N-30D 1 allied_royce55999.htm MAIN DOCUMENT

2002 Semiannual Report
| THE ROYCE FUNDS Value Investing In Small Companies For More Than 25 Years ROYCE VALUE TRUST ROYCE MICRO-CAP TRUST ROYCE FOCUS TRUST |
www.roycefunds.com

| 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 domestic 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 which may include periodic rights offerings. Proceeds from the offerings are invested in an actively managed portfolio of securities. Investors wanting to buy or sell shares of a publicly traded closed-end fund after the offerings must do so on a stock exchange or the Nasdaq market, as with any publicly traded stock. This is in contrast to open-end mutual funds, where 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 open-end funds, our closed-end funds are able to distribute capital gains on a quarterly basis. Royce Value Trust and Royce Micro-Cap Trust have adopted a quarterly distribution policy for their 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 11, 13 and 15. For additional information on the Funds’ Distribution Reinvestment and Cash Purchase Options and the benefits for stockholders, see page 16. |  |

THE ROYCE FUNDS

SEMIANNUAL REPORT REFERENCE GUIDE
For more than 25 years, our approach has focused on evaluating a company’s current worth — our assessment of 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. This analysis takes into consideration a number of relevant factors, including the company’s future prospects. We select these securities using a risk-averse value approach, with the expectation that their market prices should increase toward our estimate of their current worth, resulting in capital appreciation for Fund investors. |  |
Letter to Our Stockholders:
Decline and Fall … Ere it Come | 2
Small-Cap Market Cycle Performance | 8
History Since Inception | 9
Performance and Portfolio Review: Royce Value Trust, Royce Micro-Cap Trust and Royce Focus Trust | 10
Distribution Reinvestment and Cash Purchase Options | 16
Updates and Notes to Performance and Risk Information | 17
Schedules of Investments and Other Financial Statements | 18
Postscript: Stupid CEO Tricks | Inside Back Cover

NAV AVERAGE ANNUAL TOTAL RETURNS Through June 30, 2002
FUND | 2ND QUARTER 2002* | YEAR-TO-DATE 2002* | 1-YEAR | 3-YEAR | 5-YEAR | SINCE INCEPTION | INCEPTION DATE
Royce Value Trust | –9.18% | 0.02% | –0.20% | 12.68% | 11.83% | 12.80% | 11/26/86
Royce Micro-Cap Trust | –5.78 | 5.69 | 7.43 | 16.77 | 12.17 | 13.82 | 12/14/93
Royce Focus Trust | –7.00 | 0.41 | –0.66 | 9.68 | 7.20 | 9.89 | 11/1/96**
Russell 2000 | –8.35 | –4.70 | –8.60 | 1.67 | 4.44 |  |
Royce Value Trust’s 10-year NAV average annual total return for the period ended 6/30/02 was 14.27%.
* Not annualized.
** Date Royce & Associates, LLC assumed investment management responsibility.

|  | LETTER TO OUR STOCKHOLDERS
Charles M. Royce, President We regularly assert that we are long-term investors and that Fund stockholders also need to have a long-term investment horizon. It is worth asking what we mean by the term “long term,” and why we place such importance on it. When we talk about the long term, we are referring generally to at least a three-year period of time. There are three reasons why we think this is important. First, investments in small-and micro-cap companies often require a great deal of time to bear fruit in the form of increased stock prices. A company’s industry or sector may be suffering from a prolonged slump in its business cycle, which keeps prices down, sometimes even for companies that are flourishing in, or successfully weathering, a spate of bad times. A profitable and (continued on page 4) |  |  | DECLINE AND FALL E nron, Kmart, WorldCom, Xerox … the list of recently fallen giants runs on and on. Their decline has shaken the equity world, creating the perception of a stock market in ruins, a once proud and vital institution reduced to rubble by greed and chicanery. If 2000’s bursting dot.com bubble was not painful enough for investors, the latest round of accounting scandals is surely making the pain (and losses) worse. In addition, a near-dearth of capital spending on technology is exacerbating the market’s woes. It should be noted that as recently as March, the situation seemed far brighter to us, and until the news of the Enron disaster broke, a mood of guarded optimism had slowly begun to assert itself. The market’s gradual rebound seemed to be signalling the end of what would be a brief, relatively benign recession. While no one was predicting a return to the juiced-up returns of the mid-to-late ’90s, many investors felt it was safe to go back into the market. As dramatic and significant as the Enron affair has been, it initially looked to be anomalous as well. Unfortunately, the advent of spring brought a seemingly endless stream of continued bad news about shady accounting, dire conflicts of interest and a dismal earnings picture. Each new development served to further erode an increasingly fragile sense of investor confidence. By May, the market, including many value-oriented stocks, was as firmly in the grip of the bear’s maw as it had been since the downturn first began in March of 2000. However, as the English historian Sir Edward Gibbon observed of the Roman Empire, it is easier to deplore the fate of the American stock market than to describe its actual condition. The question of the validity of equity investing persists today with at least as much stubbornness as did the notion three years ago that down markets were a thing of the past. Each view reflects more emotion than reason, though a rational perspective is at no time more necessary than the present, when so many investors are caught in feelings of despair and lethargy. Some justification exists for this pessimism. We believe that the closest analogue to the current period was the collapse of the “Nifty Fifty” (along with much of the rest of the market) in 1973-4. That downturn was also characterized by slumping cap-weighted indices, and was marked by a duration and severity that left many investors looking elsewhere for investment options. Although for very different reasons, such as Watergate, the oil embargo and a sluggish economy, it also occurred during an uneasy cultural moment.
2 | THE ROYCE FUNDS SEMIANNUAL REPORT 2002 |  |

| To the current bear market, one can add a weakening dollar, ongoing violence in the Mid-East and domestic fears of further terrorist attacks to the negative side of the ledger. On the positive side, there has been stronger-than-expected consumer confidence and a productive economy, both of which indicate that the recession might be over. This is complicated by the fact that, historically, the market leads the economy and not the other way around, yet the market continues to insist on trending downward. We would like to advance the thesis here that, although stocks as a whole are not doing great, we believe that the market is never more ready for a turnaround than when investors appear to have given up on it. |
| We would like to advance the thesis here that, although stocks as a whole are not doing great, we believe that the market is never more ready for a turnaround than when investors appear to have given up on it. |
| ALL STOCKS GREAT AND SMALL On the face of things, the recent short-term performance of both large- and small-cap stocks suggests that matters are indeed grim. The S&P 500 and Nasdaq Composite fell in each month of the second quarter and in five of the first six months of 2002, part of a sustained down market that began in March 2000 with the collapse of Internet and other technology companies. In the first half, the S&P 500 was down 13.2%, and the more tech-laden Nasdaq Composite was down 25.0%, both indices creeping close to their post 9/11 lows (which they fell below by July 22). Relatively speaking, then, the small-cap Russell 2000 has managed fairly well, although it has also endured short-term negative returns. After looking as if it had broken free of the bear in the first quarter (+4.0%), the small-cap index fell 8.4% in the second, leaving it with a loss of 4.7% for the first half. Still, it stayed ahead of its larger-cap counterparts in both the second quarter and the first half, and it was ahead of both the S&P 500 and the Nasdaq Composite for the one-, three- and five-year periods ended 6/30/02. |

THE ROYCE FUNDS SEMIANNUAL REPORT 2002 | 3

well-run company may be in an unnoticed or unglamorous line of business, which makes it difficult for other investors to catch on to what we believe is a wonderful business. These factors require us to have a long-term investment horizon. Second, we believe that an investment approach can be evaluated only on a long-term basis, one that includes at least one full-market cycle. Although a market cycle typically lasts for a minimum of 18 months, they often last much longer. For example, the current market cycle began with the peak in March 2000 and shows no signs of ending with a new peak any time soon. Its severity has already made for some harsh judgments. Yet just as many money managers garnered more praise than they perhaps deserved during the raging bull markets of the late ’90s, others may be enduring more than their share of criticism (and redemptions) in today’s very difficult bear market. We think that it’s necessary to see how an approach fares in both good times and bad. (continued on page 6) |  |  | LETTER TO OUR STOCKHOLDERS
Outperformance in bear markets, while offering cold comfort to most investors in the short run, is significant in building solid returns over the long run. From the time of their respective March 2000 highs, the Russell 2000 was down 21.3% through 6/30/02, while the S&P 500 and Nasdaq Composite were down 33.3% and 71.0%, respectively. Part of this down-market advantage can be attributed to small-cap’s relative underperformance in the extreme large-cap and technology bull markets of the late ’90s — having not risen to the heady highs of the Nasdaq, small-caps had less to lose. Small-cap only recently became mired in the downward cycle that has been afflicting large-caps, retaining the somewhat dubious distinction of market leader in a down market. This helps to explain our refusal to capitulate to the fatalism that has recently driven so many people out of equity investing, although it must be admitted that the indiscriminate free-fall that extended past June 30 through new large- and small-cap market lows on July 23 has been very tough on investors. However, what looks like a falling sky to some looks to us like an unsurprising, though extreme, correction. And unlike the Roman Empire, the stock market still moves in cycles. Each rise historically leads to a fall, which in turn brings about another rise, and so on. This duration feels painfully long, and the current downturn has discouraged many investors, but we think that the historically cyclical nature of the stock market must always be borne in mind. ET TU, VALUE? In an even more pronounced fashion than has been demonstrated by small-cap as a whole, small-cap value has so far performed well in the long bear market. In fact, from the small-cap market peak on 3/9/00, the Russell 2000 Value index was up 43.6% through 6/30/02, while the Russell 2000 Growth index suffered a 55.5% decline over the same period, an amazing performance considering the double-digit declines of the three major indices during this period. Even after taking small-cap value’s dismal returns from June 30 through July 23 into account, the style’s long-term advantage remains considerable.
SMALL-CAP VALUE BOOGIE through June 30, 2002
|  | RUSSELL 2000 VALUE | RUSSELL 2000 GROWTH
|  | Year-to-date 2002 | 7.3% | –17.4%
|  | 1-Year | 8.5% | –25.0%
|  | 3-Year (Annualized) | 12.0% | –9.6%
|  | Small-cap value’s 2002 performance has been solid. Until mid-April, the small-cap value asset category was the market’s leader. In fact, one striking element of this year’s second-quarter downturn was the negative performance of many small-cap value issues, as the bears’ ravenous appetite led them to search under all tents. However, the Russell 2000 Value index’s second-quarter drop of 2.1% looks almost benign when compared to the Russell 2000 Growth index’s loss of 15.7% for the same period. Similarly, the value index’s healthy first-half return of 7.3%, which was well ahead of its growth counterpart’s –17.4% mark, would be nectar to many investors.
4 | THE ROYCE FUNDS SEMIANNUAL REPORT 2002 |

| The market’s current problems appear to have inspired a reflexive recoil from equity investing as a whole. Throughout much of the second quarter, investors turned thumbs down to the equity gladiators, and understandably so, as the bad news continued to pile up. Much of this information had little or nothing to do with small-cap stocks themselves (or the funds that invest in them), but that has not deterred people from a pattern of selling that might best be described as indiscriminate. At first, the sustained crash of 2000 seemed to remind many investors of the sterling virtues of balance-sheet quality and cash flows, ideas that may have been lost in the latest rounds of fevered selling. However, small-cap value’s more recent difficulties indicate to us that these lessons have never been more important. |
| Throughout much of the second quarter, investors turned thumbs down to the equity gladiators, and understandably so, as the bad news continued to pile up. Much of this information had little or nothing to do with small-cap stocks themselves (or the funds that invest in them), but that has not deterred people from a pattern of selling that might best be described as indiscriminate. |
| FRIENDS, INVESTORS, STOCKHOLDERS, LEND US YOUR EARS Without doubt, some of this emotional selling affected first-half performances for our closed-end funds. Certainly overall returns for the three funds reflected the market’s volatility. Relatively higher portfolio weightings in more volatile industries such as telecommunications and biotech hurt on the down side, while relatively greater exposure to more traditional cyclical industries such as oil and gas, retail and other consumer-oriented areas helped some portfolios retain a piece of their first-quarter gains in the difficult second quarter. In general, we think that certain depressed industries offer excellent performance potential, though obviously they had not reached a bottom by June 30. This is all right with us — we have typically been willing to endure short-term performance snags when we thought that they would lead to stronger long-term performance (by which we mean periods of three years or longer). |
| Over the long term, the performance picture looks better. All three Royce Funds then in existence were ahead of the Russell 2000 for the one-, three-, five- and 10-year periods ended 6/30/02. In addition, each of our closed-end funds provided double-digit positive returns from the 3/9/00 small-cap market peak through 6/30/02, putting them substantially ahead of the Russell 2000. Finally, our performance advantage over the small-cap benchmark came with lower downside volatility. (Page 17 has a more complete discussion of volatility.) Our mission remains the same — to help investors build wealth over the long term with lower levels of volatility. |

THE ROYCE FUNDS SEMIANNUAL REPORT 2002 | 5

Perhaps the most important reason is that a long-term approach allows us to take advantage of short-term thinking. Many investors, professional or otherwise, will sell shares of a company for missing an earnings estimate or because of a downturn in the firm’s business or industry that may turn out to be temporary. They may be speculators — traders interested only in short-term swings in a stock’s price — or simply impatient. Whatever the reason, we think that over long-term periods, we can potentially capitalize on the short-term thinking that often dominates the investment world. If investors always behaved rationally, then there would be few opportunities for value investors like us. However, the investment world does not live by reason alone, so opportunities are almost always created by the stock market’s short attention span. The current climate, in which so many investors are behaving fatalistically in the face of plummeting prices, has created many chances for us to make what we think are intelligent long-term decisions in contrast to the short-term mindset of others. |  |  | LETTER TO OUR STOCKHOLDERS
FOR THOSE ABOUT TO BUY, WE SALUTE YOU One source for the sense of hopelessness that many investors now seem to be feeling has been the double-barreled nature of the bear market: The Internet bubble was followed by the events of 9/11 and then by Enron and other corporate scandals, which combined to form a now longer-than-two-year bear market. It is worth remembering, however, that the long bull market was itself fueled first by the run-up in both traditional and tech-related large-cap stocks from 1995 through 1998, when the S&P 500 was the dominant index, and then by the frenzy of the technology and Internet bubble of 1998-1999, when the Nasdaq was the index of the day. So in many ways, the ongoing correction, while definitely unpleasant, has historical precedent — specifically the bear market of ’73-4 that we mentioned earlier. Furthermore, when people seem to have given up on stocks, the behavior has often signalled a bottom. The perception of a stock market nearing ruin remains stronger than what we see as the reality. As a check, our best recourse is to look at what has happened historically. While granting that every bubble blows up in its own particularly miserable way, we feel that the past remains the best tool available with which to analyze the market’s future. We are now emerging from a period where the S&P 500’s four-year cumulative total return was –8.0% for the period ended 6/30/02. A four-year loss for the S&P 500 has not happened since 1975, when it was followed by a six-year period of solid average annual total returns. In attempting to look ahead to the next three to five years, our sense is that overall total equity returns should be positive. No one, of course, can predict the bottom, but we would not be shocked if it arrived before the end of the year. With equal doses of hope and caution, we are prepared to raise the bullish flag for equities a little higher.
6 | THE ROYCE FUNDS SEMIANNUAL REPORT 2002 |  |  |

| O! THAT A MAN MIGHT KNOW THE END OF THIS DAY’S BUSINESS, ERE IT COME In the meantime, we are seeing what we regard as terrific opportunities in the current market. The one advantage of bear markets for value investors (even those bear periods in which value stocks perform well) has been the ample supply of beaten-up companies. Our task is to sort through those industries that have been punished and find what we think are well-managed, financially strong businesses. We then hold on and wait patiently for bad fortune to reverse itself, helped along by good management and successful business practices. It often requires years, but we believe that a good business should always be worth more than what we invest in terms of both money and time. Rome was not built in a day, and neither is a solid mutual fund portfolio. | (l-r) Charlie Dreifus, Jack Fockler, Buzz Zaino, Whitney George, Chuck Royce
| In attempting to look ahead to the next three to five years, our sense is that overall total equity returns should be positive. No one, of course, can predict the bottom, but we would not be shocked if it arrived before the end of the year. With equal doses of hope and caution, we are prepared to raise the bullish flag for equities a little higher.
| In the months to come, small-cap value investing may be facing a curtain call in terms of market leadership. The style has recently seen its first sustained correction since the current market cycle began in March of 2000. We think that small-cap value can continue to do well, especially if volatility remains high, and still believe that the current decade is likely to see higher returns for small-cap than for large-cap stocks. Interestingly, the recent round of accounting scandals may actually help small-cap relative outperformance. Small-cap companies are typically involved in a single line of business. This makes their accounting simpler, easier to grasp and more transparent than their larger counterparts. However, it’s not unreasonable to expect our approach to lag a bit in any substantial rally, as it has occasionally done in the past. Our guess is that no style or asset class — value or growth, large or small — will dominate over the next three to five years, a period which we still see as having low, but positive average annual total returns for the market in general. We are content with this possibility and ultimately see good things for equity investors. We appreciate your continued support.
| Sincerely,

| Charles M. Royce President |  | W. Whitney George Vice President |  | Jack E. Fockler, Jr Vice President |
| July 31, 2002
| P.S. The final chapter on the recent market gyrations has yet to be written. For updates and commentary, pay a visit to www.roycefunds.com. Our “What’s New” feature, located on the homepage, is a stockholder’s best source for up-to-date information on the Funds. | THE ROYCE FUNDS SEMIANNUAL REPORT 2002 | 7

SMALL-CAP MARKET CYCLE PERFORMANCE Since the Russell 2000’s inception in 1979, value has outperformed growth in five of the six full small-cap market cycles (defined as a move of 15% from a previous peak or trough). The last small-cap market cycle (4/21/98 – 3/9/00) was the exception. The current cycle represents what we believe is a return to an historically more typical performance pattern in that value has provided a significant advantage during the downturn (3/9/00 – 9/21/01) and through June 30, 2002.
|  | PEAK-TO-PEAK 4/21/98 – 3/9/00 | PEAK-TO-TROUGH 3/9/00 – 9/21/01 | TROUGH-TO-CURRENT 9/21/01 – 6/30/02 | PEAK-TO-CURRENT 3/9/00 – 6/30/02 |
| Russell 2000 | 26.3% | –36.2% | 23.4% | –21.3% |
| Russell 2000 Value | –12.7 | 7.1 | 34.1 | 43.6 |
| Russell 2000 Growth | 64.8 | –60.0 | 11.3 | –55.5 |
| NAV CUMULATIVE TOTAL RETURN |  |  |  |  |
| Royce Value Trust | 10.0 | –3.1 | 27.8 | 23.8 |
| Royce Micro-Cap Trust | 10.6 | –7.9 | 36.3 | 25.6 |
| Royce Focus Trust | –10.7 | –1.3 | 32.9 | 31.2 |
PEAK-TO-TROUGH: Not only did value outperform growth (as measured by the Russell 2000 style indices), but it provided positive performance during the downdraft. All three Royce Funds outperformed the Russell 2000 in this period. TROUGH-TO-CURRENT: Through June 30, 2002, value led growth during the rally from the September low. All Royce Funds posted total returns of more than 25% during this period. Our micro-cap oriented portfolio, Royce Micro-Cap Trust (+36.3%), fared best. PEAK-TO-CURRENT: Through June 30, 2002, value maintained a sizeable lead over growth. Again, all three Royce Funds held performance advantages over the Russell 2000 (–21.3%) and all have provided positive performance.
8 | THE ROYCE FUNDS SEMIANNUAL REPORT 2002

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 |  | Year-to-date distribution total $0.76 |  |  |  |  |  | 14.670 |  | 217 |  |  |  |  |  |  |
6/30/02 |  |  |  | $ | 16,322 |  |  |  |  | 4,924 |  | $ | 81,492 |  | $ | 81,492 |
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 |  | Year-to-date distribution total $0.27 |  |  |  |  |  | 11.250 |  | 50 |  |  |  |  |  |  |
6/30/02 |  |  |  | $ | 8,900 |  |  |  |  | 2,138 |  | $ | 26,105 |  | $ | 24,972 |
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 |
6/30/02 |  |  |  | $ | 4,375 |  |  |  |  | 1,232 |  | $ | 9,006 |  | $ | 8,439 |
* Beginning with 1997 distribution, the purchase price on RVT’s distributions is an average of the Fund’s full year distribution reinvestment cost.
** Other than for initial purchase and 6/30/02, values are stated as of December 31 of the year indicated, after reinvestment of distributions.
THE ROYCE FUNDS SEMIANNUAL REPORT 2002 | 9

ROYCE VALUE TRUST
| NAV AVERAGE ANNUAL TOTAL RETURNS Through 6/30/02 |  | MANAGER’S DISCUSSION R oyce Value Trust’s diverse portfolio of small- and micro-cap stocks endured a difficult second quarter, down 9.2% on a net asset value (NAV) basis and down 5.6% on a market price basis. For the first half the news was slightly better, as RVT outperformed both of its small-cap benchmarks, the Russell 2000 (–4.70%) and the S&P 600 (–0.04%), on both an NAV (+0.02%) and market price (+10.13%) basis. More importantly from our perspective, the Fund beat its benchmarks from the small-cap market peak on 3/9/00 through 6/30/02. For this period, RVT was up 23.8% on an NAV basis and 50.5% on a market price basis, versus –21.3% for the Russell 2000 and 5.4% for the S&P 600. The Fund also outperformed its benchmarks on an NAV basis for the three-, five-, 10-year and since inception (11/26/86) periods ended 6/30/02. RVT’s average annual NAV total return since inception for the period ended 6/30/02 was 12.8%. Many of the Fund’s portfolio holdings suffered in the bearish environment of the second quarter, as equities of all kinds felt the bite of the bear. Particularly hard-hit were holdings in the Health and Technology sectors. Technology issues continued to fall under the combined weight of investor discouragement and a dearth of capital spending for technological upgrades and improvements. However, we believe that corporate spending on technology will resume, and that portfolio holdings can benefit. Top-ten holding Avnet distributes electronic components, computer equipment and embedded subsystems. We like its position as a “chicken technology” business, one involved in a more peripheral, and thus potentially less risky, area of a strong growth industry. We have a similar level of confidence in another top-ten position, international business and information technology consulting firm, American Management Systems, whose growing business keeps us hopeful. In the Health sector, we are holding gene-based therapeutic discovery and development company Applera-Celera Genomics Group, because we think that the strength of its attractive core business can ultimately overcome its short-term losses and declining stock price. The poor market for biotech and a plummeting stock price led us to build our position in biopharmaceutical company Lexicon Genetics, a specialist in gene knockout technology, a process which is designed to systematically aid the physiological functions and medical uses of genes. We like the growth potential of its business and the fact that it has nearly $3 in cash per share. Portfolio gains came from a variety of industries, although they were primarily limited to traditional cyclical businesses. Printing, transportation and logistics, real estate, banking and insurance all posted modest gains in the first half, managing to hold on to some of their first-quarter gains through the second-quarter downturn. Retail stocks were especially robust, buoyed by consumers who continued to spend with the same determination with which investors abandoned the stock market. The price of closeout merchandiser Big Lots rose throughout the first half, as the combination of strong sales and earnings and Wall Street curiosity had investors lining up for more. Long-time holding Charming Shoppes also reaped the benefits of a stronger-than-expected retail market. We trimmed our position in this well-managed women’s apparel specialist during the first half, though we still hold a good-sized position. We believe that the Fund’s holdings in currently depressed but promising industries, as well as in those that have been performing well, leave it poised to potentially benefit from ongoing market volatility.
| Second Quarter 2002* | –9.18% |
| Jan-Jun 2002* | 0.02 |
| 1-Year | –0.20 |
| 3-Year | 12.68 |
| 5-Year | 11.83 |
| 10-year | 14.27 |
| 15-year | 12.58 |
| Since Inception (11/26/86) | 12.80 |
* | Not annualized. |
| RISK/RETURN COMPARISON 3-Year Period ended 6/30/02 |
|  | Average Annual Total Return | Standard Deviation | RUR* |
| Royce Value Trust (NAV) | 12.7 | 18.6 | 0.68 |
| S&P 600 | 8.4 | 20.9 | 0.40 |
| Russell 2000 | 1.7 | 23.2 | 0.07 |
* | Return per Unit of Risk (RUR) is the average annual total return divided by the annualized standard deviation over a designated time period. |
| Over the last three years, Royce Value Trust has outperformed the S&P 600 and the Russell 2000 on both an absolute and a risk-adjusted basis. |
| CALENDAR YEAR NAV TOTAL RETURNS |
| Year | RVT | Year | RVT |
| 2001 | 15.2% | 1993 | 17.9% |
| 2000 | 16.6 | 1992 | 19.9 |
| 1999 | 11.7 | 1991 | 39.5 |
| 1998 | 3.3 | 1990 | –13.1 |
| 1997 | 27.5 | 1989 | 19.2 |
| 1996 | 15.5 | 1988 | 22.8 |
| 1995 | 22.6 | 1987 | –7.7 |
| 1994 | 1.1 |  |  |
| 10 | THE ROYCE FUNDS SEMIANNUAL REPORT 2002

PERFORMANCE AND PORTFOLIO REVIEW
|  |  |  |  |  |  | PORTFOLIO DIAGNOSTICS
| GOOD IDEAS THAT WORKED Net Realized and Unrealized Gain Year-to-Date Through 6/30/02 |  | Thor Industries — A lousy stock market proved to be no road block for this recreation vehicle and small- to mid-sized bus manufacturer that announced record sales in May and a two-for-one split in June. We sold some of our shares in this Fund in June. Ducommun — Talented management and the ability to prosper in a very competitive industry helped boost the price of this military aircraft component manufacturer. We trimmed our position a few times in the first half, but are otherwise happy to keep holding what we think is a terrific company. |  |  | Median Market Capitalization | $657 million
|  |  | Weighted Average P/E Ratio | 21.5x*
| Thor Industries | $4,408,651 |  |  | Weighted Average P/B Ratio | 1.6x
| Ducommun | 4,128,231 |  |  | Weighted Average Yield | 1.0%
| Big Lots | 3,686,045 |  |  | Fund Net Assets | $839 million
| Curtiss-Wright | 3,126,632 |  |  | Turnover Rate | 15%
| Hilb, Rogal & Hamilton | 3,084,099 |  |  | Net Leverage† | 15%
|  |  |  |  | Symbol – Market Price | RVT
|  |  |  | – NAV | XRVTX
|  |  |  | * Excludes 23% of the portfolio holdings with zero or negative earnings as of 6/30/02.
| GOOD IDEAS AT THE TIME Net Realized and Unrealized Loss Year-to-Date Through 6/30/02 |  | Emisphere Technologies — We still think very highly of this biopharmaceutical firm that develops pill and liquid forms of injectable drugs, in spite of the recent decline in the stock’s price following the late-stage failure of an oral version of a blood-thinning drug. We are holding on to our position. Lattice Semiconductor — We like the attractive niche business of this manufacturer of specialized semiconductors known as programmable logic devices (PLDs), so we built our position amidst plunging prices in the first half. |  |  | † Net leverage is the percentage, in excess of 100%, of the total value of equity type investments, divided by net assets, excluding preferred stock.
| Emisphere Technologies | $3,340,260 |  |
| Lattice Semiconductor | 2,371,102 |
| Applera Corporation - Celera Genomics Group | 2,312,980 |  |  | TOP 10 POSITIONS % of Net Assets
| Time Warner Telecom Cl. A | 2,107,457 |  |  | Farmer Bros. | 1.1%
| Mentor Graphics | 1,927,483 |  |  | Big Lots | 0.9
|  |  |  |  |  |  | ProAssurance | 0.9
|  |  |  |  |  |  | Arrow International | 0.8
|  |  | Avnet | 0.8
|  | Weyco Group | 0.8
|  | American Management Systems | 0.8
|  | Zenith National Insurance | 0.8
|  | White Mountains Insurance Group | 0.8
|  | Ash Grove Cement Company Cl. B | 0.8
|  | PORTFOLIO SECTOR BREAKDOWN % of Net Assets
|  | Technology | 16.3%
|  | Industrial Services | 12.4
|  | Industrial Products | 12.1
|  | Financial Intermediaries | 11.0
|  | Consumer Products | 9.2
|  | Health | 8.3
|  | Natural Resources | 6.6
|  | Consumer Services | 6.3
|  | Financial Services | 5.4
|  | Miscellaneous | 4.6
|  | Bonds & Preferred Stocks | 0.6
|  | Treasuries, Cash & Cash Equivalents | 7.2
|  | CAPITAL STRUCTURE Publicly Traded Securities Outstanding at 6/30/02 at NAV or Liquidation Value
|  | 41.0 million shares of Common Stock | $679 million
|  | 7.80% Cumulative Preferred Stock | $60 million
|  | 7.30% Tax-Advantaged Cumulative Preferred Stock | $100 million
| THE ROYCE FUNDS SEMIANNUAL REPORT 2002 | 11

ROYCE MICRO-CAP TRUST
| NAV AVERAGE ANNUAL TOTAL RETURNS Through 6/30/02 |  | MANAGER’S DISCUSSION R oyce Micro-Cap Trust (OTCM) managed to hang tough in the volatile first half, helped in part by stronger relative performance in the second-quarter downturn, when the Fund lost 5.8% on a net asset value (NAV) basis and 0.7% on a market price basis, both returns ahead of the Fund’s small-cap benchmark, the Russell 2000, which declined 8.4% in the same period. On both an NAV (+5.7%) and market price basis (+13.9%), the Fund outpaced the Russell 2000 in the first half, as the benchmark was down 4.7%. The long-term performance picture was even brighter: From the small-cap market peak on 3/9/00 through 6/30/02, OTCM was up 25.6% on an NAV basis and 44.1% on a market price basis, outperforming the Russell 2000, which was down 21.3% for the same period. The Fund also outperformed the Russell 2000 on an NAV basis for the one-, three-, five-year and since inception (12/14/93) periods ended 6/30/02. The Fund’s average annual NAV total return since inception for the period ended 6/30/02 was 13.8%. Micro-cap stocks have historically been among the most unpredictable of equities, and it might reasonably be expected that the higher levels of volatility in the market would have an especially adverse effect on them. So it is somewhat surprising, and certainly pleasing, that the portfolio as a whole has so far weathered the market’s extremes over the last two-plus years (beginning with the arrival of the bear in March of 2000) more effectively than both their small-cap siblings and their larger-cap counterparts. Because the bottom of the current market cycle cannot be definitively called as of this writing, it is difficult to say whether micro-caps as an asset class will have outperformed during a bear market. However, it is certainly gratifying to know that the sort of fundamentally sound, attractively valued micro-cap companies that we seek for the portfolio have performed well in the current downturn. Investors may have left the market in droves, but enough consumers kept spending to keep the prices of many retail and consumer-oriented stocks climbing through June. La Senza is a Montreal-based apparel maker that markets women’s fashions through the Suzy Shier, L.A. Express and anne.x labels in Canada, England and the U.S. The firm’s strong business attracted Wall Street’s attention as well as additional investors. We continue to hold a large position. The price of discount clothing retailer Stein Mart also displayed some resistance to the bear, helped along by increasing sales. Men’s footwear manufacturer and distributor Weyco Group also refused to let the bear bar its path. The firm completed the acquisition of Florsheim in May. While purchases sometimes cause the buyer’s stock to lose a step, this was not the case in this instance as Weyco’s price rose through the end of June. Other portfolio gains came from commercial industrial services, insurance, oil and gas and energy services, making the first half on balance a good one for traditional cyclical businesses. More volatile sectors, however, saw trouble, especially Technology and Health issues. Plummeting prices led us to slightly increase our exposure to each sector from 12/31/01. Our belief is that each sector should enjoy substantial recovery when capital spending on technology resumes and when biotech rebounds. We increased our stake in interactive internet audio and video company Liberty Livewire, attracted by its growing niche business. E-commerce content and security provider CryptoLogic also endured stock price woes. We like its expanding international business, its new management and its record of profitability, so we increased our position throughout the first half. We think that the Fund’s portfolio is well-positioned for what we believe should be a highly volatile market in the months ahead.
| Second Quarter 2002* | –5.78% |
| Jan-Jun 2002* | 5.69 |
| 1-Year | 7.43 |
| 3-Year | 16.77 |
| 5-Year | 12.17 |
| Since Inception (12/14/93) | 13.82 |
* | Not annualized. |
| RISK/RETURN COMPARISON 3-Year Period ended 6/30/02 |
|  | Average Annual Total Return | Standard Deviation | RUR* |
| Royce Micro-Cap Trust (NAV) | 16.8 | 20.1 | 0.84 |
| Russell 2000 | 1.7 | 23.2 | 0.07 |
* | Return per Unit of Risk (RUR) is the average annual total return divided by the annualized standard deviation over a designated time period. |
| Over the last three years, Royce Micro-Cap Trust has outperformed the Russell 2000 on both an absolute and a risk-adjusted basis. |
| CALENDAR YEAR NAV TOTAL RETURNS |
| Year |  | OTCM |
| 2001 |  | 23.4% |
| 2000 |  | 10.9 |
| 1999 |  | 12.7 |
| 1998 |  | –4.1 |
| 1997 |  | 27.1 |
| 1996 |  | 16.6 |
| 1995 |  | 22.9 |
| 1994 |  | 6.0 |

12 | THE ROYCE FUNDS SEMIANNUAL REPORT 2002

PERFORMANCE AND PORTFOLIO REVIEW
|  |  |  |  |  |  | PORTFOLIO DIAGNOSTICS
| GOOD IDEAS THAT WORKED Net Realized and Unrealized Gain Year-to-Date Through 6/30/02 |  | Ducommun — Talented management and the ability to prosper in a very competitive industry helped boost the price of this military aircraft component manufacturer. We sold some shares in the first half, but are otherwise happy to keep holding what we think is a terrific company. |  |  | Median Market Capitalization | $240 million
|  |  | Weighted Average P/E Ratio | 20.6x*
| Ducommun | $2,183,960 |  |  | Weighted Average P/B Ratio | 1.3x
| Strategic Distribution | 1,771,065 |  |  | Weighted Average Yield | 0.40%
| La Senza Corporation | 1,085,419 |  |  | Fund Net Assets | $250 million
| Thor Industries | 1,070,909 |  |  | Turnover Rate | 18%
| Stein Mart | 1,031,949 |  |  | Net Leverage† | 14%
|  |  |  |  | Symbol – Market Price | OTCM
|  |  |  |  |  |  | – NAV | XOTCX
| Strategic Distribution — The price of this industrial services firm that provides data and supply management services to various businesses climbed throughout the first half, as improved earnings and effective cost-cutting increased the firm’s inventory of investors. |  |  | * Excludes 30% of the portfolio holdings with zero or negative earnings as of 6/30/02.
|  |  | † Net leverage is the percentage, in excess of 100%, of the total value of equity type investments, divided by net assets, excluding preferred stock.
|  |  |  |  |  |  | TOP 10 POSITIONS % of Net Assets
| GOOD IDEAS AT THE TIME Net Realized and Unrealized Loss Year-to-Date Through 6/30/02 |  | Lexicon Genetics — The stock price of this biopharmaceutical company has been steadily falling since January, dragged down in the very difficult market for drug and biotechnology issues. The firm specializes in what it calls gene knockout technology, which is designed to systematically discover the physiological functions and medical uses of genes. We like the growth potential of its business and the fact that it has nearly $3 in cash per share, so we increased our position in the first half. |  |  | Stein Mart | 1.4%
|  |  | Ducommun | 1.1
| Lexicon Genetics | $959,977 |  |  | Weyco Group | 1.1
| Emisphere Technologies | 898,128 |  |  | Ash Grove Cement Company | 1.0
| Fab Industries | 767,056 |  |  | 800 JR Cigar | 1.0
| Liberty Livewire Cl. A | 709,174 |  |  | Seneca Foods | 1.0
| CryptoLogic | 659,940 |  |  | IPC Holdings | 1.0
|  |  |  |  | Wackenhut Corrections | 1.0
|  |  |  |  | Philadelphia Consolidated Holding | 1.0
|  |  |  |  |  |  | Delta Apparel | 0.9
| Emisphere Technologies — We still think very highly of this biopharmaceutical firm that develops pill and liquid forms of injectable drugs, in spite of the recent decline in the stock’s price following the late-stage failure of an oral version of blood-thinning drug. We are holding on to our position. |  |  |
|  |  | PORTFOLIO SECTOR BREAKDOWN % of Net Assets
|  |  | Technology | 20.4%
|  |  | Industrial Services | 13.4
|  |  | Industrial Products | 13.0
|  |  | Consumer Products | 10.8
|  | Health | 8.6
|  | Natural Resources | 8.5
|  | Financial Intermediaries | 7.5
|  | Consumer Services | 5.5
|  | Financial Services | 2.6
|  | Diversified Investment Companies | 0.2
|  | Miscellaneous | 4.8
|  | Preferred Stocks | 0.4
|  | Treasuries, Cash & Cash Equivalents | 4.3
|  | CAPITAL STRUCTURE Publicly Traded Securities Outstanding at 6/30/02 at NAV or Liquidation Value
|  | 17.2 million shares of Common Stock | $210 million
| 7.75% Cumulative Preferred Stock | $40 million

THE ROYCE FUNDS SEMIANNUAL REPORT 2002 | 13

ROYCE FOCUS TRUST
| NAV AVERAGE ANNUAL TOTAL RETURNS Through 6/30/02 |  | MANAGER’S DISCUSSION R oyce Focus Trust’s (FUND) concentrated portfolio of small-cap stocks fared relatively well in the bearish second quarter, narrowly besting its small-cap benchmark, the Russell 2000 (–8.4%), on both a net asset value (NAV) (–7.0%) and market price (–4.2%) basis. In the first half, the Fund was up 0.4% on an NAV basis and 3.0% on a market price basis, both results ahead of the Russell 2000, which lost 4.7% for the same period. 2002’s first half exemplifies how a short-term period of outperformance can be an important part of stronger long-term returns. From the small-cap market peak on 3/9/00 through 6/30/02, the Fund was up 31.2% on an NAV basis and 46.9% on a market price basis, substantially outperforming the Russell 2000, which was down 21.3% for the same period. FUND outperformed the Russell 2000 on an NAV basis for the one-, three-, five-year and since inception of Royce’s management (11/1/96) periods ended 6/30/02. The Fund’s average annual NAV total return for the period since the inception of our management through 6/30/02 was 9.9%. Effective July 2002, Senior Portfolio Manager Whitney George became the Fund’s portfolio manager. He has been actively involved in the Fund’s portfolio activities since the inception of our management. Portfolio gains came primarily from traditional cyclical industries, indicating that, while many value-oriented companies were down, they weren’t out in the tumultuous second-quarter market. This was especially true of retail and other consumer-oriented businesses. The market’s difficulties could not slow down the price of recreation vehicle and small- to mid-sized bus manufacturer Thor Industries, which announced record sales in May and a two-for-one stock split in June. We sold off our position before the end of the first half. Women’s retailer Charming Shoppes is the sort of retailer that we perennially like — well-managed and financially strong. A rising stock price complemented strong sales, so we sold some shares between February and April, though we still hold a good-sized position. Investors seemed to find the combination of growing business and strong earnings particularly tasty, as the price of personal care and nutritional product maker Nu Skin Enterprises rose steadily in the first half. We first bought shares in March and are happy to hold on for now, because we think that this well-managed firm still has room to grow. Industrial-based stocks also performed well. A rising stock price benefited military component manufacturer Curtiss-Wright, so we took some gains from late winter through mid-spring. The price of top-ten position, welding and cutting products manufacturer Lincoln Electric Holdings, was sparked by its growing international business, which helped to offset a sluggish domestic market. The stock price gave back some first-quarter gains in the second quarter, but the firm still was a net positive performer in the first half. Another top-ten holding, facilities services contractor ABM Industries, rode a wave of expanding business to a solid first half, although its price also slumped a bit in the second quarter. Wescast Industries manufactures exhaust manifolds for passenger cars and light trucks. Its solid earnings and strong business helped its price to ride smoothly upward. The price of domestic oil and natural gas exploration company 3TEC Energy did not gush skyward, but the firm’s stock posted modest gains in the first half, as did seismic data acquisition product manufacturer Input/Output. We continue to hold large stakes in each company. Recent struggles in the Technology and Health sectors hindered the Fund’s first-half performance, although we continue to see what we regard as terrific purchase opportunities in these historically volatile areas. Our holdings in these areas, along with those in more traditional cyclical industries, make us confident that the Fund is capable of solid performance over the long term.
| Second Quarter 2002* | –7.00% |
| Jan-Jun 2002* | 0.41 |
| 1-Year | –0.66 |
| 3-Year | 9.68 |
| 5-Year | 7.20 |
| Since Inception (11/1/96)† | 9.89 |
* | Not annualized. |
† | Royce & Associates assumed investment management responsibility for the Fund on 11/1/96. |
| RISK/RETURN COMPARISON 3-Year Period ended 6/30/02 |
|  | Average Annual Total Return | Standard Deviation | RUR* |
| Royce Focus Trust (NAV) | 9.7 | 19.6 | 0.49 |
| Russell 2000 | 1.7 | 23.2 | 0.07 |
* | Return per Unit of Risk (RUR) is the average annual total return divided by the annualized standard deviation over a designated time period. |
| Over the last three years, Royce Focus Trust has outperformed the Russell 2000 on both an absolute and a risk-adjusted basis. |
| CALENDAR YEAR NAV TOTAL RETURNS |
| Year |  |  | FUND |
| 2001 |  |  | 10.0% |
| 2000 |  |  | 20.9 |
| 1999 |  |  | 8.7 |
| 1998 |  |  | –6.8 |
| 1997 |  |  | 20.5 |
| 14 | THE ROYCE FUNDS SEMIANNUAL REPORT 2002

PERFORMANCE AND PORTFOLIO REVIEW
|  |  |  |  |  |  | PORTFOLIO DIAGNOSTICS
| GOOD IDEAS THAT WORKED Net Realized and Unrealized Gain Year-to-Date Through 6/30/02 |  | AngloGold — Rising commodity prices attracted more investors to this international gold mining company. We were initially drawn by its talented management and sterling financial condition. Big Lots — The price of this closeout merchandiser rose throughout the first half, as strong sales and earnings combined with Wall Street attention to make investors line up for more. |  |  | Median Market Capitalization | $689 million
|  |  | Weighted Average P/E Ratio | 20.2x*
| AngloGold | $1,041,116 |  |  | Weighted Average P/B Ratio | 1.7x
| Big Lots | 876,060 |  |  | Weighted Average Yield | 1.00%
| Thor Industries | 866,779 |  |  | Fund Net Assets | $87 million
| Charming Shoppes | 674,134 |  |  | Turnover Rate | 16%
| Curtiss-Wright | 622,186 |  |  | Net Leverage† | 0%
|  |  |  |  | Symbol – Market Price | FUND
|  |  |  |  |  | – NAV | XFUNX
|  |  |  |  | * Excludes 14% of the portfolio holdings with zero or negative earnings as of 6/30/02.
|  |  |  |  |  |  | † Net leverage is the percentage, in excess of 100%, of the total value of equity type investments, divided by net assets, excluding preferred stock.
|  |  |  |  |  |  | TOP 10 POSITIONS % of Net Assets
| GOOD IDEAS AT THE TIME Net Realized and Unrealized Loss Year-to-Date Through 6/30/02 |  | Perot Systems — The price of this technology and business consultant plummeted in May after the company was accused of price manipulations in the California energy market. Our sense is that the firm will survive the imbroglio and resume its place as a leader and innovator in its field. |  |  | Lincoln Electric Holdings | 3.1%
|  |  | Tom Brown | 2.6
| Perot Systems Cl. A | $1,170,735 |  |  | ProAssurance | 2.5
| Lexicon Genetics | 1,020,625 |  |  | Florida Rock Industries | 2.5
| E*TRADE Group | 840,546 |  |  | ABM Industries | 2.4
| Applera Corporation - |  |  |  | 3TEC Energy | 2.4
| Celera Genomics Group | 596,406 |  |  | Simpson Manufacturing | 2.3
| Kronos | 496,475 |  |  | Avnet | 2.3
|  |  |  |  | Input/Output | 2.2
| Lexicon Genetics — The stock price of this biopharmaceutical company has been steadily falling since January, dragged down in the very difficult market for drug and biotechnology issues. The firm specializes in what it calls gene knockout technology, which is designed to systematically discover the physiological functions and medical uses of genes. We like the growth potential of its business and the fact that it has nearly $3 in cash per share, so we increased our position in the first half. |  |  | Wescast Industries | 2.2
|  |  | PORTFOLIO SECTOR BREAKDOWN % of Net Assets
|  |  | Technology | 16.6%
|  |  | Industrial Products | 11.1
|  |  | Health | 8.7
|  | Industrial Services | 8.6
|  | Natural Resources | 8.5
|  | Financial Intermediaries | 7.3
|  | Consumer Services | 4.6
|  | Consumer Products | 4.3
|  | Financial Services | 3.6
|  | Treasuries, Cash & Cash Equivalents | 26.7
|  | CAPITAL STRUCTURE Publicly Traded Securities Outstanding at 6/30/02 at NAV or Liquidation Value
|  | 9.2 million shares of Common Stock | $67 million
|  | 7.45% Cumulative Preferred Stock | $20 million
| THE ROYCE FUNDS SEMIANNUAL REPORT 2002 | 15

DISTRIBUTION REINVESTMENT AND CASH PURCHASE OPTIONS FOR COMMON STOCKHOLDERS
| 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 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, EquiServe, in writing. A registered stockholder also has the option to receive the distribution in the form of a stock certificate or in cash if EquiServe 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 EquiServe on a monthly basis, and to deposit certificates representing your Fund shares with EquiServe for safekeeping. The Funds’ investment adviser is absorbing all commissions on optional cash purchases under the Plans through December 31, 2002.
| HOW DO THE PLANS WORK FOR REGISTERED STOCKHOLDERS? EquiServe 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 EquiServe 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 EquiServe 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, EquiServe 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 EquiServe. All correspondence (including notifications) should be directed to: [Name of Fund] Distribution Reinvestment and Cash Purchase Plan, c/o EquiServe, PO Box 43011, Providence, RI 02940-3011, telephone (800) 426-5523.

16 | THE ROYCE FUNDS SEMIANNUAL REPORT 2002

UPDATES AND NOTES TO PERFORMANCE AND RISK INFORMATION
| AUTHORIZED SHARE TRANSACTIONS Each of Royce Value Trust, Royce Micro-Cap Trust and Royce Focus Trust may repurchase up to 300,000 shares of its common stock and up to 10% of the issued and outstanding shares of each series of its preferred stock during the year ending December 31, 2002. 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.

|  | NOTES TO PERFORMANCE AND RISK INFORMATION
|  | All performance information is presented on a total return basis and reflects the reinvestment of distributions. Past performance is no guarantee of future results. Share prices will fluctuate, so that shares may be worth more or less than their original cost when sold. Royce closed-end funds invest primarily in securities of small-cap and/or micro-cap companies that may involve considerably more risk than investments in securities of larger-cap companies. The thoughts expressed in this report concerning recent market movements and future prospects for small-cap company stocks are solely those of Royce, and, of course, historical market trends are not necessarily indicative of future market movements. Statements regarding the future prospects for particular securities held in the Funds’ portfolios and Royce’s investment intentions with respect to those securities reflect Royce’s opinions as of June 30, 2002, and are subject to change at any time without notice. There can be no assurance that securities mentioned in this report will be included in any Royce-managed portfolio in the future.
|  | 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 Funds’ P/E ratio calculations exclude companies with zero or negative earnings.
|  | The Russell 2000, Russell 2000 Value, Russell 2000 Growth, Nasdaq Composite, S&P 500 and S&P 600 SmallCap are unmanaged indices of domestic common stocks. The Royce Funds is a service mark of The Royce Funds.

THE ROYCE FUNDS SEMIANNUAL REPORT 2002 | 17

ROYCE VALUE TRUST, INC.
SCHEDULE OF INVESTMENTS | JUNE 30, 2002 (UNAUDITED)
COMMON STOCKS – 92.2% |  |  |  |  |  |  |  |  |  |
| SHARES |  |  | VALUE |  |  | SHARES |  |  | VALUE
Consumer Products – 9.2% |  |  |  |  |  | Shuffle Master a | 25,000 |  | $ | 459,250
Apparel and Shoes - 3.5% |  |  |  |  |  | Ticketmaster Cl. B a | 274,000 |  |  | 5,126,540
Garan | 46,900 |  | $ | 2,713,165 |  |  |  |  |
Jones Apparel Group a | 81,500 |  |  | 3,056,250 |  |  |  |  |  | 6,827,988
K-Swiss Cl. A | 169,000 |  |  | 4,390,620 |  |  |  |  |
Nautica Enterprises a | 85,700 |  |  | 1,113,243 |  | Restaurants/Lodgings - 0.5% |  |  |  |
Oshkosh B’Gosh Cl. A | 104,300 |  |  | 4,535,997 |  | Four Seasons Hotels | 10,000 |  |  | 469,000
Polo Ralph Lauren Cl. A a | 186,100 |  |  | 4,168,640 |  | IHOP Corporation a | 86,700 |  |  | 2,553,315
Timberland Company Cl. A a | 15,000 |  |  | 537,300 |  | Prime Hospitality a | 96,400 |  |  | 1,252,236
Tommy Hilfiger a | 20,000 |  |  | 286,400 |  | Ryan’s Family Steak Houses a | ,300 |  |  | 3,963
Weyco Group | 167,664 |  |  | 6,703,207 |  |  |  |  |
Wolverine World Wide | 99,400 |  |  | 1,734,530 |  |  |  |  |  | 4,278,514
|  |  |  | 29,239,352 |  | Retail Stores - 3.9% |  |  |  |
|  |  |  |  | Big Lots a | 392,200 |  |  | 7,718,496
Collectibles - 0.3% |  |  |  |  |  | Charming Shoppes a | 646,700 |  |  | 5,587,488
The Boyds Collection a | 210,100 |  |  | 1,321,529 |  | Claire’s Stores | 127,700 |  |  | 2,924,330
Enesco Group a | 172,200 |  |  | 1,505,028 |  | Payless ShoeSource a | 98,200 |  |  | 5,661,230
|  |  |  |  | Ross Stores | 134,500 |  |  | 5,480,875
|  |  |  | 2,826,557 |  | Stein Mart a | 192,800 |  |  | 2,288,536
|  |  |  |  | Urban Outfitters a | 89,000 |  |  | 3,090,080
Food/Beverage/Tobacco-0.6% |  |  |  |  |  |  |  |  |
800 JR Cigar a,d | 172,400 |  |  | 2,241,200 |  |  |  |  |  | 32,751,035
Hain Celestial Group a | 37,800 |  |  | 699,300 |  |  |  |  |
Hershey Creamery | 709 |  |  | 1,226,570 |  | Other Consumer Services - 1.1% |  |  |  |
Tootsie Roll Industries | 14,204 |  |  | 547,706 |  | ITT Educational Services a | 120,000 |  |  | 2,616,000
|  |  |  |  | Sotheby’s Holdings Cl. A a | 405,200 |  |  | 5,774,100
|  |  |  | 4,714,776 |  | Strayer Education | 10,000 |  |  | 636,000
Home Furnishing/Appliances - 1.1% |  |  |  |  |  |  |  |  |  | 9,026,100
Bassett Furniture Industries | 116,675 |  |  | 2,275,046 |  |  |  |  |
Falcon Products a | 377,000 |  |  | 2,299,700 |  | Total (Cost $36,842,530) |  |  |  | 52,883,637
La-Z-Boy | 68,200 |  |  | 1,720,004 |  |  |  |  |
Lifetime Hoan | 295,327 |  |  | 2,107,690 |  | Financial Intermediaries – 11.0% |  |  |  |
Natuzzi ADR b | 62,200 |  |  | 944,818 |  | Banking - 2.0% |  |  |  |
|  |  |  |  | BOK Financial a | 121,904 |  |  | 4,078,908
|  |  |  | 9,347,258 |  | Farmers & Merchants Bank of Long Beach | 1,266 |  |  | 3,861,300
|  |  |  |  | First National Bank Alaska | 2,130 |  |  | 2,918,100
Publishing - 0.5% |  |  |  |  |  | Hudson City Bancorp | 80,000 |  |  | 1,592,000
Martha Stewart Living Omnimedia Cl. A a | 200,200 |  |  | 2,296,294 |  | Mechanics Bank | 200 |  |  | 3,160,000
Marvel Enterprises a | 364,400 |  |  | 1,996,912 |  | Oriental Financial Group | 63,800 |  |  | 1,617,968
|  |  |  | 4,293,206 |  |  |  |  |  | 17,228,276
Sports and Recreation - 1.3% |  |  |  |  |  | Insurance - 8.8% |  |  |  |
Callaway Golf | 60,000 |  |  | 950,400 |  | Argonaut Group | 187,000 |  |  | 4,005,540
Coachmen Industries | 182,700 |  |  | 2,649,150 |  | Baldwin & Lyons Cl. B | 126,000 |  |  | 2,876,580
Fleetwood Enterprises a | 152,300 |  |  | 1,325,010 |  | Erie Indemnity Company Cl. A | 157,900 |  |  | 6,396,529
Monaco Coach a | 74,050 |  |  | 1,577,265 |  | Everest Re Group | 45,300 |  |  | 2,534,535
Sturm, Ruger & Co. | 258,400 |  |  | 3,656,360 |  | Fidelity National Financial | 33,275 |  |  | 1,051,490
Thor Industries | 11,050 |  |  | 787,423 |  | First American | 41,700 |  |  | 959,100
|  |  |  |  | HCC Insurance Holdings | 78,700 |  |  | 2,073,745
|  |  |  | 10,945,608 |  | Horace Mann Educators | 91,000 |  |  | 1,698,970
|  |  |  |  | Leucadia National | 65,900 |  |  | 2,086,394
Other Consumer Products - 1.9% |  |  |  |  |  | MBIA | 24,900 |  |  | 1,407,597
Burnham Corporation Cl. A | 46,956 |  |  | 1,760,850 |  | Markel Corporation a | 4,200 |  |  | 827,400
Burnham Corporation Cl. B | 18,000 |  |  | 675,000 |  | Mercury General | 43,500 |  |  | 2,109,750
Lazare Kaplan International a | 103,600 |  |  | 740,740 |  | NYMAGIC a | 60,200 |  |  | 918,050
Matthews International Cl. A | 221,000 |  |  | 5,160,350 |  | Navigators Group a | 83,200 |  |  | 2,228,096
Starrett (L.S.) Company Cl. A | 75,400 |  |  | 1,903,850 |  | Old Republic International | 109,200 |  |  | 3,439,800
Velcro Industries | 525,800 |  |  | 5,271,145 |  | PMA Capital Cl. A | 241,700 |  |  | 5,111,955
|  |  |  |  | PXRE Group | 176,551 |  |  | 4,095,983
|  |  |  | 15,511,935 |  | The Phoenix Companies | 81,900 |  |  | 1,502,865
|  |  |  |  | ProAssurance a | 428,070 |  |  | 7,534,032
Total (Cost $46,610,791) |  |  |  | 76,878,692 |  | RLI | 61,362 |  |  | 3,129,462
|  |  |  |  | Reinsurance Group of America | 30,000 |  |  | 924,600
Consumer Services – 6.3% |  |  |  |  |  | Wesco Financial | 11,990 |  |  | 3,616,184
Leisure/Entertainment - 0.8% |  |  |  |  |  | White Mountains Insurance Group | 20,600 |  |  | 6,519,900
Corus Entertainment Cl. B a | 22,000 |  |  | 387,860 |  | Zenith National Insurance | 206,900 |  |  | 6,589,765
Hearst-Argyle Television a | 17,000 |  |  | 383,350 |  |  |  |  |
Liberty Livewire Cl. A a | 160,200 |  |  | 470,988 |  |  |  |  |  | 73,638,322
18 | THE ROYCE FUNDS SEMIANNUAL REPORT 2002

ROYCE VALUE TRUST, INC.
SCHEDULE OF INVESTMENTS | JUNE 30, 2002 (UNAUDITED)
| SHARES |  |  | VALUE |  |  | SHARES |  |  | VALUE
Financial Intermediaries (continued) |  |  |  |  |  | Lexicon Genetics a | 256,200 |  | $ | 1,252,562
Securities Brokers - 0.2% |  |  |  |  |  | Millennium Pharmaceuticals a | 24,000 |  |  | 291,600
E*TRADE Group a | 170,000 |  | $ | 928,200 |  | Organogenesis a | 363,500 |  |  | 72,700
Instinet Group a | 108,000 |  |  | 704,160 |  | Shire Pharmaceuticals Group ADR a,b | 20,853 |  |  | 538,216
|  |  |  | 1,632,360 |  |  |  |  |  | 15,320,883
Total (Cost $56,741,903) |  |  |  | 92,498,958 |  | Health Services - 1.4% |  |  |  |
|  |  |  |  | Covance a | 270,200 |  |  | 5,066,250
Financial Services – 5.4% |  |  |  |  |  | DIANON Systems a | 10,000 |  |  | 534,200
Information and Processing - 0.9% |  |  |  |  |  | Gentiva Health Services a | 30,150 |  |  | 271,049
BARRA a | 52,200 |  |  | 1,940,796 |  | Health Management Associates Cl. A a | 27,400 |  |  | 552,110
eFunds Corporation a | 177,675 |  |  | 1,685,958 |  | Lincare Holdings a | 44,600 |  |  | 1,440,580
Global Payments | 41,500 |  |  | 1,234,625 |  | Manor Care a | 63,300 |  |  | 1,455,900
Moody’s Corporation | 50,000 |  |  | 2,487,500 |  | MedQuist a | 73,893 |  |  | 1,967,771
SEI Investments | 12,000 |  |  | 338,040 |  |  |  |  |
|  |  |  |  |  |  |  |  | 11,287,860
|  |  |  | 7,686,919 |  |  |  |  |
|  |  |  |  | Personal Care - 1.2% |  |  |  |
Insurance Brokers - 1.8% |  |  |  |  |  | Chattem a | 85,400 |  |  | 2,690,100
Brown & Brown | 20,000 |  |  | 630,000 |  | Ocular Sciences a | 167,500 |  |  | 4,438,750
Clark/Bardes a | 95,900 |  |  | 2,190,356 |  | Regis | 112,200 |  |  | 3,031,532
Crawford & Co. Cl. A | 327,350 |  |  | 2,013,202 |  |  |  |  |
Crawford & Co. Cl. B | 75,300 |  |  | 609,930 |  |  |  |  |  | 10,160,382
Gallagher (Arthur J.) & Company | 99,200 |  |  | 3,437,280 |  |  |  |  |
Hilb, Rogal & Hamilton | 135,350 |  |  | 6,124,587 |  | Surgical Products and Devices - 2.3% |  |  |  |
|  |  |  |  | Arrow International | 180,600 |  |  | 7,052,430
|  |  |  | 15,005,355 |  | CONMED a | 28,500 |  |  | 636,405
|  |  |  |  | Datascope | 25,000 |  |  | 691,000
Investment Management - 2.5% |  |  |  |  |  | Haemonetics a | 112,900 |  |  | 3,296,680
Affiliated Managers Group a | 60,000 |  |  | 3,690,000 |  | Invacare | 67,000 |  |  | 2,479,000
Alliance Capital Management Holding L.P. | 135,000 |  |  | 4,623,750 |  | Novoste a | 66,500 |  |  | 307,230
BKF Capital Group a | 94,000 |  |  | 2,679,000 |  | STERIS a | 33,600 |  |  | 642,096
BlackRock Cl. A a | 45,000 |  |  | 1,993,500 |  | Varian Medical Systems a | 85,800 |  |  | 3,479,190
Eaton Vance | 115,200 |  |  | 3,594,240 |  | Zoll Medical a | 20,200 |  |  | 657,106
Federated Investors Cl. B | 15,000 |  |  | 518,550 |  |  |  |  |
John Nuveen Company Cl. A | 154,200 |  |  | 3,962,940 |  |  |  |  |  | 19,241,137
|  |  |  | 21,061,980 |  | Total (Cost $58,400,795) |  |  |  | 69,379,486
Other Financial Services - 0.2% |  |  |  |  |  | Industrial Products – 12.1% |  |  |  |
PRG-Schultz International a | 123,800 |  |  | 1,523,978 |  | Building Systems and Components - 1.5% |  |  |  |
|  |  |  |  | Decker Manufacturing | 6,022 |  |  | 204,748
Total (Cost $25,182,436) |  |  |  | 45,278,232 |  | Preformed Line Products Company | 131,600 |  |  | 2,434,468
|  |  |  |  | Simpson Manufacturing a | 100,200 |  |  | 5,724,426
Health – 8.3% |  |  |  |  |  | Skyline | 123,400 |  |  | 4,072,200
Commercial Services - 1.6% |  |  |  |  |  |  |  |  |
IDEXX Laboratories a | 69,100 |  |  | 1,782,089 |  |  |  |  |  | 12,435,842
PAREXEL International a | 277,700 |  |  | 3,862,807 |  |  |  |  |
Perrigo a | 169,900 |  |  | 2,208,700 |  | Construction Materials - 2.0% |  |  |  |
Pharmaceutical Product Development a | 10,000 |  |  | 263,400 |  | Ameron International | 13,000 |  |  | 939,250
Quintiles Transnational a | 140,300 |  |  | 1,752,347 |  | Ash Grove Cement Company Cl. B | 50,518 |  |  | 6,516,822
Sybron Dental Specialties a | 21,000 |  |  | 388,500 |  | Florida Rock Industries | 158,800 |  |  | 5,686,628
The TriZetto Group a | 166,900 |  |  | 1,426,995 |  | Puerto Rican Cement Company | 105,200 |  |  | 3,682,000
Young Innovations a | 77,550 |  |  | 1,684,386 |  |  |  |  |
|  |  |  |  |  |  |  |  | 16,824,700
|  |  |  | 13,369,224 |  |  |  |  |
|  |  |  |  | Industrial Components - 1.1% |  |  |  |
Drugs and Biotech - 1.8% |  |  |  |  |  | Belden | 47,800 |  |  | 996,152
Abgenix a | 38,000 |  |  | 372,400 |  | Cable Design Technologies a | 15,000 |  |  | 153,750
Affymetrix a | 78,600 |  |  | 1,885,614 |  | Penn Engineering & Manufacturing | 257,600 |  |  | 4,487,392
Antigenics a | 38,500 |  |  | 379,225 |  | Penn Engineering & Manufacturing Cl. A | 79,600 |  |  | 1,317,380
Applera Corporation-Celera Genomics Groupa | 199,200 |  |  | 2,390,400 |  | PerkinElmer | 135,000 |  |  | 1,491,750
Biopure Corporation Cl. A a | 43,200 |  |  | 330,480 |  | Woodhead Industries | 45,400 |  |  | 778,156
Celgene Corporation a | 40,000 |  |  | 612,000 |  |  |  |  |
Cerus Corporation a | 21,700 |  |  | 735,196 |  |  |  |  |  | 9,224,580
Chiron Corporation a | 21,800 |  |  | 770,630 |  |  |  |  |
Emisphere Technologies a | 120,500 |  |  | 504,895 |  | Machinery - 2.5% |  |  |  |
Gene Logic a | 235,400 |  |  | 3,295,600 |  | Ampco-Pittsburgh | 5,000 |  |  | 60,000
Genzyme Corporation - General Division a | 28,000 |  |  | 538,720 |  | Coherent a | 183,700 |  |  | 5,509,163
IDEC Pharmaceuticals a | 38,100 |  |  | 1,350,645 |  | Federal Signal | 58,600 |  |  | 1,406,400
|  |  |  |  |  | Graco | 26,550 |  |  | 667,467
|  |  |  |  |  | Lincoln Electric Holdings | 237,880 |  |  | 6,398,972
THE ROYCE FUNDS SEMIANNUAL REPORT 2002 | 19

ROYCE VALUE TRUST, INC.
SCHEDULE OF INVESTMENTS | JUNE 30, 2002 (UNAUDITED)
|  | SHARES |  |  | VALUE |  |  |  | SHARES |  |  | VALUE
Industrial Products (continued) |  |  |  |  |  |  | MPS Group a |  | 144,300 |  | $ | 1,226,550
Machinery (continued) |  |  |  |  |  |  | Manpower |  | 55,800 |  |  | 2,050,650
Mueller (Paul) |  | 53,200 |  | $ | 1,715,700 |  | MAXIMUS a |  | 28,000 |  |  | 887,600
Nordson Corporation |  | 93,000 |  |  | 2,293,380 |  | New Horizons Worldwide a |  | 111,500 |  |  | 1,136,185
Oshkosh Truck |  | 5,000 |  |  | 295,550 |  | On Assignment a |  | 78,800 |  |  | 1,402,640
PAXAR a |  | 175,100 |  |  | 2,932,925 |  | RemedyTemp Cl. A a |  | 78,500 |  |  | 1,428,700
|  |  |  |  |  | Spherion Corporation a |  | 109,000 |  |  | 1,297,100
|  |  |  |  | 21,279,557 |  | TMP Worldwide a |  | 24,000 |  |  | 516,000
Pumps, Valves and Bearings - 1.3% |  |  |  |  |  |  |  |  |  |  |  | 29,022,458
Baldor Electric |  | 62,900 |  |  | 1,585,080 |  |  |  |  |  |
ConBraCo Industries a |  | 7,630 |  |  | 1,640,450 |  | Engineering and Construction - 0.2% |  |  |  |  |
Denison International ADR a,b |  | 89,400 |  |  | 1,658,370 |  | Clayton Homes |  | 25,000 |  |  | 395,000
Franklin Electric |  | 23,600 |  |  | 1,110,852 |  | Jacobs Engineering Group a |  | 20,000 |  |  | 695,600
Kaydon Corporation |  | 161,200 |  |  | 3,805,932 |  | McDermott International a |  | 71,000 |  |  | 575,100
NN |  | 127,100 |  |  | 1,626,880 |  | Todd Shipyards a |  | 39,200 |  |  | 491,960
|  |  |  |  | 11,427,564 |  |  |  |  |  |  | 2,157,660
Specialty Chemicals and Materials - 1.5% |  |  |  |  |  |  | Food/Tobacco Processors - 2.1% |  |  |  |  |
Aceto |  | 60,010 |  |  | 639,761 |  | Farmer Bros. |  | 26,000 |  |  | 9,432,020
Arch Chemicals |  | 38,200 |  |  | 943,540 |  | Midwest Grain Products |  | 321,200 |  |  | 4,172,388
Brady Corporation Cl. A |  | 79,400 |  |  | 2,779,000 |  | Seaboard |  | 2,650 |  |  | 658,393
CFC International a |  | 123,500 |  |  | 554,515 |  | Universal |  | 89,000 |  |  | 3,266,300
Calgon Carbon |  | 50,000 |  |  | 420,000 |  |  |  |  |  |
Donaldson Company |  | 26,000 |  |  | 911,040 |  |  |  |  |  |  | 17,529,101
Hawkins |  | 301,278 |  |  | 2,813,937 |  |  |  |  |  |
MacDermid |  | 149,131 |  |  | 3,206,316 |  | Industrial Distribution - 0.8% |  |  |  |  |
|  |  |  |  |  | Central Steel & Wire |  | 3,699 |  |  | 1,941,975
|  |  |  |  | 12,268,109 |  | Ritchie Bros. Auctioneers a |  | 155,200 |  |  | 4,843,792
Textiles - 0.4% |  |  |  |  |  |  |  |  |  |  |  | 6,785,767
Fab Industries a |  | 67,700 |  |  | 552,432 |  |  |  |  |  |
Unifi a |  | 245,100 |  |  | 2,671,590 |  | Printing - 2.3% |  |  |  |  |
|  |  |  |  |  | Bowne & Co. |  | 383,100 |  |  | 5,646,894
|  |  |  |  | 3,224,022 |  | Ennis Business Forms |  | 393,100 |  |  | 5,129,955
|  |  |  |  |  | Moore Corporation a |  | 125,700 |  |  | 1,443,036
Other Industrial Products - 1.8% |  |  |  |  |  |  | New England Business Service |  | 178,300 |  |  | 4,482,462
BHA Group Holdings a |  | 187,252 |  |  | 3,061,570 |  | Standard Register (The) |  | 68,710 |  |  | 2,349,195
Diebold |  | 100,000 |  |  | 3,724,000 |  |  |  |  |  |
IMPCO Technologies a |  | 15,500 |  |  | 203,050 |  |  |  |  |  |  | 19,051,542
Kimball International Cl. B |  | 334,880 |  |  | 5,488,683 |  |  |  |  |  |
Myers Industries |  | 42,182 |  |  | 723,000 |  | Transportation and Logistics - 2.6% |  |  |  |  |
Open Plan Systems a,c |  | 376,000 |  |  | 11,280 |  | Airborne |  | 100,000 |  |  | 1,920,000
Steelcase Cl. A |  | 32,500 |  |  | 434,850 |  | AirNet Systems a |  | 121,800 |  |  | 1,035,300
Trinity Industries |  | 20,000 |  |  | 414,400 |  | Atlas Air Worldwide Holdings a |  | 65,000 |  |  | 240,500
Wescast Industries Cl. A |  | 28,000 |  |  | 991,200 |  | C.H. Robinson Worldwide |  | 40,000 |  |  | 1,341,200
|  |  |  |  |  | CNF |  | 62,600 |  |  | 2,377,548
|  |  |  |  | 15,052,033 |  | EGL a |  | 198,525 |  |  | 3,366,984
|  |  |  |  |  | Hub Group Cl. A a |  | 77,000 |  |  | 712,250
Total (Cost $67,993,314) |  |  |  |  | 101,736,407 |  | Landstar System a |  | 19,400 |  |  | 2,072,890
|  |  |  |  |  | Patriot Transportation Holding a,c |  | 166,300 |  |  | 4,490,100
Industrial Services – 12.4% |  |  |  |  |  |  | Pittston Brink’s Group |  | 156,213 |  |  | 3,749,112
Advertising/Publishing - 0.3% |  |  |  |  |  |  | UTI Worldwide |  | 45,000 |  |  | 889,650
Grey Global Group |  | 3,817 |  |  | 2,633,768 |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  | 22,195,534
Commercial Services - 3.5% |  |  |  |  |  |  |  |  |  |  |
ABM Industries |  | 137,000 |  |  | 2,378,320 |  | Other Industrial Services - 0.6% |  |  |  |  |
Allied Waste Industries a |  | 294,800 |  |  | 2,830,080 |  | Landauer |  | 117,900 |  |  | 4,578,057
American Bank Note Holographics a |  | 500 |  |  | 660 |  | Republic Services a |  | 18,600 |  |  | 354,702
CDI Corporation a |  | 128,100 |  |  | 4,169,655 |  |  |  |  |  |
Carlisle Holdings a |  | 634,900 |  |  | 1,872,955 |  |  |  |  |  |  | 4,932,759
Catalina Marketing a |  | 12,200 |  |  | 344,284 |  |  |  |  |  |
Central Parking |  | 24,200 |  |  | 552,970 |  | Total (Cost $71,205,285) |  |  |  |  | 104,308,589
Cornell Companies a |  | 124,400 |  |  | 1,474,140 |  |  |  |  |  |
Fisher Communications |  | 4,096 |  |  | 240,517 |  | Natural Resources – 6.6% |  |  |  |  |
iGATE Corporation a |  | 77,200 |  |  | 356,664 |  | Energy Services - 2.5% |  |  |  |  |
Iron Mountain a |  | 112,450 |  |  | 3,469,082 |  | Carbo Ceramics |  | 105,600 |  |  | 3,901,920
Korn/Ferry International a |  | 43,700 |  |  | 397,670 |  | Chiles Offshore a |  | 31,300 |  |  | 759,025
Learning Tree International a |  | 53,400 |  |  | 990,036 |  | Global Industries a |  | 119,500 |  |  | 835,305
|  |  |  |  |  |  | Helmerich & Payne |  | 98,400 |  |  | 3,514,848
|  |  |  |  |  |  | Input/Output a |  | 431,600 |  |  | 3,884,400
|  |  |  |  |  |  | Peerless Mfg. a,c |  | 158,600 |  |  | 2,696,026
|  |  |  |  |  |  | Precision Drilling a |  | 37,500 |  |  | 1,302,750
20 | THE ROYCE FUNDS SEMIANNUAL REPORT 2002

ROYCE VALUE TRUST, INC.
SCHEDULE OF INVESTMENTS | JUNE 30, 2002 (UNAUDITED)
|  | SHARES |  |  | VALUE |  |  |  | SHARES |  |  | VALUE
Natural Resources (continued) |  |  |  |  |  |  | Symbol Technologies |  | 119,900 |  | $ | 1,019,150
Energy Services (continued) |  |  |  |  |  |  | Technitrol |  | 145,900 |  |  | 3,399,470
Tidewater |  | 21,600 |  | $ | 711,072 |  | Zebra Technologies Cl. A a |  | 51,700 |  |  | 2,492,974
Willbros Group a |  | 189,100 |  |  | 3,214,700 |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  | 28,052,129
|  |  |  |  | 20,820,046 |  |  |  |  |  |
|  |  |  |  |  | Distribution - 2.4% |  |  |  |  |
Oil and Gas - 1.8% |  |  |  |  |  |  | Anixter International a |  | 41,900 |  |  | 984,650
Tom Brown a |  | 51,000 |  |  | 1,445,850 |  | Arrow Electronics a |  | 86,100 |  |  | 1,786,575
Denbury Resources a |  | 432,600 |  |  | 4,451,454 |  | Avnet a |  | 305,355 |  |  | 6,714,756
EOG Resources |  | 5,000 |  |  | 198,500 |  | Benchmark Electronics a |  | 45,400 |  |  | 1,316,600
PetroCorp a |  | 124,400 |  |  | 1,192,996 |  | Pioneer-Standard Electronics |  | 158,125 |  |  | 1,642,919
Pure Resources a |  | 206,132 |  |  | 4,287,546 |  | Plexus a |  | 233,600 |  |  | 4,228,160
3TEC Energy a |  | 142,000 |  |  | 2,475,060 |  | Richardson Electronics |  | 190,300 |  |  | 2,041,919
Toreador Resources a |  | 100,300 |  |  | 408,221 |  | Tech Data a |  | 37,500 |  |  | 1,419,375
Vintage Petroleum |  | 48,300 |  |  | 574,770 |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  | 20,134,954
|  |  |  |  | 15,034,397 |  |  |  |  |  |
|  |  |  |  |  | Internet Software and Services - 0.4% |  |  |  |  |
Precious Metals and Mining - 0.8% |  |  |  |  |  |  | CNET Networks a |  | 182,400 |  |  | 362,976
AngloGold ADR b |  | 177,900 |  |  | 4,639,632 |  | CryptoLogic a |  | 124,000 |  |  | 1,087,480
Barrick Gold |  | 26,500 |  |  | 503,235 |  | DoubleClick a |  | 196,700 |  |  | 1,426,075
Gold Fields ADR b |  | 98,800 |  |  | 1,108,536 |  | RealNetworks a |  | 85,400 |  |  | 347,578
MK Gold a |  | 517,900 |  |  | 341,814 |  | Vastera a |  | 15,000 |  |  | 65,850
|  |  |  |  | 6,593,217 |  |  |  |  |  |  | 3,289,959
Real Estate - 1.5% |  |  |  |  |  |  | IT Services - 2.3% |  |  |  |  |
Alico |  | 52,000 |  |  | 1,528,280 |  | American Management Systems a |  | 346,900 |  |  | 6,629,259
Chelsea Property Group |  | 75,000 |  |  | 2,508,750 |  | answerthink a |  | 351,100 |  |  | 1,330,669
Consolidated-Tomoka Land |  | 13,564 |  |  | 271,958 |  | CGI Group Cl. A a |  | 106,700 |  |  | 486,552
Public Storage |  | 45,000 |  |  | 1,669,500 |  | Cognizant Technology Solutions a |  | 20,000 |  |  | 1,075,000
Trammell Crow Company a |  | 447,400 |  |  | 6,464,930 |  | Covansys Corporation a |  | 74,300 |  |  | 417,566
|  |  |  |  |  | DiamondCluster International Cl. A a |  | 218,900 |  |  | 1,309,022
|  |  |  |  | 12,443,418 |  | Forrester Research a |  | 36,500 |  |  | 708,063
|  |  |  |  |  | Gartner Cl. A a |  | 166,000 |  |  | 1,676,600
Total (Cost $32,834,701) |  |  |  |  | 54,891,078 |  | Perot Systems Cl. A a |  | 115,100 |  |  | 1,253,439
|  |  |  |  |  | QRS Corporation a |  | 57,500 |  |  | 447,925
Technology – 16.3% |  |  |  |  |  |  | Sapient Corporation a |  | 1,069,400 |  |  | 1,133,564
Aerospace/Defense - 2.3% |  |  |  |  |  |  | Syntel a |  | 65,300 |  |  | 807,108
Curtiss-Wright |  | 71,800 |  |  | 5,744,000 |  | Unisys Corporation a |  | 195,000 |  |  | 1,755,000
Ducommun a |  | 226,300 |  |  | 5,938,112 |  |  |  |  |  |
Herley Industries a |  | 30,000 |  |  | 636,300 |  |  |  |  |  |  | 19,029,767
Integral Systems a |  | 84,800 |  |  | 1,850,336 |  |  |  |  |  |
Special Metals a |  | 420,600 |  |  | 126,180 |  | Semiconductors and Equipment - 2.5% |  |  |  |  |
Woodward Governor |  | 83,600 |  |  | 4,942,432 |  | BE Semiconductor Industries a |  | 58,000 |  |  | 370,620
|  |  |  |  |  | Cabot Microelectronics a |  | 28,000 |  |  | 1,208,480
|  |  |  |  | 19,237,360 |  | Credence Systems a |  | 10,600 |  |  | 188,362
|  |  |  |  |  | Cymer a |  | 14,500 |  |  | 508,080
Components and Systems - 3.4% |  |  |  |  |  |  | DuPont Photomasks a |  | 35,000 |  |  | 1,136,800
Adaptec a |  | 99,500 |  |  | 785,055 |  | Electroglas a |  | 210,200 |  |  | 2,102,000
Advanced Digital Information a |  | 90,000 |  |  | 758,700 |  | Exar a |  | 62,300 |  |  | 1,228,556
American Power Conversion a |  | 111,200 |  |  | 1,404,456 |  | Fairchild Semiconductor Cl. A a |  | 98,000 |  |  | 2,381,400
Analogic |  | 17,800 |  |  | 875,226 |  | Helix Technology |  | 36,900 |  |  | 760,140
Cognex Corporation a |  | 93,400 |  |  | 1,872,670 |  | Intevac a |  | 191,850 |  |  | 479,625
DDi Corporation a |  | 20,000 |  |  | 18,000 |  | Kulicke & Soffa Industries a |  | 105,800 |  |  | 1,310,862
Dionex a |  | 106,000 |  |  | 2,839,740 |  | Lam Research a |  | 5,000 |  |  | 89,900
Excel Technology a |  | 168,500 |  |  | 3,538,500 |  | Lattice Semiconductor a |  | 244,000 |  |  | 2,132,560
Imation Corporation a |  | 35,700 |  |  | 1,062,432 |  | Mentor Graphics a |  | 225,700 |  |  | 3,209,454
InFocus Corporation a |  | 79,000 |  |  | 930,620 |  | National Semiconductor a |  | 23,200 |  |  | 676,744
Kronos a |  | 35,850 |  |  | 1,093,031 |  | Novellus Systems a |  | 12,000 |  |  | 408,000
Newport a |  | 102,600 |  |  | 1,606,716 |  | PCD a,c |  | 482,900 |  |  | 265,595
Perceptron a |  | 397,400 |  |  | 615,970 |  | TTM Technologies a |  | 194,800 |  |  | 1,020,752
Radiant Systems a |  | 57,500 |  |  | 749,225 |  | Veeco Instruments a |  | 45,000 |  |  | 1,039,950
Rainbow Technologies a |  | 106,900 |  |  | 525,948 |  | Vishay Intertechnology a |  | 33,900 |  |  | 745,800
REMEC a |  | 204,200 |  |  | 1,145,562 |  |  |  |  |  |
Scitex a |  | 320,700 |  |  | 679,884 |  |  |  |  |  |  | 21,263,680
Storage Technology a |  | 40,000 |  |  | 638,800 |  |  |  |  |  |
THE ROYCE FUNDS SEMIANNUAL REPORT 2002 | 21

ROYCE VALUE TRUST, INC.
SCHEDULE OF INVESTMENTS |  | JUNE 30, 2002 (UNAUDITED)
| SHARES |  | VALUE |  |  | SHARES |  | VALUE
Technology (continued) |  |  |  | PREFERRED STOCKS – 0.4% |  |  |
Software - 2.1% |  |  |  | †Aristotle Corporation 11.00% Conv. a | 2,600 |  | $ 16,250
ANSYS a | 45,500 |  | $ 914,550 | Pioneer-Standard Electronics 6.75% Conv. | 80,000 |  | 3,460,000
Aspen Technology a | 27,100 |  | 226,014 | SVB Capital I 8.25% | 20,000 |  | 460,000
Autodesk | 251,000 |  | 3,325,750 |  |  |  |
Business Objects ADR a,b | 25,500 |  | 716,550 | TOTAL PREFERRED STOCKS |  |  |
HNC Software a | 10,000 |  | 167,000 | (Cost $4,331,885) |  |  | 3,936,250
JDA Software Group a | 122,400 |  | 3,459,024 |  |  |  |
MRO Software a | 46,000 |  | 523,480 |  | PRINCIPAL |  |
MSC.Software a | 42,600 |  | 381,270 |  | AMOUNT |  |
Macromedia a | 61,600 |  | 546,392 |  |  |  |
Manugistics Group a | 49,200 |  | 300,612 | CORPORATE BONDS – 0.2% |  |  |
National Instruments a | 41,100 |  | 1,338,216 | Dixie Group 7.00% |  |  |
Phoenix Technologies a | 20,900 |  | 209,000 | Conv. Sub. Deb. due 5/15/12 | $ 585,000 |  | 380,250
Progress Software a | 50,500 |  | 745,329 | Richardson Electronics 7.25% |  |  |
SPSS a | 107,500 |  | 1,670,550 | Conv. Sub. Deb. due 12/15/06 | 1,319,000 |  | 1,122,799
Transaction Systems Architects Cl. A a | 237,300 |  | 2,790,648 |  |  |  |
|  |  |  | TOTAL CORPORATE BONDS |  |  |
|  |  | 17,314,385 | (Cost $1,533,250) |  |  | 1,503,049
Telecommunication - 0.9% |  |  |  | U.S. TREASURY OBLIGATIONS – 5.7% |  |  |
ADC Telecommunications a | 83,000 |  | 190,070 | U.S. Treasury Notes |  |  |
Allegiance Telecom a | 435,900 |  | 797,697 | 4.25%, due 3/31/03 | 25,000,000 |  | 25,444,000
Clarent Corporation a | 15,000 |  | 900 | †7.50%, due 2/15/05 | 20,000,000 |  | 22,140,600
Globecomm Systems a | 130,300 |  | 532,927 |  |  |  |
IDT Corporation a | 25,000 |  | 423,000 | TOTAL U.S. TREASURY OBLIGATIONS |  |  |
IDT Corporation Cl. B a | 40,000 |  | 644,000 | (Cost $46,839,985) |  |  | 47,584,600
Inet Technologies a | 65,000 |  | 438,750 |  |  |  |
Level 3 Communications a | 488,400 |  | 1,440,780 | REPURCHASE AGREEMENT – 2.2% |  |  |
Liberty Satellite & Technology Cl. A a | 81,630 |  | 183,667 | State Street Bank & Trust Company, |  |  |
†McLeodUSA Cl. A a | 242,549 |  | 101,871 | 1.00% dated 6/28/02, due |  |  |
Plantronics a | 55,100 |  | 1,047,451 | 7/1/02, maturity value $18,240,520 |  |  |
Time Warner Telecom Cl. A a | 292,000 |  | 490,560 | (collateralized by U.S. Treasury |  |  |
West Corporation a | 75,000 |  | 1,654,500 | Bonds, 8.125% due 8/15/19, |  |  |
|  |  |  | valued at $18,608,864) |  |  |
|  |  | 7,946,173 | (Cost $18,239,000) |  |  | 18,239,000
Total (Cost $143,122,701) |  |  | 136,268,407 | TOTAL INVESTMENTS – 100.7% |  |  |
|  |  |  | (Cost $652,103,605) |  |  | 844,238,042
Miscellaneous – 4.6% |  |  |  |  |  |  |
Total (Cost $42,225,029) |  |  | 38,851,657 | LIABILITIES LESS |  |  |
|  |  |  | CASH AND OTHER ASSETS – (0.7)% |  |  | (5,577,455)
TOTAL COMMON STOCKS |  |  |  |  |  |  |
(Cost $581,159,485) |  |  | 772,975,143 | NET ASSETS – 100.0% |  |  | $838,660,587

a | Non-income producing.
b | American Depository Receipt.
c | At June 30, 2002, 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.
d | A security for which market quotations are no longer readily available represents 0.3% of net assets. This security has been valued at its fair value under procedures established by the Fund’s Board of Directors.
† | New additions in 2002.
| Bold indicates the Fund’s largest 20 equity holdings in terms of June 30, 2002 market value.
INCOME TAX INFORMATION: The cost of total investments for Federal income tax purposes was $654,508,914. At June 30, 2002, net unrealized appreciation for all securities was $189,729,128, consisting of aggregate gross unrealized appreciation of $261,435,488 and aggregate gross unrealized depreciation of $71,706,360. The primary differences in book and tax basis cost is 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.

22 | THE ROYCE FUNDS SEMIANNUAL REPORT 2002

ROYCE VALUE TRUST, INC. |
STATEMENT OF ASSETS AND LIABILITIES |  | JUNE 30, 2002 (UNAUDITED) |

ASSETS: |  |
Investments at value (identified cost $633,864,605) | $825,999,042 |
Repurchase agreement (at cost and value) | 18,239,000 |
Cash | 373,042 |
Receivable for investments sold | 18,037 |
Receivable for dividends and interest | 1,300,745 |
Prepaid expenses | 40,225 |
Total Assets | 845,970,091 |
LIABILITIES: |  |
Payable for investments purchased | 5,939,485 |
Payable for investment advisory fee | 897,291 |
Preferred dividends accrued but not yet declared | 266,224 |
Accrued expenses | 206,504 |
Total Liabilities | 7,309,504 |
Net Assets | $838,660,587 |
ANALYSIS OF NET ASSETS: |  |
PREFERRED STOCK: |  |
Par value of 7.80% Cumulative Preferred Stock – $0.001 per share; 2,400,000 shares outstanding | $ 2,400 |
Par value of 7.30% Tax-Advantaged Cumulative Preferred Stock – $0.001 per share; 4,000,000 shares outstanding | 4,000 |
Additional paid-in capital | 159,993,600 |
Net Assets applicable to Preferred Stock at a liquidation value of $25 per share | 160,000,000 |
COMMON STOCK: |  |
Par value of Common Stock – $0.001 per share; 40,996,604 shares outstanding (150,000,000 shares authorized) | 40,997 |
Additional paid-in capital | 476,806,355 |
Undistributed net investment income | 1,608,480 |
Accumulated net realized gain on investments | 44,793,512 |
Net unrealized appreciation on investments | 192,134,451 |
Quarterly and accrued distributions | (36,723,208 | )
Net Assets applicable to Common Stock (net asset value per share – $16.55) | 678,660,587 |
Net Assets | $838,660,587 |
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

THE ROYCE FUNDS SEMIANNUAL REPORT 2002 | 23

ROYCE VALUE TRUST, INC.
STATEMENT OF OPERATIONS |  | SIX MONTHS ENDED JUNE 30, 2002 (UNAUDITED) |
INVESTMENT INCOME: |  |  |  |  |  |  |  |  |
Income: |  |  |  |  |  |  |  |  |
Dividends |  |  |  |  |  |  | $ | 3,851,608 |
Interest |  |  |  |  |  |  |  | 1,370,708 |
Total income |  |  |  |  |  |  |  | 5,222,316 |
Expenses: |  |  |  |  |  |  |  |  |
Investment advisory fees |  |  |  |  |  |  |  | 5,255,250 |
Stockholder reports |  |  |  |  |  |  |  | 130,693 |
Administrative and office facilities expenses |  |  |  |  |  |  |  | 117,590 |
Custody and transfer agent fees |  |  |  |  |  |  |  | 107,344 |
Directors’ fees |  |  |  |  |  |  |  | 65,861 |
Professional fees |  |  |  |  |  |  |  | 25,209 |
Other expenses |  |  |  |  |  |  |  | 28,567 |
Total expenses |  |  |  |  |  |  |  | 5,730,514 |
Net investment income (loss) |  |  |  |  |  |  |  | (508,198 | )
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: |  |  |  |  |  |  |  |  |
Net realized gain on investments |  |  |  |  |  |  |  | 40,764,839 |
Net change in unrealized appreciation on investments |  |  |  |  |  |  |  | (34,201,676 | )
Net realized and unrealized gain on investments |  |  |  |  |  |  |  | 6,563,163 |
NET INCREASE IN NET ASSETS FROM INVESTMENT OPERATIONS |  |  |  |  |  |  | $ | 6,054,965 |
STATEMENTS OF CHANGES IN NET ASSETS |  |  |  |  |  |  |  |  |
|  |  | Six months ended |  | Year ended |
|  |  | June 30, 2002 |  | December 31, |
|  |  | (unaudited) |  | 2001 |
INVESTMENT OPERATIONS: |  |  |  |  |  |  |  |  |
Net investment income (loss) |  |  | $ | (508,198 | ) |  | $ | 2,247,245 |
Net realized gain on investments |  |  |  | 40,764,839 |  |  |  | 53,961,553 |
Net change in unrealized appreciation on investments |  |  |  | (34,201,676 | ) |  |  | 46,195,029 |
Net increase in net assets from investment operations |  |  |  | 6,054,965 |  |  |  | 102,403,827 |
DISTRIBUTIONS TO PREFERRED STOCKHOLDERS: |  |  |  |  |  |  |  |  |
Net investment income |  |  |  | – |  |  |  | (370,182 | )
Net realized gain on investments |  |  |  | – |  |  |  | (11,609,818 | )
Quarterly distributions* |  |  |  | (5,990,000 | ) |  |  | – |
Total distributions to Preferred Stockholders |  |  |  | (5,990,000 | ) |  |  | (11,980,000 | )
DISTRIBUTIONS TO COMMON STOCKHOLDERS: |  |  |  |  |  |  |  |  |
Net investment income |  |  |  | – |  |  |  | (1,768,474 | )
Net realized gain on investments |  |  |  | – |  |  |  | (55,464,014 | )
Quarterly distributions* |  |  |  | (30,466,985 | ) |  |  | – |
Total distributions to Common Stockholders |  |  |  | (30,466,985 | ) |  |  | (57,232,488 | )
CAPITAL STOCK TRANSACTIONS: |  |  |  |  |  |  |  |  |
Reinvestment of distributions to Common Stockholders |  |  |  | 19,921,639 |  |  |  | 32,687,267 |
NET INCREASE (DECREASE) IN NET ASSETS |  |  |  | (10,480,381 | ) |  |  | 65,878,606 |
NET ASSETS: |  |  |  |  |  |  |  |  |
Beginning of period |  |  |  | 849,140,968 |  |  |  | 783,262,362 |
End of period (including undistributed net investment income |  |  |  |  |  |  |  |  |
of $1,608,480 and $2,116,678, respectively) |  |  | $ | 838,660,587 |  |  | $ | 849,140,968 |
* To be allocated to net investment income and capital gains at year-end.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

24 | THE ROYCE FUNDS SEMIANNUAL REPORT 2002

ROYCE VALUE, TRUST INC.
FINANCIAL HIGHLIGHTS
| This table is presented to show selected data for a share of Common Stock outstanding throughout each period, and to assist stockholders in evaluating the Fund’s performance for the periods presented.
| Six months ended June 30, 2002 (unaudited) | Years ended December 31,
| 2001 | 2000 | 1999 | 1998 | 1997
NET ASSET VALUE, BEGINNING OF PERIOD | $17.31 |  | $16.56 |  | $15.77 |  | $15.72 |  | $16.91 |  | $14.32 |
INVESTMENT OPERATIONS (a): |  |  |  |  |  |  |  |  |  |  |  |
Net investment income (loss) | (0.01 | ) | 0.05 |  | 0.18 |  | 0.26 |  | 0.17 |  | 0.21 |
Net realized and unrealized gain on investments | 0.18 |  | 2.58 |  | 2.58 |  | 1.65 |  | 0.67 |  | 3.85 |
Total investment operations | 0.17 |  | 2.63 |  | 2.76 |  | 1.91 |  | 0.84 |  | 4.06 |
DISTRIBUTIONS TO PREFERRED STOCKHOLDERS: |  |  |  |  |  |  |  |  |  |  |  |
Net investment income | – |  | (0.01 | ) | (0.03 | ) | (0.04 | ) | (0.03 | ) | (0.03 | )
Net realized gain on investments | – |  | (0.30 | ) | (0.30 | ) | (0.32 | ) | (0.26 | ) | (0.15 | )
Quarterly distributions* | (0.15 | ) | – |  | – |  | – |  | – |  | – |
Total distributions to Preferred Stockholders | (0.15 | ) | (0.31 | ) | (0.33 | ) | (0.36 | ) | (0.29 | ) | (0.18 | )
DISTRIBUTIONS TO COMMON STOCKHOLDERS: |  |  |  |  |  |  |  |  |  |  |  |
Net investment income | – |  | (0.05 | ) | (0.13 | ) | (0.15 | ) | (0.16 | ) | (0.19 | )
Net realized gain on investments | – |  | (1.44 | ) | (1.35 | ) | (1.22 | ) | (1.38 | ) | (1.02 | )
Quarterly distributions* | (0.76 | ) | – |  | – |  | – |  | – |  | – |
Total distributions to Common Stockholders | (0.76 | ) | (1.49 | ) | (1.48 | ) | (1.37 | ) | (1.54 | ) | (1.21 | )
CAPITAL STOCK TRANSACTIONS: |  |  |  |  |  |  |  |  |  |  |  |
Effect of reinvestment of distributions by Common Stockholders | (0.02 | ) | (0.08 | ) | (0.16 | ) | (0.13 | ) | (0.09 | ) | (0.08 | )
Effect of Preferred Stock offering | – |  | – |  | – |  | – |  | (0.11 | ) | – |
Total capital stock transactions | (0.02 | ) | (0.08 | ) | (0.16 | ) | (0.13 | ) | (0.20 | ) | (0.08 | )
NET ASSET VALUE, END OF PERIOD (a) | $16.55 |  | $17.31 |  | $16.56 |  | $15.77 |  | $15.72 |  | $16.91 |
MARKET VALUE, END OF PERIOD | $16.55 |  | $15.72 |  | $14.438 |  | $13.063 |  | $13.75 |  | $15.063 |
TOTAL RETURN (b): |  |  |  |  |  |  |  |  |  |  |  |
Net Asset Value (a) | 0.0 | %*** | 15.2 | % | 16.6 | % | 11.7 | % | 3.3 | % | 27.5 | %
Market Value | 10.1 | %*** | 20.0 | % | 22.7 | % | 5.7 | % | 1.5 | % | 28.8 | %
RATIOS BASED ON AVERAGE NET ASSETS APPLICABLE TO |  |  |  |  |  |  |  |  |  |  |  |
COMMON STOCKHOLDERS: |  |  |  |  |  |  |  |  |  |  |  |
Total expenses (c,d) | 1.61 | %** | 1.61 | % | 1.43 | % | 1.39 | % | 1.31 | % | 1.12 | %
Management fee expense | 1.48 | %** | 1.45 | % | 1.25 | % | 1.18 | % | 1.10 | % | 0.39 | %
Interest expense | – |  | – |  | – |  | – |  | – |  | 0.45 | %
Other operating expenses | 0.13 | %** | 0.16 | % | 0.18 | % | 0.21 | % | 0.21 | % | 0.28 | %
Net investment income (loss) | (0.14 | )%** | 0.35 | % | 1.18 | % | 1.47 | % | 1.11 | % | 1.53 | %
SUPPLEMENTAL DATA: |  |  |  |  |  |  |  |  |  |  |  |
Net Assets, End of Period (in thousands) | $838,661 |  | $849,141 |  | $783,262 |  | $712,928 |  | $676,963 |  | $554,231 |
Portfolio Turnover Rate | 15 | % | 30 | % | 36 | % | 41 | % | 43 | % | 29 | %
PREFERRED STOCK: |  |  |  |  |  |  |  |  |  |  |  |
Total shares outstanding | 6,400,000 |  | 6,400,000 |  | 6,400,000 |  | 6,400,000 |  | 6,400,000 |  | 2,400,000 |
Asset coverage per share | $131.04 |  | $132.68 |  | $122.38 |  | $111.40 |  | $105.78 |  | $165.51 |
Liquidation preference per share | $25.00 |  | $25.00 |  | $25.00 |  | $25.00 |  | $25.00 |  | $25.00 |
Average market value per share: |  |  |  |  |  |  |  |  |  |  |  |
7.80% Cumulative (e) | $26.36 |  | $25.70 |  | $23.44 |  | $24.98 |  | $25.91 |  | $25.70 |
7.30% Tax-Advantaged Cumulative (e) | $25.83 |  | $25.37 |  | $22.35 |  | $24.24 |  | $25.43 |  | – |
NOTES: |  |  |  |  |  |  |  |  |  |  |  |
Total amount outstanding (in thousands) | – |  | – |  | – |  | – |  | – |  | $27,801 |
Asset coverage per note | – |  | – |  | – |  | – |  | – |  | $2,090.89 |
Average market value per note (e) | – |  | – |  | – |  | – |  | – |  | $107.69 |

(a) | Through December 31, 1997, Net Asset Value per share, Net Asset Value Total Returns and Income from Investment Operations were calculated assuming that the then outstanding convertible notes had been fully converted, except when the effect of doing so resulted in a higher Net Asset Value per share than would have been calculated without such assumption. If it were not assumed that the Notes had been converted, the Net Asset Value per share would have been increased by $0.31 at December 31, 1997.
(b) | The Net Asset Value and Market Value Total Returns assume a continuous Common Stockholder who reinvested all net investment income dividends and capital gain distributions.
(c) | Expense ratios based on total average net assets were 1.32%, 1.30%, 1.12%, 1.06%, 1.06% and 0.99% for the periods ended June 30, 2002 and December 31, 2001, 2000, 1999, 1998 and 1997, respectively.
(d) | Expense ratios based on average net assets applicable to Common Stockholders before waiver of fees by the investment adviser would have been 1.65%, 1.51%, 1.48%, 1.34% and 1.14% for the periods ended December 31, 2001, 2000, 1999, 1998 and 1997, respectively.
(e) | The average of month-end market values during the period.
* | To be allocated to net investment income and capital gains at year-end.
** | Annualized.
*** | Not annualized. | THE ROYCE FUNDS SEMIANNUAL REPORT 2002 | 25

ROYCE VALUE TRUST, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Summary of Significant Accounting Policies:
| Royce Value Trust, Inc. (“the Fund”) was incorporated under the laws of the State of Maryland on July 1, 1986 as a diversified closed-end investment company. The Fund commenced operations on November 26, 1986.
| The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
| Valuation of Investments:
| Securities listed on an exchange or on the Nasdaq National Market System (NMS) are valued on the basis of the last reported sale prior to the time the valuation is made or, if no sale is reported for such day, at their bid price for exchange-listed securities and at the average of their bid and asked prices for Nasdaq NMS securities. Quotations are taken from the market where the security is primarily traded. Other over-the-counter securities for which market quotations are readily available are valued at their bid price. Securities for which market quotations are not readily available are valued at their fair value under procedures established 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.
| Investment Transactions and Related Investment Income:
| Investment transactions are accounted for on the trade date. Dividend income is recorded on the ex-dividend date and any non-cash dividend income is recorded at the fair market value of the securities received. Interest income is recorded on the accrual basis. Realized gains and losses from investment transactions are determined on the basis of identified cost for book and tax purposes.
| Expenses:
| The Fund incurs direct and indirect expenses. Expenses directly attributable to the Fund are charged to the Fund’s operations, while expenses applicable to more than one of the Royce Funds are allocated in an equitable manner. Allocated personnel and occupancy costs related to The Royce Funds are included in administrative and office facilities expenses. The Fund has adopted a deferred fee agreement that allows the Fund’s Directors to defer the receipt of all or a portion of Directors’ Fees otherwise payable. The deferred fees remain invested in certain Royce Funds until distributed in accordance with the agreement.
| 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 recorded on an accrual basis and paid quarterly. 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 enters into repurchase agreements with respect to its portfolio securities solely with State Street Bank and Trust Company (“SSB&T”), the custodian of its assets. The Fund restricts repurchase agreements to maturities of no more than seven days. Securities pledged as collateral for repurchase agreements, which are held by SSB&T 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 SSB&T, including possible delays or restrictions upon the ability of the Fund to dispose of the underlying securities.
Capital Stock:
| The Fund currently has two issues of Preferred Stock outstanding: 7.80% Cumulative Preferred Stock and 7.30% Tax-Advantaged Cumulative Preferred Stock. Both issues of Preferred Stock have a liquidation preference of $25.00 per share.
26 | THE ROYCE FUNDS SEMIANNUAL REPORT 2002

ROYCE VALUE TRUST, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
| Under the Investment Company Act of 1940, the Fund is required to maintain an asset coverage of at least 200% for the Preferred Stock. In addition, pursuant to the Rating Agency Guidelines established by Moody’s, the Fund is required to maintain a certain discounted asset coverage. The Fund has met these requirements since issuing Preferred Stock.
| 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 dividends are not paid from long-term capital gains, net investment income or net short-term capital gains, they will represent a return of capital.
| The Fund issued 1,194,883 and 2,167,201 shares of Common Stock as reinvestment of distributions by Common Stockholders for the periods ended June 30, 2002 and December 31, 2001, respectively.
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 600 SmallCap 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 month-end net assets of the Fund for the rolling 60-month period ending with such month. 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 maximum increase or decrease in the Basic Fee for any month may not exceed 1/12 of .5%. Accordingly, for each month, the maximum monthly fee rate as adjusted for performance is 1/12 of 1.5% and is payable if the investment performance of the Fund exceeds the percentage change in the investment record of the S&P 600 by 12 or more percentage points for the performance period, and the minimum monthly fee rate as adjusted for performance is 1/12 of .5% and is payable if the percentage change in the investment record of the S&P 600 exceeds the investment performance of the Fund by 12 or more percentage points for the performance period.
| Notwithstanding the foregoing, Royce is not entitled to receive any fee for any month when the investment performance of the Fund for the rolling 36-month period ending with such month is negative. In the event that the Fund’s investment performance for such a performance period is less than zero, Royce will not be required to refund to the Fund any fee earned in respect of any prior performance period.
| Royce has voluntarily committed to waive the portion of its investment advisory fee attributable to an issue of the Fund’s Preferred Stock for any month in which the Fund’s average annual NAV total return since issuance of the Preferred Stock fails to exceed the applicable Preferred Stock dividend rate.
| For the period ended June 30, 2002, the Fund accrued and paid Royce advisory fees totaling $5,255,250.
Purchases and Sales of Investment Securities:
| For the period ended June 30, 2002, the cost of purchases and proceeds from sales of investment securities, other than short-term securities, amounted to $158,529,576 and $126,053,844, respectively.
Transactions in Shares of Affiliated Companies:
| An “Affiliated Company”, as defined in the Investment Company Act of 1940, is a company in which a fund owns 5% or more of the company’s outstanding voting securities. The Fund effected the following transactions in shares of such companies during the period ended June 30, 2002:

|  | Purchases |  | Sales |  |  |  |
Affiliated Company |  | Shares |  | Cost |  | Shares |  | Cost |  | Realized Gain (Loss) |  | Dividend Income
Open Plan Systems |  | — |  | — |  | — |  | — |  | — |  | —
PCD |  | 5,300 |  | $2,756 |  | — |  | — |  | — |  | —
Patriot Transportation |  |  |  |  |  |  |  |  |  |  |  |
Holding |  | — |  | — |  | — |  | — |  | — |  | —
Peerless Mfg. |  | — |  | — |  | — |  | — |  | — |  | —
RockShox |  | — |  | — |  | 1,141,400 |  | $537,508 |  | $(69,534) |  | —
THE ROYCE FUNDS SEMIANNUAL REPORT 2002 | 27

ROYCE MICRO-CAP TRUST, INC.
SCHEDULE OF INVESTMENTS | JUNE 30, 2002 (UNAUDITED)
COMMON STOCKS – 95.3% |  |  |  |  |  |  |  |  |  |  |  |
|  | SHARES |  |  | VALUE |  |  |  | SHARES |  |  | VALUE
Consumer Products – 10.8% |  |  |  |  |  |  | Retail Stores - 4.4% |  |  |  |  |
Apparel and Shoes - 4.2% |  |  |  |  |  |  | Brookstone a |  | 23,000 |  | $ | 408,020
Ashworth a |  | 50,000 |  | $ | 450,500 |  | Buckle (The) a |  | 56,500 |  |  | 1,392,725
Delta Apparel |  | 88,400 |  |  | 2,373,540 |  | Cato Cl. A |  | 58,000 |  |  | 1,293,400
Garan |  | 23,700 |  |  | 1,371,045 |  | Dress Barn (The) a |  | 94,800 |  |  | 1,466,556
Kleinert’s a,d |  | 14,200 |  |  | 113,600 |  | †Factory 2-U Stores a |  | 50,000 |  |  | 692,500
Nautica Enterprises a |  | 107,600 |  |  | 1,397,724 |  | Gadzooks a |  | 25,000 |  |  | 314,750
Oshkosh B’Gosh Cl. A |  | 47,000 |  |  | 2,044,025 |  | La Senza Corporation |  | 189,900 |  |  | 1,938,138
Weyco Group |  | 68,400 |  |  | 2,734,632 |  | Stein Mart a |  | 285,200 |  |  | 3,385,324
|  |  |  |  | 10,485,066 |  |  |  |  |  |  | 10,891,413
Collectibles - 1.2% |  |  |  |  |  |  | Other Consumer Services – 0.2% |  |  |  |  |
The Boyds Collection a |  | 216,800 |  |  | 1,363,672 |  | Ambassadors International a |  | 5,100 |  |  | 51,306
Department 56 a |  | 17,000 |  |  | 276,760 |  | E-LOAN a |  | 505,500 |  |  | 556,050
Enesco Group a |  | 52,400 |  |  | 457,976 |  |  |  |  |  |
Topps Company (The) a |  | 101,000 |  |  | 1,016,060 |  |  |  |  |  |  | 607,356
|  |  |  |  | 3,114,468 |  | Total (Cost $9,548,050) |  |  |  |  | 13,657,215
Food/Beverage/Tobacco - 1.1% |  |  |  |  |  |  | Diversified Investment Companies – 0.2% |  |  |  |  |
800 JR Cigar a,d |  | 193,000 |  |  | 2,509,000 |  | Closed-End Mutual Funds - 0.2% |  |  |  |  |
Tasty Baking |  | 10,000 |  |  | 135,000 |  | Central Fund of Canada Cl. A |  | 140,000 |  |  | 597,800
|  |  |  |  | 2,644,000 |  | Total (Cost $554,082) |  |  |  |  | 597,800
Home Furnishing/Appliances - 0.9% |  |  |  |  |  |  | Financial Intermediaries – 7.5% |  |  |  |  |
Bassett Furniture Industries |  | 26,300 |  |  | 512,824 |  | Banking - 0.3% |  |  |  |  |
Falcon Products a |  | 122,700 |  |  | 748,470 |  | First Midwest Financial |  | 1,000 |  |  | 13,960
Lifetime Hoan |  | 120,054 |  |  | 856,801 |  | Queen City Investments a |  | 948 |  |  | 420,912
|  |  |  |  |  | Sterling Bancorp |  | 12,100 |  |  | 431,970
|  |  |  |  | 2,118,095 |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  | 866,842
Publishing - 0.1% |  |  |  |  |  |  |  |  |  |  |
Information Holdings a |  | 5,000 |  |  | 122,000 |  | Insurance - 7.2% |  |  |  |  |
Marvel Enterprises a |  | 42,700 |  |  | 233,996 |  | Argonaut Group |  | 30,900 |  |  | 661,878
|  |  |  |  |  | Arch Capital Group a |  | 25,700 |  |  | 723,455
|  |  |  |  | 355,996 |  | CNA Surety |  | 15,000 |  |  | 218,250
|  |  |  |  |  | GAINSCO a |  | 25,000 |  |  | 1,275
Sports and Recreation - 1.1% |  |  |  |  |  |  | IPC Holdings a |  | 80,600 |  |  | 2,461,524
Lund International Holdings a |  | 387,950 |  |  | 640,117 |  | Independence Holding |  | 36,630 |  |  | 818,314
Meade Instruments a |  | 143,600 |  |  | 814,212 |  | NYMAGIC a |  | 107,100 |  |  | 1,633,275
Monaco Coach a |  | 65,900 |  |  | 1,403,670 |  | Navigators Group a |  | 57,200 |  |  | 1,531,816
|  |  |  |  |  | PICO Holdings a |  | 76,100 |  |  | 1,260,977
|  |  |  |  | 2,857,999 |  | PMA Capital Cl. A |  | 57,109 |  |  | 1,207,855
|  |  |  |  |  | PXRE Group |  | 73,164 |  |  | 1,697,405
Other Consumer Products - 2.2% |  |  |  |  |  |  | Philadelphia Consolidated Holding a |  | 52,500 |  |  | 2,380,350
Cross (A.T.) & Company Cl. A a |  | 100,000 |  |  | 750,000 |  | ProAssurance a |  | 124,900 |  |  | 2,198,240
Hunt Corporation |  | 50,000 |  |  | 542,500 |  | Wellington Underwriting a |  | 444,712 |  |  | 464,451
Lazare Kaplan International a |  | 151,700 |  |  | 1,084,655 |  | Zenith National Insurance |  | 20,000 |  |  | 637,000
Matthews International Cl. A |  | 96,000 |  |  | 2,241,600 |  |  |  |  |  |
Velcro Industries |  | 81,500 |  |  | 817,038 |  |  |  |  |  |  | 17,896,065
|  |  |  |  | 5,435,793 |  | Total (Cost $11,300,782) |  |  |  |  | 18,762,907
Total (Cost $15,993,665) |  |  |  |  | 27,011,417 |  | Financial Services – 2.6% |  |  |  |  |
|  |  |  |  |  | Information and Processing - 0.1% |  |  |  |  |
Consumer Services – 5.5% |  |  |  |  |  |  | Multex.com a |  | 15,000 |  |  | 61,200
Direct Marketing - 0.1% |  |  |  |  |  |  |  |  |  |  |
ValueVision Media Cl. A a |  | 5,000 |  |  | 90,750 |  | Insurance Brokers - 0.5% |  |  |  |  |
|  |  |  |  |  | Clark/Bardes a |  | 20,900 |  |  | 477,356
Leisure/Entertainment - 0.6% |  |  |  |  |  |  | CorVel a |  | 18,750 |  |  | 628,065
ACTV a |  | 55,000 |  |  | 63,250 |  | Hilb, Rogal & Hamilton |  | 5,200 |  |  | 235,300
Liberty Livewire Cl. A a |  | 220,700 |  |  | 648,858 |  |  |  |  |  |
†Shuffle Master a |  | 35,000 |  |  | 642,950 |  |  |  |  |  |  | 1,340,721
TiVo a |  | 20,000 |  |  | 74,200 |  |  |  |  |  |
|  |  |  |  |  | Investment Management - 0.3% |  |  |  |  |
|  |  |  |  | 1,429,258 |  | BKF Capital Group a |  | 27,700 |  |  | 789,450
Restaurants/Lodgings - 0.2% |  |  |  |  |  |  |  |  |  |  |  |
Benihana Cl. A a |  | 27,800 |  |  | 523,752 |  |  |  |  |  |  |
Chart House Enterprises a |  | 3,333 |  |  | 11,166 |  |  |  |  |  |  |
Diedrich Coffee a |  | 32,350 |  |  | 103,520 |  |  |  |  |  |  |
|  |  |  |  | 638,438 |  |  |  |  |  |  |
28 | THE ROYCE FUNDS SEMIANNUAL REPORT 2002

ROYCE MICRO-CAP TRUST, INC.
SCHEDULE OF INVESTMENTS | JUNE 30, 2002 (UNAUDITED)
|  | SHARES |  |  | VALUE |  |  |  | SHARES |  |  | VALUE
Financial Services (continued) |  |  |  |  |  |  | Osteotech a |  | 122,100 |  | $ | 902,319
Other Financial Services - 1.7% |  |  |  |  |  |  | PLC Systems a |  | 105,200 |  |  | 42,080
Electro Rent a |  | 114,300 |  | $ | 1,484,757 |  |  |  |  |  |
†LendingTree a |  | 55,000 |  |  | 699,050 |  |  |  |  |  |  | 4,616,501
New Century Financial |  | 5,000 |  |  | 174,850 |  |  |  |  |  |
PRG-Schultz International a |  | 165,000 |  |  | 2,031,150 |  | Total (Cost $17,365,063) |  |  |  |  | 21,563,649
|  |  |  |  | 4,389,807 |  | Industrial Products – 13.0% |  |  |  |  |
|  |  |  |  |  | Building Systems and Components - 1.7% |  |  |  |  |
Total (Cost $3,808,889) |  |  |  |  | 6,581,178 |  | Juno Lighting a |  | 94,200 |  |  | 913,740
|  |  |  |  |  | LSI Industries |  | 43,850 |  |  | 805,524
Health – 8.6% |  |  |  |  |  |  | Simpson Manufacturing a |  | 27,600 |  |  | 1,576,788
Commercial Services - 1.9% |  |  |  |  |  |  | Skyline |  | 32,100 |  |  | 1,059,300
ICON ADR a,b |  | 800 |  |  | 22,800 |  |  |  |  |  |
PAREXEL International a |  | 134,400 |  |  | 1,869,504 |  |  |  |  |  |  | 4,355,352
The TriZetto Group a |  | 83,000 |  |  | 709,650 |  |  |  |  |  |
Young Innovations a |  | 98,850 |  |  | 2,147,022 |  | Construction Materials - 3.2% |  |  |  |  |
|  |  |  |  |  | Ash Grove Cement Company |  | 20,000 |  |  | 2,580,000
|  |  |  |  | 4,748,976 |  | Encore Wire a |  | 10,000 |  |  | 142,300
|  |  |  |  |  | Florida Rock Industries |  | 50,000 |  |  | 1,790,500
Drugs and Biotech - 2.1% |  |  |  |  |  |  | Monarch Cement |  | 50,410 |  |  | 1,058,610
Antigenics a |  | 60,800 |  |  | 598,880 |  | Puerto Rican Cement Company |  | 58,700 |  |  | 2,054,500
Arena Pharmaceuticals a |  | 14,000 |  |  | 117,600 |  | Synalloy Corporation a |  | 95,700 |  |  | 288,057
BioReliance a |  | 20,300 |  |  | 503,440 |  |  |  |  |  |
BioSource International a |  | 89,300 |  |  | 526,870 |  |  |  |  |  |  | 7,913,967
DUSA Pharmaceuticals a |  | 79,700 |  |  | 231,130 |  |  |  |  |  |
Emisphere Technologies a |  | 32,400 |  |  | 135,756 |  | Industrial Components - 2.1% |  |  |  |  |
Geron a |  | 6,000 |  |  | 27,480 |  | †Aaon a |  | 37,500 |  |  | 703,875
Lexicon Genetics a |  | 192,100 |  |  | 939,177 |  | Bel Fuse Cl. A a |  | 31,200 |  |  | 711,360
Martek Biosciences a |  | 33,800 |  |  | 707,096 |  | Chase Industries a |  | 27,900 |  |  | 387,531
Myriad Genetics a |  | 5,000 |  |  | 101,700 |  | Penn Engineering & Manufacturing |  | 56,600 |  |  | 985,972
Sangamo BioSciences a |  | 10,000 |  |  | 58,800 |  | Penn Engineering & Manufacturing Cl. A |  | 30,800 |  |  | 509,740
3-Dimensional Pharmaceuticals a |  | 10,000 |  |  | 44,500 |  | †Powell Industries a |  | 68,300 |  |  | 1,656,275
ViroPharma a |  | 18,800 |  |  | 26,884 |  | Scientific Technologies a |  | 10,700 |  |  | 38,466
Visible Genetics a |  | 44,500 |  |  | 84,995 |  | Woodhead Industries |  | 10,000 |  |  | 171,400
VIVUS a |  | 167,200 |  |  | 1,131,944 |  |  |  |  |  |
Zila a |  | 95,000 |  |  | 95,950 |  |  |  |  |  |  | 5,164,619
|  |  |  |  | 5,332,202 |  | Machinery - 0.5% |  |  |  |  |
|  |  |  |  |  | Astec Industries a |  | 31,700 |  |  | 510,053
Health Services - 1.8% |  |  |  |  |  |  | Atchison Casting a |  | 52,500 |  |  | 13,125
aaiPharma a |  | 47,000 |  |  | 1,056,560 |  | Lindsay Manufacturing |  | 10,000 |  |  | 231,500
Covalent Group a |  | 25,000 |  |  | 92,000 |  | Mueller (Paul) |  | 16,650 |  |  | 536,962
DIANON Systems a |  | 15,500 |  |  | 828,010 |  |  |  |  |  |
†First Consulting Group a |  | 85,000 |  |  | 731,000 |  |  |  |  |  |  | 1,291,640
MedCath Corporation a |  | 18,000 |  |  | 307,800 |  |  |  |  |  |
RehabCare Group a |  | 25,000 |  |  | 600,750 |  | Paper and Packaging - 0.5% |  |  |  |  |
Sierra Health Services a |  | 40,000 |  |  | 894,000 |  | Peak International a |  | 207,000 |  |  | 1,210,950
|  |  |  |  | 4,510,120 |  | Pumps, Valves and Bearings - 1.7% |  |  |  |  |
|  |  |  |  |  | Denison International ADR a,b |  | 113,500 |  |  | 2,105,425
Personal Care - 0.9% |  |  |  |  |  |  | NN |  | 80,500 |  |  | 1,030,400
Ocular Sciences a |  | 88,900 |  |  | 2,355,850 |  | Sun Hydraulics |  | 152,550 |  |  | 1,229,553
Surgical Products and Devices - 1.9% |  |  |  |  |  |  |  |  |  |  |  | 4,365,378
Aksys a |  | 85,000 |  |  | 586,500 |  |  |  |  |  |
Allied Healthcare Products a |  | 247,400 |  |  | 1,073,493 |  | Specialty Chemicals and Materials - 1.1% |  |  |  |  |
Cohesion Technologies a |  | 5,000 |  |  | 10,750 |  | Aceto |  | 58,421 |  |  | 622,820
CONMED a |  | 3,900 |  |  | 87,087 |  | Balchem |  | 10,000 |  |  | 232,500
Cyberonics a |  | 15,000 |  |  | 196,785 |  | CFC International a |  | 144,700 |  |  | 649,703
Exactech a |  | 15,000 |  |  | 229,650 |  | Hawkins |  | 122,667 |  |  | 1,145,710
Interpore International a |  | 17,600 |  |  | 170,192 |  |  |  |  |  |
NMT Medical a |  | 44,000 |  |  | 280,720 |  |  |  |  |  |  | 2,650,733
Orthofix International a |  | 29,500 |  |  | 1,036,925 |  |  |  |  |  |
|  |  |  |  |  |  | Textiles - 0.2% |  |  |  |  |
|  |  |  |  |  |  | Fab Industries a |  | 76,400 |  |  | 623,424
|  |  |  |  |  |  | Other Industrial Products - 2.0% |  |  |  |  |
|  |  |  |  |  |  | BHA Group Holdings a |  | 96,915 |  |  | 1,584,560
|  |  |  |  |  |  | Maxwell Technologies a |  | 36,800 |  |  | 320,896
|  |  |  |  |  |  | Mity Enterprises a |  | 27,300 |  |  | 300,300
THE ROYCE FUNDS SEMIANNUAL REPORT 2002 | 29

ROYCE MICRO-CAP TRUST, INC.
SCHEDULE OF INVESTMENTS | JUNE 30, 2002 (UNAUDITED)
| SHARES |  |  | VALUE |  |  | SHARES |  |  | VALUE
Industrial Products (continued) |  |  |  |  |  | Knight Transportation a | 38,925 |  | $ | 902,671
Other Industrial Products (continued) |  |  |  |  |  | Patriot Transportation Holding a | 27,700 |  |  | 747,900
Myers Industries | 53,474 |  | $ | 916,544 |  | Pittston Brink’s Group | 34,365 |  |  | 824,760
Open Plan Systems a | 57,400 |  |  | 1,722 |  |  |  |  |
Quixote | 27,500 |  |  | 466,125 |  |  |  |  |  | 5,578,476
Wescast Industries Cl. A | 37,900 |  |  | 1,341,660 |  |  |  |  |
|  |  |  |  | Other Industrial Services - 0.5% |  |  |  |
|  |  |  | 4,931,807 |  | Landauer | 32,300 |  |  | 1,254,209
Total (Cost $22,610,149) |  |  |  | 32,507,870 |  | Total (Cost $22,869,172) |  |  |  | 33,363,268
Industrial Services – 13.4% |  |  |  |  |  | Natural Resources – 8.5% |  |  |  |
Commercial Services - 6.2% |  |  |  |  |  | Energy Services - 3.4% |  |  |  |
American Bank Note Holographics a | 222,500 |  |  | 293,700 |  | Carbo Ceramics | 33,600 |  |  | 1,241,520
Butler International a | 38,500 |  |  | 84,662 |  | Dril-Quip a | 42,700 |  |  | 1,065,365
CDI Corporation a | 40,900 |  |  | 1,331,295 |  | GulfMark Offshore a | 34,600 |  |  | 1,432,786
Edgewater Technology a | 18,339 |  |  | 75,007 |  | Input/Output a | 194,500 |  |  | 1,750,500
Exponent a | 63,200 |  |  | 815,912 |  | Lufkin Industries | 25,000 |  |  | 721,750
iGATE Corporation a | 289,700 |  |  | 1,338,414 |  | MarkWest Hydrocarbon a | 15,200 |  |  | 108,072
Kforce a | 55,000 |  |  | 327,250 |  | NATCO Group Cl. A a | 90,400 |  |  | 786,480
Manufacturers Services a | 110,000 |  |  | 531,300 |  | NewPower Holdings a | 267,800 |  |  | 5,356
Marketing Specialists a | 155,000 |  |  | 31 |  | Peerless Mfg. a | 43,200 |  |  | 734,352
Micro General a | 104,840 |  |  | 1,749,780 |  | Valley National Gases a | 30,100 |  |  | 215,215
NCO Group a | 20,000 |  |  | 435,600 |  | Willbros Group a | 30,900 |  |  | 525,300
NIC a | 26,800 |  |  | 39,664 |  |  |  |  |
National Service Industries | 92,800 |  |  | 835,200 |  |  |  |  |  | 8,586,696
New Horizons Worldwide a | 117,300 |  |  | 1,195,287 |  |  |  |  |
On Assignment a | 32,000 |  |  | 569,600 |  | Oil and Gas - 3.5% |  |  |  |
Pegasystems a | 65,000 |  |  | 586,235 |  | Bonavista Petroleum a | 81,000 |  |  | 1,600,053
ProBusiness Services a | 10,000 |  |  | 145,690 |  | Denbury Resources a | 146,700 |  |  | 1,509,543
RemedyTemp Cl. A a | 71,700 |  |  | 1,304,940 |  | Evergreen Resources a | 20,000 |  |  | 850,000
Volt Information Sciences a | 16,200 |  |  | 396,738 |  | PetroCorp a | 203,200 |  |  | 1,948,688
Wackenhut Corrections a | 164,800 |  |  | 2,406,080 |  | Pure Resources a | 68,724 |  |  | 1,429,459
Westaff a | 362,500 |  |  | 1,051,250 |  | 3TEC Energy a | 80,000 |  |  | 1,394,400
|  |  |  |  | Toreador Resources a | 800 |  |  | 3,256
|  |  |  | 15,513,635 |  |  |  |  |
|  |  |  |  |  |  |  |  | 8,735,399
Food/Tobacco Processors - 1.7% |  |  |  |  |  |  |  |  |
Farmer Bros. | 4,000 |  |  | 1,451,080 |  | Precious Metals and Mining - 0.7% |  |  |  |
Midwest Grain Products | 96,122 |  |  | 1,248,625 |  | Apex Silver Mines a | 79,600 |  |  | 1,154,200
Seneca Foods Cl. B a | 47,200 |  |  | 698,560 |  | Brush Engineered Materials a | 5,000 |  |  | 62,000
Seneca Foods Cl. A a | 58,500 |  |  | 782,438 |  | MK Gold a | 603,700 |  |  | 398,442
|  |  |  | 4,180,703 |  |  |  |  |  | 1,614,642
Industrial Distribution - 1.1% |  |  |  |  |  | Real Estate - 0.9% |  |  |  |
†Central Steel & Wire | 1,200 |  |  | 630,000 |  | HomeFed a | 1,108,521 |  |  | 1,008,754
Lawson Products | 12,200 |  |  | 375,882 |  | Liberte Investors | 346,800 |  |  | 1,352,520
Strategic Distribution a | 114,690 |  |  | 1,617,129 |  |  |  |  |
|  |  |  |  |  |  |  |  | 2,361,274
|  |  |  | 2,623,011 |  |  |  |  |
|  |  |  |  | Total (Cost $11,661,923) |  |  |  | 21,298,011
Printing - 1.7% |  |  |  |  |  |  |  |  |
Bowne & Co. | 110,000 |  |  | 1,621,400 |  | Technology – 20.4% |  |  |  |
Ennis Business Forms | 36,200 |  |  | 472,410 |  | Aerospace/Defense - 4.3% |  |  |  |
Moore Corporation a | 39,600 |  |  | 454,608 |  | Curtiss-Wright | 26,400 |  |  | 2,112,000
New England Business Service | 52,900 |  |  | 1,329,906 |  | Ducommun a | 109,500 |  |  | 2,873,280
Schawk | 31,300 |  |  | 334,910 |  | Hawaiian Airlines a | 120,000 |  |  | 438,000
|  |  |  |  | HEICO | 55,000 |  |  | 771,100
|  |  |  | 4,213,234 |  | HEICO Cl. A | 15,750 |  |  | 176,400
|  |  |  |  | Herley Industries a | 80,000 |  |  | 1,696,800
Transportation and Logistics - 2.2% |  |  |  |  |  | Integral Systems a | 58,300 |  |  | 1,272,106
AirNet Systems a | 110,200 |  |  | 936,700 |  | Mesaba Holdings a | 25,000 |  |  | 146,750
EGL a | 42,100 |  |  | 714,016 |  | SkyWest | 10,000 |  |  | 233,900
Forward Air a | 36,800 |  |  | 1,206,304 |  | Special Metals a | 228,800 |  |  | 68,640
Frozen Food Express Industries a | 77,500 |  |  | 186,000 |  | Woodward Governor | 15,300 |  |  | 904,536
Hub Group Cl. A a | 6,500 |  |  | 60,125 |  |  |  |  |
|  |  |  |  |  |  |  |  |  | 10,693,512
30 | THE ROYCE FUNDS SEMIANNUAL REPORT 2002

ROYCE MICRO-CAP TRUST, INC.
SCHEDULE OF INVESTMENTS | JUNE 30, 2002 (UNAUDITED)
| SHARES |  |  | VALUE |  |  | SHARES |  |  | VALUE
Technology (continued) |  |  |  |  |  | Exar a | 17,000 |  | $ | 335,240
Components and Systems - 3.8% |  |  |  |  |  | FSI International a | 34,500 |  |  | 257,715
CSP a | 117,581 |  | $ | 369,040 |  | GlobespanVirata a | 10,000 |  |  | 38,700
Com21 a | 17,500 |  |  | 7,875 |  | Helix Technology | 9,500 |  |  | 195,700
†Del Global Technologies a,c | 464,279 |  |  | 1,741,046 |  | inSilicon Corporation a | 41,500 |  |  | 98,355
Excel Technology a | 97,900 |  |  | 2,055,900 |  | Intevac a | 111,450 |  |  | 278,625
Kronos a | 30,750 |  |  | 937,537 |  | Photronics a | 29,750 |  |  | 563,465
MOCON | 52,600 |  |  | 478,660 |  | Semitool a | 50,500 |  |  | 412,080
Newport a | 45,000 |  |  | 704,700 |  | SIPEX Corporation a | 24,100 |  |  | 117,825
PC-Tel a | 61,100 |  |  | 413,586 |  | Teradyne a | 13,604 |  |  | 319,694
Performance Technologies a | 24,750 |  |  | 164,092 |  | Xicor a | 35,000 |  |  | 141,400
Radiant Systems a | 15,000 |  |  | 195,450 |  |  |  |  |
Rainbow Technologies a | 229,500 |  |  | 1,129,140 |  |  |  |  |  | 3,996,399
Read-Rite a | 5,000 |  |  | 2,400 |  |  |  |  |
REMEC a | 132,500 |  |  | 743,325 |  | Software - 2.1% |  |  |  |
Spectrum Control a | 17,500 |  |  | 105,875 |  | Aladdin Knowledge Systems a | 27,300 |  |  | 63,609
TransAct Technologies a | 68,200 |  |  | 332,816 |  | ANSYS a | 15,400 |  |  | 309,540
|  |  |  |  | Applix a | 20,000 |  |  | 31,000
|  |  |  | 9,381,442 |  | JDA Software Group a | 28,000 |  |  | 791,280
|  |  |  |  | Lightspan a | 340,000 |  |  | 591,600
Distribution - 1.9% |  |  |  |  |  | MSC.Software a | 17,700 |  |  | 158,415
Brightpoint a | 18,571 |  |  | 47,355 |  | Roxio a | 115,293 |  |  | 830,110
Daisytek International a | 63,300 |  |  | 1,073,568 |  | SCB Computer Technology a | 50,000 |  |  | 43,500
Elamex a | 70,200 |  |  | 361,530 |  | SPSS a | 91,900 |  |  | 1,428,126
Jaco Electronics a | 38,000 |  |  | 178,600 |  | Transaction Systems Architects Cl. A a | 90,100 |  |  | 1,059,576
Nu Horizons Electronics a | 40,000 |  |  | 331,600 |  |  |  |  |
PC Connection a | 5,000 |  |  | 20,500 |  |  |  |  |  | 5,306,756
Pioneer-Standard Electronics | 107,000 |  |  | 1,111,730 |  |  |  |  |
Richardson Electronics | 146,600 |  |  | 1,573,018 |  | Telecommunication - 2.1% |  |  |  |
|  |  |  |  | Brooktrout a | 28,400 |  |  | 161,880
|  |  |  | 4,697,901 |  | C-COR.net a | 5,000 |  |  | 35,000
|  |  |  |  | Captaris a | 30,000 |  |  | 88,500
Internet Software and Services - 0.7% |  |  |  |  |  | Computer Access Technology a | 48,000 |  |  | 162,725
CryptoLogic a | 78,000 |  |  | 684,060 |  | Globecomm Systems a | 113,400 |  |  | 463,806
Lionbridge Technologies a | 37,500 |  |  | 75,000 |  | Liberty Satellite & Technology Cl. A a | 34,000 |  |  | 76,500
RealNetworks a | 65,700 |  |  | 267,399 |  | MetaSolv a | 120,000 |  |  | 478,800
Register.com a | 63,100 |  |  | 480,822 |  | PECO II a | 93,600 |  |  | 313,560
Stamps.com a | 80,000 |  |  | 354,400 |  | Somera Communications a | 132,900 |  |  | 948,906
|  |  |  |  | †SpectraLink Corporation a | 132,000 |  |  | 1,404,480
|  |  |  | 1,861,681 |  | Technical Communications a,c | 96,700 |  |  | 77,843
|  |  |  |  | †ViaSat a | 128,400 |  |  | 1,082,412
IT Services - 3.9% |  |  |  |  |  |  |  |  |
Analysts International a | 175,000 |  |  | 743,750 |  |  |  |  |  | 5,294,412
answerthink a | 253,600 |  |  | 961,144 |  |  |  |  |
CACI International Cl. A a | 10,000 |  |  | 381,900 |  | Total (Cost $48,155,746) |  |  |  | 50,964,609
CIBER a | 185,000 |  |  | 1,341,250 |  |  |  |  |
Covansys Corporation a | 192,500 |  |  | 1,081,850 |  | Miscellaneous – 4.8% |  |  |  |
DiamondCluster International Cl. A a | 90,000 |  |  | 538,200 |  | Total (Cost $14,634,681) |  |  |  | 12,033,369
Forrester Research a | 70,500 |  |  | 1,367,630 |  |  |  |  |
†Sapient Corporation a | 1,070,000 |  |  | 1,134,200 |  |  |  |  |  |
Syntel a | 133,200 |  |  | 1,646,352 |  | TOTAL COMMON STOCKS |  |  |  |
Technology Solutions a | 50,000 |  |  | 64,000 |  | (Cost $178,502,202) |  |  |  | 238,341,293
Tier Technologies Cl. B a | 26,500 |  |  | 472,230 |  |  |  |  |
|  |  |  |  | PREFERRED STOCKS – 0.4% |  |  |  |
|  |  |  | 9,732,506 |  | Chart House Enterprises a | 6,991 |  |  | 4,544
|  |  |  |  | Seneca Foods Conv. a | 75,409 |  |  | 989,743
Semiconductors and Equipment - 1.6% |  |  |  |  |  |  |  |  |
August Technology a | 40,000 |  |  | 395,600 |  | TOTAL PREFERRED STOCKS |  |  |  |
California Micro Devices a | 25,000 |  |  | 127,000 |  | (Cost $957,998) |  |  |  | 994,287
Electroglas a | 71,500 |  |  | 715,000 |  |  |  |  |
THE ROYCE FUNDS SEMIANNUAL REPORT 2002 | 31

ROYCE MICRO-CAP TRUST, INC.
SCHEDULE OF INVESTMENTS |  | JUNE 30, 2002 (UNAUDITED)
|  | PRINCIPAL |  |  |  |  |  |  |  |  |
|  | AMOUNT |  |  | VALUE |  |  |  |  | VALUE |
U.S. TREASURY OBLIGATIONS – 2.0% |  |  |  |  |  |  | TOTAL INVESTMENTS – 100.5% |  |  |  |
U.S. Treasury Notes |  |  |  |  |  |  | (Cost $191,409,455) |  |  | $251,338,580 |
6.00%, due 9/30/02 |  | $5,000,000 |  | $ | 5,054,000 |  |  |  |  |  |
|  |  |  |  |  |  | LIABILITIES LESS CASH |  |  |  |
TOTAL U.S. TREASURY OBLIGATIONS |  |  |  |  |  |  | AND OTHER ASSETS – (0.5)% |  |  | (1,374,258 | )
(Cost $5,000,255) |  |  |  |  | 5,054,000 |  |  |  |  |
|  |  |  |  |  |  | NET ASSETS – 100.0% |  |  | $249,964,322 |
REPURCHASE AGREEMENT – 2.8% |  |  |  |  |  |  |  |  |  |
State Street Bank & Trust Company, |  |  |  |  |  |  |  |  |  |  |
1.00% dated 6/28/02, due 7/1/02, |  |  |  |  |  |  |  |  |  |  |
maturity value $6,949,579 |  |  |  |  |  |  |  |  |  |  |
(collateralized by U.S. Treasury Bonds, |  |  |  |  |  |  |  |  |  |  |
8.125% due 8/15/19, valued at $7,092,212) |  |  |  |  |  |  |  |  |  |  |
(Cost $6,949,000) |  |  |  |  | 6,949,000 |  |  |  |  |  |

a | Non-income producing.
b | American Depository Receipt.
c | At June 30, 2002, 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.
d | Securities for which market quotations are no longer readily available represent 1.05% of net assets. These securities have been valued at their fair value under procedures established by the Fund’s Board of Directors.
† | New additions in 2002.
| Bold indicates the Fund’s largest 20 equity holdings in terms of June 30, 2002 market value.
INCOME TAX INFORMATION: The cost of total investments for Federal income tax purposes was $191,732,855. At June 30, 2002, net unrealized appreciation for all securities was $59,605,725, consisting of aggregate gross unrealized appreciation of $80,334,337 and aggregate gross unrealized depreciation of $20,728,612. The primary differences in book and tax basis cost is 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.
32 | THE ROYCE FUNDS SEMIANNUAL REPORT 2002

ROYCE MICRO-CAP TRUST, INC.
STATEMENT OF ASSETS AND LIABILITIES | JUNE 30, 2002 (UNAUDITED)
ASSETS:
Investments at value (identified cost $184,460,455) |  | $ | 244,389,580 |
Repurchase agreement (at cost and value) |  |  | 6,949,000 |
Cash |  |  | 279 |
Receivable for investments sold |  |  | 2,341,012 |
Receivable for dividends and interest |  |  | 143,392 |
Prepaid expenses |  |  | 18,200 |
Total Assets |  |  | 253,841,463 |
LIABILITIES: |  |  |  |
Payable for investments purchased |  |  | 3,444,732 |
Payable for investment advisory fee |  |  | 269,495 |
Preferred dividends accrued but not yet declared |  |  | 68,888 |
Accrued expenses |  |  | 94,026 |
Total Liabilities |  |  | 3,877,141 |
Net Assets |  | $ | 249,964,322 |
ANALYSIS OF NET ASSETS: |  |  |  |
PREFERRED STOCK: |  |  |  |
Par value of 7.75% Cumulative Preferred Stock – $0.001 per share; 1,600,000 shares outstanding |  | $ | 1,600 |
Additional paid-in capital |  |  | 39,998,400 |
Net Assets applicable to Preferred Stock at a liquidation value of $25 per share |  |  | 40,000,000 |
COMMON STOCK: |  |  |  |
Par value of Common Stock – $0.001 per share; 17,199,145 shares outstanding (150,000,000 shares authorized) |  |  | 17,199 |
Additional paid-in capital |  |  | 132,737,509 |
Undistributed net investment income (loss) |  |  | (987,737 | )
Accumulated net realized gain on investments |  |  | 24,462,466 |
Net unrealized appreciation on investments |  |  | 59,929,119 |
Quarterly and accrued distributions |  |  | (6,194,234 | )
Net Assets applicable to Common Stock (net asset value per share – $12.21) |  |  | 209,964,322 |
Net Assets |  | $ | 249,964,322 |
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
THE ROYCE FUNDS SEMIANNUAL REPORT 2002 | 33

ROYCE MICRO-CAP TRUST, INC. |
STATEMENT OF OPERATIONS |  | SIX MONTHS ENDED JUNE 30, 2002 (UNAUDITED) |
INVESTMENT INCOME: |  |  |  |  |  |  |  |  |
Income: |  |  |  |  |  |  |  |  |
Dividends |  |  |  |  |  |  | $ | 529,991 |
Interest |  |  |  |  |  |  |  | 256,843 |
Total income |  |  |  |  |  |  |  | 786,834 |
Expenses: |  |  |  |  |  |  |  |  |
Investment advisory fees |  |  |  |  |  |  |  | 1,571,554 |
Custody and transfer agent fees |  |  |  |  |  |  |  | 61,570 |
Administrative and office facilities expenses |  |  |  |  |  |  |  | 33,426 |
Directors’ fees |  |  |  |  |  |  |  | 31,505 |
Stockholder reports |  |  |  |  |  |  |  | 30,231 |
Professional fees |  |  |  |  |  |  |  | 16,233 |
Other expenses |  |  |  |  |  |  |  | 30,052 |
Total expenses |  |  |  |  |  |  |  | 1,774,5771 |
Net investment income (loss) |  |  |  |  |  |  |  | (987,737 | )
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: |  |  |  |  |  |  |  |  |
Net realized gain on investments |  |  |  |  |  |  |  | 20,645,653 |
Net change in unrealized appreciation on investments |  |  |  |  |  |  |  | (6,861,857 | )
Net realized and unrealized gain on investments |  |  |  |  |  |  |  | 13,783,796 |
NET INCREASE IN NET ASSETS FROM INVESTMENT OPERATIONS |  |  |  |  |  |  | $ | 12,796,059 |
STATEMENTS OF CHANGES IN NET ASSETS |  |  |  |  |  |  |  |  |
|  |  | Six months ended |  | Year ended |
|  |  | June 30, 2002 |  | December 31, |
|  |  | (unaudited) |  | 2001 |
INVESTMENT OPERATIONS: |  |  |  |  |  |  |  |  |
Net investment income (loss) |  |  | $ | (987,737 | ) |  | $ | (775,205 | )
Net realized gain on investments |  |  |  | 20,645,653 |  |  |  | 12,077,022 |
Net change in unrealized appreciation on investments |  |  |  | (6,861857 | ) |  |  | 29,883,551 |
Net increase in net assets from investment operations |  |  |  | 12,796,059 |  |  |  | 41,185,368 |
DISTRIBUTIONS TO PREFERRED STOCKHOLDERS: |  |  |  |  |  |  |  |  |
Net investment income |  |  |  | – |  |  |  | – |
Net realized gain on investments |  |  |  | – |  |  |  | (3,100,000 | )
Quarterly distributions* |  |  |  | (1,550,000 | ) |  |  | – |
Total distributions to Preferred Stockholders |  |  |  | (1,550,000 | ) |  |  | (3,100,000 | )
DISTRIBUTIONS TO COMMON STOCKHOLDERS: |  |  |  |  |  |  |  |  |
Net investment income |  |  |  | – |  |  |  | – |
Net realized gain on investments |  |  |  | – |  |  |  | (9,211,976 | )
Quarterly distributions* |  |  |  | (4,575,345 | ) |  |  | – |
Total distributions to Common Stockholders |  |  |  | (4,575,345 | ) |  |  | (9,211,976 | )
CAPITAL STOCK TRANSACTIONS: |  |  |  |  |  |  |  |  |
Reinvestment of distributions to Common Stockholders |  |  |  | 2,850,483 |  |  |  | 7,749,904 |
NET INCREASE IN NET ASSETS |  |  |  | 9,521,197 |  |  |  | 36,623,296 |
NET ASSETS: |  |  |  |  |  |  |  |  |
Beginning of period |  |  |  | 240,443,125 |  |  |  | 203,819,829 |
End of period (including undistributed net investment income (loss) |  |  |  |  |  |  |  |  |
of ($987,737) and $0, respectively) |  |  | $ | 249,964,322 |  |  | $ | 240,443,125 |
* To be allocated to net investment income and capital gains at year-end.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

34 | THE ROYCE FUNDS SEMIANNUAL REPORT 2002

ROYCE MICRO-CAP TRUST, INC.
FINANCIAL HIGHLIGHTS
| This table is presented to show selected data for a share of Common Stock outstanding throughout each period, and to assist stockholders in evaluating the Fund’s performance for the periods presented.
| Six months ended June 30, 2002 (unaudited) | Years ended December 31,
| 2001 | 2000 | 1999 | 1998 | 1997
NET ASSET VALUE, BEGINNING OF PERIOD | $11.83 |  | $10.14 |  | $11.00 |  | $10.06 |  | $10.84 |  | $9.38 |
INVESTMENT OPERATIONS: |  |  |  |  |  |  |  |  |  |  |  |
Net investment income (loss) | (0.06 | ) | (0.05 | ) | 0.09 |  | 0.12 |  | 0.13 |  | 0.17 |
Net realized and unrealized gain (loss) on investments | 0.81 |  | 2.57 |  | 1.23 |  | 1.35 |  | (0.36 | ) | 2.61 |
Total investment operations | 0.75 |  | 2.52 |  | 1.32 |  | 1.47 |  | (0.23 | ) | 2.78 |
DISTRIBUTIONS TO PREFERRED STOCKHOLDERS: |  |  |  |  |  |  |  |  |  |  |  |
Net investment income | – |  | – |  | (0.01 | ) | (0.05 | ) | (0.06 | ) | (0.02 | )
Net realized gain on investments | – |  | (0.19 | ) | (0.22 | ) | (0.18 | ) | (0.18 | ) | (0.12 | )
Quarterly distributions* | (0.09 | ) | – |  | – |  | – |  | – |  | – |
Total distributions to Preferred Stockholders | (0.09 | ) | (0.19 | ) | (0.23 | ) | (0.23 | ) | (0.24 | ) | (0.14 | )
DISTRIBUTIONS TO COMMON STOCKHOLDERS: |  |  |  |  |  |  |  |  |  |  |  |
Net investment income | – |  | – |  | (0.09 | ) | (0.06 | ) | (0.07 | ) | (0.16 | )
Net realized gain on investments | – |  | (0.57 | ) | (1.63 | ) | (0.21 | ) | (0.22 | ) | (0.84 | )
Quarterly distributions* | (0.27 | ) | – |  | – |  | – |  | – |  | – |
Total distributions to Common Stockholders | (0.27 | ) | (0.57 | ) | (1.72 | ) | (0.27 | ) | (0.29 | ) | (1.00 | )
CAPITAL STOCK TRANSACTIONS: |  |  |  |  |  |  |  |  |  |  |  |
Effect of reinvestment of distributions by Common Stockholders | (0.01 | ) | (0.07 | ) | (0.23 | ) | (0.03 | ) | (0.02 | ) | (0.06 | )
Effect of Preferred Stock offering | – |  | – |  | – |  | – |  | – |  | (0.12 | )
Total capital stock transactions | (0.01 | ) | (0.07 | ) | (0.23 | ) | (0.03 | ) | (0.02 | ) | (0.18 | )
NET ASSET VALUE, END OF PERIOD | $12.21 |  | $11.83 |  | $10.14 |  | $11.00 |  | $10.06 |  | $10.84 |
MARKET VALUE, END OF PERIOD | $11.68 |  | $10.50 |  | $8.625 |  | $9.00 |  | $8.875 |  | $10.125 |
TOTAL RETURN (a): |  |  |  |  |  |  |  |  |  |  |  |
Net Asset Value | 5.7 | %*** | 23.4 | % | 10.9 | % | 12.7 | % | (4.1 | )% | 27.1 | %
Market Value | 13.9 | %*** | 28.8 | % | 15.3 | % | 4.5 | % | (9.4 | )% | 35.0 | %
RATIOS BASED ON AVERAGE NET ASSETS APPLICABLE TO |  |  |  |  |  |  |  |  |  |  |  |
COMMON STOCKHOLDERS: |  |  |  |  |  |  |  |  |  |  |  |
Total expenses (b,c) | 1.66 | %** | 1.78 | % | 1.32 | % | 1.27 | % | 1.18 | % | 0.83 | %
Management fee expense | 1.47 | %** | 1.57 | % | 1.08 | % | 0.91 | % | 0.80 | % | 0.40 | %
Other operating expenses | 0.19 | %** | 0.21 | % | 0.24 | % | 0.36 | % | 0.38 | % | 0.43 | %
Net investment income (loss) | (0.93 | )%** | (0.43 | )% | 0.74 | % | 1.20 | % | 1.21 | % | 1.77 | %
SUPPLEMENTAL DATA: |  |  |  |  |  |  |  |  |  |  |  |
Net Assets, End of Period (in thousands) | $249,964 |  | $240,443 |  | $203,820 |  | $191,269 |  | $175,495 |  | $182,362 |
Portfolio Turnover Rate | 18 | % | 27 | % | 49 | % | 49 | % | 44 | % | 34 | %
PREFERRED STOCK: |  |  |  |  |  |  |  |  |  |  |  |
Total shares outstanding | 1,600,000 |  | 1,600,000 |  | 1,600,000 |  | 1,600,000 |  | 1,600,000 |  | 1,600,000 |
Asset coverage per share | $156.23 |  | $150.28 |  | $127.39 |  | $119.54 |  | $109.68 |  | $113.98 |
Liquidation preference per share | $25.00 |  | $25.00 |  | $25.00 |  | $25.00 |  | $25.00 |  | $25.00 |
Average market value per share (d) | $25.92 |  | $25.30 |  | $23.08 |  | $24.67 |  | $25.40 |  | $25.56 |

(a) | The Net Asset Value and Market Value Total Returns assume a continuous Common Stockholder who reinvested all net investment income dividends and capital gain distributions.
(b) | Expense ratios based on total average net assets were 1.40%, 1.46%, 1.06%, 0.98%, 0.92% and 0.72% for the periods ended June 30, 2002 and December 31, 2001, 2000, 1999, 1998 and 1997, respectively.
(c) | Expense ratios based on average net assets applicable to Common Stockholders before waiver of fees by the investment adviser would have been 1.81%, 1.44% and 1.24% for the periods ended December 31, 2001, 1999 and 1998, respectively.
(d) | The average of month-end market values during the period.
* | To be allocated to net investment income and capital gains at year-end.
** | Annualized.
*** | Not annualized.
THE ROYCE FUNDS SEMIANNUAL REPORT 2002 | 35

ROYCE MICRO-CAP TRUST, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Summary of Significant Accounting Policies:
| Royce Micro-Cap Trust, Inc. (the “Fund”) was incorporated under the laws of the State of Maryland on September 9, 1993 as a diversified closed-end investment company. The Fund commenced operations on December 14, 1993. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Valuation of Investments: Securities listed on an exchange or on the Nasdaq National Market System (NMS) are valued on the basis of the last reported sale prior to the time the valuation is made or, if no sale is reported for such day, at their bid price for exchange-listed securities and at the average of their bid and asked prices for Nasdaq NMS securities. Quotations are taken from the market where the security is primarily traded. Other over-the-counter securities for which market quotations are readily available are valued at their bid price. Securities for which market quotations are not readily available are valued at their fair value under procedures established 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. Investment Transactions and Related Investment Income: Investment transactions are accounted for on the trade date. Dividend income is recorded on the ex-dividend date and any non-cash dividend income is recorded at the fair market value of the securities received. Interest income is recorded on the accrual basis. Realized gains and losses from investment transactions are determined on the basis of identified cost for book and tax purposes. Expenses: The Fund incurs direct and indirect expenses. Expenses directly attributable to the Fund are charged to the Fund’s operations, while expenses applicable to more than one of the Royce Funds are allocated in an equitable manner. Allocated personnel and occupancy costs related to The Royce Funds are included in administrative and office facilities expenses. The Fund has adopted a deferred fee agreement that allows the Fund’s Directors to defer the receipt of all or a portion of Directors’ Fees otherwise payable. The deferred fees remain invested in certain Royce Funds until distributed in accordance with the agreement. 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: Effective April 25, 2002, the Fund adopted 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 recorded on an accrual basis and paid quarterly. 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 enters into repurchase agreements with respect to its portfolio securities solely with State Street Bank and Trust Company (“SSB&T”), the custodian of its assets. The Fund restricts repurchase agreements to maturities of no more than seven days. Securities pledged as collateral for repurchase agreements, which are held by SSB&T 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 SSB&T, including possible delays or restrictions upon the ability of the Fund to dispose of the underlying securities.
Capital Stock:
| The Fund currently has 1,600,000 shares of 7.75% Cumulative Preferred Stock outstanding. The stock has a liquidation preference of $25.00 per share.
36 | THE ROYCE FUNDS SEMIANNUAL REPORT 2002

ROYCE MICRO-CAP TRUST, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
| Under the Investment Company Act of 1940, the Fund is required to maintain an asset coverage of at least 200% for the Preferred Stock. In addition, pursuant to the Rating Agency Guidelines established by Moody’s, the Fund is required to maintain a certain discounted asset coverage. The Fund has met these requirements since issuing the Preferred Stock. 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 dividends on the shares of Preferred Stock are not paid from long-term capital gains, net investment income or net short-term capital gains, they will represent a return of capital. The Fund issued 253,377 and 784,403 shares of Common Stock as reinvestment of distributions by Common Stockholders for the periods ended June 30, 2002 and December 31, 2001, respectively.
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 month-end net assets of the Fund for the rolling 36-month period ending with such month. 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 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 Preferred Stock’s dividend rate. For the period ended June 30, 2002, the Fund accrued and paid Royce advisory fees totaling $1,571,554.
Purchases and Sales of Investment Securities:
| For the period ended June 30, 2002, the cost of purchases and proceeds from sales of investment securities, other than short-term securities, amounted to $46,003,646 and $52,901,986, respectively.
Transactions in Shares of Affiliated Companies:
| An “Affiliated Company”, as defined in the Investment Company Act of 1940, is a company in which a fund owns 5% or more of the company’s outstanding voting securities. The Fund effected the following transactions in shares of such companies during the period ended June 30, 2002:

|  | Purchases |  | Sales |  |  |  |  |
Affiliated Company |  | Shares |  |  | Cost |  | Shares |  |  | Cost |  |  | Realized Gain (Loss) |  | Dividend Income
Del Global Technologies |  | 464,279 |  | $ | 1,601,411 |  | — |  |  | — |  |  | — |  | —
Strategic Distribution |  | 18,000 |  | $ | 109,695 |  | 112,000 |  | $ | 894,705 |  | $ | 641,935 |  | —
Technical Communications |  | — |  |  | — |  | — |  |  | — |  |  | — |  | —
THE ROYCE FUNDS SEMIANNUAL REPORT 2002 | 37

ROYCE FOCUS TRUST, INC. |
SCHEDULE OF INVESTMENTS |  | JUNE 30, 2002 (UNAUDITED) |

COMMON STOCKS – 73.3% |  |  |  |  |  |  |  |
| SHARES |  | VALUE |  |  | SHARES |  | VALUE
Consumer Products – 4.3% |  |  |  | Industrial Products – 11.1% |  |  |
Apparel and Shoes - 1.3% |  |  |  | Building Systems and Components - 2.3% |  |  |
Nautica Enterprises a | 89,000 |  | $ 1,156,110 | Simpson Manufacturing a | 35,000 |  | $ 1,999,550
Home Furnishing/Appliances - 1.5% |  |  |  | Construction Materials - 2.5% |  |  |
Natuzzi ADR b | 83,800 |  | 1,272,922 | Florida Rock Industries | 59,850 |  | 2,143,229
Sports and Recreation - 1.5% |  |  |  | Machinery - 3.1% |  |  |
Monaco Coach a | 61,350 |  | 1,306,755 | Lincoln Electric Holdings | 101,600 |  | 2,733,040
Total (Cost $2,752,587) |  |  | 3,735,787 | Other Industrial Products - 3.2% |  |  |
|  |  |  | Diebold | 25,000 |  | 931,000
Consumer Services – 4.6% |  |  |  | Wescast Industries Cl. A | 53,000 |  | 1,876,200
Direct Marketing - 1.6% |  |  |  |  |  |  |
†Nu Skin Enterprises Cl. A | 97,000 |  | 1,411,350 |  |  |  | 2,807,200
Retail Stores - 3.0% |  |  |  | Total (Cost $6,321,597) |  |  | 9,683,019
Big Lots a | 89,400 |  | 1,759,392 |  |  |  |
Charming Shoppes a | 100,000 |  | 864,000 | Industrial Services – 8.6% |  |  |
|  |  |  | Commercial Services - 6.7% |  |  |
|  |  | 2,623,392 | ABM Industries | 121,400 |  | 2,107,504
|  |  |  | Cornell Companies a | 100,000 |  | 1,185,000
Total (Cost $2,114,839) |  |  | 4,034,742 | New Horizons Worldwide a | 80,500 |  | 820,295
|  |  |  | On Assignment a | 50,000 |  | 890,000
Financial Intermediaries – 7.3% |  |  |  | Spherion Corporation a | 72,500 |  | 862,750
Insurance - 6.2% |  |  |  |  |  |  |
Erie Indemnity Company Cl. A | 23,500 |  | 951,985 |  |  |  | 5,865,549
ProAssurance a | 124,255 |  | 2,186,888 |  |  |  |
White Mountains Insurance Group | 4,000 |  | 1,266,000 | Food/Tobacco Processors - 1.4% |  |  |
Zenith National Insurance | 29,800 |  | 949,130 | Midwest Grain Products | 92,200 |  | 1,197,678
|  |  | 5,354,003 | Transportation and Logistics - 0.5% |  |  |
|  |  |  | EGL a | 25,000 |  | 424,000
Securities Brokers - 1.1% |  |  |  |  |  |  |
E*TRADE Group a | 180,000 |  | 982,800 | Total (Cost $6,771,109) |  |  | 7,487,227
Total (Cost $4,727,726) |  |  | 6,336,803 | Natural Resources – 8.5% |  |  |
|  |  |  | Energy Services - 2.2% |  |  |
Financial Services – 3.6% |  |  |  | Input/Output a | 208,900 |  | 1,880,100
Insurance Brokers-1.6% |  |  |  |  |  |  |
Gallagher (Arthur J.) & Company | 41,000 |  | 1,420,650 | Oil and Gas - 5.0% |  |  |
|  |  |  | Tom Brown a | 78,800 |  | 2,233,980
|  |  |  | 3TEC Energy a | 120,000 |  | 2,091,600
Investment Management - 0.7% |  |  |  |  |  |  |
†U.S. Global Investors Cl. A a | 295,605 |  | 591,210 |  |  |  | 4,325,580
Other Financial Services - 1.3% |  |  |  | Precious Metals and Mining - 1.3% |  |  |
†Electro Rent a | 84,400 |  | 1,096,356 | AngloGold ADR b | 44,600 |  | 1,163,168
Total (Cost $2,178,216) |  |  | 3,108,216 | Total (Cost $4,454,176) |  |  | 7,368,848
Health – 8.7% |  |  |  | Technology – 16.6% |  |  |
Commercial Services - 0.3% |  |  |  | Aerospace/Defense - 0.9% |  |  |
Quintiles Transnational a | 20,000 |  | 249,800 | Curtiss-Wright | 9,800 |  | 784,000
Drugs and Biotech - 4.8% |  |  |  | Components and Systems - 4.2% |  |  |
†Antigenics a | 100,000 |  | 985,000 | Dionex a | 50,000 |  | 1,339,500
Applera Corporation - |  |  |  | Kronos a | 27,750 |  | 846,070
Celera Genomics Group a | 39,000 |  | 468,000 | Zebra Technologies Cl. A a | 30,200 |  | 1,456,244
†Gene Logic a | 130,000 |  | 1,820,000 |  |  |  |
Lexicon Genetics a | 189,500 |  | 926,465 |  |  |  | 3,641,814
|  |  | 4,199,465 | Distribution - 3.8% |  |  |
|  |  |  | Avnet a | 89,100 |  | 1,959,309
Personal Care - 1.4% |  |  |  | Richardson Electronics | 129,000 |  | 1,384,170
Ocular Sciences a | 46,000 |  | 1,219,000 |  |  |  |
|  |  |  |  |  |  | 3,343,479
Surgical Products and Devices - 2.2% |  |  |  |  |  |  |
Arrow International | 40,200 |  | 1,569,810 | Internet Software and Services - 0.7% |  |  |
†VISX a | 30,000 |  | 327,000 | Register.com a | 80,000 |  | 609,600
|  |  | 1,896,810 |  |  |  |
Total (Cost $8,431,844) |  |  | 7,565,075 |  |  |  |

38 | THE ROYCE FUNDS SEMIANNUAL REPORT 2002

ROYCE FOCUS TRUST, INC. |
SCHEDULE OF INVESTMENTS | JUNE 30, 2002 (UNAUDITED) |
|  |  |  |  |  |  |  | PRINCIPAL |  |  |  |
|  | SHARES |  |  | VALUE |  |  | AMOUNT |  |  | VALUE |
Technology (continued) |  |  |  |  |  |  | U.S. TREASURY OBLIGATIONS – 12.1% |  |  |  |  |  |
IT Services - 4.6% |  |  |  |  |  |  | U.S. Treasury Notes |  |  |  |  |  |
†Covansys Corporation a |  | 85,000 |  | $ | 477,700 |  | 5.75% due 10/31/02 | $ | 5,000,000 |  | $ | 5,066,750 |
Forrester Research a |  | 53,600 |  |  | 1,039,786 |  | 7.25% due 8/15/04 |  | 5,000,000 |  |  | 5,438,250 |
Perot Systems Cl. A a |  | 138,600 |  |  | 1,509,354 |  |  |  |  |  |  |
Syntel a |  | 77,500 |  |  | 957,900 |  |  |  |  |  |  |  |
|  |  |  |  |  | TOTAL U.S. TREASURY OBLIGATIONS |  |  |  |  |  |
|  |  |  |  | 3,984,740 |  | (Cost $10,061,019) |  |  |  |  | 10,505,000 |
Software - 1.2% |  |  |  |  |  |  |  |  |  |  |  |  |
JDA Software Group a |  | 37,100 |  |  | 1,048,446 |  | REPURCHASE AGREEMENT – 14.7% |  |  |  |  |  |
|  |  |  |  |  | State Street Bank & Trust Company, |  |  |  |  |  |
Telecommunication - 1.2% |  |  |  |  |  |  | 1.00% dated 6/28/02, due 7/1/02, |  |  |  |  |  |
Plantronics a |  | 10,000 |  |  | 190,100 |  | maturity value $12,761,063 |  |  |  |  |  |
†Somera Communications a |  | 120,000 |  |  | 856,800 |  | (collateralized by U.S. Treasury Bonds, |  |  |  |  |  |
|  |  |  |  |  | 8.125% due 8/15/19, valued at $13,017,684) |  |  |  |
|  |  |  |  | 1,046,900 |  | (Cost $12,760,000) |  |  |  |  | 12,760,000 |
Total (Cost $12,566,168) |  |  |  |  | 14,458,979 |  |  |  |  |  |  |  |
|  |  |  |  |  | TOTAL INVESTMENTS – 100.1% |  |  |  |  |  |
TOTAL COMMON STOCKS |  |  |  |  |  |  | (Cost $73,139,281) |  |  |  |  | 87,043,696 |
(Cost $50,318,262) |  |  |  |  | 63,778,696 |  |  |  |  |  |  |  |
|  |  |  |  |  | LIABILITIES LESS CASH |  |  |  |  |  |
|  |  |  |  |  |  | AND OTHER ASSETS – (0.1)% |  |  |  |  | (29,975 | )
|  |  |  |  |  |  | NET ASSETS – 100.0% |  |  |  | $ | 87,013,721 |
a Non-income producing.
b American Depository Receipt.
† New additions in 2002.
Bold indicates the Fund’s largest 20 equity holdings in terms of June 30, 2002 market value.
INCOME TAX INFORMATION:The cost of total investments for Federal income tax purposes was $73,197,023. At June 30, 2002, net unrealized appreciation for all securities was $13,846,673, consisting of aggregate gross unrealized appreciation of $16,680,850 and aggregate gross unrealized depreciation of $2,834,177. The primary differences in book and tax basis cost is 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.
THE ROYCE FUNDS SEMIANNUAL REPORT 2002 | 39

ROYCE FOCUS TRUST, INC. |
STATEMENT OF ASSETS AND LIABILITIES |  | JUNE 30, 2002 (UNAUDITED) |

ASSETS: |  |  |
Investments at value (identified cost $60,379,281) | $ | 74,283,696 |
Repurchase agreement (at cost and value) |  | 12,760,000 |
Cash |  | 76 |
Receivable for dividends and interest |  | 231,249 |
Prepaid expenses |  | 14,805 |
Total Assets |  | 87,289,826 |
LIABILITIES: |  |  |
Payable for investments purchased |  | 125,600 |
Payable for investment advisory fee |  | 55,095 |
Preferred dividends accrued but not yet declared |  | 33,112 |
Accrued expenses |  | 62,298 |
Total Liabilities |  | 276,105 |
Net Assets | $ | 87,013,721 |
ANALYSIS OF NET ASSETS: |  |  |
PREFERRED STOCK: |  |  |
Par value of 7.45% Cumulative Preferred Stock – $0.001 per share; 800,000 shares outstanding | $ | 800 |
Additional paid-in capital |  | 19,999,200 |
Net Assets applicable to Preferred Stock at a liquidation value of $25 per share |  | 20,000,000 |
COMMON STOCK: |  |  |
Par value of Common Stock – $0.001 per share; 9,161,324 shares outstanding (100,000,000 shares authorized) |  | 9,161 |
Additional paid-in capital |  | 45,366,987 |
Undistributed net investment income |  | 431,731 |
Accumulated net realized gain on investments |  | 8,079,539 |
Net unrealized appreciation on investments |  | 13,904,415 |
Quarterly and accrued distributions |  | (778,112 | )
Net Assets applicable to Common Stock (net asset value per share – $7.31) |  | 67,013,721 |
Net Assets | $ | 87,013,721 |
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

40 | THE ROYCE FUNDS SEMIANNUAL REPORT 2002

ROYCE FOCUS TRUST, INC. |
STATEMENT OF OPERATIONS |  | SIX MONTHS ENDED JUNE 30, 2002 (UNAUDITED) |

INVESTMENT INCOME: |  |  |  |  |  |  |  |  |
Income: |  |  |  |  |  |  |  |  |
Interest |  |  |  |  |  |  | $ | 360,300 |
Dividends |  |  |  |  |  |  |  | 212,932 |
Total income |  |  |  |  |  |  |  | 573,232 |
Expenses: |  |  |  |  |  |  |  |  |
Investment advisory fees |  |  |  |  |  |  |  | 443,631 |
Custody and transfer agent fees |  |  |  |  |  |  |  | 37,380 |
Stockholder reports |  |  |  |  |  |  |  | 24,673 |
Directors’ fees |  |  |  |  |  |  |  | 16,821 |
Administrative and office facilities expenses |  |  |  |  |  |  |  | 11,956 |
Professional fees |  |  |  |  |  |  |  | 13,735 |
Other expenses |  |  |  |  |  |  |  | 33,228 |
Total expenses |  |  |  |  |  |  |  | 581,424 |
Fees waived by investment adviser |  |  |  |  |  |  |  | (16,438 | )
Net expenses |  |  |  |  |  |  |  | 564,986 |
Net investment income |  |  |  |  |  |  |  | 8,246 |
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: |  |  |  |  |  |  |  |  |
Net realized gain on investments |  |  |  |  |  |  |  | 6,440,689 |
Net change in unrealized appreciation on investments |  |  |  |  |  |  |  | (5,343,857 | )
Net realized and unrealized gain on investments |  |  |  |  |  |  |  | 1,096,832 |
NET INCREASE IN NET ASSETS FROM INVESTMENT OPERATIONS |  |  |  |  |  |  | $ | 1,105,078 |
STATEMENTS OF CHANGES IN NET ASSETS |  |  |  |  |  |  |  |  |
|  |  | Six months ended |  | Year ended |
|  |  | June 30, 2002 |  | December 31, |
|  |  | (unaudited) |  | 2001 |
INVESTMENT OPERATIONS: |  |  |  |  |  |  |  |  |
Net investment income |  |  | $ | 8,246 |  |  | $ | 431,263 |
Net realized gain on investments |  |  |  | 6,440,689 |  |  |  | 2,603,772 |
Net change in unrealized appreciation on investments |  |  |  | (5,343,857 | ) |  |  | 4,458,997 |
Net increase in net assets from investment operations |  |  |  | 1,105,078 |  |  |  | 7,494,032 |
DISTRIBUTIONS TO PREFERRED STOCKHOLDERS: |  |  |  |  |  |  |  |  |
Net investment income |  |  |  | – |  |  |  | (321,840 | )
Net realized gain on investments |  |  |  | – |  |  |  | (1,168,160 | )
Quarterly distributions* |  |  |  | (745,000 | ) |  |  | – |
Total distributions to Preferred Stockholders |  |  |  | (745,000 | ) |  |  | (1,490,000 | )
DISTRIBUTIONS TO COMMON STOCKHOLDERS: |  |  |  |  |  |  |  |  |
Net investment income |  |  |  | – |  |  |  | (272,127 | )
Net realized gain on investments |  |  |  | – |  |  |  | (987,720 | )
Total distributions to Common Stockholders |  |  |  | – |  |  |  | (1,259,847 | )
CAPITAL STOCK TRANSACTIONS: |  |  |  |  |  |  |  |  |
Reinvestment of distributions to Common Stockholders |  |  |  | – |  |  |  | 976,135 |
NET INCREASE IN NET ASSETS |  |  |  | 360,078 |  |  |  | 5,720,320 |
NET ASSETS: |  |  |  |  |  |  |  |  |
Beginning of period |  |  |  | 86,653,643 |  |  |  | 80,933,323 |
End of period (including undistributed net investment income |  |  |  |  |  |  |  |  |
of $431,731 and $423,485, respectively) |  |  | $ | 87,013,721 |  |  | $ | 86,653,643 |
*To be allocated to net investment income and capital gains at year-end. |  |  |  |  |  |  |  |  |
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

THE ROYCE FUNDS SEMIANNUAL REPORT 2002 | 41

ROYCE FOCUS TRUST, INC.
FINANCIAL HIGHLIGHTS
This table is presented to show selected data for a share of Common Stock outstanding throughout each period, and to assist stockholders in evaluating the Fund’s performance for the periods presented.
| Six months ended June 30, 2002 (unaudited) | Years ended December 31,
| 2001 |  | 2000 |  | 1999 |  | 1998 |  | 1997 |
NET ASSET VALUE, BEGINNING OF PERIOD | $7.28 |  | $6.77 |  | $5.94 |  | $5.63 |  | $6.04 |  | $5.52 |
INVESTMENT OPERATIONS: |  |  |  |  |  |  |  |  |  |  |  |
Net investment income | 0.00 |  | 0.05 |  | 0.12 |  | 0.08 |  | 0.12 |  | 0.08 |
Net realized and unrealized gain (loss) on investments | 0.11 |  | 0.79 |  | 1.26 |  | 0.58 |  | (0.35 | ) | 1.12 |
Total investment operations | 0.11 |  | 0.84 |  | 1.38 |  | 0.66 |  | (0.23 | ) | 1.20 |
DISTRIBUTIONS TO PREFERRED STOCKHOLDERS: |  |  |  |  |  |  |  |  |  |  |  |
Net investment income | – |  | (0.04 | ) | (0.03 | ) | (0.01 | ) | (0.16 | ) | – |
Net realized gain on investments | – |  | (0.13 | ) | (0.14 | ) | (0.17 | ) | (0.02 | ) | (0.01 | )
Quarterly distributions* | (0.08 | ) | – |  | – |  | – |  | – |  | – |
Total distributions to Preferred Stockholders | (0.08 | ) | (0.17 | ) | (0.17 | ) | (0.18 | ) | (0.18 | ) | (0.01 | )
DISTRIBUTIONS TO COMMON STOCKHOLDERS: |  |  |  |  |  |  |  |  |  |  |  |
Net investment income | – |  | (0.03 | ) | (0.06 | ) | (0.01 | ) | – |  | (0.12 | )
Net realized gain on investments | – |  | (0.11 | ) | (0.28 | ) | (0.14 | ) | – |  | (0.41 | )
Total distributions to Common Stockholders | – |  | (0.14 | ) | (0.34 | ) | (0.15 | ) | – |  | (0.53 | )
CAPITAL STOCK TRANSACTIONS: |  |  |  |  |  |  |  |  |  |  |  |
Effect of reinvestment of distributions by Common Stockholders | – |  | (0.02 | ) | (0.04 | ) | (0.02 | ) | – |  | (0.04 | )
Effect of Preferred Stock offering | – |  | – |  | – |  | – |  | – |  | (0.10 | )
Total capital stock transactions | – |  | (0.02 | ) | (0.04 | ) | (0.02 | ) | – |  | (0.14 | )
NET ASSET VALUE, END OF PERIOD | $7.31 |  | $7.28 |  | $6.77 |  | $5.94 |  | $5.63 |  | $6.04 |
MARKET VALUE, END OF PERIOD | $6.85 |  | $6.65 |  | $5.69 |  | $4.72 |  | $4.88 |  | $5.06 |
TOTAL RETURN (a): |  |  |  |  |  |  |  |  |  |  |  |
Net Asset Value | 0.4 | %*** | 10.0 | % | 20.9 | % | 8.7 | % | (6.8 | )% | 20.5 | %
Market Value | 3.0 | %*** | 19.7 | % | 27.9 | % | (0.3 | )% | (3.7 | )% | 21.3 | %
RATIOS BASED ON AVERAGE NET ASSETS |  |  |  |  |  |  |  |  |  |  |  |
APPLICABLE TO COMMON STOCKHOLDERS: |  |  |  |  |  |  |  |  |  |  |  |
Total expenses (b,c) | 1.64 | %** | 1.47 | % | 1.44 | % | 1.51 | % | 1.62 | % | 0.94 | %
Management fee expense | 1.24 | %** | 1.11 | % | 1.00 | % | 1.00 | % | 1.14 | % | 0.39 | %
Other operating expenses | 0.40 | %** | 0.36 | % | 0.44 | % | 0.51 | % | 0.48 | % | 0.55 | %
Net investment income | 0.02 | %** | 0.70 | % | 1.93 | % | 1.47 | % | 1.95 | % | 1.35 | %
SUPPLEMENTAL DATA: |  |  |  |  |  |  |  |  |  |  |  |
Net Assets, End of Period (in thousands) | $87,014 |  | $86,654 |  | $80,933 |  | $71,003 |  | $67,457 |  | $70,893 |
Portfolio Turnover Rate | 16 | % | 54 | % | 69 | % | 60 | % | 90 | % | 74 | %
PREFERRED STOCK: |  |  |  |  |  |  |  |  |  |  |  |
Total shares outstanding | 800,000 |  | 800,000 |  | 800,000 |  | 800,000 |  | 800,000 |  | 800,000 |
Asset coverage per share | $108.77 |  | $108.32 |  | $101.17 |  | $88.75 |  | $84.32 |  | $88.62 |
Liquidation preference per share | $25.00 |  | $25.00 |  | $25.00 |  | $25.00 |  | $25.00 |  | $25.00 |
Average market value per share (d) | $25.71 |  | $25.09 |  | $22.23 |  | $24.00 |  | $25.16 |  | $25.25 |

(a) | The Net Asset Value and Market Value Total Returns assume a continuous Common Stockholder who reinvested all net investment income dividends and capital gain distributions.
(b) | Expense ratios based on total average net assets were 1.27%, 1.11%, 1.05%, 1.06%, 1.16% and 0.90% for the periods ended June 30, 2002 and December 31, 2001, 2000, 1999, 1998 and 1997, respectively.
(c) | Expense ratios based on average net assets applicable to Common Stockholders before waiver of fees by the investment adviser would have been 1.69%, 1.69%, 1.81%, 1.93%, 1.88% and 1.60% for the periods ended June 30, 2002 and December 31, 2001, 2000, 1999, 1998 and 1997, respectively.
(d) | The average of month-end market values during the period.
* | To be allocated to net investment income and capital gains at year-end.
** | Annualized.
*** | Not annualized.
42 | THE ROYCE FUNDS SEMIANNUAL REPORT 2002

ROYCE FOCUS TRUST, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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 listed on an exchange or on the Nasdaq National Market System (NMS) are valued on the basis of the last reported sale prior to the time the valuation is made or, if no sale is reported for such day, at their bid price for exchange-listed securities and at the average of their bid and asked prices for Nasdaq NMS securities. Quotations are taken from the market where the security is primarily traded. Other over-the-counter securities for which market quotations are readily available are valued at their bid price. Securities for which market quotations are not readily available are valued at their fair value under procedures established 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. Investment Transactions and Related Investment Income: Investment transactions are accounted for on the trade date. Dividend income is recorded on the ex-dividend date and any non-cash dividend income is recorded at the fair market value of the securities received. Interest income is recorded on the accrual basis. Realized gains and losses from investment transactions are determined on the basis of identified cost for book and tax purposes. Expenses: The Fund incurs direct and indirect expenses. Expenses directly attributable to the Fund are charged to the Fund’s operations, while expenses applicable to more than one of the Royce Funds are allocated in an equitable manner. Allocated personnel and occupancy costs related to The Royce Funds are included in administrative and office facilities expenses. The Fund has adopted a deferred fee agreement that allows the Fund’s Directors to defer the receipt of all or a portion of Directors’ Fees otherwise payable. The deferred fees remain invested in certain Royce Funds until distributed in accordance with the agreement. 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: Distributions to Common Stockholders are recorded on the ex-dividend date and paid annually in December. Distributions to Preferred Stockholders are recorded on an accrual basis and paid quarterly. 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 enters into repurchase agreements with respect to its portfolio securities solely with State Street Bank and Trust Company (“SSB&T”), the custodian of its assets. The Fund restricts repurchase agreements to maturities of no more than seven days. Securities pledged as collateral for repurchase agreements, which are held by SSB&T 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 SSB&T, including possible delays or restrictions upon the ability of the Fund to dispose of the underlying securities. THE ROYCE FUNDS SEMIANNUAL REPORT 2002 | 43

ROYCE FOCUS TRUST, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
Capital Stock:
| The Fund currently has 800,000 shares of 7.45% Cumulative Preferred Stock outstanding. The stock has a liquidation preference of $25.00 per share. Under the Investment Company Act of 1940, the Fund is required to maintain an asset coverage of at least 200% for the Preferred Stock. In addition, pursuant to the Rating Agency Guidelines established by Moody’s, the Fund is required to maintain a certain discounted asset coverage. The Fund has met these requirements since issuing the Preferred Stock. 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 dividends on the shares of Preferred Stock are not paid from long-term capital gains, net investment income or net short-term capital gains, they will represent a return of capital. The Fund issued 162,419 of Common Stock as reinvestment of distributions by Common Stockholders for the year ended December 31, 2001.
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 average daily net assets of the Fund. Royce has voluntarily committed to waive the portion of its investment advisory fee attributable to 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 Preferred Stock’s dividend rate. For the period ended June 30, 2002, the Fund accrued and paid Royce advisory fees totaling $427,193, which is net of $16,438, voluntarily waived by Royce.
Purchases and Sales of Investment Securities:
| For the period ended June 30, 2002, the cost of purchases and proceeds from sales of investment securities, other than short-term securities, amounted to $12,831,466 and $18,126,483, respectively.
44 | THE ROYCE FUNDS SEMIANNUAL REPORT 2002

POSTSCRIPT |
| STUPID CEO TRICKS
| Fans of David Letterman’s shows are familiar with his famous bits, “Stupid Pet Tricks” and the more recently developed “Stupid Human Tricks” in which pets and people show off a clever, tough-to-execute, though typically useless, trick for the amusement of Dave and the audience. The recent wave of accounting scandals, and their related instances of boorish and/or illegal executive behavior, led us to think that maybe Letterman would soon be extending an invitation to a certain CEO so he could relate how to recommend holding on to the company’s stock as he frantically sells his own. Or perhaps one former CEO could do a remote spot detailing how the construction of his $20 million home was progressing as the business he managed was falling apart.
| Yet as unseemly and disappointing as these and other recent stories have been, the corporate world is no stranger to executive behavior that ranges from the eccentric to the downright bizarre and destructive. Throughout history, there have been countless instances of bad business behavior on the part of people who clearly should have known better. Their stories provide plenty of worthy contestants for a segment of “Stupid CEO Tricks.”
| Sometimes the story has been a case of greed run amok, such as the tulip-mania that bloomed in seventeenth-century Holland. Other times, it has been outright deception, such as the con men selling shares of nonexistent companies who bilked hundreds of people out of thousands of pounds in the South Sea Bubble in eighteenth-century England. The nineteenth century had the railroad bubble, which combined greed and deception and left many investors penniless. Between the end of the nineteenth century and the beginning of the twentieth, there were the robber barons, whose name leaves little doubt as to the ethical nature of their business practices. One cause of the Great Depression was ignorant investors eagerly believing the pie-in-the-sky sales pitches of unscrupulous brokers who encouraged reckless margin trading on new and unproven companies. Of the $50 billion in new securities issued in the 1920s, roughly half became worthless. One result of these calamities was the creation of the Securities and Exchange Commission in 1934.
| More recently, the rogue’s gallery became populated with figures such as Bernie Cornfield, who was accused of soaking foreign and American expatriate investors (conveniently outside the bounds of SEC regulations) with wildly high mutual fund fees in the 1960s. Cornfield’s Investors Overseas Services was then bought by the arguably even more suspect Robert Vesco, who fled the U.S. amidst numerous charges of securities fraud and government bribery. The ’80s brought us the insider trading scams of Ivan Boesky and the related junk bond shenanigans of Michael Milken, whose antics were soon eclipsed by a bevy of corporate executives and politicians mired in the savings and loan debacle of the late ’80s and early ’90s. And lest we forget, there was the scandal over derivatives, in which stockbrokers recommended highly speculative and volatile instruments to often novice investors by claiming that they were as safe and secure as Treasury bills.
| In our own experience, we have seen an apparently profitable company collapse into bankruptcy once the auditors discovered that the company was keeping two sets of books, one for the public and another genuine set for itself. We have listened in confusion and alarm as the CEO of a company with a struggling stock price concluded a perfunctory recitation of middling results with the claim that the company’s $20 stock would be trading at $30 within 90 days. Why? He must have forgotten to tell us. As did the chief executive whose reputation as a superb manager suffered almost as much as his company’s stock price did when the firm began buying bad debt the way a dryer collects lint.
| The point of these stories is not to suggest that upper-level managers are inherently more stupid or greedy than anyone else, but to help bear in mind that these people can pop up in any corporate setting. This is part of the risk in money management. Some failures are more damaging and costly than others, of course, as the shareholders of companies such as WorldCom can sadly attest. This is why, when looking at companies, we work so hard to have a sense that what management says is consistent with what it does. It also explains why we try to focus on a company’s financial history and the liquidity of its balance sheet and why we routinely re-evaluate our holdings — the last thing we want is to be contestants on “Stupid Investment Manager Tricks.”

|  | The Royce Funds |  |
|  | 1414 AVENUE OF THE AMERICAS • NEW YORK, NY 10019 |  |
|  | WEALTH OF EXPERIENCE With approximately $9.1 billion in total assets under management, Royce & Associates is committed to the same small-company investing principles that have served us well for more than 25 years. Charles M. Royce, our Chief Investment Officer, enjoys one of the longest tenures of any active mutual fund manager. He is supported by a senior staff that includes four Portfolio Managers and a Managing Director, as well as ten analysts and four 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 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 affiliates currently have approximately $47 million invested in The Royce Funds. |  |
|  | GENERAL INFORMATION Additional Report Copies (800) 221-4268 EQUISERVE 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, Transactions or Account Inquiries (800) 33-ROYCE (337-6923) |  |
|  | www.roycefunds.com |  |
CE-SA-0602