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

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT
OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES

Investment Company Act File Number: 811-05379

Name of Registrant: Royce Focus Trust, Inc.

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

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

Registrant’s telephone number, including area code: (212) 508-4500
Date of fiscal year end: December 31, 2012
Date of reporting period: January 1, 2013 – June 30, 2013




Item 1. Reports to Shareholders.


 

SEMIANNUAL
REVIEW AND REPORT

TO STOCKHOLDERS

 

Royce Value Trust

Royce Micro-Cap Trust

Royce Focus Trust
     
 
 
 
 


www.roycefunds.com





A Few Words on Closed-End Funds


Royce & Associates, LLC manages three closed-end funds: Royce Value Trust, the first small-cap value closed-end fund offering; Royce Micro-Cap Trust, the only micro-cap closed-end fund; and Royce Focus Trust, a closed-end fund that invests in a limited number of primarily small-cap companies.

A closed-end fund is an investment company whose shares are listed and traded on a stock exchange. Like all investment companies, including open-end mutual funds, the assets of a closed-end fund are professionally managed in accordance with the investment objectives and policies approved by the Fund’s Board of Directors. A closed-end fund raises cash for investment by issuing a fixed number of shares through initial and other public offerings that may include shelf offerings and periodic rights offerings. Proceeds from the offerings are invested in an actively managed portfolio of securities. Investors wanting to buy or sell shares of a publicly traded closed-end fund after the offerings must do so on a stock exchange, as with any publicly traded stock. This is in contrast to open-end mutual funds, in which the fund sells and redeems its shares on a continuous basis.

A Closed-End Fund Offers Several Distinct Advantages Not Available from an Open-End Fund Structure

 

Since a closed-end fund does not issue redeemable securities or offer its securities on a continuous basis, it does not need to liquidate securities or hold uninvested assets to meet investor demands for cash redemptions, as an open-end fund must.

 

In a closed-end fund, not having to meet investor redemption requests or invest at inopportune times is ideal for value managers who attempt to buy stocks when prices are depressed and sell securities when prices are high.

 

A closed-end fund may invest more freely in less liquid portfolio securities because it is not subject to potential stockholder redemption demands. This is particularly beneficial for Royce-managed closed-end funds, which invest in small- and micro-cap securities.

 

The fixed capital structure allows permanent leverage to be employed as a means to enhance capital appreciation potential.

 

Unlike Royce’s open-end funds, our closed-end funds are able to distribute capital gains on a quarterly basis. Each of the Funds has adopted a quarterly distribution policy for its common stock. Please see page 16-18 for more details.

   

 

   

We believe that the closed-end fund structure is very suitable for the long-term investor who understands the benefits of a stable pool of capital.


Why Dividend Reinvestment is Important
A very important component of an investor’s total return comes from the reinvestment of distributions. By reinvesting distributions, our investors can maintain an undiluted investment in a Fund. To get a fair idea of the impact of reinvested distributions, please see the charts on pages 11, 13, and 15. For additional information on the Funds’ Distribution Reinvestment and Cash Purchase Options and the benefits for stockholders, please see page 18 or visit our website at www.roycefunds.com.

Each of the Boards of Directors of Royce Value Trust, Royce Micro-Cap Trust and Royce Focus Trust have authorized a managed distribution policy (“MDP”) paying quarterly distributions at an annual rate of 5% of the average of the prior four quarter-end net asset values. With each distribution, the Funds will issue a notice to stockholders and an accompanying press release which will provide detailed information regarding the amount and composition of the distribution and other information required by a Fund’s MDP. You should not draw any conclusions about a Fund’s investment performance from the amount of distributions or from the terms of a Fund’s MDP. A Fund’s Board of Directors may amend or terminate the MDP at any time without prior notice to stockholders; however, at this time, there are no reasonably foreseeable circumstances that might cause the termination of any of the MDPs.


This page is not part of the 2013 Semiannual Report to Stockholders



Table of Contents  

   
Semiannual Review  

   
Performance Table 2
   
Letter to Our Stockholders 3
   
Postscript: Searching for Super Small-Cap Companies
   Through the Macro Noise
Inside Back Cover
   
   
Semiannual Report to Stockholders 9
   
   
 
   

For 40 years, we have used a value approach to invest in small-cap securities. We focus primarily on the quality of a company’s balance sheet, its ability to generate free cash flow, and other measures of profitability or sound financial condition. We then use these factors to assess the company’s current worth, basing the assessment on either what we believe a knowledgeable buyer might pay to acquire the entire company or what we think the value of the company should be in the stock market.

   
   

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Performance Table  

                                                 
NAV Average Annual Total Returns       Through June 30, 2013
                                                 

    Royce   Royce   Royce   Russell   Russell   Russell
    Value Trust   Micro-Cap Trust   Focus Trust   2000 Index   Microcap Index   2500 Index

Year-to-Date1     12.42 %     13.43 %     2.60 %     15.86 %       18.32 %       15.42 %

One-Year     24.64       25.00       14.40       24.21       25.38       25.61  

Three-Year     16.17       17.06       10.57       18.67       18.28       19.57  

Five-Year     6.24       7.39       1.45       8.77       8.53       9.21  

10-Year     9.35       9.89       10.57       9.53       7.81       10.34  

15-Year     8.39       8.92       8.90       6.60       n.a.       8.07  

20-Year     10.30       n.a.       n.a.       8.88       n.a.       10.31  

25-Year     10.87       n.a.       n.a.       9.34       n.a.       10.83  

Since Inception     10.61       10.86       9.90       n.a.       n.a.       n.a.  

Inception Date   11/26/86   12/14/93   11/1/962     n.a.       n.a.       n.a.  

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


Important Performance and Risk Information
All performance information in this Review and Report reflects past performance, is presented on a total return basis, and reflects the reinvestment of distributions. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when sold. Current performance may be higher or lower than performance quoted. Current month-end performance may be obtained at www.roycefunds.com. Certain immaterial adjustments were made to the net assets of Royce Micro-Cap Trust at 12/31/12 for financial reporting purposes, and as a result the net asset value originally calculated on that date and the total return based on that net asset value differs from the adjusted net asset value and total return reported in the Financial Highlights. All indexes referenced are unmanaged and capitalization-weighted. Each index’s returns include net reinvested dividends and/or interest income. Russell Investment Group is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Russell Investment Group. The Russell 2000 Index is an index of domestic small-cap stocks that measures the performance of the 2,000 smallest publicly traded U.S. companies in the Russell 3000 Index. The Russell Microcap Index includes 1,000 of the smallest securities in the small-cap Russell 2000 Index, along with the next smallest eligible securities as determined by Russell. The Russell 2500 Index is an index of the 2,500 smallest publicly traded U.S. companies in the Russell 3000 Index.

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Letter to Our Stockholders

 
 

Exile on Wall Street

   
The small-cap market reached peaks in July 2007 and April 2011 before surging to its most recent record highs. Surveying the small-cap landscape from the vantage points of these respective summits shows that each cycle (the second of which is still going on) has presented a difficult environment for active managers such as the parties penning this letter. This has been particularly true of the most recent period, which has seen solid results for the major small-cap indexes, ETFs, and other passive investment vehicles, while the active managers who once routinely outperformed all of them have achieved more muted results. The current phase has favored more defensive sectors and investments with high dividend yields, such as REITs and MLPs. Strong balance sheets and higher-quality metrics such as returns on invested capital (ROIC) have also been out of favor in this world of easy money and zero interest rates that tends to be more supportive of lower-quality businesses. And we have not even mentioned the flight to fixed income, which, along with the proliferation of ETFs, has been one of the most significant developments in the investment world during the last three-plus years.
     These events took shape in a market that has featured regular spasms of high volatility and periods of declining stock prices, some of them of a historically extreme nature. These are periods in which fundamentally driven active management approaches such as ours have historically proven their worth. That many of our portfolios struggled to preserve their value as effectively as they have done historically during the market downturns since the pre-crisis peak in July 2007 has been frustrating and humbling, to say the least. Yet investing is a routinely humbling business. This is not the first time (and almost certainly won’t be the last)
  By buying out-of-favor companies and
rooting around beaten down sectors and
industries, we do things every day that
may not look particularly savvy to many
on Wall Street, at least in the short run.
After 40 years, we are used to doing
things according to our own principles
and long-term time frame and do not
mind being something akin to exiles on
Wall Street.

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Charles M. Royce, President



As it has for the past few years,
sentiment once again shifted
dramatically in the second quarter
and volatility returned to the
markets. However, unlike the
previous few years, it was the bond
market that felt the brunt of the
pain as speculation that the Federal
Reserve may soon pull back from
its unprecedented stimulus efforts
fueled a one percentage point jump
in 10-year Treasury yields during the
final two months of the quarter.

After gaining 12.4% in the first quarter
of 2013, the Russell 2000 Index
advanced 3.1% in the second quarter,
finishing the first half of the year with
a 15.9% gain. At the same time, the
CBOE Volatility Index (VIX), after
hitting a fresh 2013 low in March 2013,
spiked 33% in the second quarter—the
largest quarterly increase since
the third quarter of 2011.

In the span of one quarter, we have
transitioned from a world in which the
idea that interest rates would remain
indefinitely low to one in which the
shift back to a more normalized yield
environment is now center stage.





Continued on page 6...
    Letter to Our Stockholders

in which we have endured a prolonged relative slump versus the small-cap market as a whole. But behind every contrarian, especially an out-of-sync one, is a disciplined investor. By buying out-of-favor companies and rooting around beaten down sectors and industries, we do things every day that may not look particularly savvy to many on Wall Street, at least in the short run. After 40 years, we are used to doing things according to our own principles and long-term time frame and do not mind being something akin to exiles on Wall Street.
     It should come as no surprise, then, that we are not persuaded—or even bothered—by those voices suggesting that active management has perhaps seen its day in the sun. With ETFs and high-frequency trading seemingly making markets that much more efficient, with so many investors disenchanted with equities, and with sustained periods of relative underperformance in the books, perhaps (so the argument runs) active managers should simply switch to indexing or find another line of work. To be sure, the last several years have given us little to crow about (while serving up plenty of crow to eat). However, we remain as enthusiastic as ever about active management in general and value-oriented small-cap investing in particular. To paraphrase Mark Twain, we find reports of the death of active management to be greatly exaggerated.
     So while lower-quality stocks have dominated the market and outperformed many of our holdings through the current cycle, we are undeterred in our conviction that well-run, cash-rich businesses with high returns on invested capital remain the best route to building long-term wealth. It is also important to remember that many stocks possessing these attributes have done very well on an absolute basis through the current cycle even as they have suffered in comparison to their more defensive or higher-yielding cohorts. Finally, we have already seen signs of a change in which we think the kind of higher-quality companies that we favor can assume a leadership role. There were encouraging signals in May and in the second half of 2012 that investors were giving more thought to fundamentals. In short, we are excited about the days ahead. We are bullish not only on stocks but, more important, on our specific approach to quality and active management.


Tumbling Dice
When 2012 drew to a close, we were equally optimistic. The second half of 2012 offered much that was good for what ailed quality-centric investors. The last few months in particular saw a brief resurgence of quality as many companies with strong balance sheets, high ROIC, and strong cash flow characteristics outpaced the rest of the small-cap market. This rally did not last long into 2013, however, as more highly levered and lower-ROIC businesses soon resumed leadership. Quality stocks for the most part acquitted themselves well in the bullish first quarter; they simply did not attract as much interest as more defensive areas. The strongest sectors for the small-cap Russell 2000 Index during the first quarter were Health Care, Consumer Discretionary, and Financials, the latter drawing much of its strength from REITs. More cyclical sectors such as Technology and Energy, which we see as featuring some of the most attractively valued, high-quality companies available over the last couple of years, lagged.
     The result was a strong opening quarter for stocks across the board. Small-caps led, showing positive returns for the third consecutive quarter. The Russell 2000 gained 12.4% compared
 
 
       

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to respective gains of 11.0% and 10.6% for the large-cap Russell 1000 and S&P 500 Indexes, while the more tech-oriented Nasdaq Composite rose 8.2%. Quality stocks resuming their back seat was not entirely surprising. Stocks as a whole have been on an encouraging roll since the low on June 2, 2012, so some give-back was not entirely unexpected, even if it was somewhat disappointing.

   
     Going into the second quarter, we were confident that the rally could last, though we also assumed that a correction would be a natural part of a longer-term bullish trend, as has been the case over the past several years. While share prices all over the globe were more volatile in the second quarter, on the domestic front a rocky market still resulted in positive returns, with strength across all asset classes. The tech-oriented Nasdaq Composite led for the quarter with a 4.2% advance. Small-cap edged out the large-cap indexes, with the Russell 2000 up 3.1% for the quarter compared to respective gains of 2.9% and 2.7% for the S&P 500 and Russell 1000 Indexes.
   
     One-year results were also strong for the major indexes, with the Russell 2000 leading (+24.2%), followed by the Russell 1000 (+21.2%), S&P 500 (+20.6%), and Nasdaq (+16.0%). Three-year results were even more closely aligned, offering compelling evidence of just how tightly correlated equity returns have been. Average annual total returns for the three-year period ended June 30, 2013 for the Russell 2000 (+18.7%), the Russell 1000 (+18.6%), and S&P 500 (+18.5%) were within two-tenths of one another while the Nasdaq rose 17.3% over the same span. That stocks continue to perform well could be seen by the fact that trailing one-, five-, and 10-year results for the small-cap and two large-cap indexes were well ahead of their returns for the same periods ended one year prior.
     Micro-cap returns also continued their ascent. The Russell Microcap Index gained 18.3% year-to-date through June 30, 2013. Its one-year result was also strong, up 25.4%. The micro-cap index’s trailing three-, five-, and 10-year results were also fine, though it trailed the Russell 2000 in these periods. By contrast, mid-caps narrowly underperformed year-to-date—the Russell Midcap Index rose 15.5% through the end of June—but outpaced their small-cap peers for the one-, three-, 10-, 15-, 20-, and 25-year periods ended June 30, 2013. This impressive long-term record helps to explain why we think of mid-caps as the market’s stealth asset class.
     Outside the U.S., short- and intermediate-term results were far less bullish. The first quarter saw positive, though lower, returns for the Russell ex-U.S. Small Cap Index, which climbed 6.5% while the Russell ex-U.S. Large Cap Index was up 3.1%. Second-quarter results slipped into the red as the Russell ex-U.S. Small Cap Index fell 4.5% and the Russell Global ex-U.S. Large Cap Index was down 2.9%. This resulted in considerably lower year-to-date results through June 30, 2013: the Russell ex-U.S. Small Cap Index was up 1.8% while its large-cap sibling managed only a 0.1% advance. In this context it was hardly surprising that one-, three-, and five-year results for the non-U.S. indexes were also well behind their U.S. equivalents for the periods ended June 30, 2013.
 









We are bullish not only on stocks
but, more important, on our
specific approach to quality
and active management.

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  From our perspective, the end to the
easy money bias that has been in place
for several years presents an attractive
environment for active managers
with an absolute orientation like
us, as underlying fundamentals and
less-leveraged balance sheets should
become increasingly more important.

We have long thought that the ongoing
efforts to reflate the economy through
numerous quantitative easings and a
zero interest rate policy would have
unintended consequences. To be
sure, the actions of the Fed have been
distorting asset pricing and valuations
in the equity market in a number of
ways. Many of the fundamental qualities
we hold so dear, for example, seem
temporarily suspended in an investment
world where highly-leveraged businesses
are benefiting from the ability to
restructure their debt, lower funding
costs, and extend maturities.

The unintended consequence of
leveling the playing field has given
lower-quality companies the luxury of
time, which in a normal environment
they would not have. It would not
surprise us to see these trends reverse
as tapering is implemented and
monetary stimulus is slowly trimmed
back and ultimately withdrawn.

To be clear, our balance sheet scrutiny is
paramount to our process, particularly
our focus on risk. To that end, we have
always chosen to focus on companies
with high operating leverage. Our
measure of financial leverage centers
on the ratio of assets to stockholders’
equity, looking for a two-to-one ratio
for non-financial companies.


Continued on page 8...
 
 
 
Letter to Our Stockholders

 
Shine a Light
On an NAV (net asset value) basis, each of our three closed-end portfolios—Royce Value Trust, Micro-Cap Trust, and Focus Trust—underperformed their respective benchmarks for the year-to-date period through the end of June (see table on opposite page). Market price results for Royce Value Trust and Royce Micro-Cap Trust were better on a relative basis. These two portfolios also posted strong absolute results on an NAV basis in the first half, which somewhat mitigated our disappointment with falling behind our benchmarks. Royce Focus Trust suffered in part from a relatively high exposure to metals & mining companies, many of which struggled in the first half.
     As a group, the Funds featured in this Semiannual Review and Report had strong results from several sectors, most notably Information Technology, Financials, Industrials, and Consumer Discretionary. Royce Focus Trust and, to a lesser extent, Royce Micro-Cap Trust each paid a price for their respective exposures to the Materials sector in the form of sizable net losses. Declines for the sector in both portfolios came overwhelmingly from the metals & mining industry, and especially from precious metals mining companies, a once sterling industry that has recently become a persistent trouble spot.
     In the first quarter cyclical companies mostly lagged defensive sectors, but the second quarter offered a more eclectic, and thus encouraging, mix. Within the Russell 2000, both Consumer-oriented sectors remained strong, as did Health Care, Information Technology, and Telecommunications Services. However, the more cyclical Energy, Materials, and Industrials sectors fell, as did more high-yielding areas such as REITs and Utilities. The S&P 500 showed a similarly scrambled pattern among large-cap sector returns. Although painful in the short term, we see this growing differentiation as a very positive sign that the market is beginning to break out of its correlation groove.
   
 
Let it Loose
During the first half of 2013 the stock market displayed a broadly similar pattern of results to the first halves of 2010, 2011, and 2012. This was a model in which a robustly bullish first quarter gave way to a far more volatile second quarter, with a sudden shift in market sentiment driven primarily by global macro issues. However, this year’s first half also showed some notable differences that suggest a break with the market’s previously unyielding pattern of the last three calendar years—a pattern marked by closely correlated returns and, as a result, relatively uninspired results for many active managers. For example, during the first quarter of 2013 the market was remarkably good at tuning out a great deal of ominous political news. When Congress and the President failed to produce a long-term plan to tackle the deficit, the market mostly shrugged and continued to climb. When sequestration began to take effect in the aftermath of the stalled budget negotiations, stocks once again paused then resumed moving upward.
     This stood in stark contrast to what we saw in 2010, 2011, and most of the first half of 2012, when the markets seemed to react to little other than macro headlines that were themselves largely driven by political events. In addition, when macro issues did inspire a sell-off, year-to-date

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2013 NAV YEAR-TO-DATE TOTAL RETURNS FOR THE ROYCE FUNDS VS.
RUSSELL 2000, RUSSELL MICROCAP AND THE RUSSELL 2500
as of 6/30/13
   

   
   
     
     
returns were not too adversely affected, with most stocks and domestic indexes escaping the more uncertain second quarter of 2013 in the black despite a 33% second-quarter spike in the CBOE Volatility Index (VIX). This increase was the largest quarterly advance for the VIX, which hit a fresh 2013 low in March before spiking higher, since the third quarter of 2011. Another significant deviation from the pattern of previous years was the pain born by the bond market. Speculation that the Fed would taper its stimulus efforts fueled a full one percentage point jump in 10-year Treasury yields during May and June. We saw an encouraging variation in performance at the stock, industry, and sector levels, which was especially pronounced in these same two months, as signals that the economy was slowly finding its way back to more historically normal—that is, less Fed-dependent—levels of growth and activity.

Happy?
All of this makes us optimistic. Our contention is that the unusual performance pattern spurred by the effects of multiple rounds of QE and zero interest rates has begun to unwind, which will set the stage for more fundamentally based value-oriented approaches to take hold of market leadership. One sign that the process has already begun is that in the space of roughly three months we have moved from an environment in which many believed that interest rates would remain low indefinitely to one in which more historically normal yields are inching closer and closer. We have argued that an unintended consequence of QE and zero interest rates has been to make life a little too easy for lower-quality companies. Highly levered businesses have been able to re-finance their obligations at record low rates and thus not pay the usual economic cost for being over-levered. This unnatural and (we believe) temporary advantage reduced the attractiveness of the conservatively capitalized businesses that have been our portfolio mainstays since the early 1970s. However, with Fed policy changing, we are moving closer to a market in which strong fundamentals are likely to be in high demand once more.
  Our contention is that the unusual
performance pattern spurred by the
effects of multiple rounds of QE and
zero interest rates has begun to
unwind, which will set the stage for
more fundamentally based value-
oriented approaches to take hold
of market leadership.

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This is an important part of our
ongoing search for a company’s
“margin of safety.” If a company is
carrying too much debt, it impedes its
own ability to meet the challenge of
out-of-left-field occurrences such as
lawsuits, the loss of a major customer,
or overseas currency crises.

A conservatively capitalized company,
especially a smaller company, can
better weather these storms because
it has the necessary financial reserves
to do so, while a company with too
much debt on the balance sheet runs a
greater risk that stormy weather will
turn into a hurricane.

We also view financially strong
companies as well-positioned to grow.
The assets of these companies are
derived more from retained earnings
than paid-in capital, i.e., they have
the ability to self-fund their own
success as a business.

Of course, transitions are never easy.
Shifting back to a more normalized
yield environment is likely to be marked
by increased volatility and pockets of
uncertainty. Stock prices have begun
the transition from their reliance on
monetary policy to fundamentals,
which is a process we believe will stress
the importance of companies with
strong, less-leveraged balance sheets,
excess cash flow generation, and the
ability to self-finance.

We look forward to a more normalized
yield environment that could usher in
that long-awaited flight to quality.



 
   
Letter to Our Stockholders



     What Ben Bernanke actually said back in June about the Fed potentially tapering its bond purchases seemed entirely positive. Many of us have been waiting for the economy and the markets to return to more historically normal conditions for some time. We have been especially eager to see interest rates normalize, which would be as sure a sign as any that the economy and markets are operating at something like business as usual (and this period of QE and zero interest rates has been anything but that). We suspect an environment in which the Fed is not as intimately involved in the economy will be a healthy one for stocks. So while many investors saw the Fed’s plans to taper bond purchases as a cause for alarm, we saw it as an affirmation that the economy is healing as it grows. Within the next couple of years, it should grow even stronger. Along with more historically normal—that is, higher—rates, this would be a very welcome development for equities in our view, particularly the kind of attractively valued, well-run, financially strong small-cap businesses that remain our favorites. Guarded optimism may be as close to bliss as we can usually get, but we have seldom felt more confident about our investment approach than we do right now, looking out on the months and years to come.

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

July 31, 2013

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Table of Contents    

     
Semiannual Report to Stockholders    

Managers’ Discussions of Fund Performance    
     
Royce Value Trust   10
     
Royce Micro-Cap Trust   12
     
Royce Focus Trust   14

History Since Inception   16
     
Distribution Reinvestment and Cash Purchase Options   18
     
Schedules of Investments and Other Financial Statements    
     
Royce Value Trust   19
     
Royce Micro-Cap Trust   35
     
Royce Focus Trust   48
     
Directors and Officers   57
     
Board Approval of Investment Advisory Agreements   58
     
Notes to Performance and Other Important Information   60
     
 

The Royce Funds 2013 Semiannual Report to Stockholders  |  9



Royce Value Trust

 

 


AVERAGE ANNUAL NAV TOTAL RETURNS
Through 6/30/13

January–June 20131   12.42 %  

One-Year         24.64    

Three-Year         16.17    

Five-Year         6.24    

10-Year         9.35    

15-Year         8.39    

20-Year         10.30    

25-Year         10.87    

Since Inception (11/26/86)         10.61    

1 Not annualized  
       
CALENDAR YEAR NAV TOTAL RETURNS  

Year   RVT     Year     RVT    

2012   15.4 %   2004     21.4 %  

2011   -10.1     2003     40.8    

2010   30.3     2002     -15.6    

2009   44.6     2001     15.2    

2008   -45.6     2000     16.6    

2007   5.0     1999     11.7    

2006   19.5     1998     3.3    

2005   8.4     1997     27.5    

                     
TOP 10 POSITIONS % of Net Assets  

Carter’s   1.2 %  

HEICO Corporation   1.1    

PAREXEL International   1.0    

Coherent   1.0    

Lincoln Electric Holdings   1.0    

Reliance Steel & Aluminum   0.9    

E-L Financial   0.9    

Federated Investors Cl. B   0.9    

On Assignment   0.8    

Ethan Allen Interiors   0.8    

                     
PORTFOLIO SECTOR BREAKDOWN % of Net Assets  

Industrials   28.3 %  

Information Technology   21.4    

Financials   16.6    

Consumer Discretionary   13.9    

Materials   6.7    

Health Care   6.6    

Energy   5.0    

Consumer Staples   1.8    

Telecommunication Services   0.7    

Diversified Investment Companies   0.7    

Miscellaneous   4.9    

Preferred Stock   0.1    

Outstanding Line of Credit,
Net of Cash and Cash Equivalents
  -6.7    

 
 
 

 
Manager’s Discussion
For the year-to-date period ended June 30, 2013, Royce Value Trust (RVT) gained 12.4% on an NAV (net asset value) basis and 15.9% on a market price basis compared to respective gains of 15.9% and 16.2% for its unleveraged small-cap benchmarks, the Russell 2000 and S&P SmallCap 600 Indexes, for the same period. For the bullish first quarter the Fund rose 10.6% on an NAV basis and 13.7% on a market price basis, in the latter case outperforming both of its unleveraged benchmarks as the Russell 2000 was up 12.4% and the S&P 600 SmallCap advanced 11.8%.
     The second quarter was more volatile and uncertain. The globe’s capital markets fell precipitously in late June following the announcement by Fed Chairman Ben Bernanke that the central bank was likely to slow the pace of its monthly bond purchases later in the year. Along with less-than-stellar news out of China, Brazil, Turkey, and Europe, stock prices slipped for several sessions before beginning to stabilize here in the U.S. The Fund trailed both of its benchmarks in the second quarter, gaining 1.7% on an NAV basis and 1.9% on a market price basis versus 3.1% for the Russell 2000 and 3.9% for the S&P SmallCap 600.
     Longer-term results were a bit better on a relative basis. On an NAV and market price basis, RVT outperformed the Russell 2000 for the 15-, 20-, 25-year, and since inception (11/26/86) periods ended June 30, 2013 while outpacing the S&P 600 Small-Cap for each of those periods save the 20-year span (and on a market price basis for the 15-year period). RVT’s average annual NAV total return for the since inception period ended June 30, 2013 was 10.6%.
     Ten of the Fund’s 11 equity sectors made positive contributions in the first half of 2013. Information Technology led by a sizable margin, followed by the Industrials and Financials sectors. Detracting from performance for the year-to-date period were the Materials and Diversified Investment Companies sectors, with net losses for the latter sector being relatively modest. At the industry level, capital markets, electronic equipment, instruments & components, and machinery were the top performers. Conversely, metals & mining, closed-end funds, and commercial services & supplies were the Fund’s top three detracting industries.
      At the company level, the Fund’s top performer came from the Health Care sector. PAREXEL International is a biopharmaceutical services company that provides clinical research and consulting products and services to the biotech and med-tech device industries. We first bought shares in May of 1998 and have owned shares continuously since 1999. For many years we have liked the company’s quality characteristics and its competitive advantage in the life sciences tools & services industry. The company has been moving through a previously built-up backlog, which has improved revenues and fueled interest in the stock. We took gains in April.

  GOOD IDEAS THAT WORKED
  Top Contributors to Performance
  Year-to-Date through 6/30/131  

PAREXEL International   0.38%

Carter’s   0.28   

VistaPrint   0.24   

E-L Financial   0.24   

Mohawk Industries   0.21   

1 Includes dividends    
     
Important Performance and Risk Information
All performance information reflects past performance, is presented on a total return basis, and reflects the reinvestment of distributions. Past performance is no guarantee of future results. Current performance may be higher or lower than performance quoted. Returns as of the most recent month-end may be obtained at www.roycefunds.com. The market price of the Fund’s shares will fluctuate, so that shares may be worth more or less than their original cost when sold. The Fund invests primarily in securities of small- and micro-cap companies, which may involve considerably more risk than investing in a more diversified portfolio of larger-cap companies. Regarding the two “Good Ideas” tables shown above, the sum of all contributors to, and all detractors from, performance for all securities in the portfolio would approximate the Fund’s year-to-date performance for 2013.

10  |  The Royce Funds 2013 Semiannual Report to Stockholders



Performance and Portfolio Review



      Holdings in the metals & mining industry, which is part of the Materials sector, accounted for the majority of the Fund’s net losses in the first half of the year. Four out of 10 of the Fund’s largest detractors were metals & mining companies. Additionally, 10 of the Fund’s largest 20 detractors for the period were metals & mining businesses. Several factors worked against precious metals miners in the first half. Gold and silver prices declined significantly, mine operating costs were climbing, and several firms went through management changes. For the mining industry, it has often looked as if a recovery would never happen. In many cases, valuations have reached levels that we have not seen since the late 2008-early 2009 lows. We chose to add shares of two closed-end funds—Central Fund of Canada, which invests primarily in gold and silver bullion, and ASA Gold and Precious Metals, which invests primarily in companies involved in gold mining. We parted ways with Hochschild Mining and reduced our position in Major Drilling Group International, a contract drilling services business.
     The Board of Directors of the Fund (the “Board”) has approved, subject to stockholder approval, the contribution of a portion of the Fund’s assets to a newly formed closed-end investment company, Royce Global Value Trust, Inc. (“Royce Global Value Trust”) in exchange for Royce Global Value Trust’s common shares.
     The Fund would contribute to the Royce Global Value Trust approximately $100 million of its cash and/or securities, and would then distribute all of the shares of Royce Global Value Trust pro rata to the Common Stockholders of the Fund. The transaction is expected to be voted upon at a Special Meeting of the Fund’s Common Stockholders on September 5, 2013. The amount of capital and the number of Royce Global Value Trust’s shares to be distributed and the record and distribution dates will be announced at a later time. The distribution will be made only by means of a prospectus and this stockholder report does not constitute an offer of any securities for sale.

  GOOD IDEAS AT THE TIME
  Top Detractors from Performance
  Year-to-Date through 6/30/131  


Central Fund of Canada Cl. A -0.15%

ASA Gold and Precious Metals -0.12   

GrafTech International -0.11   

Hochschild Mining -0.11   

Major Drilling Group International -0.09   

1 Net of dividends
 
MARKET PRICE PERFORMANCE HISTORY SINCE INCEPTION (11/26/86) through 6/30/13

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

Fund Total Net Assets $1,201 million   

Number of Holdings 532   

Turnover Rate 18%   

Symbol  
    Market Price RVT   
    NAV XRVTX   

Net Leverage1 7%   

Average Market Capitalization2 $1,590 million   

Weighted Average P/E Ratio3,4 17.3x   

Weighted Average P/B Ratio3 1.8x   

U.S. Investments (% of Net Assets) 83.3%   

Non-U.S. Investments (% of Net Assets) 23.4%   

1 Net leverage is the percentage, in excess of 100%, of the total value of equity type investments, divided by net assets.
2 Geometric Average. This weighted calculation uses each portfolio holding’s market cap in a way designed to not skew the effect of very large or small holdings; instead, it aims to better identify the portfolio’s center, which Royce believes offers a more accurate measure of average market cap than a simple mean or median.
3 Harmonic Average. This weighted calculation evaluates a portfolio as if it were a single stock and measures it overall. It compares the total market value of the portfolio to the portfolio’s share in the earnings or book value, as the case may be, of its underlying stocks.
4 The Fund’s P/E ratio calculation excludes companies with zero or negative earnings (9% of portfolio holdings as of 6/30/13).
 

DOWN MARKET PERFORMANCE COMPARISON
All Down Periods of 7.5% or Greater
Over the Last 7 Years, in Percentages(%)





 
 

The Royce Funds 2013 Semiannual Report to Stockholders  |  11



Royce Micro-Cap Trust

 

 


AVERAGE ANNUAL NAV TOTAL RETURNS
Through 6/30/13

January–June 20131   13.43 %  

One-Year         25.00    

Three-Year         17.06    

Five-Year         7.39    

10-Year         9.89    

15-Year         8.92    

Since Inception (12/14/93)     10.86    

1 Not annualized  
 
CALENDAR YEAR NAV TOTAL RETURNS

Year   RMT     Year      RMT    

2012   17.3 %   2004     18.7 %  

2011   -7.7     2003     55.5    

2010   28.5     2002     -13.8    

2009   46.5     2001     23.4    

2008   -45.5     2000     10.9    

2007   0.6     1999     12.7    

2006   22.5     1998     -4.1    

2005   6.8     1997     27.1    

                     
TOP 10 POSITIONS % of Net Assets

Quaker Chemical   1.3 %  

Tennant Company   1.2    

Integrated Electrical Services   1.2    

Flexsteel Industries   1.2    

Exponent   1.2    

Seneca Foods   1.2    

Computer Task Group   1.2    

Drew Industries   1.1    

Kennedy-Wilson Holdings   1.1    

Universal Electronics   1.1    

                     
PORTFOLIO SECTOR BREAKDOWN % of Net Assets

Industrials   29.4 %  

Information Technology   23.5    

Financials   18.3    

Consumer Discretionary   11.8    

Health Care   7.6    

Materials   7.1    

Energy   3.8    

Consumer Staples   2.9    

Utilities   0.1    

Miscellaneous   5.0    

Preferred Stock   0.4    

Outstanding Line of Credit,
Net of Cash and Cash Equivalents
  -9.9    

 
 


Manager’s Discussion

Micro-cap stocks as a whole enjoyed a solid performance in the first half of 2013. For the period ended June 30, 2013, Royce Micro-Cap Trust (RMT) gained 13.4% on an NAV (net asset value) basis and 17.3% on a market price basis compared to its unleveraged benchmarks, the Russell 2000 Index and Russell Microcap Index, which had respective gains of 15.9% and 18.3%, for the same period. During the first quarter, RMT gained 12.8% on an NAV basis, falling behind both the Russell 2000 and the Russell Microcap, which rose 12.4% and 12.6%, respectively. On a market price basis, RMT outpaced both unleveraged benchmark indexes, gaining 16.0% during the first quarter.
    Unlike the bullish first quarter, the second quarter was more volatile. Market sentiment soured in late June after the Fed announced that it would likely begin winding down its quantitative easing policies later in the year. Adding to the uncertainty was the less-than-stellar news out of China, Brazil, Turkey, and Europe, which led to a drop in stock prices for several sessions before showing signs of stabilization here in the U.S. just before the end of June. RMT trailed both the Russell 2000 and Russell Microcap indexes in the second quarter, gaining 1.8% on an NAV basis and 2.4% on a market price basis compared to respective gains of 3.1% and 5.1%.
     On a long-term NAV basis, we were pleased that the Fund outperformed the Russell 2000 for the 10-, 15-year, and since inception (12/14/93) periods ended June 30, 2013. The Fund also outpaced the Russell Microcap for the 10-year period on an NAV basis. On a market price basis, RMT outperformed the Russell 2000 for the one-, three-, 10-, 15-year, and since inception (12/14/93) periods ended June 30, 2013. The Fund also outpaced the Russell Microcap for the one-, three-, and 10-year periods. (Data for the Russell Microcap only goes back to 2000.) RMT’s average annual NAV total return for the since inception period ended June 30, 2013 was 10.9%.
     Eight of the Fund’s 10 equity sectors made positive contributions in the first half of 2013, with Materials being the lone detractor. (Utilities and Telecommunication Services were basically flat.) Industrials, Information Technology, and Financials were the Fund’s top contributing sectors, followed by the Consumer Discretionary sector, which also posted notable net gains. At the industry level, building products, electronic equipment, instruments & components, and real estate management & development were the top year-to-date performers.
      We have long believed that the capital markets area is an under-appreciated industry within the Financials sector. Over the past several years, money managers have traded at very attractive valuations, largely because of the risk-averse attitude of the market. Top-five holding Virtus Investment Partners is an investment management firm that provides services to individual and institutional clients. Being in the business ourselves, we like the company’s customer- and product-

  GOOD IDEAS THAT WORKED
  Top Contributors to Performance
  Year-to-Date through 6/30/131  

Virtus Investment Partners   0.59%

comScore   0.42   

BofI Holding   0.38   

Kennedy-Wilson Holdings   0.38   

AAON   0.36   

1 Includes dividends    
     
Important Performance and Risk Information
All performance information reflects past performance, is presented on a total return basis, and reflects the reinvestment of distributions. Past performance is no guarantee of future results. Current performance may be higher or lower than performance quoted. Returns as of the most recent month-end may be obtained at www.roycefunds.com. Certain immaterial adjustments were made to the net assets of Royce Micro-Cap Trust at 12/31/12 for financial reporting purposes, and as a result the net asset value originally calculated on that date and the total return based on that net asset value differs from the adjusted net asset value and total return reported in the Financial Highlights. The market price of the Fund’s shares will fluctuate, so that shares may be worth more or less than their original cost when sold. The Fund normally invests in micro-cap companies, which may involve considerably more risk than investing in a more diversified portfolio of larger-cap companies. Regarding the two “Good Ideas” tables shown above, the sum of all contributors to, and all detractors from, performance for all securities in the portfolio would approximate the Fund’s year-to-date performance for 2013.

12  |  The Royce Funds 2013 Semiannual Report to Stockholders



Performance and Portfolio Review



centric business model. We began purchasing shares at the tail end of 2010 and began significantly reducing our position in March and late June after its share price began to hit our sell targets.
     Information Technology is another sector where we are seeing broad-based opportunities. An Internet software & services company that provides digital analytics solutions domestically and in Europe through its proprietary databases, comScore has a competitive position within its industry (some of its clients include Microsoft, Comcast, and BrightRoll). The company announced healthy fiscal first-quarter revenue growth in early May from both new and existing clients. This helped to drive its share price higher, as did news in June when the company detailed its strategy to drive growth, announced a $50 million share repurchase program, and revealed that it would be launching a new analytics product. As more and more businesses increase their digital presence, the accelerated demand for real-time data will become crucial. We began trimming our position later in June.
     San Diego-based BofI Holding has been a holding in the portfolio since late August of 2006. BofI acts as the holding company for BofI Federal Bank, an Internet-based bank that provides financing for residential properties and small businesses. The company saw its web-based banking services in both the consumer and commercial markets in high demand. We were initially attracted to its online business model and steady growth. We took gains in the first half.
     Celsion Corporation develops heat-based cancer treatments, currently focused on breast and liver cancer. Although we reduced our stake between July 2012 and January 2013, we still held a small position at the end of the first half. Its stock price cratered late in January on news that an experimental treatment for liver cancer had failed. We liked its core business and were reasonably hopeful that it could recover. Our exposure to the metals & mining industry created notable net losses for the Fund in the first half. Five out of the Fund’s top-10 detractors were from the metals & mining industry. A decline in gold and silver prices and an increase in mine operating costs were some of the major reasons why the industry has descended to valuation levels close to those we saw in late 2008-early 2009. Confident in an eventual turnaround, we added shares of gold miner Vista Gold and closed-end fund ASA Gold and Precious Metals, which invests primarily in companies involved in gold mining.

  GOOD IDEAS AT THE TIME
  Top Detractors from Performance
  Year-to-Date through 6/30/131  


Celsion Corporation -0.32%

Vista Gold -0.30   

ASA Gold and Precious Metals -0.20   

Golden Star Resources -0.18   

PMFG -0.14   

1 Net of dividends
 
MARKET PRICE PERFORMANCE HISTORY SINCE INCEPTION (12/14/93) through 6/30/13

 
1 Reflects the cumulative total return of an investment made by a stockholder who purchased one share at inception ($7.50 IPO), reinvested distributions and fully participated in the primary subscription of the 1994 rights offering.
2 Reflects the actual market price of one share as it traded on the NYSE and, prior to 12/1/03, on the Nasdaq.

FUND INFORMATION AND
PORTFOLIO DIAGNOSTICS

Fund Total Net Assets $357 million   

Number of Holdings 363   

Turnover Rate 16%   

Symbol  
    Market Price RMT   
    NAV XOTCX   

Net Leverage1 10%   

Average Market Capitalization2 $372 million   

Weighted Average P/E Ratio3,4 18.5x   

Weighted Average P/B Ratio3 1.6x   

U.S. Investments (% of Net Assets) 96.6%   

Non-U.S. Investments (% of Net Assets) 13.3%   

1 Net leverage is the percentage, in excess of 100%, of the total value of equity type investments, divided by net assets.
2 Geometric Average. This weighted calculation uses each portfolio holding’s market cap in a way designed to not skew the effect of very large or small holdings; instead, it aims to better identify the portfolio’s center, which Royce believes offers a more accurate measure of average market cap than a simple mean or median.
3 Harmonic Average. This weighted calculation evaluates a portfolio as if it were a single stock and measures it overall. It compares the total market value of the portfolio to the portfolio’s share in the earnings or book value, as the case may be, of its underlying stocks.
4 The Fund’s P/E ratio calculation excludes companies with zero or negative earnings (21% of portfolio holdings as of 6/30/13).
 

DOWN MARKET PERFORMANCE COMPARISON
All Down Periods of 7.5% or Greater
Over the Last 7 Years, in Percentages(%)





 
 

The Royce Funds 2013 Semiannual Report to Stockholders  |  13



Royce Focus Trust

 

 


AVERAGE ANNUAL NAV TOTAL RETURNS
Through 6/30/13

January–June 20131   2.60 %  

One-Year         14.40    

Three-Year         10.57    

Five-Year         1.45    

10-Year         10.57    

15-Year         8.90    

Since Inception (11/1/96)2 9.90    

1 Not annualized  
2 Royce & Associates assumed investment management responsibility for the Fund on 11/1/96.  
       
CALENDAR YEAR NAV TOTAL RETURNS  

Year   FUND     Year     FUND    

2012   11.4 %   2004     29.3 %  

2011   -10.5     2003     54.3    

2010   21.8     2002     -12.5    

2009   54.0     2001     10.0    

2008   -42.7     2000     20.9    

2007   12.2     1999     8.7    

2006   15.8     1998     -6.8    

2005   13.3     1997     20.5    

                     
TOP 10 POSITIONS % of Net Assets  

Western Digital   4.9 %  

Microsoft Corporation   4.2    

Berkshire Hathaway Cl. B   4.0    

Franklin Resources   3.3    

Helmerich & Payne   3.2    

Buckle (The)   3.1    

Exxon Mobil   3.0    

Mosaic Company (The)   2.9    

Myriad Genetics   2.9    

Thor Industries   2.7    

                     
PORTFOLIO SECTOR BREAKDOWN % of Net Assets  

Materials   19.5 %  

Information Technology   19.1    

Financials   17.7    

Energy   12.8    

Consumer Discretionary   11.6    

Industrials   7.4    

Consumer Staples   6.4    

Health Care   2.9    

Cash and Cash Equivalents   2.6    

 
 
 

 
Manager’s Discussion
For the six-month period ended June 30, 2013, Royce Focus Trust (FUND) gained 2.6% on an NAV (net asset value) basis and 8.6% on a market price basis compared to gains of 15.4% for the small- and mid-cap Russell 2500 Index and 15.9% for the small-cap Russell 2000 Index, for the same period. The Fund could not keep pace through the first quarter of 2013, a more or less consistently bullish period that lifted share prices across asset classes. The Fund climbed 2.3% on an NAV basis and 7.3% on a market price basis in the first quarter, lagging behind gains of 12.8% for the Russell 2500 and 12.4% for the Russell 2000.
     Following this bull run, the markets shifted to a more volatile and unsettled mode. The second quarter saw declines in the emerging markets and a slowdown in China that, combined with Fed Chairman Ben Bernanke’s announcement that the pace of the central bank’s $85 billion monthly bond purchase program was likely to slow by the end of the year, further distorted valuations and depressed asset prices. The market’s reaction to these macro headlines was swift and dramatic, though U.S. stocks generally did a better job of pushing through these challenges than many non-U.S. stocks. Most U.S. indexes finished the quarter in the black. FUND lagged both its benchmarks in the second quarter, gaining 0.2% on an NAV basis and 1.3% on a market price basis versus respective gains of 2.3% and 3.1% for the Russell 2500 and Russell 2000.
     While we were disappointed by FUND’s intermediate-term performance on a relative scale, we were generally pleased with its returns on an absolute basis, with the exception of its five-year results through the end of June. On an NAV and market price basis, FUND outperformed the Russell 2500 and the Russell 2000 for the 10-, 15-year, and since inception of our management (11/1/96) periods ended June 30, 2013. The Fund’s average annual NAV total return for the since inception period ended June 30, 2013 was 9.9%.
     Seven of the Fund’s eight equity sectors contributed positively to the Fund’s year-to-date performance, with Information Technology, Consumer Discretionary, Consumer Staples, and Financials leading by a wide margin. Computers & peripherals, specialty retail, and personal products positively impacted the Fund’s performance at the industry level, with the metals & mining industry being a large and significant detractor. Precious metals miners accounted for eight of the Fund’s ten—and nine of its 20—largest detractors for the period. Several factors worked against these holdings in the first half. Gold and silver prices declined significantly, mine operating costs were climbing, and several firms went through management changes. Warren Buffett once said, “Only when the tide goes out do you discover who’s been swimming naked.” For the mining industry, it has often looked as if the tide was never coming back in. In many cases, valuations have reached what we view as rock-bottom levels that have not been seen since the late 2008-early 2009 lows. For the most part, we have chosen to hold those companies that we think look best positioned

  GOOD IDEAS THAT WORKED
  Top Contributors to Performance
  Year-to-Date through 6/30/131  

Western Digital   1.75%

GameStop Corporation Cl. A   1.17   

Nu Skin Enterprises Cl. A   1.10   

Microsoft Corporation   1.05   

Berkshire Hathaway Cl. B   0.81   

1 Includes dividends    
     
Important Performance and Risk Information
All performance information reflects past performance, is presented on a total return basis, and reflects the reinvestment of distributions. Past performance is no guarantee of future results. Current performance may be higher or lower than performance quoted. Returns as of the most recent month-end may be obtained at www.roycefunds.com. The market price of the Fund’s shares will fluctuate, so that shares may be worth more or less than their original cost when sold. The Fund normally invests primarily in small-cap companies, which may involve considerably more risk than investing in a more diversified portfolio of larger-cap companies. Regarding the two “Good Ideas” tables shown above, the sum of all contributors to, and all detractors from, performance for all securities in the portfolio would approximate the Fund’s year-to-date performance for 2013.

14  |  The Royce Funds 2013 Semiannual Report to Stockholders



Performance and Portfolio Review


for an eventual turnaround. We held our positions in Allied Nevada Gold, Pretium Resources, and Seabridge Gold while we doubled our stake in Fresnillo in May.
     Outside the metals & mining industry, we also added shares of Apple in January. We first purchased shares following Steve Jobs’ death in October 2011. Near the end of 2012, we were struck by how attractive its valuation appeared, which led us to buy more shares. We are confident in the ability of this iconic, global brand to continue to surprise and delight consumers with new products, some of which we may see before the end of 2013.
     The Fund’s top contributor for the period was Irvine, CA.-based Western Digital, a manufacturer of hard disk drives. Its core business, which involves solutions for the collection, storage, management, and protection of digital content, has long interested us. The company is also one of two firms that dominate disk drive production worldwide. We began purchasing shares at the end of April 2010 when its valuation began to reach levels that we found attractive and continued to slowly add to our position as share prices remained compelling. It seemed that during this time many investors were selling based on the idea that a decline in the need for PCs would hurt its business. However, we saw opportunities in the need that cloud computing server farms would have for its products. Its shares began to gradually rebound in February 2013, following news in January of solid EPS (earnings per share) growth, and again in March on reports that global demand for data storage would remain strong.
      GameStop Corporation is a video game retailer that sells new and pre-owned gaming products, hardware, and software. Over the last couple of years there have been concerns over the viability of its business model as downloadable games and mobile applications have become more and more available. However, announcements from Microsoft and Sony that each would be introducing updated gaming consoles mollified worries. In addition to the updated consoles, the company’s video game exchange business should continue to thrive as new games are introduced with the release of the new consoles and older games from outdated systems should be harder to find. We began significantly trimming our position in early February and mid-April.

  GOOD IDEAS AT THE TIME
  Top Detractors from Performance
  Year-to-Date through 6/30/131  


Allied Nevada Gold -1.73%

Pretium Resources -0.78   

Apple -0.72   

Fresnillo -0.70   

Seabridge Gold -0.70   

1 Net of dividends
 
MARKET PRICE PERFORMANCE HISTORY SINCE INCEPTION (11/1/96)3 through 6/30/13

 
1 Reflects the cumulative total return experience of a continuous common stockholder who reinvested all distributions and fully participated in the primary subscription of the 2005 rights offering.
2 Reflects the actual market price of one share as it traded on Nasdaq.
3 Royce & Associates assumed investment management responsibility for the Fund on 11/1/96.
 
FUND INFORMATION AND
PORTFOLIO DIAGNOSTICS

Fund Total Net Assets $166 million   

Number of Holdings 54   

Turnover Rate 13%   

Symbol  
    Market Price FUND   
    NAV XFUNX   

Average Market Capitalization1 $6,326 million   

Weighted Average P/E Ratio2,3 14.8x   

Weighted Average P/B Ratio2 1.8x   

U.S. Investments (% of Net Assets) 71.6%   

Non-U.S. Investments (% of Net Assets) 25.8%   

1 Geometric Average. This weighted calculation uses each portfolio holding’s market cap in a way designed to not skew the effect of very large or small holdings; instead, it aims to better identify the portfolio’s center, which Royce believes offers a more accurate measure of average market cap than a simple mean or median.
2 Harmonic Average. This weighted calculation evaluates a portfolio as if it were a single stock and measures it overall. It compares the total market value of the portfolio to the portfolio’s share in the earnings, or book value, as the case may be, of its underlying stocks.
3 The Fund’s P/E ratio calculation excludes companies with zero or negative earnings (10% of portfolio holdings as of 6/30/13).
 

DOWN MARKET PERFORMANCE COMPARISON
All Down Periods of 7.5% or Greater
Over the Last 7 Years, in Percentages(%)





 
 

The Royce Funds 2013 Semiannual Report to Stockholders  |  15



History Since Inception

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

 
        Amount   Purchase       NAV   Market
                       History   Invested   Price1   Shares   Value2   Value2
 
Royce Value Trust                            
11/26/86   Initial Purchase   $ 10,000   $ 10.000   1,000   $ 9,280   $ 10,000
10/15/87   Distribution $0.30           7.000   42            
12/31/87   Distribution $0.22           7.125   32     8,578     7,250
12/27/88   Distribution $0.51           8.625   63     10,529     9,238
9/22/89   Rights Offering     405     9.000   45            
12/29/89   Distribution $0.52           9.125   67     12,942     11,866
9/24/90   Rights Offering     457     7.375   62            
12/31/90   Distribution $0.32           8.000   52     11,713     11,074
9/23/91   Rights Offering     638     9.375   68            
12/31/91   Distribution $0.61           10.625   82     17,919     15,697
9/25/92   Rights Offering     825     11.000   75            
12/31/92   Distribution $0.90           12.500   114     21,999     20,874
9/27/93   Rights Offering     1,469     13.000   113            
12/31/93   Distribution $1.15           13.000   160     26,603     25,428
10/28/94   Rights Offering     1,103     11.250   98            
12/19/94   Distribution $1.05           11.375   191     27,939     24,905
11/3/95   Rights Offering     1,425     12.500   114            
12/7/95   Distribution $1.29           12.125   253     35,676     31,243
12/6/96   Distribution $1.15           12.250   247     41,213     36,335
1997   Annual distribution total $1.21           15.374   230     52,556     46,814
1998   Annual distribution total $1.54           14.311   347     54,313     47,506
1999   Annual distribution total $1.37           12.616   391     60,653     50,239
2000   Annual distribution total $1.48           13.972   424     70,711     61,648
2001   Annual distribution total $1.49           15.072   437     81,478     73,994
2002   Annual distribution total $1.51           14.903   494     68,770     68,927
1/28/03   Rights Offering     5,600     10.770   520            
2003   Annual distribution total $1.30           14.582   516     106,216     107,339
2004   Annual distribution total $1.55           17.604   568     128,955     139,094
2005   Annual distribution total $1.61           18.739   604     139,808     148,773
2006   Annual distribution total $1.78           19.696   693     167,063     179,945
2007   Annual distribution total $1.85           19.687   787     175,469     165,158
2008   Annual distribution total $1.723           12.307   1,294     95,415     85,435
3/11/09   Distribution $0.323           6.071   537     137,966     115,669
12/2/10   Distribution $0.03           13.850   23     179,730     156,203
2011   Annual distribution total $0.783           13.043   656     161,638     139,866
2012   Annual distribution total $0.80           13.063   714     186,540     162,556
2013   Year-to-Date distribution total $0.38           14.943   310            
 
6/30/13       $ 21,922         12,423   $ 209,700   $ 188,333
 
1 The purchase price used for annual distribution totals is a weighted average of the distribution reinvestment prices for the year.
2 Other than for initial purchase, values are stated as of December 31 of the year indicated, after reinvestment of distributions.
3 Includes a return of capital.

16  |  The Royce Funds 2013 Semiannual Report to Stockholders




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

 
        Amount   Purchase           NAV   Market
  History   Invested   Price1   Shares   Value2   Value2
 
Royce Micro-Cap Trust
12/14/93   Initial Purchase   $ 7,500     $ 7.500       1,000     $ 7,250     $ 7,500  
10/28/94   Rights Offering     1,400       7.000       200                  
12/19/94   Distribution $0.05             6.750       9       9,163       8,462  
12/7/95   Distribution $0.36             7.500       58       11,264       10,136  
12/6/96   Distribution $0.80             7.625       133       13,132       11,550  
12/5/97   Distribution $1.00             10.000       140       16,694       15,593  
12/7/98   Distribution $0.29             8.625       52       16,016       14,129  
12/6/99   Distribution $0.27             8.781       49       18,051       14,769  
12/6/00   Distribution $1.72             8.469       333       20,016       17,026  
12/6/01   Distribution $0.57             9.880       114       24,701       21,924  
2002   Annual distribution total $0.80             9.518       180       21,297       19,142  
2003   Annual distribution total $0.92             10.004       217       33,125       31,311  
2004   Annual distribution total $1.33             13.350       257       39,320       41,788  
2005   Annual distribution total $1.85             13.848       383       41,969       45,500  
2006   Annual distribution total $1.55             14.246       354       51,385       57,647  
2007   Annual distribution total $1.35             13.584       357       51,709       45,802  
2008   Annual distribution total $1.193             8.237       578       28,205       24,807  
3/11/09   Distribution $0.223             4.260       228       41,314       34,212  
12/2/10   Distribution $0.08             9.400       40       53,094       45,884  
2011   Annual distribution total $0.533             8.773       289       49,014       43,596  
2012   Annual distribution total $0.51             9.084       285       57,501       49,669  
2013   Year-to-Date distribution total $0.27             10.657       134                  

6/30/13       $ 8,900               5,390     $ 65,219     $ 58,266  

Royce Focus Trust
10/31/96   Initial Purchase   $ 4,375     $ 4.375       1,000     $ 5,280     $ 4,375  
12/31/96                                 5,520       4,594  
12/5/97   Distribution $0.53             5.250       101       6,650       5,574  
12/31/98                                 6,199       5,367  
12/6/99   Distribution $0.145             4.750       34       6,742       5,356  
12/6/00   Distribution $0.34             5.563       69       8,151       6,848  
12/6/01   Distribution $0.14             6.010       28       8,969       8,193  
12/6/02   Distribution $0.09             5.640       19       7,844       6,956  
12/8/03   Distribution $0.62             8.250       94       12,105       11,406  
2004   Annual distribution total $1.74             9.325       259       15,639       16,794  
5/6/05   Rights offering     2,669       8.340       320                  
2005   Annual distribution total $1.21             9.470       249       21,208       20,709  
2006   Annual distribution total $1.57             9.860       357       24,668       27,020  
2007   Annual distribution total $2.01             9.159       573       27,679       27,834  
2008   Annual distribution total $0.473             6.535       228       15,856       15,323  
3/11/09   Distribution $0.093             3.830       78       24,408       21,579  
12/31/10                                 29,726       25,806  
2011   Annual distribution total $0.413             6.894       207       26,614       22,784  
2012   Annual distribution total $0.46             6.686       255       29,652       25,549  
2013   Year-to-Date distribution total $0.19             6.985       106                  
6/30/13       $ 7,044               3,977     $ 30,424     $ 27,759  

1 The purchase price used for annual distribution totals is a weighted average of the distribution reinvestment prices for the year.
2 Other than for initial purchase, values are stated as of December 31 of the year indicated, after reinvestment of distributions.
3 Includes a return of capital.

The Royce Funds 2013 Semiannual Report to Stockholders  |  17



Distribution Reinvestment and Cash Purchase Options

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

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

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

What if my shares are held by a brokerage firm or a bank?
If your shares are held by a brokerage firm, bank, or other intermediary as the stockholder of record, you should contact your brokerage firm or bank to be certain that it is automatically reinvesting distributions on your behalf. If they are unable to reinvest distributions on your behalf, you should have your shares registered in your name in order to participate.

What other features are available for registered stockholders?
The Distribution Reinvestment and Cash Purchase Plans also allow registered stockholders to make optional cash purchases of shares of a Fund’s common stock directly through Computershare on a monthly basis, and to deposit certificates representing your Fund shares with Computershare for safekeeping. The Funds’ investment adviser is absorbing all commissions on optional cash purchases under the Plans through December 31, 2013.

How do the Plans work for registered stockholders?
Computershare maintains the accounts for registered stockholders in the Plans and sends written confirmation of all transactions in the account. Shares in the account of each participant will be held by Computershare in non-certificated form in the name of the participant, and each participant will be able to vote those shares at a stockholder meeting or by proxy. A participant may also send other stock certificates held by them to Computershare to be held in non-certificated form. There is no service fee charged to participants for reinvesting distributions. If a participant elects to sell shares from a Plan account, Computershare will deduct a $2.50 fee plus brokerage commissions from the sale transaction. If a nominee is the registered owner of your shares, the nominee will maintain the accounts on your behalf.

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

18  |   The Royce Funds 2013 Semiannual Report to Stockholders



Royce Value Trust June 30, 2013 (unaudited)


Schedule of Investments                
                 
        SHARES       VALUE
COMMON STOCKS – 106.6%                
                 
Consumer Discretionary – 13.9%                
Auto Components - 0.4%                

China XD Plastics 1

      109,700     $ 450,867

Drew Industries

      40,991       1,611,766

Gentex Corporation 2

      97,400       2,245,070

Minth Group

      356,100       560,133
             
                4,867,836
             
Automobiles - 0.9%                

Thor Industries 2

      114,500       5,631,110

Winnebago Industries 1

      222,500       4,670,275
             
                10,301,385
             
Distributors - 1.0%                

Genuine Parts

      7,700       601,139

LKQ Corporation 1

      368,000       9,476,000

Weyco Group

      97,992       2,469,398
             
                12,546,537
             
Diversified Consumer Services - 1.1%                

Career Education 1

      28,900       83,810

MegaStudy

      52,150       2,817,438

Regis Corporation 2

      233,800       3,838,996

Sotheby’s 2,3

      156,500       5,932,915

Universal Technical Institute

      110,432       1,140,763
               
                13,813,922
               
Hotels, Restaurants & Leisure - 0.4%                

Ambassadors Group

      32,100       113,955

CEC Entertainment

      64,100       2,630,664

Lotto24 1

      74,716       495,996

Net Holding

      142,000       184,062

Tak Sing Alliance Holdings

      1,178,500       243,113

Tipp24 1

      16,300       938,423
               
                4,606,213
               
Household Durables - 2.6%                

Blyth

      29,600       413,216

Desarrolladora Homex ADR 1

      14,100       52,593

Ekornes

      125,000       1,996,099

Ethan Allen Interiors

      345,800       9,959,040

Hanssem

      49,100       1,317,731

Harman International Industries 2,3

      151,600       8,216,720

Mohawk Industries 1,2,3

      79,700       8,965,453
               
                30,920,852
               
Internet & Catalog Retail - 0.3%                

Manutan International

      45,000       1,927,092

NutriSystem

      63,000       742,140

Takkt

      75,000       1,132,435
               
                3,801,667
               
Leisure Equipment & Products - 0.5%                

Arctic Cat

      7,000       314,860

Beneteau 1

      175,000       1,933,925

Nautilus 1

      119,200       1,035,848

Shimano

      32,000       2,716,677
               
                6,001,310
               
Media - 1.2%                

Global Mediacom

      4,044,000       876,030

Media Chinese International

      2,650,000       964,551

Morningstar 2

      98,900       7,672,662

Pico Far East Holdings

      4,985,000       1,703,219

Television Broadcasts

      197,800       1,370,769

Wiley (John) & Sons Cl. A

      35,000       1,403,150
               
                13,990,381
               

Multiline Retail - 0.5%

               

Dollar Tree 1

      43,750       2,224,250

New World Department Store China

      7,715,700       3,899,607
               
                6,123,857
               
Specialty Retail - 1.7%                

Advance Auto Parts

      7,400       600,658

Asahi Company

      7,100       104,374

Ascena Retail Group 1,2

      118,600       2,069,570

bebe stores

      15,300       85,833

Beter Bed Holding

      49,300       903,532

Bonjour Holdings

      5,892,000       1,078,724

Dickson Concepts (International)

      331,300       185,810

Hour Glass (The)

      400,000       550,690

Kirkland’s 1

      29,800       514,050

Lewis Group

      400,000       2,549,304

L’Occitane International

      150,000       403,234

Luk Fook Holdings (International)

      168,500       391,050

OSIM International

      1,200,000       1,860,355

Ross Stores

      4,330       280,627

Sa Sa International Holdings

      886,000       873,886

Stein Mart

      167,800       2,290,470

Systemax

      194,000       1,825,540

TravelCenters of America LLC 1

      18,500       202,390

USS

      12,000       1,523,291

West Marine 1

      131,100       1,442,100

Wet Seal (The) Cl. A 1

      63,200       297,672
               
                20,033,160
               
Textiles, Apparel & Luxury Goods - 3.3%                

Anta Sports Products

      1,188,200       1,041,736

Carter’s 2,3

      194,600       14,414,022

Columbia Sportswear 2,3

      10,597       663,902

Daphne International Holdings

      4,991,500       4,266,817

Gildan Activewear

      13,500       546,885

Grendene

      175,000       1,588,948

J.G. Boswell Company 4

      2,292       1,959,660

Makalot Industrial

      345,000       1,646,091

Pacific Textiles Holdings

      3,670,000       4,135,585

Stella International Holdings

      265,100       733,156

Texwinca Holdings

      1,128,300       1,050,319

Van de Velde

      50,000       2,183,517

Wolverine World Wide 2

      108,700       5,936,107
               
                40,166,745
               
Total (Cost $119,252,596)               167,173,865
               
                 
Consumer Staples – 1.8%                
Food & Staples Retailing - 0.3%                

FamilyMart

      76,000       3,241,379
               


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 2013 Semiannual Report to Stockholders  |  19


Royce Value Trust


Schedule of Investments                
                 
        SHARES       VALUE
Consumer Staples (continued)                
Food Products - 1.5%                

Alico

      27,000     $ 1,082,970

Amira Nature Foods 1

      111,461       936,272

Cal-Maine Foods

      37,148       1,727,753

First Resources

      1,165,900       1,632,720

Industrias Bachoco ADR

      3,000       104,100

Seneca Foods Cl. A 1

      110,000       3,374,800

Seneca Foods Cl. B 1

      13,251       371,426

Super Group

      480,000       1,685,207

Tootsie Roll Industries

      225,520       7,167,026

Waterloo Investment Holdings 1,5

      598,676       81,959
               
                18,164,233
               
Total (Cost $15,775,797)               21,405,612
               
                 
Diversified Investment Companies – 0.7%                
Closed-End Funds - 0.7%                

British Empire Securities and General Trust

      174,909       1,266,292

Central Fund of Canada Cl. A 2,3

      389,800       5,301,280

RIT Capital Partners

      64,658       1,140,762

Royce Global Value Trust 1,5,6

      10,160       100,076
               
Total (Cost $7,039,516)               7,808,410
               
                 
Energy – 5.0%                
Energy Equipment & Services - 4.2%                

Cal Dive International 1

      456,250       857,750

CARBO Ceramics 2,3

      17,200       1,159,796

Era Group 1,2,3

      132,866       3,474,446

Helmerich & Payne 2,3

      118,400       7,394,080

ION Geophysical 1

      361,500       2,176,230

Oil States International 1,2,3

      88,823       8,228,563

Pason Systems

      115,500       2,099,800

SEACOR Holdings 2,3

      108,875       9,042,069

Steel Excel 1,4

      156,880       4,549,520

Superior Energy Services 1,2

      55,900       1,450,046

TGS-NOPEC Geophysical

      78,500       2,280,943

Tidewater

      64,300       3,663,171

Trican Well Service

      139,200       1,850,353

Unit Corporation 1

      60,200       2,563,316
               
                50,790,083
               
                 
Oil, Gas & Consumable Fuels - 0.8%                

Africa Oil 1

      74,800       501,417

Bill Barrett 1,2

      50,000       1,011,000

Cimarex Energy 2

      61,300       3,983,887

Contango Oil & Gas

      12,300       415,125

Green Plains Renewable Energy 1

      59,100       787,212

Lundin Petroleum 1

      24,100       477,968

Resolute Energy 1,2

      248,334       1,981,705
               
                9,158,314
               
Total (Cost $49,419,996)               59,948,397
               
                 
Financials – 16.6%                
Capital Markets - 8.4%                

Affiliated Managers Group 1,2,3

      42,200       6,918,268

AllianceBernstein Holding L.P. 2,3

      324,600       6,758,172

AP Alternative Assets L.P. 1

      124,555       2,621,883

ASA Gold and Precious Metals

      205,501       2,609,863

Ashmore Group

      746,000       3,899,718

Aurelius

      14,400       346,010

Cowen Group 1

      1,274,458       3,695,928

Dubai Investments

      8,500,000       3,008,440

Eaton Vance 2

      85,300       3,206,427

FBR & Co. 1

      144,050       3,638,703

Federated Investors Cl. B 2,3

      390,100       10,692,641

GAMCO Investors Cl. A

      40,300       2,233,023

Jupiter Fund Management

      75,000       330,464

KKR & Co. L.P.

      415,000       8,158,900

Lazard Cl. A

      169,800       5,459,070

MVC Capital

      254,200       3,200,378

Oppenheimer Holdings Cl. A

      75,000       1,428,000

Paris Orleans

      226,496       5,365,695

Partners Group Holding

      10,200       2,761,791

Reinet Investments 1

      164,948       2,943,598

Reinet Investments DR 1

      500,000       954,472

SEI Investments

      303,900       8,639,877

Sprott

      1,045,600       2,783,759

Value Partners Group

      4,089,900       2,204,187

Waddell & Reed Financial Cl. A 2

      139,300       6,059,550

Westwood Holdings Group

      23,460       1,006,903
               
                100,925,720
               
Commercial Banks - 1.9%                

Bank of N.T. Butterfield & Son

      1,784,161       2,497,826

BCB Holdings 1

      309,426       91,771

Farmers & Merchants Bank of Long Beach

      1,200       5,881,200

Fauquier Bankshares

      160,800       1,950,504

First Citizens BancShares Cl. A

      45,527       8,743,460

Huntington Bancshares

      76,000       598,880

Mechanics Bank

      200       2,560,000
               
                22,323,641
               
Diversified Financial Services - 1.1%                

Banca Finnat Euramerica

      1,060,000       365,633

Pargesa Holding

      4,300       287,031

PICO Holdings 1

      67,500       1,414,800

RHJ International 1

      622,500       2,933,202

Sofina

      89,000       8,064,096

Texas Pacific Land Trust

      3,800       322,088
               
                13,386,850
               
Insurance - 2.9%                

Alleghany Corporation 1,2

      10,399       3,986,041

Berkley (W.R.)

      5,700       232,902

eHealth 1

      38,850       882,672

E-L Financial

      18,000       10,868,118

Erie Indemnity Cl. A 2

      50,000       3,984,500

Independence Holding Company

      349,423       4,130,180

Platinum Underwriters Holdings

      91,900       5,258,518

Primerica

      135,000       5,054,400
               
                34,397,331
               


20  |  2013 Semiannual Report to Stockholders THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.


June 30, 2013 (unaudited)

        SHARES       VALUE
Financials (continued)                
Real Estate Management & Development - 2.0%                

Consolidated-Tomoka Land

      60,564     $ 2,311,122

E-House China Holdings ADR

      231,861       1,006,277

Forestar Group 1,2

      102,000       2,046,120

Kennedy-Wilson Holdings

      191,000       3,178,240

Midland Holdings

      7,571,100       2,830,847

St. Joe Company (The) 1,2,3

      167,000       3,515,350

Tejon Ranch 1

      342,600       9,760,674
               
                24,648,630
               
                 
Thrifts & Mortgage Finance - 0.3%                

Timberland Bancorp 6

      444,200       3,740,164

Vestin Realty Mortgage II 1

      214,230       351,337
               
                4,091,501
               
Total (Cost $179,595,212)               199,773,673
               
                 
                 
Health Care – 6.6%                
Biotechnology - 0.4%                

Genomic Health 1

      33,000       1,046,430

Green Cross

      12,600       1,351,517

Myriad Genetics 1

      111,750       3,002,722
               
                5,400,669
               
                 
Health Care Equipment & Supplies - 2.2%                

Abaxis 2

      23,100       1,097,481

Allied Healthcare Products 1

      140,512       386,408

Analogic Corporation 2

      44,035       3,207,069

AngioDynamics 1,2

      81,950       924,396

Atrion Corporation

      17,225       3,767,280

bioMerieux

      17,000       1,647,211

Carl Zeiss Meditec

      50,000       1,659,603

CONMED Corporation

      81,500       2,546,060

DiaSorin

      50,000       1,996,079

IDEXX Laboratories 1,2

      42,211       3,789,704

Kossan Rubber Industries

      647,568       1,022,746

Nihon Kohden

      20,100       768,088

Straumann Holding

      15,000       2,251,866

Top Glove

      475,000       938,123

Urologix 1,4

      142,648       21,412

West Pharmaceutical Services

      1,300       91,338
               
                26,114,864
               
                 
Health Care Providers & Services - 0.6%                

Accretive Health 1

      160,000       1,729,600

Bangkok Chain Hospital

      50,000       12,655

Landauer 2

      75,500       3,647,405

MWI Veterinary Supply 1,2

      10,000       1,232,400

Schein (Henry) 1

      900       86,175

VCA Antech 1,2

      27,800       725,302
               
                7,433,537
               
                 
Life Sciences Tools & Services - 2.0%                

Bio-Rad Laboratories Cl. A 1

      22,888       2,568,034

EPS Corporation

      1,224       1,362,468

PAREXEL International 1

      265,500       12,197,070

PerkinElmer 2

      185,800       6,038,500

Techne Corporation

      19,900       1,374,692
               
                23,540,764
               
Pharmaceuticals - 1.4%                

Adcock Ingram Holdings

      389,000       2,557,903

Boiron

      47,500       2,473,134

Hi-Tech Pharmacal

      17,700       587,640

Kalbe Farma

      4,000,000       580,353

Questcor Pharmaceuticals

      10,200       463,692

Recordati

      275,000       3,051,554

Santen Pharmaceutical

      58,500       2,518,602

Vetoquinol

      91,100       3,100,874

Virbac

      6,000       1,241,774
               
                16,575,526
               
Total (Cost $49,555,914)               79,065,360
               
                 
Industrials – 28.3%                
Aerospace & Defense - 1.9%                

AeroVironment 1

      13,200       266,376

Alliant Techsystems 2

      3,200       263,456

Cubic Corporation

      45,054       2,167,097

Ducommun 1

      117,200       2,491,672

HEICO Corporation 2

      210,351       10,595,380

HEICO Corporation Cl. A

      64,647       2,386,121

Hexcel Corporation 1

      47,500       1,617,375

Moog Cl. A 1

      25,000       1,288,250

Teledyne Technologies 1

      24,300       1,879,605
               
                22,955,332
               
                 
Air Freight & Logistics - 2.0%                

Air Transport Services Group 1,2

      34,000       224,740

Expeditors International of Washington

      175,500       6,670,755

Forward Air

      209,750       8,029,230

Hub Group Cl. A 1,2,3

      149,400       5,441,148

UTi Worldwide

      175,000       2,882,250
               
                23,248,123
               
                 
Building Products - 1.1%                

American Woodmark 1

      123,335       4,279,725

Apogee Enterprises 2

      21,600       518,400

Burnham Holdings Cl. B 4

      36,000       639,000

Simpson Manufacturing

      275,300       8,099,326
               
                13,536,451
               
                 
Commercial Services & Supplies - 2.3%                

Brink’s Company (The)

      206,320       5,263,223

CompX International Cl. A

      211,100       2,946,956

Copart 1

      149,780       4,613,224

Kaba Holding

      8,000       3,000,370

Kimball International Cl. B

      286,180       2,778,808

Moshi Moshi Hotline

      35,600       444,372

Ritchie Bros. Auctioneers 2,3

      297,800       5,723,716

Tetra Tech 1

      106,600       2,506,166
               
                27,276,835
               
Construction & Engineering - 1.7%                

EMCOR Group

      149,400       6,073,110

Foster Wheeler 1

      15,000       325,650

Integrated Electrical Services 1

      351,960       1,566,222

Jacobs Engineering Group 1,2

      92,620       5,106,141

KBR

      180,000       5,850,000


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 2013 Semiannual Report to Stockholders  |  21


Royce Value Trust


Schedule of Investments                
                 
        SHARES       VALUE
Industrials (continued)                
Construction & Engineering (continued)                

Northwest Pipe 1

      13,200     $ 368,280

Raubex Group

      375,300       827,668
               
                20,117,071
               
                 
Electrical Equipment - 3.1%                

AZZ

      48,599       1,873,977

Belden

      57,800       2,885,954

Franklin Electric

      209,200       7,039,580

Global Power Equipment Group

      111,082       1,790,642

GrafTech International 1

      654,287       4,763,209

Graphite India

      250,000       309,213

Hubbell Cl. B 2

      7,000       693,000

Powell Industries 1

      101,953       5,265,873

Preformed Line Products

      91,600       6,073,996

Regal-Beloit

      100,000       6,484,000

Vicor 1

      54,950       376,408
               
                37,555,852
               
Industrial Conglomerates - 0.5%                

Carlisle Companies 2

      10,400       648,024

Raven Industries 2

      192,400       5,768,152
               
                6,416,176
               
Machinery - 9.1%                

Armstrong Industrial

      1,514,500       412,231

Astec Industries

      32,000       1,097,280

Burckhardt Compression Holding

      12,400       4,936,107

CB Industrial Product Holding

      189,000       156,727

Chen Hsong Holdings

      1,159,000       351,165

CLARCOR 2

      92,500       4,829,425

Columbus McKinnon 1

      93,900       2,001,948

Donaldson Company 2

      185,600       6,618,496

EVA Precision Industrial Holdings

      3,476,000       470,575

FAG Bearings India

      29,500       704,599

Graco

      116,376       7,356,127

Haitian International Holdings

      530,000       774,905

IDEX Corporation

      67,400       3,626,794

Kennametal 2,3

      205,200       7,967,916

Lincoln Electric Holdings

      204,585       11,716,583

NN

      197,100       2,248,911

Nordson Corporation

      74,296       5,149,456

Pfeiffer Vacuum Technology

      10,000       1,036,113

PMFG 1

      388,352       2,687,396

Rational

      4,000       1,340,959

RBC Bearings 1

      47,000       2,441,650

Rotork

      30,000       1,218,281

Sarin Technologies

      1,018,600       1,245,625

Semperit AG Holding

      70,000       2,514,787

Spirax-Sarco Engineering

      38,518       1,574,150

Sun Hydraulics

      8,600       269,008

Timken Company (The)

      45,600       2,566,368

Valmont Industries

      47,900       6,854,011

WABCO Holdings 1

      103,800       7,752,822

Wabtec Corporation 2,3

      165,850       8,861,365

Woodward

      220,700       8,828,000
               
                109,609,780
               
                 
Marine - 0.7%                

Clarkson

      42,900       1,109,881

Kirby Corporation 1,2,3

      94,200       7,492,668
               
                8,602,549
               
Professional Services - 3.9%                

Acacia Research-Acacia Technologies

      60,800       1,358,880

Advisory Board (The) 1,2,3

      165,700       9,055,505

CRA International 1

      64,187       1,185,534

Equifax

      7,200       424,296

Heidrick & Struggles International

      300,831       5,029,894

JobStreet Corporation

      723,400       892,945

ManpowerGroup

      85,700       4,696,360

Michael Page International

      350,000       1,974,953

Nihon M&A Center

      42,100       2,347,378

On Assignment 1

      375,400       10,030,688

Robert Half International

      63,472       2,109,175

Towers Watson & Company Cl. A

      86,000       7,046,840

TrueBlue 1

      30,300       637,815
               
                46,790,263
               
                 
Road & Rail - 1.1%                

Landstar System 2,3

      99,400       5,119,100

Patriot Transportation Holding 1

      212,958       6,397,258

Universal Truckload Services 1

      68,916       1,661,565
               
                13,177,923
               
                 
Trading Companies & Distributors - 0.8%                

AerCap Holdings 1,2

      45,000       785,700

Lawson Products 1

      161,431       2,072,774

MISUMI Group

      81,600       2,243,630

MSC Industrial Direct Cl. A 2

      56,948       4,411,192
               
                9,513,296
               
                 
Transportation Infrastructure - 0.1%                

Wesco Aircraft Holdings 1

      83,400       1,548,738
               
Total (Cost $194,014,034)               340,348,389
               
                 
Information Technology – 21.4%                
Communications Equipment - 1.5%                

AAC Technologies Holdings

      177,600       998,364

ADTRAN 2

      212,700       5,234,547

Bel Fuse Cl. A

      36,672       508,641

Bel Fuse Cl. B

      14,063       189,147

Comba Telecom Systems Holdings 1

      450,000       143,888

Comtech Telecommunications 2

      30,000       806,700

Emulex Corporation 1

      50,000       326,000

EVS Broadcast Equipment

      35,000       2,430,049

Globecomm Systems 1

      183,700       2,321,968

Plantronics

      16,100       707,112

Sonus Networks 1

      574,000       1,727,740

Tellabs

      700,000       1,386,000

VTech Holdings

      47,050       711,569
               
                17,491,725
               
                 
Computers & Peripherals - 1.4%                

Asustek Computer

      50,000       430,416

Catcher Technology

      84,600       440,346

Diebold

      251,600       8,476,404


22  |  2013 Semiannual Report to Stockholders THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.


June 30, 2013 (unaudited)

        SHARES       VALUE
Information Technology (continued)                
Computers & Peripherals (continued)                

Intevac 1

      20,000     $ 113,200

STEC 1

      320,500       2,153,760

Western Digital 2

      93,200       5,786,788
               
                17,400,914
               
                 
Electronic Equipment, Instruments & Components - 8.5%      

Agilysys 1

      175,125       1,977,161

Anixter International 1,2

      61,795       4,684,679

Benchmark Electronics 1,2

      165,200       3,320,520

Broadway Industrial Group

      923,400       211,271

Chroma ATE

      219,982       374,331

Cognex Corporation

      69,800       3,156,356

Coherent

      217,540       11,979,928

Dolby Laboratories Cl. A 2,3

      128,900       4,311,705

Domino Printing Sciences

      185,000       1,755,784

DTS 1

      207,000       4,260,060

FARO Technologies 1,2

      33,100       1,119,442

FEI Company 2

      88,900       6,488,811

FLIR Systems

      268,240       7,234,433

Hollysys Automation Technologies 1

      42,227       524,037

IPG Photonics 2,3

      82,720       5,023,585

Maxwell Technologies 1

      53,000       378,950

Methode Electronics

      40,500       688,905

Molex 2

      72,600       2,130,084

National Instruments

      251,850       7,036,689

Newport Corporation 1

      523,500       7,292,355

Perceptron

      357,700       2,822,253

Plexus Corporation 1

      176,100       5,263,629

Richardson Electronics

      427,332       5,016,878

Rofin-Sinar Technologies 1

      289,000       7,207,660

Tech Data 1,2,3

      67,800       3,192,702

TTM Technologies 1,2

      211,400       1,775,760

Vaisala Cl. A

      90,320       2,324,260
               
                101,552,228
               
                 
Internet Software & Services - 1.5%                

Akamai Technologies 1

      7,300       310,615

comScore 1

      123,000       2,999,970

QuinStreet 1

      93,428       806,284

RealNetworks 1

      165,851       1,253,833

Support.com 1

      111,100       507,727

ValueClick 1

      145,000       3,578,600

Vistaprint 1,2,3

      177,000       8,738,490
               
                18,195,519
               
                 
IT Services - 2.7%                

Computer Task Group

      3,400       78,098

Convergys Corporation

      121,000       2,109,030

CSE Global

      949,400       636,679

eClerx Services

      35,900       433,760

Fiserv 1

      1,900       166,079

Hackett Group

      655,000       3,399,450

Innodata 1

      89,973       287,914

ManTech International Cl. A

      35,400       924,648

MAXIMUS

      94,200       7,016,016

MoneyGram International 1,2

      157,462       3,566,514

NeuStar Cl. A 1

      29,287       1,425,691

Sapient Corporation 1

      706,602       9,228,222

Sykes Enterprises 1

      91,124       1,436,114

Teradata Corporation 1

      4,700       236,081

Unisys Corporation 1

      94,000       2,074,580
               
                33,018,876
               
                 
Office Electronics - 0.1%                

Zebra Technologies Cl. A 1,2

      23,058       1,001,639
               
                 
Semiconductors & Semiconductor Equipment - 3.9%      

Aixtron ADR 1

      118,858       1,994,437

Analog Devices 2

      8,900       401,034

ASM Pacific Technology

      15,000       165,838

ATMI 1

      110,815       2,620,775

Cabot Microelectronics 1

      41,609       1,373,513

Diodes 1

      252,450       6,556,127

Entegris 1

      48,700       457,293

Entropic Communications 1

      102,000       435,540

Exar Corporation 1

      157,576       1,697,094

Integrated Silicon Solution 1

      190,700       2,090,072

International Rectifier 1

      330,000       6,910,200

Miraial

      26,170       410,572

MKS Instruments

      108,200       2,871,628

Nanometrics 1,2

      149,200       2,188,764

OmniVision Technologies 1

      24,900       464,385

Power Integrations 2

      49,000       1,987,440

RDA Microelectronics ADR

      72,000       797,760

Teradyne 1,2,3

      246,000       4,322,220

TriQuint Semiconductor 1

      809,967       5,613,071

Veeco Instruments 1,2

      94,200       3,336,564
               
                46,694,327
               
Software - 1.8%                

ACI Worldwide 1,2,3

      131,150       6,095,852

ANSYS 1,2,3

      105,600       7,719,360

Aspen Technology 1

      42,100       1,212,059

Blackbaud 2

      31,400       1,022,698

MICROS Systems 1

      97,600       4,211,440

SimCorp

      50,000       1,483,395

TeleNav 1

      43,597       228,012
               
                21,972,816
               
Total (Cost $196,192,377)               257,328,044
               
                 
Materials – 6.7%                
Chemicals - 1.2%                

Cabot Corporation 2

      58,000       2,170,360

Hawkins

      86,178       3,394,552

Huchems Fine Chemical

      62,256       1,003,030

Intrepid Potash 2

      34,966       666,102

LSB Industries 1

      31,810       967,342

Minerals Technologies 2

      67,060       2,772,260

OM Group 1

      22,200       686,424

Tronox Cl. A

      23,500       473,525

Valspar Corporation (The)

      1,200       77,604

Victrex

      60,000       1,409,008


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 2013 Semiannual Report to Stockholders  |  23


Royce Value Trust


Schedule of Investments                  
                   
        SHARES       VALUE  
Materials (continued)                  
Chemicals (continued)                  

W.R. Grace & Co. 1,2

      5,900     $ 495,836  
               
 
                14,116,043  
               
 
                   
Construction Materials - 0.9%                  

Ash Grove Cement Cl. B 4

      50,518       9,487,280  

Eternit

      120,000       508,212  

Mardin Cimento Sanayii

      600,000       1,368,798  
               
 
                11,364,290  
               
 
Containers & Packaging - 0.9%                  

Greif Cl. A 2

      90,844       4,784,753  

Mayr-Melnhof Karton

      60,000       6,450,975  
               
 
                11,235,728  
               
 
Metals & Mining - 3.6%                  

AuRico Gold

      132,000       576,840  

Central Steel & Wire 4

      6,050       4,319,700  

Endeavour Mining 1

      300,000       159,741  

Fresnillo

      22,500       301,833  

Gabriel Resources 1

      550,000       732,148  

Hecla Mining

      410,000       1,221,800  

IAMGOLD Corporation

      510,000       2,208,300  

Kimber Resources 1

      560,000       52,528  

Kinross Gold

      24,600       125,460  

Kirkland Lake Gold 1

      90,000       378,245  

Maharashtra Seamless

      511,300       1,763,845  

Major Drilling Group International

      354,900       2,416,168  

Pan American Silver

      243,730       2,837,017  

Pretium Resources 1

      211,000       1,392,600  

Reliance Steel & Aluminum 2,3

      173,420       11,369,415  

Saracen Mineral Holdings 1

      200,600       21,098  

Schnitzer Steel Industries Cl. A 2

      100,000       2,338,000  

Sims Metal Management ADR

      186,567       1,410,447  

Synalloy Corporation

      178,800       2,776,764  

Village Main Reef

      986,600       44,913  

Worthington Industries

      194,500       6,167,595  
               
 
                42,614,457  
               
 
                   
Paper & Forest Products - 0.1%                  

Qunxing Paper Holdings 5

      3,296,000       42,496  

Schweitzer-Mauduit International

      22,300       1,112,324  
               
 
                1,154,820  
               
 
Total (Cost $72,326,510)               80,485,338  
               
 
                   
Telecommunication Services – 0.7%                  
Wireless Telecommunication Services - 0.7%                  

Telephone and Data Systems

      338,270       8,338,356  
               
 
Total (Cost $8,279,046)               8,338,356  
               
 
                   
Miscellaneous 7 – 4.9%                  
Total (Cost $55,133,774)               58,480,564  
               
 
                   
TOTAL COMMON STOCKS                  
(Cost $946,584,772)               1,280,156,008  
               
 
PREFERRED STOCK – 0.1%                  

Seneca Foods Conv. 1,5

                 

(Cost $796,468)

      55,000       1,518,660  
               
 
                   
REPURCHASE AGREEMENT – 6.1%                  
Fixed Income Clearing Corporation,            

0.01% dated 6/28/13, due 7/1/13,

           

maturity value $72,466,060 (collateralized

           

by obligations of various U.S. Government

         

Agencies, 0.125%-1.50% due 12/31/13, valued at

       

$73,918,050) (Cost $72,466,000)

        72,466,000  
               
 
                   
TOTAL INVESTMENTS – 112.8%                  

(Cost $1,019,847,240)

              1,354,140,668  
                   
LIABILITIES LESS CASH AND OTHER ASSETS – (12.8)%     (153,575,048 )
               
 
NET ASSETS – 100.0%               $  1,200,565,620  
               
 


24  |  2013 Semiannual Report to Stockholders THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.


June 30, 2013 (unaudited)

New additions in 2013.
1 Non-income producing.
2 All or a portion of these securities were pledged as collateral in connection with the revolving credit agreement at June 30, 2013. Total market value of pledged securities at June 30, 2013, was $339,962,479.
3 At June 30, 2013, a portion of these securities were rehypothecated in connection with the Fund’s revolving credit agreement in the aggregate amount of $146,033,748.
4 These securities are defined as Level 2 securities due to fair value being based on quoted prices for similar securities. See Notes to Financial Statements.
5 Securities for which market quotations are not readily available represent 0.1% of net assets. These securities have been valued at their fair value under procedures approved by the Fund’s Board of Directors. These securities are defined as Level 3 securities due to the use of significant unobservable inputs in the determination of fair value. See Notes to Financial Statements.
6 At June 30, 2013, the Fund owned 5% or more of the Company’s outstanding voting securities thereby making the Company an Affiliated Company as that term is defined in the Investment Company Act of 1940. See Notes to Financial Statements.
7 Includes securities first acquired in 2013 and less than 1% of net assets.
   
  Bold indicates the Fund’s 20 largest equity holdings in terms of June 30, 2013, market value.
   
  TAX INFORMATION: The cost of total investments for Federal income tax purposes was $1,021,803,853. At June 30, 2013, net unrealized appreciation for all securities was $332,336,815, consisting of aggregate gross unrealized appreciation of $405,550,776 and aggregate gross unrealized depreciation of $73,213,961. The primary difference between book and tax basis cost is the timing of the recognition of losses on securities sold.



THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 2013 Semiannual Report to Stockholders  |  25


Royce Value Trust   June 30, 2013 (unaudited)


  Statement of Assets and Liabilities          
           
ASSETS:          
Investments at value          

Non-Affiliated Companies (cost $941,848,598)

    $ 1,277,834,428  

Affiliated Companies (cost $5,532,642)

      3,840,240  
 
Total investments at value       1,281,674,668  
Repurchase agreements (at cost and value)       72,466,000  
Cash and foreign currency       42,650  
Receivable for investments sold       2,072,666  
Receivable for dividends and interest       908,269  
Prepaid expenses and other assets       481,299  
 

Total Assets

      1,357,645,552  
 
LIABILITIES:          
Revolving credit agreement       150,000,000  
Payable for investments purchased       6,301,898  
Payable for investment advisory fee       472,327  
Payable for interest expense       20,400  
Accrued expenses       285,307  
 

Total Liabilities

      157,079,932  
 

Net Assets

    $ 1,200,565,620  
 
ANALYSIS OF NET ASSETS:          
Paid-in capital - $0.001 par value per share; 71,115,120 shares outstanding (150,000,000 shares authorized)     $ 832,908,853  
Undistributed net investment income (loss)       6,661,363  
Accumulated net realized gain (loss) on investments and foreign currency       53,499,501  
Net unrealized appreciation (depreciation) on investments and foreign currency       334,279,920  
Quarterly distributions       (26,784,017 )
 

Net Assets (net asset value per share - $16.88)

    $ 1,200,565,620  
 

Investments at identified cost

    $ 947,381,240  

26  |  2013 Semiannual Report to Stockholders   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.



Royce Value Trust   Six Months Ended June 30, 2013 (unaudited)

     
  Statement of Operations          
           
INVESTMENT INCOME:          
Income:          

Dividends

         

Non-Affiliated Companies

    $ 8,330,764  

Affiliated Companies

      26,652  

Foreign withholding tax

      (423,192 )

Interest

      47,580  

Rehypothecation income

      220,756  
 
Total income       8,202,560  
 
Expenses:          

Investment advisory fees

      2,843,074  

Interest expense

      930,181  

Stockholder reports

      199,242  

Custody and transfer agent fees

      159,517  

Administrative and office facilities

      67,761  

Directors’ fees

      63,292  

Professional fees

      29,721  

Other expenses

      66,604  
 
Total expenses       4,359,392  
Compensating balance credits       (10 )
 
Net expenses       4,359,382  
 
Net investment income (loss)       3,843,178  
 
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:          
Net realized gain (loss):          

Investments

      39,996,189  

Foreign currency transactions

      (87,864 )
Net change in unrealized appreciation (depreciation):          

Investments and foreign currency translations

      88,632,732  

Other assets and liabilities denominated in foreign currency

      (1,065 )
 
Net realized and unrealized gain (loss) on investments and foreign currency       128,539,992  
 
NET INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS       132,383,170  

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.   2013 Semiannual Report to Stockholders  |  27



Royce Value Trust

  Statement of Changes in Net Assets Applicable to Common Stockholders
                       
      Six months ended          
      6/30/13   Year ended
      (unaudited)   12/31/12
INVESTMENT OPERATIONS:                      
Net investment income (loss)       $ 3,843,178       $ 16,207,117  
Net realized gain (loss) on investments and foreign currency         39,908,325         62,897,553  
Net change in unrealized appreciation (depreciation) on investments and foreign currency         88,631,667         75,702,882  
 
Net increase (decrease) in net assets from investment operations         132,383,170         154,807,552  
 
DISTRIBUTIONS TO PREFERRED STOCKHOLDERS:                      
Net investment income                 (2,356,525 )
Net realized gain on investments and foreign currency                 (9,000,970 )
 
Total distributions to Preferred Stockholders                 (11,357,495 )
 

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

        132,383,170         143,450,057  
 
DISTRIBUTIONS TO COMMON STOCKHOLDERS:                      
Net investment income                 (11,444,608 )
Net realized gain on investments and foreign currency                 (43,713,673 )
Quarterly distributions1         (26,784,017 )        
 
Total distributions to Common Stockholders         (26,784,017 )       (55,158,281 )
 
CAPITAL STOCK TRANSACTIONS:                      
Reinvestment of distributions to Common Stockholders         12,539,971         27,494,847  
 
Total capital stock transactions         12,539,971         27,494,847  
 
NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS         118,139,124         115,786,623  
 
NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS:                      

Beginning of period

        1,082,426,496         966,639,873  
 

End of period (including undistributed net investment income (loss) of $6,661,363 at 6/30/13 and $2,818,184 at 12/31/12)

      $ 1,200,565,620       $ 1,082,426,496  

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

28  |  2013 Semiannual Report to Stockholders   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.



Royce Value Trust   June 30, 2013 (unaudited)


  Statement of Cash Flows          
           
CASH FLOWS FROM OPERATING ACTIVITIES:          

Net increase (decrease) in net assets from investment operations

    $ 132,383,170  

Adjustments to reconcile net increase (decrease) in net assets from operations to net cash provided by operating activities:

         

Purchases of long-term investments

      (225,830,118 )

Proceeds from sales and maturities of long-term investments

      233,433,209  

Net purchases, sales and maturities of short-term investments

      2,181,000  

Net (increase) decrease in dividends and interest receivable and other assets

      44,358  

Net increase (decrease) in interest expense payable, accrued expenses and other liabilities

      24,199  

Net change in unrealized appreciation (depreciation) on investments

      (88,632,732 )

Net realized gain on investments and foreign currency

      (39,908,325 )
 
Cash provided by operating activities       13,694,761  
 
CASH FLOW FROM FINANCING ACTIVITIES:          
Distributions paid to Common Stockholders       (26,784,017 )
Reinvestment of distributions to Common Stockholders       12,539,971  
 
Cash used for financing activities       (14,244,046 )
 
INCREASE (DECREASE) IN CASH:       (549,285 )
 

Cash and foreign currency at beginning of period

      591,935  
 

Cash and foreign currency at end of period

    $ 42,650  

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.   2013 Semiannual Report to Stockholders  |  29



Royce Value Trust


  Financial Highlights

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

    Six months ended                                                  
    June 30, 2013     Years ended December 31,
    (unaudited)       2012         2011         2010         2009         2008  
 
NET ASSET VALUE, BEGINNING OF PERIOD     $ 15.40       $ 14.18       $ 16.73       $ 12.87       $ 9.37       $ 19.74  
 
INVESTMENT OPERATIONS:                                                            

Net investment income (loss)

      0.05         0.23         0.10         0.24         0.17         0.14  

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

      1.83         2.02         (1.62 )       3.85         3.87         (8.50 )
 

Total investment operations

      1.88         2.25         (1.52 )       4.09         4.04         (8.36 )
 
DISTRIBUTIONS TO PREFERRED STOCKHOLDERS:                                                            

Net investment income

         –         (0.04 )       (0.03 )       (0.20 )       (0.18 )       (0.01 )

Net realized gain on investments and foreign currency

         –         (0.13 )       (0.16 )          –            –         (0.20 )

Return of capital

         –            –            –            –         (0.02 )          –  
 

Total distributions to Preferred Stockholders

         –         (0.17 )       (0.19 )       (0.20 )       (0.20 )       (0.21 )
 

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

      1.88         2.08         (1.71 )       3.89         3.84         (8.57 )
 
DISTRIBUTIONS TO COMMON STOCKHOLDERS:                                                            

Net investment income

         –         (0.17 )       (0.08 )       (0.03 )          –         (0.06 )

Net realized gain on investments and foreign currency

         –         (0.63 )       (0.43 )          –            –         (1.18 )

Return of capital

         –            –         (0.27 )          –         (0.32 )       (0.48 )

Quarterly distributions1

      (0.38 )          –            –            –            –            –  
 

Total distributions to Common Stockholders

      (0.38 )       (0.80 )       (0.78 )       (0.03 )       (0.32 )       (1.72 )
 
CAPITAL STOCK TRANSACTIONS:                                                            

Effect of reinvestment of distributions by Common Stockholders

      (0.02 )       (0.06 )       (0.06 )       (0.00 )       (0.02 )       (0.08 )
 

Total capital stock transactions

      (0.02 )       (0.06 )       (0.06 )       (0.00 )       (0.02 )       (0.08 )
 
NET ASSET VALUE, END OF PERIOD     $ 16.88       $ 15.40       $ 14.18       $ 16.73       $ 12.87       $ 9.37  
 
MARKET VALUE, END OF PERIOD     $ 15.16       $ 13.42       $ 12.27       $ 14.54       $ 10.79       $ 8.39  
 
TOTAL RETURN: 2                                                            
Market Value       15.86 %3       16.22 %       (10.46 )%       35.05 %       35.39 %       (48.27 )%
Net Asset Value       12.42 %3       15.41 %       (10.06 )%       30.27 %       44.59 %       (45.62 )%
RATIOS BASED ON AVERAGE NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS:

Investment advisory fee expense 4

      0.49 %5       0.56 %       0.86 %       0.11 %       0.00 %       1.27 %

Other operating expenses

      0.26 %5       0.15 %       0.12 %       0.12 %       0.16 %       0.12 %
Total expenses (net) 6       0.75 %5       0.71 %       0.98 %       0.23 %       0.16 %       1.39 %

Expenses net of fee waivers and excluding interest expense

      0.59 %5       0.68 %       0.98 %       0.23 %       0.16 %       1.39 %

Expenses prior to fee waivers and balance credits

      0.75 %5       0.71 %       0.98 %       0.23 %       0.16 %       1.39 %
Expenses prior to fee waivers       0.75 %5       0.71 %       0.98 %       0.23 %       0.16 %       1.39 %
Net investment income (loss)       0.66 %5       1.57 %       0.63 %       1.69 %       1.66 %       0.94 %
SUPPLEMENTAL DATA:                                                            
Net Assets Applicable to Common Stockholders,                                                            

End of Period (in thousands)

    $ 1,200,566       $ 1,082,426       $ 966,640       $ 1,105,879       $ 849,777       $ 603,234  
Liquidation Value of Preferred Stock, End of Period (in thousands)                         $ 220,000       $ 220,000       $ 220,000       $ 220,000  
Portfolio Turnover Rate       18 %       25 %       26 %       30 %       31 %       25 %
PREFERRED STOCK:                                                            
Total shares outstanding                           8,800,000         8,800,000         8,800,000         8,800,000  
Asset coverage per share                         $ 134.88       $ 150.67       $ 121.57       $ 93.55  
Liquidation preference per share                         $ 25.00       $ 25.00       $ 25.00       $ 25.00  
Average month-end market value per share                         $ 25.37       $ 25.06       $ 23.18       $ 22.51  
REVOLVING CREDIT AGREEMENT:                                                            
Asset coverage       900 %       822 %                                        
Asset coverage per $1,000     $ 9,004       $ 8,216                                          
 

1

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

2

The Market Value Total Return is calculated assuming a purchase of Common Stock on the opening of the first business day and a sale on the closing of the last business day of each period. Dividends and distributions are assumed for the purposes of this calculation to be reinvested at prices obtained under the Fund’s Distribution Reinvestment and Cash Purchase Plan. Net Asset Value Total Return is calculated on the same basis, except that the Fund’s net asset value is used on the purchase and sale dates instead of market value.

3 Not annualized
4

The investment advisory fee is calculated based on average net assets over a rolling 60-month basis, while the above ratios of investment advisory fee expenses are based on the average net assets applicable to Common Stockholders over a 12-month basis.

5 Annualized
6

Expense ratios based on total average net assets including liquidation value of Preferred Stock were 0.60%, 0.82%, 0.18%, 0.12% and 1.13% for the years ended December 31, 2012, 2011, 2010, 2009 and 2008, respectively.


30  |  2013 Semiannual Report to Stockholders   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.



Royce Value Trust


  Notes to Financial Statements (unaudited)

Summary of Significant Accounting Policies:

     Royce Value Trust, Inc. (the "Fund"), was incorporated under the laws of the State of Maryland on July 1, 1986, as a diversified closed-end investment company. The Fund commenced operations on November 26, 1986.
     The Board of Directors of the Fund (the “Board”) has approved, subject to stockholder approval, the contribution of a portion of the Fund’s assets to a newly formed closed-end investment company, Royce Global Value Trust, Inc. (“RGT”). All of the RGT’s common shares would then be distributed to the Common Stockholders of the Fund.
     The Fund would contribute to RGT approximately $100 million of its cash and/or securities, and would then distribute all of the shares of RGT pro rata to the Common Stockholders of the Fund.
     RGT is a closed-end management investment company, organized as a Maryland corporation and registered under the 1940 Act, whose objective is long-term growth of capital. RGT had no operations prior to June 30, 2013, other than the sale of 10,160 common shares for $100,076 to the Fund on June 19, 2013.
      The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

Valuation of Investments:
     Securities are valued as of the close of trading on the New York Stock Exchange (NYSE) (generally 4:00 p.m. Eastern time) on the valuation date. Securities that trade on an exchange, and securities traded on Nasdaq’s Electronic Bulletin Board, are valued at their last reported sales price or Nasdaq official closing price taken from the primary market in which each security trades or, if no sale is reported for such day, at their bid price. Other over-the-counter securities for which market quotations are readily available are valued at their highest bid price, except in the case of some bonds and other fixed income securities which may be valued by reference to other securities with comparable ratings, interest rates and maturities, using established independent pricing services. The Fund values its non-U.S. dollar denominated securities in U.S. dollars daily at the prevailing foreign currency exchange rates as quoted by a major bank. Securities for which market quotations are not readily available are valued at their fair value in accordance with the provisions of the 1940 Act, under procedures approved by the Fund’s Board of Directors, and are reported as Level 3 securities. As a general principle, the fair value of a security is the amount which the Fund might reasonably expect to receive for the security upon its current sale. However, in light of the judgment involved in fair valuations, there can be no assurance that a fair value assigned to a particular security will be the amount which the Fund might be able to receive upon its current sale. In addition, if, between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that are significant and may make the closing price unreliable, the Fund may fair value the security. The Fund uses an independent pricing service to provide fair value estimates for relevant non-U.S. equity securities on days when the U.S. market volatility exceeds a certain threshold. This pricing service uses proprietary correlations it has developed between the movement of prices of non-U.S. equity securities and indices of U.S.-traded securities, futures contracts and other indications to estimate the fair value of relevant non-U.S. securities. When fair value pricing is employed, the prices of securities used by the Fund may differ from quoted or published prices for the same security. Investments in money market funds are valued at net asset value per share.
     Various inputs are used in determining the value of the Fund’s investments, as noted above. These inputs are summarized in the three broad levels below:
Level  

1 – quoted prices in active markets for identical securities.

Level  

2 – other significant observable inputs (including quoted prices for similar securities, foreign securities that may be fair valued and repurchase agreements). The table below includes all Level 2 securities. Level 2 securities with values based on quoted prices for similar securities are noted in the Schedule of Investments.

Level  

3 – significant unobservable inputs (including last trade price before trading was suspended, or at a discount thereto for lack of marketability or otherwise, market price information regarding other securities, information received from the company and/or published documents, including SEC filings and financial statements, or other publicly available information).

     The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
     The following is a summary of the inputs used to value the Fund’s investments as of June 30, 2013. For a detailed breakout of common stocks by sector classification, please refer to the Schedule of Investments.

        Level 1       Level 2     Level 3     Total
Common Stocks       $1,258,954,905       $20,976,572     $ 224,531       $1,280,156,008
Preferred Stocks                   1,518,660       1,518,660
Cash Equivalents             72,466,000             72,466,000

     For the six months ended June 30, 2013, certain securities have transferred in and out of Level 1 and Level 2 measurements as a result of the fair value pricing procedures for international equities. The Fund recognizes transfers between levels as of the end of the reporting period. At June 30, 2013, securities valued at $207,379,737 were transferred from Level 2 to Level 1 and securities valued at $21,411 were transferred from Level 1 to Level 2 within the fair value hierarchy.

2013 Semiannual Report to Stockholders  |  31



Royce Value Trust


  Notes to Financial Statements (unaudited) (continued)

Valuation of Investments (continued):

     Level 3 Reconciliation:

                    Realized and Unrealized        
    Balance as of 12/31/12   Purchases   Gain (Loss)1   Balance as of 6/30/13
Common Stocks   $ 263,067     $ 100,076     $ (138,612 )   $ 224,531  
Preferred Stocks     1,504,800             13,860       1,518,660  

1

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

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

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

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

Distributions:
     The Fund pays quarterly distributions on the Fund’s Common Stock at the annual rate of 5% of the rolling average of the prior four calendar quarter-end NAVs of the Fund’s Common Stock, with the fourth quarter distribution being the greater of 1.25% of the rolling average or the distribution required by IRS regulations. Prior to November 15, 2012, distributions to Preferred Stockholders were accrued daily and paid quarterly. Distributions to Common Stockholders are recorded on ex-dividend date. Distributable capital gains and/or net investment income were first allocated to Preferred Stockholder distributions, with any excess allocable to Common Stockholders. If capital gains and/or net investment income were allocated to both Preferred and Common Stockholders, the tax character of such allocations was proportional. To the extent that distributions are not paid from long-term capital gains, net investment income or net short-term capital gains, they will represent a return of capital. Distributions are determined in accordance with income tax regulations that may differ from accounting principles generally accepted in the United States of America. Permanent book and tax differences relating to stockholder distributions will result in reclassifications within the capital accounts. Undistributed net investment income may include temporary book and tax basis differences, which will reverse in a subsequent period. Any taxable income or gain remaining undistributed at fiscal year end is distributed in the following year.

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

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

32  |  2013 Semiannual Report to Stockholders



Royce Value Trust


  Notes to Financial Statements (unaudited) (continued)

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

Capital Stock:
     The Fund issued 839,889 and 2,103,737 shares of Common Stock as reinvestment of distributions by Common Stockholders for the six months ended June 30, 2013 and the year ended December 31, 2012, respectively.

Borrowings:
     The Fund entered into a $150,000,000 revolving credit agreement (the credit agreement) with BNP Paribas Prime Brokerage Inc. (BNPP) on November 14, 2012. The Fund pays a commitment fee of 0.50% per annum on the unused portion of the credit agreement. The credit agreement has a 360-day rolling term that resets daily; however, if the Fund exceeds certain net asset value triggers, the credit agreement may convert to a 60-day rolling term that resets daily. The Fund is required to pledge portfolio securities as collateral in an amount up to two times the loan balance outstanding and has granted a security interest in the securities pledged to, and in favor of, BNPP as security for the loan balance outstanding. If the Fund fails to meet certain requirements, or maintain other financial covenants required under the credit agreement, the Fund may be required to repay immediately, in part or in full, the loan balance outstanding under the credit agreement necessitating the sale of portfolio securities at potentially inopportune times. The credit agreement also permits, subject to certain conditions, BNPP to rehypothecate portfolio securities pledged by the Fund up to the amount of the loan balance outstanding. The Fund continues to receive payments in lieu of dividends and interest on rehypothecated securities. The Fund also has the right under the credit agreement to recall the rehypothecated securities from BNPP on demand. If BNPP fails to deliver the recalled security in a timely manner, the Fund will be compensated by BNPP for any fees or losses related to the failed delivery or, in the event a recalled security will not be returned by BNPP, the Fund, upon notice to BNPP, may reduce the loan balance outstanding by the amount of the recalled security failed to be returned. The Fund will receive a portion of the fees earned by BNPP in connection with the rehypothecation of portfolio securities.
     As of June 30, 2013, the Fund has outstanding borrowings of $150,000,000. During the six months ended June 30, 2013, the Fund borrowed an average daily balance of $150,000,000 at a weighted average borrowing cost of 1.23%. As of June 30, 2013, the aggregate value of rehypothecated securities was $146,033,748. During the six months ended June 30, 2013, the Fund earned $220,756 in fees from rehypothecated securities.

Investment Advisory Agreement:
     As compensation for its services under the Investment Advisory Agreement, Royce receives a fee comprised of a Basic Fee (“Basic Fee”) and an adjustment to the Basic Fee based on the investment performance of the Fund in relation to the investment record of the S&P SmallCap 600 Index (“S&P 600").
     The Basic Fee is a monthly fee equal to 1/12 of 1% (1% on an annualized basis) of the average of the Fund’s month-end net assets applicable to Common Stockholders, plus the liquidation value of outstanding Preferred Stock, for the rolling 60-month period ending with such month (the "performance period"). The Basic Fee for each month is increased or decreased at the rate of 1/12 of .05% for each percentage point that the investment performance of the Fund exceeds, or is exceeded by, the percentage change in the investment record of the S&P 600 for the performance period by more than two percentage points. The performance period for each such month is a rolling 60-month period ending with such month. The maximum increase or decrease in the Basic Fee for any month may not exceed 1/12 of .5%. Accordingly, for each month, the maximum monthly fee rate as adjusted for performance is 1/12 of 1.5% and is payable if the investment performance of the Fund exceeds the percentage change in the investment record of the S&P 600 by 12 or more percentage points for the performance period, and the minimum monthly fee rate as adjusted for performance is 1/12 of .5% and is payable if the percentage change in the investment record of the S&P 600 exceeds the investment performance of the Fund by 12 or more percentage points for the performance period.
     Notwithstanding the foregoing, Royce is not entitled to receive any fee for any month when the investment performance of the Fund for the rolling 36-month period ending with such month is negative. In the event that the Fund’s investment performance for such a performance period is less than zero, Royce will not be required to refund to the Fund any fee earned in respect of any prior performance period.
     For the six rolling 60-month periods ended June 2013, the Fund’s investment performance ranged from 20% to 28% below the investment performance of the S&P 600. Accordingly, the net investment advisory fee consisted of a Basic Fee of $5,686,148 and a net downward adjustment of $2,843,074 for the performance of the Fund relative to that of the S&P 600. For the six months ended June 30, 2013, the Fund accrued and paid Royce investment advisory fees totaling $2,843,074.

2013 Semiannual Report to Stockholders  |  33



Royce Value Trust


  Notes to Financial Statements (unaudited) (continued)

Purchases and Sales of Investment Securities:
     For the six months ended June 30, 2013, the costs of purchases and proceeds from sales of investment securities, other than short-term securities, amounted to $231,788,925 and $221,192,129, respectively.

Transactions in Affiliated Companies:
     An “Affiliated Company” as defined in the Investment Company Act of 1940, is a company in which a fund owns 5% or more of the company’s outstanding voting securities at any time during the period. The Fund effected the following transactions in shares of such companies for the six months ended June 30, 2013:

    Shares   Market Value   Cost of   Cost of   Realized   Dividend   Shares   Market Value
Affiliated Company   12/31/12   12/31/12   Purchases   Sales   Gain (Loss)   Income   6/30/13   6/30/13
Royce Global Value Trust           $ 100,076         $     10,160   $ 100,076  
Timberland Bancorp