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, 2019 – December 31, 2019
Item 1. Reports to Shareholders.
Royce Closed-End Funds 2019 Annual
Review and Report to Stockholders
December 31, 2019
Royce Global Value Trust
Royce Micro-Cap Trust
Royce Value Trust
Beginning on January 1, 2021, as permitted by regulations adopted by the U.S. Securities and Exchange Commission, paper copies of the Funds' shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports from the Funds or from your financial intermediary (such as a broker-dealer or bank). Instead, the reports will be made available on the Funds' website (www.royceinvest.com), and you will be notified by mail each time a report is posted and provided with a website link to access the report. If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Funds electronically anytime by contacting your financial intermediary or, if you are a direct investor with the Funds, by calling 1-800-841-1180. Beginning on January 1, 2019, you may elect to receive all future reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports. If you invest directly with the Funds, you can call 1-800-841-1180 to let the Funds know you wish to continue receiving paper copies of your shareholder reports. Your election to receive reports in paper will apply to all Funds held in your account if you invest through your financial intermediary or all Funds held with our fund complex if you invest directly with the Funds.
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| | A Few Words on Closed-End Funds | |
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| | Royce Investment Partners 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. | |
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| | 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. | |
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| | 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 61 and 62. For additional information on the Funds’ Distribution Reinvestment and Cash Purchase Options and the benefits for stockholders, please see page 63 or visit our website at www.royceinvest.com. | |
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| | 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. | |
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This page is not part of the 2019 Annual Report to Stockholders
Table of Contents
This page is not part of the 2019 Annual Report to Stockholders
Letter to Our Stockholders
A BIG YEAR FOR STOCKS
Aperiod of pauses, pivots, and rallies, 2019 ended as a highly rewarding year for equities. The major domestic and international indexes posted healthy double-digit returns, most in the range of 20-35%. The small-cap Russell 2000 Index gained 25.5% while the Russell Top 50 Mega Cap Index advanced 32.9%, the large-cap Russell 1000 Index was up 31.4%, and the Russell Microcap Index increased 22.4%—generally, bigger was better in 2019. Still, the 25.5% gain for the Russell 2000 placed it in the index's top 27% of calendar-year showings since its 1978 inception. The advance was also impressively broad, with 70% of the stocks in the small-cap index posting positive returns, 61% advancing at least 10%, and 49% posting a calendar-year gain of
20% or more. Additionally, 10 of 11 Russell 2000 sectors were positive for the year (Energy was the sole detractor).
Although many investors think that some event, or series of events, must be present to propel share prices, there are times when the absence of negative developments is more than enough to push stocks consistently upward. This was the case in 2019, when both a recession and a more hawkish Fed failed to materialize, which was all it took to kick-start the recovery that succeeded the dramatic downturn that saw out 2018. The Fed's course was especially interesting. Arguably out of touch with the anxieties bred by slipping oil prices and an inverted yield curve in December 2018, the Fed raised rates and announced that 2019 would likely see at least two more hikes—all of this based on the central bank's cautiously optimistic outlook on the U.S. economy. Once the market's plunge showed that investors did not share this view, the Fed paused, saying it would hold the line on rates. The central bank then pivoted in July 2019, reversing course by lowering rates—which it proceeded to do again in September and October. These cuts fueled a healthy fourth quarter and helped stocks to end the year on a decidedly upbeat note.
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LETTER TO OUR STOCKHOLDERS
Notable Index Performance Spreads
Russell Index Performance—6/30/18-12/31/19
WHAT WILL FOLLOW MEGA-CAP MANIA?
Performance in 2019 was mostly in line with previous snapbacks off precipitous declines—biotech, software, and other growth stocks were among those that did best, along with non-dividend payers and companies with high debt. The somewhat peculiar exception to the pattern was large-cap outperformance. In high-octane markets such as what we saw in 2019, small-cap stocks have typically contended with few, if any, competitors for leadership. This pattern was undone by the ongoing leadership of mega-cap stocks—including the now familiar “FAANG” group of Facebook, Apple, Amazon, Netflix, and Google—which have led the market by a substantial margin over the last 18 months. For example, from 6/30/18-12/31/19, the Russell Top 50 Index advanced 26.1% cumulatively compared with a paltry 3.7% gain for small-caps—and a decline of 3.9% for micro-caps.
If the dominance of mega-caps were to unwind, or even pause, we see the potential for a subsequent rotation to small-caps. We think one point effectively illustrates the size of the potential opportunity: over the last 20 years, the 50 biggest stocks in the Russell 3000 Index have averaged a combined total market cap of about four times the total market cap of the Russell 2000. At the end of 2019, however, that ratio was more than six times, which is higher than it was even at the height of the Internet bubble in 2000. We’re certainly not expecting mega-caps to collapse any time soon, which would be anomalous behavior in what we think will be
an advancing market. But we do think a performance pause at their current high valuations could occur, allowing small- and micro-cap stocks to catch up.
We may have seen the first seeds of such a leadership reversal in the last four months of 2019, which from our perspective provided the year’s most compelling developments. Beginning on August 27th, several reversals inverted previous market leadership patterns, each of which held through the end of 2019: small-caps outpaced large-caps, cyclicals outperformed defensives, small-cap value beat small-cap growth, and micro-caps led domestic equity performance. What was of particular interest to us about these reversals was their simultaneity. Leadership rotation is common, but the changes typically emerge over longer stretches of time before they take root.
Equally important, we would also argue that valuations—both relative and absolute—must be kept in mind when looking at returns. In spite of the performance boosts that came with the late
August’s Reversals Held
Late August Saw Key Market Shifts That Held Through The End Of 2019
This page is not part of the 2019 Annual Report to Stockholders | 3
LETTER TO OUR STOCKHOLDERS
Small-Cap’s Relative Valuation Is Below Its Long-Term Average
Russell 2000 vs. Russell 1000 Median LTM EV/EBIT¹ (ex. Negative EBIT Companies) from 12/31/01 to 12/31/19
1Earnings before interest and taxes. Source: FactSet
August reversals, relative valuations for small-cap versus large-cap, small-cap cyclicals versus small-cap defensives, and small-cap value versus small-cap growth still looked attractive to us. At the end of 2019, each remained near the 20-year lows they hit in late August. As the chart above shows, small-cap stocks have lagged large-caps for so long that they were relatively cheaper at the end of 2019 than at any other time since 2001 based on our preferred valuation metric, EV/EBIT, (enterprise value over earnings before interest and taxes).
BEWARE OF THE CALENDAR
When thinking about the prospects for small-cap performance, we think it’s important to avoid a common pitfall that we all stumble into occasionally—the tendency to put more emphasis on year-end results than on other month-end periods. From the vantage point of the calendar year, small-cap performance certainly looks good. But if we look at the two-year annualized return for the Russell 2000, we see a markedly lower gain of 5.7%. Moreover, three- and five-year annualized returns for the Russell 2000 were below their respective monthly rolling averages since inception (12/31/78) at the end of 2019.
Recent 3- and 5-Year Returns Lower Than History
Russell 2000 Average Annual Total Returns vs. Long-Term Rolling Monthly Averages as of 12/31/19
Finally, the Russell 2000 finished 2019 2.2% off its most recent peak—and all-time high—reached on 8/31/18. What do these observations of historical performance suggest? Taken together, we think they suggest that, despite 2019’s strong calendar-year return, caution or pessimism about future small-cap returns and opportunities may be misplaced.
THE CASE FOR SMALL-CAP CYCLICALS
To be sure, we believe that small-cap stocks are more than capable of a strong run in 2020—and certainly resumed market leadership could be part of the equation. Even after a terrific 2019, many small-caps are still carrying what we would call a recession discount from the deep downturn at the end of 2018. Small-cap cyclicals continued to trade at a significant valuation discount to defensives at the end of 2019 based on EV/EBIT. In fact, the spread was wider than it was in October 2008, when a recession was exacerbated by the Great Financial Crisis.
Small-Cap Cyclicals Are Relatively Cheaper Than in 2008
Russell 2000 Relative Median EV/EBIT (Ex Negative EBIT) From 12/31/99 to 12/31/19
These historically low relative valuations offer support for our view that late August’s performance reversals can be sustained in 2020. This confidence has led us to be active buyers in areas as diverse as energy services; healthcare devices, diagnostics, and testing; paper & packaging; semiconductors & semiconductor equipment; chemicals; and consumer finance.
Small-caps have also historically outpaced large-caps when the economy is growing and have lagged when it’s contracting. They have
4 | This page is not part of the 2019 Annual Report to Stockholders
LETTER TO OUR STOCKHOLDERS
To be sure, we believe that small-cap stocks are more than capable of a strong run in 2020—and certainly resumed market leadership could be part of the equation. Even after a terrific 2019, many small-caps are still carrying what we would call a recession discount from the deep downturn at the end of 2018.
beaten large-caps, for example, in 70% of all trailing monthly rolling one-year periods—74 out of 106—when the ISM PMI rose over the last 20 years.1 This dynamic holds true for cyclicals versus defensives as well. So if the most recent slowdown is behind us, and the global economy is gradually improving (which appears to be the case), then renewed expansion supports a continuation of August’s reversals.
THE GLOBAL SMALL-CAP SCENE
Our confidence for small-cap extends beyond our borders. Japan has shown intermittent but promising signs of renewed growth, as had China prior to the outbreak of the coronavirus. Europe, particularly Germany, has been caught in the middle of the U.S.-China trade and tariff disputes given its more export-driven economies. It was also slowed by the protracted uncertainty over Brexit. Yet December showed marginal improvements through much of Europe, including upticks in business confidence and retail sales, which indicate that the global economy has bottomed—it grew by about 2% in 2019. If it were to begin rebounding towards the 20-year average annual nominal GDP rate of around 5%—a not unreasonable expectation, we think— then that should create tailwinds to sustain small-cap cyclicals.
Also worth noting is that the cumulative two-year return for non-U.S. small-caps, as measured by the MSCI ACWI ex USA Small Cap Index, was essentially flat, up just 0.1%. Over this same period, however, earnings have been growing at healthy clip, suggesting that returns can narrow this gap. We think that the combination of attractive valuations for cyclicals, a strengthening global economy, and the flat two-year return imply that the next few years are likely to be at least as good for international small-caps as the last few—and quite possibly better.
Of course, our greatest source of confidence is not macroeconomic analysis or the examination of long-term
performance patterns (though they certainly help)—it comes from our own research into companies and industries as well as the numerous conversations we have with small-cap management teams. Much to our satisfaction, most of the management teams we’ve been meeting with report that they are hiring or holding steady and seeing little if any contraction in their orders or demand.
GOOD-BYE TO ALL THAT?
2019 closes out one of the most interesting—and challenging— decades that we have seen in more than 45 years of managing small-cap portfolios. It was a decade in which financial assets performed far better than the economy did—mostly due to frequent central bank interventions that suppressed rates and kept the capital markets flush with liquidity. We also saw developments that we would never have thought possible, such as negative interest rates. In addition, years of highly accommodative monetary policy had the unintended consequence of creating few, if any, penalties for companies that borrowed extensively.
We anticipate that each of these unusual developments should unwind to some extent over the next decade. This makes us highly confident about the prospects for select small-caps, particularly in cyclical areas that haven’t fully participated in the decade that just passed. However, the persistence of these peculiar developments has thrown up numerous road blocks on the road back to normalization. (Indeed, one thing that has not changed over the last 10 years is the humbling nature of the prediction business.)
The question is whether or not the last decade-plus (stretching back to the 2007 market peaks and the Great Financial Crisis of 2008) of slow growth, historically low rates, and regular central bank interventions represents a “New Normal.” While our initial contention was that it did not, we now suspect that we will arrive at a
1The ISM PMI rose in 106 of 229 periods.
This page is not part of the 2019 Annual Report to Stockholders | 5
LETTER TO OUR STOCKHOLDERS
Does the Small-Cap Recovery Have Room to Run?
Russell 2000 Declines and Two Subsequent Calendar Year’s Performance from 12/31/78 through 12/31/19 (%)
Past performance is no guarantee of future results.
blend of the old and the new. As Mark Twain is said to have quipped, “History doesn’t repeat itself, but it often rhymes.” Perhaps, then, this will result in a series of lows—low rates, low inflation, and low (by which we mean slow) economic growth—which will translate into lower U.S. equity returns than what we have seen over the last decade, along with more frequent bouts of volatility and wider variations in stock returns. While this menu may seem unpalatable, periods with more modest performance have historically been very favorable for disciplined active management approaches.
FAVORABLE CONDITIONS FOR SMALL-CAPS
The current backdrop looks quite promising to us for solid to strong small-cap performance overall thanks to the four favorable factors that we cited in July’s “Letter to Our Stockholders”—low inflation, modest valuations, moderate growth, and ample access to capital. Together, they suggest that small-cap returns can go higher, especially the many small-cap cyclical areas that we typically
like best. A few historical factors are also worth noting. Over the past 30 years, 76% of all monthly rolling one-year returns for the Russell 2000 have been positive—with an average return of 11.5%. So investors who are bearish on small-cap stocks are betting against the odds. To get a firmer sense of what 2020 may hold, we went back to the inception of the Russell 2000 and looked at the 11 calendar years when small-caps declined, as in 2018, and examined what happened in the second subsequent year. In nine of those 11 years the small-cap index advanced by an average of 14.5%. (2000 and 2002 were the exceptions.)
And two consecutive years of double-digit increases are fairly common for small-caps. Periods in which a healthy second year followed a strong one occurred in the following two-year spans: 1988-89, 1991-92, 1995-96, 2003-04, 2009-10, 2012-13, and 2016-17. With the favorable conditions we’ve outlined above in mind, we suspect that the current small-cap rally can continue, with the potential to add 2019-20 to this list.
| Sincerely, | | |
| | | |
 |  |  |
| Charles M. Royce | Christopher D. Clark | Francis D. Gannon |
| Chairman, | Chief Executive Officer, and | Co-Chief Investment Officer, |
| Royce Investment Partners | Co-Chief Investment Officer, | Royce Investment Partners |
| | Royce Investment Partners | |
| January 31, 2020 | | |
6 | This page is not part of the 2019 Annual Report to Stockholders
Performance
NAV Average Annual Total Returns
As of December 31, 2019 (%)
| | | | | | | | | | SINCE | INCEPTION |
| | 1-YR | 3-YR | 5-YR | 10-YR | 15-YR | 20-YR | 25-YR | 30-YR | INCEPTION | DATE |
| Royce Global Value Trust | 31.20 | 12.99 | 9.13 | N/A | N/A | N/A | N/A | N/A | 6.65 | 10/17/13 |
| Royce Micro-Cap Trust | 22.44 | 8.39 | 6.52 | 11.06 | 7.60 | 9.84 | 10.76 | N/A | 10.53 | 12/14/93 |
| Royce Value Trust | 30.46 | 10.04 | 9.20 | 11.00 | 7.69 | 9.27 | 10.51 | 10.56 | 10.51 | 11/26/86 |
| INDEX | | | | | | | | | | |
| MSCI ACWI Small Cap Index | 24.65 | 9.73 | 7.85 | 9.71 | 8.06 | 7.71 | 8.01 | N/A | N/A | N/A |
| Russell Microcap Index | 22.43 | 6.39 | 6.57 | 11.26 | 6.16 | N/A | N/A | N/A | N/A | N/A |
| Russell 2000 Index | 25.52 | 8.59 | 8.23 | 11.83 | 7.92 | 7.59 | 9.35 | 9.49 | N/A | N/A |
Important Performance and Risk Information
All performance information in thisReview 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.royceinvest.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 Value Trust at 6/30/18 and Royce Micro-Cap Trust at 6/30/19, 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. Source: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indexes or any securities or financial products. This report is not approved, endorsed, reviewed or produced by MSCI. None of the MSCI data is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. 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 MSCI ACWI Small Cap Index is an unmanaged, capitalization-weighted index of global small-cap stocks. The performance of an index does not represent exactly any particular investment, as you cannot invest directly in an index. Index returns include net reinvested dividends and/or interest income. Royce Value, Micro-Cap, and Global Value Trust shares of common stock trade on the NYSE. Royce Fund Services, LLC (“RFS”) is a member of FINRA and files certain material with FINRA on behalf of each Fund. RFS is not an underwriter or distributor of any of the Funds.
This page is not part of the 2019 Annual Report to Stockholders | 7
MANAGERS’ DISCUSSION (UNAUDITED)
Royce Global Value Trust (RGT)
Chuck Royce
FUND PERFORMANCE
Royce Global Value Trust (“RGT”) advanced 31.2% on an NAV (net asset value) basis and 32.3% based on market price for 2019, outperforming its unleveraged benchmark, the MSCI ACWI Small Cap Index, which gained 24.7% for the same period. The Fund also outpaced its benchmark on an NAV and market price basis for the three- and five-year periods ended 12/31/19.
WHAT WORKED... AND WHAT DIDN’T
Ten of RGT’s 11 portfolio sectors made a positive contribution to performance in 2019, with by far the biggest impact coming from Industrials and Information Technology—the Fund’s two largest sectors at year-end. Financials also made a solid positive impact while Communication Services was the only sector that detracted—doing so quite modestly. Utilities and Consumer Staples made the smallest contributions. At the industry level, machinery (Industrials) had the biggest positive effect, followed by notable contributions from electronic equipment, instruments & components (Information Technology) and capital markets (Financials). The top detracting industries were paper & forest products (Materials), industrial conglomerates (Industrials), and media (Communication Services).
The Fund’s top-contributing position was Brazil’s TOTVS, which provides enterprise resource planning and supply chain management software solutions. TOTVS capped a strong 2019 with robust revenue growth, effective cost management that created greater operational efficiency, and adjusted EBITDA margin expansion driven by its core software business. The cost of its new initiatives also did not significantly impact the firm’s profits. Finally, TOTVS acquired SUPPLIER, a credit card company with a virtual private label B2B solution. KBR, which offers differentiated engineering and related services and technologies, followed as the next-best contributor. The company operates in three synergistic segments: Government Solutions, Technology Solutions, and Energy Solutions. Its shares benefited from KBR exceeding earnings estimates for four consecutive quarters as of October 2019. This growth was driven by robust book-to-bill rates and notable strength in its Energy Solutions division.
Virtu Financial is a New York City based financial company that uses its technology to act as a market maker and liquidity provider to the global financial markets. Its business endured a slump through most of the year as the company typically does best in highly volatile markets—which were mostly absent in 2019—and/or when global trading volumes are heavy. Believing that volatility is more likely, we built our position. The stock of U.K.-based Metro Bank fell earlier in the year after the discovery in the first quarter of a historic accounting error relating to how the bank calculated loan risk. We exited our position in June. Canadian company Pason Systems provides instrumentation and data management systems for drilling rigs. The company saw its near-term outlook weaken in 2019 as North American drilling activity declined through the year on supply/demand concerns exacerbated by slumping oil and natural gas prices as well as the slower global economy. We think the market has more than fully discounted the negative impact of these developments on Pason’s near-term fundamentals while also seeming not to recognize the attributes that look obvious to us: a durable, high-ROIC business model, an innovative and robust technology pipeline, and a debt-free balance sheet.
Relative to the MSCI ACWI Small Cap, the Fund benefited from both stock selection and sector allocation, with the former having by far the highest impact. Industrials, Information Technology, and Energy were the top contributors at the sector level. Our relative advantage in the first and third were keyed by stock selection while in Tech both stock picking and our greater exposure contributed, with the latter having the bigger impact. Conversely, poor stock selection hampered relative performance most in Financials and Communication Services; RGT’s cash position also detracted in 2019.
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| | Top Contributors to Performance | | Top Detractors from Performance | |
| | For 2019 (%)1 | | | For 2019 (%)2 | | |
| | TOTVS | 1.02 | | Virtu Financial Cl. A | -0.78 | |
| | KBR | 0.87 | | Metro Bank | -0.31 | |
| | CIRCOR International | 0.70 | | Pason Systems | -0.29 | |
| | Ashmore Group | 0.63 | | Burford Capital | -0.22 | |
| | Altus Group | 0.63 | | Stella-Jones | -0.15 | |
| | 1 Includes dividends | | 2 Net of dividends | |
| | | | | |
CURRENT POSITIONING AND OUTLOOK
We see several potential tailwinds for global small-caps, particularly those in more economically sensitive cyclical industries. China had shown intermittent but promising signs of renewed growth prior to the outbreak of the coronavirus. Europe, particularly Germany, has been caught in the middle of the U.S.-China trade and tariff disputes given its more export-driven economies. It was also slowed by the protracted uncertainty over Brexit. Yet December showed marginal improvements through much of Europe, including upticks in business confidence and retail sales, which indicate that the global economy has bottomed—it grew by about 2% in 2019. If it were to begin rebounding towards the 20-year average annual nominal GDP rate of around 5%—a not unreasonable expectation, we think—then that should create enough lift to sustain small-cap cyclicals. Earnings have also been growing—at a healthy clip for many companies—further bolstering the case for ongoing positive performance. In our view, attractively valued cyclicals, a strengthening global economy, low rates throughout most of the developed world, and ample access to capital here in the U.S. together suggest that the next few years are likely to be at least as good for global small-caps as the last few—and quite possibly better.
8 | 2019 Annual Report to Stockholders
| PERFORMANCE AND PORTFOLIO REVIEW (UNAUDITED) | SYMBOLSMARKET PRICERGTNAVXRGTX |
Performance
Average Annual Total Return (%) Through 12/31/19
| | JUL-DEC 20191 | 1-YR | 3-YR | 5-YR | SINCE INCEPTION (10/17/13) |
| RGT (NAV) | 10.07 | 31.20 | 12.99 | 9.13 | 6.65 |
1Not 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 | 32.3% | 53.1% | N/A | N/A | N/A | 39.7% |
| 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. |
Morningstar Style MapTM As of 12/31/19
TheMorningstar Style Mapis theMorningstar Style Box™with the center 75% of fund holdings plotted as theMorningstar 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
| FLIR Systems | 2.1 |
| Kirby Corporation | 2.1 |
| Tel Aviv Stock Exchange | 1.8 |
| Virtu Financial Cl. A | 1.4 |
| KBR | 1.4 |
| Hansen Technologies | 1.3 |
| TGS-NOPEC Geophysical | 1.3 |
| Quaker Chemical | 1.3 |
| Computer Modelling Group | 1.3 |
| Mycronic | 1.1 |
Portfolio Sector Breakdown
% of Net Assets
| Industrials | 32.1 |
| Information Technology | 24.5 |
| Financials | 15.3 |
| Materials | 8.8 |
| Health Care | 7.5 |
| Energy | 4.5 |
| Consumer Discretionary | 2.9 |
| Real Estate | 2.0 |
| Consumer Staples | 1.9 |
| Communication Services | 0.1 |
| Preferred Stock | 0.6 |
| Outstanding Line of Credit, Net of Cash and Cash Equivalents | -0.2 |
Calendar Year Total Returns (%)
| YEAR | RGT |
| 2019 | 31.2 |
| 2018 | -16.1 |
| 2017 | 31.1 |
| 2016 | 11.1 |
| 2015 | -3.4 |
| 2014 | -6.2 |
Portfolio Country Breakdown1,2
% of Net Assets
| United States | 26.6 |
| United Kingdom | 11.7 |
| Canada | 10.3 |
| Japan | 8.3 |
| Sweden | 7.5 |
| Switzerland | 4.9 |
| Australia | 4.7 |
| Germany | 4.5 |
| France | 3.4 |
| 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 | $143 million |
| Number of Holdings | 187 |
| Turnover Rate | 48% |
| Net Asset Value | $13.60 |
| Market Price | $11.69 |
| Net Leverage1 | 0.2% |
| Average Market Capitalization2 | $1,754 million |
| Weighted Average P/E Ratio3,4 | 25.2x |
| Weighted Average P/B Ratio3 | 2.9x |
| Active Share5 | 97% |
| 1 | Net leverage is the percentage, in excess of 100%, of the total value of equity type investments, divided by net assets. |
| 2 | Geometric Average.This weighted calculation uses each portfolio holding’s market cap in a way designed to not skew the effect of very large or small holdings; instead, it aims to better identify the portfolio’s center, which Royce believes offers a more accurate measure of average market cap than a simple mean or median. |
| 3 | Harmonic Average. This weighted calculation evaluates a portfolio as if it were a single stock and measures it overall. It compares the total market value of the portfolio to the portfolio’s share in the earnings or book value, as the case may be, of its underlying stocks. |
| 4 | The Fund's P/E ratio calculation excludes companies with zero or negative earnings (9% of portfolio holdings as of 12/31/19). |
| 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.royceinvest.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 2019.
2019 Annual Report to Stockholders | 9
Royce Global Value Trust
| Schedule of Investments | | | | | | |
| Common Stocks – 99.6% | | | | | | | | |
| | | SHARES | | | VALUE | |
| | | | | | | | | |
| AUSTRALIA – 4.7% | | | | | | | | |
| ALS | | | 100,000 | | | $ | 644,207 | |
| Bravura Solutions | | | 304,100 | | | | 1,109,691 | |
| Cochlear | | | 4,500 | | | | 709,669 | |
| Hansen Technologies | | | 696,216 | | | | 1,856,564 | |
| IPH | | | 260,747 | | | | 1,500,429 | |
| Steadfast Group | | | 156,000 | | | | 380,966 | |
| Technology One | | | 100,000 | | | | 581,751 | |
| Total (Cost $5,139,033) | | | | | | | 6,783,277 | |
| | | | | | | | | |
| AUSTRIA – 0.5% | | | | | | | | |
| Mayr-Melnhof Karton | | | 2,500 | | | | 335,388 | |
| †Rhi Magnesita | | | 8,900 | | | | 453,639 | |
| Total (Cost $808,073) | | | | | | | 789,027 | |
| | | | | | | | | |
| BERMUDA – 0.7% | | | | | | | | |
| †Assured Guaranty | | | 21,700 | | | | 1,063,734 | |
| Total (Cost $1,067,052) | | | | | | | 1,063,734 | |
| | | | | | | | | |
| BRAZIL – 2.3% | | | | | | | | |
| B3-Brasil, Bolsa, Balcao | | | 16,000 | | | | 170,910 | |
| OdontoPrev | | | 200,000 | | | | 838,740 | |
| Tegma Gestao Logistica | | | 42,400 | | | | 396,838 | |
| TOTVS | | | 80,795 | | | | 1,296,472 | |
| †YDUQS Part | | | 49,400 | | | | 583,315 | |
| Total (Cost $1,853,813) | | | | | | | 3,286,275 | |
| | | | | | | | | |
| CANADA – 10.3% | | | | | | | | |
| Agnico Eagle Mines1,2 | | | 10,000 | | | | 616,100 | |
| Alamos Gold Cl. A | | | 215,000 | | | | 1,296,408 | |
| Altus Group | | | 46,200 | | | | 1,350,546 | |
| Computer Modelling Group | | | 283,000 | | | | 1,791,429 | |
| E-L Financial | | | 1,300 | | | | 829,876 | |
| †EnWave3 | | | 294,400 | | | | 380,880 | |
| FirstService Corporation | | | 10,300 | | | | 958,312 | |
| Genworth MI Canada | | | 13,000 | | | | 568,834 | |
| Major Drilling Group International3 | | | 336,000 | | | | 1,467,113 | |
| Morneau Shepell | | | 31,500 | | | | 819,672 | |
| Pan American Silver1 | | | 31,800 | | | | 753,342 | |
| †Pason Systems | | | 98,500 | | | | 994,444 | |
| †People Corporation3 | | | 39,700 | | | | 306,643 | |
| Questor Technology3 | | | 76,000 | | | | 290,293 | |
| Sprott | | | 520,600 | | | | 1,194,708 | |
| Stella-Jones | | | 37,000 | | | | 1,069,069 | |
| Total (Cost $14,772,429) | | | | | | | 14,687,669 | |
| | | | | | | | | |
| CHINA – 0.9% | | | | | | | | |
| A-Living Services | | | 168,800 | | | | 582,719 | |
| TravelSky Technology | | | 300,000 | | | | 732,261 | |
| Total (Cost $703,722) | | | | | | | 1,314,980 | |
| | | | | | | | | |
| DENMARK – 0.2% | | | | | | | | |
| SimCorp | | | 3,000 | | | | 341,121 | |
| Total (Cost $193,442) | | | | | | | 341,121 | |
| | | | | | | | | |
| FRANCE – 3.4% | | | | | | | | |
| †Esker | | | 1,700 | | | | 176,197 | |
| Gaztransport Et Technigaz | | | 7,800 | | | | 747,187 | |
| Interparfums | | | 17,600 | | | | 730,451 | |
| Lectra | | | 14,000 | | | | 350,980 | |
| Neurones | | | 32,500 | | | | 750,978 | |
| Robertet | | | 700 | | | | 724,730 | |
| Thermador Groupe | | | 22,100 | | | | 1,313,847 | |
| Total (Cost $3,585,852) | | | | | | | 4,794,370 | |
| | | | | | | | | |
| GERMANY – 3.9% | | | | | | | | |
| Amadeus Fire | | | 6,000 | | | | 994,723 | |
| AURELIUS Equity Opportunities | | | 10,800 | | | | 472,460 | |
| CompuGroup Medical | | | 10,000 | | | | 715,084 | |
| †Medios3 | | | 7,800 | | | | 230,106 | |
| MorphoSys3 | | | 6,000 | | | | 853,389 | |
| Norma Group | | | 25,800 | | | | 1,099,715 | |
| PATRIZIA | | | 25,900 | | | | 576,973 | |
| STRATEC | | | 10,000 | | | | 684,237 | |
| Total (Cost $4,174,048) | | | | | | | 5,626,687 | |
| | | | | | | | | |
| GREECE – 1.1% | | | | | | | | |
| †Mytilineos | | | 105,000 | | | | 1,151,873 | |
| Sarantis | | | 43,100 | | | | 411,902 | |
| Total (Cost $1,640,620) | | | | | | | 1,563,775 | |
| | | | | | | | | |
| HONG KONG – 0.6% | | | | | | | | |
| Value Partners Group | | | 1,448,700 | | | | 892,389 | |
| Total (Cost $1,071,774) | | | | | | | 892,389 | |
| | | | | | | | | |
| INDIA – 1.1% | | | | | | | | |
| AIA Engineering | | | 22,500 | | | | 520,086 | |
| Cyient | | | 75,000 | | | | 429,228 | |
| †Muthoot Finance | | | 55,000 | | | | 586,422 | |
| Total (Cost $1,606,959) | | | | | | | 1,535,736 | |
| | | | | | | | | |
| INDONESIA – 0.4% | | | | | | | | |
| Selamat Sempurna | | | 5,500,000 | | | | 590,312 | |
| Total (Cost $513,090) | | | | | | | 590,312 | |
| | | | | | | | | |
| ISRAEL – 2.4% | | | | | | | | |
| Nova Measuring Instruments1,3 | | | 19,800 | | | | 749,034 | |
| †Tel Aviv Stock Exchange3 | | | 771,200 | | | | 2,626,274 | |
| Total (Cost $2,060,249) | | | | | | | 3,375,308 | |
| | | | | | | | | |
| ITALY – 1.4% | | | | | | | | |
| †Avio | | | 18,300 | | | | 284,506 | |
| †Carel Industries | | | 65,000 | | | | 1,010,539 | |
| DiaSorin | | | 5,000 | | | | 647,221 | |
| Total (Cost $1,271,956) | | | | | | | 1,942,266 | |
| | | | | | | | | |
| JAPAN – 8.3% | | | | | | | | |
| As One | | | 9,000 | | | | 845,704 | |
| Benefit One | | | 42,500 | | | | 884,382 | |
| Cosel | | | 90,000 | | | | 977,406 | |
| Daifuku | | | 17,500 | | | | 1,072,661 | |
| eGuarantee | | | 11,000 | | | | 127,357 | |
| Fujitec | | | 50,000 | | | | 818,646 | |
| †Fukui Computer Holdings | | | 22,000 | | | | 718,789 | |
| †Harmonic Drive Systems | | | 12,000 | | | | 582,026 | |
| Meitec Corporation | | | 17,500 | | | | 990,520 | |
| Morningstar Japan KK | | | 150,000 | | | | 566,012 | |
| NSD | | | 50,000 | | | | 827,389 | |
| †Pigeon | | | 14,200 | | | | 524,716 | |
| †Prestige International | | | 71,000 | | | | 646,910 | |
| †SCSK | | | 8,300 | | | | 433,123 | |
| †TechnoPro Holdings | | | 4,500 | | | | 316,829 | |
| 10 | 2019 Annual Report to Stockholders | THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS |
December 31, 2019
| Schedule of Investments (continued) | | | | | | | | |
| | | | | | | | | |
| | | SHARES | | | VALUE | |
| | | | | | | | | |
| JAPAN (continued) | | | | | | | | |
| TKC Corporation | | | 15,000 | | | $ | 719,249 | |
| USS | | | 14,900 | | | | 283,313 | |
| †UT Group | | | 17,100 | | | | 517,776 | |
| Total (Cost $9,102,632) | | | | | | | 11,852,808 | |
| | | | | | | | | |
| MEXICO – 0.3% | | | | | | | | |
| Becle | | | 200,000 | | | | 371,810 | |
| Total (Cost $338,328) | | | | | | | 371,810 | |
| | | | | | | | | |
| NETHERLANDS – 1.1% | | | | | | | | |
| IMCD | | | 10,000 | | | | 872,683 | |
| Intertrust | | | 35,000 | | | | 679,582 | |
| Total (Cost $1,389,557) | | | | | | | 1,552,265 | |
| | | | | | | | | |
| NEW ZEALAND – 0.5% | | | | | | | | |
| Fisher & Paykel Healthcare | | | 35,000 | | | | 523,076 | |
| †Gentrack Group | | | 100,000 | | | | 252,450 | |
| Total (Cost $545,465) | | | | | | | 775,526 | |
| | | | | | | | | |
| NORWAY – 1.3% | | | | | | | | |
| TGS-NOPEC Geophysical | | | 60,000 | | | | 1,825,430 | |
| Total (Cost $1,236,672) | | | | | | | 1,825,430 | |
| | | | | | | | | |
| RUSSIA – 0.3% | | | | | | | | |
| Globaltrans Investment GDR | | | 42,000 | | | | 371,700 | |
| Total (Cost $413,086) | | | | | | | 371,700 | |
| | | | | | | | | |
| SINGAPORE – 0.9% | | | | | | | | |
| Midas Holdings3,4 | | | 400,000 | | | | 0 | |
| XP Power | | | 30,000 | | | | 1,231,878 | |
| Total (Cost $817,261) | | | | | | | 1,231,878 | |
| | | | | | | | | |
| SOUTH AFRICA – 1.0% | | | | | | | | |
| Coronation Fund Managers | | | 70,800 | | | | 201,946 | |
| Hudaco Industries | | | 65,000 | | | | 494,902 | |
| PSG Group | | | 25,000 | | | | 417,964 | |
| Transaction Capital | | | 201,900 | | | | 304,162 | |
| Total (Cost $1,815,599) | | | | | | | 1,418,974 | |
| | | | | | | | | |
| SOUTH KOREA – 0.4% | | | | | | | | |
| Koh Young Technology | | | 6,700 | | | | 611,224 | |
| Total (Cost $539,944) | | | | | | | 611,224 | |
| | | | | | | | | |
| SPAIN – 0.3% | | | | | | | | |
| Applus Services | | | 30,000 | | | | 383,621 | |
| Total (Cost $361,708) | | | | | | | 383,621 | |
| | | | | | | | | |
| SWEDEN – 7.5% | | | | | | | | |
| Addtech Cl. B | | | 12,500 | | | | 404,373 | |
| †Alimak Group | | | 30,000 | | | | 447,133 | |
| †Biotage | | | 50,000 | | | | 661,944 | |
| Bravida Holding | | | 70,000 | | | | 679,720 | |
| †BTS Group | | | 20,000 | | | | 508,202 | |
| Bufab | | | 39,300 | | | | 547,981 | |
| †CTT Systems | | | 25,000 | | | | 471,902 | |
| Dometic Group | | | 55,000 | | | | 553,855 | |
| Hexpol | | | 110,000 | | | | 1,078,115 | |
| Lagercrantz Group | | | 54,000 | | | | 844,043 | |
| Loomis Cl. B | | | 15,000 | | | | 621,053 | |
| †Medcap3 | | | 50,000 | | | | 742,018 | |
| †Mycronic | | | 82,700 | | | | 1,634,337 | |
| OEM International Cl. B | | | 16,500 | | | | 440,406 | |
| Scandi Standard | | | 55,500 | | | | 440,855 | |
| †Swedol Cl. B | | | 115,000 | | | | 569,085 | |
| Total (Cost $8,258,759) | | | | | | | 10,645,022 | |
| | | | | | | | | |
| SWITZERLAND – 4.9% | | | | | | | | |
| †Bossard Holding | | | 2,200 | | | | 397,128 | |
| Burkhalter Holding | | | 4,500 | | | | 353,844 | |
| †Coltene Holding | | | 7,500 | | | | 688,159 | |
| dormakaba Holding | | | 600 | | | | 429,324 | |
| Forbo Holding | | | 300 | | | | 510,849 | |
| Inficon Holding | | | 500 | | | | 397,035 | |
| Kardex | | | 9,100 | | | | 1,532,651 | |
| LEM Holding | | | 450 | | | | 662,120 | |
| †VAT Group | | | 5,600 | | | | 946,353 | |
| VZ Holding | | | 3,600 | | | | 1,110,353 | |
| Total (Cost $5,609,932) | | | | | | | 7,027,816 | |
| | | | | | | | | |
| THAILAND – 0.1% | | | | | | | | |
| Krungthai Card | | | 64,200 | | | | 84,661 | |
| Total (Cost $93,180) | | | | | | | 84,661 | |
| | | | | | | | | |
| UKRAINE – 0.2% | | | | | | | | |
| MHP GDR | | | 30,000 | | | | 291,000 | |
| Total (Cost $411,612) | | | | | | | 291,000 | |
| | | | | | | | | |
| UNITED KINGDOM – 11.7% | | | | | | | | |
| Abcam | | | 60,000 | | | | 1,074,515 | |
| Advanced Medical Solutions Group | | | 90,000 | | | | 352,873 | |
| Ashmore Group | | | 228,300 | | | | 1,566,464 | |
| †CentralNic Group3 | | | 300,000 | | | | 357,642 | |
| Clarkson | | | 15,600 | | | | 625,079 | |
| Computacenter | | | 24,500 | | | | 575,386 | |
| Croda International | | | 11,226 | | | | 761,342 | |
| Diploma | | | 35,000 | | | | 938,347 | |
| DiscoverIE Group | | | 100,000 | | | | 755,022 | |
| †Draper Esprit3 | | | 47,000 | | | | 298,830 | |
| †Eckoh | | | 248,000 | | | | 180,675 | |
| FDM Group Holdings | | | 81,500 | | | | 1,116,254 | |
| Ferroglobe (Warranty Insurance Trust)3,4 | | | 41,100 | | | | 0 | |
| †Johnson Service Group | | | 175,000 | | | | 454,338 | |
| Jupiter Fund Management | | | 36,000 | | | | 195,320 | |
| †Keystone Law Group | | | 85,000 | | | | 598,984 | |
| †Marlowe3 | | | 70,000 | | | | 470,564 | |
| †Midwich Group | | | 35,300 | | | | 257,171 | |
| †Mortgage Advice Bureau Holdings | | | 56,600 | | | | 580,286 | |
| Polypipe Group | | | 125,000 | | | | 894,105 | |
| Porvair | | | 50,000 | | | | 442,416 | |
| Restore | | | 65,000 | | | | 473,544 | |
| Rotork | | | 125,000 | | | | 554,676 | |
| †RWS Holdings | | | 70,100 | | | | 565,484 | |
| †Sabre Insurance Group | | | 66,900 | | | | 272,936 | |
| Spirax-Sarco Engineering | | | 8,000 | | | | 942,055 | |
| †SThree | | | 89,600 | | | | 449,813 | |
| Victrex | | | 25,500 | | | | 842,406 | |
| WANdisco3 | | | 26,800 | | | | 157,972 | |
| Total (Cost $12,325,794) | | | | | | | 16,754,499 | |
| | | | | | | | | |
| UNITED STATES – 26.6% | | | | | | | | |
| Air Lease Cl. A1 | | | 13,530 | | | | 642,946 | |
| THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS | 2019 Annual Report to Stockholders | 11 |
December 31, 2019
Royce Global Value Trust
| Schedule of Investments (continued) | | | | | | | | |
| | | | | | | | | |
| | | SHARES | | | VALUE | |
| | | | | | | | | |
| UNITED STATES (continued) | | | | | | | | |
| †Boku3 | | | 94,800 | | | $ | 108,620 | |
| Brooks Automation1 | | | 21,700 | | | | 910,532 | |
| †Cabot Microelectronics | | | 10,300 | | | | 1,486,496 | |
| †Chicken Soup For The Soul Entertainment Cl. A3 | | | 20,000 | | | | 160,000 | |
| CIRCOR International3 | | | 21,400 | | | | 989,536 | |
| Cognex Corporation1 | | | 10,748 | | | | 602,318 | |
| Coherent1,3 | | | 5,600 | | | | 931,560 | |
| †Colfax Corporation3 | | | 42,900 | | | | 1,560,702 | |
| Diodes1,2,3 | | | 20,500 | | | | 1,155,585 | |
| FLIR Systems1 | | | 56,700 | | | | 2,952,369 | |
| Helios Technologies1 | | | 24,639 | | | | 1,139,061 | |
| Innospec1,2 | | | 12,457 | | | | 1,288,552 | |
| Kadant1 | | | 7,800 | | | | 821,652 | |
| KBR1 | | | 64,600 | | | | 1,970,300 | |
| Kirby Corporation1,2,3 | | | 32,900 | | | | 2,945,537 | |
| KKR & Co. Cl. A1 | | | 25,000 | | | | 729,250 | |
| Lazard Cl. A | | | 27,400 | | | | 1,094,904 | |
| †Lindblad Expeditions Holdings3 | | | 43,000 | | | | 703,050 | |
| Lindsay Corporation1,2 | | | 13,700 | | | | 1,315,063 | |
| Littelfuse | | | 4,000 | | | | 765,200 | |
| †Mesa Laboratories | | | 4,300 | | | | 1,072,420 | |
| Morningstar | | | 7,200 | | | | 1,089,432 | |
| National Instruments1 | | | 15,200 | | | | 643,568 | |
| Onto Innovation1,2,3 | | | 44,545 | | | | 1,627,674 | |
| †PAR Technology3 | | | 38,391 | | | | 1,180,139 | |
| Quaker Chemical1,2 | | | 11,069 | | | | 1,821,072 | |
| SEACOR Holdings1,2,3 | | | 10,100 | | | | 435,815 | |
| SEACOR Marine Holdings3 | | | 20,309 | | | | 280,061 | |
| SEI Investments1 | | | 13,800 | | | | 903,624 | |
| Tennant Company1 | | | 11,600 | | | | 903,872 | |
| †Upland Software3 | | | 20,600 | | | | 735,626 | |
| Virtu Financial Cl. A1 | | | 124,300 | | | | 1,987,557 | |
| †Webster Financial | | | 19,700 | | | | 1,051,192 | |
| Total (Cost $28,430,498) | | | | | | | 38,005,285 | |
| | | | | | | | | |
| URUGUAY – 0.3% | | | | | | | | |
| Arcos Dorados Holdings Cl. A1 | | | 46,800 | | | | 379,080 | |
| Total (Cost $351,426) | | | | | | | 379,080 | |
| | | | | | | | | |
| TOTAL COMMON STOCKS | | | | | | | | |
| (Cost $112,503,565) | | | | | | | 142,169,525 | |
| PREFERRED STOCK – 0.6% | | | | | | |
| | | | | | | |
| GERMANY – 0.6% | | | | | | |
| FUCHS PETROLUB | | | 18,500 | | | | 916,384 | |
| (Cost $802,646) | | | | | | | 916,384 | |
| | | | | | | | | |
| REPURCHASE AGREEMENT – 5.8% | | | | | | | | |
Fixed Income Clearing Corporation, 0.25% dated 12/31/19, due 1/2/20, maturity value $8,353,116 (collateralized by obligations of various U.S. Government Agencies, 2.25% due 11/15/24, valued at $8,520,857) | | | | | | | | |
| (Cost $8,353,000) | | | | | | | 8,353,000 | |
| | | | | | | | | |
| TOTAL INVESTMENTS – 106.0% | | | | | | | | |
| (Cost $121,659,211) | | | | | | | 151,438,909 | |
| | | | | | | | | |
| LIABILITIES LESS CASH AND OTHER ASSETS – (6.0)% | | | | | | | (8,628,688 | ) |
| | | | | | | | | |
| NET ASSETS – 100.0% | | | | | | $ | 142,810,221 | |
GDR – Global Depository Receipt
| 1 | All or a portion of these securities were pledged as collateral in connection with the Fund's revolving credit agreement at December 31, 2019. Total market value of pledged securities at December 31, 2019, was $17,754,276. |
| 2 | At December 31, 2019, a portion of these securities were rehypothecated in connection with the Fund's revolving credit agreement in the aggregate amount of $4,752,843. |
| 4 | Securities for which market quotations are not readily available represent 0.0% of net assets. These securities have been valued at their fair value under procedures approved by the 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. |
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, 2019, market value.
TAX INFORMATION: The cost of total investments for Federal income tax purposes was $121,730,220. At December 31, 2019, net unrealized appreciation for all securities was $29,708,689 consisting of aggregate gross unrealized appreciation of $34,728,552 and aggregate gross unrealized depreciation of $5,019,863. The primary causes of the difference 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.
| 12 | 2019 Annual Report to Stockholders | THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS |
| Royce Global Value Trust | December 31, 2019 |
Statement of Assets and Liabilities
| ASSETS: | | |
| Investments at value | | $ | 143,085,909 | |
| Repurchase agreements (at cost and value) | | | 8,353,000 | |
| Cash | | | 495 | |
| Foreign currency (cost $2) | | | 2 | |
| Receivable for dividends and interest | | | 268,303 | |
| Prepaid expenses and other assets | | | 31,751 | |
| Total Assets | | | 151,739,460 | |
| LIABILITIES: | | | | |
| Revolving credit agreement | | | 8,000,000 | |
| Payable for investments purchased | | | 714,875 | |
| Payable for investment advisory fee | | | 118,224 | |
| Payable for directors’ fees | | | 6,387 | |
| Payable for interest expense | | | 19,726 | |
| Accrued expenses | | | 70,027 | |
| Total Liabilities | | | 8,929,239 | |
| Net Assets | | $ | 142,810,221 | |
| ANALYSIS OF NET ASSETS: | | | | |
| Paid-in capital - $0.001 par value per share; 10,503,468 shares outstanding (150,000,000 shares authorized) | | $ | 118,349,286 | |
| Total distributable earnings (loss) | | | 24,460,935 | |
| Net Assets (net asset value per share - $13.60) | | $ | 142,810,221 | |
| Investments at identified cost | | $ | 113,306,211 | |
| THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS | 2019 Annual Report to Stockholders | 13 |
| Royce Global Value Trust | Year Ended December 31, 2019 |
Statement of Operations
| INVESTMENT INCOME: | | |
| INCOME: | | |
| Dividends | | $ | 2,682,323 | |
| Foreign withholding tax | | | (223,760 | ) |
| Interest | | | 19,875 | |
| Rehypothecation income | | | 7,391 | |
| Total income | | | 2,485,829 | |
| EXPENSES: | | | | |
| Investment advisory fees | | | 1,267,202 | |
| Interest expense | | | 265,899 | |
| Custody and transfer agent fees | | | 93,896 | |
| Stockholder reports | | | 78,926 | |
| Professional fees | | | 68,177 | |
| Administrative and office facilities | | | 66,454 | |
| Directors’ fees | | | 31,990 | |
| Other expenses | | | 28,976 | |
| Total expenses | | | 1,901,520 | |
| Compensating balance credits | | | (174 | ) |
| Net expenses | | | 1,901,346 | |
| Net investment income (loss) | | | 584,483 | |
| REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY: | | | | |
| NET REALIZED GAIN (LOSS): | | | | |
| Investments | | | 5,485,933 | |
| Foreign currency transactions | | | (55,074 | ) |
| NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION): | | | | |
| Investments | | | 27,918,834 | |
| Other assets and liabilities denominated in foreign currency | | | 4,536 | |
| Net realized and unrealized gain (loss) on investments and foreign currency | | | 33,354,229 | |
| NET INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS | | $ | 33,938,712 | |
| 14 | 2019 Annual Report to Stockholders | THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS |
Royce Global Value Trust
Statement of Changes in Net Assets
| | | YEAR ENDED 12/31/19 | | YEAR ENDED 12/31/18 |
| | | | | |
| INVESTMENT OPERATIONS: | | | | | | | | |
| Net investment income (loss) | | $ | 584,483 | | | $ | 386,440 | |
| Net realized gain (loss) on investments and foreign currency | | | 5,430,859 | | | | 4,457,193 | |
| Net change in unrealized appreciation (depreciation) on investments and foreign currency | | | 27,923,370 | | | | (25,870,375 | ) |
| Net increase (decrease) in net assets from investment operations | | | 33,938,712 | | | | (21,026,742 | ) |
| DISTRIBUTIONS: | | | | | | | | |
| Total distributable earnings | | | (628,921 | ) | | | (418,468 | ) |
| Total distributions | | | (628,921 | ) | | | (418,468 | ) |
| CAPITAL STOCK TRANSACTIONS: | | | | | | | | |
| Reinvestment of distributions | | | 246,799 | | | | 172,659 | |
| Total capital stock transactions | | | 246,799 | | | | 172,659 | |
| Net Increase (Decrease) In Net Assets | | | 33,556,590 | | | | (21,272,551 | ) |
| NET ASSETS: | | | | | | | | |
| Beginning of year | | | 109,253,631 | | | | 130,526,182 | |
| End of year | | $ | 142,810,221 | | | $ | 109,253,631 | |
| THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS | 2019 Annual Report to Stockholders | 15 |
| Royce Global Value Trust | Year Ended December 31, 2019 |
Statement of Cash Flows
| CASH FLOWS FROM OPERATING ACTIVITIES: | | |
| Net increase (decrease) in net assets from investment operations | | $ | 33,938,712 | |
| Adjustments to reconcile net increase (decrease) in net assets from investment operations to net cash provided by operating activities: | | | | |
| Purchases of long-term investments | | | (61,642,151 | ) |
| Proceeds from sales and maturities of long-term investments | | | 69,164,735 | |
| Net purchases, sales and maturities of short-term investments | | | (7,711,000 | ) |
| Net (increase) decrease in dividends and interest receivable and other assets | | | (4,394 | ) |
| Net increase (decrease) in interest expense payable, accrued expenses and other liabilities | | | 25,150 | |
| Net change in unrealized appreciation (depreciation) on investments | | | (27,918,834 | ) |
| Net realized gain (loss) on investments | | | (5,485,933 | ) |
| Net cash provided by operating activities | | | 366,285 | |
| CASH FLOWS FROM FINANCING ACTIVITIES: | | | | |
| Distributions | | | (628,921 | ) |
| Reinvestment of distributions | | | 246,799 | |
| Net cash used for financing activities | | | (382,122 | ) |
| INCREASE (DECREASE) IN CASH: | | | (15,837 | ) |
| Cash and foreign currency at beginning of year | | | 16,334 | |
| Cash and foreign currency at end of year | | $ | 497 | |
Supplemental disclosure of cash flow information:
For the year ended December 31, 2019, the Fund paid $249,504 in interest expense.
| 16 | 2019 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 period, and to assist stockholders in evaluating the Fund’s performance for the periods presented.
| | | YEARS ENDED |
| | | | 12/31/19 | | | | 12/31/18 | | | | 12/31/17 | | | | 12/31/16 | | | | 12/31/15 | |
| Net Asset Value, Beginning of Period | | $ | 10.42 | | | $ | 12.48 | | | $ | 9.62 | | | $ | 8.81 | | | $ | 9.25 | |
| INVESTMENT OPERATIONS: | | | | | | | | | | | | | | | | | | | | |
| Net investment income (loss) | | | 0.06 | | | | 0.04 | | | | 0.02 | | | | 0.06 | | | | 0.10 | |
| Net realized and unrealized gain (loss) on investments and foreign currency | | | 3.18 | | | | (2.06 | ) | | | 2.96 | | | | 0.90 | | | | (0.43 | ) |
| Net increase (decrease) in net assets from investment operations | | | 3.24 | | | | (2.02 | ) | | | 2.98 | | | | 0.96 | | | | (0.33 | ) |
| DISTRIBUTIONS: | | | | | | | | | | | | | | | | | | | | |
| Net investment income | | | (0.06 | ) | | | (0.04 | ) | | | (0.11 | ) | | | (0.14 | ) | | | (0.10 | ) |
| Net realized gain on investments and foreign currency | | | – | | | | – | | | | – | | | | – | | | | – | |
| Total distributions | | | (0.06 | ) | | | (0.04 | ) | | | (0.11 | ) | | | (0.14 | ) | | | (0.10 | ) |
| CAPITAL STOCK TRANSACTIONS: | | | | | | | | | | | | | | | | | | | | |
| Effect of reinvestment of distributions by Common Stockholders | | | (0.00 | ) | | | (0.00 | ) | | | (0.01 | ) | | | (0.01 | ) | | | (0.01 | ) |
| Total capital stock transactions | | | (0.00 | ) | | | (0.00 | ) | | | (0.01 | ) | | | (0.01 | ) | | | (0.01 | ) |
| Net Asset Value, End of Period | | $ | 13.60 | | | $ | 10.42 | | | $ | 12.48 | | | $ | 9.62 | | | $ | 8.81 | |
| Market Value, End of Period | | $ | 11.69 | | | $ | 8.88 | | | $ | 10.81 | | | $ | 8.04 | | | $ | 7.45 | |
| TOTAL RETURN:1 | | | | | | | | | | | | | | | | | | | | |
| Net Asset Value | | | 31.20 | % | | | (16.11 | )% | | | 31.07 | % | | | 11.12 | % | | | (3.44 | )% |
| Market Value | | | 32.33 | % | | | (17.50 | )% | | | 35.96 | % | | | 9.77 | % | | | (6.06 | )% |
| RATIOS BASED ON AVERAGE NET ASSETS: | | | | | | | | | | | | | | | | | | | | |
| Investment advisory fee expense | | | 1.00 | % | | | 1.25 | % | | | 1.25 | % | | | 1.25 | % | | | 1.25 | % |
| Other operating expenses | | | 0.50 | % | | | 0.49 | % | | | 0.42 | % | | | 0.46 | % | | | 0.43 | % |
| Total expenses (net) | | | 1.50 | % | | | 1.74 | % | | | 1.67 | % | | | 1.71 | % | | | 1.68 | % |
| Expenses excluding interest expense | | | 1.29 | % | | | 1.53 | % | | | 1.52 | % | | | 1.57 | % | | | 1.58 | % |
| Expenses prior to balance credits | | | 1.50 | % | | | 1.74 | % | | | 1.67 | % | | | 1.71 | % | | | 1.68 | % |
| Net investment income (loss) | | | 0.46 | % | | | 0.30 | % | | | 0.21 | % | | | 0.69 | % | | | 1.03 | % |
| SUPPLEMENTAL DATA: | | | | | | | | | | | | | | | | | | | | |
| Net Assets, End of Period (in thousands) | | $ | 142,810 | | | $ | 109,254 | | | $ | 130,526 | | | $ | 100,228 | | | $ | 91,174 | |
| Portfolio Turnover Rate | | | 48 | % | | | 57 | % | | | 34 | % | | | 59 | % | | | 65 | % |
| REVOLVING CREDIT AGREEMENT: | | | | | | | | | | | | | | | | | | | | |
| Asset coverage | | | 1885 | % | | | 1466 | % | | | 1732 | % | | | 1353 | % | | | 1240 | % |
| Asset coverage per $1,000 | | | 18,851 | | | | 14,657 | | | | 17,316 | | | | 13,528 | | | | 12,397 | |
| 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, sale and dividend reinvestment dates instead of market value. |
| THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS | 2019 Annual Report to Stockholders | 17 |
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.”
Royce & Associates, LP, the Fund’s investment adviser, primarily conducts business using the name Royce Investment Partners (“Royce”).
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, 2019. 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 | $142,169,525 | $ – | $ 0 | $142,169,525 |
| Preferred Stocks | 916,384 | – | – | 916,384 |
| Repurchase Agreement | – | 8,353,000 | – | 8,353,000 |
Level 3 Reconciliation:
| | BALANCE AS OF 12/31/18 | PURCHASES | SALES | REALIZED GAIN (LOSS) | UNREALIZED GAIN (LOSS)1 | BALANCE AS OF 12/31/19 |
| Common Stocks | $ 42,261 | $ – | $ – | $ – | $ (42,261) | $ 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. |
18 | 2019 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, 2019 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, other than investments in securities at the end of the reporting period, as a result of changes in foreign currency exchange rates.
The Fund does not isolate that portion of the results of operations resulting from fluctuations in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.
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.
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 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 21,442 and 20,315 shares of Common Stock as reinvestment of distributions for the years ended December 31, 2019 and December 31, 2018, respectively.
2019 Annual Report to Stockholders | 19
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 179-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, 2019, the Fund has outstanding borrowings of $8,000,000. During the year ended December 31, 2019, the Fund borrowed an average daily balance of $8,000,000 at a weighted average borrowing cost of 3.28%. The maximum amount outstanding during the year ended December 31, 2019, was $8,000,000. As of December 31, 2019, the aggregate value of rehypothecated securities was $4,752,843. During the year ended December 31, 2019, the Fund earned $7,391 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 1.00% of the Fund’s average daily net assets. For the year ended December 31, 2019, the Fund expensed Royce investment advisory fees totaling $1,267,202.
Purchases and Sales of Investment Securities:
For the year ended December 31, 2019, the costs of purchases and proceeds from sales of investment securities, other than short-term securities, amounted to $62,070,572 and $67,386,736, 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. The Fund’s Chief Compliance Officer reviews such transactions each quarter for compliance with the requirements and restrictions set forth by Rule 17a-7, and reports the results of her review to the Board of Directors. Cross trades for the year ended December 31, 2019, were as follows:
| COSTS OF PURCHASES | PROCEEDS FROM SALES | REALIZED GAIN (LOSS) |
| $1,082,315 | $699,687 | $55,743 |
20 | 2019 Annual Report to Stockholders
Royce Global Value Trust
Notes to Financial Statements (continued)
Tax Information:
Distributions during the years ended December 31, 2019 and 2018, were characterized as follows for tax purposes:
| ORDINARY INCOME | LONG-TERM CAPITAL GAINS | RETURN OF CAPITAL |
| 2019 | 2018 | 2019 | 2018 | 2019 | 2018 |
| $580,547 | $418,468 | $ – | $ – | $48,374 | $ – |
The tax basis components of distributable earnings at December 31, 2019, were as follows:
| UNDISTRIBUTED ORDINARY INCOME | UNDISTRIBUTED LONG-TERM CAPITAL GAINS OR (CAPITAL LOSS CARRYFORWARD) | NET UNREALIZED APPRECIATION (DEPRECIATION)1 | QUALIFIED LATE YEAR ORDINARY AND POST-OCTOBER LOSS DEFERRALS2 | TOTAL DISTRIBUTABLE EARNINGS | CAPITAL LOSS CARRYFORWARD UTILIZED |
| $ - | $(5,152,012) | $29,707,603 | $(94,656) | $24,460,935 | $(6,161,127) |
| 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, 2019, the Fund recorded the following permanent reclassifications, which relate primarily to non-deductible excise taxes paid and return of capital distributions.
| TOTAL DISTRIBUTABLE EARNINGS (LOSS) | PAID-IN CAPITAL |
| $50,917 | $(50,917) |
Management has analyzed the Fund’s tax positions taken on federal income tax returns for all open tax years (2016-2019) and has concluded that as of December 31, 2019, no provision for income tax is required in the Fund’s financial statements.
Subsequent Events:
On February 18, 2020, Franklin Resources, Inc., a global investment management organization operating as Franklin Templeton, announced that it had entered into a definitive agreement to acquire Legg Mason, Inc., the parent company of Royce. This transaction is subject to approval by Legg Mason’s shareholders and is expected to close no later than the third quarter of 2020. Royce will continue to operate as an independent investment organization with its own brand. There are no changes planned to the management of the organization or investment teams at Royce as a result of this transaction. Stockholders of Royce Global Value Trust are expected to be asked to approve a new investment advisory agreement with Royce due to the change of control resulting from the transaction.
2019 Annual Report to Stockholders | 21
Report of Independent Registered Public Accounting Firm
To the Board of Directors and 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, 2019, the related statements of operations and cash flows for the year ended December 31, 2019, the statement of changes in net assets for each of the two years in the period ended December 31, 2019, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2019 (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, 2019, 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, 2019 and the financial highlights for each of the five years in the period ended December 31, 2019 in conformity with accounting principles generally accepted in the United States of America.
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, 2019 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
New York, New York
February 21, 2020
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 been able to determine the specific year we began serving as auditor.
22 | 2019 Annual Report to Stockholders
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2019 Annual Report to Stockholders | 23
MANAGERS’ DISCUSSION (UNAUDITED)
Royce Micro-Cap Trust (RMT)
Chuck Royce
Brendan Hartmann, Chris Flynn,
Jim Stoeffel
FUND PERFORMANCE
Royce Micro-Cap Trust (“RMT”) advanced 22.4% on an NAV (net asset value) basis and 24.8% based on market price compared to respective gains of 22.4% and 25.5% for RMT’s unleveraged benchmarks, the Russell Microcap and Russell 2000 Indexes, for the same period.The Fund also outpaced the Russell Microcap on an NAV and market price basis for the three- and 15-year periods ended 12/31/19 while beating the micro-cap index on a market price basis for the 10-year period as well.
WHAT WORKED... AND WHAT DIDN’T
Ten of RMT’s 11 equity sectors finished 2019 in the black, with its two largest—Information Technology and Industrials—making the biggest positive impact, followed by Health Care. Communication Services was the only sector that detracted from 2019 results while the smallest contributions came from Utilities and Real Estate. At the industry level, semiconductors & semiconductor equipment (Information Technology) had an outsized positive effect despite not having a single holding among the Fund’s top five contributors. Machinery (Industrials) and metals & mining (Materials) also made notable positive contributions while the most significant detractors at the industry level were media and interactive media & services (both in Communication Services), followed by textiles, apparel & luxury goods (Consumer Discretionary).
The Fund’s top contributor was CIRCOR International, a machinery company that makes precision valves. Its shares rose sharply after it received a takeover offer from a larger industrial company in May, which was rescinded in July. The company then reported favorable results in August, driven by new and existing platform growth across both its defense and commercial business sectors as well as margin expansion from volume, price, and low cost manufacturing initiatives. Zealand Pharma, which focuses on developing peptide-based therapeutics for metabolic and gastrointestinal diseases, was another notable contributor. The company’s two latest stage products targeting short bowel system and hypoglycemia in diabetics had positive results during the year. Zealand Pharma also completed its first ever acquisition, buying Encycle Therapeutics in October. National Research provides survey-based performance measurement, analysis, and tracking services to the healthcare industry. High demand helped to increase sales, keep earnings steady, and allow for an optimistic outlook for 2020.
The biggest detractor at the position level was comScore, which provides digital marketing intelligence that helps its customers make business decisions and implement digital strategies. The firm faced accounting issues that led to two shakeups in upper management before the firm announced in August that it was exploring strategic alternatives to maximize shareholder value, including the potential sale of the company. The possibility of a profitable acquisition informed our decision to hold our shares at year-end. Red Lion Hotels was hurt in its efforts to transition from company-owned hotels to a franchise model. Selling its company-owned units took longer than anticipated, and Red Lion experienced greater-than-expected attrition in its newly acquired franchisees—factors that led us to begin reducing our position in November. Shares of biotech company Zafgen have yet to recover from a November 2018 FDA decision to put its major drug on a clinical hold amid safety concerns.
Relative to the Russell 2000, both stock selection and sector allocation hampered performance, with the first having the greater negative impact. Ineffective stock picks in Communication Services and Consumer Discretionary hurt most, while the Fund’s cash position also hindered results. At the industry level, poor stock picks in the media group (Communication Services) detracted most by a wide margin, followed by capital markets (Financials)—where stock selection had the biggest negative impact—and health care equipment & supplies (Health Care), where both our underweight and stock picks detracted. Conversely, savvy stock selection drove relative outperformance in the Energy, Information Technology, and Materials sectors. Successful stock picking in the oil, gas & consumable fuels group (Energy) and our greater exposure to semiconductors & semiconductor equipment (Information Technology) helped most versus the Russell 2000 at the industry level, as did better stock picking in metals & mining (Materials).
| | | | | | | |
| | Top Contributors to Performance | | Top Detractors from Performance | |
| | For 2019 (%)1 | | | For 2019 (%)2 | | |
| | CIRCOR International | 1.10 | | comScore | -0.72 | |
| | Zealand Pharma | 1.07 | | Red Lion Hotels | -0.43 | |
| | National Research | 0.60 | | Zafgen | -0.36 | |
| | Impala Platinum Holdings | 0.60 | | Infrastructure and Energy Alternatives | -0.36 | |
| | Solium Capital | 0.55 | | YGM Trading | -0.25 | |
| | 1 Includes dividends | | | 2 Net of dividends | | |
| | | | | | | |
CURRENT POSITIONING AND OUTLOOK
The backdrop looks quite favorable to us for solid to strong micro-cap performance in the months ahead. We have previously cited four favorable factors in the current market environment—low inflation, modest valuations, moderate growth, and ample access to capital. Each of these remains present and suggests that micro-cap returns can go higher. We see a global economy that’s showing signs of renewed life, an ISM Manufacturing Index that’s been incrementally rising (despite December’s setback), and, most important, valuations that range from reasonable to attractive among the many cyclical areas that we typically like best. Our focus has been on those areas that either didn’t participate in 2019’s upswing or trailed significantly, including several cyclical stocks at the larger end of our selection universe, an area that lagged meaningfully prior to 2019’s fourth quarter.
24 | 2019 Annual Report to Stockholders
| PERFORMANCE AND PORTFOLIO REVIEW (UNAUDITED) | SYMBOLS MARKET PRICERMT NAVXOTCX |
Performance
Average Annual Total Return (%) Through 12/31/19
| | | | | | | | | | SINCE INCEPTION |
| | JUL-DEC 20191 | 1-YR | 3-YR | 5-YR | 10-YR | 15-YR | 20-YR | 25-YR | (12/14/93) |
| RMT (NAV) | 7.47 | 22.44 | 8.39 | 6.52 | 11.06 | 7.60 | 9.84 | 10.76 | 10.53 |
1Not Annualized
Market Price Performance History Since Inception (12/14/93)
Cumulative Performance of Investment1
| | 1-YR | 5-YR | 10-YR | 15-YR | 20-YR | SINCE INCEPTION (12/14/93) |
| RMT | 24.8% | 36.8% | 205.9% | 150.5% | 608.7% | 1068.3% |
| 1 | Reflects the cumulative performance experience of a continuous common stockholder who purchased one share at inception ($7.50 IPO), reinvested all distributions and fully participated in the primary subscription of the Fund’s 1994 rights offering. |
| 2 | Reflects the actual month-end market price movement of one share as it has traded on NYSE and, prior to 12/1/03, on the Nasdaq. |
Morningstar Style Map™As of 12/31/19
TheMorningstar Style Mapis theMorningstar Style Box™with the center 75% of fund holdings plotted as theMorningstar 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
| Mesa Laboratories | 3.2 |
| PAR Technology | 1.8 |
| Sandstorm Gold | 1.5 |
| FARO Technologies | 1.4 |
| Zealand Pharma | 1.4 |
| Major Drilling Group International | 1.3 |
| Kadant | 1.3 |
| Seneca Foods | 1.2 |
| Onto Innovation | 1.2 |
| Atrion Corporation | 1.1 |
Portfolio Sector Breakdown
% of Net Assets
| Industrials | 20.9 |
| Information Technology | 19.3 |
| Health Care | 14.5 |
| Financials | 11.8 |
| Consumer Discretionary | 11.5 |
| Energy | 8.4 |
| Materials | 6.5 |
| Communication Services | 2.9 |
| Real Estate | 2.4 |
| Consumer Staples | 2.1 |
| Utilities | 0.7 |
| Outstanding Line of Credit, Net of Cash and Cash Equivalents | -1.0 |
Calendar Year Total Returns (%)
| YEAR | RMT |
| 2019 | 22.4 |
| 2018 | -11.6 |
| 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 |
Portfolio Diagnostics
| Fund Net Assets | $405 million |
| Number of Holdings | 312 |
| Turnover Rate | 15% |
| Net Asset Value | $9.63 |
| Market Price | $8.54 |
| Net Leverage1 | 1.0% |
| Average Market Capitalization2 | $501 million |
| Weighted Average P/B Ratio3 | 2.0x |
| Active Share4 | 96% |
| U.S. Investments (% of Net Assets) | 78.4% |
| Non-U.S. Investments (% of Net Assets) | 22.6% |
| 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.royceinvest.com. Certain immaterial adjustments were made to the net assets of Royce Micro-Cap Trust at 12/31/14 and 6/30/19 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 2019.
2019 Annual Report to Stockholders | 25
Royce Micro-Cap Trust
Schedule of Investments
Common Stocks – 101.0%
| | | SHARES | | VALUE |
| | | | | |
| COMMUNICATION SERVICES – 2.9% | | | | | | | | |
| DIVERSIFIED TELECOMMUNICATION SERVICES - 0.1% | | | | | | | | |
| ORBCOMM1 | | | 65,000 | | | $ | 273,650 | |
| ENTERTAINMENT - 0.8% | | | | | | | | |
| Chicken Soup For The Soul Entertainment Cl. A1 | | | 314,500 | | | | 2,516,000 | |
| Gaia Cl. A1,2,3 | | | 100,000 | | | | 799,000 | |
| | | | | | | | 3,315,000 | |
| INTERACTIVE MEDIA & SERVICES - 1.5% | | | | | | | | |
| Care.com1,2,3 | | | 186,787 | | | | 2,807,409 | |
| QuinStreet1 | | | 220,700 | | | | 3,378,917 | |
| | | | | | | | 6,186,326 | |
| MEDIA - 0.5% | | | | | | | | |
| comScore1 | | | 297,195 | | | | 1,468,143 | |
| Gannett Company | | | 66,200 | | | | 422,356 | |
| | | | | | | | 1,890,499 | |
| Total (Cost $13,106,828) | | | | | | | 11,665,475 | |
| | | | | | | | | |
| CONSUMER DISCRETIONARY – 11.5% | | | | | | | | |
| AUTO COMPONENTS - 1.9% | | | | | | | | |
| Fox Factory Holding1 | | | 5,300 | | | | 368,721 | |
| Motorcar Parts of America1 | | | 54,800 | | | | 1,207,244 | |
| Sebang Global Battery | | | 50,500 | | | | 1,628,821 | |
| Standard Motor Products | | | 50,860 | | | | 2,706,769 | |
| Stoneridge1,2,3 | | | 56,100 | | | | 1,644,852 | |
| | | | | | | | 7,556,407 | |
| DISTRIBUTORS - 0.2% | | | | | | | | |
| Weyco Group2 | | | 36,300 | | | | 960,135 | |
| DIVERSIFIED CONSUMER SERVICES - 2.0% | | | | | | | | |
| Aspen Group1 | | | 141,520 | | | | 1,132,160 | |
| Collectors Universe2,3 | | | 98,900 | | | | 2,279,645 | |
| †Park Lawn | | | 50,000 | | | | 1,127,796 | |
| Universal Technical Institute1 | | | 445,000 | | | | 3,430,950 | |
| | | | | | | | 7,970,551 | |
| HOTELS, RESTAURANTS & LEISURE - 2.0% | | | | | | | | |
| Century Casinos1 | | | 222,500 | | | | 1,762,200 | |
| Inspired Entertainment1 | | | 50,000 | | | | 337,500 | |
| Lindblad Expeditions Holdings1 | | | 280,968 | | | | 4,593,827 | |
| Red Lion Hotels1 | | | 324,671 | | | | 1,211,023 | |
| | | | | | | | 7,904,550 | |
| HOUSEHOLD DURABLES - 1.2% | | | | | | | | |
| Cavco Industries1,2,3 | | | 8,600 | | | | 1,680,268 | |
| Flexsteel Industries2 | | | 16,100 | | | | 320,712 | |
| †Legacy Housing1 | | | 100,000 | | | | 1,664,000 | |
| Lifetime Brands2,3 | | | 119,294 | | | | 829,093 | |
| Universal Electronics1 | | | 6,100 | | | | 318,786 | |
| | | | | | | | 4,812,859 | |
| INTERNET & DIRECT MARKETING RETAIL - 1.4% | | | | | | | | |
| Gue Liquidation Companies1,4 | | | 67,200 | | | | 0 | |
| Real Matters1 | | | 255,000 | | | | 2,419,314 | |
| Rubicon Project (The)1 | | | 240,000 | | | | 1,958,400 | |
| Stamps.com1 | | | 11,700 | | | | 977,184 | |
| Yatra Online1 | | | 105,000 | | | | 330,750 | |
| | | | | | | | 5,685,648 | |
| LEISURE PRODUCTS - 0.6% | | | | | | | | |
| Clarus Corporation | | | 174,926 | | | | 2,371,997 | |
| MasterCraft Boat Holdings1 | | | 10,200 | | | | 160,650 | |
| | | | | | | | 2,532,647 | |
| SPECIALTY RETAIL - 1.4% | | | | | | | | |
| AutoCanada | | | 440,000 | | | | 4,198,221 | |
| Barnes & Noble Education1 | | | 80,000 | | | | 341,600 | |
| Destination XL Group1 | | | 50,000 | | | | 64,000 | |
| Lazydays Holdings1 | | | 30,000 | | | | 129,300 | |
| MarineMax1 | | | 8,800 | | | | 146,872 | |
| Shoe Carnival2 | | | 17,016 | | | | 634,357 | |
| Stage Stores1,2,3 | | | 15,000 | | | | 121,800 | |
| | | | | | | | 5,636,150 | |
| TEXTILES, APPAREL & LUXURY GOODS - 0.8% | | | | | | | | |
| Crown Crafts | | | 112,159 | | | | 689,778 | |
| J.G. Boswell Company5 | | | 2,490 | | | | 1,494,000 | |
| YGM Trading | | | 2,564,600 | | | | 1,250,655 | |
| | | | | | | | 3,434,433 | |
| Total (Cost $45,678,017) | | | | | | | 46,493,380 | |
| | | | | | | | | |
| CONSUMER STAPLES – 2.1% | | | | | | | | |
| BEVERAGES - 0.2% | | | | | | | | |
| Crimson Wine Group1,5 | | | 58,124 | | | | 430,117 | |
| †Eastside Distilling1 | | | 23,000 | | | | 67,850 | |
| Primo Water1 | | | 40,400 | | | | 453,490 | |
| | | | | | | | 951,457 | |
| FOOD PRODUCTS - 1.8% | | | | | | | | |
| Farmer Bros.1,2,3 | | | 31,300 | | | | 471,378 | |
| John B Sanfilippo & Son2 | | | 7,900 | | | | 721,112 | |
| Landec Corporation1,2,3 | | | 75,610 | | | | 855,149 | |
| RiceBran Technologies1 | | | 50,000 | | | | 73,500 | |
| Seneca Foods Cl. A1,2 | | | 81,087 | | | | 3,307,539 | |
| Seneca Foods Cl. B1 | | | 40,400 | | | | 1,656,400 | |
| SunOpta1 | | | 50,000 | | | | 125,000 | |
| | | | | | | | 7,210,078 | |
| HOUSEHOLD PRODUCTS - 0.1% | | | | | | | | |
| Central Garden & Pet1 | | | 12,000 | | | | 372,840 | |
| Total (Cost $5,390,899) | | | | | | | 8,534,375 | |
| | | | | | | | | |
| ENERGY – 8.4% | | | | | | | | |
| ENERGY EQUIPMENT & SERVICES - 4.6% | | | | | | | | |
| Aspen Aerogels1 | | | 101,785 | | | | 789,851 | |
| CARBO Ceramics1,2,3,5 | | | 169,038 | | | | 39,741 | |
| CES Energy Solutions | | | 25,000 | | | | 44,858 | |
| Computer Modelling Group | | | 639,775 | | | | 4,049,864 | |
| Dawson Geophysical1 | | | 77,336 | | | | 185,606 | |
| Era Group1,2,3 | | | 383,700 | | | | 3,902,229 | |
| Geospace Technologies1,2 | | | 9,500 | | | | 159,315 | |
| Hornbeck Offshore Services1,2,5 | | | 460,000 | | | | 48,346 | |
| Independence Contract Drilling1 | | | 100,000 | | | | 99,680 | |
| Matrix Service1,2,3 | | | 28,700 | | | | 656,656 | |
| Nabors Industries | | | 34,000 | | | | 97,920 | |
| Newpark Resources1 | | | 68,200 | | | | 427,614 | |
| North American Construction Group | | | 50,000 | | | | 606,000 | |
| Pason Systems | | | 221,000 | | | | 2,231,189 | |
| Profire Energy1 | | | 175,000 | | | | 253,750 | |
| SEACOR Marine Holdings1,2 | | | 216,957 | | | | 2,991,837 | |
| TerraVest Industries | | | 209,000 | | | | 2,092,334 | |
| | | | | | | | 18,676,790 | |
| OIL, GAS & CONSUMABLE FUELS - 3.8% | | | | | | | | |
| Ardmore Shipping1 | | | 161,300 | | | | 1,459,765 | |
| Dorchester Minerals L.P. | | | 153,963 | | | | 3,003,818 | |
| Dorian LPG1 | | | 163,138 | | | | 2,525,376 | |
| GeoPark | | | 86,971 | | | | 1,922,059 | |
| Navigator Holdings1 | | | 175,000 | | | | 2,357,250 | |
| 26 | 2019 Annual Report to Stockholders | THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS |
December 31, 2019
Schedule of Investments (continued)
| | | SHARES | | VALUE |
| | | | | |
| ENERGY (continued) | | | | | | | | |
| OIL, GAS & CONSUMABLE FUELS (continued) | | | | | | | | |
| Ring Energy1 | | | 50,000 | | | $ | 132,000 | |
| Sabine Royalty Trust2 | | | 59,548 | | | | 2,399,784 | |
| StealthGas1 | | | 229,664 | | | | 787,748 | |
| Teekay Offshore Partners L.P.1,2,3 | | | 405,877 | | | | 625,051 | |
| | | | | | | | 15,212,851 | |
| Total (Cost $36,021,277) | | | | | | | 33,889,641 | |
| | | | | | | | | |
| FINANCIALS – 11.8% | | | | | | | | |
| BANKS - 1.5% | | | | | | | | |
| Bryn Mawr Bank | | | 25,000 | | | | 1,031,000 | |
| Caribbean Investment Holdings1 | | | 735,635 | | | | 326,431 | |
| Chemung Financial | | | 31,000 | | | | 1,317,500 | |
| Fauquier Bankshares2 | | | 133,200 | | | | 2,829,168 | |
| Live Oak Bancshares2 | | | 30,900 | | | | 587,409 | |
| Midway Investments1,4 | | | 735,647 | | | | 0 | |
| | | | | | | | 6,091,508 | |
| CAPITAL MARKETS - 7.0% | | | | | | | | |
| ASA Gold and Precious Metals | | | 171,150 | | | | 2,332,775 | |
| Ashford1 | | | 10,000 | | | | 236,000 | |
| B. Riley Financial | | | 27,500 | | | | 692,450 | |
| Bolsa Mexicana de Valores | | | 1,068,000 | | | | 2,348,668 | |
| Canaccord Genuity Group | | | 203,300 | | | | 757,747 | |
| Donnelley Financial Solutions1 | | | 50,000 | | | | 523,500 | |
| Fiera Capital Cl. A | | | 78,000 | | | | 703,385 | |
| GAIN Capital Holdings2 | | | 25,000 | | | | 98,750 | |
| GMP Capital | | | 292,800 | | | | 435,181 | |
| Great Elm Capital Group1 | | | 566,700 | | | | 1,892,778 | |
| INTL FCStone1,2 | | | 69,327 | | | | 3,385,237 | |
| JZ Capital Partners1 | | | 50,000 | | | | 203,988 | |
| Manning & Napier Cl. A | | | 136,600 | | | | 237,684 | |
| MVC Capital | | | 219,900 | | | | 2,016,483 | |
| †Portman Ridge Finance | | | 22,039 | | | | 46,723 | |
| Pzena Investment Management Cl. A | | | 6,100 | | | | 52,582 | |
| Queen City Investments5 | | | 203 | | | | 203,000 | |
| Silvercrest Asset Management Group Cl. A | | | 203,300 | | | | 2,557,514 | |
| Sprott | | | 1,764,533 | | | | 4,049,369 | |
| U.S. Global Investors Cl. A2 | | | 439,454 | | | | 632,814 | |
| Urbana Corporation | | | 237,600 | | | | 525,133 | |
| Value Line2,3 | | | 74,574 | | | | 2,155,934 | |
| Vostok New Ventures SDR | | | 100,000 | | | | 671,553 | |
| Warsaw Stock Exchange | | | 52,900 | | | | 547,977 | |
| Westaim Corporation1 | | | 500,000 | | | | 1,020,369 | |
| | | | | | | | 28,327,594 | |
| CONSUMER FINANCE - 0.4% | | | | | | | | |
| Currency Exchange International1 | | | 7,000 | | | | 97,031 | |
| EZCORP Cl. A1,2,3 | | | 201,000 | | | | 1,370,820 | |
| | | | | | | | 1,467,851 | |
| DIVERSIFIED FINANCIAL SERVICES - 0.6% | | | | | | | | |
| †ECN Capital | | | 556,000 | | | | 2,050,934 | |
| Waterloo Investment Holdings1,4 | | | 806,000 | | | | 241,800 | |
| | | | | | | | 2,292,734 | |
| INSURANCE - 1.3% | | | | | | | | |
| Hallmark Financial Services1,2 | | | 114,000 | | | | 2,002,980 | |
| Health Insurance Innovations Cl. A1,2,3 | | | 13,600 | | | | 262,344 | |
| Trupanion1,2,3 | | | 82,300 | | | | 3,082,958 | |
| | | | | | | | 5,348,282 | |
| INVESTMENT COMPANIES - 1.0% | | | | | | | | |
| GS Acquisition Holdings Cl. A1 | | | 200,000 | | | | 2,206,000 | |
| †Oaktree Acquisition (Units)1 | | | 200,000 | | | | 2,030,000 | |
| | | | | | | | 4,236,000 | |
| Total (Cost $47,710,009) | | | | | | | 47,763,969 | |
| | | | | | | | | |
| HEALTH CARE – 14.5% | | | | | | | | |
| BIOTECHNOLOGY - 2.6% | | | | | | | | |
| Abeona Therapeutics1,2,3 | | | 142,221 | | | | 465,063 | |
| AMAG Pharmaceuticals1 | | | 5,000 | | | | 60,850 | |
| Arcturus Therapeutics Holdings1 | | | 106,436 | | | | 1,156,959 | |
| †BioSpecifics Technologies1 | | | 8,900 | | | | 506,766 | |
| CareDx1 | | | 16,700 | | | | 360,219 | |
| Idera Pharmaceuticals1 | | | 58,061 | | | | 105,671 | |
| Neoleukin Therapeutics1,2 | | | 145,397 | | | | 1,791,291 | |
| Theratechnologies1 | | | 10,000 | | | | 32,806 | |
| Zafgen1,2,3 | | | 336,781 | | | | 373,827 | |
| Zealand Pharma1 | | | 153,015 | | | | 5,406,866 | |
| Zealand Pharma ADR1 | | | 10,000 | | | | 332,000 | |
| | | | | | | | 10,592,318 | |
| HEALTH CARE EQUIPMENT & SUPPLIES - 7.1% | | | | | | | | |
| †Apyx Medical1 | | | 11,700 | | | | 98,982 | |
| AtriCure1,2,3 | | | 15,000 | | | | 487,650 | |
| Atrion Corporation2 | | | 6,169 | | | | 4,636,003 | |
| Chembio Diagnostics1 | | | 197,400 | | | | 900,144 | |
| CryoLife1 | | | 4,600 | | | | 124,614 | |
| GenMark Diagnostics1 | | | 31,100 | | | | 149,591 | |
| LeMaitre Vascular | | | 5,000 | | | | 179,750 | |
| Mesa Laboratories2 | | | 52,000 | | | | 12,968,800 | |
| OraSure Technologies1,2,3 | | | 50,000 | | | | 401,500 | |
| OrthoPediatrics Corporation1 | | | 6,500 | | | | 305,435 | |
| †Oxford Immunotec Global1 | | | 5,200 | | | | 86,320 | |
| †Semler Scientific1,5 | | | 22,400 | | | | 1,075,200 | |
| STRATEC | | | 14,000 | | | | 957,932 | |
| Surmodics1,2 | | | 73,800 | | | | 3,057,534 | |
| TearLab Corporation1,5 | | | 8,500 | | | | 332 | |
| Utah Medical Products | | | 33,000 | | | | 3,560,700 | |
| | | | | | | | 28,990,487 | |
| HEALTH CARE PROVIDERS & SERVICES - 2.1% | | | | | | | | |
| AAC Holdings1,5 | | | 89,400 | | | | 48,267 | |
| BioTelemetry1 | | | 17,279 | | | | 800,017 | |
| CRH Medical1 | | | 475,000 | | | | 1,646,067 | |
| Cross Country Healthcare1 | | | 130,800 | | | | 1,519,896 | |
| National Research2 | | | 51,868 | | | | 3,420,176 | |
| PetIQ Cl. A1,2,3 | | | 25,000 | | | | 626,250 | |
| Psychemedics Corporation2 | | | 37,500 | | | | 343,125 | |
| | | | | | | | 8,403,798 | |
| HEALTH CARE TECHNOLOGY - 1.2% | | | | | | | | |
| Simulations Plus2 | | | 80,670 | | | | 2,345,077 | |
| Tabula Rasa HealthCare1,2,3 | | | 38,400 | | | | 1,869,312 | |
| Vocera Communications1 | | | 33,100 | | | | 687,156 | |
| | | | | | | | 4,901,545 | |
| LIFE SCIENCES TOOLS & SERVICES - 0.8% | | | | | | | | |
| †Harvard Bioscience1 | | | 28,300 | | | | 86,315 | |
| Quanterix Corporation1 | | | 129,200 | | | | 3,052,996 | |
| | | | | | | | 3,139,311 | |
| PHARMACEUTICALS - 0.7% | | | | | | | | |
| Agile Therapeutics1,2,3 | | | 80,000 | | | | 200,000 | |
| Correvio Pharma1 | | | 101,100 | | | | 41,451 | |
| Knight Therapeutics1 | | | 187,000 | | | | 1,091,571 | |
| THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS | 2019 Annual Report to Stockholders | 27 |
Royce Micro-Cap Trust
| Schedule of Investments (continued) | | | | | | | | |
| | | | | | | | | |
| | | SHARES | | | VALUE | |
| | | | | | | | | |
| HEALTH CARE (continued) | | | | | | | | |
| PHARMACEUTICALS (continued) | | | | | | | | |
| Theravance Biopharma1,2,3 | | | 59,009 | | | $ | 1,527,743 | |
| | | | | | | | 2,860,765 | |
| Total (Cost $36,547,192) | | | | | | | 58,888,224 | |
| | | | | | | | | |
| INDUSTRIALS – 20.9% | | | | | | | | |
| AEROSPACE & DEFENSE - 1.6% | | | | | | | | |
| Astronics Corporation1 | | | 7,229 | | | | 202,051 | |
| CPI Aerostructures1 | | | 171,800 | | | | 1,156,214 | |
| Innovative Solutions and Support1 | | | 78,828 | | | | 460,356 | |
| SIFCO Industries1 | | | 45,800 | | | | 180,910 | |
| Virgin Galactic Holdings1,2 | | | 388,850 | | | | 4,491,217 | |
| | | | | | | | 6,490,748 | |
| BUILDING PRODUCTS - 1.3% | | | | | | | | |
| Burnham Holdings Cl. A5 | | | 117,000 | | | | 1,649,700 | |
| CSW Industrials | | | 20,000 | | | | 1,540,000 | |
| DIRTT Environmental Solutions1 | | | 96,000 | | | | 314,197 | |
| Insteel Industries2 | | | 44,200 | | | | 949,858 | |
| Patrick Industries | | | 17,250 | | | | 904,417 | |
| | | | | | | | 5,358,172 | |
| COMMERCIAL SERVICES & SUPPLIES - 2.0% | | | | | | | | |
| Acme United | | | 25,000 | | | | 594,750 | |
| Atento1 | | | 109,300 | | | | 314,784 | |
| Civeo Corporation1 | | | 150,000 | | | | 193,500 | |
| CompX International Cl. A | | | 500 | | | | 7,295 | |
| Heritage-Crystal Clean1,2,3 | | | 129,501 | | | | 4,062,446 | |
| Hudson Technologies1 | | | 50,000 | | | | 48,875 | |
| PICO Holdings1,2,3 | | | 121,200 | | | | 1,347,744 | |
| Team1,2,3 | | | 93,300 | | | | 1,490,001 | |
| | | | | | | | 8,059,395 | |
| CONSTRUCTION & ENGINEERING - 3.1% | | | | | | | | |
| Ameresco Cl. A1 | | | 231,400 | | | | 4,049,500 | |
| Construction Partners Cl. A1 | | | 88,200 | | | | 1,487,934 | |
| Granite Construction | | | 13,500 | | | | 373,545 | |
| IES Holdings1,2 | | | 141,800 | | | | 3,638,588 | |
| Infrastructure and Energy Alternatives1 | | | 275,100 | | | | 885,822 | |
| Northwest Pipe1,2,3 | | | 59,400 | | | | 1,978,614 | |
| | | | | | | | 12,414,003 | |
| ELECTRICAL EQUIPMENT - 1.1% | | | | | | | | |
| American Superconductor1 | | | 47,525 | | | | 373,071 | |
| Encore Wire2 | | | 3,307 | | | | 189,822 | |
| LSI Industries | | | 415,740 | | | | 2,515,227 | |
| Powell Industries2 | | | 21,400 | | | | 1,048,386 | |
| Power Solutions International1,2,5 | | | 21,100 | | | | 166,690 | |
| Revolution Lighting Technologies1,2,5 | | | 81,200 | | | | 4,060 | |
| | | | | | | | 4,297,256 | |
| INDUSTRIAL CONGLOMERATES - 0.7% | | | | | | | | |
| Raven Industries2 | | | 83,600 | | | | 2,880,856 | |
| MACHINERY - 6.2% | | | | | | | | |
| CIRCOR International1 | | | 70,200 | | | | 3,246,048 | |
| Exco Technologies | | | 72,900 | | | | 445,186 | |
| Graham Corporation2,3 | | | 93,150 | | | | 2,038,122 | |
| Helios Technologies2 | | | 50,000 | | | | 2,311,500 | |
| Hurco Companies2 | | | 36,866 | | | | 1,414,180 | |
| Kadant2 | | | 48,800 | | | | 5,140,592 | |
| Kornit Digital1 | | | 4,800 | | | | 164,304 | |
| L.B. Foster Company1,2 | | | 95,300 | | | | 1,846,914 | |
| Lindsay Corporation2,3 | | | 32,600 | | | | 3,129,274 | |
| Luxfer Holdings2 | | | 72,612 | | | | 1,344,048 | |
| Lydall1 | | | 31,700 | | | | 650,484 | |
| NN1 | | | 90,600 | | | | 838,050 | |
| Spartan Motors | | | 17,200 | | | | 310,976 | |
| Titan International | | | 212,200 | | | | 768,164 | |
| Twin Disc1 | | | 4,300 | | | | 47,386 | |
| Wabash National | | | 6,400 | | | | 94,016 | |
| Westport Fuel Systems1 | | | 491,100 | | | | 1,163,907 | |
| | | | | | | | 24,953,151 | |
| MARINE - 1.8% | | | | | | | | |
| Algoma Central | | | 40,000 | | | | 401,679 | |
| Clarkson | | | 109,900 | | | | 4,403,599 | |
| Eagle Bulk Shipping1 | | | 570,000 | | | | 2,622,000 | |
| | | | | | | | 7,427,278 | |
| PROFESSIONAL SERVICES - 0.8% | | | | | | | | |
| Acacia Research1,2 | | | 190,000 | | | | 505,400 | |
| Barrett Business Services | | | 2,000 | | | | 180,920 | |
| Franklin Covey1,2 | | | 40,100 | | | | 1,292,423 | |
| GP Strategies1 | | | 32,500 | | | | 429,975 | |
| InnerWorkings1 | | | 25,000 | | | | 137,750 | |
| Kforce2 | | | 2,800 | | | | 111,160 | |
| Resources Connection | | | 39,300 | | | | 641,769 | |
| | | | | | | | 3,299,397 | |
| ROAD & RAIL - 0.6% | | | | | | | | |
| Marten Transport | | | 2,500 | | | | 53,725 | |
| Patriot Transportation Holding1,2 | | | 55,764 | | | | 1,086,283 | |
| Universal Logistics Holdings2 | | | 75,200 | | | | 1,425,792 | |
| | | | | | | | 2,565,800 | |
| TRADING COMPANIES & DISTRIBUTORS - 1.7% | | | | | | | | |
| EVI Industries1,2,3 | | | 131,582 | | | | 3,557,977 | |
| Houston Wire & Cable1 | | | 331,418 | | | | 1,461,554 | |
| Lawson Products1 | | | 2,200 | | | | 114,620 | |
| †Transcat1 | | | 48,400 | | | | 1,542,024 | |
| | | | | | | | 6,676,175 | |
| Total (Cost $72,140,206) | | | | | | | 84,422,231 | |
| | | | | | | | | |
| INFORMATION TECHNOLOGY – 19.3% | | | | | | | | |
| COMMUNICATIONS EQUIPMENT - 0.9% | | | | | | | | |
| Clearfield1 | | | 85,200 | | | | 1,187,688 | |
| Digi International1 | | | 38,900 | | | | 689,308 | |
| †Ituran Location and Control | | | 50,000 | | | | 1,256,500 | |
| PCTEL | | | 34,100 | | | | 288,827 | |
| | | | | | | | 3,422,323 | |
| ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS - 6.1% | | | | | | | | |
| Bel Fuse Cl. A | | | 67,705 | | | | 1,083,280 | |
| Fabrinet1 | | | 2,200 | | | | 142,648 | |
| FARO Technologies1,2,3 | | | 114,600 | | | | 5,770,110 | |
| Firan Technology Group1 | | | 25,000 | | | | 78,357 | |
| Genasys1 | | | 75,100 | | | | 245,577 | |
| HollySys Automation Technologies | | | 51,900 | | | | 851,679 | |
| LightPath Technologies Cl. A1 | | | 100,000 | | | | 72,500 | |
| †Luna Innovations1 | | | 23,500 | | | | 171,315 | |
| nLIGHT1,2,3 | | | 227,800 | | | | 4,619,784 | |
| Novanta1 | | | 3,400 | | | | 300,696 | |
| PAR Technology1,2,3 | | | 233,224 | | | | 7,169,306 | |
| PC Connection2 | | | 33,416 | | | | 1,659,438 | |
| Perceptron1 | | | 19,000 | | | | 104,500 | |
| Richardson Electronics | | | 316,900 | | | | 1,784,147 | |
| †SMTC1 | | | 65,715 | | | | 222,774 | |
| 28 | 2019 Annual Report to Stockholders | THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS |
December 31, 2019
| Schedule of Investments (continued) | | | | | | |
| | | | | | | |
| | | SHARES | | | VALUE | |
| | | | | | | |
| INFORMATION TECHNOLOGY (continued) | | | | | | |
| ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS (continued) | | | | | | | | |
| Vishay Precision Group1 | | | 15,000 | | | $ | 510,000 | |
| | | | | | | | 24,786,111 | |
| IT SERVICES - 0.4% | | | | | | | | |
| Computer Task Group1 | | | 84,800 | | | | 439,264 | |
| Hackett Group (The)2 | | | 27,700 | | | | 447,078 | |
| USA Technologies1,2,5 | | | 90,500 | | | | 669,700 | |
| | | | | | | | 1,556,042 | |
| SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 7.7% | | | | | | | | |
| Adesto Technologies1 | | | 236,500 | | | | 2,010,250 | |
| Alpha & Omega Semiconductor1 | | | 17,900 | | | | 243,798 | |
| Amtech Systems1,2 | | | 92,184 | | | | 660,037 | |
| AXT1 | | | 100,000 | | | | 435,000 | |
| Brooks Automation2 | | | 52,100 | | | | 2,186,116 | |
| Camtek | | | 93,700 | | | | 1,014,771 | |
| Cohu | | | 38,790 | | | | 886,351 | |
| CyberOptics Corporation1 | | | 50,300 | | | | 924,514 | |
| Everspin Technologies1 | | | 5,900 | | | | 31,034 | |
| FormFactor1 | | | 22,869 | | | | 593,908 | |
| †Ichor Holdings1 | | | 24,900 | | | | 828,423 | |
| Kulicke & Soffa Industries2 | | | 77,200 | | | | 2,099,840 | |
| NeoPhotonics Corporation1,2,3 | | | 98,600 | | | | 869,652 | |
| Nova Measuring Instruments1,2 | | | 73,900 | | | | 2,795,637 | |
| Onto Innovation1,2,3 | | | 133,150 | | | | 4,865,301 | |
| PDF Solutions1 | | | 189,700 | | | | 3,204,033 | |
| Photronics1 | | | 218,700 | | | | 3,446,712 | |
| Silicon Motion Technology ADR | | | 36,100 | | | | 1,830,631 | |
| Ultra Clean Holdings1,2,3 | | | 77,500 | | | | 1,818,925 | |
| Veeco Instruments1,2 | | | 17,500 | | | | 256,988 | |
| | | | | | | | 31,001,921 | |
| SOFTWARE - 3.1% | | | | | | | | |
| Agilysys1 | | | 90,000 | | | | 2,286,900 | |
| American Software Cl. A | | | 120,352 | | | | 1,790,838 | |
| †Digital Turbine1 | | | 100,000 | | | | 713,000 | |
| Model N1 | | | 50,000 | | | | 1,753,500 | |
| OneSpan1 | | | 5,600 | | | | 95,872 | |
| Optiva1 | | | 28,000 | | | | 1,121,251 | |
| QAD Cl. A | | | 23,687 | | | | 1,206,379 | |
| RealNetworks1 | | | 100,171 | | | | 120,205 | |
| SeaChange International1 | | | 50,000 | | | | 209,500 | |
| SharpSpring1 | | | 110,000 | | | | 1,261,700 | |
| †Upland Software1 | | | 60,300 | | | | 2,153,313 | |
| | | | | | | | 12,712,458 | |
| TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS - 1.1% | | | | | | | | |
| AstroNova | | | 37,300 | | | | 511,756 | |
| Intevac1 | | | 539,400 | | | | 3,808,164 | |
| TransAct Technologies | | | 28,600 | | | | 313,742 | |
| | | | | | | | 4,633,662 | |
| Total (Cost $60,189,782) | | | | | | | 78,112,517 | |
| | | | | | | | | |
| MATERIALS – 6.5% | | | | | | | | |
| CHEMICALS - 1.1% | | | | | | | | |
| Balchem Corporation | | | 3,250 | | | | 330,298 | |
| LSB Industries1 | | | 135,800 | | | | 570,360 | |
| OMNOVA Solutions1 | | | 25,000 | | | | 252,750 | |
| Quaker Chemical2,3 | | | 14,400 | | | | 2,369,088 | |
| Rayonier Advanced Materials1 | | | 50,000 | | | | 192,000 | |
| Trecora Resources1 | | | 89,600 | | | | 640,640 | |
| | | | | | | | 4,355,136 | |
| CONSTRUCTION MATERIALS - 0.2% | | | | | | | | |
| Monarch Cement5 | | | 16,303 | | | | 984,701 | |
| CONTAINERS & PACKAGING - 0.4% | | | | | | | | |
| UFP Technologies1 | | | 36,445 | | | | 1,808,036 | |
| METALS & MINING - 4.8% | | | | | | | | |
| Alamos Gold Cl. A | | | 261,044 | | | | 1,574,044 | |
| Ampco-Pittsburgh1 | | | 79,002 | | | | 237,796 | |
| Haynes International2 | | | 38,000 | | | | 1,359,640 | |
| Imdex | | | 650,666 | | | | 673,492 | |
| MAG Silver1 | | | 154,050 | | | | 1,823,952 | |
| Major Drilling Group International1 | | | 1,204,084 | | | | 5,257,523 | |
| Olympic Steel | | | 35,000 | | | | 627,200 | |
| Pretium Resources1 | | | 80,000 | | | | 890,223 | |
| Sandstorm Gold1 | | | 810,000 | | | | 6,034,500 | |
| Universal Stainless & Alloy Products1,2 | | | 33,620 | | | | 500,938 | |
| Victoria Gold1 | | | 59,333 | | | | 388,380 | |
| | | | | | | | 19,367,688 | |
| Total (Cost $23,576,089) | | | | | | | 26,515,561 | |
| | | | | | | | | |
| REAL ESTATE – 2.4% | | | | | | | | |
| EQUITY REAL ESTATE INVESTMENT TRUSTS (REITS) - 0.5% | | | | | | | | |
| †Postal Realty Trust Cl. A | | | 114,000 | | | | 1,932,300 | |
| REAL ESTATE MANAGEMENT & DEVELOPMENT - 1.9% | | | | | | | | |
| Altus Group | | | 87,000 | | | | 2,543,237 | |
| Dundee Corporation Cl. A1 | | | 413,200 | | | | 378,659 | |
| Marcus & Millichap1,2 | | | 4,900 | | | | 182,525 | |
| RMR Group (The) Cl. A | | | 49,900 | | | | 2,277,436 | |
| Tejon Ranch1,2 | | | 154,994 | | | | 2,476,804 | |
| | | | | | | | 7,858,661 | |
| Total (Cost $12,178,430) | | | | | | | 9,790,961 | |
| | | | | | | | | |
| UTILITIES – 0.7% | | | | | | | | |
| INDEPENDENT POWER & RENEWABLE ELECTRICITY PRODUCER - 0.0% | | | | | | | | |
| Innergex Renewable Energy | | | 15,573 | | | | 202,195 | |
| WATER UTILITIES - 0.7% | | | | | | | | |
| AquaVenture Holdings1 | | | 50,000 | | | | 1,356,000 | |
| Global Water Resources | | | 106,000 | | | | 1,393,900 | |
| | | | | | | | 2,749,900 | |
| Total (Cost $1,514,639) | | | | | | | 2,952,095 | |
| | | | | | | | | |
| TOTAL COMMON STOCKS | | | | | | | | |
| (Cost $354,053,368) | | | | | | | 409,028,429 | |
| | | | | | | | | |
| WARRANTS – 0.0% | | | | | | | | |
| | | | | | | | | |
| INDUSTRIALS – 0.0% | | | | | | | | |
| CONSTRUCTION & ENGINEERING - 0.0% | | | | | | | | |
| Infrastructure and Energy Alternatives (Warrants)1 | | | 100,000 | | | | 8,000 | |
| Total (Cost $106,385) | | | | | | | 8,000 | |
| | | | | | | | | |
| INFORMATION TECHNOLOGY – 0.0% | | | | | | | | |
| SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 0.0% | | | | | | | | |
| eMagin Corporation (Warrants)1,4 | | | 50,000 | | | | 0 | |
| Total (Cost $0) | | | | | | | 0 | |
| | | | | | | | | |
| TOTAL WARRANTS | | | | | | | | |
| (Cost $106,385) | | | | | | | 8,000 | |
| THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS | 2019 Annual Report to Stockholders | 29 |
December 31, 2019
Royce Micro-Cap Trust
Schedule of Investments (continued)
| | | |
| | | VALUE |
| | | |
| REPURCHASE AGREEMENT – 4.4% | | | | |
Fixed Income Clearing Corporation, 0.25% dated 12/31/19, due 1/2/20, maturity value
$17,790,247 (collateralized by obligations of various U.S. Government Agencies, 2.00%
due 5/31/24, valued at $18,149,576) | |
| (Cost $17,790,000) | | $ | 17,790,000 | |
| | | | | |
| TOTAL INVESTMENTS – 105.4% | | | | |
| (Cost $371,949,753) | | | 426,826,429 | |
| | | | | |
| LIABILITIES LESS CASH AND OTHER ASSETS – (5.4)% | | | (22,019,433 | ) |
| | | | | |
| NET ASSETS – 100.0% | | $ | 404,806,996 | |
ADR – American Depository Receipt
SDR – Swedish Depository Receipt
| 2 | All or a portion of these securities were pledged as collateral in connection with the Fund’s revolving credit agreement at December 31, 2019. Total market value of pledged securities at December 31, 2019, was $59,239,294. |
| 3 | At December 31, 2019, a portion of these securities were rehypothecated in connection with the Fund’s revolving credit agreement in the aggregate amount of $18,132,420. |
| 4 | 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. |
| 5 | 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. |
Bold indicates the Fund’s 20 largest equity holdings in terms of December 31, 2019, market value
TAX INFORMATION:The cost of total investments for Federal income tax purposes was $373,097,986. At December 31, 2019, net unrealized appreciation for all securities was $53,728,443 consisting of aggregate gross unrealized appreciation of $115,007,116 and aggregate gross unrealized depreciation of $61,278,673. The primary causes of the difference between book and tax basis cost are the timing of the recognition of losses on securities sold, investments in publicly traded partnerships and Trusts, investments in Real Estate Investment Trusts and mark-to-market of Passive Foreign Investment Companies.
| 30 | 2019 Annual Report to Stockholders | THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS |
December 31, 2019
Royce Micro-Cap Trust
Statement of Assets and Liabilities
| ASSETS: | | |
| Investments at value | | $ | 409,036,429 | |
| Repurchase agreements (at cost and value) | | | 17,790,000 | |
| Cash and foreign currency | | | 67,624 | |
| Receivable for investments sold | | | 324,900 | |
| Receivable for dividends and interest | | | 235,844 | |
| Prepaid expenses and other assets | | | 42,493 | |
| Total Assets | | | 427,497,290 | |
| LIABILITIES: | | | | |
| Revolving credit agreement | | | 22,000,000 | |
| Payable for investments purchased | | | 198,460 | |
| Payable for investment advisory fee | | | 311,430 | |
| Payable for directors’ fees | | | 20,719 | |
| Payable for interest expense | | | 54,247 | |
| Accrued expenses | | | 105,438 | |
| Total Liabilities | | | 22,690,294 | |
| Net Assets | | $ | 404,806,996 | |
| ANALYSIS OF NET ASSETS: | | | | |
| Paid-in capital - $0.001 par value per share; 42,019,251 shares outstanding (150,000,000 shares authorized) | | $ | 354,148,607 | |
| Total distributable earnings (loss) | | | 50,658,389 | |
| Net Assets (net asset value per share - $9.63) | | $ | 404,806,996 | |
| Investments at identified cost | | $ | 354,159,753 | |
| THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS | 2019 Annual Report to Stockholders | 31 |
| Royce Micro-Cap Trust | |
| | Year Ended December 31, 2019 |
Statement of Operations
| INVESTMENT INCOME: | | |
| INCOME: | | |
| Dividends | | $ | 4,937,204 | |
| Foreign withholding tax | | | (174,317 | ) |
| Interest | | | 52,896 | |
| Rehypothecation income | | | 140,672 | |
| Total income | | | 4,956,455 | |
| EXPENSES: | | | | |
| Investment advisory fees | | | 3,222,579 | |
| Interest expense | | | 730,938 | |
| Administrative and office facilities | | | 178,480 | |
| Stockholder reports | | | 145,210 | |
| Directors’ fees | | | 100,775 | |
| Custody and transfer agent fees | | | 80,077 | |
| Professional fees | | | 67,390 | |
| Other expenses | | | 49,139 | |
| Total expenses | | | 4,574,588 | |
| Compensating balance credits | | | (299 | ) |
| Net expenses | | | 4,574,289 | |
| Net investment income (loss) | | | 382,166 | |
| REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY: | | | | |
| NET REALIZED GAIN (LOSS): | | | | |
| Investments | | | 21,766,559 | |
| Foreign currency transactions | | | (15,779 | ) |
| NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION): | | | | |
| Investments | | | 52,498,039 | |
| Other assets and liabilities denominated in foreign currency | | | 825 | |
| Net realized and unrealized gain (loss) on investments and foreign currency | | | 74,249,644 | |
| NET INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS | | $ | 74,631,810 | |
| 32 | 2019 Annual Report to Stockholders | THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS |
Royce Micro-Cap Trust
Statement of Changes in Net Assets
| | | YEAR ENDED 12/31/19 | | YEAR ENDED 12/31/18 |
| | | | | |
| INVESTMENT OPERATIONS: | | | | | | | | |
| Net investment income (loss) | | $ | 382,166 | | | $ | 429,883 | |
| Net realized gain (loss) on investments and foreign currency | | | 21,750,780 | | | | 30,311,057 | |
| Net change in unrealized appreciation (depreciation) on investments and foreign currency | | | 52,498,864 | | | | (77,891,540 | ) |
| Net increase (decrease) in net assets from investment operations | | | 74,631,810 | | | | (47,150,600 | ) |
| DISTRIBUTIONS: | | | | | | | | |
| Total distributable earnings | | | (27,923,323 | ) | | | (29,685,741 | ) |
| Total distributions | | | (27,923,323 | ) | | | (29,685,741 | ) |
| CAPITAL STOCK TRANSACTIONS: | | | | | | | | |
| Reinvestment of distributions | | | 12,599,364 | | | | 12,430,570 | |
| Total capital stock transactions | | | 12,599,364 | | | | 12,430,570 | |
| Net Increase (Decrease) In Net Assets | | | 59,307,851 | | | | (64,405,771 | ) |
| NET ASSETS: | | | | | | | | |
| Beginning of year | | | 345,499,145 | | | | 409,904,916 | |
| End of year | | $ | 404,806,996 | | | $ | 345,499,145 | |
| THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS | 2019 Annual Report to Stockholders | 33 |
| Royce Micro-Cap Trust | Year Ended December 31, 2019 |
Statement of Cash Flows
| CASH FLOWS FROM OPERATING ACTIVITIES: | | |
| Net increase (decrease) in net assets from investment operations | | $ | 74,631,810 | |
| Adjustments to reconcile net increase (decrease) in net assets from investment operations to net cash provided by operating activities: | | | | |
| Purchases of long-term investments | | | (60,606,523 | ) |
| Proceeds from sales and maturities of long-term investments | | | 75,713,003 | |
| Net purchases, sales and maturities of short-term investments | | | (240,000 | ) |
| Net (increase) decrease in dividends and interest receivable and other assets | | | 110,316 | |
| Net increase (decrease) in interest expense payable, accrued expenses and other liabilities | | | 47,150 | |
| Net change in unrealized appreciation (depreciation) on investments | | | (52,498,039 | ) |
| Net realized gain (loss) on investments | | | (21,766,559 | ) |
| Net cash provided by operating activities | | | 15,391,158 | |
| CASH FLOWS FROM FINANCING ACTIVITIES: | | | | |
| Distributions | | | (27,923,323 | ) |
| Reinvestment of distributions | | | 12,599,364 | |
| Net cash used for financing activities | | | (15,323,959 | ) |
| INCREASE (DECREASE) IN CASH: | | | 67,199 | |
| Cash and foreign currency at beginning of year | | | 425 | |
| Cash and foreign currency at end of year | | $ | 67,624 | |
Supplemental disclosure of cash flow information:
For the year ended December 31, 2019, the Fund paid $685,850 in interest expense.
| 34 | 2019 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 |
| | | | 12/31/19 | | | | 12/31/18 | | | | 12/31/17 | | | | 12/31/16 | | | | 12/31/15 | |
| Net Asset Value, Beginning of Period | | $ | 8.53 | | | $ | 10.48 | | | $ | 9.63 | | | $ | 8.59 | | | $ | 11.33 | |
| INVESTMENT OPERATIONS: | | | | | | | | | | | | | | | | | | | | |
| Net investment income (loss) | | | 0.01 | | | | 0.01 | | | | 0.06 | | | | 0.03 | | | | 0.03 | |
| Net realized and unrealized gain (loss) on investments and foreign currency | | | 1.81 | | | | (1.18 | ) | | | 1.52 | | | | 1.70 | | | | (1.42 | ) |
| Net increase (decrease) in net assets from investment operations | | | 1.82 | | | | (1.17 | ) | | | 1.58 | | | | 1.73 | | | | (1.39 | ) |
| DISTRIBUTIONS: | | | | | | | | | | | | | | | | | | | | |
| Net investment income | | | (0.03 | ) | | | (0.00 | ) | | | (0.06 | ) | | | (0.08 | ) | | | (0.01 | ) |
| Net realized gain on investments and foreign currency | | | (0.65 | ) | | | (0.75 | ) | | | (0.63 | ) | | | (0.56 | ) | | | (1.25 | ) |
| Total distributions | | | (0.68 | ) | | | (0.75 | ) | | | (0.69 | ) | | | (0.64 | ) | | | (1.26 | ) |
| CAPITAL STOCK TRANSACTIONS: | | | | | | | | | | | | | | | | | | | | |
| Effect of reinvestment of distributions by Common Stockholders | | | (0.04 | ) | | | (0.03 | ) | | | (0.04 | ) | | | (0.05 | ) | | | (0.09 | ) |
| Total capital stock transactions | | | (0.04 | ) | | | (0.03 | ) | | | (0.04 | ) | | | (0.05 | ) | | | (0.09 | ) |
| Net Asset Value, End of Period | | $ | 9.63 | | | $ | 8.53 | | | $ | 10.48 | | | $ | 9.63 | | | $ | 8.59 | |
| Market Value, End of Period | | $ | 8.54 | | | $ | 7.42 | | | $ | 9.44 | | | $ | 8.16 | | | $ | 7.26 | |
| TOTAL RETURN:1 | | | | | | | | | | | | | | | | | | | | |
| Net Asset Value | | | 22.44 | % | | | (11.62 | )% | | | 17.67 | % | | | 21.98 | % | | | (11.64 | )% |
| Market Value | | | 24.82 | % | | | (14.65 | )% | | | 25.09 | % | | | 22.30 | % | | | (16.06 | )% |
| RATIOS BASED ON AVERAGE NET ASSETS: | | | | | | | | | | | | | | | | | | | | |
| Investment advisory fee expense2 | | | 0.85 | % | | | 0.92 | %3 | | | 0.49 | % | | | 0.87 | % | | | 0.93 | % |
| Other operating expenses | | | 0.35 | % | | | 0.43 | % | | | 0.40 | % | | | 0.39 | % | | | 0.35 | % |
| Total expenses (net) | | | 1.20 | % | | | 1.35 | % | | | 0.89 | % | | | 1.26 | % | | | 1.28 | % |
| Expenses excluding interest expense | | | 1.01 | % | | | 1.05 | % | | | 0.62 | % | | | 1.02 | % | | | 1.08 | % |
| Expenses prior to balance credits | | | 1.20 | % | | | 1.35 | % | | | 0.89 | % | | | 1.26 | % | | | 1.28 | % |
| Net investment income (loss) | | | 0.10 | % | | | 0.10 | % | | | 0.56 | % | | | 0.32 | % | | | 0.26 | % |
| SUPPLEMENTAL DATA: | | | | | | | | | | | | | | | | | | | | |
| Net Assets, End of Period (in thousands) | | $ | 404,807 | | | $ | 345,499 | | | $ | 409,905 | | | $ | 363,701 | | | $ | 312,407 | |
| Portfolio Turnover Rate | | | 15 | % | | | 21 | % | | | 15 | % | | | 26 | % | | | 39 | % |
| REVOLVING CREDIT AGREEMENT: | | | | | | | | | | | | | | | | | | | | |
| Asset coverage | | | 1940 | % | | | 1670 | % | | | 1011 | % | | | 908 | % | | | 794 | % |
| Asset coverage per $1,000 | | $ | 19,400 | | | $ | 16,705 | | | $ | 10,109 | | | $ | 9,082 | | | $ | 7,942 | |
| 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, sale and dividend reinvestment 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. |
| 3 | Includes the impact of the adjustment of prior period’s performance fees of 0.06%. |
| THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS | 2019 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.”
Royce & Associates, LP, the Fund’s investment adviser, primarily conducts business using the name Royce Investment Partners (“Royce”).
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, 2019. 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 | | $ | 401,972,775 | | | $ | 6,813,854 | | | $ | 241,800 | | | $ | 409,028,429 | |
| Warrants | | | 8,000 | | | | – | | | | 0 | | | | 8,000 | |
| Repurchase Agreement | | | – | | | | 17,790,000 | | | | – | | | | 17,790,000 | |
36 | 2019 Annual Report to Stockholders
Royce Micro-Cap Trust
Notes to Financial Statements (continued)
VALUATION OF INVESTMENTS (continued):
Level 3 Reconciliation:
| | BALANCE AS OF 12/31/18 | ADDITIONS | REALIZED GAIN (LOSS) | UNREALIZED GAIN (LOSS)1 | BALANCE AS OF 12/31/19 |
| Common Stocks | $241,800 | | $2,003,114 | | $ – | | $(2,003,114) | | $241,800 | |
| Warrants | 0 | | – | | – | | – | | 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. |
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
12/31/19 | VALUATION TECHNIQUE(S) | UNOBSERVABLE INPUT(S) | RANGE AVERAGE | IMPACT TO VALUATION FROM
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, 2019 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, other than investments in securities at the end of the reporting period, as a result of changes in foreign currency exchange rates.
The Fund does not isolate that portion of the results of operations resulting from fluctuations in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.
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 in any year are not paid from long-term capital gains, net investment income or net short-term capital gains, they will represent a return of capital. Distributions are determined in accordance with income tax regulations that may differ from accounting principles generally accepted in the United States of America. Permanent book and tax differences relating to stockholder distributions will result in reclassifications within the capital accounts. Undistributed net investment income may include temporary book and tax basis differences, which will reverse in a subsequent period. Any taxable income or gain remaining undistributed at fiscal year end is distributed in the following year.
2019 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 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 1,519,172 and 1,383,439 shares of Common Stock as reinvestment of distributions for the years ended December 31, 2019 and December 31, 2018, 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 179-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, 2019, the Fund has outstanding borrowings of $22,000,000. During the year ended December 31, 2019, the Fund borrowed an average daily balance of $22,000,000 at a weighted average borrowing cost of 3.28%. The maximum amount outstanding during the year ended December 31, 2019 was $22,000,000. As of December 31, 2019, the aggregate value of rehypothecated securities was $18,132,420. During the year ended December 31, 2019, the Fund earned $140,672 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.
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
38 | 2019 Annual Report to Stockholders
Royce Micro-Cap Trust
Notes to Financial Statements (continued)
Investment Advisory Agreement (continued):
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 2019, the Fund’s investment performance ranged from 3% below to 10% below the investment performance of the Russell 2000. Accordingly, the net investment advisory fee consisted of a Basic Fee of $3,866,862 and a net downward adjustment of $644,283 for the performance of the Fund relative to that of the Russell 2000. For the year ended December 31, 2019, the Fund expensed Royce investment advisory fees totaling $3,222,579.
Purchases and Sales of Investment Securities:
For the year ended December 31, 2019, the costs of purchases and proceeds from sales of investment securities, other than short-term securities, amounted to $58,630,112 and $66,932,693, 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. The Fund’s Chief Compliance Officer reviews such transactions each quarter for compliance with the requirements and restrictions set forth by Rule 17a-7, and reports the results of her review to the Board of Directors. Cross trades for the year ended December 31, 2019, were as follows:
| COSTS OF PURCHASES | PROCEEDS FROM SALES | REALIZED GAIN (LOSS) |
| $5,532,003 | $3,197,316 | $712,573 |
Tax Information:
Distributions during the years ended December 31, 2019 and 2018, were characterized as follows for tax purposes:
| ORDINARY INCOME | LONG-TERM CAPITAL GAINS |
| 2019 | 2018 | 2019 | 2018 |
| $2,744,066 | $1,668,339 | $25,179,257 | $28,017,402 |
The tax basis components of distributable earnings at December 31, 2019, were as follows:
UNDISTRIBUTED ORDINARY INCOME | UNDISTRIBUTED LONG-TERM CAPITAL GAINS OR (CAPITAL LOSS CARRYFORWARD) | NET UNREALIZED APPRECIATION (DEPRECIATION)1 | QUALIFIED LATE YEAR ORDINARY AND POST-OCTOBER LOSS DEFERRALS2 | TOTAL DISTRIBUTABLE EARNINGS |
| $ – | $840,830 | $53,729,427 | $(3,911,868) | $50,658,389 |
| 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, 2019, the Fund had no reclassifications.
Management has analyzed the Fund’s tax positions taken on federal income tax returns for all open tax years (2016-2019) and has concluded that as of December 31, 2019, no provision for income tax is required in the Fund’s financial statements.
Subsequent Events:
On February 18, 2020, Franklin Resources, Inc., a global investment management organization operating as Franklin Templeton, announced that it had entered into a definitive agreement to acquire Legg Mason, Inc., the parent company of Royce. This transaction is subject to approval by Legg Mason’s shareholders and is expected to close no later than the third quarter of 2020. Royce will continue to operate as an independent investment organization with its own brand. There are no changes planned to the management of the organization or investment teams at Royce as a result of this transaction. Stockholders of Royce Micro-Cap Trust are expected to be asked to approve a new investment advisory agreement with Royce due to the change of control resulting from the transaction.
2019 Annual Report to Stockholders | 39
Report of Independent Registered Public Accounting Firm
To the Board of Directors and 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, 2019, the related statements of operations and cash flows for the year ended December 31, 2019, the statement of changes in net assets for each of the two years in the period ended December 31, 2019, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2019 (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, 2019, 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, 2019 and the financial highlights for each of the five years in the period ended December 31, 2019 in conformity with accounting principles generally accepted in the United States of America.
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, 2019 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
New York, New York
February 21, 2020
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 been able to determine the specific year we began serving as auditor.
40 | 2019 Annual Report to Stockholders
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2019 Annual Report to Stockholders | 41
MANAGERS’ DISCUSSION (UNAUDITED)
Royce Value Trust (RVT)
Chuck Royce
FUND PERFORMANCE
A robust 2019 gave Royce Value Trust (“RVT”) its third out of the last four calendar years of strong absolute and relative performance.
RVT advanced 30.5% on an NAV (net asset value) basis and 35.2% based on market price in 2019, compared to respective gains of 25.5% and 22.7% for the Russell 2000 and S&P SmallCap 600 Indexes—its unleveraged small-cap benchmarks—for the same period. We were also pleased that on an NAV and market price basis, RVT outpaced the Russell 2000 for the three-, five-, 20-, 25-, 30-year, and since inception (11/26/86) periods ended 12/31/19.
WHAT WORKED...AND WHAT DIDN’T
Nine of the Fund’s 11 equity sectors made a positive impact on 2019’s results, with Industrials and Information Technology making the biggest positive contributions to performance. Communication Services and Utilities were the only sectors that detracted in 2019. At the industry level, two areas made outsized positive impacts—semiconductors & semiconductor equipment (Information Technology) and machinery (Industrials)—while media (Communication Services) and leisure products (Consumer Discretionary) were the industry groups that detracted most.
Two Information Technology holdings were among RVT’s leading contributors, including the Fund’s top positive performer, Cirrus Logic, a leading producer of specialized audio and voice devices and solutions. Its shares rose by double digits in October on news of better-than-expected third-quarter results keyed by increased demand for its innovative products, which capped off a very strong year for its stock. MKS Instruments, which manufactures devices and instruments used in semiconductor production, sailed past (admittedly fairly low) third-quarter earnings estimates. It pleased us to see its advanced markets segment do well in 2019, and to see what looked like a bottom in the semiconductor capital equipment cycle. Ares Management is an asset manager that focuses on tradable credit, direct lending, private equity, and real estate. Investors became more optimistic about the company’s ability to sustain mid-teens, high margin earnings growth for an extended period. The company also converted to C-corp. status, which broadened ownership, supporting an increase in its valuation. HEICO Corporation is the largest designer, manufacturer, and distributor of generic replacement parts for airplane engines and components. Its shares reached their highest altitude in September, with organic growth fueled by increased demand for new product offerings in HEICO’s aftermarket replacement parts and specialty products lines.
The biggest detractor at the position level was comScore, which provides digital marketing intelligence that helps its customers make business decisions and implement digital strategies. The firm faced accounting issues that led to two shakeups in upper management. The firm then announced in August that it was exploring strategic alternatives to maximize shareholder value, including the potential sale of the company, which informed our decision to hold our shares. Health and fitness company Nautilus suffered through two consecutive failed product launches that led to the departure of its CEO. We exited our position in July as we thought it would take at least a year for the firm to rebuild its product pipeline. Virtu Financial uses its technology to act as a market maker and liquidity provider to the global financial markets. Its business endured a slump through most of the year as the company typically does best in highly volatile markets—which were mostly absent in 2019—and/or when global trading volumes are heavy. Believing that volatility is more likely, we built our position. We held our stake in construction company Infrastructure and Energy Alternatives after it suffered a second-quarter earnings miss that sent its shares tumbling.
The Fund’s 2019 advantage versus the Russell 2000 came primarily from stock selection, though sector allocation was also additive. This was the pattern for the portfolio’s biggest relative advantages at the sector level in Industrials and Information Technology. Conversely, ineffective stock selection hurt results in Real Estate while our cash position also hampered relative performance.
| | | | | |
| | Top Contributors to Performance | | Top Detractors from Performance | |
| | For 2019 (%)1 | | | For 2019 (%)2 | | |
| | Cirrus Logic | 1.01 | | comScore | -0.50 | |
| | Ares Management Cl. A | 0.82 | | Nautilus | -0.39 | |
| | HEICO Corporation | 0.81 | | Virtu Financial Cl. A | -0.34 | |
| | MKS Instruments | 0.76 | | Infrastructure and Energy | | |
| | CIRCOR International | 0.70 | | Alternatives | -0.21 | |
| | 1 Includes dividends | | | Pason Systems | -0.21 | |
| | | | | 2 Net of dividends | | |
| | | | | | | |
CURRENT POSITIONING AND OUTLOOK
The backdrop looks quite favorable to us for solid to strong small-cap performance overall. We have previously cited four favorable factors in the current market environment—low inflation, modest valuations, moderate growth, and ample access to capital. Each of these remains present and suggests that small-cap returns can go higher. We see a global economy that’s showing signs of renewed life, an ISM Manufacturing Index that’s been incrementally rising (despite December’s setback), and, most important, valuations that range from reasonable to attractive among the many small-cap cyclical areas that we typically like best. We believe that the market is starting to pivot from rewarding those areas that have succeeded to those that have lagged, so our focus has been on those areas that either didn’t participate in 2019’s upswing or trailed significantly. More specifically, we have added several cyclical stocks in diverse industries, including several leading energy services companies.
42 | 2019 Annual Report to Stockholders
| PERFORMANCE AND PORTFOLIO REVIEW (UNAUDITED) | SYMBOLS MARKET PRICERVT NAVXRVTX |
Performance
Average Annual Total Return (%) Through 12/31/19
| | JUL-DEC 20191 | 1-YR | 3-YR | 5-YR | 10-YR | 15-YR | 20-YR | 25-YR | 30-YR | SINCE INCEPTION (11/26/86) |
| RVT (NAV) | 9.13 | 30.46 | 10.04 | 9.20 | 11.00 | 7.69 | 9.27 | 10.51 | 10.56 | 10.51 |
1 Not Annualized
Market Price Performance History Since Inception (11/26/86)
Cumulative Performance of Investment through 12/31/191
| | 1-YR | 5-YR | 10-YR | 15-YR | 20-YR | SINCE INCEPTION (11/26/86) |
| RVT | 35.2% | 57.0% | 202.0% | 151.2% | 536.5% | 2195.0% |
| 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. |
Morningstar Style Map™ As of 12/31/19
TheMorningstar Style Map is theMorningstar Style Box™ with the center 75% of fund holdings plotted as theMorningstar 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 | |
| FLIR Systems | 2.0 |
| HEICO Corporation | 1.9 |
| Quaker Chemical | 1.7 |
| MKS Instruments | 1.7 |
| Cirrus Logic | 1.5 |
| Kirby Corporation | 1.5 |
| Cognex Corporation | 1.2 |
| Reliance Steel & Aluminum | 1.2 |
| Clarkson | 1.2 |
| Air Lease Cl. A | 1.1 |
| Portfolio Sector Breakdown | |
| % of Net Assets | |
| Industrials | 26.9 |
| Information Technology | 20.0 |
| Financials | 16.3 |
| Materials | 12.2 |
| Consumer Discretionary | 8.2 |
| Energy | 6.7 |
| Health Care | 5.6 |
| Real Estate | 4.2 |
| Consumer Staples | 1.9 |
| Communication Services | 1.4 |
| Utilities | 0.2 |
| Diversified Investment Companies | 0.0 |
| Outstanding Line of Credit, Net of Cash and Cash Equivalents | -3.6 |
| Calendar Year Total Returns (%) | |
| YEAR | RVT |
| 2019 | 30.5 |
| 2018 | -14.4 |
| 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 |
| Portfolio Diagnostics | |
| Fund Net Assets | $1,628 million |
| Number of Holdings | 476 |
| Turnover Rate | 30% |
| Net Asset Value | $16.58 |
| Market Price | $14.77 |
| Net Leverage1 | 3.6% |
| Average Market Capitalization2 | $2,069 million |
| Weighted Average P/E Ratio3,4 | 24.4x |
| Weighted Average P/B Ratio3 | 2.2x |
| Active Share5 | 86% |
| U.S. Investments (% of Net Assets) | 86.6% |
| Non-U.S. Investments (% of Net Assets) | 17.0% |
| 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 12/31/19). |
| 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.royceinvest.com. Certain immaterial adjustments were made to the net assets of Royce Value Trust at 12/31/16 and 6/30/18 for financial reporting purposes, and as a result the net asset value originally calculated on that date and the total return based on that net asset value differs from the adjusted net asset value and total return reported in the Financial Highlights. The market price of the 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. 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 2019.
2019 Annual Report to Stockholders | 43
Royce Value Trust
| Schedule of Investments | | | | | | |
| Common Stocks – 103.6% | | | | | | |
| | | SHARES | | | VALUE | |
| | | | | | | |
| COMMUNICATION SERVICES - 1.4% | | | | | | | | |
| DIVERSIFIED TELECOMMUNICATION SERVICES - 0.4% | | | | | | | | |
| †Bandwidth Cl. A1 | | | 70,500 | | | $ | 4,515,525 | |
| Cogent Communications Holdings | | | 18,615 | | | | 1,225,053 | |
| Vonage Holdings1 | | | 9,039 | | | | 66,979 | |
| | | | | | | | 5,807,557 | |
| ENTERTAINMENT - 0.0% | | | | | | | | |
| Global Eagle Entertainment1 | | | 110,000 | | | | 55,000 | |
| INTERACTIVE MEDIA & SERVICES - 0.2% | | | | | | | | |
| Care.com1 | | | 19,674 | | | | 295,700 | |
| QuinStreet1,2,3 | | | 180,254 | | | | 2,759,689 | |
| | | | | | | | 3,055,389 | |
| MEDIA - 0.8% | | | | | | | | |
| comScore1,2,3 | | | 808,910 | | | | 3,996,015 | |
| Gannett Company | | | 176,578 | | | | 1,126,568 | |
| Gray Television1,2,3 | | | 50,000 | | | | 1,072,000 | |
| Liberty Latin America Cl. C1,2,3 | | | 246,300 | | | | 4,792,998 | |
| Meredith Corporation2 | | | 26,700 | | | | 866,949 | |
| †Nexstar Media Group Cl. A | | | 3,200 | | | | 375,200 | |
| Pico Far East Holdings | | | 2,612,400 | | | | 797,905 | |
| | | | | | | | 13,027,635 | |
| WIRELESS TELECOMMUNICATION SERVICES - 0.0% | | | | | | | | |
| Boingo Wireless1,2,3 | | | 50,000 | | | | 547,500 | |
| Total (Cost $33,686,529) | | | | | | | 22,493,081 | |
| | | | | | | | | |
| CONSUMER DISCRETIONARY – 8.2% | | | | | | | | |
| AUTO COMPONENTS - 1.4% | | | | | | | | |
| †Cooper-Standard Holdings1 | | | 3,110 | | | | 103,128 | |
| Dorman Products1,2,3 | | | 51,700 | | | | 3,914,724 | |
| †Garrett Motion1 | | | 51,870 | | | | 518,181 | |
| Gentex Corporation | | | 96,310 | | | | 2,791,064 | |
| LCI Industries2 | | | 139,084 | | | | 14,900,069 | |
| Standard Motor Products2 | | | 4,183 | | | | 222,619 | |
| †Stoneridge1 | | | 4,220 | | | | 123,730 | |
| Superior Industries International1 | | | 203,911 | | | | 752,432 | |
| | | | | | | | 23,325,947 | |
| DISTRIBUTORS - 0.5% | | | | | | | | |
| Core-Mark Holding2 | | | 31,543 | | | | 857,654 | |
| LKQ Corporation1,2,3 | | | 139,300 | | | | 4,973,010 | |
| Weyco Group2 | | | 97,992 | | | | 2,591,889 | |
| | | | | | | | 8,422,553 | |
| DIVERSIFIED CONSUMER SERVICES - 0.4% | | | | | | | | |
| American Public Education1 | | | 19,979 | | | | 547,225 | |
| Collectors Universe2,3 | | | 71,100 | | | | 1,638,855 | |
| Perdoceo Education1 | | | 11,417 | | | | 209,958 | |
| Regis Corporation1 | | | 14,420 | | | | 257,685 | |
| Universal Technical Institute1 | | | 504,032 | | | | 3,886,087 | |
| | | | | | | | 6,539,810 | |
| HOTELS, RESTAURANTS & LEISURE - 0.6% | | | | | | | | |
| Century Casinos1 | | | 244,320 | | | | 1,935,014 | |
| Lindblad Expeditions Holdings1,2,3 | | | 415,200 | | | | 6,788,520 | |
| †Red Robin Gourmet Burgers1 | | | 12,332 | | | | 407,203 | |
| Ruth’s Hospitality Group | | | 36,595 | | | | 796,490 | |
| | | | | | | | 9,927,227 | |
| HOUSEHOLD DURABLES - 0.7% | | | | | | | | |
| Cavco Industries1,2,3 | | | 14,700 | | | | 2,872,086 | |
| Ethan Allen Interiors2 | | | 156,519 | | | | 2,983,252 | |
| La-Z-Boy | | | 16,848 | | | | 530,375 | |
| †LGI Homes1 | | | 53,900 | | | | 3,808,035 | |
| Meritage Homes1 | | | 18,477 | | | | 1,129,130 | |
| | | | | | | | 11,322,878 | |
| INTERNET & DIRECT MARKETING RETAIL - 0.8% | | | | | | | | |
| Etsy1,2,3 | | | 155,800 | | | | 6,901,940 | |
| †PetMed Express | | | 16,879 | | | | 396,994 | |
| †Shutterstock1 | | | 26,185 | | | | 1,122,813 | |
| Stamps.com1 | | | 53,667 | | | | 4,482,268 | |
| | | | | | | | 12,904,015 | |
| LEISURE PRODUCTS - 0.4% | | | | | | | | |
| Brunswick Corporation | | | 75,400 | | | | 4,522,492 | |
| Johnson Outdoors Cl. A | | | 1,820 | | | | 139,594 | |
| MasterCraft Boat Holdings1 | | | 27,850 | | | | 438,638 | |
| Sturm, Ruger & Co. | | | 15,149 | | | | 712,457 | |
| | | | | | | | 5,813,181 | |
| SPECIALTY RETAIL - 2.7% | | | | | | | | |
| Abercrombie & Fitch Cl. A | | | 23,798 | | | | 411,467 | |
| America’s Car-Mart1,2,3 | | | 120,000 | | | | 13,159,200 | |
| AutoCanada | | | 1,138,000 | | | | 10,858,126 | |
| Barnes & Noble Education1 | | | 91,318 | | | | 389,928 | |
| Buckle (The) | | | 68,915 | | | | 1,863,462 | |
| Caleres | | | 29,576 | | | | 702,430 | |
| Camping World Holdings Cl. A2,3 | | | 606,813 | | | | 8,944,424 | |
| CarMax1 | | | 5,500 | | | | 482,185 | |
| Cato Corporation (The) Cl. A | | | 64,847 | | | | 1,128,338 | |
| †Chico’s FAS | | | 137,191 | | | | 522,698 | |
| Children’s Place | | | 52,348 | | | | 3,272,797 | |
| Haverty Furniture | | | 17,217 | | | | 347,095 | |
| Hibbett Sports1 | | | 12,747 | | | | 357,426 | |
| †Michaels Companies1 | | | 37,444 | | | | 302,922 | |
| Monro2 | | | 2,339 | | | | 182,910 | |
| †Shoe Carnival | | | 14,125 | | | | 526,580 | |
| Sleep Number1 | | | 4,514 | | | | 222,269 | |
| †Zumiez1 | | | 5,227 | | | | 180,540 | |
| | | | | | | | 43,854,797 | |
| TEXTILES, APPAREL & LUXURY GOODS - 0.7% | | | | | | | | |
| †Canada Goose Holdings1 | | | 85,000 | | | | 3,080,400 | |
| Crocs1 | | | 10,931 | | | | 457,899 | |
| Culp2 | | | 29,400 | | | | 400,428 | |
| G-III Apparel Group1 | | | 11,050 | | | | 370,175 | |
| J.G. Boswell Company4 | | | 3,940 | | | | 2,364,000 | |
| Movado Group | | | 40,673 | | | | 884,231 | |
| Steven Madden | | | 33,784 | | | | 1,453,050 | |
| Vera Bradley1 | | | 52,176 | | | | 615,677 | |
| Wolverine World Wide2 | | | 76,800 | | | | 2,591,232 | |
| | | | | | | | 12,217,092 | |
| Total (Cost $122,017,306) | | | | | | | 134,327,500 | |
| | | | | | | | | |
| CONSUMER STAPLES - 1.9% | | | | | | | | |
| BEVERAGES - 0.1% | | | | | | | | |
| Compania Cervecerias Unidas ADR2 | | | 64,500 | | | | 1,223,565 | |
| FOOD & STAPLES RETAILING - 0.0% | | | | | | | | |
| †SpartanNash Company | | | 28,701 | | | | 408,702 | |
| FOOD PRODUCTS - 1.4% | | | | | | | | |
| Cal-Maine Foods1,2,3 | | | 34,154 | | | | 1,460,083 | |
| Farmer Bros.1,2 | | | 54,700 | | | | 823,782 | |
| Industrias Bachoco ADR Ser. B | | | 8,040 | | | | 418,080 | |
| John B Sanfilippo & Son | | | 6,354 | | | | 579,993 | |
| Nomad Foods1,2 | | | 143,600 | | | | 3,212,332 | |
| 44 | 2019 Annual Report to Stockholders | THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS |
December 31, 2019
| Schedule of Investments (continued) | | | | | | |
| | | | | | | |
| | | SHARES | | | VALUE | |
| | | | | | | |
| CONSUMER STAPLES (continued) | | | | | | | | |
| FOOD PRODUCTS (continued) | | | | | | | | |
| Seneca Foods Cl. A1,2,3 | | | 236,301 | | | $ | 9,638,718 | |
| Seneca Foods Cl. B1 | | | 13,840 | | | | 567,440 | |
| Tootsie Roll Industries2 | | | 179,144 | | | | 6,115,976 | |
| | | | | | | | 22,816,404 | |
| HOUSEHOLD PRODUCTS - 0.1% | | | | | | | | |
| Central Garden & Pet1 | | | 8,868 | | | | 275,529 | |
| †WD-40 Company | | | 4,152 | | | | 806,069 | |
| | | | | | | | 1,081,598 | |
| PERSONAL PRODUCTS - 0.3% | | | | | | | | |
| Inter Parfums2 | | | 60,045 | | | | 4,365,872 | |
| USANA Health Sciences1 | | | 3,038 | | | | 238,635 | |
| | | | | | | | 4,604,507 | |
| TOBACCO - 0.0% | | | | | | | | |
| Universal Corporation | | | 14,694 | | | | 838,440 | |
| Total (Cost $21,139,205) | | | | | | | 30,973,216 | |
| | | | | | | | | |
| DIVERSIFIED INVESTMENT COMPANIES – 0.0% | | | | | | | | |
| CLOSED-END FUNDS - 0.0% | | | | | | | | |
| †Eagle Point Income | | | 11,844 | | | | 222,134 | |
| Total (Cost $217,183) | | | | | | | 222,134 | |
| | | | | | | | | |
| ENERGY – 6.7% | | | | | | | | |
| ENERGY EQUIPMENT & SERVICES - 4.6% | | | | | | | | |
| CARBO Ceramics1,4 | | | 78,000 | | | | 18,338 | |
| Computer Modelling Group | | | 1,333,624 | | | | 8,442,023 | |
| Diamond Offshore Drilling1,2,3 | | | 214,000 | | | | 1,538,660 | |
| Era Group1 | | | 742,846 | | | | 7,554,744 | |
| Forum Energy Technologies1 | | | 249,431 | | | | 419,044 | |
| Helmerich & Payne2 | | | 94,000 | | | | 4,270,420 | |
| ION Geophysical1 | | | 71,880 | | | | 623,918 | |
| †KLX Energy Services Holdings1 | | | 15,746 | | | | 101,404 | |
| Matrix Service1 | | | 28,866 | | | | 660,454 | |
| Oil States International1,2,3 | | | 217,795 | | | | 3,552,237 | |
| Pason Systems | | | 1,160,780 | | | | 11,719,091 | |
| †ProPetro Holding1 | | | 42,451 | | | | 477,574 | |
| SEACOR Holdings1,2,3 | | | 265,231 | | | | 11,444,718 | |
| SEACOR Marine Holdings1,2 | | | 638,834 | | | | 8,809,521 | |
| TGS-NOPEC Geophysical | | | 465,610 | | | | 14,165,643 | |
| | | | | | | | 73,797,789 | |
| OIL, GAS & CONSUMABLE FUELS - 2.1% | | | | | | | | |
| †Bonanza Creek Energy1 | | | 42,156 | | | | 983,921 | |
| Callon Petroleum1 | | | 63,252 | | | | 305,507 | |
| Cimarex Energy | | | 50,000 | | | | 2,624,500 | |
| †CONSOL Energy1 | | | 73,270 | | | | 1,063,148 | |
| Dorchester Minerals L.P.2 | | | 279,148 | | | | 5,446,177 | |
| Dorian LPG1 | | | 394,936 | | | | 6,113,609 | |
| GeoPark2,3 | | | 53,200 | | | | 1,175,720 | |
| †Parsley Energy Cl. A | | | 224,700 | | | | 4,249,077 | |
| REX American Resources1 | | | 10,209 | | | | 836,730 | |
| San Juan Basin Royalty Trust | | | 212,272 | | | | 539,171 | |
| Unit Corporation1 | | | 15,000 | | | | 10,434 | |
| World Fuel Services2 | | | 224,227 | | | | 9,735,936 | |
| WPX Energy1,2,3 | | | 110,000 | | | | 1,511,400 | |
| | | | | | | | 34,595,330 | |
| Total (Cost $121,392,309) | | | | | | | 108,393,119 | |
| | | | | | | | | |
| FINANCIALS – 16.3% | | | | | | | | |
| BANKS - 3.3% | | | | | | | | |
| †Ameris Bancorp | | | 6,385 | | | | 271,618 | |
| Bank of N.T. Butterfield & Son2 | | | 228,416 | | | | 8,455,960 | |
| Boston Private Financial Holdings | | | 22,382 | | | | 269,256 | |
| Canadian Western Bank | | | 279,500 | | | | 6,864,006 | |
| †CIT Group | | | 13,000 | | | | 593,190 | |
| †Customers Bancorp1 | | | 19,034 | | | | 453,200 | |
| Dime Community Bancshares | | | 7,207 | | | | 150,554 | |
| †Eagle Bancorp | | | 19,919 | | | | 968,661 | |
| Farmers & Merchants Bank of Long Beach4 | | | 730 | | | | 5,729,770 | |
| Fauquier Bankshares2 | | | 160,800 | | | | 3,415,392 | |
| †First BanCorp | | | 76,051 | | | | 805,380 | |
| First Citizens BancShares Cl. A | | | 15,576 | | | | 8,289,703 | |
| †First Commonwealth Financial | | | 57,204 | | | | 830,030 | |
| †First Financial Bancorp | | | 22,019 | | | | 560,163 | |
| †First Hawaiian | | | 10,300 | | | | 297,155 | |
| †First Midwest Bancorp | | | 15,011 | | | | 346,154 | |
| †Franklin Financial Network | | | 3,568 | | | | 122,489 | |
| †Great Western Bancorp | | | 30,340 | | | | 1,054,012 | |
| †Hanmi Financial | | | 16,340 | | | | 326,718 | |
| †HarborOne Bancorp1 | | | 46,400 | | | | 509,936 | |
| †HomeTrust Bancshares | | | 18,700 | | | | 501,721 | |
| †Preferred Bank | | | 18,336 | | | | 1,101,810 | |
| †Prosperity Bancshares | | | 10,403 | | | | 747,872 | |
| †Simmons First National Cl. A | | | 4,909 | | | | 131,512 | |
| Webster Financial2 | | | 193,500 | | | | 10,325,160 | |
| | | | | | | | 53,121,422 | |
| CAPITAL MARKETS - 7.4% | | | | | | | | |
| Ares Management Cl. A2,3 | | | 405,094 | | | | 14,457,805 | |
| Artisan Partners Asset Management Cl. A2 | | | 127,580 | | | | 4,123,386 | |
| ASA Gold and Precious Metals | | | 249,821 | | | | 3,405,060 | |
| Ashmore Group | | | 548,400 | | | | 3,762,807 | |
| Associated Capital Group Cl. A2 | | | 20,200 | | | | 791,840 | |
| †Barings BDC | | | 29,000 | | | | 298,120 | |
| Bolsa Mexicana de Valores | | | 1,723,106 | | | | 3,789,329 | |
| Focus Financial Partners Cl. A1,2,3 | | | 50,000 | | | | 1,473,500 | |
| †Garrison Capital | | | 53,500 | | | | 311,370 | |
| †Golub Capital BDC | | | 22,100 | | | | 407,855 | |
| Houlihan Lokey Cl. A2 | | | 62,940 | | | | 3,075,878 | |
| Jupiter Fund Management | | | 230,000 | | | | 1,247,879 | |
| Lazard Cl. A2 | | | 122,265 | | | | 4,885,709 | |
| MarketAxess Holdings | | | 31,900 | | | | 12,093,609 | |
| †Moelis & Company Cl. A | | | 16,000 | | | | 510,720 | |
| Morningstar2 | | | 84,600 | | | | 12,800,826 | |
| MVC Capital | | | 195,688 | | | | 1,794,459 | |
| †Oaktree Strategic Income | | | 36,200 | | | | 296,478 | |
| Qalaa Holdings1 | | | 7,749,921 | | | | 1,187,838 | |
| Rothschild & Co | | | 50,293 | | | | 1,444,190 | |
| SEI Investments2 | | | 155,200 | | | | 10,162,496 | |
| †Solar Capital | | | 14,400 | | | | 296,928 | |
| Sprott | | | 2,564,800 | | | | 5,885,876 | |
| †Tel Aviv Stock Exchange1 | | | 17,500 | | | | 59,595 | |
| TMX Group | | | 76,000 | | | | 6,581,341 | |
| †Tradeweb Markets Cl. A | | | 161,050 | | | | 7,464,668 | |
| U.S. Global Investors Cl. A | | | 520,551 | | | | 749,593 | |
| Value Partners Group | | | 5,453,000 | | | | 3,359,008 | |
| Virtu Financial Cl. A2 | | | 652,700 | | | | 10,436,673 | |
| Waddell & Reed Financial Cl. A | | | 85,176 | | | | 1,424,143 | |
| Westwood Holdings Group2 | | | 38,850 | | | | 1,150,737 | |
| THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS | 2019 Annual Report to Stockholders | 45 |
Royce Value Trust
| Schedule of Investments (continued) | | | | | | |
| | | | | | | |
| | | SHARES | | | VALUE | |
| | | | | | | |
| FINANCIALS (continued) | | | | | | | | |
| CAPITAL MARKETS (continued) | | | | | | | | |
| WisdomTree Investments | | | 22,900 | | | $ | 110,836 | |
| | | | | | | | 119,840,552 | |
| CONSUMER FINANCE - 0.0% | | | | | | | | |
| †Enova International1 | | | 35,341 | | | | 850,305 | |
| DIVERSIFIED FINANCIAL SERVICES - 0.1% | | | | | | | | |
| †Banco Latinoamericano de Comercio Exterior Cl. E | | | 13,700 | | | | 292,906 | |
| †ECN Capital | | | 163,100 | | | | 601,632 | |
| First Pacific | | | 1,020,000 | | | | 346,881 | |
| Waterloo Investment Holdings1,5 | | | 2,972,000 | | | | 891,600 | |
| | | | | | | | 2,133,019 | |
| INSURANCE - 3.5% | | | | | | | | |
| Alleghany Corporation1 | | | 600 | | | | 479,742 | |
| †Ambac Financial Group1 | | | 24,530 | | | | 529,112 | |
| American Equity Investment Life Holding | | | 23,213 | | | | 694,765 | |
| Assured Guaranty | | | 7,900 | | | | 387,258 | |
| eHealth1 | | | 20,700 | | | | 1,988,856 | |
| E-L Financial | | | 22,500 | | | | 14,363,232 | |
| †Employers Holdings | | | 27,030 | | | | 1,128,503 | |
| Erie Indemnity Cl. A | | | 15,500 | | | | 2,573,000 | |
| †FBL Financial Group Cl. A | | | 5,530 | | | | 325,883 | |
| Independence Holding Company2 | | | 210,523 | | | | 8,858,808 | |
| ProAssurance Corporation2 | | | 394,257 | | | | 14,248,448 | |
| RLI Corp.2 | | | 49,670 | | | | 4,471,293 | |
| Trupanion1,2,3 | | | 136,300 | | | | 5,105,798 | |
| †Universal Insurance Holdings | | | 39,156 | | | | 1,095,976 | |
| | | | | | | | 56,250,674 | |
| INVESTMENT COMPANIES - 0.5% | | | | | | | | |
| †Oaktree Acquisition (Units)1 | | | 800,000 | | | | 8,120,000 | |
| THRIFTS & MORTGAGE FINANCE - 1.5% | | | | | | | | |
| Axos Financial1,2,3 | | | 34,589 | | | | 1,047,355 | |
| †Flagstar Bancorp | | | 26,785 | | | | 1,024,526 | |
| Genworth MI Canada | | | 219,725 | | | | 9,614,396 | |
| †HomeStreet1 | | | 2,922 | | | | 99,348 | |
| †Meridian Bancorp | | | 29,500 | | | | 592,655 | |
| †Meta Financial Group | | | 15,276 | | | | 557,727 | |
| NMI Holdings Cl. A1 | | | 28,770 | | | | 954,589 | |
| OceanFirst Financial | | | 20,400 | | | | 521,016 | |
| †Provident Bancorp1 | | | 48,200 | | | | 600,090 | |
| †Territorial Bancorp | | | 9,300 | | | | 287,742 | |
| Timberland Bancorp2 | | | 274,457 | | | | 8,162,351 | |
| Vestin Realty Mortgage II1,4 | | | 34 | | | | 34,000 | |
| Walker & Dunlop | | | 12,700 | | | | 821,436 | |
| | | | | | | | 24,317,231 | |
| Total (Cost $206,971,387) | | | | | | | 264,633,203 | |
| | | | | | | | | |
| HEALTH CARE – 5.6% | | | | | | | | |
| BIOTECHNOLOGY - 1.1% | | | | | | | | |
| †Acorda Therapeutics1 | | | 25,477 | | | | 51,973 | |
| AMAG Pharmaceuticals1,2,3 | | | 32,423 | | | | 394,588 | |
| †Anika Therapeutics1 | | | 14,413 | | | | 747,314 | |
| BioSpecifics Technologies1 | | | 3,430 | | | | 195,304 | |
| Eagle Pharmaceuticals1 | | | 14,520 | | | | 872,362 | |
| †Emergent BioSolutions1 | | | 2,613 | | | | 140,971 | |
| †Enanta Pharmaceuticals1 | | | 6,661 | | | | 411,517 | |
| †Pfenex1 | | | 16,247 | | | | 178,392 | |
| Sangamo Therapeutics1,2,3 | | | 65,815 | | | | 550,871 | |
| †Vanda Pharmaceuticals1 | | | 25,375 | | | | 416,404 | |
| Zealand Pharma1 | | | 408,857 | | | | 14,447,179 | |
| | | | | | | | 18,406,875 | |
| HEALTH CARE EQUIPMENT & SUPPLIES - 2.8% | | | | | | | | |
| Atrion Corporation | | | 15,750 | | | | 11,836,125 | |
| Haemonetics1 | | | 14,100 | | | | 1,620,090 | |
| †Inogen1 | | | 3,077 | | | | 210,252 | |
| Integer Holdings1,2,3 | | | 42,400 | | | | 3,410,232 | |
| Masimo Corporation1,2 | | | 45,000 | | | | 7,112,700 | |
| Meridian Bioscience1 | | | 50,703 | | | | 495,368 | |
| †Mesa Laboratories2 | | | 38,600 | | | | 9,626,840 | |
| Neogen Corporation1,2,3 | | | 22,400 | | | | 1,461,824 | |
| †OraSure Technologies1 | | | 40,269 | | | | 323,360 | |
| †Quidel Corporation1 | | | 29,829 | | | | 2,238,070 | |
| Surmodics1,2 | | | 161,000 | | | | 6,670,230 | |
| | | | | | | | 45,005,091 | |
| HEALTH CARE PROVIDERS & SERVICES - 0.4% | | | | | | | | |
| AMN Healthcare Services1 | | | 8,938 | | | | 556,927 | |
| Community Health Systems1 | | | 790,000 | | | | 2,291,000 | |
| CorVel Corporation1 | | | 3,967 | | | | 346,557 | |
| †Ensign Group (The) | | | 5,483 | | | | 248,764 | |
| †HealthEquity1 | | | 20,000 | | | | 1,481,400 | |
| †Magellan Health1 | | | 12,610 | | | | 986,732 | |
| †Pennant Group1 | | | 2,741 | | | | 90,645 | |
| †Tivity Health1 | | | 19,621 | | | | 399,189 | |
| †U.S. Physical Therapy | | | 4,583 | | | | 524,066 | |
| | | | | | | | 6,925,280 | |
| HEALTH CARE TECHNOLOGY - 0.1% | | | | | | | | |
| †HealthStream1 | | | 7,060 | | | | 192,032 | |
| †Simulations Plus | | | 67,470 | | | | 1,961,353 | |
| | | | | | | | 2,153,385 | |
| LIFE SCIENCES TOOLS & SERVICES - 0.9% | | | | | | | | |
| Bio-Rad Laboratories Cl. A1 | | | 31,398 | | | | 11,618,202 | |
| Bio-Techne2 | | | 12,023 | | | | 2,639,169 | |
| †Medpace Holdings1 | | | 4,167 | | | | 350,278 | |
| | | | | | | | 14,607,649 | |
| PHARMACEUTICALS - 0.3% | | | | | | | | |
| Alimera Sciences1 | | | 46,125 | | | | 349,627 | |
| †Assertio Therapeutics1 | | | 156,932 | | | | 196,165 | |
| †Corcept Therapeutics1 | | | 63,684 | | | | 770,576 | |
| Innoviva1 | | | 72,352 | | | | 1,024,504 | |
| Lannett Company1 | | | 86,513 | | | | 763,045 | |
| †Supernus Pharmaceuticals1 | | | 21,998 | | | | 521,793 | |
| Theravance Biopharma1,2,3 | | | 34,291 | | | | 887,794 | |
| | | | | | | | 4,513,504 | |
| Total (Cost $55,408,556) | | | | | | | 91,611,784 | |
| | | | | | | | | |
| INDUSTRIALS – 26.9% | | | | | | | | |
| AEROSPACE & DEFENSE - 3.3% | | | | | | | | |
| Aerojet Rocketdyne Holdings1 | | | 17,967 | | | | 820,373 | |
| Ducommun1,2 | | | 105,500 | | | | 5,330,915 | |
| HEICO Corporation2 | | | 195,300 | | | | 22,293,495 | |
| HEICO Corporation Cl. A2 | | | 104,426 | | | | 9,349,260 | |
| Hexcel Corporation2,3 | | | 46,700 | | | | 3,423,577 | |
| Magellan Aerospace | | | 96,800 | | | | 1,048,098 | |
| National Presto Industries | | | 10,886 | | | | 962,213 | |
| Park Aerospace | | | 13,847 | | | | 225,291 | |
| Teledyne Technologies1 | | | 300 | | | | 103,962 | |
| †Vectrus1 | | | 2,650 | | | | 135,839 | |
| 46 | 2019 Annual Report to Stockholders | THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS |
December 31, 2019
| Schedule of Investments (continued) | | | | | | |
| | | | | | | |
| | | SHARES | | | VALUE | |
| | | | | | | |
| INDUSTRIALS (continued) | | | | | | | | |
| AEROSPACE & DEFENSE (continued) | | | | | | | | |
| Virgin Galactic Holdings1 | | | 819,918 | | | $ | 9,470,053 | |
| | | | | | | | 53,163,076 | |
| AIR FREIGHT & LOGISTICS - 0.7% | | | | | | | | |
| †Echo Global Logistics1 | | | 38,490 | | | | 796,743 | |
| Forward Air2,3 | | | 153,490 | | | | 10,736,625 | |
| | | | | | | | 11,533,368 | |
| BUILDING PRODUCTS - 0.8% | | | | | | | | |
| American Woodmark1 | | | 6,364 | | | | 665,102 | |
| Apogee Enterprises | | | 17,129 | | | | 556,692 | |
| Burnham Holdings Cl. B4 | | | 36,000 | | | | 507,600 | |
| †Gibraltar Industries1 | | | 8,150 | | | | 411,086 | |
| Insteel Industries | | | 5,899 | | | | 126,770 | |
| Patrick Industries2 | | | 77,510 | | | | 4,063,849 | |
| †PGT Innovations1 | | | 11,783 | | | | 175,685 | |
| †Quanex Building Products | | | 34,066 | | | | 581,847 | |
| Simpson Manufacturing2 | | | 64,313 | | | | 5,159,832 | |
| †Trex Company1 | | | 3,534 | | | | 317,636 | |
| †Universal Forest Products | | | 6,507 | | | | 310,384 | |
| | | | | | | | 12,876,483 | |
| COMMERCIAL SERVICES & SUPPLIES - 1.7% | | | | | | | | |
| CompX International Cl. A2 | | | 211,100 | | | | 3,079,949 | |
| Heritage-Crystal Clean1,2 | | | 100,106 | | | | 3,140,325 | |
| Kimball International Cl. B2 | | | 253,740 | | | | 5,244,806 | |
| †LSC Communications1,4 | | | 63,906 | | | | 13,165 | |
| †MSA Safety | | | 1,300 | | | | 164,268 | |
| PICO Holdings1 | | | 409,400 | | | | 4,552,528 | |
| Pitney Bowes | | | 145,515 | | | | 586,426 | |
| Ritchie Bros. Auctioneers2 | | | 62,900 | | | | 2,701,555 | |
| Steelcase Cl. A | | | 7,440 | | | | 152,222 | |
| Tetra Tech | | | 12,927 | | | | 1,113,790 | |
| UniFirst Corporation | | | 29,729 | | | | 6,004,663 | |
| US Ecology | | | 4,915 | | | | 284,628 | |
| | | | | | | | 27,038,325 | |
| CONSTRUCTION & ENGINEERING - 2.6% | | | | | | | | |
| Arcosa2 | | | 112,420 | | | | 5,008,311 | |
| Comfort Systems USA | | | 25,375 | | | | 1,264,944 | |
| IES Holdings1,2 | | | 594,244 | | | | 15,248,301 | |
| Infrastructure and Energy Alternatives1 | | | 600,000 | | | | 1,932,000 | |
| Jacobs Engineering Group2,3 | | | 83,500 | | | | 7,500,805 | |
| MYR Group1 | | | 2,242 | | | | 73,067 | |
| Sterling Construction1,2,3 | | | 143,978 | | | | 2,027,210 | |
| Valmont Industries2 | | | 57,455 | | | | 8,605,610 | |
| Williams Industrial Services Group1,4 | | | 631,820 | | | | 1,086,730 | |
| | | | | | | | 42,746,978 | |
| ELECTRICAL EQUIPMENT - 1.0% | | | | | | | | |
| †Encore Wire | | | 14,409 | | | | 827,077 | |
| EnerSys | | | 2,950 | | | | 220,748 | |
| LSI Industries | | | 814,857 | | | | 4,929,885 | |
| Powell Industries2 | | | 94,500 | | | | 4,629,555 | |
| Preformed Line Products2 | | | 91,600 | | | | 5,528,060 | |
| Sensata Technologies Holding1 | | | 7,500 | | | | 404,025 | |
| | | | | | | | 16,539,350 | |
| INDUSTRIAL CONGLOMERATES - 0.6% | | | | | | | | |
| Carlisle Companies | | | 3,500 | | | | 566,440 | |
| Raven Industries2 | | | 271,725 | | | | 9,363,643 | |
| | | | | | | | 9,930,083 | |
| MACHINERY - 9.0% | | | | | | | | |
| CIRCOR International1 | | | 135,627 | | | | 6,271,392 | |
| Colfax Corporation1,2,3 | | | 435,832 | | | | 15,855,568 | |
| Franklin Electric2,3 | | | 218,800 | | | | 12,541,616 | |
| Helios Technologies2 | | | 264,014 | | | | 12,205,367 | |
| Hillenbrand | | | 37,374 | | | | 1,244,928 | |
| John Bean Technologies2,3 | | | 108,106 | | | | 12,179,222 | |
| Kadant2 | | | 126,019 | | | | 13,274,841 | |
| Kennametal | | | 4,490 | | | | 165,636 | |
| Lincoln Electric Holdings2 | | | 113,960 | | | | 11,023,351 | |
| Lindsay Corporation2,3 | | | 110,000 | | | | 10,558,900 | |
| †Meritor1 | | | 27,130 | | | | 710,535 | |
| Mueller Industries | | | 41,248 | | | | 1,309,624 | |
| NN1 | | | 308,700 | | | | 2,855,475 | |
| Nordson Corporation2 | | | 23,096 | | | | 3,760,953 | |
| Proto Labs1 | | | 10,000 | | | | 1,015,500 | |
| RBC Bearings1 | | | 84,058 | | | | 13,309,744 | |
| Standex International | | | 1,793 | | | | 142,274 | |
| Tennant Company2 | | | 116,504 | | | | 9,077,992 | |
| Titan International | | | 173,100 | | | | 626,622 | |
| Wabash National | | | 67,990 | | | | 998,773 | |
| Watts Water Technologies Cl. A2 | | | 61,000 | | | | 6,085,360 | |
| Woodward2 | | | 89,500 | | | | 10,600,380 | |
| | | | | | | | 145,814,053 | |
| MARINE - 2.7% | | | | | | | | |
| Clarkson | | | 471,100 | | | | 18,876,574 | |
| Eagle Bulk Shipping1 | | | 320,478 | | | | 1,474,199 | |
| Kirby Corporation1,2 | | | 265,200 | | | | 23,743,356 | |
| | | | | | | | 44,094,129 | |
| PROFESSIONAL SERVICES - 1.2% | | | | | | | | |
| Exponent2 | | | 100,000 | | | | 6,901,000 | |
| Forrester Research1 | | | 34,570 | | | | 1,441,569 | |
| FTI Consulting1 | | | 1,509 | | | | 166,986 | |
| Heidrick & Struggles International | | | 44,624 | | | | 1,450,280 | |
| Korn Ferry | | | 32,548 | | | | 1,380,035 | |
| ManpowerGroup2 | | | 15,842 | | | | 1,538,258 | |
| †Morneau Shepell | | | 17,500 | | | | 455,374 | |
| TrueBlue1,2,3 | | | 39,316 | | | | 945,943 | |
| †Upwork1 | | | 556,200 | | | | 5,934,654 | |
| | | | | | | | 20,214,099 | |
| ROAD & RAIL - 1.1% | | | | | | | | |
| ArcBest | | | 14,279 | | | | 394,100 | |
| Landstar System2 | | | 121,080 | | | | 13,787,380 | |
| Patriot Transportation Holding1,2 | | | 139,100 | | | | 2,709,668 | |
| Saia1,2,3 | | | 2,754 | | | | 256,453 | |
| Universal Logistics Holdings2 | | | 78,916 | | | | 1,496,247 | |
| | | | | | | | 18,643,848 | |
| TRADING COMPANIES & DISTRIBUTORS - 2.2% | | | | | | | | |
| Air Lease Cl. A2 | | | 392,700 | | | | 18,661,104 | |
| Applied Industrial Technologies | | | 5,116 | | | | 341,186 | |
| †BMC Stock Holdings1 | | | 119,700 | | | | 3,434,193 | |
| †EVI Industries1 | | | 20,322 | | | | 549,507 | |
| †GMS1 | | | 25,788 | | | | 698,339 | |
| Houston Wire & Cable1,6 | | | 877,363 | | | | 3,869,171 | |
| †Richelieu Hardware | | | 88,400 | | | | 1,846,900 | |
| SiteOne Landscape Supply1,2,3 | | | 25,000 | | | | 2,266,250 | |
| Watsco2,3 | | | 19,500 | | | | 3,512,925 | |
| | | | | | | | 35,179,575 | |
| Total (Cost $285,250,163) | | | | | | | 437,773,367 | |
| THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS | 2019 Annual Report to Stockholders | 47 |
Royce Value Trust
| Schedule of Investments (continued) | | | | | | |
| | | | | | | |
| | | SHARES | | | VALUE | |
| | | | | | | |
| INFORMATION TECHNOLOGY – 20.0% | | | | | | | | |
| COMMUNICATIONS EQUIPMENT - 0.2% | | | | | | | | |
| ADTRAN2 | | | 214,973 | | | $ | 2,126,083 | |
| CalAmp Corporation1 | | | 38,928 | | | | 372,930 | |
| Comtech Telecommunications | | | 15,866 | | | | 563,085 | |
| NetScout Systems1 | | | 8,160 | | | | 196,411 | |
| | | | | | | | 3,258,509 | |
| ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS - 8.9% | | | | | | | | |
| Anixter International1,2 | | | 50,995 | | | | 4,696,640 | |
| †Badger Meter | | | 3,560 | | | | 231,151 | |
| Benchmark Electronics | | | 8,142 | | | | 279,759 | |
| Cognex Corporation2 | | | 340,100 | | | | 19,059,204 | |
| Coherent1 | | | 88,090 | | | | 14,653,772 | |
| Fabrinet1,2 | | | 193,660 | | | | 12,556,914 | |
| FARO Technologies1,2,3 | | | 259,947 | | | | 13,088,331 | |
| FLIR Systems2 | | | 630,037 | | | | 32,806,027 | |
| Insight Enterprises1 | | | 29,951 | | | | 2,105,256 | |
| IPG Photonics1 | | | 53,300 | | | | 7,724,236 | |
| Kimball Electronics1 | | | 24,797 | | | | 435,187 | |
| Littelfuse | | | 20,520 | | | | 3,925,476 | |
| Methode Electronics | | | 10,351 | | | | 407,312 | |
| National Instruments2 | | | 235,650 | | | | 9,977,421 | |
| nLIGHT1,2 | | | 165,610 | | | | 3,358,571 | |
| †PAR Technology1 | | | 156,353 | | | | 4,806,291 | |
| Perceptron1 | | | 357,700 | | | | 1,967,350 | |
| Richardson Electronics6 | | | 711,475 | | | | 4,005,604 | |
| TTM Technologies1,2,3 | | | 562,687 | | | | 8,468,439 | |
| Vishay Intertechnology | | | 12,340 | | | | 262,719 | |
| Vishay Precision Group1 | | | 7,950 | | | | 270,300 | |
| | | | | | | | 145,085,960 | |
| IT SERVICES - 1.3% | | | | | | | | |
| †Cardtronics1 | | | 20,118 | | | | 898,269 | |
| †Computer Services4 | | | 24,492 | | | | 1,089,894 | |
| CSG Systems International | | | 13,242 | | | | 685,671 | |
| †EVERTEC | | | 27,498 | | | | 936,032 | |
| Hackett Group (The)2 | | | 285,266 | | | | 4,604,193 | |
| KBR2 | | | 337,400 | | | | 10,290,700 | |
| NIC | | | 5,470 | | | | 122,254 | |
| Perficient1 | | | 2,790 | | | | 128,535 | |
| TTEC Holdings | | | 2,853 | | | | 113,036 | |
| Unisys Corporation1,2,3 | | | 160,000 | | | | 1,897,600 | |
| †WEX1 | | | 600 | | | | 125,676 | |
| | | | | | | | 20,891,860 | |
| SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 7.4% | | | | | | | | |
| Advanced Energy Industries1,2,3 | | | 15,242 | | | | 1,085,230 | |
| Axcelis Technologies1 | | | 14,900 | | | | 359,016 | |
| Brooks Automation2 | | | 389,600 | | | | 16,347,616 | |
| Cabot Microelectronics2 | | | 63,589 | | | | 9,177,164 | |
| Cirrus Logic1,2,3 | | | 295,000 | | | | 24,310,950 | |
| Cohu | | | 14,053 | | | | 321,111 | |
| Diodes1,2,3 | | | 281,504 | | | | 15,868,380 | |
| Entegris2,3 | | | 195,200 | | | | 9,777,568 | |
| †Ichor Holdings1 | | | 24,219 | | | | 805,766 | |
| Kulicke & Soffa Industries2 | | | 53,210 | | | | 1,447,312 | |
| Lattice Semiconductor1 | | | 49,000 | | | | 937,860 | |
| MKS Instruments2 | | | 248,339 | | | | 27,319,773 | |
| Nova Measuring Instruments1,2,3 | | | 46,620 | | | | 1,763,635 | |
| Onto Innovation1 | | | 53,272 | | | | 1,946,559 | |
| Photronics1 | | | 183,700 | | | | 2,895,112 | |
| †Rambus1 | | | 77,914 | | | | 1,073,265 | |
| Silicon Motion Technology ADR2 | | | 28,560 | | | | 1,448,278 | |
| †SMART Global Holdings1 | | | 27,706 | | | | 1,051,166 | |
| †SolarEdge Technologies1 | | | 15,444 | | | | 1,468,570 | |
| Ultra Clean Holdings1 | | | 10,656 | | | | 250,096 | |
| Xperi Corporation2 | | | 79,127 | | | | 1,463,850 | |
| | | | | | | | 121,118,277 | |
| SOFTWARE - 2.2% | | | | | | | | |
| Descartes Systems Group (The)1,2,3 | | | 181,600 | | | | 7,757,952 | |
| †Ebix | | | 1,761 | | | | 58,835 | |
| j2 Global1,2,3 | | | 24,605 | | | | 2,305,735 | |
| Manhattan Associates1,2,3 | | | 94,900 | | | | 7,568,275 | |
| Progress Software | | | 11,153 | | | | 463,407 | |
| RealNetworks1 | | | 109,950 | | | | 131,940 | |
| †SharpSpring1 | | | 20,000 | | | | 229,400 | |
| Support.com | | | 216,766 | | | | 236,275 | |
| †SVMK1 | | | 408,100 | | | | 7,292,747 | |
| TiVo | | | 19,836 | | | | 168,209 | |
| †Upland Software1 | | | 267,300 | | | | 9,545,283 | |
| | | | | | | | 35,758,058 | |
| Total (Cost $212,066,410) | | | | | | | 326,112,664 | |
| | | | | | | | | |
| MATERIALS – 12.2% | | | | | | | | |
| CHEMICALS - 5.5% | | | | | | | | |
| Chase Corporation2 | | | 79,059 | | | | 9,366,910 | |
| Element Solutions1,2 | | | 822,800 | | | | 9,610,304 | |
| FutureFuel Corporation | | | 594,083 | | | | 7,360,688 | |
| Hawkins2 | | | 89,062 | | | | 4,079,930 | |
| †Huntsman Corporation | | | 17,500 | | | | 422,800 | |
| Ingevity Corporation1,2,3 | | | 43,200 | | | | 3,774,816 | |
| Innospec2 | | | 94,383 | | | | 9,762,978 | |
| Minerals Technologies2 | | | 207,492 | | | | 11,957,764 | |
| NewMarket Corporation | | | 8,000 | | | | 3,892,160 | |
| Quaker Chemical | | | 171,569 | | | | 28,226,532 | |
| Stepan Company | | | 4,000 | | | | 409,760 | |
| †Tredegar Corporation | | | 23,989 | | | | 536,154 | |
| †Trinseo | | | 7,976 | | | | 296,787 | |
| Westlake Chemical | | | 5,100 | | | | 357,765 | |
| | | | | | | | 90,055,348 | |
| CONSTRUCTION MATERIALS - 0.2% | | | | | | | | |
| Imerys | | | 90,000 | | | | 3,803,909 | |
| †U.S. Concrete1 | | | 6,620 | | | | 275,789 | |
| | | | | | | | 4,079,698 | |
| CONTAINERS & PACKAGING - 0.1% | | | | | | | | |
| Myers Industries | | | 31,785 | | | | 530,174 | |
| †Packaging Corporation of America | | | 1,500 | | | | 167,985 | |
| UFP Technologies1 | | | 2,720 | | | | 134,939 | |
| | | | | | | | 833,098 | |
| METALS & MINING - 5.6% | | | | | | | | |
| Alamos Gold Cl. A | | | 2,066,300 | | | | 12,459,381 | |
| Ferroglobe (Warranty Insurance Trust)1,5 | | | 49,300 | | | | 0 | |
| Franco-Nevada2 | | | 113,900 | | | | 11,765,870 | |
| Gold Fields ADR | | | 370,000 | | | | 2,442,000 | |
| Haynes International2 | | | 113,900 | | | | 4,075,342 | |
| Hecla Mining | | | 721,300 | | | | 2,445,207 | |
| IAMGOLD Corporation1 | | | 600,000 | | | | 2,238,000 | |
| Lundin Mining | | | 640,000 | | | | 3,824,573 | |
| MAG Silver1 | | | 198,900 | | | | 2,354,976 | |
| Major Drilling Group International1 | | | 2,217,291 | | | | 9,681,599 | |
| 48 | 2019 Annual Report to Stockholders | THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS |
December 31, 2019
| Schedule of Investments (continued) | | | | | | |
| | | | | | | |
| | | SHARES | | | VALUE | |
| | | | | | | |
| MATERIALS (continued) | | | | | | | | |
| METALS & MINING (continued) | | | | | | | | |
| Materion Corporation | | | 5,377 | | | $ | 319,663 | |
| Pan American Silver | | | 124,627 | | | | 2,952,414 | |
| Pretium Resources1 | | | 101,000 | | | | 1,123,907 | |
| Reliance Steel & Aluminum2,3 | | | 158,300 | | | | 18,958,008 | |
| Royal Gold2 | | | 16,600 | | | | 2,029,350 | |
| †SunCoke Energy | | | 75,080 | | | | 467,748 | |
| Synalloy Corporation1,2,3 | | | 178,800 | | | | 2,308,308 | |
| VanEck Vectors Junior Gold Miners ETF | | | 183,000 | | | | 7,733,580 | |
| †Warrior Met Coal | | | 21,030 | | | | 444,364 | |
| Worthington Industries2 | | | 80,400 | | | | 3,391,272 | |
| | | | | | | | 91,015,562 | |
| PAPER & FOREST PRODUCTS - 0.8% | | | | | | | | |
| †Boise Cascade | | | 32,725 | | | | 1,195,444 | |
| Mercer International | | | 78,779 | | | | 968,982 | |
| Neenah2,3 | | | 16,700 | | | | 1,176,181 | |
| Schweitzer-Mauduit International | | | 31,853 | | | | 1,337,508 | |
| Stella-Jones | | | 262,458 | | | | 7,583,400 | |
| | | | | | | | 12,261,515 | |
| Total (Cost $152,899,193) | | | | | | | 198,245,221 | |
| | | | | | | | | |
| REAL ESTATE – 4.2% | | | | | | | | |
| EQUITY REAL ESTATE INVESTMENT TRUSTS (REITS) - 0.0% | | | | | | | | |
| New York REIT1,5 | | | 15,000 | | | | 193,500 | |
| REAL ESTATE MANAGEMENT & DEVELOPMENT - 4.2% | | | | | | | | |
| †Colliers International Group | | | 20,700 | | | | 1,613,979 | |
| FirstService Corporation | | | 185,200 | | | | 17,231,008 | |
| FRP Holdings1,2,3 | | | 153,158 | | | | 7,628,800 | |
| Jones Lang LaSalle | | | 4,349 | | | | 757,117 | |
| Kennedy-Wilson Holdings2 | | | 712,690 | | | | 15,892,987 | |
| Marcus & Millichap1,2,3 | | | 236,598 | | | | 8,813,276 | |
| RMR Group (The) Cl. A2 | | | 80,100 | | | | 3,655,764 | |
| St. Joe Company (The)1,2,3 | | | 197,000 | | | | 3,906,510 | |
| Tejon Ranch1,2,3 | | | 557,136 | | | | 8,903,033 | |
| | | | | | | | 68,402,474 | |
| Total (Cost $51,462,304) | | | | | | | 68,595,974 | |
| | | | | | | | | |
| UTILITIES – 0.2% | | | | | | | | |
| GAS UTILITIES - 0.1% | | | | | | | | |
| UGI Corporation2 | | | 29,700 | | | | 1,341,252 | |
| MULTI-UTILITIES - 0.0% | | | | | | | | |
| †Avista Corporation | | | 3,195 | | | | 153,647 | |
| WATER UTILITIES - 0.1% | | | | | | | | |
| †American States Water | | | 11,279 | | | | 977,213 | |
| Total (Cost $2,335,519) | | | | | | | 2,472,112 | |
| | | | | | | | | |
| TOTAL COMMON STOCKS | | | | | | | | |
| (Cost $1,264,846,064) | | | | | | | 1,685,853,375 | |
| | | | | | | | | |
| WARRANTS – 0.0% | | | | | | | | |
| | | | | | | | | |
| INDUSTRIALS – 0.0% | | | | | | | | |
| CONSTRUCTION & ENGINEERING - 0.0% | | | | | | | | |
| Infrastructure and Energy Alternatives (Warrants)1 | | | 625,000 | | | | 50,000 | |
| Total (Cost $470,283) | | | | | | | 50,000 | |
| | | | | | | | | |
| INFORMATION TECHNOLOGY – 0.0% | | | | | | | | |
| SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 0.0% | | | | | | | | |
| eMagin Corporation (Warrants)1,5 | | | 50,000 | | | | 0 | |
| Total (Cost $0) | | | | | | | 0 | |
| | | | | | | | | |
| TOTAL WARRANTS | | | | | | | | |
| (Cost $470,283) | | | | | | | 50,000 | |
| | | | | | | | | |
| REPURCHASE AGREEMENT – 0.7% | | | | | | | | |
Fixed Income Clearing Corporation, 0.25% dated 12/31/19, due 1/2/20, maturity value
$12,153,169 (collateralized by obligations of various U.S. Government Agencies, 2.00%
due 5/31/24, valued at $12,401,025) | | | | | | | | |
| (Cost $12,153,000) | | | | | | | 12,153,000 | |
| | | | | | | | | |
| TOTAL INVESTMENTS – 104.3% | | | | | | | | |
| (Cost $1,277,469,347) | | | | | | | 1,698,056,375 | |
| | | | | | | | | |
| LIABILITIES LESS CASH AND OTHER ASSETS – (4.3)% | | | | | | | (70,016,882 | ) |
| | | | | | | | | |
| NET ASSETS - 100.0% | | | | | | $ | 1,628,039,493 | |
ADR – American Depository Receipt
† New additions in 2019.
1Non-income producing.
2All or a portion of these securities were pledged as collateral in connection with the Fund’s revolving credit agreement at December 31, 2019. Total market value of pledged securities at December 31, 2019, was $162,038,473.
3At December 31, 2019, a portion of these securities were rehypothecated in connection with the Fund’s revolving credit agreement in the aggregate amount of $57,983,069.
4These securities are defined as Level 2 securities due to fair value being based on quoted prices for similar securities. See Notes to Financial Statements.
5Securities 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.
6At December 31, 2019, 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.
Bold indicates the Fund’s 20 largest equity holdings in terms of December 31, 2019, market value.
TAX INFORMATION: The cost of total investments for Federal income tax purposes was $1,278,122,594. At December 31, 2019, net unrealized appreciation for all securities was $419,933,781 consisting of aggregate gross unrealized appreciation of $526,934,973 and aggregate gross unrealized depreciation of $107,001,192. The primary causes of the difference between book and tax basis cost are the timing of the recognition of losses on securities sold, investments in publicly traded partnerships and Trusts, investments in Real Estate Investment Trusts and mark-to-market of Passive Foreign Investment Companies.
| THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS | 2019 Annual Report to Stockholders | 49 |
| Royce Value Trust | December 31, 2019 |
| Statement of Assets and Liabilities | | | | |
| | | | | |
| ASSETS: | | | | |
| Investments at value | | | | |
| Non-Affiliated Companies | | $ | 1,678,028,600 | |
| Affiliated Companies | | | 7,874,775 | |
| Repurchase agreements (at cost and value) | | | 12,153,000 | |
| Cash and foreign currency | | | 7,611 | |
| Receivable for investments sold | | | 17,041 | |
| Receivable for dividends and interest | | | 1,289,664 | |
| Prepaid expenses and other assets | | | 691,796 | |
| Total Assets | | | 1,700,062,487 | |
| LIABILITIES: | | | | |
| Revolving credit agreement | | | 70,000,000 | |
| Payable for investments purchased | | | 592,746 | |
| Payable for investment advisory fee | | | 955,299 | |
| Payable for directors' fees | | | 41,209 | |
| Payable for interest expense | | | 172,603 | |
| Accrued expenses | | | 261,137 | |
| Total Liabilities | | | 72,022,994 | |
| Net Assets | | $ | 1,628,039,493 | |
| ANALYSIS OF NET ASSETS: | | | | |
| Paid-in capital - $0.001 par value per share; 98,217,833 shares outstanding (150,000,000 shares authorized) | | $ | 1,206,998,945 | |
| Total distributable earnings (loss) | | | 421,040,548 | |
| Net Assets (net asset value per share - $16.58) | | $ | 1,628,039,493 | |
| Investments at identified cost | | $ | 1,265,316,347 | |
| 50 | 2019 Annual Report to Stockholders | THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS |
| Royce Value Trust | Year Ended December 31, 2019 |
| Statement of Operations | | |
| | | |
| INVESTMENT INCOME: | | | | |
| INCOME: | | | | |
| Dividends | | | | |
| Non-Affiliated Companies | | $ | 22,043,587 | |
| Affiliated Companies | | | 154,225 | |
| Foreign withholding tax | | | (770,434 | ) |
| Interest | | | 196,291 | |
| Rehypothecation income | | | 267,943 | |
| Total income | | | 21,891,612 | |
| EXPENSES: | | | | |
| Investment advisory fees | | | 7,398,487 | |
| Interest expense | | | 2,324,015 | |
| Administrative and office facilities | | | 650,825 | |
| Stockholder reports | | | 435,443 | |
| Directors' fees | | | 203,660 | |
| Custody and transfer agent fees | | | 203,080 | |
| Professional fees | | | 122,729 | |
| Other expenses | | | 142,493 | |
| Total expenses | | | 11,480,732 | |
| Net investment income (loss) | | | 10,410,880 | |
| REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY: | | | | |
| NET REALIZED GAIN (LOSS): | | | | |
| Investments in Non-Affiliated Companies | | | 80,268,183 | |
| Investments in Affiliated Companies | | | (2,022,091 | ) |
| Foreign currency transactions | | | (21,903 | ) |
| NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION): | | | | |
| Investments in Non-Affiliated Companies | | | 296,072,779 | |
| Investments in Affiliated Companies | | | (178,289 | ) |
| Other assets and liabilities denominated in foreign currency | | | 6,121 | |
| Net realized and unrealized gain (loss) on investments and foreign currency | | | 374,124,800 | |
| NET INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS | | $ | 384,535,680 | |
| THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS | 2019 Annual Report to Stockholders | 51 |
| Royce Value Trust |
| |
| Statement of Changes in Net Assets |
| | | YEAR ENDED 12/31/19 | | YEAR ENDED 12/31/18 |
| | | | | |
| INVESTMENT OPERATIONS: | | | | | | | | |
| Net investment income (loss) | | $ | 10,410,880 | | | $ | 16,192,591 | |
| Net realized gain (loss) on investments and foreign currency | | | 78,224,189 | | | | 111,658,737 | |
| Net change in unrealized appreciation (depreciation) on investments and foreign currency | | | 295,900,611 | | | | (347,149,860 | ) |
| Net increase (decrease) in net assets from investment operations | | | 384,535,680 | | | | (219,298,532 | ) |
| DISTRIBUTIONS: | | | | | | | | |
| Total distributable earnings | | | (105,830,150 | ) | | | (112,695,474 | ) |
| Total distributions | | | (105,830,150 | ) | | | (112,695,474 | ) |
| CAPITAL STOCK TRANSACTIONS: | | | | | | | | |
| Net proceeds from rights offering | | | – | | | | 108,466,176 | |
| Reinvestment of distributions | | | 45,227,078 | | | | 47,185,262 | |
| Total capital stock transactions | | | 45,227,078 | | | | 155,651,438 | |
| Net Increase (Decrease) In Net Assets | | | 323,932,608 | | | | (176,342,568 | ) |
| NET ASSETS: | | | | | | | | |
| Beginning of year | | | 1,304,106,885 | | | | 1,480,449,453 | |
| End of year | | $ | 1,628,039,493 | | | $ | 1,304,106,885 | |
| 52 | 2019 Annual Report to Stockholders | THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS |
| Royce Value Trust | Year Ended December 31, 2019 |
| | |
| Statement of Cash Flows | |
| CASH FLOWS FROM OPERATING ACTIVITIES: | | |
| Net increase (decrease) in net assets from investment operations | | $ | 384,535,680 | |
| Adjustments to reconcile net increase (decrease) in net assets from investment operations to net cash provided by operating activities: | | | | |
| Purchases of long-term investments | | | (459,201,963 | ) |
| Proceeds from sales and maturities of long-term investments | | | 510,459,522 | |
| Net purchases, sales and maturities of short-term investments | | | (12,153,000 | ) |
| Net (increase) decrease in dividends and interest receivable and other assets | | | 15,359 | |
| Net increase (decrease) in interest expense payable, accrued expenses and other liabilities | | | 587,831 | |
| Net change in unrealized appreciation (depreciation) on investments | | | (295,894,490 | ) |
| Net realized gain (loss) on investments | | | (78,246,092 | ) |
| Net cash provided by operating activities | | | 50,102,847 | |
| CASH FLOWS FROM FINANCING ACTIVITIES: | | | | |
| Increase in revolving credit agreement | | | 25,000,000 | |
| Distributions | | | (105,830,150 | ) |
| Decrease in payable to custodian for cash and foreign currency overdrawn | | | (14,492,164 | ) |
| Reinvestment of distributions | | | 45,227,078 | |
| Net cash used for financing activities | | | (50,095,236 | ) |
| INCREASE (DECREASE) IN CASH: | | | 7,611 | |
| Cash and foreign currency at beginning of year | | | – | |
| Cash and foreign currency at end of year | | $ | 7,611 | |
Supplemental disclosure of cash flow information:
For the year ended December 31, 2019, the Fund paid $2,170,147 in interest expense.
| THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS | 2019 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 |
| | | | 12/31/19 | | | | 12/31/18 | | | | 12/31/17 | | | | 12/31/16 | | | | 12/31/15 | |
| Net Asset Value, Beginning of Period | | $ | 13.73 | | | $ | 17.50 | | | $ | 15.85 | | | $ | 13.56 | | | $ | 16.24 | |
| INVESTMENT OPERATIONS: | | | | | | | | | | | | | | | | | | | | |
| Net investment income (loss) | | | 0.11 | | | | 0.18 | | | | 0.13 | | | | 0.12 | | | | 0.12 | |
| Net realized and unrealized gain (loss) on investments and foreign currency | | | 3.90 | | | | (2.46 | ) | | | 2.74 | | | | 3.27 | | | | (1.48 | ) |
| Net increase (decrease) in net assets from investment operations | | | 4.01 | | | | (2.28 | ) | | | 2.87 | | | | 3.39 | | | | (1.36 | ) |
| DISTRIBUTIONS: | | | | | | | | | | | | | | | | | | | | |
| Net investment income | | | (0.11 | ) | | | (0.19 | ) | | | (0.13 | ) | | | (0.13 | ) | | | (0.16 | ) |
| Net realized gain on investments and foreign currency | | | (0.99 | ) | | | (1.07 | ) | | | (1.03 | ) | | | (0.89 | ) | | | (1.08 | ) |
| Total distributions | | | (1.10 | ) | | | (1.26 | ) | | | (1.16 | ) | | | (1.02 | ) | | | (1.24 | ) |
| CAPITAL STOCK TRANSACTIONS: | | | | | | | | | | | | | | | | | | | | |
| Effect of reinvestment of distributions by Common Stockholders | | | (0.06 | ) | | | (0.06 | ) | | | (0.06 | ) | | | (0.08 | ) | | | (0.08 | ) |
| Effect of rights offering | | | | | | | (0.17 | ) | | | | | | | | | | | | |
| Total capital stock transactions | | | (0.06 | ) | | | (0.23 | ) | | | (0.06 | ) | | | (0.08 | ) | | | (0.08 | ) |
| Net Asset Value, End of Period | | $ | 16.58 | | | $ | 13.73 | | | $ | 17.50 | | | $ | 15.85 | | | $ | 13.56 | |
| Market Value, End of Period | | $ | 14.77 | | | $ | 11.80 | | | $ | 16.17 | | | $ | 13.39 | | | $ | 11.77 | |
| TOTAL RETURN:1 | | | | | | | | | | | | | | | | | | | | |
| Net Asset Value | | | 30.46 | % | | | (14.45 | )% | | | 19.31 | % | | | 26.87 | % | | | (8.09 | )% |
| Market Value | | | 35.23 | % | | | (20.43 | )% | | | 30.49 | % | | | 23.48 | % | | | (9.59 | )% |
| RATIOS BASED ON AVERAGE NET ASSETS: | | | | | | | | | | | | | | | | | | | | |
| Investment advisory fee expense2 | | | 0.49 | % | | | 0.42 | % | | | 0.43 | % | | | 0.51 | % | | | 0.50 | % |
| Other operating expenses | | | 0.27 | % | | | 0.21 | % | | | 0.22 | % | | | 0.22 | % | | | 0.18 | % |
| Total expenses (net) | | | 0.76 | % | | | 0.63 | % | | | 0.65 | % | | | 0.73 | % | | | 0.68 | % |
| Expenses excluding interest expense | | | 0.61 | % | | | 0.52 | % | | | 0.54 | % | | | 0.62 | % | | | 0.61 | % |
| Expenses prior to balance credits | | | 0.76 | % | | | 0.63 | % | | | 0.65 | % | | | 0.73 | % | | | 0.68 | % |
| Net investment income (loss) | | | 0.69 | % | | | 1.06 | % | | | 0.80 | % | | | 0.85 | % | | | 0.78 | % |
| SUPPLEMENTAL DATA: | | | | | | | | | | | | | | | | | | | | |
| Net Assets, End of Period (in thousands) | | $ | 1,628,039 | | | $ | 1,304,107 | | | $ | 1,480,449 | | | $ | 1,296,012 | | | $ | 1,072,035 | |
| Portfolio Turnover Rate | | | 30 | % | | | 28 | % | | | 19 | % | | | 28 | % | | | 35 | % |
| REVOLVING CREDIT AGREEMENT: | | | | | | | | | | | | | | | | | | | | |
| Asset coverage | | | 2426 | % | | | 2998 | % | | | 2215 | % | | | 1951 | % | | | 1631 | % |
| Asset coverage per $1,000 | | $ | 24,258 | | | $ | 29,980 | | | $ | 22,149 | | | $ | 19,514 | | | $ | 16,315 | |
| 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, sale and dividend reinvestment 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 | 2019 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.”
Royce & Associates, LP, the Fund’s investment adviser, primarily conducts business using the name Royce Investment Partners (“Royce”).
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, 2019. 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 | | $ | 1,673,924,778 | | | $ | 10,843,497 | | | $ | 1,085,100 | | | $ | 1,685,853,375 | |
| Warrants | | | 50,000 | | | | – | | | | 0 | | | | 50,000 | |
| Repurchase Agreement | | | – | | | | 12,153,000 | | | | – | | | | 12,153,000 | |
2019 Annual Report to Stockholders | 55
Royce Value Trust
Notes to Financial Statements (continued)
VALUATION OF INVESTMENTS (continued):
Level 3 Reconciliation:
| | BALANCE AS OF 12/31/18 | SALES | REALIZED GAIN (LOSS) | UNREALIZED GAIN (LOSS)1 | BALANCE AS OF 12/31/19 |
| Common Stocks | $ 1,100,250 | | $ 15,150 | | $ | 0 | $ | – | $ 1,085,100 | |
| Warrants | 0 | | – | | | – | | – | 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. |
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
12/31/19 | VALUATION TECHNIQUE(S) | UNOBSERVABLE INPUT(S) | RANGE AVERAGE | IMPACT TO VALUATION FROM
AN INCREASE IN INPUT1 |
| Waterloo Investment Holdings | $ 891,600 | Discounted Present Value
Balance Sheet Analysis | Liquidity Discount | 30%-40% | Decrease |
| New York REIT | 193,500 | Guidance from Options Clearing Authorities
Balance Sheet Analysis | Liquidity Discount | 20%-30% | 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, 2019 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, other than investments in securities at the end of the reporting period, as a result of changes in foreign currency exchange rates.
The Fund does not isolate that portion of the results of operations resulting from fluctuations in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.
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.
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
56 | 2019 Annual Report to Stockholders
Royce Value Trust
Notes to Financial Statements (continued)
DISTRIBUTIONS (continued):
average or the distribution required by IRS regulations. Distributions to Common Stockholders are recorded on ex-dividend date. To the extent that distributions in any year are not paid from long-term capital gains, net investment income or net short-term capital gains, they will represent a return of capital. Distributions are determined in accordance with income tax regulations that may differ from accounting principles generally accepted in the United States of America. Permanent book and tax differences relating to stockholder distributions will result in reclassifications within the capital accounts. Undistributed net investment income may include temporary book and tax basis differences, which will reverse in a subsequent period. Any taxable income or gain remaining undistributed at fiscal year end is distributed in the following year.
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 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 3,207,809 and 3,301,756 shares of Common Stock as reinvestment of distributions for the years ended December 31, 2019 and December 31, 2018, respectively.
On July 5, 2018, the Fund completed a rights offering of Common Stock to its stockholders at the rate of one common share for each 10 rights held by stockholders of record on May 30, 2018. The rights offering resulted in the issuance of 7,120,544 common shares at a price of $15.33, and proceeds of $109,157,940 to the Fund prior to the deduction of expenses of $691,764. The net asset value per share of the Fund’s Common Stock was reduced by approximately $0.17 per share as a result of the issuance.
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 179-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.
2019 Annual Report to Stockholders | 57
Royce Value Trust
Notes to Financial Statements (continued)
Borrowings (continued):
As of December 31, 2019, the Fund has outstanding borrowings of $70,000,000. During the year ended December 31, 2019, the Fund borrowed an average daily balance of $69,931,507 at a weighted average borrowing cost of 3.28%. The maximum amount outstanding during the year ended December 31, 2019 was $70,000,000. As of December 31, 2019 the aggregate value of rehypothecated securities was $57,983,069. During the year ended December 31, 2019, the Fund earned $267,943 in fees from rehypothecated securities.
Investment Advisory Agreement:
As compensation for its services under the investment advisory agreement, Royce receives a fee comprised of a Basic Fee (“Basic Fee”) and an adjustment to the Basic Fee based on the investment performance of the Fund in relation to the investment record of the S&P SmallCap 600 Index (“S&P 600”).
The Basic Fee is a monthly fee equal to 1/12 of 1% (1% on an annualized basis) of the average of the Fund’s month-end net assets 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 2019, the Fund’s investment performance ranged from 5% below to 21% below the investment performance of the S&P 600. Accordingly, the net investment advisory fee consisted of a Basic Fee of $13,229,217 and a net downward adjustment of $5,830,730 for the performance of the Fund relative to that of the S&P 600. For the year ended December 31, 2019, the Fund expensed Royce investment advisory fees totaling $7,398,487.
Purchases and Sales of Investment Securities:
For the year ended December 31, 2019, the costs of purchases and proceeds from sales of investment securities, other than short-term securities, amounted to $455,696,062 and $501,103,417, 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. The Fund’s Chief Compliance Officer reviews such transactions each quarter for compliance with the requirements and restrictions set forth by Rule 17a-7, and reports the results of her review to the Board of Directors. Cross trades for the year ended December 31, 2019, were as follows:
| COSTS OF PURCHASES | PROCEEDS FROM SALES | REALIZED GAIN (LOSS) |
| $23,818,786 | $3,884,059 | $427,122 |
Tax Information:
Distributions during the years ended December 31, 2019 and 2018, were characterized as follows for tax purposes:
| ORDINARY INCOME | LONG-TERM CAPITAL GAINS |
| 2019 | 2018 | 2019 | 2018 |
| $15,576,453 | $30,738,849 | $90,253,697 | $81,956,625 |
The tax basis components of distributable earnings at December 31, 2019, were as follows:
UNDISTRIBUTED
ORDINARY INCOME | UNDISTRIBUTED LONG-TERM
CAPITAL GAINS OR
(CAPITAL LOSS CARRYFORWARD) | NET UNREALIZED
APPRECIATION
(DEPRECIATION)1 | QUALIFIED LATE YEAR
ORDINARY AND
POST-OCTOBER LOSS
DEFERRALS2 | TOTAL
DISTRIBUTABLE
EARNINGS |
| $ – | $1,159,142 | $419,931,826 | $(50,420) | $421,040,548 |
| 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 | 2019 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, 2019, the Fund recorded the following permanent reclassifications, which relate primarily to publicly traded partnerships and Trusts.
| TOTAL DISTRIBUTABLE EARNINGS (LOSS) | PAID-IN CAPITAL |
| $560 | $(560) |
Management has analyzed the Fund’s tax positions taken on federal income tax returns for all open tax years (2016-2019) and has concluded that as of December 31, 2019, 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 following transactions were effected in shares of such companies for the year end December 31, 2019:
| AFFILIATED COMPANY | SHARES
12/31/18 | | MARKET VALUE
12/31/18 | | COSTS OF
PURCHASES | | PROCEEDS
FROM SALES | | REALIZED
GAIN (LOSS) | | CHANGE IN NET
UNREALIZED
APPRECIATION
(DEPRECIATION) | | DIVIDEND
INCOME | | SHARES
12/31/19 | | MARKET VALUE
12/31/19 |
| CONSUMER DISCRETIONARY - 0.0% | | | | | | | | | | | | | | | | | | | | | | |
| HOUSEHOLD DURABLES - 0.0% | | | | | | | | | | | | | | | | | | | | | | |
| HG Holdings1,2,3 | 912,235 | | $ | 392,261 | | $ | – | | $ 464,067 | | $ | (2,022,091) | | $ | 2,093,897 | | $ | – | | | | |
| | | | | 392,261 | | | | | | | | (2,022,091) | | | 2,093,897 | | | – | | | | |
| INDUSTRIALS - 0.2% | | | | | | | | | | | | | | | | | | | | | | |
| TRADING COMPANIES & DISTRIBUTORS - 0.2% | | | | | | | | | | | | | | | | | | | | | | |
| Houston Wire & Cable2,4 | 877,363 | | | 4,439,457 | | | – | | – | | | – | | | (570,286) | | | – | | 877,363 | | $ 3,869,171 |
| | | | | 4,439,457 | | | | | | | | – | | | (570,286) | | | – | | | | 3,869,171 |
| INFORMATION TECHNOLOGY - 0.2% | | | | | | | | | | | | | | | | | | | | | | |
| ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS - 0.2% | | | | | | | | | | | | | | | | | | | | | | |
| Richardson Electronics4 | 573,732 | | | 4,985,731 | | | 721,773 | | – | | | – | | | (1,701,900) | | | 154,225 | | 711,475 | | 4,005,604 |
| | | | | 4,985,731 | | | | | | | | – | | | (1,701,900) | | | 154,225 | | | | 4,005,604 |
| | | | $ | 9,817,449 | | | | | | | $ | (2,022,091) | | $ | (178,289) | | $ | 154,225 | | | | $ 7,874,775 |
| 1 | Not an Affiliated Company at December 31, 2019. |
| 3 | This security was defined as a Level 2 security due to fair value being based on quoted prices for similar securities. |
| 4 | At December 31, 2019, 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. |
Subsequent Events:
On February 18, 2020, Franklin Resources, Inc., a global investment management organization operating as Franklin Templeton, announced that it had entered into a definitive agreement to acquire Legg Mason, Inc., the parent company of Royce. This transaction is subject to approval by Legg Mason’s shareholders and is expected to close no later than the third quarter of 2020. Royce will continue to operate as an independent investment organization with its own brand. There are no changes planned to the management of the organization or investment teams at Royce as a result of this transaction. Stockholders of Royce Value Trust are expected to be asked to approve a new investment advisory agreement with Royce due to the change of control resulting from the transaction.
2019 Annual Report to Stockholders | 59
Report of Independent Registered Public Accounting Firm
To the Board of Directors and 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, 2019, the related statements of operations and cash flows for the year ended December 31, 2019, the statement of changes in net assets for each of the two years in the period ended December 31, 2019, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2019 (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, 2019, 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, 2019 and the financial highlights for each of the five years in the period ended December 31, 2019 in conformity with accounting principles generally accepted in the United States of America.
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, 2019 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
New York, New York
February 21, 2020
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 been able to determine the specific year we began serving as auditor.
| 60 | 2019 Annual Report to Stockholders |
History Since Inception
The following table details the share accumulations by an initial investor in the Funds who reinvested all distributions and participated fully in primary subscriptions for each of the rights offerings. Full participation in distribution reinvestments and rights offerings can maximize the returns available to a long-term investor. This table should be read in conjunction with the Performance and Portfolio Reviews of the Funds.
| HISTORY | | | AMOUNT INVESTED | | | PURCHASE PRICE1 | | | SHARES | | | NAV VALUE2 | | | MARKET VALUE2 |
Royce Global Value Trust | | | | | | | | | | | | | | | | | | | | |
| 10/17/13 | Initial Purchase | | $ | 8,975 | | | $ | 8.975 | | | | 1,000 | | | $ | 9,780 | | | $ | 8,975 | |
| 12/11/14 | Distribution $0.15 | | | | | | | 7.970 | | | | 19 | | | | 9,426 | | | | 8,193 | |
| 12/10/15 | Distribution $0.10 | | | | | | | 7.230 | | | | 14 | | | | 9,101 | | | | 7,696 | |
| 12/9/16 | Distribution $0.14 | | | | | | | 7.940 | | | | 18 | | | | 10,111 | | | | 8,446 | |
| 12/12/17 | Distribution $0.11 | | | | | | | 10.610 | | | | 11 | | | | 13,254 | | | | 11,484 | |
| 12/12/18 | Distribution $0.04 | | | | | | | 8.500 | | | | 5 | | | | 11,118 | | | | 9,475 | |
| 12/11/19 | Distribution $0.06 | | | | | | | 10.670 | | | | 6 | | | | | | | | | |
| 12/31/19 | | | $ | 8,975 | | | | | | | | 1,073 | | | $ | 14,593 | | | $ | 12,543 | |
| | | | | | | | | | | | | | | | | | | | | | |
| 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 | | | | 109,076 | | | | 98,254 | |
| 2018 | Annual distribution total $0.75 | | | | | | | 8.993 | | | | 893 | | | | 96,398 | | | | 83,853 | |
| 2019 | Annual distribution total $0.68 | | | | | | | 8.297 | | | | 955 | | | | | | | | | |
| 12/31/19 | | | $ | 8,900 | | | | | | | | 12,256 | | | $ | 118,025 | | | $ | 104,666 | |
| 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. |
| 2019 Annual Report to Stockholders | 61 |
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 | | | | 350,840 | | | | 324,176 | |
| 2018 | Distribution through 6/30/18 $0.59 | | | | | | | 15.962 | | | | 748 | | | | | | | | | |
| 2018 | Rights Offering | | | 31,289 | | | | 15.330 | | | | 2,041 | | | | | | | | | |
| 2018 | Distribution after 6/30/18 $0.67 | | | | | | | 12.706 | | | | 1,168 | | | | 329,589 | | | | 283,259 | |
| 2019 | Annual distribution total $1.10 | | | | | | | 14.100 | | | | 1,929 | | | | | | | | | |
| 12/31/19 | | | $ | 53,211 | | | | | | | | 25,934 | | | $ | 429,986 | | | $ | 383,045 | |
| 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. |
| 62 | 2019 Annual Report to Stockholders |
Distribution Reinvestment and Cash Purchase Options
Why should I reinvest my distributions?
By reinvesting distributions, a stockholder can maintain an undiluted investment in the Fund. The regular reinvestment of distributions has a significant impact on stockholder returns. In contrast, the stockholder who takes distributions in cash is penalized when shares are issued below net asset value to other stockholders.
How does the reinvestment of distributions from the Royce closed-end funds work?
The Funds automatically issue shares in payment of distributions unless you indicate otherwise. The shares are generally issued at the lower of the market price or net asset value on the valuation date.
How does this apply to registered stockholders?
If your shares are registered directly with a Fund, your distributions are automatically reinvested unless you have otherwise instructed the Funds’ transfer agent, Computershare, in writing, 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, 2019.
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, 2019. 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.).
2019 Annual Report to Stockholders | 63
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: 80 | Number of Funds Overseen: 16 | Tenure: Since 1982
Non-Royce Directorships: Director of Oxford Square Capital Corp.
Principal Occupation(s) During Past Five Years: A member of the Board of Managers of Royce & Associates, LP (“Royce”), the Trust’s investment adviser; Chief Executive Officer (1972–June 2016), President (1972-June 2014) of Royce.
Christopher D. Clark, Director1, President
Age: 54 | Number of Funds Overseen: 16 | 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: 71 | Number of Funds Overseen: 16 | Tenure: Since 2009
Non-Royce Directorships: Trustee of Voya 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: 58 | Number of Funds Overseen: 16 | 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, Director2
Age: 80 | Number of Funds Overseen: 16 | 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: 77 | Number of Funds Overseen: 36 | Tenure: Since 2004
Non-Royce Directorships: Director/Trustee of registered investment companies constituting the 20 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, Director2
Age: 80 | Number of Funds Overseen: 16 | 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: 74 | Number of Funds Overseen: 36 | Tenure: Since 2001
Non-Royce Directorships: Director/Trustee of registered investment companies constituting the 20 Legg Mason Funds.
Principal Occupation(s) During Past Five Years: Trustee Emeritus of Colgate University (since 2005); Board Member of Hill House, Inc. (since 1999); Formerly Director of TICC Capital Corp (from 2003-2017): Trustee of Colgate University (from 1996 to 2005), President of Hill House, Inc. (from 2001 to 2005) and Managing Director/Equity Capital Markets Group of Merrill Lynch & Co. (from 1971 to 1999) .
Michael K. Shields, Director
Age: 61 | Number of Funds Overseen: 16 | 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: 52 | 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: 57 | 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: 53 | 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: 52 | 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: 60 | 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. |
| 2 | Retired effective December 31, 2019. |
Director will hold office until their successors have been duly elected and qualified or until their earlier resignation or removal.
64 | 2019 Annual Report to Stockholders
Results of Stockholders Meeting
Royce Value Trust, Inc.
At the 2019 Annual Meeting of Stockholders held on September 24, 2019, the Fund’s stockholders elected three Directors, consisting of:
| | VOTES FOR | VOTES WITHHELD |
| Patricia W. Chadwick | 81,049,028 | 4,920,047 |
| Arthur S. Mehlman | 81,116,677 | 4,852,398 |
| Michael K. Shields | 81,101,096 | 4,867,979 |
Royce Micro-Cap Trust, Inc.
At the 2019 Annual Meeting of Stockholders held on September 24, 2019, the Fund’s stockholders elected three Directors, consisting of:
| | VOTES FOR | VOTES WITHHELD |
| Patricia W. Chadwick | 33,389,940 | 1,741,058 |
| Arthur S. Mehlman | 33,639,000 | 1,491,998 |
| Michael K. Shields | 33,393,572 | 1,737,426 |
Royce Global Value Trust, Inc.
At the 2019 Annual Meeting of Stockholders held on September 24, 2019, the Fund’s stockholders elected three Directors, consisting of:
| | VOTES FOR | VOTES WITHHELD |
| Patricia W. Chadwick | 7,564,329 | 1,834,066 |
| Arthur S. Mehlman | 7,540,304 | 1,858,091 |
| Michael K. Shields | 7,582,405 | 1,815,990 |
Bylaw Changes
The Boards of Directors of Royce Value Trust, Inc., Royce Micro-Cap Trust, Inc., and Royce Global Value Trust, Inc. (each, a “Fund” and collectively, the “Funds”) approved certain changes to the Funds’ Bylaws at meetings held on December 3-4, 2019. Prior to such changes, the Bylaws for each Fund provided that the election of directors shall be decided by a plurality of votes cast. After such changes, the Bylaws provide that a majority of the votes entitled to be cast in the election of directors shall be required to elect a director.
2019 Annual Report to Stockholders | 65
Notes to Performance and Other Important Information
The thoughts expressed in thisReview and Report concerning recent market movements and future prospects for small company stocks are solely the opinion of Royce at December 31, 2019, 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, 2019 and are subject to change at any time without notice. There can be no assurance that securities mentioned in thisReview 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.royceinvest.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. Frank Russell Company (“Russell”) is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Frank Russell Company. Neither Russell nor its licensors accept any liability for any errors or omissions in the Russell Indexes and/or Russell ratings or underlying data and no party may rely on any Russell Indexes and/or Russell ratings and/or underlying data contained in this communication. No further distribution of Russell Data is permitted without Russell’s express written consent. Russell does not promote, sponsor or endorse the content of this communication. The Russell 2000 Index is an index of domestic small-cap stocks. It measures the performance of the 2,000 smallest publicly traded U.S. companies in the Russell 3000 Index. The Russell Top 50 Mega Cap Index is an unmanaged, capitalization-weighted index of domestic mega-cap stocks that measures the performance of the 50 largest 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. Source: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indexes or any securities or financial products. This report is not approved, endorsed, reviewed or produced by MSCI. None of the MSCI data is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. The MSCI ACWI Small Cap Index is an unmanaged, capitalization-weighted index of global small-cap stocks. Index returns include net reinvested dividends and/or interest income. The S&P 600 is an index of U.S. small-cap stocks selected by Standard & Poor’s based on market size, liquidity, and industry grouping, among other factors. 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 ISM Manufacturing Index (ISM) monitors employment, production, inventories, new orders and supplier deliveries.
The Price-Earnings, or P/E, Ratio is calculated by dividing a company’s share price by its trailing 12-month earnings-per-share (EPS). The Price-to-Book, or P/B, Ratio is calculated by dividing a company’s share price by its book value per share. The 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. |
ThisReview 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 thisReview 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, 2020. 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.royceinvest.com, by calling (800) 221-4268 (toll-free) and on the website of the Securities and Exchange Commission (“SEC”), at www.sec.gov.
Disclosure of Portfolio Holdings
The Funds’ complete portfolio holdings are also available on Exhibit F to Form N-PORT, which filings are made with the SEC within 60 days of the end of the first and third fiscal quarters. The Funds’ Form N-PORT filings are available on the SEC’s website at http://www.sec.gov.
66 | 2019 Annual Report to Stockholders
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2019 Annual Report to Stockholders | 67
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68 | 2019 Annual Report to Stockholders
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| | About Royce Investment Partners | | Contact Us | |
| | | | | |
| | Unparalleled Knowledge + Experience | | GENERAL INFORMATION | |
| | Pioneers in small-cap investing, with 45+ years | | General Royce Funds information including an | |
| | of experience, depth of knowledge, and focus. | | overview of our firm and Funds | |
| | | | (800) 221-4268 | |
| | Independent Thinking | | | |
| | The confidence to go against consensus, the insight | | | |
| | to uncover opportunities others might miss, and the | | COMPUTERSHARE | |
| | tenacity to stay the course through market cycles. | | Transfer Agent and Registrar | |
| | | | Speak with a representative about: | |
| | Specialized Approaches | | • Your account, transactions, and forms | |
| | U.S., international, and global investment strategies | | (800) 426-5523 | |
| | that pursue approaches with different risk profiles. | | | |
| | | | | |
| | Unwavering Commitment | | FINANCIAL ADVISORS AND BROKER-DEALERS | |
| | Our team of 17 portfolio managers has significant | | Speak with your regional Royce contact regarding: | |
| | personal investments in the strategies they manage. | | • Information about our firm, strategies, and Funds | |
| | | | • Fund Materials | |
| | | | (800) 337-6923 | |
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| | | | CE-REP-1219 | |
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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.
Year ended December 31, 2019 - $46,624
Year ended December 31, 2018 - $45,710
Year ended December 31, 2019 - $0
Year ended December 31, 2018 - $0
Year ended December 31, 2019 - $9,933 - Preparation of tax returns
Year ended December 31, 2018 - $9,738- Preparation of tax returns
Year ended December 31, 2019 - $0
Year ended December 31, 2018 - $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.
| (g) | Year ended December 31, 2019 - $9,933 |
Year ended December 31, 2018 - $9,738
| (h) | No such services were rendered during 2019 or 2018. |
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, Christopher C. Grisanti, Arthur S. Mehlman, G. Peter O’Brien, and Michael K. Shields 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, 2019)
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); and Portfolio Manager and Analyst at Royce (since 2004). |
| Steven G. McBoyle | Assistant Portfolio Manager* | Since September 1, 2018 | Assistant Portfolio Manager of the Registrant (sinceSeptember 1, 2018); and Portfolio Manager at Royce (since 2007). |
| Andrew S. Palen | Assistant Portfolio Manager* | Since September 1, 2018 | Assistant Portfolio Manager of the Registrant (sinceSeptember 1, 2018); Portfolio Manager and Analyst at Royce (since 2015); Senior Analyst at Armistice Capital (2013-2015); Summer Associate at UBS Global Management (2012); and Associate at Comvest Partners (2008-2011). |
* 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, 2019)
Other Accounts
Name of Portfolio Manager | Type of Account | Number of AccountsManaged | Total Assets
Managed | Number of Accounts Managed for which Advisory Fee is Performance-Based | Value of Managed Accounts for which Advisory Fee is PerformanceBased |
| Charles M. Royce | | | | | |
| | Registered investment companies | 8 | 7,596,586,780 | 2 | 2,032,846,489 |
| | Private pooled investment vehicles | 3 | 81,714,999 | -- | -- |
| | Other accounts* | 12 | 50,000,892 | -- | -- |
| | | | | | |
| Chris E. Flynn | | | | | |
| | Registered investment companies | 5 | 5,541,357,891 | 2 | 2,032,846,489 |
| | Private pooled investment vehicles | 1 | 81,362,378 | -- | -- |
| | Other accounts* | -- | -- | -- | -- |
| | | | | | |
| Lauren A. Romeo | | | | | |
| | Registered investment companies | 3 | 5,385,762,988 | 1 | 1,628,039,493 |
| | Private pooled investment vehicles | 5 | 516,599,424 | -- | -- |
| | Other accounts* | -- | -- | -- | -- |
| Steven G. McBoyle | | | | | |
| | Registered investment companies | 4 | 4,528,092,095 | 1 | 1,628,039,493 |
| | Private pooled investment vehicles | 5 | 403,153,315 | -- | -- |
| | Other accounts* | -- | -- | -- | -- |
| | | | | | |
| Andrew S. Palen | | | | | |
| | Registered investment companies | 2 | 3,577,369,282 | 1 | 1,628,039,493 |
| | Private pooled investment vehicles | -- | -- | -- | -- |
| | 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, 2019)
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, 2019)
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-$500,000 |
| Lauren A. Romeo | $100,001-$500,000 |
| Steven G. McBoyle | $0 |
| Andrew S. Palen | $0 |
(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, 2020 | |
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, 2020 | | Date: March, 2020 | |
