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: 1414 Avenue of the Americas
New York, NY 10019
     
Name and address of agent for service:   John E. Denneen, Esquire
    1414 Avenue of the Americas
    New York, NY 10019
     
Registrant’s telephone number, including area code: (212) 486-1445
Date of fiscal year end: December 31
Date of reporting period: January 1, 2008 – June 30, 2008
     
     
Item 1. Reports to Stockholders    








   
  Royce Value Trust


Royce Micro-Cap Trust


Royce Focus Trust






































 
SEMIANNUAL
REVIEW AND REPORT

TO STOCKHOLDERS
 
 
 
 


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
           
n
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.
    n
The fixed capital structure allows permanent leverage to be employed as a means to enhance capital appreciation potential.
           
n
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.
    n
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.
           
n
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.
   
We believe that the closed-end fund structure is very suitable for the long-term investor who understands the benefits of a stable pool of capital.



 
Why Dividend Reinvestment Is Important
 
 

A very important component of an investor’s total return comes from the reinvestment of distributions. By reinvesting distributions, our investors can maintain an undiluted investment in a Fund. To get a fair idea of the impact of reinvested distributions, please see the charts on pages 13, 15 and 17. For additional information on the Funds’ Distribution Reinvestment and Cash Purchase Options and the benefits for stockholders, please see page 19 or visit our website at www.roycefunds.com.
 
     
     
 
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Table of Contents


Semiannual Review    

Performance Table   2
 
Letter to Our Stockholders   3
 
Small-Cap Market Cycle Performance   10
 
Postscript: Freeway Jam   Inside Back Cover

Semiannual Report to Stockholders   11
 

For more than 30 years, we have used a value approach to invest in smaller-cap securities. We focus primarily on the quality of a company’s balance sheet, its ability to generate free cash flow and other measures of profitability or sound financial condition. At times, we may also look at other factors, such as a company’s unrecognized asset values, its future growth prospects or its turnaround potential following an earnings disappointment or other business difficulties. We then use these factors to assess the company’s current worth, basing the assessment on either what we believe a knowledgeable buyer might pay to acquire the entire company, or what we think the value of the company should be in the stock market.

















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Performance Table    

 
NAV Average Annual Total Returns   Through June 30, 2008

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

  Second Quarter 2008*         -1.12 %   -1.21 %       8.03 % 0.58 %

  Year-to-Date 2008*         -11.67     -11.70         2.28   -9.37  

  One-Year         -15.53     -18.64         -1.01   -16.19  

  Three-Year         7.05     5.62         17.18   3.79  

  Five-Year         12.55     12.44         20.52   10.29  

  10-Year         9.49     9.70         12.83   5.53  

  15-Year         11.68     n/a         n/a   8.92  

  20-Year         12.06     n/a         n/a   9.48  

  Since Inception         11.65     12.08         13.73   —     

  Inception Date                11/26/86                12/14/93              11/1/96** —     



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. The Royce Funds invest primarily in securities of small-cap and/or micro-cap companies, which may involve considerably more risk than investments in securities of larger-cap companies.

The thoughts expressed in this Review and Report to Stockholders concerning recent market movements and future prospects for small-company stocks are solely the opinion of Royce at June 30, 2008, and, of course, historical market trends are not necessarily indicative of future market movements. Statements regarding the future prospects for particular securities held in the Funds’ portfolios and Royce’s investment intentions with respect to those securities reflect Royce’s opinions as of June 30, 2008 and are subject to change at any time without notice. There can be no assurance that securities mentioned in this Review and Report to Stockholders will be included in any Royce-managed portfolio in the future.


  *Not annualized.
**Date Royce & Associates, LLC assumed investment management responsibility for the Fund.
 
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Letter to Our Stockholders      

     
     
Ballad of a Thin Market      
The first six months of 2008 gave even the most serene investor cause for anxiety, if not outright panic. First, a long list of worries ushered in the new year: the credit crisis, housing bubble, subprime implosion, falling dollar, stumbling equity prices, and an economy in either a full-blown recession or “merely” stalled. By the end of June, one could add to this list rapidly rising oil prices and associated energy costs. And we would be remiss if we did not also mention that smaller-company stock prices, after rallying from mid- March through early June, spent most of that latter month swooning. Indeed, share price declines throughout the market were so severe that on July 1 several media outlets were trotting out comparisons to the 1930s, since June saw the worst respective one-month losses for both the Dow Jones Industrial Average and the S&P 500 since the Great Depression.
  Both domestically and internationally, we
have seen a large number of what we believe
are superb values emerge in our asset class.
As is often the case with value investing,
patience and discipline will be critical as we
wait for the markets to rebound.
 
     Each of the formidable problems besetting the economy and financial markets remained unsolved as the year crept nervously to its midpoint, with little in the way of solutions on the immediate horizon. For anyone expecting good news soon about these matters, we can offer only sympathy. It will probably take some time before genuine improvement begins. We do not mean to imply that we like being where we are, only that a measured look at the current landscape suggests that most equities will need
     
       

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We are contrarians. To us, the term
has always been synonymous with
value investor. Our research screens
include searches for well-run
businesses whose stock prices have
fallen, which typically leads us to
companies, and often entire
industries, that others have recently
fled or are otherwise happy to ignore
.

Searching among the neglected and
broken in the smaller-company world
for new investment ideas not only
helps us to find potential hidden
gems, it also helps to lower
portfolio risk. Companies whose stock
prices have been beaten up by
mass sell-offs often carry very low
expectations (and price risk)
,
especially once the smoke has cleared
and former stockholders have moved
on. Although there’s always the risk
of additional stock price erosion if a
company’s fortunes worsen or an
industry’s prospects grow dimmer
,
we try to use falling stock prices to
our advantage; it is common for us
to add to positions at such times
(provided, of course, that our
long-term outlook for the company
remains positive)
.

While our hope is that any subsequent
drops in share prices are temporary
,
it is also why we look for companies


Continued on page 6...
    Letter to Our Stockholders

to log a few more miles of volatility and poor short-term performance prior to a sustained recovery. The fact that this is not surprising does not make the news any easier to bear. What it does mean for smaller-company bargain-hunters such as ourselves is opportunity. Both domestically and internationally, we have seen a large number of what we believe are superb values emerge in our asset class. As is often the case with value investing, patience and discipline will be critical as we wait for the markets to rebound.
    While we wait, it is worth noting that many observers, including some for whom we have enormous respect, are arguing that the events of the past year—particularly the housing crisis, the credit crunch and the slowing economy—signal the end of the era of low interest rates and low-to-moderate inflation that began following the 1982 recession and ran, with some notable interruptions, through the stock market peaks in 2007. We agree in large part with this assessment. It seems plain to us that we have entered a period that will be characterized by higher inflation and rising interest rates. However, there is little agreement as to how pronounced an effect these changes will have on the U.S. economy and stock markets. So these recent travails put all of us in the position of Dylan’s Mr. Jones: there is something happening here, but we don’t know what it is. Our take is that the short term will be challenging at best, but that solid recoveries for both the economy and equities will come in the next three to five years. As is our habit, we first look at history for future direction. In a Royce Fund 1989 Annual Report, we recalled a “full-blown recession” that led to a robust economic expansion, “an epic crash in 1987 and mini-crash in 1989,” and a market that saw “speculative binges in oil, precious metals and real estate as well as stocks.” In other words, it seems to us that nothing about the ’90s or the current decade is unprecedented.

Subterranean Small-Cap Blues
As might be expected in such a tumultuous period, the current market leadership question also looks unsettled. Domestic small-caps, as measured by the Russell 2000 index, finished the year-to-date period ended 6/30/08 with a loss of 9.4%, which was better than the large-cap S&P 500 index (-11.9%), the more tech-laden Nasdaq Composite (-13.6%) and the global MSCI EAFE (Europe, Australasia and Far East) index (-11.0%). Small-cap’s performance advantage over large-cap stocks thus far in 2008 was primarily attributable to its advantage in the second quarter, in particular its strong relative showing in May, when the Russell 2000 gained 4.6% versus 1.3% for the S&P 500. (Smaller stocks finished the second quarter just barely in positive territory, up 0.6% versus -2.7% for their large-cap peers.) The strong rally from the current small-cap trough on 3/10/08 was followed by an almost equally strong decline in June that collapsed share prices across the globe. During the month, the Russell 2000 lost 7.7%, the S&P 500 fell 8.4%, the Nasdaq Composite was down 9.1% and the MSCI EAFE declined 8.2%.
      The relative resilience of smaller companies during June was a welcome development. Although it did not decisively shift market leadership back to our chosen asset class, it certainly helped the Russell 2000 lose less during the highly volatile first half of 2008.
     

   
       

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However, the S&P 500 was slightly ahead of its small-cap counterpart in the first quarter of 2008 (-9.5% versus -9.9%) and decidedly better in the second half of 2007. These outperformance periods allowed the S&P 500 to stay ahead of the Russell 2000 for both the one-year (-13.1% versus -16.2%) and three-year (+4.4% versus +3.8%) periods ended 6/30/08, while over longer-term periods, smaller stocks held serve; the Russell 2000 beat the S&P 500 for the five-, 10- and 15-year periods ended 6/30/08.
    While large-cap stocks had to wait until early July to officially enter a bear market (traditionally defined as a price decline of 20% or more from a previous peak), the seeming inevitability of its arrival put the phrase ‘bear market’ on the lips of most investors before the end of June. The Dow Jones Industrial Average finished the second quarter with a price 19.9% below its 10/9/07 all-time peak. After making a cyclical high in May, the S&P 500 fell more than 10% to close the quarter within a single percentage point of its cycle low on 3/10/08. The Russell 2000 rallied to a new cyclical high in early June before it fell 9.5% by the end of the quarter. However, the small-cap index also managed to retain more of its gain, staying 7.6% above its current cycle low on 3/10/08.
    We expect more volatility and lower, possibly negative returns for much of the market in the coming months. Although we once believed that large-cap would have an advantage, we now believe that quality-oriented companies, regardless of market cap, should outperform and that smaller companies may provide an edge during short-term market upswings. We also suspect that smaller stocks should lead when share prices eventually show some sustained recovery. This, however, is likely to take some time before materializing. Putting aside for a moment the challenges that must be worked through in the economy as well as in the credit and housing markets, the Russell 2000 also enjoyed a mostly uninterrupted run from its trough on 10/9/02 through its most recent peak on 7/13/07. Nearly five years of primarily rising stock prices does not correct itself quickly or, unfortunately, without pain. (For more on recent small-cap market cycles, see page 10).

  Although we once believed that large-cap
would have an advantage, we now believe
that quality-oriented companies, regardless
of market cap, should outperform and that
smaller companies may provide an edge
during short-term market upswings. We also
suspect that smaller stocks should lead
when share prices eventually show some
sustained recovery.
     
Tangled up in Value
Small-cap value stocks, as measured by the Russell 2000 Value index, have felt more than their share of pain recently after dominating the Russell 2000 Growth index during the first seven years of the current decade. During the last full small-cap market cycle, which lasted from 3/9/00 until 7/13/07, the Russell 2000 Value index substantially outperformed the Russell 2000 Growth index (+189.5% versus -14.8%). The small-cap value index also outpaced the small-cap growth index from the small-cap market trough on 10/9/02 through 7/13/07, up 183.9% versus 169.7%. However, the small-cap growth index began to chip away at this lead during 2007, when it beat small-cap value in each of that year’s four quarters.
    Small-cap growth hung on to its advantage through the year-to-date period ended 6/30/08 (-8.9% versus -9.8% for the small-cap value index), as well as from the recent small-cap peak on 7/13/07. Results for both small-cap style indices were close from
   
     

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that have the financial strength to survive difficult times for their industry or sector. This remains a cornerstone of our approach because, despite our best intelligence, trouble sometimes lasts longer than we anticipate. Just as we attempt to be opportunistic from a purchase-price standpoint, we like companies that view opportunity through a similar prism. Businesses with strong balance sheets will at times act in a similar fashion, using their financial position to acquire lesser competitors.

Our practice of purchasing low-expectation companies often involves going against the grain of Wall Street. Five years ago, for example, oil was trading at a then-high of $30 per barrel. The Wall Street consensus was that the price of oil had reached a peak and would soon begin to decline. We began to look closely at energy services companies as well as oil and gas businesses because expectations were driving investors away to the point that share prices began to look more and more attractive to us. This, combined with many years of industry consolidation, gave us the conviction to start building positions within the sector.

We were not making a call on the prospects for oil prices or thinking that we knew better than the analysts who devote their careers to the study of energy—we simply saw an industry in which we had enjoyed success in the past once again looking attractively undervalued to us.



Continued on page 8...

 
 

Letter to Our Stockholders

 
7/13/07 through the new small-cap trough on 3/10/08, a period in which the Russell 2000 Value index fell 25.4% and its small-cap growth sibling lost 23.0%, reversing small-cap value’s usual edge during downturns. From the small-cap market peak on 7/13/07 through 6/30/08, the small-cap growth index enjoyed a larger performance edge, falling 13.8% versus a loss of 23.1% for the small-cap value index.
       While neither index has been exempt from the market’s troubles over the past year, investors may be wondering what became of small-cap value’s typical performance edge in down-market periods. We think that the current reversal is not entirely a surprise when one considers just how thoroughly the Russell 2000 Value index prevailed over the Russell 2000 Growth index both from the previous small-cap market peak on 3/9/00 and from the small-cap market trough on 10/9/02 through the end of the last full market cycle in July 2007. That small-cap value has been struggling of late is therefore not unexpected, both in the context of reversion to the mean and in the context of an indiscriminate bear market. Of course, just as we spent much of the first several years of the decade looking for high-quality bargains in areas usually populated by smaller-company growth managers, we have spent much of the last year scrutinizing those places where value managers are thought to roam.

Our Back Pages
Performance during the first half of 2008 for our three closed-end portfolios was decidedly mixed on both an absolute and relative basis, with a particularly wide margin separating the terrific NAV (net asset value) results of Royce Focus Trust and the less inspiring showings for both Royce Value Trust and Royce Micro-Cap Trust (see the chart below). Each Fund looks at a slightly different area of the smaller-company universe: Royce Focus Trust typically holds fewer positions, most of which are selected from the upper tier of the smaller-company world, where market capitalizations run from $500 million to $2.5 billion. Royce Value Trust and Royce Micro-Cap Trust are more diversified and make most of their respective selections



from the micro- and small-cap area (market caps up to $2.5 billion) and micro-cap area (market caps up to $500 million). Thus, we view a certain divergence as a healthy
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development. Still, we were very disappointed in our two portfolios that struggled on a relative and absolute basis during both the six-month and one-year periods ended 6/30/08.
     Much of the strength of Royce Focus Trust’s first-half performance came from its greater exposure to both energy and steel companies. These areas did well in all three portfolios, but both Royce Value Trust and Royce Micro-Cap Trust were comparatively underweight in their respective exposure and thus paid the price. They also suffered from having relatively larger exposures to sectors that struggled, such as consumer, technology and financial stocks. Indeed, financials continued to be a drag across the entire equity market. On average, the financial components of the Dow declined 26.6% in the second quarter, versus a 7.4% decline for the index. Within the S&P 500, banking and related industries declined 24.9% on average, versus a 2.7% decline for the index. The Financial Services sector of the Russell 2000 was that index’s worst performer, losing 13.4%, while the index gained 0.6%.

     
The Times They Are A-Changin’    

As much as the current bearish period has convinced us that major changes are working their way through the market, it seems to us that there is a significant element to the story that has not received as much attention, namely, the shift in the status of the U.S. in the global economy. The U.S. has gone from being by far the most dominant force, perhaps the only truly dominant force, to being first among a small group of leading players, which includes the European Union, China, Japan and India. The first sign of this change can be traced back to late 2000, when the U.S. dollar first began to decline versus the Euro, a decline that has lasted more than seven years and counting. Other factors also contributed—the bursting Internet bubble, the events of 9/11, a war that has made the U.S. unpopular abroad, the surging economies of China and India, and our own recent struggles with housing, credit and an overall stalled economy. Each is a piece of a larger puzzle that shows the global economy undergoing major changes, and we believe that the shifting role of the U.S. within this system is the critical event.
     We have sought to meet the challenges these changes present by exporting our investment approach over the past decade. Our initial forays into international smaller companies generally involved those with a strong domestic presence, while more recently we have been expanding our scope to include companies whose activities are more international or centered in a particular overseas region such as Western Europe. Our evolution to international investing is rooted in the Royce tradition of attempting to capitalize on market inefficiencies to generate strong absolute returns, while always keeping a close eye on managing risk. We are focusing primarily on developed economies, where we see ample inefficiencies that could translate into opportunities to find attractively priced securities. Interestingly, the degree of inefficiency that we are seeing today in many international smaller companies reminds us of the small-cap market in the United States 15 to 20 years ago. It is possible that we may be in the early phases of a long-term outperformance cycle for smaller companies on a global

 






Interestingly, the degree of inefficiency that we are seeing today in many international smaller companies reminds us of the small-cap market in the United States 15 to 20 years ago.
     

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Our thinking was that the industry was both significant and robust enough to eventually recover, though we set no specific time table as to when.

More recently, certain industries in the consumer sectors appear to us to have been suffering from a similar dearth of positive expectations. The slowing economy, the credit crunch, the housing bubble and, somewhat ironically, rising energy costs have all convinced many observers that the American consumer is too financially challenged for consumer stocks to do anything more than languish at best. As was the case with energy earlier in the decade, we see a traditionally cyclical area at what looks to us like a potential low point in its business cycle.

Our practice in the past several months has been to root around various consumer industries looking for smaller-cap businesses that boast sterling financial characteristics in the form of strong balance sheets, established records of earnings and the ability to generate free cash flow.

The contrarian habit of scouring beaten-down industries that others are avoiding or ignoring is a hallmark of our time-tested value approach. By closely examining industries for which expectations are at a minimum, we stay true to our goal of trying to lower risk, which is a critical part of building strong, long-term returns for The Royce Funds.

  Letter to Our Stockholders

scale, as international smaller companies follow their U.S. peers and potentially evolve into a professional asset class.
     The number of opportunities in international investing is vast. There are more companies from which to choose and greater total market capitalization. Our research indicates that there are three times as many micro-cap companies—those with market capitalizations up to $500 million—in the developed international universe, with roughly twice the total market capitalization of the U.S. micro-cap universe. Similarly, in the upper tier of the international small-cap world—market caps of $500 million to $2.5 billion—there are more total companies (2,091 versus 1,119) and greater total market capitalization ($2.4 trillion versus $1.3 trillion domestically). However, average market caps tend to be smaller in the international market. For example, according to Reuters the international micro-cap market has a weighted average market cap of $219, compared to $257 domestically. Liquidity issues, therefore, tend to increase as we move down the market-cap scale, which contributes to greater pricing inefficiencies. Independent research is difficult to come by (when it is available at all). We believe that these differences give us the opportunity to find quality businesses that are not properly priced. In addition, a counter-weight to the liquidity challenges is a marketplace with generally higher yields. As of 6/30/08, the

     
       DEVELOPED UNIVERSE BY MARKET CAPITALIZATION (EXCLUDING USA) June 30, 2008
   

    Market Cap Range
(Millions)
  Number
of Companies
  Total Market Cap
(Billions)
  Percent of
Companies
  Percent of
Total Market Cap
     
        $0 - $500  
14,148
 
1,235
  81 %   6 %
   

        $500 - $1,000  
1,106
 
798
  6     4  
   

        $1,000 - $2,000  
753
 
1,078
  4     5  
   

        $2,000 - $2,500  
232
 
518
  1     2  
   

        $2,500 - $5,000  
507
 
1,810
  3     8  
   

        $5,000 and over  
755
 
16,844
  4     76  
   

        Total  
17,501
 
22,283
  100     100  
   

        Source: Reuters                    
     

   

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weighted average yield of the international small-cap universe was more than a percentage point higher than its domestic equivalent, 3.5% versus 2.1%.
     Most importantly, we have found that quality is a truly international concept, an idea that recognizes no borders. The same attributes that attract us to domestic companies—strong balance sheets, an established record of earnings, the ability to generate free cash flow and excellent growth prospects—are readily found in international businesses. It really is a small world after all.

Bringing It all Back Home
However promising the future for global opportunities in smaller companies, we think that far too much uncertainty currently exists here at home for the equity markets to settle down and establish a consistent, forward-looking direction. Although there have been plenty of pleasant surprises, we do not think the profit picture is strong enough to outweigh the anxiety that so many investors are feeling, especially about inflation. We see the next year or so being a very volatile period as the market continues to sort out the effects of the housing and credit bubbles and adjusts to a more inflationary environment.
     It seems plain to us that investors will therefore be looking for lower risk in the form of company quality, especially if the bond markets begin to struggle, as many seem to expect. We see the next year or two as a time to prepare and position our portfolios for a market and economic rebound that looks at least a year or two away. We think that three to five years from now, investors will be mostly pleased with returns because we expect the economy to recover and think that the market will see it coming first. So while smaller companies should be all right in the short term, we suspect that the real action lies further ahead. In any case, we keep doing what we have always done—buying what we think are high-quality smaller companies trading at attractive prices. A volatile stock market has historically been a boon to value investors, and the current period will hopefully be no exception. Certain areas continue to offer what look to us like compelling bargains, both here and abroad. In addition, some industries have been doing very well, so we have been taking gains in some cases, holding in others and even building positions in companies that are managing their growth most effectively. Wide divergence in sector performance is something that we anticipate will be with us for a while, so we see ample opportunity out there on a global scale.
 











We see the next year or two as a time to prepare and position our portfolios for a market and economic rebound that looks at least a year or two away. We think that three to five years from now, investors will be mostly pleased with returns because we expect the economy to recover and think that the market will see it coming first.
     

Sincerely,
             
               
         
Charles M. Royce   W. Whitney George   Jack E. Fockler, Jr.      
President   Vice President   Vice President      
               
               
July 31, 2008              

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Small-Cap Market Cycle Performance

We believe strongly in the idea that a long-term investment perspective is crucial for determining the success of a particular investment approach. Flourishing in an up market is wonderful. Surviving a bear market by losing less (or not at all) is at least as good. However, the true test of a portfolio’s mettle is performance over full market cycle periods, which include both up and down market periods. We believe that providing full market cycle results is more appropriate even than showing three- to five-year standardized returns because the latter periods may not include the up and down phases that constitute a full market cycle.

Since the Russell 2000’s inception on 12/31/78, value—as measured by the Russell 2000 Value Index—outperformed growth—as measured by the Russell 2000 Growth Index—in six of the small-cap index’s eight full market cycles. The most recently concluded cycle, which ran from 3/9/00 through 7/13/07, was the longest in the index’s history, and represented what we believe was a return to more historically typical performance in that value provided a significant advantage during its downturn (3/9/00–10/9/02) and for the full cycle. In contrast, the new market cycle that began on 7/13/07 has so far favored growth over value, an unsurprising development when one considers how thoroughly value dominated growth in the previous full cycle.


Peak-to-Peak
For the full cycle, value provided a sizeable margin over growth, which finished the period with a loss. Each of our closed-end funds held a sizeable performance advantage over the Russell 2000 on both an NAV (net asset value) and market price basis. On an NAV basis, Royce Focus Trust (+264.2%) was our best performer by a wide margin, followed by Royce Micro-Cap Trust (+175.9%) and Royce Value Trust (+161.3%).

Peak-to-Trough
In the new cycle’s somewhat brief peak-to-trough period, growth was ahead of value, though its advantage was slight and neither style index managed to provide positive performance during the downdraft. All of our closed-end funds outperformed the Russell 2000 in this period, with Royce Focus Trust again providing the best (albeit negative) performance for the period, followed by Royce Value Trust.

Trough-to-Current
We would caution against reading too much into a period that has lasted only slightly longer than a calendar quarter, but it is still worth noting that growth’s return more than tripled that of the value index. Only Royce Focus Trust outpaced the Russell 2000 during this period, with Royce Value Trust and Royce Micro-Cap Trust both underperforming.

Peak-to-Current
During this nearly year-long period, both value and growth posted negative returns, though growth lost less by a comfortable margin. Once again, Royce Focus Trust distinguished itself. Both it and Royce Value Trust outperformed the Russell 2000, while Royce Micro-Cap Trust lagged the small-cap index.
 
   ROYCE FUNDS NAV TOTAL RETURNS VS. RUSSELL 2000 INDEX:
   MARKET CYCLE RESULTS

    Peak-to-
Peak

3/9/00-
7/13/07
  Peak-to-
Trough

7/13/07-
3/10/08
  Trough-to-
Current

3/10/08-
6/30/08
  Peak-to-  
Current  

7/13/07-  
6/30/08  
 
    Russell 2000   54.9 %   -24.1 %   7.6 %   -18.4 %

    Russell 2000 Value   189.5     -25.4     3.0     -23.1  

    Russell 2000 Growth   -14.8     -23.0     11.9     -13.8  

    Royce Value Trust   161.3     -20.9     3.9     -17.8  

    Royce Micro-Cap Trust   175.9     -22.6     2.8     -20.4  

    Royce Focus Trust   264.2     -15.3     11.8     -5.3  


The thoughts concerning recent market movements and future prospects for smaller-company stocks are solely those of Royce & Associates and, of course, there can be no assurance with regard to future market movements. Smaller-company stocks may involve considerably more risk than larger-cap stocks. Past performance is no guarantee of future results. See page 2 for important performance information for all of the above funds.

10  |  This page is not part of the 2008 Semiannual Report to Stockholders



Table of Contents


Semiannual Report to Stockholders  

   
Managers’ Discussions of Fund Performance  
   
Royce Value Trust 12
   
Royce Micro-Cap Trust 14
   
Royce Focus Trust 16
   
History Since Inception 18
   
Distribution Reinvestment and Cash Purchase Options 19
   
Schedules of Investments and Other Financial Statements  
   
Royce Value Trust 21
   
Royce Micro-Cap Trust 36
   
Royce Focus Trust 51
   
Notes to Performance and Other Important Information 60
   
Directors and Officers 61
   
Board Approval of Investment Advisory Agreements 62
   


2008 Semiannual Report to Stockholders  |  11



 
                   
                   
  AVERAGE ANNUAL NAV TOTAL RETURNS
Through 6/30/08
 
 
 
  Second Quarter 2008*   -1.12 %  
 
 
  Year-to-Date 2008*   -11.67    
 
 
  One-Year   -15.53    
 
 
  Three-Year   7.05    
 
 
  Five-Year   12.55    
 
 
  10-Year   9.49    
 
 
  15-Year   11.68    
 
 
  20-Year   12.06    
 
 
  Since Inception (11/26/86)   11.65    
 
 
  * Not annualized        
                   
  CALENDAR YEAR NAV TOTAL RETURNS  
 
 
  Year RVT   Year   RVT  
 
 
  2007 5.0 %   1998   3.3 %  
 
 
  2006 19.5     1997   27.5    
 
 
  2005 8.4     1996   15.5    
 
 
  2004 21.4     1995   21.6    
 
 
  2003 40.8     1994   0.1    
 
 
  2002 -15.6     1993   17.3    
 
 
  2001 15.2     1992   19.3    
 
 
  2000 16.6     1991   38.4    
 
 
  1999 11.7     1990   -13.8    
 
 
                   
  TOP 10 POSITIONS
% of Net Assets Applicable
to Common Stockholders
 
 
 
  AllianceBernstein Holding L.P.   1.8 %  
 
 
  Ritchie Bros. Auctioneers   1.5    
 
 
  Lincoln Electric Holdings   1.4    
 
 
  Ash Grove Cement Cl. B   1.2    
 
 
  Nordson Corporation   1.2    
 
 
  SEACOR Holdings   1.1    
 
 
  PAREXEL International   1.0    
 
 
  Sotheby’s   1.0    
 
 
  Woodward Governor   1.0    
 
 
  Forward Air   0.9    
 
 
                   
  PORTFOLIO SECTOR BREAKDOWN
% of Net Assets Applicable
to Common Stockholders
 
 
 
  Technology   21.3 %  
 
 
  Industrial Products   21.0    
 
 
  Industrial Services   16.3    
 
 
  Financial Intermediaries   13.1    
 
 
  Financial Services   12.3    
 
 
  Natural Resources   10.7    
 
 
  Health   6.2    
 
 
  Consumer Products   5.8    
 
 
  Consumer Services   3.9    
 
 
  Diversified Investment Companies   0.5    
 
 
  Utilities   0.2    
 
 
  Miscellaneous   2.6    
 
 
  Bond and Preferred Stocks   0.4    
 
 
  Cash and Cash Equivalents   7.3    
 
 
     
     
 

 
 
Royce Value Trust

 
Manager’s Discussion
During the first half of 2008, Royce Value Trust (RVT) lagged each of its small-cap benchmarks in a bear market environment. The Fund declined 11.7% on a net asset value (NAV) basis, and 10.7% on a market price basis, for the year-to-date period ended 6/30/08, compared with losses of 9.4% for the Russell 2000 and 7.1% for the S&P SmallCap 600 for the same period. In the first quarter downturn, RVT was down 10.7% on an NAV basis while its market price fell 13.0%, versus a decline of 9.9% for the Russell 2000 and 7.5% for the S&P 600. The second quarter was equally frustrating. After establishing a market trough on 3/10/08, smaller companies enjoyed a strong short-term rally that lasted into early June, when stock prices again dropped throughout most of the market. In the thus-volatile second quarter, RVT again underperformed its benchmarks on an NAV basis, declining 1.1% versus respective gains of 0.6% and 0.4% for the Russell 2000 and for the S&P 600, while outgaining each index on a market price basis, up 2.7%.
      During the short-term period from the recent small-cap market trough on 3/10/08 through 6/30/08—a span nearly coterminus with the second quarter—RVT’s market price performance was strong on a relative basis, but the Fund underperformed on an NAV basis. From 3/10/08 through 6/30/08, RVT gained 3.9% on an NAV basis and was up 9.7% on a market price basis, compared with a 7.6% gain for the Russell 2000 and a 6.3% gain for the S&P 600. The Fund’s performance pattern since the beginning of the new small-cap market cycle on 7/13/07 has been disappointing so far in that
we would expect the Fund to better hold its value during a down-market period. From the July 2007 peak through 6/30/08, RVT was down 17.8% on an NAV basis, and 20.0% on a market price basis, compared to the Russell 2000’s 18.4% loss and the S&P 600’s decline of 17.1% during the same period.
         
 
GOOD IDEAS THAT WORKED
Net Realized and Unrealized Investment Return*
Year-to-Date Through 6/30/08

Energy Conversion Devices     $4,292,218

Cimarex Energy     3,448,987

CARBO Ceramics     3,312,445

Nordson Corporation     2,604,509

Helmerich & Payne     2,586,241

  *Includes dividends      
 
     Over full market cycle and other longer-term periods, positive performances were more common, as was strong absolute and relative performance. RVT held a large advantage over both the Russell 2000 and the S&P 600 from the previous small-cap market peak on 3/9/00 through 6/30/08, gaining 114.7% on an NAV basis and 148.2% on a market price basis, while the Russell was up 26.4%, and the S&P 600 was up 76.2%. The Fund outperformed each of its benchmarks on an NAV basis for the three-, five-, 10-, 15-, 20-year and since inception (11/26/86) periods ended 6/30/08 and on a market price basis for each period except the three- and five-year intervals. RVT’s NAV average annual total return since inception was 11.7%.
 
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 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. Standard deviation is a statistical measure within which a fund’s total returns have varied over time. The greater the standard deviation, the greater a fund’s volatility.

12  |  2008 Semiannual Report to Stockholders



 
 
Performance and Portfolio Review

 
     Natural Resources was not only the Fund’s best-performing sector on a dollar basis in the first half, it was the only notable positive contributor to performance. The oil and gas industry and energy services group were the sector’s strongest areas, home to three of the Fund’s best-performing stocks. Cimarex Energy is an oil and gas exploration and production company that tapped a benefit from the record-shattering price of oil and a recovery in natural gas prices. CARBO Ceramics manufactures ceramic proppants used in hydraulic fracturing of natural gas and oil wells. We have long admired its strong niche, clean balance sheet and history of profitability. We were happy to see other investors catch on in the first half. We classify the Fund’s top gainer, Energy Conversion Devices, as a Technology holding, but, as its name suggests, it does much of its business supplying products and processes for alternative energy generation and storage. The firm’s new CEO concentrated efforts on its solar-energy production segments, which helped the firm generate positive earnings.
     The Financial Services sector was home to the two holdings with the largest negative impact on first-half performance. AllianceBernstein Holding remains a healthy dividend payer and, in our view, a very well-run business. Its stock disappointed after the firm revised its earnings guidance for fiscal 2007 early in 2008. It was the Fund’s largest holding at the end of June. The share price of MoneyGram International was beaten down in 2007 as the result of exposure to subprime mortgages in its investment portfolio.
 
GOOD IDEAS AT THE TIME
Net Realized and Unrealized Investment Loss*
Year-to-Date Through 6/30/08
 
Matters grew worse in January 2008 when the company announced, after re-valuing the portfolio, that it had experienced additional losses due to the subprime contagion. Its already-plummeting share price fell precipitously through June. We increased our stake in January and February because we think that the firm’s various money transfer businesses are strong enough to help it eventually overcome its formidable problems. We were also somewhat encouraged by a large infusion of cash that the company received in March from Thomas Lee Partners and Goldman Sachs.

AllianceBernstein Holding L.P.     $6,222,308

MoneyGram International     5,798,413

Rofin-Sinar Technologies     4,349,521

Sotheby’s     4,189,440

Advent Software     3,950,988

*Net of dividends      
 
 
 
 
  FUND INFORMATION AND  
  PORTFOLIO DIAGNOSTICS  
 
 
  Average Market Capitalization* $1,063 million  
 
 
  Weighted Average P/E Ratio**   15.2x  
 
 
  Weighted Average P/B Ratio   1.7x  
 
 
  Weighted Average Portfolio Yield   1.5%  
 
 
  Fund Net Assets $1,238 million  
 
 
  Net Leverage   14%  
 
 
  Turnover Rate   14%  
 
 
  Symbol      
 

Market Price

  RVT  
 

NAV

  XRVTX  
 
 
 
* Geometrically calculated

 
 
**The Fund’s P/E ratio calculation excludes companies with zero or negative earnings (11% of portfolio holdings as of 6/30/08).

 
 
Net leverage is the percentage, in excess of 100%, of the total value of equity type investments, divided by net assets, excluding preferred stock.
 
     
  CAPITAL STRUCTURE
Publicly Traded Securities Outstanding
at 6/30/08 at NAV or Liquidation Value
 
 
 
  61.8 million shares
of Common Stock
  $1,018 million  
 
 
  5.90% Cumulative
Preferred Stock
  $220 million  
 
 
     
  RISK/RETURN COMPARISON
Five-Year Period Ended 6/30/08
 
 
 
      Average Annual   Standard   Return  
      Total Return   Deviation   Efficiency*  
 
 
  RVT (NAV)     12.55 %     14.05       0.89    
 
 
  Russell 2000     10.29       14.38       0.72    
 
 
 
*Return Efficiency is the average annual total return divided by the annualized standard deviation over a designated time period.
 
     
     
 

2008 Semiannual Report to Stockholders  |  13




 
                   
                   
  AVERAGE ANNUAL NAV TOTAL RETURNS
Through 6/30/08
 
 
 
  Second Quarter 2008*   -1.21 %  
 
 
  Year-to-Date 2008*   -11.70    
 
 
  One-Year   -18.64    
 
 
  Three-Year   5.62    
 
 
  Five-Year   12.44    
 
 
  10-Year   9.70    
 
 
  Since Inception (12/14/93)   12.08    
 
 
  *Not annualized        
                   
  CALENDAR YEAR NAV TOTAL RETURNS  
 
 
  Year RMT   Year   RMT  
 
 
  2007 0.6 %   2000   10.9 %  
 
 
  2006 22.5     1999   12.7    
 
 
  2005 6.8     1998   -4.1    
 
 
  2004 18.7     1997   27.1    
 
 
  2003 55.5     1996   16.6    
 
 
  2002 -13.8     1995   22.9    
 
 
  2001 23.4     1994   5.0    
 
 
                   
  TOP 10 POSITIONS
% of Net Assets Applicable
to Common Stockholders
 
 
 
  Pegasystems   1.7 %  
 
 
  ASA   1.5    
 
 
  Peerless Manufacturing   1.4    
 
 
  Seneca Foods Cl. B   1.3    
 
 
  Exponent   1.3    
 
 
  Dril-Quip   1.2    
 
 
  Pason Systems   1.2    
 
 
  GulfMark Offshore   1.1    
 
 
  Sapient Corporation   1.1    
 
 
  Weyco Group   1.1    
 
 
                   
  PORTFOLIO SECTOR BREAKDOWN
% of Net Assets Applicable
to Common Stockholders
 
 
 
  Technology   22.6 %  
 
 
  Industrial Products   17.4    
 
 
  Industrial Services   15.0    
 
 
  Health   14.5    
 
 
  Natural Resources   13.9    
 
 
  Financial Intermediaries   11.0    
 
 
  Consumer Products   7.6    
 
 
  Financial Services   6.4    
 
 
  Consumer Services   5.8    
 
 
  Diversified Investment Companies   2.4    
 
 
  Miscellaneous   2.6    
 
 
  Preferred Stock   0.5    
 
 
  Cash and Cash Equivalents   1.3    
 
 
     
     

 
 
Royce Micro-Cap Trust

 
Manager’s Discussion
During the first half of 2008, Royce Micro-Cap Trust (RMT) disappointed on both an absolute and relative basis. For the year-to-date period ended 6/30/08, the Fund was down 11.7% on a net asset value (NAV) basis and lost 7.9% on a market price basis, compared with a decline of 9.4% for its small-cap benchmark, the Russell 2000. RMT did outperform the Russell Microcap index, which was down 15.5% during the first half. In the first quarter downturn, RMT fell 10.6% on an NAV basis and 8.6% on a market price basis versus a decline of 9.9% for the small-cap index and 12.4% for the Russell Microcap index. After the recent small-cap trough on 3/10/08, share prices roared back throughout the market, then swooned again in the last several weeks of June. Although the Fund enjoyed strong performance on a market price basis during this mini-rally, it could not keep pace on an NAV basis. The Fund then proceeded to endure a miserable June on both an NAV and market price basis, while also underperforming the small-cap index. The upshot was a volatile second quarter in which RMT again underperformed its benchmark on an NAV basis, declining 1.2% versus a 0.6% gain for the Russell 2000 and 3.5% decline for the Russell Microcap index. Meanwhile, the Fund was up 0.7% on a market price basis in the second quarter.
 
      The Fund’s performance from the beginning of the new small-cap market cycle on 7/13/07 was also disappointing. From the July 2007 peak through 6/30/08, RMT fell 20.4% on an NAV basis and 25.5% based on market price, in both cases lagging its benchmark’s 18.4% loss for the same period, while beating the Russell Microcap index’s 26.8% decline. In addition, RMT trailed its benchmark from the recent small-cap trough on 3/10/08, up 2.8% on an NAV basis and 5.6% on a market value basis, compared with a 7.6% gain for the Russell 2000 and a 2.3% gain for the Russell Microcap index.
 
GOOD IDEAS THAT WORKED
Net Realized and Unrealized Investment Return*
Year-to-Date Through 6/30/08

America’s Car-Mart     $995,191

eResearch Technology     984,316

PharMerica Corporation     871,000

Trex Company     805,000

Pason Systems     755,100

*Includes dividends      

     Positive performances were more common over previous market cycle and other long-term periods. RMT held a large advantage over the Russell 2000 from the previous small-cap market peak on 3/9/00 through 6/30/08, gaining 119.7% on an NAV basis and 143.3% based on its market price, while its benchmark was up 26.4%. (Data for the Russell Microcap index only goes back to 2002.) While its recent performance was disappointing, we were pleased with the Fund’s longer-term record. On an NAV basis, RMT outperformed the Russell 2000 for the three-, five-, 10-year and since inception (12/14/93) periods ended 6/30/08 and beat the small-cap index in each of those time spans save the three-year period on a market price basis. The Fund’s NAV average annual total return since inception was 12.1%.
 
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 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 in micro-cap companies, which may involve considerably more risk than investing in a more diversified portfolio of larger-cap companies. Standard deviation is a statistical measure within which a fund’s total returns have varied over time. The greater the standard deviation, the greater a fund’s volatility.

14  |  2008 Semiannual Report to Stockholders




   
 
Performance and Portfolio Review

 
     Natural Resources was by far the Fund’s best performing sector on a dollar basis during the first half, led by the energy services group and the oil and gas industry. Pason Systems benefited from increased demand for its specialized oilfield drilling instrumentation systems for use on land-based drilling rigs. The Diversified Investment Companies sector also made a positive dollar-based contribution, primarily the result of strong results from holdings in closed-end funds. In the otherwise dismal Consumer Services sector, automotive retailer America’s Car-Mart was the Fund’s best performer on a dollar basis in the first half. Specializing in low-end cars drove its success in a distressed auto market especially sensitive to gas-price increases. Its earnings tripled in the second quarter, putting its stock price in the fast lane. We took gains in May and June, but still held a good-sized position at the end of June.
     Making the largest dollar-based negative impact on first-half performance was TravelCenters of America, which primarily operates truck stops, gas stations and restaurants along U.S. interstates. We first purchased shares in RMT’s portfolio in February 2008. The company acquired its chief rival in May 2007, and its stock price mostly fell from around that time through the end of June 2008. Ongoing losses over the last several quarters, as well as reduced highway traffic—the result of soaring gas prices—probably also had an effect on its stalled share price during the first half of 2008. We liked the strong balance sheet and positive earnings history of Medical Action Industries, which manufactures disposable medical products primarily in the U.S.

GOOD IDEAS AT THE TIME
Net Realized and Unrealized Investment Loss*
Year-to-Date Through 6/30/08
 
Although still posting positive earnings, it endured manufacturing inefficiencies that the firm expected to continue through 2008, as well as the increased cost of resin (necessary in the manufacture of plastic products), and increased shipping costs for its products made in China. The Technology sector posted significant net losses on a dollar basis from the telecommunications group and the aerospace and defense industry. Sapient Corporation, which offers brand and marketing strategies, as well as business and IT services, was among the biggest disappointments for the period. In January, lower-than-expected earnings helped its stock price to plunge.

TravelCenters of America   $ 1,400,112

Medical Action Industries     1,312,620

Epoch Holding Corporation     1,235,160

Tennant Company     1,231,272

Sapient Corporation     1,195,000

*Net of dividends      
 
 
                             
                             
  FUND INFORMATION AND  
  PORTFOLIO DIAGNOSTICS  
 
 
  Average Market Capitalization*   $283 million  
 
 
  Weighted Average P/E Ratio**   16.2x  
 
 
  Weighted Average P/B Ratio   1.4x  
 
 
  Weighted Average Portfolio Yield   1.0%  
 
 
  Fund Net Assets   $345 million  
 
 
  Net Leverage   20%  
 
 
  Turnover Rate   41%  
 
 
  Symbol      
 

Market Price

  RMT  
 

NAV

  XOTCX  
 
 
 
*Geometrically calculated

 
 
**The Fund’s P/E ratio calculation excludes companies with zero or negative earnings (21% of portfolio holdings as of 6/30/08).

 
 
Net leverage is the percentage, in excess of 100%, of the total value of equity type investments, divided by net assets, excluding preferred stock.
 
     
  CAPITAL STRUCTURE
Publicly Traded Securities Outstanding
at 6/30/08 at NAV or Liquidation Value
 
 
 
  25.4 million shares
of Common Stock
      $285 million    
 
 
  6.00% Cumulative
Preferred Stock
      $60 million    
 
 
     
  RISK/RETURN COMPARISON
Five-Year Period Ended 6/30/08
 
 
 
      Average Annual   Standard   Return  
      Total Return   Deviation   Efficiency*  
 
 
  RMT (NAV)     12.44 %     14.16       0.88    
 
 
  Russell 2000     10.29       14.38       0.72    
 
 
 
*Return Efficiency is the average annual total return divided by the annualized standard deviation over a designated time period.
 
     
     
 

2008 Semiannual Report to Stockholders  |  15




 
                   
                   
  AVERAGE ANNUAL NAV TOTAL RETURNS
Through 6/30/08
 
 
 
  Second Quarter 2008*   8.03 %  
 
 
  Year-to-Date 2008*   2.28    
 
 
  One-Year   -1.01    
 
 
  Three-Year   17.18    
 
 
  Five-Year   20.52    
 
 
  10-Year   12.83    
 
 
  Since Inception (11/1/96)   13.73    
 
 
  * Not annualized        
 
Royce & Associates assumed investment management responsibility for the Fund on 11/1/96.
                   
  CALENDAR YEAR NAV TOTAL RETURNS  
 
 
  Year   FUND Year   FUND  
 
 
  2007   12.2 % 2001   10.0 %  
 
 
  2006   16.3   2000   20.9    
 
 
  2005   13.3   1999   8.7    
 
 
  2004   29.2   1998   -6.8    
 
 
  2003   54.3   1997   20.5    
 
 
  2002   -12.5            
 
 
                   
  TOP 10 POSITIONS  
  % of Net Assets Applicable  
  to Common Stockholders  
 
 
  Australian Government 7.50% Bond   5.8 %  
 
 
  Kennedy-Wilson Conv.   5.5    
 
 
  Reliance Steel & Aluminum   4.6    
 
 
  Unit Corporation 4.5    
 
 
  Sims Group ADR   3.6    
 
 
  Ensign Energy Services   3.3    
 
 
  Knight Capital Group Cl. A   3.2    
 
 
  Trican Well Service   3.0    
 
 
  Gammon Gold   2.9    
 
 
  Lincoln Electric Holdings   2.8    
 
 
                   
  PORTFOLIO SECTOR BREAKDOWN
% of Net Assets Applicable
to Common Stockholders
 
 
 
  Natural Resources   29.2 %  
 
 
  Industrial Products   24.3    
 
 
  Technology   11.5    
 
 
  Consumer Products   10.0    
 
 
  Industrial Services   8.5    
 
 
  Financial Intermediaries   6.2    
 
 
  Health   3.4    
 
 
  Financial Services   2.3    
 
 
  Bond and Preferred Stock   11.1    
 
 
  Cash and Cash Equivalents   6.3    
 
 
     
     
 

 
 
Royce Focus Trust

 
Manager’s Discussion
The first half of 2008 was a good time for the contrarian approach we use in Royce Focus Trust (FUND). For the year-to-date period ended 6/30/08, the Fund was up 2.3% on a net asset value (NAV) basis and 1.4% on a market price basis, in both cases ahead of the 9.4% loss for its small-cap benchmark, the Russell 2000, during the same period. While the Russell 2000 fell 9.9% in the difficult first quarter, the Fund held up well, down 5.3% on an NAV basis and 8.4% on a market price basis. Following the small-cap market trough on 3/10/08, equities rallied through the beginning of June. After losing less in the first quarter, FUND was also able to build on its advantage during April and May. When share prices tumbled again in June, the Fund followed suit, though its NAV performance was better than that of its benchmark (-5.0% versus -7.7%). The end result for the volatile second quarter was both significant relative outperformance and strong absolute performance—FUND gained 8.0% on an NAV basis and 10.6% on a market price basis during the second quarter, compared to a gain of 0.6% for the Russell 2000.
Smaller stocks established a new peak on 7/13/07. With this new peak, the previous small-cap cycle that began with the peak on 3/9/00 came to a close and a new cycle, which has been marked by high volatility and mostly negative returns, got under way. From 7/13/07 through 6/30/08, the Fund was down 5.3% on
an NAV basis and fell 6.5% on a market price basis versus a loss of 18.4% for its small-cap benchmark. In the short-term period from the recent small-cap market trough on 3/10/08 through 6/30/08, FUND gained 11.8% on an NAV basis and 14.0% on a market price basis versus a 7.6% gain for the Russell 2000. We were very pleased with the Fund’s recent results, especially in the more volatile, downward-trending market that began with the new small-cap market cycle in July 2007 when the portfolio held its value well.
 
GOOD IDEAS THAT WORKED
Net Realized and Unrealized Investment Return*
Year-to-Date Through 6/30/08

Unit Corporation     $4,128,841

Sims Group ADR     3,298,213

Reliance Steel & Aluminum     2,309,000

Schnitzer Steel Industries Cl. A     2,241,024

Ensign Energy Services     1,633,792

*Includes dividends      
       
These results were consistent with FUND’s performance over longer-term periods, which offer a more meaningful gauge of its merits. From the previous small-cap market peak on 3/9/00 through 6/30/08, the Fund significantly outpaced its benchmark on both an NAV and market price basis. During this period, FUND gained 244.9% on an NAV basis and 310.8% on a market price basis compared to the Russell 2000’s 26.4% gain. This was a critical factor in the Fund’s outperformance of the small-cap index for the one-, three-, five, 10-year and since inception of our management (11/1/96) periods ended 6/30/08. FUND’s NAV average annual total return since inception was 13.7%.

     The most significant dollar-based net losses during the first half came from the Consumer Products sector, home to RV (recreational vehicle) makers Thor Industries and Winnebago
 
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 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. Standard deviation is a statistical measure within which a fund’s total returns have varied over time. The greater the standard deviation, the greater a fund’s volatility.

16  |  2008 Semiannual Report to Stockholders




 
 
Performance and Portfolio Review

 
Industries. (Thor also makes small- and mid-sized buses, while Winnebago focuses solely on motor homes.) Although energy stocks were terrific performers in FUND’s portfolio, rising energy prices also contributed to each company’s dismal performance. Both have struggled in an inhospitable environment for their industry. We increased our stake in Thor Industries a bit in January and chose to hold on to Winnebago. At the end of June, we thought that both were capable of an eventual rebound. Elsewhere in the portfolio, Fronteer Development Group posted a sizeable net loss. The firm is a gold mining company with what we believe are several promising projects. Investors opted for a different point of view in the form of a mass exodus from its stock in February. At issue was the ownership of a uranium mine in which the firm holds an equity stake. We built our position in January and March before trimming it in June. At the end of the first half, we remained confident in the firm’s long-term prospects.
Unit Corporation is primarily a contract drilling company, but also runs its own oil and natural gas exploration business. The record-shattering price of oil and its own growing businesses helped its share price to climb during the first half. Although we took some gains in May, Unit was the Fund’s fourth-largest position at the end of June. Steel companies from the Industrial Products sector, such as Australian firm Sims Group, Reliance Steel & Aluminum and Schnitzer Steel Industries, continued to benefit from the weak U.S. dollar, which has made domestic steel and scrap metal attractively priced to BRIC (Brazil, Russia, India and China) and other developing countries.

GOOD IDEAS AT THE TIME
Net Realized and Unrealized Investment Loss*
Year-to-Date Through 6/30/08
 
After Metal Management merged with Australian scrap-metal business Sims Group in March 2008, the price of the latter moved up appreciably, no doubt reaping a benefit from its global presence in an increasingly international market. Reliance Steel & Aluminum provides metals processing services and distributor of metal products. Following a volatile 2007, the company’s stock price rose more or less steadily through the first six months of 2008 as investors took notice of its improved earnings. As with Sims, the firm’s global footprint seemed to boost its business.

Thor Industries     $2,436,777

Winnebago Industries     2,053,700

Fronteer Development Group     1,440,298

LECG Corporation     1,247,400

Dynamic Materials     1,166,833

*Net of dividends      
 
 
                             
                             
  FUND INFORMATION AND  
  PORTFOLIO DIAGNOSTICS  
 
 
  Average Market Capitalization*   $1,386 million  
 
 
  Weighted Average P/E Ratio**   13.0x  
 
 
  Weighted Average P/B Ratio   2.2x  
 
 
  Weighted Average Portfolio Yield   1.4%  
 
 
  Fund Net Assets   $193 million  
 
 
  Net Leverage   9%  
 
 
  Turnover Rate   62%  
 
 
  Symbol      
 

Market Price

  FUND  
 

NAV

  XFUNX  
 
 
 
*Geometrically calculated

 
 
** The Fund’s P/E ratio calculation excludes companies with zero or negative earnings (10% of portfolio holdings as of 6/30/08).

 
 
Net leverage is the percentage, in excess of 100%, of the total value of equity type investments, divided by net assets, excluding preferred stock.
 
     
  CAPITAL STRUCTURE
Publicly Traded Securities Outstanding
at 6/30/08 at NAV or Liquidation Value
 
 
 
  18.9 million shares of Common Stock   $168 million  
 
 
  6.00% Cumulative Preferred Stock   $25 million  
 
 
     
  RISK/RETURN COMPARISON
Five-Year Period Ended 6/30/08
 
 
 
      Average Annual   Standard   Return  
      Total Return   Deviation   Efficiency*  
 
 
  FUND (NAV)     20.52 %     15.16       1.35    
 
 
  Russell 2000     10.29       14.38       0.72    
 
 
 
*Return Efficiency is the average annual total return divided by the annualized standard deviation over a designated time period.
 
     
 

2008 Semiannual Report to Stockholders  |  17




History Since Inception


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

          Amount     Purchase         NAV     Market  
  History     Invested     Price*   Shares     Value**     Value**  
Royce Value Trust                                      
11/26/86   Initial Purchase     $ 10,000     $ 10.000   1,000     $ 9,280     $ 10,000  
10/15/87   Distribution $0.30               7.000   42                  
12/31/87   Distribution $0.22               7.125   32       8,578       7,250  
12/27/88   Distribution $0.51               8.625   63       10,529       9,238  
9/22/89   Rights Offering       405       9.000   45                  
12/29/89   Distribution $0.52               9.125   67       12,942       11,866  
9/24/90   Rights Offering       457       7.375   62                  
12/31/90   Distribution $0.32               8.000   52       11,713       11,074  
9/23/91   Rights Offering       638       9.375   68                  
12/31/91   Distribution $0.61               10.625   82       17,919       15,697  
9/25/92   Rights Offering       825       11.000   75                  
12/31/92   Distribution $0.90               12.500   114       21,999       20,874  
9/27/93   Rights Offering       1,469       13.000   113                  
12/31/93   Distribution $1.15               13.000   160       26,603       25,428  
10/28/94   Rights Offering       1,103       11.250   98                  
12/19/94   Distribution $1.05               11.375   191       27,939       24,905  
11/3/95   Rights Offering       1,425       12.500   114                  
12/7/95   Distribution $1.29               12.125   253       35,676       31,243  
12/6/96   Distribution $1.15               12.250   247       41,213       36,335  
1997   Annual distribution total $1.21               15.374   230       52,556       46,814  
1998   Annual distribution total $1.54               14.311   347       54,313       47,506  
1999   Annual distribution total $1.37               12.616   391       60,653       50,239  
2000   Annual distribution total $1.48               13.972   424       70,711       61,648  
2001   Annual distribution total $1.49               15.072   437       81,478       73,994  
2002   Annual distribution total $1.51               14.903   494       68,770       68,927  
1/28/03   Rights Offering       5,600       10.770   520                  
2003   Annual distribution total $1.30               14.582   516       106,216       107,339  
2004   Annual distribution total $1.55               17.604   568       128,955       139,094  
2005   Annual distribution total $1.61               18.739   604       139,808       148,773  
2006   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   Year-to-date distribution total $0.92               16.116   515                  

6/30/08         $ 21,922           9,404     $ 154,978     $ 147,455  

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   Year-to-date distribution total $0.64               10.837   230                  

6/30/08         $ 8,900           4,066     $ 45,661     $ 42,164  

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   Year-to-date distribution total $0.25               8.497   92                  

6/30/08         $ 7,044           3,195     $ 28,308     $ 28,212  

  *  
Beginning with the 1997 (RVT), 2002 (RMT) and 2004 (FUND) distributions, the purchase price of distributions is a weighted average of the distribution reinvestment prices for the year.
**  
Other than for initial purchase and June 30, 2008, values are stated as of December 31 of the year indicated, after reinvestment of distributions.
     
18 | 2008 Semiannual Report to Stockholders



Distribution Reinvestment and Cash Purchase Options



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

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

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

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

What other features are available for registered stockholders?
The Distribution Reinvestment and Cash Purchase Plans also allow registered stockholders to make optional cash purchases of shares of a Fund’s common stock directly through Computershare on a monthly basis, and to deposit certificates representing your Fund shares with Computershare for safekeeping. The Funds’ investment adviser is absorbing all commissions on optional cash purchases under the Plans through December 31, 2008.

 

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.


  2008 Semiannual Report to Stockholders  |  19

















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Royce Value Trust   June 30, 2008 (unaudited)


Schedule of Investments

    SHARES     VALUE
COMMON STOCKS – 113.9%          
           
Consumer Products – 5.8%          
Apparel, Shoes and Accessories - 1.8%          

Columbia Sportswear

  34,600   $ 1,271,550

Delta Apparel a,b,c

  605,560     2,228,461

K-Swiss Cl. A

  160,000     2,352,000

Lazare Kaplan International c

  103,600     922,040

Polo Ralph Lauren

  17,500     1,098,650

Timberland Company (The) Cl. A b,c

  17,500     286,125

Tod’s

  35,000     1,922,641

Weyco Group

  307,992     8,171,027
       
          18,252,494
       
Collectibles - 0.5%          

Leapfrog Enterprises Cl. A b,c

  175,000     1,456,000

Russ Berrie & Company c

  417,000     3,323,490
       
          4,779,490
       
Consumer Electronics - 0.8%          

Dolby Laboratories Cl. A c

  153,900     6,202,170

DTS b,c

  64,100     2,007,612
       
          8,209,782
       
Food/Beverage/Tobacco - 0.6%          

B&G Foods (Units)

  120,100     2,041,700

B&G Foods Cl. A

  51,300     479,142

Hershey Creamery

  709     1,488,900

Seneca Foods Cl. A b,c

  80,000     1,668,000

Seneca Foods Cl. B b,c

  13,251     283,174
       
          5,960,916
       
Health, Beauty and Nutrition - 0.0%          

Nutraceutical International c

  22,800     273,600
       
Home Furnishing and Appliances - 1.1%          

Aaron Rents

  4,500     100,485

American Woodmark

  123,335     2,606,069

Ekornes

  110,000     1,619,807

Ethan Allen Interiors

  65,800     1,618,680

Kimball International Cl. B

  286,180     2,369,570

La-Z-Boy

  68,200     521,730

Mohawk Industries b,c

  25,000     1,602,500

Nice

  215,000     953,743

Universal Electronics b,c

  10,000     209,000
       
          11,601,584
       
Sports and Recreation - 1.0%          

Beneteau

  81,000     1,773,950

Coachmen Industries b,c

  47,700     101,124

RC2 Corporation c

  132,600     2,461,056

Sturm, Ruger & Company c

  272,900     1,926,674

Thor Industries

  110,900     2,357,734

Winnebago Industries

  97,500     993,525
       
          9,614,063
       
Total (Cost $57,925,364)         58,691,929
       
           
Consumer Services – 3.9%          
Direct Marketing - 0.3%          

Manutan International

  8,945     647,839
    SHARES     VALUE
Consumer Services (continued)          
Direct Marketing (continued)          

Takkt

  130,000   $ 2,290,354
       
          2,938,193
       
Leisure and Entertainment - 0.0%          

Shuffle Master b,c

  15,000     74,100
       
Media and Broadcasting - 0.1%          

Cox Radio Cl. A b,c

  23,000     271,400

Discovery Holding Company Cl. B b,c

  36,600     827,526
       
          1,098,926
       
Online Commerce - 0.1%          

CryptoLogic

  200     2,872

FTD Group b

  55,000     733,150
       
          736,022
       
Restaurants and Lodgings - 0.6%          

Benihana b,c

  3,300     20,658

CEC Entertainment b,c

  116,000     3,249,160

Steak n Shake c

  198,000     1,253,340

Tim Hortons

  65,000     1,864,850
       
          6,388,008
       
Retail Stores - 2.8%          

America’s Car-Mart b,c

  65,400     1,171,968

AnnTaylor Stores c

  50,000     1,198,000

Bulgari

  322,000     3,252,233

CarMax b,c

  120,000     1,702,800

Charming Shoppes b,c

  22,800     104,652

Children’s Place Retail Stores c

  13,670     493,487

Dress Barn (The) b,c

  287,280     3,843,806

Fielmann

  22,000     1,607,893

Gander Mountain c

  53,300     196,677

Lewis Group

  518,000     2,183,142

Pier 1 Imports c

  626,200     2,154,128

Stein Mart b,c

  182,800     824,428

Tiffany & Co.

  158,700     6,467,025

Tractor Supply b,c

  21,200     615,648

Urban Outfitters b,c

  27,000     842,130

West Marine c

  131,100     537,510

Wet Seal (The) Cl. A c

  162,000     772,740
       
          27,968,267
       
Total (Cost $44,701,966)         39,203,516
       
           
Diversified Investment Companies – 0.5%          
Closed-End Funds - 0.5%          

Central Fund of Canada Cl. A

  211,500     2,738,925

Kohlberg Capital

  209,884     2,098,840
       
Total (Cost $4,642,086)         4,837,765
       
           
Financial Intermediaries – 13.1%          
Banking - 5.5%          

Abigail Adams National Bancorp

  160,500     1,500,675

Ameriana Bancorp

  40,000     380,000

Banca Finnat Euramerica

  500,000     577,036

Bank of N.T. Butterfield & Son

  446,875     6,613,750

Bank Sarasin & Cie Cl. B

  15,000     674,710

Banque Privee Edmond de Rothschild

  17     632,372

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 2008 Semiannual Report to Stockholders  | 21




Royce Value Trust


Schedule of Investments

    SHARES     VALUE
Financial Intermediaries (continued)          
Banking (continued)          

BB Holdings c

  289,400   $ 1,311,404

BOK Financial

  164,227     8,777,933

Boston Private Financial Holdings

  203,000     1,151,010

Cadence Financial

  40,300     436,449

Center Bancorp

  66,811     584,596

Centrue Financial

  82,200     895,980

CFS Bancorp

  265,000     3,124,350

CNB Financial

  11,116     157,180

Commercial National Financial

  54,900     818,010

Farmers & Merchants Bank of Long

         

Beach

  1,200     5,760,000

Fauquier Bankshares

  160,800     2,588,880

Hawthorn Bancshares

  44,400     1,121,988

Heritage Financial

  20,615     326,748

HopFed Bancorp

  112,500     1,549,125

Jefferson Bancshares

  32,226     295,835

Kearny Financial

  60,862     669,482

Mechanics Bank (The)

  200     3,410,000

Nexity Financial c

  109,999     511,495

Old Point Financial

  25,000     445,000

Peapack-Gladstone Financial

  10,000     219,700

Peoples Community Bancorp c

  179,310     408,827

Timberland Bancorp a

  469,200     3,762,984

Tompkins Financial

  17,545     652,674

Vontobel Holding

  15,600     532,955

W Holding Company

  935,400     795,090

Whitney Holding

  41,500     759,450

Wilber Corporation (The)

  103,900     880,033

Wilmington Trust

  131,000     3,463,640

Yadkin Valley Financial

  3,800     45,410
       
          55,834,771
       
Insurance - 4.5%          

Alleghany Corporation c

  16,644     5,526,640

Argo Group International Holdings b,c

  64,751     2,173,043

Aspen Insurance Holdings

  64,000     1,514,880

CNA Surety b,c

  130,600     1,650,784

Enstar Group b,c

  7,000     612,500

Erie Indemnity Cl. A

  91,500     4,222,725

First American

  20,000     528,000

Greenlight Capital Re Cl. A b,c

  87,200     1,993,392

Hilltop Holdings b,c

  230,000     2,371,300

Independence Holding

  317,658     3,103,519

IPC Holdings

  27,000     716,850

LandAmerica Financial Group

  10,000     221,900

Leucadia National

  34,940     1,640,084

Markel Corporation c

  11,100     4,073,700

Montpelier Re Holdings

  66,000     973,500

NYMAGIC

  232,200     4,448,952

Old Republic International

  20,000     236,800

ProAssurance Corporation c

  33,070     1,590,998

RLI

  99,724     4,933,346

Stewart Information Services

  100,000     1,934,000

Wesco Financial

  4,750     1,814,500
       
          46,281,413
       
    SHARES     VALUE
Financial Intermediaries (continued)          
Real Estate Investment Trusts - 0.1%          

Gladstone Commercial

  34,700   $ 601,351
       
Securities Brokers - 2.4%          

Broadpoint Securities Group b,c

  200,100     400,200

Close Brothers Group

  33,000     363,493

Cowen Group b,c

  32,000     247,040

DundeeWealth

  33,300     425,516

E*TRADE Financial b,c

  75,000     235,500

Egyptian Financial Group-Hermes Holding

         

GDR

  28,000     504,000

Evercore Partners Cl. A

  308,500     2,930,750

HQ

  26,000     429,559

Investcorp Bank GDR c

  22,000     561,000

Investment Technology Group b,c

  30,400     1,017,184

KBW b,c

  70,058     1,441,794

LaBranche & Co b,c

  137,000     969,960

Lazard Cl. A

  176,700     6,034,305

MF Global b,c

  145,500     918,105

Oppenheimer Holdings Cl. A

  30,000     847,800

optionsXpress Holdings

  53,000     1,184,020

Penson Worldwide b,c

  50,000     597,500

Phatra Securities

  575,000     524,525

Piper Jaffray b,c

  105,700     3,100,181

Shinko Securities

  464,300     1,368,611
       
          24,101,043
       
Securities Exchanges - 0.0%          

MarketAxess Holdings c

  67,000     506,520
       
Other Financial Intermediaries - 0.6%          

KKR Financial Holdings

  481,404     5,054,742

KKR Private Equity Investors L.P.

  105,000     1,338,750
       
          6,393,492
       
Total (Cost $140,006,502)         133,718,590
       
           
Financial Services – 12.3%          
Diversified Financial Services - 0.6%          

AmeriCredit Corporation b,c

  18,870     162,660

Centerline Holding Company

  59,600     99,532

Discover Financial Services

  10,000     131,700

Encore Capital Group b,c

  88,000     777,040

Municipal Mortgage & Equityb

  40,300     118,885

Ocwen Financial b,c

  173,600     807,240

World Acceptance b,c

  133,700     4,501,679
       
          6,598,736
       
Information and Processing - 1.7%          

Broadridge Financial Solutions

  30,000     631,500

Global Payments

  68,500     3,192,100

Interactive Data

  134,300     3,374,959

MoneyGram International c

  428,500     386,507

MSCI Cl. A b,c

  30,000     1,088,700

Paychex

  30,000     938,400

PRG-Schultz International b,c

  14,420     135,692

SEI Investments

  306,800     7,215,936
       
          16,963,794
       
Insurance Brokers - 0.9%          

Brown & Brown

  206,800     3,596,252

22 |  2008 Semiannual Report to Stockholders THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.




June 30, 2008 (unaudited)


 

    SHARES     VALUE
Financial Services (continued)          
Insurance Brokers (continued)          

Crawford & Company Cl. A c

  289,200   $ 1,807,500

Crawford & Company Cl. B b,c

  162,300     1,296,777

Gallagher (Arthur J.) & Co.

  111,200     2,679,920
       
          9,380,449
       
Investment Management - 7.8%          

A.F.P. Provida ADR

  16,100     411,033

Affiliated Managers Group b,c

  28,500     2,566,710

AllianceBernstein Holding L.P.

  333,100     18,213,908

Anima

  736,402     1,669,578

AP Alternative Assets L.P.

  315,600     3,471,600

Ashmore Group

  80,000     344,988

Australian Wealth Management

  291,000     361,262

Azimut Holding

  53,000     466,880

BKF Capital Group b,c

  227,050     467,723

Calamos Asset Management Cl. A

  45,000     766,350

Candover Investments

  10,500     412,432

CapMan Cl. B

  632,000     2,487,633

Cockleshell c

  337,644     366,532

Coronation Fund Managers

  496,000     288,225

Deutsche Beteiligungs

  95,000     2,402,140

Eaton Vance

  172,800     6,870,528

Equity Trustees

  23,477     490,636

F&C Asset Management

  210,000     615,930

Federated Investors Cl. B

  145,700     5,014,994

Fiducian Portfolio Services

  227,000     500,511

GAMCO Investors Cl. A

  133,600     6,629,232

GIMV

  20,000     1,319,390

GP Investments BDR c

  15,000     181,898

JAFCO

  37,300     1,275,124

MVC Capital

  484,200     6,628,698

New Star Asset Management Group

  126,500     255,748

Onex Corporation

  50,000     1,472,492

Perpetual

  11,100     455,116

Pzena Investment Management Cl. A

  238,700     3,045,812

Rathbone Brothers

  28,000     517,283

RHJ International c

  177,500     2,235,720

Schroders

  150,000     2,730,825

SHUAA Capital

  320,000     659,506

SPARX Group

  7,020     2,426,275

Tasmanian Perpetual Trustees

  115,000     551,224

Trust Company

  65,500     533,728

Value Partners Group

  520,000     446,824
       
          79,554,488
       
Special Purpose Acquisition Corporation - 0.4%          

Alternative Asset Management

         

Acquisition (Units) c

  250,000     2,425,000

Prospect Acquisition (Units) c

  150,000     1,434,000
       
          3,859,000
       
Specialty Finance - 0.9%          

Credit Acceptance b,c

  214,601     5,485,201

MCG Capital

  157,715     627,706

NGP Capital Resources

  50,000     770,500
    SHARES     VALUE
Financial Services (continued)          
Specialty Finance (continued)          

Portfolio Recovery Associates c

  62,100   $ 2,328,750
       
          9,212,157
       
Total (Cost $130,560,196)         125,568,624
       
           
Health – 6.2%          
Commercial Services - 1.0%          

PAREXEL International b,c

  384,400     10,113,564
       
Drugs and Biotech - 1.6%          

Affymetrix b,c

  10,000     102,900

Biovail Corporation

  41,200     397,580

Endo Pharmaceuticals Holdings b,c

  155,000     3,749,450

Genitope Corporation b,c

  150,000     6,660

Human Genome Sciences b,c

  90,000     468,900

K-V Pharmaceutical Cl. A b,c

  51,500     995,495

Medicines Company (The) b,c

  20,000     396,400

Mylan b,c

  52,200     630,054

Myriad Genetics b,c

  50,000     2,276,000

Ore Pharmaceuticals b,c

  117,980     155,734

Perrigo Company

  162,950     5,176,921

Pharmacyclics b,c

  383,000     677,910

QLT c

  114,070     391,260

Sinovac Biotech b,c

  37,400     121,550

Sunesis Pharmaceuticals b,c

  582,000     838,080
       
          16,384,894
       
Health Services - 1.1%          

Albany Molecular Research c

  85,000     1,127,950

Chem Rx (Units) c

  280,000     1,416,800

Cross Country Healthcare c

  30,000     432,300

Gentiva Health Services c

  30,150     574,357

HMS Holdings b,c

  50,000     1,073,500

Lincare Holdings b,c

  52,562     1,492,761

MedQuist c

  73,893     580,060

On Assignment b,c

  375,400     3,010,708

PharmaNet Development Group b,c

  10,000     157,700

Res-Care b,c

  65,460     1,163,879

WellCare Health Plans b,c

  5,000     180,750
       
          11,210,765
       
Medical Products and Devices - 2.5%          

Allied Healthcare Products c

  180,612     1,228,161

ArthroCare Corporation b,c

  10,000     408,100

Atrion Corporation

  15,750     1,509,165

Bruker Corporation c

  370,200     4,757,070

Coloplast Cl. B

  17,000     1,482,287

CONMED Corporation b,c

  81,500     2,163,825

Golden Meditech c

  200,000     67,460

IDEXX Laboratories c

  158,000     7,700,920

STERIS Corporation

  98,600     2,835,736

Straumann Holding

  1,000     239,636

Urologix b,c

  445,500     815,265

Young Innovations

  62,550     1,302,291

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 2008 Semiannual Report to Stockholders  | 23




Royce Value Trust


Schedule of Investments

    SHARES     VALUE
Health (continued)          
Medical Products and Devices (continued)          

Zoll Medical b,c

  40,400   $ 1,360,268
       
          25,870,184
       
Total (Cost $41,943,864)         63,579,407
       
           
Industrial Products – 21.0%          
Automotive - 2.2%          

Copart c

  153,100     6,555,742

ElringKlinger

  15,000     1,421,493

Fuel Systems Solutions b,c

  22,500     866,250

International Textile Group c

  85,000     29,750

LKQ Corporation b,c

  375,000     6,776,250

SORL Auto Parts b,c

  54,600     292,656

Superior Industries International

  98,400     1,660,992

WABCO Holdings

  98,800     4,590,248

Wonder Auto Technology b,c

  13,400     94,202
       
          22,287,583
       
Building Systems and Components - 1.1%          

Decker Manufacturing

  6,022     216,792

Heywood Williams Group c

  958,837     272,155

NCI Building Systems b,c

  13,900     510,547

Preformed Line Products

  91,600     3,692,396

Simpson Manufacturing

  293,400     6,965,316
       
          11,657,206
       
Construction Materials - 2.1%          

Ash Grove Cement Cl. B

  50,518     12,073,802

Duratex

  45,300     834,451

Owens Corning b,c

  25,000     568,750

Pretoria Portland Cement

  375,000     1,374,042

United Rentals b,c

  232,500     4,559,325

USG Corporation b,c

  50,000     1,478,500
       
          20,888,870
       
Industrial Components - 1.9%          

CLARCOR

  113,500     3,983,850

Donaldson Company

  92,800     4,142,592

GrafTech International b,c

  64,790     1,738,316

II-VI c

  13,500     471,420

Mueller Water Products Cl. A

  72,500     585,075

PerkinElmer

  135,800     3,782,030

Powell Industries c

  92,400     4,657,884
       
          19,361,167
       
Machinery - 5.5%          

Astec Industries b,c

  20,000     642,800

Baldor Electric

  62,900     2,200,242

Bell Equipment

  200,000     910,600

Burnham Holdings Cl. A

  117,964     1,557,125

Burnham Holdings Cl. B

  36,000     475,200

Franklin Electric

  104,800     4,064,144

Hardinge

  26,193     344,962

Intermec b,c

  23,000     484,840

Lincoln Electric Holdings

  177,980     14,007,026

Manitou BF

  65,000     1,947,517

Nordson Corporation

  162,200     11,822,758

OSG Corporation

  20,000     226,021
    SHARES     VALUE
Industrial Products (continued)          
Machinery (continued)          

Rofin-Sinar Technologies c

  236,000   $ 7,127,200

Takatori Corporation

  40,000     192,118

Williams Controls b,c

  37,499     475,112

Woodward Governor

  274,600     9,792,236
       
          56,269,901
       
Metal Fabrication and Distribution - 1.4%          

Central Steel & Wire

  6,062     4,000,920

Commercial Metals

  36,600     1,379,820

CompX International

  292,300     1,695,340

Gerdau Ameristeel

  61,100     1,179,230

NN

  197,100     2,747,574

RBC Bearings b,c

  45,000     1,499,400

Reliance Steel & Aluminum

  25,920     1,998,173
       
          14,500,457
       
Miscellaneous Manufacturing - 3.5%          

Barnes Group

  20,000     461,800

Brady Corporation Cl. A

  188,400     6,505,452

Matthews International Cl. A

  100,000     4,526,000

Mettler-Toledo International b,c

  28,700     2,722,482

Peerless Manufacturing c

  191,600     8,980,292

Rational

  15,200     3,065,645

Raven Industries

  86,200     2,825,636

Semperit AG Holding

  50,000     1,957,043

Somfy

  5,000     1,254,444

Synalloy Corporation

  198,800     3,065,496
       
          35,364,290
       
Paper and Packaging - 0.4%          

Mayr-Melnhof Karton

  38,000     3,589,150
       
Pumps, Valves and Bearings - 1.5%          

Graco

  143,625     5,467,804

IDEX Corporation

  54,000     1,989,360

Kaydon Corporation

  76,900     3,953,429

Pfeiffer Vacuum Technology

  35,000     3,630,369
       
          15,040,962
       
Specialty Chemicals and Materials - 1.2%          

Aceto Corporation

  119,710     914,584

American Vanguard

  26,666     327,992

Cabot Corporation

  181,000     4,400,110

Hawkins

  206,878     3,094,895

Migao Corporation c

  12,700     105,117

New Oriental Energy & Chemical b,c

  1,000     5,270

Schulman (A.)

  150,100     3,456,803
       
          12,304,771
       
Textiles - 0.0%          

Unific

  145,100     365,652
       
Other Industrial Products - 0.2%          

Vacon

  45,000     1,824,395
       
Total (Cost $117,039,891)         213,454,404
       
           
Industrial Services – 16.3%          
Advertising and Publishing - 0.5%          

Focus Media Holding ADR b,c

  71,900     1,993,068

Lamar Advertising Cl. A c

  45,000     1,621,350

24 |  2008 Semiannual Report to Stockholders THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.




June 30, 2008 (unaudited)


 

    SHARES     VALUE
Industrial Services (continued)          
Advertising and Publishing (continued)          

MDC Partners Cl. A b,c

  60,000   $ 430,800

Sun-Times Media Group Cl. A b,c

  180,000     88,200

ValueClick b,c

  45,000     681,750

Voyager Learning b,c

  150,000     757,500
       
          5,572,668
       
Commercial Services - 9.2%          

Animal Health International b,c

  30,000     186,900

Canadian Solar b,c

  50,000     2,009,500

ChinaCast Education b,c

  35,700     149,583

Convergys Corporation b,c

  121,000     1,798,060

Corinthian Colleges b,c

  106,500     1,236,465

CRA International b,c

  79,287     2,866,225

Diamond Management & Technology Consultants

  80,400     418,884

Forrester Research c

  40,300     1,244,464

Gartner c

  213,000     4,413,360

Global Sources b,c

  3,900     59,202

Hackett Group b,c

  655,000     3,759,700

Hewitt Associates Cl. A b,c

  205,720     7,885,248

Iron Mountain b,c

  210,862     5,598,386

ITT Educational Services c

  95,000     7,849,850

Landauer

  117,900     6,630,696

Learning Tree International b,c

  53,400     913,140

Manpower

  3,100     180,544

ManTech International Cl. A b,c

  119,400     5,745,528

MAXIMUS

  127,900     4,453,478

Michael Page International

  397,000     1,848,411

Monster Worldwide b,c

  24,800     511,128

MPS Group c

  564,600     6,001,698

New Horizons Worldwide b,c

  228,600     354,330

Ritchie Bros. Auctioneers

  550,200     14,926,926

Robert Half International

  65,500     1,570,035

Sotheby’s

  371,600     9,799,092

Spherion Corporation b,c

  53,000     244,860

TRC Companies c

  3,600     14,472

Wright Express b,c

  30,000     744,000
       
          93,414,165
       
Engineering and Construction - 1.2%          

Desarrolladora Homex ADR b,c

  9,800     574,084

Fleetwood Enterprises c

  234,300     613,866

HLS Systems International b,c

  109,120     571,789

Integrated Electrical Services b,c

  355,400     6,112,880

KBR

  140,000     4,887,400
       
          12,760,019
       
Food, Tobacco and Agriculture - 0.4%          

Agria Corporation ADR b,c

  21,900     93,732

Alico

  27,000     935,820

Astral Foods

  80,000     929,758

HQ Sustainable Maritime Industries b,c

  17,000     225,250

MGP Ingredients

  127,400     738,920

Origin Agritech b,c

  105,100     628,498

Zhongpin c

  9,400     117,500
       
          3,669,478
       
    SHARES     VALUE
Industrial Services (continued)          
Industrial Distribution - 0.7%          

Lawson Products

  161,431   $ 4,000,260

MSC Industrial Direct Cl. A

  74,300     3,277,373
       
          7,277,633
       
Printing - 0.1%          

Bowne & Co.

  68,100     868,275
       
Transportation and Logistics - 4.2%          

Alexander & Baldwin

  60,000     2,733,000

Atlas Air Worldwide Holdings b,c

  17,000     840,820

C.H. Robinson Worldwide

  80,000     4,387,200

Forward Air

  269,750     9,333,350

Frozen Food Express Industries

  286,635     1,934,786

Hub Group Cl. A b,c

  174,400     5,952,272

Landstar System

  96,200     5,312,164

Patriot Transportation Holding c

  72,300     5,784,000

Universal Truckload Services c

  115,100     2,534,502

UTI Worldwide

  175,000     3,491,250
       
          42,303,344
       
Total (Cost $102,643,264)         165,865,582
       
           
Natural Resources – 10.7%          
Energy Services - 5.3%          

Cal Dive International c

  50,000     714,500

CARBO Ceramics

  135,200     7,888,920

Core Laboratories b,c

  10,000     1,423,500

Ensign Energy Services

  126,300     2,752,168

Exterran Holdings b,c

  103,600     7,406,364

Global Industries b,c

  54,500     977,185

Helix Energy Solutions Group b,c

  34,226     1,425,171

Helmerich & Payne

  53,700     3,867,474

ION Geophysical b,c

  464,500     8,105,525

RPC

  25,000     420,000

SEACOR Holdings b,c

  127,300     11,394,623

TETRA Technologies b,c

  68,000     1,612,280

Willbros Group c

  103,800     4,547,478

World Fuel Services

  60,000     1,316,400
       
          53,851,588
       
Oil and Gas - 2.0%          

Bill Barrett c

  50,000     2,970,500

Carrizo Oil & Gas b,c

  41,700     2,839,353

Cimarex Energy

  115,490     8,046,188

Edge Petroleum b,c

  326,900     1,761,991

Penn Virginia

  32,880     2,479,810

PetroCorp c,d

  61,400     0

Storm Cat Energy b,c

  330,800     383,728

W&T Offshore

  25,000     1,462,750
       
          19,944,320
       
Precious Metals and Mining - 2.3%          

Centerra Gold c

  30,000     140,335

Endeavour Mining Capital

  150,000     1,088,555

Etruscan Resources c

  745,900     1,206,958

Gammon Gold c

  198,300     2,151,555

Golden Star Resources b,c

  350,000     941,500

Harry Winston Diamond

  10,000     287,900

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 2008 Semiannual Report to Stockholders  | 25




Royce Value Trust


Schedule of Investments

    SHARES     VALUE
Natural Resources (continued)          
Precious Metals and Mining (continued)          

Hecla Mining c

  490,500   $ 4,542,030

IAMGOLD Corporation

  335,620     2,030,501

Kimber Resources b,c

  560,000     890,400

Kinross Gold

  40,286     951,153

Metorex c

  800,000     2,360,153

Northam Platinum

  225,000     1,942,529

Northgate Minerals c

  90,000     247,500

NovaGold Resources b,c

  45,000     335,250

Pan American Silver b,c

  41,000     1,417,780

Royal Gold

  34,400     1,078,784

Yamana Gold

  113,525     1,877,704
       
          23,490,587
       
Real Estate - 1.1%          

Consolidated-Tomoka Land

  13,564     570,502

PICO Holdings b,c

  75,200     3,267,440

SARE Holding Cl. B c

  730,000     956,288

St. Joe Company (The) b,c

  132,100     4,533,672

Tejon Ranch b,c

  65,000     2,343,900
       
          11,671,802
       
Total (Cost $58,192,473)         108,958,297
       
           
Technology – 21.3%          
Aerospace and Defense - 1.0%          

AerCap Holdings b,c

  45,000     568,350

Astronics Corporation c

  52,400     728,884

Ceradyne b,c

  1,000     34,300

Ducommun c

  117,200     2,690,912

HEICO Corporation

  129,000     4,197,660

Hexcel Corporation b,c

  47,500     916,750

Integral Systems c

  39,876     1,543,201
       
          10,680,057
       
Components and Systems - 6.2%          

Analogic Corporation

  40,135     2,531,314

Belden

  57,800     1,958,264

Benchmark Electronics c

  208,200     3,401,988

Checkpoint Systems c

  56,060     1,170,533

China Security & Surveillance

         

Technology b,c

  6,000     80,880

Diebold

  73,600     2,618,688

Dionex Corporation c

  81,000     5,375,970

Electronics for Imaging b,c

  25,000     365,000

Energy Conversion Devices b,c

  84,500     6,222,580

Excel Technology c

  168,500     3,760,920

Hutchinson Technology b,c

  97,500     1,310,400

KEMET Corporation c

  95,600     309,744

Lexmark International Cl. A b,c

  4,000     133,720

Methode Electronics

  50,000     522,500

Nam Tai Electronics

  23,400     306,072

Newport Corporation b,c

  592,200     6,745,158

Perceptron c

  357,700     3,129,875

Plexus Corporation c

  300,700     8,323,376

Richardson Electronics

  520,712     3,087,822

Technitrol

  261,200     4,437,788

Vaisala Cl. A

  84,205     3,488,092
    SHARES     VALUE
Technology (continued)          
Components and Systems (continued)          

Vishay Intertechnology b,c

  186,000   $ 1,649,820

Zebra Technologies Cl. A c

  76,525     2,497,776
       
          63,428,280
       
Distribution - 0.9%          

Agilysys

  165,125     1,872,517

Anixter International c

  61,795     3,676,185

China 3C Group c

  157,300     202,917

Tech Data b,c

  86,500     2,931,485
       
          8,683,104
       
Internet Software and Services - 0.8%          

Arbinet-thexchange

  21,700     84,413

CMGI b,c

  173,500     1,839,100

CyberSource Corporation b,c

  10,000     167,300

EarthLink b,c

  55,200     477,480

j2 Global Communications b,c

  43,420     998,660

Jupitermedia Corporation b,c

  525,000     735,000

KongZhong Corporation ADR b,c

  8,300     30,959

Lionbridge Technologies c

  37,500     96,750

Perficient b,c

  10,000     96,600

RealNetworks b,c

  245,400     1,619,640

SkyTerra Communications c

  62,200     419,850

SupportSoft c

  220,000     715,000

VeriSign b,c

  24,800     937,440
       
          8,218,192
       
IT Services - 2.3%          

Alten c

  44,000     1,607,199

BearingPoint b,c

  529,100     428,571

Black Box

  67,300     1,829,887

Computer Task Group c

  101,100     517,632

DST Systems b,c

  5,000     275,250

Metavante Technologies b,c

  20,000     452,400

Sapient Corporation b,c

  806,602     5,178,385

SRA International Cl. A b,c

  213,300     4,790,718

Syntel

  152,679     5,148,336

Total System Services

  25,000     555,500

TriZetto Group (The) c

  107,600     2,300,488

Yucheng Technologies b,c

  13,500     151,065
       
          23,235,431
       
Semiconductors and Equipment - 3.8%          

Actions Semiconductor ADR b,c

  46,600     160,770

BE Semiconductor Industries b,c

  58,000     281,300

Brooks Automation c

  5,152     42,607

CEVA c

  31,666     252,378

Cognex Corporation

  236,200     5,444,410

Coherent c

  243,500     7,278,215

Diodes c

  297,450     8,221,518

DSP Group b,c

  164,500     1,151,500

Exar Corporation b,c

  232,576     1,753,623

Fairchild Semiconductor International c

  51,200     600,576

Himax Technologies ADR

  100,000     512,000

Image Sensing Systems b,c

  8,310     106,950

International Rectifier b,c

  120,000     2,304,000

Intevac b,c

  57,450     648,036

Jazz Technologies (Units) c

  805,000     966,000

26 |  2008 Semiannual Report to Stockholders THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.




June 30, 2008 (unaudited)


 

    SHARES     VALUE
Technology (continued)          
Semiconductors and Equipment (continued)          

Jinpan International

  3,700   $ 136,900

Kulicke & Soffa Industries c

  105,800     771,282

Novellus Systems b,c

  12,000     254,280

Power Integrations b,c

  49,000     1,548,890

Sanmina-SCI Corporation b,c

  200,000     256,000

Semitool c

  50,000     375,500

TTM Technologies b,c

  221,400     2,924,694

Varian b,c

  2,000     102,120

Veeco Instruments b,c

  65,000     1,045,200

Vimicro International ADR b,c

  270,000     766,800

Virage Logic b,c

  120,000     859,200
       
          38,764,749
       
Software - 3.9%          

ACI Worldwide c

  233,150     4,101,109

Advent Software b,c

  187,900     6,779,432

ANSYS b,c

  100,000     4,712,000

Aspen Technology c

  42,100     589,400

Avid Technology b,c

  96,000     1,631,040

Borland Software b,c

  280,000     380,800

China Fire & Security Group c

  16,300     131,215

Datasul

  150,000     2,138,045

Epicor Software b,c

  79,900     552,109

JDA Software Group b,c

  99,900     1,808,190

MSC.Software c

  50,000     549,000

National Instruments

  72,900     2,068,173

Net 1 UEPS Technologies b,c

  50,000     1,215,000

Pegasystems

  44,200     594,932

PLATO Learning c

  149,642     396,551

Radiant Systems b,c

  32,500     348,725

Renaissance Learning

  15,000     168,150

SPSS c

  179,600     6,532,052

Sybase b,c

  82,600     2,430,092

Teradata Corporation c

  35,000     809,900

THQ b,c

  20,000     405,200

Verint Systems b,c

  40,000     920,800
       
          39,261,915
       
Telecommunications - 2.4%          

Adaptec b,c

  2,584,100     8,269,120

ADTRAN

  65,000     1,549,600

Catapult Communications c

  87,100     620,152

China GrenTech ADR b,c

  8,700     39,672

China Mobile Media Technology c

  160,200     3,204

Cogent Communications Group b,c

  204,200     2,736,280

Cogo Group b,c

  7,900     71,969

Foundry Networks c

  298,600     3,529,452

Globalstar b,c

  50,000     141,500

Globecomm Systems c

  233,700     1,930,362

IDT Corporation c

  108,400     163,684

IDT Corporation Cl. B c

  245,000     416,500

Level 3 Communications b,c

  401,341     1,183,956

NMS Communications b,c

  380,000     421,800

Sycamore Networks b,c

  191,000     615,020

Tandberg

  90,000     1,475,497

Tollgrade Communications c

  20,000     89,800
      SHARES     VALUE
Technology (continued)            
Telecommunications (continued)            

UTStarcom c

    31,400   $ 171,758

Zhone Technologies c

    1,090,000     850,200
         
            24,279,526
         
Total (Cost $206,076,638)           216,551,254
         
             
Utilities – 0.2%            

CH Energy Group

    44,500     1,582,865

Southern Union

    11,576     312,784
         
Total (Cost $2,127,413)           1,895,649
         
             
Miscellaneouse – 2.6%            
Total (Cost $29,778,681)           26,716,887
         
             
TOTAL COMMON STOCKS            

(Cost $935,638,338)

          1,159,041,904
         
             
PREFERRED STOCKS – 0.4%            

Duratex

    130,000     2,757,158

Seneca Foods Conv. c,d

    85,000     1,595,025
         
TOTAL PREFERRED STOCKS            

(Cost $4,182,756)

          4,352,183
         
             
      PRINCIPAL      
      AMOUNT      
CORPORATE BOND – 0.0%            

Dixie Group 7.00%

           

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

           

(Cost $264,314)

  $ 307,000     286,661
         
             
REPURCHASE AGREEMENT – 6.6%            
State Street Bank & Trust Company,            

2.05% dated 6/30/08, due 7/1/08,

           

maturity value $67,473,842 (collateralized

           

by obligations of various U.S. Government

           

Agencies, valued at $69,159,350)

           

(Cost $67,470,000)

          67,470,000
         
             
COLLATERAL RECEIVED FOR SECURITIES            

LOANED – 11.6%

           
U.S. Treasury Bills            

due 11/13/08-11/20/08

    37,368     37,368
U.S. Treasury Bonds            

5.50%-8.875%

           

due 5/15/17-8/15/28

    1,275,121     1,302,986
U.S. Treasury Notes            

4.50%-5.00%

           

due 4/30/09-8/15/11

    146,659     149,229
U.S. Treasury Notes-TIPS            

1.875%-2.00%

           

due 7/15/14-7/15/15

    82,587     83,209

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 2008 Semiannual Report to Stockholders  | 27




Royce Value Trust   June 30, 2008 (unaudited)


Schedule of Investments

          VALUE  
COLLATERAL RECEIVED FOR SECURITIES            

LOANED (continued)

           
Money Market Funds            

State Street Navigator Securities Lending

           

Prime Portfolio (7 day yield-2.6748%)

      $ 116,161,736  
       
 
             
TOTAL COLLATERAL RECEIVED FOR            

SECURITIES LOANED

           

(Cost $117,734,528)

        117,734,528  
       
 
             
TOTAL INVESTMENTS – 132.5%            

(Cost $1,125,289,936)

        1,348,885,276  
             
LIABILITIES LESS CASH            

AND OTHER ASSETS – (10.9)%

        (110,717,436 )
             
PREFERRED STOCK – (21.6)%         (220,000,000 )
       
 
             
NET ASSETS APPLICABLE TO COMMON            

STOCKHOLDERS – 100.0%

      $ 1,018,167,840  
       
 




  New additions in 2008.
     
a  
At June 30, 2008, 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.
     
b   All or a portion of these securities were on loan at June 30, 2008. Total market value of loaned securities at June 30, 2008 was $112,828,640.
     
c   Non-income producing.
     
d   Securities for which market quotations are not readily available represent 0.2% of net assets. These securities have been valued at their fair value under procedures established by the Fund’s Board of Directors.
     
e   Includes securities first acquired in 2008 and less than 1% of net assets applicable to Common Stockholders.
     
    Bold indicates the Fund’s 20 largest equity holdings in terms of June 30, 2008 market value.
     
TAX INFORMATION: The cost of total investments for Federal income tax purposes was $1,126,378,186. At June 30, 2008, net unrealized appreciation for all securities was $222,507,090, consisting of aggregate gross unrealized appreciation of $376,486,271 and aggregate gross unrealized depreciation of $153,979,181. The primary difference in book and tax basis cost is the timing of the recognition of losses on securities sold.


28 |  2008 Semiannual Report to Stockholders THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.




Royce Value Trust   June 30, 2008 (unaudited)


Statement of Assets and Liabilities

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

Non-Affiliated Companies (cost $1,047,784,334)

  $ 1,275,423,831  

Affiliated Companies (cost $10,035,602)

    5,991,445  

Total investments at value     1,281,415,276  
Repurchase agreements (at cost and value)     67,470,000  
Cash and foreign currency     48,083  
Receivable for investments sold     14,465,352  
Receivable for dividends and interest     1,087,014  
Prepaid expenses and other assets     220,593  

Total Assets

    1,364,706,318  

LIABILITIES:        
Payable for collateral on loaned securities     117,734,528  
Payable for investments purchased     6,876,866  
Payable for investment advisory fee     1,356,971  
Preferred dividends accrued but not yet declared     288,446  
Accrued expenses     281,667  

Total Liabilities

    126,538,478  

PREFERRED STOCK:        
5.90% Cumulative Preferred Stock - $0.001 par value, $25 liquidation value per share; 8,800,000 shares outstanding     220,000,000  

     Total Preferred Stock     220,000,000  

NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS   $ 1,018,167,840  

ANALYSIS OF NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS:        
Common Stock paid-in capital - $0.001 par value per share; 61,776,913 shares outstanding (150,000,000 shares authorized)   $ 798,626,791  
Undistributed net investment income (loss)     1,438,972  
Accumulated net realized gain (loss) on investments and foreign currency     56,907,336  
Net unrealized appreciation (depreciation) on investments and foreign currency     223,598,013  
Quarterly and accrued distributions     (62,403,272 )

Net Assets applicable to Common Stockholders (net asset value per share - $16.48)

  $ 1,018,167,840  

*Investments at identified cost (including $117,734,528 of collateral on loaned securities)   $ 1,057,819,936  
 Market value of loaned securities     112,828,640  

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 2008 Semiannual Report to Stockholders  | 29




Royce Value Trust   Six Months Ended June 30, 2008 (unaudited)


Statement of Operations

INVESTMENT INCOME:        
Income:        

Dividends*

       

Non-Affiliated Companies

  $ 8,931,086  

Affiliated Companies

    103,224  

Interest

    1,286,403  

Securities lending

    798,937  

Total income     11,119,650  

Expenses:        

Investment advisory fees

    8,935,138  

Stockholder reports

    244,964  

Custody and transfer agent fees

    130,097  

Directors’ fees

    63,720  

Administrative and office facilities expenses

    56,362  

Professional fees

    28,628  

Other expenses

    69,227  

Total expenses     9,528,136  
 
Compensating balance credits     (3,514 )

Net expenses     9,524,622  

Net investment income (loss)     1,595,028  

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

Non-Affiliated Companies

    39,652,598  

Affiliated Companies

     
Net change in unrealized appreciation (depreciation) on investments and foreign currency     (174,123,794 )

Net realized and unrealized gain (loss) on investments and foreign currency     (134,471,196 )

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM INVESTMENT OPERATIONS     (132,876,168 )

DISTRIBUTIONS TO PREFERRED STOCKHOLDERS     (6,490,000 )

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

RESULTING FROM INVESTMENT OPERATIONS

  $ (139,366,168 )
         
* Net of foreign withholding tax of $447,399.        

30 |  2008 Semiannual Report to Stockholders THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.




Royce Value Trust


Statement of Changes in Net Assets

    Six months ended        
    6/30/08   Year ended
    (unaudited)   12/31/07
INVESTMENT OPERATIONS:                
Net investment income (loss)   $ 1,595,028     $ 5,297,518  
Net realized gain (loss) on investments and foreign currency     39,652,598       121,683,331  
Net change in unrealized appreciation (depreciation) on investments and foreign currency     (174,123,794 )     (56,217,996 )

Net increase (decrease) in net assets resulting from investment operations     (132,876,168 )     70,762,853  

DISTRIBUTIONS TO PREFERRED STOCKHOLDERS:                
Net investment income           (613,954 )
Net realized gain on investments and foreign currency           (12,366,046 )
Quarterly distributions *     (6,490,000 )      

Total distributions to Preferred Stockholders     (6,490,000 )     (12,980,000 )

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

               

RESULTING FROM INVESTMENT OPERATIONS

    (139,366,168 )     57,782,853  

DISTRIBUTIONS TO COMMON STOCKHOLDERS:                
Net investment income           (5,095,420 )
Net realized gain on investments and foreign currency           (102,630,144 )
Quarterly distributions *     (55,624,823 )      

Total distributions to Common Stockholders     (55,624,823 )     (107,725,564 )

CAPITAL SHARE TRANSACTIONS:                
Reinvestment of distributions to Common Stockholders     28,489,506       54,184,473  

Total capital stock transactions     28,489,506       54,184,473  

NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS     (166,501,485 )     4,241,762  

NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS:                

Beginning of period

    1,184,669,325       1,180,427,563  

End of period (including undistributed net investment income (loss) of $1,438,972 at 6/30/08 and

               

$(156,056) at 12/31/07)

  $ 1,018,167,840     $ 1,184,669,325  



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


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 2008 Semiannual Report to Stockholders  | 31




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   Years ended December 31,
    ended  
    June 30, 2008                                        
    (unaudited)     2007       2006       2005       2004       2003  

NET ASSET VALUE, BEGINNING OF PERIOD   $ 19.74     $ 20.62     $ 18.87     $ 18.95     $ 17.03     $ 13.22  

INVESTMENT OPERATIONS:                                                
Net investment income (loss)
    0.03       0.09       0.13       0.01       (0.08 )     (0.05 )
Net realized and unrealized gain (loss) on investments and
                                               
foreign currency
    (2.22 )     1.13       3.63       1.75       3.81       5.64  

Total investment operations
    (2.19 )     1.22       3.76       1.76       3.73       5.59  

DISTRIBUTIONS TO PREFERRED STOCKHOLDERS:                                                
Net investment income
    –           (0.01 )     (0.02 )     –           –           –      
Net realized gain on investments and foreign currency
    –           (0.21 )     (0.21 )     (0.24 )     (0.26 )     (0.26 )
Quarterly distributions *
    (0.11 )     –           –           –           –           –      

Total distributions to Preferred Stockholders
    (0.11 )     (0.22 )     (0.23 )     (0.24 )     (0.26 )     (0.26 )

NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON

                                               
STOCKHOLDERS RESULTING FROM INVESTMENT OPERATIONS
    (2.30 )     1.00       3.53       1.52       3.47       5.33  

DISTRIBUTIONS TO COMMON STOCKHOLDERS:                                                
Net investment income
    –           (0.09 )     (0.14 )     –           –           –      
Net realized gain on investments and foreign currency
    –           (1.76 )     (1.64 )     (1.61 )     (1.55 )     1.30  
Quarterly distributions *
    (0.92 )     –           –           –           –           –      

Total distributions to Common Stockholders
    (0.92 )     (1.85 )     (1.78 )     (1.61 )     (1.55 )     (1.30 )

CAPITAL STOCK TRANSACTIONS:                                                
Effect of reinvestment of distributions by Common Stockholders
    (0.04 )     (0.03 )     (0.00 )     0.01       0.00       (0.00 )
Effect of rights offering and Preferred Stock offering
    –           –           –           –           –           (0.22 )

Total capital stock transactions
    (0.04 )     (0.03 )     (0.00 )     0.01       0.00       (0.22 )

NET ASSET VALUE, END OF PERIOD   $ 16.48     $ 19.74     $ 20.62     $ 18.87     $ 18.95     $ 17.03  

MARKET VALUE, END OF PERIOD   $ 15.68     $ 18.58     $ 22.21     $ 20.08     $ 20.44     $ 17.21  

TOTAL RETURN (a):                                                
Market Value     (10.72 )%***     (8.21 )%     20.96 %     6.95 %     29.60 %     41.96 %
Net Asset Value     (11.67 )%***     5.04 %     19.50 %     8.41 %     21.42 %     40.80 %
RATIOS BASED ON AVERAGE NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS:                                              
Total expenses (b,c)     1.79 %**     1.38 %     1.29 %     1.49 %     1.51 %     1.49 %
Management fee expense (d)
    1.68 %**     1.29 %     1.20 %     1.37 %     1.39 %     1.34 %
Other operating expenses
    0.11 %**     0.09 %     0.09 %     0.12 %     0.12 %     0.15 %
Net investment income (loss)     0.30 %**     0.43 %     0.62 %     0.03 %     (0.50 )%     (0.36 )%
SUPPLEMENTAL DATA:                                                
Net Assets Applicable to Common Stockholders,                                                
End of Period (in thousands)
  $ 1,018,168     $ 1,184,669     $ 1,180,428     $ 1,032,120     $ 993,304     $ 850,773  
Liquidation Value of Preferred Stock, End of Period (in thousands)     $220,000       $220,000       $220,000       $220,000       $220,000       $220,000  
Portfolio Turnover Rate     14 %     26 %     21 %     31 %     30 %     23 %
PREFERRED STOCK:                                                
Total shares outstanding     8,800,000       8,800,000       8,800,000       8,800,000       8,800,000       8,800,000  
Asset coverage per share   $ 140.70     $ 159.62     $ 159.14     $ 142.29     $ 137.88     $ 121.68  
Liquidation preference per share   $ 25.00     $ 25.00     $ 25.00     $ 25.00     $ 25.00     $ 25.00  
Average market value per share (e):                                                
5.90% Cumulative
  $ 23.35     $ 23.68     $ 23.95     $ 24.75     $ 24.50     $ 25.04  
7.80% Cumulative
    –           –           –           –           –         $ 25.87  
7.30% Tax-Advantaged Cumulative
    –           –           –           –           –         $ 25.53  

(a)
The Market Value Total Return is calculated assuming a purchase of Common Stock on the opening of the first business day and a sale on the closing of the last business day of each period reported. Dividends and distributions are assumed for the purposes of this calculation to be reinvested at prices obtained under the Fund’s Distribution Reinvestment and Cash Purchase Plan. Net Asset Value Total Return is calculated on the same basis, except that the Fund’s net asset value is used on the purchase and sale dates instead of market value.
(b)
Expense ratios based on total average net assets including liquidation value of Preferred Stock were 1.48%, 1.17%, 1.08%, 1.22%, 1.21% and 1.19% for the periods ended June 30, 2008 and December 31, 2007, 2006, 2005, 2004 and 2003, respectively.
(c)
Expense ratios based on average net assets applicable to Common Stockholders before waiver of fees by the investment adviser would have been 1.62% for the year ended December 31, 2003; before waiver of fees and earnings credits would have been 1.79%, 1.38%, 1.29%, 1.49%, 1.51% and 1.62% for the periods ended June 30, 2008 and December 31, 2007, 2006, 2005, 2004 and 2003, respectively.
(d)
The management fee is calculated based on average net assets over a rolling 60-month basis, while the above ratios of management fee expenses are based on the average net assets applicable to Common Stockholders over a 12-month basis.
(e) The average of month-end market values during the period that the Preferred Stock was outstanding.
         * To be allocated to net investment income and capital gains at year end.
        ** Annualized.                                                                                                     *** Not annualized.

32 |  2008 Semiannual Report to Stockholders THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.




Royce Value Trust


Notes to Financial Statements (unaudited)

Summary of Significant Accounting Policies:

Royce Value Trust, Inc. (the “Fund”), was incorporated under the laws of the State of Maryland on July 1, 1986 as a diversified closed-end investment company. The Fund commenced operations on November 26, 1986.
     The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

Valuation of Investments:

Securities are valued as of the close of trading on the New York Stock Exchange (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. Securities for which market quotations are not readily available are valued at their fair value under procedures established by the Fund’s Board of Directors. 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 price of securities used by the Fund may differ from quoted or published prices for the same security. Bonds and other fixed income securities may be valued by reference to other securities with comparable ratings, interest rates and maturities, using established independent pricing services. Investments in money market funds are valued at net asset value per share.
      Various inputs are used in determining the value of the Fund’s investments. 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)
          Level 3 – significant observable inputs (including the Fund’s own assumptions in determining the fair value of investments)
     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, 2008:

Level 1