<PAGE>
ROYCE
GLOBAL SERVICES
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:
The first half of 1995 was the best six month period for the S&P 500
since the first two quarters of 1991. Up 20.2%, the S&P 500 outperformed
both major small-cap indices, the Russell 2000* and the S&P Small Cap 600,
which were up 14.4% and 14.7%, respectively.
Royce Global Services Fund ("RGS") was up 15.6%** in the first half, ahead
of both small-cap indices, but behind the large-cap oriented S&P 500. We
deem this to be a reasonable start especially given the strong performance of
technology stocks which are significantly underweighted in the portfolio.
With the Philadelphia Semiconductor Index up over 100% in the last twelve
months, the current wave of euphoria has eradicated any recollection of the
"high tech, high wreck" experience that occurred with the last technology
stock run-up in 1983 and subsequent collapse. Although the services segment
of the market may not be as glamorous as the technology sector, it does offer
something that the technology sector has not been able to consistently
provide - attractive long-term returns on capital.
The Fund uses what it believes is a low risk approach to invest in the
common stocks of domestic and foreign companies in service industries.
Service industries include banking, insurance, securities, investment
management, advertising, publishing, consulting and communication. While
much has been written about the emergence of service economies, relatively
little capital appears to have been focused on prospering from the trend. We
refer to this as being blessed by the three curses: over-looked,
out-of-fashion, and discarded. We use the term "blessed" because these
characteristics are indicative of a market with many investment
opportunities. With technology riding so high, RGS had little problems
finding high quality companies selling at discounted prices. As a result, we
are very optimistic about the focus and direction of our Fund.
Your continued confidence is appreciated.
Yours faithfully,
/s/ Charles M. Royce
Charles M. Royce Jack E. Fockler, Jr.
President W. Whitney George
Vice Presidents
June 30, 1995
________
* The S&P 500, Russell 2000 and S&P Small Cap 600 are unmanaged indices and
include the reinvestment of dividends.
** The Fund's return represents past performance and should not be
considered representative of the "total return" from an investment in the
Fund today. It is provided only to give an historical perspective of the
Fund. During the quoted period, certain fees were waived by the investment
adviser. If these fees had not been waived, the Fund's return would have been
lower. 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.
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ROYCE GLOBAL SERVICES FUND
Schedule of Investments at June 30, 1995 (Unaudited)
COMMON STOCKS - 80.7%
Value
Shares (Note 1)
CONSUMER DURABLES - 4.9%
1,600 The Singer Company N.V. $41,400
1,000 Stanhome Inc. 33,000
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74,400
CONSUMER STAPLES - 8.3%
1,000 Cott Corporation 11,750
1,000 K-Swiss Inc. Cl. A 13,000
1,000 Reebok International Ltd. 34,000
3,000 The Stride Rite Corporation 31,125
100 Velcro Industries N.V. 5,775
1,000 PANAMERICAN BEVERAGES, INC. 30,000
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125,650
FINANCIAL - 28.2%
Banking - 6.1%
1,000 Belize Holdings Inc. 16,000
1,000 Comdisco, Inc. 30,375
1,000 Oriental Federal Savings Bank 19,000
500 Republic New York Corporation 28,000
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93,375
Insurance - 13.9%
1,000 Alexander & Alexander Services Inc. 23,875
1,500 E.W. Blanch Holdings, Inc. 27,938
1,100 Fremont General Corporation 26,538
100 Leucadia National Corporation 5,050
500 MacKenzie Financial Corporation 3,912
1,100 PartnerRe Holdings Ltd. 28,738
800 Poe & Brown, Inc. 18,600
1,500 * Transnational Re Corporation Cl. A 30,094
100 Wesco Financial Corporation 12,625
1,000 + Willis Corroon Group plc ADR 12,000
1,000 Zenith National Insurance Corp. 21,500
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210,870
Securities and Investment Management Industries - 8.2%
1,500 American Express Company 52,688
500 Dean Witter, Discover & Co. 23,500
3,200 Piper Jaffray Companies Inc. 48,400
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124,588
The accompanying notes are an integral part of the financial statements
<PAGE>
INDUSTRIAL CYCLICALS - 11.1%
1,000 *+Concordia Paper (Holdings) Limited ADS 14,125
10,000 * MK Gold Company 35,000
700 Nordson Corporation 38,150
1,000 Precision Castparts Corp. 35,125
2,000 * Simpson Manufacturing Co., Inc. 24,250
1,000 * J. Ray McDermott, S.A. 22,125
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168,775
RETAIL - 11.0%
1,000 * Ethan Allen Interiors Inc. 17,750
1,500 The Gap, Inc. 52,313
2,000 * InterTAN Inc. 15,000
2,500 * Little Switzerland, Inc. 10,938
4,000 * Suzy Shier Limited 19,652
1,500 Tiffany & Co. 51,000
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166,653
SERVICES - 11.6%
2,500 ADT Limited 29,375
200 Bowne & Co., Inc. 3,425
2,000 *+Cordiant plc ADR 9,500
400 Crawford & Company Cl. A 6,900
7,000 * FCA International Ltd. 15,795
500 + Grupo Televisa, S.A. de C.V. GDS 10,188
1,000 * Marshall Industries 33,500
1,000 The Reader's Digest Association, Inc. 44,125
500 Sotheby's Holdings, Inc. Cl. A 6,813
900 * Vallen Corporation 16,200
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175,821
UTILITIES - 5.6%
500 + Telecomunicacoes Brasileiras S.A. - Tel 16,750
1,000 Telefonica de Argentina S.A. ADS 24,750
1,500 + Telefonos de Mexico, S.A. de C.V. Cl. L 44,434
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85,934
Total Common Stocks
(Cost $1,133,712) 1,226,066
PREFERRED STOCK - .9%
5,000 United Services Advisors, Inc. 5% Non C 13,125
(Cost $13,750)
TOTAL INVESTMENTS - 81.6%
(Cost $1,147,462) 1,239,191
CASH AND OTHER ASSETS LESS
LIABLIITIES - 18.4% 279,657
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NET ASSETS -100.0% 1,518,848
The accompanying notes are an integral part of the financial statements
<PAGE>
*Non income producing.
+The abbrevations ADR, ADS and GDS refer to American Depository Receipt,
American Depository Share and Global Depository Share, respectively.
Income Tax Information - The cost for federal income tax purposes was
$1,147,462. At June 30, 1995, net unrealized appreciation for all
securities was $91,729, consisting of aggregate gross unrealized
appreciation of $109,692 and aggregate gross unrealized depreciation of
$17,963.
<PAGE>
ROYCE GLOBAL SERVICES FUND
Statement of Assets and Liabilities at June 30, 1995(Unaudited)
ASSETS:
Investments at value(identified cost $1,147,462)(Note 1)$1,239,191
Cash 321,349
Receivable for dividends and interest 1,581
Prepaid expenses and other assets 6,024
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TOTAL ASSETS 1,568,145
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LIABILITIES:
Payable for investments purchased 47,618
Accrued expenses 1,679
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TOTAL LIABILITIES 49,297
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NET ASSETS $1,518,848
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ANALYSIS OF NET ASSETS:
Net investment loss ($3,461)
Net realized gain on investments 83,858
Net unrealized appreciation on investments 91,729
Shares of beneficial interest 1,347
Additional paid-in capital 1,345,375
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NET ASSETS $1,518,848
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PRICING OF SHARES:
Net asset value, offering and redemption price per share
($1,518,848 259,618 shares outstanding) (Note 3) $5.85
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STATEMENTS OF CHANGES IN NET ASSETS
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For the period For the period
ended December 15, 1994
June 30, 1995 through
From Investment Activities: (unaudited) December 31, 1994
Net investment loss ($3,210) ($251)
Net realized gain on investments 83,858 0
Net unrealized appreciation on investments 84,963 6,766
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Increase in net assets resulting from
operations 165,611 6,515
From Capital Share Transactions:
Increase in net assets from capital
share transactions(Note 3) 838,745 506,977
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Increase in Net Assets 1,004,356 513,492
Net Assets:
Beginning of period 514,492 1,000
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End of period $1,518,848 $514,492
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The accompanying notes are an integral part of the financial statements.
<PAGE>
ROYCE GLOBAL SERVICES FUND
Statement of Operations for the period ended June 30,1995 (Unaudited)
INVESTMENT INCOME:
Income:
Dividends $7,561
Interest 29
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Total Income 7,590
Expenses:
Investment adviser fees 8,220
Custodian and transfer agent fees 5,557
Legal and auditing fees 2,060
Distribution fees 1,370
Federal and state registration fees 1,200
Supplies and postage 1,000
Administrative and clerical services 225
Miscellaneous 695
Facilities and office space 63
Fees waived by Adviser and Distributor (9,590)
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Total Expenses 10,800
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Net Investment Loss (3,210)
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REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments $83,858
Net unrealized appreciation on investments 84,963
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Net realized and unrealized gain on investments 168,821
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NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $165,611
The accompanying notes are an integral part of the financial statements
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Financial Highlights
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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 periods.
<TABLE>
For the period For the period
ended December 15, 1994
June 30, 1995 through
(unaudited) December 31, 1994
<S> <C> <C>
Net Asset Value, Beginning of Period $5.06 $5.00
Income From Investment Operations:
Net investment income (0.02) 0.00
Net gain on investments (realized and unrealized) 0.81 0.06
Total from investment operations 0.79 0.06
Less Distributions:
Dividends (from net investment income) 0.00 0.00
Distributions (from capital gains) 0.00 0.00
Total distributions 0.00 0.00
Net Asset Value, End of Period $5.85 $5.06
Total Return 15.6% 1.2%
Ratios/Supplemental Data:
Net Assets, End of Year $1,518,848 $514,492
Ratio of Expenses to Average Net Assets (a) 1.97%* 1.78%*
Ratio of Net Investment Loss to Average Net Assets -0.59% 0%
Portfolio Turnover Rate 63% 0%
</TABLE>
*Annualized.
(a) Expenses are shown after waivers by the adviser and distributor.
Absent such waivers, the ratio of expenses to average net assets would
have been 3.72% for the period ended June 30, 1995, and 3.69% for the
period ended December 31, 1994.
<PAGE>
ROYCE GLOBAL SERVICES FUND
NOTES TO FINANCIAL STATEMENTS (unaudited)
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1. Summary of Significant Accounting Policies:
Royce Global Services 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, 1994.
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:
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:
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 GLOBAL SERVICES FUND
NOTES TO FINANCIAL STATEMENTS (unaudited)(continued)
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f. Organizational expenses:
Costs incurred by the Fund in connection with its organization and
initial registration of shares of $5,952 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 $8,220 were voluntarily waived by Quest for the
period 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' shares, is
an affiliate of Quest. QDI voluntarily waived the Fund's distribution fee of
$1,370 for the period ended June 30, 1995. The distribution agreement
provides for maximum fees of .25% per annum of the Fund's average total net
assets.
Certain administrative, clerical and facilities costs are allocated
amoung the Fund and other affiliated funds.
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:
For the period For the period
ended December 15, 1994 through
June 30, 1995 December 31, 1994 (Note 1)
Shares Amount Shares Amount
Balance, beginning of period 101,588 $ 507,977 200 $ 1,000
Sold 158,173 839,495 101,388 506,977
Redeemed (143) (750) --- ---
Balance, end of period 259,618 $1,346,722 101,588 $507,977
Shares redeemed within one year are subject to a 1% redemption fee.
4. Purchases of Securities:
During the period ended June 30, 1995, the cost of purchases and the
proceeds from sales of portfolio securities, other than short-term
securities, amounted to $1,270,358 and $472,553, respectively.
<PAGE>
POSTSCRIPT: Watch Us In The Corners
There isn't much joy sitting recent underperformance in the
in a summer traffic jam when you're dynamic stock market rally now
headed for the beach. One's mind underway. The well-tuned small-cap
tends to wander and contemplate vehicles in which we have invested
some of the farfetched symmetries are currently being passed by
of life; for example, how similar momentum muscle cars and technology
driving a vacation home is to dragsters. As we barrel down one
investing. In both, the goal is of the longest straightaways in
clearly defined, and earlier decades, more powerful equities
achievement is preferable to a long have made our stock cars look like
delay. Nevertheless, getting to the little jalopies. Yet we know we
destination requires both attention have not selected inferior
and patience. Once the traffic jam clunkers, but rather well- tuned
clears and more aggressive drivers vehicles with high return
speed by on both sides, a sense of suspensions and strong balance
frustration sets in. We don't sheet brakes. Our diverse team can
appreciate it when we are going manoeuver well in the economic
along at a good clip, only to see turns, ease by the interest rate
others rocket by at very high slicks and avoid the overpriced
speeds. accidents.
But, in both investing and road Watch us in the corners. At
racing, you have to finish in order some point the momentum muscle cars
to finish first. There is usually will run out of fuel and pull over
challenging terrain with hills, to wait for the tax loss tow
straightaways and curves. There trucks. The technology dragsters,
are also obstacles, some lacking brakes, will deploy their
foreseeable, others totally parachutes at the first turn or
unpredictable. Oil slicks and become tech wrecks. The investment
accidents are no more predictable corners are where our nimble
than the exact course of interest small-cap speedsters will
rates or inflation. At the end, outperform. We think we see some
victory belongs to those who of those yellow caution signs
navigate the course with speed, signalling curves in the distance,
precision and caution. so this race is far from over. We
have competed in these races for
Our own feeling of inadequacy on many years and we know our
the highway is a painful reminder companies will finish well.
of our
Drive safely.
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.
