3

At a Glance

Why invest in Special Equity?

  • Small-cap value fund (generally market caps up to $3 billion) that looks for conservatively managed companies with transparent accounting that have a viable niche or franchise whose stock can be bought below its economic value
  • Seeks companies with superior balance sheets, sustainable returns on invested capital, and strong levels of free cash flow from operations, among other attributes
  • Has a long-term history of low volatility and better risk-adjusted returns than its benchmark, the Russell 2000 Index

As of 06/30/16

  • Small-Cap
    Value Approach
    $1.23B
    Avg. Market Cap
  • Low
    Volatility
    98%
    Active Share
  • Lead Manager
    Tenure
    18+
    Years on Fund

Portfolio Management

"A deep understanding of accounting principles gives me a chance to get at the veracity of a company’s finances by scrutinizing the financial reports… I spend a lot of time going over the numbers. Frankly, I benefit, because I don’t believe everyone does this kind of work."
Charlie Dreifus

Performance

Average Annual Total Returns (%)

Outperformed Russell 2000 for the Year To Date, 1-Year, 10-Year, 15-Year and since inception (05/01/98) periods as of 06/30/16.
QTR YTD 1YR 3YR 5YR 10YR 15YR SINCE INCEPT. DATE
Special Equity 2.53 8.31-4.583.366.817.249.468.62 05/01/98
Russell 2000 3.79 2.22-6.737.098.356.206.966.28 N/A

Annual Operating Expenses: 1.15

AUG YTD 1YR 3YR 5YR 10YR 15YR SINCE INCEPT. DATE
Special Equity 2.15 14.057.125.069.747.869.708.84 05/01/98
Russell 2000 1.77 10.238.598.5312.857.048.136.66 N/A

Annual Operating Expenses: 1.15

SEP YTD 1YR 3YR 5YR 10YR 15YR SINCE INCEPT. DATE
Special Equity 0.29 14.3811.032.7811.447.6710.558.83 05/01/98
Russell 2000 1.28 11.6511.756.8415.587.209.766.71 N/A

Annual Operating Expenses: 1.15

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. Shares redeemed within 30 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. 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 Investment Class as of the Fund's most current prospectus and include management fees and other expenses.

All performance and risk information presented in this material reflects Investment Class results. Shares of RSE's Service and Consultant Classes bear an annual distribution expense that is not borne by the Investment Class.

Rolling Returns

On a monthly basis, the Fund outperformed the Russell 2000 in 86% of all 10-Year periods; and 67% of all 5-Year periods.

For 100% of the periods, 10-year average annual total returns were greater than 5%.

Relative Returns: Monthly Rolling Average Annual Return Periods Since Inception Through 06/30/16

periods beating
the index(%)
fund
avg(%)
index
avg(%)
10-year
84/98
86 9.5 6.7
5-year
106/158
67 10.7 8.0
1-year
89/206
43 10.4 9.5

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% 35 36
> 5% and ≤ 10% 63 64
> 0% and ≤ 5% 0 0
≤ 0% 0 0

The Fund averaged a 9.5% return over all 98 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
Special Equity20.8%
Russell 20006.6%

Peak-Peak - 04/29/11 - 06/23/15
Special Equity43.4%
Russell 200058.5%

Peak-Current - 06/23/15 - 06/30/16
Special Equity-6.8%
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 05/01/98 and 06/30/16

Special Equity$44,895.92
Russell 2000$30,218.97

Portfolio Impactas of 06/30/16

SECTOR NAMEAVERAGE WEIGHT (%)TOTAL RETURN (%)CONTRIBUTION TO RETURN (%)
Materials
11.07
15.27
1.61
Industrials
25.45
3.89
1.02
Consumer Staples
3.95
12.95
0.48
Information Technology
14.92
0.13
0.07
Financials
1.25
0.08
0.01
Consumer Discretionary
34.76
-0.78
-0.40
Cash
8.59
0.06
0.01

Top Contributors

INDUSTRYSECTORGAIN (%)
Paper & Forest ProductsMaterials0.94
MediaConsumer Discretionary0.80
Auto ComponentsConsumer Discretionary0.72
ChemicalsMaterials0.50
Food & Staples RetailingConsumer Staples0.48

Top Detractors

INDUSTRYSECTORGAIN (%)
Household DurablesConsumer Discretionary-1.30
Specialty RetailConsumer Discretionary-0.75
Semiconductors & Semiconductor EquipmentInformation Technology-0.33
MachineryIndustrials-0.04
IT ServicesInformation Technology-0.02

Top Contributors

COMPANYINDUSTRYSECTORGAIN (%)
Standard Motor ProductsAuto ComponentsConsumer Discretionary0.73
Neenah PaperPaper & Forest ProductsMaterials0.66
AVX CorporationElectronic Equipment, Instruments & ComponentsInformation Technology0.59
Meredith CorporationMediaConsumer Discretionary0.51
HawkinsChemicalsMaterials0.50

Top Detractors

COMPANYINDUSTRYSECTORGAIN (%)
Hooker FurnitureHousehold DurablesConsumer Discretionary-0.89
TeradyneSemiconductors & Semiconductor EquipmentInformation Technology-0.33
Bed Bath & BeyondSpecialty RetailConsumer Discretionary-0.29
Bassett Furniture IndustriesHousehold DurablesConsumer Discretionary-0.28
Haverty FurnitureSpecialty RetailConsumer Discretionary-0.25
SECTOR NAMEAVERAGE WEIGHT (%)TOTAL RETURN (%)CONTRIBUTION TO RETURN (%)
Consumer Discretionary
36.30
8.70
3.28
Industrials
25.29
11.32
2.71
Materials
10.51
15.31
1.47
Consumer Staples
5.08
22.66
0.97
Information Technology
14.32
4.09
0.63
Financials
1.00
-12.83
-0.16
Cash
7.50
0.13
0.01

Top Contributors

INDUSTRYSECTORGAIN (%)
Specialty RetailConsumer Discretionary1.67
MediaConsumer Discretionary1.21
Commercial Services & SuppliesIndustrials1.00
Paper & Forest ProductsMaterials0.95
Electronic Equipment, Instruments & ComponentsInformation Technology0.79

Top Detractors

INDUSTRYSECTORGAIN (%)
Household DurablesConsumer Discretionary-0.52
Semiconductors & Semiconductor EquipmentInformation Technology-0.18
Capital MarketsFinancials-0.09
Real Estate Management & DevelopmentFinancials-0.07
TobaccoConsumer Staples-0.02

Top Contributors

COMPANYINDUSTRYSECTORGAIN (%)
Children's PlaceSpecialty RetailConsumer Discretionary1.93
Meredith CorporationMediaConsumer Discretionary1.11
AVX CorporationElectronic Equipment, Instruments & ComponentsInformation Technology0.92
UniFirst CorporationCommercial Services & SuppliesIndustrials0.86
Neenah PaperPaper & Forest ProductsMaterials0.77

Top Detractors

COMPANYINDUSTRYSECTORGAIN (%)
Hooker FurnitureHousehold DurablesConsumer Discretionary-0.39
Haverty FurnitureSpecialty RetailConsumer Discretionary-0.27
Minerals TechnologiesChemicalsMaterials-0.24
Bed Bath & BeyondSpecialty RetailConsumer Discretionary-0.22
TeradyneSemiconductors & Semiconductor EquipmentInformation Technology-0.18
SECTOR NAMEAVERAGE WEIGHT (%)TOTAL RETURN (%)CONTRIBUTION TO RETURN (%)
Consumer Staples
5.68
23.99
1.09
Materials
10.95
7.45
0.68
Industrials
24.37
0.00
0.15
Health Care
0.11
-6.51
-0.02
Information Technology
13.92
-2.06
-0.10
Financials
1.67
-44.73
-1.34
Consumer Discretionary
36.24
-10.06
-3.93
Cash
7.05
0.17
0.01

Top Contributors

INDUSTRYSECTORGAIN (%)
Paper & Forest ProductsMaterials1.22
Food & Staples RetailingConsumer Staples0.77
Aerospace & DefenseIndustrials0.62
Auto ComponentsConsumer Discretionary0.47
Trading Companies & DistributorsIndustrials0.36

Top Detractors

INDUSTRYSECTORGAIN (%)
Specialty RetailConsumer Discretionary-4.10
Capital MarketsFinancials-1.23
MachineryIndustrials-0.78
ChemicalsMaterials-0.76
Household DurablesConsumer Discretionary-0.59

Top Contributors

COMPANYINDUSTRYSECTORGAIN (%)
Children's PlaceSpecialty RetailConsumer Discretionary1.19
Neenah PaperPaper & Forest ProductsMaterials1.06
Weis MarketsFood & Staples RetailingConsumer Staples0.77
Standard Motor ProductsAuto ComponentsConsumer Discretionary0.63
National Presto IndustriesAerospace & DefenseIndustrials0.62

Top Detractors

COMPANYINDUSTRYSECTORGAIN (%)
Bed Bath & BeyondSpecialty RetailConsumer Discretionary-2.34
Finish Line (The) Cl. ASpecialty RetailConsumer Discretionary-1.63
Waddell & Reed Financial Cl. ACapital MarketsFinancials-1.23
Minerals TechnologiesChemicalsMaterials-1.09
Buckle (The)Specialty RetailConsumer Discretionary-1.00
SECTOR NAMEAVERAGE WEIGHT (%)TOTAL RETURN (%)CONTRIBUTION TO RETURN (%)
Information Technology
15.40
24.95
4.89
Materials
12.02
36.04
4.20
Industrials
22.54
18.71
3.78
Consumer Staples
6.40
50.29
2.39
Health Care
2.01
35.70
1.09
Energy
0.22
-2.47
0.12
Consumer Discretionary
31.41
-0.12
-0.51
Financials
0.88
-45.61
-1.36
Cash
9.13
0.22
0.02

Top Contributors

INDUSTRYSECTORGAIN (%)
ChemicalsMaterials2.77
Electronic Equipment, Instruments & CompInformation Technology2.47
MediaConsumer Discretionary2.18
Electrical EquipmentIndustrials1.71
Commercial Services & SuppliesIndustrials1.49

Top Detractors

INDUSTRYSECTORGAIN (%)
Specialty RetailConsumer Discretionary-2.98
Capital MarketsFinancials-1.25
MachineryIndustrials-0.63
Leisure ProductsConsumer Discretionary-0.57
Construction & EngineeringIndustrials-0.52

Top Contributors

COMPANYINDUSTRYSECTORGAIN (%)
Molex Cl. AElectronic Equipment, Instruments & CompInformation Technology2.47
Children's PlaceSpecialty RetailConsumer Discretionary2.12
Minerals TechnologiesChemicalsMaterials1.49
Neenah PaperPaper & Forest ProductsMaterials1.47
EnerSysElectrical EquipmentIndustrials1.44

Top Detractors

COMPANYINDUSTRYSECTORGAIN (%)
Bed Bath & BeyondSpecialty RetailConsumer Discretionary-2.21
Waddell & Reed Financial Cl. ACapital MarketsFinancials-1.25
Foster (L.B.) CompanyMachineryIndustrials-1.15
Buckle (The)Specialty RetailConsumer Discretionary-0.99
American Eagle OutfittersSpecialty RetailConsumer Discretionary-0.84
SECTOR NAMEAVERAGE WEIGHT (%)TOTAL RETURN (%)CONTRIBUTION TO RETURN (%)
Industrials
22.06
65.64
13.76
Consumer Discretionary
27.90
46.95
11.39
Materials
12.00
87.30
9.32
Information Technology
17.44
39.78
7.25
Consumer Staples
6.53
114.18
5.80
Health Care
3.77
45.66
1.54
Energy
0.13
-2.47
0.12
Financials
0.53
-45.61
-1.36
Cash
9.64
0.34
0.04

Top Contributors

INDUSTRYSECTORGAIN (%)
Electrical EquipmentIndustrials6.66
ChemicalsMaterials6.15
MediaConsumer Discretionary4.55
Commercial Services & SuppliesIndustrials3.93
Auto ComponentsConsumer Discretionary3.82

Top Detractors

INDUSTRYSECTORGAIN (%)
Capital MarketsFinancials-1.25
Household DurablesConsumer Discretionary-0.72
Leisure ProductsConsumer Discretionary-0.65
Construction & EngineeringIndustrials-0.52
Internet Software & ServicesInformation Technology-0.36

Top Contributors

COMPANYINDUSTRYSECTORGAIN (%)
Molex Cl. AElectronic Equipment, Instruments & CompInformation Technology3.64
UniFirst CorporationCommercial Services & SuppliesIndustrials3.44
Meredith CorporationMediaConsumer Discretionary3.16
Dorman ProductsAuto ComponentsConsumer Discretionary3.16
EnerSysElectrical EquipmentIndustrials2.93

Top Detractors

COMPANYINDUSTRYSECTORGAIN (%)
Waddell & Reed Financial Cl. ACapital MarketsFinancials-1.25
Veeco InstrumentsSemiconductors & Semiconductor EquipmentInformation Technology-1.22
Bed Bath & BeyondSpecialty RetailConsumer Discretionary-1.17
Foster (L.B.) CompanyMachineryIndustrials-0.74
Dana Holding CorporationAuto ComponentsConsumer Discretionary-0.64

Risk

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

The Fund has a low volatility within its peer group of 474 Small-Cap Funds based on 5-year rolling standard deviation.

Down Market Performance Comparisonas of 06/30/16

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

Market Downturns (%)

DownMarketImg
Outperformed in 16 out of 20 down quarters.

Russell 2000 Down Quarters

QUARTER ENDRUSSELL 2000 (%)SPECIAL EQUITY (%)SPREAD (%)
03/31/16-1.5+5.6+7.1
09/30/15-11.9-11.3+0.6
09/30/14-7.4-7.1+0.3
06/30/12-3.5-4.4-0.9
09/30/11-21.9-14.7+7.2
06/30/11-1.6-2.4-0.8
06/30/10-9.9-9.8+0.1
03/31/09-15.0-8.5+6.5
12/31/08-26.1-14.9+11.2
09/30/08-1.1+2.4+3.5
03/31/08-9.9-4.4+5.5
12/31/07-4.6-0.9+3.7
09/30/07-3.1-5.0-1.9
06/30/06-5.0-3.7+1.3
03/31/05-5.3-2.3+3.0
09/30/04-2.9-3.0-0.1
03/31/03-4.5-4.2+0.3
09/30/02-21.4-9.0+12.4
06/30/02-8.4+3.7+12.1
09/30/01-20.8-8.5+12.3

Capture Ratios Fund's First Full Quarter (06/30/98) 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 10 years, the Fund outperformed the Russell 2000 Index with lower volatility.
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 50% of small-cap objective funds, as shown by its standard deviation.
The Fund produced lower volatility than the Russell 2000 and 90% of small-cap objective funds, as shown by its standard deviation.
The Fund beat the Russell 2000 and performed within the top 50% of small-cap objective funds on a risk-adjusted basis, as shown by its Sharpe ratio. In addition, the Fund produced lower volatility than the Russell 2000 and 90% of small-cap objective funds, as shown by its standard deviation.
Sharpe RatioStandard Deviation
Special Equity0.4715.35
Russell 20000.3619.83
Category Median0.3619.51
Best Decile Breakpoint0.4717.62

Category Median and Best Decile Breakpoint based on 389 small-cap objective funds (oldest class only) with at least ten years of history.
Sharpe Ratio Standard Deviation
Special Equity
Russell 2000
Category Median
Best Quartile Breakpoint

Composition

Morningstar Style Map™as of 06/30/16

mstar-RYSEX

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

  RYSEX Russell 2000
Average Market Cap
1.23B
1.37B
98%
-
2015 Portfolio Turnover
15%
-
Weighted Average P/E,
16.1x
19.6x
Weighted Average P/B
1.8x
2.0x
U.S. Investments (% of Net Assets)
91.2%
-
Non-U.S. Investments (% of Net Assets)
0.0%
-

Portfolio Allocation

  • Total
    Holdings
    41


SECTORS
RYSEX (%) RUSSELL
2000 (%)
Consumer Discretionary
34.1
13.5
Industrials
25.6
13.8
Information Technology
15.0
17.3
Materials
10.9
4.6
Consumer Staples
4.1
3.1
Financials
1.4
25.8
Health Care
-
13.6
Utilities
-
4.3
Energy
-
3.0
Telecommunication Services
-
0.9
Cash and Cash Equivalents
8.8
-
POSITIONS% OF NET ASSETS
(SUBJECT TO CHANGE)
UniFirst Corporation
7.1
AVX Corporation
6.8
Meredith Corporation
5.3
Standard Motor Products
5.1
Neenah Paper
4.8
Scholastic Corporation
4.6
Hubbell Cl. B
4.3
Weis Markets
4.0
Children's Place
3.9
Teradyne
3.5
Top 10 as % of Net Assets
49.4

SECTORS
RYSEX (%) RUSSELL
2000 (%)
Consumer Discretionary
35.4
-
Industrials
23.5
-
Information Technology
14.9
-
Materials
10.4
-
Consumer Staples
4.3
-
Financials
1.4
-
Cash and Cash Equivalents
10.0
-
POSITIONS% OF NET ASSETS
(SUBJECT TO CHANGE)
UniFirst Corporation
6.6
AVX Corporation
6.5
Standard Motor Products
5.0
Meredith Corporation
4.7
Scholastic Corporation
4.7
Neenah Paper
4.7
Hubbell Cl. B
4.4
Children's Place
4.0
Weis Markets
3.9
Teradyne
3.4
Top 10 as % of Net Assets
47.9

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 0.2393 - 1.8558 - 2.0951 17.94
12/16/14 12/17/14 12/17/14 0.1196 0.1069 2.1579 - 2.3844 22.40
12/04/13 12/05/13 12/05/13 0.0299 0.2421 1.9603 - 2.2323 24.14
12/27/12 12/28/12 12/28/12 0.0343 - - - 0.0343 20.73
12/05/12 12/06/12 12/06/12 0.4294 - 1.0981 - 1.5275 20.70
12/07/11 12/08/11 12/08/11 0.0932 - 1.0775 - 1.1707 19.43
12/08/10 12/09/10 12/09/10 0.0617 - - - 0.0617 20.68
12/08/09 12/09/09 12/09/09 0.0725 - - - 0.0725 16.95

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 30 days) 1.00

Annual Fund Operating Expenses (%)

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

Management fees 0.99
Distribution (12b-1) fees 0.00
Other expenses 0.16
Total annual Fund operating expenses 1.15

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 invests primarily in small-cap and 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.) As of 3/31/16, the Fund held a limited number of stocks, which may involve considerably more risk than a less concentrated portfolio because a decline in the value of any one of these stocks would cause the Fund's overall value to decline to a greater degree.

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.

Managed by Charlie Dreifus since 1998, assistant portfolio manager Steven McBoyle since 2014

5/1/1998 12:00:00 AM

Share:

Subscribe:

Sign Up

Follow: