Dear Royce Capital Fund Shareholder:


For the past year, we have been looking for the right corporate partner, one
that would allow us to manage The Royce Funds in the years ahead with the same
approach that shareholders have known for the past almost 30 years.

We are pleased to announce that we have found that partner in Legg Mason,
Inc., a public company listed on the New York Stock Exchange (Symbol LM). Legg
Mason has agreed to purchase the business of Royce & Associates, Inc. ("R&A"),
the Investment Adviser to The Royce Funds. R&A will become a wholly owned
subsidiary of Legg Mason and is expected to retain day-to-day operating
autonomy.

Legg Mason, Inc., headquartered in Baltimore, is a holding company that
provides asset management, securities brokerage, investment banking and
related financial services through its subsidiaries. As of June 30, 2001, Legg
Mason's asset management subsidiaries had aggregate assets under management of
$145.6 billion, including approximately $29.5 billion in proprietary mutual
funds.

Our partnership with Legg Mason offers important benefits for all shareholders
of The Royce Funds:

o    We expect to retain full autonomy over our investment process and to
     manage our portfolios in the same small-cap value style that you have
     come to appreciate.

o    Whitney George, Buzz Zaino, Charlie Dreifus and I will continue as Senior
     Portfolio Managers of R&A, and there is great incentive for us to provide
     high-quality investment management services to our client accounts.

o    The Funds will retain their same management fee structure upon completion
     of the transaction; no additional levels of expenses will be added to the
     Funds as a result of the transaction, and they will remain available to
     new investors.

As a result of the transaction, The Royce Funds must obtain approval by the
Funds' shareholders of new investment advisory agreements. Enclosed is a Proxy
statement giving further details and asking for your approval. We hope that
you will read it carefully and vote promptly.

Please call Investor Services at 1-800-221-4268 with any questions.

As always, thank you for your continued support of our work. We look forward
to serving you for many years to come.

Sincerely,


Charles M. Royce



                             IMPORTANT INFORMATION


For Royce Capital Fund Shareholders

Enclosed is a Proxy Statement for an up-coming shareholder meeting. While we
encourage you to carefully read the full text of the enclosed Proxy Statement,
here is a brief overview of matters to be voted on:

Q&A

Q    What am I being asked to vote "FOR" on this proxy?

A    This proxy has two proposals:

     1.   Approval of a new investment advisory agreement between the Trust,
          on behalf of each of its Funds, and Royce & Associates, Inc.
          ("R&A"), on substantially similar terms as the current investment
          advisory agreement, but with R&A operating as a wholly-owned
          subsidiary of Legg Mason, Inc. (NYSE:LM);

     2.   Election of Trustees of the Trust.


Q    Why are we being asked to vote on a new investment advisory agreement?

A    R&A has agreed to be acquired by Legg Mason. That transaction will
terminate the current investment advisory agreements between the Funds and R&A.
The transaction cannot be completed unless a number of conditions are met. One
condition is that the shareholders of all but our smallest funds must approve
the proposed new investment advisory agreements. As a result, you are being
asked to vote on the new investment advisory agreements with R&A, operating
under its new ownership.


Q    Why are you selling the firm?

A    We wanted to ensure that R&A would be in a position to continue to provide
well into the future the same level of Fund investment management as it has
for the past almost 30 years.


Q    Will this change the advisory fees on my fund?

A    No. The new investment advisory agreements provide for advisory fees
payable to R&A at the same rates contained in the current advisory agreements.

Q    Will the portfolio management team change as a result of the transaction?

A    No. The current portfolio management team is expected to remain in place
upon completion of the transaction, and Chuck Royce, Whitney George and Buzz
Zaino have each signed a five-year employment agreement.



Q    How does the Board of Trustees recommend shareholders vote on these
proposals?

A    The Board of Trustees has unanimously recommended that shareholders vote
"FOR" each of the proposals. The Board believes that R&A's proposed
acquisition by Legg Mason is in the best interests of the Funds and their
shareholders.


Q    How can I vote my proxy?

A    For your convenience, there are several ways you can vote:
o  By mail: vote, sign and return the enclosed proxy card
o  By telephone: 800-690-6903
o  By facsimile (if you are a registered shareholder): vote, sign and fax the
   enclosed proxy card to 800-733-1885
o  By internet: www.proxyvote.com
o  In person: September 14, 2001, 4:30 p.m., 1414 Avenue of the Americas, New
   York, NY 10019


See your proxy card for specific instructions on how to vote via telephone,
facsimile or the internet.

It is important that you vote your proxy promptly