 

 

 

 

 

Magma Energy a

 

 

2,798,700

 

 

4,137,674

 

 

 

 

 

 

    

 

Total (Cost $130,072,008)

 

 

 

 

264,921,619

 

 

 

 

 

 

    

 

 

Technology – 12.9%

 

 

 

 

 

 

 

Aerospace and Defense - 0.7%

 

 

 

 

 

 

 

Ducommun

 

 

255,900

 

 

5,573,502

 

LaBarge a

 

 

323,072

 

 

5,075,461

 

 

 

 

 

 

    

 

 

 

 

 

 

10,648,963

 

 

 

 

 

 

    

 

Components and Systems - 3.3%

 

 

 

 

 

 

 

†Fabrinet a

 

 

352,900

 

 

7,587,350

 

Pfeiffer Vacuum Technology

 

 

68,000

 

 

7,996,419

 

SMART Modular Technologies (WWH) a

 

 

1,941,268

 

 

11,181,703

 

Super Micro Computer a

 

 

327,989

 

 

3,784,993

 

Vaisala Cl. A

 

 

214,000

 

 

5,862,348

 

Xyratex a

 

 

589,700

 

 

9,618,007

 

 

 

 

 

 

    

 

 

 

 

 

 

46,030,820

 

 

 

 

 

 

    

 

Distribution - 0.4%

 

 

 

 

 

 

 

Diploma

 

 

1,220,000

 

 

5,278,331

 

 

 

 

 

 

    

 


 

 

 

68 | The Royce Funds 2010 Annual Report to Shareholders

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

December 31, 2010
 

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Technology (continued)

 

 

 

 

 

 

 

Internet Software and Services - 0.5%

 

 

 

 

 

 

 

†VASCO Data Security International a

 

 

804,170

 

$

6,537,902

 

 

 

 

 

 

    

 

IT Services - 0.2%

 

 

 

 

 

 

 

Neurones

 

 

350,000

 

 

3,217,810

 

 

 

 

 

 

    

 

Semiconductors and Equipment - 3.9%

 

 

 

 

 

 

 

Advanced Energy Industries a

 

 

248,036

 

 

3,383,211

 

ATMI a

 

 

519,800

 

 

10,364,812

 

†AXT a

 

 

869,661

 

 

9,079,261

 

GSI Technology a

 

 

410,539

 

 

3,325,366

 

Inficon Holding

 

 

18,000

 

 

3,455,615

 

Rubicon Technology a,c

 

 

219,900

 

 

4,635,492

 

Rudolph Technologies a

 

 

568,800

 

 

4,681,224

 

Sigma Designs a

 

 

657,175

 

 

9,312,170

 

Supertex a

 

 

259,200

 

 

6,267,456

 

 

 

 

 

 

    

 

 

 

 

 

 

54,504,607

 

 

 

 

 

 

    

 

Software - 1.5%

 

 

 

 

 

 

 

†Envestnet a

 

 

283,200

 

 

4,831,392

 

PROS Holdings a

 

 

571,839

 

 

6,513,246

 

Smith Micro Software a

 

 

609,500

 

 

9,593,530

 

 

 

 

 

 

    

 

 

 

 

 

 

20,938,168

 

 

 

 

 

 

    

 

Telecommunications - 2.4%

 

 

 

 

 

 

 

Anaren a

 

 

549,987

 

 

11,467,229

 

Atlantic Tele-Network

 

 

283,600

 

 

10,873,224

 

Digi International a

 

 

530,400

 

 

5,887,440

 

KVH Industries a

 

 

529,800

 

 

6,331,110

 

 

 

 

 

 

    

 

 

 

 

 

 

34,559,003

 

 

 

 

 

 

    

 

Total (Cost $128,404,865)

 

 

 

 

181,715,604

 

 

 

 

 

 

    

 

 

Miscellaneouse – 4.7%

 

 

 

 

 

 

 

Total (Cost $60,118,367)

 

 

 

 

66,347,995

 

 

 

 

 

 

    

 

 

TOTAL COMMON STOCKS

 

 

 

 

 

 

 

(Cost $904,315,798)

 

 

 

 

1,240,969,105

 

 

 

 

 

 

    

 

 

REPURCHASE AGREEMENT – 12.0%

 

 

 

 

 

 

 

State Street Bank & Trust Company, 0.13% dated 12/31/10, due 1/3/11, maturity value $169,169,833 (collateralized by obligations of various U.S. Government Agencies, 0.36% due 3/22/11-3/28/11, valued at $173,401,500)
(Cost $169,168,000)

 

 

 

 

169,168,000

 

 

 

 

 

 

    

 

 

 

 

 

 

     

VALUE

 

COLLATERAL RECEIVED FOR SECURITIES

 

 

 

 

LOANED – 1.2%

 

 

 

 

Money Market Funds

 

 

 

 

Federated Government Obligations Fund

 

 

 

 

(7 day yield-0.0154%)

 

 

 

 

(Cost $17,666,381)

 

$

17,666,381

 

 

 

    

 

 

TOTAL INVESTMENTS – 101.4%

 

 

 

 

(Cost $1,091,150,179)

 

 

1,427,803,486

 

 

 

 

 

 

LIABILITIES LESS CASH

 

 

 

 

AND OTHER ASSETS – (1.4)%

 

 

(20,364,714

)

 

 

    

 

 

NET ASSETS – 100.0%

 

$

1,407,438,772

 

 

 

    

 


 

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

The Royce Funds 2010 Annual Report to Shareholders | 69

 

Schedules of Investments
 

 

Royce Premier Fund

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

COMMON STOCKS – 90.2%

 

 

 

 

 

 

 

 

Consumer Products – 11.7%

 

 

 

 

 

 

 

Apparel, Shoes and Accessories - 6.0%

 

 

 

 

 

 

 

Columbia Sportswear

 

 

856,600

 

$

51,652,980

 

Fossil a

 

 

2,133,944

 

 

150,400,373

 

Polo Ralph Lauren Cl. A

 

 

1,144,200

 

 

126,914,664

 

Timberland Company (The) Cl. A a,b

 

 

3,032,279

 

 

74,563,741

 

 

 

 

 

 

    

 

 

 

 

 

 

403,531,758

 

 

 

 

 

 

    

 

Food/Beverage/Tobacco - 2.0%

 

 

 

 

 

 

 

Cal-Maine Foods b

 

 

1,762,686

 

 

55,665,624

 

Sanderson Farms b

 

 

2,074,791

 

 

81,228,067

 

 

 

 

 

 

    

 

 

 

 

 

 

136,893,691

 

 

 

 

 

 

    

 

Health, Beauty and Nutrition - 1.5%

 

 

 

 

 

 

 

Nu Skin Enterprises Cl. A b

 

 

3,431,500

 

 

103,837,190

 

 

 

 

 

 

    

 

Sports and Recreation - 2.2%

 

 

 

 

 

 

 

Thor Industries b

 

 

4,314,757

 

 

146,529,148

 

 

 

 

 

 

    

 

Total (Cost $506,537,188)

 

 

 

 

790,791,787

 

 

 

 

 

 

    

 

 

Consumer Services – 2.4%

 

 

 

 

 

 

 

Retail Stores - 0.9%

 

 

 

 

 

 

 

Buckle (The)

 

 

1,663,536

 

 

62,831,755

 

 

 

 

 

 

    

 

Other Consumer Services - 1.5%

 

 

 

 

 

 

 

Sotheby’s

 

 

2,281,294

 

 

102,658,230

 

 

 

 

 

 

    

 

Total (Cost $78,664,079)

 

 

 

 

165,489,985

 

 

 

 

 

 

    

 

 

Financial Intermediaries – 6.5%

 

 

 

 

 

 

 

Insurance - 3.0%

 

 

 

 

 

 

 

Alleghany Corporation a

 

 

347,574

 

 

106,486,246

 

ProAssurance Corporation a,b

 

 

1,633,449

 

 

98,987,010

 

 

 

 

 

 

    

 

 

 

 

 

 

205,473,256

 

 

 

 

 

 

    

 

Securities Brokers - 2.2%

 

 

 

 

 

 

 

Knight Capital Group Cl. A a

 

 

4,667,200

 

 

64,360,688

 

†Stifel Financial a

 

 

1,349,725

 

 

83,736,939

 

 

 

 

 

 

    

 

 

 

 

 

 

148,097,627

 

 

 

 

 

 

    

 

Securities Exchanges - 1.3%

 

 

 

 

 

 

 

TMX Group

 

 

2,372,900

 

 

88,205,153

 

 

 

 

 

 

    

 

Total (Cost $316,160,731)

 

 

 

 

441,776,036

 

 

 

 

 

 

    

 

 

Financial Services – 3.9%

 

 

 

 

 

 

 

Information and Processing - 1.0%

 

 

 

 

 

 

 

Morningstar

 

 

1,333,206

 

 

70,766,575

 

 

 

 

 

 

    

 

Investment Management - 2.9%

 

 

 

 

 

 

 

Affiliated Managers Group a

 

 

500,000

 

 

49,610,000

 

Federated Investors Cl. B

 

 

3,194,300

 

 

83,594,831

 

Partners Group Holding

 

 

316,613

 

 

60,071,814

 

 

 

 

 

 

    

 

 

 

 

 

 

193,276,645

 

 

 

 

 

 

    

 

Total (Cost $183,029,619)

 

 

 

 

264,043,220

 

 

 

 

 

 

    

 

 

Health – 4.2%

 

 

 

 

 

 

 

Drugs and Biotech - 2.6%

 

 

 

 

 

 

 

Endo Pharmaceuticals Holdings a

 

 

3,009,250

 

 

107,460,317

 

Perrigo Company

 

 

1,059,600

 

 

67,104,468

 

 

 

 

 

 

    

 

 

 

 

 

 

174,564,785

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Health (continued)

 

 

 

 

 

 

 

Medical Products and Devices - 1.6%

 

 

 

 

 

 

 

IDEXX Laboratories a

 

 

1,536,500

 

$

106,356,530

 

 

 

 

 

 

    

 

Total (Cost $90,647,966)

 

 

 

 

280,921,315

 

 

 

 

 

 

    

 

 

Industrial Products – 20.7%

 

 

 

 

 

 

 

Building Systems and Components - 1.5%

 

 

 

 

 

 

 

Simpson Manufacturing b

 

 

3,387,886

 

 

104,719,556

 

 

 

 

 

 

    

 

Industrial Components - 2.2%

 

 

 

 

 

 

 

GrafTech International a

 

 

5,499,876

 

 

109,117,540

 

PerkinElmer

 

 

1,523,500

 

 

39,336,770

 

 

 

 

 

 

    

 

 

 

 

 

 

148,454,310

 

 

 

 

 

 

    

 

Machinery - 5.5%

 

 

 

 

 

 

 

Lincoln Electric Holdings b

 

 

2,512,497

 

 

163,990,679

 

Wabtec Corporation

 

 

1,233,237

 

 

65,225,905

 

Woodward Governor b

 

 

3,841,024

 

 

144,268,862

 

 

 

 

 

 

    

 

 

 

 

 

 

373,485,446

 

 

 

 

 

 

    

 

Metal Fabrication and Distribution - 6.4%

 

 

 

 

 

 

 

Kennametal

 

 

1,563,500

 

 

61,695,710

 

Reliance Steel & Aluminum

 

 

2,419,800

 

 

123,651,780

 

Schnitzer Steel Industries Cl. A b

 

 

2,108,038

 

 

139,952,643

 

Sims Metal Management ADR

 

 

4,859,714

 

 

106,136,154

 

 

 

 

 

 

    

 

 

 

 

 

 

431,436,287

 

 

 

 

 

 

    

 

Miscellaneous Manufacturing - 1.1%

 

 

 

 

 

 

 

Rational

 

 

329,966

 

 

72,930,407

 

 

 

 

 

 

    

 

Pumps, Valves and Bearings - 2.2%

 

 

 

 

 

 

 

Gardner Denver

 

 

2,132,400

 

 

146,751,768

 

 

 

 

 

 

    

 

Specialty Chemicals and Materials - 1.8%

 

 

 

 

 

 

 

Westlake Chemical

 

 

2,835,781

 

 

123,271,400

 

 

 

 

 

 

    

 

Total (Cost $748,679,471)

 

 

 

 

1,401,049,174

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Industrial Services – 9.7%

 

 

 

 

 

 

 

Commercial Services - 6.1%

 

 

 

 

 

 

 

Copart a,c

 

 

1,491,100

 

 

55,692,585

 

Gartner a

 

 

4,607,100

 

 

152,955,720

 

Ritchie Bros. Auctioneers

 

 

4,109,000

 

 

94,712,450

 

†Strayer Education

 

 

481,226

 

 

73,252,222

 

Towers Watson & Company Cl. A

 

 

741,011

 

 

38,577,032

 

 

 

 

 

 

    

 

 

 

 

 

 

415,190,009

 

 

 

 

 

 

    

 

Industrial Distribution - 1.4%

 

 

 

 

 

 

 

MSC Industrial Direct Cl. A

 

 

952,284

 

 

61,603,252

 

Pool Corporation

 

 

1,511,400

 

 

34,066,956

 

 

 

 

 

 

    

 

 

 

 

 

 

95,670,208

 

 

 

 

 

 

    

 

Transportation and Logistics - 2.2%

 

 

 

 

 

 

 

Kirby Corporation a

 

 

1,273,635

 

 

56,103,622

 

Landstar System

 

 

1,180,300

 

 

48,321,482

 

UTi Worldwide

 

 

1,999,700

 

 

42,393,640

 

 

 

 

 

 

    

 

 

 

 

 

 

146,818,744

 

 

 

 

 

 

    

 

Total (Cost $413,249,510)

 

 

 

 

657,678,961

 

 

 

 

 

 

    

 

 

Natural Resources – 14.7%

 

 

 

 

 

 

 

Energy Services - 6.5%

 

 

 

 

 

 

 

Ensign Energy Services

 

 

7,103,000

 

 

107,370,099

 

Pason Systems

 

 

3,778,500

 

 

53,050,246

 


 

 

 

70 | The Royce Funds 2010 Annual Report to Shareholders

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

December 31, 2010
 

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Natural Resources (continued)

 

 

 

 

 

 

 

Energy Services (continued)

 

 

 

 

 

 

 

Trican Well Service

 

 

6,841,100

 

$

138,569,600

 

Unit Corporation a,b

 

 

2,939,974

 

 

136,649,991

 

 

 

 

 

 

    

 

 

 

 

 

 

435,639,936

 

 

 

 

 

 

    

 

Precious Metals and Mining - 5.7%

 

 

 

 

 

 

 

Pan American Silver

 

 

4,825,044

 

 

198,840,063

 

Seabridge Gold a,b,c

 

 

2,803,900

 

 

86,023,652

 

Silver Standard Resources a

 

 

3,621,999

 

 

102,212,812

 

 

 

 

 

 

    

 

 

 

 

 

 

387,076,527

 

 

 

 

 

 

    

 

Real Estate - 2.5%

 

 

 

 

 

 

 

Jones Lang LaSalle

 

 

1,169,700

 

 

98,161,224

 

St. Joe Company (The) a,c

 

 

3,223,474

 

 

70,432,907

 

 

 

 

 

 

    

 

 

 

 

 

 

168,594,131

 

 

 

 

 

 

    

 

Total (Cost $621,509,524)

 

 

 

 

991,310,594

 

 

 

 

 

 

    

 

 

Technology – 13.6%

 

 

 

 

 

 

 

Components and Systems - 3.9%

 

 

 

 

 

 

 

Benchmark Electronics a

 

 

2,320,000

 

 

42,131,200

 

Dionex Corporation a,b

 

 

1,354,500

 

 

159,844,545

 

Zebra Technologies Cl. A a

 

 

1,706,500

 

 

64,829,935

 

 

 

 

 

 

    

 

 

 

 

 

 

266,805,680

 

 

 

 

 

 

    

 

IT Services - 0.8%

 

 

 

 

 

 

 

Jack Henry & Associates

 

 

1,841,640

 

 

53,683,806

 

 

 

 

 

 

    

 

Semiconductors and Equipment - 6.7%

 

 

 

 

 

 

 

ADTRAN

 

 

2,340,434

 

 

84,747,115

 

Cabot Microelectronics a,b

 

 

2,136,191

 

 

88,545,117

 

Cognex Corporation b

 

 

2,957,717

 

 

87,016,034

 

MKS Instruments a,b

 

 

2,941,910

 

 

72,047,376

 

Varian Semiconductor Equipment

 

 

 

 

 

 

 

Associates a

 

 

3,343,121

 

 

123,595,183

 

 

 

 

 

 

    

 

 

 

 

 

 

455,950,825

 

 

 

 

 

 

    

 

Software - 2.2%

 

 

 

 

 

 

 

Fair Isaac

 

 

1,832,600

 

 

42,827,862

 

National Instruments

 

 

2,730,801

 

 

102,787,350

 

 

 

 

 

 

    

 

 

 

 

 

 

145,615,212

 

 

 

 

 

 

    

 

Total (Cost $660,927,640)

 

 

 

 

 

922,055,523

 

 

 

 

 

 

    

 

Miscellaneouse – 2.8%

 

 

 

 

 

 

 

Total (Cost $173,437,318)

 

 

 

 

187,793,961

 

 

 

 

 

 

    

 
 

TOTAL COMMON STOCKS

 

 

 

 

 

 

 

(Cost $3,792,843,046)

 

 

 

 

6,102,910,556

 

 

 

 

 

 

    

 
 

REPURCHASE AGREEMENT – 9.8%

 

 

 

 

 

 

 

State Street Bank & Trust Company, 0.13% dated 12/31/10, due 1/3/11, maturity value $664,638,200 (collateralized by obligations of various U.S. Government Agencies, 0.54%-5.125% due 4/11/11-6/10/11, valued at $681,253,444)
(Cost $664,631,000)

 

 

 

 

664,631,000

 

 

 

 

 

 

    

 

 

 

 

 

 

     

VALUE

 

COLLATERAL RECEIVED FOR SECURITIES

 

 

 

 

LOANED – 1.6%

 

 

 

 

Money Market Funds
Federated Government Obligations Fund
(7 day yield-0.0154%)
(Cost $106,015,166)

 

$

106,015,166

 

 

 

    

 

 

TOTAL INVESTMENTS – 101.6%

 

 

 

 

(Cost $4,563,489,212)

 

 

6,873,556,722

 

 

LIABILITIES LESS CASH

 

 

 

 

AND OTHER ASSETS – (1.6)%

 

 

(108,866,187

)

 

 

    

 

 

NET ASSETS – 100.0%

 

$

6,764,690,535

 

 

 

    

 


 

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

The Royce Funds 2010 Annual Report to Shareholders | 71

 

Schedules of Investments
 

 

Royce Low-Priced Stock Fund

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

COMMON STOCKS – 92.4%

 

 

 

 

 

 

 

 

Consumer Products – 7.0%

 

 

 

 

 

 

 

Apparel, Shoes and Accessories - 2.6%

 

 

 

 

 

 

 

Fossil a

 

 

769,650

 

$

54,244,932

 

Gildan Activewear a

 

 

481,700

 

 

13,723,633

 

K-Swiss Cl. A a

 

 

852,000

 

 

10,624,440

 

Timberland Company (The) Cl. A a

 

 

1,801,382

 

 

44,295,983

 

 

 

 

 

 

    

 

 

 

 

 

 

122,888,988

 

 

 

 

 

 

    

 

Food/Beverage/Tobacco - 0.6%

 

 

 

 

 

 

 

Industrias Bachoco ADR

 

 

1,137,495

 

 

27,516,004

 

 

 

 

 

 

    

 

Health, Beauty and Nutrition - 1.8%

 

 

 

 

 

 

 

Nu Skin Enterprises Cl. A

 

 

2,051,000

 

 

62,063,260

 

NutriSystem

 

 

991,816

 

 

20,857,891

 

 

 

 

 

 

    

 

 

 

 

 

 

82,921,151

 

 

 

 

 

 

    

 

Home Furnishing and Appliances - 0.5%

 

 

 

 

 

 

 

Helen of Troy a

 

 

801,996

 

 

23,851,361

 

 

 

 

 

 

    

 

Sports and Recreation - 1.5%

 

 

 

 

 

 

 

Callaway Golf

 

 

1,600,066

 

 

12,912,532

 

RC2 Corporation a

 

 

500,062

 

 

10,886,350

 

†Thor Industries

 

 

889,753

 

 

30,216,012

 

Winnebago Industries a

 

 

1,070,535

 

 

16,272,132

 

 

 

 

 

 

    

 

 

 

 

 

 

70,287,026

 

 

 

 

 

 

    

 

Total (Cost $203,128,050)

 

 

 

 

327,464,530

 

 

 

 

 

      

 

 

Consumer Services – 2.3%

 

 

 

 

 

 

 

Retail Stores - 2.3%

 

 

 

 

 

 

 

Buckle (The)

 

 

704,575

 

 

26,611,798

 

Cato Corporation (The) Cl. A

 

 

597,350

 

 

16,373,364

 

Charming Shoppes a

 

 

2,423,428

 

 

8,603,169

 

Lewis Group

 

 

1,543,747

 

 

19,049,897

 

Men’s Wearhouse (The)

 

 

856,700

 

 

21,400,366

 

Williams-Sonoma

 

 

440,405

 

 

15,718,054

 

 

 

 

 

 

    

 

Total (Cost $52,736,438)

 

 

 

 

107,756,648

 

 

 

 

 

 

    

 

 

Financial Intermediaries – 4.3%

 

 

 

 

 

 

 

Insurance - 2.2%

 

 

 

 

 

 

 

Argo Group International Holdings

 

 

521,897

 

 

19,545,043

 

Aspen Insurance Holdings

 

 

553,000

 

 

15,826,860

 

Greenlight Capital Re Cl. A a

 

 

573,812

 

 

15,383,900

 

Montpelier Re Holdings

 

 

572,500

 

 

11,415,650

 

Validus Holdings

 

 

1,361,140

 

 

41,664,495

 

 

 

 

 

 

    

 

 

 

 

 

 

103,835,948

 

 

 

 

 

 

    

 

Securities Brokers - 1.0%

 

 

 

 

 

 

 

Jefferies Group

 

 

198,200

 

 

5,278,066

 

Knight Capital Group Cl. A a

 

 

2,899,500

 

 

39,984,105

 

 

 

 

 

 

    

 

 

 

 

 

 

45,262,171

 

 

 

 

 

 

    

 

Securities Exchanges - 0.6%

 

 

 

 

 

 

 

MarketAxess Holdings

 

 

601,985

 

 

12,527,308

 

TMX Group

 

 

470,500

 

 

17,489,369

 

 

 

 

 

 

    

 

 

 

 

 

 

30,016,677

 

 

 

 

 

 

    

 

Other Financial Intermediaries - 0.5%

 

 

 

 

 

 

 

KKR Financial Holdings LLC

 

 

2,363,430

 

 

21,979,899

 

 

 

 

 

 

    

 

Total (Cost $129,977,900)

 

 

 

 

201,094,695

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Financial Services – 6.3%

 

 

 

 

 

 

 

Diversified Financial Services - 0.4%

 

 

 

 

 

 

 

Duff & Phelps Cl. A

 

 

1,204,900

 

$

20,314,614

 

 

 

 

 

 

    

 

Insurance Brokers - 0.4%

 

 

 

 

 

 

 

Brown & Brown

 

 

850,000

 

 

20,349,000

 

 

 

 

 

 

    

 

Investment Management - 4.7%

 

 

 

 

 

 

 

†Artio Global Investors Cl. A

 

 

1,976,537

 

 

29,153,921

 

Ashmore Group

 

 

4,080,363

 

 

21,318,026

 

Brait

 

 

2,700,000

 

 

9,918,785

 

CapMan Cl. B

 

 

2,918,978

 

 

6,943,121

 

Deutsche Beteiligungs

 

 

409,995

 

 

11,505,402

 

Federated Investors Cl. B

 

 

1,199,700

 

 

31,396,149

 

Sprott

 

 

5,568,400

 

 

45,138,592

 

Sprott Resource a,c

 

 

2,980,100

 

 

13,697,131

 

U.S. Global Investors Cl. A

 

 

661,751

 

 

5,380,036

 

Value Partners Group

 

 

44,167,900

 

 

44,322,460

 

 

 

 

 

 

    

 

 

 

 

 

 

218,773,623

 

 

 

 

 

 

    

 

Other Financial Services - 0.8%

 

 

 

 

 

 

 

Kennedy-Wilson Holdings a,b,c

 

 

2,894,994

 

 

28,920,990

 

†Syswin ADR a,c

 

 

1,355,866

 

 

8,121,638

 

 

 

 

 

 

    

 

 

 

 

 

 

37,042,628

 

 

 

 

 

 

    

 

Total (Cost $263,378,808)

 

 

 

 

296,479,865

 

 

 

 

 

 

    

 

 

Health – 4.9%

 

 

 

 

 

 

 

Commercial Services - 0.2%

 

 

 

 

 

 

 

OdontoPrev

 

 

500,000

 

 

7,557,229

 

 

 

 

 

 

    

 

Drugs and Biotech - 2.4%

 

 

 

 

 

 

 

Emergent Biosolutions a

 

 

887,900

 

 

20,830,134

 

Endo Pharmaceuticals Holdings a

 

 

1,834,200

 

 

65,499,282

 

Lexicon Pharmaceuticals a

 

 

2,027,300

 

 

2,919,312

 

Maxygen

 

 

690,200

 

 

2,712,486

 

Sino Biopharmaceutical

 

 

15,950,000

 

 

5,909,839

 

†Sinovac Biotech a

 

 

1,749,629

 

 

7,908,323

 

ViroPharma a

 

 

511,003

 

 

8,850,572

 

 

 

 

 

 

    

 

 

 

 

 

 

114,629,948

 

 

 

 

 

 

    

 

Health Services - 1.2%

 

 

 

 

 

 

 

Cross Country Healthcare a,b

 

 

2,328,100

 

 

19,719,007

 

eResearchTechnology a

 

 

1,686,250

 

 

12,393,938

 

Myriad Genetics a

 

 

1,003,400

 

 

22,917,656

 

 

 

 

 

 

    

 

 

 

 

 

 

55,030,601

 

 

 

 

 

 

    

 

Medical Products and Devices - 1.1%

 

 

 

 

 

 

 

Caliper Life Sciences a,c

 

 

2,009,729

 

 

12,741,682

 

Carl Zeiss Meditec

 

 

1,527,800

 

 

29,164,242

 

CONMED Corporation a

 

 

205,500

 

 

5,431,365

 

Medical Action Industries a

 

 

394,250

 

 

3,776,915

 

 

 

 

 

 

    

 

 

 

 

 

 

51,114,204

 

 

 

 

 

 

    

 

Total (Cost $166,602,409)

 

 

 

 

228,331,982

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Industrial Products – 9.3%

 

 

 

 

 

 

 

Automotive - 0.1%

 

 

 

 

 

 

 

Gentex Corporation

 

 

177,774

 

 

5,254,999

 

 

 

 

 

 

    

 

Building Systems and Components - 0.7%

 

 

 

 

 

 

 

AAON

 

 

471,250

 

 

13,293,963

 

WaterFurnace Renewable Energy b

 

 

849,500

 

 

21,162,742

 

 

 

 

 

 

    

 

 

 

 

 

 

34,456,705

 

 

 

 

 

 

    

 


 

 

 

72 | The Royce Funds 2010 Annual Report to Shareholders

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

December 31, 2010
 

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Industrial Products (continued)

 

 

 

 

 

 

 

Industrial Components - 1.9%

 

 

 

 

 

 

 

GrafTech International a

 

 

3,877,800

 

$

76,935,552

 

Powell Industries a

 

 

314,848

 

 

10,352,202

 

 

 

 

 

 

    

 

 

 

 

 

 

87,287,754

 

 

 

 

 

 

    

 

Machinery - 0.5%

 

 

 

 

 

 

 

Lincoln Electric Holdings

 

 

347,385

 

 

22,673,819

 

 

 

 

 

 

    

 

Metal Fabrication and Distribution - 4.4%

 

 

 

 

 

 

 

Castle (A.M.) & Co. a,b

 

 

1,799,667

 

 

33,131,870

 

Horsehead Holding Corporation a

 

 

1,849,035

 

 

24,111,416

 

Kennametal

 

 

1,644,500

 

 

64,891,970

 

Olympic Steel

 

 

510,800

 

 

14,649,744

 

Reliance Steel & Aluminum

 

 

180,000

 

 

9,198,000

 

Schnitzer Steel Industries Cl. A

 

 

177,100

 

 

11,757,669

 

Sims Metal Management ADR

 

 

2,318,950

 

 

50,645,868

 

 

 

 

 

 

    

 

 

 

 

 

 

208,386,537

 

 

 

 

 

 

    

 

Pumps, Valves and Bearings - 0.7%

 

 

 

 

 

 

 

Gardner Denver

 

 

450,618

 

 

31,011,531

 

 

 

 

 

 

    

 

Specialty Chemicals and Materials - 1.0%

 

 

 

 

 

 

 

Schulman (A.)

 

 

421,190

 

 

9,641,039

 

Victrex

 

 

600,000

 

 

13,872,865

 

Westlake Chemical

 

 

529,800

 

 

23,030,406

 

 

 

 

 

 

    

 

 

 

 

 

 

46,544,310

 

 

 

 

 

 

    

 

Total (Cost $220,281,038)

 

 

 

 

435,615,655

 

 

 

 

 

 

    

 

 

Industrial Services – 9.7%

 

 

 

 

 

 

 

Advertising and Publishing - 0.3%

 

 

 

 

 

 

 

ValueClick a

 

 

1,002,600

 

 

16,071,678

 

 

 

 

 

 

    

 

Commercial Services - 5.3%

 

 

 

 

 

 

 

CBIZ a,c

 

 

597,600

 

 

3,729,024

 

Copart a

 

 

311,795

 

 

11,645,543

 

Corinthian Colleges a,b,c

 

 

5,739,200

 

 

29,901,232

 

†E-House China Holdings ADR

 

 

1,545,504

 

 

23,120,740

 

Exponent a

 

 

250,400

 

 

9,397,512

 

Forrester Research

 

 

518,300

 

 

18,290,807

 

Kforce a

 

 

448,774

 

 

7,261,163

 

Korn/Ferry International a

 

 

1,754,663

 

 

40,550,262

 

MAXIMUS

 

 

246,891

 

 

16,191,112

 

Monster Worldwide a

 

 

175,000

 

 

4,135,250

 

TeleTech Holdings a

 

 

1,013,600

 

 

20,870,024

 

TrueBlue a

 

 

2,115,491

 

 

38,057,683

 

Universal Technical Institute

 

 

1,080,679

 

 

23,796,552

 

 

 

 

 

 

    

 

 

 

 

 

 

246,946,904

 

 

 

 

 

 

    

 

Engineering and Construction - 0.6%

 

 

 

 

 

 

 

Dycom Industries a

 

 

544,100

 

 

8,025,475

 

†Raubex Group

 

 

5,279,971

 

 

18,715,343

 

 

 

 

 

 

    

 

 

 

 

 

 

26,740,818

 

 

 

 

 

 

    

 

Food, Tobacco and Agriculture - 2.1%

 

 

 

 

 

 

 

Asian Citrus Holdings

 

 

14,918,000

 

 

18,520,829

 

Imperial Sugar b

 

 

763,740

 

 

10,211,204

 

Intrepid Potash a,c

 

 

1,854,900

 

 

69,169,221

 

 

 

 

 

 

    

 

 

 

 

 

 

97,901,254

 

 

 

 

 

 

    

 

Industrial Distribution - 0.4%

 

 

 

 

 

 

 

Houston Wire & Cable b

 

 

1,591,200

 

 

21,385,728

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Industrial Services (continued)

 

 

 

 

 

 

 

Printing - 0.4%

 

 

 

 

 

 

 

Ennis

 

 

1,004,600

 

$

17,178,660

 

 

 

 

 

 

    

 

Transportation and Logistics - 0.6%

 

 

 

 

 

 

 

Heartland Express

 

 

688,366

 

 

11,027,623

 

Universal Truckload Services a

 

 

387,561

 

 

6,169,971

 

Werner Enterprises

 

 

490,600

 

 

11,087,560

 

 

 

 

 

 

    

 

 

 

 

 

 

28,285,154

 

 

 

 

 

 

    

 

Total (Cost $372,603,558)

 

 

 

 

454,510,196

 

 

 

 

 

 

    

 

 

Natural Resources – 26.0%

 

 

 

 

 

 

 

Energy Services - 10.3%

 

 

 

 

 

 

 

Calfrac Well Services

 

 

1,756,100

 

 

60,473,564

 

Ensign Energy Services

 

 

3,154,100

 

 

47,677,887

 

Global Industries a

 

 

1,436,950

 

 

9,958,063

 

Lamprell

 

 

8,002,946

 

 

40,114,799

 

Oil States International a

 

 

706,200

 

 

45,260,358

 

Pason Systems

 

 

2,250,700

 

 

31,599,891

 

RPC

 

 

855,846

 

 

15,507,929

 

Tesco Corporation a,b,c

 

 

3,263,005

 

 

51,816,519

 

†TGS-NOPEC Geophysical

 

 

910,000

 

 

20,507,965

 

Total Energy Services b

 

 

1,966,700

 

 

27,968,559

 

Trican Well Service

 

 

4,113,800

 

 

83,326,895

 

Unit Corporation a

 

 

1,013,400

 

 

47,102,832

 

 

 

 

 

 

    

 

 

 

 

 

 

481,315,261

 

 

 

 

 

 

    

 

Oil and Gas - 0.4%

 

 

 

 

 

 

 

SM Energy

 

 

328,000

 

 

19,329,040

 

 

 

 

 

 

    

 

Precious Metals and Mining - 14.8%

 

 

 

 

 

 

 

Alamos Gold

 

 

4,023,400

 

 

76,559,115

 

Allied Nevada Gold a

 

 

2,300,550

 

 

60,527,470

 

Centamin Egypt a

 

 

15,322,400

 

 

42,840,465

 

Denison Mines a,c

 

 

2,650,800

 

 

9,065,736

 

†Endeavour Mining a,c

 

 

2,275,000

 

 

6,429,398

 

Fronteer Gold a,c

 

 

3,785,500

 

 

44,403,915

 

Gammon Gold a

 

 

3,447,500

 

 

28,235,025

 

Hecla Mining a

 

 

2,878,115

 

 

32,407,575

 

Hochschild Mining

 

 

5,448,900

 

 

54,370,405

 

Ivanhoe Mines a,c

 

 

492,550

 

 

11,289,246

 

†Kingsgate Consolidated

 

 

1,600,000

 

 

17,804,907

 

Major Drilling Group International

 

 

860,800

 

 

35,971,277

 

Northam Platinum

 

 

2,040,000

 

 

14,028,387

 

Pan American Silver

 

 

2,163,053

 

 

89,139,414

 

†Pretium Resources a,b

 

 

4,500,000

 

 

28,919,843

 

Seabridge Gold a,c

 

 

1,111,783

 

 

34,109,502

 

Silver Standard Resources a

 

 

2,199,400

 

 

62,067,068

 

Silvercorp Metals

 

 

3,060,400

 

 

39,264,932

 

US Gold a,c

 

 

750,000

 

 

6,052,500

 

 

 

 

 

 

    

 

 

 

 

 

 

693,486,180

 

 

 

 

 

 

    

 

Other Natural Resources - 0.5%

 

 

 

 

 

 

 

China Forestry Holdings

 

 

23,300,000

 

 

10,941,360

 

Magma Energy a

 

 

9,732,900

 

 

14,389,382

 

 

 

 

 

 

    

 

 

 

 

 

 

25,330,742

 

 

 

 

 

 

    

 

Total (Cost $650,093,808)

 

 

 

 

1,219,461,223

 

 

 

 

 

 

    

 


 

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

The Royce Funds 2010 Annual Report to Shareholders | 73

 

Schedules of Investments
 

 

Royce Low-Priced Stock Fund (continued)

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Technology – 17.9%

 

 

 

 

 

 

 

Aerospace and Defense - 2.2%

 

 

 

 

 

 

 

Ceradyne a

 

 

1,130,967

 

$

35,659,389

 

HEICO Corporation Cl. A

 

 

1,501,953

 

 

56,052,886

 

Integral Systems a,b

 

 

1,306,726

 

 

12,949,655

 

 

 

 

 

 

    

 

 

 

 

 

 

104,661,930

 

 

 

 

 

 

    

 

Components and Systems - 1.6%

 

 

 

 

 

 

 

Littelfuse

 

 

258,400

 

 

12,160,304

 

Methode Electronics

 

 

1,126,000

 

 

14,604,220

 

STEC a,c

 

 

1,050,000

 

 

18,532,500

 

†Xyratex a,b

 

 

1,752,837

 

 

28,588,772

 

 

 

 

 

 

    

 

 

 

 

 

 

73,885,796

 

 

 

 

 

 

    

 

IT Services - 0.7%

 

 

 

 

 

 

 

Jack Henry & Associates

 

 

197,100

 

 

5,745,465

 

SRA International Cl. A a

 

 

1,362,500

 

 

27,863,125

 

 

 

 

 

 

    

 

 

 

 

 

 

 

33,608,590

 

 

 

 

 

 

    

 

Semiconductors and Equipment - 9.4%

 

 

 

 

 

 

 

ADTRAN

 

 

1,430,700

 

 

51,805,647

 

Advanced Energy Industries a

 

 

1,229,100

 

 

16,764,924

 

†Aixtron ADR c

 

 

586,304

 

 

21,810,509

 

Brooks Automation a

 

 

2,633,582

 

 

23,886,589

 

CEVA a

 

 

206,286

 

 

4,228,863

 

Cirrus Logic a

 

 

678,400

 

 

10,840,832

 

Cognex Corporation

 

 

427,738

 

 

12,584,052

 

Exar Corporation a

 

 

461,700

 

 

3,222,666

 

Fairchild Semiconductor

 

 

 

 

 

 

 

International a

 

 

3,470,739

 

 

54,178,236

 

International Rectifier a

 

 

1,623,522

 

 

48,202,368

 

Lam Research a

 

 

343,800

 

 

17,801,964

 

MKS Instruments a

 

 

1,587,800

 

 

38,885,222

 

Novellus Systems a,c

 

 

650,000

 

 

21,008,000

 

OmniVision Technologies a

 

 

1,027,191

 

 

30,415,125

 

Sigma Designs a,b

 

 

2,007,658

 

 

28,448,514

 

TTM Technologies a

 

 

1,650,035

 

 

24,602,022

 

Varian Semiconductor Equipment

 

 

 

 

 

 

 

Associates a

 

 

629,980

 

 

23,290,360

 

Verigy a,c

 

 

660,200

 

 

8,595,804

 

 

 

 

 

 

    

 

 

 

 

 

 

440,571,697

 

 

 

 

 

 

    

 

Software - 0.6%

 

 

 

 

 

 

 

Aveva Group

 

 

445,000

 

 

11,197,918

 

Avid Technology a

 

 

674,543

 

 

11,777,521

 

THQ a

 

 

462,500

 

 

2,802,750

 

 

 

 

 

 

    

 

 

 

 

 

 

25,778,189

 

 

 

 

 

 

    

 

Telecommunications - 3.4%

 

 

 

 

 

 

 

Arris Group a

 

 

1,391,971

 

 

15,617,914

 

Citic Telecom International Holdings

 

 

19,837,000

 

 

6,329,220

 

Harmonic a

 

 

2,372,500

 

 

20,332,325

 

KVH Industries a,b

 

 

1,100,200

 

 

13,147,390

 

NETGEAR a

 

 

1,242,800

 

 

41,857,504

 

†Neutral Tandem a

 

 

1,496,500

 

 

21,609,460

 

Novatel Wireless a,b

 

 

2,292,176

 

 

21,890,281

 

PC-Tel a,b

 

 

1,195,592

 

 

7,173,552

 

 

 

 

 

 

 

 

 

SHARES

      

VALUE

 

Technology (continued)

 

 

 

 

 

 

 

Telecommunications (continued)

 

 

 

 

 

 

 

Tekelec a

 

 

1,050,000

 

$

12,505,500

 

 

 

 

 

 

    

 

 

 

 

 

 

160,463,146

 

 

 

 

 

 

    

 

Total (Cost $613,314,549)

 

 

 

 

838,969,348

 

 

 

 

 

 

    

 

 

Miscellaneouse – 4.7%

 

 

 

 

 

 

 

Total (Cost $196,854,571)

 

 

 

 

223,427,295

 

 

 

 

 

 

    

 

 

TOTAL COMMON STOCKS

 

 

 

 

 

 

 

(Cost $2,868,971,129)

 

 

 

 

4,333,111,437

 

 

 

 

 

 

    

 
 

REPURCHASE AGREEMENT – 7.6%

 

 

 

 

 

 

 

State Street Bank & Trust Company, 0.13% dated 12/31/10, due 1/3/11, maturity value $354,894,845 (collateralized by obligations of various U.S. Government Agencies, 0.41%-4.50% due 2/1/11-3/11/11, valued at $363,766,150)
(Cost $354,891,000)

 

 

 

 

354,891,000

 

 

 

 

 

 

    

 

 

 

 

 

PRINCIPAL

 

 

 

 

 

 

 

AMOUNT

 

 

 

 

 

COLLATERAL RECEIVED FOR
SECURITIES LOANED – 2.0%

 

 

 

 

 

 

 

U.S. Treasury Bonds

 

 

 

 

 

 

 

5.50%-7.875%

 

 

 

 

 

 

 

due 2/15/21-8/15/28

 

$

2,700,152

 

 

2,755,833

 

Money Market Funds
Federated Government Obligations Fund
(7 day yield-0.0154%)

 

 

 

 

92,756,758

 

 

 

 

 

 

    

 

 

TOTAL COLLATERAL RECEIVED FOR

 

 

 

 

 

 

 

SECURITIES LOANED

 

 

 

 

 

 

 

(Cost $95,512,591)

 

 

 

 

95,512,591

 

 

 

 

 

 

    

 

 

TOTAL INVESTMENTS – 102.0%

 

 

 

 

 

 

 

(Cost $3,319,374,720)

 

 

 

 

4,783,515,028

 

 

LIABILITIES LESS CASH

 

 

 

 

 

 

 

AND OTHER ASSETS – (2.0)%

 

 

 

 

(93,862,626

)

 

 

 

 

 

    

 

 

NET ASSETS – 100.0%

 

 

 

$

4,689,652,402

 

 

 

 

 

 

    

 


 

 

 

74 | The Royce Funds 2010 Annual Report to Shareholders

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

December 31, 2010
 

 

Royce Total Return Fund


 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

COMMON STOCKS – 93.1%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer Products – 7.0%

 

 

 

 

 

 

 

Apparel, Shoes and Accessories - 2.7%

 

 

 

 

 

 

 

†Barry (R.G.) b

 

 

1,048,496

 

$

11,659,276

 

Columbia Sportswear

 

 

123,909

 

 

7,471,713

 

Guess?

 

 

331,085

 

 

15,666,942

 

K-Swiss Cl. A a

 

 

92,375

 

 

1,151,916

 

Steven Madden a

 

 

775,684

 

 

32,361,536

 

The Jones Group

 

 

639,281

 

 

9,934,427

 

Weyco Group

 

 

282,000

 

 

6,906,180

 

Wolverine World Wide

 

 

1,347,513

 

 

42,958,714

 

 

 

 

 

 

    

 

 

 

 

 

 

128,110,704

 

 

 

 

 

 

    

 

Food/Beverage/Tobacco - 2.6%

 

 

 

 

 

 

 

Cal-Maine Foods

 

 

90,998

 

 

2,873,717

 

Flowers Foods

 

 

400,000

 

 

10,764,000

 

Hershey Creamery d

 

 

173

 

 

300,155

 

Hormel Foods

 

 

543,933

 

 

27,882,005

 

J&J Snack Foods

 

 

440,815

 

 

21,264,916

 

J.M. Smucker Company (The)

 

 

324,000

 

 

21,270,600

 

Lancaster Colony

 

 

445,594

 

 

25,487,977

 

Sanderson Farms

 

 

8,632

 

 

337,943

 

Tootsie Roll Industries

 

 

461,653

 

 

13,374,087

 

 

 

 

 

 

    

 

 

 

 

 

 

123,555,400

 

 

 

 

 

 

    

 

Health, Beauty and Nutrition - 0.5%

 

 

 

 

 

 

 

Inter Parfums

 

 

1,116,544

 

 

21,046,854

 

Nu Skin Enterprises Cl. A

 

 

19,700

 

 

596,122

 

NutriSystem

 

 

182,260

 

 

3,832,928

 

 

 

 

 

 

    

 

 

 

 

 

 

25,475,904

 

 

 

 

 

 

    

 

Home Furnishing and Appliances - 0.6%

 

 

 

 

 

 

 

Ethan Allen Interiors

 

 

1,168,050

 

 

23,372,680

 

Kimball International Cl. B

 

 

724,600

 

 

4,999,740

 

Leggett & Platt

 

 

62,026

 

 

1,411,712

 

 

 

 

 

 

    

 

 

 

 

 

 

29,784,132

 

 

 

 

 

 

    

 

Household Products/Wares - 0.1%

 

 

 

 

 

 

 

American Greetings Cl. A

 

 

16,000

 

 

354,560

 

Blyth

 

 

89,027

 

 

3,069,651

 

 

 

 

 

 

    

 

 

 

 

 

 

3,424,211

 

 

 

 

 

 

    

 

Sports and Recreation - 0.5%

 

 

 

 

 

 

 

Arctic Cat a

 

 

117,230

 

 

1,716,247

 

Callaway Golf

 

 

1,089,233

 

 

8,790,110

 

Hasbro

 

 

13,538

 

 

638,723

 

Sturm, Ruger & Co.

 

 

134,967

 

 

2,063,646

 

Thor Industries

 

 

375,685

 

 

12,758,263

 

 

 

 

 

 

    

 

 

 

 

 

 

25,966,989

 

 

 

 

 

 

    

 

Total (Cost $269,162,994)

 

 

 

 

336,317,340

 

 

 

 

 

 

    

 

 

Consumer Services – 8.0%

 

 

 

 

 

 

 

Leisure and Entertainment - 0.9%

 

 

 

 

 

 

 

Ambassadors Group

 

 

66,104

 

 

760,196

 

International Speedway Cl. A

 

 

845,647

 

 

22,130,582

 

Speedway Motorsports

 

 

86,537

 

 

1,325,747

 

World Wrestling Entertainment Cl. A

 

 

1,136,584

 

 

16,184,956

 

 

 

 

 

 

    

 

 

 

 

 

 

40,401,481

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Consumer Services (continued)

 

 

 

 

 

 

 

Restaurants and Lodgings - 0.4%

 

 

 

 

 

 

 

†Abu Dhabi National Hotels f

 

 

1,200,000

 

$

980,125

 

Bob Evans Farms

 

 

484,773

 

 

15,978,118

 

DineEquity a,c

 

 

61,030

 

 

3,013,662

 

 

 

 

 

 

    

 

 

 

 

 

 

19,971,905

 

 

 

 

 

 

    

 

Retail Stores - 6.7%

 

 

 

 

 

 

 

American Eagle Outfitters

 

 

2,508,031

 

 

36,692,494

 

Buckle (The)

 

 

967,636

 

 

36,547,612

 

Cato Corporation (The) Cl. A b

 

 

1,477,815

 

 

40,506,909

 

Christopher & Banks

 

 

53,523

 

 

329,166

 

Dress Barn (The) a

 

 

1,466,089

 

 

38,734,071

 

Family Dollar Stores

 

 

884,800

 

 

43,983,408

 

Finish Line (The) Cl. A

 

 

144,868

 

 

2,490,281

 

Foot Locker

 

 

112,292

 

 

2,203,169

 

†GameStop Corporation Cl. A a,c

 

 

1,444,557

 

 

33,051,464

 

Men’s Wearhouse (The)

 

 

303,139

 

 

7,572,412

 

Pep Boys-Manny, Moe & Jack (The)

 

 

742,500

 

 

9,971,775

 

RadioShack Corporation

 

 

88,381

 

 

1,634,165

 

Regis Corporation

 

 

53,200

 

 

883,120

 

Ross Stores

 

 

199,600

 

 

12,624,700

 

Systemax

 

 

385,911

 

 

5,441,345

 

Tiffany & Co.

 

 

484,100

 

 

30,144,907

 

Village Super Market Cl. A

 

 

517,280

 

 

17,070,240

 

Weis Markets

 

 

25,307

 

 

1,020,631

 

Williams-Sonoma

 

 

7,100

 

 

253,399

 

 

 

 

 

 

    

 

 

 

 

 

 

321,155,268

 

 

 

 

 

 

    

 

Total (Cost $295,147,776)

 

 

 

 

381,528,654

 

 

 

 

 

 

    

 

 

Diversified Investment Companies – 0.5%

 

 

 

 

 

 

 

Closed-End Funds - 0.5%

 

 

 

 

 

 

 

Central Fund of Canada Cl. A

 

 

830,500

 

 

17,216,265

 

MVC Capital

 

 

425,000

 

 

6,205,000

 

 

 

 

 

 

    

 

Total (Cost $16,495,180)

 

 

 

 

23,421,265

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Financial Intermediaries – 21.4%

 

 

 

 

 

 

 

Banking - 3.1%

 

 

 

 

 

 

 

Banco Latinoamericano de Comercio

 

 

 

 

 

 

 

Exterior Cl. E

 

 

122,575

 

 

2,262,735

 

Bancorp Rhode Island b

 

 

261,300

 

 

7,601,217

 

Bank of Hawaii

 

 

432,001

 

 

20,394,767

 

Bank of N.T. Butterfield & Son a,f

 

 

1,839,192

 

 

2,298,990

 

Bank Sarasin & Co. Cl. B

 

 

82,000

 

 

3,736,043

 

Banque Privee Edmond de Rothschild

 

 

35

 

 

1,010,695

 

BOK Financial

 

 

491,382

 

 

26,239,799

 

Canadian Western Bank

 

 

783,200

 

 

22,338,884

 

Centrue Financial a,c

 

 

153,755

 

 

150,680

 

Credicorp

 

 

235,800

 

 

28,038,978

 

Farmers & Merchants Bank of Long

 

 

 

 

 

 

 

Beach

 

 

479

 

 

1,916,000

 

First Citizens BancShares Cl. A

 

 

10,800

 

 

2,041,740

 

First Financial Bancorp

 

 

100,000

 

 

1,848,000

 

First National Bank Alaska

 

 

3,110

 

 

5,566,900

 

HopFed Bancorp

 

 

126,480

 

 

1,135,790

 

Julius Baer Group

 

 

10,000

 

 

468,449

 

Kearny Financial

 

 

292,100

 

 

2,512,060

 


 

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

The Royce Funds 2010 Annual Report to Shareholders | 75

 

Schedules of Investments
 

 

Royce Total Return Fund (continued)

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Financial Intermediaries (continued)

 

 

 

 

 

 

 

Banking (continued)

 

 

 

 

 

 

 

National Bankshares

 

 

79,160

 

$

2,492,748

 

Peapack-Gladstone Financial b

 

 

463,145

 

 

6,044,042

 

Sun Bancorp a

 

 

284,428

 

 

1,319,746

 

Trustmark Corporation

 

 

80,700

 

 

2,004,588

 

Vontobel Holding

 

 

55,000

 

 

2,094,118

 

Wilmington Trust

 

 

842,100

 

 

3,654,714

 

 

 

 

 

 

    

 

 

 

 

 

 

 

147,171,683

 

 

 

 

 

 

    

 

Insurance - 13.7%

 

 

 

 

 

 

 

Alleghany Corporation a

 

 

103,828

 

 

31,809,784

 

Allied World Assurance Company

 

 

 

 

 

 

 

Holdings

 

 

749,773

 

 

44,566,507

 

Alterra Capital Holdings

 

 

960,851

 

 

20,792,816

 

American Financial Group

 

 

292,750

 

 

9,452,898

 

American National Insurance

 

 

177,293

 

 

15,179,827

 

Arch Capital Group a

 

 

405,090

 

 

35,668,175

 

Argo Group International Holdings

 

 

105,581

 

 

3,954,008

 

Aspen Insurance Holdings

 

 

1,376,404

 

 

39,392,682

 

Assured Guaranty

 

 

280,400

 

 

4,963,080

 

Baldwin & Lyons Cl. B

 

 

108,741

 

 

2,558,676

 

Cincinnati Financial

 

 

300,000

 

 

9,507,000

 

Donegal Group Cl. A

 

 

11,951

 

 

173,050

 

E-L Financial

 

 

56,588

 

 

27,915,533

 

EMC Insurance Group

 

 

101,164

 

 

2,290,353

 

Employers Holdings

 

 

30,600

 

 

534,888

 

Endurance Specialty Holdings

 

 

377,372

 

 

17,385,528

 

Erie Indemnity Cl. A

 

 

650,400

 

 

42,581,688

 

Everest Re Group

 

 

22,100

 

 

1,874,522

 

Fidelity National Financial Cl. A

 

 

1,010,200

 

 

13,819,536

 

Flagstone Reinsurance Holdings

 

 

240,254

 

 

3,027,200

 

Harleysville Group

 

 

161,800

 

 

5,944,532

 

HCC Insurance Holdings

 

 

790,146

 

 

22,866,825

 

Infinity Property & Casualty

 

 

105,662

 

 

6,529,912

 

Leucadia National

 

 

514,800

 

 

15,021,864

 

Markel Corporation a

 

 

67,900

 

 

25,675,027

 

Meadowbrook Insurance Group

 

 

1,387,053

 

 

14,217,293

 

Mercury General

 

 

171,000

 

 

7,354,710

 

Montpelier Re Holdings

 

 

1,240,810

 

 

24,741,751

 

Old Republic International

 

 

1,067,000

 

 

14,543,210

 

OneBeacon Insurance Group Cl. A

 

 

114,669

 

 

1,738,382

 

PartnerRe

 

 

547,451

 

 

43,987,688

 

Platinum Underwriters Holdings

 

 

323,706

 

 

14,557,059

 

Presidential Life

 

 

106,873

 

 

1,061,249

 

Reinsurance Group of America

 

 

720,734

 

 

38,710,623

 

RenaissanceRe Holdings

 

 

134,109

 

 

8,541,402

 

RLI

 

 

72,535

 

 

3,813,165

 

StanCorp Financial Group

 

 

490,800

 

 

22,154,712

 

State Auto Financial

 

 

50,000

 

 

871,000

 

Transatlantic Holdings

 

 

308,824

 

 

15,941,495

 

United Fire & Casualty

 

 

119,974

 

 

2,677,820

 

Validus Holdings

 

 

710,526

 

 

21,749,201

 

Wesco Financial

 

 

30,623

 

 

11,281,819

 

White Mountains Insurance Group

 

 

18,426

 

 

6,183,766

 

 

 

 

 

 

    

 

 

 

 

 

 

 

657,612,256

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Financial Intermediaries (continued)

 

 

 

 

 

 

 

Real Estate Investment Trusts - 3.1%

 

 

 

 

 

 

 

Annaly Capital Management

 

 

703,900

 

$

12,613,888

 

Colony Financial b

 

 

1,432,749

 

 

28,683,635

 

Cousins Properties

 

 

1,078,241

 

 

8,992,530

 

DCT Industrial Trust

 

 

1,121,600

 

 

5,955,696

 

Essex Property Trust

 

 

83,000

 

 

9,480,260

 

Lexington Realty Trust

 

 

1,711,246

 

 

13,604,406

 

MFA Financial

 

 

986,200

 

 

8,047,392

 

National Health Investors

 

 

159,570

 

 

7,183,841

 

National Retail Properties

 

 

650,000

 

 

17,225,000

 

PennyMac Mortgage Investment Trust

 

 

50,000

 

 

907,500

 

PS Business Parks

 

 

168,500

 

 

9,388,820

 

Rayonier

 

 

529,400

 

 

27,804,088

 

Starhill Global REIT

 

 

400,000

 

 

194,803

 

Suntec Real Estate Investment Trust

 

 

400,000

 

 

467,526

 

 

 

 

 

 

    

 

 

 

 

 

 

150,549,385

 

 

 

 

 

 

    

 

Securities Brokers - 0.8%

 

 

 

 

 

 

 

Egyptian Financial Group-Hermes

 

 

 

 

 

 

 

Holding

 

 

1,158,022

 

 

6,704,758

 

Knight Capital Group Cl. A a

 

 

1,008,440

 

 

13,906,388

 

Oppenheimer Holdings Cl. A

 

 

27,567

 

 

722,531

 

Raymond James Financial

 

 

597,925

 

 

19,552,147

 

 

 

 

 

 

    

 

 

 

 

 

 

40,885,824

 

 

 

 

 

 

    

 

Securities Exchanges - 0.6%

 

 

 

 

 

 

 

TMX Group

 

 

799,600

 

 

29,722,635

 

 

 

 

 

 

    

 

Other Financial Intermediaries - 0.1%

 

 

 

 

 

 

 

KKR Financial Holdings LLC

 

 

288,878

 

 

2,686,565

 

 

 

 

 

 

    

 

Total (Cost $835,441,299)

 

 

 

 

1,028,628,348

 

 

 

 

 

 

    

 

 

Financial Services – 7.7%

 

 

 

 

 

 

 

Information and Processing - 1.3%

 

 

 

 

 

 

 

Global Payments

 

 

7,746

 

 

357,943

 

SEI Investments

 

 

1,511,633

 

 

35,961,749

 

Total System Services

 

 

1,848,425

 

 

28,428,776

 

 

 

 

 

 

    

 

 

 

 

 

 

64,748,468

 

 

 

 

 

 

    

 

Insurance Brokers - 1.3%

 

 

 

 

 

 

 

Brown & Brown

 

 

1,484,765

 

 

35,545,274

 

Gallagher (Arthur J.) & Co.

 

 

978,200

 

 

28,446,056

 

 

 

 

 

 

    

 

 

 

 

 

 

63,991,330

 

 

 

 

 

 

    

 

Investment Management - 4.8%

 

 

 

 

 

 

 

A.F.P. Provida ADR

 

 

311,700

 

 

24,845,607

 

AGF Management Cl. B

 

 

815,600

 

 

15,987,171

 

AllianceBernstein Holding L.P.

 

 

1,508,400

 

 

35,190,972

 

AP Alternative Assets L.P.

 

 

76,000

 

 

671,080

 

Apollo Investment

 

 

1,161,400

 

 

12,856,698

 

CI Financial

 

 

983,500

 

 

22,255,607

 

Cohen & Steers

 

 

385,630

 

 

10,064,943

 

Federated Investors Cl. B

 

 

1,772,563

 

 

46,387,974

 

GAM Holding a

 

 

10,000

 

 

165,241

 

GAMCO Investors Cl. A

 

 

278,300

 

 

13,361,183

 

Gladstone Capital

 

 

80,000

 

 

921,600

 

Janus Capital Group

 

 

497,400

 

 

6,451,278

 

Schroders

 

 

90,000

 

 

2,602,916

 

T. Rowe Price Group

 

 

456,800

 

 

29,481,872

 


 

 

 

76 | The Royce Funds 2010 Annual Report to Shareholders

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

December 31, 2010
 

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Financial Services (continued)

 

 

 

 

 

 

 

Investment Management (continued)

 

 

 

 

 

 

 

Teton Advisors Cl. A d

 

 

1,297

 

$

9,727

 

Waddell & Reed Financial Cl. A

 

 

263,600

 

 

9,302,444

 

 

 

 

 

 

    

 

 

 

 

 

 

230,556,313

 

 

 

 

 

 

    

 

Specialty Finance - 0.2%

 

 

 

 

 

 

 

Credit Acceptance a

 

 

50,540

 

 

3,172,396

 

GATX Corporation

 

 

129,000

 

 

4,551,120

 

 

 

 

 

 

    

 

 

 

 

 

 

7,723,516

 

 

 

 

 

 

    

 

Other Financial Services - 0.1%

 

 

 

 

 

 

 

CoreLogic

 

 

231,400

 

 

4,285,528

 

 

 

 

 

 

    

 

Total (Cost $304,853,229)

 

 

 

 

371,305,155

 

 

 

 

 

 

    

 

 

Health – 3.4%

 

 

 

 

 

 

 

Drugs and Biotech - 0.2%

 

 

 

 

 

 

 

Medicis Pharmaceutical Cl. A

 

 

127,925

 

 

3,427,111

 

Pharmaceutical Product Development

 

 

69,710

 

 

1,891,929

 

Valeant Pharmaceuticals International

 

 

156,368

 

 

4,423,651

 

 

 

 

 

 

    

 

 

 

 

 

 

9,742,691

 

 

 

 

 

 

    

 

Health Services - 1.0%

 

 

 

 

 

 

 

Chemed Corporation

 

 

649,236

 

 

41,232,978

 

Computer Programs and Systems

 

 

35,896

 

 

1,681,369

 

Healthcare Services Group

 

 

37,032

 

 

602,511

 

Omnicare

 

 

98,399

 

 

2,498,350

 

 

 

 

 

 

    

 

 

 

 

 

 

46,015,208

 

 

 

 

 

 

    

 

Medical Products and Devices - 2.2%

 

 

 

 

 

 

 

Atrion Corporation

 

 

12,149

 

 

2,180,260

 

Hill-Rom Holdings

 

 

373,363

 

 

14,699,301

 

IDEXX Laboratories a

 

 

379,600

 

 

26,275,912

 

Invacare Corporation

 

 

140,568

 

 

4,239,531

 

Owens & Minor

 

 

811,950

 

 

23,895,688

 

STERIS Corporation

 

 

518,816

 

 

18,916,031

 

Teleflex

 

 

309,700

 

 

16,664,957

 

Young Innovations

 

 

18,765

 

 

600,668

 

 

 

 

 

 

    

 

 

 

 

 

 

107,472,348

 

 

 

 

 

 

    

 

Total (Cost $89,958,181)

 

 

 

 

 

163,230,247

 

 

 

 

 

 

    

 

 

Industrial Products – 16.9%

 

 

 

 

 

 

 

Automotive - 0.4%

 

 

 

 

 

 

 

Gentex Corporation

 

 

595,000

 

 

17,588,200

 

Spartan Motors

 

 

90,857

 

 

553,319

 

Superior Industries International

 

 

83,100

 

 

1,763,382

 

 

 

 

 

 

    

 

 

 

 

 

 

19,904,901

 

 

 

 

 

 

    

 

Building Systems and Components - 0.9%

 

 

 

 

 

 

 

AAON

 

 

10,548

 

 

297,559

 

Apogee Enterprises

 

 

330,784

 

 

4,455,661

 

LSI Industries

 

 

1,093,661

 

 

9,252,372

 

McGrath RentCorp

 

 

291,300

 

 

7,637,886

 

Preformed Line Products

 

 

199,036

 

 

11,648,582

 

Simpson Manufacturing

 

 

382,051

 

 

11,809,196

 

 

 

 

 

 

    

 

 

 

 

 

 

45,101,256

 

 

 

 

 

 

    

 

Construction Materials - 0.4%

 

 

 

 

 

 

 

Ameron International

 

 

157,300

 

 

12,013,001

 

Ash Grove Cement d

 

 

39,610

 

 

6,139,550

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Industrial Products (continued)

 

 

 

 

 

 

 

Construction Materials (continued)

 

 

 

 

 

 

 

Louisiana-Pacific Corporation a

 

 

78,000

 

$

737,880

 

 

 

 

 

 

    

 

 

 

 

 

 

18,890,431

 

 

 

 

 

 

    

 

Industrial Components - 1.7%

 

 

 

 

 

 

 

Bel Fuse Cl. A

 

 

22,350

 

 

565,902

 

Bel Fuse Cl. B

 

 

98,360

 

 

2,350,804

 

Chase Corporation b

 

 

773,974

 

 

12,615,776

 

CLARCOR

 

 

329,500

 

 

14,132,255

 

CTS Corporation

 

 

76,512

 

 

846,223

 

Donaldson Company

 

 

146,700

 

 

8,549,676

 

Hubbell Cl. B

 

 

380,077

 

 

22,854,030

 

PerkinElmer

 

 

702,600

 

 

18,141,132

 

Regal-Beloit

 

 

27,703

 

 

1,849,452

 

Watts Water Technologies Cl. A

 

 

19,200

 

 

702,528

 

 

 

 

 

 

    

 

 

 

 

 

 

82,607,778

 

 

 

 

 

 

    

 

Machinery - 4.8%

 

 

 

 

 

 

 

Alamo Group

 

 

2,764

 

 

76,894

 

Ampco-Pittsburgh

 

 

190,220

 

 

5,335,671

 

Briggs & Stratton

 

 

474,730

 

 

9,347,434

 

Bucyrus International

 

 

6,000

 

 

536,400

 

Cascade Corporation

 

 

142,079

 

 

6,717,495

 

Franklin Electric

 

 

366,900

 

 

14,279,748

 

FreightCar America

 

 

65,339

 

 

1,890,911

 

Gorman-Rupp Company

 

 

461,307

 

 

14,909,442

 

Lincoln Electric Holdings

 

 

227,329

 

 

14,837,764

 

Lindsay Corporation

 

 

234,383

 

 

13,929,382

 

Mueller (Paul) Company a,b,d

 

 

116,700

 

 

1,983,900

 

Nordson Corporation

 

 

365,900

 

 

33,618,892

 

Roper Industries

 

 

214,500

 

 

16,394,235

 

Starrett (L.S.) Company (The) Cl. A b

 

 

529,400

 

 

6,183,392

 

Sun Hydraulics

 

 

674,265

 

 

25,487,217

 

Tennant Company

 

 

580,700

 

 

22,304,687

 

Toro Company (The)

 

 

328,275

 

 

20,234,871

 

Woodward Governor

 

 

609,200

 

 

22,881,552

 

 

 

 

 

 

    

 

 

 

 

 

 

230,949,887

 

 

 

 

 

 

    

 

Metal Fabrication and Distribution - 2.1%

 

 

 

 

 

 

 

Carpenter Technology

 

 

293,775

 

 

11,821,506

 

Kennametal

 

 

142,300

 

 

5,615,158

 

Mueller Industries

 

 

406,762

 

 

13,301,118

 

Olympic Steel

 

 

56,597

 

 

1,623,202

 

Reliance Steel & Aluminum

 

 

628,913

 

 

32,137,454

 

Schnitzer Steel Industries Cl. A

 

 

195,400

 

 

12,972,606

 

Sims Metal Management ADR

 

 

337,175

 

 

7,363,902

 

Timken Company (The)

 

 

45,732

 

 

2,182,788

 

Trinity Industries

 

 

486,487

 

 

12,945,419

 

 

 

 

 

 

    

 

 

 

 

 

 

99,963,153

 

 

 

 

 

 

    

 

Miscellaneous Manufacturing - 1.8%

 

 

 

 

 

 

 

Acuity Brands

 

 

6,068

 

 

349,942

 

American Railcar Industries a

 

 

201,312

 

 

4,455,034

 

Barnes Group

 

 

24,564

 

 

507,738

 

Brady Corporation Cl. A

 

 

456,800

 

 

14,896,248

 

Carlisle Companies

 

 

82,583

 

 

3,281,848

 

Crane Company

 

 

301,000

 

 

12,362,070

 

HNI Corporation

 

 

446,384

 

 

13,927,181

 

Raven Industries

 

 

156,201

 

 

7,449,226

 


 

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

The Royce Funds 2010 Annual Report to Shareholders | 77

 

Schedules of Investments
 

 

Royce Total Return Fund (continued)

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Industrial Products (continued)

 

 

 

 

 

 

 

Miscellaneous Manufacturing (continued)

 

 

 

 

 

 

 

Smith (A.O.) Corporation

 

 

586,800

 

$

22,345,344

 

Standex International

 

 

76,645

 

 

2,292,452

 

Valmont Industries

 

 

20,634

 

 

1,830,855

 

 

 

 

 

 

    

 

 

 

 

 

 

83,697,938

 

 

 

 

 

 

    

 

Paper and Packaging - 1.0%

 

 

 

 

 

 

 

AptarGroup

 

 

86,500

 

 

4,114,805

 

Bemis Company

 

 

464,800

 

 

15,180,368

 

Greif Cl. A

 

 

237,101

 

 

14,676,552

 

Schweitzer-Mauduit International

 

 

3,100

 

 

195,052

 

Sealed Air

 

 

13,113

 

 

333,726

 

Sonoco Products

 

 

383,080

 

 

12,898,303

 

 

 

 

 

 

    

 

 

 

 

 

 

47,398,806

 

 

 

 

 

 

    

 

Pumps, Valves and Bearings - 0.2%

 

 

 

 

 

 

 

Kaydon Corporation

 

 

202,900

 

 

8,262,088

 

Robbins & Myers

 

 

22,604

 

 

808,771

 

 

 

 

 

 

    

 

 

 

 

 

 

9,070,859

 

 

 

 

 

 

    

 

Specialty Chemicals and Materials - 3.4%

 

 

 

 

 

 

 

Agrium

 

 

5,200

 

 

477,100

 

Albemarle Corporation

 

 

443,000

 

 

24,710,540

 

Balchem Corporation

 

 

991,500

 

 

33,522,615

 

Cabot Corporation

 

 

770,700

 

 

29,016,855

 

H.B. Fuller Company

 

 

19,867

 

 

407,671

 

Innophos Holdings

 

 

23,410

 

 

844,633

 

International Flavors & Fragrances

 

 

175,000

 

 

9,728,250

 

Lubrizol Corporation (The)

 

 

249,500

 

 

26,666,560

 

Methanex Corporation

 

 

341,898

 

 

10,393,699

 

Minerals Technologies

 

 

27,217

 

 

1,780,264

 

NewMarket Corporation

 

 

9,626

 

 

1,187,560

 

Park Electrochemical

 

 

110,545

 

 

3,316,350

 

Quaker Chemical

 

 

405,000

 

 

16,876,350

 

Schulman (A.)

 

 

25,439

 

 

582,299

 

Stepan Company

 

 

51,339

 

 

3,915,625

 

 

 

 

 

 

    

 

 

 

 

 

 

163,426,371

 

 

 

 

 

 

    

 

Other Industrial Products - 0.2%

 

 

 

 

 

 

 

MTS Systems

 

 

226,491

 

 

8,484,353

 

 

 

 

 

 

    

 

Total (Cost $457,954,959)

 

 

 

 

809,495,733

 

 

 

 

 

 

    

 

 

Industrial Services – 8.3%

 

 

 

 

 

 

 

Advertising and Publishing - 0.0%

 

 

 

 

 

 

 

Harte-Hanks

 

 

22,237

 

 

283,967

 

Scholastic Corporation

 

 

76,400

 

 

2,256,856

 

 

 

 

 

 

    

 

 

 

 

 

 

2,540,823

 

 

 

 

 

 

    

 

Commercial Services - 4.4%

 

 

 

 

 

 

 

ABM Industries

 

 

709,700

 

 

18,665,110

 

Corporate Executive Board

 

 

236,000

 

 

8,861,800

 

Heidrick & Struggles International

 

 

196,097

 

 

5,618,179

 

Hillenbrand

 

 

243,625

 

 

5,069,836

 

Kelly Services Cl. A a

 

 

595,000

 

 

11,186,000

 

Landauer

 

 

386,371

 

 

23,170,669

 

Manpower

 

 

387,452

 

 

24,316,487

 

MAXIMUS

 

 

519,583

 

 

34,074,253

 

Ritchie Bros. Auctioneers

 

 

1,596,320

 

 

36,795,176

 

Rollins

 

 

833,625

 

 

16,464,094

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Industrial Services (continued)

 

 

 

 

 

 

 

Commercial Services (continued)

 

 

 

 

 

 

 

Towers Watson & Company Cl. A

 

 

455,700

 

$

23,723,742

 

UniFirst Corporation

 

 

46,316

 

 

2,549,696

 

 

 

 

 

 

    

 

 

 

 

 

 

210,495,042

 

 

 

 

 

 

    

 

Engineering and Construction - 0.4%

 

 

 

 

 

 

 

Comfort Systems USA

 

 

512,007

 

 

6,743,132

 

Granite Construction

 

 

192,375

 

 

5,276,847

 

KBR

 

 

191,313

 

 

5,829,307

 

 

 

 

 

 

    

 

 

 

 

 

 

17,849,286

 

 

 

 

 

 

    

 

Food, Tobacco and Agriculture - 0.7%

 

 

 

 

 

 

 

Corn Products International

 

 

88,967

 

 

4,092,482

 

Farmer Bros.

 

 

542,300

 

 

9,652,940

 

Seaboard Corporation

 

 

9,476

 

 

18,866,716

 

 

 

 

 

 

    

 

 

 

 

 

 

32,612,138

 

 

 

 

 

 

    

 

Industrial Distribution - 0.9%

 

 

 

 

 

 

 

Applied Industrial Technologies

 

 

314,870

 

 

10,226,978

 

Doshisha

 

 

60,000

 

 

1,401,897

 

Grainger (W.W.)

 

 

158,100

 

 

21,835,191

 

Houston Wire & Cable

 

 

69,064

 

 

928,220

 

Mine Safety Appliances

 

 

196,000

 

 

6,101,480

 

Watsco

 

 

19,602

 

 

1,236,494

 

 

 

 

 

 

    

 

 

 

 

 

 

41,730,260

 

 

 

 

 

 

    

 

Printing - 0.2%

 

 

 

 

 

 

 

Ennis

 

 

545,341

 

 

9,325,331

 

Schawk

 

 

63,700

 

 

1,310,946

 

 

 

 

 

 

    

 

 

 

 

 

 

10,636,277

 

 

 

 

 

 

    

 

Transportation and Logistics - 1.7%

 

 

 

 

 

 

 

Alexander & Baldwin

 

 

494,700

 

 

19,802,841

 

Arkansas Best

 

 

228,281

 

 

6,259,465

 

C. H. Robinson Worldwide

 

 

256,000

 

 

20,528,640

 

Euroseas

 

 

125,346

 

 

463,780

 

Expeditors International of Washington

 

 

458,400

 

 

25,028,640

 

UTi Worldwide

 

 

492,600

 

 

10,443,120

 

 

 

 

 

 

    

 

 

 

 

 

 

82,526,486

 

 

 

 

 

 

    

 

Other Industrial Services - 0.0%

 

 

 

 

 

 

 

US Ecology

 

 

28,000

 

 

486,640

 

 

 

 

 

 

    

 

Total (Cost $231,548,919)

 

 

 

 

398,876,952

 

 

 

 

 

 

    

 

 

Natural Resources – 10.9%

 

 

 

 

 

 

 

Energy Services - 4.9%

 

 

 

 

 

 

 

Boardwalk Pipeline Partners L.P.

 

 

48,000

 

 

1,494,240

 

CARBO Ceramics

 

 

279,100

 

 

28,898,014

 

Energy Transfer Equity L.P.

 

 

530,600

 

 

20,730,542

 

Ensign Energy Services

 

 

5,400

 

 

81,627

 

Enterprise Products Partners L.P.

 

 

428,850

 

 

17,844,449

 

Exterran Partners L.P.

 

 

479,700

 

 

12,884,742

 

Frontier Oil a

 

 

40,000

 

 

720,400

 

Gulf Island Fabrication

 

 

13,087

 

 

368,792

 

Helmerich & Payne

 

 

628,555

 

 

30,472,346

 

Lufkin Industries

 

 

115,536

 

 

7,208,291

 

National Fuel Gas

 

 

62,076

 

 

4,073,427

 

Nicor

 

 

372,892

 

 

18,614,769

 

NuStar GP Holdings LLC

 

 

369,200

 

 

13,413,036

 

Patterson-UTI Energy

 

 

128,177

 

 

2,762,214

 


 

 

 

78 | The Royce Funds 2010 Annual Report to Shareholders

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

December 31, 2010
 

 

 

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Natural Resources (continued)

 

 

 

 

 

 

 

Energy Services (continued)

 

 

 

 

 

 

 

Precision Drilling a

 

 

700,150

 

$

6,784,453

 

Rowan Companies a

 

 

848,505

 

 

29,621,310

 

SEACOR Holdings

 

 

306,600

 

 

30,994,194

 

Tidewater

 

 

13,266

 

 

714,241

 

Trican Well Service

 

 

278,400

 

 

5,639,119

 

World Fuel Services

 

 

49,599

 

 

1,793,500

 

 

 

 

 

 

    

 

 

 

 

 

 

 

235,113,706

 

 

 

 

 

 

    

 

Oil and Gas - 4.0%

 

 

 

 

 

 

 

Berry Petroleum Cl. A

 

 

1,300

 

 

56,810

 

Cimarex Energy

 

 

291,690

 

 

25,823,316

 

Delek US Holdings

 

 

49,403

 

 

359,654

 

Energen Corporation

 

 

1,063,100

 

 

51,305,206

 

Hugoton Royalty Trust

 

 

250,600

 

 

5,142,312

 

Magellan Midstream Partners L.P.

 

 

433,701

 

 

24,504,106

 

Penn Virginia

 

 

633,760

 

 

10,659,843

 

Penn Virginia GP Holdings L.P.

 

 

525,000

 

 

13,818,000

 

Pioneer Southwest Energy Partners L.P.

 

 

701,567

 

 

21,068,057

 

Plains All American Pipeline L.P.

 

 

281,530

 

 

17,677,269

 

San Juan Basin Royalty Trust

 

 

26,590

 

 

625,929

 

SM Energy

 

 

33,242

 

 

1,958,951

 

Sunoco Logistics Partners L.P.

 

 

231,000

 

 

19,309,290

 

W&T Offshore

 

 

77,700

 

 

1,388,499

 

 

 

 

 

 

    

 

 

 

 

 

 

 

193,697,242

 

 

 

 

 

 

    

 

Precious Metals and Mining - 1.6%

 

 

 

 

 

 

 

Agnico-Eagle Mines

 

 

40,000

 

 

3,068,000

 

Alliance Holdings GP L.P.

 

 

528,500

 

 

25,362,715

 

Alliance Resource Partners L.P.

 

 

278,000

 

 

18,281,280

 

Gold Fields ADR

 

 

434,700

 

 

7,881,111

 

IAMGOLD Corporation

 

 

101,000

 

 

1,797,800

 

Major Drilling Group International

 

 

211,500

 

 

8,838,203

 

Natural Resource Partners L.P.

 

 

325,200

 

 

10,796,640

 

 

 

 

 

 

    

 

 

 

 

 

 

 

76,025,749

 

 

 

 

 

 

    

 

Real Estate - 0.4%

 

 

 

 

 

 

 

Deltic Timber

 

 

172,000

 

 

9,690,480

 

W.P. Carey & Co.

 

 

281,231

 

 

8,799,718

 

 

 

 

 

 

    

 

 

 

 

 

 

 

18,490,198

 

 

 

 

 

 

    

 

Total (Cost $328,040,395)

 

 

 

 

 

523,326,895

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Technology – 4.9%

 

 

 

 

 

 

 

Aerospace and Defense - 2.0%

 

 

 

 

 

 

 

American Science & Engineering

 

 

138,012

 

 

11,762,763

 

Cubic Corporation

 

 

321,577

 

 

15,162,356

 

HEICO Corporation

 

 

238,000

 

 

12,145,140

 

HEICO Corporation Cl. A

 

 

250,198

 

 

9,337,389

 

ManTech International Cl. A a

 

 

840,868

 

 

34,753,074

 

National Presto Industries

 

 

94,616

 

 

12,301,026

 

Triumph Group

 

 

20,188

 

 

1,805,009

 

 

 

 

 

 

    

 

 

 

 

 

 

 

97,266,757

 

 

 

 

 

 

    

 

Components and Systems - 1.1%

 

 

 

 

 

 

 

Analogic Corporation

 

 

141,400

 

 

7,000,714

 

AVX Corporation

 

 

1,034,146

 

 

15,956,873

 

Diebold

 

 

20,700

 

 

663,435

 

Methode Electronics

 

 

1,151,680

 

 

14,937,290

 

Nam Tai Electronics

 

 

1,756,871

 

 

11,243,974

 

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Technology (continued)

 

 

 

 

 

 

 

Components and Systems (continued)

 

 

 

 

 

 

 

OPTEX

 

 

30,000

 

$

445,991

 

Sato Corporation

 

 

30,000

 

 

397,586

 

 

 

 

 

 

    

 

 

 

 

 

 

 

50,645,863

 

 

 

 

 

 

    

 

Internet Software and Services - 0.1%

 

 

 

 

 

 

 

EarthLink

 

 

435,898

 

 

3,748,723

 

United Online

 

 

533,551

 

 

3,521,436

 

 

 

 

 

 

    

 

 

 

 

 

 

 

7,270,159

 

 

 

 

 

 

    

 

IT Services - 0.6%

 

 

 

 

 

 

 

Black Box

 

 

322,875

 

 

12,362,884

 

Jack Henry & Associates

 

 

500,400

 

 

14,586,660

 

 

 

 

 

 

    

 

 

 

 

 

 

 

26,949,544

 

 

 

 

 

 

    

 

Semiconductors and Equipment - 0.5%

 

 

 

 

 

 

 

ADTRAN

 

 

270,400

 

 

9,791,184

 

Cognex Corporation

 

 

418,300

 

 

12,306,386

 

Maxim Integrated Products

 

 

36,000

 

 

850,320

 

Micrel

 

 

30,600

 

 

397,494

 

 

 

 

 

 

    

 

 

 

 

 

 

 

23,345,384

 

 

 

 

 

 

    

 

Software - 0.1%

 

 

 

 

 

 

 

Fair Isaac

 

 

180,657

 

 

4,221,954

 

 

 

 

 

 

    

 

Telecommunications - 0.5%

 

 

 

 

 

 

 

Atlantic Tele-Network

 

 

284,903

 

 

10,923,181

 

Comtech Telecommunications

 

 

192,388

 

 

5,334,919

 

Plantronics

 

 

116,691

 

 

4,343,239

 

SureWest Communications a

 

 

271,400

 

 

2,903,980

 

USA Mobility

 

 

167,433

 

 

2,975,285

 

 

 

 

 

 

    

 

 

 

 

 

 

 

26,480,604

 

 

 

 

 

 

    

 

Total (Cost $200,589,317)

 

 

 

 

 

236,180,265

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Utilities – 2.0%

 

 

 

 

 

 

 

ALLETE

 

 

201,047

 

 

7,491,011

 

Aqua America

 

 

819,766

 

 

18,428,340

 

Consolidated Water

 

 

41,627

 

 

381,720

 

ITC Holdings

 

 

250,000

 

 

15,495,000

 

Otter Tail

 

 

15,000

 

 

338,100

 

Piedmont Natural Gas

 

 

474,500

 

 

13,267,020

 

PNM Resources

 

 

638,900

 

 

8,318,478

 

SJW

 

 

400,400

 

 

10,598,588

 

Southern Union

 

 

22,576

 

 

543,404

 

UGI Corporation

 

 

660,076

 

 

20,845,200

 

 

 

 

 

 

    

 

Total (Cost $78,043,033)

 

 

 

 

 

95,706,861

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Miscellaneouse – 2.1%

 

 

 

 

 

 

 

Total (Cost $81,186,071)

 

 

 

 

 

98,665,632

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

TOTAL COMMON STOCKS

 

 

 

 

 

 

 

(Cost $3,188,421,353)

 

 

 

 

 

4,466,683,347

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

PREFERRED STOCKS – 0.3%

 

 

 

 

 

 

 

†Bank of N.T. Butterfield & Son 0% Conv.a,f

 

 

77,665

 

 

72,209

 

MF Global Holdings 9.75% Conv.d

 

 

50,000

 

 

6,050,000

 

Reinsurance Group of America 5.75% Conv.

 

 

89,000

 

 

6,245,130

 


 

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

The Royce Funds 2010 Annual Report to Shareholders | 79

 

 

Schedules of Investments
 

 

Royce Total Return Fund (continued)

Royce Heritage Fund

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

PREFERRED STOCKS (continued)

 

 

 

 

 

 

 

Vornado Realty Trust 6.625% Ser. G

 

 

30,000

 

$

696,000

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

TOTAL PREFERRED STOCKS

 

 

 

 

 

 

 

(Cost $9,772,554)

 

 

 

 

 

13,063,339

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

 

 

PRINCIPAL

 

 

 

 

 

 

AMOUNT

 

 

 

 

CORPORATE BONDS – 0.4%

 

 

 

 

 

 

 

Charming Shoppes 1.125% Conv. Senior Note due 5/1/14

 

$

20,000,000

 

 

16,700,000

 

GAMCO Investors 0.00% due 12/31/15 f

 

 

8,905

 

 

605,540

 

Leucadia National 3.75% Conv. Senior Note due 4/15/14

 

 

3,000,000

 

 

4,203,750

 

Mueller Industries 6.00% Sub. Deb. due 11/1/14 c

 

 

1,088,000

 

 

1,078,480

 

 

 

 

 

 

    

 

TOTAL CORPORATE BONDS

 

 

 

 

 

 

 

(Cost $20,268,508)

 

 

 

 

 

22,587,770

 

 

 

 

 

 

    

 

 

REPURCHASE AGREEMENT – 6.3%

 

 

 

 

 

 

 

State Street Bank & Trust Company, 0.13% dated 12/31/10, due 1/3/11, maturity value $301,220,263 (collateralized by obligations of various U.S. Government Agencies, 0.35%-2.75% due 3/28/11-4/11/11, valued at $308,747,675)

 

 

 

 

 

 

 

(Cost $301,217,000)

 

 

 

 

 

301,217,000

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

COLLATERAL RECEIVED FOR SECURITIES LOANED – 0.1%

 

 

 

 

 

 

 

Money Market Funds
Federated Government Obligations
Fund (7 day yield-0.0154%)

 

 

 

 

 

 

 

(Cost $3,939,419)

 

 

 

 

 

3,939,419

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

TOTAL INVESTMENTS – 100.2%

 

 

 

 

 

 

 

(Cost $3,523,618,834)

 

 

 

 

 

4,807,490,875

 

 

 

 

 

 

 

 

 

LIABILITIES LESS CASH AND OTHER ASSETS – (0.2)%

 

 

 

 

 

(11,516,038

)

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

NET ASSETS – 100.0%

 

 

 

 

$

4,795,974,837

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

COMMON STOCKS – 94.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer Products – 3.8%

 

 

 

 

 

 

 

Apparel, Shoes and Accessories - 1.4%

 

 

 

 

 

 

 

Bulgari

 

 

58,000

 

$

626,631

 

Carter’s a

 

 

35,000

 

 

1,032,850

 

Daphne International Holdings

 

 

403,000

 

 

377,450

 

Marimekko

 

 

25,300

 

 

488,531

 

Stella International Holdings

 

 

207,400

 

 

413,583

 

True Religion Apparel a

 

 

24,400

 

 

543,144

 

Warnaco Group (The) a

 

 

7,700

 

 

424,039

 

 

 

 

 

 

    

 

 

 

 

 

 

 

3,906,228

 

 

 

 

 

 

    

 

Food/Beverage/Tobacco - 0.5%

 

 

 

 

 

 

 

†National Beverage

 

 

59,310

 

 

779,334

 

Sanderson Farms

 

 

13,500

 

 

528,525

 

 

 

 

 

 

    

 

 

 

 

 

 

 

1,307,859

 

 

 

 

 

 

    

 

Health, Beauty and Nutrition - 0.2%

 

 

 

 

 

 

 

NutriSystem

 

 

21,300

 

 

447,939

 

 

 

 

 

 

    

 

Home Furnishing and Appliances - 1.3%

 

 

 

 

 

 

 

Ethan Allen Interiors

 

 

62,100

 

 

1,242,621

 

Hunter Douglas

 

 

19,000

 

 

1,004,670

 

Mohawk Industries a

 

 

26,400

 

 

1,498,464

 

 

 

 

 

 

    

 

 

 

 

 

 

 

3,745,755

 

 

 

 

 

 

    

 

Sports and Recreation - 0.4%

 

 

 

 

 

 

 

Thor Industries

 

 

35,300

 

 

1,198,788

 

 

 

 

 

 

    

 

Total (Cost $8,638,087)

 

 

 

 

 

10,606,569

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Consumer Services – 2.7%

 

 

 

 

 

 

 

Leisure and Entertainment - 0.5%

 

 

 

 

 

 

 

DreamWorks Animation SKG Cl. A a

 

 

53,000

 

 

1,561,910

 

 

 

 

 

 

    

 

Retail Stores - 1.7%

 

 

 

 

 

 

 

Big Lots a

 

 

13,600

 

 

414,256

 

Charming Shoppes a

 

 

89,300

 

 

317,015

 

†FamilyMart

 

 

25,700

 

 

968,617

 

GameStop Corporation Cl. A a

 

 

17,600

 

 

402,688

 

Kirkland’s a

 

 

29,800

 

 

418,094

 

Lewis Group

 

 

67,000

 

 

826,782

 

Luk Fook Holdings (International)

 

 

138,900

 

 

485,171

 

Rent-A-Center

 

 

15,600

 

 

503,568

 

Wet Seal (The) Cl. A a

 

 

91,500

 

 

338,550

 

 

 

 

 

 

    

 

 

 

 

 

 

 

4,674,741

 

 

 

 

 

 

    

 

Other Consumer Services - 0.5%

 

 

 

 

 

 

 

Sotheby’s

 

 

30,600

 

 

1,377,000

 

 

 

 

 

 

    

 

Total (Cost $5,641,010)

 

 

 

 

 

7,613,651

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Financial Intermediaries – 5.9%

 

 

 

 

 

 

 

Banking - 1.0%

 

 

 

 

 

 

 

Bank Sarasin & Co. Cl. B

 

 

12,342

 

 

562,320

 

Banque Privee Edmond de Rothschild

 

 

26

 

 

750,802

 

Julius Baer Group

 

 

32,000

 

 

1,499,038

 

 

 

 

 

 

    

 

 

 

 

 

 

 

2,812,160

 

 

 

 

 

 

    

 

Insurance - 0.1%

 

 

 

 

 

 

 

Greenlight Capital Re Cl. A a

 

 

8,600

 

 

230,566

 

 

 

 

 

 

    

 

Real Estate Investment Trusts - 0.6%

 

 

 

 

 

 

 

Cousins Properties

 

 

193,171

 

 

1,611,046

 

 

 

 

 

 

    

 


 

 

 

80 | The Royce Funds 2010 Annual Report to Shareholders

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

December 31, 2010
 

 

 

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Financial Intermediaries (continued)

 

 

 

 

 

 

 

Securities Brokers - 1.6%

 

 

 

 

 

 

 

Cowen Group Cl. A a

 

 

349,594

 

$

1,629,108

 

Egyptian Financial Group-Hermes Holding

 

 

194,000

 

 

1,123,228

 

FBR Capital Markets a

 

 

215,000

 

 

821,300

 

International Assets Holding Corporation a

 

 

17,800

 

 

420,080

 

Stifel Financial a

 

 

5,700

 

 

353,628

 

 

 

 

 

 

    

 

 

 

 

 

 

 

4,347,344

 

 

 

 

 

 

    

 

Securities Exchanges - 1.8%

 

 

 

 

 

 

 

NASDAQ OMX Group (The) a

 

 

40,000

 

 

948,400

 

Singapore Exchange

 

 

129,000

 

 

846,363

 

TMX Group

 

 

86,900

 

 

3,230,236

 

 

 

 

 

 

    

 

 

 

 

 

 

 

5,024,999

 

 

 

 

 

 

    

 

Other Financial Intermediaries - 0.8%

 

 

 

 

 

 

 

†KKR & Co. L.P.

 

 

158,000

 

 

2,243,600

 

 

 

 

 

 

    

 

Total (Cost $15,394,263)

 

 

 

 

 

16,269,715

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Financial Services – 10.8%

 

 

 

 

 

 

 

Diversified Financial Services - 0.5%

 

 

 

 

 

 

 

Lazard Cl. A

 

 

34,600

 

 

1,366,354

 

 

 

 

 

 

    

 

Information and Processing - 1.5%

 

 

 

 

 

 

 

Morningstar

 

 

36,528

 

 

1,938,906

 

SEI Investments

 

 

94,400

 

 

2,245,776

 

 

 

 

 

 

    

 

 

 

 

 

 

 

4,184,682

 

 

 

 

 

 

    

 

Investment Management - 8.5%

 

 

 

 

 

 

 

Affiliated Managers Group a

 

 

9,450

 

 

937,629

 

AllianceBernstein Holding L.P.

 

 

43,500

 

 

1,014,855

 

Artio Global Investors Cl. A

 

 

104,509

 

 

1,541,508

 

Ashmore Group

 

 

384,900

 

 

2,010,926

 

Cohen & Steers

 

 

57,000

 

 

1,487,700

 

Evercore Partners Cl. A

 

 

5,400

 

 

183,600

 

Federated Investors Cl. B

 

 

90,400

 

 

2,365,768

 

Invesco

 

 

50,500

 

 

1,215,030

 

†Jupiter Fund Management a

 

 

300,900

 

 

1,409,275

 

Partners Group Holding

 

 

5,900

 

 

1,119,423

 

Reinet Investments a

 

 

30,000

 

 

521,157

 

Sprott

 

 

214,100

 

 

1,735,539

 

T. Rowe Price Group

 

 

20,700

 

 

1,335,978

 

Value Partners Group

 

 

2,709,700

 

 

2,719,182

 

VZ Holding

 

 

4,600

 

 

590,374

 

Waddell & Reed Financial Cl. A

 

 

60,800

 

 

2,145,632

 

Westwood Holdings Group

 

 

33,797

 

 

1,350,528

 

 

 

 

 

 

    

 

 

 

 

 

 

 

23,684,104

 

 

 

 

 

 

    

 

Specialty Finance - 0.3%

 

 

 

 

 

 

 

First Cash Financial Services a

 

 

9,200

 

 

285,108

 

World Acceptance a

 

 

8,300

 

 

438,240

 

 

 

 

 

 

    

 

 

 

 

 

 

 

723,348

 

 

 

 

 

 

    

 

Total (Cost $21,808,960)

 

 

 

 

 

29,958,488

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Health – 5.3%

 

 

 

 

 

 

 

Commercial Services - 0.4%

 

 

 

 

 

 

 

† PAREXEL International a

 

 

55,000

 

 

1,167,650

 

 

 

 

 

 

    

 

Drugs and Biotech - 1.9%

 

 

 

 

 

 

 

†Adcock Ingram Holdings

 

 

105,000

 

 

954,763

 

 

 

 

 

 

 

 

 

 

 

 

SHARES

     

 

VALUE

 

Health (continued)

 

 

 

 

 

 

 

Drugs and Biotech (continued)

 

 

 

 

 

 

 

Endo Pharmaceuticals Holdings a

 

 

12,400

 

$

442,804

 

†Green Cross

 

 

7,700

 

 

943,079

 

†Hikma Pharmaceuticals

 

 

72,000

 

 

910,950

 

†Unichem Laboratories

 

 

340,000

 

 

1,855,306

 

 

 

 

 

 

    

 

 

 

 

 

 

 

5,106,902

 

 

 

 

 

 

    

 

Health Services - 1.2%

 

 

 

 

 

 

 

Advisory Board (The) a

 

 

29,000

 

 

1,381,270

 

†EPS

 

 

300

 

 

734,204

 

ICON ADR a

 

 

55,100

 

 

1,206,690

 

 

 

 

 

 

    

 

 

 

 

 

 

 

3,322,164

 

 

 

 

 

 

    

 

Medical Products and Devices - 1.8%

 

 

 

 

 

 

 

Atrion Corporation

 

 

4,900

 

 

879,354

 

Carl Zeiss Meditec

 

 

57,000

 

 

1,088,075

 

Exactech a

 

 

57,000

 

 

1,072,740

 

Fielmann

 

 

4,700

 

 

446,803

 

Techne Corporation

 

 

12,100

 

 

794,607

 

Waters Corporation a

 

 

10,000

 

 

777,100

 

 

 

 

 

 

    

 

 

 

 

 

 

 

5,058,679

 

 

 

 

 

 

    

 

Total (Cost $12,097,055)

 

 

 

 

 

14,655,395

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Industrial Products – 19.0%

 

 

 

 

 

 

 

Automotive - 0.9%

 

 

 

 

 

 

 

Gentex Corporation

 

 

40,000

 

 

1,182,400

 

Nokian Renkaat

 

 

28,000

 

 

1,027,080

 

Norstar Founders Group a,f

 

 

533,500

 

 

25,052

 

SORL Auto Parts a

 

 

27,600

 

 

235,428

 

 

 

 

 

 

    

 

 

 

 

 

 

 

2,469,960

 

 

 

 

 

 

    

 

Building Systems and Components - 1.8%

 

 

 

 

 

 

 

AAON

 

 

54,900

 

 

1,548,729

 

Drew Industries

 

 

57,300

 

 

1,301,856

 

Simpson Manufacturing

 

 

63,000

 

 

1,947,330

 

 

 

 

 

 

    

 

 

 

 

 

 

 

4,797,915

 

 

 

 

 

 

    

 

Industrial Components - 1.4%

 

 

 

 

 

 

 

Amphenol Corporation Cl. A

 

 

16,900

 

 

891,982

 

GrafTech International a

 

 

108,200

 

 

2,146,688

 

PerkinElmer

 

 

33,500

 

 

864,970

 

 

 

 

 

 

    

 

 

 

 

 

 

 

3,903,640

 

 

 

 

 

 

    

 

Machinery - 4.3%

 

 

 

 

 

 

 

Astec Industries a

 

 

26,700

 

 

865,347

 

Burckhardt Compression Holding

 

 

4,500

 

 

1,246,524

 

FreightCar America

 

 

18,300

 

 

529,602

 

Hurco Companies a

 

 

22,400

 

 

529,760

 

IPG Photonics a

 

 

40,000

 

 

1,264,800

 

Jinpan International

 

 

82,298

 

 

866,598

 

Lincoln Electric Holdings

 

 

31,000

 

 

2,023,370

 

Rofin-Sinar Technologies a

 

 

44,500

 

 

1,577,080

 

Spirax-Sarco Engineering

 

 

43,000

 

 

1,296,578

 

Tennant Company

 

 

45,200

 

 

1,736,132

 

 

 

 

 

 

    

 

 

 

 

 

 

 

11,935,791

 

 

 

 

 

 

    

 

Metal Fabrication and Distribution - 6.2%

 

 

 

 

 

 

 

Allegheny Technologies

 

 

21,000

 

 

1,158,780

 

China Metal Recycling (Holdings)

 

 

417,600

 

 

442,163

 

Commercial Metals

 

 

28,800

 

 

477,792

 

Foster (L.B.) Company Cl. A a

 

 

46,100

 

 

1,887,334

 


 

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

The Royce Funds 2010 Annual Report to Shareholders | 81

 

Schedules of Investments
 

 

Royce Heritage Fund (continued)

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Industrial Products (continued)

 

 

 

 

 

 

 

Metal Fabrication and Distribution (continued)

 

 

 

 

 

 

 

Fushi Copperweld a,c

 

 

77,946

 

$

692,161

 

Haynes International

 

 

8,200

 

 

343,006

 

†Horsehead Holding Corporation a

 

 

57,900

 

 

755,016

 

Kennametal

 

 

70,100

 

 

2,766,146

 

Nucor Corporation

 

 

55,300

 

 

2,423,246

 

Schnitzer Steel Industries Cl. A

 

 

32,700

 

 

2,170,953

 

Sims Metal Management ADR

 

 

68,400

 

 

1,493,856

 

†Worthington Industries

 

 

142,000

 

 

2,612,800

 

 

 

 

 

 

    

 

 

 

 

 

 

 

17,223,253

 

 

 

 

 

 

    

 

Miscellaneous Manufacturing - 1.4%

 

 

 

 

 

 

 

Raven Industries

 

 

50,200

 

 

2,394,038

 

†Valmont Industries

 

 

17,200

 

 

1,526,156

 

 

 

 

 

 

    

 

 

 

 

 

 

 

3,920,194

 

 

 

 

 

 

    

 

Paper and Packaging - 1.0%

 

 

 

 

 

 

 

Greif Cl. A

 

 

44,100

 

 

2,729,790

 

 

 

 

 

 

    

 

Pumps, Valves and Bearings - 1.3%

 

 

 

 

 

 

 

Gardner Denver

 

 

19,000

 

 

1,307,580

 

Kaydon Corporation

 

 

54,900

 

 

2,235,528

 

 

 

 

 

 

    

 

 

 

 

 

 

 

3,543,108

 

 

 

 

 

 

    

 

Specialty Chemicals and Materials - 0.4%

 

 

 

 

 

 

 

OM Group a

 

 

6,900

 

 

265,719

 

†Victrex

 

 

40,000

 

 

924,858

 

 

 

 

 

 

    

 

 

 

 

 

 

 

1,190,577

 

 

 

 

 

 

    

 

Other Industrial Products - 0.3%

 

 

 

 

 

 

 

MTS Systems

 

 

23,400

 

 

876,564

 

 

 

 

 

 

    

 

Total (Cost $36,559,203)

 

 

 

 

 

52,590,792

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Industrial Services – 14.5%

 

 

 

 

 

 

 

Advertising and Publishing - 0.2%

 

 

 

 

 

 

 

ValueClick a

 

 

32,500

 

 

520,975

 

 

 

 

 

 

    

 

Commercial Services - 6.2%

 

 

 

 

 

 

 

Brink’s Company (The)

 

 

108,880

 

 

2,926,695

 

Global Sources a

 

 

26,606

 

 

253,289

 

Grupo Aeroportuario del Centro Norte ADR

 

 

67,000

 

 

1,035,150

 

Heritage-Crystal Clean a

 

 

176,164

 

 

1,758,117

 

Manpower

 

 

36,800

 

 

2,309,568

 

MAXIMUS

 

 

19,500

 

 

1,278,810

 

Michael Page International

 

 

105,000

 

 

908,565

 

†Pico Far East Holdings

 

 

3,894,000

 

 

826,613

 

Ritchie Bros. Auctioneers

 

 

125,600

 

 

2,895,080

 

Team a

 

 

16,810

 

 

406,802

 

Towers Watson & Company Cl. A

 

 

26,200

 

 

1,363,972

 

Verisk Analytics Cl. A a

 

 

39,000

 

 

1,329,120

 

 

 

 

 

 

    

 

 

 

 

 

 

 

17,291,781

 

 

 

 

 

 

    

 

Engineering and Construction - 4.5%

 

 

 

 

 

 

 

Cavco Industries a

 

 

18,400

 

 

859,096

 

Comfort Systems USA

 

 

28,200

 

 

371,394

 

EMCOR Group a

 

 

115,700

 

 

3,352,986

 

Fluor Corporation

 

 

29,600

 

 

1,961,296

 

KBR

 

 

75,500

 

 

2,300,485

 

NVR a

 

 

3,400

 

 

2,349,468

 

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Industrial Services (continued)

 

 

 

 

 

 

 

Engineering and Construction (continued)

 

 

 

 

 

 

 

†Raubex Group

 

 

370,000

 

$

1,311,499

 

 

 

 

 

 

    

 

 

 

 

 

 

 

12,506,224

 

 

 

 

 

 

    

 

Food, Tobacco and Agriculture - 1.2%

 

 

 

 

 

 

 

China Green (Holdings)

 

 

638,800

 

 

624,598

 

†Darling International a

 

 

100,000

 

 

1,328,000

 

Intrepid Potash a

 

 

32,900

 

 

1,226,841

 

 

 

 

 

 

    

 

 

 

 

 

 

 

3,179,439

 

 

 

 

 

 

    

 

Transportation and Logistics - 2.4%

 

 

 

 

 

 

 

Forward Air

 

 

41,300

 

 

1,172,094

 

Landstar System

 

 

55,800

 

 

2,284,452

 

Patriot Transportation Holding a

 

 

26,504

 

 

2,463,812

 

Universal Truckload Services a

 

 

46,600

 

 

741,872

 

 

 

 

 

 

    

 

 

 

 

 

 

 

6,662,230

 

 

 

 

 

 

    

 

Total (Cost $32,803,438)

 

 

 

 

 

40,160,649

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Natural Resources – 14.5%

 

 

 

 

 

 

 

Energy Services - 6.6%

 

 

 

 

 

 

 

CE Franklin a

 

 

56,800

 

 

406,120

 

†Ensco ADR

 

 

35,500

 

 

1,894,990

 

Ensign Energy Services

 

 

24,800

 

 

374,881

 

Helmerich & Payne

 

 

83,700

 

 

4,057,776

 

Lamprell

 

 

280,000

 

 

1,403,501

 

Lufkin Industries

 

 

27,000

 

 

1,684,530

 

Oil States International a

 

 

42,200

 

 

2,704,598

 

Pason Systems

 

 

72,700

 

 

1,020,710

 

Patterson-UTI Energy

 

 

19,800

 

 

426,690

 

Rowan Companies a

 

 

14,800

 

 

516,668

 

SEACOR Holdings

 

 

8,000

 

 

808,720

 

†TGS-NOPEC Geophysical

 

 

46,500

 

 

1,047,935

 

Trican Well Service

 

 

96,800

 

 

1,960,728

 

 

 

 

 

 

    

 

 

 

 

 

 

 

18,307,847

 

 

 

 

 

 

    

 

Oil and Gas - 0.3%

 

 

 

 

 

 

 

Gran Tierra Energy a

 

 

56,600

 

 

455,630

 

SM Energy

 

 

7,800

 

 

459,654

 

 

 

 

 

 

    

 

 

 

 

 

 

 

915,284

 

 

 

 

 

 

    

 

Precious Metals and Mining - 7.1%

 

 

 

 

 

 

 

†African Barrick Gold

 

 

67,200

 

 

640,154

 

Agnico-Eagle Mines

 

 

18,400

 

 

1,411,280

 

†Compass Minerals International

 

 

15,000

 

 

1,339,050

 

Fresnillo

 

 

86,000

 

 

2,236,497

 

†Gold Fields ADR

 

 

73,400

 

 

1,330,742

 

†Hochschild Mining

 

 

289,300

 

 

2,886,703

 

†Kinross Gold

 

 

84,455

 

 

1,601,267

 

Major Drilling Group International

 

 

60,000

 

 

2,507,291

 

Pan American Silver

 

 

53,600

 

 

2,208,856

 

Randgold Resources ADR

 

 

3,100

 

 

255,223

 

Seabridge Gold a

 

 

101,500

 

 

3,114,020

 

 

 

 

 

 

    

 

 

 

 

 

 

 

19,531,083

 

 

 

 

 

 

    

 


 

 

 

82 | The Royce Funds 2010 Annual Report to Shareholders

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

December 31, 2010
 

 

 

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Natural Resources (continued)

 

 

 

 

 

 

 

Other Natural Resources - 0.5%

 

 

 

 

 

 

 

China Forestry Holdings

 

 

1,462,500

 

$

686,770

 

Magma Energy a

 

 

450,000

 

 

665,292

 

 

 

 

 

 

    

 

 

 

 

 

 

 

1,352,062

 

 

 

 

 

 

    

 

Total (Cost $25,305,997)

 

 

 

 

 

40,106,276

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Technology – 12.8%

 

 

 

 

 

 

 

Aerospace and Defense - 1.1%

 

 

 

 

 

 

 

†FLIR Systems a

 

 

70,200

 

 

2,088,450

 

HEICO Corporation

 

 

17,500

 

 

893,025

 

 

 

 

 

 

    

 

 

 

 

 

 

 

2,981,475

 

 

 

 

 

 

    

 

Components and Systems - 2.4%

 

 

 

 

 

 

 

Benchmark Electronics a

 

 

40,000

 

 

726,400

 

Dionex Corporation a

 

 

18,000

 

 

2,124,180

 

†Pfeiffer Vacuum Technology

 

 

17,000

 

 

1,999,105

 

Pulse Electronics

 

 

185,000

 

 

984,200

 

Western Digital a

 

 

25,600

 

 

867,840

 

 

 

 

 

 

    

 

 

 

 

 

 

 

6,701,725

 

 

 

 

 

 

    

 

Distribution - 0.2%

 

 

 

 

 

 

 

Cogo Group a

 

 

72,260

 

 

639,501

 

 

 

 

 

 

    

 

IT Services - 1.3%

 

 

 

 

 

 

 

Sapient Corporation

 

 

119,800

 

 

1,449,580

 

SRA International Cl. A a

 

 

103,300

 

 

2,112,485

 

Yucheng Technologies a

 

 

8,000

 

 

28,880

 

 

 

 

 

 

    

 

 

 

 

 

 

 

3,590,945

 

 

 

 

 

 

    

 

Semiconductors and Equipment - 4.3%

 

 

 

 

 

 

 

ADTRAN

 

 

32,400

 

 

1,173,204

 

Advanced Energy Industries a

 

 

53,000

 

 

722,920

 

Analog Devices

 

 

31,000

 

 

1,167,770

 

Chroma Ate

 

 

378,640

 

 

1,131,122

 

Cognex Corporation

 

 

50,000

 

 

1,471,000

 

† Coherent a

 

 

45,000

 

 

2,031,300

 

Diodes a

 

 

98,300

 

 

2,653,117

 

International Rectifier a

 

 

48,000

 

 

1,425,120

 

 

 

 

 

 

    

 

 

 

 

 

 

 

11,775,553

 

 

 

 

 

 

    

 

Software - 3.1%

 

 

 

 

 

 

 

Actuate Corporation a

 

 

76,600

 

 

436,620

 

American Software Cl. A

 

 

61,330

 

 

415,204

 

ANSYS a

 

 

46,400

 

 

2,416,048

 

†AutoNavi Holdings ADR a,c

 

 

35,000

 

 

561,050

 

Blackboard a,c

 

 

34,700

 

 

1,433,110

 

†Convio a

 

 

135,000

 

 

1,117,800

 

National Instruments

 

 

55,500

 

 

2,089,020

 

 

 

 

 

 

    

 

 

 

 

 

 

 

8,468,852

 

 

 

 

 

 

    

 

Telecommunications - 0.4%

 

 

 

 

 

 

 

†Citic Telecom International Holdings

 

 

1,817,000

 

 

579,734

 

Tekelec a

 

 

52,000

 

 

619,320

 

 

 

 

 

 

    

 

 

 

 

 

 

 

1,199,054

 

 

 

 

 

 

    

 

Total (Cost $26,762,280)

 

 

 

 

 

35,357,105

 

 

 

 

 

 

    

 
 

Miscellaneouse – 4.7%

 

 

 

 

 

 

 

Total (Cost $12,097,156)

 

 

 

 

 

13,104,550

 

 

 

 

 

 

    

 

 

 

 

 

 

 

     

VALUE

 

TOTAL COMMON STOCKS

 

 

 

 

(Cost $197,107,449)

 

$

260,423,190

 

 

 

    

 

 

 

 

 

 

REPURCHASE AGREEMENT – 6.5%

 

 

 

 

State Street Bank & Trust Company, 0.13% dated 12/31/10, due 1/3/11, maturity value $18,106,196 (collateralized by obligations of various U.S. Government Agencies, due 5/24/11, valued at $18,561,769)

 

 

 

 

(Cost $18,106,000)

 

 

18,106,000

 

 

 

    

 

 

 

 

 

 

 

 

 

COLLATERAL RECEIVED FOR SECURITIES
LOANED – 0.7%

 

 

 

 

Money Market Funds

 

 

 

 

Federated Government Obligations
Fund (7 day yield-0.0154%)
(Cost $1,857,773)

 

 

1,857,773

 

 

 

    

 

 

 

 

 

 

 

 

 

TOTAL INVESTMENTS – 101.2%

 

 

 

 

(Cost $217,071,222)

 

 

280,386,963

 

 

 

 

 

 

 

 

 

LIABILITIES LESS CASH
AND OTHER ASSETS – (1.2)%

 

 

(3,328,449

)

 

 

    

 

 

 

 

 

 

 

 

 

NET ASSETS – 100.0%

 

$

277,058,514

 

 

 

    

 


 

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

The Royce Funds 2010 Annual Report to Shareholders | 83

 

Schedules of Investments
 

 

Royce Opportunity Fund


 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

COMMON STOCKS – 93.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer Products – 3.7%

 

 

 

 

 

 

 

Apparel, Shoes and Accessories - 1.8%

 

 

 

 

 

 

 

Bernard Chaus a,d

 

 

1,036,836

 

$

114,052

 

Frederick’s of Hollywood Group a

 

 

930,328

 

 

837,295

 

Hanesbrands a

 

 

354,300

 

 

8,999,220

 

†Joe’s Jeans a,c

 

 

1,015,600

 

 

1,584,336

 

Liz Claiborne a,c

 

 

1,674,969

 

 

11,992,778

 

Quiksilver a

 

 

733,200

 

 

3,717,324

 

The Jones Group

 

 

860,171

 

 

13,367,058

 

 

 

 

 

 

    

 

 

 

 

 

 

 

40,612,063

 

 

 

 

 

 

    

 

Food/Beverage/Tobacco - 0.1%

 

 

 

 

 

 

 

Smart Balance a

 

 

608,500

 

 

2,634,805

 

 

 

 

 

 

    

 

Health, Beauty and Nutrition - 0.3%

 

 

 

 

 

 

 

Elizabeth Arden a

 

 

287,352

 

 

6,611,969

 

 

 

 

 

 

    

 

Home Furnishing and Appliances - 1.2%

 

 

 

 

 

 

 

American Woodmark

 

 

290,608

 

 

7,131,520

 

Furniture Brands International a

 

 

1,641,401

 

 

8,436,801

 

La-Z-Boy a

 

 

1,143,441

 

 

10,313,838

 

 

 

 

 

 

    

 

 

 

 

 

 

 

25,882,159

 

 

 

 

 

 

    

 

Sports and Recreation - 0.3%

 

 

 

 

 

 

 

Steinway Musical Instruments a

 

 

328,200

 

 

6,514,770

 

 

 

 

 

 

    

 

Total (Cost $86,038,890)

 

 

 

 

 

82,255,766

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Consumer Services – 10.0%

 

 

 

 

 

 

 

Direct Marketing - 0.2%

 

 

 

 

 

 

 

Gaiam Cl. A

 

 

672,234

 

 

5,176,202

 

 

 

 

 

 

    

 

Leisure and Entertainment - 0.6%

 

 

 

 

 

 

 

†Isle of Capri Casinos a

 

 

471,130

 

 

4,814,949

 

†Six Flags Entertainment

 

 

167,395

 

 

9,106,288

 

 

 

 

 

 

    

 

 

 

 

 

 

 

13,921,237

 

 

 

 

 

 

    

 

Media and Broadcasting - 0.1%

 

 

 

 

 

 

 

Ballantyne Strong a

 

 

152,550

 

 

1,185,313

 

 

 

 

 

 

    

 

Online Commerce - 0.3%

 

 

 

 

 

 

 

Autobytel a

 

 

1,363,422

 

 

1,172,543

 

1-800-FLOWERS.COM Cl. A a

 

 

1,541,027

 

 

4,145,362

 

 

 

 

 

 

    

 

 

 

 

 

 

 

5,317,905

 

 

 

 

 

 

    

 

Restaurants and Lodgings - 2.3%

 

 

 

 

 

 

 

California Pizza Kitchen a

 

 

578,868

 

 

10,002,839

 

Einstein Noah Restaurant Group a

 

 

340,552

 

 

4,784,756

 

Jamba a

 

 

2,228,167

 

 

5,057,939

 

Krispy Kreme Doughnuts a

 

 

740,000

 

 

5,165,200

 

Orient-Express Hotels Cl. A a

 

 

878,100

 

 

11,406,519

 

Red Robin Gourmet Burgers a

 

 

362,669

 

 

7,786,503

 

Ruby Tuesday a

 

 

554,200

 

 

7,237,852

 

 

 

 

 

 

    

 

 

 

 

 

 

 

51,441,608

 

 

 

 

 

 

    

 

Retail Stores - 6.5%

 

 

 

 

 

 

 

bebe stores

 

 

1,236,121

 

 

7,367,281

 

Brown Shoe

 

 

373,244

 

 

5,199,289

 

Central Garden & Pet a

 

 

629,697

 

 

6,196,218

 

Coldwater Creek a

 

 

724,400

 

 

2,296,348

 

Collective Brands a

 

 

419,600

 

 

8,853,560

 

Conn’s a,c

 

 

625,233

 

 

2,926,090

 

Cost Plus a

 

 

1,080,038

 

 

10,476,369

 

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Consumer Services (continued)

 

 

 

 

 

 

 

Retail Stores (continued)

 

 

 

 

 

 

 

dELiA*s a,b,c

 

 

2,002,784

 

$

3,484,844

 

Dillard’s Cl. A

 

 

519,100

 

 

19,694,654

 

Lithia Motors Cl. A

 

 

873,550

 

 

12,483,030

 

MarineMax a,b

 

 

1,219,450

 

 

11,401,858

 

Pacific Sunwear of California a

 

 

746,800

 

 

4,047,656

 

Penske Automotive Group a

 

 

563,956

 

 

9,824,114

 

Pier 1 Imports a

 

 

352,400

 

 

3,700,200

 

REX American Resources a

 

 

336,900

 

 

5,174,784

 

Saks a

 

 

836,850

 

 

8,954,295

 

Talbots (The) a

 

 

886,362

 

 

7,551,804

 

West Marine a

 

 

946,161

 

 

10,010,383

 

Wet Seal (The) Cl. A a

 

 

826,700

 

 

3,058,790

 

 

 

 

 

 

    

 

 

 

 

 

 

 

142,701,567

 

 

 

 

 

 

    

 

Total (Cost $169,149,980)

 

 

 

 

 

219,743,832

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Financial Intermediaries – 7.7%

 

 

 

 

 

 

 

Banking - 2.8%

 

 

 

 

 

 

 

Berkshire Hills Bancorp

 

 

196,300

 

 

4,338,230

 

Boston Private Financial Holdings

 

 

914,830

 

 

5,992,137

 

First Financial Holdings

 

 

198,200

 

 

2,281,282

 

Guaranty Bancorp a

 

 

716,501

 

 

1,010,266

 

Middleburg Financial

 

 

155,100

 

 

2,211,726

 

Old National Bancorp

 

 

370,700

 

 

4,407,623

 

Pacific Mercantile Bancorp a

 

 

15,786

 

 

58,566

 

Sterling Bancorp

 

 

489,700

 

 

5,127,159

 

SVB Financial Group a

 

 

234,500

 

 

12,440,225

 

†Tennessee Commerce Bancorp a

 

 

453,298

 

 

2,225,693

 

Texas Capital Bancshares a

 

 

297,800

 

 

6,334,206

 

Umpqua Holdings

 

 

510,200

 

 

6,214,236

 

Valley National Bancorp

 

 

160,780

 

 

2,299,154

 

Washington Federal

 

 

408,600

 

 

6,913,512

 

 

 

 

 

 

    

 

 

 

 

 

 

 

61,854,015

 

 

 

 

 

 

    

 

Insurance - 3.2%

 

 

 

 

 

 

 

Argo Group International Holdings

 

 

286,400

 

 

10,725,680

 

Fidelity National Financial Cl. A

 

 

464,300

 

 

6,351,624

 

MBIA a,c

 

 

618,110

 

 

7,411,139

 

Meadowbrook Insurance Group

 

 

391,800

 

 

4,015,950

 

Navigators Group a

 

 

227,900

 

 

11,474,765

 

†Old Republic International

 

 

628,300

 

 

8,563,729

 

Radian Group

 

 

431,400

 

 

3,481,398

 

Tower Group

 

 

377,700

 

 

9,661,566

 

Unitrin

 

 

362,400

 

 

8,893,296

 

 

 

 

 

 

    

 

 

 

 

 

 

 

70,579,147

 

 

 

 

 

 

    

 

Real Estate Investment Trusts - 0.0%

 

 

 

 

 

 

 

RAIT Financial Trust a

 

 

497,300

 

 

1,089,087

 

 

 

 

 

 

    

 

Securities Brokers - 1.7%

 

 

 

 

 

 

 

†KBW

 

 

371,500

 

 

10,372,280

 

Penson Worldwide a,c

 

 

681,030

 

 

3,330,237

 

Piper Jaffray a

 

 

263,900

 

 

9,239,139

 

†Stifel Financial a

 

 

229,300

 

 

14,225,772

 

 

 

 

 

 

    

 

 

 

 

 

 

 

37,167,428

 

 

 

 

 

 

    

 

Total (Cost $159,277,604)

 

 

 

 

 

170,689,677

 

 

 

 

 

 

    

 


 

 

 

84 | The Royce Funds 2010 Annual Report to Shareholders

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

December 31, 2010
 

 

 

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Financial Services – 1.6%

 

 

 

 

 

 

 

Diversified Financial Services - 0.5%

 

 

 

 

 

 

 

†PHH Corporation a

 

 

492,306

 

$

11,396,884

 

 

 

 

 

 

    

 

Investment Management - 1.0%

 

 

 

 

 

 

 

Evercore Partners Cl. A

 

 

245,400

 

 

8,343,600

 

Harris & Harris Group a

 

 

614,802

 

 

2,692,833

 

†Janus Capital Group

 

 

785,100

 

 

10,182,747

 

 

 

 

 

 

    

 

 

 

 

 

 

 

21,219,180

 

 

 

 

 

 

    

 

Other Financial Services - 0.1%

 

 

 

 

 

 

 

Hilltop Holdings a

 

 

324,200

 

 

3,216,064

 

 

 

 

 

 

    

 

Total (Cost $31,523,632)

 

 

 

 

 

35,832,128

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Health – 1.8%

 

 

 

 

 

 

 

Commercial Services - 0.1%

 

 

 

 

 

 

 

Kendle International a

 

 

286,233

 

 

3,117,077

 

 

 

 

 

 

    

 

Drugs and Biotech - 0.4%

 

 

 

 

 

 

 

Cambrex Corporation a,b

 

 

1,601,354

 

 

8,279,000

 

 

 

 

 

 

    

 

Health Services - 0.7%

 

 

 

 

 

 

 

Albany Molecular Research a

 

 

702,575

 

 

3,948,472

 

Kindred Healthcare a

 

 

327,800

 

 

6,021,686

 

PharMerica Corporation a

 

 

419,480

 

 

4,803,046

 

 

 

 

 

 

    

 

 

 

 

 

 

 

14,773,204

 

 

 

 

 

 

    

 

Medical Products and Devices - 0.6%

 

 

 

 

 

 

 

AngioDynamics a

 

 

314,188

 

 

4,829,070

 

Del Global Technologies a,b,d

 

 

1,581,912

 

 

1,123,158

 

Digirad Corporation a

 

 

546,201

 

 

1,147,022

 

†Synergetics USA a,c

 

 

333,915

 

 

1,566,061

 

Wright Medical Group a

 

 

273,876

 

 

4,253,294

 

 

 

 

 

 

    

 

 

 

 

 

 

 

12,918,605

 

 

 

 

 

 

    

 

Total (Cost $45,714,110)

 

 

 

 

 

39,087,886

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Industrial Products – 24.5%

 

 

 

 

 

 

 

Automotive - 2.0%

 

 

 

 

 

 

 

ArvinMeritor a

 

 

429,305

 

 

8,809,339

 

Cooper Tire & Rubber

 

 

427,269

 

 

10,075,003

 

Dana Holding Corporation a

 

 

677,386

 

 

11,657,813

 

†Visteon Corporation a,c

 

 

68,766

 

 

5,105,875

 

†Wabash National a

 

 

688,600

 

 

8,159,910

 

 

 

 

 

 

    

 

 

 

 

 

 

 

43,807,940

 

 

 

 

 

 

    

 

Building Systems and Components - 1.1%

 

 

 

 

 

 

 

Apogee Enterprises

 

 

604,563

 

 

8,143,464

 

Federal Signal

 

 

656,876

 

 

4,506,169

 

NCI Building Systems a

 

 

713,469

 

 

9,981,431

 

PGT a,c

 

 

1,112,009

 

 

2,724,422

 

 

 

 

 

 

    

 

 

 

 

 

 

 

25,355,486

 

 

 

 

 

 

    

 

Construction Materials - 1.6%

 

 

 

 

 

 

 

Louisiana-Pacific Corporation a

 

 

1,105,100

 

 

10,454,246

 

Texas Industries

 

 

278,577

 

 

12,753,255

 

Trex Company a,c

 

 

524,740

 

 

12,572,770

 

 

 

 

 

 

    

 

 

 

 

 

 

 

35,780,271

 

 

 

 

 

 

    

 

Industrial Components - 1.7%

 

 

 

 

 

 

 

CTS Corporation

 

 

617,164

 

 

6,825,834

 

Gerber Scientific a,b

 

 

1,306,100

 

 

10,279,007

 

GrafTech International a

 

 

266,960

 

 

5,296,486

 

Magnetek a

 

 

1,269,418

 

 

1,713,714

 

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Industrial Products (continued)

 

 

 

 

 

 

 

Industrial Components (continued)

 

 

 

 

 

 

 

Mueller Water Products Cl. A

 

 

1,180,175

 

$

4,921,330

 

Planar Systems a,b,c

 

 

1,418,133

 

 

2,892,991

 

Zygo Corporation a

 

 

453,586

 

 

5,547,357

 

 

 

 

 

 

    

 

 

 

 

 

 

 

37,476,719

 

 

 

 

 

 

    

 

Machinery - 1.3%

 

 

 

 

 

 

 

Astec Industries a

 

 

45,333

 

 

1,469,243

 

Chart Industries a

 

 

313,193

 

 

10,579,660

 

Flow International a

 

 

1,823,172

 

 

7,456,773

 

Hardinge

 

 

390,507

 

 

3,803,538

 

Hurco Companies a

 

 

205,795

 

 

4,867,052

 

 

 

 

 

 

    

 

 

 

 

 

 

 

28,176,266

 

 

 

 

 

 

    

 

Metal Fabrication and Distribution - 5.3%

 

 

 

 

 

 

 

Carpenter Technology

 

 

378,581

 

 

15,234,099

 

Haynes International

 

 

398,091

 

 

16,652,147

 

Insteel Industries

 

 

406,800

 

 

5,080,932

 

†Kaiser Aluminum

 

 

272,400

 

 

13,644,516

 

Ladish a

 

 

55,274

 

 

2,686,869

 

†Mueller Industries

 

 

256,700

 

 

8,394,090

 

NN a

 

 

722,850

 

 

8,934,426

 

Northwest Pipe a

 

 

384,735

 

 

9,245,182

 

RTI International Metals a

 

 

273,500

 

 

7,379,030

 

Timken Company (The)

 

 

304,000

 

 

14,509,920

 

Trinity Industries

 

 

549,750

 

 

14,628,848

 

 

 

 

 

 

    

 

 

 

 

 

 

 

116,390,059

 

 

 

 

 

 

    

 

Miscellaneous Manufacturing - 0.6%

 

 

 

 

 

 

 

Barnes Group

 

 

583,500

 

 

12,060,945

 

Flanders Corporation a,d

 

 

299,765

 

 

926,274

 

†Spire Corporation a,c

 

 

264,684

 

 

1,379,004

 

 

 

 

 

 

    

 

 

 

 

 

 

 

14,366,223

 

 

 

 

 

 

    

 

Paper and Packaging - 2.0%

 

 

 

 

 

 

 

Albany International Cl. A

 

 

577,800

 

 

13,688,082

 

Boise

 

 

777,600

 

 

6,166,368

 

†GCB Jefferson Smurfit (Warrants) a

 

 

3,677,000

 

 

119,503

 

Graphic Packaging Holding Company a

 

 

1,039,400

 

 

4,043,266

 

†Smurfit-Stone Container a

 

 

371,039

 

 

9,498,598

 

†Stone & Webster (Warrants) a,c

 

 

2,206,000

 

 

71,695

 

Temple-Inland

 

 

524,200

 

 

11,134,008

 

 

 

 

 

 

    

 

 

 

 

 

 

 

44,721,520

 

 

 

 

 

 

    

 

Pumps, Valves and Bearings - 0.9%

 

 

 

 

 

 

 

CIRCOR International

 

 

200,477

 

 

8,476,168

 

Robbins & Myers

 

 

314,100

 

 

11,238,498

 

 

 

 

 

 

    

 

 

 

 

 

 

 

19,714,666

 

 

 

 

 

 

    

 

Specialty Chemicals and Materials - 6.7%

 

 

 

 

 

 

 

Aceto Corporation

 

 

873,979

 

 

7,865,811

 

Chemtura Corporation a

 

 

403,800

 

 

6,452,724

 

Cytec Industries

 

 

101,113

 

 

5,365,056

 

Ferro Corporation a

 

 

938,795

 

 

13,743,959

 

H.B. Fuller Company

 

 

411,700

 

 

8,448,084

 

Lydall a,b

 

 

905,463

 

 

7,288,977

 

Material Sciences a,b

 

 

1,006,950

 

 

6,434,410

 

Minerals Technologies

 

 

154,300

 

 

10,092,763

 

OM Group a

 

 

398,380

 

 

15,341,614

 

Park Electrochemical

 

 

460,142

 

 

13,804,260

 

PolyOne Corporation a

 

 

692,350

 

 

8,647,451

 


 

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

The Royce Funds 2010 Annual Report to Shareholders | 85

 

Schedules of Investments
 

 

Royce Opportunity Fund (continued)

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Industrial Products (continued)

 

 

 

 

 

 

 

Specialty Chemicals and Materials (continued)

 

 

 

 

 

 

 

Quaker Chemical

 

 

232,800

 

$

9,700,776

 

Rockwood Holdings a

 

 

147,374

 

 

5,765,271

 

Solutia a

 

 

536,800

 

 

12,389,344

 

Spartech Corporation a

 

 

887,561

 

 

8,307,571

 

†Zoltek Companies a,c

 

 

674,400

 

 

7,789,320

 

 

 

 

 

 

    

 

 

 

 

 

 

 

147,437,391

 

 

 

 

 

 

    

 

Textiles - 1.0%

 

 

 

 

 

 

 

Dixie Group a,b

 

 

773,044

 

 

2,775,228

 

Interface Cl. A

 

 

485,500

 

 

7,598,075

 

Unifi a

 

 

654,239

 

 

11,076,266

 

 

 

 

 

 

    

 

 

 

 

 

 

 

21,449,569

 

 

 

 

 

 

    

 

Other Industrial Products - 0.3%

 

 

 

 

 

 

 

Koppers Holdings

 

 

166,392

 

 

5,953,506

 

 

 

 

 

 

    

 

Total (Cost $373,961,835)

 

 

 

 

 

540,629,616

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Industrial Services – 8.6%

 

 

 

 

 

 

 

Advertising and Publishing - 2.7%

 

 

 

 

 

 

 

Harris Interactive a

 

 

2,415,064

 

 

2,946,378

 

†Interpublic Group of Companies a

 

 

903,900

 

 

9,599,418

 

Journal Communications Cl. A a

 

 

330,086

 

 

1,666,934

 

Martha Stewart Living Omnimedia Cl. A a

 

 

1,371,850

 

 

6,063,577

 

McClatchy Company (The) Cl. A a,c

 

 

1,231,500

 

 

5,751,105

 

Media General Cl. A a

 

 

1,111,610

 

 

6,425,106

 

†Meredith Corporation

 

 

260,462

 

 

9,025,008

 

New York Times Cl. A a,c

 

 

860,900

 

 

8,436,820

 

ValueClick a

 

 

622,891

 

 

9,984,943

 

 

 

 

 

 

    

 

 

 

 

 

 

 

59,899,289

 

 

 

 

 

 

    

 

Commercial Services - 2.3%

 

 

 

 

 

 

 

Cinedigm Digital Cinema Cl. A a,c

 

 

967,100

 

 

1,595,715

 

Furmanite Corporation a

 

 

1,307,980

 

 

9,038,142

 

Hudson Highland Group a

 

 

679,478

 

 

3,961,357

 

†Korn/Ferry International a

 

 

419,000

 

 

9,683,090

 

Rentrak Corporation a

 

 

230,400

 

 

6,948,864

 

TRC Companies a,b

 

 

1,772,880

 

 

6,205,080

 

United Rentals a

 

 

581,440

 

 

13,227,760

 

 

 

 

 

 

    

 

 

 

 

 

 

 

50,660,008

 

 

 

 

 

 

    

 

Engineering and Construction - 1.9%

 

 

 

 

 

 

 

Comstock Homebuilding Cl. A a,b

 

 

1,229,265

 

 

1,425,947

 

Hovnanian Enterprises Cl. A a,c

 

 

1,277,332

 

 

5,224,288

 

iShares Dow Jones US Home Construction Index Fund

 

 

472,900

 

 

6,232,822

 

M.D.C. Holdings

 

 

364,800

 

 

10,495,296

 

Matrix Service a

 

 

640,400

 

 

7,800,072

 

Toll Brothers a

 

 

602,984

 

 

11,456,696

 

 

 

 

 

 

    

 

 

 

 

 

 

 

42,635,121

 

 

 

 

 

 

    

 

Transportation and Logistics - 1.7%

 

 

 

 

 

 

 

Arkansas Best

 

 

270,772

 

 

7,424,568

 

Atlas Air Worldwide Holdings a

 

 

179,400

 

 

10,015,902

 

Horizon Lines Cl. A

 

 

1,007,056

 

 

4,400,835

 

JetBlue Airways a

 

 

307,200

 

 

2,030,592

 

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Industrial Services (continued)

 

 

 

 

 

 

 

Transportation and Logistics (continued)

 

 

 

 

 

 

 

Overseas Shipholding Group

 

 

362,400

 

$

12,836,208

 

 

 

 

 

 

    

 

 

 

 

 

 

 

36,708,105

 

 

 

 

 

 

    

 

Total (Cost $187,334,620)

 

 

 

 

 

189,902,523

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Natural Resources – 3.8%

 

 

 

 

 

 

 

Energy Services - 1.0%

 

 

 

 

 

 

 

Newpark Resources a

 

 

474,177

 

 

2,920,930

 

†Patterson-UTI Energy

 

 

401,300

 

 

8,648,015

 

Rowan Companies a

 

 

120,700

 

 

4,213,637

 

StealthGas a

 

 

854,945

 

 

6,813,912

 

 

 

 

 

 

    

 

 

 

 

 

 

 

22,596,494

 

 

 

 

 

 

    

 

Oil and Gas - 2.1%

 

 

 

 

 

 

 

Goodrich Petroleum a,c

 

 

440,100

 

 

7,763,364

 

†McMoRan Exploration a,c

 

 

333,802

 

 

5,721,366

 

SM Energy

 

 

112,800

 

 

6,647,304

 

Stone Energy a

 

 

262,200

 

 

5,844,438

 

Swift Energy a

 

 

248,100

 

 

9,713,115

 

†Tesoro Corporation a

 

 

526,300

 

 

9,757,602

 

 

 

 

 

 

    

 

 

 

 

 

 

 

45,447,189

 

 

 

 

 

 

    

 

Precious Metals and Mining - 0.7%

 

 

 

 

 

 

 

Century Aluminum a

 

 

1,009,200

 

 

15,672,876

 

 

 

 

 

 

    

 

Total (Cost $57,548,427)

 

 

 

 

 

83,716,559

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Technology – 26.8%

 

 

 

 

 

 

 

Aerospace and Defense - 2.3%

 

 

 

 

 

 

 

GenCorp a

 

 

795,642

 

 

4,113,469

 

Hexcel Corporation a

 

 

657,847

 

 

11,900,452

 

Kaman Corporation

 

 

521,081

 

 

15,147,825

 

Mercury Computer Systems a

 

 

527,800

 

 

9,700,964

 

Moog Cl. A a

 

 

242,500

 

 

9,651,500

 

 

 

 

 

 

    

 

 

 

 

 

 

 

50,514,210

 

 

 

 

 

 

    

 

Components and Systems - 5.0%

 

 

 

 

 

 

 

Analogic Corporation

 

 

207,225

 

 

10,259,710

 

Benchmark Electronics a

 

 

531,860

 

 

9,658,578

 

Cray a

 

 

1,402,381

 

 

10,027,024

 

Dot Hill Systems a

 

 

2,328,221

 

 

4,051,104

 

Evans & Sutherland Computer a,b,d

 

 

766,730

 

 

567,380

 

Identive Group a

 

 

902,205

 

 

2,273,557

 

Intermec a

 

 

913,850

 

 

11,569,341

 

Interphase Corporation a,b

 

 

373,600

 

 

672,480

 

KEMET Corporation a

 

 

801,254

 

 

11,682,283

 

Maxwell Technologies a

 

 

378,311

 

 

7,146,295

 

Methode Electronics

 

 

373,102

 

 

4,839,133

 

Network Engines a

 

 

1,018,246

 

 

1,547,734

 

Newport Corporation a

 

 

726,687

 

 

12,622,553

 

Perceptron a

 

 

288,213

 

 

1,420,890

 

SigmaTron International a,b

 

 

329,572

 

 

2,109,261

 

SMART Modular Technologies (WWH) a

 

 

492,600

 

 

2,837,376

 

†Viasystems Group a

 

 

334,608

 

 

6,739,005

 

Vishay Intertechnology a

 

 

784,423

 

 

11,515,330

 

 

 

 

 

 

    

 

 

 

 

 

 

 

111,539,034

 

 

 

 

 

 

    

 

Distribution - 0.5%

 

 

 

 

 

 

 

Ingram Micro Cl. A a

 

 

613,300

 

 

11,707,897

 

 

 

 

 

 

    

 


 

 

 

86 | The Royce Funds 2010 Annual Report to Shareholders

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

December 31, 2010
 

 

 

 

 

 

 

 

 

 

 

 

 

 

SHARES

     

 

VALUE

 

Technology (continued)

 

 

 

 

 

 

 

Internet Software and Services - 1.8%

 

 

 

 

 

 

 

†AOL a

 

 

492,200

 

$

11,670,062

 

EarthLink

 

 

894,500

 

 

7,692,700

 

InfoSpace a

 

 

898,121

 

 

7,454,404

 

S1 Corporation a

 

 

959,857

 

 

6,623,013

 

Support.com a

 

 

730,485

 

 

4,733,543

 

WebMediaBrands a,c

 

 

1,367,982

 

 

2,188,771

 

 

 

 

 

 

    

 

 

 

 

 

 

 

40,362,493

 

 

 

 

 

 

    

 

Semiconductors and Equipment - 9.7%

 

 

 

 

 

 

 

Advanced Energy Industries a

 

 

876,256

 

 

11,952,132

 

ANADIGICS a

 

 

1,166,393

 

 

8,083,104

 

†ATMI a

 

 

428,900

 

 

8,552,266

 

AXT a

 

 

466,980

 

 

4,875,271

 

Brooks Automation a

 

 

1,285,800

 

 

11,662,206

 

BTU International a,b

 

 

627,955

 

 

5,645,315

 

Cascade Microtech a

 

 

34,916

 

 

150,837

 

Cohu

 

 

417,300

 

 

6,918,834

 

Fairchild Semiconductor International a

 

 

544,900

 

 

8,505,889

 

FEI Company a

 

 

444,400

 

 

11,736,604

 

Integrated Silicon Solution a

 

 

333,875

 

 

2,681,016

 

International Rectifier a

 

 

258,592

 

 

7,677,597

 

Intevac a

 

 

541,494

 

 

7,586,331

 

Kulicke & Soffa Industries a

 

 

713,600

 

 

5,137,920

 

LeCroy Corporation a

 

 

777,636

 

 

7,651,938

 

MEMC Electronic Materials a

 

 

1,090,200

 

 

12,275,652

 

Mentor Graphics a

 

 

960,500

 

 

11,526,000

 

Nanometrics a

 

 

720,542

 

 

9,244,554

 

Novellus Systems a

 

 

220,901

 

 

7,139,520

 

Pericom Semiconductor a

 

 

980,766

 

 

10,768,811

 

PLX Technology a

 

 

1,105,212

 

 

3,989,815

 

Rudolph Technologies a

 

 

333,311

 

 

2,743,150

 

Sanmina-SCI Corporation a

 

 

812,301

 

 

9,325,215

 

Standard Microsystems a

 

 

266,600

 

 

7,686,078

 

SunPower Corporation Cl. B a

 

 

980,568

 

 

12,168,849

 

TriQuint Semiconductor a

 

 

410,072

 

 

4,793,742

 

TTM Technologies a

 

 

608,200

 

 

9,068,262

 

Ultra Clean Holdings a

 

 

176,206

 

 

1,640,478

 

Varian Semiconductor Equipment Associates a

 

 

68,200

 

 

2,521,354

 

 

 

 

 

 

    

 

 

 

 

 

 

 

213,708,740

 

 

 

 

 

 

    

 

Software - 1.8%

 

 

 

 

 

 

 

Aspen Technology a

 

 

470,935

 

 

5,980,875

 

Avid Technology a

 

 

638,733

 

 

11,152,278

 

Bottomline Technologies a

 

 

710,698

 

 

15,429,254

 

Concurrent Computer a

 

 

374,787

 

 

1,888,926

 

Epicor Software a

 

 

456,585

 

 

4,611,508

 

 

 

 

 

 

    

 

 

 

 

 

 

 

39,062,841

 

 

 

 

 

 

    

 

Telecommunications - 5.7%

 

 

 

 

 

 

 

Aviat Networks a

 

 

1,480,438

 

 

7,505,821

 

ClearOne Communications a,b

 

 

684,326

 

 

2,477,260

 

Dialogic a,c

 

 

515,724

 

 

2,037,110

 

General Communication Cl. A a

 

 

807,087

 

 

10,217,721

 

Globecomm Systems a

 

 

612,705

 

 

6,127,050

 

Harmonic a

 

 

1,035,200

 

 

8,871,664

 

† Iridium Communications a,c

 

 

522,416

 

 

4,309,932

 

Loral Space & Communications a

 

 

175,580

 

 

13,431,870

 

 

 

 

 

 

 

 

 

 

 

 

SHARES

     

 

VALUE

 

Technology (continued)

 

 

 

 

 

 

 

Telecommunications (continued)

 

 

 

 

 

 

 

MasTec a

 

 

823,858

 

$

12,020,088

 

Network Equipment Technologies a,b

 

 

1,838,489

 

 

8,512,204

 

Oplink Communications a

 

 

491,016

 

 

9,069,066

 

Opnext a

 

 

1,652,606

 

 

2,908,587

 

Powerwave Technologies a

 

 

2,055,750

 

 

5,221,605

 

Symmetricom a

 

 

1,028,804

 

 

7,294,220

 

Tekelec a

 

 

596,150

 

 

7,100,146

 

Tollgrade Communications a,b

 

 

651,988

 

 

6,050,449

 

UTStarcom a

 

 

2,518,402

 

 

5,187,908

 

Westell Technologies Cl. A a

 

 

2,061,071

 

 

6,739,702

 

 

 

 

 

 

    

 

 

 

 

 

 

 

125,082,403

 

 

 

 

 

 

    

 

Total (Cost $495,129,222)

 

 

 

 

 

591,977,618

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Miscellaneouse – 5.0%

 

 

 

 

 

 

 

Total (Cost $96,557,520)

 

 

 

 

 

109,385,723

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

TOTAL COMMON STOCKS

 

 

 

 

 

 

 

(Cost $1,702,235,840)

 

 

 

 

 

2,063,221,328

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

REPURCHASE AGREEMENT – 6.4%

 

 

 

 

 

 

 

State Street Bank & Trust Company, 0.13% dated 12/31/10, due 1/3/11, maturity value $142,589,545 (collateralized by obligations of various U.S. Government Agencies, 0.48% due 4/25/11-4/29/11, valued at $146,155,623)

 

 

 

 

 

 

 

(Cost $142,588,000)

 

 

 

 

 

142,588,000

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

COLLATERAL RECEIVED FOR SECURITIES LOANED – 1.9%

 

 

 

 

 

 

 

Money Market Funds
Federated Government Obligations Fund
(7 day yield-0.0154%)

 

 

 

 

 

 

 

(Cost $41,587,493)

 

 

 

 

 

41,587,493

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

TOTAL INVESTMENTS – 101.8%

 

 

 

 

 

 

 

(Cost $1,886,411,333)

 

 

 

 

 

2,247,396,821

 

 

 

 

 

 

 

 

 

LIABILITIES LESS CASH AND OTHER
ASSETS – (1.8)%

 

 

 

 

 

(40,652,287

)

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

NET ASSETS – 100.0%

 

 

 

 

$

2,206,744,534

 

 

 

 

 

 

    

 


 

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

The Royce Funds 2010 Annual Report to Shareholders | 87

 

Schedules of Investments
 

 

Royce Special Equity Fund


 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

COMMON STOCKS – 84.7%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer Products – 12.3%

 

 

 

 

 

 

 

Apparel, Shoes and Accessories - 4.3%

 

 

 

 

 

 

 

Deckers Outdoor a

 

 

497,700

 

$

39,686,598

 

Movado Group a,b

 

 

1,297,900

 

 

20,948,106

 

Volcom

 

 

482,000

 

 

9,095,340

 

Wolverine World Wide

 

 

700,800

 

 

22,341,504

 

 

 

 

 

 

    

 

 

 

 

 

 

 

92,071,548

 

 

 

 

 

 

    

 

Food/Beverage/Tobacco - 4.8%

 

 

 

 

 

 

 

J&J Snack Foods

 

 

558,265

 

 

26,930,703

 

Lancaster Colony

 

 

966,500

 

 

55,283,800

 

National Beverage

 

 

1,622,148

 

 

21,315,025

 

 

 

 

 

 

    

 

 

 

 

 

 

 

103,529,528

 

 

 

 

 

 

    

 

Home Furnishing and Appliances - 1.7%

 

 

 

 

 

 

 

Hooker Furniture b

 

 

1,070,000

 

 

15,119,100

 

Universal Electronics a,b

 

 

749,437

 

 

21,261,528

 

 

 

 

 

 

    

 

 

 

 

 

 

 

36,380,628

 

 

 

 

 

 

    

 

Sports and Recreation - 0.7%

 

 

 

 

 

 

 

Hasbro

 

 

318,500

 

 

15,026,830

 

 

 

 

 

 

    

 

Other Consumer Products - 0.8%

 

 

 

 

 

 

 

CSS Industries b

 

 

793,100

 

 

16,345,791

 

 

 

 

 

 

    

 

Total (Cost $188,205,911)

 

 

 

 

 

263,354,325

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Consumer Services – 9.9%

 

 

 

 

 

 

 

Leisure and Entertainment - 0.2%

 

 

 

 

 

 

 

Bowl America Cl. A b

 

 

331,339

 

 

4,141,737

 

 

 

 

 

 

    

 

Restaurants and Lodgings - 0.5%

 

 

 

 

 

 

 

Frisch’s Restaurants b

 

 

505,100

 

 

11,273,832

 

 

 

 

 

 

    

 

Retail Stores - 9.2%

 

 

 

 

 

 

 

American Eagle Outfitters

 

 

3,109,300

 

 

45,489,059

 

Arden Group Cl. A

 

 

132,001

 

 

10,890,083

 

Bed Bath & Beyond a

 

 

1,065,300

 

 

52,359,495

 

Buckle (The)

 

 

427,500

 

 

16,146,675

 

PetSmart

 

 

718,200

 

 

28,598,724

 

Tiffany & Co.

 

 

306,200

 

 

19,067,074

 

†Weis Markets

 

 

560,000

 

 

22,584,800

 

 

 

 

 

 

    

 

 

 

 

 

 

 

195,135,910

 

 

 

 

 

 

    

 

Total (Cost $172,389,484)

 

 

 

 

 

210,551,479

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Financial Services – 1.9%

 

 

 

 

 

 

 

Information and Processing - 1.9%

 

 

 

 

 

 

 

Computer Services b,d

 

 

778,977

 

 

19,708,118

 

†Total System Services

 

 

1,293,300

 

 

19,890,954

 

 

 

 

 

 

    

 

Total (Cost $33,315,089)

 

 

 

 

 

39,599,072

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Health – 8.2%

 

 

 

 

 

 

 

Commercial Services - 1.0%

 

 

 

 

 

 

 

Schein (Henry) a

 

 

332,100

 

 

20,387,619

 

 

 

 

 

 

    

 

Drugs and Biotech - 0.6%

 

 

 

 

 

 

 

Pharmaceutical Product Development

 

 

489,300

 

 

13,279,602

 

 

 

 

 

 

    

 

Health Services - 0.2%

 

 

 

 

 

 

 

Psychemedics Corporation b

 

 

517,800

 

 

4,235,604

 

 

 

 

 

 

    

 

Medical Products and Devices - 6.4%

 

 

 

 

 

 

 

Atrion Corporation b

 

 

147,030

 

 

26,386,004

 

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Health (continued)

 

 

 

 

 

 

 

Medical Products and Devices (continued)

 

 

 

 

 

 

 

Bio-Rad Laboratories Cl. A a

 

 

549,000

 

$

57,013,650

 

Mesa Laboratories b

 

 

309,648

 

 

9,289,440

 

Owens & Minor

 

 

610,600

 

 

17,969,958

 

STERIS Corporation

 

 

518,600

 

 

18,908,156

 

Utah Medical Products b

 

 

272,768

 

 

7,274,722

 

 

 

 

 

 

    

 

 

 

 

 

 

 

136,841,930

 

 

 

 

 

 

    

 

Total (Cost $127,005,055)

 

 

 

 

 

174,744,755

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Industrial Products – 29.9%

 

 

 

 

 

 

 

Automotive - 2.3%

 

 

 

 

 

 

 

Dorman Products a,b

 

 

1,347,037

 

 

48,816,621

 

 

 

 

 

 

    

 

Construction Materials - 0.1%

 

 

 

 

 

 

 

Monarch Cement

 

 

76,500

 

 

1,894,905

 

 

 

 

 

 

    

 

Industrial Components - 7.6%

 

 

 

 

 

 

 

Hubbell Cl. B

 

 

984,400

 

 

59,191,972

 

Powell Industries a

 

 

453,400

 

 

14,907,792

 

Regal-Beloit

 

 

617,324

 

 

41,212,550

 

Thomas & Betts a

 

 

981,000

 

 

47,382,300

 

 

 

 

 

 

    

 

 

 

 

 

 

 

162,694,614

 

 

 

 

 

 

    

 

Machinery - 2.4%

 

 

 

 

 

 

 

Ampco-Pittsburgh b

 

 

791,700

 

 

22,207,185

 

Hurco Companies a,b

 

 

347,100

 

 

8,208,915

 

Nordson Corporation

 

 

79,000

 

 

7,258,520

 

Wabtec Corporation

 

 

267,620

 

 

14,154,422

 

 

 

 

 

 

    

 

 

 

 

 

 

 

51,829,042

 

 

 

 

 

 

    

 

Metal Fabrication and Distribution - 2.3%

 

 

 

 

 

 

 

Central Steel & Wire d

 

 

2,900

 

 

1,827,000

 

Foster (L.B.) Company Cl. A a,b

 

 

814,111

 

 

33,329,704

 

Insteel Industries b

 

 

1,048,733

 

 

13,098,675

 

 

 

 

 

 

    

 

 

 

 

 

 

 

48,255,379

 

 

 

 

 

 

    

 

Miscellaneous Manufacturing - 2.4%

 

 

 

 

 

 

 

Carlisle Companies

 

 

580,700

 

 

23,077,018

 

Met-Pro Corporation b

 

 

835,704

 

 

9,869,664

 

Standex International b

 

 

632,800

 

 

18,927,048

 

 

 

 

 

 

    

 

 

 

 

 

 

 

51,873,730

 

 

 

 

 

 

    

 

Paper and Packaging - 2.4%

 

 

 

 

 

 

 

Clearwater Paper a,b

 

 

658,500

 

 

51,560,550

 

 

 

 

 

 

    

 

Pumps, Valves and Bearings - 1.0%

 

 

 

 

 

 

 

Kaydon Corporation

 

 

524,000

 

 

21,337,280

 

 

 

 

 

 

    

 

Specialty Chemicals and Materials - 9.4%

 

 

 

 

 

 

 

Hawkins

 

 

440,600

 

 

19,562,640

 

Lubrizol Corporation (The)

 

 

645,000

 

 

68,937,600

 

Park Electrochemical b

 

 

1,442,000

 

 

43,260,000

 

Schulman (A.)

 

 

1,292,500

 

 

29,585,325

 

†Stepan Company b

 

 

510,492

 

 

38,935,225

 

 

 

 

 

 

    

 

 

 

 

 

 

 

200,280,790

 

 

 

 

 

 

    

 

Total (Cost $445,940,277)

 

 

 

 

 

638,542,911

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Industrial Services – 7.4%

 

 

 

 

 

 

 

Advertising and Publishing - 1.3%

 

 

 

 

 

 

 

Meredith Corporation

 

 

785,400

 

 

27,214,110

 

 

 

 

 

 

    

 

Commercial Services - 3.2%

 

 

 

 

 

 

 

Cintas Corporation

 

 

586,400

 

 

16,395,744

 


 

 

 

88 | The Royce Funds 2010 Annual Report to Shareholders

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

December 31, 2010
 

 

 

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Industrial Services (continued)

 

 

 

 

 

 

 

Commercial Services (continued)

 

 

 

 

 

 

 

Towers Watson & Company Cl. A

 

 

383,700

 

$

19,975,422

 

†UniFirst Corporation

 

 

576,700

 

 

31,747,335

 

 

 

 

 

 

    

 

 

 

 

 

 

 

68,118,501

 

 

 

 

 

 

    

 

Engineering and Construction - 0.9%

 

 

 

 

 

 

 

Baker (Michael) a,b

 

 

593,014

 

 

18,442,736

 

 

 

 

 

 

    

 

Industrial Distribution - 2.0%

 

 

 

 

 

 

 

Applied Industrial Technologies

 

 

772,559

 

 

25,092,716

 

Watsco

 

 

291,700

 

 

18,400,436

 

 

 

 

 

 

    

 

 

 

 

 

 

 

43,493,152

 

 

 

 

 

 

    

 

Total (Cost $128,308,229)

 

 

 

 

 

157,268,499

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Natural Resources – 0.2%

 

 

 

 

 

 

 

Energy Services - 0.2%

 

 

 

 

 

 

 

Lufkin Industries

 

 

61,938

 

 

3,864,312

 

 

 

 

 

 

    

 

Total (Cost $985,548)

 

 

 

 

 

3,864,312

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Technology – 13.7%

 

 

 

 

 

 

 

Aerospace and Defense - 3.5%

 

 

 

 

 

 

 

National Presto Industries b

 

 

575,500

 

 

74,820,755

 

 

 

 

 

 

    

 

Components and Systems - 4.0%

 

 

 

 

 

 

 

AVX Corporation

 

 

4,621,000

 

 

71,302,030

 

Littelfuse

 

 

29,562

 

 

1,391,188

 

Rimage Corporation a

 

 

301,500

 

 

4,495,365

 

Zebra Technologies Cl. A a

 

 

217,800

 

 

8,274,222

 

 

 

 

 

 

    

 

 

 

 

 

 

 

85,462,805

 

 

 

 

 

 

    

 

Semiconductors and Equipment - 1.7%

 

 

 

 

 

 

 

†Teradyne a

 

 

2,511,800

 

 

35,265,672

 

 

 

 

 

 

    

 

Software - 0.1%

 

 

 

 

 

 

 

Versant Corporation a,b

 

 

184,168

 

 

2,175,024

 

 

 

 

 

 

    

 

Telecommunications - 4.4%

 

 

 

 

 

 

 

† Arris Group a

 

 

2,721,300

 

 

30,532,986

 

NeuStar Cl. A a

 

 

1,193,900

 

 

31,101,095

 

Plantronics

 

 

887,500

 

 

33,032,750

 

 

 

 

 

 

    

 

 

 

 

 

 

 

94,666,831

 

 

 

 

 

 

    

 

Total (Cost $209,448,568)

 

 

 

 

 

292,391,087

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Miscellaneouse – 1.2%

 

 

 

 

 

 

 

Total (Cost $22,908,784)

 

 

 

 

 

25,899,248

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

TOTAL COMMON STOCKS

 

 

 

 

 

 

 

(Cost $1,328,506,945)

 

 

 

 

 

1,806,215,688

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

REPURCHASE AGREEMENT – 15.1%

 

 

 

 

 

 

 

State Street Bank & Trust Company, 0.13% dated 12/31/10, due 1/3/11, maturity value $320,797,475 (collateralized by obligations of various U.S. Government Agencies, 0.54% due 5/24/11-5/27/11, valued at $328,816,581)

 

 

 

 

 

 

 

(Cost $320,794,000)

 

 

 

 

 

320,794,000

 

 

 

 

 

 

    

 

 

 

 

 

 

 

     

VALUE

 

TOTAL INVESTMENTS – 99.8%

 

 

 

 

(Cost $1,649,300,945)

 

$

2,127,009,688

 

 

 

 

 

 

 

 

 

CASH AND OTHER ASSETS
LESS LIABILITIES – 0.2%

 

 

5,157,791

 

 

 

    

 

 

 

 

 

 

 

 

 

NET ASSETS – 100.0%

 

$

2,132,167,479

 

 

 

    

 


 

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

The Royce Funds 2010 Annual Report to Shareholders | 89

 

Schedules of Investments
 

 

Royce Value Fund

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

COMMON STOCKS – 98.3%

 

 

 

 

 

 

 

Consumer Products – 6.1%

 

 

 

 

 

 

 

Apparel, Shoes and Accessories - 2.8%

 

 

 

 

 

 

 

Coach

 

 

372,695

 

$

20,613,760

 

Fossil a

 

 

422,604

 

 

29,785,130

 

 

 

 

 

 

    

 

 

 

 

 

 

 

50,398,890

 

 

 

 

 

 

    

 

Food/Beverage/Tobacco - 1.8%

 

 

 

 

 

 

 

Hormel Foods

 

 

639,644

 

 

32,788,152

 

 

 

 

 

 

    

 

Sports and Recreation - 1.5%

 

 

 

 

 

 

 

Thor Industries

 

 

803,840

 

 

27,298,406

 

 

 

 

 

 

    

 

Total (Cost $60,687,858)

 

 

 

 

 

110,485,448

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Consumer Services – 12.3%

 

 

 

 

 

 

 

Leisure and Entertainment - 0.9%

 

 

 

 

 

 

 

International Speedway Cl. A

 

 

598,095

 

 

15,652,146

 

 

 

 

 

 

    

 

Retail Stores - 11.4%

 

 

 

 

 

 

 

American Eagle Outfitters

 

 

1,709,346

 

 

25,007,732

 

Buckle (The)

 

 

1,127,146

 

 

42,572,304

 

Dress Barn (The) a

 

 

1,394,160

 

 

36,833,707

 

Family Dollar Stores

 

 

666,395

 

 

33,126,496

 

GameStop Corporation Cl. A a

 

 

2,196,726

 

 

50,261,091

 

†Jos. A. Bank Clothiers a

 

 

521,717

 

 

21,035,629

 

 

 

 

 

 

    

 

 

 

 

 

 

 

208,836,959

 

 

 

 

 

 

    

 

Total (Cost $190,675,009)

 

 

 

 

 

224,489,105

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Financial Intermediaries – 12.0%

 

 

 

 

 

 

 

Insurance - 8.5%

 

 

 

 

 

 

 

Allied World Assurance Company Holdings

 

 

598,089

 

 

35,550,410

 

Alterra Capital Holdings

 

 

765,486

 

 

16,565,117

 

Arch Capital Group a

 

 

364,535

 

 

32,097,307

 

Aspen Insurance Holdings

 

 

502,420

 

 

14,379,260

 

PartnerRe

 

 

480,305

 

 

38,592,507

 

Validus Holdings

 

 

577,298

 

 

17,671,092

 

 

 

 

 

 

    

 

 

 

 

 

 

 

154,855,693

 

 

 

 

 

 

    

 

Securities Brokers - 1.9%

 

 

 

 

 

 

 

Knight Capital Group Cl. A a

 

 

2,508,532

 

 

34,592,656

 

 

 

 

 

 

    

 

Securities Exchanges - 1.6%

 

 

 

 

 

 

 

TMX Group

 

 

801,100

 

 

29,778,393

 

 

 

 

 

 

    

 

Total (Cost $185,042,794)

 

 

 

 

 

219,226,742

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Financial Services – 6.8%

 

 

 

 

 

 

 

Information and Processing - 1.3%

 

 

 

 

 

 

 

Total System Services

 

 

1,576,700

 

 

24,249,646

 

 

 

 

 

 

    

 

Investment Management - 5.5%

 

 

 

 

 

 

 

†Ashmore Group

 

 

4,031,000

 

 

21,060,127

 

Federated Investors Cl. B

 

 

1,725,111

 

 

45,146,155

 

Partners Group Holding

 

 

68,990

 

 

13,089,653

 

†Value Partners Group

 

 

20,000,000

 

 

20,069,988

 

 

 

 

 

 

    

 

 

 

 

 

 

 

99,365,923

 

 

 

 

 

 

    

 

Total (Cost $97,213,704)

 

 

 

 

 

123,615,569

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Health – 5.0%

 

 

 

 

 

 

 

Health Services - 4.1%

 

 

 

 

 

 

 

Chemed Corporation

 

 

317,347

 

$

20,154,708

 

†LHC Group a

 

 

926,313

 

 

27,789,390

 

†MEDNAX a

 

 

406,591

 

 

27,359,509

 

 

 

 

 

 

    

 

 

 

 

 

 

 

75,303,607

 

 

 

 

 

 

    

 

Medical Products and Devices - 0.9%

 

 

 

 

 

 

 

Patterson Companies

 

 

550,729

 

 

16,868,829

 

 

 

 

 

 

    

 

Total (Cost $76,515,548)

 

 

 

 

 

92,172,436

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Industrial Products – 11.7%

 

 

 

 

 

 

 

Building Systems and Components - 0.8%

 

 

 

 

 

 

 

Simpson Manufacturing

 

 

492,200

 

 

15,213,902

 

 

 

 

 

 

    

 

Industrial Components - 1.9%

 

 

 

 

 

 

 

†GrafTech International a

 

 

1,755,125

 

 

34,821,680

 

 

 

 

 

 

    

 

Machinery - 1.3%

 

 

 

 

 

 

 

Lincoln Electric Holdings

 

 

362,935

 

 

23,688,767

 

 

 

 

 

 

    

 

Metal Fabrication and Distribution - 6.5%

 

 

 

 

 

 

 

Reliance Steel & Aluminum

 

 

1,036,500

 

 

52,965,150

 

Schnitzer Steel Industries Cl. A

 

 

676,100

 

 

44,886,279

 

Sims Metal Management ADR

 

 

944,638

 

 

20,630,894

 

 

 

 

 

 

    

 

 

 

 

 

 

 

118,482,323

 

 

 

 

 

 

    

 

Pumps, Valves and Bearings - 1.2%

 

 

 

 

 

 

 

Gardner Denver

 

 

311,291

 

 

21,423,047

 

 

 

 

 

 

    

 

Total (Cost $165,495,028)

 

 

 

 

 

213,629,719

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Industrial Services – 5.2%

 

 

 

 

 

 

 

Commercial Services - 2.8%

 

 

 

 

 

 

 

FTI Consulting a

 

 

444,778

 

 

16,581,324

 

MAXIMUS

 

 

524,211

 

 

34,377,757

 

 

 

 

 

 

    

 

 

 

 

 

 

 

50,959,081

 

 

 

 

 

 

    

 

Engineering and Construction - 1.3%

 

 

 

 

 

 

 

Jacobs Engineering Group a

 

 

527,500

 

 

24,185,875

 

 

 

 

 

 

    

 

Transportation and Logistics - 1.1%

 

 

 

 

 

 

 

Kirby Corporation a

 

 

448,949

 

 

19,776,204

 

 

 

 

 

 

    

 

Total (Cost $76,174,512)

 

 

 

 

 

94,921,160

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Natural Resources – 23.1%

 

 

 

 

 

 

 

Energy Services - 8.8%

 

 

 

 

 

 

 

Helmerich & Payne

 

 

895,606

 

 

43,418,979

 

Oil States International a

 

 

347,485

 

 

22,270,314

 

Rowan Companies a

 

 

707,513

 

 

24,699,279

 

Trican Well Service

 

 

1,483,400

 

 

30,046,943

 

Unit Corporation a

 

 

863,675

 

 

40,143,614

 

 

 

 

 

 

    

 

 

 

 

 

 

 

160,579,129

 

 

 

 

 

 

    

 

Oil and Gas - 2.7%

 

 

 

 

 

 

 

Cimarex Energy

 

 

140,992

 

 

12,482,022

 

Energen Corporation

 

 

751,791

 

 

36,281,433

 

 

 

 

 

 

    

 

 

 

 

 

 

 

48,763,455

 

 

 

 

 

 

    

 

Precious Metals and Mining - 10.9%

 

 

 

 

 

 

 

†Allied Nevada Gold a

 

 

1,366,800

 

 

35,960,508

 

†Centamin Egypt a

 

 

7,021,600

 

 

19,631,951

 

Fresnillo

 

 

631,700

 

 

16,427,848

 

Major Drilling Group International

 

 

808,100

 

 

33,769,039

 


 

 

 

90 | The Royce Funds 2010 Annual Report to Shareholders

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

December 31, 2010
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Natural Resources (continued)

 

 

 

 

 

 

 

Precious Metals and Mining (continued)

 

 

 

 

 

 

 

Pan American Silver

 

 

1,175,430

 

$

48,439,470

 

Seabridge Gold a

 

 

950,900

 

 

29,173,612

 

Silver Standard Resources a

 

 

581,101

 

 

16,398,670

 

 

 

 

 

 

    

 

 

 

 

 

 

 

199,801,098

 

 

 

 

 

 

    

 

Real Estate - 0.7%

 

 

 

 

 

 

 

PICO Holdings a

 

 

397,222

 

 

12,631,660

 

 

 

 

 

 

    

 

Total (Cost $303,333,251)

 

 

 

 

 

421,775,342

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Technology – 13.6%

 

 

 

 

 

 

 

Aerospace and Defense - 2.5%

 

 

 

 

 

 

 

ManTech International Cl. A a

 

 

1,088,324

 

 

44,980,431

 

 

 

 

 

 

    

 

Components and Systems - 2.0%

 

 

 

 

 

 

 

Pfeiffer Vacuum Technology

 

 

306,000

 

 

35,983,884

 

 

 

 

 

 

    

 

Semiconductors and Equipment - 7.4%

 

 

 

 

 

 

 

†Aixtron ADR c

 

 

639,397

 

 

23,785,568

 

Cabot Microelectronics a

 

 

323,609

 

 

13,413,593

 

Lam Research a

 

 

368,200

 

 

19,065,396

 

MKS Instruments a

 

 

858,400

 

 

21,022,216

 

Novellus Systems a

 

 

700,231

 

 

22,631,466

 

Varian Semiconductor Equipment Associates a

 

 

974,200

 

 

36,016,174

 

 

 

 

 

 

    

 

 

 

 

 

 

 

135,934,413

 

 

 

 

 

 

    

 

Telecommunications - 1.7%

 

 

 

 

 

 

 

Comtech Telecommunications

 

 

1,107,875

 

 

30,721,374

 

 

 

 

 

 

    

 

Total (Cost $217,309,912)

 

 

 

 

 

247,620,102

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Miscellaneouse – 2.5%

 

 

 

 

 

 

 

Total (Cost $37,315,289)

 

 

 

 

 

45,722,292

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

TOTAL COMMON STOCKS

 

 

 

 

 

 

 

(Cost $1,409,762,905)

 

 

 

 

 

1,793,657,915

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

REPURCHASE AGREEMENT – 1.8%

 

 

 

 

 

 

 

State Street Bank & Trust Company, 0.13% dated 12/31/10, due 1/3/11, maturity value $32,190,349 (collateralized by obligations of various U.S. Government Agencies, due 5/5/11, valued at $32,998,493)

 

 

 

 

 

 

 

(Cost $32,190,000)

 

 

 

 

 

32,190,000

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

COLLATERAL RECEIVED FOR SECURITIES LOANED – 1.3%

 

 

 

 

 

 

 

Money Market Funds Federated Government Obligations Fund (7 day yield-0.0154%)

 

 

 

 

 

 

 

(Cost $23,568,788)

 

 

 

 

 

23,568,788

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

TOTAL INVESTMENTS – 101.4%

 

 

 

 

 

 

 

(Cost $1,465,521,693)

 

 

 

 

 

1,849,416,703

 

 

 

 

 

 

 

 

 

LIABILITIES LESS CASH AND OTHER ASSETS – (1.4)%

 

 

 

 

 

(24,646,428

)

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

NET ASSETS – 100.0%

 

 

 

 

$

1,824,770,275

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Royce Value Plus Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

COMMON STOCKS – 96.1%

 

 

 

 

 

 

 

Consumer Products – 5.6%

 

 

 

 

 

 

 

Apparel, Shoes and Accessories - 3.2%

 

 

 

 

 

 

 

†Carter’s a

 

 

1,285,200

 

$

37,926,252

 

Coach

 

 

905,500

 

 

50,083,205

 

Gildan Activewear a

 

 

538,342

 

 

15,337,363

 

 

 

 

 

 

    

 

 

 

 

 

 

 

103,346,820

 

 

 

 

 

 

    

 

Food/Beverage/Tobacco - 0.9%

 

 

 

 

 

 

 

Sanderson Farms

 

 

410,671

 

 

16,077,770

 

Snyders-Lance

 

 

563,000

 

 

13,196,720

 

 

 

 

 

 

    

 

 

 

 

 

 

 

29,274,490

 

 

 

 

 

 

    

 

Health, Beauty and Nutrition - 1.5%

 

 

 

 

 

 

 

Inter Parfums

 

 

877,570

 

 

16,542,195

 

NutriSystem b

 

 

1,483,874

 

 

31,205,870

 

 

 

 

 

 

    

 

 

 

 

 

 

 

47,748,065

 

 

 

 

 

 

    

 

Total (Cost $144,634,042)

 

 

 

 

 

180,369,375

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Consumer Services – 7.9%

 

 

 

 

 

 

 

Leisure and Entertainment - 0.9%

 

 

 

 

 

 

 

DreamWorks Animation SKG Cl. A a

 

 

933,548

 

 

27,511,660

 

 

 

 

 

 

    

 

Online Commerce - 0.8%

 

 

 

 

 

 

 

Liquidity Services a,b

 

 

1,520,723

 

 

21,366,158

 

LoopNet a

 

 

482,502

 

 

5,360,597

 

 

 

 

 

 

    

 

 

 

 

 

 

 

26,726,755

 

 

 

 

 

 

    

 

Restaurants and Lodgings - 0.2%

 

 

 

 

 

 

 

Cosi a,b,c

 

 

4,975,812

 

 

6,070,491

 

 

 

 

 

 

    

 

Retail Stores - 6.0%

 

 

 

 

 

 

 

Casual Male Retail Group a,b

 

 

3,858,734

 

 

18,290,399

 

Christopher & Banks

 

 

468,734

 

 

2,882,714

 

GameStop Corporation Cl. A a

 

 

1,366,000

 

 

31,254,080

 

†Jos. A. Bank Clothiers a,c

 

 

728,000

 

 

29,352,960

 

Monro Muffler Brake

 

 

710,358

 

 

24,571,283

 

O’Reilly Automotive a

 

 

673,000

 

 

40,662,660

 

†Rent-A-Center

 

 

550,000

 

 

17,754,000

 

Tractor Supply

 

 

586,000

 

 

28,415,140

 

 

 

 

 

 

    

 

 

 

 

 

 

 

193,183,236

 

 

 

 

 

 

    

 

Total (Cost $222,265,564)

 

 

 

 

 

253,492,142

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Financial Intermediaries – 9.2%

 

 

 

 

 

 

 

Banking - 4.8%

 

 

 

 

 

 

 

†Associated Banc-Corp

 

 

1,200,000

 

 

18,180,000

 

Bancorp (The) a,b

 

 

1,317,170

 

 

13,395,619

 

Berkshire Hills Bancorp b

 

 

1,088,300

 

 

24,051,430

 

Enterprise Financial Services

 

 

599,800

 

 

6,273,908

 

Fifth Third Bancorp

 

 

1,563,800

 

 

22,956,584

 

Northern Trust

 

 

430,000

 

 

23,826,300

 

SVB Financial Group a

 

 

296,000

 

 

15,702,800

 

Umpqua Holdings

 

 

1,162,300

 

 

14,156,814

 

†Zions Bancorporation

 

 

599,000

 

 

14,513,770

 

 

 

 

 

 

    

 

 

 

 

 

 

 

153,057,225

 

 

 

 

 

 

    

 

Insurance - 1.0%

 

 

 

 

 

 

 

Hanover Insurance Group

 

 

138,200

 

 

6,456,704

 

PartnerRe

 

 

73,000

 

 

5,865,550

 

Validus Holdings

 

 

324,952

 

 

9,946,781

 


 

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

The Royce Funds 2010 Annual Report to Shareholders | 91

 

Schedules of Investments
 

 

Royce Value Plus Fund (continued)

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Financial Intermediaries (continued)

 

 

 

 

 

 

 

Insurance (continued)

 

 

 

 

 

 

 

White Mountains Insurance Group

 

 

30,000

 

$

10,068,000

 

 

 

 

 

 

    

 

 

 

 

 

 

 

32,337,035

 

 

 

 

 

 

    

 

Securities Brokers - 3.1%

 

 

 

 

 

 

 

KBW

 

 

403,900

 

 

11,276,888

 

Knight Capital Group Cl. A a

 

 

2,090,700

 

 

28,830,753

 

Raymond James Financial

 

 

1,393,000

 

 

45,551,100

 

TradeStation Group a,b

 

 

2,190,000

 

 

14,782,500

 

 

 

 

 

 

    

 

 

 

 

 

 

 

100,441,241

 

 

 

 

 

 

    

 

Securities Exchanges - 0.3%

 

 

 

 

 

 

 

MarketAxess Holdings

 

 

175,000

 

 

3,641,750

 

TMX Group

 

 

200,000

 

 

7,434,376

 

 

 

 

 

 

    

 

 

 

 

 

 

 

11,076,126

 

 

 

 

 

 

    

 

Total (Cost $263,493,144)

 

 

 

 

 

296,911,627

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Financial Services – 2.9%

 

 

 

 

 

 

 

Information and Processing - 1.2%

 

 

 

 

 

 

 

SEI Investments

 

 

500,000

 

 

11,895,000

 

†Total System Services

 

 

1,785,000

 

 

27,453,300

 

 

 

 

 

 

    

 

 

 

 

 

 

 

39,348,300

 

 

 

 

 

 

    

 

Insurance Brokers - 0.9%

 

 

 

 

 

 

 

Brown & Brown

 

 

1,155,100

 

 

27,653,094

 

 

 

 

 

 

    

 

Investment Management - 0.8%

 

 

 

 

 

 

 

†Partners Group Holding

 

 

119,000

 

 

22,578,182

 

U.S. Global Investors Cl. A

 

 

500,000

 

 

4,065,000

 

 

 

 

 

 

    

 

 

 

 

 

 

 

26,643,182

 

 

 

 

 

 

    

 

Total (Cost $97,941,245)

 

 

 

 

 

93,644,576

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Health – 4.0%

 

 

 

 

 

 

 

Commercial Services - 0.6%

 

 

 

 

 

 

 

Schein (Henry) a

 

 

321,000

 

 

19,706,190

 

 

 

 

 

 

    

 

Drugs and Biotech - 0.3%

 

 

 

 

 

 

 

Rigel Pharmaceuticals a

 

 

1,050,000

 

 

7,906,500

 

 

 

 

 

 

    

 

Health Services - 1.3%

 

 

 

 

 

 

 

Myriad Genetics a

 

 

1,816,000

 

 

41,477,440

 

 

 

 

 

 

    

 

Medical Products and Devices - 1.8%

 

 

 

 

 

 

 

†C.R. Bard

 

 

374,000

 

 

34,321,980

 

Caliper Life Sciences a,b

 

 

2,765,500

 

 

17,533,270

 

Cerus Corporation a,b

 

 

2,884,500

 

 

7,095,870

 

 

 

 

 

 

    

 

 

 

 

 

 

 

58,951,120

 

 

 

 

 

 

    

 

Total (Cost $119,313,405)

 

 

 

 

 

128,041,250

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Industrial Products – 11.7%

 

 

 

 

 

 

 

Industrial Components - 1.5%

 

 

 

 

 

 

 

†American Superconducter a,c

 

 

378,000

 

 

10,807,020

 

FARO Technologies a,b

 

 

1,104,800

 

 

36,281,632

 

 

 

 

 

 

    

 

 

 

 

 

 

 

47,088,652

 

 

 

 

 

 

    

 

Machinery - 3.4%

 

 

 

 

 

 

 

IPG Photonics a

 

 

1,548,899

 

 

48,976,186

 

Rofin-Sinar Technologies a

 

 

842,373

 

 

29,853,699

 

Tennant Company

 

 

831,055

 

 

31,920,823

 

 

 

 

 

 

    

 

 

 

 

 

 

 

110,750,708

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Industrial Products (continued)

 

 

 

 

 

 

 

Metal Fabrication and Distribution - 4.9%

 

 

 

 

 

 

 

Horsehead Holding Corporation a

 

 

1,651,353

 

$

21,533,643

 

Kennametal

 

 

1,236,300

 

 

48,784,398

 

Sims Metal Management

 

 

516,121

 

 

11,386,559

 

Sims Metal Management ADR

 

 

1,250,125

 

 

27,302,730

 

†Worthington Industries

 

 

2,574,100

 

 

47,363,440

 

 

 

 

 

 

    

 

 

 

 

 

 

 

156,370,770

 

 

 

 

 

 

    

 

Miscellaneous Manufacturing - 1.9%

 

 

 

 

 

 

 

†Acuity Brands

 

 

363,600

 

 

20,968,812

 

Valmont Industries

 

 

461,000

 

 

40,904,530

 

 

 

 

 

 

    

 

 

 

 

 

 

 

61,873,342

 

 

 

 

 

 

    

 

Total (Cost $274,210,725)

 

 

 

 

 

376,083,472

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Industrial Services – 13.1%

 

 

 

 

 

 

 

Commercial Services - 4.3%

 

 

 

 

 

 

 

Cintas Corporation

 

 

1,408,700

 

 

39,387,252

 

Resources Connection

 

 

866,900

 

 

16,115,671

 

Ritchie Bros. Auctioneers

 

 

1,125,600

 

 

25,945,080

 

Robert Half International

 

 

1,404,800

 

 

42,986,880

 

UniFirst Corporation

 

 

284,400

 

 

15,656,220

 

 

 

 

 

 

    

 

 

 

 

 

 

 

140,091,103

 

 

 

 

 

 

    

 

Food, Tobacco and Agriculture - 1.6%

 

 

 

 

 

 

 

†Darling International a

 

 

2,365,262

 

 

31,410,680

 

Intrepid Potash a,c

 

 

525,000

 

 

19,577,250

 

 

 

 

 

 

    

 

 

 

 

 

 

 

50,987,930

 

 

 

 

 

 

    

 

Industrial Distribution - 3.9%

 

 

 

 

 

 

 

Grainger (W.W.)

 

 

313,600

 

 

43,311,296

 

MSC Industrial Direct Cl. A

 

 

753,300

 

 

48,730,977

 

Watsco

 

 

511,100

 

 

32,240,188

 

 

 

 

 

 

    

 

 

 

 

 

 

 

124,282,461

 

 

 

 

 

 

    

 

Transportation and Logistics - 3.3%

 

 

 

 

 

 

 

Celadon Group a,b

 

 

1,818,600

 

 

26,897,094

 

Heartland Express

 

 

1,035,000

 

 

16,580,700

 

Kirby Corporation a

 

 

403,000

 

 

17,752,150

 

Knight Transportation

 

 

725,100

 

 

13,776,900

 

Universal Truckload Services a

 

 

318,322

 

 

5,067,686

 

Werner Enterprises

 

 

1,186,000

 

 

26,803,600

 

 

 

 

 

 

    

 

 

 

 

 

 

 

106,878,130

 

 

 

 

 

 

    

 

Total (Cost $326,852,183)

 

 

 

 

 

422,239,624

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Natural Resources – 15.5%

 

 

 

 

 

 

 

Energy Services - 3.9%

 

 

 

 

 

 

 

Ensign Energy Services

 

 

1,731,700

 

 

26,176,658

 

Pason Systems

 

 

1,491,000

 

 

20,933,682

 

Tesco Corporation a

 

 

407,700

 

 

6,474,276

 

Trican Well Service

 

 

1,453,800

 

 

29,447,382

 

Unit Corporation a

 

 

875,400

 

 

40,688,592

 

 

 

 

 

 

    

 

 

 

 

 

 

 

123,720,590

 

 

 

 

 

 

    

 

Oil and Gas - 3.2%

 

 

 

 

 

 

 

Bill Barrett a

 

 

788,200

 

 

32,418,666

 

Comstock Resources a

 

 

975,000

 

 

23,946,000

 

†Energy Partners a

 

 

1,620,560

 

 

24,081,522

 


 

 

 

92 | The Royce Funds 2010 Annual Report to Shareholders

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

December 31, 2010
 

 

 

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Natural Resources (continued)

 

 

 

 

 

 

 

Oil and Gas (continued)

 

 

 

 

 

 

 

†Rex Energy a

 

 

1,696,000

 

$

23,150,400

 

 

 

 

 

 

    

 

 

 

 

 

 

 

103,596,588

 

 

 

 

 

 

    

 

Precious Metals and Mining - 7.7%

 

 

 

 

 

 

 

†African Barrick Gold

 

 

2,202,100

 

 

20,977,417

 

Agnico-Eagle Mines

 

 

325,100

 

 

24,935,170

 

Alamos Gold

 

 

2,181,600

 

 

41,512,493

 

Allied Nevada Gold a

 

 

1,965,000

 

 

51,699,150

 

Fronteer Gold a

 

 

3,841,000

 

 

45,054,930

 

Silver Standard Resources a

 

 

1,597,900

 

 

45,092,738

 

†SouthGobi Resources a

 

 

1,377,500

 

 

17,722,056

 

 

 

 

 

 

    

 

 

 

 

 

 

 

246,993,954

 

 

 

 

 

 

    

 

Real Estate - 0.7%

 

 

 

 

 

 

 

PICO Holdings a

 

 

737,222

 

 

23,443,659

 

 

 

 

 

 

    

 

Total (Cost $374,513,524)

 

 

 

 

 

497,754,791

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Technology – 21.3%

 

 

 

 

 

 

 

Aerospace and Defense - 1.2%

 

 

 

 

 

 

 

Mercury Computer Systems a,b

 

 

2,113,749

 

 

38,850,706

 

 

 

 

 

 

    

 

Components and Systems - 7.3%

 

 

 

 

 

 

 

Brocade Communications Systems a

 

 

6,126,000

 

 

32,406,540

 

Checkpoint Systems a

 

 

1,048,700

 

 

21,550,785

 

Intermec a

 

 

2,948,423

 

 

37,327,035

 

Littelfuse

 

 

804,695

 

 

37,868,947

 

†SanDisk Corporation a

 

 

576,000

 

 

28,719,360

 

†STEC a,c

 

 

1,718,000

 

 

30,322,700

 

Trimble Navigation a

 

 

1,145,500

 

 

45,739,815

 

 

 

 

 

 

    

 

 

 

 

 

 

 

233,935,182

 

 

 

 

 

 

    

 

IT Services - 0.3%

 

 

 

 

 

 

 

SRA International Cl. A a

 

 

509,115

 

 

10,411,402

 

 

 

 

 

 

    

 

Semiconductors and Equipment - 6.7%

 

 

 

 

 

 

 

ADTRAN

 

 

669,500

 

 

24,242,595

 

GSI Group a,d

 

 

1,622,075

 

 

17,161,553

 

International Rectifier a

 

 

1,887,048

 

 

56,026,455

 

†Lattice Semiconductor a

 

 

5,228,700

 

 

31,685,922

 

†Micrel

 

 

3,039,610

 

 

39,484,534

 

Supertex a,b

 

 

882,053

 

 

21,328,042

 

Varian Semiconductor Equipment Associates a

 

 

700,000

 

 

25,879,000

 

 

 

 

 

 

    

 

 

 

 

 

 

 

215,808,101

 

 

 

 

 

 

    

 

Software - 2.0%

 

 

 

 

 

 

 

†Accelrys a

 

 

2,155,250

 

 

17,888,575

 

Avid Technology a,b

 

 

2,612,672

 

 

45,617,253

 

 

 

 

 

 

    

 

 

 

 

 

 

 

63,505,828

 

 

 

 

 

 

    

 

Telecommunications - 3.8%

 

 

 

 

 

 

 

Comverse Technology a,d

 

 

2,938,400

 

 

21,274,016

 

Digi International a

 

 

1,236,800

 

 

13,728,480

 

Finisar Corporation a

 

 

971,000

 

 

28,828,990

 

Infinera Corporation a

 

 

3,093,833

 

 

31,959,295

 

†Polycom a

 

 

720,000

 

 

28,065,600

 

 

 

 

 

 

    

 

 

 

 

 

 

 

123,856,381

 

 

 

 

 

 

    

 

Total (Cost $589,081,302)

 

 

 

 

 

686,367,600

 

 

 

 

 

 

    

 

 

 

 

 

 

 

     

VALUE

 

Miscellaneouse – 4.9%

 

 

 

 

Total (Cost $151,156,084)

 

$

158,476,531

 

 

 

    

 

 

 

 

 

 

 

 

 

TOTAL COMMON STOCKS

 

 

 

 

(Cost $2,563,461,218)

 

 

3,093,380,988

 

 

 

    

 

 

 

 

 

 

 

 

 

REPURCHASE AGREEMENT – 5.1%

 

 

 

 

State Street Bank & Trust Company, 0.13% dated 12/31/10, due 1/3/11, maturity value $162,933,765 (collateralized by obligations of various U.S. Government Agencies, 5.625% due 3/15/11-3/21/11, valued at $167,009,938)

 

 

 

 

(Cost $162,932,000)

 

 

162,932,000

 

 

 

    

 

 

 

 

 

 

 

 

 

COLLATERAL RECEIVED FOR SECURITIES LOANED – 1.0%

 

 

 

 

Money Market Funds
Federated Government Obligations Fund (7 day yield-0.0154%)

 

 

 

 

(Cost $33,734,875)

 

 

33,734,875

 

 

 

    

 

 

 

 

 

 

 

 

 

TOTAL INVESTMENTS – 102.2%

 

 

 

 

(Cost $2,760,128,093)

 

 

3,290,047,863

 

 

 

 

 

 

 

 

 

LIABILITIES LESS CASH AND OTHER ASSETS – (2.2)%

 

 

(71,578,685

)

 

 

    

 

 

 

 

 

 

 

 

 

NET ASSETS – 100.0%

 

$

3,218,469,178

 

 

 

    

 


 

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

The Royce Funds 2010 Annual Report to Shareholders | 93

 

Schedules of Investments
 

 

Royce 100 Fund

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

COMMON STOCKS – 92.8%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer Products – 5.9%

 

 

 

 

 

 

 

Apparel, Shoes and Accessories - 1.9%

 

 

 

 

 

 

 

Columbia Sportswear

 

 

47,800

 

$

2,882,340

 

†Warnaco Group (The) a

 

 

97,000

 

 

5,341,790

 

 

 

 

 

 

    

 

 

 

 

 

 

 

8,224,130

 

 

 

 

 

 

    

 

Consumer Electronics - 1.0%

 

 

 

 

 

 

 

DTS a

 

 

89,600

 

 

4,394,880

 

 

 

 

 

 

    

 

Food/Beverage/Tobacco - 1.1%

 

 

 

 

 

 

 

Cal-Maine Foods

 

 

41,127

 

 

1,298,791

 

Sanderson Farms

 

 

84,700

 

 

3,316,005

 

 

 

 

 

 

    

 

 

 

 

 

 

 

4,614,796

 

 

 

 

 

 

    

 

Home Furnishing and Appliances - 1.9%

 

 

 

 

 

 

 

Ethan Allen Interiors

 

 

164,100

 

 

3,283,641

 

Mohawk Industries a

 

 

89,715

 

 

5,092,223

 

 

 

 

 

 

    

 

 

 

 

 

 

 

8,375,864

 

 

 

 

 

 

    

 

Total (Cost $19,999,257)

 

 

 

 

 

25,609,670

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Consumer Services – 1.4%

 

 

 

 

 

 

 

Leisure and Entertainment - 0.7%

 

 

 

 

 

 

 

DreamWorks Animation SKG Cl. A a

 

 

105,000

 

 

3,094,350

 

 

 

 

 

 

    

 

Retail Stores - 0.7%

 

 

 

 

 

 

 

Dress Barn (The) a

 

 

118,500

 

 

3,130,770

 

 

 

 

 

 

    

 

Total (Cost $4,971,157)

 

 

 

 

 

6,225,120

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Financial Intermediaries – 2.1%

 

 

 

 

 

 

 

Securities Brokers - 2.1%

 

 

 

 

 

 

 

Cowen Group Cl. A a

 

 

700,080

 

 

3,262,373

 

Interactive Brokers Group Cl. A

 

 

188,200

 

 

3,353,724

 

Knight Capital Group Cl. A a

 

 

191,300

 

 

2,638,027

 

 

 

 

 

 

    

 

Total (Cost $9,511,983)

 

 

 

 

 

9,254,124

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Financial Services – 11.4%

 

 

 

 

 

 

 

Diversified Financial Services - 1.2%

 

 

 

 

 

 

 

Lazard Cl. A

 

 

128,800

 

 

5,086,312

 

 

 

 

 

 

    

 

Information and Processing - 3.1%

 

 

 

 

 

 

 

Morningstar

 

 

93,872

 

 

4,982,726

 

SEI Investments

 

 

219,500

 

 

5,221,905

 

Total System Services

 

 

209,100

 

 

3,215,958

 

 

 

 

 

 

    

 

 

 

 

 

 

 

13,420,589

 

 

 

 

 

 

    

 

Insurance Brokers - 0.5%

 

 

 

 

 

 

 

Brown & Brown

 

 

96,900

 

 

2,319,786

 

 

 

 

 

 

    

 

Investment Management - 6.6%

 

 

 

 

 

 

 

Affiliated Managers Group a

 

 

52,197

 

 

5,178,986

 

AllianceBernstein Holding L.P.

 

 

172,639

 

 

4,027,668

 

Artio Global Investors Cl. A

 

 

195,032

 

 

2,876,722

 

Cohen & Steers

 

 

149,800

 

 

3,909,780

 

Federated Investors Cl. B

 

 

189,200

 

 

4,951,364

 

Waddell & Reed Financial Cl. A

 

 

125,900

 

 

4,443,011

 

Westwood Holdings Group

 

 

90,395

 

 

3,612,184

 

 

 

 

 

 

    

 

 

 

 

 

 

 

28,999,715

 

 

 

 

 

 

    

 

Total (Cost $43,796,960)

 

 

 

 

 

49,826,402

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Health – 1.6%

 

 

 

 

 

 

 

Health Services - 1.6%

 

 

 

 

 

 

 

Advisory Board (The) a

 

 

48,900

 

$

2,329,107

 

ICON ADR a

 

 

216,600

 

 

4,743,540

 

 

 

 

 

 

    

 

Total (Cost $6,100,955)

 

 

 

 

 

7,072,647

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Industrial Products – 19.4%

 

 

 

 

 

 

 

Building Systems and Components - 1.4%

 

 

 

 

 

 

 

Drew Industries

 

 

142,656

 

 

3,241,145

 

Simpson Manufacturing

 

 

100,000

 

 

3,091,000

 

 

 

 

 

 

    

 

 

 

 

 

 

 

6,332,145

 

 

 

 

 

 

    

 

Industrial Components - 4.4%

 

 

 

 

 

 

 

CLARCOR

 

 

88,200

 

 

3,782,898

 

FARO Technologies a

 

 

137,387

 

 

4,511,789

 

GrafTech International a

 

 

296,900

 

 

5,890,496

 

PerkinElmer

 

 

197,900

 

 

5,109,778

 

 

 

 

 

 

    

 

 

 

 

 

 

 

19,294,961

 

 

 

 

 

 

    

 

Machinery - 2.4%

 

 

 

 

 

 

 

Rofin-Sinar Technologies a

 

 

183,400

 

 

6,499,696

 

Wabtec Corporation

 

 

72,500

 

 

3,834,525

 

 

 

 

 

 

    

 

 

 

 

 

 

 

10,334,221

 

 

 

 

 

 

    

 

Metal Fabrication and Distribution - 5.6%

 

 

 

 

 

 

 

Kennametal

 

 

161,900

 

 

6,388,574

 

Reliance Steel & Aluminum

 

 

92,400

 

 

4,721,640

 

Schnitzer Steel Industries Cl. A

 

 

57,600

 

 

3,824,064

 

Sims Metal Management ADR

 

 

257,317

 

 

5,619,803

 

Steel Dynamics

 

 

208,500

 

 

3,815,550

 

 

 

 

 

 

    

 

 

 

 

 

 

 

24,369,631

 

 

 

 

 

 

    

 

Miscellaneous Manufacturing - 2.1%

 

 

 

 

 

 

 

AZZ

 

 

95,100

 

 

3,804,951

 

†Valmont Industries

 

 

60,600

 

 

5,377,038

 

 

 

 

 

 

    

 

 

 

 

 

 

 

9,181,989

 

 

 

 

 

 

    

 

Paper and Packaging - 1.3%

 

 

 

 

 

 

 

Greif Cl. A

 

 

91,200

 

 

5,645,280

 

 

 

 

 

 

    

 

Pumps, Valves and Bearings - 2.2%

 

 

 

 

 

 

 

Gardner Denver

 

 

62,800

 

 

4,321,896

 

Kaydon Corporation

 

 

124,500

 

 

5,069,640

 

 

 

 

 

 

    

 

 

 

 

 

 

 

9,391,536

 

 

 

 

 

 

    

 

Total (Cost $61,674,325)

 

 

 

 

 

84,549,763

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Industrial Services – 20.9%

 

 

 

 

 

 

 

Commercial Services - 8.0%

 

 

 

 

 

 

 

Brink’s Company (The)

 

 

152,115

 

 

4,088,851

 

Cintas Corporation

 

 

150,800

 

 

4,216,368

 

Corporate Executive Board

 

 

56,700

 

 

2,129,085

 

CRA International a

 

 

153,513

 

 

3,609,090

 

Gartner a

 

 

120,000

 

 

3,984,000

 

Manpower

 

 

95,266

 

 

5,978,894

 

MAXIMUS

 

 

52,300

 

 

3,429,834

 

Universal Technical Institute

 

 

144,232

 

 

3,175,989

 

Verisk Analytics Cl. A a

 

 

130,100

 

 

4,433,808

 

 

 

 

 

 

    

 

 

 

 

 

 

 

35,045,919

 

 

 

 

 

 

    

 

Engineering and Construction - 5.2%

 

 

 

 

 

 

 

EMCOR Group a

 

 

185,300

 

 

5,369,994

 


 

 

 

94 | The Royce Funds 2010 Annual Report to Shareholders

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

December 31, 2010
 

 

 

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Industrial Services (continued)

 

 

 

 

 

 

 

Engineering and Construction (continued)

 

 

 

 

 

 

 

†Jacobs Engineering Group a

 

 

95,000

 

$

4,355,750

 

KBR

 

 

146,600

 

 

4,466,902

 

NVR a

 

 

6,200

 

 

4,284,324

 

Quanta Services a

 

 

205,000

 

 

4,083,600

 

 

 

 

 

 

    

 

 

 

 

 

 

 

22,560,570

 

 

 

 

 

 

    

 

Food, Tobacco and Agriculture - 1.2%

 

 

 

 

 

 

 

Intrepid Potash a

 

 

143,400

 

 

5,347,386

 

 

 

 

 

 

    

 

Industrial Distribution - 1.7%

 

 

 

 

 

 

 

Applied Industrial Technologies

 

 

101,300

 

 

3,290,224

 

MSC Industrial Direct Cl. A

 

 

65,500

 

 

4,237,195

 

 

 

 

 

 

    

 

 

 

 

 

 

 

7,527,419

 

 

 

 

 

 

    

 

Transportation and Logistics - 4.8%

 

 

 

 

 

 

 

Arkansas Best

 

 

91,400

 

 

2,506,188

 

Expeditors International of Washington

 

 

108,800

 

 

5,940,480

 

Forward Air

 

 

89,500

 

 

2,540,010

 

Kirby Corporation a

 

 

77,500

 

 

3,413,875

 

Landstar System

 

 

89,300

 

 

3,655,942

 

UTi Worldwide

 

 

124,900

 

 

2,647,880

 

 

 

 

 

 

    

 

 

 

 

 

 

 

20,704,375

 

 

 

 

 

 

    

 

Total (Cost $71,575,410)

 

 

 

 

 

91,185,669

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Natural Resources – 12.1%

 

 

 

 

 

 

 

Energy Services - 8.6%

 

 

 

 

 

 

 

Ensign Energy Services

 

 

201,500

 

 

3,045,907

 

Helmerich & Payne

 

 

123,800

 

 

6,001,824

 

Oil States International a

 

 

100,400

 

 

6,434,636

 

Pason Systems

 

 

302,800

 

 

4,251,321

 

SEACOR Holdings

 

 

41,500

 

 

4,195,235

 

ShawCor Cl. A

 

 

149,400

 

 

4,974,991

 

Trican Well Service

 

 

262,700

 

 

5,321,108

 

Unit Corporation a

 

 

73,200

 

 

3,402,336

 

 

 

 

 

 

    

 

 

 

 

 

 

 

37,627,358

 

 

 

 

 

 

    

 

Precious Metals and Mining - 3.5%

 

 

 

 

 

 

 

†Cliffs Natural Resources

 

 

43,800

 

 

3,416,838

 

Fresnillo

 

 

170,000

 

 

4,420,982

 

Major Drilling Group International

 

 

141,000

 

 

5,892,135

 

Randgold Resources ADR

 

 

15,900

 

 

1,309,047

 

 

 

 

 

 

    

 

 

 

 

 

 

 

15,039,002

 

 

 

 

 

 

    

 

Total (Cost $31,622,021)

 

 

 

 

 

52,666,360

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Technology – 14.3%

 

 

 

 

 

 

 

Aerospace and Defense - 1.1%

 

 

 

 

 

 

 

HEICO Corporation Cl. A

 

 

126,650

 

 

4,726,578

 

 

 

 

 

 

    

 

Components and Systems - 2.3%

 

 

 

 

 

 

 

Diebold

 

 

90,500

 

 

2,900,525

 

Dionex Corporation a

 

 

45,000

 

 

5,310,450

 

Plexus Corporation a

 

 

58,400

 

 

1,806,896

 

 

 

 

 

 

    

 

 

 

 

 

 

 

10,017,871

 

 

 

 

 

 

    

 

IT Services - 1.7%

 

 

 

 

 

 

 

Sapient Corporation

 

 

347,900

 

 

4,209,590

 

SRA International Cl. A a

 

 

164,175

 

 

3,357,379

 

 

 

 

 

 

    

 

 

 

 

 

 

 

7,566,969

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Technology (continued)

 

 

 

 

 

 

 

Semiconductors and Equipment - 6.0%

 

 

 

 

 

 

 

ADTRAN

 

 

127,800

 

$

4,627,638

 

†Aixtron ADR c

 

 

107,000

 

 

3,980,400

 

Cabot Microelectronics a

 

 

120,700

 

 

5,003,015

 

Coherent a

 

 

118,700

 

 

5,358,118

 

†Cymer a

 

 

97,500

 

 

4,394,325

 

Diodes a

 

 

100,000

 

 

2,699,000

 

 

 

 

 

 

    

 

 

 

 

 

 

 

26,062,496

 

 

 

 

 

 

    

 

Software - 3.2%

 

 

 

 

 

 

 

Blackbaud

 

 

102,100

 

 

2,644,390

 

Blackboard a,c

 

 

60,000

 

 

2,478,000

 

National Instruments

 

 

128,800

 

 

4,848,032

 

†NetScout Systems a

 

 

174,200

 

 

4,008,342

 

 

 

 

 

 

    

 

 

 

 

 

 

 

13,978,764

 

 

 

 

 

 

    

 

Total (Cost $43,202,326)

 

 

 

 

 

62,352,678

 

 

 

 

 

 

    

 
 

Miscellaneouse – 3.7%

 

 

 

 

 

 

 

Total (Cost $13,843,477)

 

 

 

 

 

16,350,275

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

TOTAL COMMON STOCKS

 

 

 

 

 

 

 

(Cost $306,297,871)

 

 

 

 

 

405,092,708

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

REPURCHASE AGREEMENT – 7.2%

 

 

 

 

 

 

 

State Street Bank & Trust Company, 0.13% dated 12/31/10, due 1/3/11, maturity value $31,316,339 (collateralized by obligations of various U.S. Government Agencies, 3.50% due 5/5/11, valued at $32,100,408)

 

 

 

 

 

 

 

(Cost $31,316,000)

 

 

 

 

 

31,316,000

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

COLLATERAL RECEIVED FOR SECURITIES LOANED – 1.3%

 

 

 

 

 

 

 

Money Market Funds
Federated Government Obligations Fund
(7 day yield-0.0154%)

 

 

 

 

 

 

 

(Cost $5,649,568)

 

 

 

 

 

5,649,568

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

TOTAL INVESTMENTS – 101.3%

 

 

 

 

 

 

 

(Cost $343,263,439)

 

 

 

 

 

442,058,276

 

 

 

 

 

 

 

 

 

LIABILITIES LESS CASH AND OTHER ASSETS – (1.3)%

 

 

 

 

 

(5,589,839

)

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

NET ASSETS – 100.0%

 

 

 

 

$

436,468,437

 

 

 

 

 

 

    

 


 

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

The Royce Funds 2010 Annual Report to Shareholders | 95

 

Schedules of Investments
 

 

Royce Discovery Fund


 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

COMMON STOCKS – 94.1%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer Products – 9.6%

 

 

 

 

 

 

 

Apparel, Shoes and Accessories - 0.8%

 

 

 

 

 

 

 

†Barry (R.G.)

 

 

2,700

 

$

30,024

 

 

 

 

 

 

    

 

Health, Beauty and Nutrition - 1.8%

 

 

 

 

 

 

 

†NutriSystem

 

 

1,800

 

 

37,854

 

Schiff Nutrition International Cl. A

 

 

3,100

 

 

28,148

 

 

 

 

 

 

    

 

 

 

 

 

 

 

66,002

 

 

 

 

 

 

    

 

Home Furnishing and Appliances - 1.3%

 

 

 

 

 

 

 

†Universal Electronics a

 

 

1,600

 

 

45,392

 

 

 

 

 

 

    

 

Household Products/Wares - 1.6%

 

 

 

 

 

 

 

†Blyth

 

 

900

 

 

31,032

 

Oil-Dri Corporation of America

 

 

1,300

 

 

27,937

 

 

 

 

 

 

    

 

 

 

 

 

 

 

58,969

 

 

 

 

 

 

    

 

Sports and Recreation - 3.2%

 

 

 

 

 

 

 

Arctic Cat a

 

 

2,900

 

 

42,456

 

JAKKS Pacific a

 

 

2,200

 

 

40,084

 

†Sturm, Ruger & Co.

 

 

2,200

 

 

33,638

 

 

 

 

 

 

    

 

 

 

 

 

 

 

116,178

 

 

 

 

 

 

    

 

Other Consumer Products - 0.9%

 

 

 

 

 

 

 

CSS Industries

 

 

1,581

 

 

32,585

 

 

 

 

 

 

    

 

Total (Cost $302,124)

 

 

 

 

 

349,150

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Consumer Services – 6.8%

 

 

 

 

 

 

 

Direct Marketing - 1.1%

 

 

 

 

 

 

 

†APAC Customer Services a

 

 

6,400

 

 

38,848

 

 

 

 

 

 

    

 

Restaurants and Lodgings - 0.8%

 

 

 

 

 

 

 

†Papa John’s International a

 

 

1,100

 

 

30,470

 

 

 

 

 

 

    

 

Retail Stores - 4.9%

 

 

 

 

 

 

 

†Finish Line (The) Cl. A

 

 

2,200

 

 

37,818

 

†Kirkland’s a

 

 

2,900

 

 

40,687

 

Shoe Carnival a

 

 

1,300

 

 

35,100

 

†Systemax

 

 

1,400

 

 

19,740

 

†Wet Seal (The) Cl. A a

 

 

11,800

 

 

43,660

 

 

 

 

 

 

    

 

 

 

 

 

 

 

177,005

 

 

 

 

 

 

    

 

Total (Cost $225,415)

 

 

 

 

 

246,323

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Financial Intermediaries – 4.4%

 

 

 

 

 

 

 

Insurance - 4.4%

 

 

 

 

 

 

 

American Safety Insurance Holdings a

 

 

1,700

 

 

36,346

 

Amerisafe a

 

 

1,700

 

 

29,750

 

Hallmark Financial Services a

 

 

3,020

 

 

27,482

 

Meadowbrook Insurance Group

 

 

3,899

 

 

39,965

 

SeaBright Holdings

 

 

2,800

 

 

25,816

 

 

 

 

 

 

    

 

Total (Cost $160,455)

 

 

 

 

 

159,359

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Health – 16.3%

 

 

 

 

 

 

 

Commercial Services - 0.6%

 

 

 

 

 

 

 

†AMN Healthcare Services a

 

 

3,400

 

 

20,876

 

 

 

 

 

 

    

 

Drugs and Biotech - 3.3%

 

 

 

 

 

 

 

American Oriental Bioengineering a

 

 

7,300

 

 

17,520

 

Harvard Bioscience a

 

 

6,999

 

 

28,626

 

Hi-Tech Pharmacal a

 

 

1,100

 

 

27,445

 

 

 

 

 

 

 

 

 

 

 

 

SHARES

     

 

VALUE

 

Health (continued)

 

 

 

 

 

 

 

Drugs and Biotech (continued)

 

 

 

 

 

 

 

†SciClone Pharmaceuticals a

 

 

11,200

 

$

46,816

 

 

 

 

 

 

    

 

 

 

 

 

 

 

120,407

 

 

 

 

 

 

    

 

Health Services - 8.3%

 

 

 

 

 

 

 

Almost Family a

 

 

700

 

 

26,894

 

Amedisys a

 

 

1,300

 

 

43,550

 

†Continucare Corporation a

 

 

12,100

 

 

56,628

 

†Cross Country Healthcare a

 

 

2,800

 

 

23,716

 

†Genoptix a

 

 

2,100

 

 

39,942

 

†LHC Group a

 

 

1,300

 

 

39,000

 

Metropolitan Health Networks a

 

 

9,148

 

 

40,892

 

†Molina Healthcare a

 

 

1,200

 

 

33,420

 

 

 

 

 

 

    

 

 

 

 

 

 

 

304,042

 

 

 

 

 

 

    

 

Medical Products and Devices - 4.1%

 

 

 

 

 

 

 

Atrion Corporation

 

 

200

 

 

35,892

 

ICU Medical a

 

 

800

 

 

29,200

 

Kensey Nash a

 

 

1,267

 

 

35,260

 

†Symmetry Medical a

 

 

3,000

 

 

27,750

 

Utah Medical Products

 

 

813

 

 

21,683

 

 

 

 

 

 

    

 

 

 

 

 

 

 

149,785

 

 

 

 

 

 

    

 

Total (Cost $527,460)

 

 

 

 

 

595,110

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Industrial Products – 16.5%

 

 

 

 

 

 

 

Automotive - 2.3%

 

 

 

 

 

 

 

Fuel Systems Solutions a

 

 

1,100

 

 

32,318

 

Miller Industries

 

 

1,700

 

 

24,191

 

†Spartan Motors

 

 

4,600

 

 

28,014

 

 

 

 

 

 

    

 

 

 

 

 

 

 

84,523

 

 

 

 

 

 

    

 

Building Systems and Components - 3.5%

 

 

 

 

 

 

 

†Apogee Enterprises

 

 

1,800

 

 

24,246

 

Drew Industries

 

 

1,900

 

 

43,168

 

†Preformed Line Products

 

 

1,000

 

 

58,525

 

 

 

 

 

 

    

 

 

 

 

 

 

 

125,939

 

 

 

 

 

 

    

 

Industrial Components - 3.6%

 

 

 

 

 

 

 

Bel Fuse Cl. B

 

 

1,200

 

 

28,680

 

Gerber Scientific a

 

 

4,114

 

 

32,377

 

Graham Corporation

 

 

2,100

 

 

42,000

 

†Powell Industries a

 

 

900

 

 

29,592

 

 

 

 

 

 

    

 

 

 

 

 

 

 

132,649

 

 

 

 

 

 

    

 

Metal Fabrication and Distribution - 2.9%

 

 

 

 

 

 

 

Foster (L.B.) Company Cl. A a

 

 

900

 

 

36,846

 

†Fushi Copperweld a

 

 

3,800

 

 

33,744

 

Universal Stainless & Alloy Products a

 

 

1,100

 

 

34,408

 

 

 

 

 

 

    

 

 

 

 

 

 

 

104,998

 

 

 

 

 

 

    

 

Miscellaneous Manufacturing - 0.9%

 

 

 

 

 

 

 

AZZ

 

 

800

 

 

32,008

 

 

 

 

 

 

    

 

Paper and Packaging - 1.1%

 

 

 

 

 

 

 

KapStone Paper and Packaging a

 

 

2,600

 

 

39,780

 

 

 

 

 

 

    

 

Specialty Chemicals and Materials - 2.2%

 

 

 

 

 

 

 

†Innophos Holdings

 

 

500

 

 

18,040

 

†Schulman (A.)

 

 

1,100

 

 

25,179

 


 

 

 

96 | The Royce Funds 2010 Annual Report to Shareholders

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

December 31, 2010
 

 

 

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Industrial Products (continued)

 

 

 

 

 

 

 

Specialty Chemicals and Materials (continued)

 

 

 

 

 

 

 

†Stepan Company

 

 

500

 

$

38,135

 

 

 

 

 

 

    

 

 

 

 

 

 

 

81,354

 

 

 

 

 

 

    

 

Total (Cost $531,357)

 

 

 

 

 

601,251

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Industrial Services – 6.7%

 

 

 

 

 

 

 

Commercial Services - 3.7%

 

 

 

 

 

 

 

†Global Sources a

 

 

4,000

 

 

38,080

 

GP Strategies a

 

 

3,100

 

 

31,744

 

ICF International a

 

 

1,100

 

 

28,292

 

Lincoln Educational Services

 

 

2,300

 

 

35,673

 

 

 

 

 

 

    

 

 

 

 

 

 

 

133,789

 

 

 

 

 

 

    

 

Engineering and Construction - 2.2%

 

 

 

 

 

 

 

Baker (Michael) a

 

 

800

 

 

24,880

 

†Comfort Systems USA

 

 

3,000

 

 

39,510

 

Layne Christensen a

 

 

500

 

 

17,210

 

 

 

 

 

 

    

 

 

 

 

 

 

 

81,600

 

 

 

 

 

 

    

 

Printing - 0.8%

 

 

 

 

 

 

 

Ennis

 

 

1,700

 

 

29,070

 

 

 

 

 

 

    

 

Total (Cost $214,765)

 

 

 

 

 

244,459

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Natural Resources – 5.8%

 

 

 

 

 

 

 

Oil and Gas - 4.9%

 

 

 

 

 

 

 

†China Integrated Energy a

 

 

3,200

 

 

23,456

 

Energy Partners a

 

 

1,200

 

 

17,832

 

PetroQuest Energy a

 

 

5,600

 

 

42,168

 

TransGlobe Energy a

 

 

3,300

 

 

52,701

 

VAALCO Energy a

 

 

6,000

 

 

42,960

 

 

 

 

 

 

    

 

 

 

 

 

 

 

179,117

 

 

 

 

 

 

    

 

Precious Metals and Mining - 0.9%

 

 

 

 

 

 

 

†L&L Energy a

 

 

2,900

 

 

31,320

 

 

 

 

 

 

    

 

Total (Cost $166,698)

 

 

 

 

 

210,437

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Technology – 25.4%

 

 

 

 

 

 

 

Aerospace and Defense - 4.9%

 

 

 

 

 

 

 

Ducommun

 

 

1,400

 

 

30,492

 

Dynamics Research a

 

 

2,300

 

 

30,820

 

†Force Protection a

 

 

4,500

 

 

24,795

 

Kaman Corporation

 

 

1,200

 

 

34,884

 

LaBarge a

 

 

2,100

 

 

32,991

 

†VSE Corporation

 

 

700

 

 

23,114

 

 

 

 

 

 

    

 

 

 

 

 

 

 

177,096

 

 

 

 

 

 

    

 

Components and Systems - 6.1%

 

 

 

 

 

 

 

†Imation Corporation a

 

 

2,800

 

 

28,868

 

†Multi-Fineline Electronix a

 

 

1,500

 

 

39,735

 

Nam Tai Electronics

 

 

4,398

 

 

28,147

 

RadiSys Corporation a

 

 

3,100

 

 

27,590

 

Rimage Corporation a

 

 

1,700

 

 

25,347

 

Super Micro Computer a

 

 

3,100

 

 

35,774

 

Xyratex a

 

 

2,200

 

 

35,882

 

 

 

 

 

 

    

 

 

 

 

 

 

 

221,343

 

 

 

 

 

 

    

 

Internet Software and Services - 3.3%

 

 

 

 

 

 

 

ePlus a

 

 

1,600

 

 

37,824

 

†InfoSpace a

 

 

3,200

 

 

26,560

 

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Technology (continued)

 

 

 

 

 

 

 

Internet Software and Services (continued)

 

 

 

 

 

 

 

†United Online

 

 

4,000

 

$

26,400

 

VASCO Data Security International a

 

 

3,500

 

 

28,455

 

 

 

 

 

 

    

 

 

 

 

 

 

 

119,239

 

 

 

 

 

 

    

 

IT Services - 0.9%

 

 

 

 

 

 

 

CIBER a

 

 

6,700

 

 

31,356

 

 

 

 

 

 

    

 

Semiconductors and Equipment - 3.8%

 

 

 

 

 

 

 

†Brooks Automation a

 

 

4,400

 

 

39,908

 

Image Sensing Systems a

 

 

1,537

 

 

19,996

 

†Integrated Silicon Solution a

 

 

4,300

 

 

34,529

 

TTM Technologies a

 

 

3,000

 

 

44,730

 

 

 

 

 

 

    

 

 

 

 

 

 

 

139,163

 

 

 

 

 

 

    

 

Software - 2.1%

 

 

 

 

 

 

 

Actuate Corporation a

 

 

7,200

 

 

41,040

 

†Manhattan Associates a

 

 

1,000

 

 

30,540

 

Pervasive Software a

 

 

1,200

 

 

6,192

 

 

 

 

 

 

    

 

 

 

 

 

 

 

77,772

 

 

 

 

 

 

    

 

Telecommunications - 4.3%

 

 

 

 

 

 

 

Audiovox Corporation Cl. A a

 

 

1,460

 

 

12,600

 

Communications Systems

 

 

2,000

 

 

27,880

 

†Novatel Wireless a

 

 

3,900

 

 

37,245

 

†Sierra Wireless a

 

 

3,300

 

 

49,236

 

†Symmetricom a

 

 

4,300

 

 

30,487

 

 

 

 

 

 

    

 

 

 

 

 

 

 

157,448

 

 

 

 

 

 

    

 

Total (Cost $857,544)

 

 

 

 

 

923,417

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Miscellaneouse – 2.6%

 

 

 

 

 

 

 

Total (Cost $119,235)

 

 

 

 

 

93,335

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

TOTAL COMMON STOCKS

 

 

 

 

 

 

 

(Cost $3,105,053)

 

 

 

 

 

3,422,841

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

REPURCHASE AGREEMENT – 4.0%

 

 

 

 

 

 

 

State Street Bank & Trust Company, 0.13% dated 12/31/10, due 1/3/11, maturity value $147,002 (collateralized by obligations of various U.S. Government Agencies, 1.375% due 5/15/13, valued at $152,295)

 

 

 

 

 

 

 

(Cost $147,000)

 

 

 

 

 

147,000

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

TOTAL INVESTMENTS – 98.1%

 

 

 

 

 

 

 

(Cost $3,252,053)

 

 

 

 

 

3,569,841

 

 

 

 

 

 

 

 

 

CASH AND OTHER ASSETS LESS LIABILITIES – 1.9%

 

 

 

 

 

67,308

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

NET ASSETS – 100.0%

 

 

 

 

$

3,637,149

 

 

 

 

 

 

    

 


 

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

The Royce Funds 2010 Annual Report to Shareholders | 97

 

Schedules of Investments
 

 

Royce Financial Services Fund


 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

COMMON STOCKS – 93.0%

 

 

 

 

 

 

 

Banking - 9.7%

 

 

 

 

 

 

 

Bank of N.T. Butterfield & Son a,f

 

 

10,871

 

$

13,589

 

Bank Sarasin & Co. Cl. B

 

 

3,085

 

 

140,557

 

Banque Privee Edmond de Rothschild

 

 

3

 

 

86,631

 

BOK Financial

 

 

5,942

 

 

317,303

 

Fauquier Bankshares

 

 

2,400

 

 

30,960

 

†First Republic Bank a

 

 

8,400

 

 

244,608

 

Julius Baer Group

 

 

3,900

 

 

182,695

 

Northern Trust

 

 

3,000

 

 

166,230

 

Peapack-Gladstone Financial

 

 

2,835

 

 

36,997

 

Vontobel Holding

 

 

3,000

 

 

114,224

 

Wilber Corporation (The)

 

 

6,100

 

 

61,610

 

Wilmington Trust

 

 

7,400

 

 

32,116

 

 

 

 

 

 

    

 

Total (Cost $1,525,262)

 

 

 

 

 

1,427,520

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Closed-End Funds - 0.4%

 

 

 

 

 

 

 

MVC Capital

 

 

3,800

 

 

55,480

 

 

 

 

 

 

    

 

Total (Cost $45,075)

 

 

 

 

 

55,480

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Diversified Financial Services - 2.0%

 

 

 

 

 

 

 

IOOF Holdings

 

 

11,528

 

 

91,969

 

Lazard Cl. A

 

 

5,000

 

 

197,450

 

 

 

 

 

 

    

 

Total (Cost $185,670)

 

 

 

 

 

289,419

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Information and Processing - 6.9%

 

 

 

 

 

 

 

MasterCard Cl. A

 

 

700

 

 

156,877

 

Morningstar

 

 

4,600

 

 

244,168

 

MSCI Cl. A a

 

 

3,300

 

 

128,568

 

SEI Investments

 

 

9,400

 

 

223,626

 

Western Union

 

 

14,000

 

 

259,980

 

 

 

 

 

 

    

 

Total (Cost $742,678)

 

 

 

 

 

1,013,219

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Insurance - 9.8%

 

 

 

 

 

 

 

Alleghany Corporation a

 

 

518

 

 

158,700

 

Berkley (W.R.)

 

 

7,100

 

 

194,398

 

E-L Financial

 

 

200

 

 

98,662

 

Enstar Group a

 

 

3,200

 

 

270,656

 

Erie Indemnity Cl. A

 

 

2,500

 

 

163,675

 

Marsh & McLennan

 

 

9,300

 

 

254,262

 

†Primerica

 

 

6,900

 

 

167,325

 

RLI

 

 

1,100

 

 

57,827

 

Validus Holdings

 

 

2,300

 

 

70,403

 

 

 

 

 

 

    

 

Total (Cost $1,103,640)

 

 

 

 

 

1,435,908

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Insurance Brokers - 2.3%

 

 

 

 

 

 

 

Brown & Brown

 

 

2,600

 

 

62,244

 

Gallagher (Arthur J.) & Co.

 

 

4,900

 

 

142,492

 

Willis Group Holdings

 

 

4,000

 

 

138,520

 

 

 

 

 

 

    

 

Total (Cost $272,176)

 

 

 

 

 

343,256

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Investment Management - 36.2%

 

 

 

 

 

 

 

Affiliated Managers Group a

 

 

2,400

 

 

238,128

 

AGF Management Cl. B

 

 

10,600

 

 

207,778

 

 

 

 

 

 

 

 

 

 

 

 

SHARES

     

 

VALUE

 

 

 

 

 

 

 

 

 

Investment Management (continued)

 

 

 

 

 

 

 

AllianceBernstein Holding L.P.

 

 

9,200

 

$

214,636

 

Artio Global Investors Cl. A

 

 

5,000

 

 

73,750

 

Ashmore Group

 

 

50,000

 

 

261,227

 

Azimut Holding

 

 

10,675

 

 

96,717

 

Cohen & Steers

 

 

10,500

 

 

274,050

 

Federated Investors Cl. B

 

 

6,400

 

 

167,488

 

GAM Holding a

 

 

3,300

 

 

54,529

 

GAMCO Investors Cl. A

 

 

3,300

 

 

158,433

 

Gartmore Group a

 

 

20,000

 

 

28,687

 

Invesco

 

 

11,425

 

 

274,886

 

Investec

 

 

8,500

 

 

69,840

 

Janus Capital Group

 

 

11,700

 

 

151,749

 

†Jupiter Fund Management a

 

 

51,200

 

 

239,797

 

Och-Ziff Capital Management Group LLC Cl. A

 

 

9,000

 

 

140,220

 

Partners Group Holding

 

 

1,000

 

 

189,733

 

Reinet Investments a

 

 

5,500

 

 

95,546

 

RHJ International a

 

 

10,000

 

 

82,851

 

SHUAA Capital a

 

 

150,000

 

 

51,048

 

SPARX Group a

 

 

400

 

 

45,079

 

Sprott

 

 

43,900

 

 

355,862

 

T. Rowe Price Group

 

 

3,400

 

 

219,436

 

U.S. Global Investors Cl. A

 

 

19,700

 

 

160,161

 

Value Partners Group

 

 

300,000

 

 

301,050

 

†Virtus Investment Partners a

 

 

9,000

 

 

408,330

 

VZ Holding

 

 

2,600

 

 

333,690

 

Waddell & Reed Financial Cl. A

 

 

5,900

 

 

208,211

 

Westwood Holdings Group

 

 

5,300

 

 

211,788

 

 

 

 

 

 

    

 

Total (Cost $4,276,367)

 

 

 

 

 

5,314,700

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Other Financial Intermediaries - 1.0%

 

 

 

 

 

 

 

KKR & Co. L.P.

 

 

11,000

 

 

156,200

 

 

 

 

 

 

    

 

Total (Cost $101,379)

 

 

 

 

 

156,200

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Other Financial Services - 1.9%

 

 

 

 

 

 

 

Hilltop Holdings a

 

 

5,200

 

 

51,584

 

Kennedy-Wilson Holdings a

 

 

22,676

 

 

226,533

 

 

 

 

 

 

    

 

Total (Cost $268,256)

 

 

 

 

 

278,117

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Precious Metals and Mining - 0.3%

 

 

 

 

 

 

 

Endeavour Mining a

 

 

17,900

 

 

50,587

 

 

 

 

 

 

    

 

Total (Cost $106,263)

 

 

 

 

 

50,587

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Real Estate - 1.2%

 

 

 

 

 

 

 

Jones Lang LaSalle

 

 

2,100

 

 

176,232

 

 

 

 

 

 

    

 

Total (Cost $80,182)

 

 

 

 

 

176,232

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Securities Brokers - 17.3%

 

 

 

 

 

 

 

Bolsas y Mercados Espanoles

 

 

4,000

 

 

95,305

 

Cowen Group Cl. A a

 

 

30,700

 

 

143,062

 

Egyptian Financial Group-Hermes Holding

 

 

23,000

 

 

133,166

 

FBR Capital Markets a

 

 

29,000

 

 

110,780

 

GFI Group

 

 

10,300

 

 

48,307

 


 

 

 

98 | The Royce Funds 2010 Annual Report to Shareholders

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

December 31, 2010
 

 

 

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Securities Brokers (continued)

 

 

 

 

 

 

 

Gleacher & Company a

 

 

14,000

 

$

33,180

 

GMP Capital

 

 

6,000

 

 

73,016

 

HQ

 

 

7,200

 

 

3,907

 

Interactive Brokers Group Cl. A

 

 

12,600

 

 

224,532

 

Jefferies Group

 

 

5,900

 

 

157,117

 

KBW

 

 

4,500

 

 

125,640

 

Kim Eng Holdings

 

 

100,000

 

 

190,907

 

MF Global Holdings a

 

 

16,000

 

 

133,760

 

Mirae Asset Securities

 

 

1,081

 

 

57,055

 

Mizuho Securities

 

 

10,800

 

 

30,994

 

Numis Corporation

 

 

28,000

 

 

56,315

 

Oppenheimer Holdings Cl. A

 

 

4,300

 

 

112,703

 

Raymond James Financial

 

 

5,100

 

 

166,770

 

Samsung Securities

 

 

1,600

 

 

124,205

 

Sanders Morris Harris Group

 

 

18,200

 

 

131,950

 

Stifel Financial a

 

 

3,559

 

 

220,800

 

Tokai Tokyo Financial Holdings

 

 

9,400

 

 

35,660

 

UOB-Kay Hian Holdings

 

 

95,000

 

 

131,024

 

 

 

 

 

 

    

 

Total (Cost $2,492,275)

 

 

 

 

 

2,540,155

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Securities Exchanges - 1.6%

 

 

 

 

 

 

 

Hellenic Exchanges

 

 

10,500

 

 

68,752

 

Singapore Exchange

 

 

25,000

 

 

164,024

 

 

 

 

 

 

    

 

Total (Cost $207,176)

 

 

 

 

 

232,776

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Software - 1.2%

 

 

 

 

 

 

 

Fair Isaac

 

 

7,400

 

 

172,938

 

 

 

 

 

 

    

 

Total (Cost $153,499)

 

 

 

 

 

172,938

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Specialty Finance - 1.2%

 

 

 

 

 

 

 

Credit Acceptance a

 

 

1,066

 

 

66,913

 

World Acceptance a

 

 

2,000

 

 

105,600

 

 

 

 

 

 

    

 

Total (Cost $79,687)

 

 

 

 

 

172,513

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

TOTAL COMMON STOCKS

 

 

 

 

 

 

 

(Cost $11,639,585)

 

 

 

 

 

13,659,020

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

PREFERRED STOCK – 0.0%

 

 

 

 

 

 

 

†Bank of N.T. Butterfield & Son 0% Conv. a,f

 

 

 

 

 

 

 

(Cost $555)

 

 

459

 

 

427

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PRINCIPAL

 

 

 

 

 

 

AMOUNT

 

 

 

 

CORPORATE BOND – 0.1%

 

 

 

 

 

 

 

GAMCO Investors 0.00%

 

 

 

 

 

 

 

due 12/31/15 f

 

 

 

 

 

 

 

(Cost $10,560)

 

$

105

 

 

7,140

 

 

 

 

 

 

    

 

 

 

 

 

 

 

     

 

VALUE

 

REPURCHASE AGREEMENT – 6.2%

 

 

 

 

State Street Bank & Trust Company, 0.13% dated 12/31/10, due 1/3/11, maturity value $912,010 (collateralized by obligations of various U.S. Government Agencies, 1.375% due 5/15/13, valued at $939,153)

 

 

 

 

(Cost $912,000)

 

$

912,000

 

 

 

    

 

 

 

 

 

 

 

 

 

TOTAL INVESTMENTS – 99.3%

 

 

 

 

(Cost $12,562,700)

 

 

14,578,587

 

 

 

 

 

 

 

 

 

CASH AND OTHER ASSETS LESS LIABILITIES – 0.7%

 

 

109,030

 

 

 

    

 

 

 

 

 

 

 

 

 

NET ASSETS – 100.0%

 

$

14,687,617

 

 

 

    

 


 

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

The Royce Funds 2010 Annual Report to Shareholders | 99

 

Schedules of Investments
 

 

Royce Dividend Value Fund

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

COMMON STOCKS – 93.1%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer Products – 5.3%

 

 

 

 

 

 

 

Apparel, Shoes and Accessories - 2.2%

 

 

 

 

 

 

 

†Barry (R.G.)

 

 

79,243

 

$

881,182

 

Guess?

 

 

14,400

 

 

681,408

 

Marimekko

 

 

19,798

 

 

382,290

 

†Stella International Holdings

 

 

104,000

 

 

207,390

 

†Weyco Group

 

 

11,600

 

 

284,084

 

Wolverine World Wide

 

 

30,300

 

 

965,964

 

 

 

 

 

 

    

 

 

 

 

 

 

 

3,402,318

 

 

 

 

 

 

    

 

Food/Beverage/Tobacco - 2.1%

 

 

 

 

 

 

 

Hormel Foods

 

 

7,400

 

 

379,324

 

Industrias Bachoco ADR

 

 

6,100

 

 

147,559

 

J&J Snack Foods

 

 

24,200

 

 

1,167,408

 

Lancaster Colony

 

 

20,500

 

 

1,172,600

 

Lindt & Spruengli

 

 

4

 

 

128,770

 

Sanderson Farms

 

 

5,400

 

 

211,410

 

 

 

 

 

 

    

 

 

 

 

 

 

 

3,207,071

 

 

 

 

 

 

    

 

Home Furnishing and Appliances - 0.6%

 

 

 

 

 

 

 

American Woodmark

 

 

3,700

 

 

90,798

 

Ethan Allen Interiors

 

 

24,000

 

 

480,240

 

Hunter Douglas

 

 

5,000

 

 

264,387

 

 

 

 

 

 

    

 

 

 

 

 

 

 

835,425

 

 

 

 

 

 

    

 

Sports and Recreation - 0.1%

 

 

 

 

 

 

 

Thor Industries

 

 

4,000

 

 

135,840

 

 

 

 

 

 

    

 

Other Consumer Products - 0.3%

 

 

 

 

 

 

 

Societe BIC

 

 

5,500

 

 

472,730

 

 

 

 

 

 

    

 

Total (Cost $7,055,766)

 

 

 

 

 

8,053,384

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Consumer Services – 6.4%

 

 

 

 

 

 

 

Leisure and Entertainment - 0.8%

 

 

 

 

 

 

 

International Speedway Cl. A

 

 

17,600

 

 

460,592

 

World Wrestling Entertainment Cl. A

 

 

51,152

 

 

728,404

 

 

 

 

 

 

    

 

 

 

 

 

 

 

1,188,996

 

 

 

 

 

 

    

 

Online Commerce - 0.7%

 

 

 

 

 

 

 

†PetMed Express

 

 

56,000

 

 

997,360

 

 

 

 

 

 

    

 

Restaurants and Lodgings - 0.3%

 

 

 

 

 

 

 

†Abu Dhabi National Hotels f

 

 

535,000

 

 

436,973

 

 

 

 

 

 

    

 

Retail Stores - 4.6%

 

 

 

 

 

 

 

American Eagle Outfitters

 

 

55,300

 

 

809,039

 

Buckle (The)

 

 

42,650

 

 

1,610,890

 

Cato Corporation (The) Cl. A

 

 

23,710

 

 

649,891

 

Dress Barn (The) a

 

 

17,600

 

 

464,992

 

Family Dollar Stores

 

 

16,700

 

 

830,157

 

Le Chateau Cl. A

 

 

10,000

 

 

115,659

 

Lewis Group

 

 

41,000

 

 

505,942

 

Regis Corporation

 

 

116,200

 

 

1,928,920

 

Williams-Sonoma

 

 

5,100

 

 

182,019

 

 

 

 

 

 

    

 

 

 

 

 

 

 

7,097,509

 

 

 

 

 

 

    

 

Total (Cost $8,567,463)

 

 

 

 

 

9,720,838

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Financial Intermediaries – 20.0%

 

 

 

 

 

 

 

Banking - 3.0%

 

 

 

 

 

 

 

Banca Generali

 

 

4,200

 

 

50,877

 

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Financial Intermediaries (continued)

 

 

 

 

 

 

 

Banking (continued)

 

 

 

 

 

 

 

†Bank of Hawaii

 

 

23,000

 

$

1,085,830

 

Bank Sarasin & Co. Cl. B

 

 

24,000

 

 

1,093,476

 

BOK Financial

 

 

14,700

 

 

784,980

 

†City Holding Company

 

 

18,397

 

 

666,523

 

Fauquier Bankshares

 

 

4,400

 

 

56,760

 

†First Republic Bank a

 

 

26,600

 

 

774,592

 

Peapack-Gladstone Financial

 

 

2,205

 

 

28,775

 

 

 

 

 

 

    

 

 

 

 

 

 

 

4,541,813

 

 

 

 

 

 

    

 

Insurance - 10.7%

 

 

 

 

 

 

 

Allied World Assurance Company Holdings

 

 

26,900

 

 

1,598,936

 

Alterra Capital Holdings

 

 

32,400

 

 

701,136

 

Aspen Insurance Holdings

 

 

11,400

 

 

326,268

 

Berkley (W.R.)

 

 

45,500

 

 

1,245,790

 

Cincinnati Financial

 

 

4,700

 

 

148,943

 

†E-L Financial

 

 

3,100

 

 

1,529,267

 

Erie Indemnity Cl. A

 

 

17,000

 

 

1,112,990

 

Fidelity National Financial Cl. A

 

 

20,000

 

 

273,600

 

†First American Financial

 

 

9,300

 

 

138,942

 

Harleysville Group

 

 

24,800

 

 

911,152

 

†HCC Insurance Holdings

 

 

33,900

 

 

981,066

 

Marsh & McLennan

 

 

39,700

 

 

1,085,398

 

Montpelier Re Holdings

 

 

19,400

 

 

386,836

 

Old Republic International

 

 

76,200

 

 

1,038,606

 

PartnerRe

 

 

6,400

 

 

514,240

 

Reinsurance Group of America

 

 

29,500

 

 

1,584,445

 

†StanCorp Financial Group

 

 

21,700

 

 

979,538

 

Transatlantic Holdings

 

 

24,000

 

 

1,238,880

 

†United Fire & Casualty

 

 

11,900

 

 

265,608

 

Validus Holdings

 

 

12,537

 

 

383,757

 

 

 

 

 

 

    

 

 

 

 

 

 

 

16,445,398

 

 

 

 

 

 

    

 

Real Estate Investment Trusts - 3.1%

 

 

 

 

 

 

 

Colony Financial

 

 

53,500

 

 

1,071,070

 

CommonWealth REIT

 

 

6,250

 

 

159,438

 

Cousins Properties

 

 

40,010

 

 

333,683

 

DCT Industrial Trust

 

 

23,400

 

 

124,254

 

†Essex Property Trust

 

 

8,000

 

 

913,760

 

Lexington Realty Trust

 

 

58,706

 

 

466,713

 

National Health Investors

 

 

38,700

 

 

1,742,274

 

 

 

 

 

 

    

 

 

 

 

 

 

 

4,811,192

 

 

 

 

 

 

    

 

Securities Brokers - 1.0%

 

 

 

 

 

 

 

Egyptian Financial Group-Hermes

 

 

 

 

 

 

 

Holding

 

 

68,000

 

 

393,709

 

GMP Capital

 

 

6,500

 

 

79,101

 

Raymond James Financial

 

 

7,800

 

 

255,060

 

Sanders Morris Harris Group

 

 

105,000

 

 

761,250

 

 

 

 

 

 

    

 

 

 

 

 

 

 

1,489,120

 

 

 

 

 

 

    

 

Securities Exchanges - 1.4%

 

 

 

 

 

 

 

†Singapore Exchange

 

 

140,000

 

 

918,534

 

†TMX Group

 

 

32,200

 

 

1,196,934

 

 

 

 

 

 

    

 

 

 

 

 

 

 

2,115,468

 

 

 

 

 

 

    

 


 

 

 

100 | The Royce Funds 2010 Annual Report to Shareholders

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

December 31, 2010
 

 

 

 

 

 

 

 

 

 

 

 

 

 

SHARES

     

 

VALUE

 

Financial Intermediaries (continued)

 

 

 

 

 

 

 

Other Financial Intermediaries - 0.8%

 

 

 

 

 

 

 

†KKR & Co. L.P.

 

 

87,600

 

$

1,243,920

 

 

 

 

 

 

    

 

Total (Cost $27,850,570)

 

 

 

 

 

30,646,911

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Financial Services – 13.7%

 

 

 

 

 

 

 

Diversified Financial Services - 0.4%

 

 

 

 

 

 

 

Lazard Cl. A

 

 

16,700

 

 

659,483

 

 

 

 

 

 

    

 

Information and Processing - 1.6%

 

 

 

 

 

 

 

SEI Investments

 

 

61,000

 

 

1,451,190

 

Total System Services

 

 

64,300

 

 

988,934

 

Value Line

 

 

3,000

 

 

43,350

 

 

 

 

 

 

    

 

 

 

 

 

 

 

2,483,474

 

 

 

 

 

 

    

 

Insurance Brokers - 1.3%

 

 

 

 

 

 

 

Brown & Brown

 

 

25,000

 

 

598,500

 

Willis Group Holdings

 

 

39,600

 

 

1,371,348

 

 

 

 

 

 

    

 

 

 

 

 

 

 

1,969,848

 

 

 

 

 

 

    

 

Investment Management - 10.1%

 

 

 

 

 

 

 

†Affiliated Managers Group a

 

 

14,800

 

 

1,468,456

 

AGF Management Cl. B

 

 

23,900

 

 

468,481

 

AllianceBernstein Holding L.P.

 

 

65,000

 

 

1,516,450

 

Apollo Investment

 

 

7,300

 

 

80,811

 

†Artio Global Investors Cl. A

 

 

48,000

 

 

708,000

 

Ashmore Group

 

 

53,000

 

 

276,901

 

Cohen & Steers

 

 

24,200

 

 

631,620

 

†Epoch Holding Corporation

 

 

51,800

 

 

804,454

 

Federated Investors Cl. B

 

 

95,800

 

 

2,507,086

 

Gluskin Sheff + Associates

 

 

9,200

 

 

192,365

 

Invesco

 

 

39,600

 

 

952,776

 

Investec

 

 

52,200

 

 

428,899

 

†Jupiter Fund Management a

 

 

119,700

 

 

560,619

 

Och-Ziff Capital Management Group LLC Cl. A

 

 

56,100

 

 

874,038

 

Partners Group Holding

 

 

500

 

 

94,866

 

Sprott

 

 

125,000

 

 

1,013,276

 

U.S. Global Investors Cl. A

 

 

84,000

 

 

682,920

 

VZ Holding

 

 

1,000

 

 

128,342

 

Waddell & Reed Financial Cl. A

 

 

37,600

 

 

1,326,904

 

Westwood Holdings Group

 

 

16,923

 

 

676,243

 

 

 

 

 

 

    

 

 

 

 

 

 

 

15,393,507

 

 

 

 

 

 

    

 

Other Financial Services - 0.3%

 

 

 

 

 

 

 

Kennedy-Wilson Holdings a

 

 

48,600

 

 

485,514

 

 

 

 

 

 

    

 

Total (Cost $17,511,785)

 

 

 

 

 

20,991,826

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Health – 3.0%

 

 

 

 

 

 

 

Commercial Services - 0.1%

 

 

 

 

 

 

 

OdontoPrev

 

 

12,800

 

 

193,465

 

 

 

 

 

 

    

 

Drugs and Biotech - 0.8%

 

 

 

 

 

 

 

†Adcock Ingram Holdings

 

 

48,900

 

 

444,647

 

Boiron

 

 

1,500

 

 

57,147

 

Pharmaceutical Product Development

 

 

17,500

 

 

474,950

 

Recordati

 

 

20,000

 

 

188,552

 

 

 

 

 

 

    

 

 

 

 

 

 

 

1,165,296

 

 

 

 

 

 

    

 

Health Services - 0.6%

 

 

 

 

 

 

 

Chemed Corporation

 

 

15,400

 

 

978,054

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Health (continued)

 

 

 

 

 

 

 

Medical Products and Devices - 1.5%

 

 

 

 

 

 

 

Carl Zeiss Meditec

 

 

9,500

 

$

181,346

 

Fielmann

 

 

3,200

 

 

304,206

 

†Owens & Minor

 

 

44,500

 

 

1,309,635

 

†Pall Corporation

 

 

9,900

 

 

490,842

 

 

 

 

 

 

    

 

 

 

 

 

 

 

2,286,029

 

 

 

 

 

 

    

 

Total (Cost $3,918,066)

 

 

 

 

 

4,622,844

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Industrial Products – 20.0%

 

 

 

 

 

 

 

Automotive - 0.1%

 

 

 

 

 

 

 

Xinyi Glass Holdings

 

 

130,000

 

 

107,040

 

 

 

 

 

 

    

 

Building Systems and Components - 1.3%

 

 

 

 

 

 

 

AAON

 

 

19,900

 

 

561,379

 

Preformed Line Products

 

 

13,100

 

 

766,677

 

†TOTO

 

 

74,000

 

 

536,840

 

WaterFurnace Renewable Energy

 

 

6,000

 

 

149,472

 

 

 

 

 

 

    

 

 

 

 

 

 

 

2,014,368

 

 

 

 

 

 

    

 

Construction Materials - 0.2%

 

 

 

 

 

 

 

Duratex

 

 

13,741

 

 

147,757

 

Geberit

 

 

1,000

 

 

231,230

 

 

 

 

 

 

    

 

 

 

 

 

 

 

378,987

 

 

 

 

 

 

    

 

Industrial Components - 2.9%

 

 

 

 

 

 

 

Amphenol Corporation Cl. A

 

 

17,100

 

 

902,538

 

CLARCOR

 

 

23,400

 

 

1,003,626

 

Donaldson Company

 

 

9,500

 

 

553,660

 

Hubbell Cl. B

 

 

19,600

 

 

1,178,548

 

Regal-Beloit

 

 

11,400

 

 

761,064

 

 

 

 

 

 

    

 

 

 

 

 

 

 

4,399,436

 

 

 

 

 

 

    

 

Machinery - 2.2%

 

 

 

 

 

 

 

Burckhardt Compression Holding

 

 

1,600

 

 

443,209

 

Franklin Electric

 

 

6,000

 

 

233,520

 

Lincoln Electric Holdings

 

 

3,100

 

 

202,337

 

†Lindsay Corporation

 

 

14,700

 

 

873,621

 

Nordson Corporation

 

 

7,700

 

 

707,476

 

Spirax-Sarco Engineering

 

 

9,500

 

 

286,453

 

Tennant Company

 

 

15,300

 

 

587,673

 

 

 

 

 

 

    

 

 

 

 

 

 

 

3,334,289

 

 

 

 

 

 

    

 

Metal Fabrication and Distribution - 5.5%

 

 

 

 

 

 

 

†Allegheny Technologies

 

 

13,000

 

 

717,340

 

Carpenter Technology

 

 

16,000

 

 

643,840

 

†Commercial Metals

 

 

18,700

 

 

310,233

 

CompX International Cl. A

 

 

25,800

 

 

296,700

 

†Insteel Industries

 

 

72,000

 

 

899,280

 

Kennametal

 

 

25,000

 

 

986,500

 

†Nucor Corporation

 

 

30,000

 

 

1,314,600

 

Reliance Steel & Aluminum

 

 

12,000

 

 

613,200

 

Schnitzer Steel Industries Cl. A

 

 

12,400

 

 

823,236

 

Sims Metal Management ADR

 

 

25,000

 

 

546,000

 

Steel Dynamics

 

 

21,000

 

 

384,300

 

†Worthington Industries

 

 

51,800

 

 

953,120

 

 

 

 

 

 

    

 

 

 

 

 

 

 

8,488,349

 

 

 

 

 

 

    

 

Miscellaneous Manufacturing - 2.0%

 

 

 

 

 

 

 

†AZZ

 

 

20,700

 

 

828,207

 

Rational

 

 

1,000

 

 

221,024

 

Raven Industries

 

 

9,600

 

 

457,824

 


 

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

The Royce Funds 2010 Annual Report to Shareholders | 101

 

Schedules of Investments
 

 

Royce Dividend Value Fund (continued)

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Industrial Products (continued)

 

 

 

 

 

 

 

Miscellaneous Manufacturing (continued)

 

 

 

 

 

 

 

†Semperit AG Holding

 

 

12,000

 

$

634,849

 

†Valmont Industries

 

 

10,000

 

 

887,300

 

 

 

 

 

 

    

 

 

 

 

 

 

 

3,029,204

 

 

 

 

 

 

    

 

Paper and Packaging - 1.1%

 

 

 

 

 

 

 

AptarGroup

 

 

9,800

 

 

466,186

 

Greif Cl. A

 

 

20,955

 

 

1,297,115

 

 

 

 

 

 

    

 

 

 

 

 

 

 

1,763,301

 

 

 

 

 

 

    

 

Pumps, Valves and Bearings - 2.2%

 

 

 

 

 

 

 

†Flowserve Corporation

 

 

7,900

 

 

941,838

 

Gardner Denver

 

 

7,400

 

 

509,268

 

Graco

 

 

15,400

 

 

607,530

 

Kaydon Corporation

 

 

30,900

 

 

1,258,248

 

 

 

 

 

 

    

 

 

 

 

 

 

 

3,316,884

 

 

 

 

 

 

    

 

Specialty Chemicals and Materials - 2.3%

 

 

 

 

 

 

 

Balchem Corporation

 

 

19,050

 

 

644,080

 

Cabot Corporation

 

 

11,500

 

 

432,975

 

Quaker Chemical

 

 

32,600

 

 

1,358,442

 

†Stepan Company

 

 

11,548

 

 

880,766

 

Victrex

 

 

7,500

 

 

173,411

 

 

 

 

 

 

    

 

 

 

 

 

 

 

3,489,674

 

 

 

 

 

 

    

 

Textiles - 0.1%

 

 

 

 

 

 

 

Interface Cl. A

 

 

8,000

 

 

125,200

 

 

 

 

 

 

    

 

Other Industrial Products - 0.1%

 

 

 

 

 

 

 

MTS Systems

 

 

3,500

 

 

131,110

 

 

 

 

 

 

    

 

Total (Cost $24,803,064)

 

 

 

 

 

30,577,842

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Industrial Services – 9.6%

 

 

 

 

 

 

 

Commercial Services - 6.1%

 

 

 

 

 

 

 

Brink’s Company (The)

 

 

46,700

 

 

1,255,296

 

Corporate Executive Board

 

 

3,900

 

 

146,445

 

†Electro Rent

 

 

15,900

 

 

256,944

 

Grupo Aeroportuario del Centro Norte ADR

 

 

14,600

 

 

225,570

 

Grupo Aeroportuario del Pacifico ADR

 

 

21,500

 

 

873,115

 

Kelly Services Cl. A a

 

 

35,600

 

 

669,280

 

Landauer

 

 

6,700

 

 

401,799

 

†Manpower

 

 

15,000

 

 

941,400

 

MAXIMUS

 

 

16,400

 

 

1,075,512

 

Michael Page International

 

 

36,000

 

 

311,508

 

†Pico Far East Holdings

 

 

1,278,000

 

 

271,292

 

†Ritchie Bros. Auctioneers

 

 

60,000

 

 

1,383,000

 

Towers Watson & Company Cl. A

 

 

29,900

 

 

1,556,594

 

 

 

 

 

 

    

 

 

 

 

 

 

 

9,367,755

 

 

 

 

 

 

    

 

Engineering and Construction - 0.3%

 

 

 

 

 

 

 

†Raubex Group

 

 

135,000

 

 

478,520

 

 

 

 

 

 

    

 

Industrial Distribution - 1.0%

 

 

 

 

 

 

 

Grainger (W.W.)

 

 

400

 

 

55,244

 

Houston Wire & Cable

 

 

31,400

 

 

422,016

 

†Mine Safety Appliances

 

 

35,000

 

 

1,089,550

 

 

 

 

 

 

    

 

 

 

 

 

 

 

1,566,810

 

 

 

 

 

 

    

 

Printing - 0.3%

 

 

 

 

 

 

 

Domino Printing Sciences

 

 

36,000

 

 

364,829

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Industrial Services (continued)

 

 

 

 

 

 

 

Transportation and Logistics - 1.8%

 

 

 

 

 

 

 

†Forward Air

 

 

24,000

 

$

681,120

 

Landstar System

 

 

40,300

 

 

1,649,882

 

Pacer International a

 

 

8,000

 

 

54,720

 

UTi Worldwide

 

 

16,700

 

 

354,040

 

 

 

 

 

 

    

 

 

 

 

 

 

 

2,739,762

 

 

 

 

 

 

    

 

Other Industrial Services - 0.1%

 

 

 

 

 

 

 

US Ecology

 

 

7,700

 

 

133,826

 

 

 

 

 

 

    

 

Total (Cost $12,554,465)

 

 

 

 

 

14,651,502

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Natural Resources – 6.2%

 

 

 

 

 

 

 

Energy Services - 2.6%

 

 

 

 

 

 

 

†Ensco ADR

 

 

10,000

 

 

533,800

 

Ensign Energy Services

 

 

25,300

 

 

382,439

 

Exterran Partners L.P.

 

 

6,404

 

 

172,011

 

Helmerich & Payne

 

 

26,400

 

 

1,279,872

 

Lamprell

 

 

71,000

 

 

355,888

 

Lufkin Industries

 

 

7,400

 

 

461,686

 

Oil States International a

 

 

7,600

 

 

487,084

 

Tidewater

 

 

6,000

 

 

323,040

 

 

 

 

 

 

    

 

 

 

 

 

 

 

3,995,820

 

 

 

 

 

 

    

 

Oil and Gas - 1.8%

 

 

 

 

 

 

 

Cimarex Energy

 

 

2,600

 

 

230,178

 

Energen Corporation

 

 

33,600

 

 

1,621,536

 

Pioneer Southwest Energy Partners L.P.

 

 

30,300

 

 

909,909

 

 

 

 

 

 

    

 

 

 

 

 

 

 

2,761,623

 

 

 

 

 

 

    

 

Precious Metals and Mining - 1.5%

 

 

 

 

 

 

 

†Aquarius Platinum

 

 

81,500

 

 

447,275

 

†Compass Minerals International

 

 

11,100

 

 

990,897

 

Fresnillo

 

 

18,000

 

 

468,104

 

†Kingsgate Consolidated

 

 

33,000

 

 

367,226

 

 

 

 

 

 

    

 

 

 

 

 

 

 

2,273,502

 

 

 

 

 

 

    

 

Other Natural Resources - 0.3%

 

 

 

 

 

 

 

China Forestry Holdings

 

 

920,000

 

 

432,019

 

 

 

 

 

 

    

 

Total (Cost $7,157,736)

 

 

 

 

 

9,462,964

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Technology – 3.9%

 

 

 

 

 

 

 

Aerospace and Defense - 0.5%

 

 

 

 

 

 

 

Ducommun

 

 

6,600

 

 

143,748

 

HEICO Corporation Cl. A

 

 

15,457

 

 

576,855

 

 

 

 

 

 

    

 

 

 

 

 

 

 

720,603

 

 

 

 

 

 

    

 

Components and Systems - 2.0%

 

 

 

 

 

 

 

AVX Corporation

 

 

73,500

 

 

1,134,105

 

Diebold

 

 

13,800

 

 

442,290

 

†Pfeiffer Vacuum Technology

 

 

12,500

 

 

1,469,930

 

Vaisala Cl. A

 

 

3,300

 

 

90,401

 

 

 

 

 

 

    

 

 

 

 

 

 

 

3,136,726

 

 

 

 

 

 

    

 

IT Services - 0.2%

 

 

 

 

 

 

 

Jack Henry & Associates

 

 

9,700

 

 

282,755

 

 

 

 

 

 

    

 

Semiconductors and Equipment - 0.5%

 

 

 

 

 

 

 

ADTRAN

 

 

3,300

 

 

119,493

 

†Aixtron ADR

 

 

15,000

 

 

558,000

 

Cognex Corporation

 

 

3,000

 

 

88,260

 

 

 

 

 

 

    

 

 

 

 

 

 

 

765,753

 

 

 

 

 

 

    

 


 

 

 

102 | The Royce Funds 2010 Annual Report to Shareholders

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

December 31, 2010
 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Technology (continued)

 

 

 

 

 

 

 

Software - 0.7%

 

 

 

 

 

 

 

National Instruments

 

 

28,600

 

$

1,076,504

 

 

 

 

 

 

    

 

Total (Cost $4,904,519)

 

 

 

 

 

5,982,341

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Utilities – 0.1%

 

 

 

 

 

 

 

Northeast Utilities

 

 

4,100

 

 

130,708

 

 

 

 

 

 

    

 

Total (Cost $90,469)

 

 

 

 

 

130,708

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Miscellaneouse – 4.9%

 

 

 

 

 

 

 

Total (Cost $6,919,713)

 

 

 

 

 

7,541,285

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

TOTAL COMMON STOCKS

 

 

 

 

 

 

 

(Cost $121,333,616)

 

 

 

 

 

142,382,445

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

PREFERRED STOCK – 0.0%

 

 

 

 

 

 

 

†Bank of N.T. Butterfield & Son 0% Conv. a,f

 

 

 

 

 

 

 

(Cost $422)

 

 

350

 

 

325

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

REPURCHASE AGREEMENT – 5.7%

 

 

 

 

 

 

 

State Street Bank & Trust Company, 0.13% dated 12/31/10, due 1/3/11, maturity value $8,745,095 (collateralized by obligations of various U.S. Government Agencies, due 5/24/11, valued at $8,963,781)

 

 

 

 

 

 

 

(Cost $8,745,000)

 

 

 

 

 

8,745,000

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

TOTAL INVESTMENTS – 98.8%

 

 

 

 

 

 

 

(Cost $130,079,038)

 

 

 

 

 

151,127,770

 

 

 

 

 

 

 

 

 

CASH AND OTHER ASSETS LESS LIABILITIES – 1.2%

 

 

 

 

 

1,802,617

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

NET ASSETS – 100.0%

 

 

 

 

$

152,930,387

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Royce European Smaller-Companies Fund

 

 

SHARES

     

VALUE

 

COMMON STOCKS – 89.6%

 

 

 

 

 

 

 

Australia – 1.2%

 

 

 

 

 

 

 

Centamin Egypt a

 

 

65,000

 

$

178,766

 

 

 

 

 

 

    

 

Total (Cost $92,793)

 

 

 

 

 

178,766

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Austria – 5.1%

 

 

 

 

 

 

 

Mayr-Melnhof Karton

 

 

3,200

 

 

372,282

 

Semperit AG Holding

 

 

7,700

 

 

407,362

 

 

 

 

 

 

    

 

Total (Cost $607,095)

 

 

 

 

 

779,644

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Belgium – 3.1%

 

 

 

 

 

 

 

EVS Broadcast Equipment

 

 

3,500

 

 

224,031

 

GIMV

 

 

2,500

 

 

136,536

 

Sipef

 

 

1,200

 

 

113,853

 

 

 

 

 

 

    

 

Total (Cost $396,526)

 

 

 

 

 

474,420

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Denmark – 3.0%

 

 

 

 

 

 

 

H Lundbeck

 

 

12,000

 

 

228,037

 

†SimCorp

 

 

1,500

 

 

240,675

 

 

 

 

 

 

    

 

Total (Cost $444,755)

 

 

 

 

 

468,712

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Egypt – 0.9%

 

 

 

 

 

 

 

Egyptian Financial Group-Hermes Holding

 

 

25,000

 

 

144,746

 

 

 

 

 

 

    

 

Total (Cost $151,258)

 

 

 

 

 

144,746

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Finland – 3.0%

 

 

 

 

 

 

 

Marimekko

 

 

4,200

 

 

81,100

 

Ponsse

 

 

5,500

 

 

79,376

 

Vacon

 

 

1,000

 

 

52,116

 

Vaisala Cl. A

 

 

8,864

 

 

242,822

 

 

 

 

 

 

    

 

Total (Cost $445,710)

 

 

 

 

 

455,414

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

France – 13.3%

 

 

 

 

 

 

 

†Audika

 

 

6,500

 

 

145,403

 

Beneteau a

 

 

8,000

 

 

169,229

 

†bioMerieux

 

 

2,500

 

 

246,614

 

Boiron

 

 

5,500

 

 

209,539

 

†Ipsen

 

 

5,500

 

 

167,829

 

Manutan International

 

 

3,000

 

 

198,040

 

†Meetic

 

 

10,000

 

 

217,149

 

†Parrot a

 

 

2,800

 

 

90,173

 

Piscines Desjoyaux

 

 

10,000

 

 

92,873

 

Societe Internationale de Plantations d’Heveas

 

 

2,200

 

 

244,596

 

Vetoquinol

 

 

3,000

 

 

118,623

 

Virbac

 

 

800

 

 

138,975

 

 

 

 

 

 

    

 

Total (Cost $1,836,254)

 

 

 

 

 

2,039,043

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Germany – 11.6%

 

 

 

 

 

 

 

†Aixtron

 

 

6,500

 

 

239,776

 

Carl Zeiss Meditec

 

 

15,000

 

 

286,336

 

Deutsche Beteiligungs

 

 

2,000

 

 

56,125

 

Fuchs Petrolub

 

 

1,200

 

 

158,271

 


 

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

The Royce Funds 2010 Annual Report to Shareholders | 103

 

Schedules of Investments
 

 

Royce European Smaller-Companies Fund (continued)

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Germany (continued)

 

 

 

 

 

 

 

†KWS Saat

 

 

900

 

$

174,808

 

Pfeiffer Vacuum Technology

 

 

2,800

 

 

329,264

 

Rational

 

 

400

 

 

88,410

 

†SMA Solar Technology

 

 

3,000

 

 

278,618

 

Takkt

 

 

12,000

 

 

173,184

 

 

 

 

 

 

    

 

Total (Cost $1,527,989)

 

 

 

 

 

1,784,792

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Greece – 0.7%

 

 

 

 

 

 

 

Hellenic Exchanges

 

 

17,500

 

 

114,588

 

 

 

 

 

 

    

 

Total (Cost $162,175)

 

 

 

 

 

114,588

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Hong Kong – 1.1%

 

 

 

 

 

 

 

Asian Citrus Holdings

 

 

140,000

 

 

176,802

 

 

 

 

 

 

    

 

Total (Cost $67,215)

 

 

 

 

 

176,802

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Ireland – 0.9%

 

 

 

 

 

 

 

Charter International

 

 

10,000

 

 

131,666

 

 

 

 

 

 

    

 

Total (Cost $90,368)

 

 

 

 

 

131,666

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Italy – 1.5%

 

 

 

 

 

 

 

Recordati

 

 

25,000

 

 

235,690

 

 

 

 

 

 

    

 

Total (Cost $197,822)

 

 

 

 

 

235,690

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Jersey – 0.7%

 

 

 

 

 

 

 

Randgold Resources

 

 

1,300

 

 

106,915

 

 

 

 

 

 

    

 

Total (Cost $56,612)

 

 

 

 

 

106,915

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Mexico – 1.5%

 

 

 

 

 

 

 

Fresnillo

 

 

9,000

 

 

234,052

 

 

 

 

 

 

    

 

Total (Cost $70,575)

 

 

 

 

 

234,052

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Netherlands – 1.0%

 

 

 

 

 

 

 

Fugro

 

 

1,866

 

 

153,353

 

 

 

 

 

 

    

 

Total (Cost $124,511)

 

 

 

 

 

153,353

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Norway – 3.7%

 

 

 

 

 

 

 

Ekornes

 

 

3,000

 

 

82,262

 

Fred Olsen Energy

 

 

4,000

 

 

176,725

 

†TGS-NOPEC Geophysical

 

 

13,500

 

 

304,239

 

 

 

 

 

 

    

 

Total (Cost $405,426)

 

 

 

 

 

563,226

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Peru – 2.3%

 

 

 

 

 

 

 

Hochschild Mining

 

 

35,000

 

 

349,238

 

 

 

 

 

 

    

 

Total (Cost $132,522)

 

 

 

 

 

349,238

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

South Africa – 8.8%

 

 

 

 

 

 

 

†Adcock Ingram Holdings

 

 

25,000

 

 

227,324

 

†Advtech Limited

 

 

76,000

 

 

68,068

 

†Aquarius Platinum

 

 

40,000

 

 

219,521

 

Bell Equipment a

 

 

75,000

 

 

115,218

 

Discovery Holdings

 

 

17,000

 

 

101,729

 

Lewis Group

 

 

17,000

 

 

209,781

 

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

South Africa (continued)

 

 

 

 

 

 

 

Net 1 UEPS Technologies a

 

 

6,000

 

$

73,560

 

Northam Platinum

 

 

21,000

 

 

144,410

 

†Raubex Group

 

 

55,000

 

 

194,953

 

 

 

 

 

 

    

 

Total (Cost $1,110,770)

 

 

 

 

 

1,354,564

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Spain – 1.8%

 

 

 

 

 

 

 

†Almirall

 

 

30,000

 

 

273,407

 

 

 

 

 

 

    

 

Total (Cost $286,197)

 

 

 

 

 

273,407

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Sweden – 1.2%

 

 

 

 

 

 

 

Lundin Petroleum a

 

 

15,000

 

 

186,562

 

 

 

 

 

 

    

 

Total (Cost $83,103)

 

 

 

 

 

186,562

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Switzerland – 8.5%

 

 

 

 

 

 

 

Bank Sarasin & Co. Cl. B

 

 

3,000

 

 

136,685

 

Banque Privee Edmond de Rothschild

 

 

5

 

 

144,385

 

Burckhardt Compression Holding

 

 

1,350

 

 

373,957

 

Inficon Holding

 

 

600

 

 

115,187

 

Julius Baer Group

 

 

1,100

 

 

51,529

 

Partners Group Holding

 

 

1,300

 

 

246,652

 

†Sika

 

 

65

 

 

142,583

 

VZ Holding

 

 

700

 

 

89,840

 

 

 

 

 

 

    

 

Total (Cost $939,729)

 

 

 

 

 

1,300,818

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Turkey – 1.4%

 

 

 

 

 

 

 

†Ford Otomotiv Sanayi

 

 

10,000

 

 

84,521

 

†Mardin Cimento Sanayii Ve Ticaret

 

 

25,000

 

 

124,028

 

 

 

 

 

 

    

 

Total (Cost $202,534)

 

 

 

 

 

208,549

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

United Arab Emirates – 2.4%

 

 

 

 

 

 

 

†Abu Dhabi National Hotels f

 

 

55,000

 

 

44,922

 

Lamprell

 

 

65,000

 

 

325,813

 

 

 

 

 

 

    

 

Total (Cost $203,755)

 

 

 

 

 

370,735

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

United Kingdom – 10.9%

 

 

 

 

 

 

 

†African Barrick Gold

 

 

15,000

 

 

142,891

 

Ashmore Group

 

 

55,000

 

 

287,350

 

Begbies Traynor

 

 

110,000

 

 

102,901

 

Diploma

 

 

25,000

 

 

108,163

 

Domino Printing Sciences

 

 

6,000

 

 

60,805

 

†Jupiter Fund Management a

 

 

50,000

 

 

234,177

 

Michael Page International

 

 

14,000

 

 

121,142

 

Rotork

 

 

3,000

 

 

85,501

 

†Severfield-Rowen

 

 

50,000

 

 

240,101

 

Spirax-Sarco Engineering

 

 

3,500

 

 

105,535

 

†Spirent Communications

 

 

33,500

 

 

77,196

 

†Ted Baker

 

 

5,000

 

 

50,008

 

Victrex

 

 

2,800

 

 

64,740

 

 

 

 

 

 

    

 

Total (Cost $1,221,348)

 

 

 

 

 

1,680,510

 

 

 

 

 

 

    

 


 

 

 

104 | The Royce Funds 2010 Annual Report to Shareholders

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

December 31, 2010
 

 

             Royce Global Value Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     

VALUE

 

TOTAL COMMON STOCKS

 

 

 

 

(Cost $10,857,042)

 

$

13,766,212

 

 

 

    

 

 

 

 

 

 

REPURCHASE AGREEMENT – 8.9%

 

 

 

 

State Street Bank & Trust Company, 0.13% dated 12/31/10, due 1/3/11, maturity value $1,368,015 (collateralized by obligations of various U.S. Government Agencies, due 4/25/11, valued at $1,404,298)

 

 

 

 

(Cost $1,368,000)

 

 

1,368,000

 

 

 

    

 

 

 

 

 

 

TOTAL INVESTMENTS – 98.5%

 

 

 

 

(Cost $12,225,042)

 

 

15,134,212

 

 

 

 

 

 

CASH AND OTHER ASSETS LESS LIABILITIES – 1.5%

 

 

234,339

 

 

 

    

 

 

 

 

 

 

NET ASSETS – 100.0%

 

$

15,368,551

 

 

 

    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

COMMON STOCKS – 89.3%

 

 

 

 

 

 

 

Australia – 3.0%

 

 

 

 

 

 

 

†Centamin Egypt a

 

 

825,000

 

$

2,306,648

 

†Medusa Mining

 

 

325,000

 

 

2,150,693

 

 

 

 

 

 

    

 

Total (Cost $3,780,902)

 

 

 

 

 

4,457,341

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Austria – 4.9%

 

 

 

 

 

 

 

Mayr-Melnhof Karton

 

 

30,300

 

 

3,525,050

 

Semperit AG Holding

 

 

71,500

 

 

3,782,644

 

 

 

 

 

 

    

 

Total (Cost $5,723,780)

 

 

 

 

 

7,307,694

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Belgium – 2.9%

 

 

 

 

 

 

 

†EVS Broadcast Equipment

 

 

17,500

 

 

1,120,153

 

GIMV

 

 

25,000

 

 

1,365,365

 

Sipef

 

 

20,000

 

 

1,897,546

 

 

 

 

 

 

    

 

Total (Cost $3,523,796)

 

 

 

 

 

4,383,064

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Canada – 12.0%

 

 

 

 

 

 

 

Major Drilling Group International

 

 

85,000

 

 

3,551,996

 

Pan American Silver

 

 

73,500

 

 

3,028,935

 

Pason Systems

 

 

80,000

 

 

1,123,202

 

Seabridge Gold a

 

 

75,000

 

 

2,301,000

 

†Sino-Forest Corporation a

 

 

52,500

 

 

1,229,735

 

Sprott

 

 

235,000

 

 

1,904,958

 

Tesco Corporation a

 

 

80,000

 

 

1,270,400

 

TMX Group

 

 

37,000

 

 

1,375,360

 

Trican Well Service

 

 

101,100

 

 

2,047,827

 

 

 

 

 

 

    

 

Total (Cost $13,885,269)

 

 

 

 

 

17,833,413

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

China – 2.5%

 

 

 

 

 

 

 

China Forestry Holdings

 

 

3,300,000

 

 

1,549,635

 

†E-House China Holdings ADR

 

 

143,000

 

 

2,139,280

 

 

 

 

 

 

    

 

Total (Cost $3,524,772)

 

 

 

 

 

3,688,915

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Denmark – 1.0%

 

 

 

 

 

 

 

H Lundbeck

 

 

75,000

 

 

1,425,229

 

 

 

 

 

 

    

 

Total (Cost $1,420,321)

 

 

 

 

 

1,425,229

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Egypt – 0.8%

 

 

 

 

 

 

 

Egyptian Financial Group-Hermes Holding

 

 

200,000

 

 

1,157,967

 

 

 

 

 

 

    

 

Total (Cost $1,114,512)

 

 

 

 

 

1,157,967

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

France – 2.7%

 

 

 

 

 

 

 

Boiron

 

 

55,000

 

 

2,095,385

 

Societe Internationale de Plantations d’Heveas

 

 

17,000

 

 

1,890,063

 

 

 

 

 

 

    

 

Total (Cost $3,049,847)

 

 

 

 

 

3,985,448

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Germany – 7.2%

 

 

 

 

 

 

 

†Aixtron

 

 

62,500

 

 

2,305,535

 

Carl Zeiss Meditec

 

 

120,000

 

 

2,290,685

 

Pfeiffer Vacuum Technology

 

 

25,000

 

 

2,939,860

 


 

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

The Royce Funds 2010 Annual Report to Shareholders | 105

 

Schedules of Investments
 

 

Royce Global Value Fund (continued)

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Germany (continued)

 

 

 

 

 

 

 

Rational

 

 

5,900

 

$

1,304,042

 

†SMA Solar Technology

 

 

20,000

 

 

1,857,457

 

 

 

 

 

 

    

 

Total (Cost $8,910,021)

 

 

 

 

 

10,697,579

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Hong Kong – 6.1%

 

 

 

 

 

 

 

Asian Citrus Holdings

 

 

1,750,000

 

 

2,184,389

 

Citic Telecom International Holdings

 

 

3,250,000

 

 

1,036,949

 

Luk Fook Holdings (International)

 

 

702,000

 

 

2,452,051

 

Value Partners Group

 

 

3,450,000

 

 

3,462,073

 

 

 

 

 

 

    

 

Total (Cost $5,198,215)

 

 

 

 

 

9,135,462

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

India – 0.7%

 

 

 

 

 

 

 

†Maharashtra Seamless

 

 

120,000

 

 

1,033,210

 

 

 

 

 

 

    

 

Total (Cost $1,016,934)

 

 

 

 

 

1,033,210

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Italy – 1.4%

 

 

 

 

 

 

 

†Recordati

 

 

215,000

 

 

2,026,933

 

 

 

 

 

 

    

 

Total (Cost $1,949,121)

 

 

 

 

 

2,026,933

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Japan – 6.3%

 

 

 

 

 

 

 

†FamilyMart

 

 

50,000

 

 

1,884,469

 

†Moshi Moshi Hotline

 

 

77,000

 

 

2,020,076

 

†Nomura Research Institute

 

 

80,000

 

 

1,781,500

 

†Santen Pharmaceutical

 

 

105,000

 

 

3,647,001

 

 

 

 

 

 

    

 

Total (Cost $8,892,201)

 

 

 

 

 

9,333,046

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Mexico – 2.1%

 

 

 

 

 

 

 

Fresnillo

 

 

50,200

 

 

1,305,490

 

Industrias Bachoco ADR

 

 

75,000

 

 

1,814,250

 

 

 

 

 

 

    

 

Total (Cost $2,112,985)

 

 

 

 

 

3,119,740

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Norway – 1.4%

 

 

 

 

 

 

 

†TGS-NOPEC Geophysical

 

 

95,000

 

 

2,140,941

 

 

 

 

 

 

    

 

Total (Cost $1,334,897)

 

 

 

 

 

2,140,941

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Peru – 2.0%

 

 

 

 

 

 

 

Hochschild Mining

 

 

295,000

 

 

2,943,579

 

 

 

 

 

 

    

 

Total (Cost $1,458,548)

 

 

 

 

 

2,943,579

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

South Africa – 5.8%

 

 

 

 

 

 

 

†Adcock Ingram Holdings

 

 

251,500

 

 

2,286,884

 

Aquarius Platinum

 

 

300,000

 

 

1,646,409

 

Lewis Group

 

 

95,000

 

 

1,172,304

 

Northam Platinum

 

 

176,000

 

 

1,210,292

 

†Raubex Group

 

 

650,000

 

 

2,303,985

 

 

 

 

 

 

    

 

Total (Cost $7,187,934)

 

 

 

 

 

8,619,874

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

South Korea – 1.3%

 

 

 

 

 

 

 

†MegaStudy

 

 

12,500

 

 

1,940,700

 

 

 

 

 

 

    

 

Total (Cost $1,923,932)

 

 

 

 

 

1,940,700

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Switzerland – 3.4%

 

 

 

 

 

 

 

Burckhardt Compression Holding

 

 

12,000

 

$

3,324,064

 

Partners Group Holding

 

 

8,800

 

 

1,669,647

 

 

 

 

 

 

    

 

Total (Cost $3,265,171)

 

 

 

 

 

4,993,711

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Turkey – 0.8%

 

 

 

 

 

 

 

†Mardin Cimento Sanayii Ve Ticaret

 

 

255,000

 

 

1,265,091

 

 

 

 

 

 

    

 

Total (Cost $1,313,401)

 

 

 

 

 

1,265,091

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

United Arab Emirates – 1.7%

 

 

 

 

 

 

 

Lamprell

 

 

500,000

 

 

2,506,252

 

 

 

 

 

 

    

 

Total (Cost $1,480,188)

 

 

 

 

 

2,506,252

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

United Kingdom – 4.6%

 

 

 

 

 

 

 

Ashmore Group

 

 

500,000

 

 

2,612,271

 

†Ensco ADR

 

 

32,000

 

 

1,708,160

 

†Jupiter Fund Management a

 

 

550,000

 

 

2,575,943

 

 

 

 

 

 

    

 

Total (Cost $5,048,669)

 

 

 

 

 

6,896,374

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

United States – 14.7%

 

 

 

 

 

 

 

†Allied Nevada Gold a

 

 

60,000

 

 

1,578,600

 

†Analog Devices

 

 

55,000

 

 

2,071,850

 

GrafTech International a

 

 

90,000

 

 

1,785,600

 

†Helmerich & Payne

 

 

42,500

 

 

2,060,400

 

Jacobs Engineering Group a

 

 

22,000

 

 

1,008,700

 

Lincoln Electric Holdings

 

 

16,000

 

 

1,044,320

 

Nu Skin Enterprises Cl. A

 

 

55,000

 

 

1,664,300

 

Sanderson Farms

 

 

55,000

 

 

2,153,250

 

†SanDisk Corporation a

 

 

20,000

 

 

997,200

 

Schnitzer Steel Industries Cl. A

 

 

24,500

 

 

1,626,555

 

†Teradyne a

 

 

75,000

 

 

1,053,000

 

U.S. Global Investors Cl. A

 

 

115,200

 

 

936,576

 

†Varian Semiconductor Equipment Associates a

 

 

60,000

 

 

2,218,200

 

†Western Digital a

 

 

50,000

 

 

1,695,000

 

 

 

 

 

 

    

 

Total (Cost $19,836,836)

 

 

 

 

 

21,893,551

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

TOTAL COMMON STOCKS

 

 

 

 

 

 

 

(Cost $106,952,252)

 

 

 

 

 

132,785,114

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

REPURCHASE AGREEMENT – 7.8%

 

 

 

 

 

 

 

State Street Bank & Trust Company, 0.13% dated 12/31/10, due 1/3/11, maturity value $11,551,125 (collateralized by obligations of various U.S. Government Agencies, 3.50% due 5/5/11, valued at $11,843,700)

 

 

 

 

 

 

 

(Cost $11,551,000)

 

 

 

 

 

11,551,000

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

TOTAL INVESTMENTS – 97.1%

 

 

 

 

 

 

 

(Cost $118,503,252)

 

 

 

 

 

144,336,114

 

 

 

 

 

 

 

 

 

CASH AND OTHER ASSETS LESS LIABILITIES – 2.9%

 

 

 

 

 

4,281,584

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

NET ASSETS – 100.0%

 

 

 

 

$

148,617,698

 

 

 

 

 

 

    

 


 

 

 

106 | The Royce Funds 2010 Annual Report to Shareholders

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

December 31, 2010
 

 

Royce SMid-Cap Value Fund


 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

COMMON STOCKS – 85.7%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer Products – 2.7%

 

 

 

 

 

 

 

Food/Beverage/Tobacco - 1.1%

 

 

 

 

 

 

 

†Sanderson Farms

 

 

1,700

 

$

66,555

 

 

 

 

 

 

    

 

Sports and Recreation - 1.6%

 

 

 

 

 

 

 

Thor Industries

 

 

3,000

 

 

101,880

 

 

 

 

 

 

    

 

Total (Cost $178,563)

 

 

 

 

 

168,435

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Consumer Services – 4.1%

 

 

 

 

 

 

 

Retail Stores - 4.1%

 

 

 

 

 

 

 

American Eagle Outfitters

 

 

3,500

 

 

51,205

 

Dollar Tree a

 

 

600

 

 

33,648

 

Family Dollar Stores

 

 

1,200

 

 

59,652

 

GameStop Corporation Cl. A a

 

 

4,700

 

 

107,536

 

 

 

 

 

 

    

 

Total (Cost $235,048)

 

 

 

 

 

252,041

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Financial Intermediaries – 4.9%

 

 

 

 

 

 

 

Banking - 1.4%

 

 

 

 

 

 

 

Comerica

 

 

2,100

 

 

88,704

 

 

 

 

 

 

    

 

Insurance - 1.6%

 

 

 

 

 

 

 

PartnerRe

 

 

1,200

 

 

96,420

 

 

 

 

 

 

    

 

Securities Exchanges - 1.9%

 

 

 

 

 

 

 

†TMX Group

 

 

3,100

 

 

115,233

 

 

 

 

 

 

    

 

Total (Cost $268,371)

 

 

 

 

 

300,357

 

 

 

 

 

 

    

 


Financial Services – 7.0%

 

 

 

 

 

 

 

Information and Processing - 0.9%

 

 

 

 

 

 

 

SEI Investments

 

 

2,400

 

 

57,096

 

 

 

 

 

 

    

 

Investment Management - 6.1%

 

 

 

 

 

 

 

†Ashmore Group

 

 

30,000

 

 

156,736

 

Federated Investors Cl. B

 

 

2,200

 

 

57,574

 

†Value Partners Group

 

 

164,000

 

 

164,574

 

 

 

 

 

 

    

 

 

 

 

 

 

 

378,884

 

 

 

 

 

 

    

 

Total (Cost $318,176)

 

 

 

 

 

435,980

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Health – 1.4%

 

 

 

 

 

 

 

Commercial Services - 0.5%

 

 

 

 

 

 

 

Schein (Henry) a

 

 

500

 

 

30,695

 

 

 

 

 

 

    

 

Drugs and Biotech - 0.9%

 

 

 

 

 

 

 

Endo Pharmaceuticals Holdings a

 

 

1,500

 

 

53,565

 

 

 

 

 

 

    

 

Total (Cost $57,507)

 

 

 

 

 

84,260

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Industrial Products – 21.8%

 

 

 

 

 

 

 

Automotive - 1.3%

 

 

 

 

 

 

 

Autoliv

 

 

1,000

 

 

78,940

 

 

 

 

 

 

    

 

Industrial Components - 6.2%

 

 

 

 

 

 

 

GrafTech International a

 

 

8,300

 

 

164,672

 

Hubbell Cl. B

 

 

1,100

 

 

66,143

 

PerkinElmer

 

 

2,680

 

 

69,198

 

Thomas & Betts a

 

 

1,700

 

 

82,110

 

 

 

 

 

 

    

 

 

 

 

 

 

 

382,123

 

 

 

 

 

 

    

 

Machinery - 1.1%

 

 

 

 

 

 

 

Rofin-Sinar Technologies a

 

 

1,900

 

 

67,336

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Industrial Products (continued)

 

 

 

 

 

 

 

Metal Fabrication and Distribution - 5.6%

 

 

 

 

 

 

 

Kennametal

 

 

1,800

 

$

71,028

 

Reliance Steel & Aluminum

 

 

3,000

 

 

153,300

 

Schnitzer Steel Industries Cl. A

 

 

1,900

 

 

126,141

 

 

 

 

 

 

    

 

 

 

 

 

 

 

350,469

 

 

 

 

 

 

    

 

Miscellaneous Manufacturing - 2.9%

 

 

 

 

 

 

 

†Semperit AG Holding

 

 

3,400

 

 

179,874

 

 

 

 

 

 

    

 

Paper and Packaging - 1.6%

 

 

 

 

 

 

 

Greif Cl. A

 

 

1,600

 

 

99,040

 

 

 

 

 

 

    

 

Specialty Chemicals and Materials - 3.1%

 

 

 

 

 

 

 

Lubrizol Corporation (The)

 

 

1,780

 

 

190,246

 

 

 

 

 

 

    

 

Total (Cost $1,056,570)

 

 

 

 

 

1,348,028

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Industrial Services – 2.4%

 

 

 

 

 

 

 

Engineering and Construction - 1.8%

 

 

 

 

 

 

 

†Jacobs Engineering Group a

 

 

2,400

 

 

110,040

 

 

 

 

 

 

    

 

Transportation and Logistics - 0.6%

 

 

 

 

 

 

 

Kirby Corporation a

 

 

900

 

 

39,645

 

 

 

 

 

 

    

 

Total (Cost $131,100)

 

 

 

 

 

149,685

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Natural Resources – 21.6%

 

 

 

 

 

 

 

Energy Services - 10.8%

 

 

 

 

 

 

 

Ensco ADR

 

 

3,810

 

 

203,378

 

Helmerich & Payne

 

 

3,400

 

 

164,832

 

Pason Systems

 

 

9,400

 

 

131,976

 

†Trican Well Service

 

 

4,100

 

 

83,048

 

Unit Corporation a

 

 

1,900

 

 

88,312

 

 

 

 

 

 

    

 

 

 

 

 

 

 

671,546

 

 

 

 

 

 

    

 

Precious Metals and Mining - 10.8%

 

 

 

 

 

 

 

†Allied Nevada Gold a

 

 

5,300

 

 

139,443

 

†Centamin Egypt a

 

 

41,200

 

 

115,193

 

†Hochschild Mining

 

 

5,900

 

 

58,871

 

Pan American Silver

 

 

5,000

 

 

206,050

 

Seabridge Gold a

 

 

4,800

 

 

147,264

 

 

 

 

 

 

    

 

 

 

 

 

 

 

666,821

 

 

 

 

 

 

    

 

Total (Cost $1,083,490)

 

 

 

 

 

1,338,367

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Technology – 19.5%

 

 

 

 

 

 

 

Aerospace and Defense - 0.6%

 

 

 

 

 

 

 

Rockwell Collins

 

 

650

 

 

37,869

 

 

 

 

 

 

    

 

Components and Systems - 3.6%

 

 

 

 

 

 

 

AVX Corporation

 

 

7,400

 

 

114,182

 

†Western Digital a

 

 

3,200

 

 

108,480

 

 

 

 

 

 

    

 

 

 

 

 

 

 

222,662

 

 

 

 

 

 

    

 

Distribution - 1.6%

 

 

 

 

 

 

 

Arrow Electronics a

 

 

2,900

 

 

99,325

 

 

 

 

 

 

    

 

Semiconductors and Equipment - 13.0%

 

 

 

 

 

 

 

ADTRAN

 

 

2,000

 

 

72,420

 

†Aixtron ADR

 

 

2,500

 

 

93,000

 

Analog Devices

 

 

3,600

 

 

135,612

 

Cabot Microelectronics a

 

 

1,300

 

 

53,885

 

International Rectifier a

 

 

5,842

 

 

173,449

 

†Micrel

 

 

3,700

 

 

48,063

 

†Teradyne a

 

 

4,300

 

 

60,372

 


 

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

The Royce Funds 2010 Annual Report to Shareholders | 107

 

Schedules of Investments
 

 

 

 

 

 

 

 

 

Royce SMid-Cap Value Fund (continued)

 

 

 

 

 

 

 

 

 

 

 

SHARES

     

 

VALUE

 

Technology (continued)

 

 

 

 

 

 

 

Semiconductors and Equipment (continued)

 

 

 

 

 

 

 

†Varian Semiconductor Equipment Associates a

 

 

4,600

 

$

170,062

 

 

 

 

 

 

    

 

 

 

 

 

 

 

806,863

 

 

 

 

 

 

    

 

Telecommunications - 0.7%

 

 

 

 

 

 

 

Citic Telecom International Holdings

 

 

138,500

 

 

44,190

 

 

 

 

 

 

    

 

Total (Cost $985,609)

 

 

 

 

 

1,210,909

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Miscellaneouse – 0.3%

 

 

 

 

 

 

 

Total (Cost $15,478)

 

 

 

 

 

18,973

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

TOTAL COMMON STOCKS

 

 

 

 

 

 

 

(Cost $4,329,912)

 

 

 

 

 

5,307,035

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

REPURCHASE AGREEMENT – 14.3%

 

 

 

 

 

 

 

State Street Bank & Trust Company, 0.13% dated 12/31/10, due 1/3/11, maturity value $889,010 (collateralized by obligations of various U.S. Government Agencies, due 4/25/11, valued at $914,543)

 

 

 

 

 

 

 

(Cost $889,000)

 

 

 

 

 

889,000

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

TOTAL INVESTMENTS – 100.0%

 

 

 

 

 

 

 

(Cost $5,218,912)

 

 

 

 

 

6,196,035

 

 

 

 

 

 

 

 

 

LIABILITIES LESS CASH AND OTHER ASSETS – (0.0)%

 

 

 

 

 

(886

)

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

NET ASSETS – 100.0%

 

 

 

 

$

6,195,149

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Royce International Smaller-Companies Fund

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

COMMON STOCKS – 91.2%

 

 

 

 

 

 

 

Australia – 2.1%

 

 

 

 

 

 

 

†Centamin Egypt a

 

 

40,000

 

$

111,837

 

IOOF Holdings

 

 

10,000

 

 

79,779

 

†Medusa Mining

 

 

30,000

 

 

198,526

 

 

 

 

 

 

    

 

Total (Cost $285,952)

 

 

 

 

 

390,142

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Austria – 2.9%

 

 

 

 

 

 

 

Mayr-Melnhof Karton

 

 

2,000

 

 

232,676

 

Semperit AG Holding

 

 

5,500

 

 

290,973

 

 

 

 

 

 

    

 

Total (Cost $412,134)

 

 

 

 

 

523,649

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Belgium – 1.6%

 

 

 

 

 

 

 

EVS Broadcast Equipment

 

 

1,800

 

 

115,216

 

†GIMV

 

 

1,500

 

 

81,922

 

Sipef

 

 

975

 

 

92,505

 

 

 

 

 

 

    

 

Total (Cost $204,949)

 

 

 

 

 

289,643

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Brazil – 1.6%

 

 

 

 

 

 

 

Duratex

 

 

5,000

 

 

53,765

 

†Grendene

 

 

20,000

 

 

112,289

 

†Kroton Educacional (Units) a

 

 

10,000

 

 

131,627

 

 

 

 

 

 

    

 

Total (Cost $185,573)

 

 

 

 

 

297,681

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Canada – 9.9%

 

 

 

 

 

 

 

AGF Management Cl. B

 

 

6,500

 

 

127,411

 

†Celestica a

 

 

7,000

 

 

67,900

 

Dundee Corporation Cl. A a

 

 

5,400

 

 

111,063

 

DundeeWealth

 

 

3,000

 

 

64,719

 

Ensign Energy Services

 

 

4,000

 

 

60,465

 

Gildan Activewear a

 

 

2,500

 

 

71,225

 

Gluskin Sheff + Associates

 

 

5,000

 

 

104,546

 

Ivanhoe Mines a

 

 

2,900

 

 

66,468

 

†Ivanhoe Mines (Rights) a

 

 

2,900

 

 

4,060

 

†Magma Energy a

 

 

33,000

 

 

48,788

 

Major Drilling Group International

 

 

3,000

 

 

125,364

 

Pan American Silver

 

 

3,000

 

 

123,630

 

Pason Systems

 

 

4,500

 

 

63,180

 

Ritchie Bros. Auctioneers

 

 

3,500

 

 

80,675

 

Seabridge Gold a

 

 

2,000

 

 

61,360

 

ShawCor Cl. A

 

 

2,300

 

 

76,589

 

†Sino-Forest Corporation a

 

 

4,500

 

 

105,406

 

Sprott

 

 

14,000

 

 

113,487

 

TMX Group

 

 

4,775

 

 

177,496

 

Trican Well Service

 

 

8,000

 

 

162,044

 

 

 

 

 

 

    

 

Total (Cost $1,186,979)

 

 

 

 

 

1,815,876

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Cayman Islands – 0.4%

 

 

 

 

 

 

 

Greenlight Capital Re Cl. A a

 

 

2,500

 

 

67,025

 

 

 

 

 

 

    

 

Total (Cost $32,727)

 

 

 

 

 

67,025

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

China – 2.9%

 

 

 

 

 

 

 

†Chemspec International ADR

 

 

9,000

 

 

67,320

 


 

 

 

108 | The Royce Funds 2010 Annual Report to Shareholders

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

December 31, 2010
 

 

 

 

 

 

 

 

 
 

 

 

SHARES

     

VALUE

 

China (continued)

 

 

 

 

 

 

 

China Forestry Holdings

 

 

201,000

 

$

94,387

 

E-House China Holdings ADR

 

 

12,000

 

 

179,520

 

Jinpan International

 

 

5,000

 

 

52,650

 

†Pacific Textiles Holdings

 

 

125,000

 

 

81,534

 

Simcere Pharmaceutical Group ADR a

 

 

5,000

 

 

57,050

 

 

 

 

 

 

    

 

Total (Cost $515,261)

 

 

 

 

 

532,461

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Denmark – 1.0%

 

 

 

 

 

 

 

†H Lundbeck

 

 

5,000

 

 

95,016

 

†SimCorp

 

 

600

 

 

96,270

 

 

 

 

 

 

    

 

Total (Cost $178,008)

 

 

 

 

 

191,286

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Egypt – 0.5%

 

 

 

 

 

 

 

Egyptian Financial Group-Hermes Holding

 

 

16,000

 

 

92,637

 

 

 

 

 

 

    

 

Total (Cost $74,297)

 

 

 

 

 

92,637

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Finland – 1.5%

 

 

 

 

 

 

 

Marimekko

 

 

3,000

 

 

57,928

 

†Ponsse

 

 

4,000

 

 

57,728

 

Vacon

 

 

700

 

 

36,481

 

Vaisala Cl. A

 

 

4,500

 

 

123,274

 

 

 

 

 

 

    

 

Total (Cost $253,245)

 

 

 

 

 

275,411

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

France – 8.5%

 

 

 

 

 

 

 

†Audika

 

 

5,000

 

 

111,848

 

Beneteau a

 

 

4,000

 

 

84,614

 

†bioMerieux

 

 

1,500

 

 

147,969

 

Boiron

 

 

4,000

 

 

152,392

 

Bollore

 

 

225

 

 

47,791

 

†Ipsen

 

 

4,000

 

 

122,057

 

Manutan International

 

 

1,800

 

 

118,824

 

†Meetic

 

 

7,000

 

 

152,004

 

†Paris Orleans et Cie

 

 

5,000

 

 

126,147

 

†Parrot a

 

 

2,200

 

 

70,851

 

†Piscines Desjoyaux

 

 

6,000

 

 

55,724

 

Societe BIC

 

 

700

 

 

60,165

 

Societe Internationale de Plantations d’Heveas

 

 

1,500

 

 

166,770

 

Vetoquinol

 

 

1,750

 

 

69,197

 

Virbac

 

 

360

 

 

62,539

 

 

 

 

 

 

    

 

Total (Cost $1,412,390)

 

 

 

 

 

1,548,892

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Germany – 6.1%

 

 

 

 

 

 

 

†Aixtron

 

 

5,000

 

 

184,443

 

Carl Zeiss Meditec

 

 

10,500

 

 

200,435

 

Fuchs Petrolub

 

 

550

 

 

72,541

 

†KWS Saat

 

 

500

 

 

97,116

 

Pfeiffer Vacuum Technology

 

 

1,500

 

 

176,391

 

Rational

 

 

250

 

 

55,256

 

†SMA Solar Technology

 

 

1,800

 

 

167,171

 

STRATEC Biomedical Systems

 

 

1,500

 

 

63,962

 

 

 

 

 

 

 

 

 
 

 

 

SHARES

     

VALUE

 

Germany (continued)

 

 

 

 

 

 

 

Takkt

 

 

7,000

 

$

101,024

 

 

 

 

 

 

    

 

Total (Cost $903,450)

 

 

 

 

 

1,118,339

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Greece – 0.5%

 

 

 

 

 

 

 

Hellenic Exchanges

 

 

14,500

 

 

94,944

 

 

 

 

 

 

    

 

Total (Cost $128,810)

 

 

 

 

 

94,944

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Hong Kong – 4.7%

 

 

 

 

 

 

 

†Asia Satellite Telecommunications
Holdings

 

 

20,500

 

 

35,605

 

Asian Citrus Holdings

 

 

60,000

 

 

74,490

 

China Green (Holdings)

 

 

45,000

 

 

44,000

 

Citic Telecom International Holdings

 

 

400,000

 

 

127,625

 

Luk Fook Holdings (International)

 

 

35,000

 

 

122,253

 

†Midland Holdings

 

 

69,100

 

 

56,718

 

Minth Group

 

 

28,000

 

 

45,965

 

Pico Far East Holdings

 

 

270,000

 

 

57,315

 

†Stella International Holdings

 

 

30,000

 

 

59,824

 

Value Partners Group

 

 

230,000

 

 

230,805

 

 

 

 

 

 

    

 

Total (Cost $635,351)

 

 

 

 

 

854,600

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

India – 1.5%

 

 

 

 

 

 

 

†Graphite India

 

 

17,000

 

 

38,589

 

†Jyothy Laboratories

 

 

8,300

 

 

50,154

 

†Maharashtra Seamless

 

 

15,000

 

 

129,151

 

†Unichem Laboratories

 

 

11,000

 

 

60,025

 

 

 

 

 

 

    

 

Total (Cost $282,524)

 

 

 

 

 

277,919

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Italy – 1.0%

 

 

 

 

 

 

 

Recordati

 

 

20,000

 

 

188,552

 

 

 

 

 

 

    

 

Total (Cost $152,179)

 

 

 

 

 

188,552

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Japan – 7.6%

 

 

 

 

 

 

 

†Benesse Holdings

 

 

2,500

 

 

115,162

 

†EPS

 

 

50

 

 

122,367

 

†FamilyMart

 

 

4,500

 

 

169,602

 

†Hogy Medical

 

 

1,300

 

 

63,247

 

ITO EN

 

 

2,700

 

 

44,895

 

†Kao Corporation

 

 

1,900

 

 

51,203

 

†Moshi Moshi Hotline

 

 

5,000

 

 

131,174

 

Nomura Research Institute

 

 

8,000

 

 

178,150

 

†Sankyo Company

 

 

1,200

 

 

67,767

 

†Santen Pharmaceutical

 

 

7,500

 

 

260,500

 

Shimano

 

 

1,000

 

 

50,868

 

†TOTO

 

 

10,000

 

 

72,546

 

†Wacom

 

 

37

 

 

58,834

 

 

 

 

 

 

    

 

Total (Cost $1,277,319)

 

 

 

 

 

1,386,315

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Jersey – 0.3%

 

 

 

 

 

 

 

Randgold Resources ADR

 

 

600

 

 

49,398

 

 

 

 

 

 

    

 

Total (Cost $26,176)

 

 

 

 

 

49,398

 

 

 

 

 

 

    

 


 

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

The Royce Funds 2010 Annual Report to Shareholders | 109

 

Schedules of Investments
 

 

Royce International Smaller-Companies Fund (continued)

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Luxembourg – 0.5%

 

 

 

 

 

 

 

Brait

 

 

15,000

 

$

55,104

 

Reinet Investments a

 

 

2,300

 

 

39,956

 

 

 

 

 

 

    

 

Total (Cost $66,249)

 

 

 

 

 

95,060

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Mexico – 2.5%

 

 

 

 

 

 

 

†Alsea

 

 

45,000

 

 

47,004

 

Fresnillo

 

 

4,000

 

 

104,023

 

†Grupo Herdez

 

 

65,000

 

 

116,579

 

Industrias Bachoco ADR

 

 

7,500

 

 

181,425

 

 

 

 

 

 

    

 

Total (Cost $312,986)

 

 

 

 

 

449,031

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Netherlands – 0.6%

 

 

 

 

 

 

 

Hunter Douglas

 

 

2,000

 

 

105,755

 

 

 

 

 

 

    

 

Total (Cost $82,673)

 

 

 

 

 

105,755

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Norway – 1.5%

 

 

 

 

 

 

 

†TGS-NOPEC Geophysical

 

 

12,500

 

 

281,703

 

 

 

 

 

 

    

 

Total (Cost $170,640)

 

 

 

 

 

281,703

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Peru – 0.8%

 

 

 

 

 

 

 

Hochschild Mining

 

 

15,000

 

 

149,674

 

 

 

 

 

 

    

 

Total (Cost $58,330)

 

 

 

 

 

149,674

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Singapore – 1.7%

 

 

 

 

 

 

 

ARA Asset Management

 

 

109,000

 

 

131,648

 

Biosensors International Group a

 

 

70,000

 

 

61,635

 

Kim Eng Holdings

 

 

40,300

 

 

76,935

 

Raffles Education a

 

 

200,000

 

 

39,740

 

 

 

 

 

 

    

 

Total (Cost $224,065)

 

 

 

 

 

309,958

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

South Africa – 6.4%

 

 

 

 

 

 

 

†Adcock Ingram Holdings

 

 

22,500

 

 

204,592

 

†Advtech Limited

 

 

85,000

 

 

76,129

 

†Aquarius Platinum

 

 

35,000

 

 

192,081

 

Bell Equipment a

 

 

50,000

 

 

76,812

 

†Discovery Holdings

 

 

22,000

 

 

131,649

 

Lewis Group

 

 

12,000

 

 

148,081

 

Northam Platinum

 

 

20,000

 

 

137,533

 

†Raubex Group

 

 

40,000

 

 

141,784

 

†Reunert Limited

 

 

7,000

 

 

71,195

 

 

 

 

 

 

    

 

Total (Cost $989,148)

 

 

 

 

 

1,179,856

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

South Korea – 3.8%

 

 

 

 

 

 

 

Binggrae Company

 

 

2,500

 

 

123,359

 

Green Cross

 

 

700

 

 

85,734

 

GS Home Shopping

 

 

1,000

 

 

96,308

 

†Hanssem

 

 

5,500

 

 

67,120

 

MegaStudy

 

 

1,150

 

 

178,544

 

†Sung Kwang Bend

 

 

3,500

 

 

72,628

 

Woongjin Coway

 

 

2,000

 

 

71,020

 

 

 

 

 

 

    

 

Total (Cost $632,470)

 

 

 

 

 

694,713

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Spain – 1.0%

 

 

 

 

 

 

 

†Almirall

 

 

20,000

 

$

182,271

 

 

 

 

 

 

    

 

Total (Cost $193,326)

 

 

 

 

 

182,271

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Sweden – 0.5%

 

 

 

 

 

 

 

Lundin Petroleum a

 

 

7,500

 

 

93,281

 

 

 

 

 

 

    

 

Total (Cost $39,068)

 

 

 

 

 

93,281

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Switzerland – 5.6%

 

 

 

 

 

 

 

Bank Sarasin & Co. Cl. B

 

 

2,100

 

 

95,679

 

Banque Privee Edmond de Rothschild

 

 

3

 

 

86,631

 

Burckhardt Compression Holding

 

 

1,100

 

 

304,706

 

Julius Baer Group

 

 

1,700

 

 

79,636

 

Lindt & Spruengli

 

 

3

 

 

96,578

 

Partners Group Holding

 

 

1,200

 

 

227,679

 

†Sika

 

 

40

 

 

87,743

 

Vontobel Holding

 

 

1,200

 

 

45,690

 

 

 

 

 

 

    

 

Total (Cost $744,611)

 

 

 

 

 

1,024,342

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Taiwan – 0.7%

 

 

 

 

 

 

 

Chroma Ate

 

 

20,600

 

 

61,539

 

St. Shine Optical

 

 

5,000

 

 

66,537

 

 

 

 

 

 

    

 

Total (Cost $57,240)

 

 

 

 

 

128,076

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Thailand – 0.3%

 

 

 

 

 

 

 

†Thai Beverage

 

 

263,000

 

 

58,406

 

 

 

 

 

 

    

 

Total (Cost $49,541)

 

 

 

 

 

58,406

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Turkey – 1.5%

 

 

 

 

 

 

 

†Ford Otomotiv Sanayi

 

 

10,000

 

 

84,521

 

†Mardin Cimento Sanayii Ve Ticaret

 

 

25,000

 

 

124,029

 

†Vestel Beyaz Esya Sanayi Ve Ticaret

 

 

27,500

 

 

60,913

 

 

 

 

 

 

    

 

Total (Cost $285,251)

 

 

 

 

 

269,463

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

United Arab Emirates – 1.7%

 

 

 

 

 

 

 

†Abu Dhabi National Hotels f

 

 

125,000

 

 

102,097

 

Lamprell

 

 

40,000

 

 

200,500

 

 

 

 

 

 

    

 

Total (Cost $215,462)

 

 

 

 

 

302,597

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

United Kingdom – 7.2%

 

 

 

 

 

 

 

†African Barrick Gold

 

 

12,500

 

 

119,076

 

Ashmore Group

 

 

42,500

 

 

222,043

 

Begbies Traynor

 

 

75,000

 

 

70,160

 

†De La Rue

 

 

6,200

 

 

79,217

 

Domino Printing Sciences

 

 

7,500

 

 

76,006

 

†Ensco ADR

 

 

1,500

 

 

80,070

 

Hikma Pharmaceuticals

 

 

4,000

 

 

50,608

 

†Jupiter Fund Management a

 

 

35,000

 

 

163,924

 

Michael Page International

 

 

8,000

 

 

69,224

 

†Rotork

 

 

3,000

 

 

85,501

 

†Severfield-Rowen

 

 

12,500

 

 

60,025

 

Spirax-Sarco Engineering

 

 

2,700

 

 

81,413

 

†Spirent Communications

 

 

38,000

 

 

87,565

 


 

 

 

110 | The Royce Funds 2010 Annual Report to Shareholders

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

December 31, 2010
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SHARES

     

 

VALUE

 

United Kingdom (continued)

 

 

 

 

 

 

 

Victrex

 

 

3,500

 

$

80,925

 

 

 

 

 

 

    

 

Total (Cost $952,216)

 

 

 

 

 

1,325,757

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

United States – 0.3%

 

 

 

 

 

 

 

WaterFurnace Renewable Energy

 

 

2,000

 

 

49,824

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Total (Cost $44,460)

 

 

 

 

 

49,824

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

TOTAL COMMON STOCKS

 

 

 

 

 

 

 

(Cost $13,265,060)

 

 

 

 

 

16,694,537

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

REPURCHASE AGREEMENT – 7.4%

 

 

 

 

 

 

 

State Street Bank & Trust Company, 0.13% dated 12/31/10, due 1/3/11, maturity value $1,350,015 (collateralized by obligations of various U.S. Government Agencies, due 5/24/11, valued at $1,388,263)

 

 

 

 

 

 

 

(Cost $1,350,000)

 

 

 

 

 

1,350,000

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

TOTAL INVESTMENTS – 98.6%

 

 

 

 

 

 

 

(Cost $14,615,060)

 

 

 

 

 

18,044,537

 

 

 

 

 

 

 

 

 

CASH AND OTHER ASSETS LESS LIABILITIES – 1.4%

 

 

 

 

 

252,956

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

NET ASSETS – 100.0%

 

 

 

 

$

18,297,493

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Royce Focus Value Fund

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

COMMON STOCKS – 96.5%

 

 

 

 

 

 

 

Consumer Products – 6.8%

 

 

 

 

 

 

 

Apparel, Shoes and Accessories - 0.6%

 

 

 

 

 

 

 

Coach

 

 

1,000

 

$

55,310

 

 

 

 

 

 

    

 

Food/Beverage/Tobacco - 4.3%

 

 

 

 

 

 

 

Cal-Maine Foods

 

 

5,000

 

 

157,900

 

Industrias Bachoco ADR

 

 

4,500

 

 

108,855

 

Sanderson Farms

 

 

3,000

 

 

117,450

 

 

 

 

 

 

    

 

 

 

 

 

 

 

384,205

 

 

 

 

 

 

    

 

Sports and Recreation - 1.9%

 

 

 

 

 

 

 

†Thor Industries

 

 

5,000

 

 

169,800

 

 

 

 

 

 

    

 

Total (Cost $531,476)

 

 

 

 

 

609,315

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Consumer Services – 2.8%

 

 

 

 

 

 

 

Retail Stores - 2.8%

 

 

 

 

 

 

 

Buckle (The)

 

 

3,000

 

 

113,310

 

†GameStop Corporation Cl. A a

 

 

6,000

 

 

137,280

 

 

 

 

 

 

    

 

Total (Cost $228,477)

 

 

 

 

 

250,590

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Diversified Investment Companies – 1.0%

 

 

 

 

 

 

 

Exchange Traded Funds - 1.0%

 

 

 

 

 

 

 

ProShares UltraShort 20+ Year Treasury a

 

 

2,500

 

 

92,625

 

 

 

 

 

 

    

 

Total (Cost $76,975)

 

 

 

 

 

92,625

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Financial Intermediaries – 7.1%

 

 

 

 

 

 

 

Insurance - 3.6%

 

 

 

 

 

 

 

Berkshire Hathaway Cl. B a

 

 

4,000

 

 

320,440

 

 

 

 

 

 

    

 

Securities Brokers - 2.3%

 

 

 

 

 

 

 

†International Assets Holding
Corporation a

 

 

4,000

 

 

94,400

 

Knight Capital Group Cl. A a

 

 

8,000

 

 

110,320

 

 

 

 

 

 

    

 

 

 

 

 

 

 

204,720

 

 

 

 

 

 

    

 

Securities Exchanges - 1.2%

 

 

 

 

 

 

 

TMX Group

 

 

3,000

 

 

111,515

 

 

 

 

 

 

    

 

Total (Cost $539,561)

 

 

 

 

 

636,675

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Financial Services – 14.0%

 

 

 

 

 

 

 

Information and Processing - 1.0%

 

 

 

 

 

 

 

†SEI Investments

 

 

4,000

 

 

95,160

 

 

 

 

 

 

    

 

Investment Management - 12.1%

 

 

 

 

 

 

 

†Affiliated Managers Group a

 

 

1,000

 

 

99,220

 

†Ashmore Group

 

 

30,000

 

 

156,736

 

Franklin Resources

 

 

2,500

 

 

278,025

 

Partners Group Holding

 

 

700

 

 

132,813

 

U.S. Global Investors Cl. A

 

 

20,000

 

 

162,600

 

†Value Partners Group

 

 

250,000

 

 

250,875

 

 

 

 

 

 

    

 

 

 

 

 

 

 

1,080,269

 

 

 

 

 

 

    

 

Other Financial Services - 0.9%

 

 

 

 

 

 

 

Kennedy-Wilson Holdings a

 

 

8,000

 

 

79,920

 

 

 

 

 

 

    

 

Total (Cost $944,905)

 

 

 

 

 

1,255,349

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Industrial Products – 12.4%

 

 

 

 

 

 

 

Building Systems and Components - 0.8%

 

 

 

 

 

 

 

WaterFurnace Renewable Energy

 

 

3,000

 

 

74,736

 

 

 

 

 

 

    

 


 

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

The Royce Funds 2010 Annual Report to Shareholders | 111

 

Schedules of Investments
 

 

Royce Focus Value Fund (continued)

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Industrial Products (continued)

 

 

 

 

 

 

 

Industrial Components - 2.7%

 

 

 

 

 

 

 

GrafTech International a

 

 

12,000

 

$

238,080

 

 

 

 

 

 

    

 

Metal Fabrication and Distribution - 7.7%

 

 

 

 

 

 

 

Horsehead Holding Corporation a

 

 

10,000

 

 

130,400

 

Nucor Corporation

 

 

2,000

 

 

87,640

 

Reliance Steel & Aluminum

 

 

4,000

 

 

204,400

 

Schnitzer Steel Industries Cl. A

 

 

4,000

 

 

265,560

 

 

 

 

 

 

    

 

 

 

 

 

 

 

688,000

 

 

 

 

 

 

    

 

Pumps, Valves and Bearings - 1.2%

 

 

 

 

 

 

 

Gardner Denver

 

 

1,500

 

 

103,230

 

 

 

 

 

 

    

 

Total (Cost $704,596)

 

 

 

 

 

1,104,046

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Industrial Services – 7.6%

 

 

 

 

 

 

 

Engineering and Construction - 2.1%

 

 

 

 

 

 

 

Jacobs Engineering Group a

 

 

4,000

 

 

183,400

 

 

 

 

 

 

    

 

Food, Tobacco and Agriculture - 3.4%

 

 

 

 

 

 

 

Mosaic Company (The)

 

 

4,000

 

 

305,440

 

 

 

 

 

 

    

 

Transportation and Logistics - 2.1%

 

 

 

 

 

 

 

Patriot Transportation Holding a

 

 

2,000

 

 

185,920

 

 

 

 

 

 

    

 

Total (Cost $499,223)

 

 

 

 

 

674,760

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Natural Resources – 27.0%

 

 

 

 

 

 

 

Energy Services - 9.0%

 

 

 

 

 

 

 

†Ensco ADR

 

 

5,000

 

 

266,900

 

†Helmerich & Payne

 

 

3,000

 

 

145,440

 

Pason Systems

 

 

5,500

 

 

77,220

 

†Trican Well Service

 

 

10,000

 

 

202,555

 

Unit Corporation a

 

 

2,500

 

 

116,200

 

 

 

 

 

 

    

 

 

 

 

 

 

 

808,315

 

 

 

 

 

 

    

 

Oil and Gas - 1.8%

 

 

 

 

 

 

 

Exxon Mobil

 

 

2,200

 

 

160,864

 

 

 

 

 

 

    

 

Precious Metals and Mining - 15.5%

 

 

 

 

 

 

 

†Allied Nevada Gold a

 

 

7,500

 

 

197,325

 

†Centamin Egypt a

 

 

60,000

 

 

167,756

 

Fresnillo

 

 

5,000

 

 

130,029

 

Major Drilling Group International

 

 

5,000

 

 

208,941

 

†Newmont Mining

 

 

3,000

 

 

184,290

 

Pan American Silver

 

 

6,000

 

 

247,260

 

Seabridge Gold a

 

 

8,000

 

 

245,440

 

 

 

 

 

 

    

 

 

 

 

 

 

 

1,381,041

 

 

 

 

 

 

    

 

Real Estate - 0.7%

 

 

 

 

 

 

 

PICO Holdings a

 

 

2,000

 

 

63,600

 

 

 

 

 

 

    

 

Total (Cost $1,748,553)

 

 

 

 

 

2,413,820

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Technology – 17.8%

 

 

 

 

 

 

 

Components and Systems - 4.7%

 

 

 

 

 

 

 

†SanDisk Corporation a

 

 

2,000

 

 

99,720

 

†Western Digital a

 

 

5,500

 

 

186,450

 

†Xyratex a

 

 

8,000

 

 

130,480

 

 

 

 

 

 

    

 

 

 

 

 

 

 

416,650

 

 

 

 

 

 

    

 

Internet Software and Services - 1.1%

 

 

 

 

 

 

 

†eBay a

 

 

3,500

 

 

97,405

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Technology (continued)

 

 

 

 

 

 

 

Semiconductors and Equipment - 7.5%

 

 

 

 

 

 

 

†Aixtron ADR

 

 

3,500

 

$

130,200

 

†Analog Devices

 

 

6,000

 

 

226,020

 

†Teradyne a

 

 

6,500

 

 

91,260

 

†Varian Semiconductor Equipment Associates a

 

 

6,000

 

 

221,820

 

 

 

 

 

 

    

 

 

 

 

 

 

 

669,300

 

 

 

 

 

 

    

 

Software - 4.5%

 

 

 

 

 

 

 

†CA

 

 

7,500

 

 

183,300

 

Microsoft Corporation

 

 

8,000

 

 

223,360

 

 

 

 

 

 

    

 

 

 

 

 

 

 

406,660

 

 

 

 

 

 

    

 

Total (Cost $1,344,963)

 

 

 

 

 

1,590,015

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

TOTAL COMMON STOCKS

 

 

 

 

 

 

 

(Cost $6,618,729)

 

 

 

 

 

8,627,195

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

REPURCHASE AGREEMENT – 3.7%

 

 

 

 

 

 

 

State Street Bank & Trust Company, 0.13% dated 12/31/10, due 1/3/11, maturity value $336,004 (collateralized by obligations of various U.S. Government Agencies, due 3/22/11, valued at $345,000)

 

 

 

 

 

 

 

(Cost $336,000)

 

 

 

 

 

336,000

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

TOTAL INVESTMENTS – 100.2%

 

 

 

 

 

 

 

(Cost $6,954,729)

 

 

 

 

 

8,963,195

 

 

 

 

 

 

 

 

 

LIABILITIES LESS CASH AND OTHER ASSETS – (0.2)%

 

 

 

 

 

(21,099

)

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

NET ASSETS – 100.0%

 

 

 

 

$

8,942,096

 

 

 

 

 

 

    

 


 

 

 

112 | The Royce Funds 2010 Annual Report to Shareholders

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

December 31, 2010
 

 

Royce Partners Fund


 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

COMMON STOCKS – 89.8%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer Products – 1.2%

 

 

 

 

 

 

 

Home Furnishing and Appliances - 1.2%

 

 

 

 

 

 

 

Hunter Douglas

 

 

400

 

$

21,151

 

 

 

 

 

 

    

 

Total (Cost $10,494)

 

 

 

 

 

21,151

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Consumer Services – 2.0%

 

 

 

 

 

 

 

Other Consumer Services - 2.0%

 

 

 

 

 

 

 

Sotheby’s

 

 

800

 

 

36,000

 

 

 

 

 

 

    

 

Total (Cost $9,472)

 

 

 

 

 

36,000

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Diversified Investment Companies – 4.8%

 

 

 

 

 

 

 

Exchange Traded Funds - 4.8%

 

 

 

 

 

 

 

ProShares UltraShort 20+ Year

 

 

 

 

 

 

 

Treasury a

 

 

2,300

 

 

85,215

 

 

 

 

 

 

    

 

Total (Cost $98,823)

 

 

 

 

 

85,215

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Financial Intermediaries – 15.8%

 

 

 

 

 

 

 

Banking - 8.9%

 

 

 

 

 

 

 

Bank of New York Mellon (The)

 

 

1,400

 

 

42,280

 

Bank Sarasin & Co. Cl. B

 

 

514

 

 

23,418

 

Northern Trust

 

 

900

 

 

49,869

 

State Street

 

 

900

 

 

41,706

 

 

 

 

 

 

    

 

 

 

 

 

 

 

157,273

 

 

 

 

 

 

    

 

Insurance - 4.2%

 

 

 

 

 

 

 

Alleghany Corporation a

 

 

100

 

 

30,637

 

Marsh & McLennan

 

 

1,600

 

 

43,744

 

 

 

 

 

 

    

 

 

 

 

 

 

 

74,381

 

 

 

 

 

 

    

 

Real Estate Investment Trusts - 0.0%

 

 

 

 

 

 

 

Cousins Properties

 

 

17

 

 

142

 

 

 

 

 

 

    

 

Securities Brokers - 0.6%

 

 

 

 

 

 

 

Egyptian Financial Group-Hermes Holding

 

 

2,000

 

 

11,580

 

 

 

 

 

 

    

 

Securities Exchanges - 2.1%

 

 

 

 

 

 

 

TMX Group

 

 

1,000

 

 

37,172

 

 

 

 

 

 

    

 

Total (Cost $236,143)

 

 

 

 

 

280,548

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Financial Services – 30.9%

 

 

 

 

 

 

 

Diversified Financial Services - 2.2%

 

 

 

 

 

 

 

Lazard Cl. A

 

 

1,000

 

 

39,490

 

 

 

 

 

 

    

 

Information and Processing - 7.3%

 

 

 

 

 

 

 

MasterCard Cl. A

 

 

100

 

 

22,411

 

Morningstar

 

 

600

 

 

31,848

 

†SEI Investments

 

 

1,500

 

 

35,685

 

Western Union

 

 

2,100

 

 

38,997

 

 

 

 

 

 

    

 

 

 

 

 

 

 

128,941

 

 

 

 

 

 

    

 

Investment Management - 21.4%

 

 

 

 

 

 

 

†Affiliated Managers Group a

 

 

200

 

 

19,844

 

†AllianceBernstein Holding L.P.

 

 

1,700

 

 

39,661

 

Artio Global Investors Cl. A

 

 

1,000

 

 

14,750

 

Ashmore Group

 

 

4,500

 

 

23,511

 

Cohen & Steers

 

 

1,200

 

 

31,320

 

Invesco

 

 

1,100

 

 

26,466

 

†Jupiter Fund Management a

 

 

5,700

 

 

26,696

 

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Financial Services (continued)

 

 

 

 

 

 

 

Investment Management (continued)

 

 

 

 

 

 

 

Partners Group Holding

 

 

100

 

$

18,973

 

T. Rowe Price Group

 

 

300

 

 

19,362

 

†Value Partners Group

 

 

100,000

 

 

100,350

 

VZ Holding

 

 

300

 

 

38,503

 

Westwood Holdings Group

 

 

500

 

 

19,980

 

 

 

 

 

 

    

 

 

 

 

 

 

 

379,416

 

 

 

 

 

 

    

 

Total (Cost $412,594)

 

 

 

 

 

547,847

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Health – 0.7%

 

 

 

 

 

 

 

Drugs and Biotech - 0.7%

 

 

 

 

 

 

 

†Adcock Ingram Holdings

 

 

1,300

 

 

11,821

 

 

 

 

 

 

    

 

Total (Cost $11,114)

 

 

 

 

 

11,821

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Industrial Products – 9.3%

 

 

 

 

 

 

 

Industrial Components - 2.6%

 

 

 

 

 

 

 

Amphenol Corporation Cl. A

 

 

300

 

 

15,834

 

GrafTech International a

 

 

1,500

 

 

29,760

 

 

 

 

 

 

    

 

 

 

 

 

 

 

45,594

 

 

 

 

 

 

    

 

Machinery - 1.4%

 

 

 

 

 

 

 

Spirax-Sarco Engineering

 

 

800

 

 

24,122

 

 

 

 

 

 

    

 

Metal Fabrication and Distribution - 2.5%

 

 

 

 

 

 

 

Nucor Corporation

 

 

1,000

 

 

43,820

 

 

 

 

 

 

    

 

Miscellaneous Manufacturing - 1.5%

 

 

 

 

 

 

 

†Valmont Industries

 

 

300

 

 

26,619

 

 

 

 

 

 

    

 

Pumps, Valves and Bearings - 1.3%

 

 

 

 

 

 

 

Graco

 

 

600

 

 

23,670

 

 

 

 

 

 

    

 

Total (Cost $114,641)

 

 

 

 

 

163,825

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Industrial Services – 21.1%

 

 

 

 

 

 

 

Commercial Services - 6.5%

 

 

 

 

 

 

 

Brink’s Company (The)

 

 

1,100

 

 

29,568

 

Copart a

 

 

800

 

 

29,880

 

Manpower

 

 

400

 

 

25,104

 

Ritchie Bros. Auctioneers

 

 

1,300

 

 

29,965

 

 

 

 

 

 

    

 

 

 

 

 

 

 

114,517

 

 

 

 

 

 

    

 

Engineering and Construction - 8.5%

 

 

 

 

 

 

 

†EMCOR Group a

 

 

1,000

 

 

28,980

 

Fluor Corporation

 

 

800

 

 

53,008

 

†NVR a

 

 

100

 

 

69,102

 

 

 

 

 

 

    

 

 

 

 

 

 

 

151,090

 

 

 

 

 

 

    

 

Transportation and Logistics - 6.1%

 

 

 

 

 

 

 

C. H. Robinson Worldwide

 

 

300

 

 

24,057

 

Expeditors International of Washington

 

 

500

 

 

27,300

 

Landstar System

 

 

500

 

 

20,470

 

Patriot Transportation Holding a

 

 

400

 

 

37,184

 

 

 

 

 

 

    

 

 

 

 

 

 

 

109,011

 

 

 

 

 

 

    

 

Total (Cost $307,887)

 

 

 

 

 

374,618

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Natural Resources – 2.3%

 

 

 

 

 

 

 

Energy Services - 2.3%

 

 

 

 

 

 

 

†Ensco ADR

 

 

300

 

 

16,014

 


 

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

The Royce Funds 2010 Annual Report to Shareholders | 113

 

Schedules of Investments
 

 

 

 

 

 

 

 

 

 

Royce Partners Fund (continued)

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Natural Resources (continued)

 

 

 

 

 

 

 

Energy Services (continued)

 

 

 

 

 

 

 

Schlumberger

 

 

300

 

$

25,050

 

 

 

 

 

 

    

 

Total (Cost $29,625)

 

 

 

 

 

41,064

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Technology – 1.7%

 

 

 

 

 

 

 

Software - 0.8%

 

 

 

 

 

 

 

Microsoft Corporation

 

 

500

 

 

13,960

 

 

 

 

 

 

    

 

Telecommunications - 0.9%

 

 

 

 

 

 

 

Corning

 

 

800

 

 

15,456

 

 

 

 

 

 

    

 

Total (Cost $23,403)

 

 

 

 

 

29,416

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

TOTAL COMMON STOCKS

 

 

 

 

 

 

 

(Cost $1,254,196)

 

 

 

 

 

1,591,505

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

REPURCHASE AGREEMENT – 11.8%

 

 

 

 

 

 

 

State Street Bank & Trust Company, 0.13% dated 12/31/10, due 1/3/11, maturity value $208,002 (collateralized by obligations of various U.S. Government Agencies, 0.36% due 3/28/11, valued at $215,538)

 

 

 

 

 

 

 

(Cost $208,000)

 

 

 

 

 

208,000

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

TOTAL INVESTMENTS – 101.6%

 

 

 

 

 

 

 

(Cost $1,462,196)

 

 

 

 

 

1,799,505

 

 

 

 

 

 

 

 

 

LIABILITIES LESS CASH AND OTHER ASSETS – (1.6)%

 

 

 

 

 

(28,010

)

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

NET ASSETS – 100.0%

 

 

 

 

$

1,771,495

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

 

Royce Mid-Cap Fund

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

COMMON STOCKS – 90.8%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer Products – 3.2%

 

 

 

 

 

 

 

Food/Beverage/Tobacco - 2.1%

 

 

 

 

 

 

 

†J.M. Smucker Company (The)

 

 

1,550

 

$

101,757

 

 

 

 

 

 

    

 

Sports and Recreation - 1.1%

 

 

 

 

 

 

 

†Hasbro

 

 

1,150

 

 

54,257

 

 

 

 

 

 

    

 

Total (Cost $132,503)

 

 

 

 

 

156,014

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Consumer Services – 7.1%

 

 

 

 

 

 

 

Retail Stores - 7.1%

 

 

 

 

 

 

 

†American Eagle Outfitters

 

 

4,650

 

 

68,029

 

†Dollar Tree a

 

 

1,400

 

 

78,512

 

†GameStop Corporation Cl. A a

 

 

3,850

 

 

88,088

 

†O’Reilly Automotive a

 

 

850

 

 

51,357

 

†Staples

 

 

2,700

 

 

61,479

 

 

 

 

 

 

    

 

Total (Cost $289,322)

 

 

 

 

 

347,465

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Financial Intermediaries – 5.8%

 

 

 

 

 

 

 

Insurance - 2.0%

 

 

 

 

 

 

 

†Lincoln National

 

 

1,750

 

 

48,668

 

†PartnerRe

 

 

600

 

 

48,210

 

 

 

 

 

 

    

 

 

 

 

 

 

 

96,878

 

 

 

 

 

 

    

 

Securities Brokers - 2.6%

 

 

 

 

 

 

 

†TD AMERITRADE Holding Corporation

 

 

6,800

 

 

129,132

 

 

 

 

 

 

    

 

Securities Exchanges - 1.2%

 

 

 

 

 

 

 

†TMX Group

 

 

1,550

 

 

57,616

 

 

 

 

 

 

    

 

Total (Cost $273,482)

 

 

 

 

 

283,626

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Financial Services – 2.9%

 

 

 

 

 

 

 

Investment Management - 2.9%

 

 

 

 

 

 

 

†Partners Group Holding

 

 

300

 

 

56,920

 

†T. Rowe Price Group

 

 

1,300

 

 

83,902

 

 

 

 

 

 

    

 

Total (Cost $103,987)

 

 

 

 

 

140,822

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Health – 7.2%

 

 

 

 

 

 

 

Drugs and Biotech - 3.6%

 

 

 

 

 

 

 

†Biogen Idec a

 

 

1,900

 

 

127,395

 

†BioMarin Pharmaceutical a

 

 

1,800

 

 

48,474

 

 

 

 

 

 

    

 

 

 

 

 

 

 

175,869

 

 

 

 

 

 

    

 

Health Services - 1.5%

 

 

 

 

 

 

 

†Myriad Genetics a

 

 

3,300

 

 

75,372

 

 

 

 

 

 

    

 

Medical Products and Devices - 2.1%

 

 

 

 

 

 

 

†C.R. Bard

 

 

650

 

 

59,651

 

†Teleflex

 

 

750

 

 

40,357

 

 

 

 

 

 

    

 

 

 

 

 

 

 

100,008

 

 

 

 

 

 

    

 

Total (Cost $292,062)

 

 

 

 

 

351,249

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Industrial Products – 21.5%

 

 

 

 

 

 

 

Automotive - 2.3%

 

 

 

 

 

 

 

†Autoliv

 

 

700

 

 

55,258

 

†BorgWarner a

 

 

800

 

 

57,888

 

 

 

 

 

 

    

 

 

 

 

 

 

 

113,146

 

 

 

 

 

 

    

 


 

 

 

114 | The Royce Funds 2010 Annual Report to Shareholders

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

December 31, 2010
 

 

 

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Industrial Products (continued)

 

 

 

 

 

 

 

Industrial Components - 2.2%

 

 

 

 

 

 

 

†Precision Castparts

 

 

400

 

$

55,684

 

†Regal-Beloit

 

 

800

 

 

53,408

 

 

 

 

 

 

    

 

 

 

 

 

 

 

109,092

 

 

 

 

 

 

    

 

Machinery - 1.2%

 

 

 

 

 

 

 

†Stanley Black & Decker

 

 

900

 

 

60,183

 

 

 

 

 

 

    

 

Metal Fabrication and Distribution - 4.4%

 

 

 

 

 

 

 

†Allegheny Technologies

 

 

1,300

 

 

71,734

 

†Nucor Corporation

 

 

1,000

 

 

43,820

 

†Reliance Steel & Aluminum

 

 

1,900

 

 

97,090

 

 

 

 

 

 

    

 

 

 

 

 

 

 

212,644

 

 

 

 

 

 

    

 

Paper and Packaging - 1.2%

 

 

 

 

 

 

 

†Greif Cl. A

 

 

900

 

 

55,710

 

 

 

 

 

 

    

 

Pumps, Valves and Bearings - 2.9%

 

 

 

 

 

 

 

†Flowserve Corporation

 

 

1,200

 

 

143,064

 

 

 

 

 

 

    

 

Specialty Chemicals and Materials - 5.9%

 

 

 

 

 

 

 

†Agrium

 

 

1,060

 

 

97,255

 

†FMC Corporation

 

 

700

 

 

55,923

 

†Lubrizol Corporation (The)

 

 

1,250

 

 

133,600

 

 

 

 

 

 

    

 

 

 

 

 

 

 

286,778

 

 

 

 

 

 

    

 

Other Industrial Products - 1.4%

 

 

 

 

 

 

 

†Cooper Industries

 

 

1,200

 

 

69,948

 

 

 

 

 

 

    

 

Total (Cost $868,219)

 

 

 

 

 

1,050,565

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Industrial Services – 7.6%

 

 

 

 

 

 

 

Commercial Services - 5.8%

 

 

 

 

 

 

 

†Cintas Corporation

 

 

3,250

 

 

90,870

 

†FTI Consulting a

 

 

1,800

 

 

67,104

 

†Manpower

 

 

900

 

 

56,484

 

†TeleTech Holdings a

 

 

3,400

 

 

70,006

 

 

 

 

 

 

    

 

 

 

 

 

 

 

284,464

 

 

 

 

 

 

    

 

Engineering and Construction - 1.8%

 

 

 

 

 

 

 

†Jacobs Engineering Group a

 

 

1,900

 

 

87,115

 

 

 

 

 

 

    

 

Total (Cost $325,650)

 

 

 

 

 

371,579

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Natural Resources – 13.9%

 

 

 

 

 

 

 

Energy Services - 4.9%

 

 

 

 

 

 

 

†Ensco ADR

 

 

2,800

 

 

149,464

 

†Trican Well Service

 

 

4,400

 

 

89,124

 

 

 

 

 

 

    

 

 

 

 

 

 

 

238,588

 

 

 

 

 

 

    

 

Oil and Gas - 2.2%

 

 

 

 

 

 

 

†EQT Corporation

 

 

1,150

 

 

51,566

 

†QEP Resources

 

 

1,600

 

 

58,096

 

 

 

 

 

 

    

 

 

 

 

 

 

 

109,662

 

 

 

 

 

 

    

 

Precious Metals and Mining - 6.8%

 

 

 

 

 

 

 

†Agnico-Eagle Mines

 

 

850

 

 

65,195

 

†Allied Nevada Gold a

 

 

2,000

 

 

52,620

 

†IAMGOLD Corporation

 

 

2,800

 

 

49,840

 

†Kinross Gold

 

 

3,000

 

 

56,880

 

†Pan American Silver

 

 

2,650

 

 

109,207

 

 

 

 

 

 

    

 

 

 

 

 

 

 

333,742

 

 

 

 

 

 

    

 

Total (Cost $574,522)

 

 

 

 

 

681,992

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

 

 

SHARES

     

VALUE

 

Technology – 17.4%

 

 

 

 

 

 

 

Aerospace and Defense - 3.4%

 

 

 

 

 

 

 

†FLIR Systems a

 

 

1,700

 

$

50,575

 

†Goodrich Corporation

 

 

730

 

 

64,291

 

†Rockwell Collins

 

 

850

 

 

49,521

 

 

 

 

 

 

    

 

 

 

 

 

 

 

164,387

 

 

 

 

 

 

    

 

Components and Systems - 3.3%

 

 

 

 

 

 

 

†Western Digital a

 

 

4,750

 

 

161,025

 

 

 

 

 

 

    

 

Semiconductors and Equipment - 6.4%

 

 

 

 

 

 

 

†Aixtron ADR

 

 

1,700

 

 

63,240

 

†Analog Devices

 

 

3,800

 

 

143,146

 

†LSI Corporation a

 

 

18,150

 

 

108,719

 

 

 

 

 

 

    

 

 

 

 

 

 

 

315,105

 

 

 

 

 

 

    

 

Software - 4.3%

 

 

 

 

 

 

 

†Activision Blizzard

 

 

6,400

 

 

79,616

 

†CA

 

 

5,400

 

 

131,976

 

 

 

 

 

 

    

 

 

 

 

 

 

 

211,592

 

 

 

 

 

 

    

 

Total (Cost $784,236)

 

 

 

 

 

852,109

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Miscellaneouse – 4.2%

 

 

 

 

 

 

 

Total (Cost $195,397)

 

 

 

 

 

205,350

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

TOTAL COMMON STOCKS

 

 

 

 

 

 

 

(Cost $3,839,380)

 

 

 

 

 

4,440,771

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

REPURCHASE AGREEMENT – 9.2%

 

 

 

 

 

 

 

State Street Bank & Trust Company, 0.13% dated 12/31/10, due 1/3/11, maturity value $447,005 (collateralized by obligations of various U.S. Government Agencies, 1.375% due 5/15/13, valued at $461,962)

 

 

 

 

 

 

 

(Cost $447,000)

 

 

 

 

 

447,000

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

TOTAL INVESTMENTS – 100.0%

 

 

 

 

 

 

 

(Cost $4,286,380)

 

 

 

 

 

4,887,771

 

 

 

 

 

 

 

 

 

CASH AND OTHER ASSETS LESS LIABILITIES – 0.0%

 

 

 

 

 

1,285

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

NET ASSETS – 100.0%

 

 

 

 

$

4,889,056

 

 

 

 

 

 

    

 


 

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

The Royce Funds 2010 Annual Report to Shareholders | 115

 

 

Schedules of Investments

December 31, 2010
   

 

 
 

†

New additions in 2010.

a

Non-income producing.

b

At December 31, 2010, the Fund owned 5% or more of the Company’s outstanding voting securities thereby making the Company an Affiliated Company as that term is defined in the Investment Company Act of 1940. See Notes to Financial Statements.

c

All or a portion of these securities were on loan at December 31, 2010.

d

These securities are defined as Level 2 securities due to fair value being based on quoted prices for similar securities. See Notes to Financial Statements.

e

Includes securities first acquired in 2010 and less than 1% of net assets.

f

Securities for which market quotations are not readily available represent 0.0%, 0.0%, 0.1%, 0.0%, 0.1%, 0.3%, 0.3% and 0.6% of net assets for Royce Pennsylvania Mutual Fund, Royce Micro-Cap Fund, Royce Total Return Fund, Royce Heritage Fund, Royce Financial Services Fund, Royce Dividend Value Fund, Royce European Smaller-Companies Fund and Royce International Smaller-Companies Fund, respectively. These securities have been valued at their fair value under procedures approved by the Fund’s Board of Trustees. These securities are defined as Level 3 securities due to the use of significant unobservable inputs in the determination of fair value. See Notes to Financial Statements.

 

Securities of Global/International Funds are categorized by the country of their headquarters, with the exception of exchange-traded funds.

 

Bold indicates a Fund’s 20 largest equity holdings in terms of December 31, 2010 market value.
 

 

 

 

116 | The Royce Funds 2010 Annual Report to Shareholders

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

 

Statements of Assets and Liabilities

December 31, 2010
   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royce
Pennsylvania
Mutual Fund

 

Royce
Micro-Cap
Fund

 

Royce
Premier
Fund

 

Royce
Low-Priced
Stock Fund

 

ASSETS:

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments at value (including collateral on loaned securities)*

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-Affiliated Companies

 

$

5,716,510,202

 

$

1,190,821,046

 

$

4,465,056,487

 

$

4,043,288,170

 

Affiliated Companies

 

 

182,449,579

 

 

67,814,440

 

 

1,743,869,235

 

 

385,335,858

 

Repurchase agreements (at cost and value)

 

 

213,747,000

 

 

169,168,000

 

 

664,631,000

 

 

354,891,000

 

Cash and foreign currency

 

 

116,825

 

 

793

 

 

—

 

 

269,175

 

Receivable for investments sold

 

 

6,015,086

 

 

7,678

 

 

—

 

 

6,227,389

 

Receivable for capital shares sold

 

 

8,739,265

 

 

2,258,500

 

 

13,797,337

 

 

16,297,011

 

Receivable for dividends and interest

 

 

3,703,811

 

 

985,821

 

 

3,273,408

 

 

1,435,634

 

Prepaid expenses and other assets

 

 

1,581,209

 

 

16,030

 

 

78,355

 

 

50,341

 
                           

Total Assets

 

 

6,132,862,977

 

 

1,431,072,308

 

 

6,890,705,822

 

 

4,807,794,578

 
                           

LIABILITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

Payable for collateral on loaned securities

 

 

63,193,230

 

 

17,666,381

 

 

106,015,166

 

 

95,512,591

 

Payable for investments purchased

 

 

6,772,106

 

 

2,066,197

 

 

710,031

 

 

2,163,764

 

Payable for capital shares redeemed

 

 

9,947,572

 

 

1,888,267

 

 

12,898,583

 

 

14,564,930

 

Payable to custodian for overdrawn balance

 

 

—

 

 

—

 

 

52

 

 

—

 

Payable for investment advisory fees

 

 

3,855,744

 

 

1,509,058

 

 

5,299,306

 

 

4,305,688

 

Accrued expenses

 

 

1,754,461

 

 

503,633

 

 

1,092,149

 

 

1,595,203

 
                           

Total Liabilities

 

 

85,523,113

 

 

23,633,536

 

 

126,015,287

 

 

118,142,176

 
                           

Net Assets

 

$

6,047,339,864

 

$

1,407,438,772

 

$

6,764,690,535

 

$

4,689,652,402

 
                           

ANALYSIS OF NET ASSETS:

 

 

 

 

 

 

 

 

 

 

 

 

 

Paid-in capital

 

$

4,711,660,745

 

$

1,089,019,342

 

$

4,450,929,674

 

$

3,269,252,781

 

Undistributed net investment income (loss)

 

 

(3,733,882

)

 

(25,547,024

)

 

(9,856,057

)

 

(43,018,249

)

Accumulated net realized gain (loss) on investments and foreign currency

 

 

(47,995,487

)

 

7,332,864

 

 

13,483,478

 

 

(730,427

)

Net unrealized appreciation (depreciation) on investments and foreign currency

 

 

1,387,408,488

 

 

336,633,590

 

 

2,310,133,440

 

 

1,464,148,297

 
                           

Net Assets

 

$

6,047,339,864

 

$

1,407,438,772

 

$

6,764,690,535

 

$

4,689,652,402

 
                           

Investment Class

 

$

4,735,402,877

 

$

1,085,782,214

 

$

4,961,891,077

 

$

148,143,918

 

Service Class

 

 

448,784,056

 

 

139,910,974

 

 

584,816,490

 

 

3,456,142,550

 

Consultant Class

 

 

841,524,683

 

 

181,745,584

 

 

71,685,468

 

 

 

 

Institutional Class

 

 

 

 

 

 

 

 

706,870,180

 

 

1,077,658,948

 

W Class

 

 

 

 

 

 

 

 

425,396,518

 

 

 

 

R Class

 

 

17,868,562

 

 

 

 

 

10,185,371

 

 

2,925,293

 

K Class

 

 

3,759,686

 

 

 

 

 

3,845,431

 

 

4,781,693

 
                           

SHARES OUTSTANDING (unlimited number of $.001 par value):

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

406,406,289

 

 

61,782,209

 

 

243,872,601

 

 

8,090,867

 

Service Class

 

 

38,532,502

 

 

8,026,066

 

 

29,142,504

 

 

189,268,736

 

Consultant Class

 

 

79,304,615

 

 

11,420,413

 

 

3,811,396

 

 

 

 

Institutional Class

 

 

 

 

 

 

 

 

34,500,898

 

 

58,795,719

 

W Class

 

 

 

 

 

 

 

 

20,855,131

 

 

 

 

R Class

 

 

1,563,949

 

 

 

 

 

511,660

 

 

162,023

 

K Class

 

 

355,639

 

 

 

 

 

367,458

 

 

408,804

 
                           

NET ASSET VALUES (Net Assets ÷ Shares Outstanding):

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class(1)

 

$

11.65

 

$

17.57

 

$

20.35

 

$

18.31

 

Service Class(1)

 

 

11.65

 

 

17.43

 

 

20.07

 

 

18.26

 

Consultant Class(1)

 

 

10.61

 

 

15.91

 

 

18.81

 

 

 

 

Institutional Class(2)

 

 

 

 

 

 

 

 

20.49

 

 

18.33

 

W Class(2)

 

 

 

 

 

 

 

 

20.40

 

 

 

 

R Class(1)

 

 

11.43

 

 

 

 

 

19.91

 

 

18.05

 

K Class(1)

 

 

10.57

 

 

 

 

 

10.46

 

 

11.70

 
                           

* Investments at identified cost

 

$

4,511,558,192

 

$

921,982,179

 

$

3,898,858,212

 

$

2,964,483,720

 

Market value of loaned securities

 

 

61,119,218

 

 

16,873,762

 

 

103,415,035

 

 

92,594,129

 

 

 

(1)

Offering and redemption price per share; shares redeemed within 180 days of purchase are subject to a 1% redemption fee, payable to the Fund.

(2)

Offering and redemption price per share.

 

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

The Royce Funds 2010 Annual Report to Shareholders | 117

 

Statements of Assets and Liabilities
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royce
Total Return
Fund

 

Royce
Heritage
Fund

 

Royce
Opportunity
Fund

 

Royce
Special Equity
Fund

 

ASSETS:

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments at value (including collateral on loaned securities)*

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-Affiliated Companies

 

$

4,390,995,728

 

$

262,280,963

 

$

2,017,183,972

 

$

1,266,579,604

 

Affiliated Companies

 

 

115,278,147

 

 

—

 

 

87,624,849

 

 

539,636,084

 

Repurchase agreements (at cost and value)

 

 

301,217,000

 

 

18,106,000

 

 

142,588,000

 

 

320,794,000

 

Cash and foreign currency

 

 

280,892

 

 

225

 

 

38

 

 

854

 

Receivable for investments sold

 

 

362,366

 

 

763,742

 

 

8,695,990

 

 

517,739

 

Receivable for capital shares sold

 

 

7,332,314

 

 

325,052

 

 

6,558,086

 

 

10,032,987

 

Receivable for dividends and interest

 

 

6,599,168

 

 

151,889

 

 

614,371

 

 

4,799,539

 

Prepaid expenses and other assets

 

 

58,850

 

 

3,147

 

 

25,916

 

 

21,757

 
                           

Total Assets

 

 

4,822,124,465

 

 

281,631,018

 

 

2,263,291,222

 

 

2,142,382,564

 
                           

LIABILITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

Payable for collateral on loaned securities

 

 

3,939,419

 

 

1,857,773

 

 

41,587,493

 

 

—

 

Payable for investments purchased

 

 

783,531

 

 

1,485,117

 

 

5,337,897

 

 

6,657,515

 

Payable for capital shares redeemed

 

 

16,446,023

 

 

867,970

 

 

7,469,240

 

 

1,430,727

 

Payable for investment advisory fees

 

 

3,894,836

 

 

229,301

 

 

1,814,503

 

 

1,765,078

 

Accrued expenses

 

 

1,085,819

 

 

132,343

 

 

337,555

 

 

361,765

 
                           

Total Liabilities

 

 

26,149,628

 

 

4,572,504

 

 

56,546,688

 

 

10,215,085

 
                           

Net Assets

 

$

4,795,974,837

 

$

277,058,514

 

$

2,206,744,534

 

$

2,132,167,479

 
                           

ANALYSIS OF NET ASSETS:

 

 

 

 

 

 

 

 

 

 

 

 

 

Paid-in capital

 

$

3,663,137,955

 

$

209,233,933

 

$

2,027,365,080

 

$

1,626,897,090

 

Undistributed net investment income (loss)

 

 

4,323,647

 

 

(781,045

)

 

—

 

 

5,440,655

 

Accumulated net realized gain (loss) on investments and foreign currency

 

 

(155,368,400

)

 

5,286,250

 

 

(181,606,034

)

 

22,120,991

 

Net unrealized appreciation (depreciation) on investments and foreign currency

 

 

1,283,881,635

 

 

63,319,376

 

 

360,985,488

 

 

477,708,743

 
                           

Net Assets

 

$

4,795,974,837

 

$

277,058,514

 

$

2,206,744,534

 

$

2,132,167,479

 
                           

Investment Class

 

$

3,562,001,470

 

$

13,312,829

 

$

1,170,606,373

 

$

1,487,631,753

 

Service Class

 

 

295,656,075

 

 

243,821,745

 

 

312,727,729

 

 

160,870,652

 

Consultant Class

 

 

391,886,195

 

 

12,800,858

 

 

13,126,077

 

 

38,496,903

 

Institutional Class

 

 

356,038,072

 

 

 

 

 

702,219,986

 

 

445,168,171

 

W Class

 

 

75,063,355

 

 

 

 

 

 

 

 

 

 

R Class

 

 

20,011,065

 

 

1,909,063

 

 

1,407,116

 

 

 

 

K Class

 

 

95,318,605

 

 

5,214,019

 

 

6,657,253

 

 

 

 
                           

SHARES OUTSTANDING (unlimited number of $.001 par value):

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

270,456,253

 

 

881,632

 

 

96,896,579

 

 

71,290,330

 

Service Class

 

 

22,421,775

 

 

16,221,115

 

 

26,551,258

 

 

7,721,332

 

Consultant Class

 

 

29,524,578

 

 

1,023,758

 

 

1,145,259

 

 

1,909,521

 

Institutional Class

 

 

27,086,913

 

 

 

 

 

57,766,975

 

 

21,408,183

 

W Class

 

 

5,689,201

 

 

 

 

 

 

 

 

 

 

R Class

 

 

1,507,246

 

 

164,111

 

 

119,479

 

 

 

 

K Class

 

 

9,244,806

 

 

446,380

 

 

606,268

 

 

 

 
                           

NET ASSET VALUES (Net Assets ÷ Shares Outstanding):

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class(1)

 

$

13.17

 

$

15.10

 

$

12.08

 

$

20.87

 

Service Class(1)

 

 

13.19

 

 

15.03

 

 

11.78

 

 

20.83

 

Consultant Class(1)

 

 

13.27

 

 

12.50

 

 

11.46

 

 

20.16

 

Institutional Class(2)

 

 

13.14

 

 

 

 

 

12.16

 

 

20.79

 

W Class(2)

 

 

13.19

 

 

 

 

 

 

 

 

 

 

R Class(1)

 

 

13.28

 

 

11.63

 

 

11.78

 

 

 

 

K Class(1)

 

 

10.31

 

 

11.68

 

 

10.98

 

 

 

 
                           

* Investments at identified cost

 

$

3,222,401,834

 

$

198,965,222

 

$

1,743,823,333

 

$

1,328,506,945

 

Market value of loaned securities

 

 

3,800,304

 

 

1,801,800

 

 

40,140,209

 

 

 

 

 

 

(1)

Offering and redemption price per share; shares redeemed within 180 days of purchase are subject to a 1% redemption fee, payable to the Fund.

(2)

Offering and redemption price per share.

 

 

 

118 | The Royce Funds 2010 Annual Report to Shareholders

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

December 31, 2010
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royce Value Fund

 

Royce Value Plus Fund

 

Royce 100 Fund

 

Royce Discovery Fund

 

ASSETS:

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments at value (including collateral on loaned securities)*

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-Affiliated Companies

 

$

1,817,226,703

 

$

2,804,349,529

 

$

410,742,276

 

$

3,422,841

 

Affiliated Companies

 

 

—

 

 

322,766,334

 

 

—

 

 

—

 

Repurchase agreements (at cost and value)

 

 

32,190,000

 

 

162,932,000

 

 

31,316,000

 

 

147,000

 

Cash and foreign currency

 

 

247

 

 

758

 

 

537

 

 

357

 

Receivable for investments sold

 

 

205,149

 

 

1,330,141

 

 

—

 

 

—

 

Receivable for capital shares sold

 

 

3,108,529

 

 

2,973,340

 

 

1,703,559

 

 

83,055

 

Receivable for dividends and interest

 

 

720,172

 

 

1,199,947

 

 

220,243

 

 

1,070

 

Prepaid expenses and other assets

 

 

21,385

 

 

44,192

 

 

4,352

 

 

42

 
                           

Total Assets

 

 

1,853,472,185

 

 

3,295,596,241

 

 

443,986,967

 

 

3,654,365

 
                           

LIABILITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

Payable for collateral on loaned securities

 

 

23,568,788

 

 

33,734,875

 

 

5,649,568

 

 

—

 

Payable for investments purchased

 

 

—

 

 

3,627,230

 

 

960,336

 

 

—

 

Payable for capital shares redeemed

 

 

3,019,459

 

 

35,976,238

 

 

369,656

 

 

—

 

Payable for investment advisory fees

 

 

1,522,682

 

 

2,720,523

 

 

363,417

 

 

—

 

Accrued expenses

 

 

590,981

 

 

1,068,197

 

 

175,553

 

 

17,216

 
                           

Total Liabilities

 

 

28,701,910

 

 

77,127,063

 

 

7,518,530

 

 

17,216

 
                           

Net Assets

 

$

1,824,770,275

 

$

3,218,469,178

 

$

436,468,437

 

$

3,637,149

 
                           

ANALYSIS OF NET ASSETS:

 

 

 

 

 

 

 

 

 

 

 

 

 

Paid-in capital

 

$

1,512,903,895

 

$

3,113,864,877

 

$

333,063,479

 

$

3,913,976

 

Undistributed net investment income (loss)

 

 

(2,577,809

)

 

(15,848,865

)

 

179,691

 

 

(5,812

)

Accumulated net realized gain (loss) on investments and foreign currency

 

 

(69,467,617

)

 

(409,472,113

)

 

4,429,523

 

 

(588,802

)

Net unrealized appreciation (depreciation) on investments and foreign currency

 

 

383,911,806

 

 

529,925,279

 

 

98,795,744

 

 

317,787

 
                           

Net Assets

 

$

1,824,770,275

 

$

3,218,469,178

 

$

436,468,437

 

$

3,637,149

 
                           

Investment Class

 

$

115,006,901

 

$

305,161,398

 

$

66,011,124

 

 

 

 

Service Class

 

 

1,415,766,115

 

 

2,454,325,143

 

 

366,183,499

 

$

3,637,149

 

Consultant Class

 

 

35,166,654

 

 

30,279,283

 

 

 

 

 

 

 

Institutional Class

 

 

219,110,718

 

 

425,910,499

 

 

 

 

 

 

 

R Class

 

 

26,524,612

 

 

941,507

 

 

1,358,420

 

 

 

 

K Class

 

 

13,195,275

 

 

1,851,348

 

 

2,915,394

 

 

 

 
                           

SHARES OUTSTANDING (unlimited number of $.001 par value):

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

9,054,215

 

 

22,577,930

 

 

6,719,674

 

 

 

 

Service Class

 

 

111,892,599

 

 

182,817,679

 

 

37,513,834

 

 

693,965

 

Consultant Class

 

 

2,880,601

 

 

2,330,277

 

 

 

 

 

 

 

Institutional Class

 

 

17,245,171

 

 

31,508,075

 

 

 

 

 

 

 

R Class

 

 

2,115,610

 

 

71,126

 

 

115,860

 

 

 

 

K Class

 

 

1,251,475

 

 

189,498

 

 

246,799

 

 

 

 
                           

NET ASSET VALUES (Net Assets ÷ Shares Outstanding):

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class(1)

 

$

12.70

 

$

13.52

 

$

9.82

 

 

 

 

Service Class(1)

 

 

12.65

 

 

13.42

 

 

9.76

 

$

5.24

 

Consultant Class(1)

 

 

12.21

 

 

12.99

 

 

 

 

 

 

 

Institutional Class(2)

 

 

12.71

 

 

13.52

 

 

 

 

 

 

 

R Class(1)

 

 

12.54

 

 

13.24

 

 

11.72

 

 

 

 

K Class(1)

 

 

10.54

 

 

9.77

 

 

11.81

 

 

 

 
                           

*  Investments at identified cost

 

$

1,433,331,693

 

$

2,597,196,093

 

$

311,947,439

 

$

3,105,053

 

Market value of loaned securities

 

 

23,380,237

 

 

33,018,403

 

 

5,570,069

 

 

 

 

 

 

(1)

Offering and redemption price per share; shares redeemed within 180 days of purchase are subject to a 1% redemption fee, payable to the Fund.

(2)

Offering and redemption price per share.

 

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

The Royce Funds 2010 Annual Report to Shareholders | 119


 

Statements of Assets and Liabilities
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royce Financial Services Fund

 

Royce Dividend Value Fund

 

Royce European Smaller- Companies Fund

 

Royce Global Value Fund

 

ASSETS:

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments at value*

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-Affiliated Companies

 

$

13,666,587

 

$

142,382,770

 

$

13,766,212

 

$

132,785,114

 

Repurchase agreements (at cost and value)

 

 

912,000

 

 

8,745,000

 

 

1,368,000

 

 

11,551,000

 

Cash and foreign currency

 

 

3,555

 

 

623

 

 

47,209

 

 

176,732

 

Receivable for capital shares sold

 

 

186,818

 

 

5,292,801

 

 

335,045

 

 

5,089,725

 

Receivable for dividends and interest

 

 

16,318

 

 

172,681

 

 

14,564

 

 

86,124

 

Prepaid expenses and other assets

 

 

175

 

 

703

 

 

110

 

 

805

 
                           

   Total Assets

 

 

14,785,453

 

 

156,594,578

 

 

15,531,140

 

 

149,689,500

 
                           

LIABILITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

Payable for investments purchased

 

 

—

 

 

3,000,085

 

 

73,327

 

 

866,636

 

Payable for capital shares redeemed

 

 

64,378

 

 

475,652

 

 

57,498

 

 

744

 

Payable for investment advisory fees

 

 

10,059

 

 

116,877

 

 

7,420

 

 

134,825

 

Accrued expenses

 

 

23,399

 

 

71,577

 

 

24,344

 

 

69,597

 
                           

Total Liabilities

 

 

97,836

 

 

3,664,191

 

 

162,589

 

 

1,071,802

 
                           

Net Assets

 

$

14,687,617

 

$

152,930,387

 

$

15,368,551

 

$

148,617,698

 
                           

ANALYSIS OF NET ASSETS:

 

 

 

 

 

 

 

 

 

 

 

 

 

Paid-in capital

 

$

14,016,775

 

$

131,785,248

 

$

15,197,606

 

$

133,763,681

 

Undistributed net investment income (loss)

 

 

(67,097

)

 

5,972

 

 

(38,263

)

 

(238,425

)

Accumulated net realized gain (loss) on investments and foreign currency

 

 

(1,279,192

)

 

90,022

 

 

(2,699,430

)

 

(10,736,219

)

Net unrealized appreciation (depreciation) on investments and foreign currency

 

 

2,017,131

 

 

21,049,145

 

 

2,908,638

 

 

25,828,661

 
                           

Net Assets

 

$

14,687,617

 

$

152,930,387

 

$

15,368,551

 

$

148,617,698

 
                           

Investment Class

 

 

 

 

$

35,626,448

 

 

 

 

$

6,625,376

 

Service Class

 

$

14,687,617

 

 

117,303,939

 

$

15,368,551

 

 

141,992,322

 
                           

SHARES OUTSTANDING (unlimited number of $.001 par value):

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

 

 

 

5,242,084

 

 

 

 

 

455,672

 

Service Class

 

 

2,259,792

 

 

17,192,719

 

 

1,423,818

 

 

9,755,498

 
                           

NET ASSET VALUES (Net Assets ÷ Shares Outstanding):

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class(1)

 

 

 

 

$

6.80

 

 

 

 

$

14.54

(2)

Service Class(1)

 

$

6.50

 

 

6.82

 

$

10.79

(2)

 

14.56

(2)
                           

* Investments at identified cost

 

$

11,650,700

 

$

121,334,038

 

$

10,857,042

 

$

106,952,252

 

 

 

(1)

Offering and redemption price per share; shares redeemed within 180 days of purchase are subject to a 1% redemption fee, payable to the Fund.

(2)

For Royce European Smaller-Companies Fund and Royce Global Value Fund, shares redeemed within 180 days of purchase are subject to a 2% redemption fee, payable to the Fund.

 

 

 

120 | The Royce Funds 2010 Annual Report to Shareholders

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.


 

December 31, 2010
 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royce SMid-Cap Value Fund

 

Royce International Smaller- Companies Fund

 

Royce Focus Value Fund

 

ASSETS:

 

 

 

 

 

 

 

 

 

 

Investments at value*

 

 

 

 

 

 

 

 

 

 

Non-Affiliated Companies

 

$

5,307,035

 

$

16,694,537

 

$

8,627,195

 

Repurchase agreements (at cost and value)

 

 

889,000

 

 

1,350,000

 

 

336,000

 

Cash and foreign currency

 

 

778

 

 

774

 

 

399

 

Receivable for capital shares sold

 

 

28,442

 

 

314,335

 

 

29,436

 

Receivable for dividends and interest

 

 

3,324

 

 

15,738

 

 

3,963

 

Prepaid expenses and other assets

 

 

71

 

 

169

 

 

87

 
                     

Total Assets

 

 

6,228,650

 

 

18,375,553

 

 

8,997,080

 
                     

LIABILITIES:

 

 

 

 

 

 

 

 

 

 

Payable for investments purchased

 

 

—

 

 

34,247

 

 

—

 

Payable for capital shares redeemed

 

 

13,652

 

 

3,407

 

 

26,591

 

Payable for investment advisory fees

 

 

1,861

 

 

12,803

 

 

10,577

 

Accrued expenses

 

 

17,988

 

 

27,603

 

 

17,816

 
                     

Total Liabilities

 

 

33,501

 

 

78,060

 

 

54,984

 
                     

Net Assets

 

$

6,195,149

 

$

18,297,493

 

$

8,942,096

 
                     

ANALYSIS OF NET ASSETS:

 

 

 

 

 

 

 

 

 

 

Paid-in capital

 

$

11,348,528

 

$

14,282,872

 

$

6,940,276

 

Undistributed net investment income (loss)

 

 

(14,144

)

 

(36,715

)

 

(50,108

)

Accumulated net realized gain (loss) on investments and foreign currency

 

 

(6,116,376

)

 

621,512

 

 

43,343

 

Net unrealized appreciation (depreciation) on investments and foreign currency

 

 

977,141

 

 

3,429,824

 

 

2,008,585

 
                     

Net Assets

 

$

6,195,149

 

$

18,297,493

 

$

8,942,096

 
                     

Service Class

 

$

6,195,149

 

$

18,297,493

 

$

8,942,096

 
                     

SHARES OUTSTANDING (unlimited number of $.001 par value):

 

 

 

 

 

 

 

 

 

 

Service Class

 

 

541,713

 

 

1,423,827

 

 

538,950

 
                     

NET ASSET VALUES (Net Assets ÷ Shares Outstanding):

 

 

 

 

 

 

 

 

 

 

Service Class(1)

 

$

11.44

 

$

12.85

(2)

$

16.59

 
                     

* Investments at identified cost

 

$

4,329,912

 

$

13,265,060

 

$

6,618,729

 

 

 

(1)

Offering and redemption price per share; shares redeemed within 180 days of purchase are subject to a 1% redemption fee, payable to the Fund.

(2)

For Royce International Smaller-Companies Fund, shares redeemed within 180 days of purchase are subject to a 2% redemption fee, payable to the Fund.

 

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

The Royce Funds 2010 Annual Report to Shareholders | 121


 

 

 

Statements of Assets and Liabilities

 

December 31, 2010
     

 

 

 

 

 

 

 

 

 

 

Royce Partners Fund

 

Royce Mid-Cap Fund

 

ASSETS:

 

 

 

 

 

 

 

Investments at value*

 

 

 

 

 

 

 

Non-Affiliated Companies

 

$

1,591,505

 

$

4,440,771

 

Repurchase agreements (at cost and value)

 

 

208,000

 

 

447,000

 

Cash and foreign currency

 

 

545

 

 

993

 

Receivable for capital shares sold

 

 

—

 

 

15,350

 

Receivable for dividends and interest

 

 

1,262

 

 

2,609

 

Prepaid expenses and other assets

 

 

21

 

 

50

 
               

Total Assets

 

 

1,801,333

 

 

4,906,773

 
               

LIABILITIES:

 

 

 

 

 

 

 

Payable for investments purchased

 

 

10,884

 

 

—

 

Payable for capital shares redeemed

 

 

2,336

 

 

1,000

 

Payable for investment advisory fees

 

 

—

 

 

1

 

Accrued expenses

 

 

16,618

 

 

16,716

 
               

Total Liabilities

 

 

29,838

 

 

17,717

 
               

Net Assets

 

$

1,771,495

 

$

4,889,056

 
               

ANALYSIS OF NET ASSETS:

 

 

 

 

 

 

 

Paid-in capital

 

$

1,384,484

 

$

4,272,738

 

Undistributed net investment income (loss)

 

 

(19,345

)

 

—

 

Accumulated net realized gain (loss) on investments and foreign currency

 

 

69,007

 

 

14,881

 

Net unrealized appreciation (depreciation) on investments and foreign currency

 

 

337,349

 

 

601,437

 
               

Net Assets

 

$

1,771,495

 

$

4,889,056

 
               

Service Class

 

$

1,771,495

 

$

4,889,056

 
               

SHARES OUTSTANDING (unlimited number of $.001 par value):

 

 

 

 

 

 

 

Service Class

 

 

134,691

 

 

412,129

 
               

NET ASSET VALUES (Net Assets ÷ Shares Outstanding):

 

 

 

 

 

 

 

Service Class(1)

 

$

13.15

 

$

11.86

 
               

* Investments at identified cost

 

$

1,254,196

 

$

3,839,380

 

 

 

(1)

Offering and redemption price per share; shares redeemed within 180 days of purchase are subject to a 1% redemption fee, payable to the Fund.

 

 

 

122 | The Royce Funds 2010 Annual Report to Shareholders

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.


 

Statements of Changes in Net Assets
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royce Pennsylvania Mutual Fund

 

Royce Micro-Cap Fund

 

Royce Premier Fund

 

 

 

  

 

  

 

  

 

 

 

Year ended 12/31/10

 

Year ended 12/31/09

 

Year ended 12/31/10

 

Year ended 12/31/09

 

Year ended 12/31/10

 

Year ended 12/31/09

 

INVESTMENT OPERATIONS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income (loss)

 

$

23,376,925

 

$

4,498,562

 

$

(4,802,627

)

$

(4,268,637

)

$

(4,370,867

)

$

(6,011,148

)

Net realized gain (loss) on investments and foreign currency

 

 

244,539,402

 

 

(131,643,031

)

 

95,049,136

 

 

(31,441,694

)

 

102,599,727

 

 

5,687,774

 

Net change in unrealized appreciation (depreciation) on investments and foreign currency

 

 

919,035,457

 

 

1,353,645,992

 

 

228,144,154

 

 

382,990,029

 

 

1,282,579,039

 

 

1,193,921,561

 
                                       

Net increase (decrease) in net assets from investment operations

 

 

1,186,951,784

 

 

1,226,501,523

 

 

318,390,663

 

 

347,279,698

 

 

1,380,807,899

 

 

1,193,598,187

 
                                       

DISTRIBUTIONS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

(21,589,039

)

 

(2,801,892

)

 

(15,361,971

)

 

(11,157,943

)

 

—

 

 

—

 

Service Class

 

 

—

 

 

—

 

 

(1,821,688

)

 

(1,071,605

)

 

—

 

 

—

 

Consultant Class

 

 

—

 

 

—

 

 

(1,445,582

)

 

(1,114,364

)

 

—

 

 

—

 

Institutional Class

 

 

 

 

 

 

 

 

 

 

 

 

 

 

—

 

 

—

 

W Class

 

 

 

 

 

 

 

 

 

 

 

 

 

 

—

 

 

—

 

R Class

 

 

(5,843

)

 

—

 

 

 

 

 

 

 

 

—

 

 

—

 

K Class

 

 

(1,718

)

 

—

 

 

 

 

 

 

 

 

—

 

 

—

 

Net realized gain on investments and foreign currency

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

—

 

 

—

 

 

—

 

 

—

 

 

(64,420,469

)

 

—

 

Service Class

 

 

—

 

 

—

 

 

—

 

 

—

 

 

(7,538,439

)

 

—

 

Consultant Class

 

 

—

 

 

—

 

 

—

 

 

—

 

 

(1,018,562

)

 

—

 

Institutional Class

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,075,185

)

 

—

 

W Class

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,523,283

)

 

—

 

R Class

 

 

—

 

 

—

 

 

 

 

 

 

 

 

(126,237

)

 

—

 

K Class

 

 

—

 

 

—

 

 

 

 

 

 

 

 

(93,135

)

 

—

 
                                       

Total distributions

 

 

(21,596,600

)

 

(2,801,892

)

 

(18,629,241

)

 

(13,343,912

)

 

(87,795,310

)

 

—

 
                                       

CAPITAL SHARE TRANSACTIONS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net capital share transactions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

311,755,659

 

 

379,027,780

 

 

8,350,914

 

 

130,266,475

 

 

93,744,515

 

 

381,703,030

 

Service Class

 

 

(294,880,724

)

 

352,809,846

 

 

27,761,923

 

 

31,846,914

 

 

102,603,557

 

 

85,584,636

 

Consultant Class

 

 

(76,663,689

)

 

(76,272,328

)

 

(7,597,680

)

 

(3,447,974

)

 

(459,568

)

 

18,288,074

 

Institutional Class

 

 

 

 

 

 

 

 

 

 

 

 

 

 

56,876,832

 

 

40,687,524

 

W Class

 

 

 

 

 

 

 

 

 

 

 

 

 

 

23,708,347

 

 

3,196,459

 

R Class

 

 

4,796,667

 

 

2,069,250

 

 

 

 

 

 

 

 

6,077,290

 

 

1,890,383

 

K Class

 

 

1,204,781

 

 

752,676

 

 

 

 

 

 

 

 

1,720,954

 

 

1,256,498

 

Shareholder redemption fees

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

328,540

 

 

335,132

 

 

68,470

 

 

84,891

 

 

301,208

 

 

249,500

 

Service Class

 

 

1,026,394

 

 

824,379

 

 

9,397

 

 

29,982

 

 

77,800

 

 

48,054

 

Consultant Class

 

 

948

 

 

30,245

 

 

734

 

 

7,092

 

 

25

 

 

1,784

 

R Class

 

 

382

 

 

13

 

 

 

 

 

 

 

 

385

 

 

6

 

K Class

 

 

1,263

 

 

824

 

 

 

 

 

 

 

 

—

 

 

—

 
                                       

Net increase (decrease) in net assets from capital share transactions

 

 

(52,429,779

)

 

659,577,817

 

 

28,593,758

 

 

158,787,380

 

 

284,651,345

 

 

532,905,948

 
                                       

NET INCREASE (DECREASE) IN NET ASSETS

 

 

1,112,925,405

 

 

1,883,277,448

 

 

328,355,180

 

 

492,723,166

 

 

1,577,663,934

 

 

1,726,504,135

 

NET ASSETS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning of year

 

 

4,934,414,459

 

 

3,051,137,011

 

 

1,079,083,592

 

 

586,360,426

 

 

5,187,026,601

 

 

3,460,522,466

 
                                       

End of year

 

$

6,047,339,864

 

$

4,934,414,459

 

$

1,407,438,772

 

$

1,079,083,592

 

$

6,764,690,535

 

$

5,187,026,601

 
                                       

UNDISTRIBUTED NET INVESTMENT INCOME
(LOSS) AT END OF YEAR

 

$

(3,733,882

)

$

7,338,192

 

$

(25,547,024

)

$

(9,466,086

)

$

(9,856,057

)

$

(5,508,335

)

 

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

The Royce Funds 2010 Annual Report to Shareholders | 123


 

Statements of Changes in Net Assets
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royce Low-Priced Stock Fund

 

Royce Total Return Fund

 

Royce Heritage Fund

 

 

 

  

 

  

 

  

 

 

 

Year ended 12/31/10

 

Year ended 12/31/09

 

Year ended 12/31/10

 

Year ended 12/31/09

 

Year ended 12/31/10

 

Year ended 12/31/09

 

INVESTMENT OPERATIONS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income (loss)

 

$

(10,947,027

)

$

(9,080,283

)

$

65,973,516

 

$

57,021,457

 

$

400,157

 

$

(69,909

)

Net realized gain (loss) on investments and foreign currency

 

 

190,296,151

 

 

(87,267,633

)

 

70,220,724

 

 

(189,731,841

)

 

28,064,301

 

 

(2,351,245

)

Net change in unrealized appreciation (depreciation) on investments and foreign currency

 

 

900,883,703

 

 

1,332,573,466

 

 

773,290,273

 

 

963,763,879

 

 

29,544,806

 

 

59,309,275

 
                                       

Net increase (decrease) in net assets from investment operations

 

 

1,080,232,827

 

 

1,236,225,550

 

 

909,484,513

 

 

831,053,495

 

 

58,009,264

 

 

56,888,121

 
                                       

DISTRIBUTIONS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

(773,069

)

 

(298,274

)

 

(42,720,669

)

 

(39,146,850

)

 

(66,004

)

 

—

 

Service Class

 

 

(13,092,584

)

 

(3,209,684

)

 

(2,173,184

)

 

(1,981,005

)

 

(931,740

)

 

—

 

Consultant Class

 

 

 

 

 

 

 

 

(1,276,985

)

 

(1,660,454

)

 

—

 

 

—

 

Institutional Class

 

 

(5,651,601

)

 

(2,037,644

)

 

(4,780,738

)

 

(3,685,232

)

 

 

 

 

 

 

W Class

 

 

 

 

 

 

 

 

(764,664

)

 

(857,210

)

 

 

 

 

 

 

R Class

 

 

(12,555

)

 

(31

)

 

(57,119

)

 

(24,161

)

 

(4,813

)

 

—

 

K Class

 

 

(39,444

)

 

(2,710

)

 

(615,594

)

 

(462,195

)

 

(26,367

)

 

—

 

Net realized gain on investments and foreign currency

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

(1,069,269

)

 

—

 

 

—

 

 

—

 

 

(248,759

)

 

—

 

Service Class

 

 

(25,429,129

)

 

—

 

 

—

 

 

—

 

 

(4,575,379

)

 

—

 

Consultant Class

 

 

 

 

 

 

 

 

—

 

 

—

 

 

(268,232

)

 

—

 

Institutional Class

 

 

(7,864,337

)

 

—

 

 

—

 

 

—

 

 

 

 

 

 

 

W Class

 

 

 

 

 

 

 

 

—

 

 

—

 

 

 

 

 

 

 

R Class

 

 

(21,454

)

 

—

 

 

—

 

 

—

 

 

(43,920

)

 

—

 

K Class

 

 

(52,402

)

 

—

 

 

—

 

 

—

 

 

(125,645

)

 

—

 
                                       

Total distributions

 

 

(54,005,844

)

 

(5,548,343

)

 

(52,388,953

)

 

(47,817,107

)

 

(6,290,859

)

 

—

 
                                       

CAPITAL SHARE TRANSACTIONS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net capital share transactions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

22,184,156

 

 

(5,050,009

)

 

(154,296,876

)

 

(91,509,188

)

 

767,926

 

 

1,444,488

 

Service Class

 

 

15,026,879

 

 

(103,397,366

)

 

27,736,411

 

 

15,019,931

 

 

15,192,583

 

 

52,835,057

 

Consultant Class

 

 

 

 

 

 

 

 

(47,216,839

)

 

(59,717,473

)

 

3,190,956

 

 

549,991

 

Institutional Class

 

 

181,504,377

 

 

(172,188,340

)

 

26,515,464

 

 

22,637,144

 

 

 

 

 

 

 

W Class

 

 

 

 

 

 

 

 

14,011,372

 

 

(27,447,742

)

 

 

 

 

 

 

R Class

 

 

1,234,883

 

 

783,751

 

 

10,925,475

 

 

2,439,278

 

 

761,656

 

 

650,634

 

K Class

 

 

3,256,422

 

 

549,258

 

 

39,793,363

 

 

15,638,522

 

 

4,034,349

 

 

145,515

 

Shareholder redemption fees

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

6,128

 

 

12,722

 

 

150,127

 

 

275,591

 

 

2,128

 

 

192

 

Service Class

 

 

355,963

 

 

274,606

 

 

24,584

 

 

299,140

 

 

44,483

 

 

43,589

 

Consultant Class

 

 

 

 

 

 

 

 

1,669

 

 

19,753

 

 

—

 

 

1,526

 

R Class

 

 

—

 

 

302

 

 

—

 

 

—

 

 

55

 

 

—

 

K Class

 

 

61

 

 

—

 

 

—

 

 

164

 

 

—

 

 

—

 
                                       

Net increase (decrease) in net assets from capital share transactions

 

 

223,568,869

 

 

(279,015,076

)

 

(82,355,250

)

 

(122,344,880

)

 

23,994,136

 

 

55,670,992

 
                                       

NET INCREASE (DECREASE) IN NET ASSETS

 

 

1,249,795,852

 

 

951,662,131

 

 

774,740,310

 

 

660,891,508

 

 

75,712,541

 

 

112,559,113

 

NET ASSETS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning of year

 

 

3,439,856,550

 

 

2,488,194,419

 

 

4,021,234,527

 

 

3,360,343,019

 

 

201,345,973

 

 

88,786,860

 
                                       

End of year

 

$

4,689,652,402

 

$

3,439,856,550

 

$

4,795,974,837

 

$

4,021,234,527

 

$

277,058,514

 

$

201,345,973

 
                                       

UNDISTRIBUTED NET INVESTMENT INCOME
(LOSS) AT END OF YEAR

 

$

(43,018,249

)

$

(27,279,876

)

$

4,323,647

 

$

53,726,349

 

$

(781,045

)

$

198,755

 

 

 

 

124 | The Royce Funds 2010 Annual Report to Shareholders

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.


 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royce Opportunity Fund

 

Royce Special Equity Fund

 

Royce Value Fund

 

 

 

  

 

  

 

  

 

 

 

Year ended 12/31/10

 

Year ended 12/31/09

 

Year ended 12/31/10

 

Year ended 12/31/09

 

Year ended 12/31/10

 

Year ended 12/31/09

 

INVESTMENT OPERATIONS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income (loss)

 

$

(8,708,875

)

$

(5,600,827

)

$

12,707,197

 

$

5,014,952

 

$

1,384,070

 

$

(2,867,391

)

Net realized gain (loss) on investments and foreign currency

 

 

97,287,552

 

 

(190,846,794

)

 

31,061,346

 

 

2,358,466

 

 

91,152,444

 

 

(103,373,697

)

Net change in unrealized appreciation (depreciation) on investments and foreign currency

 

 

453,984,682

 

 

841,768,153

 

 

261,788,478

 

 

212,821,166

 

 

267,338,600

 

 

511,404,073

 
                                       

Net increase (decrease) in net assets from investment operations

 

 

542,563,359

 

 

645,320,532

 

 

305,557,021

 

 

220,194,584

 

 

359,875,114

 

 

405,162,985

 
                                       

DISTRIBUTIONS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

—

 

 

(93,286

)

 

(4,263,501

)

 

(3,385,049

)

 

(349,958

)

 

—

 

Service Class

 

 

—

 

 

—

 

 

(218,875

)

 

(209,964

)

 

(1,051,113

)

 

—

 

Consultant Class

 

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

Institutional Class

 

 

—

 

 

(776,463

)

 

(1,730,390

)

 

(1,273,715

)

 

(930,242

)

 

—

 

R Class

 

 

—

 

 

—

 

 

 

 

 

 

 

 

(7,422

)

 

—

 

K Class

 

 

—

 

 

—

 

 

 

 

 

 

 

 

(24,374

)

 

—

 

Net realized gain on investments and foreign currency

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

Service Class

 

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

Consultant Class

 

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

Institutional Class

 

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

R Class

 

 

—

 

 

—

 

 

 

 

 

 

 

 

—

 

 

—

 

K Class

 

 

—

 

 

—

 

 

 

 

 

 

 

 

—

 

 

—

 
                                       

Total distributions

 

 

—

 

 

(869,749

)

 

(6,212,766

)

 

(4,868,728

)

 

(2,363,109

)

 

—

 
                                       

CAPITAL SHARE TRANSACTIONS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net capital share transactions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

48,604,363

 

 

(77,385,940

)

 

438,853,515

 

 

373,830,873

 

 

26,878,907

 

 

36,972,542

 

Service Class

 

 

(68,625,351

)

 

19,995,582

 

 

66,899,892

 

 

54,047,538

 

 

(43,101,323

)

 

138,448,254

 

Consultant Class

 

 

2,790,972

 

 

257,754

 

 

12,453,437

 

 

5,667,472

 

 

934,299

 

 

4,621,513

 

Institutional Class

 

 

29,777,213

 

 

(2,395,697

)

 

98,071,920

 

 

67,463,685

 

 

8,658,294

 

 

3,381,940

 

R Class

 

 

812,498

 

 

231,793

 

 

 

 

 

 

 

 

15,825,122

 

 

5,247,846

 

K Class

 

 

5,297,219

 

 

205,273

 

 

 

 

 

 

 

 

6,149,329

 

 

2,112,321

 

Shareholder redemption fees

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

321,779

 

 

95,640

 

 

305,788

 

 

416,743

 

 

8,886

 

 

11,260

 

Service Class

 

 

97,327

 

 

115,967

 

 

56,950

 

 

21,199

 

 

175,025

 

 

327,594

 

Consultant Class

 

 

—

 

 

161

 

 

—

 

 

1,795

 

 

—

 

 

9,468

 

R Class

 

 

—

 

 

—

 

 

 

 

 

 

 

 

—

 

 

429

 

K Class

 

 

9

 

 

—

 

 

 

 

 

 

 

 

—

 

 

—

 
                                       

Net increase (decrease) in net assets from capital share transactions

 

 

19,076,029

 

 

(58,879,467

)

 

616,641,502

 

 

501,449,305

 

 

15,528,539

 

 

191,133,167

 
                                       

NET INCREASE (DECREASE) IN NET ASSETS

 

 

561,639,388

 

 

585,571,316

 

 

915,985,757

 

 

716,775,161

 

 

373,040,544

 

 

596,296,152

 

NET ASSETS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning of year

 

 

1,645,105,146

 

 

1,059,533,830

 

 

1,216,181,722

 

 

499,406,561

 

 

1,451,729,731

 

 

855,433,579

 
                                       

End of year

 

$

2,206,744,534

 

$

1,645,105,146

 

$

2,132,167,479

 

$

1,216,181,722

 

$

1,824,770,275

 

$

1,451,729,731

 
                                       

UNDISTRIBUTED NET INVESTMENT INCOME (LOSS) AT END OF YEAR

 

$

—

 

$

(696,863

)

$

5,440,655

 

$

146,224

 

$

(2,577,809

)

$

(1,856,432

)

 

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

The Royce Funds 2010 Annual Report to Shareholders | 125

 

 

 


 

Statements of Changes in Net Assets
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royce Value Plus Fund

 

Royce 100 Fund

 

Royce Discovery Fund

 

 

 

  

 

  

 

  

 

 

 

Year ended 12/31/10

 

Year ended 12/31/09

 

Year ended 12/31/10

 

Year ended 12/31/09

 

Year ended 12/31/10

 

Year ended 12/31/09

 

INVESTMENT OPERATIONS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income (loss)

 

$

(14,074,966

)

$

(4,999,257

)

$

236,758

 

$

(191,502

)

$

(5,812

)

$

(7,605

)

Net realized gain (loss) on investments and foreign currency

 

 

32,937,292

 

 

(267,746,788

)

 

9,871,519

 

 

595,396

 

 

(3,482

)

 

(321,069

)

Net change in unrealized appreciation (depreciation) on investments and foreign currency

 

 

547,191,503

 

 

1,150,189,259

 

 

69,183,429

 

 

42,325,144

 

 

587,020

 

 

947,447

 
                                       

Net increase (decrease) in net assets from investment operations

 

 

566,053,829

 

 

877,443,214

 

 

79,291,706

 

 

42,729,038

 

 

577,726

 

 

618,773

 
                                       

DISTRIBUTIONS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

(2,117,287

)

 

—

 

 

—

 

 

—

 

 

 

 

 

 

 

Service Class

 

 

(6,367,729

)

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

Consultant Class

 

 

—

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

Institutional Class

 

 

(2,438,053

)

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

R Class

 

 

(2,932

)

 

—

 

 

—

 

 

—

 

 

 

 

 

 

 

K Class

 

 

(10,296

)

 

—

 

 

—

 

 

—

 

 

 

 

 

 

 

Net realized gain on investments and foreign currency

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

—

 

 

—

 

 

(697,900

)

 

—

 

 

 

 

 

 

 

Service Class

 

 

—

 

 

—

 

 

(3,944,450

)

 

—

 

 

—

 

 

—

 

Consultant Class

 

 

—

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

Institutional Class

 

 

—

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

R Class

 

 

—

 

 

—

 

 

(13,212

)

 

—

 

 

 

 

 

 

 

K Class

 

 

—

 

 

—

 

 

(25,819

)

 

—

 

 

 

 

 

 

 
                                       

Total distributions

 

 

(10,936,297

)

 

—

 

 

(4,681,381

)

 

—

 

 

—

 

 

—

 
                                       

CAPITAL SHARE TRANSACTIONS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net capital share transactions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

(15,346,990

)

 

74,580,764

 

 

19,961,541

 

 

11,792,285

 

 

 

 

 

 

 

Service Class

 

 

(470,751,871

)

 

76,229,580

 

 

105,343,116

 

 

118,681,123

 

 

149,337

 

 

(40,455

)

Consultant Class

 

 

(6,041,337

)

 

(4,006,240

)

 

 

 

 

 

 

 

 

 

 

 

 

Institutional Class

 

 

(2,966,134

)

 

130,449,239

 

 

 

 

 

 

 

 

 

 

 

 

 

R Class

 

 

154,551

 

 

196,142

 

 

840,176

 

 

166,654

 

 

 

 

 

 

 

K Class

 

 

206,682

 

 

962,414

 

 

2,342,128

 

 

28,845

 

 

 

 

 

 

 

Shareholder redemption fees

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

12,914

 

 

14,148

 

 

6,106

 

 

2,116

 

 

 

 

 

 

 

Service Class

 

 

267,552

 

 

434,206

 

 

111,470

 

 

58,801

 

 

62

 

 

11

 

Consultant Class

 

 

—

 

 

4,454

 

 

 

 

 

 

 

 

 

 

 

 

 

K Class

 

 

—

 

 

—

 

 

—

 

 

13

 

 

 

 

 

 

 
                                       

Net increase (decrease) in net assets from capital share transactions

 

 

(494,464,633

)

 

278,864,707

 

 

128,604,537

 

 

130,729,837

 

 

149,399

 

 

(40,444

)
                                       

NET INCREASE (DECREASE) IN NET ASSETS

 

 

60,652,899

 

 

1,156,307,921

 

 

203,214,862

 

 

173,458,875

 

 

727,125

 

 

578,329

 

NET ASSETS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning of year

 

 

3,157,816,279

 

 

2,001,508,358

 

 

233,253,575

 

 

59,794,700

 

 

2,910,024

 

 

2,331,695

 
                                       

End of year

 

$

3,218,469,178

 

$

3,157,816,279

 

$

436,468,437

 

$

233,253,575

 

$

3,637,149

 

$

2,910,024

 
                                       

UNDISTRIBUTED NET INVESTMENT INCOME (LOSS) AT END OF YEAR

 

$

(15,848,865

)

$

(5,416,604

)

$

179,691

 

$

126,504

 

$

(5,812

)

$

—

 

 

 

 

126 | The Royce Funds 2010 Annual Report to Shareholders

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.


 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royce Financial Services Fund

 

Royce Dividend Value Fund

 

Royce European Smaller-Companies Fund

 

 

 

  

 

  

 

  

 

 

 

Year ended 12/31/10

 

Year ended 12/31/09

 

Year ended 12/31/10

 

Year ended 12/31/09

 

Year ended 12/31/10

 

Year ended 12/31/09

 

INVESTMENT OPERATIONS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income (loss)

 

$

144,116

 

$

105,679

 

$

899,354

 

$

197,125

 

$

63,486

 

$

52,106

 

Net realized gain (loss) on investments and foreign currency

 

 

390,086

 

 

(1,443,540

)

 

1,076,357

 

 

(186,573

)

 

239,934

 

 

(1,353,447

)

Net change in unrealized appreciation (depreciation) on investments and foreign currency

 

 

1,626,374

 

 

4,587,226

 

 

18,614,359

 

 

4,672,330

 

 

2,754,746

 

 

3,338,300

 
                                       

Net increase (decrease) in net assets from investment operations

 

 

2,160,576

 

 

3,249,365

 

 

20,590,070

 

 

4,682,882

 

 

3,058,166

 

 

2,036,959

 
                                       

DISTRIBUTIONS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

 

 

 

 

 

 

(278,000

)

 

(79,110

)

 

 

 

 

 

 

Service Class

 

 

(209,509

)

 

(107,275

)

 

(570,815

)

 

(100,822

)

 

(137,685

)

 

(101,039

)

Net realized gain on investments and foreign currency

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

 

 

 

 

 

 

(119,326

)

 

—

 

 

 

 

 

 

 

Service Class

 

 

—

 

 

—

 

 

(408,875

)

 

—

 

 

—

 

 

—

 
                                       

Total distributions

 

 

(209,509

)

 

(107,275

)

 

(1,377,016

)

 

(179,932

)

 

(137,685

)

 

(101,039

)
                                       

CAPITAL SHARE TRANSACTIONS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net capital share transactions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

 

 

 

 

 

 

17,236,933

 

 

9,684,811

 

 

 

 

 

 

 

Service Class

 

 

(795,645

)

 

811,874

 

 

87,149,778

 

 

8,370,992

 

 

5,551,851

 

 

906,650

 

Shareholder redemption fees

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

 

 

 

 

 

 

4,769

 

 

2,257

 

 

 

 

 

 

 

Service Class

 

 

6,833

 

 

18,065

 

 

11,165

 

 

1,161

 

 

9,664

 

 

445

 
                                       

Net increase (decrease) in net assets from capital share transactions

 

 

(788,812

)

 

829,939

 

 

104,402,645

 

 

18,059,221

 

 

5,561,515

 

 

907,095

 
                                       

NET INCREASE (DECREASE) IN NET ASSETS

 

 

1,162,255

 

 

3,972,029

 

 

123,615,699

 

 

22,562,171

 

 

8,481,996

 

 

2,843,015

 

NET ASSETS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning of year

 

 

13,525,362

 

 

9,553,333

 

 

29,314,688

 

 

6,752,517

 

 

6,886,555

 

 

4,043,540

 
                                       

End of year

 

$

14,687,617

 

$

13,525,362

 

$

152,930,387

 

$

29,314,688

 

$

15,368,551

 

$

6,886,555

 
                                       

UNDISTRIBUTED NET INVESTMENT INCOME (LOSS) AT END OF YEAR

 

$

(67,097

)

$

42,189

 

$

5,972

 

$

62,175

 

$

(38,263

)

$

(21,117

)

 

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

The Royce Funds 2010 Annual Report to Shareholders | 127


 

Statements of Changes in Net Assets
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royce Global Value Fund

 

Royce SMid-Cap Value Fund

 

Royce International Smaller-Companies Fund

 

 

 

  

 

  

 

  

 

 

 

Year ended 12/31/10

 

Year ended 12/31/09

 

Year ended 12/31/10

 

Year ended 12/31/09

 

Year ended 12/31/10

 

Year ended 12/31/09

 

INVESTMENT OPERATIONS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income (loss)

 

$

86

 

$

40,611

 

$

(13,283

)

$

(16,390

)

$

59,044

 

$

(8,080

)

Net realized gain (loss) on investments and foreign currency

 

 

2,090,551

 

 

(5,113,914

)

 

773,207

 

 

(2,379,962

)

 

1,076,115

 

 

46,359

 

Net change in unrealized appreciation (depreciation) on investments and foreign currency

 

 

22,542,657

 

 

22,985,888

 

 

233,947

 

 

3,221,156

 

 

2,301,912

 

 

1,722,089

 
                                       

Net increase (decrease) in net assets from investment operations

 

 

24,633,294

 

 

17,912,585

 

 

993,871

 

 

824,804

 

 

3,437,071

 

 

1,760,368

 
                                       

DISTRIBUTIONS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

(24,828

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service Class

 

 

(651,421

)

 

(252,560

)

 

—

 

 

(7,303

)

 

(142,278

)

 

(11,461

)

Net realized gain on investments and foreign currency

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service Class

 

 

—

 

 

—

 

 

—

 

 

—

 

 

(434,104

)

 

—

 
                                       

Total distributions

 

 

(676,249

)

 

(252,560

)

 

—

 

 

(7,303

)

 

(576,382

)

 

(11,461

)
                                       

CAPITAL SHARE TRANSACTIONS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net capital share transactions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

6,094,259

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service Class

 

 

67,568,185

 

 

2,205,902

 

 

(2,164,117

)

 

(7,519,717

)

 

7,559,241

 

 

4,158,315

 

Shareholder redemption fees

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service Class

 

 

52,226

 

 

40,041

 

 

750

 

 

7,772

 

 

6,355

 

 

3,778

 
                                       

Net increase (decrease) in net assets from capital share transactions

 

 

73,714,670

 

 

2,245,943

 

 

(2,163,367

)

 

(7,511,945

)

 

7,565,596

 

 

4,162,093

 
                                       

NET INCREASE (DECREASE) IN NET ASSETS

 

 

97,671,715

 

 

19,905,968

 

 

(1,169,496

)

 

(6,694,444

)

 

10,426,285

 

 

5,911,000

 

NET ASSETS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning of year

 

 

50,945,983

 

 

31,040,015

 

 

7,364,645

 

 

14,059,089

 

 

7,871,208

 

 

1,960,208

 
                                       

End of year

 

$

148,617,698

 

$

50,945,983

 

$

6,195,149

 

$

7,364,645

 

$

18,297,493

 

$

7,871,208

 
                                       

UNDISTRIBUTED NET INVESTMENT INCOME (LOSS) AT END OF YEAR

 

$

(238,425

)

$

(160,982

)

$

(14,144

)

$

5,578

 

$

(36,715

)

$

(16,596

)

 

 

 

128 | The Royce Funds 2010 Annual Report to Shareholders

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.


 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royce Focus Value Fund

 

Royce Partners Fund

 

Royce Mid-Cap Fund

 

 

 

Year ended 12/31/10

 

Period ended 12/31/09*

 

Year ended 12/31/10

 

Period ended 12/31/09**

 

Period ended 12/31/10***

 

INVESTMENT OPERATIONS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income (loss)

 

$

(21,592

)

$

4,490

 

$

1,550

 

$

(6,112

)

$

(9,247

)

Net realized gain (loss) on investments and foreign currency

 

 

267,539

 

 

137,666

 

 

119,594

 

 

7,322

 

 

24,128

 

Net change in unrealized appreciation (depreciation) on investments and foreign currency

 

 

1,041,898

 

 

966,686

 

 

155,600

 

 

181,749

 

 

601,437

 
                                 

Net increase (decrease) in net assets from investment operations

 

 

1,287,845

 

 

1,108,842

 

 

276,744

 

 

182,959

 

 

616,318

 
                                 

DISTRIBUTIONS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service Class

 

 

(28,453

)

 

(15,589

)

 

(19,788

)

 

—

 

 

—

 

Net realized gain on investments and foreign currency

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service Class

 

 

(214,071

)

 

(136,754

)

 

(52,910

)

 

—

 

 

—

 
                                 

Total distributions

 

 

(242,524

)

 

(152,343

)

 

(72,698

)

 

—

 

 

—

 
                                 

CAPITAL SHARE TRANSACTIONS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net capital share transactions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service Class

 

 

3,100,468

 

 

3,839,041

 

 

65,397

 

 

1,318,213

 

 

4,265,971

 

Shareholder redemption fees

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service Class

 

 

699

 

 

68

 

 

712

 

 

168

 

 

6,767

 
                                 

Net increase (decrease) in net assets from capital share transactions

 

 

3,101,167

 

 

3,839,109

 

 

66,109

 

 

1,318,381

 

 

4,272,738

 
                                 

NET INCREASE (DECREASE) IN NET ASSETS

 

 

4,146,488

 

 

4,795,608

 

 

270,155

 

 

1,501,340

 

 

4,889,056

 

NET ASSETS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning of period

 

 

4,795,608

 

 

—

 

 

1,501,340

 

 

—

 

 

 

 
                                 

End of period

 

$

8,942,096

 

$

4,795,608

 

$

1,771,495

 

$

1,501,340

 

$

4,889,056

 
                                 

UNDISTRIBUTED NET INVESTMENT INCOME (LOSS) AT END OF PERIOD

 

$

(50,108

)

$

(11,624

)

$

(19,345

)

$

—

 

$

—

 

 

 

*

The Fund commenced operations on March 2, 2009.

**

The Fund commenced operations on April 28, 2009.

***

The Fund commenced operations on January 4, 2010.

 

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

The Royce Funds 2010 Annual Report to Shareholders | 129


 

 

 

Statements of Operations

 

Year Ended December 31, 2010
     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royce Pennsylvania Mutual Fund

 

Royce Micro-Cap Fund

 

Royce Premier Fund

 

Royce Low-Priced Stock Fund

 

Royce Total Return Fund

 

Royce Heritage Fund

 

Royce Opportunity Fund

 

INVESTMENT INCOME:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-Affiliated Companies

 

$

78,425,570

 

$

12,794,560

 

$

46,204,685

 

$

39,441,000

 

$

111,916,604

 

$

3,549,050

 

$

12,159,776

 

Affiliated Companies

 

 

1,745,296

 

 

830,118

 

 

12,824,429

 

 

1,374,708

 

 

2,750,978

 

 

—

 

 

—

 

Interest

 

 

588,864

 

 

104,560

 

 

522,818

 

 

195,986

 

 

3,665,516

 

 

6,163

 

 

179,153

 

Securities lending

 

 

1,227,924

 

 

713,959

 

 

628,317

 

 

697,568

 

 

136,432

 

 

117,077

 

 

1,086,034

 
                                             

Total income

 

 

81,987,654

 

 

14,443,197

 

 

60,180,249

 

 

41,709,262

 

 

118,469,530

 

 

3,672,290

 

 

13,424,963

 
                                             

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment advisory fees

 

 

40,852,642

 

 

15,235,767

 

 

54,303,172

 

 

41,820,890

 

 

41,294,432

 

 

2,302,355

 

 

18,753,553

 

Distribution fees

 

 

9,404,047

 

 

1,824,805

 

 

1,824,642

 

 

7,130,263

 

 

4,483,093

 

 

619,113

 

 

846,340

 

Shareholder servicing

 

 

5,059,181

 

 

1,188,842

 

 

5,122,719

 

 

4,307,886

 

 

4,187,145

 

 

258,836

 

 

1,515,970

 

Shareholder reports

 

 

1,692,705

 

 

452,549

 

 

1,654,024

 

 

838,283

 

 

1,089,985

 

 

73,892

 

 

368,083

 

Administrative and office facilities

 

 

595,751

 

 

128,091

 

 

629,740

 

 

409,504

 

 

481,091

 

 

24,645

 

 

205,622

 

Custody

 

 

453,408

 

 

291,745

 

 

452,591

 

 

528,440

 

 

373,376

 

 

72,267

 

 

193,913

 

Registration

 

 

182,326

 

 

107,232

 

 

147,704

 

 

78,869

 

 

159,510

 

 

52,743

 

 

70,852

 

Trustees’ fees

 

 

147,510

 

 

31,863

 

 

154,959

 

 

99,359

 

 

115,262

 

 

6,259

 

 

51,001

 

Legal

 

 

122,612

 

 

29,770

 

 

129,926

 

 

84,896

 

 

100,233

 

 

5,803

 

 

42,360

 

Audit

 

 

75,016

 

 

43,637

 

 

76,035

 

 

68,449

 

 

78,670

 

 

29,228

 

 

43,904

 

Other expenses

 

 

149,294

 

 

32,927

 

 

155,902

 

 

467,926

 

 

138,821

 

 

7,987

 

 

52,099

 
                                             

Total expenses

 

 

58,734,492

 

 

19,367,228

 

 

64,651,414

 

 

55,834,765

 

 

52,501,618

 

 

3,453,128

 

 

22,143,697

 

Compensating balance credits

 

 

(6,617

)

 

(2,252

)

 

(7,635

)

 

(2,170

)

 

(5,604

)

 

(458

)

 

(1,480

)

Fees waived by distributor

 

 

(116,837

)

 

—

 

 

(91,519

)

 

(569,179

)

 

—

 

 

(172,128

)

 

—

 

Expenses reimbursed by investment adviser

 

 

(309

)

 

(119,152

)

 

(1,144

)

 

(2,607,127

)

 

—

 

 

(8,409

)

 

(8,379

)
                                             

Net expenses

 

 

58,610,729

 

 

19,245,824

 

 

64,551,116

 

 

52,656,289

 

 

52,496,014

 

 

3,272,133

 

 

22,133,838

 
                                             

Net investment income (loss)

 

 

23,376,925

 

 

(4,802,627

)

 

(4,370,867

)

 

(10,947,027

)

 

65,973,516

 

 

400,157

 

 

(8,708,875

)
                                             

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:

 

 

 

 

 

 

 

 

 

 

 

 

Net realized gain (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments in Non-Affiliated Companies

 

 

243,455,100

 

 

91,239,895

 

 

98,124,311

 

 

201,604,088

 

 

70,218,870

 

 

28,065,755

 

 

98,975,271

 

Investments in Affiliated Companies

 

 

936,795

 

 

3,667,703

 

 

4,452,271

 

 

(11,237,335

)

 

31,174

 

 

—

 

 

(1,689,006

)

Foreign currency transactions

 

 

147,507

 

 

141,538

 

 

23,145

 

 

(70,602

)

 

(29,320

)

 

(1,454

)

 

1,287

 

Net change in unrealized appreciation (depreciation):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments and foreign currency translations

 

 

919,035,732

 

 

228,099,559

 

 

1,282,529,987

 

 

900,881,459

 

 

773,283,215

 

 

29,543,627

 

 

453,984,682

 

Other assets and liabilities denominated in foreign currency

 

 

(275

)

 

44,595

 

 

49,052

 

 

2,244

 

 

7,058

 

 

1,179

 

 

—

 
                                             

Net realized and unrealized gain (loss) on investments and foreign currency

 

 

1,163,574,859

 

 

323,193,290

 

 

1,385,178,766

 

 

1,091,179,854

 

 

843,510,997

 

 

57,609,107

 

 

551,272,234

 
                                             

NET INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS

 

$

1,186,951,784

 

$

318,390,663

 

$

1,380,807,899

 

$

1,080,232,827

 

$

909,484,513

 

$

58,009,264

 

$

542,563,359

 

 

 

 

130 | The Royce Funds 2010 Annual Report to Shareholders

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.


 

 

 

Statements of Operations

 

Year Ended December 31, 2010
     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

INVESTMENT INCOME:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-Affiliated Companies

 

$

20,418,169

 

$

22,696,793

 

$

24,391,449

 

$

4,840,141

 

$

40,008

 

$

332,210

 

$

1,810,923

 

Affiliated Companies

 

 

11,009,860

 

 

—

 

 

3,331,979

 

 

—

 

 

—

 

 

—

 

 

—

 

Interest

 

 

242,078

 

 

37,422

 

 

128,791

 

 

22,925

 

 

161

 

 

251

 

 

5,342

 

Securities lending

 

 

147,051

 

 

380,512

 

 

449,326

 

 

56,725

 

 

—

 

 

—

 

 

—

 
                                             

Total income

 

 

31,817,158

 

 

23,114,727

 

 

28,301,545

 

 

4,919,791

 

 

40,169

 

 

332,461

 

 

1,816,265

 
                                             

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment advisory fees

 

 

16,333,016

 

 

15,560,090

 

 

30,723,547

 

 

3,302,517

 

 

30,860

 

 

126,408

 

 

647,038

 

Distribution fees

 

 

567,671

 

 

3,478,412

 

 

6,387,832

 

 

707,861

 

 

7,715

 

 

31,602

 

 

114,638

 

Shareholder servicing

 

 

1,267,269

 

 

1,934,648

 

 

3,731,830

 

 

445,137

 

 

15,596

 

 

25,062

 

 

74,581

 

Shareholder reports

 

 

428,183

 

 

436,985

 

 

991,249

 

 

164,934

 

 

1,603

 

 

6,072

 

 

28,580

 

Administrative and office facilities

 

 

160,739

 

 

172,395

 

 

365,803

 

 

31,234

 

 

345

 

 

1,492

 

 

4,511

 

Custody

 

 

143,746

 

 

150,222

 

 

266,690

 

 

32,418

 

 

5,337

 

 

21,573

 

 

27,610

 

Registration

 

 

152,242

 

 

78,739

 

 

84,938

 

 

59,998

 

 

15,672

 

 

17,602

 

 

42,712

 

Trustees’ fees

 

 

42,413

 

 

42,399

 

 

87,747

 

 

8,520

 

 

83

 

 

347

 

 

1,350

 

Legal

 

 

35,162

 

 

35,509

 

 

75,884

 

 

6,239

 

 

1,822

 

 

313

 

 

882

 

Audit

 

 

43,251

 

 

43,378

 

 

67,530

 

 

25,863

 

 

14,191

 

 

14,208

 

 

30,508

 

Other expenses

 

 

35,921

 

 

46,440

 

 

93,156

 

 

7,826

 

 

689

 

 

1,143

 

 

5,541

 
                                             

Total expenses

 

 

19,209,613

 

 

21,979,217

 

 

42,876,206

 

 

4,792,547

 

 

93,913

 

 

245,822

 

 

977,951

 

Compensating balance credits

 

 

(3,117

)

 

(2,493

)

 

(1,994

)

 

(1,092

)

 

(14

)

 

(36

)

 

(220

)

Fees waived by investment adviser and distributor

 

 

(33,635

)

 

(246,067

)

 

(486,312

)

 

(101,044

)

 

(30,860

)

 

(57,441

)

 

(22,928

)

Expenses reimbursed by investment adviser

 

 

(62,900

)

 

—

 

 

(11,389

)

 

(7,378

)

 

(17,058

)

 

—

 

 

(37,892

)
                                             

Net expenses

 

 

19,109,961

 

 

21,730,657

 

 

42,376,511

 

 

4,683,033

 

 

45,981

 

 

188,345

 

 

916,911

 
                                             

Net investment income (loss)

 

 

12,707,197

 

 

1,384,070

 

 

(14,074,966

)

 

236,758

 

 

(5,812

)

 

144,116

 

 

899,354

 
                                             

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:

 

 

 

 

 

 

 

 

 

 

 

 

Net realized gain (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments in Non-Affiliated Companies

 

 

40,600,017

 

 

91,203,145

 

 

114,189,258

 

 

9,869,916

 

 

(3,482

)

 

393,551

 

 

1,087,518

 

Investments in Affiliated Companies

 

 

(9,538,671

)

 

—

 

 

(81,188,338

)

 

—

 

 

—

 

 

—

 

 

—

 

Foreign currency transactions

 

 

—

 

 

(50,701

)

 

(63,628

)

 

1,603

 

 

—

 

 

(3,465

)

 

(11,161

)

Net change in unrealized appreciation (depreciation):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments and foreign currency translations

 

 

261,788,478

 

 

267,323,595

 

 

547,191,285

 

 

69,183,234

 

 

587,020

 

 

1,625,502

 

 

18,612,107

 

Other assets and liabilities denominated in foreign currency

 

 

—

 

 

15,005

 

 

218

 

 

195

 

 

—

 

 

872

 

 

2,252

 
                                             

Net realized and unrealized gain (loss) on investments and foreign currency

 

 

292,849,824

 

 

358,491,044

 

 

580,128,795

 

 

79,054,948

 

 

583,538

 

 

2,016,460

 

 

19,690,716

 
                                             

NET INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS

 

$

305,557,021

 

$

359,875,114

 

$

566,053,829

 

$

79,291,706

 

$

577,726

 

$

2,160,576

 

$

20,590,070

 

 

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

The Royce Funds 2010 Annual Report to Shareholders | 131


Statements of Operations

 

Period Ended December 31, 2010
     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royce European Smaller- Companies Fund

 

Royce Global Value Fund

 

Royce SMid-Cap Value Fund

 

Royce International Smaller- Companies Fund

 

Royce Focus Value Fund

 

Royce Partners Fund

 

Royce Mid-Cap Fund

 

INVESTMENT INCOME:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

 

$

215,029

 

$

1,148,280

 

$

62,434

 

$

279,697

 

$

77,434

 

$

24,305

 

$

45,678

 

Interest

 

 

646

 

 

5,751

 

 

517

 

 

702

 

 

565

 

 

119

 

 

281

 
                                             

Total income

 

 

215,675

 

 

1,154,031

 

 

62,951

 

 

280,399

 

 

77,999

 

 

24,424

 

 

45,959

 
                                             

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment advisory fees

 

 

112,566

 

 

854,770

 

 

51,166

 

 

163,699

 

 

66,826

 

 

15,352

 

 

37,049

 

Distribution fees

 

 

22,513

 

 

169,045

 

 

12,792

 

 

32,740

 

 

16,706

 

 

3,838

 

 

9,262

 

Shareholder servicing

 

 

22,211

 

 

90,039

 

 

11,646

 

 

25,785

 

 

9,252

 

 

5,932

 

 

8,124

 

Shareholder reports

 

 

3,319

 

 

15,590

 

 

1,081

 

 

3,411

 

 

654

 

 

70

 

 

289

 

Administrative and office facilities

 

 

835

 

 

6,267

 

 

695

 

 

1,180

 

 

636

 

 

175

 

 

306

 

Custody

 

 

30,386

 

 

57,193

 

 

10,056

 

 

43,545

 

 

10,026

 

 

9,447

 

 

7,748

 

Registration

 

 

23,436

 

 

29,340

 

 

20,130

 

 

16,027

 

 

11,199

 

 

7,366

 

 

17,904

 

Trustees’ fees

 

 

217

 

 

1,609

 

 

137

 

 

327

 

 

177

 

 

49

 

 

94

 

Legal

 

 

170

 

 

1,499

 

 

152

 

 

235

 

 

128

 

 

36

 

 

2,456

 

Audit

 

 

14,200

 

 

27,209

 

 

14,195

 

 

19,306

 

 

14,196

 

 

14,188

 

 

14,006

 

Other expenses

 

 

1,860

 

 

4,990

 

 

956

 

 

887

 

 

726

 

 

640

 

 

746

 
                                             

Total expenses

 

 

231,713

 

 

1,257,551

 

 

123,006

 

 

307,142

 

 

130,526

 

 

57,093

 

 

97,984

 

Compensating balance credits

 

 

(26

)

 

(122

)

 

(9

)

 

(30

)

 

(7

)

 

(22

)

 

(4

)

Fees waived by investment adviser and distributor

 

 

(79,498

)

 

(33,809

)

 

(46,763

)

 

(85,757

)

 

(30,928

)

 

(18,897

)

 

(42,774

)

Expenses reimbursed by investment adviser

 

 

—

 

 

(69,675

)

 

—

 

 

—

 

 

—

 

 

(15,300

)

 

—

 
                                             

Net expenses

 

 

152,189

 

 

1,153,945

 

 

76,234

 

 

221,355

 

 

99,591

 

 

22,874

 

 

55,206

 
                                             

Net investment income (loss)

 

 

63,486

 

 

86

 

 

(13,283

)

 

59,044

 

 

(21,592

)

 

1,550

 

 

(9,247

)
                                             

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:

 

 

 

 

 

 

 

 

 

 

 

 

Net realized gain (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments

 

 

234,648

 

 

2,107,368

 

 

773,829

 

 

1,074,426

 

 

267,650

 

 

119,850

 

 

24,924

 

Foreign currency transactions

 

 

5,286

 

 

(16,817

)

 

(622

)

 

1,689

 

 

(111

)

 

(256

)

 

(796

)

Net change in unrealized appreciation (depreciation):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments and foreign currency translations

 

 

2,755,320

 

 

22,547,511

 

 

233,945

 

 

2,301,368

 

 

1,041,793

 

 

155,499

 

 

601,391

 

Other assets and liabilities denominated in foreign currency

 

 

(574

)

 

(4,854

)

 

2

 

 

544

 

 

105

 

 

101

 

 

46

 
                                             

Net realized and unrealized gain (loss) on investments and foreign currency

 

 

2,994,680

 

 

24,633,208

 

 

1,007,154

 

 

3,378,027

 

 

1,309,437

 

 

275,194

 

 

625,565

 
                                             

NET INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS

 

$

3,058,166

 

$

24,633,294

 

$

993,871

 

$

3,437,071

 

$

1,287,845

 

$

276,744

 

$

616,318

 

 

 

 

132 | The Royce Funds 2010 Annual Report to Shareholders

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.


 

Financial Highlights
 

This table is presented to show selected data for a share outstanding throughout each period, and to assist shareholders in evaluating a Fund’s performance for the periods presented. Per share amounts have been determined on the basis of the weighted average number of shares outstanding during the period.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratio of Expenses to Average Net Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

Net Asset Value, Beginning of Period

 

Net Investment Income (Loss)

 

Net Realized and Unrealized Gain (Loss) on Investments and Foreign Currency

 

Total from Investment Operations

 

Distributions from Net Investment Income

 

Distributions from Net Realized Gain on Investments and Foreign Currency

 

Total Distributions

 

Shareholder Redemption Fees

 

Net Asset Value, End of Period

 

Total Return

 

Net Assets, End of Period (in thousands)

 

Prior to Fee Waivers and Balance Credits

 

Prior to Fee Waivers

 

Net of Fee Waivers

 

Ratio of Net Investment Income (Loss) to Average Net Assets

 

Portfolio Turnover Rate

 
                                                                   

Royce Pennsylvania Mutual Fund – Investment Class

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

9.45

 

$

0.06

 

$

2.19

 

$

2.25

 

$

(0.05

)

$

—

 

$

(0.05

)

$

—

 

$

11.65

 

 

23.86

% 

$

4,735,403

 

 

0.90

%

 

0.90

%

 

0.90

%

 

0.63

%

 

25

%

2009

 

 

6.94

 

 

0.02

 

 

2.50

 

 

2.52

 

 

(0.01

)

 

—

 

 

(0.01

)

 

—

 

 

9.45

 

 

36.28

 

 

3,555,507

 

 

0.92

 

 

0.92

 

 

0.92

 

 

0.33

 

 

23

 

2008

 

 

10.82

 

 

0.05

 

 

(3.82

)

 

(3.77

)

 

(0.01

)

 

(0.10

)

 

(0.11

)

 

—

 

 

6.94

 

 

(34.78

)

 

2,293,526

 

 

0.90

 

 

0.89

 

 

0.89

 

 

0.55

 

 

36

 

2007

 

 

11.57

 

 

0.05

 

 

0.29

 

 

0.34

 

 

(0.08

)

 

(1.01

)

 

(1.09

)

 

—

 

 

10.82

 

 

2.75

 

 

3,157,742

 

 

0.89

 

 

0.88

 

 

0.88

 

 

0.44

 

 

43

 

2006

 

 

10.78

 

 

0.04

 

 

1.56

 

 

1.60

 

 

(0.04

)

 

(0.77

)

 

(0.81

)

 

—

 

 

11.57

 

 

14.78

 

 

2,867,562

 

 

0.88

 

 

0.87

 

 

0.87

 

 

0.39

 

 

38

 
                                                                                                   

Royce Pennsylvania Mutual Fund – Service Class

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

9.41

 

$

0.02

 

$

2.20

 

$

2.22

 

$

—

 

$

—

 

$

—

 

$

0.02

 

$

11.65

 

 

23.80

% 

$

448,784

 

 

1.27

%

 

1.27

%

 

1.25

%

 

0.18

%

 

25

%

2009

 

 

6.90

 

 

(0.00

)

 

2.49

 

 

2.49

 

 

—

 

 

—

 

 

—

 

 

0.02

 

 

9.41

 

 

36.38

 

 

609,445

 

 

1.31

 

 

1.31

 

 

1.29

 

 

(0.05

)

 

23

 

2008

 

 

10.78

 

 

0.04

 

 

(3.82

)

 

(3.78

)

 

—

 

 

(0.10

)

 

(0.10

)

 

—

 

 

6.90

 

 

(35.00

)

 

115,959

 

 

1.11

 

 

1.11

 

 

1.11

 

 

0.41

 

 

36

 

2007

 

 

11.53

 

 

0.03

 

 

0.28

 

 

0.31

 

 

(0.05

)

 

(1.01

)

 

(1.06

)

 

—

 

 

10.78

 

 

2.56

 

 

55,478

 

 

1.10

 

 

1.09

 

 

1.09

 

 

0.24

 

 

43

 

2006

 

 

10.77

 

 

(0.04

)

 

1.61

 

 

1.57

 

 

(0.04

)

 

(0.77

)

 

(0.81

)

 

—

 

 

11.53

 

 

14.49

 

 

40,049

 

 

1.16

 

 

1.16

 

 

1.14

 

 

0.30

 

 

38

 
                                                                                                   

Royce Pennsylvania Mutual Fund – Consultant Class

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

8.65

 

$

(0.03

)

$

1.99

 

$

1.96

 

$

—

 

$

—

 

$

—

 

$

—

 

$

10.61

 

 

22.66

% 

$

841,525

 

 

1.87

%

 

1.87

%

 

1.87

%

 

(0.36

)%

 

25

%

2009

 

 

6.40

 

 

(0.05

)

 

2.30

 

 

2.25

 

 

—

 

 

—

 

 

—

 

 

—

 

 

8.65

 

 

35.16

 

 

757,734

 

 

1.89

 

 

1.89

 

 

1.89

 

 

(0.64

)

 

23

 

2008

 

 

10.09

 

 

(0.04

)

 

(3.55

)

 

(3.59

)

 

—

 

 

(0.10

)

 

(0.10

)

 

—

 

 

6.40

 

 

(35.52

)

 

635,688

 

 

1.88

 

 

1.87

 

 

1.87

 

 

(0.46

)

 

36

 

2007

 

 

10.89

 

 

(0.06

)

 

0.27

 

 

0.21

 

 

—

 

 

(1.01

)

 

(1.01

)

 

—

 

 

10.09

 

 

1.73

 

 

1,164,136

 

 

1.89

 

 

1.88

 

 

1.88

 

 

(0.55

)

 

43

 

2006

 

 

10.25

 

 

(0.07

)

 

1.48

 

 

1.41

 

 

—

 

 

(0.77

)

 

(0.77

)

 

—

 

 

10.89

 

 

13.71

 

 

1,163,265

 

 

1.87

 

 

1.86

 

 

1.86

 

 

(0.61

)

 

38

 
                                                                                                   

Royce Pennsylvania Mutual Fund – R Class(a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

9.28

 

$

0.01

 

$

2.14

 

$

2.15

 

$

(0.00

)

$

—

 

$

(0.00

)

$

—

 

$

11.43

 

 

23.21

% 

$

17,868

 

 

1.51

%

 

1.51

%

 

1.51

%

 

0.06

%

 

25

%

2009

 

 

6.87

 

 

(0.05

)

 

2.46

 

 

2.41

 

 

—

 

 

—

 

 

—

 

 

—

 

 

9.28

 

 

35.08

 

 

9,808

 

 

1.95

 

 

1.95

 

 

1.84

 

 

(0.61

)

 

23

 

2008

 

 

10.78

 

 

(0.00

)

 

(3.81

)

 

(3.81

)

 

—

 

 

(0.10

)

 

(0.10

)

 

—

 

 

6.87

 

 

(35.28

)

 

5,270

 

 

1.58

 

 

1.57

 

 

1.57

 

 

(0.03

)

 

36

 

2007

 

 

12.71

 

 

(0.11

)

 

(0.75

)

 

(0.86

)

 

(0.06

)

 

(1.01

)

 

(1.07

)

 

—

 

 

10.78

 

 

(6.91

)#

 

871

 

 

7.52

##

 

7.50

##

 

1.74

##

 

(0.42

)##

 

43

 
                                                                                                   

Royce Pennsylvania Mutual Fund – K Class(b)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

8.59

 

$

0.00

 

$

1.98

 

$

1.98

 

$

(0.00

)

$

—

 

$

(0.00

)

$

—

 

$

10.57

 

 

23.11

% 

$

3,760

 

 

1.61

%

 

1.61

%

 

1.59

%

 

0.01

%

 

25

%

2009

 

 

6.34

 

 

(0.02

)

 

2.27

 

 

2.25

 

 

—

 

 

—

 

 

—

 

 

—

 

 

8.59

 

 

35.49

 

 

1,920

 

 

1.79

 

 

1.79

 

 

1.59

 

 

(0.34

)

 

23

 

2008

 

 

10.00

 

 

0.01

 

 

(3.57

)

 

(3.56

)

 

—

 

 

(0.10

)

 

(0.10

)

 

—

 

 

6.34

 

 

(35.53

)#

 

694

 

 

12.12

##

 

12.12

##

 

1.59

##

 

0.13

##

 

36

 
                                                                                                   

Royce Micro-Cap Fund – Investment Class

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

13.71

 

$

(0.03

)

$

4.14

 

$

4.11

 

$

(0.25

)

$

—

 

$

(0.25

)

$

—

 

$

17.57

 

 

30.06

%

$

1,085,782

 

 

1.50

%

 

1.50

%

 

1.50

%

 

(0.27

)%

 

36

%

2009

 

 

8.93

 

 

(0.06

)

 

5.02

 

 

4.96

 

 

(0.18

)

 

—

 

 

(0.18

)

 

—

 

 

13.71

 

 

55.67

 

 

844,859

 

 

1.54

 

 

1.54

 

 

1.54

 

 

(0.41

)

 

34

 

2008

 

 

15.72

 

 

0.12

 

 

(6.58

)

 

(6.46

)

 

—

 

 

(0.33

)

 

(0.33

)

 

—

 

 

8.93

 

 

(40.94

)

 

455,077

 

 

1.52

 

 

1.51

 

 

1.51

 

 

0.89

 

 

43

 

2007

 

 

17.35

 

 

0.00

 

 

1.22

 

 

1.22

 

 

(0.45

)

 

(2.40

)

 

(2.85

)

 

—

 

 

15.72

 

 

7.07

 

 

693,320

 

 

1.46

 

 

1.46

 

 

1.46

 

 

(0.06

)

 

49

 

2006

 

 

15.90

 

 

(0.06

)

 

3.58

 

 

3.52

 

 

(0.28

)

 

(1.79

)

 

(2.07

)

 

—

 

 

17.35

 

 

22.31

 

 

682,513

 

 

1.44

 

 

1.43

 

 

1.43

 

 

(0.31

)

 

42

 
                                                                                                   

Royce Micro-Cap Fund – Service Class

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

13.61

 

$

(0.08

)

$

4.14

 

$

4.06

 

$

(0.24

)

$

—

 

$

(0.24

)

$

—

 

$

17.43

 

 

29.85

%

$

139,911

 

 

1.78

%

 

1.78

%

 

1.66

%

 

(0.41

)%

 

36

%

2009

 

 

8.87

 

 

(0.10

)

 

5.01

 

 

4.91

 

 

(0.18

)

 

—

 

 

(0.18

)

 

0.01

 

 

13.61

 

 

55.49

 

 

84,771

 

 

1.77

 

 

1.77

 

 

1.66

 

 

(0.53

)

 

34

 

2008

 

 

15.63

 

 

0.07

 

 

(6.51

)

 

(6.44

)

 

—

 

 

(0.33

)

 

(0.33

)

 

0.01

 

 

8.87

 

 

(40.98

)

 

28,245

 

 

1.79

 

 

1.78

 

 

1.66

 

 

0.58

 

 

43

 

2007

 

 

17.27

 

 

(0.14

)

 

1.33

 

 

1.19

 

 

(0.43

)

 

(2.40

)

 

(2.83

)

 

—

 

 

15.63

 

 

6.90

 

 

27,224

 

 

1.72

 

 

1.71

 

 

1.66

 

 

(0.21

)

 

49

 

2006

 

 

15.85

 

 

(0.18

)

 

3.65

 

 

3.47

 

 

(0.26

)

 

(1.79

)

 

(2.05

)

 

—

 

 

17.27

 

 

22.02

 

 

7,521

 

 

1.93

 

 

1.93

 

 

1.66

 

 

(0.50

)

 

42

 

 

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

The Royce Funds 2010 Annual Report to Shareholders | 133


 

Financial Highlights
 

This table is presented to show selected data for a share outstanding throughout each period, and to assist shareholders in evaluating a Fund’s performance for the periods presented. Per share amounts have been determined on the basis of the weighted average number of shares outstanding during the period.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratio of Expenses to Average Net Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

Net Asset Value, Beginning of Period

 

Net Investment Income (Loss)

 

Net Realized and Unrealized Gain (Loss) on Investments and Foreign Currency

 

Total from Investment Operations

 

Distributions from Net Investment Income

 

Distributions from Net Realized Gain on Investments and Foreign Currency

 

Total Distributions

 

Shareholder Redemption Fees

 

Net Asset Value, End of Period

 

Total Return

 

Net Assets, End of Period (in thousands)

 

Prior to Fee Waivers and Balance Credits

 

Prior to Fee Waivers

 

Net of Fee Waivers

 

Ratio of Net Investment Income (Loss) to Average Net Assets

 

Portfolio Turnover Rate

 
                                                                   

Royce Micro-Cap Fund – Consultant Class

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 2010

 

$

12.45

 

$

(0.15

)

$

3.74

 

$

3.59

 

$

(0.13

)

$

—

 

$

(0.13

)

$

—

 

$

15.91

 

 

28.85

% 

$

181,746

 

 

2.43

%

 

2.43

%

 

2.43

%

 

(1.20

)%

 

36

%

 2009

 

 

8.14

 

 

(0.13

)

 

4.53

 

 

4.40

 

 

(0.09

)

 

—

 

 

(0.09

)

 

—

 

 

12.45

 

 

54.14

 

 

149,454

 

 

2.46

 

 

2.46

 

 

2.46

 

 

(1.30

)

 

34

 

2008

 

 

14.51

 

 

0.00

 

 

(6.04

)

 

(6.04

)

 

—

 

 

(0.33

)

 

(0.33

)

 

—

 

 

8.14

 

 

(41.46

)

 

103,038

 

 

2.45

 

 

2.45

 

 

2.45

 

 

0.02

 

 

43

 

2007

 

 

16.21

 

 

(0.16

)

 

1.13

 

 

0.97

 

 

(0.27

)

 

(2.40

)

 

(2.67

)

 

—

 

 

14.51

 

 

6.01

 

 

203,044

 

 

2.45

 

 

2.45

 

 

2.45

 

 

(1.06

)

 

49

 

2006

 

 

14.98

 

 

(0.21

)

 

3.35

 

 

3.14

 

 

(0.12

)

 

(1.79

)

 

(1.91

)

 

—

 

 

16.21

 

 

21.10

 

 

221,411

 

 

2.44

 

 

2.42

 

 

2.42

 

 

(1.30

)

 

42

 
                                                                                                   

Royce Premier Fund – Investment Class

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 2010

 

$

16.31

 

$

(0.01

)

$

4.32

 

$

4.31

 

$

—

 

$

(0.27

)

$

(0.27

)

$

—

 

$

20.35

 

 

26.46

% 

$

4,961,891

 

 

1.12

%

 

1.12

%

 

1.12

%

 

(0.07

)%

 

10

%

2009

 

 

12.24

 

 

(0.02

)

 

4.09

 

 

4.07

 

 

—

 

 

—

 

 

—

 

 

—

 

 

16.31

 

 

33.25

 

 

3,911,502

 

 

1.15

 

 

1.15

 

 

1.15

 

 

(0.14

)

 

14

 

2008

 

 

17.36

 

 

0.02

 

 

(4.94

)

 

(4.92

)

 

—

 

 

(0.20

)

 

(0.20

)

 

—

 

 

12.24

 

 

(28.29

)

 

2,634,045

 

 

1.13

 

 

1.12

 

 

1.12

 

 

0.15

 

 

11

 

2007

 

 

17.66

 

 

0.07

 

 

2.21

 

 

2.28

 

 

(0.28

)

 

(2.30

)

 

(2.58

)

 

—

 

 

17.36

 

 

12.73

 

 

3,702,043

 

 

1.10

 

 

1.10

 

 

1.10

 

 

0.29

 

 

21

 

2006

 

 

16.86

 

 

0.03

 

 

1.47

 

 

1.50

 

 

(0.07

)

 

(0.63

)

 

(0.70

)

 

—

 

 

17.66

 

 

8.81

 

 

3,628,842

 

 

1.10

 

 

1.09

 

 

1.09

 

 

0.18

 

 

13

 
                                                                                                   

Royce Premier Fund – Service Class

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

16.12

 

$

(0.05

)

$

4.27

 

$

4.22

 

$

—

 

$

(0.27

)

$

(0.27

)

$

—

 

$

20.07

 

 

26.22

% 

$

584,817

 

 

1.39

%

 

1.39

%

 

1.37

%

 

(0.30

)%

 

10

%

2009

 

 

12.14

 

 

(0.06

)

 

4.04

 

 

3.98

 

 

—

 

 

—

 

 

—

 

 

—

 

 

16.12

 

 

32.78

 

 

377,079

 

 

1.44

 

 

1.44

 

 

1.43

 

 

(0.41

)

 

14

 

2008

 

 

17.25

 

 

(0.01

)

 

(4.91

)

 

(4.92

)

 

—

 

 

(0.20

)

 

(0.20

)

 

0.01

 

 

12.14

 

 

(28.41

)

 

209,647

 

 

1.37

 

 

1.37

 

 

1.34

 

 

(0.06

)

 

11

 

2007

 

 

17.56

 

 

0.01

 

 

2.23

 

 

2.24

 

 

(0.25

)

 

(2.30

)

 

(2.55

)

 

—

 

 

17.25

 

 

12.56

 

 

246,313

 

 

1.38

 

 

1.38

 

 

1.29

 

 

0.12

 

 

21

 

2006

 

 

16.77

 

 

(0.00

)

 

1.46

 

 

1.46

 

 

(0.04

)

 

(0.63

)

 

(0.67

)

 

—

 

 

17.56

 

 

8.61

 

 

193,860

 

 

1.38

 

 

1.38

 

 

1.29

 

 

(0.01

)

 

13

 
                                                                                                   

Royce Premier Fund – Consultant Class

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

15.24

 

$

(0.17

)

$

4.01

 

$

3.84

 

$

—

 

$

(0.27

)

$

(0.27

)

$

—

 

$

18.81

 

 

25.24

% 

$

71,686

 

 

2.08

%

 

2.08

%

 

2.08

%

 

(1.04

)%

 

10

%

2009

 

 

11.55

 

 

(0.15

)

 

3.84

 

 

3.69

 

 

—

 

 

—

 

 

—

 

 

—

 

 

15.24

 

 

31.95

 

 

58,241

 

 

2.14

 

 

2.14

 

 

2.14

 

 

(1.13

)

 

14

 

2008

 

 

16.57

 

 

(0.13

)

 

(4.69

)

 

(4.82

)

 

—

 

 

(0.20

)

 

(0.20

)

 

—

 

 

11.55

 

 

(29.04

)

 

28,977

 

 

2.12

 

 

2.11

 

 

2.11

 

 

(0.84

)

 

11

 

2007

 

 

16.96

 

 

(0.13

)

 

2.13

 

 

2.00

 

 

(0.09

)

 

(2.30

)

 

(2.39

)

 

—

 

 

16.57

 

 

11.60

 

 

51,700

 

 

2.10

 

 

2.09

 

 

2.09

 

 

(0.70

)

 

21

 

2006

 

 

16.31

 

 

(0.14

)

 

1.42

 

 

1.28

 

 

—

 

 

(0.63

)

 

(0.63

)

 

—

 

 

16.96

 

 

7.74

 

 

50,862

 

 

2.12

 

 

2.11

 

 

2.11

 

 

(0.83

)

 

13

 
                                                                                                   

Royce Premier Fund – Institutional Class

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

16.40

 

$

0.01

 

$

4.35

 

$

4.36

 

$

—

 

$

(0.27

)

$

(0.27

)

$

—

 

$

20.49

 

 

26.62

% 

$

706,870

 

 

0.99

%

 

0.99

%

 

0.99

%

 

0.07

%

 

10

%

2009

 

 

12.30

 

 

(0.00

)

 

4.10

 

 

4.10

 

 

—

 

 

—

 

 

—

 

 

—

 

 

16.40

 

 

33.33

 

 

516,900

 

 

1.03

 

 

1.03

 

 

1.03

 

 

(0.01

)

 

14

 

2008

 

 

17.42

 

 

0.04

 

 

(4.96

)

 

(4.92

)

 

—

 

 

(0.20

)

 

(0.20

)

 

—

 

 

12.30

 

 

(28.19

)

 

352,804

 

 

1.01

 

 

1.01

 

 

1.01

 

 

0.27

 

 

11

 

2007

 

 

17.71

 

 

0.06

 

 

2.25

 

 

2.31

 

 

(0.30

)

 

(2.30

)

 

(2.60

)

 

—

 

 

17.42

 

 

12.86

 

 

450,492

 

 

1.01

 

 

1.00

 

 

1.00

 

 

0.40

 

 

21

 

2006

 

 

16.91

 

 

0.05

 

 

1.47

 

 

1.52

 

 

(0.09

)

 

(0.63

)

 

(0.72

)

 

—

 

 

17.71

 

 

8.88

 

 

355,293

 

 

1.01

 

 

1.00

 

 

1.00

 

 

0.27

 

 

13

 
                                                                                                   

Royce Premier Fund – W Class

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

16.33

 

$

0.01

 

$

4.33

 

$

4.34

 

$

—

 

$

(0.27

)

$

(0.27

)

$

—

 

$

20.40

 

 

26.61

% 

$

425,397

 

 

1.02

%

 

1.02

%

 

1.02

%

 

0.04

%

 

10

%

2009

 

 

12.25

 

 

(0.01

)

 

4.09

 

 

4.08

 

 

—

 

 

—

 

 

—

 

 

—

 

 

16.33

 

 

33.31

 

 

319,120

 

 

1.07

 

 

1.07

 

 

1.07

 

 

(0.06

)

 

14

 

2008

 

 

17.36

 

 

0.04

 

 

(4.95

)

 

(4.91

)

 

—

 

 

(0.20

)

 

(0.20

)

 

—

 

 

12.25

 

 

(28.23

)

 

234,618

 

 

1.04

 

 

1.04

 

 

1.04

 

 

0.23

 

 

11

 

2007

 

 

17.67

 

 

0.07

 

 

2.21

 

 

2.28

 

 

(0.29

)

 

(2.30

)

 

(2.59

)

 

—

 

 

17.36

 

 

12.72

 

 

332,720

 

 

1.05

 

 

1.05

 

 

1.05

 

 

0.34

 

 

21

 

2006

 

 

16.87

 

 

0.04

 

 

1.46

 

 

1.50

 

 

(0.07

)

 

(0.63

)

 

(0.70

)

 

—

 

 

17.67

 

 

8.82

 

 

299,129

 

 

1.08

 

 

1.07

 

 

1.07

 

 

0.20

 

 

13

 
                                                                                                   

Royce Premier Fund – R Class(a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

16.07

 

$

(0.11

)

$

4.22

 

$

4.11

 

$

—

 

$

(0.27

)

$

(0.27

)

$

—

 

$

19.91

 

 

25.61

% 

$

10,185

 

 

1.78

%

 

1.78

%

 

1.78

%

 

(0.64

)%

 

10

%

2009

 

 

12.15

 

 

(0.12

)

 

4.04

 

 

3.92

 

 

—

 

 

—

 

 

—

 

 

—

 

 

16.07

 

 

32.26

 

 

2,634

 

 

2.26

 

 

2.26

 

 

1.84

 

 

(0.83

)

 

14

 

2008

 

 

17.36

 

 

(0.08

)

 

(4.93

)

 

(5.01

)

 

—

 

 

(0.20

)

 

(0.20

)

 

—

 

 

12.15

 

 

(28.81

)

 

396

 

 

3.97

 

 

3.97

 

 

1.84

 

 

(0.54

)

 

11

 

2007

 

 

20.38

 

 

(0.02

)

 

(0.49

)

 

(0.51

)

 

(0.21

)

 

(2.30

)

 

(2.51

)

 

—

 

 

17.36

 

 

(2.67

)#

 

97

 

 

14.23

##

 

14.23

##

 

1.74

##

 

(0.18

)##

 

21

 

 

 

 

134 | The Royce Funds 2010 Annual Report to Shareholders

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.


 

Financial Highlights
 

This table is presented to show selected data for a share outstanding throughout each period, and to assist shareholders in evaluating a Fund’s performance for the periods presented. Per share amounts have been determined on the basis of the weighted average number of shares outstanding during the period.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratio of Expenses to Average Net Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

Net Asset Value, Beginning of Period

 

Net Investment Income (Loss)

 

Net Realized and Unrealized Gain (Loss) on Investments and Foreign Currency

 

Total from Investment Operations

 

Distributions from Net Investment Income

 

Distributions from Net Realized Gain on Investments and Foreign Currency

 

Total Distributions

 

Shareholder Redemption Fees

 

Net Asset Value, End of Period

 

Total Return

 

Net Assets, End of Period (in thousands)

 

Prior to Fee Waivers and Balance Credits

 

Prior to Fee Waivers

 

Net of Fee Waivers

 

Ratio of Net Investment Income (Loss) to Average Net Assets

 

Portfolio Turnover Rate

 
                                                                   

Royce Premier Fund – K Class(b)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

8.53

 

$

(0.04

)

$

2.24

 

$

2.20

 

$

—

 

$

(0.27

)

$

(0.27

)

$

—

 

$

10.46

 

 

25.86

% 

$

3,845

 

 

1.63

%

 

1.63

%

 

1.59

%

 

(0.47

)%

 

10

%

2009

 

 

6.44

 

 

(0.05

)

 

2.14

 

 

2.09

 

 

—

 

 

—

 

 

—

 

 

—

 

 

8.53

 

 

32.45

 

 

1,551

 

 

2.39

 

 

2.39

 

 

1.59

 

 

(0.60

)

 

14

 

2008

 

 

10.00

 

 

(0.02

)

 

(3.34

)

 

(3.36

)

 

—

 

 

(0.20

)

 

(0.20

)

 

—

 

 

6.44

 

 

(33.51

)#

 

35

 

 

35.36

##

 

35.36

##

 

1.59

##

 

(0.38

)##

 

11

 
                                                                                                   

Royce Low-Priced Stock Fund – Investment Class(c)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

14.08

 

$

(0.03

)

$

4.50

 

$

4.47

 

$

(0.10

)

$

(0.14

)

$

(0.24

)

$

—

 

$

18.31

 

 

31.77

%

$

148,144

 

 

1.26

%

 

1.26

%

 

1.24

%

 

(0.10

)%

 

24

%

2009

 

 

9.17

 

 

(0.01

)

 

4.96

 

 

4.95

 

 

(0.04

)

 

—

 

 

(0.04

)

 

—

 

 

14.08

 

 

54.04

 

 

94,966

 

 

1.27

 

 

1.27

 

 

1.24

 

 

(0.14

)

 

22

 

2008

 

 

14.75

 

 

0.03

 

 

(5.35

)

 

(5.32

)

 

—

 

 

(0.27

)

 

(0.27

)

 

0.01

 

 

9.17

 

 

(35.77

)

 

65,004

 

 

1.24

 

 

1.24

 

 

1.24

 

 

0.29

 

 

39

 

2007

 

 

17.06

 

 

(2.35

)

 

2.58

 

 

0.23

 

 

(0.49

)

 

(2.05

)

 

(2.54

)

 

—

 

 

14.75

 

 

1.15

#

 

29,260

 

 

2.11

##

 

2.12

##

 

1.24

##

 

0.44

##

 

30

 
                                                                                                   

Royce Low-Priced Stock Fund – Service Class

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

14.05

 

$

(0.05

)

$

4.47

 

$

4.42

 

$

(0.07

)

$

(0.14

)

$

(0.21

)

$

—

 

$

18.26

 

 

31.49

%

$

3,456,142

 

 

1.60

%

 

1.60

%

 

1.49

%

 

(0.37

)%

 

24

%

2009

 

 

9.16

 

 

(0.04

)

 

4.95

 

 

4.91

 

 

(0.02

)

 

—

 

 

(0.02

)

 

—

 

 

14.05

 

 

53.58

 

 

2,669,235

 

 

1.60

 

 

1.60

 

 

1.49

 

 

(0.38

)

 

22

 

2008

 

 

14.78

 

 

(0.01

)

 

(5.34

)

 

(5.35

)

 

—

 

 

(0.27

)

 

(0.27

)

 

—

 

 

9.16

 

 

(35.97

)

 

1,870,016

 

 

1.56

 

 

1.55

 

 

1.49

 

 

(0.10

)

 

39

 

2007

 

 

16.83

 

 

0.02

 

 

0.40

 

 

0.42

 

 

(0.42

)

 

(2.05

)

 

(2.47

)

 

—

 

 

14.78

 

 

2.32

 

 

3,337,488

 

 

1.53

 

 

1.53

 

 

1.49

 

 

(0.16

)

 

30

 

2006

 

 

15.53

 

 

(0.05

)

 

3.00

 

 

2.95

 

 

(0.12

)

 

(1.53

)

 

(1.65

)

 

—

 

 

16.83

 

 

18.97

 

 

4,065,946

 

 

1.51

 

 

1.51

 

 

1.46

 

 

(0.37

)

 

27

 
                                                                                                   

Royce Low-Priced Stock Fund – Institutional Class(d)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

14.09

 

$

(0.02

)

$

4.50

 

$

4.48

 

$

(0.10

)

$

(0.14

)

$

(0.24

)

$

—

 

$

18.33

 

 

31.82

%

$

1,077,659

 

 

1.18

%

 

1.18

%

 

1.18

%

 

(0.04

)%

 

24

%

2009

 

 

9.18

 

 

(0.01

)

 

4.96

 

 

4.95

 

 

(0.04

)

 

—

 

 

(0.04

)

 

—

 

 

14.09

 

 

53.97

 

 

673,846

 

 

1.24

 

 

1.24

 

 

1.24

 

 

(0.15

)

 

22

 

2008

 

 

14.76

 

 

0.03

 

 

(5.34

)

 

(5.31

)

 

—

 

 

(0.27

)

 

(0.27

)

 

—

 

 

9.18

 

 

(35.75

)

 

553,070

 

 

1.18

 

 

1.18

 

 

1.18

 

 

0.22

 

 

39

 

2007

 

 

16.82

 

 

(0.04

)

 

0.51

 

 

0.47

 

 

(0.48

)

 

(2.05

)

 

(2.53

)

 

—

 

 

14.76

 

 

2.61

 

 

869,042

 

 

1.22

 

 

1.22

 

 

1.22

 

 

0.12

 

 

30

 

2006

 

 

15.84

 

 

(0.18

)

 

2.87

 

 

2.69

 

 

(0.18

)

 

(1.53

)

 

(1.71

)

 

—

 

 

16.82

 

 

16.94

#

 

608,092

 

 

1.20

##

 

1.19

##

 

1.19

##

 

0.02

##

 

27

 
                                                                                                   

Royce Low-Priced Stock Fund – R Class(a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

13.95

 

$

(0.12

)

$

4.44

 

$

4.32

 

$

(0.08

)

$

(0.14

)

$

(0.22

)

$

—

 

$

18.05

 

 

31.00

%

$

2,925

 

 

2.21

%

 

2.21

%

 

1.84

%

 

(0.67

)%

 

24

%

2009

 

 

9.11

 

 

(0.09

)

 

4.92

 

 

4.83

 

 

(0.00

)

 

—

 

 

(0.00

)

 

0.01

 

 

13.95

 

 

53.13

 

 

1,134

 

 

3.02

 

 

3.02

 

 

1.84

 

 

(0.76

)

 

22

 

2008

 

 

14.76

 

 

(0.05

)

 

(5.33

)

 

(5.38

)

 

—

 

 

(0.27

)

 

(0.27

)

 

—

 

 

9.11

 

 

(36.22

)

 

74

 

 

10.95

 

 

10.94

 

 

1.84

 

 

(0.42

)

 

39

 

2007

 

 

18.69

 

 

(0.02

)

 

(1.44

)

 

(1.46

)

 

(0.42

)

 

(2.05

)

 

(2.47

)

 

—

 

 

14.76

 

 

(7.96

)#

 

92

 

 

11.93

##

 

11.93

##

 

1.74

##

 

(0.28

)##

 

30

 
                                                                                                   

Royce Low-Priced Stock Fund – K Class(b)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

9.09

 

$

(0.08

)

$

2.93

 

$

2.85

 

$

(0.10

)

$

(0.14

)

$

(0.24

)

$

—

 

$

11.70

 

 

31.44

%

$

4,782

 

 

1.78

%

 

1.78

%

 

1.59

%

 

(0.40

)%

 

24

%

2009

 

 

5.95

 

 

(0.10

)

 

3.28

 

 

3.18

 

 

(0.04

)

 

—

 

 

(0.04

)

 

—

 

 

9.09

 

 

53.45

 

 

676

 

 

4.75

 

 

4.75

 

 

1.59

 

 

(0.44

)

 

22

 

2008

 

 

10.00

 

 

(0.01

)

 

(3.77

)

 

(3.78

)

 

—

 

 

(0.27

)

 

(0.27

)

 

—

 

 

5.95

 

 

(37.47

)#

 

30

 

 

40.19

##

 

40.19

##

 

1.59

##

 

(0.19

)##

 

39

 
                                                                                                   

Royce Total Return Fund – Investment Class

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

10.81

 

$

0.19

 

$

2.32

 

$

2.51

 

$

(0.15

)

$

—

 

$

(0.15

)

$

—

 

$

13.17

 

 

23.47

%

$

3,562,002

 

 

1.14

%

 

1.14

%

 

1.14

%

 

1.64

%

 

15

%

2009

 

 

8.70

 

 

0.16

 

 

2.09

 

 

2.25

 

 

(0.14

)

 

—

 

 

(0.14

)

 

—

 

 

10.81

 

 

26.22

 

 

3,077,099

 

 

1.17

 

 

1.17

 

 

1.17

 

 

1.74

 

 

20

 

2008

 

 

12.93

 

 

0.20

 

 

(4.20

)

 

(4.00

)

 

(0.23

)

 

(0.00

)

 

(0.23

)

 

—

 

 

8.70

 

 

(31.17

)

 

2,577,031

 

 

1.12

 

 

1.12

 

 

1.12

 

 

1.69

 

 

25

 

2007

 

 

13.75

 

 

0.19

 

 

0.16

 

 

0.35

 

 

(0.17

)

 

(1.00

)

 

(1.17

)

 

—

 

 

12.93

 

 

2.39

 

 

4,214,156

 

 

1.08

 

 

1.08

 

 

1.08

 

 

1.29

 

 

27

 

2006

 

 

12.60

 

 

0.18

 

 

1.64

 

 

1.82

 

 

(0.15

)

 

(0.52

)

 

(0.67

)

 

—

 

 

13.75

 

 

14.54

 

 

4,438,964

 

 

1.09

 

 

1.09

 

 

1.09

 

 

1.31

 

 

25

 

 

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

The Royce Funds 2010 Annual Report to Shareholders | 135


 

Financial Highlights
 

This table is presented to show selected data for a share outstanding throughout each period, and to assist shareholders in evaluating a Fund’s performance for the periods presented. Per share amounts have been determined on the basis of the weighted average number of shares outstanding during the period.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratio of Expenses to Average Net Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

Net Asset Value, Beginning of Period

 

Net Investment Income (Loss)

 

Net Realized and Unrealized Gain (Loss) on Investments and Foreign Currency

 

Total from Investment Operations

 

Distributions from Net Investment Income

 

Distributions from Net Realized Gain on Investments and Foreign Currency

 

Total Distributions

 

Shareholder Redemption Fees

 

Net Asset Value, End of Period

 

Total Return

 

Net Assets, End of Period (in thousands)

 

Prior to Fee Waivers and Balance Credits

 

Prior to Fee Waivers

 

Net of Fee Waivers

 

Ratio of Net Investment Income (Loss) to Average Net Assets

 

Portfolio Turnover Rate

 
                                                                   

Royce Total Return Fund – Service Class

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

10.81

 

$

0.16

 

$

2.32

 

$

2.48

 

$

(0.10

)

$

—

 

$

(0.10

)

$

—

 

$

13.19

 

 

23.11

% 

$

295,656

 

 

1.42

%

 

1.42

%

 

1.42

%

 

1.39

%

 

15

%

2009

 

 

8.67

 

 

0.14

 

 

2.09

 

 

2.23

 

 

(0.10

)

 

—

 

 

(0.10

)

 

0.01

 

 

10.81

 

 

26.16

 

 

215,939

 

 

1.42

 

 

1.42

 

 

1.42

 

 

1.49

 

 

20

 

2008

 

 

12.82

 

 

0.17

 

 

(4.16

)

 

(3.99

)

 

(0.18

)

 

(0.00

)

 

(0.18

)

 

0.02

 

 

8.67

 

 

(31.17

)

 

155,644

 

 

1.37

 

 

1.37

 

 

1.34

 

 

1.49

 

 

25

 

2007

 

 

13.61

 

 

0.15

 

 

0.17

 

 

0.32

 

 

(0.11

)

 

(1.00

)

 

(1.11

)

 

—

 

 

12.82

 

 

2.20

 

 

268,562

 

 

1.39

 

 

1.39

 

 

1.29

 

 

1.09

 

 

27

 

2006

 

 

12.46

 

 

0.15

 

 

1.63

 

 

1.78

 

 

(0.11

)

 

(0.52

)

 

(0.63

)

 

—

 

 

13.61

 

 

14.32

 

 

371,755

 

 

1.34

 

 

1.34

 

 

1.29

 

 

1.12

 

 

25

 
                                                                                                   

Royce Total Return Fund – Consultant Class

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

10.90

 

$

0.08

 

$

2.33

 

$

2.41

 

$

(0.04

)

$

—

 

$

(0.04

)

$

—

 

$

13.27

 

 

22.18

%

$

391,886

 

 

2.09

%

 

2.09

%

 

2.09

%

 

0.68

%

 

15

%

2009

 

 

8.76

 

 

0.07

 

 

2.12

 

 

2.19

 

 

(0.05

)

 

—

 

 

(0.05

)

 

—

 

 

10.90

 

 

25.12

 

 

366,367

 

 

2.12

 

 

2.12

 

 

2.12

 

 

0.78

 

 

20

 

2008

 

 

12.91

 

 

0.08

 

 

(4.18

)

 

(4.10

)

 

(0.05

)

 

(0.00

)

 

(0.05

)

 

—

 

 

8.76

 

 

(31.83

)

 

354,384

 

 

2.09

 

 

2.08

 

 

2.08

 

 

0.71

 

 

25

 

2007

 

 

13.73

 

 

0.04

 

 

0.17

 

 

0.21

 

 

(0.03

)

 

(1.00

)

 

(1.03

)

 

—

 

 

12.91

 

 

1.35

 

 

648,191

 

 

2.08

 

 

2.07

 

 

2.07

 

 

0.30

 

 

27

 

2006

 

 

12.58

 

 

0.05

 

 

1.64

 

 

1.69

 

 

(0.02

)

 

(0.52

)

 

(0.54

)

 

—

 

 

13.73

 

 

13.45

 

 

689,311

 

 

2.07

 

 

2.06

 

 

2.06

 

 

0.34

 

 

25

 
                                                                                                   

Royce Total Return Fund – Institutional Class

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

10.80

 

$

0.21

 

$

2.31

 

$

2.52

 

$

(0.18

)

$

—

 

$

(0.18

)

$

—

 

$

13.14

 

 

23.56

%

$

356,038

 

 

1.01

%

 

1.01

%

 

1.01

%

 

1.79

%

 

15

%

2009

 

 

8.70

 

 

0.17

 

 

2.09

 

 

2.26

 

 

(0.16

)

 

—

 

 

(0.16

)

 

—

 

 

10.80

 

 

26.41

 

 

264,041

 

 

1.04

 

 

1.04

 

 

1.04

 

 

1.87

 

 

20

 

2008

 

 

12.95

 

 

0.20

 

 

(4.19

)

 

(3.99

)

 

(0.26

)

 

(0.00

)

 

(0.26

)

 

—

 

 

8.70

 

 

(31.09

)

 

191,014

 

 

1.00

 

 

0.99

 

 

0.99

 

 

1.82

 

 

25

 

2007

 

 

13.77

 

 

0.20

 

 

0.17

 

 

0.37

 

 

(0.19

)

 

(1.00

)

 

(1.19

)

 

—

 

 

12.95

 

 

2.52

 

 

257,066

 

 

0.99

 

 

0.99

 

 

0.99

 

 

1.38

 

 

27

 

2006

 

 

12.63

 

 

0.19

 

 

1.65

 

 

1.84

 

 

(0.18

)

 

(0.52

)

 

(0.70

)

 

—

 

 

13.77

 

 

14.62

 

 

282,295

 

 

1.00

 

 

0.99

 

 

0.99

 

 

1.42

 

 

25

 
                                                                                                   

Royce Total Return Fund – W Class

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

10.83

 

$

0.20

 

$

2.32

 

$

2.52

 

$

(0.16

)

$

—

 

$

(0.16

)

$

—

 

$

13.19

 

 

23.44

%

$

75,063

 

 

1.09

%

 

1.09

%

 

1.09

%

 

1.74

%

 

15

%

2009

 

 

8.71

 

 

0.16

 

 

2.10

 

 

2.26

 

 

(0.14

)

 

—

 

 

(0.14

)

 

—

 

 

10.83

 

 

26.28

 

 

48,058

 

 

1.13

 

 

1.13

 

 

1.13

 

 

1.78

 

 

20

 

2008

 

 

12.95

 

 

0.23

 

 

(4.23

)

 

(4.00

)

 

(0.24

)

 

(0.00

)

 

(0.24

)

 

—

 

 

8.71

 

 

(31.18

)

 

65,260

 

 

1.08

 

 

1.08

 

 

1.08

 

 

1.66

 

 

25

 

2007

 

 

13.76

 

 

0.19

 

 

0.18

 

 

0.37

 

 

(0.18

)

 

(1.00

)

 

(1.18

)

 

—

 

 

12.95

 

 

2.49

 

 

250,178

 

 

1.06

 

 

1.06

 

 

1.06

 

 

1.31

 

 

27

 

2006

 

 

12.61

 

 

0.18

 

 

1.65

 

 

1.83

 

 

(0.16

)

 

(0.52

)

 

(0.68

)

 

—

 

 

13.76

 

 

14.54

 

 

220,716

 

 

1.10

 

 

1.09

 

 

1.09

 

 

1.33

 

 

25

 
                                                                                                   

Royce Total Return Fund – R Class(a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

10.88

 

$

0.15

 

$

2.32

 

$

2.47

 

$

(0.07

)

$

—

 

$

(0.07

)

$

—

 

$

13.28

 

 

22.76

%

$

20,011

 

 

1.71

%

 

1.71

%

 

1.71

%

 

1.20

%

 

15

%

2009

 

 

8.74

 

 

0.10

 

 

2.10

 

 

2.20

 

 

(0.06

)

 

—

 

 

(0.06

)

 

—

 

 

10.88

 

 

25.43

 

 

6,450

 

 

1.85

 

 

1.85

 

 

1.84

 

 

1.05

 

 

20

 

2008

 

 

12.93

 

 

0.11

 

 

(4.19

)

 

(4.08

)

 

(0.11

)

 

(0.00

)

 

(0.11

)

 

—

 

 

8.74

 

 

(31.67

)

 

2,946

 

 

2.03

 

 

2.02

 

 

1.84

 

 

1.10

 

 

25

 

2007

 

 

14.89

 

 

(0.02

)

 

(0.87

)

 

(0.89

)

 

(0.07

)

 

(1.00

)

 

(1.07

)

 

—

 

 

12.93

 

 

(6.15

)#

 

1,224

 

 

6.15

##

 

6.14

##

 

1.74

##

 

0.78

##

 

27

 
                                                                                                   

Royce Total Return Fund – K Class(e)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

8.47

 

$

0.13

 

$

1.81

 

$

1.94

 

$

(0.10

)

$

—

 

$

(0.10

)

$

—

 

$

10.31

 

 

23.08

%

$

95,319

 

 

1.43

%

 

1.43

%

 

1.43

%

 

1.46

%

 

15

%

2009

 

 

6.81

 

 

0.11

 

 

1.63

 

 

1.74

 

 

(0.08

)

 

—

 

 

(0.08

)

 

—

 

 

8.47

 

 

25.89

 

 

43,281

 

 

1.42

 

 

1.42

 

 

1.42

 

 

1.44

 

 

20

 

2008

 

 

10.00

 

 

0.02

 

 

(3.07

)

 

(3.05

)

 

(0.14

)

 

(0.00

)

 

(0.14

)

 

—

 

 

6.81

 

 

(30.56

)#

 

14,064

 

 

1.46

##

 

1.46

##

 

1.46

##

 

1.81

##

 

25

 
                                                                                                   

Royce Heritage Fund – Investment Class(c)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

12.12

 

$

0.04

 

$

3.31

 

$

3.35

 

$

(0.08

)

$

(0.29

)

$

(0.37

)

$

—

 

$

15.10

 

 

27.71

%

$

13,313

 

 

1.25

%

 

1.25

%

 

1.24

%

 

0.35

%

 

66

%

2009

 

 

7.97

 

 

0.02

 

 

4.13

 

 

4.15

 

 

—

 

 

—

 

 

—

 

 

—

 

 

12.12

 

 

52.07

 

 

10,052

 

 

1.34

 

 

1.34

 

 

1.24

 

 

0.19

 

 

59

 

2008

 

 

12.88

 

 

0.04

 

 

(4.70

)

 

(4.66

)

 

—

 

 

(0.25

)

 

(0.25

)

 

—

 

 

7.97

 

 

(36.07

)

 

5,522

 

 

1.39

 

 

1.38

 

 

1.24

 

 

0.40

 

 

128

 

2007

 

 

14.03

 

 

(0.01

)

 

0.28

 

 

0.27

 

 

—

 

 

(1.42

)

 

(1.42

)

 

—

 

 

12.88

 

 

1.64

#

 

8,884

 

 

3.33

##

 

3.33

##

 

1.24

##

 

(0.06

)##

 

138

 

 

 

 

136 | The Royce Funds 2010 Annual Report to Shareholders

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.


 

Financial Highlights
 

This table is presented to show selected data for a share outstanding throughout each period, and to assist shareholders in evaluating a Fund’s performance for the periods presented. Per share amounts have been determined on the basis of the weighted average number of shares outstanding during the period.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratio of Expenses to Average Net Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

Net Asset Value, Beginning of Period

 

Net Investment Income (Loss)

 

Net Realized and Unrealized Gain (Loss) on Investments and Foreign Currency

 

Total from Investment Operations

 

Distributions from Net Investment Income

 

Distributions from Net Realized Gain on Investments and Foreign Currency

 

Total Distributions

 

Shareholder Redemption Fees

 

Net Asset Value, End of Period

 

Total Return

 

Net Assets, End of Period (in thousands)

 

Prior to Fee Waivers and Balance Credits

 

Prior to Fee Waivers

 

Net of Fee Waivers

 

Ratio of Net Investment Income (Loss) to Average Net Assets

 

Portfolio Turnover Rate

 
                                                                   

Royce Heritage Fund – Service Class

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

12.07

 

$

0.03

 

$

3.28

 

$

3.31

 

$

(0.06

)

$

(0.29

)

$

(0.35

)

$

—

 

$

15.03

 

 

27.50

% 

$

243,822

 

 

1.47

%

 

1.47

%

 

1.38

%

 

0.21

%

 

66

%

2009

 

 

7.95

 

 

(0.00

)

 

4.12

 

 

4.12

 

 

—

 

 

—

 

 

—

 

 

—

 

 

12.07

 

 

51.82

 

 

182,690

 

 

1.51

 

 

1.51

 

 

1.42

 

 

(0.02

)

 

59

 

2008

 

 

12.88

 

 

0.02

 

 

(4.70

)

 

(4.68

)

 

—

 

 

(0.25

)

 

(0.25

)

 

—

 

 

7.95

 

 

(36.22

)

 

78,526

 

 

1.50

 

 

1.49

 

 

1.49

 

 

0.14

 

 

128

 

2007

 

 

14.09

 

 

(0.02

)

 

0.22

 

 

0.20

 

 

—

 

 

(1.42

)

 

(1.42

)

 

0.01

 

 

12.88

 

 

1.20

 

 

103,652

 

 

1.42

 

 

1.42

 

 

1.27

 

 

(0.10

)

 

138

 

2006

 

 

12.47

 

 

0.01

 

 

2.82

 

 

2.83

 

 

—

 

 

(1.21

)

 

(1.21

)

 

—

 

 

14.09

 

 

22.62

 

 

95,349

 

 

1.48

 

 

1.47

 

 

1.32

 

 

(0.05

)

 

98

 
                                                                                                   

Royce Heritage Fund – Consultant Class

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

10.14

 

$

(0.08

)

$

2.73

 

$

2.65

 

$

—

 

$

(0.29

)

$

(0.29

)

$

—

 

$

12.50

 

 

26.22

%

$

12,801

 

 

2.36

%

 

2.36

%

 

2.36

%

 

(0.77

)%

 

66

%

2009

 

 

6.75

 

 

(0.09

)

 

3.48

 

 

3.39

 

 

—

 

 

—

 

 

—

 

 

—

 

 

10.14

 

 

50.22

 

 

7,485

 

 

2.55

 

 

2.55

 

 

2.49

 

 

(1.05

)

 

59

 

2008

 

 

11.10

 

 

(0.08

)

 

(4.03

)

 

(4.11

)

 

—

 

 

(0.25

)

 

(0.25

)

 

0.01

 

 

6.75

 

 

(36.81

)

 

4,609

 

 

2.69

 

 

2.68

 

 

2.49

 

 

(0.86

)

 

128

 

2007

 

 

12.47

 

 

(0.17

)

 

0.21

 

 

0.04

 

 

—

 

 

(1.42

)

 

(1.42

)

 

0.01

 

 

11.10

 

 

0.07

 

 

6,728

 

 

2.61

 

 

2.60

 

 

2.49

 

 

(1.33

)

 

138

 

2006

 

 

11.29

 

 

(0.14

)

 

2.53

 

 

2.39

 

 

—

 

 

(1.21

)

 

(1.21

)

 

—

 

 

12.47

 

 

21.08

 

 

3,879

 

 

3.20

 

 

3.18

 

 

2.49

 

 

(1.12

)

 

98

 
                                                                                                   

Royce Heritage Fund – R Class(b)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

9.43

 

$

(0.03

)

$

2.55

 

$

2.52

 

$

(0.03

)

$

(0.29

)

$

(0.32

)

$

—

 

$

11.63

 

 

26.84

%

$

1,909

 

 

2.22

%

 

2.22

%

 

1.84

%

 

(0.25

)%

 

66

%

2009

 

 

6.23

 

 

(0.05

)

 

3.25

 

 

3.20

 

 

—

 

 

—

 

 

—

 

 

—

 

 

9.43

 

 

51.36

 

 

832

 

 

4.03

 

 

4.03

 

 

1.84

 

 

(0.56

)

 

59

 

2008

 

 

10.00

 

 

(0.01

)

 

(3.51

)

 

(3.52

)

 

—

 

 

(0.25

)

 

(0.25

)

 

—

 

 

6.23

 

 

(35.05

)#

 

65

 

 

19.77

##

 

19.76

##

 

1.84

##

 

(0.27

)##

 

128

 
                                                                                                   

Royce Heritage Fund – K Class(b)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

9.46

 

$

(0.03

)

$

2.60

 

$

2.57

 

$

(0.06

)

$

(0.29

)

$

(0.35

)

$

—

 

$

11.68

 

 

27.29

%

$

5,214

 

 

1.67

%

 

1.67

%

 

1.59

%

 

(0.00

)%

 

66

%

2009

 

 

6.24

 

 

(0.02

)

 

3.24

 

 

3.22

 

 

—

 

 

—

 

 

—

 

 

—

 

 

9.46

 

 

51.60

 

 

287

 

 

5.82

 

 

5.82

 

 

1.59

 

 

(0.26

)

 

59

 

2008

 

 

10.00

 

 

(0.00

)

 

(3.51

)

 

(3.51

)

 

—

 

 

(0.25

)

 

(0.25

)

 

—

 

 

6.24

 

 

(34.95

)#

 

65

 

 

19.53

##

 

19.53

##

 

1.59

##

 

(0.02

)##

 

128

 
                                                                                                   

Royce Opportunity Fund – Investment Class

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

9.03

 

$

(0.04

)

$

3.09

 

$

3.05

 

$

—

 

$

—

 

$

—

 

$

—

 

$

12.08

 

 

33.78

%

$

1,170,607

 

 

1.17

%

 

1.17

%

 

1.17

%

 

(0.44

)%

 

47

%

2009

 

 

5.57

 

 

(0.03

)

 

3.49

 

 

3.46

 

 

(0.00

)

 

—

 

 

(0.00

)

 

—

 

 

9.03

 

 

62.14

 

 

836,268

 

 

1.22

 

 

1.22

 

 

1.22

 

 

(0.43

)

 

44

 

2008

 

 

11.02

 

 

0.06

 

 

(5.12

)

 

(5.06

)

 

(0.05

)

 

(0.34

)

 

(0.39

)

 

—

 

 

5.57

 

 

(45.73

)

 

581,860

 

 

1.17

 

 

1.17

 

 

1.17

 

 

0.63

 

 

52

 

2007

 

 

13.04

 

 

0.06

 

 

(0.27

)

 

(0.21

)

 

(0.07

)

 

(1.74

)

 

(1.81

)

 

—

 

 

11.02

 

 

(2.00

)

 

1,550,045

 

 

1.11

 

 

1.10

 

 

1.10

 

 

0.36

 

 

50

 

2006

 

 

12.29

 

 

(0.01

)

 

2.32

 

 

2.31

 

 

—

 

 

(1.56

)

 

(1.56

)

 

—

 

 

13.04

 

 

18.76

 

 

1,811,073

 

 

1.12

 

 

1.11

 

 

1.11

 

 

(0.05

)

 

47

 
                                                                                                   

Royce Opportunity Fund – Service Class

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

8.83

 

$

(0.08

)

$

3.03

 

$

2.95

 

$

—

 

$

—

 

$

—

 

$

—

 

$

11.78

 

 

33.41

%

$

312,728

 

 

1.46

%

 

1.46

%

 

1.46

%

 

(0.78

)%

 

47

%

2009

 

 

5.46

 

 

(0.05

)

 

3.42

 

 

3.37

 

 

—

 

 

—

 

 

—

 

 

—

 

 

8.83

 

 

61.72

 

 

298,410

 

 

1.47

 

 

1.47

 

 

1.47

 

 

(0.69

)

 

44

 

2008

 

 

10.80

 

 

0.04

 

 

(5.00

)

 

(4.96

)

 

(0.04

)

 

(0.34

)

 

(0.38

)

 

—

 

 

5.46

 

 

(45.76

)

 

162,607

 

 

1.41

 

 

1.41

 

 

1.34

 

 

0.40

 

 

52

 

2007

 

 

12.82

 

 

0.02

 

 

(0.25

)

 

(0.23

)

 

(0.05

)

 

(1.74

)

 

(1.79

)

 

—

 

 

10.80

 

 

(2.22

)

 

293,012

 

 

1.39

 

 

1.39

 

 

1.29

 

 

0.14

 

 

50

 

2006

 

 

12.13

 

 

(0.03

)

 

2.28

 

 

2.25

 

 

—

 

 

(1.56

)

 

(1.56

)

 

—

 

 

12.82

 

 

18.51

 

 

291,911

 

 

1.40

 

 

1.40

 

 

1.29

 

 

(0.20

)

 

47

 
                                                                                                   

Royce Opportunity Fund – Consultant Class(f)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

8.66

 

$

(0.15

)

$

2.95

 

$

2.80

 

$

—

 

$

—

 

$

—

 

$

—

 

$

11.46

 

 

32.33

%

$

13,126

 

 

2.29

%

 

2.29

%

 

2.29

%

 

(1.56

)%

 

47

%

2009

 

 

5.42

 

 

(0.11

)

 

3.35

 

 

3.24

 

 

—

 

 

—

 

 

—

 

 

—

 

 

8.66

 

 

59.78

 

 

7,500

 

 

2.45

 

 

2.45

 

 

2.45

 

 

(1.66

)

 

44

 

2008

 

 

10.78

 

 

(0.07

)

 

(4.95

)

 

(5.02

)

 

—

 

 

(0.34

)

 

(0.34

)

 

—

 

 

5.42

 

 

(46.40

)

 

4,707

 

 

2.48

 

 

2.47

 

 

2.47

 

 

(0.74

)

 

52

 

2007

 

 

12.90

 

 

(0.14

)

 

(0.24

)

 

(0.38

)

 

—

 

 

(1.74

)

 

(1.74

)

 

—

 

 

10.78

 

 

(3.34

)

 

7,982

 

 

2.48

 

 

2.46

 

 

2.46

 

 

(1.03

)

 

50

 

2006

 

 

14.29

 

 

(0.12

)

 

0.29

 

 

0.17

 

 

—

 

 

(1.56

)

 

(1.56

)

 

—

 

 

12.90

 

 

1.16

#

 

4,080

 

 

3.75

##

 

3.74

##

 

2.49

##

 

(1.24

)##

 

47

 

 

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

The Royce Funds 2010 Annual Report to Shareholders | 137


 

Financial Highlights
 

This table is presented to show selected data for a share outstanding throughout each period, and to assist shareholders in evaluating a Fund’s performance for the periods presented. Per share amounts have been determined on the basis of the weighted average number of shares outstanding during the period.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratio of Expenses to Average Net Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

Net Asset Value, Beginning of Period

 

Net Investment Income (Loss)

 

Net Realized and Unrealized Gain (Loss) on Investments and Foreign Currency

 

Total from Investment Operations

 

Distributions from Net Investment Income

 

Distributions from Net Realized Gain on Investments and Foreign Currency

 

Total Distributions

 

Shareholder Redemption Fees

 

Net Asset Value, End of Period

 

Total Return

 

Net Assets, End of Period (in thousands)

 

Prior to Fee Waivers and Balance Credits

 

Prior to Fee Waivers

 

Net of Fee Waivers

 

Ratio of Net Investment Income (Loss) to Average Net Assets

 

Portfolio Turnover Rate

 
                                                                   

Royce Opportunity Fund – Institutional Class

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

9.07

 

$

(0.03

)

$

3.12

 

$

3.09

 

$

—

 

$

—

 

$

—

 

$

—

 

$

12.16

 

 

34.07

% 

$

702,220

 

 

1.04

%

 

1.04

%

 

1.04

%

 

(0.32

)%

 

47

%

2009

 

 

5.60

 

 

(0.02

)

 

3.50

 

 

3.48

 

 

(0.01

)

 

—

 

 

(0.01

)

 

—

 

 

9.07

 

 

62.23

 

 

502,300

 

 

1.04

 

 

1.04

 

 

1.04

 

 

(0.26

)

 

44

 

2008

 

 

11.09

 

 

0.05

 

 

(5.13

)

 

(5.08

)

 

(0.07

)

 

(0.34

)

 

(0.41

)

 

—

 

 

5.60

 

 

(45.66

)

 

310,272

 

 

1.04

 

 

1.04

 

 

1.04

 

 

0.60

 

 

52

 

2007

 

 

13.11

 

 

0.06

 

 

(0.25

)

 

(0.19

)

 

(0.09

)

 

(1.74

)

 

(1.83

)

 

—

 

 

11.09

 

 

(1.89

)

 

333,452

 

 

1.02

 

 

1.02

 

 

1.02

 

 

0.47

 

 

50

 

2006

 

 

12.34

 

 

0.00

 

 

2.33

 

 

2.33

 

 

—

 

 

(1.56

)

 

(1.56

)

 

—

 

 

13.11

 

 

18.85

 

 

248,710

 

 

1.04

 

 

1.03

 

 

1.03

 

 

0.03

 

 

47

 
                                                                                                   

Royce Opportunity Fund – R Class(a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

8.86

 

$

(0.11

)

$

3.03

 

$

2.92

 

$

—

 

$

—

 

$

—

 

$

—

 

$

11.78

 

 

32.96

%

$

1,407

 

 

2.88

%

 

2.88

%

 

1.84

%

 

(1.06

)%

 

47

%

2009

 

 

5.50

 

 

(0.07

)

 

3.43

 

 

3.36

 

 

—

 

 

—

 

 

—

 

 

—

 

 

8.86

 

 

61.09

 

 

341

 

 

9.91

 

 

9.91

 

 

1.84

 

 

(1.05

)

 

44

 

2008

 

 

11.02

 

 

(0.06

)

 

(5.08

)

 

(5.14

)

 

(0.04

)

 

(0.34

)

 

(0.38

)

 

—

 

 

5.50

 

 

(46.50

)

 

64

 

 

18.28

 

 

18.27

 

 

1.84

 

 

(0.04

)

 

52

 

2007

 

 

14.43

 

 

(0.08

)

 

(1.57

)

 

(1.65

)

 

(0.02

)

 

(1.74

)

 

(1.76

)

 

—

 

 

11.02

 

 

(11.77

)#

 

88

 

 

14.59

##

 

14.59

##

 

1.74

##

 

(0.92

)##

 

50

 
                                                                                                   

Royce Opportunity Fund – K Class(b)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

8.24

 

$

(0.07

)

$

2.81

 

$

2.74

 

$

—

 

$

—

 

$

—

 

$

—

 

$

10.98

 

 

33.25

%

$

6,657

 

 

1.63

%

 

1.63

%

 

1.59

%

 

(0.76

)%

 

47

%

2009

 

 

5.11

 

 

(0.06

)

 

3.19

 

 

3.13

 

 

—

 

 

—

 

 

—

 

 

—

 

 

8.24

 

 

61.25

 

 

286

 

 

6.85

 

 

6.85

 

 

1.59

 

 

(0.86

)

 

44

 

2008

 

 

10.00

 

 

(0.00

)

 

(4.51

)

 

(4.51

)

 

(0.04

)

 

(0.34

)

 

(0.38

)

 

—

 

 

5.11

 

 

(44.92

)#

 

24

 

 

44.39

##

 

44.39

##

 

1.59

##

 

(0.06

)##

 

52

 
                                                                                                   

Royce Special Equity Fund – Investment Class

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

17.50

 

$

0.14

 

$

3.29

 

$

3.43

 

$

(0.06

)

$

—

 

$

(0.06

)

$

—

 

$

20.87

 

 

19.61

%

$

1,487,632

 

 

1.17

%

 

1.16

%

 

1.16

%

 

0.78

%

 

21

%

2009

 

 

13.69

 

 

0.07

 

 

3.80

 

 

3.87

 

 

(0.07

)

 

—

 

 

(0.07

)

 

0.01

 

 

17.50

 

 

28.38

 

 

842,678

 

 

1.17

 

 

1.17

 

 

1.17

 

 

0.62

 

 

10

 

2008

 

 

18.27

 

 

0.21

 

 

(3.83

)

 

(3.62

)

 

(0.21

)

 

(0.75

)

 

(0.96

)

 

—

 

 

13.69

 

 

(19.62

)

 

316,558

 

 

1.15

 

 

1.15

 

 

1.15

 

 

1.32

 

 

27

 

2007

 

 

19.72

 

 

0.13

 

 

0.86

 

 

0.99

 

 

(0.12

)

 

(2.32

)

 

(2.44

)

 

—

 

 

18.27

 

 

4.74

 

 

385,864

 

 

1.12

 

 

1.11

 

 

1.11

 

 

0.57

 

 

29

 

2006

 

 

18.70

 

 

0.11

 

 

2.53

 

 

2.64

 

 

(0.11

)

 

(1.51

)

 

(1.62

)

 

—

 

 

19.72

 

 

14.00

 

 

438,427

 

 

1.13

 

 

1.13

 

 

1.13

 

 

0.51

 

 

16

 
                                                                                                   

Royce Special Equity Fund – Service Class

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

17.48

 

$

0.10

 

$

3.27

 

$

3.37

 

$

(0.03

)

$

—

 

$

(0.03

)

$

0.01

 

$

20.83

 

 

19.33

%

$

160,870

 

 

1.48

%

 

1.48

%

 

1.39

%

 

0.56

%

 

21

%

2009

 

 

13.69

 

 

(0.00

)

 

3.84

 

 

3.84

 

 

(0.06

)

 

—

 

 

(0.06

)

 

0.01

 

 

17.48

 

 

28.11

 

 

72,360

 

 

1.52

 

 

1.52

 

 

1.39

 

 

0.29

 

 

10

 

2008

 

 

18.28

 

 

0.11

 

 

(3.77

)

 

(3.66

)

 

(0.19

)

 

(0.75

)

 

(0.94

)

 

0.01

 

 

13.69

 

 

(19.74

)

 

9,549

 

 

1.83

 

 

1.82

 

 

1.35

 

 

1.27

 

 

27

 

2007

 

 

19.73

 

 

0.03

 

 

0.92

 

 

0.95

 

 

(0.09

)

 

(2.32

)

 

(2.41

)

 

0.01

 

 

18.28

 

 

4.58

 

 

2,758

 

 

2.04

 

 

2.03

 

 

1.35

 

 

0.27

 

 

29

 

2006

 

 

18.66

 

 

0.10

 

 

2.48

 

 

2.58

 

 

—

 

 

(1.51

)

 

(1.51

)

 

—

 

 

19.73

 

 

13.70

 

 

1,200

 

 

1.69

 

 

1.69

 

 

1.35

 

 

0.52

 

 

16

 
                                                                                                   

Royce Special Equity Fund – Consultant Class

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

17.03

 

$

(0.04

)

$

3.17

 

$

3.13

 

$

—

 

$

—

 

$

—

 

$

—

 

$

20.16

 

 

18.38

%

$

38,497

 

 

2.17

%

 

2.17

%

 

2.17

%

 

(0.22

)%

 

21

%

2009

 

 

13.42

 

 

(0.06

)

 

3.67

 

 

3.61

 

 

—

 

 

—

 

 

—

 

 

—

 

 

17.03

 

 

26.90

 

 

20,891

 

 

2.23

 

 

2.23

 

 

2.23

 

 

(0.41

)

 

10

 

2008

 

 

17.87

 

 

0.03

 

 

(3.72

)

 

(3.69

)

 

(0.01

)

 

(0.75

)

 

(0.76

)

 

—

 

 

13.42

 

 

(20.46

)

 

11,460

 

 

2.26

 

 

2.26

 

 

2.26

 

 

0.18

 

 

27

 

2007

 

 

19.43

 

 

(0.10

)

 

0.86

 

 

0.76

 

 

—

 

 

(2.32

)

 

(2.32

)

 

—

 

 

17.87

 

 

3.63

 

 

15,778

 

 

2.20

 

 

2.19

 

 

2.19

 

 

(0.50

)

 

29

 

2006

 

 

18.55

 

 

(0.12

)

 

2.51

 

 

2.39

 

 

—

 

 

(1.51

)

 

(1.51

)

 

—

 

 

19.43

 

 

12.75

 

 

17,231

 

 

2.23

 

 

2.22

 

 

2.22

 

 

(0.60

)

 

16

 
                                                                                                   

Royce Special Equity Fund – Institutional Class

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

17.44

 

$

0.16

 

$

3.27

 

$

3.43

 

$

(0.08

)

$

—

 

$

(0.08

)

$

—

 

$

20.79

 

 

19.69

%

$

445,168

 

 

1.04

%

 

1.04

%

 

1.04

%

 

0.91

%

 

21

%

2009

 

 

13.65

 

 

0.11

 

 

3.77

 

 

3.88

 

 

(0.09

)

 

—

 

 

(0.09

)

 

—

 

 

17.44

 

 

28.42

 

 

280,253

 

 

1.05

 

 

1.05

 

 

1.05

 

 

0.81

 

 

10

 

2008

 

 

18.22

 

 

0.21

 

 

(3.80

)

 

(3.59

)

 

(0.23

)

 

(0.75

)

 

(0.98

)

 

—

 

 

13.65

 

 

(19.52

)

 

161,840

 

 

1.05

 

 

1.05

 

 

1.05

 

 

1.43

 

 

27

 

2007

 

 

19.68

 

 

0.13

 

 

0.87

 

 

1.00

 

 

(0.14

)

 

(2.32

)

 

(2.46

)

 

—

 

 

18.22

 

 

4.79

 

 

157,100

 

 

1.04

 

 

1.04

 

 

1.04

 

 

0.64

 

 

29

 

2006

 

 

18.66

 

 

0.12

 

 

2.54

 

 

2.66

 

 

(0.13

)

 

(1.51

)

 

(1.64

)

 

—

 

 

19.68

 

 

14.12

 

 

147,661

 

 

1.05

 

 

1.05

 

 

1.05

 

 

0.58

 

 

16

 

 

 

 

 

138 | The Royce Funds 2010 Annual Report to Shareholders

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

Financial Highlights
 

This table is presented to show selected data for a share outstanding throughout each period, and to assist shareholders in evaluating a Fund’s performance for the periods presented. Per share amounts have been determined on the basis of the weighted average number of shares outstanding during the period.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratio of Expenses to Average Net Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

Net Asset Value, Beginning of Period

 

Net Investment Income (Loss)

 

Net Realized and Unrealized Gain (Loss) on Investments and Foreign Currency

 

Total from Investment Operations

 

Distributions from Net Investment Income

 

Distributions from Net Realized Gain on Investments and Foreign Currency

 

Total Distributions

 

Shareholder Redemption Fees

 

Net Asset Value, End of Period

 

Total Return

 

Net Assets, End of Period (in thousands)

 

Prior to Fee Waivers and Balance Credits

 

Prior to Fee Waivers

 

Net of Fee Waivers

 

Ratio of Net Investment Income (Loss) to Average Net Assets

 

Portfolio Turnover Rate

 
                                                                   

Royce Value Fund – Investment Class(c)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

10.16

 

$

0.03

 

$

2.55

 

$

2.58

 

$

(0.04

)

$

—

 

$

(0.04

)

$

—

 

$

12.70

 

 

25.42

%

$

115,007

 

 

1.16

%

 

1.16

%

 

1.16

%

 

0.32

%

 

35

%

2009

 

 

7.00

 

 

0.01

 

 

3.15

 

 

3.16

 

 

—

 

 

—

 

 

—

 

 

—

 

 

10.16

 

 

45.14

 

 

67,249

 

 

1.14

 

 

1.14

 

 

1.14

 

 

0.06

 

 

49

 

2008

 

 

10.62

 

 

(0.01

)

 

(3.61

)

 

(3.62

)

 

—

 

 

—

 

 

—

 

 

—

 

 

7.00

 

 

(34.09

)

 

18,993

 

 

1.16

 

 

1.16

 

 

1.16

 

 

(0.06

)

 

41

 

2007

 

 

11.22

 

 

(0.32

)

 

0.60

 

 

0.28

 

 

(0.19

)

 

(0.69

)

 

(0.88

)

 

—

 

 

10.62

 

 

2.36

#

 

13,233

 

 

1.89

##

 

1.88

##

 

1.24

##

 

0.06

##

 

67

 
                                                                                                   

Royce Value Fund – Service Class

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

10.13

 

$

0.00

 

$

2.53

 

$

2.53

 

$

(0.01

)

$

—

 

$

(0.01

)

$

—

 

$

12.65

 

 

24.97

%

$

1,415,766

 

 

1.46

%

 

1.46

%

 

1.44

%

 

0.04

%

 

35

%

2009

 

 

7.00

 

 

(0.03

)

 

3.16

 

 

3.13

 

 

—

 

 

—

 

 

—

 

 

—

 

 

10.13

 

 

44.71

 

 

1,178,806

 

 

1.47

 

 

1.47

 

 

1.45

 

 

(0.31

)

 

49

 

2008

 

 

10.64

 

 

(0.03

)

 

(3.62

)

 

(3.65

)

 

—

 

 

—

 

 

—

 

 

0.01

 

 

7.00

 

 

(34.21

)

 

704,406

 

 

1.45

 

 

1.45

 

 

1.45

 

 

(0.34

)

 

41

 

2007

 

 

11.06

 

 

(0.03

)

 

0.45

 

 

0.42

 

 

(0.16

)

 

(0.69

)

 

(0.85

)

 

0.01

 

 

10.64

 

 

3.77

 

 

663,808

 

 

1.43

 

 

1.43

 

 

1.36

 

 

(0.08

)

 

67

 

2006

 

 

9.67

 

 

(0.02

)

 

1.63

 

 

1.61

 

 

(0.02

)

 

(0.22

)

 

(0.24

)

 

0.02

 

 

11.06

 

 

16.76

 

 

452,383

 

 

1.43

 

 

1.42

 

 

1.31

 

 

(0.15

)

 

41

 
                                                                                                   

Royce Value Fund – Consultant Class(f)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

9.84

 

$

(0.07

)

$

2.44

 

$

2.37

 

$

—

 

$

—

 

$

—

 

$

—

 

$

12.21

 

 

24.09

%

$

35,167

 

 

2.18

%

 

2.18

%

 

2.18

%

 

(0.69

)%

 

35

%

2009

 

 

6.85

 

 

(0.09

)

 

3.08

 

 

2.99

 

 

—

 

 

—

 

 

—

 

 

—

 

 

9.84

 

 

43.65

 

 

27,625

 

 

2.23

 

 

2.23

 

 

2.23

 

 

(1.09

)

 

49

 

2008

 

 

10.50

 

 

(0.11

)

 

(3.54

)

 

(3.65

)

 

—

 

 

—

 

 

—

 

 

—

 

 

6.85

 

 

(34.76

)

 

15,915

 

 

2.29

 

 

2.28

 

 

2.28

 

 

(1.18

)

 

41

 

2007

 

 

10.98

 

 

(0.16

)

 

0.45

 

 

0.29

 

 

(0.09

)

 

(0.69

)

 

(0.78

)

 

0.01

 

 

10.50

 

 

2.65

 

 

14,374

 

 

2.35

 

 

2.33

 

 

2.33

 

 

(1.05

)

 

67

 

2006

 

 

10.94

 

 

(0.07

)

 

0.32

 

 

0.25

 

 

(0.00

)

 

(0.22

)

 

(0.22

)

 

0.01

 

 

10.98

 

 

2.33

#

 

4,424

 

 

4.35

##

 

4.34

##

 

2.49

##

 

(0.93

)##

 

41

 
                                                                                                   

Royce Value Fund – Institutional Class(g)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

10.17

 

$

0.05

 

$

2.54

 

$

2.59

 

$

(0.05

)

$

—

 

$

(0.05

)

$

—

 

$

12.71

 

 

25.52

%

$

219,111

 

 

1.04

%

 

1.04

%

 

1.04

%

 

0.45

%

 

35

%

2009

 

 

7.00

 

 

0.01

 

 

3.16

 

 

3.17

 

 

—

 

 

—

 

 

—

 

 

—

 

 

10.17

 

 

45.29

 

 

167,215

 

 

1.04

 

 

1.04

 

 

1.04

 

 

0.10

 

 

49

 

2008

 

 

10.61

 

 

0.00

 

 

(3.61

)

 

(3.61

)

 

—

 

 

—

 

 

—

 

 

—

 

 

7.00

 

 

(34.02

)

 

114,244

 

 

1.04

 

 

1.04

 

 

1.04

 

 

0.03

 

 

41

 

2007

 

 

11.04

 

 

0.02

 

 

0.43

 

 

0.45

 

 

(0.19

)

 

(0.69

)

 

(0.88

)

 

—

 

 

10.61

 

 

4.00

 

 

172,877

 

 

1.03

 

 

1.03

 

 

1.03

 

 

0.25

 

 

67

 

2006

 

 

10.52

 

 

0.01

 

 

0.77

 

 

0.78

 

 

(0.04

)

 

(0.22

)

 

(0.26

)

 

—

 

 

11.04

 

 

7.35

#

 

13,898

 

 

1.27

##

 

1.27

##

 

1.04

##

 

0.43

##

 

41

 
                                                                                                   

Royce Value Fund – R Class(h)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

10.05

 

$

(0.02

)

$

2.51

 

$

2.49

 

$

(0.00

)

$

—

 

$

(0.00

)

$

—

 

$

12.54

 

 

24.81

%

$

26,524

 

 

1.68

%

 

1.67

%

 

1.67

%

 

(0.16

)%

 

35

%

2009

 

 

6.97

 

 

(0.06

)

 

3.14

 

 

3.08

 

 

—

 

 

—

 

 

—

 

 

—

 

 

10.05

 

 

44.19

 

 

6,114

 

 

2.08

 

 

2.08

 

 

1.84

 

 

(0.68

)

 

49

 

2008

 

 

10.63

 

 

(0.06

)

 

(3.62

)

 

(3.68

)

 

—

 

 

—

 

 

—

 

 

0.02

 

 

6.97

 

 

(34.43

)

 

326

 

 

6.72

 

 

6.71

 

 

1.84

 

 

(0.68

)

 

41

 

2007

 

 

11.64

 

 

(0.01

)

 

(0.14

)

 

(0.15

)

 

(0.17

)

 

(0.69

)

 

(0.86

)

 

—

 

 

10.63

 

 

(1.39

)#

 

99

 

 

16.39

##

 

16.39

##

 

1.74

##

 

(0.26

)##

 

67

 
                                                                                                   

Royce Value Fund – K Class(b)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

8.46

 

$

(0.00

)

$

2.10

 

$

2.10

 

$

(0.02

)

$

—

 

$

(0.02

)

$

—

 

$

10.54

 

 

24.82

%

$

13,195

 

 

1.50

%

 

1.50

%

 

1.50

%

 

0.01

%

 

35

%

2009

 

 

5.91

 

 

(0.03

)

 

2.58

 

 

2.55

 

 

—

 

 

—

 

 

—

 

 

—

 

 

8.46

 

 

43.15

 

 

4,721

 

 

1.73

 

 

1.73

 

 

1.59

 

 

(0.43

)

 

49

 

2008

 

 

10.00

 

 

(0.01

)

 

(4.08

)

 

(4.09

)

 

—

 

 

—

 

 

—

 

 

—

 

 

5.91

 

 

(40.90

)#

 

1,550

 

 

9.63

##

 

9.63

##

 

1.59

##

 

(0.35

)##

 

41

 
                                                                                                   

Royce Value Plus Fund – Investment Class(c)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

11.31

 

$

(0.02

)

$

2.31

 

$

2.29

 

$

(0.08

)

$

—

 

$

(0.08

)

$

—

 

$

13.52

 

 

20.25

%

$

305,161

 

 

1.08

%

 

1.08

%

 

1.08

%

 

(0.14

)%

 

48

%

2009

 

 

7.97

 

 

0.01

 

 

3.33

 

 

3.34

 

 

—

 

 

—

 

 

—

 

 

—

 

 

11.31

 

 

41.91

 

 

261,906

 

 

1.06

 

 

1.06

 

 

1.06

 

 

0.13

 

 

39

 

2008

 

 

13.80

 

 

(0.02

)

 

(5.63

)

 

(5.65

)

 

—

 

 

(0.18

)

 

(0.18

)

 

—

 

 

7.97

 

 

(40.88

)

 

122,043

 

 

1.07

 

 

1.07

 

 

1.07

 

 

(0.15

)

 

42

 

2007

 

 

14.38

 

 

(0.61

)

 

0.81

 

 

0.20

 

 

(0.21

)

 

(0.58

)

 

(0.79

)

 

0.01

 

 

13.80

 

 

1.33

#

 

66,888

 

 

1.33

##

 

1.32

##

 

1.24

##

 

(0.24

)##

 

42

 

 

 

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

The Royce Funds 2010 Annual Report to Shareholders | 139


 

Financial Highlights
 

This table is presented to show selected data for a share outstanding throughout each period, and to assist shareholders in evaluating a Fund’s performance for the periods presented. Per share amounts have been determined on the basis of the weighted average number of shares outstanding during the period.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratio of Expenses to Average Net Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

Net Asset Value, Beginning of Period

 

Net Investment Income (Loss)

 

Net Realized and Unrealized Gain (Loss) on Investments and Foreign Currency

 

Total from Investment Operations

 

Distributions from Net Investment Income

 

Distributions from Net Realized Gain on Investments and Foreign Currency

 

Total Distributions

 

Shareholder Redemption Fees

 

Net Asset Value, End of Period

 

Total Return

 

Net Assets, End of Period (in thousands)

 

Prior to Fee Waivers and Balance Credits

 

Prior to Fee Waivers

 

Net of Fee Waivers

 

Ratio of Net Investment Income (Loss) to Average Net Assets

 

Portfolio Turnover Rate

 
                                                                   

Royce Value Plus Fund – Service Class

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

11.24

 

$

(0.06

)

$

2.27

 

$

2.21

 

$

(0.03

)

$

—

 

$

(0.03

)

$

—

 

$

13.42

 

 

19.70

% 

$

2,454,325

 

 

1.44

%

 

1.44

%

 

1.42

%

 

(0.53

)%

 

48

%

2009

 

 

7.95

 

 

(0.02

)

 

3.31

 

 

3.29

 

 

—

 

 

—

 

 

—

 

 

—

 

 

11.24

 

 

41.38

 

 

2,505,017

 

 

1.47

 

 

1.47

 

 

1.45

 

 

(0.25

)

 

39

 

2008

 

 

13.81

 

 

(0.06

)

 

(5.62

)

 

(5.68

)

 

—

 

 

(0.18

)

 

(0.18

)

 

—

 

 

7.95

 

 

(41.07

)

 

1,709,764

 

 

1.44

 

 

1.43

 

 

1.43

 

 

(0.53

)

 

42

 

2007

 

 

14.09

 

 

(0.08

)

 

0.54

 

 

0.46

 

 

(0.17

)

 

(0.58

)

 

(0.75

)

 

0.01

 

 

13.81

 

 

3.24

 

 

2,690,448

 

 

1.41

 

 

1.40

 

 

1.33

 

 

(0.37

)

 

42

 

2006

 

 

12.03

 

 

(0.06

)

 

2.38

 

 

2.32

 

 

(0.00

)

 

(0.27

)

 

(0.27

)

 

0.01

 

 

14.09

 

 

19.35

 

 

1,513,626

 

 

1.41

 

 

1.40

 

 

1.26

 

 

(0.45

)

 

31

 
                                                                                                   

Royce Value Plus Fund – Consultant Class(f)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

10.93

 

$

(0.14

)

$

2.20

 

$

2.06

 

$

—

 

$

—

 

$

—

 

$

—

 

$

12.99

 

 

18.85

%

$

30,279

 

 

2.16

%

 

2.16

%

 

2.16

%

 

(1.26

)%

 

48

%

2009

 

 

7.79

 

 

(0.09

)

 

3.23

 

 

3.14

 

 

—

 

 

—

 

 

—

 

 

—

 

 

10.93

 

 

40.31

 

 

31,154

 

 

2.20

 

 

2.20

 

 

2.20

 

 

(0.98

)

 

39

 

2008

 

 

13.65

 

 

(0.15

)

 

(5.53

)

 

(5.68

)

 

—

 

 

(0.18

)

 

(0.18

)

 

—

 

 

7.79

 

 

(41.55

)

 

26,024

 

 

2.21

 

 

2.21

 

 

2.21

 

 

(1.30

)

 

42

 

2007

 

 

13.97

 

 

(0.20

)

 

0.54

 

 

0.34

 

 

(0.09

)

 

(0.58

)

 

(0.67

)

 

0.01

 

 

13.65

 

 

2.40

 

 

47,409

 

 

2.18

 

 

2.16

 

 

2.16

 

 

(1.18

)

 

42

 

2006

 

 

13.85

 

 

(0.16

)

 

0.55

 

 

0.39

 

 

—

 

 

(0.27

)

 

(0.27

)

 

—

 

 

13.97

 

 

2.78

#

 

12,956

 

 

2.91

##

 

2.90

##

 

2.49

##

 

(1.61

)##

 

31

 
                                                                                                   

Royce Value Plus Fund – Institutional Class(i)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

11.31

 

$

(0.01

)

$

2.30

 

$

2.29

 

$

(0.08

)

$

—

 

$

(0.08

)

$

—

 

$

13.52

 

 

20.25

%

$

425,911

 

 

1.04

%

 

1.04

%

 

1.04

%

 

(0.12

)%

 

48

%

2009

 

 

7.97

 

 

0.01

 

 

3.33

 

 

3.34

 

 

—

 

 

—

 

 

—

 

 

—

 

 

11.31

 

 

41.91

 

 

357,734

 

 

1.06

 

 

1.06

 

 

1.06

 

 

0.08

 

 

39

 

2008

 

 

13.80

 

 

(0.01

)

 

(5.64

)

 

(5.65

)

 

—

 

 

(0.18

)

 

(0.18

)

 

—

 

 

7.97

 

 

(40.88

)

 

143,315

 

 

1.04

 

 

1.04

 

 

1.04

 

 

(0.13

)

 

42

 

2007

 

 

14.08

 

 

(0.17

)

 

0.68

 

 

0.51

 

 

(0.21

)

 

(0.58

)

 

(0.79

)

 

—

 

 

13.80

 

 

3.52

 

 

143,312

 

 

1.05

 

 

1.04

 

 

1.04

 

 

(0.05

)

 

42

 

2006

 

 

14.20

 

 

(0.04

)

 

0.21

 

 

0.17

 

 

(0.02

)

 

(0.27

)

 

(0.29

)

 

—

 

 

14.08

 

 

1.16

#

 

30,985

 

 

1.17

##

 

1.17

##

 

1.04

##

 

(0.18

)##

 

31

 
                                                                                                   

Royce Value Plus Fund – R Class(h)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

11.13

 

$

(0.11

)

$

2.26

 

$

2.15

 

$

(0.04

)

$

—

 

$

(0.04

)

$

—

 

$

13.24

 

 

19.34

%

$

942

 

 

2.75

%

 

2.75

%

 

1.84

%

 

(0.90

)%

 

48

%

2009

 

 

7.91

 

 

(0.06

)

 

3.28

 

 

3.22

 

 

—

 

 

—

 

 

—

 

 

—

 

 

11.13

 

 

40.71

 

 

642

 

 

3.76

 

 

3.76

 

 

1.84

 

 

(0.70

)

 

39

 

2008

 

 

13.80

 

 

(0.09

)

 

(5.62

)

 

(5.71

)

 

—

 

 

(0.18

)

 

(0.18

)

 

—

 

 

7.91

 

 

(41.31

)

 

331

 

 

6.62

 

 

6.62

 

 

1.84

 

 

(0.92

)

 

42

 

2007

 

 

15.16

 

 

(0.03

)

 

(0.57

)

 

(0.60

)

 

(0.18

)

 

(0.58

)

 

(0.76

)

 

—

 

 

13.80

 

 

(4.05

)#

 

96

 

 

16.18

##

 

16.18

##

 

1.74

##

 

(0.68

)##

 

42

 
                                                                                                   

Royce Value Plus Fund – K Class(b)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

8.22

 

$

(0.06

)

$

1.67

 

$

1.61

 

$

(0.06

)

$

—

 

$

(0.06

)

$

—

 

$

9.77

 

 

19.55

%

$

1,851

 

 

1.88

%

 

1.88

%

 

1.59

%

 

(0.67

)%

 

48

%

2009

 

 

5.82

 

 

(0.03

)

 

2.43

 

 

2.40

 

 

—

 

 

—

 

 

—

 

 

—

 

 

8.22

 

 

41.24

 

 

1,363

 

 

2.46

 

 

2.45

 

 

1.59

 

 

(0.38

)

 

39

 

2008

 

 

10.00

 

 

(0.04

)

 

(3.96

)

 

(4.00

)

 

—

 

 

(0.18

)

 

(0.18

)

 

—

 

 

5.82

 

 

(39.91

)#

 

31

 

 

39.36

##

 

39.36

##

 

1.59

##

 

(0.75

)##

 

42

 
                                                                                                   

Royce 100 Fund – Investment Class(c)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

7.94

 

$

0.03

 

$

1.96

 

$

1.99

 

$

—

 

$

(0.11

)

$

(0.11

)

$

—

 

$

9.82

 

 

25.06

%

$

66,011

 

 

1.17

%

 

1.17

%

 

1.17

%

 

0.33

%

 

27

%

2009

 

 

5.74

 

 

0.00

 

 

2.20

 

 

2.20

 

 

—

 

 

—

 

 

—

 

 

—

 

 

7.94

 

 

38.33

 

 

35,165

 

 

1.22

 

 

1.22

 

 

1.22

 

 

0.03

 

 

42

 

2008

 

 

8.23

 

 

0.01

 

 

(2.41

)

 

(2.40

)

 

—

 

 

(0.09

)

 

(0.09

)

 

—

 

 

5.74

 

 

(29.13

)

 

15,748

 

 

1.39

 

 

1.39

 

 

1.24

 

 

0.21

 

 

72

 

2007

 

 

8.42

 

 

0.00

 

 

0.54

 

 

0.54

 

 

—

 

 

(0.73

)

 

(0.73

)

 

—

 

 

8.23

 

 

6.20

#

 

7,246

 

 

3.37

##

 

3.36

##

 

1.24

##

 

0.04

##

 

85

 
                                                                                                   

Royce 100 Fund – Service Class

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

7.91

 

$

0.00

 

$

1.96

 

$

1.96

 

$

—

 

$

(0.11

)

$

(0.11

)

$

—

 

$

9.76

 

 

24.77

%

$

366,184

 

 

1.50

%

 

1.50

%

 

1.46

%

 

0.03

%

 

27

%

2009

 

 

5.73

 

 

(0.01

)

 

2.19

 

 

2.18

 

 

—

 

 

—

 

 

—

 

 

—

 

 

7.91

 

 

38.05

 

 

197,607

 

 

1.54

 

 

1.54

 

 

1.49

 

 

(0.19

)

 

42

 

2008

 

 

8.22

 

 

(0.01

)

 

(2.40

)

 

(2.41

)

 

—

 

 

(0.09

)

 

(0.09

)

 

0.01

 

 

5.73

 

 

(29.17

)

 

43,882

 

 

1.57

 

 

1.56

 

 

1.49

 

 

(0.10

)

 

72

 

2007

 

 

8.32

 

 

(0.01

)

 

0.64

 

 

0.63

 

 

—

 

 

(0.73

)

 

(0.73

)

 

—

 

 

8.22

 

 

7.34

 

 

28,749

 

 

1.56

 

 

1.56

 

 

1.31

 

 

(0.08

)

 

85

 

2006

 

 

7.52

 

 

(0.02

)

 

1.04

 

 

1.02

 

 

—

 

 

(0.23

)

 

(0.23

)

 

0.01

 

 

8.32

 

 

13.70

 

 

34,691

 

 

1.73

 

 

1.72

 

 

1.47

 

 

(0.26

)

 

45

 

 

 

 

 

140 | The Royce Funds 2010 Annual Report to Shareholders

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.


 

Financial Highlights
 

This table is presented to show selected data for a share outstanding throughout each period, and to assist shareholders in evaluating a Fund’s performance for the periods presented. Per share amounts have been determined on the basis of the weighted average number of shares outstanding during the period.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratio of Expenses to Average Net Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

Net Asset Value, Beginning of Period

 

Net Investment Income (Loss)

 

Net Realized and Unrealized Gain (Loss) on Investments and Foreign Currency

 

Total from Investment Operations

 

Distributions from Net Investment Income

 

Distributions from Net Realized Gain on Investments and Foreign Currency

 

Total Distributions

 

Shareholder Redemption Fees

 

Net Asset Value, End of Period

 

Total Return

 

Net Assets, End of Period (in thousands)

 

Prior to Fee Waivers and Balance Credits

 

Prior to Fee Waivers

 

Net of Fee Waivers

 

Ratio of Net Investment Income (Loss) to Average Net Assets

 

Portfolio Turnover Rate

 
                                                                   

Royce 100 Fund – R Class(b)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

9.52

 

$

(0.03

)

$

2.34

 

$

2.31

 

$

—

 

$

(0.11

)

$

(0.11

)

$

—

 

$

11.72

 

 

24.26

%

$

1,358

 

 

2.22

%

 

2.21

%

 

1.84

%

 

(0.29

)%

 

27

%

2009

 

 

6.93

 

 

(0.05

)

 

2.64

 

 

2.59

 

 

—

 

 

—

 

 

—

 

 

—

 

 

9.52

 

 

37.37

 

 

296

 

 

6.58

 

 

6.57

 

 

1.84

 

 

(0.56

)

 

42

 

2008

 

 

10.00

 

 

(0.02

)

 

(2.96

)

 

(2.98

)

 

—

 

 

(0.09

)

 

(0.09

)

 

—

 

 

6.93

 

 

(29.78

)#

 

70

 

 

18.97

##

 

18.97

##

 

1.84

##

 

(0.44

)##

 

72

 
                                                                                                   

Royce 100 Fund – K Class(b)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

9.57

 

$

0.02

 

$

2.33

 

$

2.35

 

$

—

 

$

(0.11

)

$

(0.11

)

$

—

 

$

11.81

 

 

24.55

%

$

2,915

 

 

1.89

%

 

1.89

%

 

1.59

%

 

0.20

%

 

27

%

2009

 

 

6.94

 

 

(0.03

)

 

2.66

 

 

2.63

 

 

—

 

 

—

 

 

—

 

 

—

 

 

9.57

 

 

37.90

 

 

186

 

 

5.78

 

 

5.78

 

 

1.59

 

 

(0.41

)

 

42

 

2008

 

 

10.00

 

 

(0.01

)

 

(2.96

)

 

(2.97

)

 

—

 

 

(0.09

)

 

(0.09

)

 

—

 

 

6.94

 

 

(29.68

)#

 

95

 

 

17.55

##

 

17.55

##

 

1.59

##

 

(0.13

)##

 

72

 
                                                                                                   

Royce Discovery Fund – Service Class

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

4.38

 

$

(0.01

)

$

0.87

 

$

0.86

 

$

—

 

$

—

 

$

—

 

$

—

 

$

5.24

 

 

19.63

%

$

3,637

 

 

3.04

%

 

3.04

%

 

1.49

%

 

(0.19

)%

 

105

%

2009

 

 

3.48

 

 

(0.01

)

 

0.91

 

 

0.90

 

 

—

 

 

—

 

 

—

 

 

—

 

 

4.38

 

 

25.86

 

 

2,910

 

 

3.56

 

 

3.56

 

 

1.49

 

 

(0.30

)

 

13

 

2008

 

 

5.85

 

 

(0.01

)

 

(2.06

)

 

(2.07

)

 

—

 

 

(0.30

)

 

(0.30

)

 

—

 

 

3.48

 

 

(35.07

)

 

2,332

 

 

2.77

 

 

2.77

 

 

1.49

 

 

(0.22

)

 

63

 

2007

 

 

6.87

 

 

(0.02

)

 

(0.49

)

 

(0.51

)

 

—

 

 

(0.51

)

 

(0.51

)

 

—

 

 

5.85

 

 

(7.44

)

 

3,911

 

 

2.43

 

 

2.43

 

 

1.49

 

 

(0.35

)

 

105

 

2006

 

 

6.33

 

 

(0.02

)

 

1.08

 

 

1.06

 

 

—

 

 

(0.52

)

 

(0.52

)

 

—

 

 

6.87

 

 

16.84

 

 

4,405

 

 

3.75

 

 

3.73

 

 

1.49

 

 

(0.37

)

 

91

 
                                                                                                   

Royce Financial Services Fund – Service Class

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

5.57

 

$

0.07

 

$

0.96

 

$

1.03

 

$

(0.10

)

$

—

 

$

(0.10

)

$

—

 

$

6.50

 

 

18.45

%

$

14,688

 

 

1.94

%

 

1.94

%

 

1.49

%

 

1.14

%

 

16

%

2009

 

 

4.25

 

 

0.04

 

 

1.31

 

 

1.35

 

 

(0.04

)

 

—

 

 

(0.04

)

 

0.01

 

 

5.57

 

 

32.13

 

 

13,525

 

 

2.06

 

 

2.06

 

 

1.49

 

 

0.90

 

 

34

 

2008

 

 

6.71

 

 

0.07

 

 

(2.46

)

 

(2.39

)

 

(0.05

)

 

(0.03

)

 

(0.08

)

 

0.01

 

 

4.25

 

 

(35.37

)

 

9,553

 

 

2.35

 

 

2.34

 

 

1.49

 

 

1.85

 

 

48

 

2007

 

 

7.37

 

 

0.08

 

 

(0.43

)

 

(0.35

)

 

(0.08

)

 

(0.24

)

 

(0.32

)

 

0.01

 

 

6.71

 

 

(4.72

)

 

4,650

 

 

2.38

 

 

2.37

 

 

1.49

 

 

1.01

 

 

36

 

2006

 

 

6.26

 

 

0.08

 

 

1.46

 

 

1.54

 

 

(0.06

)

 

(0.37

)

 

(0.43

)

 

—

 

 

7.37

 

 

24.77

 

 

4,080

 

 

3.71

 

 

3.70

 

 

1.49

 

 

1.44

 

 

14

 
                                                                                                   

Royce Dividend Value Fund – Investment Class(h)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

5.31

 

$

0.09

 

$

1.51

 

$

1.60

 

$

(0.08

)

$

(0.03

)

$

(0.11

)

$

—

 

$

6.80

 

 

30.46

%

$

35,626

 

 

1.38

%

 

1.38

%

 

1.24

%

 

1.56

%

 

21

%

2009

 

 

3.90

 

 

0.07

 

 

1.40

 

 

1.47

 

 

(0.06

)

 

—

 

 

(0.06

)

 

—

 

 

5.31

 

 

38.22

 

 

13,208

 

 

1.69

 

 

1.69

 

 

1.24

 

 

1.70

 

 

43

 

2008

 

 

5.82

 

 

0.11

 

 

(1.91

)

 

(1.80

)

 

(0.12

)

 

(0.00

)

 

(0.12

)

 

—

 

 

3.90

 

 

(31.38

)

 

1,881

 

 

2.84

 

 

2.83

 

 

1.24

 

 

2.13

 

 

61

 

2007

 

 

6.94

 

 

0.01

 

 

(0.11

)

 

(0.10

)

 

(0.02

)

 

(1.00

)

 

(1.02

)

 

—

 

 

5.82

 

 

(1.71

)#

 

1,843

 

 

17.04

##

 

17.04

##

 

1.24

##

 

2.83

##

 

126

 
                                                                                                   

Royce Dividend Value Fund – Service Class

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

5.33

 

$

0.08

 

$

1.51

 

$

1.59

 

$

(0.07

)

$

(0.03

)

$

(0.10

)

$

—

 

$

6.82

 

 

30.11

%

$

117,304

 

 

1.56

%

 

1.56

%

 

1.49

%

 

1.32

%

 

21

%

2009

 

 

3.92

 

 

0.07

 

 

1.39

 

 

1.46

 

 

(0.05

)

 

—

 

 

(0.05

)

 

—

 

 

5.33

 

 

37.73

 

 

16,107

 

 

2.04

 

 

2.04

 

 

1.49

 

 

1.45

 

 

43

 

2008

 

 

5.83

 

 

0.09

 

 

(1.90

)

 

(1.81

)

 

(0.10

)

 

(0.00

)

 

(0.10

)

 

—

 

 

3.92

 

 

(31.47

)

 

4,872

 

 

2.54

 

 

2.54

 

 

1.49

 

 

1.89

 

 

61

 

2007

 

 

6.92

 

 

0.14

 

 

(0.13

)

 

0.01

 

 

(0.11

)

 

(1.00

)

 

(1.11

)

 

0.01

 

 

5.83

 

 

(0.02

)

 

3,835

 

 

2.03

 

 

2.04

 

 

1.49

 

 

2.08

 

 

126

 

2006

 

 

5.98

 

 

0.11

 

 

1.07

 

 

1.18

 

 

(0.09

)

 

(0.15

)

 

(0.24

)

 

—

 

 

6.92

 

 

19.87

 

 

6,819

 

 

2.73

 

 

2.72

 

 

1.49

 

 

1.72

 

 

19

 
                                                                                                   

Royce European Smaller-Companies Fund – Service Class(j)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

8.06

 

$

0.03

 

$

2.79

 

$

2.82

 

$

(0.10

)

$

—

 

$

(0.10

)

$

0.01

 

$

10.79

 

 

35.20

%

$

15,369

 

 

2.57

%

 

2.57

%

 

1.69

%

 

0.70

%

 

32

%

2009

 

 

5.19

 

 

0.06

 

 

2.93

 

 

2.99

 

 

(0.12

)

 

—

 

 

(0.12

)

 

—

 

 

8.06

 

 

57.69

 

 

6,887

 

 

3.21

 

 

3.21

 

 

1.69

 

 

1.11

 

 

51

 

2008

 

 

10.14

 

 

0.22

 

 

(4.95

)

 

(4.73

)

 

(0.23

)

 

—

 

 

(0.23

)

 

0.01

 

 

5.19

 

 

(46.38

)

 

4,044

 

 

2.74

 

 

2.72

 

 

1.69

 

 

2.22

 

 

88

 

2007

 

 

10.00

 

 

0.03

 

 

0.10

 

 

0.13

 

 

(0.00

)

 

—

 

 

(0.00

)

 

0.01

 

 

10.14

 

 

1.44

#

 

9,469

 

 

3.03

##

 

2.60

##

 

1.69

##

 

0.28

##

 

47

 
                                                                                                   

Royce Global Value Fund – Investment Class(k)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

11.02

 

$

(0.06

)

$

3.68

 

$

3.62

 

$

(0.10

)

$

—

 

$

(0.10

)

$

—

 

$

14.54

 

 

32.88

%#

$

6,626

 

 

2.07

%##

 

2.07

%##

 

1.44

%##

 

(0.58%

)##

 

42

%

 

 

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

The Royce Funds 2010 Annual Report to Shareholders | 141


 

Financial Highlights
 

This table is presented to show selected data for a share outstanding throughout each period, and to assist shareholders in evaluating a Fund’s performance for the periods presented. Per share amounts have been determined on the basis of the weighted average number of shares outstanding during the period.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratio of Expenses to Average Net Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

Net Asset Value, Beginning of Period

 

Net Investment Income (Loss)

 

Net Realized and Unrealized Gain (Loss) on Investments and Foreign Currency

 

Total from Investment Operations

 

Distributions from Net Investment Income

 

Distributions from Net Realized Gain on Investments and Foreign Currency

 

Total Distributions

 

Shareholder Redemption Fees

 

Net Asset Value, End of Period

 

Total Return

 

Net Assets, End of Period (in thousands)

 

Prior to Fee Waivers and Balance Credits

 

Prior to Fee Waivers

 

Net of Fee Waivers

 

Ratio of Net Investment Income (Loss) to Average Net Assets

 

Portfolio Turnover Rate

 
                                                                   

Royce Global Value Fund – Service Class(l)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

10.79

 

$

(0.03

)

$

3.87

 

$

3.84

 

$

(0.08

)

$

—

 

$

(0.08

)

$

0.01

 

$

14.56

 

 

35.69

%

$

141,992

 

 

1.84

%

 

1.84

%

 

1.69

%

 

0.01

%

 

42

%

2009

 

 

6.70

 

 

0.01

 

 

4.13

 

 

4.14

 

 

(0.06

)

 

—

 

 

(0.06

)

 

0.01

 

 

10.79

 

 

61.89

 

 

50,946

 

 

1.88

 

 

1.88

 

 

1.69

 

 

0.11

 

 

71

 

2008

 

 

11.20

 

 

0.14

 

 

(4.65

)

 

(4.51

)

 

(0.03

)

 

(0.00

)

 

(0.03

)

 

0.04

 

 

6.70

 

 

(39.92

)

 

31,040

 

 

1.91

 

 

1.90

 

 

1.69

 

 

1.64

 

 

45

 

2007

 

 

10.00

 

 

(0.14

)

 

1.53

 

 

1.39

 

 

(0.21

)

 

(0.02

)

 

(0.23

)

 

0.04

 

 

11.20

 

 

14.28

#

 

19,876

 

 

2.17

##

 

2.00

##

 

1.69

##

 

(0.23

)##

 

54

 
                                                                                                   

Royce SMid-Cap Value Fund – Service Class(m)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

9.08

 

$

(0.03

)

$

2.39

 

$

2.36

 

$

—

 

$

—

 

$

—

 

$

—

 

$

11.44

 

 

25.99

%

$

6,195

 

 

2.40

%

 

2.40

%

 

1.49

%

 

(0.26

)%

 

126

%

2009

 

 

7.06

 

 

(0.01

)

 

2.03

 

 

2.02

 

 

(0.01

)

 

—

 

 

(0.01

)

 

0.01

 

 

9.08

 

 

28.75

 

 

7,365

 

 

2.03

 

 

2.03

 

 

1.49

 

 

(0.20

)

 

216

 

2008

 

 

9.99

 

 

0.02

 

 

(2.96

)

 

(2.94

)

 

(0.01

)

 

—

 

 

(0.01

)

 

0.02

 

 

7.06

 

 

(29.27

)

 

14,059

 

 

2.05

 

 

2.04

 

 

1.49

 

 

0.31

 

 

397

 

2007

 

 

10.00

 

 

0.01

 

 

0.01

 

 

0.02

 

 

(0.02

)

 

(0.01

)

 

(0.03

)

 

—

 

 

9.99

 

 

0.16

#

 

1,379

 

 

16.82

##

 

16.40

##

 

1.49

##

 

0.67

##

 

17

 
                                                                                                   

Royce International Smaller-Companies Fund – Service Class(n)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

10.49

 

$

0.03

 

$

2.72

 

$

2.75

 

$

(0.10

)

$

(0.30

)

$

(0.40

)

$

0.01

 

$

12.85

 

 

26.45

%

$

18,297

 

 

2.35

%

 

2.35

%

 

1.69

%

 

0.45

%

 

55

%

2009

 

 

6.99

 

 

(0.02

)

 

3.53

 

 

3.51

 

 

(0.02

)

 

—

 

 

(0.02

)

 

0.01

 

 

10.49

 

 

50.31

 

 

7,871

 

 

3.01

 

 

3.01

 

 

1.69

 

 

(0.18

)

 

38

 

2008

 

 

10.00

 

 

(0.02

)

 

(2.99

)

 

(3.01

)

 

—

 

 

—

 

 

—

 

 

—

 

 

6.99

 

 

(30.10

)#

 

1,960

 

 

6.24

##

 

5.98

##

 

1.69

##

 

(0.43

)##

 

1

 
                                                                                                   

Royce Focus Value Fund – Service Class(o)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

14.82

 

$

(0.06

)

$

2.30

 

$

2.24

 

$

(0.06

)

$

(0.41

)

$

(0.47

)

$

—

 

$

16.59

 

 

15.16

%

$

8,942

 

 

1.95

%

 

1.95

%

 

1.49

%

 

(0.32

)%

 

31

%

2009

 

 

10.00

 

 

0.00

 

 

5.31

 

 

5.31

 

 

(0.05

)

 

(0.44

)

 

(0.49

)

 

—

 

 

14.82

 

 

53.27

#

 

4,796

 

 

2.97

##

 

2.97

##

 

1.49

##

 

0.17

##

 

21

 
                                                                                                   

Royce Partners Fund – Service Class(p)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

11.56

 

$

0.01

 

$

2.14

 

$

2.15

 

$

(0.16

)

$

(0.41

)

$

(0.57

)

$

0.01

 

$

13.15

 

 

18.74

%

$

1,771

 

 

3.72

%

 

3.72

%

 

1.49

%

 

0.10

%

 

38

%

2009

 

 

10.00

 

 

(0.05

)

 

1.61

 

 

1.56

 

 

—

 

 

—

 

 

—

 

 

—

 

 

11.56

 

 

15.60

#

 

1,501

 

 

5.27

##

 

5.27

##

 

1.49

##

 

(0.71

)##

 

14

 
                                                                                                   

Royce Mid-Cap Fund – Service Class(q)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

10.00

 

$

(0.03

)

$

1.87

 

$

1.84

 

$

—

 

$

—

 

$

—

 

$

0.02

 

$

11.86

 

 

18.60

%#

$

4,889

 

 

2.64

%##

 

2.64

%##

 

1.49

%##

 

(0.25

)%##

 

117

%

 

(a)

The Class commenced operations on May 21, 2007.

(b)

The Class commenced operations on May 15, 2008.

(c)

The Class commenced operations on March 15, 2007.

(d)

The Class commenced operations on January 3, 2006.

(e)

The Class commenced operations on May 1, 2008.

(f)

The Class commenced operations on March 30, 2006.

(g)

The Class commenced operations on June 1, 2006.

(h)

The Class commenced operations on September 14, 2007.

(i)

The Class commenced operations on May 10, 2006.

(j)

The Fund commenced operations on December 29, 2006.

(k)

The Class commenced operations on September 1, 2010.

(l)

The Class commenced operations on December 29, 2006.

(m)

The Fund commenced operations on September 28, 2007.

(n)

The Fund commenced operations on July 1, 2008.

(o)

The Fund commenced operations on March 2, 2009.

(p)

The Fund commenced operations on April 28, 2009.

(q)

The Fund commenced operations on January 4, 2010.

#

Not annualized

##

Annualized

 


 

 

 

142 | The Royce Funds 2010 Annual Report to Shareholders

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

Notes to Financial Statements
 

Summary of Significant Accounting Policies:
    Royce Pennsylvania Mutual Fund, Royce Micro-Cap Fund, Royce Premier Fund, Royce Low-Priced Stock Fund, Royce Total Return Fund, Royce Heritage Fund, 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 European Smaller-Companies Fund, Royce Global Value Fund, Royce SMid-Cap Value Fund, Royce International Smaller-Companies Fund, Royce Focus Value Fund, Royce Partners Fund and Royce Mid-Cap Fund (the “Fund” or “Funds”), are twenty-one series of The Royce Fund (the “Trust”), a diversified open-end management investment company organized as a Delaware statutory trust.
    Classes of shares have equal rights as to earnings and assets, except that each class may bear different fees and expenses for distribution, shareholder servicing, registration and shareholder reports, and receive different compensating balance credits and expense reimbursements. Investment income, realized and unrealized capital gains or losses on investments and foreign currency, and expenses other than those attributable to a specific class are allocated to each class of shares based on its relative net assets.
    The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
    Under the Fund’s organizational documents, the officers and trustees are indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts with service providers that contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risk of loss to be remote.
    At December 31, 2010, officers, employees of Royce & Associates, LLC (“Royce”), Fund trustees, the Royce retirement plans and other affiliates owned more than 10% of the following Funds:

 

 

 

 

 

Royce Discovery Fund

57%

 

Royce Focus Value Fund

72%

Royce Financial Services Fund

12%

 

Royce Partners Fund

90%

Royce SMid-Cap Value Fund

30%

 

Royce Mid-Cap Fund

43%

Royce International Smaller-Companies Fund

16%

 

 

 

Valuation of Investments:
    Securities are valued as of the close of trading on the New York Stock Exchange (NYSE) (generally 4:00 p.m. Eastern time) on the valuation date. Securities that trade on an exchange, and securities traded on Nasdaq’s Electronic Bulletin Board, are valued at their last reported sales price or Nasdaq official closing price taken from the primary market in which each security trades or, if no sale is reported for such day, at their bid price. Other over-the-counter securities for which market quotations are readily available are valued at their highest bid price, except in the case of some bonds and other fixed income securities which may be valued by reference to other securities with comparable ratings, interest rates and maturities, using established independent pricing services. The Funds value their non-U.S. dollar denominated securities in U.S. dollars daily at the prevailing foreign currency exchange rates as quoted by a major bank. Securities for which market quotations are not readily available are valued at their fair value under procedures approved by the Board of Trustees. In addition, 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, a Fund 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. When fair value pricing is employed, the prices of securities used by a Fund may differ from quoted or published prices for the same security. Investments in money market funds are valued at net asset value per share.

    Various inputs are used in determining the value of each Fund’s investments, as noted above. These inputs are summarized in the three broad levels below:

Level 1

– quoted prices in active markets for identical securities.

Level 2

– other significant observable inputs (including quoted prices for similar securities, foreign securities that may be fair valued and repurchase agreements). The table below includes all Level 2 securities. Level 2 securities with values based on quoted prices for similar securities are noted in the Schedules of Investments.

Level 3

– significant unobservable inputs (including each Fund’s own assumptions in determining the fair value of investments).

    The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
    The following is a summary of the inputs used to value each Fund’s investments as of December 31, 2010. For a detailed breakout of common stocks by sector classification, please refer to the Schedules of Investments.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Royce Pennsylvania Mutual Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

   Common stocks

 

$

5,607,401,694

 

$

228,048,929

 

$

—

 

$

5,835,450,623

 

   Corporate bonds

 

 

—

 

 

—

 

 

315,928

 

 

315,928

 

   Cash equivalents

 

 

63,193,230

 

 

213,747,000

 

 

—

 

 

276,940,230

 

 

The Royce Funds 2010 Annual Report to Shareholders | 143


 

Notes to Financial Statements (continued)
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Valuation of Investments (continued):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Royce Micro-Cap Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stocks

 

$

861,760,029

 

$

378,731,032

 

$

478,044

 

$

1,240,969,105

 

Cash equivalents

 

 

17,666,381

 

 

169,168,000

 

 

—

 

 

186,834,381

 

Royce Premier Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stocks

 

 

5,541,100,976

 

 

561,809,580

 

 

—

 

 

6,102,910,556

 

Cash equivalents

 

 

106,015,166

 

 

664,631,000

 

 

—

 

 

770,646,166

 

Royce Low-Priced Stock Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stocks

 

 

3,212,606,708

 

 

1,120,504,729

 

 

—

 

 

4,333,111,437

 

Cash equivalents

 

 

95,512,591

 

 

354,891,000

 

 

—

 

 

450,403,591

 

Royce Total Return Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stocks

 

 

4,297,068,944

 

 

166,335,288

 

 

3,279,115

 

 

4,466,683,347

 

Preferred stocks

 

 

6,941,130

 

 

6,050,000

 

 

72,209

 

 

13,063,339

 

Corporate bonds

 

 

—

 

 

21,982,230

 

 

605,540

 

 

22,587,770

 

Cash equivalents

 

 

3,939,419

 

 

301,217,000

 

 

—

 

 

305,156,419

 

Royce Heritage Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stocks

 

 

196,752,558

 

 

63,645,580

 

 

25,052

 

 

260,423,190

 

Cash equivalents

 

 

1,857,773

 

 

18,106,000

 

 

—

 

 

19,963,773

 

Royce Opportunity Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stocks

 

 

2,060,299,267

 

 

2,922,061

 

 

—

 

 

2,063,221,328

 

Cash equivalents

 

 

41,587,493

 

 

142,588,000

 

 

—

 

 

184.175.493

 

Royce Special Equity Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stocks

 

 

1,784,680,570

 

 

21,535,118

 

 

—

 

 

1,806,215,688

 

Cash equivalents

 

 

—

 

 

320,794,000

 

 

—

 

 

320,794,000

 

Royce Value Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stocks

 

 

1,560,030,125

 

 

233,627,790

 

 

—

 

 

1,793,657,915

 

Cash equivalents

 

 

23,568,788

 

 

32,190,000

 

 

—

 

 

55,758,788

 

Royce Value Plus Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stocks

 

 

2,798,813,358

 

 

294,567,630

 

 

—

 

 

3,093,380,988

 

Cash equivalents

 

 

33,734,875

 

 

162,932,000

 

 

—

 

 

196,666,875

 

Royce 100 Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stocks

 

 

377,186,264

 

 

27,906,444

 

 

—

 

 

405,092,708

 

Cash equivalents

 

 

5,649,568

 

 

31,316,000

 

 

—

 

 

36,965,568

 

Royce Discovery Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stocks

 

 

3,422,841

 

 

—

 

 

—

 

 

3,422,841

 

Cash equivalents

 

 

—

 

 

147,000

 

 

—

 

 

147,000

 

Royce Financial Services Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stocks

 

 

9,302,341

 

 

4,343,090

 

 

13,589

 

 

13,659,020

 

Preferred stocks

 

 

—

 

 

—

 

 

427

 

 

427

 

Corporate bonds

 

 

—

 

 

—

 

 

7,140

 

 

7,140

 

Cash equivalents

 

 

—

 

 

912,000

 

 

—

 

 

912,000

 

Royce Dividend Value Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stocks

 

 

118,190,329

 

 

23,755,143

 

 

436,973

 

 

142,382,445

 

Preferred stocks

 

 

—

 

 

—

 

 

325

 

 

325

 

Cash equivalents

 

 

—

 

 

8,745,000

 

 

—

 

 

8,745,000

 

Royce European Smaller-Companies Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stocks

 

 

73,560

 

 

13,647,730

 

 

44,922

 

 

13,766,212

 

Cash equivalents

 

 

—

 

 

1,368,000

 

 

—

 

 

1,368,000

 

Royce Global Value Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stocks

 

 

34,155,576

 

 

98,629,538

 

 

—

 

 

132,785,114

 

Cash equivalents

 

 

—

 

 

11,551,000

 

 

—

 

 

11,551,000

 

Royce SMid-Cap Value Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stocks

 

 

4,238,367

 

 

1,068,668

 

 

—

 

 

5,307,035

 

Cash equivalents

 

 

—

 

 

889,000

 

 

—

 

 

889,000

 

Royce International Smaller-Companies Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stocks

 

 

1,209,776

 

 

15,382,664

 

 

102,097

 

 

16,694,537

 

Cash equivalents

 

 

—

 

 

1,350,000

 

 

—

 

 

1,350,000

 

Royce Focus Value Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stocks

 

 

7,114,019

 

 

1,513,176

 

 

—

 

 

8,627,195

 

Cash equivalents

 

 

—

 

 

336,000

 

 

—

 

 

336,000

 

Royce Partners Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stocks

 

 

1,254,208

 

 

337,297

 

 

—

 

 

1,591,505

 

Cash equivalents

 

 

—

 

 

208,000

 

 

—

 

 

208,000

 

Royce Mid-Cap Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stocks

 

 

4,165,729

 

 

275,042

 

 

—

 

 

4,440,771

 

Cash equivalents

 

 

—

 

 

447,000

 

 

—

 

 

447,000

 

144 | The Royce Funds 2010 Annual Report to Shareholders


 
 

Valuation of Investments (continued):

 

   Level 3 Reconciliation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of 12/31/09

 

Purchases

 

Transfers In

 

Sales

 

Realized and Unrealized Gain (Loss)(1)

 

Balance as of 12/31/10

 

Royce Pennsylvania Mutual Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

$

—

 

$

464,640

 

$

—

 

$

—

 

$

(148,712

)

$

315,928

 

Royce Micro-Cap Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stocks

 

 

—

 

 

—

 

 

4,691,084

 

 

815,011

 

 

(3,398,029

)

 

478,044

 

Royce Total Return Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stocks

 

 

—

 

 

3,100,052

 

 

1,977,975

 

 

—

 

 

(1,798,912

)

 

3,279,115

 

Preferred stocks

 

 

—

 

 

93,974

 

 

—

 

 

—

 

 

(21,765

)

 

72,209

 

Corporate bonds

 

 

—

 

 

890,560

 

 

—

 

 

—

 

 

(285,020

)

 

605,540

 

Royce Heritage Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stocks

 

 

25,115

 

 

—

 

 

—

 

 

—

 

 

(63

)

 

25,052

 

Royce Special Equity Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stocks

 

 

225,131

 

 

—

 

 

—

 

 

1,793,930

 

 

1,568,799

 

 

—

 

Royce Value Plus Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stocks

 

 

97,821

 

 

—

 

 

—

 

 

—

 

 

(97,821

)

 

—

 

Royce Financial Services Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stocks

 

 

—

 

 

6,666

 

 

20,912

 

 

—

 

 

(13,989

)

 

13,589

 

Preferred stocks

 

 

—

 

 

555

 

 

—

 

 

—

 

 

(128

)

 

427

 

Corporate bonds

 

 

—

 

 

10,560

 

 

—

 

 

—

 

 

(3,420

)

 

7,140

 

Royce Dividend Value Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stocks

 

 

—

 

 

470,482

 

 

—

 

 

—

 

 

(33,509

)

 

436,973

 

Preferred stocks

 

 

—

 

 

422

 

 

—

 

 

—

 

 

(97

)

 

325

 

Royce European Smaller-Companies Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stocks

 

 

—

 

 

48,367

 

 

—

 

 

—

 

 

(3,445

)

 

44,922

 

Royce International Smaller-Companies Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stocks

 

 

—

 

 

108,897

 

 

—

 

 

—

 

 

(6,800

)

 

102,097

 

 

 

(1)

The net change in unrealized appreciation (depreciation) is included in the accompanying Statement of Operations. Change in unrealized appreciation (depreciation) includes net unrealized appreciation (depreciation) resulting from changes in investment values during the reporting period and the reversal of previously recorded unrealized appreciation (depreciation) when gains or losses are realized. Net realized gain (loss) from investments and foreign currency transactions is included in the accompanying Statement of Operations.

Repurchase Agreements:
    The Funds may enter into repurchase agreements with institutions that the Funds’ investment adviser has determined are creditworthy. Each Fund restricts repurchase agreements to maturities of no more than seven days. Securities pledged as collateral for repurchase agreements, which are held until maturity of the repurchase agreements, are marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest). Repurchase agreements could involve certain risks in the event of default or insolvency of the counter-party, including possible delays or restrictions upon the ability of each Fund to dispose of its underlying securities.

Foreign Currency:
    Net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, expiration of currency forward contracts, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on each Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities, including investments in securities at the end of the reporting period, as a result of changes in foreign currency exchange rates.

Securities Lending:
    The Funds loan securities to qualified institutional investors for the purpose of realizing additional income. Collateral for the Funds on all securities loaned is accepted in cash and cash equivalents and invested temporarily by the custodian. The collateral maintained is at least 100% of the current market value of the loaned securities. The market value of the loaned securities is determined at the close of business of the Funds and any additional required collateral is delivered to the Funds on the next business day. The Funds retain the risk of any loss on the securities on loan as well as incurring the potential loss on investments purchased with cash collateral received for securities lending.

Distributions and Taxes:
    As qualified regulated investment companies under Subchapter M of the Internal Revenue Code, the Funds are not subject to income taxes to the extent that each Fund distributes substantially all of its taxable income for its fiscal year.
    Royce Total Return Fund and Royce Dividend Value Fund pay any dividends from net investment income quarterly and make any distributions from net realized gains annually in December. The other Funds pay any dividends and capital gain distributions annually in December. Dividends from net investment income are determined at a class level and distributions from capital gains are determined at a Fund level. Because federal income tax regulations differ from generally accepted accounting principles, income and capital gain distributions determined in accordance with tax

The Royce Funds 2010 Annual Report to Shareholders | 145


 

Notes to Financial Statements (continued)
 

Distributions and Taxes (continued):
regulations may differ from net investment income and realized gains recognized for financial reporting purposes. Accordingly, the character of distributions and composition of net assets for tax purposes differ from those reflected in the accompanying financial statements.

Investment Transactions and Related Investment Income:
    Investment transactions are accounted for on the trade date. Dividend income is recorded on the ex-dividend date. Non-cash dividend income is recorded at the fair market value of the securities received. Interest income is recorded on an accrual basis. Premium and discounts on debt securities are amortized using the effective yield-to-maturity method. Realized gains and losses from investment transactions are determined on the basis of identified cost for book and tax purposes.

Expenses:
    The Funds incur direct and indirect expenses. Expenses directly attributable to a Fund are charged to the Fund’s operations, while expenses applicable to more than one series of the Trust are allocated equitably. Certain personnel, occupancy costs and other administrative expenses related to The Royce Funds are allocated by Royce under an administration agreement and are included in administrative and office facilities and legal expenses. The Fund has adopted a deferred fee agreement that allows the Trustees to defer the receipt of all or a portion of trustees’ fees otherwise payable. The deferred fees are invested in certain Royce Funds until distributed in accordance with the agreement.

Compensating Balance Credits:
    The Funds have arrangements with their custodian bank and transfer agent, whereby a portion of the custodian’s fee and transfer agent’s fee is paid indirectly by credits earned on a Fund’s cash on deposit with the bank and transfer agent. These deposit arrangements are an alternative to purchasing overnight investments. Conversely, a Fund pays interest to the custodian on any cash overdrafts, to the extent they are not offset by credits earned on positive cash balances.

Line of Credit:
    The Funds, along with certain other Royce Funds, participate in a $75 million line of credit (“Credit Agreement”) to be used for temporary or emergency purposes. This 364-day revolving Credit Agreement expires on July 15, 2011. Pursuant to the Credit Agreement, each participating Fund is liable only for principal and interest payments related to borrowings made by that Fund. Borrowings under the Credit Agreement bear interest at a rate equal to the higher of the federal funds rate + 1.25% or overnight LIBOR + 1.25%. The Funds did not utilize the line of credit during the period ended December 31, 2010.

Capital Share Transactions (in dollars):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares sold

 

Shares issued for reinvestment of distributions

 

Shares redeemed

 

Net increase (decrease) from capital share transactions

 

 

 

  

 

  

 

  

 

  

 

 

 

Period ended 12/31/10

 

Period ended 12/31/09

 

Period ended 12/31/10

 

Period ended 12/31/09

 

Period ended 12/31/10

 

Period ended 12/31/09

 

Period ended 12/31/10

 

Period ended 12/31/09

 
                                   

Royce Pennsylvania Mutual Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

$

1,021,481,166

 

$

993,063,566

 

$

18,616,325

 

$

2,453,668

 

$

(728,341,832

)

$

(616,489,454

)

$

311,755,659

 

$

379,027,780

 

Service Class

 

 

375,014,152

 

 

467,658,337

 

 

—

 

 

—

 

 

(669,894,876

)

 

(114,848,491

)

 

(294,880,724

)

 

352,809,846

 

Consultant Class

 

 

64,532,975

 

 

67,621,287

 

 

—

 

 

—

 

 

(141,196,664

)

 

(143,893,615

)

 

(76,663,689

)

 

(76,272,328

)

R Class

 

 

9,629,657

 

 

7,013,579

 

 

5,842

 

 

—

 

 

(4,838,832

)

 

(4,944,329

)

 

4,796,667

 

 

2,069,250

 

K Class

 

 

1,868,949

 

 

2,188,355

 

 

1,209

 

 

—

 

 

(665,377

)

 

(1,435,679

)

 

1,204,781

 

 

752,676

 
                                                   

Royce Micro-Cap Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

245,026,926

 

 

274,755,883

 

 

13,933,478

 

 

10,180,845

 

 

(250,609,490

)

 

(154,670,253

)

 

8,350,914

 

 

130,266,475

 

Service Class

 

 

50,199,457

 

 

54,858,097

 

 

1,817,837

 

 

1,066,422

 

 

(24,255,371

)

 

(24,077,605

)

 

27,761,923

 

 

31,846,914

 

Consultant Class

 

 

16,478,416

 

 

22,597,949

 

 

1,412,350

 

 

1,080,120

 

 

(25,488,446

)

 

(27,126,043

)

 

(7,597,680

)

 

(3,447,974

)
                                                   

Royce Premier Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

1,023,867,278

 

 

963,110,437

 

 

60,677,340

 

 

—

 

 

(990,800,103

)

 

(581,407,407

)

 

93,744,515

 

 

381,703,030

 

Service Class

 

 

212,183,471

 

 

145,503,832

 

 

7,533,718

 

 

—

 

 

(117,113,632

)

 

(59,919,196

)

 

102,603,557

 

 

85,584,636

 

Consultant Class

 

 

12,180,780

 

 

25,689,866

 

 

989,567

 

 

—

 

 

(13,629,915

)

 

(7,401,792

)

 

(459,568

)

 

18,288,074

 

Institutional Class

 

 

151,651,283

 

 

136,898,688

 

 

8,919,376

 

 

—

 

 

(103,693,827

)

 

(96,211,164

)

 

56,876,832

 

 

40,687,524

 

W Class

 

 

124,612,526

 

 

127,104,144

 

 

2,911,987

 

 

—

 

 

(103,816,166

)

 

(123,907,685

)

 

23,708,347

 

 

3,196,459

 

R Class

 

 

7,193,721

 

 

2,085,562

 

 

126,237

 

 

—

 

 

(1,242,668

)

 

(195,179

)

 

6,077,290

 

 

1,890,383

 

K Class

 

 

2,300,659

 

 

1,708,570

 

 

93,135

 

 

—

 

 

(672,840

)

 

(452,072

)

 

1,720,954

 

 

1,256,498

 
                                                   

Royce Low-Priced Stock Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

60,223,068

 

 

27,456,500

 

 

1,426,231

 

 

267,431

 

 

(39,465,143

)

 

(32,773,940

)

 

22,184,156

 

 

(5,050,009

)

Service Class

 

 

640,095,579

 

 

569,977,299

 

 

37,942,086

 

 

3,156,857

 

 

(663,010,786

)

 

(676,531,522

)

 

15,026,879

 

 

(103,397,366

)

Institutional Class

 

 

256,842,683

 

 

127,077,304

 

 

13,493,631

 

 

2,033,713

 

 

(88,831,937

)

 

(301,299,357

)

 

181,504,377

 

 

(172,188,340

)

R Class

 

 

1,580,738

 

 

868,934

 

 

33,954

 

 

31

 

 

(379,809

)

 

(85,214

)

 

1,234,883

 

 

783,751

 

K Class

 

 

4,069,123

 

 

668,408

 

 

91,477

 

 

2,710

 

 

(904,178

)

 

(121,860

)

 

3,256,422

 

 

549,258

 

146 | The Royce Funds 2010 Annual Report to Shareholders


 
 

 

Capital Share Transactions (in dollars) (continued):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares sold

 

Shares issued for reinvestment of distributions

 

Shares redeemed

 

Net increase (decrease) from capital share transactions

 

 

 

  

 

  

 

  

 

  

 

 

 

Period ended 12/31/10

 

Period ended 12/31/09

 

Period ended 12/31/10

 

Period ended 12/31/09

 

Period ended 12/31/10

 

Period ended 12/31/09

 

Period ended 12/31/10

 

Period ended 12/31/09

 
                                   

Royce Total Return Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

$

595,300,600

 

$

609,097,390

 

$

38,890,681

 

$

35,441,140

 

$

(788,488,157

)

$

(736,047,718

)

$

(154,296,876

)

$

(91,509,188

)

Service Class

 

 

117,247,421

 

 

84,991,931

 

 

2,154,755

 

 

1,968,232

 

 

(91,665,765

)

 

(71,940,232

)

 

27,736,411

 

 

15,019,931

 

Consultant Class

 

 

26,461,371

 

 

22,731,048

 

 

1,202,598

 

 

1,607,528

 

 

(74,880,808

)

 

(84,056,049

)

 

(47,216,839

)

 

(59,717,473

)

Institutional Class

 

 

99,549,949

 

 

61,211,702

 

 

4,433,493

 

 

3,482,778

 

 

(77,467,978

)

 

(42,057,336

)

 

26,515,464

 

 

22,637,144

 

W Class

 

 

34,556,183

 

 

20,536,531

 

 

659,228

 

 

740,993

 

 

(21,204,039

)

 

(48,725,266

)

 

14,011,372

 

 

(27,447,742

)

R Class

 

 

13,538,892

 

 

4,763,429

 

 

57,119

 

 

24,162

 

 

(2,670,536

)

 

(2,348,313

)

 

10,925,475

 

 

2,439,278

 

K Class

 

 

69,287,066

 

 

67,478,616

 

 

615,594

 

 

462,195

 

 

(30,109,297

)

 

(52,302,289

)

 

39,793,363

 

 

15,638,522

 
                                                   

Royce Heritage Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

2,036,981

 

 

1,706,371

 

 

304,569

 

 

—

 

 

(1,573,624

)

 

(261,883

)

 

767,926

 

 

1,444,488

 

Service Class

 

 

55,802,911

 

 

68,353,903

 

 

5,456,092

 

 

—

 

 

(46,066,420

)

 

(15,518,846

)

 

15,192,583

 

 

52,835,057

 

Consultant Class

 

 

4,578,016

 

 

1,536,327

 

 

265,346

 

 

—

 

 

(1,652,406

)

 

(986,336

)

 

3,190,956

 

 

549,991

 

R Class

 

 

837,908

 

 

746,648

 

 

48,733

 

 

—

 

 

(124,985

)

 

(96,014

)

 

761,656

 

 

650,634

 

K Class

 

 

4,343,321

 

 

304,274

 

 

152,012

 

 

—

 

 

(460,984

)

 

(158,759

)

 

4,034,349

 

 

145,515

 
                                                   

Royce Opportunity Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

375,263,712

 

 

151,455,534

 

 

—

 

 

87,471

 

 

(326,659,349

)

 

(228,928,945

)

 

48,604,363

 

 

(77,385,940

)

Service Class

 

 

192,973,474

 

 

111,366,615

 

 

—

 

 

—

 

 

(261,598,825

)

 

(91,371,033

)

 

(68,625,351

)

 

19,995,582

 

Consultant Class

 

 

4,501,500

 

 

1,680,560

 

 

—

 

 

—

 

 

(1,710,528

)

 

(1,422,806

)

 

2,790,972

 

 

257,754

 

Institutional Class

 

 

142,341,079

 

 

142,303,773

 

 

—

 

 

768,442

 

 

(112,563,866

)

 

(145,467,912

)

 

29,777,213

 

 

(2,395,697

)

R Class

 

 

1,052,405

 

 

288,287

 

 

—

 

 

—

 

 

(239,907

)

 

(56,494

)

 

812,498

 

 

231,793

 

K Class

 

 

6,276,296

 

 

372,004

 

 

—

 

 

—

 

 

(979,077

)

 

(166,731

)

 

5,297,219

 

 

205,273

 
                                                   

Royce Special Equity Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

715,355,403

 

 

521,753,915

 

 

3,824,253

 

 

3,134,446

 

 

(280,326,141

)

 

(151,057,488

)

 

438,853,515

 

 

373,830,873

 

Service Class

 

 

96,747,229

 

 

59,459,845

 

 

206,806

 

 

203,927

 

 

(30,054,143

)

 

(5,616,234

)

 

66,899,892

 

 

54,047,538

 

Consultant Class

 

 

16,120,058

 

 

9,085,788

 

 

—

 

 

—

 

 

(3,666,621

)

 

(3,418,316

)

 

12,453,437

 

 

5,667,472

 

Institutional Class

 

 

141,266,593

 

 

97,475,741

 

 

1,443,464

 

 

1,111,120

 

 

(44,638,137

)

 

(31,123,176

)

 

98,071,920

 

 

67,463,685

 
                                                   

Royce Value Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

49,545,899

 

 

44,839,359

 

 

214,510

 

 

—

 

 

(22,881,502

)

 

(7,866,817

)

 

26,878,907

 

 

36,972,542

 

Service Class

 

 

317,849,506

 

 

404,232,843

 

 

1,017,552

 

 

—

 

 

(361,968,381

)

 

(265,784,589

)

 

(43,101,323

)

 

138,448,254

 

Consultant Class

 

 

6,486,593

 

 

8,183,054

 

 

—

 

 

—

 

 

(5,552,294

)

 

(3,561,541

)

 

934,299

 

 

4,621,513

 

Institutional Class

 

 

46,681,429

 

 

33,400,280

 

 

876,119

 

 

—

 

 

(38,899,254

)

 

(30,018,340

)

 

8,658,294

 

 

3,381,940

 

R Class

 

 

18,765,661

 

 

6,609,269

 

 

7,422

 

 

—

 

 

(2,947,961

)

 

(1,361,423

)

 

15,825,122

 

 

5,247,846

 

K Class

 

 

8,278,537

 

 

2,716,479

 

 

20,566

 

 

—

 

 

(2,149,774

)

 

(604,158

)

 

6,149,329

 

 

2,112,321

 
                                                   

Royce Value Plus Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

112,455,416

 

 

116,957,162

 

 

1,234,530

 

 

—

 

 

(129,036,936

)

 

(42,376,398

)

 

(15,346,990

)

 

74,580,764

 

Service Class

 

 

422,495,842

 

 

673,823,258

 

 

6,218,181

 

 

—

 

 

(899,465,894

)

 

(597,593,678

)

 

(470,751,871

)

 

76,229,580

 

Consultant Class

 

 

1,503,660

 

 

4,179,085

 

 

—

 

 

—

 

 

(7,544,997

)

 

(8,185,325

)

 

(6,041,337

)

 

(4,006,240

)

Institutional Class

 

 

117,655,144

 

 

202,406,452

 

 

2,221,522

 

 

—

 

 

(122,842,800

)

 

(71,957,213

)

 

(2,966,134

)

 

130,449,239

 

R Class

 

 

211,969

 

 

508,814

 

 

2,932

 

 

—

 

 

(60,350

)

 

(312,672

)

 

154,551

 

 

196,142

 

K Class

 

 

679,901

 

 

1,161,025

 

 

10,125

 

 

—

 

 

(483,344

)

 

(198,611

)

 

206,682

 

 

962,414

 
                                                   

Royce 100 Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

29,781,027

 

 

13,884,627

 

 

597,115

 

 

—

 

 

(10,416,601

)

 

(2,092,342

)

 

19,961,541

 

 

11,792,285

 

Service Class

 

 

172,989,231

 

 

138,133,327

 

 

3,859,949

 

 

—

 

 

(71,506,064

)

 

(19,452,204

)

 

105,343,116

 

 

118,681,123

 

R Class

 

 

1,279,852

 

 

186,635

 

 

13,212

 

 

—

 

 

(452,888

)

 

(19,981

)

 

840,176

 

 

166,654

 

K Class

 

 

2,621,155

 

 

158,170

 

 

25,750

 

 

—

 

 

(304,777

)

 

(129,325

)

 

2,342,128

 

 

28,845

 
                                                   

Royce Discovery Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service Class

 

 

326,254

 

 

278,467

 

 

—

 

 

—

 

 

(176,917

)

 

(318,922

)

 

149,337

 

 

(40,455

)
                                                   

Royce Financial Services Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service Class

 

 

3,491,364

 

 

6,254,114

 

 

207,318

 

 

106,477

 

 

(4,494,327

)

 

(5,548,717

)

 

(795,645

)

 

811,874

 
                                                   

Royce Dividend Value Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

32,140,043

 

 

10,184,027

 

 

392,085

 

 

78,488

 

 

(15,295,195

)

 

(577,704

)

 

17,236,933

 

 

9,684,811

 

Service Class

 

 

92,086,119

 

 

9,567,065

 

 

902,308

 

 

99,681

 

 

(5,838,649

)

 

(1,295,754

)

 

87,149,778

 

 

8,370,992

 
                                                   

Royce European Smaller-Companies Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service Class

 

 

7,242,229

 

 

2,220,253

 

 

133,619

 

 

100,027

 

 

(1,823,997

)

 

(1,413,630

)

 

5,551,851

 

 

906,650

 
                                                   

Royce Global Value Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

6,075,100

 

 

 

 

 

24,125

 

 

 

 

 

(4,966

)

 

 

 

 

6,094,259

 

 

 

 

Service Class

 

 

83,554,835

 

 

14,999,576

 

 

625,530

 

 

244,439

 

 

(16,612,180

)

 

(13,038,113

)

 

67,568,185

 

 

2,205,902

 

The Royce Funds 2010 Annual Report to Shareholders | 147


 

Notes to Financial Statements (continued)
 

 

Capital Share Transactions (in dollars) (continued):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares sold

 

Shares issued for reinvestment of distributions

 

Shares redeemed

 

Net increase (decrease) from capital share transactions

 

 

 

  

 

  

 

  

 

  

 

 

 

Period ended 12/31/10

 

Period ended 12/31/09

 

Period ended 12/31/10

 

Period ended 12/31/09

 

Period ended 12/31/10

 

Period ended 12/31/09

 

Period ended 12/31/10

 

Period ended 12/31/09

 
                                   

Royce SMid-Cap Value Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service Class

 

$

2,306,077

 

$

858,186

 

$

—

 

$

7,287

 

$

(4,470,194

)

$

(8,385,190

)

$

(2,164,117

)

$

(7,519,717

)
                                                   

Royce International Smaller-Companies Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service Class

 

 

10,656,114

 

 

4,781,029

 

 

412,206

 

 

6,944

 

 

(3,509,079

)

 

(629,658

)

 

7,559,241

 

 

4,158,315

 
                                                   

Royce Focus Value Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service Class

 

 

3,276,473

 

 

3,721,032

 

 

241,674

 

 

152,281

 

 

(417,679

)

 

(34,272

)

 

3,100,468

 

 

3,839,041

 
                                                   

Royce Partners Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service Class

 

 

99,583

 

 

1,326,043

 

 

72,698

 

 

—

 

 

(106,884

)

 

(7,830

)

 

65,397

 

 

1,318,213

 
                                                   

Royce Mid-Cap Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service Class

 

 

4,991,388

 

 

 

 

 

—

 

 

 

 

 

(725,417

)

 

 

 

 

4,265,971

 

 

 

 

Capital Share Transactions (in shares):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares sold

 

Shares issued for reinvestment of distributions

 

Shares redeemed

 

Net increase (decrease) in shares outstanding

 

 

 

  

 

  

 

  

 

  

 

 

 

Period ended 12/31/10

 

Period ended 12/31/09

 

Period ended 12/31/10

 

Period ended 12/31/09

 

Period ended 12/31/10

 

Period ended 12/31/09

 

Period ended 12/31/10

 

Period ended 12/31/09

 
                                   

Royce Pennsylvania Mutual Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

101,110,350

 

 

128,954,661

 

 

1,631,580

 

 

269,928

 

 

(72,768,989

)

 

(83,480,643

)

 

29,972,941

 

 

45,743,946

 

Service Class

 

 

38,047,623

 

 

64,120,842

 

 

—

 

 

—

 

 

(64,257,471

)

 

(16,174,620

)

 

(26,209,848

)

 

47,946,222

 

Consultant Class

 

 

7,044,939

 

 

9,653,720

 

 

—

 

 

—

 

 

(15,388,040

)

 

(21,257,753

)

 

(8,343,101

)

 

(11,604,033

)

R Class

 

 

995,466

 

 

913,488

 

 

522

 

 

—

 

 

(489,108

)

 

(623,547

)

 

506,880

 

 

289,941

 

K Class

 

 

206,383

 

 

311,883

 

 

117

 

 

—

 

 

(74,476

)

 

(197,735

)

 

132,024

 

 

114,148

 
                                                   

Royce Micro-Cap Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

16,721,387

 

 

24,606,119

 

 

818,173

 

 

770,692

 

 

(17,371,149

)

 

(14,704,008

)

 

168,411

 

 

10,672,803

 

Service Class

 

 

3,356,423

 

 

5,244,026

 

 

107,628

 

 

81,282

 

 

(1,666,813

)

 

(2,281,052

)

 

1,797,238

 

 

3,044,256

 

Consultant Class

 

 

1,243,087

 

 

2,179,405

 

 

91,533

 

 

89,935

 

 

(1,916,627

)

 

(2,926,337

)

 

(582,007

)

 

(656,997

)
                                                   

Royce Premier Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

58,441,794

 

 

69,138,504

 

 

3,069,162

 

 

—

 

 

(57,533,512

)

 

(44,443,445

)

 

3,977,444

 

 

24,695,059

 

Service Class

 

 

12,254,979

 

 

10,655,818

 

 

386,344

 

 

—

 

 

(6,886,422

)

 

(4,543,363

)

 

5,754,901

 

 

6,112,455

 

Consultant Class

 

 

758,406

 

 

1,919,946

 

 

54,134

 

 

—

 

 

(822,849

)

 

(606,098

)

 

(10,309

)

 

1,313,848

 

Institutional Class

 

 

8,510,569

 

 

10,074,601

 

 

448,210

 

 

—

 

 

(5,979,587

)

 

(7,246,499

)

 

2,979,192

 

 

2,828,102

 

W Class

 

 

7,141,869

 

 

9,480,970

 

 

146,922

 

 

—

 

 

(5,974,561

)

 

(9,091,961

)

 

1,314,230

 

 

389,009

 

R Class

 

 

411,800

 

 

144,674

 

 

6,524

 

 

—

 

 

(70,594

)

 

(13,329

)

 

347,730

 

 

131,345

 

K Class

 

 

250,706

 

 

235,283

 

 

9,158

 

 

—

 

 

(74,155

)

 

(58,922

)

 

185,709

 

 

176,361

 
                                                   

Royce Low-Priced Stock Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

3,887,888

 

 

2,526,545

 

 

79,946

 

 

19,751

 

 

(2,622,542

)

 

(2,889,842

)

 

1,345,292

 

 

(343,546

)

Service Class

 

 

41,918,039

 

 

51,509,283

 

 

2,131,578

 

 

233,496

 

 

(44,731,293

)

 

(65,992,252

)

 

(681,676

)

 

(14,249,473

)

Institutional Class

 

 

16,269,786

 

 

11,781,140

 

 

755,522

 

 

150,090

 

 

(6,069,850

)

 

(24,363,674

)

 

10,955,458

 

 

(12,432,444

)

R Class

 

 

103,709

 

 

80,581

 

 

1,929

 

 

2

 

 

(24,898

)

 

(7,398

)

 

80,740

 

 

73,185

 

K Class

 

 

417,054

 

 

84,216

 

 

8,024

 

 

310

 

 

(90,599

)

 

(15,303

)

 

334,479

 

 

69,223

 
                                                   

Royce Total Return Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

51,349,868

 

 

66,691,360

 

 

3,363,155

 

 

4,096,644

 

 

(68,825,212

)

 

(82,503,619

)

 

(14,112,189

)

 

(11,715,615

)

Service Class

 

 

10,027,392

 

 

9,795,833

 

 

190,183

 

 

234,616

 

 

(7,774,768

)

 

(8,010,935

)

 

2,442,807

 

 

2,019,514

 

Consultant Class

 

 

2,233,488

 

 

2,463,647

 

 

106,582

 

 

200,193

 

 

(6,441,621

)

 

(9,500,170

)

 

(4,101,551

)

 

(6,836,330

)

Institutional Class

 

 

8,759,355

 

 

6,701,977

 

 

380,496

 

 

396,949

 

 

(6,499,135

)

 

(4,612,272

)

 

2,640,716

 

 

2,486,654

 

W Class

 

 

3,016,907

 

 

2,368,224

 

 

56,074

 

 

87,706

 

 

(1,821,665

)

 

(5,513,102

)

 

1,251,316

 

 

(3,057,172

)

R Class

 

 

1,135,434

 

 

496,178

 

 

5,065

 

 

2,957

 

 

(226,077

)

 

(243,470

)

 

914,422

 

 

255,665

 

K Class

 

 

7,402,335

 

 

9,621,859

 

 

66,901

 

 

64,641

 

 

(3,334,675

)

 

(6,642,677

)

 

4,134,561

 

 

3,043,823

 
                                                   

Royce Heritage Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

150,046

 

 

161,964

 

 

20,776

 

 

—

 

 

(118,424

)

 

(25,903

)

 

52,398

 

 

136,061

 

Service Class

 

 

4,374,299

 

 

6,850,069

 

 

373,705

 

 

—

 

 

(3,662,221

)

 

(1,594,394

)

 

1,085,783

 

 

5,255,675

 

Consultant Class

 

 

420,013

 

 

182,279

 

 

21,839

 

 

—

 

 

(156,180

)

 

(127,315

)

 

285,672

 

 

54,964

 

R Class

 

 

83,174

 

 

88,228

 

 

4,313

 

 

—

 

 

(11,604

)

 

(10,425

)

 

75,883

 

 

77,803

 

K Class

 

 

447,333

 

 

38,592

 

 

13,405

 

 

—

 

 

(44,699

)

 

(18,678

)

 

416,039

 

 

19,914

 

148 | The Royce Funds 2010 Annual Report to Shareholders

 
 

Capital Share Transactions (in shares) (continued):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares sold

 

Shares issued for
reinvestment of distributions

 

Shares redeemed

 

Net increase (decrease) in
shares outstanding

 

 

 

  

 

  

 

  

 

    

 

 

Period ended
12/31/10

 

Period ended
12/31/09

 

Period ended
12/31/10

 

Period ended
12/31/09

 

Period ended
12/31/10

 

Period ended
12/31/09

 

Period ended
12/31/10

 

Period ended
12/31/09

 
                                   

Royce Opportunity Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

36,826,637

 

 

22,727,090

 

 

—

 

 

10,220

 

 

(32,589,167

)

 

(34,528,859

)

 

4,237,470

 

 

(11,791,549

)

Service Class

 

 

19,011,793

 

 

17,769,715

 

 

—

 

 

—

 

 

(26,272,300

)

 

(13,752,892

)

 

(7,260,507

)

 

4,016,823

 

Consultant Class

 

 

458,104

 

 

234,503

 

 

—

 

 

—

 

 

(178,812

)

 

(237,198

)

 

279,292

 

 

(2,695

)

Institutional Class

 

 

13,727,224

 

 

20,709,406

 

 

—

 

 

89,250

 

 

(11,325,662

)

 

(20,845,121

)

 

2,401,562

 

 

(46,465

)

R Class

 

 

104,496

 

 

35,999

 

 

—

 

 

—

 

 

(23,466

)

 

(9,225

)

 

81,030

 

 

26,774

 

K Class

 

 

679,650

 

 

51,871

 

 

—

 

 

—

 

 

(108,059

)

 

(21,863

)

 

571,591

 

 

30,008

 
                                                   

Royce Special Equity Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

38,299,308

 

 

34,709,215

 

 

184,925

 

 

184,923

 

 

(15,350,204

)

 

(9,855,702

)

 

23,134,029

 

 

25,038,436

 

Service Class

 

 

5,187,766

 

 

3,787,341

 

 

10,015

 

 

12,046

 

 

(1,616,364

)

 

(356,802

)

 

3,581,417

 

 

3,442,585

 

Consultant Class

 

 

888,340

 

 

613,647

 

 

—

 

 

—

 

 

(205,355

)

 

(241,164

)

 

682,985

 

 

372,483

 

Institutional Class

 

 

7,710,142

 

 

6,212,829

 

 

70,071

 

 

65,786

 

 

(2,443,673

)

 

(2,063,317

)

 

5,336,540

 

 

4,215,298

 
                                                   

Royce Value Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

4,503,426

 

 

4,896,838

 

 

17,299

 

 

—

 

 

(2,083,054

)

 

(994,635

)

 

2,437,671

 

 

3,902,203

 

Service Class

 

 

29,677,258

 

 

48,816,094

 

 

82,326

 

 

—

 

 

(34,261,304

)

 

(33,117,885

)

 

(4,501,720

)

 

15,698,209

 

Consultant Class

 

 

618,137

 

 

973,408

 

 

—

 

 

—

 

 

(545,534

)

 

(489,694

)

 

72,603

 

 

483,714

 

Institutional Class

 

 

4,299,637

 

 

3,904,032

 

 

70,598

 

 

—

 

 

(3,572,609

)

 

(3,785,684

)

 

797,626

 

 

118,348

 

R Class

 

 

1,786,143

 

 

713,415

 

 

606

 

 

—

 

 

(279,178

)

 

(152,162

)

 

1,507,571

 

 

561,253

 

K Class

 

 

931,951

 

 

385,079

 

 

1,997

 

 

—

 

 

(240,755

)

 

(88,792

)

 

693,193

 

 

296,287

 
                                                   

Royce Value Plus Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

9,643,732

 

 

12,430,441

 

 

93,102

 

 

—

 

 

(10,310,055

)

 

(4,582,728

)

 

(573,221

)

 

7,847,713

 

Service Class

 

 

35,983,196

 

 

73,697,489

 

 

471,789

 

 

—

 

 

(76,585,725

)

 

(65,796,465

)

 

(40,130,740

)

 

7,901,024

 

Consultant Class

 

 

131,986

 

 

460,614

 

 

—

 

 

—

 

 

(652,487

)

 

(949,469

)

 

(520,501

)

 

(488,855

)

Institutional Class

 

 

10,031,511

 

 

21,362,295

 

 

167,536

 

 

—

 

 

(10,323,416

)

 

(7,706,026

)

 

(124,369

)

 

13,656,269

 

R Class

 

 

18,510

 

 

53,631

 

 

226

 

 

—

 

 

(5,314

)

 

(37,793

)

 

13,422

 

 

15,838

 

K Class

 

 

78,291

 

 

190,221

 

 

1,056

 

 

—

 

 

(55,768

)

 

(29,640

)

 

23,579

 

 

160,581

 
                                                   

Royce 100 Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

3,459,608

 

 

2,037,878

 

 

62,329

 

 

—

 

 

(1,231,178

)

 

(352,066

)

 

2,290,759

 

 

1,685,812

 

Service Class

 

 

20,571,872

 

 

20,228,994

 

 

405,457

 

 

—

 

 

(8,444,144

)

 

(2,905,008

)

 

12,533,185

 

 

17,323,986

 

R Class

 

 

126,780

 

 

23,103

 

 

1,155

 

 

—

 

 

(43,144

)

 

(2,167

)

 

84,791

 

 

20,936

 

K Class

 

 

254,869

 

 

19,972

 

 

2,233

 

 

—

 

 

(29,663

)

 

(14,326

)

 

227,439

 

 

5,646

 
                                                   

Royce Discovery Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service Class

 

 

67,564

 

 

78,799

 

 

—

 

 

—

 

 

(37,528

)

 

(84,145

)

 

30,036

 

 

(5,346

)
                                                   

Royce Financial Services Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service Class

 

 

602,019

 

 

1,286,610

 

 

32,474

 

 

19,609

 

 

(801,725

)

 

(1,126,842

)

 

(167,232

)

 

179,377

 
                                                   

Royce Dividend Value Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

5,414,498

 

 

2,112,380

 

 

64,249

 

 

16,916

 

 

(2,725,647

)

 

(122,659

)

 

2,753,100

 

 

2,006,637

 

Service Class

 

 

15,000,568

 

 

2,036,287

 

 

144,056

 

 

23,076

 

 

(974,160

)

 

(280,462

)

 

14,170,464

 

 

1,778,901

 
                                                   

Royce European Smaller-Companies Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service Class

 

 

758,743

 

 

292,045

 

 

12,689

 

 

12,553

 

 

(202,383

)

 

(228,860

)

 

569,049

 

 

75,738

 
                                                   

Royce Global Value Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

454,322

 

 

 

 

 

1,698

 

 

 

 

 

(348

)

 

 

 

 

455,672

 

 

 

 

Service Class

 

 

6,453,160

 

 

1,694,091

 

 

43,959

 

 

23,302

 

 

(1,461,080

)

 

(1,630,911

)

 

5,036,039

 

 

86,482

 
                                                   

Royce SMid-Cap Value Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service Class

 

 

229,339

 

 

110,575

 

 

—

 

 

835

 

 

(498,691

)

 

(1,291,805

)

 

(269,352

)

 

(1,180,395

)
                                                   

Royce International Smaller-Companies Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service Class

 

 

948,228

 

 

535,293

 

 

32,898

 

 

670

 

 

(307,842

)

 

(66,043

)

 

673,284

 

 

469,920

 
                                                   

Royce Focus Value Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service Class

 

 

227,732

 

 

315,435

 

 

14,854

 

 

10,531

 

 

(27,225

)

 

(2,377

)

 

215,361

 

 

323,589

 
                                                   

Royce Partners Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service Class

 

 

8,177

 

 

130,517

 

 

5,627

 

 

—

 

 

(8,943

)

 

(688

)

 

4,861

 

 

129,829

 
                                                   

Royce Mid-Cap Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service Class

 

 

482,804

 

 

 

 

 

—

 

 

 

 

 

(70,675

)

 

 

 

 

412,129

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Royce Funds 2010 Annual Report to Shareholders | 149


 

Notes to Financial Statements (continued)
 

Investment Adviser and Distributor:
    Investment Adviser: Under the Trust’s investment advisory agreements with Royce, Royce is entitled to receive Investment Advisory fees that are computed daily and payable monthly. Royce’s commitment to waive its fees and reimburse class-specific expenses to the extent necessary to maintain certain Funds’ net annual operating expense ratios at specified levels through April 30, 2011, is shown below to the extent that it impacted net expenses for the period ended December 31, 2010. See the Prospectus for contractual waiver expiration dates.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Annual contractual
advisory fee as a

 

Committed net annual
operating expense ratio capc

 

Period ended
December 31, 2010

 

 

 

 

 

 

  

 

    

 

 

percentage of
average net assetsa

 

Investment
Class

 

Service
Class

 

Consultant
Class

 

Institutional
Class

 

W Class

 

R Class

 

K Class

 

Net advisory
fees

 

Advisory
fees waived

 

Royce Pennsylvania Mutual Fund

 

 

0.75%b

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

1.59%

 

$

40,852,642

 

$

—

 

Royce Micro-Cap Fund

 

 

1.30%

 

 

N/A

 

 

1.66%

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

15,235,767

 

 

—

 

Royce Premier Fund

 

 

0.95%

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

1.59%

 

 

54,303,172

 

 

—

 

Royce Low-Priced Stock Fund

 

 

1.13%

 

 

1.24%

 

 

1.49%

 

 

N/A

 

 

N/A

 

 

N/A

 

 

1.84%

 

 

1.59%

 

 

41,820,890

 

 

—

 

Royce Total Return Fund

 

 

0.97%

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

41,294,432

 

 

—

 

Royce Heritage Fund

 

 

1.00%

 

 

1.24%

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

1.84%

 

 

1.59%

 

 

2,302,355

 

 

—

 

Royce Opportunity Fund

 

 

1.00%

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

1.84%

 

 

1.59%

 

 

18,753,553

 

 

—

 

Royce Special Equity Fund

 

 

1.00%

 

 

N/A

 

 

1.39%

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

16,333,016

 

 

—

 

Royce Value Fund

 

 

1.00%

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

15,560,090

 

 

—

 

Royce Value Plus Fund

 

 

0.98%

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

1.84%

 

 

1.59%

 

 

30,723,547

 

 

—

 

Royce 100 Fund

 

 

1.00%

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

1.84%

 

 

1.59%

 

 

3,302,517

 

 

—

 

Royce Discovery Fund

 

 

1.00%

 

 

N/A

 

 

1.49%

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

—

 

 

30,860

 

Royce Financial Services Fund

 

 

1.00%

 

 

N/A

 

 

1.49%

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

68,967

 

 

57,441

 

Royce Dividend Value Fund

 

 

1.00%

 

 

1.24%

 

 

1.49%

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

647,038

 

 

—

 

Royce European Smaller-Companies Fund

 

 

1.25%

 

 

N/A

 

 

1.69%

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

33,068

 

 

79,498

 

Royce Global Value Fund

 

 

1.25%

 

 

1.44%

 

 

1.69%

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

854,770

 

 

—

 

Royce SMid-Cap Value Fund

 

 

1.00%

 

 

N/A

 

 

1.49%

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

5,756

 

 

45,410

 

Royce International Smaller-Companies Fund

 

 

1.25%

 

 

N/A

 

 

1.69%

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

77,942

 

 

85,757

 

Royce Focus Value Fund

 

 

1.00%

 

 

N/A

 

 

1.49%

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

50,515

 

 

16,311

 

Royce Partners Fund

 

 

1.00%

 

 

N/A

 

 

1.49%

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

—

 

 

15,352

 

Royce Mid-Cap Fund

 

 

1.00%

 

 

N/A

 

 

1.49%

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

 

2,968

 

 

34,081

 

 

 

a

From a base annual rate of 1.00% (1.30% for Royce Micro-Cap Fund, 1.15% for Royce Low-Priced Stock Fund and 1.25% for Royce European Smaller-Companies Fund, Royce Global Value Fund and Royce International Smaller-Companies Fund), the annual rates of investment advisory fees payable by each of the Funds, other than Royce Pennsylvania Mutual Fund, are reduced by the indicated amount at the following breakpoints applicable to a Fund’s net assets in excess of $2 billion: more than $2 billion to $4 billion - .05% per annum; more than $4 billion to $6 billion - .10% per annum; over $6 billion - .15% per annum.

b

Royce Pennsylvania Mutual Fund’s fees are calculated at the annual rate of 1.00% of the first $50 million of the Fund’s average net assets, 0.875% of the next $50 million of average net assets and 0.75% of average net assets in excess of $100 million.

c

Committed net annual operating expense ratio cap excludes acquired fund fees and expenses.

Distributor: Royce Fund Services, Inc. (“RFS”), the distributor of the Trust’s shares, is a wholly owned subsidiary of Royce. RFS is entitled to receive distribution fees that are computed daily and payable monthly.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Period ended December 31, 2010

 

 

 

 

 

 

    

 

 

Annual contractual distribution fee as
a percentage of average net assets

 

Net distribution
fees

 

Distribution fees
waived

 

Royce Pennsylvania Mutual Fund – Service Class

 

 

0.25%

 

$

1,531,363

 

$

116,837

 

Royce Pennsylvania Mutual Fund – Consultant Class

 

 

1.00%

 

 

7,680,044

 

 

—

 

Royce Pennsylvania Mutual Fund – R Class

 

 

0.50%

 

 

69,272

 

 

—

 

Royce Pennsylvania Mutual Fund – K Class

 

 

0.25%

 

 

6,531

 

 

—

 

Royce Micro-Cap Fund – Service Class

 

 

0.25%

 

 

255,445

 

 

—

 

Royce Micro-Cap Fund – Consultant Class

 

 

1.00%

 

 

1,569,360

 

 

—

 

Royce Premier Fund – Service Class

 

 

0.25%

 

 

1,052,471

 

 

91,519

 

Royce Premier Fund – Consultant Class

 

 

1.00%

 

 

647,225

 

 

—

 

Royce Premier Fund – R Class

 

 

0.50%

 

 

27,388

 

 

—

 

Royce Premier Fund – K Class

 

 

0.25%

 

 

6,039

 

 

—

 

Royce Low-Priced Stock Fund – Service Class

 

 

0.25%

 

 

6,545,562

 

 

569,179

 

Royce Low-Priced Stock Fund – R Class

 

 

0.50%

 

 

8,968

 

 

—

 

Royce Low-Priced Stock Fund – K Class

 

 

0.25%

 

 

6,554

 

 

—

 

Royce Total Return Fund – Service Class

 

 

0.25%

 

 

618,931

 

 

—

 

Royce Total Return Fund – Consultant Class

 

 

1.00%

 

 

3,672,587

 

 

—

 

Royce Total Return Fund – R Class

 

 

0.50%

 

 

56,316

 

 

—

 

Royce Total Return Fund – K Class

 

 

0.25%

 

 

135,259

 

 

—

 
 

 

 

 

150 | The Royce Funds 2010 Annual Report to Shareholders

 

 


 
 

Distributor (continued):


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Period ended December 31, 2010

 

 

 

 

 

 

    

 

 

Annual contractual distribution fee as
a percentage of average net assets

 

Net distribution
fees

 

Distribution fees
waived

 

Royce Heritage Fund – Service Class

 

 

0.25%

 

$

343,389

 

$

172,128

 

Royce Heritage Fund – Consultant Class

 

 

1.00%

 

 

89,401

 

 

—

 

Royce Heritage Fund – R Class

 

 

0.50%

 

 

6,545

 

 

—

 

Royce Heritage Fund – K Class

 

 

0.25%

 

 

7,650

 

 

—

 

Royce Opportunity Fund – Service Class

 

 

0.25%

 

 

737,888

 

 

—

 

Royce Opportunity Fund – Consultant Class

 

 

1.00%

 

 

98,600

 

 

—

 

Royce Opportunity Fund – R Class

 

 

0.50%

 

 

3,593

 

 

—

 

Royce Opportunity Fund – K Class

 

 

0.25%

 

 

6,259

 

 

—

 

Royce Special Equity Fund – Service Class

 

 

0.25%

 

 

249,320

 

 

33,635

 

Royce Special Equity Fund – Consultant Class

 

 

1.00%

 

 

284,716

 

 

—

 

Royce Value Fund – Service Class

 

 

0.25%

 

 

2,829,768

 

 

246,067

 

Royce Value Fund – Consultant Class

 

 

1.00%

 

 

297,714

 

 

—

 

Royce Value Fund – R Class

 

 

0.50%

 

 

82,806

 

 

—

 

Royce Value Fund – K Class

 

 

0.25%

 

 

22,057

 

 

—

 

Royce Value Plus Fund – Service Class

 

 

0.25%

 

 

5,592,594

 

 

486,312

 

Royce Value Plus Fund – Consultant Class

 

 

1.00%

 

 

301,215

 

 

—

 

Royce Value Plus Fund – R Class

 

 

0.50%

 

 

3,784

 

 

—

 

Royce Value Plus Fund – K Class

 

 

0.25%

 

 

3,927

 

 

—

 

Royce 100 Fund – Service Class

 

 

0.25%

 

 

598,734

 

 

101,044

 

Royce 100 Fund – R Class

 

 

0.50%

 

 

5,076

 

 

—

 

Royce 100 Fund – K Class

 

 

0.25%

 

 

3,007

 

 

—

 

Royce Discovery Fund – Service Class

 

 

0.25%

 

 

7,715

 

 

—

 

Royce Financial Services Fund – Service Class

 

 

0.25%

 

 

31,602

 

 

—

 

Royce Dividend Value Fund – Service Class

 

 

0.25%

 

 

91,710

 

 

22,928

 

Royce European Smaller-Companies Fund – Service Class

 

 

0.25%

 

 

22,513

 

 

—

 

Royce Global Value Fund – Service Class

 

 

0.25%

 

 

135,236

 

 

33,809

 

Royce SMid-Cap Value Fund – Service Class

 

 

0.25%

 

 

11,439

 

 

1,353

 

Royce International Smaller-Companies Fund – Service Class

 

 

0.25%

 

 

32,740

 

 

—

 

Royce Focus Value Fund – Service Class

 

 

0.25%

 

 

2,089

 

 

14,617

 

Royce Partners Fund – Service Class

 

 

0.25%

 

 

293

 

 

3,545

 

Royce Mid-Cap Fund – Service Class

 

 

0.25%

 

 

569

 

 

8,693

 

Purchases and Sales of Investment Securities:
    For the period ended December 31, 2010, the costs of purchases and the proceeds from sales of investment securities, other than short-term securities and collateral received for securities loaned, were as follows:

 

 

 

 

 

 

 

 

 

 

Purchases

 

Sales

 

Royce Pennsylvania Mutual Fund

 

$

1,299,036,789

 

$

1,332,688,981

 

Royce Micro-Cap Fund

 

 

373,257,183

 

 

401,962,558

 

Royce Premier Fund

 

 

685,919,102

 

 

484,123,704

 

Royce Low-Priced Stock Fund

 

 

852,621,866

 

 

819,321,597

 

Royce Total Return Fund

 

 

616,062,957

 

 

839,147,248

 

Royce Heritage Fund

 

 

155,038,869

 

 

145,107,912

 

Royce Opportunity Fund

 

 

827,417,411

 

 

880,716,284

 

Royce Special Equity Fund

 

 

801,559,759

 

 

282,484,624

 

Royce Value Fund

 

 

613,349,526

 

 

521,051,340

 

Royce Value Plus Fund

 

 

1,412,819,517

 

 

1,911,321,280

 

Royce 100 Fund

 

 

202,735,387

 

 

80,552,944

 

Royce Discovery Fund

 

 

3,094,468

 

 

3,053,168

 

 

 

 

 

 

 

 

 

 

 

Purchases

 

Sales

 

Royce Financial Services Fund

 

$

2,004,896

 

$

3,196,663

 

Royce Dividend Value Fund

 

 

107,080,971

 

 

12,632,857

 

Royce European Smaller-Companies Fund

 

 

7,291,229

 

 

2,666,595

 

Royce Global Value Fund

 

 

88,615,783

 

 

26,509,409

 

Royce SMid-Cap Value Fund

 

 

5,748,377

 

 

7,894,351

 

Royce International Smaller-Companies Fund

 

 

12,901,586

 

 

6,575,493

 

Royce Focus Value Fund

 

 

5,168,895

 

 

1,875,892

 

Royce Partners Fund

 

 

808,871

 

 

501,360

 

Royce Mid-Cap Fund

 

 

7,864,982

 

 

4,049,730

 

Redemptions-In-Kind:
    The Funds may make payment for Fund shares redeemed wholly or in part by distributing portfolio securities to shareholders. For the year ended December 31, 2010, Royce Special Equity Fund had redemptions-in-kind with total proceeds in the amount of $7,257,223. The net realized gain on these redemptions-in-kind amounted to $184,263, which will not be realized for tax purposes.

 

 

 

 

 

The Royce Funds 2010 Annual Report to Shareholders | 151


 

Notes to Financial Statements (continued)
 

Class Specific Expenses:
    Class specific expenses, for Funds with multiple classes, were as follows for the period ended December 31, 2010:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net
Distribution
Fees

 

 

Shareholder
Servicing

 

 

Shareholder
Reports

 

 

Registration

 

Transfer
Agent
Balance
Credits

 

Total

 

Expenses
Reimbursed by
Investment
Adviser

 

Royce Pennsylvania Mutual Fund – Investment Class

 

$

—

 

$

3,662,455

 

$

917,801

 

$

128,635

 

$

(4,205

)

$

4,704,686

 

$

—

 

Royce Pennsylvania Mutual Fund – Service Class

 

 

1,531,363

 

 

1,034,176

 

 

470,879

 

 

32,064

 

 

(71

)

 

3,068,411

 

 

—

 

Royce Pennsylvania Mutual Fund – Consultant Class

 

 

7,680,044

 

 

319,642

 

 

301,748

 

 

19,386

 

 

(1,836

)

 

8,318,984

 

 

—

 

Royce Pennsylvania Mutual Fund – R Class

 

 

69,272

 

 

28,136

 

 

2,033

 

 

2,187

 

 

(14

)

 

101,614

 

 

—

 

Royce Pennsylvania Mutual Fund – K Class

 

 

6,531

 

 

14,772

 

 

244

 

 

54

 

 

(2

)

 

21,599

 

 

309

 

 

 

 

9,287,210

 

 

5,059,181

 

 

1,692,705

 

 

182,326

 

 

(6,128

)

 

 

 

 

309

 

Royce Micro-Cap Fund – Investment Class

 

 

—

 

 

985,575

 

 

379,458

 

 

74,381

 

 

(1,751

)

 

1,437,663

 

 

—

 

Royce Micro-Cap Fund – Service Class

 

 

255,445

 

 

143,730

 

 

21,997

 

 

18,828

 

 

(149

)

 

439,851

 

 

119,152

 

Royce Micro-Cap Fund – Consultant Class

 

 

1,569,360

 

 

59,537

 

 

51,094

 

 

14,023

 

 

(352

)

 

1,693,662

 

 

—

 

 

 

 

1,824,805

 

 

1,188,842

 

 

452,549

 

 

107,232

 

 

(2,252

)

 

 

 

 

119,152

 

Royce Premier Fund – Investment Class

 

 

—

 

 

4,442,404

 

 

1,353,533

 

 

94,934

 

 

(4,632

)

 

5,886,239

 

 

—

 

Royce Premier Fund – Service Class

 

 

1,052,471

 

 

577,525

 

 

123,609

 

 

21,390

 

 

(445

)

 

1,774,550

 

 

—

 

Royce Premier Fund – Consultant Class

 

 

647,225

 

 

30,066

 

 

24,142

 

 

12,153

 

 

(174

)

 

713,412

 

 

—

 

Royce Premier Fund – Institutional Class

 

 

—

 

 

9,657

 

 

64,946

 

 

2,279

 

 

(10

)

 

76,872

 

 

—

 

Royce Premier Fund – W Class

 

 

—

 

 

40,381

 

 

86,228

 

 

14,656

 

 

(300

)

 

140,965

 

 

—

 

Royce Premier Fund – R Class

 

 

27,388

 

 

13,269

 

 

1,247

 

 

2,220

 

 

(9

)

 

44,115

 

 

—

 

Royce Premier Fund – K Class

 

 

6,039

 

 

9,417

 

 

319

 

 

72

 

 

(2

)

 

15,845

 

 

1,144

 

 

 

 

1,733,123

 

 

5,122,719

 

 

1,654,024

 

 

147,704

 

 

(5,572

)

 

 

 

 

1,144

 

Royce Low-Priced Stock Fund – Investment Class

 

 

—

 

 

74,490

 

 

16,112

 

 

12,709

 

 

(25

)

 

103,286

 

 

20,659

 

Royce Low-Priced Stock Fund – Service Class

 

 

6,545,562

 

 

4,209,170

 

 

677,784

 

 

58,387

 

 

(1,774

)

 

11,489,129

 

 

2,574,799

 

Royce Low-Priced Stock Fund – Institutional Class

 

 

—

 

 

7,690

 

 

143,442

 

 

5,591

 

 

(13

)

 

156,710

 

 

—

 

Royce Low-Priced Stock Fund – R Class

 

 

8,968

 

 

7,239

 

 

593

 

 

2,053

 

 

(5

)

 

18,848

 

 

6,661

 

Royce Low-Priced Stock Fund – K Class

 

 

6,554

 

 

9,297

 

 

352

 

 

129

 

 

(1

)

 

16,331

 

 

5,008

 

 

 

 

6,561,084

 

 

4,307,886

 

 

838,283

 

 

78,869

 

 

(1,818

)

 

 

 

 

2,607,127

 

Royce Total Return Fund – Investment Class

 

 

—

 

 

3,537,397

 

 

845,086

 

 

95,159

 

 

(3,772

)

 

4,473,870

 

 

—

 

Royce Total Return Fund – Service Class

 

 

618,931

 

 

341,851

 

 

47,743

 

 

27,136

 

 

(115

)

 

1,035,546

 

 

—

 

Royce Total Return Fund – Consultant Class

 

 

3,672,587

 

 

172,253

 

 

149,094

 

 

18,175

 

 

(954

)

 

4,011,155

 

 

—

 

Royce Total Return Fund – Institutional Class

 

 

—

 

 

7,795

 

 

16,511

 

 

5,271

 

 

(6

)

 

29,571

 

 

—

 

Royce Total Return Fund – W Class

 

 

—

 

 

9,004

 

 

29,147

 

 

11,658

 

 

(23

)

 

49,786

 

 

—

 

Royce Total Return Fund – R Class

 

 

56,316

 

 

19,988

 

 

1,485

 

 

2,246

 

 

(10

)

 

80,025

 

 

—

 

Royce Total Return Fund – K Class

 

 

135,259

 

 

98,857

 

 

919

 

 

(135

)

 

(3

)

 

234,897

 

 

—

 

 

 

 

4,483,093

 

 

4,187,145

 

 

1,089,985

 

 

159,510

 

 

(4,883

)

 

 

 

 

 

 

Royce Heritage Fund – Investment Class

 

 

—

 

 

8,097

 

 

686

 

 

11,224

 

 

(4

)

 

20,003

 

 

1,058

 

Royce Heritage Fund – Service Class

 

 

343,389

 

 

223,402

 

 

67,475

 

 

28,130

 

 

(386

)

 

662,010

 

 

—

 

Royce Heritage Fund – Consultant Class

 

 

89,401

 

 

10,414

 

 

5,021

 

 

11,220

 

 

(37

)

 

116,019

 

 

—

 

Royce Heritage Fund – R Class

 

 

6,545

 

 

5,850

 

 

631

 

 

2,137

 

 

(1

)

 

15,162

 

 

4,944

 

Royce Heritage Fund – K Class

 

 

7,650

 

 

11,073

 

 

79

 

 

32

 

 

(1

)

 

18,833

 

 

2,407

 

 

 

 

446,985

 

 

258,836

 

 

73,892

 

 

52,743

 

 

(429

)

 

 

 

 

8,409

 

Royce Opportunity Fund – Investment Class

 

 

—

 

 

1,035,015

 

 

265,308

 

 

37,688

 

 

(1,260

)

 

1,336,751

 

 

—

 

Royce Opportunity Fund – Service Class

 

 

737,888

 

 

448,517

 

 

79,306

 

 

19,632

 

 

(27

)

 

1,285,316

 

 

—

 

Royce Opportunity Fund – Consultant Class

 

 

98,600

 

 

9,595

 

 

4,888

 

 

10,911

 

 

(38

)

 

123,956

 

 

—

 

Royce Opportunity Fund – Institutional Class

 

 

—

 

 

7,361

 

 

17,462

 

 

397

 

 

(8

)

 

25,212

 

 

—

 

Royce Opportunity Fund – R Class

 

 

3,593

 

 

6,929

 

 

694

 

 

2,058

 

 

(7

)

 

13,267

 

 

7,430

 

Royce Opportunity Fund – K Class

 

 

6,259

 

 

8,553

 

 

425

 

 

166

 

 

(1

)

 

15,402

 

 

949

 

 

 

 

846,340

 

 

1,515,970

 

 

368,083

 

 

70,852

 

 

(1,341

)

 

 

 

 

8,379

 

Royce Special Equity Fund – Investment Class

 

 

—

 

 

1,086,503

 

 

362,730

 

 

108,135

 

 

(2,320

)

 

1,555,048

 

 

—

 

Royce Special Equity Fund – Service Class

 

 

249,320

 

 

149,815

 

 

47,469

 

 

27,243

 

 

(328

)

 

473,519

 

 

62,900

 

Royce Special Equity Fund – Consultant Class

 

 

284,716

 

 

17,746

 

 

11,878

 

 

11,633

 

 

(90

)

 

325,883

 

 

—

 

Royce Special Equity Fund – Institutional Class

 

 

—

 

 

13,205

 

 

6,106

 

 

5,231

 

 

(5

)

 

24,537

 

 

—

 

 

 

 

534,036

 

 

1,267,269

 

 

428,183

 

 

152,242

 

 

(2,743

)

 

 

 

 

62,900

 

 

 

 

152 | The Royce Funds 2010 Annual Report to Shareholders

 

 


 
 

Class Specific Expenses (continued):


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net
Distribution
Fees

 

Shareholder
Servicing

 

Shareholder
Reports

 

Registration

 

Transfer
Agent
Balance
Credits

 

Total

 

Expenses
Reimbursed by
Investment
Adviser

 

Royce Value Fund – Investment Class

 

$

—

 

$

75,370

 

$

25,487

 

$

13,052

 

$

(25

)

$

113,884

 

$

—

 

Royce Value Fund – Service Class

 

 

2,829,768

 

 

1,797,959

 

 

392,776

 

 

50,217

 

 

(1,866

)

 

5,068,854

 

 

—

 

Royce Value Fund – Consultant Class

 

 

297,714

 

 

17,281

 

 

14,857

 

 

12,063

 

 

(114

)

 

341,801

 

 

—

 

Royce Value Fund – Institutional Class

 

 

—

 

 

7,431

 

 

1,797

 

 

432

 

 

(4

)

 

9,656

 

 

—

 

Royce Value Fund – R Class

 

 

82,806

 

 

17,835

 

 

1,509

 

 

2,688

 

 

(13

)

 

104,825

 

 

—

 

Royce Value Fund – K Class

 

 

22,057

 

 

18,772

 

 

559

 

 

287

 

 

(3

)

 

41,672

 

 

—

 

 

 

 

3,232,345

 

 

1,934,648

 

 

436,985

 

 

78,739

 

 

(2,025

)

 

 

 

 

 

 

Royce Value Plus Fund – Investment Class

 

 

—

 

 

147,322

 

 

35,788

 

 

22,068

 

 

(378

)

 

204,800

 

 

—

 

Royce Value Plus Fund – Service Class

 

 

5,592,594

 

 

3,489,480

 

 

887,269

 

 

49,687

 

 

(1,493

)

 

10,017,537

 

 

—

 

Royce Value Plus Fund – Consultant Class

 

 

301,215

 

 

18,011

 

 

16,290

 

 

10,597

 

 

(109

)

 

346,004

 

 

—

 

Royce Value Plus Fund – Institutional Class

 

 

—

 

 

60,849

 

 

51,013

 

 

565

 

 

(7

)

 

112,420

 

 

—

 

Royce Value Plus Fund – R Class

 

 

3,784

 

 

6,935

 

 

399

 

 

2,011

 

 

(3

)

 

13,126

 

 

6,844

 

Royce Value Plus Fund – K Class

 

 

3,927

 

 

9,233

 

 

490

 

 

10

 

 

(4

)

 

13,656

 

 

4,545

 

 

 

 

5,901,520

 

 

3,731,830

 

 

991,249

 

 

84,938

 

 

(1,994

)

 

 

 

 

11,389

 

Royce 100 Fund – Investment Class

 

 

—

 

 

40,413

 

 

9,304

 

 

13,934

 

 

(54

)

 

63,597

 

 

—

 

Royce 100 Fund – Service Class

 

 

598,734

 

 

391,180

 

 

155,008

 

 

46,016

 

 

(1,024

)

 

1,189,914

 

 

—

 

Royce 100 Fund – R Class

 

 

5,076

 

 

6,553

 

 

378

 

 

8

 

 

(3

)

 

12,012

 

 

3,799

 

Royce 100 Fund – K Class

 

 

3,007

 

 

6,991

 

 

244

 

 

40

 

 

(1

)

 

10,281

 

 

3,579

 

 

 

 

606,817

 

 

445,137

 

 

164,934

 

 

59,998

 

 

(1,082

)

 

 

 

 

7,378

 

Royce Dividend Value Fund – Investment Class

 

 

—

 

 

24,142

 

 

7,937

 

 

14,519

 

 

(10

)

 

46,588

 

 

27,241

 

Royce Dividend Value Fund – Service Class

 

 

91,710

 

 

50,439

 

 

20,643

 

 

28,193

 

 

(195

)

 

190,790

 

 

10,651

 

 

 

 

91,710

 

 

74,581

 

 

28,580

 

 

42,712

 

 

(205

)

 

 

 

 

37,892

 

Royce Global Value Fund – Investment Class

 

 

—

 

 

2,936

 

 

3

 

 

2,329

 

 

—

 

 

5,268

 

 

4,788

 

Royce Global Value Fund – Service Class

 

 

135,236

 

 

87,103

 

 

15,587

 

 

27,011

 

 

(122

)

 

264,815

 

 

64,887

 

 

 

 

135,236

 

 

90,039

 

 

15,590

 

 

29,340

 

 

(122

)

 

 

 

 

69,675

 

Tax Information:
          At December 31, 2010, net unrealized appreciation (depreciation) based on identified cost for tax purposes was as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Unrealized
Appreciation

 

Gross Unrealized

 

 

 

 

 

 

 

 

 

    

 

 

Tax Basis Cost

 

(Depreciation)

 

Appreciation

 

Depreciation

 

Royce Pennsylvania Mutual Fund

 

$

4,737,333,669

 

$

1,375,373,112

 

$

1,664,644,071

 

$

289,270,959

 

Royce Micro-Cap Fund

 

 

1,135,998,793

 

 

291,804,693

 

 

371,962,292

 

 

80,157,599

 

Royce Premier Fund

 

 

4,592,917,130

 

 

2,280,639,592

 

 

2,341,767,500

 

 

61,127,908

 

Royce Low-Priced Stock Fund

 

 

3,404,883,705

 

 

1,378,631,323

 

 

1,528,554,555

 

 

149,923,232

 

Royce Total Return Fund

 

 

3,484,053,301

 

 

1,323,437,574

 

 

1,527,220,405

 

 

203,782,831

 

Royce Heritage Fund

 

 

218,249,228

 

 

62,137,735

 

 

66,120,018

 

 

3,982,283

 

Royce Opportunity Fund

 

 

1,897,840,245

 

 

349,556,576

 

 

531,578,312

 

 

182,021,736

 

Royce Special Equity Fund

 

 

1,649,325,274

 

 

477,684,414

 

 

486,711,399

 

 

9,026,985

 

Royce Value Fund

 

 

1,473,118,428

 

 

376,298,275

 

 

400,531,234

 

 

24,232,959

 

Royce Value Plus Fund

 

 

2,795,224,337

 

 

494,823,526

 

 

651,145,149

 

 

156,321,623

 

Royce 100 Fund

 

 

343,266,973

 

 

98,791,303

 

 

102,450,304

 

 

3,659,001

 

Royce Discovery Fund

 

 

3,259,771

 

 

310,070

 

 

494,842

 

 

184,772

 

Royce Financial Services Fund

 

 

12,738,209

 

 

1,840,378

 

 

3,113,358

 

 

1,272,980

 

Royce Dividend Value Fund

 

 

130,169,326

 

 

20,958,444

 

 

21,925,501

 

 

967,057

 

Royce European Smaller-Companies Fund

 

 

12,325,859

 

 

2,808,353

 

 

3,140,018

 

 

331,665

 

Royce Global Value Fund

 

 

118,989,940

 

 

25,346,174

 

 

26,127,615

 

 

781,441

 

Royce SMid-Cap Value Fund

 

 

5,255,678

 

 

940,357

 

 

1,003,933

 

 

63,576

 

Royce International Smaller-Companies Fund

 

 

14,656,245

 

 

3,388,292

 

 

3,726,836

 

 

338,544

 

Royce Focus Value Fund

 

 

7,004,838

 

 

1,958,357

 

 

2,016,501

 

 

58,144

 

Royce Partners Fund

 

 

1,488,334

 

 

311,171

 

 

336,709

 

 

25,538

 

Royce Mid-Cap Fund

 

 

4,293,549

 

 

594,222

 

 

628,888

 

 

34,666

 

    The primary difference between book and tax basis cost is the timing of the recognition of losses on securities sold, dividends accrued from Real Estate Investment Trusts, investments in publicly traded partnerships and mark-to-market of Passive Foreign Investment Companies.

 

 

 

 

 

The Royce Funds 2010 Annual Report to Shareholders | 153


 

Notes to Financial Statements (continued)
 

Tax Information (continued):
    Distributions during the periods ended December 31, 2010 and 2009 were characterized as follows for tax purposes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ordinary Income

 

Long-Term Capital Gains

 

 

 

    

 

 

 

2010

 

 

2009

 

 

2010

 

 

2009

 

Royce Pennsylvania Mutual Fund

 

 

$21,596,600

 

 

$  2,801,892

 

 

$               —

 

 

$  —

 

Royce Micro-Cap Fund

 

 

18,629,241

 

 

13,343,912

 

 

—

 

 

—

 

Royce Premier Fund

 

 

—

 

 

—

 

 

87,795,310

 

 

—

 

Royce Low-Priced Stock Fund

 

 

19,569,253

 

 

5,548,343

 

 

34,436,591

 

 

—

 

Royce Total Return Fund

 

 

52,388,953

 

 

47,817,107

 

 

—

 

 

—

 

Royce Heritage Fund

 

 

1,028,924

 

 

—

 

 

5,261,935

 

 

—

 

Royce Opportunity Fund

 

 

—

 

 

869,749

 

 

—

 

 

—

 

Royce Special Equity Fund

 

 

6,212,766

 

 

4,868,728

 

 

—

 

 

—

 

Royce Value Fund

 

 

2,363,109

 

 

—

 

 

—

 

 

—

 

Royce Value Plus Fund

 

 

10,936,297

 

 

—

 

 

—

 

 

—

 

Royce 100 Fund

 

 

845,980

 

 

—

 

 

3,835,401

 

 

—

 

Royce Discovery Fund

 

 

—

 

 

—

 

 

—

 

 

—

 

Royce Financial Services Fund

 

 

209,509

 

 

107,275

 

 

—

 

 

—

 

Royce Dividend Value Fund

 

 

1,024,235

 

 

179,932

 

 

352,781

 

 

—

 

Royce European Smaller-Companies Fund

 

 

137,685

 

 

101,039

 

 

—

 

 

—

 

Royce Global Value Fund

 

 

676,249

 

 

252,560

 

 

—

 

 

—

 

Royce SMid-Cap Value Fund

 

 

—

 

 

7,303

 

 

—

 

 

—

 

Royce International Smaller-Companies Fund

 

 

409,013

 

 

11,461

 

 

167,369

 

 

—

 

Royce Focus Value Fund

 

 

29,907

 

 

152,343

 

 

212,617

 

 

—

 

Royce Partners Fund

 

 

50,600

 

 

—

 

 

22,098

 

 

—

 

Royce Mid-Cap Fund

 

 

—

 

 

 

 

 

—

 

 

 

 

    The tax basis components of distributable earnings at December 31, 2010 were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Undistributed
Ordinary
Income

 

Undistributed
Long-Term
Capital Gains or
(Capital Loss
Carryforward
to 12/31/16)

 

Capital Loss
Carryforward
to 12/31/17(1)

 

Net Unrealized
Appreciation
(Depreciation)(2)

 

Post-
October
Loss
Deferrals(3)

 

Total
Distributable
Earnings

 

Capital Loss
Carryforward
Utilized

 

Royce Pennsylvania Mutual Fund

 

$

10,216,664

 

$

—

 

$

(48,267,494

)

$

1,373,731,431

 

$

(1,482

)

$

1,335,679,119

 

$

241,579,113

 

Royce Micro-Cap Fund

 

 

14,271,892

 

 

12,362,563

 

 

—

 

 

291,784,975

 

 

—

 

 

318,419,430

 

 

75,792,277

 

Royce Premier Fund

 

 

18,926,379

 

 

14,128,961

 

 

—

 

 

2,280,705,521

 

 

—

 

 

2,313,760,861

 

 

652,311

 

Royce Low-Priced Stock Fund

 

 

21,207,473

 

 

20,552,835

 

 

—

 

 

1,378,639,313

 

 

—

 

 

1,420,399,621

 

 

130,097,580

 

Royce Total Return Fund

 

 

18,585,176

 

 

(568,113

)

 

(194,942,266

)

 

1,309,767,890

 

 

(5,805

)

 

1,132,836,882

 

 

21,742,267

 

Royce Heritage Fund

 

 

1,878,558

 

 

4,270,940

 

 

—

 

 

61,684,683

 

 

(9,600

)

 

67,824,581

 

 

17,085,264

 

Royce Opportunity Fund

 

 

—

 

 

—

 

 

(170,177,124

)

 

349,556,578

 

 

—

 

 

179,379,454

 

 

91,026,839

 

Royce Special Equity Fund

 

 

5,440,655

 

 

22,145,321

 

 

—

 

 

477,684,413

 

 

—

 

 

505,270,389

 

 

8,375,654

 

Royce Value Fund

 

 

4,774,888

 

 

—

 

 

(69,220,513

)

 

376,315,070

 

 

(3,065

)

 

311,866,380

 

 

90,466,192

 

Royce Value Plus Fund

 

 

17,102,723

 

 

(35,633,509

)

 

(371,676,452

)

 

494,829,032

 

 

(17,493

)

 

104,604,301

 

 

15,942,295

 

Royce 100 Fund

 

 

1,367,512

 

 

3,308,765

 

 

—

 

 

98,734,652

 

 

(5,971

)

 

103,404,958

 

 

763,371

 

Royce Discovery Fund

 

 

1,906

 

 

(240,954

)

 

(347,850

)

 

310,071

 

 

—

 

 

(276,827

)

 

—

 

Royce Financial Services Fund

 

 

120,472

 

 

—

 

 

(1,088,130

)

 

1,638,894

 

 

(394

)

 

670,842

 

 

213,495

 

Royce Dividend Value Fund

 

 

186,991

 

 

25,752

 

 

—

 

 

20,933,826

 

 

(1,430

)

 

21,145,139

 

 

516,514

 

Royce European Smaller-Companies Fund

 

 

19,893

 

 

(1,118,865

)

 

(1,537,904

)

 

2,807,821

 

 

—

 

 

170,945

 

 

111,849

 

Royce Global Value Fund

 

 

164,493

 

 

(975,320

)

 

(9,673,699

)

 

25,341,970

 

 

(3,427

)

 

14,854,017

 

 

1,333,242

 

Royce SMid-Cap Value Fund

 

 

16,963

 

 

(1,768,812

)

 

(3,870,118

)

 

468,588

 

 

—

 

 

(5,153,379

)

 

605,582

 

Royce International Smaller-Companies Fund

 

 

178,131

 

 

447,848

 

 

—

 

 

3,388,642

 

 

—

 

 

4,014,621

 

 

—

 

Royce Focus Value Fund

 

 

1,621

 

 

41,724

 

 

—

 

 

1,958,475

 

 

—

 

 

2,001,820

 

 

—

 

Royce Partners Fund

 

 

31,728

 

 

44,090

 

 

—

 

 

311,212

 

 

(19

)

 

387,011

 

 

—

 

Royce Mid-Cap Fund

 

 

22,050

 

 

—

 

 

—

 

 

594,268

 

 

—

 

 

616,318

 

 

—

 

 

 

(1)

For Royce Discovery Fund, this amount represents $344,097 expiring 12/31/17 and $3,753 expiring 12/31/18.

(2)

Includes timing differences on foreign currency, recognition of losses on securities sold, mark-to-market of Passive Foreign Investment Companies and investments in Real Estate Investment Trusts and publicly traded partnerships.

(3)

Under the current tax law, capital losses, foreign currency losses and losses realized on Passive Foreign Investment Companies after October 31 may be deferred and treated as occurring on the first day of the following fiscal year.
 

 

 

 

154 | The Royce Funds 2010 Annual Report to Shareholders

 

 


 
 

Tax Information (continued):

    For financial reporting purposes, capital accounts and distributions to shareholders are adjusted to reflect the tax character of permanent book/tax differences. For the period ended December 31, 2010, the Funds recorded the following permanent reclassifications, which relate primarily to current net operating losses, distribution reclassifications, Real Estate Investment Trusts, publicly traded partnerships, foreign currency transactions and gains from the sale of Passive Foreign Investment Companies. Results of operations and net assets were not affected by these reclassifications.

 

 

 

 

 

 

 

 

 

 

 

 

 

Undistributed
Net Investment
Income (Loss)

 

Accumulated
Net Realized
Gain (Loss)

 

Paid–in
Capital

 

Royce Pennsylvania Mutual Fund

 

$

(12,852,399

)

$

13,748,276

 

$

(895,877

)

Royce Micro-Cap Fund

 

 

7,350,930

 

 

(7,350,930

)

 

—

 

Royce Premier Fund

 

 

23,145

 

 

(23,145

)

 

—

 

Royce Low-Priced Stock Fund

 

 

14,777,907

 

 

(14,777,907

)

 

—

 

Royce Total Return Fund

 

 

(62,987,265

)

 

62,618,513

 

 

368,752

 

Royce Heritage Fund

 

 

(351,033

)

 

351,033

 

 

—

 

Royce Opportunity Fund

 

 

9,405,739

 

 

6,212

 

 

(9,411,951

)

Royce Special Equity Fund

 

 

(1,200,000

)

 

(184,263

)

 

1,384,263

 

Royce Value Fund

 

 

257,662

 

 

(257,662

)

 

—

 

Royce Value Plus Fund

 

 

14,579,002

 

 

(14,579,002

)

 

—

 

Royce 100 Fund

 

 

(183,572

)

 

251,962

 

 

(68,390

)

Royce Discovery Fund

 

 

—

 

 

—

 

 

—

 

Royce Financial Services Fund

 

 

(43,892

)

 

39,046

 

 

4,846

 

Royce Dividend Value Fund

 

 

(106,743

)

 

112,427

 

 

(5,684

)

Royce European Smaller-Companies Fund

 

 

57,053

 

 

(56,106

)

 

(947

)

Royce Global Value Fund

 

 

598,719

 

 

(597,538

)

 

(1,181

)

Royce SMid-Cap Value Fund

 

 

(6,439

)

 

13,037

 

 

(6,598

)

Royce International Smaller-Companies Fund

 

 

63,115

 

 

(63,115

)

 

—

 

Royce Focus Value Fund

 

 

11,561

 

 

(11,561

)

 

—

 

Royce Partners Fund

 

 

(1,107

)

 

1,113

 

 

(6

)

Royce Mid-Cap Fund

 

 

9,247

 

 

(9,247

)

 

—

 

    Management has analyzed the Funds’ tax positions taken on federal income tax returns for all open tax years (2007 – 2010) and has concluded that as of December 31, 2010, no provision for income tax is required in the Funds’ financial statements.

Transactions in Affiliated Companies:
    An “Affiliated Company,” as defined in the Investment Company Act of 1940, is a company in which a fund owns 5% or more of the company’s outstanding voting securities at any time during the period. The following transactions were effected in shares of such companies for the year ended December 31, 2010:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Affiliated Company

 

Shares
12/31/09

 

Market
Value
12/31/09

 

Cost of
Purchases

 

Cost of
Sales

 

Realized
Gain
(Loss)

 

Dividend
Income

 

Shares
12/31/10

 

Market
Value
12/31/10

 

Royce Pennsylvania Mutual Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Almost Family

 

 

300,541

 

$

11,880,386

 

$

10,789,689

 

$

––

 

$

––

 

$

—

 

 

607,582

 

$

23,343,300

 

Colony Financial*

 

 

286,647

 

 

5,838,999

 

 

13,230,541

 

 

13,015,276

 

 

(930,357

)

 

666,602

 

 

 

 

 

 

 

CRA International

 

 

446,874

 

 

11,909,192

 

 

2,989,341

 

 

—

 

 

—

 

 

—

 

 

574,643

 

 

13,509,857

 

Ethan Allen Interiors

 

 

1,587,541

 

 

21,304,800

 

 

—

 

 

314,732

 

 

(73,287

)

 

315,464

 

 

1,573,910

 

 

31,493,939

 

Harbinger Group

 

 

1,009,600

 

 

7,087,392

 

 

—

 

 

—

 

 

—

 

 

—

 

 

1,009,600

 

 

6,249,424

 

Home Diagnostics*

 

 

878,647

 

 

5,359,747

 

 

—

 

 

7,104,923

 

 

2,934,721

 

 

—

 

 

 

 

 

 

 

Nutraceutical International

 

 

737,810

 

 

9,126,710

 

 

—

 

 

—

 

 

—

 

 

—

 

 

737,810

 

 

10,469,524

 

Obagi Medical Products

 

 

1,143,524

 

 

13,722,288

 

 

3,501,672

 

 

1,717,041

 

 

284,207

 

 

—

 

 

1,270,715

 

 

14,676,758

 

Orchids Paper Products*

 

 

45,100

 

 

902,902

 

 

6,047,391

 

 

4,649,938

 

 

(1,390,447

)

 

—

 

 

 

 

 

 

 

Pervasive Software

 

 

1,461,500

 

 

7,044,430

 

 

—

 

 

—

 

 

—

 

 

—

 

 

1,461,500

 

 

7,541,340

 

Preformed Line Products

 

 

241,085

 

 

10,559,523

 

 

3,341,304

 

 

248,934

 

 

68,994

 

 

246,819

 

 

329,506

 

 

19,284,339

 

Pulse Electronics

 

 

1,584,739

 

 

6,941,157

 

 

2,114,337

 

 

—

 

 

—

 

 

144,396

 

 

2,095,739

 

 

11,149,332

 

Rimage Corporation

 

 

648,314

 

 

11,241,765

 

 

—

 

 

39,017

 

 

9,433

 

 

—

 

 

645,314

 

 

9,621,632

 

Stanley Furniture

 

 

689,924

 

 

7,002,729

 

 

—

 

 

—

 

 

—

 

 

—

 

 

912,235

 

 

2,837,051

 

U.S. Physical Therapy

 

 

905,675

 

 

15,333,078

 

 

—

 

 

82,249

 

 

33,531

 

 

—

 

 

898,675

 

 

17,811,738

 

Weyco Group

 

 

590,500

 

 

13,959,420

 

 

—

 

 

—

 

 

—

 

 

372,015

 

 

590,500

 

 

14,461,345

 

 

 

 

 

 

159,214,518

 

 

 

 

 

 

 

 

936,795

 

 

1,745,296

 

 

 

 

 

182,449,579

 
 

 

 

 

 

 

The Royce Funds 2010 Annual Report to Shareholders | 155


 

Notes to Financial Statements (continued)
 

Transactions in Affiliated Companies (continued):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Affiliated Company

 

Shares
12/31/09

 

Market
Value
12/31/09

 

Cost of
Purchases

 

Cost of
Sales

 

Realized
Gain
(Loss)

 

Dividend
Income

 

Shares
12/31/10

 

Market
Value
12/31/10

 

Royce Micro-Cap Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Arctic Cat*

 

 

1,013,800

 

$

9,286,408

 

$

—

 

$

5,600,292

 

$

893,863

 

$

—

 

 

 

 

 

 

 

Cache*

 

 

708,800

 

 

3,239,216

 

 

—

 

 

1,155,344

 

 

2,934,820

 

 

—

 

 

 

 

 

 

 

CryptoLogic

 

 

751,575

 

 

2,750,765

 

 

—

 

 

—

 

 

—

 

 

—

 

 

751,575

 

$

1,044,689

 

GP Strategies

 

 

1,028,900

 

 

7,747,617

 

 

748,737

 

 

—

 

 

—

 

 

—

 

 

1,123,840

 

 

11,508,122

 

Graham Corporation

 

 

406,500

 

 

8,414,550

 

 

2,892,293

 

 

—

 

 

—

 

 

42,364

 

 

590,654

 

 

11,813,080

 

Heritage-Crystal Clean

 

 

317,133

 

 

3,317,211

 

 

4,577,900

 

 

—

 

 

—

 

 

—

 

 

847,033

 

 

8,453,390

 

Key Technology

 

 

405,314

 

 

4,725,961

 

 

531,959

 

 

—

 

 

—

 

 

—

 

 

444,814

 

 

7,566,286

 

LaCrosse Footwear

 

 

522,669

 

 

6,648,350

 

 

155,300

 

 

—

 

 

—

 

 

787,754

 

 

532,669

 

 

8,735,772

 

PDI

 

 

740,394

 

 

3,568,699

 

 

2,176,167

 

 

—

 

 

—

 

 

—

 

 

1,015,694

 

 

10,705,415

 

TGC Industries

 

 

1,405,193

 

 

5,494,305

 

 

391,102

 

 

4

 

 

(1

)

 

—

 

 

1,575,202

 

 

5,985,768

 

ULURU*

 

 

4,423,519

 

 

928,939

 

 

—

 

 

6,393,409

 

 

(5,918,300

)

 

—

 

 

 

 

 

 

 

Uranium Resources*

 

 

 

 

 

 

 

 

2,721,851

 

 

2,134,114

 

 

5,757,321

 

 

—

 

 

 

 

 

 

 

World Energy Solutions

 

 

428,100

 

 

1,232,928

 

 

787,227

 

 

—

 

 

—

 

 

—

 

 

709,900

 

 

2,001,918

 

 

 

 

 

 

 

57,354,949

 

 

 

 

 

 

 

 

3,667,703

 

 

830,118

 

 

 

 

 

67,814,440

 

Royce Premier Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Arkansas Best*

 

 

1,906,902

 

 

56,120,126

 

 

—

 

 

67,631,008

 

 

(23,131,942

)

 

105,414

 

 

 

 

 

 

 

Cabot Microelectronics

 

 

2,086,191

 

 

68,760,855

 

 

1,799,524

 

 

—

 

 

—

 

 

—

 

 

2,136,191

 

 

88,545,117

 

Cal-Maine Foods

 

 

1,712,686

 

 

58,368,339

 

 

1,643,839

 

 

—

 

 

—

 

 

1,758,139

 

 

1,762,686

 

 

55,665,624

 

Cognex Corporation

 

 

2,957,717

 

 

52,410,745

 

 

—

 

 

—

 

 

—

 

 

739,429

 

 

2,957,717

 

 

87,016,034

 

Dionex Corporation

 

 

1,294,500

 

 

95,624,715

 

 

4,430,563

 

 

—

 

 

—

 

 

—

 

 

1,354,500

 

 

159,844,545

 

Fossil*

 

 

3,548,290

 

 

119,080,612

 

 

—

 

 

39,338,378

 

 

34,369,743

 

 

—

 

 

 

 

 

 

 

Knight Capital Group Cl. A*

 

 

4,667,200

 

 

71,874,880

 

 

—

 

 

—

 

 

—

 

 

—

 

 

 

 

 

 

 

Lincoln Electric Holdings

 

 

2,512,497

 

 

134,318,090

 

 

—

 

 

—

 

 

—

 

 

2,889,372

 

 

2,512,497

 

 

163,990,679

 

MKS Instruments

 

 

2,941,910

 

 

51,218,653

 

 

—

 

 

—

 

 

—

 

 

—

 

 

2,941,910

 

 

72,047,376

 

Nu Skin Enterprises Cl. A

 

 

3,381,500

 

 

90,860,905

 

 

3,114,405

 

 

1,055,361

 

 

568,836

 

 

1,678,250

 

 

3,431,500

 

 

103,837,190

 

ProAssurance Corporation

 

 

1,633,449

 

 

87,732,546

 

 

—

 

 

—

 

 

—

 

 

—

 

 

1,633,449

 

 

98,987,010

 

Sanderson Farms

 

 

1,957,391

 

 

82,523,605

 

 

6,143,699

 

 

—

 

 

—

 

 

1,263,120

 

 

2,074,791

 

 

81,228,067

 

Schnitzer Steel Industries Cl. A

 

 

1,635,238

 

 

78,000,853

 

 

23,212,202

 

 

722,151

 

 

(25,055

)

 

135,522

 

 

2,108,038

 

 

139,952,643

 

Seabridge Gold

 

 

2,103,900

 

 

51,061,653

 

 

18,812,989

 

 

—

 

 

—

 

 

—

 

 

2,803,900

 

 

86,023,652

 

Silver Standard Resources*

 

 

4,116,399

 

 

90,025,646

 

 

—

 

 

17,600,868

 

 

(7,346,642

)

 

—

 

 

 

 

 

 

 

Simpson Manufacturing

 

 

3,308,986

 

 

88,978,634

 

 

2,014,668

 

 

332,862

 

 

17,331

 

 

1,348,264

 

 

3,387,886

 

 

104,719,556

 

Thor Industries

 

 

3,754,300

 

 

117,885,020

 

 

16,715,932

 

 

—

 

 

—

 

 

1,413,519

 

 

4,314,757

 

 

146,529,148

 

Timberland Company (The) Cl. A

 

 

2,582,279

 

 

46,300,263

 

 

8,606,598

 

 

—

 

 

—

 

 

—

 

 

3,032,279

 

 

74,563,741

 

Trican Well Service*

 

 

6,069,100

 

 

81,590,616

 

 

9,667,546

 

 

—

 

 

—

 

 

571,554

 

 

 

 

 

 

 

Unit Corporation

 

 

2,920,474

 

 

124,120,145

 

 

781,560

 

 

—

 

 

—

 

 

—

 

 

2,939,974

 

 

136,649,991

 

Woodward Governor

 

 

3,841,024

 

 

98,983,188

 

 

—

 

 

—

 

 

—

 

 

921,846

 

 

3,841,024

 

 

144,268,862

 

 

 

 

 

 

 

1,745,840,089

 

 

 

 

 

 

 

 

4,452,271

 

 

12,824,429

 

 

 

 

 

1,743,869,235

 

Royce Low-Priced Stock Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Castle (A.M.) & Co.

 

 

1,849,667

 

 

25,321,941

 

 

—

 

 

1,248,335

 

 

(498,056

)

 

—

 

 

1,799,667

 

 

33,131,870

 

Ceradyne*

 

 

1,583,100

 

 

30,411,351

 

 

—

 

 

8,884,413

 

 

1,466,656

 

 

—

 

 

 

 

 

 

 

Corinthian Colleges

 

 

1,932,792

 

 

26,614,546

 

 

24,692,846

 

 

—

 

 

—

 

 

—

 

 

5,739,200

 

 

29,901,232

 

Cross Country Healthcare

 

 

2,328,100

 

 

23,071,471

 

 

—

 

 

—

 

 

—

 

 

—

 

 

2,328,100

 

 

19,719,007

 

Houston Wire & Cable

 

 

1,465,700

 

 

17,441,830

 

 

1,486,093

 

 

—

 

 

—

 

 

532,508

 

 

1,591,200

 

 

21,385,728

 

Imperial Sugar

 

 

713,740

 

 

12,447,625

 

 

1,377,914

 

 

580,000

 

 

193,505

 

 

55,379

 

 

763,740

 

 

10,211,204

 

Integral Systems

 

 

1,366,294

 

 

11,832,106

 

 

—

 

 

650,325

 

 

(120,720

)

 

—

 

 

1,306,726

 

 

12,949,655

 

Kennedy-Wilson Holdings

 

 

1,994,994

 

 

17,855,196

 

 

9,325,500

 

 

—

 

 

—

 

 

—

 

 

2,894,994

 

 

28,920,990

 

KVH Industries

 

 

1,100,200

 

 

16,227,950

 

 

—

 

 

—

 

 

—

 

 

—

 

 

1,100,200

 

 

13,147,390

 

LECG Corporation*

 

 

1,722,490

 

 

5,150,245

 

 

—

 

 

11,413,313

 

 

(9,738,429

)

 

—

 

 

 

 

 

 

 

Magma Energy*

 

 

5,132,900

 

 

8,883,252

 

 

5,205,687

 

 

—

 

 

—

 

 

—

 

 

 

 

 

 

 

New Frontier Media*

 

 

1,903,000

 

 

3,596,670

 

 

—

 

 

3,444,430

 

 

(430,154

)

 

—

 

 

 

 

 

 

 

Novatel Wireless

 

 

2,292,176

 

 

18,268,643

 

 

—

 

 

—

 

 

—

 

 

—

 

 

2,292,176

 

 

21,890,281

 

PC-Tel

 

 

1,295,592

 

 

7,669,905

 

 

—

 

 

780,634

 

 

(168,396

)

 

—

 

 

1,195,592

 

 

7,173,552

 

Pretium Resources

 

 

 

 

 

 

 

 

26,724,600

 

 

—

 

 

—

 

 

—

 

 

4,500,000

 

 

28,919,843

 

Sigma Designs

 

 

2,045,558

 

 

21,887,471

 

 

123,471

 

 

582,895

 

 

(21,855

)

 

—

 

 

2,007,658

 

 

28,448,514

 

Tesco Corporation

 

 

3,077,305

 

 

39,728,008

 

 

2,239,631

 

 

—

 

 

—

 

 

—

 

 

3,263,005

 

 

51,816,519

 

Total Energy Services

 

 

1,966,700

 

 

13,069,335

 

 

—

 

 

—

 

 

—

 

 

213,155

 

 

1,966,700

 

 

27,968,559

 

TTM Technologies*

 

 

2,300,035

 

 

26,519,403

 

 

—

 

 

7,862,803

 

 

(1,919,886

)

 

—

 

 

 

 

 

 

 

WaterFurnace Renewable Energy

 

 

700,500

 

 

17,387,752

 

 

3,579,140

 

 

—

 

 

—

 

 

573,666

 

 

849,500

 

 

21,162,742

 

Xyratex

 

 

 

 

 

 

 

 

23,929,584

 

 

—

 

 

—

 

 

—

 

 

1,752,837

 

 

28,588,772

 

 

 

 

 

 

 

343,384,700

 

 

 

 

 

 

 

 

(11,237,335

)

 

1,374,708

 

 

 

 

 

385,335,858

 

 

 

 

156 | The Royce Funds 2010 Annual Report to Shareholders

 

 


 
 

Transactions in Affiliated Companies (continued):


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Affiliated Company

 

Shares
12/31/09

 

Market
Value
12/31/09

 

Cost of
Purchases

 

Cost of
Sales

 

Realized
Gain
(Loss)

 

Dividend
Income

 

Shares
12/31/10

 

Market
Value
12/31/10

 

Royce Total Return Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bancorp Rhode Island

 

 

261,300

 

$

6,710,184

 

$

—

 

$

—

 

$

—

 

$

182,910

 

 

261,300

 

$

7,601,217

 

Barry (R.G.)

 

 

 

 

 

 

 

 

11,471,693

 

 

—

 

 

—

 

 

122,327

 

 

1,048,496

 

 

11,659,276

 

Cato Corporation (The) Cl. A

 

 

1,323,580

 

 

26,551,015

 

 

4,246,861

 

 

632,213

 

 

31,174

 

 

1,004,602

 

 

1,477,815

 

 

40,506,909

 

Chase Corporation

 

 

773,974

 

 

9,140,633

 

 

—

 

 

—

 

 

—

 

 

270,891

 

 

773,974

 

 

12,615,776

 

Colony Financial

 

 

286,283

 

 

5,831,585

 

 

21,245,720

 

 

—

 

 

—

 

 

939,975

 

 

1,432,749

 

 

28,683,635

 

Mueller (Paul) Company

 

 

116,700

 

 

2,334,000

 

 

—

 

 

—

 

 

—

 

 

—

 

 

116,700

 

 

1,983,900

 

Peapack-Gladstone Financial

 

 

463,145

 

 

5,872,679

 

 

—

 

 

—

 

 

—

 

 

92,629

 

 

463,145

 

 

6,044,042

 

Starrett (L.S.) Company (The) Cl. A

 

 

529,400

 

 

4,664,014

 

 

—

 

 

—

 

 

—

 

 

137,644

 

 

529,400

 

 

6,183,392

 

 

 

 

 

 

 

61,104,110

 

 

 

 

 

 

 

 

31,174

 

 

2,750,978

 

 

 

 

 

115,278,147

 

Royce Opportunity Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AXT*

 

 

1,796,352

 

 

5,838,144

 

 

123,538

 

 

4,776,576

 

 

4,088,550

 

 

—

 

 

 

 

 

 

 

BTU International

 

 

622,455

 

 

3,952,589

 

 

29,946

 

 

—

 

 

—

 

 

—

 

 

627,955

 

 

5,645,315

 

Cambrex Corporation

 

 

1,595,708

 

 

8,904,051

 

 

963,957

 

 

842,044

 

 

50,785

 

 

—

 

 

1,601,354

 

 

8,279,000

 

ClearOne Communications

 

 

699,862

 

 

2,211,564

 

 

—

 

 

63,041

 

 

(11,785

)

 

—

 

 

684,326

 

 

2,477,260

 

Comstock Homebuilding Cl. A

 

 

911,315

 

 

738,165

 

 

355,829

 

 

20,504

 

 

(3,928

)

 

—

 

 

1,229,265

 

 

1,425,947

 

Concurrent Computer*

 

 

459,787

 

 

1,839,148

 

 

—

 

 

1,346,439

 

 

(873,411

)

 

—

 

 

 

 

 

 

 

Cost Plus*

 

 

1,103,440

 

 

1,125,509

 

 

815,607

 

 

4,546,357

 

 

(826,269

)

 

—

 

 

 

 

 

 

 

Del Global Technologies

 

 

 

 

 

 

 

 

497,258

 

 

—

 

 

—

 

 

—

 

 

1,581,912

 

 

1,123,158

 

dELiA*s

 

 

2,037,584

 

 

3,810,282

 

 

—

 

 

86,113

 

 

(30,633

)

 

—

 

 

2,002,784

 

 

3,484,844

 

Dixie Group

 

 

698,444

 

 

1,892,783

 

 

239,266

 

 

—

 

 

—

 

 

—

 

 

773,044

 

 

2,775,228

 

Evans & Sutherland Computer

 

 

766,730

 

 

76,673

 

 

—

 

 

—

 

 

—

 

 

—

 

 

766,730

 

 

567,380

 

Gerber Scientific

 

 

1,267,500

 

 

6,400,875

 

 

223,412

 

 

—

 

 

—

 

 

—

 

 

1,306,100

 

 

10,279,007

 

Interlink Electronics*

 

 

792,875

 

 

261,649

 

 

—

 

 

2,739,956

 

 

(2,521,522

)

 

—

 

 

 

 

 

 

 

Interphase Corporation

 

 

404,700

 

 

1,036,032

 

 

—

 

 

252,268

 

 

(210,657

)

 

—

 

 

373,600

 

 

672,480

 

LeCroy Corporation*

 

 

855,536

 

 

3,122,706

 

 

451,076

 

 

1,991,490

 

 

(769,738

)

 

—

 

 

 

 

 

 

 

Lydall

 

 

874,600

 

 

4,556,666

 

 

231,808

 

 

—

 

 

—

 

 

—

 

 

905,463

 

 

7,288,977

 

MarineMax

 

 

1,285,700

 

 

11,815,583

 

 

1,368,642

 

 

5,727,556

 

 

(3,190,404

)

 

—

 

 

1,219,450

 

 

11,401,858

 

Material Sciences

 

 

970,950

 

 

1,718,581

 

 

136,271

 

 

—

 

 

—

 

 

—

 

 

1,006,950

 

 

6,434,410

 

Merix Corporation*

 

 

1,722,167

 

 

4,219,309

 

 

—

 

 

—

 

 

—

 

 

—

 

 

 

 

 

 

 

Network Equipment Technologies

 

 

1,830,887

 

 

7,415,092

 

 

121,399

 

 

148,470

 

 

(31,244

)

 

—

 

 

1,838,489

 

 

8,512,204

 

Planar Systems

 

 

1,372,633

 

 

3,912,004

 

 

107,917

 

 

—

 

 

—

 

 

—

 

 

1,418,133

 

 

2,892,991

 

REX American Resources*

 

 

670,200

 

 

9,423,012

 

 

—

 

 

4,651,018

 

 

717,382

 

 

—

 

 

 

 

 

 

 

SigmaTron International

 

 

329,572

 

 

1,647,860

 

 

—

 

 

—

 

 

—

 

 

—

 

 

329,572

 

 

2,109,261

 

Tennessee Commerce Bancorp*

 

 

 

 

 

 

 

 

1,820,655

 

 

—

 

 

—

 

 

—

 

 

 

 

 

 

 

Thermadyne Holdings*

 

 

713,971

 

 

5,190,569

 

 

—

 

 

8,542,421

 

 

1,923,868

 

 

—

 

 

 

 

 

 

 

Tollgrade Communications

 

 

623,388

 

 

3,808,901

 

 

183,729

 

 

—

 

 

—

 

 

—

 

 

651,988

 

 

6,050,449

 

TRC Companies

 

 

1,756,647

 

 

5,252,375

 

 

44,686

 

 

—

 

 

—

 

 

—

 

 

1,772,880

 

 

6,205,080

 

 

 

 

 

 

 

100,170,122

 

 

 

 

 

 

 

 

(1,689,006

)

 

—

 

 

 

 

 

87,624,849

 

Royce Special Equity Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ampco-Pittsburgh

 

 

536,000

 

 

16,900,080

 

 

6,433,593

 

 

88,458

 

 

92

 

 

466,273

 

 

791,700

 

 

22,207,185

 

Atrion Corporation

 

 

132,000

 

 

20,555,040

 

 

2,200,263

 

 

133,378

 

 

16,337

 

 

1,456,243

 

 

147,030

 

 

26,386,004

 

Baker (Michael)

 

 

173,655

 

 

7,189,317

 

 

16,688,985

 

 

1,125,922

 

 

(232,695

)

 

—

 

 

593,014

 

 

18,442,736

 

Bowl America Cl. A

 

 

303,587

 

 

3,961,810

 

 

391,957

 

 

21,696

 

 

(2,336

)

 

197,125

 

 

331,339

 

 

4,141,737

 

Clearwater Paper

 

 

414,300

 

 

22,774,071

 

 

15,540,806

 

 

215,203

 

 

23,148

 

 

—

 

 

658,500

 

 

51,560,550

 

Computer Services

 

 

334,000

 

 

11,957,200

 

 

2,325,281

 

 

78,563

 

 

1,024

 

 

302,492

 

 

778,977

 

 

19,708,118

 

CSS Industries

 

 

646,000

 

 

12,558,240

 

 

2,689,923

 

 

63,784

 

 

476

 

 

439,989

 

 

793,100

 

 

16,345,791

 

Dorman Products

 

 

1,059,063

 

 

16,584,926

 

 

7,551,463

 

 

155,002

 

 

30,081

 

 

—

 

 

1,347,037

 

 

48,816,621

 

Foster (L.B.) Company Cl. A

 

 

752,911

 

 

22,444,277

 

 

1,828,282

 

 

122,739

 

 

(5,037

)

 

—

 

 

814,111

 

 

33,329,704

 

Frisch’s Restaurants

 

 

506,784

 

 

12,086,798

 

 

17,300

 

 

62,039

 

 

(13,223

)

 

283,840

 

 

505,100

 

 

11,273,832

 

Hooker Furniture

 

 

577,640

 

 

7,145,407

 

 

5,994,472

 

 

50,873

 

 

79

 

 

304,502

 

 

1,070,000

 

 

15,119,100

 

Hurco Companies

 

 

334,900

 

 

4,956,520

 

 

391,684

 

 

204,118

 

 

(20,970

)

 

—

 

 

347,100

 

 

8,208,915

 

Insteel Industries

 

 

831,510

 

 

10,809,630

 

 

2,812,228

 

 

936,404

 

 

(122,837

)

 

115,270

 

 

1,048,733

 

 

13,098,675

 

Koss Corporation*

 

 

450,262

 

 

225,131

 

 

—

 

 

4,384,872

 

 

(2,590,942

)

 

—

 

 

 

 

 

 

 

Lawson Products*

 

 

582,700

 

 

10,284,655

 

 

—

 

 

14,570,546

 

 

(6,184,771

)

 

32,804

 

 

 

 

 

 

 

Mesa Laboratories

 

 

231,644

 

 

6,103,820

 

 

2,089,879

 

 

42,362

 

 

(7,877

)

 

134,184

 

 

309,648

 

 

9,289,440

 

Met-Pro Corporation

 

 

621,100

 

 

6,596,082

 

 

2,108,064

 

 

42,511

 

 

809

 

 

192,425

 

 

835,704

 

 

9,869,664

 

Movado Group

 

 

1,074,300

 

 

10,442,196

 

 

2,520,753

 

 

65,925

 

 

568

 

 

—

 

 

1,297,900

 

 

20,948,106

 

National Presto Industries

 

 

499,500

 

 

54,560,385

 

 

8,194,457

 

 

310,701

 

 

(8,517

)

 

4,070,925

 

 

575,500

 

 

74,820,755

 

Park Electrochemical

 

 

1,007,000

 

 

27,833,480

 

 

11,573,036

 

 

174,083

 

 

157

 

 

1,904,664

 

 

1,442,000

 

 

43,260,000

 

Psychemedics Corporation

 

 

436,672

 

 

3,209,539

 

 

658,315

 

 

39,923

 

 

(16,571

)

 

229,819

 

 

517,800

 

 

4,235,604

 

Standex International

 

 

480,000

 

 

9,643,200

 

 

4,162,871

 

 

341,901

 

 

16,484

 

 

112,470

 

 

632,800

 

 

18,927,048

 
 

 

 

 

 

 

The Royce Funds 2010 Annual Report to Shareholders | 157


 

Notes to Financial Statements (continued)
 

Transactions in Affiliated Companies (continued):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Affiliated Company

 

Shares
12/31/09

 

Market
Value
12/31/09

 

Cost of
Purchases

 

Cost of
Sales

 

Realized
Gain
(Loss)

 

Dividend
Income

 

Shares
12/31/10

 

Market
Value
12/31/10

 

Royce Special Equity Fund (continued)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stepan Company

 

 

 

 

 

 

 

$

37,530,442

 

$

144,020

 

$

4,204

 

$

357,352

 

 

510,492

 

$

38,935,225

 

Universal Electronics

 

 

556,500

 

$

12,921,930

 

 

6,127,086

 

 

2,287,975

 

 

345,555

 

 

—

 

 

749,437

 

 

21,261,528

 

Utah Medical Products

 

 

149,216

 

 

4,375,013

 

 

3,402,070

 

 

34,113

 

 

87

 

 

409,483

 

 

272,768

 

 

7,274,722

 

Versant Corporation

 

 

310,614

 

 

4,739,970

 

 

471,144

 

 

2,598,981

 

 

(771,996

)

 

—

 

 

184,168

 

 

2,175,024

 

 

 

 

 

 

 

320,858,717

 

 

 

 

 

 

 

 

(9,538,671

)

 

11,009,860

 

 

 

 

 

539,636,084

 

Royce Value Plus Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

A.C. Moore Arts & Crafts*

 

 

1,883,100

 

 

5,536,314

 

 

—

 

 

31,459,210

 

 

(25,368,241

)

 

—

 

 

 

 

 

 

 

Affymetrix*

 

 

3,260,464

 

 

19,041,110

 

 

1,868,680

 

 

29,749,713

 

 

(14,060,260

)

 

—

 

 

 

 

 

 

 

American Italian Pasta Cl. A*

 

 

 

 

 

 

 

 

44,350,797

 

 

44,350,797

 

 

16,288,136

 

 

—

 

 

 

 

 

 

 

Avid Technology

 

 

2,342,672

 

 

29,892,495

 

 

6,965,939

 

 

6,263,421

 

 

(2,334,761

)

 

—

 

 

2,612,672

 

 

45,617,253

 

Bancorp (The)

 

 

1,317,170

 

 

9,035,786

 

 

—

 

 

—

 

 

—

 

 

—

 

 

1,317,170

 

 

13,395,619

 

Berkshire Hills Bancorp

 

 

612,500

 

 

12,666,500

 

 

8,231,693

 

 

—

 

 

—

 

 

696,512

 

 

1,088,300

 

 

24,051,430

 

Caliper Life Sciences

 

 

2,990,500

 

 

7,685,585

 

 

—

 

 

1,510,157

 

 

(139,736

)

 

—

 

 

2,765,500

 

 

17,533,270

 

Casual Male Retail Group

 

 

4,088,734

 

 

9,526,750

 

 

—

 

 

2,779,262

 

 

(1,656,583

)

 

—

 

 

3,858,734

 

 

18,290,399

 

Celadon Group

 

 

1,893,600

 

 

20,545,560

 

 

—

 

 

1,301,232

 

 

(152,857

)

 

—

 

 

1,818,600

 

 

26,897,094

 

Cerus Corporation

 

 

2,884,500

 

 

5,740,155

 

 

—

 

 

—

 

 

—

 

 

—

 

 

2,884,500

 

 

7,095,870

 

Christopher & Banks*

 

 

2,253,900

 

 

17,174,718

 

 

—

 

 

32,708,893

 

 

(23,034,956

)

 

540,936

 

 

 

 

 

 

 

Cosi

 

 

3,997,600

 

 

2,398,560

 

 

489,106

 

 

—

 

 

—

 

 

—

 

 

4,975,812

 

 

6,070,491

 

Cosi (Rights)*

 

 

3,997,600

 

 

97,821

 

 

—

 

 

—

 

 

—

 

 

—

 

 

 

 

 

 

 

Cypress Bioscience*

 

 

2,259,200

 

 

13,012,992

 

 

—

 

 

21,492,993

 

 

(14,923,073

)

 

—

 

 

 

 

 

 

 

Digi International*

 

 

1,213,800

 

 

11,069,856

 

 

516,420

 

 

279,233

 

 

(13,097

)

 

—

 

 

 

 

 

 

 

Energy Partners*

 

 

 

 

 

 

 

 

25,286,839

 

 

9,181,603

 

 

(231,998

)

 

—

 

 

 

 

 

 

 

Exar Corporation*

 

 

2,171,464

 

 

15,439,109

 

 

350,630

 

 

17,591,562

 

 

(4,569,895

)

 

—

 

 

 

 

 

 

 

FARO Technologies

 

 

1,584,700

 

 

33,975,968

 

 

—

 

 

12,497,097

 

 

9,130

 

 

—

 

 

1,104,800

 

 

36,281,632

 

GSI Group*

 

 

2,538,394

 

 

2,157,635

 

 

4,471,785

 

 

—

 

 

—

 

 

—

 

 

 

 

 

 

 

HealthTronics*

 

 

2,518,718

 

 

6,649,416

 

 

—

 

 

13,491,530

 

 

(1,419,376

)

 

—

 

 

 

 

 

 

 

Intermec*

 

 

1,359,000

 

 

17,476,740

 

 

19,998,124

 

 

2,589,335

 

 

(187,892

)

 

—

 

 

 

 

 

 

 

Liquidity Services

 

 

1,748,723

 

 

17,609,641

 

 

—

 

 

4,179,655

 

 

(683,157

)

 

—

 

 

1,520,723

 

 

21,366,158

 

Littelfuse*

 

 

1,549,395

 

 

49,813,049

 

 

5,586,805

 

 

32,432,680

 

 

5,289,521

 

 

130,754

 

 

 

 

 

 

 

Mercury Computer Systems

 

 

2,198,749

 

 

24,208,226

 

 

—

 

 

1,177,393

 

 

334,193

 

 

—

 

 

2,113,749

 

 

38,850,706

 

Micrel*

 

 

 

 

 

 

 

 

28,399,976

 

 

604,368

 

 

58,992

 

 

331,649

 

 

 

 

 

 

 

NutriSystem

 

 

1,158,874

 

 

36,122,102

 

 

9,899,030

 

 

8,045,020

 

 

(3,619,896

)

 

1,099,962

 

 

1,483,874

 

 

31,205,870

 

RADVision*

 

 

1,391,600

 

 

8,405,264

 

 

—

 

 

17,245,676

 

 

(8,454,086

)

 

—

 

 

 

 

 

 

 

Shamir Optical Industry*

 

 

1,257,200

 

 

10,057,600

 

 

—

 

 

10,262,917

 

 

3,974,593

 

 

—

 

 

 

 

 

 

 

Supertex

 

 

782,053

 

 

23,305,179

 

 

2,579,368

 

 

—

 

 

—

 

 

—

 

 

882,053

 

 

21,328,042

 

Symyx Technologies*

 

 

3,132,577

 

 

17,229,174

 

 

1,407,120

 

 

7,824,426

 

 

(3,737,521

)

 

—

 

 

 

 

 

 

 

Tennant Company*

 

 

861,000

 

 

22,549,590

 

 

1,878,719

 

 

3,697,054

 

 

415,294

 

 

532,166

 

 

 

 

 

 

 

Theratechnologies*

 

 

3,319,600

 

 

14,061,125

 

 

437,989

 

 

19,320,457

 

 

(2,970,812

)

 

—

 

 

 

 

 

 

 

TradeStation Group

 

 

2,190,000

 

 

17,279,100

 

 

—

 

 

—

 

 

—

 

 

—

 

 

2,190,000

 

 

14,782,500

 

 

 

 

 

 

 

479,763,120

 

 

 

 

 

 

 

 

(81,188,338

)

 

3,331,979

 

 

 

 

 

322,766,334

 

 

 

*

  Not an Affiliated Company at December 31, 2010.

 

 

 
 

158 | The Royce Funds 2010 Annual Report to Shareholders

 

 


 

Report of Independent Registered Public Accounting Firm
 

To the Board of Trustees of The Royce Fund and the Shareholders of
Royce Pennsylvania Mutual Fund, Royce Micro-Cap Fund, Royce Premier Fund, Royce Low-Priced Stock Fund, Royce Total Return Fund, Royce Heritage Fund, 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 European Smaller-Companies Fund, Royce Global Value Fund, Royce SMid-Cap Value Fund, Royce International Smaller-Companies Fund, Royce Focus Value Fund, Royce Partners Fund and Royce Mid-Cap Fund

In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Royce Pennsylvania Mutual Fund, Royce Micro-Cap Fund, Royce Premier Fund, Royce Low-Priced Stock Fund, Royce Total Return Fund, Royce Heritage Fund, 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 European Smaller-Companies Fund, Royce Global Value Fund, Royce SMid-Cap Value Fund, Royce International Smaller-Companies Fund, Royce Focus Value Fund, Royce Partners Fund and Royce Mid-Cap Fund (constituting The Royce Fund, hereafter referred to as the “Funds”) at December 31, 2010, the results of their operations, the changes in their net assets, and their financial highlights for each of the fiscal periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2010 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Baltimore, Maryland
February 22, 2011

 

 

 

 

 

The Royce Funds 2010 Annual Report to Shareholders | 159


 

Understanding Your Fund’s Expenses (unaudited)

 

    As a shareholder of a mutual fund, you pay ongoing expenses, including management fees and other Fund expenses including, for some funds, distribution and/or service (12b-1) fees. Using the information below, you can estimate how these ongoing expenses (in dollars) affect your investment and compare them with the ongoing expenses of other funds. You may also incur one-time transaction expenses, including redemption fees, which are not shown in this section and would result in higher total costs. The example is based on an investment of $1,000 invested at July 1, 2010 and held for the entire six-month period ended December 31, 2010. Service, Consultant, R and K Class shares are generally available only through certain brokers or retirement plan administrators who receive distribution and/or service fees from the Fund for services that they perform. Institutional and W Class shares are generally available only to institutions or intermediaries with a minimum account size of $1 million.

Actual Expenses
    The first part of the table below provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value at December 31, 2010 by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes
    The second part of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
    Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, this section is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Actual

 

Hypothetical (5% per year return before expenses)

 

 

 

  

 

    

 

 

Beginning
Account Value
7/1/10

 

Ending
Account Value
12/31/10

 

Expenses Paid
During the
Period(1)

 

Beginning
Account Value
7/1/10

 

Ending
Account Value
12/31/10

 

Expenses Paid
During the
Period(1)

 

Annualized
Expense
Ratio(2)

 

Investment Class

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royce Pennsylvania Mutual Fund

 

$

1,000.00

 

$

1,270.89

 

$

5.15

 

$

1,000.00

 

$

1,020.67

 

$

4.58

 

 

0.90

% 

Royce Micro-Cap Fund

 

 

1,000.00

 

 

1,317.91

 

 

8.82

 

 

1,000.00

 

 

1,017.59

 

 

7.68

 

 

1.51

 

Royce Premier Fund

 

 

1,000.00

 

 

1,300.52

 

 

6.55

 

 

1,000.00

 

 

1,019.51

 

 

5.75

 

 

1.13

 

Royce Low-Priced Stock Fund

 

 

1,000.00

 

 

1,378.44

 

 

7.43

 

 

1,000.00

 

 

1,018.95

 

 

6.31

 

 

1.24

 

Royce Total Return Fund

 

 

1,000.00

 

 

1,246.12

 

 

6.45

 

 

1,000.00

 

 

1,019.46

 

 

5.80

 

 

1.14

 

Royce Heritage Fund(3)

 

 

1,000.00

 

 

1,325.19

 

 

7.27

 

 

1,000.00

 

 

1,018.95

 

 

6.31

 

 

1.24

 

Royce Opportunity Fund

 

 

1,000.00

 

 

1,346.71

 

 

6.86

 

 

1,000.00

 

 

1,019.36

 

 

5.90

 

 

1.16

 

Royce Special Equity Fund

 

 

1,000.00

 

 

1,232.76

 

 

6.53

 

 

1,000.00

 

 

1,019.36

 

 

5.90

 

 

1.16

 

Royce Value Fund

 

 

1,000.00

 

 

1,298.91

 

 

6.72

 

 

1,000.00

 

 

1,019.36

 

 

5.90

 

 

1.16

 

Royce Value Plus Fund

 

 

1,000.00

 

 

1,239.78

 

 

6.21

 

 

1,000.00

 

 

1,019.66

 

 

5.60

 

 

1.10

 

Royce 100 Fund

 

 

1,000.00

 

 

1,289.54

 

 

6.69

 

 

1,000.00

 

 

1,019.36

 

 

5.90

 

 

1.16

 

Royce Dividend Value Fund

 

 

1,000.00

 

 

1,285.70

 

 

7.14

 

 

1,000.00

 

 

1,018.95

 

 

6.31

 

 

1.24

 

Royce Global Value Fund

 

 

1,000.00

 

 

1,328.78

 

 

5.56

 

 

1,000.00

 

 

1,011.80

 

 

4.80

 

 

1.44

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service Class

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royce Pennsylvania Mutual Fund

 

 

1,000.00

 

 

1,271.83

 

 

7.27

 

 

1,000.00

 

 

1,018.80

 

 

6.46

 

 

1.27

 

Royce Micro-Cap Fund

 

 

1,000.00

 

 

1,316.91

 

 

9.69

 

 

1,000.00

 

 

1,016.84

 

 

8.44

 

 

1.66

 

Royce Premier Fund

 

 

1,000.00

 

 

1,299.24

 

 

7.82

 

 

1,000.00

 

 

1,018.40

 

 

6.87

 

 

1.35

 

Royce Low-Priced Stock Fund

 

 

1,000.00

 

 

1,376.62

 

 

8.93

 

 

1,000.00

 

 

1,017.69

 

 

7.58

 

 

1.49

 

Royce Total Return Fund

 

 

1,000.00

 

 

1,244.22

 

 

8.03

 

 

1,000.00

 

 

1,018.05

 

 

7.22

 

 

1.42

 

Royce Heritage Fund(3)

 

 

1,000.00

 

 

1,324.41

 

 

8.20

 

 

1,000.00

 

 

1,018.15

 

 

7.12

 

 

1.40

 

Royce Opportunity Fund

 

 

1,000.00

 

 

1,344.75

 

 

8.75

 

 

1,000.00

 

 

1,017.74

 

 

7.53

 

 

1.48

 

Royce Special Equity Fund

 

 

1,000.00

 

 

1,231.37

 

 

7.82

 

 

1,000.00

 

 

1,018.20

 

 

7.07

 

 

1.39

 

Royce Value Fund

 

 

1,000.00

 

 

1,297.09

 

 

8.34

 

 

1,000.00

 

 

1,017.95

 

 

7.32

 

 

1.44

 

Royce Value Plus Fund

 

 

1,000.00

 

 

1,236.65

 

 

8.01

 

 

1,000.00

 

 

1,018.05

 

 

7.22

 

 

1.42

 

Royce 100 Fund

 

 

1,000.00

 

 

1,286.77

 

 

8.36

 

 

1,000.00

 

 

1,017.90

 

 

7.38

 

 

1.45

 

Royce Discovery Fund

 

 

1,000.00

 

 

1,224.30

 

 

8.35

 

 

1,000.00

 

 

1,017.69

 

 

7.58

 

 

1.49

 

Royce Financial Services Fund

 

 

1,000.00

 

 

1,303.89

 

 

8.65

 

 

1,000.00

 

 

1,017.69

 

 

7.58

 

 

1.49

 

Royce Dividend Value Fund

 

 

1,000.00

 

 

1,283.40

 

 

8.58

 

 

1,000.00

 

 

1,017.69

 

 

7.58

 

 

1.49

 

Royce European Smaller-Companies Fund

 

 

1,000.00

 

 

1,391.76

 

 

10.19

 

 

1,000.00

 

 

1,016.69

 

 

8.59

 

 

1.69

 

Royce Global Value Fund

 

 

1,000.00

 

 

1,406.38

 

 

10.25

 

 

1,000.00

 

 

1,016.69

 

 

8.59

 

 

1.69

 
 

 

 

 

160 | The Royce Funds 2010 Annual Report to Shareholders

 

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Actual

 

Hypothetical (5% per year return before expenses)

 

 

 

  

 

    

 

 

Beginning
Account Value
7/1/10

 

Ending
Account Value
12/31/10

 

Expenses Paid
During the
Period(1)

 

Beginning
Account Value
7/1/10

 

Ending
Account Value
12/31/10

 

Expenses Paid
During the
Period(1)

 

Annualized
Expense
Ratio(2)

 

Service Class (continued)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royce SMid-Cap Value Fund

 

$

1,000.00

 

$

1,283.95

 

$

8.58

 

$

1,000.00

 

$

1,017.69

 

$

7.58

 

1.49

% 

Royce International Smaller-Companies Fund

 

 

1,000.00

 

 

1,319.86

 

 

9.88

 

 

1,000.00

 

 

1,016.69

 

 

8.59

 

1.69

 

Royce Focus Value Fund

 

 

1,000.00

 

 

1,275.51

 

 

8.55

 

 

1,000.00

 

 

1,017.69

 

 

7.58

 

1.49

 

Royce Partners Fund

 

 

1,000.00

 

 

1,290.09

 

 

8.60

 

 

1,000.00

 

 

1,017.69

 

 

7.58

 

1.49

 

Royce Mid-Cap Fund

 

 

1,000.00

 

 

1,265.74

 

 

8.51

 

 

1,000.00

 

 

1,017.69

 

 

7.58

 

1.49

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consultant Class

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royce Pennsylvania Mutual Fund

 

 

1,000.00

 

 

1,264.60

 

 

10.56

 

 

1,000.00

 

 

1,015.88

 

 

9.40

 

1.85

 

Royce Micro-Cap Fund

 

 

1,000.00

 

 

1,311.64

 

 

14.04

 

 

1,000.00

 

 

1,013.06

 

 

12.23

 

2.41

 

Royce Premier Fund

 

 

1,000.00

 

 

1,293.97

 

 

11.97

 

 

1,000.00

 

 

1,014.77

 

 

10.51

 

2.07

 

Royce Total Return Fund

 

 

1,000.00

 

 

1,238.97

 

 

11.74

 

 

1,000.00

 

 

1,014.72

 

 

10.56

 

2.08

 

Royce Heritage Fund(3)

 

 

1,000.00

 

 

1,318.08

 

 

13.61

 

 

1,000.00

 

 

1,013.46

 

 

11.82

 

2.33

 

Royce Opportunity Fund

 

 

1,000.00

 

 

1,338.79

 

 

13.38

 

 

1,000.00

 

 

1,013.76

 

 

11.52

 

2.27

 

Royce Special Equity Fund

 

 

1,000.00

 

 

1,226.28

 

 

12.12

 

 

1,000.00

 

 

1,014.32

 

 

10.97

 

2.16

 

Royce Value Fund

 

 

1,000.00

 

 

1,292.06

 

 

12.54

 

 

1,000.00

 

 

1,014.27

 

 

11.02

 

2.17

 

Royce Value Plus Fund

 

 

1,000.00

 

 

1,232.45

 

 

12.10

 

 

1,000.00

 

 

1,014.37

 

 

10.92

 

2.15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Institutional Class

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royce Premier Fund

 

 

1,000.00

 

 

1,301.14

 

 

5.74

 

 

1,000.00

 

 

1,020.21

 

 

5.04

 

0.99

 

Royce Low-Priced Stock Fund

 

 

1,000.00

 

 

1,378.86

 

 

7.08

 

 

1,000.00

 

 

1,019.26

 

 

6.01

 

1.18

 

Royce Total Return Fund

 

 

1,000.00

 

 

1,246.47

 

 

5.72

 

 

1,000.00

 

 

1,020.11

 

 

5.14

 

1.01

 

Royce Opportunity Fund

 

 

1,000.00

 

 

1,348.12

 

 

6.10

 

 

1,000.00

 

 

1,020.01

 

 

5.24

 

1.03

 

Royce Special Equity Fund

 

 

1,000.00

 

 

1,232.91

 

 

5.80

 

 

1,000.00

 

 

1,020.01

 

 

5.24

 

1.03

 

Royce Value Fund

 

 

1,000.00

 

 

1,299.93

 

 

6.03

 

 

1,000.00

 

 

1,019.96

 

 

5.30

 

1.04

 

Royce Value Plus Fund

 

 

1,000.00

 

 

1,239.78

 

 

5.93

 

 

1,000.00

 

 

1,019.91

 

 

5.35

 

1.05

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

W Class

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royce Premier Fund

 

 

1,000.00

 

 

1,301.21

 

 

5.97

 

 

1,000.00

 

 

1,020.01

 

 

5.24

 

1.03

 

Royce Total Return Fund

 

 

1,000.00

 

 

1,245.80

 

 

6.00

 

 

1,000.00

 

 

1,019.86

 

 

5.40

 

1.06

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

R Class

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royce Pennsylvania Mutual Fund

 

 

1,000.00

 

 

1,269.01

 

 

 8.58

 

 

1,000.00

 

 

1,017.64

 

 

7.63

 

1.50

 

Royce Premier Fund

 

 

1,000.00

 

 

1,296.47

 

 

10.13 

 

 

1,000.00

 

 

1,016.38

 

 

8.89

 

1.75

 

Royce Low-Priced Stock Fund

 

 

1,000.00

 

 

1,374.00

 

 

11.01 

 

 

1,000.00

 

 

1,015.93

 

 

9.35

 

1.84

 

Royce Total Return Fund

 

 

1,000.00

 

 

1,242.77

 

 

 9.44

 

 

1,000.00

 

 

1,016.79

 

 

8.49

 

1.67

 

Royce Heritage Fund

 

 

1,000.00

 

 

1,320.24

 

 

10.76 

 

 

1,000.00

 

 

1,015.93

 

 

9.35

 

1.84

 

Royce Opportunity Fund

 

 

1,000.00

 

 

1,343.22

 

 

10.87 

 

 

1,000.00

 

 

1,015.93

 

 

9.35

 

1.84

 

Royce Value Fund

 

 

1,000.00

 

 

1,295.84

 

 

 9.49

 

 

1,000.00

 

 

1,015.93

 

 

9.35

 

1.84

 

Royce Value Plus Fund

 

 

1,000.00

 

 

1,234.40

 

 

10.36 

 

 

1,000.00

 

 

1,015.93

 

 

9.35

 

1.84

 

Royce 100 Fund

 

 

1,000.00

 

 

1,284.41

 

 

10.59 

 

 

1,000.00

 

 

1,015.93

 

 

9.35

 

1.84

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

K Class

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royce Pennsylvania Mutual Fund

 

 

1,000.00

 

 

1,266.47

 

 

9.08

 

 

1,000.00

 

 

1,017.19

 

 

8.08

 

1.59

 

Royce Premier Fund

 

 

1,000.00

 

 

1,296.61

 

 

9.20

 

 

1,000.00

 

 

1,017.19

 

 

8.08

 

1.59

 

Royce Low-Priced Stock Fund

 

 

1,000.00

 

 

1,376.50

 

 

9.52

 

 

1,000.00

 

 

1,017.19

 

 

8.08

 

1.59

 

Royce Total Return Fund

 

 

1,000.00

 

 

1,242.97

 

 

8.37

 

 

1,000.00

 

 

1,017.74

 

 

7.53

 

1.48

 

Royce Heritage Fund

 

 

1,000.00

 

 

1,323.26

 

 

9.31

 

 

1,000.00

 

 

1,017.19

 

 

8.08

 

1.59

 

Royce Opportunity Fund

 

 

1,000.00

 

 

1,343.94

 

 

9.39

 

 

1,000.00

 

 

1,017.19

 

 

8.08

 

1.59

 

Royce Value Fund

 

 

1,000.00

 

 

1,295.73

 

 

8.56

 

 

1,000.00

 

 

1,017.74

 

 

7.53

 

1.48

 

Royce Value Plus Fund

 

 

1,000.00

 

 

1,236.13

 

 

8.96

 

 

1,000.00

 

 

1,017.19

 

 

8.08

 

1.59

 

Royce 100 Fund

 

 

1,000.00

 

 

1,287.19

 

 

9.17

 

 

1,000.00

 

 

1,017.19

 

 

8.08

 

1.59

 

 

 

(1)

Expenses are equal to the Fund’s annualized expense ratio multiplied by the average account value for the period, multiplied by 184 days in the most recent fiscal half-year divided by 365 days (to reflect the half-year period for all funds existing for the full half-year period; Royce Global Value Fund-Investment Class multiplied by 121 days).

(2)

Annualized expense ratio used to derive figures in the table is based on the most recent fiscal half-year.

(3)

GiftShare accounts pay an annual $50 trustee fee to State Street Bank, NA, as trustee. If these fees were included above, your costs would be higher.

 

 

 

 

 

The Royce Funds 2010 Annual Report to Shareholders | 161


 

Federal Tax Information

 

    In January 2011, taxable shareholders were mailed a Form 1099-DIV reporting the federal tax status of all distributions paid during the calendar year 2010.

2010 Supplemental Tax Information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fund

 

%
QDI

 

% U.S. Govt
Income

 

%
Income Qualifying
For DRD

 

Long-Term Capital
Gain Distribution or
Maximum Allowable (OOO’s)

 

Royce Pennsylvania Mutual Fund

 

 

100.00%

 

 

N/A

 

 

100.00%

 

 

N/A

 

Royce Micro-Cap Fund

 

 

66.44%

 

 

N/A

 

 

29.25%

 

 

N/A

 

Royce Premier Fund

 

 

N/A

 

 

N/A

 

 

N/A

 

 

$ 87,795

 

Royce Low-Priced Stock Fund

 

 

100.00%

 

 

N/A

 

 

100.00%

 

 

34,437

 

Royce Total Return Fund

 

 

99.16%

 

 

N/A

 

 

100.00%

 

 

N/A

 

Royce Heritage Fund

 

 

100.00%

 

 

N/A

 

 

100.00%

 

 

5,262

 

Royce Opportunity Fund

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

Royce Special Equity Fund

 

 

100.00%

 

 

N/A

 

 

100.00%

 

 

N/A

 

Royce Value Fund

 

 

100.00%

 

 

N/A

 

 

100.00%

 

 

N/A

 

Royce Value Plus Fund

 

 

100.00%

 

 

N/A

 

 

100.00%

 

 

N/A

 

Royce 100 Fund

 

 

100.00%

 

 

N/A

 

 

100.00%

 

 

3,835

 

Royce Discovery Fund

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

Royce Financial Services Fund

 

 

100.00%

 

 

N/A

 

 

83.13%

 

 

N/A

 

Royce Dividend Value Fund

 

 

100.00%

 

 

N/A

 

 

100.00%

 

 

353

 

Royce European Smaller-Companies Fund

 

 

100.00%

 

 

N/A

 

 

0.00%

 

 

N/A

 

Royce Global Value Fund

 

 

100.00%

 

 

N/A

 

 

0.00%

 

 

N/A

 

Royce SMid-Cap Value Fund

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

Royce International Smaller-Companies Fund

 

 

70.93%

 

 

N/A

 

 

0.00%

 

 

167

 

Royce Focus Value Fund

 

 

0.08%

 

 

N/A

 

 

100.00%

 

 

213

 

Royce Partners Fund

 

 

41.42%

 

 

N/A

 

 

23.31%

 

 

22

 

Royce Mid-Cap Fund

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

Definitions:
% QDI: Qualified Dividend Income; % of net investment income and/or short-term capital gains distributions that qualify for treatment at long-term capital gain rates.
% U.S. Govt Income: % of investment income paid from U.S. Government obligations.
% Income Qualifying for DRD: % of investment income eligible for the corporate dividend received deduction.

Foreign Tax Credit
    For the year ended December 31, 2010, the following funds had elected to pass through the credit for tax paid in foreign countries. The net foreign source income and foreign tax per share outstanding on the dividend distribution date are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fund

 

Net Foreign
Source Income

 

Net Foreign
Source Income
Per Share

 

Foreign
Tax

 

Foreign
Tax Per Share

 

Royce European Smaller-Companies Fund

 

$

130,347

 

$

.0993

 

$

23,881

 

$

.0182

 

Royce Global Value Fund

 

 

519,652

 

 

.0610

 

 

88,024

 

 

.0103

 

Royce International Smaller-Companies Fund

 

 

222,945

 

 

.1564

 

 

23,998

 

 

.0168

 

 

 

 

162 | The Royce Funds 2010 Annual Report to Shareholders

 

 


 

Trustees and Officers

 

All Trustees and Officers may be reached c/o The Royce Funds, 745 Fifth Avenue, New York, NY 10151

Charles M. Royce, Trustee*, President
Age: 71 | Number of Funds Overseen: 35 | Tenure: Since 1982
Non-Royce Directorships: Director of Technology Investment Capital Corp.

Principal Occupation(s) During Past Five Years: President, Co-Chief Investment Officer and Member of Board of Managers of Royce & Associates, LLC (“Royce”), the Trust’s investment adviser.

Mark R. Fetting, Trustee*
Age: 56 | Number of Funds Overseen: 52 | Tenure: Since 2001
Non-Royce Directorships: Director/Trustee of registered investment companies constituting the 17 Legg Mason Funds.

Principal Occupation(s) During Past 5 Years: President, CEO, Chairman and Director of Legg Mason, Inc. and Chairman of Legg Mason Funds. Mr. Fetting’s prior business experience includes having served as a member of the Board of Managers of Royce; President of all Legg Mason Funds; Senior Executive Vice President of Legg Mason, Inc.; Director and/or officer of various Legg Mason, Inc. affiliates; Division President and Senior Officer of Prudential Financial Group, Inc. and related companies.

Patricia W. Chadwick, Trustee
Age: 62 | Number of Funds Overseen: 35 | Tenure: Since 2009
Non-Royce Directorships: Trustee of ING Mutual Funds and Director of Wisconsin Energy Corp.

Principal Occupation(s) During Past 5 Years: Consultant and President of Ravengate Partners LLC (since 2000).

Richard M. Galkin, Trustee
Age: 72 | Number of Funds Overseen: 35 | Tenure: Since 1982
Non-Royce Directorships: None

Principal Occupation(s) During Past Five Years: 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. (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, Trustee
Age: 71 | Number of Funds Overseen: 35 | Tenure: Since 1989
Non-Royce Directorships: None

Principal Occupation(s) During Past Five Years: 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).

Arthur S. Mehlman, Trustee
Age: 68 | Number of Funds Overseen: 52 | Tenure: Since 2004
Non-Royce Directorships: Director/Trustee of registered investment companies constituting the 17 Legg Mason Funds and Director of Municipal Mortgage & Equity, LLC.

Principal Occupation(s) During Past Five Years: 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).

David L. Meister, Trustee
Age: 71 | Number of Funds Overseen: 35 | Tenure: Since 1982
Non-Royce Directorships: None

Principal Occupation(s) During Past Five Years: 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 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.

G. Peter O’Brien, Trustee
Age: 65 | Number of Funds Overseen: 52 | Tenure: Since 2001
Non-Royce Directorships: Director/Trustee of registered investment companies constituting the 17 Legg Mason Funds; Director of Technology Investment Capital Corp.

Principal Occupation(s) During Past Five Years: 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).

 
 
 

John D. Diederich, Vice President and Treasurer
Age: 59 | Tenure: Since 2001

Principal Occupation(s) During Past Five Years: Chief Operating Officer, Managing Director and member of the Board of Managers of Royce; Chief Financial Officer of Royce; Director of Administration of the Trust; and President of RFS, having been employed by Royce since April 1993.

Jack E. Fockler, Jr., Vice President
Age: 52 | Tenure: Since 1995

Principal Occupation(s) During Past Five Years: Managing Director and Vice President of Royce, and Vice President of RFS, having been employed by Royce since October 1989.

W. Whitney George, Vice President
Age: 52 | Tenure: Since 1995

Principal Occupation(s) During Past Five Years: Co-Chief Investment Officer, Managing Director and Vice President of Royce, having been employed by Royce since October 1991.

Daniel A. O’Byrne, Vice President and Assistant Secretary
Age: 48 | Tenure: Since 1994

Principal Occupation(s) During Past Five Years: Principal and Vice President of Royce, having been employed by Royce since October 1986.

John E. Denneen, Secretary and Chief Legal Officer
Age: 43 | Tenure: 1996-2001 and Since April 2002

Principal Occupation(s) During Past Five Years: General Counsel, Principal, Chief Legal and Compliance Officer and Secretary of Royce; Secretary and Chief Legal Officer of The Royce Funds.

Lisa Curcio, Chief Compliance Officer
Age: 51 | Tenure: Since 2004

Principal Occupation(s) During Past Five Years: Chief Compliance Officer of The Royce Funds (since October 2004) and Compliance Officer of Royce (since June 2004).

 
 

*

Interested Trustee.

Trustees will hold office until their successors have been duly elected and qualified or until their earlier resignation or removal. The Statement of Additional Information, which contains additional information about the Trust’s trustees and officers, is available and can be obtained without charge at www.roycefunds.com or by calling (800) 221-4268.


 

 

 

 

 

The Royce Funds 2010 Annual Report to Shareholders | 163


 

Notes to Performance and Other Important Information

 

The thoughts expressed in this report concerning recent market movements and future prospects for small company stocks are solely the opinion of Royce at December 31, 2010, and, of course, historical market trends are not necessarily indicative of future market movements. Statements regarding the future prospects for particular securities held in the Funds’ portfolios and Royce’s investment intentions with respect to those securities reflect Royce’s opinions as of December 31, 2010 and are subject to change at any time without notice. There can be no assurance that securities mentioned in this report will be included in any Royce-managed portfolio in the future.
    The Russell 2000 is an index of domestic small-cap stocks. It measures the performance of the 2,000 smallest publicly traded U.S. companies in the Russell 3000 index. The Russell 2000 Value and Growth indices consist of the respective value and growth stocks within the Russell 2000 as determined by Russell Investments. The Russell Microcap index includes 1,000 of the smallest securities in the Russell 2000 index. The Russell 2500 is an index of domestic small- to mid-cap stocks. It includes approximately 2,500 of the smallest securities in the Russell 3000 index. The returns for the Russell 2500—Financial Sector represent those of the financial services companies within the Russell 2500 index. The Russell Midcap index measures the performance of the mid-cap segment of the U.S. equity universe. It includes approximately 800 of the smallest securities in the Russell 1000 index. The S&P 500 is an index of U.S. large-cap stocks, selected by Standard & Poor’s based on market size, liquidity and industry grouping, among other factors. The Nasdaq Composite is an index of the more than 3,000 common equities listed on the Nasdaq stock exchange. The MSCI EAFE index (Europe, Australasia, Far East) is designed to measure the equity market performance of developed markets, excluding the U.S. & Canada. The MSCI Europe Small Core index represents the small-cap segment within the developed equity markets in Europe. The MSCI World Small Core index represents the small-cap segment in the world’s developed equity markets. The MSCI World ex USA Small Core represents these markets excluding the United States. Returns for the market indexes used in this report were based on information supplied to Royce by Russell Investments and MSCI. Royce has not independently verified the above described information.
    The Sharpe Ratio is calculated for a specified period by dividing a fund’s annualized excess returns by its annualized standard deviation. The higher the Sharpe Ratio, the better the fund’s historical risk-adjusted performance. Standard deviation is a statistical measure within which a fund’s total returns have varied over time. The greater the standard deviation, the greater a fund’s volatility. The Royce Funds is a service mark of The Royce Funds. Distributor: Royce Fund Services, Inc.

    The Funds invest primarily in securities of micro-, small- and/or mid-cap companies, which may involve considerably more risk than investments in securities of larger-cap companies (see “Primary Risks for Fund Investors” in the respective prospectus). Royce European Smaller-Companies Fund invests primarily in European stocks. Royce Global Value Fund invests in companies in at least three countries, which may include the United States. Royce International Smaller-Companies Fund invests primarily in companies domiciled outside the United States. All other Royce Funds may invest up to 25% (35% of Royce Financial Services, Focus Value, Partners, 10% of Opportunity and 5% of Special Equity Funds) of their respective assets in foreign securities, which generally may involve political, economic, currency and other risks not encountered in U.S. investments. (Please see “Investing in International Securities” in the prospectus.) Please read the prospectus carefully before investing or sending money. A copy of the Funds’ current prospectus and Statement of Additional Information may be obtained by calling 1-800-221-4268, or by visiting www.roycefunds.com. All publicly released material Fund information is disclosed by the Funds on their website at www.roycefunds.com.

Forward-Looking Statements
This material contains forward-looking statements within the meaning of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve risks and uncertainties, including, among others, statements as to:

•

the Funds’ future operating results,

•

the prospects of the Funds’ portfolio companies,

•

the impact of investments that the Funds have made or may make,

•

the dependence of the Funds’ future success on the general economy and its impact on the companies and industries in which the Funds invest, and

•

the ability of the Funds’ portfolio companies to achieve their objectives.

    This review and report use words such as “anticipates,” “believes,” expects,” “future,” “intends,” and similar expressions to identify forward-looking statements. Actual results may differ materially from those projected in the forward-looking statements for any reason.
    The Royce Funds have based the forward-looking statements included in this review and report on information available to us on the date of the report, and we assume no obligation to update any such forward-looking statements. Although The Royce Funds undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make through future shareholder communications or reports.


 



Proxy Voting
A copy of the policies and procedures that The Royce Funds use to determine how to vote proxies relating to portfolio securities and information regarding how each of The Royce Funds voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available, without charge, on The Royce Funds’ website at www.roycefunds.com, by calling 1-800-221-4268 (toll-free) and on the website of the Securities and Exchange Commission (“SEC”), at www.sec.gov.

Form N-Q Filing
The Funds file their complete schedules of investments with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the SEC’s website at www.sec.gov. The Royce Funds’ holdings are also on the 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’ Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. To find out more about this public service, call the SEC at 1-202-942-8090. The Funds’ complete schedules of investments are updated quarterly, and are available at www.roycefunds.com.

 

 

 

 

164 | The Royce Funds 2010 Annual Report to Shareholders

 

 


 

2010: The Year in Quotes
 

 

The best investors in the world do not target returns; they focus first on risk. - Seth Klarman

 

Markets are constantly in a state of uncertainty and flux and money is made by discounting the obvious and betting on the unexpected. - George Soros



Points To Ponder
We're in the early stages of a long-term recovery in global M&A volume. Historically, you see that the upcycles last five to eight years, and the downcycles typically two to three years. We have just come through more than a two-year down cycle, and it is clear to me that we have turned the corner.
- Roger Altman, Barron's, February 8, 2010

U.S. consumers are shedding debt at the fastest rate in more than six decades, largely through a wave of defaults, in a trend that underscores the depth of their financial troubles but could also help clear the way for a stronger economic recovery.

- Mark Whitehouse, The Wall Street Journal,
March 12, 2010

Balance sheets are like bikinis: What they reveal is suggestive, but what they conceal is vital.
- SimoleonSense.com

More U.S. stocks are paying dividends that exceed bond yields than any time in at least 15 years as profits rise at the fastest pace in two decades.
- Bloomberg, September 7, 2010

The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt. People must again learn to work, instead of living on public assistance.
- Cicero, 55 BC

In Absolute Agreement
Investors who seek funds in which managers are willing to invest their own money seem to significantly tilt the odds in their favor. The correlation is absolute and significant. Among equity funds, the correlation of better returns is stronger with manager ownership than it is with low costs.

- Don Phillips, Morningstar Advisor,
February 18, 2010

(MESSAGE)

It's been an ideal period for investors: A climate of fear is their best friend... Big opportunities come infrequently. When it's raining gold, reach for a bucket, not a thimble.

- Warren Buffett, The Wall Street Journal,
March 1, 2010

We focus on strong balance sheets and free-cash flow—if earnings are depressed—and look at downside risk before we look at upside appreciation. It's a very risk-sensitive strategy...and an outgrowth of our starting in the business in the late '60s and early '70s when we experienced firsthand how downside can hurt you and make compounding returns difficult.

- Tom Perkins, Perkins Mid Cap Value Fund,
  Barron's, October 16, 2010

If you focus solely on the economy, you could get bearish...but when you look at the health of companies themselves, it's very easy to get bullish.

- Ronald Muhlenkamp, Muhlenkamp Fund,
  Money Magazine, October 21, 2010

Cocktail Conversation
The good news is that valuation is more compelling overseas than it is in the U.S. In '08, most foreign stock markets fell a lot more than they did in the U.S. But most foreign markets, especially in local currency terms, didn't bounce back nearly as much as they did in the U.S.

- Charles de Vaulx, Barron's, May 15, 2010

As a portfolio manager, if you go only with your best ideas, you're not diversified enough.

- Aaron Brown, AQR Capital Management,
  Institutional Investor, May 2010

When we buy something, we try to look at it as if we were buying a bond...If a bond [price] declines, its yield goes up. So if a stock declines, its forward rate of return goes up.
- Donald Yacktman, Yacktman Fund,
  Barron's, May 22, 2010

Timeless Tidbits
We cannot become what we need to be by remaining what we are.
- Max Depree

There is no such uncertainty as a sure thing.
- Robert Burns

The only reason for time is so that everything doesn't happen at once.
- Albert Einstein



This page is not part of the 2010 Annual Report to Shareholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

About The Royce Funds

 

 

 

 

 

 

 

 

 

 

 

Wealth Of Experience

 

Consistent Discipline

 

 

 

With approximately $37 billion in open- and closed-end fund assets under management, Royce & Associates is committed to the same small-company investing principles that have served us well for more than 35 years. Charles M. Royce, our President and Co-Chief Investment Officer, enjoys one of the longest tenures of any active mutual fund manager. Royce’s investment staff also includes Co-Chief Investment Officer W. Whitney George, 15 Portfolio Managers, 11 assistant portfolio managers and analysts, and nine traders.

Multiple Funds, Common Focus
Our goal is to offer both individual and institutional investors the best available smaller-cap portfolios. Unlike a lot of mutual fund groups with broad product offerings, we have chosen to concentrate on smaller-company investing by providing investors with a range of funds that take full advantage of this large and diverse sector.

 

Our approach emphasizes paying close attention to risk and maintaining the same discipline, regardless of market movements and trends. The price we pay for a security must be significantly below our appraisal of its current worth. This requires a thorough analysis of the financial and business dynamics of an enterprise, as though we were purchasing the entire company.

Co-Ownership Of Funds
It is important that our employees and shareholders share a common financial goal; our officers, employees and their families currently have approximately $130 million invested in The Royce Funds.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

This Review and Report must be accompanied or preceded by a current prospectus for the Funds. Please read the prospectus carefully before investing or sending money.

 

 

 

 

 

 

 

 
           

 

 

 

 

 

 

 

 

 

 

 

Contact Us

 

 

 

 

 

 

 

 

 

General Information

 

RIA Services

 

Broker/Dealer Services

 

Shareholder Services

 

Royce InfoLine

 

Additional Report Copies
and Prospectus Inquiries
(800) 221-4268

 

Fund Materials and
Performance Updates
(800) 33-ROYCE (337-6923)

 

Fund Materials and
Performance Updates
(800) 59-ROYCE (597-6923)

 

Transactions and
Account Inquiries
(800) 841-1180

 

24-Hour Automated
Telephone Service
(800) 78-ROYCE (787-6923)

 

 

 

 

 

 

 

 

 

 

OE-REP-1210

             
             
             
             
       
             
             
  QUALIFIED INVESTOR



Royce Select Fund I



Royce Select Fund II 		   

ANNUAL

    
     

REVIEW AND REPORT

     

TO SHAREHOLDERS

    
             
             
  Royce Global Select Fund          
             
             
  Royce SMid-Cap Select Fund          
             
             
  Royce Opportunity Select Fund          
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
     
             
             
             
 
 
    
  www.roycefunds.com          
             
             
             



 

 

 

Performance and Expenses

 

Through December 31, 2010
     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Annual Total Returns

 

 

 

 

  

 

 

Fund

 

 

1-Year

 

 

3-Year

 

 

5-Year

 

 

10-Year/Since Inception (Date)

 

Annual Operating Expenses
                             

QUALIFIED INVESTOR

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royce Select Fund I

 

 

18.15

%

 

6.91

%

 

9.24

%

 

12.34

%

 

 

 

 

0.03

%
                                       

Royce Select Fund II

 

 

20.96

 

 

10.32

 

 

8.72

 

 

9.24

 

 

(6/30/05)

 

 

0.69

 
                                       

Royce Global Select Fund

 

 

33.21

 

 

10.91

 

 

14.00

 

 

16.02

 

 

(6/30/05)

 

 

0.17

 
                                       

Royce SMid-Cap Select Fund

 

 

17.22

 

 

2.44

 

 

n.a.

 

 

2.42

 

 

(9/28/07)

 

 

0.04

 
                                       

Royce Opportunity Select Fund

 

 

n.a.

 

 

n.a.

 

 

n.a.

 

 

27.30

*

 

(8/31/10)

 

 

0.70

 
                                       

Russell 2000

 

 

26.86

 

 

2.22

 

 

4.47

 

 

6.33

 

 

 

 

 

n.a.

 
                                       

Russell 2500

 

 

26.71

 

 

2.48

 

 

4.86

 

 

6.98

 

 

 

 

 

n.a.

 
                                       

MSCI World Small Core

 

 

26.13

 

 

1.85

 

 

4.53

 

 

9.14

 

 

 

 

 

n.a.

 
                                       

Royce Select Fund I’s average annual total return since inception (11/18/98) was 14.89%.
* Not annualized

Important Performance, Expense and Risk Information
All performance information in this Review and Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when redeemed. Shares redeemed within 365 days of purchase may be subject to a 2% redemption fee, payable to the respective Fund. Redemption fees are not reflected in the performance shown above except in the case of Royce Opportunity Select Fund’s since inception return, which is adjusted to reflect the 2% fee assessed on redemptions of shares held for less than 365 days. If the other Funds’ respective returns reflected the performance fees, returns would be lower. Current performance may be higher or lower than performance quoted. Current month-end performance may be obtained at www.roycefunds.com. Annual operating expenses for Royce Select Fund I, Select Fund II, Global Select and SMid-Cap Select Funds reflect each Fund’s total annual operating expenses as of the most current prospectus and include each Fund’s performance fee based on 12.5% of its pre-fee, high watermark total return in 2009. There was no high watermark return for Royce Select Fund I, Select Fund II, Global Select and SMid-Cap Select Funds for 2009. For Royce Select Fund I, expenses consisted of dividends on securities sold short and acquired fund fees and expenses. For Royce Global Select Fund, expenses consisted solely of acquired fund fees and expenses. For Royce Select Fund II and SMid-Cap Select Fund, it consisted of dividends on securities sold short, acquired fund fees and expenses and interest expense on borrowings. Royce Opportunity Select Fund’s annual operating expenses include estimated performance fees of 12.5% of an assumed pre-fee, high watermark, total return of 5.00%, plus an estimate for dividend expenses related to short selling. Royce has contractually agreed to absorb all other operating expenses of each Select Fund, other than acquired fund fees and expenses, dividend expenses relating to any short selling activity and interest expense on borrowings of these Funds. Acquired fund fees and expenses reflect the estimated amount of the fees and expenses incurred indirectly by any applicable Fund through its investments in mutual funds, hedge funds, private equity funds and other investment companies.

The Royce Funds invest primarily in securities of micro-cap, small-cap and/or mid-cap companies, which may involve considerably more risk than investments in securities of larger-cap companies (see “Primary Risks for Fund Investors” in the Prospectus). Please read the Prospectus carefully before investing or sending money. The Russell 2000 is an unmanaged, capitalization-weighted index of domestic small-cap stocks. It measures the performance of the 2,000 smallest publicly traded U.S. companies in the Russell 3000 index. The Russell 2500 is an index of domestic small to mid-cap stocks. It includes approximately 2500 of the smallest securities in the Russell 3000 index. The Morgan Stanley Capital International (MSCI) World Small Core is an unmanaged index of global small-cap stock. Distributor: Royce Fund Services, Inc.

This page is not part of the 2010 Annual Report to Shareholders



 

 

 

Portfolio Characteristics

 

Through December 31, 2010
     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Portfolio Composition*

 

 

 

 

 

CATEGORY
Fund

 

Micro

 

Small

 

Mid

 

Non-U.S.
Securities

 

Portfolio Approach

 

Volatility
                 

QUALIFIED INVESTOR

 

 

 

 

 

 

 

 

 

 

 

 

 

 
 

Royce Select Fund I

 

Micro

 

Small

 

Mid

 

0%

(MESSAGE)

35%

 

Limited

 

Low
 

Royce Select Fund II

 

Micro

 

Small

 

Mid

 

0%

(MESSAGE)

35%

 

Limited

 

High
 

Royce Global Select Fund

 

Micro

 

Small

 

Mid

 

0%

(MESSAGE)

100%

 

Limited

 

Moderate
 

Royce SMid-Cap Select Fund

 

Micro

 

Small

 

Mid

 

0%

(MESSAGE)

35%

 

Limited

 

Low
 

Royce Opportunity Select Fund**

 

Micro

 

Small

 

Mid

 

0%

(MESSAGE)

35%

 

Limited

 

—
 

  * Source: FactSet
** The Fund does not have the three years of history required for calculating a volatility score.

 

 

 

 

 

 

 

 

 

 

Indicates primary portfolio composition
(based on Average Market Capitalization)

 

Indicates secondary portfolio composition
(based on exposure greater than 20%)

 

Indicates little (less than 20%)
or no exposure

 

 

 

Investment Universe
Micro-Cap: Market Caps up to $500 million
Small-Cap: Market Caps between $500 million and $2.5 billion
Mid-Cap: Market Caps between $2.5 billion and $15 billion
Non-U.S. Securities: Non-U.S. securities are those securities that do not trade on a U.S. exchange, trade outside the U.S. and/ or are issued by companies that are domiciled outside the U.S.

Portfolio Approach
Limited: A limited portfolio at Royce is one that either (i) generally invests in no more than 100 companies, and whose top positions generally exceed 2% of net assets, or (ii) invests primarily in a single sector.

Volatility
Each Fund’s volatility is measured using Morningstar’s Risk Ratio, which measures variations in a fund’s monthly returns,

 

with an emphasis on downside performance. Each Royce Fund’s overall Risk Ratio is a weighted combination of its three-, five- and 10-year scores, if applicable. Each Fund’s results reflect its score compared with all small-cap objective funds tracked by Morningstar with at least three years of history (365 funds as of 12/31/10). For Royce Global Select Fund, included are all world stock funds with weighted average market-caps of less than $5 billion tracked by Morningstar with at least three years of history (22 funds as of 12/31/10). For Royce SMid-Cap Select Fund, included are all mid-cap stock funds with weighted average market-caps between $500 million and $10 billion tracked by Morningstar with at least three years of history (26 funds as of 12/31/10 ). We consider funds whose results rank in the top third of the category to have relatively low volatility; those in the middle third to have moderate volatility; and those in the bottom third to have high volatility.

This page is not part of the 2010 Annual Report to Shareholders  |  1



 

Table of Contents
 

 

 

Annual Review

 
   

 

 

Performance and Expenses

Inside Cover

 

 

Portfolio Characteristics

1

 

 

Letter to Our Shareholders

3

 

 

Postscript: Style Points

Inside Back Cover

 

 
   

 

 

Annual Report to Shareholders

9

 

 
   

 

 

 

 

The Select Choice—Royce’s Qualified Investor Funds

 

 

Royce’s Qualified Investor Funds incorporate the same fundamental investment disciplines of our core long-only offerings with added flexibility—the Funds may also short stocks and use leverage.

 

 

     When they choose to, the Funds’ portfolio managers can seek to profit from both positive and negative views of an enterprise that develop out of the normal course of our investment due diligence. This increased investment flexibility provides more efficient use of Royce’s in-depth research process, while also presenting opportunities for an enhanced portfolio.

 

 

     More importantly, the Fund’s fee and expense structure, unique among mutual funds, is tied directly to each Fund’s total return. Each Fund pays a management fee to Royce equal to 12.5% of its pre-fee total return to a performance peak. Royce absorbs most other ordinary operating expenses of the Funds. Each Fund’s respective management fee is subject to a high watermark, which means that Royce will only receive a fee during periods of positive performance from a prior peak for each Fund.

 

 

     If the total return recedes from the high watermark, no fee will be taken until the Fund’s pre-fee total return once again exceeds the high watermark. It is calculated in a manner that we believe is equitable for the investor and aligns the adviser’s interests with the shareholders’. The real advantage is that during low-return periods, the expenses have a much more modest impact on returns, and during negative-return periods, there are no ordinary operating expenses charged to the Fund, other than dividend expense relating to any short selling activity of the Fund, acquired fund fees and expenses and interest expense on borrowings, when applicable.

 

 

     In our view, these features give qualified investors the best of both worlds—the transparency and liquidity of a publicly traded mutual fund, along with some of the flexibility and portfolio architecture of a hedge fund.

 

 

     Each Qualified Investor Fund seeks long-term growth of capital and may invest in both long and short positions in equity securities. The long portion of each portfolio is primarily invested in a limited number (generally less than 100) of smaller companies. Short portions may include individual equity securities and pooled investment vehicles, such as ETFs.

 




(MESSAGE)

2  |  This page is not part of the 2010 Annual Report to Shareholders


 

   
 
Charles M. Royce, President
 
Here at Royce, we have consistently
applied a highly disciplined approach
that surveys the entire universe
of micro-cap, small-cap and mid-cap
companies, striving to uncover
mispriced and underappreciated
businesses. Our experience over nearly
four decades, a span encompassing
multiple market and economic cycles,
has given us a unique perspective
into what makes companies grow,
what can lead them to be overvalued
and what makes them undervalued.
 
Our long-term perspective involves
an attempt to understand what a
business is worth and, consequently,
what a private buyer might pay for
the entire enterprise. In other words,
we think like owners, not renters. So as
holding periods have contracted of
late, we find our thoughts more closely
aligned with private equity investors
who seek to buy entire companies
 
Continued on page 4...



     
Letter to Our Shareholders
Into The Great Wide Open
The stock market enjoyed a very good year in 2010. In a normal year, this would be an unremarkable observation, perhaps one not even worth making, at least not as a statement on its own. Twenty-ten, however, was no normal year, even applying the most generous range to that modifier. One could even argue that the mostly terrific results for equities were one of the major symptoms of the year's glaring lack of normalcy. Consider the fact that equity markets across the globe did all right to very well in the midst of ongoing economic uncertainty not just here in the United States, but in fellow economic heavyweights China and Europe as well.
     The nature and direction of that uncertainty is also worth noting, as it took on a generally western drift and included crises—some real, others perceived and a few arguably exaggerated—in each of the aforementioned locales. It began early in 2010 with an economic slowdown in China, which hurt hard asset prices everywhere while sending a chill through most of the world's capital markets. By spring, it had rolled into Europe in the form of the sovereign debt crisis before blowing across the Atlantic in the summer with fears of a double-dip recession in the U.S. The prospect of crisis then drifted back to China early in the autumn with attempts by the Chinese government to slow the nation's economy, before again lingering in Europe later in the fall with another sovereign debt problem, this time in Ireland.
     Interestingly, and perhaps tellingly, the world's equity markets began to shake off these events, or their possible materialization, in July. Share prices mostly climbed from that month through the end of the year, with the third and fourth quarters producing healthy, double-digit returns for most of the world's major indexes. So what happened to swing

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because, like them, we evaluate the
financial and business dynamics of an
enterprise as if we were purchasing
the entire company. Our goal is to buy
businesses, not just stocks.
 
This business buyer's mentality has
served us very well over the years as
styles have gone in and out of favor,
many times driven by economic cycles.
Our analytical work centers first
on evaluating what a business is worth
today, in recognition of the fact that
it is a far more difficult proposition
to discern what a business will be worth
in the future. Once we have appro-
priate conviction on the value of
an enterprise, we then establish a share
price that we are willing to pay that
discounts a required rate of return on
our capital and adds additional margin
for our inevitable mistakes. Generally
speaking, we target a discount of at
least 30%-and preferably 50%-below
our assessment of a business's worth.
This would translate into a 44%-100%
return on our investment in the event
that our share price objective is met.
 
So what differentiates a business
buyer's analysis from the traditional
 
Continued on page 6...



     
Letter to Our Shareholders
 
the mood of investors? While clearly concerned about a repeat of 2008, even a more muted version, investors at the same time seemed to respond a little better to the news of each impending difficulty. They may have seen some of what we saw—companies that, since the financial crisis erupted in the fall of 2008, have been managing their businesses successfully, providing many pockets of strength in a domestic economy that was slowly and, at least in our estimation, surely recovering.
     So while serious problems remain—housing, unemployment, the sorry state of national, state and municipal balance sheets—we see better times ahead. At the same time, we accept that the coming year (and perhaps longer) represents something like uncharted territory. To some, the immediate future feels like the great wide open, a place where all of the uncertainty and contradictory signals create a free-falling sensation that lacks the solid footing one might otherwise expect two years' worth of strong market returns to supply. After breaking down the year's returns for the major indexes and The Royce Funds in this Review and Report, we'll make our case that we are on more solid ground than many think.

Breakdown
While the year ended well for most major equity indexes, results through the first half of the year were fairly dismal, with all of the major domestic and non-U.S. indexes posting negative returns. Following domestic market lows in early July, however, share prices began an ascent that took them through the end of the year, making 2010 the second consecutive year of double-digit positive performance for the three major U.S. indexes. Small-caps led the way by a substantial margin. For the calendar year, the small-cap Russell 2000 gained 26.9%, the large-cap S&P 500 climbed 15.1% and the more tech-heavy Nasdaq Composite rose 16.9%. (Although returns for the Russell Midcap index were also quite healthy, they lagged those of small-cap in 2010, with the Russell Midcap index up 25.5%.)
     Each index's showing from the interim small-cap low on July 6, 2010—a period that coincided with the greatest anxiety over a double-dip recession—was particularly impressive. From that date through December 31, 2010 the Russell 2000 was up 33.6% versus respective gains of 23.6% and 26.7% for the S&P 500 and Nasdaq Composite. The advantage for small-cap stocks during both the recent bull run and the year as a whole was sealed during the fourth quarter, when the Russell 2000 was up 16.3% versus respective gains of 10.8% and 12.0% for the larger-cap S&P 500 and Nasdaq Composite. Better relative first-half performance was also a factor, as the small-cap index lost less than its larger siblings through the first six months of 2010. As welcome and strong as 2010's returns were, the three U.S. indexes remained shy of their respective peaks, though the Russell 2000, only 3.8% off its previous peak on July 13, 2007, came closest to setting a new market cycle high. The S&P 500 finished the year 13.6% shy of its peak on October 9, 2007, while the Nasdaq has still not surpassed its peak from March 10, 2000 and ended the year 47.5% off that high.

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     Non-U.S. indexes performed in line with their U.S. counterparts, though small-cap's edge was even more pronounced in 2010 than it was here at home. For the calendar year, the MSCI World (ex U.S.) Small Core index gained 24.5%, while the MSCI EAFE index was up 7.8%. Both the small-cap and large-cap non-U.S. indexes were strong off the early July domestic small-cap low. From July 6, 2010 through December 31, 2010, the MSCI World (ex U.S.) Small Core index climbed 29.8%, and the MSCI EAFE index rose 21.3%. Three-year average annual returns for both overseas indexes were negative, as they were for the S&P 500. The Nasdaq was essentially flat for the three-year period ended December 31, 2010, while the Russell 2000 gained 2.2%. For the five-year period ended December 31, 2010, the two non-U.S. and three domestic indexes were all positive, with the Russell 2000 and MSCI World (ex U.S.) Small Core index in the lead, followed by the S&P 500, the MSCI EAFE and the Nasdaq.

 

 

          Within small-cap, growth continued its leadership, outperforming value in 2010. The Russell 2000 Value index rose 24.5% compared to a gain of 29.1% for the Russell 2000 Growth index. Small-cap growth also held an edge for the five-year period ended December 31, 2010, while annualized periods of 10 years or more saw a sizeable edge for small-cap value. Micro-cap companies performed even better in the calendar year, with the Russell Microcap index up 28.9% in 2010. As was the case with small-cap, growth provided an edge relative to value within the Russell Microcap index for the calendar-year period.

 

One could even argue that the mostly terrific results for equities were one of the major symptoms of the year's glaring lack of normalcy. Consider the fact that equity markets across the globe did all right to very well in the midst of ongoing economic uncertainty not just here in the United States, but in fellow economic heavyweights China and Europe as well.

 

 

 

Good Enough

 

 

Accepting that there is more to portfolio management—and life—than beating a benchmark, we were very satisfied with performance as a whole for the five Qualified Investor Funds featured in this Annual Review and Report. We were especially pleased with two developments: Four of the Qualified Investor Funds then in existence performed very well on a relative basis in 2010's lone significant correction, the period from the interim small-cap high on April 23, 2010 through the interim small-cap low on July 6, 2010. More importantly, each Fund finished the year with strong returns on an absolute basis. The two are not unrelated in our view. Key to our disciplined value ethos is the idea that not losing money is as critical as making it.

 

Our work was showing many pockets of strength in the economy that accelerated throughout the year, businesses that were benefitting from the decline of the dollar, and renewed activity in many sectors and industries. So the market's strength through much of 2010 was not a surprise to us.

          That said, relative results for the calendar year were admittedly not as stellar, with only Royce Global Select Fund outpacing its benchmark. However, three of the four portfolios with sufficient history—Royce Select Fund I, Royce Select Fund II and Royce Global Select Fund each outpaced their respective benchmarks for the three-year and five-year periods ended December 31, 2010. Factoring in the Funds' strong down market results, absolute calendar-year returns and generally better longer-term performance records versus their respective benchmarks, we were not

 

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approach more concerned with
earnings growth? First and most
importantly, the business is measured
over a long-term period and not on
financial results from one quarter
or even one year. Businesses tend not
to change overnight. However, we
know from experience that their stock
prices certainly can.
 
Measuring the profitability of a
business is not a novel idea, but it's
a task that we perform diligently in
an attempt to understand the quality
and sustainability of a business.
Return on Invested Capital (ROIC),
Return on Assets (ROA) and Free
Cash Flow are our favored metrics, but
they are obviously just numbers that
are readily available to everyone and,
on their own, only reveal so much.
While each plays an important part in
determining a company's valuation,
it is ultimately the subjective assess-
ment of an enterprise that tests our
analytical acumen.
 
Enterprise Conviction (EC) is a pro-
prietary methodology that we developed
at Royce to isolate our assessment of
conviction in the quality of a business
 
Continued on page 8...



     
Letter to Our Shareholders
 
terribly disappointed with overall relative returns for the calendar year. A year as strong as 2010 gave even hard-to-please value investors like ourselves little to complain about.
     Within the small-cap market as a whole, stocks in the energy and technology sectors were the top performers in 2010, according to data from Russell Investments. Although we organize our own sector and industry breakdowns a little differently than Russell, we saw strength in one similar area, namely our own Natural Resources sector, as well as strength in the Industrial Products, Financial Services and Consumer Products sectors. Net gains for the first of these sectors were driven by several precious metals and mining companies as well as many energy services stocks. Taken as a whole, the portfolios also had a lot of success with investments in the Technology and Industrial Services sectors. In fact, there were net contributors in nearly all sector and industry group, another testament to the depth and breadth of the market's recovery.

Long After Dark
As wonderful as it was to see a second straight year of terrific equity returns, particularly coming off the financial collapse of late 2008-early 2009, the issue remains that the market rose markedly in a period of intense economic anxiety, which has engendered a host of questions about how and why this happened. It puts us in mind of the old adage that the market climbs a wall of worry. It also dovetails nicely with the notion that the market is almost always looking ahead a few years, which, if nothing else, makes it clear that investors were more optimistic about the global economy than many others.
     In fact, both of those ideas define what happened in 2010 pretty well. Looking more closely, we think what happened was that the media focused on a narrow set of economic news, namely deficits, housing and unemployment, and missed much of what was going on elsewhere in the economy. For months, the dominant stories were budget woes, foreclosures and jobless claims. While these are undoubtedly serious problems, they also offer very narrow lenses through which to view the economy, whether that of the U.S. or the world. Our own work was showing many pockets of strength in the economy that accelerated throughout the year, businesses that were benefitting from the decline of the dollar, and renewed activity in many sectors and industries. So the market's strength through much of 2010 was not a surprise to us.
     If not for those worrisome problems just mentioned, the success of the market in 2010 would be a very different kind of story. However, we remain convinced that what took place in equities last year was simply the historical advantage that small-caps have typically enjoyed coming out of recessions. They are often thought of as being more nimble and thus more responsive to economic events, and 2010 represents to us the latest phase in the post-recession recovery for stocks that began after the market low in March 2009. Of course, the world is not as complacent as it was in the middle part of the decade. Much of the wariness about the recent bull market is symptomatic of the generally more cautious

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attitude that many people now possess. As value investors, we are always all for caution, but we see the intelligence with which so many companies have managed themselves over the last two or three years as more meaningful than the economic problems we are currently laboring to solve. This is what inspires our confidence in the economy going forward.

 

We suspect that the reign of high-beta, often low-quality companies is likely to end soon, usurped by companies with characteristics such as high returns on invested capital, free cash flow generation and dividends.

 

 

 

The Waiting

 

 

Returning to the more narrow sphere of stocks, we have noticed that the world seems to have been waiting for a while now for large-cap to post a pronounced gain in performance at the expense of their small-cap counterparts. As of this writing, this grand shift to large-cap leadership has not materialized. From our somewhat biased perspective, we do not see it coming soon, though we do see what we regard as an important change in the market. As indiscriminately good as most of the last 22 months have been for stocks, we suspect that the reign of high-beta, often low-quality companies is likely to end soon, usurped by companies with characteristics such as high returns on invested capital, free cash flow generation and dividends. These elements are more likely to determine leadership than market capitalization. So while it would not be surprising to see large-cap enjoying periods of outperformance in the months to come, we do not expect the spread to be significant. We believe that the days of wide divergence between small-cap and large-cap, such as we saw in the '90s, are over, at least for the intermediate term.

 

Overall, our outlook is fairly positive. Corrections in the 10% or greater range should create opportunities for us on a global scale. We think that returns will remain positive and that volatility will remain a presence which we seek to use to our advantage in the months and years ahead.

     As long-established believers in reversion to the mean, we think that the decade ahead should be a positive one for stocks if for no other reason than that the previous one was so difficult. We also see the next few years as something of a reverse of the previous two—our expectation is that the economy will heat up and grow more quickly than the stock market. While we remain essentially confident about the long-term prospects for

 

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from its valuation. We have developed
core tenets designed to reveal the
structure of the company's market,
the sustainable or competitive edge that
it possesses, its future prospects, and
the ability of the management team to
guide the business going forward.
 
Importantly, this combination of
Enterprise Conviction backed up by
traditional analytics has also created
a consistent approach to our inter-
actions with company management
teams. Meeting and interviewing the
key leaders of a business is a critical
part of Royce's business evaluation
process. Using our specialized
process offers a measure of protection
against common investor pitfalls such
as "value traps," commitment bias
or allowing an interesting management
story to morph into investment convic-
tion. At Royce, our process centers on
uncovering the worth of a business,
not on what its stock may do in the
near term. By establishing conviction
about our knowledge of an entire
enterprise, we can more easily assess
the financial opportunities, weigh
the risks of investment, and determine
an appropriate price to pay.
 
 



          
Letter to Our Shareholders
 
 
stocks, we do not see the kind of returns on an annualized basis that we saw in 2009 and 2010 and instead see annualized returns in the high single digits for the decade as a whole. There should be a lot of differentiation and an ample number of corrections, some of them, like 2010's spring-summer downturn, more than capable of temporarily suspending investors' confidence. We view this as a near-ideal environment for disciplined and discriminating stock pickers such as ourselves. Overall, then, our outlook is fairly positive. Corrections in the 10% or greater range should create opportunities for us on a global scale. We think that returns will remain positive and that volatility will remain a presence which we seek to use to our advantage in the months and years ahead.

Sincerely,
   
Charles M. Royce
President		   W. Whitney George
Vice President		   Jack E. Fockler, Jr.
Vice President
 


January 31, 2011

We dedicate this Review and Report to the memory of our beloved partner and colleague, Denis Fitzgerald, who passed away in February. Denis was a valued member of our marketing and research teams and contributed immeasurably to the production and design of our materials. He worked alongside of us for nearly 22 years. His commitment to our firm and its betterment were unsurpassed. His energy and spirit not only define our firm, but will remain with us forever.


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Table of Contents

 
   

 

 

Annual Report to Shareholders

 
   

 

 

Managers’ Discussions of Fund Performance

 

 

 

Royce Select Fund I

10

 

 

Royce Select Fund II

12

 

 

Royce Global Select Fund

14

 

 

Royce SMid-Cap Select Fund

16

 

 

Royce Opportunity Select Fund

18

 

 

Schedules of Investments and Financial Statements

20

 

 

Notes to Financial Statements

36

 

 

Report of Independent Registered Public Accounting Firm

39

 

 

Understanding Your Fund’s Expenses

40

 

 

Trustees and Officers

42

 

 

Notes to Performance and Other Important Information

43

 

 

Board Approval of Investment Advisory Agreement

44

 

 
   

The Royce Funds 2010 Annual Report to Shareholders   |  9



     
  QUALIFIED INVESTOR
 
 
  Qualified Investor Funds use a performance fee structure with a specific portfolio management style.
   
   
  AVERAGE ANNUAL TOTAL RETURNS
  Through 12/31/10
 
  July-December 2010*   23.54 %
 
  One-Year   18.15  
 
  Three-Year   6.91  
 
  Five-Year   9.24  
 
  10-Year   12.34  
 
  Since Inception (11/18/98)   14.89  
 
  ANNUAL EXPENSE RATIO
 
  Operating Expenses   0.03 %
  *Not annualized
 
CALENDAR YEAR TOTAL RETURNS
                       
  Year   RS1     Year       RS1  
  2010   18.2 %   2004       19.1 %
  2009   39.6     2003       48.7  
  2008   -25.9     2002       -15.8  
  2007   10.7     2001       24.5  
  2006   15.0     2000       15.0  
  2005   10.9     1999       35.4  
                       
TOP 10 POSITIONS % of Net Assets
  Sims Metal Management ADR   2.3 %
  Reliance Steel & Aluminum   2.2  
  ICON ADR   2.2  
  GrafTech International   2.1  
  Rofin-Sinar Technologies   2.1  
  Warnaco Group (The)   2.0  
  ShawCor Cl. A   1.9  
  Oil States International   1.9  
  Intrepid Potash   1.9  
  Cintas Corporation   1.9  
                       
  PORTFOLIO SECTOR BREAKDOWN
  % of Net Assets
  Industrial Products   21.5 %
  Industrial Services   17.5  
  Natural Resources   14.5  
  Financial Services   8.8  
  Consumer Products   8.5  
  Technology   7.8  
  Health   4.8  
  Consumer Services   2.6  
  Financial Intermediaries   2.3  
  Miscellaneous   1.6  
  Cash and Cash Equivalents   10.1  
                       

Royce Select Fund I
 
Manager’s Discussion
In a mostly bullish environment, Royce Select Fund I (RS1) gained 18.2% for the calendar year, trailing its benchmark, the Russell 2000, which was up 26.9% for the same period. We were somewhat split about the Fund's calendar-year performance. On the one hand, we never like underperforming the small-cap index, while on the other hand, we were satisfied with its results on an absolute basis.
     While RS1 lagged its benchmark in the more bearish first half of the year, down 4.4% versus a loss of 1.9%, it actually showed down market strength during the year's only significant correction, which lasted from late April through early July. From the interim small-cap high on April 23, 2010 through the interim small-cap low on July 6, 2010, RS1 lost 16.4% versus a decline of 20.3% for the Russell 2000. Along with the Fund's strong absolute return for the calendar year, this down-market showing helped to mitigate the disappointment of underperforming the small-cap index in 2010. The Fund was reasonably competitive with the small-cap index from the market low on March 9, 2009 through the end of 2010, gaining 113.0% versus 134.0% for the benchmark.
      It was during the welcome rally that spanned most of the third quarter (+9.0% versus +11.3%) and all of the fourth quarter (+13.3% versus +16.3%) that RS1 ceded the most ground to the Russell 2000. Recent short-term relative underperformance versus the benchmark notwithstanding, the Fund has recently performed in line with our expectations by losing less in downdrafts and remaining close to the Russell 2000 during
          
     GOOD IDEAS THAT WORKED
     Top Contributors to 2010 Performance*
 
  Cliffs Natural Resources     1.66%
  Calfrac Well Services     1.14   
  Oil States International     1.09   
  Rofin-Sinar Technologies   1.02   
  Hain Celestial Group     0.97   
  *Includes dividends
upswings by posting solid to strong performance on an absolute basis. These kinds of performances helped RS1 to hold an advantage over the Russell 2000 over longer-term periods. The Fund outpaced the index for the three-, five-, 10-year and since inception (11/18/98) periods ended December 31, 2010. RS1's average annual return since inception was 14.9%.
     The Natural Resources and Industrial Products sectors made the most significant contribution to calendar-year performance. The first received a boost from rising commodity prices—oil and precious metals, respectively, while industrial companies derived a benefit from a near-global revival of industrial activity along with signs of a nascent recovery in the U.S. commercial real estate market.
 
Important Performance and Expense Information
All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when redeemed. Shares redeemed within 365 days of purchase may be subject to a 2% redemption fee, payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current performance may be higher or lower than performance quoted. Current month-end performance may be obtained at www.roycefunds.com. Operating expenses reflect the Fund's total annual operating expenses as of the most current prospectus and include the Fund's management fee based on 12.5% of its pre-fee, high watermark return. There was no high watermark return in 2009, and the Fund's total annual Fund operating expenses ratio of 0.03% consisted of dividends on securities sold short and acquired fund fees and expenses. Royce & Associates has contractually agreed to absorb all other operating expenses of the Fund, other than dividend expense relating to any short selling activity of the Fund, acquired fund fees and expenses and interest expense on borrowings, when applicable. Acquired fund fees and expenses reflect the estimated amount of the fees and expenses incurred indirectly by the Fund through its investments in mutual funds, hedge funds, private equity funds and other investment companies. The sum of all contributions and detractions for all securities would approximate the Fund's performance for 2010.

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Performance and Portfolio Review

     Cliffs Natural Resources is a mining and natural resources company that produces iron ore and coal in North America, South America and Australia. Its business grew as iron ore prices rose throughout the year on strengthening demand for steel in Asia. We took gains between August and October. Calfrac Well Services provides specialized fracture-stimulation, coiled tubing, cementing, fracturing, pressure pumping, and other hydraulic fracturing services, as well as various technical services to the oil and natural gas industry. Its strength was fueled by a robust environment for energy companies. Aggressive shale drilling activity continues to drive full utilization of well fracturing equipment and to push day rates higher. After building a position through June, we took gains between September and November. Oil States International provides specialized products and services to the oil and gas industry. Rising oil prices and increased demand fueled results, as did the firm's announcement of its acquisition of a leading Australian remote accommodations company that will provide it with a new geographic growth platform. Although we sold some shares between June and November, it was a top-ten position at the end of December.
     Rofin-Sinar Technologies designs and manufactures industrial lasers and supplies used for laser-based material processing applications. Rebounding global demand drove double-digit year-over-year and sequential growth in industrial laser orders and sales. The company also saw healthy recovery in its margins, which closed in on more historically average levels. We bought shares through the end of July and then began to take gains late in
     
September when its share price climbed. Hain Celestial Group, together with its subsidiaries, manufactures, distributes and sells natural and organic food in the U.S. and other countries. As 2010 wore on, increasing numbers of consumers returned to buying branded, organic foods, while activist investor Carl Icahn also built a good-sized stake through the year. We sold shares in June, September and December as its stock price fattened up.
     Disappointed with how federal regulations were hampering its stock price, we sold our shares of for-profit education company Corinthian Colleges in RS1 between September and November. While we still like the industry, we thought that the new regulations would create potentially intractable problems for the company's business model. Another significant detractor was our position in ProShares UltraShort 20+ Year Treasury, an ETF (exchange traded fund) that seeks twice (200%) the inverse (opposite) of the daily performance of the Barclays Capital 20+ Year U.S. Treasury Index. We sold the position as it became apparent that the Fed has a seemingly endless willingness to use monetary policy options to keep interest rates low.
 
 
 
 
 
 
 

GOOD IDEAS AT THE TIME
Top Detractors from 2010 Performance*

  
 
 
Corinthian Colleges -1.60%  
 
ProShares UltraShort 20+ Year Treasury -0.92     
 
Duff & Phelps Cl. A -0.60     
 
Comtech Telecommunications -0.28     
 
FTI Consulting -0.26     
 
*Net of dividends  
 

 
 
 
 
 
     
     
  FUND INFORMATION AND
PORTFOLIO DIAGNOSTICS		  
 
 
  Average Market Capitalization* $1,787 million     
 
 
  Weighted Average P/E Ratio** 20.6x    
 
 
  Weighted Average P/B Ratio 2.3x     
 
 
  U.S. Investments (% of Net Assets) 83.0%     
 
 
  Non-U.S. Investments (% of Net Assets) 6.9%     
 
 
  Fund Net Assets $59 million     
 
 
  Turnover Rate 49%     
 
 
  Number of Holdings 63     
 
 
  Symbol RYSFX  
 
 
   * Geometrically calculated  
 

** The Fund's P/E calculation excludes companies with zero or negative earnings (6% of portfolio holdings as of 12/31/10).

  
     
  MORNINGSTAR STATISTICAL MEASURES*  
 
 
    RS1 Category  
Median  		 Best  
Decile  
Breakpoint  		  
 
 
  Sharpe Ratio 0.44 0.20   0.37    
 
 
  Standard Deviation 19.33 22.50   20.05    
 
 
 

* Five years ended 12/31/10. Category Median and Best Decile Breakpoint based on 338 small-cap objective funds (oldest class) with at least five years of history.

 
   
  RISK/RETURN COMPARISON
Five-Year Period Ended 12/31/10		  
 
 
    Average Annual
Total Return 		Standard  
Deviation  		 Return Efficiency*  
 
 
  RS1 9.24% 19.33   0.48    
 
 
  Russell 2000 4.47 23.11   0.19    
 
 
 
* Return Efficiency is the average annual total return divided by the annualized standard deviation over a designated time period. Please read the prospectus for a more complete discussion of risk. 
  
     
  DOWN MARKET PERFORMANCE COMPARISON
All Down Periods of 7.5% or Greater
Over the Last 10 Years, in Percentages (%) 		  
 
 
   
     

The Royce Funds 2010 Annual Report to Shareholders  |  11



     
  QUALIFIED INVESTOR  
 
 
 
Qualified Investor Funds use a performance fee structure with a specific portfolio management style.
  
 

   

  
  AVERAGE ANNUAL TOTAL RETURNS
Through 12/31/10		  
 
 
  July - December 2010*   27.20 %  
 
 
  One-Year         20.96    
 
 
  Three-Year         10.32    
 
 
  Five-Year         8.72    
 
 
  Since Inception (6/30/05)         9.24    
 
 
  ANNUAL EXPENSE RATIOS  
 
 
  Operating Expenses   0.69 %  
 
 
  * Not annualized  
         
  CALENDAR YEAR TOTAL RETURNS  
 
 
  Year   RS2     Year     RS2    
 
 
  2010   21.0 %   2007     -5.5 %  
 
 
  2009   66.6     2006     19.8    
 
 
  2008   -33.4                
 
 
                       
  TOP 10 POSITIONS % of Net Assets  
 
 
  Seabridge Gold   2.9 %  
 
 
  EPS   2.4    
 
 
  Market Vectors Junior Gold
Miners ETF		   2.3    
 
 
  FamilyMart   2.2    
 
 
  Value Partners Group   2.2    
 
 
  Market Vectors Gold Miners ETF   2.0    
 
 
  Western Digital   2.0    
 
 
  Jinpan International   1.9    
 
 
  TMX Group   1.7    
 
 
  Horsehead Holding Corporation   1.7    
 
 
                       
  SHORT POSITION % of Net Assets  
 
 
  AutoNation   -1.9 %  
 
 
  Reality Income   -1.9    
 
 
  SPDR S&P Semiconductor ETF   -1.6    
 
 
  iShares MSCI Hong Kong Index Fund   -1.1    
 
 
  Financial Select Sector SPDR Fund   -0.9    
 
 
           
  PORTFOLIO SECTOR BREAKDOWN*
% of Net Assets		  
 
 
  Natural Resources   19.4 %  
 
 
  Industrial Products   15.8    
 
 
  Technology   13.4    
 
 
  Industrial Services   10.0    
 
 
  Consumer Services   9.5    
 
 
  Consumer Products   7.7    
 
 
  Financial Services   7.1    
 
 
  Health   5.7    
 
 
  Financial Intermediaries   4.1    
 
 
  Miscellaneous   4.6    
 
 
  Cash and Cash Equivalents   2.7    
 
 
  * Long positions only        
           

Royce Select Fund II

Manager's Discussion
The second half of 2010 was more bullish than the first half was bearish, and the upshot was a strong year for stocks of all sorts. The second half was particularly good for the kind of micro-cap, small-cap and mid-cap issues that comprised the portfolio of Royce Select Fund II (RS2). The Fund gained 21.0% for the calendar year versus a 26.9% showing for its small-cap benchmark, the Russell 2000, for the same period. We were pleased with the Fund's results on an absolute basis. Although its relative results were mildly disappointing, we were not too upset about it, especially since the year included a terrific rebound for RS2 between July and December that helped to mitigate the effects of a lackluster first half (-4.9%).
     Recent market cycle returns were also encouraging. During the year's only substantial down market period, the Fund outpaced the Russell 2000, losing 14.8% versus a decline of 20.3% for the small-cap index from the interim small-cap high on April 23, 2010 through the interim small-cap low on July 6, 2010. The stock market began to heat up with the temperature, and in the third quarter RS2 rose 11.8% while its benchmark climbed 11.3%. During the fourth quarter, the Fund lost this slight advantage, up 13.8% versus 16.3% for the Russell 2000. Looking at a longer-term market cycle period, RS2 was ahead of the small-cap index, climbing 146.9% versus a gain of 134.0% from the market low on March 9, 2009 through December 31, 2010.
     These market cycle results played a role in the Fund's longer-term advantage over its benchmark and thus underscore the importance of solid performance in both up and down markets. RS2 outpaced the Russell 2000 for the three-year, five-year and since inception (6/30/05) periods ended December 31, 2010. The Fund's average annual total return since inception was 9.2%.
     Even a year with strong absolute results produces some disappointments in the portfolio. The Fund's top two detractors from performance switched the places they held at the end of June 2010. Jinpan International struggled in a fashion consistent with many U.S.-listed Chinese stocks in the first half. The company manufactures cast resin transformers for power distribution and alternative energy applications in China. Earlier in
      GOOD IDEAS THAT WORKED
  Top Contributors to 2010 Performance*
   
    Luk Fook Holdings (International)   3.15%
   
    Market Vectors Junior Gold Miners ETF   1.52   
   
    Value Partners Group   1.44   
   
    Hochschild Mining   1.20   
   
    Rent-A-Center   1.08   
   
    * Includes dividends    
           


Important Performance and Expense Information
All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment distributions and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when redeemed. Shares redeemed within 365 days of purchase may be subject to a 2% redemption fee, payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current performance may be higher or lower than performance quoted. Current month-end performance may be obtained at www.roycefunds.com. Operating expenses for Royce Select Fund II reflect the Fund's total annual operating expenses as of most current prospectus and typically include the Fund's management fee based on 12.5% of the Fund's pre-fee, high watermark return. There was no high watermark return in 2009, and the Fund's total annual Fund operating expense ratio of 0.69% consisted of dividends on securities sold short, acquired fund fees and expenses and interest expense on borrowings. Royce & Associates has contractually agreed to absorb all other operating expenses of the Fund, other than dividend expense relating to any short selling activity of the Fund, acquired fund fees and expenses and interest expense on borrowings, when applicable. Acquired fund fees and expenses reflect the estimated amount of the fees and expenses incurred indirectly by the Fund through its investments in mutual funds, hedge funds, private equity funds and other investment companies. The sum of all contributions and detractions for all securities would approximate the Fund's performance for 2010.

             12  |  The Royce Funds 2010 Annual Report to Shareholders



 
 
 
Performance and Portfolio Review

the year, its troubles included pricing pressure when resin prices fell and purchases were delayed until later in the year. Ever contrarian, we substantially added to our stake in 2010, liking its valuation more and more while remaining confident in the firm's ability to withstand what we anticipate will be short-term problems. Willbros Group provides engineering, procurement, and construction services to the oil and gas and power industries primarily in the U.S., Canada and Oman. News of an acquisition by the company was released in March, the financing for which initially proved elusive, which resulted in its stock price being punished. Seeing what we deemed better opportunities elsewhere, we sold our position in November.
     Each of the Fund's equity sectors made a positive contribution to performance, with Natural Resources, the Fund's largest sector at the end of December, leading by a wide margin. The Consumer Services, Financial Services and Industrial Services sectors also made notable positive impacts. Within Natural Resources, the top-performing industry was precious metals and mining companies. The group's top gainer was the Market Vectors Junior Gold Miners ETF, which we saw as an effective way to obtain broad exposure to a series of small-cap and mid-cap gold and silver mining stocks. We built our position between January and July before making a modest trim in December. Like many portfolio holdings, it enjoyed a particularly strong second half. We first bought shares of Hochschild Mining in April and added to our stake in May. The company mines and processes primarily silver, as well as gold. Operating mostly in Latin America, it has several mines that are producing metals. We view it as a well-managed, conservatively capitalized business that was well-positioned to benefit from the rise in precious metals prices.
     
      Luk Fook Holdings (International) continued to succeed in all aspects of its business designing, wholesaling and retailing a variety of gold jewelry, gem-set jewelry, gemstones and authentication services. It is now one of the best known jewelry companies in China after having been long established in Hong Kong. We found very little we did not like about the company—it possesses a terrific franchise model, impressive margins, a solid balance sheet, high cash flow and accessible management. We began to take gains in April, but still held a good-sized position at yearend. Top-ten position Value Partners Group is a Hong Kong-based investment management group focusing on China and the Asia Pacific region. It gained visibility during 2010 by diversifying successfully beyond hedge funds (it is the leading hedge fund manager in Asia) into ETFs while announcing plans to enter the mutual fund arena. Rent-A-Center leases household durable goods to customers on a rent-to-own basis in the U.S. The reviving economy, along with the company's ample free cash flow and solid earnings, helped its share price to climb.

GOOD IDEAS AT THE TIME
Top Detractors from 2010 Performance*

  
 
 
Jinpan International -1.40%  
 
Willbros Group -0.93     
 
Duoyuan Printing -0.82     
 
NutriSystem -0.81     
 
Popular -0.61     
 
*Net of dividends  
   
 
 
 
     
     
  FUND INFORMATION AND
PORTFOLIO DIAGNOSTICS		  
 
 
  Average Market Capitalization* $999 million     
 
 
  Weighted Average P/E Ratio** 14.6x   
 
 
  Weighted Average P/B Ratio 2.0x   
 
 
  U.S. Investments†
(% of Net Assets)		 74.0%  
 
 
  Non-U.S. Investments†
(% of Net Assets)		 23.3%  
 
 
  Fund Net Assets $5 million  
 
 
  Turnover Rate 126%  
 
 
  Number of Holdings 95  
 
 
  Symbol RSFDX  
 
 
   * Geometrically calculated  
 

**The Fund’s P/E calculation excludes companies with zero or negative earnings (12% of portfolio holdings as of 12/31/10).

  
 

† Long positions only

  
     
  MORNINGSTAR STATISTICAL MEASURES*  
 
 
    RS2 Category Median Best Quartile Breakpoint  
 
 
  Sharpe Ratio 0.38 0.20   0.28    
 
 
  Standard Deviation 23.10 22.50   21.29    
 
 
 

*  Five years ended 12/31/10. Category Median and Best Quartile Breakpoint based on 338 small-cap objective funds (oldest class) with at least five years of history.

  
     
   
  RISK/RETURN COMPARISON
Five-Year Period Ended 12/31/10		  
 
 
    Average
Annual Total
Return 		Standard  
Deviation  		 Return Efficiency*  
 
 
  RS2 8.72% 23.10   0.38    
 
 
  Russell 2000 4.47 23.11   0.19    
 
 
 

** Return Efficiency is the average annual total return divided by the annualized standard deviation over a designated time period. Please read the prospectus for a more complete discussion of risk. 

  
     
  DOWN MARKET PERFORMANCE COMPARISON
All Down Periods of 7.5% or Greater
in Percentages (%) 		  
   
     

The Royce Funds 2010 Annual Report to Shareholders  |  13



     
  QUALIFIED INVESTOR  
 
 
  Qualified Investor Funds use a performance fee structure with a specific portfolio management style.  
 

   

  
  AVERAGE ANNUAL TOTAL RETURNS
Through 12/31/10		  
 
 
  July-December 2010*   34.01 %  
 
 
  One-Year         33.21    
 
 
  Three-Year         10.91    
 
 
  Five-Year         14.00    
 
 
  Since Inception (6/30/05)         16.02    
 
 
  ANNUAL EXPENSE RATIO  
 
 
  Operating Expenses   0.17 %  
 
 
  * Not annualized  
         
  CALENDAR YEAR TOTAL RETURNS  
 
 
  Year   RGS     Year     RGS    
 
 
  2010   33.2 %   2007     18.2 %  
 
 
  2009   56.1     2006     19.4    
 
 
  2008   -34.4                
 
 
                       
  TOP 10 POSITIONS % of Net Assets  
 
 
  Value Partners Group   3.1 %  
 
 
  Semperit AG Holding   3.0    
 
 
  Santen Pharmaceutical   2.8    
 
 
  Burckhardt Compression Holding   2.7    
 
 
  Pfeiffer Vacuum Technology   2.6    
 
 
  Major Drilling Group International   2.6    
 
 
  Hochschild Mining   2.4    
 
 
  Mayr-Melnhof Karton   2.4    
 
 
  Fresnillo   2.2    
 
 
  Lamprell   2.2    
 
 
                       
  SHORT POSITIONS % of Net Assets  
 
 
  ProShares Ultra MSCI Emerging Markets   -1.3 %  
 
 
  ProShares Ultra Industrials   -1.0    
 
 
  iShares Barclays 20+ Year Treasury Bond Fund   -0.9    
 
 
  iShares MSCI Canada Index Fund   -0.9    
 
 
  ProShares Ultra Financials   -0.7    
 
 
  ProShares Ultra Health Care   -0.6    
 
 
  Panera Bread Cl. A   -0.5    
 
 
  Tempur-Pedic International   -0.4    
 
 
  Stericycle   -0.3    
 
 
                       
  PORTFOLIO SECTOR BREAKDOWN*
% of Net Assets		  
 
 
  Natural Resources   23.2 %  
 
 
  Industrial Products   15.2    
 
 
  Health   12.5    
 
 
  Technology   11.0    
 
 
  Financial Services   9.4    
 
 
  Consumer Services   8.8    
 
 
  Consumer Products   5.2    
 
 
  Industrial Services   4.1    
 
 
  Miscellaneous   1.3    
 
 
  Cash and Cash Equivalents   9.3    
 
 
  * Long positions only  
     



Royce Global Select Fund

Manager’s Discussion
Royce Global Select Fund (RGS) made the most of the worldwide recovery for stocks in the latter half of 2010, gaining 33.2% for the calendar year, outpacing its global small-cap benchmark, the MSCI WORLD Small Core index, which rose 26.1% for the same period. After losing 0.6% in the first half of the year, RGS roared back when the markets rallied off the interim domestic small-cap low on July 6, 2010, rising 17.5% in the third quarter versus a gain of 14.6% for its global small-cap benchmark. The fourth quarter was also a strong period, though the Fund cooled off a bit in relation to its benchmark, up 14.1% compared to a 14.3% gain for the MCSI WORLD Small Core index. This was consistent with the Fund's strong absolute showing from the domestic small-cap low on March 9, 2009 through December 31, 2010, in which RGS climbed 138.2% versus 141.9% for the global small-cap index. Nonetheless, the Fund held a relative edge over the global small-cap index in longer-term periods tied more closely to calendar years. RGS outpaced its benchmark for the three-year, five-year and since inception (6/30/05) periods ended December 31, 2010. We remain very pleased with the Fund's results since inception. RGS's average annual total return since inception was 16.0%.
     The Natural Resources sector led by a wide margin in 2010, with net gains more than twice that of Financial Services, the Fund's second-best performing sector, which posted its own sizable contribution, as did the Industrial Products and Consumer Products sectors. The two largest industry groups in Natural Resources—
precious metals and mining stocks and energy services companies—were the first and third top-gaining industries in 2010, with precious metals and mining outpacing each of the Fund's remaining sectors. Our interest in gold and silver miners goes back to the early part of the previous decade, prior to RGS's inception, when we began to build positions in mining companies that looked attractively undervalued, in part because the industry had spent several years in the doldrums. When we launched the Fund in June 2005, mining businesses were among our first selections. Our conviction was then fortified by the financial collapse of late 2008-early 2009, when commodity prices cratered and we began to see the increasing likelihood of inflation, events that led us to build several positions in the
      GOOD IDEAS THAT WORKED
  Top Contributors to 2010 Performance*
   
    Hochschild Mining   2.72%
   
    Fresnillo   2.60   
   
    Value Partners Group   2.60   
   
    Lamprell   2.17   
   
    Burckhardt Compression Holding   1.81   
   
    * Includes dividends    
           
Important Performance and Expense Information
All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when redeemed. Shares redeemed within 365 days of purchase may be subject to a 2% redemption fee, payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current performance may be higher or lower than performance quoted. Current month-end performance may be obtained at www.roycefunds.com. Operating expenses for Royce Global Select Fund reflect the Fund's total annual operating expenses as of the most current prospectus and typically include the Fund's management fee based on 12.5% of the Fund's pre-fee, high watermark return. There was no high watermark return in 2009, and the Fund's total annual Fund operating expense ratio of 0.17% consisted of acquired fund fees and expenses. Royce & Associates has contractually agreed to absorb all other operating expenses of the Fund, other than dividend expense relating to any short selling activity of the Fund and acquired fund fees and expenses, when applicable. Acquired fund fees and expenses are those incurred indirectly as a result of investment in one or more acquired funds, including mutual funds, hedge funds, private equity funds and other pooled investment vehicles. The sum of all contributions and detractions for all securities would approximate the Fund's performance for 2010.

14  |  The Royce Funds 2010 Annual Report to Shareholders



 
 
 
Performance and Portfolio Review


industry. As the prices of precious metals rose through much of 2009 and 2010, the stock prices of many portfolio holdings began to follow suit.
      Hochschild Mining mines and processes primarily silver, as well as gold. It operates mostly in Latin America and has several mines that are producing metals. We view it as a well-managed, conservatively capitalized business that was well-positioned to benefit from the rise in precious metals prices. Although we began to take gains in June, it was a top-ten holding at year end. Between April and June, we also took gains in another top-performing mining stock (and top-ten holding). Fresnillo is the world's largest primary silver producer and Mexico's second-largest gold producer. The company boasts an attractive combination of a very high-quality asset base and low operational costs, which should allow for margins above its industry's average for the foreseeable future. We also like the way that its share price more closely tracks the silver price than many of its peers.
     Value Partners Group, the Fund's top holding at the end of December, is a Hong Kong-based investment management group focusing on China and the Asia Pacific region that gained visibility during the year by diversifying successfully beyond hedge funds—it is a leading hedge fund manager in Asia—into ETFs while also announcing plans to start mutual funds. Lamprell provides construction and engineering services for oil and gas rigs and is the leading contractor in the Arabian Gulf, where it has operated for more than 30 years. It benefitted from a pickup in activity and by diversifying its business to liftboats and FPSOs (floating production storage & offloading vessels), to supplement their core business of jack-up rig refurbishments. Burckhardt Compression Holding
     
makes reciprocating compressors primarily for the oil and gas industries. The stock of this Swiss company shot up partly as a result of improved earnings guidance and the growing realization that margins are likely to soon recover towards peak levels, driven not only by new orders, but also by Burckhardt's lucrative maintenance/service business.
     In August, we sold our position in ProShares UltraShort 20+ Year Treasury, an ETF (exchange traded fund) that seeks twice (200%) the inverse (opposite) of the daily performance of the Barclays Capital 20+ Year U.S. Treasury Index. The position reflected our thought that investors' flight to the safety of Treasuries was approaching a bubble and that we were likely to see inflation and higher interest rates in the years ahead. We sold the position because it seemed clear that the Fed would continue to use monetary policy options to keep interest rates low. We also parted ways with Intrepid Potash, selling our shares in June as its share price was falling and we saw more fertile opportunities elsewhere in the agriculture industry.

GOOD IDEAS AT THE TIME
Top Detractors from 2010 Performance*

  
 
 
ProShares UltraShort 20+ Year Treasury -0.70%  
 
Intrepid Potash -0.64     
 
ProShares Ultra MSCI Emerging Markets -0.50     
 
ProShares Ultra Industrials -0.45     
 
Vaisala Cl. A -0.32     
 
*Net of dividends  
   
 
 
 
 
     
     
  FUND INFORMATION AND
PORTFOLIO DIAGNOSTICS		  
 
 
  Average Market Capitalization* $1,811 million     
 
 
  Weighted Average P/E Ratio** 14.3x    
 
 
  Weighted Average P/B Ratio 2.6x     
 
 
  Fund Net Assets $16 million     
 
 
  Turnover Rate 80%     
 
 
  Number of Holdings 67     
 
 
  Symbol RSFTX  
 
 
   * Geometrically calculated  
 

**The Fund’s P/E calculation excludes companies with zero or negative earnings (5% of portfolio holdings as of 12/31/10).

  
     
  MORNINGSTAR STATISTICAL MEASURES*  
 
 
    RGS Category  
Median  		 Best
Quartile
Breakpoint		  
 
 
  Sharpe Ratio 0.62 0.26   0.31    
 
 
  Standard Deviation 21.35   22.79   21.41    
 
 
 

* Five years ended 12/31/10. Category Median and Best Quartile Breakpoint based on 17 small-cap objective funds (oldest class) with at least five years of history.

  
     
  RISK/RETURN COMPARISON
Five-Year Period Ended 12/31/10		  
 
 
    Average Annual
Total Return 		Standard  
Deviation  		 Return Efficiency*  
 
 
  RGS 14.00% 21.35   0.66    
 
 
  MSCI World
Small Core		 4.53 22.72   0.20    
 
 
 

* Return Efficiency is the average annual total return divided by the annualized standard deviation over a designated time period. Please read the prospectus for a more complete discussion of risk. 

  
     
  PORTFOLIO COUNTRY BREAKDOWN*
% of Net Assets		  
 
 
  Japan 10.6%  
 
 
  Germany 8.6     
 
 
  United States 8.4     
 
 
  South Africa 7.1     
 
 
  Canada 6.6     
 
 
  Hong Kong 6.0     
 
 
  Austria 5.4     
 
 
  Switzerland 4.3     
 
 
  Mexico 3.6     
 
 
  Australia 3.3     
 
 
  United Kingdom 3.1     
 
 
  Brazil 2.9     
 
 
  Peru 2.4     
 
 
  France 2.3     
 
 
  United Arab Emirates 2.1     
 
 
  Italy 1.9     
 
 
  Norway 1.7     
 
 
  Finland 1.5     
 
 
  Turkey 1.5     
 
 
  Denmark 1.5     
 
 
  Belgium 1.5     
 
 
  India 1.5     
 
 
  South Korea 1.3     
 
 
  China 0.9     
 
 
  Jersey 0.7     
 
 
     
 

* Long positions only are represented above and except in the case of ETF's securities are categorized by the country of their headquarters.

  
     


The Royce Funds 2010 Annual Report to Shareholders  |  15



                   
  QUALIFIED INVESTOR  
 
 
 
Qualified Investor Funds use a performance fee structure with a specific portfolio management style.
 
   
  AVERAGE ANNUAL TOTAL RETURNS
Through 12/31/10		  
 
 
  July-December 2010*   21.71 %  
 
 
  One-Year   17.22    
 
 
  Three-Year   2.44    
 
 
  Since Inception (9/28/07)   2.42    
 
 
  ANNUAL EXPENSE RATIO  
 
 
  Operating Expenses   0.04 %  
 
 
  * Not annualized        
                   
  CALENDAR YEAR TOTAL RETURNS  
 
 
  Year RSS   Year   RSS  
 
 
  2010 17.2 %   2008   -25.5 %  
 
 
  2009 23.1              
 
 
                   
  TOP 10 POSITIONS % of Net Assets  
 
 
  AVX Corporation   3.0 %  
 
 
  Greif Cl. A   2.9    
 
 
  Hubbell Cl. B   2.7    
 
 
  Arrow Electronics   2.5    
 
 
  Helmerich & Payne   2.5    
 
 
  Comerica   2.4    
 
 
  Ensco ADR   2.4    
 
 
  EMCOR Group   2.1    
 
 
  Rofin-Sinar Technologies   2.0    
 
 
  Kennametal   1.9    
 
 
                   
  PORTFOLIO SECTOR BREAKDOWN
% of Net Assets		  
 
 
  Industrial Products   22.0 %  
 
 
  Technology   17.8    
 
 
  Natural Resources   9.9    
 
 
  Industrial Services   7.9    
 
 
  Financial Services   6.0    
 
 
  Financial Intermediaries   5.9    
 
 
  Consumer Services   3.6    
 
 
  Utilities   1.8    
 
 
  Health   1.8    
 
 
  Consumer Products   1.6    
 
 
  Miscellaneous   3.6    
 
 
  Cash and Cash Equivalents   18.1    
 
 
     

 
 
Royce SMid-Cap Select Fund
 
Manager's Discussion
    One segment of the equity market with very attractive investment characteristics is the upper end of the smaller company universe, that zone with market caps between $500 million and $10 billion. Extending above industry definitions of small-cap yet well below the typical selection universe for large-cap managers, the smid-cap area has unique attributes that make it a rich hunting ground for diligent investors. Several decades of investing in small-cap stocks has given the Royce investment team deep institutional knowledge of many companies, of which several have graduated just beyond the traditional confines of our investment universe. Royce SMid-Cap Select Fund (RSS), with its focus on this particular niche that mixes the small-cap and mid-cap universes, generated a solid absolute return in 2010, though it struggled to keep pace on a relative basis with its benchmark, particularly in the powerful rally that characterized the third and fourth quarters. For the full-year period ended December 31, 2010, the Fund rose 17.2%, underperforming its benchmark, the Russell 2500 index, which rose 26.7% for the same period.
    The calendar year saw an extremely volatile first half that was then succeeded by a very strong and highly correlated second half, in part the result of a second round of quantitative easing (QE2) enacted by the Federal Reserve in August. After underperforming its benchmark during the bullish first quarter (+6.0% versus +9.2%), the Fund's defensive positioning and relatively high cash position allowed it to slightly outperform the index in the broadly negative environment that characterized the second quarter (-9.2% versus -10.0%). This conservative stance, however, was not as suited to the more bullish third and fourth quarters. While pleasing from an absolute standpoint, the Fund lost its relative performance advantage, gaining 9.4% versus 12.2% in the third quarter and 11.3% versus 14.9% for the index in the final quarter.
      We launched the Fund in September 2007. Its early days were marked by a broad-based decline in equity prices—U.S. small-cap stocks peaked in July 2007—followed by the onset of the financial crisis in the fall of 2008. Thus, its short existence has been defined by high volatility, ample correlation and systemic risk. Considering this challenging environment, we were pleased that, while the Fund lagged in 2010, its relative returns since inception were
 
GOOD IDEAS THAT WORKED
Top Contributors to 2010 Performance*
Family Dollar Stores     1.28%
International Rectifier     0.91   
American Italian Pasta Cl. A     0.91   
Hubbell Cl. B     0.83   
Lubrizol Corporation (The)     0.81   
* Includes dividends      
 
 
Important Performance and Expense Information
All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when redeemed. Shares redeemed within 365 days of purchase may be subject to a 2% redemption fee, payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current performance may be higher or lower than performance quoted. Current month-end performance may be obtained at www.roycefunds.com. Operating expenses for Royce SMid-Cap Select Fund reflect the Fund's total annual operating expenses as of the most current prospectus and include the Fund's management fee based on 12.5% of the Fund's pre-fee, high watermark return. There was no high watermark return in 2009, and the Fund's total annual Fund operating expense ratio of 0.04% consisted of dividends on securities sold short, acquired fund fees and expenses and interest expense on borrowings. Royce & Associates has contractually agreed to absorb all other operating expenses of the Fund, other than dividend expense relating to any short selling activity of the Fund, acquired fund fees and expenses and interest expense on borrowings when applicable. Acquired fund fees and expenses are those incurred indirectly as a result of investment in one or more acquired funds, including mutual funds, hedge funds, private equity funds and other pooled investment vehicles. The sum of all contributions and detractions for all securities would approximate the Fund's performance for 2010.


16   |   The Royce Funds 2010 Annual Report to Shareholders


   
 
Performance and Portfolio Review
 
satisfactory. From its inception on September 28, 2007 through December 31, 2010, the Fund's average annual total return was 2.4%, ahead of the 0.9% gain for the Russell 2500 for the same period. Of course, regardless of the market climate, the Fund has been consistent in its core investment discipline of seeking to uncover high-quality businesses with a strong margin of financial safety at what we believe are compelling valuations.
     Nine of the Fund's eleven equity sectors contributed positively to returns for the year, with investments in the Industrial Products sector accounting for roughly half the Fund's annual gain. Technology and Natural Resources were next in line, as fears of a double-dip recession in the U.S. rapidly gave way to confidence in a renewed corporate capital investment cycle and rising commodity prices. Diversified Investment Companies and Industrial Services were the only two sectors in negative territory, posting very modest net losses. Gains at the industry level were broad based as well, with specialty chemicals and materials leading the way, followed by industrial components stocks, semiconductors and equipment companies, and retail stores.
     Family Dollar Stores was the Fund's top performer in 2010. This national chain of discount stores benefitted from improving sales and margins as cost-conscious consumers made the move towards more value-based retailers. With what we regard as a very attractive capital structure, Family Dollar was in the pleasant position of having significant excess cash flow with which to aggressively buy back its shares, adding to a notable increase in shareholder value. We began to take gains in September. American Italian Pasta, the Fund's performance leader in the first half,
GOOD IDEAS AT THE TIME
Top Detractors from 2010 Performance*
  
was its second-largest gainer for the calendar year. Its position as North America's largest producer and seller of dry pasta to both private label and branded pasta markets made it a tempting takeover target, and the company agreed to be acquired by RalCorp Holdings at a healthy premium to its stock price in June.
     As first discussed in 2010's Semiannual Report, GameStop, the world's largest specialty retailer of electronic games and PC entertainment software, continued its disappointing performance for the full year. Constantly challenged by a range of potential competitors, the demise of its business model has been a constant source of investor concerns and has led to a fall in its share price. We began to sell our position in August. AllianceBernstein Holding was another
GameStop Corporation Cl. A   -0.73 %
AllianceBernstein Holding L.P.   -0.32  
Alliant Techsystems   -0.30  
Tekelec   -0.29  
Thor Industries   -0.28  
* Net of dividends      
disappointment. This large institutional asset management firm in the midst of an aggressive turnaround struggled throughout the year with persistent asset outflows due to continued poor investment performance. Unimpressed with the timing and execution of the turnaround, we sold our shares between July and October.
 
 
 
                             
                             
                             
     FUND INFORMATION AND
PORTFOLIO DIAGNOSTICS		  
 
 
  Average Market Capitalization*   $3,040 million  
 
 
  Weighted Average P/E Ratio**   16.3x  
 
 
  Weighted Average P/B Ratio 2.0x  
 
 
  U.S. Investments
(% of Net Assets)		   78.4%  
 
 
  Non-U.S. Investments
(% of Net Assets)		   3.5%  
 
 
  Fund Net Assets   $1 million  
 
 
  Turnover Rate   166%  
 
 
  Number of Holdings   68  
 
 
  Symbol   RMISX  
 
 
 
  * Geometrically calculated
 
 
** The Fund's P/E calculation excludes companies with zero or negative earnings (8% of portfolio holdings as of 12/31/10).
  
     
     
     
                 
                 
     
                             
     
                             
     
 
 
  
     
   
     
     
     



The Royce Funds 2010 Annual Report to Shareholders   |  17



                   
  QUALIFIED INVESTOR  
 
 
 
Qualified Investor Funds use a performance fee structure with a specific portfolio management style.
  
     
  CUMULATIVE TOTAL RETURNS
Through 12/31/10 		 
 
 
  Since Inception (8/31/10)   29.90 %  
 
 
  Since Inception (8/31/10)
(Net)*		   27.30    
 
 
     
 
* Since inception result is adjusted to reflect the 2% fee assessed on redemptions of shares held for less than 365 days.
  
     
  ANNUAL EXPENSE RATIO  
 
 
  Operating Expenses   0.70 %  
 
 
                   
  TOP 10 POSITIONS % of Net Assets  
 
 
  Wabash National   3.4 %  
 
 
  KEMET Corporation   2.7    
 
 
  SM Energy   2.5    
 
 
  Mueller Water Products Cl. A   2.2    
 
 
  Standard Pacific   2.2    
 
 
  Advanced Energy Industries   2.1    
 
 
  Century Aluminum   2.1    
 
 
  Union Drilling   2.1    
 
 
  Smith Micro Software   2.1    
 
 
  Powerwave Technologies   2.0    
 
 
                   
  SHORT POSITIONS % of Net Assets  
 
 
  Research in Motion   -2.4 %  
 
 
  Medtronic   -2.3    
 
 
  General Motors   -1.9    
 
 
  Panera Bread Cl. A   -1.6    
 
 
  Acorda Therapeutics   -1.4    
 
 
  Auxilium Pharmaceuticals   -1.1    
 
 
  Urban Outfitters   -0.9    
 
 
  Veeco Instruments   -0.9    
 
 
  AnnTaylor Stores   -0.7    
 
 
                   
  PORTFOLIO SECTOR BREAKDOWN*
% of Net Assets		  
 
 
  Technology   29.8 %  
 
 
  Industrial Products   21.5    
 
 
  Industrial Services   13.9    
 
 
  Natural Resources   11.7    
 
 
  Health   7.4    
 
 
  Consumer Services   5.8    
 
 
  Financial Intermediaries   4.7    
 
 
  Consumer Products   3.3    
 
 
  Diversified Investment Companies   1.5    
 
 
  Miscellaneous   1.6    
 
 
  Cash and Cash Equivalents   -1.2    
 
 
     
  * Long positions only  
     

 
 
Royce Opportunity Select Fund
 
Managers’ Discussion
We think that attempts to time the market are generally fools' errands, so our launch of Royce Opportunity Select Fund (ROS) on August 31, 2010 can only be regarded as serendipitously scheduled. The Fund debuted in the middle of the robustly bullish third quarter, when small-caps were rallying off the interim small-cap market low on July 6, 2010, boosted in part by the Fed's decision to create a second round of quantitative easing in August.
     Of course, commencing operations in the midst of a rapidly rising market can be a mixed blessing. Starting out with a portfolio entirely made up of cash, the Fund was not fully invested during the month of September and thus lagged the powerful advance of its small-cap benchmark, the Russell 2000 index, for that month, up 6.7% versus 12.5%. In its first full quarter of operation (the fourth quarter of 2010), the Fund benefitted from the strong tailwind for equities generated by the second round of quantitative easing. For the quarter, ROS advanced 21.7%, easily outpacing the small-cap index,
 
GOOD IDEAS THAT WORKED
Top Contributors to Performance
Since Inception Through 12/31/10*
Cost Plus   2.00 %
Wabash National   1.71  
SM Energy   1.45  
Basic Energy Services   1.39  
Smith Micro Software   1.33  
* Includes dividends      
 
which rose 16.3% over the same period. From its inception on August 31, 2010 through the end of 2010, the Fund tracked largely in line with its benchmark, rising 29.9% versus a gain of 30.7% for the Russell 2000. We were therefore very pleased with ROS's absolute and relative returns in its admittedly short-term first period of operation.
     The Fund essentially uses the opportunistic value approach that was first implemented in Royce Opportunity Fund. ROS has the added flexibility to invest in both long and short equity positions and to use a modest amount of leverage. The same four investment themes define the Fund's thematic positioning; it focuses the long portion of its portfolio on turnarounds, unrecognized asset values, undervalued growth and interrupted earnings.
     All but one of Fund's ten equity sectors made positive contributions to returns in the since-inception period. Technology and Industrial Products were the top performers, followed by solid net gains from Natural Resources, Industrial Services and Consumer Services. Only Diversified Investment Companies detracted from returns in the period, doing so in a modest fashion. Looking at industry results gave a comparable picture, with the majority having a positive impact. The telecommunications
 
Important Performance and Expense Information
All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when redeemed. Shares redeemed within 365 days of purchase may be subject to a 2% redemption fee, payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current performance may be higher or lower than performance quoted. Current month-end performance may be obtained at www.roycefunds.com. Operating expenses include performance fees based on 12.5% of the Fund's estimated pre-fee, high watermarked total returns and have been estimated based on an assumed 5.00% pre-fee annual rate of return plus an estimate for dividend expenses related to short selling. Royce & Associates has contractually agreed to absorb all other operating expenses of the Fund, other than dividend expense relating to any short selling activity of the Fund and acquired fund fees and expenses, when applicable. Acquired fund fees and expenses are those incurred indirectly as a result of investment in one or more acquired funds, including mutual funds, hedge funds, private equity funds and other pooled investment vehicles. The sum of all contributions and detractions for all securities would approximate the Fund's since inception (8/31/10) through 12/31/10 performance.


18   |   The Royce Funds 2010 Annual Report to Shareholders


 
 
Performance and Portfolio Review
 
group, commercial industrial services businesses, oil and gas companies, metal fabrication and distribution stocks, and energy services firms were the top-performing areas. The largest detractor at the industry level came in the category of ETFs (exchange traded funds), an area used primarily by the Fund to indicate a negative view of a theme or segment of the market.
      Looking at individual securities that contributed to the Fund's return, one gets a sense as to how broad the market's rally was. The rising tide of equities left few boats behind, with several of the Fund's strong gainers being worthy of note. Cost Plus, a California-based retailer of value-oriented casual home furnishings, was the top contributor. Distinctly in the turnaround category, management's concerted effort to improve merchandising dovetailed with a renewed credit agreement that allowed for continued restructuring, both of which led to positive year-over-year sales growth and strong appreciation in the shares. We sold our position in November and December. Wabash National, one of the largest trailer manufacturers in the U.S. specializing in dry vans, refrigerated vans, flatbeds, and dump trailers, benefitted from the improving economic backdrop that led to enormous order growth across the range of its products. Wabash transitioned from a large earnings loss in 2009 to a more modest loss in 2010. The company is currently expected to generate positive earnings in 2011, seeming to please shareholders in the process.

GOOD IDEAS AT THE TIME
Top Detractors from Performance
Since Inception Through 12/31/10*
  
     SM Energy produces and explores for oil and natural gas primarily in North America. Rising energy prices and an improved profit outlook fueled the rise in its stock price. Basic Energy Services was the third-best performer during the Fund's first performance period. This pure-play U.S. oilfield services provider focuses on four business segments consisting of well services, contract drilling, completion services and fluid services. Strategic positioning towards oil-focused regions and away from natural gas locales allowed the company to benefit from the surprising divergence in price favoring oil and the resulting higher demand for its drilling and related services.
 
FormFactor   -1.50 %
Kendle International   -0.88  
ProShares Short Russell2000   -0.84  
General Maritime   -0.55  
Spartech Corporation   -0.53  
* Net of dividends      

 
 
     As for holdings with which we enjoyed less success, we moved quickly in and out of a position in FormFactor, selling our shares in mid-September based on concerns that its turnaround potential was rapidly diminished. The firm makes semiconductor wafer probe cards that test logic and memory chips on the front end of the semiconductor manufacturing process. We were more confident in the prospects for Kendle International. We see the company's contract research business for clinical research and drug development as a global growth business as outsourcing remains prevalent in its industry.
 
                             
                             
                             
    FUND INFORMATION AND
PORTFOLIO DIAGNOSTICS		  
 
 
  Average Market
Capitalization*		   $393 million  
 
 
  Weighted Average
P/B Ratio		   1.4x  
 
 
  U.S. Investments**
(% of Net Assets)		   101.2%  
 
 
  Non-U.S. Investments**
(% of Net Assets)		   0.0%  
 
 
  Fund Net Assets   $2 million  
 
 
  Turnover Rate   95%  
 
 
  Number of Holdings   74  
 
 
  Symbol

   ROSFX  
 
 
 
  * Geometrically calculated
 
 
** Long positions only
  
     
     
     
                 
                 
     
                             
     
                             
     
 
 
  
     
     
     
                 
     
     

The Royce Funds 2010 Annual Report to Shareholders   |  19



 

Schedules of Investments
 

 

Royce Select Fund I


 

 

 

 

 

 

 

 

 

 

SHARES

 

VALUE

 

 

 

 

 

 

 

 

 

COMMON STOCKS – 89.9%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer Products – 8.5%

 

 

 

 

 

 

 

Apparel, Shoes and Accessories - 5.4%

 

 

 

 

 

 

 

Columbia Sportswear

 

 

15,627

 

$

942,308

 

Volcom

 

 

56,400

 

 

1,064,268

 

Warnaco Group (The) a

 

 

21,300

 

 

1,172,991

 

 

 

 

 

 

    

 

 

 

 

 

 

 

3,179,567

 

 

 

 

 

 

    

 

Food/Beverage/Tobacco - 3.1%

 

 

 

 

 

 

 

Cal-Maine Foods

 

 

26,963

 

 

851,492

 

Hain Celestial Group a

 

 

35,600

 

 

963,336

 

 

 

 

 

 

    

 

 

 

 

 

 

 

1,814,828

 

 

 

 

 

 

    

 

Total (Cost $3,635,464)

 

 

 

 

 

4,994,395

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Consumer Services – 2.6%

 

 

 

 

 

 

 

Retail Stores - 2.6%

 

 

 

 

 

 

 

†Aeropostale a

 

 

22,700

 

 

559,328

 

†Jos. A. Bank Clothiers a

 

 

24,250

 

 

977,760

 

 

 

 

 

 

    

 

Total (Cost $1,490,671)

 

 

 

 

 

1,537,088

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Financial Intermediaries – 2.3%

 

 

 

 

 

 

 

Insurance - 2.3%

 

 

 

 

 

 

 

Alleghany Corporation a

 

 

2,839

 

 

869,784

 

Markel Corporation a

 

 

1,300

 

 

491,569

 

 

 

 

 

 

    

 

Total (Cost $1,183,507)

 

 

 

 

 

1,361,353

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Financial Services – 8.8%

 

 

 

 

 

 

 

Diversified Financial Services - 1.6%

 

 

 

 

 

 

 

Lazard Cl. A

 

 

23,500

 

 

928,015

 

 

 

 

 

 

    

 

Information and Processing - 4.5%

 

 

 

 

 

 

 

†Altisource Portfolio Solutions a

 

 

21,800

 

 

625,878

 

SEI Investments

 

 

45,200

 

 

1,075,308

 

Total System Services

 

 

60,200

 

 

925,876

 

 

 

 

 

 

    

 

 

 

 

 

 

 

2,627,062

 

 

 

 

 

 

    

 

Insurance Brokers - 1.5%

 

 

 

 

 

 

 

Brown & Brown

 

 

37,400

 

 

895,356

 

 

 

 

 

 

    

 

Investment Management - 1.2%

 

 

 

 

 

 

 

Evercore Partners Cl. A

 

 

5,600

 

 

190,400

 

Federated Investors Cl. B

 

 

21,000

 

 

549,570

 

 

 

 

 

 

    

 

 

 

 

 

 

 

739,970

 

 

 

 

 

 

    

 

Total (Cost $4,071,626)

 

 

 

 

 

5,190,403

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Health – 4.8%

 

 

 

 

 

 

 

Drugs and Biotech - 1.6%

 

 

 

 

 

 

 

†Questcor Pharmaceuticals a

 

 

63,651

 

 

937,579

 

 

 

 

 

 

    

 

Health Services - 3.2%

 

 

 

 

 

 

 

ICON ADR a

 

 

58,200

 

 

1,274,580

 

VCA Antech a

 

 

25,400

 

 

591,566

 

 

 

 

 

 

    

 

 

 

 

 

 

 

1,866,146

 

 

 

 

 

 

    

 

Total (Cost $2,417,105)

 

 

 

 

 

2,803,725

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

 

 

SHARES

 

VALUE

 

 

 

 

 

 

 

 

 

Industrial Products – 21.5%

 

 

 

 

 

 

 

Building Systems and Components - 2.8%

 

 

 

 

 

 

 

Apogee Enterprises

 

 

30,967

 

$

417,125

 

Drew Industries

 

 

41,900

 

 

951,968

 

Simpson Manufacturing

 

 

8,300

 

 

256,553

 

 

 

 

 

 

    

 

 

 

 

 

 

 

1,625,646

 

 

 

 

 

 

    

 

Industrial Components - 3.5%

 

 

 

 

 

 

 

GrafTech International a

 

 

62,900

 

 

1,247,936

 

Regal-Beloit

 

 

12,500

 

 

834,500

 

 

 

 

 

 

    

 

 

 

 

 

 

 

2,082,436

 

 

 

 

 

 

    

 

Machinery - 5.2%

 

 

 

 

 

 

 

Columbus McKinnon a

 

 

38,000

 

 

772,160

 

Rofin-Sinar Technologies a

 

 

35,100

 

 

1,243,944

 

Wabtec Corporation

 

 

20,175

 

 

1,067,056

 

 

 

 

 

 

    

 

 

 

 

 

 

 

3,083,160

 

 

 

 

 

 

    

 

Metal Fabrication and Distribution - 4.5%

 

 

 

 

 

 

 

Reliance Steel & Aluminum

 

 

25,000

 

 

1,277,500

 

Sims Metal Management ADR

 

 

62,140

 

 

1,357,138

 

 

 

 

 

 

    

 

 

 

 

 

 

 

2,634,638

 

 

 

 

 

 

    

 

Miscellaneous Manufacturing - 2.8%

 

 

 

 

 

 

 

AZZ

 

 

25,200

 

 

1,008,252

 

†Valmont Industries

 

 

7,000

 

 

621,110

 

 

 

 

 

 

    

 

 

 

 

 

 

 

1,629,362

 

 

 

 

 

 

    

 

Paper and Packaging - 1.3%

 

 

 

 

 

 

 

†Greif Cl. A

 

 

12,000

 

 

742,800

 

 

 

 

 

 

    

 

Pumps, Valves and Bearings - 1.4%

 

 

 

 

 

 

 

Gardner Denver

 

 

11,800

 

 

812,076

 

 

 

 

 

 

    

 

Total (Cost $8,675,666)

 

 

 

 

 

12,610,118

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Industrial Services – 17.5%

 

 

 

 

 

 

 

Commercial Services - 8.9%

 

 

 

 

 

 

 

Cintas Corporation

 

 

39,200

 

 

1,096,032

 

Copart a

 

 

19,100

 

 

713,385

 

CRA International a

 

 

30,479

 

 

716,561

 

FTI Consulting a

 

 

8,100

 

 

301,968

 

MAXIMUS

 

 

14,650

 

 

960,747

 

Robert Half International

 

 

35,000

 

 

1,071,000

 

Universal Technical Institute

 

 

17,268

 

 

380,242

 

 

 

 

 

 

    

 

 

 

 

 

 

 

5,239,935

 

 

 

 

 

 

    

 

Food, Tobacco and Agriculture - 1.9%

 

 

 

 

 

 

 

Intrepid Potash a

 

 

30,397

 

 

1,133,504

 

 

 

 

 

 

    

 

Industrial Distribution - 1.7%

 

 

 

 

 

 

 

MSC Industrial Direct Cl. A

 

 

14,900

 

 

963,881

 

 

 

 

 

 

    

 

Transportation and Logistics - 5.0%

 

 

 

 

 

 

 

Arkansas Best

 

 

29,700

 

 

814,374

 

Kirby Corporation a

 

 

19,800

 

 

872,190

 

Landstar System

 

 

19,700

 

 

806,518

 

Universal Truckload Services a

 

 

28,500

 

 

453,720

 

 

 

 

 

 

    

 

 

 

 

 

 

 

2,946,802

 

 

 

 

 

 

    

 

Total (Cost $8,132,883)

 

 

 

 

 

10,284,122

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Natural Resources – 14.5%

 

 

 

 

 

 

 

Energy Services - 10.4%

 

 

 

 

 

 

 

Calfrac Well Services

 

 

24,000

 

 

826,471

 

 

 

20  |  The Royce Funds 2010 Annual Report to Shareholders

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.


 

December 31, 2010
 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SHARES

 

VALUE

 

 

 

 

 

 

 

 

 

Natural Resources (continued)

 

 

 

 

 

 

 

Energy Services (continued)

 

 

 

 

 

 

 

Helmerich & Payne

 

 

22,300

 

$

1,081,104

 

Oil States International a

 

 

17,700

 

 

1,134,393

 

Pason Systems

 

 

73,000

 

 

1,024,922

 

ShawCor Cl. A

 

 

34,300

 

 

1,142,183

 

Unit Corporation a

 

 

20,150

 

 

936,572

 

 

 

 

 

 

    

 

 

 

 

 

 

 

6,145,645

 

 

 

 

 

 

    

 

Precious Metals and Mining - 4.1%

 

 

 

 

 

 

 

Cliffs Natural Resources

 

 

14,000

 

 

1,092,140

 

Major Drilling Group International

 

 

25,200

 

 

1,053,063

 

Randgold Resources ADR

 

 

2,900

 

 

238,757

 

 

 

 

 

 

    

 

 

 

 

 

 

 

2,383,960

 

 

 

 

 

 

    

 

Total (Cost $4,760,460)

 

 

 

 

 

8,529,605

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Technology – 7.8%

 

 

 

 

 

 

 

Components and Systems - 0.6%

 

 

 

 

 

 

 

Intermec a

 

 

29,500

 

 

373,470

 

 

 

 

 

 

    

 

Semiconductors and Equipment - 4.7%

 

 

 

 

 

 

 

†Aixtron ADR

 

 

22,000

 

 

818,400

 

Cabot Microelectronics a

 

 

24,000

 

 

994,800

 

Cymer a

 

 

20,500

 

 

923,935

 

 

 

 

 

 

    

 

 

 

 

 

 

 

2,737,135

 

 

 

 

 

 

    

 

Software - 1.1%

 

 

 

 

 

 

 

†NetScout Systems a

 

 

29,000

 

 

667,290

 

 

 

 

 

 

    

 

Telecommunications - 1.4%

 

 

 

 

 

 

 

Harmonic a

 

 

96,000

 

 

822,720

 

 

 

 

 

 

    

 

Total (Cost $3,322,994)

 

 

 

 

 

4,600,615

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Miscellaneous d – 1.6%

 

 

 

 

 

 

 

Total (Cost $796,880)

 

 

 

 

 

915,342

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

TOTAL COMMON STOCKS

 

 

 

 

 

 

 

(Cost $38,487,256)

 

 

 

 

 

52,826,766

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

REPURCHASE AGREEMENT – 12.7%

 

 

 

 

 

 

 

State Street Bank & Trust Company, 0.13% dated 12/31/10, due 1/3/11, maturity value $7,467,081 (collateralized by obligations of various U.S. Government Agencies, due 5/24/11, valued at $7,655,419)

 

 

 

 

 

 

 

(Cost $7,467,000)

 

 

 

 

 

7,467,000

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

TOTAL INVESTMENTS – 102.6%

 

 

 

 

 

 

 

(Cost $45,954,256)

 

 

 

 

 

60,293,766

 

 

 

 

 

 

 

 

 

LIABILITIES LESS CASH AND OTHER ASSETS – (2.6)%

 

 

 

 

 

(1,506,205

)

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

NET ASSETS – 100.0%

 

 

 

 

$

58,787,561

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Royce Select Fund II

 

 

 

 

 

 

 

 

SHARES

 

VALUE

 

 

 

 

 

 

 

 

 

COMMON STOCKS – 97.3%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer Products – 7.7%

 

 

 

 

 

 

 

Apparel, Shoes and Accessories - 4.0%

 

 

 

 

 

 

 

Daphne International Holdings

 

 

47,800

 

$

44,769

 

Stella International Holdings

 

 

24,200

 

 

48,258

 

True Religion Apparel a

 

 

2,900

 

 

64,554

 

Warnaco Group (The) a

 

 

900

 

 

49,563

 

 

 

 

 

 

    

 

 

 

 

 

 

 

207,144

 

 

 

 

 

 

    

 

Food/Beverage/Tobacco - 2.7%

 

 

 

 

 

 

 

†Binggrae Company

 

 

1,181

 

 

58,275

 

Cal-Maine Foods b

 

 

2,500

 

 

78,950

 

 

 

 

 

 

    

 

 

 

 

 

 

 

137,225

 

 

 

 

 

 

    

 

Health, Beauty and Nutrition - 1.0%

 

 

 

 

 

 

 

NutriSystem b

 

 

2,500

 

 

52,575

 

 

 

 

 

 

    

 

Total (Cost $289,945)

 

 

 

 

 

396,944

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Consumer Services – 9.5%

 

 

 

 

 

 

 

Retail Stores - 8.8%

 

 

 

 

 

 

 

†Big Lots a

 

 

1,600

 

 

48,736

 

†Charming Shoppes a

 

 

10,600

 

 

37,630

 

†FamilyMart

 

 

3,000

 

 

113,068

 

GameStop Corporation Cl. A a

 

 

2,100

 

 

48,048

 

Kirkland’s a

 

 

3,500

 

 

49,105

 

Luk Fook Holdings (International)

 

 

16,400

 

 

57,284

 

Rent-A-Center

 

 

1,800

 

 

58,104

 

Wet Seal (The) Cl. A a

 

 

10,800

 

 

39,960

 

 

 

 

 

 

    

 

 

 

 

 

 

 

451,935

 

 

 

 

 

 

    

 

Other Consumer Services - 0.7%

 

 

 

 

 

 

 

†ChinaCast Education a,b

 

 

4,400

 

 

34,144

 

 

 

 

 

 

    

 

Total (Cost $389,546)

 

 

 

 

 

486,079

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Financial Intermediaries – 4.1%

 

 

 

 

 

 

 

Insurance - 0.5%

 

 

 

 

 

 

 

Greenlight Capital Re Cl. A a

 

 

1,000

 

 

26,810

 

 

 

 

 

 

    

 

Securities Brokers - 1.9%

 

 

 

 

 

 

 

International Assets Holding Corporation a

 

 

2,200

 

 

51,920

 

Stifel Financial a

 

 

700

 

 

43,428

 

 

 

 

 

 

    

 

 

 

 

 

 

 

95,348

 

 

 

 

 

 

    

 

Securities Exchanges - 1.7%

 

 

 

 

 

 

 

TMX Group

 

 

2,400

 

 

89,213

 

 

 

 

 

 

    

 

Total (Cost $171,731)

 

 

 

 

 

211,371

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Financial Services – 7.1%

 

 

 

 

 

 

 

Diversified Financial Services - 1.1%

 

 

 

 

 

 

 

Lazard Cl. A

 

 

1,400

 

 

55,286

 

 

 

 

 

 

    

 

Investment Management - 4.3%

 

 

 

 

 

 

 

†Artio Global Investors Cl. A

 

 

2,600

 

 

38,350

 

Evercore Partners Cl. A

 

 

600

 

 

20,400

 

†Sprott

 

 

6,000

 

 

48,637

 

Value Partners Group

 

 

112,400

 

 

112,794

 

 

 

 

 

 

    

 

 

 

 

 

 

 

220,181

 

 

 

 

 

 

    

 


 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

The Royce Funds 2010 Annual Report to Shareholders  |  21


 

Schedules of Investments
 

 

Royce Select Fund II (continued)


 

 

 

 

 

 

 

 

 

 

SHARES

 

VALUE

 

 

 

 

 

 

 

 

 

Financial Services (continued)

 

 

 

 

 

 

 

Specialty Finance - 1.7%

 

 

 

 

 

 

 

First Cash Financial Services a

 

 

1,100

 

$

34,089

 

World Acceptance a

 

 

1,040

 

 

54,912

 

 

 

 

 

 

    

 

 

 

 

 

 

 

89,001

 

 

 

 

 

 

    

 

Total (Cost $224,235)

 

 

 

 

 

364,468

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Health – 5.7%

 

 

 

 

 

 

 

Drugs and Biotech - 1.4%

 

 

 

 

 

 

 

Endo Pharmaceuticals Holdings a,b

 

 

1,400

 

 

49,994

 

†3SBio ADR a

 

 

1,220

 

 

18,520

 

 

 

 

 

 

    

 

 

 

 

 

 

 

68,514

 

 

 

 

 

 

    

 

Health Services - 4.3%

 

 

 

 

 

 

 

†Continucare Corporation a

 

 

11,660

 

 

54,569

 

†EPS

 

 

50

 

 

122,367

 

†LHC Group a

 

 

1,500

 

 

45,000

 

 

 

 

 

 

    

 

 

 

 

 

 

 

221,936

 

 

 

 

 

 

    

 

Total (Cost $235,857)

 

 

 

 

 

290,450

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Industrial Products – 15.8%

 

 

 

 

 

 

 

Automotive - 0.5%

 

 

 

 

 

 

 

SORL Auto Parts a

 

 

3,331

 

 

28,413

 

 

 

 

 

 

    

 

Building Systems and Components - 1.3%

 

 

 

 

 

 

 

†Drew Industries

 

 

1,600

 

 

36,352

 

†WaterFurnace Renewable Energy

 

 

1,300

 

 

32,386

 

 

 

 

 

 

    

 

 

 

 

 

 

 

68,738

 

 

 

 

 

 

    

 

Industrial Components - 1.4%

 

 

 

 

 

 

 

†Graham Corporation

 

 

3,602

 

 

72,040

 

 

 

 

 

 

    

 

Machinery - 4.3%

 

 

 

 

 

 

 

FreightCar America

 

 

2,200

 

 

63,668

 

Hurco Companies a

 

 

2,600

 

 

61,490

 

Jinpan International b

 

 

9,018

 

 

94,960

 

 

 

 

 

 

    

 

 

 

 

 

 

 

220,118

 

 

 

 

 

 

    

 

Metal Fabrication and Distribution - 7.7%

 

 

 

 

 

 

 

China Metal Recycling (Holdings)

 

 

48,900

 

 

51,776

 

Commercial Metals b

 

 

3,400

 

 

56,406

 

Foster (L.B.) Company Cl. A a

 

 

1,700

 

 

69,598

 

Fushi Copperweld a

 

 

9,640

 

 

85,603

 

Haynes International

 

 

1,000

 

 

41,830

 

†Horsehead Holding Corporation a

 

 

6,800

 

 

88,672

 

 

 

 

 

 

    

 

 

 

 

 

 

 

393,885

 

 

 

 

 

 

    

 

Specialty Chemicals and Materials - 0.6%

 

 

 

 

 

 

 

OM Group a

 

 

800

 

 

30,808

 

 

 

 

 

 

    

 

Total (Cost $728,986)

 

 

 

 

 

814,002

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Industrial Services – 10.0%

 

 

 

 

 

 

 

Advertising and Publishing - 1.2%

 

 

 

 

 

 

 

ValueClick a

 

 

3,760

 

 

60,273

 

 

 

 

 

 

    

 

Commercial Services - 4.3%

 

 

 

 

 

 

 

†E-House China Holdings ADR

 

 

5,800

 

 

86,768

 

Global Sources a,b

 

 

3,110

 

 

29,607

 

†IFM Investments ADR a,b

 

 

10,820

 

 

54,100

 

 

 

 

 

 

 

 

 

 

 

SHARES

 

VALUE

 

 

 

 

 

 

 

 

 

Industrial Services (continued)

 

 

 

 

 

 

 

Commercial Services (continued)

 

 

 

 

 

 

 

Team a,b

 

 

2,010

 

$

48,642

 

 

 

 

 

 

    

 

 

 

 

 

 

 

219,117

 

 

 

 

 

 

    

 

Engineering and Construction - 2.2%

 

 

 

 

 

 

 

Comfort Systems USA

 

 

3,400

 

 

44,778

 

EMCOR Group a

 

 

2,400

 

 

69,552

 

 

 

 

 

 

    

 

 

 

 

 

 

 

114,330

 

 

 

 

 

 

    

 

Food, Tobacco and Agriculture - 2.3%

 

 

 

 

 

 

 

China Green (Holdings)

 

 

78,100

 

 

76,364

 

†First Resources

 

 

34,500

 

 

41,937

 

 

 

 

 

 

    

 

 

 

 

 

 

 

118,301

 

 

 

 

 

 

    

 

Total (Cost $430,308)

 

 

 

 

 

512,021

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Natural Resources – 19.4%

 

 

 

 

 

 

 

Energy Services - 5.4%

 

 

 

 

 

 

 

CE Franklin a

 

 

6,700

 

 

47,905

 

†Ensco ADR

 

 

1,100

 

 

58,718

 

†Helmerich & Payne

 

 

1,300

 

 

63,024

 

Patterson-UTI Energy

 

 

2,300

 

 

49,565

 

Rowan Companies a

 

 

1,750

 

 

61,093

 

 

 

 

 

 

    

 

 

 

 

 

 

 

280,305

 

 

 

 

 

 

    

 

Oil and Gas - 3.0%

 

 

 

 

 

 

 

Gran Tierra Energy a,b

 

 

6,700

 

 

53,935

 

SM Energy

 

 

900

 

 

53,037

 

VAALCO Energy a

 

 

6,700

 

 

47,972

 

 

 

 

 

 

    

 

 

 

 

 

 

 

154,944

 

 

 

 

 

 

    

 

Precious Metals and Mining - 11.0%

 

 

 

 

 

 

 

†Hochschild Mining

 

 

7,800

 

 

77,830

 

†Kingsgate Consolidated

 

 

3,200

 

 

35,610

 

Market Vectors Gold Miners ETF

 

 

1,700

 

 

104,499

 

†Market Vectors Junior Gold Miners ETF

 

 

2,900

 

 

115,681

 

†Medusa Mining

 

 

8,100

 

 

53,602

 

Randgold Resources ADR

 

 

350

 

 

28,815

 

Seabridge Gold a,b

 

 

4,800

 

 

147,264

 

 

 

 

 

 

    

 

 

 

 

 

 

 

563,301

 

 

 

 

 

 

    

 

Total (Cost $678,955)

 

 

 

 

 

998,550

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Technology – 13.4%

 

 

 

 

 

 

 

Components and Systems - 5.6%

 

 

 

 

 

 

 

†Multi-Fineline Electronix a

 

 

2,700

 

 

71,523

 

†SMART Modular Technologies (WWH) a

 

 

9,900

 

 

57,024

 

†Super Micro Computer a

 

 

4,700

 

 

54,238

 

Western Digital a

 

 

3,050

 

 

103,395

 

 

 

 

 

 

    

 

 

 

 

 

 

 

286,180

 

 

 

 

 

 

    

 

Distribution - 1.5%

 

 

 

 

 

 

 

Cogo Group a

 

 

8,549

 

 

75,659

 

 

 

 

 

 

    

 

IT Services - 0.1%

 

 

 

 

 

 

 

Yucheng Technologies a

 

 

1,066

 

 

3,848

 

 

 

 

 

 

    

 

Semiconductors and Equipment - 2.9%

 

 

 

 

 

 

 

†Integrated Silicon Solution a

 

 

6,100

 

 

48,983

 

†MKS Instruments a

 

 

2,500

 

 

61,225

 

†Teradyne a

 

 

2,700

 

 

37,908

 

 

 

 

 

 

    

 

 

 

 

 

 

 

148,116

 

 

 

 

 

 

    

 


 

 

22  |  The Royce Funds 2010 Annual Report to Shareholders

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.


 

December 31, 2010
 

 

 


 

 

 

 

 

 

 

 

 

 

SHARES

 

VALUE

 

 

 

 

 

 

 

 

 

Technology (continued)

 

 

 

 

 

 

 

Software - 1.9%

 

 

 

 

 

 

 

Actuate Corporation a,b

 

 

9,000

 

$

51,300

 

American Software Cl. A

 

 

7,270

 

 

49,218

 

 

 

 

 

 

    

 

 

 

 

 

 

 

100,518

 

 

 

 

 

 

    

 

Telecommunications - 1.4%

 

 

 

 

 

 

 

Tekelec a

 

 

6,150

 

 

73,246

 

 

 

 

 

 

    

 

Total (Cost $609,974)

 

 

 

 

 

687,567

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Miscellaneous d – 4.6%

 

 

 

 

 

 

 

Total (Cost $225,431)

 

 

 

 

 

238,962

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

TOTAL COMMON STOCKS

 

 

 

 

 

 

 

(Cost $3,984,968)

 

 

 

 

 

5,000,414

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

REPURCHASE AGREEMENT – 5.0%

 

 

 

 

 

 

 

State Street Bank & Trust Company, 0.13% dated 12/31/10, due 1/3/11, maturity value $258,003 (collateralized by obligations of various U.S. Government Agencies, 1.375% due 5/15/13, valued at $269,055)

 

 

 

 

 

 

 

(Cost $258,000)

 

 

 

 

 

258,000

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

TOTAL INVESTMENTS – 102.3%

 

 

 

 

 

 

 

(Cost $4,242,968)

 

 

 

 

 

5,258,414

 

 

 

 

 

 

 

 

 

LIABILITIES LESS CASH AND OTHER ASSETS – (2.3)%

 

 

 

 

 

(117,227

)

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

NET ASSETS – 100.0%

 

 

 

 

$

5,141,187

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

SECURITIES SOLD SHORT COMMON STOCKS – 7.4%

 

 

 

 

 

 

 

Consumer Services – 1.9%

 

 

 

 

 

 

 

Retail Stores - 1.9%

 

 

 

 

 

 

 

AutoNation

 

 

3,500

 

$

98,700

 

 

 

 

 

 

    

 

Total (Proceeds $83,150)

 

 

 

 

 

98,700

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Diversified Investment Companies – 1.1%

 

 

 

 

 

 

 

Exchange Traded Funds - 1.1%

 

 

 

 

 

 

 

iShares MSCI Hong Kong Index Fund

 

 

2,850

 

 

53,894

 

 

 

 

 

 

    

 

Total (Proceeds $43,933)

 

 

 

 

 

53,894

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Financial Intermediaries – 1.9%

 

 

 

 

 

 

 

Real Estate Investment Trusts - 1.9%

 

 

 

 

 

 

 

Realty Income

 

 

2,800

 

 

95,760

 

 

 

 

 

 

    

 

Total (Proceeds $91,799)

 

 

 

 

 

95,760

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Financial Services – 0.9%

 

 

 

 

 

 

 

Diversified Financial Services - 0.9%

 

 

 

 

 

 

 

Financial Select Sector SPDR Fund

 

 

3,000

 

 

47,850

 

 

 

 

 

 

    

 

Total (Proceeds $42,989)

 

 

 

 

 

47,850

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

 

 

SHARES

 

VALUE

 

 

 

 

 

 

 

 

 

Technology – 1.6%

 

 

 

 

 

 

 

Semiconductors and Equipment - 1.6%

 

 

 

 

 

 

 

SPDR S&P Semiconductor ETF

 

 

1,500

 

$

81,900

 

 

 

 

 

 

    

 

Total (Proceeds $67,448)

 

 

 

 

 

81,900

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

TOTAL SECURITIES SOLD SHORT

 

 

 

 

 

 

 

(Proceeds $329,319)

 

 

 

 

$

378,104

 

 

 

 

 

 

    

 


 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

The Royce Funds 2010 Annual Report to Shareholders  |  23


 

Schedules of Investments
 

 

Royce Global Select Fund

 

 

 

 

 

 

 

 

 

 

SHARES

 

VALUE

 

 

 

 

 

 

 

 

 

COMMON STOCKS – 90.7%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Australia – 3.3%

 

 

 

 

 

 

 

†Centamin Egypt a

 

 

75,000

 

$

206,269

 

†Medusa Mining

 

 

50,000

 

 

330,876

 

 

 

 

 

 

    

 

Total (Cost $418,098)

 

 

 

 

 

537,145

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Austria – 5.4%

 

 

 

 

 

 

 

Mayr-Melnhof Karton

 

 

3,400

 

 

395,550

 

Semperit AG Holding

 

 

9,300

 

 

492,008

 

 

 

 

 

 

    

 

Total (Cost $631,415)

 

 

 

 

 

887,558

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Belgium – 1.5%

 

 

 

 

 

 

 

Sipef

 

 

2,500

 

 

237,193

 

 

 

 

 

 

    

 

Total (Cost $140,783)

 

 

 

 

 

237,193

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Brazil – 2.9%

 

 

 

 

 

 

 

Duratex

 

 

12,000

 

 

129,036

 

†Grendene

 

 

25,000

 

 

140,361

 

†Kroton Educacional (Units) a

 

 

15,000

 

 

197,440

 

 

 

 

 

 

    

 

Total (Cost $319,239)

 

 

 

 

 

466,837

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Canada – 6.6%

 

 

 

 

 

 

 

Major Drilling Group International

 

 

10,000

 

 

417,882

 

†Sino-Forest Corporation a,b

 

 

7,000

 

 

163,965

 

Sprott

 

 

30,000

 

 

243,186

 

Tesco Corporation a,b

 

 

16,000

 

 

254,080

 

 

 

 

 

 

    

 

Total (Cost $597,466)

 

 

 

 

 

1,079,113

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

China – 0.9%

 

 

 

 

 

 

 

China Forestry Holdings

 

 

325,000

 

 

152,616

 

 

 

 

 

 

    

 

Total (Cost $92,988)

 

 

 

 

 

152,616

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Denmark – 1.5%

 

 

 

 

 

 

 

H Lundbeck

 

 

12,500

 

 

237,538

 

 

 

 

 

 

    

 

Total (Cost $229,508)

 

 

 

 

 

237,538

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Finland – 1.5%

 

 

 

 

 

 

 

Vaisala Cl. A

 

 

8,700

 

 

238,329

 

 

 

 

 

 

    

 

Total (Cost $284,833)

 

 

 

 

 

238,329

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

France – 2.3%

 

 

 

 

 

 

 

Boiron

 

 

6,500

 

 

247,637

 

†Societe Internationale de Plantations d’Heveas

 

 

1,200

 

 

133,416

 

 

 

 

 

 

    

 

Total (Cost $369,938)

 

 

 

 

 

381,053

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Germany – 8.6%

 

 

 

 

 

 

 

†Aixtron

 

 

8,000

 

 

295,108

 

Carl Zeiss Meditec

 

 

15,000

 

 

286,336

 

†KWS Saat

 

 

800

 

 

155,385

 

Pfeiffer Vacuum Technology

 

 

3,600

 

 

423,340

 

 

 

 

 

 

 

 

 

 

 

SHARES

 

VALUE

 

 

 

 

 

 

 

 

 

Germany (continued)

 

 

 

 

 

 

 

†SMA Solar Technology

 

 

2,700

 

$

250,757

 

 

 

 

 

 

    

 

Total (Cost $1,114,581)

 

 

 

 

 

1,410,926

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Hong Kong – 6.0%

 

 

 

 

 

 

 

Asian Citrus Holdings

 

 

200,000

 

 

250,438

 

Citic Telecom International Holdings

 

 

715,000

 

 

228,129

 

Value Partners Group

 

 

500,000

 

 

501,750

 

 

 

 

 

 

    

 

Total (Cost $620,162)

 

 

 

 

 

980,317

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

India – 1.5%

 

 

 

 

 

 

 

†Maharashtra Seamless

 

 

27,500

 

 

236,777

 

 

 

 

 

 

    

 

Total (Cost $233,634)

 

 

 

 

 

236,777

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Italy – 1.9%

 

 

 

 

 

 

 

Recordati

 

 

32,500

 

 

306,397

 

 

 

 

 

 

    

 

Total (Cost $246,991)

 

 

 

 

 

306,397

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Japan – 10.6%

 

 

 

 

 

 

 

†Benesse Holdings

 

 

5,500

 

 

253,356

 

†EPS

 

 

100

 

 

244,735

 

†FamilyMart

 

 

7,700

 

 

290,208

 

†Moshi Moshi Hotline

 

 

10,000

 

 

262,348

 

†Nomura Research Institute

 

 

10,300

 

 

229,368

 

†Santen Pharmaceutical

 

 

13,000

 

 

451,533

 

 

 

 

 

 

    

 

Total (Cost $1,607,536)

 

 

 

 

 

1,731,548

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Jersey – 0.7%

 

 

 

 

 

 

 

Randgold Resources ADR b

 

 

1,400

 

 

115,262

 

 

 

 

 

 

    

 

Total (Cost $69,120)

 

 

 

 

 

115,262

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Mexico – 3.6%

 

 

 

 

 

 

 

Fresnillo

 

 

14,000

 

 

364,081

 

Industrias Bachoco ADR b

 

 

9,400

 

 

227,386

 

 

 

 

 

 

    

 

Total (Cost $312,271)

 

 

 

 

 

591,467

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Norway – 1.7%

 

 

 

 

 

 

 

†TGS-NOPEC Geophysical

 

 

12,500

 

 

281,703

 

 

 

 

 

 

    

 

Total (Cost $165,099)

 

 

 

 

 

281,703

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Peru – 2.4%

 

 

 

 

 

 

 

Hochschild Mining

 

 

40,000

 

 

399,130

 

 

 

 

 

 

    

 

Total (Cost $182,699)

 

 

 

 

 

399,130

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

South Africa – 7.1%

 

 

 

 

 

 

 

†Adcock Ingram Holdings

 

 

30,000

 

 

272,789

 

Aquarius Platinum

 

 

45,000

 

 

246,962

 

Lewis Group

 

 

18,000

 

 

222,121

 

Northam Platinum

 

 

22,700

 

 

156,100

 

†Raubex Group

 

 

75,000

 

 

265,844

 

 

 

 

 

 

    

 

Total (Cost $882,117)

 

 

 

 

 

1,163,816

 

 

 

 

 

 

    

 

 

 

 

24  |  The Royce Funds 2010 Annual Report to Shareholders

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.


 

December 31, 2010
 

 

 


 

 

 

 

 

 

 

 

 

 

SHARES

 

VALUE

 

 

 

 

 

 

 

 

 

South Korea – 1.3%

 

 

 

 

 

 

 

†MegaStudy

 

 

1,400

 

$

217,358

 

 

 

 

 

 

    

 

Total (Cost $211,273)

 

 

 

 

 

217,358

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Switzerland – 4.3%

 

 

 

 

 

 

 

Burckhardt Compression Holding

 

 

1,600

 

 

443,208

 

Partners Group Holding

 

 

1,400

 

 

265,626

 

 

 

 

 

 

    

 

Total (Cost $419,823)

 

 

 

 

 

708,834

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Turkey – 1.5%

 

 

 

 

 

 

 

†Ford Otomotiv Sanayi

 

 

12,000

 

 

101,425

 

†Mardin Cimento Sanayii Ve Ticaret

 

 

27,500

 

 

136,431

 

 

 

 

 

 

    

 

Total (Cost $232,202)

 

 

 

 

 

237,856

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

United Arab Emirates – 2.1%

 

 

 

 

 

 

 

Lamprell

 

 

70,000

 

 

350,875

 

 

 

 

 

 

    

 

Total (Cost $149,078)

 

 

 

 

 

350,875

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

United Kingdom – 3.1%

 

 

 

 

 

 

 

Ashmore Group

 

 

65,000

 

 

339,595

 

†Ensco ADR b

 

 

3,000

 

 

160,140

 

 

 

 

 

 

    

 

Total (Cost $336,296)

 

 

 

 

 

499,735

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

United States – 8.4%

 

 

 

 

 

 

 

†Analog Devices b

 

 

5,500

 

 

207,185

 

†Helmerich & Payne

 

 

4,000

 

 

193,920

 

Sanderson Farms

 

 

6,000

 

 

234,900

 

†SanDisk Corporation a

 

 

1,700

 

 

84,762

 

Schnitzer Steel Industries Cl. A b

 

 

4,500

 

 

298,755

 

U.S. Global Investors Cl. A

 

 

23,000

 

 

186,990

 

†Western Digital a,b

 

 

5,000

 

 

169,500

 

 

 

 

 

 

    

 

Total (Cost $1,134,198)

 

 

 

 

 

1,376,012

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

TOTAL COMMON STOCKS

 

 

 

 

 

 

 

(Cost $11,001,348)

 

 

 

 

 

14,825,395

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

REPURCHASE AGREEMENT – 10.2%

 

 

 

 

 

 

 

State Street Bank & Trust Company, 0.13% dated 12/31/10, due 1/3/11, maturity value $1,670,018 (collateralized by obligations of various U.S. Government Agencies, 0.41% due 2/1/11, valued at $1,716,413)

 

 

 

 

 

 

 

(Cost $1,670,000)

 

 

 

 

 

1,670,000

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

TOTAL INVESTMENTS – 100.9%

 

 

 

 

 

 

 

(Cost $12,671,348)

 

 

 

 

 

16,495,395

 

 

 

 

 

 

 

 

 

LIABILITIES LESS CASH AND OTHER ASSETS – (0.9)%

 

 

 

 

 

(140,176

)

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

NET ASSETS – 100.0%

 

 

 

 

$

16,355,219

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

 

 

SHARES

 

VALUE

 

 

 

 

 

 

 

 

 

SECURITIES SOLD SHORT

 

 

 

 

 

 

 

COMMON STOCKS – 6.6%

 

 

 

 

 

 

 

Canada – 0.8%

 

 

 

 

 

 

 

iShares MSCI Canada Index Fund

 

 

4,500

 

$

139,500

 

 

 

 

 

 

    

 

Total (Proceeds $120,639)

 

 

 

 

 

139,500

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

United States – 4.5%

 

 

 

 

 

 

 

iShares Barclays 20+ Year Treasury Bond Fund

 

 

1,500

 

 

141,180

 

Panera Bread Cl. A

 

 

800

 

 

80,968

 

ProShares Ultra Financials

 

 

1,800

 

 

119,484

 

ProShares Ultra Health Care

 

 

1,800

 

 

93,636

 

ProShares Ultra Industrials

 

 

3,500

 

 

161,455

 

Stericycle

 

 

700

 

 

56,644

 

Tempur-Pedic International

 

 

1,700

 

 

68,102

 

 

 

 

 

 

    

 

Total (Proceeds $644,113)

 

 

 

 

 

721,469

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Non-Country Specific – 1.3%

 

 

 

 

 

 

 

ProShares Ultra MSCI Emerging Markets

 

 

2,000

 

 

219,104

 

 

 

 

 

 

    

 

Total (Proceeds $174,353)

 

 

 

 

 

219,104

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

TOTAL SECURITIES SOLD SHORT

 

 

 

 

 

 

 

(Proceeds $939,105)

 

 

 

 

$

1,080,073

 

 

 

 

 

 

    

 


 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

The Royce Funds 2010 Annual Report to Shareholders  |  25


 

Schedules of Investments
 

 

Royce SMid-Cap Select Fund


 

 

 

 

 

 

 

 

 

 

SHARES

 

VALUE

 

 

 

 

 

 

 

 

 

COMMON STOCKS – 81.9%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer Products – 1.6%

 

 

 

 

 

 

 

Apparel, Shoes and Accessories - 1.6%

 

 

 

 

 

 

 

†Warnaco Group (The) a

 

 

330

 

$

18,173

 

 

 

 

 

 

    

 

Total (Cost $16,363)

 

 

 

 

 

18,173

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Consumer Services – 3.6%

 

 

 

 

 

 

 

Retail Stores - 3.6%

 

 

 

 

 

 

 

American Eagle Outfitters

 

 

1,025

 

 

14,996

 

Dress Barn (The) a

 

 

380

 

 

10,039

 

Family Dollar Stores

 

 

125

 

 

6,214

 

GameStop Corporation Cl. A a

 

 

200

 

 

4,576

 

O’Reilly Automotive a

 

 

105

 

 

6,344

 

 

 

 

 

 

    

 

Total (Cost $38,985)

 

 

 

 

 

42,169

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Financial Intermediaries – 5.9%

 

 

 

 

 

 

 

Banking - 3.2%

 

 

 

 

 

 

 

Comerica

 

 

670

 

 

28,301

 

†Glacier Bancorp

 

 

200

 

 

3,022

 

†Huntington Bancshares

 

 

300

 

 

2,061

 

†KeyCorp

 

 

450

 

 

3,982

 

 

 

 

 

 

    

 

 

 

 

 

 

 

37,366

 

 

 

 

 

 

    

 

Insurance - 1.9%

 

 

 

 

 

 

 

Alleghany Corporation a

 

 

50

 

 

15,319

 

PartnerRe

 

 

77

 

 

6,187

 

 

 

 

 

 

    

 

 

 

 

 

 

 

21,506

 

 

 

 

 

 

    

 

Securities Exchanges - 0.8%

 

 

 

 

 

 

 

NASDAQ OMX Group (The) a

 

 

380

 

 

9,010

 

 

 

 

 

 

    

 

Total (Cost $63,220)

 

 

 

 

 

67,882

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Financial Services – 6.0%

 

 

 

 

 

 

 

Information and Processing - 2.6%

 

 

 

 

 

 

 

Equifax

 

 

520

 

 

18,512

 

Fiserv a

 

 

200

 

 

11,712

 

 

 

 

 

 

    

 

 

 

 

 

 

 

30,224

 

 

 

 

 

 

    

 

Investment Management - 2.4%

 

 

 

 

 

 

 

Federated Investors Cl. B

 

 

560

 

 

14,655

 

†Value Partners Group

 

 

12,900

 

 

12,945

 

 

 

 

 

 

    

 

 

 

 

 

 

 

27,600

 

 

 

 

 

 

    

 

Specialty Finance - 1.0%

 

 

 

 

 

 

 

GATX Corporation

 

 

330

 

 

11,643

 

 

 

 

 

 

    

 

Total (Cost $61,670)

 

 

 

 

 

69,467

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Health – 1.8%

 

 

 

 

 

 

 

Commercial Services - 0.5%

 

 

 

 

 

 

 

Schein (Henry) a

 

 

100

 

 

6,139

 

 

 

 

 

 

    

 

Medical Products and Devices - 1.3%

 

 

 

 

 

 

 

C.R. Bard

 

 

160

 

 

14,683

 

 

 

 

 

 

    

 

Total (Cost $18,489)

 

 

 

 

 

20,822

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

 

 

SHARES

 

VALUE

 

 

 

 

 

 

 

 

 

Industrial Products – 22.0%

 

 

 

 

 

 

 

Automotive - 1.5%

 

 

 

 

 

 

 

Hertz Global Holdings a

 

 

1,200

 

$

17,388

 

 

 

 

 

 

    

 

Industrial Components - 6.6%

 

 

 

 

 

 

 

GrafTech International a

 

 

240

 

 

4,762

 

Hubbell Cl. B

 

 

510

 

 

30,666

 

PerkinElmer

 

 

790

 

 

20,398

 

Thomas & Betts a

 

 

420

 

 

20,286

 

 

 

 

 

 

    

 

 

 

 

 

 

 

76,112

 

 

 

 

 

 

    

 

Machinery - 1.9%

 

 

 

 

 

 

 

Rofin-Sinar Technologies a

 

 

640

 

 

22,682

 

 

 

 

 

 

    

 

Metal Fabrication and Distribution - 3.7%

 

 

 

 

 

 

 

Kennametal

 

 

560

 

 

22,097

 

Reliance Steel & Aluminum

 

 

410

 

 

20,951

 

 

 

 

 

 

    

 

 

 

 

 

 

 

43,048

 

 

 

 

 

 

    

 

Paper and Packaging - 2.9%

 

 

 

 

 

 

 

Greif Cl. A

 

 

535

 

 

33,116

 

 

 

 

 

 

    

 

Specialty Chemicals and Materials - 5.4%

 

 

 

 

 

 

 

Cabot Corporation

 

 

440

 

 

16,566

 

Lubrizol Corporation (The)

 

 

185

 

 

19,773

 

Rogers Corporation a

 

 

460

 

 

17,595

 

†Schulman (A.)

 

 

400

 

 

9,156

 

 

 

 

 

 

    

 

 

 

 

 

 

 

63,090

 

 

 

 

 

 

    

 

Total (Cost $199,036)

 

 

 

 

 

255,436

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Industrial Services – 7.9%

 

 

 

 

 

 

 

Advertising and Publishing - 1.2%

 

 

 

 

 

 

 

†Interpublic Group of Companies a

 

 

1,330

 

 

14,125

 

 

 

 

 

 

    

 

Commercial Services - 2.1%

 

 

 

 

 

 

 

Cintas Corporation

 

 

620

 

 

17,335

 

†Team a

 

 

300

 

 

7,260

 

 

 

 

 

 

    

 

 

 

 

 

 

 

24,595

 

 

 

 

 

 

    

 

Engineering and Construction - 4.0%

 

 

 

 

 

 

 

†Chicago Bridge & Iron a

 

 

460

 

 

15,134

 

†EMCOR Group a

 

 

820

 

 

23,764

 

†Jacobs Engineering Group a

 

 

150

 

 

6,877

 

 

 

 

 

 

    

 

 

 

 

 

 

 

45,775

 

 

 

 

 

 

    

 

Transportation and Logistics - 0.6%

 

 

 

 

 

 

 

Landstar System

 

 

164

 

 

6,714

 

 

 

 

 

 

    

 

Total (Cost $85,479)

 

 

 

 

 

91,209

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Natural Resources – 9.9%

 

 

 

 

 

 

 

Energy Services - 7.2%

 

 

 

 

 

 

 

Ensco ADR

 

 

510

 

 

27,224

 

Ensign Energy Services

 

 

700

 

 

10,581

 

Helmerich & Payne

 

 

600

 

 

29,088

 

†Trican Well Service

 

 

800

 

 

16,204

 

 

 

 

 

 

    

 

 

 

 

 

 

 

83,097

 

 

 

 

 

 

    

 

Precious Metals and Mining - 2.7%

 

 

 

 

 

 

 

AMCOL International

 

 

345

 

 

10,695

 


 

 

26  |  The Royce Funds 2010 Annual Report to Shareholders

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

 

December 31, 2010
 

 

 


 

 

 

 

 

 

 

 

 

 

SHARES

 

VALUE

 

Natural Resources (continued)

 

 

 

 

 

 

 

Precious Metals and Mining (continued)

 

 

 

 

 

 

 

Pan American Silver

 

 

500

 

$

20,605

 

 

 

 

 

 

    

 

 

 

 

 

 

 

31,300

 

 

 

 

 

 

    

 

Total (Cost $98,366)

 

 

 

 

 

114,397

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Technology – 17.8%

 

 

 

 

 

 

 

Aerospace and Defense - 1.8%

 

 

 

 

 

 

 

Rockwell Collins

 

 

180

 

 

10,487

 

Teledyne Technologies a

 

 

250

 

 

10,992

 

 

 

 

 

 

    

 

 

 

 

 

 

 

21,479

 

 

 

 

 

 

    

 

Components and Systems - 3.7%

 

 

 

 

 

 

 

AVX Corporation

 

 

2,235

 

 

34,486

 

†Western Digital a

 

 

240

 

 

8,136

 

 

 

 

 

 

    

 

 

 

 

 

 

 

42,622

 

 

 

 

 

 

    

 

Distribution - 4.9%

 

 

 

 

 

 

 

Anixter International

 

 

330

 

 

19,711

 

Arrow Electronics a

 

 

855

 

 

29,284

 

†Avnet a

 

 

228

 

 

7,531

 

 

 

 

 

 

    

 

 

 

 

 

 

 

56,526

 

 

 

 

 

 

    

 

Semiconductors and Equipment - 7.4%

 

 

 

 

 

 

 

ADTRAN

 

 

500

 

 

18,105

 

†Diodes a

 

 

530

 

 

14,305

 

International Rectifier a

 

 

700

 

 

20,783

 

†Micrel

 

 

850

 

 

11,041

 

†Teradyne a

 

 

625

 

 

8,775

 

†Varian Semiconductor Equipment Associates a

 

 

330

 

 

12,200

 

 

 

 

 

 

    

 

 

 

 

 

 

 

85,209

 

 

 

 

 

 

    

 

Total (Cost $171,924)

 

 

 

 

 

205,836

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Utilities – 1.8%

 

 

 

 

 

 

 

UGI Corporation

 

 

660

 

 

20,843

 

 

 

 

 

 

    

 

Total (Cost $17,754)

 

 

 

 

 

20,843

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Miscellaneous d – 3.6%

 

 

 

 

 

 

 

Total (Cost $38,994)

 

 

 

 

 

41,569

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

TOTAL COMMON STOCKS

 

 

 

 

 

 

 

(Cost $810,280)

 

 

 

 

 

947,803

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

REPURCHASE AGREEMENT – 18.8%

 

 

 

 

 

 

 

State Street Bank & Trust Company, 0.13% dated 12/31/10, due 1/3/11, maturity value $218,002 (collateralized by obligations of various U.S. Government Agencies, 1.375% due 5/15/13, valued at $228,443)

 

 

 

 

 

 

 

(Cost $218,000)

 

 

 

 

 

218,000

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

VALUE

 

 

 

 

 

 

TOTAL INVESTMENTS – 100.7%

 

 

 

 

(Cost $1,028,280)

 

$

1,165,803

 

 

 

 

 

 

LIABILITIES LESS CASH AND OTHER ASSETS – (0.7)%

 

 

(7,734

)

 

 

    

 

 

 

 

 

 

NET ASSETS – 100.0%

 

$

1,158,069

 

 

 

    

 


 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

The Royce Funds 2010 Annual Report to Shareholders  |  27


 

Schedules of Investments
 

 

Royce Opportunity Select Fund


 

 

 

 

 

 

 

 

 

 

SHARES

 

VALUE

 

 

 

 

 

 

 

 

 

COMMON STOCKS – 101.2%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer Products – 3.3%

 

 

 

 

 

 

 

Food/Beverage/Tobacco - 1.3%

 

 

 

 

 

 

 

†Smart Balance a

 

 

6,000

 

$

25,980

 

 

 

 

 

 

    

 

Health, Beauty and Nutrition - 2.0%

 

 

 

 

 

 

 

†Physicians Formula Holdings a

 

 

10,000

 

 

37,600

 

 

 

 

 

 

    

 

Total (Cost $55,112)

 

 

 

 

 

63,580

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Consumer Services – 5.8%

 

 

 

 

 

 

 

Restaurants and Lodgings - 2.9%

 

 

 

 

 

 

 

†Kona Grill a

 

 

4,700

 

 

19,270

 

†O’Charleys a,b

 

 

5,000

 

 

36,000

 

 

 

 

 

 

    

 

 

 

 

 

 

 

55,270

 

 

 

 

 

 

    

 

Retail Stores - 2.9%

 

 

 

 

 

 

 

†dELiA*s a

 

 

15,000

 

 

26,100

 

† Lithia Motors Cl. A

 

 

2,000

 

 

28,580

 

 

 

 

 

 

    

 

 

 

 

 

 

 

54,680

 

 

 

 

 

 

    

 

Total (Cost $104,690)

 

 

 

 

 

109,950

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Diversified Investment Companies – 1.5%

 

 

 

 

 

 

 

Closed-End Funds - 1.5%

 

 

 

 

 

 

 

†BlackRock New York Investment Quality Municipal Trust

 

 

2,000

 

 

28,600

 

 

 

 

 

 

    

 

Total (Cost $28,299)

 

 

 

 

 

28,600

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Financial Intermediaries – 4.7%

 

 

 

 

 

 

 

Banking - 0.8%

 

 

 

 

 

 

 

†Tennessee Commerce Bancorp a

 

 

3,000

 

 

14,730

 

 

 

 

 

 

    

 

Insurance - 1.5%

 

 

 

 

 

 

 

†Radian Group

 

 

3,500

 

 

28,245

 

 

 

 

 

 

    

 

Real Estate Investment Trusts - 1.1%

 

 

 

 

 

 

 

†RAIT Financial Trust a,b

 

 

10,000

 

 

21,900

 

 

 

 

 

 

    

 

Securities Brokers - 1.3%

 

 

 

 

 

 

 

†GFI Group

 

 

5,100

 

 

23,919

 

 

 

 

 

 

    

 

Total (Cost $82,722)

 

 

 

 

 

88,794

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Health – 7.4%

 

 

 

 

 

 

 

Commercial Services - 2.7%

 

 

 

 

 

 

 

†AMN Healthcare Services a

 

 

5,000

 

 

30,700

 

†Kendle International a

 

 

2,000

 

 

21,780

 

 

 

 

 

 

    

 

 

 

 

 

 

 

52,480

 

 

 

 

 

 

    

 

Medical Products and Devices - 4.7%

 

 

 

 

 

 

 

†Accuray a,b

 

 

5,500

 

 

37,125

 

†TomoTherapy a

 

 

6,000

 

 

21,660

 

†Wright Medical Group a

 

 

2,000

 

 

31,060

 

 

 

 

 

 

    

 

 

 

 

 

 

 

89,845

 

 

 

 

 

 

    

 

Total (Cost $131,407)

 

 

 

 

 

142,325

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Industrial Products – 21.5%

 

 

 

 

 

 

 

Automotive - 3.4%

 

 

 

 

 

 

 

†Wabash National a,b

 

 

5,500

 

 

65,175

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

 

 

SHARES

 

VALUE

 

 

 

 

 

 

 

 

 

Industrial Products (continued)

 

 

 

 

 

 

 

Building Systems and Components - 1.4%

 

 

 

 

 

 

 

†Apogee Enterprises

 

 

2,000

 

$

26,940

 

 

 

 

 

 

    

 

Construction Materials - 2.0%

 

 

 

 

 

 

 

†Louisiana-Pacific Corporation a

 

 

4,000

 

 

37,840

 

 

 

 

 

 

    

 

Industrial Components - 2.2%

 

 

 

 

 

 

 

†Mueller Water Products Cl. A

 

 

10,000

 

 

41,700

 

 

 

 

 

 

    

 

Machinery - 2.8%

 

 

 

 

 

 

 

†Flow International a

 

 

8,000

 

 

32,720

 

†Hardinge

 

 

2,200

 

 

21,428

 

 

 

 

 

 

    

 

 

 

 

 

 

 

54,148

 

 

 

 

 

 

    

 

Metal Fabrication and Distribution - 6.0%

 

 

 

 

 

 

 

†Carpenter Technology

 

 

650

 

 

26,156

 

†Dynamic Materials

 

 

1,000

 

 

22,570

 

†Haynes International

 

 

900

 

 

37,647

 

†NN a

 

 

2,300

 

 

28,428

 

 

 

 

 

 

    

 

 

 

 

 

 

 

114,801

 

 

 

 

 

 

    

 

Specialty Chemicals and Materials - 1.8%

 

 

 

 

 

 

 

†Material Sciences a

 

 

5,500

 

 

35,145

 

 

 

 

 

 

    

 

Other Industrial Products - 1.9%

 

 

 

 

 

 

 

†Koppers Holdings

 

 

1,000

 

 

35,780

 

 

 

 

 

 

    

 

Total (Cost $295,097)

 

 

 

 

 

411,529

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Industrial Services – 13.9%

 

 

 

 

 

 

 

Advertising and Publishing - 1.4%

 

 

 

 

 

 

 

†Martha Stewart Living Omnimedia Cl. A a

 

 

6,000

 

 

26,520

 

 

 

 

 

 

    

 

Commercial Services - 4.7%

 

 

 

 

 

 

 

†Furmanite Corporation a

 

 

5,000

 

 

34,550

 

†Heidrick & Struggles International b

 

 

1,000

 

 

28,650

 

†Hudson Highland Group a

 

 

4,500

 

 

26,235

 

 

 

 

 

 

    

 

 

 

 

 

 

 

89,435

 

 

 

 

 

 

    

 

Engineering and Construction - 3.5%

 

 

 

 

 

 

 

†Hovnanian Enterprises Cl. A a

 

 

6,500

 

 

26,585

 

†Standard Pacific a

 

 

9,000

 

 

41,400

 

 

 

 

 

 

    

 

 

 

 

 

 

 

67,985

 

 

 

 

 

 

    

 

Transportation and Logistics - 4.3%

 

 

 

 

 

 

 

†Arkansas Best

 

 

1,200

 

 

32,904

 

†General Maritime

 

 

4,000

 

 

13,000

 

†Horizon Lines Cl. A

 

 

5,000

 

 

21,850

 

†Overseas Shipholding Group

 

 

400

 

 

14,168

 

 

 

 

 

 

    

 

 

 

 

 

 

 

81,922

 

 

 

 

 

 

    

 

Total (Cost $227,755)

 

 

 

 

 

265,862

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Natural Resources – 11.7%

 

 

 

 

 

 

 

Energy Services - 4.0%

 

 

 

 

 

 

 

†Basic Energy Services a

 

 

1,000

 

 

16,480

 

†Key Energy Services a

 

 

1,500

 

 

19,470

 

†Union Drilling a

 

 

5,500

 

 

40,040

 

 

 

 

 

 

    

 

 

 

 

 

 

 

75,990

 

 

 

 

 

 

    

 

Oil and Gas - 5.6%

 

 

 

 

 

 

 

†Goodrich Petroleum a

 

 

2,000

 

 

35,280

 

†McMoRan Exploration a

 

 

1,500

 

 

25,710

 

†SM Energy b

 

 

800

 

 

47,144

 

 

 

 

 

 

    

 

 

 

 

 

 

 

108,134

 

 

 

 

 

 

    

 


 

 

28  |  The Royce Funds 2010 Annual Report to Shareholders

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.


 

December 31, 2010
 

 

 


 

 

 

 

 

 

 

 

 

 

SHARES

 

VALUE

 

 

 

 

 

 

 

 

 

Natural Resources (continued)

 

 

 

 

 

 

 

Precious Metals and Mining - 2.1%

 

 

 

 

 

 

 

†Century Aluminum a,b

 

 

2,600

 

$

40,378

 

 

 

 

 

 

    

 

Total (Cost $156,855)

 

 

 

 

 

224,502

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Technology – 29.8%

 

 

 

 

 

 

 

Components and Systems - 2.7%

 

 

 

 

 

 

 

†KEMET Corporation a

 

 

3,500

 

 

51,030

 

 

 

 

 

 

    

 

Semiconductors and Equipment - 14.4%

 

 

 

 

 

 

 

†Advanced Energy Industries a,b

 

 

3,000

 

 

40,920

 

†Alpha & Omega Semiconductor a

 

 

2,000

 

 

25,660

 

†Brooks Automation a

 

 

4,000

 

 

36,280

 

†Integrated Silicon Solution a

 

 

4,500

 

 

36,135

 

†Kulicke & Soffa Industries a

 

 

3,500

 

 

25,200

 

†MEMC Electronic Materials a

 

 

3,000

 

 

33,780

 

†PLX Technology a

 

 

5,500

 

 

19,855

 

†Rudolph Technologies a

 

 

3,000

 

 

24,690

 

†Ultra Clean Holdings a

 

 

3,500

 

 

32,585

 

 

 

 

 

 

    

 

 

 

 

 

 

 

275,105

 

 

 

 

 

 

    

 

Software - 3.4%

 

 

 

 

 

 

 

†Bottomline Technologies a

 

 

1,200

 

 

26,052

 

†Smith Micro Software a,b

 

 

2,500

 

 

39,350

 

 

 

 

 

 

    

 

 

 

 

 

 

 

65,402

 

 

 

 

 

 

    

 

Telecommunications - 9.3%

 

 

 

 

 

 

 

†Aviat Networks a

 

 

5,000

 

 

25,350

 

†Ciena Corporation a

 

 

1,500

 

 

31,575

 

†Dialogic a,b

 

 

3,900

 

 

15,405

 

†Iridium Communications a

 

 

4,000

 

 

33,000

 

†MRV Communications a,c

 

 

20,000

 

 

35,200

 

†Powerwave Technologies a

 

 

15,000

 

 

38,100

 

 

 

 

 

 

    

 

 

 

 

 

 

 

178,630

 

 

 

 

 

 

    

 

Total (Cost $491,729)

 

 

 

 

 

570,167

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Miscellaneous d – 1.6%

 

 

 

 

 

 

 

Total (Cost $27,652)

 

 

 

 

 

30,475

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

TOTAL COMMON STOCKS

 

 

 

 

 

 

 

(Cost $1,601,318)

 

 

 

 

 

1,935,784

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

 

 

SHARES

 

VALUE

 

 

 

 

 

 

 

 

 

TOTAL INVESTMENTS – 101.2%

 

 

 

 

 

 

 

(Cost $1,601,318)

 

 

 

 

$

1,935,784

 

LIABILITIES LESS CASH AND OTHER ASSETS – (1.2)%

 

 

 

 

 

(22,754

)

 

 

 

 

 

    

 

NET ASSETS – 100.0%

 

 

 

 

$

1,913,030

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

SECURITIES SOLD SHORT
COMMON STOCKS – 13.3%

 

 

 

 

 

 

 

Consumer Services – 3.2%

 

 

 

 

 

 

 

Restaurants and Lodgings - 1.6%

 

 

 

 

 

 

 

Panera Bread Cl. A

 

 

300

 

$

30,363

 

 

 

 

 

 

    

 

Retail Stores - 1.6%

 

 

 

 

 

 

 

AnnTaylor Stores

 

 

500

 

 

13,695

 

Urban Outfitters

 

 

500

 

 

17,905

 

 

 

 

 

 

    

 

 

 

 

 

 

 

31,600

 

 

 

 

 

 

    

 

Total (Proceeds $63,743)

 

 

 

 

 

61,963

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Health – 4.9%

 

 

 

 

 

 

 

Drugs and Biotech - 2.6%

 

 

 

 

 

 

 

Acorda Therapeutics

 

 

1,000

 

 

27,260

 

Auxilium Pharmaceuticals

 

 

1,000

 

 

21,100

 

 

 

 

 

 

    

 

 

 

 

 

 

 

48,360

 

 

 

 

 

 

    

 

Medical Products and Devices - 2.3%

 

 

 

 

 

 

 

Medtronic

 

 

1,200

 

 

44,508

 

 

 

 

 

 

    

 

Total (Proceeds $89,901)

 

 

 

 

 

92,868

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Industrial Products – 1.9%

 

 

 

 

 

 

 

Automotive - 1.9%

 

 

 

 

 

 

 

General Motors

 

 

1,000

 

 

36,860

 

 

 

 

 

 

    

 

Total (Proceeds $33,679)

 

 

 

 

 

36,860

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Technology – 3.3%

 

 

 

 

 

 

 

Semiconductors and Equipment - 0.9%

 

 

 

 

 

 

 

Veeco Instruments

 

 

400

 

 

17,184

 

 

 

 

 

 

    

 

Telecommunications - 2.4%

 

 

 

 

 

 

 

Research In Motion

 

 

800

 

 

46,504

 

 

 

 

 

 

    

 

Total (Proceeds $67,085)

 

 

 

 

 

63,688

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

TOTAL SECURITIES SOLD SHORT

 

 

 

 

 

 

 

(Proceeds $254,408)

 

 

 

 

$

255,379

 

 

 

 

 

 

    

 

 

 
   

†

New additions in 2010.

a

Non-income producing.

b

All or a portion of these securities have been segregated as collateral for short sales.

c

This security is defined as a Level 2 security due to fair value being based on quoted prices for similar securities. See Notes to Financial Statements.

d

Includes securities first acquired in 2010 and less than 1% of net assets.

 

 

 

Securities of Global/International Funds are categorized by the country of their headquarters, with the exception of exchange-traded funds.

 

 

 

Bold indicates a Fund’s 20 largest equity holdings in terms of December 31, 2010 market value.
   

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

The Royce Funds 2010 Annual Report to Shareholders  |  29


 

Statements of Assets and Liabilities
 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royce Select Fund I

 

Royce Select Fund II

 

Royce Global Select Fund

 

ASSETS:

 

 

 

 

 

 

 

 

 

 

Investments at value*

 

$

52,826,766

 

$

5,000,414

 

$

14,825,395

 

Repurchase agreements (at cost and value)

 

 

7,467,000

 

 

258,000

 

 

1,670,000

 

Deposits with brokers for securities sold short

 

 

-

 

 

241,886

 

 

935,315

 

Cash and foreign currency

 

 

297

 

 

796

 

 

14,606

 

Receivable for investments sold

 

 

-

 

 

73,947

 

 

-

 

Receivable for capital shares sold

 

 

451,725

 

 

-

 

 

79,937

 

Receivable for dividends and interest

 

 

24,119

 

 

1,341

 

 

7,021

 
                   

 

Total Assets

 

 

60,769,907

 

 

5,576,384

 

 

17,532,274

 
                   

 

LIABILITIES:

 

 

 

 

 

 

 

 

 

 

Securities sold short, at fair value**

 

 

-

 

 

378,104

 

 

1,080,073

 

Payable for investments purchased

 

 

1,497,614

 

 

36,117

 

 

45,936

 

Payable for capital shares redeemed

 

 

10,000

 

 

-

 

 

-

 

Payable for dividends and interest

 

 

-

 

 

404

 

 

481

 

Payable for investment advisory fees

 

 

474,732

 

 

20,572

 

 

50,565

 
                   

 

Total Liabilities

 

 

1,982,346

 

 

435,197

 

 

1,177,055

 
                   

 

Net Assets

 

$

58,787,561

 

$

5,141,187

 

$

16,355,219

 
                   

 

ANALYSIS OF NET ASSETS:

 

 

 

 

 

 

 

 

 

 

Paid-in capital

 

$

44,496,154

 

$

3,939,028

 

$

12,735,404

 

Undistributed net investment income (loss)

 

 

(42

)

 

(36,807

)

 

(5,562

)

Accumulated net realized gain (loss) on investments and foreign currency

 

 

(48,208

)

 

272,305

 

 

(57,804

)

Net unrealized appreciation (depreciation) on investments and foreign currency

 

 

14,339,657

 

 

966,661

 

 

3,683,181

 
                   

 

Net Assets

 

$

58,787,561

 

$

5,141,187

 

$

16,355,219

 
                   

 

Investment Class

 

$

58,787,561

 

$

5,141,187

 

$

16,355,219

 
                   

 

SHARES OUTSTANDING:

 

 

 

 

 

 

 

 

 

 

(unlimited number of $.001 par value shares authorized for each Fund)

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

2,893,036

 

 

369,855

 

 

822,202

 
                   

 

NET ASSET VALUES:

 

 

 

 

 

 

 

 

 

 

(Net Assets ÷ Shares Outstanding)

 

 

 

 

 

 

 

 

 

 

Investment Class(1)

 

$

20.32

 

$

13.90

 

$

19.89

 
                   

 

*   Investments at identified cost

 

$

38,487,256

 

$

3,984,968

 

$

11,001,348

 

**  Proceeds of short sales

 

 

-

 

 

329,319

 

 

939,105

 

Aggregate value of segregated securities

 

 

-

 

 

456,840

 

 

1,124,378

 

 

 

(1)  

Offering and redemption price per share; shares redeemed within 365 days of purchase are subject to a 2% redemption fee, payable to the Fund.


 

 

30  |  The Royce Funds 2010 Annual Report to Shareholders

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.


 

December 31, 2010
 

 

 

 

 

 

 

 

 

 

 

 

Royce SMid-Cap Select Fund

 

Royce Opportunity Select Fund

 

ASSETS:

 

 

 

 

 

 

 

Investments at value*

 

$

947,803

 

$

1,935,784

 

Repurchase agreements (at cost and value)

 

 

218,000

 

 

-

 

Deposits with brokers for securities sold short

 

 

-

 

 

277,478

 

Cash and foreign currency

 

 

728

 

 

-

 

Receivable for investments sold

 

 

-

 

 

41,732

 

Receivable for dividends and interest

 

 

866

 

 

280

 
             

 

Total Assets

 

 

1,167,397

 

 

2,255,274

 
             

 

LIABILITIES:

 

 

 

 

 

 

 

Securities sold short, at fair value**

 

 

-

 

 

255,379

 

Payable for investments purchased

 

 

2,723

 

 

37,800

 

Payable for investment advisory fees

 

 

6,605

 

 

31,147

 

Payable to custodian for overdrawn balance

 

 

-

 

 

17,918

 
             

 

Total Liabilities

 

 

9,328

 

 

342,244

 
             

 

Net Assets

 

$

1,158,069

 

$

1,913,030

 
             

 

ANALYSIS OF NET ASSETS:

 

 

 

 

 

 

 

Paid-in capital

 

$

1,042,021

 

$

1,502,457

 

Undistributed net investment income (loss)

 

 

-

 

 

-

 

Accumulated net realized gain (loss) on investments and foreign currency

 

 

(21,476

)

 

77,077

 

Net unrealized appreciation (depreciation) on investments and foreign currency

 

 

137,524

 

 

333,496

 
             

 

Net Assets

 

$

1,158,069

 

$

1,913,030

 
             

 

Investment Class

 

$

1,158,069

 

$

1,913,030

 
             

 

SHARES OUTSTANDING:

 

 

 

 

 

 

 

(unlimited number of $.001 par value shares authorized for each Fund)
Investment Class

 

 

111,061

 

 

147,239

 
             

 

NET ASSET VALUES:

 

 

 

 

 

 

 

(Net Assets ÷ Shares Outstanding)

 

 

 

 

 

 

 

Investment Class(1)

 

$

10.43

 

$

12.99

 
             

 

*    Investments at identified cost

 

$

810,280

 

$

1,601,318

 

**   Proceeds of short sales

 

 

-

 

 

254,408

 

Aggregate value of segregated securities

 

 

-

 

 

255,719

 

 

 

(1)  

Offering and redemption price per share; shares redeemed within 365 days of purchase are subject to a 2% redemption fee, payable to the Fund.


 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

The Royce Funds 2010 Annual Report to Shareholders  |  31


 

Statements of Changes in Net Assets
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royce Select Fund I

 

Royce Select Fund II

 

Royce Global Select Fund

 

 

 

      

 

      

 

      

 

 

 

Year ended 12/31/10

 

Year ended 12/31/09

 

Year ended 12/31/10

 

Year ended 12/31/09

 

Year ended 12/31/10

 

Year ended 12/31/09

 

INVESTMENT OPERATIONS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income (loss)

 

$

(615,447

)

$

286,369

 

$

(63,679

)

$

14,319

 

$

(158,653

)

$

110,001

 

Net realized gain (loss) on investments and foreign currency

 

 

543,995

 

 

730,989

 

 

800,562

 

 

189,431

 

 

715,634

 

 

(112,125

)

Net change in unrealized appreciation (depreciation) on investments and foreign currency

 

 

8,574,585

 

 

6,754,500

 

 

174,379

 

 

1,171,161

 

 

2,586,380

 

 

3,175,109

 
                                     

 

Net increase (decrease) in net assets from investment operations

 

 

8,503,133

 

 

7,771,858

 

 

911,262

 

 

1,374,911

 

 

3,143,361

 

 

3,172,985

 
                                     

 

DISTRIBUTIONS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income
Investment Class

 

 

-

 

 

(286,266

)

 

(878

)

 

(25,616

)

 

(35,259

)

 

(157,637

)

Net realized gain on investments and foreign currency
Investment Class

 

 

(737,749

)

 

-

 

 

(54,943

)

 

-

 

 

-

 

 

-

 
                                     

 

Total distributions

 

 

(737,749

)

 

(286,266

)

 

(55,821

)

 

(25,616

)

 

(35,259

)

 

(157,637

)
                                     

 

CAPITAL SHARE TRANSACTIONS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Value of shares sold
Investment Class

 

 

21,312,282

 

 

11,207,666

 

 

808,908

 

 

1,050,028

 

 

6,980,721

 

 

1,483,333

 

Distributions reinvested
Investment Class

 

 

713,721

 

 

271,809

 

 

55,718

 

 

24,676

 

 

31,697

 

 

147,518

 

Value of shares redeemed
Investment Class

 

 

(4,907,048

)

 

(2,550,977

)

 

(689,514

)

 

(13,573

)

 

(2,886,856

)

 

(1,589,769

)

Shareholder redemption fees
Investment Class

 

 

6,948

 

 

2,505

 

 

1,861

 

 

128

 

 

4,671

 

 

11,333

 
                                     

 

Net increase (decrease) in net assets from capital share transactions

 

 

17,125,903

 

 

8,931,003

 

 

176,973

 

 

1,061,259

 

 

4,130,233

 

 

52,415

 
                                     

 

NET INCREASE (DECREASE) IN NET ASSETS

 

 

24,891,287

 

 

16,416,595

 

 

1,032,414

 

 

2,410,554

 

 

7,238,335

 

 

3,067,763

 

NET ASSETS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning of year

 

 

33,896,274

 

 

17,479,679

 

 

4,108,773

 

 

1,698,219

 

 

9,116,884

 

 

6,049,121

 
                                     

 

End of year

 

$

58,787,561

 

$

33,896,274

 

$

5,141,187

 

$

4,108,773

 

$

16,355,219

 

$

9,116,884

 
                                     

 

UNDISTRIBUTED NET INVESTMENT INCOME (LOSS) AT END OF YEAR

 

$

(42

)

$

150,996

 

$

(36,807

)

$

(8,035

)

$

(5,562

)

$

(33,277

)

 

 

32  |  The Royce Funds 2010 Annual Report to Shareholders

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.



 

 

 

 

 

 

 

 

 

 

 

 

 

Royce SMid-Cap Select Fund

 

Royce Opportunity Select Fund

 

 

 

      

 

  

 

 

 

Year ended 12/31/10

 

Year ended 12/31/09

 

Period ended 12/31/10#

 

INVESTMENT OPERATIONS:

 

 

 

 

 

 

 

 

 

 

Net investment income (loss)

 

$

5,232

 

$

8,836

 

$

(58,362

)

Net realized gain (loss) on investments and foreign currency

 

 

124,985

 

 

99,211

 

 

135,439

 

Net change in unrealized appreciation (depreciation) on investments and foreign currency

 

 

40,774

 

 

106,998

 

 

333,496

 
                   

 

Net increase (decrease) in net assets from investment operations

 

 

170,991

 

 

215,045

 

 

410,573

 
                   

 

DISTRIBUTIONS:

 

 

 

 

 

 

 

 

 

 

Net investment income
Investment Class

 

 

(6,757

)

 

(9,548

)

 

-

 

Net realized gain on investments and foreign currency
Investment Class

 

 

-

 

 

-

 

 

-

 
                   

 

Total distributions

 

 

(6,757

)

 

(9,548

)

 

-

 
                   

 

CAPITAL SHARE TRANSACTIONS:

 

 

 

 

 

 

 

 

 

 

Value of shares sold
Investment Class

 

 

1,500

 

 

17,875

 

 

1,502,458

 

Distributions reinvested
Investment Class

 

 

6,757

 

 

9,548

 

 

-

 

Value of shares redeemed
Investment Class

 

 

(164,709

)

 

-

 

 

(1

)

Shareholder redemption fees
Investment Class

 

 

15

 

 

-

 

 

-

 
                   

 

Net increase (decrease) in net assets from capital share transactions

 

 

(156,437

)

 

27,423

 

 

1,502,457

 
                   

 

NET INCREASE (DECREASE) IN NET ASSETS

 

 

7,797

 

 

232,920

 

 

1,913,030

 

NET ASSETS:

 

 

 

 

 

 

 

 

 

 

Beginning of period

 

 

1,150,272

 

 

917,352

 

 

-

 
                   

 

End of period

 

$

1,158,069

 

$

1,150,272

 

$

1,913,030

 
                   

 

UNDISTRIBUTED NET INVESTMENT
INCOME (LOSS) AT END OF PERIOD

 

$

-

 

$

587

 

$

-

 

# The Fund commenced operations on September 1, 2010.

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

The Royce Funds 2010 Annual Report to Shareholders  |  33


 

 

Statements of Operations

Period Ended December 31, 2010
   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royce Select Fund I

 

Royce Select Fund II

 

Royce Global Select Fund

 

Royce SMid-Cap Select Fund

 

Royce Opportunity Select Fund

 

INVESTMENT INCOME:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

 

$

534,175

 

$

55,620

 

$

196,964

 

$

12,417

 

$

3,296

 

Interest

 

 

5,706

 

 

280

 

 

538

 

 

182

 

 

26

 
                               

 

Total income

 

 

539,881

 

 

55,900

 

 

197,502

 

 

12,599

 

 

3,322

 
                               

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment advisory fees

 

 

1,155,328

 

 

106,575

 

 

348,036

 

 

7,367

 

 

61,681

 

Dividends on securities sold short

 

 

-

 

 

4,350

 

 

4,884

 

 

-

 

 

-

 

Interest expense

 

 

-

 

 

8,654

 

 

3,235

 

 

-

 

 

3

 
                               

 

Total expenses

 

 

1,155,328

 

 

119,579

 

 

356,155

 

 

7,367

 

 

61,684

 
                               

 

Net investment income (loss)

 

 

(615,447

)

 

(63,679

)

 

(158,653

)

 

5,232

 

 

(58,362

)
                               

 

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net realized gain (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments

 

 

544,352

 

 

801,404

 

 

721,754

 

 

124,984

 

 

135,439

 

Foreign currency transactions

 

 

(357

)

 

(842

)

 

(6,120

)

 

1

 

 

-

 

Net change in unrealized appreciation (depreciation):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments and foreign currency translations

 

 

8,574,535

 

 

174,378

 

 

2,586,389

 

 

40,773

 

 

333,496

 

Other assets and liabilities denominated in foreign currency

 

 

50

 

 

1

 

 

(9

)

 

1

 

 

-

 
                               

 

Net realized and unrealized gain (loss) on investments and foreign currency

 

 

9,118,580

 

 

974,941

 

 

3,302,014

 

 

165,759

 

 

468,935

 
                               

 

NET INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS

 

$

8,503,133

 

$

911,262

 

$

3,143,361

 

$

170,991

 

$

410,573

 

 

 

34  |  The Royce Funds 2010 Annual Report to Shareholders

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.


 

Financial Highlights
 

This table is presented to show selected data for a share outstanding throughout each period, and to assist shareholders in evaluating a Fund’s performance for the periods presented. Per share amounts have been determined on the basis of the weighted average number of shares outstanding during the period.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Asset Value, Beginning of Period

 

Net Investment Income (Loss)

 

Net Realized and Unrealized Gain (Loss) on Investments and Foreign Currency

 

Total from Investment Operations

 

Distributions from Net Investment Income

 

Distributions from Net Realized Gain on Investments and Foreign Currency

 

Total Distributions

 

Shareholder Redemption Fees

 

Net Asset Value, End of Period

 

Total Return

 

Net Assets, End of Period (in thousands)

 

Ratio of Expenses to Average Net Assets

 

Ratio of Net Investment Income (Loss) to Average Net Assets

 

Portfolio Turnover Rate

 

 

Royce Select Fund I

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

17.42

 

$

(0.23

)

$

3.39

 

$

3.16

 

$

-

 

$

(0.26

)

$

(0.26

)

$

-

 

$

20.32

 

 

18.15

%

$

58,788

 

 

2.37

%

 

(1.26

)%

 

49

%

2009

 

 

12.59

 

 

0.15

 

 

4.83

 

 

4.98

 

 

(0.15

)

 

-

 

 

(0.15

)

 

-

 

 

17.42

 

 

39.59

 

 

33,896

 

 

0.01

 

 

1.28

 

 

80

 

2008

 

 

18.20

 

 

0.19

 

 

(4.93

)

 

(4.74

)

 

(0.16

)

 

(0.71

)

 

(0.87

)

 

-

 

 

12.59

 

 

(25.91

)

 

17,480

 

 

0.08

 

 

1.25

 

 

116

 

2007

 

 

19.02

 

 

(0.04

)

 

2.09

 

 

2.05

 

 

(0.00

)

 

(2.87

)

 

(2.87

)

 

-

 

 

18.20

 

 

10.70

 

 

23,235

 

 

2.09

 

 

(0.20

)

 

77

 

2006

 

 

19.16

 

 

(0.09

)

 

2.99

 

 

2.90

 

 

-

 

 

(3.05

)

 

(3.05

)

 

0.01

 

 

19.02

 

 

15.02

 

 

23,420

 

 

2.18

 

 

(0.46

)

 

45

 

 

Royce Select Fund II

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

11.62

 

$

(0.18

)

$

2.60

 

$

2.42

 

$

(0.00

)

$

(0.15

)

$

(0.15

)

$

0.01

 

$

13.90

 

 

20.96

%

$

5,141

 

 

2.77

%

 

(1.47

)%

 

126

%

2009

 

 

7.02

 

 

0.03

 

 

4.64

 

 

4.67

 

 

(0.07

)

 

-

 

 

(0.07

)

 

-

 

 

11.62

 

 

66.58

 

 

4,109

 

 

0.67

 

 

0.53

 

 

114

 

2008

 

 

10.66

 

 

0.09

 

 

(3.65

)

 

(3.56

)

 

(0.08

)

 

-

 

 

(0.08

)

 

-

 

 

7.02

 

 

(33.37

)

 

1,698

 

 

0.24

 

 

0.98

 

 

268

 

2007

 

 

12.01

 

 

(0.02

)

 

(0.64

)

 

(0.66

)

 

-

 

 

(0.69

)

 

(0.69

)

 

-

 

 

10.66

 

 

(5.53

)

 

2,416

 

 

1.01

 

 

(0.15

)

 

393

 

2006

 

 

10.71

 

 

(0.21

)

 

2.32

 

 

2.11

 

 

-

 

 

(0.81

)

 

(0.81

)

 

-

 

 

12.01

 

 

19.76

 

 

1,768

 

 

2.99

 

 

(1.70

)

 

443

 

 

Royce Global Select Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

14.97

 

$

(0.26

)

$

5.22

 

$

4.96

 

$

(0.05

)

$

-

 

$

(0.05

)

$

0.01

 

$

19.89

 

 

33.21

%

$

16,355

 

 

3.48

%

 

(1.55

)%

 

80

%

2009

 

 

9.76

 

 

0.18

 

 

5.27

 

 

5.45

 

 

(0.26

)

 

-

 

 

(0.26

)

 

0.02

 

 

14.97

 

 

56.11

 

 

9,117

 

 

0.00

 

 

1.55

 

 

85

 

2008

 

 

15.01

 

 

0.23

 

 

(5.40

)

 

(5.17

)

 

-

 

 

(0.09

)

 

(0.09

)

 

0.01

 

 

9.76

 

 

(34.39

)

 

6,049

 

 

0.50

 

 

1.75

 

 

41

 

2007

 

 

13.43

 

 

(0.24

)

 

2.68

 

 

2.44

 

 

(0.35

)

 

(0.51

)

 

(0.86

)

 

-

 

 

15.01

 

 

18.16

 

 

5,786

 

 

2.40

 

 

(0.56

)

 

75

 

2006

 

 

11.77

 

 

0.00

 

 

2.29

 

 

2.29

 

 

(0.03

)

 

(0.60

)

 

(0.63

)

 

-

 

 

13.43

 

 

19.40

 

 

1,599

 

 

2.40

 

 

(0.57

)

 

50

 

 

Royce SMid-Cap Select Fund (a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

8.95

 

$

0.05

 

$

1.49

 

$

1.54

 

$

(0.06

)

$

-

 

$

(0.06

)

$

-

 

$

10.43

 

 

17.22

%

$

1,158

 

 

0.70

%

 

0.50

%

 

166

%

2009

 

 

7.33

 

 

0.07

 

 

1.62

 

 

1.69

 

 

(0.07

)

 

-

 

 

(0.07

)

 

-

 

 

8.95

 

 

23.13

 

 

1,150

 

 

0.03

 

 

0.88

 

 

415

 

2008

 

 

10.04

 

 

0.13

 

 

(2.80

)

 

(2.67

)

 

(0.12

)

 

(0.02

)

 

(0.14

)

 

0.10

 

 

7.33

 

 

(25.53

)

 

917

 

 

0.28

 

 

1.48

 

 

764

 

2007

 

 

10.00

 

 

0.00

 

 

0.06

 

 

0.06

 

 

(0.02

)

 

-

 

 

(0.02

)

 

-

 

 

10.04

 

 

0.56

#

 

1,319

 

 

0.48

#

 

0.11

#

 

47

 

 

Royce Opportunity Select Fund (b)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

10.00

 

$

(0.43

)

$

3.42

 

$

2.99

 

$

-

 

$

-

 

$

-

 

$

-

 

$

12.99

 

 

29.90

%#

$

1,913

 

 

4.01

%#

 

(3.79

)%#

 

95

%

 

 

(a)   

The Fund commenced operations on September 28, 2007.

(b)   

The Fund commenced operations on September 1, 2010.

#   

Not annualized

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

The Royce Funds 2010 Annual Report to Shareholders  |  35


 

Notes to Financial Statements
 

Summary of Significant Accounting Policies:
     Royce Select Fund I, Royce Select Fund II, Royce Global Select Fund, Royce SMid-Cap Select Fund and Royce Opportunity Select Fund (the “Fund” or “Funds”), are five series of the Royce Fund (the “Trust”), a diversified open-end management investment company organized as a Delaware statutory trust.
     The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
     Under the Fund’s organizational documents, the officers and trustees are indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts with service providers that contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risk of loss to be remote.
     At December 31, 2010, officers, employees of Royce & Associates, LLC (“Royce”), Fund trustees, the Royce retirement plans and other affiliates owned more than 10% of the following Funds:

 

 

 

 

Royce Select Fund II

34%

Royce SMid-Cap Select Fund

76%

Royce Global Select Fund

20%

Royce Opportunity Select Fund

79%

Valuation of Investments:
     Securities are valued as of the close of trading on the New York Stock Exchange (NYSE) (generally 4:00 p.m. Eastern time) on the valuation date. Securities that trade on an exchange, and securities traded on Nasdaq’s Electronic Bulletin Board, are valued at their last reported sales price or Nasdaq official closing price taken from the primary market in which each security trades or, if no sale is reported for such day, at their highest bid price (in the case of long positions) or at the lowest ask price (in the case of short positions). Other over-the-counter securities for which market quotations are readily available are valued at their highest bid price, except in the case of some bonds and other fixed income securities which may be valued by reference to other securities with comparable ratings, interest rates and maturities, using established independent pricing services. The Funds value their non-U.S. dollar denominated securities in U.S. dollars daily at the prevailing foreign currency exchange rates as quoted by a major bank. Securities for which market quotations are not readily available are valued at their fair value under procedures approved by the Board of Trustees. In addition, 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, a Fund 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. When fair value pricing is employed, the prices of securities used by a Fund may differ from quoted or published prices for the same security. Investments in money market funds are valued at net asset value per share.
     Various inputs are used in determining the value of each Fund’s investments, as noted above. These inputs are summarized in the three broad levels below:

 

 

 

 

Level 1  –  

quoted prices in active markets for identical securities.

 

Level 2  –  

other significant observable inputs (including quoted prices for similar securities, foreign securities that may be fair valued and repurchase agreements). The table below includes all Level 2 securities. Level 2 securities with values based on quoted prices for similar securities are noted in the Schedules of Investments.

 

Level 3  –  

significant unobservable inputs (including each Fund’s own assumptions in determining the fair value of investments).

     The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
     The following is a summary of the inputs used to value each Fund’s investments as of December 31, 2010. For a detailed breakout of common stocks by sector classification, please refer to the Schedules of Investments.

 

 

 

 

 

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Royce Select Fund I

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stocks

 

$

48,780,127

 

$

4,046,639

 

$

-

 

$

52,826,766

 

Cash equivalents

 

 

-

 

 

7,467,000

 

 

-

 

 

7,467,000

 

Royce Select Fund II

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stocks

 

 

3,801,431

 

 

1,198,983

 

 

-

 

 

5,000,414

 

Cash equivalents

 

 

-

 

 

258,000

 

 

-

 

 

258,000

 

Royce Global Select Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stocks

 

 

2,132,880

 

 

12,692,515

 

 

-

 

 

14,825,395

 

Cash equivalents

 

 

-

 

 

1,670,000

 

 

-

 

 

1,670,000

 

Royce SMid-Cap Select Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stocks

 

 

908,072

 

 

39,731

 

 

-

 

 

947,803

 

Cash equivalents

 

 

-

 

 

218,000

 

 

-

 

 

218,000

 

Royce Opportunity Select Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stocks

 

 

1,900,584

 

 

35,200

 

 

-

 

 

1,935,784

 

Cash equivalents

 

 

-

 

 

-

 

 

-

 

 

-

 

36  |  The Royce Funds 2010 Annual Report to Shareholders


 
 

 

Valuation of Investments (continued):

     Short positions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Royce Select Fund II

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stocks

 

$

(378,104

)

$

-

 

$

-

 

$

(378,104

)

Royce Global Select Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stocks

 

 

(1,080,073

)

 

-

 

 

-

 

 

(1,080,073

)

Royce Opportunity Select Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stocks

 

 

(255,379

)

 

-

 

 

-

 

 

(255,379

)

Repurchase Agreements:
     The Funds may enter into repurchase agreements with institutions that the Funds’ investment adviser has determined are creditworthy. Each Fund restricts repurchase agreements to maturities of no more than seven days. Securities pledged as collateral for repurchase agreements, which are held until maturity of the repurchase agreements, are marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest). Repurchase agreements could involve certain risks in the event of default or insolvency of the counter-party, including possible delays or restrictions upon the ability of each Fund to dispose of its underlying securities.

Foreign Currency:
     Net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, expiration of currency forward contracts, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on each Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities, including investments in securities at the end of the reporting period, as a result of changes in foreign currency exchange rates.

Short Sales:
     The Funds may sell securities they do not own in anticipation of a decline in the fair value of that security. When a Fund sells a security short, it must borrow the security sold short and deliver it to the broker-dealer through which it made the short sale. A gain, limited to the price at which the Fund sold the security short, or a loss, unlimited in size, will be recognized upon the termination of a short sale. On ex-dividend date, dividends on short sales are recorded as an expense to the Fund.

Distributions and Taxes:
     As qualified regulated investment companies under Subchapter M of the Internal Revenue Code, the Funds are not subject to income taxes to the extent that each Fund distributes substantially all of its taxable income for its fiscal year.
     The Funds pay any dividends and capital gain distributions annually in December. Because federal income tax regulations differ from generally accepted accounting principles, income and capital gain distributions determined in accordance with tax regulations may differ from net investment income and realized gains recognized for financial reporting purposes. Accordingly, the character of distributions and composition of net assets for tax purposes differ from those reflected in the accompanying financial statements.

Investment Transactions and Related Investment Income:
     Investment transactions are accounted for on the trade date. Dividend income is recorded on the ex-dividend date. Non-cash dividend income is recorded at the fair market value of the securities received. Interest income is recorded on an accrual basis. Premium and discounts on debt securities are amortized using the effective yield-to-maturity method. Realized gains and losses from investment transactions are determined on the basis of identified cost for book and tax purposes.

Expenses:
     The Funds generally incur only performance fees, dividends on securities sold short and interest charges as expenses. See the “Investment Adviser” section of these notes.

Line of Credit:
     The Funds, along with certain other Royce Funds, participate in a $75 million line of credit (“Credit Agreement”) to be used for temporary or emergency purposes. This 364-day revolving Credit Agreement expires on July 15, 2011. Pursuant to the Credit Agreement, each participating Fund is liable only for principal and interest payments related to borrowings made by that Fund. Borrowings under the Credit Agreement bear interest at a rate equal to the higher of the federal funds rate + 1.25% or overnight LIBOR + 1.25%. The Funds did not utilize the line of credit during the period ended December 31, 2010.

The Royce Funds 2010 Annual Report to Shareholders  |  37


 

Notes to Financial Statements (continued)
 

Capital Share Transactions (in shares):

 

 

 

 

 

 

 

 

 

 

 

 

Shares sold

 

Shares issued for reinvestment of distributions

 

Shares redeemed

 

Net increase (decrease) in shares outstanding

 

 

 

  

 

  

 

  

 

  

 

 

 

 

Period
ended
12/31/10

 

 

Period
ended
12/31/09

 

 

Period
ended
12/31/10

 

 

Period
ended
12/31/09

 

 

Period
ended
12/31/10

 

 

Period
ended
12/31/09

 

 

Period
ended
12/31/10

 

 

Period
ended
12/31/09

 
                                                 

 

Royce Select Fund I

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

1,187,472

 

 

714,961

 

 

35,245

 

 

15,730

 

 

(275,301

)

 

(173,316

)

 

947,416

 

 

557,375

 
                                                 

 

Royce Select Fund II

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

68,329

 

 

110,897

 

 

4,085

 

 

2,161

 

 

(56,208

)

 

(1,190

)

 

16,206

 

 

111,868

 
                                                 

 

Royce Global Select Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

396,038

 

 

111,879

 

 

1,631

 

 

9,995

 

 

(184,488

)

 

(132,821

)

 

213,181

 

 

(10,947

)
                                                 

 

Royce SMid-Cap Select Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

167

 

 

2,341

 

 

650

 

 

1,077

 

 

(18,303

)

 

-

 

 

(17,486

)

 

3,418

 
                                                 

 

Royce Opportunity Select Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Class

 

 

147,239

 

 

 

 

-

 

 

 

 

-

 

 

 

 

147,239

 

 

 

Investment Adviser:
     Under the Trust’s investment advisory agreements with Royce, Royce is entitled to receive performance fees that are computed daily and payable monthly. Royce is entitled to receive from each of the Funds a performance fee of 12.5% of each Fund’s pre-fee total return (calculated using “then current” net assets of the Fund), subject to high watermark accounting. Fund shares will not bear a fee for any day on which the Fund’s pre-fee cumulative total return does not exceed its pre-fee cumulative total return as of the day on which a fee was last accrued. However, Royce will not reimburse previously accrued fees because of any negative total returns occurring after their accrual. Under the agreement, all expenses of the Funds, except brokerage commissions, dividends on short sales, taxes, interest, acquired fund fees and expenses, and extraordinary expenses, will be paid by Royce. For the period ended December 31, 2010, the Funds accrued the following performance fees:

 

 

 

 

 

Royce Select Fund I

 

$

1,155,328

 

Royce Select Fund II

 

 

106,575

 

Royce Global Select Fund

 

 

348,036

 

Royce SMid-Cap Select Fund

 

 

7,367

 

Royce Opportunity Select Fund

 

 

61,681

 

Purchases and Sales of Investment Securities:
     For the period ended December 31, 2010, the costs of purchases and the proceeds from sales of investment securities, other than short-term securities, were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchases

 

Sales

 

Short Sales

 

Purchases to Cover Short Sales

 

Royce Select Fund I

 

$

35,241,321

 

$

20,478,852

 

$

-

 

$

-

 

Royce Select Fund II

 

 

4,985,428

 

 

4,291,323

 

 

430,377

 

 

469,720

 

Royce Global Select Fund

 

 

9,666,400

 

 

6,409,368

 

 

1,012,088

 

 

69,135

 

Royce SMid-Cap Select Fund

 

 

1,391,521

 

 

1,595,966

 

 

-

 

 

-

 

Royce Opportunity Select Fund

 

 

2,610,753

 

 

1,141,545

 

 

331,377

 

 

73,640

 

Tax Information:
     At December 31, 2010, net unrealized appreciation (depreciation) based on identified cost for tax purposes was as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Unrealized
Appreciation

 

Gross Unrealized

 

 

 

 

 

 

 

 

  

 

 

 

Tax Basis Cost

 

(Depreciation)

 

Appreciation

 

Depreciation

 

Royce Select Fund I

 

$

46,032,702

 

$

14,261,064

 

$

14,276,240

 

$

15,176

 

Royce Select Fund II

 

 

3,943,136

 

 

937,174

 

 

1,033,923

 

 

96,749

 

Royce Global Select Fund

 

 

11,732,243

 

 

3,683,079

 

 

3,939,422

 

 

256,343

 

Royce SMid-Cap Select Fund

 

 

1,028,657

 

 

137,146

 

 

142,105

 

 

4,959

 

Royce Opportunity Select Fund

 

 

1,347,047

 

 

333,358

 

 

355,523

 

 

22,165

 

     The primary difference between book and tax basis cost is the timing of the recognition of losses on securities sold.

38  |  The Royce Funds 2010 Annual Report to Shareholders


 
 


Tax Information (continued):
      Distributions during the periods ended December 31, 2010 and 2009 were characterized as follows for tax purposes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ordinary Income

 

Long-Term Capital Gains

 

 

 

  

 

 

 

2010

 

2009

 

2010

 

2009

 

Royce Select Fund I

 

$

376,160

 

$

286,266

 

$

361,589

 

$

-

 

Royce Select Fund II

 

 

878

 

 

25,616

 

 

54,943

 

 

-

 

Royce Global Select Fund

 

 

35,259

 

 

157,637

 

 

-

 

 

-

 

Royce SMid-Cap Select Fund

 

 

6,757

 

 

9,548

 

 

-

 

 

-

 

Royce Opportunity Select Fund

 

 

-

 

 

 

 

 

-

 

 

 

 

     The tax basis components of distributable earnings at December 31, 2010 were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Undistributed Ordinary Income

 

Undistributed Long-Term Capital Gains

 

Capital Loss Carryforward to 12/31/17

 

Net Unrealized Appreciation (Depreciation)(1)

 

Post- October Loss Deferrals(2)

 

Total Distributable Earnings

 

Capital Loss Carryforward Utilized

 

Royce Select Fund I

 

$

-

 

$

30,236

 

$

-

 

$

14,261,213

 

$

(42

)

$

14,291,407

 

$

-

 

Royce Select Fund II

 

 

22,428

 

 

244,923

 

 

-

 

 

935,614

 

 

(806

)

 

1,202,159

 

 

435,477

 

Royce Global Select Fund

 

 

-

 

 

-

 

 

(57,804

)

 

3,683,181

 

 

(5,562

)

 

3,619,815

 

 

576,946

 

Royce SMid-Cap Select Fund

 

 

-

 

 

-

 

 

(21,099

)

 

137,147

 

 

-

 

 

116,048

 

 

123,519

 

Royce Opportunity Select Fund

 

 

77,214

 

 

-

 

 

-

 

 

333,359

 

 

-

 

 

410,573

 

 

-

 

 

 

(1)

Includes timing differences on foreign currency, recognition of losses on securities sold, mark-to-market of Passive Foreign Investment Companies and investments in publicly traded partnerships.

(2)

Under current tax law, capital losses, foreign currency losses and losses realized on Passive Foreign Investment Companies after October 31 may be deferred and treated as occurring on the first day of the following fiscal year.

     For financial reporting purposes, capital accounts and distributions to shareholders are adjusted to reflect the tax character of permanent book/tax differences. For the period ended December 31, 2010, the Funds recorded the following permanent reclassifications, which relate primarily to current net operating losses, publicly traded partnerships, short sales, foreign currency transactions and gains from the sale of Passive Foreign Investment Companies. Results of operations and net assets were not affected by these reclassifications.

 

 

 

 

 

 

 

 

 

 

 

 

 

Undistributed Net Investment Income (Loss)

 

Accumulated Net Realized Gain (Loss)

 

Paid-in Capital

 

Royce Select Fund I

 

$

464,409

 

$

48,146

 

$

(512,555

)

Royce Select Fund II

 

 

35,785

 

 

(35,768

)

 

(17

)

Royce Global Select Fund

 

 

221,628

 

 

(129,186

)

 

(92,442

)

Royce SMid-Cap Select Fund

 

 

938

 

 

746

 

 

(1,684

)

Royce Opportunity Select Fund

 

 

58,362

 

 

(58,362

)

 

-

 

     Management has analyzed the Funds’ tax positions taken on federal income tax returns for all open tax years (2007 – 2010) and has concluded that as of December 31, 2010, no provision for income tax is required in the Funds’ financial statements.

 

Report of Independent Registered Public Accounting Firm

 

To the Board of Trustees of The Royce Fund and the Shareholders of
Royce Select Fund I, Royce Select Fund II, Royce Global Select Fund, Royce SMid-Cap Select Fund and Royce Opportunity Select Fund

In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Royce Select Fund I, Royce Select Fund II, Royce Global Select Fund, Royce SMid-Cap Select Fund and Royce Opportunity Select Fund (five series of The Royce Fund, hereafter referred to as the “Funds”) at December 31, 2010, the results of their operations, the changes in their net assets, and their financial highlights for each of the fiscal periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2010 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Baltimore, Maryland
February 24, 2011

The Royce Funds 2010 Annual Report to Shareholders  |  39


 

Understanding Your Fund’s Expenses (unaudited)

 

     As a shareholder of a mutual fund, you pay ongoing expenses, including management fees and other Fund expenses including, for some funds, distribution and/or service (12b-1) fees. Using the information below, you can estimate how these ongoing expenses (in dollars) affect your investment and compare them with the ongoing expenses of other funds. You may also incur one-time transaction expenses, including redemption fees, which are not shown in this section and would result in higher total costs. The example is based on an investment of $1,000 invested at July 1, 2010 and held for the entire six-month period ended December 31, 2010.

Actual Expenses
     The first part of the table below provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value at December 31, 2010 by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes
     The second part of the table below provides information about hypothetical account values and hypothetical expenses based on an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return, and the expense ratio that would be incurred at that rate of return before expenses. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
     Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, this section is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

 

 

 

 

 

 

 

Actual

Hypothetical (5% per year return before expenses)

 

 

    

 

  

 

 

Beginning Account Value 7/1/10

 

Ending Account Value 12/31/10

 

Expenses Paid During the Period(1)

 

Actual
Expense
Ratio(1),(2)

 

Beginning Account Value 7/1/10

 

Ending Account Value 12/31/10

 

Expenses Paid During the Period(3)

 

Hypothetical Expense Ratio(4)

 
 

Investment Class

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royce Select Fund I

 

$

1,000.00

 

$

1,235.41

 

$

10.28

 

 

0.92

%

$

1,000.00

 

$

1,018.91

 

$

6.36

 

 

0.63

%

Royce Select Fund II

 

 

1,000.00

 

 

1,271.98

 

 

19.65

 

 

1.73

%

 

1,000.00

 

 

1,018.91

 

 

6.36

 

 

0.63

%

Royce Global Select Fund

 

 

1,000.00

 

 

1,340.15

 

 

35.80

 

 

3.06

%

 

1,000.00

 

 

1,018.91

 

 

6.36

 

 

0.63

%

Royce SMid-Cap

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Select Fund

 

 

1,000.00

 

 

1,217.10

 

 

  7.76

 

 

0.70

%

 

1,000.00

 

 

1,018.91

 

 

6.36

 

 

0.63

%

Royce Opportunity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Select Fund

 

 

1,000.00

 

 

1,299.00

 

 

46.09

 

 

4.01

%

 

1,000.00

 

 

1,018.91

 

 

6.36

 

 

0.63

%

 

 

(1)

Expenses are equal to the Fund’s actual expense ratio for the most recent fiscal half-year multiplied by the average account value for the period.

(2)

Actual expense ratio used to derive figures in the table is based on the most recent fiscal half-year.

(3)

Expenses are equal to the Fund’s hypothetical annualized expense ratio for the most recent fiscal half-year multiplied by the average account value for the period.

(4)

Hypothetical expense ratio used to derive figures in the table is based on 12.5% of the assumed rate of return of 5% per year before expenses and excludes dividends on securities sold short and interest expense.

40  |  The Royce Funds 2010 Annual Report to Shareholders


 

Federal Tax Information
 

     In January 2011, taxable shareholders were mailed a Form 1099-DIV reporting the federal tax status of all distributions paid during the calendar year 2010.

2010 Supplemental Tax Information:

 

 

 

 

 

 

 

Fund

 

% QDI

 

% U.S. Govt
Income

 

%
Income Qualifying
For DRD

 

Long-Term Capital Gain
Distribution or
Maximum Allowable
(000’s)

 

Royce Select Fund I

 

 

0.05%

 

 

N/A

 

 

100.00%

 

$

361

 

Royce Select Fund II

 

 

0.97%

 

 

N/A

 

 

100.00%

 

 

55

 

Royce Global Select Fund

 

 

0.04%

 

 

N/A

 

 

100.00%

 

 

N/A

 

Royce SMid-Cap Select Fund

 

 

100.00%

 

 

N/A

 

 

100.00%

 

 

N/A

 

Royce Opportunity Select Fund

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

Definitions:
% QDI: Qualified Dividend Income; % of net investment income and/or short-term capital gains distributions that qualify for treatment at long-term capital gain rates.
% U.S. Govt Income: % of investment income paid from U.S. Government obligations.
% Income Qualifying for DRD: % of investment income eligible for the corporate dividend received deduction.
 
Foreign Tax Credit:
     For the year ended December 31, 2010, the following funds had elected to pass through the credit for tax paid in foreign countries. The net foreign source income and foreign tax per share outstanding on the dividend distribution date are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fund

 

Net Foreign
Source Income

 

Net Foreign
Source Income
Per Share

 

Foreign
Tax

 

Foreign
Tax Per
Share

 

Royce Global Select Fund

 

$

32,516

 

$

.0463

 

$

13,914

 

$

.0198

 

The Royce Funds 2010 Annual Report to Shareholders  |  41


 

Trustees and Officers
 

All Trustees and Officers may be reached c/o The Royce Funds, 745 Fifth Avenue, New York, NY 10151

Charles M. Royce, Trustee*, President
Age: 71 | Number of Funds Overseen: 35 | Tenure: Since 1982
Non-Royce Directorships: Director of Technology Investment Capital Corp.

Principal Occupation(s) During Past Five Years: President, Co-Chief Investment Officer and Member of Board of Managers of Royce & Associates, LLC (“Royce”), the Trust’s investment adviser.

Mark R. Fetting, Trustee*
Age: 56 | Number of Funds Overseen: 52 | Tenure: Since 2001
Non-Royce Directorships: Director/Trustee of registered investment companies constituting the 17 Legg Mason Funds.

Principal Occupation(s) During Past 5 Years: President, CEO, Chairman and Director of Legg Mason, Inc. and Chairman of Legg Mason Funds. Mr. Fetting’s prior business experience includes having served as a member of the Board of Managers of Royce; President of all Legg Mason Funds; Senior Executive Vice President of Legg Mason, Inc.; Director and/or officer of various Legg Mason, Inc. affiliates; Division President and Senior Officer of Prudential Financial Group, Inc. and related companies.

 
 

Patricia W. Chadwick, Trustee
Age: 62 | Number of Funds Overseen: 35 | Tenure: Since 2009
Non-Royce Directorships: Trustee of ING Mutual Funds and Director of Wisconsin Energy Corp.

Principal Occupation(s) During Past 5 Years: Consultant and President of Ravengate Partners LLC (since 2000).

Richard M. Galkin, Trustee
Age: 72 | Number of Funds Overseen: 35 | Tenure: Since 1982
Non-Royce Directorships: None

Principal Occupation(s) During Past Five Years: 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. (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, Trustee
Age: 71 | Number of Funds Overseen: 35 | Tenure: Since 1989
Non-Royce Directorships: None

Principal Occupation(s) During Past Five Years: 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).

Arthur S. Mehlman, Trustee
Age: 68 | Number of Funds Overseen: 52 | Tenure: Since 2004
Non-Royce Directorships: Director/Trustee of registered investment companies constituting the 17 Legg Mason Funds and Director of Municipal Mortgage & Equity, LLC.

Principal Occupation(s) During Past Five Years: 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).

David L. Meister, Trustee
Age: 71 | Number of Funds Overseen: 35 | Tenure: Since 1982
Non-Royce Directorships: None

Principal Occupation(s) During Past Five Years: 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 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.

G. Peter O’Brien, Trustee
Age: 65 | Number of Funds Overseen: 52 | Tenure: Since 2001
Non-Royce Directorships: Director/Trustee of registered investment companies constituting the 17 Legg Mason Funds; Director of Technology Investment Capital Corp.

Principal Occupation(s) During Past Five Years: 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).

John D. Diederich, Vice President and Treasurer
Age: 59 | Tenure: Since 2001

 
 

Principal Occupation(s) During Past Five Years: Chief Operating Officer, Managing Director and member of the Board of Managers of Royce; Chief Financial Officer of Royce; Director of Administration of the Trust; and President of RFS, having been employed by Royce since April 1993.

Jack E. Fockler, Jr., Vice President
Age: 52 | Tenure: Since 1995

Principal Occupation(s) During Past Five Years: Managing Director and Vice President of Royce, and Vice President of RFS, having been employed by Royce since October 1989.

W. Whitney George, Vice President
Age: 52 | Tenure: Since 1995

Principal Occupation(s) During Past Five Years: Co-Chief Investment Officer, Managing Director and Vice President of Royce, having been employed by Royce since October 1991.

Daniel A. O’Byrne, Vice President and Assistant Secretary
Age: 48 | Tenure: Since 1994

Principal Occupation(s) During Past Five Years: Principal and Vice President of Royce, having been employed by Royce since October 1986.

John E. Denneen, Secretary and Chief Legal Officer
Age: 43 | Tenure: 1996-2001 and Since April 2002

Principal Occupation(s) During Past Five Years: General Counsel, Principal, Chief Legal and Compliance Officer and Secretary of Royce; Secretary and Chief Legal Officer of The Royce Funds.

Lisa Curcio, Chief Compliance Officer
Age: 51 | Tenure: Since 2004

Principal Occupation(s) During Past Five Years: Chief Compliance Officer of The Royce Funds (since October 2004) and Compliance Officer of Royce (since June 2004).

 
 

* Interested Trustee.

Trustees will hold office until their successors have been duly elected and qualified or until their earlier resignation or removal. The Statement of Additional Information, which contains additional information about the Trust’s trustees and officers, is available and can be obtained without charge at www.roycefunds.com or by calling (800) 221-4268.



42  |  The Royce Funds 2010 Annual Report to Shareholders


 

Notes to Performance and Other Important Information
 

The thoughts expressed in this report concerning recent market movements and future prospects for small company stocks are solely the opinion of Royce at December 31, 2010, and, of course, historical market trends are not necessarily indicative of future market movements. Statements regarding the future prospects for particular securities held in the Funds’ portfolios and Royce’s investment intentions with respect to those securities reflect Royce’s opinions as of December 31, 2010 and are subject to change at any time without notice. There can be no assurance that securities mentioned in this report will be included in any Royce-managed portfolio in the future.
     The Sharpe Ratio is calculated for a specified period by dividing a fund’s annualized excess returns by its annualized standard deviation. The higher the Sharpe Ratio, the better the fund’s historical risk-adjusted performance. Standard deviation is a statistical measure within which a fund’s total returns have varied over time. The greater the standard deviation, the greater a fund’s volatility.
     The Russell 2000 is an index of domestic small-cap stocks. It measures the performance of the 2,000 smallest publicly traded U.S. companies in the Russell 3000 index. The Russell 2000 Value and Growth indexes consist of the respective value and growth stocks within the Russell 2000 as determined by Russell Investments. The Russell Microcap index includes 1,000 of the smallest securities in the small-cap Russell 2000 index. The Russell 2500 is an index of domestic small- to mid-cap stocks. It includes approximately 2,500 of the smallest securities in the Russell 3000 index. The Russell Midcap index measures the performance of the mid-cap segment of the U.S. equity universe. The S&P 500 is an index of U.S. large-cap stocks selected by Standard & Poor’s based on market size, liquidity and industry grouping, among other factors. The Nasdaq Composite is an index of the more than 3,000 common equities listed on the Nasdaq stock exchange. The Morgan Stanley Capital International Europe, Australasia, Far East index (MSCI EAFE) is an unmanaged index of the world’s stock markets, excluding the United States. The Morgan Stanley Capital International (MSCI) World Small Core index excluding U.S. is an unmanaged index of global small-cap stocks, excluding the United States. Returns for the market indexes used in this report were based on information supplied to Royce by Russell Investments. Royce has not independently verified the above described information. The Royce Funds is a service mark of The Royce Funds. Distributor: Royce Fund Services, Inc.

     The Funds invest primarily in limited number of securities which may involve considerably more risk than a less concentrated portfolio because a decline in the value of one of these securities would cause a Fund’s overall value to decline to a greater degree. The Funds invest in mid-, small- and/or micro-cap companies which may involve considerably more risk than investments in securities of larger-cap companies. (Please see “Primary Risks for Fund Investors” in the respective prospectus.) Royce Select Fund I (up to 10%), Royce Select Fund II (up to 25%), Royce Global Select Fund (up to 100%), Royce SMid-Cap Select Fund (up to 25%) and Royce Opportunity Select Fund (up to 25%) may each invest its assets in foreign securities that may involve political, economic, currency and other risks not encountered in U.S. investments. (Please see “Investing in Foreign Securities” in the prospectus.) Please read the prospectus carefully before investing or sending money.

Forward-Looking Statements
This material contains forward-looking statements within the meaning of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve risks and uncertainties, including, among others, statements as to:

•  the Funds’ future operating results,
•  the prospects of the Funds’ portfolio companies,
•  the impact of investments that the Funds have made or may make,
•  the dependence of the Funds’ future success on the general
   economy and its impact on the companies and industries in which
   the Funds invest, and
•  the ability of the Funds’ portfolio companies to achieve their
   objectives.

     This review and report use words such as “anticipates,” “believes,” “expects,” “future,” “intends,” and similar expressions to identify forward-looking statements. Actual results may differ materially from those projected in the forward looking statements for any reason.
     The Royce Funds have based the forward-looking statements included in this review and report on information available to us on the date of the report, and we assume no obligation to update any such forward-looking statements. Although The Royce Funds undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make through future shareholder communications or reports.


 



Proxy Voting
A copy of the policies and procedures that The Royce Funds use to determine how to vote proxies relating to portfolio securities and information regarding how each of The Royce Funds voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available, without charge, on The Royce Funds’ website at www.roycefunds.com, by calling (800) 221-4268 (toll-free) and on the website of the Securities and Exchange Commission (“SEC”), at www.sec.gov.

Form N-Q Filing
The Funds file their complete schedules of investments with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the SEC’s website at www.sec.gov. The Royce Funds’ holdings are also on the 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’ Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. To find out more about this public service, call the SEC at (202) 942-8090. The Funds’ complete schedules of investments are updated quarterly, and are available at www.roycefunds.com.

 

The Royce Funds 2010 Annual Report to Shareholders  |  43



 

Board Approval of Investment Advisory Agreement
 


The Board of Trustees of The Royce Fund (the “Trust”), including a majority of the Trustees who are not parties to Royce Opportunity Select Fund’s (the “Fund”) Investment Advisory Agreement, or interested persons of any such party (“Independent Trustees”), have responsibility under the Investment Company Act of 1940 to approve the Fund’s proposed Investment Advisory Agreement for its initial term and its continuation annually thereafter at meetings of the Board called for the purpose of voting on such approvals. The Investment Advisory Agreement for the Fund was discussed at a meeting held on June 9-10, 2010 and was unanimously approved at such meeting for its initial term by the Board of Trustees, including the Independent Trustees.

     In considering whether to approve the Fund’s Investment Advisory Agreement, the Board reviewed the materials provided by Royce & Associates, LLC (“R&A”), which included, among other things, information regarding the past performance of funds managed by R&A and a memorandum outlining the legal duties of the Board prepared by counsel to the Independent Trustees. The Board also met with advisory personnel from R&A. The Board considered factors relating to both the selection of the investment adviser and the approval of the advisory fee when reviewing the Investment Advisory Agreement. In particular, the Board considered the following:

 

 

 

(i)

The nature, extent and quality of services to be provided by R&A: The Independent Trustees reviewed the services that R&A would provide to the Fund, including, but not limited to, generally managing the Fund’s investments in accordance with the stated policies of the Fund. The Independent Trustees discussed with officers of R&A and Charles Royce, the amount of time that R&A would dedicate to the Fund. Additionally, the Independent Trustees considered the services provided by R&A to the other Funds in the Trust.

 

 

 

 

 

The Independent Trustees determined that the services proposed for the Fund by R&A would be similar to those being provided to the other Funds in the Trust. They also took into consideration the favorable history, reputation and background of William Hench, who will serve as portfolio manager for the Fund, and Boniface Zaino, who will serve as assistant portfolio manager for the Fund, finding that these would likely have an impact on the success of the Fund. Lastly, the Independent Trustees noted R&A’s ability to attract quality and experienced personnel. The Independent Trustees concluded that the proposed services of R&A to the Fund compared favorably to services provided by R&A for other Funds in the Trust and other R&A client accounts in both nature and quality. The Independent Trustees concluded that the scope of services to be provided by R&A would be suitable for the Fund.

 

 

 

(ii)

Investment performance of the Fund and R&A: Because the Fund was just being formed, the Independent Trustees did not consider the investment performance of the Fund. The Independent Trustees reviewed R&A’s performance for other Funds in the Trust. The Independent Trustees recognized that past performance is not an indicator of future performance, but found that R&A had the necessary expertise to manage the Fund. The Independent Trustees determined that R&A would be an appropriate investment adviser for the Fund.

 

 

 

(iii)

Cost of the services to be provided and profits to be realized by R&A from its relationship with the Fund: The Independent Trustees considered the anticipated cost of the services to be provided by R&A. Under the proposed Investment Advisory Agreement, the Fund would pay R&A a performance-based fee of 12.5% of its pre-fee total return. The fee would be payable monthly and accrued daily based on the value of the Fund’s then current net assets. The fee would be subject to a high watermark test. The Independent Trustees considered the fact that R&A would be responsible for paying all of the Fund’s other operating expenses, except for brokerage commissions, taxes, interest, litigation expenses, dividend expenses relating to short selling, interest expenses, “acquired fund” expenses and other expenses not incurred in the ordinary course of the Fund’s business. It was noted that this arrangement puts R&A at risk to the extent ordinary operating expenses are not covered by performance fees.

 

 

 

 

 

In reviewing the proposed investment advisory fee for the Fund, the Independent Trustees considered the advisory fees of other similar funds. However, since these funds do not charge such a performance-based fee, direct comparisons were not helpful. The Independent Trustees considered the fact that the proposed fee structure was the same as the fee structure for Royce Select Fund I and II, Royce Global Select Fund and Royce SMid-Cap Select Fund, other funds in the Trust. The Independent Trustees also noted that the advisory fee structure is performance based, accrued daily and subject to a high watermark test. The Independent Trustees noted that the performance fee proposed for the Fund aligns the interest of R&A directly with those of investors. They could not consider the profitability of the Fund since it was recently formed and had no operating history.

 

 

 

(iv)

The extent to which economies of scale would be realized as the Fund grows and whether fee levels would reflect such economies of scale: The Independent Trustees noted that R&A did not currently expect the Fund to grow to a size that would allow the Fund to experience significant economies of scale. However, it was noted by the Independent Trustees that the Fund charges an all-inclusive performance fee.

 

 

 

(v)

Comparison of services to be rendered and fees to be paid to those under other investment advisory contracts, such as contracts of the same and other investment advisers or other clients: As discussed above in (i) and (iii), the Independent Trustees compared both the services to be rendered and the fees to be paid under the Investment Advisory Agreement to other contracts of R&A and to contracts of other investment advisers to registered investment companies investing in securities of U.S., smaller-cap securities.

No single factor was determinative to the decision of the Board. Rather, after weighing all of the facts discussed above, the Board, including the Independent Trustees, unanimously approved the Investment Advisory Agreement.


44  |  The Royce Funds 2010 Annual Report to Shareholders


 

Style Points

 

 

It is impossible to produce superior performance unless you do something different from the majority.
– Sir John Templeton

 

 

 

 

 

 

 

Every active manager needs an edge. There needs to be something dynamic and at least somewhat unique about the security selection process that sets their portfolios apart. This is especially true if their goal—as it is for us here at The Royce Funds—is to generate strong absolute long-term returns. The quote above from Sir John Templeton illustrates this perfectly. How any “superior performance” is produced, however, is another matter.

 

 we look at companies. First, we use a time-tested approach that most commonly focuses on strong balance sheets, high returns on invested capital and a record of success as a business. Second, we pay very close attention to risk at multiple levels. While most managers focus chiefly on potential returns, we devote at least equal and sometimes more attention to the risk side of the equation. Our contention is that failing to do so can erode, or even destroy, long-term returns.
 

 


(MESSAGE)

Our Funds seek to help investors build wealth as consistently, and with as little volatility, as possible within our investment universe. Without the requisite discipline, such a goal could not be reached. Our approach and our unshakeable commitment to it are the vital things that we believe have helped us to separate our Funds from the portfolio pack.

 

          After all, the world is full of ostensibly great investment approaches, seemingly sound strategies and apparently foolproof methods for making money in the stock market. Yet these techniques do not always accomplish what they set out to do. With this in mind, it seems to us that the key questions are, how does one establish a long-term performance edge? How does a manager do something differently from the majority, and do it successfully?

 

 

 

          Combined with this is an equally important third factor: our managers’ willingness to stick to their respective approaches, regardless of market movements and trends. Adhering to the discipline is as vital to our success as the approach itself. This is especially relevant during market extremes such as those we have seen over the last several years.

 

 

 

 

 

 

 

 

 

          These questions have only grown in importance over the last three years, as the world just barely avoided a collapse of the global financial system late in 2008 and has been struggling to create a more lasting recovery ever since. The difficulties of the more recent period further validate the importance of measuring performance over full market cycles (or rolling five- and 10-year periods), spans that include both up and down phases. On those scores, a close look at pages 10-19 provides the long-term returns for the Royce Select Funds and their showings against their respective benchmarks.
          The success that we have enjoyed over these periods is the result of three closely related elements. The first two relate to how

 

 

          For us, the security selection process and the discipline and commitment to stick with it are inextricably bound together. Our goal is always to grow capital. While we enjoy besting benchmarks as much as any active asset manager, our focus is never on beating the market. When it happens, we see it only as a happy byproduct of the successful execution of our investment discipline. Our Funds seek to help investors build wealth as consistently, and with as little volatility, as possible within our investment universe. Without the requisite discipline, such a goal could not be reached. Our approach and our unshakeable commitment to it are the vital things that we believe have helped us to separate our Funds from the portfolio pack.


This page is not part of the 2010 Annual Report to Shareholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

About The Royce Funds

 

 

 

 

 

 

 

 

 

 

 

Wealth Of Experience

 

Consistent Discipline

 

 

 

With approximately $37 billion in open- and closed-end fund assets under management, Royce & Associates is committed to the same small-company investing principles that have served us well for more than 35 years. Charles M. Royce, our President and Co-Chief Investment Officer, enjoys one of the longest tenures of any active mutual fund manager. Royce’s investment staff also includes Co-Chief Investment Officer W. Whitney George, 15 Portfolio Managers, 11 assistant portfolio managers and analysts, and nine traders.

Multiple Funds, Common Focus
Our goal is to offer both individual and institutional investors the best available smaller-cap portfolios. Unlike a lot of mutual fund groups with broad product offerings, we have chosen to concentrate on smaller-company investing by providing investors with a range of funds that take full advantage of this large and diverse sector.

 

Our approach emphasizes paying close attention to risk and maintaining the same discipline, regardless of market movements and trends. The price we pay for a security must be significantly below our appraisal of its current worth. This requires a thorough analysis of the financial and business dynamics of an enterprise, as though we were purchasing the entire company.

Co-Ownership Of Funds
It is important that our employees and shareholders share a common financial goal; our officers, employees and their families currently have approximately $130 million invested in The Royce Funds.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

This Review and Report must be accompanied or preceded by a current prospectus for the Funds. Please read the prospectus carefully before investing or sending money.

 

 

 

 

 

 

 

 
           

 

 

 

 

 

 

 

 

 

 

 

Contact Us

 

General Information

 

RIA Services

 

Broker/Dealer Services

 

Shareholder Services

 

Royce InfoLine

 

Additional Report Copies
and Prospectus Inquiries
(800) 221-4268

 

Fund Materials and
Performance Updates
(800) 33-ROYCE (337-6923)

 

Fund Materials and
Performance Updates
(800) 59-ROYCE (597-6923)

 

Transactions and
Account Inquiries
(800) 841-1180

 

24-Hour Automated
Telephone Service
(800) 78-ROYCE (787-6923)

 

 

 

 

 

 

 

 

 

 

RSF-REP-1210


Item 2.  Code(s) of Ethics.   As of the end of the period covered by this report, the Registrant had adopted a code of ethics, as defined in Item 2 of Form N-CSR, applicable to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.  A copy of this code of ethics is filed as an exhibit to this Form N-CSR.  No substantive amendments were approved or waivers were granted to this code of ethics during the period covered by this report.


Item 3. Audit Committee Financial Expert.


(a)(1)

The Board of Trustees of the Registrant has determined that it has an audit committee financial expert.


(a)(2)

Arthur S. Mehlman and Patricia W. Chadwick were designated by the Board of Trustees as the Registrant’s  Audit Committee Financial Experts, effective April 15, 2004 and April 8, 2010, respectively.  Mr. Mehlman and Ms. Chadwick are “independent” as defined under Item 3 of Form N-CSR.


Item 4. Principal Accountant Fees and Services.


(a)

Audit Fees:

Year ended December 31, 2010 - $520,960

Year ended December 31, 2009 - $483,442



(b)

Audit-Related Fees:

Year ended December 31, 2010 - $0

Year ended December 31, 2009 - $0


(c)

Tax Fees:

Year ended December 31, 2010 - $223,331 – Preparation of tax returns and excise tax review

Year ended December 31, 2009 - $198,724 – Preparation of tax returns and excise tax review


(d)

All Other Fees:

Year ended December 31, 2010 - $0

Year ended December 31, 2009 - $0


(e)(1)

Annual Pre-Approval:  On an annual basis, the Registrant’s independent auditor submits to the Audit Committee a schedule of proposed audit, audit-related, tax and other non-audit services to be rendered to the Registrant and/or investment adviser(s) for the following year that require pre-approval by the Audit Committee.  This schedule provides a description of each type of service that is expected to require pre-approval and the maximum fees that can be paid for each such service without further Audit Committee approval.  The Audit Committee then reviews and determines whether to approve the types of scheduled services and the projected fees for them.  Any subsequent revision to already pre-approved services or fees (including fee increases) are presented for consideration at the next regularly scheduled Audit Committee meeting, as needed.


If subsequent to the annual pre-approval of services and fees by the Audit Committee, the Registrant or one of its affiliates determines that it would like to engage the Registrant’s independent auditor to perform a service not already pre-approved, the request is to be submitted to the Registrant’s Chief Financial Officer, and if he or she determines that the service fits within the independence guidelines (e.g., it is not a prohibited service), he or she will then arrange for a discussion of the proposed service and fee to be included on the agenda for the next regularly scheduled Audit Committee meeting so that pre-approval can be considered.


Interim Pre-Approval:  If, in the judgment of the Registrant's Chief Financial Officer, a proposed engagement needs to commence before the next regularly scheduled Audit Committee meeting, he or she shall submit a written summary of the proposed engagement to all members of the Audit Committee, outlining the services, the estimated maximum cost, the category of the services (e.g., audit, audit-related, tax or other) and the rationale for engaging the Registrant’s independent auditor to perform the services.  To the extent the proposed engagement involves audit, audit-related or tax services, any individual member of the Audit Committee who is an independent Board member is authorized to pre-approve the engagement.  To the extent the proposed engagement involves non-audit services other than audit-related or tax, the Chairman of the Audit Committee is authorized to



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pre-approve the engagement.  The Registrant’s Chief Financial Officer will arrange for this interim review and coordinate with the appropriate member(s) of the Committee.  The independent auditor may not commence the engagement under consideration until the Registrant’s Chief Financial Officer has informed the auditor in writing that pre-approval has been obtained from the Audit Committee or an individual member who is an independent Board member.  The member of the Audit Committee who pre-approves any engagements in between regularly scheduled Audit Committee meetings is to report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next regularly scheduled meeting.


(e)(2)

Not Applicable


(f)

Not Applicable


(g)

Year ended December 31, 2010 - $223,331

Year ended December 31, 2009 - $198,724


(h)

No such services were rendered during 2010 or 2009.  


Item 5.  Audit Committee of Listed Registrants. Not Applicable.


Item 6. Investments.

(a) See Item 1.


(b) Not Applicable


Item 7.  Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not Applicable.


Item 8.   Portfolio Managers of Closed-End Management Investment Companies. Not Applicable.


Item 9.  Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not Applicable


Item 10.  Submission of Matters to a Vote of Security Holders.  Not Applicable.


Item 11. Controls and Procedures.


(a) Disclosure Controls and Procedures. The Principal Executive and Financial Officers concluded that the Registrant's Disclosure Controls and Procedures are effective based on their evaluation of the Disclosure Controls and Procedures as of a date within 90 days of the filing date of this report.


(b) Internal Control over Financial Reporting. There were no significant changes in Registrant's internal control over financial reporting or in other factors that could significantly affect this control subsequent to the date of the evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses during the second fiscal quarter of the period covered by this report.



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Item 12.  Exhibits.   Attached hereto.  

 (a)(1)  The Registrant’s code of ethics pursuant to Item 2 of Form N-CSR.


(a)(2)  Separate certifications by the Registrant’s Principal Executive Officer and Principal Financial Officer as required by Rule 30a-2(a) under the Investment Company Act of 1940.  


(a)(3) Not Applicable


(b)  Separate certifications by the Registrant’s Principal Executive Officer and Principal Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(b) under the Investment Company Act of 1940.


Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


THE ROYCE FUND


BY:

/s/Charles M. Royce

Charles M. Royce

President


Date: March 4, 2011



Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


THE ROYCE FUND

THE ROYCE FUND


BY:

/s/Charles N. Royce

BY:  /s/John D. Diederich

Charles M. Royce

John D. Diederich

President

Chief Financial Officer


Date: March 4, 2011

Date: March 4, 2011



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