SEMI-ANNUAL REPORT
JUNE 30, 1997
THE REVEST GROWTH & INCOME FUND
A NO-LOAD MUTUAL FUND
MANAGED IN MAINE
A VALUE ORIENTED
INVESTMENT IN SMALL AND
MEDIUM-SIZED COMPANY EQUITIES
A SERIES OF THE ROYCE FUND
PROFILE OF THE FUND
The REvest Growth & Income Fund ("REvest" or the "Fund") is an open-end,
diversified management investment company. Jennifer E. Goff, President of
Royce, Ebright & Associates, Inc. ("RE&A"), a registered investment
adviser, is responsible for the management of the Fund's portfolio, subject
to the authority of the Fund's Trustees.
REvest seeks long-term growth and secondarily current income by investing
in a diversified portfolio of common stocks and convertible securities.
Prospective portfolio investments are selected on a value basis, and are
limited to small and medium-sized companies, viewed by the Fund's
investment adviser as having attractive financial characteristics and/or
growth prospects. By combining the prospect of growth with a value-oriented
selection process, we believe we are able to buy GREAT COMPANIS at GREAT
PRICES. These tenets are elaborated upon in the following outline:
[PHOTO OF THE BACK OF A SUSAN B. ANTHONY DOLLAR]
- -- SMALL & MID-CAP STOCKS - We believe these securities have more potential
for capital appreciation as they have historically generated higher returns
for investors, and are generally less well-known, and thus more likely to
be improperly priced by the marketplace. The Fund will normally invest at
least 90% of its assets in common stocks, convertible preferred stocks and
convertible bonds. At least 80% of these securities will be income-
producing, and 80% of these will be issued by companies with market
capitalizations between $200 million and $2 billion.
[PHOTO OF THE BACK OF A SUSAN B. ANTHONY DOLLAR]
- -- VALUE-ORIENTATION, PLUS GROWTH - We look for companies with "value
discrepancies," or market prices below our assessment of their "real"
business worth. We then select companies from that group that have growth
prospects which will allow them to increase their long-term value. REvest
believes that profits can come from both the continued success and growth
of each portfolio company, as well as the eventual elimination of any value
discrepancy that we believe was present at the time of purchase.
[PHOTO OF THE BACK OF A SUSAN B. ANTHONY DOLLAR]
- -- CONSISTENT PORTFOLIO CHARACTER - We will automatically close the Fund to
new investors at the end of any calendar year during which its assets reach
$350 million. Since we specialize in small and medium size company
equities, we believe a larger asset base could limit our flexibility in
buying and selling for the Fund, or force us to invest in more companies
than we can closely follow. By placing practical limits on our size, we
believe we can make it possible for the adviser to actively manage the
portfolio, and enable the Fund to maintain a constant character over its
lifetime.
Please keep in mind, however, that this is a "fixed" style of money
management. REvest does not change from year-to-year, or attempt in any way
to anticipate market trends. Because of this, the Fund is often out-of-sync
with the general equity markets, and short-term performance may be better
or worse than either the "market" or other less specialized funds.
Management follows this very disciplined and consistent path because it
believes that in the long run, this "fixed" characteristic can lead to
premium long-term returns.
MANAGER'S LETTER
[PHOTO OF JENNIFER EBRIGHT GOFF]
Dear Friends and Fellow Shareholders:
As you are well aware of by now, Thomas R. Ebright, my father and the
previous Portfolio Manager to the REvest Growth and Income Fund, passed
away July 14. For those of you who knew him well, you will not be surprised
to find out that in anticipation of the printing of this Semi-Annual
Report, he had already begun working on his Manager's Letter. Upon
discovering it, I felt compelled to include portions of his letter in this,
my first Manager's Letter. By doing so, not only do I pay tribute to my
mentor and partner, but he and I complete the "passing of the baton" in
this our final, shared "event":
Even with an interest rate boost in the first half of the year, the large-
cap equity market, characterized by the S&P 500 Index, continued its upward
surge into a seventh unprecedented positive year, gaining 20.6% in early
1997. If history were a reliable guide, none of this should be happening!
The S&P 500, by most fundamental historical standards, such as price-to-
earnings, price-to-book and dividend yield, appears to be over-valued and
therefore incapable of continuing the pace of the last few years. But then
this market doesn't seem to pay much attention to history, or at least not
yet!
Nothing much has changed for small company stocks either during early 1997.
They continue to bring up the rear of the market for the fourth consecutive
year, with the Russell 2000 Index up only 10.2%. REvest, with its small-
company, value-oriented approach to investing, achieved a 9.4% gain for its
shareholders during this period, running slightly behind this Index.
With the market at all-time highs, management decided to lower the risk
profile of the Fund by raising its yield. We took some profits early in the
year after several of our portfolio securities reached the price objectives
set for them in our research process. The proceeds from those sales were
invested primarily in several convertible bonds that we felt had capital
gains promise and had high yields compared to the regular equities in the
portfolio. We believed that the resulting higher-yield portfolio would be
somewhat more conservative. This strategy worked well during the first
quarter when market returns were more modest, but didn't work quite as well
during the second quarter when the market once again went on a tear.
The environment for small-cap stocks does seem to be getting better albeit
with little or no market recognition. The earnings growth of small-cap
stocks for the latest quarter outpaced large-cap stocks 13% to 8%*.
Meanwhile, small company prices have continued to lag those of their larger
brethren. This would seem to suggest that this neglected sector may offer
the investing public stronger earnings at relatively cheaper prices, a fact
that can't go unnoticed for long!
We remain very confident that our portfolio is properly structured for the
times. With its higher yield configuration, our portfolio offers some
protection against market volatility. In addition, we continue to believe
that our stocks, on average, have extremely attractive valuations as
compared to the typical S&P 500 stock. And finally, we believe that our
companies have "vitality factors" (characteristics that could result in the
building of future value for shareholders) that will allow them to be
strong financial performers, and hopefully strong market performers, in the
next twelve to eighteen months.
Our hope is that small companies finally start to get some long overdue
recognition in the second half of the year. As usual we will continue to
maintain the "fixed" style that has been our stock in trade since the
Fund's inception. Your continued support of this work through the ownership
of your shares is much appreciated.
Sincerely,
S/JENNIFER EBRIGHT GOFF
Jennifer Ebright Goff
Portfolio Manager
President, Royce, Ebright & Associates, Inc.
August 1, 1997
Note: The S&P 500 and the Russell 2000 are unmanaged indices and include
the reinvestment of dividends.
*Source: The Wall Street Journal 8/4/97, Article entitled "Capital-Gains
Cut Won't Hurt Small-Caps."
PORTFOLIO SUMMARY
The following (unaudited) information provides a "bird's eye" view of the
REvest portfolio as of June 30, 1997.
For a more complete picture, the full portfolio and accompanying financial
statements should be read in their entirety.
<TABLE>
PORTFOLIO COMPOSITION Value % of Net Assets
___________________________________________________________________________
<S> <C> <C>
Common Stocks:
Micro-Caps (under $200M) $ 5,897,606 10.6%
Small-Caps ($200M - $1B) 30,140,375 54.3%
Mid-Caps ($1B - $2B) 9,028,312 16.3%
Convertible Bonds 6,118,299 11.0%
Non-Convertible Bond 717,500 1.3%
Cash & Other Net Assets 3,583,233 6.5%
--------- ----
Total Net Assets $55,485,325 100.0%
__________ _____
__________ _____
</TABLE>
<TABLE>
INDUSTRY CONCENTRATION % of Net Assets
___________________________________________________________________
<S> <C>
Consumer Products 13.9%
Industrial Cyclicals 13.6%
Technology 13.0%
Financial 12.7%
Services 10.5%
Energy 8.9%
Health 8.9%
Real Estate 7.5%
Cash 6.5%
Retail 4.5%
</TABLE>
<TABLE>
AVERAGE FINANCIAL CHARACTERISTICS OF PORTFOLIO COMPANIES
_______________________________________________________________________
<S> <C>
Market Capitalization $568.5M
P/E Ratio 17.8X
P/B Ratio 2.2X
Return on Assets 7.1%
Return on Equity 13.3%
Compound 5-Year Growth Rate 21.1%
Gross Portfolio Yield 2.9%
</TABLE>
<TABLE>
TOP TEN POSITIONS MARKET VALUE % OF NET ASSETS
___________________________________________________________________________________________
<S> <C> <C>
1. Berry Petroleum Company $1,653,000 3.0%
2. Cousins Properties Incorporated 1,248,750 2.3%
3. Penn Virginia Corporation 1,225,000 2.2%
4. Helix Technology Corporation 1,215,000 2.2%
5. Russ Berrie and Company, Inc. 1,206,562 2.2%
6. Oxford Industries, Inc. 1,163,375 2.1%
7. In Focus Systems, Inc. 1,153,125 2.1%
8. Matthews International Corporation Class A 1,095,000 2.0%
9. Baldor Electric Company 1,093,813 2.0%
10. Cohu, Inc. 1,093,750 2.0%
</TABLE>
PERFORMANCE DISCUSSION
In the first half of 1997, there was once again significant performance
divergence, both by capitalization-size and by style. Large-cap stocks
continued to outpace small-cap stocks, with the S&P 500 Index up 20.6% and
the Russell 2000 Index up 10.2%. Within the small-cap universe, the Russell
2000 Value Index outdid the Russell 2000 Growth Index, 14.8% versus 5.2%,
respectively. REvest finished this period up 9.4% just slightly behind its
benchmark, the Russell 2000 Index.
Probably the most notable difference in the early going of 1997, however,
was the performance differential between the first and second quarters. In
the first quarter, the S&P 500 was up only 2.7%, followed by a 17.5% upward
bound in the second quarter. The Russell 2000, on the other hand, was
actually down 5.2% in the first quarter, only to recoup its losses with a
16.2% rise in the second quarter. REvest significantly outperformed the
small company index in the first quarter, up 1.4%, and then significantly
underperformed this same index, up only 7.8% in the second quarter.
All that REvest proved so far in 1997 was that it was much less volatile
than the index for its sector. With the market valuations at all-time
highs, management believes that the steps it took in early 1997 to give the
Fund a lower risk profile by raising its yield are entirely appropriate.
Our belief is that the second half of 1997 will see a much more modest
market where risk control will have a pay-off for our investors.
COMPARSION OF CHANGE IN VALUE OF A $10,000 INITIAL INVESTMENT ON 8/1/94*
BETWEEN THE REVEST GROWTH & INCOME FUND, THE S&P500 AND THE RUSSELL 2000
[LINE GRAPH]
<TABLE>
REVEST RUSSELL 2000 S&P500
<S> <C> <C> <C>
9/30/94 $10,040 $10,523 $10,165
12/31/94 9,710 10,330 10,160
3/31/95 10,097 10,506 11,150
6/30/95 10,699 11,808 12,211
9/30/95 11,357 12,976 13,186
12/31/95 11,283 13,264 13,970
3/31/96 11,915 13,942 14,720
6/30/96 12,355 14,643 15,395
9/30/96 12,710 14,688 15,873
12/31/96 13,799 15,453 17,183
3/31/97 13,966 14,654 17,644
6/30/97 15,096 17,029 20,723
</TABLE>
<TABLE>
PERIOD YEAR YEAR
ENDED ENDED ENDED
6/30/97 12/31/96 12/31/95
------- -------- --------
<S> <C> <C> <C>
REvest total return 9.4% 22.3% 16.2%
S&P 500 total return 10.2% 16.5% 28.4%
Russell 2000 total return 20.6% 23.0% 37.5%
</TABLE>
The above table and preceding narrative depict the historical returns of
REvest, the S&P 500, an unmanaged index representative of large-company
stocks, and the Russell 2000, Russell 2000 Value and Growth indices,
unmanaged indices representative of small-company stocks. The Fund's
present investment philosophy was followed in each of the periods
identified. All results presented in this Report are on a "total return"
basis, which assumes that all dividends and distributions were reinvested.
No redemption fees are included because they apply only to accounts open
for less than one year.
The results presented in this Report represent past performance and 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 the Fund's shares
will fluctuate so that the shares may be worth more or less than their
original cost when redeemed.
*Commencement of Operations - August 1, 1994
SCHEDULE OF INVESTMENTS (AT 6/30/97 - UNAUDITED)
<TABLE>
Common Stocks and Bonds- 93.5%
Shares or Principal Value Cost Value
- ------------------------- ---- -----
<S> <C> <C>
CONSUMER PRODUCTS - 13.9%
55,000 Haggar Corporation $ 818,606 $ 701,250
45,000 In Focus Systems, Inc.* 1,021,375 1,153,125
30,000 LaDZDBoy Incorporated 912,769 1,080,000
17,000 National Presto Industies, Inc. 703,774 685,313
$800,000 Outboard Marine Corporation 7% Conv. Sub. Deb. due 7/01/02 799,990 798,000
41,000 Oxford Industries, Inc. 796,870 1,163,375
55,000 Russ Berrie and Company, Inc. 888,440 1,206,562
25,000 The Toro Company 874,025 946,875
------- -------
6,815,849 7,734,500
--------- ---------
ENERGY - 8.9%
34,000 Barrett Resources Corporation* 899,081 1,017,875
87,000 Berry Petroleum Company Class A 999,411 1,653,000
25,000 Penn Virginia Corporation 898,437 1,225,000
$1,000,000 Snyder Oil Corporation 7% Conv. Sub. Notes due 5/15/01 920,963 1,035,099
------- ---------
3,717,892 4,930,974
--------- ---------
FINANCIAL - 12.7%
39,000 Donegal Group Inc. 713,315 950,625
30,000 Keystone Financial, Inc. 629,815 937,500
30,898 Keystone Heritage Group, Inc. 627,040 971,356
20,000 Mercantile Bankshares Corporation 459,492 800,000
26,000 Peoples Heritage Financial Group, Inc. 421,425 984,750
25,000 The Peoples State Bank 406,250 456,250
20,000 Protective Life Corporation 542,057 1,005,000
24,500 Susquehanna Bancshares, Inc. 636,856 961,625
------- -------
4,436,250 7,067,106
--------- ---------
HEALTH - 8.9%
32,000 Analogic Corporation 989,806 1,088,000
27,500 Arrow International, Inc. 800,083 804,375
25,200 Diagnostic Products Corporation 740,851 795,375
42,000 Haemonetics Corporation* 689,890 803,250
40,000 IDEXX Laboratories, Inc.* 537,875 497,500
40,000 Invacare Corporation 894,785 935,000
------- -------
4,653,290 4,923,500
--------- ---------
INDUSTRIAL CYCLICALS - 13.6%
37,000 Baldor Electric Company 902,040 1,093,813
40,000 CLARCOR Inc. 830,975 990,000
45,000 Control Devices, Inc. 561,074 573,750
37,000 Greif Brothers Corporation Class A 909,760 999,000
20,000 Kimball International, Inc. Class B 540,520 805,000
30,000 Matthews International Corporation Class A 621,337 1,095,000
25,000 Rayonier Inc. 908,125 1,051,562
31,000 Teleflex, Incorporated 615,635 968,750
------- -------
5,889,466 7,576,875
--------- ---------
REAL ESTATE - 7.5%
45,000 Cavalier Homes, Inc. 486,763 450,000
45,000 Cousins Properties Incorporated 899,999 1,248,750
41,000 Manufactured Home Communities, Inc. 762,320 945,563
34,000 New Plan Realty Trust 701,292 750,125
$800,000 Sizeler Property Investors, Inc. 8% Conv. Sub. Deb. due 7/15/03 742,566 766,000
------- -------
3,592,940 4,160,438
--------- ---------
</TABLE>
The accompanying notes are an intergral part of the financial statements
<TABLE>
Shares or Principal Value Cost Value
- ------------------------- ---- -----
<S> <C> <C>
RETAIL - 4.5%
22,000 Cracker Barrel Old Country Store, Inc. $ 455,006 $ 583,000
46,000 The Dress Barn, Inc.* 433,587 897,000
28,000 Hannaford Brothers Company . 795,147 995,750
------- -------
1,683,740 2,475,750
--------- ---------
SERVICES - 10.5%
$800,000 Airborne Freight Corporation 6.75% Conv. Sub. Deb. due 8/15/01 809,000 949,000
23,000 Chemed Corporation 886,460 861,062
78,000 Lucor, Inc. Class A* 454,375 394,875
$800,000 MacNeal Schwendler Corp. 7.875% Conv. Sub. Deb due 8/18/04 772,706 804,000
27,000 Progress Software Corp.* 414,483 432,000
$747,000 Richardson Electronics, Ltd. 8.25% Conv. Sub. Deb. due 6/15/06 647,400 642,420
$153,000 Richardson Electronics, Ltd. 7.25% Conv. Sub. Deb. due 12/15/06 132,345 116,280
$700,000 Sequa Corporation 9.375% Sr. Sub. Notes dues 12/15/03 696,834 717,500
30,000 The Standard Register Company 638,085 918,750
------- -------
5,451,688 5,835,887
--------- ---------
TECHNOLOGY - 13.0%
54,500 Cirrus Logic, Inc.* 897,419 572,250
35,000 Cohu, Inc. 701,733 1,093,750
65,000 Exabyte Corporation* 883,875 832,812
50,000 FEI Company* 627,063 787,500
30,000 Helix Technology Corporation 909,153 1,215,000
51,000 Salient 3 Communications, Inc. Class A 702,013 612,000
1,000,000 VLSI Technology, Inc. 8.25% Conv. Sub. Notes due 10/01/05 972,981 1,007,500
35,000 Watkins-Johnson Co. 914,950 1,076,250
------- ---------
6,609,187 7,197,062
--------- ---------
TOTAL COMMON STOCKS AND CORPORATE BONDS 42,850,302 51,902,092
U.S. TREASURY OBLIGATIONS - 3.6%
$1,000,000 U.S. Treasury Notes 6.00% due 9/30/98 1,000,937 1,001,090
$1,000,000 U.S. Treasury Notes 6.00% due 10/15/99 987,266 997,970
------- -------
TOTAL U.S. TREASURY OBLIGATIONS 1,988,203 1,999,060
REPURCHASE AGREEMENT - 1.8%
State Street Bank and Trust Company, 5.15% dated 6/30/97,
due 7/01/97, maturity value $1,000,143, (collateralized by U.S.
Treasury Notes, 6.25% due 6/30/98, valued at $1,024,782) 1,000,000 1,000,000
--------- ---------
TOTAL INVESTMENTS - 98.9% $45,838,505 54,901,152
__________
----------
CASH AND OTHER ASSETS LESS LIABILITIES - 1.1% 584,173
-------
TOTAL NET ASSETS - 100.0% $55,485,325
__________
__________
</TABLE>
*Non-income producing.
INCOME TAX INFORMATION - The cost for federal income tax purposes was
$45,838,505. At June 30, 1997, net unrealized appreciation for all
securities amounted to $9,062,647, consisting of aggregate gross unrealized
appreciation of $9,849,779 and aggregate gross unrealized depreciation of
$787,132.
The accompanying notes are an integral part of the financial statements
STATEMENT OF ASSETS AND LIABILITIES (AT 6/30/97 - UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments at value (identified cost $45,838,505) $54,901,152
Cash 268,680
Receivable for capital shares sold 183,814
Receivable for dividends and interest 205,572
Prepaid expenses and other assets 3,483
__________
TOTAL ASSETS 55,562,701
__________
LIABILITIES:
Payable for capital shares redeemed 10,000
Investment advisory fee payable 43,321
Accrued expenses 24,055
__________
TOTAL LIABILITIES 77,376
__________
NET ASSETS $55,485,325
__________
__________
ANALYSIS OF NET ASSETS:
Distributions in excess of net investment income $ (254)
Accumulated net realized gain on investments 2,148,887
Net unrealized appreciation on investments 9,062,647
Capital shares 4,191
Additional paid-in capital 44,269,854
__________
NET ASSETS $55,485,325
__________
__________
PRICING OF SHARES:
Net asset value, offering and redemption price per share
($55,485,325 DIVIDED BY 4,190,996 shares outstanding) $13.24
_____
_____
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
Six Months ended Year ended
June 30, 1997 December 31,
(unaudited) 1996
__________ __________
<S> <C> <C>
INVESTMENT OPERATIONS:
Net investment income $ 429,196 $ 670,454
Net realized gain on investments 2,163,729 2,201,712
Net change in unrealized appreciation on investments 1,730,078 4,806,560
________ _________
Net increase in net assets from investment operations 4,323,003 7,678,726
DIVIDENDS AND DISTRIBUTIONS:
Net investment income (417,747) (675,154)
Net realized gain on investments -- (2,223,159)
_______ _________
(417,747) (2,898,313)
CAPITAL SHARE TRANSACTIONS:
Net increase in net assets from capital share transactions 9,481,222 1,514,553
_________ _________
NET INCREASE IN NET ASSETS 13,386,478 6,294,966
NET ASSETS:
Beginning of period 42,098,847 35,803,881
__________ __________
End of period (including distributions in excess of net investment income of
$254 and $11,703, respectively) $55,485,325 $42,098,847
__________ __________
__________ __________
</TABLE>
The accompanying notes are an integral part of the financial statements.
STATEMENT OF OPERATIONS (FOR THE SIX MONTHS ENDED 6/30/97 - UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends $ 438,546
Interest 283,627
________
Total Income 722,173
________
Expenses:
Investment advisory fee 225,395
Custodian and transfer agent fees 18,431
Professional fees 8,095
Administrative and office facilities expenses 14,527
Federal and state registration fees 9,114
Trustees' fees 3,302
Other expenses 14,113
_______
Total Expenses 292,977
_______
Net Investment Income 429,196
_______
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 2,163,729
Net change in unrealized appreciation on investments 1,730,078
_________
Net realized and unrealized gain on investments 3,893,807
__________
NET INCREASE IN NET ASSETS FROM INVESTMENT OPERATIONS $4,323,003
__________
__________
</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.
<TABLE>
Six Months ended Period ended
June 30, 1997 Years ended December 31, December 31,
(unaudited) 1996 1995 1994
__________________________________________________________________
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.21 $10.73 $9.66 $10.00
_____ _____ ____ _____
INVESTMENT OPERATIONS:
Net Investment Income 0.11 0.21 0.18 0.04
Net realized and unrealized gain (loss) on
investments 1.03 2.16 1.38 (0.33)
____ ____ ____ ____
Total from investment operations 1.14 2.37 1.56 (0.29)
____ ____ ____ ____
DIVIDENDS AND DISTRIBUTIONS:
Net investment income (0.11) (0.21) (0.17) (0.05)
Net realized gain on investments -- (0.68) (0.32) --
____ ____ ____ ____
Total dividends and distributions (0.11) (0.89) (0.49) (0.05)
____ ____ ____ ____
NET ASSET VALUE, END OF PERIOD $13.24 $12.21 $10.73 $9.66
_____ _____ _____ ____
TOTAL RETURN 9.4% 22.3% 16.2% -2.9%
RATIOS/SUPPLMENTAL DATA:
Net Assets, End of Period (in thousands) $55,485 $42,099 $35,804 $21,676
Ratio of Expenses to Average Net Assets (a) 1.30%* 1.29% 1.30% 1.42%*
Ratio of Net Investment Income to Average Net Assets 1.90%* 1.78% 1.73% 1.45%*
Portfolio Turnover Rate 26% 64% 53% 5%
Average Commission Rate Paid+ $0.0603 $0.0580 -- --
</TABLE>
* Annualized.
+ For fiscal years beginning on or after October 1, 1995, the Fund is
required to disclose its average commission rate paid per share for
purchases and sales of investments.
(a) The ratio of expenses to average net assets before waiver of fees by
the investment adviser would have been 1.78% for the period ended December
31, 1994.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The REvest Growth & Income Fund (the "Fund") is a series of The Royce Fund
(the "Trust"), a diversified open-end management investment company. The
Trust, originally established as a business trust under the laws of
Massachusetts, converted to a Delaware business trust at the close of
business on June 28, 1996. The Fund commenced operations on August 1, 1994.
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 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
an accrual basis. Realized gains and losses from investment transactions
and unrealized appreciation and depreciation of investments are determined
on the basis of identified cost for book and tax purposes.
c. EXPENSES:
Expenses directly attributable to the Fund are charged to the Fund's
operations while expenses which are applicable to all Funds are allocated
in an equitable manner.
d. 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".
e. DISTRIBUTIONS:
The Fund declares dividends on a quarterly basis and capital gain
distributions annually. These dividends and distributions are recorded on
the ex-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 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.
f. 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:
Under the Trust's investment advisory agreement with Royce, Ebright &
Associates, Inc. ("RE&A"), the Fund accrued and paid RE&A fees totaling
$225,395 for the six months ended June 30, 1997. The agreement provides for
fees equal to 1.0% per annum of the first $50 million of the Fund's average
net assets and 0.75% per annum of any additional average net assets over
$50 million. These fees are computed daily and are payable monthly to
RE&A.
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>
Six Months ended
June 30, 1997 Year ended
(unaudited) December 31, 1996
________________ _________________
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Sold 1,295,461 $16,479,269 417,971 $4,876,471
Issued as reinvested
dividends and
distributions 30,143 388,187 223,492 2,702,689
Redeemed (582,731) (7,386,234) (528,815) (6,064,607)
Shares redeemed within one year of purchase are subject to a 1.0%
redemption fee.
4. PURCHASES AND SALES OF SECURITIES:
For the six months ended June 30, 1997, the cost of purchases and the
proceeds from sales of investment securities, other than short-term
securities, amounted to $19,646,404 and $11,671,263, respectively.
IN MEMORIAL
[PHOTO OF THOMAS R. EBRIGHT]
The officers, directors and employees of Royce, Ebright & Associates, Inc.
wish to pay special tribute to the late Thomas R. Ebright, founder of RE&A,
whose life prematurely ended on July 14, 1997. He will be sorely missed.
His dedication to the field of small-cap, value investing and to providing
premium, long term returns to shareholders through a "fixed" style of money
management is shared by current management and will continue to be a vital
part of the philosophy of the Fund going forward.
CUSTOMER SERVICE
1. IF I NEED LITERATURE OR HAVE QUESTIONS ABOUT THE FUND WHO MAY I CALL?
Call Mike McNamara, RE&A's customer service officer, at 800-277-5573.
The RE&A office is open from 9:00am to 5:30pm (Eastern Time) every
business day.
2. IF I HAVE QUESTIONS ABOUT THE FUND'S INVESTMENTS WHO SHOULD I CALL?
Call Jennifer Goff, the Fund's portfolio manager, at 800-277-5573.
We're one of a small number of funds where the manager is available to talk
directly to investors. If Jen's traveling she'll return your call when she
returns to the office. We try to treat our investors as true partners with
us, in the Fund.
3. HOW OFTEN DOES THE FUND MAIL OUT STATEMENTS?
Cumulative year-to-date statements are mailed out after each
transaction and after each dividend. Tax information is mailed by January
31st of each year. The Fund distributes formal Semi-Annual and Annual
Reports which are mailed to each shareholder in August and February.
4. IS IT CORRECT THAT THERE ARE NO SALES CHARGES OR 12b-1 FEES?
Yes, not one penny of your investment goes to any sales charge or 12b-1
fee. The Fund is one of the so-called "pure" no-load Funds. You will
rarely, if ever, see the Fund advertised to investors. We believe that the
Fund should sell itself because it does a good job for its investors.
5. IS THE FUND AVAILABLE FOR IRA INVESTMENTS AND OTHER RETIREMENT PLANS?
Yes, the Fund offers both IRA and 403(b)(7) plans to its investors.
Because of the Fund's philosophy and long-term approach to investing, we
believe that it may be an appropriate vehicle for all types of retirement
plans.
6. WHEN DOES THE FUND PAY INCOME AND CAPITAL GAIN DISTRIBUTIONS?
The Fund makes quarterly income distributions and an annual capital
gain distribution at the end of December. A preliminary, non-binding
estimate of the amount of the year-end distributions is available to
shareholders by calling the RE&A office any time after the Thanksgiving
holiday. Distributions are automatically reinvested unless we receive
other instructions from the shareholder.
7. WHY DOES THE FUND IMPOSE A 1% REDEMPTION FEE DURING THE FIRST YEAR OF
OWNERSHIP?
This fee is charged to discourage short-term trading in the Fund's
shares. When short-term investors trade in and out of a mutual fund, they
increase the costs of operations for the permanent shareholders. This
activity can also disrupt the investment plan for the portfolio and reduce
overall returns. When charged, the 1% fee recovers the costs of this
disruption for the rest of the shareholders.
</TABLE>
<TABLE>
HISTORICAL PRICE & DISTRIBUTION CHART
Quarter Payable Distribution Reinvest
Ended Price Date Amount Type Price
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
8/01/94* 10.00*
9/30/94 10.04 None
12/31/94 9.66 12/30/94 0.050 Income 9.66
3/31/95 10.00 3/24/95 0.045 Income 9.91
6/30/95 10.55 6/30/95 0.045 Income 10.55
9/30/95 11.16 9/25/95 0.040 Income 11.20
12/31/95 10.73 12/29/95 0.040 Income 10.73
12/29/95 0.160 ST Gains 10.73
12/29/95 0.160 LT Gains 10.73
3/31/96 11.26 3/15/96 0.050 Income 11.06
6/30/96 11.65 6/14/96 0.050 Income 11.90
9/30/96 11.92 9/13/96 0.060 Income 11.77
12/31/96 12.21 12/31/96 0.050 Income 12.21
12/31/96 0.160 ST Gains 12.21
12/31/96 0.520 LT Gains 12.21
3/31/97 12.33 3/14/97 0.055 Income 12.64
6/30/97 13.24 6/13/97 0.055 Income 13.09
</TABLE>
*Initial offering date and price.
Special Note: The Fund maintains a "direct" mailing list especially for
its "street name" shareholders. This will speed up your receipt of all Fund
mailings such as our financial reports and special interim shareholder
letters. If you are not on the mailing list and would like to be included,
please call Mike McNamara, our customer service officer, and he will add
your name.
This report must be accompanied or preceded by a current Prospectus of the
Fund.
ROYCE, EBRIGHT ASSOCIATES, INC.
INVESTMENT ADVISER
50 PORTLAND PIER
PORTLAND, ME 04101-4721
(207) 774-7455 (800) 277-5573
FAX (207) 772-7370
REVEST
GROWTH & INCOME FUND
1414 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
(800) 221-4268
A SERIES OF THE ROYCE FUND
