While in the investment world, an “opportunity” nearly always refers to a possibly positive circumstance or a chance for growth, “opportunistic” often implies an act or attitude more appropriate for speculators or other people with a decidedly short-term mindset and a healthy—perhaps too healthy—appetite for risk. However, in Royce Opportunity Fund (ROF), portfolio manager Buzz Zaino uses an opportunistic approach to small-cap value investing that has achieved long-term results which look anything but negative (see the table below). As a result of the Fund’s success, we have entirely positive associations with both terms.
     Buzz joined Royce in January 1998. He shares with our founder and Co-CIO Chuck Royce the experience of having been a young and relatively inexperienced portfolio manager through the rise and fall of the “Nifty Fifty” market of 1973-74, one whose precipitous declines shook the equity world as dramatically as the crisis period of late 2008-09. During the earlier period, Buzz was managing the Lehman Capital Fund, where he developed the theme-based methodology that he has used throughout his career.
     Buzz’s security selection process differs from that used by most of our portfolio managers, who begin with the balance sheet and proceed to factors such as returns on invested capital and the ability to generate free cash flow. By contrast, Buzz favors small-cap turnarounds and special situations. He looks for a catalyst for change at the company or industry level, one that he thinks is likely to eventually reverse the firm’s fortunes and drive its stock price upward.
     He typically slots purchase candidates into one of four themes: Companies with unrecognized asset values are those selling below probable liquidating value, franchise value, tangible book value, or physical asset value relative to plant or liquid assets. Turnarounds are companies recovering from depressed operating margins due to management changes or industry- and/or sector-specific factors. Undervalued Growth stocks are those that we believe can provide potential growth rates of at least 12%, have strong balance sheets, and whose stock prices are selling at relatively low valuations. Interrupted Earnings are companies with the potential for either a 20% annual growth rate or preeminent market position, accompanied by a price-earnings multiple substantially less than the expected growth rate.
     At the same time, these purchase candidates must be, in his words, “statistically valid for a value portfolio.” The primary metrics used to determine this are price-to-book and price-to-sales ratios, as Buzz believes that examining each in concert provides the best estimate of a company’s potential to rebound. He prefers companies with low debt, but is willing to look past a less-than-pristine balance sheet if he believes that the company is otherwise well-positioned to generate positive or improved earnings. He also begins to buy slowly, patiently building positions over time, usually at the first signs of corporate distress. Positions typically begin by accounting for anywhere from 0.25% to 0.50% of net assets. If the company’s stock price rises and it reaches to 1.00% of net assets, he generally begins to pare it back or sell it off entirely.
     Since Buzz began to manage the Fund in January 1998, ROF has been characterized by his disciplined and methodical approach, a commitment to broad diversity and an ample number of micro-cap stocks. Bill Hench joined Buzz as the Fund’s assistant portfolio manager in 2004 and together they have built a strong long-term performance record.

All performance information is for the Fund’s Investment Class, reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 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 redeemed. Shares redeemed within 180 days of purchase may be subject to a 1% redemption fee, payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current performance may be higher or lower than performance quoted. Current month-end performance information may be obtained at www.roycefunds.com. Operating expenses reflect the Fund’s total annual operating expenses for the Investment Class as of the Fund’s most current prospectus and include management fees, other expenses, and acquired fund fees and expenses. Acquired fund fees and expenses reflect the estimated amount of the fees and expenses incurred indirectly by the Fund through its investments in mutual funds, hedge funds, private equity funds and other investment companies. Shares of ROF’s Service, Consultant, R, and K Classes bear an annual distribution expense that is not borne by the Investment Class.

The Fund invests primarily in small-cap and micro-cap stocks, which may involve considerably more risk than investing in larger-cap stocks. (Please see “Primary Risks for Fund Investors” in the prospectus.) Russell Investment Group is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Russell Investment Group. The Russell 2000 Index is an unmanaged, capitalization-weighted index of domestic small-cap stocks. It measures the performance of the 2,000 smallest publicly traded U.S. companies in the Russell 3000 Index. Distributor: Royce Fund Services, Inc.

For the six months ended June 30, 2013, certain securities have transferred in and out of Level 1 and Level 2 measurements as a result of the fair value pricing procedures for international equities. The Funds recognize transfers between levels as of the end of the reporting period.
At June 30, 2013, the following Funds had securities transfer from Level 2 to Level 1 within the fair value hierarchy:

The following table presents by financial instrument, each Fund’s derivative liabilities net of related collateral held by each Fund at June 30, 2013:

Distributor: Royce Fund Services, Inc. (“RFS”), the distributor of the Trust’s shares, is a wholly owned subsidiary of Royce. RFS is entitled to receive distribution fees that are computed daily and payable monthly.

The primary difference between book and tax basis cost is the timing of the recognition of losses on securities sold.

As a shareholder of a mutual fund, you pay ongoing expenses, including management fees and other Fund expenses including, for some funds, distribution and/or service (12b-1) fees. Using the information below, you can estimate how these ongoing expenses (in dollars) affect your investment and compare them with the ongoing expenses of other funds. You may also incur one-time transaction expenses, including redemption fees, which are not shown in this section and would result in higher total costs. The example is based on an investment of $1,000 invested at January 1, 2013, and held for the entire six-month period ended June 30, 2013. Service, Consultant, R and K Class shares are generally available only through certain brokers or retirement plan administrators who receive distribution and/or service fees from the Fund for services that they perform. Institutional and W Class shares are generally available only to institutions or intermediaries with a minimum account size of $1 million.

Charles M. Royce, Trustee¹, President
Age: 73 | Number of Funds Overseen: 34 | Tenure: Since 1982
Non-Royce Directorships: Director of TICC Capital Corp.

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

Patricia W. Chadwick, Trustee
Age: 64 | Number of Funds Overseen: 34 | Tenure: Since 2009
Non-Royce Directorships: Trustee of ING Mutual Funds and Director of Wisconsin Energy Corp.

Principal Occupation(s) During Past 5 Years: Consultant and President of Ravengate Partners LLC (since 2000).

Richard M. Galkin, Trustee
Age: 75 | Number of Funds Overseen: 34 | Tenure: Since 1982
Non-Royce Directorships: None

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

Stephen L. Isaacs, Trustee
Age: 73 | Number of Funds Overseen: 34 | Tenure: Since 1989
Non-Royce Directorships: None

Principal Occupation(s) During Past Five Years: Attorney and President of Health Policy Associates, Inc., consultants. Mr. Isaacs’s prior business experience includes having served as President of the Center for Health and Social Policy (from 1996 to 2012); Director of Columbia University Development Law and Policy Program and Professor at Columbia University (until August 1996).

Arthur S. Mehlman, Trustee
Age: 71 | Number of Funds Overseen: 48 | Tenure: Since 2004
Non-Royce Directorships: Director/Trustee of registered investment companies constituting the 14 Legg Mason Funds.

Principal Occupation(s) During Past Five Years: Director of The League for People with Disabilities, Inc.; Director of University of Maryland Foundation (non-profits). Formerly: Director of Municipal Mortgage & Equity, LLC (from October 2004 to April 1, 2011); Director of University of Maryland College Park Foundation (non-profit) (from 1998 to 2005); Partner, KPMG LLP (international accounting firm) (from 1972 to 2002); Director of Maryland Business Roundtable for Education (from July 1984 to June 2002).

David L. Meister, Trustee
Age: 73 | Number of Funds Overseen: 34 | Tenure: Since 1982
Non-Royce Directorships: None

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

G. Peter O’Brien, Trustee
Age: 67 | Number of Funds Overseen: 48 | Tenure: Since 2001
Non-Royce Directorships: Director/Trustee of registered investment companies constituting the 14 Legg Mason Funds; Director of TICC Capital Corp.

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

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

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

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

Daniel A. O’Byrne, Vice President and Assistant Secretary
Age: 51 | Tenure: Since 1994

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

John E. Denneen, Secretary and Chief Legal Officer
Age: 46 | Tenure: 1996-2001 and Since April 2002

Principal Occupation(s) During Past Five Years: General Counsel, Principal, Chief Legal and Compliance Officer, and Secretary of Royce; Secretary and Chief Legal Officer of The Royce Funds.

Principal Occupation(s) During Past Five Years: Chief Compliance Officer of The Royce Funds (since October 2004) and Compliance Officer of Royce (since June 2004).

Trustees will hold office until their successors have been duly elected and qualified or until their earlier resignation or removal. The Statement of Additional Information, which contains additional information about the Trust’s trustees and officers, is available and can be obtained without charge at www.roycefunds.com or by calling (800) 221-4268.

At meetings held on June 11-12, 2013, the Board of Trustees of The Royce Fund (the “Board”), including all of the non-interested trustees, approved the continuance of the Investment Advisory Agreements between Royce & Associates, LLC (“R&A”) and The Royce Fund (“TRF”) relating to each of Royce Pennsylvania Mutual Fund, Royce Low-Priced Stock Fund, Royce Heritage Fund, Royce Value Plus Fund, Royce Premier Fund, Royce Special Equity Fund, Royce Value Fund, Royce 100 Fund, Royce Total Return Fund, Royce Dividend Value Fund, Royce Micro-Cap Fund, Royce Opportunity Fund, Royce Global Value Fund, and Royce International Smaller-Companies Fund (each, a “Fund” and collectively, the “Funds”). In reaching these decisions, the Board reviewed, among other things, information prepared internally by R&A and independently by Morningstar Associates, LLC (“Morningstar”) containing detailed expense ratio and investment performance comparisons for each Fund with other mutual funds in their “peer group” and “category”, information regarding the past performance of the Funds and other registered investment companies managed by R&A and a memorandum outlining the legal duties of the Board prepared by independent counsel to the non-interested trustees. R&A also provided the trustees with an analysis of its profitability with respect to providing investment advisory services to each Fund. In addition, the Board took into account information furnished throughout the year at regular Board meetings, including reports on investment performance, shareholder services, distribution fees and expenses, regulatory compliance, brokerage commissions and research, brokerage and other execution products and services provided to the Funds. The Board also considered other matters they deemed important to the approval process such as allocation of Fund brokerage commissions, “soft dollar” research services R&A receives, payments made to affiliates of R&A, as well as payments made by R&A, relating to distribution of Fund shares and other direct and indirect benefits to R&A and its affiliates from their relationship with the Funds. The trustees also met throughout the year with investment advisory personnel from R&A. The Board, in its deliberations, recognized that, for many of the Funds’ shareholders, the decision to purchase Fund shares included a decision to select R&A as the investment adviser and that there was a strong association in the minds of Fund shareholders between R&A and each of the Funds. In considering factors relating to the approval of the continuance of the Investment Advisory Agreements, the non-interested trustees received assistance and advice from, and met separately with, their independent counsel. While the Investment Advisory Agreements for the Funds were considered at the same meetings, the trustees dealt with each agreement separately. Among other factors, the trustees considered the following:

In light of R&A’s risk-averse approach to investing, the trustees believe that risk-adjusted performance continues to be an appropriate measure of each Fund’s investment performance. One measure of risk-adjusted performance the trustees have historically used in their review of the Funds’ performance is the Sharpe Ratio. The Sharpe Ratio is a risk-adjusted measure of performance developed by Nobel Laureate William Sharpe. It is calculated by dividing a fund’s annualized excess returns by its annualized standard deviation to determine reward per unit of risk. The higher the Sharpe Ratio, the better a fund’s historical risk-adjusted performance. The Board attaches primary importance to risk-adjusted performance over relatively long periods of time, typically 3 to 10 years. Except as described below, each of the Funds with 3 or more years of performance fell in the 1st or 2nd quartile within its Morningstar category and the small-cap universe for the 3-year, 5-year and 10-year periods ended December 31, 2012.
Royce Premier Fund (“RPR”) and Royce Global Value Fund (“RGV”) placed in the middle quintile for the 3-year period ended December 31, 2012 within their respective Morningstar category. Royce Low-Priced Stock Fund (“RLP”) and Royce Opportunity Fund (“ROF”) fell in the middle quintile for the 5-year period within their Morningstar categories and RLP’s 10-year ranking fell in the middle quintile of its Morningstar category. Royce Micro-Cap Fund’s (“RMC”) Sharpe Ratio for the 5-year period fell in the 3rd quartile as its risk-adjusted performance in 2012 adversely impacted its longer-term performance. It was noted that as of December 31, 2011 RMC had placed in the first quartile for the 3-year, 5-year and 10-year periods. The Board noted that Royce Value Plus Fund (“RVP”) has struggled during recent market cycles as its portfolio manager had taken a more defensive portfolio approach going into the strong up market beginning with the March 2009 market low, leading to a 3rd quartile total return and Sharpe Ratio performance for the 5-year period and a 4th quartile Sharpe Ratio for the 3-year period. RVP was in the top quartile (4th percentile) for the 10-year period. It was also noted that RVP’s portfolio manager had repositioned the Fund to take it back to its “value plus” growth roots, resulting in a total return in 2012 of 15.2%, slightly trailing the Russell 2000 Index in a strong up market. RLP’s, RMC’s, Royce Heritage Fund’s (“RHF”), and Royce Value Fund’s (“RVV”), Sharpe Ratios fell in the 4th quartile for the 3-year period within each Fund’s Morningstar category. This was attributable in part to RLP’s, RMC’s, and RVV’s significant overweighting in materials, particularly metals and mining companies, and RHF’s focus on companies with low leverage and solid balance sheets, each of which contributed to lagging

128 | The Royce Funds 2013 Semiannual Report to Shareholders

performance. In addition to each Fund’s risk-adjusted performance, the trustees also reviewed and considered each Fund’s absolute total returns, down market performance and, for the Funds in existence for such periods, long-term performance records over periods of 10 years or longer.
The Board also considered it important to look beyond the current snapshot of performance as of December 31, 2012 and therefore examined extended performance histories for each series with 3 years or more since its inception using monthly rolling average return periods through March 31, 2013.
The trustees noted that R&A manages a number of funds that invest in small-cap and micro-cap issuers, many of which had outperformed their benchmark indexes and their competitors over longer-term periods. Although the trustees recognized that past performance is not necessarily an indicator of future results, they found that R&A had the necessary qualifications, experience and track record in managing mid-cap, small-cap and micro-cap securities to manage the Funds. The trustees determined that R&A continued to be an appropriate investment adviser for each Fund and concluded that each of Fund’s performance supported the continuation of its Investment Advisory Agreement.

Cost of the services provided and profits realized by R&A from its relationship with each Fund:

The trustees considered the cost of the services provided by R&A and the profits realized by R&A from its relationship with each Fund. As part of the analysis, the Board discussed with R&A its methodology in allocating its costs to each Fund and concluded that its allocations were reasonable. The trustees noted that at times R&A had closed certain of the Funds to new investors because of the rate of growth in Fund assets. The trustees concluded that R&A’s profits were reasonable in relation to the nature and quality of services provided.

The extent to which economies of scale would be realized as the Funds grow and whether fee levels would reflect such economies of scale:

The trustees considered whether there have been economies of scale in respect of the management of the Funds, whether the Funds have appropriately benefited from any economies of scale and whether there is potential for realization of any further economies of scale. The trustees noted the time and effort involved in managing portfolios of small- and micro-cap stocks and that they did not involve the same efficiencies as do portfolios of large-cap stocks. The trustees noted that in 2004 breakpoints had been added to the investment advisory fees for all Funds except Royce Pennsylvania Mutual Fund (“PMF”) (PMF’s fee schedule already had breakpoints) and that the contractual investment advisory fee rate for each of RMC and RLP had been reduced in 2004. The trustees concluded that the current fee structure for each Fund was reasonable and that shareholders sufficiently participated in economies of scale.

Comparison of services to be rendered and fees to be paid to those under other investment advisory contracts, such as contracts of the same and other investment advisers or other clients:

The trustees reviewed the investment advisory fee paid by each Fund and compared both the services to be rendered and the fees to be paid under the Investment Advisory Agreements to other contracts of R&A and to contracts of other investment advisers to registered investment companies investing in small- and micro-cap stocks, as provided by Morningstar. The trustees also considered each Fund’s administrative, sub-transfer agent, and transfer agent expenses. The trustees noted the importance of the net expense ratio in measuring a fund’s efficiency, particularly in light of the variations in the mutual fund industry as to who is responsible for which expenses. The net expense ratios for PMF, RHF, ROF, and Royce Special Equity Fund ranked within the first or second quartile among their peers, as selected by Morningstar. RPR fell in the 3rd quartile among its peers, but its net expense ratio was only 5 basis points higher than its peer group median. RMC placed in the 3rd quartile within its peer group, 6 basis points higher than its peer group median. The Board also noted that RMC’s net expense ratio is below the average net expense ratio for the 46 non-institutional, non-ETF, domestic stock funds in the Morningstar database that invest primarily in issuers with market caps below $500 million and 12b-1 fees equal to or less than 0.25%. It was noted by the Board that RLP’s expense ratio placed in the 4th quartile, 22 basis points higher than its peer group median. RLP’s higher management fee, reflecting the Fund’s use of low-priced and micro-cap stocks, accounts for this difference. RLP’s net expense ratio is five basis points higher than the mean for all 304 small-cap category funds (non-institutional, non-index, non-ETF) with 12b-1 fees of 25 basis points. The trustees noted that RVV’s expense ratio placed in the 4th quartile within its peer group, 39 basis points higher than its peer group median as its management fee was 25 basis points higher than the peer group median. RVP’s expense ratio placed in the 4th quartile, 17 basis points higher than its peer group median. Each of Royce 100 Fund’s (“ROH”) and Royce Dividend Value Fund’s (“RDV”) expense ratios placed in the 3rd quartile, 7 and 10 basis points higher than their peer group median, respectively, as their management fees were 22 and 13 basis points higher. The management fees for ROH and RDV are consistent with other Royce open-end funds and their fund net expense ratios are below or approximate the 1.44% mean for all 304 small-cap category funds (non-institutional, non-index, non-ETF) with 12b-1 fees of 25 basis points. It was noted that most of RGV’s peers are in large-cap style boxes per the Morningstar data. After taking into consideration that the level of work necessary to invest in small-cap international securities is significantly greater than that necessary to invest in larger-cap securities, the trustees noted that the basis point differential in management fees, which gave rise to the generally higher expense ratio, was appropriate for RGV. It was also noted that 33% of the peers for Royce International Smaller-Companies Fund (“RIS”), as selected by Morningstar, do not have 12b-1 fees. Despite having no 12b-1 fees, these peers were selected because of their comparable investment market-cap ranges. The average 12b-1 fees for the peer group is 15 basis points, and the 10 basis points difference between that average and RIS’ 0.25% 12b-1 fee accounts for the majority of the differential in net expenses for these funds.
The trustees noted that R&A has waived advisory fees for numerous series of TRF in order to maintain expense ratios at competitive levels and acknowledged R&A’s intention to continue this expense limitation practice. The trustees also considered fees charged by R&A to institutional and other clients and noted that, given the greater levels of services that R&A provides to registered investment companies such as the Funds as compared to other accounts, each of the Funds’ advisory fees compared favorably to these other accounts. It was noted that no single factor was cited as determinative to the decision of the trustees. Rather, after weighing all of considerations and conclusions discussed above, the entire Board, including all the non-interested trustees, determined to approve the continuation of the existing Investment Advisory Agreements, concluding that a contract continuation on the existing terms was in the best interest of the shareholders of each Fund and that each investment advisory fee rate was reasonable in relation to the services provided.

The Royce Funds 2013 Semiannual Report to Shareholders | 129

Notes to Performance and Other Important Information

Sector weightings are determined using the Global Industry Classification Standard (“GICS”). GICS was developed by, and is the exclusive property of, Standard & Poor’s Financial Services LLC (“S&P”) and MSCI Inc. (“MSCI”). GICS is the trademark of S&P and MSCI. “Global Industry Classification Standard (GICS)” and “GICS Direct” are service marks of S&P and MSCI.

All indexes referred to are unmanaged and capitalization weighted. Each index’s returns include net reinvested dividends and/or interest income. Russell Investment Group is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. Russell^® is a trademark of Russell Investment Group. The Russell 2000 is an index of domestic small-cap stocks. It measures the performance of the 2,000 smallest publicly traded U.S. companies in the Russell 3000 Index. The Russell 1000 Index is an index of domestic large-cap stocks. It measures the performance of the 1,000 largest publicly traded U.S. companies in the Russell 3000 Index. The Russell Microcap Index includes 1,000 of the smallest securities in the Russell 2000 Index, along with the next smallest eligible securities as determined by Russell. The Russell 2500 is an index of domestic small- to mid-cap stocks. It includes approximately 2,500 of the smallest securities in the Russell 3000 Index. The Russell Midcap Index measures the performance of the mid-cap segment of the U.S. equity universe. It includes approximately 800 of the smallest securities in the Russell 1000 Index. The Russell Global Small Cap Index is an index of global small-cap stocks. The Russell Global ex-U.S. Small Cap Index is an index of global small-cap stocks, excluding the United States. The Russell Global ex-U.S. Large Cap Index is an index of global large-cap stocks, excluding the United States. The CBOE Volatility Index (VIX) measures market expectations of near-term volatility conveyed by S&P 500 Stock index option prices. The S&P 500 is an index of U.S. large-cap stocks, selected by Standard & Poor’s based on market size, liquidity, and industry grouping, among other factors. The Nasdaq Composite is an index of the more than 3,000 common equities listed on the Nasdaq stock exchange. The performance of an index does not represent exactly any particular investment, as you cannot invest directly in an index. Returns for the market indexes used in this report were based on information supplied to Royce by Russell Investments. Royce has not independently verified the above described information.

The Price-Earnings, or P/E, Ratio is calculated by dividing a company’s share price by its trailing 12-month earnings-per share (EPS). The Price-to-Book, or P/B, Ratio is calculated by dividing a company’s share price by its book value per share. The Sharpe Ratio is calculated for a specified period by dividing a fund’s annualized excess returns by its annualized standard deviation. The higher the Sharpe Ratio, the better the fund’s historical risk-adjusted performance. Standard deviation is a statistical measure within which a fund’s total returns have varied over time. The greater the standard deviation, the greater a fund’s volatility. The Royce Funds is a service mark of The Royce Funds. Distributor: Royce Fund Services, Inc.

Investments in securities of micro-cap, small-cap and/or mid-cap companies may involve considerably more risk than investments in securities of larger-cap companies. (Please see “Primary Risks for Fund Investors” in the prospectus.) Certain Royce Funds may invest up to 25% (100% for Royce Global Value and International Smaller-Companies Funds, 35% of Heritage, Low-Priced Stock, and Micro-Cap Funds, 10% of Opportunity Fund, and 5% of Special Equity Fund) of their respective assets in foreign securities, which generally may involve political, economic, currency, and other risks not encountered in U.S. investments. (Please see “Investing in Foreign Securities” in the prospectus.) Please read the prospectus carefully before investing or sending money. A copy of the Funds’ current prospectus and Statement of Additional Information may be obtained by calling (800) 221-4268 or by visiting www.roycefunds.com. All publicly released material Fund information is disclosed by the Funds on their website at www.roycefunds.com.

Forward-Looking Statements

This material contains forward-looking statements within the meaning of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve risks and uncertainties, including, among others, statements as to:

•	the Funds’ future operating results,
•	the prospects of the Funds’ portfolio companies,
•	the impact of investments that the Funds have made or may make,
•	the dependence of the Funds’ future success on the general economy and its impact on the companies and industries in which the Funds invest, and
•	the ability of the Funds’ portfolio companies to achieve their objectives.

This review and report use words such as “anticipates,” “believes,” “expects,” “future,” “intends,” and similar expressions to identify forward-looking statements. Actual results may differ materially from those projected in the forward-looking statements for any reason.

The Royce Funds have based the forward-looking statements included in this review and report on information available to us on the date of the report, and we assume no obligation to update any such forward-looking statements. Although The Royce Funds undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events, or otherwise, you are advised to consult any additional disclosures that we may make through future shareholder communications or reports.

Proxy Voting

A copy of the policies and procedures that The Royce Funds use to determine how to vote proxies relating to portfolio securities and information regarding how each of The Royce Funds voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available, without charge, on The Royce Funds’ website at www.roycefunds.com, by calling (800) 221-4268 (toll-free) and on the website of the Securities and Exchange Commission (“SEC”) at www.sec.gov.

Form N-Q Filing

The Funds file their complete schedules of investments with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the SEC’s website at www.sec.gov. The Royce Funds’ holdings are also on the Funds’ website approximately 15 to 20 days after each calendar quarter end and remain available until the next quarter’s holdings are posted. The Funds’ Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. To find out more about this public service, call the SEC at (202) 942-8090. The Funds’ complete schedules of investments are updated quarterly and are available at www.roycefunds.com.

130 | The Royce Funds 2013 Semiannual Report to Shareholders

2013 In Quotes

It’s not during up years that great investment track records are made.

– Charles de Vaulx, International Value Advisers, The Art of Value Investing

Points to Ponder

The reversion-to-the-mean effect shows up most over longer periods. Investors selecting a sector on the basis of its prior five-year performance would have earned much higher returns over the following five years by selecting the worst-performing sector than the best. The gap is more than 30 percentage points. In the long term it pays to be contrarian.

– The Economist, January 12, 2013

– Brian Rodgers, Barron’s, January 26, 2013

Active managers earn their fees building a long-term performance record through time arbitrage... Value investors succeed not by chasing relative returns, but by embracing the fundamentals of value investing, finding the strongest, highest-quality companies at the best possible prices.

– Chuck Royce, Barron’s, May 11, 2013

While absolute skill tends to improve, relative skill tends to become more uniform. In plain words, that means that the difference between the best and the average is less than what it used to be. So, the best hitter in baseball is closer to an average player today than was the case 50 years ago.

– Michael Mauboussin, Morningstar Advisor, April/May 2013

With interest rates at all-time lows, stocks continue to offer investors the best prospects.

– Jeremy J. Siegel, Kiplinger’s Personal Finance, June 2013

Throughout the post-World War II era, the average stock-market decline in a bear market is about 25% and lasts about 10 months. So the bear market that ended in March of ’09 was twice as severe as the average. Most bear markets are induced by economic contractions. During the average recession in the postwar period, real gross domestic product goes down 2% from peak to trough. The most recent recession was about twice as severe in magnitude, so you had a bear market twice as severe as the average bear market, and the market discounted twice as severe an economic contraction.

– Leon Cooperman, Barron’s, May 18, 2013

In Absolute Agreement

For any period of less than five years you are evaluating serendipity rather than skill.

– Bill Nygren, Kiplinger’s Personal Finance, March 2013

American business will do fine over time. And stocks will do well just as certainly, since their fate is tied to business performance. Periodic setbacks will occur, yes, but investors and managers are in a game that is heavily stacked in their favor. (The Dow Jones Industrials advanced from 66 to 11,497 in the 20th Century, a staggering 17,320% increase that materialized despite four costly wars, a Great Depression and many recessions. And don’t forget that shareholders received substantial dividends throughout the century as well.)

– Warren Buffett, Berkshire Hathaway 2013 annual report letter, March 1, 2013

Cocktail Conversation

Commodities are not an investment. An investment by definition is either current income or a stream of future income. When you buy a commodity, you have to be assuming that you are going to be able to sell it at a higher price to someone else, because it has no income. Thus, it is not investing—it is speculating.

– Barton Biggs, Diary of a Hedgehog

Many who abandoned equities in the “flight to safety” have begun to slowly migrate from cash and bonds to high dividend, low volatility stocks, and very recently, to more cyclical stocks. The timid move back into equities is in early stages with much money still on the sidelines, but flows could occur sporadically.

– Longleaf Partners Fund, First Quarter 2013 Report

The Dow Jones Industrial Index has risen in 17 of the past 20 months, the longest such streak since 1951.

– Sandra Ward, Barron’s, June 1, 2013

Timeless Tidbits

When all is said and done, more is said than done.

– Lou Holtz

There are more fools among buyers than among sellers.

– Proverb

A creative man is motivated by the desire to achieve, not by the desire to beat others.

– Ayn Rand

Try not to become a man of success, but rather try to become a man of value.

– Albert Einstein

There are no secrets to success. It is the result of preparation, hard work, and learning from failure.

– Colin Powell

The thoughts expressed above represent solely the opinions of the persons quoted and, of course, there can be no assurance of future market trends or performance.

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Making Headlines

At The Royce Funds, the integrity of our process and the reputation of our people are as important to us as the long-term performance of our portfolios, so it is always gratifying when the results of these three efforts are recognized in the wider world. Through the years, we have been fortunate enough to have a number of positive articles written about The Royce Funds, our firm, and our people, as well as opportunities to share our investment beliefs and approach. Below is a summary of several media mentions we received in the first half of this year.

June 26, 2013

Jay Kaplan Shares “The Case for Equities” with Investment News and Asset.tv

Moderating a comprehensive discussion on equities, host Evan Cooper gleaned insights on topics such as the current state of the market, interest rates, dividend stocks and bond proxies, Fed policy, the risks of investing in small-caps, diversified portfolios, gaining international exposure through small-cap portfolios, current investment opportunities, and more. When asked what advisors and investors should take away from the discussion, Jay responded, “There are three things we think about at The Royce Funds and have for a long time... and they are: always invest in companies with financial strength, try to invest in really good businesses—businesses that earn high returns on their capital—and the price you pay really matters, so be really careful about valuation and the price you pay.”

May 23, 2013

Chuck Royce in Barron’s “Willing to Wait”

“Right now, we’re working our way through a bubble of fear, a mirror to how it was in the 1990s, when we were in a bubble of greed,” said Co-CIO and President of The Royce Funds Chuck Royce in “Willing to Wait,” an article written by Jack Willoughby and published by Barron’s on May 11, 2013. “This market and the wide availability of credit rewards the overleveraged operations that have made excessive use of debt,” said Chuck. “It’s taken us awhile to understand the destructive effects of quantitative easing,” he added. Among the consequences of the Federal Reserve’s quantitative easing program—in addition to distorting stock value—have been investors’ preference for lower-quality companies, fixed-income securities, and passive management vehicles such as exchange-traded funds (ETFs) and index funds. However, while investor confidence can wax and wane quickly, playing a major role in the market’s direction, Chuck remains disciplined and sticks to his path. The article also looked closely at Chuck’s investment methodology, citing three companies that he currently likes.

May 9, 2013

Consuelo Mack WealthTrack:

Exclusive Interview with The Royce Funds’ “Great Investor”

On April 26, 2013, Co-CIO, President, and Portfolio Manager Chuck Royce was welcomed once again as a guest on Consuelo Mack WealthTrack. Introduced as a “small-company stock pioneer,” Chuck answered questions that revolved around his 40 years of experience investing in small-cap stocks, how the market has changed during his tenure, and the most important lessons he’s learned since enduring the bear market of the early- and mid-1970s, which include controlling risk, measuring performance by full market cycles, focusing on absolute returns (not comparisons to indexes), and maintaining a long-term investment discipline. “You have to suspend your fear in the short term in order to capture the long-term performance,” said Chuck. The interview also consisted of Chuck’s thoughts on the current market environment, small-caps as a distinct asset class, where Chuck is currently finding value, and avoiding the bandwagon while betting on quality.

April 15, 2013

The Wall Street Journal: Royce Special Equity Multi-Cap Among “Promising New Funds From Old Hands”

For many investors, distinguishing whether a new fund is either “promising” or “lucky” depends heavily on that manager’s experience and track record with other funds. Managed by Charlie Dreifus, Royce Special Equity Multi-Cap Fund was one of four portfolios mentioned in the Wall Street Journal’s April 7, 2013 article “Promising New Funds From Old Hands.” Author Javier Espinoza stated that, “Mr. Dreifus says he looks for companies that are inexpensive on an absolute basis, not just compared with the market or peers.” He added, “[Charlie] says his approach includes a ‘deep dive into the accounting’ of the companies.”

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Searching for Super Small-Cap Companies Through the Macro Noise

Portfolio Manager and Principal Chris Clark offers insights into our disciplined, long-term investment process by emphasizing the role that contrarian thinking plays in our portfolios.

Without giving away the plot, let’s just say that some variation of this unlikely turn of events does indeed occur, and while the film made no reference to the impact this unfriendly visit had on financial markets (sadly for me), it’s no stretch to conclude that there would probably be more sellers than buyers during the initial period of panic and uncertainty.

Not wanting to miss the full effects of this thriller, I convinced my wife and daughters to see the movie in IMAX 3D. In hindsight, this was probably not a great call on my part. To say that the whole experience overwhelmed the senses understates the continuous visual and audio assault that exhausted more than it entertained several moviegoers, my wife and youngest daughter included.

Other viewers had a similar experience, with several congregating outside the theater doors also attempting to regain their lost senses. I was able to make it through to the ending but felt disoriented by the whole experience. It took several hours for the effects to fully wear off.

Clearly the theater’s supersized viewing screen and deafening Dolby Surround Sound, combined with the movie’s exhilarating action and awesome 3-D imagery, had the desired effect of hijacking the senses. However, it also had the unintended consequence of numbing the viewer to the underlying plot.

Although no one will pay hard-earned dollars to watch the action on trading floors or Ben Bernanke’s press conferences, the corollaries to today’s investment climate are otherwise surprisingly close. Systemic risks abound and while clearly different and (perhaps) less fantastic than those depicted in the movie, they are no less unsettling when followed to their potential conclusion.

The most dramatic systemic risks imply the end of civilization due to natural resource exhaustion, civil strife over wealth disparity, wars over unpaid liabilities (people generally like to get paid back), and religious fanaticism. Of course, risks are one thing and outcomes can be entirely different—therein lies the true challenge for today’s would-be heroic investor.

The prognostications from market pundits through the various media outlets are overwhelming and constant. Much like the IMAX 3-D experience, the extreme noise can make the underlying plot tough to discern. And weighing the probabilities of any outcome is another challenge entirely.

One recent favorite of the pundits has been the inherently flawed eurozone currency structure. Another doomsday scenario centers on Japanese Prime Minister Shinzo Abe’s attempt to target inflation through extreme monetary and fiscal policies. A third recent view sees China struggling with demographic and environmental catastrophe while also facing an economic hard landing that will unleash massive social upheaval in the world’s most populous country. And there’s always the old favorite involving the respective pursuits of nuclear weapons by North Korea and Iran, as well as each nation’s stated goals of annihilating their adversaries (a list that often includes the U.S.).

This is important because we invest in companies, not headlines or economic statistics. Like the best-drawn movie characters, companies can be resilient and dynamic entities that more often than not self-determine their long-term success or failure. There is no question that macroeconomic factors provide relevant inputs. Yet from our perspective they are often far less important than investors believe.

So whether or not the investment community decides to sell everything because chaos and destruction appear imminent is less of a concern to us than which companies look likely to survive, adapt, and ultimately grow stronger in whatever the aftermath. That is our business, and we are sticking with it. All that loud noise is like Kryptonite to us.

The thoughts in this essay concerning the stock market are solely those of Royce & Associates and, of course, there can be no assurance with regard to future market movements.

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About The Royce Funds

Wealth Of Experience
With approximately $36 billion in total assets under management, Royce & Associates is committed to the same small-company investing principles that have served us well for 40 years. Charles M. Royce, our President and Co-Chief Investment Officer, enjoys one of the longest tenures of any active mutual fund manager. Royce’s investment staff also includes Co-Chief Investment Officer W. Whitney George, 18 Portfolio Managers, four assistant portfolio managers and analysts, and nine traders.

Multiple Funds, Common Focus
Our goal is to offer both individual and institutional investors the best available smaller-cap portfolios. Unlike a lot of mutual fund groups with broad product offerings, we have chosen to concentrate on smaller-company investing by providing investors with a range of funds that take full advantage of this large and diverse sector.

Consistent Discipline
Our approach emphasizes paying close attention to risk and maintaining the same discipline, regardless of market movements and trends. The price we pay for a security must be significantly below our appraisal of its current worth. This requires a thorough analysis of the financial and business dynamics of an enterprise, as though we were purchasing the entire company.

Co-Ownership Of Funds
It is important that our employees and shareholders share a common financial goal; our officers, employees, and their families currently have approximately $168 million invested in The Royce Funds.

This Review and Report must be accompanied or preceded by a current prospectus for the Funds. Please read the prospectus carefully before investing or sending money.

General Information
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SEMIANNUAL
REVIEW AND REPORT
TO SHAREHOLDERS

	Royce Select Fund I Royce Select Fund II Royce Global Select Long/Short Fund Royce Enterprise Select Fund Royce Opportunity Select Fund Royce Micro-Cap Discovery Fund Royce Financial Services Fund Royce SMid-Cap Value Fund Royce Focus Value Fund Royce Partners Fund Royce Special Equity Multi-Cap Fund Royce European Smaller-Companies Fund Royce Global Dividend Value Fund Royce International Micro-Cap Fund Royce International Premier Fund



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¹ Any direct Royce Funds IRA investor who chooses eDelivery of prospectuses, financial reports, and RWord will be exempt from the $15 annual IRA maintenance fee. (We will continue to also waive the fee for investors with more than $20,000 invested in Royce IRAs at the time the fee is charged, and for new transfer and rollover accounts in their first year.)

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Table of Contents


Semiannual Review


Fund Guide	2

Performance and Expenses	4

Portfolio Characteristics	5

Letter to Our Shareholders	6

2013 In Quotes	98

Making Headlines	99

Postscript: Searching for Super Small-Cap Companies Through the Macro Noise	Inside Back Cover



Semiannual Report to Shareholders	13

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Royce Fund Guide

Value-Oriented Small-Cap Offerings Tailored to Specific Investor Needs

INVESTMENT UNIVERSE BREAKDOWN¹

The size and diversity of the small-company universe make it a unique and fertile area for investment. For 40 years, it has been our primary area of focus. Over that time, this universe has evolved into an established asset class, used by a wide range of investors, including institutions, consultants, advisors, and individuals. Today, there are numerous small-cap and micro-cap indexes and ETFs. Importantly, the continuous regeneration of the asset class, through the entrance of new companies, spin-offs, and IPOs, makes it an evergreen source of investment opportunities. This is why we have elected to focus on the smaller-company universe and believe it is ideally suited for a variety of distinct offerings.

Market Cap
The smaller company universe consists of more than 4,000¹ publicly traded companies in the U.S. (and more than 21,000¹ outside the U.S.). We break it down into two distinct market segments: micro-cap—companies with market caps up to $750 million—and small-cap—companies with market caps between $750 million and $2.5 billion.
Sorting the universe into two markets is critical because, in our experience, each requires a portfolio approach based primarily on diversification needs. Our portfolio managers share a common investment approach, one that emphasizes paying attention to risk and buying what each thinks are strong businesses at discounted prices, but our portfolios also possess important differences that make each one unique.

Portfolio Approach
Our portfolio managers possess broad latitude within our investment universe, though in general they seek a combination of quality—measured by the balance sheet and returns on invested capital—and valuation.
Portfolios that invest more heavily in micro-caps are, in general, more broadly diversified due to liquidity considerations; those that invest primarily in the upper end of small-cap portfolios universe tend to be more focused. In addition, we seek to take advantage of pockets of opportunity, such as dividend-paying companies, low-priced companies, turnarounds, special situations, etc., within each universe.

Broadly Diversified Portfolios

A broadly diversified portfolio at Royce is one that generally holds more than 100 securities and whose top positions generally do not exceed 2% of net assets.

Focused Portfolios

A focused portfolio at Royce is one that either (i) generally invests in no more than 100 companies and whose top positions generally exceed 2% of net assets, or (ii) invests primarily in a single sector.

¹ Reuters as of 6/30/13

The Royce Funds, other than Royce Special Equity Multi-Cap Fund, invest primarily in micro-cap, small-cap, and/or mid-cap stocks, which may involve considerably more risk than investing in larger-cap stocks (please see “Primary Risks for Fund Investors” in the prospectus). Each Fund may invest a portion of its net assets in foreign securities, which may involve political, economic, currency, and other risks not encountered in U.S. investments (please see “Investing in Foreign Securities” in the prospectus). Distributor: Royce Fund Services, Inc.

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This guide is designed to help investors better understand both the different approaches and the common ground among our portfolios. Looking closely at our Fund Guide allows investors to see other important differences—in levels of volatility, sector orientation, and investment themes—within the context of our two key differentiators, namely market cap and portfolio approach. We think that understanding these differences can inform asset allocation decisions, especially when investors incorporate more than one Royce offering within their portfolios. Listed below are the Royce Funds included in this Semiannual Report, arranged by average market cap. For a complete listing of our Funds and their attributes please visit our website at www.roycefunds.com.

Fund Tools
Go online for more tools to help you better understand our Funds.

Compare Funds
> www.roycefunds.com/compare

Prices & Performance
> www.roycefunds.com/prices

¹ Geometric Average. This weighted calculation uses each portfolio holding’s market cap in a way designed to not skew the effect of very large or small holdings; instead, it aims to better identify the portfolio’s center, which Royce believes offers a more accurate measure of average market cap than a simple mean or median.

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Performance and Expenses	Through June 30, 2013

	Average Annual Total Returns																	Gross Annual			Net Annual
													Since			Since		Operating			Operating
Fund	Year-to-Date¹			1-Year			5-Year			10-Year			Inception			Inception Date		Expenses			Expenses

Royce Select Fund I		6.72	%		18.05	%		8.32	%		11.72	%		13.40	%		11/18/98		1.15	%		1.15	%

Royce Select Fund II		6.37			14.81			9.43			n.a.			6.80			6/30/05		3.08			1.60

Royce Global Select Long/Short Fund		-9.15			0.20			1.45			n.a.			8.57			6/30/05		2.20			1.70

Royce Enterprise Select Fund		11.49			21.93			7.37			n.a.			6.06			9/28/07		3.86			1.24

Royce Opportunity Select Fund		17.88			36.45			n.a.			n.a.			20.99			8/31/10		2.67			1.38

Royce Micro-Cap Discovery Fund		12.24			15.72			5.04			n.a.			5.36			10/3/03		2.94			1.49

Royce Financial Services Fund		18.89			32.61			8.23			n.a.			7.44			12/31/03		1.96			1.58

Royce SMid-Cap Value Fund		4.80			17.84			4.25			n.a.			3.65			9/28/07		1.90			1.35

Royce Focus Value Fund		4.41			14.01			n.a.			n.a.			13.52			2/27/09		2.06			1.36

Royce Partners Fund		12.13			26.14			n.a.			n.a.			12.60			4/27/09		4.85			1.37

Royce Special Equity Multi-Cap Fund		17.81			23.27			n.a.			n.a.			14.75			12/31/10		1.51			1.39

Royce European Smaller-Companies Fund		2.31			20.19			3.98			n.a.			2.45			12/29/06		2.16			1.72

Royce Global Dividend Value Fund		1.97			18.11			n.a.			n.a.			2.26			12/31/10		2.87			1.70

Royce International Micro-Cap Fund		-0.46			8.56			n.a.			n.a.			-4.67			12/31/10		3.97			1.76

Royce International Premier Fund		4.60			18.86			n.a.			n.a.			2.92			12/31/10		3.54			1.69

¹ Not annualized

Important Performance, Expense, and Risk Information

All performance information in this Review and Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions, and does not reflect the deduction of taxes a shareholder would pay on fund distributions or the redemption of fund shares. 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 redeemed. Shares redeemed within 180 days of purchase may be subject to a 1% redemption fee payable to the Fund (2% for Royce Select II, Global Select Long/Short, European Smaller-Companies, Global Dividend Value, International Micro-Cap, and International Premier Funds). Redemption fees are not reflected in the performance shown above; if they were, performance would be lower. Current performance may be higher or lower than performance quoted. Current month-end performance may be obtained at www.roycefunds.com. All performance and expense information reflects results of the Fund’s oldest share Class (Investment Class or Service Class, as the case may be). Price and total return information is based on net asset values calculated for shareholder transactions. Gross annual operating expenses reflect the Fund’s gross total annual operating expenses and include management fees, any 12b-1 distribution and service fees, other expenses, and any applicable acquired fund fees and expenses. Net annual operating expenses reflect contractual fee waivers and/or reimbursements. All expense information is reported as of the Fund’s most current prospectus. Royce & Associates has contractually agreed to waive fees and/or reimburse operating expenses, other than acquired fund fees and expenses, if any, to the extent necessary to maintain net operating expenses at or below: 1.35% for Royce Focus Value and Partners Funds; 1.39% for Royce Special Equity Multi-Cap Fund; 1.49% for Royce Micro-Cap Discovery and Financial Services Funds; and 1.69% for Royce European Smaller-Companies, Global Dividend Value, International Micro-Cap and International Premier Funds through April 30, 2014, at or below: 1.24% for Royce Enterprise Select and Opportunity Select Funds; and 1.49% for Royce Select II and Royce Global Select Long/Short Funds through April 30, 2015, at or below: 1.99% for Royce Select Fund II, Global Select Long/Short, Enterprise Select, Opportunity Select, Micro-Cap Discovery, Focus Value, Partners, European Smaller-Companies, Global Dividend Value, International Micro-Cap and International Premier Funds through April 30, 2023. Acquired fund fees and expenses reflect the estimated amount of fees and expenses incurred indirectly by the Fund through its investments in mutual funds, hedge funds, private equity funds and other investment companies. Shares of the Funds’ Service Class bear an annual distribution expense that is not borne by the Funds’ Investment Class. Investments in securities of micro-cap, small-cap, and/or mid-cap companies may involve considerably more risk than investments in securities of larger-cap companies. (Please see “Primary Risks for Fund Investors” in the prospectus.) Royce Select I, Select II, Global Select Long/Short, Enterprise Select, and Opportunity Select Funds may sell securities short which involves selling a security it does not own in anticipation that the security’s price will decline. Short sales present unlimited risk on an individual stock basis since the Fund may be required to buy security sold short at a time when the security has appreciated in value. Royce Global Select Long/Short, European Smaller-Companies, Global Dividend Value, International Micro-Cap, and International Premier Funds invest a significant portion of their respective assets in foreign companies that may be subject to different risks than investments in securities of U.S. companies, including adverse political, social, economic, or other developments that are unique to a particular country or region. (Please see “Investing in Foreign Securities” in the prospectus.) Therefore, the prices of securities of foreign companies in particular countries or regions may, at times, move in a different direction than those of securities of U.S. companies. (Please see “Primary Risk of Fund Investors” in the prospectus.) Please read the prospectus carefully before investing or sending money. Distributor: Royce Fund Services, Inc.

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Portfolio Characteristics			Through June 30, 2013


		Longevity		Average				2012			% of			Five-Year
		of Fund		Market		Number of		Turnover			Non-U.S.			Standard
Fund	Portfolio Manager(s)	(in years)		Cap¹		Holdings		Rate			Securities			Deviation

Royce Select Fund I	Lauren Romeo		14		$1,884		74		54	%		8.3	%		21.50

Royce Select Fund II	Jim Harvey		8		889		86		123			34.7	²		24.10

Royce Global Select Long/Short Fund	David Nadel		8		1,299		72		77			108.3	²		22.43

Royce Enterprise Select Fund	Steven McBoyle		5		3,882		59		127			5.4			16.63

Royce Opportunity Select Fund	Bill Hench		2		703		92		196			4.5	²		n.a.

Royce Financial Services Fund	Chuck Royce		9		2,933		86		26			24.4			23.38

Royce Micro-Cap Discovery Fund	George Necakov, Jim Harvey		9		416		101		87			4.2			23.46

Royce SMid-Cap Value Fund	Steven McBoyle, Whitney George		5		3,493		47		46			26.0			22.72

Royce Focus Value Fund	George Wyper		4		4,243		52		21			12.4			n.a.

Royce Partners Fund	Chuck Royce		4		3,624		60		31			29.0			n.a.

Royce Special Equity Multi-Cap Fund	Charlie Dreifus		2		23,858		29		14			n.a.			n.a.

Royce European Smaller-Companies Fund	David Nadel, Chuck Royce		6		1,081		79		22			96.1			25.92

Royce Global Dividend Value Fund	Chuck Royce		2		1,217		154		36			83.4			n.a.

Royce International Micro-Cap Fund	David Nadel		2		346		115		62			94.3			n.a.

Royce International Premier Fund	David Nadel		2		1,664		51		103			99.3			n.a.

¹	Geometric Average. This weighted calculation uses each portfolio holding’s market cap in a way designed to not skew the effect of very large or small holdings; instead, it aims to better identify the portfolio’s center, which Royce believes offers a more accurate measure of average market cap than a simple mean or median.
² Long positions only.

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Charles M. Royce, President As it has for the past few years, sentiment once again shifted dramatically in the second quarter and volatility returned to the markets. However, unlike the previous few years, it was the bond market that felt the brunt of the pain as speculation that the Federal Reserve may soon pull back from its unprecedented stimulus efforts fueled a one percentage point jump in 10-year Treasury yields during the final two months of the quarter. After gaining 12.4% in the first quarter of 2013, the Russell 2000 Index advanced 3.1% in the second quarter, finishing the first half of the year with a 15.9% gain. At the same time, the CBOE Volatility Index (VIX), after hitting a fresh 2013 low in March 2013, spiked 33% in the second quarter—the largest quarterly increase since the third quarter of 2011. In the span of one quarter, we have transitioned from a world in which the idea that interest rates would remain indefinitely low to one in which the shift back to a more normalized yield environment is now center stage. Continued on page 8...			Letter to Our Shareholders Exile on Wall Street The small-cap market reached peaks in July 2007 and April 2011 before surging to its most recent record highs. Surveying the small-cap landscape from the vantage points of these respective summits shows that each cycle (the second of which is still going on) has presented a difficult environment for active managers such as the parties penning this letter. This has been particularly true of the most recent period, which has seen solid results for the major small-cap indexes, ETFs, and other passive investment vehicles, while the active managers who once routinely outperformed all of them have achieved more muted results. The current phase has favored more defensive sectors and investments with high dividend yields, such as REITs and MLPs. Strong balance sheets and higher-quality metrics such as returns on invested capital (ROIC) have also been out of favor in this world of easy money and zero interest rates that tends to be more supportive of lower-quality businesses. And we have not even mentioned the flight to fixed income, which, along with the proliferation of ETFs, has been one of the most significant developments in the investment world during the last three-plus years. These events took shape in a market that has featured regular spasms of high volatility and periods of declining stock prices, some of them of a historically extreme nature. These are periods in which fundamentally driven active management approaches such as ours have historically proven their worth. That many of our portfolios struggled to preserve their value as effectively as they have done historically during the market downturns since the pre-crisis peak in July 2007 has been frustrating and humbling, to say the least. Yet investing is a routinely humbling business. This is not the first time (and almost certainly won’t be the last) in which we

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have endured a prolonged relative slump versus the small-cap market as a whole. But behind every contrarian, especially an out-of-sync one, is a disciplined investor. By buying out-of-favor companies and rooting around beaten down sectors and industries, we do things every day that may not look particularly savvy to many on Wall Street, at least in the short run. After 40 years, we are used to doing things according to our own principles and long-term time frame and do not mind being something akin to exiles on Wall Street. It should come as no surprise, then, that we are not persuaded—or even bothered—by those voices suggesting that active management has perhaps seen its day in the sun. With ETFs and high-frequency trading seemingly making markets that much more efficient, with so many investors disenchanted with equities, and with sustained periods of relative underperformance in the books, perhaps (so the argument runs) active managers should simply switch to indexing or find another line of work. To be sure, the last several years have given us little to crow about (while serving up plenty of crow to eat). However, we remain as enthusiastic as ever about active management in general and value-oriented small-cap investing in particular. To paraphrase Mark Twain, we find reports of the death of active management to be greatly exaggerated. So while lower-quality stocks have dominated the market and outperformed many of our holdings through the current cycle, we are undeterred in our conviction that well-run, cash-rich businesses with high returns on invested capital remain the best route to building long-term wealth. It is also important to remember that many stocks possessing these attributes have done very well on an absolute basis through the current cycle even as they have suffered in comparison to their more defensive or higher-yielding cohorts. Finally, we have already seen signs of a change in which we think the kind of higher-quality companies that we favor can assume a leadership role. There were encouraging signals in May and in the second half of 2012 that investors were giving more thought to fundamentals. In short, we are excited about the days ahead. We are bullish not only on stocks but, more important, on our specific approach to quality and active management. Tumbling Dice When 2012 drew to a close, we were equally optimistic. The second half of 2012 offered much that was good for what ailed quality-centric investors. The last few months in particular saw a brief resurgence of quality as many companies with strong balance sheets, high ROIC, and strong cash flow characteristics outpaced the rest of the small-cap market. This rally did not last long into 2013, however, as more highly levered and lower-ROIC businesses soon resumed leadership. Quality stocks for the most part acquitted themselves well in the bullish first quarter; they simply did not attract as much interest as more defensive areas. The strongest sectors for the small-cap Russell 2000 Index during the first quarter were Health Care,		By buying out-of-favor companies and rooting around beaten down sectors and industries, we do things every day that may not look particularly savvy to many on Wall Street, at least in the short run. After 40 years, we are used to doing things according to our own principles and long-term time frame and do not mind being something akin to exiles on Wall Street.

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From our perspective, the end to the easy money bias that has been in place for several years presents an attractive environment for active managers with an absolute orientation like us, as underlying fundamentals and less-leveraged balance sheets should become increasingly more important. We have long thought that the ongoing efforts to reflate the economy through numerous quantitative easings and a zero interest rate policy would have unintended consequences. To be sure, the actions of the Fed have been distorting asset pricing and valuations in the equity market in a number of ways. Many of the fundamental qualities we hold so dear, for example, seem temporarily suspended in an investment world where highly-leveraged businesses are benefiting from the ability to restructure their debt, lower funding costs, and extend maturities. The unintended consequence of leveling the playing field has given lower-quality companies the luxury of time, which in a normal environment they would not have. It would not surprise us to see these trends reverse as tapering is implemented and monetary stimulus is slowly trimmed back and ultimately withdrawn. Continued on page 10...			Letter to Our Shareholders Consumer Discretionary, and Financials, the latter drawing much of its strength from REITs. More cyclical sectors such as Technology and Energy, which we see as featuring some of the most attractively valued, high-quality companies available over the last couple of years, lagged. The result was a strong opening quarter for stocks across the board. Small-caps led, showing positive returns for the third consecutive quarter. The Russell 2000 gained 12.4% compared to respective gains of 11.0% and 10.6% for the large-cap Russell 1000 and S&P 500 Indexes, while the more tech-oriented Nasdaq Composite rose 8.2%. Quality stocks resuming their back seat was not entirely surprising. Stocks as a whole have been on an encouraging roll since the low on June 2, 2012, so some give-back was not entirely unexpected, even if it was somewhat disappointing. Going into the second quarter, we were confident that the rally could last, though we also assumed that a correction would be a natural part of a longer-term bullish trend, as has been the case over the past several years. While share prices all over the globe were more volatile in the second quarter, on the domestic front a rocky market still resulted in positive returns, with strength across all asset classes. The tech-oriented Nasdaq Composite led for the quarter with a 4.2% advance. Small-cap edged out the large-cap indexes, with the Russell 2000 up 3.1% for the quarter compared to respective gains of 2.9% and 2.7% for the S&P 500 and Russell 1000 Indexes. One-year results were also strong for the major indexes, with the Russell 2000 leading (+24.2%), followed by the Russell 1000 (+21.2%), S&P 500 (+20.6%), and Nasdaq (+16.0%). Three-year results were even more closely aligned, offering compelling evidence of just how tightly correlated equity returns have been. Average annual total returns for the three-year period ended June 30, 2013 for the Russell 2000 (+18.7%), the Russell 1000 (+18.6%), and S&P 500 (+18.5%) were within two-tenths of one another while the Nasdaq rose 17.3% over the same span. That stocks continue to perform well could be seen by the fact that trailing one-, five-, and 10-year results for the small-cap and two large-cap indexes were well ahead of their returns for the same periods ended one year prior. Micro-cap returns also continued their ascent. The Russell Microcap Index gained 18.3% year-to-date through June 30, 2013. Its one-year result was also strong, up 25.4%. The micro-cap index’s trailing three-, five-, and 10-year results were also fine, though it trailed the Russell 2000 in these periods. By contrast, mid-caps narrowly underperformed year-to-date—the Russell Midcap Index rose 15.5% through the end of June—but outpaced their small-cap peers for the one-, three-, 10-, 15-, 20-, and 25-year periods ended June 30, 2013. This impressive long-term record helps to explain why we think of mid-caps as the market’s stealth asset class.

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Outside the U.S., short- and intermediate-term results were far less bullish. The first quarter saw positive, though lower, returns for the Russell ex-U.S. Small Cap Index, which climbed 6.5% while the Russell ex-U.S. Large Cap Index was up 3.1%. Second-quarter results slipped into the red as the Russell ex-U.S. Small Cap Index fell 4.5% and the Russell Global ex-U.S. Large Cap Index was down 2.9%. This resulted in considerably lower year-to-date results through June 30, 2013: the Russell ex-U.S. Small Cap Index was up 1.8% while its large-cap sibling managed only a 0.1% advance. In this context it was hardly surprising that one-, three-, and five-year results for the non-U.S. indexes were also well behind their U.S. equivalents for the periods ended June 30, 2013. Shine a Light Among The Royce Funds in this Semiannual Review and Report, Royce Opportunity Select, Financial Services, Special Equity Multi-Cap, and International Premier Funds outperformed their respective benchmarks for the year-to-date period through the end of June, providing four happy exceptions to what was otherwise a lackluster six months on a relative basis. The other Funds ran the gamut. Three portfolios turned in strong absolute results—Royce Enterprise Select, Micro-Cap Discovery, and Partners Funds. Royce Select Fund I, Select Fund II, SMid-Cap Value, and Focus Value Funds were not as robust, but still posted respectable absolute returns. Those portfolios that fared less well—Royce Global Select Long/Short, European Smaller-Companies, Global Dividend Value, and International Micro-Cap Funds—shared a significant exposure to non-U.S. stocks, many of which struggled in the first half. As a group, the Funds featured in this Semiannual Review and Report had strong results from several sectors, including Financials, Information Technology, Industrials, and Consumer Discretionary. Those portfolios with anything beyond a modest amount of exposure to the Materials sector generally paid a high price in the form of sizable net losses. These declines came overwhelmingly from the metals & mining industry, and especially from precious metals mining companies, a once sterling industry that has recently become a persistent trouble spot for a few Royce-managed portfolios. In the first quarter cyclical companies mostly lagged defensive sectors, but the second quarter offered a more eclectic, and thus encouraging, mix. Within the Russell 2000, both Consumer-oriented sectors remained strong, as did Health Care, Information Technology, and Telecommunications Services. However, the more cyclical Energy, Materials, and Industrials sectors fell, as did more high-yielding areas such as REITs and Utilities. The S&P 500 showed a similarly scrambled pattern among large-cap sector returns. Although painful in the short term, we see this growing differentiation as a very positive sign that the U.S. market is beginning to break out of its correlation groove.				We are bullish not only on stocks but, more important, on our specific approach to quality and active management.

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	To be clear, our balance sheet scrutiny is paramount to our process, particularly our focus on risk. To that end, we have always chosen to focus on companies with high operating leverage. Our measure of financial leverage centers on the ratio of assets to stockholders’ equity, looking for a two-to-one ratio for non-financial companies. This is an important part of our ongoing search for a company’s “margin of safety.” If a company is carrying too much debt, it impedes its own ability to meet the challenge of out-of-left-field occurrences such as lawsuits, the loss of a major customer, or overseas currency crises. A conservatively capitalized company, especially a smaller company, can better weather these storms because it has the necessary financial reserves to do so, while a company with too much debt on the balance sheet runs a greater risk that stormy weather will turn into a hurricane. We also view financially strong companies as well-positioned to grow. The assets of these companies are derived more from retained earnings than paid-in capital, i.e., they have the ability to self-fund their own success as a business. Continued on page 12...

Letter to Our Shareholders

2013 YEAR-TO-DATE TOTAL RETURNS FOR THE ROYCE FUNDS VS. BENCHMARK INDEXES
as of 6/30/13

Let it Loose
During the first half of 2013 the stock market displayed a broadly similar pattern of results to the first halves of 2010, 2011, and 2012. This was a model in which a robustly bullish first quarter gave way to a far more volatile second quarter, with a sudden shift in market sentiment driven primarily by global macro issues. However, this year’s first half also showed some notable differences that suggest a break with the market’s previously unyielding pattern of the last three calendar years—a pattern marked by closely correlated returns and, as a result, relatively uninspired results for many active managers. For example, during the first quarter of 2013 the market was remarkably good at tuning out a great deal of ominous political news. When Congress and the President failed to produce a long-term plan to tackle the deficit, the market mostly shrugged and continued to climb. When sequestration began to take effect in the aftermath of the stalled budget negotiations, stocks once again paused then resumed moving upward.

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This stood in stark contrast to what we saw in 2010, 2011, and most of the first half of 2012, when the markets seemed to react to little other than macro headlines that were themselves largely driven by political events. In addition, when macro issues did inspire a sell-off, year-to-date returns were not too adversely affected, with most stocks and domestic indexes escaping the more uncertain second quarter of 2013 in the black despite a 33% second-quarter spike in the CBOE Volatility Index (VIX). This increase was the largest quarterly advance for the VIX, which hit a fresh 2013 low in March before spiking higher, since the third quarter of 2011. Another significant deviation from the pattern of previous years was the pain born by the bond market. Speculation that the Fed would taper its stimulus efforts fueled a full one percentage point jump in 10-year Treasury yields during May and June. We saw an encouraging variation in performance at the stock, industry, and sector levels, which was especially pronounced in these same two months, as signals that the economy was slowly finding its way back to more historically normal—that is, less Fed-dependent—levels of growth and activity. Happy? All of this makes us optimistic. Our contention is that the unusual performance pattern spurred by the effects of multiple rounds of QE and zero interest rates has begun to unwind, which will set the stage for more fundamentally based value-oriented approaches to take hold of market leadership. One sign that the process has already begun is that in the space of roughly three months we have moved from an environment in which many believed that interest rates would remain low indefinitely to one in which more historically normal		Our contention is that the unusual performance pattern spurred by the effects of multiple rounds of QE and zero interest rates has begun to unwind, which will set the stage for more fundamentally based value- oriented approaches to take hold of market leadership.

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Of course, transitions are never easy. Shifting back to a more normalized yield environment is likely to be marked by increased volatility and pockets of uncertainty. Stock prices have begun the transition from their reliance on monetary policy to fundamentals, which is a process we believe will stress the importance of companies with strong, less-leveraged balance sheets, excess cash flow generation, and the ability to self-finance. We look forward to a more normalized yield environment that could usher in that long-awaited flight to quality.	yields are inching closer and closer. We have argued that an unintended consequence of QE and zero interest rates has been to make life a little too easy for lower-quality companies. Highly levered businesses have been able to re-finance their obligations at record low rates and thus not pay the usual economic cost for being over-levered. This unnatural and (we believe) temporary advantage reduced the attractiveness of the conservatively capitalized businesses that have been our portfolio mainstays since the early 1970s. However, with Fed policy changing, we are moving closer to a market in which strong fundamentals are likely to be in high demand once more. What Ben Bernanke actually said back in June about the Fed potentially tapering its bond purchases seemed entirely positive. Many of us have been waiting for the economy and the markets to return to more historically normal conditions for some time. We have been especially eager to see interest rates normalize, which would be as sure a sign as any that the economy and markets are operating at something like business as usual (and this period of QE and zero interest rates has been anything but that). We suspect an environment in which the Fed is not as intimately involved in the economy will be a healthy one for stocks. So while many investors saw the Fed’s plans to taper bond purchases as a cause for alarm, we saw it as an affirmation that the economy is healing as it grows. Within the next couple of years, it should grow even stronger. Along with more historically normal—that is, higher—rates, this would be a very welcome development for equities in our view, particularly the kind of attractively valued, well-run, financially strong small-cap businesses that remain our favorites. Guarded optimism may be as close to bliss as we can usually get, but we have seldom felt more confident about our investment approach than we do right now, looking out on the months and years to come. Sincerely,

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

	July 31, 2013

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Table of Contents


Semiannual Report to Shareholders

Managers’ Discussions of Fund Performance

Royce Select Fund I		14

Royce Select Fund II		16

Royce Global Select Long/Short Fund		18

Royce Enterprise Select Fund		20

Royce Opportunity Select Fund		22

Royce Micro-Cap Discovery Fund		24

Royce Financial Services Fund		26

Royce SMid-Cap Value Fund		28

Royce Focus Value Fund		30

Royce Partners Fund		32

Royce Special Equity Multi-Cap Fund		34

Royce European Smaller-Companies Fund		36

Royce Global Dividend Value Fund		38

Royce International Micro-Cap Fund		40

Royce International Premier Fund		42

Schedules of Investments and Financial Statements		44

Notes to Financial Statements		86

Understanding Your Fund’s Expenses		93

Trustees and Officers		94

Board of Approval Investment Advisory Agreements		95

Notes to Performance and Other Important Information		97

The Royce Funds 2013 Semiannual Report to Shareholders | 13

Royce Select Fund I

AVERAGE ANNUAL TOTAL RETURNS Through 6/30/13

January–June 2013¹				6.72	%

One-Year				18.05

Three-Year				13.05

Five-Year				8.32

10-Year				11.72

Since Inception (11/18/98)				13.40

ANNUAL EXPENSE RATIO

Operating Expenses				1.15	%

¹ Not annualized

CALENDAR YEAR TOTAL RETURNS

Year	RS1		Year	RS1

2012	13.7	%	2005	10.9	%

2011	-3.6		2004	19.1

2010	18.2		2003	48.7

2009	39.6		2002	-15.8

2008	-25.9		2001	24.5

2007	10.7		2000	15.0

2006	15.0		1999	35.4


TOP 10 POSITIONS % of Net Assets

Reliance Steel & Aluminum				3.1	%

Federated Investors Cl. B				2.9

Helmerich & Payne				2.9

Alleghany Corporation				2.7

Oil States International				2.3

MKS Instruments				2.1

Unit Corporation				2.1

ATMI				2.0

GrafTech International				2.0

Bio-Rad Laboratories Cl. A				2.0


PORTFOLIO SECTOR BREAKDOWN % of Net Assets

Industrials				22.8	%

Information Technology				22.6

Energy				13.4

Financials				8.7

Materials				8.3

Consumer Discretionary				7.9

Health Care				5.9

Consumer Staples				1.4

Miscellaneous				2.9

Cash and Cash Equivalents				6.1



Manager’s Discussion The first-half performance of Royce Select Fund I (RS1) left us a little vexed. On the one hand, we found the Fund’s absolute result satisfactory; on the other hand, its relative performance left a great deal to be desired. For the year-to-date period ended June 30, 2013, RS1 gained 6.7%, well behind the 15.9% advance for its small-cap benchmark, the Russell 2000, over the same period. This was frustrating in light of the Fund’s impressive showing in the second half of 2012 when RS1 outpaced the small-cap index, gaining 10.6% versus 7.2%. We were hoping for improved absolute and relative results as well as a market that would continue to be less enamored of high yield and instant growth and more attracted to companies with strong fundamentals. So while the first quarter of 2013 was bullish, it appeared to be a different sort of bull run than what we saw in last year’s second half. RS1 was up 7.3% in the first quarter, trailing the Russell 2000, which climbed 12.4%. The second quarter brought a wave of volatility, more uncertainty, and enough variation in sector, industry, and company results to rekindle our hopes that the long period of close correlation and higher returns for lower-quality businesses was finally ending. However, the Fund fell further behind the Russell 2000 between the beginning of April and the end of June, a period in which RS1 lost ground to the small-cap index during the more volatile months of the second quarter. In April the Fund fell 3.1% versus a loss of 0.4% for the Russell 2000; in June RS1 slipped 2.7% compared to a 0.5% decline of the small-cap index. The Fund did beat the benchmark in May, a bullish month in which RS1 was up 5.4% compared to 4.0% for the Index. For the second quarter as a whole the Fund finished with a disappointing loss of 0.5% versus a 3.1% gain for the Russell 2000. Much of this decline can be traced to the portfolio’s holdings in four industry groups—metals & mining, electronic equipment, instruments & components, commercial services & supplies, and electrical equipment. RS1 did maintain a performance advantage over its benchmark for longer-term periods, outpacing the Russell 2000 for the 10-year and since inception (11/18/98) periods ended June 30, 2013. The Fund’s average annual total return since inception was 13.4%. Based in Houston, Oil States International provides products and services to oil and gas companies, including connection technology for offshore oil and gas development and production, the distribution of tubular products, hydraulic workover and well control services, and remote site accommodations, catering, and logistics. Its expertise in a wide variety of

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

Oil States International		0.78%

Federated Investors Cl. B		0.51

ADTRAN		0.41

Aixtron ADR		0.37

Thor Industries		0.37

¹ Includes dividends

Important Performance and Expense Information All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 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 redeemed. Shares redeemed within 180 days of purchase may be subject to a 1% redemption fee payable to the Fund, which is not reflected in performance shown above. Current month-end performance may be higher or lower than performance quoted and may be obtained at www.roycefunds.com. Operating expenses reflect the Fund’s total annual operating expenses for the Investment Class as of the Fund’s most current prospectus and include management fees, and other expenses. Regarding the two “Good Ideas” tables shown above, the sum of all contributors to, and all detractors from, performance for all securities in the portfolio would approximate the Fund’s year-to-date performance for 2013.

14 | The Royce Funds 2013 Semiannual Report to Shareholders

Performance and Portfolio Review

energy-related fields helped to fuel our initial interest in the company. Its share price skyrocketed at the end of April on news that activist shareholders were asking the company’s management to create a REIT from its oilfield accommodation business. Its sharp rise notwithstanding, we liked its other business lines, valuation, and ongoing prospects enough for it to be the Fund’s fifth-largest holding at the end of June. We remain very fond of both the core business and long-term prospects for asset manager and money market specialist Federated Investors. Its shares benefited from the “taper tantrum” pulled by the financial markets—for example, the 50 basis point rise in the 10-year Treasury note and the negative results for equity bond proxies such as REITs and Utilities in the second quarter—as rising rates that ultimately lift short rates should enable the firm to eliminate fee waivers and thus unlock earnings that have been hampered by the Fed’s zero interest rate policy. Although we trimmed our position in May and June, we held a large stake at the end of the period, when it was the Fund’s second-largest holding.
ADTRAN, which makes networking and communications equipment primarily for telecommunications networks, made the move from 2012’s “Good Ideas at the Time” list to a more favorable status as one of the first half’s top contributors. Its stock price hit a low in early April before rebounding on stronger-than-expected fiscal first quarter earnings. Although we took gains between March and May, it was the Fund’s seventeenth-largest holding at the end of the period. Aixtron is a German business that manufactures metal organic chemical vapor deposition (MOCVD) equipment for the semiconductor industry. Like ADTRAN, its price was volatile during the first half, though it recovered and mostly rose following a late April low. While revenues and margins fell below analysts’ expectations, the company’s even-keeled pre-announcement, improving utilization rates, and efforts to better manage its cost structure seemed to help bring investors back.
Top-10 holding GrafTech International manufactures synthetic and natural graphite and carbon-based products that are used to produce steel. We still like its long-term prospects, but stiffer competition and weak demand that hurt pricing led its share price down. Major Drilling Group International provides contract drilling services for the metals industry. Its stock struggled in the face of weak precious and base metals prices and slumping demand that slowed drilling activity and rig utilization while increasing pricing pressure. After buying shares in the first quarter, we reduced our position from 2012 levels in the second quarter.

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


GrafTech International	-0.59%

Major Drilling Group International	-0.51

Intrepid Potash	-0.29

TGS-NOPEC Geophysical	-0.25

Tetra Tech	-0.17

¹ Net of dividends

ROYCE SELECT FUND I VS. RUSSELL 2000 Value of $10,000 Invested on 11/18/98


Includes reinvestment of distributions.

PORTFOLIO DIAGNOSTICS

Fund Net Assets	$44 million

Number of Holdings	74

Turnover Rate	30%

Average Market Capitalization¹	$1,884 million

Weighted Average P/E Ratio^2,3	17.3x

Weighted Average P/B Ratio²	1.8x

U.S. Investments (% of Net Assets)	85.6%

Non-U.S. Investments (% of Net Assets)	8.3%

Symbol	RYSFX

¹ Geometric Average. This weighted calculation uses each portfolio holding’s market cap in a way designed to not skew the effect of very large or small holdings; instead, it aims to better identify the portfolio’s center, which Royce believes offers a more accurate measure of average market cap than a simple mean or median.
² Harmonic Average. This weighted calculation evaluates a portfolio as if it were a single stock and measures it overall. It compares the total market value of the portfolio to the portfolio’s share in the earnings or book value, as the case may be, of its underlying stocks.
³ The Fund’s P/E calculation excludes companies with zero or negative earnings (8% of portfolio holdings as of 6/30/13).

MORNINGSTAR STATISTICAL MEASURES¹

	Sharpe Ratio	Standard Deviation

RS1	0.47	21.50

Russell 2000	0.46	24.07

Category Median	0.46	23.47

Best Quartile Breakpoint	0.52	22.36

¹ Five years ended 6/30/13. Category Median and Best Quartile Breakpoint based on 348 small-cap objective funds (oldest class) with at least five years of history.

The Fund beat the Russell 2000 and performed within the top 50% of small-cap objective funds on a risk-adjusted basis, as shown by its Sharpe ratio. In addition, the Fund produced lower volatility than the Russell 2000 and 75% of small-cap objective funds, as shown by its standard deviation.

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

The Royce Funds 2013 Semiannual Report to Shareholders | 15

Royce Select Fund II

AVERAGE ANNUAL TOTAL RETURNS Through 6/30/13

January–June 2013¹				6.37	%

One-Year				14.81

Three-Year				9.80

Five-Year				9.43

Since Inception (6/30/05)				6.80

ANNUAL EXPENSE RATIOS

Gross Operating Expenses				3.08	%

Net Operating Expenses				1.60

¹ Not Annualized

CALENDAR YEAR TOTAL RETURNS

Year	RS2		Year	RS2

2012	13.8	%	2008	-33.4	%

2011	-14.0		2007	-5.5

2010	21.0		2006	19.8

2009	66.6


TOP 10 LONG POSITIONS % of Net Assets

Bankrate				2.6	%

Federated Investors Cl. B				2.2

First Resources				2.2

Analogic Corporation				2.2

Teradyne				2.0

Minerals Technologies				2.0

FamilyMart				1.8

Total System Services				1.8

Acacia Research-Acacia Technologies				1.8

Destination Maternity				1.6


SHORT POSITIONS % of Net Assets

Direxion Daily Small Cap Bull 3X Shares				-1.2	%

VelocityShares Daily Inverse VIX Short Term ETN				-1.0

iShares 20+ Year Treasury Bond ETF				-0.6

Direxion Daily Financial Bear 3X Shares				-0.5


PORTFOLIO SECTOR BREAKDOWN¹ % of Net Assets

Information Technology				25.0	%

Consumer Discretionary				15.0

Industrials				14.0

Financials				8.2

Consumer Staples				6.4

Materials				5.7

Health Care				4.9

Energy				4.9

Telecommunication Services				1.2

Miscellaneous				4.6

Cash and Cash Equivalents				10.1

¹ Long positions only

Manager’s Discussion
Royce Select Fund II (RS2) gained 6.4% for the year-to-date period ended June 30, 2013 versus a 15.9% increase for its domestic small-cap benchmark, the Russell 2000 Index, and a 6.7% gain for its global benchmark, the Russell Global Small Cap Index, for the same period. While the Fund posted a solid result on an absolute basis, its relative performance was disappointing, especially in the context of a highly volatile market in which we would typically expect the Fund to perform better. (It should be noted that since May 1, 2011 the Fund may invest in U.S. and/or non-U.S. securities and there is no limit to the Fund’s foreign exposure. As a result, we introduced the Russell Global Small Cap Index as an additional benchmark for the Fund.)
We were hoping for improved absolute and relative results as well as a market that would continue to be less enamored of high yield and instant growth and more attracted to companies with strong fundamentals. So while the first quarter of 2013 was bullish, it was not the sort of bull run that we were hoping for. RS2 was up 5.9% in the first quarter, trailing both the Russell 2000, which climbed 12.4%, and the global small-cap index, which advanced 8.6%. The second quarter brought a wave of volatility, more uncertainty, and enough variation in sector, industry, and company results to rekindle our hopes that the long period of close correlation and higher returns for lower-quality businesses was finally ending. While the Fund fell further behind the Russell 2000 between the beginning of April and the end of June, it outpaced its small-cap global benchmark over the same period. For the second quarter, the Fund finished with a slight gain of 0.4% versus a 3.1% gain for the Russell 2000 and a loss of 1.7% for the Russell Global Small Cap Index. Much of the portfolio’s second-quarter net losses came primarily from holdings in the metals & mining group.
The Fund’s longer-term results were somewhat better on a relative basis. RS2 outperformed the Russell Global Small Cap Index for the five-year and since inception (6/30/05) periods ended June 30, 2013. The Fund also narrowly trailed the Russell 2000 for the since inception period, up 6.8% compared to 6.9%.

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

Astronics Corporation		0.85%

Federated Investors Cl. B		0.61

Sarin Technologies		0.59

Stamps.com		0.54

Bankrate		0.52

¹ Includes dividends

Important Performance and Expense Information All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment distributions, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 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 redeemed. Shares redeemed within 180 days of purchase may be subject to a 2% redemption fee, payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current month-end performance may be higher or lower than performance quoted and may be obtained at www.roycefunds.com. Price and total return information is based on net asset values calculated for shareholder transactions. Certain immaterial adjustments were made to the net assets of Royce Select Fund II at 12/30/11 for financial reporting purposes, and as a result the net asset values for shareholder transactions on that date and the calendar-year total returns based on those net asset values differ from the adjusted net asset values and calendar-year total returns reported in the Financial Highlights. Gross operating expenses reflect the Fund’s total gross annual operating expenses and include management fees, other expenses, and acquired fund fees and expenses. Net operating expenses reflect contractual fee waivers and/or expense reimbursements. All expense information is reported as of the Fund’s most current prospectus. Royce & Associates has contractually agreed to waive fees and/or reimburse operating expenses to the extent necessary to maintain the Fund’s net annual operating expenses, other than dividends on securities sold short, acquired fund fees and expenses, and interest expense of borrowing, at or below 1.49% through April 30, 2015 and at or below 1.99% through April 30, 2023. Acquired fund fees and expenses reflect the estimated amount of the fees and expenses incurred indirectly by the Fund through its investments in mutual funds, hedge funds, private equity funds, and other investment companies. Regarding the two “Good Ideas” tables shown above, the sum of all contributors to, and all detractors from, performance for all securities in the portfolio would approximate the Fund’s year-to-date performance for 2013.

16 | The Royce Funds 2013 Semiannual Report to Shareholders

Performance and Portfolio Review

     At the end of the period, 34.7% of the Fund’s net assets were invested in non-U.S. companies. Only -3.3% of its net assets were in short positions. For the year-to-date period ended June 30, 2013 all but one of the Fund’s nine equity sectors were positive. The Information Technology, Industrials, and Consumer Discretionary sectors were the greatest contributors to performance. At the industry level, internet software & services led the advance, followed by machinery and IT services. Materials was the worst-performing sector for the period, with the metals & mining industry the largest detractor to performance by a wide margin. Also in Materials, chemical companies posted a modest net loss. At the end of the period Information Technology was the largest sector in the Fund, followed by the Consumer Discretionary and Industrials sectors.
     Astronics Corporation was the top performer for the period. Based in East Aurora, NY, the company provides advanced, high-performance lighting, electrical power, and automated test systems for the global aerospace & defense industries. Its shares surged on record first-quarter earnings, which showed record backlog and cash flow generation. Federated Investors benefited from the volatility in the financial markets—increasing interest rates should allow the company to scale back its fee waivers and thereby unlock earnings that have been hampered by the Fed’s zero interest rate policy. We added to our position in May and June, helping to make it the portfolio’s second-largest holding at the end of the period. We also built our position in Sarin Technologies, an Israeli company that manufactures advanced planning, measurement, and evaluation systems for diamond and gemstone production. Rising revenues and net profits drove up its share price through much of the first half. It was RS2’s eleventh-largest holding at the end of June. Bankrate, which aggregates and distributes personal finance content on the Internet and owns several financial services websites and lead-generation properties, was the largest individual holding at the end of June and was one of the top performers for the period. Improved EPS (earnings per share) and better-than-expected guidance helped to key a rebound for its stock.
     The top two detractors to performance in the first half were the Market Vectors Junior Gold Miners ETF and Hochschild Mining. Precious metals miners faced a highly challenging environment in the first half. Gold and silver prices declined significantly, mine operating costs were climbing, and demand in China slowed significantly. Seeing opportunities elsewhere in the market, we chose to take our losses in each of these investments and move on. We also trimmed our position in Sprott, a Canadian investment management company with a history dating back to 1981 that saw its share price decline primarily due to its high exposure to the precious metals mining industry.

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


Market Vectors Junior Gold Miners ETF	-0.76%

Hochschild Mining	-0.74

Direxion Daily Small Cap Bull 3X Shares (Short)	-0.50

NEXT FUNDS Nikkei 225 Leveraged Index ETF (Short)	-0.44

Sprott	-0.40

¹ Net of dividends

ROYCE SELECT FUND II VS. RUSSELL 2000 AND RUSSELL GLOBAL SMALL CAP Value of $10,000 Invested on 6/30/05

Includes reinvestment of distributions.

PORTFOLIO DIAGNOSTICS

Fund Net Assets	$4 million

Number of Holdings	86

Turnover Rate	80%

Average Market Capitalization^1,4	$889 million

Weighted Average P/E Ratio^2,3,4	15.2x

Weighted Average P/B Ratio^2,4	1.9x

Symbol	RSFDX

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

MORNINGSTAR STATISTICAL MEASURES¹

	Sharpe Ratio	Standard Deviation

RS2	0.49	24.10

Russell 2000	0.46	24.07

Category Median	0.46	23.47

Best Quartile Breakpoint	0.52	22.36

¹ Five years ended 6/30/13. Category Median and Best Quartile Breakpoint based on 348 small-cap objective funds (oldest class) with at least five years of history. The Fund beat the Russell 2000 and performed within the top 50% of small-cap objective funds on a risk-adjusted basis, as shown by its Sharpe ratio.

PORTFOLIO COUNTRY BREAKDOWN^1,2 % of Net Assets

United States		55.2	%

Canada		3.9

China		3.9

Malaysia		3.3

¹ Represents countries that are 3% or more of net assets.
² Long positions only are represented above and except in the case of ETF’s securities are categorized by the country of their headquarters.
DOWN MARKET PERFORMANCE COMPARISON All Down Periods of 7.5% or Greater in Percentages (%)

The Royce Funds 2013 Semiannual Report to Shareholders | 17

Royce Global Select Long/Short Fund

AVERAGE ANNUAL TOTAL RETURNS Through 6/30/13

January–June 2013¹				-9.15	%

One-Year				0.20

Three-Year				4.51

Five-Year				1.45

Since Inception (6/30/05)				8.57

ANNUAL EXPENSE RATIOS

Gross Operating Expenses				2.20	%

Net Operating Expenses				1.70

¹ Not annualized

CALENDAR YEAR TOTAL RETURNS

Year	RGS		Year	RGS

2012	14.0	%	2008	-34.4	%

2011	-17.8		2007	18.2

2010	33.2		2006	19.4

2009	56.1


TOP 10 LONG POSITIONS % of Net Assets

Semperit AG Holding				4.6	%

FamilyMart				4.0

Lewis Group				3.6

Mayr-Melnhof Karton				3.5

Recordati				3.1

USS				3.1

Media Chinese International				3.1

MegaStudy				3.0

Brasil Brokers Participacoes				3.0

Ekornes				3.0


TOP 10 SHORT POSITIONS % of Net Assets

Direxion Daily Energy Bull 3X Shares				-2.0	%

iShares China Large-Cap ETF				-1.8

ProShares Ultra Basic Materials				-1.6

NEXT FUNDS Nikkei 225 Leveraged Index ETF				-1.6

Monster Beverage				-1.4

NCR Corporation				-1.4

ProShares Ultra Health Care				-1.1

Delta Air Lines				-1.1

Orion Cl. B				-0.9

Direxion Daily Emerging Markets Bull 3X Shares				-0.9


PORTFOLIO SECTOR BREAKDOWN¹ % of Net Assets

Consumer Discretionary				27.0	%

Materials				19.8

Industrials				19.7

Health Care				15.8

Financials				11.5

Consumer Staples				10.7

Energy				7.6

Information Technology				5.0

Cash and Cash Equivalents				-17.1

¹ Long positions only

Manager’s Discussion
The first half of 2013 was at times a challenging period for equities all over the world. It was also a highly disappointing period for Royce Global Select Long/Short Fund (RGS). The Fund fell 9.2% for the year-to-date period ended June 30, 2013 versus a 6.7% advance for its long-only benchmark, the Russell Global Small Cap Index, for the same period. The portfolio ended the period with 117.4% of its net assets invested in common stocks, 3.1% in cash and cash equivalents, and 20.5% in short positions. Short positions, designed in part to provide a measure of downside protection when markets are flat to bearish, had a negative net impact as a group in the first half, though two shorts were also among the portfolio’s top contributors.
As was the case in 2012, the first quarter was a solidly bullish period for most equities, though unlike 2012, non-U.S. equities generally had lower returns. Unlike last year, RGS not only underperformed its benchmark by a sizable margin, but fell into the red as well. The Fund was down 1.4% in the year’s opening quarter while the global small-cap index rose 8.6%. This left the Fund with a lot of ground to make up against the benchmark in the second quarter, a much more uncertain period than the first three months of the year. We were once again frustrated that the portfolio could not more effectively preserve its value when non-U.S. stock prices were falling in May and June. For the quarter as a whole, RGS fell 7.9% versus a decline of 1.7% for the benchmark.
The second-quarter correction was a global event, fueled by concerns over an economic slowdown and credit issues in China, social unrest and slowing growth in emerging markets countries such as Brazil and Turkey, the by now requisite concerns over the fiscal health of certain eurozone nations, and the Fed’s announcement that it would begin to taper the pace of bond purchases later this year. These developments combined to help push share prices down. None of these are new problems, and all have possible solutions, yet their surfacing so close to one another in May and June clearly spooked many investors who remain understandably skittish in light of all that has happened since the financial crisis in 2008. Along with underperforming the global small-cap index in 2012 (+14.0% versus +17.7%), the Fund’s relative disadvantage in 2013 eroded some of its longer-term relative advantage. For the period ended June 30, 2013, RGS beat the Russell Global Small Cap Index for the since inception (6/30/05) period. The Fund’s average annual total return since inception was 8.6%.

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

Direxion Daily Emerging Markets Bull 3X Shares (Short)		1.11%

Nihon M&A Center		0.68

Recordati		0.57

iShares China Large Cap ETF (Short)		0.49

SimCorp		0.48

¹ Includes dividends

Important Performance and Expense Information All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 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 redeemed. Shares redeemed within 180 days of purchase may be subject to a 2% redemption fee, payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current month-end performance may be higher or lower than performance quoted and may be obtained at www.roycefunds.com. Gross operating expenses reflect the Fund’s total gross annual operating expenses and include management fees and other expenses. Net operating expenses reflect contractual fee waivers and/or expense reimbursements. All expense information is reported as of the Fund’s most current prospectus. Royce & Associates has contractually agreed to waive fees and/or reimburse operating expenses to the extent necessary to maintain the Fund’s net annual operating expenses, other than dividends on securities sold short and interest expense on borrowing, at or below 1.49% through April 30, 2015 and at or below 1.99% through 2023. Regarding the two “Good Ideas” tables shown above, the sum of all contributors to, and all detractors from, performance for all securities in the portfolio would approximate the Fund’s year-to-date performance for 2013.

18 | The Royce Funds 2013 Semiannual Report to Shareholders

Performance and Portfolio Review

     Aside from the overall impact of the portfolio’s short positions, a large share of its losses in the first half came from the metals & mining industry within the Materials sector, which finished the year’s first six months in the red. Precious metals miners accounted for the Fund’s top three largest detractors for the period. Several factors had a negative effect on these holdings in the first half. Gold and silver prices declined significantly while mine operating costs increased, which pushed valuations in many cases to what we see as levels that have not been reached since the lows in late 2008–early 2009. We chose to sell Medusa Mining, trimmed our stake in Hochschild Mining in early July, and added shares of Fresnillo as we think the London-based gold and silver miner with most of its lower-cost properties in Mexico is well positioned for an eventual turnaround.
     In what remained a robust period for many Health Care stocks, RGS’s short position in ProShares Ultra Health Care continued to be unprofitable. (The position was a significant detractor in 2012.) We partially covered the short position with buys in March and May. We chose to hold our shares of top-ten holding MegaStudy, a South Korean educational firm that specializes in online tutoring and test preparation. It has spent much of the last 18 months mired in disappointing results for its business based on increased competition. We remain confident in its ability to turn its business around.
     A short position in an ETF that we used as a hedge against once-robust emerging market growth was the portfolio’s top contributor in the first half—Direxion Daily Emerging Markets Bull 3X Shares. With the declines in many prominent markets in the developing world, this was a profitable strategy in the first half. We made cover buys in June but maintained a short position at the end of the semiannual period. Tokyo-based Nihon M&A Center provides M&A advisory and other related services to small and medium-sized businesses. Growing revenues and earnings helped draw investors to its stock. We were intrigued by its niche in Japan, a country in which approximately 150,000 companies are said to lack succession plans, which represents a great opportunity for Nihon M&A. We reduced our position as its share price soared past our sell targets. Since the mid-point of 2012, we have enjoyed a mostly positive experience with Recordati, a Milan-based pharmaceutical business with an 80-year history and an expanding global reach, especially in Russia, Turkey, and Eastern Europe, where demand for its products has been growing. The company researches and manufactures prescription pharmaceuticals, including lercanidipine, a treatment for hypertension. Its shares slumped between February and early April 2013 before climbing again on a strong fiscal first quarter and revised guidance for 2013.

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


Hochschild Mining	-2.04%

Fresnillo	-1.59

Medusa Mining	-0.88

ProShares Ultra Health Care (Short)	-0.77

MegaStudy	-0.76

¹ Net of dividends

ROYCE GLOBAL SELECT LONG/SHORT FUND VS. RUSSELL GLOBAL SMALL CAP INDEX Value of $10,000 Invested on 6/30/05

Includes reinvestment of distributions.

PORTFOLIO DIAGNOSTICS

Fund Net Assets	$11 million

Number of Holdings	72

Turnover Rate	81%

Average Market Capitalization^1,4	$1,299 million

Weighted Average P/E Ratio^2,3,4	12.3x

Weighted Average P/B Ratio^2,4	1.8x

Symbol	RSFTX

¹ Geometric Average. This weighted calculation uses each portfolio holding’s market cap in a way designed to not skew the effect of very large or small holdings; instead, it aims to better identify the portfolio’s center, which Royce believes offers a more accurate measure of average market cap than a simple mean or median.
² Harmonic Average. This weighted calculation evaluates a portfolio as if it were a single stock and measures it overall. It compares the total market value of the portfolio to the portfolio’s share in the earnings or book value, as the case may be, of its underlying stocks.
³ The Fund’s P/E calculation excludes ETF’s and companies with zero or negative earnings (0% of portfolio holdings as of 6/30/13).
⁴ Long Positions only

MORNINGSTAR STATISTICAL MEASURES¹

	Sharpe Ratio	Standard Deviation

RGS	0.17	22.43

Russell Global Small Cap	0.29	23.87

Category Median	0.27	23.74

Best Quartile Breakpoint	0.36	22.36

¹ Five years ended 6/30/13. Category Median and Best Quartile Breakpoint based on 19 world stock small-cap objective funds (oldest class) with at least five years of history.

The Fund produced lower volatility than the Russell Global Small Cap and 50% of world stock small-cap objective funds, as shown by its standard deviation.

PORTFOLIO COUNTRY BREAKDOWN^1,2 % of Net Assets

Japan		18.8	%

United Kingdom		14.0

Hong Kong		8.9

United States		8.8

South Africa		8.5

Austria		8.1

India		6.7

Brazil		5.6

Norway		5.5

Mexico		5.0

Italy		3.1

South Korea		3.1

¹ Represents countries that are 3% or more of net assets.
² Long positions only are represented above and, except in the case of ETF’s, securities are categorized by the country of their headquarters.

The Royce Funds 2013 Semiannual Report to Shareholders | 19

Royce Enterprise Select Fund

AVERAGE ANNUAL TOTAL RETURNS Through 6/30/13

January–June 2013¹				11.49	%

One-Year				21.93

Three-Year				16.47

Five-Year				7.37

Since Inception (9/28/07)				6.06

ANNUAL EXPENSE RATIOS

Gross Operating Expenses				3.86	%

Net Operating Expenses				1.24

¹ Not annualized

CALENDAR YEAR TOTAL RETURNS

Year	RSS		Year	RSS

2012	15.7	%	2009	23.1	%

2011	0.7		2008	-25.5

2010	17.2


TOP 10 POSITIONS % of Net Assets

Dollar Tree				3.2	%

Thor Industries				3.1

Towers Watson & Company Cl. A				2.7

Western Digital				2.6

iShares 1-3 Year Treasury Bond ETF				2.5

AVX Corporation				2.4

Expeditors International of Washington				2.1

Methode Electronics				2.0

Myriad Genetics				2.0

Garmin				2.0


PORTFOLIO SECTOR BREAKDOWN % of Net Assets

Information Technology				17.5	%

Industrials				17.2

Consumer Discretionary				16.8

Financials				7.2

Materials				4.7

Health Care				4.2

Energy				2.4

Utilities				1.8

Miscellaneous				1.3

Government Bonds				2.5

Cash and Cash Equivalents				24.4



Manager’s Discussion U.S. Federal Reserve policy once again hopped into the spotlight in 2013’s first half as Fed Chairman Ben Bernanke surprised investors of all kinds with a statement that quantitative easing could be tapered in the not-too-distant future if the U.S. economy continued to grow at a reasonable pace. In place since the depths of the financial crisis in the fall of 2008, the Fed’s asset purchase plan has since taken many forms but has clearly provided a strong foundation for securities prices not only in the U.S. but around the world as well. So the resulting volatility was not unexpected for market participants though it seemed to somewhat surprise its architects as Bernanke and his colleagues worked tirelessly in the following weeks to provide greater clarity as to what they really meant. Their main challenge seemed to be the propensity of investors to extrapolate current trends far into the future, meaning that there were some who believed the Fed’s massive stimulus was designed to go on forever. This obviously not being the case, the underpinnings of their decision were actually rooted in an improving outlook for economic stability as well as growth that is becoming increasingly self-sustaining. The yield on the 10-year Treasury jumped more than 100 basis points on the news, which led to the first significant losses in bond portfolios in years. Equity markets shuddered, but then quickly regained their footing and were propelled to new highs, at least here in the U.S. Royce Enterprise Select Fund (RSS), with its focus on our highest-conviction ideas in the larger end of the smaller company universe, posted strong absolute returns in the year’s first half while underperforming its benchmark. For the year-to-date period ended June 30, 2013, the Fund gained 11.5% compared to its small-cap benchmark, the Russell 2500, which advanced 15.4% for the same period. The first two quarters of 2013 were quite similar to the comparable periods in the three preceding years. During the bullish first quarter, RSS gained 8.3% and fell behind the streaking Russell 2500, which advanced 12.9%. When markets turned more volatile in the second quarter—giving us the year’s first correction of any magnitude—RSS advanced 2.9%, edging out its benchmark, which rose 2.3%. Launched in September 2007, just two months after a historic peak for U.S. small-caps and near the onset of what would become the global financial crisis, the Fund has seen its fair share of market volatility. We were encouraged then that our vigilance with regard to risk and consistent focus on what we think are quality companies with high internal rates of return and strong balance sheets helped RSS to outperform the Russell 2500 since the Fund’s inception on

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

Towers Watson & Company Cl. A		0.95%

UGI Corporation		0.79

Leucadia National		0.75

Western Digital		0.65

Thor Industries		0.62

¹ Includes dividends

Important Performance and Expense Information All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 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 redeemed. Shares redeemed within 180 days of purchase may be subject to a 1% redemption fee, payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current month-end performance may be higher or lower than performance quoted and may be obtained at www.roycefunds.com. Gross operating expenses reflect the Fund’s total gross annual operating expenses and include management fees and other expenses. Net operating expenses reflect contractual fee waivers and/or expense reimbursements. All expense information is reported as of the Fund’s most current prospectus. Royce & Associates has contractually agreed to waive fees and/or reimburse operating expenses to the extent necessary to maintain the Fund’s net annual operating expenses, other than interest expense on borrowings, at or below 1.24% through April 30, 2015 and at or below 1.99% through April 30, 2023. Regarding the two “Good Ideas” tables shown above, the sum of all contributors to, and all detractors from, performance for all securities in the portfolio would approximate the Fund’s year-to-date performance for 2013.

20 | The Royce Funds 2013 Semiannual Report to Shareholders

Performance and Portfolio Review

September 28, 2007. For the period ended June 30, 2013, RSS’s average annual total return for the since inception period was 6.1% versus 5.6% for its benchmark.
     Industrials led all of the Fund’s sectors during the period, followed by notable net gains for Financials and Consumer Discretionary. Seven of the Fund’s eight equity sectors contributed positively to returns, while Consumer Staples was flat. At the industry level, most groups generated positive net returns. Professional services led all industries, though diversified financial services also showed notable strength.
     The Fund’s largest contributor came from the Industrials sector—top-three holding Towers Watson & Company Cl. A, which provides human resource and financial consulting services. It offers employee benefit programs, develops attraction, retention, and reward strategies, and provides other related services. Its price rose more or less steadily through the first half of 2013. Earnings have been strong, revenues have grown, and cash flows have been solid. In May the firm’s management also raised adjusted EPS (earnings per share) guidance for fiscal 2013. We were initially drawn to its core business and steady earnings. UGI Corporation distributes energy products and services, operates natural gas and electric utilities in Pennsylvania, and distributes propane. A cold winter helped fuel earnings improvement.
     A rising share price prompted us to sell our position in Leucadia National during the first half. Leucadia National is a diversified holding company with subsidiaries in several businesses, including beef processing, manufacturing, gaming entertainment, real estate, and medical product development. It also holds significant equity interests in other businesses. It merged with global investment banker Jefferies Group in March, a move that investors seemed to like, along with the firm’s strong fiscal 2012 results. Western Digital, RSS’s fourth-largest holding at the end of the period, is the globe’s largest manufacturer of hard disk drives. While the company was mostly a supplier to the desktop market until 2004, it has successfully expanded into cloud computing server farms and the notebook segment. Its shares began to rebound in February on solid EPS growth and again in March on reports that global demand for data storage would remain strong.
     As for positions that detracted from returns, Myriad Genetics is engaged in the development of molecular diagnostic products designed to assess an individual’s lifetime risk of disease development. A longtime Royce favorite and top-ten holding at the end of June, Myriad Genetics struggled in the first half from the overhang of a Supreme Court decision challenging the patentability of human genes. The company lost a handful of patents as a result of the ruling, which we believe was more of a temporary problem than a significant setback for what we see as an otherwise strong business.

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


Myriad Genetics	-0.40%

Cabot Corporation	-0.28

MICROS Systems	-0.23

Garmin	-0.15

Ascena Retail Group	-0.10

¹ Net of dividends

ROYCE ENTERPRISE SELECT FUND VS. RUSSELL 2500 Value of $10,000 Invested on 9/28/07


Includes reinvestment of distributions.

PORTFOLIO DIAGNOSTICS

Fund Net Assets	$2 million

Number of Holdings	59

Turnover Rate	77%

Average Market Capitalization¹	$3,882 million

Weighted Average P/E Ratio^2,3	17.4x

Weighted Average P/B Ratio²	2.3x

U.S. Investments (% of Net Assets)	70.2%

Non-U.S. Investments (% of Net Assets)	5.4%

Symbol	RMISX

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

MORNINGSTAR STATISTICAL MEASURES¹

	Sharpe Ratio	Standard Deviation

RSS	0.50	16.63

Russell 2500	0.49	23.15

Category Median	0.42	21.94

Best Decile Breakpoint	0.58	19.30

¹ Five years ended 6/30/13. Category Median and Best Decile Breakpoint based on 348 mid-cap objective funds (oldest class) with at least five years of history.

The Fund beat the Russell 2500 and performed within the top 50% of mid-cap objective funds on a risk-adjusted basis, as shown by its Sharpe ratio. In addition, the Fund produced lower volatility than the Russell 2500 and 90% of mid-cap objective funds, as shown by its standard deviation.

The Royce Funds 2013 Semiannual Report to Shareholders | 21

Royce Opportunity Select Fund

AVERAGE ANNUAL TOTAL RETURNS Through 6/30/13

January–June 2013¹				17.88	%

One-Year				36.45

Since Inception (8/31/10)				20.99

ANNUAL EXPENSE RATIOS

Gross Operating Expenses				2.67	%

Net Operating Expenses				1.38

¹ Not annualized

CALENDAR YEAR TOTAL RETURNS

Year	ROS		Year	ROS

2012	35.1	%	2011	-17.1	%


TOP 10 LONG POSITIONS % of Net Assets

Kennedy-Wilson Holdings				2.2	%

Zumiez				2.1

Kratos Defense & Security Solutions				2.1

Mueller Water Products Cl. A				2.0

Jones Group (The)				2.0

Orient-Express Hotels Cl. A				2.0

Louisiana-Pacific Corporation				2.0

Audience				1.9

Ellie Mae				1.9

Exar Corporation				1.9


TOP 10 SHORT POSITIONS % of Net Assets

Lumber Liquidators Holdings				-2.2	%

Fleetmatics Group				-1.5

Stamps.com				-1.3

Fresh Market				-1.2

Lithia Motors Cl. A				-1.2

Life Time Fitness				-1.1

Tile Shop Holdings				-0.6

Sonic Automotive Cl. A				-0.3

iRobot Corporation				-0.3

Bravo Brio Restaurant Group				-0.1


PORTFOLIO SECTOR BREAKDOWN¹ % of Net Assets

Information Technology				36.4	%

Industrials				18.0

Financials				16.7

Consumer Discretionary				12.7

Energy				7.4

Materials				5.8

Health Care				1.3

Miscellaneous				4.3

Cash and Cash Equivalents				-2.6

¹ Long positions only



Manager’s Discussion Royce Opportunity Select Fund (ROS) advanced 17.9% for the year-to-date period ended June 30, 2013, outpacing its small-cap benchmark, the Russell 2000 Index, which was up 15.9% for the same period. ROS’s first-half showing was part of a more than year-long trend of enviable absolute and relative returns. The first quarter seemed like an uneventfully bullish period, though it did mark the return to market leadership of more defensive sectors and high-yielding equities at the expense of cyclical areas across most asset classes. The Fund managed the transition well, though it lagged its benchmark, gaining 11.5% versus 12.4% for the small-cap index. Volatility then made a dramatic return to the market. Share prices began falling before a bearish April gave way to a bullish May. June was already looking rocky and unpredictable when the Fed announced on the 19th that it would likely begin to taper its bond-buying program later this year. Along with a rapidly rising rate on the 10-year Treasury, underwhelming news out of China, and growing unrest in the developing world, the global markets nosedived for several days, though most domestic indexes were showing signs of recovery by the end of the month. The Fund fared well in this uncertain environment, rising 5.7% for the second quarter, ahead of the Russell 2000’s 3.1% increase. Performance through recent market cycles was strong. For the periods ended June 30, 2013, ROS beat the small-cap index from the most recent peak on April 29, 2011 (+22.3% versus +16.6%); from the small-cap trough on October 3, 2011 (+92.0% versus +64.5%); from the small-cap high on March 26, 2012 (+32.4% versus +17.7%); and from the small-cap low on June 4, 2012 (+52.8% versus +34.7%). These results were especially noteworthy because the Fund held a performance advantage relative to the benchmark in both bullish and bearish periods. ROS also outperformed the Russell 2000 for the one-year and since inception (8/31/10) periods ended June 30, 2013. The Fund’s average annual total return for the since inception period was 21.0%. The Financials, Information Technology, and Consumer Discretionary sectors made the largest contribution to ROS’s first-half performance. Short positions as a whole detracted from results, mostly in the Consumer Discretionary and Information Technology sectors, where they put a drag on what were still strong net results. Net losses at the level of individual positions were mostly modest. We sold our shares of metallurgical coal mining business

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

SunEdison		1.68%

Radian Group		1.61

SunPower Corporation		1.47

Acquity Group ADR		1.23

MGIC Investment		1.09

¹ Includes dividends

Important Performance and Expense Information All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 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 redeemed. Shares redeemed within 180 days of purchase may be subject to a 1% redemption fee, payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current month-end performance may be higher or lower than performance quoted and may be obtained at www.roycefunds.com. Gross operating expenses reflect the Fund’s total gross annual operating expenses and include management fees and other expenses. Net operating expenses reflect contractual fee waivers and/or expense reimbursements. All expense information is reported as of the Funds most current prospectus. Royce & Associates has contractually agreed to waive fees and/or reimburse operating expenses to the extent necessary to maintain the Fund’s net annual operating expenses, other than dividends on securities sold short, acquired fund fees and expenses, and interest expense on borrowing, at or below 1.24% through April 30, 2015 and at or below 1.99% through April 30, 2023. Regarding the two “Good Ideas” tables shown above, the sum of all contributors to, and all detractors from, performance for all securities in the portfolio would approximate the Fund’s year-to-date performance for 2013.

22 | The Royce Funds 2013 Semiannual Report to Shareholders

Performance and Portfolio Review

Walter Energy in June. Coal prices fell in the first half, mostly due to slumping demand from China. When a refinancing effort fell through in mid-June, we chose to sell our shares and move on. We went 0-for-2 in our estimate of Deckers Outdoor, which makes footwear and accessories. We thought that its sales growth would remain slow and that pricing would not recover. Wrong on both counts, we covered our short sales in March.
     The Fund’s leading industry was the semiconductor & semiconductor equipment group. Prospects for this industry have been more or less steadily improving for the last year, boosted by growth in the U.S. economy. That European economies look to have hit bottom and other national economies, especially in Asia, did not fall as hard as many had predicted were also factors in the improvement for this highly volume-sensitive business. Inventory levels were reasonable and pricing in the memory market was better than expected, which also helped to attract investors.
     As their respective share prices soared past our sell targets, we reduced our stake in two of ROS’s top-five contributors that came from the semiconductor group—SunPower Corporation and SunEdison. Each of these companies also benefited from the resurgence of interest in companies involved in solar power, an area that we think has considerable potential. SunPower manufactures high-performance solar electric equipment while SunEdison produces electronic-grade polysilicon used for electronics, solar cells, and film devices while also developing solar power projects. In spite of fears that reduced government subsidies would derail growth, the demand for solar technology has continued to grow. Many lesser-quality players have either exited the business or lost market share. Technological efficiency has improved, which has helped bring down costs, while China recently called for a five-fold increase in installed solar capacity.
     Two companies in the mortgage financing business benefited from the robust housing recovery to make strong contributions. Radian Group provides financial guarantee insurance. Its services allow people to buy homes more quickly (often with smaller down payments), protect lenders against loan default, and lower the costs of mortgage origination and servicing. MGIC Investment Corporation provides private mortgage insurance coverage. A decline in the number of defaults also helped both businesses to grow. Hong Kong-based digital marketing and e-commerce specialist Acquity Group was acquired in the spring while BofI Holdings saw its web-based banking services in both the consumer and commercial markets in high demand. We thought that its valuation remained attractive at the end of June and like its prospects going forward.

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


Walter Energy	-1.28%

Deckers Outdoor (Short)	-0.64

Mindspeed Technologies	-0.57

Genco Shipping & Trading	-0.55

Stamps.com (Short)	-0.54

¹ Net of dividends

ROYCE OPPORTUNITY SELECT FUND VS. RUSSELL 2000 Value of $10,000 Invested on 8/31/10


Includes reinvestment of distributions.

PORTFOLIO DIAGNOSTICS

Fund Net Assets		$7 million

Number of Holdings		92

Turnover Rate		95%

Average Market Capitalization^1,3		$703 million

Weighted Average P/B Ratio^2,3		1.5x

U.S. Investments³ (% of Net Assets)		98.1%

Non-U.S. Investments³ (% of Net Assets)		4.5%

Symbol		ROSFX

¹ Geometric Average. This weighted calculation uses each portfolio holding’s market cap in a way designed to not skew the effect of very large or small holdings; instead, it aims to better identify the portfolio’s center, which Royce believes offers a more accurate measure of average market cap than a simple mean or median.
² Harmonic Average. This weighted calculation evaluates a portfolio as if it were a single stock and measures it overall. It compares the total market value of the portfolio to the portfolio’s share in the earnings or book value, as the case may be, of its underlying stocks.
³ Long positions only

The Royce Funds 2013 Semiannual Report to Shareholders | 23

Royce Micro-Cap Discovery Fund

AVERAGE ANNUAL TOTAL RETURNS Through 6/30/13

January–June 2013¹				12.24	%

One-Year				15.72

Three-Year				11.47

Five-Year				5.04

Since Inception (10/3/03)				5.36

ANNUAL EXPENSE RATIOS

Gross Operating Expenses				2.94	%

Net Operating Expenses				1.49

¹ Not annualized

CALENDAR YEAR TOTAL RETURNS

Year	RDF		Year	RDF

2012	3.1	%	2007	-7.4	%

2011	-2.2		2006	16.8

2010	19.6		2005	7.6

2009	25.9		2004	13.3

2008	-35.1


TOP 10 POSITIONS % of Net Assets

TESSCO Technologies				1.7	%

American Software Cl. A				1.7

Computer Task Group				1.7

Globecomm Systems				1.7

Materion Corporation				1.7

Lifetime Brands				1.6

Johnson Outdoors Cl. A				1.5

ePlus				1.5

Alamo Group				1.5

Miller Industries				1.5


PORTFOLIO SECTOR BREAKDOWN % of Net Assets

Information Technology				25.3	%

Industrials				16.0

Materials				11.6

Consumer Discretionary				10.8

Health Care				8.9

Financials				7.9

Energy				5.7

Consumer Staples				4.3

Telecommunication Services				1.2

Miscellaneous				4.8

Cash and Cash Equivalents				3.5



Managers’ Discussion The diversified portfolio of Royce Micro-Cap Discovery Fund (RDF) gained 12.2% for the year-to-date period ended June 30, 2013 compared to gains of 18.3% for its benchmark, the Russell Microcap Index, and 15.9% for the small-cap Russell 2000 Index for the same period. The year’s first quarter saw the bulk of underperformance. The first three months of the year were a mostly bullish period that followed a solid third quarter and more volatile fourth quarter in 2012. While the Fund posted a solid result on an absolute basis, its relative performance fell short. For the first quarter, the Fund gained 8.2% versus 12.6% for its benchmark and 12.4% for the small-cap index. The second quarter brought considerably more volatility and, unsurprisingly, lower returns for equities across the board. Markets all over the world convulsed late in June following the announcement by Fed Chairman Bernanke that the central bank would consider slowing the pace of monthly bond purchases later in the year. Along with less-than-stellar news out of China, Brazil, Turkey, and Europe, stocks fell precipitously for several sessions before beginning to find their feet again. The upshot was a rougher quarter for stocks, though the U.S. fared better on the whole than foreign markets. RDF was up 3.7% for the second quarter. This was a mixed performance on a relative basis, as the Russell Microcap rose 5.1% while the small-cap index advanced 3.1%. The lack of exposure to more defensive areas of the market, most notably REITs and MLPs (master limited partnerships), was also a factor in first-half results (though REITs abruptly reversed course in the second quarter). This was consistent with much of what hampered relative returns in 2012. (It is worth pointing out, however, that the Fund outperformed the Russell Microcap in 74% of all monthly rolling five-year return periods ended June 30, 2013.) As we have mentioned previously, we made important changes to the Fund’s principal investment strategies in August 2010. Primarily, the changes mean that the Fund’s portfolio managers evaluate the purchase and sale recommendations of its proprietary model using both quantitative and qualitative portfolio analysis before investment decisions are implemented. The Fund had heavier weightings in more economically sensitive areas of the micro-cap space. These sectors, including RDF’s three largest—Information Technology, Industrials, and

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

Obagi Medical Products		0.83%

Standard Motor Products		0.72

Stein Mart		0.63

PC Connection		0.60

Glatfelter		0.55

¹ Includes dividends

Important Performance and Expense Information All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 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 redeemed. Shares redeemed within 180 days of purchase may be subject to a 1% redemption fee payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current month-end performance may be higher or lower than performance quoted and may be obtained at www.roycefunds.com. Price and total return information is based on net asset values calculated for shareholder transactions. Certain immaterial adjustments were made to the net assets of Royce Micro-Cap Discovery Fund at 6/29/12 for financial reporting purposes, and as a result the net asset values for shareholder transactions on that date and calendar-year total returns based on those net asset values differ from the adjusted net asset values and calendar-year total returns reported in the Financial Highlights. Gross operating expenses reflect the Fund’s gross total annual operating expenses for the Service Class and include management fees, 12b-1 distribution and service fees, and other expenses. Net operating expenses reflect contractual fee waivers and/or expense reimbursements. All expense information is reported as of the Fund’s most current prospectus. Royce & Associates has contractually agreed to waive fees and/or reimburse operating expenses to the extent necessary to maintain the Service Class’s net annual operating expense ratio at or below 1.49% through April 30, 2014 and at or below 1.99% through April 30, 2023. Regarding the two “Good Ideas” tables shown above, the sum of all contributors to, and all detractors from, performance for all securities in the portfolio would approximate the Fund’s year-to-date performance for 2013.

24 | The Royce Funds 2013 Semiannual Report to Shareholders

Performance and Portfolio Review

Materials—hindered relative performance even as they posted respectable (in the case of Materials) or strong (for Information Technology and Industrials) results during the first half. Indeed, at the end of the period all of the Fund’s nine sectors were in positive territory. Information Technology, Consumer Discretionary, and Industrials were the Fund’s best performers. At the industry level insurance, professional services, chemicals, and energy equipment & services companies all made sizable net contributions. The only significant net losses at the industry level came from the oil, gas & consumable fuels industry.
Obagi Medical Products was the top performer in the Fund for the period. The Long Beach, CA-based firm was acquired by Valeant Pharmaceuticals in April at a healthy premium. We sold the last of our shares in April. Automotive parts manufacturer Standard Motor Products benefited from continued growth in the large, historically stable auto aftermarket business. In particular, the company enjoyed revenue growth (primarily via acquisitions) and strong cash flows. Strong earnings also seemed to help attract investors. We took some gains in March. Stein Mart is a clothing retailer that fixed some internal accounting issues. This news initially hurt its stock price, although the company uncovered and resolved these issues on its own. In early May the firm completed its restatement review and released its fiscal 2013 results. Beating Wall Street expectations and boasting strong EPS (earnings per share) growth, the company saw its stock price soar. We made a modest trim to our position in May. We made a larger reduction to our stake in PC Connection in February and May. The company provides a full range of information technology (IT) solutions to business, government, and educational customers. Its growing business and solid earnings, as well as a tech-friendlier market, appeared to give a boost to its share price. Glatfelter manufactures specialty paper and engineered products. The company made an acquisition in March that analysts and investors seemed to love, especially as the deal was thought to provide Glatfelter with a sizable earnings enhancement. We sold some shares in March as its price was moving up.
VAALCO Energy was the Fund’s worst performing position for the period. The Texas-based energy producer and explorer stumbled badly with a fiscal fourth-quarter miss, rising costs, and a stalled project in Angola, all of which affected margins and kept its stock price in a slump. Confident in its long-term potential, we increased our position with small buys in February and March. We chose to hold our shares in Canadian silver producer Endeavour Silver. Precious metals miners endured an awful first half of 2013 as commodity prices fell and mine operating costs rose, but we like its potential pending a recovery for its industry.

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


VAALCO Energy	-0.44%

Endeavour Silver	-0.37

Nevsun Resources	-0.29

TeleNav	-0.29

TransGlobe Energy	-0.26

¹ Net of dividends

ROYCE MICRO-CAP DISCOVERY FUND VS. RUSSELL MICROCAP Value of $10,000 Invested on 6/30/00 (Russell Microcap Inception)


Includes reinvestment of distributions.

PORTFOLIO DIAGNOSTICS

Fund Net Assets	$5 million

Number of Holdings	101

Turnover Rate	34%

Average Market Capitalization¹	$416 million

Weighted Average P/E Ratio^2,3	15.3x

Weighted Average P/B Ratio²	1.4x

U.S. Investments (% of Net Assets)	92.3%

Non-U.S. Investments (% of Net Assets)	4.2%

Symbol	RYDFX

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

MORNINGSTAR STATISTICAL MEASURES¹

	Sharpe Ratio	Standard Deviation

RDF	0.32	23.46

Russell Microcap	0.45	25.07

Category Median	0.51	24.28

Best Quartile Breakpoint	0.55	23.77

¹ Five years ended 6/30/13. Category Median and Best Quartile Breakpoint based on 24 micro-cap objective funds (oldest class only) with at least five years of history.

The Fund produced lower volatility than the Russell Microcap and 75% of micro-cap objective funds, as shown by its standard deviation.

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

The Royce Funds 2013 Semiannual Report to Shareholders | 25

Royce Financial Services Fund

AVERAGE ANNUAL TOTAL RETURNS Through 6/30/13

January–June 2013¹				18.89	%

One-Year				32.61

Three-Year				18.41

Five-Year				8.23

Since Inception (12/31/03)				7.44

ANNUAL EXPENSE RATIOS

Gross Operating Expenses				1.96	%

Net Operating Expenses				1.58

¹ Not annualized

CALENDAR YEAR TOTAL RETURNS

Year	RFS		Year	RFS

2012	20.7	%	2007	-4.7	%

2011	-11.3		2006	24.8

2010	18.5		2005	12.2

2009	32.1		2004	15.1

2008	-35.4


TOP 10 POSITIONS % of Net Assets

Artisan Partners Asset Management				2.7	%

State Street				2.0

Lazard Cl. A				2.0

Towers Watson & Company Cl. A				1.9

WisdomTree Investments				1.9

Apollo Global Management LLC Cl. A				1.9

SEI Investments				1.9

Northern Trust				1.8

Jupiter Fund Management				1.7

Regional Management				1.7


PORTFOLIO INDUSTRY BREAKDOWN % of Net Assets

Capital Markets				48.9	%

Diversified Financial Services				8.5

Insurance				6.5

IT Services				3.7

Commercial Banks				3.3

Professional Services				3.0

Consumer Finance				2.9

Software				2.5

Trading Companies & Distributors				1.6

Media				1.3

Real Estate Management & Development				1.2

Closed-End Funds				0.6

Cash and Cash Equivalents				16.0



Manager’s Discussion Royce Financial Services Fund (RFS) continued its recent run of strong absolute and relative results with a terrific showing in the first half of 2013. The Fund gained 18.9% for the year-to-date period ended June 30, 2013, ahead of its benchmarks, the small-cap Russell 2000 Index, which rose 15.9%, and the Russell 2500 Financial Services Index, which was up 15.5% for the same period. The first quarter was a mostly consistent bull phase, with domestic share prices showing strength across all asset classes in the form of double-digit returns for most major U.S. indexes. The Fund fully participated in the good times, rising 14.2% versus respective gains of 12.4% for the Russell 2000 and 14.0% for the financial services component of the Russell 2500. This marked the third consecutive quarter in which RFS achieved positive quarterly performance and beat both its benchmark and the financial services companies in the Russell 2500. The second quarter saw the Fund go four-for-four. This was a far more volatile period than this year’s first quarter, somewhat similar to 2012’s second and fourth quarters. The period between the beginning of April and the end of June saw underwhelming economic news from China (along with credit issues and the threat of an overheated real estate market), new attempts at fiscal stimulus in Japan, unrest—and plunging markets—in Turkey and Brazil, a spike in the 10-year Treasury note between mid-May and mid-June, and word from the Federal Reserve that it would likely begin to slow the pace of its bond purchase program later this year. All of this was enough to send financial markets into a frenzy of selling, especially outside the U.S. Indeed, the major domestic equity indexes stabilized and finished the quarter in the black. RFS finished the second quarter with a gain of 4.1% compared to respective advances of 3.1% and 1.3% for the Russell 2000 and Russell 2500 Financial Services Index. Results over the last full market cycle were also more mixed. The Fund was up 1.2% from the previous small-cap peak on July 13, 2007 through the most recent peak on April 29, 2011 versus an increase of 6.6% for the Russell 2000 and a loss of 13.5% for the financial services component of the Russell 2500. From that April 2011 small-cap peak through June 30, 2013, RFS gained 18.7% versus 16.6% for its benchmark and 25.0% for the financial services sector of the Russell 2500. The Fund outperformed both indexes for the one-year period ended June 30, 2013 and was also ahead of the Russell 2500 Financial Services Index for the since inception (12/31/03) period ended June 30, 2013 (+7.4% versus 5.4%). In addition, RFS finished only slightly behind the

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

WisdomTree Investments		1.53%

Apollo Global Management LLC Cl. A		1.15

State Street		0.87

Regional Management		0.74

Artisan Partners Asset Management		0.63

¹ Includes dividends

Important Performance and Expense Information All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 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 redeemed. Shares redeemed within 180 days of purchase may be subject to a 1% redemption fee payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current month-end performance may be higher or lower than performance quoted and may be obtained at www.roycefunds.com. Gross operating expenses reflect the Fund’s gross total annual operating expenses for the Service Class and include management fees, 12b-1 distribution and service fees, other expenses, and acquired fund fees and expenses. Net operating expenses reflect contractual fee waivers and/ or expense reimbursements. All expense information is reported as of the Fund’s most current prospectus. Royce & Associates has contractually agreed to waive fees and/or reimburse expenses to the extent necessary to maintain the Fund’s net annual operating expenses, other than acquired fund fees and expenses, at or below 1.49% through April 30, 2014. Acquired fund fees and expenses reflect the estimated amount of the fees and expenses incurred indirectly by the Fund through its investments in mutual funds, hedge funds, private equity funds, and other investment companies. Regarding the two “Good Ideas” tables shown above, the sum of all contributors to, and all detractors from, performance for all securities in the portfolio would approximate the Fund’s year-to-date performance for 2013.

26 | The Royce Funds 2013 Semiannual Report to Shareholders

Performance and Portfolio Review

Russell 2000’s 7.5% increase over the same period. Our disciplined approach to investing in what we believe are fundamentally sound, conservatively capitalized, and attractively valued financial companies has at times put us out of sync both with the benchmark and the index that tracks the performance of micro-cap, small-cap, and mid-cap financial services stocks. With that in mind, we were pleased with the Fund’s 7.4% average annual total return since inception for the period ended June 30, 2013.
The portfolio’s substantial overweight in capital markets was a net positive for the period. The industry was more than well-represented among RFS’s top contributors, where it accounted for four of the Fund’s five best performers, as well as eight of its top 10 and 14 of its top 20. However, capital markets was also home to the portfolio’s five largest detractors and eight of its 10 top net losers, though net losses at the company level were generally more modest than net gains. The Fund’s top contributor for the period was WisdomTree Investments, an asset management company that primarily sponsors ETFs (exchange traded funds). Robust inflows and strong product line growth helped to attract investors to its stock. With its price on the rise, we trimmed our position in the first half, though it was the Fund’s fifth-largest holding at the end of the period. New York City-based Apollo Global Management, another top-ten position, offers alternative asset and other investment management services including private equity, credit, and real estate funds. We like its core business, dividend, solid earnings history, and positive cash flows and were content to hold our shares as its earnings remained solid. State Street, the Fund’s second-largest holding at the end of June, is one of the world’s leading providers of financial services to institutional investors, including investment servicing, investment management, and investment research and trading. Its price climbed through much of the first half, boosted by strong fiscal 2012 results, which included strong EPS (earnings per share) growth and a growing dividend.
The Fund’s most significant detractor for the period was Sprott, a Canadian investment management company with a history dating back to 1981. The firm saw its share price decline primarily as a result of its significant exposure to the precious metals mining industry, which suffered from declining commodity prices and increased operational costs. We added shares in March. Similar issues plagued U.S. Global Investors, a boutique registered investment advisory firm specializing in natural resources and emerging markets, two poor-performing areas of the market in the first half. We substantially increased our position in June.

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


Sprott	-0.57%

U.S. Global Investors Cl. A	-0.46

Citadel Capital	-0.16

Ashmore Group	-0.14

Egyptian Financial Group-Hermes Holding Company	-0.10

¹ Net of dividends

ROYCE FINANCIAL SERVICES FUND VS. RUSSELL 2000 AND RUSSELL 2500 FINANCIAL SERVICES Value of $10,000 Invested on 12/31/03


Includes reinvestment of distributions.

PORTFOLIO DIAGNOSTICS

Fund Net Assets	$28 million

Number of Holdings	86

Turnover Rate	3%

Average Market Capitalization¹	$2,933 million

Weighted Average P/E Ratio^2,3	18.6x

Weighted Average P/B Ratio²	2.2x

U.S. Investments (% of Net Assets)	59.6%

Non-U.S. Investments (% of Net Assets)	24.4%

Symbol	RYFSX

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

MORNINGSTAR STATISTICAL MEASURES¹

	Sharpe Ratio	Standard Deviation

RFS	0.45	23.38

Russell 2000	0.49	24.07

Category Median	0.38	24.10

Best Quartile Breakpoint	0.45	22.11

¹ Five years ended 6/30/13. Category Median and Best Quartile Breakpoint based on 29 financial services objective funds (oldest class only) with at least five years of history.

The Fund performed within the top 50% of financial services objective funds on a risk-adjusted basis, as shown by its Sharpe ratio. In addition, the Fund produced lower volatility than the Russell 2000 and 50% of financial services objective funds, as shown by its standard deviation.

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

The Royce Funds 2013 Semiannual Report to Shareholders | 27

Royce SMid-Cap Value Fund

AVERAGE ANNUAL TOTAL RETURNS Through 6/30/13

January–June 2013¹				4.80	%

One-Year				17.84

Three-Year				11.16

Five-Year				4.25

Since Inception (9/28/07)				3.65

ANNUAL EXPENSE RATIOS

Gross Operating Expenses				1.90	%

Net Operating Expenses				1.35

¹ Not annualized

CALENDAR YEAR TOTAL RETURNS

Year	RSV		Year	RSV

2012	15.4	%	2009	28.7	%

2011	-11.6		2008	-29.3

2010	26.0


TOP 10 POSITIONS % of Net Assets

Western Digital				5.1	%

Helmerich & Payne				4.1

Jacobs Engineering Group				3.8

Thor Industries				3.7

Reliance Steel & Aluminum				3.6

Pason Systems				3.0

Myriad Genetics				3.0

Teradyne				3.0

Stella-Jones				2.7

Westlake Chemical				2.6


PORTFOLIO SECTOR BREAKDOWN % of Net Assets

Information Technology				19.2	%

Industrials				14.8

Materials				14.8

Financials				13.5

Energy				11.1

Consumer Discretionary				9.9

Health Care				3.0

Consumer Staples				1.1

Cash and Cash Equivalents				12.6



Managers’ Discussion Royce SMid-Cap Value Fund (RSV), with its mandate to explore the larger segment of the smaller company universe, had a challenging first half of 2013. With investor preferences decidedly favoring those areas of the market with more defensive or high-yielding characteristics, the portfolio’s contrarian positioning favored more economically sensitive and cyclical businesses during a time when fears persisted about the general health of the global economy. For the year-to-date period ended June 30, 2013, RSV gained 4.8%, trailing its benchmark index, the Russell 2500, which gained 15.4%. Reminiscent of the first half of the prior three years, 2013’s opening six months began on a strongly bullish note only to be followed by a period of elevated volatility as two main storylines developed to stunt the enthusiasm of investors. Credit tightening in China orchestrated by that country’s central bank to address the excessive speculation in the housing market and unchecked lending in their shadow banking industry once again raised important questions around the sustainability of that nation’s remarkable growth rate. Perhaps more significantly, Fed Chairman Ben Bernanke surprised financial markets in June by signaling that the central bank would taper the pace of asset purchases, long the mainstay of the Fed’s quantitative easing program dating back to the financial crisis in 2008. While logically unsettling to fixed income markets, equity markets also swooned as investors struggled to come to grips with the potential withdrawal of the proverbial punchbowl. RSV got off to a slow start in the year’s ebullient first quarter, managing an increase of only 4.4% compared to the 12.9% advance for its benchmark index. The more challenging second quarter saw the Fund’s return more closely parallel that of the overall market as volatility returned while investors became a bit more selective. RSV gained 0.4% in the second quarter versus a 2.3% increase for the Russell 2500. Launched on September 28, 2007 near the eve of the financial crisis, RSV has seen its fair share of market volatility and a seemingly continuous tension between specific company fundamentals and the constant stream of macroeconomic risks. Throughout this time, the Fund has stayed true to its investment mandate to invest in well-capitalized businesses that we believe possess high quality and are mispriced in the marketplace. Performance in the first half of 2013 was mostly positive from a sector standpoint, with only one of the Fund’s eight equity sectors meaningfully detracting from returns. Leading the list of positive contributors was the Information Technology sector, followed by Industrials and Financials.

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

Western Digital		1.65%

Thor Industries		0.77

Jacobs Engineering Group		0.76

SanDisk Corporation		0.58

Westlake Chemical		0.57

¹ Includes dividends

Important Performance and Expense Information All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 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 redeemed. Shares redeemed within 180 days of purchase may be subject to a 1% redemption fee payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current month-end performance may be higher or lower than performance quoted and may be obtained at www.roycefunds.com. Gross operating expenses reflect gross total annual operating expenses for the Service Class and include management fees, 12b-1 distribution and service fees, and other expenses. Net operating expenses reflect contractual fee waivers and/or expense reimbursements. All expense information is reported as of the Fund’s most current prospectus. Royce & Associates has contractually agreed to waive fees and/or reimburse operating expenses to the extent necessary to maintain the Service Class’s net annual operating expenses at or below 1.35% through April 30, 2014. Regarding the two “Good Ideas” tables shown above, the sum of all contributors to, and all detractors from, performance for all securities in the portfolio would approximate the Fund’s year-to-date performance for 2013.

28 | The Royce Funds 2013 Semiannual Report to Shareholders

Performance and Portfolio Review

Materials, a leadership group in 2010 and in the first half of 2011, was the notable detractor to Fund performance as precious metals prices fell precipitously in the first half, hurting the underlying companies engaged in their extraction. Results were largely consistent at the industry level with metals & mining being the biggest trouble spot. Household durables was the only other notable detractor. On the positive side, computers & peripherals was a bright spot leading all industry groups by a wide margin.
Western Digital was the Fund’s top contributor to performance by a healthy margin. Based in Irvine, CA, Western Digital is the globe’s largest manufacturer of hard disk drives. While the company was mostly a supplier to the desktop market until 2004, it has successfully expanded into cloud computing server farms and the notebook segment. First buying shares early in 2010, we took gains in April and early in July. Long-time Royce favorite Thor Industries remained in the fast lane during the first half of 2013. Our analysis of this RV and small- and mid-size bus maker, which we first bought in the portfolio in 2010, has not shifted. The company emerged in 2012 in what we thought was excellent condition following a five-year period of sluggish sales and intense industry consolidation. Thor recently brought on some new faces in upper management, including a CEO who rose through the ranks of the company and has worked to make the business more focused and efficient just as demand is picking up. We think its stock has the potential to stay in high gear. Jacobs Engineering Group provides a range of engineering, construction, and technical services to industrial, commercial, and government clients around the world. As evidenced by recent backlog growth, the company looks well-positioned to benefit from the recovery in capital spending here in the U.S. and the ripple effect (in the form of infrastructure improvements) related to the reviving energy industry. Utilization rates have recently improved, driving margin expansion and revenue growth.
As mentioned the bulk of the Fund’s net losses in the first half came from the metals & mining industry. Precious metals miners accounted for five of the Fund’s 10 largest detractors for the period. Several factors worked against these holdings in the first half. Gold and silver prices declined significantly, mine operating costs increased, and several firms went through management changes. Warren Buffett once said, “Only when the tide goes out do you discover who’s been swimming naked.” For the mining industry, it has often looked as if the tide was never coming back in. In many cases, valuations have reached what we view as rock-bottom levels that have not been seen since the late 2008-early 2009 lows. Still, we have chosen not to build positions but to hold those we think best positioned for an eventual turnaround, such as Hochschild Mining and Pan American Silver.

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


Hochschild Mining	-1.06%

Pan American Silver	-0.91

Pretium Resources	-0.66

Globe Specialty Metals	-0.55

Sprott	-0.45

¹ Net of dividends

ROYCE SMID-CAP VALUE FUND VS. RUSSELL 2500 Value of $10,000 Invested on 9/28/07

Includes reinvestment of distributions.

PORTFOLIO DIAGNOSTICS

Fund Net Assets	$11 million

Number of Holdings	47

Turnover Rate	17%

Average Market Capitalization¹	$3,493 million

Weighted Average P/E Ratio^2,3	15.5x

Weighted Average P/B Ratio²	2.0x

U.S. Investments (% of Net Assets)	61.4%

Non-U.S. Investments (% of Net Assets)	26.0%

Symbol	RMVSX

¹ Geometric Average. This weighted calculation uses each portfolio holding’s market cap in a way designed to not skew the effect of very large or small holdings; instead, it aims to better identify the portfolio’s center, which Royce believes offers a more accurate measure of average market cap than a simple mean or median.
² Harmonic Average. This weighted calculation evaluates a portfolio as if it were a single stock and measures it overall. It compares the total market value of the portfolio to the portfolio’s share in the earnings or book value, as the case may be, of its underlying stocks.
³ The Fund’s P/E ratio calculation excludes companies with zero or negative earnings (11% of portfolio holdings as of 6/30/13).

MORNINGSTAR STATISTICAL MEASURES¹

	Sharpe Ratio	Standard Deviation

RSV	0.29	22.72

Russell 2500	0.49	23.15

Category Median	0.42	21.94

Best Quartile Breakpoint	0.50	20.58

¹ Five years ended 6/30/13. Category Median and Best Quartile Breakpoint based on 348 mid-cap objective funds (oldest class only) with at least five years of history.
The Fund produced lower volatility than the Russell 2500, as shown by its standard deviation.

The Royce Funds 2013 Semiannual Report to Shareholders | 29

Royce Focus Value Fund

AVERAGE ANNUAL TOTAL RETURNS Through 6/30/13

January–June 2013¹				4.41	%

One-Year				14.01

Three-Year				7.79

Since Inception (2/27/09)				13.52

ANNUAL EXPENSE RATIOS

Gross Operating Expenses				2.06	%

Net Operating Expenses				1.36

¹ Not annualized

CALENDAR YEAR TOTAL RETURNS

Year	RFV		Year	RFV

2012	9.2	%	2010	15.2	%

2011	-13.9


TOP 10 POSITIONS % of Net Assets

Berkshire Hathaway Cl. B				3.9	%

Google Cl. A				3.5

Franklin Resources				3.4

SemGroup Corporation Cl. A				3.3

Western Digital				3.2

Exxon Mobil				3.2

ePlus				3.0

Nautilus				2.9

NutriSystem				2.6

eHealth				2.5


PORTFOLIO SECTOR BREAKDOWN % of Net Assets

Financials				20.1	%

Information Technology				16.0

Consumer Discretionary				13.0

Industrials				12.3

Energy				11.2

Health Care				8.7

Materials				6.1

Consumer Staples				3.8

Miscellaneous				0.7

Government Bonds				1.3

Cash and Cash Equivalents				6.8



Manager’s Discussion Royce Focus Value Fund (RFV) had a difficult first half of 2013. For the year-to-date period, the Fund rose 4.4% compared to a gain of 15.4% for its benchmark, the Russell 2500 Index, for the same period. These first-half results follow a string of disappointing performances for the Fund dating back to 2011, a period characterized by closely correlated market results, strong performance for defensive stocks, the growing popularity of higher-yielding vehicles such as REITs, MLPs (master limited partnerships), and Utilities, and a widespread preference for fixed-income securities over many equities. Needless to say, these are not the kinds of investments that we seek for RFV’s portfolio, choosing instead to focus on small to mid-cap companies with strong balance sheets and what look to us like compelling valuations. In contrast to the second, the first quarter was pleasantly, smoothly bullish for most stocks. The Russell 2500 rose 12.9% between the beginning of January and the end of March while the Fund managed a 2.7% return. This made the task of a strong absolute first-half return, as well as narrowing the gap with the benchmark, more than a little challenging. The Fund fell further behind in the second quarter, which was unfortunate enough, but we were particularly frustrated that RFV underperformed the benchmark during the more volatile months of the second quarter. In April the Fund fell 1.0% versus a gain of 0.3% for the Russell 2500; in June RFV slipped 2.3% compared to a 1.1% decline of the small-to-mid cap index. The Fund did beat the benchmark in May, a bullish month in which RFV was up 5.1% compared to 3.1% for the benchmark. For the second quarter as a whole the Fund gained 1.7% while the Russell 2500 advanced 2.3%. Much of the underperformance came from the portfolio’s holdings in the metals & mining industry. The Fund is one of a select group of Royce offerings with the flexibility to pursue opportunities up and down the market capitalization spectrum. Consistent with our view that leadership in the market will most likely rotate between small- and larger-cap stocks over time, this flexibility is of great value, especially within the context of an asset class—equities—that looks broadly attractive to us versus other asset classes, particularly fixed income. We use the same rigorous criteria of strong balance sheets, high internal rates of return, and compelling valuation combined with a long-term investment horizon that has come to distinguish the Royce approach over the past four decades. So while

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

Western Digital		1.68%

Berkshire Hathaway Cl. B		0.87

NutriSystem		0.64

GameStop Corporation Cl. A		0.64

Jacobs Engineering Group		0.54

¹ Includes dividends

Important Performance and Expense Information All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 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 redeemed. Shares redeemed within 180 days of purchase may be subject to a 1% redemption fee payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current month-end performance may be higher or lower than performance quoted and may be obtained at www.roycefunds.com. Gross operating expenses reflect total gross annual operating expenses and include management fees, 12b-1 distribution and service fees, other expenses, and acquired fund fees and expenses. Net operating expenses reflect contractual fee waivers and/or reimbursements. All expense information is reported as of the Fund’s most current prospectus. Royce & Associates has contractually agreed to waive its fees and/or reimburse operating expenses to the extent necessary to maintain the Fund’s net annual operating expenses, other than acquired fund fees and expenses, at or below 1.35% through April 30, 2014. Acquired fund fees and expenses reflect the estimated amount of the fees and expenses incurred indirectly by the Fund through its investments in mutual funds, hedge funds, private equity funds, and other investment companies. Regarding the two “Good Ideas” tables shown above, the sum of all contributors to, and all detractors from, performance for all securities in the portfolio would approximate the Fund’s year-to-date performance for 2013.

30 | The Royce Funds 2013 Semiannual Report to Shareholders

Performance and Portfolio Review

a meaningful portion of the portfolio will continue to be sourced from our favored segment of smaller companies, the Fund also has the opportunity to apply our strict methodology to companies of all sizes. RFV’s average annual total return since inception was 13.5%.
RFV ended the period with 52 holdings, up from 50 at the end of 2012. Two of the Fund’s equity sectors, Materials and Health Care, finished the first half in negative territory, though the Materials sector detracted most and by a wide margin. The Information Technology, Financials, and Consumer Discretionary sectors were the greatest contributors to performance. At the industry level, computers & peripherals led the advance, followed by insurance and capital markets. The bulk of the Fund’s net losses in the first half came from the metals & mining industry, part of the Materials sector. Companies in this industry accounted for seven of the Fund’s ten—and 11 of its 20—largest detractors for the period. Most were precious metals mining companies. Several factors worked against these holdings in the first half. Gold and silver prices declined significantly, mine operating costs were climbing, and several firms went through management changes. As a result, we substantially reduced the portfolio’s exposure to this industry and Materials stocks in general. The sector accounted for 6.1% of net assets at the end of the period. Among the positions we sold were Allied Nevada Gold, Pretium Resources, Newmont Mining, Fresnillo, Seabridge Gold, Pan American Silver, Schnitzer Steel Industries, Agnico Eagles Mines, Alamos Gold, and Major Drilling Group International, each of which was a significant detractor to performance in the first half.
Long-time holding Berkshire Hathaway was the Fund’s top holding at the end of the semiannual period, while Western Digital was the Fund’s top contributor to performance by a healthy margin. Based in Irvine, CA, Western Digital is the globe’s largest manufacturer of hard disk drives. While the company was mostly a supplier to the desktop market until 2004, it has successfully expanded into cloud computing server farms and the notebook segment. Another top performer for the period was GameStop Corporation. The Texas-based firm is a video game retailer that sells new and pre-owned gaming products, including hardware and software. Many investors doubted the long-term viability of its business model at a time when tablet applications and downloads predominate. When Microsoft and Sony announced earlier this year that they would be introducing updated consoles, the news helped assure investors that the company’s video game exchange business can continue to grow and quieted fears that GameStop would go the same route as Blockbuster Video. The company should also draw a benefit from selling the consoles themselves. It was a top-30 position for the Fund at the end of June.

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

Allied Nevada Gold		-1.32%

Pretium Resources		-0.96

Newmont Mining		-0.74

Fresnillo		-0.70

Apple		-0.62

¹ Net of dividends

ROYCE FOCUS VALUE FUND VS. RUSSELL 2500 Value of $10,000 Invested on 2/27/09


Includes reinvestment of distributions.

PORTFOLIO DIAGNOSTICS

Fund Net Assets	$10 million

Number of Holdings	52

Turnover Rate	85%

Average Market Capitalization¹	$4,243 million

Weighted Average P/E Ratio^2,3	18.2x

Weighted Average P/B Ratio²	2.2x

U.S. Investments (% of Net Assets)	80.8%

Non-U.S. Investments (% of Net Assets)	12.4%

Symbol	RYFVX

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

MORNINGSTAR STATISTICAL MEASURES¹

	Sharpe Ratio	Standard Deviation

RFV	0.50	18.18

Russell 2500	1.11	17.48

Category Median	1.05	16.85

Best Quartile Breakpoint	1.15	15.63

¹ Three years ended 6/30/13. Category Median and Best Quartile Breakpoint based on 370 mid-cap objective funds (oldest class only) with at least three years of history.

The Royce Funds 2013 Semiannual Report to Shareholders | 31

Royce Partners Fund

AVERAGE ANNUAL TOTAL RETURNS Through 6/30/13

January–June 2013¹				12.13	%

One-Year				26.14

Three-Year				15.55

Since Inception (4/27/09)				12.60

ANNUAL EXPENSE RATIOS

Gross Operating Expenses				4.85	%

Net Operating Expenses				1.37

¹ Not annualized

CALENDAR YEAR TOTAL RETURNS

Year	PTR		Year	PTR

2012	20.7	%	2010	18.7	%

2011	-11.7


TOP 10 POSITIONS % of Net Assets

E-L Financial				3.0	%

Towers Watson & Company Cl. A				2.4

MasterCard Cl. A				2.3

Verisk Analytics Cl. A				2.2

Sanofi ADR				2.1

Tidewater				2.1

SEI Investments				2.1

Global Telecom & Technology				2.1

Schwab (Charles)				2.0

Zebra Technologies Cl. A				2.0


PORTFOLIO SECTOR BREAKDOWN % of Net Assets

Financials				25.2	%

Industrials				23.9

Information Technology				14.4

Materials				11.2

Consumer Discretionary				6.2

Energy				4.9

Health Care				4.6

Telecommunication Services				2.1

Miscellaneous				0.9

Cash and Cash Equivalents				6.6



Manager’s Discussion Royce Partners Fund (PTR) did fine in the first half on an absolute basis, though we were disappointed that it came up short against its benchmark. For the year-to-date period ended June 30, 2013, the Fund rose 12.1% compared to a gain of 15.4% for its benchmark, the Russell 2500 Index, for the same period. PTR finished 2012 on a high note, outperforming the small to mid-cap index through the last six months of the year with a 12.5% advance compared to a 8.9% gain for the benchmark. However, the Fund was unable to maintain this pace through the more or less consistently bullish first quarter of 2013. PTR did well on an absolute basis but lost ground against the Russell 2500, gaining 10.7% versus 12.9% for the index. The Fund fell further behind in the second quarter, a far more volatile period than this year’s first quarter and somewhat similar to the second and fourth quarters of 2012, which only served to exacerbate our frustration. The period between the beginning of April and the end of June saw underwhelming economic news from China (along with credit issues and the threat of an overheated real estate market), new attempts at fiscal stimulus in Japan, unrest—and plunging markets—in Turkey and Brazil, a spike in the 10-year Treasury rate between mid-May and mid-June, and word from the Federal Reserve that it would likely begin to reduce its bond purchase program later this year. All of this was enough to send financial markets into a frenzy of selling, especially outside the U.S. Indeed, the major domestic equity indexes stabilized and finished the second quarter in the black. For the second quarter as a whole the Fund gained 1.3% while the Russell 2500 advanced 2.3%. PTR is one of a select group of Royce offerings with the flexibility to pursue opportunities up and down the market capitalization spectrum. Consistent with our view that leadership in the market will most likely rotate between small- and larger-cap stocks over time, this flexibility is of great value, especially within the context of an asset class—equities—that looks broadly attractive to us versus other asset classes, particularly fixed income. We use the same rigorous criteria of strong balance sheets, high internal rates of return, and compelling valuation combined with a long-term investment horizon that has come to distinguish the Royce approach over the past four decades. So while a meaningful portion of the portfolio will continue to be sourced from our favored segment of smaller companies, the Fund also has the opportunity to apply our strict methodology to companies of all sizes. We were

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

WisdomTree Investments		1.56%

State Street		0.89

AllianceBernstein Holding L.P.		0.85

Towers Watson & Company Cl. A		0.81

Moody’s Corporation		0.60

¹ Includes dividends

Important Performance and Expense Information All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 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 redeemed. Shares redeemed within 180 days of purchase may be subject to a 1% redemption fee payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current month-end performance may be higher or lower than performance quoted and may be obtained at www.roycefunds.com. Gross operating expenses reflect total gross annual operating expenses and include management fees, 12b-1 distribution and service fees, other expenses, and acquired fund fees and expenses. Net operating expenses reflect contractual fee waivers and/or reimbursements. All expense information is reported as of the Fund’s most current prospectus. Royce & Associates has contractually agreed to waive its fees and/or reimburse operating expenses to the extent necessary to maintain the Fund’s net annual operating expenses, other than acquired fund fees and expenses, at or below 1.35% through April 30, 2014 and 1.99% through April 30, 2023. Acquired fund fees and expenses reflect the estimated amount of the fees and expenses incurred indirectly by the Fund through its investments in mutual funds, hedge funds, private equity funds, and other investment companies. Regarding the two “Good Ideas” tables shown above, the sum of all contributors to, and all detractors from, performance for all securities in the portfolio would approximate the Fund’s year-to-date performance for 2013.

32 | The Royce Funds 2013 Semiannual Report to Shareholders

Performance and Portfolio Review

pleased that PTR outperformed the Russell 2500 for the one-year period ended June 30, 2013. The Fund’s average annual total return since inception was 12.6%.
     PTR ended the period with 60 holdings, up from 58 at the end of 2012. All of the Fund’s eight equity sectors made positive contributions in the first half, with Financials leading by a considerable margin, followed by strong net gains from the Industrials and Information Technology sectors. At the industry level, capital markets—the dominant industry in the Financials sector—led all groups, followed by professional services and machinery. WisdomTree Investments, a New York-based asset management firm sponsoring ETFs (exchange-traded funds) and other financial products to retail and institutional investors, was the top performer for the period. Robust inflows and strong product line growth helped to attract investors to its stock. With its price on the rise, we took some gains in the first half. State Street is one of the world’s leading providers of financial services to institutional investors, including investment servicing, investment management, and investment research and trading. Its price climbed through much of the first half, boosted by strong fiscal 2012 results, which included EPS (earnings per share) growth and a growing dividend. We reduced our position as its stock price climbed in the first half.
     Asset management business Alliance Bernstein is a longtime Royce favorite. However, we chose to sell our position in PTR as its price soared past our sell target in May. We liked the valuation and growth potential for Towers Watson & Company enough for it to be the Fund’s second-largest holding at the end of June. The company provides human resource and financial consulting services. It offers employee benefit programs, develops attraction, retention, and reward strategies, and provides other related services. Its price rose more or less steadily through the first half of 2013. The company continues to deliver steady growth in its benefits consulting business, generates strong free cash flow, and showed solid initial enrollments in its exchange solutions business as it gains traction in the early innings of healthcare exchange implementation. Earnings have been strong, revenues have grown, and cash flows have been solid. In May the firm’s management also raised adjusted EPS guidance for fiscal 2013.
     Gold Fields was the largest detractor to performance by a wide margin. Precious metals miners faced the dual challenges of slumping commodity prices and rising operational costs in the first half. We held our shares in the hope of en eventual industry turnaround. We added to our stake in Italian shoemaker and retailer Geox. Declining sales and earnings drove its price down, but we thought that its strong brand could help the stock to step up when eurozone economies in the Mediterranean begin to recover.

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


Gold Fields ADR	-0.95%

Geox	-0.34

Sprott	-0.31

GrafTech International	-0.27

Value Partners Group	-0.26

¹ Net of dividends

ROYCE PARTNERS FUND VS. RUSSELL 2500 Value of $10,000 Invested on 4/27/09


Includes reinvestment of distributions.

PORTFOLIO DIAGNOSTICS

Fund Net Assets	$2 million

Number of Holdings	60

Turnover Rate	34%

Average Market Capitalization¹	$3,624 million

Weighted Average P/E Ratio^2,3	18.2x

Weighted Average P/B Ratio²	2.1x

U.S. Investments (% of Net Assets)	64.4%

Non-U.S. Investments (% of Net Assets)	29.0%

Symbol	RPTRX

¹ Geometric Average. This weighted calculation uses each portfolio holding’s market cap in a way designed to not skew the effect of very large or small holdings; instead, it aims to better identify the portfolio’s center, which Royce believes offers a more accurate measure of average market cap than a simple mean or median.
² Harmonic Average. This weighted calculation evaluates a portfolio as if it were a single stock and measures it overall. It compares the total market value of the portfolio to the portfolio’s share in the earnings or book value, as the case may be, of its underlying stocks.
³ The Fund’s P/E ratio calculation excludes companies with zero or negative earnings (5% of portfolio holdings as of 6/30/13).

MORNINGSTAR STATISTICAL MEASURES¹

	Sharpe Ratio	Standard Deviation

PTR	0.92	17.30

Russell 2500	1.11	17.48

Category Median	1.05	16.85

Best Quartile Breakpoint	1.15	15.63

¹ Three years ended 6/30/13. Category Median and Best Quartile Breakpoint based on 370 mid-cap objective funds (oldest class only) with at least three years of history.
The Fund produced lower volatility than the Russell 2500, as shown by its standard deviation.

The Royce Funds 2013 Semiannual Report to Shareholders | 33

Royce Special Equity Multi-Cap Fund

AVERAGE ANNUAL TOTAL RETURNS Through 6/30/13

January–June 2013¹				17.81	%

One-Year				23.27

Since Inception (12/31/10)				14.75

ANNUAL EXPENSE RATIOS

Gross Operating Expenses				1.51	%

Net Operating Expenses				1.39

¹ Not annualized

CALENDAR YEAR TOTAL RETURNS

Year	RSM		Year	RSM

2012	11.6	%	2011	7.2	%


TOP 10 POSITIONS % of Net Assets

Bed Bath & Beyond				5.1	%

Gap (The)				5.0

Molex Cl. A				4.9

Emerson Electric				4.8

Staples				4.6

Microsoft Corporation				4.5

Nordstrom				4.4

Occidental Petroleum				4.3

Cisco Systems				4.3

Dover Corporation				4.0


PORTFOLIO SECTOR BREAKDOWN % of Net Assets

Information Technology				27.1	%

Consumer Discretionary				24.0

Industrials				23.8

Health Care				14.7

Energy				4.3

Consumer Staples				1.7

Financials				0.8

Cash and Cash Equivalents				3.6

Manager’s Discussion
The first six months of 2013 offered two very different market climates, and we were pleased with the absolute and relative results for Royce Special Equity Multi-Cap Fund (RSM) in each of them. The Fund advanced 17.8% for the year-to-date period ended June 30, 2013, ahead of its benchmark, the Russell 1000 Index, which was up 13.9% for the same period. The first quarter was a bullish period that in many ways continued the trend that began following the market lows in June 2012. RSM trailed the Russell 1000 through the last six months of 2012, up 4.6% versus 6.4%, and began 2013 by remaining slightly behind. For the first quarter the Fund was up 10.3%, trailing the 11.0% gain for its benchmark. The Fund’s early disadvantage was not surprising since lower-quality issues have often dominated the market over the last few years.
     We were pleased that the more volatile second quarter saw substantial improvement on a relative basis. Markets were sent reeling following the Fed’s announcement that it would likely begin tapering the pace of monthly bond purchases later in the year. In this more uncertain environment,the Fund more than doubled the return of its benchmark with a gain of 6.8% versus 2.7% for the Russell 1000. Strong results from holdings in the Consumer Discretionary sector, which also made a notable contribution in the first quarter, helped make the difference. The Fund also outperformed the Russell 1000 for the one-year and since inception (12/31/10) periods ended June 30, 2013. RSM’s average annual total return since inception was 14.8%.
     We remain bullish and are not alone in this view, as evidenced by an article that appeared on June 16th in the New York Times, “Even Pessimists Feel Optimistic Over Economy.” In the piece, the author says that a number of economists in academia and on Wall Street are now predicting something the United States has not experienced in years—healthier, more lasting growth. This helps to explain why stocks remain in our view the best way to access yield, particularly when focusing, as we do, on those equities that generate substantial free cash flow and have the ability to grow their dividends.
     The market needed time to recalibrate and digest the Fed’s earlier-than-expected announcement of a potential reduction in QE. An analogy offered by investment research company I.S.I. was that the Fed has its foot on the gas pedal driving 85 mph and is contemplating slowing down to 60 mph. At this point, we think it is too early to jump out of

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

Staples		1.40%

Gap (The)		1.38

Bed Bath & Beyond		1.15

Microsoft Corporation		1.09

Walgreen Company		0.91

¹ Includes dividends

Important Performance and Expense Information All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 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 redeemed. Shares redeemed within 180 days of purchase may be subject to a 1% redemption fee payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current month-end performance may be higher or lower than performance quoted and may be obtained at www.roycefunds.com. All performance and risk information reflects results of the Service Class (its oldest Class). Gross operating expenses reflect total gross annual operating expenses for the Service Class and include management fees, 12b-1 distribution and service fees, and other expenses. Net operating expenses reflect contractual fee waivers and/or reimbursements. All expense information is reported as of the Fund’s most current prospectus. Royce & Associates has contractually agreed to waive its fees and/or reimburse operating expenses to the extent necessary to maintain the Fund’s net annual operating expenses, at or below 1.39% through April 30, 2014. Regarding the two “Good Ideas” tables shown above, the sum of all contributors to, and all detractors from, performance for all securities in the portfolio would approximate the Fund’s year-to-date performance for 2013.

34 | The Royce Funds 2013 Semiannual Report to Shareholders

Performance and Portfolio Review

that car. That said, there is no real precedent for what the Fed is doing. In the end, it will all boil down to the economic outlook. It should be remembered, however, that the stock market has been trending higher as long as the Fed’s balance sheet has been expanding. Even with tapering it would still be expanding, just not as rapidly.
     During the June selloff, the rise in rates did not bother us, as the level is too far away to pose a real threat to equities. We think the 10-year Treasury needs to be in the 5% region before it is a problem historically. We also believe further decoupling will occur with the trend in equities up and bonds flat to down. In addition, we suspect the decoupling of the U.S. market with the rest of the world is likely to continue, at least for the time being.
     We are known for worrying and, despite our bullish stance, we still keep a watchful eye on issues that could cause us to change that view. Among the more notable potential issues are a poorly executed Fed tapering, another euro crisis, a hard landing in China, and unforeseen events such as terrorism, earthquakes, pandemics, and geopolitical risk as a result of unstable or extreme governments. At the same time, we cannot ignore the many domestic positives including improvements in energy production and manufacturing. This list would also include the decline in the budget deficit as a percentage of GDP, our debt to GDP having stabilized at a reasonable figure (70%), and the slowing of healthcare costs, which is reducing Medicare’s unfunded liabilities. We believe that the portfolio remains well-positioned for a market in which dividends and quality matter and that looks as if it is headed higher. However, we also recognize that volatility will be higher as we travel a new, uncharted road.
     Six of the Fund’s seven equity sectors posted net gains in the first half. Consumer Discretionary led all sectors by a sizable margin. Specialty retail was the best-performing industry group within the sector and in the Fund overall. The group received a boost from the portfolio’s three largest contributors, Staples (one of 2012’s chief detractors), The Gap (a top performer last year), and Bed Bath & Beyond. Each was also a top-ten holding at the end of June. Information Technology, Industrials, Health Care, and Consumer Staples also made strong-to-solid net contributions to first-half results. RSM’s top detractor was another retailer, Kohl’s Corporation. The company also made that list in 2012. We sold our shares in January 2013.

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


Kohl’s Corporation	-0.05%

Franklin Resources	-0.01

Jacobs Engineering Group	-0.01

¹ Net of dividends

ROYCE SPECIAL EQUITY MULTI-CAP FUND VS. RUSSELL 1000 Value of $10,000 Invested on 12/31/10

Includes reinvestment of distributions.

PORTFOLIO DIAGNOSTICS

Fund Net Assets		$159 million

Number of Holdings		29

Turnover Rate		20%

Average Market Capitalization¹		$23,858 million

Weighted Average P/E Ratio^2,3		15.6x

Weighted Average P/B Ratio²		2.8x

U.S. Investments (% of Net Assets)		96.4%

Non-U.S. Investments (% of Net Assets)		0.0%

Symbol
Investment Class		RSMCX
Service Class		RSEMX
Institutional Class		RMUIX

¹ Geometric Average. This weighted calculation uses each portfolio holding’s market cap in a way designed to not skew the effect of very large or small holdings; instead, it aims to better identify the portfolio’s center, which Royce believes offers a more accurate measure of average market cap than a simple mean or median.
² Harmonic Average. This weighted calculation evaluates a portfolio as if it were a single stock and measures it overall. It compares the total market value of the portfolio to the portfolio’s share in the earnings or book value, as the case may be, of its underlying stocks.
³ The Fund’s P/E ratio calculation excludes companies with zero or negative earnings (5% of portfolio holdings as of 6/30/13).

The Royce Funds 2013 Semiannual Report to Shareholders | 35

Royce European Smaller-Companies Fund

AVERAGE ANNUAL TOTAL RETURNS Through 6/30/13

January–June 2013¹				2.31	%

One-Year				20.19

Three-Year				12.00

Five-Year				3.98

Since Inception (12/29/06)				2.45

ANNUAL EXPENSE RATIOS

Gross Operating Expenses				2.16	%

Net Operating Expenses				1.72

¹ Not annualized

CALENDAR YEAR TOTAL RETURNS

Year	RES		Year	RES

2012	23.8	%	2009	57.7	%

2011	-20.3		2008	-46.4

2010	35.2		2007	1.4


TOP 10 POSITIONS % of Net Assets

Stallergenes				2.7	%

Recordati				2.4

Semperit AG Holding				2.4

Forbo Holding				2.1

Ashmore Group				2.0

Mayr-Melnhof Karton				2.0

Zehnder Group				1.9

Lewis Group				1.9

Boiron				1.8

Raubex Group				1.8


PORTFOLIO SECTOR BREAKDOWN % of Net Assets

Industrials				21.9	%

Health Care				19.5

Consumer Discretionary				18.9

Information Technology				11.7

Financials				10.6

Materials				5.9

Energy				5.3

Consumer Staples				2.3

Cash and Cash Equivalents				3.9


PORTFOLIO COUNTRY BREAKDOWN^1,2 % of Net Assets

United Kingdom				21.3	%

France				16.8

Switzerland				12.4

Germany				10.0

Italy				7.9

South Africa				5.6

Austria				4.4

Norway				4.0

¹ Represents countries that are 3% or more of net assets.
² Securities are categorized by the country of their headquarters.



Manager’s Discussion European stocks had trouble keeping up with the blistering pace of returns shown by their U.S. peers. Nonetheless, returns were generally positive as many of the ever-present headlines about the eurozone’s thus-far intractable debt issues were overshadowed by renewed investor concern over the health certain emerging markets economies and the impact of the U.S. Federal Reserve’s signaling a potential roadmap for reducing fixed-income purchases. Royce European Smaller Companies Fund (RES), with its charter to invest in the highest conviction ideas we are finding in our European research efforts, demonstrated mixed results in what was a volatile first half for European small-caps. RES gained 2.3% in the first half of 2013, lagging its benchmark, the Russell Europe Small Cap Index, which advanced 5.7% for the same period. The bullish first quarter saw RES gain a respectable 2.5% while falling behind its European benchmark index, which gained 5.2%. Markets experienced a significant spike in volatility in the second quarter as the fragile eurozone economies came to grips with the potential for a reduction in U.S. monetary stimulus and higher interest rates. April and May were bullish, continuing the positive momentum of the first quarter, while June turned decidedly bearish. RES lost 0.2% in 2013’s second quarter compared to slightly better performance by the benchmark, with the Russell Europe Small Cap Index gaining by 0.5%. Now in its seventh year, RES continued to hold its longer term relative performance advantage over its benchmark. For the period ended June 30, 2013, the Fund’s average annual total return since inception (12/29/06) was 2.5% versus a decline of 1.2% for the Russell Europe Small Cap Index for the same period. Breaking the pattern of the past few years, in which news flow was dominated by fears of global economic weakness and the potential for renewed recessionary activities in the world’s important growth engines, was the potentially positive take on the health of the U.S. economy that motivated Fed Chairman Ben Bernanke to first articulate a potential slowing in the pace of the Fed’s balance sheet expansion by reducing the size of its monthly bond purchases. While we see this as an inherently positive development, the risks around removing the primary support mechanism of the fragile global economy led to a sharp increase in the yield of the 10-year U.S. Treasury and an uptick in equity market volatility, particularly in the latter half of the second quarter. Six of the Fund’s eight equity sectors generated positive performance for the first half of 2013. Health Care led by a considerable margin, more than doubling the contribution of the

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

Boiron		0.74%

Almirall		0.49

Stallergenes		0.48

Recordati		0.48

Azimut Holding		0.45

¹ Includes dividends

Important Performance and Expense Information All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 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 redeemed. Shares redeemed within 180 days of purchase may be subject to a 2% redemption fee payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current month end performance may be higher or lower than performance quoted and may be obtained at www.roycefunds.com. Gross operating expenses reflect total gross annual operating expenses and include management fees, 12b-1 distribution and service fees, other expenses, and acquired fund fees and expenses. Net operating expenses reflect contractual fee waivers and/or expense reimbursements. All expense information is reported as of the Fund’s most current prospectus. Royce & Associates has contractually agreed to waive its fees and/or reimburse operating expenses to the extent necessary to maintain the Fund’s net annual operating expenses, other than acquired fund fees and expenses, at or below 1.69% through April 30, 2014 and at or below 1.99% through April 30, 2023. Acquired fund fees and expenses reflect the estimated amount of the fees and expenses incurred indirectly by the Fund through its investments in mutual funds, hedge funds, private equity funds, and other investment companies. Regarding the two “Good Ideas” tables shown above, the sum of all contributors to, and all detractors from, performance for all securities in the portfolio would approximate the Fund’s year-to-date performance for 2013.

36 | The Royce Funds 2013 Semiannual Report to Shareholders

Performance and Portfolio Review

next-best performing sector, Information Technology, which also made a strong contribution. With Financials and Industrials also posting solid net gains, the portfolio demonstrated solid performance characteristics from both the cyclical and more traditionally defensive areas of the market. Materials and Energy detracted from first-half performance as natural resource and commodity-based businesses reacted to the growing economic headwinds buffeting the emerging markets, especially China and Brazil. At the industry level, results remained broadly positive. Pharmaceuticals led all industry groups, followed by capital markets and software.
The top performer in the period was Boiron, a French developer and manufacturer of homeopathic pharmaceutical products. The company published results for fiscal 2012 and the fiscal first quarter of 2013, both of which showed strong revenue growth and continued high levels of profitability. The share price responded favorably, with the company appearing attractively valued on both an absolute level and compared to its peers. Although we took some gains in the first half, we believed at the end of the period that Boiron remained attractively valued. It was RES’s ninth-largest holding at the end of June. Almirall is a Spanish company that is also in the pharmaceutical industry. It focuses on allergy and respiratory compounds as well as a range of infectious disease drugs. Although during the period the company reported further profit declines for both fiscal 2012 and the fiscal first quarter of 2013, many investors appeared to believe the company was moving close to positive trends in growth and profitability. The most challenging aspects of Spanish healthcare reforms now look to be in the past while news on clinical trials and new drug launches looked increasingly positive. However, based on our belief that many of its improved prospects have been priced in, we finished selling our shares in late June.
Unhappy with ongoing share price declines over the past year, we also sold our shares of Hochschild Mining, a standout from 2012’s first half. This U.K.-based gold and silver mining company with operations primarily in South America saw its shares begin to fall sharply in the first quarter, closely tracking the steep losses experienced in the physical gold market. Mining companies also face increased operating costs, creating a nightmarish scenario. We felt better about the future prospects for Paris-based Parrot, which develops software and components for portable voice recognition devices, hands-free telephone kits for cars, and voice-activated personal digital assistants. Its shares suffered from a sharp drop in semiconductor sales in the automotive market that we believe resulted from general weakness in Europe’s automobile market and the timing of Parrot’s new product launches. We continue to believe that Parrot’s prospects for 2014 and beyond are bright and that the stock was attractively priced at the end of the period.

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


Hochschild Mining	-1.42%

Parrot	-0.49

Lewis Group	-0.36

Koza Altin Isletmeleri	-0.32

Semperit AG Holding	-0.26

¹ Net of dividends

ROYCE EUROPEAN SMALLER-COMPANIES FUND VS. RUSSELL EUROPE SMALL CAP Value of $10,000 Invested on 12/29/06


Includes reinvestment of distributions.

PORTFOLIO DIAGNOSTICS

Fund Net Assets	$19 million

Number of Holdings	79

Turnover Rate	27%

Average Market Capitalization¹	$1,081 million

Weighted Average P/E Ratio^2,3	12.8x

Weighted Average P/B Ratio²	2.2x

Symbol	RISCX

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

MORNINGSTAR STATISTICAL MEASURES¹

	Sharpe Ratio	Standard Deviation

RES	0.28	25.92

Russell Europe Small Cap	0.14	28.85

Category Median	0.09	25.73

Best Quartile Breakpoint	0.23	24.23

¹ Five years ended 6/30/13. Category Median and Best Quartile Breakpoint based on 22 European stock objective funds (oldest class only) with at least five years of history.

The Fund beat the Russell Europe Small Cap and performed within the top 25% of European stock objective funds on a risk-adjusted basis, as shown by its Sharpe ratio. In addition, the Fund produced lower volatility than the Russell Europe Small Cap, as shown by its standard deviation.

DOWN MARKET PERFORMANCE COMPARISON All Down Periods of 7.5% or Greater in Percentages(%)

The Royce Funds 2013 Semiannual Report to Shareholders | 37

Royce Global Dividend Value Fund

AVERAGE ANNUAL TOTAL RETURNS Through 6/30/13

January–June 2013¹				1.97	%

One-Year				18.11

Since Inception (12/31/10)				2.26

ANNUAL EXPENSE RATIOS

Gross Operating Expenses				2.87	%

Net Operating Expenses				1.70

¹ Not annualized

CALENDAR YEAR TOTAL RETURNS

Year	RGD		Year	RGD

2012	22.5	%	2011	-15.4	%


TOP 10 POSITIONS % of Net Assets

Mayr-Melnhof Karton				1.2	%

Raubex Group				1.1

Lewis Group				1.0

Garmin				1.0

Apollo Global Management LLC Cl. A				1.0

Expeditors International of Washington				1.0

Domino Printing Sciences				0.9

Stella-Jones				0.9

Randgold Resources ADR				0.9

WaterFurnace Renewable Energy				0.9


PORTFOLIO SECTOR BREAKDOWN % of Net Assets

Consumer Discretionary				24.0	%

Industrials				18.5

Financials				17.1

Information Technology				11.2

Materials				11.0

Health Care				6.7

Energy				2.9

Consumer Staples				2.7

Diversified Investment Companies				0.2

Cash and Cash Equivalents				5.7

Manager’s Discussion
The first half of 2013 was often challenging for non-U.S. equities. It was also a disappointing period for Royce Global Dividend Value Fund (RGD), which gained 2.0% for the year-to-date period ended June 30, 2013 versus a 6.7% increase for its small-cap benchmark, the Russell Global Small-Cap Index, for the same period. As was the case in 2012, the first quarter was a solidly bullish period for most stocks. Unlike 2012, however, non-U.S. equities generally had lower returns. Also unlike last year, RGD underperformed its benchmark by a considerable margin. The Fund gained 4.1% in the year’s opening quarter while the global small-cap index rose 8.6%. This left the Fund with substantial ground to make up versus the benchmark in the second quarter. The period was far more volatile, and we were unhappy that the portfolio was unable to better hold its value when share prices were falling from April through June. For the quarter as a whole, RGD fell 2.0% versus a decline of 1.7% for the benchmark.
The second-quarter correction affected stocks globally. It was spurred by anxieties about the slowed pace of growth and credit issues in China, declining markets and social unrest in emerging markets countries such as Brazil and Turkey, the by now perennial concerns over the fiscal health of certain eurozone nations, and the U.S. Federal Reserve’s announcement that it would begin to taper the pace of bond purchases later this year. These developments combined to drive stock prices lower, especially outside the U.S. Of course, these issues are not new, and all have solutions, yet their coming so close together between mid-May and mid-June clearly spooked many investors who remain understandably skittish in light of all that has happened since the financial crisis in 2008. After nicely outpacing the global small-cap index in the second half of 2012 (+15.8% versus +11.0%), the Fund’s underperformance in 2013 eroded some of its longer-term relative advantage. From our point of view dividends have always been a marker of quality in the smaller-capitalization space. They also typically can potentially provide a cushion against high volatility. This, however, has not been as evident as we would have liked for RGD since its inception at the end of 2010.
It may seem odd that non-dividend payers outperformed companies that pay them in the first half. With U.S. interest rates at zero, one might expect smaller dividend-paying companies to be more consistently in high demand. Yet over the last two-and-a-half years, greater numbers of investors have flocked to higher-yielding equities of lower quality, such as REITs, MLPs (master limited partnerships), and Utilities, and/or to companies that pay no dividends, carry sizable debt, and have low returns on invested capital. The potential for high growth and the desire

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

Apollo Global Management LLC Cl. A		0.37%

Western Digital		0.36

Nihon M&A Center		0.29

Tidewater		0.29

Nemetschek		0.27

¹ Includes dividends

Important Performance and Expense Information All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 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 redeemed. Shares redeemed within 180 days of purchase may be subject to a 2% redemption fee payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current month-end performance may be higher or lower than performance quoted and may be obtained at www.roycefunds.com. Gross operating expenses reflect total gross annual operating expenses and include management fees, 12b-1 distribution and service fees, other expenses, and acquired fund fees and expenses. Net operating expenses reflect contractual fee waivers and/or expense reimbursements. All expense information is reported as of the Fund’s most current prospectus. Royce & Associates has contractually agreed to waive its fees and/or reimburse operating expenses to the extent necessary to maintain the Fund’s net annual operating expenses, other than acquired fund fees and expenses, at or below 1.69% through April 30, 2014 and at or below 1.99% through April 30, 2023. Acquired fund fees and expenses reflect the estimated amount of the fees and expenses incurred indirectly by the Fund through its investments in mutual funds, hedge funds, private equity funds, and other investment companies. Regarding the two “Good Ideas” tables shown above, the sum of all contributors to, and all detractors from, performance for all securities in the portfolio would approximate the Fund’s year-to-date performance for 2013.

38 | The Royce Funds 2013 Semiannual Report to Shareholders

Performance and Portfolio Review

for high yield have outweighed other factors, such as those qualities that we hold dear—strong balance sheets, high returns on invested capital, strong cash flows, and, in many cases, growing dividends. While this has caused some frustration when reviewing recent relative returns, the situation has also created numerous opportunities for us to find better businesses—those that possess those key quality attributes we just listed. As a result, we think the portfolio is very well positioned for the more historically typical market we anticipate going forward, in which rising interest rates and a faster-growing, less Fed-dependent economy are likely to steer investors toward what we regard as better businesses.
All but one of the Fund’s eight equity sectors were positive in the first half. Materials was the only sector to finish the period in the red. The lion’s share of its net losses came from the metals & mining industry, which was the largest detractor among all of the Fund’s industry groups. Four of the portfolio’s five—and eight of its ten—largest detractors came from this industry, and most were precious metals mining companies. While we liked the attractive valuations of many miners at the end of June, our estimate of each company’s fundamentals and the likelihood of a strong rebound when the industry recovers from falling commodity prices and rising operations costs guided our decisions. We chose to hold a position in Randgold Resources (a top-ten holding at the end of June), sold our shares of Hochschild Mining and Hecla Mining, and built our stake in Imdex, which provides drilling fluids and downhole survey instruments to the mining, oil and gas, water well, HDD, and civil engineering industries worldwide. We also added to our position in Sprott, a Canadian investment management company that saw its share price decline primarily due to its significant exposure to the precious metals and mining industry.
The Information Technology, Industrials, and Health Care sectors were the greatest contributors to performance for the period. At the industry level, capital markets led the advance along with pharmaceutical companies and electronic equipment, instruments & components stocks. Top-ten position Apollo Global Management was also the top performer for the period. The New York City-based company is a leading global asset manager that applies a contrarian, value-oriented investment style in private equity, credit-oriented capital markets, and real estate. Western Digital, headquartered in Lake Forest, CA, is the largest global manufacturer of hard disk drives. While the company was mostly a supplier to the desktop market until 2004, it has successfully expanded into cloud computing server farms and the notebook segment.

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


Randgold Resources ADR	-0.45%

Imdex	-0.41

Hochschild Mining	-0.39

Sprott	-0.31

Hecla Mining	-0.30

¹ Net of dividends

ROYCE GLOBAL DIVIDEND VALUE FUND VS. RUSSELL GLOBAL SMALL CAP Value of $10,000 Invested on 12/31/10

Includes reinvestment of distributions.

PORTFOLIO DIAGNOSTICS

Fund Net Assets		$8 million

Number of Holdings		154

Turnover Rate		49%

Average Market Capitalization¹		$1,217 million

Weighted Average P/E Ratio^2,3		13.9x

Weighted Average P/B Ratio²		2.0x

Symbol		RGVDX

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

PORTFOLIO COUNTRY BREAKDOWN^1,2 % of Net Assets

Hong Kong	11.3	%

United States	10.9

United Kingdom	10.7

Switzerland	8.0

Canada	6.7

South Africa	6.4

Japan	5.2

France	3.4

¹ Represents countries that are 3% or more of net assets.
² Securities are categorized by the country of their headquarters.

The Royce Funds 2013 Semiannual Report to Shareholders | 39

Royce International Micro-Cap Fund

AVERAGE ANNUAL TOTAL RETURNS Through 6/30/13

January–June 2013¹				-0.46	%

One-Year				8.56

Since Inception (12/31/10)				-4.67

ANNUAL EXPENSE RATIOS

Gross Operating Expenses				3.97	%

Net Operating Expenses				1.76

¹ Not annualized

CALENDAR YEAR TOTAL RETURNS

Year	RMI		Year	RMI

2012	13.6	%	2011	-21.5	%


TOP 10 POSITIONS % of Net Assets

Manutan International				1.7	%

Latchways				1.6

CB Industrial Product Holding				1.5

Semperit AG Holding				1.5

Makalot Industrial				1.5

Beter Bed Holding				1.5

Stallergenes				1.4

Ekornes				1.4

Clarkson				1.3

Elektrobudowa				1.3


PORTFOLIO SECTOR BREAKDOWN % of Net Assets

Consumer Discretionary				26.2	%

Industrials				22.4

Information Technology				13.0

Health Care				12.8

Materials				10.3

Financials				5.8

Energy				3.2

Consumer Staples				2.6

Cash and Cash Equivalents				3.7

Manager’s Discussion
From the standpoint of the international markets, the first half of 2013 exhibited many of the same performance characteristics as comparable periods in 2012 and 2011. Early gains gave way to a more volatile period as investors weighed developing economic risks mostly around events in the emerging world. China was back in the spotlight as growing credit risks around an increasingly overheated real estate market brought swift action by that country’s central bank to improve and gain greater control over lending standards. Volatility in global bond markets also gave investors pause as a potential change to slow the pace of the U.S. Federal Reserve’s monthly bond purchases (quantitative easing) was introduced and reinforced in May and June, sending yields 100 basis points higher on the 10-year Treasury note.
     In this often topsy-turvy environment, Royce International Micro-Cap Fund (RMI) lost 0.5% for the year-to-date period ended June 30, 2013, trailing its international smallcap benchmark, the Russell Global ex-U.S. Small Cap Index, which was up 1.8% for the same period. RMI’s selection universe is quite large and diverse, incorporating thousands of companies and more than $2.7 trillion in aggregate market capitalization. The characteristics of this evergreen universe have strong intellectual appeal given the inherent inefficiencies and lack of institutional resources dedicated to exploring it, attributes that originally attracted us to this segment of the U.S. equity market more than two decades ago.
     During the more bullish first quarter, RMI’s eclectic mix of what we deem to be high quality micro-cap companies struggled to keep pace with the solid gains exhibited by its benchmark index, which rose 6.5% over the period versus the Fund’s 2.2% advance. This contrasted with the more volatile second quarter in which international markets diverged meaningfully from the generally positive trends experienced in the U.S. RMI benefited from the margin of safety discipline, a hallmark of the Royce investment approach, by falling a modest 2.6% compared to the relevant Russell index, which lost 4.5%. While not satisfied with the half-year result, we were pleased to see the Fund preserve its value during this challenging period.
     Five of the Fund’s eight equity sectors generated positive performance for the first half of 2013, led by Industrials, Information Technology, and Health Care. Consumer Discretionary was also a contributor, meaning that the portfolio got solid performance from both cyclical and more traditionally defensive segments of the market. What most hampered performance, then, were

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

Nihon M&A Center		0.60%

Makalot Industrial		0.44

Kossan Rubber Industries		0.34

Clarkson		0.32

Clinigen Group		0.31

¹ Includes dividends

Important Performance and Expense Information All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 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 redeemed. Shares redeemed within 180 days of purchase may be subject to a 2% redemption fee payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current month-end performance may be higher or lower than performance quoted and may be obtained at www.roycefunds.com. Gross operating expenses reflect total gross annual operating expenses and include management fees, 12b-1 distribution and service fees, other expenses, and acquired fund fees and expenses. Net operating expenses reflect contractual fee waivers and/or expense reimbursements. All expense information is reported as of the Fund’s most current prospectus. Royce & Associates has contractually agreed to waive its fees and/or reimburse operating expenses, to the extent necessary to maintain the Fund’s net annual operating expenses other than acquired fund fees and expenses, at or below 1.69% through April 30, 2014 and at or below 1.99% though April 30, 2023. Expenses are estimated for the current fiscal year. Acquired fund fees and expenses reflect the estimated amount of the fees and expenses incurred indirectly by the Fund through its investments in mutual funds, hedge funds, private equity funds, and other investment companies. Regarding the two “Good Ideas” tables shown above, the sum of all contributors to, and all detractors from, performance for all securities in the portfolio would approximate the Fund’s year-to-date performance for 2013.

40 | The Royce Funds 2013 Semiannual Report to Shareholders

Performance and Portfolio Review

holdings in Materials, which posted outsized net losses in the first half. The Energy sector also detracted, though far more modestly, as natural resource and commodity-oriented businesses reacted to the growing economic headwinds buffeting emerging markets, especially China and Brazil. At the industry level, results were broadly positive, with professional services, software, and pharmaceuticals the top gainers. Not surprisingly given the sector results, the metals & mining industry led detractors by a sizable margin followed by net losses for diversified consumer services companies and energy equipment & services stocks.
Companies in the metals & mining industry accounted for all of the Fund’s five largest detractors for the period as well as seven of its top 10 and 10 of its top 20. Most of the Fund’s net losses in the metals & mining industry came from precious metals miners. Several factors had a negative effect on these businesses in the first half. Gold and silver prices declined significantly and mine operating costs continued to climb, dramatically affecting margins. Warren Buffett once said, “Only when the tide goes out do you discover who’s been swimming naked.” For too many precious metals mining businesses, it has often looked as if the tide was never coming back in. This drove many companies’ valuations to what we regard as rock-bottom levels that have not been reached since the lows of late 2008-early 2009. We built our position in Australian gold producer Evolution Mining, which had an outsized negative effect on first-half results. We also added to our stake in two other Australian businesses—Imdex, which provides drilling fluids and downhole survey instruments to the mining, oil and gas, water well, HDD, and civil engineering industries worldwide, and junior gold producer Troy Resources. We chose to part ways with French drilling services business Foraco International and Australian gold producer Kingsrose Mining.
Tokyo-based Nihon M&A Center provides M&A advisory and other related services to small- and medium-sized businesses. Growing revenues and earnings helped draw investors to its stock. We were intrigued by its niche in Japan, a country in which approximately 150,000 companies are said to lack succession plans, which represents a great opportunity for Nihon M&A. We reduced our position as its share price soared past our sell targets. Makalot Industrial is true to its name, making a large variety of garments, including underwear, sleepwear, skirts, dresses, shirts, pants, shorts, etc. and exporting most of its products to the U.S. Based in Taiwan, the company enjoyed strong sales and revenue growth, taking advantage of lower production costs outside of China in Southeast Asia. It also boasts a solid dividend. We took some gains in early July 2013.

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


Evolution Mining	-0.91%

Imdex	-0.59

Troy Resources	-0.54

Foraco International	-0.47

Kingsrose Mining	-0.41

¹ Net of dividends

ROYCE INTERNATIONAL MICRO-CAP FUND VS. RUSSELL GLOBAL EX-U.S. SMALL CAP Value of $10,000 Invested on 12/31/10

Includes reinvestment of distributions.

PORTFOLIO DIAGNOSTICS

Fund Net Assets		$4 million

Number of Holdings		115

Turnover Rate		25%

Average Market Capitalization¹		$346 million

Weighted Average P/E Ratio^2,3		11.2x

Weighted Average P/B Ratio²		1.5x

Symbol		ROIMX

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

PORTFOLIO COUNTRY BREAKDOWN^1,2 % of Net Assets

France	10.7	%

Hong Kong	9.7

United Kingdom	9.6

Japan	8.3

India	6.0

Germany	4.6

Malaysia	4.4

South Africa	4.2

Switzerland	4.1

¹ Represents countries that are 3% or more of net assets.
² Securities are categorized by the country of their headquarters.

The Royce Funds 2013 Semiannual Report to Shareholders | 41

Royce International Premier Fund

AVERAGE ANNUAL TOTAL RETURNS Through 6/30/13

January–June 2013¹				4.60	%

One-Year				18.86

Since Inception (12/31/10)				2.92

ANNUAL EXPENSE RATIOS

Gross Operating Expenses				3.54	%

Net Operating Expenses				1.69

¹ Not annualized

CALENDAR YEAR TOTAL RETURNS

Year	RIP		Year	RIP

2012	23.4	%	2011	-16.8	%


TOP 10 POSITIONS % of Net Assets

Daphne International Holdings				2.9	%

Stallergenes				2.9

Mayr-Melnhof Karton				2.8

Lewis Group				2.7

Kaba Holding				2.7

Stella International Holdings				2.6

Domino Printing Sciences				2.5

Forbo Holding				2.5

Santen Pharmaceutical				2.5

FamilyMart				2.4


PORTFOLIO SECTOR BREAKDOWN % of Net Assets

Health Care				27.2	%

Consumer Discretionary				26.4

Industrials				17.9

Information Technology				11.1

Financials				7.2

Materials				5.5

Consumer Staples				4.0

Cash and Cash Equivalents				0.7

Manager’s Discussion
With all the negative headlines surrounding the global economy and international markets over the course of the first half of 2013, we were quite pleased with the results of Royce International Premier Fund (RIP). Tasked with uncovering and investing in the highest quality and most durable small-cap businesses we can find outside the United States, RIP invests in a relatively concentrated portfolio of our highest conviction ideas sourced from our global research efforts. The Fund gained 4.6% for the year-to-date period ended June 30, 2013, nicely ahead of its small-cap benchmark, Russell Global ex-US Small Cap Index, which advanced 1.8% for the same period.
     The volatile first half of 2013 saw a return of the same troubling economic headlines that had plagued the first halves of the preceding three years. An overheated real estate market in China stole many of the headlines as policy makers there sought to cool speculation through surprising credit restrictions that had the unintended consequence of rejuvenating fears of an economic slowdown. Civil unrest in developing nations such as Turkey and Brazil also challenged the underpinnings of the emerging market’s secular growth thesis. The sharp rise in the yield of the 10-year U.S. Treasury note during May and June provided yet another headwind as Ben Bernanke and the U.S. Federal Reserve began to guide financial markets toward a likely reduction in bond purchases—the mainstay of the various quantitative easing programs.
     During the bullish first quarter, RIP’s portfolio of what we deem to be high-quality companies delivered solid absolute returns—our preferred measure—while lagging on a relative basis. Gaining 4.1% in the first quarter, RIP trailed its benchmark, which rose 6.5%. As the global investment landscape became more volatile in the second quarter, RIP advanced 0.5% compared to a 4.5% decline for the benchmark index, highlighting the defensive and high-quality attributes of the Fund’s positions.
     We were quite pleased that five of the Fund’s seven equity sectors generated positive performance during the first half, led notably by Health Care, Information Technology, and Industrials. It was also satisfying to see portfolios achieve solid performance from both the cyclical and more traditionally defensive areas of the market. Only the Consumer Discretionary sector had a noticeable negative contribution, with the Materials sector essentially flat for the period. At the industry level results were also broadly positive, with pharmaceuticals, internet software & services, and health care equipment & supplies being the top gainers. Diversified consumer services, textiles, apparel & luxury goods, and specialty retail were the biggest detractors among a short list of industries that posted net losses.

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

Kakaku.com		1.29%

Stallergenes		0.62

Straumann Holding		0.54

M3		0.49

Recordati		0.47

¹ Includes dividends

Important Performance and Expense Information All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 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 redeemed. Shares redeemed within 180 days of purchase may be subject to a 2% redemption fee payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current month-end performance may be higher or lower than performance quoted and may be obtained at www.roycefunds.com. Gross operating expenses reflect total gross annual operating expenses and include management fees, 12b-1 distribution and service fees, and other expenses. Net operating expenses reflect contractual fee waivers and/or expense reimbursements. All expense information is reported as of the Fund’s most current prospectus. Royce & Associates has contractually agreed to waive its fees and/or reimburse operating expenses to the extent necessary to maintain the Fund’s net annual operating expenses, at or below 1.69% through April 30, 2014 and at or below 1.99% through April 30, 2023. Regarding the two “Good Ideas” tables shown above, the sum of all contributors to, and all detractors from, performance for all securities in the portfolio would approximate the Fund’s year-to-date performance for 2013.

42 | The Royce Funds 2013 Semiannual Report to Shareholders

Performance and Portfolio Review

Tokyo-based Kakaku.com had a pleasantly outsized effect on first-half results. The company provides websites that offer price comparison services and product information on restaurants, hotels, and consumer appliances, among other services. Its shares advanced in the first half as an increase in the number of PC and smartphone users, a move into profitability in its travel & real estate segment, and positive momentum in its restaurant segment helped spark impressive earnings growth. We reduced our position as its stock price climbed. Stallergenes develops and markets immunotherapy pharmaceuticals for respiratory allergies. It is the second-largest global player in this market, with a nearly 30% market share. It benefited from a number of positive developments in the period, including the FDA’s announcement that it will examine the company’s application for its Oralair grass pollen tablet (this would be a significant step towards market penetration in the all-important U.S. market), positive corporate developments that will assist in the hoped-for future commercialization of Oralair in the U.S., and the announcement of further profitable growth that took place in fiscal 2012. The company also held a comprehensive and well-attended investor day in France that helped to increase investor awareness of this still under-researched company. Recordati, a pharmaceutical business based in Milan with a growing global reach, was another notable performer during the period. The company produced notable growth over the last two fiscal years that were reported in the first half. Investors seemed to appreciate its increasing revenues from Russia, Turkey, and Eastern Europe, markets where demand for pharmaceutical products is growing in the high single-digits.
We used the sliding stock price of Daphne International Holdings as an opportunity to build our position in this Chinese footwear maker and retailer, which sells Aerosole shoes in China. Adding shares between March and June, we like the company’s long-term potential based on its strong management and market position, though we recognize that this investment may require patience in the short run. The general slowdown in the Chinese economy has taken its toll on Daphne’s business. Lower levels of consumer spending in particular have caused sales and revenues to slump. It was the Fund’s largest position at the end of June. MegaStudy, a South Korean educational firm that specializes in online tutoring and test preparation, was the second largest detractor in the first half as high school and middle school online business experienced stagnating enrollment trends.

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


Daphne International Holdings	-0.88%

MegaStudy	-0.71

Lewis Group	-0.66

Semperit AG Holding	-0.28

Green Cross	-0.21

¹ Net of dividends

ROYCE INTERNATIONAL PREMIER FUND VS. RUSSELL GLOBAL EX-U.S. SMALL CAP Value of $10,000 Invested on 12/31/10

Includes reinvestment of distributions.

PORTFOLIO DIAGNOSTICS

Fund Net Assets		$7 million

Number of Holdings		51

Turnover Rate		16%

Average Market Capitalization¹		$1,664 million

Weighted Average P/E Ratio^2,3		16.4x

Weighted Average P/B Ratio²		2.8x

Symbol		RYIPX

¹ Geometric Average. This weighted calculation uses each portfolio holding’s market cap in a way designed to not skew the effect of very large or small holdings; instead, it aims to better identify the portfolio’s center, which Royce believes offers a more accurate measure of average market cap than a simple mean or median.
² Harmonic Average. This weighted calculation evaluates a portfolio as if it were a single stock and measures it overall. It compares the total market value of the portfolio to the portfolio’s share in the earnings or book value, as the case may be, of its underlying stocks.
³ The Fund’s P/E ratio calculation excludes companies with zero or negative earnings (0% of portfolio holdings as of 6/30/13).

PORTFOLIO COUNTRY BREAKDOWN^1,2 % of Net Assets

United Kingdom	19.5	%

Switzerland	17.3

Japan	10.8

France	8.8

Germany	7.1

Austria	5.3

Italy	4.7

Hong Kong	4.7

South Korea	3.8

¹ Represents countries that are 3% or more of net assets.
² Securities are categorized by the country of their headquarters.

The Royce Funds 2013 Semiannual Report to Shareholders | 43

Schedules of Investments

Royce Select Fund I

	SHARES		VALUE
COMMON STOCKS – 93.9%

Consumer Discretionary – 7.9%
Auto Components - 2.1%
Drew Industries	13,796	$	542,459
Gentex Corporation	15,900		366,495

			908,954

Automobiles - 1.5%
Thor Industries	13,100		644,258

Diversified Consumer Services - 0.5%
Sotheby’s	5,792		219,575

Household Durables - 1.2%
^†Harman International Industries	10,100		547,420

Specialty Retail - 2.0%
Ascena Retail Group ¹	49,200		858,540

Textiles, Apparel & Luxury Goods - 0.6%
Columbia Sportswear	4,121		258,180

Total (Cost $2,481,584)			3,436,927

Consumer Staples – 1.4%
Food Products - 1.4%
Cal-Maine Foods	12,978		603,607

Total (Cost $371,741)			603,607

Energy – 13.4%
Energy Equipment & Services - 13.4%
CARBO Ceramics	5,400		364,122
Helmerich & Payne	19,900		1,242,755
Oil States International ¹	10,900		1,009,776
Pason Systems	45,400		825,376
^†SEACOR Holdings	5,699		473,302
Superior Energy Services ¹	18,400		477,296
^†TGS-NOPEC Geophysical	16,400		476,528
Trican Well Service	4,000		53,171
Unit Corporation ¹	21,650		921,857

Total (Cost $4,278,452)			5,844,183

Financials – 8.7%
Capital Markets - 6.0%
Federated Investors Cl. B	46,500		1,274,565
Lazard Cl. A	23,800		765,170
SEI Investments	21,100		599,873

			2,639,608

Insurance - 2.7%
Alleghany Corporation ¹	3,055		1,171,012

Total (Cost $2,872,513)			3,810,620

Health Care – 5.9%
Biotechnology - 1.2%
^†Myriad Genetics ¹	19,700		529,339

Health Care Providers & Services - 0.5%
VCA Antech ¹	9,110		237,680

Life Sciences Tools & Services - 3.1%
Bio-Rad Laboratories Cl. A ¹	7,700		863,940
Techne Corporation	6,800		469,744

			1,333,684

Pharmaceuticals - 1.1%
^†Jazz Pharmaceuticals ¹	6,700		460,491

Total (Cost $2,281,000)			2,561,194

Industrials – 22.8%
Aerospace & Defense - 1.6%
^†Cubic Corporation	14,500		697,450

Commercial Services & Supplies - 1.9%
Tetra Tech ¹	36,000		846,360

Electrical Equipment - 6.3%
AZZ	16,910		652,050
^†EnerSys	11,300		554,152
Global Power Equipment Group	41,518		669,270
GrafTech International ¹	121,759		886,405

			2,761,877

Machinery - 7.7%
Astec Industries	10,934		374,927
Columbus McKinnon ¹	16,500		351,780
Kennametal	16,700		648,461
Lincoln Electric Holdings	5,450		312,122
^†Timken Company (The)	12,100		680,988
Valmont Industries	4,900		701,141
Wabtec Corporation	5,168		276,126

			3,345,545

Professional Services - 4.4%
CRA International ¹	24,279		448,433
^†ICF International ¹	14,500		456,895
Robert Half International	11,728		389,722
Towers Watson & Company Cl. A	4,900		401,506
TrueBlue ¹	10,287		216,541

			1,913,097

Trading Companies & Distributors - 0.9%
MSC Industrial Direct Cl. A	4,952		383,582

Total (Cost $8,608,893)			9,947,911

Information Technology – 22.6%
Communications Equipment - 1.7%
ADTRAN	30,300		745,683

Electronic Equipment, Instruments & Components - 5.7%
Coherent	4,281		235,755
Dolby Laboratories Cl. A	12,600		421,470
FARO Technologies ¹	11,200		378,784
FEI Company	2,552		186,270
IPG Photonics	11,790		716,007
Rofin-Sinar Technologies ¹	22,164		552,770

			2,491,056

IT Services - 1.1%
Sykes Enterprises ¹	30,500		480,680

Office Electronics - 0.9%
Zebra Technologies Cl. A ¹	8,600		373,584

44 | The Royce Funds 2013 Semiannual Report to Shareholders

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

June 30, 2013 (unaudited)

	SHARES		VALUE
Information Technology (continued)
Semiconductors & Semiconductor Equipment - 13.2%
Aixtron ADR ¹	39,807	$	667,961
ATMI ¹	37,500		886,875
Cabot Microelectronics ¹	15,791		521,261
Integrated Silicon Solution ¹	78,000		854,880
^†MKS Instruments	34,800		923,592
Nanometrics ¹	50,100		734,967
Teradyne ¹	39,000		685,230
Veeco Instruments ¹	13,300		471,086

			5,745,852

Total (Cost $8,577,076)			9,836,855

Materials – 8.3%
Chemicals - 4.0%
^†Innospec	12,400		498,232
Intrepid Potash	11,858		225,895
LSB Industries ¹	8,751		266,118
Minerals Technologies	18,840		778,846

			1,769,091

Metals & Mining - 4.3%
Major Drilling Group International	51,700		351,975
Reliance Steel & Aluminum	20,400		1,337,424
Sims Metal Management ADR	22,170		167,605

			1,857,004

Total (Cost $2,983,064)			3,626,095

Miscellaneous² – 2.9%
Total (Cost $1,179,615)			1,238,558

TOTAL COMMON STOCKS
(Cost $33,633,938)			40,905,950

REPURCHASE AGREEMENT – 6.4%
Fixed Income Clearing Corporation,
0.01% dated 6/28/13, due 7/1/13, maturity value $2,801,002 (collateralized by obligations of various U.S. Government Agencies, 4.125% due 4/15/14, valued at $2,861,756) (Cost $2,801,000)			2,801,000

TOTAL INVESTMENTS – 100.3%
(Cost $36,434,938)			43,706,950

LIABILITIES LESS CASH
AND OTHER ASSETS – (0.3)%			(111,764	)


NET ASSETS – 100.0%		$	43,595,186

Royce Micro-Cap Discovery Fund

	SHARES		VALUE
COMMON STOCKS – 96.5%

Consumer Discretionary – 10.8%
Auto Components - 1.5%
Standard Motor Products	2,200	$	75,548

Diversified Consumer Services - 2.1%
Capella Education ¹	1,600		66,640
Corinthian Colleges ¹	17,800		39,872

			106,512

Hotels, Restaurants & Leisure - 1.1%
Ruby Tuesday ¹	6,000		55,380

Household Durables - 2.0%
Hooker Furniture	1,500		24,390
^†Lifetime Brands	6,000		81,480

			105,870

Leisure Equipment & Products - 2.1%
Arctic Cat	600		26,988
Johnson Outdoors Cl. A ¹	3,200		79,680

			106,668

Multiline Retail - 0.7%
Fred’s Cl. A	2,500		38,725

Specialty Retail - 1.3%
Stein Mart	4,900		66,885

Total (Cost $438,357)			555,588

Consumer Staples – 4.3%
Food & Staples Retailing - 1.1%
Village Super Market Cl. A	1,700		56,253

Food Products - 2.3%
Calavo Growers	2,200		59,818
John B. Sanfilippo & Son	3,000		60,480

			120,298

Household Products - 0.9%
Oil-Dri Corporation of America	1,700		46,699

Total (Cost $217,337)			223,250

Energy – 5.7%
Energy Equipment & Services - 2.9%
Matrix Service ¹	2,700		42,066
Natural Gas Services Group ¹	2,400		56,376
^†Newpark Resources ¹	4,800		52,752

			151,194

Oil, Gas & Consumable Fuels - 2.8%
Hallador Energy	3,200		25,760
TransGlobe Energy ¹	5,000		31,000
VAALCO Energy ¹	7,600		43,472
Warren Resources ¹	16,100		41,055

			141,287

Total (Cost $279,096)			292,481

Financials – 7.9%
Consumer Finance - 1.1%
Nicholas Financial	3,700		55,944

Diversified Financial Services - 0.7%
Resource America	4,200		35,700

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

The Royce Funds 2013 Semiannual Report to Shareholders | 45

Schedules of Investments

Royce Micro-Cap Discovery Fund (continued)

	SHARES		VALUE
Financials (continued)
Insurance - 6.1%
Baldwin & Lyons Cl. B	2,100	$	50,988
EMC Insurance Group	1,500		39,390
^†Employers Holdings	2,000		48,900
Maiden Holdings	6,100		68,442
National Western Life Insurance Cl. A	200		37,970
Safety Insurance Group	700		33,957
United Fire Group	1,400		34,762

			314,409

Total (Cost $369,391)			406,053

Health Care – 8.9%
Health Care Equipment & Supplies - 4.2%
Anika Therapeutics ¹	1,900		32,300
CryoLife	8,900		55,714
ICU Medical ¹	800		57,648
Invacare Corporation	4,000		57,440
Symmetry Medical ¹	1,500		12,630

			215,732

Health Care Providers & Services - 3.4%
Almost Family	1,900		36,100
^†Bio-Reference Laboratories ¹	2,400		69,000
National HealthCare	1,500		71,700

			176,800

Pharmaceuticals - 1.3%
Hi-Tech Pharmacal	960		31,872
SciClone Pharmaceuticals ¹	6,700		33,232

			65,104

Total (Cost $418,953)			457,636

Industrials – 16.0%
Aerospace & Defense - 2.4%
AeroVironment ¹	1,700		34,306
National Presto Industries	800		57,624
Sparton Corporation ¹	2,000		34,480

			126,410

Commercial Services & Supplies - 1.5%
^†Consolidated Graphics ¹	1,000		47,010
Intersections	3,200		28,064

			75,074

Construction & Engineering - 2.4%
Baker (Michael)	1,100		29,821
Comfort Systems USA	1,589		23,708
MYR Group ¹	3,600		70,020

			123,549

Machinery - 5.4%
Alamo Group	1,900		77,558
Lydall ¹	3,700		54,020
Miller Industries	5,020		77,207
Standex International	700		36,925
Twin Disc	1,400		33,180

			278,890

Professional Services - 4.3%
^†CDI Corporation	2,600		36,816
ICF International ¹	2,300		72,473
Korn/Ferry International ¹	3,000		56,220
TrueBlue ¹	2,600		54,730

			220,239

Total (Cost $763,119)			824,162

Information Technology – 25.3%
Communications Equipment - 6.1%
Bel Fuse Cl. B	1,000		13,450
Comtech Telecommunications	2,100		56,469
Globecomm Systems ¹	6,900		87,216
Oplink Communications ¹	3,800		66,006
TESSCO Technologies	3,400		89,760

			312,901

Computers & Peripherals - 1.6%
QLogic Corporation ¹	5,100		48,756
Xyratex	3,200		32,192

			80,948

Electronic Equipment, Instruments & Components - 2.5%
Daktronics	3,000		30,780
PC Connection	4,000		61,800
^†Richardson Electronics	3,000		35,220

			127,800

Internet Software & Services - 2.9%
Dice Holdings ¹	5,800		53,418
Digital River ¹	1,700		31,909
United Online	8,500		64,430

			149,757

IT Services - 4.4%
Computer Task Group	3,800		87,286
^†Forrester Research	1,000		36,690
Sykes Enterprises ¹	4,300		67,768
TeleTech Holdings ¹	1,600		37,488

			229,232

Semiconductors & Semiconductor Equipment - 3.4%
IXYS Corporation	6,600		72,996
Kulicke & Soffa Industries ¹	5,400		59,724
^†Volterra Semiconductor ¹	2,900		40,948

			173,668

Software - 4.4%
Actuate Corporation ¹	9,500		63,080
American Software Cl. A	10,200		88,638
ePlus	1,300		77,857

			229,575

Total (Cost $1,136,150)			1,303,881

Materials – 11.6%
Chemicals - 5.8%
^†Arabian American Development ¹	7,300		63,510
FutureFuel Corporation	4,900		69,433
Innospec	900		36,162

46 | The Royce Funds 2013 Semiannual Report to Shareholders

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

June 30, 2013 (unaudited)

	SHARES		VALUE
Materials (continued)
Chemicals (continued)
KMG Chemicals	3,200	$	67,520
Schulman (A.)	1,400		37,548
Stepan Company	500		27,805

			301,978

Construction Materials - 0.7%
United States Lime & Minerals ¹	700		36,575

Metals & Mining - 3.8%
Endeavour Silver ¹	3,900		13,377
Haynes International	1,200		57,444
Materion Corporation	3,200		86,688
Nevsun Resources	13,500		39,825

			197,334

Paper & Forest Products - 1.3%
Glatfelter	2,600		65,260

Total (Cost $519,827)			601,147

Telecommunication Services – 1.2%
Diversified Telecommunication Services - 1.2%
^†Premiere Global Services ¹	5,000		60,350

Total (Cost $48,334)			60,350

Miscellaneous² – 4.8%
Total (Cost $259,863)			246,885

TOTAL COMMON STOCKS
(Cost $4,450,427)			4,971,433

REPURCHASE AGREEMENT – 3.3%
Fixed Income Clearing Corporation,
0.01% dated 6/28/13, due 7/1/13, maturity value $170,000 (collateralized by obligations of various U.S. Government Agencies, 0.30% due 12/11/13, valued at $175,219) (Cost $170,000)			170,000

TOTAL INVESTMENTS – 99.8%
(Cost $4,620,427)			5,141,433

CASH AND OTHER ASSETS
LESS LIABILITIES – 0.2%			9,652


NET ASSETS – 100.0%		$	5,151,085

Royce Financial Services Fund

	SHARES		VALUE
COMMON STOCKS – 84.0%

Capital Markets - 48.9%
Affiliated Managers Group ¹	1,500	$	245,910
AllianceBernstein Holding L.P.	14,500		301,890
Apollo Global Management LLC Cl. A	22,000		530,200
^†Artisan Partners Asset Management ¹	15,000		748,650
Ashmore Group	70,000		365,925
Banque Privee Edmond de Rothschild	3		52,215
Blackstone Group L.P.	16,300		343,278
Citadel Capital ¹	150,000		52,996
Coronation Fund Managers	62,000		393,574
Cowen Group ¹	83,000		240,700
Daewoo Securities	3,800		33,440
Diamond Hill Investment Group	2,500		212,625
Egyptian Financial Group-Hermes Holding
Company ¹	211,875		223,667
Federated Investors Cl. B	11,900		326,179
Financial Engines	6,800		310,012
Invesco	13,800		438,840
Investec	8,500		53,483
IOOF Holdings	11,528		77,596
Jupiter Fund Management	105,000		462,650
KKR & Co. L.P.	18,300		359,778
Lazard Cl. A	17,100		549,765
Manning & Napier	15,800		280,608
MVC Capital	3,800		47,842
Northern Trust	8,400		486,360
Oaktree Capital Group LLC	4,700		246,985
Och-Ziff Capital Management Group LLC Cl. A	15,300		159,732
Oppenheimer Holdings Cl. A	11,500		218,960
Partners Group Holding	1,000		270,764
Raymond James Financial	5,100		219,198
Reinet Investments ¹	5,500		98,151
Samsung Securities	1,791		72,296
^†Schwab (Charles)	18,800		399,124
SEI Investments	18,400		523,112
SHUAA Capital ¹	580,000		107,378
^†Silvercrest Asset Management Group Cl. A ¹	24,500		294,000
Sprott	117,500		312,827
State Street	8,500		554,285
Stifel Financial ¹	6,073		216,624
T. Rowe Price Group	3,500		256,025
TD Ameritrade Holding Corporation	15,500		376,495
Tokai Tokyo Financial Holdings	9,400		64,069
U.S. Global Investors Cl. A	178,300		376,213
UOB-Kay Hian Holdings	95,000		122,919
Value Partners Group	566,000		305,037
Vontobel Holding	3,000		92,425
Waddell & Reed Financial Cl. A	5,900		256,650
Westwood Holdings Group	5,300		227,476
WisdomTree Investments ¹	46,000		532,220

Total (Cost $10,986,300)			13,441,148

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

The Royce Funds 2013 Semiannual Report to Shareholders | 47

Schedules of Investments

Royce Financial Services Fund (continued)

	SHARES		VALUE
Closed-End Funds - 0.6%
RIT Capital Partners	8,500	$	149,965

Total (Cost $153,505)			149,965

Commercial Banks - 3.3%
BLOM Bank GDR	8,000		68,000
BOK Financial	4,100		262,605
First Citizens BancShares Cl. A	1,900		364,895
First Republic Bank	5,600		215,488

Total (Cost $753,374)			910,988

Consumer Finance - 2.9%
Credit Acceptance ¹	848		89,082
Regional Management ¹	18,200		455,000
World Acceptance ¹	3,000		260,820

Total (Cost $414,103)			804,902

Diversified Financial Services - 8.5%
^†Bolsa Mexicana de Valores	110,000		273,526
Bolsas y Mercados Espanoles	4,000		97,962
Hellenic Exchanges	36,000		280,219
Interactive Brokers Group	12,800		204,416
^†Japan Exchange Group	3,500		353,600
Leucadia National	9,801		256,982
Moody’s Corporation	6,000		365,580
MSCI Cl. A ¹	2,800		93,156
RHJ International ¹	10,000		47,120
Singapore Exchange	25,000		138,659
Warsaw Stock Exchange	19,000		217,636

Total (Cost $2,048,866)			2,328,856

Insurance - 6.5%
Brown & Brown	2,600		83,824
E-L Financial	400		241,514
First American Financial	5,000		110,200
Greenlight Capital Re Cl. A ¹	9,000		220,770
Marsh & McLennan	7,400		295,408
Platinum Underwriters Holdings	5,500		314,710
RLI Corp.	1,100		84,051
State Auto Financial	11,000		199,870
Willis Group Holdings	6,100		248,758

Total (Cost $1,313,031)			1,799,105

IT Services - 3.7%
^†Broadridge Financial Solutions	12,800		340,224
MasterCard Cl. A	700		402,150
Vantiv Cl. A ¹	10,000		276,000

Total (Cost $634,865)			1,018,374

Media - 1.3%
Morningstar	4,600		356,868

Total (Cost $181,189)			356,868

Professional Services - 3.0%
Towers Watson & Company Cl. A	6,500		532,610
Verisk Analytics Cl. A ¹	5,100		304,470

Total (Cost $612,812)			837,080

Real Estate Management & Development - 1.2%
Kennedy-Wilson Holdings	19,676		327,409

Total (Cost $186,246)			327,409

Software - 2.5%
Fair Isaac	7,400		339,142
^†SimCorp	12,000		356,015

Total (Cost $421,695)			695,157

Trading Companies & Distributors - 1.6%
Air Lease Cl. A	15,700		433,163

Total (Cost $356,874)			433,163

TOTAL COMMON STOCKS
(Cost $18,062,860)			23,103,015

REPURCHASE AGREEMENT – 18.3%
Fixed Income Clearing Corporation,
0.01% dated 6/28/13, due 7/1/13, maturity value $5,045,004 (collateralized by obligations of various U.S. Government Agencies, 0.30% due 12/11/13, valued at $5,146,425) (Cost $5,045,000)			5,045,000

TOTAL INVESTMENTS – 102.3%
(Cost $23,107,860)			28,148,015

LIABILITIES LESS CASH
AND OTHER ASSETS – (2.3)%			(631,319	)


NET ASSETS – 100.0%		$	27,516,696

48 | The Royce Funds 2013 Semiannual Report to Shareholders

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

June 30, 2013 (unaudited)

Royce Select Fund II

	SHARES		VALUE
COMMON STOCKS – 89.9%

Consumer Discretionary – 15.0%
Auto Components - 3.0%
Drew Industries ³	1,201	$	47,223
Minth Group	16,900		26,583
^†Selamat Sempurna	221,200		59,061

			132,867

Distributors - 1.0%
^†Core-Mark Holding Company	700		44,450

Household Durables - 1.0%
^†Lifetime Brands	3,300		44,814

Media - 1.8%
IMAX Corporation ¹	1,400		34,804
^†Media Prima	49,200		43,602

			78,406

Multiline Retail - 1.1%
New World Department Store China	91,500		46,245

Specialty Retail - 6.0%
^†Destination Maternity	2,900		71,340
^†Lewis Group	5,600		35,690
Luk Fook Holdings (International)	6,400		14,853
^†Padini Holdings	59,700		35,713
Signet Jewelers ³	900		60,687
Stage Stores	300		7,050
^†USS	300		38,082

			263,415

Textiles, Apparel & Luxury Goods - 1.1%
Daphne International Holdings	58,600		50,092

Total (Cost $603,676)			660,289

Consumer Staples – 6.4%
Food & Staples Retailing - 1.8%
FamilyMart	1,900		81,034

Food Products - 4.6%
^†Amira Nature Foods ¹	7,100		59,640
First Resources	68,100		95,367
SunOpta ¹	6,200		47,058

			202,065

Total (Cost $275,560)			283,099

Energy – 4.9%
Energy Equipment & Services - 4.9%
Helmerich & Payne ³	890		55,580
RPC ³	3,200		44,192
TGS-NOPEC Geophysical	2,200		63,925
Total Energy Services	3,800		52,572

Total (Cost $187,907)			216,269

Financials – 8.2%
Capital Markets - 5.6%
Ashmore Group	5,700		29,797
Federated Investors Cl. B ³	3,600		98,676
Lazard Cl. A	600		19,290
Sprott	13,100		34,877
^†Westwood Holdings Group	1,500		64,380

			247,020

Real Estate Management & Development - 2.6%
E-House China Holdings ADR ³	10,600		46,004
Midland Holdings	174,600		65,283

			111,287

Total (Cost $449,986)			358,307

Health Care – 4.9%
Health Care Equipment & Supplies - 4.3%
Analogic Corporation ³	1,300		94,679
Invacare Corporation	2,900		41,644
Kossan Rubber Industries	32,635		51,543

			187,866

Pharmaceuticals - 0.6%
Hi-Tech Pharmacal	861		28,585

Total (Cost $199,969)			216,451

Industrials – 14.0%
Aerospace & Defense - 1.2%
Astronics Corporation ^1,3	1,330		54,357

Building Products - 1.3%
WaterFurnace Renewable Energy	2,800		54,712

Commercial Services & Supplies - 1.2%
Team ^1,3	1,344		50,870

Electrical Equipment - 1.0%
Global Power Equipment Group	2,800		45,136

Machinery - 4.7%
Flow International ¹	16,892		62,331
Sarin Technologies	54,400		66,525
^†Semperit AG Holding	1,000		35,926
Sun Hydraulics ³	1,300		40,664

			205,446

Marine - 1.5%
Clarkson	2,500		64,678

Professional Services - 3.1%
Acacia Research-Acacia Technologies	3,500		78,225
^†Exponent	1,000		59,110

			137,335

Total (Cost $550,102)			612,534

Information Technology – 25.0%
Communications Equipment - 4.9%
CalAmp Corporation ¹	3,100		45,260
Oplink Communications ¹	3,282		57,008
Plantronics	1,200		52,704
Polycom ¹	5,800		61,132

			216,104

Computers & Peripherals - 0.9%
Western Digital	600		37,254

Electronic Equipment, Instruments & Components - 1.4%
DTS ^1,3	1,613		33,196

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

The Royce Funds 2013 Semiannual Report to Shareholders | 49

Schedules of Investments

Royce Select Fund II (continued)

	SHARES		VALUE
Information Technology (continued)
Electronic Equipment, Instruments & Components (continued)
Vishay Intertechnology ¹	2,100	$	29,169

			62,365

Internet Software & Services - 3.9%
Bankrate ^1,3	7,874		113,071
Stamps.com ¹	1,000		39,390
ValueClick ^1,3	805		19,867

			172,328

IT Services - 3.3%
Computer Task Group ³	2,700		62,019
Total System Services ³	3,300		80,784

			142,803

Semiconductors & Semiconductor Equipment - 8.0%
Kulicke & Soffa Industries ¹	5,000		55,300
MKS Instruments	2,388		63,378
Photronics ^1,3	5,840		47,070
RDA Microelectronics ADR	4,200		46,536
Silicon Motion Technology ADR	4,900		51,891
Teradyne ^1,3	5,050		88,729

			352,904

Software - 2.6%
Actuate Corporation ^1,3	8,200		54,448
American Software Cl. A ³	6,764		58,779

			113,227

Total (Cost $896,589)			1,096,985


Materials – 5.7%
Chemicals - 3.1%
Innophos Holdings	1,000		47,170
Minerals Technologies	2,100		86,814

			133,984

Metals & Mining - 2.6%
Haynes International	799		38,248
Hochschild Mining	6,000		14,172
Horsehead Holding Corporation ¹	3,400		43,554
Market Vectors Junior Gold Miners ETF ³	2,200		20,152

			116,126

Total (Cost $263,088)			250,110


Telecommunication Services – 1.2%
Diversified Telecommunication Services - 1.2%
^†Premiere Global Services ¹	4,400		53,108

Total (Cost $49,099)			53,108


Miscellaneous² – 4.6%
Total (Cost $218,241)			202,089


TOTAL COMMON STOCKS
(Cost $3,694,217)			3,949,241

REPURCHASE AGREEMENT – 14.3%
Fixed Income Clearing Corporation,
0.01% dated 6/28/13, due 7/1/13, maturity value $628,001 (collateralized by obligations of various U.S. Government Agencies, 0.30% due 12/11/13, valued at $640,800) (Cost $628,000)			628,000


TOTAL INVESTMENTS – 104.2%
(Cost $4,322,217)			4,577,241

LIABILITIES LESS CASH
AND OTHER ASSETS – (4.2)%			(186,015	)


NET ASSETS – 100.0%		$	4,391,226


SECURITIES SOLD SHORT
COMMON STOCKS – 2.7%
Diversified Investment Companies – 2.1%
Exchange Traded Funds - 2.1%
Direxion Daily Small Cap Bull 3X Shares	1,100	$	51,700
VelocityShares Daily Inverse VIX Short
Term ETN	2,100		41,874

Total (Proceeds $89,736)			93,574


Financials – 0.6%
Commercial Banks - 0.6%
Direxion Daily Financial Bear 3X Shares	700		23,520

Total (Proceeds $36,763)			23,520


FIXED INCOME – 0.6%
Government Bonds – 0.6%
iShares 20+ Year Treasury Bond ETF	250		27,610

Total (Proceeds $32,212)			27,610


TOTAL SECURITIES SOLD SHORT
(Proceeds $158,711)		$	144,704

50 | The Royce Funds 2013 Semiannual Report to Shareholders

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

June 30, 2013 (unaudited)

Royce Global Select Long/Short Fund

	SHARES		VALUE
COMMON STOCKS – 117.1%

Austria – 8.1%
Mayr-Melnhof Karton	3,500	$	376,307
Semperit AG Holding ³	13,500		484,994

Total (Cost $847,309)			861,301

Belgium – 2.5%
Sipef ³	4,000		268,765

Total (Cost $271,698)			268,765

Bermuda – 2.5%
^†Signet Jewelers ³	4,000		269,720

Total (Cost $275,329)			269,720

Brazil – 5.6%
Brasil Brokers Participacoes ³	110,000		322,898
Eternit ³	65,000		275,282

Total (Cost $699,200)			598,180

China – 2.4%
Daphne International Holdings	300,000		256,445

Total (Cost $320,683)			256,445

Finland – 2.7%
Nokian Renkaat ³	7,000		285,283

Total (Cost $266,291)			285,283

France – 2.3%
Societe Internationale de Plantations
d’Heveas ³	3,500		246,604

Total (Cost $284,243)			246,604

Germany – 1.1%
Carl Zeiss Meditec ³	3,000		99,576
Pfeiffer Vacuum Technology ³	181		18,754

Total (Cost $49,028)			118,330

Hong Kong – 8.9%
Luk Fook Holdings (International)	90,000		208,869
Media Chinese International	900,000		327,584
^†New World Department Store China	325,000		164,259
Value Partners Group	450,000		242,520

Total (Cost $1,062,153)			943,232

India – 6.7%
Graphite India	200,000		247,370
Maharashtra Seamless ³	70,000		241,481
^†McLeod Russel India ³	45,000		219,529

Total (Cost $1,148,623)			708,380

Italy – 3.1%
Recordati ³	30,000		332,897

Total (Cost $203,669)			332,897

Japan – 18.8%
EPS Corporation ³	245		272,716
FamilyMart ³	10,000		426,497
MISUMI Group ³	9,000		247,459
Moshi Moshi Hotline ³	22,500		280,853
Nihon M&A Center ³	2,500		139,393
Santen Pharmaceutical ³	7,000		301,371
USS ³	2,600		330,047

Total (Cost $1,586,001)			1,998,336

Jersey – 1.8%
Randgold Resources ADR ³	3,000		192,150

Total (Cost $217,267)			192,150

Mexico – 5.0%
Fresnillo ³	22,500		301,832
Industrias Bachoco ADR ³	6,500		225,550

Total (Cost $639,170)			527,382

Norway – 5.5%
Ekornes ³	20,000		319,376
^†Spectrum	12,000		95,615
TGS-NOPEC Geophysical ³	6,000		174,340

Total (Cost $545,579)			589,331

Singapore – 1.5%
^†ComfortDelGro Corporation	110,000		159,251

Total (Cost $168,382)			159,251

South Africa – 8.5%
Adcock Ingram Holdings ³	45,000		295,901
Lewis Group ³	60,000		382,396
Raubex Group	100,000		220,535

Total (Cost $1,142,612)			898,832

South Korea – 3.1%
MegaStudy ³	6,000		324,154

Total (Cost $737,850)			324,154

Switzerland – 1.4%
Partners Group Holding ³	550		148,920

Total (Cost $49,594)			148,920

Turkey – 2.8%
Koza Altin Isletmeleri ³	6,000		72,795
Mardin Cimento Sanayii ³	100,000		228,133

Total (Cost $571,867)			300,928

United Kingdom – 14.0%
Ashmore Group ³	60,000		313,650

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

The Royce Funds 2013 Semiannual Report to Shareholders | 51

Schedules of Investments

Royce Global Select Long/Short Fund (continued)

	SHARES		VALUE
United Kingdom (continued)
^†Consort Medical	10,000	$	126,619
Domino Printing Sciences ³	33,500		317,939
EnQuest ¹	160,000		287,642
Hochschild Mining ³	70,000		165,342
Jupiter Fund Management ³	45,000		198,279
Spirax-Sarco Engineering ³	2,001		81,777

Total (Cost $1,455,098)			1,491,248


United States – 8.8%
^†Cubic Corporation ³	4,500		216,450
Dolby Laboratories Cl. A ³	6,500		217,425
Helmerich & Payne ³	4,000		249,800
Myriad Genetics ^1,3	9,500		255,265

Total (Cost $880,269)			938,940


TOTAL COMMON STOCKS
(Cost $13,421,915)			12,458,609


REPURCHASE AGREEMENT – 3.0%
Fixed Income Clearing Corporation,
0.01% dated 6/28/13, due 7/1/13, maturity value $315,000 (collateralized by obligations of various U.S. Government Agencies, 0.125% due 12/31/13, valued at $325,000) (Cost $315,000)			315,000


TOTAL INVESTMENTS – 120.1%
(Cost $13,736,915)			12,773,609

LIABILITIES LESS CASH
AND OTHER ASSETS – (20.1)%			(2,137,886	)


NET ASSETS – 100.0%		$	10,635,723


SECURITIES SOLD SHORT
COMMON STOCKS – 20.4%
Cayman Islands – 0.8%
Herbalife	2,000	$	90,280

Total (Proceeds $115,219)			90,280


China – 1.8%
iShares China Large-Cap ETF	6,000		195,120

Total (Proceeds $246,864)			195,120


Finland – 0.9%
Orion Cl. B	4,000		93,823

Total (Proceeds $117,278)			93,823


Germany – 0.6%
Deutsche Bank	1,500		62,925

Total (Proceeds $65,217)			62,925

Japan – 1.6%
NEXT FUNDS Nikkei 225 Leveraged Index ETF	2,000		169,792

Total (Proceeds $139,917)			169,792


United States – 13.8%
Brunswick Corporation	2,000		63,900
Coca-Cola Company (The)	1,500		60,165
Delta Air Lines	6,000		112,260
Deluxe Corporation	1,500		51,975
Direxion Daily Energy Bull 3X Shares	3,500		218,015
General Motors	2,000		66,620
Haverty Furniture	3,700		85,137
Monster Beverage	2,500		151,925
NCR Corporation	4,500		148,455
ProShares Ultra Basic Materials	5,000		172,350
ProShares Ultra Health Care	2,000		120,600
Tempur Sealy International	1,800		79,020
Terex Corporation	700		18,410
Toll Brothers	2,000		65,260
United Rentals	1,100		54,901

Total (Proceeds $1,116,660)			1,468,993


Non-Country Specific – 0.9%
Direxion Daily Emerging Markets Bull 3X
Shares	4,000		93,560

Total (Proceeds $115,754)			93,560


TOTAL SECURITIES SOLD SHORT
(Proceeds $1,916,909)		$	2,174,493

52 | The Royce Funds 2013 Semiannual Report to Shareholders

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

June 30, 2013 (unaudited)

Royce European Smaller-Companies Fund

	SHARES		VALUE
COMMON STOCKS – 96.1%

Austria – 4.4%
Mayr-Melnhof Karton	3,500	$	376,307
Semperit AG Holding	12,200		438,291

Total (Cost $922,131)			814,598


Belgium – 2.8%
EVS Broadcast Equipment	3,850		267,306
Sipef	3,800		255,326

Total (Cost $565,037)			522,632


Cyprus – 1.3%
^†Globaltrans Investment GDR	17,500		240,450

Total (Cost $268,876)			240,450


Denmark – 1.4%
H. Lundbeck	14,500		258,617

Total (Cost $230,483)			258,617


Finland – 2.1%
^†F-Secure	44,500		122,797
Nokian Renkaat	6,550		266,943

Total (Cost $377,158)			389,740


France – 16.8%
Altamir	15,000		168,889
Alten	6,300		215,096
Audika Groupe ¹	22,000		222,504
Beneteau ¹	20,200		223,230
bioMerieux	2,700		261,616
Boiron	6,550		341,032
Manutan International	6,000		256,946
Parrot ¹	10,000		278,293
Societe Internationale de Plantations
d’Heveas	3,450		243,081
Stallergenes	7,105		498,942
Vetoquinol	8,600		292,728
Virbac	600		124,177

Total (Cost $3,291,272)			3,126,534


Germany – 10.0%
Aixtron ¹	9,000		151,297
^†Bertrandt	2,400		257,789
Carl Zeiss Meditec	5,650		187,535
KWS Saat	450		162,807
Nemetschek	2,550		164,301
Pfeiffer Vacuum Technology	1,100		113,972
PUMA	915		257,556
Rational	545		182,706
^†SMT Scharf	5,000		153,465
Takkt	15,000		226,487

Total (Cost $1,674,173)			1,857,915

Italy – 7.9%
Azimut Holding	17,400		316,855
^†De’Longhi	16,000		250,125
DiaSorin	7,600		303,404
Geox	66,000		164,430
Recordati	39,500		438,314

Total (Cost $1,179,357)			1,473,128


Netherlands – 2.9%
ASM International	5,100		172,134
Beter Bed Holding	15,000		274,908
Fugro	1,800		97,585

Total (Cost $545,787)			544,627


Norway – 4.0%
Ekornes	19,950		318,577
^†MultiClient Geophysical ¹	150,392		82,941
^†Spectrum	25,000		199,199
TGS-NOPEC Geophysical	4,700		136,566

Total (Cost $867,134)			737,283


Poland – 0.7%
Warsaw Stock Exchange	12,000		137,454

Total (Cost $129,779)			137,454


South Africa – 5.6%
Adcock Ingram Holdings	40,650		267,298
^†Cashbuild	6,300		84,765
Lewis Group	55,000		350,529
Raubex Group	150,000		330,802

Total (Cost $1,281,859)			1,033,394


Sweden – 1.4%
^†Bjoern Borg	12,500		54,987
Lundin Petroleum ¹	10,000		198,327

Total (Cost $306,410)			253,314


Switzerland – 12.4%
Banque Privee Edmond de Rothschild	5		87,026
Burckhardt Compression Holding	360		143,306
^†Calida Holding	5,000		122,810
^†Forbo Holding	600		382,722
Partners Group Holding	750		203,073
Sika	55		142,427
^†Straumann Holding	2,100		315,261
Sulzer	1,500		239,956
VZ Holding	2,250		314,435
Zehnder Group	8,000		356,572

Total (Cost $1,993,911)			2,307,588


Turkey – 1.1%
Mardin Cimento Sanayii	85,000		193,913

Total (Cost $360,161)			193,913

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

The Royce Funds 2013 Semiannual Report to Shareholders | 53

Schedules of Investments

Royce European Smaller-Companies Fund (continued)

	SHARES		VALUE
United Kingdom – 21.3%
Ashmore Group	72,500	$	378,994
Clarkson	12,000		310,456
^†Consort Medical	8,934		113,121
Diploma	10,000		85,249
Domino Printing Sciences	25,000		237,268
^†E2V Technologies	97,000		175,195
EnQuest ¹	150,000		269,664
^†Homeserve	60,000		255,520
Jupiter Fund Management	50,500		222,513
^†Lancashire Holdings	12,000		144,551
Latchways	14,600		265,915
Michael Page International	20,000		112,854
^†Photo-Me International	200,000		266,927
Rotork	6,000		243,656
^†Sepura	70,000		130,421
Severfield-Rowen	300,000		215,595
Spirax-Sarco Engineering	4,815		196,779
Spirent Communications	85,000		181,898
Victrex	6,000		140,901

Total (Cost $3,574,377)			3,947,477

TOTAL COMMON STOCKS
(Cost $17,567,905)			17,838,664

REPURCHASE AGREEMENT – 1.4%
Fixed Income Clearing Corporation,
0.01% dated 6/28/13, due 7/1/13, maturity value $257,000 (collateralized by obligations of various U.S. Government Agencies, 1.375% due 2/25/14, valued at $263,275) (Cost $257,000)			257,000

TOTAL INVESTMENTS – 97.5%
(Cost $17,824,905)			18,095,664

CASH AND OTHER ASSETS
LESS LIABILITIES – 2.5%			473,135


NET ASSETS – 100.0%		$	18,568,799

Royce Enterprise Select Fund

	SHARES		VALUE
COMMON STOCKS – 73.1%

Consumer Discretionary – 16.8%
Automobiles - 3.1%
Thor Industries	1,275	$	62,705

Distributors - 1.7%
Genuine Parts	430		33,570

Household Durables - 2.0%
Garmin	1,100		39,776

Leisure Equipment & Products - 0.2%
^†Arctic Cat	100		4,498

Multiline Retail - 3.2%
Dollar Tree ¹	1,250		63,550

Specialty Retail - 3.5%
Advance Auto Parts	420		34,092
^†Ross Stores	300		19,443
Signet Jewelers	235		15,846

			69,381

Textiles, Apparel & Luxury Goods - 3.1%
Gildan Activewear	730		29,572
^†Wolverine World Wide	600		32,766

			62,338

Total (Cost $302,635)			335,818

Energy – 2.4%
Energy Equipment & Services - 2.4%
CARBO Ceramics	100		6,743
Helmerich & Payne	100		6,245
^†SEACOR Holdings	420		34,881

Total (Cost $45,938)			47,869

Financials – 7.2%
Capital Markets - 2.4%
^†Artisan Partners Asset Management ¹	200		9,982
Federated Investors Cl. B	1,400		38,374

			48,356

Insurance - 2.6%
Alleghany Corporation ¹	100		38,331
Berkley (W.R.)	320		13,075

			51,406

Real Estate Management & Development - 2.2%
Jones Lang LaSalle	390		35,545
Kennedy-Wilson Holdings	513		8,536

			44,081

Total (Cost $123,049)			143,843

Health Care – 4.2%
Biotechnology - 2.0%
Myriad Genetics ¹	1,500		40,305

Health Care Equipment & Supplies - 1.7%
Analogic Corporation	210		15,294
C.R. Bard	80		8,695

54 | The Royce Funds 2013 Semiannual Report to Shareholders

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

June 30, 2013 (unaudited)

	SHARES		VALUE
Health Care (continued)
Health Care Equipment & Supplies (continued)
IDEXX Laboratories ¹	100	$	8,978

			32,967

Health Care Providers & Services - 0.5%
Schein (Henry) ¹	110		10,532

Total (Cost $84,194)			83,804


Industrials – 17.2%
Aerospace & Defense - 0.8%
Teledyne Technologies ¹	200		15,470

Air Freight & Logistics - 2.1%
Expeditors International of
Washington	1,100		41,811

Commercial Services & Supplies - 2.0%
Cintas Corporation	500		22,770
UniFirst Corporation	190		17,337

			40,107

Construction & Engineering - 1.7%
Jacobs Engineering Group ¹	630		34,732

Machinery - 2.5%
^†AGCO Corporation	330		16,562
Valmont Industries	230		32,911

			49,473

Marine - 1.9%
Kirby Corporation ¹	475		37,782

Professional Services - 5.4%
Equifax	400		23,572
^†Huron Consulting Group ¹	200		9,248
ManpowerGroup	400		21,920
Towers Watson & Company Cl. A	650		53,261

			108,001

Transportation Infrastructure - 0.8%
^†Wesco Aircraft Holdings ¹	800		14,856

Total (Cost $307,295)			342,232


Information Technology – 17.5%
Communications Equipment - 1.9%
^†Plantronics	880		38,650

Computers & Peripherals - 2.6%
Western Digital	820		50,914

Electronic Equipment, Instruments & Components - 9.1%
AVX Corporation	4,160		48,880
Coherent	530		29,187
FLIR Systems	1,200		32,364
^†Methode Electronics	2,400		40,824
Rogers Corporation ¹	640		30,285

			181,540

IT Services - 0.4%
Fiserv ¹	100		8,741

Semiconductors & Semiconductor Equipment - 1.0%
Analog Devices	420		18,925

Software - 2.5%
MICROS Systems ¹	850		36,677
^†Rovi Corporation ¹	600		13,704

			50,381

Total (Cost $324,142)			349,151


Materials – 4.7%
Chemicals - 2.5%
^†Innospec	226		9,081
Sigma-Aldrich Corporation	206		16,554
Westlake Chemical	250		24,102

			49,737

Metals & Mining - 1.4%
Reliance Steel & Aluminum	430		28,191

Paper & Forest Products - 0.8%
Stella-Jones	170		15,848

Total (Cost $80,356)			93,776


Utilities – 1.8%
Gas Utilities - 1.8%
UGI Corporation	900		35,199

Total (Cost $27,729)			35,199


Miscellaneous² – 1.3%
Total (Cost $25,846)			26,738


TOTAL COMMON STOCKS
(Cost $1,321,184)			1,458,430


FIXED INCOME – 2.5%
Government Bonds – 2.5%
^†iShares 1-3 Year Treasury Bond ETF	590		49,725


TOTAL FIXED INCOME
(Cost $49,848)			49,725


REPURCHASE AGREEMENT – 25.8%
Fixed Income Clearing Corporation,
0.01% dated 6/28/13, due 7/1/13, maturity value $516,000 (collateralized by obligations of various U.S. Government Agencies, 1.375% due 2/25/14, valued at $526,551) (Cost $516,000)			516,000


TOTAL INVESTMENTS – 101.4%
(Cost $1,887,032)			2,024,155

LIABILITIES LESS CASH
AND OTHER ASSETS – (1.4)%			(28,902	)


NET ASSETS – 100.0%		$	1,995,253

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

The Royce Funds 2013 Semiannual Report to Shareholders | 55

Schedules of Investments

Royce SMid-Cap Value Fund

	SHARES		VALUE
COMMON STOCKS – 87.4%

Consumer Discretionary – 9.9%
Auto Components - 0.3%
Autoliv	370	$	28,634

Automobiles - 3.6%
Thor Industries	7,900		388,522

Household Durables - 2.6%
Garmin	7,700		278,432

Multiline Retail - 1.7%
Dollar Tree ¹	3,500		177,940

Specialty Retail - 1.7%
Signet Jewelers	2,720		183,410

Total (Cost $883,429)			1,056,938


Consumer Staples – 1.1%
Food Products - 1.1%
Sanderson Farms	1,700		112,914

Total (Cost $90,213)			112,914


Energy – 11.1%
Energy Equipment & Services - 10.2%
Helmerich & Payne	7,000		437,150
Pason Systems	17,800		323,606
Trican Well Service	16,000		212,684
Unit Corporation ¹	2,600		110,708

			1,084,148

Oil, Gas & Consumable Fuels - 0.9%
^†HollyFrontier Corporation	2,200		94,116

Total (Cost $1,160,311)			1,178,264


Financials – 13.5%
Capital Markets - 10.0%
^†Artisan Partners Asset Management ¹	2,600		129,766
Ashmore Group	51,600		269,739
Federated Investors Cl. B	7,900		216,539
Partners Group Holding	500		135,382
Sprott	39,700		105,695
Value Partners Group	384,000		206,951

			1,064,072

Diversified Financial Services - 0.5%
Leucadia National	1,950		51,129

Real Estate Management & Development - 3.0%
Jones Lang LaSalle	1,630		148,558
Kennedy-Wilson Holdings	10,500		174,720

			323,278

Total (Cost $1,512,279)			1,438,479


Health Care – 3.0%
Biotechnology - 3.0%
Myriad Genetics ¹	12,000		322,440

Total (Cost $305,909)			322,440

Industrials – 14.8%
Construction & Engineering - 3.8%
Jacobs Engineering Group ¹	7,300		402,449

Machinery - 7.8%
Kennametal	3,200		124,256
Lincoln Electric Holdings	1,900		108,813
Semperit AG Holding	7,400		265,849
Valmont Industries	1,925		275,448
Wabtec Corporation	1,000		53,430

			827,796

Marine - 0.8%
Kirby Corporation ¹	1,100		87,494

Professional Services - 2.4%
ManpowerGroup	2,000		109,600

Towers Watson & Company Cl. A	1,800		147,492

			257,092

Total (Cost $1,306,233)			1,574,831


Information Technology – 19.2%
Computers & Peripherals - 7.2%
SanDisk Corporation ¹	3,700		226,070
Western Digital	8,700		540,183

			766,253

Electronic Equipment, Instruments & Components - 1.4%
AVX Corporation	12,200		143,350

Semiconductors & Semiconductor Equipment - 9.8%
Analog Devices	6,100		274,866
^†Cirrus Logic ¹	7,800		135,408
International Rectifier ¹	8,142		170,493
LSI Corporation ¹	18,800		134,232
Teradyne ¹	18,350		322,410

			1,037,409

Software - 0.8%
SimCorp	3,000		89,004

Total (Cost $1,688,887)			2,036,016


Materials – 14.8%
Chemicals - 2.6%
Westlake Chemical	2,900		279,589

Metals & Mining - 9.5%
Alamos Gold	10,000		121,137
Globe Specialty Metals	22,100		240,227
Hochschild Mining	21,300		50,312
Pan American Silver	14,700		171,108
Pretium Resources ¹	5,800		38,280
Reliance Steel & Aluminum	5,900		386,804

			1,007,868

Paper & Forest Products - 2.7%
Stella-Jones	3,025		281,992

Total (Cost $1,769,106)			1,569,449


TOTAL COMMON STOCKS
(Cost $8,716,367)			9,289,331

56 | The Royce Funds 2013 Semiannual Report to Shareholders

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

June 30, 2013 (unaudited)

		VALUE
REPURCHASE AGREEMENT – 12.6%
Fixed Income Clearing Corporation,
0.01% dated 6/28/13, due 7/1/13, maturity value $1,338,001 (collateralized by obligations of various U.S. Government Agencies, 0.30% due 12/11/13, valued at $1,366,706) (Cost $1,338,000)	$	1,338,000


TOTAL INVESTMENTS – 100.0%
(Cost $10,054,367)		10,627,331

LIABILITIES LESS CASH
AND OTHER ASSETS – (0.0)%		(2,377	)


NET ASSETS – 100.0%	$	10,624,954

Royce Focus Value Fund

	SHARES		VALUE
COMMON STOCKS – 91.9%

Consumer Discretionary – 13.0%
Automobiles - 1.5%
Thor Industries	3,000	$	147,540

Household Durables - 2.9%
^†Blyth	8,200		114,472
^†iRobot Corporation ¹	4,400		174,988

			289,460

Internet & Catalog Retail - 2.6%
^†NutriSystem	21,700		255,626

Leisure Equipment & Products - 2.9%
^†Nautilus ¹	32,800		285,032

Specialty Retail - 3.1%
Buckle (The)	3,500		182,070
GameStop Corporation Cl. A	3,100		130,293

			312,363

Total (Cost $1,012,274)			1,290,021


Consumer Staples – 3.8%
Food Products - 3.8%
Cal-Maine Foods	2,000		93,020
Industrias Bachoco ADR	4,500		156,150
Sanderson Farms	2,000		132,840

Total (Cost $211,314)			382,010


Energy – 11.2%
Energy Equipment & Services - 3.0%
Helmerich & Payne	2,400		149,880
Trican Well Service	11,000		146,221

			296,101

Oil, Gas & Consumable Fuels - 8.2%
Africa Oil ¹	15,000		100,552
Exxon Mobil	3,500		316,225
^†Lundin Petroleum ¹	3,900		77,347
^†SemGroup Corporation Cl. A	6,100		328,546

			822,670

Total (Cost $978,727)			1,118,771


Financials – 20.1%
Capital Markets - 9.8%
Affiliated Managers Group ¹	600		98,364
Ashmore Group	30,000		156,825
Federated Investors Cl. B	5,000		137,050
Franklin Resources	2,500		340,050
Partners Group Holding	400		108,306
Value Partners Group	250,000		134,733

			975,328

Diversified Financial Services - 1.7%
^†Sprott Resource Lending	134,100		165,760

Insurance - 6.4%
Berkshire Hathaway Cl. B ¹	3,500		391,720
^†eHealth ¹	10,950		248,784

			640,504

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

The Royce Funds 2013 Semiannual Report to Shareholders | 57

Schedules of Investments

Royce Focus Value Fund (continued)

	SHARES		VALUE
Financials (continued)
Real Estate Management & Development - 2.2%
Kennedy-Wilson Holdings	13,400	$	222,976

Total (Cost $1,442,855)			2,004,568


Health Care – 8.7%
Biotechnology - 4.4%
^†Cubist Pharmaceuticals ¹	4,200		202,860
Myriad Genetics ¹	8,700		233,769

			436,629

Health Care Providers & Services - 2.9%
^†Chemed Corporation	1,300		94,159
^†DaVita HealthCare Partners ¹	1,600		193,280

			287,439

Pharmaceuticals - 1.4%
^†Medicines Company (The) ¹	4,600		141,496

Total (Cost $897,057)			865,564


Industrials – 12.3%
Aerospace & Defense - 2.0%
^†Boeing Company	1,900		194,636

Construction & Engineering - 2.2%
Jacobs Engineering Group ¹	4,000		220,520

Machinery - 3.4%
^†CIRCOR International	4,500		228,870
Lincoln Electric Holdings	2,000		114,540

			343,410

Marine - 1.3%
^†Kirby Corporation ¹	1,600		127,264

Professional Services - 1.6%
^†Towers Watson & Company Cl. A	1,900		155,686

Road & Rail - 1.8%
Patriot Transportation Holding ¹	6,000		180,240

Total (Cost $1,097,337)			1,221,756


Information Technology – 16.0%
Computers & Peripherals - 4.0%
Apple	200		79,216
Western Digital	5,100		316,659

			395,875

Internet Software & Services - 3.5%
^†Google Cl. A ¹	400		352,148

Semiconductors & Semiconductor Equipment - 3.6%
MKS Instruments	8,000		212,320
^†OmniVision Technologies ¹	7,900		147,335

			359,655

Software - 4.9%
^†ePlus	5,000		299,450
^†MICROS Systems ¹	4,300		185,545

			484,995

Total (Cost $1,444,215)			1,592,673

Materials – 6.1%
Chemicals - 1.0%
^†W.R. Grace & Co. ¹	1,200		100,848

Metals & Mining - 5.1%
Fresnillo	4,000		53,659
Randgold Resources ADR	2,100		134,505
Reliance Steel & Aluminum	3,500		229,460
^†Worthington Industries	2,800		88,788

			506,412

Total (Cost $503,254)			607,260


Miscellaneous² – 0.7%
Total (Cost $66,000)			72,000


TOTAL COMMON STOCKS
(Cost $7,653,033)			9,154,623


FIXED INCOME – 1.3%
Government Bonds – 1.3%
ProShares UltraShort 20+ Year Treasury ¹	1,750		126,752


TOTAL FIXED INCOME
(Cost $185,658)			126,752


REPURCHASE AGREEMENT – 10.3%
Fixed Income Clearing Corporation,
0.01% dated 6/28/13, due 7/1/13, maturity value $1,033,001 (collateralized by obligations of various U.S. Government Agencies, 0.30% due 12/11/13, valued at $1,056,319) (Cost $1,033,000)			1,033,000


TOTAL INVESTMENTS – 103.5%
(Cost $8,871,691)			10,314,375

LIABILITIES LESS CASH
AND OTHER ASSETS – (3.5)%			(350,122)


NET ASSETS – 100.0%		$	9,964,253

58 | The Royce Funds 2013 Semiannual Report to Shareholders

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

June 30, 2013 (unaudited)

Royce Partners Fund

	SHARES		VALUE
COMMON STOCKS – 93.4%

Consumer Discretionary – 6.2%
Household Durables - 2.0%
Hunter Douglas	600	$	23,976
NVR ¹	25		23,050

			47,026

Media - 1.9%
Morningstar	600		46,548

Specialty Retail - 1.0%
Tiffany & Co.	333		24,256

Textiles, Apparel & Luxury Goods - 1.3%
^†Geox	12,600		31,391

Total (Cost $118,730)			149,221


Energy – 4.9%
Energy Equipment & Services - 4.9%
Ensco Cl. A	700		40,684
Schlumberger	360		25,798
Tidewater	900		51,273

Total (Cost $97,788)			117,755


Financials – 25.2%
Capital Markets - 19.7%
^†ASA Gold and Precious Metals	2,700		34,290
Ashmore Group	8,000		41,820
Bank of New York Mellon (The)	1,700		47,685
Coronation Fund Managers	5,300		33,644
Jupiter Fund Management	7,300		32,165
KKR & Co. L.P.	1,300		25,558
Northern Trust	560		32,424
^†Schwab (Charles)	2,300		48,829
SEI Investments	1,800		51,174
^†Sprott	10,000		26,624
State Street	483		31,496
Value Partners Group	84,000		45,271
WisdomTree Investments ¹	2,000		23,140

			474,120

Diversified Financial Services - 1.0%
Moody’s Corporation	406		24,738

Insurance - 3.0%
E-L Financial	120		72,454

Real Estate Management & Development - 1.5%
Jones Lang LaSalle	400		36,456

Total (Cost $510,393)			607,768


Health Care – 4.6%
Biotechnology - 1.2%
Myriad Genetics ¹	1,100		29,557

Pharmaceuticals - 3.4%
Adcock Ingram Holdings	4,400		28,932
^†Sanofi ADR	1,000		51,510

			80,442

Total (Cost $112,222)			109,999

Industrials – 23.9%
Air Freight & Logistics - 1.6%
Expeditors International of Washington	1,040		39,530

Commercial Services & Supplies - 1.5%
^†Heritage-Crystal Clean ¹	2,400		35,064

Construction & Engineering - 2.0%
Fluor Corporation	800		47,448

Machinery - 7.9%
Foster (L.B.) Company	800		34,536
Graco	720		45,511
^†RBC Bearings ¹	700		36,365
Spirax-Sarco Engineering	770		31,469
Valmont Industries	300		42,927

			190,808

Professional Services - 6.1%
ManpowerGroup	700		38,360
Towers Watson & Company Cl. A	700		57,358
Verisk Analytics Cl. A ¹	873		52,118

			147,836

Road & Rail - 3.2%
Landstar System	800		41,200
Patriot Transportation Holding ¹	1,200		36,048

			77,248

Trading Companies & Distributors - 1.6%
^†Applied Industrial Technologies	800		38,664

Total (Cost $430,844)			576,598


Information Technology – 14.4%
Computers & Peripherals - 1.0%
^†Western Digital	400		24,836

Electronic Equipment, Instruments & Components - 6.2%
Amphenol Corporation Cl. A	300		23,382
Anixter International ¹	500		37,905
FARO Technologies ¹	600		20,292
IPG Photonics	550		33,401
^†National Instruments	1,200		33,528

			148,508

IT Services - 3.4%
MasterCard Cl. A	95		54,578
Western Union	1,600		27,376

			81,954

Office Electronics - 2.0%
Zebra Technologies Cl. A ¹	1,100		47,784

Software - 1.8%
^†SimCorp	1,500		44,502

Total (Cost $254,157)			347,584


Materials – 11.2%
Chemicals - 1.6%
Airgas	400		38,184

Containers & Packaging - 3.6%
Greif Cl. A	880		46,350
Mayr-Melnhof Karton	375		40,318

			86,668

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

The Royce Funds 2013 Semiannual Report to Shareholders | 59

Schedules of Investments

Royce Partners Fund (continued)

	SHARES		VALUE
Materials (continued)
Metals & Mining - 4.3%
Gold Fields ADR	3,800	$	19,950
^†Pan American Silver	3,200		37,248
Reliance Steel & Aluminum	700		45,892

			103,090

Paper & Forest Products - 1.7%
^†Stella-Jones	440		41,017

Total (Cost $266,092)			268,959


Telecommunication Services – 2.1%
Diversified Telecommunication Services - 2.1%
^†Global Telecom & Technology ¹	11,700		50,895

Total (Cost $49,802)			50,895


Miscellaneous² – 0.9%
Total (Cost $23,063)			21,626


TOTAL COMMON STOCKS
(Cost $1,863,091)			2,250,405


REPURCHASE AGREEMENT – 6.7%
Fixed Income Clearing Corporation,
0.01% dated 6/28/13, due 7/1/13, maturity value $161,000 (collateralized by obligations of various U.S. Government Agencies, 0.30% due 12/11/13, valued at $165,206) (Cost $161,000)			161,000


TOTAL INVESTMENTS – 100.1%
(Cost $2,024,091)			2,411,405

LIABILITIES LESS CASH
AND OTHER ASSETS – (0.1)%			(3,443	)


NET ASSETS – 100.0%		$	2,407,962

Royce Opportunity Select Fund

	SHARES		VALUE
COMMON STOCKS – 102.6%

Consumer Discretionary – 12.7%
Diversified Consumer Services - 1.3%
^†Apollo Group Cl. A ¹	4,800	$	85,056

Hotels, Restaurants & Leisure - 2.0%
Orient-Express Hotels Cl. A ¹	11,000		133,760

Household Durables - 2.4%
Hovnanian Enterprises Cl. A ¹	12,000		67,320
M.D.C. Holdings	3,000		97,530

			164,850

Internet & Catalog Retail - 0.7%
Vitacost.com ¹	6,000		50,700

Specialty Retail - 2.1%
Zumiez ¹	5,000		143,750

Textiles, Apparel & Luxury Goods - 4.2%
Delta Apparel ^1,3	2,500		35,250
^†Jones Group (The)	10,000		137,500
Quiksilver ¹	17,000		109,480

			282,230

Total (Cost $765,813)			860,346


Energy – 7.4%
Energy Equipment & Services - 4.0%
Hercules Offshore ¹	10,000		70,400
Key Energy Services ¹	7,000		41,650
Newpark Resources ¹	4,000		43,960
Patterson-UTI Energy	6,000		116,130

			272,140

Oil, Gas & Consumable Fuels - 3.4%
Goodrich Petroleum ¹	5,000		64,000
Scorpio Tankers	11,000		98,780
^†Warren Resources ¹	25,000		63,750

			226,530

Total (Cost $444,165)			498,670


Financials – 16.7%
Commercial Banks - 8.0%
^†First NBC Bank Holding Company ¹	5,000		122,000
^†FirstMerit Corporation	6,200		124,186
^†Independent Bank Group ¹	3,300		100,320
^†Tristate Capital Holdings ¹	9,000		123,750
^†Trustmark Corporation	3,000		73,740

			543,996

Insurance - 0.9%
^†Old Republic International	5,000		64,350

Real Estate Investment Trusts (REITs) - 2.4%
LaSalle Hotel Properties ³	5,000		123,500
RAIT Financial Trust	5,000		37,600

			161,100

Real Estate Management & Development - 2.2%
^†Kennedy-Wilson Holdings	9,000		149,760

Thrifts & Mortgage Finance - 3.2%
BofI Holding ¹	1,900		87,058
MGIC Investment ¹	8,000		48,560

60 | The Royce Funds 2013 Semiannual Report to Shareholders

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

June 30, 2013 (unaudited)

	SHARES		VALUE
Financials (continued)
Thrifts & Mortgage Finance (continued)
Radian Group ³	7,000	$	81,340

			216,958

Total (Cost $950,291)			1,136,164


Health Care – 1.3%
Health Care Equipment & Supplies - 1.3%
Accuray ¹	15,000		86,100

Total (Cost $71,651)			86,100


Industrials – 18.0%
Aerospace & Defense - 2.1%
Kratos Defense & Security Solutions ¹	22,000		142,560

Air Freight & Logistics - 1.3%
XPO Logistics ¹	5,000		90,450

Airlines - 0.9%
JetBlue Airways ¹	10,000		63,000

Building Products - 2.2%
Builders FirstSource ¹	7,000		41,860
^†Quanex Building Products	6,500		109,460

			151,320

Construction & Engineering - 0.9%
Ameresco Cl. A ^1,3	6,600		59,466

Electrical Equipment - 1.2%
^†II-VI ¹	5,000		81,300

Machinery - 5.3%
Commercial Vehicle Group ^1,3	10,000		74,600
Hardinge	3,500		51,730
Meritor ¹	13,000		91,650
Mueller Water Products Cl. A	20,000		138,200

			356,180

Road & Rail - 2.3%
Arkansas Best	4,300		98,685
Swift Transportation ^1,3	3,500		57,890

			156,575

Trading Companies & Distributors - 1.8%
^†Air Lease Cl. A	4,500		124,155

Total (Cost $1,080,204)			1,225,006


Information Technology – 36.4%
Communications Equipment - 4.1%
^†Extreme Networks ¹	28,000		96,600
^†NETGEAR ^1,3	4,000		122,160
Westell Technologies Cl. A ¹	25,000		59,750

			278,510


Computers & Peripherals - 3.2%
Datalink Corporation ¹	9,000		95,760
^†QLogic Corporation ¹	13,000		124,280

			220,040

Electronic Equipment, Instruments & Components - 3.3%
Audience ¹	10,000		132,100
Newport Corporation ¹	5,500		76,615
SigmaTron International ¹	3,500		14,840

			223,555

IT Services - 0.8%
^†CIBER ¹	16,500		55,110

Semiconductors & Semiconductor Equipment - 22.6%
Alpha & Omega Semiconductor ^1,3	3,000		22,920
^†ATMI ¹	4,200		99,330
Exar Corporation ^1,3	12,000		129,240
^†Fairchild Semiconductor International ¹	6,000		82,800
FormFactor ¹	14,000		94,500
^†GT Advanced Technologies ¹	20,000		83,000
Inphi Corporation ^1,3	6,000		66,000
^†Intersil Corporation Cl. A	16,000		125,120
Kulicke & Soffa Industries ¹	5,000		55,300
^†MagnaChip Semiconductor ¹	4,000		73,080
NeoPhotonics Corporation ¹	11,000		95,590
OmniVision Technologies ¹	4,600		85,790
Rubicon Technology ¹	12,500		100,125
Rudolph Technologies ^1,3	11,000		123,200
SunEdison ¹	14,000		114,380
SunPower Corporation ¹	2,500		51,750
TriQuint Semiconductor ¹	11,000		76,230
Ultratech ¹	1,500		55,080

			1,533,435

Software - 2.4%
Ellie Mae ¹	5,600		129,248
Smith Micro Software ¹	30,000		31,800

			161,048

Total (Cost $2,158,046)			2,471,698


Materials – 5.8%
Chemicals - 0.9%
OM Group ¹	2,000		61,840

Metals & Mining - 2.9%
^†Molycorp ¹	17,000		105,400
US Silica Holdings	4,500		93,510

			198,910

Paper & Forest Products - 2.0%
Louisiana-Pacific Corporation ¹	9,000		133,110

Total (Cost $395,431)			393,860

Miscellaneous² – 4.3%
Total (Cost $291,018)			294,500

TOTAL COMMON STOCKS
(Cost $6,156,619)			6,966,344

REPURCHASE AGREEMENT – 3.9%
Fixed Income Clearing Corporation,
0.01% dated 6/28/13, due 7/1/13, maturity value $269,000 (collateralized by obligations of various U.S. Government Agencies, 0.30% due 12/11/13, valued at $275,344) (Cost $269,000)			269,000

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

The Royce Funds 2013 Semiannual Report to Shareholders | 61

Schedules of Investments

Royce Opportunity Select Fund (continued)

	SHARES		VALUE
TOTAL INVESTMENTS – 106.5%
(Cost $6,425,619)		$	7,235,344

LIABILITIES LESS CASH
AND OTHER ASSETS – (6.5)%			(444,079	)


NET ASSETS – 100.0%		$	6,791,265


SECURITIES SOLD SHORT
COMMON STOCKS – 9.8%
Consumer Discretionary – 5.8%
Hotels, Restaurants & Leisure - 1.2%
Bravo Brio Restaurant Group	500	$	8,910
Life Time Fitness	1,500		75,165

			84,075

Household Durables - 0.3%
iRobot Corporation	500		19,885

Specialty Retail - 4.3%
Lithia Motors Cl. A	1,500		79,965
Lumber Liquidators Holdings	1,900		147,953
Sonic Automotive Cl. A	1,000		21,140
Tile Shop Holdings	1,500		43,440

			292,498

Total (Proceeds $385,567)			396,458


Consumer Staples – 1.3%
Food & Staples Retailing - 1.3%
Fresh Market	1,700		84,524

Total (Proceeds $81,970)			84,524


Information Technology – 2.7%
Internet Software & Services - 1.3%
Stamps.com	2,200		86,658

Software - 1.4%
Fleetmatics Group	3,000		99,690

Total (Proceeds $146,647)			186,348


TOTAL SECURITIES SOLD SHORT
(Proceeds $614,184)		$	667,330

Royce Global Dividend Value Fund

	SHARES		VALUE
COMMON STOCKS – 94.3%

Australia – 0.7%
Cochlear	300	$	16,931
^†Imdex	65,000		36,856

Total (Cost $93,828)			53,787


Austria – 1.9%
Mayr-Melnhof Karton	900		96,765
Semperit AG Holding	1,500		53,888

Total (Cost $178,885)			150,653


Belgium – 2.0%
EVS Broadcast Equipment	800		55,544
Sipef	650		43,674
Van de Velde	1,400		61,139

Total (Cost $172,595)			160,357


Bermuda – 0.7%
Lazard Cl. A	1,760		56,584

Total (Cost $51,953)			56,584


Brazil – 2.6%
^†Brasil Brokers Participacoes	20,000		58,709
Eternit	12,500		52,939
Grendene	4,000		36,319
^†MAHLE Metal Leve	5,000		55,504

Total (Cost $219,666)			203,471


Canada – 6.7%
^†Alaris Royalty	2,000		60,626
Canadian Energy Services & Technology	1,200		18,633
^†Computer Modelling Group	1,900		41,895
E-L Financial	70		42,265
^†Gluskin Sheff + Associates	1,800		33,306
Major Drilling Group International	5,500		37,444
Pan American Silver	5,700		66,348
Pason Systems	2,500		45,450
Sprott	22,500		59,903
Stella-Jones	760		70,848
Trican Well Service	4,200		55,829

Total (Cost $616,498)			532,547


Chile – 0.6%
^†Inversiones La Construccion	3,000		45,940

Total (Cost $57,325)			45,940


China – 1.9%
Anta Sports Products	40,000		35,070
Daphne International Holdings	77,000		65,821
Pacific Online	110,000		48,362

Total (Cost $138,859)			149,253

62 | The Royce Funds 2013 Semiannual Report to Shareholders

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

June 30, 2013 (unaudited)

	SHARES		VALUE
Cyprus – 0.7%
Globaltrans Investment GDR	4,000	$	54,960

Total (Cost $54,719)			54,960


Denmark – 1.3%
H. Lundbeck	2,000		35,671
Pandora	800		27,113
SimCorp	1,300		38,568

Total (Cost $81,725)			101,352


Finland – 1.4%
^†F-Secure	12,500		34,494
Nokian Renkaat	1,000		40,755
Ponsse	4,500		33,621

Total (Cost $128,843)			108,870


France – 3.4%
Alten	1,900		64,870
bioMerieux	300		29,068
Boiron	1,000		52,066
Manutan International	1,600		68,519
Societe Internationale de Plantations
d’Heveas	750		52,844

Total (Cost $280,437)			267,367


Germany – 2.5%
^†Aurelius	1,500		36,043
Nemetschek	700		45,102
Pfeiffer Vacuum Technology	430		44,553
Rational	100		33,524
^†RIB Software	7,000		36,583

Total (Cost $185,144)			195,805


Hong Kong – 11.3%
Arts Optical International Holdings	150,000		30,944
^†Bosideng International Holdings	150,000		31,330
^†Dickson Concepts (International)	105,000		58,890
^†Goldlion Holdings	60,000		28,932
Le Saunda Holdings	100,000		36,746
Lung Kee (Bermuda) Holdings	110,000		42,547
Media Chinese International	160,000		58,237
Midland Holdings	170,000		63,563
New World Department Store China	75,000		37,906
Pacific Textiles Holdings	45,000		50,709
Pico Far East Holdings	170,000		58,083
Stella International Holdings	25,000		69,140
Television Broadcasts	9,500		65,836
Texwinca Holdings	72,500		67,489
Value Partners Group	120,000		64,672
VTech Holdings	3,000		45,371
Win Hanverky Holdings	276,000		27,045
Xtep International Holdings	125,000		52,217

Total (Cost $949,580)			889,657

India – 0.7%
^†Graphite India	45,000		55,658

Total (Cost $64,735)			55,658


Indonesia – 0.7%
Selamat Sempurna	200,000		53,401

Total (Cost $27,572)			53,401


Italy – 1.7%
DiaSorin	1,000		39,922
^†Nice	12,000		37,675
Recordati	5,200		57,702

Total (Cost $137,571)			135,299


Japan – 5.2%
Dr.Ci:Labo	12		31,881
EPS Corporation	45		50,091
FamilyMart	1,600		68,240
Hogy Medical	350		20,009
Miraial	2,500		39,222
Moshi Moshi Hotline	5,600		69,901
Santen Pharmaceutical	1,000		43,053
TOTO	2,000		20,347
USS	520		66,009

Total (Cost $348,544)			408,753


Jersey – 0.9%
Randgold Resources ADR	1,100		70,455

Total (Cost $88,315)			70,455


Malaysia – 2.0%
CB Industrial Product Holding	75,000		62,193
^†Media Prima	65,000		57,604
Padini Holdings	65,000		38,883

Total (Cost $128,321)			158,680


Mexico – 1.9%
Bolsa Mexicana de Valores	21,200		52,716
^†Fresnillo	5,000		67,074
Industrias Bachoco ADR	800		27,760

Total (Cost $144,306)			147,550


Netherlands – 1.1%
Beter Bed Holding	2,500		45,818
^†Exact Holding	1,200		25,562
Hunter Douglas	500		19,980

Total (Cost $90,532)			91,360


Norway – 1.9%
Ekornes	4,200		67,069
^†Oslo Bors VPS Holding	5,000		41,156
TGS-NOPEC Geophysical	1,500		43,585

Total (Cost $170,358)			151,810

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

The Royce Funds 2013 Semiannual Report to Shareholders | 63

Schedules of Investments

Royce Global Dividend Value Fund (continued)

	SHARES		VALUE
Poland – 0.4%
Warsaw Stock Exchange	3,000	$	34,364

Total (Cost $44,626)			34,364


Singapore – 1.7%
ARA Asset Management	39,050		53,607
ComfortDelGro Corporation	40,000		57,909
^†CSE Global	40,000		26,825

Total (Cost $119,973)			138,341


South Africa – 6.4%
Adcock Ingram Holdings	9,800		64,441
ADvTECH	51,000		36,115
^†AVI	6,400		38,491
^†Cashbuild	2,400		32,291
Coronation Fund Managers	9,200		58,401
^†Gold Fields ADR	12,200		64,050
JSE	6,000		43,095
Lewis Group	12,500		79,666
Raubex Group	39,500		87,111

Total (Cost $556,354)			503,661


South Korea – 1.0%
GS Home Shopping	155		32,098
MegaStudy	910		49,163

Total (Cost $116,943)			81,261


Switzerland – 8.0%
Belimo Holding	15		33,460
Burckhardt Compression Holding	100		39,807
^†Forbo Holding	70		44,651
^†Garmin	2,200		79,552
Kaba Holding	150		56,257
LEM Holding	60		38,621
Partners Group Holding	190		51,445
Sika	23		59,561
Straumann Holding	350		52,543
Sulzer	350		55,990
VZ Holding	500		69,875
Zehnder Group	1,100		49,029

Total (Cost $569,056)			630,791


Turkey – 0.6%
Mardin Cimento Sanayii	22,500		51,330

Total (Cost $83,722)			51,330



United Arab Emirates – 0.8%
^†Aramex	92,000		61,367

Total (Cost $57,210)			61,367


United Kingdom – 10.7%
Ashmore Group	10,800		56,457
^†Aveva Group	1,400		47,995
Clarkson	2,100		54,330
Close Brothers Group	1,200		17,914
^†Consort Medical	3,000		37,986
De La Rue	2,700		39,690
Diploma	3,500		29,837
Domino Printing Sciences	7,800		74,028
^†Fidessa Group	1,800		52,783
^†Homeserve	15,000		63,880
Investec	5,000		31,461
Jupiter Fund Management	15,000		66,093
^†Lancashire Holdings	5,000		60,230
Latchways	1,500		27,320
Michael Page International	3,500		19,749
^†Photo-Me International	50,000		66,732
Rathbone Brothers	700		16,821
RIT Capital Partners	1,000		17,643
Spirax-Sarco Engineering	950		38,824
^†Victrex	1,000		23,483

Total (Cost $783,984)			843,256


United States – 10.9%
Apollo Global Management LLC Cl. A	3,200		77,120
^†Cabot Corporation	1,000		37,420
^†CIRCOR International	1,200		61,032
Compass Minerals International	400		33,812
Expeditors International of
Washington	2,000		76,020
FLIR Systems	1,650		44,501
^†Gentex Corporation	2,300		53,015
Greif Cl. A	900		47,403
Harman International Industries	800		43,360
Invesco	1,900		60,420
^†Kennametal	1,600		62,128
ManpowerGroup	600		32,880
^†National Instruments	2,000		55,880
^†New Mountain Finance	2,700		38,232
Tidewater	1,200		68,364
WaterFurnace Renewable Energy	3,600		70,343

Total (Cost $755,261)			861,930


TOTAL COMMON STOCKS
(Cost $7,497,440)			7,449,870


REPURCHASE AGREEMENT – 7.9%
Fixed Income Clearing Corporation,
0.01% dated 6/28/13, due 7/1/13, maturity value $627,001 (collateralized by obligations of various U.S. Government Agencies, 0.30% due 12/11/13, valued at $640,800) (Cost $627,000)			627,000

64 | The Royce Funds 2013 Semiannual Report to Shareholders

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

June 30, 2013 (unaudited)

		VALUE
TOTAL INVESTMENTS – 102.2%
(Cost $8,124,440)	$	8,076,870

LIABILITIES LESS CASH
AND OTHER ASSETS – (2.2)%		(173,639	)


NET ASSETS – 100.0%	$	7,903,231

Royce International Micro-Cap Fund

	SHARES		VALUE
COMMON STOCKS – 96.3%

Australia – 2.6%
Evolution Mining ¹	40,000	$	20,851
Imdex	45,000		25,516
TFS Corporation ¹	90,000		41,978
Troy Resources	12,500		17,491

Total (Cost $235,960)			105,836


Austria – 1.5%
Semperit AG Holding	1,700		61,074

Total (Cost $61,718)			61,074


Belgium – 0.9%
EVS Broadcast Equipment	500		34,715

Total (Cost $21,744)			34,715


Bermuda – 0.7%
Northern Offshore	20,000		28,053

Total (Cost $39,962)			28,053


Brazil – 2.3%
Brasil Brokers Participacoes	17,500		51,370
Eternit	10,000		42,351

Total (Cost $109,349)			93,721


Canada – 1.6%
Major Drilling Group International	3,500		23,828
Total Energy Services	3,000		41,504

Total (Cost $71,153)			65,332


China – 0.9%
Pacific Online	80,000		35,172
Qunxing Paper Holdings ⁴	41,000		529

Total (Cost $39,284)			35,701


Denmark – 0.7%
SimCorp	1,000		29,668

Total (Cost $15,920)			29,668


Finland – 1.4%
^†F-Secure	9,000		24,835
Ponsse	4,500		33,622

Total (Cost $66,076)			58,457


France – 10.7%
Altamir	3,500		39,408
Audika Groupe ¹	4,000		40,455
Boiron	600		31,240
Manutan International	1,600		68,519
Neurones	4,000		46,703
Parrot ¹	1,700		47,310
Societe Internationale de Plantations
d’Heveas	700		49,321

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

The Royce Funds 2013 Semiannual Report to Shareholders | 65

Schedules of Investments

Royce International Micro-Cap Fund (continued)

	SHARES		VALUE
France (continued)
Stallergenes	815	$	57,232
Vetoquinol	1,500		51,057

Total (Cost $452,324)			431,245


Germany – 4.6%
Bertrandt	200		21,483
Deutsche Beteiligungs	1,000		24,081
LPKF Laser & Electronics	1,000		15,529
Mobotix	700		13,940
Nemetschek	300		19,329
^†RIB Software	6,500		33,970
SMT Scharf	1,400		42,970
Takkt	1,000		15,099

Total (Cost $166,847)			186,401


Hong Kong – 9.7%
Arts Optical International Holdings	170,000		35,069
Dickson Concepts (International)	60,000		33,651
Embry Holdings	35,000		20,803
Goldlion Holdings	100,000		48,221
^†I.T	75,000		26,882
Le Saunda Holdings	90,000		33,071
Lung Kee (Bermuda) Holdings	100,000		38,679
Midland Holdings	100,000		37,390
Oriental Watch Holdings	65,000		21,203
Pico Far East Holdings	100,000		34,167
Tse Sui Luen Jewellery (International)	61,000		27,999
Win Hanverky Holdings	350,000		34,296

Total (Cost $467,052)			391,431


India – 6.0%
AIA Engineering	7,500		43,037
FAG Bearings India	2,000		47,770
Graphite India	40,000		49,474
Maharashtra Seamless	13,416		46,281
^†McLeod Russel India	7,000		34,149
^†Solar Industries India	1,500		23,652

Total (Cost $295,414)			244,363


Indonesia – 0.9%
Selamat Sempurna	130,000		34,710

Total (Cost $21,234)			34,710


Isle of Man – 0.5%
Geodrill ¹	27,500		18,565

Total (Cost $59,209)			18,565


Italy – 2.9%
Geox	9,000		22,422
Interpump Group	2,500		22,291
Nice	10,000		31,396
Piquadro	22,500		40,709

Total (Cost $151,426)			116,818


Japan – 8.3%
Asahi Company	3,000		44,102
BML	1,500		38,052
C. Uyemura & Co.	1,200		49,546
EPS Corporation	46		51,204
Gurunavi	1,200		12,111
Hogy Medical	300		17,151
Mandom Corporation	740		24,622
Milbon	750		26,467
Miraial	1,500		23,533
Moshi Moshi Hotline	1,700		21,220
Nihon M&A Center	500		27,878

Total (Cost $324,875)			335,886


Malaysia – 4.4%
CB Industrial Product Holding	75,000		62,193
Coastal Contracts	55,000		37,601
Kossan Rubber Industries	20,000		31,587
Padini Holdings	75,000		44,865

Total (Cost $140,979)			176,246


Mexico – 0.5%
Medica Sur Ser. B	8,500		20,336

Total (Cost $15,744)			20,336


Netherlands – 1.8%
Beter Bed Holding	3,200		58,647
^†Exact Holding	700		14,911

Total (Cost $74,243)			73,558


Norway – 2.9%
Ekornes	3,500		55,891
^†MultiClient Geophysical ¹	30,000		16,545
^†Spectrum	5,500		43,823

Total (Cost $124,493)			116,259


Poland – 2.3%
Elektrobudowa	1,200		51,500
Warsaw Stock Exchange	3,500		40,091

Total (Cost $101,350)			91,591


Singapore – 1.1%
CSE Global	25,000		16,765
Hour Glass (The)	20,000		27,535

Total (Cost $47,343)			44,300


South Africa – 4.2%
^†Cashbuild	1,500		20,182
^†Holdsport	2,800		12,404
^†Lewis Group	7,500		47,799

66 | The Royce Funds 2013 Semiannual Report to Shareholders

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

June 30, 2013 (unaudited)

	SHARES		VALUE
South Africa (continued)
Merafe Resources ¹	300,000	$	21,548
^†MiX Telematics	70,000		24,785
Raubex Group	20,000		44,107

Total (Cost $223,734)			170,825


South Korea – 2.4%
GS Home Shopping	90		18,638
Handsome Co.	1,200		30,524
MegaStudy	900		48,623

Total (Cost $102,062)			97,785


Spain – 0.6%
Clinica Baviera	3,500		25,011

Total (Cost $32,443)			25,011



Sri Lanka – 0.5%
Distilleries Company of Sri Lanka	12,500		18,501

Total (Cost $13,750)			18,501


Sweden – 0.5%
Bjoern Borg	5,000		21,995

Total (Cost $39,378)			21,995


Switzerland – 4.1%
Calida Holding	1,500		36,843
Inficon Holding	65		19,285
LEM Holding	40		25,748
VZ Holding	300		41,925
Zehnder Group	900		40,114

Total (Cost $149,732)			163,915


Taiwan – 1.5%
Makalot Industrial	12,500		59,641

Total (Cost $36,417)			59,641


Turkey – 0.8%
Mardin Cimento Sanayii	15,000		34,220

Total (Cost $53,878)			34,220


United Arab Emirates – 0.9%
Aramex	52,000		34,686

Total (Cost $25,530)			34,686


United Kingdom – 9.6%
Clarkson	2,000		51,743
Clinigen Group	7,500		34,221
^†Consort Medical	3,300		41,784
Diploma	2,500		21,312
^†E2V Technologies	15,200		27,453
Immunodiagnostic Systems Holdings	6,000		41,522
Latchways	3,500		63,747
^†Luxfer Holdings ADR	1,500		23,775
^†Photo-Me International	22,000		29,362
^†Sepura	18,000		33,537
^†Veripos	7,000		21,204

Total (Cost $336,920)			389,660


United States – 2.0%
Century Casinos ¹	12,000		41,520
WaterFurnace Renewable Energy	2,000		39,080

Total (Cost $82,721)			80,600


TOTAL COMMON STOCKS
(Cost $4,200,264)			3,891,105


REPURCHASE AGREEMENT – 3.4%
Fixed Income Clearing Corporation,
0.01% dated 6/28/13, due 7/1/13, maturity value $137,000 (collateralized by obligations of various U.S. Government Agencies, 0.30% due 12/11/13, valued at $140,175) (Cost $137,000)			137,000


TOTAL INVESTMENTS – 99.7%
(Cost $4,337,264)			4,028,105

CASH AND OTHER ASSETS
LESS LIABILITIES – 0.3%			12,598


NET ASSETS – 100.0%		$	4,040,703

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

The Royce Funds 2013 Semiannual Report to Shareholders | 67

Schedules of Investments

Royce International Premier Fund

	SHARES		VALUE
COMMON STOCKS – 99.3%

Austria – 5.3%
Mayr-Melnhof Karton	1,850	$	198,905
Semperit AG Holding	4,700		168,850

Total (Cost $410,931)			367,755


Belgium – 2.0%
EVS Broadcast Equipment	2,000		138,860

Total (Cost $118,028)			138,860


Bermuda – 2.4%
^†Signet Jewelers	2,500		168,575

Total (Cost $172,979)			168,575


Brazil – 0.9%
^†Totvs	4,000		62,724

Total (Cost $68,843)			62,724


China – 2.9%
Daphne International Holdings	240,000		205,156

Total (Cost $255,045)			205,156


Finland – 2.0%
Nokian Renkaat	3,500		142,641

Total (Cost $148,959)			142,641


France – 8.8%
bioMerieux	1,400		135,652
Stallergenes	2,895		203,299
Vetoquinol	4,405		149,938
Virbac	600		124,177

Total (Cost $545,554)			613,066


Germany – 7.1%
Carl Zeiss Meditec	4,000		132,768
Fielmann	900		94,070
Fuchs Petrolub	1,400		95,052
KWS Saat	300		108,538
Rational	200		67,048

Total (Cost $376,873)			497,476


Hong Kong – 4.7%
Media Chinese International	400,000		145,592
Stella International Holdings	65,000		179,763

Total (Cost $334,321)			325,355



Italy – 4.7%
DiaSorin	4,100		163,679
Recordati	14,700		163,119

Total (Cost $262,951)			326,798

Japan – 10.8%
FamilyMart	4,000		170,599
Kakaku.com	2,500		76,250
M3	50		112,321
MISUMI Group	4,500		123,730
Santen Pharmaceutical	4,000		172,212
USS	800		101,553

Total (Cost $617,492)			756,665


Malaysia – 2.3%
Media Prima	185,000		163,950

Total (Cost $135,652)			163,950


Norway – 2.1%
Ekornes	9,000		143,719

Total (Cost $173,376)			143,719


South Africa – 2.7%
Lewis Group	30,000		191,198

Total (Cost $244,649)			191,198


South Korea – 3.8%
Green Cross	1,155		123,889
MegaStudy	2,600		140,467

Total (Cost $377,262)			264,356


Switzerland – 17.3%
Belimo Holding	60		133,842
Burckhardt Compression Holding	300		119,422
^†Forbo Holding	270		172,225
Geberit	300		74,416
Kaba Holding	500		187,523
LEM Holding	200		128,738
Partners Group Holding	400		108,306
Straumann Holding	1,050		157,631
VZ Holding	900		125,774

Total (Cost $1,040,847)			1,207,877


United Kingdom – 19.5%
Abcam	17,500		120,706
Ashmore Group	32,500		169,894
Aveva Group	3,000		102,847
^†Consort Medical	11,000		139,281
Domino Printing Sciences	18,500		175,579
^†Lancashire Holdings	8,000		96,367
^†Latchways	8,500		154,814
Oxford Instruments	5,000		91,941
Rotork	3,000		121,828
Spirax-Sarco Engineering	2,407		98,369
Victrex	4,000		93,934

Total (Cost $1,273,695)			1,365,560

68 | The Royce Funds 2013 Semiannual Report to Shareholders

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

June 30, 2013 (unaudited)

		VALUE
TOTAL COMMON STOCKS
(Cost $6,557,457)	$	6,941,731


TOTAL INVESTMENTS – 99.3%
(Cost $6,557,457)		6,941,731

CASH AND OTHER ASSETS
LESS LIABILITIES – 0.7%		48,511


NET ASSETS – 100.0%	$	6,990,242

Royce Special Equity Multi-Cap Fund

	SHARES		VALUE
COMMON STOCKS – 96.4%

Consumer Discretionary – 24.0%
Distributors - 3.4%
Genuine Parts	69,075	$	5,392,685

Media - 1.6%
Scripps Networks Interactive Cl. A	37,900		2,530,204

Multiline Retail - 4.3%
Nordstrom	116,000		6,953,040

Specialty Retail - 14.7%
Bed Bath & Beyond ¹	114,500		8,118,050
Gap (The)	190,600		7,953,738
Staples	461,000		7,311,460

			23,383,248

Total (Cost $30,945,708)			38,259,177


Consumer Staples – 1.7%
Food & Staples Retailing - 1.2%
Walgreen Company	45,000		1,989,000

Food Products - 0.5%
Hormel Foods	20,500		790,890

Total (Cost $2,105,092)			2,779,890


Energy – 4.3%
Oil, Gas & Consumable Fuels - 4.3%
Occidental Petroleum	76,750		6,848,403

Total (Cost $6,706,836)			6,848,403


Financials – 0.8%
Capital Markets - 0.8%
^†Franklin Resources	9,500		1,292,190

Total (Cost $1,307,336)			1,292,190


Health Care – 14.7%
Health Care Equipment & Supplies - 9.1%
C.R. Bard	45,000		4,890,600
Medtronic	80,000		4,117,600
Stryker Corporation	84,500		5,465,460

			14,473,660

Health Care Providers & Services - 3.7%
Quest Diagnostics	97,500		5,911,425

Pharmaceuticals - 1.9%
Johnson & Johnson	35,000		3,005,100

Total (Cost $20,052,390)			23,390,185


Industrials – 23.8%
Aerospace & Defense - 3.2%
Raytheon Company	77,000		5,091,240

Electrical Equipment - 4.8%
Emerson Electric	139,000		7,581,060

Industrial Conglomerates - 2.7%
3M	39,150		4,281,052

Machinery - 13.1%
Cummins	36,350		3,942,521
Dover Corporation	82,800		6,430,248

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

The Royce Funds 2013 Semiannual Report to Shareholders | 69

Schedules of Investments	June 30, 2013 (unaudited)

Royce Special Equity Multi-Cap Fund (continued)

	SHARES		VALUE
Industrials (continued)
Machinery (continued)
Illinois Tool Works	66,675	$	4,611,910
Parker Hannifin	61,500		5,867,100

			20,851,779

Total (Cost $32,954,825)			37,805,131


Information Technology – 27.1%
Communications Equipment - 4.3%
Cisco Systems	280,000		6,806,800

Electronic Equipment, Instruments & Components - 7.4%
Avnet ¹	122,400		4,112,640
Molex Cl. A	311,000		7,731,460

			11,844,100

Semiconductors & Semiconductor Equipment - 10.9%
Analog Devices	119,050		5,364,393
Intel Corporation	249,000		6,030,780
KLA-Tencor	106,500		5,935,245

			17,330,418

Software - 4.5%
Microsoft Corporation	207,000		7,147,710

Total (Cost $38,368,423)			43,129,028


TOTAL COMMON STOCKS
(Cost $132,440,610)			153,504,004


			VALUE
REPURCHASE AGREEMENT – 4.2%
Fixed Income Clearing Corporation,
0.01% dated 6/28/13, due 7/1/13, maturity value $6,610,006 (collateralized by obligations of various U.S. Government Agencies, 0.30% due 12/11/13, valued at $6,743,419) (Cost $6,610,000)		$	6,610,000


TOTAL INVESTMENTS – 100.6%
(Cost $139,050,610)			160,114,004

LIABILITIES LESS CASH
AND OTHER ASSETS – (0.6)%			(934,833	)


NET ASSETS – 100.0%		$	159,179,171


^†	New additions in 2013.
¹	Non-income producing.
²	Includes securities first acquired in 2013 and less than 1% of net assets.
³	All or a portion of these securities have been segregated as collateral for short sales.
⁴	A security for which market quotations are not readily available represents 0.0% of net assets for Royce International Micro-Cap Fund. This security has been valued at its fair value under procedures approved by the Fund’s Board of Trustees. This security is defined as a Level 3 security due to the use of significant unobservable inputs in the determination of fair value. See Notes to Financial Statements.

	Securities of Global/International Funds are categorized by the country of their headquarters, with the exception of exchange-traded funds.

	Bold indicates a Fund’s 20 largest equity holdings in terms of June 30, 2013, market value.

70 | The Royce Funds 2013 Semiannual Report to Shareholders

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

Statements of Assets and Liabilities	June 30, 2013 (unaudited)

	Royce				Royce Micro-Cap				Royce			Royce
	Select				Discovery				Financial			Select
	Fund I				Fund				Services Fund			Fund II
ASSETS:
Investments at value		$	40,905,950			$	4,971,433			$	23,103,015		$	3,949,241
Repurchase agreements (at cost and value)			2,801,000				170,000				5,045,000			628,000
Cash and foreign currency			625				594				83			2,131
Receivable for investments sold			486,980				–				–			–
Receivable for capital shares sold			50				21,699				384,433			50
Receivable for dividends and interest			11,049				2,646				20,884			2,313
Prepaid expenses and other assets			372				24				81			–

Total Assets			44,206,026				5,166,396				28,553,496			4,581,735

LIABILITIES:
Securities sold short, at fair value			–				–				–			144,704
Payable for investments purchased			557,692				–				926,506			–
Payable for capital shares redeemed			–				–				76,633			–
Payable for investment advisory fees			36,445				–				13,150			–
Payable to brokers for securities sold short			–				–				–			45,805
Accrued expenses			16,703				15,311				20,511			–

Total Liabilities			610,840				15,311				1,036,800			190,509

Net Assets		$	43,595,186			$	5,151,085			$	27,516,696		$	4,391,226

ANALYSIS OF NET ASSETS:
Paid-in capital		$	32,843,453			$	4,832,541			$	23,264,580		$	3,873,233
Undistributed net investment income (loss)			(86,899	)			(15,580	)			164,289			28,038
Accumulated net realized gain (loss) on investments and foreign currency			3,566,542				(186,883	)			(952,196)			220,926
Net unrealized appreciation (depreciation) on investments and foreign currency			7,272,090				521,007				5,040,023			269,029

Net Assets		$	43,595,186			$	5,151,085			$	27,516,696		$	4,391,226

Investment Class		$	43,595,186										$	4,391,226
Service Class						$	5,151,085			$	27,516,696

SHARES OUTSTANDING (unlimited number of $.001 par value):
Investment Class			2,347,885											386,439
Service Class							876,924				3,386,730

NET ASSET VALUES (Net Assets ÷ Shares Outstanding):
Investment Class¹			$18.57											$11.36
Service Class²							$5.87				$8.12

Investments at identified cost		$	33,633,938			$	4,450,427			$	18,062,860		$	3,694,217
Proceeds of short sales			–				–				–			158,711
Aggregate value of segregated securities			–				–				–			854,400

Offering and redemption price per share; shares held less than 180 days may be subject to a 1% redemption fee for Royce Select Fund I, or a 2% redemption fee for Royce Select Fund II, payable to the Fund. From January 1-17, 2013, shares held less than 365 days may have been subject to a 2% redemption fee, payable to the Fund. From January 18 - April 30, 2013, shares held less than 180 days may have been subject to a 1% redemption fee, payable to the Fund.

Offering and redemption price per share; shares held less than 180 days may be subject to a 1% redemption fee, payable to the Fund.

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

The Royce Funds 2013 Semiannual Report to Shareholders | 71

Statements of Assets and Liabilities

	Royce				Royce				Royce			Royce
	Global Select				European Smaller-				Enterprise Select			SMid-Cap
	Long/Short Fund				Companies Fund				Fund			Value Fund
ASSETS:
Investments at value		$	12,458,609			$	17,838,664			$	1,508,155		$	9,289,331
Repurchase agreements (at cost and value)			315,000				257,000				516,000			1,338,000
Cash and foreign currency			15,567				127,988				1,347			4,606
Receivable for investments sold			98,144				472,563				–			–
Receivable for capital shares sold			50				6,750				–			7,297
Receivable for dividends and interest			32,067				52,296				866			13,255
Prepaid expenses and other assets			–				61				8			63

Total Assets			12,919,437				18,755,322				2,026,376			10,652,552

LIABILITIES:
Securities sold short, at fair value			2,174,493				–				–			–
Payable for investments purchased			–				105,519				23,795			–
Payable for capital shares redeemed			–				54,025				–			9,220
Payable for dividends and interest			7,364				–				–			–
Payable for investment advisory fees			–				8,975				–			–
Payable to brokers for securities sold short			101,857				–				–			–
Accrued expenses			–				18,004				7,328			18,378

Total Liabilities			2,283,714				186,523				31,123			27,598

Net Assets		$	10,635,723			$	18,568,799			$	1,995,253		$	10,624,954

ANALYSIS OF NET ASSETS:
Paid-in capital		$	12,609,142			$	20,243,843			$	1,734,420		$	15,795,126
Undistributed net investment income (loss)			248,585				110,791				(1,617)			7,672
Accumulated net realized gain (loss) on investments and foreign currency			(1,000,253	)			(2,053,163	)			125,327			(5,750,591	)
Net unrealized appreciation (depreciation) on investments and foreign currency			(1,221,751	)			267,328				137,123			572,747

Net Assets		$	10,635,723			$	18,568,799			$	1,995,253		$	10,624,954

Investment Class		$	10,635,723							$	1,995,253
Service Class						$	18,568,799						$	10,624,954

SHARES OUTSTANDING (unlimited number of $.001 par value):
Investment Class			687,231								172,808
Service Class							1,749,701							869,282

NET ASSET VALUES (Net Assets ÷ Shares Outstanding):
Investment Class¹			$15.48								$11.55
Service Class²							$10.61							$12.22

Investments at identified cost		$	13,421,915			$	17,567,905			$	1,371,032		$	8,716,367
Proceeds of short sales			1,916,909				–				–			–
Aggregate value of segregated securities			9,601,405				–				–			–

Offering and redemption price per share; shares held less than 180 days may be subject to a 2% redemption fee for Royce Global Select Long/Short Fund, or a 1% redemption fee for Royce Enterprise Select Fund, payable to the Fund. From January 1-17, 2013, shares held less than 365 days may have been subject to a 2% redemption fee, payable to the Fund. From January 18 - April 30, 2013, shares held less than 180 days may have been subject to a 1% redemption fee, payable to the Fund.

Offering and redemption price per share; shares held less than 180 days may be subject to a 2% redemption fee (Royce European Smaller-Companies Fund), or a 1% redemption fee (Royce SMid-Cap Value Fund), payable to the Fund.

72 | The Royce Funds 2013 Semiannual Report to Shareholders

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

June 30, 2013 (unaudited)

	Royce				Royce			Royce			Royce
	Focus Value				Partners			Opportunity			Global Dividend
	Fund				Fund			Select Fund			Value Fund
ASSETS:
Investments at value		$	9,281,375			$	2,250,405		$	6,966,344		$	7,449,870
Repurchase agreements (at cost and value)			1,033,000				161,000			269,000			627,000
Deposits with brokers for securities sold short			–				–			407,223			–
Cash and foreign currency			484				367			159			10,626
Receivable for investments sold			198,734				–			176,869			–
Receivable for capital shares sold			1,434				37			–			–
Receivable for dividends and interest			7,099				3,334			1,958			12,350
Prepaid expenses and other assets			47				11			–			46

Total Assets			10,522,173				2,415,154			7,821,553			8,099,892

LIABILITIES:
Securities sold short, at fair value			–				–			667,330			–
Payable for investments purchased			543,296				–			354,207			187,941
Payable for capital shares redeemed			40				–			–			–
Payable for dividends and interest			–				–			25			–
Payable for investment advisory fees			2,230				–			2,366			–
Accrued expenses			12,354				7,192			6,360			8,720

Total Liabilities			557,920				7,192			1,030,288			196,661

Net Assets		$	9,964,253			$	2,407,962		$	6,791,265		$	7,903,231

ANALYSIS OF NET ASSETS:
Paid-in capital		$	8,655,144			$	1,888,044		$	5,706,204		$	8,034,864
Undistributed net investment income (loss)			(58,695	)			13,870			(20,681)			35,850
Accumulated net realized gain (loss) on investments and foreign currency			(74,852	)			118,746			349,163			(120,053	)
Net unrealized appreciation (depreciation) on investments and foreign currency			1,442,656				387,302			756,579			(47,430	)

Net Assets		$	9,964,253			$	2,407,962		$	6,791,265		$	7,903,231

Investment Class									$	6,791,265
Service Class		$	9,964,253			$	2,407,962					$	7,903,231

SHARES OUTSTANDING (unlimited number of $.001 par value):
Investment Class										449,700
Service Class			647,622				178,358						772,136

NET ASSET VALUES (Net Assets ÷ Shares Outstanding):
Investment Class¹										$15.10
Service Class²			$15.39				$13.50						$10.24

Investments at identified cost		$	7,838,691			$	1,863,091		$	6,156,619		$	7,497,440
Proceeds of short sales			–				–			614,184			–
Aggregate value of segregated securities			–				–			765,191			–

¹	Offering and redemption price per share; shares held less than 180 days may be subject to a 1% redemption fee, payable to the Fund. From January 1-17, 2013, shares held less than 365 days may have been subject to a 2% redemption fee, payable to the Fund.
²	Offering and redemption price per share; shares held less than 180 days may be subject to a 1% redemption fee, or a 2% redemption fee (Royce Global Dividend Value Fund), payable to the Fund.

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

The Royce Funds 2013 Semiannual Report to Shareholders | 73

Statements of Assets and Liabilities	June 30, 2013 (unaudited)

	Royce				Royce			Royce
	International				International			Special Equity
	Micro-Cap Fund				Premier Fund			Multi-Cap Fund
ASSETS:
Investments at value		$	3,891,105			$	6,941,731		$	153,504,004
Repurchase agreements (at cost and value)			137,000				–			6,610,000
Cash and foreign currency			5,114				49,183			238
Receivable for investments sold			20,035				43,099			1,024,528
Receivable for capital shares sold			12,714				–			69,566
Receivable for dividends and interest			3,969				14,281			287,452
Prepaid expenses and other assets			22				25			830

Total Assets			4,069,959				7,048,319			161,496,618

LIABILITIES:
Payable for investments purchased			16,837				45,657			2,188,363
Payable for capital shares redeemed			–				–			646
Payable for investment advisory fees			–				604			121,567
Accrued expenses			12,419				11,816			6,871

Total Liabilities			29,256				58,077			2,317,447

Net Assets		$	4,040,703			$	6,990,242		$	159,179,171

ANALYSIS OF NET ASSETS:
Paid-in capital		$	5,321,897			$	6,915,047		$	133,570,913
Undistributed net investment income (loss)			24,085				33,797			641,961
Accumulated net realized gain (loss) on investments and foreign currency			(995,918	)			(342,845)			3,902,903
Net unrealized appreciation (depreciation) on investments and foreign currency			(309,361	)			384,243			21,063,394

Net Assets		$	4,040,703			$	6,990,242		$	159,179,171

Investment Class									$	50,209,188
Service Class		$	4,040,703			$	6,990,242			63,074,022
Institutional Class										45,895,961

SHARES OUTSTANDING (unlimited number of $.001 par value):
Investment Class										3,656,067
Service Class			471,343				667,742			4,583,251
Institutional Class										3,340,489

NET ASSET VALUES (Net Assets ÷ Shares Outstanding):
Investment Class¹										$13.73
Service Class²			$8.57				$10.47			13.76
Institutional Class³										13.74

Investments at identified cost		$	4,200,264			$	6,557,457		$	132,440,610

¹	Offering and redemption price per share; shares held less than 180 days may be subject to a 1% redemption fee, payable to the Fund.
²	Offering and redemption price per share; shares held less than 180 days may be subject to a 2% redemption fee, or a 1% redemption fee (Royce Special Equity Multi-Cap Fund), payable to the Fund.
³	Offering and redemption price per share.

74 | The Royce Funds 2013 Semiannual Report to Shareholders

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

Statements of Changes in Net Assets

									Royce Micro-Cap
	Royce Select Fund I								Discovery Fund							Royce Financial Services Fund

	Six months ended								Six months ended							Six months ended
	6/30/13				Year ended				6/30/13				Year ended			6/30/13				Year ended
	(unaudited)				12/31/12				(unaudited)				12/31/12			(unaudited)				12/31/12
INVESTMENT OPERATIONS:
Net investment income (loss)		$	(93,214	)		$	829,042			$	(15,580	)		$	34,721		$	100,858			$	241,534
Net realized gain (loss) on investments and foreign currency			3,566,873				3,357,629				241,141				583			(141,324	)			705,504
Net change in unrealized appreciation (depreciation) on investments and foreign currency			(194,739	)			2,098,657				337,078				125,030			3,460,537				1,868,205

Net increase (decrease) in net assets from investment operations			3,278,920				6,285,328				562,639				160,334			3,420,071				2,815,243

DISTRIBUTIONS:
Net investment income
Investment Class			–				(805,821	)
Service Class											–				(40,240)			–				(153,360	)
Net realized gain on investments and foreign currency
Investment Class			–				(4,035,586	)
Service Class											–				–			–				–

Total distributions			–				(4,841,407	)			–				(40,240 )			–				(153,360	)

CAPITAL SHARE TRANSACTIONS:
Net capital share transactions
Investment Class			(9,540,880	)			1,066,334
Service Class											120,132				727,013			7,203,245				127,677
Shareholder redemption fees
Investment Class			1,025				635
Service Class											88				357			4,993				3,274

Net increase (decrease) in net assets from capital share transactions			(9,539,855	)			1,066,969				120,220				727,370			7,208,238				130,951

NET INCREASE (DECREASE) IN NET ASSETS			(6,260,935	)			2,510,890				682,859				847,464			10,628,309				2,792,834
NET ASSETS:
Beginning of period			49,856,121				47,345,231				4,468,226				3,620,762			16,888,387				14,095,553

End of period		$	43,595,186			$	49,856,121			$	5,151,085			$	4,468,226		$	27,516,696			$	16,888,387

UNDISTRIBUTED NET INVESTMENT INCOME (LOSS) AT END OF PERIOD		$	(86,899	)		$	6,316			$	(15,580	)		$	–		$	164,289			$	63,430

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

The Royce Funds 2013 Semiannual Report to Shareholders | 75

Statements of Changes in Net Assets

									Royce Global Select							Royce European Smaller-
	Royce Select Fund II								Long/Short Fund							Companies Fund

	Six months ended								Six months ended							Six months ended
	6/30/13				Year ended				6/30/13				Year ended					6/30/13		Year ended
	(unaudited)				12/31/12				(unaudited)				12/31/12			(unaudited)				12/31/12

INVESTMENT OPERATIONS:
Net investment income (loss)		$	29,459			$	66,556			$	248,585			$	581,341		$	179,434			$	201,539
Net realized gain (loss) on investments and foreign currency			210,614				134,060				321,664				(977,654)			517,211				(220,323	)
Net change in unrealized appreciation (depreciation) on investments and foreign currency			(30,295	)			277,321				(1,915,664	)			3,298,845			(389,746	)			3,337,255

Net increase (decrease) in net assets from investment operations			209,778				477,937				(1,345,415	)			2,902,532			306,899				3,318,471

DISTRIBUTIONS:
Net investment income
Investment Class			–				(55,366	)			–				(610,348)
Service Class																		–				(225,920	)
Net realized gain on investments and foreign currency
Investment Class			–				(160,636	)			–				–
Service Class																		–				–

Total distributions			–				(216,002	)			–				(610,348)			–				(225,920	)

CAPITAL SHARE TRANSACTIONS:
Net capital share transactions
Investment Class			561,356				(61,887	)			(8,978,443	)			(3,844,018)
Service Class																		2,398,001				(3,163,201	)
Shareholder redemption fees
Investment Class			34				–				596				4,038
Service Class																		9,695				6,989

Net increase (decrease) in net assets from capital share transactions			561,390				(61,887	)			(8,977,847	)			(3,839,980)			2,407,696				(3,156,212	)

NET INCREASE (DECREASE) IN NET ASSETS			771,168				200,048				(10,323,262	)			(1,547,796)			2,714,595				(63,661	)
NET ASSETS:
Beginning of period			3,620,058				3,420,010				20,958,985				22,506,781			15,854,204				15,917,865

End of period		$	4,391,226			$	3,620,058			$	10,635,723			$	20,958,985		$	18,568,799			$	15,854,204

UNDISTRIBUTED NET INVESTMENT INCOME (LOSS) AT END OF PERIOD		$	28,038			$	(1,421	)		$	248,585			$	–		$	110,791			$	(68,643	)

76 | The Royce Funds 2013 Semiannual Report to Shareholders

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

	Royce Enterprise Select Fund								Royce SMid-Cap Value Fund								Royce Focus Value Fund

	Six months ended								Six months ended								Six months ended
	6/30/13				Year ended				6/30/13				Year ended				6/30/13				Year ended
	(unaudited)				12/31/12				(unaudited)				12/31/12				(unaudited)				12/31/12

INVESTMENT OPERATIONS:
Net investment income (loss)		$	(3,684	)		$	2,143			$	7,672			$	(3,245	)		$	9,196			$	31,675
Net realized gain (loss) on investments and foreign currency			122,655				127,475				194,388				(206,122	)			93,757				(105,119	)
Net change in unrealized appreciation (depreciation) on investments and foreign currency			26,855				46,734				335,357				1,627,478				268,492				871,968

Net increase (decrease) in net assets from investment operations			145,826				176,352				537,417				1,418,111				371,445				798,524

DISTRIBUTIONS:
Net investment income
Investment Class			–				(80	)
Service Class											–				–				–				(155,697	)
Net realized gain on investments and foreign currency
Investment Class			–				(119,739	)
Service Class											–				–				–				(1,950	)

Total distributions			–				(119,819	)			–				–				–				(157,647	)

CAPITAL SHARE TRANSACTIONS:
Net capital share transactions
Investment Class			550,704				119,229
Service Class											(1,053,269	)			(613,301	)			717,865				(494,067	)
Shareholder redemption fees
Service Class											365				8,222				–				664

Net increase (decrease) in net assets from capital share transactions			550,704				119,229				(1,052,904	)			(605,079	)			717,865				(493,403	)

NET INCREASE (DECREASE) IN NET ASSETS			696,530				175,762				(515,487	)			813,032				1,089,310				147,474
NET ASSETS:
Beginning of period			1,298,723				1,122,961				11,140,441				10,327,409				8,874,943				8,727,469

End of period		$	1,995,253			$	1,298,723			$	10,624,954			$	11,140,441			$	9,964,253			$	8,874,943

UNDISTRIBUTED NET INVESTMENT INCOME (LOSS) AT END OF PERIOD		$	(1,617	)		$	2,068			$	7,672			$	–			$	(58,695	)		$	(67,891	)

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

The Royce Funds 2013 Semiannual Report to Shareholders | 77

Statements of Changes in Net Assets

																Royce Global Dividend
	Royce Partners Fund							Royce Opportunity Select Fund								Value Fund

	Six months ended							Six months ended								Six months ended
	6/30/13			Year ended				6/30/13				Year ended				6/30/13				Year ended
	(unaudited)			12/31/12				(unaudited)				12/31/12				(unaudited)				12/31/12

INVESTMENT OPERATIONS:
Net investment income (loss)		$	8,378		$	6,241			$	(19,091	)		$	16,146			$	83,741			$	110,305
Net realized gain (loss) on investments and foreign currency			123,001			70,836				341,985				219,405				6,960				(71,639	)
Net change in unrealized appreciation (depreciation) on investments and foreign currency			122,715			274,404				350,677				522,838				9,348				1,214,840

Net increase (decrease) in net assets from investment operations			254,094			351,481				673,571				758,389				100,049				1,253,506

DISTRIBUTIONS:
Net investment income
Investment Class										–				(27,185	)
Service Class			–			(632	)											(45,677	)			(109,924	)
Net realized gain on investments and foreign currency
Investment Class										–				(205,395	)
Service Class			–			(76,810	)											–				–

Total distributions			–			(77,442	)			–				(232,580	)			(45,677	)			(109,924	)

CAPITAL SHARE TRANSACTIONS:
Net capital share transactions
Investment Class										2,916,590				570,739
Service Class			70,601			126,723												1,135,742				(571,143	)
Shareholder redemption fees
Investment Class										2,701				–
Service Class			218			31												4,949				1,040

Net increase (decrease) in net assets from capital share transactions			70,819			126,754				2,919,291				570,739				1,140,691				(570,103	)

NET INCREASE (DECREASE) IN NET ASSETS			324,913			400,793				3,592,862				1,096,548				1,195,063				573,479
NET ASSETS:
Beginning of period			2,083,049			1,682,256				3,198,403				2,101,855				6,708,168				6,134,689

End of period		$	2,407,962		$	2,083,049			$	6,791,265			$	3,198,403			$	7,903,231			$	6,708,168

UNDISTRIBUTED NET INVESTMENT INCOME (LOSS) AT END OF PERIOD		$	13,870		$	5,492			$	(20,681	)		$	(1,590	)		$	35,850			$	(2,214	)

78 | The Royce Funds 2013 Semiannual Report to Shareholders

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

	Royce International								Royce International							Royce Special Equity
	Micro-Cap Fund								Premier Fund							Multi-Cap Fund

	Six months ended								Six months ended							Six months ended
	6/30/13				Year ended				6/30/13			Year ended				6/30/13			Year ended
	(unaudited)				12/31/12				(unaudited)			12/31/12				(unaudited)			12/31/12

INVESTMENT OPERATIONS:
Net investment income (loss)		$	37,255			$	68,271			$	57,179		$	49,640			$	624,351		$	1,123,620
Net realized gain (loss) on investments and foreign currency			(43,220	)			(138,773	)			159,665			(382,792	)			2,935,665			1,858,816
Net change in unrealized appreciation (depreciation) on investments and foreign currency			(7,937	)			572,117				73,979			1,268,471				17,524,393			2,863,481

Net increase (decrease) in net assets from investment operations			(13,902	)			501,615				290,823			935,319				21,084,409			5,845,917

DISTRIBUTIONS:
Net investment income
Investment Class																		–			(375,548	)
Service Class			–				(79,547	)			–			(76,745	)			–			(329,533	)
Institutional Class																		–			(400,930	)
Net realized gain on investments and foreign currency
Investment Class																		–			(280,238	)
Service Class			–				–				–			–				–			(388,479	)
Institutional Class																		–			(273,181	)

Total distributions			–				(79,547	)			–			(76,745	)			–			(2,047,909	)

CAPITAL SHARE TRANSACTIONS:
Net capital share transactions
Investment Class																		8,909,844			34,833,917
Service Class			(551,972	)			608,323				253,966			1,495,086				11,586,974			2,291,212
Institutional Class																		8,625,101			31,218,929
Shareholder redemption fees
Investment Class																		558			2,238
Service Class			3,132				1,344				1,540			462				2,446			14,274

Net increase (decrease) in net assets from capital share transactions			(548,840	)			609,667				255,506			1,495,548				29,124,923			68,360,570

NET INCREASE (DECREASE) IN NET ASSETS			(562,742	)			1,031,735				546,329			2,354,122				50,209,332			72,158,578
NET ASSETS:
Beginning of period			4,603,445				3,571,710				6,443,913			4,089,791				108,969,839			36,811,261

End of period		$	4,040,703			$	4,603,445			$	6,990,242		$	6,443,913			$	159,179,171		$	108,969,839

UNDISTRIBUTED NET INVESTMENT INCOME (LOSS) AT END OF PERIOD		$	24,085			$	(13,170	)		$	33,797		$	(23,382	)		$	641,961		$	17,610

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

The Royce Funds 2013 Semiannual Report to Shareholders | 79

Statements of Operations	Six Months Ended June 30, 2013 (unaudited)

	Royce				Royce Micro-Cap				Royce				Royce				Royce
	Select				Discovery				Financial				Select				Global Select
	Fund I				Fund				Services Fund				Fund II				Long/Short Fund
INVESTMENT INCOME:
Income:
Dividends		$	191,661			$	21,079			$	273,787			$	32,678			$	323,268
Foreign withholding tax			(10,476	)			(271	)			(7,804	)			(2,171	)			(35,859	)
Interest			625				41				287				69				593

Total income			181,810				20,849				266,270				30,576				288,002

Expenses:
Investment advisory fees			236,846				24,449				111,015				–				–
Distribution fees			–				6,112				27,754				–				–
Audit			7,339				6,993				6,996				–				–
Custody			7,267				3,944				10,746				–				–
Shareholder servicing			6,620				7,480				15,304				–				–
Shareholder reports			6,601				3,032				14,862				–				–
Registration			5,664				7,801				9,036				–				–
Administrative and office facilities			2,814				245				981				–				–
Trustees’ fees			855				71				278				–				–
Legal			275				23				92				–				–
Dividends on securities sold short			–				–				–				391				28,375
Interest expense			–				–				–				726				11,042
Other expenses			752				335				469				–				–

Total expenses			275,033				60,485				197,533				1,117				39,417
Compensating balance credits			(9	)			(10	)			(25	)			–				–
Fees waived by investment adviser and distributor			–				(24,046	)			(32,096	)			–				–
Expenses reimbursed by investment adviser			–				–				–				–				–

Net expenses			275,024				36,429				165,412				1,117				39,417

Net investment income (loss)			(93,214	)			(15,580	)			100,858				29,459				248,585

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain (loss):
Investments			3,565,945				241,141				(139,574	)			212,262				332,617
Foreign currency transactions			928				–				(1,750	)			(1,648	)			(10,953	)
Net change in unrealized appreciation (depreciation):
Investments and foreign currency translations			(194,923	)			337,078				3,460,674				(30,294	)			(1,916,221	)
Other assets and liabilities denominated in foreign currency			184				–				(137	)			(1	)			557

Net realized and unrealized gain (loss) on investments and foreign currency			3,372,134				578,219				3,319,213				180,319				(1,594,000	)

NET INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS		$	3,278,920			$	562,639			$	3,420,071			$	209,778			$	(1,345,415	)

80 | The Royce Funds 2013 Semiannual Report to Shareholders

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

Statements of Operations	Six Months Ended June 30, 2013 (unaudited)

	Royce				Royce				Royce				Royce				Royce
	European Smaller-				Enterprise Select				SMid-Cap				Focus Value				Partners
	Companies Fund				Fund				Value Fund				Fund				Fund
INVESTMENT INCOME:
Income:
Dividends		$	383,834			$	5,610			$	86,940			$	73,953			$	25,394
Foreign withholding tax			(48,607	)			(10	)			(4,288	)			(1,879	)			(1,447	)
Interest			117				45				159				41				24

Total income			335,344				5,645				82,811				72,115				23,971

Expenses:
Investment advisory fees			115,318				7,524				55,659				46,606				11,550
Distribution fees			23,064				–				13,915				11,652				2,888
Audit			6,996				7,317				6,995				7,372				7,320
Custody			14,799				4,401				9,073				8,762				8,771
Shareholder servicing			16,026				2,990				8,753				7,187				5,740
Shareholder reports			10,502				99				7,971				2,478				1,182
Registration			9,312				3,483				9,089				7,367				3,875
Administrative and office facilities			944				72				643				517				116
Trustees’ fees			277				22				191				155				33
Legal			89				7				60				49				10
Other expenses			492				277				427				404				317

Total expenses			197,819				26,192				112,776				92,549				41,802
Compensating balance credits			(23	)			–				(11	)			(6	)			(31	)
Fees waived by investment adviser and distributor			(41,886	)			(7,524	)			(37,626	)			(29,624	)			(11,550	)
Expenses reimbursed by investment adviser			–				(9,339	)			–				–				(14,628	)

Net expenses			155,910				9,329				75,139				62,919				15,593

Net investment income (loss)			179,434				(3,684	)			7,672				9,196				8,378

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain (loss):
Investments			521,083				122,656				194,299				93,017				123,400
Foreign currency transactions			(3,872	)			(1	)			89				740				(399	)
Net change in unrealized appreciation (depreciation):
Investments and foreign currency translations			(386,714	)			26,853				335,449				268,494				122,727
Other assets and liabilities denominated in foreign currency			(3,032	)			2				(92	)			(2	)			(12	)

Net realized and unrealized gain (loss) on investments and foreign currency			127,465				149,510				529,745				362,249				245,716

NET INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS		$	306,899			$	145,826			$	537,417			$	371,445			$	254,094

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

The Royce Funds 2013 Semiannual Report to Shareholders | 81

Statements of Operations	Six Months Ended June 30, 2013 (unaudited)

	Royce				Royce				Royce				Royce				Royce
	Opportunity				Global Dividend				International				International				Special Equity
	Select Fund				Value Fund				Micro-Cap Fund				Premier Fund				Multi-Cap Fund
INVESTMENT INCOME:
Income:
Dividends		$	11,147			$	163,986			$	83,636			$	130,019			$	1,426,186
Foreign withholding tax			–				(15,223	)			(7,820	)			(14,378	)			–
Interest			28				54				28				43				1,054

Total income			11,175				148,817				75,844				115,684				1,427,240

Expenses:
Investment advisory fees			23,769				48,133				29,684				43,273				666,978
Distribution fees			–				9,627				5,708				8,655				62,905
Audit			7,293				6,994				8,783				7,398				14,192
Custody			5,593				13,886				15,297				13,727				11,106
Shareholder servicing			3,056				8,096				6,867				7,196				42,907
Shareholder reports			201				5,467				2,060				2,545				29,755
Registration			3,028				9,650				10,043				9,657				22,263
Administrative and office facilities			170				391				250				296				5,380
Trustees’ fees			46				114				73				79				1,400
Legal			15				37				24				28				492
Dividends on securities sold short			405				–				–				–				–
Interest expense			387				–				–				–				–
Other expenses			1,350				367				345				379				1,607

Total expenses			45,313				102,762				79,134				93,233				858,985
Compensating balance credits			(1	)			(19	)			(10	)			(4	)			(25	)
Fees waived by investment adviser and distributor			(15,046	)			(37,667	)			(29,912	)			(34,724	)			(10,003	)
Expenses reimbursed by investment adviser			–				–				(10,623	)			–				(46,068	)

Net expenses			30,266				65,076				38,589				58,505				802,889

Net investment income (loss)			(19,091	)			83,741				37,255				57,179				624,351

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain (loss):
Investments			341,985				8,795				(41,952	)			160,276				2,935,665
Foreign currency transactions			–				(1,835	)			(1,268	)			(611	)			–
Net change in unrealized appreciation (depreciation):
Investments and foreign currency translations			350,677				9,432				(7,599	)			74,019				17,524,393
Other assets and liabilities denominated in foreign currency			–				(84	)			(338	)			(40	)			–

Net realized and unrealized gain (loss) on investments and foreign currency			692,662				16,308				(51,157	)			233,644				20,460,058

NET INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS		$	673,571			$	100,049			$	(13,902	)		$	290,823			$	21,084,409

82 | The Royce Funds 2013 Semiannual Report to Shareholders

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

Financial Highlights

This table is presented to show selected data for a share outstanding throughout each period, and to assist shareholders in evaluating a Fund’s performance for the periods presented. Per share amounts have been determined on the basis of the weighted average number of shares outstanding during the period.


	Net		Net			Net Realized and Unrealized						Distributions			Distributions from Net																	Ratio of Expenses to Average Net Assets									Ratio of Net Investment
	Asset Value, Beginning of Period		Investment Income (Loss)			Gain (Loss) on Investments and Foreign Currency			Total from Investment Operations			from Net Investment Income			Realized Gain on Investments and Foreign Currency			Distributions from Return of Capital		Total Distributions			Shareholder Redemption Fees		Net Asset Value, End of Period		Total Return			Net Assets, End of Period (in thousands)		Prior to Fee Waivers and Balance Credits			Prior to Fee Waivers			Net of Fee Waivers			Income (Loss) to Average Net Assets			Portfolio Turnover Rate

Royce Select Fund I – Investment Class
^†2013	$	17.40	$	(0.04	)	$	1.21		$	1.17		$	–		$	–		$	–	$	–		$	–	$	18.57		6.72	%¹	$	43,595		1.15	%²		1.15	%²		1.15	%²		(0.39	)%²		30	%
2012		16.93		0.31			1.95			2.26			(0.30	)		(1.49	)		–		(1.79	)		–		17.40		13.68			49,856		0.00			0.00			0.00			1.68			54
2011		20.32		(0.16	)		(0.67	)		(0.83	)		–			(2.56	)		–		(2.56	)		–		16.93		(3.61	)		47,345		1.45			1.45			1.45			(0.78	)		63
2010		17.42		(0.23	)		3.39			3.16			–			(0.26	)		–		(0.26	)		–		20.32		18.15			58,788		2.37			2.37			2.37			(1.26	)		49
2009		12.59		0.15			4.83			4.98			(0.15	)		–			–		(0.15	)		–		17.42		39.59			33,896		0.01			0.01			0.01			1.28			80
2008		18.20		0.19			(4.93	)		(4.74	)		(0.16	)		(0.71	)		–		(0.87	)		–		12.59		(25.91	)		17,480		0.08			0.08			0.08			1.25			116
Royce Micro-Cap Discovery Fund – Service Class
^†2013	$	5.23	$	(0.02	)	$	0.66		$	0.64		$	–		$	–		$	–	$	–		$	–	$	5.87		12.24	%¹	$	5,151		2.47	%²		2.47	%²		1.49	%²		(0.64	)%²		34	%
2012		5.12		0.04			0.12			0.16			(0.05	)		–			–		(0.05	)		–		5.23		3.10			4,468		2.94			2.94			1.49			0.85			87
2011		5.24		(0.04	)		(0.09	)		(0.13	)		(0.00	)		–			–		(0.00	)		0.01		5.12		(2.24	)		3,621		2.99			2.99			1.49			(0.71	)		72
2010		4.38		(0.01	)		0.87			0.86			–			–			–		–			–		5.24		19.63			3,637		3.04			3.04			1.49			(0.19	)		105
2009		3.48		(0.01	)		0.91			0.90			–			–			–		–			–		4.38		25.86			2,910		3.56			3.56			1.49			(0.30	)		13
2008		5.85		(0.01	)		(2.06	)		(2.07	)		–			(0.30	)		–		(0.30	)		–		3.48		(35.07	)		2,332		2.77			2.77			1.49			(0.22	)		63
Royce Financial Services Fund – Service Class
^†2013	$	6.83	$	0.04		$	1.25		$	1.29		$	–		$	–		$	–	$	–		$	–	$	8.12		18.89	%¹	$	27,517		1.78	%²		1.78	%²		1.49	%²		0.91	%²		3	%
2012		5.71		0.10			1.08			1.18			(0.06	)		–			–		(0.06	)		–		6.83		20.72			16,888		1.87			1.87			1.49			1.53			26
2011		6.50		0.05			(0.78	)		(0.73	)		(0.06	)		–			–		(0.06	)		–		5.71		(11.29	)		14,096		1.84			1.84			1.49			0.73			23
2010		5.57		0.07			0.96			1.03			(0.10	)		–			–		(0.10	)		–		6.50		18.45			14,688		1.94			1.94			1.49			1.14			16
2009		4.25		0.04			1.31			1.35			(0.04	)		–			–		(0.04	)		0.01		5.57		32.13			13,525		2.06			2.06			1.49			0.90			34
2008		6.71		0.07			(2.46	)		(2.39	)		(0.05	)		(0.03	)		–		(0.08	)		0.01		4.25		(35.37	)		9,553		2.35			2.34			1.49			1.85			48
Royce Select Fund II – Investment Class
^†2013	$	10.68	$	0.09		$	0.59		$	0.68		$	–		$	–		$	–	$	–		$	–	$	11.36		6.37	%¹	$	4,391		0.03	%¹		0.03	%¹		0.03	%¹		0.75	%¹		80	%
2012		9.95		0.20			1.19			1.39			(0.17	)		(0.49	)		–		(0.66	)		–		10.68		14.23			3,620		0.19			0.19			0.19			1.86			123
2011		13.90		(0.01	)		(2.04	)		(2.05	)		–			(1.90	)		–		(1.90	)		–		9.95		(14.35	)		3,420		1.29			1.29			1.29			(0.09	)		153
2010		11.62		(0.18	)		2.60			2.42			(0.00	)		(0.15	)		–		(0.15	)		0.01		13.90		20.96			5,141		2.77			2.77			2.77			(1.47	)		126
2009		7.02		0.03			4.64			4.67			(0.07	)		–			–		(0.07	)		–		11.62		66.58			4,109		0.67			0.67			0.67			0.53			114
2008		10.66		0.09			(3.65	)		(3.56	)		(0.08	)		–			–		(0.08	)		–		7.02		(33.37	)		1,698		0.24			0.24			0.24			0.98			268
Royce Global Select Long/Short Fund – Investment Class
^†2013	$	17.04	$	0.23		$	(1.79	)	$	(1.56	)	$	–		$	–		$	–	$	–		$	–	$	15.48		(9.15	)%¹	$	10,636		0.22	%¹		0.22	%¹		0.22	%¹		1.37	%¹		81	%
2012		15.38		0.47			1.68			2.15			(0.49	)		–			–		(0.49	)		–		17.04		14.02			20,959		0.57			0.57			0.57			2.57			77
2011		19.89		0.25			(3.83	)		(3.58	)		(0.25	)		(0.70	)		–		(0.95	)		0.02		15.38		(17.77	)		22,507		0.98			0.98			0.98			1.46			45
2010		14.97		(0.26	)		5.22			4.96			(0.05	)		–			–		(0.05	)		0.01		19.89		33.21			16,355		3.48			3.48			3.48			(1.55	)		80
2009		9.76		0.18			5.27			5.45			(0.26	)		–			–		(0.26	)		0.02		14.97		56.11			9,117		0.00			0.00			0.00			1.55			85
2008		15.01		0.23			(5.40	)		(5.17	)		–			(0.09	)		–		(0.09	)		0.01		9.76		(34.39	)		6,049		0.50			0.50			0.50			1.75			41


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.	The Royce Funds 2013 Semiannual Report to Shareholders \| 83

Financial Highlights


	Net		Net			Net Realized and Unrealized						Distributions			Distributions from Net																	Ratio of Expenses to Average Net Assets									Ratio of Net Investment
	Asset Value, Beginning of Period		Investment Income (Loss)			Gain (Loss) on Investments and Foreign Currency			Total from Investment Operations			from Net Investment Income			Realized Gain on Investments and Foreign Currency			Distributions from Return of Capital		Total Distributions			Shareholder Redemption Fees		Net Asset Value, End of Period		Total Return			Net Assets, End of Period (in thousands)		Prior to Fee Waivers and Balance Credits			Prior to Fee Waivers			Net of Fee Waivers			Income (Loss) to Average Net Assets			Portfolio Turnover Rate

Royce European Smaller-Companies Fund – Service Class
^†2013	$	10.37	$	0.10		$	0.13		$	0.23		$	–		$	–		$	–	$	–		$	0.01	$	10.61		2.31	%¹	$	18,569		2.14	%²		2.14	%²		1.69	%²		1.94	%²		27	%
2012		8.50		0.14			1.88			2.02			(0.15	)		–			–		(0.15	)		–		10.37		23.83			15,854		2.13			2.13			1.69			1.29			22
2011		10.79		0.10			(2.31	)		(2.21	)		(0.10	)		–			–		(0.10	)		0.02		8.50		(20.32	)		15,918		2.09			2.09			1.69			0.95			36
2010		8.06		0.03			2.79			2.82			(0.10	)		–			–		(0.10	)		0.01		10.79		35.20			15,369		2.57			2.57			1.69			0.70			32
2009		5.19		0.06			2.93			2.99			(0.12	)		–			–		(0.12	)		–		8.06		57.69			6,887		3.21			3.21			1.69			1.11			51
2008		10.14		0.22			(4.95	)		(4.73	)		(0.23	)		–			–		(0.23	)		0.01		5.19		(46.38	)		4,044		2.74			2.72			1.69			2.22			88
Royce Enterprise Select Fund – Investment Class
^†2013	$	10.36	$	(0.03	)	$	1.22		$	1.19		$	–		$	–		$	–	$	–		$	–	$	11.55		11.49	%¹	$	1,995		3.48	%²		3.48	%²		1.24	%²		(0.49	)%²		77	%
2012		9.88		0.02			1.51			1.53			(0.00	)		(1.05	)		–		(1.05	)		–		10.36		15.68			1,299		0.98	²		0.98	²		0.81	²		0.18	²		127
2011		10.43		(0.04	)		0.09			0.05			–			(0.60	)		–		(0.60	)		–		9.88		0.66			1,123		1.31			1.31			1.31			(0.42	)		136
2010		8.95		0.05			1.49			1.54			(0.06	)		–			–		(0.06	)		–		10.43		17.22			1,158		0.70			0.70			0.70			0.50			166
2009		7.33		0.07			1.62			1.69			(0.07	)		–			–		(0.07	)		–		8.95		23.13			1,150		0.03			0.03			0.03			0.88			415
2008		10.04		0.13			(2.80	)		(2.67	)		(0.12	)		(0.02	)		–		(0.14	)		0.10		7.33		(25.53	)		917		0.28			0.28			0.28			1.48			764
Royce SMid-Cap Value Fund – Service Class
^†2013	$	11.66	$	0.01		$	0.55		$	0.56		$	–		$	–		$	–	$	–		$	–	$	12.22		4.80	%¹	$	10,625		2.03	%²		2.03	%²		1.35	%²		0.14	%²		17	%
2012		10.10		(0.00	)		1.55			1.55			–			–			–		–			0.01		11.66		15.45			11,140		1.90			1.90			1.35			(0.03	)		46
2011		11.44		(0.06	)		(1.27	)		(1.33	)		(0.02	)		–			–		(0.02	)		0.01		10.10		(11.57	)		10,327		1.95			1.95			1.49			(0.54	)		54
2010		9.08		(0.03	)		2.39			2.36			–			–			–		–			–		11.44		25.99			6,195		2.40			2.40			1.49			(0.26	)		126
2009		7.06		(0.01	)		2.03			2.02			(0.01	)		–			–		(0.01	)		0.01		9.08		28.75			7,365		2.03			2.03			1.49			(0.20	)		216
2008		9.99		0.02			(2.96	)		(2.94	)		(0.01	)		–			–		(0.01	)		0.02		7.06		(29.27	)		14,059		2.05			2.04			1.49			0.31			397
Royce Focus Value Fund – Service Class ^a
^†2013	$	14.74	$	0.01		$	0.64		$	0.65		$	–		$	–		$	–	$	–		$	–	$	15.39		4.41	%¹	$	9,964		1.99	%²		1.99	%²		1.35	%²		0.20	%²		85	%
2012		13.75		0.06			1.20			1.26			(0.27	)		(0.00	)		–		(0.27	)		–		14.74		9.20			8,875		2.05			2.05			1.35			0.35			21
2011		16.59		(0.05	)		(2.25	)		(2.30	)		–			(0.54	)		–		(0.54	)		–		13.75		(13.88	)		8,727		1.97			1.97			1.49			(0.31	)		25
2010		14.82		(0.06	)		2.30			2.24			(0.06	)		(0.41	)		–		(0.47	)		–		16.59		15.16			8,942		1.95			1.95			1.49			(0.32	)		31
2009		10.00		0.00			5.31			5.31			(0.05	)		(0.44	)		–		(0.49	)		–		14.82		53.27	¹		4,796		2.97	²		2.97	²		1.49	²		0.17	²		21
Royce Partners Fund – Service Class ^b
^†2013	$	12.04	$	0.05		$	1.41		$	1.46		$	–		$	–		$	–	$	–		$	–	$	13.50		12.13	%¹	$	2,408		3.62	%²		3.62	%²		1.35	%²		0.73	%²		34	%
2012		10.37		0.04			2.10			2.14			(0.01	)		(0.46	)		–		(0.47	)		–		12.04		20.74			2,083		4.83			4.83			1.35			0.33			31
2011		13.15		(0.03	)		(1.52	)		(1.55	)		(0.05	)		(1.18	)		–		(1.23	)		–		10.37		(11.66	)		1,682		4.25			4.25			1.49			(0.25	)		44
2010		11.56		0.01			2.14			2.15			(0.16	)		(0.41	)		–		(0.57	)		0.01		13.15		18.74			1,771		3.72			3.72			1.49			0.10			38
2009		10.00		(0.05	)		1.61			1.56			–			–			–		–			–		11.56		15.60	¹		1,501		5.27	²		5.27	²		1.49	²		(0.71	)²		14
Royce Opportunity Select Fund – Investment Class ^c
^†2013	$	12.81	$	(0.06	)	$	2.34		$	2.28		$	–		$	–		$	–	$	–		$	0.01	$	15.10		17.88	%¹	$	6,791		1.91	%²		1.91	%²		1.27	%²		(0.80	)%²		95	%
2012		10.33		0.07			3.50			3.57			(0.13	)		(0.96	)		–		(1.09	)		–		12.81		35.14			3,198		0.29	²		0.29	²		0.25	²		0.64	²		196
2011		12.99		0.01			(2.26	)		(2.25	)		(0.02	)		(0.39	)		–		(0.41	)		–		10.33		(17.14	)		2,102		1.14			1.14			1.14			0.08			299
2010		10.00		(0.43	)		3.42			2.99			–			–			–		–			–		12.99		29.90	¹		1,913		4.01	¹		4.01	¹		4.01	¹		(3.79	)¹		95


84 \| The Royce Funds 2013 Semiannual Report to Shareholders	THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

Financial Highlights


	Net		Net		Net Realized and Unrealized						Distributions			Distributions from Net																		Ratio of Expenses to Average Net Assets									Ratio of Net Investment
	Asset Value, Beginning of Period		Investment Income (Loss)		Gain (Loss) on Investments and Foreign Currency			Total from Investment Operations			from Net Investment Income			Realized Gain on Investments and Foreign Currency			Distributions from Return of Capital			Total Distributions			Shareholder Redemption Fees		Net Asset Value, End of Period		Total Return			Net Assets, End of Period (in thousands)		Prior to Fee Waivers and Balance Credits			Prior to Fee Waivers			Net of Fee Waivers			Income (Loss) to Average Net Assets			Portfolio Turnover Rate

Royce Global Dividend Value Fund – Service Class ^d
^†2013	$	10.10	$	0.11	$	0.08		$	0.19		$	(0.06	)	$	–		$	–		$	(0.06	)	$	0.01	$	10.24		1.97	%¹	$	7,903		2.67	%²		2.67	%²		1.69	%²		2.17	%²		49	%
2012		8.39		0.17		1.71			1.88			(0.17	)		–			–			(0.17	)		–		10.10		22.52			6,708		2.86			2.86			1.69			1.72			36
2011		10.00		0.08		(1.62	)		(1.54	)		(0.07	)		(0.01	)		–			(0.08	)		0.01		8.39		(15.37	)¹		6,135		3.47	²		3.47	²		1.69	²		1.10	²		20
Royce International Micro-Cap Fund – Service Class ^d
^†2013	$	8.61	$	0.07	$	(0.12	)	$	(0.05	)	$	–		$	–		$	–		$	–		$	0.01	$	8.57		(0.46	)%¹	$	4,041		3.47	%²		3.47	%²		1.69	%²		1.63	%²		25	%
2012		7.72		0.13		0.92			1.05			(0.16	)		–			–			(0.16	)		–		8.61		13.59			4,603		3.90			3.90			1.69			1.63			62
2011		10.00		0.10		(2.26	)		(2.16	)		(0.12	)		–			(0.01	)		(0.13	)		0.01		7.72		(21.51	)¹		3,572		3.92	²		3.92	²		1.69	²		1.08	²		71
Royce International Premier Fund – Service Class ^d
^†2013	$	10.01	$	0.09	$	0.37		$	0.46		$	–		$	–		$	–		$	–		$	–	$	10.47		4.60	%¹	$	6,990		2.69	%²		2.69	%²		1.69	%²		1.65	%²		16	%
2012		8.26		0.12		1.81			1.93			(0.18	)		–			–			(0.18	)		–		10.01		23.40			6,444		3.54			3.54			1.69			1.18			103
2011		10.00		0.05		(1.73	)		(1.68	)		(0.06	)		(0.00	)		(0.01	)		(0.07	)		0.01		8.26		(16.75	)¹		4,090		3.77	²		3.77	²		1.69	²		0.67	²		42
Royce Special Equity Multi-Cap Fund – Investment Class ^e
^†2013	$	11.64	$	0.06	$	2.03		$	2.09		$	–		$	–		$	–		$	–		$	–	$	13.73		17.96	%¹	$	50,209		1.15	%²		1.15	%²		1.14	%²		1.01	%²		20	%
2012		11.54		0.12		0.22			0.34			(0.14	)		(0.10	)		–			(0.24	)		–		11.64		3.00	¹		34,375		1.19	²		1.19	²		1.16	²		1.55	²		14
Royce Special Equity Multi-Cap Fund – Service Class ^f
^†2013	$	11.68	$	0.05	$	2.03		$	2.08		$	–		$	–		$	–		$	–		$	–	$	13.76		17.81	%¹	$	63,074		1.55	%²		1.55	%²		1.38	%²		0.76	%²		20	%
2012		10.64		0.13		1.10			1.23			(0.09	)		(0.10	)		–			(0.19	)		–		11.68		11.62			43,690		1.51			1.51			1.36			1.15			14
2011		10.00		0.06		0.65			0.71			(0.06	)		(0.02	)		–			(0.08	)		0.01		10.64		7.20	¹		36,811		1.97	²		1.97	²		1.39	²		1.45	²		5
Royce Special Equity Multi-Cap Fund – Institutional Class ^g
^†2013	$	11.64	$	0.07	$	2.03		$	2.10		$	–		$	–		$	–		$	–		$	–	$	13.74		18.04	%¹	$	45,896		1.10	%²		1.10	%²		1.04	%²		1.08	%²		20	%
2012		11.83		0.10		(0.03	)		0.07			(0.16	)		(0.10	)		–			(0.26	)		–		11.64		0.61	¹		30,905		1.21	²		1.21	²		1.04	²		1.76	²		14

^†	Six months ended June 30, 2013 (unaudited).
¹	Not annualized
²	Annualized
^a	The Fund commenced operations on March 2, 2009.
^b	The Fund commenced operations on April 28, 2009.
^c	The Fund commenced operations on September 1, 2010.
^d	The Fund commenced operations on January 3, 2011.
^e	The Class commenced operations on March 1, 2012.
^f	The Class commenced operations on January 3, 2011.
^g	The Class commenced operations on April 18, 2012.


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.	The Royce Funds 2013 Semiannual Report to Shareholders \| 85

Notes to Financial Statements (unaudited)

Summary of Significant Accounting Policies:

Royce Select Fund I, Royce Micro-Cap Discovery Fund, Royce Financial Services Fund, Royce Select Fund II, Royce Global Select Long/Short Fund, Royce European Smaller-Companies Fund, Royce Enterprise Select Fund, Royce SMid-Cap Value Fund, Royce Focus Value Fund, Royce Partners Fund, Royce Opportunity Select Fund, Royce Global Dividend Value Fund, Royce International Micro-Cap Fund, Royce International Premier Fund and Royce Special Equity Multi-Cap Fund (the “Fund” or “Funds”), are fifteen series of The Royce Fund (the “Trust”), a diversified open-end management investment company organized as a Delaware statutory trust.
     Classes of shares have equal rights as to earnings and assets, except that each class may bear different fees and expenses for distribution, shareholder servicing, registration and shareholder reports, and receive different compensating balance credits and expense reimbursements. Investment income, realized and unrealized capital gains or losses on investments and foreign currency, and expenses other than those attributable to a specific class are allocated to each class of shares based on its relative net assets.
     The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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.
     At June 30, 2013, officers, employees of Royce & Associates, LLC (“Royce”), Fund trustees, the Royce retirement plans and other affiliates owned more than 10% of the following Funds:

Royce Select Fund I	13	%	Royce Focus Value Fund	77	%
Royce Micro-Cap Discovery Fund	49	%	Royce Partners Fund	78	%
Royce Select Fund II	41	%	Royce Opportunity Select Fund	41	%
Royce Global Select Long/Short Fund	26	%	Royce Global Dividend Value Fund	14	%
Royce Enterprise Select Fund	57	%	Royce International Micro-Cap Fund	26	%
Royce SMid-Cap Value Fund	41	%	Royce International Premier Fund	21	%

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 highest bid price (in the case of long positions) or at the lowest ask price (in the case of short positions). Other over-the-counter securities for which market quotations are readily available are valued at their highest bid price, except in the case of some bonds and other fixed income securities which may be valued by reference to other securities with comparable ratings, interest rates and maturities, using established independent pricing services. The Funds value their non-U.S. dollar denominated securities in U.S. dollars daily at the prevailing foreign currency exchange rates as quoted by a major bank. Securities for which market quotations are not readily available are valued at their fair value in accordance with the provisions of the 1940 Act, under procedures approved by the Fund's Board of Trustees, and are reported as Level 3 securities. As a general principle, the fair value of a security is the amount which the Fund might reasonably expect to receive for the security upon its current sale. However, in light of the judgment involved in fair valuations, there can be no assurance that a fair value assigned to a particular security will be the amount which the Fund might be able to receive upon its current sale. In addition, if, between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that are significant and may make the closing price unreliable, a Fund may fair value the security. The Funds use an independent pricing service to provide fair value estimates for relevant non-U.S. equity securities on days when the U.S. market volatility exceeds a certain threshold. This pricing service uses proprietary correlations it has developed between the movement of prices of non-U.S. equity securities and indices of U.S.-traded securities, futures contracts and other indications to estimate the fair value of relevant non-U.S. securities. When fair value pricing is employed, the prices of securities used by a Fund may differ from quoted or published prices for the same security. Investments in money market funds are valued at net asset value per share.

	Various inputs are used in determining the value of each Fund’s investments, as noted above. These inputs are summarized in the three broad levels below:
		Level 1 – quoted prices in active markets for identical securities.
		Level 2 – other significant observable inputs (including quoted prices for similar securities, foreign securities that may be fair valued and repurchase agreements). The table below includes all Level 2 securities. Any Level 2 securities with values based on quoted prices for similar securities would be noted in the Schedules of Investments.
		Level 3 – significant unobservable inputs (including last trade price before trading was suspended, or at a discount thereto for lack of marketability or otherwise, market price information regarding other securities, information received from the company and/or published documents, including SEC filings and financial statements, or other publicly available information).
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the inputs used to value each Fund’s investments as of June 30, 2013. For a detailed breakout of common stocks by sector classification or country, please refer to the Schedules of Investments.

86 | The Royce Funds 2013 Semiannual Report to Shareholders

Valuation of Investments (continued):

Level 1

Level 2

Level 3

Total

Royce Select Fund I

Common Stocks

40,905,950

–

40,905,950

Cash Equivalents

–

2,801,000

–

2,801,000

Royce Micro-Cap Discovery Fund

Common Stocks

4,971,433

–

4,971,433

Cash Equivalents

–

170,000

–

170,000

Royce Financial Services Fund

Common Stocks

23,103,015

–

23,103,015

Cash Equivalents

–

5,045,000

–

5,045,000

Royce Select Fund II

Common Stocks

3,949,241

–

3,949,241

Cash Equivalents

–

628,000

–

628,000

Royce Global Select Long/Short Fund

Common Stocks

12,458,609

–

12,458,609

Cash Equivalents

–

315,000

–

315,000

Royce European Smaller-Companies Fund

Common Stocks

17,838,664

–

17,838,664

Cash Equivalents

–

257,000

–

257,000

Royce Enterprise Select Fund

Common Stocks

1,458,430

–

1,458,430

Fixed Income

49,725

–

49,725

Cash Equivalents

–

516,000

–

516,000

Royce SMid-Cap Value Fund

Common Stocks

9,289,331

–

9,289,331

Cash Equivalents

–

1,338,000

–

1,338,000

Royce Focus Value Fund

Common Stocks

9,154,623

–

9,154,623

Fixed Income

126,752

–

126,752

Cash Equivalents

–

1,033,000

–

1,033,000

Royce Partners Fund

Common Stocks

2,250,405

–

2,250,405

Cash Equivalents

–

161,000

–

161,000

Royce Opportunity Select Fund

Common Stocks

6,966,344

–

6,966,344

Cash Equivalents

–

269,000

–

269,000

Royce Global Dividend Value Fund

Common Stocks

7,449,870

–

7,449,870

Cash Equivalents

–

627,000

–

627,000

Royce International Micro-Cap Fund

Common Stocks

3,890,576

–

529

3,891,105

Cash Equivalents

–

137,000

–

137,000

Royce International Premier Fund

Common Stocks

6,941,731

–

6,941,731

Royce Special Equity Multi-Cap Fund

Common Stocks

153,504,004

–

153,504,004

Cash Equivalents

–

6,610,000

–

6,610,000

Short positions:

Level 1

Level 2

Level 3

Total

Royce Select Fund II

Common Stocks

(117,094

)

–

(117,094

)

Fixed Income

(27,610

)

–

(27,610

)

Royce Global Select Long/Short Fund

Common Stocks

(2,174,493

)

–

(2,174,493

)

Royce Opportunity Select Fund

Common Stocks

(667,330

)

–

(667,330

)

The Royce Funds 2013 Semiannual Report to Shareholders | 87

Notes to Financial Statements (unaudited) (continued)

Valuation of Investments (continued):

For the six months ended June 30, 2013, certain securities have transferred in and out of Level 1 and Level 2 measurements as a result of the fair value pricing procedures for international equities. The Funds recognize transfers between levels as of the end of the reporting period. At June 30, 2013, the following Funds had securities transfer from Level 2 to Level 1 within the fair value hierarchy:

	Transfers from Level 2				Transfers from Level 2
	to Level 1				to Level 1
Royce Select Fund I		$	1,230,522	Royce SMid-Cap Value Fund		$	2,011,627
Royce Financial Services Fund			4,334,488	Royce Focus Value Fund			700,295
Royce Select Fund II			676,512	Royce Partners Fund			318,582
Royce Global Select Long/Short Fund			9,985,200	Royce Global Dividend Value Fund			4,602,093
Royce European Smaller-Companies Fund			14,009,358	Royce International Micro-Cap Fund			3,179,332
Royce Enterprise Select Fund			15,847	Royce International Premier Fund			6,049,376

Level 3 Reconciliation:

Realized and Unrealized

Balance as of 12/31/12

Gain (Loss)¹

Balance as of 6/30/13

Royce International Micro-Cap Fund

Common Stocks

$2,184

$(1,655)

$529

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

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

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

Short Sales:
The Funds may sell securities they do not own in anticipation of a decline in the fair value of that security. When a Fund sells a security short, it must borrow the security sold short and deliver it to the broker-dealer through which it made the short sale. A gain, limited to the price at which the Fund sold the security short, or a loss, unlimited in size, will be recognized upon the termination of a short sale. On ex-dividend date, dividends on short sales are recorded as an expense to the Fund.

Securities Lending:
The Funds loan securities through a lending agent to qualified institutional investors for the purpose of realizing additional income. Collateral for the Funds on all securities loaned is accepted in cash and cash equivalents and invested temporarily by the custodian. The collateral maintained is at least 100% of the current market value of the loaned securities. The market value of the loaned securities is determined at the close of business of the Funds and any additional required collateral is delivered to the Funds on the next business day. The Funds retain the risk of any loss on the securities on loan as well as incurring the potential loss on investments purchased with cash collateral received for securities lending. The Funds’ securities lending income consists of the income earned on investing cash collateral, plus any premium payments received for lending certain securities, less any rebates paid to borrowers and lending agent fees associated with the loan. The lending agent is not affiliated with Royce.

Distributions and Taxes:
As qualified regulated investment companies under Subchapter M of the Internal Revenue Code, the Funds are not subject to income taxes to the extent that each Fund distributes substantially all of its taxable income for its fiscal year.
Royce Global Dividend Value Fund pays any dividends from net investment income quarterly and makes any distributions from net realized gains annually in December. The other Funds pay any dividends and capital gain distributions annually in December. Dividends from net investment income are determined at a class level and distributions from capital gains are determined at a Fund level. Because federal income tax regulations differ from generally accepted accounting principles, income and capital gain distributions determined in accordance with tax regulations may differ from net investment income and realized gains recognized for financial reporting purposes. Accordingly, the character of distributions and composition of net assets for tax purposes differ from those reflected in the accompanying financial statements.

88 | The Royce Funds 2013 Semiannual Report to Shareholders

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

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

Compensating Balance Credits:
The Funds have arrangements with their custodian bank and transfer agent, whereby a portion of the custodian’s fee and transfer agent’s fee is paid indirectly by credits earned on a Fund’s cash on deposit with the bank and transfer agent. These deposit arrangements are an alternative to purchasing overnight investments. Conversely, a Fund pays interest to the custodian on any cash overdrafts, to the extent they are not offset by credits earned on positive cash balances.

Line of Credit:
The Funds, along with certain other Royce Funds, participate in a $75 million line of credit (“Credit Agreement”) to be used for temporary or emergency purposes. This 364-day revolving Credit Agreement expires on July 11, 2014. Pursuant to the Credit Agreement, each participating Fund is liable only for principal and interest payments related to borrowings made by that Fund. Borrowings under the Credit Agreement bear interest at a rate equal to the higher of the federal funds rate + 1.25% or overnight LIBOR + 1.25%. The Funds did not utilize the line of credit during the six months ended June 30, 2013.

Capital Share Transactions (in dollars):

					Shares issued for										Net increase (decrease) from
	Shares sold				reinvestment of distributions				Shares redeemed						capital share transactions

	Period ended				Period ended				Period ended						Period ended
	6/30/13		Period ended		6/30/13		Period ended		6/30/13			Period ended			6/30/13			Period ended
	(unaudited)		12/31/12		(unaudited)		12/31/12		(unaudited)			12/31/12			(unaudited)			12/31/12

Royce Select Fund I
Investment Class	$	3,061,624	$	5,074,208	$	–	$	4,672,287	$	(12,602,504	)	$	(8,680,161	)	$	(9,540,880	)	$	1,066,334

Royce Micro-Cap Discovery Fund
Service Class		540,572		1,050,076		–		37,994		(420,440	)		(361,057	)		120,132			727,013

Royce Financial Services Fund
Service Class		9,670,740		4,612,568		–		149,100		(2,467,495	)		(4,633,991	)		7,203,245			127,677

Royce Select Fund II
Investment Class		815,496		6,284		–		215,961		(254,140	)		(284,132	)		561,356			(61,887	)

Royce Global Select Long/Short Fund
Investment Class		415,741		748,210		–		574,715		(9,394,184	)		(5,166,943	)		(8,978,443	)		(3,844,018	)

Royce European Smaller-Companies Fund
Service Class		4,740,601		3,702,876		–		219,038		(2,342,600	)		(7,085,115	)		2,398,001			(3,163,201	)

Royce Enterprise Select Fund
Investment Class		650,704		–		–		119,819		(100,000	)		(590	)		550,704			119,229

Royce SMid-Cap Value Fund
Service Class		388,676		4,410,001		–		–		(1,441,945	)		(5,023,302	)		(1,053,269	)		(613,301	)

Royce Focus Value Fund
Service Class		1,810,268		701,475		–		157,460		(1,092,403	)		(1,353,002	)		717,865			(494,067	)

Royce Partners Fund
Service Class		129,212		128,126		–		76,833		(58,611	)		(78,236	)		70,601			126,723

Royce Opportunity Select Fund
Investment Class		3,314,076		352,527		–		227,344		(397,486	)		(9,132	)		2,916,590			570,739

Royce Global Dividend Value Fund
Service Class		1,810,457		1,477,197		45,287		109,376		(720,002	)		(2,157,716	)		1,135,742			(571,143	)

Royce International Micro-Cap Fund
Service Class		832,175		1,435,544		–		78,472		(1,384,147	)		(905,693	)		(551,972	)		608,323

The Royce Funds 2013 Semiannual Report to Shareholders | 89

Notes to Financial Statements (unaudited) (continued)

Capital Share Transactions (in dollars) (continued):

					Shares issued for										Net increase (decrease) from
	Shares sold				reinvestment of distributions				Shares redeemed						capital share transactions

	Period ended				Period ended				Period ended						Period ended
	6/30/13		Period ended		6/30/13		Period ended		6/30/13			Period ended			6/30/13		Period ended
	(unaudited)		12/31/12		(unaudited)		12/31/12		(unaudited)			12/31/12			(unaudited)		12/31/12

Royce International Premier Fund
Service Class	$	851,955	$	2,793,388	$	–	$	76,745	$	(597,989	)	$	(1,375,047	)	$	253,966	$	1,495,086

Royce Special Equity Multi-Cap Fund
Investment Class		11,167,783		36,724,835		–		653,344		(2,257,939	)		(2,544,262	)		8,909,844		34,833,917
Service Class		16,677,552		34,106,088		–		705,194		(5,090,578	)		(32,520,070	)		11,586,974		2,291,212
Institutional Class		9,125,101		30,548,000		–		674,111		(500,000	)		(3,182	)		8,625,101		31,218,929

Capital Share Transactions (in shares):

					Shares issued for										Net increase (decrease) in
	Shares sold				reinvestment of distributions				Shares redeemed						shares outstanding

	Period ended				Period ended				Period ended						Period ended
	6/30/13		Period ended		6/30/13		Period ended		6/30/13			Period ended			6/30/13			Period ended
	(unaudited)		12/31/12		(unaudited)		12/31/12		(unaudited)			12/31/12			(unaudited)			12/31/12

Royce Select Fund I
Investment Class		166,482		280,124		–		276,467		(684,201	)		(488,288	)		(517,719	)		68,303

Royce Micro-Cap Discovery Fund
Service Class		96,831		210,468		–		7,462		(74,610	)		(70,120	)		22,221			147,810

Royce Financial Services Fund
Service Class		1,229,390		713,267		–		22,252		(316,352	)		(729,615	)		913,038			5,904

Royce Select Fund II
Investment Class		70,329		593		–		20,866		(22,837	)		(26,289	)		47,492			(4,830	)

Royce Global Select Long/Short Fund
Investment Class		24,358		44,803		–		33,886		(566,881	)		(312,018	)		(542,523	)		(233,329	)

Royce European Smaller-Companies Fund
Service Class		437,264		388,293		–		21,926		(217,095	)		(752,653	)		220,169			(342,434	)

Royce Enterprise Select Fund
Investment Class		56,579		–		–		11,724		(9,099	)		(59	)		47,480			11,665

Royce SMid-Cap Value Fund
Service Class		32,045		390,512		–		–		(118,050	)		(457,720	)		(86,005	)		(67,208	)

Royce Focus Value Fund
Service Class		118,453		48,418		–		10,988		(72,959	)		(91,922	)		45,494			(32,516	)

Royce Partners Fund
Service Class		9,837		11,070		–		6,589		(4,497	)		(6,930	)		5,340			10,729

Royce Opportunity Select Fund
Investment Class		228,700		28,178		–		18,773		(28,638	)		(754	)		200,062			46,197

Royce Global Dividend Value Fund
Service Class		172,529		156,760		4,306		11,645		(68,742	)		(235,478	)		108,093			(67,073	)

Royce International Micro-Cap Fund
Service Class		93,481		170,805		–		9,342		(156,926	)		(108,278	)		(63,445	)		71,869

Royce International Premier Fund
Service Class		81,922		291,121		–		7,855		(57,640	)		(150,814	)		24,282			148,162

Royce Special Equity Multi-Cap Fund
Investment Class		875,389		3,113,219		–		56,659		(172,680	)		(216,520	)		702,709			2,953,358
Service Class		1,238,858		2,986,622		–		61,008		(396,646	)		(2,765,871	)		842,212			281,759
Institutional Class		726,100		2,597,051		–		58,422		(40,816	)		(268	)		685,284			2,655,205

90 | The Royce Funds 2013 Semiannual Report to Shareholders

Investment Adviser and Distributor:
Investment Adviser: Under the Trust’s investment advisory agreements with Royce, Royce is entitled to receive Investment Advisory fees that are computed daily and payable monthly. Royce’s commitment to waive its fees and reimburse class-specific expenses to the extent necessary to maintain certain Funds’ net annual operating expense ratios at specified levels through April 30, 2014, is shown below to the extent that it impacted net expenses for the six months ended June 30, 2013. See the Prospectus for contractual waiver expiration dates.
Effective September 28, 2012, Royce Select Fund I, Royce Select Fund II and Royce Global Select Long/Short Fund have a traditional management fee structure consistent with the other series of The Royce Fund. Previously, for its services and for paying certain other ordinary expenses, Royce received from each Fund a performance fee of 12.5% of each Fund’s pre-fee total return, subject to a high watermark test. Royce will waive its compensation for services provided by it under the new agreement until a respective Fund’s pre-fee cumulative return exceeds its pre-fee total return as of the day on which a fee was last accrued under its former Investment Advisory Agreement, and agrees to reimburse certain ordinary operating expenses as well. Royce Select Fund I reached its high watermark on January 2, 2013.

	Annual contractual			Committed net annual									Six months ended
	advisory fee as a			operating expense ratio cap									June 30, 2013
	percentage of			Investment			Service			Institutional			Net advisory		Advisory
	average net assets¹			Class²			Class²			Class²			fees		fees waived
Royce Select Fund I		1.00	%		N/A			N/A			N/A		$	236,846	$	–
Royce Micro-Cap Discovery Fund		1.00	%		N/A			1.49	%		N/A			403		24,046
Royce Financial Services Fund		1.00	%		N/A			1.49	%		N/A			81,139		29,876
Royce Select Fund II		1.25	%		1.49	%		N/A			N/A			–		–
Royce Global Select Long/Short Fund		1.25	%		1.49	%		N/A			N/A			–		–
Royce European Smaller-Companies Fund		1.25	%		N/A			1.69	%		N/A			73,432		41,886
Royce Enterprise Select Fund		1.00	%		1.24	%		N/A			N/A			–		7,524
Royce SMid-Cap Value Fund		1.00	%		N/A			1.35	%		N/A			18,033		37,626
Royce Focus Value Fund		1.00	%		N/A			1.35	%		N/A			16,982		29,624
Royce Partners Fund		1.00	%		N/A			1.35	%		N/A			–		11,550
Royce Opportunity Select Fund		1.00	%		1.24	%		N/A			N/A			8,723		15,046
Royce Global Dividend Value Fund		1.25	%		N/A			1.69	%		N/A			10,466		37,667
Royce International Micro-Cap Fund		1.30	%		N/A			1.69	%		N/A			–		29,684
Royce International Premier Fund		1.25	%		N/A			1.69	%		N/A			9,588		33,685
Royce Special Equity Multi-Cap Fund		1.00	%		N/A			1.39	%		1.04	%		662,007		4,971

From a base annual rate of 1.00% (1.25% for Royce Select Fund II, Royce Global Select Long/Short Fund, Royce European Smaller-Companies Fund, Royce Global Dividend Value Fund and Royce International Premier Fund; 1.30% for Royce International Micro-Cap Fund), the annual rates of investment advisory fees payable by each of the Funds are reduced by the indicated amount at the following breakpoints applicable to a Fund's net assets in excess of $2 billion: more than $2 billion to $4 billion - .05% per annum; more than $4 billion to $6 billion - .10% per annum; over $6 billion - .15% per annum.

Committed net annual operating expense ratio cap excludes acquired fund fees and expenses, dividends on securities sold short and other expenses related to short sales.

				Six months ended June 30, 2013
	Annual contractual distribution fee as			Net distribution		Distribution fees
	a percentage of average net assets			fees		waived
Royce Micro-Cap Discovery Fund – Service Class		0.25	%	$	6,112	$	–
Royce Financial Services Fund – Service Class		0.25	%		25,534		2,220
Royce European Smaller-Companies Fund – Service Class		0.25	%		23,064		–
Royce SMid-Cap Value Fund – Service Class		0.25	%		13,915		–
Royce Focus Value Fund – Service Class		0.25	%		11,652		–
Royce Partners Fund – Service Class		0.25	%		2,888		–
Royce Global Dividend Value Fund – Service Class		0.25	%		9,627		–
Royce International Micro-Cap Fund – Service Class		0.25	%		5,480		228
Royce International Premier Fund – Service Class		0.25	%		7,616		1,039
Royce Special Equity Multi-Cap Fund – Service Class		0.25	%		57,873		5,032

The Royce Funds 2013 Semiannual Report to Shareholders | 91

Notes to Financial Statements (unaudited) (continued)

Purchases and Sales of Investment Securities:
For the six months ended June 30, 2013, the costs of purchases and the proceeds from sales of investment securities, other than short-term securities, were as follows:

					Short		Purchases to
	Purchases		Sales		Sales		Cover Short Sales
Royce Select Fund I	$	13,404,341	$	22,185,462	$	–	$	–
Royce Micro-Cap Discovery Fund		1,767,857		1,566,255		–		–
Royce Financial Services Fund		4,083,658		580,571		–		–
Royce Select Fund II		2,303,751		2,028,646		571,710		660,257
Royce Global Select Long/Short Fund		3,083,802		8,697,263		1,668,519		6,437,936
Royce European Smaller-Companies Fund		7,367,738		4,750,395		–		–
Royce Enterprise Select Fund		1,215,417		914,586		–		–
Royce SMid-Cap Value Fund		1,660,685		3,218,080		–		–
Royce Focus Value Fund		8,007,335		7,727,916		–		–
Royce Partners Fund		741,975		768,041		–		–
Royce Opportunity Select Fund		5,683,177		2,474,952		1,608,276		1,440,908
Royce Global Dividend Value Fund		4,353,881		3,496,235		–		–
Royce International Micro-Cap Fund		1,079,673		1,489,640		–		–
Royce International Premier Fund		1,653,687		1,049,494		–		–
Royce Special Equity Multi-Cap Fund		56,010,314		25,647,195		–		–

Class Specific Expenses:
Class specific expenses, for Funds with multiple classes, were as follows for the six months ended June 30, 2013:

														Class Level
									Transfer					Expenses
	Net								Agent					Reimbursed by
	Distribution		Shareholder		Shareholder				Balance					Investment
	Fees		Servicing		Reports		Registration		Credits			Total		Adviser
Royce Special Equity Multi-Cap Fund –
Investment Class	$	–	$	7,680	$	6,364	$	7,487	$	(2	)	$	21,529	$	–
Royce Special Equity Multi-Cap Fund –
Service Class		57,873		32,035		23,291		7,582		(20	)		120,761		35,582
Royce Special Equity Multi-Cap Fund –
Institutional Class		–		3,192		100		7,194		–			10,486		10,486
		57,873		42,907		29,755		22,263		(22	)				46,068

Tax Information:
At June 30, 2013, net unrealized appreciation (depreciation) based on identified cost for tax purposes was as follows:

			Net Unrealized
			Appreciation			Gross Unrealized
	Tax Basis Cost		(Depreciation)			Appreciation		Depreciation
Royce Select Fund I	$	36,443,066	$	7,263,884		$	8,240,090	$	976,206
Royce Micro-Cap Discovery Fund		4,620,517		520,916			740,384		219,468
Royce Financial Services Fund		23,107,860		5,040,155			6,525,501		1,485,346
Royce Select Fund II		4,168,482		264,055			507,712		243,657
Royce Global Select Long/Short Fund		11,823,176		(1,224,060	)		1,460,264		2,684,324
Royce European Smaller-Companies Fund		17,831,476		264,188			2,174,671		1,910,483
Royce Enterprise Select Fund		1,887,948		136,207			152,283		16,076
Royce SMid-Cap Value Fund		10,068,136		559,195			1,693,673		1,134,478
Royce Focus Value Fund		8,871,691		1,442,684			1,702,828		260,144
Royce Partners Fund		2,024,091		387,314			449,425		62,111
Royce Opportunity Select Fund		5,831,088		736,926			985,210		248,284
Royce Global Dividend Value Fund		8,138,093		(61,223	)		738,803		800,026
Royce International Micro-Cap Fund		4,340,151		(312,046	)		370,623		682,669
Royce International Premier Fund		6,558,017		383,714			741,044		357,330
Royce Special Equity Multi-Cap Fund		139,050,610		21,063,394			21,128,328		64,934

The primary difference between book and tax basis cost is the timing of the recognition of losses on securities sold.

92 | The Royce Funds 2013 Semiannual Report to Shareholders

Understanding Your Fund’s Expenses (unaudited)

As a shareholder of a mutual fund, you pay ongoing expenses, including management fees and other Fund expenses including, for some funds, distribution and/or service (12b-1) fees. Using the information below, you can estimate how these ongoing expenses (in dollars) affect your investment and compare them with the ongoing expenses of other funds. You may also incur one-time transaction expenses, including redemption fees, which are not shown in this section and would result in higher total costs. The example is based on an investment of $1,000 invested at January 1, 2013, and held for the entire six-month period ended June 30, 2013. Service Class shares are generally available only through certain brokers or retirement plan administrators who receive distribution and/or service fees from the Fund for services that they perform. Institutional Class shares are generally available only to institutions or intermediaries with a minimum account size of $1 million.

Actual Expenses
The first part of the table below provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value at June 30, 2013, by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes
The second part of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, this section is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Actual						Hypothetical (5% per year return before expenses)
	Beginning		Ending		Expenses Paid		Beginning		Ending		Expenses Paid		Annualized
	Account Value		Account Value		During the		Account Value		Account Value		During the		Expense
	1/1/13		6/30/13		Period¹		1/1/13		6/30/13		Period¹		Ratio²
Investment Class
Royce Select Fund I	$	1,000.00	$	1,067.24	$	5.89	$	1,000.00	$	1,019.09	$	5.76		1.15	%
Royce Select Fund II		1,000.00		1,063.67		7.62		1,000.00		1,017.41		7.45		1.49
Royce Global Select
Long/Short Fund		1,000.00		908.45		7.05		1,000.00		1,017.41		7.45		1.49
Royce Enterprise Select Fund		1,000.00		1,114.86		6.50		1,000.00		1,018.65		6.21		1.24
Royce Opportunity Select Fund		1,000.00		1,178.77		6.86		1,000.00		1,018.50		6.36		1.27
Royce Special Equity
Multi-Cap Fund		1,000.00		1,179.55		6.16		1,000.00		1,019.14		5.71		1.14

Service Class

Royce Micro-Cap Discovery Fund		1,000.00		1,122.37		7.84		1,000.00		1,017.41		7.45		1.49
Royce Financial Services Fund		1,000.00		1,188.87		8.09		1,000.00		1,017.41		7.45		1.49
Royce European Smaller-
Companies Fund		1,000.00		1,023.14		8.48		1,000.00		1,016.41		8.45		1.69
Royce SMid-Cap Value Fund		1,000.00		1,048.03		6.86		1,000.00		1,018.10		6.76		1.35
Royce Focus Value Fund		1,000.00		1,044.10		6.84		1,000.00		1,018.10		6.76		1.35
Royce Partners Fund		1,000.00		1,121.26		7.10		1,000.00		1,018.10		6.76		1.35
Royce Global Dividend
Value Fund		1,000.00		1,019.65		8.46		1,000.00		1,016.41		8.45		1.69
Royce International
Micro-Cap Fund		1,000.00		995.35		8.36		1,000.00		1,016.41		8.45		1.69
Royce International
Premier Fund		1,000.00		1,045.95		8.57		1,000.00		1,016.41		8.45		1.69
Royce Special Equity
Multi-Cap Fund		1,000.00		1,178.08		7.45		1,000.00		1,017.95		6.90		1.38

Institutional Class

Royce Special Equity
Multi-Cap Fund		1,000.00		1,180.41		5.62		1,000.00		1,019.64		5.21		1.04

¹	Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value for the period, multiplied by 181 days in the most recent fiscal half-year divided by 365 days (to reflect the half-year period).
²	Annualized expense ratio used to derive figures in the table is based on the most recent fiscal half-year. For Royce Select Fund II and Royce Global Select Long/Short Fund, the committed net annual operating expense ratio caps under the new Investment Advisory Agreement are used to derive figures in the table.

The Royce Funds 2013 Semiannual Report to Shareholders | 93

Trustees and Officers

All Trustees and Officers may be reached c/o The Royce Funds, 745 Fifth Avenue, New York, NY 10151

Charles M. Royce, Trustee¹, President
Age: 73 | Number of Funds Overseen: 34 | Tenure: Since 1982
Non-Royce Directorships: Director of TICC Capital Corp.

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

Patricia W. Chadwick, Trustee
Age: 64 | Number of Funds Overseen: 34 | Tenure: Since 2009
Non-Royce Directorships: Trustee of ING Mutual Funds and Director of Wisconsin Energy Corp.

Principal Occupation(s) During Past 5 Years: Consultant and President of Ravengate Partners LLC (since 2000).

Richard M. Galkin, Trustee
Age: 75 | Number of Funds Overseen: 34 | Tenure: Since 1982
Non-Royce Directorships: None

Stephen L. Isaacs, Trustee
Age: 73 | Number of Funds Overseen: 34 | Tenure: Since 1989
Non-Royce Directorships: None

David L. Meister, Trustee
Age: 73 | Number of Funds Overseen: 34 | Tenure: Since 1982
Non-Royce Directorships: None

John D. Diederich, Vice President and Treasurer
Age: 61 | Tenure: Since 2001

Jack E. Fockler, Jr., Vice President
Age: 54 | Tenure: Since 1995

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

W. Whitney George, Vice President
Age: 55 | Tenure: Since 1995

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

John E. Denneen, Secretary and Chief Legal Officer
Age: 46 | Tenure: 1996-2001 and Since April 2002

Principal Occupation(s) During Past Five Years: General Counsel, Principal, Chief Legal and Compliance Officer, and Secretary of Royce; Secretary and Chief Legal Officer of The Royce Funds.

Lisa Curcio, Chief Compliance Officer
Age: 53 | Tenure: Since 2004

Principal Occupation(s) During Past Five Years: Chief Compliance Officer of The Royce Funds (since October 2004) and Compliance Officer of Royce (since June 2004).

¹ Interested Trustee.

94 | The Royce Funds 2013 Semiannual Report to Shareholders

Board Approval of Investment Advisory Agreements

At meetings held on June 11-12, 2013, the Board of Trustees of The Royce Fund (the “Board”), including all of the non-interested trustees, approved the continuance of the Investment Advisory Agreements between Royce & Associates, LLC (“R&A”) and The Royce Fund (“TRF”) relating to each of Royce Select Fund I, Royce Select Fund II, Royce Global Select Long/Short Fund, Royce Enterprise Select Fund, Royce Opportunity Select Fund, Royce Micro-Cap Discovery Fund, Royce Financial Services Fund, Royce SMid-Cap Value Fund, Royce Focus Value Fund, Royce Partners Fund, Royce Special Equity Multi-Cap Fund, Royce European Smaller-Companies Fund, Royce Global Dividend Fund, Royce International Micro-Cap Fund, and Royce International Premier Fund (each, a “Fund” and collectively, the “Funds”). In reaching these decisions, the Board reviewed, among other things, information prepared internally by R&A and independently by Morningstar Associates, LLC (“Morningstar”) containing detailed expense ratio and investment performance comparisons for each Fund with other mutual funds in their “peer group” and “category”, information regarding the past performance of the Funds and other registered investment companies managed by R&A and a memorandum outlining the legal duties of the Board prepared by independent counsel to the non-interested trustees. R&A also provided the trustees with an analysis of its profitability with respect to providing investment advisory services to each Fund. In addition, the Board took into account information furnished throughout the year at regular Board meetings, including reports on investment performance, shareholder services, distribution fees and expenses, regulatory compliance, brokerage commissions and research, brokerage and other execution products and services provided to the Funds. The Board also considered other matters they deemed important to the approval process such as allocation of Fund brokerage commissions, “soft dollar” research services R&A receives, payments made to affiliates of R&A, as well as payments made by R&A, relating to distribution of Fund shares and other direct and indirect benefits to R&A and its affiliates from their relationship with the Funds. The trustees also met throughout the year with investment advisory personnel from R&A. The Board, in its deliberations, recognized that, for many of the Funds’ shareholders, the decision to purchase Fund shares included a decision to select R&A as the investment adviser and that there was a strong association in the minds of Fund shareholders between R&A and each of the Funds. In considering factors relating to the approval of the continuance of the Investment Advisory Agreements, the non-interested trustees received assistance and advice from, and met separately with, their independent counsel. While the Investment Advisory Agreements for the Funds were considered at the same meetings, the trustees dealt with each agreement separately. Among other factors, the trustees considered the following:

The nature, extent and quality of services provided by R&A:
The trustees considered the following factors to be of fundamental importance to their consideration of whether to approve the continuance of the Funds’ Investment Advisory Agreements: (i) R&A’s more than 40 years of value investing experience and track record; (ii) the history of long-tenured R&A portfolio managers managing many of the Funds; (iii) R&A’s focus on mid-cap, small-cap and micro-cap value investing; (iv) the consistency of R&A’s approach to managing the Funds over more than 40 years; (v) the integrity and high ethical standards adhered to at R&A; (vi) R&A’s specialized experience in the area of trading small- and micro-cap securities; (vii) R&A’s historical ability to attract and retain portfolio management talent; and (viii) R&A’s focus on shareholder interests as exemplified by capping expenses on smaller funds, closing funds to new investors when R&A believed such closings were in the best interests of existing shareholders, establishing breakpoints for a number of funds and providing expansive shareholder reporting and communications. The trustees reviewed the services that R&A provides to the Funds, including, but not limited to, managing each Fund’s investments in accordance with the stated policies of each Fund. The Board considered the fact that R&A provided certain administrative services to the Funds pursuant to the Administration Agreement between R&A and RCF which went into effect on January 1, 2008 and the methodology used by R&A in allocating the compensation paid to certain R&A personnel and other administrative expenses to the Funds under that agreement. The trustees determined that the services to be provided to the Funds by R&A would be the same as those that R&A previously provided to the Funds. They also took into consideration the histories, reputations and backgrounds of R&A’s portfolio managers for Funds, finding that these would likely have an impact on the continued success of the Funds. Lastly, the trustees noted R&A’s ability to attract and retain quality and experienced personnel. The trustees concluded that the investment advisory services provided by R&A to each Fund compared favorably to services provided by R&A to other R&A client accounts, including other funds, in both nature and quality, and that the scope of services provided by R&A would continue to be suitable for each Fund.

Investment performance of the Funds and R&A:
In light of R&A’s risk-averse approach to investing, the trustees believe that risk-adjusted performance continues to be an appropriate measure of each Fund’s investment performance. One measure of risk-adjusted performance the trustees have historically used in their review of the Funds’ performance is the Sharpe Ratio. The Sharpe Ratio is a risk-adjusted measure of performance developed by Nobel Laureate William Sharpe. It is calculated by dividing a fund’s annualized excess returns by its annualized standard deviation to determine reward per unit of risk. The higher the Sharpe Ratio, the better a fund’s historical risk-adjusted performance. The Board attaches primary importance to risk-adjusted performance over relatively long periods of time, typically 3 to 10 years. Except as described below, each of the Funds with 3 or more years of performance fell in the 1st or 2nd quartile within its Morningstar category and the small-cap universe for the 3-year, 5-year and 10-year periods ended December 31, 2012.
The Sharpe Ratio for Royce Micro-Cap Discovery Fund (“RDF”) fell in the 4th quartile for the 3-year and 5-year periods as compared with its Small Blend category as selected by Morningstar. The Board noted the impact of the addition of an active management component layered onto RDF’s quantitative structure in August 2010. The Board also noted that, other than a net 31 basis point fee received in 2007, R&A has not received a management fee on RDF since its 2003 inception. Royce SMid-Cap Value Fund’s (“RSV”), Royce Select Fund I’s (“RSI”), Royce Focus Value Fund’s (“RFV”) and Royce Partners Fund’s (“RPF”) Sharpe Ratios fell in the 4th quartile for the 3-year period within each Fund’s Morningstar category. This was attributable in part to RSV’s and RFV’s significant overweighting in materials, particularly metals and mining companies, and RSI’s and RPF’s focus on companies with low leverage and solid balance sheets contributing to lagging performance. In addition to each Fund’s risk-adjusted performance, the trustees also reviewed and considered each Fund’s absolute total returns, down market performance and for the Funds

The Royce Funds 2013 Semiannual Report to Shareholders | 95

in existence for such periods, long-term performance records over periods of 10 years or longer. The Board noted that Royce Opportunity Select Fund (“ROS”), Royce International Micro-Cap (“RMI”), Royce International Premier (“RIP”), Royce Global Dividend Value (“RGD”) and Royce Special Equity Multi-Cap Funds (“RSM”) have less than 3 years of performance. R&A’s general process of investing net inflows over longer periods of time led to larger cash positions and market lagging performance for most of these newer funds in their initial periods of operation.
The Board also considered it important to look beyond the current snapshot of performance as of December 31, 2012 and therefore examined extended performance histories for each series with 3 years or more since its inception using monthly rolling average return periods through March 31, 2013.
The trustees noted that R&A manages a number of funds that invest in small-cap and micro-cap issuers, many of which had outperformed their benchmark indexes and their competitors over longer-term periods. Although the trustees recognized that past performance is not necessarily an indicator of future results, they found that R&A had the necessary qualifications, experience and track record in managing mid-cap, small-cap and micro-cap securities to manage the Funds. The trustees determined that R&A continued to be an appropriate investment adviser for each Fund and concluded that each of Fund’s performance supported the continuation of its Investment Advisory Agreement.

Cost of the services provided and profits realized by R&A from its relationship with each Fund:
The trustees considered the cost of the services provided by R&A and the profits realized by R&A from its relationship with each Fund. As part of the analysis, the Board discussed with R&A its methodology in allocating its costs to each Fund and concluded that its allocations were reasonable. The trustees noted that at times R&A had closed certain of the Funds to new investors because of the rate of growth in Fund assets. The trustees concluded that R&A’s profits were reasonable in relation to the nature and quality of services provided.

The extent to which economies of scale would be realized as the Funds grow and whether fee levels would reflect such economies of scale:
The trustees considered whether there have been economies of scale in respect of the management of the Funds, whether the Funds have appropriately benefited from any economies of scale and whether there is potential for realization of any further economies of scale. The trustees noted the time and effort involved in managing portfolios of small- and micro-cap stocks and that they did not involve the same efficiencies as do portfolios of large-cap stocks. The trustees concluded that the current fee structure for each Fund was reasonable and that shareholders sufficiently participated in economies of scale.

Comparison of services to be rendered and fees to be paid to those under other investment advisory contracts, such as contracts of the same and other investment advisers or other clients:
The trustees reviewed the investment advisory fee paid by each Fund and compared both the services to be rendered and the fees to be paid under the Investment Advisory Agreements to other contracts of R&A and to contracts of other investment advisers to registered investment companies investing in small- and micro-cap stocks, as provided by Morningstar. The trustees also considered each Fund’s administrative, sub-transfer agent, and transfer agent expenses. The net expense ratios for RDF, RSV, RFV, and RPF ranked within the first or second quartile among their peers, as selected by Morningstar. It was noted that most of Royce European Smaller-Companies Fund’s and RGD’s peers are in large-cap style boxes per the Morningstar data. After taking into consideration that the level of work necessary to invest in small-cap international securities is significantly greater than that necessary to invest in larger-cap securities, the trustees noted that the basis point differentials in management fees, which give rise to the generally higher expense ratios, were appropriate for these Funds. It was also noted that 33% of the peers for RMI and RIP, as selected by Morningstar, do not have 12b-1 fees. Despite having no 12b-1 fees, these peers were selected because of their comparable investment market-cap ranges (RMI is, however, the only micro-cap fund in the peer group). The average 12b-1 fees for the peer group is 15 basis points, and the 10 basis point difference between that average and the Funds’ 25 basis point 12b-1 fee accounts for the majority of the differential in net expenses for these Funds. RSM’s expense ratio fell in the 3rd quartile within its peer group as selected by Morningstar, 14 basis points higher than its peer group median. It was noted that RSM’s focus on smaller-cap issuers caused its weighted average market capitalization to be the 4th lowest of its peer group.
The trustees noted that R&A has waived advisory fees for numerous series of TRF in order to maintain expense ratios at competitive levels and acknowledged R&A’s intention to continue this expense limitation practice. The trustees also considered fees charged by R&A to institutional and other clients and noted that, given the greater levels of services that R&A provides to registered investment companies such as the Funds as compared to other accounts, each of the Funds’ advisory fees compared favorably to these other accounts.
It was noted that no single factor was cited as determinative to the decision of the trustees. Rather, after weighing all of considerations and conclusions discussed above, the entire Board, including all the non-interested trustees, determined to approve the continuation of the existing Investment Advisory Agreements, concluding that a contract continuation on the existing terms was in the best interest of the shareholders of each Fund and that each investment advisory fee rate was reasonable in relation to the services provided.

96 | The Royce Funds 2013 Semiannual Report to Shareholders

Notes to Performance and Other Important Information

The thoughts expressed in this report concerning recent market movements and future prospects for small company stocks are solely the opinion of Royce at June 30, 2013, 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, 2013 and are subject to change at any time without notice. There can be no assurance that securities mentioned in this report will be included in any Royce-managed portfolio in the future.
    Sector weightings are determined using the Global Industry Classification Standard (“GICS”). GICS was developed by, and is the exclusive property of, Standard & Poor’s Financial Services LLC (“S&P”) and MSCI Inc. (“MSCI”). GICS is the trademark of S&P and MSCI. “Global Industry Classification Standard (GICS)” and “GICS Direct” are service marks of S&P and MSCI.
    All indexes referred to are unmanaged and capitalization weighted. Each index’s returns include net reinvested dividends and/or interest income. Russell Investment Group is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. Russell^® is a trademark of Russell Investment Group. The Russell 2000 is an index of domestic small-cap stocks. It measures the performance of the 2,000 smallest publicly traded U.S. companies in the Russell 3000 Index. The Russell 1000 Index is an index of domestic large-cap stocks. It measures the performance of the 1,000 largest publicly traded U.S. companies in the Russell 3000 Index. The Russell Microcap Index includes 1,000 of the smallest securities in the Russell 2000 Index, along with the next smallest eligible securities as determined by Russell. The Russell 2500 is an index of domestic small- to mid-cap stocks. It includes approximately 2,500 of the smallest securities in the Russell 3000 Index. The returns for the Russell 2500—Financial Services Sector represent those of the financial services companies within the Russell 2500 Index. The Russell Midcap Index measures the performance of the mid-cap segment of the U.S. equity universe. It includes approximately 800 of the smallest securities in the Russell 1000 Index. The Russell Global Small Cap Index is an index of global small-cap stocks. The Russell Global ex-U.S. Large Cap Index is an index of global large-cap stocks, excluding the United States. The Russell Global ex-U.S. Small Cap Index is an index of global small-cap stocks, excluding the United States. The S&P 500 is an index of U.S. large-cap stocks, selected by Standard & Poor’s based on market size, liquidity, and industry grouping, among other factors. The Russell Europe Small Cap Index is an index of European small-cap stocks. The CBOE Volatility Index (VIX) measures market expectations of near-term volatility conveyed by S&P 500 Stock Index option prices. The Nasdaq Composite is an index of the more than 3,000 common equities listed on the Nasdaq stock exchange. The performance of an index does not represent exactly any particular investment, as you cannot invest directly in an index. Returns for the market indexes used in this report were based on information supplied to Royce by Russell Investments. Royce has not independently verified the above described information.
    The Price-Earnings, or P/E, Ratio is calculated by dividing a company’s share price by its trailing 12-month earnings-per share (EPS). The Price-to-Book, or P/B, Ratio is calculated by dividing a company’s share price by its book value per share. The Sharpe Ratio is calculated for a specified period by dividing a fund’s annualized excess returns by its annualized standard deviation. The higher the Sharpe Ratio, the better the fund’s historical risk-adjusted performance. Standard deviation is a statistical measure within which a fund’s total returns have varied over time. The greater the standard deviation, the greater a fund’s volatility. The Royce Funds is a service mark of The Royce Funds. Distributor: Royce Fund Services, Inc.
    Investments in securities of micro-cap, small-cap and/or mid-cap companies may involve considerably more risk than investments in securities of larger-cap companies. (Please see “Primary Risks for Fund Investors” in the prospectus.) Certain Royce Funds may invest up to 25% (100% for Royce Global Select Long/Short Fund, Select Fund II, European Smaller-Companies, Global Dividend Value, International Micro-Cap, and International Premier Fund, 35% of Focus Value, Partners, Financial Services and SMid-Cap Value Funds, 10% of Select Fund I and 5% of Special Equity Fund) of their respective assets in foreign securities, which generally may involve political, economic, currency and other risks not encountered in U.S. investments. (Please see “Investing in Foreign Securities” in the prospectus.) Royce Select I, Select II, Global Select Long/Short, Enterprise Select, and Opportunity Select Funds may sell securities short which involves selling a security it does not own in anticipation that the security’s price will decline. Short sales present unlimited risk on an individual stock basis since the Fund may be required to buy security sold short at a time when the security has appreciated in value. Please read the prospectus carefully before investing or sending money. A copy of the Funds’ current prospectus and Statement of Additional Information may be obtained by calling (800) 221-4268, or by visiting www.roycefunds.com. All publicly released material Fund information is disclosed by the Funds on their website at www.roycefunds.com.


Forward-Looking Statements
This material contains forward-looking statements within the meaning of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve risks and uncertainties, including, among others, statements as to:
•	the Funds’ future operating results,
•	the prospects of the Funds’ portfolio companies,
•	the impact of investments that the Funds have made or may make,
•	the dependence of the Funds’ future success on the general economy and its impact on the companies and industries in which the Funds invest, and
•	the ability of the Funds’ portfolio companies to achieve their objectives.
This review and report use words such as “anticipates,” “believes,” “expects,” “future,” “intends,” and similar expressions to identify forward-looking statements. Actual results may differ materially from those projected in the forward-looking statements for any reason.
The Royce Funds have based the forward-looking statements included in this review and report on information available to us on the date of the report, and we assume no obligation to update any such forward-looking statements. Although The Royce Funds undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make through future shareholder communications or reports.

Proxy Voting

Form N-Q Filing

The Royce Funds 2013 Semiannual Report to Shareholders | 97

2013 In Quotes

It’s not during up years that great investment track records are made.
– Charles de Vaulx, International Value Advisers, The Art of Value Investing

Points to Ponder

– The Economist, January 12, 2013

Supply will be constrained, and demand will be strong, coming from corporate buyers and individual and institutional investors, who will begin to reallocate funds toward the equity market and out of bonds. There will be a great migration or great rotation, or whatever you want to call it. It will intensify as the year continues.
– Brian Rodgers, Barron’s, January 26, 2013

Active managers earn their fees building a long-term performance record through time arbitrage...Value investors succeed not by chasing relative returns, but by embracing the fundamentals of value investing, finding the strongest, highest-quality companies at the best possible prices.
– Chuck Royce, Barron’s, May 11, 2013

While absolute skill tends to improve, relative skill tends to become more uniform. In plain words, that means that the difference between the best and the average is less than what it used to be. So, the best hitter in baseball is closer to an average player today than was the case 50 years ago.
– Michael Mauboussin, Morningstar Advisor, April/May 2013

With interest rates at all-time lows, stocks continue to offer investors the best prospects.
– Jeremy J. Siegel, Kiplinger’s Personal Finance, June 2013

Throughout the post-World War II era, the average stock-market decline in a bear market is about 25% and lasts about 10 months. So the bear market that ended in March of ’09 was twice as severe as the average. Most bear markets are induced by economic contractions. During the average recession in the postwar period, real gross domestic product goes down 2% from peak to trough. The most recent recession was about twice as severe in magnitude, so you had a bear market twice as severe as the average bear market, and the market discounted twice as severe an economic contraction.
– Leon Cooperman, Barron’s, May 18, 2013

In Absolute Agreement
For any period of less than five years you are evaluating serendipity rather than skill.
– Bill Nygren, Kiplinger’s Personal Finance, March 2013

American business will do fine over time. And stocks will do well just as certainly, since their fate is tied to business performance. Periodic setbacks will occur, yes, but investors and managers are in a game that is heavily stacked in their favor. (The Dow Jones Industrials advanced from 66 to 11,497 in the 20th Century, a staggering 17,320% increase that materialized despite four costly wars, a Great Depression and many recessions. And don’t forget that shareholders received substantial dividends throughout the century as well.)
– Warren Buffett, Berkshire Hathaway 2013 annual report letter, March 1, 2013

Cocktail Conversation
Commodities are not an investment. An investment by definition is either current income or a stream of future income. When you buy a commodity, you have to be assuming that you are going to be able to sell it at a higher price to someone else, because it has no income. Thus, it is not investing—it is speculating.
– Barton Biggs, Diary of a Hedgehog

Many who abandoned equities in the “flight to safety” have begun to slowly migrate from cash and bonds to high dividend, low volatility stocks, and very recently, to more cyclical stocks. The timid move back into equities is in early stages with much money still on the sidelines, but flows could occur sporadically.
– Longleaf Partners Fund, First Quarter 2013 Report

The Dow Jones Industrial Index has risen in 17 of the past 20 months, the longest such streak since 1951.
– Sandra Ward, Barron’s, June 1, 2013

Timeless Tidbits
When all is said and done, more is said than done.
– Lou Holtz

There are more fools among buyers than among sellers.
– Proverb

A creative man is motivated by the desire to achieve, not by the desire to beat others.
– Ayn Rand

Try not to become a man of success, but rather try to become a man of value.
– Albert Einstein

There are no secrets to success. It is the result of preparation, hard work, and learning from failure.
– Colin Powell

The thoughts expressed above represent solely the opinions of the persons quoted and, of course, there can be no assurance of future market trends or performance.

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Making Headlines

At The Royce Funds, the integrity of our process and the reputation of our people are as important to us as the long-term performance of our portfolios, so it is always gratifying when the results of these three efforts are recognized in the wider world. Through the years, we have been fortunate enough to have a number of positive articles written about The Royce Funds, our firm, and our people, as well as opportunities to share our investment beliefs and approach. Below is a summary of several media mentions we received in the first half of this year.

June 26, 2013

Jay Kaplan Shares “The Case for Equities” with Investment News and Asset.tv

May 23, 2013

Chuck Royce in Barron’s “Willing to Wait”
“Right now, we’re working our way through a bubble of fear, a mirror to how it was in the 1990s, when we were in a bubble of greed,” said Co-CIO and President of The Royce Funds Chuck Royce in “Willing to Wait,” an article written by Jack Willoughby and published by Barron’s on May 11, 2013. “This market and the wide availability of credit rewards the overleveraged operations that have made excessive use of debt,” said Chuck. “It’s taken us awhile to understand the destructive effects of quantitative easing,” he added. Among the consequences of the Federal Reserve’s quantitative easing program—in addition to distorting stock value—have been investors’ preference for lower-quality companies, fixed-income securities, and passive management vehicles such as exchange-traded funds (ETFs) and index funds. However, while investor confidence can wax and wane quickly, playing a major role in the market’s direction, Chuck remains disciplined and sticks to his path. The article also looked closely at Chuck’s investment methodology, citing three companies that he currently likes.

May 9, 2013

Consuelo Mack WealthTrack:
Exclusive Interview with The Royce Funds’ “Great Investor”
On April 26, 2013, Co-CIO, President, and Portfolio Manager Chuck Royce was welcomed once again as a guest on Consuelo Mack WealthTrack. Introduced as a “small-company stock pioneer,” Chuck answered questions that revolved around his 40 years of experience investing in small-cap stocks, how the market has changed during his tenure, and the most important lessons he’s learned since enduring the bear market of the early- and mid-1970s, which include controlling risk, measuring performance by full market cycles, focusing on absolute returns (not comparisons to indexes), and maintaining a long-term investment discipline. “You have to suspend your fear in the short term in order to capture the long-term performance,” said Chuck. The interview also consisted of Chuck’s thoughts on the current market environment, small-caps as a distinct asset class, where Chuck is currently finding value, and avoiding the bandwagon while betting on quality.

April 15, 2013

The Wall Street Journal: Royce Special Equity Multi-Cap Among “Promising New Funds From Old Hands”

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Searching for Super Small-Cap Companies Through the Macro Noise

Portfolio Manager and Principal Chris Clark offers insights into our disciplined, long-term investment process by emphasizing the role that contrarian thinking plays in our portfolios.

Watching Man of Steel on its opening weekend, the latest movie based on the iconic Superman comic books, I was struck by the fact that one “tail risk” not regularly appearing on the seemingly endless list of macroeconomic concerns is the possibility, however slight, that a well-armed villain from another galaxy might unexpectedly show up and wreak havoc on our sometimes peaceful and unprepared planet. It may be the one global catastrophe that we have not been warned about by market pundits.
   Without giving away the plot, let’s just say that some variation of this unlikely turn of events does indeed occur, and while the film made no reference to the impact this unfriendly visit had on financial markets (sadly for me), it’s no stretch to conclude that there would probably be more sellers than buyers during the initial period of panic and uncertainty.
   Not wanting to miss the full effects of this thriller, I convinced my wife and daughters to see the movie in IMAX 3D. In hindsight, this was probably not a great call on my part. To say that the whole experience overwhelmed the senses understates the continuous visual and audio assault that exhausted more than it entertained several moviegoers, my wife and youngest daughter included.
   Other viewers had a similar experience, with several congregating outside the theater doors also attempting to regain their lost senses. I was able to make it through to the ending but felt disoriented by the whole experience. It took several hours for the effects to fully wear off.
   Clearly the theater’s supersized viewing screen and deafening Dolby Surround Sound, combined with the movie’s exhilarating action and awesome 3-D imagery, had the desired effect of hijacking the senses. However, it also had the unintended consequence of numbing the viewer to the underlying plot.
   Although no one will pay hard-earned dollars to watch the action on trading floors or Ben Bernanke’s press conferences, the corollaries to today’s investment climate are otherwise surprisingly close. Systemic risks abound and while clearly different and (perhaps) less fantastic than those depicted in the movie, they are no less unsettling when followed to their potential conclusion.
   The most dramatic systemic risks imply the end of civilization due to natural resource exhaustion, civil strife over wealth disparity, wars over unpaid liabilities (people generally like to get paid back), and religious fanaticism. Of course, risks are one thing and outcomes can be entirely different—therein lies the true challenge for today’s would-be heroic investor.
   The prognostications from market pundits through the various media outlets are overwhelming and constant. Much like the IMAX 3-D experience, the extreme noise can make the underlying plot tough to discern. And weighing the probabilities of any outcome is another challenge entirely.
   One recent favorite of the pundits has been the inherently flawed eurozone currency structure. Another doomsday scenario centers on Japanese Prime Minister Shinzo Abe’s attempt to target inflation through extreme monetary and fiscal policies. A third recent view sees China struggling with demographic and environmental catastrophe while also facing an economic hard landing that will unleash massive social upheaval in the world’s most populous country. And there’s always the old favorite involving the respective pursuits of nuclear weapons by North Korea and Iran, as well as each nation’s stated goals of annihilating their adversaries (a list that often includes the U.S.).

   The investment team at Royce is often asked to weigh in on macroeconomic issues and while we oblige, somewhat reluctantly, we always offer the same caveat—our expertise is evaluating and understanding companies, their value, quality, and future prospects, not predicting economic, political, or strategic outcomes, especially those that resemble the plot of a summer blockbuster. For us, the multitude of variables that go into that type of analysis would cause sensory and intellectual overload. Even more importantly, we might miss the underlying story.
   This is important because we invest in companies, not headlines or economic statistics. Like the best-drawn movie characters, companies can be resilient and dynamic entities that more often than not self-determine their long-term success or failure. There is no question that macroeconomic factors provide relevant inputs. Yet from our perspective they are often far less important than investors believe.
   So whether or not the investment community decides to sell everything because chaos and destruction appear imminent is less of a concern to us than which companies look likely to survive, adapt, and ultimately grow stronger in whatever the aftermath. That is our business, and we are sticking with it. All that loud noise is like Kryptonite to us.

The thoughts in this essay concerning the stock market are solely those of Royce & Associates and, of course, there can be no assurance with regard to future market movements.

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About The Royce Funds

Wealth Of Experience
With approximately $36 billion in total assets under management, Royce & Associates is committed to the same small-company investing principles that have served us well for 40 years. Charles M. Royce, our President and Co-Chief Investment Officer, enjoys one of the longest tenures of any active mutual fund manager. Royce’s investment staff also includes Co-Chief Investment Officer W. Whitney George, 18 Portfolio Managers, four assistant portfolio managers and analysts, and nine traders.

Multiple Funds, Common Focus
Our goal is to offer both individual and institutional investors the best available smaller-cap portfolios. Unlike a lot of mutual fund groups with broad product offerings, we have chosen to concentrate on smaller-company investing by providing investors with a range of funds that take full advantage of this large and diverse sector.

Consistent Discipline
Our approach emphasizes paying close attention to risk and maintaining the same discipline, regardless of market movements and trends. The price we pay for a security must be significantly below our appraisal of its current worth. This requires a thorough analysis of the financial and business dynamics of an enterprise, as though we were purchasing the entire company.

Co-Ownership Of Funds
It is important that our employees, and shareholders share a common financial goal; our officers, employees, and their families currently have approximately $168 million invested in The Royce Funds.

This Review and Report must be accompanied or preceded by a current prospectus for the Funds. Please read the prospectus carefully before investing or sending money.

General Information
Additional Report Copies
and Prospectus Inquiries
(800) 221-4268

RIA Services
Fund Materials and
Performance Updates
(800) 33-ROYCE (337-6923)

Broker/Dealer Services
Fund Materials and
Performance Updates
(800) 59-ROYCE (597-6923)

Shareholder Services
Transactions and
Account Inquiries
(800) 841-1180

Royce Infoline
24-Hour Automated
Telephone Service
(800) 78-ROYCE (787-6923)

Item 2. Code(s) of Ethics. Not applicable to this semi-annual report.

Item 3. Audit Committee Financial Expert. Not applicable to this semi-annual report.

Item 4. Principal Accountant Fees and Services. Not applicable to this semi-annual report.

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not Applicable.

Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not Applicable.

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not Applicable

Item 10. Submission of Matters to a Vote of Security Holders. Not Applicable.

(a) Disclosure Controls and Procedures. The Principal Executive and Financial Officers concluded that the Registrant’s Disclosure Controls and Procedures are effective based on their evaluation of the Disclosure Controls and Procedures as of a date within 90 days of the filing date of this report.

(b) Internal Control over Financial Reporting. There were no significant changes in Registrant’s internal control over financial reporting or in other factors that could significantly affect this control subsequent to the date of the evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses during the second fiscal quarter of the period covered by this report.

(a)(2) Separate certifications by the Registrant’s Principal Executive Officer and Principal Financial Officer as required by Rule 30a-2(a) under the Investment Company Act of 1940.

(b) Separate certifications by the Registrant’s Principal Executive Officer and Principal Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(b) under the Investment Company Act of 1940.

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

	Average Annual Total Returns
																				Gross Annual			Net Annual
																40-Year or Since			Inception	Operating			Operating
Fund	Year-to-Date¹			1-Year			5-Year			10-Year			20-Year			Inception			Date	Expenses			Expenses

SMALL-CAP

DIVERSIFIED

Royce Pennsylvania Mutual Fund		11.57	%		22.92	%		7.23	%		10.29	%		10.62	%		13.86	%	n.a.		0.90	%		0.90	%

Royce Low-Priced Stock Fund		-1.23			4.29			3.06			7.97			n.a.			11.20		12/15/93		1.58			1.50

Royce Heritage Fund		9.41			22.15			9.64			10.73			n.a.			13.51		12/27/95		1.51			1.51

Royce Value Plus Fund		12.36			22.27			4.75			10.91			n.a.			11.90		6/14/01		1.46			1.46

FOCUSED

Royce Premier Fund		7.88			17.13			6.72			11.98			11.77			12.10		12/31/91		1.06			1.06

Royce Special Equity Fund		12.40			22.34			11.67			9.85			n.a.			9.69		5/1/98		1.13			1.13

Royce Value Fund		8.47			20.82			3.94			11.67			n.a.			10.76		6/14/01		1.45			1.45

Royce 100 Fund		10.56			21.20			8.49			10.75			n.a.			10.75		6/30/03		1.48			1.48

TOTAL RETURN

Royce Total Return Fund		12.85			23.94			7.67			9.05			n.a.			11.11		12/15/93		1.14			1.14

Royce Dividend Value Fund		10.89			23.67			9.76			n.a.			n.a.			9.04		5/3/04		1.52			1.52

MICRO-CAP

Royce Micro-Cap Fund		3.04			8.46			4.68			9.79			11.13			12.13		12/31/91		1.49			1.49

Royce Opportunity Fund		18.49			30.58			10.90			11.52			n.a.			12.98		11/19/96		1.14			1.14

GLOBAL/INTERNATIONAL

Royce Global Value Fund		-4.78			6.18			1.34			n.a.			n.a.			4.08		12/29/06		1.81			1.70

Royce International
Smaller-Companies Fund		-0.71			13.46			5.06			n.a.			n.a.			5.06		6/30/08		2.15			1.71

INDEX

Russell 2000 Index		15.86			24.21			8.77			9.53			8.88			n.a.		n.a.		n.a.			n.a.

Russell Microcap Index		18.32			25.38			8.53			7.81			n.a.			n.a.		n.a.		n.a.			n.a.

Russell Global Small Cap Index		6.72			18.48			4.16			10.33			n.a.			n.a.		n.a.		n.a.			n.a.

Russell Global ex-U.S. Small Cap Index		1.76			15.45			2.01			11.32			n.a.			n.a.		n.a.		n.a.			n.a.

¹ Not annualized

Royce Opportunity Fund vs the Russell 2000: Performance and Expense Information																	Through June 30, 2013

	Average Annual Total Returns

																			Since
																			Inception			Net Operating
	Year-to-Date¹			One-Year			Three-Year			Five-Year			10-Year			15-Year			(11/19/96)			Expenses

Royce Opportunity Fund		18.49	%		30.58	%		19.42	%		10.90	%		11.52	%		12.11	%		12.98	%		1.14	%

Russell 2000		15.86			24.21			18.67			8.77			9.53			6.60			7.85			n.a.

¹ Not annualized

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


Quanex Building Products	-0.30%

McEwen Mining	-0.25

Hochschild Mining	-0.24

Alamos Gold	-0.22

Thoratec Corporation	-0.19

¹ Net of dividends

ROYCE VALUE PLUS FUND VS. RUSSELL 2000 Value of $10,000 Invested on 6/14/01

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


American Eagle Outfitters	-0.34%

Brady Corporation Cl. A	-0.03

Ampco-Pittsburgh	-0.03

Carlisle Companies	-0.02

Schulman (A.)	-0.01

¹ Net of dividends

ROYCE SPECIAL EQUITY FUND VS. RUSSELL 2000 Value of $10,000 Invested on 5/1/98

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


Allied Nevada Gold	-0.86%

NETGEAR	-0.60

Silver Standard Resources	-0.42

Hochschild Mining	-0.42

Seabridge Gold	-0.42

¹ Net of dividends

ROYCE VALUE FUND VS. RUSSELL 2000 Value of $10,000 Invested on 6/14/01

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

	SMALL-CAP DIVERSIFIED Royce Pennsylvania Mutual Fund Royce Low-Priced Stock Fund Royce Heritage Fund Royce Value Plus Fund FOCUSED Royce Premier Fund Royce Special Equity Fund Royce Value Fund Royce 100 Fund TOTAL RETURN Royce Total Return Fund Royce Dividend Value Fund MICRO-CAP Royce Micro-Cap Fund Royce Opportunity Fund GLOBAL/INTERNATIONAL Royce Global Value Fund Royce International Smaller-Companies Fund



	www.roycefunds.com

Table of Contents


Semiannual Review


Royce Featured Fund Guide	2

Portfolio Characteristics	4

Performance and Expenses	5

Market Cycle and Risk Adjusted Performance	6

Letter to Our Shareholders	7

Fund Focus	14

2013 In Quotes	131

Making Headlines	132

Postscript: Searching for Super Small-Cap Companies Through the Macro Noise	Inside Back Cover


Semiannual Report to Shareholders	15

		For the 10-year period ended 6/30/13, nine out of 11 Royce Funds with 10 years of history outperformed the Russell 2000, while 10 of the 11 did so with better risk-adjusted returns and Sharpe ratios.
		In addition, for the 10-year period ended 6/30/13, six of the 11 Royce Funds outperformed the Russell 2000 with lower volatility.

ROYCE U.S. EQUITY FUNDS VS. RUSSELL 2000 INDEX:
MARKET CYCLE RESULTS

	Peak-to-			Peak-to-			Peak-to-
	Peak			Peak			Current
	3/9/00–			7/13/07–			4/29/11
Fund	7/13/07			4/29/11			6/30/13

SMALL-CAP

DIVERSIFIED

Royce Pennsylvania Mutual Fund		207.1	%		11.6	%		9.8	%

Royce Low-Priced Stock Fund		198.9			27.2			-19.2

Royce Heritage Fund		150.4			25.3			2.7

Royce Value Plus Fund		n.a.			-3.0			6.3

FOCUSED

Royce Premier Fund		198.1			29.9			5.7

Royce Special Equity Fund		227.4			20.8			21.0

Royce Value Fund		n.a.			17.4			-1.6

Royce 100 Fund		n.a.			27.6			4.4

TOTAL RETURN

Royce Total Return Fund		193.9			6.8			16.9

Royce Dividend Value Fund		n.a.			21.6			14.4

MICRO-CAP

Royce Micro-Cap Fund		197.4			24.9			-10.9

Royce Opportunity Fund		191.8			6.9			17.2

INDEX

Russell 2000		54.8			6.6			16.6

Russell 2000 Value		189.4			-1.4			17.8

Russell 2000 Growth		-14.8			14.3			15.4

Exile on Wall Street
The small-cap market reached peaks in July 2007 and April 2011 before surging to its most recent record highs. Surveying the small-cap landscape from the vantage points of these respective summits shows that each cycle (the second of which is still going on) has presented a difficult environment for active managers such as the parties penning this letter. This has been particularly true of the most recent period, which has seen solid results for the major small-cap indexes, ETFs, and other passive investment vehicles, while the active managers who once routinely outperformed all of them have achieved more muted results. The current phase has favored more defensive sectors and investments with high dividend yields, such as REITs and MLPs. Strong balance sheets and higher quality metrics such as returns on invested capital (ROIC) have also been out of favor in this world of easy money and zero interest rates that tends to be more supportive of lower-quality businesses. And we have not even mentioned the flight to fixed income, which, along with the proliferation of ETFs, has been one of the most significant developments in the investment world during the last three-plus years.		By buying out-of-favor companies and rooting around beaten down sectors and industries, we do things every day that may not look particularly savvy to many on Wall Street, at least in the short run. After 40 years, we are used to doing things according to our own principles and long-term time frame and do not mind being something akin to exiles on Wall Street.


Charles M. Royce, President As it has for the past few years, sentiment once again shifted dramatically in the second quarter and volatility returned to the markets. However, unlike the previous few years, it was the bond market that felt the brunt of the pain as speculation that the Federal Reserve may soon pull back from its unprecedented stimulus efforts fueled a one percentage point jump in 10-year Treasury yields during the final two months of the quarter. After gaining 12.4% in the first quarter of 2013, the Russell 2000 Index advanced 3.1% in the second quarter, finishing the first half of the year with a 15.9% gain. At the same time, the CBOE Volatility Index (VIX), after hitting a fresh 2013 low in March 2013, spiked 33% in the second quarter—the largest quarterly increase since the third quarter of 2011. In the span of one quarter, we have transitioned from a world in which the idea that interest rates would remain indefinitely low to one in which the shift back to a more normalized yield environment is now center stage. Continued on page 10...			Letter to Our Shareholders These events took shape in a market that has featured regular spasms of high volatility and periods of declining stock prices, some of them of a historically extreme nature. These are periods in which fundamentally driven active management approaches such as ours have historically proven their worth. That many of our portfolios struggled to preserve their value as effectively as they have done historically during the market downturns since the pre-crisis peak in July 2007 has been frustrating and humbling, to say the least. Yet investing is a routinely humbling business. This is not the first time (and almost certainly won’t be the last) in which we have endured a prolonged relative slump versus the small-cap market as a whole. But behind every contrarian, especially an out-of-sync one, is a disciplined investor. By buying out-of-favor companies and rooting around beaten down sectors and industries, we do things every day that may not look particularly savvy to many on Wall Street, at least in the short run. After 40 years, we are used to doing things according to our own principles and long-term time frame and do not mind being something akin to exiles on Wall Street. It should come as no surprise, then, that we are not persuaded—or even bothered—by those voices suggesting that active management has perhaps seen its day in the sun. With ETFs and high-frequency trading seemingly making markets that much more efficient, with so many investors disenchanted with equities, and with sustained periods of relative underperformance in the books, perhaps (so the argument runs) active managers should simply switch to indexing or find another line of work. To be sure, the last several years have given us little to crow about (while serving up plenty of crow to eat). However, we remain as enthusiastic as ever about active management in general and value-oriented small-cap investing in particular. To paraphrase Mark Twain, we find reports of the death of active management to be greatly exaggerated. So while lower-quality stocks have dominated the market and outperformed many of our holdings through the current cycle, we are undeterred in our conviction that well-run, cash-rich businesses with high returns on invested capital remain the best route to building long-term wealth. It is also important to remember that many stocks possessing these attributes have done very well on an absolute basis through the current cycle even as they have suffered in comparison to their more defensive or higher-yielding cohorts. Finally, we have already seen signs of a change in which we think the kind of higher-quality companies that we favor can assume a leadership role. There were encouraging signals in May and in the second half of 2012 that investors were giving more thought to fundamentals. In short, we are excited about the days ahead. We are bullish not only on stocks but, more important, on our specific approach to quality and active management.


Tumbling Dice
When 2012 drew to a close, we were equally optimistic. The second half of 2012 offered much that was good for what ailed quality-centric investors. The last few months in particular saw a brief resurgence of quality as many companies with strong balance sheets, high ROIC, and strong cash flow characteristics outpaced the rest of the small-cap market. This rally did not last long into 2013, however, as more highly levered and lower ROIC businesses soon resumed leadership. Quality stocks for the most part acquitted themselves well in the bullish first quarter; they simply did not attract as much interest as more defensive areas. The strongest sectors for the small-cap Russell 2000 Index during the first quarter were Health Care, Consumer Discretionary, and Financials, the latter drawing much of its strength from REITs. More cyclical sectors such as Technology and Energy, which we see as featuring some of the most attractively valued, high-quality companies available over the last couple of years, lagged.
The result was a strong opening quarter for stocks across the board. Small-caps led, showing positive returns for the third consecutive quarter. The Russell 2000 gained 12.4% compared to respective gains of 11.0% and 10.6% for the large-cap Russell 1000 and S&P 500 Indexes, while the more tech-oriented Nasdaq Composite rose 8.2%. Quality stocks resuming their back seat was not entirely surprising. Stocks as a whole have been on an encouraging roll since the low on June 2, 2012, so some give-back was not entirely unexpected, even if it was somewhat disappointing.
Going into the second quarter, we were confident that the rally could last, though we also assumed that a correction would be a natural part of a longer-term bullish trend, as has been the case over the past several years. While share prices all over the globe were more volatile in the second quarter, on the domestic front a rocky market still resulted in positive returns, with strength across all asset classes. The tech-oriented Nasdaq Composite led for the quarter with a 4.2% advance. Small-cap edged out the large-cap indexes, with the Russell 2000 up 3.1% for the quarter compared to respective gains of 2.9% and 2.7% for the S&P 500 and Russell 1000 Indexes. One-year results were also strong for the major indexes, with the Russell 2000 leading (+24.2%), followed by the Russell 1000 (+21.2%), S&P 500 (+20.6%), and Nasdaq (+16.0%). Three-year results were even more closely aligned, offering compelling evidence of just how tightly correlated equity returns have been. Average annual total returns for the three-year period ended June 30, 2013 for the Russell 2000 (+18.7%), the Russell 1000 (+18.6%), and S&P 500 (+18.5%) were within two-tenths of one another while the Nasdaq rose 17.3% over the same span. That stocks continue to perform well could be seen by the fact that trailing one-, five-, and 10-year results for the small-cap and two large-cap indexes were well ahead of their returns for the same periods ended one year prior. Micro-cap returns also continued their ascent. The Russell Microcap Index gained 18.3% year-to-date through June 30, 2013. Its one-year result was also strong, up 25.4%.				We are bullish not only on stocks but, more important, on our specific approach to quality and active management.


	From our perspective, the end to the easy money bias that has been in place for several years presents an attractive environment for active managers with an absolute orientation like us, as underlying fundamentals and less-leveraged balance sheets should become increasingly more important. We have long thought that the ongoing efforts to reflate the economy through numerous quantitative easings and a zero interest rate policy would have unintended consequences. To be sure, the actions of the Fed have been distorting asset pricing and valuations in the equity market in a number of ways. Many of the fundamental qualities we hold so dear, for example, seem temporarily suspended in an investment world where highly-leveraged businesses are benefiting from the ability to restructure their debt, lower funding costs, and extend maturities. The unintended consequence of leveling the playing field has given lower-quality companies the luxury of time, which in a normal environment they would not have. It would not surprise us to see these trends reverse as tapering is implemented and monetary stimulus is slowly trimmed back and ultimately withdrawn. To be clear, our balance sheet scrutiny is paramount to our process, particularly our focus on risk. To that end, we have always chosen to focus on companies with high operating leverage. Our measure of financial leverage centers on the ratio of assets to stockholders’ equity, looking for a two-to-one ratio for non-financial companies. Continued on page 12...

Letter to Our Shareholders


The micro-cap index’s trailing three-, five-, and 10-year results were also fine, though it trailed the Russell 2000 in these periods. By contrast, mid-caps narrowly underperformed year-to-date—the Russell Midcap Index rose 15.5% through the end of June—but outpaced their small-cap peers for the one-, three-, 10-, 15-, 20-, and 25-year periods ended June 30, 2013. This impressive long-term record helps to explain why we think of mid-caps as the market’s stealth asset class. Outside the U.S., short- and intermediate-term results were far less bullish. The first quarter saw positive, though lower, returns for the Russell ex-U.S. Small Cap Index, which climbed 6.5% while the Russell ex-U.S. Large Cap Index was up 3.1%. Second-quarter results slipped into the red as the Russell ex-U.S. Small Cap Index fell 4.5% and the Russell Global ex-U.S. Large Cap Index was down 2.9%. This resulted in considerably lower year-to-date results through June 30, 2013: the Russell ex-U.S. Small Cap Index was up 1.8% while its large-cap sibling managed only a 0.1% advance. In this context it was hardly surprising that one-, three-, and five-year results for the non-U.S. indexes were also well behind their U.S. equivalents for the periods ended June 30, 2013.

Shine a Light Among The Royce Funds in this Semiannual Review and Report, only Royce Opportunity Fund outperformed its benchmark for the year-to-date period through the end of June, providing a happy exception to what was otherwise a lackluster six months on a relative basis. The remaining 13 portfolios ran the gamut. There were the portfolios that turned in strong absolute results—Royce Pennsylvania Mutual, Value Plus, Special Equity, 100, Total Return, and Dividend Value Funds. Next came three others that were not quite as robust but still posted solid absolute returns—Royce Heritage, Premier, and Value Funds. Last were those that struggled—Royce Low-Priced Stock, Micro-Cap, Global Value, and International Smaller-Companies Funds. As a group, the Funds featured in this Semiannual Review and Report had strong results from several sectors, including Consumer Discretionary, Information Technology, Industrials, and Financials. Those portfolios with anything beyond a modest amount of exposure to the Materials sector generally paid a high price in the form of sizable net losses. These declines came overwhelmingly from the metals & mining industry, especially from precious metals mining companies, a once sterling industry that has recently become a persistent trouble spot for a few Royce-managed portfolios. In the first quarter cyclical companies mostly lagged defensive sectors, but the second quarter offered a more eclectic, and thus encouraging, mix. Within the Russell 2000, both Consumer-oriented sectors remained strong, as did Health Care, Information Technology, and Telecommunication Services. However, the more cyclical Energy, Materials, and

2013 YEAR-TO-DATE TOTAL RETURNS FOR THE ROYCE FUNDS VS. BENCHMARK INDEXES As of 6/30/13



Industrials sectors fell, as did more high-yielding areas such as REITs and Utilities. The S&P 500 showed a similarly scrambled pattern among large-cap sector returns. Although painful in the short term, we see this growing differentiation as a very positive sign that the market is beginning to break out of its correlation groove. Let it Loose During the first half of 2013 the stock market displayed a broadly similar pattern of results to the first halves of 2010, 2011, and 2012. This was a model in which a robustly bullish first quarter gave way to a far more volatile second quarter, with a sudden shift in market sentiment driven primarily by global macro issues. However, this year’s first half also showed some notable differences that suggest a break with the market’s previously unyielding pattern of the last three calendar years—a pattern marked by closely correlated returns and, as a result, relatively uninspired results for many active managers. For example, during the first quarter of 2013 the market was remarkably good at tuning out a great deal of ominous political news. When Congress and the President failed to produce a long-term plan to tackle the deficit, the		Our contention is that the unusual performance pattern spurred by the effects of multiple rounds of QE and zero interest rates has begun to unwind, which will set the stage for more fundamentally based value-oriented approaches to take hold of market leadership.


This is an important part of our ongoing search for a company’s “margin of safety.” If a company is carrying too much debt, it impedes its own ability to meet the challenge of out-of-left-field occurrences such as lawsuits, the loss of a major customer, or overseas currency crises. A conservatively capitalized company, especially a smaller company, can better weather these storms because it has the necessary financial reserves to do so, while a company with too much debt on the balance sheet runs a greater risk that stormy weather will turn into a hurricane. We also view financially strong companies as well-positioned to grow. The assets of these companies are derived more from retained earnings than paid-in capital, i.e., they have the ability to self-fund their own success as a business. Of course, transitions are never easy. Shifting back to a more normalized yield environment is likely to be marked by increased volatility and pockets of uncertainty. Stock prices have begun the transition from their reliance on monetary policy to fundamentals, which is a process we believe will stress the importance of companies with strong, less-leveraged balance sheets, excess cash flow generation, and the ability to self-finance. We look forward to a more normalized yield environment that could usher in that long-awaited flight to quality.			Letter to Our Shareholders market mostly shrugged and continued to climb. When sequestration began to take effect in the aftermath of the stalled budget negotiations, stocks once again paused then resumed moving upward. This stood in stark contrast to what we saw in 2010, 2011, and most of the first half of 2012, when the markets seemed to react to little other than macro headlines that were themselves largely driven by political events. In addition, when macro issues did inspire a sell-off, year-to-date returns were not too adversely affected, with most stocks and domestic indexes escaping the more uncertain second quarter of 2013 in the black despite a 33% second-quarter spike in the CBOE Volatility Index (VIX). This increase was the largest quarterly advance for the VIX, which hit a fresh 2013 low in March before spiking higher, since the third quarter of 2011. Another significant deviation from the pattern of previous years was the pain born by the bond market. Speculation that the Fed would taper its stimulus efforts fueled a full one percentage point jump in 10-year Treasury yields during May and June. We saw an encouraging variation in performance at the stock, industry, and sector levels, which was especially pronounced in these same two months, as signals that the economy was slowly finding its way back to more historically normal—that is, less Fed-dependent—levels of growth and activity. Happy? All of this makes us optimistic. Our contention is that the unusual performance pattern spurred by the effects of multiple rounds of QE and zero interest rates has begun to unwind, which will set the stage for more fundamentally based value-oriented approaches to take hold of market leadership. One sign that the process has already begun is that



in the space of roughly three months we have moved from an environment in which many believed that interest rates would remain low indefinitely to one in which more historically normal yields are inching closer and closer. We have argued that an unintended consequence of QE and zero interest rates has been to make life a little too easy for lower-quality companies. Highly levered businesses have been able to re-finance their obligations at record low rates and thus not pay the usual economic cost for being over-levered. This unnatural and (we believe) temporary advantage reduced the attractiveness of the conservatively capitalized businesses that have been our portfolio mainstays since the early 1970s. However, with Fed policy changing, we are moving closer to a market in which strong fundamentals are likely to be in high demand once more. What Ben Bernanke actually said back in June about the Fed potentially tapering its bond purchases seemed entirely positive. Many of us have been waiting for the economy and the markets to return to more historically normal conditions for some time. We have been especially eager to see interest rates normalize, which would be as sure a sign as any that the economy and markets are operating at something like business as usual (and this period of QE and zero interest rates has been anything but that). We suspect an environment in which the Fed is not as intimately involved in the economy will be a healthy one for stocks. So while many investors saw the Fed’s plans to taper bond purchases as a cause for alarm, we saw it as an affirmation that the economy is healing as it grows. Within the next couple of years, it should grow even stronger. Along with more historically normal—that is, higher—rates, this would be a very welcome development for equities in our view, particularly the kind of attractively valued, well-run, financially strong small-cap businesses that remain our favorites. Guarded optimism may be as close to bliss as we can usually get, but we have seldom felt more confident about our investment approach as we do right now, looking out on the months and years to come. Sincerely,			Guarded optimism may be as close to bliss as we can usually get, but we have seldom felt more confident about our investment approach as we do right now, looking out on the months and years to come.

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

July 31, 2013

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

Oil States International		0.34%

Federated Investors Cl. B		0.30

Nu Skin Enterprises Cl. A		0.25

GameStop Corporation Cl. A		0.25

AAON		0.23

¹ Includes dividends

Important Performance and Expense Information All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 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 redeemed. Shares redeemed within 180 days of purchase may be subject to a 1% redemption fee payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current month-end performance may be higher or lower than performance quoted and may be obtained at www.roycefunds.com. All performance and risk information reflects results of the Investment Class (its oldest class). Operating expenses reflect the Fund’s total annual operating expenses for the Investment Class as of the Fund’s most current prospectus and include management fees, other expenses, and acquired fund fees and expenses. Acquired fund fees and expenses reflect the estimated amount of the fees and expenses incurred indirectly by the Fund through its investment in mutual funds, hedge funds, private equity funds, and other investment companies. Shares of PMF’s Service, Consultant, R, and K Classes bear an annual distribution expense that is not borne by the Investment Class. Regarding the two “Good Ideas” tables shown above, the sum of all contributors to, and all detractors from, performance for all securities in the portfolio would approximate the Fund’s year-to-date performance for 2013.

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


NETGEAR	-0.17%

Eldorado Gold	-0.15

Agnico Eagle Mines	-0.13

Seabridge Gold	-0.11

Pan American Silver	-0.10

¹ Net of dividends

ROYCE PENNSYLVANIA MUTUAL FUND VS. RUSSELL 2000 Value of $10,000 Invested on 12/31/78 (Russell 2000 Inception)

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

Nu Skin Enterprises Cl. A		0.96%

TrueBlue		0.55

GameStop Corporation Cl. A		0.51

Federated Investors Cl. B		0.41

Thor Industries		0.38

¹ Includes dividends

Important Performance and Expense Information All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 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 redeemed. Shares redeemed within 180 days of purchase may be subject to a 1% redemption fee payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current month-end performance may be higher or lower than performance quoted and may be obtained at www.roycefunds.com. All performance and risk information reflects results of the Service Class (its oldest class). Price and total return information is based on net asset values for shareholder transactions. Certain immaterial adjustments were made to the net assets of Royce Low-Priced Stock Fund at 6/30/13 for financial reporting purposes, and as a result the net asset values for shareholder transactions and the calendar year total returns based on those net asset values differ from the adjusted net asset values and calendar year total returns reported in the Financial Highlights. Gross operating expenses reflect the Fund’s gross total annual operating expenses for the Service Class, including management fees, 12b-1 distribution and service fees, other expenses, and acquired fund fees and expenses. Net operating expenses reflect contractual fee waivers and/or expense reimbursements. All expense information is reported as of the Fund’s most current prospectus. Royce & Associates has contractually agreed to waive fees and/or reimburse operating expenses to the extent necessary to maintain the Service Class’s net annual operating expenses, other than acquired fund fees and expenses, at or below 1.49% through April 30, 2014. Acquired fund fees and expenses reflect the estimated amount of the fees and expenses incurred indirectly by the Fund through its investments in mutual funds, hedge funds, private equity funds, and other investment companies. Shares of RLP’s R Class bear an annual distribution expense that is higher than that of the Service Class. Regarding the two “Good Ideas” tables shown above, the sum of all contributors to, and all detractors from, performance for all securities in the portfolio would approximate the Fund’s year-to-date performance for 2013.

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


Allied Nevada Gold	-1.55%

Hochschild Mining	-1.20

Pretium Resources	-0.82

Pan American Silver	-0.65

Silver Standard Resources	-0.62

¹ Net of dividends

ROYCE LOW-PRICED STOCK FUND VS. RUSSELL 2000 Value of $10,000 Invested on 12/15/93

PORTFOLIO DIAGNOSTICS

Fund Net Assets	$1,974 million

Number of Holdings	129

Turnover Rate	12%

Average Market Capitalization¹	$1,140 million

Weighted Average P/E Ratio^2,3	15.8x

Weighted Average P/B Ratio²	1.5x

U.S. Investments (% of Net Assets)	63.9%

Non-U.S. Investments (% of Net Assets)	34.0%

Symbol
Investment Class	RLPHX
Service Class	RYLPX
Institutional Class	RLPIX
R Class	RLPRX
K Class	RLPKX

¹ Geometric Average. This weighted calculation uses each portfolio holding’s market cap in a way designed to not skew the effect of very large or small holdings; instead, it aims to better identify the portfolio’s center, which Royce believes offers a more accurate measure of average market cap than a simple mean or median.
² Harmonic Average. This weighted calculation evaluates a portfolio as if it were a single stock and measures it overall. It compares the total market value of the portfolio to the portfolio’s share in the earnings or book value, as the case may be, of its underlying stocks.
³ The Fund’s P/E ratio calculation excludes companies with zero or negative earnings (19% of portfolio holdings as of 6/30/13).

MORNINGSTAR STATISTICAL MEASURES¹

	Sharpe Ratio	Standard Deviation

RLP	0.24	26.29

Russell 2000	0.46	24.07

Category Median	0.46	23.47

Best Quartile Breakpoint	0.52	22.36

¹ Five years ended 6/30/13. Category Median and Best Quartile Breakpoint based on 348 small-cap objective funds (oldest class only) with at least five years of history.
DOWN MARKET PERFORMANCE COMPARISON All Down Periods of 7.5% or Greater Over the Last 7 Years, in Percentages(%)



Managers’ Discussion First-half results for Royce Heritage Fund (RHF) left us in something of a quandary. We were reasonably pleased with the Fund’s absolute return while we were disappointed by its relative performance. The Fund gained 9.4% for the year-to-date period ended June 30, 2013, behind its small-cap benchmark, the Russell 2000 Index, which advanced 15.9% for the same period. The first quarter was pleasantly bullish overall, though the mostly unimpeded upward move made it easy to miss a shift in market leadership. After lagging the market overall, many cyclical stocks raced ahead in the second half of 2012, a span in which RHF handily beat the Russell 2000 with a gain of 11.6% versus 7.2%. The first quarter saw a return to leadership of more defensive companies, which was a factor in the Fund’s relative disadvantage. RHF was up 9.2% in the first quarter compared to a 12.4% increase for the small-cap index. Worrisome macro news made a comeback of its own in 2013, primarily during the second quarter, a more volatile three months than the preceding three. The developments included credit, banking, and real estate market challenges for China, unrest in developing nations such as Turkey and Brazil, a sharp rise in the 10-year Treasury rate during May and June, and word from the Fed that it would slow the pace of bond purchases at the end of 2013, allowing that the economy keeps growing. In contrast to 2011 and 2012, the domestic equity markets in general handled this news well. For the second quarter, RHF gained 0.2% while the Russell 2000 rose 3.1%. Relative results were better over longer-term time spans. For the periods ended June 30, 2013, the Fund beat the small-cap index from the previous small-cap peak on July 13, 2007, up 28.6% versus 24.3%. (More market cycle results are on page 6.) RHF also outpaced the Russell 2000 for the five-, 10-, 15-year, and since inception (12/27/95) periods ended June 30, 2013. The Fund’s average annual total return since inception was 13.5%. The Fund paid a high price for its overweight exposure to the Materials sector, which was the only one to post a net loss for the first half. The sector’s metals & mining group was particularly ubiquitous among holdings that lost value through the end of June. The industry accounted for RHF’s six largest detractors for the period. Eight of the Fund’s 10, and 11 of its 20, largest net

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

WisdomTree Investments		0.82%

Towers Watson & Company Cl. A		0.51

KKR & Co. L.P.		0.44

TD AMERITRADE Holding Corporation		0.37

ManpowerGroup		0.36

¹ Includes dividends

Important Performance and Expense Information All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 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 redeemed. Shares redeemed within 180 days of purchase may be subject to a 1% redemption fee payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current month-end performance may be higher or lower than performance quoted and may be obtained at www.roycefunds.com. All performance and risk information reflects results of the Service Class (its oldest class). Price and total return information is based on net asset values calculated for shareholder transactions. Certain immaterial adjustments were made to the net assets of Royce Heritage Fund at 12/30/11 for financial reporting purposes, and as a result the net asset values for shareholder transactions on that date and the calendar year total returns based on those net asset values differ from the adjusted net asset values and calendar year total returns reported in the Financial Highlights. Operating expenses reflect the Fund’s total annual operating expenses for the Service Class as of the Fund’s most current prospectus and include management fees, 12b-1 distribution and service fees, other expenses, and acquired fund fees and expenses. Shares of RHF’s Consultant and R Classes bear an annual distribution expense that is higher than that of the Service Class. Acquired fund fees and expenses reflect the estimated amount of the fees and expenses incurred indirectly by the Fund through its investments in mutual funds, hedge funds, private equity funds, and other investment companies. Regarding the two “Good Ideas” tables shown above, the sum of all contributors to, and all detractors from, performance for all securities in the portfolio would approximate the Fund’s year-to-date performance for 2013.

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


Hochschild Mining	-0.48%

Allied Nevada Gold	-0.43

Gold Fields ADR	-0.42

Randgold Resources ADR	-0.34

Fresnillo	-0.28

¹ Net of dividends

ROYCE HERITAGE FUND VS. RUSSELL 2000 Value of $10,000 Invested on 12/27/95

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

Infinera Corporation		0.67%

Immersion Corporation		0.64

iRobot Corporation		0.55

Healthways		0.51

Carter’s		0.49

¹ Includes dividends

Important Performance and Expense Information All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 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 redeemed. Shares redeemed within 180 days of purchase may be subject to a 1% redemption fee payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current month-end performance may be higher or lower than performance quoted and may be obtained at www.roycefunds.com. All performance and risk information reflects results of the Service Class (its oldest class). Operating expenses reflect the Fund’s total annual operating expenses for the Service Class as of the Fund’s most current prospectus and include management fees, 12b-1 distribution and service fees, other expenses, and acquired fund fees and expenses. Acquired fund fees and expenses reflect the estimated amount of fees and expenses incurred indirectly by the Fund through its investments in mutual funds, hedge funds, private equity funds, and other investment companies. Shares of RVP’s Consultant and R Classes bear an annual distribution expense that is higher than that of the Service Class. Regarding the two “Good Ideas” tables shown above, the sum of all contributors to, and all detractors from, performance for all securities in the portfolio would approximate the Fund’s year-to-date performance for 2013.



Managers’ Discussion As was the case with 2012’s results, the first-half performance for Royce Premier Fund (RPR) left us with conflicting emotions. On the one hand, we found the Fund’s absolute result satisfying; on the other hand, its relative performance left a great deal to be desired. For the year-to-date period ended June 30, 2013, RPR gained 7.9%, well behind the 15.9% advance for its small-cap benchmark, the Russell 2000, over the same period. In light of the Fund’s strong showing in the second half of 2012, when RPR outpaced the small-cap index with a gain of 8.6% versus 7.2%, we were hoping for more of the same in 2013. That is, we wanted improved absolute and relative results, but also a market that would continue to be less enamored of high yield and instant growth and more attracted to companies with strong fundamentals. So while the first quarter of 2013 was bullish, it seemed to us like a different type of bull run than we saw in last year’s second half. That said, RPR was up 6.7% in the first quarter, trailing the Russell 2000, which climbed 12.4%. The second quarter brought higher volatility, more uncertainty, and enough variation in sector, industry, and company results to rekindle our hopes that the long period of close correlation and higher returns for lower-quality businesses was finally ending. Multiple rounds of QE and zero interest rates have removed much of the stigma of high leverage on corporate balance sheets. This has in turn created a lot of asset value distortion, a development that has hurt results for the kind of conservatively capitalized, well-run businesses we seek for the portfolio. With this in mind, we were cheered by signs in the second quarter, such as the sharp rise in the 10-year Treasury rate between mid-May and mid-June and resulting bond redemptions, that signaled a return to a more historically normal environment in which the Fed’s role is not nearly as large. However, for the second quarter the Fund again trailed its benchmark, up 1.1% versus 3.1%. While underperforming in short- and intermediate-term intervals, RPR did maintain a performance advantage over the Russell 2000 for longer-term periods. (The Fund’s recent market cycle results can be found on page 6.) RPR outpaced the Russell 2000 for the 10-, 15-, 20-year, and since inception (12/31/91) periods ended June 30, 2013. The Fund’s average annual total return since inception was 12.1%, a long-term record in which we take great pride. Holdings in the metals & mining industry created an outsized drag on first-half performance, which gave the Materials sector the unwanted distinction of posting considerably larger net losses than the portfolio’s only other sector to detract from results, Health Care, which finished the

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

Nu Skin Enterprises Cl. A		1.46%

Thor Industries		0.77

Lincoln Electric Holdings		0.67

Westlake Chemical		0.60

Sanderson Farms		0.54

¹ Includes dividends

Important Performance and Expense Information All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 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 redeemed. Shares redeemed within 180 days of purchase may be subject to a 1% redemption fee payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current month-end performance may be higher or lower than performance quoted and may be obtained at www.roycefunds.com. All performance and risk information reflects results of the Investment Class (its oldest class). Operating expenses reflect the Fund’s total annual operating expenses for the Investment Class as of the Fund’s most current prospectus and include management fees and other expenses. Shares of RPR’s Service, Consultant, R, and K Classes bear an annual distribution expense that is not borne by the Investment Class. Regarding the two “Good Ideas” tables shown above, the sum of all contributors to, and all detractors from, performance for all securities in the portfolio would approximate the Fund’s year-to-date performance for 2013.

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


Allied Nevada Gold	-0.69%

Pan American Silver	-0.54

Silver Standard Resources	-0.53

Pretium Resources	-0.53

Seabridge Gold	-0.40

¹ Net of dividends

ROYCE PREMIER FUND VS. RUSSELL 2000 Value of $10,000 Invested on 12/31/91

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

Meredith Corporation		1.10%

Bed Bath & Beyond		0.95

UniFirst Corporation		0.91

EnerSys		0.90

Schweitzer-Mauduit International		0.57

¹ Includes dividends

Important Performance and Expense Information All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 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 redeemed. Shares redeemed within 180 days of purchase may be subject to a 1% redemption fee payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current month-end performance may be higher or lower than performance quoted and may be obtained at www.roycefunds.com. All performance and risk information reflects results of the Investment Class (its oldest class). Operating expenses reflect the Fund’s total annual operating expenses for the Investment Class as of the Fund’s most current prospectus and include management fees and other expenses. Shares of RSE’s Service and Consultant Classes bear an annual distribution expense that is not borne by the Investment Class. Regarding the two “Good Ideas” tables shown above, the sum of all contributors to, and all detractors from, performance for all securities in the portfolio would approximate the Fund’s year-to-date performance for 2013.

PORTFOLIO DIAGNOSTICS

Fund Net Assets	$3,338 million

Number of Holdings	48

Turnover Rate	14%

Average Market Capitalization¹	$1,799 million

Weighted Average P/E Ratio^2,3	17.3x

Weighted Average P/B Ratio²	2.1x

U.S. Investments (% of Net Assets)	90.0%

Non-U.S. Investments (% of Net Assets)	0.0%

Symbol
Investment Class	RYSEX
Service Class	RSEFX
Consultant Class	RSQCX
Institutional Class	RSEIX

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

MORNINGSTAR STATISTICAL MEASURES¹

	Sharpe Ratio	Standard Deviation

RSE	0.71	17.60

Russell 2000	0.46	24.07

Category Median	0.46	23.47

Best Decile Breakpoint	0.59	21.05

¹ Five years ended 6/30/13 Category Median and Best Decile Breakpoint based on 348 small-cap objective funds (oldest class only) with at least five years of history.
The Fund beat the Russell 2000 and performed within the top 10% of small-cap objective funds on a risk-adjusted basis, as shown by its Sharpe ratio. In addition, the Fund produced lower volatility than the Russell 2000 and 90% of small-cap objective funds, as shown by its standard deviation.
DOWN MARKET PERFORMANCE COMPARISON All Down Periods of 7.5% or Greater Over the Last 7 Years, in Percentages(%)



Manager’s Discussion A strong second quarter on both an absolute and relative basis provided Royce Value Fund (RVV) with a solid return on an absolute basis through the end of June, though it was not enough to push first-half results past its benchmark. The Fund gained 8.5% for the year-to-date period ended June 30, 2013 versus a 15.9% advance for its small-cap benchmark, the Russell 2000 Index, for the same period. As was the case through much of 2012’s second half, 2013 began with investors seeming to ignore macro headlines. The result was a bullish first quarter for most stocks. Unfortunately, RVV’s participation in this up phase did not match its sterling results in last year’s final six months. The Fund rose 3.1% in the first quarter compared to a 12.4% gain for the small-cap index. The Fund’s performance over the last two calendar years was simply not as strong as we would have liked. This led us to make changes to the portfolio during the first quarter of 2013. Some of these changes began to bear fruit immediately and were a factor in the Fund’s second-quarter results. RVV outpaced the Russell 2000 in the second quarter, up 5.2% versus 3.1%. However, one strong absolute and relative quarter was not enough to improve relative results over the last one-, three-, and five-year periods. Recent market cycle results through June 30, 2013, which can be found on page 6, were also underwhelming on a relative basis. Over longer-term periods, we remain pleased with RVV’s performance. The Fund outperformed the Russell 2000 for the 10-year and since inception (6/14/01) periods ended June 30, 2013. RVV’s average annual total return since inception was 10.8%. There were three significant changes to the portfolio in the first half. First, Whitney George, who served as co-manager from 2004-2012, became assistant portfolio manager on March 6, 2013. Jay Kaplan now serves as portfolio manager after having served as co-manager from 2003 through 2012. Second, we substantially reduced the Fund’s exposure to the Materials sector, which accounted for 17.9% of net assets at December 31, 2012 but only 7.1% of net assets at the end of June 2013. Finally, we increased the portfolio’s exposure to U.S. stocks, which went from 81.1% of net assets as of December 31, 2012 to 89.4% of net assets at the end of June 2013. This was a fortuitously timed shift as non-U.S. stocks slumped in the second quarter. Many of RVV’s non-U.S. holdings that were sold came from the metals & mining and capital markets industries. The first of these groups was in the Materials sector and has been struggling for a while. However, the decision to sell was based on a diminished emphasis on most commodity-based businesses—energy, steel, and chemicals being the exceptions. The general dependence of commodity-based industries on capital markets and the cash flow characteristics of many of these

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

GameStop Corporation Cl. A		1.73%

Nu Skin Enterprises Cl. A		1.43

Federated Investors Cl. B		0.96

Oil States International		0.91

Reinsurance Group of America		0.85

¹ Includes dividends

Important Performance and Expense Information All performance information in this Report reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 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 redeemed. Shares redeemed within 180 days of purchase may be subject to a 1% redemption fee payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current month-end performance may be higher or lower than performance quoted and may be obtained at www.roycefunds.com. All performance and risk information reflects results of the Service Class (its oldest class). Operating expenses reflect the Fund’s total annual operating expenses for the Service Class as of the Fund’s most current prospectus and include management fees, 12b-1 distribution and service fees, and other expenses. Shares of RVV’s Consultant and R Classes bear an annual distribution expense that is higher than that of the Service Class. Regarding the two “Good Ideas” tables shown above, the sum of all contributors to, and all detractors from, performance for all securities in the portfolio would approximate the Fund’s year-to-date performance for 2013.



Managers’ Discussion Royce 100 Fund (ROH) did fine in the first half on an absolute basis, though we were disappointed that it came up short against its benchmark. For the year-to-date period ended June 30, 2013, the Fund rose 10.6% compared to a gain of 15.9% for its small-cap benchmark, the Russell 2000 Index, for the same period. ROH finished 2012 on a high note, outperforming the small-cap index through the last six months of the year with a 9.6% advance compared to a 7.2% gain for the benchmark. However, the Fund could not maintain this pace through the first quarter of 2013. The period was more or less consistently bullish, and though ROH did well on an absolute basis, it lost ground against the Russell 2000, gaining 11.1% versus 12.4% for the small-cap index. The Fund fell further behind in the second quarter, which was unfortunate enough, but we were particularly frustrated that ROH underperformed the benchmark during the more volatile months of the second quarter. In April the Fund fell 3.2% versus a loss of 0.4% for the Russell 2000; in June ROH slipped 2.0% compared to a 0.5% decline of the small-cap index. The Fund did beat the benchmark in May, a bullish month in which ROH was up 4.9% compared to 4.0%. For the second quarter as a whole the Fund was down 0.5% while the Russell 2000 gained 3.1%. Much of this decline came from the portfolio’s holdings in the metals & mining industry and the electronic equipment, instruments & components group. Results over the last full market cycle were strong on a relative basis and respectable on an absolute scale. From the previous small-cap market peak on July 13, 2007 through the small-cap peak on April 29, 2011, ROH was up 27.6% versus 6.6% for the small-cap index. (Please see page 6 for more market cycle results.) The Fund, which marked its first full decade of history at the end of the period, outperformed the Russell 2000 for the 10-year and since inception (6/30/03) periods ended June 30, 2013. ROH’s average annual total return since inception was 10.8%. Seven of the Fund’s eight equity sectors made net contributions to first-half results, with Industrials, Information Technology, and Financials leading. Materials posted a comparatively modest net loss, with the metals & mining group detracting most from year-to-date performance. Precious metals companies faced weaker demand from a slower-