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 88% of all monthly rolling 10-year periods for the 20 years ended 6/30/16

As of 06/30/16

  • Small/Mid-Cap
    Core Approach
    $4.15B
    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, 15-Year, 20-Year and since inception (12/27/95) periods as of 06/30/16.
QTR YTD 1YR 3YR 5YR 10YR 15YR 20YR SINCE INCEPT. DATE
Heritage 0.33 5.08-2.943.643.685.377.1811.5111.97 12/27/95
Russell 2000 3.79 2.22-6.737.098.356.206.967.617.97 N/A

Annual Operating Expenses: Gross 1.82 Net 1.50

AUG YTD 1YR 3YR 5YR 10YR 15YR 20YR SINCE INCEPT. DATE
Heritage 1.58 11.6610.724.717.416.148.0511.8912.19 12/27/95
Russell 2000 1.77 10.238.598.5312.857.048.138.218.30 N/A

Annual Operating Expenses: Gross 1.82 Net 1.50

SEP YTD 1YR 3YR 5YR 10YR 15YR 20YR SINCE INCEPT. DATE
Heritage -0.31 11.3213.072.8410.136.079.3711.8012.14 12/27/95
Russell 2000 1.28 11.6511.756.8415.587.209.768.158.34 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 88% of all 10-Year periods; 83% of all 5-Year periods; and 62% 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 06/30/16

periods beating
the index(%)
fund
avg(%)
index
avg(%)
10-year
107/121
88 10.6 7.0
5-year
151/181
83 11.2 7.4
1-year
143/229
62 13.7 9.7

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 43
> 5% and ≤ 10% 68 54
> 0% and ≤ 5% 4 3
≤ 0% 0 0

The Fund averaged a 11.0% return over all 127 10-year monthly rolling return periods.

Market Cycle Performance

The Fund outperformed the Russell 2000 from the 6/23/15 index peak through current (6/30/16) 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 - 06/30/16
Heritage-5.5%
Russell 2000-9.7%

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 06/30/16

Heritage$101,605.74
Russell 2000$48,184.89

Portfolio Impactas of 06/30/16

SECTOR NAMEAVERAGE WEIGHT (%)TOTAL RETURN (%)CONTRIBUTION TO RETURN (%)
Industrials
28.78
2.64
0.68
Materials
9.72
5.55
0.54
Consumer Discretionary
21.10
1.89
0.35
Utilities
2.03
12.93
0.25
Health Care
0.69
13.44
0.09
Consumer Staples
0.90
-4.09
-0.03
Information Technology
8.12
-0.22
-0.04
Financials
15.11
-6.99
-1.11
Cash
13.28
0.06
0.01
Unclassified
0.26
1.58
0.00

Top Contributors

INDUSTRYSECTORGAIN (%)
Commercial Services & SuppliesIndustrials0.83
Auto ComponentsConsumer Discretionary0.81
Metals & MiningMaterials0.30
Gas UtilitiesUtilities0.25
InsuranceFinancials0.24

Top Detractors

INDUSTRYSECTORGAIN (%)
Real Estate Management & DevelopmentFinancials-0.83
Specialty RetailConsumer Discretionary-0.81
Capital MarketsFinancials-0.59
Trading Companies & DistributorsIndustrials-0.28
MachineryIndustrials-0.24

Top Contributors

COMPANYINDUSTRYSECTORGAIN (%)
Drew IndustriesAuto ComponentsConsumer Discretionary0.53
CopartCommercial Services & SuppliesIndustrials0.46
Standard Motor ProductsAuto ComponentsConsumer Discretionary0.36
Ritchie Bros. AuctioneersCommercial Services & SuppliesIndustrials0.27
Alleghany CorporationInsuranceFinancials0.25

Top Detractors

COMPANYINDUSTRYSECTORGAIN (%)
Signet JewelersSpecialty RetailConsumer Discretionary-0.72
ManpowerGroupProfessional ServicesIndustrials-0.39
Lazard Cl. ACapital MarketsFinancials-0.31
Air Lease Cl. ATrading Companies & DistributorsIndustrials-0.29
LaSalle Partners IncorporatedReal Estate Management & DevelopmentFinancials-0.27
SECTOR NAMEAVERAGE WEIGHT (%)TOTAL RETURN (%)CONTRIBUTION TO RETURN (%)
Industrials
27.49
9.91
3.28
Consumer Discretionary
20.88
8.16
1.84
Materials
9.14
11.38
1.16
Utilities
2.07
35.56
0.68
Information Technology
9.88
5.40
0.60
Consumer Staples
1.64
8.24
0.38
Energy
0.03
-5.59
-0.02
Health Care
1.12
4.45
-0.18
Financials
15.40
-9.73
-1.90
Cash
11.72
0.13
0.02
Unclassified
0.63
16.77
0.17

Top Contributors

INDUSTRYSECTORGAIN (%)
Commercial Services & SuppliesIndustrials1.08
Auto ComponentsConsumer Discretionary1.00
Metals & MiningMaterials0.76
Gas UtilitiesUtilities0.68
Electronic Equipment, Instruments & ComponentsInformation Technology0.59

Top Detractors

INDUSTRYSECTORGAIN (%)
Real Estate Management & DevelopmentFinancials-1.40
Capital MarketsFinancials-1.16
Specialty RetailConsumer Discretionary-0.67
Professional ServicesIndustrials-0.31
Health Care Equipment & SuppliesHealth Care-0.18

Top Contributors

COMPANYINDUSTRYSECTORGAIN (%)
CopartCommercial Services & SuppliesIndustrials0.72
Reliance Steel & AluminumMetals & MiningMaterials0.68
UGI CorporationGas UtilitiesUtilities0.68
Drew IndustriesAuto ComponentsConsumer Discretionary0.68
Minerals TechnologiesChemicalsMaterials0.48

Top Detractors

COMPANYINDUSTRYSECTORGAIN (%)
Signet JewelersSpecialty RetailConsumer Discretionary-0.61
LaSalle Partners IncorporatedReal Estate Management & DevelopmentFinancials-0.45
Kennedy-Wilson HoldingsReal Estate Management & DevelopmentFinancials-0.45
ManpowerGroupProfessional ServicesIndustrials-0.45
Westlake ChemicalChemicalsMaterials-0.44
SECTOR NAMEAVERAGE WEIGHT (%)TOTAL RETURN (%)CONTRIBUTION TO RETURN (%)
Industrials
24.52
0.83
1.32
Consumer Discretionary
18.29
4.32
1.28
Utilities
1.85
34.70
0.69
Consumer Staples
2.04
3.96
0.36
Materials
9.14
-2.11
0.07
Health Care
1.97
10.54
-0.11
Information Technology
11.35
-1.07
-0.15
Energy
0.33
-20.86
-0.26
Financials
17.23
-21.15
-4.76
Cash
12.52
0.17
0.02
Unclassified
0.77
39.32
0.34

Top Contributors

INDUSTRYSECTORGAIN (%)
Auto ComponentsConsumer Discretionary1.12
Commercial Services & SuppliesIndustrials1.06
Metals & MiningMaterials0.69
Gas UtilitiesUtilities0.69
DistributorsConsumer Discretionary0.57

Top Detractors

INDUSTRYSECTORGAIN (%)
Capital MarketsFinancials-3.44
Real Estate Management & DevelopmentFinancials-1.59
Specialty RetailConsumer Discretionary-1.22
ChemicalsMaterials-0.88
SoftwareInformation Technology-0.35

Top Contributors

COMPANYINDUSTRYSECTORGAIN (%)
CopartCommercial Services & SuppliesIndustrials0.83
Drew IndustriesAuto ComponentsConsumer Discretionary0.80
UGI CorporationGas UtilitiesUtilities0.69
Reliance Steel & AluminumMetals & MiningMaterials0.64
Valmont IndustriesConstruction & EngineeringIndustrials0.38

Top Detractors

COMPANYINDUSTRYSECTORGAIN (%)
Westlake ChemicalChemicalsMaterials-0.81
KKR & Co. L.P.Capital MarketsFinancials-0.64
Signet JewelersSpecialty RetailConsumer Discretionary-0.61
ManpowerGroupProfessional ServicesIndustrials-0.57
LaSalle Partners IncorporatedReal Estate Management & DevelopmentFinancials-0.57
SECTOR NAMEAVERAGE WEIGHT (%)TOTAL RETURN (%)CONTRIBUTION TO RETURN (%)
Consumer Discretionary
13.68
39.65
4.80
Information Technology
15.44
25.75
4.66
Industrials
23.62
13.67
4.29
Health Care
3.84
54.49
1.51
Materials
9.38
12.85
1.39
Utilities
0.93
87.44
0.82
Consumer Staples
1.28
16.17
0.57
Financials
17.64
7.05
0.51
Telecommunication Services
0.01
-16.82
-0.02
Energy
2.94
-41.06
-1.72
Cash
10.77
0.22
0.03
Unclassified
0.47
56.52
0.40

Top Contributors

INDUSTRYSECTORGAIN (%)
Electronic Equipment, Instruments & ComponentsInformation Technology2.11
Commercial Services & SuppliesIndustrials1.90
IT ServicesInformation Technology1.63
Auto ComponentsConsumer Discretionary1.54
DistributorsConsumer Discretionary1.43

Top Detractors

INDUSTRYSECTORGAIN (%)
Energy Equipment & ServicesEnergy-1.72
Real Estate Management & DevelopmentFinancials-1.48
Diversified Consumer ServicesConsumer Discretionary-0.24
Internet Software & ServicesInformation Technology-0.23
Trading Companies & DistributorsIndustrials-0.22

Top Contributors

COMPANYINDUSTRYSECTORGAIN (%)
Drew IndustriesAuto ComponentsConsumer Discretionary1.14
CopartCommercial Services & SuppliesIndustrials0.93
UGI CorporationGas UtilitiesUtilities0.82
Core-Mark Holding CompanyDistributorsConsumer Discretionary0.80
FiservIT ServicesInformation Technology0.77

Top Detractors

COMPANYINDUSTRYSECTORGAIN (%)
TransoceanEnergy Equipment & ServicesEnergy-0.71
Westlake ChemicalChemicalsMaterials-0.62
Unit CorporationEnergy Equipment & ServicesEnergy-0.51
Medley Management Cl. ACapital MarketsFinancials-0.51
LaSalle Partners IncorporatedReal Estate Management & DevelopmentFinancials-0.48
SECTOR NAMEAVERAGE WEIGHT (%)TOTAL RETURN (%)CONTRIBUTION TO RETURN (%)
Industrials
24.43
35.40
10.74
Consumer Discretionary
13.03
95.47
10.16
Information Technology
16.84
40.68
7.59
Financials
17.67
27.93
5.75
Health Care
4.03
68.96
1.56
Consumer Staples
1.37
62.73
1.09
Utilities
0.60
67.48
0.81
Telecommunication Services
0.01
-47.21
-0.06
Energy
4.16
-45.07
-2.99
Materials
10.03
-22.66
-4.44
Cash
7.56
0.34
0.03
Unclassified
0.28
59.29
0.40

Top Contributors

INDUSTRYSECTORGAIN (%)
Capital MarketsFinancials5.45
Professional ServicesIndustrials3.96
Electronic Equipment, Instruments & ComponentsInformation Technology3.16
Household DurablesConsumer Discretionary3.16
IT ServicesInformation Technology2.30

Top Detractors

INDUSTRYSECTORGAIN (%)
Metals & MiningMaterials-5.17
Energy Equipment & ServicesEnergy-3.04
Real Estate Management & DevelopmentFinancials-1.21
Electronic Equipment, Instruments & CompInformation Technology-0.55
Communications EquipmentInformation Technology-0.49

Top Contributors

COMPANYINDUSTRYSECTORGAIN (%)
Drew IndustriesAuto ComponentsConsumer Discretionary1.61
Mohawk IndustriesHousehold DurablesConsumer Discretionary1.31
SEI InvestmentsCapital MarketsFinancials1.26
FiservIT ServicesInformation Technology1.17
Thor IndustriesAutomobilesConsumer Discretionary1.10

Top Detractors

COMPANYINDUSTRYSECTORGAIN (%)
Trican Well ServiceEnergy Equipment & ServicesEnergy-1.16
SprottCapital MarketsFinancials-1.13
LamprellEnergy Equipment & ServicesEnergy-0.94
GrafTech InternationalElectrical EquipmentIndustrials-0.81
TransoceanEnergy Equipment & ServicesEnergy-0.71

Risk

Average Volatility vs. Peer Group as of 06/30/16

The Fund has a average volatility within its peer group of 868 Small/Mid-Cap Funds based on 5-year rolling standard deviation.

Down Market Performance Comparisonas of 06/30/16

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

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
09/30/01-20.8-18.6+2.2

Capture Ratios Fund's First Full Quarter (12/31/95) to 06/30/16

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 06/30/16

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 06/30/16

The Fund produced lower volatility than the Russell 2000 and 75% of small/mid-cap objective funds, as shown by its standard deviation.
The Fund produced lower volatility than the Russell 2000, as shown by its standard deviation.
Sharpe RatioStandard Deviation
Heritage0.3220.01
Russell 20000.3619.83
Category Median0.3818.82
Best Quartile Breakpoint0.4417.77

Category Median and Best Quartile Breakpoint based on 719 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 06/30/16

  RHFKX Russell 2000
Average Market Cap
4.15B
1.37B
97%
-
2015 Portfolio Turnover
66%
-
Weighted Average P/E,
18.0x
19.6x
Weighted Average P/B
2.5x
2.0x
U.S. Investments (% of Net Assets)
80.3%
-
Non-U.S. Investments (% of Net Assets)
6.3%
-

Portfolio Allocation

  • Total
    Holdings
    90


SECTORS
RHFKX (%) RUSSELL
2000 (%)
Industrials
29.1
13.8
Consumer Discretionary
20.1
13.5
Financials
13.5
25.8
Materials
11.8
4.6
Information Technology
8.1
17.3
Utilities
2.1
4.3
Consumer Staples
1.0
3.1
Health Care
1.0
13.6
Energy
-
3.0
Telecommunication Services
-
0.9
Cash and Cash Equivalents
13.4
-
POSITIONS% OF NET ASSETS
(SUBJECT TO CHANGE)
Standard Motor Products
2.7
Copart
2.7
Alleghany Corporation
2.6
LKQ Corporation
2.5
Reliance Steel & Aluminum
2.4
Thor Industries
2.3
Drew Industries
2.2
Minerals Technologies
2.1
UGI Corporation
2.1
Neenah Paper
2.0
Valmont Industries
2.0
Kirby Corporation
2.0
Berkshire Hathaway Cl. B
1.9
Kennedy-Wilson Holdings
1.8
Gentex Corporation
1.8
DST Systems
1.8
ManpowerGroup
1.7
Westlake Chemical
1.7
Jones Lang LaSalle
1.5
Rogers Corporation
1.5
Top 20 as % of Net Assets
41.3

SECTORS
RHFKX (%) RUSSELL
2000 (%)
Industrials
26.6
-
Consumer Discretionary
20.2
-
Financials
15.0
-
Materials
11.6
-
Information Technology
8.2
-
Utilities
1.7
-
Health Care
1.1
-
Consumer Staples
1.1
-
Cash and Cash Equivalents
14.6
-
POSITIONS% OF NET ASSETS
(SUBJECT TO CHANGE)
Copart
2.7
LKQ Corporation
2.6
Thor Industries
2.6
Alleghany Corporation
2.5
Standard Motor Products
2.5
Minerals Technologies
2.5
Berkshire Hathaway Cl. B
2.3
Neenah Paper
2.0
Drew Industries
2.0
Gentex Corporation
1.9
Kennedy-Wilson Holdings
1.9
DST Systems
1.9
Valmont Industries
1.9
Jones Lang LaSalle
1.9
ManpowerGroup
1.8
Westlake Chemical
1.8
UGI Corporation
1.7
Reliance Steel & Aluminum
1.7
Kirby Corporation
1.7
Rogers Corporation
1.6
Top 20 as % of Net Assets
41.5

Portfolio Holdings

View the complete list of holdings for this fund as of 06/30/16. 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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