Russell Investment Group is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Russell Investment Group.
The Russell Microcap Index includes 1000 of the smallest securities in the small-cap Russell 2000 Index.
Sector weightings are determined using the Global Industry Classification Standard ("GICS"). GICS was developed by, and is the exclusive property of, Standard & Poor's Financial Services LLC ("S&P") and MSCI Inc. ("MSCI"). GICS is the trademark of S&P and MSCI. "Global Industry Classification Standard (GICS)" and "GICS Direct" are service marks of S&P and MSCI.
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.
The Fund invests primarily in micro-cap stocks, which may involve considerably more risk than investing in larger-cap stocks (Please see "Primary Risks for Fund Investors" in the prospectus).
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, 2012 and at or below 1.99% through April 30, 2021.
This material is not authorized for distribution unless preceded or accompanied by a current prospectus. Please read the prospectus carefully before investing or sending money.
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.
Distributor: Royce Fund Services, Inc.
NOT FDIC INSURED · MAY LOSE VALUE · NOT BANK GUARANTEED
Management Team
Portfolio Managers
Assistant Portfolio Manager
| Drew Industries |
2.2% |
| Richmont Mines |
1.8% |
| Integrated Silicon Solution |
1.8% |
| Hi-Tech Pharmacal |
1.7% |
| PetroQuest Energy |
1.6% |
| Xyratex |
1.6% |
| Metropolitan Health Networks |
1.6% |
| G-III Apparel Group |
1.5% |
| Universal Stainless & Alloy Products |
1.4% |
| Dynamics Research |
1.4% |
| Top 10 as % of Total |
16.6% |

Royce Discovery Fund (RDF) seeks long-term growth of capital. Royce invests the Fund's assets primarily in a broadly diversified portfolio of micro-cap companies, those with market capitalizations up to $500 million. Royce selects securities identified by a proprietary quantitative investment model that implements a value approach. These candidates are then
evaluated by the Fund's portfolio managers using both quantitative and
qualitative analysis that is focused on balance sheet quality, cash flow levels
and various measures of a company’s profitability. We believe that investors in
the Fund should have a long-term investment horizon of at least three years.
| |
1-Month* |
YTD* |
1YR |
3YR |
5YR |
Since Inception |
Inception Date |
| RYDFX |
8.40% |
8.40% |
7.83% |
20.80% |
-0.86% |
5.47% |
10/3/2003 |
| Russell Microcap |
8.52% |
8.52% |
-0.50% |
21.78% |
-2.41% |
3.79% |
N/A |
| Annual Operating Expenses: Gross 3.04% Net 1.49% |
| |
4Q* |
YTD* |
1YR |
3YR |
5YR |
Since Inception |
Inception Date |
| RYDFX |
13.09% |
-2.24% |
-2.24% |
13.76% |
-2.42% |
4.50% |
10/3/2003 |
| Russell Microcap |
13.83% |
-9.27% |
-9.27% |
14.23% |
-3.75% |
2.81% |
N/A |
| Annual Operating Expenses: Gross 3.04% Net 1.49% |
-
Fund Statistics
as of Quarter-End 12/31/2011
| Fund Net Assets (All Classes) |
$4 million |
| Ticker Symbol |
RYDFX |
| Number of Holdings |
101 |
| Average Market Capitalization* |
$339 million |
| Weighted Average P/E Ratio** |
10.4x |
| Weighted Average P/B Ratio |
1.4x |
U.S. Investments (% of Net Assets) |
84.6% |
Non-U.S. Investments (% of Net Assets) |
9.7% |
| Portfolio Turnover as of 6/30/2011 |
44% |
| Minimum Investment |
$2,000 |
| Cusip Number |
780905477 |
| Fund Number |
220 |
| Fund Inception Date |
10/3/2003 |
| Benchmark Index |
Russell Microcap |
-
Value of $10,000 Invested on 10/3/03
As of Quarter-End 12/31/2011
-
Value of $10,000 Invested on 10/3/03
As of Quarter-End 12/31/2011
Calendar Year Total Returns
as of Quarter-End 12/31/2011
Performance Breakdown by Sector
for Quarter Ended 12/31/2011
| |
Sector Name |
Gain/Loss* (in millions) |
| 1 |
Information Technology |
$0.12 |
| 2 |
Consumer Discretionary |
$0.10 |
| 3 |
Industrials |
$0.08 |
| 4 |
Materials |
$0.04 |
| 5 |
Health Care |
$0.03 |
| 6 |
Energy |
$0.03 |
| 7 |
Consumer Staples |
$0.01 |
| 8 |
Financials |
$0.01 |
Top 5 Winners*
for Quarter Ended 12/31/2011
| Company |
Gain* (in millions) |
| Metropolitan Health Networks |
$0.02 |
| Standard Motor Products |
$0.02 |
| Xyratex |
$0.02 |
| Universal Stainless & Alloy Products |
$0.02 |
| Force Protection |
$0.02 |
Top 5 Losers*
for Quarter Ended 12/31/2011
| Company |
Loss* (in millions) |
| Wet Seal (The) Cl. A |
-$0.01 |
| JAKKS Pacific |
-$0.01 |
| Artio Global Investors Cl. A |
-$0.01 |
| Kensey Nash |
-$0.01 |
| Amedisys |
-$0.00 |

| |
1-Month* |
YTD* |
1YR |
3YR |
5YR |
Since Inception |
Inception Date |
| RYDFX |
8.40% |
8.40% |
7.83% |
20.80% |
-0.86% |
5.47% |
10/3/2003 |
| Russell Microcap |
8.52% |
8.52% |
-0.50% |
21.78% |
-2.41% |
3.79% |
N/A |
| Annual Operating Expenses: Gross 3.04% Net 1.49% |
| |
4Q* |
YTD* |
1YR |
3YR |
5YR |
Since Inception |
Inception Date |
| RYDFX |
13.09% |
-2.24% |
-2.24% |
13.76% |
-2.42% |
4.50% |
10/3/2003 |
| Russell Microcap |
13.83% |
-9.27% |
-9.27% |
14.23% |
-3.75% |
2.81% |
N/A |
| Annual Operating Expenses: Gross 3.04% Net 1.49% |
Absolute Return Focus: Five Year Monthly Rolling Return Periods
as of Quarter-End 12/31/11
Number of Five-Year Average Annual Return Periods since RDF's Inception
Relative Return Focus: Five Year Monthly Rolling Return Periods
as of Quarter-End 12/31/11
RDF Spread vs. Russell Microcap since RDF's Inception
Distribution History
| 5-Year Distribution History |
| Record Date |
Payable Date |
Ordinary Income |
S/T Gains |
L/T Gains |
Total |
Reinvest Price |
| 12/7/11 |
12/8/11 |
$0.0028 |
$— |
$— |
$0.00 |
$4.99 |
| 12/8/08 |
12/9/08 |
$0.0000 |
$0.1146 |
$0.1835 |
$0.30 |
$3.26 |
| 12/6/07 |
12/7/07 |
$0.0000 |
$0.0500 |
$0.4616 |
$0.51 |
$5.88 |

NAV History
| Previous 12 Months Ending 1/31/2012 |
| High |
$5.66 |
4/6/11 |
| Low |
$4.30 |
10/3/11 |
| Previous Month Ending 1/31/2012 |
| High |
$5.61 |
1/27/12 |
| Low |
$5.12 |
1/1/12 |
-
Year-End NAVs
| Year |
NAV |
| 2011 |
$5.12 |
| 2010 |
$5.24 |
| 2009 |
$4.38 |
| 2008 |
$3.48 |
| 2007 |
$5.85 |
| 2006 |
$6.87 |
| 2005 |
$6.33 |
| 2004 |
$6.39 |
| 2003 |
$5.70 |
Portfolio Managers
- Portfolio Manager and Director of Quantitative Strategies
- CFA
George Necakov, CFA, is a Portfolio Manager and the Director of Quantitative Strategies for Royce & Associates, LLC, investment adviser to The Royce Funds.
View Full Bio
Education
Experience
- 17 Years of Experience
- 17 Years at Royce
James J. Harvey, CFA, is a Portfolio Manager for Royce & Associates, LLC, investment adviser to The Royce Funds.
View Full Bio
Education
- BS, State University of New York, Albany
- MBA, New York University
Experience
- 19 Years of Experience
- 13 Years at Royce
Assistant Portfolio Manager
- President and Co-Chief Investment Officer
Charles M. Royce is President and Co-Chief Investment Officer of Royce & Associates, LLC and President of The Royce Funds, a position he has held since 1972.
View Full Bio
Education
- BA, Brown University,
- MBA, Columbia University,
Experience
- 49 Years of Experience
- 39 Years at Royce
-
Portfolio Statistics
as of Quarter-End 12/31/2011
| Fund Net Assets (All Classes) |
$4 million |
| Number of Holdings |
101 |
| Average Market Capitalization* |
$339 million |
| Weighted Average P/E Ratio** |
10.4x |
| Weighted Average P/B Ratio |
1.4x |
| Portfolio Turnover as of 6/30/2011 |
44% |
Market Cap Exposure (In Millions)
as of Quarter-End 12/31/2011
Companies by Market Capitalization
as of Quarter-End 12/31/2011
-
| Drew Industries |
2.2% |
| Richmont Mines |
1.8% |
| Integrated Silicon Solution |
1.8% |
| Hi-Tech Pharmacal |
1.7% |
| PetroQuest Energy |
1.6% |
| Xyratex |
1.6% |
| Metropolitan Health Networks |
1.6% |
| G-III Apparel Group |
1.5% |
| Universal Stainless & Alloy Products |
1.4% |
| Dynamics Research |
1.4% |
| Top 10 as % of Total |
16.6% |
Portfolio Holdings
as of Quarter-End 12/31/2011
View the complete list of holdings for Royce Discovery Fund as of 12/31/2011. Not posted sooner than 15 days after the end of the period. Unaudited schedule of portfolio holdings is presented for informational purposes only.
-
Portfolio Sector Breakdown
as of Quarter-End 12/31/2011
% of Net Assets (Subject to Change)
| Information Technology |
27.3% |
| Consumer Discretionary |
20.8% |
| Industrials |
13.6% |
| Materials |
10.7% |
| Health Care |
9.6% |
| Energy |
7.5% |
| Financials |
2.8% |
| Consumer Staples |
1.9% |
| Treasuries, Cash & Cash Equivalents |
5.7% |
Asset Allocation
as of 12/31/2011
% of Net Assets (Subject to Change)
-
Five-Year Morningstar Statistical Measures as of 12/31/2011*
| |
RDF |
Category Median |
Best Breakpoint |
| Sharpe Ratio |
-0.05 |
0.04 |
0.22 |
| Standard Deviation |
23.17 |
24.47 |
23.19 |
Royce Discovery Fund's value approach produced below average volatility relative to micro-cap objective funds.
Risk Disclosure
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.
Risk/Return Comparison
Five-Year Period Ended 12/31/2011
| |
Average Annual Total Return |
Standard Deviation |
Return Efficiency* |
| RDF |
-2.42 |
23.17 |
-0.10 |
| Russell Microcap |
-3.75 |
25.29 |
-0.15 |
|
|
Russell Microcap Down Quarters
Performance Comparison Since RDF's Inception Through 12/31/11
| Quarter |
Russell Microcap |
RDF |
Spread |
| 9/30/11 |
-22.7% |
-15.8% |
+6.9% |
| 6/30/11 |
-3.5 |
-3.4 |
+0.1 |
| 6/30/10 |
-8.9 |
-7.2 |
+1.7 |
| 12/31/09 |
-0.5 |
+0.2 |
+0.7 |
| 3/31/09 |
-15.2 |
-13.5 |
+1.7 |
| 12/31/08 |
-28.1 |
-22.5 |
+5.6 |
| 9/30/08 |
-0.8 |
-3.2 |
-2.4 |
| 6/30/08 |
-3.5 |
-4.5 |
-1.0 |
| 3/31/08 |
-12.4 |
-9.4 |
+3.0 |
| 12/31/07 |
-7.5 |
-4.5 |
+3.0 |
| 9/30/07 |
-4.6 |
-4.0 |
+0.6 |
| 9/30/06 |
-0.7 |
+1.1 |
+1.8 |
| 6/30/06 |
-6.8 |
-6.9 |
-0.1 |
| 3/31/05 |
-7.4 |
-4.4 |
+3.0 |
| 9/30/04 |
-5.6 |
-5.5 |
+0.1 |
| 6/30/04 |
-1.8 |
-2.8 |
-1.0 |
Royce Discovery Fund outperformed the Russell Microcap in 12 out of 16 down quarters.
Down Market Performance Comparison (In Percentages):
as of Quarter-End 12/31/2011
| |
1-Month* |
YTD* |
1YR |
3YR |
5YR |
Since Inception |
Inception Date |
| RYDFX |
8.40% |
8.40% |
7.83% |
20.80% |
-0.86% |
5.47% |
10/3/2003 |
| Russell Microcap |
8.52% |
8.52% |
-0.50% |
21.78% |
-2.41% |
3.79% |
N/A |
| Annual Operating Expenses: Gross 3.04% Net 1.49% |
| |
4Q* |
YTD* |
1YR |
3YR |
5YR |
Since Inception |
Inception Date |
| RYDFX |
13.09% |
-2.24% |
-2.24% |
13.76% |
-2.42% |
4.50% |
10/3/2003 |
| Russell Microcap |
13.83% |
-9.27% |
-9.27% |
14.23% |
-3.75% |
2.81% |
N/A |
| Annual Operating Expenses: Gross 3.04% Net 1.49% |

-
Shareholder Fees
| (fees paid directly from your investment) |
| Maximum sales charge (load) imposed on purchases |
0.00% |
| Maximum deferred sales charge |
0.00% |
| Maximum sales charge (load) imposed on reinvested dividends |
0.00% |
| Redemption fee (as a percentage of amount redeemed on shares held for less than 180 days) |
1.00% |
-
Annual Fund Operating Expenses
| (expenses that you pay each year as a percentage of the value of your investment) |
| Management fees |
1.00% |
| Distribution (12b-1) fees |
0.25% |
| Other expenses |
1.79% |
| Total annual Fund operating expenses |
3.04% |
| Fee waivers and/or expense reimbursements |
(1.55)% |
| Total annual Fund operating expenses after fee waivers and/or expense reimbursements |
1.49% |
Royce has contractually agreed to waive fees and/or reimburse expenses to the extent necessary to maintain the Fund's net annual operating expenses at or below 1.49% through April 30, 2012 and at or below 1.99% through April 30, 2021.
-
Account Minimums
| To Open an Account |
| Regular |
$2,000 |
| Traditional/Roth IRA/Coverdell ESA |
$1,000 |
| Automatic Investment and Direct Deposit Plans |
$1,000 |
| 401(k)s |
none |
| Subsequent Investments |
| All Account Types |
$50 |
Download literature for Royce Discovery Fund
-

©
Royce & Associates, LLC, 745 Fifth Avenue, New York, NY 10151, (800) 221-4268. All rights reserved. Distributor of The Royce Fund and Royce Capital Fund: Royce Fund Services, Inc., a wholly owned subsidiary of Royce & Associates. The Royce Funds are offered and sold only to persons residing in the United States and are offered by
prospectus only. The
prospectuses include investment objectives, risks, fees, expenses, and other information that you should read and consider carefully before investing. View our
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Sarbanes-Oxley Code of Ethics,
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