UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT
OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-04875

Name of Registrant: Royce Value Trust, Inc.

Address of Registrant: 745 Fifth Avenue
New York, NY 10151

Name and address of agent for service:           John E. Denneen, Esquire
  745 Fifth Avenue
  New York, NY 10151

Registrant’s telephone number, including area code: (212) 508-4500
Date of fiscal year end: December 31
Date of reporting period: January 1, 2010 – June 30, 2010



Item 1. Reports to Shareholders.

             
             
             
             
       
             
             
  Royce Value Trust



Royce Micro-Cap Trust



Royce Focus Trust
   

SEMIANNUAL

   
     

REVIEW AND REPORT

     

TO STOCKHOLDERS

   
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
     


             
             
             
     
             
             
             
             



A Few Words on Closed-End Funds


     
 
Royce & Associates, LLC manages three closed-end funds: Royce Value Trust, the first small-cap value closed-end fund offering; Royce Micro-Cap Trust, the only micro-cap closed-end fund; and Royce Focus Trust, a closed-end fund that invests in a limited number of primarily small-cap companies.
 
     
 
A closed-end fund is an investment company whose shares are listed and traded on a stock exchange. Like all investment companies, including open-end mutual funds, the assets of a closed-end fund are professionally managed in accordance with the investment objectives and policies approved by the Fund’s Board of Directors. A closed-end fund raises cash for investment by issuing a fixed number of shares through initial and other public offerings that may include shelf offerings and periodic rights offerings. Proceeds from the offerings are invested in an actively managed portfolio of securities. Investors wanting to buy or sell shares of a publicly traded closed-end fund after the offerings must do so on a stock exchange, as with any publicly traded stock. This is in contrast to open-end mutual funds, in which the fund sells and redeems its shares on a continuous basis.
 
     


A Closed-End Fund Offers Several Distinct Advantages Not Available From An Open-End Fund Structure

Since a closed-end fund does not issue redeemable securities or offer its securities on a continuous basis, it does not need to liquidate securities or hold uninvested assets to meet investor demands for cash redemptions, as an open-end fund must.
   
In a closed-end fund, not having to meet investor redemption requests or invest at inopportune times is ideal for value managers who attempt to buy stocks when prices are depressed and sell securities when prices are high.
   
A closed-end fund may invest more freely in less liquid portfolio securities because it is not subject to potential stockholder redemption demands. This is particularly beneficial for Royce-managed closed-end funds, which invest in small- and micro-cap securities.
The fixed capital structure allows permanent leverage to be employed as a means to enhance capital appreciation potential.
   
Unlike Royce’s open-end funds, our closed-end funds are able to distribute capital gains on a quarterly basis. In May 2009, the Funds announced the suspension of the quarterly distribution policies for their common stock. Each Fund’s Board of Directors will consider lifting the suspension once such Fund’s capital loss carryforward has been utilized to offset realized gains. Please see page 19 for more details.
   
We believe that the closed-end fund structure is very suitable for the long-term investor who understands the benefits of a stable pool of capital.



     
  Why Dividend Reinvestment Is Important  
     
 
A very important component of an investor’s total return comes from the reinvestment of distributions. By reinvesting distributions, our investors can maintain an undiluted investment in a Fund. To get a fair idea of the impact of reinvested distributions, please see the charts on pages 13, 15 and 17. For additional information on the Funds’ Distribution Reinvestment and Cash Purchase Options and the benefits for stockholders, please see page 19 or visit our website at www.roycefunds.com.
 
     

This page is not part of the 2010 Semiannual Report to Stockholders



Table of Contents  

   

Semiannual Review

 

Performance Table 2
   
Letter to Our Stockholders 3
   
Small-Cap Market Cycle Performance 10
   
Postscript: How To Swim Upstream, Against The Grain, Away From The Crowd Inside Back Cover

   
Semiannual Report to Stockholders 11
   


For more than 35 years, we have used a value approach to invest in small-cap securities. We focus primarily on the quality of a company’s balance sheet, its ability to generate free cash flow and other measures of profitability or sound financial condition. We then use these factors to assess the company’s current worth, basing the assessment on either what we believe a knowledgeable buyer might pay to acquire the entire company, or what we think the value of the company should be in the stock market.


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Performance Table  


NAV Average Annual Total Returns   Through June 30, 2010

    Royce
Value Trust
  Royce
Micro-Cap Trust
  Royce
Focus Trust
  Russell
2000

Second Quarter 2010*

    -10.41 %     -8.94 %     -11.05 %     -9.92 %

Year-to-Date 2010*

    -3.03       -1.57       -7.82       -1.95  

One-Year

    25.43       21.50       20.66       21.48  

Three-Year

    -9.99       -10.18       -7.68       -8.60  

Five-Year

    1.15       0.96       5.04       0.37  

10-Year

    6.44       7.32       10.72       3.00  

15-Year

    9.08       9.57       n.a.       6.63  

20-Year

    10.00       n.a.       n.a.       8.16  

Since Inception

    9.92       9.77       9.75           –  

Inception Date

  11/26/86   12/14/93   11/1/96**         –  



Important Performance and Risk Information
All performance information in this Review and Report reflects past performance, is presented on a total return basis and reflects the reinvestment of distributions. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when sold. Current performance may be higher or lower than performance quoted. Current month-end performance may be obtained at www.roycefunds.com. The Royce Funds invest primarily in securities of micro-cap, small-cap and mid-cap companies, which may involve considerably more risk than investments in securities of larger-cap companies.

*   Not annualized
**   Date Royce & Associates, LLC assumed investment management responsibility for the Fund.

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Letter to Our Stockholders

 
 
 
 
 
Fear and Trembling
 
Life can only be understood backwards; but it must be lived forwards.
 
– Sören Kierkegaard
Thirty-five years ago this summer, the film Jaws opened and quickly chomped its way into celluloid history, while also inspiring legions of sweaty beachgoers to stick to the safety of their towels. Yet it’s a paraphrase of the ad from the classic Spielberg film’s deservedly forgotten sequel—the subtly named Jaws 2—that provides the most apt description of investors’ attitudes here in the summer of 2010: “Just when you thought it was safe to go back in the market...” After all, in roughly two years, we have moved from a market collapse due in part to a widespread failure to heed Warren Buffett’s advice to “beware of geeks bearing formulas” to a market malaise driven by heightened fears about Greeks—to say nothing of Californians or any number of others—bearing debt. In between the financial crisis of late 2008-early 2009 and the market’s current struggles (the latter arguably a sequel to the earlier calamity), there was a dynamic market rebound that lasted—at least as of this writing—from the market low on March 9, 2009 through the interim small-cap market high on April 23, 2010. Unfortunately, equity investors seemed to regard this rally as an all-too-brief respite from a world of ever-declining stock prices and acute economic anxiety.



































We find much to like on a stock-by-stock basis and believe that there is ample proof in the form of strong fundamentals for potentially better days. Investment decisions should not be approached with fear and trembling, but with conviction, confidence and, in our view, an outlook that measures time in years, not months and quarters.

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Charles M. Royce, President
 
Using mostly broad brush strokes,
indexes offer a very useful picture of the
markets (or areas of the market) that
they represent at specific moments in
time. Like every mutual fund manager,
we also use indexes as benchmarks
against which we compare our own
Funds’ performances. Comparisons are
made not simply to calendar-based
periods, but to down market and full
market cycle periods. We do this
because of our long-held conviction
that how a portfolio performs in
difficult market environments can have
an enormous effect on long-term
returns, especially those results
achieved over full market cycles, which
have generally lasted from two to seven
years. We also make use of our various
benchmark indexes to compare
volatility scores, such as Standard
Deviation and Return Efficiency.
 
For each of our closed-end portfolios,
we use the small-cap Russell 2000, a
broad-based index of domestic small-cap
stocks. (Royce Value Trust also uses
the S&P SmallCap 600.) As useful and
important as benchmark indexes are,
they play no role in our portfolio
management practices. Their primary
significance for us is in providing a
measure of how our results stack
up vis-à-vis a close approximation to
the market in which a particular
portfolio invests.
 
Continued on page 6...



Letter to Our Stockholders

 
     Looking further back to the beginning of this new century, the markets endured the bursting of the Internet bubble, which brings to two the number of historic market implosions that have occurred within the last 11 years. It is no wonder, then, that so many equity investors are choosing to avoid what they regard as the shark-infested waters of the stock market. For many people who first invested in the stock market at the end of 1999, the experience has been most likely unprofitable (depending, of course, on where their money was invested) and highly, perhaps painfully, volatile. The evidence is compelling for investors’ recent dissatisfaction with low or negative returns from stocks and their related impatience with risk and volatility. The Investment Company Institute (ICI) tracks mutual fund asset flows and reported that in 2009 domestic equity funds had net outflows of $8.8 billion while fixed income funds took in a record $375.5 billion. Strategas Research Partners recently published data from the ICI that showed the trend continuing. For the year-to-date period ended May 31, 2010, outflows from domestic equity funds totaled $3.8 billion, while inflows to bond funds remained brisk, at $118.7 billion.
     So what do equity managers such as ourselves—patient, disciplined, risk-averse types—make of these sobering figures? Not surprisingly, we still believe in equities. Equally important, our contrarian, long-term outlook leads us to see the potential for solid returns for stocks in the years ahead, provided that investors have the stomach for the bumpy road in front of stocks in the short run. We understand the trepidation, just as we sympathize with those investors who feel as though they have lately been presented with a dismal choice between low-risk, potentially profit-less instruments—bonds or money markets—and risky equities that may not only fail to grow or preserve capital but could also erode or even destroy it. For our part, we are scrutinizing valuations for micro-cap, small-cap and mid-cap securities all over the globe. We find much to like on a stock-by-stock basis and believe that there is ample proof in the form of strong fundamentals for potentially better days. Investment decisions should not be approached with fear and trembling, but with conviction, confidence and, in our view, an outlook that measures time in years, not months and quarters.


The Concept of Anxiety
Regardless of the length of one’s outlook, recent results for the three major equity indexes were mostly uninspiring and did much to reinforce investors’ anxiety. For the year-to-date period ended June 30, 2010, small-caps, as measured by the Russell 2000 index, owned a performance edge relative to their peers, as the small-cap index was down 1.9%, while the large-cap S&P 500 lost 6.7% and the more tech-oriented Nasdaq Composite fell 7.1%. These were obviously disappointing results, not merely because of the negative performance, but also because they interrupted the much-needed rally that began with the market low on March 9, 2009. The year opened with a less

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damaging correction that the market had shaken off by early February. First-quarter results were positive for all three indexes—the Russell 2000 gained 8.9% versus 5.4% for the S&P 500 and 5.7% for the Nasdaq Composite.
     The revived rally did not last long, however. Small-cap stock prices peaked on April 23, 2010, and the Russell 2000 slipped 17.6% from that date through the end of June. While the rally had seen other downturns, each had fallen in the range of 9%-10%, making this latest decline easily the most severe for small-caps since the worst days of the financial crisis. These losses lent more than a bearish tint to second-quarter returns, which were negative across the board, putting an end to four consecutive quarters of positive performance for all three domestic indexes. For the second quarter, the Russell 2000 was down 9.9%, the S&P 500 fell 11.4%, and the Nasdaq Composite declined 12.0%.
     Markets outside the U.S. fared no better. The MSCI EAFE (Europe, Australasia and Far East) index was down 13.2% versus a loss of 6.3% for the MSCI World ex USA Small Core index for the six months ended June 30, 2010. So while returns from the U.S. market bottom on March 9, 2009 through June 30, 2010 remained strong, with each major index up more than 55%, trailing three-year returns ended June 30, 2010 for the three domestic and two non-U.S. indexes were negative, and five-year and 10-year returns were mixed. For the 10-year period, small-caps did best, as the Russell 2000 and MSCI World ex USA Small Core indexes were the top performers.
     Within small-cap, growth and value indexes suffered second-quarter losses: the Russell 2000 Value index fell 10.6% versus a loss of 9.2% for the Russell 2000 Growth index. However, year-to-date and one-year results ended June 30, 2010 favored value; three- and five-year results favored growth; and 10-, 15-, 20-, and 25-year results were decidedly won by the Russell 2000 Value index. Micro-cap companies provided better relative results, outperforming the small-cap index in both the second quarter, in which the Russell Microcap index was down 8.9%, and year-to-date period, when it rose 0.1% through 6/30/10. Within the micro-cap index, value underperformed in the second quarter (-9.7% versus -7.9%), but outperformed for the six months ended June 30, 2010 (+1.9% versus -1.9%).


Judge For Yourself!
Year-to-date results for our three closed-end portfolios reflected the high level of market volatility. While the market’s gyrations always play a role in performance to some extent, it was particularly visible in the first half, when a few percentage points made the difference between outperformance versus a Fund’s respective benchmark index. Relative performance was not a consistent strength for the portfolios taken as a group. On an NAV (net asset value) basis, only Royce Micro-Cap Trust (RMT) outperformed its particular benchmark during the first half of 2010.





Looking forward, we believe that volatility will continue to be above average, but that small-cap, both domestic and non-U.S., can provide attractive returns over the next three to five years.

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However, the investable universe of
securities for our portfolios tends to be
larger than the number of stocks that
constitute an index at any given time,
which is why we do not limit ourselves
to the stocks that comprise an index.
We prefer the freedom of looking for
what we think are attractively valued
smaller companies wherever we may
find them. For example, as of June 30,
2010, the number of U.S.-domiciled
companies with market capitalizations
up to $2.5 billion exceeded 4,500
names, according to FactSet, more
than twice the number included in the
Russell 2000.
 
In addition, indexes are fluid entities
just as actively managed mutual fund
portfolios are, though generally to a
lesser degree. Standard & Poor’s
rebalances their indexes, including the
large-cap S&P 500 and the S&P
SmallCap 600, on a quarterly basis, as
does MSCI. Russell Investments
rebalances, or reconstitutes, as they
call it, less frequently—doing so on an
annual basis.
 
Still, important changes can occur,
even in an annual reconstitution.
Based on data released from Russell
Investments in June 2010, we found
some notable changes to the index
between June 2009 and June 2010: The
index gained an impressive 33.6% for
the 12-month period ended May 28,
2010, which helped to increase the
index’s overall market capitalization
37.9% from 2009 to $1.2 trillion.

Russell went on to report, “The median
market capitalization for the index
increased to $441.3 million, a 45%
 
 
Continued on page 8...





Letter to Our Stockholders

 
 
     Our own reaction was thus somewhat mixed, as returns ran the gamut from marginally negative to more disappointingly so. Interestingly, Royce Focus Trust (FUND) failed to better the year-to-date return of its benchmark, but lost its performance edge during the far more placid (and positive) first quarter. The Fund did not fall as far as its benchmark from the interim high for domestic small-caps on April 23, 2010 through the end of June, while still finishing the first half with poorer performance. We would usually prefer that our Funds hold their value relative to the benchmark during a downturn to outshining during a short-term up-market period, even if it causes some discouragement in the short run.
     As might be expected during a period in which volatility was high and returns varied, no single sector or industry stood out during the first half the way that the Natural Resources and Technology sectors mostly did in 2009. However, there were some notable patterns. The disaster in the Gulf of Mexico did not deter many oil and gas companies in Royce Value Trust and RMT from strong results, though that sector’s energy services group struggled in all three portfolios. (In FUND, the precious metals and mining group stood out positively in the Natural Resources sector.) Financial and industrial companies tended to do relatively poorly, proving especially sensitive to concerns about a double-dip recession. Many Technology holdings also took a step back after enjoying very strong results in 2009 due in part to similar concerns. The two consumer sectors were generally solid, as was performance for the Health sector. However, in the latter’s case net gains were modest. Micro-caps in general did well, as did dividend-payers, the latter helping to narrow the gap after underperforming their small-cap non-dividend paying peers last year. Looking forward, we believe that volatility will continue to be above average, but that small-cap, both domestic and non-U.S., can provide attractive returns over the next three to five years.

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An Edifying Discourse
 
What inspires our confidence in the long-term prospects for stocks? As is often the case, we look to history for some instruction, while keeping in mind that investing must be done looking forward, not backward. We never expect the past to repeat itself, though we do believe that historical patterns are relevant when it comes to the behavior of markets. The current economic situation has already bred comments claiming that the economy and financial markets are not likely to bounce back soon, mostly owing to an ongoing dearth in consumer spending and the staggering weight of deficits. These commentators predict a scenario in which we are headed for a double-dip recession and could be facing a decade of essentially flat economic growth (or worse), calling to mind Japan over the last 20 years or our own stagnating economy of 1974-1982.
     We have a more optimistic outlook. We continue to believe that we have entered a more normalized return environment for equities. We see reason for hope in the fact that many small-cap stocks are reacting positively and negatively to underlying fundamentals—not just market sentiment. This has been creating what we regard as attractive short-term opportunities for long-term investors such as ourselves. To us, a return to a more normalized environment may not bring the outsized gains of 2009, but it could usher in a period of positive long-term returns for equities, with historically normal corrections along the way. This would be close to an ideal environment for active managers with an absolute return orientation. Neither whole sectors nor entire industries are “on sale” as they were in late 2008 and early 2009, but numerous opportunities have been available on a stock-by-stock basis. By seeking to take advantage of this period of increased volatility, we think that investors should be rewarded when the overall direction of the market reverses. While we always keep an eye on the market and economy as a whole, the current situation has not diminished our faith in the long-term prospects for stocks.
     Of course, recent declines have been painful. However, it is important to remember that a correction of 15% or more is quite typical, occurring roughly every three years on average for small-cap stocks. Since the Russell 2000 debuted on December 31, 1978, there have been 10 major corrections of at least 15% through the end of 2009. (Note: In order for a new peak to be established, a drop of 15% from the prior peak must first be recorded.) These peak-to-trough periods have ranged from a decline of 15.4% (10/5/79-10/23/79) to the more recent bear market decline of 58.9% (7/13/07- 3/9/09). Of the 10 major declines prior to 2010, the Russell 2000 on average fell 31.8%. These declines disrupt markets, they shatter confidence, but they also set the stage for new bull markets.















Any business that looks to be capable of swimming ahead of the pace of the economy as a whole is going to be in high demand, and we can see that benefiting the kind of small-caps that fit our selection criteria—those that boast strong balance sheets, high returns on invested capital and the ability to generate free cash flow.

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increase over the median capitalization
of $304 million in 2009. The weighted
average market capitalization also
increased significantly, jumping 34.7%
to $1.0B from $0.7B in 2009.” The
index’s composition is also reflective of
the growing global nature of the equity
world: “As a result of Russell’s new
methodology rule determining country
assignment, all companies that are
incorporated, headquartered, and
traded in the U.S. are eligible for the
Russell U.S. Indexes...Ten of the new
adds [of which there were a total of
321 in 2010] are due to the new
country rule.” Indexes change, and,
interestingly, they change in an
effort to better reflect the market
they are meant to represent. In
other words, they change their
constituents in order not to change
their market representation.
 
We have high regard for indexes,
especially the efforts they make to
remain truly representative of their
markets. However, we also see critical
differences between the kind of work
that we as active, disciplined small-cap
managers do and what an index does.
We do not focus our efforts on creating
representative small-cap portfolios (or
micro-cap, mid-cap or global smaller-
company portfolios). Our task is to find
what we judge to be high-quality
companies trading at attractive
discounts to our estimate of their worth
as a business (or intrinsic value). We
see indexes, then, as a bellwether to
guide us as we strive to improve our
skill as disciplined stock pickers. No
more and no less than that.
 
 





Letter to Our Stockholders

 
 
Either/Or
Admittedly, our long-term perspective has been even less in style lately than usual. We have recently been witnessing a stampede out of equities and into fixed income to such a degree that we would not be surprised to see a bubble in fixed income investments in the coming months. (Even bond king Bill Gross is bullish on stocks!) For our part, we remain convinced that stocks should provide stronger returns, particularly inflation-adjusted returns, over the next five-year and 10-year periods. It seems reasonable to us that the current decade will end up with annualized equity returns somewhere in the high single digits. Taking advantage of current volatility is, for us, critical toward building strong results for the decade, as well as other long-term periods.
     For example, we believe that investors should be encouraged, though not too excited, by the recent earnings picture, bearing in mind that recent earnings look strong in relation to where companies were in 2008 and early 2009, when most were coming off an historically terrible period. (In other words, the bar for earnings improvement was set awfully low.) Still, we think that this is encouraging because it shows that many U.S. corporations did what needed to be done—they grew leaner and meaner and effectively dealt with a financial crisis, which is being reflected in stronger earnings. While the perception seems to be that it is once again struggling, we think the economy is on the right track. We are not wildly enthusiastic, but we are optimistic.

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     Part of our reasoning is that we see a slow-growth economy as a favorable backdrop for our disciplined style, especially owing to its emphasis on company quality. Our expectation is that a slow-growth economy could lead investors to focus on two areas—high-quality companies and fast-growing companies (the latter not normally our cup of tea). Any business that looks to be capable of swimming ahead of the pace of the economy as a whole is going to be in high demand, and we can see that benefiting the kind of small-caps that fit our selection criteria—those that boast strong balance sheets, high returns on invested capital and the ability to generate free cash flow. It is also important to remember that long-term growth is not a straight-line phenomenon. Short-term setbacks are a common occurrence in the journey to more lasting success. We are ever-cautious, and in our view it is safe to go back in the water.


Sincerely,
 
 
It is important to remember that long-term growth is not a straight-line phenomenon. Short-term setbacks are a common occurrence in the journey to more lasting success. We are ever-cautious, and in our view it is safe to go back in the water.


   
Charles M. Royce
       President
  W. Whitney George
Vice President
  Jack E. Fockler, Jr.
Vice President

P.S. More than this letter’s epigraph comes from the pen of Danish philosopher, Sören Kierkegaard, as each of the headings uses the title from one of his books. We thought that Kierkegaard made an especially appropriate choice for the period under review, with his emphasis on the absurdity of life, the necessity for self-examination and the need to live life looking forward.

July 31, 2010

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Small-Cap Market Cycle Performance

We believe strongly in the idea that a long-term investment perspective is crucial for determining the success of a particular investment approach. Flourishing in an up market is wonderful. Surviving a bear market by losing less (or not at all) is at least as good. However, the true test of a portfolio’s mettle is performance over full market cycle periods, which include both up and down market periods. We believe that providing full market cycle results is more appropriate even than showing three- to five-year standardized returns because the latter periods may not include the up and down phases that constitute a full market cycle.

Since the Russell 2000’s inception on 12/31/78, value—as measured by the Russell 2000 Value Index—outperformed growth—as measured by the Russell 2000 Growth Index—in six of the small-cap index’s eight full market cycles. The most recently concluded cycle, which ran from 3/9/00 through 7/13/07, was the longest in the index’s history, and represented what we believe was a return to more historically typical performance in that value provided a significant advantage during its downturn (3/9/00–10/9/02) and for the full cycle. In contrast, the new market cycle that began on 7/13/07 has so far favored growth over value, an unsurprising development when one considers how thoroughly value dominated growth in the previous full cycle.

Peak-to-Peak (3/9/00-7/13/07)         
For the full cycle, value provided a sizeable margin over growth, which finished the period with a loss. Each of our closed-end funds held a sizeable performance advantage over the Russell 2000 on both an NAV (net asset value) and market price basis. On an NAV basis, Royce Focus Trust (+264.2%) was our best performer by a wide margin, followed by Royce Micro-Cap Trust (+175.9%) and Royce Value Trust (+161.3%). The latter two funds in particular benefited from their use of leverage during this, as well as in subsequent bullish periods.
 
Peak-to-Current (7/13/07-6/30/10)
During the difficult, volatile decline that ended 3/9/09, both value and growth posted similarly negative returns. Events in the financial markets immediately preceding the end of 2008’s third quarter caused the Russell 2000 to decline significantly. After a brief rally at the end of 2008, the index continued to fall, though it has since recovered significantly, gaining 80.9% from 3/9/09 through 6/30/10.
 
Royce Focus Trust managed to outperform the index during the decline, while Royce Value Trust and Royce Micro-Cap Trust outperformed during the rally from 3/9/09 through 6/30/10.
 
  ROYCE FUNDS NAV TOTAL RETURNS VS. RUSSELL 2000 INDEX:
  MARKET CYCLE RESULTS

    Peak-to-   Peak-to-   Trough-to-   Peak-to
    Peak   Trough   Current   Current
    3/9/00-   7/13/07-   3/9/09-   7/13/07-
    7/13/07   3/9/09   6/30/10   6/30/10
                                 
Russell 2000     54.8 %     -58.9 %     80.9 %     -25.6 %

Russell 2000 Value     189.4       -61.1       85.0       -28.1  

Russell 2000 Growth     -14.8       -56.8       76.8       -23.6  

Royce Value Trust     161.3       -65.6       105.9       -29.1  

Royce Micro-Cap Trust     175.9       -66.3       110.6       -29.1  

Royce Focus Trust     264.2       -58.3       80.3       -24.7  

The thoughts concerning recent market movements and future prospects for smaller-company stocks are solely those of Royce & Associates and, of course, there can be no assurance with regard to future market movements. Smaller-company stocks may involve considerably more risk than larger-cap stocks. Past performance is no guarantee of future results. See page 2 for important performance information for all of the above funds.

10  |  2010 Semiannual Report to Stockholders



Table of Contents    

     

Semiannual Report to Stockholders

   

Managers’ Discussions of Fund Performance

   
     
Royce Value Trust   12
     
Royce Micro-Cap Trust   14
     
Royce Focus Trust   16
     

History Since Inception

  18
     

Distribution Reinvestment and Cash Purchase Options

  19
     

Schedules of Investments and Other Financial Statements

   
     

Royce Value Trust

  20
     

Royce Micro-Cap Trust

  35
     

Royce Focus Trust

  47
     

Directors and Officers

  56
     

Notes to Performance and Other Important Information

  57
     

Board Approval of Investment Advisory Agreements

  58
     



2010 Semiannual Report to Stockholders  |  11




    
 
 
AVERAGE ANNUAL NAV TOTAL RETURNS
Through 6/30/10

Jan-June 2010*   -3.03 %

One-Year   25.43  

Three-Year   -9.99  

Five-Year   1.15  

10-Year   6.44  

15-Year   9.08  

20-Year   10.00  

Since Inception (11/26/86)   9.92  

*Not annualized
                     
CALENDAR YEAR NAV TOTAL RETURNS

Year   RVT     Year       RVT  

2009   44.6 %   2000       16.6 %

2008   -45.6     1999       11.7  

2007   5.0     1998       3.3  

2006   19.5     1997       27.5  

2005   8.4     1996       15.5  

2004   21.4     1995       21.6  

2003   40.8     1994       0.1  

2002   -15.6     1993       17.3  

2001   15.2     1992       19.3  

                     
TOP 10 POSITIONS
% of Net Assets Applicable
to Common Stockholders

Ash Grove Cement Cl. B   1.1 %

Alleghany Corporation   1.0  

Sapient Corporation   0.9  

Coherent   0.9  

AllianceBernstein Holding L.P.   0.9  

Sotheby’s   0.9  

PAREXEL International   0.9  

SEACOR Holdings   0.9  

SEI Investments   0.9  

Cimarex Energy   0.8  

                     
PORTFOLIO SECTOR BREAKDOWN
% of Net Assets Applicable to Common Stockholders

Industrial Products   22.4 %

Technology   19.9  

Industrial Services   14.6  

Financial Services   12.6  

Financial Intermediaries   12.1  

Natural Resources   10.9  

Consumer Products   8.4  

Health   7.5  

Consumer Services   4.1  

Diversified Investment Companies   0.4  

Miscellaneous   4.7  

Preferred Stocks   0.2  

Cash and Cash Equivalents   8.9  

                     



Royce Value Trust

 
Manager’s Discussion
Royce Value Trust (RVT) struggled to differentiate itself in the volatile and highly correlated period for equity returns that defined 2010’s first half. For the year-to-date period ended June 30, 2010, RVT lost 3.0% on an NAV (net asset value) basis, and 2.0% based on market price, underperforming its unleveraged small-cap benchmarks, the Russell 2000, which fell 1.9%, and the S&P SmallCap 600, which fell 0.9% for the period. In the bullish first quarter, which marked a continuation of the strong rally off the lows set in March 2009, the Fund rose 8.2% and 9.8% on an NAV and market price basis, respectively, while the Russell 2000 was up 8.9%, and the S&P SmallCap 600 advanced 8.6%. In the second quarter, when stock prices fell precipitously following new concerns over sovereign finances, specifically in Europe, RVT fell victim to the correlated downward move in stock prices with an NAV decline of 10.4% and a market price loss of 10.8% compared to the Russell 2000’s drop of 9.9%, and the S&P SmallCap 600’s decline of 8.7%.
     While results through the end of June were disappointing on both an absolute and relative basis, over most longer-term time periods the Fund’s NAV returns were solid on a relative basis. Absolute NAV returns were more mixed, however. RVT showed strength for the one-, 10-, 15-, 20-year and since inception (11/26/86) periods, but the three-year and five-year periods were more challenging on an absolute basis, falling short of the strong absolute results that we strive to provide. The impact
of the severe bear market of 2008 was the primary contributor to this shortfall. Still, we were very pleased that our style of active, disciplined management allowed RVT to beat the Russell 2000 on an NAV basis for the one-, five-, 10-, 15-, 20-year and since inception periods ended June 30, 2010. The Fund also beat the S&P SmallCap 600 for most of these periods, though it trailed over the difficult three-year span. RVT’s NAV average annual total return since inception was 9.9%.
     In the first half of 2010, sector performance reflected the high degree of individual stock correlation that defined the period. Only three of the Fund’s 11 equity sectors managed to contribute positively to returns, though the eight that detracted posted modest net losses. What anchored individual stocks and sectors together was a broad-based increase in negative sentiment that led to chiefly undifferentiated moves among equities of all shapes and sizes. Not surprisingly, defensive sectors such as Health and Consumer Products maintained their gains in the period as investors sought the relative safety of investments less sensitive to cyclical factors and more reliant on non-discretionary consumption.
         
     GOOD IDEAS THAT WORKED
     Top Contributors to Performance*
   Year-to-Date Through 6/30/10
 

  PAREXEL International   0.28 %
 
  Cimarex Energy   0.19  
 
  Sapient Corporation   0.17  
 
  Advisory Board (The)   0.16  
 
  Richardson Electronics   0.14  
 
  *Includes dividends
         
Positive contributors at the industry level were insurance companies, the software group, and food, beverage and tobacco stocks, the latter accentuating the pervasively defensive theme in the period.
         
Important Performance and Risk Information
All performance information reflects past performance, is presented on a total return basis and reflects the reinvestment of distributions. Past performance is no guarantee of future results. Current performance may be higher or lower than performance quoted. Returns as of the most recent month-end may be obtained at www.roycefunds.com. The market price of the Fund’s shares will fluctuate, so that shares may be worth more or less than their original cost when sold. The Fund invests primarily in securities of small and micro-cap companies, which may involve considerably more risk than investing in a more diversified portfolio of larger-cap companies. The sum of all contributions and detractions for all securities would approximate the Fund’s year-to-date performance for 2010.

12  |  2010 Semiannual Report to Stockholders



               
           
Performance and Portfolio Review

           
     The Industrial Products and Industrial Services sectors made the largest negative impact on performance as investors shunned those areas deemed overly exposed to the growing risks of a soft patch in the economy or, worse, a double-dip recession. Persistently high unemployment, a stubbornly depressed housing market, a pullback in leading economic indicators in the U.S., growing anxiety about the sovereign debt crisis in Europe and risks of a slowdown in the Chinese economy growth all conspired to send investors scrambling for the perceived safe haven of U.S. bonds. Investment management companies and securities brokers, along with metal fabrication and distribution businesses, were among RVT’s worst performing industries.
     While correlation of individual stocks rose throughout the first half, there still was a healthy dispersion of individual stock returns in the Fund. RVT’s top performer in the period was an old favorite, PAREXEL International. This global provider of drug development services focusing on clinical research outsourcing benefited from increased emphasis by the pharmaceutical industry on new drug development. With pipelines depleting, both large and small pharmaceutical companies sought PAREXEL’s highly integrated platform of global clinical research to advance new and innovative drug development. Cimarex Energy was another notable gainer as this Denver based oil and gas exploration and production company sported some of the highest production growth in the industry while keeping capital expenditures well below internally generated cash flow.
           
     On the negative front, a notable loser came from our favored asset management industry. Artio Global Investors is a global asset manager offering both fixed income and equity funds with a primary emphasis in international equity. Although it was hurt by the substantial dislocation in Europe following the Greek debt crisis, we remain optimistic about the firm’s long-term potential in a recovering global stock market. Vaisala is a Finnish technology company serving a global niche market in measurement systems for a variety of environmental sciences. The company suffered depressed margins after issuing a profit warning due to delivery problems in a new IT system. Recent investments in growth initiatives will also need more time to develop. With a strong balance sheet and healthy dividend yield, we are comfortable being patient.
   GOOD IDEAS AT THE TIME  
   Top Detractors from Performance*
   Year-to-Date Through 6/30/10
 

 
Artio Global Investors Cl. A   -0.15 %  

 
Vaisala Cl. A   -0.15    

 
Ritchie Bros. Auctioneers   -0.15    

 
Preformed Line Products   -0.15    

 
Lazard Cl. A   -0.13    

 
*Net of dividends  
           
 
 

MARKET PRICE PERFORMANCE HISTORY SINCE INCEPTION (11/26/86) through 6/30/10


1
Reflects the cumulative total return of an investment made by a stockholder who purchased one share at inception ($10.00 IPO), reinvested all annual distributions as indicated and fully participated in primary subscriptions of the Fund’s rights offerings.
2
Reflects the actual market price of one share as it traded on the NYSE.

 

       
  FUND INFORMATION AND
  PORTFOLIO DIAGNOSTICS
 
  Average Market Capitalization* $1,073 million  
 
  Weighted Average P/E Ratio** 15.7x  
 
  Weighted Average P/B Ratio 1.7x  
 
  U.S. Investments
(% of Net Assets applicable
to Common Stockholders)
101.5%  
 
  Non-U.S. Investments
(% of Net Assets applicable
to Common Stockholders)
16.5%  
 
  Fund Total Net Assets $1,044 million  
 
  Net Leverage 18%  
 
  Turnover Rate 13%  
 
  Number of Holdings 689  
 
  Symbol        
 

Market Price

  RVT  
 

NAV

  XRVTX  
 
    *Geometrically calculated
 
 
**The Fund’s P/E ratio calculation excludes companies with zero or negative earnings (15% of portfolio holdings as of 6/30/10).
 
 
  Net leverage is the percentage, in excess of 100%, of the total value of equity type investments, divided by net assets, excluding preferred stock.
                             
       
  CAPITAL STRUCTURE
  Publicly Traded Securities Outstanding
at 6/30/10 at NAV or Liquidation Value
 
 

66.0 million shares
of Common Stock

  $824 million  
 
 

5.90% Cumulative
Preferred Stock

  $220 million  
 
                             
  DOWN MARKET PERFORMANCE COMPARISON
  All Down Periods of 7.5% or Greater
Over the Last 10 Years, in Percentages(%)
 
 
   
 




2010 Semiannual Report to Stockholders  |  13




 
 
AVERAGE ANNUAL NAV TOTAL RETURNS
Through 6/30/10

Jan-June 2010*   -1.57 %

One-Year   21.50  

Three-Year   -10.18  

Five-Year   0.96  

10-Year   7.32  

15-Year   9.57  

Since Inception (12/14/93)   9.77  

*Not annualized
                     
CALENDAR YEAR NAV TOTAL RETURNS

Year   RMT     Year       RMT  

2009   46.5 %   2001       23.4 %

2008   -45.5     2000       10.9  

2007   0.6     1999       12.7  

2006   22.5     1998       -4.1  

2005   6.8     1997       27.1  

2004   18.7     1996       16.6  

2003   55.5     1995       22.9  

2002   -13.8     1994       5.0  

                     
TOP 10 POSITIONS
% of Net Assets Applicable to Common Stockholders

Kennedy-Wilson Holdings   2.7 %

Sapient Corporation   2.1  

Seneca Foods   1.8  

iGATE Corporation   1.3  

Tennant Company   1.3  

Pegasystems   1.1  

Epoch Holding Corporation   1.0  

SFN Group   1.0  

Richardson Electronics   0.9  

Advisory Board (The)   0.9  

                     
PORTFOLIO SECTOR BREAKDOWN
% of Net Assets Applicable to Common Stockholders

Industrial Products   23.2 %

Technology   18.4  

Industrial Services   13.8  

Natural Resources   12.1  

Financial Intermediaries   9.8  

Financial Services   9.8  

Health   9.6  

Consumer Products   9.1  

Consumer Services   3.4  

Diversified Investment Companies   1.3  

Miscellaneous   4.9  

Preferred Stock   0.6  

Cash and Cash Equivalents   9.1  

                     



    
Royce Micro-Cap Trust

 
Manager’s Discussion
Royce Micro-Cap Trust’s (RMT) broadly diversified portfolio of micro-cap stocks began 2010 with the same luster that had led to distinguished returns in 2009, only to fall victim to the precipitous drop in equity prices that occurred beginning in late April. RMT lost 1.6% on an NAV (net asset value) basis for the first half of 2010, and 0.4% based on market price, slightly outperforming its unleveraged small-cap benchmark, the Russell 2000, which declined 1.9%, and underperforming the Russell Microcap index, which rose a modest 0.1% for the same period. The Fund managed to keep pace in the bullish first quarter as stocks extended their gains off the March 2009 low. For the quarter, RMT gained 8.1% on an NAV basis and 11.1% based on market price, compared to respective advances of 8.9% and 9.9% for the Russell 2000 and Russell Microcap indexes. When stock prices rolled over and began their sharp descent in the second quarter, the Fund lost 8.9% on an NAV basis and 10.4% on a market price basis. For the same period, the Russell 2000 fell 9.9%, and the Russell Microcap lost 8.9%.
     The market decline that began on April 23, 2010 and continued through the end of the period was as severe as it was unwelcome. During this period, RMT was unable to break from the market’s grasp and fell largely in line with its benchmarks. Declines for the Fund were 16.4% (NAV) and 18.9% (market price) compared to losses of 17.6% for the
Russell 2000 and 18.1% for the Russell Microcap index. So while the Fund gave up a bit of ground from the market low on March 9, 2009 through June 30, 2010, it maintained its impressive lead, up 110.6% (NAV) and 115.9% (market price) compared to the Russell 2000, which was up 80.9% and the Russell Microcap index which rose 86.2%.
     More importantly, we continue to be pleased with the Fund’s long-term NAV performances on a relative basis. RMT beat the Russell Microcap index for the one-, three-, five- and 10-year periods ended June 30, 2010, while outpacing the Russell 2000 for the one-, five-, 10-, 15-year and since inception (12/14/93) periods ended June 30, 2010. (Data for the Russell Microcap index goes back only to 2000.) The Fund’s NAV average annual total return since inception was 9.8%.
         
     GOOD IDEAS THAT WORKED
     Top Contributors to Performance*
   Year-to-Date Through 6/30/10
 

  Sapient Corporation   0.39 %
 
  Hardinge   0.39  
 
  Virage Logic   0.38  
 
  Thomas Weisel Partners Group   0.29  
 
  Richardson Electronics   0.25  
 
  *Includes dividends
         
   For the first half of 2010, six of the Fund’s 10 equity sectors made positive contributions to performance, with Technology being the main bright spot. Within that sector, the components and systems industry and semiconductors and equipment group each benefited
         
Important Performance and Risk Information
All performance information reflects past performance, is presented on a total return basis and reflects the reinvestment of distributions. Past performance is no guarantee of future results. Current performance may be higher or lower than performance quoted. Returns as of the most recent month-end may be obtained at www.roycefunds.com. The market price of the Fund’s shares will fluctuate, so that shares may be worth more or less than their original cost when sold. The Fund normally invests in micro-cap companies, which may involve considerably more risk than investing in a more diversified portfolio of larger-cap companies. The sum of all contributions and detractions for all securities would approximate the Fund’s year-to-date performance for 2010.

14  |  2010 Semiannual Report to Stockholders



               
           
Performance and Portfolio Review

           
from the thawing of some IT budgets. Interestingly, machinery was the best performing industry in the period even though it hails from within the economically challenged Industrial Products sector. Detractors from first-half results came mostly from the more cyclical sectors of the market and reflected growing concerns that the initial phase of the economic recovery was giving way to a more uncertain pace. Inventory restocking in the industrial and retail segments of the economy, which had added a pleasant tailwind to orders as we entered the year, appeared to have run its course with new order activity perceived to be ever more reliant on suspect end-market demand. Reflecting this dynamic, Industrial Services and Natural Resources struggled, as did Consumer Services. At the industry level, energy services companies led all decliners, as the impact of the temporary ban on deep-water drilling following BP’s Gulf oil spill hurt the short-term prospects of these businesses.
     The Fund’s top performer was Sapient Corporation, a leading business consulting and technology services firm that was a direct beneficiary of improved technology and marketing spending from its corporate customers. Another performer of note was Hardinge, a manufacturer of metal cutting lathes and other tooling machinery and accessories that received an unsolicited takeover offer from Industrias Romi, a global leader in machine tools. We chose to reduce our position into the resulting improvement in its share price as we were somewhat skeptical of the potential outcome.
         

     On the negative side, the stock price of Willbros Group, an engineering and construction company primarily serving the oil and gas industry, fell sharply as concerns regarding project delays—another result of the Gulf spill—weighed on its shares. We chose to weigh the firm’s limited direct exposure to offshore construction projects and attractive valuation and used the weakness to add to our position. FBR Capital Markets provides a range of investment banking, institutional brokerage and asset management activities. Depressed levels of capital markets activity and delayed equity offerings led to a quarterly revenue and earnings miss that then drove down its share price.
   GOOD IDEAS AT THE TIME  
   Top Detractors from Performance*
   Year-to-Date Through 6/30/10
 

 
Willbros Group   -0.57 %  

 
FBR Capital Markets   -0.35    

 
Stein Mart   -0.30    

 
Charming Shoppes   -0.26    

 
Cowen Group Cl. A   -0.24    

 
*Net of dividends  

MARKET PRICE PERFORMANCE HISTORY SINCE INCEPTION (12/14/93) through 6/30/10


1Reflects the cumulative total return of an investment made by a stockholder who purchased one share at inception ($7.50 IPO), reinvested distributions as indicated and fully participated in the primary subscription of the 1994 rights offering.

2Reflects the actual market price of one share as it traded on the NYSE and, prior to 12/1/03, on Nasdaq.



 
FUND INFORMATION AND
PORTFOLIO DIAGNOSTICS

Average Market Capitalization* $290 million  

Weighted Average P/B Ratio 1.4x  

U.S. Investments
(% of Net Assets applicable
to Common Stockholders)
107.6%  

Non-U.S. Investments
(% of Net Assets applicable
to Common Stockholders)
8.3%  

Fund Total Net Assets $299 million  

Net Leverage** 16%  

Turnover Rate 10%  

Number of Holdings 358  

Symbol        

Market Price

  RMT  

NAV

  XOTCX  

*Geometrically calculated
 

**Net leverage is the percentage, in excess of 100%, of the total value of equity type investments, divided by net assets, excluding preferred stock.

                           
     
CAPITAL STRUCTURE
Publicly Traded Securities Outstanding
at 6/30/10 at NAV or Liquidation Value

27.3 million shares
of Common Stock

  $239 million  

6.00% Cumulative
Preferred Stock

  $60 million  

                           
DOWN MARKET PERFORMANCE COMPARISON
All Down Periods of 7.5% or Greater
Over the Last 10 Years, in Percentages(%)

 



2010 Semiannual Report to Stockholders  |  15




   
 
 
AVERAGE ANNUAL NAV TOTAL RETURNS
Through 6/30/10

Jan-June 2010*   -7.82 %

One-Year   20.66  

Three-Year   -7.68  

Five-Year   5.04  

10-Year   10.72  

Since Inception (11/1/96)**   9.75  

*Not annualized

**Royce & Associates assumed investment management responsibility for the Fund on 11/1/96.

                     
CALENDAR YEAR NAV TOTAL RETURNS

Year   FUND     Year       FUND  

2009   54.0 %   2002       -12.5 %

2008   -42.7     2001       10.0  

2007   12.2     2000       20.9  

2006   16.3     1999       8.7  

2005   13.3     1998       -6.8  

2004   29.2     1997       20.5  

2003   54.3                

                     
TOP 10 POSITIONS
% of Net Assets Applicable
to Common Stockholders

Berkshire Hathaway Cl. B   4.9 %

Seabridge Gold   3.6  

Sanderson Farms   3.3  

Kennedy-Wilson Holdings   3.1  

Buckle (The)   3.0  

GrafTech International   2.8  

ENSCO ADR   2.7  

Reliance Steel & Aluminum   2.5  

Mosaic Company (The)   2.4  

Trican Well Service   2.4  

                     
PORTFOLIO SECTOR BREAKDOWN
% of Net Assets Applicable
to Common Stockholders

Natural Resources   29.7 %

Industrial Products   19.7  

Consumer Products   12.1  

Financial Services   11.0  

Technology   7.9  

Financial Intermediaries   7.0  

Consumer Services   5.8  

Industrial Services   5.1  

Health   1.3  

Miscellaneous   0.9  

Cash and Cash Equivalents   18.7  

                     



Royce Focus Trust

 
Manager’s Discussion
Royce Focus Trust (FUND) fell 7.8% on an NAV (net asset value) basis and 9.3% on a market price basis for the year-to-date period ended June 30, 2010, in each case underperforming its small-cap benchmark, the Russell 2000, which was down 1.9% for the same period. This was a discouraging result, not just because negative returns are unwelcome or because we never enjoy being outpaced by the Russell 2000, but also because it disrupted the momentum that the Fund had established with a terrific showing in 2009. Still, we do not put too much emphasis on short-term results—even when they are notable on both an absolute and relative basis—because the Fund’s focus is on longer-term time spans of three years or more.
     The rally that enlivened much of 2009 stalled as the new year began, with stock prices tumbling through January and into early February before stock prices revived. This meant a mostly strong first quarter for equities. The limited portfolio of mostly small-cap stocks in Royce Focus Trust was up 3.6% on an NAV basis and 5.4% on a market price basis for 2010’s opening quarter, in each case behind its small-cap benchmark, the Russell 2000, which was up 8.9%. Although the market was doing well as the second quarter began in April, a more severe and lasting correction had set in by the end of the month, one that continued through the end of June. For the second quarter, FUND was down 11.1% on an NAV basis and 13.9% on a market prices basis versus a decline of 9.9% for the Russell 2000.
     The Fund’s NAV performance was stronger than its market price results during the correction that followed the interim small-cap high in late April. From April 23, 2010 through June 30, 2010, FUND lost 15.7% on an NAV basis and 19.5% on a market price basis compared to a loss of 17.6% for its benchmark. The Fund fell behind the Russell 2000 from the March 9, 2009 market low through June 30, 2010, rising 80.3% on an NAV basis and 68.3% on a market price basis while the small-cap index gained 80.9%. However, FUND outpaced the Russell 2000 on an NAV basis for the three-, five-, 10-year and since inception of our management (11/1/96) periods ended June 30, 2010, and for each of these periods except the three year span on a market price basis. The Fund’s NAV average annual total return since inception was 9.8%.
         
     GOOD IDEAS THAT WORKED
     Top Contributors to Performance*
   Year-to-Date Through 6/30/10
 

  Seabridge Gold   0.55 %
 
  Berkshire Hathaway Cl. B   0.49  
 
  Allied Nevada Gold   0.40  
 
  Sanderson Farms   0.39  
 
  KKR Financial Holdings   0.34  
 
  *Includes dividends
         
   The Industrial Products sector detracted most from performance through the end of June. A top-10 position, The Mosaic Company produces concentrated phosphate and potash crop nutrients for the agriculture industry. Its share price grew at a healthy rate in 2009, in part because takeover rumors ran rampant through its industry. We like its business, its balance sheet and its high returns on invested capital, so we added to our position in May. As investors fled the stock market, as well as other capital markets, the performance of many
         
Important Performance and Risk Information
All performance information reflects past performance, is presented on a total return basis and reflects the reinvestment of distributions. Past performance is no guarantee of future results. Current performance may be higher or lower than performance quoted. Returns as of the most recent month-end may be obtained at www.roycefunds.com. The market price of the Fund’s shares will fluctuate, so that shares may be worth more or less than their original cost when sold. The Fund normally invests primarily in small-cap companies, which may involve considerably more risk than investing in a more diversified portfolio of larger-cap companies. The sum of all contributions and detractions for all securities would approximate the Fund’s year-to-date performance for 2010.

16  |  2010 Semiannual Report to Stockholders



                
           
Performance and Portfolio Review

           
financial stocks was hampered, which helped to make investment management companies the portfolio’s poorest-performing industry group. Western Digital, one of the top three global manufacturers of computer hard drives, boasts a strong balance sheet, competitive positioning and, thanks to its recent share price decline, a highly attractive valuation. Conditions in its industry grew more challenging, as the company ceded some market share to defend pricing, so we built a large enough stake to make it FUND’s 17th largest holding at the end of June.
     U.S. Global Investors manages equity and fixed income mutual funds, investing primarily in the public equity, fixed income, gold and natural resources markets across the globe. We think its expertise in asset management is a key strength. Long-time Royce favorite Thor Industries also hit the high-speed lane in 2009 before stalling in this year’s first half. The stock of this RV (recreational vehicle) and small- and mid-sized bus manufacturer plummeted mostly as a result of a delayed 10-Q filing based on an auditor’s review of its past accounting policies. However, the auditor signed off on the filing without requiring any changes or restatements. Sales were also slow after months of recovery, though we think its dominant position in its industry will allow it to return to the fast lane over the long haul. Major Drilling Group International is a leading provider of contract drilling services for metals miners. The company, which provides specialized contract drilling services for metals miners, suffered through reduced levels of activity from larger mining companies in the last months of 2009. Although activity was picking up in 2010, with the company offering an optimistic outlook, it was not enough to sway most investors.
         

    Canadian gold mining business, Seabridge Gold, enjoyed success as reserves in a mine in British Columbia were verified and drilling commenced, which helped to drive up its stock price. It was the Fund’s second-largest holding at the end of June. In January, we initiated a position in the Fund’s largest holding at the end of the first half, Berkshire Hathaway, a familiar name to many investors as the company associated with Warren Buffett. We admire his expertise as well and were pleased to see the stock climb during 2010’s first six months.
   GOOD IDEAS AT THE TIME  
   Top Detractors from Performance*
   Year-to-Date Through 6/30/10
 

 
Mosaic Company (The)   -0.95 %  

 
Western Digital   -0.68    

 
U.S. Global Investors Cl. A   -0.64    

 
Thor Industries   -0.53    

 
Major Drilling Group International   -0.52    

 
*Net of dividends  
           

MARKET PRICE PERFORMANCE HISTORY SINCE INCEPTION (11/1/96)1 through 6/30/10


1Royce & Associates assumed investment management responsibility for the Fund on 11/1/96.

2Reflects the cumulative total return experience of a continuous common stockholder who reinvested all distributions as indicated and fully participated in the primary subscription of the 2005 rights offering.

3Reflects the actual market price of one share as it traded on Nasdaq.



 
FUND INFORMATION AND
PORTFOLIO DIAGNOSTICS

Average Market Capitalization* $2,358 million  

Weighted Average P/E Ratio** 12.9x  

Weighted Average P/B Ratio 1.6x  

U.S. Investments
(% of Net Assets applicable
to Common Stockholders)
84.5%  

Non-U.S. Investments
(% of Net Assets applicable
to Common Stockholders)
15.9%  

Fund Total Net Assets $155 million  

Net Leverage 1%  

Turnover Rate 20%  

Number of Holdings 60  

Symbol        

Market Price

  FUND  

NAV

  XFUNX  

*Geometrically calculated
                           
**The Fund’s P/E ratio calculation excludes companies with
    zero or negative earnings (24% of portfolio holdings as of 6/30/10).
                           

Net leverage is the percentage, in excess of 100%, of the total value of equity type investments, divided by net assets, excluding preferred stock.

                           
     
CAPITAL STRUCTURE
Publicly Traded Securities Outstanding
at 6/30/10 at NAV or Liquidation Value

19.8 million shares
of Common Stock

  $130 million  

6.00% Cumulative
Preferred Stock

  $25 million  

                           
DOWN MARKET PERFORMANCE COMPARISON
All Down Periods of 7.5% or Greater
Over the Last 10 Years, in Percentages(%)

 



2010 Semiannual Report to Stockholders  |  17



History Since Inception


The following table details the share accumulations by an initial investor in the Funds who reinvested all distributions (including fractional shares) and participated fully in primary subscriptions for each of the rights offerings. Full participation in distribution reinvestments and rights offerings can maximize the returns available to a long-term investor. This table should be read in conjunction with the Performance and Portfolio Reviews of the Funds.

        Amount   Purchase         NAV   Market  
History                      Invested   Price1   Shares   Value2   Value2  
Royce Value Trust                                
11/26/86   Initial Purchase   $ 10,000   $ 10.000     1,000   $ 9,280   $ 10,000  
10/15/87   Distribution $0.30           7.000     42              
12/31/87   Distribution $0.22           7.125     32     8,578     7,250  
12/27/88   Distribution $0.51           8.625     63     10,529     9,238  
9/22/89   Rights Offering     405     9.000     45              
12/29/89   Distribution $0.52           9.125     67     12,942     11,866  
9/24/90   Rights Offering     457     7.375     62              
12/31/90   Distribution $0.32           8.000     52     11,713     11,074  
9/23/91   Rights Offering     638     9.375     68              
12/31/91   Distribution $0.61           10.625     82     17,919     15,697  
9/25/92   Rights Offering     825     11.000     75              
12/31/92   Distribution $0.90           12.500     114     21,999     20,874  
9/27/93   Rights Offering     1,469     13.000     113              
12/31/93   Distribution $1.15           13.000     160     26,603     25,428  
10/28/94   Rights Offering     1,103     11.250     98              
12/19/94   Distribution $1.05           11.375     191     27,939     24,905  
11/3/95   Rights Offering     1,425     12.500     114              
12/7/95   Distribution $1.29           12.125     253     35,676     31,243  
12/6/96   Distribution $1.15           12.250     247     41,213     36,335  
1997   Annual distribution total $1.21           15.374     230     52,556     46,814  
1998   Annual distribution total $1.54           14.311     347     54,313     47,506  
1999   Annual distribution total $1.37           12.616     391     60,653     50,239  
2000   Annual distribution total $1.48           13.972     424     70,711     61,648  
2001   Annual distribution total $1.49           15.072     437     81,478     73,994  
2002   Annual distribution total $1.51           14.903     494     68,770     68,927  
1/28/03   Rights Offering     5,600     10.770     520              
2003   Annual distribution total $1.30           14.582     516     106,216     107,339  
2004   Annual distribution total $1.55           17.604     568     128,955     139,094  
2005   Annual distribution total $1.61           18.739     604     139,808     148,773  
2006   Annual distribution total $1.78           19.696     693     167,063     179,945  
2007   Annual distribution total $1.85           19.687     787     175,469     165,158  
2008   Annual distribution total $1.72           12.307     1,294     95,415     85,435  
3/11/09   Distribution $0.32 3           6.071     537     137,966     115,669  
6/30/10       $ 21,922           10,720   $ 133,786   $ 113,310  
Royce Micro-Cap Trust                                
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 $0.05           6.750     9     9,163     8,462  
12/7/95   Distribution $0.36           7.500     58     11,264     10,136  
12/6/96   Distribution $0.80           7.625     133     13,132     11,550  
12/5/97   Distribution $1.00           10.000     140     16,694     15,593  
12/7/98   Distribution $0.29           8.625     52     16,016     14,129  
12/6/99   Distribution $0.27           8.781     49     18,051     14,769  
12/6/00   Distribution $1.72           8.469     333     20,016     17,026  
12/6/01   Distribution $0.57           9.880     114     24,701     21,924  
2002   Annual distribution total $0.80           9.518     180     21,297     19,142  
2003   Annual distribution total $0.92           10.004     217     33,125     31,311  
2004   Annual distribution total $1.33           13.350     257     39,320     41,788  
2005   Annual distribution total $1.85           13.848     383     41,969     45,500  
2006   Annual distribution total $1.55           14.246     354     51,385     57,647  
2007   Annual distribution total $1.35           13.584     357     51,709     45,802  
2008   Annual distribution total $1.19           8.237     578     28,205     24,807  
3/11/09   Distribution $0.22 3           4.260     228     41,314     34,212  
6/30/10       $ 8,900           4,642   $ 40,664   $ 34,072  
Royce Focus Trust                                
10/31/96   Initial Purchase   $ 4,375   $ 4.375     1,000   $ 5,280   $ 4,375  
12/31/96                           5,520     4,594  
12/5/97   Distribution $0.53           5.250     101     6,650     5,574  
12/31/98                           6,199     5,367  
12/6/99   Distribution $0.145           4.750     34     6,742     5,356  
12/6/00   Distribution $0.34           5.563     69     8,151     6,848  
12/6/01   Distribution $0.14           6.010     28     8,969     8,193  
12/6/02   Distribution $0.09           5.640     19     7,844     6,956  
12/8/03   Distribution $0.62           8.250     94     12,105     11,406  
2004   Annual distribution total $1.74           9.325     259     15,639     16,794  
5/6/05   Rights offering     2,669     8.340     320              
2005   Annual distribution total $1.21           9.470     249     21,208     20,709  
2006   Annual distribution total $1.57           9.860     357     24,668     27,020  
2007   Annual distribution total $2.01           9.159     573     27,679     27,834  
2008   Annual distribution total $0.47           6.535     228     15,856     15,323  
3/11/09   Distribution $0.09 3           3.830     78     24,408     21,579  
6/30/10       $ 7,044           3,409   $ 22,499   $ 19,568  
1   Beginning with the 1997 (RVT), 2002 (RMT) and 2004 (FUND) distributions through 2008, the purchase price of distributions is a weighted average of the distribution reinvestment prices for the year.
2   Other than for initial purchase and June 30, 2010, values are stated as of December 31 of the year indicated, after reinvestment of distributions.
3   Includes a return of capital.

18  |   2010 Semiannual Report to Stockholders



Distribution Reinvestment and Cash Purchase Options



Why did the Funds suspend their managed distribution policies for common stockholders?
The Boards of Directors suspended the Funds’ quarterly distribution policies in December, 2009 because of the potentially adverse tax consequences that could occur if the policies were to continue. In certain circumstances, returns of capital could be taxable for federal income tax purposes, and all or a portion of the Funds’ capital loss carryforwards from prior years could effectively be forfeited. The Funds intend the suspension to continue until such time as they can again regularly distribute net realized gains, which should occur after they have utilized the their capital loss carryforwards. Until such time, the Funds will distribute any net investment income on an annual basis in December.

Why should I reinvest my distributions?
By reinvesting distributions, a stockholder can maintain an undiluted investment in the Fund. The regular reinvestment of distributions has a significant impact on stockholder returns. In contrast, the stockholder who takes distributions in cash is penalized when shares are issued below net asset value to other stockholders.

How does the reinvestment of distributions from the Royce closed-end funds work?
The Funds automatically issue shares in payment of distributions unless you indicate otherwise. The shares are generally issued at the lower of the market price or net asset value on the valuation date.

How does this apply to registered stockholders?
If your shares are registered directly with a Fund, your distributions are automatically reinvested unless you have otherwise instructed the Funds’ transfer agent, Computershare, in writing. A registered stockholder also has the option to receive the distribution in the form of a stock certificate or in cash if Computershare is properly notified.

What if my shares are held by a brokerage firm or a bank?
If your shares are held by a brokerage firm, bank, or other intermediary as the stockholder of record, you should contact your brokerage firm or bank to be certain that it is automatically reinvesting distributions on your behalf. If they are unable to reinvest distributions on your behalf, you should have your shares registered in your name in order to participate.
What other features are available for registered stockholders?
The Distribution Reinvestment and Cash Purchase Plans also allow registered stockholders to make optional cash purchases of shares of a Fund’s common stock directly through Computershare on a monthly basis, and to deposit certificates representing your Fund shares with Computershare for safekeeping. The Funds’ investment adviser is absorbing all commissions on optional cash purchases under the Plans through December 31, 2010.

How do the Plans work for registered stockholders?
Computershare maintains the accounts for registered stockholders in the Plans and sends written confirmation of all transactions in the account. Shares in the account of each participant will be held by Computershare in non-certificated form in the name of the participant, and each participant will be able to vote those shares at a stockholder meeting or by proxy. A participant may also send other stock certificates held by them to Computershare to be held in non-certificated form. There is no service fee charged to participants for reinvesting distributions. If a participant elects to sell shares from a Plan account, Computershare 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.

How can I get more information on the Plans?
You can call an Investor Services Representative at (800) 221-4268 or you can request a copy of the Plan for your Fund from Computershare. All correspondence (including notifications) should be directed to: [Name of Fund] Distribution Reinvestment and Cash Purchase Plan, c/o Computershare, PO Box 43010, Providence, RI 02940-3010, telephone (800) 426-5523.

2010 Semiannual Report to Stockholders  |  19

Royce Value Trust


Schedule of Investments

    SHARES     VALUE  

COMMON STOCKS – 117.6%

             
               

Consumer Products – 8.4%

             

Apparel, Shoes and Accessories - 2.2%

             

Anta Sports Products

  98,200     $ 176,802  

Bosideng International Holdings

  2,224,000       596,019  

Burberry Group

  90,000       1,014,878  

China Dongxiang Group

  145,000       95,721  

Columbia Sportswear

  59,600       2,781,532  

Daphne International Holdings

  699,500       709,737  

Hengdeli Holdings

  400,300       172,862  

K-Swiss Cl. A a

  163,600       1,837,228  

Lazare Kaplan International a,b

  95,437       143,155  

Luk Fook Holdings (International)

  604,000       758,041  

Stella International Holdings

  418,900       805,856  

Timberland Company (The) Cl. A a

  17,500       282,625  

Van De Velde

  20,000       781,271  

Volcoma,c

  77,594       1,440,921  

Warnaco Group (The) a

  58,500       2,114,190  

Weyco Group

  97,992       2,232,258  

Wolverine World Wide

  100,000       2,522,000  

Yue Yuen Industrial Holdings

  17,000       52,706  
         
 
            18,517,802  
         
 

Collectibles - 0.1%

             

Kid Brands a

  96,600       679,098  
         
 

Consumer Electronics - 0.7%

             

Dolby Laboratories Cl. A a

  56,200       3,523,178  

DTS a

  64,100       2,106,967  
         
 
            5,630,145  
         
 

Food/Beverage/Tobacco - 1.6%

             

American Italian Pasta Cl. A a

  11,000       581,570  

Asian Citrus Holdings

  292,000       213,809  

Binggrae Company

  14,050       578,099  

Cal-Maine Foods

  89,300       2,851,349  

China Yurun Food Group

  45,000       140,866  

Hershey Creamery

  709       1,196,083  

HQ Sustainable Maritime Industriesa,c

  28,200       141,000  

Huabao International Holdings

  953,000       1,216,022  

J.M. Smucker Company (The)

  6,300       379,386  

KT&G Corporation

  15,900       781,796  

Ralcorp Holdings a

  1,800       98,640  

Seneca Foods Cl. A a

  110,000       3,548,600  

Seneca Foods Cl. B a

  13,251       429,863  

Thai Beverage

  1,052,000       209,565  

Tootsie Roll Industries

  53,560       1,266,694  
         
 
            13,633,342  
         
 

Health, Beauty and Nutrition - 0.2%

             

Amorepacific Corporation

  915       777,735  

LG Household & Health Care

  1,280       362,801  

Sa Sa International Holdings

  1,219,000       923,400  
         
 
            2,063,936  
         
 

Home Furnishing and Appliances - 2.1%

             

American Woodmark

  123,335       2,109,029  

Ekornes

  30,000       584,945  

Ethan Allen Interiors

  345,800       4,837,742  

Hunter Douglas

  30,000       1,090,614  

    SHARES     VALUE  

Consumer Products (continued)

             

Home Furnishing and Appliances (continued)

             

Kimball International Cl. B

  286,180     $ 1,582,575  

Mohawk Industries a

  113,200       5,180,032  

Samson Holding

  1,100,000       153,972  

Universal Electronics a

  10,000       166,300  

Woongjin Coway

  41,700       1,394,035  
         
 
            17,099,244  
         
 

Sports and Recreation - 1.4%

             

All American Group a

  47,700       21,465  

Beneteau a

  36,000       460,884  

RC2 Corporation a

  132,600       2,136,186  

Sturm, Ruger & Company

  245,600       3,519,448  

Thor Industries

  110,900       2,633,875  

Winnebago Industries a

  247,500       2,460,150  
         
 
            11,232,008  
         
 

Other Consumer Products - 0.1%

             

Societe BIC

  9,000       638,390  
         
 
Total (Cost $60,765,399)           69,493,965  
         
 
               

Consumer Services – 4.1%

             

Direct Marketing - 0.3%

             

Manutan International

  24,906       1,258,433  

Takkt

  125,000       1,289,108  
         
 
            2,547,541  
         
 

Leisure and Entertainment - 0.0%

             

Kangwon Land

  10,000       150,771  
         
 

Online Commerce - 0.2%

             

Systemax

  121,000       1,823,470  
         
 

Restaurants and Lodgings - 0.6%

             

Ajisen China Holdings

  1,906,200       2,117,414  

Benihana a,c

  3,300       20,988  

Cafe de Coral Holdings

  97,000       248,569  

CEC Entertainment a

  64,100       2,260,166  
         
 
            4,647,137  
         
 

Retail Stores - 2.2%

             

Abercrombie & Fitch Cl. A

  3,000       92,070  

Advance Auto Parts

  4,500       225,810  

Aeropostale a

  59,500       1,704,080  

American Eagle Outfitters

  10,300       121,025  

Bed Bath & Beyond a

  4,650       172,422  

CarMax a

  160,000       3,184,000  

Charming Shoppes a

  321,900       1,207,125  

Dover Saddlery a

  17,821       55,780  

Dress Barn (The) a

  68,280       1,625,747  

Golden Eagle Retail Group

  631,000       1,323,832  

Lewis Group

  225,000       1,722,242  

New World Department Store China

  85,000       77,228  

O’Reilly Automotive a

  6,200       294,872  

QKL Stores a,c

  16,260       68,292  

Ramayana Lestari Sentosa

  2,075,000       218,291  

Stein Mart a

  182,800       1,138,844  

Tiffany & Co.

  90,200       3,419,482  

West Marine a

  131,100       1,426,368  
         
 
            18,077,510  
         
 

20  |   2010 Semiannual Report to Stockholders   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.




June 30, 2010 (unaudited)


 

    SHARES     VALUE  

Consumer Services (continued)

             

Other Consumer Services - 0.8%

             

Anhanguera Educacional Participacoes

  120,000     $ 1,814,294  

Apollo Group Cl. A a

  4,100       174,127  

Cambium Learning Group a,c

  84,466       304,077  

ChinaCast Education a

  35,000       207,900  

ITT Educational Services a

  17,000       1,411,340  

MegaStudy Company

  19,000       2,506,839  

Raffles Education a

  1,083,900       219,223  

Universal Travel Group a

  15,000       88,200  
         
 
            6,726,000  
         
 
Total (Cost $31,493,888)           33,972,429  
         
 
               

Diversified Investment Companies – 0.4%

             

Closed-End Funds - 0.4%

             

Central Fund of Canada Cl. A

  211,500       3,187,305  
         
 
Total (Cost $1,694,963)           3,187,305  
         
 
               

Financial Intermediaries – 12.1%

             

Banking - 2.9%

             

Ameriana Bancorp

  40,000       167,600  

Banca Finnat Euramerica

  867,500       570,736  

Banca Generali

  86,000       820,427  

Bank of N.T. Butterfield & Son a

  942,504       1,319,506  

Bank Sarasin & Cie Cl. B

  33,120       1,326,934  

Banque Privee Edmond de Rothschild

  23       508,195  

BCB Holdings a

  598,676       827,396  

Center Bancorp

  44,868       340,099  

Centrue Financial a

  82,200       164,400  

CFS Bancorp

  75,000       364,500  

Chuo Mitsui Trust Holdings

  118,000       415,544  

CNB Financial

  11,116       122,054  

Commercial National Financial

  54,900       886,635  

Farmers & Merchants Bank of Long Beach

  1,200       4,860,000  

Fauquier Bankshares

  160,800       2,452,200  

Hawthorn Bancshares

  48,023       573,875  

HopFed Bancorp

  104,500       943,635  

Jefferson Bancshares a

  32,226       127,937  

Kearny Financial

  50,862       465,896  

Mauritius Commercial Bank

  40,000       178,056  

Mechanics Bank

  200       2,200,000  

Old Point Financial

  25,000       325,500  

Peapack-Gladstone Financial

  10,500       122,850  

State Bank of Mauritius

  46,000       113,919  

Timberland Bancorp d

  469,200       1,538,976  

Vontobel Holding

  20,400       540,572  

Whitney Holding Corporation

  41,500       383,875  

Wilber Corporation (The)

  122,685       729,976  

Wilmington Trust

  43,500       482,415  
         
 
            23,873,708  
         
 

Insurance - 5.4%

             

Alleghany Corporation a

  28,657       8,405,098  

Amil Participacoes

  100,000       811,634  

Argo Group International Holdings

  64,751       1,980,733  

Aspen Insurance Holdings

  47,000       1,162,780  
    SHARES     VALUE  

Financial Intermediaries (continued)

             

Insurance (continued)

             

China Taiping Insurance Holdings a

  45,000     $ 145,429  

CNA Surety a

  100,600       1,616,642  

CoreLogic

  44,000       777,040  

Discovery Holdings

  250,000       1,139,490  

E-L Financial

  7,400       3,162,839  

Enstar Group a

  20,217       1,343,218  

Erie Indemnity Cl. A

  131,800       5,996,900  

Independence Holding

  317,658       1,896,418  

Leucadia National a

  44,940       876,780  

Markel Corporation a

  6,200       2,108,000  

Montpelier Re Holdings

  32,000       477,760  

NYMAGIC

  202,200       3,900,438  

Platinum Underwriters Holdings

  63,000       2,286,270  

ProAssurance Corporation a

  22,000       1,248,720  

RLI

  90,724       4,763,917  

Validus Holdings

  6,291       153,626  
         
 
            44,253,732  
         
 

Real Estate Investment Trusts - 0.1%

             

Gladstone Commercial

  30,000       490,200  
         
 

Securities Brokers - 3.1%

             

Close Brothers Group

  43,000       442,115  

Cowen Group Cl. A a

  708,600       2,905,260  

Daewoo Securities

  5,000       81,430  

DundeeWealth

  33,300       422,917  

Egyptian Financial Group-Hermes Holding

  401,500       2,065,690  

FBR Capital Markets a

  249,600       831,168  

GFI Group

  166,247       927,658  

Gleacher & Co. a

  293,000       747,150  

HQ

  40,000       283,841  

Interactive Brokers Group Cl. A a

  100,000       1,660,000  

Investcorp Bank GDR a

  27,000       128,250  

KBW a

  70,058       1,502,044  

Kim Eng Holdings

  240,000       272,046  

Lazard Cl. A

  109,300       2,919,403  

MF Global Holdings a

  225,000       1,284,750  

Mirae Asset Securities

  38,850       1,702,148  

Mizuho Securities

  492,300       1,091,144  

Oppenheimer Holdings Cl. A

  75,000       1,796,250  

Paris Orleans et Cie

  183,785       4,181,245  

Phatra Securities

  775,000       428,649  

UOB-Kay Hian Holdings

  190,000       201,013  

Woori Investment & Securities

  11,000       140,443  
         
 
            26,014,614  
         
 

Securities Exchanges - 0.1%

             

Hellenic Exchanges

  100,000       526,979  
         
 

Other Financial Intermediaries - 0.5%

             

KKR & Company (Guernsey) L.P.

  105,000       979,768  

KKR Financial Holdings

  481,404       3,591,274  
         
 
            4,571,042  
         
 
Total (Cost $126,804,852)           99,730,275  
         
 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.   2010 Semiannual Report to Stockholders  |   21



Royce Value Trust


Schedule of Investments

    SHARES     VALUE  

Financial Services – 12.6%

             

Diversified Financial Services - 0.4%

             

Encore Capital Group a

  68,000     $ 1,401,480  

Franco-Nevada Corporation

  10,000       304,354  

IOOF Holdings

  123,592       614,189  

Ocwen Financial a

  123,600       1,259,484  
         
 
            3,579,507  
         
 

Information and Processing - 2.3%

             

Altisource Portfolio Solutions a

  41,199       1,019,263  

Interactive Data

  112,300       3,748,574  

MoneyGram International a

  228,500       559,825  

Morningstar a

  109,800       4,668,696  

SEI Investments

  350,400       7,134,144  

Total System Services

  137,500       1,870,000  
         
 
            19,000,502  
         
 

Insurance Brokers - 1.0%

             

Brown & Brown

  287,400       5,500,836  

Crawford & Company Cl. B a,c

  1,160       3,666  

Gallagher (Arthur J.) & Co.

  111,200       2,711,056  
         
 
            8,215,558  
         
 

Investment Management - 7.1%

             

A.F.P. Provida ADR

  22,100       933,946  

ABG Sundal Collier Holding

  115,000       108,608  

Affiliated Managers Group a

  42,800       2,600,956  

AllianceBernstein Holding L.P.

  284,600       7,354,064  

AP Alternative Assets L.P.

  233,200       1,428,857  

Artio Global Investors Cl. A

  150,000       2,361,000  

Ashmore Group

  545,500       1,962,656  

Azimut Holding

  72,183       595,382  

BKF Capital Group a

  130,000       120,900  

BT Investment Management

  207,000       423,850  

Coronation Fund Managers

  526,000       749,728  

Eaton Vance

  125,300       3,459,533  

Endeavour Financialc

  300,000       619,980  

Endeavour Financial (Warrants) a

  75,000       57,771  

Equity Trustees

  34,176       436,171  

Evercore Partners Cl. A

  132,700       3,098,545  

F&C Asset Management

  60,000       46,380  

Federated Investors Cl. B

  204,700       4,239,337  

Fiducian Portfolio Services

  227,000       235,025  

GAMCO Investors Cl. A

  110,575       4,113,390  

GIMV

  18,000       813,679  

GP Investments BDR a

  15,604       52,042  

Investec

  118,000       793,635  

MVC Capital

  384,200       4,963,864  

MyState

  152,000       398,685  

Onex Corporation

  50,000       1,201,916  

Partners Group Holding

  15,400       1,858,280  

Perpetual

  13,078       308,186  

Platinum Asset Management

  149,000       581,387  

Rathbone Brothers

  35,400       420,470  

Reinet Investments a

  53,127       745,882  

RHJ International a

  102,500       758,797  

Schroders

  41,100       739,665  

SHUAA Capital a

  485,000       137,751  

SPARX Group a

  1,320       115,796  
    SHARES     VALUE  

Financial Services (continued)

             

Investment Management (continued)

             

Sprott

  269,600     $ 906,644  

Teton Advisors Cl. A a

  723       6,507  

Treasury Group

  51,500       218,302  

Trust Company

  97,283       450,203  

Value Partners Group

  5,281,800       3,326,196  

VZ Holding

  8,500       687,032  

Waddell & Reed Financial Cl. A

  139,300       3,047,884  

Westwood Holdings Group

  23,460       824,619  
         
 
            58,303,501  
         
 

Special Purpose Acquisition Corporation - 0.1%

             

Liberty Acquisition Holdings a,c

  66,455       658,569  

Westway Group a

  31,500       128,520  
         
 
            787,089  
         
 

Specialty Finance - 0.8%

             

Credit Acceptance a

  62,801       3,062,805  

World Acceptance a

  85,700       3,283,167  
         
 
            6,345,972  
         
 

Other Financial Services - 0.9%

             

E-House China Holdings ADRc

  189,500       2,806,495  

Hilltop Holdings a

  290,400       2,906,904  

Kennedy-Wilson Holdings a

  150,000       1,515,000  
         
 
            7,228,399  
         
 
Total (Cost $104,464,179)           103,460,528  
         
 
               

Health – 7.5%

             

Commercial Services - 1.0%

             

Affymetrix a

  10,000       59,000  

Chindex International a,c

  41,600       521,248  

OdontoPrev

  15,000       522,715  

PAREXEL International a

  332,400       7,206,432  
         
 
            8,309,395  
         
 

Drugs and Biotech - 1.9%

             

American Oriental Bioengineering a,c

  53,300       134,316  

Biogen Idec a

  7,080       335,946  

BioMarin Pharmaceutical a,c

  9,100       172,536  

Boiron

  20,000       703,703  

Bukwang Pharmaceutical

  15,000       170,927  

China Nuokang Bio-Pharmaceutical ADR a,c

  27,500       123,750  

China Shineway Pharmaceutical Group

  47,400       144,239  

Daewoong Pharmaceutical

  2,884       108,847  

Endo Pharmaceuticals Holdings a

  158,300       3,454,106  

Green Cross

  13,500       1,539,400  

LG Life Sciences a

  8,500       331,931  

Luminex Corporation a,c

  20,000       324,400  

Pharmaceutical Product Development

  100,000       2,541,000  

Pharmacyclics a

  158,746       1,057,248  

Simcere Pharmaceutical Group ADR a

  60,300       499,284  

Sino Biopharmaceutical

  2,176,600       841,653  

Sinovac Biotech a

  141,900       656,997  

Sunesis Pharmaceuticals a,c

  211,500       99,405  

3SBio ADR a

  122,700       1,427,001  

Virbac

  7,500       796,720  

22  |   2010 Semiannual Report to Stockholders   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.




June 30, 2010 (unaudited)


 

    SHARES     VALUE  

Health (continued)

             

Drugs and Biotech (continued)

             

Warner Chilcott Cl. A a,c

  4,600     $ 105,110  
         
 
            15,568,519  
         
 

Health Services - 2.1%

             

Advisory Board (The) a

  128,500       5,520,360  

Albany Molecular Research a

  85,000       439,450  

Bangkok Chain Hospital

  1,185,000       181,009  

Cross Country Healthcare a

  30,000       269,700  

eResearchTechnology a

  67,624       532,877  

HMS Holdings a

  50,000       2,711,000  

ICON ADR a

  95,500       2,758,995  

On Assignment a

  375,400       1,888,262  

Raffles Medical Group

  563,100       685,860  

Res-Care a

  90,460       873,844  

Sonic Healthcare

  2,000       17,421  

VCA Antech a

  60,500       1,497,980  
         
 
            17,376,758  
         
 

Medical Products and Devices - 2.5%

             

Allied Healthcare Products a

  180,512       617,351  

Atrion Corporation

  15,750       2,127,037  

Biosensors International Group a

  1,260,000       687,957  

C.R. Bard

  1,800       139,554  

Carl Zeiss Meditec

  135,000       1,846,256  

CONMED Corporation a

  81,500       1,518,345  

DiaSorin

  12,000       437,918  

Edwards Lifesciences a

  2,600       145,652  

IDEXX Laboratories a

  55,201       3,361,741  

Kinetic Concepts a

  6,300       230,013  

Kossan Rubber Industries

  100,300       234,935  

Shandong Weigao Group Medical Polymer

  139,800       609,050  

St. Shine Optical

  98,700       786,704  

Straumann Holding

  5,000       1,081,795  

Techne Corporation

  71,000       4,078,950  

Teleflex

  3,900       211,692  

Urologix a,c

  445,500       481,140  

Young Innovations

  62,550       1,760,782  

Zoll Medical a

  400       10,840  
         
 
            20,367,712  
         
 
Total (Cost $43,567,233)           61,622,384  
         
 
               

Industrial Products – 22.4%

             

Automotive - 1.7%

             

Gentex Corporation

  77,000       1,384,460  

LKQ Corporation a

  300,000       5,784,000  

Minth Group

  198,000       234,240  

Nokian Renkaat

  60,000       1,469,434  

Norstar Founders Group a,b

  524,000       24,562  

SORL Auto Parts a,c

  35,723       297,215  

Superior Industries International

  40,000       537,600  

Tianneng Power International

  2,236,000       754,056  

WABCO Holdings a

  103,800       3,267,624  

Wonder Auto Technology a,c

  17,945       131,357  
    SHARES     VALUE  

Industrial Products (continued)

             

Automotive (continued)

             

Xinyi Glass Holdings

  400,000     $ 149,372  
         
 
            14,033,920  
         
 

Building Systems and Components - 1.6%

             

Armstrong World Industries a

  133,200       4,019,976  

Decker Manufacturing

  6,022       139,409  

NCI Building Systems a

  2,780       23,269  

Preformed Line Products

  91,600       2,560,220  

Simpson Manufacturing

  258,400       6,343,720  
         
 
            13,086,594  
         
 

Construction Materials - 1.3%

             

Ash Grove Cement Cl. B

  50,518       8,891,168  

Duratex

  156,464       1,421,612  

USG Corporation a,c

  50,000       604,000  
         
 
            10,916,780  
         
 

Industrial Components - 2.4%

             

AMETEK

  6,300       252,945  

Bel Fuse Cl. A

  36,672       608,755  

CLARCOR

  92,500       3,285,600  

Donaldson Company

  92,800       3,957,920  

GrafTech International a

  309,690       4,527,668  

II-VI a

  13,500       400,005  

Mueller Water Products Cl. A

  72,500       268,975  

PerkinElmer

  185,800       3,840,486  

Powell Industries a

  92,400       2,526,216  

Precision Castparts

  2,300       236,716  
         
 
            19,905,286  
         
 

Machinery - 5.1%

             

Astec Industries a

  25,000       693,250  

Baldor Electric

  62,900       2,269,432  

Burckhardt Compression Holding

  12,000       2,114,732  

Burnham Holdings Cl. B

  36,000       518,400  

China High Speed Transmission Equipment Group

  44,200       92,952  

China Valves Technology a,c

  20,000       186,600  

Columbus McKinnon a

  95,000       1,327,150  

Duoyuan Global Water ADR a,c

  25,000       440,000  

Duoyuan Printing a,c

  49,300       380,596  

Franklin Electric

  104,600       3,014,572  

Hardinge

  105,345       897,540  

Hollysys Automation Technologies a,c

  11,535       103,930  

Jinpan International

  39,500       598,820  

Lincoln Electric Holdings

  104,180       5,312,138  

Nordson Corporation

  102,100       5,725,768  

Rofin-Sinar Technologies a

  313,700       6,531,234  

Spirax-Sarco Engineering

  40,000       809,682  

Takatori Corporation a

  12,100       67,902  

Wabtec Corporation

  106,725       4,257,260  

Wasion Group Holdings

  119,000       74,721  

Williams Controls a

  37,499       339,366  

Woodward Governor

  231,600       5,912,748  
         
 
            41,668,793  
         
 

Metal Fabrication and Distribution - 3.6%

             

Central Steel & Wire

  6,062       3,997,889  

Commercial Metals

  36,600       483,852  

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.   2010 Semiannual Report to Stockholders  |   23



Royce Value Trust


Schedule of Investments

    SHARES     VALUE  

Industrial Products (continued)

             

Metal Fabrication and Distribution (continued)

             

CompX International Cl. A

  185,300     $ 1,825,205  

Fushi Copperweld a

  13,145       107,526  

Haynes International

  24,000       739,920  

Kennametal

  155,000       3,941,650  

NN a

  197,100       985,500  

Nucor Corporation

  54,350       2,080,518  

RBC Bearings a

  47,000       1,362,530  

Reliance Steel & Aluminum

  152,220       5,502,753  

Schnitzer Steel Industries Cl. A

  100,000       3,920,000  

Sims Metal Management ADR

  241,375       3,417,870  

Sung Kwang Bend

  75,200       1,216,414  
         
 
            29,581,627  
         
 

Miscellaneous Manufacturing - 3.2%

             

AZZ

  36,273       1,333,758  

Barnes Group

  20,000       327,800  

Brady Corporation Cl. A

  124,600       3,105,032  

China Automation Group

  244,800       158,803  

Matthews International Cl. A

  37,000       1,083,360  

Mettler-Toledo International a

  33,500       3,739,605  

PMFG a

  344,900       5,225,235  

Rational

  6,000       926,645  

Raven Industries

  96,200       3,242,902  

Semperit AG Holding

  58,500       2,000,213  

Synalloy Corporation

  198,800       1,661,968  

Valmont Industries

  43,000       3,124,380  
         
 
            25,929,701  
         
 

Paper and Packaging - 0.9%

             

Greif Cl. A

  84,499       4,693,074  

Mayr-Melnhof Karton

  25,000       2,226,024  

Taiwan Hon Chuan Enterprise

  360,285       659,817  
         
 
            7,578,915  
         
 

Pumps, Valves and Bearings - 1.3%

             

FAG Bearings India

  13,300       162,985  

Gardner Denver

  65,500       2,920,645  

Graco

  116,376       3,280,639  

IDEX Corporation

  67,400       1,925,618  

Pfeiffer Vacuum Technology

  30,000       2,209,416  

Rotork

  25,000       472,486  
         
 
            10,971,789  
         
 

Specialty Chemicals and Materials - 1.1%

             

Agrium

  3,700       181,078  

Chemspec International ADR

  35,000       252,350  

China BlueChemical

  158,400       87,870  

China XD Plastics a,c

  39,000       265,200  

FMC Corporation

  2,300       132,089  

Gulf Resources a,c

  40,000       343,600  

Hawkins

  186,178       4,483,166  

Huchems Fine Chemical

  10,285       219,271  

Kingboard Chemical Holdings

  16,900       72,341  

OM Group a

  90,000       2,147,400  

Victrex

  60,000       974,854  
         
 
            9,159,219  
         
 

Textiles - 0.1%

             

Pacific Textiles Holdings

  670,000       330,126  
    SHARES     VALUE  

Industrial Products (continued)

             

Textiles (continued)

             

Texwinca Holdings

  275,000     $ 266,623  

Unifi a

  121,000       462,220  
         
 
            1,058,969  
         
 

Other Industrial Products - 0.1%

             

China Fire & Security Group a,c

  11,300       103,734  

Cooper Industries

  7,800       343,200  

Harbin Electric a,c

  25,835       430,153  
         
 
            877,087  
         
 
Total (Cost $123,523,575)           184,768,680  
         
 
               

Industrial Services – 14.6%

             

Advertising and Publishing - 0.3%

             

Lamar Advertising Cl. A a

  51,000       1,250,520  

SinoMedia Holding

  350,000       79,653  

ValueClick a

  145,000       1,550,050  
         
 
            2,880,223  
         
 

Commercial Services - 7.3%

             

Animal Health International a

  17,000       42,160  

Brink’s Company (The)

  127,200       2,420,616  

Cintas Corporation

  84,500       2,025,465  

Convergys Corporation a

  121,000       1,187,010  

Copart a

  85,600       3,065,336  

Corinthian Colleges a,c

  242,900       2,392,565  

CRA International a

  47,087       886,648  

Diamond Management & Technology Consultants

  80,400       828,924  

Fidelity National Information Services

  9,800       262,836  

Forrester Research a

  40,300       1,219,478  

FTI Consulting a

  7,850       342,182  

Gartner a

  213,000       4,952,250  

Global Sources a,c

  19,936       156,298  

Hackett Group a

  655,000       1,840,550  

Hewitt Associates Cl. A a

  126,720       4,366,771  

Landauer

  75,500       4,596,440  

Manpower

  69,300       2,992,374  

MAXIMUS

  110,900       6,417,783  

Michael Page International

  175,000       965,960  

Monster Worldwide a

  60,800       708,320  

Pico Far East Holdings

  4,477,000       815,199  

RINO International a,c

  11,000       137,610  

Ritchie Bros. Auctioneers

  337,700       6,152,894  

Robert Half International

  94,000       2,213,700  

SFN Group a

  62,800       342,888  

Singapore Airport Terminal Services

  275,000       523,523  

Sotheby’s

  319,400       7,304,678  

Sound Global a

  50,000       27,419  

TeleTech Holdings a

  13,000       167,570  

Universal Technical Institute a

  43,100       1,018,884  
         
 
            60,374,331  
         
 

Engineering and Construction - 1.1%

             

Desarrolladora Homex ADR a

  14,100       355,884  

Integrated Electrical Services a

  355,400       1,240,346  

Jacobs Engineering Group a

  6,400       233,216  

24  |   2010 Semiannual Report to Stockholders   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.




June 30, 2010 (unaudited)


 

    SHARES     VALUE  

Industrial Services (continued)

             

Engineering and Construction (continued)

             

KBR

  180,000     $ 3,661,200  

NVR a

  5,000       3,275,150  
         
 
            8,765,796  
         
 

Food, Tobacco and Agriculture - 0.8%

             

Alico a,c

  27,000       620,460  

Chaoda Modern Agriculture

  178,872       173,433  

China Green (Holdings)

  1,216,000       1,219,146  

Genting Plantations

  50,000       102,500  

Hanfeng Evergreen a

  69,700       380,402  

Intrepid Potash a

  91,427       1,789,226  

MGP Ingredients a,c

  127,400       844,662  

Origin Agritech a,c

  87,500       642,250  

Yuhe International a

  28,286       202,528  

Zhongpin a,c

  32,900       386,904  
         
 
            6,361,511  
         
 

Industrial Distribution - 0.8%

             

Lawson Products

  161,431       2,741,098  

MSC Industrial Direct Cl. A

  75,400       3,819,764  
         
 
            6,560,862  
         
 

Transportation and Logistics - 4.3%

             

Alexander & Baldwin

  60,000       1,786,800  

C. H. Robinson Worldwide

  60,000       3,339,600  

Forward Air

  209,750       5,715,687  

Frozen Food Express Industries a

  286,635       1,003,223  

Hub Group Cl. A a

  174,400       5,233,744  

Kirby Corporation a

  83,000       3,174,750  

Landstar System

  145,400       5,669,146  

Patriot Transportation Holding a

  70,986       5,743,477  

Universal Truckload Services a

  129,476       1,803,601  

UTi Worldwide

  175,000       2,166,500  
         
 
            35,636,528  
         
 
Total (Cost $94,888,582)           120,579,251  
         
 
               

Natural Resources – 10.9%

             

Energy Services - 5.3%

             

Cal Dive International a

  50,000       292,500  

Calfrac Well Services

  80,000       1,469,166  

CARBO Ceramics

  59,700       4,309,743  

China Power New Energy Development a

  3,260,000       289,723  

Core Laboratories

  10,000       1,476,100  

ENSCO ADR

  15,000       589,200  

Ensign Energy Services

  225,100       2,647,365  

Exterran Holdings a

  103,600       2,673,916  

Frontier Oil a

  60,000       807,000  

Helmerich & Payne

  57,300       2,092,596  

ION Geophysical a

  361,500       1,258,020  

Lufkin Industries

  62,000       2,417,380  

Oil States International a

  165,000       6,530,700  

Pason Systems

  178,800       1,899,608  

SEACOR Holdings a

  101,300       7,157,858  

ShawCor Cl. A

  77,000       1,942,088  

TETRA Technologies a

  68,000       617,440  
    SHARES     VALUE  

Natural Resources (continued)

             

Energy Services (continued)

             

Tidewater

  36,000     $ 1,393,920  

Trican Well Service

  99,900       1,279,073  

Unit Corporation a

  46,000       1,867,140  

Willbros Group a

  103,800       768,120  
         
 
            43,778,656  
         
 

Oil and Gas - 1.1%

             

Bill Barrett a

  50,000       1,538,500  

China Integrated Energy a,c

  37,000       307,100  

Cimarex Energy

  95,490       6,835,174  

EQT Corporation

  6,000       216,840  

Questar Corporation

  10,400       473,096  
         
 
            9,370,710  
         
 

Precious Metals and Mining - 3.1%

             

Aquarius Platinum

  270,000       1,309,817  

Cliffs Natural Resources

  40,000       1,886,400  

Etruscan Resources a

  745,900       308,296  

Fresnillo

  110,000       1,589,189  

Gammon Gold a

  198,300       1,082,718  

Hecla Mining a,c

  528,600       2,759,292  

Hochschild Mining

  520,000       2,361,504  

IAMGOLD Corporation

  95,620       1,690,562  

Kimber Resources a

  560,000       453,600  

Major Drilling Group International

  183,200       3,732,664  

New Gold a

  510,000       3,156,900  

Northam Platinum

  325,000       1,909,252  

Northgate Minerals a

  160,000       480,000  

Pan American Silver

  41,000       1,036,480  

Royal Gold

  34,400       1,651,200  

Zhaojin Mining Industry

  15,000       35,180  
         
 
            25,443,054  
         
 

Real Estate - 1.2%

             

Consolidated-Tomoka Land

  13,564       386,574  

Midland Holdings

  732,700       598,906  

PICO Holdings a

  106,100       3,179,817  

Shimao Property Holdings

  27,500       42,676  

St. Joe Company (The) a

  48,000       1,111,680  

Tejon Ranch a,c

  195,496       4,512,048  
         
 
            9,831,701  
         
 

Other Natural Resources - 0.2%

             

China Forestry Holdings

  2,700,000       968,548  

Hidili Industry International Development a

  60,000       43,947  

Sino-Forest Corporation a,c

  11,900       169,130  
         
 
            1,181,625  
         
 
Total (Cost $66,288,920)           89,605,746  
         
 
               

Technology – 19.9%

             

Aerospace and Defense - 1.7%

             

AerCap Holdings a

  45,000       467,100  

Ducommun

  117,200       2,004,120  

FLIR Systems a

  75,000       2,181,750  

Goodrich Corporation

  3,800       251,750  

HEICO Corporation

  134,625       4,835,730  

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.   2010 Semiannual Report to Stockholders  |   25



Royce Value Trust


Schedule of Investments

    SHARES     VALUE  

Technology (continued)

             

Aerospace and Defense (continued)

             

HEICO Corporation Cl. A

  67,875     $ 1,829,231  

Hexcel Corporation a

  47,500       736,725  

L-3 Communications Holdings

  2,800       198,352  

Mercury Computer Systems a

  40,500       475,065  

Moog Cl. A a

  25,000       805,750  
         
 
            13,785,573  
         
 

Components and Systems - 4.8%

             

AAC Acoustic Technologies Holdings

  194,100       276,312  

Analogic Corporation

  40,135       1,826,544  

Belden

  57,800       1,271,600  

Benchmark Electronics a

  165,200       2,618,420  

Checkpoint Systems a

  56,060       973,202  

China Digital TV Holding Company ADR a

  5,000       27,300  

Diebold

  151,600       4,131,100  

Dionex Corporation a

  52,900       3,938,934  

Electronics for Imaging a

  8,517       83,041  

Energy Conversion Devices a,c

  84,500       346,450  

EVS Broadcast Equipment

  30,000       1,205,945  

Hana Microelectronics

  305,000       253,186  

Intermec a

  23,000       235,750  

Newport Corporation a

  483,500       4,380,510  

Otsuka Corporation

  3,200       203,711  

Paragon Technologies

  116,800       289,572  

Perceptron a

  357,700       1,573,880  

Plexus Corporation a

  215,700       5,767,818  

Richardson Electronics

  520,712       4,686,408  

Shin Zu Shing

  74,500       224,762  

Technitrol

  286,200       904,392  

Teradata Corporation a

  30,000       914,400  

Vaisala Cl. A

  116,000       2,635,174  

VTech Holdings

  24,050       255,122  

Western Digital a

  8,950       269,932  
         
 
            39,293,465  
         
 

Distribution - 1.0%

             

Agilysys a

  165,125       1,104,686  

Anixter International a

  61,795       2,632,467  

Avnet a

  8,000       192,880  

China 3C Group a

  6,600       1,987  

Cogo Group a

  51,965       324,261  

Tech Data a

  86,500       3,081,130  

WPG Holdings

  299,500       552,875  
         
 
            7,890,286  
         
 

Internet Software and Services - 0.1%

             

NetEase.com ADR a

  3,500       110,985  

Perficient a

  10,000       89,100  

RealNetworks a

  245,400       809,820  

Sohu.com a

  4,000       164,360  
         
 
            1,174,265  
         
 

IT Services - 2.4%

             

AsiaInfo Holdings a

  14,900       325,714  

Black Box

  43,798       1,221,526  

ManTech International Cl. A a

  35,400       1,506,978  

Sapient Corporation

  756,602       7,671,944  

SRA International Cl. A a

  248,800       4,893,896  
    SHARES     VALUE  

Technology (continued)

             

IT Services (continued)

             

Syntel

  122,379     $ 4,154,767  

Yucheng Technologies a

  89,840       327,018  
         
 
            20,101,843  
         
 

Semiconductors and Equipment - 3.8%

             

Analog Devices

  19,104       532,237  

ASM Pacific Technology

  9,000       69,981  

BE Semiconductor Industries a

  58,000       249,400  

Brooks Automation a

  5,152       39,825  

Chroma ATE

  186,315       357,108  

Cognex Corporation

  236,200       4,152,396  

Coherent a

  215,500       7,391,650  

Comba Telecom Systems Holdings

  203,247       223,847  

Cymer a

  77,500       2,328,100  

Delta Electronics

  204,400       654,309  

Diodes a

  252,450       4,006,381  

Exar Corporation a

  157,576       1,092,002  

Himax Technologies ADR a

  80,500       234,255  

Image Sensing Systems a

  8,310       108,861  

Integrated Device Technology a

  395,000       1,955,250  

International Rectifier a

  120,000       2,233,200  

Intevac a

  57,450       612,991  

Power Integrations

  49,000       1,577,555  

Seoul Semiconductor

  8,200       289,406  

TTM Technologies a

  221,400       2,103,300  

Vimicro International ADR a

  240,000       1,084,800  
         
 
            31,296,854  
         
 

Software - 3.8%

             

ACI Worldwide a

  201,150       3,916,391  

Activision Blizzard

  23,100       242,319  

Advent Software a,c

  130,300       6,118,888  

ANSYS a

  100,000       4,057,000  

Aspen Technology a

  42,100       458,469  

Aveva Group

  40,000       669,757  

Avid Technology a

  176,000       2,240,480  

Blackbaud

  41,890       911,945  

CA

  8,100       149,040  

DynaVox Cl. A a,c

  55,000       880,550  

Epicor Software a

  79,900       638,401  

Fair Isaac

  44,500       969,655  

JDA Software Group a

  49,900       1,096,802  

Majesco Entertainment a,c

  36,255       25,741  

National Instruments

  167,900       5,335,862  

NCSoft Corporation

  1,700       280,264  

Net 1 UEPS Technologies a

  50,000       670,500  

Novell a

  309,284       1,756,733  

Parametric Technology a

  59,300       929,231  

THQ a

  20,000       86,400  
         
 
            31,434,428  
         
 

Telecommunications - 2.3%

             

Adaptec a

  1,568,800       4,533,832  

ADTRAN

  65,000       1,772,550  

Citic 1616 Holdings

  8,286,500       2,218,304  

Comtech Telecommunications a

  68,627       2,054,006  

Globecomm Systems a

  233,700       1,928,025  

26  |   2010 Semiannual Report to Stockholders   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.




June 30, 2010 (unaudited)


 

    SHARES     VALUE  

Technology (continued)

             

Telecommunications (continued)

             

LiveWire Mobile

  38,000     $ 115,900  

NeuStar Cl. A a

  154,000       3,175,480  

Sonus Networks a

  604,000       1,636,840  

Sycamore Networks

  88,100       1,464,222  

Zhone Technologies a

  224,000       333,760  
         
 
            19,232,919  
         
 
Total (Cost $159,102,839)           164,209,633  
         
 

Miscellaneouse– 4.7%

             
Total (Cost $39,229,087)           38,745,362  
         
 

TOTAL COMMON STOCKS

             

(Cost $851,823,517)

          969,375,558  
         
 

PREFERRED STOCKS – 0.2%

             

Bank of N.T. Butterfield & Son 0% Conv.b

  39,800       41,445  

Seneca Foods Conv. a,b

  55,000       1,596,650  
         
 

TOTAL PREFERRED STOCKS

             

(Cost $844,625)

          1,638,095  
         
 
          VALUE  

REPURCHASE AGREEMENT – 9.1%

             
State Street Bank & Trust Company,              

0.005% dated 6/30/10, due 7/1/10,

             

maturity value $75,361,010 (collateralized

             

by obligations of various U.S. Government

             

Agencies, 1.125% due 6/30/11, valued at

             

$77,245,025)

             

(Cost $75,361,000)

        $ 75,361,000  
         
 
               

COLLATERAL RECEIVED FOR SECURITIES LOANED – 1.5%

             
Money Market Funds              

Federated Government Obligations Fund

             

(7 day yield-0.0409%)

             

(Cost $12,049,430)

          12,049,430  
         
 
               

TOTAL INVESTMENTS – 128.4%

             

(Cost $940,078,572)

          1,058,424,083  
               

LIABILITIES LESS CASH AND OTHER ASSETS – (1.7)%

          (14,311,665 )

PREFERRED STOCK – (26.7)%

          (220,000,000 )
         
 

NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS – 100.0%

        $ 824,112,418  
         
 



  
New additions in 2010.
a  
Non-income producing.
b  
Securities for which market quotations are not readily available represent 0.2% of net assets. These securities have been valued at their fair value under procedures established by the Fund’s Board of Directors.
c  
All or a portion of these securities were on loan at June 30, 2010. Total market value of loaned securities at June 30, 2010 was $11,334,559.
d  
At June 30, 2010, the Fund owned 5% or more of the Company’s outstanding voting securities thereby making the Company an Affiliated Company as that term is defined in the Investment Company Act of 1940. See notes to financial statements.
e  
Includes securities first acquired in 2010 and less than 1% of net assets applicable to Common Stockholders.
     
   
Bold indicates the Fund’s 20 largest equity holdings in terms of June 30, 2010 market value.
     
   
TAX INFORMATION: The cost of total investments for Federal income tax purposes was $941,004,426. At June 30, 2010, net unrealized appreciation for all securities was $117,419,657, consisting of aggregate gross unrealized appreciation of $259,955,293 and aggregate gross unrealized depreciation of $142,535,636. The primary difference between book and tax basis cost is the timing of losses on securities sold.


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.   2010 Semiannual Report to Stockholders  |   27



Royce Value Trust June 30, 2010 (unaudited)


Statement of Assets and Liabilities

ASSETS:        

Investments at value (including collateral on loaned securities)*

       

Non-Affiliated Companies (Cost $858,979,256)

  $ 981,524,107  

Affiliated Companies (Cost $5,738,316)

    1,538,976  

Total investments at value

    983,063,083  

Repurchase agreements (at cost and value)

    75,361,000  

Cash and foreign currency

    162,891  

Receivable for investments sold

    2,273,632  

Receivable for dividends and interest

    835,402  

Prepaid expenses and other assets

    370,703  

Total Assets

    1,062,066,711  

LIABILITIES:

       

Payable for collateral on loaned securities

    12,049,430  

Payable for investments purchased

    5,347,224  

Preferred dividends accrued but not yet declared

    288,449  

Accrued expenses

    269,190  

Total Liabilities

    17,954,293  

PREFERRED STOCK:

       

5.90% Cumulative Preferred Stock - $0.001 par value, $25 liquidation value per share; 8,800,000 shares outstanding

    220,000,000  

Total Preferred Stock

    220,000,000  

NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS

  $ 824,112,418  

ANALYSIS OF NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS:

       

Common Stock paid-in capital - $0.001 par value per share; 66,023,310 shares outstanding (150,000,000 shares authorized)

  $ 783,354,589  

Undistributed net investment income (loss)

    9,323,557  

Accumulated net realized gain (loss) on investments and foreign currency

    (80,099,704 )

Net unrealized appreciation (depreciation) on investments and foreign currency

    118,312,425  

Unallocated and accrued distributions

    (6,778,449 )

Net Assets applicable to Common Stockholders (net asset value per share - $12.48)

  $ 824,112,418  

*Investments at identified cost (including $12,049,430 of collateral on loaned securities)

  $ 864,717,572  

Market value of loaned securities

    11,334,559  

28  |  2010 Semiannual Report to Stockholders THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.




Royce Value Trust Six Months Ended June 30, 2010 (unaudited)


Statement of Operations

INVESTMENT INCOME:        
Income:        

Dividends*

       

Non-Affiliated Companies

  $ 7,450,392  

Affiliated Companies

    4,692  

Interest

    119,464  

Securities lending

    143,451  

Total income

    7,717,999  

Expenses:

       

Investment advisory fees

     

Custody and transfer agent fees

    167,495  

Stockholder reports

    133,620  

Administrative and office facilities

    60,991  

Directors’ fees

    55,803  

Professional fees

    37,701  

Other expenses

    74,794  

Total expenses

    530,404  

Compensating balance credits

    (51 )

Net expenses

    530,353  

Net investment income (loss)

    7,187,646  

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:

       

Net realized gain (loss):

       

Investments

    25,603,414  

Foreign currency transactions

    (91,514 )

Net change in unrealized appreciation (depreciation):

       

Investments and foreign currency translations

    (51,842,304 )

Other assets and liabilities denominated in foreign currency

    (31,572 )

Net realized and unrealized gain (loss) on investments and foreign currency

    (26,361,976 )

NET INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS

    (19,174,330 )

DISTRIBUTIONS TO PREFERRED STOCKHOLDERS

    (6,490,000 )

NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS FROM INVESTMENT OPERATIONS

  $ (25,664,330 )
* Net of foreign withholding tax of $320,164.        

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 2010 Semiannual Report to Stockholders  |  29



Royce Value Trust  


Statement of Changes in Net Assets Applicable to Common Stockholders

    Six months ended        
    6/30/10   Year ended
    (unaudited)   12/31/09

INVESTMENT OPERATIONS:

               

Net investment income (loss)

  $ 7,187,646     $ 11,139,693  

Net realized gain (loss) on investments and foreign currency

    25,511,900       (81,218,148 )

Net change in unrealized appreciation (depreciation) on investments and foreign currency

    (51,873,876 )     340,204,807  

Net increase (decrease) in net assets from investment operations

    (19,174,330 )     270,126,352  

DISTRIBUTIONS TO PREFERRED STOCKHOLDERS:

               

Net investment income

          (11,909,351 )

Net realized gain on investments and foreign currency

           

Return of capital

          (1,070,649 )

Unallocated distributions*

    (6,490,000 )      

Total distributions to Preferred Stockholders

    (6,490,000 )     (12,980,000 )

NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS FROM INVESTMENT OPERATIONS

    (25,664,330 )     257,146,352  

DISTRIBUTIONS TO COMMON STOCKHOLDERS:

               

Net investment income

           

Net realized gain on investments and foreign currency

           

Return of capital

          (20,600,435 )

Total distributions to Common Stockholders

          (20,600,435 )

CAPITAL STOCK TRANSACTIONS:

               

Reinvestment of distributions to Common Stockholders

          9,996,769  

Total capital stock transactions

          9,996,769  

NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS

    (25,664,330 )     246,542,686  

NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS:

               

Beginning of period

    849,776,748       603,234,062  

End of period (including undistributed net investment income (loss) of $9,323,557 at 6/30/10 and $2,135,911 at 12/31/09)

  $ 824,112,418     $ 849,776,748  

*   To be allocated to net investment income, net realized gains and/or return of capital at year end.

30  |  2010 Semiannual Report to Stockholders THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.




Royce Value Trust  


Financial Highlights
This table is presented to show selected data for a share of Common Stock outstanding throughout each period, and to assist stockholders in evaluating the Fund’s performance for the periods presented.

    Six months   Years ended December 31,
    ended  
    June 30, 2010                                        
    (unaudited)   2009   2008   2007   2006   2005

NET ASSET VALUE, BEGINNING OF PERIOD

  $ 12.87     $ 9.37     $ 19.74     $ 20.62     $ 18.87     $ 18.95  

INVESTMENT OPERATIONS:

                                               

Net investment income (loss)

    0.11       0.17       0.14       0.09       0.13       0.01  

Net realized and unrealized gain (loss) on investments and foreign currency

    (0.40 )     3.87       (8.50 )     1.13       3.63       1.75  

Total investment operations

    (0.29 )     4.04       (8.36 )     1.22       3.76       1.76  

DISTRIBUTIONS TO PREFERRED STOCKHOLDERS:

                                               

Net investment income

      –       (0.18 )     (0.01 )     (0.01 )     (0.02 )       –  

Net realized gain on investments and foreign currency

      –         –       (0.20 )     (0.21 )     (0.21 )     (0.24 )

Return of capital

      –       (0.02 )       –         –         –         –  

Unallocated distributions*

    (0.10 )       –         –         –         –         –  

Total distributions to Preferred Stockholders

    (0.10 )     (0.20 )     (0.21 )     (0.22 )     (0.23 )     (0.24 )

NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS FROM INVESTMENT OPERATIONS

    (0.39 )     3.84       (8.57 )     1.00       3.53       1.52  

DISTRIBUTIONS TO COMMON STOCKHOLDERS:

                                               

Net investment income

      –         –       (0.06 )     (0.09 )     (0.14 )       –  

Net realized gain on investments and foreign currency

      –         –       (1.18 )     (1.76 )     (1.64 )     (1.61 )

Return of capital

      –       (0.32 )     (0.48 )       –         –         –  

Total distributions to Common Stockholders

      –       (0.32 )     (1.72 )     (1.85 )     (1.78 )     (1.61 )

CAPITAL STOCK TRANSACTIONS:

                                               

Effect of reinvestment of distributions by Common Stockholders

      –       (0.02 )     (0.08 )     (0.03 )     (0.00 )     0.01  

Total capital stock transactions

      –       (0.02 )     (0.08 )     (0.03 )     (0.00 )     0.01  

NET ASSET VALUE, END OF PERIOD

  $ 12.48     $ 12.87     $ 9.37     $ 19.74     $ 20.62     $ 18.87  

MARKET VALUE, END OF PERIOD

  $ 10.57     $ 10.79     $ 8.39     $ 18.58     $ 22.21     $ 20.08  

TOTAL RETURN (a):

                                               
Market Value     (2.04 )%***     35.39 %     (48.27 )%     (8.21 )%     20.96 %     6.95 %
Net Asset Value     (3.03 )%***     44.59 %     (45.62 )%     5.04 %     19.50 %     8.41 %

RATIOS BASED ON AVERAGE NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS:

                                               
Total expenses (b,c)     0.12 %**     0.16 %     1.39 %     1.38 %     1.29 %     1.49 %

Investment advisory fee expense (d)

    0.00 %**     0.00 %     1.27 %     1.29 %     1.20 %     1.37 %

Other operating expenses

    0.12 %**     0.16 %     0.12 %     0.09 %     0.09 %     0.12 %
Net investment income (loss)     1.63 %**     1.66 %     0.94 %     0.43 %     0.62 %     0.03 %

SUPPLEMENTAL DATA:

                                               
Net Assets Applicable to Common Stockholders,                                                

End of Period (in thousands)

  $ 824,112     $ 849,777     $ 603,234     $ 1,184,669     $ 1,180,428     $ 1,032,120  
Liquidation Value of Preferred Stock,                                                

End of Period (in thousands)

  $ 220,000     $ 220,000     $ 220,000     $ 220,000     $ 220,000     $ 220,000  
Portfolio Turnover Rate     13 %     31 %     25 %     26 %     21 %     31 %

PREFERRED STOCK:

                                               
Total shares outstanding     8,800,000       8,800,000       8,800,000       8,800,000       8,800,000       8,800,000  
Asset coverage per share   $ 118.65     $ 121.57     $ 93.55     $ 159.62     $ 159.14     $ 142.29  
Liquidation preference per share   $ 25.00     $ 25.00     $ 25.00     $ 25.00     $ 25.00     $ 25.00  
Average month-end market value per share   $ 24.82     $ 23.18     $ 22.51     $ 23.68     $ 23.95     $ 24.75  

(a)   The Market Value Total Return is calculated assuming a purchase of Common Stock on the opening of the first business day and a sale on the closing of the last business day of each period reported. Dividends and distributions are assumed for the purposes of this calculation to be reinvested at prices obtained under the Fund’s Distribution Reinvestment and Cash Purchase Plan. Net Asset Value Total Return is calculated on the same basis, except that the Fund’s net asset value is used on the purchase and sale dates instead of market value.
(b)   Expense ratios based on total average net assets including liquidation value of Preferred Stock were 0.10%, 0.12%, 1.13%, 1.17%, 1.08% and 1.22% for the periods ended June 30, 2010 and December 31, 2009, 2008, 2007, 2006 and 2005 respectively.
(c)   Expense ratios based on average net assets applicable to Common Stockholders before waiver of fees and after earnings credits would have been 0.12%, 0.16%, 1.39%, 1.38%, 1.29% and 1.49% for the periods ended June 30, 2010 and December 31, 2009, 2008, 2007, 2006 and 2005, respectively.
(d)   The investment advisory fee is calculated based on average net assets over a rolling 60-month basis, while the above ratios of investment advisory fee expenses are based on the average net assets applicable to Common Stockholders over a 12-month basis.
     
*   To be allocated to net investment income, net realized gains and/or return of capital at year end.
**   Annualized.
***   Not annualized.

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 2010 Semiannual Report to Stockholders  |  31



Royce Value Trust  


Notes to Financial Statements (unaudited)

Summary of Significant Accounting Policies:
     Royce Value Trust, Inc. (the “Fund”), was incorporated under the laws of the State of Maryland on July 1, 1986 as a diversified closed-end investment company. The Fund commenced operations on November 26, 1986.
     The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the 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.
     Under the Fund’s organizational documents, the officers and directors are indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts with service providers that contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risk of loss to be remote.

Valuation of Investments:
     Securities are valued as of the close of trading on the New York Stock Exchange (NYSE) (generally 4:00 p.m. Eastern time) on the valuation date. Securities that trade on an exchange, and securities traded on Nasdaq’s Electronic Bulletin Board, are valued at their last reported sales price or Nasdaq official closing price taken from the primary market in which each security trades or, if no sale is reported for such day, at their bid price. Other over-the-counter securities for which market quotations are readily available are valued at their highest bid price, except in the case of some bonds and other fixed income securities which may be valued by reference to other securities with comparable ratings, interest rates and maturities, using established independent pricing services. The Fund values its non-U.S. dollar denominated securities in U.S. dollars daily at the prevailing foreign currency exchange rates as quoted by a major bank. Securities for which market quotations are not readily available are valued at their fair value under procedures established by the Fund’s Board of Directors. In addition, if, between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that are significant and may make the closing price unreliable, the Fund may fair value the security. The Fund uses an independent pricing service to provide fair value estimates for relevant non-U.S. equity securities on days when the U.S. market volatility exceeds a certain threshold. This pricing service uses proprietary correlations it has developed between the movement of prices of non-U.S. equity securities and indices of U.S.-traded securities, futures contracts and other indications to estimate the fair value of relevant non-U.S. securities. When fair value pricing is employed, the prices of securities used by the Fund may differ from quoted or published prices for the same security. Investments in money market funds are valued at net asset value per share.
     Various inputs are used in determining the value of the Fund’s investments, as noted above. These inputs are summarized in the three broad levels below:
          Level 1 – quoted prices in active markets for identical securities
          Level 2 – other significant observable inputs (including quoted prices for similar securities, foreign securities that may be fair valued and repurchase agreements)
          Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)
     The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
     The following is a summary of the inputs used to value the Fund’s investments as of June 30, 2010:

    Level 1   Level 2   Level 3   Total  

Common stocks

  $ 783,907,625   $ 185,300,216   $ 167,717   $ 969,375,558  

Preferred stocks

            1,638,095     1,638,095  

Cash equivalents

    12,049,430     75,361,000         87,410,430  

Level 3 Reconciliation:                                        
                            Realized and        
    Balance as of                     Unrealized   Balance as of
    12/31/09   Purchases   Transfers In   Sales   Gain (Loss)(1)   6/30/10

Common stocks

  $ 215,542      $ –      $ –      $ 56   $ (47,769 )   $ 167,717  

Preferred stocks

    1,826,055        48,157        –        482,781     246,664       1,638,095  

(1)
The net change in unrealized appreciation (depreciation) is included in the accompanying Statement of Operations. Change in unrealized appreciation (depreciation) includes net unrealized appreciation (depreciation) resulting from changes in investment values during the reporting period and the reversal of previously recorded unrealized appreciation (depreciation) when gains or losses are realized. Net realized gain (loss) from investments and foreign currency transactions is included in the accompanying Statement of Operations.

32  |  2010 Semiannual Report to Stockholders  



Royce Value Trust  


Notes to Financial Statements (unaudited) (continued)


Repurchase Agreements:
     The Fund may enter into repurchase agreements with institutions that the Fund’s investment adviser has determined are creditworthy. The Fund restricts repurchase agreements to maturities of no more than seven days. Securities pledged as collateral for repurchase agreements, which are held until maturity of the repurchase agreements, are marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest). Repurchase agreements could involve certain risks in the event of default or insolvency of the counter-party, including possible delays or restrictions upon the ability of the Fund to dispose of its underlying securities.

Foreign Currency:
     Net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, expiration of currency forward contracts, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities, including investments in securities at the end of the reporting period, as a result of changes in foreign currency exchange rates.

Securities Lending:
     The Fund loans securities to qualified institutional investors for the purpose of realizing additional income. Collateral for the Fund on all securities loaned is accepted in cash and cash equivalents and invested temporarily by the custodian. The collateral maintained is at least 100% of the current market value of the loaned securities. The market value of the loaned securities is determined at the close of business of the Fund and any additional required collateral is delivered to the Fund on the next business day. The Fund retains the risk of any loss on the securities on loan as well as incurring the potential loss on investments purchased with cash collateral received for securities lending.

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 “Tax Information”.

Distributions:
     Effective May 18, 2009, the Fund pays any dividends and capital gain distributions annually in December on the Fund’s Common Stock. Prior to that date, the Fund paid quarterly distributions on the Fund’s Common Stock at the annual rate of 9% of the rolling average of the prior four calendar quarter-end NAVs of the Fund’s Common Stock, with the fourth quarter distribution being the greater of 2.25% of the rolling average or the distribution required by IRS regulations. Distributions to Preferred Stockholders are accrued daily and paid quarterly and distributions to Common Stockholders are recorded on ex-dividend date. Distributable capital gains and/or net investment income are first allocated to Preferred Stockholder distributions, with any excess allocable to Common Stockholders. If capital gains and/or net investment income are allocated to both Preferred and Common Stockholders, the tax character of such allocations is proportional. To the extent that distributions are not paid from long-term capital gains, net investment income or net short-term capital gains, they will represent a return of capital. Distributions are determined in accordance with income tax regulations that may differ from accounting principles generally accepted in the United States of America. Permanent book and tax differences relating to stockholder distributions will result in reclassifications within the capital accounts. 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 undistributed at fiscal year end is distributed in the following year.

Investment Transactions and Related Investment Income:
     Investment transactions are accounted for on the trade date. Dividend income is recorded on the ex-dividend date. Non-cash dividend income is recorded at the fair market value of the securities received. Interest income is recorded on an accrual basis. Premium and discounts on debt securities are amortized using the effective yield-to-maturity method. Realized gains and losses from investment transactions are determined on the basis of identified cost for book and tax purposes.

Expenses:
     The Fund incurs direct and indirect expenses. Expenses directly attributable to the Fund are charged to the Fund’s operations, while expenses applicable to more than one of the Royce Funds are allocated equitably. Certain personnel, occupancy costs and other administrative expenses related to The Royce Funds are allocated by Royce & Associates, LLC (“Royce”) under an administration agreement and are included in administrative and office facilities and professional fees. The Fund has adopted a deferred fee agreement that allows the Directors to defer the receipt of all or a portion of Directors’ Fees otherwise payable. The deferred fees are invested in certain Royce Funds until distributed in accordance with the agreement.

Compensating Balance Credits:
     The Fund has an arrangement with its custodian bank, whereby a portion of the custodian’s fee is paid indirectly by credits earned on the Fund’s cash on deposit with the bank. This deposit arrangement is an alternative to purchasing overnight investments. Conversely, the Fund pays interest to the custodian on any cash overdrafts, to the extent they are not offset by credits earned on positive cash balances.

  2010 Semiannual Report to Stockholders  |  33



Royce Value Trust  


Notes to Financial Statements (unaudited) (continued)

Capital Stock:
     The Fund issued 1,646,914 shares of Common Stock as reinvestment of distributions by Common Stockholders for the year ended December 31, 2009.
     At June 30, 2010, 8,800,000 shares of 5.90% Cumulative Preferred Stock were outstanding. The Fund, at its option, may redeem the Cumulative Preferred Stock, in whole or in part, at the redemption price. The Cumulative Preferred Stock is classified outside of permanent equity (net assets applicable to Common Stockholders) in the accompanying financial statements in accordance with accounting for redeemable equity instruments, that requires preferred securities that are redeemable for cash or other assets to be classified outside of permanent equity to the extent that the redemption is at a fixed or determinable price and at the option of the holder or upon the occurrence of an event that is not solely within the control of the issuer.
     The Fund is required to meet certain asset coverage tests with respect to the Cumulative Preferred Stock as required by the 1940 Act. In addition, pursuant to the Rating Agency Guidelines established by Moody’s, the Fund is required to maintain a certain discounted asset coverage. If the Fund fails to meet these requirements and does not correct such failure, the Fund may be required to redeem, in part or in full, the Cumulative Preferred Stock at a redemption price of $25.00 per share, plus an amount equal to the accumulated and unpaid dividends, whether or not declared on such shares, in order to meet these requirements. Additionally, failure to meet the foregoing asset coverage requirements could restrict the Fund’s ability to pay dividends to Common Stockholders and could lead to sales of portfolio securities at inopportune times. The Fund has met these requirements since issuing the Cumulative Preferred Stock.

Investment Advisory Agreement:
     As compensation for its services under the Investment Advisory Agreement, Royce receives a fee comprised of a Basic Fee (“Basic Fee”) and an adjustment to the Basic Fee based on the investment performance of the Fund in relation to the investment record of the S&P SmallCap 600 Index (“S&P 600”).
     The Basic Fee is a monthly fee equal to 1/12 of 1% (1% on an annualized basis) of the average of the Fund’s month-end net assets applicable to Common Stockholders, plus the liquidation value of Preferred Stock, for the rolling 60-month period ending with such month (the “performance period”). The Basic Fee for each month is increased or decreased at the rate of 1/12 of .05% for each percentage point that the investment performance of the Fund exceeds, or is exceeded by, the percentage change in the investment record of the S&P 600 for the performance period by more than two percentage points. The performance period for each such month is a rolling 60-month period ending with such month. The maximum increase or decrease in the Basic Fee for any month may not exceed 1/12 of .5%. Accordingly, for each month, the maximum monthly fee rate as adjusted for performance is 1/12 of 1.5% and is payable if the investment performance of the Fund exceeds the percentage change in the investment record of the S&P 600 by 12 or more percentage points for the performance period, and the minimum monthly fee rate as adjusted for performance is 1/12 of .5% and is payable if the percentage change in the investment record of the S&P 600 exceeds the investment performance of the Fund by 12 or more percentage points for the performance period.
     Notwithstanding the foregoing, Royce is not entitled to receive any fee for any month when the investment performance of the Fund for the rolling 36-month period ending with such month is negative. In the event that the Fund’s investment performance for such a performance period is less than zero, Royce will not be required to refund to the Fund any fee earned in respect of any prior performance period.
     Royce has voluntarily committed to waive the portion of its investment advisory fee attributable to an issue of the Fund’s Preferred Stock for any month in which the Fund’s average annual NAV total return since issuance of the Preferred Stock fails to exceed the applicable Preferred Stock’s dividend rate.
     For each of the six rolling 36-month periods ended June 30, 2010, the Fund had negative investment performance and, accordingly, paid no investment advisory fee.

Purchases and Sales of Investment Securities:
     For the six months ended June 30, 2010, the costs of purchases and proceeds from sales of investment securities, other than short-term securities and collateral received for securities loaned, amounted to $129,995,181 and $130,884,494, respectively.

Transactions in Affiliated Companies:
     An “Affiliated Company” as defined in the Investment Company Act of 1940, is a company in which a fund owns 5% or more of the company’s outstanding voting securities at any time during the period. The Fund effected the following transactions in shares of such companies for the six months ended June 30, 2010:

    Shares   Market Value   Cost of   Cost of   Realized     Dividend   Shares   Market Value  
Affiliated Company   12/31/09   12/31/09   Purchases   Sales   Gain (Loss)     Income   6/30/10   6/30/10  
Timberland Bancorp   469,200   $2,083,248                 $4,692     469,200   $1,538,976    
        $2,083,248                       $4,692         $1,538,976    

34  |  2010 Semiannual Report to Stockholders  




Royce Micro-Cap Trust   June 30, 2010 (unaudited)


Schedule of Investments

    SHARES       VALUE  

COMMON STOCKS – 115.4%

             
               

Consumer Products – 9.1%

             

Apparel, Shoes and Accessories - 2.2%

             

K-Swiss Cl. A a

  72,400     $ 813,052  

Luk Fook Holdings (International)

  748,300       939,143  

Movado Group a

  132,814       1,418,454  

Steven Madden a

  15,450       486,984  

True Religion Apparel a

  19,300       425,951  

Weyco Group

  48,000       1,093,440  

Yamato International

  40,000       149,989  
         
 
            5,327,013  
         
 

Consumer Electronics - 0.7%

             

DTS a

  50,000       1,643,500  
         
 

Food/Beverage/Tobacco - 2.8%

             

Asian Citrus Holdings

  1,060,000       776,156  

Binggrae Company

  19,100       785,886  

Cal-Maine Foods

  22,500       718,425  

Heckmann Corporation a,b

  200,000       928,000  

HQ Sustainable Maritime Industries a,b

  72,800       364,000  

Seneca Foods Cl. A a

  51,400       1,658,164  

Seneca Foods Cl. B a

  42,500       1,378,700  
         
 
            6,609,331  
         
 

Health, Beauty and Nutrition - 0.4%

             

NutriSystem

  38,500       883,190  
         
 

Home Furnishing and Appliances - 2.8%

             

American Woodmark

  72,000       1,231,200  

Ethan Allen Interiors

  66,600       931,734  

Flexsteel Industries

  172,500       1,897,500  

Koss Corporation

  73,400       386,084  

Lumber Liquidators Holdings a,b

  23,900       557,587  

Natuzzi ADR a

  409,800       1,208,910  

Universal Electronics a

  33,000       548,790  
         
 
            6,761,805  
         
 

Sports and Recreation - 0.1%

             

Sturm, Ruger & Company

  12,300       176,259  
         
 

Other Consumer Products - 0.1%

             

CSS Industries

  20,243       334,010  
         
 
Total (Cost $16,417,987)           21,735,108  
         
 

Consumer Services – 3.4%

             

Media and Broadcasting - 0.5%

             

Ascent Media Cl. A a

  41,500       1,048,290  
         
 

Online Commerce - 0.3%

             

CryptoLogic a,b

  88,300       169,536  

PetMed Express

  33,600       598,080  
         
 
            767,616  
         
 

Retail Stores - 2.6%

             

America’s Car-Mart a

  92,800       2,100,064  

Charming Shoppes a

  266,200       998,250  

DSW Cl. A a

  1,800       40,428  

Le Chateau Cl. A

  27,900       332,583  

Lewis Group

  57,000       436,301  

QKL Stores a,b

  38,740       162,708  

Stein Mart a

  178,900       1,114,547  
    SHARES     VALUE  

Consumer Services (continued)

             

Retail Stores (continued)

             

West Marine a

  86,000     $ 935,680  

Wet Seal (The) Cl. A a

  50,000       182,500  
         
 
            6,303,061  
         
 
Total (Cost $7,884,791)           8,118,967  
         
 
               

Diversified Investment Companies – 1.3%

             

Closed-End Funds - 1.3%

             

ASA

  30,000       811,200  

Central Fund of Canada Cl. A

  131,700       1,984,719  

Urbana Corporation a

  237,600       334,789  
         
 
Total (Cost $1,534,612)           3,130,708  
         
 

Financial Intermediaries – 9.8%

             

Banking - 4.7%

             

Alliance Bancorp, Inc. of Pennsylvania

  50,420       418,486  

Banca Finnat Euramerica

  910,000       598,697  

BCB Holdings a

  806,207       1,114,213  

BofI Holding a,b

  136,000       1,920,320  

Cass Information Systems

  15,000       513,750  

Centrue Financial a

  66,600       133,200  

CFS Bancorp

  75,000       364,500  

Chemung Financial

  40,000       806,400  

Commercial National Financial

  20,000       323,000  

Fauquier Bankshares

  135,800       2,070,950  

Financial Institutions

  36,000       639,360  

First Bancorp

  40,200       527,826  

HopFed Bancorp

  55,000       496,650  

LCNB Corporation

  30,000       352,500  

Mechanics Bank

  5       55,000  

Wilber Corporation (The)

  137,908       820,553  
         
 
            11,155,405  
         
 

Insurance - 0.8%

             

Greenlight Capital Re Cl. A a

  9,500       239,305  

Independence Holding

  95,800       571,926  

Presidential Life

  132,100       1,202,110  
         
 
            2,013,341  
         
 

Real Estate Investment Trusts - 1.0%

             

Colony Financial

  124,717       2,107,717  

Vestin Realty Mortgage II a,b

  214,230       291,353  
         
 
            2,399,070  
         
 

Securities Brokers - 2.7%

             

Cowen Group Cl. A a

  377,834       1,549,119  

Diamond Hill Investment Group

  24,479       1,387,715  

FBR Capital Markets a

  326,600       1,087,578  

International Assets Holding

             

Corporation a

  17,310       276,960  

Sanders Morris Harris Group

  199,000       1,104,450  

Thomas Weisel Partners Group a

  176,200       1,037,818  
         
 
            6,443,640  
         
 

Securities Exchanges - 0.6%

             

Bolsa Mexicana de Valores

  948,500       1,490,253  
         
 
Total (Cost $28,960,782)           23,501,709  
         
 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.   2010 Semiannual Report to Stockholders  |   35



Royce Micro-Cap Trust


Schedule of Investments

    SHARES     VALUE  

Financial Services – 9.8%

             

Diversified Financial Services - 0.2%

             

Encore Capital Group a

  22,000     $ 453,420  
         
 

Information and Processing - 0.2%

             

Value Line

  32,487       589,314  
         
 

Insurance Brokers - 0.1%

             

Western Financial Group

  148,000       353,126  
         
 

Investment Management - 5.3%

             

BKF Capital Group a

  130,200       121,086  

Cohen & Steers

  27,900       578,646  

Dundee Corporation Cl. A a

  140,200       1,602,775  

Endeavour Financialb

  618,200       1,277,573  

Endeavour Financial (Warrants) a

  50,000       38,514  

Epoch Holding Corporation

  196,500       2,411,055  

Evercore Partners Cl. A

  13,200       308,220  

JZ Capital Partners

  293,999       1,193,234  

MVC Capital

  126,200       1,630,504  

Queen City Investments

  948       1,028,580  

Sceptre Investment Counsel

  78,000       482,119  

Sprott Resource a

  70,000       264,337  

U.S. Global Investors Cl. A

  91,500       507,825  

VZ Holding

  15,000       1,212,410  
         
 
            12,656,878  
         
 

Special Purpose Acquisition Corporation - 0.4%

             

Westway Group a

  220,000       897,600  
         
 

Specialty Finance - 0.5%

             

NGP Capital Resources

  68,080       488,134  

World Acceptance a,b

  16,500       632,115  
         
 
            1,120,249  
         
 

Other Financial Services - 3.1%

             

Hilltop Holdings a

  101,400       1,015,014  

Kennedy-Wilson Holdings a

  631,766       6,380,836  
         
 
            7,395,850  
         
 
Total (Cost $21,005,886)           23,466,437  
         
 
               

Health – 9.6%

             

Commercial Services - 0.7%

             

PAREXEL International a

  40,000       867,200  

PDI a

  96,800       801,504  
         
 
            1,668,704  
         
 

Drugs and Biotech - 1.6%

             

Adolor Corporation a,b

  460,500       501,945  

American Oriental Bioengineering a,b

  100,400       253,008  

China Nuokang Bio-Pharmaceutical

             

ADR a,b

  11,147       50,161  

Hi-Tech Pharmacal a

  17,700       405,507  

Lannett Company a,b

  34,410       157,254  

Simcere Pharmaceutical Group ADR a

  25,700       212,796  

Sinovac Biotech a

  90,400       418,552  

Strategic Diagnostics a

  150,000       271,500  

Theragenics Corporation a

  306,900       352,935  

3SBio ADR a

  58,880       684,774  

ViroPharma a

  37,000       414,770  
         
 
            3,723,202  
         
 
    SHARES     VALUE  

Health (continued)

             

Health Services - 2.4%

             

Advisory Board (The) a

  51,700     $ 2,221,032  

Genoptix a

  6,173       106,176  

Gentiva Health Services a

  23,000       621,230  

HMS Holdings a

  11,900       645,218  

On Assignment a

  41,100       206,733  

PharMerica Corporation a

  40,000       586,400  

Psychemedics Corporation

  37,500       305,250  

Res-Care a

  80,620       778,789  

U.S. Physical Therapy a

  10,000       168,800  
         
 
            5,639,628  
         
 

Medical Products and Devices - 4.9%

             

Allied Healthcare Products a

  226,798       775,649  

Atrion Corporation

  5,500       742,775  

CAS Medical Systems a

  62,600       110,802  

Exactech a

  121,000       2,066,680  

Kensey Nash a

  33,981       805,690  

Medical Action Industries a

  147,950       1,773,920  

Mesa Laboratories

  48,267       1,159,373  

NMT Medical a

  198,500       104,153  

Quidel a,b

  25,000       317,250  

STRATEC Biomedical Systems

  14,000       465,568  

Syneron Medical a,b

  69,200       711,376  

Utah Medical Products

  42,300       1,054,962  

Young Innovations

  61,450       1,729,818  
         
 
            11,818,016  
         
 
Total (Cost $19,324,616)           22,849,550  
         
 
               

Industrial Products – 23.2%

             

Automotive - 0.9%

             

Fuel Systems Solutions a,b

  10,000       259,500  

Norstar Founders Group a,c

  771,500       36,163  

SORL Auto Parts a,b

  68,277       568,065  

US Auto Parts Network a

  160,900       965,400  

Wonder Auto Technology a,b

  39,550       289,506  

Xinyi Glass Holdings

  424,800       158,633  
         
 
            2,277,267  
         
 

Building Systems and Components - 2.7%

             

AAON

  73,000       1,701,630  

Apogee Enterprises

  57,900       627,057  

Drew Industries a

  90,000       1,818,000  

LSI Industries

  79,812       389,483  

NCI Building Systems a

  8,400       70,308  

Preformed Line Products

  22,800       637,260  

WaterFurnace Renewable Energy

  45,200       1,132,388  
         
 
            6,376,126  
         
 

Construction Materials - 1.9%

             

Ash Grove Cement

  8,000       1,408,000  

Monarch Cement

  52,303       1,367,723  

Trex Company a

  90,000       1,808,100  
         
 
            4,583,823  
         
 

Industrial Components - 2.1%

             

Bel Fuse Cl. A

  67,705       1,123,903  

Deswell Industries

  564,371       2,088,173  

36  |   2010 Semiannual Report to Stockholders   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.




June 30, 2010 (unaudited)


 

    SHARES     VALUE  

Industrial Products (continued)

             

Industrial Components (continued)

             

Graham Corporation

  48,500     $ 727,015  

Powell Industries a

  36,800       1,006,112  
         
 
            4,945,203  
         
 

Machinery - 6.5%

             

Burckhardt Compression Holding

  2,100       370,078  

Burnham Holdings Cl. A

  113,000       1,627,200  

Columbus McKinnon a

  25,100       350,647  

Duoyuan Printing a,b

  70,900       547,348  

Eastern Company (The)

  39,750       582,735  

FreightCar America

  52,800       1,194,336  

Hardinge

  77,151       657,327  

Hollysys Automation Technologies a,b

  162,292       1,462,251  

Hurco Companies a

  52,366       777,635  

Jinpan International

  90,224       1,367,796  

Rofin-Sinar Technologies a

  37,000       770,340  

Sun Hydraulics

  65,425       1,534,870  

Tennant Company

  92,300       3,121,586  

Williams Controls a

  125,000       1,131,250  
         
 
            15,495,399  
         
 

Metal Fabrication and Distribution - 3.0%

             

Central Steel & Wire

  1,088       717,536  

CompX International Cl. A

  107,500       1,058,875  

Encore Wire

  15,000       272,850  

Foster (L.B.) Company Cl. A a

  20,900       541,728  

Fushi Copperweld a

  29,483       241,171  

Horsehead Holding Corporation a

  57,300       433,188  

Ladish Company a

  45,000       1,022,400  

NN a

  114,300       571,500  

Olympic Steel

  22,000       505,340  

RBC Bearings a

  6,500       188,435  

RTI International Metals a

  69,900       1,685,289  
         
 
            7,238,312  
         
 

Miscellaneous Manufacturing - 2.8%

             

AZZ

  15,000       551,550  

China Automation Group

  341,700       221,663  

Griffon Corporation a

  89,500       989,870  

PMFG a

  143,800       2,178,570  

Raven Industries

  58,400       1,968,664  

Semperit AG Holding

  12,500       427,396  

Synalloy Corporation

  58,200       486,552  
         
 
            6,824,265  
         
 

Pumps, Valves and Bearings - 0.3%

             

CIRCOR International

  28,000       716,240  
         
 

Specialty Chemicals and Materials - 2.7%

             

Aceto Corporation

  72,219       413,815  

Balchem Corporation

  63,375       1,584,375  

China XD Plastics a,b

  86,000       584,800  

Gulf Resources a,b

  12,250       105,227  

Hawkins

  69,866       1,682,373  

Park Electrochemical

  15,400       375,914  

Rogers Corporation a

  58,400       1,621,768  
         
 
            6,368,272  
         
 
    SHARES     VALUE  

Industrial Products (continued)

             

Textiles - 0.1%

             

Interface Cl. A

  27,000     $ 289,980  
         
 

Other Industrial Products - 0.2%

             

MTS Systems

  10,000       290,000  

Research Frontiers a,b

  50,000       221,000  
         
 
            511,000  
         
 
Total (Cost $39,763,605)           55,625,887  
         
 

Industrial Services – 13.8%

             

Commercial Services - 5.8%

             

Acacia Research-Acacia Technologies a

  65,290       929,077  

ATC Technology a

  32,000       515,840  

CBIZ a

  47,000       298,920  

Diamond Management & Technology Consultants

  138,100       1,423,811  

Exponent a

  58,400       1,910,848  

Forrester Research a

  54,900       1,661,274  

Global Sources a,b

  29,015       227,477  

Heidrick & Struggles International

  10,000       228,200  

Heritage-Crystal Clean a

  113,301       912,073  

Kforce a

  60,000       765,000  

Rentrak Corporation a

  63,300       1,540,089  

SFN Group a

  426,600       2,329,236  

Spectrum Group International a,b

  6,925       12,673  

Team a

  93,940       1,225,917  
         
 
            13,980,435  
         
 

Engineering and Construction - 1.7%

             

Cavco Industries a

  12,491       439,434  

Comfort Systems USA

  22,600       218,316  

Insituform Technologies Cl. A a

  34,300       702,464  

Integrated Electrical Services a

  132,000       460,680  

Layne Christensen a

  13,900       337,353  

MYR Group a

  28,500       475,665  

Skyline Corporation

  62,100       1,118,421  

Sterling Construction a

  25,000       323,500  
         
 
            4,075,833  
         
 

Food, Tobacco and Agriculture - 1.2%

             

Farmer Bros.

  51,400       775,626  

Hanfeng Evergreen a

  85,100       464,451  

Origin Agritech a

  121,488       891,722  

Yuhe International a

  46,314       331,608  

Zhongpin a,b

  42,600       500,976  
         
 
            2,964,383  
         
 

Industrial Distribution - 0.8%

             

Houston Wire & Cable

  67,375       731,019  

Lawson Products

  63,269       1,074,307  
         
 
            1,805,326  
         
 

Printing - 0.7%

             

Bowne & Co.

  68,989       774,057  

Courier Corporation

  30,450       371,794  

Domino Printing Sciences

  80,000       542,042  
         
 
            1,687,893  
         
 

Transportation and Logistics - 2.9%

             

Dynamex a

  86,000       1,049,200  

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.   2010 Semiannual Report to Stockholders  |   37



Royce Micro-Cap Trust


Schedule of Investments

    SHARES     VALUE  

Industrial Services (continued)

             

Transportation and Logistics (continued)

             

Forward Air

  50,700     $ 1,381,575  

Frozen Food Express Industries a

  157,000       549,500  

Pacer International a

  35,000       244,650  

Patriot Transportation Holding a

  19,000       1,537,290  

Transat A.T. Cl. B a

  31,800       301,705  

Universal Truckload Services a

  134,200       1,869,406  
         
 
            6,933,326  
         
 

Other Industrial Services - 0.7%

             

US Ecology

  112,500       1,639,125  
         
 
Total (Cost $29,535,968)           33,086,321  
         
 
               

Natural Resources – 12.1%

             

Energy Services - 4.3%

             

CE Franklin a

  90,450       581,594  

Dawson Geophysical a

  53,213       1,131,841  

Dril-Quip a

  22,500       990,450  

Global Geophysical Services a,b

  35,000       243,950  

Gulf Island Fabrication

  29,116       451,880  

ION Geophysical a

  50,000       174,000  

Lamprell

  202,400       644,120  

Lufkin Industries

  2,000       77,980  

North American Energy Partners a

  50,000       441,500  

OYO Geospace a

  7,130       345,662  

Pason Systems

  139,200       1,478,890  

Pioneer Drilling a

  57,500       326,025  

T-3 Energy Services a

  39,150       1,092,285  

Tesco Corporation a

  50,000       614,000  

Willbros Group a

  183,600       1,358,640  

World Energy Solutions a

  72,920       210,739  
         
 
            10,163,556  
         
 

Oil and Gas - 0.6%

             

Approach Resources a

  12,000       82,560  

China Integrated Energy a,b

  65,000       539,500  

GeoMet a

  75,000       85,500  

GeoResources a

  30,000       417,900  

VAALCO Energy a

  70,400       394,240  
         
 
            1,519,700  
         
 

Precious Metals and Mining - 3.8%

             

Alamos Gold

  47,100       722,505  

Allied Nevada Gold a

  108,700       2,139,216  

Aurizon Mines a

  197,000       973,180  

Brush Engineered Materials a

  27,000       539,460  

Chesapeake Gold a

  20,000       147,480  

Exeter Resourceb

  140,000       882,000  

Extorre Gold Mines a,b

  140,000       352,449  

Gammon Gold a

  83,836       457,745  

Midway Gold a

  345,000       158,800  

Minefinders Corporation a

  36,000       320,760  

New Gold a

  141,200       874,028  

Northgate Minerals a

  270,000       810,000  

Seabridge Gold a

  16,700       516,865  

Victoria Gold a

  200,000       123,996  
    SHARES     VALUE  

Natural Resources (continued)

             

Precious Metals and Mining (continued)

             

Vista Gold a,b

  50,000     $ 85,000  
         
 
            9,103,484  
         
 

Real Estate - 2.6%

             

Avatar Holdings a

  18,104       347,234  

Consolidated-Tomoka Land

  41,950       1,195,575  

PICO Holdings a

  45,700       1,369,629  

Pope Resources L.P.

  57,205       1,462,160  

Tejon Ranch a

  80,749       1,863,687  

ZipRealty a

  25,000       65,250  
         
 
            6,303,535  
         
 

Other Natural Resources - 0.8%

             

China Hydroelectric ADS a,b

  83,100       624,081  

J.G. Boswell Company

  2,490       1,332,150  
         
 
            1,956,231  
         
 
Total (Cost $23,123,730)           29,046,506  
         
 
               

Technology – 18.4%

             

Aerospace and Defense - 2.1%

             

Applied Signal Technology

  25,000       491,250  

Ducommun

  72,100       1,232,910  

HEICO Corporation

  42,000       1,508,640  

Innovative Solutions and Support a

  100,000       440,000  

Integral Systems a

  138,222       877,710  

SIFCO Industries

  45,800       490,060  
         
 
            5,040,570  
         
 

Components and Systems - 3.2%

             

Frequency Electronics a

  269,898       1,255,026  

Hana Microelectronics

  500,000       415,058  

Methode Electronics

  66,223       645,012  

Newport Corporation a

  80,900       732,954  

Richardson Electronics

  250,900       2,258,100  

Rimage Corporation a

  79,200       1,253,736  

Technitrol

  150,000       474,000  

TransAct Technologies a

  78,600       573,780  
         
 
            7,607,666  
         
 

Distribution - 0.5%

             

Agilysys a

  90,000       602,100  

Cogo Group a

  88,115       549,838  

ScanSource a

  7,600       189,468  
         
 
            1,341,406  
         
 

Internet Software and Services - 1.7%

             

ActivIdentity Corporation a

  160,000       305,600  

Internet Capital Group a

  135,000       1,026,000  

iPass a

  210,000       224,700  

Marchex Cl. B

  95,000       365,750  

Support.com a

  390,000       1,622,400  

WebMediaBrands a

  525,000       472,500  
         
 
            4,016,950  
         
 

IT Services - 4.8%

             

Computer Task Group a

  236,100       1,525,206  

iGATE Corporation

  248,400       3,184,488  

Sapient Corporation

  500,000       5,070,000  

Syntel

  43,300       1,470,035  

38  |   2010 Semiannual Report to Stockholders   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.




June 30, 2010 (unaudited)


 

    SHARES     VALUE  

Technology (continued)

             

IT Services (continued)

             

Yucheng Technologies a

  50,960     $ 185,494  
         
 
            11,435,223  
         
 

Semiconductors and Equipment - 2.4%

             

ATMI a

  6,400       93,696  

Exar Corporation a

  121,208       839,971  

Inficon Holding

  3,600       464,165  

Mentor Graphics a

  22,400       198,240  

Micrel

  60,000       610,800  

Microtune a

  362,000       771,060  

PLX Technology a

  80,000       335,200  

TTM Technologies a

  114,400       1,086,800  

Virage Logic a

  120,000       1,426,800  
         
 
            5,826,732  
         
 

Software - 3.0%

             

ACI Worldwide a

  69,600       1,355,112  

Actuate Corporation a

  81,100       360,895  

American Software Cl. A

  104,500       482,790  

Bottomline Technologies a

  12,300       160,269  

Convio a,b

  15,000       110,100  

DynaVox Cl. A a,b

  20,000       320,200  

Fundtech a

  51,000       529,890  

Geeknet a,b

  875,000       1,085,000  

Pegasystems

  84,000       2,697,240  
         
 
            7,101,496  
         
 

Telecommunications - 0.7%

             

Anaren a

  8,000       119,520  

Atlantic Tele-Network

  14,700       607,110  

Diguang International Development a

  230,000       69,230  

Novatel Wireless a

  35,000       200,900  

PC-Tel a

  44,100       222,264  

Zhone Technologies a

  266,320       396,817  
         
 
            1,615,841  
         
 
Total (Cost $29,178,166)           43,985,884  
         
 
               

Miscellaneous d – 4.9%

             
Total (Cost $12,381,786)           11,741,379  
         
 
               

TOTAL COMMON STOCKS

             

(Cost $229,111,929)

          276,288,456  
         
 
    SHARES     VALUE  

PREFERRED STOCK – 0.6%

             

Seneca Foods Conv. a

             

(Cost $578,719)

  45,409     $ 1,321,402  
         
 

REPURCHASE AGREEMENT – 9.1%

             
State Street Bank & Trust Company,              

0.005% dated 6/30/10, due 7/1/10,

             

maturity value $21,826,003 (collateralized

             

by obligations of various U.S. Government

             

Agencies, 0.875% due 1/31/11, valued at

             

$22,376,575)

             

(Cost $21,826,000)

          21,826,000  
         
 

COLLATERAL RECEIVED FOR SECURITIES LOANED – 3.5%

             
Money Market Funds              

Federated Government Obligations Fund

             

(7 day yield-0.0409%)

             

(Cost $8,497,916)

          8,497,916  
         
 

TOTAL INVESTMENTS – 128.6%

             

(Cost $260,014,564)

          307,933,774  
               

LIABILITIES LESS CASH AND OTHER ASSETS – (3.5)%

          (8,526,025 )
               

PREFERRED STOCK – (25.1)%

          (60,000,000 )
         
 

NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS – 100.0%

        $ 239,407,749  
         
 


  New additions in 2010.
a   Non-income producing.
b  
All or a portion of these securities were on loan at June 30, 2010. Total market value of loaned securities at June 30, 2010 was $8,100,965.
c  
A security for which market quotations are not readily available represents 0.0% of net assets. This security has been valued at its fair value under procedures established by the Fund’s Board of Directors.
d  
Includes securities first acquired in 2010 and less than 1% of net assets applicable to Common Stockholders.
     
   
Bold indicates the Fund’s 20 largest equity holdings in terms of June 30, 2010 market value.
     
   
TAX INFORMATION: The cost of total investments for Federal income tax purposes was $260,492,746. At June 30, 2010, net unrealized appreciation for all securities was $47,441,028, consisting of aggregate gross unrealized appreciation of $82,620,054 and aggregate gross unrealized depreciation of $35,179,026. The primary difference between book and tax basis cost is the timing of the recognition of losses on securities sold.


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.   2010 Semiannual Report to Stockholders  |   39



Royce Micro-Cap Trust   June 30, 2010 (unaudited)

     
  Statement of Assets and Liabilities

ASSETS:        

Total investments at value (including collateral on loaned securities)*

  $ 286,107,774  

Repurchase agreements (at cost and value)

    21,826,000  

Cash and foreign currency

    1,077  

Receivable for investments sold

    142,781  

Receivable for dividends and interest

    238,568  

Prepaid expenses and other assets

    26,551  

Total Assets

    308,342,751  

LIABILITIES:

       

Payable for collateral on loaned securities

    8,497,916  

Payable for investments purchased

    26,777  

Payable for investment advisory fee

    208,098  

Preferred dividends accrued but not yet declared

    80,000  

Accrued expenses

    122,211  

Total Liabilities

    8,935,002  

PREFERRED STOCK:

       

6.00% Cumulative Preferred Stock - $0.001 par value, $25 liquidation value per share; 2,400,000 shares outstanding

    60,000,000  

Total Preferred Stock

    60,000,000  

NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS

  $ 239,407,749  

ANALYSIS OF NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS:

       

Common Stock paid-in capital - $0.001 par value per share; 27,333,915 shares outstanding (150,000,000 shares authorized)

  $ 225,210,492  

Undistributed net investment income (loss)

    (1,516,649 )

Accumulated net realized gain (loss) on investments and foreign currency

    (30,304,699 )

Net unrealized appreciation (depreciation) on investments and foreign currency

    47,898,605  

Unallocated and accrued distributions

    (1,880,000 )

Net Assets applicable to Common Stockholders (net asset value per share - $8.76)

  $ 239,407,749  

*Investments at identified cost (including $8,497,916 of collateral on loaned securities)

  $ 238,188,564  

Market value of loaned securities

    8,100,965  

40  |   2010 Semiannual Report to Stockholders   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.


Royce Micro-Cap Trust Six Months Ended June 30, 2010 (unaudited)


Statement of Operations

         
         
INVESTMENT INCOME:        
Income:        

Dividends*

  $ 1,920,678  

Interest

    7,885  

Securities lending

    81,008  

Total income     2,009,571  

Expenses:        

Investment advisory fees

    1,380,281  

Stockholder reports

    43,933  

Custody and transfer agent fees

    41,579  

Directors’ fees

    27,850  

Professional fees

    22,703  

Administrative and office facilities

    17,365  

Other expenses

    29,756  

Total expenses     1,563,467  
Compensating balance credits     (15 )
Fees waived by investment adviser     (72,500 )

Net expenses     1,490,952  

Net investment income (loss)     518,619  

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:        
Net realized gain (loss):        

Investments

    6,788,606  

Foreign currency transactions

    7,301  
Net change in unrealized appreciation (depreciation):        

Investments and foreign currency translations

    (9,247,776 )

Other assets and liabilities denominated in foreign currency

    (15,121 )

Net realized and unrealized gain (loss) on investments and foreign currency     (2,466,990 )

NET INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS     (1,948,371 )

DISTRIBUTIONS TO PREFERRED STOCKHOLDERS     (1,800,000 )

NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS        

FROM INVESTMENT OPERATIONS

  $ (3,748,371 )
         
* Net of foreign withholding tax of $22,843.        

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 2010 Semiannual Report to Stockholders  |  41



Royce Micro-Cap Trust  


Statement of Changes in Net Assets Applicable to Common Stockholders

      Six months ended    
      6/30/10   Year ended
      (unaudited)   12/31/09
INVESTMENT OPERATIONS:                  
Net investment income (loss)     $ 518,619     $ 37,740  
Net realized gain (loss) on investments and foreign currency       6,795,907       (8,011,984 )
Net change in unrealized appreciation (depreciation) on investments and foreign currency       (9,262,897 )     87,498,482  

Net increase (decrease) in net assets from investment operations       (1,948,371 )     79,524,238  

DISTRIBUTIONS TO PREFERRED STOCKHOLDERS:                  
Net investment income             (1,009,948 )
Net realized gain on investments and foreign currency              
Return of capital             (2,590,052 )
Unallocated distributions*       (1,800,000 )      

Total distributions to Preferred Stockholders       (1,800,000 )     (3,600,000 )

NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS                  

FROM INVESTMENT OPERATIONS

      (3,748,371 )     75,924,238  

DISTRIBUTIONS TO COMMON STOCKHOLDERS:                  
Net investment income              
Net realized gain on investments and foreign currency              
Return of capital             (5,846,946 )

Total distributions to Common Stockholders             (5,846,946 )

CAPITAL STOCK TRANSACTIONS:                  
Reinvestment of distributions to Common Stockholders             3,224,397  

Total capital stock transactions             3,224,397  

NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS       (3,748,371 )     73,301,689  

NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS:                  

Beginning of period

      243,156,120       169,854,431  

End of period (including undistributed net investment income (loss) of $(1,516,649) at 6/30/10 and $(2,035,268) at 12/31/09)

    $ 239,407,749     $ 243,156,120  

* To be allocated to net investment income, net realized gains and/or return of capital at year end.

42  |  2010 Semiannual Report to Stockholders THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.




Royce Micro-Cap Trust  


Financial Highlights

This table is presented to show selected data for a share of Common Stock outstanding throughout each period, and to assist stockholders in evaluating the Fund’s performance for the periods presented.
    Six months   Years ended December 31,
    ended  
    June 30, 2010                                        
    (unaudited)   2009     2008     2007     2006     2005  

NET ASSET VALUE, BEGINNING OF PERIOD   $ 8.90     $ 6.39     $ 13.48     $ 14.77     $ 13.43     $ 14.34  

INVESTMENT OPERATIONS:                                                

Net investment income (loss)

    0.02       0.00       0.02       (0.00 )     0.01       (0.03 )

Net realized and unrealized gain (loss) on investments and foreign currency

    (0.09 )     2.88       (5.70 )     0.24       3.04       1.14  

Total investment operations

    (0.07 )     2.88       (5.68 )     0.24       3.05       1.11  

DISTRIBUTIONS TO PREFERRED STOCKHOLDERS:                                                

Net investment income

          (0.04 )     (0.01 )     (0.01 )     (0.02 )      

Net realized gain on investments and foreign currency

                (0.13 )     (0.14 )     (0.14 )     (0.17 )

Return of capital

          (0.09 )                        

Unallocated distributions*

    (0.07 )                              

Total distributions to Preferred Stockholders

    (0.07 )     (0.13 )     (0.14 )     (0.15 )     (0.16 )     (0.17 )

NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS FROM INVESTMENT OPERATIONS

    (0.14 )     2.75       (5.82 )     0.09       2.89       0.94  

DISTRIBUTIONS TO COMMON STOCKHOLDERS:                                                

Net investment income

                (0.09 )     (0.08 )     (0.20 )      

Net realized gain on investments and foreign currency

                (0.83 )     (1.27 )     (1.35 )     (1.85 )

Return of capital

          (0.22 )     (0.27 )                  

Total distributions to Common Stockholders

          (0.22 )     (1.19 )     (1.35 )     (1.55 )     (1.85 )

CAPITAL STOCK TRANSACTIONS:                                                

Effect of reinvestment of distributions by Common Stockholders

          (0.02 )     (0.08 )     (0.03 )     (0.00 )     0.00  

Total capital stock transactions

          (0.02 )     (0.08 )     (0.03 )     (0.00 )     0.00  

NET ASSET VALUE, END OF PERIOD   $ 8.76     $ 8.90     $ 6.39     $ 13.48     $ 14.77     $ 13.43  

MARKET VALUE, END OF PERIOD   $ 7.34     $ 7.37     $ 5.62     $ 11.94     $ 16.57     $ 14.56  

TOTAL RETURN (a):                                                
Market Value     (0.41 )%***     37.91 %     (45.84 )%     (20.54 )%     26.72 %     8.90 %
Net Asset Value     (1.57 )%***     46.47 %     (45.45 )%     0.64 %     22.46 %     6.75 %

RATIOS BASED ON AVERAGE NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS:

                                               
Total expenses (b,c)     1.17 %**     1.59 %     1.55 %     1.56 %     1.64 %     1.63 %

Investment advisory fee expense (d)

    1.03 %**     1.38 %     1.39 %     1.44 %     1.49 %     1.43 %

Other operating expenses

    0.14 %**     0.21 %     0.16 %     0.12 %     0.15 %     0.20 %
Net investment income (loss)     0.41 %**     0.02 %     0.15 %     (0.07 )%     0.05 %     (0.27 )%
SUPPLEMENTAL DATA:                                                
Net Assets Applicable to Common Stockholders,                                                

End of Period (in thousands)

    $239,408       $243,156       $169,854       $331,476       $343,682       $293,719  
Liquidation Value of Preferred Stock,                                                

End of Period (in thousands)

    $60,000       $60,000       $60,000       $60,000       $60,000       $60,000  
Portfolio Turnover Rate     10 %     30 %     42 %     41 %     34 %     46 %
PREFERRED STOCK:                                                
Total shares outstanding     2,400,000       2,400,000       2,400,000       2,400,000       2,400,000       2,400,000  
Asset coverage per share   $ 124.75     $ 126.32     $ 95.77     $ 163.11     $ 168.20     $ 147.38  
Liquidation preference per share   $ 25.00     $ 25.00     $ 25.00     $ 25.00     $ 25.00     $ 25.00  
Average month-end market value per share   $ 24.98     $ 23.47     $ 23.08     $ 24.06     $ 24.15     $ 24.97  

(a)   The Market Value Total Return is calculated assuming a purchase of Common Stock on the opening of the first business day and a sale on the closing of the last business day of each period reported. Dividends and distributions are assumed for the purposes of this calculation to be reinvested at prices obtained under the Fund’s Distribution Reinvestment and Cash Purchase Plan. Net Asset Value Total Return is calculated on the same basis, except that the Fund’s net asset value is used on the purchase and sale dates instead of market value.
(b)   Expense ratios based on total average net assets including liquidation value of Preferred Stock were 0.95%, 1.21%, 1.26%, 1.33%, 1.38% and 1.35% for the periods ended June 30, 2010 and December 31, 2009, 2008, 2007, 2006 and 2005, respectively.
(c)   Expense ratios based on average net assets applicable to Common Stockholders before waiver of fees by the investment adviser would have been 1.23%, 1.74% and 1.58% for the periods ended June 30, 2010 and December 31, 2009 and 2008, respectively; before waiver of fees and after earnings credits would have been 1.23%, 1.74%, 1.58% 1.56%, 1.64% and 1.63% for the periods ended June 30, 2010 and December 31, 2009, 2008, 2007, 2006 and 2005, respectively.
(d)   The investment advisory fee is calculated based on average net assets over a rolling 36-month basis, while the above ratios of investment advisory fee expenses are based on the average net assets applicable to Common Stockholders over a 12-month basis.
     
*   To be allocated to net investment income, net realized gains and/or return of capital at year end.
** Annualized. ***   Not annualized.

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 2010 Semiannual Report to Stockholders  |  43



Royce Micro-Cap Trust  


Notes to Financial Statements (unaudited)

Summary of Significant Accounting Policies:
     Royce Micro-Cap Trust, Inc. (the "Fund"), was incorporated under the laws of the State of Maryland on September 9, 1993 as a diversified closed-end investment company. The Fund commenced operations on December 14, 1993.
     The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the 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.
     Under the Fund’s organizational documents, the officers and directors are indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts with service providers that contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risk of loss to be remote.

Valuation of Investments:
     Securities are valued as of the close of trading on the New York Stock Exchange (NYSE) (generally 4:00 p.m. Eastern time) on the valuation date. Securities that trade on an exchange, and securities traded on Nasdaq’s Electronic Bulletin Board, are valued at their last reported sales price or Nasdaq official closing price taken from the primary market in which each security trades or, if no sale is reported for such day, at their bid price. Other over-the-counter securities for which market quotations are readily available are valued at their highest bid price, except in the case of some bonds and other fixed income securities which may be valued by reference to other securities with comparable ratings, interest rates and maturities, using established independent pricing services. The Fund values its non-U.S. dollar denominated securities in U.S. dollars daily at the prevailing foreign currency exchange rates as quoted by a major bank. Securities for which market quotations are not readily available are valued at their fair value under procedures established by the Fund’s Board of Directors. In addition, if, between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that are significant and may make the closing price unreliable, the Fund may fair value the security. The Fund uses an independent pricing service to provide fair value estimates for relevant non-U.S. equity securities on days when the U.S. market volatility exceeds a certain threshold. This pricing service uses proprietary correlations it has developed between the movement of prices of non-U.S. equity securities and indices of U.S.-traded securities, futures contracts and other indications to estimate the fair value of relevant non-U.S. securities. When fair value pricing is employed, the prices of securities used by the Fund may differ from quoted or published prices for the same security. Investments in money market funds are valued at net asset value per share.
  Various inputs are used in determining the value of the Fund’s investments, as noted above. These inputs are summarized in the three broad levels below:
    Level 1 – quoted prices in active markets for identical securities
    Level 2 – other significant observable inputs (including quoted prices for similar securities, foreign securities that may be fair valued and repurchase agreements)
    Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)
  The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The following is a summary of the inputs used to value the Fund’s investments as of June 30, 2010:
    Level 1   Level 2   Level 3   Total  

Common stocks
  $ 244,985,967   $ 31,266,326   $ 36,163   $ 276,288,456  
Preferred stocks
        1,321,402         1,321,402  
Cash equivalents
    8,497,916     21,826,000         30,323,916  

Level 3 Reconciliation:                                      
                              Realized and        
      Balance as of                       Unrealized     Balance as of  
      12/31/09     Purchases     Transfers Out     Sales     Gain (Loss)(1)     6/30/10  

Common stocks
    $73,019     $–     $386,084     $–     $349,228     $36,163  

(1)
The net change in unrealized appreciation (depreciation) is included in the accompanying Statement of Operations. Change in unrealized appreciation (depreciation) includes net unrealized appreciation (depreciation) resulting from changes in investment values during the reporting period and the reversal of previously recorded unrealized appreciation (depreciation) when gains or losses are realized. Net realized gain (loss) from investments and foreign currency transactions is included in the accompanying Statement of Operations.

44  |  2010 Semiannual Report to Stockholders  



Royce Micro-Cap Trust  


Notes to Financial Statements (unaudited) (continued)

Repurchase Agreements:
     The Fund may enter into repurchase agreements with institutions that the Fund’s investment adviser has determined are creditworthy. The Fund restricts repurchase agreements to maturities of no more than seven days. Securities pledged as collateral for repurchase agreements, which are held until maturity of the repurchase agreements, are marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest). Repurchase agreements could involve certain risks in the event of default or insolvency of the counter-party, including possible delays or restrictions upon the ability of the Fund to dispose of its underlying securities.

Foreign Currency:
     Net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, expiration of currency forward contracts, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities, including investments in securities at the end of the reporting period, as a result of changes in foreign currency exchange rates.

Securities Lending:
     The Fund loans securities to qualified institutional investors for the purpose of realizing additional income. Collateral for the Fund on all securities loaned is accepted in cash and cash equivalents and invested temporarily by the custodian. The collateral maintained is at least 100% of the current market value of the loaned securities. The market value of the loaned securities is determined at the close of business of the Fund and any additional required collateral is delivered to the Fund on the next business day. The Fund retains the risk of any loss on the securities on loan as well as incurring the potential loss on investments purchased with cash collateral received for securities lending.

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 “Tax Information”.

Distributions:
     Effective May 18, 2009, the Fund pays any dividends and capital gain distributions annually in December on the Fund’s Common Stock. Prior to that date, the Fund paid quarterly distributions on the Fund’s Common Stock at the annual rate of 9% of the rolling average of the prior four calendar quarter-end NAVs of the Fund’s Common Stock, with the fourth quarter distribution being the greater of 2.25% of the rolling average or the distribution required by IRS regulations. Distributions to Preferred Stockholders are accrued daily and paid quarterly and distributions to Common Stockholders are recorded on ex-dividend date. Distributable capital gains and/or net investment income are first allocated to Preferred Stockholder distributions, with any excess allocable to Common Stockholders. If capital gains and/or net investment income are allocated to both Preferred and Common Stockholders, the tax character of such allocations is proportional. To the extent that distributions are not paid from long-term capital gains, net investment income or net short-term capital gains, they will represent a return of capital. Distributions are determined in accordance with income tax regulations that may differ from accounting principles generally accepted in the United States of America. Permanent book and tax differences relating to stockholder distributions will result in reclassifications within the capital accounts. 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 undistributed at fiscal year end is distributed in the following year.

Investment Transactions and Related Investment Income:
     Investment transactions are accounted for on the trade date. Dividend income is recorded on the ex-dividend date. Non-cash dividend income is recorded at the fair market value of the securities received. Interest income is recorded on an accrual basis. Premium and discounts on debt securities are amortized using the effective yield-to-maturity method. Realized gains and losses from investment transactions are determined on the basis of identified cost for book and tax purposes.

Expenses:
     The Fund incurs direct and indirect expenses. Expenses directly attributable to the Fund are charged to the Fund’s operations, while expenses applicable to more than one of the Royce Funds are allocated equitably. Certain personnel, occupancy costs and other administrative expenses related to The Royce Funds are allocated by Royce & Associates, LLC (“Royce”) under an administration agreement and are included in administrative and office facilities and professional fees. The Fund has adopted a deferred fee agreement that allows the Directors to defer the receipt of all or a portion of Directors’ Fees otherwise payable. The deferred fees are invested in certain Royce Funds until distributed in accordance with the agreement.

Compensating Balance Credits:
     The Fund has an arrangement with its custodian bank, whereby a portion of the custodian’s fee is paid indirectly by credits earned on the Fund’s cash on deposit with the bank. This deposit arrangement is an alternative to purchasing overnight investments. Conversely, the Fund pays interest to the custodian on any cash overdrafts, to the extent they are not offset by credits earned on positive cash balances.

  2010 Semiannual Report to Stockholders  |  45



Royce Micro-Cap Trust  


Notes to Financial Statements (unaudited) (continued)

Capital Stock:
     The Fund issued 756,901 shares of Common Stock as reinvestment of distributions by Common Stockholders for the year ended December 31, 2009.
     At June 30, 2010, 2,400,000 shares of 6.00% Cumulative Preferred Stock were outstanding. The Fund, at its option, may redeem the Cumulative Preferred Stock, in whole or in part, at the redemption price. The Cumulative Preferred Stock is classified outside of permanent equity (net assets applicable to Common Stockholders) in the accompanying financial statements in accordance with accounting for redeemable equity instruments, that requires preferred securities that are redeemable for cash or other assets to be classified outside of permanent equity to the extent that the redemption is at a fixed or determinable price and at the option of the holder or upon the occurrence of an event that is not solely within the control of the issuer.
     The Fund is required to meet certain asset coverage tests with respect to the Cumulative Preferred Stock as required by the 1940 Act. In addition, pursuant to the Rating Agency Guidelines established by Moody’s, the Fund is required to maintain a certain discounted asset coverage. If the Fund fails to meet these requirements and does not correct such failure, the Fund may be required to redeem, in part or in full, the Cumulative Preferred Stock at a redemption price of $25.00 per share, plus an amount equal to the accumulated and unpaid dividends, whether or not declared on such shares, in order to meet these requirements. Additionally, failure to meet the foregoing asset coverage requirements could restrict the Fund’s ability to pay dividends to Common Stockholders and could lead to sales of portfolio securities at inopportune times. The Fund has met these requirements since issuing the Cumulative Preferred Stock.

Investment Advisory Agreement:
     As compensation for its services under the Investment Advisory Agreement, Royce receives a fee comprised of a Basic Fee (“Basic Fee”) and an adjustment to the Basic Fee based on the investment performance of the Fund in relation to the investment record of the Russell 2000.
     The Basic Fee is a monthly fee equal to 1/12 of 1% (1% on an annualized basis) of the average of the Fund’s month-end net assets applicable to Common Stockholders, plus the liquidation value of Preferred Stock, for the rolling 36-month period ending with such month (the "performance period"). The Basic Fee for each month is increased or decreased at the rate of 1/12 of .05% for each percentage point that the investment performance of the Fund exceeds, or is exceeded by, the percentage change in the investment record of the Russell 2000 for the performance period by more than two percentage points. The performance period for each such month is a rolling 36-month period ending with such month. The maximum increase or decrease in the Basic Fee for any month may not exceed 1/12 of .5%. Accordingly, for each month, the maximum monthly fee rate as adjusted for performance is 1/12 of 1.5% and is payable if the investment performance of the Fund exceeds the percentage change in the investment record of the Russell 2000 by 12 or more percentage points for the performance period, and the minimum monthly fee rate as adjusted for performance is 1/12 of .5% and is payable if the percentage change in the investment record of the Russell 2000 exceeds the investment performance of the Fund by 12 or more percentage points for the performance period.
     Royce has voluntarily committed to waive the portion of its investment advisory fee attributable to an issue of the Fund’s Preferred Stock for any month in which the Fund’s average annual NAV total return since issuance of the Preferred Stock fails to exceed the applicable Preferred Stock’s dividend rate.
     For six rolling 36-month periods in 2010, the Fund’s investment performance ranged from 3% to 6% below the investment performance of the Russell 2000. Accordingly, the net investment advisory fee consisted of a Basic Fee of $1,607,248 and a net downward adjustment of $226,967 for the performance of the Fund relative to that of the Russell 2000. Additionally, Royce voluntarily waived a portion of its investment advisory fee ($72,500) attributable to issues of the Fund’s Preferred Stock for those months in which the Fund’s average annual NAV total return failed to exceed the applicable Preferred Stock’s dividend rate. For the six months ended June 30, 2010, the Fund accrued and paid Royce investment advisory fees totaling $1,307,781.

Purchases and Sales of Investment Securities:
     For the six months ended June 30, 2010, the costs of purchases and proceeds from sales of investment securities, other than short-term securities and collateral received for securities loaned, amounted to $39,640,409 and $28,703,637, respectively.

46  |  2010 Semiannual Report to Stockholders  



Royce Focus Trust   June 30, 2010 (unaudited)


Schedule of Investments

    SHARES       VALUE  
COMMON STOCKS – 100.5%              
               
Consumer Products – 12.1%              
Apparel, Shoes and Accessories - 2.6%              

Coach

  50,000     $ 1,827,500  

Timberland Company (The) Cl. A a

  100,000       1,615,000  
         
 
            3,442,500  
         
 
Food/Beverage/Tobacco - 6.7%              

Cal-Maine Foods

  80,000       2,554,400  

Industrias Bachoco ADR

  105,000       1,802,850  

Sanderson Farms

  85,000       4,312,900  
         
 
            8,670,150  
         
 
Health, Beauty and Nutrition - 1.2%              

Nu Skin Enterprises Cl. A

  60,000       1,495,800  
         
 
Sports and Recreation - 1.6%              

Thor Industries

  90,000       2,137,500  
         
 
Total (Cost $15,606,436)           15,745,950  
         
 
Consumer Services – 5.8%              
Retail Stores - 5.8%              

Buckle (The)

  120,000       3,890,400  

GameStop Corporation Cl. A a

  120,000       2,254,800  

Men’s Wearhouse (The)

  75,000       1,377,000  
         
 
Total (Cost $7,671,643)           7,522,200  
         
 
Financial Intermediaries – 7.0%              
Insurance - 4.9%              

Berkshire Hathaway Cl. B a

  80,000       6,375,200  
         
 
Securities Brokers - 2.1%              

Knight Capital Group Cl. A a

  200,000       2,758,000  
         
 
Total (Cost $8,654,100)           9,133,200  
         
 
Financial Services – 11.0%              
Investment Management - 7.9%              

Artio Global Investors Cl. A

  80,300       1,263,922  

Endeavour Financial

  1,100,000       2,273,261  

Franklin Resources

  30,000       2,585,700  

Partners Group Holding

  15,000       1,810,013  

Sprott

  450,000       1,513,315  

U.S. Global Investors Cl. A

  147,849       820,562  
         
 
            10,266,773  
         
 
Other Financial Services - 3.1%              

Kennedy-Wilson Holdings a

  400,771       4,047,787  
         
 
Total (Cost $16,382,721)           14,314,560  
         
 
               
Health – 1.3%              
Drugs and Biotech - 1.3%              

Endo Pharmaceuticals Holdings a

  80,000       1,745,600  
         
 
Total (Cost $1,121,094)           1,745,600  
         
 
Industrial Products – 19.7%              
Building Systems and Components - 2.6%              

Simpson Manufacturing

  65,000       1,595,750  
    SHARES       VALUE  
Industrial Products (continued)              
Building Systems and Components (continued)              

WaterFurnace Renewable Energy

  70,000     $ 1,753,699  
         
 
            3,349,449  
         
 
Industrial Components - 2.8%              

GrafTech International a

  250,000       3,655,000  
         
 
Machinery - 1.4%              

Lincoln Electric Holdings

  35,000       1,784,650  
         
 
Metal Fabrication and Distribution - 7.5%              

Kennametal

  30,000       762,900  

Nucor Corporation

  75,000       2,871,000  

Reliance Steel & Aluminum

  90,000       3,253,500  

Schnitzer Steel Industries Cl. A

  75,000       2,940,000  
         
 
            9,827,400  
         
 
Miscellaneous Manufacturing - 0.9%              

Rational

  8,000       1,235,526  
         
 
Pumps, Valves and Bearings - 2.1%              

Gardner Denver

  30,000       1,337,700  

Pfeiffer Vacuum Technology

  20,000       1,472,944  
         
 
            2,810,644  
         
 
Specialty Chemicals and Materials - 2.4%              

Mosaic Company (The)

  80,000       3,118,400  
         
 
Total (Cost $20,003,122)           25,781,069  
         
 
Industrial Services – 5.1%              
Commercial Services - 1.1%              

Korn/Ferry International a

  100,000       1,390,000  
         
 
Engineering and Construction - 1.4%              

Jacobs Engineering Group a

  50,000       1,822,000  
         
 
Food, Tobacco and Agriculture - 0.7%              

Intrepid Potash a

  50,000       978,500  
         
 
Transportation and Logistics - 1.9%              

Patriot Transportation Holding a

  30,000       2,427,300  
         
 
Total (Cost $7,167,862)           6,617,800  
         
 
Natural Resources – 29.7%              
Energy Services - 10.8%              

ENSCO ADR

  90,000       3,535,200  

Pason Systems

  180,000       1,912,357  

Tesco Corporation a

  210,000       2,578,800  

Trican Well Service

  240,000       3,072,848  

Unit Corporation a

  75,000       3,044,250  
         
 
            14,143,455  
         
 
Oil and Gas - 1.3%              

Exxon Mobil

  30,000       1,712,100  
         
 
Precious Metals and Mining - 15.9%              

Alamos Gold

  120,000       1,840,778  

Allied Nevada Gold a

  80,000       1,574,400  

Centamin Egypt a

  1,000,000       2,432,953  

Fresnillo

  120,000       1,733,660  

Ivanhoe Mines a

  108,400       1,413,536  

Major Drilling Group International

  120,000       2,444,977  

Pan American Silver

  100,000       2,528,000  

Seabridge Gold a

  150,000       4,642,500  

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 2010 Semiannual Report to Stockholders  |  47



Royce Focus Trust   June 30, 2010 (unaudited)


Schedule of Investments

    SHARES       VALUE  
Natural Resources (continued)              
Precious Metals and Mining (continued)              

Silver Standard Resources a

  120,000     $ 2,142,000  
         
 
            20,752,804  
         
 
Real Estate - 0.7%              

PICO Holdings a

  30,000       899,100  
         
 
Other Natural Resources - 1.0%              

Magma Energy a

  1,000,000       1,249,354  
         
 
Total (Cost $31,202,292)           38,756,813  
         
 
Technology – 7.9%              
Components and Systems - 2.0%              

Western Digital a

  85,000       2,563,600  
         
 
Semiconductors and Equipment - 2.5%              

MKS Instruments a

  120,000       2,246,400  

Sigma Designs a

  100,325       1,004,253  
         
 
            3,250,653  
         
 
Software - 1.7%              

Microsoft Corporation

  100,000       2,301,000  
         
 
Telecommunications - 1.7%              

ADTRAN

  80,000       2,181,600  
         
 
Total (Cost $11,044,942)           10,296,853  
         
 
Miscellaneous b– 0.9%              
Total (Cost $1,334,725)           1,191,500  
         
 
TOTAL COMMON STOCKS              

(Cost $120,188,937)

          131,105,545  
         
 
            VALUE  
REPURCHASE AGREEMENT – 18.7%              
State Street Bank & Trust Company,              

0.005% dated 6/30/10, due 7/1/10,

             

maturity value $24,442,003 (collateralized

             

by obligations of various U.S. Government

             

Agencies, 0.875% due 1/31/11, valued at

             

$25,056,525)

             

(Cost $24,442,000)

        $ 24,442,000  
         
 
TOTAL INVESTMENTS – 119.2%              

(Cost $144,630,937)

          155,547,545  
               
LIABILITIES LESS CASH              

AND OTHER ASSETS – (0.0)%

          (97,162 )
               
PREFERRED STOCK – (19.2)%           (25,000,000 )
         
 
NET ASSETS APPLICABLE TO COMMON              

STOCKHOLDERS – 100.0%

        $ 130,450,383  
         
 

  New additions in 2010.
a   Non-income producing.
b   Includes securities first acquired in 2010 and less than 1% of net assets applicable to Common Stockholders.
     
    Bold indicates the Fund’s 20 largest equity holdings in terms of June 30, 2010 market value.
     
    TAX INFORMATION: The cost of total investments for Federal income tax purposes was $144,630,937. At June 30, 2010 net unrealized appreciation for all securities was $10,916,608, consisting of aggregate gross unrealized appreciation of $24,562,832 and aggregate gross unrealized depreciation of $13,646,224.


48  |  2010 Semiannual Report to Stockholders   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.



Royce Focus Trust June 30, 2010 (unaudited)


Statement of Assets and Liabilities

ASSETS:        
Total investments at value*   $ 131,105,545  
Repurchase agreements (at cost and value)     24,442,000  
Cash and foreign currency     240  
Receivable for dividends and interest     113,016  
Prepaid expenses and other assets     28,143  

Total Assets

    155,688,944  

LIABILITIES:        
Payable for investment advisory fee     134,091  
Preferred dividends accrued but not yet declared     33,327  
Accrued expenses     71,143  

Total Liabilities

    238,561  

PREFERRED STOCK:        
6.00% Cumulative Preferred Stock - $0.001 par value, $25 liquidation value per share; 1,000,000 shares outstanding     25,000,000  

Total Preferred Stock

    25,000,000  

NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS   $ 130,450,383  

ANALYSIS OF NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS:        
Common Stock paid-in capital - $0.001 par value per share; 19,759,064 shares outstanding (150,000,000 shares authorized)   $ 129,051,196  
Undistributed net investment income (loss)     (1,310,065 )
Accumulated net realized gain (loss) on investments and foreign currency     (7,422,970 )
Net unrealized appreciation (depreciation) on investments and foreign currency     10,915,555  
Unallocated and accrued distributions     (783,333 )

Net Assets applicable to Common Stockholders (net asset value per share - $6.60)

  $ 130,450,383  

*Investments at identified cost   $ 120,188,937  

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 2010 Semiannual Report to Stockholders  |  49




Royce Focus Trust Six Months Ended June 30, 2010 (unaudited)


Statement of Operations

INVESTMENT INCOME:        
Income:        

Dividends*

  $ 785,134  

Interest

    6,765  

Securities lending

    7,245  

Total income     799,144  

Expenses:        

Investment advisory fees

    835,101  

Stockholder reports

    29,937  

Custody and transfer agent fees

    29,496  

Professional fees

    19,626  

Directors’ fees

    16,358  

Administrative and office facilities

    9,393  

Other expenses

    36,025  

Total expenses     975,936  

Net investment income (loss)     (176,792 )

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:        
Net realized gain (loss):        

Investments

    4,303,499  

Foreign currency transactions

    (3,484 )
Net change in unrealized appreciation (depreciation):        

Investments and foreign currency translations

    (14,418,315 )

Other assets and liabilities denominated in foreign currency

    (1,553 )

Net realized and unrealized gain (loss) on investments and foreign currency     (10,119,853 )

NET INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS     (10,296,645 )

DISTRIBUTIONS TO PREFERRED STOCKHOLDERS     (750,000 )

NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS FROM INVESTMENT OPERATIONS

  $ (11,046,645 )
* Net of foreign withholding tax of $48,845.        

50  |  2010 Semiannual Report to Stockholders THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.



Royce Focus Trust  


Statement of Changes in Net Assets Applicable to Common Stockholders

      Six months ended    
      6/30/10   Year ended
      (unaudited)   12/31/09
INVESTMENT OPERATIONS:                  
Net investment income (loss)     $ (176,792 )   $ 547,725  
Net realized gain (loss)on investments and foreign currency       4,300,015       (10,501,276 )
Net change in unrealized appreciation (depreciation) on investments and foreign currency       (14,419,868 )     61,002,195  

Net increase (decrease) in net assets from investment operations       (10,296,645 )     51,048,644  

DISTRIBUTIONS TO PREFERRED STOCKHOLDERS:                  
Net investment income             (1,500,000 )
Net realized gain on investments and foreign currency              
Unallocated distributions*       (750,000 )      

Total distributions to Preferred Stockholders       (750,000 )     (1,500,000 )

NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS FROM INVESTMENT OPERATIONS

      (11,046,645 )     49,548,644  

DISTRIBUTIONS TO COMMON STOCKHOLDERS:                  
Net investment income             (76,678 )
Net realized gain on investments and foreign currency              
Return of capital             (1,674,712 )

Total distributions to Common Stockholders             (1,751,390 )

CAPITAL STOCK TRANSACTIONS:                  
Reinvestment of distributions to Common Stockholders             1,150,102  

Total capital stock transactions             1,150,102  

NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS
      (11,046,645 )     48,947,356  

NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS:                  

Beginning of period

      141,497,028       92,549,672  

End of period (including undistributed net investment income (loss) of $(1,310,065) at 6/30/10 and $(1,133,274) at 12/31/09)

    $ 130,450,383     $ 141,497,028  

* To be allocated to net investment income, net realized gains and/or return of capital at year end.

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 2010 Semiannual Report to Stockholders  |  51



Royce Focus Trust  


Financial Highlights

This table is presented to show selected data for a share of Common Stock outstanding throughout each period, and to assist stockholders in evaluating the Fund’s performance for the periods presented.

    Six months     Years ended December 31,
    ended    
    June 30, 2010                                          
    (unaudited)       2009       2008       2007       2006       2005  

NET ASSET VALUE, BEGINNING OF PERIOD   $ 7.16     $ 4.76     $ 8.92     $ 9.75     $ 9.76     $ 9.75  

INVESTMENT OPERATIONS:                                                

Net investment income (loss)

    (0.01 )     0.03       0.07       0.15       0.16       0.06  

Net realized and unrealized gain (loss) on investments and foreign currency

    (0.51 )     2.54       (3.67 )     1.12       1.50       1.44  

Total investment operations

    (0.52 )     2.57       (3.60 )     1.27       1.66       1.50  

DISTRIBUTIONS TO PREFERRED STOCKHOLDERS:                                                

Net investment income

          (0.08 )     (0.01 )     (0.02 )     (0.01 )     (0.01 )

Net realized gain on investments and foreign currency

                (0.07 )     (0.07 )     (0.09 )     (0.11 )

Unallocated distributions*

    (0.04 )                              

Total distributions to Preferred Stockholders

    (0.04 )     (0.08 )     (0.08 )     (0.09 )     (0.10 )     (0.12 )

NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS FROM INVESTMENT OPERATIONS

    (0.56 )     2.49       (3.68 )     1.18       1.56       1.38  

DISTRIBUTIONS TO COMMON STOCKHOLDERS:                                                

Net investment income

          (0.00 )     (0.07 )     (0.44 )     (0.20 )     (0.06 )

Net realized gain on investments and foreign currency

                (0.37 )     (1.57 )     (1.37 )     (1.15 )

Return of capital

          (0.09 )     (0.03 )                  

Total distributions to Common Stockholders

          (0.09 )     (0.47 )     (2.01 )     (1.57 )     (1.21 )

CAPITAL STOCK TRANSACTIONS:                                                

Effect of reinvestment of distributions by Common Stockholders

          (0.00 )     (0.01 )     (0.00 )     (0.00 )     (0.03 )

Effect of rights offering

                                  (0.13 )

Total capital stock transactions

          (0.00 )     (0.01 )     (0.00 )     (0.00 )     (0.16 )

NET ASSET VALUE, END OF PERIOD   $ 6.60     $ 7.16     $ 4.76     $ 8.92     $ 9.75     $ 9.76  

MARKET VALUE, END OF PERIOD   $ 5.74     $ 6.33     $ 4.60     $ 8.97     $ 10.68     $ 9.53  

TOTAL RETURN (a):                                                
Market Value     (9.32 )%***     40.84 %     (44.94 )%     3.02 %     30.50 %     3.03 %
Net Asset Value     (7.82 )%***     53.95 %     (42.71 )%     12.22 %     16.33 %     13.31 %

RATIOS BASED ON AVERAGE NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS:

                                               
Total expenses (b,c)     1.37 %**     1.42 %     1.34 %     1.32 %     1.36 %     1.48 %

Investment advisory fee expense

    1.17 %**     1.16 %     1.13 %     1.14 %     1.16 %     1.21 %

Other operating expenses

    0.20 %**     0.26 %     0.21 %     0.18 %     0.20 %     0.27 %
Net investment income (loss)     (0.25 )%**     0.49 %     0.72 %     1.13 %     1.54 %     0.63 %
SUPPLEMENTAL DATA:                                                

Net Assets Applicable to Common Stockholders, End of Period (in thousands)

    $130,450       $141,497       $92,550       $165,807       $158,567       $143,244  

Liquidation Value of Preferred Stock, End of Period (in thousands)

    $25,000       $25,000       $25,000       $25,000       $25,000       $25,000  
Portfolio Turnover Rate     20 %     46 %     51 %     62 %     30 %     42 %
PREFERRED STOCK:                                                
Total shares outstanding     1,000,000       1,000,000       1,000,000       1,000,000       1,000,000       1,000,000  
Asset coverage per share   $ 155.45     $ 166.48     $ 117.55     $ 190.81     $ 183.57     $ 168.24  
Liquidation preference per share   $ 25.00     $ 25.00     $ 25.00     $ 25.00     $ 25.00     $ 25.00  
Average month-end market value per share   $ 25.21     $ 23.56     $ 22.89     $ 24.37     $ 24.98     $ 25.38  

(a)   The Market Value Total Return is calculated assuming a purchase of Common Stock on the opening of the first business day and a sale on the closing of the last business day of each period reported. Dividends and distributions are assumed for the purposes of this calculation to be reinvested at prices obtained under the Fund’s Distribution Reinvestment and Cash Purchase Plan. Net Asset Value Total Return is calculated on the same basis, except that the Fund’s net asset value is used on the purchase and sale dates instead of market value.
(b)   Expense ratios based on total average net assets including liquidation value of Preferred Stock were 1.17%, 1.16%, 1.14%, 1.15%, 1.17% and 1.22% for the periods ended June 30, 2010 and December 31, 2009, 2008, 2007, 2006 and 2005, respectively.
(c)   Expense ratios based on average net assets applicable to Common Stockholders before waiver of fees by the investment adviser would have been 1.48% and 1.39% for the years ended December 31, 2009 and 2008, respectively; before waiver of fees and after earnings credits would have been 1.37%%, 1.48%, 1.39%, 1.31%, 1.36% and 1.48% for the periods ended June 30, 2010 and December 31, 2009, 2008, 2007, 2006 and 2005, respectively.

*   To be allocated to net investment income, net realized gains and/or return of capital at year end.
**   Annualized.   *** Not annualized.

52  |  2010 Semiannual Report to Stockholders THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.



Royce Focus Trust  


Notes to Financial Statements (unaudited)

Summary of Significant Accounting Policies:
      Royce Focus Trust, Inc. (the "Fund"), is a diversified closed-end investment company incorporated under the laws of the State of Maryland. The Fund commenced operations on March 2, 1988 and Royce & Associates, LLC (“Royce”) assumed investment management responsibility for the Fund on November 1, 1996.
      The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the 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.
      Under the Fund’s organizational documents, the officers and directors are indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts with service providers that contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risk of loss to be remote.
      At June 30, 2010, officers, employees of Royce, Fund directors, the Royce retirement plans and other affiliates owned 25% of the Fund.

Valuation of Investments:
      Securities are valued as of the close of trading on the New York Stock Exchange (NYSE) (generally 4:00 p.m. Eastern time) on the valuation date. Securities that trade on an exchange, and securities traded on Nasdaq’s Electronic Bulletin Board, are valued at their last reported sales price or Nasdaq official closing price taken from the primary market in which each security trades or, if no sale is reported for such day, at their bid price. Other over-the-counter securities for which market quotations are readily available are valued at their highest bid price, except in the case of some bonds and other fixed income securities which may be valued by reference to other securities with comparable ratings, interest rates and maturities, using established independent pricing services. The Fund values its non-U.S. dollar denominated securities in U.S. dollars daily at the prevailing foreign currency exchange rates as quoted by a major bank. Securities for which market quotations are not readily available are valued at their fair value under procedures established by the Fund’s Board of Directors. In addition, if, between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that are significant and may make the closing price unreliable, the Fund may fair value the security. The Fund uses an independent pricing service to provide fair value estimates for relevant non-U.S. equity securities on days when the U.S. market volatility exceeds a certain threshold. This pricing service uses proprietary correlations it has developed between the movement of prices of non-U.S. equity securities and indices of U.S.-traded securities, futures contracts and other indications to estimate the fair value of relevant non-U.S. securities. When fair value pricing is employed, the prices of securities used by the Fund may differ from quoted or published prices for the same security. Investments in money market funds are valued at net asset value per share.

 
Various inputs are used in determining the value of the Fund’s investments, as noted above. These inputs are summarized in the three broad levels below:
     Level 1 –   quoted prices in active markets for identical securities
 
   Level 2 –  
other significant observable inputs (including quoted prices for similar securities, foreign securities that may be fair valued and repurchase agreements)
 
   Level 3 –  
significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)
 
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The following is a summary of the inputs used to value the Fund’s investments as of June 30, 2010:
    Level 1   Level 2   Level 3   Total  

Common stocks

  $ 106,359,860   $ 24,745,685       $ 131,105,545  

Cash equivalents

        24,442,000         24,442,000  

Repurchase Agreements:
     The Fund may enter into repurchase agreements with institutions that the Fund’s investment adviser has determined are creditworthy. The Fund restricts repurchase agreements to maturities of no more than seven days. Securities pledged as collateral for repurchase agreements, which are held until maturity of the repurchase agreements, are marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest). Repurchase agreements could involve certain risks in the event of default or insolvency of the counter-party, including possible delays or restrictions upon the ability of the Fund to dispose of its underlying securities.

Foreign Currency:
     Net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, expiration of currency forward contracts, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities, including investments in securities at the end of the reporting period, as a result of changes in foreign currency exchange rates.


  2010 Semiannual Report to Stockholders  |  53



Royce Focus Trust  


Notes to Financial Statements (unaudited) (continued)

Securities Lending:
     The Fund loans securities to qualified institutional investors for the purpose of realizing additional income. Collateral for the Fund on all securities loaned is accepted in cash and cash equivalents and invested temporarily by the custodian. The collateral maintained is at least 100% of the current market value of the loaned securities. The market value of the loaned securities is determined at the close of business of the Fund and any additional required collateral is delivered to the Fund on the next business day. The Fund retains the risk of any loss on the securities on loan as well as incurring the potential loss on investments purchased with cash collateral received for securities lending.

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 “Tax Information”.

Distributions:
     Effective May 18, 2009, the Fund pays any dividends and capital gain distributions annually in December on the Fund’s Common Stock. Prior to that date, the Fund paid quarterly distributions on the Fund’s Common Stock at the annual rate of 5% of the rolling average of the prior four calendar quarter-end NAVs of the Fund’s Common Stock, with the fourth quarter distribution being the greater of 1.25% of the rolling average or the distribution required by IRS regulations. Distributions to Preferred Stockholders are accrued daily and paid quarterly and distributions to Common Stockholders are recorded on ex-dividend date. Distributable capital gains and/or net investment income are first allocated to Preferred Stockholder distributions, with any excess allocable to Common Stockholders. If capital gains and/or net investment income are allocated to both Preferred and Common Stockholders, the tax character of such allocations is proportional. To the extent that distributions are not paid from long-term capital gains, net investment income or net short-term capital gains, they will represent a return of capital. Distributions are determined in accordance with income tax regulations that may differ from accounting principles generally accepted in the United States of America. Permanent book and tax differences relating to stockholder distributions will result in reclassifications within the capital accounts. 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 undistributed at fiscal year end is distributed in the following year.

Investment Transactions and Related Investment Income:
     Investment transactions are accounted for on the trade date. Dividend income is recorded on the ex-dividend date. Non-cash dividend income is recorded at the fair market value of the securities received. Interest income is recorded on an accrual basis. Premium and discounts on debt securities are amortized using the effective yield-to-maturity method. Realized gains and losses from investment transactions are determined on the basis of identified cost for book and tax purposes.

Expenses:
     The Fund incurs direct and indirect expenses. Expenses directly attributable to the Fund are charged to the Fund’s operations, while expenses applicable to more than one of the Royce Funds are allocated equitably. Certain personnel, occupancy costs and other administrative expenses related to The Royce Funds are allocated by Royce under an administration agreement and are included in administrative and office facilities and professional fees. The Fund has adopted a deferred fee agreement that allows the Directors to defer the receipt of all or a portion of Directors’ Fees otherwise payable. The deferred fees are invested in certain Royce Funds until distributed in accordance with the agreement.

Compensating Balance Credits:
     The Fund has an arrangement with its custodian bank, whereby a portion of the custodian’s fee is paid indirectly by credits earned on the Fund’s cash on deposit with the bank. This deposit arrangement is an alternative to purchasing overnight investments. Conversely, the Fund pays interest to the custodian on any cash overdrafts, to the extent they are not offset by credits earned on positive cash balances.

Capital Stock:
     The Fund issued 299,149 shares of Common Stock as reinvestment of distributions by Common Stockholders for the year ended December 31, 2009.
     At June 30, 2010, 1,000,000 shares of 6.00% Cumulative Preferred Stock were outstanding. The Fund, at its option, may redeem the Cumulative Preferred Stock, in whole or in part, at the redemption price. The Cumulative Preferred Stock is classified outside of permanent equity (net assets applicable to Common Stockholders) in the accompanying financial statements in accordance with accounting for redeemable equity instruments, that requires preferred securities that are redeemable for cash or other assets to be classified outside of permanent equity to the extent that the redemption is at a fixed or determinable price and at the option of the holder or upon the occurrence of an event that is not solely within the control of the issuer.
     The Fund is required to meet certain asset coverage tests with respect to the Cumulative Preferred Stock as required by the 1940 Act. In addition, pursuant to the Rating Agency Guidelines established by Moody’s, the Fund is required to maintain a certain discounted asset coverage. If the Fund fails to meet these requirements and does not correct such failure, the Fund may be required to redeem, in part or in full, the Cumulative Preferred


54  |  2010 Semiannual Report to Stockholders  



Royce Focus Trust  


Notes to Financial Statements (unaudited) (continued)

Capital Stock (continued):
Stock at a redemption price of $25.00 per share, plus an amount equal to the accumulated and unpaid dividends, whether or not declared on such shares, in order to meet these requirements. Additionally, failure to meet the foregoing asset coverage requirements could restrict the Fund’s ability to pay dividends to Common Stockholders and could lead to sales of portfolio securities at inopportune times. The Fund has met these requirements since issuing the Cumulative Preferred Stock.

Investment Advisory Agreement:
     The Investment Advisory Agreement between Royce and the Fund provides for fees to be paid at an annual rate of 1.0% of the Fund’s average daily net assets applicable to Common Stockholders plus the liquidation value of Preferred Stock. Royce has voluntarily committed to waive the portion of its investment advisory fee attributable to an issue of the Fund’s Preferred Stock for any month in which the Fund’s average annual NAV total return since issuance of the Preferred Stock fails to exceed the applicable Preferred Stock’s dividend rate. For the six months ended June 30, 2010, the Fund accrued and paid Royce investment advisory fees totaling $835,101.

Purchases and Sales of Investment Securities:
     For the six months ended June 30, 2010, the costs of purchases and proceeds from sales of investment securities, other than short-term securities and collateral received for securities loaned, amounted to $29,150,349 and $28,097,820, respectively.


  2010 Semiannual Report to Stockholders  |  55



Directors and Officers  


All Directors and Officers may be reached c/o The Royce Funds, 745 Fifth Avenue, New York, NY 10151

Charles M. Royce, Director*, President
Age: 70   |  Number of Funds Overseen: 31   |   Tenure: Since 1986
Non-Royce Directorships: Director of Technology Investment Capital Corp.

Principal Occupation(s) During Past Five Years: President, Co-Chief Investment Officer and Member of Board of Managers of Royce & Associates, LLC (“Royce”), the Trust’s investment adviser.

Mark R. Fetting, Director*
Age: 55  |   Number of Funds Overseen: 44   |   Tenure: Since 2001
Non-Royce Directorships: Director/Trustee of registered investment companies constituting the 14 Legg Mason Funds.

Principal Occupation(s) During Past 5 Years: President, CEO, Chairman and Director of Legg Mason, Inc. and Chairman of Legg Mason Funds. Mr. Fetting’s prior business experience includes having served as a member of the Board of Managers of Royce; President of all Legg Mason Funds; Senior Executive Vice President of Legg Mason, Inc.; Director and/or officer of various Legg Mason, Inc. affiliates; Division President and Senior Officer of Prudential Financial Group, Inc. and related companies.

Patricia W. Chadwick, Director
Age: 61   |   Number of Funds Overseen: 31   |   Tenure: Since 2010
Non-Royce Directorships: Trustee of ING Mutual Funds and Director of Wisconsin Energy Corp.

Principal Occupation(s) During Past 5 Years: Consultant and President of Ravengate Partners LLC (since 2000).


Richard M. Galkin, Director
Age: 72   |   Number of Funds Overseen: 31   |   Tenure: Since 1986
Non-Royce Directorships: None

Principal Occupation(s) During Past Five Years: Private investor. Mr. Galkin’s prior business experience includes having served as President of Richard M. Galkin Associates, Inc., telecommunications consultants, President of Manhattan Cable Television a (subsidiary of Time, Inc.), President of Haverhills Inc. (another Time, Inc. subsidiary), President of Rhode Island Cable Television and Senior Vice President of Satellite Television Corp. (a subsidiary of Comsat).

Stephen L. Isaacs, Director
Age: 70   |   Number of Funds Overseen: 31   |   Tenure: Since 1989
Non-Royce Directorships: None

Principal Occupation(s) During Past Five Years: President of The Center for Health and Social Policy (since September 1996); Attorney and President of Health Policy Associates, Inc., consultants. Mr. Isaacs’s prior business experience includes having served as Director of Columbia University Development Law and Policy Program and Professor at Columbia University (until August 1996).

Arthur S. Mehlman, Director
Age: 68   |   Number of Funds Overseen: 44   |   Tenure: Since 2004
Non-Royce Directorships: Director/Trustee of registered investment companies constituting the 14 Legg Mason Funds and Director of Municipal Mortgage & Equity, LLC.

Principal Occupation(s) During Past Five Years: Director of The League for People with Disabilities, Inc.; Director of University of Maryland Foundation (non-profits). Formerly: Director of University of Maryland College Park Foundation (non-profit) (from 1998 to 2005); Partner, KPMG LLP (international accounting firm) (from 1972 to 2002); Director of Maryland Business Roundtable for Education (from July 1984 to June 2002).

David L. Meister, Director
Age: 70   |   Number of Funds Overseen: 31  |   Tenure: Since 1986
Non-Royce Directorships: None

Principal Occupation(s) During Past Five Years: Consultant. Chairman and Chief Executive Officer of The Tennis Channel (from June 2000 to March 2005). Mr. Meister’s prior business experience includes having served as Chief Executive Officer of Seniorlife.com, a consultant to the communications industry, President of Financial News Network, Senior Vice President of HBO, President of Time-Life Films and Head of Broadcasting for Major League Baseball.

G. Peter O’Brien, Director
Age: 64   |   Number of Funds Overseen: 44   |   Tenure: Since 2001
Non-Royce Directorships: Director/Trustee of registered investment companies constituting the 14 Legg Mason Funds; Director of Technology Investment Capital Corp.

Principal Occupation(s) During Past Five Years: Trustee Emeritus of Colgate University (since 2005) ; Board Member of Hill House, Inc. (since 1999); Formerly: Trustee of Colgate University (from 1996 to 2005), President of Hill House, Inc. (from 2001 to 2005) and Managing Director/Equity Capital Markets Group of Merrill Lynch & Co. (from 1971 to 1999).


John D. Diederich, Vice President and Treasurer
Age: 58   |   Tenure: Since 2001

Principal Occupation(s) During Past Five Years: Chief Operating Officer, Managing Director and member of the Board of Managers of Royce; Chief Financial Officer of Royce; Director of Administration of the Trust; and President of RFS, having been employed by Royce since April 1993.

Jack E. Fockler , Jr. , Vice President
Age: 51   |   Tenure: Since 1995

Principal Occupation(s) During Past Five Years: Managing Director and Vice President of Royce, and Vice President of RFS, having been employed by Royce since October 1989.

W. Whitney George, Vice President
Age: 52   |   Tenure: Since 1995

Principal Occupation(s) During Past Five Years: Co-Chief Investment Officer, Managing Director and Vice President of Royce, having been employed by Royce since October 1991.

Daniel A. O’Byrne, Vice President and Assistant Secretary
Age: 48   |   Tenure: Since 1994

Principal Occupation(s) During Past Five Years: Principal and Vice President of Royce, having been employed by Royce since October 1986.

John E. Denneen, Secretary and Chief Legal Officer
Age: 43   |   Tenure: 1996-2001 and Since April 2002

Principal Occupation(s) During Past Five Years: General Counsel, Principal, Chief Legal and Compliance Officer and Secretary of Royce; Secretary and Chief Legal Officer of The Royce Funds.

Lisa Curcio, Chief Compliance Officer
Age: 50   |   Tenure: Since 2004

Principal Occupation(s) During Past Five Years: Chief Compliance Officer of The Royce Funds (since October 2004) and Compliance Officer of Royce (since June 2004); Vice President, The Bank of New York (from February 2001 to June 2004).


* Interested Director

Directors will hold office until their successors have been duly elected and qualified or until their earlier resignation or removal. The Statement of Additional Information, which contains additional information about the Trust’s directors and officers, is available and can be obtained without charge at www.roycefunds.com or by calling (800) 221-4268.


56  |  2010 Semiannual Report to Stockholders  



Notes to Performance and Other Important Information  


The thoughts expressed in this Review and Report concerning recent market movements and future prospects for small company stocks are solely the opinion of Royce at June 30, 2010, and, of course, historical market trends are not necessarily indicative of future market movements. Statements regarding the future prospects for particular securities held in the Funds’ portfolios and Royce’s investment intentions with respect to those securities reflect Royce’s opinions as of June 30, 2010 and are subject to change at any time without notice. There can be no assurance that securities mentioned in this Review and Report will be included in any Royce-managed portfolio in the future. The Funds invest primarily in securities of micro-, small- and mid-cap companies, which may involve considerably more risk than investments of larger-cap companies. All publicly released material information is always disclosed by the Funds on the website at www.roycefunds.com.
      The Russell 2000 is an index of domestic small-cap stocks. It measures the performance of the 2,000 smallest publicly traded U.S. companies in the Russell 3000 index. The Russell 2000 Value and Growth indices consist of the respective value and growth stocks within the Russell 2000 as determined by Russell Investments. The Russell Microcap Index measures the performance of the smallest 1,000 companies in the Russell 2000. The S&P 500 and S&P SmallCap 600 are indices of U.S. large- and small-cap stocks, respectively, selected by Standard & Poor’s based on market size, liquidity and industry grouping, among other factors. The Nasdaq Composite is an index of the more than 3,000 common equities listed on the Nasdaq stock exchange. The MSCI EAFE Index (Europe, Australasia, Far East) is designed to measure the equity market performance of developed equity markets, excluding the U.S. and Canada. The MSCI World ex USA Small Core index represents the small-cap segment in the world’s developed equity markets excluding the United States. Returns for the market indices used in this Review and Report were based on information supplied to Royce by Russell Investments and Morningstar. Royce has not independently verified the above described information. The Royce Funds is a service mark of The Royce Funds.
   
Forward-Looking Statements
This material contains forward-looking statements within the meaning of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve risks and uncertainties, including, among others, statements as to:
the Funds’ future operating results
the prospects of the Funds’ portfolio companies
the impact of investments that the Funds have made or may make
the dependence of the Funds’ future success on the general economy and its impact on the companies and industries in which the Funds invest, and
the ability of the Funds’ portfolio companies to achieve their objectives.
This Review and Report uses words such as “anticipates,” “believes,” “expects,” “future,” “intends,” and similar expressions to identify forward-looking statements. Actual results may differ materially from those projected in the forward-looking statements for any reason.
     The Royce Funds have based the forward-looking statements included in this Review and Report on information available to us on the date of the report, and we assume no obligation to update any such forward-looking statements. Although The Royce Funds undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make through future stockholder communications or reports.
 
Authorized Share Transactions
Royce Value Trust, Royce Micro-Cap Trust and Royce Focus Trust may each repurchase up to 5% of the issued and outstanding shares of its respective common stock and up to 10% of the issued and outstanding shares of its respective preferred stock during the year ending December 31, 2010. Any such repurchases would take place at then prevailing prices in the open market or in other transactions. Common stock repurchases would be effected at a price per share that is less than the share’s then current net asset value, and preferred stock repurchases would be effected at a price per share that is less than the share’s liquidation value.
     Royce Value Trust, Royce Micro-Cap Trust and Royce Focus Trust are also authorized to offer their common stockholders an opportunity to subscribe for additional shares of their common stock through rights offerings at a price per share that may be less than the share’s then current net asset value. The timing and terms of any such offerings are within each Board’s discretion.
 
Annual Certifications
As required, the Funds have submitted to the New York Stock Exchange (“NYSE”) for Royce Value Trust and Royce Micro-Cap Trust and to Nasdaq for Royce Focus Trust, respectively, the annual certification of the Funds’ Chief Executive Officer that he is not aware of any violation of the NYSE’s or Nasdaq’s Corporate Governance listing standards. The Funds also have included the certification of the Funds’ Chief Executive Officer and Chief Financial Officer required by section 302 of the Sarbanes-Oxley Act of 2002 as exhibits to the Funds’ form N-CSR for the period ended December 31, 2009, filed with the Securities and Exchange Commission.
 

Proxy Voting
A copy of the policies and procedures that The Royce Funds use to determine how to vote proxies relating to portfolio securities and information regarding how each of The Royce Funds voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available, without charge, on The Royce Funds’ website at www.roycefunds.com, by calling 1-800-221-4268 (toll-free) and on the website of the Securities and Exchange Commission (“SEC”), at www.sec.gov.
 
Form N-Q Filing
The Funds file their complete schedules of investments with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the SEC’s website at www.sec.gov. The Royce Funds’ holdings are also on the Funds’ website approximately 15 to 20 days after each calendar quarter end and remain available until the next quarter’s holdings are posted. The Funds’ Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. To find out more about this public service, call the SEC at 1-800-732-0330. The Funds’ complete schedules of investments are updated quarterly, and are available at www.roycefunds.com.

  2010 Semiannual Report to Stockholders  |  57



Board Approval of Investment Advisory Agreements  


At meetings held on June 9-10, 2010, each of the Funds’ respective Boards of Directors, including all of the non-interested directors, approved the continuance of the Investment Advisory Agreements between Royce & Associates, LLC (“R&A”) and each of Royce Value Trust, Royce Micro-Cap Trust and Royce Focus Trust (the “Funds”). In reaching these decisions, the Board reviewed the materials provided by R&A, which included, among other things, information prepared internally by R&A and independently by Morningstar Associates, LLC (“Morningstar”) containing detailed expense ratio and investment performance comparisons for the Funds with other funds in their “peer group,” information regarding the past performance of Funds managed by R&A and a memorandum outlining the legal duties of the Board prepared by independent counsel to the non-interested directors. R&A also provided the directors with an analysis of its profitability with respect to providing investment advisory services to each of the Funds. In addition, the Board took into account information furnished throughout the year at regular Board meetings, including reports on investment performance, stockholder services, regulatory compliance, brokerage commissions and research, brokerage and execution products and services provided to the Funds. The Board also considered other matters they deemed important to the approval process such as allocation of Fund brokerage commissions and other direct and indirect benefits to R&A and its affiliates, from their relationship with the Funds. The directors also met throughout the year with investment advisory personnel from R&A. The Board, in its deliberations, recognized that, for many of the Funds’ stockholders, the decision to purchase Fund shares included a decision to select R&A as the investment adviser and that there was a strong association in the minds of Fund stockholders between R&A and each Fund. In considering factors relating to the approval of the continuance of the Investment Advisory Agreements, the non-interested directors received assistance and advice from, and met separately with, their independent counsel. While the Investment Advisory Agreements for the Funds were considered at the same Board meetings, the Board dealt with each agreement separately. Among other factors, the directors considered the following:
     The nature, extent and quality of services provided by R&A: The Board considered the following factors to be of fundamental importance to their consideration of whether to approve the continuance of the Funds’ Investment Advisory Agreements: (i) R&A’s more than 35 years of value investing experience and track record; (ii) the history of long-tenured R&A portfolio managers managing the Funds; (iii) R&A’s focus on mid-cap, small-cap and micro-cap value investing; (iv) the consistency of R&A’s approach to managing both the Funds and open-end mutual funds over more than 35 years; (v) the integrity and high ethical standards adhered to at R&A; (vi) R&A’s specialized experience in the area of trading small- and micro-cap securities; (vii) R&A’s historical ability to attract and retain portfolio management talent and (viii) R&A’s focus on stockholder interests as exemplified by its voluntary fee waiver policy on preferred stock assets in certain circumstances where the Funds’ total return performance from the issuance of the preferred does not exceed the coupon rate on the preferred, and expansive stockholder reporting and communications. The Board reviewed the services that R&A provides to the Funds, including, but not limited to, managing each Fund’s investments in accordance with the stated policies of each Fund. The Board considered the fact that R&A provided certain administrative services to the Funds at cost pursuant to the Administration Agreement between the Funds and R&A which went into effect on January 1, 2008. The Board determined that the
services to be provided to each Fund by R&A would be the same as those it previously provided to the Funds. They also took into consideration the histories, reputations and backgrounds of R&A’s portfolio managers for the Funds, finding that these would likely have an impact on the continued success of the Funds. Lastly, the Board noted R&A’s ability to attract and retain quality and experienced personnel. The directors concluded that the services provided by R&A to each Fund compared favorably to services provided by R&A to other R&A client accounts, including other funds, in both nature and quality, and that the scope of services provided by R&A would continue to be suitable for each Fund.
      Investment performance of the Funds and R&A: In light of R&A’s risk averse approach to investing, the Board believes that risk-adjusted performance continues to be an appropriate measure of each Fund’s investment performance. One measure of risk-adjusted performance the Board has historically used in their review of the Funds’ performance is the Sharpe Ratio. The Sharpe Ratio is a risk-adjusted measure of performance developed by Nobel Laureate William Sharpe. It is calculated by dividing a fund’s annualized excess returns by its annualized standard deviation to determine reward per unit of risk. The higher the Sharpe Ratio, the better a fund’s historical risk-adjusted performance. The Board attaches primary importance to risk-adjusted performance over relatively long periods of time, typically three to 10 years. Morningstar compared each of the Funds’ risk-adjusted performance to that of its applicable open-end fund category. Royce Value Trust’s Sharpe Ratio placed in the third quartile within the small blend category assigned by Morningstar for the three- and five-year periods and in the middle quintile for the ten-year period ended December 31, 2009. Royce Micro-Cap Trust’s Sharpe Ratio placed in the middle quintile for the three- and five-year period and in the first quartile within the small blend, growth or value category assigned by Morningstar for the ten-year period ended December 31, 2009. Finally, Royce Focus Trust’s Sharpe Ratio placed in the top quartile within the small growth category assigned by Morningstar for the three-, five- and ten-year periods ended December 31, 2009.
      The Board noted that R&A manages a number of funds that invest in small-cap and micro-cap issuers, many of which were outperforming the Russell 2000 Index and their competitors. Although the Board recognized that past performance is not necessarily an indicator of future results, they found that R&A had the necessary qualifications, experience and track record in managing mid-cap, small-cap and micro-cap securities to manage the Funds. The directors determined that R&A continued to be an appropriate investment adviser for the Funds and concluded that each Fund’s performance supported the renewal of its Investment Advisory Agreement.
      Cost of the services provided and profits realized by R&A from its relationship with each Fund: The Board considered the cost of the services provided by R&A and profits realized by R&A from its relationship with each Fund. As part of the analysis, the Board discussed with R&A its methodology in allocating its costs to each Fund and concluded that its allocations were reasonable. The Board concluded that R&A’s profits were reasonable in relation to the nature and quality of services provided.
      The extent to which economies of scale would be realized as the Funds grow and whether fee levels would reflect such economies of scale: The Board considered whether there have been economies of scale in respect of the management of the Funds, whether the Funds have appropriately benefited from any economies of scale and whether there is potential for realization of any further economies of scale. The Board noted the time and effort

58  |  2010 Semiannual Report to Stockholders





involved in managing portfolios of small- and micro-cap stocks and that they did not involve the same efficiencies as do portfolios of large-cap stocks. The Board concluded that the current fee structure for each Fund was reasonable, and that no changes were currently necessary.
      Comparison of services to be rendered and fees to be paid to those under other investment advisory contracts, such as contracts of the same and other investment advisers or other clients: The Board reviewed the investment advisory fee paid by each Fund and compared both the services to be rendered and the fees to be paid under the Investment Advisory Agreements to other contracts of R&A and to contracts of other investment advisers with registered investment companies investing in small- and micro-cap stocks, as provided by Morningstar. The Board noted that, in the case of Royce Value Trust, the 1.00% basic fee that is subject to adjustment up or down (up to 0.50% in either direction) based on the Fund’s performance versus the S&P 600 SmallCap Index, an unmanaged index, over rolling periods of 60 months. The fee is charged on average net assets over those rolling periods. As a result, in a rising market, the fee will be smaller than a fee calculated on the current year’s average net assets, and visa versa. The Board determined that the performance adjustment feature continued to serve as an appropriate incentive to R&A to manage the Fund for the benefit of its long-term common stockholders. The Board noted that R&A had also agreed to waive its management fee on Fund assets in an amount equal to the liquidation preference of the Fund’s outstanding preferred stock if the Fund’s total return from issuance of the preferred on such amount is less than the preferred’s fixed dividend rate. The Board also noted that the fee arrangement, includes a provision for no fee in periods where the Fund’s trailing three-year performance is negative. Instead of receiving a set fee regardless of its performance, R&A is penalized for poor performance. The Board noted that the Fund’s trailing three-year performances earned R&A no fee in 2009.
      In the case of Royce Micro-Cap Trust, the directors noted that the Fund has a 1.00% basic fee subject to adjustment up or down (up to 0.50%
either direction) based on the Fund’s performance versus the Russell 2000 Index, an unmanaged index, over rolling 36-month periods. The fee is charged on average net assets over those rolling periods. As a result, in a rising market, the fee will be smaller than a fee calculated on the current year’s average net assets, and visa versa. The Board determined that the performance adjustment feature continued to serve as an incentive to R&A to manage the Fund for the benefit of its long-term stockholders. The Board also noted R&A’s voluntarily waiver of its fee on the liquidation value of the outstanding preferred stock in circumstances where the Fund’s total return performance from the issuance of the preferred is less than the fixed dividend rate on the preferred for each month during the year. The Board noted that if the Fund’s expense ratio were based on total average net assets including net assets applicable to Preferred Stock, it would rank in the second quartile when compared to its Morningstar-assigned open-end peer group.
      Finally, in the case of Royce Focus Trust, the Board noted that R&A had agreed to waive its management fee on the liquidation value of outstanding preferred stock if the Fund’s total return from issuance of the preferred is less than the preferred’s fixed dividend rate. The Board noted that if the Fund’s expense ratio were based on total average net assets including net assets applicable to Preferred Stock, it would place in the first quartile of its Morningstar-assigned open-end peer group.
      The Board also considered fees charged by R&A to institutional and other clients and noted that, given the greater levels of services that R&A provides to registered investment companies such as the Funds as compared to other accounts, the Funds’ base advisory fees compared favorably to those other accounts.
      The entire Board, including all the non-interested directors, approved the renewal of the existing Investment Advisory Agreements, concluding that a contract renewal on the existing terms was in the best interest of the stockholders of each Fund and that each investment advisory fee rate was reasonable in relation to the services provided.

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60  |  2010 Semiannual Report to Stockholders




How To Swim Upstream, Against The Grain, Away From The Crowd


“When in Rome, do as the Greeks.”
– Kenneth Burke
Here at Royce, we occasionally describe ourselves as contrarian investors. Although we regularly (and affectionately) define our approach as “value investing,” we also realize that the terms “value” and “growth” now carry so many varying shades of meaning—not all of them necessarily useful or sound—that for some people they may not go to the heart of what characterizes our time-tested style of asset management. We won’t be dispensing with the term “value” anytime soon, but “contrarian” also nicely encapsulates the way in which we conduct our daily investment practice.
 
There is also the important factor of one’s investment time horizon—how long is one willing to wait for other investors to recognize those allegedly sterling qualities that first attracted one’s money and interest? Closely related to this is conviction level—if the stock price continues to decline, but the company otherwise seems to be in sound financial condition, does an investor have the stomach to stick it out or, in some cases, add to the position? These are questions a contrarian investor must be able to answer if he or she seeks to successfully go against Wall Street’s consensus.

      The American Heritage Dictionary defines contrarian as, “One who takes a contrary view or action, especially an investor who makes decisions that contradict prevailing wisdom, as in buying securities that are unpopular at the time.” In defining our own contrarian bent, Royce’s Co-Chief Investment Officer, Whitney George, puts it this way: “More often than not, being a contrarian means standing alone. It requires an enormous amount of self-confidence to buy securities when the rest of the world is telling us, ‘These are bad ideas.’ Every day, we might be doing things that other smart people are insisting are wrong, so we have to believe strongly in what we are buying.” To us, then, being a contrarian involves far more than a willingness to swim against the current. It’s not just a matter of moving in the opposite direction of the market, a strategy that, if applied with no core investment principles of one’s own, would almost certainly lead to financial disaster.
      In fact, as useful as the dictionary definition is, it also leaves important questions unanswered. All value investors are, to some degree, contrarians because every investor who uses a value approach is looking for what they judge to be good companies selling at attractively low share prices. (Not to belabor the obvious, but for any stock price to be considered attractively low typically means one of two things: that much of the market believes it is not a worthwhile investment or that the majority of investors have failed to even notice the company’s existence.) Another issue is that how one determines company quality is likely to vary considerably from manager to manager.

 
Our own habit of being contrarian comes not out of a desire to flout conventional wisdom for its own sake, but from our commitment to doing what we think works best, regardless of what other investors may be buying or selling.
 

      Our own habit of being contrarian comes not out of a desire to flout conventional wisdom for its own sake, but from our commitment to doing what we think works best, regardless of what other investors may be buying or selling. Purchasing small-cap stocks when they are out of favor, when we may not have a firm idea of when their fortunes may be reversed, when it may take years—and several more stomach-churning plummets in the stock price—for an idea to be successful—all of this makes having a high level of conviction about companies an absolute necessity.
     The disciplined approach that we have been refining since the ’70s focuses on absolute, long-term returns. While we are hardly the only asset manager, even in the small-cap space, to adhere to this standard, much of Wall Street operates on a much narrower calendar, one in which quarterly results matter more than those of the full market or business cycle. Patience is a rare commodity in equity investing, as is the idea that, while beating a benchmark is wonderful, it is still far less important than helping investors to build wealth over long-term time periods.
     The qualities that we most commonly seek in small-cap companies—strong balance sheets, high returns on invested capital and the ability to generate free cash flow—are also not universally sought on Wall Street. Many investors who see the value in these qualities may not be as willing as we are to wait for them to bear fruit in the form of a company’s rising share price. This results in a relatively small number of people who share our passion for quality businesses as well as the patience to stick with them, even as others are busy following the pack. Which is exactly how we like it.


This page is not part of the 2010 Semiannual Report to Stockholders



       

   
   
   
   
  Wealth Of Experience
With approximately $29 billion in open- and closed-end fund assets under management, Royce & Associates is committed to the same small-company investing principles that have served us well for more than 35 years. Charles M. Royce, our President and Co-Chief Investment Officer, enjoys one of the longest tenures of any active mutual fund manager. Royce’s investment staff also includes Co-Chief Investment Officer W. Whitney George, 15 Portfolio Managers, 11 assistant portfolio managers and analysts, and eight traders.

Multiple Funds, Common Focus
Our goal is to offer both individual and institutional investors the best available small-cap value portfolios. Unlike a lot of mutual fund groups with broad product offerings, we have chosen to concentrate on small-company value investing by providing investors with a range of funds that take full advantage of this large and diverse sector.

Consistent Discipline
Our approach emphasizes paying close attention to risk and maintaining the same discipline, regardless of market movements and trends. The price we pay for a security must be significantly below our appraisal of its current worth. This requires a thorough analysis of the financial and business dynamics of an enterprise, as though we were purchasing the entire company.
   
 
Co-Ownership Of Funds
It is important that our employees and shareholders share a common financial goal; our officers, employees and their families currently have approximately $99 million invested in The Royce Funds.
   
              
           
   
           
   
   
   
       
  745 Fifth Avenue  |  New York, NY 10151  |   (800) 221-4268  |  www.roycefunds.com      
 

General Information
Additional Report Copies
and Prospectus Inquiries
(800) 221-4268

RIA Services
Fund Materials and
Performance Updates
(800) 33-ROYCE (337-6923)

Broker/Dealer Services
Fund Materials and
Performance Updates
(800) 59-ROYCE (597-6923)

Computershare
Transfer Agent
and Registrar
(800) 426-5523

 
 
   



 
   
   
 
 
   
   

 


Item 2. Code(s) of Ethics. Not applicable to this semi-annual report.

Item 3. Audit Committee Financial Expert. Not applicable to this semi-annual report.

Item 4. Principal Accountant Fees and Services. Not applicable to this semi-annual report.

Item 5. Audit Committee of Listed Registrants. Not applicable to this semi-annual report.

Item 6. Investments.
(a) See Item 1.
   
(b) Not applicable.

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment
Companies. Not applicable to this semi-annual report.

Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not applicable to this semi-annual report.

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not applicable.

Item 10. Submission of Matters to a Vote of Security Holders. Not applicable.

Item 11. Controls and Procedures.

(a) Disclosure Controls and Procedures. The Principal Executive and Financial Officers concluded that the Registrant’s Disclosure Controls and Procedures are effective based on their evaluation of the Disclosure Controls and Procedures as of a date within 90 days of the filing date of this report.

(b) Internal Control over Financial Reporting. There were no significant changes in Registrant’s internal control over financial reporting or in other factors that could significantly affect this control subsequent to the date of the evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses during the second fiscal quarter of the period covered by this report.

Item 12. Exhibits. Attached hereto.
(a)(1) Not applicable to this semi-annual report.

(a)(2) Separate certifications by the Registrant’s Principal Executive Officer and Principal Financial Officer as required by Rule 30a-2(a) under the Investment Company Act of 1940.

(a)(3) Not applicable.

(b) Separate certifications by the Registrant’s Principal Executive Officer and Principal Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(b) under the Investment Company Act of 1940.



Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

ROYCE VALUE TRUST, INC.
BY: /s/ Charles M. Royce
  Charles M. Royce
  President

Date: August 27, 2010

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

ROYCE VALUE TRUST, INC.   ROYCE VALUE TRUST, INC.
         
BY: /s/ Charles M. Royce   BY: /s/ John D. Diederich
  Charles M. Royce    

John D. Diederich

  President    

Chief Financial Officer

         
Date: August 27, 2010   Date: August 27, 2010