<PAGE>
SEMI-ANNUAL REPORT
June 30, 1996
[Drawing of REvest seal]
The REvest
Growth & Income
Fund
A No-Load Mutual Fund
An Investment In Small and
Medium-Sized Company Equities
A Series of The Royce Fund
<PAGE>
Profile of the Fund
The REvest Growth & Income Fund ("REvest" or the "Fund"), is a series of The
Royce Fund, a Delaware business trust registered with the Securities and
Exchange Commission as an open-end, diversified management investment company.
The objective of the Fund is primarily long-term capital growth and secondarily
current income.
Thomas R. Ebright, President of Royce, Ebright & Associates, Inc. (RE&A), a
registered investment adviser, is responsible for the management of the Fund's
portfolio, subject to the authority of The Royce Fund's Trustees.
OUR STRATEGY FOR WEALTH BUILDING
The foundation of our strategy is the use of small and mid-sized companies
with growth prospects that are owned in a carefully controlled pool of capital
deemed practical to manage. This combined with our value orientation allows us
to buy what we think are "great companies" at "great prices". The Fund is best
used as part of a well-planned and diversified team of long-term investments.
[Picture of pyramid of silver dollars]
GREAT COMPANIES
Defined as having above average returns on assets & equity, lower than average
leverage plus growth prospects.
GREAT PRICES
Defined as having a perceived valuation discrepency between business value and
market price at the time of purchase.
SMALL & MID-CAP STOCKS
These securities have, we believe, more potential for growth, have historically
generated higher returns for investors, and are generally less well-known and
more likely to be improperly priced.
CONTROLLED SIZE OF FUND
Designed to allow the Fund to maintain a constant character over its lifetime.
The Fund will automatically close to new investors when its assets reach $350
million to make it more practical for the adviser to actively manage the Fund's
portfolio.
A MIX OF GROWTH & VALUE
We look for companies that have growth prospects that will allow them to
increase their long-term business value. We combine a value-oriented selection
approach with this expectation of business growth to select our portfolio.
<PAGE>
Manager's Letter [REvest logo]
Dear Friends:
Satchel Paige, one of baseball's great all-stars, is remembered for saying
"don't look back...they may be gaining on you!" Well, large-cap stocks must
have looked back, because small-cap stocks have not only closed the gap (large-
cap stocks dominated 1995's market returns) but also moved ahead in the early
'96 performance game. For the first six months of '96 the Russell 2000 is up
10.4% versus 10.2% for the S&P 500. REvest, working in its defined small and
medium-sized company value niche, produced competitive returns in this
environment (up 9.5%).
[Picture of Tom Ebright smiling]
Our goal is to be an over-achiever. For this to happen we need a market that is
favorable to both smaller size stocks and to value-oriented securities.
Unfortunately, we have not had this combination of favorable "field conditions"
in the first two years of the Fund's operation. The early 1996 experience, with
its bias toward secondary securities, is certainly a step in the right
direction . . . and our returns thus far this year reflect this favorable
development.
A second important step would be a return to a more value-oriented market. Over
the last few years, value investors have been forced to watch from the
sidelines as growth-oriented strategies pushed stock prices (especially among
larger companies and anything involved in technology) higher and higher. Using
our value criteria, many of these stocks are unreasonably priced but our
opinion hasn't stopped the various markets from continuing their upward
speculative spiral. Our belief is that the security markets will eventually
correct what we see as "excesses." Such a return to a value-oriented market,
with more rational pricing of securities, would fit nicely with the recent
strength in small company returns, and allow REvest a better chance at winning.
We continue to work hard on our portfolio. We strive to always be as well-
researched as possible, and to make sure that the portfolio characteristics are
consistent with our stated approach. We've often described ourselves as the
third baseman on our shareholder's mutual fund team, a player who strives for
excellence in that position only and a player who will not wander around the
field trying to do other things. We take pride in being an active research
organization, with a regular company visitation schedule, and a formal program
of continuous analytical work on all of our portfolio companies and prospects.
The Fund has continued to grow in 1996 (now at $37.4 million in net assets),
with all of this year's growth coming from appreciation in the value of our
securities. This growth, along with careful expense control, has further
lowered the Fund's annualized expense ratio to 1.27% as of 6/30/96 (from 1.30%
for all of 1995). We continue to think that our commitment to a "fixed" style
that is both disciplined and consistent is the key reason why investors have
continued to invest and enabled the Fund to grow.
Being back-in-the-game and improving the Fund's performance compared to the
overall market in early '96 feels good. We believe that our "team" of
securities is well matched to what we see as the current conditions. We are
moving forward with confidence. As usual, your continued support of our work
through the ownership of your shares is much appreciated.
Sincerely,
/s/ Thomas R. Ebright
Thomas R. Ebright
Portfolio Manager
President, Royce, Ebright & Associates, Inc.
July 29, 1996
Note: The S&P 500 and the Russell 2000 are unmanaged indices and include the
reinvestment of dividends.
<PAGE>
Portfolio Summary
The following information is provided as a "bird's eye" view of The REvest
Growth and Income Fund portfolio as of June 30, 1996. For a more complete
picture, the full portfolio and accompanying financial statements should be
read in their entirety.
Portfolio Composition Value % of Net Assets
Common Stocks $31,169,603 83.3%
Convertible Bonds 2,339,700 6.2%
Non-Convertible Bond 696,500 1.9%
Cash & Other Net Assets 3,198,878 8.6%
Total Net Assets $37,404,681 100.0%
Industry Concentration % of Net Assets
Industrial Cyclicals 16.5%
Technology 13.2%
Financial 12.3%
Services 12.2%
Energy 10.2%
Consumer Products 9.0%
Retail 8.6%
Cash 8.6%
Real Estate 6.7%
Health 2.7%
Average Financial Characteristics of Portfolio Companies
Market Capitalization $521 Million
P/E Ratio 13.6x
P/B Ratio 1.7x
Return on Assets 6.8%
Return on Equity 13.8%
Compound 5-Year Growth Rate 16.7%
Gross Portfolio Yield 3.1%
Top Twenty Positions Market Value % of Net Assets
1. Storage Technology Corporation 8% Conv. Sub. Deb. due 5/31/15 $946,000 2.5%
2. KCS Energy, Inc. 920,000 2.5%
3. Berry Petroleum Company 824,688 2.2%
4. Mercantile Bankshares Corporation 803,250 2.1%
5. Grief Brothers Corporation Class A 800,000 2.1%
6. Ametek, Inc. 783,000 2.1%
7. Lucor, Inc. Class A 769,500 2.1%
8. Matthews International Corporation Class A 739,750 2.0%
9. Zero Corporation 735,300 2.0%
10. CLARCOR Inc. 730,125 2.0%
11. Barrett Resources Corporation 727,090 1.9%
12. Hannaford Brothers Company 717,750 1.9%
13. Snyder Oil Corporation 7% Conv. Sub. Notes due 5/15/01 713,700 1.9%
14. Sequa Corporation 9.375% Sen. Sub. Notes due 12/15/03 696,500 1.9%
15. Russ Berrie and Company, Inc. 689,062 1.8%
16. Richardson Electronics, Ltd.
7.25% Conv. Sub Deb. due 12/15/06 675,250 1.8%
20. Chemed Corporation 672,750 1.8%
<PAGE>
Performance Discussion [REvest logo]
In the first half of 1996, small capitalization stocks did slightly better than
their larger capitalization brethren. Growth stocks, and the technology sector
in particular, retained the market leadership that was present during 1995.
However, the divergence between large and small (S&P 500 up 10.2% versus
Russell 2000 up 10.4%) as well as between growth and value (Russell 2000 Value
up 8.6% versus the Russell 2000 Growth up 11.9%) during the first six months of
1996 was less pronounced than in 1995. REvest gained 91% of the Russell 2000's
total return (9.5% versus 10.4%) and 93% of the S&P 500's total return (9.5%
versus 10.2%). Since the REvest portfolio is different by design (constructed
with small and medium-sized company stocks that are bought using a value
approach as compared to portfolios using either larger-capitalization stocks or
which use primarily a growth approach to selection), management expects it to
be often out-of-sync with the general equity market.
Management believes that its approach, which emphasizes buying what it believes
are "great companies" at "great prices" will generate long-term quality total
returns, even if these returns are delivered in a manner that is different from
the general market. Management believes these returns will be generated from
the Fund's participation in the growth and development of its portfolio
companies and the positive resolution of the value discrepancies that
management believes were in place at the time of purchase. This investment
approach, which emphasizes moderate growth, a strong interest in business value
and non-mainstream securities, will require patience and long-term ownership in
order to realize the return benefits of owning the Fund.
Comparison of Change in Value of a $10,000 Initial Investment on 8/1/94* in The
REvest Growth & Income Fund, the S&P 500 and the Russell 2000
[Chart]
Period Year Period
Ended Ended Ended
6/30/96 12/31/95 12/31/94*
REvest total return 9.5% 16.2% -2.9%
S&P 500 total return 10.2% 37.5% 1.6%
Russell 2000 total return 10.4% 28.4% 3.3%
The above table and preceding narrative depict the historical returns of
REvest, the S&P 500, an unmanaged index representative of large-company stocks,
and the Russell 2000, Russell 2000 Value and Growth indices, unmanaged indices
representative of small-company stocks. The Fund's present investment
philosophy was followed in each of the periods identified. All results
presented in this Report are on a "total return" basis, which assumes that all
dividends and distributions were reinvested. No redemption fees are included
because they apply only to accounts open for less than one year.
The results presented in this Report represent past performance and should not
be considered representative of the "total return" from an investment in the
Fund today. They are provided only to give an historical perspective of the
Fund. The investment return and principal value of the Fund's shares will
fluctuate so that the shares may be worth more or less than their original cost
when redeemed.
*Commencement of Operations - August 1, 1994
<PAGE>
Schedule of Investments (at 6/30/96 - unaudited)
Common Stocks and Bonds- 91.4% Value
Shares or Principal Value Cost (Note 1)
CONSUMER PRODUCTS 9.0%
19,500 La-Z-Boy Chair Company $591,381 $587,438
14,200 National Presto Industries, Inc. 598,228 539,600
32,000 Oxford Industries, Inc. 598,390 516,000
28,500 The Rival Company 536,862 655,500
37,500 Russ Berrie and Company, Inc. 504,088 689,062
45,000 The Stride Rite Corporation 591,662 371,250
3,420,611 3,358,850
ENERGY - 10.2%
24,440 *Barrett Resources Corporation 480,044 727,090
72,500 Berry Petroleum Company 701,116 824,688
32,000 KCS Energy, Inc. 483,990 920,000
18,000 Penn Virginia Corporation 601,537 630,000
$780,000 Snyder Oil Corporation 7% Conv. Sub. Notes due 5/15/01
699,850 713,700
2,966,537 3,815,478
FINANCIAL -12.3%
20,225 Keystone Financial, Inc. 598,240 677,537
30,021 Keystone Heritage Group, Inc. 598,460 679,225
31,500 Mercantile Bankshares Corporation 701,890 803,250
31,300 Peoples Heritage Financial Group, Inc. 427,164 637,738
17,000 Protective Life Corporation 405,721 597,125
24,425 Susquehanna Bancshares, Inc. 589,036 653,369
22,000 Washington National Corporation 462,140 566,500
3,782,651 4,614,744
HEALTH - 2.7%
36,000 Allied Healthcare Products, Inc. 601,750 333,000
37,000 *Haemonetics Corporation 598,590 675,250
1,200,340 1,008,250
INDUSTRIAL CYCLICALS - 16.5%
36,000 Ametek, Inc. 618,966 783,000
29,500 CLARCOR Inc. 599,803 730,125
33,500 Crompton & Knowles Corporation 451,120 561,125
25,000 Greif Brothers Corporation Class A 588,680 800,000
18,000 Kennametal, Inc. 583,322 612,000
20,500 Kimball International, Inc. Class B 506,559 566,312
26,900 Matthews International Corporation Class A 528,120 739,750
17,000 Rayonier, Inc 594,065 646,000
34,400 Zero Corporation 449,133 735,300
4,919,768 6,173,612
REAL ESTATE - 6.7%
34,000 Cousins Properties Incorporated 597,529 667,250
33,800 Manufactured Home Communities, Inc. 618,541 650,650
29,000 New Plan Realty Trust 594,692 612,625
39,000 The Ryland Group, Inc. 598,230 585,000
2,408,992 2,515,525
The accompanying notes are an integral part of the financial statements.
<PAGE>
[REvest logo]
Value
Shares or Principal Value Cost (Note 1)
RETAIL - 8.6%
16,000 Blair Corporation $ 590,108 $ 378,000
25,500 Cracker Barrel Old Country Store, Inc. 540,273 618,375
62,000 *The Dress Barn, Inc. 605,015 651,000
22,000 Hannaford Brothers Company 598,602 717,750
43,000 Lillian Vernon Corporation 599,426 548,250
88,000 Sun Television and Appliances, Inc. 601,669 319,000
3,535,093 3,232,375
SERVICES -12.2%
34,500 Arnold Industries, Inc. 594,913 491,625
18,000 Chemed Corporation 703,735 672,750
81,000 *Lucor, Inc. Class A 469,750 769,500
11,000 PHH Corporation 425,720 627,000
$800,000 Richardson Electronics, Ltd.
7.25% Conv. Sub. Deb. due 12/15/06 692,000 680,000
$700,000 Sequa Corporation
9.375% Sen. Sub. Notes due 12/15/03 696,834 696,500
25,000 The Standard Register Company 461,485 615,625
4,044,437 4,553,000
TECHNOLOGY - 13.2%
32,000 *Cirrus Logic, Inc. 598,200 560,000
20,000 Cohu, Inc. 417,294 405,000
43,500 *Exabyte Corporation 603,944 568,219
42,000 *FEI Company 572,155 530,250
51,000 Gilbert Associates, Inc. Class A 702,012 650,250
$800,000 Storage Technology Corporation
8% Conv. Sub. Deb. due 5/31/15 750,250 946,000
13,500 Teleflex Incorporated 498,745 644,625
23,000 Watkins Johnson Co. 701,560 629,625
4,844,160 4,933,969
TOTAL COMMON STOCKS AND CORPORATE BONDS 31,122,589 34,205,803
U.S. TREASURY OBLIGATIONS - 8.0%
$1,000,000 U.S. Treasury Bills due 7/25/96 996,835 996,870
$1,000,000 U.S. Treasury Bills due 8/22/96 993,182 992,810
$1,000,000 U.S. Treasury Notes 6.75% due 2/28/97 982,969 1,007,030
TOTAL U.S. TREASURY OBLIGATIONS 2,972,986 2,996,710
REPURCHASE AGREEMENT - 1.1%
State Street Bank and Trust Company, 4.90% due 7/1/96,
collateralized by U.S. Treasury Notes, 5.25%, due 12/31/97,
valued at $410,704 400,000 400,000
TOTAL INVESTMENTS - 100.5% 34,495,575 37,602,513
LIABILITIES LESS CASH AND OTHER ASSETS - (.5%) (197,832)
TOTAL NET ASSETS - 100.0% $37,404,681
*Non-income producing.
Income Tax Information - The cost for federal income tax purposes was
$34,495,575. At June 30, 1996, net unrealized appreciation for all securities
amounted to $3,106,938, consisting of aggregate gross unrealized appreciation
of $4,699,044 and aggregate gross unrealized depreciation of $1,592,106.
The accompanying notes are an integral part of the financial statements.
<PAGE>
Statement of Assets and Liabilities (at 6/30/96 - unaudited)
ASSETS:
Investments at value (identified cost $34,495,575) $37,602,513
Cash 63,633
Receivable for shares of beneficial interest sold 13,050
Receivable for dividends and interest 90,911
Prepaid expenses and other assets 6,160
TOTAL ASSETS 37,776,267
LIABILITIES:
Payable for investments purchased 321,394
Investment advisory fee payable 30,207
Accrued expenses 19,985
TOTAL LIABILITIES 371,586
NET ASSETS $37,404,681
ANALYSIS OF NET ASSETS:
Undistributed net investment income $ 26,976
Accumulated net realized gain on investments 2,266,681
Net unrealized appreciation on investments 3,106,938
Shares of beneficial interest 3,212
Additional paid-in capital 32,000,874
NET ASSETS $37,404,681
PRICING OF SHARES:
Net asset value, offering and redemption price per share
($37,404,681 / 3,212,024 shares outstanding) $11.65
Statements of Changes in Net Assets
Six Months ended Year ended
June 30, 1996 December 31,
(unaudited) 1995
From Investment Activities:
Net investment income $ 347,731 $ 550,063
Net realized gain on investments 2,260,095 1,063,263
Net unrealized appreciation on investments 580,928 3,079,868
Increase in net assets resulting from operations 3,188,754 4,693,194
Dividends paid from net investment income (314,698) (525,810)
Distributions paid from net realized gains - (1,034,263)
From Capital Share Transactions:
Increase (decrease) in net assets
from capital share transactions (1,273,256) 10,994,420
Increase in net assets 1,600,800 14,127,541
Net Assets:
Beginning of period 35,803,881 21,676,340
End of period (including undistributed net investment
income of $26,976 and distributions in excess of
net investment income of $6,056, respectively) $37,404,681 $35,803,881
<PAGE>
Statement of Operations
(for the six months ended 6/30/96 - unaudited) [REvest logo]
INVESTMENT INCOME:
Income:
Dividends $441,223
Interest 134,423
Total Income 575,646
Expenses:
Investment advisory fee 178,858
Custodian and transfer agent fees 14,506
Auditing and legal fees 9,442
Federal and state registration fees 7,312
Administrative and office facilities expense 6,856
Trustees' fees 1,456
Other expenses 9,485
Total Expenses 227,915
Net Investment Income 347,731
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 2,260,095
Net unrealized appreciation on investments 580,928
Net realized and unrealized gain on investments 2,841,023
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $3,188,754
The accompanying notes are an integral part of the 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 the Fund's
performance.
Six Months ended Year ended Period ended
June 30, 1996 December 31, December 31, 1994
(unaudited) 1995 (Note 1)
Net Asset Value, Beginning of Period $10.73 $9.66 $10.00
Income From Investment Operations:
Net Investment Income (a) 0.11 0.18 0.04
Net Gains or Losses on Investments
(both realized and unrealized) 0.91 1.38 (0.33)
Total From Investment Operations 1.02 1.56 (0.29)
Less Distributions:
Dividends (from net investment income) (0.10) (0.17) (0.05)
Distributions (from net capital gains) - (0.32) -
Total Distributions (0.10) (0.49) (0.05)
Net Asset Value, End of Period $11.65 $10.73 $9.66
Total Return 9.5% 16.2% -2.9%
Ratios/Supplemental Data:
Net Assets, End of Period $37,404,681 $35,803,881 $21,676,340
Ratio of Expenses
to Average Net Assets (b) 1.27%* 1.30% 1.42%*
Ratio of Net Investment Income
to Average Net Assets (c) 1.93%* 1.73% 1.45%*
Portfolio Turnover Rate 32% 53% 5%
Average Commission Rate Paid+ 0.06 - -
* Annualized.
+ For fiscal years beginning on or after October 1, 1995, the fund is required
to disclose its average commission rate paid per share for purchases and sales
of investments. (a) Net investment income is shown after waiver of fees by the
investment adviser. The per share effect of this waiver is $0.01 for the period
ended December 31, 1994. (b) The ratio of expenses to average net assets before
waiver of fees by the investment adviser would have been 1.78% for the period
ended December 31, 1994. (c) The ratio of net investment income to average net
assets before waiver of fees by the investment adviser would have been 1.09%
for the period ended December 31, 1994.
The accompanying notes are an integral part of the financial statements.
<PAGE>
Notes To Financial Statements (unaudited)
1. Summary of Significant Accounting Policies:
The REvest Growth & Income Fund (the "Fund") a series of The Royce Fund (the
"Trust"), is a diversified open-end management investment company. The Trust,
originally established as a business trust under the laws of Massachusetts,
converted to a Delaware business trust at the close of business on June 28,
1996. The Fund commenced operations on August 1, 1994.
The preparation of financial statements in conformity with generally accepted
accounting principles required management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and 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.
a. Valuation of investments:
Securities listed on an exchange or on the Nasdaq National Market System are
valued on the basis of the last reported sale prior to the time the valuation
is made or, if no sale is reported for such day, at their bid price for
exchange-listed securities and at the average of their bid and asked 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.
b. Investment transactions and related investment income:
Investment transactions are accounted for on the trade date and dividend income
is recorded on the ex-dividend date. Interest income is recorded on the
accrual basis. Realized gains and losses from investment transactions and
unrealized appreciation and depreciation of investments are determined on the
basis of identified cost for book and tax purposes.
c. Taxes:
The Fund intends to continue to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code. The Fund is not subject to income
taxes to the extent that it distributes substantially all of its taxable income
for its fiscal year. The schedule of investments includes information regarding
income taxes under the caption "Income Tax Information".
d. Distributions:
The Fund declares dividends on a quarterly basis and capital gains
distributions annually. These dividends and distributions are recorded on the
ex-date and are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. Permanent book and tax
basis differences relating to shareholder distributions will result in
reclassifications to paid-in capital and may affect net investment income per
share. Undistributed net investment income may include temporary book and tax
basis differences which will reverse in a subsequent period. Any taxable income
or gain remaining at fiscal year end is distributed in the following year.
e. Repurchase agreements:
The Fund enters into repurchase agreements with respect to its portfolio
securities solely with State Street Bank and Trust Company ("SSB&T"), the
custodian of its assets. The Fund restricts repurchase agreements to
maturities of no more than seven days. Securities pledged as collateral for
repurchase agreements are held by SSB&T until maturity of the repurchase
agreements. Repurchase agreements could involve certain risks in the event of
default or insolvency of SSB&T, including possible delays or restrictions upon
the ability of the Fund to dispose of the underlying securities.
2. Investment Adviser:
Under the Trust's investment advisory agreement with Royce, Ebright &
Associates, Inc. ("RE&A"), the Fund accrued and paid RE&A fees totaling
$178,858 for the six months ended June 30, 1996. The agreement provides for
fees equal to 1.0% per annum of the Fund's average net assets. Such fees are
computed daily and are payable monthly to RE&A.
3. Fund Shares:
The Board of Trustees has authority to issue an unlimited number of shares of
beneficial interest of the Fund, with a par value of $.001. Share transactions
were as follows: Six Months ended Year
June 30, 1996 ended
(unaudited) December 31, 1995
Shares Amount Shares Amount
Sold 198,469 $2,257,668 1,147,378 $11,532,815
Issued as reinvested
dividends and distributions 26,031 298,503 149,814 1,588,717
Redeemed (347,951) (3,829,427) (204,573) (2,127,112)
Shares redeemed within one year of purchase are subject to a 1% redemption fee.
4. Purchases and Sales of Securities:
For the six months ended June 30, 1996, the cost of purchases and the proceeds
from sales of investment securities, other than short-term securities, amounted
to $11,412,289 and $14,721,510, respectively.
<PAGE>
Customer Service [REvest logo]
[Picture of Michael McNamara]
Michael McNamara
Vice President, Customer Service
1. If I have questions or need literature about the Fund who may I call?
Call Michael McNamara, RE&A's customer service officer, at 800-277-5573. The
RE&A office is open from 9:00am to 5:30pm (Eastern Time) every business day.
2. If I have questions about the Fund's investments who should I call?
Call Tom Ebright, the portfolio manager, at 800-277-5573. We're one of a small
number of funds where the manager is available to talk directly to investors.
If Tom's traveling he'll return your call when he returns to the office. We
try to treat our investors as true partners, with us, in the Fund.
3. How often does the Fund mail out statements?
Cumulative year-to-date statements are mailed out after each transaction and
after each dividend. Tax information is mailed by January 31st of each year.
The Fund distributes formal Semi-Annual and Annual Reports which are mailed to
each shareholder in August and February.
4. Does the Fund maintain a mailing list for the benefit of its "street name"
shareholders?
Yes, if your shares are held in a brokerage account and you would like to
receive your mailings directly from the Fund call Michael McNamara in RE&A's
office and we will add your name to the Fund's mailing list. This will get Fund
material to you much faster and allow us to contact you directly by mail.
5. Is it correct that there are no sales charges or 12b-1 fees?
Yes, not one penny of your investment goes to any sales charge or 12b-1 fee.
The Fund is one of the so-called "pure" no-load Funds. You will rarely, if
ever, see the Fund advertised to investors. We believe that the Fund should
sell itself because it does a good job for its investors.
6. Is the Fund available for IRA investments and other retirement plans?
Yes, the Fund offers both IRA and 403(b)(7) plans to its investors. Because of
the Fund's philosophy and long-term approach to investing, we believe that it
may be an appropriate vehicle for all types of retirement plans.
7. When does the Fund pay income & capital gain distributions?
The Fund makes quarterly income distributions and an annual capital gain
distribution at the end of December. A preliminary, non-binding estimate of
the amount of the year-end distributions is available to shareholders by
calling the RE&A office any time after the Thanksgiving holiday. Distributions
are automatically reinvested unless we receive other instructions from the
shareholder.
8. Why does the Fund impose a 1% redemption fee during the first year of
ownership?
This fee is charged to discourage short-term trading in the Fund's shares. When
short-term investors trade in and out of a mutual fund, they increase the costs
of operations for the permanent shareholders. This activity can also disrupt
the investment plan for the portfolio and reduce overall returns. When charged,
the 1% fee recovers the costs of this disruption for the rest of the
shareholders.
<PAGE>
[Picture of office building where Royce, Ebright & Associates is located]
The office of the adviser to the Fund, Royce, Ebright & Associates, Inc. is
located on the top floor of the building pictured at 50 Portland Pier in
downtown Portland, Maine. The adviser encourages shareholders to visit if they
are planning a trip to Maine.
At the Special Meeting of Shareholders held on June 26, 1996, The Royce Fund's
shareholders approved its conversion to a Delaware business trust, elected
trustees and ratified the Board's selection of The Royce Fund's independent
public accountants:
Proposals/ Votes Votes Votes Votes
Name of Trustee Cast For Withheld Cast Against Abstained
Convert the Trust to a
Delaware Business Trust 37,472,360 N/A 845,090 3,121,147
Ratification of independent
public accounts 51,370,026 N/A 442,499 2,816,187
Charles M. Royce 52,309,497 2,319,215 N/A N/A
Thomas R. Ebright 52,314,207 2,314,505 N/A N/A
Hubert L. Cafritz 52,219,769 2,408,943 N/A N/A
Richard M. Galkin 52,305,456 2,323,256 N/A N/A
Stephen L. Isaacs 52,258,406 2,370,306 N/A N/A
William L. Koke 52,300,723 2,327,989 N/A N/A
David L. Meister 52,282,477 2,346,235 N/A N/A
This report must be accompanied or preceded by a current Prospectus of the
Fund.
Royce, Ebright & Associates, Inc.
Investment Adviser
50 Portland Pier
Portland, ME 04101-4721
(207) 774-7455 . (800) 277-5573
Fax (207) 772-7370
[REvest logo]
1414 Avenue of the Americas
New York, New York 10019
(800) 221-4268
A Series of The Royce Fund
