552

At a Glance

Why invest in Heritage?

  • Small/mid-cap core fund (generally market caps up to $15 billion) that invests primarily in what Royce believes are industry leaders with discernible competitive advantages, high returns on invested capital, and a sustainable, moat-like franchise
  • Focuses on leading quality companies, those with strong balance sheets, the ability to generate excess cash flow, and attractive prospects that are selling at prices Royce believes do not fully reflect these attributes
  • Outperformed its benchmark, the Russell 2000 Index, in 86% of all monthly rolling 10-year periods for the 20 years ended 9/30/16

As of 09/30/16

  • Small/Mid-Cap
    Core Approach
    $4.66B
    Avg. Market Cap
  • Average
    Volatility
    97%
    Active Share
  • Fund
    Longevity
    20+
    Years of History

Portfolio Management

"My approach is to remain disciplined, develop well-reasoned, well-researched opinions; analyze business ecosystems and all the forces that are at play; and perhaps most importantly, remember that quality in the end wins out."
Steven McBoyle

Performance

Average Annual Total Returns (%)

Outperformed Russell 2000 for the Year To Date, 1-Year, 20-Year and since inception (12/27/95) periods as of 09/30/16.
QTR YTD 1YR 3YR 5YR 10YR 15YR 20YR SINCE INCEPT. DATE
Heritage 6.70 12.1215.653.0910.686.019.1311.8212.16 12/27/95
Russell 2000 9.05 11.4615.476.7115.827.079.268.068.32 N/A

Annual Operating Expenses: Gross 1.82 Net 1.50

NOV YTD 1YR 3YR 5YR 10YR 15YR 20YR SINCE INCEPT. DATE
Heritage 8.04 16.4011.213.078.595.738.3511.8112.26 12/27/95
Russell 2000 11.15 18.0012.086.4513.986.818.728.248.55 N/A

Annual Operating Expenses: Gross 1.82 Net 1.50

DEC YTD 1YR 3YR 5YR 10YR 15YR 20YR SINCE INCEPT. DATE
Heritage -0.10 16.2811.643.228.655.778.3511.8112.25 12/27/95
Russell 2000 N/A N/AN/AN/AN/AN/AN/AN/AN/A N/A

Annual Operating Expenses: Gross 1.82 Net 1.50

Important Performance and Expense 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. Current month-end performance may be higher or lower than performance quoted and may be obtained at www.roycefunds.com. Gross operating expenses reflect the Fund's gross total annual operating expenses for the K Class and include management fees, 12b-1 distribution and service fees, other expenses, and acquired fund fees and expenses. Net operating expenses reflect contractual waivers and/or expense reimbursements. All expense information is reported as of the Fund's most current prospectus. Royce & Associates has contractually agreed, without right of termination, to waive fees and/or reimburse expenses to the extent necessary to maintain the K Classes' net annual operating expenses (excluding brokerage commissions, taxes, interest, litigation expenses, acquired fund fees and expenses, and other expenses not borne in the ordinary course of business) at or below 1.59% through April 30, 2015. 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.

All performance and risk information presented in this material prior to the commencement date of K Class shares on 5/15/08 reflects Service Class results. K Class shares have higher annual expenses than Service Class shares. If K Class's annual expenses had been reflected, total returns prior to 5/15/08 would have been lower.

Rolling Returns

On a monthly basis, the Fund outperformed the Russell 2000 in 86% of all 10-Year periods; 82% of all 5-Year periods; and 63% of all 1-Year periods.

For 97% of the periods, 10-year average annual total returns were greater than 5%.

Relative Returns: Monthly Rolling Average Annual Return Periods 20 Years Through 09/30/16

periods beating
the index(%)
fund
avg(%)
index
avg(%)
10-year
104/121
86 10.3 6.9
5-year
148/181
82 10.9 7.4
1-year
144/229
63 13.5 9.4

Absolute Returns: 10-Year Monthly Rolling Return PeriodsNumber of 10-Year Average Annual Return Periods Since the Fund’s Inception

Return Range Periods % in Range
> 10% 55 42
> 5% and ≤ 10% 71 55
> 0% and ≤ 5% 4 3
≤ 0% 0 0

The Fund averaged a 10.9% return over all 130 10-year monthly rolling return periods.

Market Cycle Performance

The Fund outperformed the Russell 2000 from the 6/23/15 index peak through current (9/30/16) and in one of the two previous full market cycle periods.
Peak-Peak - 07/13/07 - 04/29/11
Heritage24.7%
Russell 20006.6%

Peak-Peak - 04/29/11 - 06/23/15
Heritage20.5%
Russell 200058.5%

Peak-Current - 06/23/15 - 09/30/16
Heritage0.9%
Russell 2000-1.5%

Royce defines market cycles as those that have retreated at least 15% from a previous market peak and have rebounded to establish a new peak above the previous one. 

Royce defines market cycles as those that have retreated at least 15% from a previous market peak and have rebounded to establish a new peak above the previous one. 

Calendar Year Total Returns (%)

 

Growth of Investment

Value of $10,000 invested between 12/27/95 and 09/30/16

Heritage$108,416.67
Russell 2000$52,543.63

Portfolio Impactas of 09/30/16

SECTOR NAMEAVERAGE WEIGHT (%)TOTAL RETURN (%)CONTRIBUTION TO RETURN (%)
Consumer Discretionary
20.64
11.78
2.36
Industrials
26.72
6.39
1.68
Materials
11.86
11.54
1.33
Real Estate
5.01
15.71
0.72
Information Technology
7.65
6.13
0.47
Financials
9.65
2.71
0.24
Health Care
1.08
5.20
0.06
Consumer Staples
1.09
4.97
0.06
Utilities
1.76
0.51
0.00
Cash
14.53
0.07
0.01

Top Contributors

INDUSTRYSECTORGAIN (%)
ChemicalsMaterials1.28
Auto ComponentsConsumer Discretionary1.12
Real Estate Management & DevelopmentReal Estate0.72
AutomobilesConsumer Discretionary0.69
MachineryIndustrials0.55

Top Detractors

INDUSTRYSECTORGAIN (%)
Metals & MiningMaterials-0.13
InsuranceFinancials-0.12
Multiline RetailConsumer Discretionary-0.08
Household DurablesConsumer Discretionary-0.05
Food & Staples RetailingConsumer Staples-0.03

Top Contributors

COMPANYINDUSTRYSECTORGAIN (%)
Thor IndustriesAutomobilesConsumer Discretionary0.69
Minerals TechnologiesChemicalsMaterials0.55
Standard Motor ProductsAuto ComponentsConsumer Discretionary0.51
Westlake ChemicalChemicalsMaterials0.43
Drew IndustriesAuto ComponentsConsumer Discretionary0.33

Top Detractors

COMPANYINDUSTRYSECTORGAIN (%)
Alleghany CorporationInsuranceFinancials-0.12
Reliance Steel & AluminumMetals & MiningMaterials-0.10
NVRHousehold DurablesConsumer Discretionary-0.08
Dollar TreeMultiline RetailConsumer Discretionary-0.08
CoachTextiles, Apparel & Luxury GoodsConsumer Discretionary-0.06
SECTOR NAMEAVERAGE WEIGHT (%)TOTAL RETURN (%)CONTRIBUTION TO RETURN (%)
Industrials
27.23
16.93
5.19
Consumer Discretionary
20.80
20.90
4.33
Materials
10.06
24.23
2.57
Information Technology
9.13
11.86
1.11
Utilities
1.96
36.25
0.73
Consumer Staples
1.46
13.62
0.46
Energy
0.02
-5.59
-0.02
Health Care
1.11
9.88
-0.13
Real Estate
4.23
-13.37
-0.41
Financials
10.92
-2.36
-0.66
Cash
12.67
0.21
0.03
Unclassified
0.42
16.77
0.18

Top Contributors

INDUSTRYSECTORGAIN (%)
Auto ComponentsConsumer Discretionary2.18
Commercial Services & SuppliesIndustrials1.66
ChemicalsMaterials1.39
MachineryIndustrials1.15
AutomobilesConsumer Discretionary1.06

Top Detractors

INDUSTRYSECTORGAIN (%)
Capital MarketsFinancials-0.74
Specialty RetailConsumer Discretionary-0.50
Real Estate Management & DevelopmentReal Estate-0.41
Real Estate Management & DevelopmentFinancials-0.33
Health Care Equipment & SuppliesHealth Care-0.20

Top Contributors

COMPANYINDUSTRYSECTORGAIN (%)
Minerals TechnologiesChemicalsMaterials1.06
Thor IndustriesAutomobilesConsumer Discretionary1.06
Drew IndustriesAuto ComponentsConsumer Discretionary1.05
CopartCommercial Services & SuppliesIndustrials1.02
UGI CorporationGas UtilitiesUtilities0.73

Top Detractors

COMPANYINDUSTRYSECTORGAIN (%)
Signet JewelersSpecialty RetailConsumer Discretionary-0.65
Anixter InternationalElectronic Equipment, Instruments & ComponentsInformation Technology-0.33
Kennedy Wilson Europe Real EstateReal Estate Management & DevelopmentFinancials-0.33
ManpowerGroupProfessional ServicesIndustrials-0.27
Air Lease Cl. ATrading Companies & DistributorsIndustrials-0.23
SECTOR NAMEAVERAGE WEIGHT (%)TOTAL RETURN (%)CONTRIBUTION TO RETURN (%)
Industrials
25.70
20.42
6.02
Consumer Discretionary
19.71
27.11
5.26
Materials
9.76
29.48
3.25
Information Technology
9.97
17.32
1.92
Utilities
1.90
33.04
0.71
Consumer Staples
1.71
9.26
0.42
Health Care
1.51
16.72
0.07
Energy
0.08
1.64
0.02
Real Estate
3.96
-7.04
-0.19
Financials
11.80
-1.14
-0.30
Cash
13.33
0.23
0.03
Unclassified
0.56
34.78
0.35

Top Contributors

INDUSTRYSECTORGAIN (%)
Auto ComponentsConsumer Discretionary2.71
Commercial Services & SuppliesIndustrials1.90
ChemicalsMaterials1.82
AutomobilesConsumer Discretionary1.22
Electronic Equipment, Instruments & ComponentsInformation Technology1.15

Top Detractors

INDUSTRYSECTORGAIN (%)
Specialty RetailConsumer Discretionary-0.69
Capital MarketsFinancials-0.47
Real Estate Management & DevelopmentFinancials-0.29
Real Estate Management & DevelopmentReal Estate-0.19
Health Care Equipment & SuppliesHealth Care-0.18

Top Contributors

COMPANYINDUSTRYSECTORGAIN (%)
CopartCommercial Services & SuppliesIndustrials1.31
Drew IndustriesAuto ComponentsConsumer Discretionary1.28
Thor IndustriesAutomobilesConsumer Discretionary1.23
Minerals TechnologiesChemicalsMaterials1.02
Standard Motor ProductsAuto ComponentsConsumer Discretionary0.87

Top Detractors

COMPANYINDUSTRYSECTORGAIN (%)
Signet JewelersSpecialty RetailConsumer Discretionary-0.65
Kennedy Wilson Europe Real EstateReal Estate Management & DevelopmentFinancials-0.29
Anixter InternationalElectronic Equipment, Instruments & ComponentsInformation Technology-0.25
Air Lease Cl. ATrading Companies & DistributorsIndustrials-0.21
Live Nation EntertainmentMediaConsumer Discretionary-0.21
SECTOR NAMEAVERAGE WEIGHT (%)TOTAL RETURN (%)CONTRIBUTION TO RETURN (%)
Consumer Discretionary
14.49
37.58
5.91
Information Technology
14.62
22.36
3.54
Industrials
24.12
6.92
2.96
Materials
9.59
18.99
2.15
Health Care
3.59
51.57
1.37
Utilities
1.06
86.92
0.88
Financials
14.81
7.64
0.61
Consumer Staples
1.28
11.82
0.57
Real Estate
2.62
-21.53
-0.72
Energy
2.57
-47.20
-2.44
Cash
10.78
0.29
0.04
Unclassified
0.47
56.52
0.42

Top Contributors

INDUSTRYSECTORGAIN (%)
Auto ComponentsConsumer Discretionary2.53
Commercial Services & SuppliesIndustrials1.99
DistributorsConsumer Discretionary1.64
Electronic Equipment, Instruments & ComponentsInformation Technology1.55
IT ServicesInformation Technology1.35

Top Detractors

INDUSTRYSECTORGAIN (%)
Energy Equipment & ServicesEnergy-2.42
Real Estate Management & DevelopmentReal Estate-0.72
Construction & EngineeringIndustrials-0.43
Diversified Consumer ServicesConsumer Discretionary-0.37
Specialty RetailConsumer Discretionary-0.36

Top Contributors

COMPANYINDUSTRYSECTORGAIN (%)
Drew IndustriesAuto ComponentsConsumer Discretionary1.44
CopartCommercial Services & SuppliesIndustrials1.24
Thor IndustriesAutomobilesConsumer Discretionary1.10
UGI CorporationGas UtilitiesUtilities0.88
Core-Mark Holding CompanyDistributorsConsumer Discretionary0.84

Top Detractors

COMPANYINDUSTRYSECTORGAIN (%)
TransoceanEnergy Equipment & ServicesEnergy-0.76
Anixter InternationalElectronic Equipment, Instruments & ComponentsInformation Technology-0.66
Unit CorporationEnergy Equipment & ServicesEnergy-0.55
Medley Management Cl. ACapital MarketsFinancials-0.54
Trican Well ServiceEnergy Equipment & ServicesEnergy-0.48
SECTOR NAMEAVERAGE WEIGHT (%)TOTAL RETURN (%)CONTRIBUTION TO RETURN (%)
Industrials
24.55
81.13
21.97
Information Technology
16.25
102.79
17.65
Consumer Discretionary
13.46
173.36
17.60
Financials
15.61
84.96
13.48
Health Care
3.81
116.70
3.41
Consumer Staples
1.31
92.35
1.66
Materials
10.04
12.08
1.53
Utilities
0.69
143.47
0.94
Energy
3.84
-17.80
0.86
Telecommunication Services
0.01
-8.73
-0.01
Real Estate
2.02
12.15
-0.02
Cash
8.13
0.41
0.04
Unclassified
0.28
59.29
0.43

Top Contributors

INDUSTRYSECTORGAIN (%)
Capital MarketsFinancials12.54
Electronic Equipment, Instruments & ComponentsInformation Technology8.14
Professional ServicesIndustrials4.97
MachineryIndustrials4.68
Household DurablesConsumer Discretionary4.68

Top Detractors

INDUSTRYSECTORGAIN (%)
Metals & MiningMaterials-2.33
Real Estate Management & DevelopmentFinancials-0.28
Electronic Equipment, Instruments & CompInformation Technology-0.28
Internet & Direct Marketing RetailConsumer Discretionary-0.17
Communications EquipmentInformation Technology-0.16

Top Contributors

COMPANYINDUSTRYSECTORGAIN (%)
Drew IndustriesAuto ComponentsConsumer Discretionary2.19
Thor IndustriesAutomobilesConsumer Discretionary1.95
SEI InvestmentsCapital MarketsFinancials1.72
Mohawk IndustriesHousehold DurablesConsumer Discretionary1.63
LKQ CorporationDistributorsConsumer Discretionary1.46

Top Detractors

COMPANYINDUSTRYSECTORGAIN (%)
SprottCapital MarketsFinancials-0.83
TransoceanEnergy Equipment & ServicesEnergy-0.76
Allied Nevada GoldMetals & MiningMaterials-0.73
Gold Fields ADRMetals & MiningMaterials-0.67
LamprellEnergy Equipment & ServicesEnergy-0.55

Risk

Average Volatility vs. Peer Group as of 09/30/16

The Fund has a average volatility within its peer group of 866 Small/Mid-Cap Funds based on 5-year rolling standard deviation.

Down Market Performance Comparisonas of 09/30/16

The Fund outperformed the Russell 2000 during eight out of 11 downturns of 10% or more from the index’s prior historical high over the last 20 years.

Market Downturns (%)

DownMarketImg

Russell 2000 Down Quarters

QUARTER ENDRUSSELL 2000 (%)HERITAGE (%)SPREAD (%)
03/31/16-1.5+4.7+6.2
09/30/15-11.9-10.5+1.4
09/30/14-7.4-7.40.0
06/30/12-3.5-9.4-5.9
09/30/11-21.9-23.0-1.1
06/30/11-1.6-2.4-0.8
06/30/10-9.9-8.5+1.4
03/31/09-15.0-7.7+7.3
12/31/08-26.1-25.0+1.1
09/30/08-1.1-3.9-2.8
03/31/08-9.9-10.9-1.0
12/31/07-4.6-4.2+0.4
09/30/07-3.1-1.8+1.3
06/30/06-5.0-3.7+1.3
03/31/05-5.3-6.8-1.5
09/30/04-2.9-3.5-0.6
03/31/03-4.5-6.0-1.5
09/30/02-21.4-19.7+1.7
06/30/02-8.4-9.6-1.2

Capture Ratios Fund's First Full Quarter (12/31/95) to 09/30/16

Upside Capture Ratio measures a manager's performance in up markets relative to the Fund's benchmark. It is calculated by measuring the Fund's performance in quarters when the benchmark goes up and dividing it by the benchmark's return in those quarters.

Downside Capture Ratio measures a manager's performance in down markets relative to the Fund's benchmark. It is calculated by measuring the Fund's performance in quarters when the benchmark goes down and dividing it by the benchmark's return in those quarters.

Long Term Risk Measurementas of 09/30/16

Over the past 5 years, the Fund produced lower volatility than the Russell 2000 Index.
Over the past 3 years, the Fund produced lower volatility than the Russell 2000 Index.
From the Fund's inception, the Fund outperformed the Russell 2000 Index with lower volatility.

Go to Relative Risk Spectrum Tool

Morningstar Statistical Measures as of 09/30/16

The Fund produced lower volatility than the Russell 2000 and 50% of small/mid-cap objective funds, as shown by its standard deviation.
The Fund produced lower volatility than the Russell 2000 and 50% of small/mid-cap objective funds, as shown by its standard deviation.
Sharpe RatioStandard Deviation
Heritage0.3520.02
Russell 20000.4019.85
Category Median0.4218.83
Best Quartile Breakpoint0.4817.76

Category Median and Best Quartile Breakpoint based on 712 small/mid-cap objective funds (oldest class only) with at least ten years of history.
Sharpe Ratio Standard Deviation
Heritage
Russell 2000
Category Median
Best Quartile Breakpoint

Composition

Morningstar Style Map™as of 06/30/16

mstar-RHFKX

The Morningstar Style Map is the Morningstar Style Box™ with the center 75% of fund holdings plotted as the Morningstar Ownership Zone™. The Morningstar Style Box is designed to reveal a fund's investment strategy. The Morningstar Ownership Zone provides detail about a portfolio's investment style by showing the range of stock sizes and styles. The Ownership Zone is derived by plotting each stock in the portfolio within the proprietary Morningstar Style Box. The shaded area represents the center 75% of the Fund's assets while the plot point in the middle represents the weighted average of its holdings. Over time, the shape and location of a fund's ownership zone may vary.

Portfolio Diagnosticsas of 09/30/16

  RHFKX Russell 2000
Average Market Cap
4.66B
1.50B
97%
-
2015 Portfolio Turnover
66%
-
Weighted Average P/E,
19.6x
20.6x
Weighted Average P/B
2.6x
2.1x
U.S. Investments (% of Net Assets)
81.6%
-
Non-U.S. Investments (% of Net Assets)
7.2%
-

Portfolio Allocation

  • Total
    Holdings
    85


SECTORS
RHFKX (%) RUSSELL
2000 (%)
Industrials
26.5
14.1
Consumer Discretionary
22.5
12.6
Materials
12.9
4.7
Financials
9.9
17.4
Information Technology
7.4
18.1
Real Estate
5.3
8.2
Utilities
1.8
3.8
Health Care
1.3
14.2
Consumer Staples
1.2
3.0
Energy
-
3.2
Telecommunication Services
-
0.7
Cash and Cash Equivalents
11.1
-
POSITIONS% OF NET ASSETS
(SUBJECT TO CHANGE)
Standard Motor Products
3.0
Thor Industries
3.0
LKQ Corporation
2.9
Minerals Technologies
2.9
Copart
2.9
Alleghany Corporation
2.6
Westlake Chemical
2.5
Berkshire Hathaway Cl. B
2.5
Neenah Paper
2.3
Gentex Corporation
2.1
Jones Lang LaSalle
2.1
Valmont Industries
2.0
Kirby Corporation
2.0
Drew Industries
1.9
DST Systems
1.9
ManpowerGroup
1.9
UGI Corporation
1.8
Westinghouse Air Brake Technologies
1.7
Kennedy-Wilson Holdings
1.7
Union Pacific
1.7
Top 20 as % of Net Assets
45.4

SECTORS
RHFKX (%) RUSSELL
2000 (%)
Industrials
23.7
-
Consumer Discretionary
23.6
-
Materials
12.1
-
Financials
10.0
-
Information Technology
5.7
-
Real Estate
4.8
-
Utilities
2.0
-
Consumer Staples
1.2
-
Health Care
1.2
-
Cash and Cash Equivalents
15.7
-
POSITIONS% OF NET ASSETS
(SUBJECT TO CHANGE)
Copart
3.0
Thor Industries
2.9
Minerals Technologies
2.9
Standard Motor Products
2.8
Alleghany Corporation
2.7
LKQ Corporation
2.7
Berkshire Hathaway Cl. B
2.6
Westlake Chemical
2.6
Neenah Paper
2.2
Gentex Corporation
2.1
Valmont Industries
2.1
ManpowerGroup
2.0
UGI Corporation
2.0
Drew Industries
1.9
Jones Lang LaSalle
1.9
Kirby Corporation
1.8
Lam Research
1.7
DST Systems
1.7
Sensient Technologies
1.6
Union Pacific
1.6
Top 20 as % of Net Assets
44.8

Portfolio Holdings

View the complete list of holdings for this fund as of 09/30/16. Unaudited schedule of portfolio holdings is presented for informational purposes only.

Least Portfolio Overlap - U.S. Equity Funds

Greatest Portfolio Overlap - U.S. Equity Funds

Geographical Breakdown

Distributions

NAV & Distributions


Start DateEnd Date
to

Learn more about distributions

Distributions

RECORD
DATE
EX-DATE PAYABLE
DATE
INCOME ($) SHORT
TERM
GAINS ($)
LONG
TERM
GAINS ($)
RETURN OF
CAPITAL ($)
TOTAL ($) REINVEST
PRICE ($)
12/16/15 12/17/15 12/17/15 0.0621 0.0184 1.2395 - 1.3200 8.63
12/16/14 12/17/14 12/17/14 0.0000 0.0657 0.7597 - 0.8254 10.44
12/04/13 12/05/13 12/05/13 0.0000 0.3248 1.6035 - 1.9283 11.28
12/27/12 12/28/12 12/28/12 0.0289 - - - 0.0289 10.72
12/05/12 12/06/12 12/06/12 0.0357 - 0.3625 - 0.3982 10.55
12/07/11 12/08/11 12/08/11 0.0440 0.0658 0.5243 - 0.6341 9.89
12/08/10 12/09/10 12/09/10 0.0609 - 0.2902 - 0.3511 11.34

NAV History for

Fees & Expenses

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) 0.00

Annual Fund Operating Expenses (%)

(expenses that you pay each year as a percentage of the value of your investment)

Management fees 0.85
Distribution (12b-1) fees 0.25
Other expenses 0.66
Acquired fund fees and expenses 0.06
Total annual Fund operating expenses 1.82
Fee waivers and/or expense reimbursements (0.32)
Total annual Fund operating expenses after fee waivers and/or expense reimbursements1.50
Royce & Associates has contractually agreed, without right of termination, to waive fees and/or reimburse expenses to the extent necessary to maintain the K Classes' net annual operating expenses (excluding brokerage commissions, taxes, interest, litigation expenses, acquired fund fees and expenses, and other expenses not borne in the ordinary course of business) at or below 1.44% through April 30, 2017. Total annual Fund operating expenses may differ from the expense ratio in the Fund's Financial Highlights because they include only the Fund's direct operating expenses and do not include acquired fund fees and expenses, which 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.

Important Disclosure Information

This material is not authorized for distribution unless preceded or accompanied by a current prospectus. Please read the prospectus carefuly before investing or sending money. The Fund generally invests in micro-cap, small-cap, and 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.) The Fund’s broadly diversified portfolio does not ensure a profit or guarantee against loss. The Fund may invest up to 35% of its net assets (measured at the time of investment) in securities of companies headquartered in foreign countries, which may involve political, economic, currency, and other risks not encountered in U.S. investments. (Please see "Investing in Foreign Securities" in the prospectus.)

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.

The Price-Earnings, or P/E, Ratio is calculated by dividing a company's share price by its trailing 12-month earnings-per-share (EPS). The Fund's P/E ratio calculation excludes companies with zero or negative earnings. The Price-to-Book, or P/B, Ratio is calculated by dividing a company's share price by its book value per share. 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. 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. 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 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 performance of an index does not represent exactly any particular investment, as you cannot invest directly in an index. The performance of an index does not represent exactly any particular investment, as you cannot invest directly in an index.

Steven McBoyle lead manager since 2015 (manager 2012-2015 and assistant portfolio manager 2011-2012), Chuck Royce since 2015 (lead portfolio manager 2010-2015 and manager 1995-2010)

5/15/2008 12:00:00 AM

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