<DOCUMENT>
<TYPE>N-2/A
<SEQUENCE>1
<FILENAME>efc3-0149_5309240n2a.txt
<DESCRIPTION>ROYCE VALUE TRUST, INC.
<TEXT>

       As filed with the Securities and Exchange Commission on January 28, 2003

                                             Securities Act File No. 333-102349
                                      Investment Company Act File No. 811-04875

===============================================================================

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
                         ----------------------------

                                   FORM N-2
          REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933         /x/
                       Pre-Effective Amendment No. 1                      /x/
                       Post-Effective Amendment No.                       / /
                                    and/or
                       REGISTRATION STATEMENT UNDER THE                   /x/
                        INVESTMENT COMPANY ACT OF 1940                    /x/
                               Amendment No. 25
                         ----------------------------

                            Royce Value Trust, Inc.
              (Exact Name of Registrant as Specified In Charter)
                         ----------------------------

             1414 Avenue of the Americas, New York, New York 10019
                   (Address of Principal Executive Offices)
                                (800) 221-4268
             (Registrant's Telephone Number, including Area Code)

                          Charles M. Royce, President
                            Royce Value Trust, Inc.
                          1414 Avenue of the Americas
                           New York, New York 10019
                    (Name and Address of Agent for Service)
                         ----------------------------
                                  Copies to:

   John E. Denneen, Esq.                          Frank P. Bruno, Esq.
  Royce Value Trust, Inc.                    Sidley Austin Brown & Wood LLP
1414 Avenue of the Americas                        787 Seventh Avenue
 New York, New York 10019                       New York, New York 10019
                         ----------------------------


Approximate date of proposed public offering: As soon as practicable after the
effective date of this Registration Statement.
                         ----------------------------
     If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, as amended (the "Securities Act"), other than securities offered only
in connection with dividend or interest reinvestment plans, check the
following box. [x]
                         ----------------------------

<TABLE>
<CAPTION>


       CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
====================================================================================================================
                                                                                     Proposed
                                                                     Proposed         Maximum
                                                     Amount          Maximum         Aggregate        Amount of
                    Title of                          Being       Offering Price     Offering       Registration
          Securities Being Registered             Registered(1)    Per Unit(1)       Price(1)          Fee(2)
--------------------------------------------------------------------------------------------------------------------
<S>                                            <C>                    <C>           <C>               <C>
Common Stock ($.001 par value)..................5,162,084 shares      $13.10        $67,623,301       $6,221.34
====================================================================================================================

</TABLE>

(1) Estimated solely for the purpose of calculating the registration fee.
(2) Transmitted to the designated lockbox at Mellon Bank in Pittsburgh, PA.



<PAGE>



                            ROYCE VALUE TRUST, INC.
                       4,301,737 Shares of Common Stock
                  Issuable upon Exercise of Non-Transferable
              Rights to Subscribe for such Shares of Common Stock

     Royce Value Trust, Inc. is offering to its Common Stockholders of record
as of January 28, 2003 non-transferable Rights. These Rights will allow you to
subscribe for one (1) share of Common Stock for each ten (10) Rights held. You
will receive one Right for each whole share of Common Stock that you hold of
record as of January 28, 2003, rounded up to the nearest number of Rights
evenly divisible by ten. The Rights will not be listed for trading on the New
York Stock Exchange ("NYSE") or any other exchange. The Subscription Price
will be the lower of (i) $0.50 below the last reported sale price of a share
of the Fund's Common Stock on the NYSE on the Pricing Date, which is March 11,
2003 or (ii) the net asset value of a share of the Fund's Common Stock on that
date.

     Rights may be exercised at any time until 5:00 p.m., Eastern time, on
March 10, 2003, unless extended. Since the Offer closes prior to the Pricing
Date, stockholders who exercise their Rights will not know the Subscription
Price at the time they exercise their Rights.

     The Fund is a closed-end investment company, whose shares of Common Stock
are listed and traded on the NYSE under the symbol "RVT." The Fund's primary
investment goal is long-term capital growth. The Fund normally invests at
least 75% of its assets in the equity securities of small- and micro-cap
companies. The net asset value per share of the Fund's Common Stock at the
close of business on January 22, 2003 was $13.07, and the last reported sales
price of a share of the Fund's Common Stock on the NYSE on that date was
$14.30.

     This Prospectus contains information you should know before investing,
including information about risks. Please read it before you invest and keep
it for future reference.

     Stockholders who do not fully exercise their Rights will own a smaller
proportional interest in the Fund. In addition, because the Subscription Price
may be less than the net asset value per share as of the Pricing Date, the
Offer may result in an immediate dilution of the net asset value per share for
all stockholders. See "Risk Factors and Special Considerations at a Glance" on
page 5 of this Prospectus.

                                                    Per Share         Total
Estimated Subscription Price                         $13.00          $13.00
Sales load                                            None            None
Proceeds, before expenses, to the Fund(1)(2)         $13.00        $55,922,581

(1)   Before  deduction  of expenses  payable by the Fund, estimated at
      $225,000, which will be charged against paid-in capital of the Fund.
(2)   If the Fund increases the number of shares subject to  subscription  by
      20%, the Proceeds, before expenses, to the Fund will be $67,107,092.

     The Fund may increase the number of shares of Common Stock subject to
subscription by up to 20%, or up to an additional 860,347 Shares, for an
aggregate total of 5,162,084 Shares.

     Neither the Securities and Exchange Commission ("SEC") nor any state
securities commission has approved or disapproved of these securities or
determined if this Prospectus is truthful or complete. Any representation to
the contrary is a criminal offense.

     The Shares will be ready for delivery on or about March 31, 2003.

                             --------------------

               The date of this Prospectus is January 28, 2003.



<PAGE>


     Information about the Fund can be reviewed and copied at the SEC's Public
Reference Room in Washington, D.C. Call 1-202-942-8090 for information on the
operation of the Public Reference Room. This information is also available on
the SEC's Internet site at http://www.sec.gov, and copies may be obtained upon
payment of a duplicating fee by writing the Public Reference Section of the
SEC, Washington, D.C. 20549-0102.


                                       2
<PAGE>


                              PROSPECTUS SUMMARY

     You should consider the matters discussed in this summary before
investing in the Fund through the Offer. This summary is qualified in its
entirety by reference to the detailed information included in this Prospectus
and the related Statement of Additional Information.

                             THE OFFER AT A GLANCE

The Offer

     The Fund is offering to its Common Stockholders of record as of January
28, 2003 non-transferable Rights. These Rights will allow you to subscribe for
one (1) share of Common Stock for each ten (10) Rights held. You will receive
one Right for each whole share of Common Stock that you hold of record as of
January 28, 2003, rounded up to the nearest number of Rights evenly divisible
by ten. The Rights will not be listed for trading on the NYSE or any other
exchange. Rights may be exercised at any time from February 10, 2003 through
5:00 p.m., Eastern time, on March 10, 2003, unless extended. Since the
Expiration Date is prior to the Pricing Date, stockholders who exercise their
Rights will not know the Subscription Price at the time they exercise their
Rights. The Fund may increase the number of shares of Common Stock subject to
subscription by up to 20% of the Shares (any such additional Shares are
referred to as "Additional Shares"). See "The Offer."

Subscription Price

     The Subscription Price will be the lower of (i) $0.50 below the last
reported sale price of a share of the Fund's Common Stock on the NYSE on the
Pricing Date or (ii) the net asset value of a share of the Fund's Common Stock
on that date. See "The Offer -- Subscription Price."

Over-Subscription Privilege

     If you fully exercise all Rights issued to you, you will be entitled to
subscribe for additional Shares that were not subscribed for by other
stockholders. If sufficient Shares are available, all stockholders'
over-subscription requests will be honored in full. If these requests for
additional Shares exceed the Shares available, the available Shares, including
any Additional Shares, will be allocated pro rata among stockholders who
over-subscribe based on the number of Rights originally issued to them by the
Fund. See "The Offer -- Over-Subscription Privilege."

Use of Proceeds


     We estimate the net proceeds of the Offer to be approximately $55,697,581
($66,882,092 if all of the Additional Shares are available for subscription).
These figures assume (i) all Rights are exercised in full, (ii) a Subscription
Price of $13.00 and (iii) payment of offering expenses of approximately
$225,000.


     Royce & Associates, LLC ("Royce"), the Fund's investment adviser,
anticipates that investment of the net proceeds of the Offer in accordance
with the Fund's investment goal and policies will take up to six months from
their receipt by the Fund, depending on market conditions and the availability
of appropriate securities. See "Use of Proceeds."

Obtaining Subscription Information

     If you have any questions or requests for assistance, please contact
Georgeson Shareholder Communications, Inc., the Information Agent, (toll free)
at (866) 328-5443. You may also call the Fund (toll free) at (800) 221-4268,
or contact your broker or Nominee for information with respect to the Offer.
See "The Offer -- Information Agent."


                                      3


<PAGE>


<TABLE>
<CAPTION>

                          Important Dates to Remember

                      Event                                                    Date
                      -----                                                    ----
<S>                                                                     <C>
Record Date.......................................................      January 28, 2003
Subscription Period...............................................      February 10, 2003 through March 10, 2003*
Expiration Date...................................................      March 10, 2003*
Pricing Date......................................................      March 11, 2003*
Nominee Subscription Certificate and Payment for Shares Due
   Pursuant to Notice of Guaranteed Delivery......................      March 13, 2003*
Confirmation to Participants......................................      March 18, 2003*
Final Payment for Shares..........................................      March 28, 2003*

</TABLE>

*Unless the Offer is extended.

Tax Consequences

     For Federal income tax purposes, neither the receipt nor the exercise of
the Rights will result in taxable income to you. You will not realize a
taxable loss if your Rights expire without being exercised. See "The Offer --
Federal Income Tax Consequences of the Offer."

                             THE FUND AT A GLANCE

The Fund

     The Fund is a closed-end investment company.

Investment Goal and Policies

     The Fund's primary investment goal is long-term capital growth. Royce
normally invests more than 75% of the Fund's assets in the equity securities
of small- and micro-cap companies, generally with stock market capitalizations
ranging from $100 million to $2 billion, that Royce believes are trading
significantly below its estimate of their current worth. The Fund may also
invest up to 25% of its assets in non-convertible fixed income securities. An
investment in the Fund is not appropriate for all investors. There can be no
assurance that the Fund's investment goal will be realized. See "Investment
Goal and Policies."

Capital Stock


     The Fund's Common Stock is listed and traded on the NYSE. As of January
22, 2003, the Fund had 42,417,362 shares of Common Stock, 2,400,000 shares of
7.80% Cumulative Preferred Stock and 4,000,000 shares of 7.30% Tax-Advantaged
Cumulative Preferred Stock issued and outstanding. The Fund's Preferred Stock
has an aggregate liquidation preference of $160 million. See "Description of
Capital Stock."


Distributions

     The Fund's policy is to make quarterly distributions to its Common
Stockholders at the annual rate of 9% of the rolling average of the prior four
calendar quarter-end net asset values 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 Internal Revenue Service regulations. These
quarterly distributions are generally reinvested in additional full and
fractional shares of Common Stock through the Fund's Dividend Reinvestment and
Cash Purchase Plan. The Fund's quarterly distribution policy may be changed by
the Board of Directors without stockholder approval. See "Dividends,
Distributions and Reinvestment Plan."


                                      4


<PAGE>


Investment Adviser

     Royce provides investment advisory services to the Fund. For its
services, the Fund pays Royce a monthly fee at a rate ranging from 0.5% to
1.5% per annum of the Fund's average net assets (including assets obtained
from the sale of Preferred Stock) for rolling 60 month periods based on the
investment performance of the Fund relative to the investment record of the
Standard & Poor's 600 SmallCap Stock Price Index over such periods. See
"Investment Advisory and Other Services."

              RISK FACTORS AND SPECIAL CONSIDERATIONS AT A GLANCE

Dilution - Net Asset Value and Non-Participation in the Offer


     If you do not fully exercise your Rights, you should expect that you
will, at the completion of the Offer, own a smaller proportional interest in
the Fund than would otherwise be the case had you exercised your Rights.
Further, if you do not submit a subscription request pursuant to the
Over-Subscription Privilege, you may also experience dilution in your Fund
ownership if the Fund offers Additional Shares for subscription. The Fund may
sell Additional Shares to stockholders if and to the extent that shares issued
through the Offer would dilute (reduce) the net asset value of its Common
Stock by less than 1.0%. We cannot state precisely the amount of any decrease
because we do not know at this time how many Shares will be subscribed for or
what the net asset value or market price per Share will be at the Pricing
Date. As of January 22, 2003, the Fund's shares traded at a 9.4% premium above
net asset value. If the Fund's shares trade at a premium above net asset value
as of the Pricing Date, the Fund estimates that such dilution would be
minimal. See "The Offer."


Market Risk

     As with any investment company that invests in common stocks, the Fund is
subject to market risk -- the possibility that common stock prices will
decline over short or extended periods of time. As a result, the value of an
investment in the Fund's Common Stock will fluctuate with the market, and you
could lose money over short or long periods of time.

Small- and Micro-Cap Risk


     The prices of small- and micro-cap companies are generally more volatile
and their markets are generally less liquid relative to larger-cap companies.
Therefore, the Fund may involve more risk of loss and its returns may differ
significantly from funds investing in larger-cap companies or other asset
classes. See "Investment Goal and Policies -- Risk Factors - Investing in
Small- and Micro-Cap companies."


Selection Risk

     Different types of stocks tend to shift into and out of favor with stock
market investors, depending on market and economic conditions. The performance
of funds that invest in value-style stocks may at times be better or worse
than the performance of stock funds that focus on other types of stocks or
that have a broader investment style.

Market Price of Shares


     Although the Fund's shares of Common Stock have recently traded on the
NYSE at a market price above their net asset value (a premium), the Fund's
shares have traded in the market below (a discount), at and above net asset
value since the commencement of the Fund's operations. There can be no
assurance that the Fund's shares will trade at a premium in the future, or
that any such premium is sustainable. The Fund's shares have traded at
discounts of as much as 18.1% in the past five years. Market price risk is a
risk separate and distinct from the risk that the Fund's net asset value will
decrease. In the year ended December 31, 2002, the Fund's shares traded in the
market at an average discount to net asset value of 0.6%. As of December 31,
2002, the premium above net asset value was 0.2%.



                                      5


<PAGE>


Leverage and Borrowing

     The Fund is authorized to borrow money. So long as the Issued Preferred
is rated by Moody's, the Fund cannot borrow for investment leverage purposes.
Borrowings create an opportunity for greater capital appreciation with respect
to the Fund's investment portfolio, but at the same time such borrowing is
speculative in that it will increase the Fund's exposure to capital risk. In
addition, borrowed funds are subject to interest costs that may offset or
exceed the return earned on the borrowed funds. See "Investment Goal and
Policies -- Risks to Common Stockholders of Borrowing Money and Issuing Senior
Securities."

Preferred Stock - Leverage Risk

     The leverage resulting from the issuance of Preferred Stock creates risks
for holders of Common Stock, including higher volatility of both the net asset
values and market prices of the Common Stock. If the Fund is able to realize a
net return on its investment portfolio in excess of the then current dividend
rate of the Preferred Stock, the effect of leverage permits holders of Common
Stock to realize a higher current rate of return than if the Fund were not
leveraged. On the other hand, if the current dividend rate on the Preferred
Stock exceeds the net return on the Fund's investment portfolio, the Fund's
leveraged capital structure will result in a lower rate of return to holders
of Common Stock than if the Fund were not leveraged. Similarly, because any
decline in the value of the Fund's investments will be borne entirely by
holders of Common Stock, the effect of leverage in a declining market results
in a greater decrease in net asset value to holders of Common Stock than if
the Fund were not leveraged, which would likely be reflected in a greater
decline in the market price for shares of Common Stock. See "Investment Goal
and Policies -- Risks to Common Stockholders of Borrowing Money and Issuing
Senior Securities." Leveraging through the issuance of Preferred Stock
requires that the holders of the Preferred Stock have class voting rights on
various matters that could make it more difficult for the holders of the
Common Stock to change the investment goal or other fundamental policies of
the Fund, to convert the Fund to an open-end fund or make certain other
changes. See "Investment Goal and Policies -- Changes in Investment Goal and
Methods/Policies" and "Description of Capital Stock -- Certain Corporate
Governance Provisions."

     Because Royce's fee is partially based on the average net assets of the
Fund (including assets obtained from the sale of Preferred Stock), Royce has
generally benefited from the Fund's issuance of the Issued Preferred. See
"Investment Advisory and Other Services -- Advisory Fee."

Certain Corporate Governance Provisions

     The six Fund Directors who are elected by the holders of Common Stock and
Preferred Stock voting together are divided into three classes, each having a
staggered term of three years. The two Directors elected only by the holders
of Preferred Stock stand for election at each annual meeting of stockholders.
Accordingly, it likely would take three years to change a majority of the
Board of Directors. Vacancies on the Board of Directors for one or more of the
six classified positions may be filled by the remaining Directors for the
balance of the term of the class. In addition, the Fund's By-laws permit
stockholders to call a special meeting of stockholders only if certain
procedural requirements are met and the request is made by stockholders
entitled to cast at least a majority of the votes entitled to be cast at such
a meeting. These provisions may have the effect of maintaining the continuity
of management and thus may make it more difficult for the Fund's stockholders
to change the majority of Directors. See "Description of Capital Stock --
Certain Corporate Governance Provisions."


                                      6


<PAGE>


                                 FUND EXPENSES

     The following tables are intended to assist investors in understanding
the various costs and expenses that a stockholder of the Fund will bear,
directly or indirectly.


<TABLE>
<CAPTION>


Stockholder Transaction Expenses
     <S>                                                                                                 <C>
     Sales Load....................................................................                      None
     Distribution Reinvestment and Cash Purchase Plan Fees ........................                      None


Annual Expenses (as a percentage of average net assets attributable to the
   Fund's Common Stock, and estimated for the year ending December 31, 2003)
     Investment Advisory Fees(1)(2)................................................                       1.22%
     Other Expenses(1).............................................................                       0.15%
                                                                                                  --------------------
         Total Annual Expenses(1)(3)...............................................                       1.37%
                                                                                                  ====================
--------------------


</TABLE>

(1)   Assumes the Issued Preferred remains outstanding for the year ending
      December 31, 2003. See "Risk Factors and Special Considerations at a
      Glance - Preferred Stock - Leverage Risk." If the Fund redeems the
      Issued Preferred, it is estimated that, as a percentage of net assets
      attributable to Common Stock, the Investment Advisory Fees would be
      1.0%, Other Expenses would be 0.13% and Total Annual Expenses would be
      1.13%.
(2)   The Investment Advisory Fees as a percentage of average net assets may
      be as low as 0.5% or as high as 1.5% (0.61% and 1.82%, respectively, as
      a percentage of average net assets attributable to the Fund's Common
      Stock), based on the Fund's relative investment performance. See
      "Investment Advisory and Other Services--Advisory Fee."
(3)   The indicated 1.15% expense ratio assumes that the Offer (including the
      Over-Subscription Privilege) is fully subscribed and assumes estimated
      net proceeds from the Offer of approximately $66.9 million (assuming an
      estimated Subscription Price of $13.00).


Example

     The following Example demonstrates the projected dollar amount of total
cumulative expense that would be incurred over various periods with respect to
a hypothetical investment in the Fund's Common Stock. These amounts are based
upon payment by the Fund of investment advisory fees and other expenses at the
levels set forth in the above table.

     An investor would directly or indirectly pay the following expenses on a
$1,000 investment in shares of the Fund's Common Stock, assuming (i) the
market price at the time of investment was equal to the net asset value
("NAV") per share, (ii) a 5% annual return and (iii) reinvestment of all
distributions at NAV:


      One Year           Three Years        Five Years          Ten Years
         $                    $                  $                  $
         12                  37                 64                 141


     This Example assumes that the percentage amounts listed under Annual
Expenses remain the same in the years shown. The above tables and the
assumption in the Example of a 5% annual return and reinvestment at NAV are
required by regulation of the SEC and are applicable to all investment
companies, and the assumed 5% annual return is not a prediction of, and does
not represent, the projected performance of the Fund's Common Stock. Actual
expenses and annual rates of return may be more or less than those allowed for
purposes of this Example. In addition, while the Example assumes reinvestment
of all distributions at NAV, the Fund's Distribution Reinvestment and Cash
Purchase Plan contemplates payment of net investment income dividends and
capital gain distributions in shares of the Fund's Common Stock (unless a
stockholder elects to receive payments in cash), based on the lower of the
market price or NAV on the valuation date, except that distributions may not
be reinvested for less than 95% of the market price.

     This Example should not be considered a representation of future
expenses. The Fund's actual expenses may be more or less than those shown.


                                      7


<PAGE>


                             FINANCIAL HIGHLIGHTS

     The financial highlights table is intended to help you understand the
Fund's financial performance for the periods presented and reflects financial
results for a single Fund share. The total returns in the table represent the
rate that an investor would have earned on an investment in the Fund (assuming
reinvestment of all dividends and distributions and full primary participation
in all rights offerings). The information for the six months ended June 30,
2002 has not been audited. The information for each of the four years in the
period ended December 31, 2001 has been audited by Tait, Weller & Baker, whose
report, along with the Fund's financial statements, is included in the Fund's
2001 Annual Report to Stockholders, which is available upon request. The
information for the years ended December 31, 1997, 1996 and 1995 has been
audited by Ernst & Young LLP, independent accountants, as stated in their
unqualified report accompanying such financial statements.


<TABLE>
<CAPTION>

                                        Six Months
                                        ended June                       Years ended December, 31
                                         30, 2002      ___________________________________________________________________
                                        (unaudited)      2001       2000       1999         1998        1997      1996
                                        -----------    -------     -------    -------      -------     -------   --------
<S>                                     <C>            <C>         <C>        <C>          <C>         <C>
NET ASSET VALUE, BEGINNING OF PERIOD       $17.31      $16.56      $15.77     $15.72       $16.91      $14.32    $13.56

INVESTMENT OPERATIONS(a):
  Net investment income (loss)...           (0.01)       0.05        0.18       0.26         0.17        0.21      0.26
  Net realized and unrealized                0.18        2.58        2.58       1.65         0.67        3.85      1.92
  gain on investments............
                                        ----------------------------------------------------------------------------------
    Total investment operations..            0.17        2.63        2.76       1.91         0.84        4.06      2.18
                                        ----------------------------------------------------------------------------------

DISTRIBUTIONS TO PREFERRED
STOCKHOLDERS:
  Net investment income..........             --        (0.01)      (0.03)     (0.04)       (0.03)      (0.03)    (0.01)
  Net realized gain on investments            --        (0.30)      (0.30)     (0.32)       (0.26)      (0.15)    (0.06)
  Quarterly distributions*.......           (0.15)        --          --         --           --          --        --
                                        ----------------------------------------------------------------------------------
    Total distributions to
    Preferred Stockholders.......           (0.15)      (0.31)      (0.33)     (0.36)       (0.29)      (0.18)    (0.07)
                                        ----------------------------------------------------------------------------------

DISTRIBUTIONS TO COMMON
STOCKHOLDERS:
  Net investment income..........             --        (0.05)      (0.13)     (0.15)       (0.16)      (0.19)    (0.15)
  Net realized gain on                        --        (1.44)      (1.35)     (1.22)       (1.38)      (1.02)    (1.00)
  investments....................
  Quarterly distributions*.......           (0.76)        --          --         --           --          --        --
                                        ----------------------------------------------------------------------------------
    Total distributions to
    Common Stockholders..........           (0.76)      (1.49)      (1.48)     (1.37)       (1.54)      (1.21)    (1.15)
                                        ----------------------------------------------------------------------------------

CAPITAL STOCK TRANSACTIONS:
  Effect of reinvestment of
    distributions by Common
    Stockholders.................           (0.02)      (0.08)      (0.16)     (0.13)       (0.09)      (0.08)    (0.11)
  Effect of Rights offering......             --          --          --         --           --           --       --
  Effect of Preferred Stock
    offering.....................             --          --          --         --         (0.11)         --     (0.09)
                                        ----------------------------------------------------------------------------------
    Total capital stock
    transactions.................           (0.02)      (0.08)      (0.16)     (0.13)       (0.20)      (0.08)    (0.20)
                                        ----------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD(a)........................          $16.55      $17.31      $16.56     $15.77       $15.72      $16.91    $14.32
                                        ==================================================================================

MARKET VALUE, END OF PERIOD......          $16.55      $15.72     $14.438    $13.063       $13.75     $15.063  $12.625
                                        ==================================================================================

TOTAL RETURN(b):
Market Value.....................           10.1%***    20.0%       22.7%       5.7%         1.5%       28.8%     16.3%
Net Asset Value (a)..............            0.0%***    15.2%       16.6%      11.7%         3.3%       27.5%     15.5%


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%     1.28%
  Management fee expense.........           1.48%**     1.45%       1.25%      1.18%        1.10%       0.39%     0.39%
  Interest expense...............            --          --          --          --          --         0.45%     0.64%
  Other operating expenses.......           0.13%**     0.16%       0.18%      0.21%        0.21%       0.28%     0.25%
Net investment income (loss).....         (0.14)%**     0.35%       1.18%      1.47%        1.11%       1.53%     1.27%
SUPPLEMENTAL DATA:
Net Assets; End of Period (in
thousands).......................        $838,661    $849,141    $783,262   $712,928     $676,963    $554,231  $441,837
Portfolio Turnover Rate .........             15%         30%         36%        41%          43%         29%       34%

PREFERRED STOCK:

Total shares outstanding.........       6,400,000   6,400,000   6,400,000  6,400,000    2,400,000   2,400,000      --
Asset coverage per share.........         $132.68     $122.38     $111.40    $105.78      $165.51     $120.15      --
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)...........          $25.70      $23.44      $24.98     $25.91       $25.70      $25.20      --
  7.30% Tax-Advantaged Cumualtive(e)       $25.37      $22.35      $24.24     $25.43          --          --       --
NOTES:
Total amount outstanding (in
thousands).......................             --          --          --         --           --      $27,801   $40,000
Asset coverage per note..........             --          --          --         --           --    $2,090.59 $1,201.51
Average market value per note (e)             --          --          --         --           --      $107.69   $100.68

<CAPTION>

                                       _______________________________________________
                                            1995      1994          1993       1992
                                           -------   ---------     -------   --------
<S>                                    <C>           <C>         <C>         <C>
NET ASSET VALUE, BEGINNING OF PERIOD       $12.34      $13.47      $12.50     $11.23

INVESTMENT OPERATIONS(a):
  Net investment income (loss)...            0.04        0.04        0.09       0.15
  Net realized and unrealized
  gain on investments............            2.70        0.09        2.12       2.12

    Total investment operations..      -----------------------------------------------
                                             2.74        0.13        2.21       2.27
                                          --------------------------------------------

DISTRIBUTIONS TO PREFERRED
STOCKHOLDERS:
  Net investment income..........             --          --          --         --
  Net realized gain on investments            --          --          --         --
  Quarterly distributions*.......             --          --          --         --
                                          --------------------------------------------
    Total distributions to
    Preferred Stockholders.......             --          --          --         --
                                          --------------------------------------------

DISTRIBUTIONS TO COMMON
STOCKHOLDERS:
  Net investment income..........           (0.03)      (0.01)      (0.09)     (0.15)
  Net realized gain on
  investments....................           (1.26)      (1.04)      (1.06)     (0.75)
  Quarterly distributions*.......              --          --          --        --
                                          --------------------------------------------
    Total distributions to
    Common Stockholders..........           (1.29)      (1.05)      (1.15)     (0.90)
                                          --------------------------------------------

CAPITAL STOCK TRANSACTIONS:
  Effect of reinvestment of
    distributions by Common
    Stockholders.................           (0.11)      (0.07)+     (0.01)     (0.04)
  Effect of Rights offering......           (0.12)      (0.14)      (0.08)     (0.06)
  Effect of Preferred Stock
    offering.....................             --           --         --         --
                                          --------------------------------------------
    Total capital stock
    transactions.................           (0.23)      (0.21)      (0.09)     (0.10)
                                          --------------------------------------------
NET ASSET VALUE, END OF
PERIOD(a)........................          $13.56      $12.34      $13.47     $12.50
                                          ============================================

MARKET VALUE, END OF PERIOD......         $11.875      $11.00     $12.875     $12.25
                                          ============================================

TOTAL RETURN(b):
Market Value.....................               %           %           %      26.8%
Net Asset Value (a)..............               %           %           %      19.9%

RATIOS BASED ON AVERAGE NET
ASSETS APPLICABLE TO COMMON
STOCKHOLDERS:
Total expenses (c, d)............           2.01%       2.01%       1.33%      0.81%
  Management fee expense.........           0.97%       1.21%       1.09%      0.53%
  Interest expense...............           0.75%       0.46%        --         --
  Other operating expenses.......           0.29%       0.34%       0.24%      0.28%
Net investment income (loss).....           0.34%       0.31%       0.74%      1.31%
SUPPLEMENTAL DATA:
Net Assets; End of Period (in
thousands).......................        $338,970    $269,032    $246,558   $202,483
Portfolio Turnover Rate .........             32%         35%         33%        40%
PREFERRED STOCK:
Total shares outstanding.........            --          --          --         --
Asset coverage per share.........            --          --          --         --
Liquidation preference per
share............................            --          --          --         --
Average market value per share:
  7.80% Cumulative (e)...........            --          --          --         --
  7.30% Tax-Advantaged
  Cumualtive (e).................            --          --          --         --
NOTES:
Total amount outstanding (in
thousands).......................         $40,000    $40,000         --         --
Asset coverage per note..........         $944.35    $768.67         --         --
Average market value per note (e)          $96.62     $95.62         --         --
</TABLE>

--------------------------------


                                      8


<PAGE>



(a)   Commencing June 21, 1995 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, $0.17 at December 31, 1996 and
      $0.09 at December 31, 1995.
(b)   Total investment return is calculated assuming a purchase of Common Stock
      on the opening of the first business day and a sale on the closing of the
      last business day of each period reported. Dividends and distributions,
      if any, are assumed for the purposes of this calculation, to be
      reinvested at prices obtained under the Fund's Distribution Reinvestment
      and Cash Purchase Plan. Generally, total investment return based on net
      asset value will be higher than total investment return based on market
      value in periods where there is an increase in the discount or a decrease
      in the premium of the market value to the net assets from the beginning
      to the end of such years. Conversely, total investment return based on
      net asset value will be lower than total investment return based on
      market value in periods where there is a decrease in the discount or an
      increase in the premium of the market value to the net asset value from
      the beginning to end of such periods.
(c)   Expense ratios based on total average net assets were 1.32%, 1.30%,
      1.12%, 1.06%, 1.06%, 0.99%, 1.20%, 2.01%, 2.01%, 1.33% and 0.81% for the
      period ended June 30, 2002 and years ended December 31, 2001, 2000,
      1999, 1998, 1997, 1996, 1995, 1994, 1993 and 1992, respectively.
(d)   Expense ratios based on average net assets applicable to Common
      Stockholders before waiver of fees by Royce would have been 1.65%,
      1.51%, 1.48%, 1.34%, 1.14%, 1.31%, 2.04% and 2.02% for the periods ended
      December 31, 2001, 2000, 1999, 1998, 1997, 1996, 1995 and 1994,
      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.
+     Includes distributions paid January 31, 1994 and December 30, 1994.



                                      9


<PAGE>


                            INVESTMENT PERFORMANCE

         The table below presents average annual total returns of the Fund's
Common Stock on two separate bases. The NAV Return is the compound average
annual rate of return, using NAVs, on an amount invested in the Fund from the
beginning to the end of the stated period and assumes reinvestment of net
investment income dividends and capital gains distributions. Historically,
stockholders have been able to reinvest distributions and purchase shares
through rights offerings at prices below NAV and without commission costs.
Market Value Return presents the same information, but values the Fund at
market rather than NAV and, therefore, reflects the actual experience of a
stockholder, before commission costs, who bought and sold shares of the Fund
at the beginning and ending dates.


         The record of the S&P SmallCap Stock Price 600 Index ("S&P 600
Index") has been included so that the Fund's results may be compared with an
unmanaged index reflecting 600 domestic stocks chosen by Standard & Poor's for
market size, liquidity (bid-asked spread, ownership, share turnover and number
of no trade days) and industry group representation. The S&P 600 Index is a
market-value weighted index (stock price times the number of shares
outstanding), with each stock's weight in the Index proportionate to its
market value. The record of the Russell 2000 Index has been included so that
the Fund's results may be compared with an unmanaged index reflecting the
performance of the 2,000 smallest companies in the Russell 3000 Index (which
represent the 3,000 largest U.S. companies based on total market
capitalization). As of December 31, 2002, the average market capitalization of
companies included in the Russell 2000 Index was approximately $640 million,
their median market capitalization was approximately $306 million and the
Index had a total market capitalization range of approximately $2.4 billion to
$8 million. The Fund primarily invests in small- and micro-cap companies. The
figures for each Index assume reinvestment of dividends.

<TABLE>
<CAPTION>

                                                  Average Annual Total Returns
                                                                                                         From November
                                                                                                            28, 1986
                          Three Months     Six Months    Twelve Months     Thirty-Six     Sixty Months    (inception)
                             Ended           Ended           Ended        Months Ended       Ended             to
                          December 31,    December 31,    December 31,    December 31,    December 31,    December 31,
                            2002(%)*        2002(%)*        2002(%)         2002(%)         2002(%)         2002(%)
                          ------------    ------------   -------------    -------------   --------------  -------------

<S>                             <C>            <C>             <C>              <C>             <C>            <C>
Fund Market Value
Return
Fund NAV Return
S&P 600 Index                   4.91          -14.62          -14.65            0.56            2.44            8.91
Russell 2000 Index              6.16          -16.56          -20.48           -7.54           -1.36            8.24

  * Not annualized
</TABLE>



         It should be noted that the NAV Return for the period from November
28, 1986 through December 31, 2002 is based on the Fund's initial NAV of $9.30
per share, rather than the initial public offering price of $10.00 per share.
Accordingly, that figure does not reflect underwriting commissions and
discounts or expenses of the offering paid by stockholders who purchased the
Fund's shares in the initial public offering.

         The above results represent past performance and should not be
considered an indication of future performance from an investment in the Fund
today. They are provided only to give an historical perspective of the Fund.
The investment return and net asset and market prices will fluctuate, so that
shares of Common Stock may be worth more or less than their original cost when
sold.


                                      10


<PAGE>


                                   THE OFFER

Terms of the Offer


         The Fund is offering to stockholders of record ("Stockholders") as of
the close of business on January 28, 2003 (the "Record Date") non-transferable
rights (the "Rights") to subscribe for an aggregate of 4,301,737 shares of
Common Stock (the "Shares") of the Fund. The Fund may increase the number of
shares of Common Stock subject to subscription by up to 20% of the Shares, or
up to 860,347 Additional Shares, for an aggregate total of 5,162,084 Shares.
However, the Fund may sell Additional Shares to Stockholders if and to the
extent that shares issued through the Offer would dilute (reduce) the net
asset value of its Common Stock by less than 1.0%.

         Each Stockholder is being issued one (1) Right for each whole share
of Common Stock owned on the Record Date. The Rights entitle a Stockholder to
acquire at the Subscription Price one (1) Share for each ten (10) Rights held,
rounded up to the nearest number of Rights evenly divisible by ten (the
"Offer"). Fractional Shares will not be issued upon the exercise of Rights. In
the case of shares held of record by a broker-dealer, bank or other financial
intermediary (each, a "Nominee"), the number of Rights issued to such Nominee
will be adjusted to permit rounding up (to the nearest number of Rights evenly
divisible by ten) of the Rights to be received by each of the beneficial
owners for whom it is the holder of record only if the Nominee provides to the
Fund, on or before the close of business on March 7, 2003, a written
representation of the number of Rights required for such rounding.


         Rights may be exercised at any time during the Subscription Period,
which commences on February 10, 2003 and ends as of 5:00 p.m., Eastern time,
on March 10, 2003, unless extended by the Fund (such date, as it may be
extended, is referred to in this Prospectus as the "Expiration Date"). A
Stockholder's right to acquire one (1) additional Share for each ten (10)
Rights held during the Subscription Period at the Subscription Price is
referred to as the "Primary Subscription." The Rights are evidenced by
Subscription Certificates, which will be mailed to Stockholders.

         In addition, any Stockholder who fully exercises all Rights issued to
him or her is entitled to subscribe for additional Shares, which were not
otherwise subscribed for in the Primary Subscription, at the Subscription
Price (the "Over-Subscription Privilege"). Shares acquired pursuant to the
Over-Subscription Privilege are subject to allotment and may be subject to
increase, which is more fully discussed below under "The
Offer--Over-Subscription Privilege."

         The Subscription Price will be the lower of (i) $0.50 below the last
reported sale price of a share of the Fund's Common Stock on the NYSE on March
11, 2003 (the "Pricing Date") or (ii) the net asset value ("NAV") of a share
of the Fund's Common Stock on the Pricing Date. Since the time of the close of
the Offer on the Expiration Date is prior to the Pricing Date, holders who
choose to exercise their Rights will not know the Subscription Price at the
time they exercise their Rights.

         The Rights are non-transferable. Therefore, only the underlying
Shares, and not the Rights, will be listed for trading on the NYSE.

Purposes of the Offer

         The Board of Directors of the Fund has determined that it would be in
the best interests of the Fund and its stockholders to continue to increase
the assets of the Fund available for current and future investment
opportunities. In addition, the Offer seeks to reward the long-term
stockholder by giving existing Stockholders Rights to purchase additional
Shares at a price below market price. Increasing the size of the Fund also
might result in lowering the Fund's expenses as a percentage of average net
assets. Royce expects to take up to six months from the Fund's receipt of the
proceeds of the Offer following the Expiration Date to fully invest them in
accordance with the Fund's investment goal and policies.

         The Subscription Price will be determined the first business day
subsequent to the Expiration Date in order to ensure that the Offer will
attract the maximum participation of Stockholders with the minimum dilution to
non-participating Stockholders.


                                      11


<PAGE>


         The Fund's Board of Directors voted unanimously to approve the terms
of the Offer. Two of the Fund's Directors who voted to authorize the Offer are
affiliated with Royce and, therefore, could benefit indirectly from the Offer.
The other six directors are not "interested persons" of the Fund within the
meaning of the Investment Company Act of 1940, as amended (the "1940 Act").
Royce may also benefit from the Offer because its fee is partially based on
the net assets of the Fund. See "Investment Advisory and Other
Services--Advisory Fee." It is not possible to state precisely the amount of
additional compensation Royce might receive as a result of the Offer because
it is not known how many Shares will be subscribed for and because the
proceeds of the Offer will be invested in additional portfolio securities,
which will fluctuate in value.

         The Fund may, in the future, choose to make additional rights
offerings from time to time for a number of shares and on terms that may or
may not be similar to this Offer. Any such future rights offerings will be
made in accordance with the then applicable requirements of the 1940 Act and
the Securities Act of 1933, as amended.

         There can be no assurance that the Fund or its stockholders will
achieve any of the foregoing objectives or benefits through the Offer.

Over-Subscription Privilege

         If some Stockholders do not exercise all of the Rights initially
issued to them, any Shares for which subscriptions have not been received from
Stockholders will be offered by means of the Over-Subscription Privilege to
those Stockholders who have exercised all of the Rights initially issued to
them and who wish to acquire additional Shares. Stockholders who exercise all
of the Rights initially issued to them should indicate on the Subscription
Certificate how many Shares they are willing to acquire through this
Over-Subscription Privilege. If sufficient Shares remain after completion of
the Primary Subscription, all over-subscription requests will be honored in
full. However, if sufficient Shares are not available to honor all
over-subscription requests, the Fund may issue up to an additional 20% of the
initial Shares (the "Additional Shares"), in order to honor such
over-subscription requests. The Fund may sell Additional Shares to
stockholders if and to the extent that shares issued through the Offer would
dilute (reduce) the net asset value of its Common Stock by less than 1.0%. To
the extent that there are not sufficient Shares to honor all over-subscription
requests, the available Shares will be allocated among those who
over-subscribe based on the number of Rights originally issued to them by the
Fund, so that the number of Shares issued to Stockholders who subscribe
through the Over-Subscription Privilege will generally be in proportion to the
number of Shares of the Fund owned by them on the Record Date. The percentage
of remaining Shares each over-subscribing Stockholder may acquire may be
rounded up or down to result in delivery of whole Shares. The allocation
process may involve a series of allocations in order to ensure that the total
number of Shares available for over-subscriptions is distributed, as nearly as
may be practicable, on a pro rata basis. The Fund will not offer or sell any
Shares which are not subscribed for through the Primary Subscription or the
Over-Subscription Privilege. The combination of the Over-Subscription
Privilege and the Fund's election to issue Additional Shares may result in
additional dilution of interest and voting rights to Stockholders, and
additional reduction in the Fund's NAV per share.

         Charles M. Royce and certain other officers and employees of Royce
may purchase shares of Common Stock in the Primary Subscription and the
Over-Subscription Privilege. Any such purchases will be made on the same terms
applicable to other stockholders.

Subscription Price


         The Subscription Price for the Shares to be issued pursuant to the
Offer will be the lower of (i) $0.50 below the last reported sale price of a
share of the Fund's Common Stock on the NYSE on the Pricing Date or (ii) the
NAV of a share of the Fund's Common Stock on the Pricing Date. For example, if
the last reported sale price of a share of the Fund's Common Stock on the NYSE
on the Pricing Date is $14.30 and the NAV of a share of the Fund's Common
Stock on that date is $13.07, the Subscription Price will be $13.07. However,
if the NAV of a share of the Fund's Common Stock on that date is $14.00, then
the Subscription Price will be $13.80.

         The Fund announced the Offer after the close of trading on the NYSE
on January 3, 2003. The NAV per share of the Fund's Common Stock at the close
of business on December 31, 2002 and January 22, 2003 were



                                      12


<PAGE>


$13.22 and $13.07, respectively, and the last reported sales prices of a share
of the Fund's Common Stock on the NYSE on those dates were $13.25 and $14.30,
respectively.

Expiration of the Offer

         The Expiration Date is 5:00 p.m., Eastern time, on March 10, 2003,
unless extended by the Fund. The Rights will expire on the Expiration Date and
may not be exercised after that date. Since the time of the close of the Offer
on the Expiration Date is prior to the Pricing Date, Stockholders who choose
to exercise their Rights will not know the Subscription Price when they decide
whether to acquire Shares on Primary Subscription or through the
Over-Subscription Privilege.

Subscription Agent

         The Subscription Agent for the Offer is Equiserve Trust Company, N.A.
("Equiserve"), which will receive, for its administrative, processing,
invoicing and other services as Subscription Agent, an estimated fee of
$15,000 and reimbursement for all out-of-pocket expenses related to the Offer.
The Subscription Agent is also the Fund's Transfer Agent. Stockholder
inquiries may be directed to Georgeson Shareholder Communications, Inc., the
Information Agent, (toll free) at (866) 328-5443. SIGNED SUBSCRIPTION
CERTIFICATES SHOULD BE SENT TO EQUISERVE TRUST COMPANY, N.A., by one of the
following methods:

         (1)      BY FIRST CLASS MAIL:
                  Equiserve Trust Company, N.A.
                  Attn: Corporate Actions
                  P.O. Box 43025
                  Providence,  RI  02940-3025

         (2)      BY EXPRESS MAIL OR OVERNIGHT COURIER:
                  Equiserve Trust Company, N.A.
                  Attn: Corporate Actions
                  40 Campanelli Drive
                  Braintree, MA 02184

         (3)      BY HAND:
                  Securities Transfer & Reporting Services, Inc.
                  100 Williams Street Galleria
                  New York,  NY  10038

                  Delivery to an address other than the above does not
                  constitute good delivery.

Information Agent Coordinator

         Any questions or requests for assistance may be directed to the
Information Agent at its telephone number listed below:

                  Georgeson Shareholder Communications, Inc.
                           Toll Free: (866) 328-5443

         Stockholders may also call the Fund (toll free) at (800) 221-4268 or
contact their Nominees, who hold shares for the account of others, for
information with respect to the Offer.

         The Fund will pay a fee of $12,000 to Georgeson Shareholder
Communications, Inc. and reimbursement for all out-of-pocket expenses related
to its services as Information Agent.


                                      13


<PAGE>


Method for Exercising Rights

         Rights may be exercised by Stockholders who fill in and sign the
accompanying Subscription Certificate and mail it in the envelope provided or
deliver the completed and signed Subscription Certificate to the Subscription
Agent, together with any required payment for the Shares as described below
under "Payment for Shares." Rights may also be exercised by a Stockholder
contacting his or her broker, bank or trust company, which can arrange, on the
stockholder's behalf, to guarantee delivery (using a "Notice of Guaranteed
Delivery") of a properly completed and executed Subscription Certificate and
payment for the Shares. The broker, bank or trust company may charge a fee for
this service. Fractional Shares will not be issued. Completed Subscription
Certificates must be received by the Subscription Agent prior to 5:00 p.m.,
Eastern time, on the Expiration Date (unless payment is to be effected by
means of a notice of guaranteed delivery (see "Payment for Shares")) at the
offices of the Subscription Agent.

         Stockholders who are Record Owners. Stockholders who are record
         owners can choose between either option set forth below under
         "Payment for Shares." If time is of the essence, option (1) will
         permit delivery of the Subscription Certificate and payment after the
         Expiration Date.

         Investors Whose Shares Are Held Through A Nominee. Stockholders whose
         shares are held by a Nominee such as a broker, bank or trust company,
         must contact that Nominee to exercise their Rights. In that case, the
         Nominee will complete the Subscription Certificate on behalf of the
         stockholder and arrange for proper payment by one of the methods set
         forth below under "Payment for Shares."

         Nominees. Nominees, who hold shares for the account of others, should
         notify the respective beneficial owners of such shares as soon as
         possible to ascertain such beneficial owners' intentions and to
         obtain instructions with respect to the Rights. If the beneficial
         owner so instructs, the Nominee should complete the Subscription
         Certificate and submit it to the Subscription Agent, together with
         the proper payment described below under "Payment for Shares."

Payment for Shares

         Stockholders who acquire Shares in the Primary Subscription or
pursuant to the Over-Subscription Privilege may choose between the following
methods of payment:

         (1)      If, prior to 5:00 p.m., Eastern time, on the Expiration
                  Date, the Subscription Agent has received a Notice of
                  Guaranteed Delivery by facsimile or otherwise, from a bank
                  or trust company or a NYSE member firm, guaranteeing
                  delivery of (a) payment of the full Subscription Price for
                  the Shares subscribed for in the Primary Subscription and
                  any additional Shares subscribed for through the
                  Over-Subscription Privilege and (b) a properly completed and
                  executed Subscription Certificate, the subscription will be
                  accepted by the Subscription Agent. The Subscription Agent
                  will not honor a Notice of Guaranteed Delivery if a properly
                  completed and executed Subscription Certificate is not
                  received by the Subscription Agent by the close of business
                  on the third (3rd) business day after the Expiration Date
                  and full payment for the Shares is not received by it by the
                  close of business on the tenth (10th) business day after the
                  Confirmation Date.


         (2)      Alternatively, a record owner can send payment for the
                  Shares acquired in the Primary Subscription, together with
                  the Subscription Certificate, to the Subscription Agent
                  based on an assumed purchase price of $13.00 per Share. To
                  be accepted, such payment, together with the Subscription
                  Certificate, must be received by the Subscription Agent
                  prior to 5:00 p.m., Eastern time, on the Expiration Date.


         IF THE SECOND METHOD DESCRIBED ABOVE IS USED, PAYMENT BY CHECK MUST
ACCOMPANY ANY SUBSCRIPTION CERTIFICATE FOR THE SUBSCRIPTION CERTIFICATE TO BE
ACCEPTED.


                                      14


<PAGE>


         Stockholders will have no right to rescind their subscription after
receipt of their payment for Shares by the Subscription Agent, except as
provided below under "Notice of Net Asset Value Decline / Possible Suspension
or Withdrawal of the Offer."

         The method of delivery of Subscription Certificates and payment of
the Subscription Price to the Fund will be at the election and risk of the
Rights holders, but if sent by mail it is recommended that such Subscription
Certificates and payment be sent by registered mail, properly insured, with
return receipt requested, and that a sufficient number of days be allowed to
ensure delivery to the Fund and clearance of payment prior to 5:00 p.m.,
Eastern time, on the Expiration Date. Because uncertified personal checks may
take at least five business days to clear and may, at the discretion of the
Fund, not be accepted if not cleared prior to the Expiration Date, you are
strongly encouraged to pay, or arrange for payment, by means of certified or
bank cashier's check.

         A confirmation will be sent by the Subscription Agent to each
Stockholder (or, if the Fund's Shares on the Record Date are held by a
Nominee, to such Nominee) by March 18, 2003, showing (i) the number of Shares
acquired pursuant to the Primary Subscription; (ii) the number of Shares, if
any, acquired through the Over-Subscription Privilege; (iii) the per Share and
total purchase price for the Shares; and (iv) any additional amount payable by
the Stockholder to the Fund or any excess to be refunded by the Fund to the
Stockholder, in each case based on the Subscription Price as determined on the
Pricing Date. In the case of any Stockholder who exercises his or her right to
acquire Shares pursuant to the Over-Subscription Privilege, any excess payment
which would otherwise be refunded to the Stockholder will be applied by the
Fund toward payment for additional Shares acquired pursuant to exercise of the
Over-Subscription Privilege. Any additional payment required from a
Stockholder must be received by the Subscription Agent within ten (10)
business days after the Confirmation Date. Any excess payment to be refunded
by the Fund to a Stockholder will be mailed by the Subscription Agent to such
Stockholder as promptly as possible within ten (10) business days after the
Confirmation Date. All payments by a Stockholder must be made in United States
dollars by money order or check drawn on a bank located in the United States
of America and payable to ROYCE VALUE TRUST, INC.

         Issuance and delivery of certificates for the Shares purchased are
subject to collection of checks and actual payment through any Notice of
Guaranteed Delivery.

         If a Stockholder who acquires Shares pursuant to the Primary
Subscription or Over-Subscription Privilege does not make payment of all
amounts due by the eighth (8th) business day after the Confirmation Date, the
Fund reserves the right to (i) find other purchasers for such subscribed and
unpaid Shares; (ii) apply any payment actually received by it toward the
purchase of the greatest number of whole Shares which could be acquired by
such Stockholder upon exercise of the Primary Subscription and/or
Over-Subscription Privilege; and/or (iii) exercise any and all other rights
and/or remedies to which it may be entitled, including, without limitation,
the right to set-off against payments actually received by it with respect to
such subscribed Shares.

         All questions concerning the timeliness, validity, form and
eligibility of any exercise of Rights will be determined by the Fund, whose
determinations will be final and binding. The Fund in its sole discretion may
waive any defect or irregularity, or permit a defect or irregularity to be
corrected within such time as it may determine, or reject the purported
exercise of any Right. Subscriptions will not be deemed to have been received
or accepted until all irregularities have been waived or cured within such
time as the Fund determines in its sole discretion. The Fund will not be under
any duty to give notification of any defect or irregularity in connection with
the submission of Subscription Certificates or incur any liability for failure
to give such notification.

Notice of Net Asset Value Decline / Possible Suspension or Withdrawal of the
Offer


         The Fund has, as required by the SEC's registration form, undertaken
to suspend the Offer until it amends this Prospectus if, subsequent to January
28, 2003, the effective date of the Fund's Registration Statement, the Fund's
NAV declines more than 10% from its NAV as of January 28, 2003. Accordingly,
the Fund will notify Stockholders of any such decline and thereby permit them
to cancel their exercise of Rights.



                                      15


<PAGE>


Delivery of Share Certificates

         Participants in the Fund's Distribution Reinvestment and Cash
Purchase Plan (the "Plan") will have any Shares acquired in the Primary
Subscription and pursuant to the Over-Subscription Privilege credited to their
accounts in the Plan. Stock certificates will not be issued for Shares
credited to Plan accounts. Stockholders whose Shares are held of record by a
Nominee on their behalf will have any Shares acquired in the Primary
Subscription and pursuant to the Over-Subscription Privilege credited to the
account of such Nominee. For all other Stockholders, stock certificates for
all Shares acquired will be mailed promptly after full payment for the
subscribed Shares has been received and cleared.

Federal Income Tax Consequences of the Offer

         Stockholders who receive Rights pursuant to the Offer will not
recognize taxable income for U.S. Federal income tax purposes upon their
receipt of the Rights. If Rights issued to a Stockholder expire without being
exercised, no basis will be allocated to such Rights, and such stockholder
will not recognize any gain or loss for U.S. Federal income tax purposes upon
such expiration.

         The tax basis of a Stockholder's Common Stock will remain unchanged,
and the stockholder's basis in the Rights will be zero. A Stockholder who
exercises Rights will not recognize any gain or loss for U.S. Federal income
tax purposes upon the exercise. The basis of the newly acquired Common Stock
will equal the Subscription Price paid for the Common Stock. Upon a sale or
exchange of the Common Stock so acquired, the Stockholder will recognize gain
or loss measured by the difference between the proceeds of the sale or
exchange and the cost basis of such Common Stock. Assuming the Stockholder
holds the Common Stock as a capital asset, any gain or loss realized upon its
sale will generally be treated as a capital gain or loss, which gain or loss
will be short-term or long-term, depending on the length of the Stockholder's
holding period for such Common Stock. However, it currently appears that any
loss recognized upon the sale of shares of Common Stock with a tax holding
period of 6 months or less will be treated as a long-term capital loss to the
extent of any capital gain distribution previously received by the Stockholder
with respect to such Shares, and a loss may be disallowed under wash sale
rules to the extent that the Stockholder purchases additional Common Stock
(including by reinvestment of distributions) within 30 days before or after
the sale date. The holding period for Common Stock acquired upon the exercise
of Rights will begin on the date of exercise of the Rights.

         The foregoing is a summary of the material U.S. Federal income tax
consequences of the Offer under the provisions of the U.S. Internal Revenue
Code of 1986, as amended (the "Code"), and applicable existing and proposed
regulations thereunder, all as currently in effect and all subject to change
at any time, perhaps with retroactive effect. It does not include any state,
local or foreign tax consequences of the Offer. This summary is generally
applicable to Stockholders that are United States persons as defined in the
Code. Further, this summary is not intended to be, nor should it be, construed
as legal or tax advice, and stockholders are urged to consult their own tax
advisors to determine the tax consequences to them of the Offer and their
ownership of Rights and Common Stock.


Dilution

         If you do not fully exercise your Rights, you should expect that you
will, at the completion of the Offer, own a smaller proportional interest in
the Fund than would otherwise be the case if you exercised your Rights. We
cannot determine the extent of this dilution at this time because we do not
know what proportion of the Fund's Shares will be purchased as a result of the
Offer.

         You may experience dilution in your holdings because you will
indirectly bear the expenses of the Offer. Further, if you do not submit
subscription requests pursuant to the Over-Subscription Privilege, you may
also experience dilution in your holdings if the Fund offers Additional Shares
for subscription. We cannot state precisely the amount of any such decrease in
NAV because we do not know at this time how many Shares will be subscribed for
or what the NAV or market price per share will be at the Pricing Date. As of
January 22, 2003, the Fund's shares traded at a 9.4% premium above NAV. If the
Fund's shares trade at a premium above NAV as of the Pricing Date, the Fund
estimates that such dilution would be minimal. See "Risk Factors and Special
Considerations at a Glance - Dilution - Net Asset Value and Non-Participation
in the Offer." Except as described in this Prospectus,



                                      16


<PAGE>


you will have no right to rescind your subscription requests after receipt of
your payment for Shares by the Subscription Agent.

Other Rights Offerings

         The Fund had below-NAV rights offerings during each of the seven
years ended December 31, 1995, and may have similar rights offerings in the
future. Any such future rights offerings would be separately registered with
the SEC and made by means of separate prospectuses.

                                USE OF PROCEEDS


         We estimate the net proceeds of the Offer to be approximately
$55,697,581 ($66,882,092 if all of the Additional Shares are available for
subscription). These figures assume (i) all Rights are exercised in full, (ii)
a Subscription Price of $13.00 and (iii) payment of offering expenses of
approximately $225,000. Royce anticipates that investment of the net proceeds
of the Offer in accordance with the Fund's investment goal and policies will
take up to six months from January 28, 2003, depending on market conditions
and the availability of appropriate securities. Pending investment, the net
proceeds of the Offer will be held in the types of short-term debt securities
and instruments in which the Fund may invest. See "Investment Goal and
Policies--Investment Methods/Policies." As a result of this short-term
investment of the proceeds, a lower yield may be realized.


                         INVESTMENT GOAL AND POLICIES

Investment Goal

         The Fund's primary investment goal and one of its fundamental
policies is long-term capital growth. Royce normally invests more than 75% of
the Fund's assets in the equity securities of small- and micro-cap companies,
with stock market capitalizations ranging from $100 million to $2 billion.
(Stock market capitalization is calculated by multiplying the total number of
common shares issued and outstanding by the per share market price of the
common stock.) See "Changes in Investment Goal and Methods/Policies." There
are market risks inherent in any investment, and there is no assurance that
the Fund's primary investment goal will be achieved.

Investment Methods/Policies

         Royce uses a value method in managing the Fund's assets. In selecting
securities for the Fund, Royce evaluates the quality of a company's balance
sheet, the level of its cash flows and various measures of a company's
profitability. Royce then uses these factors to assess the company's current
worth, basing this assessment on either what it believes a knowledgeable buyer
might pay to acquire the entire company or what it thinks the value of the
company should be in the stock market. This analysis takes a number of factors
into consideration, including the company's future growth prospects and
current financial condition.

         Royce invests in securities of companies that are trading
significantly below its estimate of the company's "current worth" in an
attempt to reduce the risk of overpaying for such companies. Royce's value
approach strives to reduce some of the other risks of investing in small- and
micro-cap companies (for the Fund's portfolio taken as a whole) by evaluating
various other risk factors. Royce attempts to lessen financial risk by buying
companies that combine strong balance sheets with low leverage. While there
can be no assurance that this risk-averse value approach will be successful,
Royce believes that it can reduce some of the risks of investing in the
securities of small- and micro-cap companies, which are inherently fragile in
nature and whose securities have substantially greater market price
volatility. Although Royce's approach to security selection seeks to reduce
downside risk to the Fund's portfolio, especially during periods of broad
small-cap market declines, it may also potentially have the effect of limiting
gains in strong small-cap up markets.

         Foreign Investments. The Fund may invest up to 10% of its assets in
securities of foreign issuers. Foreign investments involve certain additional
risks, such as political or economic instability of the issuer or of the
country of issue, fluctuating exchange rates and the possibility of imposition
of exchange controls.


                                      17


<PAGE>


         Fixed Income Securities. The Fund may invest up to 25% of its assets
in direct obligations of the government of the United States or its agencies
and/or in non-convertible preferred stocks and non-convertible debt securities
of various issuers, including up to 5% of its net assets in below
investment-grade debt securities, also known as high-yield fixed income
securities. Such below investment-grade debt securities may be in the
lowest-grade categories of recognized ratings agencies (C in the case of
Moody's Investor Service, Inc. ("Moody's") or D in the case of Standard &
Poor's) or may be unrated. High-yield/high-risk investments are primarily
speculative and may entail substantial risk of loss of principal and
non-payment of interest, but may also produce above-average returns for the
Fund. Debt securities rated C or D may be in default as to the payment of
interest or repayment of principal.

         Warrants, Rights or Options. The Fund may invest up to 5% of its
total assets in warrants, rights or options. A warrant, right or call option
entitles the holder to purchase a given security within a specified period for
a specified price and does not represent an ownership interest in the
underlying security. A put option gives the holder the right to sell a
particular security at a specified price during the term of the option. These
securities have no voting rights, pay no dividends and have no liquidation
rights. In addition, market prices of warrants, rights or call options do not
necessarily move parallel to the market prices of the underlying securities;
market prices of put options tend to move inversely to the market prices of
the underlying securities.

         Securities Lending. The Fund may lend up to 25% of its assets to
brokers, dealers and other financial institutions. However, under the Moody's
current rating agency guidelines relating to the Issued Preferred, the Fund
may not lend portfolio securities in excess of 5% of its total assets. Moody's
current rating agency guidelines may in the future be amended to permit the
Fund to lend a greater percentage of its total assets. Securities lending
allows the Fund to retain ownership of the securities loaned and, at the same
time, to earn additional income. Since there may be delays in the recovery of
loaned securities or even a loss of rights in collateral supplied should the
borrower fail financially, loans will be made only to parties that participate
in a Global Securities Lending Program organized and monitored by the Fund's
custodian and who are deemed by it to be of good standing. Furthermore, such
loans will be made only if, in Royce's judgment, the consideration to be
earned from such loans would justify the risk.

         The current view of the staff of the SEC is that a fund may engage in
such loan transactions only under the following conditions: (i) the fund must
receive 100% collateral in the form of cash or cash equivalents (e.g., U.S.
Treasury bills or notes) from the borrower; (ii) the borrower must increase
the collateral whenever the market value of the securities loaned (determined
on a daily basis at the close of regular trading) rises above the value of the
collateral; (iii) after giving notice, the fund must be able to terminate the
loan at any time; (iv) the fund must receive reasonable interest on the loan
or a flat fee from the borrower, as well as amounts equivalent to any
dividends, interest or other distributions on the securities loaned; (v) the
fund may pay only reasonable custodian fees in connection with the loan; and
(vi) the fund must be able to vote proxies on the securities loaned, either by
terminating the loan or by entering into an alternative arrangement with the
borrower.

         Temporary Investments. The assets of the Fund are normally invested
in the equity securities of small- and micro-cap companies. However, for
temporary defensive purposes (i.e., when Royce determines that market
conditions warrant) or when it has uncommitted cash balances, the Fund may
also invest in U.S. Treasury bills, domestic bank certificates of deposit,
repurchase agreements with its custodian bank covering United States Treasury
and agency obligations having a term of not more than one week, high-quality
commercial paper and money market funds registered under the 1940 Act, or
retain all or part of its assets in cash. Accordingly, the composition of the
Fund's portfolio may vary from time to time.

Changes in Investment Goal and Methods/Policies

         The Fund's primary investment goal of long-term capital growth is a
fundamental policy of the Fund and may not be changed without approvals of the
holders of a majority of the Fund's outstanding shares of Common Stock and
Issued Preferred and any other Preferred Stock, voting together as a single
class, and a majority of the Issued Preferred and any other Preferred Stock,
voting as a separate class (which for this purpose and under the 1940 Act
means the lesser of (i) 67% or more of the relevant shares of capital stock of
the Fund present or represented at a meeting of stockholders, at which the
holders of more than 50% of the outstanding relevant shares of capital stock
are present or represented or (ii) more than 50% of the outstanding relevant
shares of capital stock of the Fund). Except as indicated under "Investment
Restrictions" in the Statement of Additional Information, the Fund does not


                                      18


<PAGE>


consider its other policies, such as seeking current income, to be
fundamental, and such policies may be changed by the Board of Directors
without stockholder approval or prior notice to stockholders. Although the
Fund may seek current income by investing in dividend-paying equity securities
of small- and micro-cap companies, this is not the Fund's primary investment
goal.

         The Fund's investment policies are subject to certain restrictions.
See "Investment Restrictions" in the Statement of Additional Information.

                               ----------------


Risk Factors - Investing in Small- and Micro-Cap Companies


         Royce views the large and diverse universe of small-cap companies as
having two investment segments or tiers. Royce defines small-cap as those
companies with market capitalizations between $400 million and $2 billion; it
refers to the segment with market capitalizations less than $400 million as
micro-cap.

         The securities of small- and micro-cap companies offer investment
opportunities and additional risks. They may not be well known to the
investing public, may not be significantly owned by institutional investors
and may not have steady earnings growth. In addition, the securities of such
companies may be more volatile in price, have wider spreads between their bid
and ask prices and have significantly lower trading volumes than larger
capitalization stocks. As a result, the purchase or sale of more than a
limited number of shares of a small- or micro-cap security may affect its
market price. Royce may need a considerable amount of time to purchase or sell
its positions in these securities, particularly when other accounts managed by
Royce or other investors are also seeking to purchase or sell them.
Accordingly, Royce's investment focus on small- and micro-cap companies
generally requires it to have a long-term (at least three years) investment
outlook for a portfolio security.

         The micro-cap segment consists of more than 6,900 companies. These
companies are followed by relatively few, if any, securities analysts, and
there tends to be less publicly available information about them. Their
securities generally have even more limited trading volumes and are subject to
even more abrupt or erratic market price movements than are the securities in
the upper tier, and Royce may be able to deal with only a few market-makers
when purchasing and selling these securities. Such companies may also have
limited markets, financial resources or product lines, may lack management
depth and may be more vulnerable to adverse business or market developments.
These conditions, which create greater opportunities to find securities
trading well below Royce's estimate of the company's current worth, also
involve increased risk. This leads Royce to more broadly diversify most of the
Fund's assets invested in micro-cap stocks by holding proportionately smaller
positions in more companies.

         The upper tier of the small-cap universe of securities consists of
approximately 1,400 companies. In this segment, there is a relatively higher
level of ownership by institutional investors and more research coverage by
securities analysts than generally exists for micro-cap companies. This
greater attention makes the market for these securities more efficient than
that of micro-cap companies because they have somewhat greater trading volumes
and narrower bid/ask spreads. As a result, Royce normally employs a more
concentrated approach when investing in the upper tier of small-caps, holding
proportionately larger positions in a relatively limited number of securities.

Risks to Common Stockholders of Borrowing Money and Issuing Senior Securities


         General. The 1940 Act and the Fund's fundamental policies (see
"Investment Restrictions" in the Statement of Additional Information) permit
the Fund to borrow money from banks and certain other lenders and to issue and
sell senior securities representing indebtedness or consisting of Preferred
Stock if various requirements are met. Such requirements include initial asset
coverage tests of 300% for indebtedness (see "Risk Factors and Special
Considerations - Risks to Common Stockholders of Borrowing Money and Issuing
Senior Securities - Asset Coverage Test" in the Statement of Additional
Information) and 200% for Preferred Stock and, except for indebtedness to
banks and certain other lenders, restrictive provisions concerning Common
Stock dividend payments, other Common Stock distributions, stock repurchases
and maintenance of asset coverage and giving certain senior security holders
the right to elect directors in the event specified asset coverage tests are
not met or


                                      19


<PAGE>


dividends are not paid. As of December 31, 2002, the aggregate involuntary
liquidation preference of the Issued Preferred was $160 million. At this
level, a decrease of 56% of the Fund's total assets or 43% of its net assets
would be necessary to reduce the asset coverage for the Issued Preferred to
less than 200%. The issuance and sale of senior securities allows the Fund to
raise additional cash for investments. It is a speculative investment
technique, involving the risk considerations of leverage and increased share
price volatility. So long as the Issued Preferred is rated by Moody's, the
Fund cannot borrow for investment leverage purposes.


         Borrowings. The following factors could increase the investment risk
and the volatility of the price of the Fund's shares of Common Stock: (i)
leveraging exaggerates any increase or decrease in the value of the Fund's
portfolio; (ii) the costs of borrowing may exceed the income from the
portfolio securities purchased with the borrowed money; (iii) a decline in NAV
results if the investment performance of the additional securities purchased
fails to cover their cost to the Fund (including any interest paid on the
money borrowed); (iv) a decline in NAV could affect the ability of the Fund to
make Common Stock dividend payments; (v) a failure to pay net investment
income dividends or make capital gains distributions could result in the
Fund's ceasing to qualify as a regulated investment company under the Code, or
in its having to pay certain entity level taxes even if it maintains its
status as a regulated investment company (see "Taxation" in this Prospectus
and in the Statement of Additional Information); and (vi) if the asset
coverage for debt securities declines to less than 300% (as a result of market
fluctuations or otherwise), the Fund may be required to sell a portion of its
investments when it may be disadvantageous to do so.

         Preferred Stock. Preferred Stock may result in higher volatility of
the NAV of the Common Stock and potentially more volatility in the market
price of the Common Stock. Holders of Common Stock will realize a higher
current rate of return than if the Fund were not leveraged only so long as the
Fund, after accounting for its costs and operating expenses, is able to
realize a higher net return on its investment portfolio than the then current
dividend rates paid on Preferred Stock. Similarly, since a pro rata portion of
the Fund's net realized capital gains are generally payable to holders of
Common Stock, the use of leverage will increase the amount of such gains
distributed to holders of Common Stock. To the extent that the dividend rates
on Preferred Stock approach the net return on the Fund's investment portfolio,
the benefit of leverage to holders of Common Stock will be decreased. (If the
dividend rates on Preferred Stock were to exceed the net return on the Fund's
portfolio, holders of Common Stock would receive a lower rate of return than
if the Fund were not leveraged.) Similarly, since both the cost of issuing
Preferred Stock and any decline in the value of the Fund's investments
(including investments purchased with the proceeds from Preferred Stock
offerings) is borne entirely by holders of Common Stock, the effect of
leverage in a declining market would result in a greater decrease in NAV to
holders of Common Stock than if the Fund were not leveraged. Such decrease in
NAV likely would be reflected in a greater decline in the market price for
shares of the Fund's Common Stock. If the Fund is liquidated, holders of
Preferred Stock will be entitled to receive liquidating distributions before
any distribution is made to holders of Common Stock. Redemption of Preferred
Stock or insufficient investment income to make dividend payments may reduce
the NAV of the Common Stock by requiring the Fund to liquidate a portion of
its investments at a time when it may be disadvantageous to do so.

         In an extreme case, a decline in NAV could affect the Fund's ability
to pay dividends on the Common Stock. Failure to make such dividend payments
could adversely affect the Fund's qualification as a regulated investment
company under the Code. See "Taxation" in this Prospectus and in the Statement
of Additional Information. However, the Fund intends to take all measures
necessary to make such Common Stock dividend payments. If the Fund's current
investment income is ever insufficient to meet dividend payments on either the
Common Stock or the Preferred Stock, the Fund may have to liquidate certain of
its investments. In addition, the Fund will have the authority to redeem the
7.80% Preferred for any reason on or after August 15, 2003, to redeem the
7.30% Preferred for any reason on or after June 22, 2003, and may redeem all
or part of the Issued Preferred prior to such dates to the extent required by
the 1940 Act and the terms of the Issued Preferred. See "Description of
Capital Stock -- Preferred Stock -- Redemption."

         The class and other voting rights of the Preferred Stock could make
it more difficult for the Fund to take certain actions that may, in the
future, be proposed by the Board of Directors and/or the holders of Common
Stock, such as (i) a merger, exchange of securities, liquidation or alteration
of the rights of a class of the Fund's securities if such actions would be
adverse to the Preferred Stock, (ii) converting the Fund to an open-end
investment company or acting inconsistently with its fundamental investment
restrictions or other fundamental policies or (iii) seeking to operate other
than as an investment company.


                                      20


<PAGE>


         The future issuance of any Preferred Stock convertible into Common
Stock might also reduce the net income and NAV per share of the Common Stock
upon conversion. Such income dilution would occur if the Fund could not, from
the investments made with the proceeds of the Preferred Stock, earn an amount
per share of Common Stock issuable upon conversion greater than the dividend
required to be paid on the amount of Preferred Stock convertible into one
share of Common Stock. Such NAV dilution would occur if Preferred Stock were
converted at a time when the NAV per share of Common Stock was greater than
the conversion price.

                               ----------------


         On December 31, 2002, the Fund had 42,417,362 shares of Common Stock
issued and outstanding, with an aggregate NAV of $13.22, 2,400,000 shares of
7.80% Cumulative Preferred Stock, par value $0.001 per share (the "7.80%
Preferred"), with an aggregate liquidation preference of $60,000,000, issued
and outstanding, and 4,000,000 shares of 7.30% Tax-Advantaged Cumulative
Preferred Stock, par value $0.001 per share (the "7.30% Preferred," and
together with the 7.80% Preferred, the "Issued Preferred"), with an aggregate
liquidation preference of $100,000,000, issued and outstanding, and no
outstanding indebtedness. Accordingly, as of such date, the Fund could have,
under the above policies and restrictions, issued and sold senior securities
representing indebtedness of up to $360,387,811 or additional shares of
Preferred Stock having an aggregate involuntary liquidation preference of up
to $400,775,623 or various combinations of lesser amounts of both securities
representing indebtedness and Preferred Stock.

         Effects of Preferred Stock Leverage on Common Stockholders. Dividends
are payable on the Issued Preferred at the annual rates of 7.80% and 7.30%,
respectively. The Fund's portfolio must experience a return of 1.7% after
expenses for the year ending December 31, 2003 in order to cover that year's
dividend on the Issued Preferred.


         The fees paid to Royce for investment advisory services are higher
than if the Fund did not have Preferred Stock outstanding because they are
calculated on the basis of the Fund's average net assets (including assets
obtained from the sale of Preferred Stock). See "Investment Advisory and Other
Services."

         The following table is designed to illustrate the effect on the
return to a holder of the Fund's Common Stock of the leverage obtained with
the Issued Preferred, assuming hypothetical annual returns on the Fund's
portfolio of minus 10% to plus 10%. As the table shows, leverage generally
increases the return to stockholders when portfolio return is positive and
decreases the return when portfolio return is negative. See "Risk Factors and
Special Considerations at a Glance - Preferred Stock - Leverage Risk." The
figures appearing in the following table are hypothetical. Actual returns may
be greater or less than those appearing in the table.

<TABLE>
<CAPTION>

Assumed return on portfolio (net

<S>                                    <C>         <C>         <C>         <C>         <C>        <C>         <C>
of expenses)                          -15%        -10%        -5%          0%          5%         10%         15%
Corresponding NAV return to
Common Stockholder                  -21.42%     -14.99%      -8.56%      -2.14%      4.29%       10.72%      17.14%
</TABLE>


         Financial Impact of Senior Securities on Common Stockholders. The
costs related to the issue and sale of senior securities such as Preferred
Stock, including underwriting discount, rating agency fees and offering
expenses, are paid by the Fund and, therefore, borne by its Common
Stockholders. Also, the interest and dividend requirements of such senior
securities will reduce the amount of and may entirely eliminate any net
investment income dividends otherwise payable by the Fund to its Common
Stockholders.

                    INVESTMENT ADVISORY AND OTHER SERVICES


         Royce & Associates, LLC (which term as used in this Prospectus
includes its corporate predecessor) ("Royce"), a Delaware limited liability
company, is an investment advisory firm whose predecessor was organized in
February 1967. Royce is registered as an investment adviser under Investment
Advisers Act of 1940, as amended. Royce became investment adviser of the Fund
in November 1986, when the Fund commenced operations. Royce also serves as
investment adviser to other management investment companies and institutional
accounts. As of December 31, 2002, Royce managed approximately $8.3 billion in
assets for the Fund and other registered


                                      21


<PAGE>


investment companies advised and sponsored by Royce and other client accounts.
Substantially all of Royce's client accounts are managed as small- and
micro-cap investment products.

         On October 1, 2001, Royce became an indirect wholly-owned subsidiary
of Legg Mason, Inc. ("Legg Mason"). On March 31, 2002, Royce's corporate
predecessor was merged into Royce Holdings, LLC (a wholly-owned subsidiary of
Legg Mason), which then changed its name to Royce & Associates, LLC. As a
result of this merger, Royce & Associates, LLC became the Fund's investment
adviser and a direct wholly-owned subsidiary of Legg Mason. Founded in 1899,
Legg Mason is a publicly-held financial services company primarily engaged in
providing asset management, securities brokerage, investment banking and
related financial services through its subsidiaries. As of December 31, 2002,
Legg Mason's asset management subsidiaries had aggregate assets under
management of approximately $184.7 billion.


         Under the Fund's Articles of Incorporation, as amended and
supplemented (the "Charter"), and Maryland law, the Fund's business and
affairs are managed under the direction of its Board of Directors. Investment
decisions for the Fund are made by Royce, subject to any direction it may
receive from the Fund's Board of Directors, which periodically reviews the
Fund's investment performance.

Portfolio Management

         Royce is responsible for the management of the Fund's assets. Royce
has been investing in small-cap companies with a value approach for more than
25 years. Its offices are located at 1414 Avenue of the Americas, New York, NY
10019. Charles M. Royce has been the firm's President and Chief Investment
Officer during this period. He is also the primary portfolio manager of the
Fund.


         Royce's investment staff also includes three other Senior Portfolio
Managers: W. Whitney George, Managing Director and Vice President; Boniface A.
Zaino, Managing Director; and Charles R. Dreifus, Principal. Royce's
investment staff is assisted by Jack E. Fockler, Jr., Managing Director and
Vice President. Mr. George has been a Portfolio Manager at Royce since 2000,
and prior thereto was a Senior Analyst. He has been employed by Royce since
1991. Mr. Zaino joined Royce in April 1998 as a Senior Portfolio Manager and
previously was a Portfolio Manager and Group Managing Director at Trust
Company of the West (since 1984). Mr. Dreifus joined Royce in February 1998 as
a Senior Portfolio Manager and previously was a Portfolio Manager and Managing
Director (since June 1995) and General Partner (from 1983 until June 1995) of
Lazard Freres & Co. LLC. Mr. Fockler has been employed by Royce since 1989 as
its Director of Marketing.


Investment Advisory Agreement

         Under the Investment Advisory Agreement between the Fund and Royce,
Royce determines the composition of the Fund's portfolio, the nature and
timing of the changes in it and the manner of implementing such changes;
provides the Fund with investment advisory, research and related services for
the investment of its assets; and pays all expenses incurred in performing its
investment advisory duties under the Agreement.

         The Fund pays all of its own administrative and other costs and
expenses attributable to its operations and transactions (except those set
forth above), including, without limitation, registrar, transfer agent and
custodian fees; legal, administrative and clerical services; rent for its
office space and facilities; auditing; preparation, printing and distribution
of its proxy statements, stockholder reports and notices; Federal and state
registration fees; listing fees and expenses; Federal, state and local taxes;
non-affiliated directors fees; interest on its borrowings; brokerage
commissions; and the cost of issue, sale and repurchase of its shares. Thus,
unlike most other investment companies, the Fund is required to pay
substantially all of its expenses, and Royce does not incur substantial fixed
expenses.

Advisory Fee

         As compensation for its services under the Investment Advisory
Agreement, Royce is entitled to receive a fee comprised of a Basic Fee (the
"Basic Fee") at the rate of 1% per annum of the Fund's average net assets
(including assets obtained from the sale of Preferred Stock) and an adjustment
to the Basic Fee based on the


                                      22


<PAGE>


investment performance of the Fund in relation to the investment record of the
S&P 600 Index . A rolling period of 60 months ending with the most recent
calendar month is utilized for measuring performance and average net assets.

         The Basic Fee for each such month will be increased or decreased at
the rate of 1/12 of .05% per percentage point, depending on the extent, if
any, by which the investment performance of the Fund exceeds by more than two
percentage points, or is exceeded by more than two percentage points by, the
percentage change in the investment record of the S&P 600 Index for the
performance period. The maximum increase or decrease in the Basic Fee for any
month is 1/12 of 0.5%. Accordingly, for each month the maximum monthly fee
rate as adjusted for performance will be 1/12 of 1.5% and will be payable if
the investment performance of the Fund exceeds the percentage change in the
investment record of the S&P 600 Index by 12 or more percentage points for the
performance period, and the minimum monthly fee rate as adjusted for
performance will be 1/12 of 0.5% and will be payable if the percentage change
in the investment record of the S&P 600 Index exceeds the investment
performance of the Fund by 12 or more percentage points for the performance
period. As a result, the actual investment advisory fee rate may at times be
greater than the fee rate paid by many other funds.


         Because the Basic Fee is a function of the Fund's net assets and not
of its total assets, Royce will not receive any fee in respect of those assets
of the Fund equal to the aggregate unpaid principal amount of any indebtedness
of the Fund. Royce will receive a fee in respect of any assets of the Fund
equal to the liquidation preference of and any potential redemption premium
for the outstanding 7.80% Cumulative Preferred Stock, 7.30% Tax-Advantaged
Cumulative Preferred Stock and for any other Preferred Stock that may be
issued and sold by the Fund.

         The following table illustrates, on an annualized basis, the full
range of permitted increases or decreases to the Basic Fee.
<TABLE>
<CAPTION>

      Difference between Performance
      of Fund and % Change in S & P              Adjustment to 1%
             600 Index Record                       Basic Fee                     Fees as Adjusted
      ------------------------------             -----------------                -----------------
<S>                                              <C>                              <C>
             +12 or more                                 +.5%                               1.5%
             +11                                         +.45%                              1.45%
             +10                                         +.4%                               1.4%
             +9                                          +.35%                              1.35%
             +8                                          +.3%                               1.3%
             +7                                          +.25%                              1.25%
             +6                                          +.2%                               1.2%
             +5                                          +.15%                              1.15%
             +4                                          +.1%                               1.1%
             +3                                          +.05%                              1.05%
             +/-2                                        0                                  1%
             - 3                                        -0.5                                 .95%
             - 4                                         -.1%                                .9%
             - 5                                         -.15%                               .85%
             - 6                                         -.2%                                .8%
             - 7                                         -.25%                               .75%
             - 8                                         -.3%                                .7%
             - 9                                         -.35%                               .65%
             - 10                                        -.4%                                .6%
             - 11                                        -.45%                               .55%
             - 12 or less                                -.5%                                .5%
</TABLE>

         In calculating the investment performance of the Fund and the
percentage change in the investment record of the S&P 600 Index, all dividends
and other distributions during the performance period are treated as having
been reinvested, and no effect is given to gain or loss resulting from capital
share transactions of the Fund. Fractions of a percentage point are rounded to
the nearest whole point (to the higher whole point if exactly one-half).



                                      23


<PAGE>


         Notwithstanding the foregoing, Royce will not be 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 on an absolute
basis. 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 committed to voluntarily waive the portion of its
investment advisory fee attributable to a series of Issued Preferred for any
month when the Fund's average annual net asset value total return since
issuance of the series fails to exceed the applicable series' dividend rate.

Code of Ethics

         The Fund's Board of Directors approved a Code of Ethics under Rule
17j-1 of the 1940 Act that covers the Fund and Royce. The Code of Ethics
establishes procedures for personal investing and restricts certain
transactions. Employees subject to the Code of Ethics may invest in securities
for their personal investment accounts, including, in certain cases,
securities that may be purchased or held by the Fund. See "Code of Ethics and
Related Matters" in the Statement of Additional Information.

                         DESCRIPTION OF CAPITAL STOCK

General

         The Fund, which was incorporated under the laws of the State of
Maryland on July 1, 1986, is authorized to issue 150,000,000 shares of Common
Stock, par value $.001 per share. Each share of Common Stock has equal
dividend, distribution and liquidation rights and is entitled to one vote per
share on each matter submitted to a vote of Common Stockholders. The shares of
Common Stock outstanding and those Shares offered hereby, when issued and paid
for pursuant to the terms of the Offer, will be fully paid and non-assessable.
Shares of Common Stock are not redeemable and have no preemptive, exchange,
conversion or cumulative voting rights. As a NYSE-listed company, the Fund is
required to hold annual meetings of its stockholders.

         The Fund's Board of Directors has authority to cause the Fund to
issue and sell up to 50,000,000 shares of Preferred Stock, $.001 par value per
share, that may be convertible into shares of the Fund's Common Stock. The
terms of such Preferred Stock are, or would be, fixed by the Board of
Directors and materially limit and/or qualify, or would materially limit
and/or qualify, the rights of the holders of the Fund's Common Stock. See
"Investment Goal and Policies -- Risks to Common Stockholders of Borrowing
Money and Issuing Senior Securities."

         The following table shows the number of shares of (i) capital stock
authorized and (ii) capital stock outstanding for each class of authorized
securities of the Fund as of December 31, 2002 and as adjusted for the Offer.


<TABLE>
<CAPTION>
                                                                                    Amount
                                            Amount             Amount            Outstanding,
                 Title of Class           Authorized        Outstanding*         As Adjusted
              _________________           ___________       _____________        _____________

<S>                                       <C>                <C>                 <C>
              Common Stock                150,000,000        42,417,362          46,719,099**

              Preferred Stock              50,000,000         6,400,000            6,400,000
                   7.80% Preferred         10,000,000         2,400,000            2,400,000
                   7.30% Preferred         10,000,000         4,000,000            4,000,000
-------------
</TABLE>
*    The Fund does not hold any shares of Common Stock or Preferred Stock for
     its own account.
**   If the Fund increases the amount of Shares subject to the Offer by 20% in
     order to satisfy over-subscription requests, the amount of shares of
     Common Stock outstanding as adjusted would be increased by 860,347 Shares
     to an aggregate of 47,579,446 Shares.



                                      24


<PAGE>


Common Stock

         Net Asset Values and Sales Prices. The Fund's shares of Common Stock
are publicly held and are listed and traded on the NYSE under the symbol
"RVT." The following table sets forth for the periods indicated the high and
low sales prices on the NYSE per share of Common Stock of the Fund, the NAV
per share on the dates of the market highs and lows and the number of shares
traded.
<TABLE>
<CAPTION>


                                                                                       Net Asset Value
                                                    Market Price Per Share            Per Share on Date
                                                         and Related                   of Market High       Reported NYSE
                                               Discount (-)/Premium (+) (2)(3)           and Low (1)            Volume
                                           ---------------------------------------    -----------------     ----------------
Quarter Ended                                     High                  Low            High        Low
                                           ------------------    -----------------    ------      -----

<S>                                        <C>          <C>       <C>         <C>      <C>        <C>       <C>
March 31, 2001                             16.61       -8.51      13.80      -10.7     16.83      15.09     3.2 million shs
June 30, 2001                              16.73       -9.9       13.95       -7.1     18.56      15.01     3.7 million shs
September 30, 2001                         16.25       -9.3       12.57       -9.4     17.92      13.87     6.2 million shs
December 31, 2001                          16.10       -4.4       12.98       -9.5     17.41      14.35     5.8 million shs
March 31, 2002                             17.95       -3.8       15.45       -9.0     18.66      16.97     6.9 million shs
June 30, 2002                              18.90       -1.6       15.59       -3.2     19.28      16.09     7.1 million shs
September 30, 2002                         16.05       -0.3       12.59       +0.2     16.10      12.41     5.9 million shs
December 31, 2002                          15.22       +4.9       11.66       +2.1     14.51      11.42     4.7 million shs
---------------------
(1)  Based on the Fund's computations.
(2)  Highest and lowest market price per share reported on the NYSE.
(3)  "Related Discount (-) / Premium (+)" represents the discount or premium
     from NAV of the shares on the date of the high and low market price for
     the respective quarter.
</TABLE>

         As evidenced by the above table, the Common Stock has generally
traded in the market below NAV. On January 3, 2003, when the Offer was
publicly announced, the NAV per share of Common Stock was $13.53, and the
closing price on the NYSE was $13.98, representing a premium of 3.3% above
NAV. On January 22, 2003, such NAV was $13.07, and such closing price was
$14.30, representing a premium of 9.4% above NAV.



                                      25

<PAGE>

         There can be no assurance that the Common Stock will trade in the
future at, above or below NAV.

         Distributions. So long as any shares of Preferred Stock are
outstanding, holders of the Fund's Common Stock will not be entitled to
receive any dividends or other distributions from the Fund unless all
accumulated dividends on outstanding shares of Preferred Stock have been paid,
and unless asset coverage (as defined in the 1940 Act) with respect to such
Preferred Stock would be at least 200% after giving effect to such
distributions.

         Net Asset Value. The NAV of the Fund's shares of Common Stock is
calculated at the close of regular trading on the NYSE (generally 4:00 p.m.
Eastern time) every day that the NYSE is open. The Fund makes this information
available daily by telephone (800-221-4268), via its web site
(www.roycefunds.com) and through electronic distribution for media
publication, including major internet-based financial services web sites and
portals (bloomberg.com, yahoo.com, cbsmarketwatch.com, etc.). Currently, The
Wall Street Journal, The New York Times and Barron's publish NAVs for
closed-end investment companies weekly.

         The NAV per share of the Common Stock is calculated by dividing the
current value of the Fund's total assets less the sum of all of its
liabilities and the aggregate liquidation preferences of its outstanding
shares of Preferred Stock, by the total number of outstanding shares of Common
Stock. The Fund's investments are valued based on market prices or, if market
quotations are not readily available, at their fair value as determined in
good faith under procedures established by the Fund's Board of Directors.

Preferred Stock

         General. Under the Charter, the Fund is authorized to issue up to
10,000,000 shares of 7.80% Preferred and up to 10,000,000 shares of 7.30%
Preferred. As of the date of this Prospectus, there were 2,400,000 shares of


                                      29


<PAGE>


7.80% Preferred issued and outstanding and 4,000,000 shares of 7.30% Preferred
issued and outstanding, constituting the only authorized series of Preferred
Stock. The 7.80% Preferred and 7.30% Preferred rank on a parity with each
other as to dividends and payment upon liquidation. The Board of Directors
reserves the right to issue additional shares of 7.80% Preferred, 7.30%
Preferred or other Preferred Stock from time to time, subject to the
restrictions in the Charter and the 1940 Act. The shares of all Preferred
Stock will, upon issuance, be fully paid and nonassessable. Any shares of
Issued Preferred repurchased or redeemed by the Fund will be classified as
authorized but unissued Preferred Stock. The Board of Directors may by
resolution classify or reclassify any authorized but unissued Preferred Stock
from time to time by setting or changing the preferences, rights, voting
powers, restrictions, limitations or terms of redemption. The Fund may not
issue any class of stock senior to the shares of Issued Preferred.

         Under the 1940 Act, the Fund is permitted to have outstanding more
than one series of Preferred Stock so long as no single series has priority
over another series as to the distribution of assets of the Fund or the
payment of dividends. Holders of the Fund's Issued Preferred do not have
preemptive rights to purchase any shares of Preferred Stock that might be
issued.

         Distributions. Holders of shares of 7.80% Preferred and 7.30%
Preferred are entitled to receive, when, as and if declared by the Board of
Directors of the Fund out of funds legally available therefor, cumulative cash
dividends at the annual rate of 7.80% and 7.30%, respectively, per share of
their liquidation preference of $25.00 per share, payable quarterly. The
Issued Preferred is listed and traded on the NYSE. If the Fund fails to pay
dividends for two years or more, holders of the Issued Preferred will acquire
certain additional voting rights. See "Voting Rights." Such rights will be
their exclusive remedy for any such failure.

         Redemption. Prior to August 15, 2003 (with respect to the 7.80%
Preferred) and June 22, 2003 (with respect to the 7.30% Preferred), the Fund
may not redeem the Issued Preferred unless failure to do so would cause the
Fund to fail to (i) satisfy the asset coverage test, (ii) maintain the
discounted asset coverage required by Moody's or (iii) continue to qualify for
tax treatment as a regulated investment company.

         Shares of Issued Preferred will generally be redeemable at the option
of the Fund at a price equal to their liquidation preference of $25.00 per
share plus an amount equal to all unpaid dividends accumulated to and
including the date fixed for such payment (whether or not earned or declared
by the Fund, but excluding interest thereon) (the "Liquidation Preference").
Shares of the Issued Preferred are subject to mandatory redemption at a price
equal to their liquidation preference plus accumulated but unpaid dividends to
the date of redemption upon the occurrence of certain specified events, such
as the failure of the Fund to maintain the asset coverage for the Issued
Preferred specified by Moody's in connection with their issuance of ratings on
the Issued Preferred.

         Liquidation Rights. Upon a liquidation, dissolution or winding up of
the affairs of the Fund (whether voluntary or involuntary), holders of then
outstanding shares of Preferred Stock will be entitled to receive out of the
assets of the Fund available for distribution to stockholders, after
satisfying claims of creditors but before any distribution or payment of
assets is made to holders of the Common Stock, a Liquidation Preference, and
such holders will be entitled to no further participation in any distribution
payment in connection with any such liquidation, dissolution or winding up.
If, upon any liquidation, dissolution or winding up of the affairs of the
Fund, whether voluntary or involuntary, the assets of the Fund available for
distribution among the holders of all outstanding shares of Issued Preferred
and any other outstanding class or series of Preferred Stock ranking on a
parity with the Issued Preferred as to payment upon liquidation, will be
insufficient to permit the payment in full to such holders of Issued Preferred
of the Liquidation Preference and the amounts due upon liquidation with
respect to such other Preferred Stock, then such available assets will be
distributed among the holders of Issued Preferred and such other Preferred
Stock ratably in proportion to the respective preferential amounts to which
they are entitled. Unless and until the Liquidation Preference has been paid
in full to the holders of Issued Preferred, no dividends or distributions will
be made to holders of the Common Stock or any other stock of the Fund ranking
junior to the Issued Preferred as to liquidation.

         Upon any liquidation, the holders of the Common Stock, after required
payments to the holders of Preferred Stock, will be entitled to participate
equally and ratably in the remaining assets of the Fund.


                                      30


<PAGE>


         Rating Agency Guidelines. The Fund intends that, so long as shares of
Issued Preferred are outstanding, the composition of its portfolio will
reflect guidelines established by Moody's in connection with the Fund's
receipt of a rating for the Issued Preferred of Aaa from Moody's. Moody's
issues ratings for various securities reflecting the perceived
creditworthiness of those securities. The guidelines are designed to ensure
that assets underlying outstanding debt or preferred stock will be
sufficiently varied and will be of sufficient quality and amount to justify
investment grade ratings. The guidelines do not have the force of law but have
been adopted by the Fund in order to receive the above-described ratings for
shares of Issued Preferred, which ratings are generally relied upon by
investors in purchasing such securities. The guidelines provide a set of tests
for portfolio composition and asset coverage that supplement (and in some
cases are more restrictive than) the applicable requirements under the 1940
Act.

         The Fund intends to maintain a portfolio value at least equal to the
discounted value of the assets in its portfolio which satisfies minimum values
set by Moody's. Upon any failure to do this, the Fund will seek to alter the
composition of its portfolio to satisfy Moody's. To the extent it is not able
to do so in a timely basis, the Fund may redeem shares of Issued Preferred in
accordance with their terms.

         A securities rating is not a recommendation to buy, sell or hold
securities and is subject to revision or withdrawal at any time by the
assigning rating agency. Each rating should be evaluated independently of any
other rating.

         Voting Rights. Except as otherwise stated in this Prospectus and as
otherwise required by applicable law, holders of shares of Issued Preferred
and any other Preferred Stock will be entitled to one vote per share on each
matter submitted to a vote of stockholders and will vote together with holders
of shares of Common Stock as a single class. Also, except as otherwise
required by the 1940 Act, (i) holders of outstanding shares of each series of
Issued Preferred will be entitled as a series, to the exclusion of the holders
of all other securities, including the other series of Issued Preferred, other
Preferred Stock, Common Stock and other classes of capital stock of the Fund,
to vote on matters affecting such series of the Issued Preferred that do not
materially adversely affect any of the contract rights of holders of such
other securities, including the other series of Issued Preferred, other
Preferred Stock, Common Stock and other classes of capital stock, as expressly
set forth in the Fund's Charter, and (ii) holders of outstanding shares of
each series of Issued Preferred will not be entitled to vote on matters
affecting the other series of Issued Preferred or any other Preferred Stock
that do not materially adversely affect any of the contract rights of holders
of such series of Issued Preferred, as expressly set forth in the Charter. The
foregoing voting provisions will not apply to any shares of Issued Preferred
if, at or prior to the time when the act with respect to which such vote
otherwise would be required will be effected, such shares will have been (i)
redeemed or (ii) called for redemption as required by the Charter.

         In connection with the election of the Fund's Directors, holders of
shares of Issued Preferred and any other Preferred Stock, voting as a separate
class, will be entitled at all times to elect two of the Fund's Directors, and
the remaining Directors will be elected by holders of shares of Common Stock
and holders of shares of Issued Preferred and any other Preferred Stock,
voting together as single class. In addition, if at any time dividends on
outstanding shares of Issued Preferred and/or any other Preferred Stock are
unpaid in an amount equal to at least two full years' dividends thereon or if
at any time holders of any shares of other Preferred Stock are entitled,
together with the holders of shares of Issued Preferred, to elect a majority
of the Directors of the Fund under the 1940 Act, then the number of Directors
constituting the Board of Directors automatically will be increased by the
smallest number that, when added to the two Directors elected exclusively by
the holders of shares of Issued Preferred and any other Preferred Stock as
described above, would constitute a majority of the Board of Directors as so
increased by such smallest number. Such additional Directors will be elected
at a special meeting of stockholders which will be called and held as soon as
practicable, and at all subsequent meetings at which Directors are to be
elected, the holders of shares of Issued Preferred and any other Preferred
Stock, voting as a separate class, will be entitled to elect the smallest
number of additional Directors that, together with the two Directors which
such holders in any event will be entitled to elect, constitutes a majority of
the total number of Directors of the Fund as so increased. The terms of office
of the persons who are Directors at the time of that election will continue.
If the Fund thereafter pays, or declares and sets apart for payment in full,
all dividends payable on all outstanding shares of Issued Preferred and any
other Preferred Stock for all past dividend periods, the additional voting
rights of the holders of shares of Issued Preferred and any other Preferred
Stock as described above will cease, and the terms of office of all of the
additional Directors elected by the holders of shares of Issued Preferred and
any other Preferred Stock (but not of the Directors


                                      31


<PAGE>


with respect to whose election the holders of shares of Common Stock were
entitled to vote or the two Directors the holders of shares of Issued
Preferred and any other Preferred Stock have the right to elect in any event)
will terminate automatically.

         So long as shares of Issued Preferred are outstanding, the Fund may
not, without the affirmative vote of the holders of two-thirds of the shares
of Issued Preferred outstanding at the time, voting separately as one class,
amend, alter or repeal the provisions of the Charter, whether by merger,
consolidation or otherwise, so as to materially adversely affect any of the
contract rights expressly set forth in the Charter of holders of shares of the
Issued Preferred. The Board of Directors, however, without stockholder
approval, may amend, alter or repeal the rating agency guidelines applicable
to the Issued Preferred in the event the Fund receives confirmation from
Moody's that any such amendment, alteration or repeal would not impair the
rating then assigned to the Issued Preferred. Furthermore, under certain
circumstances, without the vote of stockholders, the Board of Directors may
determine that it is not in the best interests of the Fund to continue to
comply with the rating agency guidelines. See "Rating Agency Guidelines"
above. The affirmative vote of a majority of the votes entitled to be cast by
holders of outstanding shares of the Issued Preferred and any other Preferred
Stock, voting as a separate class, will be required to approve any plan of
reorganization adversely affecting such shares or any action requiring a vote
of security holders under Section 13(a) of the 1940 Act, including, among
other things, changes in the Fund's primary investment goal or changes in the
investment restrictions described as fundamental policies under "Investment
Restrictions" in the Statement of Additional Information. The class vote of
holders of shares of the Issued Preferred and any other Preferred Stock
described above in each case will be in addition to a separate vote of the
requisite percentage of shares of Common Stock and Issued Preferred and any
other Preferred Stock, voting together as a single class, necessary to
authorize the action in question.

         Issuance of Additional Issued Preferred. So long as any shares of
Issued Preferred are outstanding, the Fund may issue and sell up to 7,600,000
additional shares of 7.80% Preferred, 6,000,000 additional shares of 7.30%
Preferred and/or shares of one or more other series of Preferred Stock,
provided that the provisions of the Charter relating to such issuance are
satisfied.

         Repurchase of Issued Preferred. The Fund is a closed-end investment
company and, as such, holders of Issued Preferred do not, and will not, have
the right to redeem their shares of the Fund. The Fund may, however,
repurchase shares of the Issued Preferred and/or any other Preferred Stock
when it is deemed advisable by the Board of Directors in compliance with the
requirements of the 1940 Act and the rules and regulations thereunder.

Certain Corporate Governance Provisions

         The six Fund Directors who are elected by the holders of Common Stock
and Preferred Stock voting together are divided into three classes, each
having a staggered term of three years. The two Directors elected only by the
holders of Preferred Stock stand for election at each annual meeting of
stockholders. Accordingly, it likely would take three years to change a
majority of the Board of Directors. Vacancies on the Board of Directors for
one or more of the six classified positions may be filled by the remaining
Directors for the balance of the term of the class.

         The Fund's By-laws permit stockholders to call a special meeting of
stockholders only if certain procedural requirements are met and the request
is made by stockholders entitled to cast at least a majority of the votes
entitled to be cast at such a meeting. The By-laws also require that advance
notice be given to the Fund in the event a stockholder desires to nominate a
person for election to the Board of Directors or to transact any other
business at an annual meeting of stockholders. With respect to an annual
meeting of stockholders, notice of any such nomination or business must be
delivered to or received at the principal executive offices of the Fund not
less than 90 calendar days nor more than 120 calendar days prior to the
anniversary of the date of mailing of the notice for the preceding year's
annual meeting (subject to certain exceptions). Any advance notice by a
stockholder must be accompanied by certain information as provided in the
By-laws.

         Certain provisions of the 1940 Act and the Charter require a separate
additional vote of the holders of Preferred Stock to approve certain
transactions, including certain mergers, asset dispositions and conversion of
the Fund to open-end status.


                                      32


<PAGE>


         These provisions may have the effect of maintaining the continuity of
management and thus may make it more difficult for the Fund's stockholders to
change the majority of Directors.

                           REPURCHASES OF SECURITIES

         The Fund is a closed-end diversified management investment company
and, as such, its stockholders do not, and will not, have the right to redeem
their shares of the Fund. Although the Fund will not offer to repurchase its
shares of Common Stock and/or Issued Preferred on a periodic basis, it may
repurchase its shares of Common Stock and/or Issued Preferred on such
occasions when it is deemed advisable by the Fund. Under the 1940 Act, the
Fund may repurchase its securities (i) on a securities exchange or such other
open market designated by the SEC (provided that the Fund has, in the case of
purchases of its stock, informed holders of the class of stock involved within
the preceding six months of its intention to repurchase such stock), (ii) by a
tender offer open to all holders of the class of securities involved or (iii)
as otherwise permitted by the SEC. Where a repurchase of shares of the Fund is
to be made that is not to be effected on a securities exchange or an open
market or by the making of a tender offer, the 1940 Act provides that certain
conditions must be met regarding, among other things, distribution of net
income, identity of the seller, price paid, brokerage commissions, prior
notice to holders of the class of its securities involved of an intention to
purchase such securities and the purchase not being made in a manner or on a
basis which discriminates unfairly against the other holders of such class.
The Fund may incur debt, in an amount not exceeding 10% of its total assets,
to finance share repurchase transactions. Any related interest charges will be
paid by the Fund and borne pro rata by the stockholders indirectly through
their interest in the Fund. See "Investment Goal and Policies -- Risks to
Common Stockholders of Borrowing Money and Issuing Senior Securities."

         If the Fund repurchases its shares of Common Stock for a price below
their NAV, the NAV of those shares of Common Stock that remain outstanding
would be enhanced, but this does not necessarily mean that the market price of
those outstanding shares would be affected, either positively or negatively.
Repurchases of shares of Common Stock by the Fund would also decrease its
total assets and accordingly may increase its expenses as a percentage of
average net assets. Further, interest on any borrowings to finance any such
share repurchase transactions would reduce the Fund's net income.

         The Board of Directors of the Fund has authorized the Fund to
repurchase up to 300,000 shares of its Common Stock and up to 10% of each
series of Issued Preferred during the year ending December 31, 2003. 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 NAV, and Preferred Stock
repurchases would be effected at a price per share that is less than the
share's liquidation preference.

                DIVIDENDS, DISTRIBUTIONS AND REINVESTMENT PLAN

         The Fund currently has a policy of paying quarterly distributions to
its Common Stockholders. 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 the
Code. If, for any quarterly distribution, the Fund's net investment income and
net realized capital gains are less than the amount of the distribution, the
difference will constitute a return of capital. The Fund's final distribution
for each calendar year will include any remaining net investment income and
net realized capital gains deemed, for Federal income tax purposes,
undistributed during the year, and may, but need not, include all net
long-term capital gains realized during the year. If, for any calendar year,
the total distributions exceed net investment income and net realized capital
gains, the excess will generally be treated as a tax-free return of capital
(up to the amount of the stockholder's tax basis in his or her shares). The
amount treated as a tax-free return of capital will reduce a stockholder's
adjusted basis in his or her shares, thereby increasing his or her potential
gain or reducing his or her potential loss on the sale of his or her shares.
Pursuant to the requirements of the 1940 Act and other applicable laws, a
notice will accompany each quarterly distribution with respect to the
estimated source of the distribution made. Such distribution policy may, under
certain circumstances, have certain adverse consequences to the Fund and its
stockholders. In addition, in order to make such distributions, the Fund may
have to sell a portion of its investment portfolio at a time when independent
investment judgment might not dictate such action. The Fund's quarterly
distribution policy may be changed by the Board of Directors without
stockholder approval.


                                      33


<PAGE>


         The Fund has adopted a Distribution Reinvestment and Cash Purchase
Plan (the "Plan"), through which all such net investment income dividends and
capital gains distributions are paid to stockholders in the form of additional
shares of the Fund's Common Stock (plus cash in lieu of any fractional shares
which otherwise would have been issuable), unless a stockholder elects to
receive cash as provided below. In this way, a stockholder can maintain an
undiluted investment in the Fund and still allow the Fund to pay out the
required distributable income.

         Distributions to Issued Preferred stockholders are recorded on an
accrual basis and paid quarterly. See "Description of Capital Stock--Preferred
Stock--Distributions."

         No action is required on the part of a registered stockholder to
receive a distribution in shares of Common Stock of the Fund. A registered
stockholder may elect to receive an entire distribution in cash by notifying
Equiserve, the Plan Agent and the Fund's transfer agent and registrar, in
writing so that such notice is received by Equiserve no later than 10 days
prior to the record date for distributions to stockholders. Equiserve will set
up an account for shares acquired through the Plan for each stockholder who
has not elected to receive distributions in cash ("Participant") and hold such
shares in non-certificated form. Upon request by a Participant, received in
writing not less than 10 days prior to the record date, Equiserve will,
instead of crediting shares to the Participant's account, issue a certificate
registered in the Participant's name for the number of whole shares of the
Fund's Common Stock and a check for any fractional share.

         Those stockholders whose shares are held by a broker or other
financial intermediary may receive distributions in cash by notifying their
broker or other financial intermediary.

         The Fund uses only newly-issued shares to implement the Plan, whether
its shares are trading at a premium or at a discount to NAV. The number of
shares to be issued to a stockholder is determined by dividing the total
dollar amount of the distribution payable to such stockholder by the market
price per share of the Fund's Common Stock at the close of regular trading on
the NYSE on the valuation date for such distribution. Market price per share
on that date will be the closing price for such shares on NYSE or, if no sale
is reported for such day, at the average of their electronically-reported bid
and asked prices. The number of shares of the Fund's Common Stock to be
outstanding after giving effect to payment of the distribution cannot be
established until the value per share at which additional shares will be
issued has been determined and elections of the Fund's stockholders have been
tabulated.

         There is no charge to stockholders for receiving their distributions
in the form of additional shares of the Fund's Common Stock. Equiserve's fees
for handling distributions in stock are paid by the Fund. There are no
brokerage charges with respect to shares issued directly by the Fund as a
result of distributions payable in stock. If a Participant elects by written
notice to Equiserve to have Equiserve sell part or all of the shares held by
Equiserve in the Participant's account and remit the proceeds to the
Participant, Equiserve is authorized to deduct a $2.50 transaction fee plus
brokerage commissions from the proceeds.

         Stockholders who receive distributions in the form of stock are
subject to the same Federal, state and local tax consequences as are
stockholders who elect to receive their distributions in cash. A stockholder's
basis for determining gain or loss upon the sale of stock received in a
distribution from the Fund will be equal to the total dollar amount of the
distribution payable to the stockholder.

                                   TAXATION

         The Fund has qualified and intends to continue to qualify as a
regulated investment company under the Code. The Fund currently intends to
distribute all or substantially all its investment company taxable income (all
taxable net investment income and net short-term capital gains) and its net
capital gain each year, thereby avoiding the imposition on the Fund of Federal
income and excise taxes on such distributed income and gain.

         Dividends paid by the Fund from its ordinary income or from an excess
of net short-term capital gains over net long-term capital losses (together
"ordinary income dividends") are taxable to stockholders as ordinary income.
Distributions made from an excess of net long-term gains over net short-term
losses (including gains or losses from certain transactions in warrants and
options) ("capital gain dividends") are taxable to stockholders as long-term
capital gains, regardless of the length of time the stockholder has owned Fund
shares. After the end of each taxable


                                      34


<PAGE>


year, the Fund will notify stockholders of the Federal income tax status of
any distributions or deemed distributions made by the Fund during such year.

         Ordinary income dividends paid to stockholders who are nonresident
aliens or foreign entities will be subject to a 30% United States withholding
tax under existing provisions of the Code applicable to foreign individuals
and entities unless a reduced rate of withholding or a withholding exemption
is provided under applicable treaty law. Nonresident stockholders are urged to
consult their own tax advisors concerning the applicability of the United
States withholding tax.

         Under certain Code provisions, some stockholders may be subject to a
backup withholding tax on certain ordinary income dividends and on capital
gain dividends ("backup withholding"). Generally, stockholders subject to
backup withholding are those for whom no certified taxpayer identification
number is on file with the Fund or who, to the Fund's knowledge , have
furnished an incorrect number.

         This section summarizes some of the consequences under current
Federal income tax law of an investment in the Fund. It is not a substitute
for personal tax advice. Fund stockholders are urged to consult their own tax
advisors to determine the Federal income tax as well as state and local tax
consequences to them of the ownership of stock of the Fund. See "Taxation" in
the Statement of Additional Information.

                    CUSTODIAN, TRANSFER AGENT AND REGISTRAR

         State Street Bank and Trust Company, Two Heritage Drive, North
Quincy, Massachusetts 02171, acts as custodian of the cash and other assets of
the Fund. Equiserve Trust Company, N.A., 225 Franklin Street, Boston,
Massachusetts 02110, acts as transfer agent and registrar for the Fund's
shares and as Plan Agent under its Plan. Stockholder inquiries should be
directed to P.O. Box 8200, Boston, Massachusetts 02266-8200 (Tel. No. (800)
426-5523).

                                    EXPERTS

         Tait, Weller & Baker, independent auditors, are the independent
auditors of the Fund. The audited financial statements of the Fund and certain
of the information appearing under the caption "Financial Highlights" included
in this Prospectus have been audited by Tait, Weller & Baker and Ernst & Young
LLP for the periods indicated in their reports with respect thereto, and are
included in reliance upon such reports and upon the authority of such firms as
experts in accounting and auditing. Tait, Weller & Baker has an office at 1818
Market Street, Suite 2400, Philadelphia, Pennsylvania 19103, and also performs
tax and other professional services for the Fund. Ernst & Young LLP has an
office at 5 Times Square, New York, New York 10036.

                            ADDITIONAL INFORMATION


         A Statement of Additional Information dated January 28, 2003 has been
filed with the SEC and is incorporated by reference in this Prospectus. The
Table of Contents of the Statement of Additional Information is as follows:

                                                             Page
                                                             ----
Risk Factors and Special Considerations.................     B-2
Investment Restrictions.................................     B-5
Principal Stockholders..................................     B-6
Directors and Officers..................................     B-7
Code of Ethics and Related Matters......................     B-12
Investment Advisory and Other Services..................     B-13
Taxation................................................     B-15
Brokerage Allocation and Other Practices................     B-16
Net Asset Value.........................................     B-17
Financial Statements....................................     B-18



                                      35
<PAGE>


<TABLE>
<CAPTION>
======================================================        ========================================================



<S>                                                                          <C>
     You   should   rely  only  on  the   information                           4,301,737 Shares of
contained   in  this   Prospectus   and  the  related                          Common Stock Issuable
Statement  of  Additional  Information.  We have  not                            Upon Exercise of
authorized  any  other  person  to  provide  you with                         Non-Transferable Rights
different  information.  If anyone  provides you with                          to Subscribe for such
different  or  inconsistent  information,  you should                         Shares of Common Stock
not rely on it.  We are not  making  an offer to sell
these securities in any jurisdiction  where the offer
or sale is not  permitted.  You  should  assume  that
the information  appearing in this Prospectus and the
related   Statement  of  Additional   Information  is
accurate  only as of the date on the front  covers of
this   Prospectus   and  the  related   Statement  of
Additional  Information.   Our  business,   financial
condition,  results of  operations  and prospects may
have changed since that date.
                --------------------
                                                                              ROYCE VALUE TRUST, INC.
                  TABLE OF CONTENTS
                                                 Page
Prospectus Summary...........................    3
Fund Expenses................................    7
Financial Highlights.........................    8
Investment Performance.......................   10
The Offer....................................   11
Use of Proceeds..............................   17                                _______________
Investment Goal and Policies.................   17
Investment Advisory and Other Services.......   21                                  PROSPECTUS
Description of Capital Stock.................   23                                _______________
Repurchase of Securities.....................   32
Dividends, Distributions and
 Reinvestment Plan...........................   32
Taxation.....................................   33
Custodian, Transfer Agent and Registrar......   34                               January 28, 2003
Experts......................................   34
Additional Information.......................   34


======================================================        ========================================================
</TABLE>


<PAGE>



                            ROYCE VALUE TRUST, INC.

                      STATEMENT OF ADDITIONAL INFORMATION


         ROYCE VALUE TRUST, INC. (the "Fund") is a closed-end diversified
management investment company, whose shares of Common Stock are listed on the
New York Stock Exchange under the symbol "RVT." Its primary investment
objective is long-term capital appreciation, with current income as a
secondary objective.

         This Statement of Additional Information is not a prospectus, but
should be read in conjunction with the Fund's Prospectus dated January 28,
2003. Please retain this document for future reference. To obtain a copy of
the Prospectus or the Fund's Annual Report to Stockholders for the year ended
December 31, 2001, Semi-Annual Report to Stockholders for the six months ended
June 30, 2002 or Annual Report to Stockholders for the year ended December 31,
2002 (which is expected to be mailed to stockholders and available on the
Fund's website (www.roycefunds.com) on or around February 28, 2003), please
call Investor Information at 1-800-221-4268.


                               TABLE OF CONTENTS

                                                                 Page
                                                                 ----
Risk Factors and Special Considerations.....................     B-2
Investment Restrictions.....................................     B-5
Principal Stockholders......................................     B-6
Directors and Officers......................................     B-7
Code of Ethics and Related Matters..........................     B-12
Investment Advisory and Other Services......................     B-13
Taxation....................................................     B-15
Brokerage Allocation and Other Practices....................     B-16
Net Asset Value.............................................     B-17
Financial Statements........................................     B-18



                               January 28, 2003



<PAGE>


                    RISK FACTORS AND SPECIAL CONSIDERATIONS

Fund's Rights as Stockholder

         The Fund may not invest in a company for the purpose of exercising
control of management. However, the Fund may exercise its rights as a
stockholder and communicate its views on important matters of policy to
management, the board of directors and/or stockholders if Royce & Associates,
LLC (which term as used in this Statement of Additional Information includes
its corporate predecessor) ("Royce" or the "Investment Adviser") or the Board
of Directors determines that such matters could have a significant effect on
the value of the Fund's investment in the company. The activities that the
Fund may engage in, either individually or in conjunction with others, may
include, among others, supporting or opposing proposed changes in a company's
corporate structure or business activities; seeking changes in a company's
board of directors or management; seeking changes in a company's direction or
policies; seeking the sale or reorganization of a company or a portion of its
assets; or supporting or opposing third party takeover attempts. This area of
corporate activity is increasingly prone to litigation, and it is possible
that the Fund could be involved in lawsuits related to such activities. Royce
will monitor such activities with a view to mitigating, to the extent
possible, the risk of litigation against the Fund and the risk of actual
liability if the Fund is involved in litigation. However, no assurance can be
given that litigation against the Fund will not be undertaken or liabilities
incurred.

         The Fund may, at its expense or in conjunction with others, pursue
litigation or otherwise exercise its rights as a security holder to seek to
protect the interests of security holders if Royce and the Board of Directors
determine this to be in the best interests of the Fund's stockholders.

High-Yield and Investment Grade Debt Securities

         The Fund may invest up to 5% of its net assets in high-yield,
non-convertible debt securities. They may be rated from Ba to Ca by Moody's or
from BB to D by Standard & Poor's ("S&P") or may be unrated. These securities
have poor protection with respect to the payment of interest and repayment of
principal and may be in default as to the payment of principal or interest.
These securities are often speculative and involve greater risk of loss or
price changes due to changes in the issuer's capacity to pay. The market
prices of high-yield debt securities may fluctuate more than those of
higher-rated debt securities and may decline significantly in periods of
general economic difficulty, which may follow periods of rising interest
rates.

         The market for high-yield debt securities may be thinner and less
active than that for higher-rated debt securities, which can adversely affect
the prices at which the former are sold. If market quotations cease to be
readily available for a high-yield debt security in which the Fund has
invested, the security will then be valued in accordance with procedures
established by the Board of Directors. Judgment may play a greater role in
valuing high-yield debt securities than is the case for securities for which
more external sources for quotations and last sale information are available.
Adverse publicity and changing investor perceptions may affect the Fund's
ability to dispose of high-yield debt securities.

         Since the risk of default is higher for high-yield debt securities,
Royce's research and credit analysis may play an important part in managing
securities of this type for the Fund. In considering such investments for the
Fund, Royce will attempt to identify those issuers of high-yield debt
securities whose financial condition is adequate to meet future obligations,
has improved or is expected to improve in the future. Royce's analysis may
focus on relative values based on such factors as interest or dividend
coverage, asset coverage, earnings prospects and the experience and managerial
strength of the issuer.

         The Fund may also invest in non-convertible debt securities in the
lowest rated category of investment grade debt. Such securities may have
speculative characteristics, and adverse changes in economic conditions or
other circumstances are more likely to lead to a weakened capacity to make
principal and interest payments than is the case with higher grade securities.

         The Fund may also invest in higher rated investment grade
non-convertible debt securities. Such securities include those rated Aaa by
Moody's or AAA by S&P (which are considered to be of the highest credit
quality and where the capacity to pay interest and repay principal is
extremely strong), those rated Aa by Moody's or AA by


                                     B-2


<PAGE>


S&P (where the capacity to repay principal is considered very strong, although
elements may exist that make risks appear somewhat larger than expected with
securities rated Aaa or AAA), securities rated A by Moody's or A by S&P (which
are considered to possess adequate factors giving security to principal and
interest) and securities rated Baa by Moody's or BBB by S&P (which are
considered to have an adequate capacity to pay interest and repay principal,
but may have some speculative characteristics).

Foreign Investments


         The Fund may invest up to 10% of its total assets in the securities
of foreign issuers. (For purposes of this restriction, securities issued by a
foreign domiciled company that are registered with the SEC under Section 12(b)
or (g) of the Securities Exchange Act of 1934 are not treated as securities of
foreign issuers.) Foreign investments involve certain risks which typically
are not present in securities of domestic issuers. There may be less
information publicly available about a foreign company than a domestic
company; foreign companies may not be subject to accounting, auditing and
reporting standards and requirements comparable to those applicable to
domestic companies; and foreign markets, brokers and issuers are generally
subject to less extensive government regulation than their domestic
counterparts. Markets for foreign securities may be less liquid and may be
subject to greater price volatility than those for domestic securities.
Foreign brokerage commissions and custodial fees are generally higher than
those in the United States. Foreign markets also have different clearance and
settlement procedures, and in certain markets there have been times when
settlements have been unable to keep pace with the volume of securities
transactions, thereby making it difficult to conduct such transactions. Delays
or problems with settlements might affect the liquidity of the Fund's
portfolio. Foreign investments may also be subject to local economic and
political risks, political, economic and social instability, military action
or unrest or adverse diplomatic developments, and possible nationalization of
issuers or expropriation of their assets, which might adversely affect the
Fund's ability to realize on its investment in such securities. Royce may not
be able to anticipate these potential events or counter their effects.
Furthermore, some foreign securities are subject to brokerage taxes levied by
foreign governments, which have the effect of increasing the cost of such
investment and reducing the realized gain or increasing the realized loss on
such securities at the time of sale. Foreign markets may also give less
protection to investors such as the Fund.


         Although changes in foreign currency rates may adversely affect the
Fund's foreign investments, Royce does not expect to purchase or sell foreign
currencies for the Fund to hedge against declines in the U.S. dollar or to
lock in the value of any foreign securities it purchases for the Fund.
Consequently, the risks associated with such investments may be greater than
if the Fund were to engage in foreign currency transactions for hedging
purposes.

         Exchange control regulations in such foreign markets may also
adversely affect the Fund's foreign investments, and the Fund's ability to
make certain distributions necessary to maintain its eligibility as a
regulated investment company and avoid the imposition of income and excise
taxes may, to that extent, be limited.

         The considerations noted above are generally intensified for
investments in developing countries. Developing countries may have relatively
unstable governments, economies based on only a few industries and securities
markets that trade a small number of securities.

         The Fund may purchase the securities of foreign companies in the form
of American Depositary Receipts (ADRs). ADRs are certificates held in trust by
a bank or similar financial institution evidencing ownership of securities of
a foreign-based issuer. Designed for use in U.S. securities markets, ADRs are
alternatives to the purchase of the underlying foreign securities in their
national markets and currencies.

         Depositories may establish either unsponsored or sponsored ADR
facilities. While ADRs issued under these two types of facilities are in some
respects similar, there are distinctions between them relating to the rights
and obligations of ADR holders and the practices of market participants. A
depository may establish an unsponsored facility without participation by (or
even necessarily the acquiescence of) the issuer of the deposited securities,
although typically the depository requests a letter of non-objection from such
issuer prior to the establishment of the facility. Holders of unsponsored ADRs
generally bear all the costs of such facilities. The depository usually
charges fees upon the deposit and withdrawal of the deposited securities, the
conversion of dividends into U.S. dollars, the disposition of non-cash
distributions and the performance of other services. The depository of an
unsponsored facility frequently is under no obligation to distribute
stockholder communications


                                     B-3


<PAGE>


received from the issuer of the deposited securities or to pass through voting
rights to ADR holders in respect of the deposited securities. Depositories
create sponsored ADR facilities in generally the same manner as unsponsored
facilities, except that the issuer of the deposited securities enters into a
deposit agreement with the depository. The deposit agreement sets out the
rights and responsibilities of the issuer, the depository and the ADR holders.
With sponsored facilities, the issuer of the deposited securities generally
will bear some of the costs relating to the facility (such as deposit and
withdrawal fees). Under the terms of most sponsored arrangements, depositories
agree to distribute notices of stockholder meetings and voting instructions
and to provide stockholder communications and other information to the ADR
holders at the request of the issuer of the deposited securities.

Repurchase Agreements

         In a repurchase agreement, the Fund in effect makes a loan by
purchasing a security and simultaneously committing to resell that security to
the seller at an agreed upon price on an agreed upon date within a number of
days (usually not more than seven) from the date of purchase. The resale price
reflects the purchase price plus an agreed upon incremental amount which is
unrelated to the coupon rate or maturity of the purchased security. A
repurchase agreement requires or obligates the seller to pay the agreed upon
price, which obligation is in effect secured by the value (at least equal to
the amount of the agreed upon resale price and marked to market daily) of the
underlying security.

         The Fund may engage in repurchase agreements, provided that such
agreements are collateralized by cash or securities issued by the U.S.
Government or its agencies having a value at least equal to the amount loaned.
Repurchase agreements could involve certain risks if the custodian defaults or
becomes insolvent, including possible delays or restrictions upon the Fund's
ability to dispose of collateral. While it does not presently appear possible
to eliminate all risks from these transactions (particularly the possibility
of a decline in the market value of the underlying securities, as well as
delays and costs to the Fund in connection with bankruptcy proceedings), it is
the policy of the Fund to enter into repurchase agreements only with its
custodian, State Street Bank and Trust Company, and having a term of seven
days or less.

Warrants, Rights and Options

         The Fund may invest up to 5% of its total assets in warrants, rights
and options. A warrant, right or call option entitles the holder to purchase a
given security within a specified period for a specified price and does not
represent an ownership interest. A put option gives the holder the right to
sell a particular security at a specified price during the term of the option.
These securities have no voting rights, pay no dividends and have no
liquidation rights. In addition, their market prices do not necessarily move
parallel to the market prices of the underlying securities.

         The sale of warrants, rights or options held for more than one year
generally results in a long-term capital gain or loss to the Fund, and the
sale of warrants, rights or options held for one year or less generally
results in a short term capital gain or loss. The holding period for
securities acquired upon exercise of a warrant, right or call option, however,
generally begins on the day after the date of exercise, regardless of how long
the warrant, right or option was held. The securities underlying warrants,
rights and options could include shares of common stock of a single company or
securities market indices representing shares of the common stocks of a group
of companies, such as the S&P SmallCap Stock Price 600 Index ("S&P 600
Index").

         Investing in warrants, rights and call options on a given security
allows the Fund to hold an interest in that security without having to commit
assets equal to the market price of the underlying security and, in the case
of securities market indices, to participate in a market without having to
purchase all of the securities comprising the index. Put options, whether on
shares of common stock of a single company or on a securities market index,
would permit the Fund to protect the value of a portfolio security against a
decline in its market price and/or to benefit from an anticipated decline in
the market price of a given security or of a market. Thus, investing in
warrants, rights and options permits the Fund to incur additional risk and/or
to hedge against risk.

Risks to Common Stockholders of Borrowing Money and Issuing Senior Securities


                                     B-4


<PAGE>


         Asset Coverage Test. Section 18(a)(1) of the Investment Company Act
of 1940, as amended (the "1940 Act") permits a registered closed-end company
such as the Fund to issue and sell a class of senior securities (such as the
Issued Preferred) only if, immediately after such issuance and sale, the net
asset value ("NAV") of the Fund's portfolio is at least 200% of the
liquidation preference of the Issued Preferred. Section 18(g) of the 1940 Act
defines a senior security to mean any stock of a class having priority over
any other class as to distribution of assets or payment of dividends. Under
Section 18(h) of the 1940 Act, asset coverage of a class of senior securities
of an issuer which is a stock means the ratio which the value of the issuer's
total assets, less all of its liabilities and indebtedness not represented by
senior securities, bears to the aggregate amount of the issuer's senior
securities representing indebtedness plus the aggregate of the involuntary
liquidation preference of such class of senior security which is a stock.
Section 18(a)(1) of the 1940 Act also prevents the Fund from declaring any
cash or other non-stock dividends or distributions on its Common Stock or
purchasing any shares of its capital stock if, immediately thereafter, the NAV
of the Fund's portfolio (determined after deducting the amount of such
dividend or distribution) is at least 200% of the liquidation preference of
its outstanding Preferred Stock.

         If the asset coverage for outstanding Preferred Stock as of the last
day of March, June, September or December in any calendar year should fall
below 200%, the Fund would redeem such Preferred Stock at a price equal to its
liquidation preference plus accumulated but unpaid dividends to the date of
redemption and/or any other senior securities of the Fund then outstanding to
the extent necessary to restore such asset coverage to at least 200%. See
"Description of Capital Stock - Preferred Stock - Redemption" in the
Prospectus.

         The Articles Supplementary governing the Issued Preferred (the
"Articles Supplementary") contains more restrictive provisions concerning the
Fund's obligation to maintain asset coverage for the Issued Preferred than
those required by Section 18(a)(1) of the 1940 Act. See "Description of
Capital Stock-Preferred Stock-Rating Agency Guidelines" in the Prospectus.


                               ----------------


         Royce believes that the Fund is suitable for investment only by
persons who can invest without concern for current income, and that the Fund
is suitable only for those investors who are in a financial position to assume
above-average risks in search for long-term capital appreciation.

                            INVESTMENT RESTRICTIONS

         The policies set forth below are fundamental policies of the Fund and
may not be changed without the affirmative vote of the holders of a majority
of the Fund's outstanding voting securities, as set forth under "Investment
Goal and Policies-Changes in Investment Objectives and Policies" in the
Prospectus. The Fund may not:

          1.      Issue any class of senior security, or sell any such
                  security of which it is the issuer, except as permitted by
                  the 1940 Act.

          2.      Purchase on margin or write call options on its portfolio
                  securities.

          3.      Sell securities short.

          4.      Underwrite the securities of other issuers, or invest in
                  restricted securities unless such securities are redeemable
                  shares issued by money market funds registered under the
                  1940 Act.

          5.      Invest more than 25% of its total assets in any one
                  industry.

          6.      Purchase or sell real estate or real estate mortgage loans,
                  or invest in the securities of real estate companies unless
                  such securities are publicly-traded.


                                     B-5


<PAGE>


          7.      Purchase or sell commodities or commodity contracts.

          8.      Make loans, except for (a) purchases of portions of issues
                  of publicly-distributed bonds, debentures and other
                  securities, whether or not such purchases are made on the
                  original issuance of such securities, (b) repurchase
                  agreements with any bank that is the custodian of its assets
                  covering U.S. Treasury and agency obligations and having a
                  term of not more than one week and (c) loans of up to 25% of
                  its assets to qualified brokers, dealers or institutions for
                  their use relating to short sales or other security
                  transactions (provided that such loans are secured by
                  collateral equal at all times to at least 100% of the value
                  of the securities loaned).

          9.      Invest in companies for the purpose of exercising control of
                  management.

          10.     Purchase portfolio securities from or sell such securities
                  directly to any of its officers, directors, employees or
                  investment adviser, as principal for their own accounts.

          11.     Invest in the securities of any one issuer (other than the
                  United States or any agency or instrumentality of the United
                  States) if, at the time of acquisition, the Fund would own
                  more than 10% of the voting securities of such issuer or, as
                  to 75% of the Fund's total assets, more than 5% of such
                  assets would be invested in the securities of such issuer.

          12.     Invest more than 5% of its total assets in warrants, rights
                  or options.

         If a percentage restriction is met at the time of investment, a later
increase or decrease in percentage resulting from a change in the value of
portfolio securities or amount of total assets is not considered a violation
of any of the above restrictions.

         In addition to issuing and selling senior securities as set forth in
No. 1 above, the Fund may obtain (i) temporary bank borrowings (not in excess
of 5% of the value of its total assets) for emergency or extraordinary
purposes and (ii) such short-term credits (not in excess of 5% of the value of
its total assets) as are necessary for the clearance of securities
transactions. Under the 1940 Act and the Articles Supplementary, such
temporary bank borrowings would be treated as indebtedness in determining
whether or not asset coverage was at least 200% for senior securities of the
Fund representing indebtedness.

         Although there are no liquidity restrictions on investments made by
the Fund and the Fund may, therefore, invest without limit in illiquid
securities, the Fund expects to invest only in securities for which market
quotations are readily available.


                            PRINCIPAL STOCKHOLDERS


         As of January 22, 2003, there were 42,417,362 shares of Common Stock
and 6,400,000 shares of Preferred Stock of the Fund outstanding. The following
persons were known to the Fund to be beneficial owners or owners of record of
5% or more of its outstanding shares of Common Stock or Preferred Stock as of
the Record Date:

<TABLE>
<CAPTION>

                                                                          Amount and Nature          Percent of
    Name and Address of Owner         Class/Series of Stock                 of Ownership            Class/Series
  ---------------------------       --------------------------    ---------------------------       -------------
<S>                                 <C>                           <C>                                <C>
  Cede & Co.*                              Common Stock           40,657,633 shares--Record               96%
  Depository Trust Company
  P.O. Box #20                      7.80% Cumulative Preferred    2,380,516 shares--Record                37%
  Bowling Green Station                       Stock
  New York, NY 10028

                                       7.30% Tax-Advantaged       3,974,430 shares--Record                62%
                                    Cumulative Preferred Stock
  ---------------
   *  Shares held by brokerage firms, banks and other financial intermediaries
      on behalf of beneficial owners are registered in the name of Cede & Co.
</TABLE>



                                     B-6


<PAGE>


                            DIRECTORS AND OFFICERS

         The Board of Directors of the Fund is comprised of the eight
individuals named below. Two of the Directors, William L. Koke and David L.
Meister, are elected annually by the holders of Issued Preferred, voting as a
separate class. The remaining six Directors are divided into three classes and
are elected by the holders of Common Stock and Issued Preferred, voting
together as a single class. The Class I Directors, Charles M. Royce and G.
Peter O'Brien, have terms that expire in 2003; the Class II Directors, Mark R.
Fetting and Richard M. Galkin, have terms that expire in 2004; and the Class
III Directors, Donald R. Dwight and Stephen L. Isaacs, have terms that expire
in 2005. To the extent permitted by the 1940 Act and Maryland law, vacancies
on the Board can be filled by the remaining Directors for the remainder of the
term of the respective Board position.

         There are no family relationships between any of the Fund's Directors
and officers. Each Director will hold office until his term expires and his
successor has been duly elected or until his earlier resignation or removal.
Each of the Fund's Directors is also a director/trustee of the other
management investment companies comprising The Royce Funds, which have
seventeen portfolios.

Directors

         Interested Directors. Certain biographical and other information
concerning the Directors who are "interested persons" as defined in the 1940
Act, of the Fund, including their designated classes, is set forth below.
Officers are elected by and serve at the pleasure of the Board of Directors.
Each officer will hold office for the year ending December 31, 2003, and
thereafter until his respective successor is duly elected and qualified.

<TABLE>
<CAPTION>

                                    Term Of                                                           Other Public
                                   Office And                                                           Company
  Name, Age And     Position(s)    Length Of                                                         Directorships
    Address*       With The Fund  Time Served     Principal Occupations During Past Five Years      Held by Director
----------------   -------------  -----------   ------------------------------------------------    ----------------

<S>                <C>            <C>           <C>                                                 <C>
   Charles M.         Class I       Term as     President, Chief Investment Officer and                   None
     Royce**       Director and     Director    Manager/Director of Royce; and President of The
      (63)         President        expires     Royce Funds.
                                     2003;
                                    Director
                                  and Officer
                                   since 1986

Mark R. Fetting**    Class II       Term as     Executive Vice President of Legg Mason;               Director of
      (48)           Director       Director    Manager/Director of Royce; and Division                registered
                                    expires     President and Senior Officer of Prudential             investment
                                     2004;      Financial Group, Inc. and related companies,           companies
                                    Director    including Fund Boards and consulting services to   constituting four
                                   since 2001   subsidiary companies (from 1991 to 2000). Mr.       Legg Mason Funds
                                                Fetting's prior business experience also
                                                includes having served as Partner, Greenwich
                                                Associates, and Vice President, T. Rowe Price
                                                Group, Inc.
---------
*     Mr. Royce's address is c/o Royce, 1414 Avenue of the Americas, New York,
      New York 10019.  Mr. Fetting's address is c/o Legg
      Mason, 100 Light Street, Baltimore, Maryland 21202.
**    Messrs. Royce and Fetting are "interested persons" of the Fund within
      the meaning of Section 2(a)(19) of the 1940 Act due to the positions
      they hold with Royce and for Mr. Fetting, Legg Mason, and their
      ownership in Legg Mason.
</TABLE>


                                     B-7


<PAGE>


         Non-Interested Directors. Certain biographical and other information
concerning the Fund Directors who are not "interested persons," as defined in
the 1940 Act, of the Fund, including their designated classes, is set forth
below. Each non-interested Director is also a member of the Fund's audit
committee.

<TABLE>
<CAPTION>

                                    Term Of                                                           Other Public
                                   Office And                                                           Company
  Name, Age And     Position(s)    Length Of                                                         Directorships
    Address*       With The Fund  Time Served     Principal Occupations During Past Five Years      Held by Director
----------------   -------------  -----------   ------------------------------------------------    ----------------

<S>                <C>            <C>           <C>                                                 <C>

 Donald R. Dwight     Class III       Term as    President of Dwight Partners, Inc., corporate      Trustee of the
       (71)            Director      Director    communications consultants; and Chairman (from       registered
                                      expires    1982 until March 1998) of Newspapers New             investment
                                       2005;     England, Inc. Mr. Dwight's prior experience           companies
                                     Director    includes having served as Lieutenant Governor     constituting the
                                    since 1998   of the Commonwealth of Massachusetts and as        94 Eaton Vance
                                                 President and Publisher of Minneapolis Star and         Funds
                                                 Tribune Company.

Richard M. Galkin      Class II       Term as    Private investor.  Mr. Galkin's prior business          None
       (64)            Director      Director    experience includes having served as President
                                      expires    of Richard M. Galkin Associates, Inc.,
                                       2004;     telecommunications consultants, President of
                                     Director    Manhattan Cable Television (a subsidiary of
                                    since 1986   Time Inc.), President of Haverhills Inc.
                                                 (another Time Inc. subsidiary), President of
                                                 Rhode Island Cable Television and Senior Vice
                                                 President of Satellite Television Corp. (a
                                                 subsidiary of Comsat).

Stephen L. Isaacs     Class III       Term as    President of The Center for Health and Social           None
       (63)            Director      Director    Policy (since September 1996); Attorney and
                                      expires    President of Health Policy Associates, Inc.,
                                       2005;     consultants. Mr. Isaacs' prior experience
                                     Director    includes having served as Director of Columbia
                                    since 1986   University Development Law and Policy Program
                                                 and Professor at Columbia University.

 William L. Koke       Director       Term as    Financial planner with Shoreline Financial              None
       (68)           elected by     Director    Consultants. Mr. Koke's prior business
                      Preferred       expires    experience includes having served as Director
                     Stockholders    annually;   of Financial Relations of SONAT, Inc.,
                                     Director    Treasurer of Ward Foods, Inc. and President of
                                    since 2001   CFC, Inc.


                                     B-8


<PAGE>


 David L. Meister      Director       Term as    Chairman and Chief Executive Officer of The             None
       (63)           elected by     Director    Tennis Channel (since June 2000); and Chief
                      Preferred       expires    Executive Officer of Seniorlife.com (from
                     Stockholders    annually;   December 1999 to May 2000). Mr. Meister's prior
                                     Director    business experience includes having served as a
                                    since 1986   consultant to the communications industry,
                                                 President of Financial News
                                                 Network, Senior Vice
                                                 President of HBO, President
                                                 of Time-Life Films and Head
                                                 of Broadcasting for Major
                                                 League Baseball.

 G.Peter              Class I        Term as     Trustee of Colgate University, Director of            Director/
 O'Brien (57)        Director        Director    Pinnacle Holdings, Inc., President of Hill          Trustee of the
                                      expires    House, Inc. and Managing Director/Equity             registered
                                       2003;     Capital Markets Group of Merrill Lynch & Co.         investment
                                     Director    (from 1971 to 1999).                                  companies
                                    since 2001                                                     constituting the
                                                                                                     18 Legg Mason
                                                                                                    Funds; Director
                                                                                                    of Renaissance
                                                                                                        Capital
                                                                                                    Greenwich Fund.
---------
*  Messrs.  Dwight,  Galkin,  Isaacs,  Koke, Meister and O'Brien's address is c/o Royce,
   1414 Avenue of the Americas,  New York, New York 10019.

</TABLE>

Officers

         Certain biographical and other information concerning the officers of
the Fund is set forth below. Officers are elected by and serve at the pleasure
of the Board of Directors. Each officer will hold office for the year ending
December 31, 2003, and thereafter until his respective successor is duly
elected and qualified.
<TABLE>
<CAPTION>

                                                Term Of Office
                                Position(s)      And Length Of            Principal Occupations During
   Name, Age And Address*      With The Fund      Time Served                    Past Five Years
--------------------------    ---------------   ---------------  -----------------------------------------------


<S>                           <C>                <C>             <C>
  John D. Diederich (51)      Vice President,    Officer since   Manager/Director,   Chief   Operating   Officer
                                Director of          2001        (since October 2001),  Chief Financial  Officer
                               Administration                    (since  March  2002) and  Managing  Director of
                               and Treasurer                     Royce;  Vice President,  Treasurer and Director
                                                                 of  Administration  of the other  Royce  Funds;
                                                                 and President of Royce Fund Services, Inc.

 Jack E. Fockler, Jr. (44)    Vice President    Officer since   Managing  Director and Vice President of Royce;
                                                     1995        Vice President of The Royce Funds.


                                     B-9


<PAGE>


 W. Whitney George (44)        Vice President    Officer since   Managing Director and Vice President of Royce;
                                                     1995        and Vice President of The Royce Funds.

   Daniel A. O'Byrne (40)      Vice President    Officer since   Principal  and Vice  President  of  Royce;  and
                               and Assistant         1994        Vice President of The Royce Funds.
                                 Secretary

    John E. Denneen (35)       Secretary and     Officer from    General  Counsel of Royce (since January 2003);
                              General Counsel    1996 to 2001    Deputy  General   Counsel,   Principal,   Chief
                                                  and since      Compliance   Officer  and  Secretary  of  Royce
                                                  April 2003     2002 (since  March 2002); Secretary of The Royce
                                                                 Funds (1996-2001 and since April 2002); Associate
                                                                 General Counsel, Principal and Chief Compliance
                                                                 Officer of Royce (1996-2001); and Principal
                                                                 of Credit Suisse First Boston Private Equity
                                                                 (2001-2002).
      ---------------
   *     The address of each officer is c/o Royce, 1414 Avenue of the Americas, New York, New York 10019.
</TABLE>



Ownership of Securities

         Information relating to each Director's share ownership in the Fund
and in The Royce Funds as of December 31, 2002 is set forth in the tables
below.

<TABLE>
<CAPTION>


                                           Aggregate Dollar Range of Equity       Aggregate Dollar Range of Equity
                 Name                           Securities in the Fund              Securities in The Royce Funds
                 ----                      --------------------------------       ---------------------------------

Interested Directors
<S>                                                  <C>                                  <C>
     Charles M. Royce..................                Over $100,000                        Over $100,000
     Mark R. Fetting...................                     None                            Over $100,000

Non-Interested Directors
     Donald R. Dwight..................                  $1-$10,000                         Over $100,000
     Richard M. Galkin.................                  $1-$10,000                         Over $100,000
     Stephen L. Isaacs.................               $10,001-$50,000                      $10,001-$50,000
     William L. Koke...................               $50,001-$100,000                      Over $100,000
     David L. Meister..................                     None                            Over $100,000
     G. Peter O'Brien..................               $10,001-$50,000                       Over $100,000
</TABLE>



Board Committees and Meetings

         The Board of Directors has an Audit Committee, comprised of Donald R.
Dwight, Richard M. Galkin, Stephen L. Isaacs, William L. Koke, David L.
Meister and G. Peter O'Brien. The Audit Committee is responsible for, among
other things, recommending the selection and nomination of the Fund's
independent accountants and for conducting post-audit reviews of the Fund's
financial condition with such independent accountants. The Fund has adopted an
Audit Committee charter. Mr. Galkin serves as Chairman of the Audit Committee.
The members of the Audit Committee are "independent" within the meaning of the
1940 Act and the New York Stock Exchange corporate governance standards for
audit committees. The Fund's Audit Committee held three meetings during the
year ended December 31, 2002. Although the Board of Directors does not have a
standing compensation committee or a nominating committee, the non-interested
Directors review and nominate candidates to serve as


                                     B-10


<PAGE>


non-interested Directors. The non-interested Directors generally will not
consider nominees recommended by stockholders of the Fund.

Compensation of Directors and Certain Officers


         For the year ended December 31, 2002, the following Directors of the
Fund received compensation from the Fund and The Royce Funds, as follows:

<TABLE>
<CAPTION>

                           Aggregate      Pension or Retirement         Estimated           Total Compensation
                         Compensation      Benefits Accrued as       Annual Benefits       from The Royce Funds
         Name              from Fund      Part of Fund Expenses      upon Retirement        paid to Directors
         ----              ---------      ---------------------      ---------------        -----------------
<S>                         <C>           <C>                        <C>                          <C>
Donald R. Dwight,           $15,000                None                    None                    $65,250
Director 1

Richard M. Galkin,          $15,000                None                    None                    $65,250
Director 2

Stephen L. Isaacs,          $15,000                None                    None                    $65,250
Director

William L. Koke,            $15,000                None                    None                    $65,250
Director

David L. Meister,           $15,000                None                    None                    $65,250
Director

G. Peter O'Brien,           $15,000                None                    None                    $65,250
Director

--------------
1   Includes  $2,250 from the Fund  ($9,562.50  from the Fund and other Royce Funds)
    deferred  during 2002 at the election of Mr. Dwight under The Royce Funds' Deferred Compensation Plan for Trustees/Directors.
2   Includes  $15,000  from the Fund  ($63,750  from the Fund and other Royce Funds)
    deferred  during 2002 at the election of Mr. Galkin under The Royce Funds' Deferred Compensation Plan for Trustees/Directors.
</TABLE>



Directors' Consideration of Investment Advisory Agreement

         The Fund's Board of Directors determined at meetings held on July
16-17, 2001 to approve the Fund's current Investment Advisory Agreement. In
making their determinations, the Directors considered a wide range of
information of the type they regularly consider when determining whether to
continue the Fund's advisory arrangements as in effect from year to year. In
addition, the Directors gave particular consideration to matters relating to
the possible effects of the October 1, 2001 acquisition of Royce by Legg Mason
on Royce and the Fund. In its consideration of the current Investment Advisory
Agreement, the Board of Directors focused on information it had received
relating to, among other things: (a) the nature, quality and extent of the
advisory and other services to be provided to the Fund by Royce, (b)
comparative data with respect to advisory fees paid by other funds with
similar investment objectives, (c) the operating expenses and expense ratio of
the Fund compared to funds with similar investment objectives, (d) the
performance of the Fund as compared to such comparable funds, (e) the relative
profitability of the present arrangements and the proposed arrangements to
Royce, (f) information about the services to be performed and the personnel
performing such services under the previous Investment Advisory Agreement and
the current Investment Advisory Agreement, (g) the general reputation and
financial resources of Legg Mason, (h) compensation payable by the Fund to
affiliates of Royce for other services, (i) Royce's practices regarding the
selection and compensation of brokers that execute portfolio transactions for
the Fund and the brokers' provision of brokerage and research services to
Royce, (j) the ability of Royce to continue providing investment advisory
services of the same character and at least the same quality as provided prior
to the October 1, 2001 acquisition of Royce by Legg Mason, (k) potential
effect on portfolio management or other Fund services due to new affiliates
and (l) potential effect on Fund performance. The Board of Directors was
advised by separate legal


                                     B-11


<PAGE>


counsel in connection with its review of the Fund's investment advisory
arrangements.

         In addition, the Directors considered that the Stock Purchase
Agreement for the transaction provided that Legg Mason would (subject to
certain qualifications) use its reasonable best efforts to assure compliance
with the safe-harbor provided by Section 15(f) of the 1940 Act. Section 15(f)
provides that a registered investment company's investment adviser or its
affiliates can receive benefit or compensation in connection with a change of
control of the investment adviser (e.g., the change of control of Royce as a
result of its acquisition by Legg Mason) if two conditions are satisfied.
First, for three years after the change of control, at least 75% of the
members of the board of any registered investment company advised by the
adviser must consist of persons who are not "interested persons," as defined
in the 1940 Act, of the adviser. Second, no "unfair burden" may be imposed on
any such registered investment company as a result of the change of control
transaction or any express or implied terms, conditions or understandings
applicable to the transaction. "Unfair burden" means any arrangement, during
the two years after the transaction, by which the investment adviser or any
"interested person" of the adviser receives or is entitled to receive any
compensation, directly or indirectly, from such investment company or its
security holders (other than fees for bona fide investment advisory or other
services) or from any other person in connection with the purchase or sale of
securities or other property to, from or on behalf of such investment company.

Information Concerning Royce

         On October 1, 2001, Royce became an indirect wholly-owned subsidiary
of Legg Mason. On March 31, 2002, Royce's corporate predecessor was merged
into Royce Holdings, LLC (a wholly-owned subsidiary of Legg Mason), which then
changed its name to Royce & Associates, LLC. As a result of this merger, Royce
& Associates, LLC became the Fund's investment adviser and a direct
wholly-owned subsidiary of Legg Mason.


                      CODE OF ETHICS AND RELATED MATTERS

         Royce and the Fund have adopted a Code of Ethics under which
directors (other than non-management directors), officers and employees of
Royce ("Royce-related persons") and interested trustees/directors, officers
and employees of the Fund are generally prohibited from personal trading in
any security which is then being purchased or sold or considered for purchase
or sale by the Fund or any other Royce account. The Code of Ethics permits
such persons to engage in other personal securities transactions if (i) the
securities involved are certain debt securities, money market instruments,
shares of registered open-end investment companies or shares acquired from an
issuer in a rights offering or under an automatic dividend reinvestment or
employer-sponsored automatic payroll deduction cash purchase plan, (ii) the
transactions are either non-volitional or are effected in an account over
which such person has no direct or indirect influence or control or (iii) they
first obtain permission to trade from Royce's Compliance Officer and either an
executive officer or Senior Portfolio Manager of Royce. The Code contains
standards for the granting of such permission, and permission to trade will
usually be granted only in accordance with such standards.

         Royce's clients include several private investment companies in which
Royce, Royce-related persons and/or other Legg Mason affiliates have (and,
therefore, may be deemed to beneficially own) a share of up to 15% of the
company's realized and unrealized net capital gains from securities
transactions, but less than 25% of the company's equity interests. The Code of
Ethics does not restrict transactions effected by Royce for such private
investment company accounts, and transactions for such accounts are subject to
Royce's allocation policies and procedures. See "Brokerage Allocation and
Other Practices."


         As of December 31, 2002, Royce-related persons, interested
trustees/directors, officers and employees of The Royce Funds and members of
their immediate families beneficially owned shares of The Royce Funds having a
total value of over $40.6 million, and such persons beneficially owned equity
interests in Royce-related private investment companies totaling approximately
$8.6 million.



                                     B-12


<PAGE>


                    INVESTMENT ADVISORY AND OTHER SERVICES

Advisory Fee

         As compensation for its services under the Investment Advisory
Agreement, Royce is entitled to receive a fee comprised of a Basic Fee (the
"Basic Fee") at the rate of 1% per annum of the Fund's average net assets
(including proceeds from the sale of Preferred Stock) 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 Index. A rolling period of 60 months ending
with the most recent calendar month is utilized for measuring performance and
average net assets.

         The Basic Fee for each such month will be increased or decreased at
the rate of 1/12 of .05% per percentage point, depending on the extent, if
any, by which the investment performance of the Fund exceeds by more than two
percentage points, or is exceeded by more than two percentage points by, the
percentage change in the investment record of the S&P 600 Index for the
performance period. The maximum increase or decrease in the Basic Fee for any
month is 1/12 of 0.5%. Accordingly, for each month the maximum monthly fee
rate as adjusted for performance will be 1/12 of 1.5% and will be payable if
the investment performance of the Fund exceeds the percentage change in the
investment record of the S&P 600 Index by 12 or more percentage points for the
performance period, and the minimum monthly fee rate as adjusted for
performance will be 1/12 of 0.5% and will be payable if the percentage change
in the investment record of the S&P 600 Index exceeds the investment
performance of the Fund by 12 or more percentage points for the performance
period.

         Notwithstanding the foregoing, Royce will not be 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 on an absolute
basis. 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.

         Because the Basic Fee is a function of the Fund's net assets and not
of its total assets, Royce will not receive any fee in respect of those assets
of the Fund equal to the aggregate unpaid principal amount of any indebtedness
of the Fund. Royce will receive a fee in respect of any assets of the Fund
equal to the liquidation preference of and any potential redemption premium
for the outstanding 7.80% Cumulative Preferred Stock, 7.30% Tax-Advantaged
Cumulative Preferred Stock and for any other Preferred Stock that may be
issued and sold by the Fund.

         The following table illustrates, on an annualized basis, the full
range of permitted increases or decreases to the Basic Fee.

<TABLE>
<CAPTION>

      Difference between Performance
      of Fund and % Change in S & P               Adjustment to 1%
             600 Index Record                        Basic Fee                   Fees as Adjusted
      ------------------------------              -----------------              ----------------

<S>                                                     <C>                             <C>
          +12 or more                                  +.5%                             1.5%
          +11                                          +.45%                            1.45%
          +10                                          +.4%                             1.4%
          +9                                           +.35%                            1.35%
          +8                                           +.3%                             1.3%
          +7                                           +.25%                            1.25%
          +6                                           +.2%                             1.2%
          +5                                           +.15%                            1.15%
          +4                                           +.1%                             1.1%
          +3                                           +.05%                            1.05%
          +/-2                                         0                                1%
          - 3                                         -0.5                               .95%
          - 4                                          -.1%                              .9%
          - 5                                          -.15%                             .85%
          - 6                                          -.2%                              .8%
          - 7                                          -.25%                             .75%


                                     B-13


<PAGE>


      Difference between Performance
      of Fund and % Change in S & P               Adjustment to 1%
             600 Index Record                        Basic Fee                   Fees as Adjusted
      ------------------------------              -----------------              ----------------

          - 8                                          -.3%                              .7%
          - 9                                          -.35%                             .65%
          - 10                                         -.4%                              .6%
          - 11                                         -.45%                             .55%
          - 12 or less                                 -.5%                              .5%

</TABLE>


         In calculating the investment performance of the Fund and the
percentage change in the investment record of the S&P 600 Index, all dividends
and other distributions during the performance period are treated as having
been reinvested, and no effect is given to gain or loss resulting from capital
share transactions of the Fund. Fractions of a percentage point are rounded to
the nearest whole point (to the higher whole point if exactly one-half).

         Royce has committed to voluntarily waive the portion of its
investment advisory fee attributable to a series of Preferred Stock for any
month when the Fund's average annual net asset value total return since
issuance of the Preferred Stock fails to exceed the applicable Preferred
Stock's dividend rate.


         For the years ended December 31, 2002, 2001 and 2000, Royce received
investment advisory fees from the Fund of $10,024,212, $9,410,553 and
$7,342,211 (net of $665,068, $249,670 and $505,624 voluntarily waived by
Royce), respectively.


Other

         The Investment Advisory Agreement provides that the Fund may use
"Royce" as part of its name only for as long as the Investment Advisory
Agreement remains in effect. The name "Royce" is a property right of Royce,
and it may at any time permit others, including other investment entities, to
use such name.

         The Investment Advisory Agreement protects and indemnifies Royce
against liability to the Fund, its stockholders or others for any action taken
or omitted to be taken by Royce in connection with the performance of any of
its duties or obligations under Investment Advisory Agreement or otherwise as
an investment adviser to the Fund. However, Royce is not protected or
indemnified against liabilities to which it would otherwise be subject by
reason of willful malfeasance, bad faith or gross negligence in the
performance of its duties or by reason of its reckless disregard of its duties
and obligations under the Investment Advisory Agreement.

         Royce's services to the Fund are not deemed to be exclusive, and
Royce or any of its affiliates may provide similar services to other
investment companies and other clients or engage in other activities.

         The Investment Advisory Agreement will remain in effect until June
30, 2003 and may be continued in effect from year to year thereafter if such
continuance is specifically approved at least annually by the Board of
Directors or by the vote of a majority of the Fund's outstanding voting
securities and, in either case, by a majority of the directors who are not
parties to the Agreement or interested persons of any such party. The
Investment Advisory Agreement will automatically terminate if it is assigned
(as defined by the 1940 Act and the rules thereunder) and may be terminated
without penalty by vote of a majority of the Fund's outstanding voting
securities or by either party thereto on not less than 60 days' written
notice.

Service Contract with State Street


         State Street Bank and Trust Company ("State Street"), the custodian
of the Fund's assets, provides certain management-related services to the
Fund. Such services include keeping books of accounts and rendering such
financial and other statements as may be requested by the Fund from time to
time generally assisting in the preparation of reports to the Fund's
stockholders, to the SEC and others and in the auditing of accounts and in
other ministerial matters of like nature, as agreed to between the Fund and
State Street. For the fiscal years ended December 31, 2002, 2001 and 2000, the
Fund paid $213,265, $235,710 and $218,247 in fees to the Fund's custodian and
transfer agent.



                                     B-14


<PAGE>


                                   TAXATION

General

         The Fund intends to continue to qualify for the special tax treatment
afforded regulated investment companies ("RICs") under the Internal Revenue
Code of 1986, as amended (the "Code"). As long as it so qualifies, the Fund
(but not its stockholders) will not be subject to Federal income tax to the
extent that it distributes its net investment income and net realized capital
gains. The Fund intends to distribute substantially all of such income.

         The Code requires a RIC to pay a nondeductible 4% excise tax to the
extent the RIC does not distribute, during each calendar year, 98% of its
ordinary income, determined on a calendar year basis, and 98% of its capital
gains, determined, in general, on an October 31 year end, plus certain
undistributed amounts from previous years. While the Fund intends to
distribute its income and capital gains in the manner necessary to minimize
imposition of the 4% excise tax, there can be no assurance that sufficient
amounts of the Fund's taxable income and capital gains will be distributed to
avoid entirely the imposition of the tax. In such event, the Fund will be
liable for the tax only on the amount by which it does not meet the foregoing
distribution requirements.

         Dividends paid by the Fund from its ordinary income or from an excess
of net short-term capital gains over net long-term capital losses (together
referred to hereafter as "ordinary income dividends") are taxable to
stockholders as ordinary income. Distributions made from an excess of net
long-term capital gains over net short-term capital losses (including gains or
losses from certain transactions in warrants and options) ("capital gain
dividends") are taxable to stockholders as long-term capital gains, regardless
of the length of time the stockholder has owned Fund shares. Any loss upon the
sale or exchange of Fund shares held for six months or less will be treated as
long-term capital loss to the extent of any capital gain dividends received by
the stockholder. Distributions in excess of the Fund's earnings and profits
will first reduce the adjusted tax basis of a holder's shares and, after such
adjusted tax basis is reduced to zero, will constitute capital gains to such
holder (assuming the shares are held as a capital asset). Certain categories
of capital gains are taxable at different rates. Generally not later than 60
days after the close of its taxable year, the Fund will provide its
stockholders with a written notice designating the amounts of any capital gain
dividends as well as any amounts of capital gain dividends in the different
categories of capital gain referred to above.

         Dividends are taxable to stockholders even though they are reinvested
in additional shares of the Fund. A portion of the Fund's ordinary income may
be eligible for the dividends received deduction allowed to corporations under
the Code, if certain requirements are met.

         A loss realized on a sale or exchange of shares of the Fund will be
disallowed if other Fund shares are acquired (whether through the automatic
reinvestment of dividends or otherwise) within a 61-day period beginning 30
days before and ending 30 days after the date that the shares are disposed of.
In such a case, the basis of the shares acquired will be adjusted to reflect
the disallowed loss.

         The IRS has taken the position in a revenue ruling that if a RIC has
two or more classes of shares, it may designate distributions made to each
class in any year as consisting of no more than such class' proportionate
share of particular types of income, including exempt interest and net
long-term capital gains. A class's proportionate share of a particular type of
income is determined according to the percentage of total dividends paid by
the RIC during such year that was paid to such class. Thus, the Fund is
required to allocate a portion of its net capital gains and other taxable
income to the shares of Preferred Stock.

         If at any time when shares of Preferred Stock are outstanding the
Fund does not meet the asset coverage requirements of the 1940 Act, the Fund
will be required to suspend distributions to holders of Common Stock until the
asset coverage is restored. See "Risk Factors and Special Considerations -
Risks to Common Stockholders of Borrowing Money and Issuing Senior Securities
- Asset Coverage Test." This may prevent the Fund from distributing at least
90% of its net income and may, therefore, jeopardize the Fund's qualification
for taxation as a RIC. Upon any failure to meet the asset coverage
requirements of the 1940 Act, the Fund, in its sole discretion, may, and under
certain circumstances will be required to, redeem shares of Preferred Stock in
order to maintain or restore the requisite asset coverage and avoid the
adverse consequences to the Fund and its stockholders of failing to


                                     B-15


<PAGE>


qualify as a RIC. See "Description of Capital Stock -- Preferred Stock --
Redemption" in the Prospectus. There can be no assurance, however, that any
such action would achieve such objectives.

         The Fund may invest in securities rated in the medium to lower rating
categories of nationally recognized rating organizations, and in unrated
securities ("high yield bonds"), as previously described. Some of these high
yield bonds may be purchased at a discount and may therefore cause the Fund to
accrue and distribute income before amounts due under the obligations are
paid. In addition, a portion of the interest payments on such high yield
securities may be treated as dividends for Federal income tax purposes; in
such case, if the issuer of such high yield/high risk securities is a domestic
corporation, dividend payments by the Fund will be eligible for the dividends
received deduction to the extent of the deemed dividend portion of such
interest payments.

         Ordinary income dividends paid to stockholders who are non-resident
aliens or foreign entities will be subject to a 30% United States withholding
tax under existing provisions of the Code applicable to foreign individuals
and entities unless a reduced rate of withholding or a withholding exemption
is provided under applicable treaty law. Non-resident stockholders are urged
to consult their own tax advisers concerning the applicability of the United
States withholding tax.

         Under certain provisions of the Code, some stockholders may be
subject to a withholding tax on ordinary income dividends and capital gain
dividends ("backup withholding"). Generally, stockholders subject to backup
withholding will be those for whom no certified taxpayer identification number
is on file with the Fund or who, to the Fund's knowledge, have furnished an
incorrect number. When establishing an account, an investor must certify under
penalty of perjury that such number is correct and that such investor is not
otherwise subject to backup withholding.

         Dividends and interest received by the Fund may give rise to
withholding and other taxes imposed by foreign countries. Tax conventions
between certain countries and the United States may reduce or eliminate such
taxes.

         The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations presently in effect. For the
complete provisions, reference should be made to the pertinent Code sections
and the Treasury regulations promulgated thereunder. The Code and the Treasury
regulations are subject to change by legislative, judicial or administrative
action either prospectively or retroactively.

         Ordinary income and capital gain dividends may also be subject to
state and local taxes.

         Certain states exempt from state income taxation dividends paid by
RICs which are derived from interest on United States Government obligations.
State law varies as to whether dividend income attributable to United States
Government obligations is exempt from state income tax.

         Stockholders are urged to consult their own tax advisers regarding
specific questions as to Federal, foreign, state or local taxes. Foreign
investors should consider applicable foreign taxes in their evaluation of an
investment in the Fund.


                   BROKERAGE ALLOCATION AND OTHER PRACTICES

         Royce is responsible for selecting the brokers who effect the
purchases and sales of the Fund's portfolio securities. No broker is selected
to effect a securities transaction for the Fund unless such broker is believed
by Royce to be capable of obtaining the best price for the security involved
in the transaction. Best price and execution is comprised of several factors,
including the liquidity of the security, the commission charged, the
promptness and reliability of execution, priority accorded the order and other
factors affecting the overall benefit obtained. In addition to considering a
broker's execution capability, Royce generally considers the brokerage and
research services which the broker has provided to it, including any research
relating to the security involved in the transaction and/or to other
securities. Such services may include general economic research, market and
statistical information, industry and technical research, strategy and company
research and performance measurement, and


                                     B-16


<PAGE>


may be written or oral. Brokers that provide both research and execution
services are generally paid higher commissions than those paid to brokers who
do not provide such research and execution services. Royce determines the
overall reasonableness of brokerage commissions paid, after considering the
amount another broker might have charged for effecting the transaction and the
value placed by Royce upon the brokerage and/or research services provided by
such broker, viewed in terms of either that particular transaction or Royce's
overall responsibilities with respect to its accounts.

         Royce is authorized, under Section 28(e) of the Securities Exchange
Act of 1934 and under its Investment Advisory Agreement with the Fund, to pay
a broker a commission in excess of that which another broker might have
charged for effecting the same transaction, in recognition of the value of
brokerage and research services provided by the broker.

         Brokerage and research services furnished by brokers through whom the
Fund effects securities transactions may be used by Royce in servicing all of
its accounts, and not all of such services may be used by Royce in connection
with the Fund.

         Even though investment decisions for the Fund are made independently
from those for the other accounts managed by Royce, securities of the same
issuer are frequently purchased, held or sold by more than one Royce account
because the same security may be suitable for all of them. When the same
security is being purchased or sold for more than one Royce account on the
same trading day, Royce may seek to average the transactions as to price and
allocate them as to amount in a manner believed to be equitable to each. Such
purchases and sales of the same security are generally effected pursuant to
Royce's Trade Allocation Guidelines and Procedures. Under such Guidelines and
Procedures, unallocated orders are placed with and executed by broker-dealers
during the trading day. The securities purchased or sold in such transactions
are then allocated to one or more of Royce's accounts at or shortly following
the close of trading, using the average net price obtained. Such allocations
are done based on a number of judgmental factors that Royce believes should
result in fair and equitable treatment to those of its accounts for which the
securities may be deemed suitable. In some cases, this procedure may adversely
affect the price paid or received by the Fund or the size of the position
obtained for the Fund.

         The Fund may effect brokerage transactions on a securities exchange
with Legg Mason Wood Walker, Incorporated ("Legg Mason Wood Walker") and any
other affiliated broker-dealers in accordance with the procedures and
requirements set forth in Rule 17e-1 under the 1940 Act. Any such transactions
would involve the use of the affiliated broker-dealer for execution purposes
only and/or for locating the purchasers or sellers involved in the
transaction. The affiliated broker-dealer would not be compensated because of
any other research-related service or product provided or to be provided by it
and may not be used to effect brokerage transactions in Nasdaq or other
over-the-counter securities. Although the Fund will not effect any principal
transactions with any affiliated broker-dealers, they may purchase securities
that are offered in certain underwritings in which an affiliated broker-dealer
is a participant in accordance with the procedures and requirements set forth
in Rule 10f-3 under the 1940 Act. Charles M. Royce and/or trusts primarily for
the benefit of members of his family may own or acquire substantial amounts of
Legg Mason common stock.

         During the year ended December 31, 2002, the Fund did not acquire any
securities of any of its regular brokers (as defined in Rule 10b-1 under the
1940 Act) or of any of their parents.


         During each of the three years ended December 31, 2002, 2001 and
2000, the Fund paid brokerage commissions of approximately $1,043,502,
$602,336 and $694,188, respectively. Since October 1, 2001, when Royce became
an indirect wholly-owned subsidiary of Legg Mason, the Fund paid no brokerage
commissions to Legg Mason Wood Walker or to any other affiliates of Legg
Mason.



                                NET ASSET VALUE

         The NAV of the Fund's shares of Common Stock is calculated at the
close of regular trading on the New York Stock Exchange ("NYSE") (generally
4:00 p.m. Eastern time) every day that the NYSE is open. The Fund makes this
information available daily by telephone (800-221-4268) and via its web site
(www.roycefunds.com) and


                                     B-17


<PAGE>


through electronic distribution for media publication, including major
internet-based financial services web sites and portals (bloomberg.com,
yahoo.com, cbsmarketwatch.com, etc.) Currently, The Wall Street Journal, The
New York Times and Barron's publish NAVs for closed-end investment companies
weekly.

         The net asset value per share of the Fund's Common Stock is
calculated by dividing the current value of the Fund's total assets less the
sum of all of its liabilities and the aggregate liquidation preferences of its
outstanding shares of Preferred Stock, by the total number of outstanding
shares of Common Stock. The Fund's investments are valued based on market
value or, if market quotations are not readily available, at their fair value
as determined in good faith under procedures established by the Fund's Board
of Directors.


         For the years ended December 31, 2002, 2001 and 2000, the Fund's
portfolio turnover rates were 35%, 30% and 36%, respectively.



                             FINANCIAL STATEMENTS

         The audited financial statements included in the Annual Report to the
Fund's Stockholders for the fiscal year ended December 31, 2001, together with
the report of Tait, Weller & Baker thereon, and the unaudited financial
statements included in the Semi-Annual Report to the Fund's Stockholders for
the six months ended June 30, 2002 are incorporated herein by reference. It is
expected that the audited financial statements included in the Annual Report
to the Fund's Stockholders for the fiscal year ended December 31, 2002,
together with the report of Tait, Weller & Baker thereon, will be mailed to
stockholders and available on the Fund's website (www.roycefunds.com) on or
around February 28, 2003.



                                     B-18
<PAGE>

                                    Part C

                               Other Information

Item 24. Financial Statements and Exhibits

1.   a.      The following audited financial statements of Royce Value
             Trust, Inc. (the "Fund") are included in the Fund's Annual
             Report to Stockholders for the fiscal year ended December 31,
             2001, filed with the Securities and Exchange Commission ("SEC")
             under Section 30 (b) (1) of the Investment Company Act of 1940,
             as amended ("1940 Act"), and are incorporated in Part B hereof
             by reference:

             Schedule of Investments, December 31, 2001; Statement of
             Assets and Liabilities, December 31, 2001; Statement of
             Operations for the fiscal year ended December 31, 2001;
             Statement of Changes in Net Assets for the years ended
             December 31, 2001 and 2000; Notes to Financial Statements at
             December 31, 2001; Financial Highlights for the five fiscal
             years ended December 31, 2001; and Report of Independent
             Accountants.

     b.      The following unaudited financial statements of the Fund are
             included in the Fund's Semi-Annual Report to Stockholders
             for the six months ended June 30, 2002, filed with the SEC
             under Section 30 (b) (1) of the 1940 Act, and are
             incorporated in Part B hereof by reference:

             Schedule of Investments, June 30, 2002; Statement of Assets
             and Liabilities, June 30, 2002; Statement of Operations for
             the six months ended June 30, 2002;
             Statement of Changes in Net Assets for the six months ended
             June 30, 2002; and for the year ended December 31, 2001.
             Notes to Financial Statements at June 30, 2002; and
             Financial Highlights for the five fiscal years ended
             December 31, 2001 and for the six months ended June 30,
             2002.
<TABLE>
<CAPTION>

2.   Exhibits

<S>                 <C>
      (a)(1)        Articles of Incorporation dated July 1, 1986. (1)
         (2)        Articles of Amendment dated May 6, 1988. (1)
         (3)        Articles of Amendment dated April 28, 1989. (1)
         (4)        Articles of Amendment dated March 2, 1998. (1)
         (5)        Articles of Amendment dated March 19, 1998. (1)
         (6)        Certificate of Correction dated May 11, 1998. (1)
         (7)        Form of Articles Supplementary creating the 7.80% Cumulative
                    Preferred Stock ("7.80% Preferred Stock"). (2)
         (8)        Form of Articles Supplementary creating the 7.30% Tax-Advantaged
                    Cumulative Preferred Stock ("7.30% Preferred Stock"). (3)
         (9)        Form of Articles Supplementary dated January ___, 2003. (1)
      (b)           Amended and Restated By-laws. (1)


<PAGE>


      (c)           Not applicable.
      (d)(1)        Form of specimen share certificate for Common
                    Stock. (1)
         (2)        Form of share certificate for 7.80% Preferred Stock. (4)
         (3)        Form of share certificate for 7.3% Preferred Stock. (3)
      (e)           Amended and Restated Distribution Reinvestment and
                    Cash Purchase Plan. (5)
      (f)           Not applicable.
      (g)           Investment Advisory Agreement dated October 1, 2001
                    between the Fund and Royce & Associates, Inc. ("R &
                    A"). (6)
      (h)           Not applicable. (i) Not applicable.
      (j)(1)        Custodian Contract with State Street Bank and Trust
                    Company ("State Street") dated October 20, 1986. (1)
         (2)        Amendment to Custodian Contract dated December 11, 1987. (1)
         (3)        Amendment to Custodian Contract dated May 13, 1988. (1)
         (4)        Amendment to Custodian Contract dated April 2, 1992. (1)
         (5)        Amendment to Custodian Contract dated November 3, 1997. (1)
         (6)        Amendment to Custodian Contract dated September 14, 2000. (1)
         (7)        Form of Amendment to Custodian Contract dated January ___, 2003. (1)
      (k)(1)        Registrar, Transfer Agency and Service Agreement
                    with State Street (Common Stock) dated October 20,
                    1986. (1)
         (2)        Registrar, Transfer Agency and Service Agreement with State Street (7.80% Preferred
                    Stock) dated August 21, 1996. (1)
         (3)        First Amendment to Registrar, Transfer Agency and Paying Agency Agreement (7.80%
                    Preferred Stock and 7.3% Preferred Stock) dated May 18, 1998. (7)
         (4)        Form of Subscription Certificate. (1)
         (5)        Form of Subscription Agent Agreement. (1)
         (6)        Form of Information Agent Agreement. (1)
      (l)           Opinion and Consent of Sidley Austin Brown & Wood LLP
    . (m)           Not applicable.
      (n)(1)        Consent of Tait, Weller & Baker, independent auditors for the Fund.
         (2)        Consent of Ernst & Young LLP, independent auditors.
      (o)           Not applicable.
      (p)           Not applicable.
      (q)           Not applicable.
      (r)           Code of Ethics. (1)
---------
(1)      Incorporated by reference to the Fund's Registration Statement on
         Form N-2, filed with the SEC on January 3, 2003 (File No.
         333-102349).
(2)      Incorporated by reference to Pre-Effective Amendment No. 1 to the
         Fund's Registration Statement on Form N-2, filed with the SEC on
         August 9, 1996 (File No. 333-8039).
(3)      Incorporated by reference to the Fund's Registration Statement on
         Form N-2, filed with the SEC on April 29, 1998 (File No. 333-51295).
(4)      Incorporated by reference to the Fund's Registration Statement on
         Form N-2, filed with the SEC on July 12, 1996 (File No. 333-8039).
(5)      Incorporated by reference to the Fund's Registration Statement on
         Form N-2, filed with the SEC on August 11, 1995 (File No. 811-4875).


                                      2


<PAGE>


(6)      Incorporated by reference to the Fund's Form NSAR-B, filed with the
         SEC on February 28, 2002.
(7)      Incorporated by reference to Pre-Effective Amendment No. 1 to the
         Fund's Registration Statement on Form N-2, filed with the SEC on
         May 14, 1998 (File No. 333-51295).
</TABLE>

Item 25. Marketing Arrangements

         Not applicable.

Item 26. Other Expenses of Issuance and Distribution

         The following table sets forth the estimated expenses to be incurred
in connection with the offering described in this Registration Statement:

<TABLE>
<CAPTION>

                                                                         Estimated
        Category                                                         Expenses
        --------------------------------------------------------    ------------------
<S>                                                                 <C>
        Registration
        fees...................................................             6,221
        New York Stock Exchange listing fees...................            52,569
        Printing expenses......................................            30,000
        Subscription Agent fees and expenses ..................            15,000
        Information Agent fees and expenses....................            12,000
        Accounting fees and
        expenses...............................................             4,200
        Legal fees and
        expenses...............................................           100,000
        Miscellaneous..........................................             5,010
                                                                    ------------------

        Total..................................................           225,000
                                                                    ==================
</TABLE>

Item 27. Person Controlled by or Under Common Control with Fund

         None.

Item 28. Number of Holders of Securities

         The following information is given as of January 22, 2003:


<TABLE>
<CAPTION>
                                                                                         Number of
                                    Title of Class                                     Record Holders
-----------------------------------------------------------------------------        ------------------
<S>                                                                                  <C>
Common Stovalue..............................................................              2,005
7.80% Cumulative Preferred Stock, $.001 par value............................                 19
7.30% Tax-Advantaged Cumulative Preferred Stock, $.001 par value.............                 28
</TABLE>

Item 29. Indemnification

         Reference is made to Section 2-418 of the Maryland General
Corporation Law, Article VI and VII of the Fund's Articles of Incorporation,
as amended, Article V of the Fund's Amended and Restated By-laws and the
Investment Advisory Agreement, each of which provide for indemnification.


                                      3


<PAGE>


         The Investment Advisory Agreement between the Fund and R & A
obligates the Fund to indemnify R & A and hold it harmless from and against
all damages, liabilities, costs and expenses (including reasonable attorneys'
fees) incurred by R & A in or by reason of any action, suit, investigation or
other proceeding arising out of or otherwise based upon any action actually or
allegedly taken or omitted to be taken by R & A in connection with the
performance of any of its duties or obligations under the Agreement or
otherwise as an investment adviser of the Fund. R & A is not entitled to
indemnification in respect of any liability to the Fund or its security
holders to which it would otherwise be subject by reason of its willful
misfeasance, bad faith or gross negligence.

         Insofar as indemnification for liability arising under the Securities
Act of 1933, as amended (the "1933 Act"), may be permitted to directors,
officers and controlling persons of the Fund pursuant to the foregoing
provisions or otherwise, the Fund has been advised that, in the opinion of the
SEC, such indemnification is against public policy as expressed in the 1933
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Fund
of expenses incurred or paid by a director, officer or controlling person of
the Fund in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the Fund will, unless in the opinion of its
counsel the matter has been settled by controlling precedent or such claim is
to be paid under insurance policies, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

         The Fund, its officers and directors, R & A and certain others are
presently insured under a Directors and Officers/Errors and Omissions
Liability Insurance Policy issued by ICI Mutual Insurance Company, which
generally covers claims by the Fund's stockholders and third persons based on
or alleging negligent acts, misstatements or omissions by the insureds and the
costs and expenses of defending those claims, up to a limit of $15,000,000,
with a deductible amount of $250,000.

Item 30. Business and other Connections of Investment Adviser

         Reference is made to Schedules D and F to Royce's amended Form ADV
(File No. 801-8268), which are incorporated herein by reference.

Item 31. Location of Accounts and Records

         Records are located at:

          1.      Royce Value Trust, Inc.
                  10th Floor
                  1414 Avenue of the Americas
                  New York, New York 10019

(Corporate records and records relating to the function of Royce as investment
adviser)

          2.      State Street Bank and Trust Company
                  Two Heritage Drive
                  North Quincy, Massachusetts 02171


                                      4


<PAGE>


                  Attention: Royce Value Trust, Inc.

(Records relating to its functions as Custodian for the Fund)

          3.      Equiserve Trust Company, N.A.
                  225 Franklin Street
                  Boston, Massachusetts 02110
                  Attention: Royce Value Trust, Inc.

(Records relating to its functions as Registrar and Transfer Agent and
Dividend Paying Agent for the Fund)

Item 32. Management Services

         Not applicable.

Item 33. Undertakings

(1) The Fund undertakes to suspend the offering of its shares until it amends
its prospectus if (a) subsequent to the effective date of its Registration
Statement, the net asset value of its shares declines more than 10% from its
net asset value as of the effective date of the Registration Statement or (b)
the net asset value increases to an amount greater than its net proceeds as
stated in the prospectus.

(2) Not applicable.

(3) The Fund hereby undertakes to supplement the prospectus, after the
expiration of the subscription period, to set forth the results of the
subscription offer, and the terms of any subsequent reoffering thereof.

(4) Not applicable.

(5) Not applicable.

(6) The Fund undertakes to send by first class mail or other means designed to
ensure equally prompt delivery, within two business days of receipt of a
written or oral request, any Statement of Additional Information.


                                      5


<PAGE>


                                  SIGNATURES

         Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Fund has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York and State of New York on the 28th day of
January, 2003.

                                ROYCE VALUE TRUST, INC.
                                (Fund)

                                By:  /s/ Charles M. Royce
                                     ----------------------------------------
                                     Charles M. Royce, President and Director


         Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>

Signature                                Title                                                Date
---------                                -----                                                ----
<S>                                      <C>                                                  <C>
/s/ Charles M. Royce*                    President and Director
---------------------------------        (Principal Executive Officer)
Charles M. Royce

/s/ John D. Diederich*                   Treasurer
---------------------------------        (Principal Financial and Accounting
John D. Diederich                        Officer)

/s/ Donald R. Dwight*                    Director
---------------------------------
Donald R. Dwight

/s/ Mark R. Fetting*                     Director
---------------------------------
Mark R. Fetting

/s/ Richard M. Galkin*                   Director
---------------------------------
Richard M. Galkin

/s/ Stephen L. Isaacs*                   Director
---------------------------------
Stephen L. Isaacs

/s/ William L. Koke*                     Director
---------------------------------
William L. Koke

/s/ David L. Meister*                    Director
---------------------------------
David L. Meister

/s/ G. Peter O'Brien*                    Director
---------------------------------
G. Peter O'Brien

*By: /s/ Charles M. Royce                                                                      January 28, 2003
     ----------------------------
      (Charles M. Royce,
Attorney-in-Fact)
</TABLE>



<PAGE>

                                 Exhibit Index

Exhibit Number    Document
--------------    --------

    (l)           Opinion and Consent of Sidley Austin Brown & Wood LLP
    (n)(1)        Consent of Tait, Weller & Baker
       (2)        Consent of Ernst & Young LLP


                                      7
<PAGE>

</TEXT>
</DOCUMENT>
