The Royce Funds
Royce Total Return Fund
PROSPECTUS -- May 2, 1995, as amended September 14, 1995
NEW ACCOUNT AND GENERAL INFORMATION: Investor Information -- 1-800-221-4268
SHAREHOLDER SERVICES -- 1-800-841-1180 INVESTMENT ADVISOR SERVICES --
1-800-33-ROYCE
INVESTMENT
OBJECTIVE AND
POLICIES
Royce Total Return Fund (the "Fund") seeks long-term growth of capital and
current income by investing primarily in a broadly diversified portfolio of
dividend-paying common stocks. There can be no assurance that the Fund will
achieve its objective.
Royce Total Return Fund is a no-load series of The Royce Fund (the "Trust"), a
diversified, open-end management investment company. The Trust is currently
offering shares of eight series. This Prospectus relates to Royce Total
Return Fund only.
ABOUT THIS
PROSPECTUS
This Prospectus sets forth concisely the information that you should know
about the Fund before you invest. It should be retained for future
reference. A "Statement of Additional Information" containing further
information about the Fund and the Trust has been filed with the Securities
and Exchange Commission. The Statement is dated July 31, 1995 and has been
incorporated by reference into this Prospectus. A copy may be obtained
without charge by writing to the Trust or calling Investor Information.
TABLE OF CONTENTS
Page
Fund Expenses. . . . . . 2
Financial Highlights . . 3
Investment Performance . 4
Investment Objective . . 4
Investment Policies. . . 4
Investment Risks . . . . 5
Investment Limitations . 5
Management of the Trust 6
General Information. . . 7
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Page
Dividends, Distributions and Taxes . . . . . . . . . . . . . 8
Net Asset Value Per Share. . . . . . . . . . . . . . . . . . 9
SHAREHOLDER GUIDE
Opening an Account and Purchasing Shares . . . . . . . . . . 10
Choosing a Distribution Option . . . . . . . . . . . . . . . 12
Important Account Information. . . . . . . . . . . . . . . . 12
Redeeming Your Shares. . . . . . . . . . . . . . . . . . . . 13
Exchange Privilege . . . . . . . . . . . . . . . . . . . . . 15
Transferring Ownership . . . . . . . . . . . . . . . . . . . 15
Other Services . . . . . . . . . . . . . . . . . . . . . . . 15
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EX- CHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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FUND EXPENSES
The Fund is no-load
and no 12b-1
fees are being
charged
The following table illustrates all expenses and fees that you would incur as
a shareholder of the Fund.
Shareholder Transaction Expenses
Sales Load Imposed on Purchases . . . . None
Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load . . . . . . . . . . None
Redemption Fee -- 1 Year or More After Initial PurchaseNone
Early Redemption Fee -- Less Than 1 Year After Initial Purchase1%
Annual Fund Operating Expenses
Management Fees (after waivers) .00%
12b-1 Fees (after waivers) .00%
Other Expenses. . . . . . 1.96%
Total Operating Expenses (after waivers)1.96%
The purpose of the above table is to assist you in understanding the various
costs and expenses that you would bear directly or indirectly as an investor
in the Fund.
Management fees would have been 1.00%, 12b-1 fees would have been .25% and
total operating expenses would have been 3.21% without the waivers of
management fees by Quest Advisory Corp. ("Quest"), the Fund's investment
adviser, and of the 12b-1 fees by Quest Distributors, Inc. ("QDI"), the
Fund's distributor.
The following examples illustrate the expenses that you would incur on a
$1,000 investment over various periods, assuming a 5% annual rate of return
and redemption at the end of each period.
1 Year 3 Years 5 Years 10 Years
$20 $62 $107 $232
These examples should not be considered representations of past or future
expenses or performance. Actual expenses may be higher or lower than those
shown.
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FINANCIAL
HIGHLIGHTS
(For a share out-
standing through-
out each period)
The following financial highlights are part of the Fund's financial statements
and have been audited by Coopers & Lybrand L.L.P., independent accountants.
The Fund's financial statements and Coopers & Lybrand L.L.P.'s report on them
are included in the Fund's Annual Reports to Shareholders and are
incorporated by reference into the Statement of Additional Information and
this Prospectus. Further information about the Fund's performance is
contained elsewhere in this Prospectus and in the Fund's Annual Report to
Shareholders for 1994, which may be obtained without charge by calling
Investor Information.
Year endedPeriod ended
December 31,December 31,
Net Asset Value, Beginning of 1994 1993 (2)
Period . . . . . . . . . . . . . . $5.00 $5.00
Income from Investment
Operations
Net investment income (1). . . 0.02 0.00
Net gains (losses) on
securities (both
realized and unrealized) . . 0.24 0.00
Total from Investment Operations 0.26 0.00
Less Distributions
Dividends (from net
investment income) . . . . . (0.02) 0.00
Distributions (from capital gains) (0.12) 0.00
Total Distributions. . . (0.14) 0.00
Net Asset Value, End of Period . . $5.12 $5.00
Total Return . . . . . . . . . . . 5.2% 0.0%
Ratios/Supplemental Data
Net Assets, End of Period (000's) $1,656 $451
Ratio of Expenses to
Average Net Assets (1) . . . 1.96% 0.29%*
Ratio of Net Investment
Income to Average Net Assets 0.49% -0.29%*
Portfolio Turnover Rate. . . . 88% 0%
(1) Net investment income and the ratio of expenses to average net assets are
shown after waiver of fees by the adviser and distributor. Absent such
waivers, the ratios of expenses to average net assets would have been 3.21%
and 2.04% for 1994 and the period ended December 31, 1993, respectively.
(2) From inception of the Fund on December 15, 1993.
* Annualized.
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INVESTMENT
PERFORMANCE
Total return is the
change in value over
a given time period,
assuming reinvestment
of any dividends and
distributions
From time to time, the Fund may include in communications to current or
prospective shareholders figures reflecting total return over various time
periods. "Total return" is the rate of return on an amount invested in the
Fund from the beginning to the end of the stated period. "Average annual
total return" is the annual compounded percentage change in the value of an
amount invested in the Fund from the beginning until the end of the stated
period. Total returns are historical measures of past performance and are not
intended to indicate future performance. Total returns assume the
reinvestment of all dividends and capital gains distributions. The figures
do not reflect the Fund's early redemption fee because it applies only to
redemptions in accounts open for less than one year.
The Fund's average annual total returns for the periods ended December 31,
1994 were:
One Since 12/15/93
Year Inception
5.2% 4.9%
INVESTMENT
OBJECTIVE
Since certain risks are inherent in owning any security, there can be no
assurance that the Fund will achieve its objective.
Royce Total Return Fund's investment objective is an equal focus on both
long-term growth of capital and current income. It seeks to achieve this
objective through investments in a broadly diversified portfolio of
dividend-paying common stocks of companies selected on a value basis.
This investment objective is fundamental and may not be changed without the
approval of a majority of the Fund's outstanding voting shares.
INVESTMENT
POLICIES
The Fund invests on a
"value" basis
The Fund invests
primarily in small
companies
Quest uses a "value" method in managing the Fund's assets. In its selection
process, Quest puts primary emphasis on various internal returns indicative
of profitability, balance sheet quality, cash flows and the relationships
that these factors have to the current price of a given security. This is in
contrast to other methods that primarily focus on the future prospects of a
company and concentrate on high growth or emerging growth companies.
Quest's value method is based on its belief that the securities of certain
small companies may sell at a discount from its estimate of such companies'
"business worth". Quest attempts to identify and invest in these securities
for the Fund, with the expectation that this "value discount" will narrow
over time and thus provide capital appreciation for the Fund. The securities
in which the Fund invests may be traded on securities exchanges or in the
over-the-counter market.
In accordance with its dual objective of seeking both capital appreciation
(realized and unrealized) and current income, the Fund will normally invest
at least 80% of its assets in common stocks. At least 90% of these
securities will be dividend-paying, and at least 65% of these securities will
be issued by companies with stock market capitalizations under
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$1,000,000,000 at the time of investment. The remainder of the Fund's assets
may be invested in securities with higher stock market capitalizations,
non-dividend-paying common stocks and convertible and non-convertible
securities. While most of the Fund's securities will be income-producing,
the composite yield of the Fund will vary and may be either higher or lower
than the composite yield of the stocks in the Standard & Poor's 500 Index.
INVESTMENT
RISKS
The Fund is subject
to certain investment
risks
As a mutual fund investing primarily in common stocks and/or securities
convertible into common stocks, the Fund is subject to market risk, that is,
the possibility that common stock prices will decline over short or even
extended periods. The Fund may invest in securities of companies that are
not well-known to the investing public, may not have significant
institutional ownership and may have cyclical, static or only moderate growth
prospects. The stocks of such companies may be more volatile in price and
have lower trading volumes than the larger capitalization stocks included in
the S&P 500 Index. Accordingly, Quest's investment method requires a
long-term investment horizon. The Fund should not be used to play short-term
swings in the market.
INVESTMENT
LIMITATIONS
The Fund has
adopted certain
fundamental
limitations
The Fund has adopted certain fundamental limitations, designed to reduce its
exposure to specific situations, which may not be changed without the
approval of a majority of its outstanding voting shares, as that term is
defined in the Investment Company Act of 1940 (the "1940 Act"). These
limitations are set forth in the Statement of Additional Information and
provide, among other things, that the Fund will not:
(a) with respect to 75% of its assets, invest more than 5% of its assets in
the securities of any one issuer, excluding obligations of the U.S.
Government;
(b) invest more than 25% of its assets in any one industry; or
(c) invest in companies for the purpose of exercising control of management.
Other Investment
Practices:
In addition to investing primarily in the equity and fixed income securities
described above, the Fund may follow a number of additional investment
practices.
Short-term fixed
income securities
The Fund may invest in short-term fixed income securities for temporary
defensive purposes, to invest uncommitted cash balances or to maintain
liquidity to meet shareholder redemptions. These securities consist of
United States Treasury bills, domestic bank certificates of deposit,
high-quality commercial paper and repurchase agreements collateralized by
U.S. Government securities. In a repurchase agreement, a bank sells a
security to the Fund at one price and agrees to repurchase it at the Fund's
cost plus interest within a specified period of seven or fewer days. In
these transactions, which are, in effect, secured loans by the Fund, the
securities purchased by the Fund will have a value equal to or in excess of
the value of the repurchase agreement and will be held by the Fund's
custodian bank until repurchased. Should the Fund implement a temporary
investment policy, its investment objective may not be achieved.
<PAGE>
Securities lending
The Fund may lend up to 25% of its assets to qualified institutional investors
for the purpose of realizing additional income. Loans of securities of the
Fund will be collateralized by cash or securities issued or guaranteed by the
United States Government or its agencies or instrumentalities. The
collateral will equal at least 100% of the current market value of the loaned
securities. The risks of securities lending include possible delays in
receiving additional collateral or in recovery of loaned securities or loss of
rights in the collateral if the borrower defaults or becomes insolvent.
Foreign securities
The Fund may invest up to 10% of its assets in debt and/or equity securities
of foreign issuers. Foreign investments involve certain risks, such as
political or economic instability of the issuer or of the country of issue,
fluctuating exchange rates and the possibility of imposition of exchange
controls. These securities may also be subject to greater fluctuations in
price than the securities of U.S. corporations, and there may be less publicly
available information about their operations. Foreign companies may not be
subject to accounting standards or governmental supervision comparable to
U.S. companies, and foreign markets may be less liquid or more volatile than
U.S. markets and may offer less protection to investors such as the Fund.
Lower-rated
debt securities
Up to 20% of the Fund's assets may be invested in debt securities in the
lowest category of investment grade debt. These bonds may have speculative
characteristics, and changes in economic conditions or other circumstances
are more likely to lead to a weakened capacity to make principal and interest
payments than is the case with higher grade bonds. The Fund may also invest
no more than 5% of its net assets in lower-rated (high-risk) non- convertible
debt securities, which are below investment grade.
Portfolio turnover
Although the Fund generally seeks to invest for the long term, it retains the
right to sell securities regardless of how long they have been held. The
Fund's annual portfolio turnover rates are shown in the "Financial
Highlights". The portfolio turnover rate for the Fund in 1994 was 88%, which
is higher than that of other funds. A 100% turnover rate occurs, for
example, if all of the Fund's portfolio securities are replaced in one year.
High portfolio activity increases the Fund's transaction costs, including
brokerage commissions.
MANAGEMENT OF
THE TRUST
Quest Advisory Corp.
is responsible for
the management of
the Fund's portfolio
The Trust's business and affairs are managed under the direction of its Board
of Trustees. Quest, the Fund's investment adviser, is responsible for the
management of the Fund's portfolio, subject to the authority of the Board of
Trustees. Quest was organized in 1967 and has been the Fund's adviser since
its inception. Charles M. Royce, Quest's President, Chief Investment Officer
and sole voting shareholder since 1972, is primarily responsible for
supervising Quest's investment management activities. Mr. Royce is assisted
by Thomas R. Ebright, Jack E. Fockler, Jr. and W. Whitney George, Vice
Presidents of Quest, all of whom participate in the investment management
activities, with their specific responsibilities varying from time to time.
Quest is also the investment adviser to Royce Value, Royce Equity Income,
Royce Premier, Royce Micro-Cap, Royce Low-Priced Stock and Royce Global
Services Funds, which are other series of the Trust, to Pennsylvania Mutual
Fund, and to other investment and non-investment company accounts.
<PAGE>
As compensation for its services to the Fund, Quest is entitled to receive
annual advisory fees of 1% of the average net assets of the Fund. These fees
are payable monthly from the assets of the Fund involved and are higher than
those paid by most other mutual funds with similar investment objectives.
For 1994, Quest voluntarily waived its fees on the Fund.
Quest selects the brokers who execute the purchases and sales of the Fund's
portfolio securities and may place orders with brokers who provide brokerage
and research services to Quest. Quest is authorized, in recognition of the
value of brokerage and research services provided, to pay commissions to a
broker in excess of the amount which another broker might have charged for
the same transaction.
Quest Distributors, Inc. ("QDI"), which is wholly-owned by Charles M. Royce,
acts as distributor of the Fund's shares. The Trust has adopted a
distribution plan for the Fund pursuant to Rule 12b-1. The plan provides for
payment to QDI of .25% per annum of the average net assets of the Fund, which
may be used for payment of sales commissions and other fees to those who
introduce investors to the Fund and for various other promotional,
sales-related and servicing costs and expenses. QDI has committed to waive
its fees through 1995.
GENERAL
INFORMATION
The Royce Fund (the "Trust") is a Massachusetts business trust registered with
the Securities and Exchange Commission as a diversified, open-end management
investment company. The Trustees have the authority to issue an unlimited
number of shares of beneficial interest, without shareholder approval, and
these shares may be divided into an unlimited number of series. Shareholders
are entitled to one vote per share. Shares vote by individual series on all
matters, except that shares are voted in the aggregate and not by individual
series when required by the 1940 Act and that if the Trustees determine that
a matter affects only one series, then only shareholders of that series are
entitled to vote on that matter.
Meetings of shareholders will not be held except as required by the 1940 Act
or other applicable law. A meeting will be held to vote on the removal of a
Trustee or Trustees of the Trust if requested in writing by the holders of
not less than 10% of the outstanding shares of the Trust.
The custodian for securities and cash of the Fund is State Street Bank and
Trust Company. State Street, through its agent National Financial Data
Services ("NFDS"), also serves as the Fund's Transfer Agent. Coopers &
Lybrand L.L.P. serves as independent accountants for the Fund.
<PAGE>
DIVIDENDS,
DISTRIBUTIONS
AND TAXES
The Fund pays
dividends and capital
gains annually in
December
The Fund pays dividends from net investment income (if any) and distributes
any net realized capital gains annually in December. Dividends and
distributions will be automatically reinvested in additional shares of the
Fund unless the shareholder chooses otherwise.
Shareholders will receive information annually as to the tax status of
distributions made by the Fund for the calendar year. For Federal income tax
purposes, all distributions by the Fund are taxable to shareholders when
declared, whether received in cash or reinvested in shares. Distributions
paid from the Fund's net investment income and short-term capital gains are
taxable to shareholders as ordinary income dividends. A portion of the
Fund's dividends may qualify for the corporate dividends-received deduction,
subject to certain limitations. The portion of the Fund's dividends
qualifying for such deduction is generally limited to the aggregate taxable
dividends received by the Fund from domestic corporations.
Distributions paid from long-term capital gains of the Fund are treated by a
shareholder for Federal income tax purposes as long-term capital gains,
regardless of how long a shareholder has held Fund shares. If a shareholder
disposes of shares held for six months or less at a loss, such loss will be
treated as a long-term capital loss to the extent of any long-term capital
gains reported by the shareholder with respect to such shares.
The redemption of shares is a taxable event, and a shareholder may realize a
capital gain or capital loss. The Fund will report to redeeming shareholders
the proceeds of their redemptions. However, because the tax consequences of
a redemption will also depend on the shareholder's basis in the redeemed
shares for tax purposes, shareholders should retain their account statements
for use in determining their tax liability on a redemption.
At the time of a shareholder's purchase, the Fund's net asset value may
reflect undistributed income or capital gains. A subsequent distribution of
these amounts by the Fund will be taxable to the shareholder even though the
distribution economically is a return of part of the shareholder's
investment.
The Fund is required to withhold 31% of taxable dividends, capital gain
distributions and redemptions paid to non-corporate shareholders who have not
complied with Internal Revenue Service taxpayer identification regulations.
Shareholders may avoid this withholding requirement by certifying on the
Account Application their proper Social Security or Taxpayer Identification
Number and certifying that they are not subject to backup withholding.
The discussion of Federal income taxes above is for general information only.
Shareholders may also be subject to state and local taxes on their
investment. Investors should consult their own tax advisers concerning the
tax consequences of an investment in the Fund. The Statement of Additional
Information includes an additional description of Federal income tax aspects
that may be relevant to a shareholder.
<PAGE>
NET ASSET VALUE
PER SHARE
Net asset value per
share (NAV) is
determined each day
the New York Stock
Exchange is open
Fund shares are purchased and redeemed at their net asset value per share next
determined after an order is received by the Fund's transfer agent. Net
asset value per share is determined by dividing the total value of the Fund's
investments and other assets, less any liabilities, by the number of
outstanding shares of the Fund. Net asset value per share is calculated at
the close of regular trading on the New York Stock Exchange on each day the
Exchange is open for business.
In determining net asset value, securities listed on an exchange or the Nasdaq
National Market System are valued on the basis of the last reported sale
price prior to the time the valuation is made or, if no sale is reported for
that day, at their bid price for exchange-listed securities and at the
average of their bid and ask prices for Nasdaq securities. Quotations are
taken from the market where the security is primarily traded. Other over-the
counter securities for which market quotations are readily available are
valued at their bid price. Securities for which market quotations are not
readily available are valued at their fair value under procedures established
and supervised by the Board of Trustees. Bonds and other fixed income
securities may be valued by reference to other securities with comparable
ratings, interest rates and maturities, using established independent pricing
services.
<PAGE>
OPENING AN
ACCOUNT AND
PURCHASING
SHARES
SHAREHOLDER GUIDE
The Fund's shares are offered on a no-load basis. New accounts (other than
IRA or 403(b)(7) accounts) can be opened either by mail, by telephone or by
wire. An Account Application must be completed and returned, regardless of
the method selected. If you need assistance with the Account Application or
have any questions about the Fund, please call Investor Information. Note:
For certain types of account registrations (e.g., corporations, partnerships,
foundations, associations, other organizations, trusts or powers of
attorney), please call Investor Information to determine if you need to
provide additional forms with your application.
Minimum Initial
Investments
Type of Account Minimum
Regular accounts $2,000
IRAs * $500
Accounts established with Automatic $500
Investment Plan or Direct Deposit Plan
403(b)(7) accounts * None
* Separate forms must be used for opening IRAs or 403(b)(7) accounts; please
call Investor Information at 1-800- 221-4268 if you need these forms.
Additional
Investments
Subsequent investments may be made by mail ($50 minimum), telephone ($500
minimum), wire ($1,000 minimum) or Express Service (a system of electronic
funds transfer from your bank account).
Purchasing By Mail:
Complete and sign the
enclosed Account
Application Form
ADDITIONAL INVESTMENTS
NEW ACCOUNT TO EXISTING ACCOUNTS
Please include the amount of your Additional investments should include
initial investment on the the Invest-by-Mail remittance form
Application, make your check payable attached to your Fund confirmation
to The Royce Fund, and mail to: statements. Please make your check
payable to The Royce Fund, write
The Royce Funds your account number on your check
P.O. Box 419012 and, using the return envelope
Kansas City, MO 64141-6012 provided, mail to the address
indicated on the Invest-by-Mail
For express or form.
registered mail,
send to: All written requests should be mailed
to one of the addresses indicated
The Royce Funds for new accounts.
c/o National Financial Data Services
1004 Baltimore, 5th Floor
Kansas City, MO 64105
Purchasing By
Telephone:
To open an account by telephone, you Subsequent telephone purchases ($500
should call Investor Information minimum) may also be made by calling
before 4:00 p.m., Eastern time. You Investor Information. For all
will be given a confirming order telephone purchases, payment is due
number for your purchase. This within three business days and may
number must be placed on your be made by wire or personal,
completed Application before mailing. business or bank check, subject to
If a completed Application is not collection.
received, the account may be subject
to backup withholding of Federal
income taxes.
<PAGE>
Purchasing By Wire:
Money should be wired to:
State Street Bank and Trust Company
ABA 011000028 DDA 9904-712-8
Ref: (Name of Fund)
Order Number or Account Number____________________
Account Name ____________________________________
Before Wiring:
For a new account,
please contact Investor
Information at
1-800-221-4268
To ensure proper receipt, please be sure your bank includes the name of the
Fund and your order number (for telephone purchases) or account number. If
you are opening a new account, you must call Investor Information to obtain
an order number, and complete the Account Application and mail it to the "New
Account" address above after completing your wire arrangement. Note: Federal
Funds wire purchase orders will be accepted only when the Fund and Custodian
are open for business.
Purchasing By
Express
Service:
You can purchase shares automatically or at your discretion through the
following options:
Expedited Purchase Option permits you, at your discretion, to transfer funds
($100 minimum and $200,000 maximum) from your bank account to purchase shares
in your Royce Fund account by telephone.
Automatic Investment Plan allows you to make regular, automatic transfers
($50 minimum) from your bank account to purchase shares in your Royce Fund
account on the monthly or quarterly schedule you select.
To establish the Expedited Purchase Option and/or the Automatic Investment
Plan, please provide the appropriate information on the Account Application
and attach a voided check. We will send you a confirmation of Express
Service activation. Please wait three weeks before using the service.
To make an Expedited Purchase, please call Shareholder Services at
1-800-841-1180 before 4:00 p.m., Eastern time.
Payroll Direct Deposit Plan and Government Direct Deposit Plan let you have
investments ($50 minimum) made from your net payroll or government check into
your existing Royce Fund account each pay period. Your employer must have
direct deposit capabilities through ACH (Automated Clearing House) available
to its employees. You may terminate participation in these programs by
giving written notice to your employer or government agency, as appropriate.
The Fund is not responsible for the efficiency of the employer or government
agency making the payment or any financial institution transmitting payments.
To initiate a Direct Deposit Plan, you must complete an Authorization for
Direct Deposit form which may be obtained from Investor Information by
calling 1-800-221-4268.
<PAGE>
CHOOSING A
DISTRIBUTION
OPTION
You may select one of three distribution options:
1.Automatic Reinvestment Option--Both dividends and capital gain distributions
will be reinvested in additional Fund shares. This option will be selected
for you automatically unless you specify one of the other options.
2.Cash Dividend Option--Your dividends will be paid in cash and your capital
gain distributions will be reinvested in additional Fund shares.
3.All Cash Option--Both dividends and capital gains distributions will be paid
in cash.
You may change your option by calling Shareholder Services at 1-800-841-1180.
IMPORTANT
ACCOUNT
INFORMATION
The easiest way to establish optional services on your account is to select
the options you desire when you complete your Account Application Form. If
you want to add or change shareholder options later, you may need to provide
additional information and a signature guarantee. Please call Shareholder
Services at 1-800-841-1180 for further assistance.
Signature Guarantees
For our mutual protection, we may require a signature guarantee on certain
written transaction requests. A signature guarantee verifies the
authenticity of your signature and may be obtained from banks, brokerage
firms and any other guarantor that our transfer agent deems acceptable. A
signature guarantee cannot be provided by a notary public.
Certificates
Certificates for whole shares will be issued upon request. If a certificate
is lost, stolen or destroyed, you may incur an expense to replace it.
Purchases Through
Service Providers
If you purchase shares of the Fund through a program of services offered or
administered by a broker-dealer, financial institution or other service
provider, you should read the program materials provided by the service
provider, including information regarding fees which may be charged, in
conjunction with this prospectus. Certain shareholder servicing features of
the Fund may not be available or may be modified in connection with the
program of services offered. When shares of the Fund are purchased in this
way, the service provider, rather than the customer, may be the shareholder
of record of the shares. Certain service providers may receive compensation
from the Fund, QDI and/or Quest for providing such services.
Telephone
Transactions
Neither the Fund nor its transfer agent will be liable for following
instructions communicated by telephone that are reasonably believed to be
genuine. The transfer agent uses certain procedures designed to confirm that
telephone instructions are genuine, which may include requiring some form of
personal identification prior to acting on the instructions, providing
written confirmation of the transaction and/or recording incoming calls, and
if it does not follow such procedures, the Fund or the Transfer Agent may be
liable for any losses due to unauthorized or fraudulent transactions.
<PAGE>
Nonpayment
If your check or wire does not clear, or if payment is not received for any
telephone purchase, the transaction will be cancelled and you will be
responsible for any loss the Fund incurs. If you are already a shareholder,
the Fund can redeem shares from any identically registered account in the
Fund as reimbursement for any loss incurred.
Trade Date for
purchases
Your trade date is the date on which your account is credited. If your
purchase is made by telephone, check, Federal Funds wire or exchange and is
received by the close of regular trading on the New York Stock Exchange
(generally 4:00 p.m., Eastern time), your trade date is the date of receipt.
If your purchase is received after the close of regular trading on the
Exchange, your trade date is the next business day. Your shares are purchased
at the net asset value determined on your trade date.
In order to prevent lengthy processing delays caused by the clearing of
foreign checks, the Fund will accept only a foreign check which has been
drawn in U.S. dollars and has been issued by a foreign bank with a United
States correspondent bank.
The Trust reserves the right to suspend the offering of Fund shares to new
investors. The Trust also reserves the right to reject any specific purchase
request.
REDEEMING YOUR
SHARES
You may redeem any portion of your account at any time. You may request a
redemption in writing or by telephone. Redemption proceeds normally will be
sent within two business days after the receipt of the request in Good Order.
Redeeming By Mail:
Requests should be mailed to The Royce Funds, c/o NFDS, P.O. Box 419012,
Kansas City, MO 64141-6012. (For express or registered mail, send your
request to The Royce Funds, c/o NFDS, 1004 Baltimore, 5th Floor, Kansas City,
MO 64105.)
Definition of
Good Order
The redemption price of shares will be their net asset value next determined
after NFDS has received all required documents in Good Order.
Good Order means that the request includes the following:
1.The account number and Fund name.
2.The amount of the transaction (specified in dollars or shares).
3.Signatures of all owners exactly as they are registered on the account.
4.Signature guarantees if the value of the shares being redeemed exceeds
$50,000 or if the payment is to be sent to an address other than the address
of record or is to be made to a payee other than the shareholder.
5.Certificates, if any are held.
6.Other supporting legal documentation that might be required, in the case of
retirement plans, corporations, trusts, estates and certain other accounts.
If you have any questions about what is required as it pertains to your
request, please call Shareholder Services at 1-800-841-1180.
<PAGE>
Redeeming By
Telephone:
Shareholders who have not established Express Service may redeem up to $50,000
of their Fund shares by telephone, provided the proceeds are mailed to their
address of record. If preapproved, higher maximums may apply to
institutional accounts. To redeem shares by telephone, you or your
pre-authorized representative may call Shareholder Services at 1-800-
841-1180. Redemption requests received by telephone prior to the close of
regular trading on the New York Stock Exchange (generally 4:00 p.m., Eastern
time) are processed on the day of receipt; redemption requests received by
telephone after the close of regular trading on the Exchange are processed on
the business day following receipt. Telephone redemption service is not
available for Trust-sponsored retirement plan accounts or if certificates are
held. Telephone redemptions will not be permitted for a period of sixty days
after a change in the address of record. See also "Important Account
Information- Telephone Transactions".
Redeeming By
Express
Service:
If you select the Express Service Automatic Withdrawal option, shares will be
automatically redeemed from your Fund account and the proceeds transferred to
your bank account according to the schedule you have selected. You must have
at least $25,000 in your Fund account to establish the Automatic Withdrawal
option.
The Expedited Redemption option lets you redeem up to $50,000 of shares from
your Fund account by telephone and transfer the proceeds directly to your
bank account. You may elect Express Service on the Account Application Form
or call Shareholder Services at 1-800-841-1180 for an Express Service
application.
Important
Redemption
Information
If you are redeeming shares recently purchased by check, Express Service
Expedited Purchase or Automatic Investment Plan, the proceeds of the
redemption may not be sent until payment for the purchase is collected, which
may take up to fifteen calendar days. Otherwise, redemption proceeds must be
sent to you within seven days of receipt of your request in Good Order.
If you experience difficulty in making a telephone redemption during periods
of drastic economic or market changes, your redemption request may be made by
regular or express mail. It will be processed at the net asset value next
determined after your request has been received by the Transfer Agent in Good
Order. The Trust reserves the right to revise or terminate the telephone
redemption privilege at any time.
The Trust may suspend the redemption right or postpone payment at times when
the New York Stock Exchange is closed or under any emergency circumstances as
determined by the Securities and Exchange Commission.
Although redemptions have always been made in cash, the Fund may redeem in
kind under certain circumstances.
Early Redemption
Fee
In order to discourage short-term trading, an early redemption fee of 1% of
the net asset value of the shares being redeemed is imposed if a shareholder
redeems shares of the Fund less than one year after becoming a shareholder.
The fee is payable to the Fund out of the redemption proceeds otherwise
payable to the shareholder. No redemption fee will be
<PAGE>
payable on an exchange into another Royce fund or by shareholders who are (a)
employees of the Trust or Quest or members of their immediate families or
employee benefit plans for them, (b) participants in the Automatic Withdrawal
Plan, (c) certain Trust-approved Group Investment Plans and charitable
organizations, (d) profit-sharing trusts, corporations or other institutional
investors who are investment advisory clients of Quest; or (e) omnibus or
similar account customers of certain Trust-approved broker-dealers and other
institutions.
Minimum Account
Balance Requirement
Due to the relatively high cost of maintaining smaller accounts, the Trust
reserves the right to involuntarily redeem shares in any Fund account that
falls below the minimum initial investment due to redemptions by the
shareholder. If at any time the balance in an account does not have a value
at least equal to the minimum initial investment, or if an Automatic
Investment Plan is discontinued before an account reaches the minimum initial
investment that would otherwise be required, you may be notified that the
value of your account is below the Fund's minimum account balance
requirement. You would then have sixty days to increase your account balance
before the account is liquidated. Proceeds would be promptly paid to the
shareholder.
EXCHANGE
PRIVILEGE
Exchanges between series of the Trust, and with other open-end Royce funds are
permitted by telephone or by mail. An exchange is treated as a redemption and
purchase; therefore, you could realize a taxable gain or loss on the
transaction. Exchanges are accepted only if the registrations and the tax
identification numbers of the two accounts are identical. Minimum investment
requirements must be met when opening a new account by exchange and exchanges
may be made only for shares of a series or fund then offering its shares for
sale in your state of residence. The Trust reserves the right to revise or
terminate the exchange privilege at any time.
TRANSFERRING
OWNERSHIP
You may transfer the ownership of any of your Fund shares to another person
by writing to: The Royce Funds, c/o NFDS, P.O. Box 419012, Kansas City, MO
64141-6012. The request must be in Good Order (see "Redeeming Your Shares -
Definition of Good Order"). Before mailing your request, please contact
Shareholder Services (1-800-841-1180) for full instructions.
OTHER SERVICES
For more information about any of these services, please call Investor
Information at 1-800- 221-4268.
Statements and
Reports
A confirmation statement will be sent to you each time you have a transaction
in your account and semi-annually. Financial reports will be mailed
semi-annually. To reduce expenses, only one copy of most shareholder reports
may be mailed to a household. Please call Investor Information if you need
additional copies.
Tax-sheltered
Retirement Plans
Shares of the Fund are available for purchase in connection with certain types
of tax- sheltered retirement plans, including Individual Retirement Accounts
(IRA's) for individuals and 403(b)(7) Plans for employees of certain
tax-exempt organizations.
These plans should be established with the Trust only after an investor has
consulted with a tax adviser or attorney. Information about the plans and
the appropriate forms may be obtained from Investor Information at
1-800-221-4268.
<PAGE>
The Royce Funds
1414 Avenue of the Americas
New York, NY 10019
1-800-221-4268
The Royce Funds
Investment Adviser
Quest Advisory Corp.
1414 Avenue of the Americas
New York, NY 10019
Distributor
Quest Distributors, Inc.
1414 Avenue of the Americas
New York, NY 10019 Royce
Total Return
Fund
Transfer Agent
State Street Bank and Trust Company A No-Load Mutual Fund
c/o NFDS
P.O. Box 419012
Kansas City, MO 64141-6012
1-800-841-1180
Custodian
State Street Bank and Trust Company
P.O. Box 1713
Boston, MA 02105
Officers
Charles M. Royce, President and Treasurer
Jack E. Fockler, Jr., Vice President Prospectus
W. Whitney George, Vice President May 2, 1995,
Daniel A. O'Byrne, Vice President and As amended September 14, 1995
Assistant Secretary
Susan I. Grant, Secretary
