<PAGE>
ROYCE
MICRO-CAP
TRUST
SEMI-ANNUAL REPORT
1995
<PAGE>
Royce Micro-Cap Trust, Inc.
1414 Avenue of the Americas
New York, NY 10019
(212) 355-7311
(800) 221-4268
Dear Shareholder:
If the Dow Jones Industrial Average were to continue its first half pace,
it would top 30,000 in the year 2000! Something to think about.
THE NUMBERS . . . UP, UP AND AWAY
The first half of 1995 was the best six month period for the S&P 500 since
the opening two quarters of 1991. Up 20.2%, the S&P 500 bested both major small
company indices, the Russell 2000 and the S&P Small Cap 600, which were up 14.4%
and 14.7%, respectively.
Royce Micro-Cap Trust (Nasdaq-'OTCM') was up 7.6% for the second quarter
and 12.7% for the first six months of 1995 on a net asset value basis. OTCM's
micro-cap focus, which has provided above average results since its inception,
was a hinderance to its short-term relative performance. Nevertheless, the Fund
is up a total of 19.7% (NAV) since its inception on December 14, 1993. This
compares favorably to both major small-cap indices, the Russell 2000 and the S&P
600, which were up 16.2% and 13.2%, respectively, for the same period.
We remain encouraged by the investment opportunities that we are finding in
the micro-cap universe, especially given that, as a market cycle matures, a turn
away from growth and momentum to less exciting, low valuation issues usually
takes place. This type of period should prove favorable to OTCM's style of
investing.
SMALL-CAP STOCKS - LAGGING THEIR WAY TO NEW HIGHS
In the movie Star Wars, Luke Skywalker is told to 'Let The Force Be With
You.' The force in the first six months of 1995 was clearly with large-cap,
globally oriented stocks. The drop in the U.S. dollar and the submerging of many
'emerging' markets created a renewed interest in domestic, large-cap equities,
pushing the popular Dow Jones Industrial Average and S&P 500 indices to a long
string of new highs. In contrast, small-caps struggled to keep up. The Russell
2000 index of small-cap stocks finally eclipsed its previous high (March 18,
1994) in early June. In spite of the June surge, small-caps still lag their
large-cap counterparts.
WE HAD OUR 'SOX' KNOCKED OFF
Contributing to the first half's spectacular market returns was a meteoric
rise in technology stocks. The Philadelphia Semiconductor Index ('SOX') was up
over 100% in the last twelve months.
WEEKLY PRICE GRAPH FOR 'SOX'
(PHILA. SEMICONDUCTOR INDEX 6/94-6/95)
[GRAPH]
[Chart showing increase in Philadelphia Semiconductor Index from June 30,
1994 to June 30, 1995, with 1 year percentage change equalling 104.3%, and
6/30/94 and 6/30/95 closes being 119.46 and 244.01, respectively.]
2
<PAGE>
The current atmosphere of euphoria suggests that memories of the 'high
tech, high wreck' experience that occurred with the last technology stock run-up
in 1983 (and subsequent collapse) have been erased. Although small-cap
technology stocks are popular and available, it has never been a market segment
to which we have committed significant amounts of capital.
Imagine if the auto industry, in order to compete, had to produce more
fuel-efficient, easier-to-drive cars every year while cutting prices in half. Or
better yet, consider the airline industry which has a long record of high unit
growth but, as an industry, has yet to make the first dime in profits. We feel
that both examples are analogous to the pressures that many companies face in
the technology sector. The rate of product obsolescence rendered by scientific
advancement has made it difficult for many technology companies to maintain
competitive advantages and generate attractive long-term returns on capital.
Successful high technology companies require staggering amounts of product
innovation, incredible pricing power and uninterrupted earnings per share
gains - very hard to accomplish and very rare, indeed. For those companies that
slip in the competition, turnarounds are highly unusual. What these enterprises
may lack in retained earnings, they often make up in richly priced common
stocks.
For anyone feeling depressed about missing the recent high-tech stock
run-up, we thought we would share some interesting investment trivia which runs
counter to popular current assumptions:
<TABLE>
<CAPTION>
AVERAGE ANNUAL PERFORMANCE RESULTS
(12/31/79 - 6/30/95)
S&P S&P RUSSELL RUSSELL 2000
500 TECHNOLOGY 2000 TECHNOLOGY
---- ---------- ------- ------------
<S> <C> <C> <C>
15.3% 12.9% 13.6% 11.5%
</TABLE>
IN SPITE OF THE RECENT STELLAR MARKET PERFORMANCE AND ENORMOUS UNIT GROWTH,
TECHNOLOGY STOCKS HAVE ACTUALLY BEEN A DRAG ON THE LAST 15+ YEARS OF PERFORMANCE
FOR BOTH THE S&P 500 AND THE RUSSELL 2000.
History provides additional perspective on these exceptionally emotional
phases of the market. Past 'bubbles' have reflected obsessions like the 'tulip
mania' in the 17th century, the 'Nifty Fifty' in the early '70s, the energy
stock bonanza of the early '80s and the 1991 biotech stock craze. In each of
these bubbles, the money made by those smart enough to invest early was only
exceeded by the amount of money lost by those who invested late.
We believe that the appropriate way to participate in the technology sector
is to invest in companies who serve or benefit from the industry. It was the
suppliers of the picks and shovels, not the speculators, who made money during
the California gold rush. Our approach to the technology sector is similar.
[ILLUSTRATION]
[Cartoon showing miners standing in line to purchase picks and shovels.]
WHAT WE DO
Royce Micro-Cap Trust uses a risk averse approach to invest in the
securities of micro-cap companies. The investment approach attempts to
understand and value a company's 'private worth.' Private worth is what we
believe the company would bring if the entire enterprise were sold in a private
transaction to a knowledgeable buyer. The price we will pay for a security must
be significantly under our appraisal of its private worth. The consistent use of
this discipline, applied to less well-known securities, is the source of our
performance.
3
<PAGE>
NO OTHER PLACE WE WOULD RATHER BE
The Fund focuses on companies with market caps below $300 million. Although
our orientation is micro-cap, the picking universe is by no means limited.
Currently, more than 6,000 securities, representing over $400 billion in total
market capitalization, fall within our range. We believe micro-cap stocks are
generally less-known and, therefore, less likely to be understood and properly
priced by investors.
HOW IT WORKS
Investment returns in undervalued micro-cap companies can be unpredictable,
out-of-sync with the market and generally frustrating. Specific returns in any
given period are related to individual securities and market conditions.
Nevertheless, we expect in any period to have our share of winners and to see a
few laggards.
WINNERS
Our most recent successes are depicted in the table that follows. During
the first half of 1995, each contributed substantially to our performance and
are representative of our approach to investing. OTCM's BEST PERFORMERS, as
measured by dollar impact, were:
<TABLE>
<CAPTION>
SECURITY % GAIN
---------------------------------------- ------
<S> <C>
Dreco Energy Services Ltd. 90%
Penn Eng. & Manu. Corp. 95%
Boca Research, Inc. 200%
Diagnostic Products Corp. 40%
AMRESCO, Inc. 40%
</TABLE>
With several of our winners, we made relatively large investments in good
companies which were unknown to Wall Street. In the case of our top performer,
Dreco Energy Services, we purchased a solid energy company when the industry was
out of favor and others were selling to establish tax losses. Penn Engineering
and Manufacturing Corp. is a well-run family enterprise with a long history of
superior returns and a strong balance sheet. As a consistent high quality, low
cost producer in its field, it has generated the kind of financial results that
investors like. In the case of Boca Research, we stumbled into the high tech
boom, which produced a return beyond our wildest expectations.
MORE PATIENCE REQUIRED
One happy by-product of a bull market is that most of your stocks go up.
There are always a few exceptions. Our laggards generally fall into two
categories: undervalued companies that got cheaper (caught the flu) and those in
intensive care (with pneumonia). Fortunately, over the last two quarters, only
two of our five WORST PERFORMERS, as measured by dollar impact, fall into the
second category:
<TABLE>
<CAPTION>
SECURITY % LOSS
--------------------------------------- ------
<S> <C>
Thomaston Mills, Inc. 20%
K-Swiss, Inc. 35%
Fresh America Corp. 40%
Medex, Inc. 25%
International Imaging Materials, Inc. 23%
</TABLE>
We still view Thomaston Mills and K-Swiss as undervalued enterprises worthy
of further investment. Given that we have sold our holdings in Fresh America
Corp. and Medex we would label them as pneumonia patients, or more
appropriately, mistakes. The good news is that any of our remaining
underachievers, with a little more patience, could make next year's winners
list.
NO LONGER SMALL, UNKNOWN OR UNDER-OWNED
THERE HAVE BEEN SOME EXTRAORDINARY DEVELOPMENTS IN THE SMALL-CAP SECTOR,
BUT THEY ARE NOT WHAT YOU MAY THINK.
4
<PAGE>
Small-caps are no longer 'small' when compared to industry definitions of a
decade ago. The upward bias (success) of the overall equity market has elevated
the capitalization of small-cap stocks dramatically over the last ten years. For
example, the weighted average market cap of the Russell 2000 index of small-cap
issues has risen from $140 million in June 1985 to $410 million as of June 30,
1995.
Morningstar, the leading independent mutual fund evaluation service, has
devised a set of market capitalization parameters that places equity mutual
funds into one of three capitalization boxes: small, medium or large. Portfolios
with median market caps under $1 billion are considered small-cap. Although we
do not have exact numbers, we believe the weighted average market cap in many of
these funds is close to $1 billion, a more revealing picture of just how 'big'
small-cap has become.
TEN YEARS OF EXPLOSIVE GROWTH!
[GRAPH]
[Pictorial chart showing increase in number of small-cap funds and assets
under management from 1984 to 1995; in 1995, 310 funds with $50 billion in
assets.]
Performance success and investor acceptance has translated into a
significant flow of funds into the small-cap sector. In the mutual fund arena,
there are now over 300 small-cap funds representing approximately $50 billion in
assets. By contrast, there were only 24 small-cap funds with assets totaling $4
billion at the end of 1984. This over ten-fold increase in the number of
small-cap funds and category assets has changed the playing field in a
significant way. It is interesting to note that the majority of the funds have
elected to focus their energies at the upper end of the Morningstar
capitalization range ($500 million - $1 billion) where there is greater
liquidity but, by definition, more competition.
The growth in small company funds and assets has dramatically decreased the
number of unknown, inefficiently priced stocks at the upper end of the small-cap
market, and simultaneously, increased the number of opportunities at the low end
of the capitalization range.
Micro-cap companies are the antithesis of what most professional small-cap
investors are looking for - they are not well known, not well researched and
their securities are not easy to buy and sell. These are precisely the
conditions that breed undervalued securities. Currently, fewer than 10 mutual
funds have a micro-cap charter. As an experienced institutional investor in a
sector dominated by individuals, we believe that we have a particular advantage
in micro-cap research and trading capabilities, key components for success. We
believe that micro-caps offer today the investment opportunities that small-caps
did 15 years ago.
5
<PAGE>
[ILLUSTRATION]
[Cartoon of fortune teller and customer]
STAR GAZING
In spite of the spectacular run-up by large-cap equities since the market
lows of last December, there are several indications that small-cap stocks may
soon resume a leadership role. June was the first month of small-cap
outperformance since February, with the Russell 2000 up 5.2% versus a 2.4%
return for the S&P 500. This performance momentum has continued into the first
part of the third quarter, a good omen for micro-cap issues. Also, now that the
U.S. dollar has stopped declining against other major currencies, domestic
small-cap stocks are competing on a level playing field. This has historically
given small and micro-cap stocks a performance edge.
Finally, one has to wonder if the current level of low volatility is
sustainable in light of the market's high returns. While we cannot explain this
phenomena, we do not view this as a permanent condition. Since the last 10%
market correction in 1990, the pay-off has been with investors who took the
highest risk. We believe that over the next three years risk management will
have a similar pay-off. WE REMAIN COMMITTED TO ACHIEVING ABOVE AVERAGE LONG-TERM
RETURNS WITH THIS LOW RISK APPROACH.
Your continued confidence is appreciated.
Yours Faithfully,
<TABLE>
<S> <C>
CHARLES M. ROYCE Jack E. Fockler, Jr.
Charles M. Royce W. Whitney George
President Vice Presidents
</TABLE>
July 31, 1995
NOTE: S&P 500, Russell 2000 and S&P 600 are unmanaged and include the
reinvestment of dividends.
6
<PAGE>
<TABLE>
<CAPTION>
FUND HIGHLIGHTS June 30, 1995
--------------
<S> <C> <C>
Net Assets $92,953,690
Net Asset Value Per Share $8.54
Market Price Per Share $7.375
Shares Outstanding 10,886,317
</TABLE>
--------------------------------------------------------------------------------
FINANCIAL REVIEW
The table below represents the total returns of the Fund on two separate bases.
NAV total return is the compound rate of return, using net asset values, on an
amount invested in the Fund from the beginning to the end of the stated period.
NAV return is the most meaningful measurement of a continuous stockholder's
progress. Market Value total return presents similar information, but values the
Fund at market rather than NAV and therefore reflects the actual experience of a
stockholder, before commission costs, who bought and sold shares of the Fund at
the beginning and ending dates.
<TABLE>
<CAPTION>
Period Ended NAV Market Value S&P Russell S&P Nasdaq
June 30, 1995 Total Return Total Return 500 2000 SmallCap 600 Composite
-------------------------------- ------------ ------------ ---- ------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
3 Months 7.6% 5.4% 9.5% 9.4% 9.5% 14.2%
6 Months 12.7 5.4 20.2 14.4 14.7 24.1
1 Year 18.3 11.2 26.1 20.1 20.4 32.3
Average Annual Total
Return From Inception* 12.1 0.0 14.2 10.3 8.5 15.1
</TABLE>
The S&P 500, Russell 2,000 and the S&P SmallCap 600 are unmanaged indices and
include the reinvestment of dividends. The Nasdaq Composite is unmanaged.
Source: Frank Russell Co.
* Inception date - December 14, 1993
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 NET ASSET AND MARKET VALUES OF FUND SHARES WILL
FLUCTUATE, SO THAT THE SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST
WHEN SOLD.
7
<PAGE>
HISTORY SINCE INCEPTION
The following table details the share accumulation history of an initial
investor in the Fund who reinvested all distributions and participated fully in
the rights offering. By reinvesting all distributions and fully participating in
the rights offering, an investor maximizes his returns. This table should be
read in conjunction with the Financial Review of the Fund (see page 7).
<TABLE>
<CAPTION>
Amount Purchase NAV MKT
History Invested Price Shares Value Value
----------------- -------- -------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
12/14/93 Initial Purchase $7,500 $7.500 1,000 $ 7,250 $7,500
10/28/94 Rights Offering 1,400 7.000 200
12/19/94 Distribution $.05 6.750 9
12/31/94 1,209 $ 9,163 $8,462
-------------------------------------------------------------------------------------------
6/30/95 $8,900 1,209 $10,325 $8,916
</TABLE>
The Board of Directors of the Fund has authorized the Fund to repurchase up to
300,000 shares of its common stock in transactions through December 31, 1995.
Such repurchases would be effected at a price per share which is less than the
then current net asset value, but not in excess of the then prevailing market
price.
------------------------
The Board of Directors of the Fund is authorized to offer stockholders an
opportunity to subscribe for additional shares of common stock of the Fund
through rights offerings at a price per share that may be less than the then
current net asset value of the Fund's common stock. The timing and terms of any
such offerings are left to the Board's discretion.
8
<PAGE>
PORTFOLIO SUMMARY
The following information is provided as a 'bird's eye' view of the Royce
Micro-Cap Trust portfolio. For a more complete picture, the full portfolio and
accompanying financial statements should be read in their entirety.
--------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
<TABLE>
<CAPTION>
Value % of Net Assets
--------------- ---------------
<S> <C> <C>
Common Stocks..................................................... $89,382,360 96.2%
Preferred Stocks.................................................. 895,688 1.0
Cash & Other Net Assets........................................... 2,675,642 2.8
--------------- -------
Total Net Assets.................................................. $92,953,690 100.0%
--------------- -------
--------------- -------
</TABLE>
--------------------------------------------------------------------------------
COMMON STOCK SECTORS
<TABLE>
<CAPTION>
% of Net Assets
---------------
<S> <C>
Industrial Cyclicals............................................... 21.2%
Financial.......................................................... 16.7
Services........................................................... 16.1
Energy............................................................. 9.7
Technology......................................................... 8.4
Consumer Durables.................................................. 8.3
Retail............................................................. 8.0
Consumer Staples................................................... 5.0
Health............................................................. 2.5
Utilities.......................................................... 0.3
</TABLE>
--------------------------------------------------------------------------------
TOP TWENTY POSITIONS
<TABLE>
<CAPTION>
Market Value % of Net Assets
--------------- ---------------
<C> <S> <C> <C>
1 Grey Advertising Inc. ........................................ $ 1,248,000 1.3%
2 Life Technologies, Inc. ...................................... 1,199,250 1.3
3 Florida Rock Industries, Inc. ................................ 1,180,400 1.3
4 Penn Engineering and Manufacturing Corp. ..................... 1,132,500 1.2
5 Chemfab Corporation........................................... 1,126,600 1.2
6 The First Years, Inc. ........................................ 1,093,500 1.2
7 Trenwick Group Inc. .......................................... 1,045,500 1.1
8 CATHERINES STORES CORPORATION................................. 1,043,525 1.1
9 Stein Mart, Inc. ............................................. 1,012,500 1.1
10 DUFF & PHELPS CREDIT RATING CO. .............................. 995,800 1.1
11 ALLIED Life Financial Corporation............................. 988,425 1.1
12 Nobel Insurance Limited....................................... 971,438 1.0
13 Matthews International Corporation Cl. A...................... 948,750 1.0
14 Cliffs Drilling Company....................................... 923,400 1.0
15 Bell Industries, Inc. ........................................ 921,412 1.0
16 The Dress Barn, Inc. ......................................... 916,500 1.0
17 Thomaston Mills, Inc. Cl. A................................... 912,500 1.0
18 Vallen Corporation............................................ 900,000 1.0
19 Exar Corporation.............................................. 896,800 1.0
20 AMRESCO, INC. ................................................ 894,375 1.0
</TABLE>
9
<PAGE>
ROYCE MICRO-CAP TRUST, INC.
SCHEDULE OF INVESTMENTS AT JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
COMMON STOCKS -- 96.2%
<TABLE>
<CAPTION>
Value
Shares (Note 1)
<S> <C> <C>
CONSUMER DURABLES -- 8.3%
34,300 *Aldila, Inc. .................. $ 175,777
10,625 Allen Organ Company Cl. B...... 472,813
54,000 *The First Years, Inc. ......... 1,093,500
51,100 Garan Incorporated............. 855,925
6,200 *Johnson Worldwide Associates,
Inc. Cl. A................... 145,700
25,000 Juno Lighting, Inc. ........... 400,000
15,800 *Kit Manufacturing Co. ......... 169,850
59,200 *Lazare Kaplan International,
Inc. ........................ 444,000
73,700 *Lifetime Hoan Corporation...... 829,125
50,600 Matthews International
Corporation Cl. A............ 948,750
55,500 Rauch Industries, Inc. ........ 509,906
53,100 The Rival Company.............. 783,225
22,500 *River Oaks Furniture, Inc. .... 270,000
4,100 Skyline Corporation............ 74,313
29,300 Thor Industries, Inc. ......... 578,675
-----------
7,751,559
-----------
CONSUMER STAPLES -- 5.0%
21,700 Alico, Inc. ................... 385,175
2,000 Farmer Bros. Co. .............. 245,000
80,600 Golden Enterprises, Inc. ...... 564,200
5,300 Haggar Corp. .................. 103,350
22,500 *Jean Philippe Fragrances,
Inc. ........................ 244,688
50,900 K-Swiss Inc. Cl. A............. 661,700
40,900 Midwest Grain Products,
Inc. ........................ 756,650
35,500 The Smithfield Companies,
Inc. ........................ 387,172
25,000 *The Topps Company, Inc. ....... 156,250
11,000 Velcro Industries N.V. ........ 635,250
14,600 Weyco Group, Inc. ............. 525,600
-----------
4,665,035
-----------
ENERGY -- 9.7%
60,500 *Alamco, Inc. .................. 468,875
87,500 *American Oilfield Divers,
Inc. ........................ 568,750
50,000 *Belden & Blake Corporation..... 812,500
30,000 Berry Petroleum Company........ 292,500
64,800 *Cliffs Drilling Company........ 923,400
59,000 *Dreco Energy Services Ltd. Cl.
A............................ 855,500
128,000 *Equity Oil Company............. 560,000
36,000 *Gulfmark International
Inc. ........................ 675,000
34,800 *Hornbeck Offshore Services,
Inc. ........................ 548,100
40,000 Lufkin Industries, Inc. ....... 750,000
15,400 *McFarland Energy, Inc. ........ 111,650
53,000 *Offshore Logistics, Inc. ...... 742,000
10,000 Penn Virginia Corporation...... 281,250
10,000 *Pool Energy Services Co. ...... 82,500
59,000 *Tide West Oil Company.......... 678,500
66,000 *Toreador Royalty
Corporation.................. 206,250
58,600 Tucker Drilling Co., Inc. ..... 439,500
-----------
8,996,275
-----------
<CAPTION>
Value
Shares (Note 1)
<S> <C> <C>
FINANCIAL -- 16.7%
10,000 *Allied Capital Advisers,
Inc. ........................ $ 46,250
57,300 ALLIED Life Financial
Corporation.................. 988,425
95,400 AMRESCO, INC. ................. 894,375
53,024 Baldwin & Lyons, Inc. Cl. B.... 821,872
24,400 Belize Holdings Inc. .......... 390,400
20,000 *Benson Financial
Corporation.................. 265,000
5,800 E.W. Blanch Holdings, Inc. .... 108,025
31,100 Capitol Transamerica
Corporation.................. 598,675
10,000 *Danielson Holding
Corporation.................. 78,750
21,600 Eaton Vance Corp. ............. 696,600
54,100 *Gryphon Holdings Inc. ......... 879,125
8,800 Guaranty National
Corporation.................. 162,800
25,200 *Hanmi Bank..................... 163,800
60,900 Hilb, Rogal & Hamilton
Company...................... 761,250
40,000 Independence Holding Company... 140,000
1,000 *Insignia Financial Group, Inc.
Cl. A........................ 26,750
54,800 Intercargo Corporation......... 602,800
22,000 Iron and Glass Bancorp,
Inc. ........................ 594,000
10,000 Lawyers Title Corporation...... 155,000
20,750 *Mutual Assurance, Inc. ........ 622,500
94,200 Nobel Insurance Limited........ 971,438
46,300 Oriental Federal Savings
Bank......................... 879,700
30,500 Pennsylvania Manufacturers
Corporation.................. 472,750
38,200 Piper Jaffray Companies
Inc. ........................ 577,775
18,000 Poe & Brown, Inc. ............. 418,500
81,250 *Rand Capital Corporation....... 497,656
18,700 Raymond James Financial,
Inc. ........................ 362,313
45,000 Southwest Securities Group,
Inc. ........................ 371,250
6,510 TITAN Holdings, Inc. .......... 78,934
41,000 *Transnational Re Corporation
Cl. A........................ 822,563
24,600 Trenwick Group Inc. ........... 1,045,500
-----------
15,494,776
-----------
HEALTH -- 2.5%
20,200 Diagnostic Products
Corporation.................. 737,300
11,500 Jones Medical Industries,
Inc. ........................ 127,938
53,300 Life Technologies, Inc. ....... 1,199,250
24,000 Sterile Concepts Holdings,
Inc. ........................ 297,000
-----------
2,361,488
-----------
INDUSTRIAL CYCLICALS -- 21.2%
23,000 Aceto Corporation.............. 339,250
24,600 American Filtrona
Corporation.................. 725,700
10,000 Ash Grove Cement Company....... 730,000
51,200 Guy F. Atkinson Company of
California................... 480,000
11,000 Baldor Electric Company........ 314,875
4,400 *Bird Corp. .................... 30,250
41,000 Blessings Corporation.......... 512,500
68,800 *Chemfab Corporation............ 1,126,600
3,000 CLARCOR Inc. .................. 68,625
30,000 *Detection Systems, Inc. ....... 206,250
</TABLE>
The accompanying notes are an integral part of the financial
statements.
10
<PAGE>
ROYCE MICRO-CAP TRUST, INC.
SCHEDULE OF INVESTMENTS AT JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 1)
<S> <C> <C>
INDUSTRIAL CYCLICALS-(CONT'D)
40,100 *Devcon International Corp. .... $ 290,725
62,500 *DeVlieg-Bullard, Inc. ......... 85,938
19,400 Fab Industries, Inc. .......... 591,700
51,200 *Figgie International Inc. Cl.
A............................ 441,600
16,300 *Figgie International Inc. Cl.
B............................ 126,325
41,600 Florida Rock Industries,
Inc. ........................ 1,180,400
45,600 Gilbert Associates, Inc. Cl.
A............................ 592,800
12,000 Haskel International, Inc. Cl.
A............................ 84,000
38,200 *Hauser Chemical Research,
Inc. ........................ 202,938
67,100 Hawkins Chemical, Inc. ........ 452,925
42,000 *C. H. Heist Corp. ............. 341,250
35,800 *Insituform Technologies,
Inc. ........................ 474,350
21,800 International Aluminum
Corporation.................. 692,150
15,000 *International Imaging
Materials, Inc. ............. 382,500
30,500 Kaman Corporation Cl. A........ 388,875
45,700 Lilly Industries, Inc. Cl. A... 536,975
170,000 *MK Gold Company................ 595,000
12,359 MacDermid, Incorporated........ 568,514
18,000 NN Ball and Roller, Inc. ...... 319,500
25,200 Oshkosh Truck Corporation Cl.
B............................ 311,850
4,000 Peerless Mfg. Co. ............. 43,500
15,000 *Pegasus Gold Inc. ............. 151,875
15,000 Penn Engineering and
Manufacturing Corp. ......... 1,132,500
32,000 *Perini Corporation............. 328,000
25,700 Puerto Rican Cement Company,
Inc. ........................ 783,850
26,000 *Shiloh Industries, Inc. ....... 276,250
60,000 *Simpson Manufacturing Co.,
Inc. ........................ 727,500
65,000 Thermal Industries, Inc. ...... 641,875
73,000 Thomaston Mills, Inc. Cl. A.... 912,500
16,000 *The Turner Corporation......... 160,000
37,900 Versa Technologies, Inc. ...... 549,550
39,700 *Webco Industries, Inc. ........ 248,125
10,030 *Wedco Technology, Inc. ........ 97,793
7,000 Woodward Governor Company...... 441,000
-----------
19,688,683
-----------
RETAIL -- 8.0%
33,000 *Brookstone, Inc. .............. 226,875
46,700 *The Buckle, Inc. .............. 729,688
93,800 *CATHERINES STORES
CORPORATION.................. 1,043,525
10,000 The Cato Corporation Cl. A..... 81,250
18,800 Claire's Stores, Inc. ......... 340,750
8,700 *Crown Books Corporation........ 97,875
2,500 Dart Group Corporation Cl. A... 210,938
94,000 *The Dress Barn, Inc. .......... 916,500
75,700 *Little Switzerland, Inc. ...... 331,188
13,100 *Mikasa, Inc. .................. 194,863
29,137 *Monro Muffler Brake, Inc. ..... 422,494
17,100 *Orchard Supply Hardware Stores
Corporation.................. 192,375
<CAPTION>
Value
Shares (Note 1)
<S> <C> <C>
41,400 Oshkosh B'Gosh, Inc. Cl. A..... 662,400
10,000 *Ross Stores, Inc. ............. $ 117,500
75,000 *Stein Mart, Inc. .............. 1,012,500
40,000 *Suzy Shier Limited............. 196,524
137,157 *The Wet Seal, Inc. Cl. A....... 634,351
-----------
7,411,596
-----------
SERVICES -- 16.1%
7,000 ABM Industries Incorporated.... 161,875
53,400 *Ag Services Of America,
Inc. ........................ 418,856
18,350 Air Express International
Corporation.................. 431,225
5,500 *Air Transportation Holding
Company, Inc. ............... 22,688
48,000 *Allwaste, Inc. ................ 264,000
43,107 *Bell Industries, Inc. ......... 921,412
57,000 *Jenny Craig, Inc. ............. 470,250
33,500 Dames & Moore.................. 435,500
23,675 *Dataflex Corporation........... 180,522
76,600 DUFF & PHELPS CREDIT RATING
CO. ......................... 995,800
5,000 EMPHESYS Financial Group,
Inc. ........................ 118,125
41,500 Ennis Business Forms, Inc. .... 513,563
10,000 Expeditors International of
Washington, Inc.............. 225,000
22,700 *FRP Properties, Inc. .......... 488,050
51,800 *FCA International Ltd. ........ 116,881
85,000 Frozen Food Express Industries,
Inc. ........................ 823,438
6,500 Grey Advertising Inc. ......... 1,248,000
35,100 *Handex Environmental Recovery,
Inc. ........................ 245,700
24,500 *Hirsh International Corp. Cl.
A............................ 392,000
22,500 *IHOP Corp. .................... 579,375
5,000 *KLLM Transport Services,
Inc. ........................ 60,000
11,000 Kenan Transport Company........ 220,000
3,000 *Kent Electronics
Corporation.................. 113,625
20,000 Lawson Products, Inc. ......... 530,000
41,000 Merrill Corporation............ 779,000
17,000 *MovieFone, Inc. Cl. A.......... 74,375
50,300 *Nichols Research
Corporation.................. 861,388
5,000 *Payco American Corporation..... 38,750
6,500 Plenum Publishing
Corporation.................. 227,500
105,200 Richardson Electronics,
Ltd. ........................ 762,700
68,300 *Steck-Vaughn Publishing
Corporation.................. 597,625
45,500 Treadco, Inc. ................. 637,000
7,900 *UNC, Inc. ..................... 42,463
50,000 *Vallen Corporation............. 900,000
7,000 *Western Micro Technology,
Inc. ........................ 22,750
-----------
14,919,436
-----------
TECHNOLOGY -- 8.4%
21,000 BGS Systems, Inc. ............. 687,750
20,000 *Banyan Systems Incorporated.... 275,000
23,100 *Boca Research, Inc. ........... 623,700
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
ROYCE MICRO-CAP TRUST, INC.
SCHEDULE OF INVESTMENTS AT JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 1)
<S> <C> <C>
TECHNOLOGY-(CONT'D)
15,400 *Comptek Research, Inc. ........ $ 277,200
35,000 *Continental Circuits Corp. .... 411,250
10,800 *Dionex Corporation............. 494,100
30,400 *Exar Corporation............... 896,800
40,482 *Giga-tronics Incorporated...... 313,736
16,250 Hach Company................... 219,375
39,900 *ILC Technology, Inc. .......... 369,075
15,400 *Integral Systems, Inc. ........ 423,500
46,500 Landauer Inc................... 877,688
40,700 *Liberty Technologies, Inc. .... 223,850
54,200 *MDL Information Systems,
Inc. ........................ 806,225
70,300 Newport Corporation............ 659,063
1,900 Sage Laboratories, Inc. ....... 121,600
8,200 *Technitrol, Inc. .............. 116,850
1,000 *Tridex Corporation............. 6,250
-----------
7,803,012
-----------
UTILITIES -- .3%
33,200 Southwest Water Company........ 290,500
-----------
Total Common Stocks
(Cost $77,984,832)........... 89,382,360
-----------
<CAPTION>
Value
Shares (Note 1)
<S> <C> <C>
PREFERRED STOCKS -- 1.0%
12,250 Bird Corp. $1.85 Conv. ........ $ 229,688
12,500 Sterling Financial Corporation
$1.8125 Conv. Cum. .......... 356,250
118,000 `D'United Services Advisors,
Inc. 5% Non Cum. ............ 309,750
-----------
Total Preferred Stocks
(Cost $1,101,102)............ 895,688
-----------
REPURCHASE AGREEMENT -- 2.1%
State Street Bank and Trust
Company, 5.5% due 7/3/95,
collateralized by U.S.
Treasury notes, 7.5% due
1/31/97, valued at $2,004,764
(Cost $2,000,000)............ 2,000,000
-----------
TOTAL INVESTMENTS -- 99.3%
(COST $81,085,934)....................... 92,278,048
CASH AND OTHER ASSETS LESS
LIABILITIES -- .7%....................... 675,642
-----------
NET ASSETS -- 100.0%....................... $92,953,690
-----------
-----------
</TABLE>
* Non-income producing.
`D' At June 30, 1995, the Fund owned 5% or more of the Company's outstanding
shares thereby making the Company an affiliated person as defined in the
Investment Company Act of 1940.
INCOME TAX INFORMATION -- The cost for federal income tax purposes was
$81,085,934. At June 30, 1995, net unrealized appreciation for all securities
amounted to $11,192,114, consisting of aggregate gross unrealized appreciation
of $13,870,867 and aggregate gross unrealized depreciation of $2,678,753.
The accompanying notes are an integral part of the financial
statements.
12
<PAGE>
ROYCE MICRO-CAP TRUST, INC.
STATEMENT OF ASSETS AND LIABILITIES (unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30, 1995
-------------
<S> <C>
ASSETS:
Investments in securities, at value (identified cost $81,085,934)........................... $ 92,278,048
Receivable for investments sold............................................................. 955,699
Cash........................................................................................ 955,359
Receivable for dividends and interest....................................................... 118,854
Deferred organizational costs and other assets.............................................. 68,285
-------------
Total Assets........................................................................... 94,376,245
-------------
LIABILITIES:
Payable for investments purchased........................................................... 1,177,977
Accrued expenses and other liabilities...................................................... 161,970
Payable for investment advisory fees........................................................ 67,704
Payable for administration fees............................................................. 14,904
-------------
Total Liabilities...................................................................... 1,422,555
-------------
Net Assets............................................................................. $ 92,953,690
-------------
-------------
ANALYSIS OF NET ASSETS:
Net investment loss......................................................................... $ (38,136)
Accumulated net realized gain on investments................................................ 3,292,440
Net unrealized appreciation on investments.................................................. 11,192,114
Capital stock............................................................................... 10,886
Additional paid-in capital.................................................................. 78,496,386
-------------
Net Assets............................................................................. $ 92,953,690
-------------
-------------
Net asset value per share ($92,953,690[div]10,886,317 shares outstanding)................... $8.54
-----
-----
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
June 30, 1995 Year Ended
(unaudited) December 31, 1994
------------- -----------------
<S> <C> <C>
INVESTMENT ACTIVITIES:
Net investment income (loss)..................................... $ (38,136) $ 156,686
Net realized gain on investments................................. 3,447,259 229,922
Net change in unrealized appreciation on investments............. 7,010,739 3,785,535
------------- -----------------
Total from investment activities............................ 10,419,862 4,172,143
------------- -----------------
DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income............................................ -- (216,571)
Net realized gain on investments................................. -- (324,856)
------------- -----------------
Total dividends and distributions........................... -- (541,427)
------------- -----------------
CAPITAL STOCK TRANSACTIONS:
Increase in net assets from capital stock transactions........... -- 7,776,860
------------- -----------------
NET INCREASE IN NET ASSETS............................................ 10,419,862 11,407,576
NET ASSETS:
Beginning of period.............................................. 82,533,828 71,126,252
------------- -----------------
End of period.................................................... $ 92,953,690 $82,533,828
------------- -----------------
------------- -----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
ROYCE MICRO-CAP TRUST, INC.
STATEMENT OF OPERATIONS (unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1995
----------------
<S> <C>
INVESTMENT INCOME:
Dividends........................................................................... $ 581,657
Interest............................................................................ 87,594
----------------
Total Income................................................................... 669,251
----------------
EXPENSES:
Investment advisory fees............................................................ 449,742
Administration fee.................................................................. 88,673
Custodian and transfer agent fees................................................... 37,286
Legal and auditing fees............................................................. 29,865
Postage and supplies................................................................ 28,598
Administrative and clerical services................................................ 18,856
Shareholder reports................................................................. 17,919
Directors' fees..................................................................... 9,050
Organizational expenses............................................................. 6,873
Facilities and office space......................................................... 5,238
Miscellaneous expense............................................................... 18,165
Fee waived by investment adviser.................................................... (2,878)
----------------
Total Expenses................................................................. 707,387
----------------
Net Investment Loss............................................................ (38,136)
----------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments.................................................... 3,447,259
Net change in unrealized appreciation on investments................................ 7,010,739
----------------
Net realized and unrealized gain on investments..................................... 10,457,998
----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..................................... $ 10,419,862
----------------
----------------
</TABLE>
The accompanying notes are an integral part of the financial
statements.
14
<PAGE>
ROYCE MICRO-CAP TRUST, INC.
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
This table is presented to show selected data for a share outstanding
throughout each period, and to assist stockholders in evaluating the Fund's
performance for the periods presented.
<TABLE>
<CAPTION>
Six Months For the Period
Ended December 14, 1993*
June 30, 1995 Year Ended through
(unaudited) December 31, 1994 December 31, 1993
------------- ----------------- ------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............. $7.58 $7.27 $7.25
------------- ----------------- ------------------
FROM INVESTMENT ACTIVITIES:
Net investment income (loss)................... -- 0.01 --
Net realized and unrealized gain on
investments................................. 0.96 0.41 0.02
------------- ----------------- ------------------
Total from investment activities............ 0.96 0.42 0.02
------------- ----------------- ------------------
DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income.......................... -- (0.02) --
Net realized gain on investments............... -- (0.03) --
------------- ----------------- ------------------
Total dividends and distributions........... -- (0.05) --
------------- ----------------- ------------------
CAPITAL STOCK TRANSACTIONS:
Effect of rights offering...................... -- (0.06) --
------------- ----------------- ------------------
Total capital stock transactions............ -- (0.06) --
------------- ----------------- ------------------
NET ASSET VALUE, END OF PERIOD................... $8.54 $7.58 $7.27
------------- ----------------- ------------------
------------- ----------------- ------------------
MARKET VALUE, END OF PERIOD...................... $7.375 $7.00 $7.50
------------- ----------------- ------------------
------------- ----------------- ------------------
TOTAL RETURN:(a)(b)
Net Asset Value................................ 12.7% 6.0% 0.3%
Market Value................................... 5.4% (5.1)% 0.0%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000 omitted).......... $92,954 $82,534 $ 71,126
Ratio of Expenses to Average Net Assets.......... 1.65%** 1.88% 1.92%(c)**
Ratio of Net Investment Income (Loss) to Average
Net Assets..................................... (0.09)%** 0.21% (0.06)%(c)**
Portfolio Turnover Rate.......................... 22% 23% 0%
</TABLE>
------------
* Commencement of operations.
** Annualized.
(a) Reflects the net asset value and market value experiences, respectively, of
a continuous stockholder who made commission-free acquisitions through
reinvestment of dividends and distributions and exercised primary
subscription rights.
(b) Total investment return for a period of less than one year is not
annualized.
(c) Presented after waiver by the Investment Adviser and Administrator. For the
period ended December 31, 1993, the ratios of expenses and net investment
loss to average net assets would have been 2.12% and (.26)%, respectively,
absent such waivers.
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
ROYCE MICRO-CAP TRUST, INC.
NOTES TO FINANCIAL STATEMENTS (unaudited)
--------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Royce Micro-Cap Trust, Inc. (the 'Fund'), formerly Royce OTC Micro-Cap
Fund, Inc. is a closed-end, diversified management investment company registered
under the Investment Company Act of 1940 and was incorporated under the laws of
the State of Maryland on September 9, 1993. The Fund commenced operations on
December 14, 1993.
Valuation of Investments:
Securities listed on an exchange or on the Nasdaq National Market System
are valued on the basis of 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 Trust's Board of Directors. 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.
Investment Transactions and Related Investment Income:
Investment transactions are accounted for on the trade date. Dividend
income is recorded on the ex-dividend date. Interest income is recorded on an
accrual basis. Realized gains and losses from investment transactions are
determined on the basis of identified cost for both book and tax purposes.
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'.
Dividends and Distributions:
Dividends and capital gain distributions are recorded on the ex-dividend
date and paid annually in December. Dividend and capital gain distributions are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. Permanent book and tax basis
differences relating to shareholder distributions will result in
reclassifications to additional 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.
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.
16
<PAGE>
ROYCE MICRO-CAP TRUST, INC.
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
--------------------------------------------------------------------------------
Organizational Expenses:
Costs of $70,000 incurred by the Fund in connection with its organization
have been deferred and are being amortized on a straight line basis over a five
year period from the date the Trust commenced operations.
NOTE 2. INVESTMENT ADVISORY AGREEMENT:
Under the Investment Advisory Agreement between Quest Advisory Corp.
('Quest') and the Fund, the Basic Fee is a monthly fee equal to 1/12 of 1% (1%
on an annualized basis) of the average of the net assets of the Fund at the end
of each month included in the applicable performance period, which is a rolling
period of up to 36 months, beginning January 1, 1994 and ending with the most
recent calendar month.
The Basic Fee for such monthly period may be increased or decreased,
depending on the extent, if any, by which the investment performance of the Fund
exceeds by more than 2 percentage points, or is exceeded by more than 2
percentage points, by the percentage change in the investment record of the
Nasdaq Composite Index (the 'Index') for the performance period.
The maximum increase or decrease in the Basic Fee for any month may not
exceed 1/12 of 0.5%. Accordingly, for each month, the maximum fee rate as
adjusted for performance is 1/12 of 1.5% and would be payable if the investment
performance of the Fund exceeds the percentage change in the investment record
of the Index by 12 or more percentage points for the performance period. The
minimum fee rate as adjusted for performance is 1/12 of 0.5% and would be
payable if the percentage change in the investment record of the Index exceeds
the investment performance of the Fund by 12 or more percentage points for the
performance period.
For the six months ended June 30, 1995, the Fund paid Quest advisory fees
totaling $446,864, net of $2,878 voluntarily waived by Quest.
NOTE 3. ADMINISTRATION AGREEMENT:
Under the Administration Agreement with the Fund, Mitchell Hutchins Asset
Management Inc. (the 'Administrator') serves as the Fund's Administrator. The
Administrator performs or assists in certain aspects of the Fund's operations.
Under the terms of the Administration Agreement, a monthly administration fee is
paid to the Administrator at an annual rate of 0.20% of the Fund's average net
assets.
NOTE 4. CAPITAL STOCK:
At June 30, 1995, there were 150,000,000 shares of common stock, $.001 par
value, authorized. There were no capital stock transactions for the six months
ended June 30, 1995. Capital stock transactions for the year ended December 31,
1994 were as follows:
<TABLE>
<CAPTION>
Year Ended
December 31, 1994
-----------------------
Shares Amount
--------- ----------
<S> <C> <C>
Adjustments to additional paid-in capital...................................... -- $ 30,315
Proceeds from rights offering.................................................. 1,039,756 7,356,629
Dividend and distribution reinvestment......................................... 57,765 389,916
</TABLE>
17
<PAGE>
ROYCE MICRO-CAP TRUST, INC.
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
--------------------------------------------------------------------------------
NOTE 5. PURCHASES AND SALES OF SECURITIES:
For the six months ended June 30, 1995, the cost of purchases and the
proceeds from the sales of investment securities, other than short-term
securities, amounted to $20,286,498 and $18,367,033 respectively.
NOTE 6. QUARTERLY RESULTS OF OPERATIONS:
<TABLE>
<CAPTION>
Net Realized Net Increase
and Unrealized (Decrease) in Net
Net Investment Gain (Loss) on Assets Resulting
Income (Loss) Investments from Operations
--------------- ----------------- -----------------
Total Per Total Per Total Per
Quarter Ended (000) Share (000) Share (000) Share
---------------------------------------------- ----- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
June 30, 1995................................. $ (22) $(0.00) $ 6,541 $ 0.60 $ 6,519 $ 0.60
March 31, 1995................................ (16) (0.00) 3,917 0.36 3,901 0.36
----- ------ ------- ------ ------- ------
Totals................................... $ (38) $(0.00) $10,458 $ 0.96 $10,420 $ 0.96
----- ------ ------- ------ ------- ------
----- ------ ------- ------ ------- ------
December 31, 1994............................. $ (6) $(0.00) $ (125) $(0.01) $ (131) $(0.01)
September 30, 1994............................ (57) (0.01) 3,640 0.37 3,583 0.36
June 30, 1994................................. 23 0.00 80 0.01 103 0.01
March 31, 1994................................ 197 0.02 420 0.04 617 0.06
----- ------ ------- ------ ------- ------
Totals................................... $ 157 $ 0.01 $ 4,015 $ 0.41 $ 4,172 $ 0.42
----- ------ ------- ------ ------- ------
----- ------ ------- ------ ------- ------
December 31, 1993 (Note 1).................... $ (2) $(0.00) $ 396 $ 0.02 $ 396 $ 0.02
----- ------ ------- ------ ------- ------
----- ------ ------- ------ ------- ------
</TABLE>
At the Annual Meeting of Stockholders held on June 28, 1995, Fund
stockholders elected directors, approved a change in the Fund's stated
investment objective by eliminating the requirement that it invest at least 65%
of its assets in the securities of micro-cap companies that are traded in the
over-the-counter market, approved an amendment of the Fund's Articles of
Incorporation changing its name and ratified the Board's selection of the Fund's
independent public accountant for 1995, as follows:
<TABLE>
<CAPTION>
NAME OF DIRECTOR/ VOTES VOTES VOTES CAST
OTHER PROPOSALS CAST FOR ABSTAINED AGAINST
---------------------------------------------------- --------- --------- ----------
<S> <C> <C> <C>
Charles M. Royce 6,304,738 158,430 N/A
Thomas R. Ebright 6,304,738 158,430 N/A
Richard M. Galkin 6,302,635 160,533 N/A
Stephen L. Isaacs 6,302,635 160,533 N/A
David L. Meister 6,301,629 161,539 N/A
Change in stated investment objective 4,906,039 163,245 115,256
Change of name 6,098,572 170,970 105,563
Ratification of independent public accountant 6,258,625 137,894 66,647
</TABLE>
18
<PAGE>
DISTRIBUTION REINVESTMENT PLAN
WHAT IS THE DISTRIBUTION REINVESTMENT PLAN?
Distributions of net investment income, if any, and capital gains are
normally made in December. The Fund's Distribution Reinvestment Plan (the
'Plan') offers you an automatic way to reinvest your dividends and capital gains
distributions in additional shares of the Fund, increasing your holdings in the
Fund. Reinvestment of the annual distribution is done at market price, without
commissions. The number of shares to be issued to a stockholder will be
determined by dividing the amount of the distribution payable to the stockholder
by the last reported sale price of a share of the Fund's common stock on the
valuation date, which follows the record date.
HOW DO REGISTERED STOCKHOLDERS PARTICIPATE IN THE PLAN?
If your shares are registered directly with the Fund, you are automatically
a participant in the Plan unless you have instructed the Plan Agent in writing
otherwise. The Plan Agent must receive the instructions not less than 10 days
prior to the record date for a distribution in order to be effective for that
distribution. A registered stockholder may also receive the distribution in the
form of a stock certificate for the full shares and a check for the fractional
share if the Plan Agent is properly notified. Stockholders who elect to not
participate in the Plan will receive all distributions in cash paid by check
mailed directly to the stockholder by State Street Bank and Trust Company,
dividend paying agent and Plan Agent.
WHAT IF MY SHARES ARE HELD BY A BROKERAGE FIRM, BANK OR OTHER NOMINEE?
If your shares are held in the name of a brokerage firm, bank, or other
nominee as the stockholder of record, we still expect them to automatically
participate in the Plan on your behalf. Please consult with your brokerage firm,
bank or other nominee to be certain that it is participating in the Plan on your
behalf. If your nominee is unable to participate on your behalf, you should
instruct your nominee to have your shares registered in your name in order to
participate.
HOW WILL I KNOW HOW MANY SHARES I HAVE?
The Plan Agent maintains the account for registered stockholders in the
Plan and sends written confirmation of all transactions in the account,
including information needed by participants for personal and tax records.
Shares in the account of each participant will be held by the Plan Agent in
non-certificated form in the name of the participant, and each participant will
be able to vote those shares at a shareholder meeting or by proxy. A participant
may also send other stock certificates held by them to the Plan Agent to be held
in non-certificated form. There is no service fee charged to participants for
reinvesting distributions. The Plan Agent's fees for the processing of the
distribution reinvestment are paid for by the Fund. A participant may terminate
his account under the Plan by written notice to the Plan Agent. Termination will
be effective as described in the Plan. If a participant elects to sell his
shares before the Plan is terminated, the Plan Agent will deduct a $2.50 fee
plus brokerage commissions from the sale transaction. If a nominee is the
registered owner of your shares, the nominee will maintain the accounts on your
behalf.
WHAT IF I NEED MORE INFORMATION?
You may obtain more detailed information by requesting a copy of the Plan
from the Plan Agent. All correspondence (including notifications) should be
directed to: Royce Micro-Cap Trust, Inc. Distribution Reinvestment Plan, c/o
State Street Bank and Trust Company, PO Box 8200, Boston MA 02266-8200, (800)
426-5523.
<PAGE>
OFFICERS
Charles M. Royce, President and Treasurer
Jack E. Fockler, Jr., Vice President
W. Whitney George, Vice President
Daniel A. O'Byrne, Vice President and
Assistant Secretary
Susan I. Grant, Secretary
INVESTMENT ADVISER
Quest Advisory Corp.
1414 Avenue of the Americas
New York, NY 10019
ADMINISTRATOR
Mitchell Hutchins Asset Management
1285 Avenue of the Americas
New York, NY 10019
INDEPENDENT ACCOUNTANTS
Ernst & Young LLP
CUSTODIAN, TRANSFER AGENT
AND REGISTRAR
State Street Bank and Trust Company
DIRECTORS
Thomas R. Ebright
Quest Advisory Corp., Vice President
Royce, Ebright & Associates, Inc., President
Richard M. Galkin
Richard M. Galkin Associates Inc.,
President
Stephen L. Isaacs
Columbia University Development Law and
Policy Program, Director; Attorney
David L. Meister
Communications Industry, Consultant
Charles M. Royce
Quest Advisory Corp., President
Royce Micro-Cap Trust, Inc.
Semi-Annual Report 1995
1414 Avenue of the Americas
New York, New York 10019
(800) 221-4268
19
STATEMENT OF DIFFERENCES
The dagger symbol shall be expressed as....................... 'D'
The division symbol shall be expressed as..................... [div]
