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: 811-04875

 

Name of Registrant: Royce Value Trust, Inc.

 

Address of Registrant: 745 Fifth Avenue

New York, NY 10151

 

Name and address of agent for service:  John E. Denneen, Esquire

  745 Fifth Avenue
New York, NY 10151

 

Registrant's telephone number, including area code: (212) 508-4500

Date of fiscal year end: December 31

Date of reporting period: January 1, 2017 – December 31, 2017

 

Item 1. Reports to Shareholders.

 

 

 

       
     
    DECEMBER 31, 2017
     
     
     
    2017 Annual
    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 fund’s Board of Directors. A closed-end fund raises cash for investment by issuing a fixed number of shares through initial and other public offerings that may include shelf offerings and periodic rights offerings. Proceeds from the offerings are invested in an actively managed portfolio of securities. Investors wanting to buy or sell shares of a publicly traded closed-end fund after the offerings must do so on a stock exchange, as with any publicly traded stock. 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 investor’s total return comes from the reinvestment of distributions. By reinvesting distributions, our investors can maintain an undiluted investment in a Fund. To get a fair idea of the impact of reinvested distributions, please see the charts on pages 62 and 63. For additional information on the Funds’ Distribution Reinvestment and Cash Purchase Options and the benefits for stockholders, please see page 64 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 Fund’s MDP. You should not draw any conclusions about a Fund’s investment performance from the amount of distributions or from the terms of a Fund’s MDP. A Fund’s Board of Directors may amend or terminate the MDP at any time without prior notice to stockholders; however, at this time there are no reasonably foreseeable circumstances that might cause the termination of any of the MDPs.


This page is not part of the 2017 Annual Report to Stockholders

       

Table of Contents      
       
       
Annual Review      
       
Letter to Our Stockholders   2  
       
Performance   7  
       
       
Annual Report to Stockholders      
       
Royce Global Value Trust      
       

Managers’ Discussions of Fund Performance

  8  
       

Schedule of Investments

  10  
       

Other Financial Statements

  15  
       
Royce Micro-Cap Trust      
       

Managers’ Discussion of Fund Performance

  24  
       

Schedule of Investments

  26  
       

Other Financial Statements

  31  
       
Royce Value Trust      
       

Managers’ Discussion of Fund Performance

  42  
       

Schedule of Investments

  44  
       

Other Financial Statements

  50  
       
History Since Inception   62  
       
Distribution Reinvestment and Cash Purchase Options   64  
       
Directors and Officers   65  
       
Notes to Performance and Other Important Information   66  
       
Results of Stockholders Meetings   67  




This page is not part of the 2017 Annual Report to Stockholders

       

Letter to Our Stockholders

A GOOD YEAR, A PUZZLING PATTERN

A good year for equities, 2017 also looked a little strange at first...
It was a terrific year for stocks in 2017 up and down the asset class scale and across much of the globe. Yet it was also a seemingly odd year, and it played out much differently than we thought it would. A second consecutive year of double-digit returns for small-cap stocks, with the Russell 2000 Index gaining 14.6% in 2017,1 was more than welcome, of course, even as returns also defied what we would have anticipated against the backdrop of a rapidly growing domestic economy and a rebounding global one. While large-cap’s relatively higher returns in 2017 made sense to us in this context, we also expected that small-cap would draw the bulk of its strength from cyclicals and value stocks in this healthy environment. So we were surprised to see certain growth and defensive stocks take the lead early in 2017 after lagging—in some cases significantly—in 2016, a year that marked its own significant (and in our view favorable) leadership reversals to cyclicals and value. Over the last three years, then, we have transitioned from
2015’s very narrow, growth-led market to 2016’s broader move driven by cyclicals and value stocks to 2017, in which growth reasserted leadership while value lagged significantly.

It was a terrific year for stocks in 2017 up and down the asset class scale and across much of the globe.

  At first, we chalked up this apparent oddity to the market’s long history of refusing to behave in a logical fashion, at least over the short term. As we parsed the data more closely, however, we were able to more accurately decode what happened. First, the advantages enjoyed by growth stocks and defensives within the Russell 2000 came disproportionately from Health Care, which rose 35.5% in 2017, making it by far the best-performing sector within the small-cap index. Rising more than 50%, biotechnology was particularly strong, bouncing back from a corrective phase



1 It was also the first calendar year since its 1978 inception in which the small-cap index posted a return between 6% and 16%.

2 | This page is not part of the 2017 Annual Report to Stockholders

       

LETTER TO OUR STOCKHOLDERS

in 2016 while pharmaceuticals also made an impressive recovery, climbing 37.2%. In aggregate, five of the six industry groups that comprise the Health Care sector in the Russell 2000 outpaced the overall index in 2017.

     Following Health Care, however, were four sectors in more cyclical areas, each of which also beat the small-cap index: Consumer Discretionary (+15.6%), Industrials (+19.8%), Information Technology (+17.4%), and Materials (+16.7%). Among the index’s largest sectors, tech is also arguably its most diverse, embracing a mix of cyclical growth and value companies. Two of its more growth-oriented industries—Internet software & services (+28.4%) and software (+27.3%)—did very well while two of its more cyclical industries—electronic equipment, instruments & components (+23.9%) and semiconductors & semiconductor equipment (+15.2%)—also had index-beating returns in 2017.
 
     What, then, contributed most to the odd disparity in small-cap results between cyclicals and defensives, value and growth? An underwhelming, low single-digit performance from banks was arguably the major factor. Slotted in the Financials sector, banks had a weighting just shy of 11% in the Russell 2000 at year-end, larger than six of the 11 sectors in the index, which gives their performance a meaningful impact. (In the Russell 2000 Value Index, their weighting was just shy of 20% at year-end— larger than any other sector in the style index.) Anemic returns for small-cap banks thus played a major role in relative disadvantages for both cyclicals and value. We find the following illustration especially revealing: defensives were up 20.0% in 2017 versus 12.7% for cyclicals. With banks, biotechnology, and pharmaceuticals excluded, however, cyclicals showed better absolute and relative performance—up 15.0% versus 11.4% for defensives.
 
A Different Picture Emerges Ex-Outliers
2017 Russell 2000 Cyclical vs Defensive Sector Returns
 
Cyclical and Defensive are defined as follows: Cyclical, Consumer Discretionary, Energy, Financials, Industrials. Defensive: Consumer Staples, Health Care, Real Estate, Telecommunication Services, Utilities.
 
    We think this outlier—excluding comparison goes a long way toward explaining why results for cyclicals versus defensives and value versus growth at first glance looked so strange in a period of economic acceleration.

ARE SMALL-CAPS POISED FOR ANOTHER SHIFT?

After an encouraging 4Q17, can small-cap cyclicals take the lead going forward?
Being narrower, growth-led markets typically create challenges for active managers, who tend to embrace a wider swath of companies. So it was not surprising that results for domestic active small-cap strategies were more varied, and we were pleased to see a number of market-beating performances for a select number of approaches. No doubt, the intertwined effect of strong absolute and relative results for certain cyclical sectors and vibrant global economic growth was the dominant factor. So while active strategies faced crosscurrents during the year as investors revisited more speculative issues, they were also bolstered by the expanding global economy.


Going forward, we expect investors to increasingly focus on individual company attributes, especially cyclical exposure and company-specific risks. Our view is that this performance pattern should extend into 2018.

This page is not part of the 2017 Annual Report to Stockholders | 3

       

 
Equity Indexes as of December 31, 2017 (%)                    
    1-YR   3-YR   5-YR   10-YR
 
Russell 2000     14.65       9.96       14.12       8.71  
 
Russell 2000 Value     7.84       9.55       13.01       8.17  
 
Russell 2000 Growth     22.17       10.28       15.21       9.19  
 
S&P 500     21.83       11.41       15.79       8.50  
 
Russell 1000     21.69       11.23       15.71       8.59  
 
Nasdaq Composite     28.24       13.38       17.98       10.04  
 
Russell Midcap     18.52       9.58       14.96       9.11  
 
Russell Microcap     13.17       8.91       14.29       7.68  
 
Russell Global ex-U.S. Small Cap     30.49       11.27       9.25       3.89  
 
Russell Global ex-U.S. Large Cap     27.47       8.09       7.17       2.09  
 
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.

     This raises the question of when and how—even if—the market’s response to the quickening pace of global growth will mark a more pronounced shift to cyclicals. A clue may have been found in a reversal that occurred in the fourth quarter, when small-cap cyclicals enjoyed higher returns than defensives, which is typically the case in a growing economy. After trailing through the first three quarters of 2017, small-cap cyclicals advanced 3.9% while defensive stocks were up 1.9% (and the Russell 2000 was up 3.3%). Going forward, we expect investors to increasingly focus on individual company attributes, especially cyclical exposure and company-specific risks. Our view is that this performance pattern should extend into 2018.

WHEN IT COMES TO SMALL-CAP, IT’S THE COMPANIES, NOT THE INDEXES

Its high valuation makes the Russell 2000 Index look risky, but numerous opportunities can still be found in small-cap
Based on this view, we believe the opportunity for small-cap investors is not the index itself or the broader asset class as a whole—it’s in select companies in the asset class. In a similar vein, we think that investors should lower their expectations for overall small-cap returns—which is why we believe selectivity has been so critical of late, and why we are increasingly convinced that it will remain so in 2018. Both the lofty state of small-cap valuations at the end of 2017 and recent performance patterns suggest that returns are unlikely to stay as elevated as they have been—for
the index, growth stocks, and defensives in particular, but not necessarily for certain cyclical small-caps. We suspect that success over the next few years will hinge on making careful selections and maintaining discipline—in essence, the time-honored argument for the importance of active small-cap management.

     A look at five-year results for the Russell 2000 and Russell 2000 Growth best clarifies our thinking, as both exceeded their long-term averages. The small-cap index’s 14.1% five-year average annual total return for the period ended December 31, 2017 ran appreciably higher than its 10.6% monthly rolling five-year average since inception (12/31/78). The spread was even more pronounced for growth—a 15.2% five-year average annual total return for the same period versus its 8.6% monthly rolling five-year average since inception. These higher-than-average returns simply do not look sustainable to us over the long run. To be sure, while we are optimistic about the prospects for select small-cap companies, we remain firm believers in reversion to the mean for the index.
 
 
Latest Returns Much Higher Than History

     For context, we invite investors to consider how the metrics for the Russell 2000 stack up compared to a fundamentally strong small-cap business with positive earnings and healthy cash flows from operations. At the end of 2017, more than 34% of the companies in the small-cap index had no earnings compared to only 25% at the end of 2007. The index in aggregate also had higher leverage than it did 10 years ago: at the end of 2017, the weighted average long-term debt to capital ratio2 for the Russell


2 Long-term debt to capital is calculated by dividing a company’s long-term debt by its total capital.

4 | This page is not part of the 2017 Annual Report to Stockholders

 

LETTER TO OUR STOCKHOLDERS

2000 was 35% versus 29% at the end of 2007. Add to all this the fact that small-caps have not seen a pullback greater than 6.4% for nearly two years dating back to the last small-cap trough on February 11, 2016, and the Russell 2000 looks very risky to us, especially compared to the opportunities to be found in individual small-cap businesses. From our perspective as small-cap specialists, all of this makes a small-cap correction look increasingly likely in 2018. Financially sound companies with growing earnings and modest valuations look far better positioned to us for the kind of lower-return market we are anticipating. Our expectation for annual small-cap returns falls in the 5-7% range over the intermediate term. It’s also worth noting that five-year periods in the zone of 5-10% for the small-cap index have been those with the biggest outperformance spread for active managers.

     Two other points are worth emphasizing. The first is to offer a seemingly counterintuitive word of caution about the expanding global economy. As excited as we are about the current period of synchronized global growth, we have also observed that Main Street and Wall Street do not always walk hand in hand. Market cycles and economic cycles are different animals. As economic news continues to improve, there is no guarantee that the market will match its pace. Ultimately, we see global growth as a positive for stocks. But the market may well deviate from what the economy is doing in the months ahead (which is fairly typical) as investors try to sort things out after an almost 10-year bull market for large-caps and a nearly two-year upswing for small-caps.

     Our second point is to highlight the enormity and diversity of the U.S. small-cap universe. This goes beyond the more than 2,200

publicly traded companies with market capitalizations between $100 million and $3 billion. It also pertains to performance and valuation. For example, the top two deciles of the Russell 2000 were up 121% and 51% in 2017, while the bottom two fell 55% and 28%. Given such wide dispersion, we believe that we can always find long-term opportunities.
 
 
Divergence: Russell 2017 Returns
THE SMALL-CAP OPPORTUNITY:
GLOBAL GROWTH IN CYCLICALS


We see leadership coming from small-caps in economically sensitive industries that blend profitability, relatively attractive valuation, and global exposure

As confidence in the economy solidifies, the mounting importance of earnings growth or recovery should benefit cyclicals—small-caps in particular—as it has in the past. Cyclicals have historically done best in exactly the kind of economic environment in which we now find ourselves. Valuations for small-cap cyclicals also look more attractive relative to defensives. Moreover, it seems that the end has come for the extended, 30-year bull market for bonds. Being far less yield sensitive, cyclicals should face fewer headwinds as rates rise.


Ultimately, we see global growth as a positive for stocks. But the market may well deviate from what the economy is doing in the months ahead (which is fairly typical) as investors try to sort things out after an almost 10-year bull market for large-caps and a nearly two-year upswing for small-caps.

This page is not part of the 2017 Annual Report to Stockholders | 5

 

LETTER TO OUR STOCKHOLDERS

 
Go Global

2017 Russell 2000
Returns by Percent
of Foreign Sales

     We think investors should be focusing on these matters rather than tax cuts or high valuations for indexes. While the reduced corporate tax rate is an undeniable benefit for small-caps, its positive effect is only lasting insofar as it encourages productive capital investment and allocation (the key, in our view, to creating additional growth beyond the reduced rate). As small-cap specialists, we see the accelerating global economy as the more significant development. Indeed, its effects can already be seen when one looks more closely at 2017’s returns. Companies in the Russell 2000 with no foreign sales were up 12% while those with foreign sales of 30% or greater advanced 19%.

     So we enter 2018 with a measured confidence, charting a middle course between bullishness and bearishness. Our expectation is for positive small-cap returns that are nonetheless likely to be lower than their long-term historical average. We believe that small-cap performance will be driven by three factors: a preference for profitability, relatively lower valuations for both cyclicals and value stocks, and burgeoning economic strength at home and abroad. Together, these support the leadership case for small-cap companies with global exposure in cyclical industries that also possess quality in the form of high returns on invested capital. Russell 2000 companies with the highest ROIC did quite well in 2017, in fact. These kinds of businesses look best positioned to benefit from increasing economic growth—even in the event of a pullback. With selectivity and discipline being the keys, we see the opportunity for disciplined and select active small-cap strategies to shine in 2018.



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
         
January 31, 2018        

6 | This page is not part of the 2017 Annual Report to Stockholders

 

Performance

 
 
NAV Average Annual Total Returns
As of December 31, 2017 (%)
                     
                                           
      1-YR   3-YR   5-YR   10-YR   15-YR   20-YR   25-YR   30-YR   SINCE
INCEPTION
  INCEPTION
DATE
 
Royce Global Value Trust   31.07   12.04   N/A   N/A   N/A   N/A   N/A   N/A   7.50   10/17/13
 
Royce Micro-Cap Trust   17.67   8.21   13.65   7.75   11.51   9.84   N/A   N/A   11.09   12/14/93
 
Royce Value Trust   19.38   11.63   13.47   7.18   10.79   9.45   10.73   11.53   10.83   11/26/86
 

INDEX
                                       
 
Russell Global Small Cap Index   23.33   10.54   10.94   5.43   11.34   7.97   N/A   N/A   N/A   N/A
 
Russell Microcap Index   13.17   8.91   14.29   7.68   10.34   N/A   N/A   N/A   N/A   N/A
 
Russell 2000 Index   14.65   9.96   14.12   8.71   11.17   7.89   9.54   10.46   N/A   N/A
 

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 Fund’s 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 Fund’s 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 Micro-Cap Trust at 12/31/12, as well as 12/31/14 and of Royce Value Trust at 12/31/16, 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 index’s returns include net reinvested dividends and/or interest income. Russell Investment Group is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Russell Investment Group. The Russell 2000 Index is an index of domestic small-cap stocks that measures the performance of the 2,000 smallest publicly traded U.S. companies in the Russell 3000 Index. The Russell Microcap Index includes 1,000 of the smallest securities in the small-cap Russell 2000 Index, along with the next smallest eligible securities as determined by Russell. The Russell 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, Inc (“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 2017 Annual Report to Stockholders | 7


 
MANAGERS’ DISCUSSION
Royce Global Value Trust (RGT)

Chuck Royce
David Nadel
Chris Flynn
 
FUND PERFORMANCE
A strong absolute and relative showing in 2017 gave Royce Global Value Trust (“RGT”) an advantage over its unleveraged benchmark, the Russell Global Small Cap Index, for the one- and three-year periods ended December 31, 2017 on both a net asset value (“NAV”) and market price basis. The Fund advanced 31.1% on an NAV basis and 36.0% based on market price in 2017, in both instances substantially ahead of the Russell Global Small Cap Index, which rose 23.3% for the same period. 2017 was a terrific year for stocks up and down the asset class scale and across much of the globe, and we were pleased to see the portfolio more than fully participate.

WHAT WORKED... AND WHAT DIDN’T
Nine of the Fund’s 11 equity sectors finished 2017 in the black. Only Energy detracted—and did so modestly—while Utilities was essentially flat. Industrials and Information Technology led by wide margins, followed by more-than-respectable contributions from Financials and Health Care. Relative to the benchmark, the portfolio’s advantage came overwhelmingly from stock selection, primarily in Financials, Information Technology, and Industrials. The first of these sectors saw the greatest relative edge come from holdings in capital markets and consumer finance while in Information Technology the electronic equipment, instruments & components and IT services groups had the biggest impact. In Industrials, trading companies & distributors and commercial services & supplies showed the best relative strength. Conversely, ineffective stock selection in Materials hurt relative performance, as did the portfolio’s cash position.

     At the industry level, two groups dominated results on an absolute basis—the aforementioned capital markets and electronic equipment, instruments & components—while the IT services (Information Technology) and health care equipment & supplies (Health Care) industries also made noteworthy positive contributions. The impact of detractors at this same level was comparably very light, with oil, gas & consumable fuels (Energy), technology hardware, storage & peripherals (Information Technology), insurance (Financials), and communications equipment (Information Technology) detracting most. Those countries making the greatest positive impact in 2017 were the U.S., the United Kingdom, Japan, and Germany while South Africa and Puerto Rico detracted most.

     The top contributor at the position level was Indian consumer finance company, Bajaj Finance. Its shares were lifted by its strong position in India’s nascent credit markets, which we believe have a long runway for growth given the nation’s fast-growing middle class and its low household debt to GDP ratio. Bajaj has also benefited from successfully cross selling services across its many locations. Cognex Corporation is the market leader in machine vision technology, which captures and analyzes visual information to automate tasks that previously relied on human eyesight and is thus a major driver of industrial and process automation. The firm has just begun to move into key end markets, such as consumer electronics, while adoption is expanding to other industries, including a fast-growing logistics segment. With ever-evolving proprietary technology and an unmatched global corps of engineers serving customers, the firm looks poised to sustain its well-above-average ROIC and compound its business value into the future.
 
     The top detractor at the position level was South Africa’s EOH Holdings, Africa’s largest independent information-technology provider, with leading positions in business process outsourcing and SAP implementation across the continent. We were attracted to its rare combination of attractive valuation, strong market position, high growth, and conservative balance sheet. However, we sold our shares when unexplained insider selling and the threat of customer losses compounded the effects of well-publicized accounting and corruption scandals engulfing even some of the blue-chip denizens of South African business. We had more confidence in the turnaround potential of CIRCOR International, which makes an array of valves and provides related flow control products and services. Valve sales to the domestic land-based oil industry improved when the price of oil rallied in the second half of the year, but could not offset the sales declines to large offshore project customers where investments are only now showing signs of bottoming and pricing is intense. We think it can eventually benefit from a recovery in energy prices and the further integration of a recent acquisition, which diversifies its end markets and brings higher margins, differentiated products, and aftermarket service revenue streams, factors that led us to add shares in 2017.

         
  Top Contributors to Performance
For 2017 (%)1
     
         
  Bajaj Finance   0.98  
     
  Cognex Corporation   0.97  
     
  SEI Investments   0.75  
     
  Relo Group   0.74  
     
  Vakrangee   0.71  
     
  1 Includes dividends      
         

         
  Top Detractors from Performance
For 2017 (%)2
     
         
  EOH Holdings Limited   -0.28  
     
  CIRCOR International   -0.26  
     
  MBIA   -0.25  
     
  World Fuel Services   -0.20  
     
  Diebold Nixdorf   -0.18  
     
  2 Net of dividends      
         

CURRENT POSITIONING AND OUTLOOK
We have a more positive outlook for international stocks and are more cautious on domestic issues, which makes the Fund’s global flexibility particularly timely. While guarded about prospective U.S. small-cap index returns, we are also optimistic about the portfolio’s potential as it leans towards three factors that we believe will be rewarded going forward—cyclicals, global exposure, and—in many cases—high profitability. In this environment, we see the opportunity for the Fund to continue outperforming in the years ahead.

8 | 2017 Annual Report to Stockholders

 

PERFORMANCE AND PORTFOLIO REVIEW   SYMBOLS     MARKET PRICE RGT NAV XRGTX

 
Performance
Average Annual Total Return (%) Through 12/31/17
    JUL-DEC 20171   1-YR   3-YR   SINCE INCEPTION (10/17/13)
 
RGT (NAV)   12.89   31.07   12.04   7.50
 
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   36.0%   N/A   N/A   N/A   N/A   28.0%
 

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 fund’s investment strategy. The Morningstar Ownership Zone provides detail about a portfolio’s 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    
     
SEI Investments   1.9
 
Kirby Corporation   1.7
 
TGS-NOPEC Geophysical   1.7
 
FLIR Systems   1.5
 
VZ Holding   1.5
 
Lazard Cl. A   1.3
 
Ashmore Group   1.2
 
Clarkson   1.1
 
Spirax-Sarco Engineering   1.1
 
USS   1.1
 


Portfolio Sector Breakdown    
% of Net Assets    
     
Industrials   25.6
 
Information Technology   18.4
 
Financials   16.7
 
Materials   11.1
 
Health Care   9.9
 
Consumer Discretionary   8.4
 
Energy   3.3
 
Consumer Staples   2.8
 
Real Estate   2.3
 
Telecommunication Services   0.2
 
Utilities   0.1
 
Cash and Cash Equivalents, Net of Outstanding Line of Credit   1.2
 


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   12.0
 
Japan   9.3
 
Canada   8.5
 
Switzerland   4.1
 
Australia   3.8
 
France   3.7
 
India   3.4
 
Germany   3.3
 
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   $131 million
 
Number of Holdings   348
 
2017 Annual Turnover Rate   34%
 
Net Asset Value   $12.48
 
Market Price   $10.81
 
Average Market Capitalization1   $1,933 million
 
Weighted Average P/E Ratio2,3   22.2x
 
Weighted Average P/B Ratio2   2.9x
 
Active Share4   97%
 
1 
Geometric Average. This weighted calculation uses each portfolio holding’s market cap in a way designed to not skew the effect of very large or small holdings; instead, it aims to better identify the portfolio’s center, which Royce believes offers a more accurate measure of average market cap than a simple mean or median.
2 
Harmonic Average. This weighted calculation evaluates a portfolio as if it were a single stock and measures it overall. It compares the total market value of the portfolio to the portfolio’s share in the earnings or book value, as the case may be, of its underlying stocks.
3 
The Fund’s P/E ratio calculation excludes companies with zero or negative earnings (7% of portfolio holdings as of 12/31/17).
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 Fund’s 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 Fund’s shares will fluctuate, so that shares may be worth more or less than their original cost when sold. The Fund invests primarily in securities of small- and mid-cap companies, which may involve considerably more risk than investments in securities of larger-cap companies. The Fund’s 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 Fund’s year-to-date performance for 2017.

2017 Annual Report to Stockholders | 9

 

Royce Global Value Trust

 
Schedule of Investments                
Common Stocks – 98.8%                
      SHARES       VALUE  
 
                 
AUSTRALIA – 3.8%                

ALS

    155,000     $ 844,746  

Austal

    43,700       61,786  

Bravura Solutions

    395,449       533,811  

Cochlear

    5,500       734,261  

Decmil Group

    60,000       60,972  

Eureka Group Holdings 1

    175,000       43,539  

Hansen Technologies

    335,000       1,031,112  

HT&E

    110,400       161,803  

Imdex 1

    103,100       84,750  

IPH

    260,000       1,114,946  

NetComm Wireless 1

    13,350       12,484  

Seeing Machines 1

    2,171,489       164,892  

Tassal Group

    48,300       141,362  
 
Total (Cost $4,291,516)             4,990,464  
 
                 
AUSTRIA – 0.8%                

Mayr-Melnhof Karton

    7,500       1,102,357  
 
Total (Cost $893,160)             1,102,357  
 
                 
BELGIUM – 0.1%                

Agfa-Gevaert 1

    15,200       70,885  

Greenyard

    2,700       65,120  
 
Total (Cost $123,771)             136,005  
 
                 
BRAZIL – 2.1%                

B3

    32,847       225,163  

Construtora Tenda 1

    20,000       120,380  

Direcional Engenharia 1

    14,000       23,765  

International Meal Company Alimentacao

    25,000       65,045  

Minerva

    26,250       84,186  

MRV Engenharia e Participacoes

    21,700       98,229  

OdontoPrev

    225,000       1,076,219  

T4F Entretenimento

    50,400       111,355  

TOTVS

    108,000       972,174  
 
Total (Cost $2,398,739)             2,776,516  
 
                 
CANADA – 8.5%                

Agnico Eagle Mines 2

    5,000       230,900  

AGT Food and Ingredients

    4,300       68,793  

Aimia 1

    35,000       104,137  

Calfrac Well Services 1

    26,100       124,167  

Canaccord Genuity Group

    92,000       424,503  

Centric Health 1

    221,800       91,755  

Computer Modelling Group

    108,000       824,821  

Corsa Coal 1

    99,200       161,782  

E-L Financial

    1,200       777,861  

Exco Technologies

    24,000       193,604  

FirstService Corporation

    10,300       720,176  

Franco-Nevada Corporation 2

    10,200       815,490  

Genworth MI Canada

    13,000       449,881  

Gluskin Sheff + Associates

    23,000       304,654  

Hudbay Minerals

    7,400       65,120  

Leucrotta Exploration 1

    27,700       37,903  

Magellan Aerospace

    9,400       157,115  

Major Drilling Group International 1

    188,500       1,058,719  

Morneau Shepell

    50,000       887,033  

North American Energy Partners

    31,882       157,816  

Pan American Silver 2,3

    31,800       494,808  

Rocky Mountain Dealerships

    7,100       77,383  

Sandstorm Gold 1

    10,000       49,900  

Solium Capital 1

    69,000       598,878  

Sprott

    520,600       1,010,552  

Supremex

    18,500       66,376  

Total Energy Services

    2,500       29,554  

Wajax Corporation

    3,400       66,729  

Western Forest Products

    50,150       97,747  

Winpak

    25,000       930,788  
 
Total (Cost $10,916,771)             11,078,945  
 
                 
CHILE – 0.1%                

SMU 1

    318,400       96,234  
 
Total (Cost $85,780)             96,234  
 
                 
CHINA – 1.4%                

China Communications Services

    203,400       136,045  

China Lesso Group Holdings

    130,900       84,766  

Chinasoft International

    130,900       86,752  

Delong Holdings 1

    67,000       132,553  

Fufeng Group

    275,100       179,556  

Hopefluent Group Holdings

    50,000       21,947  

Hua Hong Semiconductor

    58,000       122,743  

TravelSky Technology

    300,000       899,032  

Xingda International Holdings

    160,500       56,876  

Xtep International Holdings

    295,800       115,471  
 
Total (Cost $1,399,684)             1,835,741  
 
                 
DENMARK – 1.0%                

Chr. Hansen Holding

    5,500       515,822  

Coloplast Cl. B

    4,000       317,184  

Columbus

    26,200       62,419  

DFDS

    1,200       64,008  

Zealand Pharma 1

    24,000       328,519  
 
Total (Cost $1,042,617)             1,287,952  
 
                 
EGYPT – 0.1%                

Egyptian Financial Group-Hermes Holding

               

Company

    70,800       93,975  

Oriental Weavers

    82,300       77,209  
 
Total (Cost $172,777)             171,184  
 
                 
FINLAND – 0.0%                

Ferratum

    1,300       47,432  
 
Total (Cost $37,828)             47,432  
 
                 
FRANCE – 3.7%                

Bigben Interactive 1

    5,000       82,601  

HighCo

    8,100       47,503  

Interparfums

    13,500       558,931  

Manutan International

    450       48,315  

Neurones

    25,500       880,548  

Rothschild & Co

    33,000       1,207,840  

Synergie

    1,400       73,648  

Thermador Groupe

    9,500       1,293,798  

Vetoquinol

    8,000       580,948  
 
Total (Cost $2,899,952)             4,774,132  
 
                 
GEORGIA – 0.1%                

BGEO Group

    2,400       115,015  
 
Total (Cost $72,732)             115,015  
 

10 | 2017 Annual Report to Stockholders   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS

 

December 31, 2017

 
Schedule of Investments (continued)                
                 
      SHARES       VALUE  
 
                 
GERMANY – 3.3%                

CANCOM

    1,350     $ 112,193  

Carl Zeiss Meditec

    17,500       1,084,791  

CompuGroup Medical

    8,000       523,821  

Deutsche EuroShop

    1,700       69,203  

Energiekontor

    6,200       106,037  

Fielmann

    8,000       704,068  

FinTech Group 1

    1,800       65,971  

HolidayCheck Group 1

    19,150       64,132  

JDC Group 1

    7,000       81,020  

MorphoSys 1

    6,000       549,246  

mutares

    2,500       47,683  

PSI Software

    2,600       57,736  

STRATEC Biomedical

    9,000       697,806  

VIB Vermoegen

    5,200       132,145  
 
Total (Cost $2,616,679)             4,295,852  
 
                 
GREECE – 0.1%                

Aegean Marine Petroleum Network 2

    1,250       5,375  

JUMBO

    5,900       105,302  

Sarantis

    2,900       43,954  
 
Total (Cost $151,794)             154,631  
 
                 
HONG KONG – 1.4%                

Dah Sing Financial Holdings

    19,900       127,375  

HKBN

    100,000       126,456  

I.T

    182,900       77,947  

International Housewares Retail

    380,000       75,825  

Oriental Watch Holdings

    232,950       53,053  

Perfect Shape Beauty Technology

    600,000       96,150  

Pico Far East Holdings

    376,300       149,308  

Television Broadcasts

    54,000       194,651  

Texhong Textile Group

    47,600       61,770  

Tongda Group Holdings

    224,100       57,295  

Value Partners Group

    712,600       754,107  

Xinyi Glass Holdings

    71,100       92,627  
 
Total (Cost $1,725,861)             1,866,564  
 
                 
INDIA – 3.4%                

Bajaj Finance

    50,000       1,378,247  

Borosil Glass Works

    3,400       51,996  

CCL Products India

    10,600       49,786  

Dewan Housing Finance

    6,500       59,127  

Edelweiss Financial Services

    19,300       89,714  

Hinduja Global Solutions

    3,500       49,145  

IIFL Holdings

    2,750       28,899  

Indo Count Industries

    42,200       82,071  

Manappuram Finance

    70,100       134,633  

Mphasis

    2,400       27,113  

Multi Commodity Exchange of India

    5,300       75,775  

NIIT 1

    35,400       56,948  

Radico Khaitan

    13,900       63,872  

Redington India

    30,000       82,433  

SH Kelkar & Company

    175,000       810,260  

Shriram Transport Finance

    2,400       55,232  

Vakrangee

    100,000       655,634  

Vakrangee (Bonus Shares) 1

    100,000       656,457  
 
Total (Cost $2,336,170)             4,407,342  
 
                 
INDONESIA – 0.5%                

Media Nusantara Citra

    378,800       35,875  

Mitra Pinasthika Mustika

    1,000,000       71,507  

Selamat Sempurna

    5,800,000       536,338  
 
Total (Cost $647,283)             643,720  
 
                 
IRELAND – 0.6%                

Irish Residential Properties REIT

    20,000       36,149  

Keywords Studios

    37,500       804,977  
 
Total (Cost $113,998)             841,126  
 
                 
ISRAEL – 0.7%                

Frutarom Industries

    7,500       703,945  

Nova Measuring Instruments 1,2,3

    5,500       142,505  

Sarine Technologies

    12,850       9,606  
 
Total (Cost $635,614)             856,056  
 
                 
ITALY – 0.8%                

Anima Holding

    7,400       52,852  

DiaSorin

    8,500       754,250  

Openjobmetis 1

    11,900       183,850  
 
Total (Cost $573,963)             990,952  
 
                 
JAPAN – 9.3%                

Ai Holdings

    45,000       1,088,184  

As One

    15,000       937,542  

Ateam

    4,700       112,861  

C. Uyemura & Co.

    1,100       83,894  

EPS Holdings

    2,500       56,456  

Financial Products Group

    5,700       69,150  

G-Tekt

    3,400       69,930  

H.I.S.

    1,100       39,835  

IDOM

    16,800       119,037  

Investors Cloud

    9,000       133,702  

Itochu Techno-Solutions

    2,900       125,697  

Kenedix

    13,450       81,970  

Kenko Mayonnaise

    1,650       59,678  

Kyowa Exeo

    5,000       129,457  

Leopalace21

    11,500       89,423  

Mandom Corporation

    2,800       91,514  

Meitec Corporation

    26,400       1,389,867  

Nihon Kohden

    37,500       870,463  

Nitto Kohki

    3,100       78,630  

NS Solutions

    6,800       185,358  

NSD

    3,600       76,616  

Open House

    2,400       128,882  

Osaka Soda

    2,540       65,003  

Outsourcing

    5,500       100,161  

Pressance

    1,850       24,684  

Relo Group

    40,000       1,089,485  

Ryobi

    1,040       29,554  

Santen Pharmaceutical

    55,000       863,488  

Shimano

    3,500       492,452  

SPARX Group

    27,550       76,166  

Sugi Holdings

    17,500       892,480  

Sun Frontier Fudousan

    12,000       136,290  

Takara Leben

    12,600       55,638  

Tenpos Busters

    5,800       111,087  

Tokai Corporation

    4,400       100,413  

Tokuyama Corporation

    1,980       64,389  

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS   2017 Annual Report to Stockholders | 11

 

Royce Global Value Trust

 
Schedule of Investments (continued)                
                 
      SHARES       VALUE  
 
                 
JAPAN (continued)                

Trancom

    2,400     $ 168,742  

USS

    67,500       1,427,970  

Yumeshin Holdings

    15,300       147,537  

Zenkoku Hosho

    5,100       219,685  
 
Total (Cost $9,037,116)             12,083,370  
 
                 
MALAYSIA – 0.1%                

CB Industrial Product Holding

    151,200       67,238  
 
Total (Cost $70,731)             67,238  
 
                 
MEXICO – 0.7%                

Becle 1

    200,000       321,424  

Bolsa Mexicana de Valores

    268,700       462,034  

Nemak

    57,700       41,876  

Rassini

    31,700       112,870  
 
Total (Cost $1,010,617)             938,204  
 
                 
MONGOLIA – 0.0%                

Mongolian Mining 1

    862,000       23,193  
 
Total (Cost $34,260)             23,193  
 
                 
NETHERLANDS – 0.2%                

AMG Advanced Metallurgical Group

    3,300       165,779  

DP Eurasia 1

    24,400       70,834  
 
Total (Cost $166,721)             236,613  
 
                 
NEW ZEALAND – 1.6%                

Fisher & Paykel Healthcare

    102,875       1,043,223  

New Zealand Refining

    21,550       40,457  

Trade Me Group

    300,000       1,031,081  
 
Total (Cost $1,587,857)             2,114,761  
 
                 
NORWAY – 1.9%                

Kongsberg Automotive 1

    63,000       90,043  

Nordic Semiconductor 1

    10,750       54,972  

NRC Group

    5,450       40,821  

Protector Forsikring

    8,950       98,104  

TGS-NOPEC Geophysical

    92,500       2,188,077  
 
Total (Cost $2,098,720)             2,472,017  
 
                 
PERU – 0.1%                

Ferreycorp

    93,200       73,295  
 
Total (Cost $56,092)             73,295  
 
                 
PHILIPPINES – 0.1%                

Pryce Corporation 1

    563,600       76,407  

Robinsons Retail Holdings

    44,500       85,834  
 
Total (Cost $150,761)             162,241  
 
                 
POLAND – 0.3%                

Warsaw Stock Exchange

    33,000       445,467  
 
Total (Cost $459,764)             445,467  
 
                 
PORTUGAL – 0.1%                

Sonae SGPS

    60,000       80,897  
 
Total (Cost $77,642)             80,897  
 
                 
RUSSIA – 0.3%                

Globaltrans Investment GDR

    45,500       427,257  
 
Total (Cost $239,644)             427,257  
 
                 
SINGAPORE – 1.3%                

CSE Global

    535,150       145,955  

Duty Free International

    466,600       92,453  

Duty Free International (Warrants) 1

    80,440       481  

Sheng Siong Group

    141,800       98,033  

Tat Hong Holdings 1

    200,000       67,285  

XP Power

    24,000       1,110,975  

Yanlord Land Group

    143,000       173,184  
 
Total (Cost $1,206,718)             1,688,366  
 
                 
SOUTH AFRICA – 0.7%                

Adcock Ingram Holdings

    12,050       56,817  

Coronation Fund Managers

    59,000       351,790  

JSE

    15,000       186,532  

MiX Telematics ADR

    11,500       146,740  

Nampak 1

    77,200       101,172  

Raubex Group

    52,250       84,313  
 
Total (Cost $878,826)             927,364  
 
                 
SOUTH KOREA – 0.8%                

Eugene Technology

    4,400       86,296  

Hansol Chemical

    900       60,851  

Hanssem

    500       84,071  

Huchems Fine Chemical

    4,200       96,240  

Interojo Company

    2,958       107,355  

KIWOOM Securities

    700       57,240  

Koh Young Technology

    2,600       199,896  

Loen Entertainment

    600       63,049  

Modetour Network

    3,000       85,426  

Samjin Pharmaceutical

    2,800       93,693  

SK Materials

    500       84,033  

Tera Semicon

    3,100       80,722  
 
Total (Cost $897,954)             1,098,872  
 
                 
SPAIN – 0.4%                

Atento 2

    49,900       506,485  
 
Total (Cost $501,699)             506,485  
 
                 
SRI LANKA – 0.1%                

National Development Bank

    71,600       63,528  

Sunshine Holdings

    158,150       56,666  
 
Total (Cost $123,254)             120,194  
 
                 
SWEDEN – 2.9%                

Addtech Cl. B

    61,460       1,342,561  

Bravida Holding

    120,000       801,170  

Byggmax Group

    12,200       81,737  

Dustin Group

    8,250       81,887  

Hexpol

    100,000       1,013,586  

Hoist Finance

    8,800       98,859  

Knowit

    7,000       132,469  

Momentum Group 1

    6,300       89,439  

Proact IT Group

    8,100       178,282  
 
Total (Cost $3,160,407)             3,819,990  
 
                 
SWITZERLAND – 4.1%                

Burkhalter Holding

    10,000       1,302,182  

LEM Holding

    500       847,591  

Partners Group Holding

    1,800       1,233,425  

VZ Holding

    5,600       1,899,445  
 
Total (Cost $3,539,666)             5,282,643  
 

12 | 2017 Annual Report to Stockholders   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS

 

December 31, 2017

 
Schedule of Investments (continued)                
                 
      SHARES       VALUE  
 
                 
TAIWAN – 1.0%                

Egis Technology 1

    12,000     $ 91,366  

Flytech Technology

    16,390       45,116  

Formosa Laboratories

    29,050       67,333  

Gourmet Master

    11,030       160,976  

Posiflex Technology

    8,874       40,604  

Sinmag Equipment

    20,900       119,390  

Sitronix Technology

    51,400       144,746  

Sporton International

    33,781       182,119  

Taiwan Paiho

    56,400       229,287  

TCI

    16,470       159,122  

Tehmag Foods

    6,000       47,371  
 
Total (Cost $1,109,346)             1,287,430  
 
                 
THAILAND – 0.1%                

Beauty Community

    57,200       36,649  

Erawan Group (The)

    130,000       34,681  

Forth Smart Service

    102,400       55,414  

Plan B Media

    300,000       58,786  
 
Total (Cost $163,239)             185,530  
 
                 
TURKEY – 0.2%                

Soda Sanayii

    112,200       149,155  

Tat Gida Sanayi

    72,350       101,303  
 
Total (Cost $297,753)             250,458  
 
                 
UNITED ARAB EMIRATES – 0.1%                

ADES International Holding 1

    5,600       75,224  
 
Total (Cost $75,713)             75,224  
 
                 
UNITED KINGDOM – 12.0%                

Abcam

    25,000       355,755  

Alliance Pharma

    100,000       90,542  

Ashmore Group

    279,000       1,525,650  

Avon Rubber

    3,000       49,423  

Berkeley Energia 1

    61,600       49,152  

Biffa

    23,600       83,480  

Character Group

    5,700       34,221  

Clarkson

    38,100       1,471,066  

Connect Group

    117,650       177,755  

Consort Medical

    61,150       963,300  

Conviviality

    30,800       167,531  

Diploma

    25,000       419,840  

DiscoverIE Group

    17,500       87,112  

dotdigital group

    117,200       164,818  

Elementis

    200,000       777,933  

Epwin Group

    72,750       82,301  

Equiniti Group

    225,000       867,338  

Ferroglobe 1

    41,100       665,820  

Ferroglobe (Warranty Insurance Trust) 1,4

    41,100       0  

Fidessa Group

    20,000       683,198  

Finsbury Food Group

    41,000       59,786  

Gattaca

    6,000       24,684  

Hilton Food Group

    16,100       187,061  

ITE Group

    375,000       919,538  

Jupiter Fund Management

    36,000       305,305  

Macfarlane Group

    45,500       47,778  

Norcros

    47,360       114,072  

Pendragon

    139,300       53,652  

Polypipe Group

    60,000       318,271  

Rank Group

    20,000       64,947  

Real Estate Investors

    45,000       35,519  

Restore

    6,900       54,812  

River and Mercantile Group

    15,000       72,329  

Rotork

    195,000       700,480  

RPC Group

    3,000       35,488  

Severfield

    87,200       94,292  

SIG

    46,400       110,301  

Spirax-Sarco Engineering

    19,000       1,437,977  

Staffline Group

    2,600       36,500  

Stallergenes Greer 1

    10,800       498,997  

STV Group

    17,500       76,727  

Topps Tiles

    90,000       97,114  

Victrex

    32,500       1,157,567  

Wincanton

    17,000       54,293  

Xaar

    90,000       449,175  
 
Total (Cost $13,586,516)             15,722,900  
 
                 
UNITED STATES – 27.5%                

Air Lease Cl. A

    24,560       1,181,090  

Brooks Automation 2

    18,100       431,685  

Century Casinos 1

    5,000       45,650  

CIRCOR International

    18,100       881,108  

Cognex Corporation

    10,748       657,348  

Coherent 1

    3,000       846,660  

Copart 1

    19,800       855,162  

Diebold Nixdorf 2

    28,800       470,880  

Diodes 1

    20,500       587,735  

Dorian LPG 1

    4,475       36,784  

DST Systems

    15,800       980,706  

EnerSys 2

    11,000       765,930  

Expeditors International of Washington 2

    13,300       860,377  

FLIR Systems 2

    42,400       1,976,688  

Innospec 2

    12,457       879,464  

Kadant

    7,800       783,120  

KBR 2

    58,700       1,164,021  

Kirby Corporation 1,2,3

    32,900       2,197,720  

Lazard Cl. A

    32,600       1,711,500  

Lindsay Corporation

    13,700       1,208,340  

Littelfuse

    4,000       791,280  

ManpowerGroup

    8,800       1,109,768  

MBIA 1,2,3

    80,300       587,796  

Nanometrics 1,2,3

    35,600       887,152  

National Instruments 2,3

    15,200       632,776  

Oaktree Capital Group LLC Cl. A

    10,400       437,840  

Popular

    13,100       464,919  

Quaker Chemical 2,3

    6,069       915,145  

Raven Industries

    40,000       1,374,000  

Rogers Corporation 1,2,3

    4,800       777,216  

SEACOR Holdings

    20,200       933,644  

SEACOR Marine Holdings 1

    20,309       237,615  

SEI Investments 2

    34,500       2,479,170  

Sensient Technologies 2,3

    9,500       694,925  

Signet Jewelers

    5,500       311,025  

Standard Motor Products

    11,200       502,992  

Sun Hydraulics 2

    15,139       979,342  

Tennant Company 2

    11,600       842,740  

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS   2017 Annual Report to Stockholders | 13

 

Royce Global Value Trust   December 31, 2017

 
Schedule of Investments (continued)                
                 
      SHARES       VALUE  
 
                 
UNITED STATES (continued)                

Valmont Industries

    4,500     $ 746,325  

Virtu Financial Cl. A 2

    74,300       1,359,690  

World Fuel Services

    12,000       337,680  
 
Total (Cost $27,056,544)             35,925,008  
 
                 
URUGUAY – 0.4%                

Arcos Dorados Holdings Cl. A 1

    46,800       484,380  

Biotoscana Investments BDR 1

    8,900       55,128  
 
Total (Cost $416,576)             539,508  
 
                 
TOTAL COMMON STOCKS                
 
(Cost $101,140,825)             129,022,745  
 
                 
REPURCHASE AGREEMENT7.2%                
Fixed Income Clearing Corporation, 0.20% dated 12/29/17, due 1/2/18, maturity value
$9,331,207 (collateralized by obligations of various U.S. Government Agencies, 0.875%
due 5/15/19, valued at $9,521,062)
               
 
Cost $9,331,000)             9,331,000  
 
                 
TOTAL INVESTMENTS – 106.0%                
 
(Cost $110,471,825)             138,353,745  
 
                 
LIABILITIES LESS CASH AND OTHER ASSETS – (6.0)%             (7,827,563 )
               
                 
 
NET ASSETS 100.0%           $ 130,526,182  
 

New additions in 2017.
1 Non-income producing.
2
All or a portion of these securities were pledged as collateral in connection with the Fund’s revolving credit agreement at December 31, 2017. Total market value of pledged securities at December 31, 2017, was $14,399,588.
3
At December 31, 2017, a portion of these securities were rehypothecated in connection with the Fund’s revolving credit agreement in the aggregate amount of $5,610,341.
4
A security for which market quotations are not readily available represents 0.0% of net assets. This security has been valued at its fair value under procedures approved by the Fund’s Board of Directors. This security is defined as a Level 3 security due to the use of significant unobservable inputs in the determination of fair value. See Notes to Financial Statements.
   
 
Securities of Global/International Funds are categorized by the country of their headquarters, with the exception of exchange-traded funds.

Bold indicates the Fund’s 20 largest equity holdings in terms of December 31, 2017, market value.
   
 
TAX INFORMATION: The cost of total investments for Federal income tax purposes was $111,882,790. At December 31, 2017, net unrealized appreciation for all securities was $26,470,955 consisting of aggregate gross unrealized appreciation of $30,869,278 and aggregate gross unrealized depreciation of $4,398,323. The primary causes of the differences between book and tax basis cost are the timing of the recognition of losses on securities sold, investments in publicly traded partnerships and Trusts and mark-to-market of Passive Foreign Investment Companies.

14 | 2017 Annual Report to Stockholders   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS

 

Royce Global Value Trust   December 31, 2017

 
Statement of Assets and Liabilities        
         
ASSETS:        
Investments at value   $ 129,022,745  
 
Repurchase agreements (at cost and value)     9,331,000  
 
Cash and foreign currency     597  
 
Receivable for investments sold     555,458  
 
Receivable for dividends and interest     203,693  
 
Prepaid expenses and other assets     41,098  
 
Total Assets     139,154,591  
 
LIABILITIES:        
Revolving credit agreement     8,000,000  
 
Payable for investments purchased     244,677  
 
Payable for investment advisory fee     136,108  
 
Payable for directors’ fees     6,967  
 
Payable for interest expense     2,351  
 
Accrued expenses     78,472  
 
Deferred capital gains tax     159,834  
 
Total Liabilities     8,628,409  
 
Net Assets   $ 130,526,182  
 
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)     (1,199,309 )
 
Accumulated net realized gain (loss) on investments and foreign currency     (13,980,873 )
 
Net unrealized appreciation (depreciation) on investments and foreign currency     27,725,620  
 
Net Assets (net asset value per share - $12.48)   $ 130,526,182  
 
Investments at identified cost   $ 101,140,825  
 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS   2017 Annual Report to Stockholders | 15

 

Royce Global Value Trust

 
Statement of Changes in Net Assets                
                 
    YEAR ENDED 12/31/17   YEAR ENDED 12/31/16
 
                 
INVESTMENT OPERATIONS:                
Net investment income (loss)   $ 241,105     $ 651,129  
 
Net realized gain (loss) on investments and foreign currency     6,555,345       (1,449,508 )
 
Net change in unrealized appreciation (depreciation) on investments and foreign currency     24,156,512       10,740,946  
 
Net increase (decrease) in net assets from investment operations     30,952,962       9,942,567  
 
DISTRIBUTIONS:                
Net investment income     (1,145,697 )     (1,435,789 )
 
Net realized gain on investments and foreign currency            
 
Return of capital           (12,497 )
 
Total distributions     (1,145,697 )     (1,448,286 )
 
CAPITAL STOCK TRANSACTIONS:                
Reinvestment of distributions     491,130       559,946  
 
Total capital stock transactions     491,130       559,946  
 
Net Increase (Decrease) In Net Assets     30,298,395       9,054,227  
 
NET ASSETS:                
 
Beginning of year     100,227,787       91,173,560  
 
End of year (including undistributed net investment income (loss) of $(1,199,309) at 12/31/17 and $(672,740) at 12/31/16)   $ 130,526,182     $ 100,227,787  
 

16 | 2017 Annual Report to Stockholders   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS

 

Royce Global Value Trust   Year Ended December 31, 2017

 
Statement of Operations        
         
INVESTMENT INCOME:        
INCOME:        
Dividends   $ 2,315,787  
 
Foreign withholding tax     (143,344 )
 
Interest     6,626  
 
Rehypothecation income     4,306  
 
Total income     2,183,375  
 
EXPENSES:        
 
Investment advisory fees     1,450,623  
 
Interest expense     179,613  
 
Custody and transfer agent fees     111,286  
 
Professional fees     66,067  
 
Stockholder reports     61,312  
 
Administrative and office facilities     28,644  
 
Directors’ fees     28,487  
 
Other expenses     16,360  
 
Total expenses     1,942,392  
 
Compensating balance credits     (122 )
 
Net expenses     1,942,270  
 
Net investment income (loss)     241,105  
 
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:        
 
NET REALIZED GAIN (LOSS):        
 
Investments     6,558,027  
 
Foreign currency transactions     (2,682 )
 
NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION):        
 
Investments and foreign currency translations     24,234,510  
 
Other assets and liabilities denominated in foreign currency     (77,998 )
 
Net realized and unrealized gain (loss) on investments and foreign currency     30,711,857  
 
NET INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS   $ 30,952,962  
 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS   2017 Annual Report to Stockholders | 17

 

Royce Global Value Trust   Year Ended December 31, 2017

 
Statement of Cash Flows        
         
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net increase (decrease) in net assets from investment operations   $ 30,952,962  
 
Adjustments to reconcile net increase (decrease) in net assets from investment operations to net cash provided by operating activities:        
 

Purchases of long-term investments

    (40,717,589 )
 

Proceeds from sales and maturities of long-term investments

    43,446,710  
 

Net purchases, sales and maturities of short-term investments

    (2,541,000 )
 

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

    (29,607 )
 

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

    134,385  
 

Net change in unrealized appreciation (depreciation) on investments

    (24,234,510 )
 

Net realized gain (loss) on investments and foreign currency

    (6,555,345 )
 
Net cash provided by operating activities     456,006  
 
CASH FLOWS FROM FINANCING ACTIVITIES:        
 
Distributions     (1,145,697 )
 
Reinvestment of distributions     491,130  
 
Net cash used for financing activities     (654,567 )
 
INCREASE (DECREASE) IN CASH:     (198,561 )
 
Cash and foreign currency at beginning of year     199,158  
 
Cash and foreign currency at end of year   $ 597  
 

18 | 2017 Annual Report to Stockholders   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS

 

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 Fund’s performance for the periods presented.

    YEARS ENDED   PERIOD ENDED
             
    12/31/17   12/31/16   12/31/15   12/31/14   12/31/131
 
Net Asset Value, Beginning of Period   $ 9.62     $ 8.81     $ 9.25     $ 10.05     $ 9.78  
 
INVESTMENT OPERATIONS:                                        
Net investment income (loss)     0.02       0.06       0.10       0.13       (0.00 )
 
Net realized and unrealized gain (loss) on investments and foreign currency     2.96       0.90       (0.43 )     (0.77 )     0.27  
 
Net increase (decrease) in net assets from investment operations     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   $ 12.48     $ 9.62     $ 8.81     $ 9.25     $ 10.05  
 
Market Value, End of Period   $ 10.81     $ 8.04     $ 7.45     $ 8.04     $ 8.89  
 
TOTAL RETURN:2                                        
Net Asset Value     31.07 %     11.12 %     (3.44 )%     (6.23 )%     2.76 %3
 
Market Value     35.96 %     9.77 %     (6.06 )%     (7.86 )%     (0.95 )%3
 
RATIOS BASED ON AVERAGE NET ASSETS:                                        
Investment advisory fee expense     1.25 %     1.25 %     1.25 %     1.25 %     1.25 %4
 
Other operating expenses     0.42 %     0.46 %     0.43 %     0.24 %     0.37 %4
 
Total expenses (net)     1.67 %     1.71 %     1.68 %     1.49 %     1.62 %4
 
Expenses excluding interest expense     1.52 %     1.57 %     1.58 %     1.49 %     1.62 %4
 
Expenses prior to balance credits     1.67 %     1.71 %     1.68 %     1.49 %     1.62 %4
 
Net investment income (loss)     0.21 %     0.69 %     1.03 %     1.30 %     (0.13 )%4
 
SUPPLEMENTAL DATA:                                        
Net Assets, End of Period (in thousands)   $ 130,526     $ 100,228     $ 91,174     $ 95,285     $ 102,684  
 
Portfolio Turnover Rate     34 %     59 %     65 %     43 %     7 %
 
REVOLVING CREDIT AGREEMENT:                                        
Asset coverage     1732 %     1353 %     1240 %                
 
Asset coverage per $1,000     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 Fund’s Distribution Reinvestment and Cash Purchase Plan. Net Asset Value Total Return is calculated on the same basis, except that the Fund’s net asset value is used on the purchase and sale dates instead of market value.
3 Not annualized
4 Annualized

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS   2017 Annual Report to Stockholders | 19

 

Royce Global Value Trust
 
Notes to Financial Statements

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

Various inputs are used in determining the value of the Fund’s investments, as noted above. These inputs are summarized in the three broad levels below:

  Level 1 quoted prices in active markets for identical securities.
  Level 2
other significant observable inputs (including quoted prices for similar securities, foreign securities that may be fair valued and repurchase agreements). The table below includes all Level 2 securities. 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 Fund’s investments as of December 31, 2017. 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   $ 50,120,139     $ 78,902,606     $ 0     $ 129,022,745
 
Cash Equivalents           9,331,000             9,331,000
 

Level 3 Reconciliation:                                
        BALANCE AS OF 12/31/16       REALIZED GAIN (LOSS)       UNREALIZED GAIN (LOSS)1       BALANCE AS OF 12/31/17
 
Common Stocks       $9,349       $(341,019)       $331,670       $0
 
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.

20 | 2017 Annual Report to Stockholders

 

Royce Global Value Trust
 
Notes to Financial Statements (continued)

REPURCHASE AGREEMENTS:

The Fund may enter into repurchase agreements with institutions that the Fund’s investment adviser has determined are creditworthy. The Fund restricts repurchase agreements to maturities of no more than seven days. Securities pledged as collateral for repurchase agreements, which are held until maturity of the repurchase agreements, are marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest). Repurchase agreements could involve certain risks in the event of default or insolvency of the counter-party, including possible delays or restrictions upon the ability of the Fund to dispose of its underlying securities. The remaining contractual maturity of the repurchase agreement held by the Fund at December 31, 2017 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 Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities, including investments in securities at the end of the reporting period, as a result of changes in foreign currency exchange rates.


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 Fund’s operations, while expenses applicable to more than one of the Royce Funds are allocated equitably. Certain personnel, occupancy costs and other administrative expenses related to the 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 custodian's fee is paid indirectly by credits earned on the Fund's cash on deposit with the bank. This deposit arrangement is an alternative to purchasing overnight investments. Conversely, the Fund pays interest to the custodian on any cash overdrafts, to the extent they are not offset by credits earned on positive cash balances.


Capital Stock:

The Fund issued 46,290 and 70,522 shares of Common Stock as reinvestment of distributions for the years ended December 31, 2017 and December 31, 2016, respectively.


2017 Annual Report to Stockholders | 21

 

Royce Global Value Trust
 
Notes to Financial Statements (continued)

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 Fund’s 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 December 31, 2017, the Fund has outstanding borrowings of $8,000,000. During the year ended December 31, 2017, the Fund borrowed an average daily balance of $8,000,000 at a weighted average borrowing cost of 2.21%. The maximum amount outstanding during the year ended December 31, 2017 was $8,000,000. As of December 31, 2017, the aggregate value of rehypothecated securities was $5,610,341. During the year ended December 31, 2017, the Fund earned $4,306 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 Fund’s average daily net assets. For the year ended December 31, 2017, the Fund expensed Royce investment advisory fees totaling $1,450,623.


Purchases and Sales of Investment Securities:

For the year ended December 31, 2017, the costs of purchases and proceeds from sales of investment securities, other than short-term securities, amounted to $39,804,958 and $42,497,581, respectively.


Tax Information:

Distributions during the years ended December 31, 2017 and 2016, were characterized as follows for tax purposes:


ORDINARY INCOME   LONG-TERM CAPITAL GAINS   RETURN OF CAPITAL
 
2017 2016   2017 2016   2017 2016
 
$1,145,697 $1,435,789   $ – $ –   $ – $12,497
 

The tax basis components of distributable earnings at December 31, 2017, were as follows:


                                     
                    QUALIFIED LATE YEAR                
UNDISTRIBUTED     UNDISTRIBUTED LONG-TERM       NET UNREALIZED     ORDINARY AND       TOTAL       CAPITAL LOSS
ORDINARY     CAPITAL GAINS OR       APPRECIATION     POST-OCTOBER LOSS       DISTRIBUTABLE       CARRYFORWARD
INCOME     (CAPITAL LOSS CARRYFORWARD)       (DEPRECIATION)1     DEFERRALS1       EARNINGS       UTILIZED
 
$106,299     $(13,708,861)       $26,313,581     $(165,581)       $12,545,438       $6,007,549
 
1
Includes timing differences on foreign currency, investments in publicly traded partnerships, recognition of losses on securities sold and mark-to-market of Passive Foreign Investment Companies.
2
Under the current tax law, capital losses and qualified late year ordinary losses incurred after October 31 may be deferred and treated as occurring on the first day of the following fiscal year.

For financial reporting purposes, capital accounts and distributions to stockholders are adjusted to reflect the tax character of permanent book/tax differences. For the year ended December 31, 2017, the Fund recorded the following permanent reclassifications, which relate primarily to current investments in publicly traded partnerships, foreign currency transactions, foreign capital gains tax and gains from the sale of Passive Foreign Investment Companies. Results of operations and net assets were not affected by these reclassifications.


UNDISTRIBUTED NET
INVESTMENT INCOME
    ACCUMULATED NET
REALIZED GAIN (LOSS)
    PAID-IN CAPITAL
 
$378,023     $(390,520)     $12,497
 

Management has analyzed the Fund’s tax positions taken on federal income tax returns for all open tax years (2014-2017) and has concluded that as of December 31, 2017, no provision for income tax is required in the Fund’s financial statements.


22 | 2017 Annual Report to Stockholders

 

Report of Independent Registered Public Accounting Firm
 
To the Board of Directors and the Stockholders of Royce Global Value Trust, Inc.:

Opinion on the Financial Statements
 
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Royce Global Value Trust, Inc. (the “Fund”) as of December 31, 2017, the related statements of operations and cash flows for the year ended December 31, 2017, the statement of changes in net assets for each of the two years in the period ended December 31, 2017, including the related notes, and the financial highlights for each of the three years in the period ended December 31, 2017 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, the results of its operations and its cash flows for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2017 and the financial highlights for each of the three years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.
 
The financial statements of the Fund as of and for the year ended December 31, 2014 and the financial highlights for each of the periods ended on or prior to December 31, 2014 (not presented herein, other than the financial highlights) were audited by other auditors whose report dated February 23, 2015 expressed an unqualified opinion on those financial statements and financial highlights.

Basis for Opinion
 
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
 
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
 
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2017 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.



/s/PricewaterhouseCoopers LLP
Baltimore, MD
February 22, 2018

We have served as the auditor of one or more investment companies in the Royce investment company group since at least 1967. We have not determined the specific year we began serving as auditor.

2017 Annual Report to Stockholders | 23

 

    MANAGERS’ DISCUSSION
Royce Micro-Cap Trust (RMT)    

Chuck Royce
Jim Harvey
Chris Flynn

FUND PERFORMANCE
A second consecutive year of strong absolute and relative 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-, 15-, 20-year, and since inception (12/14/93) periods ended December 31, 2017. It also outpaced the micro-cap index on both an NAV and market price basis for the one-, 10-, and 15-year periods ended December 31, 2017. (Data for the Russell Microcap Index goes back only to 6/30/00). The Fund advanced 17.7% on an NAV basis and 25.1% based on market price in 2017, ahead of respective gains of 14.6% and 13.2% for the Russell 2000 and Russell Microcap for the same period. The year was especially gratifying because it presented crosscurrents for the Fund’s multi-discipline approach in the form of leadership for larger companies and the lift from strength for cyclicals, in particular those with global exposure.
 
WHAT WORKED... AND WHAT DIDN’T
Information Technology, Industrials, and Health Care led the list of nine of 11 equity sectors that made positive contributions to 2017 performance. Energy and Consumer Staples, the two sectors that detracted, made decidedly modest negative impacts. Relative to the Russell 2000, the best performance in 2017 came from Financials, where both our lower weighting and (to a lesser degree) better investments in banks were the primary sources of outperformance. Superior stock selection drove positive relative results in Information Technology, most notably in the Internet software & services group, while both savvy stock picks and lower exposure were additive in Real Estate. Conversely, the largest relative detractor at the sector level came from ineffective stock selection in a number of Consumer Discretionary industries, including Internet & direct marketing retail and distributors. The portfolio’s cash position also had a negative impact on relative performance, as did poor stock selection in Health Care’s pharmaceuticals industry.
      At the industry level, three groups made large contributions on an absolute basis—biotechnology (from Health Care and a relative strength in that sector), machinery (Industrials), and the previously mentioned Internet software & services industry. The impact of detractors at this level was comparably light, led by energy equipment & services (Energy, which was the only sector in the Russell 2000 to post net losses in 2017), food products (Consumer Staples), and distributors (Consumer Discretionary). These results are mostly consistent with a market that saw the biggest returns go to high-growth areas in healthcare and tech while more economically sensitive cyclical industries did well on an absolute basis while trailing on a relative scale.
Three biotechnology companies topped the portfolio’s list of contributors at the position level in 2017. Abeona Therapeutics develops gene therapies for rare, life-threatening diseases. Positive news in clinical trials for a gene-therapy treatment and a secondary stock offering in October helped to keep its share price healthy. We reduced our position through much of the fourth quarter as its stock climbed. We acted similarly throughout the second half of 2017 with our stake in Sangamo Therapeutics, which develops genomic therapies and medications that treat genetic diseases. Its share price began to rise in May when a collaboration with Pfizer to work on gene therapies for hemophilia was announced. The firm then reported in the fall that new partnerships with other firms were likely while also detailing promising developments in the progress of other treatments, such as its zinc finger nuclease technology that can be used in genome editing. Mirati Therapeutics develops cancer treatments and saw its stock rise on the steady progress of its product pipeline, along with the November announcement of a new public offering of common stock and warrants. We began to reduce our position in October.
As for positions that detracted, Era Group provides helicopter transportation services and personnel primarily to and from offshore oil drilling rigs and platforms. Earlier in 2017, its shares were challenged by falling oil prices that were reflected in disappointing earnings. Liking the long-term prospects for its niche business, we added shares and were pleased to see a little recovery for the stock in the second half of 2017. Our experience with automotive parts recycler and reseller Fenix Parts continued to be very disappointing as its shares were delisted on Nasdaq when it missed financial reporting filing deadlines.

  Top Contributors to Performance
For 2017 (%)1
     
     
Abeona Therapeutics   0.87
 
Sangamo Therapeutics   0.87
 
Mirati Therapeutics   0.70
 
QuinStreet   0.62
 
Kadant   0.55
 
1 Includes dividends    

  Top Detractors from Performance
For 2017 (%)2
     
     
Era Group   -0.49
 
Fenix Parts   -0.30
 
FTD Companies   -0.29
 
Dundee Corporation Cl. A   -0.27
 
Aceto Corporation   -0.25
 
2 Net of dividends    

CURRENT POSITIONING AND OUTLOOK
While we are cautious about the prospects for small- and micro-cap returns as a whole, we are also optimistic about the portfolio’s return potential as it leans towards three factors that we believe will be rewarded going forward—economically sensitive cyclicals, global exposure, and—in many cases—high profitability. These are the select qualities that we anticipate will drive small-cap leadership. In this environment, we see the opportunity for the Fund to continue outperforming in the years ahead.

24  |  2017 Annual Report to Stockholders  

 

PERFORMANCE AND PORTFOLIO REVIEW SYMBOLS    MARKET PRICE RMT NAV XOTCX


Performance                                
Average Annual Total Return (%) Through 12/31/17                        
    JUL-DEC 20171   1-YR   3-YR   5-YR   10-YR   15-YR   20-YR   SINCE INCEPTION (12/14/93)
RMT (NAV)   11.09   17.67   8.21   13.65   7.75   11.51   9.84   11.09
 
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   25.1%   97.7%   114.4%   413.3%   530.0%   996.6%
 

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 fund’s investment strategy. The Morningstar Ownership Zone provides detail about a portfolio’s 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    
     
Kadant   1.2
 
Heritage-Crystal Clean   1.2
 
Sun Hydraulics   1.2
 
Major Drilling Group International   1.2
 
Orbotech   1.1
 
Clarkson   1.0
 
Mesa Laboratories   1.0
 
QuinStreet   1.0
 
Atrion Corporation   0.9
 
IES Holdings   0.9
 


Portfolio Sector Breakdown    
% of Net Assets    
     
Industrials   20.9
 
Information Technology   20.7
 
Financials   12.8
 
Consumer Discretionary   12.7
 
Health Care   12.5
 
Energy   5.7
 
Materials   5.5
 
Real Estate   4.3
 
Consumer Staples   2.5
 
Utilities   0.4
 
Telecommunication Services   0.1
 
Miscellaneous   4.9
 
Outstanding Line of Credit, Net of Cash and Cash Equivalents   -3.0
 


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   $410 million
 
Number of Holdings   373
 
2017 Annual Turnover Rate   15%
 
Net Asset Value   $10.48
 
Market Price   $9.44
 
Net Leverage1   3.0%
 
Average Market Capitalization2   $449 million
 
Weighted Average P/B Ratio3   2.0x
 
Active Share4   95%
 
U.S. Investments (% of Net Assets)   82.3%
 
Non-U.S. Investments (% of Net Assets)   20.7%
 
 
1 Net leverage is the percentage, in excess of 100%, of the total value of equity type investments, divided by net assets.
2 Geometric Average. This weighted calculation uses each portfolio holding’s market cap in a way designed to not skew the effect of very large or small holdings; instead, it aims to better identify the portfolio’s center, which Royce believes offers a more accurate measure of average market cap than a simple mean or median.
3 Harmonic Average. This weighted calculation evaluates a portfolio as if it were a single stock and measures it overall. It compares the total market value of the portfolio to the portfolio’s share in the earnings or book value, as the case may be, of its underlying stocks.
4 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 Fund’s 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 Fund’s shares will fluctuate, so that shares may be worth more or less than their original cost when sold. The Fund normally invests in micro-cap companies, which may involve considerably more risk than investments in securities of larger-cap companies. The Fund’s 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 Fund’s year-to-date performance for 2017.

    2017 Annual Report to Stockholders |  25

 

Royce Micro-Cap Trust

 
Schedule of Investments
Common Stocks – 103.0%

      SHARES       VALUE
 
               
CONSUMER DISCRETIONARY 12.7%              
AUTO COMPONENTS - 1.4%              

Fox Factory Holding 1

    5,300     $ 205,905

Motorcar Parts of America 1

    54,800       1,369,452

Sebang Global Battery

    50,500       1,686,851

Standard Motor Products

    50,860       2,284,123

Stoneridge 1

    7,500       171,450

Unique Fabricating

    12,200       90,524
             
              5,808,305
             
DISTRIBUTORS - 0.6%              

Fenix Parts 1,2

    440,800       101,384

Uni-Select

    33,800       763,929

Weyco Group

    54,300       1,613,796
             
              2,479,109
             
DIVERSIFIED CONSUMER SERVICES - 1.8%              

American Public Education 1

    73,200       1,833,660

Collectors Universe 3

    108,200       3,098,848

Liberty Tax Cl. A

    142,900       1,571,900

Universal Technical Institute 1

    270,000       648,000
             
              7,152,408
             
HOTELS, RESTAURANTS & LEISURE - 1.4%              

Century Casinos 1

    222,500       2,031,425

Del Taco Restaurants 1

    8,200       99,384

Lindblad Expeditions Holdings 1

    254,000       2,486,660

Lindblad Expeditions Holdings (Warrants) 1

    18,100       24,978

Red Lion Hotels 1

    111,100       1,094,335
             
              5,736,782
             
HOUSEHOLD DURABLES - 3.2%              

AV Homes 1

    82,000       1,365,300

Cavco Industries 1,3,4

    20,241       3,088,777

Ethan Allen Interiors 3

    18,100       517,660

Flexsteel Industries 3

    16,100       753,158

Lifetime Brands 3

    119,294       1,968,351

PICO Holdings 3,4

    142,000       1,817,600

Skyline Corporation 1

    63,700       818,545

Stanley Furniture 1

    193,468       168,317

Universal Electronics 1

    6,100       288,225

ZAGG 1

    121,600       2,243,520
             
              13,029,453
             
INTERNET & DIRECT MARKETING RETAIL - 0.5%              

FTD Companies 1

    67,200       483,168

Gaia Cl. A 1,3,4

    125,000       1,550,000
             
              2,033,168
             
LEISURE PRODUCTS - 0.8%              

American Outdoor Brands 1,3

    27,100       347,964

Clarus Corporation 1

    174,926       1,373,169

Nautilus 1

    118,500       1,581,975
             
              3,303,108
             
MEDIA - 0.6%              

Entravision Communications Cl. A

    126,200       902,330

McClatchy Company (The) Cl. A 1

    69,313       618,965

New Media Investment Group

    66,200       1,110,836
             
              2,632,131
             
SPECIALTY RETAIL - 1.2%              

AutoCanada

    115,200       2,074,883

Barnes & Noble Education 1

    80,000       659,200

Destination Maternity 1

    212,000       629,640

Destination XL Group 1

    50,000       110,000

Haverty Furniture

    30,000       679,500

Kirkland’s 1

    11,000       131,615

MarineMax 1

    7,600       143,640

Shoe Carnival 3

    21,028       562,499

Stage Stores 3

    15,000       25,200
              5,016,177
             
TEXTILES, APPAREL & LUXURY GOODS - 1.2%              

Crown Crafts

    112,159       723,426

Culp

    32,900       1,102,150

J.G. Boswell Company 2

    2,490       1,765,410

YGM Trading

    1,482,000       1,403,687
             
              4,994,673
 
Total (Cost $53,083,590)             52,185,314
 
               
CONSUMER STAPLES 2.5%              
BEVERAGES - 0.2%              

Crimson Wine Group 1,2

    58,124       609,721
             
FOOD PRODUCTS - 2.2%              

Farmer Bros. 1,3,4

    62,600       2,012,590

John B. Sanfilippo & Son 3,4

    17,800       1,125,850

Landec Corporation 1,3

    75,610       952,686

Seneca Foods Cl. A 1

    73,087       2,247,425

Seneca Foods Cl. B 1

    40,400       1,373,600

SunOpta 1

    176,281       1,366,178
             
              9,078,329
             
HOUSEHOLD PRODUCTS - 0.1%              

Central Garden & Pet 1

    12,000       467,040
 
Total (Cost $6,140,646)             10,155,090
 
               
ENERGY 5.7%              
ENERGY EQUIPMENT & SERVICES - 2.6%              

Aspen Aerogels 1

    94,985       463,527

CARBO Ceramics 1,3,4

    70,000       712,600

CES Energy Solutions

    25,000       129,873

Dawson Geophysical 1

    73,654       366,060

Era Group 1

    309,800       3,330,350

Geospace Technologies 1,3

    9,500       123,215

Independence Contract Drilling 1

    134,400       534,912

Matrix Service 1,3

    33,700       599,860

Newpark Resources 1

    11,200       96,320

North American Energy Partners

    50,000       247,500

Pioneer Energy Services 1,3

    245,600       749,080

SEACOR Marine Holdings 1

    205,457       2,403,847

TerraVest Capital

    109,000       810,780

Trican Well Service 1

    53,300       173,002
             
              10,740,926
             
OIL, GAS & CONSUMABLE FUELS - 3.1%              

Ardmore Shipping 1

    199,300       1,594,400

Cross Timbers Royalty Trust

    67,631       991,470

Dorchester Minerals L.P.

    140,569       2,136,649

Dorian LPG 1

    138,138       1,135,494

Hugoton Royalty Trust

    287,574       402,603

Panhandle Oil and Gas Cl. A

    5,500       113,025

Permian Basin Royalty Trust

    176,333       1,564,074

Sabine Royalty Trust

    59,548       2,655,841

San Juan Basin Royalty Trust

    143,407       1,181,674

StealthGas 1

    229,664       1,001,335
             
              12,776,565
 
Total (Cost $24,650,686)             23,517,491
 

26 | 2017 Annual Report to Stockholders   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS

 

December 31, 2017

 
Schedule of Investments (continued)

      SHARES       VALUE
 
               
FINANCIALS 12.8%              
BANKS - 2.4%              

Bank of N.T. Butterfield & Son

    43,810     $ 1,589,865

Blue Hills Bancorp

    50,000       1,005,000

Bryn Mawr Bank

    25,000       1,105,000

Caribbean Investment Holdings 1

    735,635       228,440

Chemung Financial

    31,000       1,491,100

Fauquier Bankshares

    133,200       2,914,416

Live Oak Bancshares 3,4

    30,900       736,965

Midway Investments 1,5

    735,647       0

Peapack-Gladstone Financial

    20,606       721,622
             
              9,792,408
             
CAPITAL MARKETS - 8.6%              

ASA Gold and Precious Metals

    171,150       1,937,418

Canaccord Genuity Group

    224,100       1,034,033

Diamond Hill Investment Group 3

    3,584       740,669

Dundee Corporation Cl. A 1

    413,200       831,660

EQT Holdings

    43,150       673,574

Fiera Capital Cl. A

    78,000       806,683

GAIN Capital Holdings

    25,000       250,000

Gluskin Sheff + Associates

    67,400       892,768

Great Elm Capital Group 1

    395,200       1,600,560

Hamilton Lane Cl. A 3

    32,300       1,143,097

INTL FCStone 1,3

    41,727       1,774,649

JZ Capital Partners 1

    209,999       1,375,095

Manning & Napier Cl. A

    136,600       491,760

Medley Management Cl. A

    153,400       997,100

MVC Capital

    341,430       3,605,501

OHA Investment

    88,620       101,913

Pzena Investment Management Cl. A

    6,100       65,087

Queen City Investments 2

    948       1,232,400

Silvercrest Asset Management Group Cl. A

    203,300       3,262,965

Sprott

    1,414,533       2,745,792

U.S. Global Investors Cl. A 3

    439,454       1,713,871

Urbana Corporation

    237,600       686,148

Value Line

    136,074       2,633,032

Virtu Financial Cl. A 3

    107,800       1,972,740

Warsaw Stock Exchange

    52,900       714,096

Westaim Corporation 1

    45,000       111,337

Westwood Holdings Group 3

    12,400       821,004

ZAIS Group Holdings Cl. A 1,3,4

    262,960       1,022,914
             
              35,237,866
             
CONSUMER FINANCE - 0.6%              

EZCORP Cl. A 1,3,4

    201,000       2,452,200

J.G. Wentworth Company Cl. A 1,2

    135,000       783
             
              2,452,983
             
DIVERSIFIED FINANCIAL SERVICES - 0.1%              

Banca Finnat Euramerica

    568,000       272,160

Waterloo Investment Holdings 1,5

    806,000       241,800
             
              513,960
             
INSURANCE - 1.1%              

Hallmark Financial Services 1,3,4

    114,000       1,189,020

State Auto Financial

    59,264       1,725,768

Trupanion 1,3,4

    52,300       1,530,821
             
              4,445,609
 
Total (Cost $50,587,017)             52,442,826
 
               
HEALTH CARE 12.5%              
BIOTECHNOLOGY - 4.6%              

Abeona Therapeutics 1,3,4

    142,221       2,254,203

Aquinox Pharmaceuticals 1,3,4

    145,397       1,709,869

ARCA biopharma 1

    324,847       446,665

BioCryst Pharmaceuticals 1

    144,000       707,040

Invitae Corporation 1

    156,412       1,420,221

Keryx Biopharmaceuticals 1,3,4

    117,725       547,421

Kindred Biosciences 1

    126,000       1,190,700

Knight Therapeutics 1

    187,000       1,236,253

Mirati Therapeutics 1

    121,100       2,210,075

Progenics Pharmaceuticals 1

    6,500       38,675

Sangamo Therapeutics 1

    121,650       1,995,060

Stemline Therapeutics 1

    6,800       106,080

Zafgen 1

    548,491       2,534,028

Zealand Pharma 1

    187,900       2,572,032
             
              18,968,322
             
HEALTH CARE EQUIPMENT & SUPPLIES - 4.4%              

Analogic Corporation

    18,200       1,524,250

AtriCure 1,3

    15,000       273,600

Atrion Corporation

    6,169       3,890,171

CRH Medical 1

    133,000       350,223

CryoLife 1

    4,600       88,090

Exactech 1

    38,700       1,913,715

Inogen 1

    5,400       643,032

Invacare Corporation 3

    44,300       746,455

LeMaitre Vascular

    5,000       159,200

OraSure Technologies 1,3,4

    50,000       943,000

STRATEC Biomedical

    14,000       1,085,475

Surmodics 1

    125,892       3,524,976

TearLab Corporation 1,2

    8,500       3,273

Utah Medical Products

    34,000       2,767,600
             
              17,913,060
             
HEALTH CARE PROVIDERS & SERVICES - 2.2%              

Aceto Corporation

    79,600       822,268

BioTelemetry 1

    47,700       1,426,230

Cross Country Healthcare 1

    150,800       1,924,208

National Research Cl. A

    89,529       3,339,432

Psychemedics Corporation 3

    37,500       771,000

U.S. Physical Therapy

    10,000       722,000
             
              9,005,138
             
HEALTH CARE TECHNOLOGY - 0.3%              

Connecture 1,2

    20,000       3,200

Vocera Communications 1

    33,100       1,000,282
             
              1,003,482
             
PHARMACEUTICALS - 1.0%              

Agile Therapeutics 1,3,4

    80,000       215,200

Arcturus Therapeutics 1

    106,436       847,230

Flex Pharma 1

    310,210       1,082,633

Lipocine 1

    142,204       489,182

Theravance Biopharma 1

    59,009       1,645,761
             
              4,280,006
 
Total (Cost $32,617,874)             51,170,008
 
               
INDUSTRIALS 20.9%              
AEROSPACE & DEFENSE - 0.7%              

Astronics Corporation 1

    2,460       102,016

CPI Aerostructures 1

    11,800       105,610

FLYHT Aerospace Solutions 1

    191,680       298,881

Innovative Solutions and Support 1

    142,828       419,914

Mercury Systems 1,3,4

    29,700       1,525,095

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS   2017 Annual Report to Stockholders | 27

 

Royce Micro-Cap Trust

 
Schedule of Investments (continued)

      SHARES       VALUE
 
               
INDUSTRIALS (continued)              
AEROSPACE & DEFENSE (continued)              

SIFCO Industries 1

    45,800     $ 304,584
             
              2,756,100
             
BUILDING PRODUCTS - 1.3%              

Burnham Holdings Cl. A 2

    117,000       1,825,200

DIRTT Environmental Solutions 1

    196,100       1,051,483

Insteel Industries

    44,200       1,251,744

Patrick Industries 1

    17,250       1,198,012
             
              5,326,439
             
COMMERCIAL SERVICES & SUPPLIES - 2.1%              

Atento

    191,401       1,942,720

CompX International Cl. A

    78,200       1,040,060

Heritage-Crystal Clean 1,3,4

    223,477       4,860,625

Team 1,3,4

    57,500       856,750
             
              8,700,155
             
CONSTRUCTION & ENGINEERING - 2.3%              

Ameresco Cl. A 1

    251,400       2,162,040

IES Holdings 1

    220,000       3,795,000

Layne Christensen 1,3,4

    50,000       627,500

Northwest Pipe 1,3,4

    61,600       1,179,024

NV5 Global 1,3,4

    27,400       1,483,710
             
              9,247,274
             
ELECTRICAL EQUIPMENT - 0.9%              

Encore Wire 3

    4,100       199,465

LSI Industries

    147,412       1,014,195

Orion Energy Systems 1

    170,000       149,600

Powell Industries

    21,400       613,110

Power Solutions International 1,2,3,4

    21,100       158,250

Preformed Line Products

    20,743       1,473,790

Revolution Lighting Technologies 1,3,4

    81,200       267,148
             
              3,875,558
             
INDUSTRIAL CONGLOMERATES - 0.9%              

Raven Industries 3

    102,559       3,522,901
             
MACHINERY - 8.3%              

CIRCOR International 3

    56,900       2,769,892

Eastern Company (The)

    39,750       1,039,462

Exco Technologies

    85,400       688,907

Foster (L.B.) Company 1,3,4

    95,300       2,587,395

FreightCar America

    86,500       1,477,420

Global Brass and Copper Holdings

    5,000       165,500

Graham Corporation 3,4

    75,150       1,572,890

Harsco Corporation 1

    4,400       82,060

Hurco Companies

    36,866       1,555,745

Kadant

    49,800       4,999,920

Kornit Digital 1

    37,000       597,550

Lindsay Corporation 3

    32,600       2,875,320

Luxfer Holdings 3

    59,712       943,450

Lydall 1

    1,800       91,350

NN

    45,300       1,250,280

Sun Hydraulics

    74,000       4,787,060

Tennant Company

    34,400       2,499,160

Titan International

    212,200       2,733,136

Westport Fuel Systems 1

    377,900       1,420,904
             
              34,137,401
             
MARINE - 1.0%              

Clarkson

    109,900       4,243,312
             
PROFESSIONAL SERVICES - 1.3%              

Acacia Research 1,3

    190,000       769,500

CBIZ 1

    47,000       726,150

Franklin Covey 1

    40,100       832,075

GP Strategies 1

    7,600       176,320

Heidrick & Struggles International

    46,300       1,136,665

Kforce 3

    4,700       118,675

Resources Connection

    11,200       173,040

RPX Corporation

    96,000       1,290,240
             
              5,222,665
             
ROAD & RAIL - 0.7%              

Marten Transport

    5,500       111,650

Patriot Transportation Holding 1,3

    55,764       980,889

Universal Logistics Holdings 3,4

    77,600       1,843,000
             
              2,935,539
             
TRADING COMPANIES & DISTRIBUTORS - 1.4%              

Central Steel & Wire 2

    788       354,600

EnviroStar 3,4

    74,400       2,976,000

Houston Wire & Cable 1

    331,418       2,386,209
              5,716,809
 
Total (Cost $59,573,079)             85,684,153
 
               
INFORMATION TECHNOLOGY 20.7%              
COMMUNICATIONS EQUIPMENT - 0.7%              

ADTRAN 3

    23,300       450,855

Clearfield 1

    61,300       750,925

EMCORE Corporation 1

    8,300       53,535

Harmonic 1

    147,000       617,400

Oclaro 1

    137,100       924,054

PCTEL

    34,100       251,317
             
              3,048,086
             
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS - 6.1%              

Airgain 1

    4,800       43,152

Bel Fuse Cl. A

    67,705       1,478,000

ePlus 1

    3,000       225,600

Fabrinet 1

    2,200       63,140

FARO Technologies 1,3,4

    76,800       3,609,600

Firan Technology Group 1

    25,000       71,798

HollySys Automation Technologies

    58,500       1,302,795

Inficon Holding

    3,220       2,009,699

LRAD Corporation 1

    853,456       2,125,106

Mesa Laboratories 3

    32,900       4,089,470

Novanta 1

    37,600       1,880,000

Orbotech 1,3,4

    87,000       4,370,880

PC Connection

    43,716       1,145,796

Perceptron 1

    8,500       82,875

Richardson Electronics

    316,900       2,135,906

Rogers Corporation 1,3

    600       97,152

Vishay Precision Group 1

    10,000       251,500
             
              24,982,469
             
INTERNET SOFTWARE & SERVICES - 5.0%              

Actua Corporation 1

    36,876       575,266

Care.com 1,3,4

    171,787       3,099,037

comScore 1,2

    64,195       1,829,558

Etsy 1

    80,300       1,642,135

IZEA 1,3,4

    85,870       388,132

MINDBODY Cl. A 1

    38,900       1,184,505

QuinStreet 1

    475,550       3,985,109

Real Matters 1

    255,000       2,044,869

Reis

    25,000       516,250

Solium Capital 1

    309,700       2,688,009

28 | 2017 Annual Report to Stockholders   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS

 

December 31, 2017

 
Schedule of Investments (continued)

      SHARES       VALUE
 
               
INFORMATION TECHNOLOGY (continued)              
INTERNET SOFTWARE & SERVICES (continued)              

Stamps.com 1

    12,300     $ 2,312,400

Support.com 1

    105,600       255,552
             
              20,520,822
             
IT SERVICES - 0.5%              

Computer Task Group 1,3

    150,838       769,274

Hackett Group (The)

    27,700       435,167

Innodata 1

    437,275       594,694

Virtusa Corporation 1

    2,300       101,384
             
              1,900,519
             
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 4.8%              

Amtech Systems 1,3,4

    92,184       928,293

Brooks Automation

    91,500       2,182,275

CyberOptics Corporation 1

    46,600       699,000

FormFactor 1

    22,869       357,900

Intermolecular 1

    240,000       328,800

IXYS Corporation 1

    18,800       450,260

Kopin Corporation 1

    242,200       775,040

Kulicke & Soffa Industries 1

    77,200       1,878,662

MoSys 1,3,4

    68,427       75,954

Nanometrics 1

    64,600       1,609,832

NeoPhotonics Corporation 1,3,4

    51,300       337,554

Nova Measuring Instruments 1

    66,100       1,712,651

PDF Solutions 1

    97,000       1,522,900

Photronics 1

    223,500       1,905,337

Rudolph Technologies 1

    52,100       1,245,190

Sigma Designs 1

    60,000       417,000

Silicon Motion Technology ADR

    34,100       1,805,936

Ultra Clean Holdings 1,3

    49,900       1,152,191

Veeco Instruments 1,3,4

    17,500       259,875

Xcerra Corporation 1

    11,300       110,627
             
              19,755,277
             
SOFTWARE - 2.6%              

Agilysys 1

    170,587       2,094,808

American Software Cl. A

    120,352       1,399,694

BSQUARE Corporation 1

    83,675       389,088

Computer Modelling Group

    337,700       2,579,093

Model N 1

    67,193       1,058,290

Monotype Imaging Holdings

    15,000       361,500

PSI Software

    34,000       755,009

RealNetworks 1

    130,171       445,185

Rubicon Project 1

    75,000       140,250

SeaChange International 1

    284,200       1,116,906

Varonis Systems 1

    2,600       126,230
             
              10,466,053
             
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS - 1.0%              

Intevac 1

    293,400       2,009,790

Kortek

    135,007       2,059,314
             
              4,069,104
 
Total (Cost $64,410,193)             84,742,330
 
               
MATERIALS 5.5%              
CHEMICALS - 2.0%              

Balchem Corporation

    11,775       949,065

FutureFuel Corporation

    85,262       1,201,342

LSB Industries 1

    135,800       1,189,608

Quaker Chemical 3,4

    24,400       3,679,276

Trecora Resources 1

    89,600       1,209,600
             
              8,228,891
             
CONSTRUCTION MATERIALS - 0.3%              

Monarch Cement 2

    16,303       1,137,949

U.S. Concrete 1

    3,400       284,410
             
              1,422,359
             
CONTAINERS & PACKAGING - 0.3%              

UFP Technologies 1

    36,445       1,013,171
             
METALS & MINING - 2.9%              

Alamos Gold Cl. A

    186,044       1,212,172

Ampco-Pittsburgh

    79,002       979,625

Comstock Mining 1

    375,000       146,250

Haynes International 3

    26,100       836,505

Imdex 1

    750,666       617,063

MAG Silver 1

    74,050       915,258

Major Drilling Group International 1

    850,357       4,776,070

Olympic Steel

    35,000       752,150

Pretium Resources 1

    80,000       912,649

Universal Stainless & Alloy Products 1

    15,300       327,726

Victoria Gold 1

    890,000       307,995
             
              11,783,463
 
Total (Cost $18,241,725)             22,447,884
 
               
REAL ESTATE 4.3%              
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITS) - 0.7%              

BRT Apartments

    230,331       2,715,603
             
REAL ESTATE MANAGEMENT & DEVELOPMENT - 3.6%              

Altus Group

    87,000       2,556,014

FRP Holdings 1,3,4

    76,500       3,385,125

Griffin Industrial Realty

    38,784       1,423,373

Hopefluent Group Holdings

    1,400,000       614,522

Marcus & Millichap 1,3,4

    49,567       1,616,380

RMR Group Cl. A

    34,900       2,069,570

Tejon Ranch 1,3,4

    154,994       3,217,675
             
              14,882,659
 
Total (Cost $12,321,495)             17,598,262
 
               
TELECOMMUNICATION SERVICES – 0.1%              
DIVERSIFIED TELECOMMUNICATION SERVICES - 0.1%              

ORBCOMM 1

    67,100       683,078
 
Total (Cost $570,215)             683,078
 
               
UTILITIES 0.4%              
GAS UTILITIES - 0.1%              

Shizuoka Gas

    40,000       340,422
             
INDEPENDENT POWER & RENEWABLE ELECTRICITY PRODUCER - 0.1%              

Alterra Power

    45,000       286,396
             
WATER UTILITIES - 0.2%              

Global Water Resources

    106,000       990,040
 
Total (Cost $1,145,614)             1,616,858
 
               
MISCELLANEOUS6 4.9%              
 
Total (Cost $18,803,152)             20,172,168
 
               
TOTAL COMMON STOCKS              
 
(Cost $342,145,286)             422,415,462
 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS   2017 Annual Report to Stockholders | 29

 

Royce Micro-Cap Trust   December 31, 2017

 
Schedule of Investments (continued)

      VALUE  
 
         
REPURCHASE AGREEMENT 7.7%        
Fixed Income Clearing Corporation, 0.20% dated 12/29/17, due 1/2/18, maturity value
$31,430,698 (collateralized by obligations of various U.S. Government Agencies, 0.75%-
1.75% due 10/31/18, valued at $32,059,068)
  $ 31,430,000  
 
(Cost $31,430,000)        
 
         
TOTAL INVESTMENTS 110.7%        
 
(Cost $373,575,286)     453,845,462  
 
         
LIABILITIES LESS CASH AND OTHER ASSETS (10.7)%     (43,940,546 )
       
         
 
NET ASSETS 100.0%   $ 409,904,916  
 

New additions in 2017.
1
Non-income producing.
2
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.
3
All or a portion of these securities were pledged as collateral in connection with the Fund’s revolving credit agreement at December 31, 2017. Total market value of pledged securities at
 
December 31, 2017, was $69,255,541.
4
At December 31, 2017, a portion of these securities were rehypothecated in connection with the Fund’s revolving credit agreement in the aggregate amount of $42,559,647.
5
Securities for which market quotations are not readily available represent 0.1% of net assets. These securities have been valued at their fair value under procedures approved by the Fund’s Board of Directors. These securities are defined as Level 3 securities due to the use of significant unobservable inputs in the determination of fair value. See Notes to Financial Statements.
6
Includes securities first acquired in 2017 and less than 1% of net assets.
   
 
Bold indicates the Fund’s 20 largest equity holdings in terms of December 31, 2017, market value.
   
 
TAX INFORMATION: The cost of total investments for Federal income tax purposes was $375,885,077. At December 31, 2017, net unrealized appreciation for all securities was $77,960,385 consisting of aggregate gross unrealized appreciation of $125,706,455 and aggregate gross unrealized depreciation of $47,746,070. The primary causes of the differences between book and tax basis cost are the timing of the recognition of losses on securities sold, investments in publicly traded partnerships and Trusts and mark-to-market of Passive Foreign Investment Companies.

30 | 2017 Annual Report to Stockholders   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS

 

Royce Micro-Cap Trust   December 31, 2017

 
Statement of Assets and Liabilities

ASSETS:        
Investments at value   $ 422,415,462  
 
Repurchase agreements (at cost and value)     31,430,000  
 
Receivable for investments sold     1,356,246  
 
Receivable for dividends and interest     317,349  
 
Prepaid expenses and other assets     35,726  
 
Total Assets     455,554,783  
 
LIABILITIES:        
Revolving credit agreement     45,000,000  
 
Payable to custodian for cash and foreign currency overdrawn     303  
 
Payable for investments purchased     350,225  
 
Payable for investment advisory fee     162,616  
 
Payable for directors’ fees     23,165  
 
Payable for interest expense     13,223  
 
Accrued expenses     100,335  
 
Total Liabilities     45,649,867  
 
Net Assets   $ 409,904,916  
 
ANALYSIS OF NET ASSETS:        
Paid-in capital - $0.001 par value per share; 39,116,640 shares outstanding (150,000,000 shares authorized)   $ 329,118,673  
 
Undistributed net investment income (loss)     (1,002,531 )
 
Accumulated net realized gain (loss) on investments and foreign currency     1,518,443  
 
Net unrealized appreciation (depreciation) on investments and foreign currency     80,270,331  
 
Net Assets (net asset value per share - $10.48)   $ 409,904,916  
 
Investments at identified cost   $ 342,145,286  
 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS   2017 Annual Report to Stockholders | 31

 

Royce Micro-Cap Trust

 
Statement of Changes in Net Assets

    YEAR ENDED 12/31/17   YEAR ENDED 12/31/16
 
                 
INVESTMENT OPERATIONS:                
Net investment income (loss)   $ 2,126,051     $ 1,040,381  
 
Net realized gain (loss) on investments and foreign currency     25,657,103       17,298,523  
 
Net change in unrealized appreciation (depreciation) on investments and foreign currency     33,136,932       46,017,634  
 
Net increase (decrease) in net assets from investment operations     60,920,086       64,356,538  
 
DISTRIBUTIONS:                
Net investment income     (2,282,512 )     (2,974,373 )
 
Net realized gain on investments and foreign currency     (24,135,451 )     (20,650,513 )
 
Total distributions     (26,417,963 )     (23,624,886 )
 
CAPITAL STOCK TRANSACTIONS:                
Reinvestment of distributions     11,702,040       10,562,009  
 
Total capital stock transactions     11,702,040       10,562,009  
 
Net Increase (Decrease) In Net Assets     46,204,163       51,293,661  
 
NET ASSETS:                
 
Beginning of year     363,700,753       312,407,092  
 
End of year (including undistributed net investment income (loss) of $(1,002,531) at 12/31/17 and $(1,987,430) at 12/31/16)   $ 409,904,916     $ 363,700,753  
 

32 | 2017 Annual Report to Stockholders   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS

 

Royce Micro-Cap Trust   Year Ended December 31, 2017

 
Statement of Operations

INVESTMENT INCOME:        
INCOME:        
Dividends   $ 5,460,744  
 
Foreign withholding tax     (113,927 )
 
Interest     36,662  
 
Rehypothecation income     105,571  
 
Total income     5,489,050  
EXPENSES:        
 
Investment advisory fees     1,849,250  
 
Interest expense     1,010,324  
 
Stockholder reports     121,130  
 
Administrative and office facilities     97,552  
 
Custody and transfer agent fees     91,086  
 
Directors’ fees     90,170  
 
Professional fees     59,188  
 
Other expenses     44,302  
 
Total expenses     3,363,002  
 
Compensating balance credits     (3 )
 
Net expenses     3,362,999  
 
Net investment income (loss)     2,126,051  
 
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:        
NET REALIZED GAIN (LOSS):        
 
Investments     25,643,717  
 
Foreign currency transactions     13,386  
 
NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION):        
 
Investments and foreign currency translations     33,135,300  
 
Other assets and liabilities denominated in foreign currency     1,632  
 
Net realized and unrealized gain (loss) on investments and foreign currency     58,794,035  
 
NET INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS   $ 60,920,086  
 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS   2017 Annual Report to Stockholders | 33

 

Royce Micro-Cap Trust   Year Ended December 31, 2017

 
Statement of Cash Flows

CASH FLOWS FROM OPERATING ACTIVITIES:        
Net increase (decrease) in net assets from investment operations   $ 60,920,086  
 
Adjustments to reconcile net increase (decrease) in net assets from investment operations to net cash provided by operating activities:        
 

Purchases of long-term investments

    (60,892,834 )
 

Proceeds from sales and maturities of long-term investments

    61,228,982  
 

Net purchases, sales and maturities of short-term investments

    12,042,000  
 

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

    189,283  
 

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

    19,867  
 

Net change in unrealized appreciation (depreciation) on investments

    (33,135,300 )
 

Net realized gain (loss) on investments and foreign currency

    (25,657,103 )
 
Net cash provided by operating activities     14,714,981  
 
CASH FLOWS FROM FINANCING ACTIVITIES:        
 
Distributions     (26,417,963 )
 
Reinvestment of distributions     11,702,040  
 
Net cash used for financing activities     (14,715,923 )
 
INCREASE (DECREASE) IN CASH:     (942 )
 
Cash and foreign currency at beginning of year     639  
 
Payable to custodian for cash and foreign currency overdrawn at end of year   $ (303 )
 

34 | 2017 Annual 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 Fund’s performance for the periods presented.

    YEARS ENDED
     
    12/31/17   12/31/16   12/31/15   12/31/14   12/31/13
 
Net Asset Value, Beginning of Period   $ 9.63     $ 8.59     $ 11.33     $ 14.12     $ 10.93  
 
INVESTMENT OPERATIONS:                                        
Net investment income (loss)     0.06       0.03       0.03       (0.01 )     0.01  
 
Net realized and unrealized gain (loss) on investments and foreign currency     1.52       1.70       (1.42 )     0.25       4.64  
 
Net increase (decrease) in net assets from investment operations     1.58       1.73       (1.39 )     0.24       4.65  
 
DISTRIBUTIONS TO COMMON STOCKHOLDERS:                                        
Net investment income     (0.06 )     (0.08 )     (0.01 )     (0.04 )     (0.03 )
 
Net realized gain on investments and foreign currency     (0.63 )     (0.56 )     (1.25 )     (2.86 )     (1.35 )
 
Total distributions to Common Stockholders     (0.69 )     (0.64 )     (1.26 )     (2.90 )     (1.38 )
 
CAPITAL STOCK TRANSACTIONS:                                        
Effect of reinvestment of distributions by Common Stockholders     (0.04 )     (0.05 )     (0.09 )     (0.13 )     (0.08 )
 
Total capital stock transactions     (0.04 )     (0.05 )     (0.09 )     (0.13 )     (0.08 )
 
Net Asset Value, End of Period   $ 10.48     $ 9.63     $ 8.59     $ 11.33     $ 14.12  
 
Market Value, End of Period   $ 9.44     $ 8.16     $ 7.26     $ 10.08     $ 12.61  
 
TOTAL RETURN:1                                        
Net Asset Value     17.67 %     21.98 %     (11.64 )%     3.46 %     44.66 %
 
Market Value     25.09 %     22.30 %     (16.06 )%     3.06 %     49.42 %
 
RATIOS BASED ON AVERAGE NET ASSETS:                                        
Investment advisory fee expense2     0.49 %     0.87 %     0.93 %     0.93 %     0.82 %
 
Other operating expenses     0.40 %     0.39 %     0.35 %     0.25 %     0.29 %
 
Total expenses (net)     0.89 %     1.26 %     1.28 %     1.18 %     1.11 %
 
Expenses net of fee waivers and excluding interest expense     0.62 %     1.02 %     1.08 %     1.05 %     0.96 %
 
Expenses prior to fee waivers and balance credits     0.89 %     1.26 %     1.28 %     1.18 %     1.11 %
 
Expenses prior to fee waivers     0.89 %     1.26 %     1.28 %     1.18 %     1.11 %
 
Net investment income (loss)     0.56 %     0.32 %     0.26 %     (0.09 )%     0.08 %
 
SUPPLEMENTAL DATA:                                        
Net Assets, End of Period (in thousands)   $ 409,905     $ 363,701     $ 312,407     $ 387,488     $ 433,121  
 
Portfolio Turnover Rate     15 %     26 %     39 %     41 %     29 %
 
REVOLVING CREDIT AGREEMENT:                                        
Asset coverage     1011 %     908 %     794 %     746 %     1062 %
 
Asset coverage per $1,000   $ 10,109     $ 9,082     $ 7,942     $ 7,458     $ 10,625  
 

1
The Market Value Total Return is calculated assuming a purchase of Common Stock on the opening of the first business day and a sale on the closing of the last business day of each period. Dividends and distributions are assumed for the purposes of this calculation to be reinvested at prices obtained under the Fund’s Distribution Reinvestment and Cash Purchase Plan. Net Asset Value Total Return is calculated on the same basis, except that the Fund’s net asset value is used on the purchase and sale dates instead of market value.
2
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.

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS   2017 Annual Report to Stockholders | 35

 

Royce Micro-Cap Trust

Notes to Financial Statements

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

Various inputs are used in determining the value of the Fund’s investments, as noted above. These inputs are summarized in the three broad levels below:

  Level 1  – 
quoted prices in active markets for identical securities.
  Level 2  – 
other significant observable inputs (including quoted prices for similar securities, foreign securities that may be fair valued and repurchase agreements). The table below includes all Level 2 securities. Level 2 securities with values based on quoted prices for similar securities are noted in the Schedule of Investments.
  Level 3  – 
significant unobservable inputs (including last trade price before trading was suspended, or at a discount thereto for lack of marketability or otherwise, market price information regarding other securities, information received from the company and/or published documents, including SEC filings and financial statements, or other publicly available information).

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

The following is a summary of the inputs used to value the Fund’s investments as of December 31, 2017. 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     $394,133,310       $28,040,352       $241,800       $422,415,462  
 
Cash Equivalents           31,430,000             31,430,000  
 

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 year ended December 31, 2017, securities valued at $2,092,392 were transferred from Level 1 to Level 2 and securities valued at $1,403,688 were transferred from Level 2 to Level 1 within the fair value hierarchy.

36 | 2017 Annual Report to Stockholders


 

Royce Micro-Cap Trust

Notes to Financial Statements (continued)

VALUATION OF INVESTMENTS (continued):

Level 3 Reconciliation:
             
  BALANCE AS OF 12/31/16 PURCHASES SALES REALIZED GAIN (LOSS) UNREALIZED GAIN (LOSS)1 BALANCE AS OF 12/31/17
 
Common Stocks $241,862 $0 $102 $51 $(11) $241,800
 
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
      12/31/17     VALUATION TECHNIQUE(S)     UNOBSERVABLE INPUT(S)     RANGE AVERAGE     AN INCREASE IN INPUT1
 
Common Stocks     $241,800     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 Fund’s investment adviser has determined are creditworthy. The Fund restricts repurchase agreements to maturities of no more than seven days. Securities pledged as collateral for repurchase agreements, which are held until maturity of the repurchase agreements, are marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest). Repurchase agreements could involve certain risks in the event of default or insolvency of the counter-party, including possible delays or restrictions upon the ability of the Fund to dispose of its underlying securities. The remaining contractual maturity of the repurchase agreement held by the Fund at December 31, 2017 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 Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities, including investments in securities at the end of the reporting period, as a result of changes in foreign currency exchange rates.

 
TAXES:

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

 
DISTRIBUTIONS:

The Fund pays quarterly distributions on the Fund’s Common Stock at the annual rate of 7% of the rolling average of the prior four calendar quarter-end NAVs of the Fund’s Common Stock, with the fourth quarter distribution being the greater of 1.75% 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 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.

2017 Annual Report to Stockholders | 37


 

Royce Micro-Cap Trust

Notes to Financial Statements (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 Fund’s operations, while expenses applicable to more than one of the Royce Funds are allocated equitably. Certain personnel, occupancy costs and other administrative expenses related to the 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 custodian's fee is paid indirectly by credits earned on the Fund's cash on deposit with the bank. This deposit arrangement is an alternative to purchasing overnight investments. Conversely, the Fund pays interest to the custodian on any cash overdrafts, to the extent they are not offset by credits earned on positive cash balances.

 
Capital Stock:

The Fund issued 1,336,310 and 1,405,544 shares of Common Stock as reinvestment of distributions for the years ended December 31, 2017 and December 31, 2016, 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 Fund’s 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 December 31, 2017, the Fund has outstanding borrowings of $45,000,000. During the year ended December 31, 2017, the Fund borrowed an average daily balance of $45,000,000 at a weighted average borrowing cost of 2.21%. The maximum amount outstanding during the year ended December 31, 2017 was $45,000,000. As of December 31, 2017, the aggregate value of rehypothecated securities was $42,559,647. During the year ended December 31, 2017, the Fund earned $105,571 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.

38 | 2017 Annual Report to Stockholders


 

Royce Micro-Cap Trust

Notes to Financial Statements (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 Fund’s 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 twelve rolling 36-month periods in 2017, the Fund’s investment performance ranged from 10% to 16% below the investment performance of the Russell 2000. Accordingly, the net investment advisory fee consisted of a Basic Fee of $3,580,381 and a net downward adjustment of $1,731,131 for the performance of the Fund relative to that of the Russell 2000. For the year ended December 31, 2017, the Fund expensed Royce investment advisory fees totaling $1,849,250.

 
Purchases and Sales of Investment Securities:

For the year ended December 31, 2017, the costs of purchases and proceeds from sales of investment securities, other than short-term securities, amounted to $60,777,855 and $60,339,949, 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 year ended December 31, 2017, were as follows:


COST OF PURCHASES     PROCEEDS FROM SALES     REALIZED GAIN (LOSS)
 
$4,400,725     $ –     $ –
 

Tax Information:

Distributions during the years ended December 31, 2017 and 2016, were characterized as follows for tax purposes:


ORDINARY INCOME       LONG-TERM CAPITAL GAINS
 
2017     2016       2017     2016
 
$5,516,070     $5,291,974       $20,901,893     $18,332,912
 

The tax basis components of distributable earnings at December 31, 2017, were as follows:

                  QUALIFIED LATE YEAR      
UNDISTRIBUTED     UNDISTRIBUTED LONG-TERM     NET UNREALIZED     ORDINARY AND     TOTAL
ORDINARY     CAPITAL GAINS OR     APPRECIATION     POST-OCTOBER LOSS     DISTRIBUTABLE
INCOME     (CAPITAL LOSS CARRYFORWARD)     (DEPRECIATION)1     DEFERRALS2     EARNINGS
 
$1,570,241     $1,469,231     $77,960,546     $(213,775)     $80,786,243
 
1
Includes timing differences on foreign currency, recognition of losses on securities sold, investments in publicly traded partnerships and Trusts and mark-to-market of Passive Foreign Investment Companies.
2
Under the current tax law, capital losses and qualified late year ordinary losses incurred after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. This column also includes passive activity losses.

     For financial reporting purposes, capital accounts and distributions to stockholders are adjusted to reflect the tax character of permanent book/tax differences. For the year ended December 31, 2017, the Fund recorded the following permanent reclassifications, which relate primarily to current investments in publicly traded partnerships and Trusts, foreign currency transactions, investments in Real Estate Investment Trusts and gains from the sale of Passive Foreign Investment Companies. Results of operations and net assets were not affected by these reclassifications.

UNDISTRIBUTED NET     ACCUMULATED NET      
INVESTMENT INCOME     REALIZED GAIN (LOSS)     PAID-IN CAPITAL
 
$1,141,360     $(1,141,357)     $ (3)
 

Management has analyzed the Fund’s tax positions taken on federal income tax returns for all open tax years (2014-2017) and has concluded that as of December 31, 2017, no provision for income tax is required in the Fund’s financial statements.

2017 Annual Report to Stockholders | 39


 

Report of Independent Registered Public Accounting Firm

To the Board of Directors and the Stockholders of Royce Micro-Cap Trust, Inc.:

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Royce Micro-Cap Trust, Inc. (the “Fund”) as of December 31, 2017, the related statements of operations and cash flows for the year ended December 31, 2017, the statement of changes in net assets for each of the two years in the period ended December 31, 2017, including the related notes, and the financial highlights for each of the three years in the period ended December 31, 2017 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, the results of its operations and its cash flows for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2017 and the financial highlights for each of the three years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.

The financial statements of the Fund as of and for the year ended December 31, 2014 and the financial highlights for each of the periods ended on or prior to December 31, 2014 (not presented herein, other than the financial highlights) were audited by other auditors whose report dated February 23, 2015 expressed an unqualified opinion on those financial statements and financial highlights.

Basis for Opinion

These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2017 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP
Baltimore, MD
February 22, 2018

We have served as the auditor of one or more investment companies in the Royce investment company group since at least 1967. We have not determined the specific year we began serving as auditor.

40 | 2017 Annual Report to Stockholders








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2017 Annual Report to Stockholders | 41


 

    MANAGERS’ DISCUSSION
Royce Value Trust (RVT)    

Chuck Royce
Chris Flynn
Lauren Romeo, CFA

FUND PERFORMANCE
With a second consecutive year of strong absolute and relative performance, Royce Value Trust further solidified long-term advantages over its unleveraged small-cap benchmark, the Russell 2000 Index, outperforming on both a net asset value (“NAV”) and market price basis for the one-, three-, 20-, 25-, 30-year, and since inception (11/26/86) periods ended December 31, 2017. The Fund advanced 19.4% on an NAV basis and 30.5% based on market price in 2017, ahead of respective gains of 14.6% and 13.2% for the Russell 2000 and S&P SmallCap 600 for the same period. The year presented crosscurrents for the Fund’s multi-discipline approach in the form of leadership for growth stocks and the lift from strength for cyclicals, in particular those with global exposure.
 
WHAT WORKED... AND WHAT DIDN’T
Nine of the Fund’s 11 equity sectors made positive contributions to 2017 performance. Industrials and Information Technology—the portfolio’s two largest sectors—led by a wide margin, followed by solid net gains for Financials while Energy and Consumer Discretionary made only modest negative impacts. Relative to the Russell 2000, the best performance in 2017 came from Financials, where both our lighter weighting in banks and (to a lesser degree) heavier investment in capital markets companies were additive against the benchmark. Savvy stock selection in both Information Technology and Industrials was another important source of outperformance. Conversely, the largest relative detraction at the sector level came from our lower weighting in Health Care—the best-performing sector in the Russell 2000 in 2017—and ineffective stock selection in Consumer Discretionary. The portfolio’s cash position also had a negative impact on relative performance. At the industry level, the largest contribution by far on an absolute basis came from electronic equipment, instruments & components (Information Technology), followed by machinery (Industrials), each from one of the Fund’s leading sectors, while the largest detractors, energy equipment & services (Energy) and Internet & direct marketing retail (Consumer Discretionary), came from its two worst.
      For many years, the portfolio has invested heavily in companies that increase productivity or otherwise help business operate faster, cheaper, and more effectively. This ‘picks and shovels’ approach often leads us to industrial and technology companies with very interesting—and in many cases ultimately profitable—niche businesses. Over the last few years, there has been a significant amount of innovation in areas such as process automation, robotics, lasers, cloud storage, etc.—all of which need equipment, components, and related technology. This has led us to invest in several companies that specialize in process automation or other innovative ways that boost productivity. Moreover, the long-term outlook for select companies in these areas looks very promising to us as the current global technology build-out continues. It was no surprise, then, that three of the portfolio’s five top-contributing stocks in 2017 were technology stocks while a fourth came from the Industrials sector.
The Fund’s two top contributors exemplify our goal for these kinds of companies. Laser diode and equipment maker Coherent saw its shares climb thanks to a record-setting fiscal 2017, which saw sales and earnings growth driven by increasing demand for ramped up OLED (organic light-emitting diode) capacity and service. Cognex Corporation is the market leader in machine vision technology, which captures and analyzes visual information to automate tasks that previously relied on human eyesight and is thus a major driver of industrial and process automation. The firm has just begun to move into key end markets, such as consumer electronics, while adoption is expanding to other industries, including a fast-growing logistics segment. With ever-evolving proprietary technology and an unmatched global corps of engineers serving customers, the firm looks poised to sustain its well-above-average ROIC and compound its business value into the future.
As for positions that detracted, we believe the new management team at Wesco Aircraft Holdings is well positioned to address the firm’s operational issues and eventually improve results. The situation is essentially a turnaround in waiting, and we built our position significantly in the fourth quarter. We held steady with our stake in FTD Companies, which provides flowers and other gifts through various subsidiaries. Disappointing sales and revenues were addressed with some changes in upper management that we think could help business to bloom.

  Top Contributors to Performance
For 2017 (%)1
     
     
Coherent   1.22
 
Cognex Corporation   0.99
 
Ash Grove Cement Cl. B   0.94
 
IPG Photonics   0.53
 
Sun Hydraulics   0.53
 
1 Includes dividends    

  Top Detractors from Performance
For 2017 (%)2
     
     
Wesco Aircraft Holdings   -0.39
 
FTD Companies   -0.38
 
Era Group   -0.27
 
MBIA   -0.23
 
Core-Mark Holding Company   -0.22
 
2 Net of dividends    

CURRENT POSITIONING AND OUTLOOK
While we are cautious about the prospects for small-cap returns as a whole, we are also optimistic about the portfolio’s return potential as it leans towards three factors that we believe will be rewarded going forward—economically sensitive cyclicals, global exposure, and—in many cases—high profitability. These are the select qualities that we anticipate will drive small-cap leadership. In this environment, we see the opportunity for the Fund to continue outperforming in the years ahead.

42 | 2017 Annual Report to Stockholders  

 

PERFORMANCE AND PORTFOLIO REVIEW SYMBOLS    MARKET PRICE RVT NAV XRVTX


Performance                                  
Average Annual Total Return (%) Through 12/31/17                  
    JUL-DEC 20171   1-YR   3-YR   5-YR   10-YR   15-YR   20-YR   25-YR   30-YR   SINCE INCEPTION (11/26/86)
RVT (NAV)   11.27   19.38   11.63   13.47   7.18   10.79   9.45   10.73   11.53   10.83
 
1 Not Annualized                              


Market Price Performance History Since Inception (11/26/86)
Cumulative Performance of Investment through 12/31/171                
    1-YR   5-YR   10-YR   15-YR   20-YR   SINCE INCEPTION (11/26/86)
 
RVT   30.5%   99.4%   96.3%   330.5%   533.7%   2029.7%
 

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 fund’s investment strategy. The Morningstar Ownership Zone provides detail about a portfolio’s 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    
     
Ash Grove Cement   1.8
 
FLIR Systems   1.7
 
HEICO Corporation   1.6
 
Coherent   1.5
 
Cognex Corporation   1.4
 
Sun Hydraulics   1.2
 
Quaker Chemical   1.1
 
Copart   1.1
 
RBC Bearings   1.0
 
E-L Financial   1.0
 


Portfolio Sector Breakdown    
% of Net Assets    
     
Industrials   30.3
 
Information Technology   20.0
 
Financials   14.8
 
Consumer Discretionary   9.6
 
Materials   8.2
 
Energy   5.2
 
Health Care   4.2
 
Real Estate   3.1
 
Consumer Staples   2.1
 
Telecommunication Services   0.6
 
Utilities   0.1
 
Miscellaneous   3.3
 
Outstanding Line of Credit, Net of Cash and Cash Equivalents   -1.5
 


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   $1,480 million
 
Number of Holdings   476
 
2017 Annual Turnover Rate   19%
 
Net Asset Value   $17.50
 
Market Price   $16.17
 
Net Leverage1   1.5%
 
Average Market Capitalization2   $1,832 million
 
Weighted Average P/E Ratio3,4   23.9x
 
Weighted Average P/B Ratio3   2.3x
 
Active Share5   89%
 
U.S. Investments (% of Net Assets)   83.6%
 
Non-U.S. Investments (% of Net Assets)   17.9%
 
 
1 Net leverage is the percentage, in excess of 100%, of the total value of equity type investments, divided by net assets.
2
Geometric Average. This weighted calculation uses each portfolio holding’s market cap in a way designed to not skew the effect of very large or small holdings; instead, it aims to better identify the portfolio’s center, which Royce believes offers a more accurate measure of average market cap than a simple mean or median.
3
Harmonic Average. This weighted calculation evaluates a portfolio as if it were a single stock and measures it overall. It compares the total market value of the portfolio to the portfolio’s share in the earnings or book value, as the case may be, of its underlying stocks.
4
The Fund’s P/E ratio calculation excludes companies with zero or negative earnings (15% of portfolio holdings as of 12/31/17).
5
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 Fund’s 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 for financial reporting purposes, and as a result the net asset value originally calculated on that date and the total return based on that net asset value differs from the adjusted net asset value and total return reported in the Financial Highlights. The market price of the Fund’s shares will fluctuate, so that shares may be worth more or less than their original cost when sold. The Fund invests primarily in securities of small- and micro-cap companies, which may involve considerably more risk than investing in larger-cap companies. The Fund’s 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 Fund’s year-to date performance for 2017.

    2017 Annual Report to Stockholders | 43

 

Royce Value Trust

 
Schedule of Investments
Common Stocks – 101.5%
    SHARES     VALUE  
 
               
CONSUMER DISCRETIONARY 9.6%              
AUTO COMPONENTS - 1.0%              

Cooper Tire & Rubber

  30,800     $ 1,088,780  

Dorman Products 1

  4,300       262,902  

Gentex Corporation

  210,270       4,405,157  

LCI Industries

  55,616       7,230,080  

Sebang Global Battery

  28,500       951,985  

Standard Motor Products

  13,391       601,390  
             
            14,540,294  
             
AUTOMOBILES - 0.9%              

Thor Industries 2

  87,730       13,222,666  
             
DISTRIBUTORS - 0.9%              

Core-Mark Holding Company

  240,900       7,607,622  

Fenix Parts 1,3

  255,000       58,650  

LKQ Corporation 1

  53,500       2,175,845  

Uni-Select

  30,200       682,564  

Weyco Group

  97,992       2,912,322  
             
            13,437,003  
             
DIVERSIFIED CONSUMER SERVICES - 0.6%              

Adtalem Global Education 1

  52,054       2,188,871  

American Public Education 1

  42,400       1,062,120  

Cambium Learning Group 1

  70,000       397,600  

Collectors Universe

  50,000       1,432,000  

H&R Block

  8,000       209,760  

Liberty Tax Cl. A

  151,573       1,667,303  

Lincoln Educational Services 1

  330,600       667,812  

Universal Technical Institute 1

  504,032       1,209,677  
             
            8,835,143  
             
HOTELS, RESTAURANTS & LEISURE - 0.5%              

Biglari Holdings 1

  1,000       414,400  

Century Casinos 1

  200,100       1,826,913  

Lindblad Expeditions Holdings 1

  207,600       2,032,404  

Noodles & Company Cl. A 1,2,4

  208,721       1,095,785  

Rank Group

  400,000       1,298,931  

Zoe’s Kitchen 1

  20,000       334,400  
             
            7,002,833  
             
HOUSEHOLD DURABLES - 1.7%              

AV Homes 1

  66,100       1,100,565  

Cavco Industries 1

  14,700       2,243,220  

Ethan Allen Interiors

  237,600       6,795,360  

Flexsteel Industries

  13,900       650,242  

Mohawk Industries 1,2,4

  12,400       3,421,160  

Natuzzi ADR 1

  2,096,300       3,354,080  

PICO Holdings

  409,400       5,240,320  

Samson Holding

  2,500,000       303,985  

Skyline Corporation 1

  55,400       711,890  

Stanley Furniture 1,5

  912,235       793,645  
             
            24,614,467  
             
INTERNET & DIRECT MARKETING RETAIL - 0.1%              

CafePress 1

  110,000       202,400  

FTD Companies 1

  298,014       2,142,721  
             
            2,345,121  
             
LEISURE PRODUCTS - 0.7%              

Character Group

  91,500       549,331  

MCBC Holdings 1

  85,500       1,899,810  

Nautilus 1

  599,400       8,001,990  
             
            10,451,131  
             
MEDIA - 0.5%              

E.W. Scripps Company Cl. A 1,2,4

  68,660       1,073,156  

Entravision Communications Cl. A

  108,200       773,630  

Global Eagle Entertainment 1

  110,000       251,900  

Gray Television 1

  50,000       837,500  

Meredith Corporation

  32,800       2,166,440  

New Media Investment Group

  60,100       1,008,478  

Pico Far East Holdings

  2,734,400       1,084,956  

T4F Entretenimento

  150,000       331,414  

Technicolor

  120,000       411,590  
             
            7,939,064  
             
MULTILINE RETAIL - 0.0%              

New World Department Store China 1

  1,447,500       307,337  
             
SPECIALTY RETAIL - 1.5%              

AutoCanada

  94,000       1,693,047  

Barnes & Noble

  67,000       448,900  

Barnes & Noble Education 1

  20,000       164,800  

Byggmax Group

  100,000       669,972  

Caleres 2

  108,100       3,619,188  

Children’s Place

  17,500       2,543,625  

Container Store Group (The) 1,2

  158,200       749,868  

Destination Maternity 1

  557,967       1,657,162  

Haverty Furniture

  23,700       536,805  

I.T

  827,000       352,446  

Monro

  95,300       5,427,335  

Oriental Watch Holdings

  967,900       220,434  

Sears Hometown and Outlet Stores 1

  170,039       442,101  

Signet Jewelers

  35,000       1,979,250  

Topps Tiles

  750,000       809,287  

TravelCenters of America LLC 1

  142,500       584,250  
             
            21,898,470  
             
TEXTILES, APPAREL & LUXURY GOODS - 1.2%              

Crown Crafts

  97,741       630,429  

Culp

  29,400       984,900  

J.G. Boswell Company 3

  3,940       2,793,460  

Movado Group

  74,271       2,391,526  

Wolverine World Wide

  298,800       9,525,744  

YGM Trading

  1,082,600       1,025,393  
             
            17,351,452  
 
Total (Cost $127,744,145)           141,944,981  
 
               
CONSUMER STAPLES 2.1%              
BEVERAGES - 0.2%              

Compania Cervecerias Unidas ADR 2

  64,500       1,907,910  
             
FOOD & STAPLES RETAILING - 0.0%              

Conviviality

  70,000       380,751  
             
FOOD PRODUCTS - 1.7%              

AGT Food and Ingredients

  19,500       311,969  

Cal-Maine Foods 1,2,4

  77,616       3,450,031  

Farmer Bros. 1

  54,700       1,758,605  

Hilton Food Group

  70,000       813,307  

Industrias Bachoco ADR

  40,795       2,337,554  

John B. Sanfilippo & Son

  17,200       1,087,900  

Lancaster Colony

  13,400       1,731,414  

Sanderson Farms

  2,900       402,462  

Seneca Foods Cl. A 1

  159,892       4,916,679  

Seneca Foods Cl. B 1

  13,840       470,560  

SunOpta 1,2,4

  187,459       1,452,807  

Tootsie Roll Industries 2

  160,708       5,849,771  
             
            24,583,059  
             

44 | 2017 Annual Report to Stockholders   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS

 

December 31, 2017

 
Schedule of Investments (continued)              
               
    SHARES     VALUE  
 
               
CONSUMER STAPLES (continued)              
HOUSEHOLD PRODUCTS - 0.0%              

Central Garden & Pet 1

  10,300     $ 400,876  
             
PERSONAL PRODUCTS - 0.2%              

Inter Parfums

  71,530       3,107,979  
 
Total (Cost $22,453,527)           30,380,575  
 
               
ENERGY 5.2%              
ENERGY EQUIPMENT & SERVICES - 3.9%              

CARBO Ceramics 1,2,4

  78,000       794,040  

Diamond Offshore Drilling 1,2,4

  189,000       3,513,510  

Era Group 1

  554,693       5,962,950  

Forum Energy Technologies 1

  144,654       2,249,370  

Frank’s International 2,4

  108,600       722,190  

Helmerich & Payne 2

  89,000       5,752,960  

ION Geophysical 1,2,4

  71,880       1,419,630  

Oil States International 1

  57,133       1,616,864  

Pason Systems

  543,580       7,866,126  

Pioneer Energy Services 1

  164,500       501,725  

Precision Drilling 1

  93,900       283,578  

SEACOR Holdings

  150,469       6,954,677  

SEACOR Marine Holdings 1

  638,834       7,474,358  

TGS-NOPEC Geophysical

  417,170       9,868,107  

Trican Well Service 1

  944,000       3,064,057  
             
            58,044,142  
             
OIL, GAS & CONSUMABLE FUELS - 1.3%              

Ardmore Shipping 1

  75,000       600,000  

Dorchester Minerals L.P.

  262,839       3,995,153  

Dorian LPG 1

  394,936       3,246,374  

Green Plains

  200,000       3,370,000  

Hallador Energy

  21,000       127,890  

Hargreaves Services

  57,683       258,640  

New Zealand Refining

  310,000       581,979  

San Juan Basin Royalty Trust

  320,352       2,639,700  

World Fuel Services

  110,800       3,117,912  

WPX Energy 1

  110,000       1,547,700  
             
            19,485,348  
 
Total (Cost $86,040,161)           77,529,490  
 
               
FINANCIALS 14.8%              
BANKS - 2.5%              

Banca Sistema

  200,000       543,626  

Bank of N.T. Butterfield & Son

  178,416       6,474,717  

Blue Hills Bancorp

  54,080       1,087,008  

Canadian Western Bank

  279,500       8,727,426  

Farmers & Merchants Bank of Long Beach 3

  1,080       8,488,800  

Fauquier Bankshares

  160,800       3,518,304  

First Citizens BancShares Cl. A

  14,676       5,914,428  

Webster Financial

  40,300       2,263,248  
             
            37,017,557  
             
CAPITAL MARKETS - 8.2%              

Affiliated Managers Group

  7,000       1,436,750  

Ares Management L.P.

  366,300       7,326,000  

Artisan Partners Asset Management Cl. A

  256,000       10,112,000  

ASA Gold and Precious Metals

  199,821       2,261,974  

Ashmore Group

  1,354,000       7,404,049  

Associated Capital Group Cl. A 2

  20,200       688,820  

Citadel Capital 1

  7,749,921       557,925  

Cowen Cl. A 1

  62,706       855,937  

Dundee Corporation Cl. A 1

  1,079,900       2,173,546  

Edmond de Rothschild (Suisse)

  153       2,901,480  

Federated Investors Cl. B

  83,340       3,006,907  

Gluskin Sheff + Associates

  57,600       762,959  

Houlihan Lokey Cl. A

  69,000       3,134,670  

Jupiter Fund Management

  230,000       1,950,559  

KKR & Co. L.P.

  24,100       507,546  

Lazard Cl. A

  103,235       5,419,838  

Manning & Napier Cl. A

  395,692       1,424,491  

MarketAxess Holdings

  51,600       10,410,300  

Medley Management Cl. A 2

  109,500       711,750  

Morningstar

  84,600       8,203,662  

mutares

  39,266       748,929  

MVC Capital

  271,183       2,863,692  

Oaktree Capital Group LLC Cl. A

  101,100       4,256,310  

Rothschild & Co

  216,893       7,938,544  

SEI Investments

  185,600       13,337,216  

Sprott

  1,927,000       3,740,557  

TMX Group

  40,700       2,280,754  

U.S. Global Investors Cl. A 2

  520,551       2,030,149  

Value Partners Group

  5,453,000       5,770,623  

Virtu Financial Cl. A 2

  101,200       1,851,960  

Westwood Holdings Group

  49,073       3,249,123  

ZAIS Group Holdings Cl. A 1,2

  492,300       1,915,047  
             
            121,234,067  
             
CONSUMER FINANCE - 0.1%              

Bajaj Finance

  55,000       1,516,072  

Currency Exchange International 1

  30,000       596,897  
             
            2,112,969  
             
DIVERSIFIED FINANCIAL SERVICES - 0.1%              

First Pacific

  1,020,000       693,041  

Waterloo Investment Holdings 1,6

  2,972,000       891,600  
             
            1,584,641  
             
INSURANCE - 2.6%              

Alleghany Corporation 1

  709       422,628  

Atlas Financial Holdings 1

  18,900       388,395  

E-L Financial

  22,500       14,584,904  

Erie Indemnity Cl. A

  25,000       3,046,000  

Independence Holding Company

  259,223       7,115,671  

MBIA 1,2,4

  942,400       6,898,368  

ProAssurance Corporation

  17,139       979,494  

RLI Corp.

  83,100       5,040,846  

WMIH 1

  77,742       66,011  
             
            38,542,317  
             
INVESTMENT COMPANIES - 0.2%              

RIT Capital Partners

  101,400       2,682,031  
             
THRIFTS & MORTGAGE FINANCE - 1.1%              

BofI Holding 1,2,4

  16,300       487,370  

Genworth MI Canada

  216,195       7,481,689  

Timberland Bancorp

  288,857       7,669,153  

Vestin Realty Mortgage II 1,3

  53       121,900  
             
            15,760,112  
 
Total (Cost $169,233,211)           218,933,694  
 
               
HEALTH CARE 4.2%              
BIOTECHNOLOGY - 0.8%              

Keryx Biopharmaceuticals 1,2,4

  139,000       646,350  

Novavax 1,2,4

  550,000       682,000  

Sangamo Therapeutics 1

  209,315       3,432,766  

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS   2017 Annual Report to Stockholders | 45

 

Royce Value Trust

 
Schedule of Investments (continued)              
               
    SHARES     VALUE  
 
               
HEALTH CARE (continued)              
BIOTECHNOLOGY (continued)              

Zealand Pharma 1

  484,607     $ 6,633,449  
             
            11,394,565  
             
HEALTH CARE EQUIPMENT & SUPPLIES - 1.8%              

Analogic Corporation

  53,735       4,500,306  

Atrion Corporation

  15,750       9,931,950  

DENTSPLY SIRONA

  5,000       329,150  

Hill-Rom Holdings

  5,000       421,450  

Integer Holdings 1

  42,400       1,920,720  

Invacare Corporation

  38,900       655,465  

Masimo Corporation 1

  50,000       4,240,000  

Neogen Corporation 1

  16,800       1,381,128  

Surmodics 1

  138,500       3,878,000  
             
            27,258,169  
             
HEALTH CARE PROVIDERS & SERVICES - 0.4%              

Aceto Corporation

  18,800       194,204  

AMN Healthcare Services 1

  54,000       2,659,500  

Community Health Systems 1

  790,000       3,365,400  
             
            6,219,104  
             
HEALTH CARE TECHNOLOGY - 0.5%              

athenahealth 1,2,4

  32,500       4,323,800  

Medidata Solutions 1

  50,000       3,168,500  
             
            7,492,300  
             
LIFE SCIENCES TOOLS & SERVICES - 0.6%              

Bio-Rad Laboratories Cl. A 1

  23,098       5,512,800  

Bio-Techne

  27,043       3,503,420  

Dyadic International 1,3

  75,000       102,750  
             
            9,118,970  
             
PHARMACEUTICALS - 0.1%              

Intra-Cellular Therapies 1

  30,000       434,400  

Theravance Biopharma 1,2

  34,291       956,376  
             
            1,390,776  
 
Total (Cost $43,180,277)           62,873,884  
 
               
INDUSTRIALS 30.3%              
AEROSPACE & DEFENSE - 3.0%              

Austal

  688,670       973,688  

Ducommun 1

  117,200       3,334,340  

HEICO Corporation

  166,622       15,720,786  

HEICO Corporation Cl. A

  101,010       7,984,840  

Hexcel Corporation

  13,700       847,345  

Magellan Aerospace

  182,779       3,055,041  

Mercury Systems 1

  25,400       1,304,290  

Teledyne Technologies 1

  20,600       3,731,690  

Wesco Aircraft Holdings 1

  915,364       6,773,694  
             
            43,725,714  
             
AIR FREIGHT & LOGISTICS - 1.4%              

Expeditors International of Washington

  158,900       10,279,241  

Forward Air

  170,750       9,807,880  
             
            20,087,121  
             
BUILDING PRODUCTS - 0.8%              

American Woodmark 1

  11,400       1,484,850  

Apogee Enterprises 2

  55,900       2,556,307  

Burnham Holdings Cl. B 3

  36,000       561,600  

DIRTT Environmental Solutions 1

  85,400       457,912  

Epwin Group

  300,000       339,384  

Insteel Industries 2

  37,880       1,072,762  

NCI Building Systems 1

  85,200       1,644,360  

Patrick Industries 1

  14,775       1,026,124  

Simpson Manufacturing

  35,200       2,020,832  
             
            11,164,131  
             
COMMERCIAL SERVICES & SUPPLIES - 2.8%              

Atento

  353,600       3,589,040  

CECO Environmental

  99,028       508,014  

CompX International Cl. A

  211,100       2,807,630  

Copart 1

  368,200       15,902,558  

Heritage-Crystal Clean 1

  146,527       3,186,962  

Kimball International Cl. B

  351,080       6,554,663  

Mobile Mini

  105,000       3,622,500  

Ritchie Bros. Auctioneers

  26,100       781,173  

Steelcase Cl. A

  114,060       1,733,712  

UniFirst Corporation

  14,070       2,320,143  
             
            41,006,395  
             
CONSTRUCTION & ENGINEERING - 3.2%              

Ameresco Cl. A 1

  40,000       344,000  

Comfort Systems USA

  21,400       934,110  

EMCOR Group 2,4

  65,800       5,379,150  

IES Holdings 1

  594,244       10,250,709  

Jacobs Engineering Group

  164,900       10,876,804  

KBR

  326,000       6,464,580  

Northwest Pipe 1

  10,000       191,400  

NV5 Global 1

  23,500       1,272,525  

Sterling Construction 1,2

  122,300       1,991,044  

Valmont Industries 2

  62,845       10,422,843  
             
            48,127,165  
             
ELECTRICAL EQUIPMENT - 1.1%              

EnerSys

  29,600       2,061,048  

Global Power Equipment Group 1,3

  631,820       2,407,234  

Hubbell Cl. B

  17,100       2,314,314  

Powell Industries

  94,500       2,707,425  

Preformed Line Products

  91,600       6,508,180  
             
            15,998,201  
             
INDUSTRIAL CONGLOMERATES - 0.8%              

A. Soriano

  2,791,000       394,031  

Carlisle Companies

  20,100       2,284,365  

Raven Industries

  251,725       8,646,754  
             
            11,325,150  
             
MACHINERY - 11.5%              

Chen Hsong Holdings

  1,159,000       352,002  

CIRCOR International

  115,484       5,621,761  

Colfax Corporation 1

  82,242       3,258,428  

Deutz

  115,000       1,043,250  

Donaldson Company

  193,559       9,474,713  

Exco Technologies

  178,500       1,439,929  

Franklin Electric

  94,600       4,342,140  

Graco

  267,828       12,111,182  

Greenbrier Companies (The)

  70,700       3,768,310  

Hurco Companies

  25,952       1,095,174  

Hyster-Yale Materials Handling Cl. A

  10,000       851,600  

IDEX Corporation

  67,400       8,894,778  

John Bean Technologies

  83,526       9,254,681  

Kadant

  53,400       5,361,360  

Kennametal

  160,100       7,750,441  

Lincoln Electric Holdings

  61,360       5,619,349  

Lindsay Corporation 2

  80,000       7,056,000  

Luxfer Holdings

  28,100       443,980  

Lydall 1,2

  35,371       1,795,078  

46 | 2017 Annual Report to Stockholders   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS

 

December 31, 2017

 
Schedule of Investments (continued)              
               
    SHARES     VALUE  
 
               
INDUSTRIALS (continued)              
MACHINERY (continued)              

NN

  308,700     $ 8,520,120  

Nordson Corporation

  24,296       3,556,934  

Proto Labs 1

  10,000       1,030,000  

RBC Bearings 1

  121,300       15,332,320  

Sarine Technologies

  327,500       244,819  

Sun Hydraulics

  279,418       18,075,551  

Tennant Company

  111,900       8,129,535  

Titan International

  173,100       2,229,528  

Wabash National

  157,500       3,417,750  

Watts Water Technologies Cl. A

  61,000       4,632,950  

Westinghouse Air Brake Technologies

  81,200       6,612,116  

Westport Fuel Systems 1,2,4

  327,100       1,229,896  

Woodward

  104,600       8,006,084  
             
            170,551,759  
             
MARINE - 1.4%              

Clarkson

  291,000       11,235,703  

Kirby Corporation 1

  144,500       9,652,600  
             
            20,888,303  
             
PROFESSIONAL SERVICES - 1.7%              

Franklin Covey 1

  40,800       846,600  

Heidrick & Struggles International

  91,380       2,243,379  

ManpowerGroup

  107,200       13,518,992  

On Assignment 1,2,4

  106,700       6,857,609  

Quess Corporation 1

  15,720       282,571  

Robert Half International

  4,532       251,707  

TrueBlue 1

  56,245       1,546,738  

Volt Information Sciences 1

  80,000       304,000  
             
            25,851,596  
             
ROAD & RAIL - 1.9%              

Genesee & Wyoming Cl. A 1

  15,000       1,180,950  

Knight-Swift Transportation Holdings Cl. A 2

  122,400       5,351,328  

Landstar System

  130,560       13,591,296  

Patriot Transportation Holding 1

  139,100       2,446,769  

Saia 1,2,4

  59,630       4,218,823  

Universal Logistics Holdings

  78,916       1,874,255  
             
            28,663,421  
             
TRADING COMPANIES & DISTRIBUTORS - 0.7%              

Central Steel & Wire 3

  4,862       2,187,900  

Houston Wire & Cable 1,5

  877,363       6,317,014  

MSC Industrial Direct Cl. A 2

  14,763       1,426,991  

SIG

  350,000       832,013  

Watsco

  2,100       357,084  
             
            11,121,002  
             
TRANSPORTATION INFRASTRUCTURE - 0.0%              

Hopewell Highway Infrastructure

  1,012,000       645,622  
 
Total (Cost $244,724,053)           449,155,580  
 
               
INFORMATION TECHNOLOGY – 20.0%              
COMMUNICATIONS EQUIPMENT - 0.5%              

ADTRAN 2

  234,973       4,546,727  

Clearfield 1,2

  55,600       681,100  

NetScout Systems 1

  65,600       1,997,520  

Oclaro 1,2,4

  91,000       613,340  
             
            7,838,687  
             
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS - 10.5%              

Anixter International 1,2,4

  70,895       5,388,020  

Bel Fuse Cl. B

  30,238       761,242  

Celestica 1

  303,700       3,182,776  

Cognex Corporation 2

  350,600       21,442,696  

Coherent 1

  80,500       22,718,710  

Dolby Laboratories Cl. A

  2,650       164,300  

Fabrinet 1

  257,500       7,390,250  

FARO Technologies 1

  161,467       7,588,949  

FLIR Systems

  545,737       25,442,259  

HollySys Automation Technologies

  50,082       1,115,326  

Horiba

  12,000       721,381  

IPG Photonics 1,2,4

  56,800       12,162,584  

LRAD Corporation 1

  744,944       1,854,911  

Methode Electronics

  27,130       1,087,913  

National Instruments

  261,850       10,900,815  

Orbotech 1

  14,000       703,360  

Perceptron 1

  357,700       3,487,575  

Plexus Corporation 1

  150,600       9,144,432  

Richardson Electronics

  573,732       3,866,954  

Rogers Corporation 1

  32,366       5,240,703  

Systemax

  38,520       1,281,560  

TTM Technologies 1,2,4

  496,400       7,778,588  

Vishay Intertechnology

  79,500       1,649,625  

Wasion Group Holdings

  1,500,000       733,256  
             
            155,808,185  
             
INTERNET SOFTWARE & SERVICES - 2.1%              

Actua Corporation 1

  63,815       995,514  

Care.com 1

  179,300       3,234,572  

CommerceHub Ser. C 1

  50,000       1,029,500  

comScore 1,3

  211,136       6,017,376  

HolidayCheck Group 1

  94,900       317,813  

IZEA 1,2,4

  75,306       340,383  

j2 Global

  75,020       5,628,751  

Leaf Group 1

  50,000       495,000  

MiX Telematics ADR

  57,985       739,889  

QuinStreet 1

  376,554       3,155,522  

Solium Capital 1

  182,800       1,586,593  

Stamps.com 1

  35,700       6,711,600  

Support.com 1

  216,766       524,574  
             
            30,777,087  
             
IT SERVICES - 1.2%              

Acxiom Corporation 1

  48,000       1,322,880  

Convergys Corporation 2

  121,000       2,843,500  

CSE Global

  3,050,000       831,843  

DST Systems 2,4

  79,000       4,903,530  

Hackett Group (The)

  417,266       6,555,249  

Innodata 1

  274,314       373,067  

Unisys Corporation 1

  60,000       489,000  
             
            17,319,069  
             
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 3.5%              

Amtech Systems 1

  79,271       798,259  

Brooks Automation 2

  279,000       6,654,150  

Cabot Microelectronics

  51,600       4,854,528  

Cohu

  129,600       2,844,720  

CyberOptics Corporation 1

  37,600       564,000  

Diodes 1

  270,850       7,765,269  

Intermolecular 1

  40,000       54,800  

Kulicke & Soffa Industries 1

  155,000       3,771,925  

MKS Instruments

  15,010       1,418,445  

Nanometrics 1

  60,500       1,507,660  

NeoPhotonics Corporation 1,2,4

  32,700       215,166  

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS   2017 Annual Report to Stockholders | 47

 

Royce Value Trust

 
Schedule of Investments (continued)              
               
    SHARES     VALUE  
 
               
INFORMATION TECHNOLOGY (continued)              
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (continued)              

Nova Measuring Instruments 1

  39,500     $ 1,023,445  

Photronics 1

  183,700       1,566,043  

Rudolph Technologies 1,2

  34,400       822,160  

Silicon Motion Technology ADR

  101,200       5,359,552  

Teradyne

  130,000       5,443,100  

Ultra Clean Holdings 1

  42,800       988,252  

Veeco Instruments 1

  17,500       259,875  

Versum Materials

  123,000       4,655,550  

Xperi

  82,300       2,008,120  
             
            52,575,019  
             
SOFTWARE - 1.8%              

American Software Cl. A

  108,690       1,264,065  

ANSYS 1,2,4

  90,200       13,312,618  

BroadSoft 1

  25,000       1,372,500  

Computer Modelling Group

  371,300       2,835,704  

Manhattan Associates 1

  10,000       495,400  

Model N 1

  114,887       1,809,470  

Monotype Imaging Holdings

  117,700       2,836,570  

PSI Software

  18,194       404,019  

RealNetworks 1

  219,879       751,986  

Rosetta Stone 1

  40,000       498,800  

SeaChange International 1

  247,069       970,981  
             
            26,552,113  
             
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS - 0.4%              

Diebold Nixdorf

  266,600       4,358,910  

Intevac 1

  168,700       1,155,595  
             
            5,514,505  
 
Total (Cost $185,355,306)           296,384,665  
 
               
MATERIALS 8.2%              
CHEMICALS - 2.2%              

FutureFuel Corporation

  48,500       683,365  

Hawkins

  86,178       3,033,466  

Innospec

  36,883       2,603,940  

Minerals Technologies

  119,493       8,227,093  

Quaker Chemical

  109,669       16,536,988  

Westlake Chemical

  14,600       1,555,338  
             
            32,640,190  
             
CONSTRUCTION MATERIALS - 1.8%              

Ash Grove Cement 3

  50,518       25,978,882  
             
CONTAINERS & PACKAGING - 0.3%              

Mayr-Melnhof Karton

  34,000       4,997,352  
             
METALS & MINING - 3.6%              

Alamos Gold Cl. A

  413,300       2,692,861  

Ampco-Pittsburgh

  36,966       458,378  

Ferroglobe 1

  50,000       810,000  

Ferroglobe (Warranty Insurance Trust) 1,6

  49,300       0  

Franco-Nevada Corporation

  107,300       8,578,635  

Gold Fields ADR

  370,000       1,591,000  

Haynes International 2

  113,900       3,650,495  

Hecla Mining

  321,300       1,275,561  

Lundin Mining

  640,000       4,256,484  

Major Drilling Group International 1

  981,757       5,514,085  

Pretium Resources 1

  165,000       1,882,339  

Reliance Steel & Aluminum

  128,720       11,042,889  

Royal Gold

  16,600       1,363,192  

Sandstorm Gold 1

  250,000       1,247,500  

Synalloy Corporation

  178,800       2,395,920  

Tree Island Steel

  30,000       63,723  

Worthington Industries

  148,000       6,520,880  
             
            53,343,942  
             
PAPER & FOREST PRODUCTS - 0.3%              

Stella-Jones

  94,600       3,800,557  
 
Total (Cost $64,206,916)           120,760,923  
 
               
REAL ESTATE 3.1%              
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITS) - 0.0%              

Irish Residential Properties REIT

  125,000       225,929  
             
REAL ESTATE MANAGEMENT & DEVELOPMENT - 3.1%              

Altus Group

  24,200       710,983  

FirstService Corporation

  135,100       9,446,192  

FRP Holdings 1

  188,558       8,343,692  

Jones Lang LaSalle

  15,600       2,323,308  

Kennedy-Wilson Holdings

  116,300       2,017,805  

Marcus & Millichap 1

  253,213       8,257,276  

Real Estate Investors

  500,000       394,654  

RMR Group Cl. A 2,4

  27,200       1,612,960  

St. Joe Company (The) 1

  177,000       3,194,850  

Tejon Ranch 1

  478,479       9,933,224  
             
            46,234,944  
 
Total (Cost $32,352,781)           46,460,873  
 
               
TELECOMMUNICATION SERVICES 0.6%              
DIVERSIFIED TELECOMMUNICATION SERVICES - 0.1%              

China Communications Services

  750,182       501,764  

HKBN

  1,000,000       1,264,561  
             
            1,766,325  
             
WIRELESS TELECOMMUNICATION SERVICES - 0.5%              

Boingo Wireless 1

  50,000       1,125,000  

Telephone and Data Systems

  208,270       5,789,906  
             
            6,914,906  
 
Total (Cost $7,460,886)           8,681,231  
 
 
UTILITIES 0.1%              
GAS UTILITIES - 0.1%              

Shizuoka Gas

  110,000       936,161  

Toho Gas

  12,000       328,866  

UGI Corporation

  6,500       305,175  
             
            1,570,202  
             
MULTI-UTILITIES - 0.0%              

Just Energy Group 2

  18,520       79,451  
 
Total (Cost $1,529,171)           1,649,653  
 
               
MISCELLANEOUS7 3.3%              
 
Total (Cost $47,298,833)           48,657,510  
 
               
TOTAL COMMON STOCKS              
 
(Cost $1,031,579,267)           1,503,413,059  
 

48 | 2017 Annual Report to Stockholders   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS

 

December 31, 2017

 
Schedule of Investments (continued)              
               
          VALUE  
 
               
REPURCHASE AGREEMENT 3.3%              
Fixed Income Clearing Corporation, 0.20% dated 12/29/17, due 1/2/18, maturity value
$48,668,081 (collateralized by obligations of various U.S. Government Agencies, 1.75%
due 10/31/18, valued at $49,644,703)
 
 
(Cost $48,667,000)         $ 48,667,000  
 
               
TOTAL INVESTMENTS 104.8%              
 
(Cost $1,080,246,267)           1,552,080,059  
 
               
LIABILITIES LESS CASH AND OTHER ASSETS (4.8)%           (71,630,606 )
             
               
 
NET ASSETS 100.0%         $ 1,480,449,453  
 

New additions in 2017.
1 Non-income producing.
2 All or a portion of these securities were pledged as collateral in connection with the Fund’s revolving credit agreement at December 31, 2017. Total market value of pledged securities at December 31, 2017, was $126,201,544.
3 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.
4 At December 31, 2017, a portion of these securities were rehypothecated in connection with the Fund’s revolving credit agreement in the aggregate amount of $60,930,162.
5 At December 31, 2017, the Fund owned 5% or more of the Company’s outstanding voting securities thereby making the Company an Affiliated Company as that term is defined in the Investment Company Act of 1940. See Notes to Financial Statements.
6 Securities for which market quotations are not readily available represent 0.1% of net assets. These securities have been valued at their fair value under procedures approved by the Fund’s Board of Directors. These securities are defined as Level 3 securities due to the use of significant unobservable inputs in the determination of fair value. See Notes to Financial Statements.
7 Includes securities first acquired in 2017 and less than 1% of net assets.
   
  Bold indicates the Fund’s 20 largest equity holdings in terms of December 31, 2017, market value.
   
  TAX INFORMATION: The cost of total investments for Federal income tax purposes was $1,083,388,346. At December 31, 2017, net unrealized appreciation for all securities was $468,691,713 consisting of aggregate gross unrealized appreciation of $565,974,039 and aggregate gross unrealized depreciation of $97,282,326. The primary causes of the differences between book and tax basis cost are the timing of the recognition of losses on securities sold, investments in Real Estate Investment Trusts and publicly traded partnerships and Trusts and mark-to-market of Passive Foreign Investment Companies.

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS   2017 Annual Report to Stockholders | 49

 

Royce Value Trust   December 31, 2017
     
 
Statement of Assets and Liabilities

ASSETS:          
Investments at value          
 

Non-Affiliated Companies

    $ 1,496,302,400  
 

Affiliated Companies

      7,110,659  
 
Repurchase agreements (at cost and value)       48,667,000  
 
Cash and foreign currency       73,896  
 
Receivable for investments sold       1,094,758  
 
Receivable for dividends and interest       1,142,291  
 
Prepaid expenses and other assets       623,991  
 
Total Assets       1,555,014,995  
 
LIABILITIES:          
Revolving credit agreement       70,000,000  
 
Payable for investments purchased       3,741,243  
 
Payable for investment advisory fee       511,607  
 
Payable for directors’ fees       44,911  
 
Payable for interest expense       20,570  
 
Accrued expenses       247,211  
 
Total Liabilities       74,565,542  
 
Net Assets     $ 1,480,449,453  
 
ANALYSIS OF NET ASSETS:          
Paid-in capital -$0.001 par value per share; 84,587,724 shares outstanding (150,000,000 shares authorized)     $ 1,006,120,990  
 
Undistributed net investment income (loss)       (1,725,122 )
 
Accumulated net realized gain (loss) on investments and foreign currency       4,219,264  
 
Net unrealized appreciation (depreciation) on investments and foreign currency       471,834,321  
 
Net Assets (net asset value per share -$17.50)     $ 1,480,449,453  
 
Investments at identified cost     $ 1,031,579,267  
 

50 | 2017 Annual Report to Stockholders   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS

 

Royce Value Trust
 
 
Statement of Changes in Net Assets

      YEAR ENDED 12/31/17     YEAR ENDED 12/31/16
 
                     
INVESTMENT OPERATIONS:                    
Net investment income (loss)     $ 10,969,682       $ 9,680,260  
 
Net realized gain (loss) on investments and foreign currency       81,750,067         75,719,009  
 
Net change in unrealized appreciation (depreciation) on investments and foreign currency       146,329,916         186,502,762  
 
Net increase (decrease) in net assets from investment operations       239,049,665         271,902,031  
 
DISTRIBUTIONS:                    
Net investment income       (10,679,021 )       (10,786,801 )
 
Net realized gain on investments and foreign currency       (85,441,777 )       (70,931,388 )
 
Total distributions       (96,120,798 )       (81,718,189 )
 
CAPITAL STOCK TRANSACTIONS:                    
Reinvestment of distributions       41,508,874         33,793,124  
 
Total capital stock transactions       41,508,874         33,793,124  
 
Net Increase (Decrease) In Net Assets       184,437,741         223,976,966  
 
NET ASSETS:                    
 
Beginning of year       1,296,011,712         1,072,034,746  
 
End of year (including undistributed net investment income (loss) of $(1,725,122) at 12/31/17 and $(1,959,371) at 12/31/16)     $ 1,480,449,453       $ 1,296,011,712  
 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS   2017 Annual Report to Stockholders | 51

 

Royce Value Trust   Year Ended December 31, 2017
     
 
Statement of Operations

INVESTMENT INCOME:          
INCOME:          
Dividends          
 

Non-Affiliated Companies

    $ 19,679,505  
 

Affiliated Companies

      213,896  
 
Foreign withholding tax       (446,367 )
 
Interest       155,761  
 
Rehypothecation income       320,116  
 
Total income       19,922,911  
 
EXPENSES:          
 
Investment advisory fees       5,983,920  
 
Interest expense       1,571,615  
 
Stockholder reports       381,577  
 
Administrative and office facilities       351,683  
 
Custody and transfer agent fees       204,139  
 
Professional fees       182,943  
 
Directors’ fees       178,047  
 
Other expenses       99,864  
 
Total expenses       8,953,788  
 
Compensating balance credits       (559 )
 
Net expenses       8,953,229  
 
Net investment income (loss)       10,969,682  
 
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:          
           
NET REALIZED GAIN (LOSS):          
 
Investments in Non-Affiliated Companies       78,822,196  
 
Investments in Affiliated Companies       2,891,007  
 
Foreign currency transactions       36,864  
 
NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION):          
 
Investments in Non-Affiliated Companies and foreign currency translations       144,856,029  
 
Investments in Affiliated Companies       1,420,227  
 
Other assets and liabilities denominated in foreign currency       53,660  
 
Net realized and unrealized gain (loss) on investments and foreign currency       228,079,983  
 
NET INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS     $ 239,049,665  
 

52 | 2017 Annual Report to Stockholders   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS

 

Royce Value Trust   Year Ended December 31, 2017
     
 
Statement of Cash Flows

CASH FLOWS FROM OPERATING ACTIVITIES:          
Net increase (decrease) in net assets from investment operations     $ 239,049,665  
 
Adjustments to reconcile net increase (decrease) in net assets from investment operations to net cash provided by operating activities:          
 

Purchases of long-term investments

      (273,234,405 )
 

Proceeds from sales and maturities of long-term investments

      284,510,862  
 

Net purchases, sales and maturities of short-term investments

      32,245,000  
 

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

      113,416  
 

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

      (37,643 )
 

Net change in unrealized appreciation (depreciation) on investments

      (146,276,256 )
 

Net realized gain (loss) on investments and foreign currency

      (81,750,067 )
 
Net cash provided by operating activities       54,620,572  
 
CASH FLOWS FROM FINANCING ACTIVITIES:          
 
Distributions       (96,120,798 )
 
Reinvestment of distributions       41,508,874  
 
Net cash used for financing activities       (54,611,924 )
 
INCREASE (DECREASE) IN CASH:       8,648  
 
Cash and foreign currency at beginning of year       65,248  
 
Cash and foreign currency at end of year     $ 73,896  
 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS   2017 Annual Report to Stockholders | 53

 

Royce Value Trust

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

    YEARS ENDED
     
    12/31/17   12/31/16   12/31/15   12/31/14   12/31/13
 
Net Asset Value, Beginning of Period   $ 15.85     $ 13.56     $ 16.24     $ 18.17     $ 15.40  
 
INVESTMENT OPERATIONS:                                        
Net investment income (loss)     0.13       0.12       0.12       0.12       0.12  
 
Net realized and unrealized gain (loss) on investments and foreign currency     2.74       3.27       (1.48 )     (0.13 )     4.89  
 
Net increase (decrease) in net assets from investment operations     2.87       3.39       (1.36 )     (0.01 )     5.01  
 
DISTRIBUTIONS TO COMMON STOCKHOLDERS:                                        
Net investment income     (0.13 )     (0.13 )     (0.16 )     (0.14 )     (0.11 )
 
Net realized gain on investments and foreign currency     (1.03 )     (0.89 )     (1.08 )     (1.68 )     (2.08 )
 
Total distributions to Common Stockholders     (1.16 )     (1.02 )     (1.24 )     (1.82 )     (2.19 )
 
CAPITAL STOCK TRANSACTIONS:                                        
Effect of reinvestment of distributions by Common Stockholders     (0.06 )     (0.08 )     (0.08 )     (0.10 )     (0.05 )
 
Total capital stock transactions     (0.06 )     (0.08 )     (0.08 )     (0.10 )     (0.05 )
 
Net Asset Value, End of Period   $ 17.50     $ 15.85     $ 13.56     $ 16.24     $ 18.17  
 
Market Value, End of Period   $ 16.17     $ 13.39     $ 11.77     $ 14.33     $ 16.01  
 
TOTAL RETURN:1                                        
Net Asset Value     19.31 %     26.87 %     (8.09 )%     0.78 %     34.14 %
 
Market Value     30.49 %     23.48 %     (9.59 )%     0.93 %     35.63 %
 
RATIOS BASED ON AVERAGE NET ASSETS:                                        
Investment advisory fee expense2     0.43 %     0.51 %     0.50 %     0.46 %     0.54 %
 
Other operating expenses     0.22 %     0.22 %     0.18 %     0.15 %     0.25 %
 
Total expenses (net)     0.65 %     0.73 %     0.68 %     0.61 %     0.79 %
 
Expenses net of fee waivers and excluding interest expense     0.54 %     0.62 %     0.61 %     0.55 %     0.65 %
 
Expenses prior to fee waivers and balance credits     0.65 %     0.73 %     0.68 %     0.61 %     0.79 %
 
Expenses prior to fee waivers     0.65 %     0.73 %     0.68 %     0.61 %     0.79 %
 
Net investment income (loss)     0.80 %     0.85 %     0.78 %     0.72 %     0.70 %
 
SUPPLEMENTAL DATA:                                        
Net Assets, End of Period (in thousands)   $ 1,480,449     $ 1,296,012     $ 1,072,035     $ 1,231,955     $ 1,307,829  
 
Portfolio Turnover Rate     19 %     28 %     35 %     40 %     33 %
 
REVOLVING CREDIT AGREEMENT:                                        
Asset coverage     2215 %     1951 %     1631 %     1860 %     1289 %
 
Asset coverage per $1,000   $ 22,149     $ 19,514     $ 16,315     $ 18,599     $ 12,889  
 

1 The Market Value Total Return is calculated assuming a purchase of Common Stock on the opening of the first business day and a sale on the closing of the last business day of each period. Dividends and distributions are assumed for the purposes of this calculation to be reinvested at prices obtained under the Fund’s Distribution Reinvestment and Cash Purchase Plan. Net Asset Value Total Return is calculated on the same basis, except that the Fund’s net asset value is used on the purchase and sale dates instead of market value.
2 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.

54 | 2017 Annual Report to Stockholders   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS

 

Royce Value Trust

Notes to Financial Statements

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

Various inputs are used in determining the value of the Fund’s investments, as noted above. These inputs are summarized in the three broad levels below:

  Level 1  – 
quoted prices in active markets for identical securities.
  Level 2  – 
other significant observable inputs (including quoted prices for similar securities, foreign securities that may be fair valued and repurchase agreements). The table below includes all Level 2 securities. Level 2 securities with values based on quoted prices for similar securities are noted in the Schedule of Investments.
  Level 3  – 
significant unobservable inputs (including last trade price before trading was suspended, or at a discount thereto for lack of marketability or otherwise, market price information regarding other securities, information received from the company and/or published documents, including SEC filings and financial statements, or other publicly available information).

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

The following is a summary of the inputs used to value the Fund’s investments as of December 31, 2017. 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     $1,355,250,667       $147,270,792       $891,600       $1,503,413,059  
 
Cash Equivalents           48,667,000             48,667,000  
 

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 year ended December 31, 2017, securities valued at $6,076,026 were transferred from Level 1 to Level 2 and securities valued at $1,025,393 were transferred from Level 2 to Level 1 within the fair value hierarchy.

2017 Annual Report to Stockholders | 55


 

Royce Value Trust

Notes to Financial Statements (continued)

VALUATION OF INVESTMENTS (continued):

Level 3 Reconciliation:
                   
  BALANCE AS OF 12/31/16   SALES   REALIZED GAIN (LOSS)   UNREALIZED GAIN (LOSS)1   BALANCE AS OF 12/31/17
 
Common Stocks $892,063   $759   $745   $(449)   $891,600
 
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
      12/31/17     VALUATION TECHNIQUE(S)     UNOBSERVABLE INPUT(S)     RANGE AVERAGE     AN INCREASE IN INPUT1
 
Common Stocks     $891,600     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 Fund’s investment adviser has determined are creditworthy. The Fund restricts repurchase agreements to maturities of no more than seven days. Securities pledged as collateral for repurchase agreements, which are held until maturity of the repurchase agreements, are marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest). Repurchase agreements could involve certain risks in the event of default or insolvency of the counter-party, including possible delays or restrictions upon the ability of the Fund to dispose of its underlying securities. The remaining contractual maturity of the repurchase agreement held by the Fund at December 31, 2017 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 Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities, including investments in securities at the end of the reporting period, as a result of changes in foreign currency exchange rates.

 
TAXES:

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

 
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 Fund’s Common Stock at the annual rate of 7% of the rolling average of the prior four calendar quarter-end NAVs of the Fund’s Common Stock, with the fourth quarter distribution being the greater of 1.75% 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 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

56 | 2017 Annual Report to Stockholders


 

Royce Value Trust

Notes to Financial Statements (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 Fund’s operations, while expenses applicable to more than one of the Royce Funds are allocated equitably. Certain personnel, occupancy costs and other administrative expenses related to the 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 custodian's fee is paid indirectly by credits earned on the Fund's cash on deposit with the bank. This deposit arrangement is an alternative to purchasing overnight investments. Conversely, the Fund pays interest to the custodian on any cash overdrafts, to the extent they are not offset by credits earned on positive cash balances.

 
Capital Stock:

The Fund issued 2,795,800 and 2,740,162 shares of Common Stock as reinvestment of distributions for the years ended December 31, 2017 and December 31, 2016, 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 Fund’s 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 December 31, 2017, the Fund has outstanding borrowings of $70,000,000. During the year ended December 31, 2017, the Fund borrowed an average daily balance of $70,000,000 at a weighted average borrowing cost of 2.21%. The maximum amount outstanding during the year ended December 31, 2017 was $70,000,000. As of December 31, 2017, the aggregate value of rehypothecated securities was $60,930,162. During the year ended December 31, 2017, the Fund earned $320,116 in fees from rehypothecated securities.

2017 Annual Report to Stockholders | 57


 

Royce Value Trust

Notes to Financial Statements (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 Fund’s month-end net assets applicable to Common Stockholders, plus the liquidation value of outstanding Preferred Stock, for the rolling 60-month period ending with such month (the "performance period"). The Basic Fee for each month is increased or decreased at the rate of 1/12 of .05% for each percentage point that the investment performance of the Fund exceeds, or is exceeded by, the percentage change in the investment record of the S&P 600 for the performance period by more than two percentage points. The performance period for each such month is a rolling 60-month period ending with such month. The maximum increase or decrease in the Basic Fee for any month may not exceed 1/12 of .5%. Accordingly, for each month, the maximum monthly fee rate as adjusted for performance is 1/12 of 1.5% and is payable if the investment performance of the Fund exceeds the percentage change in the investment record of the S&P 600 by 12 or more percentage points for the performance period, and the minimum monthly fee rate as adjusted for performance is 1/12 of .5% and is payable if the percentage change in the investment record of the S&P 600 exceeds the investment performance of the Fund by 12 or more percentage points for the performance period.

Notwithstanding the foregoing, Royce is not entitled to receive any fee for any month when the investment performance of the Fund for the rolling 36-month period ending with such month is negative. In the event that the Fund’s investment performance for such a performance period is less than zero, Royce will not be required to refund to the Fund any fee earned in respect of any prior performance period.

For the twelve rolling 60-month periods in 2017, the Fund’s investment performance ranged from 17% to 39% below the investment performance of the S&P 600. Accordingly, the net investment advisory fee consisted of a Basic Fee of $11,967,837 and a net downward adjustment of $5,983,917 for the performance of the Fund relative to that of the S&P 600. For the year ended December 31, 2017, the Fund expensed Royce investment advisory fees totaling $5,983,920.

 
Purchases and Sales of Investment Securities:

For the year ended December 31, 2017, the costs of purchases and proceeds from sales of investment securities, other than short-term securities, amounted to $274,765,818 and $255,530,768, 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 year ended December 31, 2017, were as follows:


COST OF PURCHASES     PROCEEDS FROM SALES     REALIZED GAIN (LOSS)
 
$14,263,727     $–     $–
 

Tax Information:

Distributions during the years ended December 31, 2017 and 2016, were characterized as follows for tax purposes:


ORDINARY INCOME       LONG-TERM CAPITAL GAINS
 
2017     2016       2017     2016
 
$19,301,057     $12,241,385       $76,819,741     $69,476,804
 

The tax basis components of distributable earnings at December 31, 2017, were as follows:

                  QUALIFIED LATE YEAR      
UNDISTRIBUTED     UNDISTRIBUTED LONG-TERM     NET UNREALIZED     ORDINARY AND     TOTAL
ORDINARY     CAPITAL GAINS OR     APPRECIATION     POST-OCTOBER LOSS     DISTRIBUTABLE
INCOME     (CAPITAL LOSS CARRYFORWARD)     (DEPRECIATION)1     DEFERRALS2     EARNINGS
 
$2,114,248     $3,679,814     $468,684,059     $(149,658)     $474,328,463
 
1
Includes timing differences on foreign currency, recognition of losses on securities sold, investments in publicly traded partnerships and Trusts and mark-to-market of Passive Foreign Investment Companies.
2
Under the current tax law, capital losses and qualified late year ordinary losses incurred after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. This column also includes passive activity losses.

58 | 2017 Annual Report to Stockholders


 

Royce Value Trust

Notes to Financial Statements (continued)

Tax Information (continued):
     For financial reporting purposes, capital accounts and distributions to stockholders are adjusted to reflect the tax character of permanent book/tax differences. For the year ended December 31, 2017, the Fund recorded the following permanent reclassifications, which relate primarily to current investments in Real Estate Investment Trusts, publicly traded partnerships and Trusts, foreign currency transactions, foreign capital gains tax and gains from the sale of Passive Foreign Investment Companies. Results of operations and net assets were not affected by these reclassifications.

UNDISTRIBUTED NET     ACCUMULATED NET      
INVESTMENT INCOME     REALIZED GAIN (LOSS)     PAID-IN CAPITAL
 
$(56,412)     $(1,742,832)     $1,799,244
 

Management has analyzed the Fund’s tax positions taken on federal income tax returns for all open tax years (2014-2017) and has concluded that as of December 31, 2017, no provision for income tax is required in the Fund’s financial statements.

Transactions in Affiliated Companies:
An “Affiliated Company” as defined in the Investment Company Act of 1940, is a company in which a fund owns 5% or more of the company’s outstanding voting securities at any time during the period. The Fund effected the following transactions in shares of such companies for the year ended December 31, 2017:

                    CHANGE IN NET              
                    UNREALIZED              
    SHARES MARKET VALUE COST OF PROCEEDS APPRECIATION REALIZED DIVIDEND SHARES MARKET VALUE
AFFILIATED COMPANY   12/31/16 12/31/16 PURCHASES FROM SALES (DEPRECIATION) GAIN (LOSS) INCOME 12/31/17 12/31/17
 
Houston Wire & Cable   509,200   $  3,309,800   $1,951,264   $              –   $1,055,950   $             –   $          –   877,363   $6,317,014
 
Stanley Furniture   912,235   821,194       (27,549)       912,235   793,645
 
Timberland Bancorp1   444,200   9,177,172     4,790,852   391,826   2,891,007   213,896        
 
        $13,308,166           $1,420,227   $2,891,007   $213,896       $7,110,659
 
1Not an Affiliated Company at December 31, 2017.

2017 Annual Report to Stockholders | 59


 

Report of Independent Registered Public Accounting Firm

To the Board of Directors and the Stockholders of Royce Value Trust, Inc.:

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Royce Value Trust, Inc. (the "Fund") as of December 31, 2017, the related statements of operations and cash flows for the year ended December 31, 2017, the statement of changes in net assets for each of the two years in the period ended December 31, 2017, including the related notes, and the financial highlights for each of the three years in the period ended December 31, 2017 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, the results of its operations and its cash flows for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2017 and the financial highlights for each of the three years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.

The financial statements of the Fund as of and for the year ended December 31, 2014 and the financial highlights for each of the periods ended on or prior to December 31, 2014 (not presented herein, other than the financial highlights) were audited by other auditors whose report dated February 23, 2015 expressed an unqualified opinion on those financial statements and financial highlights.

Basis for Opinion

These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2017 by correspondence with the custodian and broker; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP
Baltimore, MD
February 22, 2018

We have served as the auditor of one or more investment companies in the Royce investment company group since at least 1967. We have not determined the specific year we began serving as auditor.

60 | 2017 Annual Report to Stockholders








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2017 Annual Report to Stockholders | 61


 

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                
 
12/31/17       $ 8,975             1,062     $ 13,254     $ 11,484
 
                                         
Royce Micro-Cap Trust                                    
12/14/93 Initial Purchase   $ 7,500   $ 7.500       1,000     $ 7,250     $ 7,500
 
10/28/94   Rights Offering     1,400     7.000       200                
 
12/19/94   Distribution $0.05           6.750       9       9,163       8,462
 
12/7/95   Distribution $0.36           7.500       58       11,264       10,136
 
12/6/96   Distribution $0.80           7.625       133       13,132       11,550
 
12/5/97   Distribution $1.00           10.000       140       16,694       15,593
 
12/7/98   Distribution $0.29           8.625       52       16,016       14,129
 
12/6/99   Distribution $0.27           8.781       49       18,051       14,769
 
12/6/00   Distribution $1.72           8.469       333       20,016       17,026
 
12/6/01   Distribution $0.57           9.880       114       24,701       21,924
 
2002   Annual distribution total $0.80           9.518       180       21,297       19,142
 
2003   Annual distribution total $0.92           10.004       217       33,125       31,311
 
2004   Annual distribution total $1.33           13.350       257       39,320       41,788
 
2005   Annual distribution total $1.85           13.848       383       41,969       45,500
 
2006   Annual distribution total $1.55           14.246       354       51,385       57,647
 
2007   Annual distribution total $1.35           13.584       357       51,709       45,802
 
2008   Annual distribution total $1.193           8.237       578       28,205       24,807
 
3/11/09   Distribution $0.223           4.260       228       41,314       34,212
 
12/2/10   Distribution $0.08           9.400       40       53,094       45,884
 
2011   Annual distribution total $0.533           8.773       289       49,014       43,596
 
2012   Annual distribution total $0.51           9.084       285       57,501       49,669
 
2013   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                
 
12/31/17       $ 8,900             10,408     $ 109,076     $ 98,252
 

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.

62 | 2017 Annual 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 $1.723             12.307       1,294       95,415       85,435
 
3/11/09     Distribution $0.323             6.071       537       137,966       115,669
 
12/2/10     Distribution $0.03             13.850       23       179,730       156,203
 
2011     Annual distribution total $0.783             13.043       656       161,638       139,866
 
2012     Annual distribution total $0.80             13.063       714       186,540       162,556
 
2013     Annual distribution total $2.194             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                
 
12/31/17         $ 21,922               20,048     $ 350,840     $ 324,176
 

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.

2017 Annual Report to Stockholders | 63

 

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 Fund’s 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 December 31, 2017.
 
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 December 31, 2017. 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.).

64 | 2017 Annual 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 TICC 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 (1972–June 2016), President (1972-June 2014) of Royce.

Christopher D. Clark, Director1, President
Age: 52 | 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. Grisanti’s 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. Isaacs’s prior business experience includes having served as President of the Center for Health and Social Policy (from 1996 to 2012); Director of Columbia University Development Law and Policy Program and Professor at Columbia University (until August 1996).

Arthur S. Mehlman, Director
Age: 75 | Number of Funds Overseen: 40 | Tenure: Since 2004
Non-Royce Directorships: Director/Trustee of registered investment companies constituting the 18 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. Meister’s prior business experience includes having served as Chief Executive Officer of Seniorlife.com, a consultant to the communications industry, President of Financial News Network, Senior Vice President of HBO, President of Time-Life Films, and Head of Broadcasting for Major League Baseball.

G. Peter O’Brien, Director
Age: 72 | Number of Funds Overseen: 40 | Tenure: Since 2001
Non-Royce Directorships: Director/Trustee of registered investment companies constituting the 18 Legg Mason Funds; Director of TICC Capital Corp.
Principal Occupation(s) During Past Five Years: Trustee Emeritus of Colgate University (since 2005); Board Member of Hill House, Inc. (since 1999); Formerly: Trustee of Colgate University (from 1996 to 2005), President of Hill House, Inc. (from 2001 to 2005) and Managing Director/Equity Capital Markets Group of Merrill Lynch & Co. (from 1971 to 1999).

Michael K. Shields, Director
Age: 59 | 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. Shields’s 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. O’Byrne, 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: 51 | 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: 50 | 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.

2017 Annual Report to Stockholders | 65


 

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 December 31, 2017, and, of course, historical market trends are not necessarily indicative of future market movements. Statements regarding the future prospects for particular securities held in the Funds’ portfolios and Royce’s investment intentions with respect to those securities reflect Royce’s opinions as of December 31, 2017 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 & Poor’s Financial Services LLC (“S&P”) and MSCI Inc. (“MSCI”). GICS is the trademark of S&P and MSCI. “Global Industry Classification Standard (GICS)” and “GICS Direct” are service marks of S&P and MSCI.
All indexes referred to are unmanaged and capitalization weighted. Each index’s returns include net reinvested dividends and/or interest income. Russell Investment Group is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. Russell® is a trademark of Russell Investment Group. The Russell 2000 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. Large Cap Index is an index of global large-cap stocks, excluding the United States. The Russell Global ex-U.S. Small Cap Index is an index of global small-cap stocks, excluding the United States. The S&P 500 and SmallCap 600 are indexes of U.S. large- and small-cap stocks, respectively, selected by Standard & Poor’s based on market size, liquidity, and industry grouping, among other factors. The Nasdaq Composite is an index of the more than 3,000 common equities listed on the Nasdaq stock exchange. The performance of an index does not represent exactly any particular investment, as you cannot invest directly in an index. Returns for the market indexes used in this report were based on information supplied to Royce by Russell Investments.
The Price-Earnings, or P/E, Ratio is calculated by dividing a company’s share price by its trailing 12-month earnings-per share (EPS). The Price to-Book, or P/B, Ratio is calculated by dividing a company’s share price by its book value per share. 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 stock’s 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 share’s 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 share’s then current net asset value. The timing and terms of any such offerings are within each Board’s 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 NYSE’s 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 SEC’s website at www.sec.gov. The Royce Funds’ holdings are also on the Funds’ website approximately 15 to 20 days after each calendar quarter end and remain available until the next quarter’s holdings are posted. The Funds’ Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. To find out more about this public service, call the SEC at (800) 732-0330. The Funds’ complete schedules of investments are updated quarterly, and are available at www.roycefunds.com.

66 | 2017 Annual Report to Stockholders


 

Results of Stockholders Meeting

Royce Global Value Trust, Inc.

At the 2017 Annual Meeting of Stockholders held on September 28, 2017, the Fund’s stockholders elected three Directors, consisting of:

    VOTES FOR   VOTES WITHHELD
 
Stephen L. Isaacs   8,844,487   182,288
 
Christopher D. Clark   8,900,214   126,562
 
Christopher C. Grisanti   8,841,967   184,808
 

Royce Micro-Cap Trust, Inc.

At the 2017 Annual Meeting of Stockholders held on September 28, 2017, the Fund’s stockholders elected three Directors, consisting of:

    VOTES FOR   VOTES WITHHELD
 
Stephen L. Isaacs   33,915,596   430,464
 
Christopher D. Clark   34,044,756   301,304
 
Christopher C. Grisanti   33,919,361   426,699
 

Royce Value Trust, Inc.

At the 2017 Annual Meeting of Stockholders held on September 28, 2017, the Fund’s stockholders elected three Directors, consisting of:

    VOTES FOR   VOTES WITHHELD
 
Stephen L. Isaacs   70,538,590   1,550,816
 
Christopher D. Clark   71,095,361      994,046
 
Christopher C. Grisanti   70,532,547   1,556,859
 

2017 Annual Report to Stockholders | 67


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  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 17 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. As of the end of the period covered by this report, the Registrant had adopted a code of ethics, as defined in Item 2 of Form N-CSR, applicable to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of this code of ethics is filed as an exhibit to this Form N-CSR. No substantive amendments were approved or waivers were granted to this code of ethics during the period covered by this report.

 

Item 3. Audit Committee Financial Expert.

 

(a)(1)The Board of Directors of the Registrant has determined that it has an audit committee financial expert.

 

(a)(2)Arthur S. Mehlman and Patricia W. Chadwick were designated by the Board of Directors as the Registrant’s Audit Committee Financial Experts, effective April 15, 2004 and April 8, 2010, respectively. Mr. Mehlman and Ms. Chadwick are “independent” as defined under Item 3 of Form N-CSR.

 

Item 4. Principal Accountant Fees and Services.

 

(a)Audit Fees:

Year ended December 31, 2017 - $44,814

Year ended December 31, 2016 - $43,935

 

(b)Audit-Related Fees:

Year ended December 31, 2017 - $0

Year ended December 31, 2016 - $0

 

(c)Tax Fees:

Year ended December 31, 2017 - $9,550 - Preparation of tax returns

Year ended December 31, 2016 - $9,360 - Preparation of tax returns

 

(d)All Other Fees:

Year ended December 31, 2017 - $0

Year ended December 31, 2016 - $0

 

(e)(1)      Annual Pre-Approval: On an annual basis, the Registrant’s independent auditor submits to the Audit Committee a schedule of proposed audit, audit-related, tax and other non-audit services to be rendered to the Registrant and/or investment adviser(s) for the following year that require pre-approval by the Audit Committee. This schedule provides a description of each type of service that is expected to require pre-approval and the maximum fees that can be paid for each such service without further Audit Committee approval. The Audit Committee then reviews and determines whether to approve the types of scheduled services and the projected fees for them. Any subsequent revision to already pre-approved services or fees (including fee increases) are presented for consideration at the next regularly scheduled Audit Committee meeting, as needed.

 

If subsequent to the annual pre-approval of services and fees by the Audit Committee, the Registrant or one of its affiliates determines that it would like to engage the Registrant’s independent auditor to perform a service not already pre-approved, the request is to be submitted to the Registrant’s Chief Financial Officer, and if he or she determines that the service fits within the independence guidelines (e.g., it is not a prohibited service), he or she will then arrange for a discussion of the proposed service and fee to be included on the agenda for the next regularly scheduled Audit Committee meeting so that pre-approval can be considered.

 

Interim Pre-Approval: If, in the judgment of the Registrant's Chief Financial Officer, a proposed engagement needs to commence before the next regularly scheduled Audit Committee meeting, he or she shall submit a written summary of the proposed engagement to all members of the Audit Committee, outlining the services, the estimated maximum cost, the category of the services (e.g., audit, audit-related, tax or other) and the rationale for engaging the Registrant’s independent auditor to perform the services. To the extent the proposed engagement involves audit, audit-related or tax services, any individual member of the Audit Committee who is an independent Board member is authorized to pre-approve the engagement. To the extent the proposed engagement involves non-audit services other than audit-related or tax, the Chairman of the Audit Committee is authorized to pre-approve the engagement. The Registrant’s Chief Financial Officer will arrange for this interim review and

 
 

coordinate with the appropriate member(s) of the Committee. The independent auditor may not commence the engagement under consideration until the Registrant’s Chief Financial Officer has informed the auditor in writing that pre-approval has been obtained from the Audit Committee or an individual member who is an independent Board member. The member of the Audit Committee who pre-approves any engagements in between regularly scheduled Audit Committee meetings is to report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next regularly scheduled meeting.

 

(e)(2)      Not Applicable

 

(f)           Not Applicable

 

(g)          Year ended December 31, 2017 - $9,550

  Year ended December 31, 2016 - $9,360

 

(h) No such services were rendered during 2017 or 2016.

 

Item 5. Audit Committee of Listed Registrants. The Registrant has a separately designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. Patricia W. Chadwick, Richard M. Galkin, Stephen L. Isaacs, Arthur S. Mehlman, David L. Meister and G. Peter O’Brien are members of the Registrant’s audit committee.

 

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.

 

Royce & Associates, LP (“Royce”) has adopted written proxy voting policies and procedures (the “Proxy Voting Procedures”) for itself and client accounts for which Royce is responsible for voting proxies. Royce is generally granted proxy voting authority at the inception of its management of each client account. Proxy voting authority is generally either (i) specifically authorized in the applicable investment management agreement or other instrument; or (ii) where not specifically authorized, is granted to Royce where general investment discretion is given to Royce in the applicable investment management agreement. In voting proxies, Royce is guided by general fiduciary principles. Royce’s goal is to act prudently, solely in the best interest of the beneficial owners of the accounts it manages. Royce attempts to consider all factors of its vote that could affect the value of the investment and will vote proxies in the manner it believes will be consistent with efforts to enhance and/or protect stockholder value.

 

Royce’s personnel are responsible for monitoring receipt of all proxies and seeking to ensure that proxies are received for all securities for which Royce has proxy voting authority. Royce is not responsible for voting proxies it does not receive. Royce divides proxies into "regularly recurring" and "non-regularly recurring" matters. Examples of regularly recurring matters include non-contested elections of directors and non-contested approvals of independent auditors. Royce’s personnel are responsible for developing and maintaining a list of matters Royce treats as “regularly recurring” and for ensuring that instructions from a Royce Co-Chief Investment Officer are followed when voting those matters on behalf of Royce clients. Non-regularly recurring matters are all other proxy matters and are brought to the attention of the relevant portfolio manager(s) for the applicable account(s). After giving consideration to advisories provided by an independent third party research firm with respect to such non-regularly recurring matters, the portfolio manager(s) directs that such matters be voted in a way that he or she believes should better protect or enhance the value of the investment.

 

Certain Royce portfolio managers may provide instructions that they do not want regularly recurring matters to be voted in accordance with the standing instructions for their accounts and individual voting instructions on all matters, both regularly recurring and non-regularly recurring, will be obtained from such portfolio managers. Under certain circumstances, Royce may also vote against a proposal from the issuer's board of directors or management. Royce's portfolio managers decide these issues on a case-by-case basis. A portfolio manager of Royce

 
 

may, on occasion, decide to abstain from voting a proxy or a specific proxy item when such person concludes that the potential benefit of voting is outweighed by the cost or when it is not in the client's best interest to vote.

 

There may be circumstances where Royce may not be able to vote proxies in a timely manner, including, but not limited to, (i) when certain securities are out on loan at the time of a record date; (ii) when administrative or operational constraints impede Royce’s ability to cast a timely vote, such as late receipt of proxy voting information; and/or (iii) when systems, administrative or processing errors occur (including errors by Royce or third party vendors).

 

To further Royce's goal to vote proxies in the best interests of its client, Royce follows specific procedures outlined in the Proxy Voting Procedures to identify, assess and address material conflicts that may arise between Royce's interests and those of its clients before voting proxies on behalf of such clients. In the event such a material conflict of interest is identified, the proxy will be voted by Royce in accordance with the recommendation given by an independent third party research firm.

 

You may obtain a copy of the Proxy Voting Procedures at www.roycefunds.com or by calling 212-508-4500. Additionally, you can obtain information on how your securities were voted by calling 212-508-4500.

 

Item 8. Portfolio Managers of Closed-End Management Investment Companies.

(a)(1) Portfolio Managers of Closed-End Management Investment Companies (information as of December 31, 2017)

 

 

Name

 

Title

 

Length of Service

 

Principal Occupation(s) During Past 5 Years

Charles M. Royce Portfolio Manager and Member of the Board of Directors of the Registrant Since 1986 Chairman of the Board of Managers of Royce & Associates, LP (“Royce”), Member of the boards of directors/trustees of the Registrant, Royce Micro-Cap Trust, Inc. ("RMT"), Royce Global Value Trust, Inc. ,The Royce Fund , and Royce Capital Fund (collectively, "The Royce Funds").
Chris E. Flynn

Assistant Portfolio Manager*

 

Since April 1, 2007

Assistant Portfolio Manager of the Registrant (since April 1, 2007); and Principal, Portfolio Manager and Senior Analyst at Royce (since 1993).

 

Lauren A. Romeo Assistant Portfolio Manager* Since May 1, 2009 Assistant Portfolio of the Registrant (since May 1, 2009); Portfolio Manager and Analyst at Royce (since 2004); Portfolio Manager at Dalton, Grenier, Hartman & Maher (since 2001); an Analyst with Legg Mason Funds Management (2000-2001); and an Analyst with T. Rowe Price Group (1996-2000).  
           

* Assistant Portfolio Managers may have investment discretion over a portion of the Registrant’s portfolio subject to the supervision of Registrant’s Portfolio Manager.

 
 

(a)(2) Other Accounts Managed by Portfolio Manager and Potential Conflicts of Interest (information as of December 31, 2017)

 

Other Accounts

 

 

 

 

 

 

Name of Portfolio Manager 

 

 

 

 

 

 

 

Type of Account

 

 

 

 

Number of
Accounts
Managed

 

 

 

 

 

Total

Assets
Managed

 

 

 

Number of Accounts

Managed for which

Advisory Fee is

Performance-Based

 

Value of Managed

Accounts for which

Advisory Fee is

Performance
Based

Charles M. Royce          
  Registered investment companies 8 9,126,157,867 2 1,890,354,369
 

Private pooled

investment vehicles

1 12,619,047 1 12,619,047
  Other accounts* 12 51,481,114 - -
           
Chris E. Flynn          
  Registered investment companies 6 6,582,848,932 2 1,890,354,369
 

Private pooled

investment vehicles

- - - -
  Other accounts* - - - -
           
Lauren A. Romeo          
  Registered investment companies 4 6,035,125,179 1 1,480,449,029
 

Private pooled

investment vehicles

2 464,475,435 - -
  Other accounts* - - - -

*Other accounts include all other accounts managed by the Portfolio Manager in either a professional or personal capacity except for personal accounts subject to pre-approval and reporting requirements under the Registrant’s Rule 17j-1 Code of Ethics.

 

 
 

Conflicts of Interest

The fact that a Portfolio Manager has day-to-day management responsibility for more than one client account may create actual, potential or only apparent conflicts of interest. For example, the Portfolio Manager may have an opportunity to purchase securities of limited availability. In this circumstance, the Portfolio Manager is expected to review each account's investment guidelines, restrictions, tax considerations, cash balances, liquidity needs and other factors to determine the suitability of the investment for each account and to ensure that his or her managed accounts are treated equitably. The Portfolio Manager may also decide to purchase or sell the same security for multiple managed accounts at approximately the same time. To address any conflicts that this situation may create, the Portfolio Manager will generally combine managed account orders (i.e., enter a "bunched" order) in an effort to obtain best execution or a more favorable commission rate. In addition, if orders to buy or sell a security for multiple accounts managed by common Portfolio Managers on the same day are executed at different prices or commission rates, the transactions will generally be allocated by Royce to each of such managed accounts at the weighted average execution price and commission. In circumstances where a pre-allocated bunched order is not completely filled, each account will normally receive a pro-rated portion of the securities based upon the account's level of participation in the order. Royce may under certain circumstances allocate securities in a manner other than pro-rata if it determines that the allocation is fair and equitable under the circumstances and does not discriminate against any account.

 

As described below, there is a revenue-based component of each Portfolio Manager's Performance-Related Variable Compensation and the Portfolio Managers also receive Firm-Related Variable Compensation based on revenues (adjusted for certain imputed expenses) generated by Royce. In addition, Charles M. Royce receives variable compensation based on Royce's retained pre-tax profits from operations. As a result, the Portfolio Managers may receive a greater relative benefit from activities that increase the value to Royce of The Royce Funds and/or other Royce client accounts, including, but not limited to, increases in sales of Registrant’s shares and assets under management.

 

               Also, as described above, the Portfolio Managers generally manage more than one client account, including, among others, registered investment company accounts, separate accounts and private pooled accounts managed on behalf of institutions (e.g., pension funds, endowments and foundations) and for high-net-worth individuals. The appearance of a conflict of interest may arise where Royce has an incentive, such as a performance-based management fee (or any other variation in the level of fees payable by the Registrant or other Royce client accounts to Royce), which relates to the management of one or more of The Royce Funds or accounts with respect to which the same Portfolio Manager has day-to-day management responsibilities. Except as described below, no Royce Portfolio Manager's compensation is tied to performance fees earned by Royce for the management of any one client account. Although variable and other compensation derived from Royce revenues or profits is impacted to some extent, the impact is relatively minor given the small percentage of Royce firm assets under management for which Royce receives performance-measured revenue. Notwithstanding the above, the Performance-Related Variable Compensation paid to Charles M. Royce as Portfolio Manager of two registered investment company accounts (the Registrant and RMT) is based, in part, on performance-based fee revenues. The Registrant and RMT pay Royce a fulcrum fee that is adjusted up or down depending on the performance of the Fund relative to its benchmark index.

 

               Finally, conflicts of interest may arise when a Portfolio Manager personally buys, holds or sells securities held or to be purchased or sold for the Registrant or other Royce client account or personally buys, holds or sells the shares of one or more of The Royce Funds. To address this, Royce has adopted a written Code of Ethics designed to prevent and detect personal trading activities that may interfere or conflict with client interests (including Registrant’s stockholders’ interests). Royce generally does not permit its Portfolio Managers to purchase small- or micro-cap securities for their personal investment portfolios.

 

               Royce and The Royce Funds have adopted certain compliance procedures which are designed to address the above-described types of conflicts. However, there is no guarantee that such procedures will detect each and every situation in which a conflict arises.

 

 

 

 

 
 

 

(a)(3) Description of Portfolio Manager Compensation Structure (information as of December 31, 2017)

 

Royce seeks to maintain a compensation program that is competitively positioned to attract and retain high-caliber investment professionals. All Portfolio Managers, receive from Royce a base salary, Portfolio-Related Variable Compensation (generally the largest element of each Portfolio Manager’s compensation with the exception of Charles M. Royce), Firm-Related Variable Compensation based primarily on registered investment company and other client account revenues generated by Royce and a benefits package. Portfolio Manager compensation is reviewed and may be modified from time to time as appropriate to reflect changes in the market, as well as to adjust the factors used to determine variable compensation. Except as described below, each Portfolio Manager’s compensation consists of the following elements:

 

-BASE SALARY. Each Portfolio Manager is paid a base salary. In setting the base salary, Royce seeks to be competitive in light of the particular Portfolio Manager’s experience and responsibilities.

 

-PORTFOLIO-RELATED VARIABLE COMPENSATION. Each Portfolio Manager receives quarterly Portfolio-Related Variable Compensation that is either asset-based, or revenue-based and therefore in part based on the value of the net assets of the account for which he or she is being compensated, determined with reference to each of the registered investment company and other client accounts they are managing. The revenue used to determine the quarterly Portfolio-Related Variable Compensation received by Charles M. Royce that relates to each of RMT and RVT is performance-based fee revenue.

 

Payment of the Portfolio-Related Variable Compensation may be deferred, and any amounts deferred are forfeitable, if the Portfolio Manager is terminated by Royce with or without cause or resigns. The amount of the deferred Portfolio-Related Variable Compensation will appreciate or depreciate during the deferral period, based on the total return performance of one or more Royce-managed registered investment company accounts selected by the Portfolio Manager at the beginning of the deferral period. The amount deferred will depend on the Portfolio Manager’s total direct, indirect beneficial and deferred unvested investments in the Royce registered investment company accounts for which he or she is receiving portfolio management compensation.

 

-FIRM-RELATED VARIABLE COMPENSATION. Portfolio Managers receive quarterly variable compensation based on Royce’s net revenues.

 

-BENEFIT PACKAGE. Portfolio Managers also receive benefits standard for all Royce employees, including health care and other insurance benefits, and participation in Royce’s 401(k) Plan and Money Purchase Pension Plan. From time to time, on a purely discretionary basis, Portfolio Managers may also receive options to acquire stock in Royce’s parent company, Legg Mason, Inc. Those options typically represent a relatively small portion of a Portfolio Manager’s overall compensation.

 

(a)(4) Dollar Range of Equity Securities in Registrant Beneficially Owned by Portfolio Manager (information as of December 31, 2017)

 

The following table shows the dollar range of the Registrant’s shares owned beneficially and of record by the Portfolio Managers, including investments by his immediate family members sharing the same household and amounts invested through retirement and deferred compensation plans.

 

Portfolio Manager Dollar Range of Registrant’s Shares Beneficially Owned
Charles M. Royce Over $1,000,000
Chris E. Flynn $100,001 to $500,000
Lauren A. Romeo $100,001 to $500,000

 

(b) Not Applicable

 

 
 

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not Applicable

 

Item 10. Submission of Matters to a Vote of Security Holders. Not Applicable.

 

Item 11. Controls and Procedures.

 

(a) Disclosure Controls and Procedures. The Principal Executive and Financial Officers concluded that the Registrant's Disclosure Controls and Procedures are effective based on their evaluation of the Disclosure Controls and Procedures as of a date within 90 days of the filing date of this report.

 

(b) Internal Control over Financial Reporting. There were no significant changes in Registrant's internal control over financial reporting or in other factors that could significantly affect this control subsequent to the date of the evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses during the second fiscal quarter of the period covered by this report.

 

Item 12. Exhibits. Attached hereto.

(a)(1) The Registrant’s code of ethics pursuant to Item 2 of Form N-CSR.

 

(a)(2) Separate certifications by the Registrant’s Principal Executive Officer and Principal Financial Officer as required by Rule 30a-2(a) under the Investment Company Act of 1940.

 

(a)(3) Not Applicable

 

(b) Separate certifications by the Registrant’s Principal Executive Officer and Principal Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(b) under the Investment Company Act of 1940.

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

ROYCE VALUE TRUST, INC.

 

BY: /s/ Christopher D. Clark

Christopher D. Clark

President

 

Date: March 2, 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 VALUE TRUST, INC. ROYCE VALUE TRUST, INC.
   
BY: /s/ Christopher D. Clark BY: /s/ Peter K. Hoglund
       Christopher D. Clark        Peter K. Hoglund
       President              Treasurer
   
Date:  March 2, 2018 Date:  March 2, 2018