December 31, 1997
Dear Friends and Fellow Shareholders:
Although later than usual, I did not want 1997 to close without sending you our
sincerest wishes for a happy holiday and a prosperous new year. We at Royce,
Ebright & Associates, Inc. ("REA") appreciate your business and look forward to
playing the stalwart "third baseman" on your baseball team of funds in 1998.
As an added gift, I thought I would take this opportunity to announce that REA
has just signed a Letter of Intent with Gouws Capital Management, Inc. ("GCMI")
and Acadia Trust, N.A. ("AT") to share resources in managing and growing REvest.
The proposed transaction, which is described below, is subject to both Board and
Shareholder approval.
GCMI is a registered investment adviser, and AT is a national bank. Based in
Portland, Maine, the two affiliates work together to provide high quality
investment and trust services. GCMI provides investment advisory services to
its own clients and to AT, who acts as custodian for GCMI's approximately $1
billion in client assets. Not unlike REvest, GCMI has a value orientation, and
emphasizes in-depth analysis and company visitation. It also utilizes a
"bottom-up" approach to stock selection and attempts to minimize risk by buying
stocks of diversified, financially solid companies after they have declined
significantly in price. I believe our two companies will prove to be highly
synergistic, and that our combined efforts will produce favorable results for
shareholders.
The Letter of Intent contemplates that REA would remain the Adviser to the Fund,
with GCMI being added as a Sub-Adviser. GCMI would be responsible for providing
investment advisory services and marketing support to REA in exchange for a sub-
advisory fee and an ownership stake in the Adviser. In practice, this means
that I would remain the portfolio manager to the Fund, backed by GCMI's
experienced portfolio managers and research staff. There would be no change in
the investment philosophy or objectives of the Fund, and my sister and I would
retain control of the Adviser.
Simultaneously, we plan to reorganize the Fund, bringing it out from under The
Royce Fund umbrella. A new Board of Trustees would be elected, and new back
office service providers would be employed (including AT as the Fund's
custodian). Other than a slightly different looking statement, these changes
should be transparent to you. As a sign of good faith, we will be extending the
expense ratio cap, currently 1.30%, until June 30, 1999. These steps will
complete the changes that were contemplated last Spring and bring to fruition my
father's dream of an independent mutual fund.
As mentioned above, these steps are subject to both Board and Shareholder
approvals. If the proposed transaction is approved by The Royce Fund's Board of
Trustees, we will be calling a Shareholder Meeting and sending you detailed
information about GCMI, AT, their principals, the new Fund, its Board and the
proposed transaction.
In closing, I want to thank each and every one of you for your continued
support. Although 1998 looks to be a year of change, our promise to be a "back
to basics" mutual fund, dedicated to its shareholders, remains intact. Our
potential new partner understands this concept, and I believe that together we
can continue to offer you the high level of quality and service that you have
come to expect and deserve.
Best wishes in the new year,
/S/ Jennifer Ebright Goff
Jennifer Ebright Goff
President, Royce, Ebright & Associates, Inc. (Adviser to The REvest Growth &
Income Fund)
THIS LETTER IS A SUPPLEMENT TO THE FUND'S PROSPECTUS DATED FEBRUARY 18, 1997
