63

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 67% of all monthly rolling 10-year periods for the 20 years ended 12/31/16

As of 12/31/16

  • Small/Mid-Cap
    Core Approach
    $4.31B
    Avg. Market Cap
  • Average
    Volatility
    98%
    Active Share
  • Fund
    Longevity
    21+
    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 20-Year and since inception (12/27/95) periods as of 12/31/16.
QTR YTD 1YR 3YR 5YR 10YR 15YR 20YR SINCE INCEPT. DATE
Heritage 4.61 16.7816.781.988.414.916.9810.8911.55 12/27/95
Russell 2000 8.83 21.3121.316.7414.467.078.498.258.65 N/A

Annual Operating Expenses: Gross 2.32 Net 2.15

JAN YTD 1YR 3YR 5YR 10YR 15YR 20YR SINCE INCEPT. DATE
Heritage 1.44 1.4425.563.957.034.897.1511.0011.58 12/27/95
Russell 2000 0.39 0.3933.537.8913.006.938.598.168.64 N/A

Annual Operating Expenses: Gross 2.32 Net 2.15

FEB YTD 1YR 3YR 5YR 10YR 15YR 20YR SINCE INCEPT. DATE
Heritage 3.31 4.7926.423.786.745.267.5711.0611.71 12/27/95
Russell 2000 N/A N/AN/AN/AN/AN/AN/AN/AN/A N/A

Annual Operating Expenses: Gross 2.32 Net 2.15

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. Consultant Class shares redeemed within 365 days of purchase may be subject to a 1% contingent deferred sales charge, payable to the Fund's distributor, Royce Fund Services, Inc., which is not reflected in the performance shown above; if it were, performance would be lower. Current month-end performance may be higher or lower than performance quoted and may be obtained at www.roycefunds.com. Operating expenses reflect the Fund's total annual operating expenses for the Consultant Class as of the Fund's most current prospectus and include management fees, 12b-1 distribution and service fees, other expenses, and acquired fund fees and expenses. 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 Consultant Class shares on 12/7/01 reflects Service Class results. Consultant Class shares bear annual expenses that are higher than those borne by Service Class shares. If Consultant Class's annual expenses had been reflected, total returns prior to 12/7/01 would have been lower.

Rolling Returns

On a monthly basis, the Fund outperformed the Russell 2000 in 67% of all 10-Year periods; 70% of all 5-Year periods; and 55% of all 1-Year periods.

For 93% of the periods, 10-year average annual total returns were greater than 5%.

Relative Returns: Monthly Rolling Average Annual Return Periods 20 Years Through 12/31/16

periods beating
the index(%)
fund
avg(%)
index
avg(%)
10-year
81/121
67 9.1 6.9
5-year
127/181
70 9.8 7.6
1-year
125/229
55 12.5 9.2

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% 41 31
> 5% and ≤ 10% 83 62
> 0% and ≤ 5% 9 7
≤ 0% 0 0

The Fund averaged a 9.9% return over all 133 10-year monthly rolling return periods.

Market Cycle Performance

The Fund outperformed the Russell 2000 in one of the two previous full market cycle periods.
Peak-Peak - 07/13/07 - 04/29/11
Heritage20.7%
Russell 20006.6%

Peak-Peak - 04/29/11 - 06/23/15
Heritage16.8%
Russell 200058.5%

Peak-Current - 06/23/15 - 12/31/16
Heritage4.7%
Russell 20007.2%

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 12/31/16

Heritage$99,407.69
Russell 2000$57,185.04

Portfolio Impactas of 12/31/16

SECTOR NAMEAVERAGE WEIGHT (%)TOTAL RETURN (%)CONTRIBUTION TO RETURN (%)
Consumer Discretionary
24.58
8.32
2.15
Industrials
24.43
7.47
1.87
Financials
8.36
8.38
0.95
Materials
11.27
5.83
0.66
Information Technology
5.97
5.82
0.31
Utilities
1.79
2.39
0.04
Consumer Staples
0.91
-4.08
-0.08
Health Care
1.24
-8.99
-0.14
Real Estate
5.77
-7.91
-0.55
Cash
15.67
0.11
0.02

Top Contributors

INDUSTRYSECTORGAIN (%)
Auto ComponentsConsumer Discretionary0.97
Specialty RetailConsumer Discretionary0.58
AutomobilesConsumer Discretionary0.57
ChemicalsMaterials0.56
MachineryIndustrials0.48

Top Detractors

INDUSTRYSECTORGAIN (%)
Real Estate Management & DevelopmentReal Estate-0.55
DistributorsConsumer Discretionary-0.43
IT ServicesInformation Technology-0.20
Food ProductsConsumer Staples-0.08
Textiles, Apparel & Luxury GoodsConsumer Discretionary-0.06

Top Contributors

COMPANYINDUSTRYSECTORGAIN (%)
Camping World Holdings Cl. ASpecialty RetailConsumer Discretionary0.59
Thor IndustriesAutomobilesConsumer Discretionary0.57
ManpowerGroupProfessional ServicesIndustrials0.46
Alleghany CorporationInsuranceFinancials0.43
Berkshire Hathaway Cl. BDiversified Financial ServicesFinancials0.33

Top Detractors

COMPANYINDUSTRYSECTORGAIN (%)
LKQ CorporationDistributorsConsumer Discretionary-0.40
LaSalle Partners IncorporatedReal Estate Management & DevelopmentReal Estate-0.26
DST SystemsIT ServicesInformation Technology-0.20
EquifaxProfessional ServicesIndustrials-0.14
Kennedy-Wilson HoldingsReal Estate Management & DevelopmentReal Estate-0.13
SECTOR NAMEAVERAGE WEIGHT (%)TOTAL RETURN (%)CONTRIBUTION TO RETURN (%)
Industrials
26.08
26.28
7.36
Consumer Discretionary
21.75
30.95
6.71
Materials
10.36
31.46
3.36
Information Technology
8.34
18.37
1.48
Utilities
1.92
39.50
0.81
Financials
9.47
5.82
0.61
Consumer Staples
1.32
8.98
0.40
Energy
0.01
-5.59
-0.02
Health Care
1.14
0.01
-0.28
Real Estate
5.43
-20.22
-1.33
Cash
13.42
0.31
0.05
Unclassified
0.76
7.07
0.17

Top Contributors

INDUSTRYSECTORGAIN (%)
Auto ComponentsConsumer Discretionary3.27
ChemicalsMaterials2.02
Commercial Services & SuppliesIndustrials1.89
AutomobilesConsumer Discretionary1.69
MachineryIndustrials1.69

Top Detractors

INDUSTRYSECTORGAIN (%)
Real Estate Management & DevelopmentReal Estate-1.33
Capital MarketsFinancials-0.58
Health Care Equipment & SuppliesHealth Care-0.23
SoftwareInformation Technology-0.11
Food & Staples RetailingConsumer Staples-0.06

Top Contributors

COMPANYINDUSTRYSECTORGAIN (%)
Thor IndustriesAutomobilesConsumer Discretionary1.69
Minerals TechnologiesChemicalsMaterials1.43
LCI IndustriesAuto ComponentsConsumer Discretionary1.30
CopartCommercial Services & SuppliesIndustrials1.17
Standard Motor ProductsAuto ComponentsConsumer Discretionary1.04

Top Detractors

COMPANYINDUSTRYSECTORGAIN (%)
Signet JewelersSpecialty RetailConsumer Discretionary-0.67
LaSalle Partners IncorporatedReal Estate Management & DevelopmentReal Estate-0.47
Kennedy Wilson Europe Real EstateReal Estate Management & DevelopmentReal Estate-0.43
Anixter InternationalElectronic Equipment, Instruments & ComponentsInformation Technology-0.35
Kennedy-Wilson HoldingsReal Estate Management & DevelopmentReal Estate-0.29
SECTOR NAMEAVERAGE WEIGHT (%)TOTAL RETURN (%)CONTRIBUTION TO RETURN (%)
Industrials
26.08
26.28
7.36
Consumer Discretionary
21.75
30.95
6.71
Materials
10.36
31.46
3.36
Information Technology
8.34
18.37
1.48
Utilities
1.92
39.50
0.81
Financials
9.47
5.82
0.61
Consumer Staples
1.32
8.98
0.40
Energy
0.01
-5.59
-0.02
Health Care
1.14
0.01
-0.28
Real Estate
5.43
-20.22
-1.33
Cash
13.42
0.31
0.05
Unclassified
0.76
7.07
0.17

Top Contributors

INDUSTRYSECTORGAIN (%)
Auto ComponentsConsumer Discretionary3.27
ChemicalsMaterials2.02
Commercial Services & SuppliesIndustrials1.89
AutomobilesConsumer Discretionary1.69
MachineryIndustrials1.69

Top Detractors

INDUSTRYSECTORGAIN (%)
Real Estate Management & DevelopmentReal Estate-1.33
Capital MarketsFinancials-0.58
Health Care Equipment & SuppliesHealth Care-0.23
SoftwareInformation Technology-0.11
Food & Staples RetailingConsumer Staples-0.06

Top Contributors

COMPANYINDUSTRYSECTORGAIN (%)
Thor IndustriesAutomobilesConsumer Discretionary1.69
Minerals TechnologiesChemicalsMaterials1.43
LCI IndustriesAuto ComponentsConsumer Discretionary1.30
CopartCommercial Services & SuppliesIndustrials1.17
Standard Motor ProductsAuto ComponentsConsumer Discretionary1.04

Top Detractors

COMPANYINDUSTRYSECTORGAIN (%)
Signet JewelersSpecialty RetailConsumer Discretionary-0.67
LaSalle Partners IncorporatedReal Estate Management & DevelopmentReal Estate-0.47
Kennedy Wilson Europe Real EstateReal Estate Management & DevelopmentReal Estate-0.43
Anixter InternationalElectronic Equipment, Instruments & ComponentsInformation Technology-0.35
Kennedy-Wilson HoldingsReal Estate Management & DevelopmentReal Estate-0.29
SECTOR NAMEAVERAGE WEIGHT (%)TOTAL RETURN (%)CONTRIBUTION TO RETURN (%)
Consumer Discretionary
15.61
40.02
7.54
Industrials
23.96
6.71
2.94
Information Technology
13.62
21.65
2.73
Materials
9.81
21.00
2.53
Utilities
1.19
79.36
0.95
Health Care
3.25
27.74
0.76
Consumer Staples
1.27
5.56
0.51
Financials
13.86
4.23
0.00
Real Estate
3.43
-34.20
-1.75
Energy
2.20
-48.60
-2.70
Cash
10.91
0.38
0.06
Unclassified
0.88
13.34
0.37

Top Contributors

INDUSTRYSECTORGAIN (%)
Auto ComponentsConsumer Discretionary3.45
Commercial Services & SuppliesIndustrials1.81
AutomobilesConsumer Discretionary1.75
ChemicalsMaterials1.47
DistributorsConsumer Discretionary1.19

Top Detractors

INDUSTRYSECTORGAIN (%)
Energy Equipment & ServicesEnergy-2.67
Real Estate Management & DevelopmentReal Estate-1.75
Capital MarketsFinancials-1.53
MachineryIndustrials-0.65
Construction & EngineeringIndustrials-0.51

Top Contributors

COMPANYINDUSTRYSECTORGAIN (%)
Thor IndustriesAutomobilesConsumer Discretionary1.77
LCI IndustriesAuto ComponentsConsumer Discretionary1.59
CopartCommercial Services & SuppliesIndustrials1.23
Standard Motor ProductsAuto ComponentsConsumer Discretionary1.08
UGI CorporationGas UtilitiesUtilities0.95

Top Detractors

COMPANYINDUSTRYSECTORGAIN (%)
TransoceanEnergy Equipment & ServicesEnergy-0.88
Anixter InternationalElectronic Equipment, Instruments & ComponentsInformation Technology-0.77
KKR & Co. L.P.Capital MarketsFinancials-0.64
Unit CorporationEnergy Equipment & ServicesEnergy-0.58
Artisan Partners Asset Management Cl. ACapital MarketsFinancials-0.58
SECTOR NAMEAVERAGE WEIGHT (%)TOTAL RETURN (%)CONTRIBUTION TO RETURN (%)
Industrials
24.23
67.72
17.72
Consumer Discretionary
14.09
150.32
16.93
Financials
15.01
96.33
14.66
Information Technology
15.47
87.17
13.91
Health Care
3.63
87.11
2.92
Consumer Staples
1.25
71.29
1.37
Materials
10.03
12.59
1.37
Utilities
0.77
169.77
1.04
Telecommunication Services
0.01
-8.73
-0.01
Real Estate
2.59
-3.80
-0.98
Energy
3.53
-34.89
-1.43
Cash
8.82
0.51
0.06
Unclassified
0.56
49.82
0.45

Top Contributors

INDUSTRYSECTORGAIN (%)
Capital MarketsFinancials12.28
Electronic Equipment, Instruments & ComponentsInformation Technology6.97
Professional ServicesIndustrials4.64
Auto ComponentsConsumer Discretionary4.53
Household DurablesConsumer Discretionary3.67

Top Detractors

INDUSTRYSECTORGAIN (%)
Metals & MiningMaterials-2.73
Energy Equipment & ServicesEnergy-1.38
Real Estate Management & DevelopmentReal Estate-0.98
Communications EquipmentInformation Technology-0.39
Electronic Equipment, Instruments & CompInformation Technology-0.23

Top Contributors

COMPANYINDUSTRYSECTORGAIN (%)
Thor IndustriesAutomobilesConsumer Discretionary2.47
LCI IndustriesAuto ComponentsConsumer Discretionary2.28
IPG PhotonicsElectronic Equipment, Instruments & ComponentsInformation Technology1.76
ManpowerGroupProfessional ServicesIndustrials1.69
SEI InvestmentsCapital MarketsFinancials1.65

Top Detractors

COMPANYINDUSTRYSECTORGAIN (%)
Major Drilling Group InternationalMetals & MiningMaterials-0.87
Trican Well ServiceEnergy Equipment & ServicesEnergy-0.80
TransoceanEnergy Equipment & ServicesEnergy-0.80
SprottCapital MarketsFinancials-0.78
Gold Fields ADRMetals & MiningMaterials-0.70

Risk

Average Volatility vs. Peer Group as of 12/31/16

The Fund has a average volatility within its peer group of 949 Small/Mid-Cap Funds based on 5-year rolling standard deviation.

Down Market Performance Comparisonas of 12/31/16

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+4.6+6.1
09/30/15-11.9-10.6+1.3
09/30/14-7.4-7.6-0.2
06/30/12-3.5-9.6-6.1
09/30/11-21.9-23.2-1.3
06/30/11-1.6-2.6-1.0
06/30/10-9.9-8.7+1.2
03/31/09-15.0-7.9+7.1
12/31/08-26.1-25.1+1.0
09/30/08-1.1-4.1-3.0
03/31/08-9.9-11.1-1.2
12/31/07-4.6-4.5+0.1
09/30/07-3.1-2.0+1.1
06/30/06-5.0-3.9+1.1
03/31/05-5.3-7.1-1.8
09/30/04-2.9-3.8-0.9
03/31/03-4.5-6.3-1.8
09/30/02-21.4-19.9+1.5
06/30/02-8.4-9.9-1.5

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

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 12/31/16

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 12/31/16

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
Heritage0.3020.16
Russell 20000.4120.14
Category Median0.4219.05
Best Quartile Breakpoint0.4817.92

Category Median and Best Quartile Breakpoint based on 766 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 12/31/16

mstar-RYGCX

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 12/31/16

  RYGCX Russell 2000
Average Market Cap
4.31B
1.66B
98%
-
2016 Portfolio Turnover
67%
-
Weighted Average P/E,
20.2x
22.9x
Weighted Average P/B
2.6x
2.2x
U.S. Investments (% of Net Assets)
73.7%
-
Non-U.S. Investments (% of Net Assets)
6.3%
-

Portfolio Allocation

  • Total
    Holdings
    77


SECTORS
RYGCX (%) RUSSELL
2000 (%)
Consumer Discretionary
25.9
12.6
Industrials
22.1
14.6
Materials
9.5
4.9
Financials
7.2
19.9
Information Technology
6.7
17.0
Real Estate
4.9
7.9
Utilities
1.8
3.5
Health Care
1.2
12.1
Consumer Staples
0.8
3.0
Energy
-
3.8
Telecommunication Services
-
0.7
Cash and Cash Equivalents
20.0
-
POSITIONS% OF NET ASSETS
(SUBJECT TO CHANGE)
Alleghany Corporation
3.0
Thor Industries
2.8
Copart
2.8
Westlake Chemical
2.6
Standard Motor Products
2.5
LKQ Corporation
2.4
Gentex Corporation
2.2
ManpowerGroup
2.1
Hubbell Cl. B
2.1
Kirby Corporation
1.9
Dicks Sporting Goods
1.8
Minerals Technologies
1.8
UGI Corporation
1.8
LCI Industries
1.7
AVX Corporation
1.6
Lazard Cl. A
1.6
Camping World Holdings Cl. A
1.6
Sensient Technologies
1.6
DST Systems
1.5
Meredith Corporation
1.5
Top 20 as % of Net Assets
40.9

SECTORS
RYGCX (%) RUSSELL
2000 (%)
Consumer Discretionary
26.5
-
Industrials
21.7
-
Information Technology
8.8
-
Materials
8.1
-
Financials
7.6
-
Real Estate
3.7
-
Utilities
1.8
-
Health Care
1.4
-
Consumer Staples
1.3
-
Cash and Cash Equivalents
19.1
-
POSITIONS% OF NET ASSETS
(SUBJECT TO CHANGE)
Alleghany Corporation
3.0
Copart
2.9
Westlake Chemical
2.8
Thor Industries
2.8
LKQ Corporation
2.4
Gentex Corporation
2.3
Hubbell Cl. B
2.2
ManpowerGroup
2.0
Dicks Sporting Goods
2.0
Standard Motor Products
2.0
Minerals Technologies
1.9
UGI Corporation
1.8
IPG Photonics
1.8
Kirby Corporation
1.8
DST Systems
1.7
AVX Corporation
1.7
Lazard Cl. A
1.7
Camping World Holdings Cl. A
1.5
Affiliated Managers Group
1.5
Signet Jewelers
1.4
Top 20 as % of Net Assets
41.2

Portfolio Holdings

View the complete list of holdings for this fund as of 12/31/16. 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 ($) REINVEST
PRICE ($)
12/14/16 12/15/16 12/15/16 0.0000 - 0.5074 - 0.5074 10.54
12/16/15 12/17/15 12/17/15 0.0000 0.0184 1.2395 - 1.2579 9.34
12/16/14 12/17/14 12/17/14 0.0000 0.0657 0.7597 - 0.8254 11.19
12/04/13 12/05/13 12/05/13 0.0000 0.3248 1.6035 - 1.9283 12.13
12/05/12 12/06/12 12/06/12 0.0000 - 0.3625 - 0.3625 11.29
12/07/11 12/08/11 12/08/11 0.0000 0.0658 0.5243 - 0.5901 10.60
12/08/10 12/09/10 12/09/10 0.0000 - 0.2902 - 0.2902 12.15

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 on purchases held for less than 365 days 1.00
Maximum sales charge (load) imposed on reinvested dividends 0.00
Annual Trustee's Fee applies only to GiftShare Accounts$50.00

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 1.00
Other expenses 0.41
Acquired fund fees and expenses 0.06
Total annual Fund operating expenses 2.32
Fee waivers and/or expense reimbursements (0.17)
Total annual Fund operating expenses after fee waivers and/or expense reimbursements2.15
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)

12/7/2001 12:00:00 AM

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