High - Yield is not our goal

High Yield is Not our Goal -------------------------- JAY KAPLAN: We tend not to look for high yield dividend paying small caps. They tend to be in companies that don't fit our metrics, like, real estate investment trusts, master limited partnerships and utilities, and, sometimes, if you chase companies with high dividends, that's because the dividends are unsustainable, and the companies may be in trouble. And the last thing we want is a company that's in trouble. FRANK GANNON: We tend to focus on companies that pay consistently small dividends over time as a way for us to measure their free cash flow generation. At the same token, we use dividends as a form of corporate governance, so we can make sure that we are aligned, as shareholders we're the management team in terms of their overall thinking from a capital allocation standpoint. CHUCK ROYCE: A high yield is actually a negative signal. It often means that the dividend is subject to being lowered. It might mean they're paying out way too much of their earning power to sustain their growth, so we're very suspicious of dividends in the 5% plus range. investment professionals, or the firm as a whole. There can be no assurance with regard to future market movements. You may obtain a current prospectus for any of the Royce Funds on our website at www.roycefunds.com/ prospectus or by calling (800) 841-1180. The prospectus includes investment objectives, risks, fees, expenses, and other information that you should read and consider carefully before investing. Micro-cap, small-cap and mid-cap stocks may involve considerably more risk than investing in larger-cap stocks (Please see "Primary Risks for Fund Investors" in the prospectus). Securities of non-U.S. companies may be subject to different risks than investments in securities of U.S. companies, including adverse political, social, economic or other developments that are unique to a particular country or region. Therefore, the prices of these securities in particular countries or regions may, at times, move in a different direction than those of the securities of U.S. companies (Please see "Primary Risks for Fund Investors" in the prospectus). 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 S&P 500 is an index of U.S. large-cap stocks selected by Standard & Poor's based on market size, liquidity and industry grouping, among other factors. Distributor: Royce Fund Services, Inc.