<PAGE>
<PAGE>
ROYCE
VALUE
FUND
SEMI-ANNUAL REPORT
JUNE 30, 1996
THE ROYCE FUNDS
<PAGE>
<PAGE>
The Royce Funds
1414 Avenue of the Americas
New York, NY 10019
(212) 355-7311
(800) 221-4268
Dear Shareholder:
After a left foot start in January, small company stocks, as measured by the
Russell 2000 Index, outperformed their large company brethren (S&P 500) in
February, March, April and May (15.2% versus 6.2%), but were unable to continue
their winning ways in June (-4.1% versus 0.4%). June's downturn in performance
was the first sign of potentially higher volatility for small-cap issues. In
fact, the Nasdaq Composite closed the second quarter off over 5% from the high
it established on June 5th, its largest decline since a 13.8% drop in the second
quarter of 1994. In spite of June's downturn, and because of the February-May
surge, the Russell 2000 Index of small-cap stocks won the first half performance
derby with a 10.4% total return versus a 10.2% total return for the large-cap
oriented S&P 500.
Within small-cap, 'growth' finished ahead of 'value' with the Russell 2000
Growth Index providing an 11.9% return versus an 8.7% gain for the Russell 2000
Value Index. A similar performance relationship, but with wider disparity, was
also present in the Wilshire Target Small Cap Index Funds, as the Small Cap
Growth Fund (+13.2%) handily outperformed the Small Cap Value Fund (+3.9%).
ROYCE VALUE FUND ('RVF'), with its small-cap value orientation, performed in
line with the two small-cap value proxies, posting a 6.7% return for the first
six months. Contributing to the Fund's performance were nice gains in two
sectors (retail and consumer durables) which had been mediocre performers in
1995.
Although not always leading in the short-term, RVF's longer-term results are
highly competitive in both an absolute and relative sense. Since its inception
on 12/31/82, the Fund has provided positive returns in 11 out of the last 13
calendar years (1983-1995) and a 12.7% average annual total return, while
maintaining a significantly lower risk profile than popular small-cap indices.
According to independent mutual fund evaluation service Morningstar, RVF was one
of the lowest risk small-cap funds for the three years ended June 30, 1996, as
measured by standard deviation (13th lowest out of 194 funds), beta (26th lowest
out of 194 funds) and Morningstar's risk ratio (29th lowest out of 194 funds).
WE BELIEVE THAT OUR APPROACH OF INVESTING IN HIGH QUALITY SMALL-CAP COMPANIES,
USING ABSOLUTE VALUATION STANDARDS, IS AN APPROPRIATE STRATEGY FOR GENERATING
ABOVE AVERAGE RESULTS.
FIREWORKS IN JULY
[GRAPHIC]
Louis Pasteur once
said, 'Chance favors the prepared mind.' Although everyone was prepared for the
fireworks of July 4th, few were prepared for the market fireworks which began in
June and intensified throughout July. Double digit gains in small-cap indices
were erased and many investors now find themselves starting over at mid-year.
2
<PAGE>
<PAGE>
Performance Update Through July 31
<TABLE>
<CAPTION>
% Decline July '96 YTD Return
From High* Return thru 7/31/96
--------- -------- ------------
<S> <C> <C> <C>
RVF -6.0% -4.1% +2.3%
Russell 2000 -13.1% -8.7% +0.7%
Nasdaq Comp. -13.4% -8.8% +2.7%
</TABLE>
* Russell 2000 high was made on 5/22/96.
We view the current pyrotechnics of July from the vantage point that these
fluctuations are inevitable and desirable, and part of the normal rhythm of the
market. We are prone to keep ourselves at a distance. This is largely common
sense -- no special preparation needed.
WORTH REPEATING
To be quoted is flattering. To quote oneself presents the dual risk of boring
our readers and tooting our own horn. Nevertheless, we want to repeat some of
our comments from the 1995 Annual Report. (We promise we won't do this again.)
IN OUR LAST REPORT WE SAID:
'An interesting aspect of this five year rise in both
stocks and bonds is the ever increasing participation
of individual investors . . . In fact, it is that very same
demand which is believed to ensure future success
and prevent any major reversal in market
fortunes . . . The suggestion that continued success is
nearly guaranteed by demand is a scary
proposition . . . We remain most astonished, not with
the magnitude of investor appetite for stocks, but the
nearly universal assumption of its permanence.'
WE NOW THINK:
In a perverse way, the least informed (the purchasing public) now appear to
be dictating investment policy to those presumed most knowledgeable (portfolio
managers). Normally prudent professionals have taken comfort in the fact that
the public is pouring money into equity mutual funds. As one of our shareholders
commented, 'The inmates are running the asylum.'
ALSO IN THE 1995 ANNUAL REPORT WE SAID:
'We are certain, particularly in a global
economy, that an ample supply of securities can
be created to meet and even exceed investors'
demands.'
AND NOW:
The $132 billion of new investments in equity mutual funds for the first half
of 1996 has eclipsed the prior annual record set in 1993 ($130 billion for the
full year). Yet, the dramatic upward progress that this commitment was expected
to produce has not materialized. A move up in long-term interest rates and
increased corporate insider selling activity are partly to blame, as well as a
surge in IPO activity. By late June, roughly 80 new offerings a week were
producing a fresh supply of securities at the rate of approximately $20 billion
a month.
3
<PAGE>
<PAGE>
[GRAPHIC]
One of the most instructive offerings of the recent IPO boom was the creation
and issuance of Berkshire Hathaway Inc. Class B shares. Berkshire Hathaway's
Chairman, Warren Buffett, is perhaps the best known investor of our time.
Multiple warnings on the front page of the prospectus included: 'Neither Mr.
Buffett nor Mr. Munger (Vice Chairman) would currently buy Berkshire shares (at
the current price), nor would they recommend that their families or friends do
so' and 'Berkshire has attempted to assess the current demand for Class B shares
and has tailored the size of this offering to fully satisfy that demand (and)
therefore, buyers hoping to capture quick profits are almost certain to be
disappointed.' Yet, despite the warnings, over $500 million was raised. WALL
STREET HAS BEEN SUCCESSFUL IN CREATING AN AMPLE SUPPLY OF NEW AND SECONDARY
OFFERINGS TO FULLY SATISFY DEMAND. HOWEVER, IT PROVIDES NO SIMILAR 'WARNING
LABELS.'
ADDITIONALLY WE SAID:
'The magnitude of the decline in interest rates
is virtually not repeatable. Consequently, a
further decline in interest rates will not have the
same favorable impact on stock prices, no
matter how bullish one is on rates.'
AND NOW:
The consensus expectations of lower rates (then at 6%) in an election year
have proved to be wrong. Long-term government bond yields rose by over 20% in
the first half to a current yield of over 7.0%. While this surprise has not
ended the party, it's getting hard to find the punch bowl.
AND FINALLY WE SAID:
'THE NEXT FIVE YEARS WILL BE DIFFERENT! It's
not likely that the next five years will rival the
previous five in terms of ideal wind conditions
or spectacular performance. History tells us
that periods of high valuation and high return
are usually followed by periods of lower, less
dynamic returns . . . . We see no reason why
performance should not revert to the mean and,
thus, a period of lower five year returns is
likely. Very simply, the last five years was a
period in which risk and reward were
synonymous and one in which risk management
provided virtually no benefit. It's likely that we
have completed the best five year performance
period for this decade.'
AND NOW?
Enough said.
4
<PAGE>
<PAGE>
THE VALUE IN VALUE INVESTING
A basic premise of value investing is that stocks, like other goods and
services, should be purchased at the most attractive prices possible, preferably
at a discount to their 'intrinsic worth.' The reality for most investors is just
the opposite. In other words, investor comfort levels and, therefore, demand
increase when prices rise, and diminish as prices decline. The higher a stock
rises, the greater the perceived opportunity.
Value investing, on the other hand, takes a contrary view to this highly
emotional process. By systematically reducing risk when others ignore it and
taking risk when it is feared, one can capitalize on valuation discrepancies
(opportunities) which develop from time to time. The greatest risk that the
value investor confronts is the loss of either patience or discipline when faced
with the prospect of being out-of-sync with the market. THE VALUE IN 'VALUE
INVESTING' IS TO PROVIDE A COHERENT SYSTEM FOR RATIONAL DECISION MAKING . . .
THE PURPOSE OF WHICH IS TO COMPOUND WEALTH WHILE MINIMIZING RISK. Its basic
premise is that the price one pays for an investment makes a significant
difference in the return one receives.
WHAT WE DO
[GRAPHIC]
Royce Value Fund uses a risk-averse approach to invest
in the securities of small-cap companies. Experience tells
us that paying attention to risk does not diminish
long-term results, although individual market phases may not necessarily confirm
this.
Our approach attempts to understand and value a company's private
worth -- what we believe an enterprise would sell for in a private transaction
between rational parties. 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
While the Fund focuses on companies with market caps below $750 million, our
weighted average and median market caps are actually much lower: $422 million
and $315 million, respectively, at June 30, 1996.
Although our orientation is small-cap stocks, our picking universe is by no
means small, with over 10,000 companies valued at more than $900 billion in
total market capitalization. It is both robust and perpetuating; IPO's, spin-
offs and reorganizations create hundreds of new prospects each year. It is a
sector rich in opportunity and easily accommodates our strategy given the size
of the investable universe.
From time to time we are criticized for the large number of securities that
we hold in the portfolio. In fact, given the size of our universe, we believe
our strategy is quite focused because total portfolio holdings represent fewer
than 3% of the available small-cap universe. Not many large-cap managers would
be content with only 15 selections from the S&P 500.
Not long ago we had a conversation with a highly successful and respected
fund manager about diversification. His contention was that statistical
diversification could be achieved with just 13 holdings. His own portfolio was
concentrated in a mere 20 selections. We were impressed. Yet, upon further
examination, we discovered his 20 large-cap holdings were involved in 61
different businesses. As defined by Standard Industrial Classification codes
5
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<PAGE>
(SICs), Philip Morris has seven different business groups, Pepsi has six,
Johnson & Johnson has five and so on. In contrast, the vast majority of our
holdings have single lines of business. When one adds up the numbers, there's
really not much difference in terms of diversification between our approach and
that of 'focused' managers.
VOLATILITY IS A FRIEND
Recently, stock market volatility has generated a great deal of attention
from the financial press. While large changes (100 point or greater moves) in
the Dow Jones Industrial Average make interesting reading in the morning papers,
their significance is exaggerated. The table below depicts the Russell 2000's
yearly price variation using the index's annual range as a percentage of the
beginning year's price.
[GRAPHIC]
It's interesting to note how tame the markets have remained in the last four
and a half years relative to the prior thirteen. TO US, VOLATILITY IS A FRIEND
IN THAT IT CREATES IRRATIONAL PRICING OF SECURITIES AND, THEREFORE,
OPPORTUNITIES FOR US TO CAPITALIZE ON OUR RISK MANAGEMENT SKILLS.
ARE THERE ANY REAL INVESTORS LEFT?
[GRAPHIC]
The term 'investor' denotes a long-term supplier of capital. In contrast, a
'speculator' is one who takes opportunistic risk in hopes of generating quick
profits. In essence, investors expect to get paid by the correct assessment of
underlying business fundamentals, whereas speculators count on others (often
referred to as greater fools) to buy them out profitably.
In the current bull market, it has become very difficult to tell the
difference between investors and speculators. For example, what exactly is
'momentum investing?' The term seems oxymoronic. While equities represent a
permanent ownership position in an enterprise, in many fund portfolios, they are
reviewed and replaced more frequently than three month Treasury Bills. Wall
Street brokerage firms publish 'Buy' and 'Sell' recommendations based on a
company's quarterly progress down to the penny per share; and the country's
largest equity mutual fund lost its star manager after a short period of
underperformance, which may have contributed to the decision by that fund's
investors to withdraw in excess of $1 billion.
Only time and more difficult market conditions will separate true investors
from disappointed speculators. GIVEN THAT WE BELIEVE THAT EQUITIES REPRESENT
LONG-TERM INTERESTS IN BUSINESSES, THE TERM 'INVESTOR' SUITS US JUST FINE.
WHAT DO WE DO NOW?
Given our belief that the next phase of the market will include lower equity
returns and greater volatility -- the need for basic blocking and tackling, in
the form of commitment, focus and experience, is paramount. We remain committed
to investing in high quality, small-cap
6
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<PAGE>
companies using absolute valuation standards; our focus remains sharp, and
exclusively on small and micro-cap companies; and our 20+ years of investment
experience ensures that our vigilance and discipline remain constant. 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>
August 1, 1996
P.S. Our 'new era' fund will wait for the 'new era.'
Morningstar proprietary risk ratio, beta and standard deviation are measures of
a fund's relative risk and are calculated for the trailing 36-month period.
Morningstar risk ratio measures a fund's downside volatility relative to all
equity funds which have an average score of 1.00. Beta is a measure of
sensitivity to market movements compared to the unmanaged S&P 500 index, with
the beta of the S&P 500 equal to 1.00. Standard deviation is a statistical
measure within which a fund's total return falls. The average Morningstar risk
ratio, beta and standard deviation for the 194 small-cap equity funds with a
three-year history as of 6/30/96 were: 1.02, 0.84 & 11.87, respectively. The
Morningstar risk ratio, beta and standard deviation for Royce Value Fund over
the same period were: 0.67, 0.58 & 6.84, respectively. Source: Morningstar, Inc.
The Russell 2000, Russell 2000 Growth, Russell 2000 Value and S&P 500 indices
are unmanaged and include the reinvestment of dividends. The Nasdaq Composite is
an unmanaged index. The Wilshire Target Small Company Value and Growth Funds
attempt to replicate the performance of the Wilshire Next 1750 Small Company
Value and Growth Indices, respectively.
7
<PAGE>
<PAGE>
FINANCIAL REVIEW
<TABLE>
<CAPTION>
TOTAL TOTAL
PERIOD RETURN PERIOD RETURN
- -------------------------- ------ -------------------------- ------ AVERAGE ANNUAL TOTAL RETURNS
----------------------------------
(THROUGH 6/30/96)
<S> <C> <C> <C> <C> <C>
1996 (through 6/30)....... 6.7% 1989...................... 15.9% 1-year.................... 14.1%
1995...................... 18.7% 1988...................... 23.6% 5-year.................... 11.6%
1994...................... (1.6%) 1987...................... 0.6% 10-year................... 9.1%
1993...................... 10.7% 1986...................... 6.5% Since inception*.......... 12.7%
1992...................... 16.0% 1985...................... 27.6%
1991...................... 30.8% 1984...................... 0.0%
1990...................... (13.6%) 1983...................... 42.8%
</TABLE>
ROYCE VALUE FUND VERSUS S&P 500 AND RUSSELL 2000
VALUE OF $10,000 INVESTED ON 12/31/82
<TABLE>
<CAPTION>
Period
Ended: RVS S&P Rus 2000
--------------------------------------------
<S> <C> <C> <C>
12/31/82 10,000 10,000 10,000
03/31/83 11,260 10,998 11,745
06/30/83 13,540 12,210 14,128
09/30/83 13,800 12,189 13,436
12/31/83 14,280 12,243 12,913
03/31/84 13,969 11,948 12,047
06/30/84 13,395 11,637 11,684
09/30/84 14,278 12,761 12,327
12/31/84 14,278 12,990 11,969
03/31/85 16,168 14,185 13,634
06/30/85 16,671 15,216 14,117
09/30/85 16,524 14,588 13,501
12/31/85 18,221 17,092 15,684
03/31/86 20,012 19,495 17,905
06/30/86 21,057 20,607 18,774
09/30/86 19,337 19,175 16,474
12/31/86 19,395 20,206 16,576
03/31/87 22,618 24,512 20,607
06/30/87 22,975 25,777 20,461
09/30/87 23,830 27,481 21,318
12/31/87 19,505 21,254 15,123
03/31/88 22,513 22,476 18,007
06/30/88 23,773 23,946 19,194
09/30/88 23,973 24,034 19,014
12/31/88 24,102 24,760 18,888
03/31/89 25,852 26,498 20,342
06/30/89 27,300 28,830 21,638
09/30/89 28,477 31,900 23,099
12/31/89 27,933 32,545 21,955
03/31/90 27,570 31,549 21,470
06/30/90 28,328 33,537 22,299
09/30/90 23,453 28,908 16,827
12/31/90 24,144 31,504 17,673
03/31/91 29,000 36,092 22,929
06/30/91 29,139 36,016 22,574
09/30/91 30,319 37,953 24,414
12/30/91 31,568 41,126 25,812
03/31/92 33,999 40,078 27,748
06/30/92 32,857 40,867 25,856
09/30/92 33,678 42,134 26,595
12/31/92 36,608 44,287 30,564
03/31/93 38,457 46,196 31,869
06/30/93 38,111 46,422 32,563
09/30/93 39,460 47,615 35,409
12/31/93 40,537 48,715 36,341
03/31/94 39,953 46,859 35,374
06/30/94 39,038 47,042 33,998
09/30/94 40,413 49,352 36,357
12/31/94 39,871 49,356 35,681
03/31/95 41,534 54,164 37,326
06/30/95 44,246 59,326 40,823
09/30/95 47,263 64,066 44,857
12/31/95 47,325 67,871 45,830
03/31/96 48,598 71,570 48,172
06/30/96 50,488 74,820 50,581
</TABLE>
* 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 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 purchases held for less than one year.
8
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<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
<C> <S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
Top 200 Stocks 88.3% $ 122,822,683 82.8%
Other Stocks 11.7 16,221,867 10.9
------- --------------- -------
Common Stocks 100.0% 139,044,550 93.7
-------
-------
Preferred Stocks 440,650 0.3
Cash & Other Net Assets 8,916,065 6.0
--------------- -------
Total Net Assets $ 148,401,265 100.0%
--------------- -------
--------------- -------
PORTFOLIO DIAGNOSTICS
- ---------------------------------------------------------------------------------------------------
Weighted Average Market Capitalization (Total Portfolio) $422Million
Median Market Capitalization (Total Portfolio) $315Million
Weighted Average P/E Ratio (200 Largest Positions) 14.3x
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 24.0%
Financial 23.9
Services 17.4
Consumer Durables 9.1
Retail 6.3
Consumer Staples 4.0
Energy 2.9
Technology 2.9
Health 1.8
Miscellaneous 1.1
Utilities 0.3
TOP TWENTY POSITIONS VALUE % OF NET ASSETS
- ---------------------------------------------------------------------------------------------------
1. Comdisco, Inc. $1,891,227 1.3%
2. Alleghany Corporation 1,887,552 1.3
3. The Standard Register Company 1,684,350 1.1
4. ALLIED Group Inc. 1,676,925 1.1
5. Family Dollar Stores, Inc. 1,607,187 1.1
6. Air Express International Corporation 1,460,158 1.0
7. Baldwin & Lyons, Inc. 1,437,525 1.0
8. Kimball International, Inc. Cl. B 1,392,300 0.9
9. The Pioneer Group, Inc. 1,385,650 0.9
10. Haemonetics Corporation 1,328,600 0.9
11. Tecumseh Products Company 1,290,425 0.9
12. Orion Capital Corporation 1,289,637 0.9
13. Stanhome Inc. 1,258,750 0.8
14. Marshall Industries 1,209,600 0.8
15. Pier 1 Imports, Inc. 1,191,562 0.8
16. CalMat Co. 1,190,812 0.8
17. Lilly Industries, Inc. Cl. A 1,158,533 0.8
18. Penn Engineering and Manufacturing, Inc. 1,131,000 0.8
19. Crawford & Company 1,129,494 0.8
20. Sotheby's Holdings, Inc. Cl. A 1,119,400 0.8
</TABLE>
9
<PAGE>
<PAGE>
ROYCE VALUE FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1996 (unaudited)
- --------------------------------------------------------------------------------
COMMON STOCKS - 93.7%
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
CONSUMER DURABLES - 9.1%
15,879 Allen Organ Company Cl. B... $ 621,266
14,700 Arctco, Inc. ............... 183,750
7,000 *Baldwin Piano & Organ
Company................... 103,250
19,800 Bassett Furniture
Industries,
Incorporated.............. 529,650
6,370 Burnham Corporation Cl. A... 164,028
4,040 *Burnham Corporation Cl.
B......................... 104,030
47,388 *Delta Woodside Industries,
Inc. ..................... 242,862
43,800 Ethan Allen Interiors
Inc. ..................... 1,084,050
44,700 Flexsteel Industries,
Inc. ..................... 525,225
10,000 Garan Incorporated.......... 170,000
20,900 Haggar Corp. ............... 282,150
26,900 *Johnson Worldwide
Associates, Inc. Cl. A.... 369,875
58,900 Juno Lighting, Inc. ........ 1,001,300
12,600 K-Swiss Inc. Cl. A.......... 137,025
21,700 La-Z-Boy Chair Company...... 653,713
16,400 *Lazare Kaplan
International, Inc. ...... 215,250
25,900 Liberty Homes, Inc. Cl. A... 326,987
21,950 Liberty Homes, Inc. Cl. B... 290,838
41,162 *Lifetime Hoan
Corporation............... 442,491
2,800 Matthews International
Corporation Cl. A......... 77,000
18,700 National Presto Industries,
Inc. ..................... 710,600
16,500 *O'Sullivan Industries
Holdings, Inc. ........... 121,687
40,800 The Rival Company........... 938,400
20,400 Russ Berrie and Company,
Inc. ..................... 374,850
9,700 The Singer Company N.V. .... 196,425
25,600 Skyline Corporation......... 640,000
<CAPTION>
Shares Value
<C> <S> <C>
44,700 The Stride Rite
Corporation............... $ 368,775
23,100 Sturm, Ruger & Company,
Inc. ..................... 1,074,150
22,500 Thomaston Mills, Inc. Cl.
A......................... 253,125
34,300 Thor Industries, Inc. ...... 703,150
44,800 *The Topps Company, Inc. ... 252,000
7,200 Weyco Group, Inc. .......... 291,600
------------
13,449,502
------------
CONSUMER STAPLES - 4.0%
30,676 Alico, Inc. ................ 598,182
10,945 Block Drug Company, Inc. Cl.
A......................... 459,690
4,325 Farmer Bros. Co. ........... 596,850
5,300 Genesee Corporation Cl. B... 243,800
3,000 *J & J Snack Foods Corp. ... 34,500
33,722 *Midwest Grain Products,
Inc. ..................... 438,386
30,700 Savannah Foods & Industries,
Inc. ..................... 395,263
1,850 Seaboard Corporation........ 367,225
4,767 *Standard Commercial
Corporation............... 57,204
47,500 Stanhome Inc. .............. 1,258,750
25,900 *Thorn Apple Valley, Inc. .. 284,900
16,400 Velcro Industries N.V. ..... 910,200
26,450 WLR Foods, Inc. ............ 370,300
------------
6,015,250
------------
ENERGY - 2.9%
20,000 *Alamco, Inc. .............. 225,000
14,200 *American Oilfield Divers,
Inc. ..................... 127,800
9,100 Ashland Coal, Inc. ......... 236,600
5,000 *Belden & Blake
Corporation............... 103,750
2,700 *Tom Brown, Inc. ........... 46,238
23,700 Camco International Inc. ... 802,837
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
<PAGE>
ROYCE VALUE FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1996 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
ENERGY - (continued)
13,000 Devon Energy Corporation.... $ 318,500
16,200 *Equity Oil Company......... 77,963
3,200 *Global Industries, Ltd..... 95,200
6,300 *Gulfmark International
Inc. ..................... 218,925
19,100 Lufkin Industries, Inc. .... 391,550
10,600 *McFarland Energy, Inc. .... 95,400
50,900 *Offshore Logistics,
Inc. ..................... 706,237
700 Parker & Parsley Petroleum
Company................... 19,425
25,150 Penn Virginia Corporation... 880,250
7,300 *Westmoreland Coal
Company................... 25,550
------------
4,371,225
------------
FINANCIAL - 23.9%
6,600 Alexander & Alexander
Services Inc. ............ 130,350
9,831 *Alleghany Corporation...... 1,887,552
38,550 ALLIED Group, Inc. ......... 1,676,925
24,300 Argonaut Group, Inc. ....... 759,375
15,952 *Avatar Holdings Inc. ...... 548,350
18,900 AVEMCO Corporation.......... 255,150
5,280 Baker Boyer Bancorp......... 184,800
16,800 Baldwin & Lyons, Inc. Cl.
A......................... 344,400
53,000 Baldwin & Lyons, Inc. Cl.
B......................... 1,093,125
18,500 Bar Harbor Bankshares....... 777,000
22,350 W. R. Berkley Corp. ........ 933,112
27,400 E.W. Blanch Holdings,
Inc. ..................... 544,575
8,900 The Boston Bancorp.......... 384,925
5,800 CMAC Investment
Corporation............... 333,500
10,172 CU Bancorp.................. 109,349
71,032 Comdisco, Inc. ............. 1,891,227
9,700 The Commerce Group, Inc. ... 202,488
<CAPTION>
Shares Value
<C> <S> <C>
10,890 Community Banks, Inc. ...... $ 255,915
12,000 Consolidated-Tomoka Land
Co. ...................... 237,000
13,000 Cousins Properties
Incorporated.............. 255,125
43,700 Crawford & Company Cl. A.... 742,900
22,250 Crawford & Company Cl. B.... 386,594
11,270 Dauphin Deposit Corp. ...... 321,195
16,300 Eaton Vance Corp. .......... 590,875
12,200 Equitable of Iowa
Companies................. 433,100
1,580 Exchange Bank............... 97,170
264 Farmers & Merchants Bank of
Long Beach................ 481,272
120 The First National Bank of
Anchorage................. 181,200
3,900 Foremost Corporation of
America................... 221,325
39,720 Fremont General
Corporation............... 913,560
32,400 Arthur J. Gallagher &
Co. ...................... 1,036,800
49,600 *Gryphon Holdings Inc. ..... 744,000
41,700 Guaranty National
Corporation............... 750,600
20,737 *Hanmi Bank................. 163,304
55,375 Hilb, Rogal & Hamilton
Company................... 768,328
600 Integon Corporation......... 12,075
9,500 Intercargo Corporation...... 81,937
3,470 Investors Financial Services
Corporation............... 80,678
13,000 The John Nuveen Company..... 323,375
28,756 Leucadia National
Corporation............... 704,522
7,700 *Lexington Global Asset
Managers, Inc. ........... 38,500
15,704 *MAIC Holdings, Inc. ....... 584,974
14,500 NYMAGIC, INC. .............. 273,688
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
<PAGE>
ROYCE VALUE FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1996 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
FINANCIAL - (continued)
7,594 National Bancorp of Alaska,
Inc. ..................... $ 478,422
6,300 New England Investment
Companies, L.P............ 148,050
55,900 The Newhall Land and Farming
Company................... 922,350
1,500 Nobel Insurance Limited..... 17,437
4,700 North American Mortgage
Company................... 81,663
6,311 ONBANCorp, Inc. ............ 206,685
25,287 Orion Capital Corporation... 1,289,637
15,700 Pennsylvania Manufacturers
Corporation............... 266,900
18,600 Phoenix Duff & Phelps
Corporation............... 139,500
51,800 The Pioneer Group, Inc. .... 1,385,650
33,600 Piper Jaffray Companies
Inc. ..................... 420,000
5,200 Poe & Brown, Inc. .......... 128,700
9,578 Portsmouth Bank Shares,
Inc. ..................... 132,895
12,600 T. Rowe Price Associates,
Inc. ..................... 387,450
23,200 RLI Corp. .................. 565,500
1,300 Raymond James Financial,
Inc. ..................... 29,412
7,015 Reliance Group Holdings,
Inc. ..................... 52,613
8,251 *Reliance Group Holdings,
Inc....................... 17,022
6,200 SEI Corporation............. 130,975
14,600 Security-Connecticut Life
Insurance Company......... 397,850
16,000 Student Loan Corporation.... 576,000
8,500 *Sunrise Bancorp............ 30,812
9,200 Transatlantic Holdings,
Inc. ..................... 645,150
<CAPTION>
Shares Value
<C> <S> <C>
16,000 Transnational Re Corporation
Cl. A..................... $ 394,000
15,500 Trenwick Group Inc. ........ 775,000
5,250 Vornado Realty Trust........ 214,594
9,460 Webster Financial
Corporation............... 264,880
5,900 Wesco Financial
Corporation............... 945,475
7,200 Western Investment Real
Estate Trust.............. 93,600
67,100 `D'Willis Corroon Group
plc....................... 796,812
28,700 Zenith National Insurance
Corp. .................... 785,663
------------
35,456,912
------------
HEALTH - 1.8%
10,900 Diagnostic Products
Corporation............... 419,650
72,800 *Haemonetics Corporation.... 1,328,600
25,240 Life Technologies, Inc. .... 795,060
7,600 *Marquette Electronics, Inc.
Cl. A..................... 131,100
------------
2,674,410
------------
INDUSTRIAL CYCLICALS - 24.0%
35,400 *Ag-Chem Equipment Co.,
Inc. ..................... 752,250
12,300 *Ameron International
Corp. .................... 485,850
5,900 Ampco-Pittsburgh
Corporation............... 68,587
800 *Art's-Way Manufacturing
Co., Inc. ................ 4,000
8,500 Ash Grove Cement Company.... 947,750
18,633 *Athey Products Corp. ...... 79,190
22,900 *Guy F. Atkinson Company of
California................ 309,150
14,905 BHA Group, Inc. Cl. A....... 197,491
16,500 BW/IP, Inc. Cl. A........... 313,500
20,221 Binks Manufacturing
Company................... 551,022
19,800 *Bird Corp. ................ 64,969
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
<PAGE>
ROYCE VALUE FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1996 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
INDUSTRIAL CYCLICALS - (continued)
46,200 Blessings Corporation....... $ 473,550
36,500 W. H. Brady Co. Cl. A....... 812,125
65,700 CalMat Co. ................. 1,190,812
25,000 Cascade Corp. .............. 334,375
78 Central Steel & Wire
Company................... 49,218
15,200 CLARCOR Inc. ............... 376,200
2,100 Cohu, Inc. ................. 42,525
1,500 ConBraCo Industries,
Inc. ..................... 637,500
10,800 Core Industries Inc. ....... 155,250
15,700 Curtiss-Wright
Corporation............... 847,800
25,800 *Devcon International
Corp. .................... 238,650
38,000 *DeVlieg-Bullard, Inc. ..... 89,062
6,500 *Dixie Yarns, Inc. ......... 31,688
15,800 Donaldson Company, Inc. .... 406,850
2,600 The Duriron Company,
Inc. ..................... 62,400
3,000 Eastern Co. ................ 34,125
20,800 *Fansteel Inc. ............. 130,000
3,433 Federal Signal
Corporation............... 80,675
39,900 Florida Rock Industries,
Inc. ..................... 1,032,413
7,600 Giddings & Lewis, Inc. ..... 123,500
46,200 P. H. Glatfelter Company.... 848,925
19,087 Gorman-Rupp Company......... 252,903
24,500 Greif Bros. Corporation Cl.
A......................... 784,000
15,350 Guilford Mills, Inc. ....... 383,750
14,512 *C. H. Heist Corp. ......... 97,956
3,600 *Holophane Corporation...... 56,700
33,500 *Insituform Technologies,
Inc. ..................... 259,625
15,700 *Intermet Corporation....... 218,819
16,800 Kaman Corporation Cl. A..... 170,100
13,600 Kaydon Corporation.......... 584,800
<CAPTION>
Shares Value
<C> <S> <C>
24,000 *Kentucky Electric Steel
Company................... $ 195,000
50,400 Kimball International, Inc.
Cl. B..................... 1,392,300
4,500 *Kinark Corporation......... 15,750
12,370 Knape & Vogt Manufacturing
Company................... 194,827
3,900 *Laclede Steel Company...... 24,619
5,550 *Lancer Corporation......... 124,181
23,221 Lawter International,
Inc. ..................... 290,263
30,712 LeaRonal, Inc. ............. 767,800
68,149 Lilly Industries, Inc. Cl.
A......................... 1,158,533
9,000 The Lincoln Electric
Company................... 317,250
22,500 The Lincoln Electric Company
Cl. A..................... 680,625
9,000 Lindberg Corporation........ 92,250
7,900 Liqui-Box Corporation....... 237,000
3,500 *Lydall, Inc. .............. 77,000
6,200 Herman Miller, Inc. ........ 189,875
20,000 Mine Safety Appliances
Company................... 820,000
18,100 Minuteman International,
Inc. ..................... 153,850
14,405 The Monarch Cement
Company................... 210,673
14,405 The Monarch Cement Company
Cl. B..................... 210,673
10,000 The Monarch Machine Tool
Company................... 117,500
14,300 *Moore Products Co. ........ 268,125
5,200 Paul Mueller Company........ 176,800
32,555 Myers Industries, Inc. ..... 606,337
13,300 NCH Corporation............. 854,525
12,900 Nordson Corporation......... 728,850
12,366 Oil-Dri Corporation of
America................... 183,944
6,200 The Oilgear Company......... 91,450
33,500 Oregon Steel Mills, Inc. ... 460,625
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
<PAGE>
ROYCE VALUE FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1996 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
INDUSTRIAL CYCLICALS - (continued)
16,300 Oshkosh Truck Corporation
Cl. B..................... $ 230,238
44,400 Penn Engineering and
Manufacturing Inc. ....... 838,050
12,400 Penn Engineering and
Manufacturing Corp. Cl.
A ........................ 292,950
18,900 *Perini Corporation......... 226,800
1,000 *Pioneer Metals, Inc. ...... 200,000
9,250 Precision Castparts
Corp. .................... 397,750
21,200 Preformed Line Products
Company................... 720,800
12,400 *Proler International
Corp. .................... 75,950
26,500 Puerto Rican Cement Company,
Inc. ..................... 824,813
21,225 Robroy Industries, Inc. Cl.
A......................... 328,988
7,800 *Schuller Corporation....... 80,925
9,600 *Sealed Air Corporation..... 322,800
20,200 *Simpson Manufacturing Co.,
Inc. ..................... 404,000
8,600 The L. S. Starrett Company
Cl. A..................... 223,600
16,000 *Steel of West Virginia,
Inc. ..................... 144,000
5,900 Tecumseh Products Company... 306,800
18,300 Tecumseh Products Company
Cl. A..................... 983,625
3,800 Tennant Company............. 98,800
13,450 *Todd Shipyards
Corporation............... 100,875
16,600 *The Turner Corporation..... 190,900
36,500 *UNC, Inc. ................. 305,688
15,100 Unifi, Inc. ................ 424,687
15,800 Versa Technologies, Inc. ... 213,300
3,700 Vulcan Materials Company.... 219,687
17,800 Watts Industries, Inc. Cl.
A......................... 331,525
<CAPTION>
Shares Value
<C> <S> <C>
12,487 Woodward Governor Company... $ 1,098,856
34,600 Zero Corporation............ 739,575
------------
35,546,662
------------
RETAIL - 6.3%
5,000 J. Baker, Inc. ............. 37,500
20,500 Blair Corporation........... 484,313
26,300 *CATHERINES STORES
CORPORATION............... 259,712
57,200 *Charming Shoppes, Inc. .... 403,975
33,950 Claire's Stores, Inc. ...... 937,869
32,900 *The Clothestime, Inc. ..... 32,900
5,700 *Crown Books Corporation.... 76,950
4,900 Dart Group Corporation Cl.
A......................... 436,100
50,800 Deb Shops Inc. ............. 254,000
91,700 *The Dress Barn, Inc. ...... 962,850
92,500 Family Dollar Stores,
Inc. ..................... 1,607,187
3,900 Fingerhut Companies,
Inc. ..................... 60,938
5,900 Heilig-Meyers Company....... 141,600
8,000 *InterTAN Inc. ............. 46,000
14,000 LANDS' END, INC. ........... 346,500
5,000 *Mac Frugal's Bargains --
Close-outs Inc. .......... 88,750
38,600 *Mikasa, Inc. .............. 424,600
23,900 Nash Finch Company.......... 382,400
12,800 *Old America Stores, Inc. .. 104,000
15,200 Oshkosh B'Gosh, Inc. Cl.
A......................... 273,600
80,105 Pier 1 Imports, Inc. ....... 1,191,562
24,000 *Stein Mart, Inc. .......... 438,000
19,263 Strawbridge & Clothier Cl.
A......................... 313,024
------------
9,304,330
------------
SERVICES - 17.4%
27,600 ABM Industries
Incorporated.............. 1,079,850
15,270 Aceto Corporation........... 240,503
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
<PAGE>
ROYCE VALUE FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1996 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
SERVICES - (continued)
51,687 Air Express International
Corporation............... $ 1,460,158
8,500 Angelica Corporation........ 200,813
62,848 Arnold Industries, Inc. .... 895,584
38,600 Atlantic Southeast Airlines,
Inc. ..................... 1,090,450
16,425 Banta Corporation........... 414,731
11,100 Bay Meadows Operating
Company and California
Jockey Club............... 190,088
19,099 *Bell Industries, Inc. ..... 319,908
3,200 Bob Evans Farms, Inc. ...... 54,400
19,200 Bowl America Incorporated
Cl. A..................... 134,400
35,200 Bowne & Co., Inc. .......... 726,000
1,400 *Jenny Craig, Inc. ......... 25,025
34,000 Dames & Moore............... 412,250
4,766 DUFF & PHELPS CREDIT RATING
CO. ...................... 101,278
42,700 Ennis Business Forms,
Inc. ..................... 485,712
12,000 Expeditores International of
Washington, Inc. ......... 372,000
22,500 *FCA International Ltd...... 38,224
280 Fisher Companies Inc. ...... 24,500
6,500 FlightSafety International,
Inc. ..................... 352,625
62,846 Frozen Food Express
Industries, Inc. ......... 707,018
18,685 G & K Services, Inc. Cl.
A......................... 532,522
24,306 Gilbert Associates, Inc. Cl.
A......................... 309,902
4,772 Grey Advertising Inc. ...... 1,054,612
1,722 Hardinge Brothers, Inc. .... 54,673
54,637 The Harper Group............ 1,065,421
5,200 *IHOP Corp. ................ 140,400
21,200 *International Dairy Queen,
Inc. Cl. A................ 466,400
1,700 *Lady Baltimore Foods,
Inc. ..................... 74,800
<CAPTION>
Shares Value
<C> <S> <C>
24,400 Lawson Products, Inc. ...... $ 616,100
43,200 *Marshall Industries........ 1,209,600
30,900 Merrill Corporation......... 772,500
15,600 *Milgray Electronics,
Inc. ..................... 183,300
9,000 *National Education
Corporation............... 128,250
36,000 New England Business
Service, Inc. ............ 702,000
10,600 *Nichols Research
Corporation............... 331,250
8,200 PCA International, Inc. .... 137,350
14,225 Pioneer-Standard
Electronics, Inc. ........ 188,481
6,000 Pittston Brinks Group....... 174,750
3,000 Pittston Burlington Group... 64,875
22,800 Plenum Publishing
Corporation............... 798,000
18,200 Richardson Electronics,
Ltd....................... 182,000
47,400 *Rollins Environmental
Services, Inc. ........... 183,675
30,400 Rykoff-Sexton, Inc. ........ 437,000
12,000 *Earl Scheib, Inc. ......... 88,500
1,500 *Shoney's, Inc. ............ 16,312
77,200 Sotheby's Holdings, Inc. Cl.
A......................... 1,119,400
68,400 The Standard Register
Company................... 1,684,350
25,000 Stone & Webster, Inc. ...... 853,125
36,900 Super Food Services,
Inc. ..................... 350,550
6,000 *Supercuts, Inc. ........... 51,000
67,500 *TBC Corporation............ 582,188
7,500 Treadco, Inc. .............. 63,750
16,900 True North Communications
Inc. ..................... 376,025
5,200 Uniforce Temporary
Personnel, Inc. .......... 98,800
23,400 *The Union Corporation...... 462,150
31,500 *Vallen Corporation......... 551,250
11,696 *Vie De France
Corporation............... 26,316
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
<PAGE>
ROYCE VALUE FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1996 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
SERVICES - (continued)
1,800 Werner Enterprises, Inc. ... $ 46,800
7,725 Wyle Electronics............ 255,891
------------
25,759,785
------------
TECHNOLOGY - 2.9%
5,900 *American Power Conversion
Corporation............... 60,475
5,850 Astro-Med, Inc. ............ 52,650
18,900 *Astrosystems, Inc. ........ 120,487
2,300 BEI Electronics, Inc. ...... 23,575
7,700 *CEM Corporation............ 102,025
8,200 *CSP Inc. .................. 67,650
6,700 *Comptek Research, Inc. .... 36,850
13,275 *DH Technology, Inc. ....... 318,600
14,000 *Data Translation, Inc. .... 229,250
12,800 *Dionex Corporation......... 412,800
42,900 *Exar Corporation........... 557,700
5,156 Hach Company................ 82,496
2,700 *IFR Systems, Inc. ......... 33,075
3,200 MacNeal-Schwendler
Corporation............... 24,000
9,200 Modern Controls, Inc. ...... 95,450
45,900 National Computer Systems,
Inc. ..................... 981,112
51,300 Scitex Corporation
Limited................... 884,925
12,600 *Sunair Electronics,
Inc. ..................... 40,950
11,100 Woodhead Industries,
Inc. ..................... 130,425
10,000 *XATA Corporation........... 103,750
------------
4,358,245
------------
<CAPTION>
Shares Value
<C> <S> <C>
UTILITIES - 0.3%
17,038 *Southern Union Company..... $ 374,836
8,032 Southwest Water Company..... 92,368
------------
467,204
------------
MISCELLANEOUS - 1.1% 1,641,025
------------
Total Common Stocks (Cost
$99,076,883).............. 139,044,550
------------
PREFERRED STOCKS - 0.3%
4,100 Bird Corp. $1.85 Conv. ..... 62,525
12,500 Sterling Financial
Corporation $1.8125 Conv.
Cum. ..................... 378,125
------------
Total Preferred Stocks (Cost
$352,557)................. 440,650
------------
</TABLE>
<TABLE>
<C> <S> <C>
REPURCHASE AGREEMENT - 5.0%
State Street Bank and Trust Company,
4.90%, due 7/01/96, collateralized
by U.S. Treasury Notes, 5.25%, due
12/31/97, valued at $7,549,848
(Cost $7,400,000).................. 7,400,000
------------
TOTAL INVESTMENTS - 99.0% (COST
$106,829,440)...................... 146,885,200
CASH AND OTHER ASSETS LESS
LIABILITIES - 1.0%................. 1,516,065
------------
NET ASSETS - 100.0%.................. $148,401,265
------------
------------
</TABLE>
* Non-income producing.
`D' American Depository Receipt.
INCOME TAX INFORMATION - The cost of total investments for federal income tax
purposes was $106,841,814. At June 30, 1996, net unrealized appreciation for all
securities amounted to $40,043,386, consisting of aggregate gross unrealized
appreciation of $45,608,610 and aggregate gross unrealized depreciation of
$5,565,224.
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
<PAGE>
ROYCE VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES AT JUNE 30, 1996 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
ASSETS:
<S> <C>
Investments at value (identified cost $106,829,440).............................................. $146,885,200
Receivable for investments sold.................................................................. 1,869,611
Receivable for shares of beneficial interest sold................................................ 24,583
Receivable for dividends and interest............................................................ 215,740
Prepaid expenses and other assets................................................................ 20,077
------------
TOTAL ASSETS................................................................................... 149,015,211
------------
LIABILITIES:
Payable for investments purchased................................................................ 165,488
Payable for shares of beneficial interest redeemed............................................... 81,234
Payable for investment advisory fees............................................................. 109,521
Accrued expenses and other liabilities........................................................... 257,703
------------
TOTAL LIABILITIES.............................................................................. 613,946
------------
NET ASSETS..................................................................................... $148,401,265
------------
------------
ANALYSIS OF NET ASSETS:
Undistributed net investment income.............................................................. $ 148,891
Accumulated net realized gain on investments..................................................... 18,604,627
Net unrealized appreciation on investments....................................................... 40,055,760
Shares of beneficial interest.................................................................... 13,889
Additional paid-in capital....................................................................... 89,578,098
------------
NET ASSETS..................................................................................... $148,401,265
------------
------------
PRICING OF SHARES:
Net asset value, offering and redemption price per share
($148,401,265[div]13,888,723 shares outstanding)............................................... $10.69
------
------
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months ended Year ended
June 30, 1996 December 31,
(unaudited) 1995
---------------- ------------
<S> <C> <C>
INVESTMENT OPERATIONS:
Net investment income....................................................... $ 86,420 $ 769,183
Net realized gain on investments............................................ 16,199,292 12,863,372
Net change in unrealized appreciation on investments........................ (5,848,687) 14,831,715
---------------- ------------
Net increase in net assets resulting from investment operations........... 10,437,025 28,464,270
DIVIDENDS AND DISTRIBUTIONS:
From net investment income.................................................. -- (781,023)
From net realized gain on investments....................................... -- (11,521,019)
---------------- ------------
Total dividends and distributions......................................... -- (12,302,042)
CAPITAL SHARE TRANSACTIONS:
Net decrease in net assets from capital share transactions.................. (28,794,905) (16,283,633)
---------------- ------------
NET DECREASE IN NET ASSETS.................................................... (18,357,880) (121,405)
NET ASSETS:
Beginning of period......................................................... 166,759,145 166,880,550
---------------- ------------
End of period (including undistributed net investment income of $148,891 and
$62,471, respectively).................................................... $148,401,265 $166,759,145
---------------- ------------
---------------- ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
<PAGE>
ROYCE VALUE FUND
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1996 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends....................................................................................... $ 1,415,661
Interest........................................................................................ 122,697
-----------
Total Income................................................................................ 1,538,358
-----------
Expenses:
Distribution fees............................................................................... 791,641
Investment advisory fees........................................................................ 687,240
Custodian and transfer agent fees............................................................... 98,708
Administrative and office facilities expenses................................................... 43,199
Professional fees............................................................................... 14,924
Trustees' fees.................................................................................. 8,554
Other expenses.................................................................................. 42,131
-----------
Total Expenses.............................................................................. 1,686,397
Fees waived by distributor.................................................................. (234,459)
-----------
Net Expenses................................................................................ 1,451,938
-----------
Net Investment Income................................................................... 86,420
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments.................................................................... 16,199,292
Net change in unrealized appreciation on investments................................................ (5,848,687)
-----------
Net realized and unrealized gain on investments............................................. 10,350,605
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................................ $10,437,025
-----------
-----------
</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 for the periods presented.
<TABLE>
<CAPTION>
Six Months ended Years ended December 31,
June 30, 1996 -----------------------------------------------------
(unaudited) 1995 1994 1993 1992 1991
---------------- --------- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.............. $10.02 $9.11 $9.73 $9.51 $8.83 $6.96
------- --------- ----- ----- ----- -----
INVESTMENT OPERATIONS:
Net investment income (a)..................... 0.01 0.05 0.07 0.05 0.04 0.09
Net realized and unrealized gain (loss) on
investments................................. 0.66 1.65 (0.23) 0.97 1.37 2.05
------- --------- ----- ----- ----- -----
Total from investment operations............ 0.67 1.70 (0.16) 1.02 1.41 2.14
------- --------- ----- ----- ----- -----
DIVIDENDS AND DISTRIBUTIONS:
Net investment income......................... -- (0.05) (0.05) (0.05) (0.04) (0.09)
Net realized gain on investments.............. -- (0.74) (0.41) (0.75) (0.69) (0.18)
------- --------- ----- ----- ----- -----
Total dividends and distributions........... -- (0.79) (0.46) (0.80) (0.73) (0.27)
------- --------- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD.................... $10.69 $10.02 $9.11 $9.73 $9.51 $8.83
------- --------- ----- ----- ----- -----
------- --------- ----- ----- ----- -----
TOTAL RETURN...................................... 6.7% 18.7% (1.6%) 10.7% 16.0% 30.8%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in thousands).......... $148,401 $166,759 $166,881 $185,776 $178,128 $167,498
Ratio of Expenses to Average Net Assets (b)....... 1.83%* 1.76% 1.80% 1.84% 1.88% 1.69%
Ratio of Net Investment Income to Average Net
Assets.......................................... 0.11%* 0.46% 0.67% 0.43% 0.42% 1.00%
Portfolio Turnover Rate........................... 12% 14% 22% 31% 28% 25%
Average Commission Rate Paid+..................... $0.0650 -- -- -- -- --
</TABLE>
(a) Net investment income is shown after fee waivers by the investment adviser
and distributor. The per share effect of these waivers is $0.01 for the six
months ended June 30, 1996; $0.04 for the year ended December 31, 1995;
$0.03 for each of the years ended December 31, 1994, 1993, and 1992, and
$0.04 for the year ended December 31, 1991.
(b) Expenses are shown after fee waivers by the investment adviser and
distributor. For the six months ended June 30, 1996, and the years ended
December 31, 1995, 1994, 1993, 1992 and 1991, expense ratios before waivers
would have been 2.13%, 2.14%, 2.16%, 2.15%, 2.15% and 2.20%, respectively.
* Annualized.
+ For fiscal years beginning on or after October 1, 1995, the Fund is required
to disclose its average commission rate paid per share for purchases and
sales of investments.
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
<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. The Trust, originally
established as a business trust under the laws of Massachusetts, converted to a
Delaware business trust at the close of business on June 28, 1996. The Fund
commenced operations on December 31, 1982.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
a. Valuation of investments:
Securities listed on an exchange or on the Nasdaq 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 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 paid annually in December. These 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
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ROYCE VALUE FUND
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
- --------------------------------------------------------------------------------
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.
2. INVESTMENT ADVISER AND DISTRIBUTOR:
Under the Trust's investment advisory agreement with Quest Advisory Corp.
('Quest'), the Fund accrued and paid Quest fees totaling $687,240 for the six
months ended June 30, 1996. The agreement provides for fees equal to 1.0% per
annum of the first $50 million of the Fund's average net assets, .875% per annum
of the next $50 million of such net assets and .75% per annum of additional
amounts of average 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
$557,182 for the six months ended June 30, 1996. This amount is net of $234,459
of fees which were voluntarily waived by QDI. The distribution agreement
provides for maximum fees of 1.0% per annum of the Fund's average 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
June 30, 1996 Year ended
(unaudited) December 31, 1995
-------------------------- --------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold.............................................. 170,172 $ 1,733,455 525,172 $ 5,233,818
Issued as reinvested dividends and
distributions................................... -- -- 1,179,996 11,764,560
Redeemed.......................................... (2,930,398) (30,528,360) (3,368,817) (33,282,011)
</TABLE>
Shares redeemed within one year of purchase are subject to a 1% redemption
fee, payable to the Fund, which is used to offset costs associated with the
redemption.
4. PURCHASES AND SALES OF INVESTMENT SECURITIES:
For the six months ended June 30, 1996, the cost of purchases and the
proceeds from sales of investment securities, other than short-term securities,
amounted to $18,711,512 and $53,335,883, respectively.
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At the Special Meeting of Shareholders held on June 26, 1996, Trust shareholders
approved a conversion of the Trust to a Delaware business trust, elected
Trustees and ratified the Board's selection of the Trust's independent public
accountants, and Fund shareholders approved proposals to permit temporary
borrowing of money, securities lending and investment in warrants, rights and
options.
<TABLE>
<CAPTION>
Proposals/ Votes Votes Votes Cast Votes
Name of Trustee Cast For Withheld Against Abstained
- -------------------------------------------------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Convert the Trust to a Delaware business trust.... 37,472,360 N/A 845,090 3,121,147
Proposal to permit temporary borrowing of money... 7,225,987 N/A 655,569 626,855
Proposal to permit loans of portfolio
securities...................................... 7,015,719 N/A 821,976 670,716
Proposal to change the Fund's investment policy
concerning warrants, rights and options......... 7,233,589 N/A 673,514 601,308
Ratification of independent public accountants.... 51,370,026 N/A 442,499 2,816,187
Charles M. Royce.................................. 52,309,497 2,319,215 N/A N/A
Thomas R. Ebright................................. 52,314,207 2,314,505 N/A N/A
Hubert L. Cafritz................................. 52,219,769 2,408,943 N/A N/A
Richard M. Galkin................................. 52,305,456 2,323,256 N/A N/A
Stephen L. Isaacs................................. 52,258,406 2,370,306 N/A N/A
William L. Koke................................... 52,300,723 2,327,989 N/A N/A
David L. Meister.................................. 52,282,477 2,346,235 N/A N/A
</TABLE>
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POSTSCRIPT: NEW ERA DEFINITIONS
A by-product of any new era is a change in its language. The use of new
words and definitions typically signifies the emergence of a new culture. For
example, the acceptance of popular slang words 'cool' and 'hip' in the '60s
ushered in an era known as 'pop culture.'
The protracted bull market of the last five years has many believing that
we have entered into a new age of investing. Just as 'bad' came to mean 'good'
in the slang of the '70s, Steve Leuthold, stock market researcher and money
manager, with further corroboration from USA Today 'Money Talk' columnist,
Daniel Kadlec, has suggested, with tongue firmly in cheek, that the following
'new definitions for a new era' have replaced those established by Mr. Webster:
BEAR MARKET: When stocks decline for a week.
MAJOR CORRECTION: When stocks decline for a day.
OLD-TIMER: A person who knows someone who lost money in the stock market.
CYNIC: Anyone reminding you stocks can go down.
CONSERVATIVE: Anyone without a margin account.
RISK: How much you can lose being out of the market.
INFLATION: Historical phenomena that used to adversely affect stocks.
CONTRARIAN: Someone with nothing to talk about at parties.
IPO: Instant profit opportunity.
SHORT SALE: Temporary condition associated with memory failure.
GRAHAM & DODD: Ancient philosophers who believed the book value of a
company was too much to pay. It's widely assumed they also believed the world
was flat.
MUTUAL FUND: A pool of money guaranteed to grow because it has lots of
contributors, and you just know that many people can't be wrong.
As conservative cynics, we can only hope that when the current market is no
longer 'hip,' it will not find too many people feeling 'bad,' as it was
originally defined.
------------------------------------------------------
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
E-mail Address ................................ [email protected]
Internet Homepage .......................... http://www.roycefunds.com
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.
STATEMENT OF DIFFERENCES
________________________
The dagger symbol shall be expressed as.............. 'D'
The division sign shall be expressed as.............. [div]
GRAPHIC APPENDIX
On page 2 of the paper format Royce Total Return report:
Picture of firecracker exploding
On page 4 of the paper format Royce Total Return report:
A picture of a prospectus cover of Berkshire Hathaway Inc
On page 5 of the paper format Royce Total Return report:
A picture of a scale balancing a dollar sign and a factory.
On page 6 of the paper format Royce Total Return report:
A bar graph of the Russell 2000 price variations from 1979 to 1996.
A picture of a ticker tape machine.
