SEC Company Response from ROYCE FUND (CIK 0000709364) — Apr 16, 2021
ROYCE FUND (CIK 0000709364)
Date: April 16, 2021 · CIK: 0000709364 · Accession: 0000949377-21-000058
AI Filing Summary & Sentiment
File numbers found in text: 811-03599
Letter
Securities and Exchange Commission Attention: Elena Stojic, Division of Investment Management VIA EDGAR CORRESPONDENCE File Nos. 002-80348 and 811-03599
Re: The Royce Fund (the “Trust”)
Dear Ms. Stojic:
This letter is in response to telephonic comments received from you regarding Post-Effective Amendment No. 144 under the Securities Act of 1933, as amended (the “1933 Act”), and Amendment No. 146 under the Investment Company Act of 1940, as amended (the “1940 Act”), to the Trust’s Registration Statement on Form N-1A (referred to herein as the “Initial Amendment”). The Initial Amendment was filed pursuant to Rule 485(a)(1) under the 1933 Act on January 26, 2021 to reflect the addition of newly-created A Class shares of Royce Pennsylvania Mutual Fund (“PMF”), Royce Premier Fund (“RPR”), and Royce Special Equity Fund (“RSE,” and collectively with PMF and RPR, the “Funds”). The proposed effective date for the Initial Amendment was March 29, 2021. Pursuant to Rule 485(b)(1)(iii) under the 1933 Act, the Trust subsequently filed Post-Effective Amendment No. 145 under the 1933 Act and Amendment No. 147 under the 1940 Act to the Trust’s Registration Statement on Form N-1A to delay the effectiveness of the Initial Amendment until April 23, 2021.
Set forth below are the Commission staff’s comments in italics regarding the Initial Amendment along with the Trust’s responses to those comments. The Trust is also concurrently filing a draft of Post-Effective Amendment No. 146 under the 1933 Act and Amendment No. 148 under the 1940 Act (the “Amendment”) to the Trust’s Registration Statement on Form N-1A via Edgar correspondence. The Amendment, which will be filed pursuant to Rule 485(b) under the 1933 Act, incorporates the Trust’s responses to the Commission staff’s comments and makes certain non-material updating changes. Capitalized terms used herein and not otherwise defined herein shall have the meanings given to them in the Amendment.
Comment: Please revise each “Expense Example” to include the effect of any contingent deferred sales charge imposed on the redemption of certain A Class shares that were not subject to an initial sales charge within 18 months of their purchase.
Response: Each “Expense Example” has been revised to include a line item that reflects the imposition of a contingent deferred sales charge on the redemption of certain A Class shares that were not subject to an initial sales charge within 18 months of their purchase.
Comment: The Commission staff refers you to previous correspondence with the Trust regarding the reference to the State of Pennsylvania in the name “Royce Pennsylvania Mutual Fund”. Please explain: (i) whether PMF focuses its investments on companies that do business in the State of Pennsylvania; (ii) whether the reference to the State of Pennsylvania in the name of PMF remains appropriate; and (iii) what steps are taken to avoid investor confusion. Please consider adding disclosure to the Prospectus to the effect that PMF does not focus its investments on companies that do business in the State of Pennsylvania.
Response: PMF does not focus its investments on companies that do business in the State of Pennsylvania. The Trust notes that: (i) PMF commenced operations in 1962; (ii) Royce & Associates, LP and its predecessor firms (“Royce”) have served as PMF’s investment adviser since 1967; (iii) Charles M. Royce has been portfolio manager for PMF since November 1972; (iv) PMF has invested primarily in small-cap equity securities during Mr. Royce’s entire tenure as its portfolio manager; (v) PMF had net assets of approximately $1.92 billion as of December 31, 2020; (vi) PMF received a Morningstar Overall Rating of “Four-Stars” based on its risk-adjusted returns out of 620 Small Blend Funds as of December 31, 2020; and (vii) PMF has a registered trademark protecting its name with the U.S. Patent Office. We further note that PMF’s Prospectus and marketing materials expressly state that PMF’s assets are invested primarily in small- and micro-cap securities that are trading below Royce’s estimate of their current worth. In addition, we note that Royce generally has not received questions over the years about whether PMF seeks to focus its investments on companies headquartered or domiciled in the State of Pennsylvania. Thus, we believe the information set forth above demonstrates that PMF is a well-known small-cap equity fund managed by Charles M. Royce for nearly 50 years, with an excellent long-term performance record and that its name has accrued significant value during its history. Accordingly, we believe that the reference to the State of Pennsylvania in the name of PMF has not resulted in undue investor confusion and remains appropriate under the circumstances. Disclosure to the effect that PMF does not focus its investments on companies that do business in the State of Pennsylvania has been included the Trust’s Statement of Additional Information for some time and will now also be added to PMF’s Prospectus.
Comment: Under the heading “Performance,” please: (i) disclose the maximum initial sales charge for A Class shares and (ii) further explain how “Returns differ by class only to the extent that the Classes have different expenses because all Classes invest in the same portfolio of securities” or consider deleting that sentence.
Response: The Trust notes that: (i) a reference to the amount of the maximum initial sales charge for A Class shares has been added to the Prospectus under the heading “Performance” and (ii) the relevant sentence has been deleted.
Comment: Please confirm supplementally that Royce will not seek to recapture any amounts that may be waived or reimbursed under the relevant Funds’ investment advisory fee waiver and expense reimbursement agreements.
Response: The Trust hereby confirms that Royce will not seek to recapture any amounts that may be waived or reimbursed under the relevant Funds’ investment advisory fee waiver and expense reimbursement agreements.
Comment: In the “Financial Highlights” section of the Prospectus, we note that the end of period net assets for PMF show large changes from year-to-year. Please consider adding disclosure to the Prospects to the extent such net asset changes raise liquidity concerns for PMF.
Response: The Trust notes that the referenced disclosure applies only to Service Class shares of PMF. As of December 31, 2020, Service Class was the fourth largest of PMF’s five share classes and represented only approximately 4.1% of PMF’s overall net assets. In addition, PMF’s aggregate net assets as of December 31, 2019 and December 31, 2020 were $1.949 billion and $1.916 billion, respectively. As a result, the Trust does not believe the above-described end of period net asset changes raise liquidity concerns that warrant the addition of related disclosure to the Prospectus.
Comment: In accordance with Item 9 of Form N-1A, please provide additional information regarding the principal investment strategies and principal risks of the Funds on a Fund-by-Fund by basis under the heading “Royce’s Investment Universe” in the Prospectus.
Response: In general, each Fund invests primarily in the equity securities of small-cap companies (i.e., those that have a market capitalization not greater than that of the largest company in the Russell 2000® Index at the time of its most recent reconstitution). As a result, the “Royce’s Investment Universe” section in the Prospectus contains comprehensive information that is applicable to all of the Funds with respect to: (i) common attributes of small-cap companies; (ii) characteristics of small-cap equity markets; (iii) the risks associated with investing in small-cap equity securities; and (iv) various factors analyzed by Royce portfolio managers in evaluating whether to buy or sell a specific security. Such information is more detailed than what appears in the various “Summary” sections of the Prospectus. The “Royce’s Investment Universe” section does, however, draw distinctions, as appropriate, between the Funds with respect to various topics, including the specific qualitative and fundamental factors emphasized by Royce portfolio managers in managing a particular Fund, whether a Fund invests a substantial portion of its assets in a limited number of issuers or is more broadly diversified, and any variation in the market capitalization range in which a Fund primarily invests. The Trust believes that this holistic disclosure approach provides information to investors in a user-friendly format that avoids the large-scale repetition that would be involved in replicating the Fund-by-Fund approach used in the “Summary” sections of the Prospectus.
Comment: Under the “Investment Policies and Limitations” section of the Statement of Additional Information, please explain the applicable limits on each Fund’s investments in restricted securities and securities for which market quotations are not readily available (referred to herein as “illiquid securities”).
Response: The applicable limits on each Fund’s investments in restricted securities and illiquid securities and the sources of such limits are set forth in the table below.
SUMMARY OF APPLICABLE RESTRICTED SECURITIES AND ILLIQUID SECURITIES LIMITS
PMF RPR RSE
Restricted Securities %
Limit and Source
15%
Operating Policy*
15%
Operating Policy*
Not permitted
Fundamental Policy #7
Illiquid Securities % Limit and Source
10%
Trust’s Interpretation of
Fundamental Policy #8**
10%
Fundamental Policy #8
5%
Operating Policy***
* The Fund’s investments in restricted securities are not subject to restriction under Fundamental Policy #7 but are restricted by the Fund’s operating policy.
** PMF’s investments in illiquid securities not subject to restriction under Fundamental Policy #8 but are restricted by the Trust’s Interpretation of Fundamental Policy #8 as set forth in writing in the Statement of Additional Information.
*** Although RSE may invest up to 15% of its net assets in illiquid securities under Fundamental Policy #8 and the Trust’s Interpretation of Fundamental Policy #8 as set forth in writing in the Statement of Additional Information, RSE’s investments in illiquid securities are restricted to 5% of its net assets by its operating policy.
* * * * *
The Trust acknowledges that: (i) it is responsible for the adequacy and accuracy of the disclosure in the Amendment; (ii) Commission staff comments or changes to disclosure in response to staff comments in the filings reviewed by the staff do not foreclose the Commission from taking any action with respect to the Amendment; and (iii) the Trust may not assert this action as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
* * * * *
We believe that the proposed modifications set forth in the Amendment are responsive to the Commission staff’s comments. Please contact me at (212) 508-4578 if you have any related questions or comments.
Very truly yours,
/s/John E. Denneen
Show Raw Text
CORRESP
1
filename1.htm
April 16, 2021
Securities and Exchange Commission
100 F. Street, N.E.
Washington, D.C. 20549
Attention: Elena Stojic, Division of Investment Management
VIA EDGAR CORRESPONDENCE
Re:
The Royce Fund (the “Trust”)
File Nos. 002-80348 and 811-03599
Dear Ms. Stojic:
This letter is in response to
telephonic comments received from you regarding Post-Effective Amendment No. 144 under the Securities
Act of 1933, as amended (the “1933 Act”), and Amendment No. 146 under the Investment Company Act of 1940, as amended (the
“1940 Act”), to the Trust’s Registration Statement on Form N-1A (referred to herein as the “Initial Amendment”).
The Initial Amendment was filed pursuant to Rule 485(a)(1) under the 1933 Act on January 26, 2021 to reflect the addition of newly-created
A Class shares of Royce Pennsylvania Mutual Fund (“PMF”), Royce Premier Fund (“RPR”), and Royce Special Equity
Fund (“RSE,” and collectively with PMF and RPR, the “Funds”). The proposed effective date for the Initial Amendment
was March 29, 2021. Pursuant to Rule 485(b)(1)(iii) under the 1933 Act, the Trust subsequently
filed Post-Effective Amendment No. 145 under the 1933 Act and Amendment No. 147 under the 1940 Act to the Trust’s Registration
Statement on Form N-1A to delay the effectiveness of the Initial Amendment until April 23, 2021.
Set
forth below are the Commission staff’s comments in italics regarding the Initial Amendment along with the Trust’s responses
to those comments. The Trust is also concurrently filing a draft of Post-Effective Amendment No. 146 under the 1933 Act and Amendment
No. 148 under the 1940 Act (the “Amendment”) to the Trust’s Registration Statement on Form N-1A via Edgar correspondence.
The Amendment, which will be filed pursuant to Rule 485(b) under the 1933 Act, incorporates the Trust’s responses to the Commission
staff’s comments and makes certain non-material updating changes. Capitalized terms used herein and not otherwise defined herein
shall have the meanings given to them in the Amendment.
Comment:
Please revise each “Expense Example” to include the effect of any contingent deferred sales charge imposed on the redemption
of certain A Class shares that were not subject to an initial sales charge within 18 months of their purchase.
Response:
Each “Expense Example” has been revised to include a line item that reflects the imposition of a contingent deferred sales
charge on the redemption of certain A Class shares that were not subject to an initial sales charge within 18 months of their purchase.
Comment:
The Commission staff refers you to previous correspondence with the Trust regarding the reference to the State of Pennsylvania in the
name “Royce Pennsylvania Mutual Fund”. Please explain: (i) whether PMF focuses its investments on companies that do business
in the State of Pennsylvania; (ii) whether the reference to the State of Pennsylvania in the name of PMF remains appropriate; and (iii)
what steps are taken to avoid investor confusion. Please consider adding disclosure to the Prospectus to the effect that PMF does not
focus its investments on companies that do business in the State of Pennsylvania.
Response:
PMF does not focus its investments on companies that do business in the State of Pennsylvania. The Trust notes that: (i) PMF commenced
operations in 1962; (ii) Royce & Associates, LP and its predecessor firms (“Royce”) have served as PMF’s investment
adviser since 1967; (iii) Charles M. Royce has been portfolio manager for PMF since November 1972; (iv) PMF has invested primarily in
small-cap equity securities during Mr. Royce’s entire tenure as its portfolio manager; (v) PMF had net assets of approximately $1.92
billion as of December 31, 2020; (vi) PMF received a Morningstar Overall Rating of “Four-Stars” based
on its risk-adjusted returns out of 620 Small Blend Funds as of December 31, 2020; and (vii)
PMF has a registered trademark protecting its name with the U.S. Patent Office. We further note that PMF’s Prospectus and marketing
materials expressly state that PMF’s assets are invested primarily in small- and micro-cap securities that are trading below Royce’s
estimate of their current worth. In addition, we note that Royce generally has not received questions over the years about whether PMF
seeks to focus its investments on companies headquartered or domiciled in the State of Pennsylvania. Thus, we believe the information
set forth above demonstrates that PMF is a well-known small-cap equity fund managed by Charles M. Royce for nearly 50 years, with an excellent
long-term performance record and that its name has accrued significant value during its history. Accordingly, we believe that the reference
to the State of Pennsylvania in the name of PMF has not resulted in undue investor confusion and remains appropriate under the circumstances.
Disclosure to the effect that PMF does not focus its investments on companies that do business in the State of Pennsylvania has been included
the Trust’s Statement of Additional Information for some time and will now also be added to PMF’s Prospectus.
Comment:
Under the heading “Performance,” please: (i) disclose the maximum initial sales charge for A Class shares and (ii) further
explain how “Returns differ by class only to the extent that the Classes have different expenses because all Classes
invest in the same portfolio of securities” or consider deleting that sentence.
Response:
The Trust notes that: (i) a reference to the amount of the maximum initial sales charge for A Class shares has been added to the Prospectus
under the heading “Performance” and (ii) the relevant sentence has been deleted.
Comment:
Please confirm supplementally that Royce will not seek to recapture any amounts that may be waived or reimbursed under the relevant
Funds’ investment advisory fee waiver and expense reimbursement agreements.
Response:
The Trust hereby confirms that Royce will not seek to recapture any amounts that may be waived or reimbursed under the relevant
Funds’ investment advisory fee waiver and expense reimbursement agreements.
Comment:
In the “Financial Highlights” section of the Prospectus, we note that the end of period net assets for PMF show large changes
from year-to-year. Please consider adding disclosure to the Prospects to the extent such net asset changes raise liquidity concerns for
PMF.
Response:
The Trust notes that the referenced disclosure applies only to Service Class shares of PMF. As of December 31, 2020, Service Class was
the fourth largest of PMF’s five share classes and represented only approximately 4.1% of PMF’s overall net assets. In addition,
PMF’s aggregate net assets as of December 31, 2019 and December 31, 2020 were $1.949 billion and $1.916 billion, respectively. As
a result, the Trust does not believe the above-described end of period net asset changes raise liquidity concerns that warrant the addition
of related disclosure to the Prospectus.
Comment:
In accordance with Item 9 of Form N-1A, please provide additional information regarding the principal investment strategies and principal
risks of the Funds on a Fund-by-Fund by basis under the heading “Royce’s Investment Universe” in the Prospectus.
Response:
In general, each Fund invests primarily in the equity securities of small-cap companies (i.e., those that have a market capitalization
not greater than that of the largest company in the Russell 2000® Index at the time of its most recent reconstitution).
As a result, the “Royce’s Investment Universe” section in the Prospectus contains comprehensive information that is
applicable to all of the Funds with respect to: (i) common attributes of small-cap companies; (ii) characteristics of small-cap equity
markets; (iii) the risks associated with investing in small-cap equity securities; and (iv) various factors analyzed by Royce portfolio
managers in evaluating whether to buy or sell a specific security. Such information is more detailed than what appears in the various
“Summary” sections of the Prospectus. The “Royce’s Investment Universe” section does, however, draw distinctions,
as appropriate, between the Funds with respect to various topics, including the specific qualitative and fundamental factors emphasized
by Royce portfolio managers in managing a particular Fund, whether a Fund invests a substantial portion of its assets in a limited number
of issuers or is more broadly diversified, and any variation in the market capitalization range in which a Fund primarily invests. The
Trust believes that this holistic disclosure approach provides information to investors in a user-friendly format that avoids the large-scale
repetition that would be involved in replicating the Fund-by-Fund approach used in the “Summary” sections of the Prospectus.
Comment: Under the “Investment
Policies and Limitations” section of the Statement of Additional Information, please explain the applicable limits on each
Fund’s investments in restricted securities and securities for which market quotations are not
readily available (referred to herein as “illiquid
securities”).
Response:
The applicable limits on each Fund’s investments in restricted securities and illiquid securities and the sources of such limits
are set forth in the table below.
SUMMARY OF APPLICABLE RESTRICTED SECURITIES AND ILLIQUID SECURITIES LIMITS
PMF
RPR
RSE
Restricted Securities %
Limit and Source
15%
Operating Policy*
15%
Operating Policy*
Not permitted
Fundamental Policy #7
Illiquid
Securities
% Limit and Source
10%
Trust’s Interpretation of
Fundamental Policy #8**
10%
Fundamental Policy #8
5%
Operating Policy***
* The Fund’s investments in restricted securities are not subject to restriction under Fundamental Policy #7 but are restricted by the Fund’s operating policy.
** PMF’s investments in illiquid securities not subject to restriction under Fundamental Policy #8 but are restricted by the Trust’s Interpretation of Fundamental Policy #8 as set forth in writing in the Statement of Additional Information.
*** Although RSE may invest up to 15% of its net assets in illiquid securities under Fundamental Policy #8 and the Trust’s Interpretation of Fundamental Policy #8 as set forth in writing in the Statement of Additional Information, RSE’s investments in illiquid securities are restricted to 5% of its net assets by its operating policy.
* * * * *
The
Trust acknowledges that: (i) it is responsible for the adequacy and accuracy of the disclosure in the Amendment; (ii) Commission staff
comments or changes to disclosure in response to staff comments in the filings reviewed by the staff do not foreclose the Commission from
taking any action with respect to the Amendment; and (iii) the Trust may not assert this action as a defense in any proceeding initiated
by the Commission or any person under the federal securities laws of the United States.
* * * * *
We
believe that the proposed modifications set forth in the Amendment are responsive to the Commission staff’s comments. Please contact
me at (212) 508-4578 if you have any related questions or comments.
Very truly yours,
/s/John E. Denneen
John E. Denneen
General Counsel
Securities Act Registration No. 002-80348
Investment Company Act Registration No. 811-03599
As filed with the Securities and Exchange Commission on April 22, 2021
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
/ X /
Pre-Effective Amendment No. ______
/ /
Post-Effective Amendment No. 146
/ X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
/ X /
Amendment No. 148
/ X /
(Check appropriate box or boxes)
THE
ROYCE FUND
(Exact name of Registrant as specified in charter)
745 Fifth Avenue, New York,
New York 10151
(Address of principal executive offices) (Zip Code)
(212) 508-4500
(Registrant’s Telephone Number, including Area Code)
Christopher D. Clark, President
The Royce Fund
745 Fifth Avenue, New York, New York 10151
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
(check appropriate box)
/ / immediately upon filing pursuant to paragraph (b)
/ x / on April 23, 2021 pursuant to paragraph (b)
/ / on (Date) pursuant to paragraph (a)(1)
/ / on (Date) pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / on (Date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
/ / this post-effective amendment designates a new effective date for a previously filed post-effective
amendment.
Total number of pages: ___
Index to Exhibits is located on page:
Prospectus
A Class Shares
April 23, 2021
FUND
A
Royce Pennsylvania Mutual Fund
PAHPX
Royce Premier Fund
RAAFX
Royce Special Equity Fund
PAHQX
As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved of these securities, or determined that the information in this prospectus is accurate or complete. It is a crime to represent otherwise.
As
permitted by regulations adopted by the Securities and Exchange Commission, paper copies of each Fund’s shareholder reports
will no longer be sent by mail unless you specifically request paper copies of the reports from the Fund or from your financial
intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on https://www.royceinvest.com/funds/30e-3,
and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already
elected to receive shareholder reports electronically, you will not be affected by this change, and you need not take any action.
You may elect to receive shareholder reports and other communications from the Fund or your financial intermediary electronically
by notifying your financial intermediary directly or, if you are a direct investor, by calling 1-800-841-1180.
You may elect to
receive all future reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial
intermediary to request that you continue to receive paper copies of your reports. If you invest directly with a Fund, you can
call 1-800-841-1180. Your election to receive reports in paper will apply to all funds held with The Royce Funds or your financial
intermediary
royceinvest.com
Table
of Contents
Royce Pennsylvania Mutual Fund
2
Royce Premier Fund
5
Royce Special Equity Fund
8
Financial Highlights
11
Royce’s Investment Universe
12
Investing in Foreign Securities
14
Management of the Funds
15
General Shareholder Information
17
Appendix A: Waivers and Discounts Available from Certain Financial Intermediaries
A-1
A Class Shares of Royce Pennsylvania
Mutual Fund, Royce Premier Fund, and Royce Special Equity Fund are only offered through certain broker-dealers and other financial
intermediaries.
The
Royce Fund Prospectus 2021 | 1
Royce
Pennsylvania Mutual Fund
Investment
Goal
Royce
Pennsylvania Mutual Fund's investment goal is long-term growth of capital.
Fees
and Expenses of the Fund
The
following table presents the fees and expenses that you may pay if you buy and hold shares of the Fund.
You
may qualify for Class A sales charge discounts from certain financial intermediaries if you and your family invest, or agree to
invest in the future, at least $25,000 in certain Royce, Franklin Templeton, and Legg Mason funds. More information about these
and other sales charge discounts and waivers is available from your f