ROYCE FUND, N-30D, 1996-02-29

ROYCE FUND
N-30D, 1996-02-29

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<PAGE>
ROYCE
VALUE
FUND
ANNUAL REPORT
DECEMBER 31, 1995
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:

Harold Geneen, former CEO of the giant conglomerate ITT Corp., once offered
the following advice: 'In the business world, everyone is paid in two coins:
cash and experience. Take the experience first; the cash will come later.' In
1995, however, the formula seemed to be reversed as investors were paid with
'cash' in the form of high stock market returns. One can only wonder when
investors will be paid with 'experience.'

'ABLE TO LEAP TALL BUILDINGS
IN A SINGLE BOUND'

[GRAPHIC] This familiar phrase describes popular superhero Superman,
but it could also reflect 1995's stock market performance.
1995, like Superman, was extraordinary by any standard of
measurement. The large-cap oriented S&P 500, which was up 37.5%, had its best
calendar year return since 1958. Propelled by strong performance in 1995's first
two quarters, the S&P 500 took a breather in the third quarter only to resume a
leadership role in the final quarter of the year. Small-cap securities emerged
as performance leaders in the middle of the year, but were unable to keep up
with the 'faster than a speeding bullet' S&P 500. For the year, the Russell 2000
index of small-cap companies was up 28.4%.

ROYCE VALUE FUND'S ('RVF') small-cap value orientation, which has served its
shareholders well over the long-term, was no match for the performance of the
raging bull market of 1995. Just as 'small-cap' under-performed large-cap,
'value' under-performed growth within the small-cap category. Also, a low
exposure to the market's best performing sector, technology, and an
above-average exposure to the consumer and service sectors acted like kryptonite
in holding back the Fund's relative short-term performance. Nevertheless, RVF's
risk-averse style produced a 18.7% return in 1995, quite reasonable on an
absolute basis.

The Fund has approximately $167 million in assets and 13 years of performance
history. Average annual total returns for the Fund during the preceding five,
ten and thirteen years were 14.4%, 10.0% and 12.7%, respectively. According to
mutual fund evaluation service Morningstar, RVF had one of the lowest risk
profiles out of the 171 small-cap funds in the category, as measured by
Morningstar's risk ratio, standard deviation and beta for the last three years*.
We believe that managing risk is critical to delivering above average long-term
returns.

THE RELEVANCE OF RELATIVE PERFORMANCE

At some point in every modern bull market, generally at the [GRAPHIC]
later stages, the concept of relative performance becomes
dominant in any discussion of investment results. As prospects
of financial loss become distant memories, investors shift their
focus from absolute gains to relative rewards.
Investment strategies are changed, portfolio managers are replaced and solid
results are ignored in the quest for better relative performance. The problem
is . . . . you can't eat relative performance! The whole concept dies quickly
in a period of negative returns. When markets turn south, new

<PAGE>
<PAGE>
car purchases are deferred and vacation plans are canceled,
relative performance soon becomes irrelevant. While relative
performance may make a great conversation topic at the cocktail party, it is
positive absolute returns, compounded at reasonable rates, which put dinner on
the table.

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 value 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 always confirm this assumption's
validity.

Our 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 rational 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

While the Fund focuses on companies with market caps below $750 million, our
weighted average and median market caps are actually much lower; $480 million
and $221 million, respectively, at December 31, 1995. Although our orientation
is small-cap stocks, the capitalization of our picking universe is by no means
small. The small-cap segment is huge in numbers, with over 10,000 companies
valued at more than $700 billion in total market capitalization. It is both
robust and perpetuating; IPO's, spin-offs and reorganizations create hundreds of
new prospects each year. The small-cap sector is rich in opportunity and
easily accommodates our strategy given the size of the investable universe.

HOW IT WORKS

Our approach to investing in [GRAPHIC]
individual small-cap companies has
proven long-term benefits, but can be both unpredictable and
frustrating in the near-term. We believe that the stock

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market in the short-term is a polling place, and in the long-term, a
highly efficient weighing device. While our ultimate success will continue
to be driven by the process of 'weighing the true value' of the
small companies in which we have invested, the following provides
a brief glimpse of some of last year's 'election results.'

IDEAS THAT WORKED

[GRAPHIC] During calendar 1995, the usual but somewhat arbitrary
measurement period of choice, each of these companies made
meaningful positive contributions to our overall performance. More importantly,
they represent specific examples of our discipline at work. Royce Value Fund's
BEST PERFORMERS, as measured by dollar impact to the portfolio, were:

<TABLE>
<CAPTION>
SECURITY % GAIN $ GAIN
- ---------------------------------- ------ --------
<S> <C> <C>
Penn Eng. & Manufact. Corp. 130% $680,450
Comdisco, Inc. 47% $639,738
T. Rowe Price Associates, Inc. 56% $497,430
Claire's Stores, Inc. 47% $495,174
Alleghany Corporation 33% $483,176
</TABLE>

Our largest winners, with the exception of Penn Engineering & Manufacturing,
were relatively large, high confidence investments we knew well and regarded as
'premier' companies in their respective industries. We built our positions when
business conditions were difficult and the investment community had voted
negatively on future prospects.

Penn Engineering & Manufacturing was successful for a different reason. This
company has been a long-term 'micro-cap' investment of the Fund that finally
caught the attention of others through the strength of its results.

GOOD IDEAS AT THE TIME

[GRAPHIC] Our greatest opportunities often occur when we identify good
businesses which have fallen from favor due to some sort of short-term,
but correctable, problem. Even the best small-cap companies are not
immune to the flu. Usually, if their balance sheets are strong and they have a
solid history of high internal returns, these companies will rebound. Although
recoveries can take longer than we anticipate, we are generally rewarded for our
persistence. Unfortunately, a few of our investments never recover. The five
WORST PERFORMERS in 1995, as measured by dollar impact, were:

<TABLE>
<CAPTION>
SECURITY % LOSS $ LOSS
- ---------------------------------- ------ --------
<S> <C> <C>
Charming Shoppes, Inc. 57% $351,152
Delta Woodside Industries, Inc. 42% $231,016
Midwest Grain Products, Inc. 40% $228,024
Exar Corporation 40% $222,865
Thorn Apple Valley, Inc. 41% $219,325
</TABLE>

Of these five losers, Midwest Grain and Exar appear to have good prospects
for quick and full recoveries. In the case of the other three, Charming Shoppes,
Delta Woodside and Thorn Apple Valley, difficulties in their respective
businesses have put these companies in the intensive care ward. While we hope
for some improvement in each case, it will take more patience, and full recovery
in the near term seems unlikely. The good news is that our five worst performers
combined had less than a 1.5% negative impact on the Fund's performance in 1995.

ANYTHING BUT TYPICAL

What do you get when interest rates fall precipitously, inflation is low,
demand for equities is strong and corporate earnings outpace analysts'
estimates? Answer: the LAST FIVE YEARS (actually the last 5 1/4 years)! The last
five years have been an exceptional period for equity investing, one in

which all the 'right stuff' was in place. Consider the following:

There has not been a correction of 10% or more for the S&P 500 or 15% or more
for the Russell 2000 since October of 1990, the longest stretch ever for both
indices.

The last five years were an anomaly in that a full market cycle did not take
place, but rather a trough (bottom) to peak (top) experience only.

It was the best (in terms of return and duration) trough to peak period in
the 17 year history of the Russell 2000.

It was only the 8th time out of 49 quarterly trailing five year return
periods that the Russell 2000 generated a 20%+ average annual return.

Within this market cycle, short-term interest rates had one of their most
significant declines -- three month T-bills went from 8.2% in September 1989
to 2.7% in September 1992.

It was one of the least volatile periods on record, and especially so in the
years 1993, 1994 and 1995.

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
highly likely that we have completed the best five year performance period for
this decade.

CAUSE OR EFFECT

[GRAPHIC] An interesting aspect of this five year rise in both stocks
and bonds is the ever increasing participation of individual
investors. Demand for liquid securities has grown to
proportions that now cloud our understanding as to whether it is the cause or
the effect of this bull market. While it seemed clear several years ago that
repeated and uninterrupted gains in stocks and bonds would heighten mass appeal,
few predicted the growing appetite we have today. Now, armed with demographic
studies and a healthy dose of 20-20 hindsight, it is the consensus belief that
our population has become a nation of savers and that demand for stocks will
remain steady, if not grow. In fact, it is that very same demand which is
believed to ensure future success and prevent any major reversal in market
fortunes.

We are a bit uncomfortable with this widely held assumption of continuous
prosperity. Just as rising markets initially created greater demand for
equities, corrections could dampen enthusiasm. We think there may be limits as
to how long individuals will forgo consumption in pursuit of savings.
Furthermore, we know there are alternative investments, like real estate or
natural resources, at times more attractive, for individuals to pursue. Finally,
we are certain, particularly in a global economy, that an ample supply of
securities can be created to meet and even exceed investors' demands. The
suggestion that continued success is nearly guaranteed by demand is an absurd
proposition. WE REMAIN MOST ASTONISHED, NOT WITH THE MAGNITUDE OF INVESTOR
APPETITE FOR STOCKS, BUT THE NEARLY UNIVERSAL ASSUMPTION OF ITS PERMANENCE. THE
REAL WORLD IS CYCLICAL AND SO ARE ITS MARKETS.

A NEW ERA ?

As the bull market enters its sixth year [GRAPHIC]
uninterrupted by normal corrections, we find
ourselves asking (and

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more to the point, others asking us) is this a new era in
investing? Have changes in national demographics and attitudes and, therefore,
investing patterns evolved to the point where traditional assumptions are
obsolete? By sticking to our own time tested and cycle proven discipline, have
we become the 'Clark Kent' of the investment world, permanently nerdy within the
new order?

We believe fundamental economic principles and human nature remain unchanged
in the '90s. Our national economy has not entered a new era of accelerated
growth. In fact, we would argue the opposite. American corporations, despite
restructuring and down-sizing, are not measurably more profitable if cumulative
retained earnings are any gauge. We still believe that individual investors are
motivated by fear and greed. In the current environment, greed has driven fear
from the investment dictionary.

Before long, we expect some normal balance in people's spending habits to
resume. Appetites for mutual fund investing may moderate in favor of consumption
or debt repayments. Weak sectors of our economy like apparel retailing and
infrastructure construction will recover. Basic commodity prices could rise and
equities would once again represent long-term interests in business, as opposed
to trading vehicles. Absolute return goals, previously forgotten, will regain
the spotlight.

THE NEXT FIVE YEARS WILL BE DIFFERENT

'It is not the going out of port, but the coming in, that determines the
success of a journey.' Henry Ward Beecher

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. Historical performance returns are built with
periods of over-performance and periods of under-performance and, over the
long-term, small-cap stocks have averaged approximately 12.5% per annum, not the
20% provided by the last five years. (1926 - 1995; source: Ibbotson and
Associates). We see no reason why performance should not revert to the mean and,
thus, a period of lower five year returns is likely.

The primary driver behind the most recent rally (and almost 15 years of a
strong market) has been interest rates. Although short-term rates remain at the
lower end of their trading range, it's the change in interest rates and not the
absolute level, which drives price earnings multiples and stock prices. 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.

IMPACT ON STOCK MARKET PERFORMANCE

[GRAPH]

LONG-TERM BOND YIELDS AND DOW JONES INDUSTRIAL AVERAGE

The last five years were also unique in that never in our nation's history
have so many traditional bank savers become stock market investors. The primary
reason for the massive

level of CD conversions has been the high returns
afforded stock market investors compared to the declining returns available in
traditional bank products. A strong contributing factor has been the stock
market's lack of volatility. Volatility has been so low that new investors have
been lulled by the apparent 'safety' of equity investing. Volatility, which has
always been a part of the investment equation, is likely to resurface and resume
a more normal course as background conditions change.

TIME FOR CHANGE . . . WE THINK NOT

We have been discussing what has happened. Now it's time to [GRAPHIC]
talk about what has not happened.

First, we have not changed our investment time horizon even though it seems
the rest of the world has. We view companies and investment performance with the
same long-term horizon because attractive valuations and returns, like the
planting and harvesting seasons, are never one and the same. Although our
risk-averse approach has worked against us in the most recent performance
period, it has provided very decent absolute returns in the context of history.

Second, we have not changed our underlying investment premise, that a
disciplined approach to investing in high quality, small-cap companies using
absolute valuation standards can provide attractive long-term returns.
Experience tells us that failure to 'stay the course' results in failure.

Third, the natural laws of gravity and market cycles have not been rescinded.

And finally, our confidence in the ultimate outcome of our approach to
small-cap has not changed. We expect our approach to small-cap investing, to
have both an absolute and relative pay-off. 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>

February 15, 1996

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

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

* Morningstar's 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 171 small-cap funds with a
three-year history as of 12/31/95 were: 1.04, 0.91 and 11.79, respectively.
The Morningstar risk ratio, beta and standard deviation for Royce Value Fund
over the same period were: 0.62, 0.61 and 6.43, respectively.
Source: Morningstar, Inc.

<PAGE>
<PAGE>
FINANCIAL REVIEW

<TABLE>
<CAPTION>
ANNUAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------- ---------------------------------
<S> <C> <C> <C> <C> <C>
1995.................... 18.7% 1988.................... 23.6% Since inception*........ 12.7%
1994.................... (1.6%) 1987.................... 0.6% 10-year................. 10.0%
1993.................... 10.7% 1986.................... 6.5% 5-year.................. 14.4%
1992.................... 16.0% 1985.................... 27.6%
1991.................... 30.8% 1984.................... 0.0%
1990.................... (13.6%) 1983.................... 42.8%
1989.................... 15.9%
</TABLE>

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

[GRAPH]

* 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>
<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 79.1% $ 124,952,020 74.9%
Other Stocks 20.9% 33,087,821 19.8
------- --------------- -------
Common Stocks 100.0% 158,039,841 94.7
-------
-------
Preferred Stocks 466,025 0.3
Cash & Other Net Assets 8,253,279 5.0
--------------- -------
Total Net Assets $ 166,759,145 100.0%
--------------- -------
--------------- -------

PORTFOLIO DIAGNOSTICS (unaudited)
- ---------------------------------------------------------------------------------------------------
Weighted Average Market Capitalization (Total Portfolio) $480 Million
Median Market Capitalization (Total Portfolio) $221 Million
Weighted Average P/E Ratio (200 Largest Positions) 14.1x
Weighted Average P/B Ratio (200 Largest Positions) 1.6x
Weighted Average Portfolio Yield (200 Largest Positions) 1.8%

COMMON STOCK SECTORS % OF NET ASSETS
- ---------------------------------------------------------------------------------------------------
Industrial Cyclicals 24.7%
Financial 24.2
Services 16.2
Consumer Durables 8.5
Retail 6.6
Consumer Staples 4.9
Energy 4.3
Technology 3.7
Health 1.4
Utilities 0.2

TOP TWENTY POSITIONS VALUE % OF NET ASSETS
- ---------------------------------------------------------------------------------------------------
1 Alleghany Corporation $1,948,122 1.2%
2 Comdisco, Inc. 1,912,537 1.1
3 Farmer Bros. Co. 1,614,113 1.0
4 ALLIED Group Inc. 1,431,000 0.9
5 Orion Capital Corporation 1,425,953 0.9
6 The Pioneer Group, Inc. 1,411,550 0.8
7 The Standard Register Company 1,376,550 0.8
8 Camco International Inc. 1,332,800 0.8
9 W.R. Berkley Corp. 1,314,188 0.8
10 Baldwin & Lyons, Inc. Cl. A & B 1,282,950 0.8
11 Kimball International, Inc. Cl. B 1,272,600 0.8
12 Stanhome Inc. 1,266,938 0.8
13 Tecumseh Products Company Cl. A & B 1,255,300 0.8
14 W.H. Brady Co. 1,247,400 0.7
15 Marshall Industries 1,236,813 0.7
16 Penn Engineering and Manufacturing Corp. 1,202,800 0.7
17 Air Express International Corporation 1,188,801 0.7
18 Florida Rock Industries, Inc. 1,161,225 0.7
19 Fab Industries, Inc. 1,099,688 0.7
20 Clarie's Stores, Inc. 1,089,225 0.7
</TABLE>

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[THIS PAGE INTENTIONALLY LEFT BLANK]

<PAGE>
<PAGE>
ROYCE
VALUE
FUND

FINANCIAL STATEMENTS

<PAGE>
<PAGE>
ROYCE VALUE FUND
SCHEDULE OF INVESTMENTS AT DECEMBER 31, 1995
- --------------------------------------------------------------------------------
COMMON STOCKS - 94.7%

<TABLE>
<CAPTION>
Value
Shares (Note 1)
- --------- ------------
<S> <C> <C>
CONSUMER DURABLES - 8.5%
7,079 Allen Organ Company Cl. B... $ 298,162
14,700 Arctco, Inc. ............... 191,100
18,633 *Athey Products Corp. ...... 80,355
7,000 *Baldwin Piano & Organ
Company................... 87,500
11,787 Bassett Furniture
Industries,
Incorporated.............. 274,048
16,290 *Bell Industries, Inc. ..... 366,525
47,388 Delta Woodside Industries,
Inc. ..................... 313,946
36,100 *Ethan Allen Interiors
Inc. ..................... 735,538
42,200 Flexsteel Industries,
Inc. ..................... 432,550
4,100 Forest City Enterprises,
Inc. ..................... 132,738
10,000 Garan Incorporated.......... 168,750
10,000 Haggar Corp. ............... 180,000
5,900 Heilig-Meyers Company....... 108,413
3,600 *Holophane Corporation....... 78,300
3,300 *International Jensen
Incorporated.............. 22,275
26,900 *Johnson Worldwide
Associates, Inc. ......... 605,250
55,800 Juno Lighting, Inc. ........ 892,800
12,600 K-Swiss Inc. Cl. A.......... 137,025
2,500 Katy Industries, Inc. ...... 23,125
13,300 La-Z-Boy Chair Company...... 410,638
1,166 LADD Furniture, Inc. ....... 15,304
16,400 *Lazare Kaplan
International, Inc. ...... 130,175
25,900 Liberty Homes, Inc. Cl. A... 314,038
21,950 Liberty Homes, Inc. Cl. B... 266,144
41,162 *Lifetime Hoan
Corporation............... 380,749
2,800 Matthews International
Corporation Cl. A......... 54,600
18,700 National Presto Industries,
Inc. ..................... 743,325
<CAPTION>
Value
Shares (Note 1)
- --------- ------------
<S> <C> <C>
17,872 Oakwood Homes Corporation... $ 685,838
11,500 *O'Sullivan Industries
Holdings, Inc. ........... 76,188
15,500 Reebok International
Ltd. ..................... 437,875
44,000 The Rival Company........... 973,500
20,400 Russ Berrie and Company,
Inc. ..................... 257,550
9,700 The Singer Company N.V. .... 270,388
25,600 Skyline Corporation......... 531,200
7,300 Springs Industries, Inc. Cl.
A......................... 302,038
63,400 The Stride Rite
Corporation............... 475,500
28,200 Sturm, Ruger & Company,
Inc. ..................... 771,975
22,500 Thomaston Mills, Inc. Cl.
A......................... 284,063
29,400 Thor Industries, Inc. ...... 569,625
12,900 Tiffany & Co. .............. 649,838
44,800 *The Topps Company, Inc. ... 229,600
7,200 Weyco Group, Inc. .......... 282,600
------------
14,241,151
------------
CONSUMER STAPLES - 4.9%
30,676 Alico, Inc. ................ 805,245
24,345 Block Drug Company, Inc. Cl.
A......................... 845,992
11,825 Farmer Bros. Co. ........... 1,614,113
10,700 Flowers Industries, Inc. ... 129,738
6,200 *Fuqua Enterprises, Inc. .... 115,475
5,300 Genesee Corporation Cl. B... 233,200
3,000 *J & J Snack Foods Corp. .... 33,000
17,200 *The Leslie Fay Companies,
Inc. ..................... 1,032
24,522 Midwest Grain Products,
Inc. ..................... 343,308
3,500 Russell Corporation......... 97,125
</TABLE>

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

<PAGE>
<PAGE>
ROYCE VALUE FUND
SCHEDULE OF INVESTMENTS AT DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 1)
- --------- ------------
<S> <C> <C>
CONSUMER STAPLES - (continued)
30,700 Savannah Foods & Industries,
Inc. ..................... $ 349,212
1,850 Seaboard Corporation........ 490,250
4,674 Standard Commercial
Corporation............... 46,156
43,500 Stanhome Inc. .............. 1,266,938
25,900 Thorn Apple Valley, Inc. ... 433,825
9,200 The Tranzonic Companies Cl.
B......................... 127,650
13,800 Velcro Industries N.V. ..... 845,250
26,450 WLR Foods, Inc. ............ 436,425
------------
8,213,934
------------
ENERGY - 4.3%
20,000 *Alamco, Inc. ............... 161,250
14,200 *American Oilfield Divers,
Inc. ..................... 101,175
12,200 *Atwood Oceanics, Inc. ...... 308,050
22,230 *Barrett Resources........... 653,006
25,000 *Belden & Blake
Corporation............... 437,500
2,700 *Tom Brown, Inc. ............ 39,488
47,600 Camco International Inc. ... 1,332,800
4,000 *Dawson Geophysical Co. ..... 37,500
13,000 Devon Energy Corporation.... 331,500
16,200 *Equity Oil Company.......... 95,175
1,600 *Global Industries, Ltd. .... 48,000
6,300 *Gulfmark International
Inc. ..................... 155,925
4,500 Helmerich & Payne, Inc. .... 133,875
19,100 Lufkin Industries, Inc. .... 432,138
10,600 *McFarland Energy, Inc. ..... 80,825
35,580 *Nabors Industries, Inc. .... 395,828
14,475 *Noble Drilling
Corporation............... 130,275
47,100 *Oceaneering International,
Inc. ..................... 606,413
700 Parker & Parsley Petroleum
Company................... 15,400
<CAPTION>
Value
Shares (Note 1)
- --------- ------------
<S> <C> <C>
25,150 Penn Virginia Corporation... $ 811,088
13,400 *Pool Energy Services Co. ... 127,300
22,100 *Santa Fe Energy Resources,
Inc. ..................... 212,713
2,400 *Tide West Oil Company....... 32,100
19,000 Western Gas Resources,
Inc. ..................... 306,375
7,300 *Westmoreland Coal
Company................... 19,163
14,000 The Wiser Oil Company....... 168,000
------------
7,172,862
------------
FINANCIAL - 24.2%
6,600 Alexander & Alexander
Services Inc. ............ 125,400
9,839 *Alleghany Corporation....... 1,948,122
39,750 ALLIED Group, Inc. ......... 1,431,000
24,300 Argonaut Group, Inc. ....... 789,750
15,952 *Avatar Holdings Inc. ....... 558,320
22,900 AVEMCO Corporation.......... 366,400
5,280 Baker Boyer Bancorp......... 168,960
16,800 Baldwin & Lyons, Inc. Cl.
A......................... 298,200
60,600 Baldwin & Lyons, Inc. Cl.
B......................... 984,750
28,500 Bar Harbor Bankshares....... 748,125
24,450 W. R. Berkley Corp. ........ 1,314,188
34,300 E.W. Blanch Holdings,
Inc. ..................... 801,763
8,900 The Boston Bancorp.......... 358,225
5,800 CMAC Investment
Corporation............... 255,200
10,172 CU Bancorp.................. 104,263
9,400 Capital Re Corporation...... 289,050
4,355 *Chartwell Re Corporation.... 95,813
84,532 Comdisco, Inc. ............. 1,912,537
9,700 The Commerce Group, Inc. ... 200,063
2,000 Consolidated-Tomoka Land
Co. ...................... 34,000
</TABLE>

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

<PAGE>
<PAGE>
ROYCE VALUE FUND
SCHEDULE OF INVESTMENTS AT DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 1)
- --------- ------------
<S> <C> <C>
FINANCIAL - (continued)
24,500 Cousins Properties
Incorporated.............. $ 496,125
11,320 Dauphin Deposit Corp. ...... 325,450
5,275 Downey Financial Corp. ..... 115,391
18,600 Phoenix Duff & Phelps
Corporation............... 127,875
12,400 Eaton Vance Corp. .......... 350,300
2,100 Enhance Financial Services
Group Inc. ............... 55,913
15,700 Equitable of Iowa
Companies................. 504,363
1,580 Exchange Bank............... 106,650
264 Farmers & Merchants Bank of
Long Beach................ 487,080
13,600 The First American Financial
Corporation............... 363,800
120 The First National Bank of
Anchorage................. 183,600
3,900 Foremost Corporation of
America................... 197,925
28,380 Fremont General
Corporation............... 1,042,965
20,000 Arthur J. Gallagher &
Co. ...................... 745,000
9,100 *Glenfeld, Inc. ............. 159,250
26,700 *Gryphon Holdings Inc. ...... 513,975
41,700 Guaranty National
Corporation............... 641,138
19,201 *Hanmi Bank.................. 158,408
12,722 Harleysville Group, Inc. ... 411,875
29,875 Hilb, Rogal & Hamilton
Company................... 399,578
600 Integon Corporation......... 12,375
9,500 Intercargo Corporation...... 95,000
3,470 *Investors Financial
Services Corp. ........... 72,003
667 *Investors Financial
Services Corp. Cl. A...... 13,843
13,000 The John Nuveen Company Cl.
A......................... 321,750
<CAPTION>
Value
Shares (Note 1)
- --------- ------------
<S> <C> <C>
11,852 Keystone Heritage Group,
Inc. ..................... $ 361,486
26,000 Lehman Bros. Holdings
Inc. ..................... 552,500
29,256 Leucadia National
Corporation............... 731,400
7,700 *Lexington Global Asset
Managers, Inc. ........... 36,816
10,665 *MAIC Holdings, Inc. ........ 362,610
7,000 *Markel Corporation.......... 528,500
12,400 Mid Ocean Limited........... 460,350
14,500 NYMAGIC, INC. .............. 246,500
5,894 National Bancorp of Alaska,
Inc. ..................... 383,110
10,800 *The Navigators Group,
Inc. ..................... 190,350
6,300 New England Investment
Companies, L.P. .......... 133,088
41,600 The Newhall Land and Farming
Company................... 707,200
2,000 Nobel Insurance Limited..... 22,750
4,700 North American Mortgage
Company................... 99,875
6,311 ONBANCorp, Inc. ............ 210,630
32,875 Orion Capital Corporation... 1,425,953
4,400 *Pacific Gateway Properties
Inc. ..................... 12,650
31,400 Paine Webber Group Inc. .... 628,000
20,500 PartnerRe Holdings Ltd. .... 563,750
10,900 Pennsylvania Manufacturers
Corporation............... 198,925
51,800 The Pioneer Group, Inc. .... 1,411,550
33,600 Piper Jaffray Companies
Inc. ..................... 462,000
5,200 Poe & Brown, Inc. .......... 129,350
9,391 Portsmouth Bank Shares,
Inc. ..................... 144,387
14,000 T. Rowe Price Associates,
Inc. ..................... 689,500
</TABLE>

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

<PAGE>
<PAGE>
ROYCE VALUE FUND
SCHEDULE OF INVESTMENTS AT DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 1)
- --------- ------------
<S> <C> <C>
FINANCIAL - (continued)
26,500 RLI Corp. .................. $ 662,500
1,300 Raymond James Financial,
Inc. ..................... 27,463
16,300 *Reading Company Cl. A....... 148,738
9,500 Real Estate Investment Trust
of California............. 188,813
4,800 Reinsurance Group of
America, Incorporated..... 175,800
7,015 Reliance Group Holdings,
Inc. ..................... 60,504
8,251 *Reliance Group Holdings,
Inc. ..................... 16,502
15,972 Republic Bancorp Inc. ...... 171,699
16,200 SEI Corporation............. 352,350
19,700 Security-Connecticut Life
Insurance Company......... 534,363
17,600 Student Loan Corporation.... 598,400
8,500 *Sunrise Bancorp............. 21,250
12,710 Susquehanna Bancshares,
Inc. ..................... 336,815
9,800 Transatlantic Holdings,
Inc. ..................... 719,075
16,000 Transnational Re Corporation
Cl. A..................... 392,000
15,500 Trenwick Group Inc. ........ 871,875
12,000 U. S. Trust Corp. .......... 597,000
5,250 Vornado Realty Trust........ 196,875
9,460 Webster Financial
Corporation............... 279,070
5,900 Wesco Financial
Corporation............... 1,073,800
7,200 Western Investment Real
Estate Trust.............. 77,400
53,400`D'Willis Corroon Group
plc....................... 620,775
16,800 Zenith National Insurance
Corp. .................... 359,100
14,000 Zurich Reinsurance Centre,
Inc. ..................... 425,250
------------
40,286,408
------------
<CAPTION>
Value
Shares (Note 1)
- --------- ------------
<S> <C> <C>
HEALTH - 1.4%
4,400 *Advanced Technology
Laboratories, Inc. ....... $ 107,800
16,200 C. R. Bard, Inc. ........... 522,450
8,600 Diagnostic Products
Corporation............... 325,725
16,300 *HAEMONETICS CORPORATION..... 289,325
25,240 Life Technologies, Inc. .... 687,790
7,600 *Marquette Electronics, Inc.
Cl. A..................... 153,900
22,155 Medex, Inc. ................ 249,244
------------
2,336,234
------------
INDUSTRIAL CYCLICALS - 24.7%
11,470 Aceto Corporation........... 183,533
27,600 *Ag-Chem Equipment Co.,
Inc. ..................... 745,200
10,900 Albany International
Corp. .................... 197,563
11,800 American Filtrona
Corporation............... 407,100
12,300 Ameron, Inc. ............... 462,788
14,000 Ampco-Pittsburgh
Corporation............... 150,500
6,400 AptarGroup, Inc. ........... 239,200
800 *Art's-Way Manufacturing
Co., Inc. ................ 4,200
2,800 Ash Grove Cement Company.... 322,000
17,900 Ashland Coal, Inc. ......... 382,613
22,900 Guy F. Atkinson Company of
California................ 229,000
13,550 BHA Group, Inc. Cl. A....... 179,538
16,500 BW/IP, Inc. Cl. A........... 272,250
35,473 Binks Manufacturing
Company................... 833,616
19,800 *Bird Corp. ................. 91,575
17,500 Blessings Corporation....... 181,563
46,200 W. H. Brady Co. Cl. A....... 1,247,400
4,600 Brenco, Incorporated........ 47,150
</TABLE>

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

<PAGE>
<PAGE>
ROYCE VALUE FUND
SCHEDULE OF INVESTMENTS AT DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 1)
- --------- ------------
<S> <C> <C>
INDUSTRIAL CYCLICALS - (continued)
6,370 Burnham Corporation Cl. A... $ 156,065
4,040 *Burnham Corporation Cl.
B......................... 98,980
46,200 CalMat Co. ................. 843,150
6,100 Carlisle Companies,
Incorporated.............. 246,288
6,000 Carpenter Technology
Corporation............... 246,750
25,000 Cascade Corp. .............. 350,000
78 Central Steel & Wire
Company................... 45,786
8,100 *Chase Brass Industries,
Inc. ..................... 102,263
3,500 Chicago Rivet & Machine
Co. ...................... 101,500
15,200 CLARCOR Inc. ............... 309,700
2,500 Cohu, Inc. ................. 63,750
200 ConBraCo Industries,
Inc. ..................... 110,000
10,800 Core Industries Inc. ....... 139,050
2,400 Crompton & Knowles
Corporation............... 31,800
15,700 Curtiss-Wright
Corporation............... 843,875
5,800 *Detrex Corporation.......... 30,450
25,800 *Devcon International
Corp. .................... 206,400
14,300 *DeVlieg-Bullard, Inc. ...... 32,175
6,500 *Dixie Yarns, Inc. .......... 25,188
15,800 Donaldson Company, Inc. .... 396,975
7,600 The Duriron Company,
Inc. ..................... 177,650
3,000 Eastern Co. ................ 36,750
34,500 Fab Industries, Inc. ....... 1,099,688
20,800 Fansteel Inc. .............. 143,000
16,733 Federal Signal
Corporation............... 432,966
39,700 Florida Rock Industries,
Inc. ..................... 1,161,225
<CAPTION>
Value
Shares (Note 1)
- --------- ------------
<S> <C> <C>
18,700 *Fruit of The Loom, Inc. Cl.
A......................... $ 455,813
16,600 Giddings & Lewis, Inc. ..... 273,900
24,306 Gilbert Associates, Inc. Cl.
A......................... 303,825
39,200 P. H. Glatfelter Company.... 671,300
19,087 Gorman-Rupp Company......... 295,849
14,500 A. P. Green Industries,
Inc. ..................... 282,750
26,700 Greif Bros. Corporation Cl.
A......................... 717,563
2,825 Guardsman Products, Inc. ... 37,784
15,350 Guilford Mills, Inc. ....... 312,756
14,512 *C. H. Heist Corp. ......... 101,584
2,000 Hubbell Incorporated Cl.
A......................... 124,250
5,100 Hunt Manufacturing Co. ..... 88,613
33,500 *Insituform Technologies,
Inc. Cl. A ............... 389,438
15,700 *Intermet Corporation........ 164,850
24,300 International Aluminum
Corporation............... 698,625
13,600 Kaydon Corporation.......... 413,100
24,000 *Kentucky Electric Steel
Company................... 198,000
50,400 Kimball International, Inc.
Cl. B..................... 1,272,600
17,200 Kinark Corporation.......... 50,525
12,370 Knape & Vogt Manufacturing
Company................... 214,929
3,900 *Laclede Steel Company....... 29,250
5,550 *Lancer Corporation.......... 77,700
23,221 Lawter International,
Inc. ..................... 269,944
35,512 LeaRonal, Inc. ............. 816,776
66,249 Lilly Industries, Inc. Cl.
A......................... 844,675
5,900 The Lincoln Electric
Company................... 147,500
22,500 The Lincoln Electric Company
Cl. A..................... 540,000
</TABLE>

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

<PAGE>
<PAGE>
ROYCE VALUE FUND
SCHEDULE OF INVESTMENTS AT DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 1)
- --------- ------------
<S> <C> <C>
INDUSTRIAL CYCLICALS - (continued)
9,000 Lindberg Corporation........ $ 60,750
6,900 Liqui-Box Corporation....... 204,413
3,500 *Lydall, Inc. ............... 79,625
2,000 The Manitowoc Company,
Inc. ..................... 61,250
7,800 *Manville Corporation........ 102,375
6,200 Herman Miller, Inc. ........ 186,000
18,300 Mine Safety Appliances
Company................... 878,400
18,100 Minuteman International,
Inc. ..................... 167,425
14,405 The Monarch Cement
Company................... 158,455
14,405 *The Monarch Cement Company
Cl. B..................... 158,455
10,000 The Monarch Machine Tool
Company................... 125,000
5,200 Paul Mueller Company........ 178,100
25,555 Myers Industries, Inc. ..... 418,463
18,400 NCH Corporation............. 1,062,600
4,500 *NCI Building Systems,
Inc. ..................... 111,375
12,500 *New Jersey Steel
Corporation............... 118,750
8,400 Nordson Corporation......... 472,500
575 Northfield Precision
Instrument Corporation.... 3,450
8,166 Oil-Dri Corporation of
America................... 127,594
31,400 Oregon Steel Mills, Inc. ... 439,600
31,800 Oshkosh Truck Corporation
Cl. B..................... 484,950
12,400 Penn Engineering and
Manufacturing Corp. ...... 1,202,800
18,900 *Perini Corporation.......... 155,925
1,000 *Pioneer Metals, Inc. ....... 200,000
50,000 *Power Control Tech. ........ 406,250
23,150 Precision Castparts
Corp. .................... 920,213
15,200 Preformed Line Products
Company................... 532,000
<CAPTION>
Value
Shares (Note 1)
- --------- ------------
<S> <C> <C>
12,400 *Proler International
Corp. .................... $ 93,000
26,500 Puerto Rican Cement Company,
Inc. ..................... 877,813
37,450 Quaker Chemical
Corporation............... 505,575
10,700 Regal-Beloit Corporation.... 232,725
15,925 Robroy Industries, Inc. Cl.
A......................... 234,894
47,400 *Rollins Environmental
Services, Inc. ........... 136,275
10,900 St. Joe Paper Company....... 599,500
9,600 *Sealed Air Corporation...... 270,000
1,900 *Sequa Corporation Cl. A..... 57,950
17,900 *Shiloh Industries, Inc. .... 222,631
20,200 *Simpson Manufacturing Co.,
Inc. ..................... 272,700
8,600 The L. S. Starrett Company
Cl. A..................... 222,525
5,600 *Steel of West Virginia,
Inc. ..................... 51,800
37,700 Tab Products Co. ........... 245,050
18,300 Tecumseh Products Company
Cl. A..................... 947,025
5,900 Tecumseh Products Company
Cl. B..................... 308,275
3,800 Tennant Company............. 90,725
13,450 *Todd Shipyards
Corporation............... 79,019
7,500 Treadco, Inc. .............. 43,125
11,200 *The Turner Corporation...... 93,800
36,500 *UNC, Inc. .................. 219,000
31,500 *Vallen Corporation.......... 618,188
15,800 Versa Technologies, Inc. ... 240,950
13,700 Vulcan Materials Company.... 789,463
14,800 Watts Industries, Inc. Cl.
A......................... 344,100
5,500 Wausau Paper Mills
Company................... 149,875
3,349 *Wedco Technology, Inc. ..... 43,956
</TABLE>

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

<PAGE>
<PAGE>
ROYCE VALUE FUND
SCHEDULE OF INVESTMENTS AT DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 1)
- --------- ------------
<S> <C> <C>
INDUSTRIAL CYCLICALS - (continued)
6,787 Woodward Governor Company... $ 498,845
19,500 Zero Corporation............ 346,125
------------
41,253,739
------------
RETAIL - 6.6%
5,000 J. Baker, Inc. ............. 28,750
20,500 Blair Corporation........... 648,313
19,200 *CATHERINES STORES
CORPORATION............... 158,400
120,000 Charming Shoppes, Inc. ..... 345,000
61,800 Claire's Stores, Inc. ...... 1,089,225
32,900 *The Clothestime, Inc. ...... 20,563
5,700 *Crown Books Corporation..... 69,825
4,900 Dart Group Corporation Cl.
A......................... 458,150
50,800 Deb Shops Inc. ............. 174,625
87,100 *The Dress Barn, Inc. ....... 860,113
64,000 Family Dollar Stores,
Inc. ..................... 880,000
3,900 Fingerhut Companies,
Inc. ..................... 54,113
5,700 Hancock Fabrics, Inc. ...... 51,300
8,000 *InterTAN Inc. .............. 58,000
9,000 *LANDS' END, INC. ........... 122,625
15,000 *Mac Frugal's Bargains -
Close-outs Inc. .......... 210,000
7,800 Marsh Supermarkets, Inc. Cl.
B......................... 103,350
14,500 Melville Corporation........ 445,875
21,500 *Mikasa, Inc. ............... 290,250
23,900 Nash Finch Company.......... 436,175
26,700 The Neiman Marcus Group,
Inc. ..................... 627,450
12,800 *Old America Stores, Inc. ... 104,000
17,400 *Orchard Supply Hardware
Stores Corporation........ 358,875
15,200 Oshkosh B'Gosh, Inc. Cl.
A......................... 266,000
<CAPTION>
Value
Shares (Note 1)
- --------- ------------
<S> <C> <C>
80,105 Pier 1 Imports, Inc. ....... $ 911,194
4,100 Ross Stores, Inc. .......... 78,413
26,000 Rykoff-Sexton, Inc. ........ 455,000
17,600 *Stein Mart, Inc. ........... 193,600
25,058 Strawbridge & Clothier Cl.
A......................... 601,392
15,400 *Syms Corp. ................. 115,500
84,300 *TBC Corporation............. 727,088
10,000 *United Retail Group,
Inc. ..................... 43,750
------------
10,986,914
------------
SERVICES - 16.2%
10,700 *ADT Limited................. 160,500
27,600 ABM Industries
Incorporated.............. 765,900
1,648 ADVO, Inc. ................. 42,848
51,687 Air Express International
Corporation............... 1,188,801
11,700 AMRESCO Holdings, Inc. ..... 149,175
20,000 Analysis & Technology,
Inc. ..................... 287,500
8,500 Angelica Corporation........ 174,250
56,848 Arnold Industries, Inc. .... 987,734
36,400 Atlantic Southeast Airlines,
Inc. ..................... 782,600
10,950 Banta Corporation........... 481,800
11,100 Bay Meadows Operating
Company and California
Jockey Club............... 162,338
3,200 Bob Evans Farms, Inc. ...... 60,800
19,200 Bowl America Incorporated
Cl. A..................... 146,400
43,100 Bowne & Co., Inc. .......... 862,000
10,200 CPI Corp. .................. 163,200
1,400 *Jenny Craig, Inc. .......... 13,825
35,900 Crawford & Company Cl. A.... 574,400
19,350 Crawford & Company Cl. B.... 314,438
34,000 Dames & Moore............... 412,250
</TABLE>

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

<PAGE>
<PAGE>
ROYCE VALUE FUND
SCHEDULE OF INVESTMENTS AT DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 1)
- --------- ------------
<S> <C> <C>
SERVICES - (continued)
4,766 DUFF & PHELPS CREDIT RATING
CO. ...................... $ 68,511
10,400 *Duplex Products, Inc. ...... 84,500
12,800 Ennis Business Forms,
Inc. ..................... 156,800
12,000 Expeditors International of
Washington, Inc. ......... 313,500
22,500 *FCA International Ltd. ..... 51,142
280 Fisher Companies Inc. ...... 21,000
15,800 FlightSafety International,
Inc. ..................... 793,950
10,500 Florida East Coast
Industries, Inc. ......... 716,625
6,800 *Fresh America Corp. ........ 65,450
60,246 Frozen Food Express
Industries, Inc. ......... 527,153
42,385 G & K Services, Inc. Cl.
A......................... 1,080,818
4,172 Grey Advertising Inc. ...... 834,400
40,500 *Handex Environmental
Recovery, Inc. ........... 207,563
9,100 Handleman Company........... 52,325
1,722 Hardinge Brothers, Inc. .... 44,772
46,737 The Harper Group............ 829,582
17,100 *Hornbeck Offshore Services,
Inc. ..................... 335,588
1,600 Houghton Mifflin Company.... 68,800
5,200 *IHOP Corp. ................. 135,200
16,400 *International Dairy Queen,
Inc. Cl. A................ 373,100
8,700 Kansas City Southern
Industries, Inc. ......... 398,025
11,400 Kenan Transport Company..... 245,100
1,700 *Lady Baltimore Foods,
Inc. ..................... 100,300
24,400 Lawson Products, Inc. ...... 597,800
38,500 *Marshall Industries......... 1,236,813
30,900 Merrill Corporation......... 494,400
15,600 *Milgray Electronics,
Inc. ..................... 167,700
<CAPTION>
Value
Shares (Note 1)
- --------- ------------
<S> <C> <C>
9,000 *National Education
Corporation............... $ 73,125
18,200 New England Business
Service, Inc. ............ 398,125
10,600 *Nichols Research
Corporation............... 272,950
50,900 *Offshore Logistics,
Inc. ..................... 642,613
1,800 THE OLSTEN CORPORATION...... 71,100
5,500 PCA International, Inc. .... 60,500
14,300 *PAYCO AMERICAN
CORPORATION............... 128,700
8,600 Petroleum Helicopters,
Inc. ..................... 122,550
22,200 *Pinkerton's, Inc. .......... 432,900
11,925 Pioneer-Standard
Electronics, Inc. ........ 158,006
6,000 The Pittston Services
Group..................... 188,250
16,000 Plenum Publishing
Corporation............... 624,000
6,000 The Reynolds and Reynolds
Company Cl. A............. 233,250
16,800 Richardson Electronics,
Ltd. ..................... 180,600
12,000 *Earl Scheib, Inc. .......... 93,000
1,300 *Scioto Downs, Inc. ......... 16,250
2,500 Scope Industries............ 80,000
1,500 *Shoney's, Inc. ............. 15,375
63,900 Sotheby's Holdings, Inc. Cl.
A......................... 910,575
68,400 The Standard Register
Company................... 1,376,550
25,000 Stone & Webster, Inc. ...... 896,875
36,900 Super Food Services,
Inc. ..................... 479,700
6,000 *Supercuts, Inc. ............ 48,000
16,900 True North Communications
Inc. ..................... 312,650
5,200 Uniforce Temporary Personel,
Inc. ..................... 57,200
</TABLE>

The accompanying notes are an integral part of the financial statements.
19

<PAGE>
<PAGE>
ROYCE VALUE FUND
SCHEDULE OF INVESTMENTS AT DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 1)
- --------- ------------
<S> <C> <C>
SERVICES - (continued)
35,500 *The Union Corporation....... $ 656,750
11,696 *Vie De France
Corporation............... 36,550
1,800 Werner Enterprises, Inc. ... 36,450
6,200 John Wiley & Sons, Inc. Cl.
A......................... 203,050
13,425 Wyle Laboratories........... 471,553
------------
27,008,873
------------
TECHNOLOGY - 3.7%
8,300 AAR CORP. .................. 182,600
8,800 *Acuson Corporation.......... 108,900
5,900 *American Power Conversion
Corporation............... 56,050
9,400 *American Software, Inc. Cl.
A......................... 61,100
5,850 Astro-Med, Inc. ............ 54,113
18,900 *Astrosystems, Inc. ......... 106,313
4,700 Augat Inc. ................. 80,488
2,300 BEI Electronics, Inc. ...... 16,963
7,700 *CEM Corporation............. 102,025
8,200 *CSP Inc. ................... 73,800
6,700 *Comptek Research, Inc. ..... 56,531
9,800 *Comshare, Inc. ............. 254,800
13,275 *DH Technology, Inc. ........ 325,238
10,700 *Data I/O Corporation........ 73,563
14,000 *Data Translation, Inc. ..... 227,500
6,400 *Dionex Corporation.......... 363,200
32,500 *Exar Corporation............ 479,375
5,156 Hach Company................ 88,941
2,700 *IFR Systems, Inc. .......... 24,975
5,700 Instron Corporation......... 76,950
16,800 Kaman Corporation Cl. A..... 186,900
30,700 *Liberty Technologies,
Inc. ..................... 153,500
20,800 *MDL Information Systems,
Inc. ..................... 478,400
3,200 MacNeal-Schwendler
Corporation............... 51,200
<CAPTION>
Value
Shares (Note 1)
- --------- ------------
<S> <C> <C>
17,107 *Maxwell Laboratories,
Inc. ..................... $ 141,133
9,200 Modern Controls, Inc. ...... 100,050
14,300 *Moore Products Co. ......... 255,613
27,600 National Computer Systems,
Inc. ..................... 520,950
28,200 Newport Corporation......... 229,125
6,200 The Oilgear Company......... 105,400
40,300 Scitex Corporation
Limited................... 549,088
12,600 *Sunair Electronics,
Inc. ..................... 29,925
1,000 *Technical Communications
Corporation............... 7,984
17,000 *Wang Laboratories, Inc. .... 282,625
11,100 Woodhead Industries,
Inc. ..................... 158,175
10,000 *Xata Corporation............ 76,250
------------
6,139,743
------------
UTILITIES - .2%
12,779 *Southern Union Company...... 322,670
8,032 Southwest Water Company..... 77,313
------------
399,983
------------
Total Common Stocks (Cost
$112,231,649)............. 158,039,841
------------
PREFERRED STOCKS - .3%
7,500 Anacomp, Inc. $4.125 Cum.
Conv. Rd. Ex. ............ 22,500
4,100 Bird Corp. $1.85 Conv. ..... 77,900
12,500 Sterling Financial
Corporation $1.8125 Conv.
Cum. ..................... 365,625
------------
Total Preferred Stocks (Cost
$535,370)................. 466,025
------------
</TABLE>

The accompanying notes are an integral part of the financial statements.
20

<PAGE>
<PAGE>
ROYCE VALUE FUND
SCHEDULE OF INVESTMENTS AT DECEMBER 31, 1995
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Principal Value
Amount (Note 1)
- ----------- ------------
<S> <C> <C>
GOVERNMENT OBLIGATION - 3.2%
$ 5,000,000 U.S. Treasury Notes 7%
due 4/15/99 (Cost
$5,087,500).......... $ 5,253,100
------------
<CAPTION>

Value
(Note 1)
-------------
<S> <C> <C>
REPURCHASE AGREEMENT - 1.6%
State Street Bank and Trust Company,
5.25% due 1/2/96, collateralized by
U.S. Treasury Bond, 7.25% due
5/15/16, valued at $2,794,196
(Cost $2,738,000).................. $ 2,738,000
------------
TOTAL INVESTMENTS - 99.8% (COST
$120,592,519)...................... 166,496,966
CASH AND OTHER ASSETS LESS
LIABILITIES - .2%.................. 262,179
------------
NET ASSETS - 100.0%.................. $166,759,145
------------
------------
</TABLE>

* Non-income producing.

`D' American Depository Receipt.

INCOME TAX INFORMATION - The cost of total investments for federal income tax
purposes was $121,183,059. At December 31, 1995, net unrealized appreciation for
all securities amounted to $45,313,907, consisting of aggregate gross unrealized
appreciation of $53,137,584 and aggregate gross unrealized depreciation of
$7,823,677. The Fund designates $9,735,262 as a capital gain dividend for
purpose of the dividend paid deduction.

The accompanying notes are an integral part of the financial statements.
21

<PAGE>
<PAGE>
ROYCE VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES AT DECEMBER 31, 1995
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Investments at value (identified cost $120,592,519) (Note 1)..................................... $166,496,966
Receivable for investments sold.................................................................. 838,031
Receivable for shares of beneficial interest sold................................................ 13,054
Receivable for dividends and interest............................................................ 371,239
Prepaid expenses and other assets................................................................ 4,467
------------
TOTAL ASSETS................................................................................... 167,723,757
------------
LIABILITIES:
Payable for investments purchased................................................................ 702,895
Payable for shares of beneficial interest redeemed............................................... 55,080
Investment advisory fee payable (Note 2)......................................................... 121,572
Accrued expenses................................................................................. 85,065
------------
TOTAL LIABILITIES.............................................................................. 964,612
------------
NET ASSETS..................................................................................... $166,759,145
------------
------------
ANALYSIS OF NET ASSETS:
Undistributed net investment income.............................................................. $ 62,471
Accumulated net realized gain on investments..................................................... 2,405,335
Net unrealized appreciation on investments....................................................... 45,904,447
Shares of beneficial interest (Note 3)........................................................... 16,649
Additional paid-in capital....................................................................... 118,370,243
------------
NET ASSETS..................................................................................... $166,759,145
------------
------------
PRICING OF SHARES:
Net asset value, offering and redemption price per share
($166,759,145[div]16,648,949 shares outstanding) (Note 3)...................................... $10.02
------
------
</TABLE>

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

<TABLE>
<CAPTION>
Years ended December 31,
----------------------------
1995 1994
------------ ------------

<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Net investment income........................................................ $ 769,183 $ 1,170,329
Net realized gain on investments............................................. 12,863,372 8,986,324
Net unrealized appreciation (depreciation) on investments.................... 14,831,715 (13,075,621)
------------ ------------
Increase (decrease) in net assets resulting from operations.................. 28,464,270 (2,918,968)
Dividends paid from net investment income.................................... (781,023) (874,449)
Distributions paid from net realized gain.................................... (11,521,019) (7,169,090)
FROM CAPITAL SHARE TRANSACTIONS:
Decrease in net assets from capital share transactions (Note 3).............. (16,283,633) (7,932,456)
------------ ------------
DECREASE IN NET ASSETS......................................................... (121,405) (18,894,963)
NET ASSETS:
Beginning of year............................................................ 166,880,550 185,775,513
------------ ------------
End of year (including undistributed net investment income of $62,471 and
$77,262, respectively)..................................................... $166,759,145 $166,880,550
------------ ------------
------------ ------------
</TABLE>

The accompanying notes are an integral part of the financial statements.
22

<PAGE>
<PAGE>
ROYCE VALUE FUND
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1995
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends....................................................................................... $ 3,038,954
Interest........................................................................................ 673,266
-----------
Total Income............................................................................ 3,712,220
-----------
Expenses:
Distribution fee (Note 2)....................................................................... 1,671,395
Investment advisory fee (Note 2)................................................................ 1,440,673
Custodian and transfer agent fees............................................................... 194,387
Administrative and clerical services............................................................ 71,131
Supplies and postage............................................................................ 48,050
Legal and auditing fees......................................................................... 42,907
Shareholder reports and notices................................................................. 32,056
Insurance....................................................................................... 30,382
Facilities and office space..................................................................... 20,051
Trustees' fees.................................................................................. 14,505
Miscellaneous................................................................................... 12,796
Fees waived by investment adviser and distributor (Note 2)...................................... (635,296)
-----------
Total Expenses.......................................................................... 2,943,037
-----------
Net Investment Income................................................................... 769,183
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments.................................................................... 12,863,372
Net unrealized appreciation on investments.......................................................... 14,831,715
-----------
Net realized and unrealized gain on investments..................................................... 27,695,087
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................................ $28,464,270
-----------
-----------
</TABLE>

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

- --------------------------------------------------------------------------------
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>
Years ended December 31,
------------------------------------------------------
1995 1994 1993 1992 1991
------ --------- ----- ----- -----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR........................... $9.11 $9.73 $9.51 $8.83 $6.96
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a)................................ 0.05 0.07 0.05 0.04 0.09
Net realized and unrealized gain (loss) on investments... 1.65 (0.23) 0.97 1.37 2.05
------ --------- ----- ----- -----
Total from investment operations....................... 1.70 (0.16) 1.02 1.41 2.14
------ --------- ----- ----- -----
LESS DISTRIBUTIONS:
Dividends paid from net investment income................ (0.05) (0.05) (0.05) (0.04) (0.09)
Distributions paid from net realized gain................ (0.74) (0.41) (0.75) (0.69) (0.18)
------ --------- ----- ----- -----
Total distributions.................................... (0.79) (0.46) (0.80) (0.73) (0.27)
------ --------- ----- ----- -----
NET ASSET VALUE, END OF YEAR................................. $10.02 $9.11 $9.73 $9.51 $8.83
------ --------- ----- ----- -----
------ --------- ----- ----- -----
TOTAL RETURN................................................. 18.7% (1.6%) 10.7% 16.0% 30.8%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Year (in thousands)....................... $166,759 $166,881 $185,776 $178,128 $167,498
Ratio of Expenses to Average Net Assets (b).................. 1.76% 1.80% 1.84% 1.88% 1.69%
Ratio of Net Investment Income to Average Net Assets......... 0.46% 0.67% 0.43% 0.42% 1.00%
Portfolio Turnover Rate...................................... 14% 22% 31% 28% 25%
</TABLE>

(a) Net investment income is shown after waivers of fees by the investment
adviser and distributor. The per share effect of these waivers is $0.04 for
the year ended December 31, 1995; $0.03 for the years ended December 31,
1994, 1993 and 1992 and $0.04 for the year ended December 31, 1991.
(b) Expense ratios are shown after waivers of fees by the investment adviser and
distributor. For the years ended December 31, 1995, 1994, 1993, 1992 and
1991, the expense ratios before the waivers and reimbursements would have
been 2.14%, 2.16%, 2.15%, 2.15% and 2.20%, respectively.

The accompanying notes are an integral part of the financial statements.
23

<PAGE>
<PAGE>
ROYCE VALUE FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

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.

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 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 not 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 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
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

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

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 its investment advisory agreement with Quest Advisory Corp.
('Quest'), the Fund paid Quest fees totaling $1,424,451 (net of $16,222
voluntarily waived by Quest) for the year ended December 31, 1995. 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
$1,052,321 (net of $619,074 voluntarily waived by QDI) for the year ended
December 31, 1995. The distribution agreement pursuant to Rule 12b-1, 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>
Year Ended Year Ended
December 31, 1995 December 31, 1994
-------------------------- --------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold.............................................. 525,172 $ 5,233,818 763,903 $ 7,367,068
Issued as reinvested dividends and
distributions................................... 1,179,996 11,764,560 833,361 7,591,915
Redeemed.......................................... (3,368,817) (33,282,011) (2,377,449) (22,891,439)
</TABLE>

Shares redeemed within one year 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 SECURITIES:

For the year ended December 31, 1995, the cost of purchases and the
proceeds from sales of investment securities, other than short-term securities,
amounted to $22,373,419 and $50,742,925, respectively.

<PAGE>

<PAGE>
ROYCE VALUE FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------

To the Board of Trustees of The Royce Fund and Shareholders of Royce Value Fund:

We have audited the accompanying statement of assets and liabilities of
Royce Value Fund, including the schedule of investments as of December 31, 1995,
the related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Royce Value Fund as of December 31, 1995, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended, in conformity with generally accepted accounting
principles.

COOPERS & LYBRAND L.L.P.

Boston, Massachusetts
February 7, 1996

<PAGE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]

<PAGE>
<PAGE>
POSTSCRIPT: CRUISES, DECK CHAIRS AND INVESTING

Charlie Brown and his friends frequently offer sage commentary on life. In
one Peanuts cartoon, Lucy remarks to Charlie Brown that 'life is like a deck
chair.' Some people on a cruise take their chairs to the rear of the ship so
they can see where they have been. Others face their chairs forward, to see
where they are going. Charlie Brown laments that on his ship of life, he has
never been able to get his chair unfolded.

Investing is much the same way. Investors often get different views from
their deck chairs. Sometimes the view on the 'large-cap growth' side is better,
while at other times the views in the direction of 'mid-cap blend' or of
'small-cap value' may be better. What is most important is that an investor be
on the cruise to begin with; being left standing on the pier is no fun at all.
It is equally important that an investor not get seasick by running from one
side of the ship to the other trying to get the best view. Studies have shown
that the average investor does far worse than the market in general largely
because he buys into, or sells out of, a fund or investment style at the wrong
time in an attempt to chase the best returns.

On the most recent leg of this cruise, large-cap stocks and technology
issues provided beautiful sunsets, while our investment style provided scenery
that was much less exciting. Such market swings between market capitalization
and investment style are well documented, and the most recent under-performance
by small-cap value is just as common as the over-performance in 1992 and 1993.
Remember, the sun usually sets on the other side of the ship on the way back to
port.

As to the remainder of our cruise, we are sitting not on the deck, but in
the engine room making sure the engines are in good working order. We remain
confident in our approach and the absolute results it produces over the
long-term, even though they may not be relatively dynamic at all times. We are
not concerned with how the rest of the chairs face or if they are folded or
unfolded, just whether our passengers will get to their final destination.

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

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.galt.com/www/home/mutual/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>
<PAGE>
ROYCE
EQUITY
INCOME
FUND
ANNUAL REPORT
DECEMBER 31, 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:

'ABLE TO LEAP TALL BUILDINGS
IN A SINGLE BOUND'

This familiar phrase describes popular superhero Superman,
[GRAPHIC] but it could also reflect 1995's stock market performance.
1995, like Superman, was extraordinary by any standard of
measurement. The large-cap oriented S&P 500, which was up 37.5%, had its best
calendar year return since 1958. Propelled by strong performance in 1995's first
two quarters, the S&P 500 took a breather in the third quarter only to resume a
leadership role in the final quarter of the year. Small-cap securities emerged
as performance leaders in the middle of the year, but were unable to keep up
with the 'faster than a speeding bullet' S&P 500. For the year, the Russell 2000
index of small-cap companies was up 28.4%.

ROYCE EQUITY INCOME FUND'S ('REI') income oriented, small-cap value approach
was no match for the performance of the raging bull market of 1995. Just as
'small-cap' under-performed large-cap, 'value' under-performed growth within the
small-cap category. Also, a low exposure to the market's best performing sector,
technology, and an above-average exposure to the consumer and service sectors
acted like kryptonite in holding back the Fund's relative short-term
performance. Nevertheless, REI's risk-averse style produced a 16.4% return in
1995, quite reasonable on an absolute basis. For the five years ended December
31, 1995, average annual total return for the Fund was 14.6%.

According to mutual fund evaluation service Morningstar, REI had one of the
lowest risk profiles out of the 67 equity income funds in the category, as
measured by Morningstar's risk ratio, standard deviation and beta for the last
three years*. We believe that managing risk is critical to delivering above
average long-term returns.

THE RELEVANCE OF RELATIVE PERFORMANCE

At some point in every modern bull
market, generally at the later
stages, the concept of relative [GRAPHIC]
performance becomes dominant in any
discussion of investment results. As
prospects of financial loss become distant
memories, investors shift their focus from absolute gains to relative rewards.
Investment strategies are changed, portfolio managers are replaced and solid
results are ignored in the quest for better relative performance. The
problem is . . . you can't eat relative performance! The whole concept dies
quickly in a period of negative returns. When markets turn south, new car
purchases are deferred and vacation plans are canceled, relative performance
soon becomes irrelevant. While relative performance

<PAGE>

<PAGE>
may make a great conversation topic at the cocktail party, it is positive
absolute returns, compounded at reasonable rates, which put dinner on the table.

THE VALUE IN VALUE INVESTING

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

Royce Equity Income Fund uses a risk-averse approach to invest
[GRAPHIC] in above average dividend paying 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 always confirm this
assumption's validity.

NO OTHER PLACE WE WOULD RATHER BE

While the Fund focuses on companies with market caps below $1 billion, our
weighted average and median market caps are actually much lower; $468 million
and $309 million, respectively at December 31, 1995. Although our orientation is
small-cap stocks, the capitalization of our picking universe is by no means
small. The small-cap segment is huge in numbers, 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. The small-cap sector is rich in opportunity and easily
accommodates our strategy given the size of the investable universe.

HOW IT WORKS

Our approach to investing in
individual small-cap companies has [GRAPHIC]
proven long-term benefits, but can
be both unpredictable and frustrating
in the near-term. We believe that the stock market in the short-term
is a polling place, and in the long-term, a highly efficient weighing device.
While our ultimate success will continue to be driven by the process of
'weighing the true value' of the small companies in which we have invested, the
following provides a brief glimpse of some of last year's 'election results.'

<PAGE>

IDEAS THAT WORKED

During calendar 1995, the usual but somewhat arbitrary
[GRAPHIC] measurement period of choice, each of these companies made
meaningful positive contributions to our overall performance.
More importantly, they represent specific examples of our discipline at work.
Royce Equity Income's BEST PERFORMERS, as measured by dollar impact to the
portfolio, were:

<TABLE>
<CAPTION>
SECURITY % GAIN $ GAIN
- -------- ------ --------
<S> <C> <C>
Student Loan Marketing Assoc. 103% $462,945
Waterhouse Inv. Svcs, Inc. Conv.
Deb. 60% $442,330
Glenfeld, Inc. Pfd. 62% $381,278
Comdisco, Inc. 47% $321,001
Atlantic Southeast Airlines, Inc. 97% $313,724
</TABLE>

Student Loan Marketing Association (Sallie Mae), Comdisco and Atlantic
Southeast Airlines were relatively large, high confidence investments we knew
well and regarded as 'premier' companies in their respective industries. In each
case, we built our positions when business conditions were difficult and the
investment community had voted negatively on future prospects.

Waterhouse Investors Services and Glenfeld were two convertible securities
initially purchased for their attractive yields. As bond prices rose and
financial service companies appreciated, these two investments performed more
like equities than fixed income securities, producing outsized returns for the
risks taken.

GOOD IDEAS AT THE TIME

Our greatest opportunities often occur when we identify good
[GRAPHIC] businesses which have fallen from favor due to some sort of
short-term, but correctable, problem. Even the best small-cap
companies are not immune to the flu. Usually, if their balance sheets are strong
and they have a solid history of high internal returns, these companies will
rebound. Although recoveries can take longer than we anticipate, we are
generally rewarded for our persistence. Unfortunately, a few of our investments
never recover. The five WORST PERFORMERS in 1995, as measured by dollar impact,
were:

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

<S> <C> <C>
Delta Woodside Industries, Inc. 42% $381,707
NCH Corporation 14% $156,509
Handleman Company 49% $125,515
Blair Corporation 21% $122,169
Guaranty National Corporation 16% $110,918
</TABLE>

Of these five losers, Blair and Guaranty National appear to have the best
prospects for full recoveries. In the case of Handleman and
Delta Woodside, difficulties in retailing and apparel manufacturing have put
these two companies in the intensive care ward. While we hope for some
improvement in each case, it will take more patience and full recovery seems
unlikely. In the case of NCH, our loss was relatively modest. Our main concern
is whether or not this once dominant company can regain its former prominence as
a premier industrial distributor. The good news is that our five worst
performers combined had less than a 1.5% negative impact on the Fund's
performance in 1995.

ANYTHING BUT TYPICAL

There has not been a correction of 10% or more for the S&P 500 or 15% or more
for the Russell 2000 since October of 1990, the longest stretch ever for both
indices.

The last five years were an anomaly in that a full market cycle did not take
place, but

<PAGE>

<PAGE>
rather a trough (bottom) to peak (top) experience only.

It was the best (in terms of return and duration) trough to peak period in
the 17 year history of the Russell 2000.

It was only the 8th time out of 49 quarterly trailing five year return
periods that the Russell 2000 generated a 20%+ average annual return.

Within this market cycle, short-term interest rates had one of their most
significant declines -- three month T-bills went from 8.2% in September 1989
to 2.7% in September 1992.

It was one of the least volatile periods on record, and especially so in the
years 1993, 1994 and 1995.

CAUSE OR EFFECT

An interesting aspect of this five year rise in both stocks
[GRAPHIC] and bonds is the ever increasing participation of individual
investors. Demand for liquid securities has grown to
proportions that now cloud our understanding as to whether it is the cause or
the effect of this bull market. While it seemed clear several years ago that
repeated and uninterrupted gains in stocks and bonds would heighten mass appeal,
few predicted the growing appetite we have today. Now, armed with demographic
studies and a healthy dose of 20-20 hindsight, it is the consensus belief that
our population has become a nation of savers and that demand for stocks will
remain steady, if not grow. In fact, it is that very same demand which is
believed to ensure future success and prevent any major reversal in market
fortunes.

We are a bit uncomfortable with this widely held assumption of continuous
prosperity. Just as rising markets initially created greater demand for
equities, corrections could dampen enthusiasm. We think there may be limits as
to how long individuals will forgo consumption in
pursuit of savings. Furthermore, we know there are alternative investments, like
real estate or natural resources, at times more attractive, for individuals to
pursue. Finally, we are certain, particularly in a global economy, that an ample
supply of securities can be created to meet and even exceed investors' demands.
The suggestion that continued success is nearly guaranteed by demand is an
absurd proposition. WE REMAIN MOST ASTONISHED, NOT WITH THE MAGNITUDE OF
INVESTOR APPETITE FOR STOCKS, BUT THE NEARLY UNIVERSAL ASSUMPTION OF ITS
PERMANENCE. THE REAL WORLD IS CYCLICAL AND SO ARE ITS MARKETS.

A NEW ERA ?

As the bull market enters its sixth year
uninterrupted by normal corrections, we find
ourselves asking (and more to the point, others [GRAPHIC]
asking us) is this a new era in investing? Have
changes in national demographics and attitudes and, therefore,
investing patterns evolved to the point where traditional assumptions are
obsolete? By sticking to our own time tested and cycle proven discipline, have
we become the 'Clark Kent' of the investment world, permanently nerdy within the
new order?

<PAGE>

THE NEXT FIVE YEARS WILL BE DIFFERENT

'It is not the going out of port, but the coming in, that determines the
success of a journey.' Henry Ward Beecher

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. Historical performance returns are built with
periods of over-performance and periods of under-performance and, over the
long-term, small-cap stocks have averaged approximately 12.5% per annum, not the
20% provided by the last five years. (1926 -- 1995; source: Ibbotson and
Associates). We see no reason why performance should not revert to the mean and,
thus, a period of lower five year returns is likely.

IMPACT OF INTEREST ON STOCK MARKET PERFORMANCE

[GRAPH]

LONG-TERM GOVERNMENT BOND YIELDS AND DOW JONES INDUSTRIAL AVERAGE

The last five years were also unique in that never in our nation's history
have so many traditional bank savers become stock market investors. The primary
reason for the massive level of CD conversions has been the high returns
afforded stock market investors compared to the declining returns available in
traditional bank products. A strong contributing factor has been the stock
market's lack of volatility. Volatility has been so low that new investors have
been lulled by the apparent 'safety' of equity investing. Volatility, which has
always been a part of the investment equation, is likely to resurface and resume
a more normal course as background conditions change.

<PAGE>

TIME FOR CHANGE . . . WE THINK NOT

We have been discussing what has
happened. Now it's time to [GRAPHIC]
talk about what has not happened.

Third, the natural laws of gravity and market cycles have not been rescinded.

And finally, our confidence in the ultimate outcome of our approach has not
changed. We expect our income oriented approach to small-
cap investing, to have both an absolute and relative pay-off. Your continued
confidence is appreciated.

Yours faithfully,

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

February 15, 1996

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

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

* Morningstar's 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 67 equity income funds with a
three-year history as of 12/31/95 were: 0.67, 0.62 and 7.45, respectively. The
Morningstar risk ratio, beta and standard deviation for Royce Equity Income
Fund over the same period were: 0.51, 0.49 and 5.61, respectively. Source:
Morningstar, Inc.

<PAGE>

<PAGE>
FINANCIAL REVIEW

<TABLE>
<CAPTION>
ANNUAL RESULTS
- ---------------------------------------
<S> <C>
1995........................... 16.4%
1994........................... (3.3%)
1993........................... 13.1%
1992........................... 19.4%
1991........................... 30.3%
1990*.......................... (15.4%)
</TABLE>

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- ---------------------------------------
(THROUGH 12/31/95)
<S> <C>
Since Inception*............... 9.0%
5-Year......................... 14.6%
</TABLE>

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

[GRAPH]

* 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 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>

<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 $42,054,653 74.9%
Bonds & Preferred Stocks 10,657,131 19.0
Cash & Other Net Assets 3,465,398 6.1
----------- -----
Total Net Assets $56,177,182 100.0%
----------- -----
----------- -----
PORTFOLIO DIAGNOSTICS (unaudited)
- -----------------------------------------------------------------------------------------------------------
Weighted Average Market Capitalization $468 Million
Median Market Capitalization $309 Million
Weighted Average P/E Ratio 14.3x
Weighted Average P/B Ratio 1.4x
Weighted Average Portfolio Yield 4.5%

COMMON STOCK SECTORS % OF NET ASSETS
- -----------------------------------------------------------------------------------------------------------
Industrial Cyclicals 22.6%
Financial 18.3
Services 10.6
Consumer Durables 9.3
Retail 6.2
Consumer Staples 4.7
Energy 2.3
Technology 0.9

TOP TWENTY POSITIONS VALUE % OF NET ASSETS
- -----------------------------------------------------------------------------------------------------------
1 Central Steel & Wire Company $1,364,188 2.4%
2 Kimball International, Inc. Cl. B 1,161,500 2.1
3 The Standard Register Company 1,129,013 2.0
4 NCH Corporation 1,079,925 1.9
5 Comdisco, Inc. 1,079,213 1.9
6 Zenith National Insurance Corp. 1,066,611 1.9
7 Stanhome Inc. 1,057,238 1.9
8 Hilb, Rogal & Hamilton Company 981,725 1.7
9 *National Education Corporation 940,975 1.7
10 *Richardson Electronics, Ltd. 929,250 1.7
11 The Newhall Land and Farming Company 904,400 1.6
12 Family Dollar Stores, Inc. 880,000 1.6
13 *Reliance Group Holdings, Inc. 864,225 1.5
14 Crawford & Company 845,550 1.5
15 *Figgie International Inc. 834,805 1.5
16 Lufkin Industries, Inc. 823,550 1.5
17 *Cliffs Drilling Company 816,750 1.5
18 *Waban Inc. 799,500 1.4
19 Delta Woodside Industries, Inc. 795,000 1.4
20 P.H. Glatfelter Company 782,613 1.4

*Debt security of issuer.
</TABLE>

<PAGE>

<PAGE>
ROYCE EQUITY INCOME FUND
SCHEDULE OF INVESTMENTS AT DECEMBER 31, 1995
- --------------------------------------------------------------------------------
COMMON STOCKS - 74.9%
<TABLE>
<CAPTION>
Value
Shares (Note 1)
- --------- -----------
<S> <C> <C>
CONSUMER DURABLES - 9.3%
7,100 Bassett Furniture
Industries,
Incorporated............. $ 165,074
120,000 Delta Woodside Industries,
Inc...................... 795,000
43,400 Flexsteel Industries,
Inc...................... 444,850
45,700 Garan Incorporated......... 771,188
38,500 Juno Lighting, Inc......... 616,000
5,000 La-Z-Boy Chair Company..... 154,375
17,800 National Presto Industries,
Inc...................... 707,550
19,100 The Ryland Group, Inc...... 267,400
23,700 Skyline Corporation........ 491,775
22,900 The Stride Rite
Corporation.............. 171,750
20,000 Sturm, Ruger & Company,
Inc...................... 547,500
8,300 Superior Surgical Mfg...... 78,850
-----------
5,211,312
-----------
CONSUMER STAPLES - 4.7%
10,362 Block Drug Company, Inc.
Cl. A.................... 360,108
14,100 Genesee Corporation Cl.
B........................ 620,400
24,700 Midwest Grain Products,
Inc...................... 345,800
12,300 The J.M. Smucker Company
Cl. A.................... 270,600
36,300 Stanhome Inc............... 1,057,238
-----------
2,654,146
-----------
ENERGY - 2.3%
11,100 The Louisiana Land and
Exploration Company...... 475,913
36,400 Lufkin Industries, Inc..... 823,550
-----------
1,299,463
-----------
FINANCIAL - 18.3%
20,700 Argonaut Group, Inc........ 672,750
22,200 E.W. Blanch Holdings,
Inc...................... 518,925
47,700 Comdisco, Inc.............. 1,079,213
31,500 Cousins Properties
Incorporated............. 637,875

<CAPTION>
Value
Shares (Note 1)
- --------- -----------
<S> <C> <C>
14,400 Dauphin Deposit Corp....... $ 414,000
8,300 Eaton Vance Corp........... 234,475
2,400 Arthur J. Gallagher &
Co....................... 89,400
35,000 Guaranty National
Corporation.............. 538,125
73,400 Hilb, Rogal & Hamilton
Company.................. 981,725
2,323 *Investors Financial
Services Corp............ 48,202
447 *Investors Financial
Services Corp. Cl. A..... 9,266
14,250 Keystone Financial, Inc.... 427,500
19,400 Mercantile Bankshares
Corporation.............. 540,775
53,200 The Newhall Land and
Farming Company.......... 904,400
12,600 Susquehanna Bancshares,
Inc...................... 333,900
2,800 U. S. Trust Corp........... 139,300
9,600 Vornado Realty Trust....... 360,000
10,100 Washington National
Corporation.............. 279,013
59,400`D'Willis Corroon Group
plc...................... 690,525
10,100 Wilmington Trust
Corporation.............. 311,838
49,900 Zenith National Insurance
Corp..................... 1,066,611
-----------
10,277,818
-----------
INDUSTRIAL CYCLICALS - 22.6%
2,090 Aceto Corporation.......... 33,440
6,700 Burnham Corporation Cl.
A........................ 164,150
14,700 Calgon Carbon
Corporation.............. 176,400
34,700 CalMat Co.................. 633,275
2,324 Central Steel & Wire
Company.................. 1,364,188
16,700 CLARCOR Inc................ 340,263
24,800 Crompton & Knowles
Corporation.............. 328,600
8,500 Curtiss-Wright
Corporation.............. 456,875
22,700 Florida Rock Industries,
Inc...................... 663,975
</TABLE>

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

<PAGE>

<PAGE>
ROYCE EQUITY INCOME FUND
SCHEDULE OF INVESTMENTS AT DECEMBER 31, 1995 (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 1)
- --------- -----------
INDUSTRIAL CYCLICALS (continued)
<S> <C> <C>
45,100 Gilbert Associates, Inc.
Cl. A.................... $ 563,750
45,700 P. H. Glatfelter Company... 782,613
8,100 International Aluminum
Corporation.............. 232,875
46,000 Kimball International, Inc.
Cl. B.................... 1,161,500
45,600 Lawter International,
Inc...................... 530,100
48,200 Lilly Industries, Inc. Cl.
A........................ 614,550
1,500 Herman Miller, Inc......... 45,000
12,000 Minuteman International,
Inc...................... 111,000
18,700 NCH Corporation............ 1,079,925
30,300 Oshkosh Truck Corporation
Cl. B.................... 462,075
11,000 Quaker Chemical
Corporation.............. 148,500
21,700 The L. S. Starrett Company
Cl. A.................... 561,484
64,700 Tab Products Co............ 420,550
19,800 Watts Industries, Inc. Cl.
A........................ 460,350
9,600 Woodward Governor
Company.................. 705,600
36,600 Zero Corporation........... 649,650
-----------
12,690,688
-----------
RETAIL - 6.2%
18,400 Blair Corporation.......... 581,900
20,100 Claire's Stores, Inc....... 354,263
64,000 Family Dollar Stores,
Inc...................... 880,000
16,800 Melville Corporation....... 516,600
33,300 Nash Finch Company......... 607,725
22,900 Strawbridge & Clothier Cl.
A........................ 549,600
-----------
3,490,088
-----------
SERVICES - 10.6%
9,500 Banta Corporation.......... 418,000
29,800 Bowne & Co., Inc........... 596,000

<CAPTION>
Value
Shares (Note 1)
- --------- -----------
<S> <C> <C>
43,300 Crawford & Company Cl. A... $ 692,800
9,400 Crawford & Company Cl. B... 152,750
28,700 Ecology and Environment,
Inc. Cl. A............... 240,362
45,200 Ennis Business Forms,
Inc...................... 553,700
18,700 Handleman Company.......... 107,525
20,000 John H. Harland Company.... 417,500
5,000 National Service
Industries, Inc.......... 161,875
34,600 New England Business
Service, Inc............. 756,875
24,400 Piccadilly Cafeterias,
Inc...................... 231,800
5,000 REFAC Technology
Development
Corporation.............. 33,125
56,100 The Standard Register
Company.................. 1,129,013
33,800 Super Food Services,
Inc...................... 439,400
-----------
5,930,725
-----------
TECHNOLOGY - .9%
5,300 Kaman Corporation Cl. A.... 58,963
32,400 Scitex Corporation
Limited.................. 441,450
-----------
500,413
-----------
Total Common Stocks (Cost
$39,710,304)............. 42,054,653
-----------
PREFERRED STOCKS - 3.0%
29,700 Cliffs Drilling Company
$2.3125 Conv. Ex......... 816,750
9,400 Glenfeld, Inc. 8.75%
Non-Cum. Conv. Ser. E.... 425,350
</TABLE>

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

<PAGE>

<PAGE>
ROYCE EQUITY INCOME FUND
SCHEDULE OF INVESTMENTS AT DECEMBER 31, 1995 (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 1)
- --------- -----------
PREFERRED STOCKS (continued)
<S> <C> <C>
16,800 Manville Corporation $1
Ser. B Cum............... $ 422,100
-----------
Total Preferred Stocks
(Cost $1,350,645)........ 1,664,200
-----------
<CAPTION>
Principal
Amount
- -----------
<S> <C> <C>
CORPORATE BONDS - 16.0%
$ 388,000 AnnTaylor Stores
Corporation 8.75% Sub.
Deb. due 6/15/00......... 320,100
569,000 J. Baker, Inc. 7% Conv.
Sub. Deb.
due 6/01/02.............. 398,300
290,000 Continental Pacific Bank
Var. Rate Conv. Deb. due
4/30/03.................. 290,000
796,000 Dixie Yarns, Inc. 7% Conv.
Sub. Deb. due 5/15/12.... 616,900
700,000 Fieldcrest Cannon, Inc. 6%
Conv. Sub. Deb. due
3/15/12.................. 479,500
839,000 Figgie International Inc.
9.875% Sr. Note due
10/01/99................. 834,805
397,000 Marsh Supermarkets, Inc. 7%
Conv. Sub. Deb. due
2/15/03.................. 388,068
1,330,000 National Education
Corporation 6.5% Conv.
Sub. Deb. due 5/15/11.... 940,975
209,000 Orchard Supply Hardware
Stores Corp. 9.375% Sr.
Note due 2/15/02......... 199,595
<CAPTION>
Principal Value
Amount (Note 1)
- ----------- -----------
<S> <C> <C>
$ 575,000 Playtex Family Products
Corp 9% Sr. Sub. Note due
12/15/03................. $ 501,688
720,000 RLI Corp. 6% Conv. Sub.
Deb. due 7/15/03......... 756,900
835,000 Reliance Group Holdings,
Inc. 9% Sr. Note due
11/15/00................. 864,225
1,050,000 Richardson Electronics,
Ltd. 7.25% Conv. Sub.
Deb. due 12/15/06........ 929,250
718,000 Sequa Corporation 9.375%
Sr. Sub. Deb. due
12/15/03................. 673,125
820,000 Waban Inc. 6.50% Conv. Sub.
Deb. due 7/01/02......... 799,500
-----------
Total Corporate Bonds (Cost
$8,548,416).............. 8,992,931
-----------
REPURCHASE AGREEMENT - 5.5%
State Street Bank and Trust Company,
5.25% due 1/02/96, collateralized by
U.S. Treasury Notes, 7.25% due
5/15/16, valued at $3,184,351 (Cost
$3,117,000)........................... 3,117,000
-----------

TOTAL INVESTMENTS - 99.4% (COST
$52,726,365).......................... 55,828,784
CASH AND OTHER ASSETS LESS
LIABILITIES - .6%..................... 348,398
-----------
NET ASSETS - 100.0%..................... $56,177,182
-----------
-----------
</TABLE>

* Non-income producing.
`D' American Depository Receipt.

INCOME TAX INFORMATION - The cost of total investments for federal income tax
purposes was $52,941,502. At December 31, 1995, net unrealized apprecation for
all securities amounted to $2,887,282, consisting of aggregate gross unrealized
appreciation of $5,401,624 and aggregate gross unrealized depreciation of
$2,514,342.

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

<PAGE>

<PAGE>
ROYCE EQUITY INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES AT DECEMBER 31, 1995
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Investments at value (identified cost $52,726,365) (Note 1)....................................... $55,828,784
Receivable for investments sold................................................................... 387,432
Receivable for shares of beneficial interest sold................................................. 73,458
Receivable for dividends and interest............................................................. 283,114
-----------
TOTAL ASSETS.................................................................................... 56,572,788
-----------
LIABILITIES:
Payable for investments purchased................................................................. 275,390
Payable for shares of beneficial interest redeemed................................................ 77,503
Accrued expenses.................................................................................. 42,713
-----------
TOTAL LIABILITIES............................................................................... 395,606
-----------
NET ASSETS...................................................................................... $56,177,182
-----------
-----------
ANALYSIS OF NET ASSETS:
Accumulated net realized gain on investments...................................................... $ 67,969
Net unrealized appreciation on investments........................................................ 3,102,419
Shares of beneficial interest (Note 3)............................................................ 9,859
Additional paid-in capital........................................................................ 52,996,935
-----------
NET ASSETS...................................................................................... $56,177,182
-----------
-----------
PRICING OF SHARES:
Net asset value, offering and redemption price per share
($56,177,182 [div] 9,858,885 shares outstanding) (Note 3)....................................... $5.70
-----
-----

</TABLE>

STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Years ended December 31,
---------------------------
1995 1994
------------ -----------

<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Net investment income.......................................................... $ 2,289,102 $ 2,995,227
Net realized gain on investments............................................... 2,816,539 578,459
Net unrealized appreciation (depreciation) on investments...................... 5,050,556 (6,263,425)
------------ -----------
Increase (decrease) in net assets resulting from operations.................... 10,156,197 (2,689,739)
Dividends paid from net investment income...................................... (2,310,331) (2,910,795)
Distributions paid from net realized gains..................................... (394,120) (1,456,528)
FROM CAPITAL SHARE TRANSACTIONS:
Decrease in net assets from capital share transactions (Note 3)................ (28,405,230) (473,326)
------------ -----------
DECREASE IN NET ASSETS........................................................... (20,953,484) (7,530,388)
NET ASSETS:
Beginning of year.............................................................. 77,130,666 84,661,054
------------ -----------
End of year (including distributions in excess of net investment income of $0
and $5,515, respectively).................................................... $ 56,177,182 $77,130,666
------------ -----------
------------ -----------
</TABLE>

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

<PAGE>

<PAGE>
ROYCE EQUITY INCOME FUND
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1995
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends..................................................................................... $ 1,995,242
Interest...................................................................................... 1,107,671
-----------
Total Income........................................................................ 3,102,913
-----------
Expenses:
Investment advisory fee (Note 2).............................................................. 655,813
Custodian and transfer agent fees............................................................. 84,316
Administrative and clerical services.......................................................... 27,933
Supplies and postage.......................................................................... 27,673
Legal and auditing fees....................................................................... 18,335
Shareholder reports and notices............................................................... 14,427
Federal and state registration fees........................................................... 14,393
Miscellaneous................................................................................. 14,028
Facilities and office space................................................................... 7,874
Trustees' fees................................................................................ 6,049
Fee waived by investment adviser (Note 2)..................................................... (57,030)
-----------
Total Expenses...................................................................... 813,811
-----------
Net Investment Income............................................................... 2,289,102
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments.................................................................. 2,816,539
Net unrealized appreciation on investments........................................................ 5,050,556
-----------
Net realized and unrealized gain on investments................................................... 7,867,095
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............................................. $10,156,197
-----------
-----------
</TABLE>

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

<PAGE>

<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>
Years ended December 31,
---------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR....................... $5.12 $5.58 $5.49 $4.93 $4.03
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a)............................ 0.21 0.19 0.21 0.22 0.22
Net realized and unrealized gain (loss) on
investments....................................... 0.62 (0.37) 0.50 0.72 0.99
------- ------- ------- ------- -------
Total from investment operations................ 0.83 (0.18) 0.71 0.94 1.21
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends paid from net investment income............ (0.21) (0.18) (0.21) (0.22) (0.22)
Distributions paid from net realized gains........... (0.04) (0.10) (0.41) (0.16) (0.09)
------- ------- ------- ------- -------
Total distributions............................. (0.25) (0.28) (0.62) (0.38) (0.31)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF YEAR............................. $5.70 $5.12 $5.58 $5.49 $4.93
------- ------- ------- ------- -------
------- ------- ------- ------- -------
TOTAL RETURN............................................. 16.4% (3.3%) 13.1% 19.4% 30.3%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Year (in thousands)................... $56,177 $77,131 $84,661 $54,101 $41,063
Ratio of Expenses to Average Net Assets (b).............. 1.24% 1.27% 1.00% 0.99% 0.99%
Ratio of Net Investment Income to Average Net Assets..... 3.49% 3.43% 3.79% 4.31% 4.58%
Portfolio Turnover Rate.................................. 29% 47% 100% 59% 72%
</TABLE>

- ------------
(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, 1995, 1994 and 1993 and $.02 for the years
ended December 31, 1992 and 1991.
(b) Expense ratio before waiver of fees by the investment adviser and
distributor would have been 1.33% for each of the years ended December 31,
1995 and 1994; 1.39% for the year ended December 31, 1993 and 1.30% for
each of the years ended December 31, 1992 and 1991.

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

<PAGE>

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

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:

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:

c. Taxes:

At December 31, 1995, the Fund had a net tax basis capital loss
carryforward of approximately $643,266, of which $214,422 may be applied
annually against any realized net taxable capital gains until December 31, 1998,
the expiration date.

d. Distributions:

The Fund declares dividends on a quarterly basis and capital gains
distributions annually. These distributions are recorded on the ex-dividend date
and 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

<PAGE>

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

2. INVESTMENT ADVISER:

Under the Trust's investment advisory agreement with Quest Advisory Corp.
('Quest'), the Fund accrued and paid Quest fees totaling $598,783 (net of
$57,030 voluntarily waived by Quest) for the year ended December 31, 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:

<S> <C> <C> <C> <C>
Sold............................................ 1,556,253 $ 8,488,920 9,149,609 $ 50,298,954
Issued as reinvested dividends and
distributions................................. 336,962 1,878,994 645,924 3,397,080
Redeemed........................................ (7,105,688) (38,773,144) (9,906,907) (54,169,360)
</TABLE>

Shares redeemed within one year 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 SECURITIES:

For the year ended December 31, 1995, the cost of purchases and the
proceeds from sales of portfolio securities, other than short-term securities,
amounted to $17,365,599 and $47,336,237, respectively.

<PAGE>

<PAGE>
ROYCE EQUITY INCOME FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------

To the Board of Trustees of The Royce Fund and Shareholders of Royce Equity
Income Fund:

We have audited the accompanying statement of assets and liabilities of
Royce Equity Income Fund, including the schedule of investments as of December
31, 1995, the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.

In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Royce Equity Income Fund as of December 31, 1995, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and the financial highlights for each of the five
years in the period then ended, in conformity with generally accepted accounting
principles.

COOPERS & LYBRAND L.L.P.

Boston, Massachusetts
February 7, 1996

<PAGE>

<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]

<PAGE>

<PAGE>
POSTSCRIPT: CRUISES, DECK CHAIRS AND INVESTING

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

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.galt.com/www/home/mutual/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>
<PAGE>
ROYCE
PREMIER
FUND
ANNUAL REPORT
DECEMBER 31, 1995
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:

'ABLE TO LEAP TALL BUILDINGS
IN A SINGLE BOUND'

ROYCE PREMIER FUND'S ('PREMIER') small-cap value orientation, which has
served its shareholders well since its inception on December 31, 1991, was no
match for the performance of the raging bull market of 1995. Just as 'small-cap'
under-performed large-cap, 'value' under-performed growth within the small-cap
category.

Also, a low exposure to the market's best performing sector, technology, and
an above-average exposure to the consumer and service sectors acted like
kryptonite in holding back the Fund's relative short-term performance.
Nevertheless, Premier's risk-averse style produced a 17.8% return in 1995, quite
reasonable on an absolute basis.

The Fund now has $302 million in net assets and four years of performance
history. Average annual total returns for the Fund during the preceding three
and four years were 13.2% and 13.8%, respectively. According to mutual fund
evaluation service Morningstar, Premier had the lowest risk profile out of the
171 small-cap funds in the category as measured by Morningstar's risk ratio and
one of the lowest risk profiles as measured by standard deviation and beta for
the last three years*. We believe that managing risk is critical to delivering
above average long-term returns.

THE RELEVANCE OF RELATIVE PERFORMANCE

<PAGE>

The whole concept dies quickly in a period of negative returns. When markets
turn south, new car purchases are deferred and vacation plans are canceled,
relative performance soon becomes irrelevant. While relative performance may
make a great conversation topic at the cocktail party, it is positive absolute
returns, compounded at reasonable rates, which put dinner on the table.

THE VALUE IN VALUE INVESTING

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

Royce Premier Fund uses a risk-averse approach to invest in the
[GRAPHIC] securities of small-cap companies viewed by the advisor as having
superior financial characteristics and/or unusually attractive
business prospects. Experience tells us that paying attention to risk does not
diminish long-term results, although individual market phases may not always
confirm this assumption's validity.

NO OTHER PLACE WE WOULD RATHER BE

While the Fund focuses on companies with market caps below $1 billion, our
weighted average and median market caps are actually much lower; $599 million
and $447 million, respectively, at December 31, 1995. Although our orientation
is small-cap stocks, the capitalization of our picking universe is by no means
small. The small-cap market is huge in numbers, 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. The small-cap sector is rich in opportunity and easily
accommodates our strategy given the size of the investable universe.

<PAGE>

HOW IT WORKS

Our approach to investing in
individual small-cap companies has [GRAPHIC]
proven long-term benefits, but can
be both unpredictable and frustrating
in the near-term. We believe that the stock
market in the short-term is a polling place, and in the long-term, a highly
efficient weighing device. While our ultimate success will continue to be driven
by the process of 'weighing the true value' of the small companies in which we
have invested, the following provides a brief glimpse of some of last year's
'election results.'

IDEAS THAT WORKED

During calendar 1995, the usual but somewhat arbitrary
[GRAPHIC] measurement period of choice, each of these companies made
meaningful positive contributions to our overall performance.
More importantly, they represent specific examples of our discipline at work.
Royce Premier Fund's BEST PERFORMERS, as measured by dollar impact to the
portfolio, were:

<TABLE>
<CAPTION>
SECURITY % GAIN $ GAIN
- -------- ------ ----------
<S> <C> <C>
Atlantic Southeast Airlines,
Inc. 39% $2,330,083
Comdisco, Inc. 47% $2,312,868
T. Rowe Price Associates, Inc. 56% $2,212,307
Wesco Financial Corporation 58% $2,122,355
Claire's Stores, Inc. 47% $2,050,960
</TABLE>

In every example, our winners were attributable to earlier purchases of
companies we knew well and regarded as 'premier' participants in their
respective industries. We built our positions when business conditions were
difficult and the investment community had voted negatively on future prospects.
Rising interest rates in 1994 enabled us to acquire financial services
franchises like Comdisco (computer leasing), T. Rowe Price Associates (mutual
fund management) and Wesco Financial (Warren Buffett controlled insurance) at
large discounts to their intrinsic value. Similarly, Atlantic Southeast Airlines
sold at give-away prices after the widely publicized problems of commuter
aircraft in winter conditions. Finally, Claire's Stores stock price fell victim
to a terrible retailing environment despite strong operating results.

While our winners clearly got more votes in 1995, four out of five of our
best perfomers have yet to be properly weighed and remain as prominent positions
in our portfolio.

GOOD IDEAS AT THE TIME

<TABLE>
<CAPTION>
SECURITY % LOSS $ LOSS
- -------- ------ ----------
<S> <C> <C>
The Stride Rite Corporation 33% $1,075,384
Charming Shoppes, Inc., 57% $1,052,600
The Lincoln Electric Company 17% $ 882,271
Mikasa, Inc. 10% $ 652,478
Blessings Corporation 27% $ 616,133
</TABLE>

Of these five losers, Lincoln Electric and Mikasa appear to have excellent
prospects for quick and full recoveries. They suffer from little more than
neglect. Blessings (plastic extrusion) ran into raw material costs increases
which could not be passed along to big customers. This too should pass. However,
Stride Rite and Charming Shoppes have suffered so deeply from current conditions
in retailing that one has landed in the intensive care ward and the other now is
out of our portfolio. Needless to say, full recovery in their positions is
beyond even our patience. The good news is that we

<PAGE>

had few other losers and they were modest in comparison to our successful
investments in 1995.

ANYTHING BUT TYPICAL

There has not been a correction of 10% or more for the S&P 500 or 15% or more
for the Russell 2000 since October of 1990, the longest stretch ever for both
indices.

The last five years were an anomaly in that a full market cycle did not take
place, but rather a trough (bottom) to peak (top) experience only.

It was the best (in terms of return and duration) trough to peak period in the
17 year history of the Russell 2000.

It was only the 8th time out of 49 quarterly trailing five year return periods
that the Russell 2000 generated a 20%+ average annual return.

Within this market cycle, short-term interest rates had one of their most
significant declines -- three month T-bills went from 8.2% in September 1989
to 2.7% in September 1992.

It was one of the least volatile periods on record, and especially so in the
years 1993, 1994 and 1995.

CAUSE OR EFFECT

<PAGE>

A NEW ERA ?

As the bull market enters its sixth year
uninterrupted by normal corrections, we find [GRAPHIC]
ourselves asking (and more to the point,
others asking us) is this a new era in
investing? Have changes in national demographics and attitudes and, therefore,
investing patterns evolved to the point where traditional assumptions are
obsolete? By sticking to our own time tested and cycle proven discipline, have
we become the 'Clark Kent' of the investment world, permanently nerdy within the
new order?

Before long, we expect some normal balance in people's spending habits to
resume. Appetites for mutual fund investing may moderate in favor of consumption
or debt repayments. Weak sectors of our economy like apparel retailing and
infrastructure construction will recover. Basic commodity prices could rise
and equities would once again represent long-term interests in business, as
opposed to trading vehicles. Absolute return goals, previously forgotten, will
regain the spotlight.

THE NEXT FIVE YEARS WILL BE DIFFERENT

'It is not the going out of port, but the coming in, that determines the
success of a journey.' Henry Ward Beecher

[GRAPH GOES HERE]

The last five years were also unique in that never in our nation's history
have so many

<PAGE>

traditional bank savers become stock market investors. The primary reason for
the massive level of CD conversions has been the high returns afforded
stock market investors compared to the declining returns available in
traditional bank products. A strong contributing factor has been the stock
market's lack of volatility. Volatility has been so low that new investors have
been lulled by the apparent 'safety' of equity investing. Volatility, which has
always been a part of the investment equation, is likely to resurface and resume
a more normal course as background conditions change.

TIME FOR CHANGE . . . WE THINK NOT

We have been discussing what has
happened. Now it's time to talk about [GRAPHIC]
what has not happened.

Third, the natural laws of gravity and market cycles have not been rescinded.

And finally, our confidence in the ultimate outcome of our approach has not
changed. We expect our approach to small-cap investing to have both an absolute
and relative pay-off as it has in the past. 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>

February 15, 1996

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

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

* Morningstar's 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 171 small-cap funds with a
three-year history as of 12/31/95 were: 1.04, 0.91 and 11.79, respectively.
The Morningstar risk ratio, beta and standard deviation for Royce Premier Fund
over the same period were: 0.36, 0.42 and 5.28, respectively.
Source: Morningstar, Inc.

<PAGE>

<PAGE>
FINANCIAL REVIEW

<TABLE>
<CAPTION>
ANNUAL RETURNS
--------------
<S> <C>
1995........................... 17.8%
1994........................... 3.3%
1993........................... 19.0%
1992........................... 15.8%
</TABLE>

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
----------------------------
(THROUGH 12/31/95)
<S> <C>
Since Inception*............... 13.8%
3-year......................... 13.2%
</TABLE>

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

[GRAPH GOES HERE]

* 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>

<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 $ 249,762,137 82.6%
Cash & Other Net Assets 52,477,313 17.4
--------------- -------
Total Net Assets $ 302,239,450 100.0%
--------------- -------
--------------- -------

PORTFOLIO DIAGNOSTICS (unaudited)
- -----------------------------------------------------------------------------------------------------------
Weighted Average Market Capitalization $599 Million
Median Market Capitalization $447 Million
Weighted Average P/E Ratio 14.4x
Weighted Average P/B Ratio 1.7x
Weighted Average Portfolio Yield 1.9%

COMMON STOCK SECTORS % OF NET ASSETS
- -----------------------------------------------------------------------------------------------------------
Financial 21.5%
Industrial Cyclicals 18.2
Services 16.4
Retail 9.5
Consumer Durables 8.7
Energy 2.9
Consumer Staples 2.7
Technology 1.6
Health 1.1

TOP TWENTY POSITIONS VALUE % OF NET ASSETS
- -----------------------------------------------------------------------------------------------------------
1 Comdisco, Inc. $7,354,256 2.4%
2 Stanhome Inc. 6,238,575 2.1
3 Marshall Industries 6,222,612 2.1
4 Florida Rock Industries, Inc. 6,060,600 2.0
5 Wesco Financial Corporation 5,787,600 1.9
6 Reebok International Ltd 5,763,000 1.9
7 The Dress Barn, Inc. 5,546,788 1.8
8 The Standard Register Company 5,449,850 1.8
9 E.W. Blanch Holdings, Inc. 5,343,525 1.8
10 W.R. Berkley Corp. 5,256,750 1.7
11 Curtiss-Wright Corporation 5,197,625 1.7
12 JUNO Lighting, Inc. 5,158,400 1.7
13 Fab Industries, Inc. 4,962,938 1.6
14 Woodward Governor Company 4,684,817 1.6
15 Pennsylvania Manufacturers Corporation 4,649,370 1.5
16 Tom Brown, Inc. 4,620,184 1.5
17 Orion Capital Corporation 4,563,050 1.5
18 Sotheby's Holdings, Inc. Cl. A 4,431,750 1.5
19 Trenwick Group Inc. 4,381,875 1.4
20 CalMat Co. 4,348,975 1.4
</TABLE>

<PAGE>

<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]

<PAGE>

<PAGE>
ROYCE
PREMIER
FUND

FINANCIAL STATEMENTS

<PAGE>

<PAGE>
ROYCE PREMIER FUND
SCHEDULE OF INVESTMENTS AT DECEMBER 31, 1995
- --------------------------------------------------------------------------------
COMMON STOCKS - 82.6%

<TABLE>
<CAPTION>
Value
Shares (Note 1)
------ --------
<C> <S> <C>
CONSUMER DURABLES - 8.7%
135,000 *Ethan Allen Interiors
Inc. ................... $ 2,750,622
203,800 Garan Incorporated........ 3,439,125
322,400 Juno Lighting, Inc. ...... 5,158,400
204,000 Reebok International
Ltd. ................... 5,763,000
107,900 The Singer Company
N.V. ................... 3,007,713
320,100 The Stride Rite
Corporation............. 2,400,750
142,700 Sturm, Ruger & Company,
Inc. ................... 3,906,413
------------
26,426,023
------------
CONSUMER STAPLES - 2.7%
54,911 Block Drug Company, Inc.
Cl. A................... 1,908,170
214,200 Stanhome Inc. ............ 6,238,575
------------
8,146,745
------------
ENERGY - 2.9%
315,910 *Tom Brown, Inc. .......... 4,620,184
151,000 Camco International
Inc. ................... 4,228,000
------------
8,848,184
------------
FINANCIAL - 21.5%
15,536 *Alleghany Corporation..... 3,076,128
97,800 W. R. Berkley Corp. ...... 5,256,750
228,600 E.W. Blanch Holdings,
Inc. ................... 5,343,525
325,050 Comdisco, Inc. ........... 7,354,256
123,500 The Commerce Group,
Inc. ................... 2,547,188
90,600 Arthur J. Gallagher &
Co. .................... 3,374,850
99,900 *Gryphon Holdings Inc. .... 1,923,075
92,900 The John Nuveen Company... 2,299,275
96,600 Leucadia National
Corporation............. 2,415,000
105,200 Orion Capital
Corporation............. 4,563,050
<CAPTION>
Value
Shares (Note 1)
------ --------
<C> <S> <C>
98,300 PartnerRe Holdings
Ltd. ................... $ 2,703,250
254,760 Pennsylvania Manufacturers
Corporation............. 4,649,370
38,200 Transatlantic Holdings,
Inc. ................... 2,802,925
77,900 Trenwick Group Inc. ...... 4,381,875
31,800 Wesco Financial
Corporation............. 5,787,600
312,600`D'Willis Corroon Group
plc..................... 3,633,975
132,200 Zenith National Insurance
Corp. .................. 2,825,775
------------
64,937,867
------------
HEALTH - 1.1%
181,900 *HAEMONETICS
CORPORATION............. 3,228,725
------------
INDUSTRIAL CYCLICALS - 18.2%
168,800 Blessings Corporation..... 1,751,300
94,500 W. H. Brady Co. Cl. A..... 2,551,500
238,300 CalMat Co. ............... 4,348,975
96,700 Curtiss-Wright
Corporation............. 5,197,625
155,700 Fab Industries, Inc. ..... 4,962,938
207,200 Florida Rock Industries,
Inc. ................... 6,060,600
229,900 P. H. Glatfelter
Company................. 3,937,038
118,300 Kimball International,
Inc. Cl. B.............. 2,987,075
332,100 Lilly Industries, Inc. Cl.
A....................... 4,234,275
178,000 The Lincoln Electric
Company................. 4,272,000
108,200 Liqui-Box Corporation..... 3,205,425
63,800 NCH Corporation........... 3,684,450
79,200 Precision Castparts
Corp. .................. 3,148,200
63,739 Woodward Governor
Company................. 4,684,817
------------
55,026,218
------------
RETAIL - 9.5%
101,400 Blair Corporation......... 3,206,775
218,200 Claire's Stores, Inc. .... 3,845,775
561,700 *The Dress Barn, Inc. ..... 5,546,788
</TABLE>

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

<PAGE>

<PAGE>
ROYCE PREMIER FUND
SCHEDULE OF INVESTMENTS AT DECEMBER 31, 1995
- --------------------------------------------------------------------------------
COMMON STOCKS - continued
<TABLE>
<CAPTION>
Value
Shares (Note 1)
------ --------
RETAIL - (continued)
<C> <S> <C>
281,400 Family Dollar Stores,
Inc. ................... $ 3,869,250
221,300 *LANDS' END, INC. ......... 3,015,213
300,300 *Mikasa, Inc. ............. 4,054,050
390,000 *TBC Corporation........... 3,363,750
68,500 The Talbots, Inc. ........ 1,969,375
------------
28,870,976
------------
SERVICES - 16.4%
94,050 Air Express International
Corporation............. 2,163,150
179,700 Arnold Industries, Inc. .. 3,122,287
174,000 Atlantic Southeast
Airlines, Inc. ......... 3,741,000
179,300 Bowne & Co., Inc. ........ 3,586,000
20,000 Cracker Barrel Old Country
Store, Inc. ............ 345,000
192,700 Crawford & Company Cl.
A....................... 3,083,200
182,700 Ennis Business Forms,
Inc. ................... 2,238,075
59,500 FlightSafety
International, Inc. .... 2,989,875
21,000 Florida East Coast
Industries, Inc. ....... 1,433,250
16,262 Grey Advertising Inc. .... 3,252,400
121,600 *International Dairy
Queen, Inc. Cl. A....... 2,766,400
193,700 *Marshall Industries....... 6,222,612
99,600 McClatchy Newspapers, Inc.
Cl. A................... 2,278,350
111,400 Sbarro, Inc. ............. 2,395,100
<CAPTION>
Value
Shares (Note 1)
------ --------
<C> <S> <C>

311,000 Sotheby's Holdings, Inc.
Cl. A................... $ 4,431,750
270,800 The Standard Register
Company................. 5,449,850
------------
49,498,299
------------
TECHNOLOGY - 1.6%
37,300 *Dionex Corporation........ 2,116,775
195,400 Scitex Corporation
Limited................. 2,662,325
------------
4,779,100
------------
Total Common Stocks
(Cost $227,996,148)..... 249,762,137
------------

U.S. TREASURY OBLIGATION - 4.9%
<CAPTION>

Principal
Amount
- ---------
<C> <S> <C>
$14,000,000 U.S. Treasury Notes 7%
due 4/15/99 (Cost
$14,194,688) 14,708,680
------------

REPURCHASE AGREEMENT - 11.6%
State Street Bank and Trust Company,
5.25% due 1/02/96, collateralized by
U.S. Treasury Notes, 7.25% due
5/15/16, valued at $35,802,427 (Cost
$35,099,000)........................ 35,099,000
------------
TOTAL INVESTMENTS - 99.1% (COST
$277,289,836)....................... 299,569,817
CASH AND OTHER ASSETS LESS
LIABILITIES - .9%................... 2,669,633
------------
NET ASSETS - 100.0%................... $302,239,450
------------
------------
</TABLE>

*Non-income producing.

`D'American Depository Receipt.

INCOME TAX INFORMATION - The cost of total investments for federal income tax
purposes was $277,290,821. At December 31, 1995, net unrealized appreciation for
all securities was $22,278,996, consisting of aggregate gross unrealized
appreciation of $31,362,684 and aggregate gross unrealized depreciation of
$9,083,688. The Fund designates $3,212,366 as a capital gain dividend for the
purpose of the dividend paid deduction.

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

<PAGE>

<PAGE>
ROYCE PREMIER FUND
STATEMENT OF ASSETS AND LIABILITIES AT DECEMBER 31, 1995
- --------------------------------------------------------------------------------

<TABLE>

<S> <C>
ASSETS:
Investments at value (identified cost $242,190,836) (Note 1)..................................... $264,470,817
Repurchase agreement (Note 1).................................................................... 35,099,000
Receivable for investments sold.................................................................. 3,119,300
Receivable for shares of beneficial interest sold................................................ 517,015
Receivable for dividends and interest............................................................ 739,155
Prepaid expenses and other assets................................................................ 5,899
------------
TOTAL ASSETS................................................................................... 303,951,186
------------
LIABILITIES:
Payable for investments purchased................................................................ 1,038,571
Payable for shares of beneficial interest redeemed............................................... 273,361
Investment advisory fee payable (Note 2)......................................................... 254,244
Accrued expenses................................................................................. 145,560
------------
TOTAL LIABILITIES.............................................................................. 1,711,736
------------
NET ASSETS..................................................................................... $302,239,450
------------
------------
ANALYSIS OF NET ASSETS:
Undistributed net investment income.............................................................. $ 303,771
Accumulated net realized gain on investments..................................................... 735,541
Net unrealized appreciation on investments....................................................... 22,279,981
Shares of beneficial interest (Note 3)........................................................... 42,426
Additional paid-in capital....................................................................... 278,877,731
------------
NET ASSETS..................................................................................... $302,239,450
------------
------------
PRICING OF SHARES:
Net asset value, offering and redemption price per share
($302,239,450[div]42,425,895 shares outstanding) (Note 3)...................................... $7.12
-----
-----

</TABLE>

STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Years ended December 31,
----------------------------
1995 1994
------------ ------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Net investment income........................................................ $ 3,878,109 $ 1,659,357
Net realized gain on investments............................................. 16,399,430 3,788,411
Net unrealized appreciation (depreciation) on investments.................... 20,989,542 (706,602)
------------ ------------
Increase in net assets resulting from operations............................. 41,267,081 4,741,166
Dividends paid from net investment income.................................... (3,659,780) (1,525,419)
Distributions paid from net realized gains................................... (16,629,199) (2,746,290)
FROM CAPITAL SHARE TRANSACTIONS:
Increase in net assets from capital share transactions (Note 3).............. 78,871,235 154,777,578
------------ ------------
INCREASE IN NET ASSETS......................................................... 99,849,337 155,247,035
NET ASSETS:
Beginning of year............................................................ 202,390,113 47,143,078
------------ ------------
End of year (including undistributed net investment income of $303,771 and
$84,442, respectively)..................................................... $302,239,450 $202,390,113
------------ ------------
------------ ------------
</TABLE>

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

<PAGE>

<PAGE>
ROYCE PREMIER FUND
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1995
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends.................................................................................... $ 4,085,248
Interest..................................................................................... 3,053,383
-----------
Total Income....................................................................... 7,138,631
-----------
Expenses:
Investment advisory fee (Note 2)............................................................. 2,609,724
Custodian and transfer agent fees............................................................ 216,633
Administrative and clerical services......................................................... 111,347
Supplies and postage......................................................................... 87,246
Federal and state registration fees.......................................................... 70,428
Legal and auditing fees...................................................................... 40,413
Shareholder reports and notices.............................................................. 39,589
Facilities and office space.................................................................. 31,395
Trustees' fees............................................................................... 27,267
Miscellaneous................................................................................ 16,666
Insurance.................................................................................... 14,833
Organizational costs......................................................................... 1,260
Fee waived by investment adviser (Note 2).................................................... (6,279)
-----------
Total Expenses..................................................................... 3,260,522
-----------
Net Investment Income.............................................................. 3,878,109
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments.................................................................. 16,399,430
Net unrealized appreciation on investments........................................................ 20,989,542
-----------
Net realized and unrealized gain on investments................................................... 37,388,972
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............................................. $41,267,081
-----------
-----------
</TABLE>

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

<PAGE>

<PAGE>
ROYCE PREMIER 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 four years.

<TABLE>
<CAPTION>
Years ended December 31,
--------------------------------------
1995 1994 1993 1992
----- ----- ----- -----
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR............................... $6.48 $6.41 $5.52 $5.00
----- ----- ----- -----
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a)................................... 0.10 0.06 0.02 0.02
Net realized and unrealized gain on investments............. 1.05 0.15 1.03 0.77
----- ----- ----- -----
Total from investment operations.......................... 1.15 0.21 1.05 0.79
----- ----- ----- -----
LESS DISTRIBUTIONS:
Dividends paid from net investment income................... (0.09) (0.05) (0.02) (0.02)
Distributions paid from net realized gain................... (0.42) (0.09) (0.14) (0.25)
----- ----- ----- -----
Total distributions....................................... (0.51) (0.14) (0.16) (0.27)
----- ----- ----- -----
NET ASSET VALUE, END OF YEAR..................................... $7.12 $6.48 $6.41 $5.52
----- ----- ----- -----
----- ----- ----- -----
TOTAL RETURN..................................................... 17.8% 3.3% 19.0% 15.8%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Year (in thousands)........................... $302,239 $202,390 $47,143 $2,329
Ratio of Expenses to Average Net Assets (b)...................... 1.25% 1.38% 1.50% 1.77%
Ratio of Net Investment Income to Average Net Assets............. 1.48% 1.19% 0.68% 0.53%
Portfolio Turnover Rate.......................................... 39% 38% 85% 116%
</TABLE>

(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 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.
16

<PAGE>

<PAGE>
ROYCE PREMIER FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

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

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:

c. Taxes:

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
shareholder distributions will result in reclassification 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>

<PAGE>
ROYCE PREMIER FUND
NOTES TO FINANCIAL STATEMENTS (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:

Under the Trust's investment advisory agreement with Quest Advisory Corp.
('Quest'), the Fund accrued and paid Quest fees totaling $2,603,445 (net of
$6,279 voluntarily waived by Quest) for the year ended December 31, 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>
Year Ended Year Ended
December 31, 1995 December 31, 1994
-------------------------- -------------------------
Shares Amount Shares Amount
----------- ------------ ---------- ------------

<S> <C> <C> <C> <C>
Sold............................................. 19,665,370 $138,651,613 26,163,792 $169,885,610
Issued as reinvested dividends and
distributions.................................. 2,684,934 18,955,637 615,431 3,987,995
Redeemed......................................... (11,134,302) (78,736,015) (2,927,034) (19,096,027)
</TABLE>

Shares redeemed within one year 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 SECURITIES:

For the year ended December 31, 1995, the cost of purchases and the
proceeds from sales of portfolio securities, other than short-term securities,
amounted to $132,615,977 and $86,367,213, respectively.

<PAGE>

<PAGE>
ROYCE PREMIER FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------

To the Board of Trustees of The Royce Fund and Shareholders of Royce Premier
Fund:

We have audited the accompanying statement of assets and liabilities of
Royce Premier Fund, including the schedule of investments as of December 31,
1995, the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the four years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.

In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Royce Premier Fund as of December 31, 1995, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and the financial highlights for each of the four years
in the period then ended, in conformity with generally accepted accounting
principles.

COOPERS & LYBRAND L.L.P.

Boston, Massachusetts
February 7, 1996

<PAGE>

<PAGE>
POSTSCRIPT: CRUISES, DECK CHAIRS AND INVESTING

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

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>
<PAGE>
ROYCE
LOW-PRICED
STOCK
FUND
ANNUAL REPORT
DECEMBER 31, 1995
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:

'ABLE TO LEAP TALL BUILDINGS
IN A SINGLE BOUND'

ROYCE LOW-PRICED STOCK FUND'S ('RLP') value oriented approach to investing in
companies whose shares, at the time of purchase, trade at a price below $15 per
share was no match for the performance of the raging bull market of 1995. Just
as 'small-cap' under-performed large-cap, 'value' under-performed growth within
the small-cap category. Also, a low exposure to the market's best performing
sector, technology, and an above-average exposure to the retail and service
sectors acted like kryptonite in holding back the Fund's relative short-term
performance. Nevertheless, RLP's risk-averse style produced a 22.5% return in
1995. Also during 1995, assets grew from $1.9 million to $4.2 million.

THE RELEVANCE OF RELATIVE PERFORMANCE

At some point in every modern bull market, generally at the later [GRAPHIC]
stages, the concept of relative performance becomes dominant in any
discussion of investment results. As prospects of financial loss become distant
memories, investors shift their focus from absolute gains to relative rewards.
Investment strategies are changed, portfolio managers are replaced and solid
results are ignored in the quest for better relative performance. The problem
is . . . . you can't eat relative performance! The whole concept dies quickly in
a period of negative returns. When markets turn south, new car purchases are
deferred and vacation plans are canceled, relative performance soon becomes
irrelevant. While relative performance may make a great conversation topic at
the cocktail party, it is positive absolute returns, compounded at reasonable
rates, which put dinner on the table.

2
<PAGE>
<PAGE>
THE VALUE IN VALUE INVESTING

WHAT WE DO

Royce Low-Priced Stock Fund uses a risk-averse approach to
[GRAPHIC] invest in common stocks of companies whose shares, at the time of
purchase, trade at a price below $15 per share. Experience tells us
that paying attention to risk does not diminish long-term results, although
individual market phases may not always confirm this assumption's validity.

NO OTHER PLACE WE WOULD RATHER BE

Although not restricted as to market capitalization, the Fund focuses on
companies with market caps below $1 billion. The weighted average and median
market caps are however, much lower; $204 million and $80 million, respectively,
at December 31, 1995. Although our orientation is small-cap stocks, the
capitalization of our picking universe is by no means small. The small-cap
segment is huge in numbers, 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.
The small-cap sector is rich in opportunity and easily accommodates our strategy
given the size of the investable universe.

ANYTHING BUT TYPICAL

What do you get when interest rates fall precipitously, inflation is low,
demand for equities is strong and corporate earnings outpace analysts'
estimates? Answer: the LAST FIVE YEARS (actually the last 5 1/4 years)! The
last five years have been an exceptional period for equity investing, one in
which all the 'right stuff' was in place. Consider the following:

There has not been a correction of 10% or more for the S&P 500 or 15% or more
for the Russell 2000 since October of 1990, the longest stretch ever for both
indices.

3
<PAGE>
<PAGE>
The last five years were an anomaly in that a full market cycle did not take
place, but rather a trough (bottom) to peak (top) experience only.

It was the best (in terms of return and duration) trough to peak period in
the 17 year history of the Russell 2000.

It was only the 8th time out of 49 quarterly trailing five year return
periods that the Russell 2000 generated a 20%+ average annual return.

Within this market cycle, short-term interest rates had one of their most
significant declines - three month T-bills went from 8.2% in September 1989
to 2.7% in September 1992.

It was one of the least volatile periods on record, and especially so in the
years 1993, 1994 and 1995.

CAUSE OR EFFECT

A NEW ERA ?

As the bull market enters its sixth year [GRAPHIC]
uninterrupted by normal corrections, we find
ourselves asking (and more to the point, others asking us) is this a new era in
investing? Have changes in national demographics and attitudes and, therefore,
investing patterns evolved to the point where traditional assumptions are
obsolete? By sticking to our own time tested and cycle proven discipline, have
we become the 'Clark Kent' of the

4
<PAGE>
<PAGE>
investment world, permanently nerdy within the new order?

THE NEXT FIVE YEARS WILL BE DIFFERENT

'It is not the going out of port, but the coming in, that determines the
success of a journey.' Henry Ward Beecher

IMPACT OF INTEREST RATES ON STOCK MARKET PERFORMANCE

[GRAPH]

LONG-TERM GOVERNMENT BOND YIELDS AND DOW JONES INDUSTRIAL AVERAGE

5
<PAGE>
<PAGE>
likely to resurface and resume a more normal course as background conditions
change.

TIME FOR CHANGE . . . WE THINK NOT

We have been discussing what has happened. Now [GRAPHIC]
it's time to talk about what has not happened.

Third, the natural laws of gravity and market cycles have not been rescinded.

And finally, our confidence in the ultimate outcome of our approach has not
changed. We expect our value oriented approach to low-priced stock investing to
have both an absolute and relative pay-off as it has in the past. Your continued
confidence is appreciated.

Yours faithfully,

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

February 15, 1996

6
<PAGE>
<PAGE>
FINANCIAL REVIEW

<TABLE>
<CAPTION>
PERIOD TOTAL RETURN
- ------------------------------- ------------
<S> <C>
1995........................... 22.5%
1994........................... 3.0%

<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
- --------------------------------------------

Since Inception*............... 12.2%
</TABLE>

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

[PERFORMANCE GRAPH]

* 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 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.

7
<PAGE>
<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 $ 4,082,276 96.8%
Preferred Stock 26,000 0.6
Cash & Other Net Assets 106,777 2.6
----------- -----
Total Net Assets $ 4,215,053 100.0%
----------- -----
----------- -----
PORTFOLIO DIAGNOSTICS (unaudited)
- ---------------------------------------------------------------------------------------------------------
Weighted Average Market Capitalization $204 Million
Median Market Capitalization $ 80 Million
Weighted Average P/E Ratio 16.5x
Weighted Average P/B Ratio 1.6x
Weighted Average Portfolio Yield 1.2%

COMMON STOCK SECTORS % OF NET ASSETS
- ---------------------------------------------------------------------------------------------------------
Retail 21.3%
Industrial Cyclicals 19.4
Consumer Durables 12.9
Services 12.1
Energy 11.7
Financial 8.6
Technology 8.1
Utilities 1.7
Health 1.0

TOP TWENTY POSITIONS VALUE % OF NET ASSETS
- ---------------------------------------------------------------------------------------------------------
1 Willis Corroon Group plc $162,750 3.9%
2 Cato Corporation Cl. A 139,500 3.3
3 Tom Brown, Inc. 131,625 3.1
4 Pier 1 Imports, Inc. 127,116 3.0
5 The Dress Barn, Inc. 108,625 2.6
6 Tide West Oil Company 107,000 2.5
7 Intercargo Corporation 100,000 2.4
8 Maxwell Shoe Company Inc. 99,000 2.3
9 Aldila, Inc. 89,247 2.1
10 Frozen Food Express Industries, Inc. 87,500 2.1
11 Oshkosh Truck Corporation Cl. B 86,925 2.1
12 Kasler Holdings Co. 86,450 2.1
13 American Oilfield Divers, Inc. 85,500 2.0
14 Exar Corporation 82,600 2.0
15 The Stride Rite Corporation 82,500 2.0
16 Brookstone, Inc. 82,500 2.0
17 Lifetime Hoan Corporation 81,400 1.9
18 Lilly Industries, Inc. Cl. A 79,050 1.9
19 Compression Labs, Incorporated 71,875 1.7
20 Shorewood Packaging Corporation 71,250 1.7
</TABLE>

8
<PAGE>
<PAGE>
ROYCE LOW-PRICED STOCK FUND
SCHEDULE OF INVESTMENTS AT DECEMBER 31, 1995
- --------------------------------------------------------------------------------
COMMON STOCKS - 96.8%
<TABLE>
<CAPTION>
Value
Shares (Note 1)
- ------ -------
<C> <S> <C>
CONSUMER DURABLES - 12.9%
21,000 *Aldila, Inc..................... $ 89,247
3,800 *Kit Manufacturing Co............ 53,200
2,000 *Lazare Kaplan International,
Inc............................ 15,875
8,800 *Lifetime Hoan Corporation....... 81,400
18,000 *Maxwell Shoe Company
Inc. Cl. A..................... 99,000
400 McRae Industries, Inc. Cl. A..... 3,100
10,000 *River Oaks Furniture............ 62,500
5,000 *The Sirena Apparel Group,
Inc............................ 31,250
11,000 The Stride Rite Corporation...... 82,500
5,000 *The Topps Company, Inc.......... 25,625
----------
543,697
----------
ENERGY - 11.7%
2,000 *Alamco, Inc..................... 16,125
12,000 *American Oilfield Divers,
Inc............................ 85,500
2,000 Berry Petroleum Company Cl. A.... 20,250
9,000 *Tom Brown, Inc.................. 131,625
12,000 *Equity Oil Company.............. 70,500
10,000 Ranger Oil Limited............... 62,500
8,000 *Tide West Oil Company........... 107,000
----------
493,500
----------
FINANCIAL - 8.6%
500 Hilb, Rogal & Hamilton Company... 6,688
10,000 Intercargo Corporation........... 100,000
4,500 Nobel Insurance Limited.......... 51,188
5,000 Phoenix Duff & Phelps
Corporation.................... 34,375
2,500 *Toreador Royalty Corporation.... 6,563
14,000 `D'Willis Corroon Group plc...... 162,750
----------
361,564
----------

<CAPTION>
Value
Shares (Note 1)
- ------ -------
<C> <S> <C>
HEALTH - 1.0%
3,000 Sterile Concepts Holdings,
Inc............................ $ 43,500
----------
INDUSTRIAL CYCLICALS - 19.4%
2,100 BHA Group, Inc. Cl. A............ 27,825
4,400 Blessings Corporation............ 45,650
7,500 *CFC International, Inc.......... 64,688
2,500 *DeVlieg-Bullard, Inc............ 5,625
1,000 Haskel International, Inc. Cl.
A.............................. 5,875
13,300 *Kasler Holdings Co.............. 86,450
6,200 Lilly Industries, Inc. Cl. A..... 79,050
10,000 *MK Gold Company................. 25,000
5,700 Oshkosh Truck Corporation Cl.
B.............................. 86,925
4,000 Peerless Mfg. Co................. 37,500
400 *Perini Corporation.............. 3,300
17,000 *Rollins Environmental Services,
Inc............................ 48,875
10,000 *Royal Oaks Mines Inc............ 35,625
5,000 *Shorewood Packaging
Corporation.................... 71,250
3,000 *Simpson Manufacturing Co.,
Inc............................ 40,500
2,000 *Steel of West Virginia, Inc..... 18,500
7,800 *Todd Shipyards Corporation...... 45,825
7,000 Treadco, Inc..................... 40,250
4,600 *UNC, Inc........................ 27,600
4,000 *Webco Industries, Inc........... 22,750
----------
819,063
----------
RETAIL - 21.3%
7,000 J. Baker, Inc.................... 40,250
2,000 *Bombay Co....................... 12,750
10,000 *Brookstone, Inc................. 82,500
2,500 *The Buckle, Inc................. 44,375
7,800 *CATHERINES STORES CORPORATION... 64,350
18,000 Cato Corporation Cl. A........... 139,500
20,000 *Charming Shoppes, Inc........... 57,500
5,000 *The Clothestime, Inc............ 3,125
</TABLE>

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

<PAGE>
<PAGE>
ROYCE LOW-PRICED STOCK FUND
SCHEDULE OF INVESTMENTS AT DECEMBER 31, 1995 (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 1)
- ------ -------
RETAIL (continued)
<C> <S> <C>
8,500 *Designs, Inc.................... $ 59,500
11,000 *The Dress Barn, Inc............. 108,625
800 Frederick's of Hollywood, Inc.
Cl. A.......................... 3,400
20,000 *Hanover Direct, Inc............. 31,250
2,000 *InterTAN Inc.................... 14,500
5,000 *One Price Clothing Stores,
Inc............................ 15,000
11,175 Pier 1 Imports, Inc.............. 127,116
8,000 *Shoe Carnival, Inc.............. 30,000
10,000 *Suzy Shier Ltd.................. 21,630
5,000 *TBC Corporation................. 43,125
----------
898,496
----------
SERVICES - 12.1%
5,000 *Air Transportation Holding
Company, Inc................... 19,688
11,500 *Allwaste, Inc................... 54,625
5,000 *American Waste Services, Inc.
Cl. A.......................... 10,000
5,000 *Bertucci's, Inc................. 25,000
4,000 *Jenny Craig, Inc................ 39,500
3,800 Ecology and Environment, Inc. Cl.
A.............................. 31,825
10,000 Frozen Food Express Industries,
Inc............................ 87,500
5,000 Jackpot Enterprises, Inc......... 58,125
3,000 *Offshore Logistics, Inc......... 37,875
5,000 PCA International, Inc........... 55,000
5,000 *RENO AIR, INC................... 39,375
2,247 Richardson Electronics, Ltd...... 24,155
2,000 Sotheby's Holdings, Inc. Cl. A... 28,500
----------
511,168
----------
<CAPTION>
Value
Shares (Note 1)
- ------ -------
<C> <S> <C>
TECHNOLOGY - 8.1%
5,600 *Exar Corporation................ $ 82,600
5,000 *ILC Technology, Inc............. 46,250
2,100 *Liberty Technologies, Inc....... 10,500
4,000 MacNeal-Schwendler Corporation... 64,000
7,000 *Mitel Corporation............... 45,500
4,500 *Numerex Corp. Cl. A............. 29,250
4,500 Scitex Corporation Limited....... 61,313
----------
339,413
----------
UTILITIES - 1.7%
11,500 *Compression Labs,
Incorporated................... 71,875
----------
Total Common Stocks
(Cost $4,037,808).............. 4,082,276
----------
PREFERRED STOCK - .6%
16,000 *United Services Advisors, Inc.
5% Non Cum.
(Cost $48,668)................. 26,000
----------
REPURCHASE AGREEMENT - 10.8%
State Street Bank and Trust
Company,5.25% due 1/02/96,
collateralized
by U.S. Treasury Bond,
7.25% due 5/15/16, valued
at $464,743 (Cost $454,000)............. 454,000
----------
TOTAL INVESTMENTS - 108.2%
(COST $4,540,476)....................... 4,562,276
LIABILITIES LESS CASH AND
OTHER ASSETS - (8.2%)................... (347,223)
----------
NET ASSETS - 100.0%....................... $4,215,053
----------
----------
</TABLE>

* Non-income producing.

`D' American Depository Receipt.

INCOME TAX INFORMATION - The cost of total investments for federal income tax
purposes was $4,570,194. At December 31, 1995, net unrealized depreciation for
all securities amounted to $7,918, consisting of aggregate gross unrealized
appreciation of $326,732 and aggregate gross unrealized depreciation of
$334,650.

The accompanying notes are an integral part of the financial statements.
10
<PAGE>
<PAGE>
ROYCE LOW-PRICED STOCK FUND
STATEMENT OF ASSETS AND LIABILITIES AT DECEMBER 31, 1995
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments at value (identified cost $4,086,476) (Note 1).......................................... $4,108,276
Repurchase agreement................................................................................ 454,000
Receivable for shares of beneficial interest sold................................................... 18,267
Receivable for dividends and interest............................................................... 4,179
Prepaid expenses and other assets................................................................... 5,143
----------
TOTAL ASSETS...................................................................................... 4,589,865
----------
LIABILITIES:
Payable for investments purchased................................................................... 367,938
Accrued expenses.................................................................................... 6,874
----------
TOTAL LIABILITIES................................................................................. 374,812
----------
NET ASSETS........................................................................................ $4,215,053
----------
----------
ANALYSIS OF NET ASSETS:
Accumulated net realized gain on investments........................................................ $ 143,490
Net unrealized appreciation on investments.......................................................... 21,800
Shares of beneficial interest (Note 3).............................................................. 750
Additional paid-in capital.......................................................................... 4,049,013
----------
NET ASSETS........................................................................................ $4,215,053
----------
----------
PRICING OF SHARES:
Net asset value, offering and redemption price per share
($4,215,053[div]750,049 shares outstanding) (Note 3).............................................. $5.62
-----
-----

</TABLE>

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

<TABLE>
<CAPTION>
Years ended December 31,
---------------------------
1995 1994
----------- ------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Net investment loss............................................................... $ (27,929) $ (11,701)
Net realized gain on investments.................................................. 529,308 43,493
Net unrealized (depreciation) appreciation on investments......................... (32,889) 53,595
----------- ------------
Increase in net assets resulting from operations.................................. 468,490 85,387
Distributions paid from net realized gain......................................... (356,922) (32,759)
FROM CAPITAL SHARE TRANSACTIONS:
Increase in net assets from capital share transactions (Note 3)................... 2,223,635 1,375,085
----------- ------------
INCREASE IN NET ASSETS.............................................................. 2,335,203 1,427,713
NET ASSETS:
Beginning of year................................................................. 1,879,850 452,137
----------- ------------
End of year....................................................................... $ 4,215,053 $1,879,850
----------- ------------
----------- ------------
</TABLE>

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

<PAGE>
<PAGE>
ROYCE LOW-PRICED STOCK FUND
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1995
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends.......................................................................................... $ 21,360
Expenses:
Investment advisory fee (Note 2)................................................................... 37,599
Federal and state registration fees................................................................ 20,555
Custodian and transfer agent fees.................................................................. 9,904
Legal and auditing fees............................................................................ 6,651
Distribution fee................................................................................... 6,266
Organizational costs (Note 1)...................................................................... 1,676
Shareholder reports and notices.................................................................... 1,560
Administrative and clerical services............................................................... 1,042
Supplies and postage............................................................................... 824
Miscellaneous...................................................................................... 410
Facilities and office space........................................................................ 294
Trustees' fees..................................................................................... 199
Fees waived by investment adviser and distibutor (Note 2).......................................... (37,691)
--------
Total Expenses............................................................................. 49,289
--------
Net Investment Loss........................................................................ (27,929)
--------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments....................................................................... 529,308
Net unrealized depreciation on investments............................................................. (32,889)
--------
Net realized and unrealized gain on investments........................................................ 496,419
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................................... $468,490
--------
--------
</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 three periods.

<TABLE>
<CAPTION>
For the Period
December 15, 1993
Years ended December 31, through
----------------------------- December 31, 1993
1995 1994 (Note 1)
----------- ------------ -----------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR........................... $5.07 $ 5.01 $5.00
----------- ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss...................................... -- (0.03) 0.00
Net realized and unrealized gain on investments.......... 1.14 0.18 0.01
----------- ------ ------
Total from investment operations..................... 1.14 0.15 0.01
----------- ------ ------
LESS DISTRIBUTIONS:
Distribution paid from net realized gain................. (0.59) (0.09) --
----------- ------ ------
Total distributions.................................. (0.59) (0.09) --
----------- ------ ------
NET ASSET VALUE, END OF YEAR................................. $5.62 $5.07 $5.01
----------- ------ ------
----------- ------ ------
TOTAL RETURN................................................. 22.5% 3.0% 0.02%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period.................................... $4,215,053 $1,879,850 $452,137
Ratio of Expenses to Average Net Assets (a).................. 1.97% 1.89% 0.29%*
Ratio of Net Investment Loss to Average Net Assets........... (1.11%) (1.11%) (0.29%)*
Portfolio Turnover Rate...................................... 114% 95% 0%
</TABLE>

- ------------
* Annualized
(a) Expenses are shown after waivers by the investment adviser and distributor.
For the years ended December 31, 1995 and 1994 and for the period ended
December 31, 1993, the expense ratios before waivers would have been 3.47%,
3.63% and 2.04%, respectively.

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

12
<PAGE>
<PAGE>
ROYCE LOW-PRICED STOCK FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

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:

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 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 paid annually in December. Undistributed net investment income and
accumulated net realized gain on investment may include temporary book and tax
basis differences which will reverse in a subsequent period. These differences
are primarily due to differing treatments of income and gains on various
investment securities held by the Fund, timing differences and differing
characterizations of distributions made by the Fund. Any taxable income or gain
remaining at fiscal year end is distributed in the following year.

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

e. Repurchase agreements:

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 the Trust's investment advisory agreement with Quest Advisory Corp.
('Quest'), the Fund accrued and paid Quest fees totalling $6,174 (net of $31,425
voluntarily waived by Quest) for the year ended December 31, 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
$6,266 for the year ended December 31, 1995. The distribution agreement pursuant
to Rule 12b-1 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>
Year ended Year ended
December 31, 1995 December 31, 1994
--------------------- ----------------------
Shares Amount Shares Amount
------- ---------- -------- ----------

<S> <C> <C> <C> <C>
Sold....................................................... 350,288 $2,067,601 374,131 $1,855,225
Issued as reinvested dividends and distributions........... 60,362 338,028 6,461 32,759
Redeemed................................................... (31,052) (181,994) (100,361) (512,899)
</TABLE>

Shares redeemed within one year of purchase are subject to a 1% redemption
fee, payable to the Fund, is used to offset costs associated with the
redemption.

4. PURCHASES AND SALES OF SECURITIES:

For the year ended December 31, 1995, the cost of purchases and the
proceeds from sales of investment securities, other than short-term securities,
amounted to $4,455,558 and $2,658,891, respectively.

14
<PAGE>
<PAGE>
ROYCE LOW-PRICED STOCK FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------

To the Board of Trustees of The Royce Fund and Shareholders of Royce Low-Priced
Stock Fund:

We have audited the accompanying statement of assets and liabilities of
Royce Low-Priced Stock Fund, including the schedule of investments as of
December 31, 1995, the related statement of operations for the year then ended,
the statement of changes in net assets for each of the two years in the period
then ended, and the financial highlights for each of the two years in the period
then ended and for the period from December 15, 1993 (commencement of
operations) through December 31, 1993. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.

In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Royce Low-Priced Stock Fund as of December 31, 1995, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the two years in the period then ended and for the period from December 15, 1993
(commencement of operations) through December 31, 1993, in conformity with
generally accepted accounting principles.

COOPERS & LYBRAND L.L.P.

Boston, Massachusetts
February 7, 1996

15
<PAGE>
<PAGE>
POSTSCRIPT: CRUISES, DECK CHAIRS AND INVESTING

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

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.

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 Value report:
Picture of a man in a cape flying
Picture of Albert Einstein

On page 3 of the paper format Royce Value report:
A picture of a scale balancing a dollar sign and a factory
A picture of a man in a long white coat pointing with a pointer

On page 4 of the paper format Royce Value report:
A bullseye
A picture of a sad face

On page 5 of the paper format Royce Value report:
A picture of a boy daydreaming
A picture of two Stone-Age men building a rocket

On page 6 of the paper format Royce Value report:
A line graph showing the Dow Jones Industrial Average's performance from
December 1975 to December 1995

On page 7 of the paper format Royce Value report:
A picture of a happy alarm clock ringing

On page 8 of the paper format Royce Value report:
A line graph showing performance of the Fund, the S&P 500 and
Russell 2000 over the period indicated

On page 2 of the paper format Royce Equity Income report:
Picture of a man in a cape flying
Picture of Albert Einstein

On page 3 of the paper format Royce Equity Income report:
A picture of a scale balancing a dollar sign and a factory
A picture of a man in a long white coat pointing with a pointer

On page 4 of the paper format Royce Equity Income report:
A bullseye
A picture of a sad face

On page 5 of the paper format Royce Equity Income report:
A picture of a boy daydreaming
A picture of two Stone-Age men building a rocket

On page 6 of the paper format Royce Equity Income report:
A line graph showing the Dow Jones Industrial Average's performance from
December 1975 to December 1995

On page 7 of the paper format Royce Equity Income report:
A picture of a happy alarm clock ringing

On page 8 of the paper format Royce Equity Income report:
A line graph showing performance of the Fund and the S&P 500
over the period indicated

On page 2 of the paper format Royce Premier report:
Picture of a man in a cape flying
Picture of Albert Einstein

On page 3 of the paper format Royce Premier report:
A picture of a scale balancing a dollar sign and a factory
A picture of a man in a long white coat pointing with a pointer

On page 4 of the paper format Royce Premier report:
A bullseye
A picture of a sad face

On page 5 of the paper format Royce Premier report:
A picture of a boy daydreaming
A picture of two Stone-Age men building a rocket

On page 6 of the paper format Royce Premier report:
A line graph showing the Dow Jones Industrial Average's performance from
December 1975 to December 1995

On page 7 of the paper format Royce Premier report:
A picture of a happy alarm clock ringing

On page 8 of the paper format Royce Premier report:
A line graph showing performance of the Fund and the S&P 500
over the period indicated

On page 2 of the paper format Royce Low-Priced Stock report:
Picture of a man in a cape flying
Picture of Albert Einstein

On page 3 of the paper format Royce Low-Priced Stock report:
A picture of a scale balancing a dollar sign and a factory

On page 4 of the paper format Royce Low-Priced Stock report:
A picture of a boy daydreaming
A picture of two Stone-Age men building a rocket

On page 5 of the paper format Royce Low-Priced Stock report:
A line graph showing the Dow Jones Industrial Average's performance from
December 1975 to December 1995

On page 6 of the paper format Royce Low-Priced Stock report:
A picture of a happy alarm clock ringing

On page 7 of the paper format Royce Low-Priced Stock report:
A line graph showing performance of the Fund and the S&P 500
Russell 2000 over the period indicated