Royce Special Equity Fund (RYSEX, RSEFX, RSQCX, RSEIX)
76

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 06/30/18

  • Small-Cap
    Value Approach
    $1.44B
    Avg. Market Cap
  • Below Average
    Volatility
    99%
    Active Share
  • Lead Manager
    Tenure
    20+
    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 20-Year and since inception (05/01/98) periods as of 06/30/18. Outpaced Russell 2000 Value for the 20-Year and since inception (05/01/98) periods as of 06/30/18.
QTR YTD 1YR 3YR 5YR 10YR 15YR 20YR SINCE INCEPT. DATE
Special Equity 4.84 -0.517.667.537.459.428.899.159.02 05/01/98
Russell 2000 7.75 7.6617.5710.9612.4610.6010.508.037.66 N/A
Russell 2000 Value 8.30 5.4413.1011.2211.189.889.938.678.34 N/A

Annual Operating Expenses: Gross 1.50 Net 1.39

JUN YTD 1YR 3YR 5YR 10YR 15YR 20YR SINCE INCEPT. DATE
Special Equity 2.70 -0.517.667.537.459.428.899.159.02 05/01/98
Russell 2000 0.72 7.6617.5710.9612.4610.6010.508.037.66 N/A
Russell 2000 Value 0.61 5.4413.1011.2211.189.889.938.678.34 N/A

Annual Operating Expenses: Gross 1.50 Net 1.39

JUL YTD 1YR 3YR 5YR 10YR 15YR 20YR SINCE INCEPT. DATE
Special Equity 2.63 2.118.468.766.949.578.919.259.13 05/01/98
Russell 2000 2.72 10.6019.3611.5611.6110.7810.508.127.78 N/A
Russell 2000 Value 1.60 7.1314.0411.8610.159.859.898.718.41 N/A

Annual Operating Expenses: Gross 1.50 Net 1.39

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. Gross operating expenses reflect the Fund's gross total annual operating expenses for the Service Class and include management fees, 12b-1 distribution and service fees, and other expenses. Net operating expenses reflect contractual fee waivers and/or expense reimbursements. All expense information is reported as of the Fund's most current prospectus. Royce & Associates has contractually agreed, without right of termination, to waive fees and/or reimburse expenses to the extent necessary to maintain the Service Class's 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 1.39% through April 30, 2019.

All performance and risk information presented in this material prior to the commencement date of Service Class shares on 10/2/03 reflects Investment Class results. Service Class shares bear an annual distribution expense that is not borne by Investment Class shares. If Service Class's annual distribution expense had been reflected, total returns prior to 10/2/03 would have been lower.

Rolling Returns

On a monthly basis, the Fund outperformed the Russell 2000 in 73% of all 10-Year periods; and 57% 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 20 Years Through 06/30/18

periods beating
the index(%)
fund
avg(%)
index
avg(%)
10-year
88/121
73 9.0 6.9
5-year
104/181
57 10.4 8.7
1-year
89/229
39 10.8 10.4

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% 29 24
> 5% and ≤ 10% 93 76
> 0% and ≤ 5% 0 0
≤ 0% 0 0

The Fund averaged a 9.0% return over all 122 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
Special Equity19.9%
Russell 20006.6%

Peak-Peak - 04/29/11 - 06/23/15
Special Equity41.9%
Russell 200058.5%

Peak-Current - 06/23/15 - 06/30/18
Special Equity21.4%
Russell 200032.3%

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 06/30/18

Special Equity$57,002.49
Russell 2000$44,267.13

Risk

Below Average Volatility vs. Peer Group as of 06/30/18

The Fund has a below average volatility within its peer group of 524 Small-Cap Funds based on 5-year rolling standard deviation.

Down Market Performance Comparisonas of 06/30/18

The Fund outperformed the Russell 2000 during all four downturns of 15% or more from the index’s prior historical high since the Fund’s inception.

Market Downturns (%)

DownMarketImg
Outperformed in 11 out of 17 down quarters.

Russell 2000 Down Quarters

QUARTER ENDRUSSELL 2000 (%)SPECIAL EQUITY (%)SPREAD (%)
03/31/18-0.1-5.1-5.0
03/31/16-1.5+5.6+7.1
09/30/15-11.9-11.4+0.5
09/30/14-7.4-7.1+0.3
06/30/12-3.5-4.5-1.0
09/30/11-21.9-14.8+7.1
06/30/11-1.6-2.5-0.9
06/30/10-9.9-9.90.0
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
03/31/08-9.9-4.5+5.4
12/31/07-4.6-1.0+3.6
09/30/07-3.1-5.0-1.9
06/30/06-5.0-3.8+1.2
03/31/05-5.3-2.4+2.9
09/30/04-2.9-3.0-0.1

Capture Ratios Fund's First Full Quarter (06/30/98) to 06/30/18

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 06/30/18

Over the past 10 years, the Fund produced lower volatility than the Russell 2000 Index.
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 06/30/18

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 50% 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 Equity0.6415.60
Russell 20000.6019.57
Category Median0.6019.24
Best Decile Breakpoint0.7117.13

Category Median and Best Decile Breakpoint based on 426 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 03/31/18

mstar-RSEFX

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 06/30/18

  RSEFX Russell 2000
Average Market Cap
1.44B
1.82B
99%
-
2017 Portfolio Turnover
15%
-
Weighted Average P/E,
22.5x
19.6x
Weighted Average P/B
2.1x
2.3x
U.S. Investments (% of Net Assets)
85.9%
-
Non-U.S. Investments (% of Net Assets)
1.5%
-

Portfolio Allocation

  • Total
    Holdings
    37


SECTORS
RSEFX (%) RUSSELL
2000 (%)
Consumer Discretionary
37.3
13.3
Industrials
21.5
14.9
Information Technology
16.1
14.9
Consumer Staples
8.0
2.8
Real Estate
3.0
7.3
Materials
0.9
4.3
Energy
0.6
5.0
Financials
-
17.9
Health Care
-
15.6
Utilities
-
3.3
Telecommunication Services
-
0.7
Cash and Cash Equivalents
12.6
-
POSITIONS% OF NET ASSETS
(SUBJECT TO CHANGE)
UniFirst Corporation
5.6
Children's Place
5.4
Scholastic Corporation
5.1
AVX Corporation
4.9
Standard Motor Products
4.9
Meredith Corporation
4.2
John B. Sanfilippo & Son
4.0
Hooker Furniture
3.8
Capella Education
3.8
Hubbell Cl. B
3.7
Top 10 as % of Net Assets
45.4

SECTORS
RSEFX (%) RUSSELL
2000 (%)
Consumer Discretionary
37.3
13.3
Industrials
21.5
14.9
Information Technology
16.1
14.9
Consumer Staples
8.0
2.8
Real Estate
3.0
7.3
Materials
0.9
4.3
Energy
0.6
5.0
Financials
-
17.9
Health Care
-
15.6
Utilities
-
3.3
Telecommunication Services
-
0.7
Cash and Cash Equivalents
12.6
-
POSITIONS% OF NET ASSETS
(SUBJECT TO CHANGE)
UniFirst Corporation
5.6
Children's Place
5.4
Scholastic Corporation
5.1
AVX Corporation
4.9
Standard Motor Products
4.9
Meredith Corporation
4.2
John B. Sanfilippo & Son
4.0
Hooker Furniture
3.8
Capella Education
3.8
Hubbell Cl. B
3.7
Top 10 as % of Net Assets
45.4

Portfolio Holdings

View the complete list of holdings for this fund as of 06/30/18. 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 ($) REINVEST
PRICE ($)
12/13/17 12/14/17 12/14/17 0.0726 0.0428 1.7452 - 1.8606 21.26
12/14/16 12/15/16 12/15/16 0.1712 - 1.4903 - 1.6615 22.00
12/16/15 12/17/15 12/17/15 0.1715 - 1.8558 - 2.0273 17.92
12/16/14 12/17/14 12/17/14 0.0472 0.1069 2.1579 - 2.3120 22.36
12/04/13 12/05/13 12/05/13 0.0000 0.2421 1.9603 - 2.2024 24.09
12/05/12 12/06/12 12/06/12 0.3784 - 1.0981 - 1.4765 20.67
12/07/11 12/08/11 12/08/11 0.0515 - 1.0775 - 1.1290 19.39
12/08/10 12/09/10 12/09/10 0.0292 - - - 0.0292 20.65
12/08/09 12/09/09 12/09/09 0.0568 - - - 0.0568 16.93

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 1.00
Distribution (12b-1) fees 0.25
Other expenses 0.25
Total annual Fund operating expenses 1.50
Fee waivers and/or expense reimbursements (0.11)
Total annual Fund operating expenses after fee waivers and/or expense reimbursements1.39
Royce & Associates has contractually agreed, without right of termination, to waive fees and/or reimburse expenses to the extent necessary to maintain the Service Class's 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 1.39% through April 30, 2019.

Important Disclosure Information

This material is not authorized for distribution unless preceded or accompanied by a current prospectus. Please read the prospectus carefully before investing or sending money. The Fund invests primarily in small-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 06/30/18, the Fund invested a significant portion of its assets in a limited number of stocks, which may involve considerably more risk than more broadly diversified 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. (Please see "Primary Risks for Fund Investors" 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. Frank Russell Company (“Russell”) is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Frank Russell Company. Neither Russell nor its licensors accept any liability for any errors or omissions in the Russell Indexes and/or Russell ratings or underlying data and no party may rely on any Russell Indexes and/or Russell ratings and/or underlying data contained in this communication. No further distribution of Russell Data is permitted without Russell’s express written consent. Russell does not promote, sponsor or endorse the content of this communication. 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 Russell 2000 Value and Growth indices consist of the respective value and growth stocks within the Russell 2000 as determined by Russell Investments. 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

10/2/2003 12:00:00 AM

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