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: 1414 Avenue of the Americas
New York, NY 10019

Name and address of agent for service: John E. Denneen, Esquire
  1414 Avenue of the Americas
  New York, NY 10019

Registrant’s telephone number, including area code: (212) 486-1445
Date of fiscal year end: December 31
Date of reporting period: January 1, 2006 - June 30, 2006

Item 1: Reports to Shareholders










 


S E M I A N N U A L  R E V I E W
 
Royce Value Trust


Royce Micro-Cap Trust


Royce Focus Trust






www.roycefunds.com





























AND
R E P O R T   T O  S T O C K H O L D E R S
2006
     
TheRoyceFunds
   
VALUE INVESTING IN SMALL COMPANIES FOR MORE THAN 30 YEARS












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 on a stock exchange or are traded in the over-the-counter market. 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 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 or the Nasdaq market, 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. Each of the Funds has adopted a quarterly distribution policy for its common stock.
 
 
 
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.
 
 
 
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TABLE OF CONTENTS


Semiannual Review    

Performance Table   2

Letter to Our Stockholders   3

Online Update

  10

 

   

Semiannual Report to Stockholders   11


For more than 30 years, we have used a value approach to invest in smaller-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. At times, we may also look at other factors, such as a company’s unrecognized asset values, its future growth prospects or its turnaround potential following an earnings disappointment or other business difficulties. 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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Charles M. Royce, President


When we discuss specific security

selection criteria for many of The

Royce Funds, four qualities are

commonly listed: a strong balance

sheet, a history of earnings, high

internal rates of return and the

ability to generate free cash flow.

Each is a critical part of

determining both a company’s

current quality and the likelihood

that it will be able to maintain

that quality in the future. They

are also in many ways interrelated.

For example, previously we

discussed the importance of a low-

debt, asset-rich balance sheet in

helping to maintain or fuel

earnings, especially when a business

is experiencing earnings trouble.

Similarly, a company’s ability to

generate free cash flow is often

linked to its ability to sustain

positive earnings and to generate

high internal rates of return. We

think that it’s a positive sign

Continued on Page 4...

     
     
      PERFORMANCE TABLE
     
                                               
     

AVERAGE ANNUAL NAV TOTAL RETURNS Through June 30, 2006

 
 
 

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

     

Second Quarter 2006*

    -3.86 %       -3.16 %       -4.83 %       -5.02 %  
 
 
 

     

January - June 2006*

    9.64         11.58         8.11         8.21    
 
 
 

     

One-Year

    21.33         20.80         30.73         14.58    
 
 
 

     

Three-Year

    21.33         22.60         27.21         18.70    
 
 
 

     

Five-Year

    11.34         14.02         16.16         8.50    
 
 
 

     

10-Year

    13.88         14.11         n/a         9.05    
 
 
 

     

15-Year

    14.27         n/a         n/a         11.80    
 
 
 

     

Since Inception

    12.85         14.36         14.28            
 
 
 

     

Inception Date

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

 * Not annualized.

     

**  Date Royce & Associates, LLC assumed investment management responsibility for the Fund.

       
       
       
       
       
       
         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. Performance information does not reflect the deduction of taxes that a stockholder would pay on distributions or on the sale of Fund shares. 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 small-cap and/or micro-cap companies, which may involve considerably more risk than investments in securities of larger-cap companies.

The thoughts expressed in this Review and Report to Stockholders concerning recent market movements and future prospects for small company stocks are solely the opinion of Royce at June 30, 2006, 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, 2006 and are subject to change at any time without notice. There can be no assurance that securities mentioned in this Review and Report to Stockholders will be included in any Royce-managed portfolio in the future.

       
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LETTER TO OUR STOCKHOLDERS



Value In Vogue?

After three full decades managing small-cap value portfolios, we thought that we had seen all of the various movements, fads and trends that periodically capture the imaginations (to say nothing of the wallets) of investors. It was always easy for us to be amused at such things. Being value investors, with that term’s inherent sense of caution and conservatism, we have always measured a comfortable distance between the work that we do and anything that smacks of trends in equity investing. With its emphasis on attributes such as patience and diligence, with its demands of long hours of detailed research, value seems by nature not simply unfashionable, but nearly impervious to the short-term mindsets that typically dominate the stock market equivalent of the runways of Paris, Milan and Manhattan. Even earlier in the current decade, when value, especially small-cap value, began scoring high returns and glowing press, it did not appear to capture the investment zeitgeist in quite the same way that large-cap or Technology investments had during the ’90s. This was more than all right with us. After all, we’re not exactly high-fashion material (there’s a reason we always look better in cartoon form), and we did not think that our approach was, either.
     Yet here we are just past the halfway mark of 2006, and in our view small-cap value investing is nearing the end of its stint as domestic investment’s hottest approach. How did our style become so stylish? Its success over the last several years occurred during a period in which few alternatives in the domestic equity universe could compete with its strong results. As measured by the Russell 2000, small-cap bested large-cap (as measured by the S&P 500) for the one-, three-, five-, 10- and 15-year periods ended 6/30/06. In turn, the Russell 2000 Value index outperformed the Russell 2000 for each of these periods as well as the 20- and



The market still awaits Next Year’s Model, but small-cap value’s unexpected turn on the runway should hardly result in obsolescence.




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when earnings and cash flows

are closely aligned.



Cash flow is usually defined as the

amount of net cash that a company

brings in that may be used for

various company purposes, such as

to build assets or pay dividends.

(Cash flow can also be negative, in

which case there are no funds with

which to further capitalize business

activities or make payouts to

shareholders.) For most businesses,

cash flow comes from three

activities—operations, investment

and financing.



Our preference in most cases is for a

company that generates the bulk of

its net cash flow from operations,

from the day-to-day activities of its

business. Cash flow from operations

is also significant because it may

likely affect the other two activities.

Although they are similar

in that they help us to understand

a company’s profitability, cash flow

differs from earnings (the profits a

company makes) because it

also takes into account certain non-

cash accounting items, most

importantly depreciation.

Continued on Page 6...


   

LETTER TO OUR STOCKHOLDERS


25-year periods ended 6/30/06. These terrific results led to the plainly dressed small-cap value approach attracting speculative dollars from short-term investors, money hungry for the Next Big Thing that probably originated from those whose only experience with smaller stocks would most likely have come on the growth side. It was not long ago that this activity would have been difficult, if not impossible, without considered investments in specific small-cap stocks or astute choices in small-cap value mutual funds. However, with the advent of investment vehicles such as ETFs (Exchange Traded Funds), moving quickly in and out of virtually any equity style index has become more convenient for investors of all tastes, temperaments and time frames.

     What becomes of investment approaches when they are no longer considered the most fashionable? We suspect that styles such as ours will manage just fine beyond the glare of the hot lights just as they did before they became trendy. Although the last few years have been wonderful, the rally has been top-heavy with an extended run for energy stocks (that may not be over) and shorter, less stellar bursts in other areas. This leaves ample room for potential growth in those places that have enjoyed only intermittent success or have been mostly left out. The market still awaits Next Year’s Model, but small-cap value’s unexpected turn on the runway should hardly result in obsolescence.


Is Large the New Small?
Our track record for large-scale stock market prognostication is checkered at best—we like to joke that we’ve called 10 of the last three corrections. Still, the case for emerging large-cap leadership remains compelling to us, even as it’s also important to re-assert our view that any leadership phase in the coming months is likely to be short-lived, whether for large-caps, as measured by the S&P 500, or small-caps, as measured by the Russell 2000. The 10-year period ended 12/31/05 offered an almost eerily symmetrical split between long-term periods first of large-cap, then of small-cap dominance. We do not expect anything resembling the previous 10 years in terms of the time span of asset-class leadership or the breadth in performance spreads. We continue to believe that the stock market will be characterized by frequent leadership rotation and low returns.

     After narrowly outperforming small-cap stocks in 2005, large-caps took their by-now-familiar position in the back seat to small-cap during the first half of 2006. The Russell 2000 was up 8.2% for the year-to-date period ended 6/30/06, versus a gain of 2.7% for the S&P 500 (and a loss of 1.5% for the still-struggling Nasdaq Composite). Small-cap’s advantage came primarily from its considerable outperformance in the bullish first quarter, when the Russell 2000 was up 13.9% versus a gain of 4.2% for the S&P 500. When stock prices began to correct in the second quarter, large-cap outperformed (-1.4% for the S&P 500 versus -5.0%

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for the Russell 2000). The pattern of small-cap leading in brief up-market phases then ceding leadership to large-cap during equally brief downturns dates back to 2003.

     The down-market resilience of large-cap stocks seems to us to be the central story of the recent decline. Our earlier contention, made in our 2005 Annual Review and Report, was that large-cap would lose less during declines, which has been the case so far in 2006. We also surmised that small-cap would have an edge in any subsequent rally, which held true in the first quarter. Yet we are no longer convinced that small-cap will lead in every subsequent bullish phase. An underreported element in the downturn was the tightening of liquidity on a worldwide level. The combination of better near-term down market results for large-cap stocks and the widespread liquidity crunch is likely to draw investors in the short run to cash, bonds and what they perceive to be stable, high-quality equities. In other words, the unfashionable nature of large-cap stocks may be exactly what helps to make them fashionable again.


Value—Always in Style?

Of course, no style has been more fashionable in the current decade than small-cap value. However much we may think of our work as an all-weather strategy—a fashion perennial more akin to a navy blazer or black cocktail dress than the latest creations adorning the windows of boutiques on Rodeo Drive—there’s no denying the recent attraction of small-cap value for investors burdened with what we would describe as the investment equivalent of short attention spans. And its long run in the current decade has indeed been wildly impressive. The Russell 2000 Value index outpaced its small-cap growth counterpart, as measured by the Russell 2000 Growth index, for the one-, three-, five-, 10-, 15-, 20- and 25-year periods ended 6/30/06. One notable aspect of small-cap value’s remarkable run in the current decade has been its absolute and relative strength during the most recent long-term



We do not expect anything resembling the previous 10 years in terms of the time span of asset-class leadership or the breadth in performance spreads. We continue to believe that the stock market will be characterized by frequent leadership rotation and low returns.




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LETTER TO OUR STOCKHOLDERS


 
A company’s statement of cash

flows is crucial, because it

provides a record of how the firm

has handled cash inflows and

outflows over a given quarterly or

annual period.



It also helps to reconcile

information found on the balance

sheet (which shows a firm’s assets

and liabilities) and the income

statement (which shows all revenue,

costs, expenses and earnings).

While the balance sheet can be

used to determine the increase or

decrease in assets and the

income statement shows the

profits that have made an impact

on that growth (or lack thereof),

the statement of cash flows gives

us an idea of how that growth

was financed. It tells the story of

where the money came from and

where it went.



This is especially relevant for

capital-intensive businesses such as

industrial companies that maintain

physical plants and own stores of

equipment that will eventually

need upgrading or replacing.


Continued on Page 8...

   
up-market period. From the small-cap market trough on 10/9/02 through 6/30/06, the Russell 2000 Value index gained 140.1% versus 123.1% for the Russell 2000 Growth index. Small-cap value’s recent short-term returns were also strong. For the year-to-date period ended 6/30/06, the small-cap value index was up 10.4% versus 6.1% for the small-cap growth index. Although it trailed growth in the first quarter (+13.5% versus +14.4%), it moved ahead in the second, -2.7% versus -7.3%.

     Investors can thus be forgiven if they’re a little anxious about small-cap value’s ongoing prospects. Our admittedly biased view is that small-cap value should be all right, even if its days of doing star turns on the most chic runways may be drawing to a close. Although returns for the approach seldom reached the same levels, its performance in the current decade is analogous to some degree to what large-cap stocks were during the mid-to-late ’90s–a fashionable area where people were putting money almost to the exclusion of the rest of the stock market. Now that the attention seems to be waning, we are finally beginning to see valuations come back to what we regard as more sensible levels throughout the small-cap world, although the number of bargains as of this writing is still not as plentiful as we would like.


Royce on the Runway
While the first six months of 2006 were terrific for the Russell 2000 (and the Russell 2000 Value index), results were slightly more mixed for our three closed-end offerings. All three Funds posted strong net asset value (NAV) results on an absolute basis, but Royce Focus Trust narrowly trailed the Russell 2000 on that basis. However, this was only a small blemish, especially in the wider context of longer-term returns for periods ended 6/30/06. Over market cycle and other long-term time periods, each Fund posted impressive absolute and relative returns on both an NAV and market price basis. These are the time spans that matter most to us in evaluating performance.

      Both in our portfolios and the small-cap world as a whole, energy stocks enjoyed a strong first half, as did many Industrial Products and Services companies. However, these were not the only three areas in which Fund performance was strong in the first half. Technology companies also made a sizeable positive contribution to performance. In fact, net


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losses on a dollar basis were hard to find at the sector level, an impressive, albeit short-term, accomplishment during a volatile six months for equities.


From the Catwalk to the Coal Mine?
Some investors may be concerned that small-cap’s run has been of such long duration that the asset class is poised for a long period of desultory performance, with the recent downturn a harbinger of things to come. We respectfully disagree. The recent decline has been fairly benign as corrections go and hardly catastrophic for small-cap as a whole. In the coming months, we think that micro-cap stocks will be the area to watch most closely as a potential indicator of small-cap movement. They are generally more volatile to begin with, and having enjoyed strong performance over the last few years, they are especially vulnerable to nervous investors looking for safety. For the more fatalistic among us, they are the canary in the small-cap coal mine in that any major decline for our asset class would probably begin with them. However, we’re more confident about the prospects for the entire small-cap area. We do not believe that the recent down-market period marks the beginning of a severe and/or long-term bear market for any asset class, including micro-caps. What we have been seeing lately seems to us less serious and more in line with what has happened historically following successful, speculative periods. The really interesting element in the downturn has been that several typically non-correlated asset categories–small-cap stocks, natural resources stocks and commodities, real estate and emerging markets–were coming off strong long-term performances and then began to correct at more or less the same time in the spring of this year. It’s been an odd confluence of declining performance that we believe has been making the downward move look more severe than it really is.

     We define a correction as a decline of 15% or more from a previous small-cap peak. It remains too early to tell whether the current decline will reach this level (as of this writing it has not). However, like any previous decline, it has presented us with some discrete purchase opportunities, even as it has caused pain for investors. Although a market that steadily climbed year after year would make investors sleep more soundly, it is volatility that helps to create the pricing inefficiencies that attract value investors like ourselves. As any market sell-off worsens, quality companies are often lumped together with weaker ones, as short-term investors rush for the exits. This leaves many worthwhile companies trading for less than our estimate of their intrinsic value, piled among the rubble of companies walloped by the correction. The current decline has begun to create such situations, though not yet in large numbers. At least in the short run, further erosion in stock prices would not be the worst thing that could happen to small-cap stocks.



Although returns for the approach seldom reached the same stratospheric levels, small-caps performance in the current decade is analogous to some degree to what large-cap stocks were during the mid-to-late ’90s–a fashionable area where people were putting money almost to the exclusion of the rest of the stock market.




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LETTER TO OUR STOCKHOLDERS


 

Without positive cash flow, these

businesses are likely to have trouble

keeping up with more profitable,

cash-laden competitors. In such

businesses, we like to see cash

flows that are greater than earnings

because it means that the company’s

depreciation expenses are healthy.

In high-returning businesses, we

prefer that cash flows be reinvested

at high returns.



In all cases, regardless of the type

of business, we want to see cash

flows used intelligently. To our way

of thinking, this means reinvesting

in the business or paying dividends

to shareholders. As with most

things, we think about the longterm

picture when it comes to cash

flow. We may be willing to buy a

firm in a negative cash flow

moment if we think the firm is

capable of righting itself. However,

cash flow problems should be

temporary as few factors signal

quality more definitively than

stable, growing cash flows.

   


Five Years of Fashion
Most small-cap market cycles have been much shorter than the current cycle’s nearly six-year time span, with the average length of the eight completed cycles in the history of the Russell 2000 being 3.3 years. The shortest was little more than one-and-a-quarter years (2/8/80-6/15/81), while the longest lasted approximately six-and-a-half years (10/9/89-5/22/96). If the current cycle were to end soon, it would be the second longest on record. This is one of the reasons why we evaluate Fund performance on an absolute basis over long-term periods, such as five years, in addition to full market cycles. Examining five-year periods is especially useful because they typically include all of or most of a full market cycle, sometimes two. In addition, examining rolling five-year results gives a better picture of long-term market trends, and can also provide insight into what we might expect as the market moves forward.

     There have been 269 monthly trailing five-year return periods since the Russell 2000’s inception on 12/31/78. From inception through 6/30/06, the index’s five-year return was less than zero in only 3% of these periods. The index provided positive single-digit returns more than 40% of the time and double-digit returns 56% of the time. Over the entire period, the average of all of the 269 five-year average annual total return periods was 11.6%. In the case of small-cap value, the results are even stronger. The Russell 2000 Value index did not have any negative five-year return periods since its inception and produced positive single-digit returns in 17% of the periods. In an impressive 83% of the periods, the value index produced double-digit five-year average annual total returns, averaging 14.5% for all of the 269 return periods. (Please see the following page for more details.)

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     The foregoing is in large part why we believe that small-caps continually offer the potential to produce above-average returns over long-term time horizons, and why we regard them as a necessary component in any asset allocation plan. Fashions come and go, but we believe that approaches such as ours, those that patiently strive to build wealth over the long haul, have what it takes to remain successful no matter what happens to be in (or out) of style elsewhere in the investment world.

           
Sincerely,          
           
     
           
Charles M. Royce   W. Whitney George   Jack E. Fockler, Jr.  
President   Vice President   Vice President  
           
July 31, 2006          
           
           


The Russell 2000 Value index did not have any negative five-year return periods since its inception and produced positive single-digit returns in 17% of the periods. In an impressive 83% of the periods, the value index produced double-digit five-year average annual total returns, averaging 14.5% for all of the 269 return periods.




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ONLINE UPDATE
 



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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

  33

Royce Focus Trust

  46

Board Approval of Investment Advisory Agreements   54

Other Important Information   56



2006 SEMIANNUAL REPORT TO STOCKHOLDERS  |  11
 




ROYCE VALUE TRUST


AVERAGE ANNUAL NAV TOTAL RETURNS
Through 6/30/06

 
Manager’s Discussion

The first-half results for Royce Value Trust’s (RVT) diversified portfolio of small- and micro-cap stocks fully reflected the schizoid nature of the first six months of 2006. For the year-to-date period ended 6/30/06, the Fund was up 9.6% on a net asset value (NAV) basis and 0.7% on a market price basis versus an 8.2% return for the Russell 2000 and a 7.7% result for the S&P 600. On an NAV basis, RVT stayed ahead of both of its small-cap benchmarks, although its market price return trailed by a substantial margin. Much of the Fund’s market price lag can be attributed to its relative lack of participation in the dynamic rally that characterized the first quarter, in which RVT’s market price return was 6.1%. During the same period, the Russell 2000 was up 13.9% and the S&P 600 gained 12.8%, while RVT gained 14.0% on an NAV basis. When stock prices fell in the second quarter, RVT lost 3.9% on an NAV basis and 5.1% on a market price basis. The Russell 2000 declined 5.0% and the S&P 600 lost 4.6% in the second quarter.
     The Fund’s solid first-half NAV return contributed to its strong absolute and relative results over market-cycle and other long-term periods. From the small-cap market peak on 3/9/00 through 6/30/06, RVT gained 112.3% versus 29.5% for the Russell 2000 and 77.8% for the S&P 600. During the more bullish phase from the small-cap market trough on 10/9/02 through 6/30/06, the Fund was up 141.8% compared to a gain of 131.8% for the Russell 2000 and 128.0% for the S&P 600. On an NAV basis, RVT also held a performance advantage over each of its benchmarks for the one-, three-, five-, 10-, 15-year and since inception (11/26/86) periods ended 6/30/06. The Fund outperformed the Russell 2000 on a market price basis for each of these periods except the one year interval and bested the S&P 600 for all but the one-and three-year periods. RVT’s average annual NAV total return since inception was 12.9%.
     Each of the Fund’s equity sectors posted positive net gains during the first half. On a dollar basis, the leading sectors were Industrial Products, Industrial Services and Natural Resources. Within Industrial Products, more than 40% of the sector’s dollar-based gains came from holdings in the machinery industry, including the portfolio’s top gainer–and top-ten position–Lincoln Electric Holdings, a security that we have owned in RVT’s portfolio since 1998. What has attracted us over the years to this welding and cutting products maker were its strong balance sheet, history of positive earnings and ability to generate positive cash flow from operating activities. Its cyclical industrial business was one that attracted quality-seeking value investors like ourselves. We were pleasantly surprised by its impressive first half, as the worldwide demand for its products continued to grow at a torrid pace. The firm announced record revenues in February for both the fiscal year and fourth quarter ended 12/31/05. Record revenues were also reported in April for the fiscal first quarter of 2006. In between, the company was added to the S&P 400 MidCap index.
     We have owned shares of another Industrial Products business, Kimball International, since 1989. The firm, whose low debt and consistent dividend helped maintain our attraction, makes

Second Quarter 2006*

  -3.86 %

Jan - June 2006*

  9.64  

One-Year

              21.33  

Three-Year

              21.33  

Five-Year

              11.34  

10-Year

              13.88  

15-Year

              14.27  

Since Inception (11/26/86)

  12.85  
* Not annualized.
     

CALENDAR YEAR NAV TOTAL RETURNS


Year

  RVT     Year     RVT  

2005

  8.4 %   1996     15.5 %

2004

  21.4     1995     21.1  

2003

  40.8     1994     0.1  

2002

  -15.6     1993     17.3  

2001

  15.2     1992     19.3  

2000

  16.6     1991     38.4  

 

1999

  11.7     1990     -13.8  
All performance information in this 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 Funds’ P/E ratio calculations exclude companies with zero or negative earnings.

1998

  3.3     1989     18.3  

1997

  27.5     1988     22.7  
                   

TOP 10 POSITIONS
% of Net Assets Applicable
to Common Stockholders


AllianceBernstein Holding L.P.

  1.9 %

Ritchie Bros. Auctioneers

  1.5  

Lincoln Electric Holdings

  1.3  

Sotheby’s

  1.1  

SEACOR Holdings

  1.1  

Plexus Corporation

  1.0  

Ash Grove Cement Company Cl. B

  0.9  

Forward Air

  0.9  

Newport Corporation

  0.9  

Brady Corporation Cl. A

  0.8  
                   

PORTFOLIO SECTOR BREAKDOWN
% of Net Assets Applicable
to Common Stockholders


Technology

  21.6 %

Industrial Products

  18.0  

Industrial Services

  14.1  

Natural Resources

  9.8  

Financial Intermediaries

  8.9  

Health

  7.4  

Financial Services

  7.4  

Consumer Services

  5.7  

Consumer Products

  4.6  

Utilities

  0.2  

Diversified Investment Companies

  0.1  

Miscellaneous

  1.6  

Bond & Preferred Stocks

  0.3  

Cash and Cash Equivalents

  20.2  



12  |   2006 SEMIANNUAL REPORT TO STOCKHOLDERS
 




Performance and Portfolio Review


  GOOD IDEAS THAT WORKED
  Net Realized and Unrealized Gain Through 6/30/06
 
wood furniture and cabinets, as well as electronic assembly products. Better-than-expected fiscal third-quarter earnings and new opportunities for its electronics division seemed to attract more investors. Unlike many stocks in the first half, Kimball’s price climbed relatively late, not really taking off until May. Oregon Steel Mills specializes in steel plate and pipe products. A resurgent steel industry and recent earnings increases helped its stock price to climb and prompted us to trim our position in the first quarter. Outside of the Industrial Products sector, the Fund had success with two top-ten holdings. The price of fine art, antique and collectibles auction house Sotheby’s rose on news of higher profits in its fiscal fourth quarter. Steady, better-than-
    PORTFOLIO DIAGNOSTICS
  Lincoln Electric Holdings $4,900,103       

      Average Market Capitalization $1,055 million   
  Kimball International Cl. B 3,971,411       

      Weighted Average P/E Ratio 20.7x  
  Sotheby’s 3,828,228       

      Weighted Average P/B Ratio 2.2x   
  Plexus Corporation 3,735,779       

      Weighted Average Yield 0.8%   
  Ritchie Bros. Auctioneers 3,392,672       
          Fund Net Assets $1,108 million   
expected earnings, as well as a promising outlook, seemed to create excitement for the shares of industrial equipment auctioneer Ritchie Bros. Auctioneers.
 
     MAXIMUS provides consulting, as well as systems and operations management, to federal, state and local government agencies and privatesector clients. Its price plummeted amidst a now-settled lawsuit, a large contract problem and some     Turnover Rate 8%   
     
management decisions that left investors scratching their heads as they were selling its shares. We held a position at the end of June, hopeful that the firm was capable of righting itself. We also held a small position in PXRE Group. Its share price collapsed in the wake of fiscal fourth-quarter losses resulting from the damage wrought by Hurricanes Katrina, Rita and Wilma.
 
  GOOD IDEAS AT THE TIME
  Net Realized and Unrealized Loss Through 6/30/06
      Net Leverage 0%   
   
  MAXIMUS $1,731,766          Symbol  

        Market Price RVT   
  PXRE Group 1,538,931            NAV XRVTX   

   
 Net leverage is the percentage, in excess of 100%, of the total value of equity type investments, divided by net assets, applicable to Common Stockholders.
  HealthSouth Corporation 1,230,400       

           
  Foundry Networks 1,176,210         

      CAPITAL STRUCTURE
  Publicly Traded Securities Outstanding at 6/30/06 at
  NAV or Liquidation Value
  Fleetwood Enterprises 1,126,983       
          55.9 million shares of Common Stock $1,108 million  
       
            5.90% Cumulative Preferred Stock $220 million  
                 
    RISK/RETURN COMPARISON
  Three-Year Period Ended 6/30/06
 
    Average Annual
Total Return
Standard Deviation Return
Efficiency*
 
    RVT (NAV) 21.3% 14.1 1.51
 
    S&P 600 20.5 13.7 1.50
 
    Russell 2000 18.7 14.6 1.28
 
* Return Efficiency is the average annual total return divided by the annualized standard deviation over a designated time period.
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.
 

2006 SEMIANNUAL REPORT TO STOCKHOLDERS  |  13





ROYCE MICRO-CAP TRUST


AVERAGE ANNUAL NAV TOTAL RETURNS
Through 6/30/06

 
Manager’s Discussion

During the first half of 2006, the diversified portfolio of Royce Micro-Cap Trust (RMT) posted solid results on both an absolute and relative basis. For the year-to-date period ended 6/30/06, RMT gained 11.6% on a net asset value (NAV) basis and 4.5% on a market price basis versus a return of 8.2% for the Russell 2000, the Fund’s small-cap benchmark. In the bullish opening quarter, RMT’s portfolio fully participated in the dynamic up market with a gain of 15.2% versus the Russell 2000’s return of 13.9%, while on a market price basis the Fund lagged, gaining 7.0%. Even better news was the Fund’s stronger relative down-market showing in the second quarter, a more bearish time span that saw stock prices fall. From April through the end of June, RMT was down 3.2% on an NAV basis and 2.3% on a market price basis, both results ahead of the Russell 2000’s 5.0% decline. For the even shorter-term downturn from the most recent small-cap market high on 5/5/06 through 6/30/06, the Fund was down 6.1% on an NAV basis and 5.4% on a market price basis, both results again better then the small-cap index’s return of -7.1%. Although short-term performance periods are typically not of great interest or concern, we were pleased with RMT’s near-term down market results considering the volatility and vulnerability of the micro-cap asset class.
     We were also pleased with the Fund’s NAV full market cycle and other long-term results on both an absolute and relative basis. These are the periods that we believe matter most in any evaluation of the portfolio’s merits. From the small-cap market peak on 3/9/00 through 6/30/06, RMT gained 125.2% on an NAV basis (+174.3% on a market price basis) versus 29.5% for the Russell 2000. Arguably even more impressive was the Fund’s gain during the more bullish phase that ran from the small-cap market trough on 10/9/02 through 6/30/06, a period in which RMT was up 160.7% on an NAV basis (+191.5% on a market price basis) compared to the Russell 2000’s gain of 131.8%. The Fund also outperformed its benchmark for the one-, three-, five, 10-year and since inception (12/14/93) periods on both an NAV and market price basis. RMT’s average annual NAV total return since inception was 14.4%.
     All but one of the Fund’s equity sectors posted net gains during the first half, and losses at the individual company level were relatively small. Multi-business holding company BB Holdings spun off a subsidiary that trades in the U.S., but the prospect of its own domestic de-listing sent investors fleeing; its stock continues to trade overseas. Small pharmaceuticals companies have endured tough times recently, even conservatively capitalized businesses such as Momenta Pharmaceuticals. The firm experienced net losses as it waited for new drugs to be approved, which led many investors to go cold turkey on its stock. After selling some shares in March, we repurchased the stock in April. At the end of June, we held a position in American Bank Note Holographics, a firm that produces holograms for currency, credit card identification and document security. Its shares dropped 60% in March on news that a major credit card company

Second Quarter 2006*

  -3.16 %

Jan - June 2006*

  11.58  

One-Year

              20.80  

Three-Year

    22.60  

Five-Year

              14.02  

10-Year

              14.11  

Since Inception (12/14/93)

  14.36  
* Not annualized.
     

CALENDAR YEAR NAV TOTAL RETURNS


Year

  RMT     Year     RMT  

2005

  6.8 %   1999     12.7 %

2004

  18.7     1998     -4.1  

2003

  55.6     1997     27.1  

2002

  -13.8     1996     16.6  

2001

  23.4     1995     22.9  

2000

  10.9     1994     5.0  
                   
All performance information in this 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 Funds’ P/E ratio calculations exclude companies with zero or negative earnings.

TOP 10 POSITIONS
% of Net Assets Applicable
to Common Stockholders


ASA Bermuda

  1.5 %

Universal Truckload Services

  1.4  

Transaction Systems Architects Cl. A

  1.3  

Seneca Foods

  1.2  

PAREXEL International

  1.1  

Pason Systems

  1.0  

First Acceptance

  0.9  

Forrester Research

  0.9  

MVC Capital

  0.9  

Weyco Group

  0.9  
                   

PORTFOLIO SECTOR BREAKDOWN
% of Net Assets Applicable
to Common Stockholders


Technology

  22.5 %

Industrial Products

  14.6  

Health

  14.4  

Industrial Services

  13.1  

Natural Resources

  8.8  

Financial Intermediaries

  8.4  

Consumer Services

  6.4  

Consumer Products

  5.0  

Financial Services

  2.0  

Diversified Investment Companies

  2.1  

Miscellaneous

  4.0  

Preferred Stock

  0.5  

Cash and Cash Equivalents

  16.9  



14  |   2006 SEMIANNUAL REPORT TO STOCKHOLDERS
 




Performance and Portfolio Review


  GOOD IDEAS THAT WORKED
  Net Realized and Unrealized Gain Through 6/30/06
 
would no longer be using the firm’s security stripe.
   Industrial Products made the largest positive dollar-based contribution to performance. Insteel Industries manufactures concrete reinforcing metal products. The firm reported highly improved earnings for the fiscal first quarter of 2006, as well as strong operating cash flow results, developments that helped its stock price to soar earlier in the year. Insteel then announced even stronger fiscal second-quarter results, but also said that it was giving up its well-regarded industrial-wire business and closing the plant where these operations took place, which led to a 19% decline in its stock price. The announcement of a two-for-one stock split in May helped its share price to recover a bit. We reduced our position
    PORTFOLIO DIAGNOSTICS
  Volt Information Sciences $1,744,138       

      Average Market Capitalization $273 million   
  Dril-Quip 1,702,095       

      Weighted Average P/E Ratio 17.9x*  
  Universal Truckload Services 1,493,254       

      Weighted Average P/B Ratio 2.9x   
  Insteel Industries 1,492,665       

      Weighted Average Yield 0.7%   
  Transactions Systems Architects Cl. A 1,433,301       
          Fund Net Assets $321 million   
between February and early April, then began to repurchase shares later that month.
     Elsewhere in the portfolio, the share price of staffing, computer system and telephone services business Volt Information Sciences climbed on news of better-than-expected fiscal second quarter earnings in June, when we began to reduce our position. During March and April, we sold a little more than half our shares of Dril-Quip, which manufactures offshore drilling
 
    Turnover Rate 16%   
 
     
and production equipment. Strong results for fiscal 2005 and the fiscal first quarter of 2006 helped its stock price to rise. Top-ten holding Universal Truckload Services saw its increased revenues and steady earnings drive increasing numbers of investors towards its stock. We trimmed our stake in February, but otherwise saw solid prospects for growth.
    Net Leverage 2%   
  GOOD IDEAS AT THE TIME
  Net Realized and Unrealized Loss Through 6/30/06
   
      Symbol  
  BB Holdings $1,161,864            Market Price RMT   

        NAV XOTX   
  American Bank Note Holographics 692,692       
* Excludes 17% of portfolio holdings with zero or negative earnings as of 6/30/06.
 Net leverage is the percentage, in excess of 100%, of the total value of equity type investments, divided by net assets, applicable to Common Stockholders.

   
  Momenta Pharmaceuticals 594,939       

           
  Herley Industries 583,094          CAPITAL STRUCTURE
  Publicly Traded Securities Outstanding at 6/30/06 at
  NAV or Liquidation Value

   
  Stein Mart 498,815          22.4 million shares of Common Stock $321 million  
       
          6.00% Cumulative Preferred Stock $60 million  
                 
    RISK/RETURN COMPARISON
  Three-Year Period Ended 6/30/06
 
    Average Annual
Total Return
Standard Deviation Return
Efficiency*
 
    RMT (NAV) 22.6% 14.2 1.59
 
    Russell 2000 18.1 14.6 1.28
 
*Return Efficiency is the average annual total return divided by the annualized standard deviation over a designated time period.
1 Reflects 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.
         
2 Reflects the actual market price of one share as it traded on the Nasdaq and, beginning on 12/1/03, on the NYSE.
 

2006 SEMIANNUAL REPORT TO STOCKHOLDERS  |  15





ROYCE FOCUS TRUST


AVERAGE ANNUAL NAV TOTAL RETURNS
Through 6/30/06

 
Manager’s Discussion

We were pleased with the first-half results for Royce Focus Trust (FUND) on an absolute basis, even if the Fund’s net asset value (NAV) returns came up short by a hair’s breadth on a relative basis. For the year-to-date period ended 6/30/06, FUND gained 8.1% on an NAV basis and 10.6% on a market price basis versus a return of 8.2% for its small-cap benchmark, the Russell 2000. In hindsight, the Fund’s NAV results in the year’s first six months went as we would expect—a solid up-market turn and better relative down-market performance. During the bullish first quarter, the Fund was up 13.6% on an NAV basis and 18.4% on a market price basis, compared to a 13.9% gain for the Russell 2000. The second quarter saw stock prices decline, and the Fund lost 4.8% on an NAV basis (-6.5% on a market price basis), while the Russell 2000 declined 5.0%.
     These historically characteristic performances helped FUND to post strong absolute and superior relative results over market-cycle and other long-term performance periods. From the most recent small-cap market peak on 3/9/00 through 6/30/06, the Fund gained 179.3% on an NAV basis (+233.4% on a market price basis) versus 29.5% for the Russell 2000. In the mostly up-market phase from the small-cap market trough on 10/9/02 through 6/30/06, FUND’s NAV return was 193.6% (+210.9% on a market price basis) versus a gain of 131.8% for its small-cap benchmark. On both an NAV and market price basis, FUND outperformed the Russell 2000 for the one-, three-, five-year and since inception of Royce’s management (11/1/96) periods ended 6/30/06. The Fund’s average annual NAV total return since inception was 14.3%.
     Each of the Fund’s sectors posted net gains during the first half, led on a dollar basis by its three largest, Industrial Products, Natural Resources and Technology. Net losses at the individual company level were relatively minor, however disappointing. Orchid Cellmark has a dominant position in DNA testing, a promising niche business that we liked a great deal. However, it struggled with losses and meeting new regulations and the resulting accounting difficulties left us uncertain about the firm’s future prospects. Multi-business holding company BB Holdings spun off a subsidiary that trades in the U.S., but the prospect of its own domestic de-listing sent investors fleeing; its stock continues to trade overseas.
     Within Industrial Products, several holdings posted impressive net gains. We have owned shares of welding and cutting products maker Lincoln Electric Holdings since shortly after we assumed management of FUND’s portfolio, drawn to its strong business, low-debt balance sheet, history of earnings and steady dividend. The firm’s business has recently undergone explosive growth, reporting record sales for the fiscal year and fiscal fourth quarter of 2005, as well as the first fiscal quarter of 2006. It was a top-ten holding at the end of June. In the metal fabrication and distribution industry, we enjoyed success with Metal Management, in which we took some gains during April and May, as well as Reliance Steel & Aluminum, Canadian steel producer and

Second Quarter 2006*

  -4.83 %

Jan - June 2006*

  8.11  

One-Year

              30.73  

Three-Year

              27.21  

Five-Year

              16.16  

Since Inception (11/1/96)

    14.28  
* Not annualized.
Royce & Associates assumed investment management responsibility for the Fund on 11/1/96.
     

CALENDAR YEAR NAV TOTAL RETURNS


Year

  RFT     Year     RFT  

2005

  13.3 %   2000     20.9 %

2004

  29.2     1999     8.7  

2003

  54.3     1998     -6.8  

2002

  -12.5     1997     20.5  

2001

  10.0              
                   
All performance information in this 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 Funds’ P/E ratio calculations exclude companies with zero or negative earnings.

TOP 10 POSITIONS*
% of Net Assets Applicable
to Common Stockholders


New Zealand Government 6.00% Bond

  3.9 %

Athena Neurosciences Finance 7.25% Bond

  3.9  

IPSCO

  3.7  

Canadian Government 3.00% Bond

  3.5  

Endo Pharmaceuticals Holdings

  3.2  

Lincoln Electric Holdings

  3.1  

Thor Industries

  2.8  

Simpson Manufacturing

  2.8  

Reliance Steel & Aluminum

  2.7  

Tesco Corporation

  2.7  
* Does not include U.S. Government securities.
                   

PORTFOLIO SECTOR BREAKDOWN
% of Net Assets Applicable
to Common Stockholders


Industrial Products

  23.8 %

Natural Resources

  22.9  

Technology

  8.0  

Consumer Products

  6.1  

Health

  5.9  

Consumer Services

  4.4  

Industrial Services

  3.6  

Financial Intermediaries

  3.4  

Financial Services

  3.1  

Bonds

  11.4  

Treasuries, Cash and Cash Equivalents

  23.7  



16  |   2006 SEMIANNUAL REPORT TO STOCKHOLDERS
 



Performance and Portfolio Review


  GOOD IDEAS THAT WORKED
  Net Realized and Unrealized Gain Through 6/30/06
 
fabricator IPSCO, Schnitzer Steel Industries and Harris Steel Group. The once-thriving steel industry underwent a long period of consolidation and reorganization earlier in the decade after falling on tough times. It seems to us that neither the positive effects of these efforts nor the steady worldwide demand for steel products have yet been fully grasped by investors, which in turn allowed us to find what we thought were attractively valued, conservatively capitalized firms.
     In the Natural Resources sector, holdings in the precious metals and mining industry posted significant net gains on a dollar basis. We began to establish positions in certain precious metals companies between 2002 and 2005 as the industry struggled to rebound. Throughout this period, we
    PORTFOLIO DIAGNOSTICS
  Lincoln Electric Holdings $1,724,250       

      Average Market Capitalization $1,675 million   
  Glamis Gold 1,299,161       

      Weighted Average P/E Ratio 13.3x  
  Meridian Gold 1,231,308       

      Weighted Average P/B Ratio 2.1x   
  Metal Management 1,185,559       

      Weighted Average Yield 1.4%   
  Lowrance Electronics 1,120,055       
          Fund Net Assets $154 million   
remained patient, in part because of our belief that the close-to-20-year bear market for precious metals prices was likely to end, but mostly because we thought that the individual company qualities we held in such high regard would eventually be recognized by other investors. At times, we took advantage of further stock price declines by building positions. Commodity and stock prices finally began to recover during 2005. By the end of last year, the industry’s rebound was well under way, and the first half of 2006
 
    Turnover Rate 17%   
 
     
saw further recovery. We reduced our stake in Glamis Gold during the first half and trimmed our position in Meridian Gold.
    Net Leverage* 0%   
  GOOD IDEAS AT THE TIME
  Net Realized and Unrealized Loss Through 6/30/06
   
      Symbol  
  BB Holdings $760,536            Market Price FUND   

        NAV XFUNX   
  Orchid Cellmark 721,500       
* Net leverage is the percentage, in excess of 100%, of the total value of equity type investments, divided by net assets applicable to Common Stockholders.

   
  Trican Well Service 559,191       

           
  Nu Skin Enterprises Cl. A 546,000          CAPITAL STRUCTURE
  Publicly Traded Securities Outstanding at 6/30/06 at
  NAV or Liquidation Value

   
  International Coal Group 453,678          14.9 million shares of Common Stock $154 million  
       
          6.00% Cumulative Preferred Stock $25 million  
                 
    RISK/RETURN COMPARISON
  Three-Year Period Ended 6/30/06
 
    Average Annual
Total Return
Standard Deviation Return
Efficiency*
 
    FUND (NAV) 27.2% 15.1 1.80
 
    Russell 2000 18.7    14.6 1.28
 
* Return Efficiency is the average annual total return divided by the annualized standard deviation over a designated time period.
1 Royce & Associates assumed investment management responsibility for the Fund on 11/1/96.
         
2 Reflects the cumulative total return of a continuous common stockholder who reinvested all distributions as
indicated and fully participated in the primary subscription of the 2005 rights offering.
3 Reflects the actual market price of one share as it traded on the Nasdaq.
 
   

2006 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   Price*   Shares   Value**   Value**

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   Year-to-date distribution total $0.84             19.114     329                  

6/30/06       $ 21,922             7,738     $ 153,290     $ 149,808  

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   Year-to-date distribution total $0.63             13.725     145                  

6/30/06       $ 8,900             3,270     $ 46,826     $ 47,546  

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   Year-to-date distribution total $0.24             9.897     53                  

6/30/06       $ 7,044             2,226     $ 22,928     $ 22,906  

*  
Beginning with the 1997 (RVT), 2002 (RMT) and 2004 (FUND) distributions, the purchase price of distributions is a weighted average of the distribution reinvestment prices for the year.
**  
Other than for initial purchase and June 30, 2006, values are stated as of December 31 of the year indicated, after reinvestment of distributions.

18  |  2006 SEMIANNUAL REPORT TO STOCKHOLDERS




DISTRIBUTION REINVESTMENT AND CASH PURCHASE OPTIONS


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, 2006.

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.

2006 SEMIANNUAL REPORT TO STOCKHOLDERS  |  19






ROYCE VALUE TRUST

                               
                               

      Schedule of Investments

                               
    SHARES     VALUE       SHARES     VALUE
 
COMMON STOCKS – 99.4%             Restaurants and Lodgings - 1.0%          
             

Applebee’s International

  63,000   $ 1,210,860
Consumer Products – 4.6%            

Benihana Cl. A a

  6,600     179,124
Apparel and Shoes - 1.9%            

CEC Entertainment a, c

  121,400     3,899,368

Kenneth Cole Productions Cl. A

  35,000   $ 781,550  

IHOP Corporation

  93,400     4,490,672

Columbia Sportswear Company a, c

  34,600     1,565,996  

Ryan’s Restaurant Group a, c

  7,200     85,752

Jones Apparel Group

  81,500     2,590,885  

Steak n Shake Company (The) a

  92,600     1,401,964

K-Swiss Cl. A

  105,000     2,803,500          

Oakley

  94,900     1,599,065             11,267,740

Polo Ralph Lauren Cl. A

  58,200     3,195,180          

Tandy Brands Accessories

  16,900     175,084   Retail Stores - 2.0%          

Timberland Company Cl. A a

  60,000     1,566,000  

Big Lots a

  255,300     4,360,524

Weyco Group

  307,992     7,151,574  

CarMax a, c

  84,000     2,978,640
       
 

Children’s Place Retail Stores a, c

  13,670     820,883
          21,428,834  

Claire’s Stores

  189,800     4,841,798
       
 

Cost Plus a, c

  80,500     1,180,130
Collectibles - 0.1%            

Fred’s Cl. A

  50,000     667,500

Enesco Group a, c

  174,800     92,644  

Gander Mountain Company a, c

  53,300     308,074
       
 

Hot Topic a, c

  44,100     507,591
Food/Beverage/Tobacco - 0.2%            

Krispy Kreme Doughnuts a, c

  85,000     691,900

Hain Celestial Group a, c

  37,800     973,728  

99 Cents Only Stores a, c

  95,000     993,700

Hershey Creamery Company

  709     1,418,000  

Stein Mart

  142,800     2,113,440
       
 

Urban Outfitters a, c

  27,000     472,230
          2,391,728  

West Marine a

  131,100     1,767,228
       
 

Wet Seal (The) Cl. A a

  162,000     790,560
Home Furnishing and Appliances - 0.3%                    

Aaron Rents

  4,500     120,960             22,494,198

Ethan Allen Interiors

  35,800     1,308,490          

Jacuzzi Brands a, c

  145,000     1,276,000   Other Consumer Services - 2.4%          

La-Z-Boy c

  68,200     954,800  

Corinthian Colleges a, c

  106,500     1,529,340
       
 

ITT Educational Services a

  106,000     6,975,860
          3,660,250  

Laureate Education a, c

  75,000     3,197,250
       
 

MoneyGram International

  74,900     2,542,855
Publishing - 0.3%            

Sotheby’s a, c

  485,200     12,736,500

Scholastic Corporation a, c

  130,000     3,376,100          
       
            26,981,805
Sports and Recreation - 0.4%                    

Coachmen Industries

  47,700     569,538   Total (Cost $44,547,555)         63,100,488

Monaco Coach

  161,050     2,045,335          

Nautilus

  2,000     31,420   Diversified Investment Companies – 0.1%          

Thor Industries

  26,100     1,264,545   Closed-End Mutual Funds - 0.1%          
       
 

Central Fund of Canada Cl. A

  111,500     958,900
          3,910,838          
       
  Total (Cost $589,526)         958,900
Other Consumer Products - 1.4%                    

Blyth

  14,700     271,362   Financial Intermediaries – 8.9%          

Burnham Holdings Cl. B

  36,000     693,000   Banking - 3.2%          

Fossil a, c

  82,800     1,491,228  

BOK Financial

  129,327     6,423,672

Lazare Kaplan International a

  103,600     854,700  

Bank of NT Butterfield

  62,500     3,562,500

Leapfrog Enterprises a, c

  175,000     1,767,500  

CFS Bancorp

  260,000     3,858,400

Matthews International Cl. A

  166,000     5,722,020  

Cadence Financial

  30,300     674,781

RC2 Corporation a

  132,600     5,126,316  

Commercial National Financial

  44,900     865,223
       
 

Exchange National Bancshares

  50,400     1,491,840
          15,926,126  

Farmers & Merchants Bank of Long Beach

  1,266     7,311,150
       
 

Heritage Financial

  12,915     340,181
Total (Cost $32,213,286)         50,786,520  

HopFed Bancorp

  25,000     410,500
       
 

Jefferson Bancshares

  25,000     322,500
Consumer Services – 5.7%            

Mechanics Bank

  200     3,900,000
Direct Marketing - 0.1%            

NetBank

  70,000     464,100

FTD Group a, c

  55,000     742,500  

Old Point Financial

  20,000     587,400
       
 

Partners Trust Financial Group

  100,000     1,141,000
Leisure and Entertainment - 0.1%            

Sun Bancorp a, c

  44,100     716,184

Gemstar-TV Guide International a, c

  201,100     707,872  

Tompkins Trustco

  17,545     754,435

Shuffle Master a, c

  15,000     491,700  

Whitney Holding

  40,500     1,432,485

Steiner Leisure a, c

  2,100     83,013  

Wilber Corporation

  31,700     332,850
       
             
          1,282,585              
       
             
Media and Broadcasting - 0.1%                        

Cox Radio Cl. A a

  23,000     331,660              
       
             

20  |  2006 SEMIANNUAL REPORT TO STOCKHOLDERS THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.





JUNE 30, 2006 (Unaudited)

                               
                               

 

                               
    SHARES     VALUE       SHARES     VALUE
 
Financial Intermediaries (continued)            

National Financial Partners

  22,000   $ 974,820
Banking (continued)            

U.S.I. Holdings a, c

  40,000     536,400

Wilmington Trust

  31,000   $ 1,307,580          

Yadkin Valley Financial

  3,800     53,808             13,184,667
       
         
          35,950,589   Investment Management - 3.8%          
       
 

ADDENDA Capital

  81,000     1,861,193
Insurance - 3.6%            

AllianceBernstein Holding L.P.

  353,100     21,588,534

Alleghany Corporation a

  11,097     3,066,767  

BKF Capital Group a

  7,500     46,875

Aspen Insurance Holdings

  64,000     1,490,560  

Eaton Vance

  140,400     3,504,384

Commerce Group

  89,000     2,629,060  

Federated Investors Cl. B

  121,900     3,839,850

Erie Indemnity Company Cl. A

  139,900     7,274,800  

GAMCO Investors Cl. A

  158,600     5,830,136

IPC Holdings

  27,000     665,820  

Nuveen Investments Cl. A

  138,600     5,966,730

Leucadia National

  86,442     2,523,242          

Markel Corporation a, c

  4,200     1,457,400             42,637,702

Montpelier Re Holdings

  66,000     1,141,140          

NYMAGIC

  85,200     2,475,060   Other Financial Services - 0.5%          

Navigators Group a

  83,200     3,645,824  

AmeriCredit Corporation a, c

  18,870     526,850

Ohio Casualty

  107,000     3,181,110  

CharterMac

  59,600     1,115,116

ProAssurance Corporation a, c

  38,070     1,834,213  

Credit Acceptance a

  50,000     1,357,000

PXRE Group a

  166,551     619,570  

Municipal Mortgage & Equity

  40,300     1,094,548

RLI

  99,724     4,804,702  

Van der Moolen Holding ADR

  21,362     154,874

21st Century Insurance Group

  62,000     892,800  

World Acceptance a, c

  21,700     770,784

Wesco Financial

  4,750     1,809,750          
       
            5,019,172
          39,511,818          
       
  Total (Cost $55,307,350)         81,673,633
Real Estate Investment Trusts - 0.4%                    

Gladstone Commercial

  34,700     650,972   Health – 7.4%          

Government Properties Trust

  50,000     474,500   Commercial Services - 1.2%          

Opteum Cl. A

  347,500     3,134,450  

First Consulting Group a

  560,900     4,958,356
       
 

PAREXEL International a, c

  313,700     9,050,245
          4,259,922          
       
            14,008,601
Securities Brokers - 0.8%                    

Dundee Wealth Management

  50,000     485,980   Drugs and Biotech - 1.8%          

First Albany Companies a

  350,100     1,575,450  

Affymetrix a

  10,000     256,000

Investment Technology Group a, c

  30,400     1,546,144  

Antigenics a, c

  99,300     210,516

Knight Capital Group Cl. A a, c

  229,700     3,498,331  

Cerus Corporation a, c

  21,700     154,721

optionsXpress Holdings

  53,000     1,235,430  

Connetics Corporation a, c

  14,300     168,168
       
 

DUSA Pharmaceuticals a

  79,700     450,305
          8,341,335  

Endo Pharmaceuticals Holdings a

  229,800     7,578,804
       
 

Gene Logic a, c

  365,000     492,750
Other Financial Intermediaries - 0.9%            

Hi-Tech Pharmacal a, c

  1,650     27,340

International Securities Exchange Cl. A

  75,000     2,855,250  

Hollis-Eden Pharmaceuticals a, c

  44,000     210,760

MCG Capital

  138,000     2,194,200  

Human Genome Sciences a, c

  90,000     963,000

MVC Capital

  353,900     4,756,416  

K-V Pharmaceutical Company Cl. A a, c

  51,500     960,990

MarketAxess Holdings a

  67,000     737,670  

Martek Biosciences a, c

  12,500     361,875
       
 

Medicines Company (The) a, c

  20,000     391,000
          10,543,536  

Millennium Pharmaceuticals a, c

  100,000     997,000
       
 

Myriad Genetics a, c

  50,000     1,262,500
Total (Cost $67,981,553)         98,607,200  

Perrigo Company

  186,750     3,006,675
       
 

QLT a, c

  114,070     807,616
Financial Services – 7.4%            

SFBC International a, c

  10,000     151,600
Information and Processing - 1.9%            

Telik a

  33,000     544,500

eFunds Corporation a, c

  126,875     2,797,594  

VIVUS a

  163,300     628,705

FactSet Research Systems

  35,350     1,672,055          

Global Payments

  137,000     6,651,350             19,624,825

Interactive Data a

  134,300     2,698,087          

PRG-Schultz International a, c

  247,000     111,150   Health Services - 1.8%          

SEI Investments Company

  141,200     6,901,856  

Albany Molecular Research a

  85,000     907,800
       
 

Covance a, c

  52,700     3,226,294
          20,832,092  

Cross Country Healthcare a, c

  30,000     545,700
       
 

Eclipsys Corporation a, c

  20,000     363,200
Insurance Brokers - 1.2%            

Gentiva Health Services a

  30,150     483,304

Crawford & Company Cl. A

  289,200     1,911,612  

HMS Holdings a

  50,000     536,000

Crawford & Company Cl. B

  162,300     1,165,314              

Gallagher (Arthur J.) & Company

  111,200     2,817,808              

Hilb Rogal & Hobbs Company

  155,050     5,778,713              

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
2006 SEMIANNUAL REPORT TO STOCKHOLDERS  |  21





ROYCE VALUE TRUST

                               
                               

      Schedule of Investments

                               
    SHARES     VALUE       SHARES     VALUE
 
Health (continued)            

Intermagnetics General a, c

  6,525   $ 176,044
Health Services (continued)            

PerkinElmer

  135,000     2,821,500

HealthSouth Corporation a, c

  1,000,000   $ 3,830,000  

Powell Industries a, c

  92,400     2,211,132

Lincare Holdings a, c

  52,562     1,988,946  

II-VI a

  13,500     247,050

MedQuist a, c

  73,893     886,716  

Woodhead Industries

  45,400     868,956

National Home Health Care

  20,000     195,000          

On Assignment a

  425,400     3,909,426             15,064,829

Paramount Acquisition (Units) a

  280,000     1,904,000          

Quovadx a

  3,000     7,740   Machinery - 6.0%          

Res-Care a, c

  65,460     1,309,200  

Baldor Electric

  62,900     1,968,141
       
 

Coherent a, c

  243,500     8,213,255
          20,093,326  

Exco Technologies

  91,000     285,317
       
 

Federal Signal

  58,600     887,204
Medical Products and Devices - 2.3%            

Franklin Electric

  84,200     4,348,088

Allied Healthcare Products a

  197,700     1,146,660  

Graco

  96,825     4,452,013

Arrow International

  195,728     6,433,579  

Hardinge

  278,893     4,308,897

ArthroCare Corporation a, c

  10,000     420,100  

IDEX Corporation

  36,000     1,699,200

Bruker BioSciences a

  370,200     1,984,272  

Intermec a, c

  3,000     68,820

CONMED Corporation a, c

  81,500     1,687,050  

Lincoln Electric Holdings

  228,680     14,326,802

IDEXX Laboratories a, c

  79,000     5,935,270  

Nordson Corporation

  172,200     8,468,796

Invacare Corporation

  103,100     2,565,128  

PAXAR Corporation a, c

  267,500     5,502,475

Novoste Corporation a

  16,625     44,056  

Rofin-Sinar Technologies a

  128,000     7,356,160

STERIS Corporation

  98,600     2,253,996  

Williams Controls a

  37,500     450,000

Young Innovations

  62,550     2,203,636  

Woodward Governor Company

  154,800     4,722,948

Zoll Medical a, c

  20,200     661,752          
       
            67,058,116
          25,335,499          
       
  Metal Fabrication and Distribution - 2.5%          
Personal Care - 0.3%            

Commercial Metals Company

  36,600     940,620

Helen of Troy a, c

  81,600     1,501,440  

CompX International Cl. A

  292,300     5,232,170

Nutraceutical International a

  22,800     349,524  

Gerdau Ameristeel

  61,100     613,444

USANA Health Sciences a, c

  38,900     1,474,310  

Harris Steel Group

  100,000     2,530,682
       
 

IPSCO

  14,500     1,387,505
          3,325,274  

Kaydon Corporation

  208,700     7,786,597
       
 

NN

  127,100     1,569,685
Total (Cost $59,740,646)         82,387,525  

Novamerican Steel a

  10,800     437,076
       
 

Oregon Steel Mills a

  107,100     5,425,686
Industrial Products – 18.0%            

Reliance Steel & Aluminum

  12,960     1,075,032
Automotive - 0.6%            

Schnitzer Steel Industries Cl. A

  34,000     1,206,320

IMPCO Technologies a

  45,000     480,150          

LKQ Corporation a, c

  256,000     4,864,000             28,204,817

Quantam Fuel Systems Technologies

                   

Worldwide a, c

  15,500     52,700   Paper and Packaging - 0.1%          

Superior Industries International

  52,000     951,080  

Peak International a, c

  408,400     1,266,040
       
         
          6,347,930   Specialty Chemicals and Materials - 1.9%          
       
 

Aceto Corporation

  78,410     542,597
Building Systems and Components - 1.1%            

Bairnco Corporation

  43,000     504,390

Decker Manufacturing

  6,022     219,803  

Balchem Corporation

  11,250     253,125

Preformed Line Products Company

  91,600     3,471,640  

CFC International a

  74,200     1,219,848

Simpson Manufacturing

  250,800     9,041,340  

Cabot Corporation

  102,300     3,531,396
       
 

Hawkins

  206,878     2,897,326
          12,732,783  

Lydall a, c

  35,500     327,310
       
 

MacDermid

  264,131     7,606,973
Construction Materials - 1.8%            

Schulman (A.)

  143,100     3,275,559

Ash Grove Cement Company Cl. B

  50,518     10,002,564  

Sensient Technologies

  22,000     460,020

ElkCorp

  2,000     55,540          

Florida Rock Industries

  85,175     4,230,642             20,618,544

Heywood Williams Group a

  958,837     1,533,716          

Synalloy Corporation a, b

  345,000     4,443,600   Textiles - 0.1%          
       
 

Unifi a, c

  165,100     478,790
          20,266,062          
       
  Other Industrial Products - 2.5%          
Industrial Components - 1.4%            

Brady Corporation Cl. A

  248,800     9,165,792

Barnes Group

  4,000     79,800  

Diebold

  85,000     3,452,700

Bel Fuse Cl. A

  2,000     54,300  

Distributed Energy Systems a

  32,000     165,440

C & D Technologies c

  345,700     2,599,664  

Kimball International Cl. B

  437,380     8,620,760

CLARCOR

  83,500     2,487,465  

Maxwell Technologies a

  21,500     422,045

Donaldson Company

  92,800     3,143,136  

Myers Industries

  30,499     524,278

GrafTech International a

  64,790     375,782              
                         


22  |  2006 SEMIANNUAL REPORT TO STOCKHOLDERS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.





JUNE 30, 2006 (Unaudited)

                               
                               

 

                               
    SHARES     VALUE       SHARES     VALUE
 
Industrial Products (continued)            

Strategic Distribution a

  115,000   $ 1,610,000
Other Industrial Products (continued)                    

Peerless Manufacturing a, b

  158,600   $ 3,798,470             23,895,532

Solar Integrated Technologies a

  75,000     126,901          

Waters Corporation a, c

  25,990     1,153,956   Printing - 0.1%          
       
 

Bowne & Co.

  68,100     973,830
          27,430,342          
       
  Transportation and Logistics - 4.6%          
Total (Cost $105,829,978)         199,468,253  

Alexander & Baldwin

  60,000     2,656,200
       
 

Arkansas Best

  1,200     60,252
Industrial Services – 14.1%            

Atlas Air Worldwide Holdings a, c

  17,000     833,680
Advertising and Publishing - 0.6%            

C. H. Robinson Worldwide

  80,000     4,264,000

Interpublic Group of Companies a, c

  510,000     4,258,500  

Continental Airlines Cl. B a, c

  100,000     2,980,000

Lamar Advertising Company Cl. A a, c

  24,000     1,292,640  

EGL a, c

  123,125     6,180,875

MDC Partners Cl. A a

  60,000     491,400  

Forward Air

  234,750     9,561,367

ValueClick a, c

  45,000     690,750  

Frozen Food Express Industries a, c

  286,635     3,158,718
       
 

Grupo Aeroportuario del Sureste ADR

  36,900     1,239,471
          6,733,290  

Hub Group Cl. A a

  174,400     4,278,032
       
 

Landstar System

  11,200     528,976
Commercial Services - 4.5%            

Patriot Transportation Holding a

  96,300     8,356,914

ABM Industries

  134,800     2,305,080  

Railpower Technologies a

  67,000     144,047

Allied Waste Industries a

  188,800     2,144,768  

UTI Worldwide

  105,000     2,649,150

Anacomp Cl. A a

  26,000     269,100  

Universal Truckload Services a

  115,100     3,928,363

BB Holdings a

  194,900     738,839          

Bennett Environmental a

  20,900     59,774             50,820,045

Central Parking

  18,300     292,800          

Convergys Corporation a

  121,000     2,359,500   Other Industrial Services - 0.5%          

Copart a, c

  158,100     3,882,936  

Landauer

  117,900     5,647,410

First Advantage Cl. A a, c

  5,000     116,300          

Global Imaging Systems a, c

  50,000     2,064,000   Total (Cost $85,506,325)         155,665,543

Hewitt Associates Cl. A a, c

  164,620     3,700,658          

Iron Mountain a, c

  156,175     5,837,821   Natural Resources – 9.8%          

Learning Tree International a, c

  53,400     468,318   Energy Services - 3.4%          

MPS Group a

  564,600     8,502,876  

Atwood Oceanics a, c

  29,400     1,458,240

Manpower

  105,800     6,834,680  

Carbo Ceramics

  148,400     7,290,892

New Horizons Worldwide a

  228,600     160,020  

Core Laboratories a

  10,000     610,400

RHJ International a

  157,500     3,340,048  

Environmental Power a, c

  326,000     2,135,300

RemedyTemp Cl. A a

  160,700     2,730,293  

Global Industries a, c

  54,500     910,150

Renaissance Learning

  15,000     203,250  

Hanover Compressor Company a, c

  260,000     4,882,800

Rollins

  130,500     2,563,020  

Helmerich & Payne

  40,300     2,428,478

Spherion Corporation a, c

  53,000     483,360  

Input/Output a

  544,100     5,141,745

TRC Companies a

  3,600     37,908  

TETRA Technologies a, c

  68,000     2,059,720

Viad Corporation

  9,025     282,482  

Universal Compression Holdings a, c

  105,000     6,611,850

Wright Express a, c

  30,000     862,200  

Willbros Group a, c

  207,600     3,931,944
       
         
          50,240,031             37,461,519
       
         
Engineering and Construction - 1.1%             Oil and Gas - 3.0%          

Dycom Industries a

  47,700     1,015,533  

Bill Barrett a, c

  50,000     1,480,500

Fleetwood Enterprises a

  234,300     1,766,622  

Carrizo Oil & Gas a, c

  41,700     1,305,627

Insituform Technologies Cl. A a, c

  174,300     3,989,727  

Cimarex Energy

  193,990     8,341,570

Washington Group International a

  100,000     5,334,000  

FX Energy a, c

  20,000     92,400
       
 

Falcon Oil & Gas a

  360,000     1,238,377
          12,105,882  

Hornbeck Offshore Services a, c

  33,000     1,172,160
       
 

Particle Drilling Technologies a, c

  61,500     216,480
Food and Tobacco Processors - 0.5%            

Penn Virginia

  16,440     1,148,827

American Italian Pasta Company Cl. A a

  10,000     85,600  

Pioneer Drilling Company a, c

  1,800     27,792

MGP Ingredients

  127,400     2,958,228  

Remington Oil & Gas a

  78,500     3,451,645

Performance Food Group a, c

  10,000     303,800  

SEACOR Holdings a, c

  153,500     12,602,350

Seneca Foods Cl. A a

  69,600     1,598,712  

Storm Cat Energy a, c

  330,800     744,300

Seneca Foods Cl. B a

  13,251     303,183  

W &T Offshore

  25,000     972,250
       
         
          5,249,523             32,794,278
       
         
Industrial Distribution - 2.2%             Precious Metals and Mining - 2.7%          

Central Steel & Wire

  7,662     4,827,060  

Agnico-Eagle Mines

  34,000     1,124,720

MSC Industrial Direct Company Cl. A

  20,000     951,400  

Bema Gold a, c

  248,000     1,244,960

Ritchie Bros. Auctioneers

  310,400     16,507,072  

Cambior a

  311,000     836,590
             

Constellation Copper a

  186,900     425,267

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
2006 SEMIANNUAL REPORT TO STOCKHOLDERS  |  23





ROYCE VALUE TRUST

                               
                               

      Schedule of Investments

                               
    SHARES     VALUE       SHARES     VALUE
 
Natural Resources (continued)            

Power-One a, c

  10,000   $ 66,000
Precious Metals and Mining (continued)            

REMEC a

  143,387     157,726

Entree Gold a

  90,000   $ 86,400  

Radiant Systems a, c

  32,500     343,525

Etruscan Resources a

  675,900     2,028,366  

Richardson Electronics

  237,700     1,747,095

Gammon Lake Resources a

  188,300     2,596,657  

SafeNet a, c

  36,240     642,173

Glamis Gold a

  212,480     8,044,493  

Symbol Technologies

  99,389     1,072,407

Golden Star Resources a

  135,000     399,600  

TTM Technologies a, c

  221,400     3,203,658

Hecla Mining Company a, c

  598,000     3,139,500  

Technitrol

  311,200     7,204,280

IAMGOLD Corporation

  170,000     1,513,000  

Tektronix

  159,680     4,697,786

Ivanhoe Mines a, c

  140,000     954,800  

UQM Technologies a, c

  50,000     145,000

Meridian Gold a, c

  111,000     3,516,480  

Vishay Intertechnology a, c

  186,000     2,925,780

Miramar Mining a, c

  245,000     906,500  

Zebra Technologies Cl. A a

  76,525     2,614,094

Pan American Silver a, c

  41,000     737,590          

QGX a

  30,000     53,211             77,070,317

Randgold Resources ADR a

  53,000     1,113,000          

Stillwater Mining Company a, c

  10,780     136,690   Distribution - 1.6%          

Yamana Gold a, c

  80,000     789,600  

Agilysys

  165,125     2,972,250
       
 

Anixter International a

  61,795     2,932,791
          29,647,424  

Benchmark Electronics a, c

  208,200     5,021,784
       
 

Solectron Corporation a

  1,170,100     4,001,742
Real Estate - 0.6%            

Tech Data a, c

  86,500     3,313,815

Alico

  27,000     1,487,970          

Consolidated-Tomoka Land

  13,564     747,919             18,242,382

The St. Joe Company

  53,100     2,471,274          

Trammell Crow Company a, c

  46,500     1,635,405   Internet Software and Services - 1.5%          
       
 

Arbinet-thexchange a, c

  87,200     489,192
          6,342,568  

CMGI a, c

  1,305,000     1,579,050
       
 

CNET Networks a, c

  155,400     1,240,092
Other Natural Resources - 0.1%            

CryptoLogic

  137,000     3,318,140

PICO Holdings a

  55,200     1,780,200  

CyberSource Corporation a, c

  10,000     117,000
       
 

EarthLink a, c

  55,200     478,032
Total (Cost $57,119,311)         108,025,989  

eResearch Technology a, c

  121,000     1,101,100
       
 

Internap Network Services a

  1,448,900     1,521,345
Technology – 21.6%            

Internet Security Systems a, c

  40,000     754,000
Aerospace and Defense - 0.6%            

j2 Global Communications a, c

  43,420     1,355,572

Allied Defense Group (The) a

  45,700     1,004,943  

Lionbridge Technologies a

  37,500     207,375

Armor Holdings a, c

  11,410     625,610  

RSA Security a

  14,000     380,660

Astronics Corporation a

  52,400     701,112  

RealNetworks a, c

  245,400     2,625,780

Axsys Technologies a

  10,000     150,700  

S1 Corporation a

  20,000     96,000

Ducommun a

  117,200     2,170,544  

SupportSoft a

  220,000     866,800

Hexcel Corporation a

  47,500     746,225          

Integral Systems

  49,800     1,336,134             16,130,138
       
         
          6,735,268   IT Services - 3.8%          
       
 

answerthink a

  655,000     2,639,650
Components and Systems - 7.0%            

BearingPoint a, c

  788,800     6,602,256

Adaptec a, c

  167,000     724,780  

Black Box

  47,000     1,801,510

American Power Conversion

  151,200     2,946,888  

CACI International Cl. A a, c

  10,000     583,300

Analogic Corporation

  40,135     1,870,692  

CIBER a, c

  10,000     65,900

Belden CDT

  57,800     1,910,290  

Cogent Communications Group a, c

  226,900     2,126,053

Checkpoint Systems a

  56,060     1,245,092  

Computer Task Group a

  101,100     505,500

Dionex Corporation a

  81,000     4,427,460  

Covansys Corporation a, c

  238,900     3,002,973

Electronics for Imaging a, c

  25,000     522,000  

DiamondCluster International a

  80,400     636,768

Energy Conversion Devices a, c

  105,500     3,843,365  

Forrester Research a

  40,300     1,127,594

Excel Technology a

  168,500     5,041,520  

Gartner a

  126,000     1,789,200

Hutchinson Technology a, c

  47,500     1,027,425  

Keane a

  468,000     5,850,000

Imation Corporation

  15,700     644,485  

MAXIMUS

  127,900     2,960,885

InFocus Corporation a

  228,100     652,366  

Perot Systems Cl. A a, c

  165,100     2,390,648

KEMET Corporation a

  95,600     881,432  

Sapient Corporation a, c

  806,602     4,274,991

Kronos a, c

  38,775     1,404,043  

Syntel

  152,679     3,123,812

Methode Electronics

  50,000     525,500  

TriZetto Group (The) a, c

  215,200     3,182,808

Metrologic Instruments a, c

  15,000     225,150          

Newport Corporation a, c

  592,200     9,546,264             42,663,848

On Track Innovations a, c

  40,000     466,800          

Perceptron a

  397,400     3,203,044   Semiconductors and Equipment - 2.2%          

Plexus Corporation a, c

  325,700     11,142,197  

BE Semiconductor Industries a, c

  58,000     330,020
             

Brooks Automation a, c

  28,500     336,300


24  |  2006 SEMIANNUAL REPORT TO STOCKHOLDERS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.





JUNE 30, 2006 (Unaudited)

                               
                               

 

                               
    SHARES     VALUE       SHARES     VALUE
 
Technology (continued)            

IDT Corporation Cl. B a, c

  65,000   $ 896,350
Semiconductors and Equipment (continued)            

Level 3 Communications a, c

  400,000     1,776,000

Cabot Microelectronics a

  131,200   $ 3,976,672  

PECO II a, c

  93,600     173,160

Catalyst Semiconductor a

  200     726  

Time Warner Telecom Cl. A a, c

  179,000     2,658,150

CEVA a

  31,666     183,029  

Tollgrade Communications a, c

  20,000     194,000

Cognex Corporation

  55,300     1,439,459  

USA Mobility c

  97,500     1,618,500

Conexant Systems a, c

  11,980     29,950  

Vonage Holdings a, c

  100,000     859,000

Credence Systems a, c

  53,600     187,600  

Yak Communications a

  20,000     59,400

DSP Group a, c

  115,000     2,857,750          

DTS a, c

  64,100     1,248,668             17,214,989

Dolby Laboratories Cl. A a

  83,900     1,954,870          

Exar Corporation a, c

  181,976     2,414,821   Total (Cost $175,467,409)         239,429,703

Fairchild Semiconductor International a, c

  51,200     930,304          

International Rectifier a

  20,000     781,600   Utilities – 0.2%          

Intevac a, c

  57,450     1,245,516  

CH Energy Group

  44,500     2,136,000

IXYS Corporation a, c

  10,000     96,000  

Southern Union

  11,576     313,246

Kulicke & Soffa Industries a, c

  105,800     783,978          

MEMC Electronic Materials a

  2,000     75,000   Total (Cost $2,127,413)         2,449,246

Novellus Systems a, c

  12,000     296,400          

Pericom Semiconductor a, c

  58,000     481,400   Miscellaneous(e)– 1.6%          

Power Integrations a, c

  49,000     856,520   Total (Cost $18,109,257)         18,222,245

Sanmina-SCI Corporation a

  100,000     460,000          

Semitool a, c

  50,000     451,000   TOTAL COMMON STOCKS          

Staktek Holdings a

  184,700     897,642  

(Cost $704,539,609)

        1,100,775,245

Veeco Instruments a, c

  65,000     1,549,600          
       
  PREFERRED STOCKS – 0.2%          
          23,864,825  

Aristotle Corporation 11.00% Conv.

  4,800     39,024
       
 

Seneca Foods Conv. a

  300     6,300
Software - 3.4%            

Seneca Foods Conv. a, d

  85,000     1,757,205

Advent Software a

  116,800     4,212,976          

ANSYS a, c

  20,000     956,400   TOTAL PREFERRED STOCKS          

Aspen Technology a

  27,100     355,552  

(Cost $1,316,015)

        1,802,529

Avid Technology a, c

  20,000     666,600          

BEA Systems a, c

  65,610     858,835       PRINCIPAL      

Borland Software a, c

  240,000     1,267,200       AMOUNT      

Epicor Software a, c

  79,900     841,347   CORPORATE BONDS – 0.1%          

iPass a, c

  268,400     1,503,040  

Dixie Group 7.00%

         

JDA Software Group a, c

  99,900     1,401,597  

Conv. Sub. Deb. due 5/15/12

$ 397,000     373,180

MRO Software a, c

  46,000     923,220          

ManTech International Cl. A a, c

  119,400     3,684,684   TOTAL CORPORATE BONDS          

Manugistics Group a

  49,200     123,000  

(Cost $321,402)

        373,180

NAVTEQ Corporation a, c

  20,000     893,600          

NetIQ Corporation a, c

  60,000     731,400   REPURCHASE AGREEMENTS – 20.6%          

PLATO Learning a

  149,642     930,773   State Street Bank & Trust Company,          

Progress Software a, c

  30,500     714,005  

5.10% dated 6/30/06, due 7/3/06,

         

SPSS a

  179,600     5,772,344  

maturity value $103,601,012 (collateralized

         

Sybase a, c

  82,600     1,602,440  

by obligations of various U.S. Government

         

THQ a, c

  20,000     432,000  

Agencies, valued at $106,146,600)

         

Transaction Systems Architects Cl. A a, c

  203,150     8,469,323  

(Cost $103,557,000)

        103,557,000

Verint Systems a, c

  40,000     1,167,600          
       
  Lehman Brothers (Tri-Party),          
          37,507,936  

4.85% dated 6/30/06, due 7/3/06,

         
       
 

maturity value $125,050,521 (collateralized

         
Telecommunications - 1.5%            

by obligations of various U.S. Government

         

ADTRAN

  65,000     1,457,950  

Agencies, valued at $127,555,538)

         

Broadwing Corporation a

  1,000     10,350  

(Cost $125,000,000)

        125,000,000

Catapult Communications a, c

  87,100     949,390          

Covad Communications Group a, c

  35,000     70,350   TOTAL REPURCHASE AGREEMENTS          

Foundry Networks a, c

  373,400     3,980,444  

(Cost $228,557,000)

        228,557,000

Globecomm Systems a, c

  233,700     1,741,065          

IDT Corporation a

  58,400     770,880              

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
2006 SEMIANNUAL REPORT TO STOCKHOLDERS  |  25





ROYCE VALUE TRUST

JUNE 30, 2006 (Unaudited)

                               
                               

      Schedule of Investments

                               
    PRINCIPAL AMOUNT     VALUE  
COLLATERAL RECEIVED FOR SECURITIES            

LOANED – 11.3%

           
U.S. Treasury Bonds            

6.00%-7.125%

           

due 8/15/22-2/15/26

$ 25,585   $ 28,143  
U.S. Treasury Notes            

4.00% due 11/15/12

  19,272     18,148  
U.S. Treasury Strip-Interest            

due 11/15/18

  11,997     6,209  
Money Market Funds            

State Street Navigator Securities Lending

           

Prime Portfolio (7 day yield-5.0651%)

        125,736,199  
       
 
TOTAL COLLATERAL RECEIVED FOR            

SECURITIES LOANED

           

(Cost $125,788,699)

        125,788,699  
       
 
TOTAL INVESTMENTS – 131.6%            

(Cost $1,060,522,725)

        1,457,296,653  
             
LIABILITIES LESS CASH            

AND OTHER ASSETS – (11.7)%

        (129,709,286 )
             
PREFERRED STOCK – (19.9)%         (220,000,000 )
       
 
NET ASSETS APPLICABLE TO            

COMMON STOCKHOLDERS – 100.0%

      $ 1,107,587,367  
       
 


a   Non-income producing.
b   At June 30, 2006, 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.
c   A portion of these securities were on loan at June 30, 2006.
d   A security for which market quotations are no longer readily available represents 0.2% of net assets. This security has been valued at its fair value under procedures established by the Fund’s Board of Directors.
e   Includes securities first acquired in 2006 and less than 1% of net assets applicable to Common Stockholders.
  New additions in 2006.
     
    Bold indicates the Fund’s largest 20 equity holdings in terms of June 30, 2006 market value.
     
INCOME TAX INFORMATION: The cost of total investments for Federal income tax purposes was $1,062,163,481. At June 30, 2006, net unrealized appreciation for all securities was $395,133,172, consisting of aggregate gross unrealized appreciation of $436,662,692 and aggregate gross unrealized depreciation of $41,529,520. The primary differences in book and tax basis cost is the timing of the recognition of losses on securities sold.


26  |  2006 SEMIANNUAL REPORT TO STOCKHOLDERS THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.




ROYCE VALUE TRUST

JUNE 30, 2006 (Unaudited)

                               
                               

      Statement of Assets and Liabilities

                               
ASSETS:                
Investments at value (including collateral on loaned securities) *                

Non-Affiliates (cost $829,348,057)

          $ 1,220,497,583  

Affiliated Companies (cost $2,617,668)

            8,242,070  

Total investments at value             1,228,739,653  
Repurchase agreements (at cost and value)             228,557,000  
Cash             11,119  
Receivable for investments sold             142,437  
Receivable for dividends and interest             975,158  

Total Assets

            1,458,425,367  

LIABILITIES:                
Payable for collateral on loaned securities             125,788,699  
Payable for investments purchased             3,441,345  
Payable for investment advisory fee             932,681  
Preferred dividends accrued but not yet declared             288,452  
Accrued expenses             386,823  

Total Liabilities

            130,838,000  

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           $ 1,107,587,367  

ANALYSIS OF NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS:                
Common Stock paid-in capital - $0.001 par value per share; 55,920,647 shares outstanding (150,000,000 shares authorized)           $ 687,492,004  
Undistributed net investment income (loss)             3,405,424  
Accumulated net realized gain (loss) on investments             72,897,346  
Net unrealized appreciation (depreciation) on investments             396,773,928  
Quarterly and accrued distributions             (52,981,335 )

Net Assets applicable to Common Stockholders (net asset value per share - $19.81)

          $ 1,107,587,367  

*Investments at identified cost (including $125,788,699 of collateral on loaned securities)           $ 831,965,725  

Market value of loaned securities           $ 122,676,304  


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
2006 SEMIANNUAL REPORT TO STOCKHOLDERS  |  27




ROYCE VALUE TRUST

SIX MONTHS ENDED JUNE 30, 2006 (Unaudited)

                               
                               

      Statement of Opreations

                               
INVESTMENT INCOME:          
Income:          

Dividends

         

Non-Affiliates

    $ 5,051,854  

Interest

      5,019,063  

Securities lending

      233,214  

Total income       10,304,131  

Expenses:          

Investment advisory fees

      6,629,595  

Stockholder reports

      227,291  

Custody and transfer agent fees

      114,634  

Directors’ fees

      63,736  

Administrative and office facilities expenses

      51,734  

Professional fees

      29,312  

Other expenses

      107,647  

Total expenses       7,223,949  
Compensating balance credits       (3,830 )

Net expenses       7,220,119  

Net investment income (loss)       3,084,012  

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:          
Net realized gain (loss) on investments          

Non-Affiliates

      66,039,704  
Net change in unrealized appreciation (depreciation) on investments       35,867,224  

Net realized and unrealized gain (loss) on investments       101,906,928  

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM INVESTMENT OPERATIONS       104,990,940  

DISTRIBUTIONS TO PREFERRED STOCKHOLDERS       (6,490,000 )

NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS          
RESULTING FROM INVESTMENT OPERATIONS
    $ 98,500,940  


28  |  2006 SEMIANNUAL REPORT TO STOCKHOLDERS THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.




ROYCE VALUE TRUST

                               
                               

      Statement of Changes in Net Assets

                               

  Six months ended
6/30/06
(unaudited)
  Year ended
12/31/05

INVESTMENT OPERATIONS:              
Net investment income (loss) $ 3,084,012     $ 321,412  
Net realized gain (loss) on investments   66,039,704       99,178,811  
Net change in unrealized appreciation (depreciation) on investments   35,867,224       (4,983,024 )

Net increase (decrease) in net assets resulting from investment operations   104,990,940       94,517,199  

DISTRIBUTIONS TO PREFERRED STOCKHOLDERS:              
Net realized gain on investments         (12,980,000 )
Quarterly 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              

RESULTING FROM INVESTMENT OPERATIONS

  98,500,940       81,537,199  

DISTRIBUTIONS TO COMMON STOCKHOLDERS:              
Net realized gain on investments         (85,780,292 )
Quarterly distributions *   (46,202,886 )      

Total distributions to Common Stockholders   (46,202,886 )     (85,780,292 )

CAPITAL STOCK TRANSACTIONS:              
Reinvestment of distributions to Common Stockholders   23,169,227       43,058,750  

Total capital stock transactions   23,169,227       43,058,750  

NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS   75,467,281       38,815,657  

NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS:              

Beginning of period

  1,032,120,086       993,304,429  

End of period (including undistributed net investment income of $3,405,424 at 6/30/06

             

and $321,412 at 12/31/05)

$ 1,107,587,367     $ 1,032,120,086  

*To be allocated to net investment income and capital gains at year end.              

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
2006 SEMIANNUAL REPORT TO STOCKHOLDERS  |  29



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 ended     Years ended December 31,
    June 30, 2006    
    (unaudited)     2005     2004     2003     2002     2001

NET ASSET VALUE, BEGINNING OF PERIOD     $18.87       $18.95       $17.03       13.22       $17.31       $16.56  

INVESTMENT OPERATIONS:                                                

Net investment income (loss)

    0.06       0.01       (0.08 )     (0.05 )     (0.02 )     0.05  

Net realized and unrealized gain (loss) on investments

    1.84       1.75       3.81       5.64       (2.25 )     2.58  

Total investment operations

    1.90       1.76       3.73       5.59       (2.27 )     2.63  

DISTRIBUTIONS TO PREFERRED STOCKHOLDERS:                                                

Net investment income

                            (0.01 )     (0.01 )

Net realized gain on investments

          (0.24 )     (0.26 )     (0.26 )     (0.28 )     (0.30 )

Quarterly distributions *

    (0.12 )                              

Total distributions to Preferred Stockholders

    (0.12 )     (0.24 )     (0.26 )     (0.26 )     (0.29 )     (0.31 )

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

    1.78       1.52       3.47       5.33       (2.56 )     2.32  

DISTRIBUTIONS TO COMMON STOCKHOLDERS:                                                

Net investment income

                            (0.07 )     (0.05 )

Net realized gain on investments

          (1.61 )     (1.55 )     (1.30 )     (1.44 )     (1.44 )

Quarterly distributions *

    (0.84 )                              

Total distributions to Common Stockholders

    (0.84 )     (1.61 )     (1.55 )     (1.30 )     (1.51 )     (1.49 )

CAPITAL STOCK TRANSACTIONS:                                                

Effect of reinvestment of distributions by Common Stockholders

    (0.00 )     0.01       0.00       (0.00 )     (0.02 )     (0.08 )

Effect of rights offering and Preferred Stock offering

                      (0.22 )            

Total capital stock transactions

    (0.00 )     0.01       0.00       (0.22 )     (0.02 )     (0.08 )

NET ASSET VALUE, END OF PERIOD     $19.81       $18.87       $18.95       $17.03       $13.22       $17.31  

MARKET VALUE, END OF PERIOD     $19.36       $20.08       $20.44       $17.21       $13.25       $15.72  

TOTAL RETURN (a):                                                
Market Value     0.69 % ***     6.95 %     29.60 %     41.96 %     (6.87 )%     20.03 %
Net Asset Value     9.64 % ***     8.41 %     21.42 %     40.80 %     (15.61 )%     15.23 %

RATIOS BASED ON AVERAGE NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS:

                                               
Total expenses ( b, c)     1.30 % **     1.49 %     1.51 %     1.49 %     1.72 %     1.61 %

Management fee expense (d)

    1.19 % **     1.37 %     1.39 %     1.34 %     1.56 %     1.45 %

Other operating expenses

    0.11 % **     0.12 %     0.12 %     0.15 %     0.16 %     0.16 %
Net investment income (loss)     0.55 % **     0.03 %     (0.50 )%     (0.36 )%     (0.09 )%     0.35 %
SUPPLEMENTAL DATA:                                                

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

    $1,107,587       $1,032,120       $993,304       $850,773       $560,776       $689,141  

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

    $220,000       $220,000       $220,000       $220,000       $160,000       $160,000  
Portfolio Turnover Rate     8 %     31 %     30 %     23 %     35 %     30 %
PREFERRED STOCK:                                                
Total shares outstanding     8,800,000       8,800,000       8,800,000       8,800,000       6,400,000       6,400,000  
Asset coverage per share     $150.86       $142.29       $137.88       $121.68       $112.62       $132.68  
Liquidation preference per share     $25.00       $25.00       $25.00       $25.00       $25.00       $25.00  
Average market value per share (e):                                                

5.90% Cumulative

    $23.77       $24.75       $24.50       $25.04      

       

7.80% Cumulative

   

     

     

      $25.87       $26.37       $25.70  

7.30% Tax-Advantaged Cumulative

   

     

     

      $25.53       $25.82       $25.37  

(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, if any, 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 1.09%, 1.22%, 1.21%, 1.19%, 1.38% and 1.30% for the periods ended June 30, 2006 and December 31, 2005, 2004, 2003, 2002 and 2001, respectively.
(c)   Expense ratios based on average net assets applicable to Common Stockholders before waiver of fees by the investment adviser would have been 1.62%, 1.82% and 1.65% for the periods ended December 31, 2003, 2002 and 2001, respectively.
(d)   The management fee is calculated based on average net assets over a rolling 60-month basis, while the above ratios of Management fee expenses are based on average net assets applicable to Common Stockholders over an annualized six-month basis.
(e)   The average of month-end market values during the period that the Preferred Stock was outstanding.
*   To be allocated to net investment income and capital gains at year end.
**   Annualized.
***   Not annualized.


30  |  2006 SEMIANNUAL REPORT TO STOCKHOLDERS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.



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.


Valuation of Investments:
    Securities are valued as of the close of trading on the New York Stock Exchange (generally 4:00 p.m. Eastern time) on the valuation date. Securities that trade on an exchange or Nasdaq, 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 bid price. 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. Bonds and other fixed income securities may be valued by reference to other securities with comparable ratings, interest rates and maturities, using established independent pricing services. Investments in money market funds are valued at net asset value per share.

Investment Transactions and Related Investment Income:
    Investment transactions are accounted for on the trade date. Dividend income is recorded on the ex-dividend date and any non-cash dividend income is recorded at the fair market value of the securities received. Interest income is recorded on an accrual basis. 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 in an equitable manner. Allocated personnel and occupancy costs related to The Royce Funds are included in administrative and office facilities expenses. The Fund has adopted a deferred fee agreement that allows the Fund’s 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.
 
Taxes:
    As a qualified regulated investment company under Subchapter M of the Internal Revenue Code, the Fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. The Schedule of Investments includes information regarding income taxes under the caption “Income Tax Information”.

Distributions:
    The Fund currently has a policy of paying quarterly distributions on the Fund’s Common Stock. Distributions are currently being made 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. The Fund is required to allocate long-term capital gain distributions and other types of income proportionately to distributions made to holders of shares of Common Stock and Preferred Stock. 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 basis 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.

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 the underlying securities.

Securities Lending:
    The Fund loans securities to qualified institutional investors for the purpose of realizing additional income. Collateral on all securities loaned for the Fund is accepted in cash and cash equivalents and invested temporarily by the custodian. The collateral is equal to 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.

2006 SEMIANNUAL REPORT TO STOCKHOLDERS  |  31




ROYCE VALUE TRUST



      Notes to Financial Statements (Unaudited) (continued)


Capital Stock:
    The Fund issued 1,209,849 and 2,294,908 shares of Common Stock as reinvestment of distributions by Common Stockholders for the six months ended June 30, 2006 and the year ended December 31, 2005, respectively.
    At June 30, 2006, 8,800,000 shares of 5.90% Cumulative Preferred Stock were outstanding. Commencing October 9, 2008 and thereafter, 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 Emerging Issues Task Force (EITF) Topic D-98, Classification and Measurement of Redeemable Securities, 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 & Associates, LLC (“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 the six rolling 60-month periods ending June 2006, the investment performance of the Fund exceeded the investment performance of the S&P 600 by 4% to 12%. Accordingly, the investment advisory fee consisted of a Basic Fee of $4,977,939 and an upward adjustment of $1,651,656 for performance of the Fund above that of the S&P 600. For the six months ended June 30, 2006, the Fund accrued and paid Royce advisory fees totaling $6,629,595.


Purchases and Sales of Investment Securities:
    For the six months ended June 30, 2006, the cost of purchases and proceeds from sales of investment securities, other than short-term securities and collateral received for securities loaned, amounted to $91,002,143 and $175,751,874, respectively.

Transactions in Shares of 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. The Fund effected the following transactions in shares of such companies during the six months ended June 30, 2006:

    Shares   Market Value   Cost of   Cost of   Realized   Dividend   Shares   Market Value

Affiliated Company

  12/31/05   12/31/05   Purchases   Sales   Gain (Loss)   Income   6/30/06   6/30/06

Peerless Manufacturing   158,600   $ 2,775,500             158,600   $ 3,798,470  
Synalloy Corporation   345,000     3,610,080             345,000     4,443,600  

        $ 6,385,580                     $ 8,242,070  
   


32  |  2006 SEMIANNUAL REPORT TO STOCKHOLDERS




ROYCE MICRO-CAP TRUST


JUNE 30, 2006 (Unaudited)

 

Schedule of Investments


    SHARES     VALUE       SHARES     VALUE
 
COMMON STOCKS – 101.3%             Restaurants and Lodgings - 0.3%          
             

Benihana Cl. A a

  800   $ 21,712
Consumer Products – 5.0%            

California Pizza Kitchen a, c

  2,100     57,708
Apparel and Shoes - 2.2%            

Champps Entertainment a

  10,000     65,600

Delta Apparel

  129,300   $ 2,216,202  

Famous Dave’s of America a, c

  58,170     773,661

Hartmarx Corporation a, c

  50,000     300,000          

Kleinert’s a, d

  14,200     0             918,681

Steven Madden a

  21,750     644,235          

Shoe Pavilion a

  139,800     1,012,152   Retail Stores - 4.9%          

Stride Rite

  10,000     131,900  

A.C. Moore Arts & Crafts a

  47,600     776,356

Weyco Group

  120,000     2,786,400  

America’s Car-Mart a, c

  113,000     2,295,030
       
 

Buckle (The)

  25,500     1,067,685
          7,090,889  

Cache a

  3,200     55,488
       
 

Casual Male Retail Group a

  2,000     20,100
Collectibles - 0.4%            

Cato Corporation Cl. A

  71,850     1,857,322

Topps Company (The)

  148,500     1,220,670  

Cost Plus a, c

  45,077     660,829
       
 

Deb Shops

  19,900     479,789
Food/Beverage/Tobacco - 0.3%            

Fred’s Cl. A

  7,500     100,125

Green Mountain Coffee Roasters a, c

  26,600     1,068,522  

La Senza Corporation

  99,900     2,129,911

Nutrition 21 a, c

  20,000     36,400  

PriceSmart a

  90,000     901,800
       
 

Shoe Carnival a

  11,000     262,460
          1,104,922  

Stein Mart

  148,900     2,203,720
       
 

United Retail Group a

  60,600     939,906
Home Furnishing and Appliances - 0.3%            

West Marine a

  127,000     1,711,960

Lifetime Brands

  42,054     911,310  

Wet Seal (The) Cl. A a, c

  39,200     191,296
       
 

Wild Oats Markets a, c

  3,000     58,800
Publishing - 0.1%                    

Educational Development

  10,600     76,394             15,712,577
       
         
Sports and Recreation - 0.5%             Other Consumer Services - 0.3%          

Monaco Coach

  73,900     938,530  

Ambassadors Group

  15,000     433,200

National R.V. Holdings a

  31,800     172,038  

Ambassadors International

  6,100     141,825

Orange 21 a

  7,400     42,550  

Autobytel a, c

  20,000     70,600

Sturm, Ruger & Company a

  95,000     593,750  

Cash America International

  5,000     160,000
       
 

Escala Group a, c

  26,000     121,680
          1,746,868          
       
            927,305
Other Consumer Products - 1.2%                    

Burnham Holdings Cl. A

  79,500     1,530,375   Total (Cost $13,320,231)         20,636,314

Cobra Electronics

  10,000     94,300          

Cross (A. T.) Company Cl. A a, c

  100,000     530,000   Diversified Investment Companies – 2.1%          

JAKKS Pacific a

  25,000     502,250   Closed-End Mutual Funds - 2.1%          

Lazare Kaplan International a

  151,700     1,251,525  

ASA Bermuda

  73,300     4,680,205

Sonic Solutions a, c

  4,000     66,000  

Brantley Capital a

  56,100     120,615
       
 

Central Fund of Canada Cl. A

  207,000     1,780,200
          3,974,450          
       
  Total (Cost $3,941,581)         6,581,020
Total (Cost $10,673,077)         16,125,503          
       
  Financial Intermediaries – 8.4%          
Consumer Services – 6.4%             Banking - 2.8%          

Direct Marketing - 0.3%

           

Abigail Adams National Bancorp b

  174,400     2,441,600

Dover Saddlery a, c

  9,500     81,012  

Arrow Financial

  14,322     392,852

FTD Group a, c

  55,000     742,500  

Bancorp (The) a, c

  51,380     1,285,014

Sportsman’s Guide (The) a, c

  6,000     183,000  

First National Lincoln

  40,200     670,415

ValueVision Media Cl. A a, c

  5,000     55,150  

FirstBank NW

  9,860     258,924
       
 

Lakeland Financial

  45,000     1,093,050
          1,061,662  

Meta Financial Group

  44,800     963,200
       
 

Peapack-Gladstone Financial

  25,800     667,962
Leisure and Entertainment - 0.4%            

Queen City Investments a

  948     849,408

FortuNet a, c

  8,000     129,600  

Quest Capital

  30,000     72,292

IMAX Corporation a, c

  25,000     229,000  

Sterling Bancorp

  22,869     445,946

Multimedia Games a, c

  5,000     50,650          

New Frontier Media a

  60,000     430,200             9,140,663

Progressive Gaming International a

  9,500     74,100          

Singing Machine Company (The) a, c

  5,000     1,600              

TiVo a, c

  20,000     143,000              

Youbet.com a, c

  49,300     238,119              
       
             
          1,296,269              
       
             
Media and Broadcasting - 0.2%                        

Outdoor Channel Holdings a, c

  69,750     719,820              
       
             

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
2006 SEMIANNUAL REPORT TO STOCKHOLDERS  |  33




ROYCE MICRO-CAP TRUST


 

 

Schedule of Investments


    SHARES     VALUE       SHARES     VALUE
 
Financial Intermediaries (continued)            

Cardiome Pharma a, c

  29,300   $ 259,012
Insurance - 2.3%            

Cell Genesys a, c

  58,000     291,160

American Safety Insurance Holdings a

  20,000   $ 330,000  

Cerus Corporation a, c

  82,200     586,086

First Acceptance a

  258,405     3,044,011  

CollaGenex Pharmaceuticals a, c

  25,000     299,500

Independence Holding

  33,534     751,497  

Corcept Therapeutics a, c

  5,000     20,250

NYMAGIC

  65,400     1,899,870  

Cytokinetics a, c

  5,000     31,450

Navigators Group a, c

  17,200     753,704  

Dendreon Corporation a, c

  12,700     61,468

Wellington Underwriting

  444,712     717,511  

Discovery Partners International a

  35,000     91,000
       
 

Draxis Health a

  15,000     66,600
          7,496,593  

Durect Corporation a

  44,100     170,667
       
 

DUSA Pharmaceuticals a, c

  36,700     207,355
Real Estate Investment Trusts - 0.3%            

Dyax Corporation a, c

  15,000     44,100

Opteum Cl. A

  99,000     892,980  

Emisphere Technologies a, c

  163,200     1,392,096
       
 

Encysive Pharmaceuticals a, c

  10,000     69,300
Securities Brokers - 1.3%            

Gene Logic a

  234,479     316,547

First Albany Companies a

  76,000     342,000  

Genitope Corporation a, c

  3,000     18,960

International Assets Holding a

  149,000     2,451,050  

Halozyme Therapeutics a, c

  20,000     54,000

Sanders Morris Harris Group

  21,000     317,310  

Hi-Tech Pharmacal a

  39,830     659,983

Stifel Financial a, c

  21,233     749,737  

Idenix Pharmaceuticals a, c

  5,000     47,000

TradeStation Group a, c

  30,000     380,100  

ImmunoGen a, c

  44,000     137,720
       
 

Lannett Company a, c

  64,000     364,160
          4,240,197  

Mannkind Corporation a, c

  42,000     895,020
       
 

Maxygen a

  5,000     37,400
Other Financial Intermediaries - 1.7%            

Micromet a, c

  14,333     61,345

Electronic Clearing House a, c

  20,000     269,200  

Momenta Pharmaceuticals a, c

  65,000     826,150

MVC Capital

  211,200     2,838,528  

Monogram Biosciences a, c

  35,000     69,300

MarketAxess Holdings a, c

  123,700     1,361,937  

Myriad Genetics a, c

  25,000     631,250

NGP Capital Resources Company

  58,600     857,318  

Nabi Biopharmaceuticals a, c

  5,000     28,700
       
 

Nastech Pharmaceutical Company a, c

  2,700     42,660
          5,326,983  

Neurogen Corporation a, c

  30,000     153,600
       
 

Oncolytics Biotech a, c

  41,000     116,850
Total (Cost $18,567,765)         27,097,416  

Orchid Cellmark a, c

  78,000     217,620
       
 

Origin Agritech a, c

  51,000     731,340
Financial Services – 2.0%            

Pharmacyclics a

  98,000     378,280
Insurance Brokers - 0.1%            

SFBC International a, c

  25,000     379,000

Crawford & Company Cl. A

  50,000     330,500  

Sangamo BioSciences a, c

  10,000     59,000
       
 

Senesco Technologies a

  25,000     47,500

Investment Management - 1.7%

           

Tercica a, c

  69,800     369,242

ADDENDA Capital

  48,000     1,102,929  

Theragenics Corporation a, c

  145,800     497,178

Epoch Holding Corporation a

  218,300     1,091,500  

Trimeris a, c

  30,000     344,700

Hennessy Advisors

  16,500     470,250          

Highbury Financial a, c

  317,200     1,744,600             14,592,148

Highbury Financial (Warrants) a

  634,400     570,960          

Rockwater Capital a

  50,000     318,015   Health Services - 2.2%          
       
 

ATC Healthcare Cl. A a

  35,000     14,350
          5,298,254  

Albany Molecular Research a

  40,000     427,200
       
 

Bio-Imaging Technologies a

  42,400     174,688
Other Financial Services - 0.2%            

Covalent Group a

  25,000     75,750

Chardan North China Acquisition a, c

  60,800     465,120  

Gentiva Health Services a

  23,000     368,690

Chardan North China Acquisition (Warrants) a

  93,900     261,042  

HMS Holdings a

  35,420     379,702

MicroFinancial

  10,000     34,500  

Healthcare Services Group

  2,800     58,660
       
 

Health Grades a, c

  100,000     450,000
          760,662  

Hooper Holmes a, c

  88,600     270,230
       
 

Horizon Health a

  50,000     1,044,000
Total (Cost $5,646,654)         6,389,416  

MedCath Corporation a, c

  18,000     339,120
       
 

Mediware Information Systems a

  55,000     530,750
Health – 14.4%            

National Medical Health Card Systems a, c

  54,000     745,200
Commercial Services - 1.9%            

On Assignment a

  41,100     377,709

First Consulting Group a

  274,700     2,428,348  

Quovadx a

  5,000     12,900

PAREXEL International a, c

  121,400     3,502,390  

RehabCare Group a, c

  22,000     382,360
       
             
          5,930,738              
       
             
Drugs and Biotech - 4.5%                        

Allos Therapeutics a, c

  233,600     817,600              

Alnylam Pharmaceuticals a, c

  3,000     45,240              

AnorMED a

  160,600     923,450              

Antigenics a, c

  70,000     148,400              

Axonyx a, c

  50,000     42,500              

Barrier Therapeutics a, c

  11,300     73,902              

Cambrex Corporation

  16,000     333,280              

Caraco Pharmaceutical Laboratories a, c

  123,850     1,133,227              


34  |  2006 SEMIANNUAL REPORT TO STOCKHOLDERS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.




 


JUNE 30, 2006 (Unaudited)

 

 


    SHARES     VALUE       SHARES     VALUE
 
Health (continued)             Building Systems and Components - 1.0%          
Health Services (continued)            

Aaon

  63,700   $ 1,634,542

Res-Care a, c

  32,000   $ 640,000  

Craftmade International

  20,000     335,000

Sun Healthcare Group a, c

  51,000     443,190  

Flanders Corporation a, c

  1,500     15,045

U.S. Physical Therapy a

  10,000     146,400  

LSI Industries

  63,812     1,084,166
       
 

Modtech Holdings a

  3,800     25,726
          6,880,899  

Southern Energy Homes a

  11,600     77,720
       
         
Medical Products and Devices - 5.6%                       3,172,199

Adeza Biomedical a, c

  23,200     325,264          

Allied Healthcare Products a

  253,500     1,470,300   Construction Materials - 1.6%          

AngioDynamics a, c

  14,000     378,700  

Ash Grove Cement Company

  8,000     1,584,000

Anika Therapeutics a

  24,000     232,320  

Monarch Cement

  50,410     1,380,226

Bruker BioSciences a

  187,200     1,003,392  

Synalloy Corporation a

  161,000     2,073,680

Caliper Life Sciences a

  52,400     261,476          

Cardiac Science a, c

  29,947     236,282             5,037,906

CONMED Corporation a, c

  3,900     80,730          

Del Global Technologies a

  168,279     420,698   Industrial Components - 1.6%          

EPIX Pharmaceuticals a, c

  49,000     213,150  

American Superconducter a, c

  67,000     591,610

Endologix a, c

  10,500     37,170  

Bel Fuse Cl. A

  55,200     1,498,680

Exactech a, c

  114,100     1,568,875  

C & D Technologies c

  53,000     398,560

Kensey Nash a, c

  25,000     737,500  

Ladish Company a

  10,000     374,700

Langer a

  7,100     29,110  

Plug Power a, c

  1,370     6,398

Medical Action Industries a, c

  83,500     1,844,515  

Powell Industries a, c

  50,300     1,203,679

Merit Medical Systems a, c

  5,700     78,432  

Scientific Technologies a, c

  10,700     111,280

Microtek Medical Holdings a, c

  122,320     467,262  

Tech/Ops Sevcon

  76,200     481,584

Minrad International a, c

  12,200     50,508  

II-VI a

  20,000     366,000

Molecular Devices a, c

  25,500     779,280  

Woodhead Industries

  10,000     191,400

NMT Medical a, c

  10,600     106,106          

Neurometrix a, c

  21,500     654,890             5,223,891

Orthofix International a

  28,000     1,067,640          

OrthoLogic Corporation a, c

  84,000     136,080   Machinery - 3.0%          

PLC Systems a

  105,200     109,408  

Alamo Group

  38,600     812,530

Possis Medical a, c

  29,900     263,419  

Ampco-Pittsburgh

  12,900     369,585

Shamir Optical Industry a

  7,500     67,500  

Astec Industries a, c

  40,200     1,371,624

Sirona Dental Systems

  25,000     990,500  

Baldwin Technology Company Cl. A a, c

  45,000     243,000

STAAR Surgical a

  5,000     38,700  

Global Power Equipment Group a

  87,600     278,568

Synovis Life Technologies a, c

  23,000     226,090  

Gorman-Rupp Company

  3,375     89,775

Urologix a, c

  202,000     634,280  

Hardinge

  97,000     1,498,650

Utah Medical Products

  42,300     1,269,423  

Hurco Companies a, c

  31,500     809,235

Young Innovations

  61,450     2,164,884  

Keithley Instruments

  14,000     178,220
       
 

LeCroy Corporation a, c

  2,000     28,700
          17,943,884  

Lindsay Manufacturing

  10,000     271,200
       
 

MTS Systems

  10,000     395,100
Personal Care - 0.2%            

Mueller (Paul) Company

  9,650     342,575

CCA Industries

  9,040     83,349  

Sun Hydraulics

  38,950     809,381

Helen of Troy a, c

  20,000     368,000  

Tennant Company

  44,100     2,217,348

Nature’s Sunshine Products

  7,500     69,000          

Nutraceutical International a, c

  15,000     229,950             9,715,491
       
         
          750,299   Metal Fabrication and Distribution - 2.2%          
       
 

Aleris International a, c

  4,075     186,839
Total (Cost $35,882,100)         46,097,968  

Castle (A.M.) & Company

  15,890     512,453
       
 

Encore Wire a, c

  15,000     539,100
Industrial Products – 14.6%            

Harris Steel Group

  50,000     1,265,341
Automotive - 1.0%            

Haynes International a

  39,370     1,368,108

IMPCO Technologies a, c

  13,000     138,710  

Insteel Industries

  24,200     585,640

LKQ Corporation a, c

  11,400     216,600  

NN

  155,600     1,921,660

Noble International

  39,600     567,072  

Novamerican Steel a

  2,500     101,175

Safety Components International a, c

  46,400     638,464  

Universal Stainless & Alloy Products a, c

  23,230     679,942

Spartan Motors

  2,800     43,064          

Strattec Security a, c

  28,300     1,409,623             7,160,258

Wescast Industries Cl. A

  12,900     169,411          
       
  Paper and Packaging - 0.1%          
          3,182,944  

Mod-Pac Corporation a

  23,200     230,840
       
         
              Pumps, Valves and Bearings - 0.2%          
             

CIRCOR International

  28,000     853,720
                     

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
2006 SEMIANNUAL REPORT TO STOCKHOLDERS  |  35




ROYCE MICRO-CAP TRUST


 

 

Schedule of Investments


    SHARES     VALUE       SHARES     VALUE
 
Industrial Products (continued)            

Insituform Technologies Cl. A a, c

  75,300   $ 1,723,617
Specialty Chemicals and Materials - 1.9%            

Nobility Homes

  2,000     54,340

Aceto Corporation

  384,919   $ 2,663,639  

Skyline Corporation

  32,100     1,373,238

American Vanguard

  3,333     51,595          

Balchem Corporation

  22,500     506,250             3,654,814

CFC International a, c

  30,400     499,776          

Hawkins

  122,667     1,717,951   Food and Tobacco Processors - 1.2%          

NuCo2 a, c

  20,000     480,800  

Cal-Maine Foods

  50,000     343,500

Park Electrochemical

  10,000     257,500  

Galaxy Nutritional Foods a

  176,200     61,670
       
 

ML Macadamia Orchards L.P.

  120,200     653,888
          6,177,511  

Omega Protein a, c

  9,600     55,488
       
 

Seneca Foods Cl. A a

  62,500     1,435,625
Textiles - 0.1%            

Seneca Foods Cl. B a

  42,500     972,400

Unifi a

  100,000     290,000  

Sunopta a, c

  42,780     396,998
       
         
Other Industrial Products - 1.9%                       3,919,569

Color Kinetics a, c

  50,000     945,500          

Distributed Energy Systems a

  50,000     258,500   Industrial Distribution - 0.7%          

Eastern Company (The)

  26,500     547,225  

Central Steel & Wire

  1,088     685,440

Maxwell Technologies a

  15,300     300,339  

Elamex a

  60,200     51,772

Peerless Manufacturing a

  42,200     1,010,690  

Lawson Products

  19,500     768,690

Quixote Corporation

  35,500     639,710  

Strategic Distribution a

  59,690     835,660

Raven Industries

  73,000     2,299,500          
       
            2,341,562
          6,001,464          
       
  Printing - 0.9%          
Total (Cost $30,809,311)         47,046,224  

Bowne & Co.

  66,500     950,950
       
 

Champion Industries

  23,500     195,990
Industrial Services – 13.1%            

Courier Corporation

  22,950     918,459
Advertising and Publishing - 0.5%            

Ennis

  9,700     190,896

Greenfield Online a, c

  20,000     148,200  

Schawk

  38,900     680,750

MDC Partners Cl. A a

  84,000     687,960          

NetRatings a, c

  50,000     694,500             2,937,045
       
         
          1,530,660   Transportation and Logistics - 2.9%          
       
 

Dynamex a, c

  42,150     919,292
Commercial Services - 5.4%            

Forward Air

  50,700     2,065,011

Acacia Research-Acacia Technologies a

  31,850     447,811  

Frozen Food Express Industries a, c

  92,000     1,013,840

American Bank Note Holographics a, c

  242,200     808,948  

MAIR Holdings a, c

  8,600     53,406

BB Holdings a

  390,000     1,478,436  

Marten Transport a, c

  4,050     88,047

Carlisle Group a

  151,000     256,891  

Pacific CMA a, c

  200,000     122,000

CBIZ a, c

  87,000     644,670  

Patriot Transportation Holding a

  3,000     260,340

Clark

  85,900     1,133,880  

Universal Truckload Services a

  134,200     4,580,246

Collectors Universe

  11,700     163,566  

Vitran Corporation Cl. A a

  8,000     187,920

CorVel Corporation a, c

  31,850     796,250          

Exponent a, c

  136,600     2,308,540             9,290,102

Geo Group (The) a, c

  51,200     1,794,560          

Kforce a, c

  55,000     851,950   Other Industrial Services - 0.3%          

PDI a

  15,200     218,728  

Landauer

  21,300     1,020,270

RCM Technologies a

  33,200     166,664  

Team a

  2,200     55,110

Renaissance Learning

  2,365     32,046          

SM &A a, c

  31,300     190,930             1,075,380

Senomyx a, c

  47,000     678,210          

Services Acquisition Corporation

            Total (Cost $23,652,978)         42,130,725

International a, c

  44,800     443,520          

SITEL Corporation a, c

  40,000     156,800   Natural Resources – 8.8%          

StarTek

  15,000     224,250   Energy Services - 3.7%          

TRC Companies a, c

  61,100     643,383  

Calfrac Well Services

  1,000     21,500

Volt Information Sciences a

  51,600     2,404,560  

Carbo Ceramics

  18,750     921,187

Westaff a

  362,500     1,537,000  

Conrad Industries a

  154,000     539,000
       
 

Dawson Geophysical a

  2,400     73,848
          17,381,593  

Dril-Quip a

  27,500     2,267,100
       
 

Enerflex Systems

  2,700     67,361
Engineering and Construction - 1.2%            

Gulf Island Fabrication

  45,400     909,816

Comfort Systems USA

  25,600     365,824  

GulfMark Offshore a, c

  65,200     1,684,116

Devcon International a

  21,700     137,795  

Input/Output a

  43,500     411,075
             

Pason Systems

  222,400     3,257,404
             

StealthGas

  4,900     68,355
             

TGC Industries a

  11,280     121,147


36  |  2006 SEMIANNUAL REPORT TO STOCKHOLDERS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.




 


JUNE 30, 2006 (Unaudited)

 

 


    SHARES     VALUE       SHARES     VALUE
 
Natural Resources (continued)            

CSP a

  122,581   $ 876,454
Energy Services (continued)            

DDi Corporation a

  52,747     432,525

Valley National Gases a

  30,100   $ 787,115  

Dalsa Corporation a

  5,000     65,395

Willbros Group a, c

  35,900     679,946  

Dot Hill Systems a, c

  2,000     6,840
       
 

Excel Technology a

  92,900     2,779,568
          11,808,970  

Giga-tronics a

  3,200     6,112
       
 

Hypercom Corporation a, c

  18,010     168,394
Oil and Gas - 2.0%            

InFocus Corporation a, c

  54,700     156,442

Bonavista Energy Trust

  69,700     2,185,344  

International DisplayWorks a, c

  81,560     424,112

CE Franklin a, c

  56,010     811,585  

Merix Corporation a

  7,000     76,790

Contango Oil & Gas Company a, c

  10,000     141,400  

Metrologic Instruments a, c

  2,900     43,529

Edge Petroleum a

  2,000     39,960  

Mobility Electronics a, c

  1,000     7,260

Exploration Company of Delaware a

  5,500     58,630  

MOCON

  15,600     148,044

Nuvista Energy a

  121,000     1,527,269  

Neoware a, c

  2,600     31,954

Particle Drilling Technologies a, c

  7,000     24,640  

Performance Technologies a

  124,550     859,395

Pioneer Drilling Company a

  7,500     115,800  

Richardson Electronics

  202,100     1,485,435

Savanna Energy Services a

  2,500     51,218  

Rimage Corporation a, c

  20,000     408,400

Storm Cat Energy a, c

  302,270     680,108  

SimpleTech a, c

  201,600     756,000

VAALCO Energy a, c

  79,500     775,920  

TTM Technologies a, c

  120,700     1,746,529
       
 

TransAct Technologies a

  78,600     809,580
          6,411,874  

Zomax a

  20,000     30,600
       
         
Precious Metals and Mining - 1.9%                       12,699,637

Aurizon Mines a

  237,000     663,600          

Brush Engineered Materials a, c

  15,500     323,175   Distribution - 0.8%          

Cumberland Resources a

  220,000     1,056,000  

Agilysys

  90,000     1,620,000

Gammon Lake Resources a

  10,600     146,174  

Bell Industries a

  85,700     238,246

Gold Reserve a

  14,000     80,500  

Jaco Electronics a

  29,000     108,460

Golden Star Resources a

  168,100     497,576  

Nu Horizons Electronics a, c

  40,000     386,000

Metallica Resources a, c

  281,300     869,217  

PC Mall a, c

  6,000     38,100

Minefinders Corporation a

  116,000     947,720  

Pomeroy IT Solutions a

  6,900     49,680

Nevsun Resources a, c

  5,000     14,500          

Northern Orion Resources a

  51,400     249,804             2,440,486

Northgate Minerals a

  270,000     993,600          

NovaGold Resources a

  13,400     171,788   Internet Software and Services - 2.0%          

Spur Ventures a

  44,100     37,530  

Answers Corporation a, c

  4,100     39,032
       
 

CMGI a, c

  552,000     667,920
          6,051,184  

Digitas a

  88,840     1,032,321
       
 

EDGAR Online a, c

  38,700     181,890
Real Estate - 0.3%            

eResearch Technology a, c

  90,000     819,000

HomeFed Corporation

  11,352     774,774  

iGATE Corporation a, c

  273,400     1,747,026

Kennedy-Wilson a, c

  21,500     370,875  

Inforte Corporation a

  11,400     54,036
       
 

LookSmart a, c

  4,000     12,960
          1,145,649  

MIVA a, c

  10,000     40,500
       
 

NIC a, c

  26,800     193,764
Other Natural Resources - 0.9%            

PFSweb a

  7,242     7,314

PICO Holdings a

  55,700     1,796,325  

Stamps.com a

  21,200     589,784

Pope Resources L.P.

  33,000     1,027,950  

Stellent

  15,000     143,250
       
 

Varsity Group a, c

  150,400     613,632
          2,824,275  

Web.com a

  31,800     189,846
       
         
Total (Cost $10,941,709)         28,241,952             6,332,275
       
         
Technology – 22.5%             IT Services - 5.2%          
Aerospace and Defense - 2.3%            

CIBER a, c

  182,662     1,203,743

Allied Defense Group (The) a, c

  78,760     1,731,932  

Cogent Communications Group a, c

  32,500     304,525

Astronics Corporation a

  26,400     353,232  

Computer Task Group a, c

  381,100     1,905,500

Axsys Technologies a, c

  6,400     96,448  

Covansys Corporation a, c

  172,500     2,168,325

Ducommun a

  72,100     1,335,292  

DiamondCluster International a, c

  138,100     1,093,752

HEICO Corporation

  41,600     1,179,360  

Forrester Research a

  104,300     2,918,314

HEICO Corporation Cl. A

  24,160     573,075  

Rainmaker Systems a, c

  2,000     10,840

Integral Systems

  47,500     1,274,425  

Sapient Corporation a, c

  500,000     2,650,000

SIFCO Industries a, c

  45,800     220,756              

TVI Corporation a, c

  211,190     745,501              
       
             
          7,510,021              
       
             
Components and Systems - 3.9%                        

AZZ a, c

  45,600     1,195,176              

Advanced Photonix Cl. A a

  117,900     185,103              

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
2006 SEMIANNUAL REPORT TO STOCKHOLDERS  |  37




ROYCE MICRO-CAP TRUST


 

 

Schedule of Investments


    SHARES     VALUE       SHARES     VALUE
 
Technology (continued)             Telecommunications - 2.3%          
IT Services (continued)            

Anaren a

  24,300   $ 497,907

Syntel

  54,300   $ 1,110,978  

C-COR.net a

  5,000     38,600

TechTeam Global a

  58,100     531,615  

Captaris a

  67,800     315,270

TriZetto Group (The) a, c

  182,300     2,696,217  

Catapult Communications a, c

  5,000     54,500
       
 

Centillium Communications a

  11,000     30,910
          16,593,809  

Channell Commercial a, c

  102,825     339,322
       
 

Communications Systems

  79,500     814,080
Semiconductors and Equipment - 1.6%            

Comtech Group a, c

  31,050     345,587

CalAmp Corporation a, c

  36,200     321,818  

Hurray! Holding Company ADR a, c

  10,100     55,348

California Micro Devices a

  16,700     66,800  

Intervoice a, c

  2,900     20,648

Cascade Microtech a, c

  48,000     550,080  

North Pittsburgh Systems

  15,700     432,692

Catalyst Semiconductor a

  9,200     33,396  

Novatel Wireless a, c

  9,400     97,572

ESS Technology a

  25,000     54,000  

PC-Tel a, c

  49,600     423,584

Electroglas a, c

  281,700     856,368  

Radyne ComStream a, c

  55,720     634,094

Exar Corporation a, c

  41,208     546,830  

SpectraLink Corporation a, c

  57,000     502,740

Integrated Silicon Solution a, c

  15,000     82,650  

Symmetricom a, c

  24,782     175,209

Intevac a, c

  40,550     879,124  

UCN a

  100,000     265,000

Jinpan International

  57,050     447,842  

ViaSat a, c

  91,812     2,357,732

MIPS Technologies a, c

  10,000     60,700          

PDF Solutions a, c

  29,000     359,890             7,400,795

Photronics a, c

  29,750     440,300          

QuickLogic Corporation a

  20,000     97,800   Total (Cost $46,544,452)         72,342,050

Semitool a, c

  25,500     230,010          

White Electronic Designs a

  10,000     50,800   Miscellaneous(e) – 4.0%          
       
  Total (Cost $12,139,579)         12,853,547
          5,078,408          
       
  TOTAL COMMON STOCKS          
Software - 4.4%            

(Cost $212,119,437)

        325,542,135

Aladdin Knowledge Systems a

  27,300     555,555          

Altiris a

  3,500     63,140   PREFERRED STOCK – 0.5%          

Applix a

  20,000     147,600  

Seneca Foods Conv. a

  75,409     1,583,589

AsiaInfo Holdings a, c

  50,000     214,500          

Descartes Systems Group (The) a, c

  56,500     207,920   TOTAL PREFERRED STOCK          

DocuCorp International a

  100,000     747,000  

(Cost $943,607)

        1,583,589

Evans & Sutherland Computer a

  77,400     387,000          

Fundtech a

  55,000     539,550   REPURCHASE AGREEMENTS – 17.2%          

ILOG ADR a

  35,000     460,600   State Street Bank & Trust Company,          

Indus International a

  19,200     54,912  

5.10% dated 6/30/06, due 7/3/06,

         

InterVideo a, c

  24,500     239,365  

maturity value $25,511,838 (collateralized

         

iPass a, c

  190,000     1,064,000  

by obligations of various U.S. Government

         

JDA Software Group a, c

  59,500     834,785  

Agencies, valued at $26,138,650)

         

Majesco Entertainment Company a

  2,500     4,075  

(Cost $25,501,000)

        25,501,000

MapInfo a, c

  5,000     65,250          

McDATA Corporation Cl. A a, c

  18,199     74,252   Lehman Brothers (Tri-Party),          

MetaSolv a, c

  5,800     16,356  

4.85% dated 6/30/06, due 7/3/06,

         

MIND C.T.I.

  20,000     51,600  

maturity value $30,012,125 (collateralized

         

Moldflow Corporation a

  7,500     87,825  

by obligations of various U.S. Government

         

Peerless Systems a, c

  61,070     313,289  

Agencies, valued at $30,615,940)

         

Pegasystems c

  320,200     2,055,684  

(Cost $30,000,000)

        30,000,000

Phase Forward a, c

  43,000     495,360          

SPSS a

  41,800     1,343,452   TOTAL REPURCHASE AGREEMENTS          

SeaChange International a, c

  5,000     34,800  

(Cost $55,501,000)

        55,501,000

TeleCommunication Systems Cl. A a, c

  10,000     23,900          

Transaction Systems Architects Cl. A a, c

  100,100     4,173,169              

Unica Corporation a, c

  3,200     31,680              
       
             
          14,286,619              
       
             


38  |  2006 SEMIANNUAL REPORT TO STOCKHOLDERS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.




 


JUNE 30, 2006 (Unaudited)

 

 


      VALUE  
 
COLLATERAL RECEIVED FOR SECURITIES LOANED – 13.1%        
Money Market Funds        

State Street Navigator Securities Lending

       

Prime Portfolio (7 day yield-5.0651%)

       

(Cost $42,080,785)

  $ 42,080,785  
   
 
TOTAL INVESTMENTS – 132.1%        

(Cost $310,644,829)

    424,707,509  

LIABILITIES LESS CASH
   AND OTHER ASSETS – (13.4)%
    (43,231,776 )

PREFERRED STOCK – (18.7)%
    (60,000,000 )
   
 
NET ASSETS APPLICABLE TO        

COMMON STOCKHOLDERS – 100.0%

  $ 321,475,733  
   
 


a   Non-income producing.
b   At June 30, 2006, 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.
c   A portion of these securities were on loan at June 30, 2006.
d   A security for which market quotations are no longer readily available represents 0.00% of net assets. This security has been valued at its fair value under procedures established by the Fund’s Board of Directors.
e   Includes securities first acquired in 2006 and less than 1% of net assets applicable to Common Stockholders.
  New additions in 2006.
   
Bold indicates the Fund’s largest 20 equity holdings in terms of June 30, 2006 market value.

INCOME TAX INFORMATION: The cost of total investments for Federal income tax purposes was $311,447,026. At June 30, 2006, net unrealized appreciation for all securities was $113,260,483, consisting of aggregate gross unrealized appreciation of $125,806,222 and aggregate gross unrealized depreciation of $12,545,739. The primary differences in 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.
2006 SEMIANNUAL REPORT TO STOCKHOLDERS  |  39



ROYCE MICRO-CAP TRUST   JUNE 30, 2006 (Unaudited)

         
         

    Statement of Assets and Liabilities        

         
ASSETS:        
Investments at value (including collateral on loaned securities) *        

Non-Affiliates (cost $252,353,429)

  $ 366,764,909  

Affiliated Companies (cost $2,790,400)

    2,441,600  

Total investments at value     369,206,509  
Repurchase agreements (at cost and value)     55,501,000  
Cash     4,100  
Receivable for investments sold     364,950  
Receivable for dividends and interest     252,007  

Total Assets

    425,328,566  

LIABILITIES:        
Payable for collateral on loaned securities     42,080,785  
Payable for investments purchased     1,120,593  
Payable for investment advisory fee     421,689  
Preferred dividends accrued but not yet declared     80,000  
Accrued expenses     149,766  

Total Liabilities

    43,852,833  

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   $ 321,475,733  

ANALYSIS OF NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS:        
Common Stock paid-in capital - $0.001 par value per share; 22,456,527 shares outstanding (150,000,000 shares authorized)   $ 192,512,057  
Undistributed net investment income (loss)     78,015  
Accumulated net realized gain (loss) on investments     30,571,167  
Net unrealized appreciation (depreciation) on investments     114,062,680  
Quarterly and accrued distributions     (15,748,186 )

Net Assets applicable to Common Stockholders (net asset value per share - $14.32)

  $ 321,475,733  

*Investments at identified cost (including $42,080,785 of collateral on loaned securites)   $ 255,143,829  

Market value of loaned securities
  $ 41,104,418  



40  |  2006 SEMIANNUAL REPORT TO STOCKHOLDERS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.



ROYCE MICRO-CAP TRUST   SIX MONTHS ENDED JUNE 30, 2006 (Unaudited)

 
 

    Statement of Operations        

         
INVESTMENT INCOME:        
Income:        

Dividends

       

Non-Affiliates

  $ 1,382,968  

Affiliated Companies

    52,350  

Interest

    1,172,517  

Securities lending

    151,655  

Total income     2,759,490  

Expenses:        

Investment advisory fees

    2,442,929  

Stockholder reports

    71,008  

Custody and transfer agent fees

    69,753  

Directors’ fees

    29,954  

Professional fees

    20,665  

Administrative and office facilities expenses

    14,836  

Other expenses

    37,097  

Total expenses     2,686,242  
Compensating balance credits     (5,871 )

Net expenses     2,680,371  

Net investment income (loss)     79,119  

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:        
Net realized gain (loss) on investments        

Non-Affiliates

    28,522,036  

Affiliated Companies

    (208,963 )
Net change in unrealized appreciation (depreciation) on investments     6,966,400  

Net realized and unrealized gain (loss) on investments     35,279,473  

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM INVESTMENT OPERATIONS     35,358,592  

DISTRIBUTIONS TO PREFERRED STOCKHOLDERS     (1,800,000 )

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

  $ 33,558,592  


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
2006 SEMIANNUAL REPORT TO STOCKHOLDERS  |  41



ROYCE MICRO-CAP TRUST

 
 

    Statement of Changes in Net Assets        



    Six months ended        
    6/30/06   Year ended
    (unaudited)   12/31/05

                 
INVESTMENT OPERATIONS:                
Net investment income (loss)   $ 79,119     $ (763,209 )
Net realized gain (loss) on investments     28,313,073       37,754,245  
Net change in unrealized appreciation (depreciation) on investments     6,966,400       (14,066,144 )

Net increase (decrease) in net assets resulting from investment operations     35,358,592       22,924,892  

DISTRIBUTIONS TO PREFERRED STOCKHOLDERS:                
Net realized gain on investments           (3,600,000 )
Quarterly 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 RESULTING FROM INVESTMENT OPERATIONS

    33,558,592       19,324,892  

DISTRIBUTIONS TO COMMON STOCKHOLDERS:                
Net realized gain on investments           (38,452,900 )
Quarterly distributions *     (13,868,186 )      

Total distributions to Common Stockholders     (13,868,186 )     (38,452,900 )

CAPITAL STOCK TRANSACTIONS:                
Reinvestment of distributions to Common Stockholders     8,066,130       22,483,567  

Total capital stock transactions     8,066,130       22,483,567  

NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS     27,756,536       3,355,559  

NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS:                

Beginning of period

    293,719,197       290,363,638  

End of period (including undistributed net investment income (loss) of $78,015 at 6/30/06 and $(1,104) at 12/31/05)

  $ 321,475,733     $ 293,719,197  

*To be allocated to net investment income and capital gains at year end.                


42  |  2006 SEMIANNUAL REPORT TO STOCKHOLDERS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.




ROYCE MICRO-CAP TRUST

                                                 

Financial Hightlight

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 ended     Years ended December 31,
    June 30,2006    
    (unaudited)     2005     2004     2003     2002     2001

NET ASSET VALUE, BEGINNING OF PERIOD   $ 13.43       $ 14.34       $ 13.33       $ 9.39       $ 11.83       $ 10.14  

INVESTMENT OPERATIONS:                                                          

Net investment income (loss)

    0.00         (0.03 )       (0.08 )       (0.09 )       (0.13 )       (0.05 )

Net realized and unrealized gain (loss) on investments

    1.61         1.14         2.62         5.28         (1.29 )       2.57  

Total investment operations

    1.61         1.11         2.54         5.19         (1.42 )       2.52  

DISTRIBUTIONS TO PREFERRED STOCKHOLDERS:                                                          

Net investment income

                                             

Net realized gain on investments

            (0.17 )       (0.19 )       (0.18 )       (0.18 )       (0.19 )

Quarterly distributions *

    (0.08 )                                        

Total distributions to Preferred Stockholders

    (0.08 )       (0.17 )       (0.19 )       (0.18 )       (0.18 )       (0.19 )

NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON

                                                     

STOCKHOLDERS RESULTING FROM INVESTMENT OPERATIONS

    1.53         0.94         2.35         5.01         (1.60 )       2.33  

DISTRIBUTIONS TO COMMON STOCKHOLDERS:                                                          

Net investment income

                                             

Net realized gain on investments

            (1.85 )       (1.33 )       (0.92 )       (0.80 )       (0.57 )

Quarterly distributions *

    (0.63 )                                        

Total distributions to Common Stockholders

    (0.63 )       (1.85 )       (1.33 )       (0.92 )       (0.80 )       (0.57 )

CAPITAL STOCK TRANSACTIONS:                                                          

Effect of reinvestment of distributions by Common Stockholders

    (0.01 )       0.00         (0.01 )       (0.04 )       (0.04 )       (0.07 )

Effect of Preferred Stock offering

                            (0.11 )                

Total capital stock transactions

    (0.01 )       0.00         (0.01 )       (0.15 )       (0.04 )       (0.07 )

NET ASSET VALUE, END OF PERIOD   $ 14.32       $ 13.43       $ 14.34       $ 13.33       $ 9.39       $ 11.83  

MARKET VALUE, END OF PERIOD   $ 14.54       $ 14.56       $ 15.24       $ 12.60       $ 8.44       $ 10.50  

TOTAL RETURN (a):                                                          
Market Value     4.50 % ***       8.90 %       33.44 %       63.58 %       (12.70 )%       28.76 %
Net Asset Value     11.58 % ***       6.75 %       18.69 %       55.55 %       (13.80 )%       23.40 %

RATIOS BASED ON AVERAGE NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS:

                                                         
Total expenses (b, c)     1.67 % **       1.63 %       1.62 %       1.82 %       1.96 %       1.78 %

Management fee expense (d)

    1.52 % **       1.43 %       1.43 %       1.59 %       1.59 %       1.57 %

Other operating expenses

    0.15 % **       0.20 %       0.19 %       0.23 %       0.37 %       0.21 %
Net investment income (loss)     0.05 % **       (0.27 )%       (0.56 )%       (0.82 )%       (1.23 )%       (0.43 )%
SUPPLEMENTAL DATA:                                                          
Net Assets Applicable to Common Stockholders,                                                          

End of Period (in thousands)

  $ 321,476       $ 293,719       $ 290,364       $ 253,425       $ 167,571       $ 200,443  
Liquidation Value of Preferred Stock,                                                          

End of Period (in thousands)

  $ 60,000       $ 60,000       $ 60,000       $ 60,000       $ 40,000       $ 40,000  
Portfolio Turnover Rate     16 %       46 %       32 %       26 %       39 %       27 %
PREFERRED STOCK:                                                          
Total shares outstanding     2,400,000         2,400,000         2,400,000         2,400,000         1,600,000         1,600,000  
Asset coverage per share   $ 158.95       $ 147.38       $ 145.98       $ 130.59       $ 129.73       $ 150.28  
Liquidation preference per share   $ 25.00       $ 25.00       $ 25.00       $ 25.00       $ 25.00       $ 25.00  
Average market value per share (e):                                                          

6.00% Cumulative

  $ 23.97       $ 24.97       $ 24.66       $ 25.37                  

7.75% Cumulative

                          $ 25.70       $ 25.91       $ 25.30  

(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, if any, 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 1.41%, 1.35%, 1.32%, 1.49%, 1.62% and 1.46% for the periods ended June 30, 2006 and December 31, 2005, 2004, 2003, 2002 and 2001, respectively.
(c)   Expense ratios based on average net assets applicable to Common Stockholders before waiver of fees by the investment adviser would have been 1.92%, 2.04% and 1.81% for the periods ended December 31, 2003, 2002 and 2001, respectively.
(d)   The management fee is calculated based on average net assets over a rolling 36-month basis, while the above ratios of Management fee expenses are based on average net assets applicable to Common Stockholders over an annualized six-month basis.
(e)   The average of month-end market values during the period that the Preferred Stock was outstanding.
*   To be allocated to net investment income and capital gains at year end.
**   Annualized.
***   Not annualized.

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
2006 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.

Valuation of Investments:
       Securities are valued as of the close of trading on the New York Stock Exchange (generally 4:00 p.m. Eastern time) on the valuation date. Securities that trade on an exchange or Nasdaq, 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 bid price. 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. Bonds and other fixed income securities may be valued by reference to other securities with comparable ratings, interest rates and maturities, using established independent pricing services. Investments in money market funds are valued at net asset value per share.

Investment Transactions and Related Investment Income:
       Investment transactions are accounted for on the trade date. Dividend income is recorded on the ex-dividend date and any non-cash dividend income is recorded at the fair market value of the securities received. Interest income is recorded on an accrual basis. 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 in an equitable manner. Allocated personnel and occupancy costs related to The Royce Funds are included in administrative and office facilities expenses. The Fund has adopted a deferred fee agreement that allows the Fund’s 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.

 

Taxes:
       As a qualified regulated investment company under Subchapter M of the Internal Revenue Code, the Fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. The Schedule of Investments includes information regarding income taxes under the caption “Income Tax Information”.

Distributions:
       The Fund currently has a policy of paying quarterly distributions on the Fund’s Common Stock. Distributions are currently being made 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. The Fund is required to allocate long-term capital gain distributions and other types of income proportionately to distributions made to holders of shares of Common Stock and Preferred Stock. 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 basis 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.

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 the underlying securities.

Securities Lending:
       The Fund loans securities to qualified institutional investors for the purpose of realizing additional income. Collateral on all securities loaned for the Fund is accepted in cash and cash equivalents and invested temporarily by the custodian. The collateral is equal to 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.



44  |  2006 SEMIANNUAL REPORT TO STOCKHOLDERS
 




ROYCE MICRO-CAP TRUST

                                                 

Notes to Financial Statements (Unaudited) (continued)



Capital Stock:
       The Fund issued 587,476 and 1,625,665 shares of Common Stock as reinvestment of distributions by Common Stockholders for the six months ended June 30, 2006 and the year ended December 31, 2005, respectively.
       At June 30, 2006, 2,400,000 shares of 6.00% Cumulative Preferred Stock were outstanding. Commencing October 16, 2008 and thereafter, 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 Emerging Issues Task Force (EITF) Topic D-98, Classification and Measurement of Redeemable Securities, 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 & Associates, LLC (“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 of5% 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 the six rolling 36-month periods ending June 2006, the investment performance of the Fund exceeded the investment performance of the Russell 2000 by 18% to 29%. Accordingly, the investment advisory fee consisted of a Basic Fee of $1,628,619 and an upward adjustment of $814,310 for performance of the Fund above that of the Russell 2000. For the six months ended June 30, 2006, the Fund accrued and paid Royce advisory fees totaling $2,442,929.

Purchases and Sales of Investment Securities:
       For the six months ended June 30, 2006, the cost of purchases and proceeds from sales of investment securities, other than short-term securities and collateral received for securities loaned, amounted to $52,230,448 and $77,416,882, respectively.


Transactions in Shares of 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. The Fund effected the following transactions in shares of such companies during the six months ended June 30, 2006:


    Shares   Market Value   Cost of   Cost of   Realized   Dividend   Shares   Market Value
Affiliated Company   12/31/05   12/31/05   Purchases   Sales   Gain (Loss)   Income   6/30/06   6/30/06

Abigail Adams National Bancorp       244,400       $ 3,421,624         $ 1,120,000       $ (208,963 )     $ 52,350         174,400       $ 2,441,600  

                $ 3,421,624                           $ (208,963 )     $ 52,350                 $ 2,441,600  
   


 
2006 SEMIANNUAL REPORT TO STOCKHOLDERS  |  45




ROYCE FOCUS TRUST


 

 

Schedule of Investments


    SHARES     VALUE       SHARES     VALUE
 
COMMON STOCK – 81.2%             Metal Fabrication and Distribution - 13.6%          
             

Harris Steel Group

  150,000   $ 3,796,023
Consumer Products – 6.1%            

IPSCO

  60,000     5,741,400
Apparel and Shoes - 1.3%            

Metal Management

  120,000     3,674,400

Timberland Company Cl. A a

  75,000   $ 1,957,500  

Reliance Steel & Aluminum

  50,000     4,147,500
       
 

Schnitzer Steel Industries Cl. A

  100,000     3,548,000
Sports and Recreation - 4.8%                    

Thor Industries

  90,000     4,360,500             20,907,323

Winnebago Industries

  100,000     3,104,000          
       
  Total (Cost $17,877,031)         36,636,318
          7,464,500          
       
  Industrial Services – 3.6%          
Total (Cost $7,013,362)         9,422,000   Commercial Services - 1.0%          
       
 

BB Holdings a

  400,000     1,516,345
Consumer Services – 4.4%                    
Direct Marketing - 1.9%             Transportation and Logistics - 2.6%          

Nu Skin Enterprises Cl. A

  200,000     2,970,000  

Arkansas Best

  80,000     4,016,800
       
         
Retail Stores - 1.4%             Total (Cost $4,328,352)         5,533,145

Buckle (The)

  50,100     2,097,687          
       
  Natural Resources – 22.9%          
Other Consumer Services - 1.1%             Energy Services - 10.3%          

Corinthian Colleges a

  120,000     1,723,200  

Ensign Energy Services

  170,000     3,493,505
       
 

Input/Output a, b

  250,000     2,362,500
Total (Cost $6,047,290)         6,790,887  

Pason Systems

  200,000     2,929,320
       
 

Tesco Corporation a

  200,000     4,144,000
Financial Intermediaries – 3.4%            

Trican Well Service b

  140,000     2,796,739
Banking - 0.9%                    

Endeavour Mining Capital

  195,400     1,377,585             15,726,064
       
         

Securities Brokers - 2.5%

            Precious Metals and Mining - 12.6%          

Knight Capital Group Cl. A a, b

  250,000     3,807,500  

Gammon Lake Resources a

  100,000     1,379,000
       
 

Glamis Gold a

  100,000     3,786,000

Total (Cost $5,288,616)

        5,185,085  

International Coal Group a, b

  310,000     2,228,900
       
 

Ivanhoe Mines a, b

  400,000     2,728,000
Financial Services – 3.1%            

Meridian Gold a, b

  100,000     3,168,000
Information and Processing - 2.1%            

Pan American Silver a, b

  140,000     2,518,600

eFunds Corporation a, b

  150,000     3,307,500  

Silver Standard Resources a, b

  180,000     3,600,000
       
         
Investment Management - 1.0%                       19,408,500

GAMCO Investors Cl. A

  41,500     1,525,540          
       
  Total (Cost $19,436,521)         35,134,564
Total (Cost $3,678,413)         4,833,040          
       
  Technology – 8.0%          
Health – 5.9%             Internet Software and Services - 2.4%          
Drugs and Biotech - 4.7%            

RealNetworks a, b

  350,000     3,745,000

Endo Pharmaceuticals Holdings a

  150,000     4,947,000          

Lexicon Genetics a, b

  400,000     1,756,000   IT Services - 0.8%          

Orchid Cellmark a

  150,000     418,500  

Syntel

  60,000     1,227,600
       
         
          7,121,500   Software - 2.7%          
       
 

ManTech International Cl. A a, b

  100,000     3,086,000
Medical Products and Devices - 1.2%            

PLATO Learning a, b

  160,000     995,200

Caliper Life Sciences a

  200,000     998,000          

Possis Medical a, b

  100,000     881,000             4,081,200
       
         
          1,879,000   Telecommunications - 2.1%          
       
 

Foundry Networks a

  300,000     3,198,000
Total (Cost $8,234,381)         9,000,500          
       
  Total (Cost $8,911,099)         12,251,800
Industrial Products – 23.8%                    
Building Systems and Components - 2.8%             TOTAL COMMON STOCKS          

Simpson Manufacturing

  120,000     4,326,000  

(Cost $80,815,065)

        124,787,339
       
         
Construction Materials - 2.6%                        

Florida Rock Industries

  80,000     3,973,600              
       
             
Machinery - 4.8%                        

Lincoln Electric Holdings

  75,000     4,698,750              

Woodward Governor Company

  89,500     2,730,645              
       
             
          7,429,395              
       
             


46  |  2006 SEMIANNUAL REPORT TO STOCKHOLDERS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.




 


JUNE 30, 2006 (Unaudited)

 

 


      PRINCIPAL                
      AMOUNT     VALUE         VALUE
 
CORPORATE BONDS – 3.9%               REPURCHASE AGREEMENT – 18.3%      

Athena Neurosciences Finance 7.25%

              State Street Bank & Trust Company,      

Senior Note due 2/21/08

  $ 6,000,000   $ 5,955,000  

5.10% dated 6/30/06, due 7/3/06,

     
         
 

maturity value $28,156,962 (collateralized

     
TOTAL CORPORATE BONDS              

by obligations of various U.S. Government

     

(Cost $5,629,442)

          5,955,000  

Agencies, valued at $28,850,025)

     
         
 

(Cost $28,145,000)

  $ 28,145,000
GOVERNMENT BONDS – 7.5%                  
(Principal Amount shown               COLLATERAL RECEIVED FOR SECURITIES LOANED – 3.5%      

in local currency.)

             

Money Market Funds

     

Canadian Government Bond

             

State Street Navigator Securities Lending

     

3.00% due 6/1/07

    6,150,000     5,437,927  

Prime Portfolio (7 day yield-5.0651%)

     

New Zealand Government Bond

             

(Cost $5,412,175)

    5,412,175

6.00% due 7/18/08

    10,000,000     6,043,962      
         
  TOTAL INVESTMENTS – 120.6%      
TOTAL GOVERNMENT BONDS              

(Cost $141,750,285)

    185,411,483

(Cost $11,357,318)

          11,481,889          
         
 

LIABILITIES LESS CASH AND OTHER ASSETS – (4.3)%

    (6,666,366)
                       
U.S. TREASURY OBLIGATIONS – 6.2%              

PREFERRED STOCK – (16.3)%

    (25,000,000)

U.S. Treasury Notes

                 

Treasury Inflation Index Protection

             

NET ASSETS APPLICABLE TO

     

Security 2.00% due 7/15/14

    10,000,000     9,630,080  

COMMON STOCKHOLDERS – 100.0%

  $ 153,745,117
         
     
TOTAL U.S. TREASURY OBLIGATIONS                      

(Cost $10,391,285)

          9,630,080          
         
         
                       

a   Non-income producing.
b   A portion of these securities were on loan at June 30, 2006.
  New additions in 2006.
 
    Bold indicates the Fund’s largest 20 equity holdings in terms of June 30, 2006 market value.

INCOME TAX INFORMATION: The cost of total investments for Federal income tax purposes was $142,040,342. At June 30, 2006 net unrealized appreciation for all securities was $43,371,141, consisting of aggregate gross unrealized appreciation of $47,365,270 and aggregate gross unrealized depreciation of $3,994,129. The primary differences in 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.
2006 SEMIANNUAL REPORT TO STOCKHOLDERS  |  47




ROYCE FOCUS TRUST

JUNE 30, 2006 (Unaudited)

 
 

    Statement of Assets and Liabilities        

         
ASSETS:          
Investments at value (including collateral on loaned securities) *     $ 157,266,483  
Repurchase agreement (at cost and value)       28,145,000  
Cash       20,754  
Receivable for dividends and interest       501,305  
Prepaid expenses       12,605  

Total Assets

      185,946,147  

LIABILITIES:          
Payable for collateral on loaned securities       5,412,175  
Payable for investments purchased       1,542,059  
Payable for investment advisory fee       143,366  
Preferred dividends accrued but not yet declared       33,333  
Accrued expenses       70,097  

Total Liabilities

      7,201,030  

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     $ 153,745,117  

ANALYSIS OF NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS:          
Common Stock paid-in capital - $0.001 par value per share; 14,929,414 shares outstanding (100,000,000 shares authorized)     $ 94,890,325  
Undistributed net investment income (loss)       511,590  
Accumulated net realized gain (loss) on investments       19,002,907  
Net unrealized appreciation (depreciation) on investments       43,661,198  
Quarterly and accrued distributions       (4,320,903 )

Net Assets applicable to Common Stockholders (net asset value per share -$10.30)

    $ 153,745,117  

*Investments at identified cost (including $5,412,175 of collateral on loaned securities)     $ 113,605,285  

Market value of loaned securities     $ 5,299,032  



48  |  2006 SEMIANNUAL REPORT TO STOCKHOLDERS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.



ROYCE FOCUS TRUST   SIX MONTHS ENDED JUNE 30, 2006 (Unaudited)

 

    Statement of Operations        

         
INVESTMENT INCOME:        
Income:        

Interest

  $ 1,297,273  

Dividends

    298,117  

Securities lending

    12,132  

Total income     1,607,522  

Expenses:        

Investment advisory fees

    892,864  

Stockholder reports

    37,934  

Custody and transfer agent fees

    37,294  

Professional fees

    14,294  

Directors’ fees

    10,938  

Administrative and office facilities expenses

    6,780  

Other expenses

    40,727  

Total expenses     1,040,831  
Compensating balance credits     (738 )

Net expenses     1,040,093  

Net investment income (loss)     567,429  

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:        
Net realized gain (loss) on investments     15,168,081  
Net change in unrealized appreciation (depreciation) on investments     (3,468,818 )

Net realized and unrealized gain (loss) on investments     11,699,263  

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM INVESTMENT OPERATIONS     12,266,692  

DISTRIBUTIONS TO PREFERRED STOCKHOLDERS     (750,000 )

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

  $ 11,516,692  


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
2006 SEMIANNUAL REPORT TO STOCKHOLDERS  |  49



ROYCE FOCUS TRUST    



    Statement of Changes in Net Assets                    

                     
                     
                     

    Six months ended
6/30/06
(unaudited)
  Year ended
12/31/05

                     
INVESTMENT OPERATIONS:                    
Net investment income (loss)     $ 567,429       $ 743,582  
Net realized gain (loss) on investments       15,168,081         19,164,839  
Net change in unrealized appreciation (depreciation) on investments       (3,468,818 )       1,922,287  

Net increase (decrease) in net assets resulting from investment operations       12,266,692         21,830,708  

DISTRIBUTIONS TO PREFERRED STOCKHOLDERS:                    
Net investment income               (80,100 )
Net realized gain on investments               (1,419,900 )
Quarterly distributions *       (750,000 )        

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

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

      11,516,692         20,330,708  

DISTRIBUTIONS TO COMMON STOCKHOLDERS:                    
Net investment income               (853,787 )
Net realized gain on investments               (15,134,720 )
Quarterly distributions *       (3,537,570 )        

Total distributions to Common Stockholders       (3,537,570 )       (15,988,507 )

CAPITAL STOCK TRANSACTIONS:                    
Reinvestment of distributions to Common Stockholders       2,522,253         11,288,577  
Net proceeds from rights offering               21,760,372  

Total capital stock transactions       2,522,253         33,048,949  

NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS       10,501,375         37,391,150  

NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS:                    

Beginning of period

      143,243,742         105,852,592  

End of period (including undistributed net investment income (loss) of $511,590 at 6/30/06 and $(55,839) at 12/31/05)

    $ 153,745,117       $ 143,243,742  

*To be allocated to net investment income and capital gains at year end.                    


50  |  2006 SEMIANNUAL REPORT TO STOCKHOLDERS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.



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 ended   Years ended December 31,
    June 30, 2006  
    (unaudited)   2005     2004     2003     2002     2001  

NET ASSET VALUE, BEGINNING OF PERIOD     $ 9.76       $ 9.75       $ 9.00       $ 6.27       $ 7.28       $ 6.77  

INVESTMENT OPERATIONS:                                                            

Net investment income (loss)

      0.04         0.06         0.02         0.08         (0.01 )       0.05  

Net realized and unrealized gain (loss) on investments

      0.79         1.44         2.63         3.57         (0.74 )       0.79  

Total investment operations

      0.83         1.50         2.65         3.65         (0.75 )       0.84  

DISTRIBUTIONS TO PREFERRED STOCKHOLDERS:                                                            

Net investment income

              (0.01 )       (0.00 )       (0.02 )       (0.03 )       (0.04 )

Net realized gain on investments

              (0.11 )       (0.15 )       (0.14 )       (0.13 )       (0.13 )

Quarterly distributions *

      (0.05 )                                        

Total distributions to Preferred Stockholders

      (0.05 )       (0.12 )       (0.15 )       (0.16 )       (0.16 )       (0.17 )

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

      0.78         1.38         2.50         3.49         (0.91 )       0.67  

DISTRIBUTIONS TO COMMON STOCKHOLDERS:                                                            

Net investment income

              (0.06 )       (0.02 )       (0.06 )       (0.02 )       (0.03 )

Net realized gain on investments

              (1.15 )       (1.72 )       (0.56 )       (0.07 )       (0.11 )

Quarterly distributions *

      (0.24 )                                        

Total distributions to Common Stockholders

      (0.24 )       (1.21 )       (1.74 )       (0.62 )       (0.09 )       (0.14 )

CAPITAL STOCK TRANSACTIONS:                                                            

Effect of reinvestment of distributions by Common Stockholders

      (0.00 )       (0.03 )       (0.01 )       (0.03 )       (0.01 )       (0.02 )

Effect of rights offering and Preferred Stock offering

              (0.13 )               (0.11 )                

Total capital stock transactions

      (0.00 )       (0.16 )       (0.01 )       (0.14 )       (0.01 )       (0.02 )

NET ASSET VALUE, END OF PERIOD     $ 10.30       $ 9.76       $ 9.75       $ 9.00       $ 6.27       $ 7.28  

MARKET VALUE, END OF PERIOD     $ 10.29       $ 9.53       $ 10.47       $ 8.48       $ 5.56       $ 6.65  

TOTAL RETURN (a):                                                            
Market Value       10.62 % ***       3.03 %       47.26 %       63.98 %       (15.06 )%       19.65 %
Net Asset Value       8.11 % ***       13.31 %       29.21 %       54.33 %       (12.50 )%       10.04 %

RATIOS BASED ON AVERAGE NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS:

                                                           
Total expenses ( b, c)       1.35 % **       1.48 %       1.53 %       1.57 %       1.88 %       1.47 %

Management fee expense

      1.16 % **       1.21 %       1.27 %       1.14 %       1.13 %       1.11 %

Other operating expenses

      0.19 % **       0.27 %       0.26 %       0.43 %       0.75 %       0.36 %
Net investment income (loss)       0.74 % **       0.63 %       0.24 %       1.07 %       (0.16 )%       0.70 %
SUPPLEMENTAL DATA:                                                            

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

    $ 153,745       $ 143,244       $ 105,853       $ 87,012       $ 57,956       $ 66,654  

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

    $ 25,000       $ 25,000       $ 25,000       $ 25,000       $ 20,000       $ 20,000  
Portfolio Turnover Rate       17 %       42 %       52 %       49 %       61 %       54 %
PREFERRED STOCK:                                                            
Total shares outstanding       1,000,000         1,000,000         1,000,000         1,000,000         800,000         800,000  
Asset coverage per share     $ 178.75       $ 168.24       $ 130.85       $ 112.01       $ 97.44       $ 108.32  
Liquidation preference per share     $ 25.00       $ 25.00       $ 25.00       $ 25.00       $ 25.00       $ 25.00  
Average market value per share (d):                                                            

6.00% Cumulative

    $ 24.74       $ 25.38       $ 24.83       $ 25.45                  

7.45% Cumulative

                            $ 25.53       $ 25.64       $ 25.09  

(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, if any, 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 1.16%, 1.22%, 1.21%, 1.20%, 1.43% and 1.11% for the periods ended June 30, 2006 and December 31, 2005, 2004, 2003, 2002 and 2001, respectively.
(c)   Expense ratios based on average net assets applicable to Common Stockholders before waiver of fees by the investment adviser would have been 1.73%, 2.06% and 1.69% for the periods ended December 31, 2003, 2002 and 2001, respectively.
(d)   The average of month-end market values during the period that the Preferred Stock was outstanding.
*   To be allocated to net investment income and capital gains at year end.
**   Annualized.
***   Not annualized.

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
2006 SEMIANNUAL REPORT TO STOCKHOLDERS  |  51



ROYCE FOCUS TRUST



Notes to Financial Statements (Unaudited)


Summary of Significant Accounting Policies:   Taxes:
     Royce Focus Trust, Inc. (“the Fund”) is a diversified closed-end investment company. 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.

Valuation of Investments:
     Securities are valued as of the close of trading on the New York Stock Exchange (generally 4:00 p.m. Eastern time) on the valuation date. Securities that trade on an exchange or Nasdaq, 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 bid price. 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. Bonds and other fixed income securities may be valued by reference to other securities with comparable ratings, interest rates and maturities, using established independent pricing services. Investments in money market funds are valued at net asset value per share.

Investment Transactions and Related Investment Income:
     Investment transactions are accounted for on the trade date. Dividend income is recorded on the ex-dividend date and any non-cash dividend income is recorded at the fair market value of the securities received. Interest income is recorded on an accrual basis. 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 in an equitable manner. Allocated personnel and occupancy costs related to The Royce Funds are included in administrative and office facilities expenses. The Fund has adopted a deferred fee agreement that allows the Fund’s 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.
 
     As a qualified regulated investment company under Subchapter M of the Internal Revenue Code, the Fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. The Schedule of Investments includes information regarding income taxes under the caption “Income Tax Information”.

Distributions:
     The Fund currently has a policy of paying quarterly distributions on the Fund’s Common Stock. Distributions are currently being made 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. The Fund is required to allocate long-term capital gain distributions and other types of income proportionately to distributions made to holders of shares of Common Stock and Preferred Stock. 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 basis 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.

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 the underlying securities.

Securities Lending:
     The Fund loans securities to qualified institutional investors for the purpose of realizing additional income. Collateral on all securities loaned for the Fund is accepted in cash and cash equivalents and invested temporarily by the custodian. The collateral is equal to 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.
     
52  |  2006 SEMIANNUAL REPORT TO STOCKHOLDERS    



ROYCE FOCUS TRUST



    Notes to Financial Statements (Unaudited) (continued)


Capital Stock:
    The Fund issued 254,747 and 1,191,399 shares of Common Stock as reinvestment of distributions by Common Stockholders for the six months ended June 30, 2006 and the year ended December 31, 2005, respectively.
    On June 10, 2005, the Fund completed a rights offering of Common Stock to its stockholders at the rate of one common share for each 5 rights held by stockholders of record on May 6, 2005. The rights offering was fully subscribed, resulting in the issuance of 2,627,397 common shares at a price of $8.34, and proceeds of $21,912,491 to the Fund prior to the deduction of expenses of $152,119. The net asset value per share of the Fund’s Common Stock was reduced by approximately $0.13 per share as a result of the issuance.
    At June 30, 2006, 1,000,000 shares of 6.00% Cumulative Preferred Stock were outstanding. Commencing October 17, 2008 and thereafter, 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 Emerging Issues Task Force (EITF) Topic D-98, Classification and Measurement of Redeemable Securities, 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:
    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, 2006, the Fund accrued and paid Royce advisory fees totaling $892,864.

Purchases and Sales of Investment Securities:
    For the six months ended June 30, 2006, the cost of purchases and proceeds from sales of investment securities, other than short-term securities and collateral received for securities loaned, amounted to $25,496,847 and $36,628,988, respectively.

2006 SEMIANNUAL REPORT TO STOCKHOLDERS  |  53




BOARD APPROVAL OF INVESTMENT ADVISORY AGREEMENTS


     At meetings held on June 7-8, 2006, each of the Funds’ respective Board 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 each of 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, shareholder services, regulatory compliance, brokerage commissions and research, brokerage and execution products and services provided to the Funds. The Board also considered other matters it deemed important to the approval process such as brokerage commissions paid to R&A affiliates, 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’ shareholders, 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 shareholders 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 directors 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 directors 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 30 years of small-cap value investing experience and track record; (ii) the history of long-tenured R&A portfolio managers managing the Funds; (iii) R&A’s sole 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 30 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 shareholder interests as exemplified by its voluntary fee waiver policy on preferred stock assets in certain circumstances where the Fund’s total return performance from the issuance of the preferred does not exceed the coupon rate on the preferred, and expansive shareholder reporting and communications. The directors 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 directors 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 directors noted R&A’s ability to attract 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 directors believe that risk-adjusted performance continues to be an appropriate measure of each Fund’s investment performance. One measure of risk-adjusted performance the directors have 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 five years. Using Morningstar data, Royce Value Trust’s Sharpe Ratio placed in the 2nd quartile for all funds within the small blend category assigned by Morningstar for the three- and five-year periods ended December 31, 2005. Similarly, Royce Micro-Cap Trust’s Sharpe Ratio placed it in the 2nd quartile among funds within the small blend category assigned by Morningstar for the three- and five-year periods. Finally, Royce Focus Trust’s Sharpe Ratio placed it in the top quartile among all funds within the small blend category assigned by Morningstar for the three- and five-year periods. The directors noted that each of the Funds invest in small-cap and micro-cap issuers, and that each had

54  |  2006 SEMIANNUAL REPORT TO STOCKHOLDERS




BOARD APPROVAL OF INVESTMENT ADVISORY AGREEMENTS (CONTINUED)


outperformed the Russell 2000 Index over three- and five-year periods ended 12/31/05. Although the directors 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 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 directors 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 directors 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 directors 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 directors noted the time and effort 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 directors 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 directors 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 to registered investment companies investing in small- and micro-cap stocks, as provided by Morningstar. The directors noted that, in the case of Royce Value Trust, the 1.00% basic fee is subject to adjustment up or down (up to 50 bps in either direction) based on the Fund’s performance versus the S&P 600 SmallCap Index over a rolling period of sixty months. The fee is charged on average net assets over that rolling period. 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 vice versa. The directors 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 stockholders. The directors 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 coupon rate. The directors also noted that the fee arrangement, which also includes a provision for no fee in periods where the Fund’s performance is negative, requires R&A to measure the Fund’s performance monthly against the S&P 600, an unmanaged index. Instead of receiving a set fee regardless of its performance, R&A is penalized for poor performance.
     In the case of Royce Micro-Cap Trust, the directors noted that the Fund had a 1.00% basic fee subject to adjustment up or down (up to 50 bps in either direction) based on the Fund’s performance versus the Russell 2000 Index over a rolling 36 month period. The fee is charged on average net assets over that rolling period. 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 vice versa. The directors 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 directors also noted R&A’s voluntary 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 coupon rate on the preferred for each month during the year.
     Finally, in the case of Royce Focus Trust, the directors 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 2nd quartile of its Morningstar peer group. The directors also noted that R&A had agreed to waive its management fee on the liquidation value of the outstanding preferred stock if the Fund’s total return from the issuance of the preferred is less than its coupon rate.
     The directors also considered fees charged by R&A to institutional and other clients and noted that the Funds’ advisory fees compared favorably to those other accounts.
     After the non-interested directors deliberated in executive session, 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 shareholders of each Fund and that each investment advisory fee rate was reasonable in relation to the services provided.

2006 SEMIANNUAL REPORT TO STOCKHOLDERS  |  55




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, 2006, 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, 2006 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 mid-, small- and micro-cap companies, that 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.
     Standard deviation is a statistical measure within which a fund’s total returns have varied over time. The greater the standard deviation, the greater a fund’s volatility.
     The Russell 2000, Russell 2000 Value, Russell 2000 Growth, Nasdaq Composite, S&P 500 and S&P 600 are unmanaged indices of domestic common stocks. Returns for the market indices used in this Review and Report were based on information supplied to Royce by Frank Russell 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 300,000 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, 2006. 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.

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 Royce Funds’ website at www.roycefunds.com and on the SEC’s website at www.sec.gov. 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.

56  |  2006 SEMIANNUAL REPORT TO STOCKHOLDERS




POSTSCRIPT


Party People

For members of our investment staff, conversations at parties or other social gatherings usually follow a familiar pattern. Introductions are made, pleasantries are exchanged and soon the talk circles around to what people do for a living. When one of our staff says, “Investment management” or “Mutual funds,” the responses generally include inquiries about which firm we work for or what sort of investments we make.
     Occasionally, when we mention that we manage money for The Royce Funds, people recognize the name—some even know that we’re a small-cap value shop or mention Chuck’s ubiquitous bow ties. Often, though, a few seconds of awkward silence ensues, followed by a quick nod and an attempt at reassurance, as if we’d be crestfallen that someone might not be familiar with one of the hundreds of mutual fund companies that exist today. To puncture the silence, they’ll say something like, “Oh sure, Royce... yes, of course... no, I’ve heard of you, definitely... great company... really terrific... I think my niece owns one of your, uh, funds.” At this, we usually smile politely, nod and reach for the shrimp.
     More recently, however, we were taken aback at a question from a fellow guest who was familiar with the firm: “Why do you people have so many funds if all you do is small-cap value investing?” To be honest, we seldom thought much about this, and at first we were a bit defensive. We wondered—not aloud, fortunately—if managers at Fidelity or Vanguard get these kinds of questions? Are fund managers whose firms offer multiple large-cap or fixed income portfolios ever buttonholed at parties and asked to justify the existence of half their product offerings? Didn’t the person asking this question know that small-cap represents the largest domestic equity class in the U.S., with more than 8,000 publicly traded companies totaling more than $2.7 trillion in total market capitalization?
     But we stopped ourselves before slipping into a lecture on the wondrous variety of our chosen asset class. Taking a deep breath, we relaxed as soon as we realized that it wasn’t facts such as those mentioned above that we were battling; it was the perception that if you do one thing well, there must be only one way to do it. The truth is a little more complicated, and more difficult to explain in the language of light chatter that animates a party.
     We have always thought of small-cap value investing as an approach that encompasses a range of possible styles. Our opportunity to see this theory work in practice came in the late ’90s. Whitney George began to manage portfolios on his own just before Buzz Zaino and Charlie Dreifus joined us early in 1998. Each of their approaches has important differences and similarities to the one Chuck Royce has been refining since 1972. The same holds true for the rest of the talented group of portfolio managers and analysts who work with us today. Each of them brings something unique to the portfolio process, while sharing our overall goal of finding high-quality, undervalued small companies.
     Equally important is the enormous expansion in the number of small-cap companies available for potential investment over the last two decades. In 20 years, the number of companies has nearly doubled and the total market capitalization has increased by more than seven times: At the end of 1985, there were 4,781 companies with market caps less than $500 million (the commonly accepted definition of small-cap at the time) representing $348.7 billion in total market capitalization (Source: FactSet). We have introduced newer portfolios over the last 10 years in response to this extraordinary growth. The rapid expansion of small-cap has allowed us to bring out these new offerings.

Now maybe we can get back to cordial introductions, vacation talk and hors d’oeuvres.

THIS PAGE IS NOT PART OF THE 2006 REPORT TO STOCKHOLDERS







 
   

 

The RoyceFunds


Wealth Of Experience
With approximately $25.1 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 30 years. Charles M. Royce, our Chief Investment Officer, enjoys one of the longest tenures of any active mutual fund manager. Royce’s investment staff includes six other Portfolio Managers, as well as eight assistant portfolio managers and analysts, and six 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 $111 million invested in The Royce Funds.

 

   

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


Computershare
Transfer Agent and Registrar
(800) 426-5523

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


Advisor Services

For Fund Materials, Performance Updates
or Account Inquiries
(800) 33-ROYCE (337-6923)


   

 
    www.roycefunds.com    
   
 
 

CE-REP-0606

 
   




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: Schedule of Investments – See Item 1.

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 – None.

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.

(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 28, 2006
 

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 28, 2006   Date: August 28, 2006