UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT
OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file
number: 811-22532
Name of Registrant: Royce
Global Value Trust, Inc.
Address of Registrant: 745
Fifth Avenue
New York, NY 10151
Name and address
of agent for service:
John E. Denneen,
Esq.
745 Fifth Avenue
New York, NY 10151
Registrants telephone
number, including area code: (212) 508-4500
Date of fiscal year end: December
31, 2018
Date of reporting period: January 1, 2018 June 30, 2018
Item 1. Reports to Shareholders.
JUNE 30, 2018
2018 Semiannual
Review and Report to Stockholders
Royce Global Value Trust
Royce Micro-Cap Trust
Royce Value Trust
roycefunds.com
A Few Words on Closed-End Funds
Royce & Associates, LP manages three closed-end funds: Royce Global Value Trust, which invests primarily in
companies with headquarters outside of the United States, Royce Micro-Cap Trust, which invests primarily in
micro-cap securities; and Royce Value Trust, which invests primarily in small-cap securities. A closed-end fund is an
investment company whose shares are listed and traded on a stock exchange. Like all investment companies, including
open-end mutual funds, the assets of a closed-end fund are professionally managed in accordance with the investment
objectives and policies approved by the funds Board of Directors. A closed-end fund raises cash for investment by issuing
a fixed number of shares through initial and other public offerings that may include shelf offerings and periodic rights
offerings. Proceeds from the offerings are invested in an actively managed portfolio of securities. Investors wanting to buy
or sell shares of a publicly traded closed-end fund after the offerings must do so on a stock exchange, as with any publicly
traded stock. Shares of closed-end funds frequently trade at a discount to their net asset value. This is in contrast to open-end
mutual funds, which sell and redeem their shares at net asset value on a continuous basis.
A Closed-End Fund Can Offer Several Distinct Advantages
A closed-end fund does not issue redeemable securities or
offer its securities on a continuous basis, so it does not need to
liquidate securities or hold uninvested assets to meet investor
demands for cash redemptions.
In a closed-end fund, not having to meet investor redemption
requests or invest at inopportune times can be effective for
value managers who attempt to buy stocks when prices are
depressed and sell securities when prices are high.
A closed-end fund may invest in less liquid portfolio securities
because it is not subject to potential stockholder redemption
demands. This is potentially beneficial for Royce-managed
closed-end funds, with significant investments in small- and
micro-cap securities.
The fixed capital structure allows permanent leverage to be
employed as a means to enhance capital appreciation potential.
Royce Micro-Cap Trust and Royce Value Trust distribute capital
gains, if any, on a quarterly basis. Each of these Funds has adopted
a quarterly distribution policy for its common stock.
We believe that the closed-end fund structure can be an
appropriate investment for a long-term investor who understands
the benefits of a more stable pool of capital.
Why Dividend Reinvestment Is Important
A very important component of an investors total return comes
from the reinvestment of distributions. By reinvesting distributions,
our investors can maintain an undiluted investment in a Fund. To
get a fair idea of the impact of reinvested distributions, please see
the charts on pages 54 and 55. For additional information on the
Funds Distribution Reinvestment and Cash Purchase Options
and the benefits for stockholders, please see page 56 or visit our
website at www.roycefunds.com.
Managed Distribution Policy
The Board of Directors of each of Royce Micro-Cap Trust and
Royce Value Trust has authorized a managed distribution policy
(MDP). Under the MDP, Royce Micro-Cap Trust and Royce
Value Trust pay quarterly distributions at an annual rate of 7%
of the average of the prior four quarter-end net asset values,
with the fourth quarter being the greater of these annualized
rates or the distribution required by IRS regulations. With each
distribution, the Fund will issue a notice to its stockholders and
an accompanying press release that provides detailed information
regarding the amount and composition of the distribution
(including whether any portion of the distribution represents a
return of capital) and other information required by a Funds
MDP. You should not draw any conclusions about a Funds
investment performance from the amount of distributions or
from the terms of a Funds MDP. A Funds Board of Directors
may amend or terminate the MDP at any time without prior
notice to stockholders; however, at this time there are no
reasonably foreseeable circumstances that might cause the
termination of any of the MDPs.
This page is not part of the 2018 Semiannual Report to Stockholders
Table of Contents
Semiannual Review
Letter to Our Stockholders
2
Performance
7
Semiannual Report to Stockholders
Royce Global Value Trust
Managers Discussion of Fund Performance
8
Schedule of Investments
10
Other Financial Statements
14
Royce Micro-Cap Trust
Managers Discussion of Fund Performance
22
Schedule of Investments
24
Other Financial Statements
29
Royce Value Trust
Managers Discussion of Fund Performance
38
Schedule of Investments
40
Other Financial Statements
45
History Since Inception
54
Distribution Reinvestment and Cash Purchase Options
56
Directors and Officers
57
Notes to Performance and Other Important Information
58
Board Approval of Investment Advisory Agreements
59
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Letter to Our Stockholders
SMALL-CAPS FIRST HALF
Value Trails For Now
During the first six months of 2018, small-cap stocks
enjoyed the good times bred by a bull market that at this
writing has not yet slowed down. Although the first half
began with higher volatility and stalled equities pricesand ended
with a series of wild days that made the bullish second quarter feel
more tumultuous than it wasthe overall direction of U.S. markets
has remained positive, particularly for smaller stocks. For the year-to-date
period ended June 30, 2018, the small-cap Russell 2000 Index
gained 7.7%, well ahead of both the large-cap Russell 1000 (+2.9%)
and S&P 500 (+2.6%) Indexes, while making a new historical high
on June 20. Returns were even higher for micro-cap stocksthe
Russell Microcap Index advanced 10.7% for the same period.
This mostly welcome absolute and relative performance took
place against the backdrop of an accelerating U.S. economy, a
strong job market, and, in many cases, sterling corporate profit
growth while at the same time global economic progress slowed,
most notably in China and other large emerging markets. The
major non-U.S. indexes slipped deeper into negative territory
during the first half, as the combination of slower international
growth, rising emerging market instability, a stronger dollar, and
heightened trade war worries led investors to prefer all things
domestic. (In fact, 35 of the 45 non-U.S. small-cap markets that
we follow had declines in the first half of 2018, though only 26
were negative when measured in local currencies.) Still, growth
continued to skew positive outside the U.S., with the important
economies of Japan and Germany continuing to look solid.
Equity Indexes Average Annual Total Return as of 6/30/18 (%)
1
Not annualized.
Small-Cap is represented by Russell 2000; Small-Cap Value is represented by Russell 2000 Value, Small-Cap Growth is represented by Russell 2000 Growth, Large-Cap is represented by Russell 1000, Micro-Cap is represented by Russell Microcap. For
details on The Royce Funds performance in the period, please turn to the Managers Discussions that begin on page 8. Past performance is no guarantee of future results.
2 | This page is not part of the 2018 Semiannual Report to Stockholders
LETTER TO OUR STOCKHOLDERS
We expect a leadership shift in the form of a reversion to the mean that would favor
small-cap value outperforming small-cap growth over the next five years.
In this context, then, you would expect a small-cap specialist
to be quite content, if not happy. This might especially be the
case considering that small-capsas well as micro-capshave
been true to their historical habit of outpacing larger companies
through an economic expansion. Yet as much as we were pleased
with first-half results, we find ourselves far from blissful. A closer
look at small-cap performance in the first half reveals some genuine
historical oddities in spite of all looking well on the surface. Our
main concern is the disconnect between the confidence of the
management teams weve been meeting with and the relatively
underwhelming performance for many cyclical industries. We
anticipated that stocks in these industries would do better owing
to their recent earnings strength and ongoing prospects as well as
to the healthy state of the U.S. economy (each, of course, being
related to the other).
OBSTACLE ON THE TRACK
The Troublesome 10-Year Treasury Yield
Another related concern is the way in which the ongoing weakness of
the 10-year Treasury yield is at odds with the quickened pace of U.S.
economic growthwhen the 10-year has been sluggish in the past,
its often been seen as a symptom of economic weakness, and not
without some justification. The fact that the economy has arguably
been some distance down the track to normal for at least a couple of
years remains a source of concern to us.
Road to Normalization: Economy vs Markets
1
Quarterly data. Source: Bloomberg
We invite you to consider the following five points: through the end
of June, the U.S. economy had grown for 109 consecutive months,
GDP growth has converged with its long-term average, unemployment
reached an 18-year low in June, personal consumption expenditure
inflation hit the Feds 2% target in May, and short rates were rising.
Additionally, were also seeing the early signs of inflation. Most are
registering in increased commodity, raw material, and other input
costs, which is historically familiar economic territory. History also
shows, however, that these developments are also typically coincident
with rising interest rates. So far, though, the 10-year Treasury yield has
stubbornly refused to acquiesce to historymaking the 10-year the
major obstacle on the path back to normal in our view.
From our perspective as highly active, valuation-sensitive small-cap
specialists, the most frustrating have been those periods when
the 10-year yield has fallen back. It seems to us that nearly every time
it has declined over the last 18 months, the market has witnessed
a subsequent flight to high yield or growth stocks while value and
economically sensitive issues struggled to keep pace. It almost seems
as if investors became temporarily convinced that we had slipped
back into the 2010-2015 era of quantitative easing and zero interest
rates. We think it bears emphasizing that, for all its uncertainty, the
current environment could not be more different. Yet the disconnect
persisted into June.
The critical question, then, is, what happens next? More
pertinently for our investors, the question can be phrased in a more
specific way as, are we likely to see a shift in small-cap style and
sector leadership? We believe that we will. The second quarter saw
an admittedly short-term sign when the Russell 2000 Value Index
shook off five straight quarters of underperformance to outpace its
small-cap growth counterpart, up 8.3% versus 7.2%. But exactly
when, and under what conditions, a longer-running shift materializes
remains to be seen, of course. To be sure, the kind of leadership
change that we expectfrom growth to value and from defensives to
cyclicalsseldom occurs without a fair bit of volatility.
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SMALL-CAP HIGHS
Returns, Valuationsand Risks
Putting the issue of market turbulence aside for a moment, the
timing does seem apt to us for a change. First, the two-year
cumulative return at the end of June for the Russell 2000 was
46.5%which is a wonderful, but sadly not a sustainable, pace.
Second, the one-, five-, and 10-year average annual total returns
for the small-cap index for the period ended June 30, 2018 were all
comfortably ahead of their long-term monthly rolling averages.
Recent Small-Cap Returns Higher Than History
Russell 2000 through 6/30/18
When we look at the same information for the Russell 2000
Growth Index, the contrast is even more stark, with its latest five-year
return significantly in excess of its historical rolling average.
This is one important reason why we expect a leadership shift in the
form of a reversion to the mean that would favor small-cap value
outperforming small-cap growth over the next five years.
The state of small-cap valuations also looks unsustainably high
to us, particularly if we see a continued, and more consistent, rise in
the 10-year yield. While the P/E ratio for the Russell 2000 did not
look especially rich at the end of June, another valuation metric, the
last twelve months enterprise value to earnings before interest and
taxes (EV/EBIT)which we use most frequently when examining
companiestells a different story, one that reveals higher-than-average
historical valuations. The currently elevated state of returns and
valuations could mean that we are entering a longish period of multiple
compression, which is one reason why we prefer select small-caps with
strong earnings prospects and/or modest valuations. If we see increased
volatility over the balance of the year, these types of stocks look better
positioned to cope with it effectively.
Based on earnings and
cash flow qualityas well
as confident management
teamswe are seeing
superior fundamentals
in selected cyclical areas
that other investors are
avoiding. For example,
the supply/demand dynamics in a number of industries, such as
semiconductors & semiconductor equipment, transportation,
and chemicals, look favorable to us and do not appear to us
to be fully reflected in their current valuations. Many cyclical
companies appear much better positioned for intermediate-term
growth than defensive and/or growth stocks. While most of these
cyclical stocks have lagged the field over the last 18 months, they
are also more reasonably priced than defensives based on EV to
EBIT. We remain convinced that fundamentally strong small-cap
companies, especially those with attractive-to-reasonable valuations,
will become more appealing to investors as confidence in the U.S.
economy continues to build.
Cyclicals Cheaper than Defensives
Median LTM EV/EBIT1 Ex. Negative EBIT
for Russell 2000 as of 6/30/18
Theres a related point that may be equally important when
considering valuations: The sheer size and diversity of the small-cap
asset class means that there are almost always opportunities to
find what we think are promising or quality businesses trading at
attractive discounts. Based on EV/EBIT, the bottom three deciles of
the Russell 2000 were trading at sizable discounts compared to the
median for the index as a whole at the end of June.
Many Small-Caps Sell at a Significant Discount
Bottom Three Deciles in Russell 2000 Median LTM EV/EBIT1
Ex. Negative EBIT as of 6/30/18
1 Last Twelve Months Enterprise Value/Earnings Before Interest and Taxes
4 | This page is not part of the 2018 Semiannual Report to Stockholders
LETTER TO OUR STOCKHOLDERS
VOLATILITY AND INTEREST RATES
Both On the Rise
During the first quarter, the Russell 2000 moved 1% or more in
33% of its trading days compared to 18% in all of 2017. Another
volatility measure, the CBOE Russell 2000 Volatility Index
(RVX), measures market expectations of near-term volatility
conveyed by Russell 2000 stock index option prices. The RVX has
averaged 24.0% per year since its inception on 1/2/04. Its average
in 2017 was 15.9%, and its year-to-date average through the end
of June 2018 was 17.5%. Eighteen months of lower volatility
suggestsstrongly to usthat increased volatility is likely.
We also believe that the upward trend in rates is under wayand suspect that the 10-year yield will begin to move up more
consistently over the next year. We see both rising rates and
increased volatility as healthy. In fact, looking once more at history,
we find that periods of rising rates have been favorable for small-cap
stocks on both an absolute and relative basis. When the 10-Year
Treasury yield was rising, the Russell 2000 outperformed the large-cap
Russell 1000 in 70% of monthly rolling one-year periods for
the 20-year period ended 6/30/18, with an average one-year return
of 23.8% versus 19.2% for large-cap. Our expectations for absolute
small-cap returns are more modest, though we do expect this
historical relative return spread pattern to hold up.
How Have Small-Caps Performed When Rates Were Rising?
Russell 2000 vs Russell 1000 Trailing Monthly Rolling 1-Year Returns When
10-Year Treasury Yield was Rising From 6/30/98 through 6/30/18
10-Year Treasury Yield rose in 92 of 229 periods
More specifically, we see rising rates as a phenomenon that
should also be helpful to risk-conscious active managers in the
small-cap spaceprimarily because it fosters an environment
where better balance sheet companies are likely to be rewarded
for their fiscal prudence. In other words, risk management
matters. This is relevant today because of the increased leveragespecifically financial leveragewithin the Russell 2000. And
as rates continue to move up, the overall small-cap index looks
increasingly risky. As active managers, we have the ability to
screen and scrutinize small-cap businesses with better balance
sheets and shy away from those that we see as having excess
financial leverage. (It is worth mentioning that the market has
largely ignored better balance sheet companies for much of the
last 10 years.) Most of our strategies gravitate toward companies
with low debt. We would rather focus on companies that have
great operating leveragebut not financial leverage. With rising
rates, inflation, and economic growth becoming established, the
market seems to be transitioning into an environment that will
favor similar qualities.
REASONS TO BE CHEERFUL
We are therefore of two minds about the current cycle. On the
one hand, we think that we could see some consolidation or a
correctionthe latter certainly seems more probable now than it
did a year ago. Yet we remain optimistic about small-cap earnings
growth and like the fundamentals of our holdings across our
strategies in terms of balance sheets, cash flows, and earnings
strength. It is in cyclical areas, including Industrials, the more
cyclical precincts of technology, and Materials, and that we have
most often uncovered what we judge to be the best combination
of value, quality, and/or growth prospects. And this has always
been a function of our bottom-up process rather than a top down
view of the economy.
This page is not part of the 2018 Semiannual Report to Stockholders | 5
LETTER TO OUR STOCKHOLDERS
We see signs of progress that in our view place us squarely on the road to normalization,
which was evident in the modest increases in bond yields and the reemergence of
values leadership in 2018s second quarter.
This is why many of our portfolios have had perennially higher
weightings in those sectors (and while others we manage have had
high weightings in Financials and Consumer Discretionary). We
also long ago developed the practice of leaning into those areas
of the asset class where we see excess pessimism. Investments in
industries that the rest of the market is abandoning have often
borne fruit, though we have learned through decades of small-cap
asset management that it usually requires a great deal of
patiencemeasured in years in many casesbefore the arrival of a
bountiful harvest.
We think its worth noting that the three changes in the market
environment that we expectlower returns, higher volatility, and
value/cyclical leadershiphave all historically been coincident with
leadership for active management. We see signs of progress that in
our view place us squarely on the road to normalization, which was
evident in the modest increases in bond yields and the reemergence
of values leadership in 2018s second quarter. There were other
equally positive signs in July, including stabilizing macro indicators
from outside the U.S., a welcome rebound in the performance
of many industrial companies, and ongoing earnings strength for
several cyclical areas. We expect to see more signs of normalizing
markets to emerge as the year goes on.
Sincerely,
Charles M. Royce
Christopher D. Clark
Francis D. Gannon
Chairman,
Chief Executive Officer, and
Co-Chief Investment Officer,
Royce & Associates, LP
Co-Chief Investment Officer,
Royce & Associates, LP
Royce & Associates, LP
July 31, 2018
6 | This page is not part of the 2018 Semiannual Report to Stockholders
Performance
NAV Average Annual Total Returns
As of June 30, 2018 (%)
YTD1
1-YR
3-YR
5-YR
10-YR
15-YR
20-YR
25-YR
30-YR
SINCE
INCEPTION
INCEPTION
DATE
Royce Global Value Trust
-0.88
11.89
9.69
N/A
N/A
N/A
N/A
N/A
N/A
6.48
10/17/13
Royce Micro-Cap
Trust
7.84
19.79
11.16
12.51
9.92
10.76
9.81
N/A
N/A
11.19
12/14/93
Royce Value
Trust
2.78
14.37
12.03
11.45
8.81
10.04
9.15
10.53
10.97
10.74
11/26/86
INDEX
Russell Global
Small Cap Index
0.67
12.38
8.52
9.65
6.87
10.10
7.65
N/A
N/A
N/A
N/A
Russell Microcap
Index
10.71
20.21
10.49
12.78
10.63
9.44
N/A
N/A
N/A
N/A
N/A
Russell 2000
Index
7.66
17.57
10.96
12.46
10.60
10.50
8.03
9.59
9.85
N/A
N/A
1 Not annualized.
Important Performance and Risk Information
All performance information in this Review and Report reflects past performance, is presented on a total return basis, net of the Funds investment advisory fee, and reflects the reinvestment of distributions. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when sold. Current performance may be higher or lower than performance quoted. Current month-end performance may be obtained at www.roycefunds.com. The Funds are closed-end registered investment companies whose respective shares of common stock may trade at a discount to the net asset value. Shares of each Funds common stock are also subject to the market risk of investing in the underlying portfolio securities held by each Fund. Certain immaterial adjustments were made to the net assets of Royce Value Trust at 6/30/18, for financial reporting purposes, and as a result the total return based on that net asset value differs from the adjusted net asset value and total return reported in the Financial Highlights. All indexes referenced are unmanaged and capitalization-weighted. Each indexs returns include net reinvested dividends and/or interest income. Russell Investment Group is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Russell Investment Group. The Russell 2000 Index is an index of domestic small-cap stocks that measures the performance of the 2,000 smallest publicly traded U.S. companies in the Russell 3000 Index. The Russell Microcap Index includes 1,000 of the smallest securities in the small-cap Russell 2000 Index, along with the next smallest eligible securities as determined by Russell. The Russell Global Small Cap Index is an unmanaged, capitalization-weighted index of global small-cap stocks. The performance of an index does not represent exactly any particular investment, as you cannot invest directly in an index. Index returns include net reinvested dividends and/or interest income. Royce Value, Micro-Cap and Global Value Trust shares of common stock trade on the NYSE. Royce Fund Services, LLC (RFS) is a member of FINRA and files certain material with FINRA on behalf of each Fund. RFS is not an underwriter or distributor of any of the Funds.
This page is not part of the 2018 Semiannual Report to Stockholders | 7
MANAGERS DISCUSSION
Royce Global Value Trust (RGT)
Chuck Royce
David Nadel
Chris Flynn
FUND PERFORMANCE
Royce Global Value Trust was
down 0.9% on a net asset value
(NAV) basis and 2.8% on a
market price basis for the year-to-date
period ended June 30, 2018,
in both cases underperforming
its unleveraged benchmark, the Russell Global Small Cap Index,
which rose 0.7% for the same period. While U.S. stocks generally
did well, most international indexes slipped into negative territory
during 2018s first six months, as the combination of a modest
slowdown in international growth, rising emerging market instability, a
stronger dollar, and heightened trade war concerns all affected results.
WHAT WORKED... AND WHAT DIDNT
Six of the Funds 11 equity sectors detracted from first-half results. Led
by Consumer Discretionary and Industrials, their respective negative
impacts were somewhat modest. Vakrangee, which detracted most
at the position level, is an Indian company that operates a network
of outlets providing everyday transactional services to mostly rural
consumers, primarily in under-served areas. During the first quarter, the
company faced questions about corporate governance and its internal
investment policy, among other issues. Although Vakrangee refuted
these allegations, the cloud overhanging the firms credibility gave us
pause, and we exited our position in April. Burkhalter Holding is the
leading provider of electrical engineering services in Switzerland. Its
stock price was hurt by increasing talk that competition would pressure
pricing. Seeing these issues as more temporal than structural, we chose
to hold our shares during the first half.
The stock of California-based laser diode and equipment maker
Coherent underwent a correction in the first half after the companys
announcement of slightly better-than-expected results came with a
more muted profit outlook. Already reducing our position in 2017,
we held our position in the first half in expectation of a recovery in
its previously strong profitability. The U.K.s Clarkson is the worlds
largest ship broker. After a few difficult years, the company described
an improving environment for its business in hiring ships to transport
commodities in March. The firm then reversed course in April when it
issued a profit warning, which sent its shares into a tailspin. Thinking
about the long term, we added to our position in the first half.
Energy was the top-contributing sector in the first half, and the top
contributor at the industry level was energy equipment & services, as
the rebound for oil prices fed through to improved prospects for these
businesses. Norways TGS-NOPEC Geophysical, which provides
geoscience data to oil and gas companies worldwide, was the top
contributor in this industry and in the portfolio as a whole. Its revenue
and earnings were boosted by improving exploration and production
spending, higher oil prices, and the longer-term need for energy
companies to replenish reserves, which is driving increased spending
on seismic data. Virtu Financial uses its technology to act as a market
maker and liquidity provider to the global financial markets. Based
in New York City, the firm announced impressive first-quarter results
in profits and earnings thanks to increased market volatility and high
trading volumes. From the Industrials sector, Kirby Corporation has
the largest inland and coastal tank barge fleet in the U.S. and also
draws revenue from servicing and distributing industrial engines,
transmissions, parts, and oil field services equipment. The tank barge
markets seem to be recovering well, thanks to retirements of older
barges, limited new builds, and solid utilization rates. Kirby has also
benefited from two recent acquisitions over the last 18 months that are
allowing it to drive industry consolidation.
Relative to the Russell Global Small Cap, the major source of
underperformance was ineffective stock selection in the Information
Technology sector, most impactfully in the IT services and electronic
equipment, instruments & components industries. Stock picking
detracted in Health Care, particularly in the health care equipment &
supplies group. Conversely, stock selection was a strength versus the
benchmark in the Energy sectors energy equipment & services
industry, while a smaller advantage came from stock picks in
Industrials, where the machinery group did best.
Top Contributors to Performance
Year-to-Date Through 6/30/18 (%)1
TGS-NOPEC Geophysical
0.73
Virtu Financial Cl. A
0.47
Kirby Corporation
0.39
Bravura Solutions
0.33
Nanometrics
0.27
1 Includes dividends
Top Detractors from Performance
Year-to-Date Through 6/30/18 (%)2
Vakrangee
-0.31
Burkhalter Holding
-0.28
Coherent
-0.26
Clarkson
-0.24
ManpowerGroup
-0.23
2 Net of dividends
CURRENT POSITIONING AND OUTLOOK
The markets recent behavior looks curious to us. We hear optimism
and solid progress from the management teams we meet with, see
solid earnings reports, and observe consistently strong macroeconomic
data. On the other hand, small-cap market leadership in the U.S. has
stubbornly remained with defensive and yield-oriented stocks, while
cyclicals have lagged. In addition, the rate of change in global growth
has slowed, as measured by global PMIs (the Purchasing Managers
Index, an indicator of economic health for manufacturing and service
sectors), while the effects of tariffs are just now registeringand are
only likely to intensify before a resolution is reached. All of this raises
the degree of difficulty for U.S. equities to maintain their recent
performance pace and for non-U.S. stocks to rebound. We do believe,
however, that the portfolio holds companies that are well positioned
to execute effectively in a more challenging environment.
8 | 2018 Semiannual Report to Stockholders
PERFORMANCE AND PORTFOLIO REVIEW
SYMBOLS MARKET PRICE RGT NAV XRGTX
Performance
Average Annual Total Return (%) Through 6/30/18
JAN-JUN 20181
1-YR
3-YR
SINCE INCEPTION (10/17/13)
RGT (NAV)
-0.88
11.89
9.69
6.48
1 Not Annualized
Market Price Performance History Since Inception (10/17/13)
Cumulative Performance of Investment1
1-YR
5-YR
10-YR
15-YR
20-YR
SINCE INCEPTION (10/17/13)
RGT
10.5%
N/A
N/A
N/A
N/A
24.4%
1
Reflects the cumulative performance experience of a continuous common stockholder who purchased one share at inception ($8.975 IPO) and reinvested all distributions.
2
Reflects the actual month-end market price movement of one share as it has traded on NYSE and, prior to 12/1/03, on the Nasdaq.
The Morningstar Style Map is the Morningstar Style Box with the center 75% of fund holdings plotted as the Morningstar
Ownership Zone. The Morningstar Style Box is designed to reveal a
funds investment strategy. The Morningstar Ownership Zone provides
detail about a portfolios investment style by showing the range of
stock sizes and styles. The Ownership Zone is derived by plotting each
stock in the portfolio within the proprietary Morningstar Style Box.
Over time, the shape and location of a fund's ownership zone may vary.
See page 66 for additional information.
Top 10 Positions
% of Net Assets
Kirby Corporation
2.1
FLIR Systems
2.1
TGS-NOPEC Geophysical
1.6
Virtu Financial Cl. A
1.5
Computer Modelling Group
1.4
VZ Holding
1.4
SEI Investments
1.3
Spirax-Sarco Engineering
1.3
Lazard Cl. A
1.2
Raven Industries
1.2
Portfolio Sector Breakdown
% of Net Assets
Industrials
28.1
Information Technology
17.6
Financials
15.3
Health Care
8.8
Materials
8.8
Consumer Discretionary
6.7
Energy
5.3
Real Estate
2.6
Consumer Staples
2.4
Telecommunication Services
0.3
Utilities
0.1
Cash and Cash Equivalents, Net of
Outstanding Line of Credit
4.0
Calendar Year Total Returns (%)
YEAR
RGT
2017
31.1
2016
11.1
2015
-3.4
2014
-6.2
Portfolio Country Breakdown1,2
% of Net Assets
United States
27.5
United Kingdom
10.1
Canada
9.8
Japan
7.3
Australia
4.9
Switzerland
4.2
France
3.7
1 Represents countries that are 3% or more of net assets.
2 Securities are categorized by the country of their headquarters.
Portfolio Diagnostics
Fund Net Assets
$129 million
Number of Holdings
260
Turnover Rate
23%
Net Asset Value
$12.37
Market Price
$10.51
Average Market Capitalization1
$1,855 million
Weighted Average P/E Ratio2,3
20.0x
Weighted Average P/B Ratio2
2.6x
Active Share4
97%
1
Geometric Average. This weighted calculation uses each portfolio
holdings market cap in a way designed to not skew the effect of
very large or small holdings; instead, it aims to better identify
the portfolios 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 portfolios share in the earnings or book value, as the case may be, of its underlying stocks.
3
The Funds P/E ratio calculation excludes companies with zero or negative earnings (7% of portfolio holdings as of 6/30/18).
4
Active Share is the sum of the absolute values of the different weightings of each holding in the Fund versus each holding in the benchmark, divided by two.
Important Performance and Risk Information
All performance information reflects past performance, is presented on a total return basis, net of the Funds investment advisory fee, and reflects the reinvestment of distributions. Past performance is no
guarantee of future results. Current performance may be higher or lower than performance quoted. Returns as of the most recent month-end may be obtained at www.roycefunds.com. The market price of the
Funds shares will fluctuate, so that shares may be worth more or less than their original cost when sold. The Fund invests primarily in securities of small- and mid-cap companies, which may involve considerably
more risk than investments in securities of larger-cap companies. The Funds broadly diversified portfolio does not ensure a profit or guarantee against loss. From time to time, the Fund may invest a significant
portion of its net assets in foreign securities, which may involve political, economic, currency and other risks not encountered in U.S. investments. Regarding the Top Contributors and Top Detractors tables shown
above, the sum of all contributors to, and all detractors from, performance for all securities in the portfolio would approximate the Funds year-to-date performance for 2018.
2018 Semiannual Report to Stockholders | 9
Royce Global
Value Trust
Schedule of Investments
Common Stocks 96.0%
SHARES
VALUE
AUSTRALIA
4.9%
ALS
140,000
$
781,197
Ausdrill
109,800
149,108
Bingo
Industries
60,700
120,388
Bravura
Solutions
475,000
1,128,391
Cochlear
5,500
814,747
Hansen
Technologies
335,000
780,938
HT&E
53,400
99,192
Imdex 1
83,800
76,590
IPH
365,000
1,202,026
NetComm Wireless 1
30,000
24,533
Seeing Machines 1
1,474,517
243,249
Tassal
Group
23,000
70,297
Technology
One
285,000
896,386
Total (Cost $5,618,222)
6,387,042
AUSTRIA
0.8%
Mayr-Melnhof
Karton
7,500
1,012,483
Total (Cost $893,160)
1,012,483
BELGIUM
0.4%
Radisson
Hospitality 1
180,000
577,777
Total (Cost $505,978)
577,777
BRAZIL
2.2%
B3
32,847
173,314
Construtora
Tenda 1
20,000
122,763
CVC
Brasil Operadora e Agencia de Viagens
17,400
202,923
Direcional
Engenharia 1
40,900
62,895
Industrias
Romi
51,900
73,516
International
Meal Company Alimentacao
25,000
51,152
MRV
Engenharia e Participacoes
21,700
67,411
OdontoPrev
225,000
758,756
T4F
Entretenimento
50,400
102,731
Tegma
Gestao Logistica
24,300
96,617
TOTVS
168,000
1,179,024
Total (Cost $3,265,772)
2,891,102
CANADA
9.8%
Agnico
Eagle Mines 2
10,000
458,300
Altus
Group
38,000
847,207
Calfrac
Well Services 1
45,800
194,397
Canaccord
Genuity Group
92,000
508,059
Canadian
Western Bank
4,600
121,241
Computer Modelling Group
234,000
1,797,741
E-L
Financial
1,200
748,479
FirstService
Corporation
10,300
783,212
Franco-Nevada
Corporation 2
12,800
934,656
Genworth
MI Canada
13,000
423,033
Gluskin
Sheff + Associates
23,000
287,270
Hudbay
Minerals
13,000
72,800
Leucrotta
Exploration 1
41,900
62,468
Magellan
Aerospace
14,000
171,027
Major
Drilling Group International 1
201,300
1,062,657
Morneau
Shepell
50,000
1,033,735
North
American Construction Group
31,000
184,450
Pan
American Silver 2
31,800
569,220
Parex
Resources 1
18,700
353,048
Solium
Capital 1
66,000
577,842
Sprott
520,600
1,203,837
TORC
Oil & Gas
22,400
125,064
Western
Forest Products
101,250
206,405
Total (Cost $12,322,145)
12,726,148
CHILE
0.1%
SMU 1
318,400
93,805
Total (Cost $85,780)
93,805
CHINA
1.4%
A-Living
Services 1
45,100
82,433
China
Communications Services
303,600
192,323
China
Lesso Group Holdings
150,100
95,276
Chinasoft
International
130,900
102,109
Fufeng
Group
275,100
123,777
Hua
Hong Semiconductor
51,600
177,249
TravelSky
Technology
300,000
873,738
Xtep
International Holdings
180,100
123,271
Total (Cost $1,209,115)
1,770,176
CYPRUS
0.1%
TCS
Group Holding GDR
5,500
113,850
Total (Cost $114,206)
113,850
DENMARK
1.2%
Chr.
Hansen Holding
5,500
508,108
Coloplast
Cl. B
4,000
399,878
DFDS
4,000
255,425
Nilfisk
Holding 1
7,100
346,656
Total (Cost $1,091,309)
1,510,067
EGYPT
0.4%
Commercial
International Bank (Egypt)
23,800
112,548
Egyptian
Financial Group-Hermes
Holding
Company 1
235,100
303,304
Oriental
Weavers
82,300
56,354
Total (Cost $494,574)
472,206
FINLAND
0.0%
Ferratum
1,300
24,594
Total (Cost $37,828)
24,594
FRANCE
3.7%
Albioma
3,100
69,942
Interparfums
14,850
625,173
Neurones
26,339
738,208
Rothschild
& Co
33,000
1,115,658
Sartorius
Stedim Biotech
9,000
940,663
Synergie
1,200
59,137
Thermador Groupe
19,000
1,273,603
Total (Cost $3,335,183)
4,822,384
GEORGIA
0.1%
Bank
of Georgia Group
3,400
84,583
Georgia
Capital 1
3,400
46,217
Total (Cost $120,258)
130,800
GERMANY
2.7%
Amadeus
Fire
8,000
864,172
Carl
Zeiss Meditec
13,500
921,482
CompuGroup
Medical
8,000
411,066
FinTech
Group 1
500
15,736
10 | 2018 Semiannual Report to Stockholders
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
June 30, 2018
(unaudited)
Schedule
of Investments (continued)
SHARES
VALUE
GERMANY
(continued)
MorphoSys
1
6,000
$
735,714
STRATEC
Biomedical
5,051
394,613
VIB
Vermoegen
4,700
120,202
Total (Cost $2,145,542)
3,462,985
GREECE
0.2%
JUMBO
4,700
77,500
Sarantis
5,800
50,122
Star Bulk Carriers 1
8,000
102,880
Total (Cost $219,753)
230,502
HONG KONG
1.3%
HKBN
150,000
230,958
I.T
378,400
270,093
Pico
Far East Holdings
526,500
213,402
Texhong
Textile Group
47,600
71,834
Value
Partners Group
894,500
706,880
Xinyi
Glass Holdings
159,800
195,330
Total (Cost $1,440,404)
1,688,497
INDIA
2.0%
AIA Engineering
45,000
985,186
Borosil
Glass Works
5,800
78,092
Dewan
Housing Finance
21,500
199,577
Jubilant Life Sciences
16,300
166,890
Manappuram
Finance
27,550
39,667
Mphasis
2,400
37,831
Phillips Carbon Black
27,000
85,751
Radico
Khaitan
24,000
144,669
Redington
India
30,000
48,165
SH
Kelkar & Company
200,000
656,790
Sterlite Technologies
35,000
140,506
Total (Cost $2,836,758)
2,583,124
INDONESIA
0.4%
Selamat
Sempurna
5,500,000
502,791
Total (Cost $501,555)
502,791
IRELAND
0.6%
C&C Group
32,300
122,212
Irish
Residential Properties REIT
62,500
100,723
Keywords
Studios
25,000
588,609
Total (Cost $272,181)
811,544
ISRAEL
0.1%
Nova
Measuring Instruments 1,2
6,700
182,575
Total (Cost $126,148)
182,575
ITALY
0.8%
Anima
Holding
7,400
39,804
DiaSorin
7,500
855,706
Openjobmetis
1
15,900
178,624
Total (Cost $583,764)
1,074,134
JAPAN
7.3%
Ai
Holdings
20,000
433,907
As
One
15,000
1,041,864
EPS
Holdings
34,600
742,534
Financial
Products Group
10,000
129,070
Fujitec Company
46,000
567,132
Kyowa
Exeo
7,000
183,923
Leopalace21
11,500
63,049
Mandom
Corporation
1,200
37,393
Meitec Corporation
25,750
1,237,321
Nitto
Kohki
2,900
67,946
NS
Solutions
7,000
176,589
NSD
32,600
743,191
Open
House
2,050
121,465
Pressance
6,150
95,098
Relo
Group
40,000
1,056,406
Sun
Frontier Fudousan
3,650
43,220
TATERU
4,400
72,688
TKC Corporation
23,000
857,969
Tokai
Corporation
4,300
92,707
Trancom
1,400
96,229
USS
67,500
1,285,192
Yumeshin
Holdings
6,950
72,880
Zenkoku
Hosho
6,100
277,135
Total (Cost $7,684,846)
9,494,908
MALAYSIA
0.2%
Kossan
Rubber Industries
98,100
204,967
Total (Cost $202,847)
204,967
MEXICO
0.5%
Becle
200,000
288,214
Bolsa
Mexicana de Valores
250,000
420,815
Total (Cost $789,517)
709,029
NETHERLANDS
1.0%
AMG
Advanced Metallurgical Group
3,500
197,008
DP
Eurasia 1
119,700
250,231
Intertrust
50,000
888,696
Total (Cost $1,433,730)
1,335,935
NEW ZEALAND
1.5%
Fisher
& Paykel Healthcare
102,875
1,037,494
Trade
Me Group
300,000
946,865
Total (Cost $1,542,076)
1,984,359
NORWAY
1.8%
Kongsberg
Automotive 1
130,000
149,404
Leroy Seafood Group
12,300
82,883
Protector
Forsikring 1
8,950
72,968
TGS-NOPEC Geophysical
55,000
2,025,944
Total (Cost $1,336,546)
2,331,199
PERU
0.1%
Ferreycorp
93,200
66,693
Total (Cost $56,092)
66,693
PHILIPPINES
0.1%
Pryce
Corporation
489,100
54,530
Robinsons
Retail Holdings
69,200
103,085
Total (Cost $184,559)
157,615
POLAND
0.2%
Warsaw
Stock Exchange
33,000
322,454
Total (Cost $459,764)
322,454
THE ACCOMPANYING
NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
2018 Semiannual
Report to Stockholders | 11
Royce Global
Value Trust
Schedule
of Investments (continued)
SHARES
VALUE
PORTUGAL
0.3%
Sonae
313,400
$
376,968
Total (Cost $421,495)
376,968
RUSSIA
0.5%
Globaltrans
Investment GDR
61,600
628,320
Total (Cost $408,649)
628,320
SINGAPORE
1.2%
CSE
Global
591,850
186,786
Midas Holdings 1,3
400,000
42,275
Sheng
Siong Group
141,800
110,318
XP
Power
24,000
1,118,093
Yanlord
Land Group
134,300
156,724
Total (Cost $1,071,962)
1,614,196
SOUTH AFRICA
0.7%
Coronation
Fund Managers
59,000
250,796
JSE
15,000
177,266
Nampak
1
35,800
40,922
PSG
Group
25,000
394,022
Total (Cost $1,039,463)
863,006
SOUTH KOREA
1.1%
Amorepacific Corporation
700
202,557
Com2uS
600
90,444
Eugene
Technology
6,600
93,271
Innocean Worldwide
5,700
303,795
Interojo
2,800
87,053
KIWOOM
Securities
700
68,147
Koh
Young Technology
1,200
109,825
Modetour
Network
7,400
180,601
S-1 Corporation
2,600
225,823
Total (Cost $1,417,075)
1,361,516
SPAIN
0.3%
Atento
2
65,400
447,990
Total (Cost $622,537)
447,990
SRI LANKA
0.2%
National
Development Bank
187,179
145,321
Sampath Bank 1
28,368
54,299
Sunshine
Holdings
154,025
51,568
Total (Cost $270,465)
251,188
SWEDEN
2.7%
Addtech
Cl. B
18,960
419,557
Bravida
Holding
120,000
953,248
Dustin
Group
7,650
68,926
Green Landscaping Holding 1
40,000
115,220
Hexpol
110,000
1,144,612
Knowit
7,000
134,736
Lagercrantz Group
60,000
653,809
Total (Cost $2,910,627)
3,490,108
SWITZERLAND
4.2%
Burkhalter
Holding
10,000
847,218
Forbo
Holding
110
164,617
Kardex
4,300
596,607
LEM
Holding
500
747,248
Partners Group Holding
1,800
1,322,327
VZ Holding
5,600
1,764,314
Total (Cost $4,333,284)
5,442,331
TAIWAN
0.3%
Gourmet
Master
12,177
117,822
Sitronix
Technology
46,200
178,051
TCI
6,185
95,548
Total (Cost $271,223)
391,421
THAILAND
0.2%
Beauty
Community
205,600
75,712
Erawan
Group (The)
377,300
71,747
Plan
B Media
300,000
55,237
Total (Cost $246,746)
202,696
TURKEY
0.1%
Tat
Gida Sanayi
72,350
68,824
Total (Cost $130,798)
68,824
UKRAINE
0.3%
MHP GDR
30,000
399,000
Total (Cost $411,612)
399,000
UNITED
ARAB EMIRATES 0.1%
ADES
International Holding 1
8,100
103,275
Total (Cost $107,934)
103,275
UNITED
KINGDOM 10.1%
Abcam
28,000
492,953
Ashmore Group
279,000
1,373,425
Biffa
111,400
366,080
Clarkson
40,600
1,232,383
Consort
Medical
57,500
904,557
Conviviality
1,3
61,200
0
Diploma
28,500
493,105
dotdigital
group
142,200
140,751
Elementis
200,000
667,266
Equiniti
Group
331,000
1,078,988
Ferroglobe
41,100
352,227
Ferroglobe
(Warranty Insurance Trust)1,3
41,100
0
Go-Ahead Group
4,200
88,022
Hilton
Food Group
16,100
211,205
Huntsworth
151,800
241,407
ITE
Group
380,341
401,564
ITE Group (Rights) 1
665,596
209,943
Jupiter
Fund Management
36,000
211,899
Polypipe
Group
95,000
482,699
Restore
58,500
398,380
RPC
Group
23,000
227,111
SIG
100,000
184,369
Spirax-Sarco Engineering
19,000
1,634,907
Staffline
Group
8,400
103,875
Stallergenes
Greer 1
10,800
387,196
Victrex
22,500
865,294
WANdisco 1
8,000
117,722
Xaar
53,591
169,391
Total (Cost $12,593,083)
13,036,719
UNITED
STATES 27.5%
Air Lease Cl. A
36,460
1,530,226
12 | 2018
Semiannual Report to Stockholders
THE ACCOMPANYING
NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
June 30, 2018
(unaudited)
Schedule
of Investments (continued)
SHARES
VALUE
UNITED
STATES (continued)
Brooks
Automation 2
18,100
$
590,422
CIRCOR
International 1
32,200
1,190,112
Cognex
Corporation
10,748
479,468
Coherent
1
3,000
469,260
comScore 1
24,000
523,200
Diebold
Nixdorf 2
28,800
344,160
Diodes
1
20,500
706,635
Dorian
LPG 1
4,475
34,189
EnerSys
2
11,000
821,040
Expeditors
International of Washington 2
13,300
972,230
FLIR Systems 2
51,500
2,676,455
Innospec
2,4
12,457
953,583
Kadant
7,800
749,970
KBR
2
58,700
1,051,904
Kirby Corporation 1,2,4
32,900
2,750,440
Lazard Cl. A
32,600
1,594,466
Lindsay Corporation
13,700
1,328,763
Littelfuse
4,000
912,720
ManpowerGroup
8,800
757,328
MBIA
1,2,4
80,300
725,912
Nanometrics 1,2,4
35,600
1,260,596
National
Instruments 2,4
15,200
638,096
Popular
13,100
592,251
Quaker
Chemical 2
6,069
939,906
Raven Industries
40,000
1,538,000
Rogers
Corporation 1,2,4
4,800
535,008
SEACOR
Holdings 1
20,200
1,156,854
SEACOR
Marine Holdings 1
20,309
468,935
SEI Investments 2
27,600
1,725,552
Signet
Jewelers
5,500
306,625
Standard
Motor Products
11,200
541,408
Sun
Hydraulics 2
15,139
729,549
Tennant
Company 2
11,600
916,400
Valmont
Industries
5,400
814,050
Virtu Financial Cl. A 2
74,300
1,972,665
World
Fuel Services
12,000
244,920
Total (Cost $26,504,302)
35,543,298
URUGUAY
0.3%
Arcos Dorados Holdings Cl. A
46,800
325,260
Total (Cost $351,426)
325,260
TOTAL COMMON
STOCKS
(Cost $104,022,293)
$
124,221,861
REPURCHASE
AGREEMENT 10.2%
Fixed Income Clearing Corporation, 0.35% dated 6/29/18, due 7/2/18, maturity value
$13,162,384 (collateralized by obligations of various U.S. Government Agencies,
1.375%
due 10/07/21, valued at $13,428,459)
(Cost $13,162,000)
13,162,000
TOTAL INVESTMENTS
106.2%
(Cost $117,184,293)
137,383,861
LIABILITIES
LESS CASH AND OTHER ASSETS (6.2)%
(7,996,878
)
NET ASSETS
100.0%
$
129,386,983
New additions
in 2018.
1
Non-income
producing.
2
All or a portion
of these securities were pledged as collateral in connection with the Funds
revolving credit agreement at June 30, 2018. Total market value of pledged securities
at June 30, 2018, was $14,875,097.
3
Securities
for which market quotations are not readily available represent 0.0% of net assets.
These securities have been valued at their fair value under procedures approved
by the Funds Board of Directors. These securities are defined as Level 3 securities
due to the use of significant unobservable inputs in the determination of fair value.
See Notes to Financial Statements.
4
At June 30,
2018, a portion of these securities were rehypothecated in connection with the Funds revolving credit agreement in the aggregate amount of $5,000,988.
Securities
of Global/International Funds are categorized by the country of their headquarters,
with the exception of exchange-traded funds.
Bold indicates the Funds 20
largest equity holdings in terms of June 30, 2018, market value.
TAX INFORMATION: The cost of total investments for Federal income tax purposes was $117,231,433.
At June 30, 2018, net unrealized appreciation for all securities was $ 20,152,428
consisting of aggregate gross unrealized appreciation of $27,931,533 and aggregate
gross unrealized depreciation of $7,779,105. The primary cause of the difference
between book and tax basis cost is the timing of the recognition of losses on securities
sold.
THE ACCOMPANYING
NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
2018 Semiannual
Report to Stockholders | 13
Royce Global
Value Trust
June 30, 2018
(unaudited)
Statement
of Assets and Liabilities
ASSETS:
Investments
at value
$
124,221,861
Repurchase
agreements (at cost and value)
13,162,000
Cash and foreign
currency
27,900
Receivable
for investments sold
2,202,571
Receivable
for dividends and interest
294,102
Prepaid expenses
and other assets
31,792
Total Assets
139,940,226
LIABILITIES:
Revolving
credit agreement
8,000,000
Payable for
investments purchased
2,377,338
Payable for
investment advisory fee
136,299
Payable for
directors fees
9,151
Payable for
interest expense
2,192
Accrued expenses
28,054
Deferred capital
gains tax
209
Total Liabilities
10,553,243
Net Assets
$
129,386,983
ANALYSIS OF
NET ASSETS:
Paid-in capital
- $0.001 par value per share; 10,461,711 shares outstanding (150,000,000 shares authorized)
$
117,980,744
Undistributed
net investment income (loss)
(787,401
)
Accumulated
net realized gain (loss) on investments and foreign currency
(7,999,866
)
Net unrealized
appreciation (depreciation) on investments and foreign currency
20,193,506
Net Assets
(net asset value per share - $12.37)
$
129,386,983
Investments
at identified cost
$
104,022,293
14 | 2018
Semiannual Report to Stockholders
THE ACCOMPANYING
NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
Royce Global
Value Trust
Statement
of Changes in Net Assets
SIX MONTHS ENDED
6/30/18
(UNAUDITED)
YEAR ENDED 12/31/17
INVESTMENT
OPERATIONS:
Net investment
income (loss)
$
411,907
$
241,105
Net realized
gain (loss) on investments and foreign currency
5,981,008
6,555,345
Net change
in unrealized appreciation (depreciation) on investments and foreign currency
(7,532,114
)
24,156,512
Net increase
(decrease) in net assets from investment operations
(1,139,199
)
30,952,962
DISTRIBUTIONS:
Net investment
income
(1,145,697
)
Net realized
gain on investments and foreign currency
Total distributions
(1,145,697
)
CAPITAL STOCK
TRANSACTIONS:
Reinvestment
of distributions
491,130
Total capital
stock transactions
491,130
Net Increase
(Decrease) In Net Assets
(1,139,199
)
30,298,395
NET ASSETS:
Beginning
of period
130,526,182
100,227,787
End of
period (including undistributed net investment income (loss) of $(787,401) at 6/30/18
and $(1,199,309) at 12/31/17)
$
129,386,983
$
130,526,182
THE ACCOMPANYING
NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
2018 Semiannual
Report to Stockholders | 15
Royce Global
Value Trust
Six Months
Ended June 30, 2018 (unaudited)
Statement
of Operations
INVESTMENT
INCOME:
INCOME:
Dividends
$
1,627,362
Foreign withholding
tax
(125,280
)
Interest
14,440
Rehypothecation
income
9,719
Total income
1,526,241
EXPENSES:
Investment
advisory fees
824,678
Interest expense
124,069
Custody and
transfer agent fees
65,355
Stockholder
reports
30,650
Professional
fees
25,118
Administrative
and office facilities
16,778
Directors fees
15,562
Other expenses
12,142
Total expenses
1,114,352
Compensating
balance credits
(18
)
Net expenses
1,114,334
Net investment
income (loss)
411,907
REALIZED
AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
NET REALIZED
GAIN (LOSS):
Investments
6,005,916
Foreign currency
transactions
(24,908
)
NET CHANGE
IN UNREALIZED APPRECIATION (DEPRECIATION):
Investments
and foreign currency translations
(7,682,352
)
Other assets
and liabilities denominated in foreign currency
150,238
Net realized
and unrealized gain (loss) on investments and foreign currency
(1,551,106
)
NET INCREASE
(DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS
$
(1,139,199
)
16 | 2018
Semiannual Report to Stockholders
THE ACCOMPANYING
NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
Royce Global
Value Trust
Six Months
Ended June 30, 2018 (unaudited)
Statement
of Cash Flows
CASH FLOWS
FROM OPERATING ACTIVITIES:
Net increase
(decrease) in net assets from investment operations
$
(1,139,199
)
Adjustments
to reconcile net increase (decrease) in net assets from investment operations to
net cash provided by operating activities:
Purchases
of long-term investments
(27,799,230
)
Proceeds
from sales and maturities of long-term investments
31,384,318
Net
purchases, sales and maturities of short-term investments
(3,831,000
)
Net
(increase) decrease in dividends and interest receivable and other assets
(81,103
)
Net
increase (decrease) in interest expense payable, accrued expenses and other liabilities
(207,827
)
Net
change in unrealized appreciation (depreciation) on investments
7,682,352
Net
realized gain (loss) on investments and foreign currency
(5,981,008
)
Net cash
provided by operating activities
27,303
CASH FLOWS
FROM FINANCING ACTIVITIES:
Distributions
Reinvestment
of distributions
Net cash
used for financing activities
INCREASE
(DECREASE) IN CASH:
27,303
Cash and
foreign currency at beginning of period
597
Cash and
foreign currency at end of period
$
27,900
THE ACCOMPANYING
NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
2018 Semiannual
Report to Stockholders | 17
Royce Global
Value Trust
Financial
Highlights
This table
is presented to show selected data for a share outstanding throughout each year
or other indicated period, and to assist stockholders in evaluating the Funds
performance for the periods presented.
SIX MONTHS
YEARS ENDED
ENDED 6/30/18
PERIOD ENDED
(UNAUDITED)
12/31/17
12/31/16
12/31/15
12/31/14
12/31/13 1
Net Asset
Value, Beginning of Period
$
12.48
$
9.62
$
8.81
$
9.25
$
10.05
$
9.78
INVESTMENT
OPERATIONS:
Net investment
income (loss)
0.04
0.02
0.06
0.10
0.13
(0.00
)
Net realized
and unrealized gain (loss) on investments and foreign currency
(0.15
)
2.96
0.90
(0.43
)
(0.77
)
0.27
Net increase
(decrease) in net assets from investment operations
(0.11
)
2.98
0.96
(0.33
)
(0.64
)
0.27
DISTRIBUTIONS:
Net investment
income
(0.11
)
(0.14
)
(0.10
)
(0.15
)
Net realized
gain on investments and foreign currency
Total distributions
(0.11
)
(0.14
)
(0.10
)
(0.15
)
CAPITAL STOCK
TRANSACTIONS:
Effect of
reinvestment of distributions by Common Stockholders
(0.01
)
(0.01
)
(0.01
)
(0.01
)
Total capital stock transactions
(0.01
)
(0.01
)
(0.01
)
(0.01
)
Net Asset
Value, End of Period
$
12.37
$
12.48
$
9.62
$
8.81
$
9.25
$
10.05
Market
Value, End of Period
$
10.51
$
10.81
$
8.04
$
7.45
$
8.04
$
8.89
TOTAL RETURN:
2
Net Asset
Value
(0.88
)%3
31.07
%
11.12
%
(3.44
)%
(6.23
)%
2.76
%3
Market Value
(2.81
)%3
35.96
%
9.77
%
(6.06
)%
(7.86
)%
(0.95
)%3
RATIOS BASED
ON AVERAGE NET ASSETS:
Investment
advisory fee expense
1.25
%4
1.25
%
1.25
%
1.25
%
1.25
%
1.25
%4
Other operating
expenses
0.44
%4
0.42
%
0.46
%
0.43
%
0.24
%
0.37
%4
Total expenses
(net)
1.69
%4
1.67
%
1.71
%
1.68
%
1.49
%
1.62
%4
Expenses excluding
interest expense
1.50
%4
1.52
%
1.57
%
1.58
%
1.49
%
1.62
%4
Expenses prior
to balance credits
1.69
%4
1.67
%
1.71
%
1.68
%
1.49
%
1.62
%4
Net investment income (loss)
0.62
%4
0.21
%
0.69
%
1.03
%
1.30
%
(0.13
)%4
SUPPLEMENTAL
DATA:
Net Assets,
End of Period (in thousands)
$
129,387
$
130,526
$
100,228
$
91,174
$
95,285
$
102,684
Portfolio
Turnover Rate
23
%
34
%
59
%
65
%
43
%
7
%
REVOLVING
CREDIT AGREEMENT:
Asset coverage
1717
%
1732
%
1353
%
1240
%
Asset coverage
per $1,000
17,173
17,316
13,528
12,397
1
The Fund commenced
operations on October 18, 2013.
2
The Market
Value Total Return is calculated assuming a purchase of Common Stock on the opening
of the first business day and a sale on the closing of the last business day of
each period. Dividends and distributions are assumed for the purposes of this calculation
to be reinvested at prices obtained under the Funds Distribution Reinvestment
and Cash Purchase Plan. Net Asset Value Total Return is calculated on the same basis,
except that the Funds net asset value is used on the purchase and sale dates
instead of market value.
3
Not annualized
4
Annualized
18 | 2018
Semiannual Report to Stockholders
THE ACCOMPANYING
NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
Royce Global Value Trust
Notes to Financial Statements (unaudited)
Summary of Significant Accounting Policies
Royce Global Value Trust, Inc. (the Fund), is a diversified closed-end investment company that was incorporated under the laws of the
State of Maryland on February 14, 2011. The Fund commenced operations on October 18, 2013.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the
reporting period. Actual results could differ from those estimates.
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the
Financial Accounting Standards Board (FASB) Accounting Standard Codification Topic 946 Financial Services-Investment Companies.
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 Nasdaqs 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. Other over-the-counter securities for which market quotations are readily available are valued at
their highest bid price, except in the case of some bonds and other fixed income securities which may be valued by reference to other
securities with comparable ratings, interest rates and maturities, using established independent pricing services. The Fund values its non-U.S. dollar denominated securities in U.S. dollars daily at the prevailing foreign currency exchange rates as quoted by a major bank.
Securities for which market quotations are not readily available are valued at their fair value in accordance with the provisions of the 1940
Act, under procedures approved by the Funds Board of Directors, and are reported as Level 3 securities. As a general principle, the fair
value of a security is the amount which the Fund might reasonably expect to receive for the security upon its current sale. However, in
light of the judgment involved in fair valuations, there can be no assurance that a fair value assigned to a particular security will be the
amount which the Fund might be able to receive upon its current sale. In addition, if, between the time trading ends on a particular security
and the close of the customary trading session on the NYSE, events occur that are significant and may make the closing price unreliable,
the Fund may fair value the security. The Fund uses an independent pricing service to provide fair value estimates for relevant non-U.S.
equity securities on days when the U.S. market volatility exceeds a certain threshold. This pricing service uses proprietary correlations it
has developed between the movement of prices of non-U.S. equity securities and indices of U.S.-traded securities, futures contracts and
other indications to estimate the fair value of relevant non-U.S. securities. When fair value pricing is employed, the prices of securities used
by the Fund may differ from quoted or published prices for the same security. Investments in money market funds are valued at net asset
value per share.
Various inputs are used in determining the value of the Funds 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 Schedule of Investments.
Level 3
significant unobservable inputs (including last trade price before trading was suspended, or at a discount thereto for lack of
marketability or otherwise, market price information regarding other securities, information received from the company and/or
published documents, including SEC filings and financial statements, or other publicly available information).
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those
securities.
The following is a summary of the inputs used to value the Funds investments as of June 30, 2018. For a detailed breakout of common
stocks by country, please refer to the Schedule of Investments.
LEVEL 1
LEVEL 2
LEVEL 3
TOTAL
Common Stocks
$124,179,586
$
$42,275
$124,221,861
Cash Equivalents
13,162,000
13,162,000
Certain securities have transferred in and out of Level 1 and Level 2 measurements during the reporting period. The Fund recognizes
transfers between levels as of the end of the reporting period. For the six months ended June 30, 2018, securities valued at $59,393,938
were transferred from Level 2 to Level 1 within the fair value hierarchy.
2018 Semiannual Report to Stockholders | 19
Royce Global
Value Trust
Notes to Financial Statements (unaudited) (continued)
VALUATION OF INVESTMENTS (continued):
Level 3 Reconciliation:
BALANCE
AS OF 12/31/17
PURCHASES
SALES
REALIZED
GAIN (LOSS)
UNREALIZED
GAIN (LOSS)1
BALANCE
AS OF 6/30/18
Common Stocks
$0
$126,098
$84,433
$8,774
$(8,164)
$42,275
1
The net change in unrealized appreciation (depreciation) is included in the accompanying Statement of Operations. Change in unrealized appreciation (depreciation) includes net
unrealized appreciation (depreciation) resulting from changes in investment values during the reporting period and the reversal of previously recorded unrealized appreciation
(depreciation) when gains or losses are realized. Net realized gain (loss) from investments and foreign currency transactions is included in the accompanying Statement of Operations.
REPURCHASE
AGREEMENTS:
The Fund may enter into repurchase agreements with institutions that the Funds investment adviser has determined are creditworthy.
The Fund restricts repurchase agreements to maturities of no more than seven days. Securities pledged as collateral for repurchase
agreements, which are held until maturity of the repurchase agreements, are marked-to-market daily and maintained at a value at least
equal to the principal amount of the repurchase agreement (including accrued interest). Repurchase agreements could involve certain
risks in the event of default or insolvency of the counter-party, including possible delays or restrictions upon the ability of the Fund to
dispose of its underlying securities. The remaining contractual maturity of the repurchase agreement held by the Fund at June 30, 2018 is
overnight and continuous.
FOREIGN CURRENCY:
Net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies,
expiration of currency forward contracts, currency gains or losses realized between the trade and settlement dates on securities
transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Funds 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.
DISTRIBUTIONS
AND TAXES:
As a qualified regulated investment company under Subchapter M of the Internal Revenue Code, the Fund is not subject to income
taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. The Schedule of Investments includes
information regarding income taxes under the caption Tax Information.
The Fund pays any dividends and capital gain distributions annually in December. 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.
CAPITAL GAINS TAXES:
The Fund is subject to a tax imposed on short-term capital gains on securities of issuers domiciled in certain countries. The Fund
records an estimated deferred tax liability for gains in these securities that have been held for less than one year. This amount, if any, is
reported as deferred capital gains tax in the accompanying Statement of Assets and Liabilities, assuming those positions were disposed of
at the end of the period, and accounted for as a reduction in the market value of the security.
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. Premiums and
discounts on debt securities are amortized using the effective yield-to-maturity method. Realized gains and losses from investment
transactions are determined on the basis of identified cost for book and tax purposes.
EXPENSES:
The Fund incurs direct and indirect expenses. Expenses directly attributable to the Fund are charged to the Funds 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 Funds are allocated by Royce & Associates (Royce) under an administration agreement and are
included in administrative and office facilities and professional fees.
COMPENSATING
BALANCE CREDITS:
The Fund has an arrangement with its custodian bank, whereby a portion of the custodians fee is paid indirectly by credits earned on
the Funds cash on deposit with the bank. This deposit arrangement is an alternative to purchasing overnight investments. Conversely, the
Fund pays interest to the custodian on any cash overdrafts, to the extent they are not offset by credits earned on positive cash balances.
20 | 2018 Semiannual Report to Stockholders
Royce Global
Value Trust
Notes to Financial Statements (unaudited) (continued)
Capital
Stock:
The Fund issued 46,290 shares of Common Stock as reinvestment of distributions for the year ended December 31, 2017.
Borrowings:
The Fund is party to a revolving credit agreement (the credit agreement) with BNP Paribas Prime Brokerage International, Limited
(BNPPI). The Fund pays a commitment fee of 0.50% per annum on the unused portion of the credit agreement. The credit agreement has a
360-day rolling term that resets daily; however, if the Fund exceeds certain net asset value triggers, the credit agreement may convert to a
60-day rolling term that resets daily. The Fund is required to pledge portfolio securities as collateral in an amount up to two times the loan
balance outstanding or as otherwise required by applicable regulatory standards and has granted a security interest in the securities
pledged to, and in favor of, BNPPI as security for the loan balance outstanding. If the Fund fails to meet certain requirements, or maintain
other financial covenants required under the credit agreement, the Fund may be required to repay immediately, in part or in full, the loan
balance outstanding under the credit agreement which may necessitate the sale of portfolio securities at potentially inopportune times.
BNPPI may terminate the credit agreement upon certain ratings downgrades of its corporate parent, which would result in the Funds
entire loan balance becoming immediately due and payable. The occurrence of such ratings downgrades may necessitate the sale of
portfolio securities at potentially inopportune times. The credit agreement also permits, subject to certain conditions, BNPPI to
rehypothecate portfolio securities pledged by the Fund up to the amount of the loan balance outstanding. The Fund continues to receive
payments in lieu of dividends and interest on rehypothecated securities. The Fund also has the right under the credit agreement to recall
the rehypothecated securities from BNPPI on demand. If BNPPI fails to deliver the recalled security in a timely manner, the Fund is
compensated by BNPPI for any fees or losses related to the failed delivery or, in the event a recalled security is not returned by BNPPI, the
Fund, upon notice to BNPPI, may reduce the loan balance outstanding by the value of the recalled security failed to be returned. The Fund
receives a portion of the fees earned by BNPPI in connection with the rehypothecation of portfolio securities.
As of June 30, 2018, the Fund has outstanding borrowings of $8,000,000. During the six months ended June 30, 2018, the Fund
borrowed an average daily balance of $8,000,000 at a weighted average borrowing cost of 3.08%. The maximum amount outstanding
during the six months ended June 30, 2018 was $8,000,000. As of June 30, 2018, the aggregate value of rehypothecated securities was
$5,000,988. During the six months ended June 30, 2018, the Fund earned $9,719 in fees from rehypothecated securities.
Investment
Advisory Agreement:
The investment advisory agreement between Royce and the Fund provides for fees to be paid at an annual rate of 1.25% of the Funds
average daily net assets. For the six months ended June 30, 2018, the Fund expensed Royce investment advisory fees totaling $824,678.
Purchases and Sales of Investment Securities:
For the six months ended June 30, 2018, the costs of purchases and proceeds from sales of investment securities, other than short-term
securities, amounted to $29,931,891 and $33,031,431, respectively.
Cross trades were executed by the Fund pursuant to Rule 17a-7 under the 1940 Act. Cross trading is the buying or selling of portfolio
securities between funds to which Royce serves as investment adviser. At its regularly scheduled quarterly meetings, the Board reviews
such transactions as of the most recent calendar quarter for compliance with the requirements and restrictions set forth by Rule 17a-7.
Cross trades for the six months ended June 30, 2018, were as follows:
COST
OF PURCHASES
PROCEEDS
FROM SALES
REALIZED
GAIN (LOSS)
$
$425,880
$(22,161)
2018 Semiannual Report to Stockholders | 21
MANAGERS DISCUSSION
Royce Micro-Cap Trust (RMT)
Chuck Royce
Jim Harvey
Chris Flynn
FUND PERFORMANCE
A strong absolute performance
helped Royce Micro-Cap Trust
(RMT) to further solidify
advantages over both of its
unleveraged benchmarks, the
small-cap Russell 2000 and Russell
Microcap Indexes. RMT beat the Russell 2000 on both a net asset
value (NAV) and market price basis for the one-, three-, five-, 15-,
20-year, and since inception (12/14/93) periods ended June 30,
2018. It also outpaced the micro-cap index on both an NAV and
market price basis for the three- and 15-year periods ended June
30, 2018. (Data for the Russell Microcap Index goes back only to
6/30/00). The Fund advanced 7.8% on an NAV basis and 9.7%
based on market price for the year-to-date period ended June
30, 2018, outpacing the Russell 2000, which was up 7.7%, but
behind the 10.7% gain for the Russell Microcap for the same
period.
WHAT WORKED... AND WHAT DIDNT
Though the markets preference for higher growth and more yield-sensitive
equities created challenges for our approach, this was balanced
by the overall strength of micro-cap stocks, which were the best-performing
U.S. asset class in the first half of the year, along with select
stock selection advantages.
Seven of the portfolios 11 equity sectors made positive contributions
to performance, with Information Technology and Health Care
making outsized impacts, followed by Energy. Three sectors detracted
from first-half resultsMaterials, Industrials, and Consumer
Staplesthough their collective negative impact was modest. This was
paralleled somewhat at the industry level, where two groups dominated
the positive contributorselectronic equipment, instruments &
components (Information Technology) and health care equipment &
supplies (Health Care)and the impact of detractors, led by machinery
(Industrials) and pharmaceuticals (Health Care), was far more modest.
The portfolios top contributor at the position level, Mesa
Laboratories, is in the electronic equipment, instruments &
components group, though it does most of its business with hospitals,
pharmaceutical and medical device manufacturers, and research
laboratories by offering quality control and calibration products and
services. The company reported record revenues for its fiscal fourth
quarter and 2018, driven in part by strong results in each of its four
divisions and greater efficiencies from the firms proprietary operating
system that helped it to better manage inventories and speed up
deliveries. Three healthcare companies were also among RMTs top
contributors in the first half, including medical device company
Surmodics, which specializes in coronary stents and catheters. The firm
recently engaged in an agreement with Abbot Laboratories that granted
exclusive global commercialization rights for the companys SurVeil drug. Although we trimmed our position slightly in early July,
its extended pipeline of interesting products made us happy to hold a
sizable position at the end of June.
Collectors Universe, which provides authentication and grading
services to dealers and collectors of coins, trading cards, event tickets,
autographs, and historical and sports memorabilia, detracted most at
the position level. The companys fiscal second quarter was slower than
was expected, as softness in coin submissions in China, weakness in
the vintage coin market, and a decline in modern coin sales at the U.S.
Mint all combined to adversely affect results. Shares of Sun Hydraulics,
which makes hydraulic and electronic valves, controls, and instruments
for industrial machinery and off-highway vehicles, saw its share price
tumble. Despite robust sales growth, the companys margins and
earnings have been weaker than expected due to operating inefficiencies
incurred by a ramp up to meet strong demand, as well as higher
materials and commodity costs. We expect a reversal as the impact of
managements corrective actionswhich include price increases, new
supply agreements to ease constraints, and reduced temporary and
overtime laborto take effect.
Relative to the Russell 2000, the Funds biggest advantage came from
savvy stock selection in the Energy sectors energy equipment & services
industry, while stock picking was also a strength in the real estate
management & development group. A combination of superior stock
selection and our overweight gave us an additional, though slighter,
edge in Information Technology. Conversely, relative results were hurt
by a mix of larger exposure and stock selection miscues in Industrials.
Stock picking was an issue in the Materials sector, primarily in the
metals & mining group, while the portfolios cash position also
detracted from first-half performance.
Top Contributors to Performance
Year-to-Date Through 6/30/18 (%)1
Mesa Laboratories
0.81
Surmodics
0.76
Zafgen
0.64
Mirati Therapeutics
0.55
SEACOR Marine Holdings
0.54
1 Includes dividends
Top Detractors from Performance
Year-to-Date Through 6/30/18 (%)2
Collectors Universe
-0.35
Sun Hydraulics
-0.27
Aquinox Pharmaceuticals
-0.26
Real Matters
-0.22
U.S. Global Investors Cl. A
-0.21
2 Net of dividends
CURRENT POSITIONING AND OUTLOOK
The markets recent behavior looks curious to us. We hear optimism
and solid progress from the management teams we meet with, see
solid earnings reports, and observe consistently strong macroeconomic
data. Yet small- and micro-cap market leadership has stubbornly
remained with defensive and yield-oriented stocks, while cyclicals
have lagged. We are therefore far from ebullient, as we anticipate that
increased volatility will accompany a shift in market leadership to
value/cyclical leadership. We are also mindful that these shifts rarely
occur without some turbulence, so we have sought to position the
portfolio for increased volatility and lower returns.
22 | 2018 Semiannual Report to Stockholders
PERFORMANCE AND PORTFOLIO REVIEW
SYMBOLS MARKET PRICE RMT NAV XOTCX
Performance
Average Annual Total Return (%) Through 6/30/18
JAN-JUN 20181
1-YR
3-YR
5-YR
10-YR
15-YR
20-YR
SINCE INCEPTION (12/14/93)
RMT (NAV)
7.84
19.79
11.16
12.51
9.92
10.76
9.81
11.19
1 Not Annualized
Market Price Performance History Since Inception (12/14/93)
Cumulative Performance of Investment1
1-YR
5-YR
10-YR
15-YR
20-YR
SINCE INCEPTION (12/14/93)
RMT
24.6%
84.9%
155.6%
360.7%
578.6%
1103.3%
1
Reflects the cumulative performance experience of a continuous common stockholder who purchased one share at inception ($7.50 IPO),
reinvested all distributions and fully participated in the primary subscription of the Fund's 1994 rights offering.
2
Reflects the actual month-end market price movement of one share as it has traded on NYSE and, prior to 12/1/03, on the Nasdaq.
The Morningstar Style Map is the Morningstar Style Box with the center 75% of fund holdings plotted as the Morningstar Ownership Zone. The Morningstar Style Box is designed to reveal a
funds investment strategy. The Morningstar Ownership Zone provides
detail about a portfolios investment style by showing the range of
stock sizes and styles. The Ownership Zone is derived by plotting each
stock in the portfolio within the proprietary Morningstar Style Box.
Over time, the shape and location of a funds ownership zone may vary.
See page 66 for additional information.
Top 10 Positions
% of Net Assets
Mesa Laboratories
2.2
Surmodics
1.6
nLIGHT
1.1
FRP Holdings
1.1
Major Drilling Group International
1.1
Kadant
1.1
Zafgen
1.1
SEACOR Marine Holdings
1.1
Heritage-Crystal Clean
1.0
Social Capital Hedosophia Holdings
1.0
Portfolio Sector Breakdown
% of Net Assets
Information Technology
20.7
Industrials
20.2
Financials
13.9
Health Care
13.4
Consumer Discretionary
11.7
Energy
8.7
Materials
5.3
Real Estate
3.5
Consumer Staples
2.6
Utilities
0.4
Telecommunication Services
0.2
Preferred Stock
0.4
Outstanding Line of Credit, Net of Cash
and Cash Equivalents
-1.0
Calendar Year Total Returns (%)
YEAR
RMT
2017
17.7
2016
22.0
2015
-11.7
2014
3.5
2013
44.5
2012
17.3
2011
-7.7
2010
28.5
2009
46.5
2008
-45.5
2007
0.6
2006
22.5
2005
6.8
2004
18.7
2003
55.5
Portfolio Diagnostics
Fund Net Assets
$433 million
Number of Holdings
351
Turnover Rate
10%
Net Asset Value
$10.90
Market Price
$9.99
Net Leverage1
1.1%
Average Market Capitalization2
$511 million
Weighted Average P/B Ratio3
2.1x
Active Share4
94%
U.S. Investments (% of Net Assets)
83.2%
Non-U.S. Investments (% of Net Assets)
17.8%
1
Net leverage is the percentage, in excess of 100%, of the total value of
equity type investments, divided by net assets.
2
Geometric Average. This weighted calculation uses each portfolio
holdings market cap in a way designed to not skew the effect of
very large or small holdings; instead, it aims to better identify
the portfolios center, which Royce believes offers a more accurate
measure of average market cap than a simple mean or median.
3
Harmonic Average. This weighted calculation evaluates a portfolio
as if it were a single stock and measures it overall. It compares the
total market value of the portfolio to the portfolios share in the
earnings or book value, as the case may be, of its underlying stocks.
4
Active Share is the sum of the absolute values of the different
weightings of each holding in the Fund versus each holding in the
benchmark, divided by two.
Important Performance and Risk Information
All performance information reflects past performance, is presented on a total return basis, net of the Funds investment advisory fee, and reflects the reinvestment of distributions. Past performance is no guarantee
of future results. Current performance may be higher or lower than performance quoted. Returns as of the most recent month-end may be obtained at www.roycefunds.com. Certain immaterial adjustments were
made to the net assets of Royce Micro-Cap Trust at 12/31/12 and 12/31/14 for financial reporting purposes, and as a result the net asset value originally calculated on that date and the total return based on that
net asset value differs from the adjusted net asset value and total return reported in the Financial Highlights. The market price of the Funds shares will fluctuate, so that shares may be worth more or less than their
original cost when sold. The Fund normally invests in micro-cap companies, which may involve considerably more risk than investments in securities of larger-cap companies. The Funds broadly diversified portfolio
does not ensure a profit or guarantee against loss. From time to time, the Fund may invest a significant portion of its net assets in foreign securities, which may involve political, economic, currency and other risks
not encountered in U.S. investments. Regarding the Top Contributors and Top Detractors tables shown above, the sum of all contributors to, and all detractors from, performance for all securities in the portfolio
would approximate the Funds year-to-date performance for 2018.
2018 Semiannual Report to Stockholders | 23
Royce Micro-Cap Trust
Schedule
of Investments
Common Stocks
100.6%
SHARES
VALUE
CONSUMER DISCRETIONARY 11.7%
AUTO COMPONENTS
- 1.3%
Fox
Factory Holding 1
5,300
$
246,715
Motorcar
Parts of America 1
54,800
1,025,308
Sebang
Global Battery
50,500
1,434,119
Standard
Motor Products
50,860
2,458,572
Stoneridge
1
7,500
263,550
Unique
Fabricating
12,200
106,628
5,534,892
DISTRIBUTORS
- 0.6%
Uni-Select
33,800
537,602
Weyco
Group
54,300
1,976,520
2,514,122
DIVERSIFIED
CONSUMER SERVICES - 1.1%
Aspen
Group 1
141,520
1,057,154
Collectors
Universe 2,3
108,200
1,594,868
Liberty
Tax Cl. A
142,900
1,153,918
Universal
Technical Institute 1
270,000
850,500
4,656,440
HOTELS, RESTAURANTS
& LEISURE - 1.6%
Century
Casinos 1
222,500
1,946,875
Del
Taco Restaurants 1
8,200
116,276
Lindblad
Expeditions Holdings 1
254,000
3,365,500
Lindblad
Expeditions Holdings (Warrants) 1
18,100
49,775
Red
Lion Hotels 1
115,500
1,345,575
6,824,001
HOUSEHOLD
DURABLES - 2.5%
AV
Homes 1
6,500
139,100
Cavco Industries 1,2,3
20,241
4,203,044
Ethan
Allen Interiors 2
18,100
443,450
Flexsteel
Industries 2
16,100
642,390
Lifetime
Brands 2
119,294
1,509,069
PICO
Holdings 2,3
121,200
1,411,980
Skyline
Champion
63,700
2,232,048
Universal
Electronics 1
6,100
201,605
ZAGG
1
3,700
64,010
10,846,696
INTERNET
& DIRECT MARKETING RETAIL - 0.8%
FTD
Companies 1
67,200
311,808
Gaia
Cl. A 1,2,3
125,000
2,531,250
Yatra
Online 1
105,000
562,800
3,405,858
LEISURE PRODUCTS
- 0.7%
Clarus
Corporation 1
174,926
1,443,139
Nautilus
1
118,500
1,860,450
3,303,589
MEDIA - 0.8%
Chicken Soup For The Soul Entertainment 1
150,000
1,437,000
McClatchy
Company (The) Cl. A 1
69,313
689,664
New
Media Investment Group
66,200
1,223,376
3,350,040
MULTILINE
RETAIL - 0.0%
Tuesday
Morning 1,2,3
36,700
111,935
SPECIALTY RETAIL - 1.3%
AutoCanada
115,200
1,490,550
Barnes
& Noble Education 1
80,000
451,200
Destination
Maternity 1
212,000
1,233,840
Destination
XL Group 1
50,000
112,500
Haverty
Furniture
30,000
648,000
Kirklands 1
11,000
128,040
Lazydays Holdings 1
30,000
266,700
MarineMax
1
7,600
144,020
Sears
Hometown and Outlet Stores 1,2,3
269,700
566,370
Shoe
Carnival 2
21,028
682,359
Stage
Stores 2
15,000
36,150
5,759,729
TEXTILES,
APPAREL & LUXURY GOODS - 1.0%
Crown
Crafts
112,159
639,306
Culp
32,900
807,695
J.G.
Boswell Company 4
2,490
1,668,798
YGM
Trading
1,482,000
1,190,043
4,305,842
Total (Cost $48,461,878)
50,613,144
CONSUMER
STAPLES 2.6%
BEVERAGES
- 0.3%
Crimson
Wine Group 1,4
58,124
537,647
Primo
Water 1
40,400
706,596
1,244,243
FOOD &
STAPLES RETAILING - 0.0%
Centric Health 1
807,600
175,078
FOOD PRODUCTS
- 2.2%
AGT
Food and Ingredients
25,800
300,655
Farmer
Bros. 1,2,3
62,600
1,912,430
John
B. Sanfilippo & Son 2,3
17,800
1,325,210
Landec
Corporation 1,2
75,610
1,126,589
Seneca
Foods Cl. A 1
81,087
2,189,349
Seneca
Foods Cl. B 1
40,400
1,082,720
SunOpta
1
176,281
1,480,760
9,417,713
HOUSEHOLD
PRODUCTS - 0.1%
Central
Garden & Pet 1
12,000
521,760
Total (Cost $7,700,951)
11,358,794
ENERGY
8.7%
ENERGY EQUIPMENT
& SERVICES - 5.2%
Aspen
Aerogels 1
94,985
465,427
CARBO
Ceramics 1,2,3
70,000
641,900
CES
Energy Solutions
25,000
85,384
Computer
Modelling Group
437,700
3,362,697
Dawson
Geophysical 1
77,336
610,954
Era Group 1
329,800
4,270,910
Geospace
Technologies 1,2
9,500
133,570
Hornbeck
Offshore Services 1,2,3
460,000
1,821,600
Independence
Contract Drilling 1
134,400
553,728
Mammoth
Energy Services 1
4,500
152,820
Matrix
Service 1,2
33,700
618,395
Nabors
Industries
34,000
217,940
Newpark
Resources 1
11,200
121,520
North
American Construction Group
50,000
297,500
Pioneer
Energy Services 1,2
245,600
1,436,760
Precision
Drilling 1
108,600
360,552
Profire
Energy 1
175,000
591,500
SEACOR Marine Holdings 1
205,457
4,744,002
TerraVest
Industries
209,000
1,600,905
Total
Energy Services
25,700
227,159
Trican
Well Service 1
53,300
121,224
22,436,447
24 | 2018
Semiannual Report to Stockholders
THE ACCOMPANYING
NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
June 30, 2018 (unaudited)
Schedule of Investments (continued)
SHARES
VALUE
ENERGY
(continued)
OIL, GAS
& CONSUMABLE FUELS - 3.5%
Ardmore
Shipping 1
199,300
$
1,634,260
Cross
Timbers Royalty Trust
67,631
979,973
Dorchester
Minerals L.P.
153,963
3,171,638
Dorian
LPG 1
163,138
1,246,374
GeoPark 1
61,971
1,279,081
Hallador
Energy
24,000
171,360
Leucrotta
Exploration 1
489,800
730,239
Pacific
Ethanol 1
134,300
349,180
Panhandle
Oil and Gas Cl. A
5,500
105,050
Permian
Basin Royalty Trust
176,333
1,645,187
Sabine
Royalty Trust
59,548
2,801,733
StealthGas 1
229,664
902,580
Teekay
Offshore Partners L.P.
56,000
147,840
15,164,495
Total (Cost $33,689,668)
37,600,942
FINANCIALS
13.9%
BANKS - 2.3%
Bank
of N.T. Butterfield & Son
43,810
2,002,993
Blue
Hills Bancorp
50,000
1,110,000
Bryn
Mawr Bank
25,000
1,157,500
Caribbean
Investment Holdings 1
735,635
169,900
Chemung
Financial
31,000
1,553,410
Fauquier
Bankshares
133,200
2,823,840
Live
Oak Bancshares 2,3
30,900
947,085
Midway
Investments 1,5
735,647
0
9,764,728
CAPITAL MARKETS
- 8.6%
ASA
Gold and Precious Metals
171,150
1,745,730
Ashford 1
10,000
648,000
Banca
Finnat Euramerica
568,000
244,762
Bolsa
Mexicana de Valores
1,068,000
1,797,724
Canaccord
Genuity Group
203,300
1,122,700
Diamond
Hill Investment Group 2
3,584
696,837
Donnelley
Financial Solutions 1
50,000
868,500
Dundee
Corporation Cl. A 1
413,200
496,601
Fiera
Capital Cl. A
78,000
698,330
Founders
Advantage Capital
53,400
76,770
GAIN
Capital Holdings 2
25,000
188,750
GMP
Capital
332,800
726,533
Great
Elm Capital Group 1
515,200
1,854,720
Hamilton
Lane Cl. A 2
32,300
1,549,431
INTL
FCStone 1,2,3
63,727
3,295,323
JZ
Capital Partners 1
209,999
1,305,359
Manning
& Napier Cl. A
136,600
423,460
Medley
Management Cl. A
153,400
544,570
MVC
Capital
219,900
2,089,050
OHA
Investment
59,761
91,135
Pzena
Investment Management Cl. A
6,100
56,181
Queen
City Investments 4
948
1,094,940
Silvercrest
Asset Management Group Cl. A
203,300
3,313,790
Sprott
1,414,533
3,270,970
U.S.
Global Investors Cl. A 2
439,454
707,521
Urbana
Corporation
237,600
511,473
Value
Line
136,074
3,224,954
Virtu
Financial Cl. A 2
86,200
2,288,610
Vostok
New Ventures SDR 1
100,000
807,212
Warsaw
Stock Exchange
52,900
516,904
Westaim
Corporation 1
45,000
110,219
Westwood
Holdings Group 2,3
12,400
738,296
37,105,355
CONSUMER FINANCE
- 0.6%
Currency
Exchange International 1
7,000
160,803
EZCORP
Cl. A 1,2,3
201,000
2,422,050
2,582,853
DIVERSIFIED
FINANCIAL SERVICES - 0.1%
Waterloo
Investment Holdings 1,5
806,000
241,800
INSURANCE
- 1.3%
Hallmark
Financial Services 1,2
114,000
1,137,720
Health
Insurance Innovations Cl. A 1
4,000
129,400
Heritage
Insurance Holdings
6,600
110,022
State
Auto Financial
43,200
1,292,112
Trupanion 1,2,3
82,300
3,176,780
5,846,034
INVESTMENT
COMPANIES - 1.0%
Social Capital Hedosophia Holdings
438,850
4,410,442
Total (Cost $55,314,886)
59,951,212
HEALTH
CARE 13.4%
BIOTECHNOLOGY
- 4.3%
Abeona
Therapeutics 1,2,3
142,221
2,275,536
Aquinox
Pharmaceuticals 1,2
145,397
385,302
Arcturus
Therapeutics 1
106,436
902,577
BioCryst
Pharmaceuticals 1
144,000
825,120
CareDx 1
56,000
685,440
Idera
Pharmaceuticals 1
464,490
613,127
Invitae
Corporation 1
156,412
1,149,628
Keryx
Biopharmaceuticals 1,2,3
117,725
442,646
Knight
Therapeutics 1
187,000
1,145,058
Mirati
Therapeutics 1
51,100
2,519,230
Theratechnologies 1
10,000
96,451
Zafgen 1
465,381
4,760,848
Zealand
Pharma 1
187,900
2,473,938
Zealand
Pharma ADR 1
10,000
126,800
18,401,701
HEALTH CARE
EQUIPMENT & SUPPLIES - 4.7%
AtriCure
1,2
15,000
405,750
Atrion Corporation
6,169
3,697,699
Chembio
Diagnostics 1
33,300
369,630
CryoLife 1
4,600
128,110
GenMark
Diagnostics 1
20,400
130,152
Inogen 1
5,400
1,006,182
Invacare
Corporation 2
54,100
1,006,260
Invuity 1
13,400
52,260
LeMaitre
Vascular
5,000
167,400
OraSure
Technologies 1,2,3
50,000
823,500
OrthoPediatrics
Corporation 1
33,300
887,112
STRATEC
Biomedical
14,000
1,093,761
Surmodics 1
125,892
6,949,238
TearLab
Corporation 1,4
8,500
1,615
Utah Medical Products
34,000
3,745,100
20,463,769
HEALTH CARE
PROVIDERS & SERVICES - 2.5%
AAC
Holdings 1
89,400
837,678
Aceto
Corporation
58,300
195,305
BioTelemetry 1
47,700
2,146,500
THE
ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
2018 Semiannual Report to Stockholders | 25
Royce Micro-Cap Trust
Schedule of Investments (continued)
SHARES
VALUE
HEALTH
CARE (continued)
HEALTH CARE
PROVIDERS & SERVICES (continued)
CRH
Medical 1
133,000
$
415,799
Cross
Country Healthcare 1
150,800
1,696,500
National
Research
89,529
3,348,384
PetIQ
Cl. A 1
25,000
671,500
Psychemedics
Corporation 2
37,500
721,500
U.S.
Physical Therapy
10,000
960,000
10,993,166
HEALTH CARE
TECHNOLOGY - 1.0%
Tabula
Rasa HealthCare 1
50,000
3,191,500
Vocera
Communications 1
33,100
989,359
4,180,859
LIFE SCIENCES
TOOLS & SERVICES - 0.5%
NeoGenomics 1
125,000
1,638,750
Quanterix
Corporation 1
45,500
653,380
2,292,130
PHARMACEUTICALS
- 0.4%
Agile
Therapeutics 1,2
80,000
39,520
Corium
International 1
4,900
39,249
Flex
Pharma 1
264,274
248,418
Theravance
Biopharma 1
59,009
1,338,324
1,665,511
Total (Cost $34,133,114)
57,997,136
INDUSTRIALS
20.2%
AEROSPACE
& DEFENSE - 0.3%
Astronics
Corporation 1
2,460
88,486
CPI
Aerostructures 1
11,800
123,900
FLYHT
Aerospace Solutions 1
191,680
173,506
Innovative
Solutions and Support 1
142,828
415,629
SIFCO
Industries 1
45,800
242,740
1,044,261
BUILDING PRODUCTS
- 1.3%
Burnham
Holdings Cl. A 4
117,000
1,767,870
CSW
Industrials 1
20,000
1,057,000
DIRTT
Environmental Solutions 1
96,000
468,079
Insteel
Industries
44,200
1,476,280
Patrick
Industries 1
17,250
980,662
5,749,891
COMMERCIAL
SERVICES & SUPPLIES - 2.1%
Atento
218,701
1,498,102
Civeo
Corporation 1
150,000
654,000
CompX
International Cl. A
78,200
1,032,240
Heritage-Crystal Clean 1,2,3
223,477
4,491,888
Hudson
Technologies 1
50,000
100,500
Team 1,2,3
57,500
1,328,250
9,104,980
CONSTRUCTION
& ENGINEERING - 2.8%
Ameresco
Cl. A 1
251,400
3,016,800
Granite
Construction
13,500
751,410
IES
Holdings 1
220,000
3,685,000
Infrastructure
and Energy Alternatives 1
155,000
1,443,050
Infrastructure
and Energy Alternatives (Warrants) 1
40,000
38,000
Northwest
Pipe 1,2
61,600
1,193,192
NV5
Global 1,2
27,400
1,898,820
12,026,272
ELECTRICAL
EQUIPMENT - 1.0%
Encore
Wire 2
4,100
194,545
LSI
Industries
147,412
787,180
Powell
Industries
21,400
745,362
Power
Solutions International 1,2,3,4
21,100
195,175
Preformed
Line Products
20,743
1,841,564
Revolution
Lighting Technologies 1,2,3
81,200
327,236
4,091,062
INDUSTRIAL
CONGLOMERATES - 0.9%
Raven Industries 2
102,559
3,943,394
MACHINERY
- 7.7%
CIRCOR International 1,2
104,800
3,873,408
Eastern
Company (The)
39,750
1,114,987
Exco
Technologies
85,400
577,497
Foster
(L.B.) Company 1,2,3
95,300
2,187,135
FreightCar
America 1
86,500
1,452,335
Global
Brass and Copper Holdings
5,000
156,750
Graham
Corporation 2
75,150
1,939,621
Harsco
Corporation 1
4,400
97,240
Hurco
Companies
36,866
1,649,754
Kadant
49,800
4,788,270
Kornit
Digital 1
39,800
708,440
Lindsay
Corporation 2
32,600
3,161,874
Luxfer
Holdings 2
59,712
1,043,766
Lydall 1
1,800
78,570
NN
45,300
856,170
Sun
Hydraulics
74,000
3,566,060
Tennant
Company
34,400
2,717,600
Titan
International
212,200
2,276,906
Westport
Fuel Systems 1
454,500
1,149,885
33,396,268
MARINE - 1.3%
Clarkson
109,900
3,335,933
Eagle
Bulk Shipping 1
450,000
2,448,000
5,783,933
PROFESSIONAL
SERVICES - 0.9%
Acacia
Research 1,2
190,000
788,500
CBIZ 1
47,000
1,081,000
Franklin
Covey 1
40,100
984,455
GP
Strategies 1
7,600
133,760
IBI
Group 1
84,500
451,215
InnerWorkings 1
30,400
264,176
Kforce 2
2,800
96,040
Resources
Connection
11,200
189,280
3,988,426
ROAD &
RAIL - 0.8%
Marten
Transport
5,500
128,975
Patriot
Transportation Holding 1,2
55,764
1,198,926
Universal
Logistics Holdings 2,3
77,600
2,037,000
3,364,901
TRADING COMPANIES
& DISTRIBUTORS - 1.1%
Central
Steel & Wire 4
405
248,265
EnviroStar 2,3
44,300
1,785,290
Houston
Wire & Cable 1
331,418
2,817,053
4,850,608
Total (Cost $64,287,164)
87,343,996
INFORMATION
TECHNOLOGY 20.7%
COMMUNICATIONS
EQUIPMENT - 0.3%
Clearfield 1
85,200
941,460
26 | 2018 Semiannual Report to Stockholders
THE ACCOMPANYING
NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
June 30, 2018 (unaudited)
Schedule of Investments (continued)
SHARES
VALUE
INFORMATION
TECHNOLOGY (continued)
COMMUNICATIONS
EQUIPMENT (continued)
EMCORE
Corporation 1
8,300
$
41,915
Oclaro
1
32,600
291,118
PCTEL
34,100
212,784
1,487,277
ELECTRONIC
EQUIPMENT, INSTRUMENTS & COMPONENTS - 8.3%
Airgain
1,2
8,200
75,358
Bel
Fuse Cl. A
67,705
1,448,887
eMagin Corporation 1
125,000
225,000
eMagin Corporation (Warrants) 1,5
50,000
12,500
ePlus
1
3,000
282,300
Fabrinet
1
2,200
81,158
FARO Technologies 1,2,3
76,800
4,174,080
Firan
Technology Group 1
25,000
40,695
HollySys
Automation Technologies
51,900
1,149,066
Inficon
Holding
3,220
1,643,654
LightPath
Technologies Cl. A 1
100,000
230,000
Mesa Laboratories 2,3
45,400
9,583,032
nLIGHT 1,2,3
150,000
4,959,000
Novanta
1
37,600
2,342,480
Orbotech 1,2
69,600
4,301,280
PAR Technology 1
20,000
353,600
PC
Connection
43,716
1,451,371
Perceptron
1
8,500
89,675
Richardson
Electronics
316,900
3,086,606
Rogers
Corporation 1,2
600
66,876
Vishay
Precision Group 1
10,000
381,500
35,978,118
INTERNET SOFTWARE
& SERVICES - 4.7%
Amber
Road 1
25,000
235,250
Care.com
1,2,3
171,787
3,586,913
comScore
1
64,195
1,399,451
Etsy
1,2,3
56,200
2,371,078
IZEA
1,2,3
85,870
81,577
Leaf Group 1
64,500
699,825
MINDBODY
Cl. A 1
38,900
1,501,540
QuinStreet
1
210,850
2,677,795
Real
Matters 1
255,000
1,105,617
Reis
2
25,000
545,000
Solium
Capital 1
317,500
2,779,770
Stamps.com
1
11,700
2,960,685
Support.com
1
105,600
300,960
20,245,461
IT SERVICES
- 0.5%
Computer
Task Group 1
150,838
1,167,486
Conduent
1
30,000
545,100
Hackett
Group (The)
27,700
445,139
Innodata
1
143,883
143,883
2,301,608
SEMICONDUCTORS
& SEMICONDUCTOR EQUIPMENT - 4.6%
Adesto Technologies 1
7,200
60,480
Alpha
& Omega Semiconductor 1
3,300
46,992
Amtech
Systems 1,2
92,184
557,713
Brooks
Automation
91,500
2,984,730
CyberOptics
Corporation 1
43,000
748,200
Everspin Technologies 1
5,900
52,628
FormFactor
1
22,869
304,158
Kulicke
& Soffa Industries
77,200
1,838,904
Nanometrics
1
64,600
2,287,486
NeoPhotonics
Corporation 1,2,3
51,300
319,599
Nova
Measuring Instruments 1
68,000
1,853,000
PDF
Solutions 1
189,700
2,272,606
Photronics
1
231,900
1,849,402
Rudolph
Technologies 1
52,100
1,542,160
Silicon
Motion Technology ADR
34,100
1,803,549
Ultra
Clean Holdings 1,2
49,900
828,340
Veeco
Instruments 1,2,3
17,500
249,375
Xcerra
Corporation 1
15,600
217,932
19,817,254
SOFTWARE -
1.5%
Agilysys
1
170,587
2,644,098
American
Software Cl. A
120,352
1,753,529
BSQUARE
Corporation 1
83,675
225,923
Monotype
Imaging Holdings
15,000
304,500
Optiva
1
3,000
104,058
RealNetworks
1
100,171
370,633
Rubicon
Project 1
75,000
213,750
SeaChange
International 1
284,200
971,964
6,588,455
TECHNOLOGY
HARDWARE, STORAGE & PERIPHERALS - 0.8%
AstroNova
5,300
99,905
Cray 1
19,700
484,620
Intevac
1
397,800
1,929,330
USA
Technologies 1
61,300
858,200
3,372,055
Total (Cost $58,957,346)
89,790,228
MATERIALS
5.3%
CHEMICALS
- 1.8%
Balchem
Corporation
10,575
1,037,830
LSB
Industries 1
135,800
719,740
OMNOVA
Solutions 1
25,000
260,000
Quaker Chemical 2
24,400
3,778,828
Rayonier
Advanced Materials
50,000
854,500
Trecora
Resources 1
89,600
1,330,560
7,981,458
CONSTRUCTION
MATERIALS - 0.3%
Monarch
Cement 4
16,303
1,149,688
U.S.
Concrete 1
2,500
131,250
1,280,938
CONTAINERS
& PACKAGING - 0.3%
UFP
Technologies 1
36,445
1,124,328
METALS &
MINING - 2.9%
Alamos
Gold Cl. A
186,044
1,059,955
Ampco-Pittsburgh
1
79,002
809,770
Haynes
International 2,3
27,400
1,006,676
Hudbay
Minerals
62,200
348,320
Imdex
1
750,666
686,080
MAG
Silver 1
154,050
1,665,281
Major Drilling Group International 1
921,657
4,865,401
Olympic
Steel
35,000
714,350
Pretium
Resources 1
80,000
588,446
Universal
Stainless & Alloy Products 1
15,300
362,151
Victoria
Gold 1
890,000
236,945
12,343,375
Total (Cost $18,563,369)
22,730,099
THE
ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
2018 Semiannual Report to Stockholders | 27
Royce Micro-Cap
Trust
June 30, 2018 (unaudited)
Schedule of Investments (continued)
SHARES
VALUE
REAL ESTATE
3.5%
REAL ESTATE
MANAGEMENT & DEVELOPMENT - 3.5%
Altus
Group
87,000
$
1,939,657
FRP Holdings 1,2,3
76,500
4,953,375
Marcus
& Millichap 1,2
49,567
1,933,609
RMR
Group Cl. A
34,900
2,737,905
Tejon Ranch 1,2
154,994
3,766,354
Total (Cost $9,399,137)
15,330,900
TELECOMMUNICATION
SERVICES 0.2%
DIVERSIFIED
TELECOMMUNICATION SERVICES - 0.2%
ORBCOMM
1
67,100
677,710
Total (Cost $570,215)
677,710
UTILITIES
0.4%
INDEPENDENT
POWER & RENEWABLE ELECTRICITY PRODUCER - 0.0%
Innergex Renewable Energy
15,573
163,590
WATER UTILITIES
- 0.4%
AquaVenture Holdings 1
50,000
779,000
Global
Water Resources
106,000
996,400
1,775,400
Total (Cost $1,514,639)
1,938,990
TOTAL COMMON
STOCKS
(Cost $332,592,367)
435,333,151
PREFERRED
STOCK - 0.4%
Chicken Soup For The Soul Entertainment 9.75%
80,000
1,991,200
(Cost $2,000,000)
1,991,200
REPURCHASE
AGREEMENT 8.1%
Fixed Income
Clearing Corporation, 0.35% dated 6/29/18, due 7/2/18, maturity value $34,960,020
(collateralized by obligations of various U.S. Government Agencies, 1.375% due 10/07/21,
valued at $35,658,523)
(Cost $34,959,000)
34,959,000
TOTAL INVESTMENTS
109.1%
(Cost $369,551,367)
472,283,351
LIABILITIES
LESS CASH AND OTHER ASSETS (9.1)%
(39,504,530
)
NET ASSETS 100.0%
$
432,778,821
New additions
in 2018.
1
Non-income
producing.
2
All or
a portion of these securities were pledged as collateral in connection with the
Funds revolving credit agreement at June 30, 2018. Total market value of pledged
securities at June 30, 2018, was $82,625,162.
3
At June
30, 2018, a portion of these securities were rehypothecated in connection with the
Funds revolving credit agreement in the aggregate amount of $37,405,632.
4
These securities
are defined as Level 2 securities due to fair value being based on quoted prices
for similar securities. See Notes to Financial Statements.
5
Securities
for which market quotations are not readily available represent 0.1% of net assets.
These securities have been valued at their fair value under procedures approved
by the Funds Board of Directors. These securities are defined as Level 3 securities
due to the use of significant unobservable inputs in the determination of fair value.
See Notes to Financial Statements.
Bold
indicates the Funds 20 largest equity holdings in terms of June 30, 2018,
market value.
TAX
INFORMATION: The cost of total investments for Federal income tax purposes was $370,955,679.
At June 30, 2018, net unrealized appreciation for all securities was $101,327,672
consisting of aggregate gross unrealized appreciation of $146,842,892 and aggregate
gross unrealized depreciation of $45,515,220. The primary cause of the difference
between book and tax basis cost is the timing of the recognition of losses on securities
sold.
28 | 2018 Semiannual Report to Stockholders
THE ACCOMPANYING
NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
Royce Micro-Cap
Trust
June 30, 2018 (unaudited)
Statement of Assets and Liabilities
ASSETS:
Investments
at value
$
437,324,351
Repurchase
agreements (at cost and value)
34,959,000
Cash and foreign
currency
37,630
Receivable
for investments sold
7,538,093
Receivable
for dividends and interest
197,972
Prepaid expenses
and other assets
35,148
Total Assets
480,092,194
LIABILITIES:
Revolving
credit agreement
45,000,000
Payable for
investments purchased
1,905,985
Payable for
investment advisory fee
301,645
Payable for
directors fees
28,273
Payable for
interest expense
12,328
Accrued expenses
65,142
Total Liabilities
47,313,373
Net Assets
$
432,778,821
ANALYSIS OF
NET ASSETS:
Paid-in capital
- $0.001 par value per share; 39,711,274 shares outstanding (150,000,000 shares authorized)
$
334,988,734
Undistributed
net investment income (loss)
(536,628
)
Accumulated
net realized gain (loss) on investments and foreign currency
9,731,364
Net unrealized
appreciation (depreciation) on investments and foreign currency
102,732,734
Quarterly
distributions
(14,137,383
)
Net Assets
(net asset value per share - $10.90)
$
432,778,821
Investments
at identified cost
$
334,592,367
THE
ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
2018 Semiannual Report to Stockholders | 29
Royce Micro-Cap
Trust
Statement of Changes in Net Assets
SIX MONTHS
ENDED
6/30/18
(UNAUDITED)
YEAR
ENDED 12/31/17
INVESTMENT
OPERATIONS:
Net investment
income (loss)
$
465,902
$
2,126,051
Net realized
gain (loss) on investments and foreign currency
8,212,922
25,657,103
Net change
in unrealized appreciation (depreciation) on investments and foreign currency
22,462,403
33,136,932
Net increase
(decrease) in net assets from investment operations
31,141,227
60,920,086
DISTRIBUTIONS:
Net investment
income
(517,428
)1
(2,282,512
)
Net realized
gain on investments and foreign currency
(5,793,500
)1
(24,135,451
)
Return of
capital
(7,826,455
)1
Total distributions
(14,137,383
)
(26,417,963
)
CAPITAL STOCK
TRANSACTIONS:
Reinvestment
of distributions
5,870,061
11,702,040
Total capital
stock transactions
5,870,061
11,702,040
Net Increase
(Decrease) In Net Assets
22,873,905
46,204,163
NET ASSETS:
Beginning
of period
409,904,916
363,700,753
End of
period (including undistributed net investment income (loss) of $(536,628) at 6/30/18
and $(1,002,531) at 12/31/17)
$
432,778,821
$
409,904,916
1Amounts
are subject to change and recharacterization at year end.
30 | 2018 Semiannual Report to Stockholders
THE ACCOMPANYING
NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
Royce Micro-Cap
Trust
Six Months Ended June 30, 2018 (unaudited)
Statement of Operations
INVESTMENT INCOME:
INCOME:
Dividends
$
3,185,675
Foreign withholding
tax
(64,172
)
Interest
40,458
Rehypothecation
income
201,609
Total income
3,363,570
EXPENSES:
Investment
advisory fees
1,934,484
Interest expense
697,887
Stockholder
reports
60,385
Administrative
and office facilities
54,131
Directors fees
48,977
Custody and
transfer agent fees
45,043
Professional
fees
29,978
Other expenses
26,982
Total expenses
2,897,867
Compensating
balance credits
(199
)
Net expenses
2,897,668
Net investment
income (loss)
465,902
REALIZED
AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
NET REALIZED
GAIN (LOSS):
Investments
8,232,993
Foreign currency
transactions
(20,071
)
NET CHANGE
IN UNREALIZED APPRECIATION (DEPRECIATION):
Investments
and foreign currency translations
22,461,808
Other assets
and liabilities denominated in foreign currency
595
Net realized
and unrealized gain (loss) on investments and foreign currency
30,675,325
NET INCREASE
(DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS
$
31,141,227
THE
ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
2018 Semiannual Report to Stockholders | 31
Royce Micro-Cap
Trust
Six Months Ended June 30, 2018 (unaudited)
Statement of Cash Flows
CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase (decrease) in net assets from investment operations
$
31,141,227
Adjustments
to reconcile net increase (decrease) in net assets from investment operations to
net cash provided by operating activities:
Purchases
of long-term investments
(40,220,664
)
Proceeds
from sales and maturities of long-term investments
51,360,418
Net
purchases, sales and maturities of short-term investments
(3,529,000
)
Net
(increase) decrease in dividends and interest receivable and other assets
119,955
Net
increase (decrease) in interest expense payable, accrued expenses and other liabilities
108,049
Net
change in unrealized appreciation (depreciation) on investments
(22,461,808
)
Net
realized gain (loss) on investments and foreign currency
(8,212,922
)
Net cash
provided by operating activities
8,305,255
CASH FLOWS
FROM FINANCING ACTIVITIES:
Distributions
(14,137,383
)
Reinvestment
of distributions
5,870,061
Net cash
used for financing activities
(8,267,322
)
INCREASE
(DECREASE) IN CASH:
37,933
Payable
to custodian for cash and foreign currency overdrawn at beginning of period
(303
)
Cash and
foreign currency at end of period
$
37,630
32 | 2018 Semiannual Report to Stockholders
THE ACCOMPANYING
NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
Royce Micro-Cap Trust
Financial
Highlights
This table
is presented to show selected data for a share of Common Stock outstanding throughout
each period, and to assist stockholders in evaluating the Funds performance
for the periods presented.
SIX MONTHS
YEARS ENDED
ENDED 6/30/18
(UNAUDITED)
12/31/17
12/31/16
12/31/15
12/31/14
12/31/13
Net Asset
Value, Beginning of Period
$
10.48
$
9.63
$
8.59
$
11.33
$
14.12
$
10.93
INVESTMENT
OPERATIONS:
Net investment
income (loss)
0.01
0.06
0.03
0.03
(0.01
)
0.01
Net realized
and unrealized gain (loss) on investments and foreign currency
0.78
1.52
1.70
(1.42
)
0.25
4.64
Net increase
(decrease) in net assets from investment operations
0.79
1.58
1.73
(1.39
)
0.24
4.65
DISTRIBUTIONS:
Net investment
income
(0.01
)1
(0.06
)
(0.08
)
(0.01
)
(0.04
)
(0.03
)
Net realized
gain on investments and foreign currency
(0.15
)1
(0.63
)
(0.56
)
(1.25
)
(2.86
)
(1.35
)
Return of
capital
(0.20
)1
Total distributions
(0.36
)
(0.69
)
(0.64
)
(1.26
)
(2.90
)
(1.38
)
CAPITAL STOCK
TRANSACTIONS:
Effect of
reinvestment of distributions by Common Stockholders
(0.01
)
(0.04
)
(0.05
)
(0.09
)
(0.13
)
(0.08
)
Total capital
stock transactions
(0.01
)
(0.04
)
(0.05
)
(0.09
)
(0.13
)
(0.08
)
Net Asset
Value, End of Period
$
10.90
$
10.48
$
9.63
$
8.59
$
11.33
$
14.12
Market
Value, End of Period
$
9.99
$
9.44
$
8.16
$
7.26
$
10.08
$
12.61
TOTAL RETURN:
2
Net Asset
Value
7.84
%3
17.67
%
21.98
%
(11.64
)%
3.46
%
44.66
%
Market Value
9.72
%3
25.09
%
22.30
%
(16.06
)%
3.06
%
49.42
%
RATIOS BASED
ON AVERAGE NET ASSETS:
Investment
advisory fee expense4
0.93
%5
0.49
%
0.87
%
0.93
%
0.93
%
0.82
%
Other operating
expenses
0.46
%5
0.40
%
0.39
%
0.35
%
0.25
%
0.29
%
Total expenses
(net)
1.39
%5
0.89
%
1.26
%
1.28
%
1.18
%
1.11
%
Expenses net
of fee waivers and excluding interest expense
1.05
%5
0.62
%
1.02
%
1.08
%
1.05
%
0.96
%
Expenses prior
to fee waivers and balance credits
1.39
%5
0.89
%
1.26
%
1.28
%
1.18
%
1.11
%
Expenses prior
to fee waivers
1.39
%5
0.89
%
1.26
%
1.28
%
1.18
%
1.11
%
Net investment
income (loss)
0.22
%5
0.56
%
0.32
%
0.26
%
(0.09
)%
0.08
%
SUPPLEMENTAL
DATA:
Net Assets,
End of Period (in thousands)
$
432,779
$
409,905
$
363,701
$
312,407
$
387,488
$
433,121
Portfolio
Turnover Rate
10
%
15
%
26
%
39
%
41
%
29
%
REVOLVING
CREDIT AGREEMENT:
Asset coverage
1062
%
1011
%
908
%
794
%
746
%
1062
%
Asset coverage
per $1,000
$
10,617
$
10,109
$
9,082
$
7,942
$
7,458
$
10,625
1
Amounts are
subject to change and recharacterization at year end.
2
The Market
Value Total Return is calculated assuming a purchase of Common Stock on the opening
of the first business day and a sale on the closing of the last business day of
each period. Dividends and distributions are assumed for the purposes of this calculation
to be reinvested at prices obtained under the Funds Distribution Reinvestment
and Cash Purchase Plan. Net Asset Value Total Return is calculated on the same basis,
except that the Funds net asset value is used on the purchase and sale dates
instead of market value.
3
Not annualized
4
The investment
advisory fee is calculated based on average net assets over a rolling 36-month basis,
while the above ratios of investment advisory fee expenses are based on the average
net assets over a 12-month basis.
5
Annualized
THE ACCOMPANYING
NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
2018 Semiannual
Report to Stockholders | 33
Royce Micro-Cap Trust
Notes to Financial Statements (unaudited)
Summary of Significant Accounting Policies
Royce Micro-Cap Trust, Inc. (the Fund), is a diversified closed-end investment company that was incorporated under the laws of the
State of Maryland on September 9, 1993. The Fund commenced operations on December 14, 1993.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the
reporting period. Actual results could differ from those estimates.
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the
Financial Accounting Standards Board (FASB) Accounting Standard Codification Topic 946 Financial Services-Investment Companies.
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 Nasdaqs 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. Other over-the-counter securities for which market quotations are readily available are valued at
their highest bid price, except in the case of some bonds and other fixed income securities which may be valued by reference to other
securities with comparable ratings, interest rates and maturities, using established independent pricing services. The Fund values its non-U.S. dollar denominated securities in U.S. dollars daily at the prevailing foreign currency exchange rates as quoted by a major bank.
Securities for which market quotations are not readily available are valued at their fair value in accordance with the provisions of the 1940
Act, under procedures approved by the Funds Board of Directors, and are reported as Level 3 securities. As a general principle, the fair
value of a security is the amount which the Fund might reasonably expect to receive for the security upon its current sale. However, in
light of the judgment involved in fair valuations, there can be no assurance that a fair value assigned to a particular security will be the
amount which the Fund might be able to receive upon its current sale. In addition, if, between the time trading ends on a particular security
and the close of the customary trading session on the NYSE, events occur that are significant and may make the closing price unreliable,
the Fund may fair value the security. The Fund uses an independent pricing service to provide fair value estimates for relevant non-U.S.
equity securities on days when the U.S. market volatility exceeds a certain threshold. This pricing service uses proprietary correlations it
has developed between the movement of prices of non-U.S. equity securities and indices of U.S.-traded securities, futures contracts and
other indications to estimate the fair value of relevant non-U.S. securities. When fair value pricing is employed, the prices of securities used
by the Fund may differ from quoted or published prices for the same security. Investments in money market funds are valued at net asset
value per share.
Various inputs are used in determining the value of the Funds investments, as noted above. These inputs are summarized in the three
broad levels below:
Level 1
quoted prices in active markets for identical securities.
Level 2
other significant observable inputs (including quoted prices for similar securities, foreign securities that may be fair valued and
repurchase agreements). The table below includes all Level 2 securities. Level 2 securities with values based on quoted
prices for similar securities are noted in the Schedule of Investments.
Level 3
significant unobservable inputs (including last trade price before trading was suspended, or at a discount thereto for lack of
marketability or otherwise, market price information regarding other securities, information received from the company and/or
published documents, including SEC filings and financial statements, or other publicly available information).
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those
securities.
The following is a summary of the inputs used to value the Funds investments as of June 30, 2018. For a detailed breakout of common
stocks by sector classification, please refer to the Schedule of Investments.
LEVEL 1
LEVEL 2
LEVEL 3
TOTAL
Common Stocks
$428,414,854
$ 6,663,997
$254,300
$435,333,151
Preferred Stocks
1,991,200
1,991,200
Cash Equivalents
34,959,000
34,959,000
Certain securities have transferred in and out of Level 1 and Level 2 measurements during the reporting period. The Fund recognizes
transfers between levels as of the end of the reporting period. For the six months ended June 30, 2018, securities valued at $14,133,960
were transferred from Level 2 to Level 1 within the fair value hierarchy.
34 | 2018 Semiannual Report to Stockholders
Royce Micro-Cap Trust
Notes to Financial Statements (unaudited) (continued)
VALUATION OF INVESTMENTS (continued):
Level 3 Reconciliation:
BALANCE AS OF 12/31/17
PURCHASES
REALIZED GAIN (LOSS)
UNREALIZED GAIN (LOSS)1
BALANCE AS OF 6/30/18
Common Stocks
$241,800
$0
$
$12,500
$254,300
1
The net change in unrealized appreciation (depreciation) is included in the accompanying Statement of Operations. Change in unrealized appreciation (depreciation) includes net
unrealized appreciation (depreciation) resulting from changes in investment values during the reporting period and the reversal of previously recorded unrealized appreciation
(depreciation) when gains or losses are realized. Net realized gain (loss) from investments and foreign currency transactions is included in the accompanying Statement of Operations.
The following table summarizes the valuation techniques used and unobservable inputs approved by the Valuation Committee to
determine the fair value of certain Level 3 investments. The table does not include Level 3 investments with values derived utilizing prices
from prior transactions or third party pricing information with adjustments (e.g. broker quotes, pricing services, net asset values).
FAIR
VALUE AT
IMPACT
TO VALUATION FROM
6/30/18
VALUATION
TECHNIQUE(S)
UNOBSERVABLE
INPUT(S)
RANGE
AVERAGE
AN INCREASE
IN INPUT1
Common Stocks
$254,300
Discounted Present Value
Balance Sheet Analysis
Liquidity
Discount
30%-40%
Decrease
1
This column represents the directional change in the fair value of the Level 3 investments that would result in an increase from the corresponding unobservable input. A decrease to the
unobservable input would have the opposite effect. Significant increases and decreases in these unobservable inputs in isolation could result in significantly higher or lower fair value
measurements.
REPURCHASE
AGREEMENTS:
The Fund may enter into repurchase agreements with institutions that the Funds investment adviser has determined are creditworthy.
The Fund restricts repurchase agreements to maturities of no more than seven days. Securities pledged as collateral for repurchase
agreements, which are held until maturity of the repurchase agreements, are marked-to-market daily and maintained at a value at least
equal to the principal amount of the repurchase agreement (including accrued interest). Repurchase agreements could involve certain
risks in the event of default or insolvency of the counter-party, including possible delays or restrictions upon the ability of the Fund to
dispose of its underlying securities. The remaining contractual maturity of the repurchase agreement held by the Fund at June 30, 2018 is
overnight and continuous.
FOREIGN CURRENCY:
Net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies,
expiration of currency forward contracts, currency gains or losses realized between the trade and settlement dates on securities
transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Funds books
and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from
changes in the value of assets and liabilities, including investments in securities at the end of the reporting period, as a result of changes
in foreign currency exchange rates.
TAXES:
As a qualified regulated investment company under Subchapter M of the Internal Revenue Code, the Fund is not subject to income
taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. The Schedule of Investments includes
information regarding income taxes under the caption Tax Information.
DISTRIBUTIONS:
The Fund pays quarterly distributions on the Funds Common Stock at the annual rate of 7% of the rolling average of the prior four
calendar quarter-end NAVs of the Funds Common Stock, with the fourth quarter distribution being the greater of 1.75% of the rolling
average or the distribution required by IRS regulations. Distributions to Common Stockholders are recorded on ex-dividend date. To the
extent that distributions in any year are not paid from long-term capital gains, net investment income or net short-term capital gains, they
will represent a return of capital. Distributions are determined in accordance with income tax regulations that may differ from accounting
principles generally accepted in the United States of America. Permanent book and tax differences relating to stockholder distributions will
result in reclassifications within the capital accounts. Undistributed net investment income may include temporary book and tax basis
differences, which will reverse in a subsequent period. Any taxable income or gain remaining undistributed at fiscal year end is distributed
in the following year.
2018 Semiannual Report to Stockholders | 35
Royce Micro-Cap Trust
Notes to Financial Statements (unaudited) (continued)
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. Premiums and
discounts on debt securities are amortized using the effective yield-to-maturity method. Realized gains and losses from investment
transactions are determined on the basis of identified cost for book and tax purposes.
EXPENSES:
The Fund incurs direct and indirect expenses. Expenses directly attributable to the Fund are charged to the Funds 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 Funds are allocated by Royce & Associates (Royce) under an administration agreement and are
included in administrative and office facilities and professional fees. The Fund has adopted a deferred fee agreement that allows the
Directors to defer the receipt of all or a portion of directors fees otherwise payable. The deferred fees are invested in certain Royce Funds
until distributed in accordance with the agreement.
COMPENSATING
BALANCE CREDITS:
The Fund has an arrangement with its custodian bank, whereby a portion of the custodians fee is paid indirectly by credits earned on
the Funds cash on deposit with the bank. This deposit arrangement is an alternative to purchasing overnight investments. Conversely, the
Fund pays interest to the custodian on any cash overdrafts, to the extent they are not offset by credits earned on positive cash balances.
Capital
Stock:
The Fund issued 594,634 and 1,336,310 shares of Common Stock as reinvestment of distributions for the six months ended June 30,
2018 and the year ended December 31, 2017, respectively.
Borrowings:
The Fund is party to a revolving credit agreement (the credit agreement) with BNP Paribas Prime Brokerage International, Limited
(BNPPI). The Fund pays a commitment fee of 0.50% per annum on the unused portion of the credit agreement. The credit agreement has a
360-day rolling term that resets daily; however, if the Fund exceeds certain net asset value triggers, the credit agreement may convert to a
60-day rolling term that resets daily. The Fund is required to pledge portfolio securities as collateral in an amount up to two times the loan
balance outstanding or as otherwise required by applicable regulatory standards and has granted a security interest in the securities
pledged to, and in favor of, BNPPI as security for the loan balance outstanding. If the Fund fails to meet certain requirements, or maintain
other financial covenants required under the credit agreement, the Fund may be required to repay immediately, in part or in full, the loan
balance outstanding under the credit agreement which may necessitate the sale of portfolio securities at potentially inopportune times.
BNPPI may terminate the credit agreement upon certain ratings downgrades of its corporate parent, which would result in the Funds
entire loan balance becoming immediately due and payable. The occurrence of such ratings downgrades may necessitate the sale of
portfolio securities at potentially inopportune times. The credit agreement also permits, subject to certain conditions, BNPPI to
rehypothecate portfolio securities pledged by the Fund up to the amount of the loan balance outstanding. The Fund continues to receive
payments in lieu of dividends and interest on rehypothecated securities. The Fund also has the right under the credit agreement to recall
the rehypothecated securities from BNPPI on demand. If BNPPI fails to deliver the recalled security in a timely manner, the Fund is
compensated by BNPPI for any fees or losses related to the failed delivery or, in the event a recalled security is not returned by BNPPI, the
Fund, upon notice to BNPPI, may reduce the loan balance outstanding by the value of the recalled security failed to be returned. The Fund
receives a portion of the fees earned by BNPPI in connection with the rehypothecation of portfolio securities.
As of June 30, 2018, the Fund has outstanding borrowings of $45,000,000. During the six months ended June 30, 2018, the Fund
borrowed an average daily balance of $45,000,000 at a weighted average borrowing cost of 3.08%. The maximum amount outstanding
during the six months ended June 30, 2018 was $45,000,000. As of June 30, 2018, the aggregate value of rehypothecated securities
was $37,405,632. During the six months ended June 30, 2018, the Fund earned $201,609 in fees from rehypothecated securities.
Investment
Advisory Agreement:
As compensation for its services under the investment advisory agreement, Royce receives a fee comprised of a Basic Fee (Basic Fee)
and an adjustment to the Basic Fee based on the investment performance of the Fund in relation to the investment record of the Russell
2000.
36 | 2018 Semiannual Report to Stockholders
Royce Micro-Cap Trust
Notes to Financial Statements (unaudited) (continued)
Investment Advisory Agreement (continued):
The Basic Fee is a monthly fee equal to 1/12 of 1% (1% on an annualized basis) of the average of the Funds month-end net assets for
the rolling 36-month period ending with such month (the performance period). The Basic Fee for each month is increased or decreased
at the rate of 1/12 of .05% for each percentage point that the investment performance of the Fund exceeds, or is exceeded by, the
percentage change in the investment record of the Russell 2000 for the performance period by more than two percentage points. The
performance period for each such month is a rolling 36-month period ending with such month. The maximum increase or decrease in the
Basic Fee for any month may not exceed 1/12 of .5%. Accordingly, for each month, the maximum monthly fee rate as adjusted for
performance is 1/12 of 1.5% and is payable if the investment performance of the Fund exceeds the percentage change in the investment
record of the Russell 2000 by 12 or more percentage points for the performance period, and the minimum monthly fee rate as adjusted
for performance is 1/12 of .5% and is payable if the percentage change in the investment record of the Russell 2000 exceeds the
investment performance of the Fund by 12 or more percentage points for the performance period.
For the six rolling 36-month periods ended June 2018, the Funds investment performance ranged from 2% to 5% below the investment
performance of the Russell 2000. Accordingly, the net investment advisory fee consisted of a Basic Fee of $1,793,539 and a net
downward adjustment of $104,191 for the performance of the Fund relative to that of the Russell 2000. Additionally, investment advisory
fees for 2018 include $245,136 relating to an adjustment of prior periods performance fees. For the six months ended June 30, 2018,
the Fund expensed Royce investment advisory fees totaling $1,934,484.
Purchases
and Sales of Investment Securities:
For the six months ended June 30, 2018, the costs of purchases and proceeds from sales of investment securities, other than short-term
securities, amounted to $41,430,667 and $52,763,111, respectively.
Cross trades were executed by the Fund pursuant to Rule 17a-7 under the 1940 Act. Cross trading is the buying or selling of portfolio
securities between funds to which Royce serves as investment adviser. At its regularly scheduled quarterly meetings, the Board reviews
such transactions as of the most recent calendar quarter for compliance with the requirements and restrictions set forth by Rule 17a-7.
Cross trades for the six months ended June 30, 2018, were as follows:
COST
OF PURCHASES
PROCEEDS
FROM SALES
REALIZED
GAIN (LOSS)
$1,771,063
$
$
2018 Semiannual Report to Stockholders | 37
MANAGERS DISCUSSION
Royce Value Trust (RVT)
Chuck Royce
Chris Flynn
Lauren Romeo, CFA
FUND PERFORMANCE
Following two consecutive years
of strong absolute and relative
performance, our oldest closed-end
portfolio fell behind each of its
unleveraged small-cap benchmarks in
the first half of 2018. Royce Value
Trust (RVT) advanced 2.8% on a net asset value (NAV)
basis and 1.4% on a market price basis for the year-to-date
period ended June 30, 2018, in both cases underperforming
the Russell 2000 and S&P SmallCap 600 Indexes, which had
respective increases of 7.7% and 9.4% for the same period. The
Fund maintained its longer-term relative advantages, outperforming
the Russell 2000 based on both NAV and market price for the three-,
20-, 25-, 30-year, and since inception (11/26/86) periods ended June
30, 2018.
WHAT WORKED... AND WHAT DIDNT
Although the first half was challenging for our multi-discipline small-cap
core strategy with the market continuing to favor higher growth,
lower quality, and more yield-sensitive equities, nine of RVTs 11
equity sectors nonetheless finished the period in the black. Energy,
which recovered significantly in the second quarter, was by far the top
contributor, while Consumer Discretionary and Consumer Staples
had only modest negative results.
At the industry level, the top contributor was energy equipment
& services (Energy) as the rebound for oil prices fed through
to improved prospects for these businesses. SEACOR Marine
Holdings, which provides global marine and support transportation
services to the energy industry, was the Funds top performer overall
and in this industry. Stronger operating results came from nearly all
of its geographic markets, which helped its shares to rise. Norways
TGS-NOPEC Geophysical, which provides geoscience data to oil and
gas companies worldwide, was also a significant contributor in this
industry and in the portfolio as a whole. Its revenue and earnings were
boosted by improving exploration and production spending, higher
oil prices, and the longer-term need for energy companies to replenish
reserves, which is driving increased spending on seismic data. Outside
of energy, Copart, the largest online salvage auction provider in the
U.S., saw higher volumes and revenue per car as market conditions
remained robust in the first half. Coparts continuous improvement of
its virtual bidding platform is expanding the pool of potential buyers,
auction participants, and bids per car. A shift within its non-insurance
auto auction business toward dealers and financial institutions has
been lifting both average selling prices and gross margins higher.
Finally, the company has been supplementing its expanding European
footprint with the acquisition of a salvage operation in Finland,
augmenting its buyer base in Russia and the Baltic States.
RVTs top-two contributors from both 2016 and 2017 made the
list of top detractors in 2018s first half. The stock of laser diode and
equipment maker Coherent underwent a correction in the first half
after the companys announcement of slightly better-than-expected
results came with a more muted profit outlook. Already reducing our
position in 2017, we sold additional shares in June 2018. Cognex
Corporation has a dominant position as the global leader in machine
vision technology. It was hurt by slackening demand in its consumer
electronics market, in particular by iPhone sales that were well below
expectations. We also suspect that many technology businesses with
global reach may have suffered amid concerns about the effect trade wars
would have on worldwide growth. We held our shares in the first half.
The largest negative effect on returns relative to the Russell 2000 came
from poor stock selection in Information Technology, most impactfully
in the electronic equipment, instruments & components group and in
Internet software & services companies. Stock selection also hurt in
Consumer Discretionary, while our underweight in Health Care,
especially in biotechnology, and our overweight in Industrials, most
notably in the machinery group, also detracted. Machinery was also the
biggest detractor for RVT at the industry level, due in large part to
disappointing performance from Sun Hydraulics. In fact, several
holdings in this group reported disappointing earnings and lackluster
guidance, due partially to margin compression caused by higher input
costs. We think that some of these margin issues should prove transitory
as manufacturers must first absorb these increased costs before realizing
higher product prices. Conversely, savvy stock selection gave RVT an
advantage in the Energy and Real Estate sectors, as did our lower
exposure to Utilities.
Top Contributors
to Performance
Year-to-Date Through 6/30/18 (%)1
SEACOR Marine Holdings
0.48
TGS-NOPEC Geophysical
0.39
Copart
0.31
Wesco Aircraft Holdings
0.25
FRP Holdings
0.25
1 Includes dividends
Top Detractors from
Performance
Year-to-Date Through 6/30/18 (%)2
Coherent
-0.64
Cognex Corporation
-0.37
Thor Industries
-0.35
Sun Hydraulics
-0.32
ManpowerGroup
-0.27
2 Net of dividends
CURRENT POSITIONING AND OUTLOOK
The markets recent behavior looks curious to us. We hear optimism
and solid progress from the management teams we meet with, see
solid earnings reports, and observe consistently strong macroeconomic
data. On the other hand, small-cap market leadership has stubbornly
remained with defensive and yield-oriented stocks, while cyclicals
have lagged. Despite new highs for the Russell 2000, we are therefore
far from ebullient, as we anticipate that increased volatility will
accompany a shift in market leadership to value/cyclical leadership.
We are also mindful that these shifts rarely occur without some
turbulence. We have therefore sought to position the portfolio for
both lower small-cap returns and increased volatility.
38 | 2018 Semiannual Report to Stockholders
PERFORMANCE AND PORTFOLIO REVIEW
SYMBOLS MARKET PRICE RVT NAV XRVTX
Performance
Average Annual Total Return (%) Through 6/30/18
JAN-JUN 20181
1-YR
3-YR
5-YR
10-YR
15-YR
20-YR
25-YR
30-YR
SINCE INCEPTION (11/26/86)
RVT (NAV)
2.78
14.37
12.03
11.45
8.81
10.04
9.15
10.53
10.97
10.74
1 Not Annualized
Market Price Performance History Since Inception (11/26/86)
Cumulative Performance of Investment through 6/30/181
1-YR
5-YR
10-YR
15-YR
20-YR
SINCE INCEPTION (11/26/86)
RVT
16.9%
74.5%
122.8%
267.0%
460.2%
2058.6%
1
Reflects the cumulative performance of an investment made by a stockholder who purchased one share at inception ($10.00 IPO), reinvested
all distributions and fully participated in primary subscriptions of the Fund's rights offerings.
2
Reflects the actual month-end market price movement of one share as it has traded on the NYSE.
The Morningstar Style Map is the Morningstar Style Box with the center 75% of fund holdings plotted as the Morningstar Ownership Zone. The Morningstar Style Box is designed to reveal a
funds investment strategy. The Morningstar Ownership Zone provides
detail about a portfolios investment style by showing the range of
stock sizes and styles. The Ownership Zone is derived by plotting each
stock in the portfolio within the proprietary Morningstar Style Box.
Over time, the shape and location of a fund's ownership zone may vary.
See page 66 for additional information.
Top 10 Positions
% of Net Assets
FLIR Systems
2.1
HEICO Corporation
1.9
Quaker Chemical
1.4
Copart
1.2
Sun Hydraulics
1.2
Reliance Steel & Aluminum
1.1
Cognex Corporation
1.0
TGS-NOPEC Geophysical
1.0
SEACOR Marine Holdings
1.0
ANSYS
0.9
Portfolio Sector Breakdown
% of Net Assets
Industrials
30.8
Information Technology
19.3
Financials
14.9
Consumer Discretionary
8.8
Materials
8.6
Energy
7.0
Health Care
4.4
Real Estate
3.7
Consumer Staples
1.6
Telecommunication Services
0.5
Utilities
0.4
Cash and Cash Equivalents, Net of
Outstanding Line of Credit
0.0
Calendar Year Total Returns (%)
YEAR
RVT
2017
19.4
2016
26.8
2015
-8.1
2014
0.8
2013
34.1
2012
15.4
2011
-10.1
2010
30.3
2009
44.6
2008
-45.6
2007
5.0
2006
19.5
2005
8.4
2004
21.4
2003
40.8
Portfolio Diagnostics
Fund Net Assets
$1,490 million
Number of Holdings
372
Turnover Rate
17%
Net Asset Value
$17.34
Market Price
$15.80
Average Market
Capitalization1
$1,914 million
Weighted Average
P/E Ratio 2,3
21.7x
Weighted Average P/B Ratio2
2.2x
Active Share 4
91%
U.S. Investments (% of Net Assets)
83.1%
Non-U.S. Investments (% of Net Assets)
16.9%
1
Geometric Average. This weighted calculation uses each portfolio
holdings market cap in a way designed to not skew the effect of
very large or small holdings; instead, it aims to better identify
the portfolios 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 portfolios share in the
earnings or book value, as the case may be, of its underlying stocks.
3
The Funds P/E ratio calculation excludes companies with zero or
negative earnings (18% of portfolio holdings as of 6/30/18).
4
Active Share is the sum of the absolute values of the different
weightings of each holding in the Fund versus each holding in the
benchmark, divided by two.
Important Performance and Risk Information
All performance information reflects past performance, is presented on a total return basis, net of the Funds investment advisory fee, and reflects the reinvestment of distributions. Past performance is no
guarantee of future results. Current performance may be higher or lower than performance quoted. Returns as of the most recent month-end may be obtained at www.roycefunds.com. Certain immaterial
adjustments were made to the net assets of Royce Value Trust at 12/31/16 and 6/30/18 for financial reporting purposes, and as a result the net asset value originally calculated on that date and the total return
based on that net asset value differs from the adjusted net asset value and total return reported in the Financial Highlights. The market price of the Funds shares will fluctuate, so that shares may be worth more
or less than their original cost when sold. The Fund invests primarily in securities of small- and micro-cap companies, which may involve considerably more risk than investing in larger-cap companies. The Funds
broadly diversified portfolio does not ensure a profit or guarantee against loss. Regarding the Top Contributors and Top Detractors tables shown above, the sum of all contributors to, and all detractors from,
performance for all securities in the portfolio would approximate the Funds year-to date performance for 2018.
2018 Semiannual Report to Stockholders | 39
Royce Value Trust
Schedule
of Investments
Common Stocks
100.0%
SHARES
VALUE
CONSUMER
DISCRETIONARY 8.8%
AUTO COMPONENTS
- 0.9%
Dorman Products 1
61,400
$
4,194,234
Gentex
Corporation 2
62,500
1,438,750
LCI
Industries
73,616
6,636,482
Sebang
Global Battery
28,500
809,354
Standard
Motor Products
13,391
647,321
13,726,141
AUTOMOBILES
- 0.6%
Thor
Industries 2
93,230
9,079,670
DISTRIBUTORS
- 1.3%
Connect
Group
550,000
223,928
Core-Mark
Holding Company
456,100
10,353,470
LKQ
Corporation 1
149,300
4,762,670
Weyco
Group
97,992
3,566,909
18,906,977
DIVERSIFIED
CONSUMER SERVICES - 0.3%
Collectors
Universe
71,100
1,048,014
Houghton
Mifflin Harcourt 1
100,000
765,000
Liberty
Tax Cl. A
151,573
1,223,952
Universal
Technical Institute 1
504,032
1,587,701
4,624,667
HOTELS, RESTAURANTS
& LEISURE - 0.3%
Inspired Entertainment 1,2
150,000
937,500
Lindblad
Expeditions Holdings 1
207,600
2,750,700
Rank
Group
400,000
1,010,401
4,698,601
HOUSEHOLD
DURABLES - 1.6%
Cavco
Industries 1
14,700
3,052,455
Ethan
Allen Interiors
200,000
4,900,000
HG
Holdings 1,3,4
912,235
592,953
Natuzzi
ADR 1
2,096,300
3,375,043
PICO
Holdings
409,400
4,769,510
Purple Innovation 1
225,000
1,912,500
Purple Innovation (Warrants) 1,5
750,000
411,000
Samson
Holding
2,500,000
261,293
Skyline
Champion
70,400
2,466,816
TopBuild Corporation 1
20,300
1,590,302
23,331,872
INTERNET
& DIRECT MARKETING RETAIL - 0.4%
CafePress
1
39,079
45,722
FTD
Companies 1
298,014
1,382,785
Shutterfly 1
14,900
1,341,447
TripAdvisor
1
50,000
2,785,500
zooplus 1
6,200
1,158,458
6,713,912
LEISURE PRODUCTS
- 0.7%
Clarus
Corporation 1
90,000
742,500
Nautilus
1
574,500
9,019,650
9,762,150
MEDIA - 0.3%
Global
Eagle Entertainment 1
110,000
277,200
Gray
Television 1
50,000
790,000
Liberty
Latin America Cl. C 1,2
96,500
1,870,170
Pico
Far East Holdings
2,612,400
1,058,865
3,996,235
MULTILINE
RETAIL - 0.0%
New
World Department Store China 1
377,500
87,090
SPECIALTY
RETAIL - 1.4%
AutoCanada
114,000
1,475,024
Barnes
& Noble
67,000
425,450
Camping
World Holdings Cl. A 2,6
124,100
3,100,018
Container
Store Group (The) 1,2
158,200
1,330,462
Destination
Maternity 1
557,967
3,247,368
Duty
Free International
2,000,000
293,578
I.T
827,000
590,292
Monro
134,000
7,785,400
Oriental
Watch Holdings
967,900
310,889
Signet
Jewelers
35,000
1,951,250
TravelCenters
of America LLC 1
62,500
218,750
20,728,481
TEXTILES,
APPAREL & LUXURY GOODS - 1.0%
Culp
29,400
721,770
J.G.
Boswell Company 4
3,940
2,640,588
Wolverine
World Wide
322,300
11,206,371
YGM
Trading
1,082,600
869,326
15,438,055
Total (Cost $132,337,096)
131,093,851
CONSUMER
STAPLES 1.6%
BEVERAGES
- 0.1%
Compania
Cervecerias Unidas ADR 2
64,500
1,608,630
FOOD &
STAPLES RETAILING - 0.0%
Conviviality
1,5
350,000
0
FOOD
PRODUCTS - 1.2%
Cal-Maine
Foods 1,2
40,416
1,853,073
Farmer
Bros. 1
54,700
1,671,085
Nomad
Foods 1
125,000
2,398,750
Seneca
Foods Cl. A 1
225,429
6,086,583
Seneca
Foods Cl. B 1
13,840
370,912
SunOpta
1,2
50,000
420,000
Tootsie
Roll Industries 2
165,529
5,106,570
17,906,973
PERSONAL PRODUCTS
- 0.3%
Inter
Parfums
75,630
4,046,205
Total (Cost $18,703,637)
23,561,808
ENERGY
7.0%
ENERGY EQUIPMENT
& SERVICES - 5.5%
C&J Energy Services 1
7,700
181,720
CARBO
Ceramics 1,2,6
78,000
715,260
Computer
Modelling Group
594,350
4,566,185
Diamond
Offshore Drilling 1,2,6
214,000
4,464,040
Era
Group 1
564,693
7,312,774
Forum
Energy Technologies 1
249,431
3,080,473
Franks International 1,2
108,600
847,080
Helmerich
& Payne 2,6
94,000
5,993,440
ION
Geophysical 1,2,6
71,880
1,746,684
North
American Construction Group
160,000
952,000
Oil
States International 1
10,000
321,000
Pason
Systems
607,680
9,947,342
Patterson-UTI Energy
10,050
180,900
Precision
Drilling 1
93,900
311,748
RigNet
1
32,754
337,366
RPC
12,800
186,496
SEACOR
Holdings 1
150,469
8,617,360
SEACOR Marine Holdings 1
638,834
14,750,677
TGS-NOPEC Geophysical
419,370
15,447,642
40 | 2018
Semiannual Report to Stockholders
THE ACCOMPANYING
NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
June 30,
2018 (unaudited)
Schedule
of Investments (continued)
SHARES
VALUE
ENERGY
(continued)
ENERGY EQUIPMENT
& SERVICES (continued)
Trican
Well Service 1
897,300
$
2,040,792
Unit
Corporation 1
15,000
383,400
82,384,379
OIL, GAS
& CONSUMABLE FUELS - 1.5%
Dorchester
Minerals L.P.
279,148
5,750,449
Dorian
LPG 1
394,936
3,017,311
GeoPark
1
53,200
1,098,048
Green
Plains
145,984
2,671,507
International Petroleum 1
100,000
669,886
New
Zealand Refining
310,000
512,310
Pryce
Corporation
3,000,000
334,473
San
Juan Basin Royalty Trust
320,352
1,854,838
World
Fuel Services
224,227
4,576,473
WPX
Energy 1
110,000
1,983,300
22,468,595
Total (Cost $96,379,369)
104,852,974
FINANCIALS
14.9%
BANKS - 2.5%
Banca
Sistema
200,000
472,959
Bank
of N.T. Butterfield & Son
178,416
8,157,179
Canadian
Western Bank
279,500
7,366,733
Farmers
& Merchants Bank of Long Beach 4
1,080
8,807,400
Fauquier
Bankshares 2
160,800
3,408,960
First
Citizens BancShares Cl. A
14,676
5,918,831
Webster
Financial
40,300
2,567,110
36,699,172
CAPITAL MARKETS
- 7.5%
Ares
Management L.P.
489,600
10,134,720
Artisan
Partners Asset Management Cl. A
270,500
8,155,575
ASA
Gold and Precious Metals
199,821
2,038,174
Ashmore
Group
1,354,000
6,665,294
Associated
Capital Group Cl. A 2
20,200
766,590
Bolsa Mexicana de Valores
1,723,106
2,900,438
Citadel
Capital 1
7,749,921
1,446,883
Cowen
1
62,706
868,478
Dundee
Corporation Cl. A 1
1,079,900
1,297,868
Edmond
de Rothschild (Suisse)
153
2,641,927
GMP
Capital
287,100
626,765
Hamilton
Lane Cl. A
13,800
661,986
Jupiter
Fund Management
230,000
1,353,800
Lazard
Cl. A
89,835
4,393,830
Manning
& Napier Cl. A
395,692
1,226,645
MarketAxess
Holdings
51,600
10,209,576
Medley
Management Cl. A 2,6
109,500
388,725
Morningstar
84,600
10,849,950
mutares
7,000
94,008
MVC
Capital
271,183
2,576,239
Oaktree
Capital Group LLC Cl. A
145,700
5,922,705
Rothschild
& Co
209,893
7,096,023
SEI
Investments
148,500
9,284,220
Sprott
1,927,000
4,456,000
TMX
Group
40,700
2,668,030
U.S.
Global Investors Cl. A 2
520,551
838,087
Value
Partners Group
5,453,000
4,309,243
Virtu
Financial Cl. A 2
189,000
5,017,950
Westwood
Holdings Group
38,850
2,313,129
111,202,858
CONSUMER FINANCE
- 0.0%
Currency
Exchange International 1
30,000
689,157
DIVERSIFIED
FINANCIAL SERVICES - 0.1%
First
Pacific
1,020,000
492,735
Waterloo
Investment Holdings 1,5
2,972,000
891,600
1,384,335
INSURANCE
- 3.0%
E-L Financial
22,500
14,033,982
Erie
Indemnity Cl. A
25,000
2,931,500
Independence
Holding Company
259,223
8,619,165
MBIA
1,2,6
942,400
8,519,296
ProAssurance
Corporation
126,334
4,478,540
RLI
Corp.
65,900
4,361,921
Trupanion
1
36,400
1,405,040
44,349,444
INVESTMENT
COMPANIES - 0.6%
Landcadia Holdings Cl. A 1
63,350
641,736
RIT
Capital Partners
54,192
1,476,886
Social Capital Hedosophia Holdings 1
680,918
6,843,226
8,961,848
THRIFTS &
MORTGAGE FINANCE - 1.2%
BofI
Holding 1,2,6
16,300
666,833
Genworth
MI Canada
220,795
7,184,886
Timberland
Bancorp
288,857
10,785,920
Vestin
Realty Mortgage II 1,4
34
102,000
18,739,639
Total (Cost $175,742,781)
222,026,453
HEALTH
CARE 4.4%
BIOTECHNOLOGY
- 0.5%
Keryx
Biopharmaceuticals 1,2,6
139,000
522,640
Sangamo
Therapeutics 1,2,6
65,815
934,573
Zealand
Pharma 1
408,857
5,383,112
6,840,325
HEALTH CARE
EQUIPMENT & SUPPLIES - 1.9%
Atrion
Corporation
15,750
9,440,550
DENTSPLY
SIRONA
5,000
218,850
Haemonetics
1
6,400
573,952
Hill-Rom
Holdings
5,000
436,700
Integer
Holdings 1
42,400
2,741,160
LeMaitre Vascular
26,000
870,480
Masimo
Corporation 1
50,000
4,882,500
Neogen
Corporation 1
22,400
1,796,256
Surmodics
1
138,500
7,645,200
28,605,648
HEALTH CARE
PROVIDERS & SERVICES - 0.2%
Community
Health Systems 1
790,000
2,622,800
HEALTH CARE
TECHNOLOGY - 0.7%
athenahealth
1,2,6
32,500
5,172,050
Medidata
Solutions 1
72,750
5,860,740
11,032,790
LIFE SCIENCES
TOOLS & SERVICES - 1.0%
Bio-Rad
Laboratories Cl. A 1
34,198
9,867,491
Bio-Techne
26,843
3,971,422
PRA Health Sciences 1
16,000
1,493,760
15,332,673
PHARMACEUTICALS
- 0.1%
Formosa
Laboratories
275,000
492,481
THE ACCOMPANYING
NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
2018 Semiannual
Report to Stockholders | 41
Royce Value
Trust
Schedule
of Investments (continued)
SHARES
VALUE
HEALTH
CARE (continued)
PHARMACEUTICALS
(continued)
Theravance
Biopharma 1,2
34,291
$
777,720
1,270,201
Total (Cost $41,923,713)
65,704,437
INDUSTRIALS
30.8%
AEROSPACE
& DEFENSE - 3.4%
Austal
788,670
1,085,599
Ducommun
1
117,200
3,878,148
HEICO Corporation
260,346
18,987,052
HEICO Corporation Cl. A
157,828
9,619,586
Hexcel
Corporation
51,400
3,411,932
Magellan
Aerospace
186,800
2,281,982
Teledyne
Technologies 1
5,900
1,174,454
Wesco
Aircraft Holdings 1
935,364
10,522,845
50,961,598
AIR FREIGHT
& LOGISTICS - 1.4%
Expeditors
International of Washington
143,000
10,453,300
Forward
Air
170,750
10,087,910
20,541,210
BUILDING PRODUCTS
- 0.4%
Burnham
Holdings Cl. B 4
36,000
543,960
Patrick
Industries 1
15,775
896,809
Simpson
Manufacturing
59,900
3,725,181
5,165,950
COMMERCIAL
SERVICES & SUPPLIES - 3.3%
Atento
528,700
3,621,595
Biffa
540,000
1,774,536
CECO
Environmental 1
99,028
608,032
CompX
International Cl. A
211,100
2,786,520
Copart 1
313,000
17,703,280
Heritage-Crystal
Clean 1
146,527
2,945,193
Horizon
North Logistics
500,000
1,000,266
Interserve 1
450,000
377,119
Kimball
International Cl. B
286,180
4,624,669
Mobile
Mini
105,000
4,924,500
Ritchie
Bros. Auctioneers
107,100
3,654,252
Steelcase
Cl. A
40,000
540,000
UniFirst
Corporation
22,270
3,939,563
48,499,525
CONSTRUCTION
& ENGINEERING - 3.2%
EMCOR
Group 2,6
65,800
5,012,644
IES
Holdings 1
594,244
9,953,587
Infrastructure and Energy Alternatives 1
500,000
4,655,000
Infrastructure and Energy Alternatives
(Warrants)
1,5
625,000
475,000
Jacobs
Engineering Group
169,900
10,786,951
KBR
337,400
6,046,208
Sterling
Construction 1,2,6
122,300
1,593,569
Valmont
Industries 2
65,345
9,850,759
48,373,718
ELECTRICAL
EQUIPMENT - 1.0%
AZZ
5,000
217,250
LSI
Industries
263,000
1,404,420
Powell
Industries
94,500
3,291,435
Preformed
Line Products
91,600
8,132,248
Williams
Industrial Services Group 1,4
631,820
1,895,460
14,940,813
INDUSTRIAL
CONGLOMERATES - 0.7%
A.
Soriano
2,791,000
313,787
Raven
Industries
251,725
9,678,826
9,992,613
MACHINERY
- 10.5%
Chen
Hsong Holdings
1,159,000
295,452
CIRCOR
International 1
143,184
5,292,081
Colfax
Corporation 1
82,242
2,520,717
Deutz
115,000
888,375
Donaldson
Company
193,559
8,733,382
Exco
Technologies
110,000
743,848
Franklin
Electric
129,300
5,831,430
Graco
241,028
10,899,286
Hyster-Yale
Materials Handling Cl. A
10,000
642,500
IDEX
Corporation
53,900
7,356,272
John
Bean Technologies
103,226
9,176,791
Kadant
78,100
7,509,315
Kennametal
160,100
5,747,590
Lincoln
Electric Holdings
121,660
10,676,882
Lindsay
Corporation 2,6
80,000
7,759,200
NN
308,700
5,834,430
Nordson
Corporation
24,296
3,119,849
Proto
Labs 1
10,000
1,189,500
RBC Bearings 1
109,600
14,117,576
Sun Hydraulics
366,118
17,643,227
Tennant
Company
111,900
8,840,100
Titan
International
173,100
1,857,363
Watts
Water Technologies Cl. A
61,000
4,782,400
Westinghouse
Air Brake Technologies
73,100
7,206,198
Woodward
104,600
8,039,556
156,703,320
MARINE - 1.8%
Clarkson
371,100
11,264,466
Eagle
Bulk Shipping 1
320,478
1,743,400
Kirby Corporation 1
161,900
13,534,840
26,542,706
PROFESSIONAL
SERVICES - 1.5%
ASGN
1,2
106,700
8,342,873
Heidrick
& Struggles International
50,480
1,766,800
ManpowerGroup
107,200
9,225,632
Quess
Corporation 1
15,720
261,113
Staffline
Group
120,810
1,493,944
TrueBlue
1
56,245
1,515,803
22,606,165
ROAD &
RAIL - 1.8%
Genesee
& Wyoming Cl. A 1
15,000
1,219,800
Knight-Swift
Transportation Holdings Cl. A 2
122,400
4,676,904
Landstar System
116,760
12,750,192
Patriot
Transportation Holding 1
139,100
2,990,650
Saia
1,2,6
40,000
3,234,000
Universal
Logistics Holdings 2
78,916
2,071,545
26,943,091
TRADING COMPANIES
& DISTRIBUTORS - 1.8%
Air
Lease Cl. A
226,600
9,510,402
Central
Steel & Wire 4
4,862
2,980,406
Houston
Wire & Cable 1,3
877,363
7,457,585
SIG
940,000
1,733,070
SiteOne Landscape Supply 1
25,000
2,099,250
42 | 2018
Semiannual Report to Stockholders
THE ACCOMPANYING
NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
June 30,
2018 (unaudited)
Schedule
of Investments (continued)
SHARES
VALUE
INDUSTRIALS
(continued)
TRADING COMPANIES
& DISTRIBUTORS (continued)
Watsco
20,400
$
3,636,912
27,417,625
Total (Cost $270,653,334)
458,688,334
INFORMATION
TECHNOLOGY 19.3%
COMMUNICATIONS
EQUIPMENT - 0.3%
ADTRAN
2
214,973
3,192,349
Mitel
Networks 1
100,000
1,097,000
4,289,349
ELECTRONIC
EQUIPMENT, INSTRUMENTS & COMPONENTS - 9.7%
Anixter
International 1,2,6
63,795
4,038,224
Bel
Fuse Cl. B
30,238
631,974
Cognex Corporation 2,6
350,600
15,640,266
Coherent
1
60,400
9,447,768
eMagin Corporation (Warrants) 1,5
50,000
12,500
Fabrinet
1
285,600
10,535,784
FARO
Technologies 1
179,437
9,752,401
FLIR Systems
611,637
31,786,775
Horiba
12,000
839,995
IPG Photonics 1,2,6
51,100
11,274,193
Littelfuse
13,900
3,171,702
National
Instruments
261,850
10,992,463
nLIGHT 1,2
34,400
1,137,264
Perceptron
1
357,700
3,773,735
Plexus
Corporation 1
150,600
8,966,724
Richardson
Electronics
573,732
5,588,150
Rogers
Corporation 1
32,366
3,607,514
Seeing
Machines 1
20,131,784
3,321,116
TTM
Technologies 1,2,6
496,400
8,751,532
Wasion
Holdings
1,500,000
814,469
144,084,549
INTERNET SOFTWARE
& SERVICES - 2.3%
Alarm.com Holdings 1
10,000
403,800
Care.com
1
110,000
2,296,800
comScore
1
390,836
8,520,225
Etsy 1
61,100
2,577,809
HolidayCheck
Group 1
94,900
348,542
j2
Global
81,820
7,086,430
QuinStreet
1
180,254
2,289,226
Rhythmone
1
97,457
218,652
Solium
Capital 1
187,400
1,640,721
Stamps.com
1
35,700
9,033,885
Support.com
1
216,766
617,783
35,033,873
IT SERVICES
- 0.7%
Acxiom
Corporation 1
48,000
1,437,600
Conduent
1
20,000
363,400
CSE
Global
3,450,000
1,088,807
Hackett
Group (The)
417,266
6,705,465
Innodata
1
224,314
224,314
Unisys
Corporation 1
60,000
774,000
10,593,586
SEMICONDUCTORS
& SEMICONDUCTOR EQUIPMENT - 4.0%
Advanced
Energy Industries 1
20,000
1,161,800
Brooks Automation 2,6
351,700
11,472,454
Cabot
Microelectronics
38,400
4,130,304
Cohu
143,350
3,513,508
Diodes
1
270,850
9,336,199
Entegris
182,800
6,196,920
Kulicke
& Soffa Industries 2
66,200
1,576,884
MKS
Instruments
42,010
4,020,357
Nova
Measuring Instruments 1
39,500
1,076,375
Photronics
1
183,700
1,465,008
Rudolph
Technologies 1,2
84,500
2,501,200
Silicon
Motion Technology ADR
25,000
1,322,250
Teradyne
130,000
4,949,100
Universal Display
11,650
1,001,900
Veeco
Instruments 1
17,500
249,375
Versum
Materials
123,000
4,569,450
Xperi
2
60,000
966,000
59,509,084
SOFTWARE -
1.9%
Altair Engineering Cl. A 1
5,000
170,900
ANSYS 1,2,6
81,200
14,143,416
Manhattan
Associates 1
75,000
3,525,750
Monotype
Imaging Holdings
117,700
2,389,310
Pegasystems
15,200
832,960
PTC
1
8,600
806,766
RealNetworks
1
170,879
632,252
Rosetta
Stone 1
40,000
641,200
SS&C Technologies Holdings
12,000
622,800
StatPro
Group
400,000
907,989
TiVo
81,900
1,101,555
Workiva Cl. A 1
100,000
2,440,000
28,214,898
TECHNOLOGY
HARDWARE, STORAGE & PERIPHERALS - 0.4%
Cray
1,2
102,500
2,521,500
Diebold
Nixdorf
316,600
3,783,370
6,304,870
Total (Cost $186,393,537)
288,030,209
MATERIALS
8.6%
CHEMICALS
- 3.3%
Chase
Corporation
36,100
4,232,725
FutureFuel
Corporation
48,500
679,485
Hawkins
86,178
3,046,392
Ingevity Corporation 1
17,900
1,447,394
Innospec
36,883
2,823,394
Minerals
Technologies
120,993
9,116,823
NewMarket
Corporation
11,000
4,449,500
Platform
Specialty Products 1
190,000
2,204,000
Quaker Chemical
132,669
20,546,448
48,546,161
CONSTRUCTION
MATERIALS - 0.1%
China Resources Cement Holdings
800,000
810,646
CONTAINERS
& PACKAGING - 0.3%
Mayr-Melnhof
Karton
34,000
4,589,921
METALS
& MINING - 4.5%
Agnico
Eagle Mines
15,000
687,450
Alamos
Gold Cl. A
803,300
4,576,668
Ampco-Pittsburgh
1
36,966
378,901
Corsa
Coal 1
700,000
607,006
Ferroglobe
50,000
428,500
Ferroglobe
(Warranty Insurance Trust) 1,5
49,300
0
Franco-Nevada
Corporation
107,300
7,835,046
Gold
Fields ADR
370,000
1,320,900
THE ACCOMPANYING
NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
2018 Semiannual
Report to Stockholders | 43
Royce Value
Trust
June 30,
2018 (unaudited)
Schedule
of Investments (continued)
SHARES
VALUE
MATERIALS
(continued)
METALS &
MINING (continued)
Haynes
International 2,6
113,900
$
4,184,686
Hecla
Mining
321,300
1,118,124
Lundin
Mining
640,000
3,558,666
MAG
Silver 1
198,900
2,150,109
Major
Drilling Group International 1
1,042,757
5,504,685
Mongolian
Mining 1
12,000,000
195,778
Pretium
Resources 1
165,000
1,213,669
Reliance Steel & Aluminum
193,720
16,958,249
Royal
Gold
16,600
1,541,144
Sandstorm
Gold 1
270,000
1,215,000
Synalloy
Corporation
178,800
3,567,060
Tahoe
Resources 1
646,000
3,178,320
VanEck
Vectors Junior Gold Miners ETF
8,000
261,600
Worthington
Industries
148,000
6,211,560
66,693,121
PAPER &
FOREST PRODUCTS - 0.4%
Neenah
16,700
1,416,995
Stella-Jones
142,000
5,172,768
6,589,763
Total (Cost $98,050,104)
127,229,612
REAL ESTATE
3.7%
EQUITY REAL
ESTATE INVESTMENT TRUSTS (REITS) - 0.0%
Irish
Residential Properties REIT
250,000
402,891
New
York REIT
15,000
273,600
676,491
REAL ESTATE
MANAGEMENT & DEVELOPMENT - 3.7%
Altus
Group
24,200
539,537
FirstService Corporation
184,600
14,036,984
FRP Holdings 1
188,558
12,209,130
Kennedy-Wilson
Holdings
111,300
2,353,995
Marcus
& Millichap 1
198,713
7,751,794
Real
Estate Investors
1,000,000
706,066
RMR
Group Cl. A 2,6
27,200
2,133,840
St.
Joe Company (The) 1
197,000
3,536,150
Tejon Ranch 1,2
478,479
11,627,040
54,894,536
Total (Cost $33,757,570)
55,571,027
TELECOMMUNICATION
SERVICES 0.5%
DIVERSIFIED
TELECOMMUNICATION SERVICES - 0.1%
China
Communications Services
750,182
475,222
HKBN
1,000,000
1,539,717
2,014,939
WIRELESS TELECOMMUNICATION
SERVICES - 0.4%
Boingo
Wireless 1
50,000
1,129,500
Telephone
and Data Systems
165,270
4,531,703
5,661,203
Total (Cost $6,378,985)
7,676,142
UTILITIES
0.4%
GAS UTILITIES
- 0.3%
UGI
Corporation
73,800
3,842,766
INDEPENDENT
POWER & RENEWABLE ELECTRICITY PRODUCER - 0.1%
Vistra Energy 1
65,200
1,542,632
Total (Cost $4,181,537)
5,385,398
TOTAL COMMON
STOCKS
(Cost $1,064,501,663)
1,489,820,245
REPURCHASE
AGREEMENT 3.8%
Fixed Income
Clearing Corporation, 0.35% dated 6/29/18, due 7/2/18, maturity value
$57,596,680
(collateralized by obligations of various U.S. Government Agencies, 1.75%
due
11/30/21, valued at $58,751,694)
(Cost $57,595,000)
57,595,000
TOTAL INVESTMENTS
103.8%
(Cost $1,122,096,663)
1,547,415,245
LIABILITIES
LESS CASH AND OTHER ASSETS (3.8)%
(57,109,348
)
NET ASSETS
100.0%
$
1,490,305,897
New additions
in 2018.
1
Non-income
producing.
2
All or
a portion of these securities were pledged as collateral in connection with the
Funds revolving credit agreement at June 30, 2018. Total market value of pledged
securities at June 30, 2018, was $122,875,447.
3
At June
30, 2018, the Fund owned 5% or more of the Companys outstanding voting securities
thereby making the Company an Affiliated Company as that term is defined in the
Investment Company Act of 1940. See Notes to Financial Statements.
4
These securities
are defined as Level 2 securities due to fair value being based on quoted prices
for similar securities. See Notes to Financial Statements.
5
Securities
for which market quotations are not readily available represent 0.1% of net assets.
These securities have been valued at their fair value under procedures approved
by the Funds Board of Directors. These securities are defined as Level 3 securities
due to the use of significant unobservable inputs in the determination of fair value.
See Notes to Financial Statements.
6
At June
30, 2018, a portion of these securities were rehypothecated in connection with the
Funds revolving credit agreement in the aggregate amount of $66,358,963.
Bold
indicates the Funds 20 largest equity holdings in terms of June 30, 2018,
market value.
TAX
INFORMATION: The cost of total investments for Federal income tax purposes was $1,122,991,077.
At June 30, 2018, net unrealized appreciation for all securities was $424,424,168
consisting of aggregate gross unrealized appreciation of $521,620,171 and aggregate
gross unrealized depreciation of $97,196,003. The primary cause of the difference
between book and tax basis cost is the timing of the recognition of losses on securities
sold.
44 | 2018
Semiannual Report to Stockholders
THE ACCOMPANYING
NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
Royce Value
Trust
June 30,
2018 (unaudited)
Statement
of Assets and Liabilities
ASSETS:
Investments
at value
Non-Affiliated
Companies
$
1,481,769,707
Affiliated
Companies
8,050,538
Repurchase
agreements (at cost and value)
57,595,000
Cash and foreign
currency
345,756
Receivable
for investments sold
16,278,875
Receivable
for dividends and interest
967,109
Prepaid expenses
and other assets
774,384
Total Assets
1,565,781,369
LIABILITIES:
Revolving
credit agreement
70,000,000
Payable for
investments purchased
4,729,496
Payable for
investment advisory fee
528,153
Payable for
directors fees
55,268
Payable for
interest expense
19,176
Accrued expenses
141,245
Deferred capital
gains tax
2,134
Total Liabilities
75,475,472
Net Assets
$
1,490,305,897
ANALYSIS OF
NET ASSETS:
Paid-in capital
- $0.001 par value per share; 85,916,727 shares outstanding (150,000,000 shares
authorized)
$
1,027,312,345
Undistributed
net investment income (loss)
9,835,467
Accumulated
net realized gain (loss) on investments and foreign currency
77,928,483
Net unrealized
appreciation (depreciation) on investments and foreign currency
425,339,463
Quarterly
distributions
(50,109,861
)
Net Assets
(net asset value per share - $17.35)
$
1,490,305,897
Investments
at identified cost
$
1,064,501,663
THE ACCOMPANYING
NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
2018 Semiannual
Report to Stockholders | 45
Royce Value
Trust
Statement
of Changes in Net Assets
SIX MONTHS ENDED
6/30/18
(UNAUDITED)
YEAR ENDED 12/31/17
INVESTMENT
OPERATIONS:
Net investment
income (loss)
$
11,560,590
$
10,969,682
Net realized
gain (loss) on investments and foreign currency
73,709,218
81,750,067
Net change
in unrealized appreciation (depreciation) on investments and foreign currency
(46,494,859
)
146,329,916
Net increase
(decrease) in net assets from investment operations
38,774,949
239,049,665
DISTRIBUTIONS:
Net investment
income
(5,612,304
)1
(10,679,021
)
Net realized
gain on investments and foreign currency
(44,497,557
)1
(85,441,777
)
Total distributions
(50,109,861
)
(96,120,798
)
CAPITAL STOCK
TRANSACTIONS:
Reinvestment
of distributions
21,191,356
41,508,874
Total capital
stock transactions
21,191,356
41,508,874
Net Increase
(Decrease) In Net Assets
9,856,444
184,437,741
NET ASSETS:
Beginning
of period
1,480,449,453
1,296,011,712
End of
period (including undistributed net investment income (loss) of $9,835,467 at 6/30/18
and $(1,725,122) at 12/31/17)
$
1,490,305,897
$
1,480,449,453
1
Amounts are
subject to change and recharacterization at year end.
46 | 2018
Semiannual Report to Stockholders
THE ACCOMPANYING
NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
Royce Value
Trust
Six Months
Ended June 30, 2018 (unaudited)
Statement
of Operations
INVESTMENT
INCOME:
INCOME:
Dividends
$
16,504,205
Foreign withholding
tax
(299,311
)
Interest
102,464
Rehypothecation
income
179,246
Total income
16,486,604
EXPENSES:
Investment
advisory fees
3,129,134
Interest expense
1,085,601
Stockholder
reports
195,719
Administrative
and office facilities
195,651
Custody and
transfer agent fees
106,857
Directors fees
96,159
Professional
fees
50,760
Other expenses
66,706
Total expenses
4,926,587
Compensating
balance credits
(573
)
Net expenses
4,926,014
Net investment
income (loss)
11,560,590
REALIZED
AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
NET REALIZED
GAIN (LOSS):
Investments
73,716,050
Foreign currency
transactions
(6,832
)
NET CHANGE
IN UNREALIZED APPRECIATION (DEPRECIATION):
Investments
in Non-Affiliated Companies and foreign currency translations
(47,455,088
)
Investments
in Affiliated Companies
939,879
Other assets
and liabilities denominated in foreign currency
20,350
Net realized
and unrealized gain (loss) on investments and foreign currency
27,214,359
NET INCREASE
(DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS
$
38,774,949
THE ACCOMPANYING
NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
2018 Semiannual
Report to Stockholders | 47
Royce Value
Trust
Six Months
Ended June 30, 2018 (unaudited)
Statement
of Cash Flows
CASH FLOWS
FROM OPERATING ACTIVITIES:
Net increase
(decrease) in net assets from investment operations
$
38,774,949
Adjustments
to reconcile net increase (decrease) in net assets from investment operations to
net cash provided by operating activities:
Purchases
of long-term investments
(254,511,184
)
Proceeds
from sales and maturities of long-term investments
281,102,143
Net
purchases, sales and maturities of short-term investments
(8,928,000
)
Net
(increase) decrease in dividends and interest receivable and other assets
24,789
Net
increase (decrease) in interest expense payable, accrued expenses and other liabilities
(78,323
)
Net
change in unrealized appreciation (depreciation) on investments
46,515,209
Net
realized gain (loss) on investments and foreign currency
(73,709,218
)
Net cash
provided by operating activities
29,190,365
CASH FLOWS
FROM FINANCING ACTIVITIES:
Distributions
(50,109,861
)
Reinvestment
of distributions
21,191,356
Net cash
used for financing activities
(28,918,505
)
INCREASE
(DECREASE) IN CASH:
271,860
Cash and
foreign currency at beginning of period
73,896
Cash and
foreign currency at end of period
$
345,756
48 | 2018
Semiannual Report to Stockholders
THE ACCOMPANYING
NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
Royce Value
Trust
Financial
Highlights
This table
is presented to show selected data for a share of Common Stock outstanding throughout
each period, and to assist stockholders in evaluating the Funds performance
for the periods presented.
SIX MONTHS
YEARS ENDED
ENDED 6/30/18
(UNAUDITED)
12/31/17
12/31/16
12/31/15
12/31/14
12/31/13
Net Asset
Value, Beginning of Period
$
17.50
$
15.85
$
13.56
$
16.24
$
18.17
$
15.40
INVESTMENT
OPERATIONS:
Net investment
income (loss)
0.13
0.13
0.12
0.12
0.12
0.12
Net realized
and unrealized gain (loss) on investments and foreign currency
0.34
2.74
3.27
(1.48
)
(0.13
)
4.89
Net increase
(decrease) in net assets from investment operations
0.47
2.87
3.39
(1.36
)
(0.01
)
5.01
DISTRIBUTIONS:
Net investment
income
(0.07
)1
(0.13
)
(0.13
)
(0.16
)
(0.14
)
(0.11
)
Net realized
gain on investments and foreign currency
(0.52
)1
(1.03
)
(0.89
)
(1.08
)
(1.68
)
(2.08
)
Total distributions
(0.59
)
(1.16
)
(1.02
)
(1.24
)
(1.82
)
(2.19
)
CAPITAL STOCK
TRANSACTIONS:
Effect of
reinvestment of distributions by Common Stockholders
(0.03
)
(0.06
)
(0.08
)
(0.08
)
(0.10
)
(0.05
)
Total capital
stock transactions
(0.03
)
(0.06
)
(0.08
)
(0.08
)
(0.10
)
(0.05
)
Net Asset
Value, End of Period
$
17.35
$
17.50
$
15.85
$
13.56
$
16.24
$
18.17
Market
Value, End of Period
$
15.80
$
16.17
$
13.39
$
11.77
$
14.33
$
16.01
TOTAL RETURN:2
Net Asset
Value
2.84
%3
19.31
%
26.87
%
(8.09
)%
0.78
%
34.14
%
Market Value
1.36
%3
30.49
%
23.48
%
(9.59
)%
0.93
%
35.63
%
RATIOS BASED
ON AVERAGE NET ASSETS:
Investment
advisory fee expense4
0.42
%5
0.43
%
0.51
%
0.50
%
0.46
%
0.54
%
Other operating
expenses
0.24
%5
0.22
%
0.22
%
0.18
%
0.15
%
0.25
%
Total expenses
(net)
0.66
%5
0.65
%
0.73
%
0.68
%
0.61
%
0.79
%
Expenses net
of fee waivers and excluding interest expense
0.52
%5
0.54
%
0.62
%
0.61
%
0.55
%
0.65
%
Expenses prior
to fee waivers and balance credits
0.66
%5
0.65
%
0.73
%
0.68
%
0.61
%
0.79
%
Expenses prior
to fee waivers
0.66
%5
0.65
%
0.73
%
0.68
%
0.61
%
0.79
%
Net investment
income (loss)
1.56
%5
0.80
%
0.85
%
0.78
%
0.72
%
0.70
%
SUPPLEMENTAL
DATA:
Net Assets,
End of Period (in thousands)
$
1,490,306
$
1,480,449
$
1,296,012
$
1,072,035
$
1,231,955
$
1,307,829
Portfolio
Turnover Rate
17
%
19
%
28
%
35
%
40
%
33
%
REVOLVING
CREDIT AGREEMENT:
Asset coverage
2229
%
2215
%
1951
%
1631
%
1860
%
1289
%
Asset coverage
per $1,000
$
22,290
$
22,149
$
19,514
$
16,315
$
18,599
$
12,889
1
Amounts are
subject to change and recharacterization at year end.
2
The Market
Value Total Return is calculated assuming a purchase of Common Stock on the opening
of the first business day and a sale on the closing of the last business day of
each period. Dividends and distributions are assumed for the purposes of this calculation
to be reinvested at prices obtained under the Funds Distribution Reinvestment
and Cash Purchase Plan. Net Asset Value Total Return is calculated on the same basis,
except that the Funds net asset value is used on the purchase and sale dates
instead of market value.
3
Not annualized
4
The investment
advisory fee is calculated based on average net assets over a rolling 60-month basis,
while the above ratios of investment advisory fee expenses are based on the average
net assets over a 12-month basis.
5
Annualized
THE ACCOMPANYING
NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
2018 Semiannual
Report to Stockholders | 49
Royce Value Trust
Notes to Financial Statements (unaudited)
Summary
of Significant Accounting Policies:
Royce Value
Trust, Inc. (the Fund), is a diversified closed-end investment company that was
incorporated under the laws of the State of Maryland on July 1, 1986. The Fund
commenced operations on November 26, 1986.
The preparation
of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results
could differ from those estimates.
The Fund
is an investment company and accordingly follows the investment company accounting
and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting
Standard Codification Topic 946 Financial Services-Investment Companies.
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 Nasdaqs 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. Other over-the-counter securities for which market
quotations are readily available are valued at their highest bid price, except
in the case of some bonds and other fixed income securities which may be valued
by reference to other securities with comparable ratings, interest rates and maturities,
using established independent pricing services. The Fund values its non-U.S. dollar
denominated securities in U.S. dollars daily at the prevailing foreign currency
exchange rates as quoted by a major bank. Securities for which market quotations
are not readily available are valued at their fair value in accordance with the
provisions of the 1940 Act, under procedures approved by the Funds Board
of Directors, and are reported as Level 3 securities. As a general principle, the
fair value of a security is the amount which the Fund might reasonably expect to
receive for the security upon its current sale. However, in light of the judgment
involved in fair valuations, there can be no assurance that a fair value assigned
to a particular security will be the amount which the Fund might be able to receive
upon its current sale. In addition, if, between the time trading ends on a particular
security and the close of the customary trading session on the NYSE, events occur
that are significant and may make the closing price unreliable, the Fund may fair
value the security. The Fund uses an independent pricing service to provide fair
value estimates for relevant non-U.S. equity securities on days when the U.S. market
volatility exceeds a certain threshold. This pricing service uses proprietary correlations
it has developed between the movement of prices of non-U.S. equity securities and
indices of U.S.-traded securities, futures contracts and other indications to estimate
the fair value of relevant non-U.S. securities. When fair value pricing is employed,
the prices of securities used by the Fund may differ from quoted or published prices
for the same security. Investments in money market funds are valued at net asset
value per share.
Various
inputs are used in determining the value of the Funds investments, as noted
above. These inputs are summarized in the three broad levels below:
Level 1
quoted
prices in active markets for identical securities.
Level 2
other significant
observable inputs (including quoted prices for similar securities, foreign securities
that may be fair valued and repurchase agreements). The table below includes
all Level 2 securities. Level 2 securities with values based on quoted prices for
similar securities are noted in the Schedule of Investments.
Level 3
significant
unobservable inputs (including last trade price before trading was suspended, or
at a discount thereto for lack of marketability or otherwise, market price
information regarding other securities, information received from the company and/or
published documents, including SEC filings and financial statements, or other publicly
available information).
The inputs
or methodology used for valuing securities are not necessarily an indication of
the risk associated with investing in those securities.
The following
is a summary of the inputs used to value the Funds investments as of June
30, 2018. For a detailed breakout of common stocks by sector classification, please
refer to the Schedule of Investments.
LEVEL 1
LEVEL 2
LEVEL 3
TOTAL
Common Stocks
$1,470,467,378
$17,562,767
$1,790,100
$1,489,820,245
Cash Equivalents
57,595,000
57,595,000
Certain
securities have transferred in and out of Level 1 and Level 2 measurements during
the reporting period. The Fund recognizes transfers between levels as of the end
of the reporting period. For the six months ended June 30, 2018, securities valued
at $592,953 were transferred from Level 1 to Level 2 and securities valued at $94,451,255
were transferred from Level 2 to Level 1 within the fair value hierarchy.
50 | 2018
Semiannual Report to Stockholders
Royce Value Trust
Notes to Financial Statements (unaudited)
(continued)
VALUATION OF INVESTMENTS (continued):
Level 3 Reconciliation:
BALANCE
AS OF 12/31/17
PURCHASES
REALIZED
GAIN (LOSS)
UNREALIZED
GAIN (LOSS)1
BALANCE
AS OF 6/30/18
Common Stocks
$891,600
$932,126
$
$(33,626)
$1,790,100
1
The net
change in unrealized appreciation (depreciation) is included in the accompanying
Statement of Operations. Change in unrealized appreciation (depreciation) includes
net unrealized appreciation (depreciation) resulting from changes in investment
values during the reporting period and the reversal of previously recorded unrealized
appreciation (depreciation) when gains or losses are realized. Net realized gain
(loss) from investments and foreign currency transactions is included in the accompanying
Statement of Operations.
The following
table summarizes the valuation techniques used and unobservable inputs approved
by the Valuation Committee to determine the fair value of certain Level 3 investments.
The table does not include Level 3 investments with values derived utilizing prices
from prior transactions or third party pricing information with adjustments (e.g.
broker quotes, pricing services, net asset values).
FAIR
VALUE AT
IMPACT
TO VALUATION FROM
6/30/18
VALUATION
TECHNIQUE(S)
UNOBSERVABLE
INPUT(S)
RANGE
AVERAGE
AN INCREASE
IN INPUT1
Common Stocks
$1,790,100
Discounted
Present Value
Balance Sheet Analysis
Liquidity
Discount
30%-40%
Decrease
1
This column
represents the directional change in the fair value of the Level 3 investments that
would result in an increase from the corresponding unobservable input. A decrease
to the unobservable input would have the opposite effect. Significant increases
and decreases in these unobservable inputs in isolation could result in significantly
higher or lower fair value measurements.
REPURCHASE
AGREEMENTS:
The Fund
may enter into repurchase agreements with institutions that the Funds investment
adviser has determined are creditworthy. The Fund restricts repurchase agreements
to maturities of no more than seven days. Securities pledged as collateral for repurchase
agreements, which are held until maturity of the repurchase agreements, are marked-to-market
daily and maintained at a value at least equal to the principal amount of the repurchase
agreement (including accrued interest). Repurchase agreements could involve certain
risks in the event of default or insolvency of the counter-party, including possible
delays or restrictions upon the ability of the Fund to dispose of its underlying
securities. The remaining contractual maturity of the repurchase agreement held
by the Fund at June 30, 2018 is overnight and continuous.
FOREIGN
CURRENCY:
Net realized
foreign exchange gains or losses arise from sales and maturities of short-term securities,
sales of foreign currencies, expiration of currency forward contracts, currency
gains or losses realized between the trade and settlement dates on securities transactions,
and the difference between the amounts of dividends, interest, and foreign withholding
taxes recorded on the Funds books and the U.S. dollar equivalent of the amounts
actually received or paid. Net unrealized foreign exchange gains and losses arise
from changes in the value of assets and liabilities, including investments in securities
at the end of the reporting period, as a result of changes in foreign currency
exchange rates.
TAXES:
As a qualified
regulated investment company under Subchapter M of the Internal Revenue Code, the
Fund is not subject to income taxes to the extent that it distributes substantially
all of its taxable income for its fiscal year. The Schedule of Investments includes
information regarding income taxes under the caption Tax Information.
CAPITAL
GAINS TAXES:
The Fund
is subject to a tax imposed on short-term capital gains on securities of issuers
domiciled in certain countries. The Fund records an estimated deferred tax liability
for gains in these securities that have been held for less than one year. This amount,
if any, is reported as deferred capital gains tax in the accompanying Statement
of Assets and Liabilities, assuming those positions were disposed of at the end
of the period, and accounted for as a reduction in the market value of the security.
DISTRIBUTIONS:
The Fund
pays quarterly distributions on the Funds Common Stock at the annual rate
of 7% of the rolling average of the prior four calendar quarter-end NAVs of the
Funds Common Stock, with the fourth quarter distribution being the greater
of 1.75% of the rolling average or the distribution required by IRS regulations.
Distributions to Common Stockholders are recorded on ex-dividend date. To the extent
that distributions in any year are not paid from long-term capital gains, net investment
income or net short-term capital gains, they will represent a return of capital.
Distributions are determined in accordance with income tax regulations that may
differ from accounting principles generally accepted in the United States of America.
Permanent book and tax differences relating to stockholder distributions
2018 Semiannual
Report to Stockholders | 51
Royce Value Trust
Notes to Financial Statements (unaudited)
(continued)
DISTRIBUTIONS
(continued):
will result
in reclassifications within the capital accounts. Undistributed net investment income
may include temporary book and tax basis differences, which will reverse in a subsequent
period. Any taxable income or gain remaining undistributed at fiscal year end is
distributed in the following year.
INVESTMENT
TRANSACTIONS AND RELATED INVESTMENT INCOME:
Investment
transactions are accounted for on the trade date. Dividend income is recorded on
the ex-dividend date. Non-cash dividend income is recorded at the fair market value
of the securities received. Interest income is recorded on an accrual basis. Premiums
and discounts on debt securities are amortized using the effective yield-to-maturity
method. Realized gains and losses from investment transactions are determined on
the basis of identified cost for book and tax purposes.
EXPENSES:
The Fund incurs
direct and indirect expenses. Expenses directly attributable to the Fund are charged
to the Funds 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 Funds are allocated by Royce & Associates
(Royce) under an administration agreement and are included in administrative
and office facilities and professional fees. The Fund has adopted a deferred fee
agreement that allows the Directors to defer the receipt of all or a portion of
directors fees otherwise payable. The deferred fees are invested in certain
Royce Funds until distributed in accordance with the agreement.
COMPENSATING
BALANCE CREDITS:
The Fund has
an arrangement with its custodian bank, whereby a portion of the custodians
fee is paid indirectly by credits earned on the Funds cash on deposit with
the bank. This deposit arrangement is an alternative to purchasing overnight investments.
Conversely, the Fund pays interest to the custodian on any cash overdrafts, to
the extent they are not offset by credits earned on positive cash balances.
Capital
Stock:
The Fund issued
1,329,003 and 2,795,800 shares of Common Stock as reinvestment of distributions
for the six months ended June 30, 2018 and the year ended December 31, 2017, respectively.
Borrowings:
The Fund is
party to a revolving credit agreement (the credit agreement) with BNP Paribas Prime
Brokerage International, Limited (BNPPI). The Fund pays a commitment fee of 0.50%
per annum on the unused portion of the credit agreement. The credit agreement has
a 360-day rolling term that resets daily; however, if the Fund exceeds certain
net asset value triggers, the credit agreement may convert to a 60-day rolling
term that resets daily. The Fund is required to pledge portfolio securities as collateral
in an amount up to two times the loan balance outstanding or as otherwise required
by applicable regulatory standards and has granted a security interest in the securities
pledged to, and in favor of, BNPPI as security for the loan balance outstanding.
If the Fund fails to meet certain requirements, or maintain other financial covenants
required under the credit agreement, the Fund may be required to repay immediately,
in part or in full, the loan balance outstanding under the credit agreement which
may necessitate the sale of portfolio securities at potentially inopportune times.
BNPPI may terminate the credit agreement upon certain ratings downgrades of its
corporate parent, which would result in the Funds entire loan balance becoming
immediately due and payable. The occurrence of such ratings downgrades may necessitate
the sale of portfolio securities at potentially inopportune times. The credit agreement
also permits, subject to certain conditions, BNPPI to rehypothecate portfolio securities
pledged by the Fund up to the amount of the loan balance outstanding. The Fund continues
to receive payments in lieu of dividends and interest on rehypothecated securities.
The Fund also has the right under the credit agreement to recall the rehypothecated
securities from BNPPI on demand. If BNPPI fails to deliver the recalled security
in a timely manner, the Fund is compensated by BNPPI for any fees or losses related
to the failed delivery or, in the event a recalled security is not returned by BNPPI,
the Fund, upon notice to BNPPI, may reduce the loan balance outstanding by the
value of the recalled security failed to be returned. The Fund receives a portion
of the fees earned by BNPPI in connection with the rehypothecation of portfolio
securities.
As of June
30, 2018, the Fund has outstanding borrowings of $70,000,000. During the six months
ended June 30, 2018, the Fund borrowed an average daily balance of $70,000,000
at a weighted average borrowing cost of 3.08%. The maximum amount outstanding during
the six months ended June 30, 2018 was $70,000,000. As of June 30, 2018, the aggregate
value of rehypothecated securities was $66,358,963. During the six months ended
June 30, 2018, the Fund earned $179,246 in fees from rehypothecated securities.
52 | 2018
Semiannual Report to Stockholders
Royce Value Trust
Notes to Financial Statements (unaudited)
(continued)
Investment
Advisory Agreement:
As compensation
for its services under the investment advisory agreement, Royce receives a fee comprised
of a Basic Fee (Basic Fee) and an adjustment to the Basic Fee based
on the investment performance of the Fund in relation to the investment record of
the S&P SmallCap 600 Index (S&P 600).
The Basic
Fee is a monthly fee equal to 1/12 of 1% (1% on an annualized basis) of the average
of the Funds month-end net assets for the rolling 60-month period ending
with such month (the performance period). The Basic Fee for each month is increased
or decreased at the rate of 1/12 of .05% for each percentage point that the investment
performance of the Fund exceeds, or is exceeded by, the percentage change in the
investment record of the S&P 600 for the performance period by more than two
percentage points. The performance period for each such month is a rolling 60-month
period ending with such month. The maximum increase or decrease in the Basic Fee
for any month may not exceed 1/12 of .5%. Accordingly, for each month, the maximum
monthly fee rate as adjusted for performance is 1/12 of 1.5% and is payable if
the investment performance of the Fund exceeds the percentage change in the investment
record of the S&P 600 by 12 or more percentage points for the performance
period, and the minimum monthly fee rate as adjusted for performance is 1/12 of .5%
and is payable if the percentage change in the investment record of the S&P
600 exceeds the investment performance of the Fund by 12 or more percentage points
for the performance period.
Notwithstanding
the foregoing, Royce is not entitled to receive any fee for any month when the investment
performance of the Fund for the rolling 36-month period ending with such month
is negative. In the event that the Funds investment performance for such a
performance period is less than zero, Royce will not be required to refund to the
Fund any fee earned in respect of any prior performance period.
For the
six rolling 60-month periods ended June 2018, the Funds investment performance
ranged from 24% to 30% below the investment performance of the S&P 600. Accordingly,
the net investment advisory fee consisted of a Basic Fee of $6,258,272 and a net
downward adjustment of $3,129,138 for the performance of the Fund relative to that
of the S&P 600. For the six months ended June 30, 2018, the Fund expensed
Royce investment advisory fees totaling $3,129,134.
Purchases
and Sales of Investment Securities:
For the
six months ended June 30, 2018, the costs of purchases and proceeds from sales of
investment securities, other than short-term securities, amounted to $255,499,437
and $258,270,619, respectively.
Cross trades
were executed by the Fund pursuant to Rule 17a-7 under the 1940 Act. Cross trading
is the buying or selling of portfolio securities between funds to which Royce serves
as investment adviser. At its regularly scheduled quarterly meetings, the Board
reviews such transactions as of the most recent calendar quarter for compliance
with the requirements and restrictions set forth by Rule 17a-7. Cross trades for
the six months ended June 30, 2018, were as follows:
COST
OF PURCHASES
PROCEEDS
FROM SALES
REALIZED
GAIN (LOSS)
$8,376,878
$
$
Transactions
in Affiliated Companies:
An Affiliated
Company as defined in the Investment Company Act of 1940, is a company in
which a fund owns 5% or more of the companys outstanding voting securities
at any time during the period. The Fund held the following positions in shares
of such companies at June 30, 2018:
SHARES
MARKET VALUE
COST OF
PROCEEDS
REALIZED
CHANGE IN NET
UNREALIZED
APPRECIATION
DIVIDEND
SHARES
MARKET VALUE
AFFILIATED
COMPANY
12/31/17
12/31/17
PURCHASES
FROM SALES
GAIN (LOSS)
(DEPRECIATION)
INCOME
6/30/18
6/30/18
HG Holdings
912,235
$
793,645
$
$
$
$
(200,692)
$
912,235
$
592,953
Houston Wire
& Cable
877,363
6,317,014
1,140,571
877,363
7,457,585
$
7,110,659
$
$
939,879
$
$
8,050,538
Subsequent
Events:
On July
5, 2018, the Fund completed a rights offering of Common Stock to its stockholders
at the rate of one common share for each 10 rights held by stockholders of record
on May 30, 2018. The rights offering resulted in the issuance of 7,120,544 common
shares at a price of $15.33, and proceeds of $109,157,940 to the Fund prior to the
deduction of estimated expenses of $545,000. The net asset value per share of the
Funds Common Stock was reduced by approximately $0.16 per share as a result
of the issuance.
2018 Semiannual
Report to Stockholders | 53
History Since Inception
The following
table details the share accumulations by an initial investor in the Funds who reinvested
all distributions and participated fully in primary subscriptions for each of the
rights offerings. Full participation in distribution reinvestments and rights offerings
can maximize the returns available to a long-term investor. This table should be
read in conjunction with the Performance and Portfolio Reviews of the Funds.
HISTORY
AMOUNT
INVESTED
PURCHASE
PRICE1
SHARES
NAV VALUE2
MARKET VALUE2
Royce Global Value Trust
10/17/13
Initial Purchase
$
8,975
$
8.975
1,000
$
9,780
$
8,975
12/11/14
Distribution
$0.15
7.970
19
9,426
8,193
12/10/15
Distribution
$0.10
7.230
14
9,101
7,696
12/9/16
Distribution
$0.14
7.940
18
10,111
8,446
12/12/17
Distribution
$0.11
10.610
11
13,254
11,484
6/30/18
$
8,975
1,062
$
13,137
$
11,162
Royce Micro-Cap Trust
12/14/93
Initial Purchase
$
7,500
$
7.500
1,000
$
7,250
$
7,500
10/28/94
Rights Offering
1,400
7.000
200
12/19/94
Distribution
$0.05
6.750
9
9,163
8,462
12/7/95
Distribution
$0.36
7.500
58
11,264
10,136
12/6/96
Distribution
$0.80
7.625
133
13,132
11,550
12/5/97
Distribution
$1.00
10.000
140
16,694
15,593
12/7/98
Distribution
$0.29
8.625
52
16,016
14,129
12/6/99
Distribution
$0.27
8.781
49
18,051
14,769
12/6/00
Distribution
$1.72
8.469
333
20,016
17,026
12/6/01
Distribution
$0.57
9.880
114
24,701
21,924
2002
Annual distribution
total $0.80
9.518
180
21,297
19,142
2003
Annual distribution
total $0.92
10.004
217
33,125
31,311
2004
Annual distribution
total $1.33
13.350
257
39,320
41,788
2005
Annual distribution
total $1.85
13.848
383
41,969
45,500
2006
Annual distribution
total $1.55
14.246
354
51,385
57,647
2007
Annual distribution
total $1.35
13.584
357
51,709
45,802
2008
Annual distribution
total $1.19 3
8.237
578
28,205
24,807
3/11/09
Distribution
$0.22 3
4.260
228
41,314
34,212
12/2/10
Distribution
$0.08
9.400
40
53,094
45,884
2011
Annual distribution
total $0.53 3
8.773
289
49,014
43,596
2012
Annual distribution
total $0.51
9.084
285
57,501
49,669
2013
Annual distribution
total $1.38
11.864
630
83,110
74,222
2014
Annual distribution
total $2.90
10.513
1,704
86,071
76,507
2015
Annual distribution
total $1.26
7.974
1,256
75,987
64,222
2016
Annual distribution
total $0.64
7.513
779
92,689
78,540
2017
Annual distribution
total $ 0.69
8.746
783
109,076
98,254
2018
Year-to-Date
distribution total $0.36
9.876
383
6/30/18
$
8,900
10,791
$
117,622
$
107,802
1
The purchase
price used for annual distribution totals is a weighted average of the distribution
reinvestment prices for the year.
2
Values
are stated as of December 31 of the year indicated, after reinvestment of distributions,
other than for initial purchase.
3
Includes
a return of capital.
54 | 2018
Semiannual Report to Stockholders
History Since Inception (continued)
HISTORY
AMOUNT
INVESTED
PURCHASE
PRICE1
SHARES
NAV VALUE2
MARKET
VALUE2
Royce Value
Trust
11/26/86
Initial Purchase
$
10,000
$
10.000
1,000
$
9,280
$
10,000
10/15/87
Distribution
$0.30
7.000
42
12/31/87
Distribution
$0.22
7.125
32
8,578
7,250
12/27/88
Distribution
$0.51
8.625
63
10,529
9,238
9/22/89
Rights Offering
405
9.000
45
12/29/89
Distribution
$0.52
9.125
67
12,942
11,866
9/24/90
Rights Offering
457
7.375
62
12/31/90
Distribution
$0.32
8.000
52
11,713
11,074
9/23/91
Rights Offering
638
9.375
68
12/31/91
Distribution
$0.61
10.625
82
17,919
15,697
9/25/92
Rights Offering
825
11.000
75
12/31/92
Distribution
$0.90
12.500
114
21,999
20,874
9/27/93
Rights Offering
1,469
13.000
113
12/31/93
Distribution
$1.15
13.000
160
26,603
25,428
10/28/94
Rights Offering
1,103
11.250
98
12/19/94
Distribution
$1.05
11.375
191
27,939
24,905
11/3/95
Rights Offering
1,425
12.500
114
12/7/95
Distribution
$1.29
12.125
253
35,676
31,243
12/6/96
Distribution
$1.15
12.250
247
41,213
36,335
1997
Annual distribution
total $1.21
15.374
230
52,556
46,814
1998
Annual distribution
total $1.54
14.311
347
54,313
47,506
1999
Annual distribution
total $1.37
12.616
391
60,653
50,239
2000
Annual distribution
total $1.48
13.972
424
70,711
61,648
2001
Annual distribution
total $1.49
15.072
437
81,478
73,994
2002
Annual distribution
total $1.51
14.903
494
68,770
68,927
1/28/03
Rights Offering
5,600
10.770
520
2003
Annual distribution
total $1.30
14.582
516
106,216
107,339
2004
Annual distribution
total $1.55
17.604
568
128,955
139,094
2005
Annual distribution
total $1.61
18.739
604
139,808
148,773
2006
Annual distribution
total $1.78
19.696
693
167,063
179,945
2007
Annual distribution
total $1.85
19.687
787
175,469
165,158
2008
Annual distribution
total $1.72 3
12.307
1,294
95,415
85,435
3/11/09
Distribution
$0.32 3
6.071
537
137,966
115,669
12/2/10
Distribution
$0.03
13.850
23
179,730
156,203
2011
Annual distribution
total $0.78 3
13.043
656
161,638
139,866
2012
Annual distribution
total $0.80
13.063
714
186,540
162,556
2013
Annual distribution
total $2.19 4
16.647
1,658
250,219
220,474
2014
Annual distribution
total $1.82
14.840
1,757
252,175
222,516
2015
Annual distribution
total $1.24
12.725
1,565
231,781
201,185
2016
Annual distribution
total $1.02
12.334
1,460
293,880
248,425
2017
Annual distribution
total $1.16
14.841
1,495
350,840
324,176
2018
Year-to-Date
distribution total $0.59
15.962
748
6/30/18
$
21,922
20,796
$
360,603
$
328,577
1
The purchase
price used for annual distribution totals is a weighted average of the distribution
reinvestment prices for the year.
2
Values are
stated as of December 31 of the year indicated, after reinvestment of distributions,
other than for initial purchase.
3
Includes a
return of capital.
4
Includes Royce
Global Value Trust spin-off of $1.40 per share.
2018 Semiannual
Report to Stockholders | 55
Distribution
Reinvestment and Cash Purchase Options
Why should
I reinvest my distributions?
By reinvesting
distributions, a stockholder can maintain an undiluted investment in the Fund. The
regular reinvestment of distributions has a significant impact on stockholder returns.
In contrast, the stockholder who takes distributions in cash is penalized when
shares are issued below net asset value to other stockholders.
How does
the reinvestment of distributions from the Royce closed-end funds work?
The Funds
automatically issue shares in payment of distributions unless you indicate otherwise.
The shares are generally issued at the lower of the market price or net asset value
on the valuation date.
How does
this apply to registered stockholders?
If your shares
are registered directly with a Fund, your distributions are automatically reinvested
unless you have otherwise instructed the Funds transfer agent, Computershare,
in writing, in which case you will receive your distribution in cash. A registered
stockholder also may have the option to receive the distribution in the form of
a stock certificate.
What if
my shares are held by a brokerage firm or a bank?
If your shares
are held by a brokerage firm, bank, or other intermediary as the stockholder of
record, you should contact your brokerage firm or bank to be certain that it is
automatically reinvesting distributions on your behalf. If they are unable to reinvest
distributions on your behalf, you should have your shares registered in your name
in order to participate.
What other
features are available for registered stockholders?
The Distribution
Reinvestment and Cash Purchase Plans also allow registered stockholders to make
optional cash purchases of shares of a Funds common stock directly through
Computershare on a monthly basis, and to deposit certificates representing your
RVT and RMT shares with Computershare for safekeeping. (RGT does not issue shares
in certificated form). Plan participants are subject to a $0.75 service fee for
each voluntary cash purchase under the Plans. The Funds investment adviser
absorbed all commissions on optional cash purchases under the Plans through June
30, 2018.
How do
the Plans work for registered stockholders?
Computershare
maintains the accounts for registered stockholders in the Plans and sends written
confirmation of all transactions in the account. Shares in the account of each participant
will be held by Computershare in non-certificated form in the name of the participant,
and each participant will be able to vote those shares at a stockholder meeting
or by proxy. A participant may also send stock certificates for RVT and RMT held
by them to Computershare to be held in non-certificated form. RGT does not issue
shares in certificated form. There is no service fee charged to participants for
reinvesting distributions. If a participant elects to sell shares from a Plan account,
Computershare will deduct a $2.50 service fee from the sale transaction. The Funds investment adviser absorbed all commissions on optional sales under the Plans
through June 30, 2018. If a nominee is the registered owner of your shares, the
nominee will maintain the accounts on your behalf.
How can
I get more information on the Plans?
You can call
an Investor Services Representative at (800) 221-4268 or you can request a copy
of the Plan for your Fund from Computershare. All correspondence (including notifications)
should be directed to: [Name of Fund] Distribution Reinvestment and Cash Purchase
Plan, c/o Computershare, PO Box 43078, Providence, RI 02940-3078, telephone (800)
426-5523 (from 9:00 A.M. to 5:00 P.M.).
56 | 2018
Semiannual Report to Stockholders
Directors
and Officers
All Directors
and Officers may be reached c/o The Royce Funds, 745 Fifth Avenue, New York, NY
10151
Charles
M. Royce, Director1
Age: 78 |
Number of Funds Overseen: 22 | Tenure: Since 1982
Non-Royce
Directorships: Director of Oxford Square Capital Corp.
Principal
Occupation(s) During Past Five Years: Chairman of the Board of Managers
of Royce & Associates, LP (Royce), the Funds investment
adviser; Chief Executive Officer (1972June 2016), President (1972-June 2014)
of Royce.
Christopher
D. Clark, Director1, President
Age: 53 |
Number of Funds Overseen: 22 | Tenure: Since 2014
Principal
Occupation(s) During Past Five Years: Chief Executive Officer (since
July 2016), President (since July 2014), Co-Chief Investment Officer (Since January
2014), Managing Director of Royce, a Member of the Board of Managers of Royce,
having been employed by Royce since May 2007.
Patricia
W. Chadwick, Director
Age: 69 |
Number of Funds Overseen: 22 | 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).
Christopher
C. Grisanti, Director
Age 56 | Number
of Funds Overseen: 22 | Tenure: Since 2017
Non-Royce
Directorships: None
Principal
Occupation(s) During Past Five Years: Co-Founder and Chief Executive
Officer of Grisanti Capital Management LLC, an investment advisory firm (since
1999). Mr. Grisantis prior business experience includes serving as Director
of Research and Portfolio Manager at Spears Benzak, Salomon & Farrell (from
1994 to 1999) and a senior associate at the law firm of Simpson, Thacher &
Bartlett (from 1988 to 1994).
Stephen
L. Isaacs, Director
Age: 78 |
Number of Funds Overseen: 22 | Tenure: Since 1989
Non-Royce
Directorships: None
Principal
Occupation(s) During Past Five Years: Attorney and President of Health
Policy Associates, Inc., consultants. Mr. Isaacss 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, Director
Age: 76 |
Number of Funds Overseen: 41 | Tenure: Since 2004
Non-Royce
Directorships: Director/Trustee of registered investment companies constituting
the 19 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, Director
Age: 78 |
Number of Funds Overseen: 22 | 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. Meisters 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
OBrien, Director
Age: 72 |
Number of Funds Overseen: 41 | Tenure: Since 2001
Non-Royce
Directorships: Director/Trustee of registered investment companies
constituting the 19 Legg Mason Funds.
Principal
Occupation(s) During Past Five Years: Trustee Emeritus of Colgate University
(since 2005); Board Member of Hill House, Inc. (since 1999); Formerly Director of
TICC Capital Corp. (from 2003-2017): 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).
Michael
K. Shields, Director
Age: 60 |
Number of Funds Overseen: 22 | Tenure: Since 2015
Principal
Occupation(s) During Past Five Years: President and Chief Executive
Officer of Piedmont Trust Company, a private North Carolina trust company (since
May 2012). Mr. Shieldss prior business experience includes owning Shields Advisors,
an investment consulting firm (from April 2010 to June 2012).
Francis
D. Gannon, Vice President
Age: 50 |
Tenure: Since 2014
Principal
Occupation(s) During Past Five Years: Co-Chief Investment Officer (since
January 2014) and Managing Director of Royce, having been employed by Royce since
September 2006.
Daniel
A. OByrne, Vice President
Age: 55 |
Tenure: Since 1994
Principal
Occupation(s) During Past Five Years: Principal and Vice President of
Royce, having been employed by Royce since October 1986.
Peter K.
Hoglund, Treasurer
Age: 52 |
Tenure: Since 2015
Principal
Occupation(s) During Past Five Years: Chief Financial Officer, Chief
Administrative Officer, and Managing Director of Royce, having been employed by
Royce since December 2014. Prior to joining Royce, Mr. Hoglund spent more than 20
years with Munder Capital Management in Birmingham, MI, serving as Managing Director
and Chief Financial Officer and overseeing all financial aspects of the firm. He
began his career at Munder as a portfolio manager.
John E.
Denneen, Secretary and Chief Legal Officer
Age: 51 |
Tenure: 1996-2001 and Since 2002
Principal
Occupation(s) During Past Five Years: General Counsel, Managing Director,
and, since June 2015, a Member of the Board of Managers of Royce. Chief Legal and
Compliance Officer and Secretary of Royce.
Lisa Curcio,
Chief Compliance Officer
Age: 58 |
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 Director.
Director will hold office until their successors have been duly elected and qualified
or until their earlier resignation or removal.
2018 Semiannual
Report to Stockholders | 57
Notes to Performance and Other Important
Information
The thoughts
expressed in this Review and Report concerning recent market movements and
future prospects for small company stocks are solely the opinion of Royce at June
30, 2018, 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 Royces investment intentions
with respect to those securities reflect Royces opinions as of June 30, 2018
and are subject to change at any time without notice. There can be no assurance
that securities mentioned in this Review and Report will be included in
any Royce-managed portfolio in the future. 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. All publicly released material information
is always disclosed by the Funds on the website at www.roycefunds.com.
Sector weightings
are determined using the Global Industry Classification Standard (GICS).
GICS was developed by, and is the exclusive property of, Standard & Poors
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 indexs returns
include net reinvested dividends and/or interest income. Frank Russell Company (Russell) is the source and owner of the trademarks, service marks and
copyrights related to the Russell Indexes. Russell® is a trademark of Frank Russell
Company. Neither Russell nor its licensors accept any liability for any errors or
omissions in the Russell Indexes and / or Russell ratings or underlying data and
no party may rely on any Russell Indexes and / or Russell ratings and / or underlying
data contained in this communication. No further distribution of Russell Data is
permitted without Russells express written consent. Russell does not promote,
sponsor or endorse the content of this communication. The Russell 2000 Index 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 2000
Value and Growth Indexes consist of the respective value and growth stocks within
the Russell 2000 as determined by Russell Investments. 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 1000
Index is an index of domestic large-cap stocks. It measures the performance of the
1,000 largest publicly traded companies 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 unmanaged, capitalization-weighted 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 S&P SmallCap 500
and 600 are indexes of U.S. large-cap and small-cap stocks, respectively, selected
by Standard & Poors based on market size, liquidity, and industry grouping,
among other factors. The CBOE Russell 2000 Volatility Index (RVX) measures market
expectations of near-term volatility conveyed by Russell 2000 stock index option
prices. 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.
The Price-Earnings,
or P/E, Ratio is calculated by dividing a companys share price by its trailing
12-month earnings-per share (EPS). The Price-to-Book, or P/B, Ratio is calculated
by dividing a companys share price by its book value per share. For the Morningstar
Small Blend Category: © 2017 Morningstar. All Rights Reserved. The information regarding
the category in this piece is: (1) is proprietary to Morningstar and/or its content
providers; (2) may not be copied or distributed; and (3) is not warranted to be
accurate, complete or timely. Neither Morningstar nor its content providers are
responsible for any damages or losses arising from any use of this information.
The Morningstar Style Map uses proprietary scores of a stocks value and growth
characteristics to determine its placement in one of the five categories listed
on the horizontal axis. These characteristics are then compared to those of other
stocks within the same market capitalization band. Each is scored from zero to 100
for both value and growth attributes. The value score is subtracted from the growth
score to determine the overall style score. For the vertical, market cap axis, Morningstar
subdivides into size groups. Giant-cap stocks are defined as those that account
for the top 40% of the capitalization of each style zone; large-cap stocks represent
the next 30%; mid-cap stocks the next 20%; small-cap stocks the next 7%; micro-cap
stocks the smallest 3%. The Royce Funds is a service mark of The Royce Funds. Distributor:
Royce Fund Services, LLC.
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 uses 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 stockholder
communications or reports.
Authorized Share Transactions
Royce Global
Value Trust, Royce Micro-Cap Trust, and Royce Value Trust may each repurchase up
to 5% of the issued and outstanding shares of its respective common stock during
the year ending December 31, 2017. Any such repurchases would take place at then
prevailing prices in the open market or in other transactions. Common stock repurchases
would be effected at a price per share that is less than the shares then
current net asset value.
Royce Global
Value Trust, Royce Micro-Cap Trust, and Royce Value Trust are also authorized to
offer their common stockholders an opportunity to subscribe for additional shares
of their common stock through rights offerings at a price per share that may be
less than the shares then current net asset value. The timing and terms of
any such offerings are within each Boards discretion.
Annual
Certifications
As required,
the Funds have submitted to the New York Stock Exchange (NYSE) for
the annual certification of the Funds Chief Executive Officer that he is
not aware of any violation of the NYSEs listing standards. The Funds also
have included the certification of the Funds Chief Executive Officer and
Chief Financial Officer required by section 302 of the Sarbanes-Oxley Act of 2002
as exhibits to the Funds form N-CSR for the period ended December 31, 2016,
filed with the Securities and Exchange Commission.
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 SECs 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 quarters holdings are posted. The
Funds Forms N-Q may also be reviewed and copied at the SECs Public
Reference Room in Washington, D.C. To find out more about this public service, call
the SEC at (800) 732-0330. The Funds complete schedules of investments are
updated quarterly, and are available at www.roycefunds.com.
58 | 2018
Semiannual Report to Stockholders
Board Approval of Investment Advisory Agreements
At meetings
held on June 4-5, 2018, the Funds respective Boards of Directors, including
all of the non-interested directors, approved the continuation of investment advisory
agreements (each, an Investment Advisory Agreement and collectively,
the Investment Advisory Agreements) between Royce & Associates,
LP (R&A) and each of Royce Value Trust, Inc., Royce Micro-Cap
Trust, Inc., and Royce Global Value Trust, Inc. (each, a Fund and collectively,
the Funds). In reaching these decisions, each Board reviewed the materials
provided by R&A, which included, among other things, information prepared
internally by R&A and independently by Broadridge Financial Solutions, Inc.
(Broadridge) using the database and methodology of Morningstar Associates,
LLC (Morningstar) containing detailed investment advisory fee, expense
ratio, and investment performance comparisons for the Funds with other funds in
their respective peer groups, 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 each Board prepared by independent counsel
to the non-interested directors. R&A also provided the directors with an analysis
of its profitability with respect to providing investment advisory services to
each of the Funds. In addition, each Board took into account information furnished
throughout the year at regular Board meetings, including reports on investment
performance, stockholder services, regulatory compliance, brokerage commissions
and research, and brokerage and other execution products and services provided
to the Funds. Each Board also considered other matters it deemed important to the
approval process, such as allocation of brokerage commissions, soft dollar research services R&A receives and other direct and indirect benefits
to R&A and its affiliates, from their relationship with the relevant Fund.
The directors also met throughout the year with investment advisory personnel from
R&A. Each Board also noted R&As efforts to provide enhanced analytical
tools to its investment staff along with the ongoing meetings conducted by R&As Co-Chief Investment Officers with portfolio managers experiencing performance
challenges in an attempt to address such challenges. Each Board, in its deliberations,
recognized that, for many of the Funds stockholders, 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 stockholders between
R&A and each Fund. In considering factors relating to the approval of the continuance
of the Investment Advisory Agreements, the non-interested directors received assistance
and advice from, and met separately with, their independent counsel. While all three
of the Investment Advisory Agreements were considered at the same Board meetings,
the Boards dealt with each agreement separately. Among other factors, the directors
considered the following:
The nature,
extent and quality of services provided by R&A:
Each Board
considered the following factors to be of fundamental importance to its consideration
of whether to approve the continuance of the Investment Advisory Agreement: (i)
R&As more than 40 years of value investing experience and track record;
(ii) the history of long-tenured R&A portfolio managers managing the Funds;
(iii) R&As focus on mid-cap, small-cap and micro-cap value investing;
(iv) the consistency of R&As approach to managing the Funds and open-end
mutual funds over more than 40 years; (v) the integrity and high ethical standards
adhered to at R&A; (vi) R&As specialized experience in the area
of trading small- and micro-cap securities; (vii) R&As historical ability
to attract and retain portfolio management talent and (viii) R&As focus
on stockholder interests as exemplified by expansive stockholder reporting and
communications. The Boards also noted that R&As compensation policy arrangements
strongly encourage portfolio manager investment in each Fund that they manage. Each
Board reviewed the services that R&A provides to each Fund, including, but
not limited to, managing each Funds investments in accordance with the stated
policies of each Fund. Each Board considered the fact that R&A provided certain
administrative services to the Funds at cost pursuant to the Administration Agreement
between the Funds and R&A. Each Board determined that the services to be provided
to each Fund by R&A would be the same as those that it previously provided
to the relevant Fund. The Boards also took into consideration the histories, reputations
and backgrounds of R&As portfolio managers for the Funds, finding that
these would likely have an impact on
the continued success of the Funds. Lastly, each Board noted R&As ability
to attract and retain qualified and experienced personnel. The directors 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 the Funds.
Investment
performance of the Funds and R&A:
Although the
registered investment companies managed by R&A currently span a wider risk
spectrum than they have historically, R&A generally emphasizes a risk-averse
approach to investing. In light of that approach, each Board believes that risk-adjusted
performance continues to be the most appropriate measure of each Funds investment
performance. One measure of risk-adjusted performance the Boards use 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 Funds annualized excess returns by its annualized standard
deviation to determine reward per unit of risk. The higher the Sharpe Ratio, the
better a Funds historical risk-adjusted performance. The Boards attach primary
importance to risk-adjusted performance over relatively long periods of time, typically
3 to 10 years. It was noted, however, that Royce Global Value Trust, Inc. (RGT) had less than five full calendar years of performance because its inception
date was October 18, 2013.
Overall, the
Boards noted that financial markets were marked by increased return dispersion,
declining correlation, and a steepening yield curve in 2017, just as they were
in 2016. Similar to 2016, small-cap stocks enjoyed a very strong year in 2017 as
a result of these factors. Unlike 2016, defensive and growth stocks outperformed
cyclical and value stocks in 2017. Notwithstanding the market leadership of defensive
and growth stocks in 2017, each of Royce Value Trust, Inc. (RVT) and
Royce Micro-Cap Trust, Inc. (RMT) still enjoyed solid risk-adjusted
performance in 2017. While each Board recognized that the solid performance of RVT
and RMT in 2017 is not dispositive, it also noted that such performance during
the more historically customary market environment that prevailed in 2017 was
also not insignificant. The Boards noted that RVT and RMT also generally underperformed
their respective peers, as evidenced by their Sharpe Ratios, from approximately
March 2009 through the end of 2015. This post-2008 market period was marked by historically
low interest rates and significant U.S. Federal Reserve market intervention. During
this period, highly leveraged, non-earning companies and yield-oriented securities
(e.g., master limited partnerships, real estate investment trusts, and utilities)
generally outperformed the higher quality companies (e.g., those with solid balance
sheets, low leverage, the ability to generate and effectively allocate free cash
flow, and strong returns on invested capital) and cyclical companies favored by
RVT and RMT. The directors also noted, however, that the relative performance for
each of RVT and RMT during the more historically customary market cycle preceding
the 2008 financial crisis was quite strong. Using data provided by Broadridge, the
Sharpe Ratio for RVT placed in the 1st, 1st, 3rd, and 4th quartiles within the
Morningstar Small Blend category while the Sharpe Ratio for RMT placed in the 2nd,
4th, 4th, and 4th quartiles within the Morningstar Small Blend category for the
1-year, 3-year, 5-year, and 10-year periods, respectively, ended December 31, 2017.
The relevant Boards further noted that the use of leverage by each of RVT and RMT
through preferred stock (prior to November 15, 2012) and borrowings resulted in
higher volatility and worse down market performance. The 2017 market environment
also enabled RGT to outperform its peers in 2017 as evidenced by its Sharpe Ratio.
Using data provided by Broadridge, the Sharpe Ratio for RGT placed in the 1st and
2nd quartiles within the Morningstar World Small/Mid Stock category for the 1-year
and 3-year periods, respectively, ended December 31, 2017. The Board noted the inherent
limitations of using 1-year and 3-year Sharpe Ratios in evaluating RGTs investment
performance.
2018 Semiannual
Report to Stockholders | 59
Board Approval of Investment Advisory Agreements
In addition
to each Funds riskadjusted performance, the Boards also reviewed and
considered the absolute total returns and down market performance for each Fund
and the long-term performance records of each of RVT and RMT for periods of 10
years and longer. The Boards further noted that R&A manages a number of funds
that invest in micro-cap, small-cap, and mid-cap issuers, many of which had outperformed
their benchmark indexes and their competitors during the periods prior to the
U.S. Federal Reserves near zero interest rate policy and related market interventions
and during 2017 as noted above. Although each Board recognized that past performance
is not necessarily an indicator of future results, it found that R&A had the
necessary qualifications, experience and track record in managing micro-cap, small-cap,
and mid-cap securities to manage the relevant Fund. Each Board determined that R&A continued to be an appropriate investment adviser for the relevant Fund
and concluded that the relevant Funds performance supported the approval
of the continuance of its Investment Advisory Agreement.
Cost of
the services provided and profits realized by R&A from its relationship with
the Funds:
Each Board
considered the cost of the services provided by R&A and profits realized by
R&A from its relationship with each Fund. As part of the analysis, each Board
discussed with R&A its methodology in allocating its costs to each Fund and
concluded that R&As allocations were reasonable. The RVT Board noted
that RVT was not profitable to R&A during the year ended December 31, 2017.
The Boards of RMT and RGT concluded that R&As profits during the year
ended December 31, 2017 in respect of RMT and RGT, respectively, 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:
Each Board
considered whether there have been economies of scale in respect of the management
of each Fund, whether each Fund has appropriately benefited from any economies
of scale and whether there is potential for realization of any further economies
of scale. Each Board noted the time and effort involved in managing portfolios of
micro-, small- and mid-cap stocks and that they did not involve the same efficiencies
as do portfolios of large-cap stocks. The directors noted that, as closed-end funds,
the Funds generally would not be expected to have significant inflows of capital
that might produce increasing economies of scale. Each Board concluded that the
current fee structure for each Fund was reasonable, that stockholders sufficiently
participated in economies of scale and that no changes were currently necessary.
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:
Each Board
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 Boards noted that the contractual advisory fee rate for RVT
and RMT was lower than the median of its Broadridge-assigned peers while the contractual
advisory fee rate for RGT was higher than the median of its Broadridge-assigned
peers. Each Board further noted the importance of the net expense ratio in measuring
a funds efficiency, particularly in light of the variations in the mutual
fund industry as to which entity is responsible for particular types of expenses.
In the case
of RVT, its Board noted that it had a 1.00% basic fee that is subject to adjustment
up or down (up to 0.50% in either direction) based on its performance versus the
S&P 600 SmallCap Index over a rolling period of 60 months. The fee is charged
on average net assets over that rolling period. As a result, in a rising market,
the fee will be smaller than a fee calculated on the current years average
net assets, and vice versa. The Board determined that the performance adjustment
feature continued to serve as an appropriate incentive to R&A to manage RVT
for the benefit of its long-term common stockholders. The Board also noted that
the fee arrangement, which also includes a provision for no fee in periods where
RVTs trailing three-year performance is negative, requires R&A to measure
RVTs performance monthly against the S&P 600, an unmanaged index. Instead
of receiving a set fee regardless of its performance, R&A is penalized for
poor performance. The Board noted that RVTs net expense ratio of 0.65% placed
it in the 1st quartile within its Broadridge-assigned peer group for 2017. In the
case of RMT, the Board noted that it also had a 1.00% basic fee subject to adjustment
up or down based on its performance versus the Russell 2000 Index over a rolling
36 month period. The fee is charged on average net assets over that rolling period.
As a result, in a rising market, the fee will be smaller than a fee calculated
on the current years average net assets, and vice versa. The Board determined
that the performance adjustment feature continued to serve as an incentive to R&A to manage RMT for the benefit of its long-term common stockholders. The Board
noted that RMTs net expense ratio of 0.89% placed it in the 1st quartile
within its Broadridge-assigned peer group for 2017. The directors further noted
that RMTs net expense ratio was actually 22 basis points lower than the median
of its Broadridge-assigned peer group and 45 basis points lower than the average
expense ratio for the 44 non-institutional, non-ETF domestic funds with weighted
average market capitalizations of less than $1 billion within the Morningstar database..
Finally, in the case of RGT, the Board noted that its net expense ratio of 1.67%
placed it in the 4th quartile within its Broadridge-assigned peer group for 2017,
44 basis points above the peer group median. The directors noted, however, that
RGT had the lowest weighted average market capitalization within that peer group.
The Boards
also noted that R&A manages the Funds in an active fashion. The industry accepted
metric for measuring how actively an equity portfolio is managed is called active
share. In particular, active share measures how much the holdings of an equity
portfolio differ from the holdings of its appropriate passive benchmark index. At
the extremes, a portfolio with no holdings in common with the benchmark would
have 100% active share, while a portfolio that is identical to the benchmark would
have 0% active share. R&A presented a chart to the Boards which demonstrated
that funds with high active share scores had higher expense ratios than funds with
lower active share scores due to the resources required for the active management
of those funds. R&A also provided a 2018 article from a mutual fund news website
to each Board that indicated that R&As open-end funds had the third
highest asset-weighted active share among the open-end fund complexes that were
examined (excluding all ETFs, all money market funds, and all funds-of-funds). The
Boards noted that the active shares for RVT, RMT, and RGT were 89%, 95%, and 97%,
respectively, for the calendar year ended December 31, 2017.
Each Board
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,
the base investment advisory fee for RVT and RMT and the advisory fee for RGT compared
favorably to the investment advisory fees charged to those other accounts.
No single
factor was cited as determinative to the decision of the directors. Rather, after
weighing all of the considerations and conclusions discussed above, each entire
Board, including all of the non-interested directors, approved the continuation
of the relevant Investment Advisory Agreement, concluding that the continuation
of such agreements was in the best interest of the shareholders of the respective
Funds and that each Funds investment advisory fee rate was reasonable in
relation to the services provided.
60 | 2018
Semiannual Report to Stockholders
About The Royce Funds
Contact Us
Unparalleled Knowledge + Experience
Pioneers in small-cap investing, with 40+ years
of experience, depth of knowledge, and focus.
Independent Thinking
The confidence to go against consensus, the insight
to uncover opportunities others might miss, and the
tenacity to stay the course through market cycles.
Specialized Approaches
Strategies that use value, core, or growth investment
approaches to select micro-cap, small-cap, and
mid-cap companies.
Unwavering Commitment
Our team of 18 portfolio managers have significant
personal investments in the strategies they manage.
GENERAL INFORMATION
General Royce Funds information including
an overview of our firm and Funds
(800) 221-4268
COMPUTERSHARE
Transfer Agent and Registrar
Speak with a representative about:
Your account, transactions, and forms
(800) 426-5523
FINANCIAL ADVISORS AND BROKER-DEALERS
Speak with your regional Royce contact regarding:
Information about our firm, strategies, and Funds
Fund Materials
(800) 337-6923
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 5. Audit Committee of Listed Registrants. Not applicable to this semi-annual
report.
Item 6. Investments.
(a) See Item 1.
(b) Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management
Investment Companies. Not applicable to this semi-annual report.
Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not applicable to this semi-annual report.
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.
Item 11. Controls and Procedures.
(a) Disclosure Controls and Procedures. The Principal Executive and Financial Officers
concluded that the Registrants 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 Registrants 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.
Item 12. Exhibits. Attached hereto.
(a)(1) Not applicable to this semi-annual report.
(a)(2) Separate certifications by the Registrants Principal Executive
Officer and Principal Financial Officer as required by Rule 30a-2(a) under the Investment
Company Act of 1940.
(a)(3) Not applicable
(b) Separate certifications by the Registrants 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.
ROYCE GLOBAL VALUE TRUST, INC.
BY: /s/ Christopher D. Clark
Christopher D. Clark
President
Date: August 29, 2018
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.
ROYCE GLOBAL
VALUE TRUST, INC.
ROYCE GLOBAL
VALUE TRUST, INC.
BY: /s/ Christopher D. Clark
BY: /s/ Peter K. Hoglund
Christopher
D. Clark
Peter K.
Hoglund
President
Chief Financial
Officer
Date: August
29, 2018
Date: August
29, 2018