ROYCE FUND, N-30D, 1995-09-12

ROYCE FUND
N-30D, 1995-09-12

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<PAGE>
ROYCE
MICRO-CAP
FUND

SEMI-ANNUAL REPORT
JUNE 30, 1995

THE ROYCE FUNDS

<PAGE>
The Royce Funds

1414 Avenue of the Americas
New York, NY 10019
(212) 355-7311
(800) 221-4268

Dear Shareholder:

If the Dow Jones Industrial Average were to continue its first half pace,
it would top 30,000 in the year 2000! Something to think about.

THE NUMBERS . . . UP, UP AND AWAY

The first half of 1995 was the best six month period for the S&P 500 since
the opening two quarters of 1991. Up 20.2%, the S&P 500 bested both major small
company indices, the Russell 2000 and the S&P Small Cap 600, which were up 14.4%
and 14.7%, respectively.

Royce Micro-Cap Fund ('RMC') was up 7.4% for the second quarter and 11.4%
for the first six months of 1995. RMC's micro-cap focus, which has provided
above average results since its inception, was a hinderance to its short-term
relative performance. Nevertheless, the Fund has managed to earn a 5 Star
(*****) rating from Morningstar*, the independent mutual fund rating service.
Average annual total returns for the 1-year, 3-year and since inception
(12/31/91) periods ended June 30, 1995 were 16.5%, 19.9% and 19.2%,
respectively.

We remain encouraged by the investment opportunities that we are finding in
the micro-cap universe, especially given that, as a market cycle matures, a turn
away from growth and momentum to less exciting, low valuation issues usually
takes place. This type of period is generally favorable to RMC's style of
investing.

SMALL-CAP STOCKS -- LAGGING THEIR WAY TO NEW HIGHS

In the movie Star Wars, Luke Skywalker is told to 'Let The Force Be With
You.' The force in the first six months of 1995 was clearly with large-cap,
globally oriented stocks. The drop in the U.S. dollar and the submerging of many
'emerging' markets created a renewed interest in domestic, large-cap equities,
pushing the popular Dow Jones Industrial Average and S&P 500 indices to a long
string of new highs. In contrast, small-caps struggled to keep up. The Russell
2000 index of small-cap stocks finally eclipsed its previous high (March 18,
1994) in early June. In spite of the June surge, small-caps still lag their
large-cap counterparts.

WE HAD OUR 'SOX' KNOCKED OFF

Contributing to the first half's spectacular market returns was a meteoric
rise in technology stocks. The Philadelphia Semiconductor Index ('SOX') was up
over 100% in the last twelve months.

<PAGE>
WEEKLY PRICE GRAPH FOR 'SOX'
(PHILA. SEMICONDUCTOR INDEX 6/94 - 6/95)

[GRAPH]

[Chart showing increase in Philadelphia Semiconductor Index from June 30,
1994 to June 30, 1995, with 1 year percentage change equalling 104.3%, and
6/30/94 and 6/30/95 closes being 119.46 and 244.01, respectively.]

The current atmosphere of euphoria suggests that memories of the 'high
tech, high wreck' experience that occurred with the last technology stock run-up
in 1983 (and subsequent collapse) have been erased. Although small-cap
technology stocks are popular and available, it has never been a market segment
to which we have committed significant amounts of capital.

Imagine if the auto industry, in order to compete, had to produce more
fuel-efficient, easier-to-drive cars every year while cutting prices in half. Or
better yet, consider the airline industry which has a long record of high unit
growth but, as an industry, has yet to make the first dime in profits. We feel
that both examples are analogous to the pressures that many companies face in
the technology sector. The rate of product obsolescence rendered by scientific
advancement has made it difficult for many technology companies to maintain
competitive advantages and generate attractive long-term returns on capital.

Successful high technology companies require staggering amounts of product
innovation, incredible pricing power and uninterrupted earnings per share
gains - very hard to accomplish and very rare, indeed. For those companies that
slip in the competition, turnarounds are highly unusual. What these enterprises
may lack in retained earnings, they often make up in richly priced common
stocks.

For anyone feeling depressed about missing the recent high-tech stock
run-up, we thought we would share some interesting investment trivia which runs
counter to popular current assumptions:

<TABLE>
<CAPTION>
AVERAGE ANNUAL PERFORMANCE RESULTS
(12/31/79 - 6/30/95)
S&P S&P RUSSELL RUSSELL 2000
500 TECHNOLOGY 2000 TECHNOLOGY
---- ---------- ------- ------------

IN SPITE OF THE RECENT STELLAR MARKET PERFORMANCE AND ENORMOUS UNIT GROWTH,
TECHNOLOGY STOCKS HAVE ACTUALLY BEEN A DRAG ON THE LAST 15+ YEARS OF PERFORMANCE
FOR BOTH THE S&P 500 AND THE RUSSELL 2000.

History provides additional perspective on these exceptionally emotional
phases of the market. Past 'bubbles' have reflected obsessions like the 'tulip
mania' in the 17th century, the 'Nifty Fifty' in the early '70s, the energy
stock bonanza of the early '80s and the 1991 biotech stock craze. In each of
these bubbles, the money made by those smart enough to invest early was only
exceeded by the amount of money lost by those who invested late.

We believe that the appropriate way to participate in the technology sector
is to invest in companies who serve or benefit from the industry. It was the
suppliers of the picks and shovels, not the speculators, who made money during
the California gold rush. Our approach to the technology sector is similar.

<PAGE>

[ILLUSTRATION]

[Cartoon showing miners standing in line to purchase picks and shovels.]

WHAT WE DO
Royce Micro-Cap Fund uses a risk averse approach to invest in the
securities of micro-cap companies. The investment approach attempts to
understand and value a company's 'private worth.' Private worth is what we
believe the company would bring if the entire enterprise were sold in a private
transaction to a knowledgeable buyer. The price we will pay for a security must
be significantly under our appraisal of its private worth. The consistent use of
this discipline, applied to less well-known securities, is the source of our
performance.

NO OTHER PLACE WE WOULD RATHER BE

The Fund focuses on companies with market caps below $300 million. Although
our orientation is micro-cap, the picking universe is by no means limited.
Currently, more than 6,000 securities, representing over $400 billion in total
market capitalization, fall within our range. We believe micro-cap stocks are
generally less-known and, therefore, less likely to be understood and properly
priced by investors.

HOW IT WORKS

Investment returns in undervalued micro-cap companies can be unpredictable,
out-of-sync with the market and generally frustrating. Specific returns in any
given period are related to individual securities and market conditions.
Nevertheless, we expect in any period to have our share of winners and to see a
few laggards.

WINNERS

Our most recent successes are depicted in the table that follows. During
the first half of 1995, each contributed substantially to our performance and
are representative of our approach to investing. RMC's BEST PERFORMERS, as
measured by dollar impact, were:

<TABLE>
<CAPTION>
SECURITY % GAIN
--------------------------------------- --------

<S> <C>
Indigo, N.V. 201%
AMRESCO, Inc. 39%
Dreco Energy Services Ltd. 92%
Stein Mart, Inc. 44%
Vallen Corporation 31%
</TABLE>

Without exception, these successes resulted from our opportunistic
purchases of relatively unknown companies which met our strict criteria of
strong balance sheets and high internal rates of return. Since the beginning of
the year, more favorable economic conditions have produced a dramatic recovery
and revaluation of the companies by Wall Street.

The most dramatic gain was produced by Indigo. Indigo was a purchase we
made in a new technology company at a brief moment when such investments were
suspect. Initially billed as a hot new issue, Indigo's first weeks of trading
were anything but that. Originally offered at $20 per share, Indigo's stock
promptly lost one third of its value. Always on the lookout for fallen angels,
we invested

<PAGE>
aggressively in this 'broken deal' about a year ago. As the markets improved,
particularly in technology stocks, others discovered Indigo's revolutionary new
products. The rest is now history, for we sold the last of our Indigo shares
north of $40 per share.

In the case of Dreco Energy Services, the second biggest gainer, we
purchased a solid energy company when the industry was out of favor and others
were selling to establish tax losses.

MORE PATIENCE REQUIRED

One happy by-product of a bull market is that most of your stocks go up.
There are always a few exceptions. Our laggards generally fall into two
categories: undervalued companies that got cheaper (caught the flu) and those in
intensive care (with pneumonia). Fortunately, over the last two quarters, our
five WORST PERFORMERS, as measured by dollar impact, fall into the former
category:

<TABLE>
<CAPTION>
SECURITY % LOSS
------------------------------------------- ------

<S> <C>
Webco Industries, Inc. 30%
Thomaston Mills, Inc. 20%
K-Swiss, Inc. 35%
Charming Shoppes, Inc. 20%
Transnational Re, Inc. 15%
</TABLE>

In aggregate, our five worst performing investments cost us less than half
of what we made on our five biggest winners. In the case of Thomaston Mills and
K-Swiss, we still believe that they are undervalued enterprises worthy of
further investment. The best news is that with a little more patience, any one
of our current underachievers could make next year's winners list.

NO LONGER SMALL, UNKNOWN OR UNDER-OWNED

THERE HAVE BEEN SOME EXTRAORDINARY DEVELOPMENTS IN THE SMALL-CAP SECTOR,
BUT THEY ARE NOT WHAT YOU MAY THINK.

Small-caps are no longer 'small' when compared to industry definitions of a
decade ago. The upward bias (success) of the overall equity market has elevated
the capitalization of small-cap stocks dramatically over the last ten years. For
example, the weighted average market cap of the Russell 2000 index of small-cap
issues has risen from $140 million in June 1985 to $410 million as of June 30,
1995.

Morningstar, the leading independent mutual fund evaluation service, has
devised a set of market capitalization parameters that places equity mutual
funds into one of three capitalization boxes: small, medium or large. Portfolios
with median market caps under $1 billion are considered small-cap. Although we
do not have exact numbers, we believe the weighted average market cap in many of
these funds is close to $1 billion, a more revealing picture of just how 'big'
small-cap has become.

TEN YEARS OF EXPLOSIVE GROWTH!

[GRAPH]

[Pictorial chart showing increase in number of small-cap funds and assets
under management from 1984 to 1995; in 1995, 310 funds with $50 billion in
assets.]
5

<PAGE>
Performance success and investor acceptance has translated into a
significant flow of funds into the small-cap sector. In the mutual fund arena,
there are now over 300 small-cap funds representing approximately $50 billion in
assets. By contrast, there were only 24 small-cap funds with assets totaling $4
billion at the end of 1984. This over ten-fold increase in the number of
small-cap funds and category assets has changed the playing field in a
significant way. It is interesting to note that the majority of the funds have
elected to focus their energies at the upper end of the Morningstar
capitalization range ($500 million - $1 billion) where there is greater
liquidity but, by definition, more competition.

The growth in small company funds and assets has dramatically decreased the
number of unknown, inefficiently priced stocks at the upper end of the small-cap
market and, simultaneously, increased the number of opportunities at the low-end
of the capitalization range.

Micro-cap companies are the antithesis of what most professional small-cap
investors are looking for - they are not well known, not well researched and
their securities are not easy to buy and sell. These are precisely the
conditions that breed undervalued securities. Currently, fewer than 10 mutual
funds have a micro-cap charter. As an experienced institutional investor in a
sector dominated by individuals, we believe that we have a particular advantage
in micro-cap research and trading capabilities, key components for success. We
believe that micro-caps offer today the investment opportunities that small-caps
did 15 years ago.

[ILLUSTRATION]

[Cartoon of fortune teller and customer]

STAR GAZING

In spite of the spectacular run-up by large-cap equities since the market
lows of last December, there are several indications that small-cap stocks may
soon resume a leadership role. June was their first month of outperformance
since February, with the Russell 2000 up 5.2% versus a 2.4% return for the S&P
500. This performance momentum has continued into the first part of the third
quarter, a good omen for micro-cap issues. Also, now that the U.S. dollar has
stopped declining against other major currencies, domestic small-cap stocks are
competing on a level playing field. This has historically given small and
micro-cap stocks a performance edge.

<PAGE>
Finally, one has to wonder if the current level of low volatility is
sustainable in light of the market's high returns. While we cannot explain this
phenomena, we do not view this as a permanent condition. Since the last 10%
market correction in 1990, the pay-off has been with investors who took the
highest risk. We believe that over the next three years risk management will
have a similar pay-off. WE REMAIN COMMITTED TO ACHIEVING ABOVE AVERAGE LONG-TERM
RETURNS WITH THIS LOW RISK APPROACH.

Your continued confidence is appreciated.

Yours faithfully,

<TABLE>
<S> <C>
CHARLES M. ROYCE Jack E. Fockler, Jr.
Charles M. Royce W. Whitney George
President Vice Presidents
</TABLE>

July 31, 1995

* The Morningstar proprietary rating reflects historical risk-adjusted
performance as of June 30, 1995 and may change monthly. The rating is calculated
from the Fund's 3-year average annual return with appropriate fee adjustments
and a risk factor that reflects performance relative to the 3-month Treasury
bill returns. 1,234 equity funds were rated for the 3-year period ended June 30,
1995. 10% of the funds in an investment category receive 5 stars.

NOTE: S&P 500, Russell 2000 and S&P 600 are unmanaged and include the
reinvestment of dividends.

<PAGE>
FINANCIAL REVIEW

<TABLE>
<CAPTION>
ANNUAL RETURNS
-------------------------------
<S> <C>
1995 (thru 6/30)........ 11.4%
1994.................... 3.6%
1993.................... 23.7%
1992.................... 29.4%
</TABLE>

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
------------------------------------
<S> <C>
(THROUGH 6/30/95)
Since Inception*.............. 19.2%
3-Year........................ 19.9%
1-Year........................ 16.5%
</TABLE>

ROYCE MICRO-CAP FUND VERSUS S&P 500
VALUE OF $10,000 INVESTED ON 12/31/91

[GRAPH]

[Line graph showing change in value of $10,000 investment in Fund and the
S&P 500 between inception of Fund and June 1995.]

* Inception Date -- December 31, 1991

The results presented in this report should not be considered
representative of the total return from an investment in the Fund today. They
are only provided to give an historical perspective of the Fund. The investment
return and principal value of Fund shares will fluctuate so that the shares may
be worth more or less than their original cost when redeemed. Redemption fees
are not included because they apply only to those accounts open less than one
year.

<PAGE>
PORTFOLIO SUMMARY

The following information is provided as a 'bird's eye' view of the Royce
Micro-Cap Fund portfolio. For a more complete picture, the full portfolio and
accompanying financial statements should be read in their entirety.

<TABLE>
<CAPTION>
PORTFOLIO COMPOSITION VALUE % OF NET ASSETS
<C> <S> <C> <C>
-----------------------------------------------------------------------------------------------------------
Common Stocks $39,309,972 80.8%
Preferred Stock 91,875 0.2
Cash & Other Net Assets 9,221,242 19.0
--------------- -------
Total Net Assets $48,623,089 100.0%
--------------- -------
--------------- -------

PORTFOLIO DIAGNOSTICS
-----------------------------------------------------------------------------------------------------------
Weighted Average Market Capitalization $191 Million
Median Market Capitalization $ 93 Million
Weighted Average P/E Ratio (50 Largest Positions) 12.2x
Weighted Average P/B Ratio (50 Largest Positions) 1.4x
Weighted Average Portfolio Yield (50 Largest Positions) 1.3%

COMMON STOCK SECTORS % OF NET ASSETS
-----------------------------------------------------------------------------------------------------------
Industrial Cyclicals 16.3%
Financial 14.8
Services 12.1
Retail 10.8
Energy 7.9
Consumer Durables 6.9
Technology 6.6
Consumer Staples 3.3
Health 2.1

TOP TWENTY POSITIONS MARKET VALUE % OF NET ASSETS
-----------------------------------------------------------------------------------------------------------
1 The Dress Barn $998,400 2.1%
2 Mutual Assurance, Inc. 915,000 1.9
3 CATHERINES STORES CORPORATION 817,688 1.7
4 Vallen Corporation 774,000 1.6
5 Gryphon Holdings, Inc. 763,750 1.6
6 The Standard Register Company 760,000 1.6
7 Thor Industries, Inc. 722,850 1.5
8 Exar Corporation 710,950 1.5
9 Frozen Food Express Industries, Inc. 679,094 1.4
10 Cliffs Drilling Company 652,650 1.3
11 AMRESCO, INC. 650,625 1.3
12 The Rival Company 640,150 1.3
13 Stein Mart, Inc. 637,200 1.3
14 Juno Lighting, Inc. 622,400 1.3
15 Curtiss-Wright Corporation 602,438 1.2
16 Trenwick Group Inc. 586,500 1.2
17 Life Technologies, Inc. 564,750 1.2
18 Offshore Logistics, Inc. 557,200 1.1
19 Transnational Re Corporation Cl. A 553,725 1.1
20 Charming Shoppes, Inc. 540,225 1.1
</TABLE>

<PAGE>
ROYCE MICRO-CAP FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1995 (unaudited)
--------------------------------------------------------------------------------
COMMON STOCKS - 80.8%

<TABLE>
<CAPTION>
Value
Shares (Note 1)
<S> <C> <C>
CONSUMER DURABLES - 6.9%
10,000 *Aldila, Inc................. $ 51,239
1,200 *The First Years, Inc........ 24,300
17,000 Garan Incorporated........... 284,750
38,900 Juno Lighting, Inc........... 622,400
30,250 *Lifetime Hoan Corporation... 340,313
28,600 Matthews International
Corporation Cl. A.......... 536,250
43,400 The Rival Company............ 640,150
10,000 *River Oaks Furniture, Inc... 120,000
36,600 Thor Industries, Inc......... 722,850
-----------
3,342,252
-----------
CONSUMER STAPLES - 3.3%
13,100 *J & J Snack Foods Corp...... 165,388
29,500 K-Swiss Inc. Cl. A........... 383,500
16,300 Midwest Grain Products,
Inc........................ 301,550
20,000 *Pentech International,
Inc........................ 60,000
7,200 SL Industries, Inc........... 36,900
15,000 The Smithfield Companies,
Inc........................ 163,594
4,500 Velcro Industries N.V........ 259,875
6,400 Weyco Group, Inc............. 230,400
-----------
1,601,207
-----------
ENERGY - 7.9%
49,600 *American Oilfield Divers,
Inc........................ 322,400
5,000 *Belden & Blake
Corporation................ 81,250
45,800 *Cliffs Drilling Company..... 652,650
31,600 *Dreco Energy Services Ltd.
Cl. A...................... 458,200
50,900 *Equity Oil Company.......... 222,688
19,400 *Hornbeck Offshore Services,
Inc........................ 305,550
28,000 Lufkin Industries, Inc....... 525,000
13,000 *Noble Drilling
Corporation................ 95,875
39,800 *Offshore Logistics, Inc..... 557,200
5,500 Penn Virginia Corporation.... 154,688
41,800 *Tide West Oil Company....... 480,700
-----------
3,856,201
-----------
<CAPTION>
Value
Shares (Note 1)
<S> <C> <C>
FINANCIAL - 14.8%
26,000 ALLIED Life Financial
Corporation................ $ 448,500
69,400 AMRESCO, INC................. 650,625
20,000 *Benson Financial
Corporation................ 265,000
11,300 CMAC Investment
Corporation................ 490,138
10,000 Capitol Transamerica
Corporation................ 192,500
5,000 Eaton Vance Corp............. 161,250
47,000 *Gryphon Holdings Inc........ 763,750
39,600 Hilb, Rogal & Hamilton
Company.................... 495,000
37,800 Intercargo Corporation....... 415,800
30,500 *Mutual Assurance, Inc....... 915,000
4,600 *The Navigators Group,
Inc........................ 72,450
43,600 Nobel Insurance Limited...... 449,625
9,900 Oriental Federal Savings
Bank....................... 188,100
30,000 Pennsylvania Manufacturers
Corporation................ 465,000
7,000 Piper Jaffray Companies
Inc........................ 105,875
27,600 *Transnational Re Corporation
Cl. A...................... 553,725
13,800 Trenwick Group Inc........... 586,500
-----------
7,218,838
-----------
HEALTH - 2.1%
25,100 Life Technologies, Inc....... 564,750
20,000 Medex, Inc................... 250,000
5,000 *Professional Sports Care
Management, Inc............ 50,938
5,000 *Spacelabs Medical, Inc...... 126,875
5,000 *Staff Builders, Inc......... 20,625
-----------
1,013,188
-----------
INDUSTRIAL CYCLICALS - 16.3%
16,500 Aceto Corporation............ 243,375
1,500 American Filtrona
Corporation................ 44,250
37,900 Guy F. Atkinson Company of
California................. 355,313
</TABLE>

The accompanying notes are an integral part of the financial statements.

<PAGE>
ROYCE MICRO-CAP FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1995 (unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 1)
INDUSTRIAL CYCLICALS (CONT'D)
<S> <C> <C>
5,300 BHA Group, Inc............... $ 66,250
21,400 Blessings Corporation........ 267,500
17,600 *Chemfab Corporation......... 288,200
13,500 Curtiss-Wright Corporation... 602,438
65,000 *DeVlieg-Bullard, Inc........ 89,375
3,500 Fab Industries, Inc.......... 106,750
26,200 *Figgie International Inc.
Cl. A...................... 225,975
18,800 Florida Rock Industries,
Inc........................ 533,450
5,000 Gilbert Associates, Inc. Cl.
A.......................... 65,000
6,100 Haskel International, Inc.
Cl. A...................... 42,700
7,500 *Hauser Chemical Research,
Inc........................ 39,844
66,628 Hawkins Chemical, Inc........ 449,739
10,700 *Insituform Technologies,
Inc........................ 141,775
22,800 Kaman Corporation Cl. A...... 290,700
4,400 Knape & Vogt Manufacturing
Company.................... 66,000
45,000 Lilly Industries, Inc. Cl.
A.......................... 528,750
123,700 *MK Gold Company............. 432,950
4,500 Paul Mueller Company......... 141,750
9,300 Myers Industries, Inc........ 133,688
1,900 The Oilgear Company.......... 34,200
8,000 Oshkosh Truck Corporation Cl.
B.......................... 99,000
28,500 Peerless Mfg. Co............. 309,938
2,300 Penn Engineering and
Manufacturing Corp......... 173,650
10,000 Roper Industries, Inc........ 350,000
3,900 *Shorewood Packaging
Corporation................ 57,038
43,000 Simpson Manufacturing Co.,
Inc........................ 521,375
24,800 Thermal Industries, Inc...... 244,900
42,000 Thomaston Mills, Inc. Cl.
A.......................... 525,000
8,500 Versa Technologies, Inc...... 123,250
55,000 *Webco Industries, Inc....... 343,750
-----------
7,937,873
-----------
<CAPTION>
Value
Shares (Note 1)
<S> <C> <C>
RETAIL - 10.8%
19,900 *The Buckle, Inc............. $ 310,938
73,500 *CATHERINES STORES
CORPORATION................ 817,688
102,900 Charming Shoppes, Inc........ 540,225
48,000 *The Clothestime, Inc........ 138,000
13,500 *Crown Books Corporation..... 151,875
23,400 Deb Shops Inc................ 76,050
102,400 *The Dress Barn, Inc......... 998,400
6,633 Frederick's of Hollywood,
Inc. Cl. A................. 33,994
13,266 Frederick's of Hollywood,
Inc. Cl. B................. 59,697
10,000 *Garden Ridge Corporation.... 247,500
12,000 *InterTAN Inc................ 90,000
25,300 *Mikasa, Inc................. 376,338
2,000 Oshkosh B'Gosh, Inc. Cl. A... 32,000
47,200 *Stein Mart, Inc............. 637,200
13,000 Strawbridge & Clothier Cl.
A.......................... 260,000
19,800 *Suzy Shier Limited.......... 97,280
88,413 *The Wet Seal, Inc. Cl. A.... 408,910
-----------
5,276,095
-----------
SERVICES - 12.1%
10,000 *Ag Services Of America,
Inc........................ 78,438
2,000 *Bell Industries, Inc........ 42,750
16,700 Dames & Moore................ 217,100
16,500 DUFF & PHELPS CREDIT RATING
CO......................... 214,500
17,900 Ennis Business Forms, Inc.... 221,513
32,700 *FCA International Ltd....... 73,784
70,100 Frozen Food Express
Industries, Inc............ 679,094
16,100 *Hirsh International Corp.
Cl. A...................... 257,600
1,430 Kenan Transport Company...... 28,600
20,000 Merrill Corporation.......... 380,000
10,700 *MovieFone, Inc. Cl. A....... 46,813
21,700 *Nichols Research
Corporation................ 371,613
</TABLE>

The accompanying notes are an integral part of the financial statements.

PREFERRED STOCK - .2%
4,900 Bird Corp. $1.85 Conv.
(Cost $82,002)............. 91,875
-----------

REPURCHASE AGREEMENT - 20.6%
State Street Bank and Trust Company,
5.50% due 7/3/95, collateralized by
U.S. Treasury Note, 7.50% due
1/31/97, valued at $10,002,718 (Cost
$10,000,000)......................... 10,000,000
-----------
TOTAL INVESTMENTS - 101.6%
(COST $45,714,542)................... 49,401,847

LIABILITIES LESS CASH AND OTHER
ASSETS - (1.6%)...................... (778,758)
-----------

NET ASSETS - 100.0%.................... $48,623,089
-----------
-----------
</TABLE>

* Non-income producing.

INCOME TAX INFORMATION - The cost for federal income tax purposes was
$45,720,863. At June 30, 1995, net unrealized appreciation for all securities
amounted to $3,680,984, consisting of aggregate gross unrealized appreciation of
$5,125,586 and aggregate gross unrealized depreciation of $1,444,602.

The accompanying notes are an integral part of the financial statements.

<PAGE>
ROYCE MICRO-CAP FUND
STATEMENT OF ASSETS AND LIABILITIES AT JUNE 30, 1995 (unaudited)
--------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Investments at value (identified cost $45,714,542) (Note 1)....................................... $49,401,847
Cash.............................................................................................. 647,356
Receivable for investments sold................................................................... 143,466
Receivable for shares of beneficial interest sold................................................. 433,125
Receivable for dividends and interest............................................................. 46,478
Prepaid expenses and other assets................................................................. 8,444
-----------
TOTAL ASSETS.................................................................................... 50,680,716
-----------
LIABILITIES:
Payable for investments purchased................................................................. 1,763,815
Payable for shares of beneficial interest redeemed................................................ 211,453
Investment advisory fee payable (Note 2).......................................................... 42,490
Accrued expenses.................................................................................. 39,869
-----------
TOTAL LIABILITIES............................................................................... 2,057,627
-----------
NET ASSETS...................................................................................... $48,623,089
-----------
-----------
ANALYSIS OF NET ASSETS:
Net investment loss............................................................................... $ (22,031)
Accumulated net realized gain on investments...................................................... 969,893
Net unrealized appreciation on investments........................................................ 3,687,305
Shares of beneficial interest (Note 3)............................................................ 6,734
Additional paid-in capital........................................................................ 43,981,188
-----------
NET ASSETS...................................................................................... $48,623,089
-----------
-----------
PRICING OF SHARES:
Net asset value, offering and redemption price per share ($48,623,089[div]6,733,675 shares
outstanding) (Note 3)........................................................................... $7.22
</TABLE>

STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Six months ended
June 30, 1995 Year ended
(unaudited) December 31, 1994
---------------- -----------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Net investment loss/income.............................................. $ (22,031) $ 4,348
Net realized gain on investments........................................ 1,051,508 837,727
Net unrealized appreciation/depreciation on investments................. 3,120,427 (78,268)
---------------- -----------------
Increase in net assets resulting from operations........................ 4,149,904 763,807
Distributions paid from net realized gains.............................. -- (882,286)
FROM CAPITAL SHARE TRANSACTIONS:
Increase in net assets from capital share transactions (Note 3)......... 17,699,462 16,631,149
---------------- -----------------
INCREASE IN NET ASSETS.................................................... 21,849,366 16,512,670
NET ASSETS:
Beginning of period..................................................... 26,773,723 10,261,053
---------------- -----------------
End of period........................................................... $ 48,623,089 $26,773,723
---------------- -----------------
---------------- -----------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

<PAGE>
ROYCE MICRO-CAP FUND
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1995 (unaudited)
--------------------------------------------------------------------------------

<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends..................................................................................... $ 200,547
Interest...................................................................................... 123,643
----------
Total income........................................................................ 324,190
----------
Expenses:
Investment advisory fee (Note 2).............................................................. 254,803
Custodian and transfer agent fees............................................................. 47,772
Federal and state registration fees........................................................... 14,507
Supplies and postage.......................................................................... 14,421
Administrative and clerical services.......................................................... 8,811
Shareholder reports and notices............................................................... 8,620
Legal and auditing fees....................................................................... 5,079
Facilities and office space................................................................... 2,455
Miscellaneous................................................................................. 1,908
Trustees' fees................................................................................ 1,267
Organizational costs.......................................................................... 625
Fees waived by adviser (Note 2)............................................................... (14,047)
----------
Total expenses...................................................................... 346,221
----------
Net investment loss................................................................. (22,031)
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments................................................................... 1,051,508
Net unrealized appreciation on investments......................................................... 3,120,427
----------
Net realized and unrealized gain on investments.................................................... 4,171,935
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................................... $4,149,904
----------
----------
</TABLE>

The accompanying notes are an integral part of the financial statements.

<PAGE>
ROYCE MICRO-CAP FUND
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------

This table is presented to show selected data for a share outstanding
throughout each period, and to assist shareholders in evaluating the Fund's
performance over the last 3 years.

<TABLE>
<CAPTION>
Six months ended Years ended December 31,
June 30, 1995 ----------------------------------
(unaudited) 1994 1993 1992
---------------- ----- ----- -----
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............. $ 6.48 $6.47 $5.83 $5.00
------- ----- ----- -----
INCOME FROM INVESTMENT OPERATIONS:
Net investment income/loss (a)................. -- -- -- (0.01)
Net gains on investments (realized and
unrealized)................................. 0.74 0.23 1.38 1.48
------- ----- ----- -----
Total from investment operations............ 0.74 0.23 1.38 1.47
------- ----- ----- -----
LESS DISTRIBUTIONS:
Dividends (from net investment
income)..................................... -- -- -- --
Distributions (from capital gains)............. -- (0.22) (0.74) (0.64)
------- ----- ----- -----
Total distributions......................... -- (0.22) (0.74) (0.64)
------- ----- ----- -----
NET ASSET VALUE, END OF PERIOD................... $ 7.22 $6.48 $6.47 $5.83
------- ----- ----- -----
------- ----- ----- -----
TOTAL RETURN..................................... 11.4% 3.6% 23.7% 29.4%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period........................ $48,623,089 $26,773,723 $10,261,053 $3,372,962
Ratio of Expenses to Average Net
Assets (b)..................................... 1.99%`D' 1.99% 1.99% 1.69%
Ratio of Net Investment Income to Average Net
Assets......................................... (0.13%)`D' 0.02% (0.09%) (0.21%)
Portfolio Turnover Rate.......................... 22% 54% 116% 171%
</TABLE>

`D' Annualized.

(a) Net investment income is shown after waivers of fees by the investment
adviser and distributor. For the years ended December 31, 1994, 1993 and
1992, the per share effect of these waivers is $0.01, $0.03 and $0.12,
respectively.

(b) Expense ratios are shown after waivers of fees by the investment adviser and
distributor. For the six months ended June 30, 1995, the expense ratio
before the waiver would have been 2.07%. For the years ended December 31,
1994, 1993 and 1992, the expense ratios before the waivers and
reimbursements would have been 2.34%, 2.49% and 3.77%, respectively.

The accompanying notes are an integral part of the financial statements.

<PAGE>
ROYCE MICRO-CAP FUND
NOTES TO FINANCIAL STATEMENTS (unaudited)
--------------------------------------------------------------------------------

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Royce Micro-Cap Fund (the 'Fund') is a series of The Royce Fund (the
'Trust'), a diversified open-end management investment company established as a
business trust under the laws of Massachusetts. The Fund commenced operations on
December 31, 1991.

a. Valuation of investments:

Securities listed on an exchange or on the Nasdaq National Market System
are valued on the basis of the last reported sale prior to the time the
valuation is made or, if no sale is reported for such day, at their bid price
for exchange-listed securities and at the average of their bid and asked prices
for Nasdaq securities. Quotations are taken from the market where the security
is primarily traded. Other over-the-counter securities for which market
quotations are readily available are valued at their bid price. Securities for
which market quotations are not readily available are valued at their fair value
under procedures established and supervised by the Board of Trustees. Bonds and
other fixed income securities may be valued by reference to other securities
with comparable ratings, interest rates and maturities, using established
independent pricing services.

b. Investment transactions and related investment income:

Investment transactions are accounted for on the trade date and dividend
income is recorded on the ex-dividend date. Interest income is recorded on the
accrual basis. Realized gains and losses from investment transactions and
unrealized appreciation and depreciation of investments are determined on the
basis of identified cost for book and tax purposes.

c. Taxes:

As a qualified regulated investment company under Subchapter M of the
Internal Revenue Code, the Fund is not subject to income taxes to the extent
that it distributes substantially all of its taxable income for its fiscal year.
The schedule of investments includes information regarding income taxes under
the caption 'Income Tax Information.'

d. Distributions:

Any dividend and capital gain distributions are recorded on the ex-dividend
date and paid annually in December. Dividend and capital gain distributions are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. Permanent book and tax basis
differences relating to shareholder distributions will result in
reclassifications to paid-in capital and may affect net investment income per
share. Undistributed net investment income may include temporary book and tax
basis differences which will reverse in a subsequent period. Any taxable income
or gain remaining at fiscal year end is distributed in the following year.

e. Repurchase Agreements:

The Fund enters into repurchase agreements with respect to its portfolio
securities solely with State Street Bank and Trust Company ('SSB&T'), the
custodian of its assets. The Fund restricts repurchase agreements to maturities
of no more than seven days. Securities pledged as collateral for repurchase
agreements are held by SSB&T until maturity of the repurchase agreements.
Repurchase agreements could involve certain risks in the event of default or
insolvency of SSB&T, including possible delays or restrictions upon the ability
of the Fund to dispose of the underlying securities.

<PAGE>
ROYCE MICRO-CAP FUND
NOTES TO FINANCIAL STATEMENTS (continued) (unaudited)
--------------------------------------------------------------------------------

2. INVESTMENT ADVISER AND DISTRIBUTOR:

Under the Trust's investment advisory agreement with Quest Advisory Corp.
('Quest'), the Fund paid Quest fees totaling $240,756 (net of $14,047
voluntarily waived by Quest) for the six months ended June 30, 1995. The
agreement provides for fees equal to 1.50% per annum of the Fund's average net
assets. Such fees are computed daily and are payable monthly to Quest.

Effective December 27, 1994, the 12b-1 distribution plan between Quest
Distributors, Inc. ('QDI'), an affiliate of Quest and the Fund was eliminated.
The distribution agreement provided for maximum fees of 0.25% per annum of the
Fund's average net assets. For the period January 1, 1994 through December 26,
1994, QDI waived its distribution fees of $51,745.

3. FUND SHARES:

The Board of Trustees has authority to issue an unlimited number of shares
of beneficial interest of the Fund, with a par value of $.001. Share
transactions were as follows:

<TABLE>
<CAPTION>
Six months ended
June 30, 1995 Year ended
(unaudited) December 31, 1994
------------------------ ------------------------
Shares Amount Shares Amount
--------- ----------- --------- -----------

<S> <C> <C> <C> <C>
Sold................................................ 3,559,545 $24,106,744 3,065,935 $20,016,833
Issued as reinvested dividends and distributions.... -- -- 122,730 795,288
Redeemed............................................ (960,699) (6,407,282) (639,780) (4,180,972)
</TABLE>

4. PURCHASES AND SALES OF SECURITIES:

For the six months ended June 30, 1995, the cost of purchases and the
proceeds from sales of portfolio securities, other than short-term securities,
amounted to $15,636,234 and $6,766,810, respectively.

At the Special Meeting of Shareholders of Royce Micro-Cap Fund held
on June 28, 1995, shareholders approved a change in its stated investment
objective by eliminating the requirement that the securities in which
Royce Micro-Cap Fund will primarily invest be traded in the over-the-
counter market, as follows:

Votes Votes Cast Votes
Cast For Against Abstained
--------- ---------- ---------
<S> <C> <C> <C>

2,863,722 74,735 90,733
</TABLE>

17
<PAGE>
POSTSCRIPT: WATCH US IN THE CORNERS

There isn't much joy sitting in a summer traffic jam when you're headed for
the beach. One's mind tends to wander, contemplating some of the farfetched
symmetries of life; for example, how similar driving to a vacation home is to
investing. In both, the goal is clearly defined, and earlier achievement is
preferable to a long delay. Nevertheless, getting to the destination requires
both attention and patience. Once the traffic jam clears and more aggressive
drivers speed by on both sides, a sense of frustration sets in. We don't
appreciate it when we are going along at a good clip, only to see others rocket
by at very high speeds.

But, in both investing and road racing, you have to finish in order to
finish first. There is usually challenging terrain with hills, straightaways and
curves. There are also obstacles, some foreseeable, others totally
unpredictable. Oil slicks and accidents are no more predictable than the exact
course of interest rates or inflation. At the end, victory belongs to those who
navigate the course with speed, precision and caution.

Our own feeling of inadequacy on the highway is a reminder of our recent
underperformance in the dynamic stock market rally now underway. The well-tuned
small-cap vehicles in which we have invested are currently being passed by
momentum muscle cars and technology dragsters. As we barrel down one of the
longest straightaways in decades, more powerful equities have made our stock
cars look like little jalopies. Yet we believe we have not selected inferior
clunkers, but rather well-tuned vehicles with high return suspensions and strong
balance sheet brakes. Our diverse team can maneuver well in the economic turns,
ease by the interest rate slicks and avoid the overpriced accidents.

Watch us in the corners. At some point the momentum muscle cars will run
out of fuel and pull over to wait for the tax loss tow trucks. The technology
dragsters, lacking brakes, will deploy their parachutes at the first turn or
become tech wrecks. The investment corners are where our vehicle performs at its
best. We think we see some of those yellow caution signs signalling curves in
the distance, so this race is far from over. We have competed in these races for
many years and we know our companies will finish well.

Drive carefully.

------------------------------------------------------

THE ROYCE FUNDS

General Information and Telephone Purchases ......... 1 (800) 221-4268
Shareholder Account Services ........................ 1 (800) 841-1180
Investment Advisor Services ......................... 1 (800) 33-ROYCE
The Royce Funds InfoLine ............................ 1 (800) 78-ROYCE

1414 Avenue of the Americas, New York, New York 10019
This report must be accompanied by or preceded by a current prospectus of the
Fund

<PAGE>

ROYCE
EQUITY INCOME
FUND
SEMI-ANNUAL REPORT
JUNE 30, 1995

THE ROYCE FUNDS

<PAGE>
The Royce Funds
1414 Avenue of the Americas
New York, NY 10019
(212) 355-7311
(800) 221-4268
Dear Shareholder:

If the Dow Jones Industrial Average were to continue its first half pace,
it would top 30,000 in the year 2000! Something to think about.

THE NUMBERS . . . UP, UP AND AWAY

Royce Equity Income Fund ('REI') was up 6.8% for the second quarter and
11.0% for the first six months of 1995. Funds with an equity income focus are
rarely among the market leaders during dramatic updrafts. The good news,
however, is that equity income approaches have been among the best performers
over long-term time horizons. Although REI's use of small-cap issues was a
hindrance to its short-term relative performance, we believe that our approach,
which combines two successful investment strategies (small-cap and equity income
investing), is capable of attractive long-term returns. It is also interesting
to note that REI remains Morningstar's lowest risk equity income fund, as
measured by the Morningstar Risk Ratio.*

We remain enthusiastic about the yield-oriented small-cap companies that
we are finding, especially given that, as a market cycle matures, a turn
away from growth and momentum to less exciting, low valuation issues usually
takes place. This type of period has been favorable to REI's style of investing.

SMALL-CAP STOCKS -- LAGGING THEIR WAY TO NEW HIGHS

WE HAD OUR 'SOX' KNOCKED OFF

Contributing to the first half's spectacular market returns was a meteoric
rise in technology stocks. The Philadelphia Semiconductor Index ('SOX') was up
over 100% in the last twelve months.

WEEKLY PRICE GRAPH FOR 'SOX'
(PHILA. SEMICONDUCTOR INDEX 6/94-6/95)

[GRAPH]

<PAGE>
The current atmosphere of euphoria suggests that memories of the 'high
tech, high wreck' experience that occurred with the last technology stock run-up
in 1983 (and subsequent collapse) have been erased. Although small-cap
technology stocks are popular and available, it has never been a market segment
to which we have committed significant amounts of capital.

For anyone feeling depressed about missing the recent high-tech stock
run-up, we thought we would share some interesting investment trivia which runs
counter to popular current assumptions:

<TABLE>
<CAPTION>
AVERAGE ANNUAL PERFORMANCE RESULTS
(12/31/79 - 6/30/95)
S&P S&P RUSSELL RUSSELL 2000
500 TECHNOLOGY 2000 TECHNOLOGY
---- ---------- ------- ------------

IN SPITE OF THE RECENT STELLAR MARKET PERFORMANCE AND ENORMOUS UNIT GROWTH,
TECHNOLOGY STOCKS HAVE ACTUALLY BEEN A DRAG ON THE LAST 15+ YEARS OF PERFORMANCE
FOR BOTH THE S&P 500 AND THE RUSSELL 2000.

[ILLUSTRATION]

[Cartoon showing miners standing in line to purchase picks and shovels.]

<PAGE>
WHAT WE DO

Royce Equity Income Fund uses a risk averse approach to invest in the
securities of income-oriented small-cap companies. The investment approach
attempts to understand and value a company's 'private worth.' Private worth is
what we believe the company would bring if the entire enterprise were sold in a
private transaction to a knowledgeable buyer. The price we will pay for a
security must be significantly under our appraisal of its private worth. The
consistent use of this discipline, applied to less well-known securities, is the
source of our performance.

NO OTHER PLACE WE WOULD RATHER BE

The Fund focuses on companies with market caps below $1 billion. Although
our orientation is small-cap, the picking universe is by no means small.
Currently, more than 7,000 securities, representing over $900 billion in total
market capitalization, fall within our range. We believe small-cap stocks are
generally less-known and, therefore, less likely to be understood and properly
priced by investors.

HOW IT WORKS

Investment returns in undervalued yield-
oriented small-cap companies can be unpredictable, out-of-sync with the market
and generally frustrating. Specific returns in any given period are related to
individual securities and market conditions. Nevertheless, we expect in any
period to have our share of winners and to see a few laggards.

WINNERS

Our most recent successes are depicted in the table that follows. During
the first half of 1995, each contributed substantially to our performance and
are representative of our approach to investing. REI's BEST PERFORMERS, as
measured by dollar impact, were:

<TABLE>
<CAPTION>
SECURITY % GAIN
------------------------------------------- ------

<S> <C>
Scitex Corporation Limited 29%
Student Loan Marketing Assoc. 45%
Waterhouse Investor Services, Inc. 36%
(6% Conv. Sub. Deb. 12/15/03)
Atlantic Southeast Airlines, Inc. 94%
</TABLE>

Scitex Corporation and Atlantic Southeast Airlines were relatively large
investments in companies we knew well and are highly regarded in their
respective businesses. Due to difficult industry conditions, the shares in these
companies became unusually depressed. Since the beginning of the year, with only
modest change in the economy, the investment community's opinion has become
decidedly more optimistic for both Atlantic Southeast Airlines and Scitex
Corporation.

Waterhouse Investor Services convertible bonds were purchased at a large
discount to par value. Rising interest rates in 1994 had a negative effect on
both low coupon bonds and, in this case, the discount broker's bonds, which were
convertible into common stock. This year, with interest rates down and stocks
back up, our Waterhouse convertibles are once again approaching par value.

<PAGE>
stock declined from the mid $70's to $33 per share during the preceding 24
months. We were attracted to Sallie Mae by its dominant market position, low
valuation and high dividend yield. Encouraged by the recent political change in
Washington, we made Sallie Mae a top position in our Fund. We are happy we did
so.

MORE PATIENCE REQUIRED

One happy byproduct of a bull market is that most of your stocks go up.
There are always a few exceptions. Our laggards generally fall into two
categories: undervalued companies that got cheaper (caught the flu) and those in
intensive care (with pneumonia). Fortunately, over the last two quarters, our
WORST PERFORMERS, as measured by dollar impact, fall into the first category:

<TABLE>
<CAPTION>
SECURITY % LOSS
------------------------------------------- ------

<S> <C>
Delta Woodside Industries, Inc. 34%
NCH Corporation 14%
Blair Corporation 14%
Block Drug Company, Inc. 11%
</TABLE>

The only losing position of concern is Delta Woodside Industries. This
textile manufacturer has suffered, like many others, through a difficult period
in the apparel industry. We would feel more confident in the potential of this
company if it had stuck to its knitting, rather than invest in an exercise
equipment company. Nevertheless, at its June 30 close of $7.625 per share, most
of the risk appears to be out of the stock. As for our other underachievers,
with a little more patience, any one of these could make next year's winners
list.

NO LONGER SMALL, UNKNOWN OR UNDER-OWNED

THERE HAVE BEEN SOME EXTRAORDINARY DEVELOPMENTS IN THE SMALL-CAP SECTOR,
BUT THEY ARE NOT WHAT YOU MAY THINK.

TEN YEARS OF EXPLOSIVE GROWTH!

[GRAPH]

[Pictorial chart showing increase in number of small-cap funds and assets
under management from 1984 to 1995; in 1995, 310 funds with $50 billion in
assets.]

The growth in small company funds and assets has dramatically decreased the
number of unknown, inefficiently priced stocks at the upper end of the small-cap
market. We have taken two countermeasures for the benefit of our investors.

In the zone where most small-cap funds traffic ($500 million - $1 billion
in market capitalization), we believe that a higher level of portfolio
concentration is appropriate. This approach implies confidence in our non-
quantitative and non-Wall Street research abilities. We believe that we are
uniquely equipped to accomplish this task by virtue of our 20+ years of
small-cap investment experience and our sizeable research effort.

A second area of opportunity is at the other end of the capitalization
range, the sector known as micro-cap. The micro-cap universe has the largest
number of companies in which to invest, but the smallest number of institutional
investors who do so. Currently, fewer than 10 mutual funds have a micro-cap
charter. Micro-cap companies are the antithesis of what most professional
small-cap investors are looking for - they are not well known, not well
researched and their securities are not easy to buy and sell. These are
precisely the conditions that breed undervalued securities. As an experienced
institutional investor in a sector dominated by individuals, we believe that we
have a particular advantage in micro-cap research and trading capabilities, key
components for success. We believe that micro-caps offer today the investment
opportunities that small-caps did 15 years ago. We will continue to increase
their weighting in the portfolio.

[ILLUSTRATION]

[Cartoon of fortune teller and customer]

STAR GAZING

In spite of the spectacular run-up by large-cap equities since the market
lows of last December, there are several indications that small-cap stocks may
soon resume a leadership role. June was the first month of small-cap
outperformance since February, with the Russell 2000 up 5.2% versus a 2.4%
return for the S&P 500. This performance momentum has continued into the first
part of the third quarter, a good omen for small-cap issues. Also, now that the
U.S. dollar has stopped declining against other major currencies, domestic
small-cap stocks are competing on a level playing field. This has historically
given small-cap stocks a performance edge.

Your continued confidence is appreciated.

Yours faithfully,

<TABLE>
<S> <C>
CHARLES M. ROYCE Jack E. Fockler, Jr.
Charles M. Royce W. Whitney George
President Vice Presidents

July 31, 1995
</TABLE>

* The Morningstar proprietary risk rating measures a fund's downside volatility
relative to other funds in its investment category and may change monthly. For
the 3-year period ended June 30, 1995, the average score for all funds was 1.00
and for the 57 equity income funds with a 3-year history was .64. REI's risk
score was .39, the lowest risk fund in the equity income category for the 3-year
period.

NOTE: S&P 500, Russell 2000, S&P 600 and Lipper Equity Income Index are
unmanaged and include the reinvestment of dividends.

<PAGE>
FINANCIAL REVIEW

<TABLE>
<CAPTION>
ANNUAL RESULTS*
-----------------------------------
<S> <C>
1995 (thru 6/30)............ 11.0%
1994........................ (3.3%)
1993........................ 13.1%
1992........................ 19.4%
1991........................ 30.3%
1990*....................... (15.4%)
</TABLE>

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
----------------------------------
<S> <C>
(THROUGH 6/30/95)

Since Inception*............ 8.9%
5-year...................... 9.9%
3-year...................... 10.7%
1-year...................... 10.8%
</TABLE>

ROYCE EQUITY INCOME FUND VERSUS S&P 500
VALUE OF $10,000 INVESTED ON 1/2/90

[GRAPH]

[Line graph showing change in value of $10,000 investment in Fund and S&P
500 between inception of Fund and June 1995.]

* Inception Date - January 2, 1990

The results presented in this report should not be considered
representative of the total return from an investment in the Fund today. They
are provided only to give an historical perspective of the Fund. The investment
return and principal value of Fund shares will fluctuate, so that shares may be
worth more or less than their original cost when redeemed. Redemption fees are
not included because they apply only to accounts open less than one year.

<PAGE>
PORTFOLIO SUMMARY

The following information is provided as a 'bird's eye' view of the REI
portfolio. For a more complete picture, the full portfolio and accompanying
financial statements should be read in their entirety.

<TABLE>
<CAPTION>
PORTFOLIO COMPOSITION VALUE % OF NET ASSETS
<S> <C> <C>
---------------------------------------------------------------------------------------------------------
Common Stocks $44,227,882 67.6%
Bonds & Preferred Stocks 11,640,232 17.8
Cash & Other Net Assets 9,586,824 14.6
----------- -----
Total Net Assets $65,454,938 100.0%
----------- -----
----------- -----
PORTFOLIO DIAGNOSTICS
---------------------------------------------------------------------------------------------------------
Weighted Average Market Capitalization $525 Million
Median Market Capitalization $318 Million
Weighted Average P/E Ratio 14.6x
Weighted Average P/B Ratio 1.5x
Weighted Average Portfolio Yield 4.6%

COMMON STOCKS SECTORS % OF NET ASSETS
---------------------------------------------------------------------------------------------------------
Financial 16.9%
Industrial Cyclicals 16.4
Services 12.6
Consumer Durables 9.3
Retail 5.1
Consumer Staples 3.5
Energy 2.6
Technology 1.2

TOP TWENTY POSITIONS MARKET VALUE % OF NET ASSETS
---------------------------------------------------------------------------------------------------------
1 Kimball International, Inc. Cl. B $1,166,300 1.8%
2 NCH Corporation 1,075,250 1.6
3 Zenith National Insurance Corp. 1,072,850 1.6
4 The Standard Register Company 1,065,900 1.6
5 Stanhome Inc. 1,042,800 1.6
6 *Waterhouse Investors Services, Inc. 976,800 1.5
7 *National Education Corporation 960,050 1.5
8 *Cliffs Drilling Company 950,563 1.5
9 Hilb, Rogal & Hamilton Company 948,750 1.4
10 Kaman Corporation Cl. A 940,950 1.4
11 *Richardson Electronics, Ltd. 936,000 1.4
12 Family Dollar Stores, Inc. 908,600 1.4
13 Crawford & Company 890,025 1.4
14 P.H. Glatfelter Company 887,513 1.4
15 Garan Incorporated 824,100 1.3
16 Comdisco, Inc. 820,125 1.3
17 *Waban Inc. 809,900 1.2
18 *Glendale Federal Bank, F.S.B. 809,200 1.2
19 National Presto Industries, Inc. 807,675 1.2
20 Argonaut Group, Inc. 806,450 1.2
</TABLE>

*Debt security of issuer.

<PAGE>
ROYCE EQUITY INCOME FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1995 (unaudited)
--------------------------------------------------------------------------------
COMMON STOCKS - 67.6%

<TABLE>
<CAPTION>
Value
Shares (Note 1)
<S> <C> <C>
CONSUMER DURABLES - 9.3%
20,400 Flexsteel Industries,
Inc...................... $ 209,091
49,200 Garan Incorporated......... 824,100
10,200 Juno Lighting, Inc......... 163,200
42,800 Kimball International, Inc.
Cl. B.................... 1,166,300
5,000 La-Z-Boy Chair Company..... 131,875
17,800 National Presto Industries,
Inc...................... 807,675
15,500 Russ Berrie and Company,
Inc...................... 215,063
21,900 The Ryland Group, Inc...... 353,138
27,200 Skyline Corporation........ 493,000
31,600 Stanhome Inc............... 1,042,800
20,000 Sturm, Ruger & Company,
Inc...................... 652,500
-----------
6,058,742
-----------
CONSUMER STAPLES - 3.5%
11,161 Block Drug Company, Inc.
Cl. A.................... 376,684
15,300 Genesee Corporation Cl.
B........................ 589,050
24,700 Lance, Inc................. 463,125
14,800 Midwest Grain Products,
Inc...................... 273,800
14,300 The J.M. Smucker Company
Cl. A.................... 316,388
22,900 The Stride Rite
Corporation.............. 237,588
-----------
2,256,635
-----------
ENERGY - 2.6%
56,900 Berry Petroleum Company.... 554,775
9,100 The Louisiana Land and
Exploration Company...... 362,863
<CAPTION>
Value
Shares (Note 1)
<S> <C> <C>
43,000 Lufkin Industries, Inc..... $ 806,250
-----------
1,723,888
-----------
FINANCIAL - 16.9%
25,400 Argonaut Group, Inc........ 806,450
18,200 E.W. Blanch Holdings,
Inc...................... 338,975
27,000 Comdisco, Inc.............. 820,125
36,600 Cousins Properties
Incorporated............. 649,650
16,800 Dauphin Deposit Corp. 407,400
9,400 Eaton Vance Corp........... 303,150
7,920 Fremont General
Corporation.............. 191,070
2,400 Arthur J. Gallagher &
Co....................... 87,300
34,400 Guaranty National
Corporation.............. 636,400
75,900 Hilb, Rogal & Hamilton
Company.................. 948,750
16,750 Keystone Financial, Inc.... 472,141
29,900 Mercantile Bankshares
Corporation.............. 672,750
31,800 The Newhall Land and
Farming Company.......... 441,225
2,300 Republic New York
Corporation.............. 128,800
8,400 Student Loan Marketing
Association.............. 393,750
25,300 Susquehanna Bancshares,
Inc...................... 594,550
8,400 U.S. Trust Corp............ 604,800
10,500 Vornado Realty Trust....... 366,188
11,200 Washington National
Corporation.............. 231,000
48,000 `D'Willis Corroon Group plc
ADR...................... 576,000
11,000 Wilmington Trust
Corporation.............. 310,750
</TABLE>

The accompanying notes are an integral part of the financial statements.
10

<PAGE>
ROYCE EQUITY INCOME FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1995 (unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 1)
FINANCIAL - (continued)
<S> <C> <C>
49,900 Zenith National Insurance
Corp..................... $ 1,072,850
-----------
11,054,074
-----------
INDUSTRIAL CYCLICALS - 16.4%
2,800 Aceto Corporation.......... 41,300
1,000 American Filtrona
Corporation.............. 29,538
7,600 Burnham Corporation Cl.
A........................ 216,600
5,500 Calgon Carbon
Corporation.............. 66,688
31,500 CalMat Co.................. 653,625
1,252 Central Steel & Wire
Company.................. 732,420
19,400 CLARCOR Inc................ 443,775
9,200 Curtiss-Wright
Corporation.............. 410,550
85,200 Delta Woodside Industries,
Inc...................... 649,650
37,900 Fansteel Inc............... 260,563
22,700 Florida Rock Industries,
Inc...................... 644,113
49,800 Gilbert Associates, Inc.
Cl. A.................... 647,400
44,100 P. H. Glatfelter Company... 887,513
8,100 International Aluminum
Corporation.............. 257,175
73,800 Kaman Corporation Cl. A.... 940,950
55,500 Lawter International,
Inc...................... 666,000
18,100 Lilly Industries, Inc. Cl.
A........................ 212,675
13,800 The Manitowoc Company,
Inc...................... 398,475
5,000 Herman Miller, Inc......... 123,750
35,200 Oshkosh Truck Corporation
Cl. B.................... 435,600
<CAPTION>
Value
Shares (Note 1)
<S> <C> <C>
16,300 The L. S. Starrett Company
Cl. A.................... $ 368,788
10,500 Watts Industries, Inc. Cl.
A........................ 263,156
10,400 Woodward Governor
Company.................. 655,200
44,600 Zero Corporation........... 669,000
2,500 Zurn Industries, Inc....... 50,000
-----------
10,724,504
-----------
RETAIL - 5.1%
14,600 Blair Corporation.......... 501,875
25,600 Claire's Stores, Inc....... 464,000
61,600 Family Dollar Stores,
Inc...................... 908,600
19,200 Longs Drug Stores
Corporation.............. 720,000
18,500 Melville Corporation....... 633,625
10,200 ShopKo Stores, Inc......... 109,650
-----------
3,337,750
-----------
SERVICES - 12.6%
6,000 Atlantic Southeast
Airlines, Inc............ 180,750
15,700 Banta Corporation.......... 522,025
32,600 Bowne & Co., Inc........... 558,275
42,400 Crawford & Company Cl. A... 731,400
9,400 Crawford & Company Cl. B... 158,625
6,100 *Ecology and Environment,
Inc. Cl. A............... 48,800
45,200 Ennis Business Forms,
Inc...................... 559,350
20,300 Handleman Company.......... 195,388
22,000 John H. Harland Company.... 503,250
18,700 NCH Corporation............ 1,075,250
38,100 Nash Finch Company......... 619,125
12,300 National Service
Industries, Inc.......... 355,163
</TABLE>

The accompanying notes are an integral part of the financial statements.
11

Principal
Amount
-----------
<S> <C> <C>
CORPORATE BONDS - 14.4%
$ 290,000 Continental Pacific Bank
Con. Var. Rt. Deb. due
4/30/03.................. 290,000
<CAPTION>
Principal Value
Amount (Note 1)
-----------
<S> <C> <C>
$ 896,000 Dixie Yarns, Inc. 7% Conv.
Sub. Deb. due 5/15/12.... $ 667,520
631,000 Fieldcrest Cannon, Inc. 6%
Conv. Sub. Deb. due
3/15/12.................. 492,180
670,000 Figgie International Inc.
9.875% Sr. Note due
10/1/99.................. 636,500
437,000 Marsh Supermarkets, Inc. 7%
Conv. Sub. Deb. due
2/15/03.................. 405,864
1,477,000 National Education
Corporation 6.5% Conv.
Sub. Deb. due 5/15/11.... 960,050
209,000 Orchard Supply Hardware
Stores Corp. 9.375% Sr.
Note due 2/15/02......... 183,920
645,000 Playtex Family Products
Corp. 9% Sr. Sub. Note
due 12/15/03............. 619,200
780,000 RLI Corp. 6% Conv. Sub.
Deb. due 7/15/03......... 760,500
308,000 Reliance Group Holdings,
Inc. 9% Sr. Note due
11/15/00................. 303,765
1,170,000 Richardson Electronics,
Ltd. 7 1/4% Conv. Sub.
Deb. 12/15/06............ 936,000
603,000 Seagate Technology, Inc.
6.75% Conv. Sub. Deb. due
5/1/12................... 633,150
798,000 Sequa Corporation 9.375%
Sr. Sub. Deb. due
12/15/03................. 750,120
890,000 Waban Inc. 6.5% Conv. Sub.
Deb. due 7/01/02......... 809,900
</TABLE>

The accompanying notes are an integral part of the financial statements.
12

<PAGE>
ROYCE EQUITY INCOME FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1995 (unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Value
Amount (Note 1)
-----------
CORPORATE BONDS - (continued)
<S> <C> <C>
$ 1,056,000 Waterhouse Investors
Services, Inc. 6% Conv.
Sub. Deb. due 12/15/03... $ 976,800
-----------
Total Corporate Bonds (Cost
$8,872,455).............. 9,425,469
-----------
REPURCHASE AGREEMENT - 12.2%

State Street Bank and Trust Company,
5.50% due 7/3/95, collateralized by
U.S. Treasury Notes, 7.50% due
1/31/97, valued at $8,003,229 (Cost
$8,000,000)........................... 8,000,000
-----------
<CAPTION>
Value
(Note 1)
<S> <C> <C>

TOTAL INVESTMENTS - 97.6% (COST
$60,331,475).......................... $63,868,114

CASH AND OTHER ASSETS LESS
LIABILITIES - 2.4%.................... 1,586,824
-----------

NET ASSETS - 100.0%..................... $65,454,938
-----------
-----------
</TABLE>

* Non-income producing.

`D' American Depository Receipt.

INCOME TAX INFORMATION - The cost for federal income tax purposes was
$60,511,813. At June 30, 1995, net unrealized appreciation for all securities
amounted to $3,356,301, consisting of aggregate gross unrealized appreciation of
$5,014,338 and aggregate gross unrealized depreciation of $1,658,037.

The accompanying notes are an integral part of the financial statements.
13

<PAGE>
ROYCE EQUITY INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES AT JUNE 30, 1995 (unaudited)
--------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Investments at value (identified cost $52,331,475) (Note 1)....................................... $55,868,114
Repurchase agreement.............................................................................. 8,000,000
Cash.............................................................................................. 789,554
Receivable for investments sold................................................................... 912,953
Receivable for dividends and interest............................................................. 280,090
Receivable for shares of beneficial interest sold................................................. 93,681
Prepaid expenses and other assets................................................................. 4,358
-----------
TOTAL ASSETS.................................................................................... 65,948,750
-----------
LIABILITIES:
Payable for investments purchased................................................................. 387,716
Investment advisory fee payable (Note 2).......................................................... 54,161
Accrued expenses.................................................................................. 51,935
-----------
TOTAL LIABILITIES............................................................................... 493,812
-----------
NET ASSETS...................................................................................... $65,454,938
-----------
-----------
ANALYSIS OF NET ASSETS:
Undistributed net investment income............................................................... $ 99,046
Accumulated net realized loss on investments...................................................... (1,791,007)
Net unrealized appreciation on investments........................................................ 3,536,639
Shares of beneficial interest (Note 3)............................................................ 11,710
Additional paid-in capital........................................................................ 63,598,550
-----------
NET ASSETS...................................................................................... $65,454,938
-----------
-----------
PRICING OF SHARES:
Net asset value, offering and redemption price per share ($65,454,938[div]11,710,151 shares
outstanding) (Note 3)........................................................................... $5.59
-----
-----

</TABLE>

STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Six months ended
June 30, 1995 Years ended
(unaudited) December 31, 1994
---------------- -----------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Net investment income.................................................... $ 1,204,894 $ 2,995,227
Net realized gain on investments......................................... 532,438 578,459
Net unrealized appreciation (depreciation) on investments................ 5,484,776 (6,263,425)
---------------- -----------------
Increase (decrease) in net assets resulting from operations.............. 7,222,108 (2,689,739)
Dividends paid from net investment income................................ (1,100,333) (2,910,795)
Distributions paid from net realized gains............................... -- (1,456,528)
FROM CAPITAL SHARE TRANSACTIONS:
Decrease in net assets from capital share transactions (Note 3).......... (17,797,503) (473,326)
---------------- -----------------
DECREASE IN NET ASSETS..................................................... (11,675,728) (7,530,388)
NET ASSETS:
Beginning of period...................................................... 77,130,666 84,661,054
---------------- -----------------
End of period (including undistributed net investment income of $99,046
and distributions in excess of net investment income of $5,515,
respectively).......................................................... $ 65,454,938 $77,130,666
---------------- -----------------
---------------- -----------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

<PAGE>
ROYCE EQUITY INCOME FUND
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1995 (unaudited)
--------------------------------------------------------------------------------

<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends..................................................................................... $1,069,306
Interest...................................................................................... 601,162
----------
Total Income........................................................................ 1,670,468
----------

Expenses:
Investment advisory fee (Note 2).............................................................. 345,942
Custodian and transfer agent fees............................................................. 44,707
Administrative and clerical services.......................................................... 16,290
Supplies and postage.......................................................................... 14,861
Legal and auditing fees....................................................................... 14,489
Federal and state registration fees........................................................... 9,955
Miscellaneous................................................................................. 8,142
Shareholder reports and notices............................................................... 8,507
Facilities and office space................................................................... 5,249
Trustees' fees................................................................................ 3,973
Fee waived by the investment adviser.......................................................... (6,541)
----------
Total Expenses...................................................................... 465,574
----------
Net Investment Income............................................................... 1,204,894
----------

REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments................................................................... 532,438
Net unrealized appreciation on investments......................................................... 5,484,776
----------
Net realized and unrealized gain on investments.................................................... 6,017,214
----------

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................................... $7,222,108
----------
----------
</TABLE>

The accompanying notes are an integral part of the financial statements.

<PAGE>
ROYCE EQUITY INCOME FUND
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------

This table is presented to show selected data for a share outstanding
throughout each period, and to assist shareholders in evaluating the Fund's
performance over the last five years.

<TABLE>
<CAPTION>
Six months
ended Years ended December 31,
June 30, 1995 -----------------------------------------------
(unaudited) 1994 1993 1992 1991 1990
------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............... $5.12 $5.58 $5.49 $4.93 $4.03 $5.00
------------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a)...................... 0.10 0.19 0.21 0.22 0.22 0.23
Net gain (loss) on investments
(realized and unrealized)................... 0.46 (0.37) 0.50 0.72 0.99 (0.98)
------------- ------- ------- ------- ------- -------
Total from investment operations.......... 0.56 (0.18) 0.71 0.94 1.21 (0.75)
------------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends (from net investment income)......... (0.09) (0.18) (0.21) (0.22) (0.22) (0.22)
Distributions (from capital gains)............. -- (0.10) (0.41) (0.16) (0.09) --
------------- ------- ------- ------- ------- -------
Total distributions....................... (0.09) (0.28) (0.62) (0.38) (0.31) (0.22)
------------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD..................... $5.59 $5.12 $5.58 $5.49 $4.93 $4.03
------------- ------- ------- ------- ------- -------
------------- ------- ------- ------- ------- -------
TOTAL RETURN....................................... 11.00% (3.3%) 13.1% 19.4% 30.3% (15.4%)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in thousands)........... $65,455 $77,130 $84,661 $54,101 $41,063 $19,497
Ratio of Expenses to Average Net Assets (b)........ 1.34%* 1.27% 1.00% 0.99% 0.99% 1.00%
Ratio of Net Investment Income to Average Net
Assets........................................... 3.47%* 3.43% 3.79% 4.31% 4.58% 4.74%
Portfolio Turnover Rate............................ 13% 47% 100% 59% 72% 28%
</TABLE>

------------

* Annualized

(a) Net investment income is shown after waivers of fees by the investment
adviser and distributor. The per share effect of these waivers is $.01 for
the years ended December 31, 1994 and December 31, 1993, $.02 for the years
ended December 31, 1992 and December 31, 1991 and $.06 for the year ended
December 31, 1990.

(b) Expense ratio before waiver of fees by the investment adviser and the
distributor would have been 1.35% for the six months ended June 30, 1995,
1.33% for the year ended December 31, 1994, 1.39% for the year ended
December 31, 1993, 1.30% for each of the years ended December 31, 1992 and
1991; and 1.34% for the year ended December 31, 1990.

The accompanying notes are an integral part of the financial statements.

<PAGE>
ROYCE EQUITY INCOME FUND
NOTES TO FINANCIAL STATEMENTS (unaudited)
--------------------------------------------------------------------------------

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Royce Equity Income Fund (the 'Fund') is a series of The Royce Fund (the
'Trust'), a diversified open-end management investment company established as a
business trust under the laws of Massachusetts. The Fund commenced operations on
January 2, 1990.

a. Valuation of investments:

b. Investment transactions and related investment income:

c. Taxes:

d. Distributions to shareholders:

The Fund declares dividends on a quarterly basis and capital gain
distributions annually. All distributions are recorded on the ex-dividend date.
Dividend and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
Permanent book and tax basis differences relating to shareholder distributions
will result in reclassifications to paid-in capital and may affect net
investment income per share. Undistributed net investment income may include
temporary book and tax basis differences which will reverse in a subsequent
period. Any taxable income or gain remaining at fiscal year end is distributed
in the following year.

e. Repurchase agreements:

<PAGE>
ROYCE EQUITY INCOME FUND
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
--------------------------------------------------------------------------------
involve certain risks in the event of default or insolvency of SSB&T, including
possible delays or restrictions upon the ability of the Fund to dispose of the
underlying securities.

2. INVESTMENT ADVISER:

Under the Trust's investment advisory agreement with Quest Advisory Corp.
('Quest'), the Fund paid Quest fees totaling $339,401 (net of $6,541 voluntarily
waived by Quest) for the six months ended June 30, 1995. The agreement provides
for fees equal to 1.0% per annum of the Fund's average net assets. Such fees are
computed daily and are payable monthly to Quest.

3. FUND SHARES:

The Board of Trustees has authority to issue an unlimited number of shares
of beneficial interest of the Fund, with a par value of $.001. Share
transactions were as follows:

<TABLE>
<CAPTION>
Six months ended Year ended
June 30, 1995 December 31, 1994
-------------------------- --------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------

<S> <C> <C> <C> <C>
Sold.............................................. 995,526 $ 5,278,018 9,149,609 $ 50,298,954
Issued as reinvested dividends and
distributions................................... 139,680 755,351 654,924 3,397,080
Redeemed.......................................... (4,496,413) (23,830,872) (9,906,907) (54,169,360)
</TABLE>

4. PURCHASES AND SALES OF SECURITIES:

For the six months ended June 30, 1995, the cost of purchases and the
proceeds from sales of portfolio securities, other than short-term securities,
amounted to $8,482,983 and $33,447,411, respectively.

18
<PAGE>
POSTSCRIPT: WATCH US IN THE CORNERS

Drive carefully.

------------------------------------------------------

THE ROYCE FUNDS

1414 Avenue of the Americas, New York, New York 10019
This report must be accompanied by or preceded by a current prospectus of the
Fund

<PAGE>
ROYCE
VALUE
FUND

SEMI-ANNUAL REPORT

JUNE 30, 1995
THE ROYCE FUNDS

<PAGE>
The Royce Funds

1414 Avenue of the Americas
New York, NY 10019
(212) 355-7311
(800) 221-4268

Dear Shareholder:

If the Dow Jones Industrial Average were to continue its first half pace,
it would top 30,000 in the year 2000! Something to think about.

THE NUMBERS . . . UP, UP AND AWAY

Royce Value Fund ('RVF') provided an 11.0% return. This is in keeping with
RVF's historical range of capturing 70% to 100% of major small-cap index returns
during dramatic updrafts. As a risk averse fund, RVF has rarely matched the
small-cap indices in early bull market phases. However, as a market cycle
matures, a turn away from growth and momentum to less exciting, low valuation
issues usually takes place. This type of period has generally been favorable to
RVF's style of investing. OVER ITS 12 1/2 YEAR HISTORY, WHICH ENCOMPASSES MANY
MARKET CYCLES AND PERIODS OF UNDERPERFORMANCE, THE FUND HAS GENERATED A 12.8%
AVERAGE ANNUAL TOTAL RETURN.

SMALL-CAP STOCKS -- LAGGING THEIR WAY TO NEW HIGHS

WE HAD OUR 'SOX' KNOCKED OFF

Contributing to the first half's spectacular market returns was a meteoric
rise in technology stocks. The Philadelphia Semiconductor
Index ('SOX') was up over 100% in the last twelve months.

WEEKLY PRICE GRAPH FOR 'SOX'
(PHILA. SEMICONDUCTOR INDEX 6/94 - 6/95)

[GRAPH]

For anyone feeling depressed about missing the recent high-tech stock
run-up, we thought we would share some interesting investment trivia which runs
counter to popular current assumptions:

<TABLE>
<CAPTION>
AVERAGE ANNUAL PERFORMANCE RESULTS
(12/31/79 - 6/30/95)
S&P S&P RUSSELL RUSSELL 2000
500 TECHNOLOGY 2000 TECHNOLOGY
---- ---------- ------- ------------

IN SPITE OF THE RECENT STELLAR MARKET PERFORMANCE AND ENORMOUS UNIT GROWTH,
TECHNOLOGY STOCKS HAVE ACTUALLY BEEN A DRAG ON THE LAST 15+ YEARS OF PERFORMANCE
FOR BOTH THE S&P 500 AND THE RUSSELL 2000.

[ILLUSTRATION]

[Cartoon showing miners standing in line to purchase picks and shovels.]

<PAGE>
WHAT WE DO

Royce Value Fund uses a risk averse approach to invest in the securities of
small-cap companies. The investment approach attempts to understand and value a
company's 'private worth.' Private worth is what we believe the company would
bring if the entire enterprise were sold in a private transaction to a
knowledgeable buyer. The price we will pay for a security must be significantly
under our appraisal of its private worth. The consistent use of this discipline,
applied to less well-known securities, is the source of our performance.

NO OTHER PLACE WE WOULD RATHER BE

The Fund focuses on companies with market caps below $750 million. Although
our orientation is small-cap, the picking universe is by no means small.
Currently, more than 7,000 securities, representing over $700 billion in total
market capitalization, fall within our range. We believe small-cap stocks,
especially at the low end of the capitalization range, are generally less-known
and, therefore, less likely to be understood and properly priced by investors.

HOW IT WORKS

Investment returns in undervalued small-cap companies can be unpredictable,
out-of-sync with the market and generally frustrating. Specific returns in any
given period are related to individual securities and market conditions.
Nevertheless, we expect in any period to have our share of winners and to see a
few laggards.

WINNERS

Our most recent successes are depicted in the table that follows. During
the first half of 1995, each contributed substantially to our performance and
are representative of our approach to investing. Some of RVF's BEST
PERFORMERS, as measured by dollar impact, were:

<TABLE>
<CAPTION>
SECURITY % GAIN
------------------------------------------- ------

<S> <C>
Atlantic Southeast Airlines, Inc. 94%
Claire's Stores, Inc. 51%
Comdisco, Inc. 31%
Penn Eng. & Manufact. Corp. 79%
Ag-Chem Equipment Co., Inc. 148%
</TABLE>

Atlantic Southeast Airlines, Comdisco, and Claire's Stores were relatively
large investments in stocks we knew well and are highly regarded in their
respective industries. In each case, we made investments when business
conditions were difficult and Wall Street expectations were low. Since the
beginning of the year, the airline industry, in the case of Atlantic Southeast
Airlines, the computer leasing business, in the case of Comdisco, and the retail
environment, in the case of Claire's Stores, have improved modestly. However,
the investment community's opinion of these companies has changed radically and
they are now viewed as high quality growth stocks.

Penn Engineering and Manufacturing Corp. and Ag-Chem Equipment Co. are a
different breed of success story. Both of these companies have been long-term
micro-cap investments in the Fund's portfolio that finally caught the attention
of Wall Street. They are well-run family enterprises with long histories of
superior returns and strong balance sheets. As consistent high quality, low cost
producers in their respective fields, both produced the kind of financial
results that investors like. As long-term investors, we were rewarded for our
patience.

MORE PATIENCE REQUIRED

<PAGE>
nately, over the last two quarters, we have suffered from only one of the
latter. The five WORST PERFORMERS, as measured by dollar impact, were:

<TABLE>
<CAPTION>
SECURITY % LOSS
------------------------------------------- ------

<S> <C>
Delta Woodside Industries, Inc. 34%
NCH Corporation 14%
Velcro Industries, N.V. 16%
Arnold Industries, Inc. 16%
Anacomp, Inc. Cum. Cv. Pfd 72%
</TABLE>

The only commitment in which we are doubtful of recovering our full
investment is Anacomp. Although we were aware of the risk in owning a high
yielding senior security of this once successful technology company, it was a
mistake and we now have little hope for full recovery in this manufacturer of
micro-fiche equipment. As for our other underachievers, with a little more
patience, any one of these could make next year's winners list.

NO LONGER SMALL, UNKNOWN OR UNDER-OWNED

THERE HAVE BEEN SOME EXTRAORDINARY DEVELOPMENTS IN THE SMALL-CAP SECTOR,
BUT THEY ARE NOT WHAT YOU MAY THINK.

TEN YEARS OF EXPLOSIVE GROWTH!

[GRAPH]

[Pictorial chart showing increase in number of small-cap funds and assets
under management from 1984 to 1995; in 1995, 310 funds with $50 billion in
assets.]

Performance success and investor acceptance has translated into a
significant flow of funds into the small-cap sector. In the mutual fund arena,
there are now over 300 small-cap funds representing approximately $50 billion in
assets. By contrast, there were only 24 small-cap funds with assets totaling $4
billion at the end of 1984. This over ten-fold increase in the number of
small-cap funds and category assets has changed the playing field in a
significant way. It is interesting to note that the majority of the funds have
elected to focus their energies at the upper end of the Morningstar
capitalization range ($500 million - $1 billion) where there is greater
liquidity but, by definition, more competition.

In the zone where most small-cap funds traffic ($500 million - $1 billion
in market capitalization), we believe that a higher level of

<PAGE>
portfolio concentration is appropriate. This approach implies confidence in our
non-quantitative and non-Wall Street research abilities. We believe that we are
uniquely equipped to accomplish this task by virtue of our 20+ years of
small-cap investment experience and our sizeable research effort.

[ILLUSTRATION]

[Cartoon of fortune teller and customer]

STAR GAZING

In spite of the spectacular run-up by large-cap equities since the market
lows of last December, there are several indications that small-cap stocks may
soon resume a leadership role. June was the first month of small-cap
outperformance since February, with the Russell 2000 up 5.2% versus a 2.4%
return for the S&P 500. This performance momentum has continued into the first
part of the third quarter, a good omen for small-cap issues. Also, now that the
U.S. dollar has stopped declining against other major currencies, domestic
small-cap stocks are competing on a level playing field. This has historically
given small-cap stocks a performance edge.

Finally, one has to wonder if the current level of low volatility is
sustainable in light of the market's high returns. While we cannot explain this
phenomena, we do not view this as a permanent condition. Since the last 10%
market correction in 1990, the pay-off has been with investors who took the
highest risk. We believe that over the next three years risk management will
have a similar pay-off. WE REMAIN COMMITTED TO ACHIEVING ABOVE AVERAGE LONG-TERM
RETURNS WITH THIS LOW RISK APPROACH.

Your continued confidence is appreciated.

Yours faithfully,

<TABLE>
<S> <C>
CHARLES M. ROYCE
Charles M. Royce Jack E. Fockler, Jr.
President W. Whitney George
Vice Presidents
</TABLE>

July 31, 1995

NOTE: S&P 500, Russell 2000 and S&P 600 are unmanaged and include the
reinvestment of dividends.

<PAGE>
FINANCIAL REVIEW

<TABLE>
<CAPTION>
ANNUAL RETURNS
----------------------------------------------------------------
<S> <C> <C> <C>
1995 (thru 6/30)........ 11.0% 1988.................... 23.6%
1994.................... (1.6%) 1987.................... 0.6%
1993.................... 10.7% 1986.................... 6.5%
1992.................... 16.0% 1985.................... 27.6%
1991.................... 30.8% 1984.................... 0.0%
1990.................... (13.6%) 1983.................... 42.8%
1989.................... 15.9%
</TABLE>

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
------------------------------------

<S> <C>
Since Inception*.............. 12.6%
10-year....................... 10.3%
5-year........................ 9.3%
3-year........................ 10.4%
1-year........................ 13.3%
</TABLE>

ROYCE VALUE FUND VERSUS S&P 500 AND RUSSELL 2000
VALUE OF $10,000 INVESTED ON 12/31/82

[GRAPH]

[Line graph showing change in value of $10,000 investment in Fund, the S&P
500 and the Russell 2000 between inception of the Fund and June 1995.]

* Inception Date - December 31, 1982

The results presented in this report should not be considered
representative of the total return from an investment in the Fund today. They
are only provided to give an historical perspective of the Fund. The investment
return and principal value of Fund shares will fluctuate so that shares may be
worth more or less than their original cost when redeemed. Redemption fees are
not included because they apply only to accounts open less than one year.

<PAGE>
PORTFOLIO SUMMARY
The following information is provided as a 'bird's eye' view of the RVF
portfolio. For a more complete picture, the full portfolio and accompanying
financial statements should be read in their entirety.

<TABLE>
<CAPTION>
PORTFOLIO COMPOSITION % OF COMMON STOCKS VALUE % OF NET ASSETS
<S> <C> <C> <C>
--------------------------------------------------------------------------------------------------------
Top 200 Stocks 74.9% $ 117,261,869 70.0%
Other Stocks 25.1 39,232,645 23.4
------- --------------- -------
Common Stocks 100.0% 156,494,514 93.4
Preferred Stocks 643,000 0.4
Cash & Other Net Assets 10,403,548 6.2
--------------- -------
Total Net Assets $ 167,541,062 100.0%
--------------- -------
--------------- -------
PORTFOLIO DIAGNOSTICS
--------------------------------------------------------------------------------------------------------
Weighted Average Market Capitalization (Total Portfolio) $515Million
Median Market Capitalization (Total Portfolio) $218Million
Weighted Average P/E Ratio (200 Largest Positions) 14.7x
Weighted Average P/B Ratio (200 Largest Positions) 1.6x
Weighted Average Portfolio Yield (200 Largest Positions) 1.9%
COMMON STOCK SECTORS % OF NET ASSETS
--------------------------------------------------------------------------------------------------------
Industrial Cyclicals 23.6%
Financial 23.0
Services 17.8
Consumer Durables 6.9
Retail 6.1
Consumer Staples 5.3
Energy 5.3
Technology 3.7
Health 1.5
Utilities 0.2
TOP TWENTY POSITIONS MARKET VALUE % OF NET ASSETS
--------------------------------------------------------------------------------------------------------
1 Comdisco, Inc. $1,681,408 1.0%
2 Alleghany Corporation 1,582,786 0.9
3 Farmer Bros. Co. 1,448,563 0.9
4 Claire's Stores, Inc. 1,424,625 0.9
5 The Pioneer Group, Inc. 1,392,125 0.8
6 Orion Capital Corporation 1,282,125 0.8
7 U.S. Trust Corp. 1,267,200 0.8
8 Air Express International Corporation 1,252,245 0.7
9 Baldwin & Lyons, Inc. 1,233,300 0.7
10 Kimball International, Inc. Cl. B 1,218,075 0.7
11 Atlantic Southeast Airlines, Inc. 1,153,788 0.7
12 ALLIED Group Inc. 1,132,875 0.7
13 Marshall Industries 1,118,900 0.7
14 Camco International Inc. 1,112,650 0.7
15 W.R. Berkley Corp. 1,109,375 0.7
16 The Standard Register Company 1,105,800 0.7
17 Tecumseh Products Company 1,063,325 0.6
18 NCH Corporation 1,058,000 0.6
19 Florida Rock Industries, Inc. 1,055,550 0.6
20 Fab Industries, Inc. 1,052,250 0.6
</TABLE>

<PAGE>
ROYCE
VALUE
FUND

FINANCIAL STATEMENTS

<PAGE>
ROYCE VALUE FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1995 (unaudited)
--------------------------------------------------------------------------------
COMMON STOCKS - 93.4%

<TABLE>
<CAPTION>
Value
Shares (Note 1)
-------- ----------
<S> <C> <C>
CONSUMER DURABLES - 6.9%
7,079 Allen Organ Company Cl. B... $ 315,017
14,700 Arctco, Inc. ............... 172,725
18,633 *Athey Products Corp. ...... 111,798
7,000 *Baldwin Piano & Organ
Company................... 98,000
10,787 Bassett Furniture
Industries,
Incorporated.............. 302,036
7,800 Fleetwood Enterprises,
Inc. ..................... 154,050
42,200 Flexsteel Industries,
Inc. ..................... 432,550
4,100 Forest City Enterprises,
Inc. Cl. A................ 157,338
10,000 Garan Incorporated 167,500
3,300 *International Jensen
Incorporated.............. 24,750
26,900 *Johnson Worldwide
Associates, Inc. Cl. A.... 632,150
42,700 Juno Lighting, Inc. ........ 683,200
2,500 Katy Industries, Inc. ...... 19,688
44,700 Kimball International, Inc.
Cl. B..................... 1,218,075
13,300 La-Z-Boy Chair Company...... 350,788
1,166 LADD Furniture, Inc. ....... 15,158
16,400 *Lazare Kaplan
International, Inc. ...... 123,000
25,900 Liberty Homes, Inc. Cl. A... 242,813
21,950 Liberty Homes, Inc. Cl. B... 194,806
37,420 *Lifetime Hoan
Corporation............... 420,975
18,700 National Presto Industries,
Inc. ..................... 848,513
17,872 Oakwood Homes Corporation... 457,970
11,500 *O'Sullivan Industries
Holdings, Inc. ........... 87,688
44,000 The Rival Company........... 649,000
20,400 Russ Berrie and Company,
Inc. ..................... 283,050
9,700 The Singer Company N.V. .... 250,988
25,600 Skyline Corporation......... 464,000
26,500 *Smith Corona Corporation... 36,438
<CAPTION>
Value
Shares (Note 1)
-------- ----------
<S> <C> <C>
10,700 Springs Industries, Inc. Cl.
A......................... $ 398,575
23,500 Stanhome Inc. .............. 775,500
28,200 Sturm, Ruger & Company,
Inc. ..................... 920,025
26,200 Thor Industries, Inc. ...... 517,450
------------
11,525,614
------------
CONSUMER STAPLES - 5.3%
30,676 Alico, Inc. ................ 544,499
16,100 BIC Corporation............. 631,925
25,536 Block Drug Company, Inc. Cl.
A......................... 861,840
11,825 Farmer Bros. Co. ........... 1,448,563
9,800 Flowers Industries, Inc. ... 193,550
5,300 Genesee Corporation Cl. B... 204,050
10,000 Haggar Corp. ............... 195,000
3,000 *J & J Snack Foods Corp. ... 37,875
12,600 K-Swiss Inc. Cl. A.......... 163,800
17,200 *The Leslie Fay Companies,
Inc. ..................... 6,450
422 *Maui Land & Pineapple
Company, Inc. ............ 21,100
24,522 Midwest Grain Products,
Inc. ..................... 453,657
6,400 *Paragon Trade Brands,
Inc. ..................... 92,000
1,700 Reebok International
Ltd. ..................... 57,800
6,700 Russell Corporation......... 192,625
30,700 Savannah Foods & Industries,
Inc. ..................... 337,700
1,850 Seaboard Corporation........ 478,225
55,800 The Stride Rite
Corporation............... 578,925
25,900 Thorn Apple Valley, Inc. ... 608,650
44,800 *The Topps Company, Inc. ... 280,000
9,200 The Tranzonic Companies Cl.
B......................... 128,800
13,800 Velcro Industries N.V. ..... 796,950
21,150 WLR Foods, Inc. ............ 304,031
7,200 Weyco Group, Inc. .......... 259,200
------------
8,877,215
------------
ENERGY - 5.3%
20,000 *Alamco, Inc. .............. 155,000
</TABLE>

The accompanying notes are an integral part of the financial statements.
10

<S> <C> <C>
7,300 *Westmoreland Coal
Company................... $ 31,938
14,000 The Wiser Oil Company....... 190,750
2,400 Zeigler Coal Holding
Company................... 28,800
------------
8,839,302
------------
FINANCIAL - 23.0%
3,300 Alexander & Alexander
Services Inc. ............ 78,788
9,939 *Alleghany Corporation...... 1,582,786
39,750 ALLIED Group, Inc. ......... 1,132,875
13,600 AMRESCO, INC. .............. 127,500
24,300 Argonaut Group, Inc. ....... 771,525
15,952 *Avatar Holdings Inc. ...... 582,248
22,900 AVEMCO Corporation.......... 397,888
5,280 Baker Boyer Bancorp......... 161,040
16,800 Baldwin & Lyons, Inc. Cl.
A......................... 294,000
60,600 Baldwin & Lyons, Inc. Cl.
B......................... 939,300
5,700 Bar Harbor Bankshares....... 473,100
31,250 W. R. Berkley Corp. ........ 1,109,375
11,900 E.W. Blanch Holdings,
Inc. ..................... 221,638
8,900 The Boston Bancorp.......... 378,250
5,800 CMAC Investment
Corporation............... 251,575
10,172 *CU Bancorp................. 71,204
9,400 Capital Re Corporation...... 244,400
55,355 Comdisco, Inc. ............. 1,681,408
9,700 The Commerce Group, Inc. ... 173,388
2,000 Consolidated-Tomoka Land
Co. ...................... 27,000
24,500 Cousins Properties
Incorporated.............. 434,875
578 *Cupertino National
Bancorp................... 5,419
14,020 Dauphin Deposit Corp. ...... 339,985
5,400 Downey Financial Corp. ..... 98,550
18,600 DUFF & PHELPS CORPORATION... 199,950
11,300 Eaton Vance Corp. .......... 364,425
3,100 A.G. Edwards, Inc. ......... 69,750
2,100 Enhance Financial Services
Group Inc. ............... 40,688
</TABLE>

The accompanying notes are an integral part of the financial statements.
11

<PAGE>
ROYCE VALUE FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1995 (unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 1)
-------- ----------
<S> <C> <C>
FINANCIAL - (continued)
15,700 Equitable of Iowa
Companies................. $ 516,138
1,580 Exchange Bank............... 104,280
264 Farmers & Merchants Bank of
Long Beach................ 448,800
13,600 The First American Financial
Corporation............... 314,500
2,200 First Midwest Bancorp,
Inc. ..................... 54,313
120 The First National Bank of
Anchorage................. 181,200
5,475 First Security Corporation.. 153,300
3,900 Foremost Corporation of
America................... 151,125
10,500 Franklin Resources, Inc. ... 467,250
28,380 Fremont General
Corporation............... 684,668
18,900 Arthur J. Gallagher &
Co. ...................... 687,488
11,980 *Gateway Bancorp, Inc. ..... 143,760
10,500 *GLENFED, Inc. ............. 131,250
26,700 *Gryphon Holdings Inc. ..... 433,875
35,000 Guaranty National
Corporation............... 647,500
19,201 *Hanmi Bank................. 124,807
12,722 Harleysville Group, Inc. ... 318,050
29,875 Hilb, Rogal & Hamilton
Company................... 373,438
14,000 Horace Mann Educators
Corporation............... 322,000
600 Integon Corporation......... 10,200
9,500 Intercargo Corporation...... 104,500
13,000 The John Nuveen Company..... 312,000
11,852 Keystone Heritage Group,
Inc. ..................... 305,189
26,000 Lehman Bros. Holdings
Inc. ..................... 568,750
16,828 Leucadia National
Corporation............... 849,814
7,000 *Markel Corporation......... 390,250
13,100 Mercury General
Corporation............... 450,313
19,000 Mid Ocean Limited........... 600,875
9,565 *Mutual Assurance, Inc. .... 286,950
14,500 NYMAGIC, INC. .............. 230,188
<CAPTION>
Value
Shares (Note 1)
-------- ----------
<S> <C> <C>
5,894 National Bancorp of Alaska,
Inc. ..................... $ 300,594
10,800 *The Navigators Group,
Inc. ..................... 170,100
6,300 New England Investment
Companies, L.P. .......... 118,125
41,600 The Newhall Land and Farming
Company................... 577,200
2,000 Nobel Insurance Limited..... 20,625
4,700 North American Mortgage
Company................... 108,688
6,426 Old Republic International
Corporation............... 167,879
6,311 ONBANCorp, Inc. ............ 179,075
32,875 Orion Capital Corporation... 1,282,125
6,000 *Pacific Gateway Properties
Inc. ..................... 21,000
31,400 Paine Webber Group Inc. .... 592,675
11,500 PartnerRe Holdings Ltd. .... 300,438
4,700 Pennsylvania Manufacturers
Corporation............... 72,850
7,700 *Piedmont Management Company
Inc. ..................... 69,300
51,800 The Pioneer Group, Inc. .... 1,392,125
33,600 Piper Jaffray Companies
Inc. ..................... 508,200
3,400 Poe & Brown, Inc. .......... 79,050
9,391 Portsmouth Bank Shares,
Inc. ..................... 115,040
27,000 T. Rowe Price Associates,
Inc. ..................... 1,039,500
26,500 RLI Corp. .................. 602,875
1,300 Raymond James Financial,
Inc. ..................... 25,188
16,300 *Reading Company............ 166,056
9,500 Real Estate Investment Trust
of California............. 159,125
6,000 Reinsurance Group of
America, Incorporated..... 171,750
15,084 Reliance Group Holdings,
Inc. ..................... 98,046
8,251 *Reliance Group Holdings,
Inc. ..................... 15,471
</TABLE>

The accompanying notes are an integral part of the financial statements.
12

<PAGE>
ROYCE VALUE FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1995 (unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 1)
-------- ----------
<S> <C> <C>
FINANCIAL - (continued)
14,520 Republic Bancorp Inc. ...... $ 172,425
600 Republic New York
Corporation............... 33,600
16,200 SEI Corporation............. 364,500
19,700 Security-Connecticut Life
Insurance Company......... 507,275
700 Selective Insurance Group,
Inc. ..................... 23,100
3,200 State Street Boston
Corporation............... 118,000
400 Student Loan Marketing
Association............... 18,750
15,100 Student Loan Corporation.... 405,813
200 SunAmerica Inc. ............ 10,200
8,500 *Sunrise Bancorp............ 22,844
12,710 Susquehanna Bancshares,
Inc. ..................... 298,685
10,800 Transatlantic Holdings,
Inc. ..................... 702,000
16,000 *Transnational Re
Corporation Cl. A......... 321,000
15,500 Trenwick Group Inc. ........ 658,750
17,600 U. S. Trust Corp. .......... 1,267,200
6,200 *Vista Resources, Inc. ..... 125,550
5,250 Vornado Realty Trust........ 183,094
9,460 Webster Financial
Corporation............... 225,858
5,900 Wesco Financial
Corporation............... 744,875
7,200 Western Investment Real
Estate Trust.............. 85,500
43,800 `D'Willis Corroon Group plc
ADR....................... 525,600
2,400 Wilmington Trust
Corporation............... 67,800
16,800 Zenith National Insurance
Corp. .................... 361,200
14,000 *Zurich Reinsurance Centre,
Inc. ..................... 400,750
------------
38,617,170
------------
HEALTH - 1.5%
8,800 *Acuson Corporation......... 106,700
5,700 *Advanced Technology
Laboratories, Inc. ....... 89,775
<CAPTION>
Value
Shares (Note 1)
-------- ----------
<S> <C> <C>
16,200 C. R. Bard, Inc. ........... $ 486,000
8,600 Diagnostic Products
Corporation............... 313,900
16,300 *HAEMONETICS CORPORATION.... 313,775
4,600 Jones Medical Industries,
Inc. ..................... 51,175
25,240 Life Technologies, Inc. .... 567,900
7,600 *Marquette Electronics, Inc.
Cl. A..................... 120,650
22,155 Medex, Inc. ................ 276,938
2,900 *Nellcor Incorporated....... 130,500
3,200 *Perrigo Company............ 35,400
------------
2,492,713
------------
INDUSTRIAL CYCLICALS - 23.6%
10,428 Aceto Corporation........... 153,813
6,900 *Ag-Chem Equipment Co.,
Inc. ..................... 676,200
10,900 Albany International
Corp. .................... 260,238
11,800 American Filtrona
Corporation............... 348,100
12,300 Ameron, Inc. ............... 445,875
14,000 Ampco-Pittsburgh
Corporation............... 127,750
6,400 AptarGroup, Inc. ........... 205,600
800 *Art's-Way Manufacturing
Co., Inc. ................ 4,800
2,800 Ash Grove Cement Company.... 204,400
22,900 Guy F. Atkinson Company of
California................ 214,688
13,550 BHA Group, Inc. ............ 169,375
16,500 BW/IP, Inc. Cl. A........... 305,250
35,473 Binks Manufacturing
Company................... 900,127
19,800 *Bird Corp. ................ 136,125
17,500 Blessings Corporation....... 218,750
14,000 W. H. Brady Co. Cl. A....... 945,000
4,600 Brenco, Incorporated........ 55,775
6,370 Burnham Corporation Cl. A... 181,545
4,040 Burnham Corporation Cl. B... 115,140
44,000 CalMat Co. ................. 913,000
</TABLE>

The accompanying notes are an integral part of the financial statements.
13

<PAGE>
ROYCE VALUE FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1995 (unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 1)
-------- ----------
<S> <C> <C>
INDUSTRIAL CYCLICALS - (continued)
7,900 Carlisle Companies,
Incorporated.............. $ 302,175
9,800 Carpenter Technology
Corporation............... 667,625
25,000 Cascade Corp. .............. 400,000
6,093 A.M. Castle & Co. .......... 110,436
27,200 *Chase Brass Industries,
Inc. ..................... 319,600
5,662 Chemi-Trol Chemical Co. .... 59,451
3,500 Chicago Rivet & Machine
Co. ...................... 104,563
14,000 CLARCOR Inc. ............... 320,250
10,800 Cohu, Inc. ................. 252,450
200 ConBraCo Industries,
Inc. ..................... 100,000
10,800 Core Industries Inc. ....... 116,100
15,700 Curtiss-Wright
Corporation............... 700,613
47,388 Delta Woodside Industries,
Inc. ..................... 361,334
5,800 *Detrex Corporation......... 43,500
25,800 *Devcon International
Corp. .................... 187,050
14,300 *DeVlieg-Bullard, Inc. ..... 19,663
6,500 *Dixie Yarns, Inc. ......... 43,875
18,000 Donaldson Company, Inc. .... 470,250
14,300 The Duriron Company,
Inc. ..................... 321,750
3,000 Eastern Co. ................ 41,250
34,500 Fab Industries, Inc. ....... 1,052,250
20,800 Fansteel Inc. .............. 143,000
16,733 Federal Signal
Corporation............... 361,851
37,200 Florida Rock Industries,
Inc. ..................... 1,055,550
11,900 *Fruit of The Loom, Inc. Cl.
A......................... 251,388
16,600 Giddings & Lewis, Inc. ..... 296,725
24,306 Gilbert Associates, Inc. Cl.
A......................... 315,978
33,400 P. H. Glatfelter Company.... 672,175
8,900 Gleason Corporation......... 196,913
19,087 Gorman-Rupp Company......... 276,762
<CAPTION>
Value
Shares (Note 1)
-------- ----------
<S> <C> <C>
20,700 A. P. Green Industries,
Inc. ..................... $ 408,825
33,900 Greif Bros. Corporation Cl.
A......................... 792,413
2,825 Guardsman Products, Inc. ... 36,372
15,350 Guilford Mills, Inc. ....... 374,156
14,512 *C. H. Heist Corp. ......... 117,910
2,000 Hubbell Incorporated Cl.
A......................... 108,250
100 Hubbell Incorporated Cl.
B......................... 5,650
3,900 Hunt Manufacturing Co. ..... 59,475
33,500 *Insituform Technologies,
Inc. ..................... 443,875
22,400 *Intermet Corporation....... 212,800
24,300 International Aluminum
Corporation............... 771,525
16,800 Kaman Corporation Cl. A..... 214,200
13,600 Kaydon Corporation.......... 404,600
24,000 *Kentucky Electric Steel
Company................... 222,000
17,200 *Kinark Corporation......... 53,750
12,370 Knape & Vogt Manufacturing
Company................... 185,550
3,900 *Laclede Steel Company...... 46,800
3,700 *Lancer Corporation......... 72,613
23,221 Lawter International,
Inc. ..................... 278,652
37,812 LeaRonal, Inc. ............. 798,779
66,249 Lilly Industries, Inc. Cl.
A......................... 778,426
5,900 The Lincoln Electric
Company................... 184,375
21,500 *The Lincoln Electric
Company................... 645,000
9,000 Lindberg Corporation........ 59,063
6,900 Liqui-Box Corporation....... 220,800
8,400 *Lydall, Inc. .............. 184,800
33,900 The Manitowoc Company,
Inc. ..................... 978,863
10,100 *Manville Corporation....... 138,875
6,200 Herman Miller, Inc. ........ 153,450
18,300 Mine Safety Appliances
Company................... 969,900
18,100 Minuteman International,
Inc. ..................... 178,738
</TABLE>

The accompanying notes are an integral part of the financial statements.
14

<PAGE>
ROYCE VALUE FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1995 (unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 1)
-------- ----------
<S> <C> <C>
INDUSTRIAL CYCLICALS - (continued)
14,405 The Monarch Cement
Company................... $ 185,464
14,405 The Monarch Cement Company
Cl. B..................... 185,464
10,000 The Monarch Machine Tool
Company................... 97,500
5,200 Paul Mueller Company........ 163,800
23,232 Myers Industries, Inc. ..... 333,960
4,500 *NCI Building Systems,
Inc. ..................... 75,375
12,500 *New Jersey Steel
Corporation............... 123,438
8,400 Nordson Corporation......... 457,800
575 Northfield Precision
Instrument Corporation.... 3,450
8,166 Oil-Dri Corporation of
America................... 121,469
6,200 The Oilgear Company......... 111,600
31,400 Oregon Steel Mills, Inc. ... 537,725
31,800 Oshkosh Truck Corporation
Cl. B..................... 393,525
12,400 Penn Engineering and
Manufacturing Corp. ...... 936,200
18,900 Perini Corporation.......... 193,725
1,000 Pioneer Metals, Inc. ....... 163,500
23,150 Precision Castparts
Corp. .................... 813,144
15,200 Preformed Line Products
Company................... 509,200
12,400 Proler International
Corp. .................... 88,350
26,500 Puerto Rican Cement Company,
Inc. ..................... 808,250
37,450 Quaker Chemical
Corporation............... 608,563
10,700 Regal-Beloit Corporation.... 165,850
15,925 Robroy Industries, Inc. Cl.
A......................... 262,763
10,900 St. Joe Paper Company....... 692,150
4,800 *Sealed Air Corporation..... 211,200
1,900 *Sequa Corporation Cl. A.... 55,575
17,900 *Shiloh Industries, Inc. ... 190,188
12,000 *Simpson Manufacturing Co.,
Inc. ..................... 145,500
2,500 Snap-on Tools Corporation... 96,875
<CAPTION>
Value
Shares (Note 1)
-------- ----------
<S> <C> <C>
4,583 *Standard Commercial
Corporation............... $ 67,605
8,600 The L. S. Starrett Company
Cl. A..................... 194,575
5,600 *Steel of West Virginia,
Inc. ..................... 64,400
37,700 Tab Products Co. ........... 226,200
18,300 Tecumseh Products Company
Cl. A..................... 805,200
5,900 Tecumseh Products Company
Cl. B..................... 258,125
3,800 Tennant Company............. 102,600
22,500 Thomaston Mills, Inc. Cl.
A......................... 281,250
13,450 *Todd Shipyards
Corporation............... 80,700
11,200 *The Turner Corporation..... 112,000
15,800 Versa Technologies, Inc. ... 229,100
13,700 Vulcan Materials Company.... 746,650
14,800 Watts Industries, Inc. Cl.
A......................... 370,925
5,500 Wausau Paper Mills
Company................... 125,469
3,349 Wedco Technology, Inc. ..... 32,653
11,100 Woodhead Industries,
Inc. ..................... 152,625
6,787 Woodward Governor Company... 427,581
15,800 Zero Corporation............ 237,000
3,200 Zurn Industries, Inc. ...... 64,000
------------
39,556,824
------------
RETAIL - 6.1%
5,000 J. Baker, Inc. ............. 50,625
18,800 Blair Corporation........... 646,250
17,400 *CATHERINES STORES
CORPORATION............... 193,575
95,600 Charming Shoppes, Inc. ..... 501,900
78,600 Claire's Stores, Inc. ...... 1,424,625
32,900 *The Clothestime, Inc. ..... 94,588
5,700 *Crown Books Corporation.... 64,125
4,900 Dart Group Corporation Cl.
A......................... 413,438
50,800 Deb Shops Inc. ............. 165,100
87,100 *The Dress Barn, Inc. ...... 849,225
</TABLE>

The accompanying notes are an integral part of the financial statements.
15

<PAGE>
ROYCE VALUE FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1995 (unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 1)
-------- ----------
<S> <C> <C>
RETAIL - (continued)
32,600 *Ethan Allen Interiors
Inc. ..................... $ 578,650
67,900 Family Dollar Stores,
Inc. ..................... 1,001,525
3,900 Fingerhut Companies,
Inc. ..................... 60,938
12,200 Hancock Fabrics, Inc. ...... 111,325
8,000 *InterTAN Inc. ............. 60,000
3,700 Jones Apparel Group,
Inc. ..................... 110,538
1,700 LANDS' END, INC. ........... 27,625
15,000 *Mac Frugal's Bargains --
Close-outs Inc. .......... 262,500
7,800 Marsh Supermarkets, Inc. Cl.
B......................... 87,750
4,500 Melville Corporation........ 154,125
21,500 *Mikasa, Inc. .............. 319,813
24,100 The Neiman Marcus Group,
Inc. ..................... 343,425
12,800 *Old America Stores, Inc. .. 147,200
17,400 *Orchard Supply Hardware
Stores Corporation........ 195,750
15,200 Oshkosh B'Gosh, Inc. Cl.
A......................... 243,200
73,605 Pier 1 Imports, Inc. ....... 680,846
4,100 *Ross Stores Inc.* ......... 47,793
17,600 *Stein Mart, Inc. .......... 237,600
25,058 Strawbridge & Clothier Cl.
A......................... 501,160
15,400 *Syms Corp. ................ 111,650
16,600 Tiffany & Co. .............. 564,400
10,000 *United Retail Group,
Inc. ..................... 68,750
------------
10,320,014
------------
SERVICES - 17.8%
13,200 AAR CORP. .................. 235,950
12,300 ADT Limited................. 144,525
27,600 ABM Industries
Incorporated.............. 638,250
16,660 ADVO, Inc. ................. 314,458
53,287 Air Express International
Corporation............... 1,252,245
17,640 *American City Business
Journals, Inc. ........... 388,080
<CAPTION>
Value
Shares (Note 1)
-------- ----------
<S> <C> <C>
20,000 Analysis & Technology,
Inc. ..................... $ 280,000
8,500 Angelica Corporation........ 212,500
42,148 Arnold Industries, Inc. .... 737,590
38,300 Atlantic Southeast Airlines,
Inc. ..................... 1,153,788
10,950 Banta Corporation........... 364,088
11,100 Bay Meadows Operating
Company and California
Jockey Club............... 177,600
16,290 *Bell Industries, Inc. ..... 348,199
19,200 Bowl America Incorporated
Cl. A..................... 151,200
43,100 Bowne & Co., Inc. .......... 738,088
11,600 CPI Corp. .................. 221,850
1,400 *Jenny Craig, Inc. ......... 11,550
35,900 Crawford & Company Cl. A.... 619,275
19,350 Crawford & Company Cl. B.... 326,531
34,000 Dames & Moore............... 442,000
4,766 DUFF & PHELPS CREDIT RATING
CO. ...................... 61,958
10,400 *Duplex Products, Inc. ..... 86,450
8,800 Ennis Business Forms,
Inc. ..................... 108,900
12,000 Expeditors International of
Washington, Inc. ......... 270,000
22,500 *FCA International Ltd. .... 50,769
280 Fisher Companies Inc. ...... 20,300
15,800 FlightSafety International,
Inc. ..................... 770,250
10,500 Florida East Coast
Industries, Inc. ......... 774,375
6,800 *Fresh America Corp. ....... 35,700
54,446 Frozen Food Express
Industries, Inc. ......... 527,446
42,385 G & K Services, Inc. Cl.
A......................... 826,508
4,172 Grey Advertising Inc. ...... 801,024
5,400 *Handex Environmental
Recovery, Inc. ........... 37,800
9,100 Handleman Company........... 87,588
1,722 *Hardinge Inc. ............. 32,933
46,737 The Harper Group............ 782,845
1,600 Houghton Mifflin Company.... 84,400
</TABLE>

The accompanying notes are an integral part of the financial statements.
16

<PAGE>
ROYCE VALUE FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1995 (unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 1)
-------- ----------
<S> <C> <C>
SERVICES - (continued)
5,200 *IHOP Corp. ................ $ 133,900
12,700 *International Dairy Queen,
Inc. Cl. A................ 247,650
500 *International Family
Entertainment, Inc. ...... 7,875
8,700 Kansas City Southern
Industries, Inc. ......... 324,075
11,400 Kenan Transport Company..... 228,000
1,700 Lady Baltimore Foods,
Inc. ..................... 103,700
24,400 Lawson Products, Inc. ...... 646,600
33,400 *Marshall Industries........ 1,118,900
30,900 Merrill Corporation......... 587,100
7,800 *Milgray Electronics,
Inc. ..................... 175,500
18,400 NCH Corporation............. 1,058,000
23,900 Nash Finch Company.......... 388,375
22,700 *National Education
Corporation............... 124,850
18,200 New England Business
Service, Inc. ............ 359,450
10,600 *Nichols Research
Corporation............... 181,525
2,250 THE OLSTEN CORPORATION...... 73,688
5,500 PCA International, Inc. .... 64,625
14,300 *Payco American
Corporation............... 110,825
22,200 *Pinkerton's, Inc. ......... 407,925
7,950 Pioneer-Standard
Electronics, Inc. ........ 194,775
6,000 The Pittston Services
Group..................... 144,000
16,000 Plenum Publishing
Corporation............... 560,000
9,800 The Reynolds and Reynolds
Company Cl. A............. 289,100
12,200 Richardson Electronics,
Ltd. ..................... 88,450
47,400 *Rollins Environmental
Services, Inc. ........... 225,150
24,900 Rykoff-Sexton, Inc. ........ 438,863
13,300 *Earl Scheib, Inc. ......... 73,150
1,300 *Scioto Downs, Inc. ........ 15,925
2,500 Scope Industries............ 62,813
<CAPTION>
Value
Shares (Note 1)
-------- ----------
<S> <C> <C>
1,500 *Shoney's, Inc. ............ $ 17,625
63,900 Sotheby's Holdings, Inc. Cl.
A......................... 870,638
58,200 The Standard Register
Company................... 1,105,800
25,000 Stone & Webster, Inc. ...... 737,500
36,900 Super Food Services, Inc. .. 438,188
6,000 *Supercuts, Inc. ........... 47,250
76,300 *TBC Corporation............ 820,225
10,000 Treadco, Inc. .............. 140,000
18,000 True North Communications
Inc. ..................... 339,750
36,500 *UNC, Inc. ................. 196,188
5,200 Uniforce Temporary Personel,
Inc. ..................... 48,100
35,500 *The Union Corporation...... 563,563
31,500 *Vallen Corporation......... 567,000
22,596 *Vie De France
Corporation............... 73,437
10,600 Wallace Computer Services,
Inc. ..................... 406,775
8,000 Werner Enterprises, Inc. ... 160,000
5,400 John Wiley & Sons, Inc. Cl.
A......................... 307,125
13,425 Wyle Electronics............ 377,578
------------
29,768,544
------------
TECHNOLOGY - 3.7%
9,400 *American Software, Inc. Cl.
A......................... 48,175
20,000 *Aseco Corporation.......... 360,000
5,850 Astro-Med, Inc. ............ 66,909
18,900 *Astrosystems, Inc. ........ 86,231
4,700 Augat Inc. ................. 96,350
2,300 BEI Electronics, Inc. ...... 16,675
7,700 *CEM Corporation............ 96,250
8,200 *CSP Inc. .................. 61,500
6,700 *Comptek Research, Inc. .... 120,600
8,700 *Comshare, Inc. ............ 180,525
8,850 *DH Technology, Inc. ....... 243,375
3,700 Dallas Semiconductor
Corporation............... 75,850
10,700 *Data I/O Corporation....... 93,625
7,000 *Data Translation, Inc. .... 194,250
6,400 *Dionex Corporation......... 292,800
23,900 *Exar Corporation........... 705,050
</TABLE>

The accompanying notes are an integral part of the financial statements.
17

<TABLE>
<CAPTION>
Principal
Amount
-----------
<S> <C> <C>
$ 5,000,000 U.S. Treasury Notes 7%
due 4/15/99 (Cost
$5,087,500).......... 5,172,650
------------
REPURCHASE AGREEMENT - 4.2%
State Street Bank and Trust
Company, 5.5% due 7/3/95,
collateralized by U.S. Treasury
Notes, 7.5% due 1/31/97, valued at
$7,000,847 (Cost $7,000,000)....... 7,000,000
------------

TOTAL INVESTMENTS - 101.1%
(COST $127,610,854)................ 169,310,164
------------

LIABILITIES LESS CASH AND OTHER
ASSETS - (1.1%).................... (1,769,102)
------------

NET ASSETS - 100.0%.................. $167,541,062
------------
------------
</TABLE>

* Non-income producing.

`D'American Depository Receipt.

INCOME TAX INFORMATION -- The cost for federal income tax purposes was
$127,610,854. At June 30, 1995 net unrealized appreciation for all securities
amounted to $41,699,310, consisting of aggregate gross unrealized appreciation
of $48,377,482 and aggregate gross unrealized depreciation of $6,678,172.

The accompanying notes are an integral part of the financial statements.
18

<PAGE>
ROYCE VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES AT JUNE 30, 1995 (unaudited)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments at value (identified cost $127,610,854) (Note 1)..................................... $169,310,164
Cash............................................................................................. 382,844
Receivable for dividends and interest............................................................ 333,893
Receivable for investments sold.................................................................. 199,374
Receivable for shares of beneficial interest sold................................................ 32,756
Prepaid expenses and other assets................................................................ 10,093
------------
TOTAL ASSETS................................................................................... 170,269,124
------------
LIABILITIES:
Payable for investments purchased................................................................ 2,419,873
Payable for shares of beneficial interest redeemed............................................... 87,745
Investment advisory fee payable (Note 2)......................................................... 117,998
Accrued expenses................................................................................. 102,446
------------
TOTAL LIABILITIES.............................................................................. 2,728,062
------------
NET ASSETS..................................................................................... $167,541,062
------------
------------
ANALYSIS OF NET ASSETS:
Undistributed net investment income.............................................................. $ 585,820
Accumulated net realized gains on investments.................................................... 7,047,237
Net unrealized appreciation on investments....................................................... 41,699,310
Shares of beneficial interest (Note 3)........................................................... 16,578
Additional paid-in capital....................................................................... 118,192,117
------------
NET ASSETS..................................................................................... $167,541,062
------------
------------
PRICING OF SHARES:
Net asset value, offering and redemption price per share ($167,541,062[div]16,577,997 shares
outstanding) (Note 3).......................................................................... $10.11
</TABLE>

STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Six Months Year
ended ended
June 30, 1995 December 31,
(unaudited) 1994
------------- ------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Net investment income........................................................ $ 508,558 $ 1,170,329
Net realized gain on investments............................................. 5,987,206 8,986,324
Net unrealized appreciation (depreciation) on investments.................... 10,626,578 (13,075,621)
------------- ------------
Increase in net assets resulting from operations............................. 17,122,342 (2,918,968)
Dividends paid from net investment income.................................... -- (874,449)
Distributions paid from net realized gains................................... -- (7,169,090)
FROM CAPITAL SHARE TRANSACTIONS:
Decrease in net assets from capital share transactions (Note 3).............. (16,461,830) (7,932,456)
------------- ------------
INCREASE (DECREASE) IN NET ASSETS.............................................. 660,512 (18,894,963)
NET ASSETS:
Beginning of period.......................................................... 166,880,550 185,775,513
------------- ------------
End of period (including undistributed net investment income of $585,820 and
$77,262, respectively.).................................................... $ 167,541,062 $166,880,550
------------- ------------
------------- ------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

<PAGE>
ROYCE VALUE FUND
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1995 (unaudited)
--------------------------------------------------------------------------------

<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends.................................................................................... $ 1,521,181
Interest..................................................................................... 430,982
-----------
Total Income....................................................................... 1,952,163
-----------
Expenses:
Distribution fee (Note 2).................................................................... 822,527
Investment advisory fee (Note 2)............................................................. 708,803
Custodian and transfer agent fees............................................................ 106,440
Administrative and clerical services......................................................... 36,487
Legal and auditing fees...................................................................... 28,885
Supplies and postage......................................................................... 26,824
Shareholder reports and notices.............................................................. 14,842
Facilities and office space.................................................................. 10,498
Federal and state registration fees.......................................................... 10,000
Insurance.................................................................................... 9,322
Trustees' fees............................................................................... 6,946
Miscellaneous................................................................................ 8,121
Fees waived by investment adviser and distributor (Note 2)................................... (346,090)
-----------
Total Expenses..................................................................... 1,443,605
-----------
Net Investment Income.............................................................. 508,558
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments.................................................................. 5,987,206
Net unrealized appreciation on investments........................................................ 10,626,578
-----------
Net realized and unrealized gain on investments................................................... 16,613,784
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............................................. $17,122,342
-----------
-----------
</TABLE>

The accompanying notes are an integral part of the financial statements.

<PAGE>
ROYCE VALUE FUND
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
This table is presented to show selected data for a share outstanding
throughout each period, and to assist shareholders in evaluating the Fund's
performance over the last five years.

<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1995 ----------------------------------------------
(UNAUDITED) 1994 1993 1992 1991 1990
------------- ----- ----- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD.......................... $9.11 $9.73 $9.51 $8.83 $6.96 $8.48
------------- ----- ----- ----- ----- ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income (a)..... 0.03 0.07 0.05 0.04 0.09 0.14
Net Gain (Loss) on Investments
(realized and
unrealized)................ 0.97 (0.23) 0.97 1.37 2.05 (1.29)
------------- ----- ----- ----- ----- ------
Total from Investment
Operations............... 1.00 (0.16) 1.02 1.41 2.14 (1.15)
------------- ----- ----- ----- ----- ------
LESS DISTRIBUTIONS:
Dividends (from net investment
income).................... -- (0.05) (0.05) (0.04) (0.09) (0.15)
Distributions (from capital
gains)..................... -- (0.41) (0.75) (0.69) (0.18) (0.22)
------------- ----- ----- ----- ----- ------
Total Distributions........ -- (0.46) (0.80) (0.73) (0.27) (0.37)
------------- ----- ----- ----- ----- ------
NET ASSET VALUE, END OF PERIOD.... $10.11 $9.11 $9.73 $9.51 $8.83 $6.96
------------- ----- ----- ----- ----- ------
------------- ----- ----- ----- ----- ------
TOTAL RETURN...................... 11.0% (1.6%) 10.7% 16.0% 30.8% (13.6%)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in
thousands)...................... $167,541 $166,881 $185,776 $178,128 $167,498 $148,412
Ratio of Expenses to Average Net
Assets (b)...................... 1.76%* 1.80% 1.84% 1.88% 1.69% 1.88%
Ratio of Net Investment Income to
Average Net Assets.............. 0.62%* 0.67% 0.43% 0.42% 1.00% 1.77%
Portfolio Turnover Rate........... 8% 22% 31% 28% 25% 18%
</TABLE>

* Annualized.

(a) Net investment income is shown after waivers of fees by the investment
adviser and distributor. For the six months ended June 30, 1995, the per
share effect of the waivers is $0.05. For years ended December 31, 1994,
1993 and 1992, the per share effect of these waivers is $0.03. For the year
ended December 31, 1991, the per share effect of these waivers is $0.04.

(b) Expense ratio before waiver of fees by the investment adviser and the
distributor would have been 2.17% for the six months ended June 30, 1995,
2.16% for the year ended December 31, 1994, 2.15% for the years ended
December 31, 1993 and December 31, 1992; and 2.20% for the year ended
December 31, 1991.

The accompanying notes are an integral part of the financial statements.

21
<PAGE>
ROYCE VALUE FUND
NOTES TO FINANCIAL STATEMENTS (unaudited)
--------------------------------------------------------------------------------

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Royce Value Fund (the 'Fund') is a series of The Royce Fund (the 'Trust'),
a diversified open-end management investment company established as a business
trust under the laws of Massachusetts. The Fund commenced operations on December
31, 1982.

a. Valuation of investments:

Securities listed on an exchange or on the Nasdaq National Market System
are valued on the basis of the last reported sale prior to the time the
valuation is made or, if no sale is reported for such day, at their bid price
for exchange-listed securities and at the average of their bid and asked prices
for Nasdaq securities. Quotations are taken from the market where the security
is primarily traded. Other over-the-counter securities for which market
quotations are readily available are valued at their bid price. Securities for
which market quotations are not readily available are valued at their fair value
under procedures established and supervised by the Trustees. Bonds and other
fixed income securities may be valued by reference to other securities with
comparable ratings, interest rates and maturities, using established independent
pricing services.

b. Investment transactions and related investment income:

c. Taxes:

d. Distributions:

Distributions are recorded on the ex-dividend date. Dividend and capital
gain distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. Permanent book
and tax basis differences relating to shareholder distributions will result in
reclassifications to paid-in capital and may affect net investment income per
share. Undistributed net investment income may include temporary book and tax
basis differences which will reverse in a subsequent period. Any taxable income
or gain remaining at fiscal year end is distributed in the following year.
Dividends and capital gain distributions are paid annually in December.

e. Repurchase agreements:

<PAGE>
ROYCE VALUE FUND
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
--------------------------------------------------------------------------------

agreements to maturities of no more than seven days. Securities pledged as
collateral for repurchase agreements are held by SSB&T until maturity of the
repurchase agreements. Repurchase agreements could involve certain risks in the
event of default or insolvency of SSB&T, including possible delays or
restrictions upon the ability of the Fund to dispose of the underlying
securities.

2. INVESTMENT ADVISER AND DISTRIBUTOR:

Under its investment advisory agreement with Quest Advisory Corp.
('Quest'), the Fund paid Quest fees totaling $692,581 during the six months
ended June 30, 1995. This amount is net of $16,222 of fees which were
voluntarily waived by Quest. The agreement provides for fees equal to 1.0% per
annum of the first $50 million of the Fund's average total net assets, .875% per
annum of the next $50 million of such net assets and .75% per annum of
additional amounts of average total net assets. Such fees are computed daily and
are payable monthly to Quest.

Quest Distributors, Inc. ('QDI'), the distributor of the Fund's shares, is
an affiliate of Quest and received distribution fees from the Fund totaling
$492,659 during the six months ended June 30, 1995. This amount is net of
$329,868 of fees which were voluntarily waived by QDI. The distribution
agreement provides for maximum fees of 1.0% per annum of average total net
assets.

3. FUND SHARES:

The Board of Trustees has authority to issue an unlimited number of shares
of beneficial interest of the Fund, with a par value of $.001. Share
transactions were as follows:

<TABLE>
<CAPTION>
Six months ended Year ended
June 30, 1995 December 31, 1994
------------------------- -------------------------
Shares Amount Shares Amount
---------- ----------- ---------- -----------

<S> <C> <C> <C> <C>
Sold............................................... 262,755 $ 2,489,022 763,903 $ 7,367,068
Issued as reinvested dividends and distributions... -- -- 833,361 7,591,915
Redeemed........................................... (1,997,356) (18,950,852) (2,377,449) (22,891,439)
</TABLE>

4. PURCHASES AND SALES OF SECURITIES:

For the six months ended June 30, 1995, the cost of purchases and the
proceeds from sales of investment securities, other than short-term securities,
amounted to $13,820,312 and $32,578,433, respectively.

23
<PAGE>
POSTSCRIPT: WATCH US IN THE CORNERS

Drive carefully.

------------------------------------------------------

THE ROYCE FUNDS

1414 Avenue of the Americas, New York, New York 10019
This report must be accompanied by or preceded by a current prospectus of the
Fund

<PAGE>
ROYCE
PREMIER
FUND
SEMI-ANNUAL REPORT
JUNE 30, 1995
THE ROYCE FUNDS

<PAGE>
The Royce Funds

1414 Avenue of the Americas
New York, NY 10019
(212) 355-7311
(800) 221-4268

Dear Shareholder:

If the Dow Jones Industrial Average were to continue its first half pace,
it would top 30,000 in the year 2000! Something to think about.

THE NUMBERS . . . UP, UP AND AWAY

Royce Premier Fund ('Premier') was up 8.4% for the second quarter and 13.1%
for the first six months of 1995. Although Premier's history is relatively
short, its investment performance and low-risk profile have earned it a 5 Star
(* * * * *) rating from Morningstar*, the independent mutual fund
rating service. Average annual total returns for the 1-year, 3-year and since
inception (12/31/91) periods ended June 30, 1995 were 17.2%, 16.7% and 14.6%,
respectively.

As exciting as the first two quarters' returns have been, when a market
cycle matures, a turn away from growth and momentum to less exciting, low
valuation issues usually takes place. This type of period is generally favorable
to Premier's style of investing.

SMALL-CAP STOCKS -- LAGGING THEIR WAY TO NEW HIGHS

WE HAD OUR 'SOX' KNOCKED OFF

Contributing to the first half's spectacular market returns was a meteoric
rise in technology stocks. The Philadelphia Semiconductor Index ('SOX') was up
over 100% in the last twelve months.

WEEKLY PRICE GRAPH FOR "SOX"
(PHILA. SEMICONDUCTOR INDEX 6/94-6/95)

[GRAPH]

2
<PAGE>
The current atmosphere of euphoria suggests that memories of the 'high
tech, high wreck' experience that occurred with the last technology stock run-up
in 1983 (and subsequent collapse) have been erased. Although small-cap
technology stocks are popular and available, it has never been a market segment
to which we have committed significant amounts of capital.

For anyone feeling depressed about missing the recent high-tech stock
run-up, we thought we would share some interesting investment trivia which runs
counter to popular current assumptions:

<TABLE>
<CAPTION>
AVERAGE ANNUAL PERFORMANCE RESULTS
(12/31/79 - 6/30/95)
S&P S&P RUSSELL RUSSELL 2000
500 TECHNOLOGY 2000 TECHNOLOGY
---- ---------- ------- ------------

IN SPITE OF THE RECENT STELLAR MARKET PERFORMANCE AND ENORMOUS UNIT GROWTH,
TECHNOLOGY STOCKS HAVE ACTUALLY BEEN A DRAG ON THE LAST 15+ YEARS OF PERFORMANCE
FOR BOTH THE S&P 500 AND THE RUSSELL 2000.

[ILLUSTRATION]

[Cartoon showing miners standing in line to purchase picks and shovels.]

<PAGE>
WHAT WE DO

Royce Premier Fund uses a risk averse approach to invest in the securities
of small-cap companies viewed by the Fund's investment adviser as having
superior financial characteristics and/or unusually attractive business
prospects. The investment approach attempts to understand and value a company's
'private worth.' Private worth is what we believe the company would bring if the
entire enterprise were sold in a private transaction to a knowledgeable buyer.
The price we will pay for a security must be significantly under our appraisal
of its private worth. The consistent use of this discipline, applied to less
well-known securities, is the source of our performance.

NO OTHER PLACE WE WOULD RATHER BE

HOW IT WORKS

WINNERS

Our most recent successes are depicted in the table that follows. During
the first half of 1995, each contributed substantially to our performance and
are representative of our approach to investing. Premier's BEST PERFORMERS, as
measured by dollar impact, were:

<TABLE>
<CAPTION>
SECURITY % GAIN
--------------------------------------- --------

<S> <C>
Atlantic Southeast Airlines, Inc. 94%
Student Loan Marketing Assoc. 45%
Claire's Stores, Inc. 51%
</TABLE>

Each of these investments were purchased with our highest conviction and
represented top portfolio positions. The aggregate contribution of these three
stocks was nearly $7.5 million, well in excess of 25% of Premier's six month
gain.

Atlantic Southeast Airlines and Claire's Stores were relatively large
investments in stocks we knew well and are highly regarded in their respective
industries. In each case, we made investments when business conditions were
difficult and Wall Street expectations were low. Since the beginning of the
year, the airline industry, in the case of Atlantic Southeast Airlines, and the
retail environment, in the case of Claire's Stores, have improved modestly.
However, the investment community's opinion of these companies has changed
radically and they are now viewed as high quality growth stocks.

Our purchase of Student Loan Marketing Association, better known as 'Sallie
Mae', was somewhat more opportunistic and indicative of our contrarian approach.
Plagued by new competition from the government in lending to students and rising
interest rates, the company's stock declined from the mid $70's to $33 per share
during the preceding 24 months. We were attracted to Sallie Mae by its dominant
market position, low valuation and high dividend yield. Encouraged by the recent
political change in Washington, we made Sallie Mae a top position in our Fund.
We are happy we did so.

<PAGE>
MORE PATIENCE REQUIRED

One happy by-product of a bull market is that most of your stocks go up.
There are always a few exceptions. Our laggards generally fall into two
categories: undervalued companies that got cheaper (caught the flu) and those in
intensive care (with pneumonia). Our WORST PERFORMERS in the first half, as
measured by dollar impact, fall into the former category:

<TABLE>
<CAPTION>
SECURITY % LOSS
------------------------------------------- ------

<S> <C>
NCH Corporation 14%
Charming Shoppes, Inc. 20%
The Dress Barn, Inc 9%
</TABLE>

Although the jury is still out on Charming Shoppes, we thought we had some
downside protection, given that we bought Charming Shoppes after a 33% fall in
1993 and a 40% decline in 1994. We may still be a little early on this once
dominant retailer. As for our other underachievers, with a little more patience,
any one of these could make next year's winners list.

NO LONGER SMALL, UNKNOWN OR UNDER-OWNED

THERE HAVE BEEN SOME EXTRAORDINARY DEVELOPMENTS IN THE SMALL-CAP SECTOR,
BUT THEY ARE NOT WHAT YOU MAY THINK.

TEN YEARS OF EXPLOSIVE GROWTH!

[GRAPH]

[Pictorial chart showing increase in number of small-cap funds and assets
under management from 1984 to 1995; in 1995, 310 funds with $50 billion in
assets.]

The growth in small company funds and assets has dramatically decreased the
number of unknown, inefficiently priced stocks at the upper end of the small-cap
market.

<PAGE>
We believe that Premier's higher level of portfolio concentration is an
appropriate strategy for capturing the opportunities that remain. This approach
implies confidence in our non-quantitative and non-Wall Street research
abilities. We believe that we are uniquely equipped to accomplish this task by
virtue of our 20+ years of small-cap investment experience and our sizeable
research effort.

[ILLUSTRATION]

[Cartoon of fortune teller and customer]

STAR GAZING

In spite of the spectacular run-up by large-cap equities since the market
lows of last December, there are several indications that small-cap stocks may
soon resume a leadership role. June was the first month of small-cap
outperformance since February, with the Russell 2000 up 5.2% versus a 2.4%
return for the S&P 500. This performance momentum has continued into the first
part of the third quarter, a good omen for small-cap issues. Also, now that the
U.S. dollar has stopped declining against other major currencies, domestic
small-cap stocks are competing on a level playing field. This has historically
given small-cap stocks a performance edge.

Your continued confidence is appreciated.

Yours faithfully,

CHARLES M. ROYCE

Charles M. Royce Jack E. Fockler, Jr.
President W. Whitney George
Vice Presidents
</TABLE>

July 31, 1995

NOTE: S&P 500, Russell 2000 and S&P 600 are unmanaged and include the
reinvestment of dividends.

<PAGE>
FINANCIAL REVIEW

<TABLE>
<CAPTION>
ANNUAL RETURNS
-----------------------------------
<S> <C>
1995 (thru 6/30)............ 13.1%
1994........................ 3.3%
1993........................ 19.0%
1992........................ 15.8%
</TABLE>

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
----------------------------------
(THROUGH 6/30/95)
<S> <C>

Since Inception*............ 14.6%
3-year...................... 16.7%
1-year...................... 17.2%
</TABLE>

ROYCE PREMIER FUND VERSUS S&P 500
VALUE OF $10,000 INVESTED ON 12/31/91

[GRAPH]

[Line graph showing change in value of $10,000 investment in Fund and the
S&P 500 between inception of the Fund and June 1995.]

* Inception Date -- December 31, 1991

The results presented in this report should not be considered
representative of the total return from an investment in the Fund today. They
are provided only to give an historical perspective of the Fund. The investment
return and principal value of Fund shares will fluctuate so that shares may be
worth more or less than their original cost when redeemed. Redemption fees are
not included because they apply only to accounts open for less than one year.

<PAGE>
PORTFOLIO SUMMARY
The following information is provided as a 'bird's eye' view of the Royce
Premier Fund portfolio. For a more complete picture, the full portfolio and
accompanying financial statements should be read in their entirety.

<TABLE>
<CAPTION>
PORTFOLIO COMPOSITION VALUE % OF NET ASSETS
-----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks $ 213,789,565 79.7%
Bond 14,483,420 5.4
Cash & Other Net Assets 39,936,032 14.9
--------------- -------
Total Net Assets $ 268,209,017 100.0%
--------------- -------
--------------- -------
<CAPTION>
PORTFOLIO DIAGNOSTICS
-----------------------------------------------------------------------------------------------------------
<S> <C>
Weighted Average Market Capitalization $619 Million
Median Market Capitalization $451 Million
Weighted Average P/E Ratio 14.3x
Weighted Average P/B Ratio 1.7x
Weighted Average Portfolio Yield 1.7%

<CAPTION>
COMMON STOCK SECTORS % OF NET ASSETS
-----------------------------------------------------------------------------------------------------------
<S> <C>
Services 19.9%
Financial 19.3
Industrial Cyclicals 13.8
Retail 10.2
Consumer Durables 7.2
Consumer Staples 3.3
Technology 2.5
Energy 2.1
Health 1.4

<CAPTION>
TOP TWENTY POSITIONS MARKET VALUE % OF NET ASSETS
-----------------------------------------------------------------------------------------------------------
<S> <C> <C>
1 Comdisco, Inc. $6,430,388 2.4%
2 Atlantic Southeast Airlines, Inc. 5,982,825 2.2
3 Claire's Stores, Inc. 5,658,625 2.1
4 Florida Rock Industries, Inc. 5,411,113 2.0
5 The Dress Barn, Inc. 5,379,075 2.0
6 Marshall Industries 4,770,400 1.8
7 Fab Industries, Inc. 4,748,850 1.8
8 Stanhome Inc. 4,702,500 1.8
9 Sturm, Ruger & Company, Inc. 4,655,588 1.7
10 The Standard Register Company 4,573,300 1.7
11 Reebok International Ltd. 4,216,000 1.6
12 Juno Lighting, Inc. 4,134,400 1.5
13 W.R. Berkley Corp. 4,132,200 1.5
14 Orion Capital Corporation 4,102,800 1.5
15 Curtiss-Wright Corporation 4,092,113 1.5
16 Woodward Governor Company 4,015,557 1.5
17 Wesco Financial Corporation 4,014,750 1.5
18 HAEMONETICS CORPORATION 3,886,575 1.4
19 E.W. Blanch Holdings, Inc. 3,838,613 1.4
20 The Lincoln Electric Company 3,750,000 1.4
</TABLE>

<PAGE>
ROYCE
PREMIER
FUND

FINANCIAL STATEMENTS

<PAGE>
ROYCE PREMIER FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1995 (unaudited)
--------------------------------------------------------------------------------
COMMON STOCKS - 79.7%

<TABLE>
<CAPTION>
Value
Shares (Note 1)
------ --------
<S> <C> <C>
CONSUMER DURABLES - 7.2%
203,800 Garan Incorporated...... $ 3,413,644
258,400 Juno Lighting, Inc. .... 4,134,400
92,900 The Singer Company
N.V. ................. 2,403,788
142,500 Stanhome Inc. .......... 4,702,500
142,700 Sturm, Ruger & Company,
Inc. ................. 4,655,588
------------
19,309,920
------------
CONSUMER STAPLES - 3.3%
53,312 Block Drug Company, Inc.
Cl. A................. 1,799,280
124,000 Reebok International
Ltd. ................. 4,216,000
281,600 The Stride Rite
Corporation........... 2,921,600
------------
8,936,880
------------
ENERGY - 2.1%
136,510 *Tom Brown, Inc. ....... 2,030,586
151,000 Camco International
Inc. ................. 3,529,625
------------
5,560,211
------------
FINANCIAL - 19.3%
15,536 *Alleghany
Corporation........... 2,474,108
116,400 W. R. Berkley Corp. .... 4,132,200
206,100 E.W. Blanch Holdings,
Inc. ................. 3,838,613
27,000 CMAC Investment
Corporation........... 1,171,125
211,700 Comdisco, Inc. ......... 6,430,388
123,500 The Commerce Group,
Inc. ................. 2,207,563
99,900 *Gryphon Holdings
Inc. ................. 1,623,375
128,500 Guaranty National
Corporation........... 2,377,250
83,900 The John Nuveen
Company............... 2,013,600
58,300 Leucadia National
Corporation........... 2,944,150
105,200 Orion Capital
Corporation........... 4,102,800
<CAPTION>
Value
Shares (Note 1)
------ --------
<S> <C> <C>
118,300 PartnerRe Holdings
Ltd. ................. $ 3,090,588
206,760 Pennsylvania
Manufacturers
Corporation........... 3,204,780
94,500 T. Rowe Price
Associates, Inc. ..... 3,638,250
36,200 Transatlantic Holdings,
Inc. ................. 2,353,000
31,800 Wesco Financial
Corporation........... 4,014,750
179,800 `D'Willis Corroon Group
plc ADR............... 2,157,600
------------
51,774,140
------------
HEALTH - 1.4%
201,900 *HAEMONETICS
CORPORATION........... 3,886,575
------------
INDUSTRIAL CYCLICALS - 13.8%
168,500 Blessings Corporation... 2,106,250
176,500 CalMat Co. ............. 3,662,375
91,700 Curtiss-Wright
Corporation........... 4,092,113
155,700 Fab Industries, Inc. ... 4,748,850
190,700 Florida Rock Industries,
Inc. ................. 5,411,113
135,800 P. H. Glatfelter
Company............... 2,732,975
172,000 Lilly Industries, Inc.
Cl. A................. 2,021,000
125,000 *The Lincoln Electric
Company............... 3,750,000
37,600 Liqui-Box Corporation... 1,203,200
89,200 Precision Castparts
Corp. ................ 3,133,150
63,739 Woodward Governor
Company............... 4,015,557
------------
36,876,583
------------
RETAIL - 10.2%
89,000 Blair Corporation....... 3,059,375
294,000 Charming Shoppes,
Inc. ................. 1,543,500
312,200 Claire's Stores, Inc. .. 5,658,625
551,700 *The Dress Barn, Inc. .. 5,379,075
</TABLE>

The accompanying notes are an integral part of the financial statements.
10

<PAGE>
ROYCE PREMIER FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1995 (unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 1)
------ --------
RETAIL - (continued)
<S> <C> <C>
135,000 *Ethan Allen Interiors
Inc. ................. $ 2,396,250
201,400 Family Dollar Stores,
Inc. ................. 2,970,650
60,000 LANDS' END, INC. ....... 975,000
217,700 *Mikasa, Inc. .......... 3,238,288
65,100 Tiffany & Co. .......... 2,213,400
------------
27,434,163
------------
SERVICES - 19.9%
168,200 ADVO, Inc. ............. 3,174,775
94,050 Air Express
International
Corporation........... 2,210,175
198,600 Atlantic Southeast
Airlines, Inc. ....... 5,982,825
142,300 Bowne & Co., Inc. ...... 2,436,888
63,600 Comair Holdings,
Inc. ................. 2,408,850
192,700 Crawford & Company Cl.
A..................... 3,324,075
131,400 Dames & Moore........... 1,708,200
117,700 Ennis Business Forms,
Inc. ................. 1,456,538
39,500 FlightSafety
International, Inc. .. 1,925,625
16,262 Grey Advertising
Inc. ................. 3,122,304
86,800 *International Dairy
Queen, Inc. Cl. A..... 1,692,600
142,400 *Marshall Industries.... 4,770,400
89,600 McClatchy Newspapers,
Inc. Cl. A............ 1,982,400
63,800 NCH Corporation......... 3,668,500
47,900 Plenum Publishing
Corporation........... 1,676,500
234,300 Sotheby's Holdings, Inc.
Cl. A................. 3,192,338
<CAPTION>
Value
Shares (Note 1)
------ --------
<S> <C> <C>
240,700 The Standard Register
Company............... $ 4,573,300
323,800 *TBC Corporation........ 3,480,850
15,000 Wallace Computer
Services, Inc. ....... 575,625
------------
53,362,768
------------
TECHNOLOGY - 2.5%
64,300 *Dionex Corporation..... 2,941,725
172,400 Scitex Corporation
Limited............... 3,706,600
------------
6,648,325
------------
Total Common Stocks
(Cost $193,592,532)... 213,789,565
------------
U.S. TREASURY
OBLIGATION - 5.4%
<CAPTION>

Principal
Amount
------------
<S> <C> <C>
$14,000,000 U.S. Treasury Note 7%
due 4/15/99 (Cost
$14,194,688) 14,483,420
------------

REPURCHASE AGREEMENT - 16.0%
State Street Bank and Trust Company,
5.50% due 7/3/95, collateralized by
U.S. Treasury Obligation, 7.50% due
1/31/97, valued at $43,002,190 (Cost
$43,000,000)........................ 43,000,000
------------

TOTAL INVESTMENTS - 101.1% (COST
$250,787,220)....................... 271,272,985

LIABILITIES LESS CASH AND OTHER
ASSETS - (1.1%)..................... (3,063,968)
------------

NET ASSETS - 100.0%................... $268,209,017
------------
------------
</TABLE>

* Non-income producing.

`D' American Depository Receipt.

INCOME TAX INFORMATION -- The cost for federal income tax purposes was
$250,788,205. At June 30, 1995, net unrealized appreciation amounted to
$20,484,780, consisting of aggregate gross unrealized appreciation of
$27,184,950 and aggregate gross unrealized depreciation of $6,700,170.

The accompanying notes are an integral part of the financial statements.
11

<PAGE>
ROYCE PREMIER FUND
STATEMENT OF ASSETS AND LIABILITIES AT JUNE 30, 1995 (unaudited)
--------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Investments at value (identified cost $207,787,220) (Note 1)..................................... $228,272,985
Repurchase agreement (Note 1).................................................................... 43,000,000
Cash............................................................................................. 254,471
Receivable for investments sold.................................................................. 3,532,811
Receivable for shares of beneficial interest sold................................................ 1,087,816
Receivable for dividends and interest............................................................ 548,987
Prepaid expenses and other assets................................................................ 24,416
------------
TOTAL ASSETS................................................................................... 276,721,486
------------
LIABILITIES:
Payable for investments purchased................................................................ 7,452,642
Payable for shares of beneficial interest redeemed............................................... 684,673
Investment advisory fee payable (Note 2)......................................................... 214,120
Accrued expenses................................................................................. 161,034
------------
TOTAL LIABILITIES.............................................................................. 8,512,469
------------
NET ASSETS..................................................................................... $268,209,017
------------
------------
ANALYSIS OF NET ASSETS:
Undistributed net investment income.............................................................. $ 1,768,722
Accumulated net realized gain on investments..................................................... 9,524,809
Net unrealized appreciation on investments....................................................... 20,485,765
Shares of beneficial interest (Note 3)........................................................... 36,592
Additional paid-in capital....................................................................... 236,393,129
------------
NET ASSETS..................................................................................... $268,209,017
------------
------------
PRICING OF SHARES:
Net asset value, offering and redemption price per share
($268,209,017 [div] 36,591,552 shares outstanding) (Note 3).................................... $7.33
-----
-----
</TABLE>

STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Six months ended Year ended
June 30, 1995 December 31,
(unaudited) 1994
---------------- ------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Net investment income....................................................... $ 1,684,280 $ 1,659,357
Net realized gain on investments............................................ 8,559,499 3,788,411
Net unrealized appreciation/depreciation on investments..................... 19,195,326 (706,602)
---------------- ------------
Increase in net assets resulting from operations............................ 29,439,105 4,741,166
Dividends paid from net investment income................................... -- (1,525,419)
Distributions paid from net realized gains.................................. -- (2,746,290)
FROM CAPITAL SHARE TRANSACTIONS:
Increase in net assets from capital share transactions (Note 3)............. 36,379,799 154,777,578
---------------- ------------
INCREASE IN NET ASSETS........................................................ 65,818,904 155,247,035
NET ASSETS:
Beginning of period......................................................... 202,390,113 47,143,078
---------------- ------------
End of period (including undistributed net investment income of $1,768,722
and $84,442, respectively)................................................ $268,209,017 $202,390,113
---------------- ------------
---------------- ------------
</TABLE>

The accompanying notes are an integral part of the financial statements.
12

<PAGE>
ROYCE PREMIER FUND
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1995 (unaudited)
--------------------------------------------------------------------------------

<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends...................................................................................... $ 1,796,835
Interest....................................................................................... 1,378,064
-----------
Total Income.......................................................................... 3,174,899
-----------
Expenses:
Investment advisory fee (Note 2)............................................................... 1,154,934
Custodian and transfer agent fees.............................................................. 113,747
Supplies and postage........................................................................... 55,230
Administrative and clerical services........................................................... 53,035
Federal and state registration fees............................................................ 44,865
Legal and auditing fees........................................................................ 32,233
Shareholder reports and notices................................................................ 14,842
Facilities and office space.................................................................... 14,606
Miscellaneous.................................................................................. 11,765
Trustees' fees................................................................................. 7,240
Organizational costs........................................................................... 625
Fee waived by investment adviser............................................................... (12,503)
-----------
Total Expenses........................................................................ 1,490,619
-----------
Net Investment Income................................................................. 1,684,280
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments................................................................... 8,559,499
Net unrealized appreciation on investments......................................................... 19,195,326
-----------
Net realized and unrealized gain on investments.................................................... 27,754,825
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................................... $29,439,105
-----------
-----------
</TABLE>

--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------

This table is presented to show selected data for a share outstanding
throughout each period, and to assist shareholders in evaluating the Fund's
performance over the last 3 years.

<TABLE>
<CAPTION>
Six months ended Years ended December 31,
June 30, 1995 ---------------------------------
(unaudited) 1994 1993 1992
---------------- ----- ----- -----
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.............. $ 6.48 $6.41 $5.52 $5.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a)..................... 0.05 0.06 0.02 0.02
Net gains on investments (realized and
unrealized)................................. 0.80 0.15 1.03 0.77
------ ----- ----- -----
Total from investment operations............ 0.85 0.21 1.05 0.79
------ ----- ----- -----
LESS DISTRIBUTIONS:
Dividends (from net investment income)........ -- (0.05) (0.02) (0.02)
Distributions (from capital gains)............ -- (0.09) (0.14) (0.25)
------ ----- ----- -----
Total distributions......................... -- (0.14) (0.16) (0.27)
------ ----- ----- -----
NET ASSET VALUE, END OF PERIOD.................... $7.33 $6.48 $6.41 $5.52
------ ----- ----- -----
------ ----- ----- -----
TOTAL RETURN...................................... 13.1% 3.3% 19.0% 15.8%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in thousands).......... $268,209 $202,390 $47,143 $2,329
Ratio of Expenses to Average Net Assets (b)....... 1.29%* 1.38% 1.50% 1.77%
Ratio of Net Investment Income to Average Net
Assets.......................................... 1.45%* 1.19%* 0.68% 0.53%*
Portfolio Turnover Rate........................... 26% 38% 85% 116%
</TABLE>

* Annualized

(a) Net investment income is shown after waivers of fees by the investment
adviser and distributor. For the years ended December 31, 1993 and 1992,
the per share effect of these waivers is $0.01 and $0.09, respectively.

(b) Expense ratios are shown after waivers of fees by the investment adviser
and distributor. For the six months ended June 30, 1995, the expense ratio
before the waiver would have been 1.30%. For the years ended December 31,
1993 and 1992, the expense ratios before the waivers and reimbursements
would have been 1.68% and 4.17%, respectively.

The accompanying notes are an integral part of the financial statements.
13

<PAGE>
ROYCE PREMIER FUND
NOTES TO FINANCIAL STATEMENTS (unaudited)
--------------------------------------------------------------------------------

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Royce Premier Fund (the 'Fund') is a series of The Royce Fund (the
'Trust'), a diversified open-end management investment company established as a
business trust under the laws of Massachusetts. The Fund commenced operations on
December 31, 1991.

a. Valuation of investments:

b. Investment transactions and related investment income:

c. Taxes:

d. Distributions:

Dividend and capital gain distributions are recorded on the ex-dividend
date and paid annually in December. Dividend and capital gain distributions are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. Permanent book and tax basis
differences relating to shareholder distributions will result in
reclassifications to paid-in capital and may affect net investment income per
share. Undistributed net investment income may include temporary book and tax
basis differences which will reverse in a subsequent period. Any taxable income
or gain remaining at fiscal year end is distributed in the following year.

e. Repurchase agreements:

<PAGE>
ROYCE PREMIER FUND
NOTES TO FINANCIAL STATEMENTS (continued) (unaudited)
--------------------------------------------------------------------------------

2. INVESTMENT ADVISER:

Under the Trust's investment advisory agreement with Quest Advisory Corp.
('Quest'), the Fund paid Quest fees totaling $1,142,431 (net of $12,503
voluntarily waived by Quest) for the six months ended June 30, 1995. The
agreement provides for fees equal to 1.0% per annum of the Fund's average net
assets. Such fees are computed daily and are payable monthly to Quest.

3. FUND SHARES:

The Board of Trustees has authority to issue an unlimited number of shares
of beneficial interest of the Fund, with a par value of $.001. Share
transactions were as follows:

<TABLE>
<CAPTION>
Six months ended
June 30, 1995 Year ended
(unaudited) December 31, 1994
------------------------- --------------------------
Shares Amount Shares Amount
---------- ----------- ---------- ------------

<S> <C> <C> <C> <C>
Sold............................................. 11,883,854 $80,547,377 26,163,792 $169,885,610
Issued as reinvested dividends and
distributions.................................. -- -- 615,431 3,987,995
Redeemed......................................... (6,502,195) (44,167,578) (2,927,034) (19,096,027)
</TABLE>

4. PURCHASES AND SALES OF SECURITIES:

For the six months ended June 30, 1995, the cost of purchases and the
proceeds from sales of portfolio securities, other than short-term securities,
amounted to $72,218,512 and $52,533,433, respectively.

15
<PAGE>
POSTSCRIPT: WATCH US IN THE CORNERS

Drive carefully.

------------------------------------------------------

THE ROYCE FUNDS

1414 Avenue of the Americas, New York, New York 10019
This report must be accompanied by or preceded by a current
prospectus of the Fund

<PAGE>
ROYCE
LOW-PRICED
STOCK
FUND
SEMI-ANNUAL REPORT
JUNE 30,1995
THE ROYCE FUNDS

<PAGE>
The Royce Funds
1414 Avenue of the Americas
New York, NY 10019
(212) 355-7311
(800) 221-4268

Dear Shareholder:

If the Dow Jones Industrial Average were to continue its first half pace,
it would top 30,000 in the year 2000! Something to think about.

THE NUMBERS . . . UP, UP AND AWAY

Royce Low-Priced Stock Fund ('RLP') was up 10.2% for the second quarter and
17.6% for the first six months of 1995. As a relatively new fund, we are
satisfied with its early results. Since its inception on December 15, 1993, the
Fund has provided a 13.4% average annual total return.

A favorite of the individual investor, low-priced stocks (those priced
below $15.00) are relatively unknown to the professional investment community.
We are encouraged by the number of quality low-priced stocks that we are
finding, especially given that, as a market cycle matures, a turn away from
growth and momentum to less exciting, low valuation issues usually takes place.
This type of period is generally favorable to our style of investing. We believe
that the Fund will be our most volatile and most speculative vehicle and
hopefully it will have appropriate returns.

SMALL-CAP STOCKS -- LAGGING THEIR WAY TO NEW HIGHS

WE HAD OUR 'SOX' KNOCKED OFF

Contributing to the first half's spectacular market returns was a meteoric
rise in technology stocks. The Philadelphia Semiconductor Index ('SOX') was up
over 100% in the last twelve months.

WEEKLY PRICE GRAPH FOR 'SOX'
(PHILA. SEMICONDUCTOR INDEX 6/94-6/95)

[GRAPH]

For anyone feeling depressed about missing the recent high-tech stock
run-up, we thought we would share some interesting investment trivia which runs
counter to popular current assumptions:

<TABLE>
<CAPTION>
AVERAGE ANNUAL PERFORMANCE RESULTS
(12/31/79 - 6/30/95)
S&P S&P RUSSELL RUSSELL 2000
500 TECHNOLOGY 2000 TECHNOLOGY
---- ---------- ------- ------------

IN SPITE OF THE RECENT STELLAR MARKET PERFORMANCE AND ENORMOUS UNIT GROWTH,
TECHNOLOGY STOCKS HAVE ACTUALLY BEEN A DRAG ON THE LAST 15+ YEARS OF PERFORMANCE
FOR BOTH THE S&P 500 AND THE RUSSELL 2000.

[ILLUSTRATION]

[Cartoon showing miners standing in line to purchase picks and shovels]

<PAGE>
WHAT WE DO

Royce Low-Priced Stock Fund uses a risk averse approach to invest in common
stocks of companies whose shares, at the time of purchase, trade at a price
below $15.00 per share. The investment approach attempts to understand and value
a company's 'private worth.' Private worth is what we believe the company would
bring if the entire enterprise were sold in a private transaction to a
knowledgeable buyer. The price we will pay for a security must be significantly
under our appraisal of its private worth. The consistent use of this discipline,
applied to less well-known securities, is the source of our performance.

NO OTHER PLACE WE WOULD RATHER BE

Although not restricted as to market capitalization, the Fund will
generally focus on companies with market caps below $1 billion. Although our
orientation is small-cap, the picking universe is by no means small. Currently,
more than 7,000 securities, representing over $900 billion in total market
capitalization, fall within our range. We believe that these stocks, especially
at the low end of the price range, are generally less-known and, therefore, less
likely to be understood and properly priced by investors.

[ILLUSTRATION]

[Cartoon of fortune teller and customer]

STAR GAZING

In spite of the spectacular run-up by large-cap equities since the market
lows of last December, there are several indications that small-cap stocks may
soon resume a leadership role. June was the first month of small-cap
outperformance since February, with the Russell 2000 up 5.2% versus a 2.4%
return for the S&P 500. This performance momentum has continued into the first
part of the third quarter, a good omen for small-cap issues. Also, now that the
U.S. dollar has stopped declining against other major currencies, domestic
small-cap stocks are competing on a level playing field. This has historically
given small-cap stocks a performance edge.

Your continued confidence is appreciated.

Yours faithfully,

<TABLE>
<S> <C>
Charles M. Royce

Charles M. Royce Jack E. Fockler, Jr.
President W. Whitney George
Vice Presidents
</TABLE>

July 31, 1995

NOTE: S&P 500, Russell 2000 and S&P 600 are unmanaged and include the
reinvestment of dividends.

<PAGE>
FINANCIAL REVIEW

<TABLE>
<CAPTION>
PERIOD TOTAL RETURN
------------------------------- ------------
<S> <C>
1995 (thru 6/30)............... 17.6%
1994........................... 3.0%
</TABLE>

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
--------------------------------------------
<S> <C>
1-year......................... 25.6%
Since Inception*............... 13.4%
</TABLE>

ROYCE LOW-PRICED STOCK FUND
VALUE OF $10,000 INVESTED ON 12/15/93

[GRAPH]

[Line graph showing change in value of $10,000 investment in Fund and
the S&P 500 between inception of Fund and June 1995]

* Inception Date - December 15, 1993

<PAGE>
PORTFOLIO SUMMARY

The following information is provided as a 'bird's eye' view of the Royce
Low-Priced Stock Fund portfolio. For a more complete picture, the full portfolio
and accompanying financial statements should be read in their entirety.

<TABLE>
<CAPTION>
PORTFOLIO COMPOSITION VALUE % OF NET ASSETS
<S> <C> <C>
---------------------------------------------------------------------------------------------------------
Common Stocks $ 1,951,510 85.5%
Preferred Stock 15,750 0.7
Cash & Other Net Assets 316,120 13.8
----------- ------
Total Net Assets $ 2,283,380 100.0%
=========== ======
PORTFOLIO DIAGNOSTICS
---------------------------------------------------------------------------------------------------------
Weighted Average Market Capitalization $166 Million
Median Market Capitalization $ 87 Million
Weighted Average P/E Ratio 14.4x
Weighted Average P/B Ratio 1.5x
Weighted Average Portfolio Yield 0.9%

COMMON STOCKS SECTORS % OF NET ASSETS
---------------------------------------------------------------------------------------------------------
Retail 24.4%
Services 20.8
Energy 15.8
Industrial Cyclicals 13.8
Financial 4.9
Consumer Durables 2.2
Consumer Staples 1.8
Technology 1.8

TOP TWENTY POSITIONS MARKET VALUE % OF NET ASSETS
---------------------------------------------------------------------------------------------------------
1 The Dress Barn, Inc. $107,250 4.7%
2 Cliffs Drilling Company 99,750 4.4
3 Tide West Oil Company 92,000 4.0
4 Figgie International Inc. Cl. A 86,250 3.8
5 Stein Mart, Inc. 81,000 3.5
6 Charming Shoppes, Inc. 73,500 3.2
7 Pier 1 Imports, Inc. 72,844 3.2
8 Richardson Electronics, Ltd. 59,791 2.6
9 MovieFone, Inc. Cl. A 59,063 2.6
10 PCA International, Inc. 58,750 2.6
11 The Wet Seal, Inc. Cl. A 55,500 2.4
12 The Buckle, Inc. 54,688 2.4
13 Allwaste, Inc. 55,000 2.4
14 Equity Oil Company 52,500 2.3
15 Kaman Corporation Cl. A 51,000 2.2
16 CATHERINES STORES CORPORATION 50,063 2.2
17 Nobel Insurance Limited 46,406 2.0
18 American Oilfield Divers, Inc. 45,500 2.0
19 RENO AIR, INC. 42,656 1.9
20 Peerless Mfg. Co. 43,500 1.9
</TABLE>

<PAGE>
ROYCE
LOW-PRICED
STOCK
FUND
FINANCIAL STATEMENTS

<PAGE>
ROYCE LOW-PRICED STOCK FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1995 (unaudited)
--------------------------------------------------------------------------------
COMMON STOCKS - 85.5%

Value
Shares (Note 1)
------ --------

<S> <C> <C>
CONSUMER DURABLES - 2.2%
1,500 *Aldila, Inc..................... $ 7,685
2,500 *Kit Manufacturing Co............ 26,875
2,000 *Lazare Kaplan International,
Inc............................ 15,000
----------
49,560
----------
CONSUMER STAPLES - 1.8%
4,000 The Stride Rite Corporation...... 41,500
----------
ENERGY - 15.8%
2,000 *Alamco, Inc..................... 15,500
7,000 *American Oilfield Divers,
Inc............................ 45,500
2,000 Berry Petroleum Company.......... 19,500
7,000 *Cliffs Drilling Company......... 99,750
12,000 *Equity Oil Company.............. 52,500
2,000 *Offshore Logistics, Inc......... 28,000
8,000 *Tide West Oil Company........... 92,000
2,500 *Toreador Royalty Corporation.... 7,813
----------
360,563
----------
FINANCIAL - 4.9%
2,500 *Gryphon Holdings Inc............ 40,625
2,000 Hilb, Rogal & Hamilton Company... 25,000
4,500 Nobel Insurance Limited.......... 46,406
----------
112,031
----------
INDUSTRIAL CYCLICALS - 13.8%
5,000 *DeVlieg-Bullard, Inc............ 6,875
10,000 *Figgie International Inc. Cl.
A.............................. 86,250
1,000 Haskel International, Inc. Cl.
A.............................. 7,000
4,000 Kaman Corporation Cl. A.......... 51,000
3,000 Lilly Industries, Inc. Cl. A..... 35,250
10,000 *MK Gold Company................. 35,000
4,000 Peerless Mfg. Co................. 43,500
2,000 *Simpson Manufacturing Co.,
Inc............................ 24,250
4,000 *Webco Industries, Inc........... 25,000
----------
314,125
----------
<CAPTION>

Value
Shares (Note 1)
------ --------

RETAIL - 24.4%
5,000 *Brookstone, Inc................. $ 34,375
3,500 *The Buckle, Inc................. 54,688
4,500 *CATHERINES STORES CORPORATION... 50,063
14,000 *Charming Shoppes, Inc........... 73,500
5,000 *The Clothestime, Inc............ 14,375
11,000 *The Dress Barn, Inc............. 107,250
800 Frederick's of Hollywood, Inc.
Cl. A.......................... 4,100
700 Frederick's of Hollywood, Inc.
Cl. B.......................... 3,150
1,700 *Little Switzerland, Inc......... 7,438
7,875 Pier 1 Imports, Inc.............. 72,844
6,000 *Stein Mart, Inc................. 81,000
12,000 *The Wet Seal, Inc. Cl. A........ 55,500
----------
558,283
----------
SERVICES - 20.8%
4,500 *Air Transportation Holding
Company, Inc................... 18,563
10,000 *Allwaste, Inc................... 55,000
2,000 *Jenny Craig, Inc................ 16,500
2,500 Dames & Moore.................... 32,500
2,000 Frozen Food Express Industries,
Inc............................ 19,375
13,500 *MovieFone, Inc. Cl. A........... 59,063
5,000 PCA International, Inc........... 58,750
6,500 *RENO AIR, INC................... 42,656
8,247 Richardson Electronics, Ltd...... 59,791
5,000 *Rollins Environmental Services,
Inc............................ 23,750
2,000 Sotheby's Holdings, Inc. Cl. A... 27,250
4,600 *UNC, Inc........................ 24,725
2,000 *Vallen Corporation.............. 36,000
----------
473,923
----------
TECHNOLOGY - 1.8%
2,200 Landauer Inc..................... 41,525
----------
Total Common Stocks
(Cost $1,784,744).............. 1,951,510
----------
</TABLE>

The accompanying notes are an integral part of the financial statements.
8

<PAGE>
ROYCE LOW-PRICED STOCK FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1995 (unaudited) (continued)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 1)
------ --------

PREFERRED STOCK - .7%
<S> <C> <C>

6,000 United Services Advisors, Inc. 5%
Non Cum. (Cost $31,168)........ $ 15,750
----------

TOTAL INVESTMENTS - 86.2%
(COST $1,815,912)......................... 1,967,260

CASH AND OTHER ASSETS LESS
LIABILITIES - 13.8%..................... 316,120
----------

NET ASSETS - 100.0%....................... $2,283,380
----------
----------
</TABLE>

* Non-income producing.

INCOME TAX INFORMATION - The cost for federal income tax purposes was
$1,815,912. At June 30, 1995, net unrealized appreciation for all securities was
$151,348, consisting of aggregate gross unrealized appreciation of $231,268 and
aggregate gross unrealized depreciation of $79,920.

The accompanying notes are an integral part of the financial statements.
9

<PAGE>
ROYCE LOW-PRICED STOCK FUND
STATEMENT OF ASSETS AND LIABILITIES AT JUNE 30, 1995 (unaudited)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments at value (identified cost $1,815,912) (Note 1).......................................... $1,967,260
Cash................................................................................................ 293,373
Receivable for investments sold..................................................................... 53,155
Receivable for dividends and interest............................................................... 2,358
Prepaid expenses and other assets................................................................... 6,956
----------
TOTAL ASSETS...................................................................................... 2,323,102
----------
LIABILITIES:
Payable for investments purchased................................................................... 19,620
Payable for shares of beneficial interest redeemed.................................................. 5,478
Accrued expenses.................................................................................... 14,624
----------
TOTAL LIABILITIES................................................................................. 39,722
----------
NET ASSETS........................................................................................ $2,283,380
==========

ANALYSIS OF NET ASSETS:
Net investment loss................................................................................. ($ 9,519)
Accumulated net realized gain on investments........................................................ 246,805
Net unrealized appreciation on investments.......................................................... 151,348
Shares of beneficial interest (Note 3).............................................................. 383
Additional paid-in capital.......................................................................... 1,894,363
----------
NET ASSETS........................................................................................ $2,283,380
==========

PRICING OF SHARES:
Net asset value, offering and redemption price per share ($2,283,380[div]383,166 shares outstanding)
(Note 3).......................................................................................... $5.96
=====

</TABLE>

STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Six months ended Year ended
June 30, 1995 December 31,
(unaudited) 1994
---------------- ------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Net investment loss........................................................... ($ 9,519) ($ 11,701)
Net realized gain on investments.............................................. 247,772 43,493
Net unrealized appreciation on investments.................................... 96,658 53,595
---------------- ------------
Increase in net assets resulting from operations.............................. 334,911 85,387
Distributions paid from net realized gains.................................... -- (32,759)
FROM CAPITAL SHARE TRANSACTIONS:
Increase in net assets from capital share transactions (Note 3)............... 68,619 1,375,085
---------------- ------------
INCREASE IN NET ASSETS.......................................................... 403,530 1,427,713
NET ASSETS:
Beginning of period........................................................... 1,879,850 452,137
---------------- ------------
End of period................................................................. $2,283,380 $1,879,850
================ ============

</TABLE>

The accompanying notes are an integral part of the financial statements.

<PAGE>
ROYCE LOW-PRICED STOCK FUND
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1995 (unaudited)
--------------------------------------------------------------------------------

<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends......................................................................................... $ 9,035
Expenses:
Investment management fee (Note 2)................................................................ 15,111
Custodian and transfer agent fees................................................................. 5,419
Shareholder reports and notices................................................................... 4,500
Legal and auditing fees........................................................................... 3,700
Distribution fee (Note 2)......................................................................... 2,519
Miscellaneous..................................................................................... 2,427
Supplies and postage.............................................................................. 925
Organizational costs (Note 1)..................................................................... 831
Administrative and clerical services.............................................................. 420
Federal and state registration fees............................................................... 154
Facilities and office space....................................................................... 115
Trustees' fees.................................................................................... 63
Fees waived by investment adviser and distributor (Note 2)........................................ (17,630)
--------
Total Expenses.......................................................................... 18,554
--------
Net Investment Loss..................................................................... (9,519)
--------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments...................................................................... 247,772
Net unrealized appreciation on investments............................................................ 96,658
--------
Net realized and unrealized gain on investments....................................................... 344,430
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................................................. $334,911
==========

</TABLE>

The accompanying notes are an integral part of the financial statements.

<PAGE>
ROYCE LOW-PRICED STOCK FUND
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------

This table is presented to show selected data for a share outstanding
throughout each period, and to assist shareholders in evaluating the Fund's
performance over the last three periods.

<TABLE>
<CAPTION>
For the Period
Six months ended December 15, 1993
June 30, 1995 Year ended through
(unaudited) December 31, 1994 December 31, 1993
---------------- ----------------- -----------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............. $ 5.07 $5.01 $5.00
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss.......................... (0.03) (0.03) --
Net gain on investments (realized and
unrealized)............................... 0.92 0.18 0.01
------ ------ ------
Total from investment operations........ 0.89 0.15 0.01
------ ------ ------
LESS DISTRIBUTIONS:
Distributions (from capital gains)........... -- (0.09) --
------ ------ ------
Total distributions..................... -- (0.09) --
------ ------ ------
NET ASSET VALUE, END OF PERIOD................... $5.96 $5.07 $5.01
------ ------ ------
------ ------ ------
TOTAL RETURN..................................... 17.6% 3.0% 0.2%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period........................ $2,283,380 $1,879,850 $452,137
Ratio of Expenses to Average Net Assets (a)...... 1.84%* 1.89% 0.29%*
Ratio of Net Investment Loss to Average Net
Assets......................................... (0.94%)* (1.11%) (0.29%)*
Portfolio Turnover Rate.......................... 57% 95% 0%
</TABLE>

* Annualized

(a) Expenses are shown after waivers by the investment adviser and distributor.
For the six months ended June 30, 1995, the expense ratio would have been
3.59%. For the year ended December 31, 1994 and for the period December 15,
1993 through December 31, 1993, the expense ratios would have been 3.63%
and 2.04%, respectively.

The accompanying notes are an integral part of the financial statements.

ROYCE LOW-PRICED STOCK FUND
NOTES TO FINANCIAL STATEMENTS (unaudited)
--------------------------------------------------------------------------------

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Royce Low-Priced Stock Fund (the 'Fund') is a series of The Royce Fund (the
'Trust'), a diversified open-end management investment company established as a
business trust under the laws of Massachusetts. The Fund commenced operations on
December 15, 1993.

a. Valuation of investments:

b. Investment transactions and related investment income:

Investment transactions are accounted for on the trade date and dividend
income is recorded on the ex-dividend date. Interest income is recorded on the
accrual basis. Realized gains and losses from investment transactions are
determined on the basis of identified cost for book and tax purposes.

c. Taxes:

d. Distributions:

Dividend and capital gain distributions are recorded on the ex-dividend
date and are paid annually in December. Dividend and capital gain distributions
are determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. Permanent book and tax basis
differences relating to shareholder distributions will result in
reclassifications to paid-in capital and may affect net investment income per
share. Undistributed net investment income may include temporary book and tax
basis differences which will reverse in a subsequent period. Any taxable income
or gain remaining at fiscal year end is distributed in the following year.

e. Repurchase agreements:

<PAGE>
ROYCE LOW-PRICED STOCK FUND
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
--------------------------------------------------------------------------------

f. Organizational expenses:

Costs incurred by the Fund in connection with its organization and initial
registration of shares of $10,288 have been deferred and are being amortized on
a straight line basis over a five-year period from the date of commencement of
operations.

2. INVESTMENT ADVISER AND DISTRIBUTOR:

Under its investment advisory agreement with Quest Advisory Corp.
('Quest'), advisory fees of $15,111 were voluntarily waived by Quest for the six
months ended June 30, 1995. The agreement provides for fees equal to 1.50% per
annum of the Fund's average total net assets. Such fees are computed daily and
are payable monthly to Quest.

Quest Distributors, Inc. ('QDI'), the distributor of the Fund's shares, is
an affiliate of Quest. QDI voluntarily waived the Fund's distribution fee of
$2,519 for the six months ended June 30, 1995. The distribution agreement
provides for maximum fees of .25% per annum of the Fund's average total net
assets.

3. FUND SHARES:

The Board of Trustees has authority to issue an unlimited number of shares
of beneficial interest of the Fund, with a par value of $.001. Share
transactions were as follows:

<TABLE>
<CAPTION>
Six months ended Year ended
June 30, 1995 December 31, 1994
------------------- ----------------------
Shares Amount Shares Amount
------- -------- -------- ----------

<S> <C> <C> <C> <C>
Sold......................................................... 24,999 $134,875 374,131 $1,855,225
Issued as reinvested dividends and distributions............. -- -- 6,461 32,759
Redeemed..................................................... (12,285) (66,256) (100,361) (512,899)
</TABLE>

4. PURCHASES AND SALES OF SECURITIES:

For the six months ended June 30, 1995, the cost of purchases and the
proceeds from sales of investment securities, other than short-term securities,
amounted to $1,076,905 and $1,269,265, respectively.

<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]

<PAGE>
POSTSCRIPT: WATCH US IN THE CORNERS

Drive carefully.

------------------------------------------------------

THE ROYCE FUNDS

General Information and Telephone Purchases ....... 1 (800) 221-4268
Shareholder Account Services ...................... 1 (800) 841-1180
Investment Advisor Services ....................... 1 (800) 33-ROYCE
The Royce Funds InfoLine .......................... 1 (800) 78-ROYCE

1414 Avenue of the Americas, New York, New York 10019
This report must be accompanied by or preceded by a current prospectus of the
Fund

<PAGE>
ROYCE
TOTAL RETURN
FUND
SEMI-ANNUAL REPORT
JUNE 30, 1995
THE ROYCE FUNDS

<PAGE>
The Royce Funds

1414 Avenue of the Americas
New York, NY 10019
(212) 355-7311
(800) 221-4268

Dear Shareholder:

If the Dow Jones Industrial Average were to continue its first half pace,
it would top 30,000 in the year 2000! Something to think about.

THE NUMBERS . . . UP, UP AND AWAY

Royce Total Return Fund ('RTR') was up 7.7% for the second quarter and
14.3% for the first six months of 1995. As a relatively new fund, we are
satisfied with its early results. Since its inception on December 15, 1993, the
Fund has provided a 12.7% average annual total return.

RTR's portfolio is made up of a wide variety of income oriented securities
that share a small capitalization bias. By combining yield and small-cap, we are
attempting to provide above average long-term returns from two successful
investment categories. Our early results and the fact that we are finding
investments that meet our criteria, give us confidence in the long-term
prospects of the Fund. Also, as a market cycle matures, a turn away from growth
and momentum to less exciting, low valuation issues usually takes place. This
type of period is generally favorable to our style of investing.

SMALL-CAP STOCKS -- LAGGING THEIR WAY TO NEW HIGHS

WE HAD OUR 'SOX' KNOCKED OFF

Contributing to the first half's spectacular market returns was a meteoric
rise in technology stocks. The Philadelphia Semiconductor

<PAGE>
Index ('SOX') was up over 100% in the last twelve months.

WEEKLY PRICE GRAPH FOR 'SOX'
(PHILA. SEMICONDUCTOR INDEX 6/94-6/95)
[GRAPH]

For anyone feeling depressed about missing the recent high-tech stock
run-up, we thought we would share some interesting investment trivia which runs
counter to popular current assumptions:

<TABLE>
<CAPTION>
AVERAGE ANNUAL PERFORMANCE RESULTS
(12/31/79 - 6/30/95)
S&P S&P RUSSELL RUSSELL 2000
500 TECHNOLOGY 2000 TECHNOLOGY
---- ---------- ------- ------------

IN SPITE OF THE RECENT STELLAR MARKET PERFORMANCE AND ENORMOUS UNIT GROWTH,
TECHNOLOGY STOCKS HAVE ACTUALLY BEEN A DRAG ON THE LAST 15+ YEARS OF PERFORMANCE
FOR BOTH THE S&P 500 AND THE RUSSELL 2000.

<PAGE>
during the California gold rush. Our approach to the technology sector is
similar.

[ILLUSTRATION]

[Cartoon showing miners standing in line to purchase picks and shovels]

WHAT WE DO

Royce Total Return Fund uses a risk averse approach to invest in the
securities of income-oriented small-cap companies. The investment approach
attempts to understand and value a company's 'private worth.' Private worth is
what we believe the company would bring if the entire enterprise were sold in a
private transaction to a knowledgeable buyer. The price we will pay for a
security must be significantly under our appraisal of its private worth. The
consistent use of this discipline, applied to less well-known securities, is the
source of our performance.

NO OTHER PLACE WE WOULD RATHER BE

Although not restricted as to market capitalization, the Fund will
generally focus on companies with market caps below $1 billion. Although our
orientation is small-cap, the picking universe is by no means small. Currently,
more than 7,000 securities, representing over $900 billion in total market
capitalization, fall within our range. We believe those stocks are generally
less-known and, therefore, less likely to be understood and properly priced by
investors.

[ILLUSTRATION]

[Cartoon of fortune teller and customer]

STAR GAZING

In spite of the spectacular run-up by large-cap equities since the market
lows of last December, there are several indications that small-cap stocks may
soon resume a leadership role. June was the first month of small-cap
outperformance since February, with the Russell 2000 up 5.2% versus a 2.4%
return for the S&P 500. This performance momentum has continued into the first
part of the third quarter, a good omen for small-cap issues. Also, now that the
U.S. dollar has stopped declining against other major currencies, domestic
small-cap stocks are competing on a level playing field. This has historically
given small-cap stocks a performance edge.

Finally, one has to wonder if the current level of low volatility is
sustainable in light of

<PAGE>
the market's high returns. While we cannot explain this phenomena, we do not
view this as a permanent condition. Since the last 10% market correction in
1990, the pay-off has been with investors who took the highest risk. We believe
that over the next three years risk management will have a similar pay-off. WE
REMAIN COMMITTED TO ACHIEVING ABOVE AVERAGE LONG-TERM RETURNS WITH THIS LOW RISK
APPROACH.

Your continued confidence is appreciated.

Yours faithfully,

CHARLES M. ROYCE Jack E. Fockler, Jr.
Charles M. Royce W. Whitney George
President Vice Presidents

July 31, 1995

NOTE: S&P 500, Russell 2000, S&P 600 and the Lipper Growth and Income Index are
unmanaged and include the reinvestment of dividends.

<PAGE>
FINANCIAL REVIEW

<TABLE>
<CAPTION>
PERIOD TOTAL RETURN
------------------------------- ------------
<S> <C>
1995 (thru 6/30)............... 14.3%
1994........................... 5.2%
</TABLE>

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
--------------------------------------------
<S> <C>
1-year......................... 20.6%
Since Inception*............... 12.7%
</TABLE>

ROYCE TOTAL RETURN FUND
VALUE OF $10,000 INVESTED ON 12/15/93
[GRAPH]

[Line graph showing changes in value of $10,000 investment in Fund and
the S&P 500 between inception of Fund and June 1995]

* Inception Date - December 15, 1993

The results presented in this report should not be considered
representative of the total return from an investment in the Fund today. They
are only provided to give an historical perspective of the Fund. The investment
return and principal value of Fund shares will fluctuate, so that shares may be
worth more or less than their original cost when redeemed. Redemptions are not
included because they apply only to accounts open less than one year.

<PAGE>
PORTFOLIO SUMMARY
The following information is provided as a 'bird's eye' view of the Royce Total
Return Fund portfolio. For a more complete picture, the full portfolio and
accompanying financial statements should be read in their entirety.

<TABLE>
<CAPTION>
PORTFOLIO COMPOSITION VALUE % OF NET ASSETS
<C> <S> <C> <C>
-----------------------------------------------------------------------------------------------------------
Common Stocks $ 1,626,963 75.5%
Corporate Bonds and Preferred Stocks 400,625 18.5
Cash & Other Net Assets 128,661 6.0
--------------- -------
Total Net Assets $ 2,156,249 100.0%
--------------- -------
--------------- -------

PORTFOLIO DIAGNOSTICS
-----------------------------------------------------------------------------------------------------------
Weighted Average Market Capitalization $238 Million
Median Market Capitalization $208 Million
Weighted Average P/E Ratio 9.9x
Weighted Average P/B Ratio 1.4x
Weighted Average Portfolio Yield 4.7%

COMMON STOCK SECTORS % OF NET ASSETS
-----------------------------------------------------------------------------------------------------------
Industrial Cyclicals 26.6%
Financial 17.4
Consumer Durables 12.4
Services 7.3
Consumer Staples 6.5
Technology 4.4
Energy 0.9

TOP TWENTY POSITIONS MARKET VALUE % OF NET ASSETS
-----------------------------------------------------------------------------------------------------------
1 *Figgie International Inc. $156,225 7.2%
2 Stanhome Inc. 99,000 4.6
3 *Reliance Group Holdings, Inc. 98,625 4.6
4 *Cliffs Drilling Company 85,125 3.9
5 Nobel Insurance Limited 84,562 3.9
6 Garan Incorporated 82,075 3.8
7 Curtiss-Wright Corporation 80,325 3.7
8 Penn Engineering and Manufacturing Corp. 75,500 3.5
9 Ennis Business Forms, Inc. 74,250 3.4
10 *Bird Corp. 73,125 3.4
11 Weyco Group, Inc. 72,000 3.3
12 The Standard Register Company 66,500 3.1
13 Sturm, Ruger & Company, Inc. 65,250 3.0
14 E.W. Blanch Holdings, Inc. 65,187 3.0
15 Woodward Governor Company 63,000 2.9
16 Blessings Corporation 62,500 2.9
17 Hilb, Rogal & Hamilton Company 62,500 2.9
18 Pennsylvania Manufacturers Corporation 62,000 2.9
19 Fab Industries, Inc. 61,000 2.8
20 Florida Rock Industries, Inc. 56,750 2.6
</TABLE>

* Debt security of issuer.

<PAGE>
ROYCE
TOTAL
RETURN
FUND
FINANCIAL STATEMENTS

<PAGE>
ROYCE TOTAL RETURN FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1995 (unaudited)
--------------------------------------------------------------------------------
COMMON STOCKS - 75.5%

<TABLE>
<CAPTION>
Value
Shares (Note 1)
------ --------
<C> <S> <C>
CONSUMER DURABLES - 12.4%
2,000 Flexsteel Industries, Inc. ... $ 20,500
4,900 Garan Incorporated............ 82,075
3,000 Stanhome Inc. ................ 99,000
2,000 Sturm, Ruger & Company,
Inc. ....................... 65,250
----------
266,825
----------

CONSUMER STAPLES - 6.5%
3,500 The Stride Rite Corporation... 36,313
5,000 *The Topps Company, Inc. ..... 31,250
2,000 Weyco Group, Inc. ............ 72,000
----------
139,563
----------
ENERGY - .9%
1,300 *Tom Brown, Inc. ............. 19,338
----------

FINANCIAL - 17.4%
3,500 E.W. Blanch Holdings, Inc. ... 65,187
1,100 Fremont General Corporation... 26,538
5,000 Hilb, Rogal & Hamilton
Company..................... 62,500
1,000 The John Nuveen Company....... 24,000
8,200 Nobel Insurance Limited....... 84,562
4,000 Pennsylvania Manufacturers
Corporation................. 62,000
1,000 T. Rowe Price Associates,
Inc. ....................... 38,500
1,000 `D'Willis Corroon Group plc
ADR......................... 12,000
----------
375,287
----------

INDUSTRIAL CYCLICALS - 26.6%
5,000 Blessings Corporation......... 62,500
1,000 Crompton & Knowles
Corporation................. 14,125
<CAPTION>
Value
Shares (Note 1)
------ --------
<C> <S> <C>
1,800 Curtiss-Wright Corporation.... $ 80,325
2,000 Fab Industries, Inc. ......... 61,000
7,900 *Figgie International Inc. Cl.
B........................... 61,225
2,000 Florida Rock Industries,
Inc. ....................... 56,750
2,100 Gilbert Associates, Inc. Cl.
A........................... 27,300
2,000 Lilly Industries, Inc. Cl.
A........................... 23,500
1,500 Paul Mueller Company.......... 47,250
1,000 Penn Engineering and
Manufacturing Corp.......... 75,500
1,000 Woodward Governor Company..... 63,000
----------
572,475
----------

SERVICES - 7.3%
1,000 Crawford & Company Cl. B...... 16,875
6,000 Ennis Business Forms, Inc. ... 74,250
3,500 The Standard Register
Company..................... 66,500
----------
157,625
----------

TECHNOLOGY - 4.4%
2,800 Landauer Inc ................. 52,850
2,000 Scitex Corporation Limited.... 43,000
----------
95,850
----------
Total Common Stocks (Cost
$1,492,926)................. 1,626,963
----------

PREFERRED STOCKS - 7.3%
3,900 Bird Corp. $1.85 Conv......... 73,125
3,000 Cliffs Drilling Company
$2.3125 Conv. Exch.......... 85,125
----------
Total Preferred Stocks (Cost
$141,998)................... 158,250
----------
</TABLE>

The accompanying notes are an integral part of the financial statements.
9

<PAGE>
ROYCE TOTAL RETURN FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1995 (unaudited)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Principal Value
Amount (Note 1)
--------- --------
<C> <S> <C>
CORPORATE BONDS - 11.2%
$ 100,000 Figgie International Inc.
9.875% Sr. Note due
10/1/99..................... $ 95,000
75,000 National Education Corporation
6.5% Conv. Sub. Deb. due
5/15/11..................... 48,750
100,000 Reliance Group Holdings, Inc.
9% Sr. Note due 11/15/00.... 98,625
----------
Total Corporate Bonds
(Cost $227,100)............. 242,375
----------

TOTAL INVESTMENTS - 94.0% (COST
$1,862,024)............................. 2,027,588

CASH AND OTHER ASSETS LESS
LIABILITIES - 6.0%...................... 128,661
----------

NET ASSETS - 100.0%....................... $2,156,249
----------
----------
</TABLE>

* Non-income producing.

`D' American Depository Receipt.

INCOME TAX INFORMATION -- The cost for federal income tax purposes was
$1,864,063. At June 30, 1995, net unrealized appreciation for all securities
amounted to $163,525, consisting of aggregate gross unrealized appreciation of
$196,052 and aggregate gross unrealized depreciation of $32,527.

The accompanying notes are an integral part of the financial statements.
10

<PAGE>
ROYCE TOTAL RETURN FUND
STATEMENT OF ASSETS AND LIABILITIES AT JUNE 30, 1995 (unaudited)
--------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Investments at value (identified cost $1,862,024) (Note 1).......................................... $2,027,588
Cash................................................................................................ 105,550
Receivable for investments sold..................................................................... 33,250
Prepaid expenses and other assets................................................................... 6,967
Receivable for dividends and interest............................................................... 8,922
----------
TOTAL ASSETS...................................................................................... 2,182,277
----------
LIABILITIES:
Payable for investments purchased................................................................... 9,810
Accrued expenses.................................................................................... 16,218
----------
TOTAL LIABILITIES................................................................................. 26,028
----------
NET ASSETS........................................................................................ $2,156,249
----------
----------
ANALYSIS OF NET ASSETS:
Undistributed net investment income................................................................. $ 18,245
Accumulated net realized gain on investments........................................................ 95,196
Net unrealized appreciation on investments.......................................................... 165,564
Shares of beneficial interest (Note 3).............................................................. 368
Additional paid-in capital.......................................................................... 1,876,876
----------
NET ASSETS........................................................................................ $2,156,249
----------
----------
PRICING OF SHARES:
Net asset value, offering and redemption price per share ($2,156,249[div]368,758 shares outstanding)
(Note 3).......................................................................................... $5.85
-----
-----
</TABLE>

STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Six months ended Year ended
June 30, 1995 December 31,
(unaudited) 1994
---------------- ------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Net investment income......................................................... $ 18,202 $ 5,137
Net realized gain on investments.............................................. 100,412 32,565
Net unrealized appreciation on investments.................................... 142,932 22,632
---------------- ------------
Increase in net assets resulting from operations.............................. 261,546 60,334
Dividends paid from net investment income..................................... -- (5,037)
Distributions paid from net realized gains.................................... -- (37,781)
FROM CAPITAL SHARE TRANSACTIONS:
Increase in net assets from capital share transactions (Note 3)............... 238,503 1,187,741
---------------- ------------
INCREASE IN NET ASSETS.......................................................... 500,049 1,205,257
NET ASSETS:
Beginning of period........................................................... 1,656,200 450,943
---------------- ------------
End of period (including undistributed net investment income of $18,245 and
$43, respectively).......................................................... $2,156,249 $1,656,200
---------------- ------------
---------------- ------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

<PAGE>
ROYCE TOTAL RETURN FUND
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1995 (unaudited)
--------------------------------------------------------------------------------

<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends....................................................................................... $ 26,985
Interest........................................................................................ 9,077
--------
Total Income.......................................................................... 36,062
--------

Expenses:
Investment management fee (Note 2).............................................................. 9,606
Custodian and transfer agent fees............................................................... 4,799
Shareholder reports and notices................................................................. 4,500
Legal and auditing fees......................................................................... 3,700
Distribution fee (Note 2)....................................................................... 2,401
Miscellaneous................................................................................... 2,399
Postage and supplies............................................................................ 925
Organizational costs (Note 1)................................................................... 831
Administrative and clerical services............................................................ 408
Federal and state registration fees............................................................. 121
Facilities and office space..................................................................... 114
Trustees' fees.................................................................................. 63
Fees waived by investment adviser and distributor (Note 2)...................................... (12,007)
--------
Total Expenses........................................................................ 17,860
--------
Net Investment Income................................................................. 18,202
--------

REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments..................................................................... 100,412
Net unrealized appreciation on investments........................................................... 142,932
--------
Net realized and unrealized gain on investments...................................................... 243,344
--------

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................................. $261,546
--------
--------
</TABLE>

The accompanying notes are an integral part of the financial statements.

<PAGE>
ROYCE TOTAL RETURN FUND
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
This table is presented to show selected data for a share outstanding
throughout each period, and to assist shareholders in evaluating the Fund's
performance over the last three periods.

<TABLE>
<CAPTION>
For the period
Six months ended Year ended December 15, 1993
June 30, 1995 December 31, through
(unaudited) 1994 December 31, 1993
---------------- ------------ -----------------

<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........... $ 5.12 $ 5.00 $5.00
------- ------------ -------

INCOME FROM INVESTMENT OPERATIONS:
Net investment income..................... 0.05 0.02 --
Net gain on investments (realized and
unrealized)............................. 0.68 0.24 --
------- ------------ -------
Total from investment operations........ 0.73 0.26 --
------- ------------ -------

LESS DISTRIBUTIONS:
Dividends (from net investment income).... -- (0.02) --
Distributions (from capital gains)........ -- (0.12) --
------- ------------ -------
Total distributions..................... -- ($0.14) --
------- ------------ -------

NET ASSET VALUE, END OF PERIOD................. $ 5.85 $ 5.12 $5.00
------- ------------ -------

TOTAL RETURN................................... 14.3% 5.2% 0.0%

RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period...................... 2,1$56,249 1,6$56,200 45$0,943
Ratio of Expenses to Average
Net Assets (a)............................... 1.86%* 1.96% 0.29%*
Ratio of Net Investment Income to Average Net
Assets....................................... 1.89%* 0.49% -0.29%*
Portfolio Turnover Rate........................ 35% 88% 0%
</TABLE>

* Annualized
(a) Expenses are shown after waivers by the investment adviser and distributor.
Absent such waivers, the ratio of expenses to average net assets would have
been 3.11% for the six months ended June 30, 1995, 3.21% for the year ended
December 31, 1994 and 2.04% for the period December 15, 1993 through
December 31, 1993.

The accompanying notes are an integral part of the financial statements.

<PAGE>
ROYCE TOTAL RETURN FUND
NOTES TO FINANCIAL STATEMENTS (unaudited)
--------------------------------------------------------------------------------

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Royce Total Return Fund (the 'Fund') is a series of The Royce Fund (the
'Trust'), a diversified open-end management investment company established as a
business trust under the laws of Massachusetts. The Fund commenced operations on
December 15, 1993.

a. Valuation of investments:

b. Investment transactions and related investment income:

Investment transactions are accounted for on the trade date and dividend
income is recorded on the ex-dividend date. Interest income is recorded on an
accrual basis. Realized gains and losses from investment transactions and
unrealized appreciation and depreciation of investments are determined on the
basis of identified cost for book and tax purposes.

c. Taxes:

d. Distributions:

e. Repurchase agreements.

<PAGE>
ROYCE TOTAL RETURN FUND
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
--------------------------------------------------------------------------------

f. Organizational expenses:

2. INVESTMENT ADVISER AND DISTRIBUTOR:

Under its investment advisory agreement with Quest Advisory Corp.
('Quest'), advisory fees of $9,606 were voluntarily waived by Quest for the six
months ended June 30, 1995. The agreement provides for fees equal to 1.0% per
annum of the Fund's average total net assets. Such fees are computed daily and
are payable monthly to Quest.

Quest Distributors, Inc. ('QDI'), the distributor of the Fund's shares, is
an affiliate of Quest. QDI voluntarily waived the Fund's distribution fee of
$2,401 for the six months ended June 30, 1995. The distribution agreement
provides for maximum fees of .25% per annum of the Fund's average total net
assets.

3. FUND SHARES:

The Board of Trustees has authority to issue an unlimited number of shares
of beneficial interest of the Fund, with a par value of $.001. Share
transactions were as follows:

<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1995 December 31, 1994
--------------------------- ---------------------------
Shares Amount Shares Amount
------------- ------------ ------------ -------------

<S> <C> <C> <C> <C>
Sold.................................................. 49,452 $ 260,143 341,214 $ 1,731,736
Issued as reinvested dividends and distributions...... -- -- 8,363 42,817
Redeemed.............................................. (3,985) (21,640) (116,576) (586,812)
</TABLE>

4. PURCHASES AND SALES OF SECURITIES:

For the six months ended June 30, 1995, the cost of purchases and the
proceeds from sales of investment securities, other than short-term securities,
amounted to $843,208 and $649,653, respectively.

<PAGE>
POSTSCRIPT: WATCH US IN THE CORNERS

Drive carefully.

------------------------------------------------------

THE ROYCE FUNDS

1414 Avenue of the Americas, New York, New York 10019
This report must be accompanied by or preceded by a current prospectus of the
Fund

<PAGE>
Statement of Differences

The dagger symbol shall be expressed as............. 'D'
The 'divided by' symbol shall be expressed as........ [div]