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 - December 31, 2006



Item 1: Reports to Shareholders






 


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 shelf offerings and periodic rights offerings. Proceeds from the offerings are invested in an actively managed portfolio of securities. Investors wanting to buy or sell shares of a publicly traded closed-end fund after the offerings must do so on a stock exchange 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


Annual Review    

Performance Table   2

Letter to Our Stockholders   3

 

   

Annual Report to Stockholders   10

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


During our security selection process,

we have historically focused on five

categories of risk: valuation,

business strategy, market, portfolio

and financial. Of these, financial

risk is probably the most important.

Small companies, by virtue of their

size, are generally more fragile than

large companies, which makes the

need for strong financial condition

paramount. But how do we evaluate

a company’s financial strength?


One of the most important steps

involves a careful scrutiny of the

balance sheet. This evaluation is as

much art as science, which is one way

of saying that the process entails a

number of subjective measures in

addition to more objective,

quantifiable ones. It is not simply the

numbers that tell the story, but one’s

interpretation of their significance.


Rather than concentrate primarily

on long-term debt, we search for

companies whose balance sheets


Continued on Page 4...

     
     
      PERFORMANCE TABLE
     
                                             
     

AVERAGE ANNUAL NAV TOTAL RETURNS Through December 31, 2006

     

 

      Royce   Royce       Royce   Russell
     

 

     

Value Trust

  Micro-Cap Trust       Focus Trust   2000
                                             
     

Fourth Quarter 2006*

      8.23 %   10.07 %         11.17 %   8.90 %    
                                             
     

July-December 2006*

      8.99     9.74           7.18     9.38      
                                             
     

One-Year

      19.50     22.46           15.85     18.37      
                                             
     

Three-Year

      16.30     15.77           19.42     13.56      
                                             
     

Five-Year

      13.32     15.78           18.12     11.39      
                                             
     

10-Year

      13.96     14.62           14.09     9.44      
                                             
     

15-Year

      14.14     n/a           n/a     11.47      
                                             
     

20-Year

      13.05     n/a           n/a     10.92      
                                             
     

Since Inception

      12.99     14.58           14.35          
                                             
     

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 December 31, 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 December 31, 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



All Things Must Pass . . .


As one year fades into permanent night and a new one greets its first day, talk naturally turns to transitions. The movement from 2006 to 2007 offered far more than a change in calendars to mark the passage of one period to another: The political landscape shifted as Republicans gave way to Democrats; the Federal Reserve Board moved from raising interest rates to a neutral stance; a growing economy slowed; and the real estate bubble either burst or began to leak, depending on where you live. None of these events was surprising in and of itself. One lesson that the asset management business repeatedly teaches is that change is the only constant. And the stock market was hardly immune from its own significant movements in 2006—though it changed in ways that we did not anticipate. While we had been calling for lower returns throughout the market, the Russell 2000 and Dow Jones Industrial Average both reached new highs in December. This was the year’s biggest surprise for us, since some of the conditions for a slump or slowdown in stock prices—most critically a slower-growth economy—had been present throughout much of 2006. Although returns were high across all asset classes, we saw what appeared to be a shift in market leadership after the long-term period of dynamic outperformance for small-cap stocks relative to their larger peers.

     A possible shift in market leadership has admittedly been a bit of a preoccupation for us in our communications over the last couple of years. Yet 2006 ended without a clear sense of whether small- or large-cap stocks were leading the market into 2007. While small-cap (as measured by the Russell 2000) did better for the calendar-year period and led during the



We want to make it clear that we do not see disaster or long-term difficulties ahead for our chosen asset class. However, the recent period of outperformance for small-cap, particularly small-cap value, is subject to the same realities of cyclicality that ensure a limited stay at the top for any investment class or style.




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show low leverage. We measure

leverage more broadly by looking at

the ratio of assets to stockholders’

equity. Using this method allows us

to note net changes in long- and

short-term debt, as well as in

accounts receivable. Items that can

have an adverse effect on a

company, such as higher-than-usual

levels of receivables or increasingly

bulging inventories, are not always

financed as long-term debt. This

type of examination paints what we

believe is a more complete picture.

Our general rule-of-thumb is to look

for a two-to-one ratio of assets to

stockholders’ equity for non-financial

companies. This represents

what we refer to as the company’s

“margin of safety.”


If a company is carrying too much

debt, it impedes its own ability to

meet the challenge of out-of-left-field

occurrences such as lawsuits

and overseas currency crises. A

conservatively capitalized company

can better weather these storms

because it has the necessary financial

reserves to do so, while a company

with too much debt on the balance

sheet runs a greater risk that stormy

weather will turn into a hurricane.

Continued on Page 6...


   

LETTER TO OUR STOCKHOLDERS


dynamic rallies that opened and closed the year, large-cap (as measured by the S&P 500) led during the second half of the year and from the previous high in May 2006 through the end of the year. We had guessed that large-cap would have a firmer grip on market leadership before December bade farewell, though we were more on target regarding the shift in market leadership than we were in expecting lower returns. In any case, the strong absolute returns of 2006 were welcome, though surprising, news, especially as they benefited smaller companies (to say nothing of Royce-managed portfolios). We’ll gladly exchange that for another forecast being partially incorrect.

     The critical question for any investor is how best to deal with a new market-cycle phase that seems likely—to us, anyway—to be different from the last several years of strong returns and relative performance dominance for smaller stocks. We want to make it clear that we do not see disaster or long-term difficulties ahead for our chosen asset class. However, the recent period of outperformance for small-cap, particularly small-cap value, is subject to the same realities of cyclicality that ensure a limited stay at the top for any investment class or style. The last seven years were the reverse of the late ’90s, when large-cap stocks were enjoying a long period of relative outperformance and, within the small-cap universe, growth mostly outpaced value. Having noted that any market cycle contains a hidden expiration date, we remain optimistic about the prospects for small-cap stocks. Our security selection process does not divide the small-cap world into value and growth segments. More importantly, we currently see many companies that we regard as high-quality businesses that have not fully participated in the small-cap bull run. Our task remains what it has always been: to search throughout the small-cap world for what we think are great businesses trading at attractive stock prices.


It’s All Too Much
After finishing 2005 with nearly identical returns, the small-cap Russell 2000 took back sole possession of the relative outperformance crown in 2006. The small-cap index gained 18.4% versus 15.8% for the S&P 500 and 9.5% for the Nasdaq Composite. Putting aside its calendar-year relative underperformance, it was a terrific year for large-cap stocks. The lion’s share of small-cap’s performance edge in 2006 occurred during the first quarter, a period during which the Russell 2000 gained an impressive 13.9%, compared to a relatively paltry gain of 4.2% for the S&P 500. However, during the less dynamic second (-5.0% versus -1.4%) and third quarters (+0.4% versus +5.7%), the Russell 2000 decisively trailed the large-cap index. Third-quarter strength was also key to large-cap’s advantage over its small-cap counterparts during the second half of the year: from 6/30/06 through 12/31/06, the Russell 2000 was up 9.4% versus a gain of 12.7% for the large-cap index. Small-cap managed to outpace the S&P 500 during the dynamic fourth quarter (+8.9% versus +6.7%), though the fourth quarter saw the large-cap index finally show a positive performance on a

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total return basis from its peak established in March 2000. The S&P 500 also enjoyed its strongest calendar-year performance since 2003.

        Equally important from our perspective—because of the emphasis we put on down-market performance—was the fact that large-cap also finished ahead of small-cap from the earlier peak on 5/5/06 through 12/31/06, up 8.4% versus 1.6% for the Russell 2000. In our estimation, these stronger performances in the down and relatively flat periods of 2006 provide the most accurate barometer of the market’s subsequent near-term direction. We continue to believe that where investors go when stock prices fall is a telling indicator of nascent market leadership. Last January, we surmised that small-cap was apt to lead in any bullish period, while large-cap would lead in any bearish market environment. By the end of the second quarter, we felt differently. Issues with the economy and contracting worldwide liquidity had us convinced that large-cap was likely to capture leadership in an uptick as well as a downturn, and this reasoning proved sound until the rally that sparked the fourth quarter. What was most surprising about the upswing near the end of 2006 was the strength of more speculative issues within small-cap during a period in which we thought that investors would be looking for more safety and less risk. Micro-cap companies, as measured by the Russell Microcap index, posted significant gains in both the first (+14.1%) and fourth quarters (+10.3%) of 2006, something paralleled by some of our own portfolios with significant micro-cap exposure. Whether this late surge indicated ongoing small-cap strength remains to be seen.

Long, Long, Long
It certainly seems that small-cap value has been leading its growth counterpart, as measured by the Russell 2000 Value and Russell 2000 Growth indices, for a long, long, long time. Two thousand six actually marked the third consecutive year of value’s outperformance and sixth out of the last seven. Unlike 2005, which saw a narrowing performance spread between small-cap value and growth, 2006 was a year in which value substantially outperformed growth within small-cap. The Russell 2000 Value index was up an impressive 23.5% for the calendar year, while the Russell 2000 Growth index posted a return of 13.4%, a respectable result on an absolute basis, but more than one thousand basis points behind its value sibling. This considerable advantage for small-cap value only widened its advantage over long-term time periods. The Russell 2000 Value index outgained the Russell 2000 Growth index for the one-, three-, five-, 10-, 15-, 20- and 25-year periods ended 12/31/06.

        One interesting sidebar to the recent performance dominance of small-cap value has been its strength during upswings. It’s generally expected that value will prove its mettle during flat or down market periods, and this was certainly the case during the short-lived downdrafts of 2006, as small-cap value bested growth in the second (-2.7% versus -7.3%) and third quarters (+2.6%



What was most surprising about the upswing near the end of 2006 was the strength of more speculative issues within small-cap during a period in which we thought that investors would be looking for more safety and less risk.




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LETTER TO OUR STOCKHOLDERS


 
We also view financially strong

companies as well-positioned to

grow. The assets of these companies

are derived more from retained

earnings than paid-in capital; i.e.,

they have the ability to foster

growth out of their own success as

a business.


The balance sheet and its

accompanying footnotes and

schedules also reveal companies

whose businesses are conservatively

managed: debts are written off early,

LIFO inventories are used that may

understate profits, and asset

ownership and depreciation are the

norm as opposed to leasing. Such

practices give us critical insight into

the way a company operates. The

presence or absence of such items

tells us something about

management and their goals for

the company.


Other factors are also important to

risk-focused investment managers

like us. We ask certain questions as

we study annual reports and

financial statements: What is the

schedule for bad debt provision? Is

the company massaging earnings in

the short-term via advertising or


Continued on Page 8...

   
versus -1.8%). Yet small-cap value was also competitive in the first-quarter rally (+13.5% versus +14.4%), and actually held a slight advantage over small-cap growth in the similarly dynamic fourth quarter (+9.0% versus +8.8%). So while down- and flat-market returns were key to outperformance in the calendar year, strong absolute results in short-term upticks also helped the Russell 2000 Value index hang on to its significant performance edge in 2006.

You’re Asking Me, “Will My Fund Grow?”
We were very pleased with the strong absolute returns for our three closed-end portfolios in 2006. On a relative basis, both Royce Value Trust and Royce Micro-Cap Trust outgained the Russell 2000 on a net asset value (NAV) basis, while Royce Focus Trust came up short versus the small-cap index. All three Funds outperformed the Russell 2000 on a market price basis in 2006, and each Fund finished the year with a flourish in the form of a strong fourth quarter. This was the case for the small-cap universe as a whole, with micro-cap stocks finishing a bit stronger than their small-cap peers. Although Royce Value Trust and Royce Micro-Cap Trust each hold an ample number of micro-cap names, Royce Focus Trust has much less exposure. However, its relative underperformance came not in the fourth quarter (in which it outperformed the Russell 2000 on both an NAV and market price basis), but in the bearish second quarter. Its fourth-quarter strength was all the more notable considering the lack of micro-cap names.



      Although there are important differences among all three of our closed-end portfolios, each had similar sector strength in 2006. Industrial Products and Technology holdings as a group did well in all three Funds on a dollar basis, posting the largest net gains in each portfolio. The worldwide construction boom continued to benefit many Industrial Products holdings in the metal fabrication and machinery industries. In Technology, successes could be found in several industries, including internet software and services, IT services, and (in RVT and FUND) components and systems. Within the Natural Resources sector, precious metals and mining companies saw a resurgence late in the year and were among the top beneficiaries of the overall market rally during the fourth quarter.

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Dark Horse
As it relates to stock-market investing, quality is conventionally defined as a company’s ability to generate consistent growth in earnings and dividends over long-term time periods. It’s a definition that we agree with in large part. Some stock market observers, however, also hold that quality is the near-exclusive province of large-cap companies, mostly because their size and multiple lines of business are thought to make them less risky. By contrast, small-cap companies have traditionally been regarded as more volatile and speculative, and thus lacking the greater level of safety of their larger-cap cohorts. Here, of course, we part company with the conventional wisdom. We have always found quality companies in the small-cap world, and over the years have cultivated a pronounced preference for high-quality small-cap businesses.

     Why is this significant now? We think that in the current economic and stock-market cycles, high-quality companies offer investors several advantages, especially when compared to lower-quality stocks. Economic growth has slowed, corporate profit growth has likely peaked, and global liquidity has shown signs of contracting. Traditionally, more modest economic growth, coupled with an erosion of excess global liquidity, has favored higher quality stocks, as money flows to safer investments. Although it may seem surprising in light of small-cap value’s recent results, many high-quality small-cap stocks look attractively undervalued to us in the current market climate. Moving the capitalization parameters beyond small-cap, quality still appears undervalued. According to the Merrill Lynch Quantitative Strategy Quality Indices, the highest quality stocks (those with “A+” ratings) had an average forward price to earnings ratio of 17 times 2007 earnings, while the lowest quality stocks (those with “C” or “D” ratings) traded at an average 42 times 2007 earnings at the end of December 2006 (See the chart below).

     We have always believed that smaller companies with sound fundamentals should deliver strong absolute returns over the long term, especially when purchased at attractively low prices (a critical element in our security selection process). Our quest for quality typically begins with an examination of a company’s historical returns. We examine a business’s returns over full market cycles, with close emphasis paid to seeing precisely how those returns
 
Source: Merrill Lynch
 


We think that in the current economic and stock-market cycles, high-quality companies offer investors several advantages, especially when compared to lower-quality stocks.




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repair expenditures? Are there any

notices or indications of pending

litigation? We take an in-depth

look at the ratio of retained earnings

to total equity and capitalized

items such as development costs.

All of these factors may have a

bearing on a company’s—and by

extension our own— exposure to

risk. We take time to look back and

compare balance sheets (as well as

the rest of the financial statements)

from previous years because we are

interested in the history of a

company. We look for changes from

period to period that can tell us

about a company’s direction. If the

balance sheet takes a shape we

like, we want to understand how it

evolved to its current status.


The process of balance sheet

analysis is often time-consuming,

seldom exciting and certainly never

glamorous. It is critical, however, in

our search to find the kind of healthy

small-cap companies that have

been our mainstay for 30 years.


     
     
     
LETTER TO OUR STOCKHOLDERS
     
     


were achieved. Another metric we examine with particular scrutiny is return on assets (ROA), defined as net income divided by assets. This ratio helps to reveal to us the first markings of a quality company. Of course, for most of our managers, a company’s balance sheet, record of success as a business and potential for a profitable future are also critically important. Our disciplined, bottom-up approach focuses on identifying companies that are generating strong (or improving) free cash flow and returns on capital. Our goal is to find quality companies that are trading at a discount to our estimate of their worth as a business.

     We believe that the long-term records of The Royce Funds show that we have successfully identified growing businesses that are capable of both producing free cash and surviving potential difficulties in the stock market or the economy. For example, our three closed-end Funds’ portfolios have significant equity investments in U.S.-traded, non-financial common stocks that have a weighted average return on assets (ROA) greater than such companies contained in the Russell 2000. (See the table below). While these Funds may suffer underperformance periods from time to time, our belief is that a turn to quality in the market would benefit companies with such metrics, especially over long-term, full-market cycles. They are the small-cap universe’s ‘dark horses,’ companies that have strong fundamentals, but so far may not have enjoyed the full benefits of small-cap’s extended run.

                                             
                                  Percent of Portfolio/Index
     

 

      Return on Assets       Included in ROA Calculation
     

     

Royce Value Trust

            7.1                 71 %    
     
     

Royce Micro-Cap Trust

            6.1                 71      
     
     

Royce Focus Trust

            12.1                 67      
     
     

Russell 2000

            5.9                 71      
     
     

Results are the asset-weighted average trailing 12-month ROA for the U.S.-traded non-financial common stocks in each Fund’s portfolio as of 12/31/06.

                                             
                                             
     

Here Comes The Sun

The beginning and end points of market cycles are always unpredictable, and the timing of any leadership change often looks arbitrary until well after it has been established. It’s also important to remember that the market’s moves do not always make sense, at least until other, related factors come to light with the passage of time. Small-cap has enjoyed an extraordinary run over the last seven years. However, as this long-term small-cap rally matures, the asset class may become increasingly vulnerable to a correction. We do not see the possibility of either a period of large-cap leadership or a potential small-cap correction as bad news for investors with a long-term outlook. While a downturn would cause pain in the short run for small-cap investors, it would also present ample purchase opportunities. We also think that many of the high-quality small-caps we already own would potentially thrive beyond the difficulties of a hopefully short-term correction. Although a widespread shift to

                                             
                                             
                                             
                                             
                                             
                                             
                                             
                                             
                                             
                                             
                                             
                                             
                                             
                                             
                                             
                                             
       
       
                                             
                                             
                                             
                                             
       
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quality would certainly benefit large-cap stocks—and would be consistent with our recent contention that large-cap is overdue for a stint of market leadership—we believe that it would also benefit stocks with high-quality characteristics throughout the market, including small- and micro-cap stocks. As the song says, “It’s all right.”

           
Sincerely,          
           
     
Charles M. Royce   W. Whitney George   Jack E. Fockler, Jr.  
President   Vice President   Vice President  
           
           
January 31, 2007          
           
           


Although a widespread shift to quality would certainly benefit large-cap stocks—and would be consistent with our recent contention that large-cap is overdue for a stint of market leadership—we believe that it would also benefit stocks with high-quality characteristics throughout the market, including small- and micro-cap stocks.




THIS PAGE IS NOT PART OF THE 2006 ANNUAL REPORT TO STOCKHOLDERS  |  9
 



     
TABLE OF CONTENTS    

     
Annual Report to Stockholders    

Directors and Officers   11

Managers’ Discussions of Fund Performance    
     

Royce Value Trust

  12

Royce Micro-Cap Trust

  14

Royce Focus Trust

  16

History Since Inception   18

Distribution Reinvestment and Cash Purchase Options   19

Schedules of Investments and Other Financial Statements    
     

Royce Value Trust

  20

Royce Micro-Cap Trust

  35

Royce Focus Trust

  50

Notes to Performance and Other Important Information   60

Stockholder Meeting Results   61



        10  |  2006 ANNUAL REPORT TO STOCKHOLDERS
 




DIRECTORS AND OFFICERS

 
All Directors and Officers may be reached c/o The Royce Funds, 1414 Avenue of the Americas, New York, NY 10019

     
NAME AND POSITION: Charles M. Royce, Director*, President  
Age: 67 Number of Funds Overseen: 25  
Tenure: Since 1982 Non-Royce Directorships: Director of Technology Investment Capital Corp.  

Principal Occupation(s) During Past Five Years: President, Chief Investment Officer and Member of Board of Managers of Royce & Associates, LLC (“Royce”) (since October 2001), the Trust’s investment adviser.

 
     
NAME AND POSITION: Mark R. Fetting, Director*  
Age: 52 Number of Funds Overseen: 46  
Tenure: Since 2001

Non-Royce Directorships: Director/Trustee of registered investment companies constituting the 21 Legg Mason Funds.

 

Principal Occupation(s) During Past Five Years: Senior Executive Vice President of Legg Mason, Inc.; Member of Board of Managers of Royce (since October 2001); Division President and Senior Officer, Prudential Financial Group, Inc. and related companies, including Fund Boards and consulting services to subsidiary companies (from 1991 to 2000). Mr. Fetting’s prior business experience includes having served as Partner, Greenwich Associates and Vice President, T. Rowe Price Group, Inc.

 

 
     
NAME AND POSITION: Donald R. Dwight, Director  
Age: 75 Number of Funds Overseen: 25  
Tenure: Since 1998 Non-Royce Directorships: None  

Principal Occupation(s) During Past Five Years: President of Dwight Partners, Inc., corporate communications consultant; Chairman (from 1982 to March 1998) and Chairman Emeritus (since March 1998) of Newspapers of New England, Inc. Mr. Dwight’s prior experience includes having served as Lieutenant Governor of the Commonwealth of Massachusetts, as President and Publisher of Minneapolis Star and Tribune Company and as a Trustee of the registered investment companies constituting the Eaton Vance Funds.

 
     
NAME AND POSITION: Richard M. Galkin, Director  
Age: 68 Number of Funds Overseen: 25  
Tenure: Since 1982 Non-Royce Directorships: None  

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

 
     
NAME AND POSITION: Stephen L. Isaacs, Director  
Age: 67 Number of Funds Overseen: 25  
Tenure: Since 1989 Non-Royce Directorships: None  

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

 
     
NAME AND POSITION: William L. Koke, Director  
Age: 72 Number of Funds Overseen: 25  
Tenure: Since 1996 Non-Royce Directorships: None  

Principal Occupation(s) During Past Five Years: Private investor. Mr. Koke’s prior business experience includes having served as President of Shoreline Financial Consultants, Director of Financial Relations of SONAT, Inc., Treasurer of Ward Foods, Inc. and President of CFC, Inc.

 
     
NAME AND POSITION: Arthur S. Mehlman, Director  
Age: 64 Number of Funds Overseen: 46  
Tenure: Since 2004

Non-Royce Directorships: Director/Trustee of registered investment companies constituting the 21 Legg Mason Funds and Director of Municipal Mortgage & Equity, LLC.

 

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

 
     
     
   
NAME AND POSITION: David L. Meister, Director
Age: 67 Number of Funds Overseen: 25
Tenure: Since 1982 Non-Royce Directorships: None

Principal Occupation(s) During Past Five Years: Consultant. Chairman and Chief Executive Officer of The Tennis Channel (from June 2000 to March 2005). Chief Executive officer of Seniorlife.com (from December 1999 to May 2000). Mr. Meister’s prior business experience includes having served as a consultant to the communications industry, President of Financial News Network, Senior Vice President of HBO, President of Time-Life Films and Head of Broadcasting for Major League Baseball.

   
NAME AND POSITION: G. Peter O’Brien, Director
Age: 61 Number of Funds Overseen: 46
Tenure: Since 2001 Non-Royce Directorships: Director/Trustee of registered investment companies constituting the 21 Legg Mason Funds; Director of Technology Investment Capital Corp.

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


   
NAME AND POSITION: John D. Diederich, Vice President and Treasurer
Age: 55  
Tenure: Since 2001  

Principal Occupation(s) During Past Five Years: Chief Operating Officer, Managing Director and member of the Board of Managers of Royce; Chief Financial Officer of Royce (since March 2002); Director of Administration of the Trust; and President of RFS, having been employed by Royce since April 1993.

   
NAME AND POSITION: Jack E. Fockler, Jr., Vice President
Age: 48  
Tenure: Since 1995  

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

   
NAME AND POSITION: W. Whitney George, Vice President
Age: 48  
Tenure: Since 1995  

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

   
NAME AND POSITION: Daniel A. O’Byrne, Vice President and Assistant Secretary
Age: 44  
Tenure: Since 1994  

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

   
NAME AND POSITION: John E. Denneen, Secretary and Chief Legal Officer
Age: 39  
Tenure: 1996-2001 and Since April 2002  

Principal Occupation(s) During Past Five Years: General Counsel (Deputy General Counsel prior to 2003), Principal, Chief Legal and Compliance Officer and Secretary of Royce (since March 2002); Secretary of The Royce Funds (from 1996 to 2001 and since April 2002); and Principal of Credit Suisse First Boston Private Equity (from 2001 to 2002).

   
NAME AND POSITION: Lisa Curcio, Chief Compliance Officer
Age: 47  
Tenure: Since 2004  

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

   

* Interested Director.
 


2006 ANNUAL REPORT TO STOCKHOLDERS  |  11
 








ROYCE VALUE TRUST


AVERAGE ANNUAL NAV TOTAL RETURNS
Through 12/31/06

 
Manager’s Discussion
Royce Value Trust’s (RVT) diversified portfolio of small- and micro-cap stocks more than participated in the mostly good times for small-cap stocks in 2006. The Fund gained 19.5% on a net asset value (NAV) basis and 21.0% on a market price basis, compared to calendar-year returns of 18.4% for the Russell 2000 and 15.1% for the S&P 600. In the third quarter, RVT was up 0.7% on an NAV basis and 8.0% on a market price basis, versus a gain of 0.4% for the Russell 2000 and a loss of 0.9% for the S&P 600. The fourth quarter arrived with a strong rally that closed out the year. The Fund was up 8.2% on an NAV basis and 11.3% on a market price basis, compared to gains of 8.9% for the Russell 2000 and 7.9% for the S&P 600.

     RVT’s solid NAV return in 2006 contributed to its strong absolute and relative results over market-cycle and other long-term periods. From the previous small-cap market peak on 3/9/00 through 12/31/06, RVT gained 131.4% versus 41.7% for the Russell 2000 and 90.0% for the S&P 600. During the more bullish phase from the small-cap market trough on 10/9/02 through 12/31/06, the Fund was up 163.5% compared to a gain of 153.5% for the Russell 2000 and 143.7% for the S&P 600. On both an NAV and market price basis, RVT outperformed both of its small-cap benchmarks for the one-, three-, five-, 10-, 15-, 20-year and since inception (11/26/86) periods ended 12/31/06. (The Fund celebrated its twentieth anniversary in November 2006.) RVT’s average annual NAV total return since inception was 13.0%.

     While each of the Fund’s equity sectors had positive net gains, holdings in Industrial Products led the way in dollar-based net gains for the full year (as well as in the fourth quarter). Companies in the machinery industry posted the sector’s highest net gains on a dollar basis, though they were not as dominant in the second half as in the first. The metals and distributions and other industrial products industries also showed strong dollar-based gains. Kimball International is a company that we have owned since 1989. The firm, whose low debt and consistent dividend helped to draw and maintain our attraction, makes wood furniture and cabinets, as well as electronic assembly products. Better-than-expected fiscal third- and fourth-quarter earnings, as well as new opportunities for its electronics division, seemed to attract more investors. Unlike many stocks in 2006, Kimball’s price climbed relatively later and more consistently, taking off in May and climbing steadily from then on. We trimmed our position in November.

     The same month saw us make a small trim to our position in asset management company, AllianceBernstein Holding. We have long admired the firm for its success in a business that we know well. The Fund’s largest holding at the end of the year, it was also the largest net gainer on a dollar basis in 2006, as the firm benefited from rising profits and earnings. Although our current position dates back to 2000, we have owned the stock periodically since 1993. Fine art, antique and collectibles auction house Sotheby’s was first selected for RVT’s portfolio in 1990,



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.

Fourth Quarter 2006*

  8.23 %

July-December 2006*

  8.99  

One-Year

              19.50  

Three-Year

              16.30  

Five-Year

              13.32  

10-Year

              13.96  

15-Year

              14.14  

20-Year

              13.05  

Since Inception (11/26/86)

  12.99  
* Not annualized.

CALENDAR YEAR NAV TOTAL RETURNS


Year

  RVT     Year     RVT  

2006

  19.5 %   1996     15.5 %

2005

  8.4     1995     21.1  

2004

  21.4     1994     0.1  

2003

  40.8     1993     17.3  

2002

  -15.6     1992     19.3  

2001

  15.2     1991     38.4  

2000

  16.6     1990     -13.8  

1999

  11.7     1989     18.3  

1998

  3.3     1988     22.7  

1997

  27.5     1987     -7.7  
                   

TOP 10 POSITIONS
% of Net Assets Applicable
to Common Stockholders


AllianceBernstein Holding L.P.

  2.3 %

Ritchie Bros. Auctioneers

  1.4  

Sotheby’s

  1.3  

SEACOR Holdings

  1.3  

Lincoln Electric Holdings

  1.2  

Newport Corporation

  1.1  

Universal Compression Holdings

  1.0  

Adaptec

  1.0  

Brady Corporation Cl. A

  0.9  

Ash Grove Cement Cl. B

  0.9  
                   

PORTFOLIO SECTOR BREAKDOWN
% of Net Assets Applicable
to Common Stockholders


Technology

  24.2 %

Industrial Products

  17.7  

Industrial Services

  13.0  

Financial Intermediaries

  11.0  

Natural Resources

  10.3  

Financial Services

  8.2  

Health

  7.0  

Consumer Services

  6.5  

Consumer Products

  4.7  

Utilities

  0.2  

Diversified Investment Companies

  0.1  

Miscellaneous

  5.0  

Bonds & Preferred Stocks

  0.2  

Cash and Cash Equivalents

  10.5  

12  |  2006 ANNUAL REPORT TO STOCKHOLDERS



Performance and Portfolio Review


     

though we took our current position in 1998. Its leadership in its field has long been a source of our attraction. Its share price was volatile, but moved mostly upward in 2006. First purchased in 1998, SEACOR Holdings is a relative newcomer to RVT’s portfolio. The company engages in the ownership, operation, marketing and remarketing of mostly marine transportation and oil and gas equipment. Better-than-expected earnings fueled the rise in its stock price, and we sold a small number of shares in December.

     Net losses at the individual company level were relatively modest. The share prices of many energy-related stocks began to cool down during April and May. The problem for ceramic proppant maker Carbo Ceramics (which we’ve owned since 1996) was that its stock price remained in a downdraft for much of the rest of the year. (Proppants are used in the hydraulic fracturing of natural gas and oil wells.) Its balance sheet remained strong and earnings were positive, so we increased our stake in October. Forward Air provides various transportation and logistics services. Its calendar third-quarter earnings were positive, but lower than what analysts were anticipating, which helped to speed the decline of its share price.
 
  PORTFOLIO DIAGNOSTICS
  GOOD IDEAS THAT WORKED
  2006 Net Realized and Unrealized Gain

   

      Average Market Capitalization $1,188 million   
   
  AllianceBernstein Holding L.P. $8,396,172          Weighted Average P/E Ratio 20.2x   

   
  Sotheby’s 6,142,632          Weighted Average P/B Ratio 2.3x   

   
  Kimball International Cl. B 6,012,659          Weighted Average Yield 0.8%   

   
  SEACOR Holdings 4,755,130          Fund Net Assets $1,180 million   

   
  Newport Corporation 4,626,089          Turnover Rate 21%   
       
          Net Leverage* 8%   
  GOOD IDEAS AT THE TIME
  2006 Net Realized and Unrealized Loss

   
      Symbol  
  Carbo Ceramics $2,796,270            Market Price RVT   

        NAV XRVTX   
  Forward Air 1,812,269       
*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.

   
  First Albany Companies 1,620,963       

           
  PXRE Group 1,390,701          CAPITAL STRUCTURE
  Publicly Traded Securities Outstanding at
  12/31/06 at NAV or Liquidation Value

   
  Cimarex Energy 1,285,273       
     
        57.3 million shares
  of Common Stock
$1,180 million  
     

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.
    5.90% Cumulative
  Preferred Stock
$220 million  
         
    RISK/RETURN COMPARISON
  Five-Year Period Ended 12/31/06
 
    Average Annual
Total Return
Standard Deviation Return
Efficiency*
 
    RVT (NAV) 13.32% 16.95 0.79
 
    S&P 600 12.49     15.52 0.80
 
    Russell 2000 11.39     17.16 0.66
 
*Return Efficiency is the average annual total return divided by the annualized standard deviation over a designated time period.
         
 

2006 ANNUAL REPORT TO STOCKHOLDERS  |  13




ROYCE MICRO-CAP TRUST


AVERAGE ANNUAL NAV TOTAL RETURNS
Through 12/31/06

 
Manager’s Discussion
Helped by a strong surge from micro-caps at the end of the year, the diversified portfolio of Royce Micro-Cap Trust (RMT) posted solid results on both an absolute and relative basis in 2006. RMT gained 22.5% on a net asset value (NAV) basis and 26.7% on a market price basis versus a return of 18.4% for the Russell 2000, the Fund’s small-cap benchmark. In a year that began and ended with vigorous rallies, RMT initially participated only on an NAV basis, with respective NAV and market price gains of 15.2% and 7.00% versus the Russell 2000’s return of 13.9% in the the first quarter. When stock prices fell in the second quarter, RMT displayed impressive down-market strength, losing 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. The flatter-return period of the third quarter saw the Fund giving back some NAV gain, while it continued to be solid on a market price basis. RMT was down 0.3% an NAV basis between July and September, compared to gains of 2.8% in its market price and 0.4% for its small-cap benchmark.

     In the rally that enlivened the fourth quarter, the Fund shone on both an NAV and market price basis. RMT gained 10.1% on an NAV basis and an impressive 17.9% on a market price basis versus an 8.9% return for the Russell 2000. From the interim small-cap peak on 5/5/06 through 12/31/06, the Fund was up 3.0% on an NAV basis and 14.7% on a market price basis, both results again better than the small-cap index’s return of 1.6%. Although this latter period represented a short time period, we were pleased with the Fund’s sturdy NAV showing considering the historical volatility and vulnerability of micro-cap stocks.

     We were also pleased with the Fund’s NAV results over full market cycle and other long-term periods on both an absolute and relative basis. These are the most critical time spans when it comes to evaluating performance. From the small-cap market peak on 3/9/00 through 12/31/06, RMT gained 147.2% on an NAV basis (+232.6% on a market price basis) versus 47.1% for the Russell 2000. Perhaps more notable was its gain during the mostly bullish phase that ran from the small-cap market trough on 10/9/02 through 12/31/06, a period in which RMT gained 186.2% on an NAV basis (+253.5% on a market price basis) compared to the Russell 2000’s gain of 153.5%.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 14.6%.

     Each of the Fund’s sectors posted net gains in 2006, with Technology and Industrial Products in the lead on a dollar basis. At the individual company level, the Fund’s top net gainers came from several different sectors and industry groups, with no single area truly dominating. Securities broker International Assets Holding is involved in asset management. The announcement in June of record revenues and earnings for its fiscal third quarter appeared to attract more investors to the firm’s stock. We took some gains between June and December. La



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.

Fourth Quarter 2006*

  10.07 %

July-December 2006*

  9.74  

One-Year

              22.46  

Three-Year

              15.77  

Five-Year

              15.78  

10-Year

              14.62  

Since Inception (11/26/86)

  14.58  
* Not annualized.

CALENDAR YEAR NAV TOTAL RETURNS


Year

  RMT     Year     RMT  

2006

  22.5 %   1999     12.7 %

2005

  6.8     1998     -4.1  

2004

  18.7     1997     27.1  

2003

  55.6     1996     16.6  

2002

  -13.8     1995     22.9  

2001

  23.4     1994     5.0  

2000

  10.9              
                   

TOP 10 POSITIONS
% of Net Assets Applicable
to Common Stockholders


ASA Bermuda

  1.4 %

Seneca Foods

  1.3  

Highbury Financial

  1.2  

Covansys Corporation

  1.2  

First Consulting Group

  1.1  

PAREXEL International

  1.0  

TriZetto Group (The)

  1.0  

Aceto Corporation

  1.0  

Universal Truckload Services

  0.9  

Transaction Systems
Architects Cl. A

  0.9  
                   

PORTFOLIO SECTOR BREAKDOWN
% of Net Assets Applicable
to Common Stockholders


Technology

  24.3 %

Health

  16.9  

Industrial Products

  14.9  

Industrial Services

  12.8  

Financial Intermediaries

  10.1  

Natural Resources

  9.4  

Consumer Services

  5.7  

Consumer Products

  5.6  

Financial Services

  3.6  

Diversified Investment Companies

  1.9  

Miscellaneous

  4.9  

Preferred Stock

  0.5  

Cash and Cash Equivalents

  6.9  

14  |  2006 ANNUAL REPORT TO STOCKHOLDERS



Performance and Portfolio Review


     

Senza Corporation is a women’s apparel retailer based in Canada whose stock we first purchased in 1995. Its share price climbed when its acquisition by a larger competitor was announced in November, which prompted us to sell our position at a substantial net gain. A happy exception to the woes that afflicted many healthcare stocks in 2006 was the terrific performance of First Consulting Group, which provides management and other services to healthcare, pharmaceutical and life sciences businesses. We liked its niche business and balance sheet. The earnings strength of this top-ten position seemed to take Wall Street by surprise in 2006, which in turn drew more investors to its stock.

     Net losses for individual companies in the portfolio were generally small. Multi-business holding company BB Holdings spun off a subsidiary that trades in the U.S., but its own domestic de-listing drove investors away from the stock, which continues to trade on the London Exchange. American Bank Note Holographics, a firm that produces holograms for currency, credit card identification and document security saw its stock price fall 60% in March on news that a major credit card company would no longer be using the firm’s security stripe. Its stock was only able to mount a slight rebound. We held on to our position owing to our regard for its niche business, balance sheet and positive earnings.
 
  PORTFOLIO DIAGNOSTICS
  GOOD IDEAS THAT WORKED
  2006 Net Realized and Unrealized Gain

   

      Average Market Capitalization $280 million   
   
  International Assets Holding $2,795,352          Weighted Average P/E Ratio 18.6x*  

   
  La Senza Corporation 2,537,402          Weighted Average P/B Ratio 1.9x   

   
  First Consulting Group 2,167,383          Weighted Average Yield 0.6%   

   
  Volt Information Sciences 1,884,059          Fund Net Assets $344 million   

   
  Covansys Corporation 1,729,279          Turnover Rate 34%   
       
          Net Leverage 11%   
  GOOD IDEAS AT THE TIME
  2006 Net Realized and Unrealized Loss

   
      Symbol  
  BB Holdings $1,513,960            Market Price RMT   

        NAV XOTCX   
  American Bank Note Holographics 838,012       
*Excludes 18% of portfolio holdings with zero or negative earnings as of 12/31/06.
†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.

   
  Stein Mart 728,121       

   
  America’s Car-Mart 719,317               

      CAPITAL STRUCTURE
  Publicly Traded Securities Outstanding at
  12/31/06 at NAV or Liquidation Value
  Hi-Tech Pharmacal 637,230       
     
        23.3 million shares
  of Common Stock
$344 million  
     

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 Nasdaq and, beginning on 12/1/03, on the NYSE.
    6.00% Cumulative
  Preferred Stock
$60 million  
         
    RISK/RETURN COMPARISON
  Five-Year Period Ended 12/31/06
 
    Average Annual
Total Return
Standard Deviation Return
Efficiency*
 
    RMT (NAV) 15.78% 17.83 0.89
 
    Russell 2000 11.39     17.16 0.66
 
*Return Efficiency is the average annual total return divided by the annualized standard deviation over a designated time period.
         
 

2006 ANNUAL REPORT TO STOCKHOLDERS  |  15




ROYCE FOCUS TRUST


AVERAGE ANNUAL NAV TOTAL RETURNS
Through 12/31/06

 
Manager’s Discussion
Although its calendar-year net asset value (NAV) performance suffered a bit in comparison to its small-cap benchmark, the Russell 2000, we were pleased with the results for Royce Focus Trust (FUND) on an absolute basis. FUND gained 15.9% on an NAV basis, and an impressive 30.5% on a market price basis, compared to a gain of 18.4% for the Russell 2000. In all but one quarter in 2006, the Fund’s NAV results went much the way that we would expect, with solid up-market turns in the dynamic first and fourth quarters and slightly better relative downmarket performance in the bearish second quarter. 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 the Fund lose 4.8% on an NAV basis and 6.5% on a market price basis, while the Russell 2000 declined 5.0%.

     However, in the underwhelming environment of the third quarter, FUND declined 3.6% on an NAV basis, compared to a gain of 0.4% for both its market price and the Russell 2000. The Fund rebounded nicely in the fourth quarter, when stock prices in general were on the rise. On an NAV basis, FUND was up 11.2% (+17.5% on a market price basis) versus a return of 8.9% for the small-cap index. So while the portfolio did well to make up for its difficult third quarter, it was not enough to push its calendar-year return past that of the Russell 2000.

     The Fund once again posted strong absolute and superior relative results over market-cycle and other long-term performance periods. From the previous small-cap market peak on 3/9/00 through 12/31/06, the Fund gained 200.5% on an NAV basis (+293.4% on a market price basis) versus 41.7% for the Russell 2000. In the more bullish period from the small-cap market trough on 10/9/02 through 12/31/06, FUND’s NAV return was 215.9% (+266.8% on a market price basis) versus a gain of 153.5% for its small-cap benchmark. On both an NAV and market price basis, FUND outperformed the Russell 2000 for the three-, five-, 10-year and since inception of Royce’s management (11/1/96) periods ended 12/31/06. The Fund’s average annual NAV total return since the inception of our management was 14.4%.

     The Industrial Products, Natural Resources and Technology sectors led the way for the year as a whole in dollar-based net gains. Net losses at the individual company level were relatively modest, however disappointing. 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 in London, and we added to our stake during May and June. Canadian energy services company Trican Well Service manufactures piping and drilling equipment and provides oil well completion, maintenance and repair services. Its share price hit an all-time high early in 2006 and was mostly on a downward slide through the rest of the year, even as it continued to post solid earnings. After trimming our position between early 2005 and February 2006, we began to purchase shares at what we judged to be attractive prices during



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.

Fourth Quarter 2006*

  11.17 %

July-December 2006*

  7.18  

One-Year

              15.85  

Three-Year

              19.42  

Five-Year

              18.12  

10-Year

              14.09  

Since Inception (11/1/96)†

  14.35  
*   Not annualized.
Royce & Associates assumed investment management   responsibility for the Fund on 11/1/96.

CALENDAR YEAR NAV TOTAL RETURNS


Year

  FUND     Year     FUND  

2006

  15.9 %   2001     10.0 %

2005

  13.3     2000     20.9  

2004

  29.2     1999     8.7  

2003

  54.3     1998     -6.8  

2002

  -12.5     1997     20.5  
                   

TOP 10 POSITIONS
% of Net Assets Applicable
to Common Stockholders


New Zealand Government 6.00% Bond

  4.4 %

Athena Neurosciences Finance 7.25% Bond

  3.9  

IPSCO

  3.6  

Harris Steel Group

  3.5  

Canadian Government 3.00% Bond

  3.3  

Simpson Manufacturing

  3.0  

Metal Management

  3.0  

Silver Standard Resources

  2.9  

Ivanhoe Mines

  2.8  

Florida Rock Industries

  2.7  
                   

PORTFOLIO SECTOR BREAKDOWN
% of Net Assets Applicable
to Common Stockholders


Industrial Products

  25.9 %

Natural Resources

  21.8  

Technology

  7.5  

Health

  6.4  

Consumer Services

  6.0  

Consumer Products

  5.5  

Financial Intermediaries

  4.0  

Industrial Services

  3.0  

Financial Services

  2.6  

Bonds

  11.6  

Cash and Cash Equivalents

  21.5  

16  |  2006 ANNUAL REPORT TO STOCKHOLDERS



Performance and Portfolio Review


     

July and October. 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 with enough uncertainty about the firm’s future prospects to sell our position in August.
     Within Industrial Products, several holdings posted impressive net gains. Top-ten holding Harris Steel Group processes, fabricates and installs steel products. Its price began to rise in November with news of a second consecutive quarter of better-than-expected earnings followed by the announcement of Harris being acquired by a competitor in December. After correcting between May and early September, the share price of scrap metal recycling services company Metal Management showed new life, helped in part by strong earnings. In the Natural Resources sector, several precious metals and mining companies overcame their own stock price corrections to end the year on a high note. Six of the Fund’s 20 top-gaining stocks on a dollar basis came from the precious metals and mining group in 2006, including Silver Standard Resources and Glamis Gold. At year-end, our take on the long-term prospects for both energy and precious metals stocks remained positive. We have chosen to act opportunistically, occasionally buying on dips and at times trimming on upticks, our eyes focused firmly on the long view.
 
  PORTFOLIO DIAGNOSTICS
  GOOD IDEAS THAT WORKED
  2006 Net Realized and Unrealized Gain

   

      Average Market Capitalization $1,672 million   
   
  Silver Standard Resources $2,721,635          Weighted Average P/E Ratio 11.8x   

   
  Harris Steel Group 2,226,162          Weighted Average P/B Ratio 2.0x   

   
  Metal Management 2,119,554          Weighted Average Yield 1.4%   

   
  Glamis Gold 1,699,548          Fund Net Assets $159 million   

   
  Lincoln Electric Holdings 1,564,234          Turnover Rate 30%   
       
          Net Leverage* 0%   
  GOOD IDEAS AT THE TIME
  2006 Net Realized and Unrealized Loss

   
      Symbol  
  BB Holdings $1,121,661            Market Price FUND   

        NAV XFUNX   
  Trican Well Service 878,364       
*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.

   
  Orchid Cellmark 800,561       

           
  International Coal Group 777,511          CAPITAL STRUCTURE
  Publicly Traded Securities Outstanding at
  12/31/06 at NAV or Liquidation Value

   
  Ensign Energy Services 767,313       
     
        16.3 million shares
  of Common Stock
$159 million  
     

1 Royce & Associates assumed investment management responsibility for the Fund on 11/1/96.
1 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 Nasdaq.
    6.00% Cumulative
  Preferred Stock
$25 million  
         
    RISK/RETURN COMPARISON
  Five-Year Period Ended 12/31/06
 
    Average Annual
Total Return
Standard Deviation Return
Efficiency*
 
    FUND (NAV) 18.12% 17.31 1.05
 
    Russell 2000 11.39     17.16 0.66
 
*Return Efficiency is the average annual total return divided by the annualized standard deviation over a designated time period.
         
 

2006 ANNUAL 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   Annual distribution total $1.78             19.696     693                

12/31/06       $ 21,922             8,102     $ 167,063     $ 179,945

Royce Micro-Cap Trust                                    
12/14/93   Initial Purchase   $ 7,500     $ 7.500     1,000     $ 7,250     $ 7,500
10/28/94   Rights Offering     1,400       7.000     200                
12/19/94   Distribution $0.05             6.750     9       9,163       8,462
12/7/95   Distribution $0.36             7.500     58       11,264       10,136
12/6/96   Distribution $0.80             7.625     133       13,132       11,550
12/5/97   Distribution $1.00             10.000     140       16,694       15,593
12/7/98   Distribution $0.29             8.625     52       16,016       14,129
12/6/99   Distribution $0.27             8.781     49       18,051       14,769
12/6/00   Distribution $1.72             8.469     333       20,016       17,026
12/6/01   Distribution $0.57             9.880     114       24,701       21,924
2002   Annual distribution total $0.80             9.518     180       21,297       19,142
2003   Annual distribution total $0.92             10.004     217       33,125       31,311
2004   Annual distribution total $1.33             13.350     257       39,320       41,788
2005   Annual distribution total $1.85             13.848     383       41,969       45,500
2006   Annual distribution total $1.55             14.246     354                

12/31/06       $ 8,900             3,479     $ 51,385     $ 57,647

Royce Focus Trust                                    
10/31/96   Initial Purchase   $ 4,375     $ 4.375     1,000     $ 5,280     $ 4,375
12/31/96                               5,520       4,594
12/5/97   Distribution $0.53             5.250     101       6,650       5,574
12/31/98                               6,199       5,367
12/6/99   Distribution $0.145             4.750     34       6,742       5,356
12/6/00   Distribution $0.34             5.563     69       8,151       6,848
12/6/01   Distribution $0.14             6.010     28       8,969       8,193
12/6/02   Distribution $0.09             5.640     19       7,844       6,956
12/8/03   Distribution $0.62             8.250     94       12,105       11,406
2004   Annual distribution total $1.74             9.325     259       15,639       16,794
5/6/05   Rights offering     2,669       8.340     320                
2005   Annual distribution total $1.21             9.470     249       21,208       20,709
2006   Annual distribution total $1.57             9.860     357                

12/31/06       $ 7,044             2,530     $ 24,668     $ 27,020


*  
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, values are stated as of December 31 of the year indicated, after reinvestment of distributions.

18  |  2006 ANNUAL 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 ANNUAL REPORT TO STOCKHOLDERS  |  19



ROYCE VALUE TRUST



Schedule of Investments


    SHARES     VALUE       SHARES     VALUE

COMMON STOCKS – 107.9%

           

Restaurants and Lodgings - 1.4%

         
             

Applebee’s International

  63,000   $ 1,554,210

Consumer Products – 4.7%

           

Benihana Cl. A a,c

  6,600     202,620

Apparel and Shoes - 1.6%

           

CEC Entertainment a,c

  121,400     4,886,350

Kenneth Cole Productions Cl. A

  35,000   $ 839,650  

IHOP Corporation

  93,400     4,922,180

Columbia Sportswear c

  34,600     1,927,220  

Morgans Hotel Group a,c

  90,000     1,523,700

K-Swiss Cl. A

  105,000     3,227,700  

Steak n Shake a

  183,000     3,220,800

Oakley

  94,900     1,903,694          

Polo Ralph Lauren Cl. A

  38,200     2,966,612             16,309,860

Tandy Brands Accessories

  16,900     198,068          

Weyco Group

  307,992     7,653,601  

Retail Stores - 2.4%

         
       
 

America’s Car-Mart a,c

  70,400     834,944
          18,716,545  

Big Lots a

  155,300     3,559,476
       
 

CarMax a

  56,000     3,003,280

Collectibles - 0.3%

           

Children’s Place Retail Stores a

  13,670     868,318

Russ Berrie & Company a

  230,000     3,553,500  

Claire’s Stores

  209,800     6,952,772
       
 

Cost Plus a,c

  80,500     829,150

Food/Beverage/Tobacco - 0.2%

           

Fred’s Cl. A

  50,000     602,000

Hain Celestial Group a,c

  37,800     1,179,738  

Gander Mountain a,c

  53,300     480,233

Hershey Creamery

  709     1,488,900  

Hot Topic a,c

  29,000     386,860
       
 

Krispy Kreme Doughnuts a

  85,000     943,500
          2,668,638  

99 Cents Only Stores a,c

  95,000     1,156,150
       
 

Stein Mart

  142,800     1,893,528

Home Furnishing and Appliances - 0.3%

           

Tiffany & Co.

  75,000     2,943,000

Aaron Rents

  4,500     129,510  

Urban Outfitters a,c

  27,000     621,810

Ethan Allen Interiors

  35,800     1,292,738  

West Marine a

  131,100     2,264,097

Jacuzzi Brands a,c

  145,000     1,802,350  

Wet Seal (The) Cl. A a

  162,000     1,080,540

La-Z-Boy c

  68,200     809,534          
       
            28,419,658
          4,034,132          
       
 

Other Consumer Services - 2.4%

         

Publishing - 0.4%

           

Corinthian Colleges a,c

  106,500     1,451,595

Scholastic Corporation a

  130,000     4,659,200  

ITT Educational Services a

  80,000     5,309,600
       
 

Laureate Education a,c

  75,000     3,647,250

Sports and Recreation - 0.6%

           

MoneyGram International

  74,900     2,348,864

Coachmen Industries

  47,700     524,700  

Renaissance Learning

  15,000     265,950

Monaco Coach

  166,650     2,359,764  

Sotheby’s

  485,200     15,050,904

Nautilus

  2,000     28,000          

Sturm, Ruger & Company a

  272,900     2,619,840             28,074,163

Thor Industries

  26,100     1,148,139          
       
 

Total (Cost $48,875,384)

        76,357,108
          6,680,443          
       
 

Diversified Investment Companies – 0.1%

         

Other Consumer Products - 1.3%

           

Closed-End Funds - 0.1%

         

Blyth

  14,700     305,025  

Central Fund of Canada Cl. A

  111,500     1,041,410

Burnham Holdings Cl. B

  36,000     594,000          

Fossil a,c

  82,800     1,869,624  

Total (Cost $589,526)

        1,041,410

Lazare Kaplan International a

  103,600     1,030,820          

Leapfrog Enterprises a,c

  175,000     1,659,000  

Financial Intermediaries – 11.0%

         

Matthews International Cl. A

  100,000     3,935,000  

Banking - 3.5%

         

RC2 Corporation a

  132,600     5,834,400  

BOK Financial

  129,327     7,110,398
       
 

Bank of N.T. Butterfield & Son

  118,750     6,679,687
          15,227,869  

CFS Bancorp

  260,000     3,809,000
       
 

Cadence Financial

  30,300     656,601

Total (Cost $32,903,921)

        55,540,327  

Commercial National Financial

  45,300     878,820
       
 

Exchange National Bancshares

  50,400     1,587,600

Consumer Services – 6.5%

           

Farmers & Merchants Bank of Long Beach

  1,266     8,545,500

Direct Marketing - 0.1%

           

Heritage Financial

  12,915     316,805

FTD Group a,c

  55,000     983,950  

HopFed Bancorp

  25,000     397,500
       
 

Jefferson Bancshares

  25,000     325,500

Leisure and Entertainment - 0.1%

           

Mechanics Bank

  200     3,921,000

Shuffle Master a,c

  15,000     393,000  

NetBank

  70,000     324,800

Steiner Leisure a

  2,100     95,550  

Old Point Financial

  20,000     568,000
       
 

Partners Trust Financial Group

  100,000     1,164,000
          488,550  

Sun Bancorp a,c

  44,100     929,187
       
             

Media and Broadcasting - 0.1%

                       

Cox Radio Cl. A a,c

  23,000     374,900              

Discovery Holding Company Cl. A a,c

  50,000     804,500              

Discovery Holding Company Cl. B a,c

  56,100     901,527              
       
             
          2,080,927              
       
             


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



DECEMBER 31, 2006



 


    SHARES     VALUE       SHARES     VALUE

Financial Intermediaries (continued)

           

PRG-Schultz International a,c

  14,420   $ 115,360

Banking (continued)

           

SEI Investments

  141,200     8,409,872

Tompkins Trustco

  17,545   $ 797,420          

Whitney Holding

  40,500     1,321,110             20,410,985

Wilber Corporation

  31,700     317,634          

Wilmington Trust

  31,000     1,307,270  

Insurance Brokers - 1.2%

         

Yadkin Valley Financial

  3,800     71,668  

Crawford & Company Cl. A

  289,200     1,732,308
       
 

Crawford & Company Cl. B

  162,300     1,184,790
          41,029,500  

Gallagher (Arthur J.) & Co.

  111,200     3,285,960
       
 

Hilb Rogal & Hobbs

  155,050     6,530,706

Insurance - 4.1%

           

National Financial Partners

  22,000     967,340

Alleghany Corporation a

  11,097     4,034,869  

U.S.I. Holdings a,c

  40,000     614,400

Aspen Insurance Holdings

  64,000     1,687,040          

Commerce Group

  89,000     2,647,750             14,315,504

Erie Indemnity Cl. A

  139,900     8,111,402          

IPC Holdings

  27,000     849,150  

Investment Management - 4.5%

         

Leucadia National

  84,940     2,395,308  

ADDENDA Capital

  150,900     3,029,258

Markel Corporation a

  7,200     3,456,720  

AllianceBernstein Holding L.P.

  333,100     26,781,240

Montpelier Re Holdings

  66,000     1,228,260  

BKF Capital Group a

  65,700     220,095

NYMAGIC

  85,200     3,118,320  

Eaton Vance

  140,400     4,634,604

Ohio Casualty

  107,000     3,189,670  

Federated Investors Cl. B

  161,900     5,468,982

PXRE Group a

  166,551     767,800  

GAMCO Investors Cl. A

  158,600     6,099,756

ProAssurance Corporation a,c

  38,070     1,900,454  

Nuveen Investments Cl. A

  138,600     7,190,568

RLI

  99,724     5,626,428          

Security Capital Assurance

  30,000     834,900             53,424,503

21st Century Insurance Group

  62,000     1,094,300          

Wesco Financial

  4,750     2,185,000  

Other Financial Services - 0.8%

         

White Mountains Insurance Group

  10,000     5,794,300  

AmeriCredit Corporation a,c

  18,870     474,958
       
 

CharterMac

  59,600     1,279,612
          48,921,671  

Credit Acceptance a,c

  46,601     1,553,211
       
 

KKR Private Equity Investors LLP

  105,000     2,399,250

Real Estate Investment Trusts - 1.1%

           

Municipal Mortgage & Equity

  40,300     1,297,660

Gladstone Commercial

  34,700     698,858  

Ocwen Financial a,c

  50,000     793,000

Government Properties Trust

  50,000     530,000  

Van der Moolen Holding ADR

  21,362     125,395

KKR Financial

  161,200     4,318,548  

World Acceptance a,c

  21,700     1,018,815

Opteum Cl. A

  897,500     6,821,000          
       
            8,941,901
          12,368,406          
       
 

Total (Cost $59,143,116)

        97,092,893

Securities Brokers - 0.8%

                   

Dundee Wealth Management

  100,000     1,179,951  

Health – 7.0%

         

Evercore Partners Cl. A a,c

  19,400     714,890  

Commercial Services - 1.4%

         

First Albany Companies a

  350,100     812,232  

First Consulting Group a

  560,900     7,717,984

Investment Technology Group a

  30,400     1,303,552  

PAREXEL International a,c

  313,700     9,087,889

Knight Capital Group Cl. A a,c

  229,700     4,403,349          

optionsXpress Holdings

  53,000     1,202,570             16,805,873
       
         
          9,616,544  

Drugs and Biotech - 1.5%

         
       
 

Affymetrix a,c

  10,000     230,600

Other Financial Intermediaries - 1.5%

           

Antigenics a,c

  99,300     181,719

AP Alternative Assets L.P. a

  133,000     2,394,000  

Cerus Corporation a,c

  21,700     127,162

International Securities Exchange Cl. A

  75,000     3,509,250  

DUSA Pharmaceuticals a

  79,700     342,710

MCG Capital

  138,000     2,804,160  

Endo Pharmaceuticals Holdings a

  172,300     4,752,034

MVC Capital

  353,900     4,728,104  

Gene Logic a

  365,000     562,100

MarketAxess Holdings a

  67,000     909,190  

Hi-Tech Pharmacal a

  1,650     20,081

RHJ International a

  177,500     3,795,804  

Hollis-Eden Pharmaceuticals a,c

  44,000     231,440
       
 

Human Genome Sciences a,c

  90,000     1,119,600
          18,140,508  

K-V Pharmaceutical Cl. A a,c

  51,500     1,224,670
       
 

Medicines Company (The) a,c

  20,000     634,400

Total (Cost $90,347,936)

        130,076,629  

Millennium Pharmaceuticals a,c

  100,000     1,090,000
       
 

Myriad Genetics a,c

  50,000     1,565,000

Financial Services – 8.2%

           

Perrigo Company

  186,750     3,230,775

Information and Processing - 1.7%

           

Pharmanet Development Group a,c

  10,000     220,700

eFunds Corporation a,c

  126,875     3,489,063  

QLT a,c

  114,070     965,032

FactSet Research Systems

  35,350     1,996,568  

Telik a

  100,000     443,000

Global Payments

  68,500     3,171,550  

VIVUS a,c

  163,300     591,146

Interactive Data

  134,300     3,228,572          
                        17,532,169
                     

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



ROYCE VALUE TRUST



Schedule of Investments


    SHARES     VALUE       SHARES     VALUE

Health (continued)

           

CLARCOR

  83,500   $ 2,823,135

Health Services - 1.6%

           

Donaldson Company

  92,800     3,221,088

Albany Molecular Research a

  85,000   $ 897,600  

GrafTech International a,c

  64,790     448,347

Cross Country Healthcare a

  30,000     654,600  

PerkinElmer

  135,000     3,001,050

Eclipsys Corporation a,c

  20,000     411,200  

Powell Industries a,c

  92,400     2,917,068

Gentiva Health Services a

  30,150     574,659  

II-VI a

  13,500     377,190

HMS Holdings a,c

  50,000     757,500          

HealthSouth Corporation a,c

  200,000     4,530,000             14,573,836

Lincare Holdings a,c

  52,562     2,094,070          

MedQuist a

  73,893     993,861  

Machinery - 5.7%

         

National Home Health Care

  20,000     229,400  

Baldor Electric

  62,900     2,102,118

On Assignment a

  375,400     4,410,950  

Coherent a,c

  243,500     7,687,295

Paramount Acquisition (Units) a

  280,000     1,904,000  

Exco Technologies

  91,000     294,190

Quovadx a

  3,000     8,460  

Federal Signal

  58,600     939,944

Res-Care a,c

  65,460     1,188,099  

Franklin Electric

  84,200     4,327,038
       
 

Graco

  96,825     3,836,206
          18,654,399  

Hardinge

  192,893     2,904,969
       
 

IDEX Corporation

  36,000     1,706,760

Medical Products and Devices - 2.3%

           

Intermec a,c

  3,000     72,810

Allied Healthcare Products a

  210,200     1,086,734  

Lincoln Electric Holdings

  228,680     13,816,846

Arrow International

  195,728     6,924,857  

Nordson Corporation

  172,200     8,580,726

ArthroCare Corporation a,c

  10,000     399,200  

PAXAR Corporation a,c

  267,500     6,168,550

Bruker BioSciences a

  370,200     2,780,202  

Rofin-Sinar Technologies a

  128,000     7,738,880

CONMED Corporation a,c

  81,500     1,884,280  

Williams Controls a

  37,499     543,735

IDEXX Laboratories a

  79,000     6,264,700  

Woodward Governor

  154,800     6,147,108

Invacare Corporation

  103,100     2,531,105          

Novoste Corporation a

  16,625     44,888             66,867,175

STERIS Corporation

  98,600     2,481,762          

Young Innovations

  62,550     2,082,915  

Metal Fabrication and Distribution - 2.0%

         

Zoll Medical a

  20,200     1,176,448  

Commercial Metals

  36,600     944,280
       
 

CompX International Cl. A

  292,300     5,892,768
          27,657,091  

Gerdau Ameristeel

  61,100     545,012
       
 

Harris Steel Group

  100,000     3,729,366

Personal Care - 0.2%

           

IPSCO

  14,500     1,361,115

Nutraceutical International a

  22,800     349,068  

Kaydon Corporation

  208,700     8,293,738

USANA Health Sciences a,c

  38,900     2,009,574  

NN

  127,100     1,579,853
       
 

Novamerican Steel a

  10,800     394,200
          2,358,642  

Reliance Steel & Aluminum

  25,920     1,020,730
       
         

Total (Cost $56,168,057)

        83,008,174             23,761,062
       
         

Industrial Products – 17.7%

           

Paper and Packaging - 0.1%

         

Automotive - 0.5%

           

Peak International a

  408,400     1,192,528

Fuel Systems Solutions a,c

  22,500     496,800          

LKQ Corporation a,c

  200,000     4,598,000  

Specialty Chemicals and Materials - 2.1%

         

Quantam Fuel Systems Technologies Worldwide a,c

  15,500     24,800  

Aceto Corporation

  78,410     677,462

Superior Industries International

  52,000     1,002,040  

Balchem Corporation

  11,250     288,900
       
 

Cabot Corporation

  183,500     7,995,095
          6,121,640  

Hawkins

  206,878     2,958,355
       
 

Lydall a,c

  35,500     383,755

Building Systems and Components - 1.0%

           

MacDermid

  264,131     9,006,867

Decker Manufacturing

  6,022     222,814  

Schulman (A.)

  143,100     3,183,975

Preformed Line Products

  91,600     3,228,900  

Sensient Technologies

  22,000     541,200

Simpson Manufacturing

  250,800     7,937,820          
       
            25,035,609
          11,389,534          
       
 

Textiles - 0.1%

         

Construction Materials - 2.1%

           

Unifi a,c

  145,100     355,495

Ash Grove Cement Cl. B

  50,518     10,709,816          

Florida Rock Industries

  100,175     4,312,534  

Other Industrial Products - 2.9%

         

Heywood Williams Group a

  958,837     2,041,676  

Brady Corporation Cl. A

  293,400     10,937,952

Synalloy Corporation a,b

  345,000     6,361,800  

Diebold

  86,700     4,040,220

USG Corporation a,c

  25,000     1,370,000  

Distributed Energy Systems a

  32,000     115,200
       
 

Kimball International Cl. B

  387,380     9,413,334
          24,795,826  

Maxwell Technologies a

  21,500     299,925
       
 

Mettler-Toledo International a,c

  28,700     2,262,995

Industrial Components - 1.2%

           

Myers Industries

  30,499     477,614

Barnes Group

  4,000     87,000  

Peerless Manufacturing a

  148,600     3,667,448

Bel Fuse Cl. A

  2,000     60,340  

Solar Integrated Technologies a

  75,000     54,335

C & D Technologies c

  345,700     1,638,618              


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



DECEMBER 31, 2006



 


    SHARES     VALUE       SHARES     VALUE

Industrial Products (continued)

           

Printing - 0.1%

         

Other Industrial Products (continued)

           

Bowne & Co.

  68,100   $ 1,085,514

Waters Corporation a

  75,990   $ 3,721,230          
       
 

Transportation and Logistics - 3.4%

         
          34,990,253  

Alexander & Baldwin

  60,000     2,660,400
       
 

Arkansas Best

  1,200     43,200

Total (Cost $110,610,487)

        209,082,958  

Atlas Air Worldwide Holdings a,c

  17,000     756,500
       
 

C. H. Robinson Worldwide

  80,000     3,271,200

Industrial Services – 13.0%

           

EGL a,c

  123,125     3,666,662

Advertising and Publishing - 0.8%

           

Forward Air

  234,750     6,791,318

Interpublic Group of Companies a,c

  510,000     6,242,400  

Frozen Food Express Industries

  286,635     2,465,061

Lamar Advertising Cl. A a,c

  26,000     1,700,140  

Hub Group Cl. A a,c

  174,400     4,804,720

MDC Partners Cl. A a

  60,000     444,000  

Landstar System

  11,200     427,616

ValueClick a

  45,000     1,063,350  

Patriot Transportation Holding a

  96,300     8,990,568
       
 

UTI Worldwide

  105,000     3,139,500
          9,449,890  

Universal Truckload Services a

  115,100     2,733,625
       
         

Commercial Services - 4.7%

                      39,750,370

ABM Industries

  134,800     3,061,308          

Acquicor Technology (Units) a

  600,000     4,350,000  

Other Industrial Services - 0.5%

         

Allied Waste Industries a

  188,800     2,320,352  

Landauer

  117,900     6,186,213

Anacomp Cl. A a

  26,000     218,400          

BB Holdings a

  194,900     562,881  

Total (Cost $83,177,831)

        153,000,207

Bennett Environmental a,c

  20,900     16,720          

Central Parking

  18,300     329,400  

Natural Resources – 10.3%

         

Convergys Corporation a

  121,000     2,877,380  

Energy Services - 4.0%

         

Copart a

  158,100     4,743,000  

Atwood Oceanics a,c

  29,400     1,439,718

eResearch Technology a,c

  181,000     1,218,130  

Carbo Ceramics

  158,400     5,919,408

First Advantage Cl. A a,c

  5,000     114,800  

Core Laboratories a

  10,000     810,000

Global Imaging Systems a

  100,000     2,195,000  

Environmental Power a

  326,000     2,885,100

Grupo Aeroportuario del Sureste ADR

  36,900     1,567,143  

Global Industries a

  54,500     710,680

Hewitt Associates Cl. A a,c

  164,620     4,238,965  

Hanover Compressor a,c

  360,000     6,800,400

Iron Mountain a,c

  156,175     6,456,275  

Helmerich & Payne

  80,600     1,972,282

Learning Tree International a,c

  53,400     474,726  

Hydril a,c

  25,000     1,879,750

MPS Group a

  564,600     8,006,028  

Input/Output a

  494,100     6,734,583

Manpower

  105,800     7,927,594  

TETRA Technologies a,c

  68,000     1,739,440

New Horizons Worldwide a

  228,600     240,030  

Universal Compression Holdings a

  195,100     12,117,661

Rollins

  130,500     2,885,355  

Willbros Group a,c

  207,600     3,923,640

Spherion Corporation a,c

  53,000     393,790          

TRC Companies a

  3,600     31,068             46,932,662

Viad Corporation

  9,025     366,415          

Wright Express a,c

  30,000     935,100  

Oil and Gas - 2.5%

         
       
 

Bill Barrett a,c

  50,000     1,360,500
          55,529,860  

Carrizo Oil & Gas a,c

  41,700     1,210,134
       
 

Cimarex Energy

  193,990     7,080,635

Engineering and Construction - 1.1%

           

FX Energy a,c

  20,000     123,400

Dycom Industries a,c

  35,500     749,760  

Falcon Oil & Gas a

  360,000     1,179,265

Fleetwood Enterprises a

  234,300     1,853,313  

Helix Energy Solutions Group a,c

  34,226     1,073,670

Insituform Technologies Cl. A a,c

  174,300     4,507,398  

Particle Drilling Technologies a

  61,500     263,220

Washington Group International a

  100,000     5,979,000  

Penn Virginia

  16,440     1,151,458
       
 

PetroCorp a,d

  61,400     0
          13,089,471  

Pioneer Drilling a,c

  1,800     23,904
       
 

SEACOR Holdings a,c

  151,500     15,019,710

Food and Tobacco Processors - 0.5%

           

Storm Cat Energy a,c

  330,800     393,652

American Italian Pasta Cl. A a

  10,000     89,500  

W&T Offshore

  25,000     768,000

MGP Ingredients

  127,400     2,880,514          

Performance Food Group a

  10,000     276,400             29,647,548

Seneca Foods Cl. A a

  71,500     1,737,450          

Seneca Foods Cl. B a

  13,251     321,999  

Precious Metals and Mining - 2.2%

         
       
 

Agnico-Eagle Mines

  34,000     1,402,160
          5,305,863  

Bema Gold a,c

  248,000     1,302,000
       
 

Constellation Copper a

  186,900     230,790

Industrial Distribution - 1.9%

           

Entree Gold a

  90,000     139,500

Central Steel & Wire

  6,662     4,030,510  

Etruscan Resources a

  675,900     2,214,070

MSC Industrial Direct Cl. A

  20,000     783,000  

Gammon Lake Resources a,c

  188,300     3,067,407

Ritchie Bros. Auctioneers

  310,400     16,618,816  

Golden Star Resources a,c

  175,000     516,250

Strategic Distribution a

  115,000     1,170,700  

Hecla Mining a,c

  598,000     4,580,680
       
             
          22,603,026              
       
             

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



ROYCE VALUE TRUST



Schedule of Investments


    SHARES     VALUE       SHARES     VALUE

Natural Resources (continued)

           

UQM Technologies a,c

  50,000   $ 137,000

Precious Metals and Mining (continued)

           

Vishay Intertechnology a,c

  186,000     2,518,440

IAMGOLD Corporation

  300,620   $ 2,648,462  

Zebra Technologies Cl. A a,c

  76,525     2,662,305

International Coal Group a,c

  189,000     1,030,050          

Ivanhoe Mines a,c

  140,000     1,376,200             70,198,554

Meridian Gold a,c

  111,000     3,084,690          

Miramar Mining a

  245,000     1,107,400  

Distribution - 1.5%

         

Pan American Silver a,c

  41,000     1,031,970  

Agilysys

  165,125     2,764,192

QGX a

  30,000     47,078  

Anixter International a

  61,795     3,355,468

Randgold Resources ADR a,c

  53,000     1,243,380  

Benchmark Electronics a,c

  208,200     5,071,752

Stillwater Mining a,c

  10,780     134,642  

Solectron Corporation a,c

  1,070,100     3,445,722

Yamana Gold

  80,000     1,054,400  

Tech Data a,c

  86,500     3,275,755
       
         
          26,211,129             17,912,889
       
         

Real Estate - 1.4%

           

Internet Software and Services - 1.9%

         

Alico

  27,000     1,367,010  

Arbinet-thexchange a

  87,200     478,728

Consolidated-Tomoka Land

  13,564     982,034  

CMGI a,c

  1,535,000     2,056,900

Realogy Corporation a,c

  300,000     9,096,000  

CNET Networks a,c

  155,400     1,412,586

The St. Joe Company

  98,900     5,298,073  

CryptoLogic

  137,000     3,178,400
       
 

CyberSource Corporation a,c

  10,000     110,200
          16,743,117  

EarthLink a,c

  55,200     391,920
       
 

Internap Network Services a,c

  144,890     2,878,964

Other Natural Resources - 0.2%

           

j2 Global Communications a,c

  43,420     1,183,195

PICO Holdings a

  55,200     1,919,304  

Jupitermedia Corporation a,c

  500,000     3,960,000
       
 

Lionbridge Technologies a

  37,500     241,500

Total (Cost $71,041,325)

        121,453,760  

NetEase.com ADR a,c

  100,000     1,869,000
       
 

RealNetworks a,c

  245,400     2,684,676

Technology – 24.2%

           

S1 Corporation a

  5,054     27,848

Aerospace and Defense - 0.6%

           

SupportSoft a

  220,000     1,205,600

Allied Defense Group (The) a

  45,700     971,125          

Armor Holdings a,c

  11,410     625,839             21,679,517

Astronics Corporation a

  52,400     896,564          

Axsys Technologies a

  10,000     175,700  

IT Services - 4.1%

         

Ducommun a

  117,200     2,681,536  

answerthink a

  655,000     2,017,400

Hexcel Corporation a,c

  47,500     826,975  

BearingPoint a,c

  788,800     6,207,856

Integral Systems

  49,800     1,153,866  

Black Box

  47,000     1,973,530
       
 

CACI International Cl. A a,c

  10,000     565,000
          7,331,605  

CIBER a,c

  10,000     67,800
       
 

Cogent Communications Group a,c

  226,900     3,680,318

Components and Systems - 6.0%

           

Computer Task Group a

  101,100     480,225

Analogic Corporation

  40,135     2,253,179  

Covansys Corporation a

  188,900     4,335,255

Belden CDT

  57,800     2,259,402  

Diamond Management &

         

Checkpoint Systems a

  56,060     1,132,412  

Technology Consultants

  80,400     1,000,176

Dionex Corporation a

  81,000     4,593,510  

Forrester Research a

  40,300     1,092,533

Electronics for Imaging a,c

  25,000     664,500  

Gartner a

  126,000     2,493,540

Energy Conversion Devices a,c

  105,500     3,584,890  

Keane a

  468,000     5,573,880

Excel Technology a

  168,500     4,311,915  

MAXIMUS

  127,900     3,936,762

Hutchinson Technology a,c

  47,500     1,119,575  

Perot Systems Cl. A a,c

  165,100     2,705,989

Imation Corporation

  15,700     728,951  

Sapient Corporation a,c

  806,602     4,428,245

InFocus Corporation a

  228,100     609,027  

Syntel

  152,679     4,091,797

KEMET Corporation a

  95,600     697,880  

TriZetto Group (The) a,c

  215,200     3,953,224

Kronos a

  38,775     1,424,594          

Methode Electronics

  50,000     541,500             48,603,530

Newport Corporation a,c

  592,200     12,406,590          

On Track Innovations a,c

  40,000     276,200  

Semiconductors and Equipment - 3.6%

         

Perceptron a

  397,400     3,365,978  

Axcelis Technologies a

  135,000     787,050

Plexus Corporation a,c

  325,700     7,777,716  

BE Semiconductor Industries a

  58,000     341,620

Power-One a,c

  10,000     72,800  

Brooks Automation a,c

  28,500     410,400

REMEC

  143,387     189,271  

Cabot Microelectronics a

  131,200     4,452,928

Radiant Systems a,c

  32,500     339,300  

Catalyst Semiconductor a

  200     688

Richardson Electronics

  116,700     1,063,137  

CEVA a

  31,666     204,879

SafeNet a,c

  36,240     867,586  

Cognex Corporation

  197,700     4,709,214

TTM Technologies a

  221,400     2,508,462  

Conexant Systems a

  11,980     24,439

Technitrol

  311,200     7,434,568  

Credence Systems a,c

  53,600     278,720

Tektronix

  159,680     4,657,866  

DSP Group a

  115,000     2,495,500
             

DTS a

  64,100     1,550,579


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



DECEMBER 31, 2006



 


    SHARES     VALUE       SHARES     VALUE

Technology (continued)

           

Sycamore Networks a

  171,000   $ 642,960

Semiconductors and Equipment (continued)

           

Time Warner Telecom Cl. A a,c

  179,000     3,567,470

Diodes a,c

  167,900   $ 5,957,092  

Tollgrade Communications a

  20,000     211,400

Dolby Laboratories Cl. A a

  83,900     2,602,578  

USA Mobility

  97,500     2,181,075

Exar Corporation a,c

  231,976     3,015,688  

Vonage Holdings a

  100,000     694,000

Fairchild Semiconductor International a,c

  51,200     860,672          

International Rectifier a,c

  120,000     4,623,600             34,250,998

Intevac a

  57,450     1,490,827          

IXYS Corporation a

  10,000     89,000  

Total (Cost $209,667,396)

        285,682,412

Kulicke & Soffa Industries a,c

  105,800     888,720          

Novellus Systems a,c

  12,000     413,040  

Utilities – 0.2%

         

Pericom Semiconductor a

  58,000     665,260  

CH Energy Group

  44,500     2,349,600

Power Integrations a

  49,000     1,141,700  

Southern Union

  11,576     323,549

Sanmina-SCI Corporation a

  200,000     690,000          

Semitool a,c

  50,000     665,500  

Total (Cost $2,127,413)

        2,673,149

Staktek Holdings a

  184,700     951,205          

Veeco Instruments a,c

  65,000     1,217,450  

Miscellaneous e – 5.0%

         

Xilinx

  100,000     2,381,000  

Total (Cost $55,508,821)

        58,451,714
       
         
          42,909,349  

TOTAL COMMON STOCKS

         
       
 

(Cost $820,161,213)

        1,273,460,741

Software - 3.6%

                   

Advent Software a,c

  116,800     4,121,872  

PREFERRED STOCKS – 0.1%

         

ANSYS a

  50,000     2,174,500  

Aristotle Corporation 11.00% Conv.

  4,800     40,080

Aspen Technology a

  27,100     298,642  

Seneca Foods Conv. a

  300     7,020

Avid Technology a,c

  30,000     1,117,800  

Seneca Foods Conv. a,d

  85,000     1,858,950

BEA Systems a

  65,610     825,374          

Borland Software a,c

  270,000     1,468,800  

TOTAL PREFERRED STOCKS

         

Epicor Software a,c

  79,900     1,079,449  

(Cost $1,316,015)

        1,906,050

iPass a,c

  268,400     1,578,192          

JDA Software Group a,c

  99,900     1,375,623       PRINCIPAL      

MSC.Software a

  70,000     1,066,100       AMOUNT      

ManTech International Cl. A a

  119,400     4,397,502  

CORPORATE BONDS – 0.1%

         

NAVTEQ Corporation a,c

  70,000     2,447,900  

Dixie Group 7.00%

         

Net 1 UEPS Technologies a

  105,000     3,103,800  

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

  $397,000     379,135

PLATO Learning a,c

  149,642     809,563          

Progress Software a,c

  30,500     851,865  

TOTAL CORPORATE BONDS

         

SPSS a

  179,600     5,400,572  

(Cost $326,101)

        379,135

Sybase a,c

  82,600     2,040,220          

THQ a

  20,000     650,400  

REPURCHASE AGREEMENTS – 10.7%

         

Transaction Systems Architects Cl. A a,c

  203,150     6,616,596   State Street Bank & Trust Company,          

Verint Systems a,c

  40,000     1,371,200  

5.10% dated 12/29/06, due 1/2/07,

         
       
 

maturity value $46,292,217 (collateralized

         
          42,795,970  

by obligations of various U.S. Government

         
       
 

Agencies, valued at $47,426,931)

         

Telecommunications - 2.9%

           

(Cost $46,266,000)

        46,266,000

Adaptec a,c

  2,584,100     12,041,906          

ADTRAN

  65,000     1,475,500   Lehman Brothers (Tri-Party),          

Broadwing Corporation a

  1,000     15,620  

5.15% dated 12/29/06, due 1/3/07,

         

Catapult Communications a,c

  87,100     782,158  

maturity value $80,057,222 (collateralized

         

Covad Communications Group a,c

  35,000     48,300  

by obligations of various U.S. Government

         

Foundry Networks a,c

  373,400     5,593,532  

Agencies, valued at $81,650,071)

         

Globalstar a,c

  50,000     695,500  

(Cost $80,000,000)

        80,000,000

Globecomm Systems a

  233,700     2,058,897          

IDT Corporation a

  78,400     1,060,752  

TOTAL REPURCHASE AGREEMENTS

         

IDT Corporation Cl. B a,c

  65,000     850,200  

(Cost $126,266,000)

        126,266,000

Level 3 Communications a

  400,000     2,240,000          

PECO II a

  93,600     91,728              

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



ROYCE VALUE TRUST DECEMBER 31, 2006



Schedule of Investments


    PRINCIPAL        
    AMOUNT     VALUE  

COLLATERAL RECEIVED FOR SECURITIES
LOANED – 9.1%

             
U.S. Treasury Bonds              

5.25%-8.125% due 8/15/19-2/15/29

    $155,067   $ 158,240  
Money Market Funds              

State Street Navigator Securities Lending

             

Prime Portfolio (7 day yield-5.25%)

          108,178,797  
         
 

TOTAL COLLATERAL RECEIVED FOR
SECURITIES LOANED

             

(Cost $108,337,037)

          108,337,037  
         
 

TOTAL INVESTMENTS – 127.9%

             

(Cost $1,056,406,366)

          1,510,348,963  
               

LIABILITIES LESS CASH
AND OTHER ASSETS – (9.3)%

          (109,921,400 )
               

PREFERRED STOCK – (18.6)%

          (220,000,000 )
         
 

NET ASSETS APPLICABLE TO
COMMON STOCKHOLDERS – 100.0%

        $ 1,180,427,563  
         
 


a   Non-income producing.
     
b   At December 31, 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   All or a portion of these securities were on loan at December 31, 2006. Total market value of loaned securities at December 31, 2006 was $104,771,383.
     
d   Securities for which market quotations are no longer readily available represent 0.2% of net assets. These securities have been valued at their fair value under procedures established by the Fund’s Board of Directors.
     
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 December 31, 2006 market value.
     
INCOME TAX INFORMATION: The cost of total investments for Federal income tax purposes was $1,059,579,730. At December 31, 2006, net unrealized appreciation for all securities was $450,769,233, consisting of aggregate gross unrealized appreciation of $486,963,015 and aggregate gross unrealized depreciation of $36,193,782. The primary difference in book and tax basis cost is the timing of the recognition of losses on securities sold.



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



ROYCE VALUE TRUST DECEMBER 31, 2006



Statement of Assets and Liabilities



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

Non-Affiliates (cost $928,342,916)

  $ 1,377,721,163  

Affiliated Companies (cost $1,797,450)

    6,361,800  

Total investments at value     1,384,082,963  
Repurchase agreements (at cost and value)     126,266,000  
Cash     4,218,269  
Receivable for investments sold     163,233  
Receivable for dividends and interest     960,473  
Prepaid expenses and other assets     185,168  

Total Assets

    1,515,876,106  

LIABILITIES:        
Payable for collateral on loaned securities     108,337,037  
Payable for investments purchased     5,359,899  
Payable for investment advisory fee     1,205,995  
Preferred dividends accrued but not yet declared     288,453  
Accrued expenses     257,159  

Total Liabilities

    115,448,543  

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   $ 1,180,427,563  

ANALYSIS OF NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS:        
Common Stock paid-in capital - $0.001 par value per share; 57,258,821 shares outstanding (150,000,000 shares authorized)   $ 715,035,482  
Undistributed net investment income (loss)     (1,605,284 )
Accumulated net realized gain (loss) on investments and foreign currency     13,346,011  
Net unrealized appreciation (depreciation) on investments and foreign currency     453,939,803  
Preferred dividends accrued but not yet declared     (288,449 )

Net Assets applicable to Common Stockholders (net asset value per share - $20.62)

  $ 1,180,427,563  

*Investments at identified cost (including $108,337,037 of collateral on loaned securities)   $ 930,140,366  

Market value of loaned securities   $ 104,771,383  


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



ROYCE VALUE TRUST YEAR ENDED DECEMBER 31, 2006



Statement of Operations



INVESTMENT INCOME:        
Income:        

Dividends*

       

Non-Affiliates

  $ 10,707,136  

Interest

    10,258,813  

Securities lending

    477,117  

Total income     21,443,066  

Expenses:        

Investment advisory fees

    13,401,430  

Stockholder reports

    434,669  

Custody and transfer agent fees

    222,874  

Directors’ fees

    118,181  

Administrative and office facilities expenses

    104,740  

Professional fees

    58,230  

Other expenses

    114,509  

Total expenses     14,454,633  
Compensating balance credits     (8,259 )

Net expenses     14,446,374  

Net investment income (loss)     6,996,692  

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:        
Net realized gain (loss) on investments and foreign currency        

Non-Affiliates

    109,962,913  

Affiliated Companies

    206,529  
Net change in unrealized appreciation (depreciation) on investments and foreign currency     93,033,099  

Net realized and unrealized gain (loss) on investments and foreign currency     203,202,541  

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM INVESTMENT OPERATIONS     210,199,233  

DISTRIBUTIONS TO PREFERRED STOCKHOLDERS     (12,980,000 )

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

RESULTING FROM INVESTMENT OPERATIONS

  $ 197,219,233  

*Net of foreign withholding tax of $86,148.        


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



ROYCE VALUE TRUST  



Statement of Changes in Net Assets




      Year ended         Year ended  
      12/31/06         12/31/05  

INVESTMENT OPERATIONS:                  
Net investment income (loss)   $ 6,996,692       $ 321,412  
Net realized gain (loss) on investments and foreign currency     110,169,442         99,178,811  
Net change in unrealized appreciation (depreciation) on investments and foreign currency     93,033,099         (4,983,024 )

Net increase (decrease) in net assets resulting from investment operations     210,199,233         94,517,199  

DISTRIBUTIONS TO PREFERRED STOCKHOLDERS:                  
Net investment income     (1,020,228 )        
Net realized gain on investments and foreign currency     (11,959,772 )       (12,980,000 )

Total distributions to Preferred Stockholders     (12,980,000 )       (12,980,000 )

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

RESULTING FROM INVESTMENT OPERATIONS

    197,219,233         81,537,199  

DISTRIBUTIONS TO COMMON STOCKHOLDERS:                  
Net investment income     (7,788,658 )        
Net realized gain on investments and foreign currency     (91,303,684 )       (85,780,292 )

Total distributions to Common Stockholders     (99,092,342 )       (85,780,292 )

CAPITAL STOCK TRANSACTIONS:                  
Reinvestment of distributions to Common Stockholders     50,180,586         43,058,750  

Total capital stock transactions     50,180,586         43,058,750  

NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS     148,307,477         38,815,657  

NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS:                  

Beginning of year

    1,032,120,086         993,304,429  

End of year (including undistributed net investment income (loss) of $(1,605,284) at 12/31/06

                 

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

  $ 1,180,427,563       $ 1,032,120,086  


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

    Years ended December 31,
   
      2006       2005       2004       2003       2002  

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

INVESTMENT OPERATIONS:                                        

Net investment income (loss)

    0.13       0.01       (0.08 )     (0.05 )     (0.02 )

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

    3.63       1.75       3.81       5.64       (2.25 )

Total investment operations

    3.76       1.76       3.73       5.59       (2.27 )

DISTRIBUTIONS TO PREFERRED STOCKHOLDERS:                                        

Net investment income

    (0.02 )                       (0.01 )

Net realized gain on investments and foreign currency

    (0.21 )     (0.24 )     (0.26 )     (0.26 )     (0.28 )

Total distributions to Preferred Stockholders

    (0.23 )     (0.24 )     (0.26 )     (0.26 )     (0.29 )

NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON                                        

STOCKHOLDERS RESULTING FROM INVESTMENT OPERATIONS

    3.53       1.52       3.47       5.33       (2.56 )

DISTRIBUTIONS TO COMMON STOCKHOLDERS:                                        

Net investment income

    (0.14 )                       (0.07 )

Net realized gain on investments and foreign currency

    (1.64 )     (1.61 )     (1.55 )     (1.30 )     (1.44 )

Total distributions to Common Stockholders

    (1.78 )     (1.61 )     (1.55 )     (1.30 )     (1.51 )

CAPITAL STOCK TRANSACTIONS:                                        

Effect of reinvestment of distributions by Common Stockholders

    (0.00 )     0.01       0.00       (0.00 )     (0.02 )

Effect of rights offering and Preferred Stock offering

                      (0.22 )      

Total capital stock transactions

    (0.00 )     0.01       0.00       (0.22 )     (0.02 )

NET ASSET VALUE, END OF PERIOD   $20.62     $18.87     $18.95     $17.03     $13.22  

MARKET VALUE, END OF PERIOD   $22.21     $20.08     $20.44     $17.21     $13.25  

TOTAL RETURN (a):                                        
Market Value     20.96 %     6.95 %     29.60 %     41.96 %     (6.87 )%
Net Asset Value     19.50 %     8.41 %     21.42 %     40.80 %     (15.61 )%
RATIOS BASED ON AVERAGE NET ASSETS APPLICABLE TO                                        

COMMON STOCKHOLDERS:

                                       
Total expenses (b,c)     1.29 %     1.49 %     1.51 %     1.49 %     1.72 %

Management fee expense (d)

    1.20 %     1.37 %     1.39 %     1.34 %     1.56 %

Other operating expenses

    0.09 %     0.12 %     0.12 %     0.15 %     0.16 %
Net investment income (loss)     0.62 %     0.03 %     (0.50 )%     (0.36 )%     (0.09 )%
SUPPLEMENTAL DATA:                                        
Net Assets Applicable to Common Stockholders,                                        

End of Period (in thousands)

  $ 1,180,428     $ 1,032,120     $ 993,304     $ 850,773     $ 560,776  
Liquidation Value of Preferred Stock,                                        

End of Period (in thousands)

  $ 220,000     $ 220,000     $ 220,000     $ 220,000     $ 160,000  
Portfolio Turnover Rate     21 %     31 %     30 %     23 %     35 %
PREFERRED STOCK:                                        
Total shares outstanding     8,800,000       8,800,000       8,800,000       8,800,000       6,400,000  
Asset coverage per share   $159.14     $142.29     $137.88     $121.68     $112.62  
Liquidation preference per share   $25.00     $25.00     $25.00     $25.00     $25.00  
Average market value per share (e):                                        

5.90% Cumulative

  $23.95     $24.75     $24.50     $25.04        

7.80% Cumulative

                    $25.87     $26.37  

7.30% Tax-Advantaged Cumulative

                    $25.53     $25.82  

(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 1.08%, 1.22%, 1.21%, 1.19% and 1.38% for the periods ended December 31, 2006, 2005, 2004, 2003 and 2002, 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% and 1.82% for the periods ended December 31, 2003 and 2002, 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 the average net assets applicable to Common Stockholders over a 12-month basis.
(e)   The average of month-end market values during the period that the Preferred Stock was outstanding.

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




ROYCE VALUE TRUST DECEMBER 31, 2006



   Notes to Financial Statements


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, and securities traded on Nasdaq’s Electronic Bulletin Board, are valued at their last reported sales price or Nasdaq official closing price taken from the primary market in which each security trades or, if no sale is reported for such day, at their bid price. Other over-the-counter securities for which market quotations are readily available are valued at their highest bid price. 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.

Foreign Currency:
      The Fund does not isolate that portion of the results of operations which result from changes in foreign exchange rates on investments from the portion arising from changes in market prices of securities held. Such fluctuations are included with net realized and unrealized gains and losses on investments.
      Net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, expiration of currency forward contracts, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books, and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities, including investments in securities at fiscal year end, as a result of changes in the exchange rates.


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 on the ex-dividend date at the fair market value of the securities received. Interest income is recorded on an accrual basis. Premium and discounts on debt securities are amortized using the effective yield to maturity method. Realized gains and losses from investment transactions are determined on the basis of identified cost for book and tax purposes.
 
Expenses:
      The Fund incurs direct and indirect expenses. Expenses directly attributable to the Fund are charged to the Fund’s operations, while expenses applicable to more than one of the Royce Funds are allocated 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 and distributions to Common Stockholders are recorded on ex-dividend date. 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

2006 ANNUAL REPORT TO STOCKHOLDERS  |  31




ROYCE VALUE TRUST  



   Notes to Financial Statements (continued)


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.

New Accounting Pronouncements:
      On July 13, 2006, the Financial Accounting Standards Board (“FASB”) released FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is required to be implemented no later than the Fund’s June 29, 2007 NAV calculation and is to be applied to all open tax years as of the effective date. At this time, management is evaluating the implications of FIN 48 and its impact in the financial statements has not yet been determined.
      On September 15, 2006, the FASB released Statement of Financial Accounting Standards No. 157, “Fair Value Measurement” (“FAS 157”) which provides enhanced guidance for using fair value to measure assets and liabilities. The standard requires companies to provide expanded information about the assets and liabilities measured at fair value and the potential effect of these fair valuations on an entity’s financial performance. The standard does not expand the use of fair value in any new circumstances, but provides clarification on acceptable fair valuation methods and applications. Adoption of FAS 157 is required for fiscal years beginning after November 15, 2007. The standard is not expected to materially impact the Fund’s financial statements.

Capital Stock:
      The Fund issued 2,548,023 and 2,294,908 shares of Common Stock as reinvestment of distributions by Common Stockholders for the years ended December 31, 2006 and 2005, respectively.
      At December 31, 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.

32  |  2006 ANNUAL REPORT TO STOCKHOLDERS




  DECEMBER 31, 2006



 


      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 twelve rolling 60-month periods ending December 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 $10,218,393 and an upward adjustment of $3,183,037 for performance of the Fund above that of the S&P 600. For the year ended December 31, 2006, the Fund accrued and paid Royce advisory fees totaling $13,401,430.

Distributions to Stockholders:
      The tax character of distributions paid to stockholders during 2006 and 2005 was as follows:


Distributions paid from:     2006       2005  
Ordinary income   $ 24,577,545     $ 11,811,731  
Long-term capital gain     87,494,797       86,948,561  
   
    $ 112,072,342     $ 98,760,292  

      As of December 31, 2006, the tax basis components of distributable earnings included in stockholders’ equity were as follows:


Undistributed long-term capital gain   $ 14,955,604  
Unrealized appreciation     450,766,439  
Post October currency loss*     (41,513 )
Accrued preferred distributions     (288,449 )
   
    $ 465,392,081  


     *Under current tax law, capital and currency losses realized after October 31, and prior to the Fund’s fiscal year end, may be deferred as occurring on the first day of the following year.

   
 

     The difference between book basis and tax basis unrealized appreciation is attributable primarily to the tax deferral on wash sales and the unrealized gains on investments in Passive Foreign Investment Companies.

 


     For financial reporting purposes, capital accounts and distributions to stockholders are adjusted to reflect the tax character of permanent book / tax differences. These differences are primarily due to differing treatments of income and gains on various investment securities and foreign currency transactions held by the Fund, timing differences and different characterization of distributions made by the Fund. For the year ended December 31, 2006, the Fund recorded the following permanent reclassifications, which relate primarily to the current net operating losses. Results of operations and net assets were not affected by these reclassifications.



Undistributed       Accumulated        
Net Investment       Net Realized       Paid-in
Income       Gain (Loss)       Capital

     
     
$(114,502)       $(417,617)       $532,119


Purchases and Sales of Investment Securities:
     For the year ended December 31, 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 $246,066,275 and $259,146,868, 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 at any time during the period. The Fund effected the following transactions in shares of such companies during the year ended December 31, 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   12/31/06   12/31/06

Peerless Manufacturing**     158,600     $ 2,775,500           $ 38,275     $ 206,529                        
Synalloy Corporation     345,000       3,610,080                               345,000     $ 6,361,800  

            $ 6,385,580                     $ 206,529                   $ 6,361,800  

**Not an Affiliated Company at December 31, 2006.

2006 ANNUAL REPORT TO STOCKHOLDERS | 33




ROYCE VALUE TRUST



   Report of Independent Registered Public Accounting Firm


To the Board of Directors and Stockholders of
Royce Value Trust, Inc.
New York, New York

We have audited the accompanying statement of assets and liabilities of Royce Value Trust, Inc. (“ Fund”) including the schedule of investments, as of December 31, 2006, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2006 by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Royce Value Trust, Inc. as of December 31, 2006, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.


    TAIT, WELLER & BAKER LLP              
     
Philadelphia, Pennsylvania    
February 12, 2007    

  34  | 2006 ANNUAL REPORT TO STOCKHOLDERS




ROYCE MICRO-CAP TRUST DECEMBER 31, 2006

 

Schedule of Investments


      SHARES     VALUE         SHARES     VALUE

COMMON STOCKS – 110.1%

               

California Pizza Kitchen a,c

    2,100     $ 69,951

Consumer Products – 5.6%

               

Champps Entertainment a

    10,000       69,500

Apparel and Shoes - 2.5%

               

Famous Dave’s of America a

    44,470       732,421

Bluefly a,c

    400,000     $ 512,000              

Delta Apparel

    129,300       2,209,737                 896,432

Hartmarx Corporation a

    70,000       494,200              

Jos. A. Bank Clothiers a,c

    3,100       90,985  

Retail Stores - 4.3%

             

Kleinert’s a,d

    14,200       0  

A.C. Moore Arts & Crafts a

    45,600       988,152

Steven Madden

    21,750       763,208  

America’s Car-Mart a,c

    182,000       2,158,520

Shoe Pavilion a

    123,300       906,255  

Buckle (The)

    25,500       1,296,675

Stride Rite

    10,000       150,800  

Cache a

    3,200       80,768

True Religion Apparel a,c

    26,800       410,308  

Casual Male Retail Group a

    2,000       26,100

Weyco Group

    120,000       2,982,000  

Cato Corporation Cl. A

    71,850       1,646,084
           
 

Cost Plus a,c

    45,077       464,293
              8,519,493  

Deb Shops

    19,900       525,360
           
 

Fred’s Cl. A

    7,500       90,300

Collectibles - 0.4%

               

Gottschalks a,c

    50,000       574,000

Topps Company (The)

    148,500       1,321,650  

PriceSmart a,c

    51,916       929,816
           
 

Shoe Carnival a,c

    11,000       347,600

Food/Beverage/Tobacco - 0.3%

               

Stein Mart

    148,900       1,974,414

Green Mountain Coffee Roasters a,c

    25,600       1,260,288  

Trans World Entertainment a,c

    65,000       427,700

Nutrition 21 a,c

    20,000       34,000  

United Retail Group a

    60,600       849,612
           
 

West Marine a,c

    142,000       2,452,340
              1,294,288  

Wild Oats Markets a

    3,000       43,140
           
             

Home Furnishing and Appliances - 0.2%

                              14,874,874

Lifetime Brands

    42,054       690,947              
           
 

Other Consumer Services - 0.4%

             

Publishing - 0.1%

               

Ambassadors Group

    15,000       455,250

Educational Development

    10,600       75,790  

Ambassadors International

    6,100       278,282
           
 

Autobytel a,c

    20,000       70,000

Sports and Recreation - 0.9%

               

Cash America International

    1,500       70,350

Monaco Coach

    142,400       2,016,384  

Collectors Universe

    11,700       156,780

National R.V. Holdings a

    31,800       117,342  

Premier Exhibitions a,c

    60,000       375,000

Orange 21 a,c

    10,300       50,779  

Renaissance Learning

    2,365       41,931

Sturm, Ruger & Company a,c

    95,000       912,000              
           
                1,447,593
              3,096,505              
           
 

Total (Cost $13,764,081)

            19,676,024

Other Consumer Products - 1.2%

                           

Burnham Holdings Cl. A

    79,500       1,311,750  

Diversified Investment Companies – 1.9%

             

Cobra Electronics

    10,000       95,600  

Closed-End Funds - 1.9%

             

A.T. Cross Company Cl. A a

    100,000       760,000  

ASA Bermuda

    73,300       4,732,248

JAKKS Pacific a

    25,000       546,000  

Central Fund of Canada Cl. A

    207,000       1,933,380

Lazare Kaplan International a

    151,700       1,509,415              

Sonic Solutions a,c

    4,000       65,200  

Total (Cost $3,571,777)

            6,665,628
           
             
              4,287,965  

Financial Intermediaries – 10.1%

             
           
 

Banking - 3.3%

             

Total (Cost $12,408,469)

            19,286,638  

Abigail Adams National Bancorp

    160,500       2,166,750
           
 

Arrow Financial

    14,751       365,382

Consumer Services – 5.7%

               

Bancorp (The) a,c

    51,380       1,520,848

Direct Marketing - 0.3%

               

Endeavour Mining Capital

    150,000       913,262

Dover Saddlery a

    9,500       81,415  

First National Lincoln

    40,200       673,350

FTD Group a

    55,000       983,950  

Lakeland Financial

    45,000       1,148,850

ValueVision Media Cl. A a

    5,000       65,700  

Meta Financial Group

    44,800       1,335,040
           
 

Nexity Financial a

    96,400       1,156,800
              1,131,065  

Peapack-Gladstone Financial

    27,600       775,560
           
 

Queen City Investments

    948       857,940

Leisure and Entertainment - 0.1%

               

Quest Capital

    30,000       77,434

FortuNet a,c

    9,600       97,152  

Sterling Bancorp

    22,869       450,519

IMAX Corporation a,c

    25,000       94,000              

Multimedia Games a

    5,000       48,000                 11,441,735

Progressive Gaming International a

    9,500       86,165              

Singing Machine (The) a

    5,000       3,450  

Insurance - 2.1%

             

TiVo a,c

    20,000       102,400  

American Safety Insurance Holdings a

    20,000       371,000
           
   
              431,167  
           
 

Media and Broadcasting - 0.3%

               

Outdoor Channel Holdings a,c

    69,750       894,893  
           
 

Restaurants and Lodgings - 0.3%

               

Benihana Cl. A a

    800       24,560  

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



ROYCE MICRO-CAP TRUST  

 

Schedule of Investments


      SHARES       VALUE         SHARES       VALUE

Financial Intermediaries (continued)

               

Barrier Therapeutics a,c

    11,300     $ 85,202

Insurance (continued)

               

Cambrex Corporation

    16,000       363,520

First Acceptance a

    258,405     $ 2,770,102  

Caraco Pharmaceutical Laboratories a,c

    148,150       2,074,100

Independence Holding

    33,534       732,047  

Cardiome Pharma a,c

    23,400       260,910

NYMAGIC

    65,400       2,393,640  

Cell Genesys a

    58,000       196,620

Navigators Group a

    17,200       828,696  

Cerus Corporation a

    162,200       950,492
           
 

CollaGenex Pharmaceuticals a,c

    25,000       349,250
              7,095,485  

Cytokinetics a,c

    5,000       37,400
           
 

Dendreon Corporation a,c

    11,400       47,538

Real Estate Investment Trusts - 0.7%

               

Draxis Health a

    15,000       72,450

Capstead Mortgage

    154,900       1,285,670  

Durect Corporation a

    44,100       195,804

Opteum Cl. A

    149,000       1,132,400  

DUSA Pharmaceuticals a,c

    36,700       157,810
           
 

Dyax Corporation a,c

    15,000       45,450
              2,418,070  

Emisphere Technologies a,c

    163,200       863,328
           
 

Favrille a,c

    231,000       577,500

Securities Brokers - 1.8%

               

Gene Logic a

    234,479       361,098

Cowen Group a

    63,800       1,349,370  

Genitope Corporation a,c

    291,700       1,026,784

First Albany Companies a

    95,000       220,400  

Halozyme Therapeutics a

    20,000       161,000

International Assets Holding a,c

    106,200       3,049,002  

Hi-Tech Pharmacal a

    96,630       1,175,987

Sanders Morris Harris Group

    21,000       268,170  

Idenix Pharmaceuticals a,c

    5,000       43,450

Stifel Financial a,c

    21,233       832,971  

ImmunoGen a

    44,000       223,080

Thomas Weisel Partners Group a

    6,500       137,150  

Infinity Pharmaceuticals a

    8,750       108,938

Tradestation Group a,c

    30,000       412,500  

Lannett Company a

    56,100       350,625
           
 

Lifecore Biomedical a,c

    22,900       408,307
              6,269,563  

Mannkind Corporation a,c

    42,000       692,580
           
 

Maxygen a

    5,000       53,850

Other Financial Intermediaries - 2.2%

               

Micromet a,c

    14,333       42,999

Electronic Clearing House a,c

    20,000       368,000  

Momenta Pharmaceuticals a

    65,000       1,022,450

Kohlberg Capital a

    84,900       1,468,770  

Myriad Genetics a,c

    25,000       782,500

MVC Capital

    211,200       2,821,632  

Nabi Biopharmaceuticals a

    5,000       33,900

MarketAxess Holdings a

    123,700       1,678,609  

Nastech Pharmaceutical a,c

    2,700       40,851

NGP Capital Resources

    58,600       981,550  

Neurogen Corporation a

    40,000       238,000
           
 

Nuvelo a

    131,500       526,000
              7,318,561  

Oncolytics Biotech a,c

    41,000       85,280
           
 

Orchid Cellmark a,c

    78,000       241,800

Total (Cost $23,258,455)

            34,543,414  

Origin Agritech a

    70,300       769,082
           
 

Pharmacyclics a

    98,000       496,860

Financial Services – 3.6%

               

Pharmanet Development Group a,c

    25,000       551,750

Insurance Brokers - 0.1%

               

Poniard Pharmaceuticals a,c

    17,300       86,500

Crawford & Company Cl. A

    50,000       299,500  

Sangamo BioSciences a,c

    21,000       138,600
           
 

Seattle Genetics a,c

    170,000       906,100

Investment Management - 3.0%

               

Senesco Technologies a,c

    25,000       27,500

ADDENDA Capital

    88,000       1,766,565  

Senomyx a,c

    47,000       610,530

BKF Capital Group a

    406,500       1,361,775  

Tapestry Pharmaceuticals a,c

    483,000       966,000

Epoch Holding Corporation a

    218,300       2,169,902  

Tercica a

    7,900       39,500

Hennessy Advisors

    16,500       379,500  

Theragenics Corporation a

    145,800       451,980

Highbury Financial a,b,c

    580,400       3,383,732  

TorreyPines Therapeutics a

    6,250       46,125

Highbury Financial (Warrants) a

    533,900       880,935  

Trimeris a,c

    85,000       1,080,350

Rockwater Capital a

    50,000       221,670              
           
                21,915,454
              10,164,079              
           
 

Health Services - 2.2%

             

Other Financial Services - 0.5%

               

ATC Healthcare Cl. A a

    35,000       11,900

Chardan North China Acquisition a,c

    106,600       923,156  

Albany Molecular Research a

    40,000       422,400

Chardan North China Acquisition

               

Bio-Imaging Technologies a

    35,277       284,333

(Warrants) a

    148,000       532,800  

Encorium Group a,c

    25,000       132,750

MicroFinancial

    10,000       38,900  

Gentiva Health Services a

    23,000       438,380

Stone Arcade Acquisition a,c

    62,000       394,320  

HMS Holdings a

    11,900       180,285
           
 

Health Grades a

    107,100       480,879
              1,889,176  

Healthcare Services Group

    2,800       81,088
           
                 

Total (Cost $10,446,520)

            12,352,755                  
           
                 

Health – 16.9%

                               

Commercial Services - 2.1%

                               

First Consulting Group a

    274,700       3,779,872                  

PAREXEL International a,c

    121,400       3,516,958                  
           
                 
              7,296,830                  
           
                 

Drugs and Biotech - 6.4%

                               

Adolor Corporation a,c

    125,000       940,000                  

Allos Therapeutics a,c

    153,600       897,024                  

Alnylam Pharmaceuticals a,c

    500       10,700                  


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



  DECEMBER 31, 2006

 

 


      SHARES       VALUE         SHARES       VALUE

Health (continued)

               

Nutraceutical International a

    15,000     $ 229,650

Health Services (continued)

                           

Hooper Holmes a

    88,600     $ 293,266                 905,497

Horizon Health a

    50,000       978,500              

MedCath Corporation a

    18,000       492,480  

Total (Cost $43,945,491)

            57,996,174

Mediware Information Systems a

    63,800       533,368              

National Medical Health Card Systems a,c

    84,900       1,002,669  

Industrial Products – 14.9%

             

On Assignment a

    41,100       482,925  

Automotive - 1.0%

             

Quovadx a

    5,000       14,100  

International Textile Group a,c

    75,000       926,250

RehabCare Group a

    22,000       326,700  

LKQ Corporation a,c

    11,400       262,086

Res-Care a

    41,000       744,150  

Noble International

    41,600       834,080

Sun Healthcare Group a,c

    51,000       644,130  

Spartan Motors

    4,200       63,756

U.S. Physical Therapy a

    10,000       122,500  

Strattec Security a

    28,300       1,318,780
           
 

Wescast Industries Cl. A

    12,900       125,554
              7,666,803              
           
                3,530,506

Medical Products and Devices - 5.9%

                           

Adeza Biomedical a,c

    23,200       345,912  

Building Systems and Components - 1.0%

             

Allied Healthcare Products a

    273,500       1,413,995  

AAON

    63,700       1,674,036

AngioDynamics a

    14,000       300,860  

Craftmade International

    26,200       470,552

Anika Therapeutics a

    24,000       318,480  

Flanders Corporation a,c

    1,500       14,850

Bruker BioSciences a

    135,200       1,015,352  

LSI Industries

    63,812       1,266,668

Caliper Life Sciences a

    52,400       299,728  

Modtech Holdings a

    3,800       18,810

Cardiac Science a

    29,947       241,672              

CONMED Corporation a

    3,900       90,168                 3,444,916

Cutera a

    27,300       737,100              

Del Global Technologies a

    168,279       260,832  

Construction Materials - 1.8%

             

EPIX Pharmaceuticals a,c

    32,666       225,395  

Ash Grove Cement

    8,000       1,696,000

Endologix a,c

    10,500       36,750  

Monarch Cement

    50,410       1,638,325

Exactech a,c

    114,100       1,623,643  

Synalloy Corporation a

    161,000       2,968,840

IRIDEX Corporation a

    49,700       440,839              

Kensey Nash a,c

    24,250       771,150                 6,303,165

Langer a

    7,100       32,589              

Medical Action Industries a

    83,500       2,692,040  

Industrial Components - 2.1%

             

Merit Medical Systems a,c

    5,700       90,288  

American Superconducter a,c

    52,000       510,120

Microtek Medical Holdings a

    89,120       409,952  

Bel Fuse Cl. A

    55,200       1,665,384

Minrad International a

    6,800       37,128  

C & D Technologies c

    53,000       251,220

Molecular Devices a,c

    25,500       537,285  

Deswell Industries

    105,300       1,200,420

NMT Medical a

    12,000       162,360  

Gerber Scientific a,c

    50,500       634,280

Neurometrix a,c

    21,500       320,565  

Ladish Company a

    10,000       370,800

Orthofix International a

    28,000       1,400,000  

Plug Power a,c

    1,370       5,329

OrthoLogic Corporation a

    84,000       120,120  

Powell Industries a

    49,800       1,572,186

PLC Systems a

    105,200       64,172  

Tech/Ops Sevcon

    76,200       598,170

Possis Medical a,c

    28,900       389,572  

II-VI a

    20,000       558,800

Restore Medical a,c

    13,600       57,256              

Shamir Optical Industry a

    7,500       63,750                 7,366,709

Sirona Dental Systems

    25,000       962,750              

STAAR Surgical a

    5,000       35,050  

Machinery - 2.9%

             

Synergetics USA a,c

    5,000       21,850  

Alamo Group

    38,600       905,556

Syneron Medical a,c

    2,000       54,260  

Astec Industries a,c

    40,200       1,411,020

Synovis Life Technologies a,c

    23,000       228,850  

Gorman-Rupp Company

    4,218       155,939

Urologix a,c

    415,500       968,115  

Hardinge

    87,000       1,310,220

Utah Medical Products

    42,300       1,395,477  

Hurco Companies a

    33,900       1,077,342

Young Innovations

    61,450       2,046,285  

Keithley Instruments

    14,000       184,100
           
 

K-Tron International a

    11,000       821,370
              20,211,590  

LeCroy Corporation a

    2,000       23,020
           
 

MTS Systems

    10,000       386,200

Personal Care - 0.3%

               

Mueller (Paul) Company

    9,650       371,525

CCA Industries

    9,040       104,322  

Sun Hydraulics

    38,950       798,864

Helen of Troy a,c

    20,000       485,200  

T-3 Energy Services a

    4,912       108,310

Nature’s Sunshine Products

    7,500       86,325  

Tennant Company

    88,200       2,557,800
                             
                                10,111,266
                             
                 

Metal Fabrication and Distribution - 1.9%

             
                 

Encore Wire a,c

    15,000       330,150
                 

Harris Steel Group

    50,000       1,864,683
                 

Haynes International a

    26,770       1,418,810
                 

Insteel Industries

    30,900       549,711

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



ROYCE MICRO-CAP TRUST  

 

Schedule of Investments


      SHARES       VALUE         SHARES       VALUE

Industrial Products (continued)

               

Devcon International a

    21,700     $ 121,303

Metal Fabrication and Distribution (continued)

               

Exponent a

    136,600       2,548,956

NN

    114,300     $ 1,420,749  

Insituform Technologies Cl. A a,c

    75,300       1,947,258

Novamerican Steel a

    3,500       127,750  

Nobility Homes

    2,000       52,880

Universal Stainless & Alloy Products a

    22,730       761,000  

Skyline Corporation

    32,100       1,291,062
           
             
              6,472,853                 6,361,779
           
             

Paper and Packaging - 0.1%

               

Food and Tobacco Processors - 1.4%

             

Mod-Pac Corporation a

    23,200       255,200  

Cal-Maine Foods

    50,000       429,000
           
 

Farmer Bros.

    23,700       505,995

Pumps, Valves and Bearings - 0.3%

               

Galaxy Nutritional Foods a

    334,800       174,096

CIRCOR International

    28,000       1,030,120  

ML Macadamia Orchards L.P.

    120,200       734,422
           
 

Omega Protein a

    9,600       74,208

Specialty Chemicals and Materials - 1.9%

               

Seneca Foods Cl. A a

    62,500       1,518,750

Aceto Corporation

    384,619       3,323,108  

Seneca Foods Cl. B a

    42,500       1,032,750

American Vanguard

    3,333       52,995  

Sunopta a,c

    40,580       357,104

Balchem Corporation

    22,500       577,800              

Hawkins

    122,667       1,754,138                 4,826,325

NuCo2 a,c

    20,000       491,800              

Park Electrochemical

    10,000       256,500  

Industrial Distribution - 0.6%

             
           
 

Central Steel & Wire

    1,088       658,240
              6,456,341  

Elamex a

    60,200       39,130
           
 

Lawson Products

    19,500       894,855

Textiles - 0.1%

               

Strategic Distribution a

    59,690       607,644

Unifi a

    100,000       245,000              
           
                2,199,869

Other Industrial Products - 1.8%

                           

Basin Water a,c

    7,800       52,806  

Printing - 1.1%

             

Color Kinetics a

    50,000       1,067,500  

American Bank Note Holographics a

    242,200       663,628

Distributed Energy Systems a

    59,000       212,400  

Bowne & Co.

    66,500       1,060,010

Eastern Company (The)

    39,750       770,753  

Champion Industries

    23,500       201,865

Maxwell Technologies a

    15,300       213,435  

Courier Corporation

    22,950       894,362

Peerless Manufacturing a

    42,200       1,041,496  

Ennis

    9,700       237,262

Quixote Corporation

    35,500       698,285  

Schawk

    38,900       760,106

Raven Industries

    73,000       1,956,400              
           
                3,817,233
              6,013,075              
           
 

Transportation and Logistics - 2.3%

             

Total (Cost $30,813,011)

            51,229,151  

ABX Air a

    191,300       1,325,709
           
 

Dynamex a,c

    26,050       608,528

Industrial Services – 12.8%

               

Forward Air

    50,700       1,466,751

Advertising and Publishing - 0.5%

               

Frozen Food Express Industries

    92,000       791,200

Greenfield Online a,c

    20,000       286,000  

MAIR Holdings a,c

    8,600       61,662

MDC Partners Cl. A a

    87,300       646,020  

Marten Transport a,c

    4,050       74,236

NetRatings a,c

    50,000       875,500  

Pacific CMA a

    200,000       58,000
           
 

Patriot Transportation Holding a

    3,000       280,080
              1,807,520  

Universal Truckload Services a

    134,200       3,187,250
           
 

Vitran Corporation Cl. A a

    8,000       138,960

Commercial Services - 4.6%

                           

Acquicor Technology (Units) a

    205,000       1,486,250                 7,992,376

BB Holdings a

    390,000       1,126,340              

CBIZ a,c

    87,000       606,390  

Other Industrial Services - 0.4%

             

Carlisle Group a

    151,000       301,571  

Landauer

    21,300       1,117,611

CorVel Corporation a

    40,125       1,908,746  

Team a

    2,200       76,626

eResearch Technology a,c

    185,000       1,245,050              

Geo Group (The) a

    76,800       2,881,536                 1,194,237

Global Sources a

    47,800       849,884              

Kforce a,c

    55,000       669,350  

Total (Cost $24,631,448)

            43,877,079

PDI a

    10,200       103,530              

RCM Technologies a

    1,000       5,990  

Natural Resources – 9.4%

             

SM&A a

    31,300       181,540  

Energy Services - 4.3%

             

TRC Companies a,c

    64,200       554,046  

Calfrac Well Services

    1,000       18,951

Volt Information Sciences a

    35,200       1,767,392  

Carbo Ceramics

    18,750       700,688

Westaff a

    362,500       1,990,125  

Conrad Industries a

    115,000       701,500
           
 

Dawson Geophysical a

    1,900       69,217
              15,677,740  

Dril-Quip a

    55,000       2,153,800
           
 

Enerflex Systems

    1,900       18,004

Engineering and Construction - 1.9%

               

Environmental Power a

    90,000       796,500

Cavco Industries a,c

    3,200       112,128                  

Comfort Systems USA

    22,800       288,192                  


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



  DECEMBER 31, 2006

 

 


      SHARES       VALUE         SHARES       VALUE

Natural Resources (continued)

               

Axsys Technologies a

    6,400     $ 112,448

Energy Services (continued)

               

Ducommun a

    72,100       1,649,648

Gulf Island Fabrication

    41,400     $ 1,527,660  

HEICO Corporation

    41,600       1,615,328

GulfMark Offshore a,c

    65,200       2,439,132  

HEICO Corporation Cl. A

    24,160       787,133

Input/Output a

    43,500       592,905  

Integral Systems

    47,100       1,091,307

Newpark Resources a,c

    48,100       346,801  

SIFCO Industries a

    45,800       237,244

Pason Systems

    222,400       2,528,855  

TVI Corporation a,c

    237,490       558,102

StealthGas

    4,900       57,232              

TGC Industries a

    11,280       94,752                 7,900,314

Valley National Gases a

    30,100       796,145              

Willbros Group a,c

    67,600       1,277,640  

Components and Systems - 3.3%

             

World Energy Solutions a

    778,300       767,521  

Acacia Research-Acacia Technologies a

    90,550       1,211,559
           
 

Advanced Photonix Cl. A a

    117,900       271,170
              14,887,303  

CSP a

    122,581       1,002,713
           
 

DDi Corporation a

    70,947       510,818

Oil and Gas - 1.3%

               

Dalsa Corporation a

    5,000       54,881

Bonavista Energy Trust

    69,700       1,682,507  

Dot Hill Systems a,c

    2,000       7,860

CE Franklin a,c

    69,210       696,253  

Excel Technology a

    91,900       2,351,721

Contango Oil & Gas a,c

    10,000       238,400  

Flextronics International a,c

    9,610       110,323

Edge Petroleum a,c

    2,000       36,480  

Giga-tronics a

    3,200       6,528

Exploration Company of Delaware a,c

    5,500       73,370  

Mobility Electronics a,c

    1,000       3,350

Houston American Energy a,c

    37,500       277,125  

MOCON

    15,600       198,276

Nuvista Energy a

    121,000       1,348,883  

Neoware a,c

    103,200       1,363,272

Particle Drilling Technologies a

    8,000       34,240  

On Track Innovations a,c

    29,615       204,492

PetroCorp a,d

    104,200       0  

Performance Technologies a

    128,350       768,817

Pioneer Drilling a

    7,500       99,600  

Richardson Electronics

    80,100       729,711

Savanna Energy Services a

    2,500       40,604  

Rimage Corporation a

    20,000       520,000

Storm Cat Energy a,c

    43,370       51,610  

TTM Technologies a

    120,700       1,367,531
           
 

TransAct Technologies a

    78,600       650,022
              4,579,072              
           
                11,333,044

Precious Metals and Mining - 2.5%

                           

Aurizon Mines a

    257,000       804,410  

Distribution - 0.7%

             

Brush Engineered Materials a,c

    15,500       523,435  

Agilysys

    90,000       1,506,600

Chesapeake Gold a,c

    20,000       87,467  

Bell Industries a

    85,700       325,660

Cumberland Resources a

    220,000       1,240,800  

Jaco Electronics a

    29,000       95,700

Gammon Lake Resources a

    85,236       1,388,494  

Nu Horizons Electronics a,c

    40,000       411,600

Gold Reserve a

    14,000       66,080  

PC Mall a

    6,000       63,240

Golden Star Resources a,c

    168,100       495,895  

Pomeroy IT Solutions a

    6,900       52,371

Metallica Resources a

    341,300       1,351,548              

Minefinders Corporation a,c

    116,000       1,032,400                 2,455,171

Nevsun Resources a

    5,000       10,850              

Northern Orion Resources a

    51,400       188,124  

Internet Software and Services - 2.9%

             

Northgate Minerals a

    270,000       939,600  

Answers Corporation a,c

    4,100       54,899

Spur Ventures a

    44,100       22,312  

CMGI a

    1,595,000       2,137,300

Vista Gold a,c

    50,000       431,500  

Convera Corporation Cl. A a,c

    190,000       872,100
           
 

CryptoLogic

    3,900       90,480
              8,582,915  

Digitas a

    88,840       1,191,344
           
 

EDGAR Online a,c

    33,700       117,950

Real Estate - 0.4%

               

iGATE Corporation a

    273,400       1,880,992

HomeFed Corporation

    11,352       749,232  

Inforte Corporation a

    12,400       46,376

Kennedy-Wilson a

    21,500       481,600  

Jupitermedia Corporation a,c

    355,800       2,817,936

ZipRealty a,c

    11,000       82,390  

LookSmart a

    4,000       17,840
           
 

MIVA a,c

    32,000       108,480
              1,313,222  

NIC a

    26,800       133,196
           
 

Packeteer a

    6,700       91,120

Other Natural Resources - 0.9%

               

PFSweb a

    7,242       7,966

PICO Holdings a

    55,700       1,936,689  

Stamps.com a

    21,200       333,900

Pope Resources L.P.

    33,000       1,132,560  

Web.com a

    31,200       130,728
           
             
              3,069,249                 10,032,607
           
             

Total (Cost $13,574,348)

            32,431,761  

IT Services - 5.8%

             
           
 

CIBER a

    182,662       1,238,448

Technology – 24.3%

               

Cogent Communications Group a,c

    30,000       486,600

Aerospace and Defense - 2.3%

                               

Allied Defense Group (The) a,c

    65,760       1,397,400                  

Astronics Corporation a

    26,400       451,704                  

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
2006 ANNUAL REPORT TO STOCKHOLDERS  |  39



ROYCE MICRO-CAP TRUST  

 

Schedule of Investments


      SHARES       VALUE         SHARES       VALUE

Technology (continued)

               

SPSS a,c

    41,800     $ 1,256,926

IT Services (continued)

               

SeaChange International a,c

    5,000       51,100

Computer Task Group a

    431,100     $ 2,047,725  

TeleCommunication Systems Cl. A a,c

    10,000       31,000

Covansys Corporation a

    172,500       3,958,875  

Transaction Systems Architects Cl. A a

    97,600       3,178,832

Diamond Management & Technology

               

Unica Corporation a

    3,200       41,440

Consultants

    138,100       1,717,964              

Forrester Research a

    101,500       2,751,665                 13,880,603

Rainmaker Systems a,c

    2,000       14,940              

Sapient Corporation a,c

    500,000       2,745,000  

Telecommunications - 3.2%

             

Syntel

    54,300       1,455,240  

Anaren a

    24,200       429,792

TriZetto Group (The) a

    182,300       3,348,851  

C-COR.net a

    5,000       55,700
           
 

Captaris a

    43,300       336,441
              19,765,308  

Catapult Communications a

    5,000       44,900
           
 

Centillium Communications a

    11,000       23,540

Semiconductors and Equipment - 2.1%

               

Channell Commercial a

    5,000       14,850

California Micro Devices a

    16,700       73,146  

Communications Systems

    79,500       794,205

Cascade Microtech a

    48,000       628,800  

ECtel a

    146,400       715,896

Catalyst Semiconductor a

    9,200       31,648  

EFJ a

    10,000       67,400

ESS Technology a

    25,000       25,750  

GigaBeam a,c

    10,000       42,700

Electroglas a,c

    281,700       701,433  

Hurray! Holding Company ADR a

    10,100       62,620

Exar Corporation a,c

    121,208       1,575,704  

Intervoice a

    2,900       22,214

Genesis Microchip a,c

    8,000       81,120  

NMS Communications a,c

    600,000       1,230,000

Integrated Silicon Solution a

    15,000       86,250  

North Pittsburgh Systems

    15,700       378,998

Intevac a

    40,550       1,052,272  

Novatel Wireless a,c

    49,200       475,764

Jinpan International

    18,050       435,727  

PC-Tel a

    49,600       463,760

Kopin Corporation a

    11,400       40,698  

Radyne a

    78,520       843,305

MIPS Technologies a

    4,300       35,690  

SpectraLink Corporation a

    57,000       490,200

Nextest Systems a,c

    4,900       55,223  

Symmetricom a,c

    24,782       221,055

PDF Solutions a,c

    29,000       419,050  

UCN a

    189,500       540,075

Photronics a,c

    29,750       486,115  

ViaSat a

    91,812       2,736,916

QuickLogic Corporation a

    20,000       59,400  

WJ Communications a

    209,300       328,601

Semitool a,c

    25,500       339,405  

Zhone Technologies a,c

    481,600       630,896

Vimicro International ADR a

    100,000       1,020,000              
           
                10,949,828
              7,147,431              
           
 

Total (Cost $51,436,043)

            83,464,306

Software - 4.0%

                           

Aladdin Knowledge Systems a

    27,300       532,077  

Miscellanous e – 4.9%

             

Altiris a

    3,500       88,830  

Total (Cost $16,275,646)

            16,717,503

Applix a

    20,000       227,000              

AsiaInfo Holdings a

    50,000       384,000  

TOTAL COMMON STOCKS

             

Descartes Systems Group (The) a

    56,500       208,485  

(Cost $244,125,289)

            378,240,433

Evans & Sutherland Computer a

    83,500       353,205              

Fundtech a

    55,000       599,500  

PREFERRED STOCK – 0.5%

             

ILOG ADR a

    35,000       464,450  

Seneca Foods Conv. a

    75,409       1,764,571

Indus International a

    19,200       72,768              

iPass a,c

    190,000       1,117,200  

TOTAL PREFERRED STOCK

             

JDA Software Group a,c

    59,500       819,315  

(Cost $943,607)

            1,764,571

Majesco Entertainment a

    2,500       3,325              

MapInfo a

    5,000       65,250  

REPURCHASE AGREEMENT – 7.5%

             

McDATA Corporation Cl. A a,c

    18,199       101,004  

State Street Bank & Trust Company,

             

MIND C.T.I.

    20,000       53,800  

5.10% dated 12/29/06, due 1/2/07,

             

Moldflow Corporation a

    7,500       104,175  

maturity value $25,628,515 (collateralized

             

Peerless Systems a,c

    88,670       241,182  

by obligations of various U.S. Government

             

Pegasystems c

    320,200       3,160,374  

Agencies, valued at $26,257,513)

             

Pervasive Software a

    22,500       81,225  

(Cost $25,614,000)

            25,614,000

Phase Forward a

    43,000       644,140              


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



  DECEMBER 31, 2006

 

 


      PRINCIPAL          
      AMOUNT       VALUE  
                 

COLLATERAL RECEIVED FOR SECURITIES
LOANED – 7.5%

               
U.S. Treasury Bonds                

6.25% due 8/15/23

  $ 161,125     $ 164,383  

Money Market Funds

               

State Street Navigator Securities Lending

               

Prime Portfolio (7 day yield-5.25%)

            25,761,168  
           
 

TOTAL COLLATERAL RECEIVED FOR
SECURITIES LOANED

               

(Cost $25,925,551)

            25,925,551  
           
 

TOTAL INVESTMENTS – 125.6%

               

(Cost $296,608,447)

            431,544,555  
                 

LIABILITIES LESS CASH
AND OTHER ASSETS – (8.1)%

            (27,862,285 )
                 

PREFERRED STOCK – (17.5)%

            (60,000,000 )
           
 

NET ASSETS APPLICABLE TO
COMMON STOCKHOLDERS – 100.0%

          $ 343,682,270  
           
 


a   Non-income producing.
b   At December 31, 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   All or a portion of these securities were on loan at December 31, 2006. Total market value of loaned securities at December 31, 2006 was $24,965,008.
d   Securities for which market quotations are no longer readily available represent 0.0% of net assets. These securities have been valued at their 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 December 31, 2006 market value.
     
INCOME TAX INFORMATION: The cost of total investments for Federal income tax purposes was $300,839,343. At December 31, 2006, net unrealized appreciation for all securities was $130,705,212, consisting of aggregate gross unrealized appreciation of $144,862,458 and aggregate gross unrealized depreciation of $14,157,246. The primary difference 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 ANNUAL REPORT TO STOCKHOLDERS  |  41



ROYCE MICRO-CAP TRUST DECEMBER 31, 2006



   Statement of Assets and Liabitities


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

Non-Affiliates (cost $267,575,267)

  $ 402,546,823  

Affiliated Companies (cost $3,419,180)

    3,383,732  

Total investments at value     405,930,555  
Repurchase agreement (at cost and value)     25,614,000  
Cash     29,945  
Receivable for investments sold     470,072  
Receivable for dividends and interest     377,136  
Prepaid expenses     7,499  

Total Assets

    432,429,207  

LIABILITIES:        
Payable for collateral on loaned securities     25,925,551  
Payable for investments purchased     2,221,436  
Payable for investment advisory fee     384,478  
Preferred dividends accrued but not yet declared     80,000  
Accrued expenses     135,472  

Total Liabilities

    28,746,937  

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   $ 343,682,270  

ANALYSIS OF NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS:        
Common Stock paid-in capital - $0.001 par value per share; 23,270,418 shares outstanding (150,000,000 shares authorized)   $ 204,286,122  
Undistributed net investment income (loss)     (2,725,894 )
Accumulated net realized gain (loss) on investments and foreign currency     7,266,208  
Net unrealized appreciation (depreciation) on investments and foreign currency     134,935,834  
Preferred dividends accrued but not yet declared     (80,000 )

Net Assets applicable to Common Stockholders (net asset value per share - $14.77)

  $ 343,682,270  

*Investments at identified cost (including $25,925,551 of collateral on loaned securities)   $ 270,994,447  

Market value of loaned securities   $ 24,965,008  


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




ROYCE MICRO-CAP TRUST YEAR ENDED DECEMBER 31, 2006



   Statement of Operations


INVESTMENT INCOME:      
Income:      

Dividends

     

Non-Affiliates*

$ 2,832,838  

Affiliated Companies

  92,475  

Interest

  2,270,875  

Securities lending

  276,627  

Total income   5,472,815  

Expenses:      

Investment advisory fees

  4,833,976  

Stockholder reports

  141,775  

Custody and transfer agent fees

  140,921  

Directors’ fees

  55,772  

Professional fees

  39,358  

Administrative and office facilities expenses

  30,038  

Other expenses

  72,555  

Total expenses   5,314,395  
Compensating balance credits   (8,853 )

Net expenses   5,305,542  

Net investment income (loss)   167,273  

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:      
Net realized gain (loss) on investments and foreign currency      

Non-Affiliates

  40,575,092  

Affiliated Companies

  (234,819 )
Net change in unrealized appreciation (depreciation) on investments and foreign currency   27,839,554  

Net realized and unrealized gain (loss) on investments and foreign currency   68,179,827  

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM INVESTMENT OPERATIONS   68,347,100  

DISTRIBUTIONS TO PREFERRED STOCKHOLDERS   (3,600,000 )

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

RESULTING FROM INVESTMENT OPERATIONS

$ 64,747,100  

* Net of foreign withholding tax of $63,945.      

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.   2006 ANNUAL REPORT TO STOCKHOLDERS  |   43




ROYCE MICRO-CAP TRUST  



   Statement of Changes in Net Assets



    Year ended   Year ended
    12/31/06   12/31/05

INVESTMENT OPERATIONS:                
Net investment income (loss)   $ 167,273     $ (763,209 )
Net realized gain (loss) on investments and foreign currency     40,340,273       37,754,245  
Net change in unrealized appreciation (depreciation) on investments and foreign currency     27,839,554       (14,066,144 )

Net increase (decrease) in net assets resulting from investment operations     68,347,100       22,924,892  

DISTRIBUTIONS TO PREFERRED STOCKHOLDERS:                
Net investment income     (475,560 )      
Net realized gain on investments and foreign currency     (3,124,440 )     (3,600,000 )

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

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

RESULTING FROM INVESTMENT OPERATIONS

    64,747,100       19,324,892  

DISTRIBUTIONS TO COMMON STOCKHOLDERS:                
Net investment income     (4,585,208 )      
Net realized gain on investments and foreign currency     (30,124,923 )     (38,452,900 )

Total distributions to Common Stockholders     (34,710,131 )     (38,452,900 )

CAPITAL STOCK TRANSACTIONS:                
Reinvestment of distributions to Common Stockholders     19,926,104       22,483,567  

Total capital stock transactions     19,926,104       22,483,567  

NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS     49,963,073       3,355,559  

NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS:                

Beginning of year

    293,719,197       290,363,638  

End of year (including undistributed net investment income (loss) of $(2,725,894) at 12/31/06 and $(1,104) at 12/31/05)

  $ 343,682,270     $ 293,719,197  


44   |   2006 ANNUAL REPORT TO STOCKHOLDERS   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.




ROYCE MICRO-CAP TRUST


Financial Highlights



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

      Years ended December 31,
     
        2006       2005       2004       2003       2002  

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

INVESTMENT OPERATIONS:                                          

Net investment income (loss)

      0.01       (0.03 )     (0.08 )     (0.09 )     (0.13 )

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

      3.04       1.14       2.62       5.28       (1.29 )

Total investment operations

      3.05       1.11       2.54       5.19       (1.42 )

DISTRIBUTIONS TO PREFERRED STOCKHOLDERS:                                          

Net investment income

      (0.02 )                        

Net realized gain on investments and foreign currency

      (0.14 )     (0.17 )     (0.19 )     (0.18 )     (0.18 )

Total distributions to Preferred Stockholders

      (0.16 )     (0.17 )     (0.19 )     (0.18 )     (0.18 )

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

      2.89       0.94       2.35       5.01       (1.60 )

DISTRIBUTIONS TO COMMON STOCKHOLDERS:                                          

Net investment income

      (0.20 )                        

Net realized gain on investments and foreign currency

      (1.35 )     (1.85 )     (1.33 )     (0.92 )     (0.80 )

Total distributions to Common Stockholders

      (1.55 )     (1.85 )     (1.33 )     (0.92 )     (0.80 )

CAPITAL STOCK TRANSACTIONS:                                          

Effect of reinvestment of distributions by Common Stockholders

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

Effect of Preferred Stock offering

                        (0.11 )      

Total capital stock transactions

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

NET ASSET VALUE, END OF PERIOD     $14.77     $13.43     $14.34     $13.33     $9.39  

MARKET VALUE, END OF PERIOD     $16.57     $14.56     $15.24     $12.60     $8.44  

TOTAL RETURN (a):                                          
Market Value       26.72 %     8.90 %     33.44 %     63.58 %     (12.70 )%
Net Asset Value       22.46 %     6.75 %     18.69 %     55.55 %     (13.80 )%

RATIOS BASED ON AVERAGE NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS:

                                         
Total expenses (b,c)       1.64 %     1.63 %     1.62 %     1.82 %     1.96 %

Management fee expense (d)

      1.49 %     1.43 %     1.43 %     1.59 %     1.59 %

Other operating expenses

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

End of Period (in thousands)

    $343,682     $293,719     $290,364     $253,425     $167,571  
Liquidation Value of Preferred Stock,                                          

End of Period (in thousands)

    $60,000     $60,000     $60,000     $60,000     $40,000  
Portfolio Turnover Rate       34 %     46 %     32 %     26 %     39 %
PREFERRED STOCK:                                          
Total shares outstanding       2,400,000       2,400,000       2,400,000       2,400,000       1,600,000  
Asset coverage per share     $168.20     $147.38     $145.98     $130.59     $129.73  
Liquidation preference per share     $25.00     $25.00     $25.00     $25.00     $25.00  
Average market value per share (e):                                          

6.00% Cumulative

    $24.15     $24.97     $24.66     $25.37        

7.75% Cumulative

                      $25.70     $25.91  

(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 1.38%, 1.35%, 1.32%, 1.49% and 1.62% for the periods ended December 31, 2006, 2005, 2004, 2003 and 2002, 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% and 2.04% for the periods ended December 31, 2003 and 2002, 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 a 12-month basis.  
(e)   The average of month-end market values during the period that the Preferred Stock was outstanding.  

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
2006 ANNUAL REPORT TO STOCKHOLDERS  |  45



ROYCE MICRO-CAP TRUST



Notes to Financial Statements



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, and securities traded on Nasdaq’s Electronic Bulletin Board, are valued at their last reported sales price or Nasdaq official closing price taken from the primary market in which each security trades or, if no sale is reported for such day, at their bid price. Other over-the-counter securities for which market quotations are readily available are valued at their highest bid price. 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.


Foreign Currency:
    The Fund does not isolate that portion of the results of operations which result from changes in foreign exchange rates on investments from the portion arising from changes in market prices of securities held. Such fluctuations are included with net realized and unrealized gains and losses on investments.
    Net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, expiration of currency forward contracts, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books, and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities, including investments in securities at fiscal year end, as a result of changes in the exchange rates.


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

Expenses:
    The Fund incurs direct and indirect expenses. Expenses directly attributable to the Fund are charged to the Fund’s operations, while expenses applicable to more than one of the Royce Funds are allocated 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 and distributions to Common Stockholders are recorded on ex-dividend date. 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


46  |  2006 ANNUAL REPORT TO STOCKHOLDERS



DECEMBER 31, 2006



 


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.


New Accounting Pronouncements:
    On July 13, 2006, the Financial Accounting Standards Board (“FASB”) released FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is required to be implemented no later than the Fund’s June 29, 2007 NAV calculation and is to be applied to all open tax years as of the effective date. At this time, management is evaluating the implications of FIN 48 and its impact in the financial statements has not yet been determined.
    On September 15, 2006, the FASB released Statement of Financial Accounting Standards No. 157, “Fair Value Measurement” (“FAS 157”) which provides enhanced guidance for using fair value to measure assets and liabilities. The standard requires companies to provide expanded information about the assets and liabilities measured at fair value and the potential effect of these fair valuations on an entity’s financial performance. The standard does not expand the use of fair value in any new circumstances, but provides clarification on acceptable fair valuation methods and applications. Adoption of FAS 157 is required for fiscal years beginning after November 15, 2007. The standard is not expected to materially impact the Fund’s financial statements.


Capital Stock:
    The Fund issued 1,401,367 and 1,625,665 shares of Common Stock as reinvestment of distributions by Common Stockholders for the years ended December 31, 2006 and 2005, respectively.
    At December 31, 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 of 5% and is payable if the percentage change in the investment record of the Russell 2000 exceeds the investment performance of the Fund by 12 or more percentage points for the performance period.
    Royce has voluntarily committed to waive the portion of its investment advisory fee attributable to an issue of the Fund’s Preferred Stock for any



2006 ANNUAL REPORT TO STOCKHOLDERS  |  47



ROYCE MICRO-CAP TRUST   DECEMBER 31, 2006



Notes to Financial Statements (continued)


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 twelve rolling 36-month periods ending December 2006, the investment performance of the Fund exceeded the investment performance
 
of the Russell 2000 by 7% to 29%. Accordingly, the investment advisory fee consisted of a Basic Fee of $3,369,094 and an upward adjustment of $1,464,882 for performance of the Fund above that of the Russell 2000. For the year ended December 31, 2006, the Fund accrued and paid Royce advisory fees totaling $4,833,976.

Distributions to Stockholders:
    The tax character of distributions paid to stockholders during 2006 and 2005 was as follows:


  Distributions paid from:   2006   2005
  Ordinary income     $ 12,220,932       $ 4,022,315  
  Long-term capital gain       26,089,199         38,030,585  
       
        $ 38,310,131       $ 42,052,900  

     As of December 31, 2006, the tax basis components of distributable earnings included in stockholders’ equity were as follows:


  Undistributed net investment income       $ 2,577,694  
  Undistributed long-term capital gain         6,194,696  
  Unrealized appreciation         130,704,938  
  Post October currency loss*         (1,180 )
  Accrued preferred distributions         (80,000 )
         
          $ 139,396,148  


* Under current tax law, capital and currency losses realized after October 31, and prior to the Fund’s fiscal year end, may be deferred as occurring on the first day of the following fiscal year.

     The difference between book basis and tax basis unrealized appreciation is attributable primarily to the tax deferral on wash sales and the unrealized gains on investments in Passive Foreign Investment Companies.

     For financial reporting purposes, capital accounts and distributions to stockholders are adjusted to reflect the tax character of permanent book / tax differences. These differences are primarily due to differing treatments of income and gains on various investment securities and foreign currency transactions held by the Fund, timing differences and different characterization of distributions made by the Fund. For the year ended December 31, 2006, the Fund recorded the following permanent reclassifications, which relate primarily to the current net operating losses. Results of operations and net assets were not affected by these reclassifications.


  Undistributed     Accumulated          
  Net Investment     Net Realized       Paid-in  
  Income     Gain (Loss)       Capital  
 
   
     
 
  $2,168,705     $(2,082,796)     $ (85,909)  

Purchases and Sales of Investment Securities:
     For the year ended December 31, 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 $117,114,561 and $122,279,205, 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 at any time during the period. The Fund effected the following transactions in shares of such companies during the year ended December 31, 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   12/31/06   12/31/06

Abigail Adams National Bancorp**       244,400       $ 3,421,624               $ 1,342,400       $ (235,259 )     $ 92,475                      
BKF Capital Group**                     $ 1,601,001         94,735         440                              
Highbury Financial                       3,419,180                                 580,400       $ 3,383,732  

                $ 3,421,624                           $ (234,819 )     $ 92,475                 $ 3,383,732  


**   Not an Affilated Company at December 31, 2006.

48  |  2006 ANNUAL REPORT TO STOCKHOLDERS




ROYCE MICRO-CAP TRUST   DECEMBER 31, 2006


Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of
Royce Micro – Cap Trust, Inc.
New York, New York

We have audited the accompanying statement of assets and liabilities of Royce Micro - Cap Trust, Inc. (“Fund”) including the schedule of investments, as of December 31, 2006, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2006 by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Royce Micro - Cap Trust, Inc. as of December 31, 2006, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.


TAIT, WELLER & BAKER LLP  

Philadelphia, Pennsylvania
February 12, 2007

 
2006 ANNUAL REPORT TO STOCKHOLDERS  |  49




ROYCE FOCUS TRUST




Schedule of Investments


    SHARES     VALUE       SHARES     VALUE  

COMMON STOCKS – 82.7%

           

Metal Fabrication and Distribution - 15.0%

           
             

Harris Steel Group

  150,000   $ 5,594,049  

Consumer Products – 5.5%

           

IPSCO

  60,000     5,632,200  

Apparel and Shoes - 1.5%

           

Metal Management

  125,000     4,731,250  

Timberland Company Cl. A a

  75,000   $ 2,368,500  

Reliance Steel & Aluminum

  100,000     3,938,000  
       
 

Schnitzer Steel Industries Cl. A

  100,000     3,970,000  

Sports and Recreation - 4.0%

                   
 

Thor Industries

  90,000     3,959,100             23,865,499  

Winnebago Industries

  75,000     2,468,250          
 
       
 

Total (Cost $19,617,454)

        41,118,399  
          6,427,350          
 
       
 

Industrial Services – 3.0%

           

Total (Cost $6,260,311)

        8,795,850  

Commercial Services - 0.7%

           
       
 

BB Holdings a

  400,000     1,155,220  

Consumer Services – 6.0%

                   
 

Direct Marketing - 2.3%

           

Transportation and Logistics - 2.3%

           

Nu Skin Enterprises Cl. A

  200,000     3,646,000  

Arkansas Best

  100,000     3,600,000  
       
         
 

Retail Stores - 1.3%

           

Total (Cost $5,116,019)

        4,755,220  

Buckle (The)

  40,000     2,034,000          
 
       
 

Natural Resources – 21.8%

           

Other Consumer Services - 2.4%

           

Energy Services - 8.4%

           

Corinthian Colleges a

  120,000     1,635,600  

Ensign Energy Services

  170,000     2,680,873  

Universal Technical Institute a

  100,100     2,223,221  

Input/Output a

  100,000     1,363,000  
       
 

Pason Systems

  200,000     2,274,150  
          3,858,821  

Tesco Corporation a

  200,000     3,534,000  
       
 

Trican Well Service

  200,000     3,484,972  

Total (Cost $7,464,964)

        9,538,821          
 
       
            13,336,995  

Financial Intermediaries – 4.0%

                   
 

Banking - 1.6%

           

Oil and Gas - 1.5%

           

Endeavour Mining Capital

  400,000     2,435,364  

Unit Corporation a

  50,000     2,422,500  
       
         
 

Securities Brokers - 2.4%

           

Precious Metals and Mining - 11.9%

           

Knight Capital Group Cl. A a

  200,000     3,834,000  

Gammon Lake Resources a

  180,000     2,932,200  
       
 

Ivanhoe Mines a

  450,000     4,423,500  

Total (Cost $5,799,301)

        6,269,364  

Meridian Gold a

  100,000     2,779,000  
       
 

Pan American Silver a

  160,000     4,027,200  

Financial Services – 2.6%

           

Silver Standard Resources a,b

  150,000     4,611,000  
                 
 

Information and Processing - 2.6%

                      18,772,900  

eFunds Corporation a

  150,000     4,125,000          
 
       
 

Total (Cost $19,556,773)

        34,532,395  

Total (Cost $1,997,748)

        4,125,000          
 
       
 

Technology – 7.5%

           

Health – 6.4%

           

Internet Software and Services - 0.5%

           

Drugs and Biotech - 4.8%

           

RealNetworks a

  70,000     765,800  

Endo Pharmaceuticals Holdings a

  120,000     3,309,600          
 

Lexicon Genetics a,b

  599,400     2,163,834  

Semiconductors and Equipment - 1.0%

           

ViroPharma a

  150,000     2,196,000  

Cirrus Logic a

  224,900     1,547,312  
       
         
 
          7,669,434  

Software - 2.3%

           
       
 

ManTech International Cl. A a

  75,000     2,762,250  

Medical Products and Devices - 1.6%

           

PLATO Learning a

  160,000     865,600  

Caliper Life Sciences a

  200,000     1,144,000          
 

Possis Medical a,b

  100,000     1,348,000             3,627,850  
       
         
 
          2,492,000  

Telecommunications - 3.7%

           
       
 

ADTRAN

  75,000     1,702,500  

Total (Cost $9,002,776)

        10,161,434  

Foundry Networks a

  280,100     4,195,898  
       
         
 

Industrial Products – 25.9%

                      5,898,398  

Building Systems and Components - 3.0%

                   
 

Simpson Manufacturing

  150,000     4,747,500  

Total (Cost $8,633,826)

        11,839,360  
       
         
 

Construction Materials - 2.7%

           

TOTAL COMMON STOCKS

           

Florida Rock Industries

  100,000     4,305,000  

(Cost $83,449,172)

        131,135,843  
       
         
 

Machinery - 5.2%

                         

Lincoln Electric Holdings

  70,000     4,229,400                

Woodward Governor

  100,000     3,971,000                
       
               
          8,200,400                
       
               


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



DECEMBER 31, 2006


    PRINCIPAL                  
    AMOUNT     VALUE         VALUE  

CORPORATE BONDS – 3.9%

               

Lehman Brothers (Tri-Party),

       

Athena Neurosciences Finance 7.25%

               

5.15% dated 12/29/06, due 1/3/07,

       

Senior Note due 2/21/08

    $6,000,000     $ 6,120,000  

maturity value $20,014,306 (collateralized

       
           
 

by obligations of various U.S. Government

       

TOTAL CORPORATE BONDS

               

Agencies, valued at $20,414,326)

       

(Cost $5,735,520)

            6,120,000  

(Cost $20,000,000)

  $ 20,000,000  
           
     
 

GOVERNMENT BONDS – 7.7%

               

TOTAL REPURCHASE AGREEMENTS

       

(Principal Amount shown

               

(Cost $33,738,000)

    33,738,000  

in local currency)

                   
 

Canadian Government Bond

               

COLLATERAL RECEIVED FOR SECURITIES

       

3.00% due 6/1/07

    6,150,000       5,249,136  

LOANED – 0.5%

       

New Zealand Government Bond

               

Money Market Funds

       

6.00% due 7/15/08

    10,000,000       6,978,453  

State Street Navigator Securities Lending

       
           
 

Prime Portfolio (7 day yield-5.25%)

       

TOTAL GOVERNMENT BONDS

            12,227,589  

(Cost $786,590)

    786,590  

(Cost $11,360,867)

         
     
 

REPURCHASE AGREEMENTS – 21.3%

               

TOTAL INVESTMENTS – 116.1%

       

State Street Bank & Trust Company,

               

(Cost $135,070,149)

    184,008,022  

5.10% dated 12/29/06, due 1/2/07, maturity value $13,745,785 (collateralized by obligations of various U.S. Government Agencies, valued at $14,085,075) (Cost $13,738,000)

               

LIABILITIES LESS CASH

       
            13,738,000  

AND OTHER ASSETS – (0.3)%

    (440,771 )
         
 

PREFERRED STOCK – (15.8)%

    (25,000,000 )
                     
 
                 

NET ASSETS APPLICABLE TO

       
               

COMMON STOCKHOLDERS – 100.0%

  $ 158,567,251  
                     
 


a   Non-income producing.
b   All or a portion of these securities were on loan at December 31, 2006. Total market value of loaned securities at December 31, 2006 was $761,337.
  New additions in 2006.
   
Bold indicates the Fund’s largest 20 equity holdings in terms of December 31, 2006 market value.

INCOME TAX INFORMATION: The cost of total investments for Federal income tax purposes was $138,218,355. At December 31, 2006, net unrealized appreciation for all securities was $45,789,667 consisting of aggregate gross unrealized appreciation of $47,504,537 and aggregate gross unrealized depreciation of $1,714,870. The primary differences in book and tax basis cost are the timing of the recognition of losses on securities sold and amortization of discount for book and tax purposes.


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



ROYCE FOCUS TRUST   DECEMBER 31, 2006


Statement of Assets and Liabilities


ASSETS:        
Investments at value (including collateral on loaned securities)*   $ 150,270,022  
Repurchase agreements (at cost and value)     33,738,000  
Cash     37,201  
Receivable for dividends and interest     578,308  
Prepaid expenses     3,508  

Total Assets

    184,627,039  

LIABILITIES:        
Payable for collateral on loaned securities     786,590  
Payable for investment advisory fee     158,038  
Preferred dividends accrued but not yet declared     33,326  
Accrued expenses     81,834  

Total Liabilities

    1,059,788  

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   $ 158,567,251  

ANALYSIS OF NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS:        
Common Stock paid-in capital - $0.001 par value per share; 16,262,552 shares outstanding (100,000,000 shares authorized)   $ 108,025,365  
Undistributed net investment income (loss)     (517,355 )
Accumulated net realized gain (loss) on investments and foreign currency     2,142,267  
Net unrealized appreciation (depreciation) on investments and foreign currency     48,950,307  
Preferred dividends accrued but not yet declared     (33,333 )

Net Assets applicable to Common Stockholders (net asset value per share - $9.75)

  $ 158,567,251  

*Investments at identified cost (including $786,590 of collateral on loaned securities)   $ 101,332,149  

Market value of loaned securities   $ 761,337  


52  |  2006 ANNUAL REPORT TO STOCKHOLDERS THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.




ROYCE FOCUS TRUST   YEAR ENDED DECEMBER 31, 2006


Statement of Operations


INVESTMENT INCOME:        
Income:        

Interest

  $ 3,489,600  

Dividends*

    946,172  

Securities lending

    16,536  

Total income     4,452,308  

Expenses:        

Investment advisory fees

    1,786,912  

Stockholder reports

    80,611  

Custody and transfer agent fees

    74,751  

Professional fees

    32,120  

Directors’ fees

    20,596  

Administrative and office facilities expenses

    13,856  

Other expenses

    76,280  

Total expenses     2,085,126  
Compensating balance credits     (1,385 )

Net expenses     2,083,741  

Net investment income (loss)     2,368,567  

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:        
Net realized gain (loss) on investments and foreign currency     20,546,074  
Net change in unrealized appreciation (depreciation) on investments and foreign currency     1,820,291  

Net realized and unrealized gain (loss) on investments and foreign currency     22,366,365  

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM INVESTMENT OPERATIONS     24,734,932  

DISTRIBUTIONS TO PREFERRED STOCKHOLDERS     (1,500,000 )

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

RESULTING FROM INVESTMENT OPERATIONS

  $ 23,234,932  

*Net of foreign withholding tax of $27,116.        

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 2006 ANNUAL REPORT TO STOCKHOLDERS  |  53




ROYCE FOCUS TRUST    


Statement of Changes in Net Assets



        Year ended       Year ended  
        12/31/06       12/31/05  

INVESTMENT OPERATIONS:                  
Net investment income (loss)     $ 2,368,567     $ 743,582  
Net realized gain (loss) on investments       20,546,074       19,164,839  
Net change in unrealized appreciation (depreciation) on investments and foreign currency       1,820,291       1,922,287  

Net increase (decrease) in net assets resulting from investment operations       24,734,932       21,830,708  

DISTRIBUTIONS TO PREFERRED STOCKHOLDERS:                  
Net investment income       (187,800 )     (80,100 )
Net realized gain on investments and foreign currency       (1,312,200 )     (1,419,900 )

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

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

      23,234,932       20,330,708  

DISTRIBUTIONS TO COMMON STOCKHOLDERS:                  
Net investment income       (2,950,803 )     (853,787 )
Net realized gain on investments and foreign currency       (20,617,913 )     (15,134,720 )

Total distributions to Common Stockholders       (23,568,716 )     (15,988,507 )

CAPITAL STOCK TRANSACTIONS:                  
Reinvestment of distributions to Common Stockholders       15,657,293       11,288,577  
Net proceeds from rights offering             21,760,372  

Total capital stock transactions       15,657,293       33,048,949  

NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS       15,323,509       37,391,150  

NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS:                  

Beginning of year

      143,243,742       105,852,592  

End of year (including undistributed net investment income (loss) of $(517,355) at 12/31/06 and $(55,839) at 12/31/05)

    $ 158,567,251     $ 143,243,742  


54  |  2006 ANNUAL 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.


      Years ended December 31,
     
        2006       2005       2004       2003       2002  

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

INVESTMENT OPERATIONS:                                          

Net investment income (loss)

      0.16       0.06       0.02       0.08       (0.01 )

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

      1.50       1.44       2.63       3.57       (0.74 )

Total investment operations

      1.66       1.50       2.65       3.65       (0.75 )

DISTRIBUTIONS TO PREFERRED STOCKHOLDERS:                                          

Net investment income

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

Net realized gain on investments and foreign currency

      (0.09 )     (0.11 )     (0.15 )     (0.14 )     (0.13 )

Total distributions to Preferred Stockholders

      (0.10 )     (0.12 )     (0.15 )     (0.16 )     (0.16 )

NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON                                          

STOCKHOLDERS RESULTING FROM INVESTMENT OPERATIONS

      1.56       1.38       2.50       3.49       (0.91 )

DISTRIBUTIONS TO COMMON STOCKHOLDERS:                                          

Net investment income

      (0.20 )     (0.06 )     (0.02 )     (0.06 )     (0.02 )

Net realized gain on investments and foreign currency

      (1.37 )     (1.15 )     (1.72 )     (0.56 )     (0.07 )

Total distributions to Common Stockholders

      (1.57 )     (1.21 )     (1.74 )     (0.62 )     (0.09 )

CAPITAL STOCK TRANSACTIONS:                                          

Effect of reinvestment of distributions by Common Stockholders

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

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 )

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

MARKET VALUE, END OF PERIOD       $10.68       $9.53       $10.47       $8.48       $5.56  

TOTAL RETURN (a):                                          
Market Value       30.50 %     3.03 %     47.26 %     63.98 %     (15.06 )%
Net Asset Value       16.33 %     13.31 %     29.21 %     54.33 %     (12.50 )%
RATIOS BASED ON AVERAGE NET ASSETS APPLICABLE TO                                          

COMMON STOCKHOLDERS:

                                         
Total expenses (b,c)       1.36 %     1.48 %     1.53 %     1.57 %     1.88 %

Management fee expense

      1.16 %     1.21 %     1.27 %     1.14 %     1.13 %

Other operating expenses

      0.20 %     0.27 %     0.26 %     0.43 %     0.75 %
Net investment income (loss)       1.54 %     0.63 %     0.24 %     1.07 %     (0.16 )%
SUPPLEMENTAL DATA:                                          
Net Assets Applicable to Common Stockholders,                                          

End of Period (in thousands)

    $ 158,567     $ 143,244     $ 105,853     $ 87,012     $ 57,956  
Liquidation Value of Preferred Stock,                                          

End of Period (in thousands)

    $ 25,000     $ 25,000     $ 25,000     $ 25,000     $ 20,000  
Portfolio Turnover Rate       30 %     42 %     52 %     49 %     61 %
PREFERRED STOCK:                                          
Total shares outstanding       1,000,000       1,000,000       1,000,000       1,000,000       800,000  
Asset coverage per share       $183.57       $168.24       $130.85       $112.01       $97.44  
Liquidation preference per share       $25.00       $25.00       $25.00       $25.00       $25.00  
Average market value per share (d):                                          

6.00% Cumulative

      $24.98       $25.38       $24.83       $25.45        

7.45% Cumulative

                        $25.53       $25.64  


(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 1.17%, 1.22%, 1.21%, 1.20% and 1.43% for the periods ended December 31, 2006, 2005, 2004, 2003 and 2002, 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% and 2.06% for the periods ended December 31, 2003 and 2002, respectively.
(d)   The average of month-end market values during the period that the Preferred Stock was outstanding.

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 2006 ANNUAL REPORT TO STOCKHOLDERS  |  55



ROYCE FOCUS TRUST



Notes to Financial Statements


Summary of Significant Accounting Policies:
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, and securities traded on Nasdaq’s Electronic Bulletin Board, are valued at their last reported sales price or Nasdaq official closing price taken from the primary market in which each security trades or, if no sale is reported for such day, at their bid price. Other over-the-counter securities for which market quotations are readily available are valued at their highest bid price. 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.

Foreign Currency:
The Fund does not isolate that portion of the results of operations which result from changes in foreign exchange rates on investments from the portion arising from changes in market prices of securities held. Such fluctuations are included with net realized and unrealized gains and losses on investments.
Net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, expiration of currency forward contracts, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books, and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities, including investments in securities at fiscal year end, as a result of changes in the exchange rates.

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 on the ex-dividend date at the fair market value of the securities received. Interest income is recorded on an accrual basis.

  Premium and discounts on debt securities are amortized using the effective yield to maturity method. Realized gains and losses from investment transactions are determined on the basis of identified cost for book and tax purposes.

Expenses:
The Fund incurs direct and indirect expenses. Expenses directly attributable to the Fund are charged to the Fund’s operations, while expenses applicable to more than one of the Royce Funds are allocated 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 5% of the rolling average of the prior four calendar quarter-end NAVs of the Fund’s Common Stock, with the fourth quarter distribution being the greater of 1.25% of the rolling average or the distribution required by IRS regulations. Distributions to Preferred Stockholders are accrued daily and paid quarterly and distributions to Common Stockholders are recorded on ex-dividend date. 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.
56   |   2006 ANNUAL REPORT TO STOCKHOLDERS



DECEMBER 31, 2006



 


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.

New Accounting Pronouncements:
On July 13, 2006, the Financial Accounting Standards Board (“FASB”) released FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is required to be implemented no later than the Fund’s June 29, 2007 NAV calculation and is to be applied to all open tax years as of the effective date. At this time, management is evaluating the implications of FIN 48 and its impact in the financial statements has not yet been determined.
On September 15, 2006, the FASB released Statement of Financial Accounting Standards No. 157, “Fair Value Measurement” (“FAS 157”) which provides enhanced guidance for using fair value to measure assets and liabilities. The standard requires companies to provide expanded information about the assets and liabilities measured at fair value and the potential effect of these fair valuations on an entity’s financial performance. The standard does not expand the use of fair value in any

  new circumstances, but provides clarification on acceptable fair valuation methods and applications. Adoption of FAS 157 is required for fiscal years beginning after November 15, 2007. The standard is not expected to materially impact the Fund’s financial statements.

Capital Stock:
The Fund issued 1,587,885 and 1,191,399 shares of Common Stock as reinvestment of distributions by Common Stockholders for the years ended December 31, 2006 and 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 December 31, 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.
2006 ANNUAL REPORT TO STOCKHOLDERS   |   57



ROYCE FOCUS TRUST DECEMBER 31, 2006



Notes to Financial Statements (continued)



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 year ended December 31, 2006, the Fund accrued and paid Royce advisory fees totaling $1,786,912.

Distributions to Stockholders: The tax character of distributions paid to stockholders during 2006 and 2005 was as follows:

Distributions paid from:     2006     2005  
Ordinary income   $ 4,915,975   $ 1,682,395  
Long-term capital gain     20,152,741     15,806,112  
   
 
    $ 25,068,716   $ 17,488,507  


As of December 31, 2006, the tax basis components of distributable earnings included in stockholders’ equity were as follows:


Undistributed net investment income         $ 2,400,890  
Undistributed long-term capital gain           2,432,323  
Unrealized appreciation           45,802,101  
Post October currency loss*           (60,095 )
Accrued preferred distributions           (33,333 )
         
 
          $ 50,541,886  

*Under current tax law, capital and currency losses realized after October 31, and prior to the Fund’s fiscal year end, may be deferred as occurring on the first day of the following year.

The difference between book basis and tax basis unrealized appreciation is attributable primarily to the tax deferral on wash sales and the unrealized gains on investments in Passive Foreign Investment Companies.
For financial reporting purposes, capital accounts and distributions to stockholders are adjusted to reflect the tax character of permanent book / tax differences. These differences are primarily due to differing treatments of income and gains on various investment securities and foreign currency transactions held by the Fund, timing differences and different characterization of distributions made by the Fund. For the year ended December 31, 2006, the Fund recorded the following permanent reclassifications, which relate primarily to the current net operating losses. Results of operations and net assets were not affected by these reclassifications.


Undistributed     Accumulated          
Net Investment     Net Realized     Paid-in    
Income     Gain (Loss)     Capital    

   
   
   
$308,520   $(308,520)   $–    


Purchases and Sales of Investment Securities:
For the year ended December 31, 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 $44,695,025 and $69,675,911, respectively.

58   |   2006 ANNUAL REPORT TO STOCKHOLDERS



ROYCE FOCUS TRUST



Report of Independent Registered Public Accounting Firm


To the Board of Directors and Stockholders of
Royce Focus Trust, Inc.
New York, New York


We have audited the accompanying statement of assets and liabilities of Royce Focus Trust, Inc. (“Fund”) including the schedule of investments, as of December 31, 2006, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2006 by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Royce Focus Trust, Inc. as of December 31, 2006, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.


TAIT, WELLER & BAKER LLP

Philadelphia, Pennsylvania
February 12, 2007
2006 ANNUAL REPORT TO STOCKHOLDERS   |   59




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 December 31, 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 December 31, 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, 2007. 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.

60   |   2006 ANNUAL REPORT TO STOCKHOLDER





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.

Royce Value Trust, Inc.
At the 2006 Annual Meeting of Stockholders held on September 28, 2006, the Fund’s stockholders elected four Directors, consisting of:


      Votes For   Votes Abstained

** William L. Koke     7,308,761       87,551  
** David L. Meister     7,313,591       82,721  
* G. Peter O’Brien     57,435,488       486,956  
* Charles M. Royce     57,490,317       432,127  

* Common Stock and Preferred Stock voting together as a single class
** Preferred Stock voting as a separate class

Royce Micro-Cap Trust, Inc.
At the 2006 Annual Meeting of Stockholders held on September 28, 2006, the Fund’s stockholders elected four Directors, consisting of:


      Votes For   Votes Abstained

** William L. Koke     1,909,294       19,308  
** David L. Meister     1,908,294       20,308  
* G. Peter O’Brien     22,879,163       136,191  
* Charles M. Royce     22,891,392       123,962  

* Common Stock and Preferred Stock voting together as a single class
** Preferred Stock voting as a separate class

Royce Focus Trust, Inc.
At the 2006 Annual Meeting of Stockholders held on September 28, 2006, the Fund’s stockholders elected four Directors, consisting of:


      Votes For   Votes Abstained

** Stephen L. Isaacs     911,276       1,680  
** David L. Meister     911,276       1,680  
* G. Peter O’Brien     14,485,743       155,571  
* Charles M. Royce     14,508,798       132,516  

* Common Stock and Preferred Stock voting together as a single class
** Preferred Stock voting as a separate class

2006 ANNUAL REPORT TO STOCKHOLDERS  |  61



 
   

 

The RoyceFunds


Wealth Of Experience
With approximately $28.2 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 $113 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-1206

 
   


Item 2: Code(s) of Ethics – As of the end of the period covered by this report, the Registrant had adopted a code of ethics, as defined in Item 2 of Form N-CSR, applicable to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of this code of ethics is filed as an exhibit to this Form N-CSR. No substantive amendments were approved or waivers were granted to this code of ethics during the period covered by this report.

Item 3: Audit Committee Financial Expert –

(a)(1)   The Board of Directors of the Registrant has determined that it has an audit committee financial expert.
     
(a)(2)   Arthur S. Mehlman was designated by the Board of Directors as the Registrant’s Audit Committee Financial Expert, effective April 15, 2004. Mr. Mehlman is “independent” as defined under Item 3 of Form N-CSR.

Item 4: Principal Accountant Fees and Services.

(a)   Audit Fees:
    Year ended December 31, 2006 – $34,000
    Year ended December 31, 2005 – $33,000
     
(b)   Audit-Related Fees:
    Year ended December 31, 2006 – $1,500 – Preparation of reports to rating agency for Preferred Stock
     
    Year ended December 31, 2005 – $1,500 – Preparation of reports to rating agency for Preferred Stock
     
(c)   Tax Fees:
    Year ended December 31, 2006 – $5,000 – Preparation of tax returns
    Year ended December 31, 2005 – $2,500 – Preparation of tax returns
     
(d)   All Other Fees:
    Year ended December 31, 2006 – $0
    Year ended December 31, 2005 – $2,500 – Agreed upon procedures report relating to investment advisory fee calculation
     

(e)(1)     Annual Pre-Approval: On an annual basis, the Registrant’s independent auditor submits to the Audit Committee a schedule of proposed audit, audit-related, tax and other non-audit services to be rendered to the Registrant and/or investment adviser(s) for the following year that require pre-approval by the Audit Committee. This schedule provides a description of each type of service that is expected to require pre-approval and the maximum fees that can be paid for each such service without further Audit Committee approval. The Audit Committee then reviews and determines whether to approve the types of scheduled services and the projected fees for them. Any subsequent revision to already pre-approved services or fees (including fee increases) are presented for consideration at the next regularly scheduled Audit Committee meeting, as needed.

            If subsequent to the annual pre-approval of services and fees by the Audit Committee, the Registrant or one of its affiliates determines that it would like to engage the Registrant’s independent auditor to perform a service not already pre-approved, the request is to be submitted to the Registrant’s Chief Financial Officer, and if he or she determines that the service fits within the independence guidelines (e.g., it is not a prohibited service), he or she will then arrange for a discussion of the proposed service and fee to be included on the agenda for the next regularly scheduled Audit Committee meeting so that pre-approval can be considered.

            Interim Pre-Approval: If, in the judgment of the Registrant’s Chief Financial Officer, a proposed engagement needs to commence before the next regularly scheduled Audit Committee meeting, he or she shall submit a written summary of the proposed engagement to all members of the Audit Committee, outlining the services, the estimated maximum cost, the category of the services (e.g., audit, audit-related, tax or other) and the rationale for engaging the Registrant’s independent auditor to perform the services. To the extent the proposed engagement involves audit, audit-related or tax services, any individual member of the Audit Committee who is an independent Board member is authorized to pre-approve the engagement. To the extent the proposed engagement involves non-audit services other than audit-related or tax, the Chairman of the Audit Committee is authorized to pre-approve the engagement. The Registrant’s Chief Financial Officer will arrange for this interim review and coordinate with the appropriate member(s) of the Committee. The independent auditor may not commence the engagement under consideration until the Registrant’s Chief Financial Officer has informed the auditor in writing that pre-approval has been obtained from the Audit Committee or an individual member who is an independent Board member. The member of the Audit Committee who pre-approves any engagements in between regularly scheduled Audit Committee meetings is to report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next regularly scheduled meeting.

(e)(2)   Not Applicable
     
(f)   Not Applicable
     
(g)   Year ended December 31, 2006 – $0
    Year ended December 31, 2005 – $11,500
     
(h)   No such services were rendered during 2006 or 2005.

Item 5: The Registrant has a separately designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. Donald R. Dwight, Richard M. Galkin, Stephen L. Isaacs, William L. Koke, Arthur S. Mehlman, David L. Meister and G. Peter O’Brien are members of the Registrant’s audit committee.

Item 6: Not Applicable.

Item 7:

     
    June 5, 2003
    As amended on April 14, 2005 and
    February 28, 2006
     

Royce & Associates Proxy Voting Guidelines and Procedures

These procedures apply to Royce & Associates, LLC (“Royce”) and all funds and other client accounts for which it is responsible for voting proxies, including all open and closed-end registered investment companies (“The Royce Funds”), limited partnerships, limited liability companies, separate accounts, other accounts for which it acts as investment adviser and any accounts for which it acts as sub-adviser that have directly or indirectly delegated proxy voting authority to Royce. The Boards of Trustees/Directors of The Royce Funds (the “Boards” have delegated all proxy voting decisions to Royce, and in the case of Royce Technology Value Fund, to JHC Capital Management subject to these policies and procedures.

Receipt of Proxy Material. Under the continuous oversight of the Head of Administration or his designee is responsible for monitoring receipt of all proxies and ensuring that proxies are received for all securities for which Royce has proxy voting responsibility. All proxy materials are logged in upon receipt by Royce’s Librarian

Voting of Proxies. Once proxy material has been logged in by Royce’s Librarian, it is then promptly reviewed by the designated Administrative Assistant to evaluate the issues presented. Regularly recurring matters are usually voted as recommended by the issuer’s board of directors or “management.” The Head of Administration or his designee, in consultation with the Chief Investment Officer, develops and updates a list of matters Royce treats as “regularly recurring” and is responsible for ensuring that the designated Administrative Assistant has an up-to-date list of these matters at all times, including instructions from Royce’s Chief Investment Officer on how to vote on those matters on behalf of Royce clients. Examples of “regularly recurring” matters include non-contested elections of directors and non-contested approval of independent auditors. Non-“regularly recurring” matters are brought to the attention of the portfolio manager(s) for the account(s) involved by the designated Administrative Assistant, and, after giving some consideration to advisories from “Proxy Master” (a service provided by Institutional Shareholder Services), the portfolio manager directs that such matters be voted in a way that he or she believes should better protect or enhance the value of the investment. If the portfolio manager determines that information concerning any proxy requires analysis, is missing or incomplete, he or she then gives the proxy to an analyst or another portfolio manager for review and analysis.

  a.
From time to time, it is possible that one Royce portfolio manager will decide (i) to vote shares held in client accounts he or she manages differently from the vote of another Royce portfolio manager whose client accounts hold the same security or (ii) to abstain from voting on behalf of client accounts he or she manages when another Royce portfolio manager is casting votes on behalf of other Royce client accounts.
     
   
The designated Administrative Assistant reviews all proxy votes collected from Royce’s portfolio managers prior to such votes being cast. If any difference exists among the voting instructions given by Royce’s portfolio managers, as described above, the designated Administrative Assistant then presents these proposed votes to the Head of Administration or his designee and the Chief Investment Officer. The Chief Investment Officer, after consulting with the relevant portfolio managers, either reconciles the votes or authorizes the casting of differing votes by different portfolio managers. The Head of Administration or his designee maintains a log of all votes for which different portfolio managers have cast differing votes, that describes the rationale for allowing such differing votes and contains the initials of both the Chief Investment Officer and Head of Administration or his designee allowing such differing votes. The Head of Administration or his designee performs a weekly review of all votes cast by Royce to confirm that any conflicting votes were properly handled in accordance with the above-described procedures.
     
  b.
There are many circumstances that might cause Royce to vote against an issuer’s board of directors or “management” proposal. These would include, among others, excessive compensation, unusual management stock options, preferential voting and poison pills. The portfolio managers decide these issues on a case-by-case basis as described above.
     
  c.
A portfolio manager may, on occasion, determine to abstain from voting a proxy or a specific proxy item when he or she concludes that the potential benefit of voting is outweighed by the cost, when it is not in the client account’s best interest to vote.
     
  d.
When a client has authorized Royce to vote proxies on its behalf, Royce will generally not accept instructions from the clients regarding how to vote proxies.
     
  e.
If a security is on loan under The Royce Funds’ Securities Lending Program with State Street Bank and Trust Company (“Loaned Securities”), the Head of Administration or his designee will recall the Loaned Securities and request that they be delivered within the customary settlement period after the notice, to permit the exercise of their voting rights if the number of shares of the security on loan would have a material effect on The Royce Funds’ voting power at the up-coming stockholder meeting. A material effect is defined as any case where the Loaned Securities are 1% or more of a class of a company’s outstanding equity securities. Monthly, the Head of Administration or his designee will review the summary of this activity by State Street. A quarterly report detailing any exceptions that occur in recalling Loaned Securities will be given to the Boards.

Custodian banks are authorized to release all shares held for Royce client account portfolios to Automated Data Processing Corporation (“ADP”) for voting, utilizing ADP’s “Proxy Edge” software system. Substantially all portfolio companies utilize ADP to collect their proxy votes. However, for the limited number of portfolio companies that do not utilize ADP, Royce attempts to register at least a portion of its clients holdings as a physical shareholder in order to ensure its receipt of a physical proxy.

Under the continuous oversight of the Head of Administration or his designee, the designated Administrative Assistant is responsible for voting all proxies in a timely manner. Votes are returned to ADP using Proxy Edge as ballots are received, generally two weeks before the scheduled meeting date. The issuer can thus see that the shares were voted, but the actual vote cast is not released to the company until 4pm on the day before the meeting. If proxies must be mailed, they go out at least ten business days before the meeting date.

Conflicts of Interest. The designated Administrative Assistant reviews reports generated by Royce’s portfolio management system (“Quest PMS”) that set forth by record date, any security held in a Royce client account which is issued by a (i) public company that is, or a known affiliate of which is, a separate account client of Royce (including sub-advisory relationships), (ii) public company, or a known affiliate of a public company, that has invested in a privately-offered pooled vehicle managed by Royce or (iii) public company, or a known affiliate of a public company, by which the spouse of a Royce employee or an immediate family member of a Royce employee living in the household of such employee is employed, for the purpose of identifying any potential proxy votes that could present a conflict of interest for Royce. The Head of Administration or his designee develops and updates the list of such public companies or their known affiliates which is used by Quest PMS to generate these daily reports. This list also contains information regarding the source of any potential conflict relating to such companies. Potential conflicts identified on the “conflicts reports” are brought to the attention of the Head of Administration or his designee by the designated Administrative Assistant, who then reviews them to determine if business or personal relationships exist between Royce, its officers, managers or employees and the company that could present a material conflict of interest. Any such identified material conflicts are voted by Royce in accordance with the recommendation given by an independent third party research firm (Institutional Shareholder Services). The Head of Administration or his designee maintains a log of all such conflicts identified, the analysis of the conflict and the vote ultimately cast. Each entry in this log is signed by the Chief Investment Officer before the relevant votes are cast.

Recordkeeping. A record of the issues and how they are voted is stored in the Proxy Edge system. Copies of all physically executed proxy cards, all proxy statements and any other documents created or reviewed that are material to making a decision on how to vote proxies are retained in the Company File maintained by Royce’s Librarian.

Item 8: (a)(1) Portfolio Managers of Closed-End Management Investment Companies (information as of March 5, 2007)

Name Title Length of Service Principal Occupation(s) During Past 5 Years
Charles M. Royce President, Chief Investment Officer and member of the Board of Managers of Royce & Associates, LLC and its predecessor, Royce & Associates, Inc. (collectively, “Royce”) Since 1972
President, Chief Investment Officer and member of the Board of Managers of Royce, the Registrant’s investment adviser; Director and President of the Registrant, Royce Micro-Cap Trust, Inc. (“RMT”) and Royce Focus Trust, Inc. (“RFT”), closed-end diversified management investment companies of which Royce is the investment adviser; Trustee and President of The Royce Fund (“TRF”) and Royce Capital Fund (“RCF”), open-end diversified management investment companies of which Royce is the investment adviser (the Registrant, RMT, RFT, TRF, and RCF collectively, “The Royce Funds”); Secretary and sole director of Royce Fund Services, Inc., a wholly-owned subsidiary of Royce and the distributor of TRF’s and RFC’s shares; and managing general partner of Royce Management Company, the general partner of various private investment limited partnerships until October 2001.

(a)(2) Other Accounts Managed by Portfolio Manager and Potential Conflicts of Interest (information as of December 31, 2006)  
 
Other Accounts

Type of Account   Number of
Accounts Managed
  Total
Assets Managed
  Number of Accounts Managed for which Advisory Fee is
Performance-Based
  Value of Managed Accounts for which Advisory Fee is Performance Based
Registered investment companies   11   $17,209,849,932   4   $1,829,129,329
Private pooled investment vehicles   5   $175,251,754   3   $64,256,984
Other accounts*   13   $72,476,035   -   -

*Other accounts include all other accounts managed by the Portfolio Manager in either a professional or personal capacity except for personal accounts subject to pre-approval and reporting requirements under the Registrant’s Rule 17j-1 Code of Ethics.

Conflicts of Interest
The fact that the Portfolio Manager has day-to-day management responsibility for more than one client account may create actual, potential or only apparent conflicts of interest. For example, the Portfolio Manager may have an opportunity to purchase securities of limited availability. In this circumstance, the Portfolio Manager is expected to review each account’s investment guidelines, restrictions, tax considerations, cash balances, liquidity needs and other factors to determine the suitability of the investment for each account and to ensure that his managed accounts are treated equitably. The Portfolio Manager may also decide to purchase or sell the same security for multiple managed accounts at approximately the same time. To address any conflicts that this situation may create, the Portfolio Manager will generally combine managed account orders (i.e., enter a “bunched” order) in an effort to obtain best execution or a more favorable commission rate. In addition, if orders to buy or sell a security for multiple accounts managed by the same Portfolio Manager on the same day are executed at different prices or commission rates, the transactions will generally be allocated by Royce to each of such managed accounts at the weighted average execution price and commission. In circumstances where a bunched order is not completely filled, each account will normally receive a pro-rated portion of the securities based upon the account’s level of participation in the order. Royce may under certain circumstances allocate securities in a manner other than pro-rata if it determines that the allocation is fair and equitable under the circumstances and does not discriminate against any account.

As described below, there is a revenue-based component of the Portfolio Manager’s Performance Bonus and the Portfolio Manager also receives a Firm Bonus based on revenues (adjusted for certain imputed expenses) generated by Royce. In addition, the Portfolio Manager receives a bonus based on Royce’s retained pre-tax profits from operations. As a result, the Portfolio Manager may receive a greater relative benefit from activities that increase the value to Royce of The Royce Funds and/or other Royce client accounts, including, but not limited to, increases in sales of the Registrant’s shares and assets under management.

Also, as described above, the Portfolio Manager generally manages more than one client account, including, among others, registered investment company accounts, separate accounts and private pooled accounts managed on behalf of institutions (e.g., pension funds, endowments and foundations) and for high-net-worth individuals. The appearance of a conflict of interest may arise where Royce has an incentive, such as a performance-based management fee (or any other variation in the level of fees payable by The Royce Funds or other Royce client accounts to Royce), which relates to the management of one or more of The Royce Funds or accounts with respect to which the Portfolio Manager has day-to-day management responsibilities. The Performance Bonus paid to the Portfolio Manager for two registered investment company accounts (the Registrant and RMT) is based, in part, on performance-based fee revenues. The Registrant and RMT pay Royce a fulcrum fee that is adjusted up or down depending on the performance of that Fund relative to its benchmark index. In addition, two other registered investment company accounts managed by the Portfolio Manager, Royce Select Fund I and Royce Select Fund II, each pay Royce a performance-based fee.

Finally, conflicts of interest may arise when the Portfolio Manager personally buys, holds or sells securities held or to be purchased or sold for the Registrant or other Royce client account or personally buys, holds or sells the shares of one or more of The Royce Funds. To address this, Royce has adopted a written Code of Ethics designed to prevent and detect personal trading activities that may interfere or conflict with client interests (including Registrant shareholders’ interests). Royce generally does not permit its Portfolio Managers to purchase small- or micro-cap securities in their personal investment portfolios.

Royce and The Royce Funds have adopted certain compliance procedures which are designed to address the above-described types of conflicts. However, there is no guarantee that such procedures will detect each and every situation in which a conflict arises.

(a)(3) Description of Portfolio Manager Compensation Structure (information as of December 31, 2006)  

Royce seeks to maintain a compensation program that is competitively positioned to attract and retain high-caliber investment professionals. The Portfolio Manager receives from Royce a base salary, a Performance Bonus and a benefits package. The Portfolio Manager’s compensation is reviewed and may be modified from time to time as appropriate to reflect changes in the market, as well as to adjust the factors used to determine bonuses. The Portfolio Manager’s compensation consists of the following elements:

-
BASE SALARY. The Portfolio Manager is paid a base salary. In setting the base salary, Royce seeks to be competitive in light of the Portfolio Manager’s experience and responsibilities.
   
-
PERFORMANCE BONUS. The Portfolio Manager receives a quarterly Performance Bonus that is either asset-based. or revenue based and therefore in part based on the value of the accounts’ net assets, determined with reference to each of the registered investment company and other client accounts managed by him. The revenue used to determine the quarterly performance bonus received by the Portfolio Manager that relates to each of the Registrant and RMT are performance-based fee revenues. Except as described below, the Performance Bonus applicable to the registered investment company accounts managed by the Portfolio Manager is subject to upward or downward adjustment or elimination based on a combination of 3-year and 5-year risk-adjusted pre-tax returns of such accounts relative to all small-cap objective funds with three years of history tracked by Morningstar (as of December 31, 2006 there were 373 such Funds tracked by Morningstar) and the 5-year absolute returns of such accounts relative to 5-year U.S. Treasury Notes. The Performance Bonus applicable to non-registered investment company accounts managed by the Portfolio Manager, and to Royce Select Fund I and Royce Select Fund II, is not subject to a performance-related adjustment.

Payment of the Performance Bonus may be deferred as described below, and any amounts deferred are forfeitable, if the Portfolio Manager is terminated by Royce with or without cause or resigns. The amount of the deferred Performance Bonus will appreciate or depreciate during the deferral period, based on the total return performance of one or more Royce-managed registered investment company accounts selected by the Portfolio Manager at the beginning of the deferral period. The amount deferred will depend on the Portfolio Manager’s total direct, indirect beneficial and deferred unvested bonus investments in the Royce registered investment company account for which he or she is receiving portfolio management compensation.

- FIRM BONUS. The Portfolio Manager receives a quarterly bonus based on Royce’s net revenues.
   
-
BENEFIT PACKAGE. The Portfolio Manager also receives benefits standard for all Royce employees, including health care and other insurance benefits, and participation in Royce’s 401(k) Plan and Money Purchase Pension Plan. From time to time, on a purely discretionary basis, the Portfolio Manager may also receive options to acquire stock in Royce’s parent company, Legg Mason, Inc. Those options typically represent a relatively small portion of a Portfolio Manager’s overall compensation.

The Portfolio Manager, in addition to the above-described compensation, also receives a bonus based on Royce’s retained pre-tax operating profit. This bonus, along with the Performance Bonus and Firm Bonus, generally represents the most significant element of the Portfolio Manager’s compensation. A portion of the above-described compensation payable to the Portfolio Manager relates to his responsibilities as Royce’s Chief Executive Officer, Chief Investment Officer and President of The Royce Funds.

(a)(4) Dollar Range of Equity Securities in Registrant Beneficially Owned by Portfolio Manager (information as of December 31, 2006)

The following table shows the dollar range of the Registrant’s shares owned beneficially and of record by the Portfolio Manager, including investments by his immediately family members sharing the same household and amounts invested through retirement and deferred compensation plans.

Dollar Range of Registrant’s Shares Beneficially Owned
Over $1,000,000

Item 9: Not Applicable.

Item 10: Not Applicable.

Item 11: Controls and Procedures.

(a)  
Disclosure Controls and Procedures. The Principal Executive and Financial Officers concluded that the Registrant’s Disclosure Controls and Procedures are effective based on their evaluation of the Disclosure Controls and Procedures as of a date within 90 days of the filing date of this report.
     
(b)  
Internal Control over Financial Reporting. There were no significant changes in Registrant’s internal control over financial reporting or in other factors that could significantly affect this control subsequent to the date of the evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses during the second fiscal quarter of the period covered by this report.

Item 12: Exhibits attached hereto.

(a)(1)     The Registrant’s code of ethics pursuant to Item 2 of Form N-CSR.
       
(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: March 5, 2007

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.

BY: /s/Charles M. Royce

Charles M. Royce
President

Date: March 5, 2007

ROYCE VALUE TRUST, INC.

BY: /s/John D. Diederich

John D. Diederich
Chief Financial Officer

Date: March 5, 2007