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, 2013 – December 31, 2013



Item 1.   Reports to Shareholders.

 

ANNUAL
REVIEW AND REPORT

TO STOCKHOLDERS

 

Royce Value Trust

Royce Micro-Cap Trust

Royce Focus Trust

Royce Global Value Trust
     
 
 
 
 


www.roycefunds.com





A Few Words on Closed-End Funds


Royce & Associates, LLC manages four closed-end funds: Royce Value Trust, the first small-cap value closed-end fund offering; Royce Micro-Cap Trust, the only micro-cap closed-end fund; Royce Focus Trust, a closed-end fund that invests in a limited number of primarily small-cap companies; and Royce Global Value Trust, the first global closed-end offering that invests in a broadly diversified portfolio of both U.S. and non-U.S. small-cap stocks.
 
A closed-end fund is an investment company whose shares are listed and traded on a stock exchange. Like all investment companies, including open-end mutual funds, the assets of a closed-end fund are professionally managed in accordance with the investment objectives and policies approved by the Fund’s Board of Directors. A closed-end fund raises cash for investment by issuing a fixed number of shares through initial and other public offerings that may include shelf offerings and periodic rights offerings. Proceeds from the offerings are invested in an actively managed portfolio of securities. Investors wanting to buy or sell shares of a publicly traded closed-end fund after the offerings must do so on a stock exchange, as with any publicly traded stock. This is in contrast to open-end mutual funds, in which the fund sells and redeems its shares on a continuous basis.

A Closed-End Fund Offers Several Distinct Advantages Not Available from an Open-End Fund Structure
   
Since a closed-end fund does not issue redeemable securities or offer its securities on a continuous basis, it does not need to liquidate securities or hold uninvested assets to meet investor demands for cash redemptions, as an open-end fund must.
   
In a closed-end fund, not having to meet investor redemption requests or invest at inopportune times is ideal for value managers who attempt to buy stocks when prices are depressed and sell securities when prices are high.
   
A closed-end fund may invest more freely in less liquid portfolio securities because it is not subject to potential stockholder redemption demands. This is particularly beneficial for Royce-managed closed-end funds, which invest in small- and micro-cap securities.
   
The fixed capital structure allows permanent leverage to be employed as a means to enhance capital appreciation potential.
   
Unlike Royce’s open-end funds, our closed-end funds are able to distribute capital gains on a quarterly basis. Each of the Funds other than Royce Global Value Trust has adopted a quarterly distribution policy for its common stock. Please see pages 18-20 for more details.
   
 
We believe that the closed-end fund structure is very suitable for the long-term investor who understands the benefits of a stable pool of capital.

Why Dividend Reinvestment is Important
A very important component of an investor’s total return comes from the reinvestment of distributions. By reinvesting distributions, our investors can maintain an undiluted investment in a Fund. To get a fair idea of the impact of reinvested distributions, please see the charts on pages 11, 13, and 15. For additional information on the Funds’ Distribution Reinvestment and Cash Purchase Options and the benefits for stockholders, please see page 20 or visit our website at www.roycefunds.com.
 
The Board of Directors for each of Royce Value Trust, Royce Micro-Cap Trust and Royce Focus Trust has authorized a managed distribution policy (“MDP”) paying quarterly distributions at an annual rate of 5% of the average of the prior four quarter-end net asset values. With each distribution, these Funds will issue a notice to stockholders and an accompanying press release which will provide detailed information regarding the amount and composition of the distribution and other information required by a Fund’s MDP. You should not draw any conclusions about a Fund’s investment performance from the amount of distributions or from the terms of a Fund’s MDP. A Fund’s Board of Directors may amend or terminate the MDP at any time without prior notice to stockholders; however, at this time, there are no reasonably foreseeable circumstances that might cause the termination of any of the MDPs.

This page is not part of the 2013 Annual Report to Stockholders



Table of Contents  

   
Annual Review  

   
Performance Table 2
   
Letter to Our Stockholders 3
   
2013: In Quotes 75
   
Postscript: It’s a Small World Inside Back Cover

   
Annual Report to Stockholders 9
   
   
 
   
For more than 40 years, we have used a value approach to invest in small-cap securities. We focus primarily on the quality of a company’s balance sheet, its ability to generate free cash flow, and other measures of profitability or sound financial condition. We then use these factors to assess the company’s current worth, basing the assessment on either what we believe a knowledgeable buyer might pay to acquire the entire company or what we think the value of the company should be in the stock market.
   
   
   

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Performance Table  


NAV Average Annual Total Returns   Through December 31, 2013

    Royce   Royce   Royce   Royce Global   Russell   Russell   Russell   Russell Global
    Value Trust   Micro-Cap Trust   Focus Trust   Value Trust   2000 Index   Microcap Index   2500 Index   Small Cap Index

One-Year     34.14 %     44.52 %     19.73 %     n.a.       38.82 %     45.62 %     36.80 %     24.77 %

Three-Year     11.66       16.11       6.08       n.a.       15.67       16.52       16.28       8.09  

Five-Year     21.27       24.12       17.49       n.a.       20.08       21.05       21.77       18.49  

10-Year     8.95       9.64       9.38       n.a.       9.07       6.99       9.81       9.23  

15-Year     10.04       11.60       11.01       n.a.       8.42       n.a.       9.67       8.67  

20-Year     10.80       11.93       n.a.       n.a.       9.27       n.a.       10.77       n.a.  

25-Year     11.55       n.a.       n.a.       n.a.       10.20       n.a.       11.62       n.a.  

Since Inception     11.13       11.92       10.58       2.76 %1     n.a.       n.a.       n.a.       n.a.  

Inception Date   11/26/86     12/14/93     11/1/962     10/17/13       n.a.       n.a.       n.a.       n.a.  

1 Not annualized, cumulative since inception on 10/17/13.
2 Date Royce & Associates, LLC assumed investment management responsibility for the Fund.


Important Performance and Risk Information
All performance information in this Review and Report reflects past performance, is presented on a total return basis, and reflects the reinvestment of distributions. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when sold. Current performance may be higher or lower than performance quoted. Current month-end performance may be obtained at www.roycefunds.com. Certain immaterial adjustments were made to the net assets of Royce Micro-Cap Trust at 12/31/12 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 Funds are closed-end registered investment companies whose shares of common stock trade at a discount to their net asset value. Shares of each Fund’s common stock are also subject to the market risks of investing in the underlying portfolio securities held by each Fund, respectively. All indexes referenced are unmanaged and capitalization-weighted. Each index’s returns include net reinvested dividends and/or interest income. Russell Investment Group is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Russell Investment Group. The Russell 2000 Index is an index of domestic small-cap stocks that measures the performance of the 2,000 smallest publicly traded U.S. companies in the Russell 3000 Index. The Russell Microcap Index includes 1,000 of the smallest securities in the small-cap Russell 2000 Index, along with the next smallest eligible securities as determined by Russell. The Russell 2500 Index is an index of the 2,500 smallest publicly traded U.S. companies in the Russell 3000 Index. The Russell Global Small Cap Index is an unmanaged, capitalization-weighted index of global small-cap stocks. The performance of an index does not represent exactly any particular investment, as you cannot invest directly in an index. Index returns include net reinvested dividends and/or interest income. Royce Fund Services, Inc (“RFS”) is a member of FINRA and has filed this Review and Report with FINRA on behalf of each Fund. RFS is not an underwriter or distributor of any of the Funds.

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Letter to Our Stockholders

 
 

“Everybody Had a Good Year”

   
2013 will enter the annals of history as one of the stock market’s better years. Not only were there healthy double-digit returns for all of the major U.S. indexes, there were also no major corrections along the way. The closest the market came to a bearish phase was during the second quarter, when the rate on the 10-year Treasury began to rise off its calendar-year low in early May, mostly as a result of talk that the Federal Reserve would begin to reduce its $85 billion monthly bond-buying program. The Fed’s intentions to taper, made official by an announcement in June, then sent markets across the globe into a tailspin, while the 10-year Treasury rate mostly kept rising. (From its low on May 2 through the end of the year, it climbed more than 83%.) Yet by mid-summer, all or most of this seemed to be forgotten. Share prices climbed more or less uninterruptedly into December, where a couple of unsettled weeks in the middle of the month failed to put a Scrooge-like face on returns. Stocks quietly rallied through the last weeks of the year, making the fourth quarter as solidly bullish as the first and third.
    The market’s ability to shrug off negative news—potential or otherwise—may have been its most salient trait in 2013. Here at home, investors had to cope with the sequester, the government shutdown, questions about Fed policy, and who would succeed Federal Reserve Chairman Ben Bernanke. Outside the U.S., it was not much quieter. There was economic uncertainty in Europe, China, Brazil, among other places, unrest in the Mideast, and a significant, still-brewing political scandal in Turkey. Yet none of these things, taken alone or in concert, possessed enough force to slow the pace of the rally. Even murmurings later in the year about overvalued stocks and a market bubble gave investors little pause.
  The market’s ability to shrug off negative
news—potential or otherwise—may have been
its most salient trait in 2013.

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Charles M. Royce, President



In addition to staying on top of the
performance of The Royce Funds,
we also regularly review returns for
the major indexes, especially those
that invest mostly or exclusively in
small-cap stocks. Each month, we also
carefully look over long-term results
on an annualized basis. For the period
ended December 31, 2013, the returns
both for our portfolios and for the
small-cap Russell 2000 Index were
of particular interest to us. (These
results can be found on page 5.)

Seen from the perspective of long-
term market history, we think the
results look improbable, even absurd,
and certainly counterintuitive. We
have always been fond of the idea
that a healthy target for absolute
long-term returns should be low-
to-mid double digits. So what does
it mean when these results are in
the range of the high teens to the
mid-twenties? Did we and others
do something different or unusually
smart to achieve these results?





Continued on page 6...
    Letter to Our Stockholders

     The rally seemed to gain strength from the notion that the U.S. economy was finally entering a faster, more historically typical expansion after five years of slow and uncertain growth. This would be more than welcome news. Consider for a moment how strange and singular our present situation is. The economy has received unprecedented levels of federal stimulus in the form of both quantitative easing and historically low interest rates even as the economy has looked strong enough to stand more firmly on its own for more than a year. However, we still face stubbornly high, only slowly declining unemployment, still-stagnant levels of demand, and lower consumer confidence. On the other hand, we also have robust markets in housing and auto sales, record corporate revenues, and companies sitting on piles of cash. This complicated economic picture is set against the political background of a falling federal deficit, a national healthcare plan that refuses to be anything less than wildly controversial, and a culture in Washington so dysfunctional that it now plays like a bleak tragicomedy worthy of Samuel Beckett. (Or at least it would if politicians weren’t so verbose.) All of this makes the question of what happens next even harder to answer than it would be in more sanguine times. Resisting the temptation to prognosticate at length on larger matters, we’ll say only that we agree with the consensus that the economy is indeed growing faster and stronger. For reasons we’ll detail later, we think this is good news both for small-cap stocks and our own disciplined approach to stock selection.
     As measured by the Russell 2000 Index, the small-cap market has been on a remarkable run since the bottom in March 2009. However, there were a number of notable twists prior to last year’s mostly smooth ascent. The three years prior to 2013 all exhibited a similar performance pattern in the first half of the year. During 2010, 2011, and 2012, the opening quarter extended a bull run that had gotten underway no later than the previous year’s fourth quarter. These gains were then eroded to varying degrees by a bearish second quarter, with the market starting to reverse course in April, making it indeed the cruelest month. The motive force behind each reversal was macro oriented—recurring fears about the uneasy state of the U.S., Chinese, and/or developed European economies. (The persistence of macro factors influencing sell-offs at the expense of company fundamentals was the most troubling element to us.) In 2010 and 2012, the third quarter saw a resumption of rising stock prices, while in 2011 the third quarter was the year’s worst—political dithering in Europe and contention in the U.S. exacerbating the economic and fiscal concerns. The fourth quarter was positive for small-caps in all three years (as it was in 2009), though in 2011 its gains were not enough to keep the major indexes from finishing the year in the red.
     This pattern is worth mentioning because we saw a more muted version of it play out in 2013. The critical difference was that initially rattled investors recovered their confidence in equities before the second quarter had ended and before quarterly returns turned negative. This suggests perhaps not so much a new-found confidence as it does a steadier sense of conviction. With the economy improving and our fiscal situation increasingly more manageable, investors appear to be seeing the value of staying invested. We see this as one of
 
 
       

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several encouraging signs for active management as we enter 2014. It makes sense to us that longer investment horizons will lead larger numbers of investors to higher-quality companies.
   
 
   
“Everybody Saw the Sunshine”
   

Small-caps were once again leaders in what was a magnificent year for equities. For the full year, the Russell 2000 (+38.8%) and the tech-centric Nasdaq Composite (+38.3%) outpaced the large-cap Russell 1000 (+33.1%) and S&P 500 (+32.4%) Indexes. The Russell 2000 enjoyed its best calendar-year performance since 2003. 2013 was also the best since 1995 for the Russell 1000, since 1997 for the S&P 500, and since 2009 for the Nasdaq Composite. The latter index, however, has not yet topped the high it made back on March 10, 2000. By contrast, the small-cap index, the Russell 1000, and the S&P 500 all established new highs on the last day of 2013. It was also the first year since 1996 in which the Russell 2000 posted positive returns in all four quarters.

  Small-caps were once again leaders in what
was a magnificent year for equities. For the
full year, the Russell 2000 (+38.8%) and the
tech-centric Nasdaq Composite (+38.3%)
outpaced the large-cap Russell 1000
(+33.1%) and S&P 500 (+32.4%) Indexes.
     After a strong first half, in which all the major domestic indexes were positive both through the end of June and for the more volatile second quarter, both small-cap and large-cap stocks sailed through the rest of the year. As it did in the second quarter, the Nasdaq led in the third, up an impressive 10.8% compared to a 10.2% gain for the Russell 2000 and respective increases of 5.2% and 6.0% for the S&P 500 and Russell 1000. As mentioned, December saw a brief squall of volatility, though fourth-quarter results for all four indexes wound up solidly positive. The Nasdaq marked its third consecutive quarter of market leadership, advancing 10.7% for the fourth quarter versus 8.7% for the Russell 2000 Index, 10.2% for the Russell 1000, and 10.5% for the S&P 500. It was also notable that from the 10-year Treasury yield low of 1.66% on May 2, 2013 through the end of the year small-caps were strong. The Russell 2000 gained 25.0% during this period versus respective gains of 17.9% and 17.4% for the Russell 1000 and S&P 500. (The 10-year yield finished 2013 at 3.04%.)
   
     Outside the U.S., life was generally less bullish in 2013. Most non-U.S. indexes finished behind their stateside cousins in the first quarter and were in the red for the second. Results improved significantly in the second half, with European indexes turning in conspicuously high returns. For the third quarter, the Russell Global ex-U.S. Small Cap Index advanced 10.7% while the Russell Global ex-U.S. Large Cap Index increased 10.4%. The indexes also ended the year on a high note. For the fourth quarter, the Russell Global ex-U.S. Small Cap rose 4.0% while the Russell Global ex-U.S. Large Cap was up 5.0%. Calendar-year results were solid, though each index lagged its domestic peers. For 2013, the Russell Global ex-U.S. Small Cap Index climbed 17.2% while its large-cap sibling gained 16.1%.
     The Russell Microcap Index posted impressive results for both the third (+11.6%) and fourth (+10.3%) quarters of 2013. This second-half strength helped the micro-cap index achieve an eye-catching 45.6% return for the calendar year. Results for both the second half and full year were not quite as robust for mid-cap stocks, as measured by the Russell
  Along with the onset of tapering, rising rates—
though still historically low on an absolute basis—
strongly suggest to us that we are moving closer, if
at times by fits and starts, to a stock market that
will reward quality businesses, especially those
poised to benefit from a healthy, growing economy.

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  We suspect that the answer is both a
lot simpler and less flattering to our
stock-picking acumen. The high five-
year returns are in part a consequence
of the market’s recent strength
(especially in 2013) and, more
important, the result of dropping
some unusually bad results from the
fourth quarter of 2008—the onset
of the Financial Crisis. The five-year
average annual total return for the
Russell 2000 as of December 31, 2012
was 3.6% (+19.1% on a cumulative
basis). Yet when we fast-forward to
the end of December 2013, we see
the five-year return for the Russell
2000 jump to 20.1% (+149.7% on a
cumulative basis).

Most of the time, a five-year
period would capture a variety of
experiences, perhaps an entire market
cycle or two. But occasionally it does
not, and the result is a distortion
springing from an uncommonly
steady, mostly bullish period. So as
wonderful as they are, it seems clear
to us that the five-year returns for
several mutual funds, indexes, and
ETFs are simply too good to last.
Markets simply do not move
up forever, or even for several
years in a row.

We believe in reversion to the mean;
the cyclical nature of markets is
very real to us. Of course, we do not
pretend to know how to time market
cycles. All we know is that at some
point, the current cycle will change.


Continued on page 8...
 
 
 
Letter to Our Stockholders

 
Midcap Index, though they were more than respectable on an absolute basis. For the third quarter, the mid-cap index advanced 7.7% before rising 8.4% in the fourth, leading to a terrific 34.8% return for the full year.
   
 
Fixing A Hole
For the most part, calendar-year returns for our three oldest closed-end funds left us with mixed emotions (Royce Global Value Trust had less than three full months of performance). We were pleased, for the most part, with the Funds’ absolute results. However, on both an NAV (net asset value) and market price basis both Royce Value Trust and Focus Trust lagged their respective benchmarks, in the latter case by a sizable margin. Royce Micro-Cap Trust outpaced the small-cap Russell 2000 Index on both an NAV and market price basis for the calendar year. The Fund also beat the Russell Microcap Index on a market price basis in 2013 while it very narrowly trailed that index on an NAV basis.
     Our disciplined, risk-averse approach has often left us looking up at benchmarks during dynamic bull markets. In a more historically typical market cycle, 2013’s results would have given us less to explain or complain about. But these calendar-year results came after several portfolios underperformed their benchmarks in 2012 and 2011. The last three years, then, have left us increasingly frustrated, even as the reasons behind these underperformances are clear. Small-cap companies with high returns on invested capital (ROIC) and low-debt balance sheets have, as a group, underperformed their more leveraged counterparts. In addition, more economically sensitive cyclical sectors, including Energy, Industrials, Materials, and Technology, have trailed more defensive areas (such as Utilities) and less conservatively-capitalized, higher-yielding vehicles (e.g., REITs and MLPs) where we have little if any exposure. Over the last several years, we have found many of what we think are highly attractive opportunities in cyclical stocks and/or in companies with strong balance sheets and high ROIC. Most have had only limited participation in the rally that began in March 2009. There have also been industries, such as precious metals & mining, that did very well in the initial phase of the recovery following the Financial Crisis before they began to correct sharply in 2011 and are yet to recover. So while nearly all sectors and industries across all asset classes did well in 2013, companies with many of the qualities that we look for have not yet led for long. Our approach leads us to conservatively capitalized companies with high ROIC and strong cash flow characteristics, among other attributes. Investors have still not gravitated to these kinds of companies in comparatively large numbers. However, it’s worth mentioning that many quality small-cap companies did very well on an absolute basis in 2013, particularly in the year’s last eight months.


Let It Be
There have also been signs over the last year-and-a-half that this leadership pattern is beginning to change. Two dates stand out to us as significant. The first was June 4, 2012. From that date through the end of December 2012, investors showed a preference for companies with those quality characteristics mentioned earlier at the expense of high-yield

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2013 NAV TOTAL RETURNS FOR ROYCE’S CLOSED-END FUNDS VS. RUSSELL 2000, RUSSELL MICROCAP, RUSSELL 2500 AND THE RUSSELL GLOBAL SMALL-CAP as of 12/31/13    

   
   
     
1 Not annualized, cumulative since RGTs inception on 10/17/13.    
     
vehicles, highly leveraged stocks, and explosive growth stories. (This helps to explain why many of our portfolios outpaced their benchmarks in the final half of 2012.) Unfortunately, this quality rally was short lived, petering out early in the first quarter of 2013. But we saw it as a significant step in the right direction. After all, we have been arguing for some time now that many quality stocks underperformed over the last several years because the Fed’s zero-interest-rate policies and multiple rounds of quantitative easing led to an outsized hunger for high yield and too few consequences for businesses carrying a lot of debt. This in turn led to a comparative neglect of companies with more pristine balance sheets and those with steady, but lower, dividends. We have also insisted, however, that these advantages have largely played themselves out in the context of a strengthening economy.
    So it probably comes as no surprise that our second important date is the May 2, 2013 low for the 10-year Treasury yield, which marked the beginning of a rising interest-rate environment. Along with the onset of tapering, rising rates—though still historically low on an absolute basis—strongly suggest to us that we are moving closer, if at times by fits and starts, to a stock market that will reward quality businesses, especially those poised to benefit from a healthy, growing economy. In addition to the mini-rally in 2012, we saw improved results for many cyclical companies in the second half of 2013, especially compared to more defensive sectors. We have also seen a recovery in M&A and IPO activity. Most important, there have been increased levels of overall business activity, evidenced by the final revision of third-quarter GDP, which leaped from 3.6% to 4.1%.


We’ve Got a Feeling
Of course, considering where we have been over the last five-plus, even 13-plus, years, it seems fair to ask what a return to an “Old Normal” would look like in the market. Our sense is that small-caps are not on a collision course with a sustained decline or a catastrophic correction such as we saw in late 2008-early 2009. It seems more likely to us that the market will undergo a series of small corrections that will slow the current breakneck pace of returns. From our perspective, this would be part of the larger normalization process affecting the economy and the financial markets. Corrections are a fact of life, and we have
 




In our position as bottom-up stock-pickers,
we have always thought less about markets
and indexes than we do about stocks and
businesses. As has always been the case,
our daily work focuses squarely on finding
what we think are great companies at
attractive prices.

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No one knows exactly when or to what
degree, but it will shift. This helps to
explain why we think it’s important
to never get too excited during bullish
phases like the current period, just as
we believe investors should not get
too upset during corrections.

Markets are always changing.
We work hard to be prepared for
these changes, which is why we use
volatility and falling share prices to
our advantage. Related to this is the
idea of rotation. We cannot say for
sure what part of the equity market
will lead next—we are obviously
hoping that it’s high quality—but
it’s clear that a move will come. So
we do not expect five-year returns to
remain this robust, but we are still
enthusiastic about the potential for
small-cap returns.

Equally important, we have always
thought that any evaluation of
returns must be both long-term
and multi-dimensional in order to
measure more accurately what is
being accomplished. For example,
rolling returns are an excellent tool
to examine mutual fund performance.
It allows us to look at returns over
multiple time periods and to gauge
the experience of investors who enter
the market at different points of time.
We always try to keep in mind the
following maxim: If the number looks
too high, it probably is.

   
Letter to Our Stockholders


not seen one in more than a year. So there will be some pullback, but we believe it will be manageable, at least for those of us with a disciplined, long-term approach.
     As of this writing, the Russell 2000 Index may have hit, or may be nearing, another peak. Nonetheless, we see opportunity in our chosen asset class. So while the index as a whole looked overvalued to us at year-end, the primary selection universe for our domestic small-cap portfolios is much wider than the Russell 2000. It encompasses more than 4,000 companies with market caps up to $2.5 billion; we are also active in mid-cap stocks, a segment where the market caps fall between $2.5 billion and $5 billion. This area provides more than 400 additional names. Indeed, no small-cap index, including the Russell 2000, takes in the full measure of small-cap valuations or offers the most appropriate selection space. In these days of ETFs and strong relative results for index-based investing, we think the enormous breadth of the small-cap world has been forgotten to some degree. In our position as bottom-up stock-pickers, we have always thought less about markets and indexes than we do about stocks and businesses. As has always been the case, our daily work focuses squarely on finding what we think are great companies at attractive prices. Our goal remains strong absolute returns over long-term periods. We cannot say for sure when conservatively capitalized, well-managed, and fundamentally sound businesses might assume market leadership. However, we are confident that they will in the not-too-distant future as the expanding economy leads investors to focus once more on fundamentals, particularly those that reveal high quality.


Sincerely,

       
Charles M. Royce
President

W. Whitney George
Vice President

Jack E. Fockler, Jr.
Vice President
       

January 31, 2014
   

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Table of Contents    

     
Annual Report to Stockholders    

Managers’ Discussions of Fund Performance    
     
Royce Value Trust   10
     
Royce Micro-Cap Trust   12
     
Royce Focus Trust   14
     
Royce Global Value Trust   16

History Since Inception   18
     
Distribution Reinvestment and Cash Purchase Options   20
     
Schedules of Investments and Other Financial Statements    
     
Royce Value Trust   21
     
Royce Micro-Cap Trust   37
     
Royce Focus Trust   52
     
Royce Global Value Trust   62
     
Directors and Officers   72
     
Notes to Performance and Other Important Information   73
     
Results of Stockholders Meeting   74
 


2013 Annual Report to Stockholders  |  9



Royce Value Trust


 


AVERAGE ANNUAL NAV TOTAL RETURNS
Through 12/31/13

July–December 20131   19.32 %  

One-Year         34.14    

Three-Year         11.66    

Five-Year         21.27    

10-Year         8.95    

15-Year         10.04    

20-Year         10.80    

25-Year         11.55    

Since Inception (11/26/86)         11.13    

1 Not annualized  
       
CALENDAR YEAR NAV TOTAL RETURNS  

Year   RVT     Year     RVT    

2013   34.1 %   2005     8.4 %  

2012   15.4     2004     21.4    

2011   -10.1     2003     40.8    

2010   30.3     2002     -15.6    

2009   44.6     2001     15.2    

2008   -45.6     2000     16.6    

2007   5.0     1999     11.7    

2006   19.5     1998     3.3    

                     
TOP 10 POSITIONS % of Net Assets  

HEICO Corporation   1.4 %  

Tejon Ranch   1.0    

On Assignment   0.9    

Reliance Steel & Aluminum   0.9    

Wabtec Corporation   0.9    

Federated Investors Cl. B   0.8    

E-L Financial   0.8    

Coherent   0.8    

Helmerich & Payne   0.8    

Kennametal   0.8    

                     
PORTFOLIO SECTOR BREAKDOWN % of Net Assets  

Industrials   28.5 %  

Information Technology   18.2    

Financials   12.4    

Consumer Discretionary   11.4    

Materials   6.5    

Health Care   4.8    

Energy   4.4    

Consumer Staples   1.1    

Telecommunication Services   0.7    

Diversified Investment Companies   0.3    

Miscellaneous   4.9    

Preferred Stock   0.1    

Cash and Cash Equivalents,
Net of Outstanding Line of Credit
  6.7    

 
 
 

 
Manager’s Discussion
Royce Value Trust (RVT) gained 34.1% on an NAV (net asset value) basis and 35.6% on a market price basis in 2013, capturing most of the respective gains of 38.8% and 41.3% for its unleveraged small-cap benchmarks, the Russell 2000 Index and S&P SmallCap 600 Index, for the same period.
     Equities came off a subdued, in some cases bearish, fourth quarter of 2012 and kicked off 2013 with a dynamic first quarter. RVT gained 10.6% on an NAV basis and 13.7% on a market price basis to finish this bullish quarter, in the latter case outperforming the Russell 2000 (+12.4%) and S&P SmallCap 600 (+11.8%). The second quarter was more volatile and uncertain. Macro concerns once again influenced market sentiment as the globe’s capital markets fell precipitously in late June following the announcement by Fed Chairman Ben Bernanke that the central bank was likely to slow the pace of its monthly bond purchases later in the year. Along with less-than-stellar news out of China, Brazil, Turkey, and Europe, and the rapidly rising yield on the 10-year Treasury, these negative headlines helped drive share prices lower. The markets stabilized, however, before the end of June, which enabled most major domestic indexes to finish the period in the black. RVT trailed both of its benchmarks in the second quarter, gaining 1.7% on an NAV basis and 1.9% on a market price basis compared to the Russell 2000’s 3.1% increase and the 3.9% gain for the S&P SmallCap 600.
     The second half of the year saw a resumption of the first’s quarter’s feverish pace. The third quarter was another strong bullish period for equities, especially small-caps, which maintained their dynamic showing. On an NAV basis, RVT’s 10.5% gain was enough to outperform the Russell 2000’s 10.2% increase though it was not enough to match the S&P SmallCap 600’s 10.7% return. On a market price basis, the Fund increased 7.6%. Fourth-quarter results were in general a bit more muted than those in the first and third, but remained generally robust. During this period, RVT gained 7.9% on an NAV basis and 8.8% on a market price basis, in the latter case beating the Russell 2000’s 8.7% advance but falling short of the S&P SmallCap 600’s 9.8% increase.
     While we have generally been pleased with the Fund’s recent performances on an absolute basis, relative results were not as consistent. On an NAV and market price basis, RVT outperformed the Russell 2000 for the five-, 15-, 20-, 25-year, and since inception (11/26/86) periods ended December 31, 2013 but only outpaced the S&P SmallCap 600 for the 25-year and since inception periods on an NAV basis and the 25-year period on a market price basis. RVT’s average annual NAV total return for the since inception period ended December 31, 2013 was 11.1%.
     Ten of the Fund’s 12 equity sectors finished the year in the black. Industrials made by far the largest positive impact on calendar-year performance, followed by Information

  GOOD IDEAS THAT WORKED
  Top Contributors to 2013 Performance1  

E-L Financial   0.49%

HEICO Corporation   0.48   

On Assignment   0.47   

PAREXEL International   0.46   

Wabtec Corporation   0.43   

1 Includes dividends    
     
Important Performance and Risk Information
All performance information reflects past performance, is presented on a total return basis, and reflects the reinvestment of distributions. Past performance is no guarantee of future results. Current performance may be higher or lower than performance quoted. Returns as of the most recent month-end may be obtained at www.roycefunds.com. The market price of the Fund’s shares will fluctuate, so that shares may be worth more or less than their original cost when sold. The Fund invests primarily in securities of small- and micro-cap companies, which may involve considerably more risk than investing in a more diversified portfolio of larger-cap companies. Regarding the two “Good Ideas” tables shown above, the sum of all contributors to, and all detractors from, performance for all securities in the portfolio would approximate the Fund’s performance for 2013.

10  |  2013 Annual Report to Stockholders



Performance and Portfolio Review


Technology, Financials, and Consumer Discretionary. Materials and Diversified Investment Companies detracted from performance, but their net losses were relatively tiny. At the industry level, metals & mining was the Fund’s leading detractor, as businesses could not cope with the respective 36% and 28% drops in silver and gold prices in 2013. Two of RVT’s top five, and half of its 20, worst performers came from this category. Three other holdings that posted net losses came from outside the industry but nonetheless had significant exposure to it, including two of the Fund’s largest detractors, Central Fund of Canada, and ASA Gold and Precious Metals—both are closed-end funds. After adding shares of each throughout much of the year, we trimmed our positions in December. We parted ways with Hochschild Mining in June and added shares of Canadian gold miner IAMGOLD Corporation. Outside the precious metals area, we significantly built our stake in Daphne International Holdings, a maker and retailer of Chinese footwear that sells Aerosole shoes in China. China’s economic slowdown has hurt its share price as a cutback in consumer spending has contributed to declining sales and revenues. The company’s strong management and market position give us confidence in its long-term potential.
     E-L Financial, an investment and insurance holding company based in Toronto, was the Fund’s top contributor and a top-ten holding at the end of 2013. We like its core business and dividend and were pleased to see other investors take note of the company. We trimmed our position in January and then again in December. HEICO Corporation is a tech-driven aerospace, industrial, defense, and electronics company located in Florida. The company benefited from both a recovery and a positive long-term outlook for the airline industry as well as ongoing profitability in its more space and defense-oriented Electronic Technologies Group. This resulted not only in improved margins and earnings, but also better free cash flows. It’s a long-time Royce holding that we think is well managed and a leader in its field. On Assignment runs a global business that provides in-demand, skilled professionals in the technology, healthcare, and life sciences fields. We like its steady earnings and cash flows as well as its niche in staffing industries that we think have very strong growth potential.

  GOOD IDEAS AT THE TIME
  Top Detractors from 2013 Performance1  


Daphne International Holdings -0.22%

Central Fund of Canada Cl. A -0.19   

ASA Gold and Precious Metals -0.15   

Hochschild Mining -0.12   

IAMGOLD Corporation -0.11   

1 Net of dividends
 
MARKET PRICE PERFORMANCE HISTORY SINCE INCEPTION (11/26/86) through 12/31/13

1 Reflects the cumulative total return of an investment made by a stockholder who purchased one share at inception ($10.00 IPO), reinvested all annual distributions and fully participated in primary subscriptions of the Fund’s rights offerings.

2 Reflects the actual market price of one share as it traded on the NYSE.

 
FUND INFORMATION AND PORTFOLIO DIAGNOSTICS

Fund Total Net Assets $1,308 million   

Number of Holdings 539   

Turnover Rate 33%   

Symbol  
   Market Price RVT   
   NAV XRVTX   

Average Market Capitalization2 $1,782 million   

Weighted Average P/E Ratio3,4 21.6x   

Weighted Average P/B Ratio3 2.1x   

U.S. Investments (% of Net Assets) 78.1%   

Non-U.S. Investments (% of Net Assets) 15.2%   

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

2  Harmonic Average. This weighted calculation evaluates a portfolio as if it were a single stock and measures it overall. It compares the total market value of the portfolio to the portfolio’s share in the earnings or book value, as the case may be, of its underlying stocks.

3  The Fund’s P/E ratio calculation excludes companies with zero or negative earnings (24% of portfolio holdings as of 12/31/13).

 

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





 



2013 Annual Report to Stockholders  |  11



Royce Micro-Cap Trust

 


AVERAGE ANNUAL NAV TOTAL RETURNS
Through 12/31/13

July-December 20131   27.42 %  

One-Year         44.52    

Three-Year         16.11    

Five-Year         24.12    

10-Year         9.64    

15-Year         11.60    

20-Year         11.93    

Since Inception (12/14/93)         11.92    

1 Not annualized  
       
CALENDAR YEAR NAV TOTAL RETURNS  

Year   RMT     Year     RMT    

2013   44.5 %   2005     6.8 %  

2012   17.3     2004     18.7    

2011   -7.7     2003     55.5    

2010   28.5     2002     -13.8    

2009   46.5     2001     23.4    

2008   -45.5     2000     10.9    

2007   0.6     1999     12.7    

2006   22.5     1998     -4.1    

                     
TOP 10 POSITIONS % of Net Assets  

Integrated Electrical Services   1.2 %  

Mesa Laboratories   1.1    

Drew Industries   1.1    

Computer Task Group   1.1    

Patriot Transportation Holding   1.1    

Raven Industries   1.1    

Quaker Chemical   1.0    

Sun Hydraulics   1.0    

Seneca Foods   1.0    

Tejon Ranch   1.0    

                     
PORTFOLIO SECTOR BREAKDOWN % of Net Assets  

Industrials   28.9 %  

Information Technology   21.0    

Financials   16.1    

Consumer Discretionary   12.2    

Health Care   8.7    

Materials   5.8    

Energy   3.5    

Consumer Staples   2.4    

Telecommunication Services   0.4    

Utilities   0.1    

Miscellaneous   4.8    

Preferred Stock   0.3    

Outstanding Line of Credit, Net of Cash and Cash Equivalents   -4.2    

 
 
 

 
Manager’s Discussion
Royce Micro-Cap Trust (RMT) gained 44.5% on an NAV (net asset value) basis and 49.4% on a market price basis in 2013 compared to its unleveraged benchmarks, the Russell 2000 Index and Russell Microcap Index, which had respective gains of 38.8% and 45.6%, for the same period. During the highly bullish first quarter, RMT gained 11.4% on an NAV basis, falling behind both the Russell 2000 and the Russell Microcap, which rose 12.4% and 12.6%, respectively. On a market price basis, RMT outpaced both indexes, gaining 14.6% during the first quarter. The second quarter was more volatile. Market sentiment soured in late June after the Fed announced that it would likely begin winding down its quantitative easing policies later in the year. Adding to the uncertainty was the less-than-stellar news out of China, Brazil, Turkey, and Europe, which led to a drop in stock prices for several sessions before the markets stabilized here in the U.S. just before the end of June. RMT trailed both the Russell 2000 and Russell Microcap Indexes in the second quarter, gaining 1.8% on an NAV basis and 2.4% on a market price basis compared to respective gains of 3.1% and 5.1%.
     The Fund enjoyed a particularly strong third quarter, outpacing each of its benchmarks. RMT advanced 13.9% on an NAV basis (and gained 9.6% based on market price) while the small-cap index was up 10.2% and the micro-cap index rose 11.6% in the third quarter. The fourth quarter saw mostly lower though still positive returns, though micro-caps were something of an exception to this rule. The Fund increased 11.9% on an NAV basis and an impressive 16.2% on a market price basis versus respective gains of 8.7% and 10.3% for the Russell 2000 and Russell Microcap Indexes.
     On a long-term NAV basis, we were pleased that the Fund outperformed the Russell 2000 for the three-, five-, 10-, 15-, 20-year, and since inception (12/14/93) periods ended December 31, 2013. The Fund also outpaced the Russell Microcap for the one-, five-, and 10-year periods on an NAV basis. On a market price basis, RMT outperformed the Russell 2000 for the one-, three-, five-, 20-year, and since inception (12/14/93) periods ended December 31, 2013; the Fund also outpaced the Russell Microcap for the one-, three-, five-, and 10-year periods. (Data for the Russell Microcap only goes back to 2000.) RMT’s average annual NAV total return for the since inception period was 11.9%. We are proud of the Fund’s long-term record and are pleased that RMT celebrated 20 years of history in December 2013.
     Nine of the Fund’s 10 equity sectors made net contributions to performance in 2013. Industrials led comfortably, though strong net gains also came from Information Technology and Financials. At the position level, the largest contributions came from companies in the Financials and Industrials sectors. San Diego-based BofI Holding has been a holding in the

  GOOD IDEAS THAT WORKED
  Top Contributors to 2013 Performance1  

BofI Holding   0.99%

Altisource Asset Management   0.87   

Virtus Investment Partners   0.82   

Kennedy-Wilson Holdings   0.79   

AAON   0.76   

1 Includes dividends    
     
Important Performance and Risk Information
All performance information reflects past performance, is presented on a total return basis, and reflects the reinvestment of distributions. Past performance is no guarantee of future results. Current performance may be higher or lower than performance quoted. Returns as of the most recent month-end may be obtained at www.roycefunds.com. Certain immaterial adjustments were made to the net assets of Royce Micro-Cap Trust at 12/31/12 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 investing in a more diversified portfolio of larger-cap companies. Regarding the two “Good Ideas” tables shown above, the sum of all contributors to, and all detractors from, performance for all securities in the portfolio would approximate the Fund’s performance for 2013.

12  |  2013 Annual Report to Stockholders



Performance and Portfolio Review


portfolio since late August of 2006. BofI saw its web-based banking services in both the consumer and commercial markets in high demand. We liked its long-term prospects, but its soaring stock price convinced us to greatly reduce our position. Altisource Asset Management provides asset management and corporate governance services to investment vehicles that own real estate related assets. We began to sell our stake in September when its share price rose well beyond our price target. A rising stock price also led us to take gains in Virtus Investment Partners, a financial advisory and consulting firm, and Kennedy-Wilson Holdings, a vertically-integrated real estate investment and services company. The latter benefited from investing aggressively in West Coast commercial real estate when those markets were in distress, and the firm’s performance in 2013 reflected their much healthier condition.
     Five out of the Fund’s top 10 detractors, and 10 of its top 20, came from the metals & mining industry. Respective commodity price declines of 28% and 36% for gold and silver in 2013 were the primary cause of the industry’s woes. After adding to our stake in the first half, we chose to sell our shares in Vista Gold in the fall after further alarming share price declines. We also parted ways with Golden Star Resources. Confident that it could benefit from an eventual turnaround, we added shares in closed-end fund ASA Gold and Precious Metals, which invests primarily in companies involved in gold mining. After initiating a position in March, we substantially built our position in Sprott, a Canadian investment management company that saw its share price slide as assets and fees declined, in large part the result of its significant exposure to the precious metals mining and energy industries. Coming from the Health Care sector, Celsion Corporation develops heat-based cancer treatments, currently focused on breast and liver cancer. After gains in the stock led us to reduce our stake between July 2012 and January 2013, we held a small position throughout the year, though it was not small enough to keep the stock from hurting performance. Its share price cratered late in January on news that its liver cancer treatment, ThermoDox, failed to meet efficacy expectations in the final stage of clinical testing. We still like its core business and were reasonably hopeful that it could recover.

  GOOD IDEAS AT THE TIME
  Top Detractors from 2013 Performance1  


Vista Gold -0.48%

Celsion Corporation -0.41   

ASA Gold and Precious Metals -0.25   

Golden Star Resources -0.21   

Sprott -0.14   

1 Net of dividends
 
MARKET PRICE PERFORMANCE HISTORY SINCE INCEPTION (12/14/93) through 12/31/13

1 Reflects the cumulative total return of an investment made by a stockholder who purchased one share at inception ($7.50 IPO), reinvested distributions and fully participated in the primary subscription of the 1994 rights offering.

2 Reflects the actual market price of one share as it traded on the NYSE and, prior to 12/1/03, on the Nasdaq.

 
FUND INFORMATION AND PORTFOLIO DIAGNOSTICS

Fund Total Net Assets $433 million   

Number of Holdings 392   

Turnover Rate 29%   

Symbol  
   Market Price RMT   
   NAV XOTCX   

Net Leverage1 4%   

Average Market Capitalization2 $453 million   

Weighted Average P/E Ratio3,4 21.0x   

Weighted Average P/B Ratio3 1.9x   

U.S. Investments (% of Net Assets) 91.5%   

Non-U.S. Investments (% of Net Assets) 12.7%   

1 Net leverage is the percentage, in excess of 100%, of the total value of equity type investments, divided by net assets.

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

3  Harmonic Average. This weighted calculation evaluates a portfolio as if it were a single stock and measures it overall. It compares the total market value of the portfolio to the portfolio’s share in the earnings or book value, as the case may be, of its underlying stocks.

4  The Fund’s P/E ratio calculation excludes companies with zero or negative earnings (24% of portfolio holdings as of 12/31/13).

 

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





 



2013 Annual Report to Stockholders  |  13



Royce Focus Trust

 


AVERAGE ANNUAL NAV TOTAL RETURNS
Through 12/31/13

July-December 20131   16.69 %  

One-Year         19.73    

Three-Year         6.08    

Five-Year         17.49    

10-Year         9.38    

15-Year         11.01    

Since Inception (11/1/96)2         10.58    

1 Not annualized  
2 Royce & Associates assumed investment management responsibility for the Fund on 11/1/96.
       
CALENDAR YEAR NAV TOTAL RETURNS  

Year   FUND     Year     FUND    

2013   19.7 %   2005     13.3 %  

2012   11.4 %   2004     29.3 %  

2011   -10.5     2003     54.3    

2010   21.8     2002     -12.5    

2009   54.0     2001     10.0    

2008   -42.7     2000     20.9    

2007   12.2     1999     8.7    

2006   15.8     1998     -6.8    

                     
TOP 10 POSITIONS % of Net Assets  

Western Digital   5.0 %  

Franklin Resources   3.8    

Berkshire Hathaway Cl. B   3.7    

Helmerich & Payne   3.5    

Exxon Mobil   3.2    

Microsoft Corporation   3.1    

Thor Industries   3.0    

Apple   2.9    

Buckle (The)   2.7    

Myriad Genetics   2.5    

                     
PORTFOLIO SECTOR BREAKDOWN % of Net Assets  

Financials   18.7 %  

Materials   18.7    

Information Technology   18.7    

Energy   11.9    

Consumer Discretionary   11.2    

Industrials   8.7    

Consumer Staples   6.3    

Health Care   3.7    

Cash and Cash Equivalents   2.1    

 
 
 

 
Manager’s Discussion
     Following rough first- and second-quarter results, disappointing absolute and relative performance continued for Royce Focus Trust (FUND). For the year, FUND rose 19.7% on an NAV (net asset value) basis and 22.0% on a market price basis, lagging the 36.8% gain for its benchmark, the Russell 2500 Index.
     The Fund could not keep pace through the first quarter of 2013, a more or less consistently bullish period that lifted share prices across asset classes. The Fund climbed 2.3% on an NAV basis and 7.3% on a market price basis in the first quarter, lagging behind the 12.8% advance for the Russell 2500. Following this bull run, the markets shifted to a more volatile and unsettled mode. The second quarter saw declines in the emerging markets and a slowdown in China that, combined with Fed Chairman Ben Bernanke’s announcement that the pace of the central bank’s $85 billion monthly bond purchase program was likely to slow by the end of the year, further distorted valuations and depressed asset prices. The market’s reaction to these macro headlines was swift and dramatic, though U.S. stocks generally did a better job of pushing through these challenges than many non-U.S. stocks. Most U.S. indexes finished the quarter in the black. FUND lagged its benchmark in the second quarter, gaining 0.2% on an NAV basis and 1.3% on a market price basis versus a gain of 2.3% for the Russell 2500.
     The third quarter was only slightly less bullish than the first, with returns for most of the major indexes demonstrating the market’s resilience. Indeed, strong third-quarter results were a convincing sign that investors were happy to shrug off macro developments that were potentially similar to those that had hampered results in the previous three years. The Fund’s NAV performance was a bit stronger during this quarter, though it continued to trail its benchmark. FUND advanced 8.9% on an NAV basis and 4.9% on a market price basis in the third quarter while the benchmark rose 9.1%. The markets were a bit less dynamic in the year’s final quarter, though returns were still solidly in the black. FUND posted 7.0% on an NAV basis and 7.1% on a market price basis to finish the year, underperforming the Russell 2500’s 8.7% increase. While we were pleased that the Fund outpaced its benchmark for the 15-year and since inception of our management (11/1/96) periods ended December 31, 2013, relative results over other long-term periods were disappointing. The Fund’s average annual NAV total return for the since inception period ended December 31, 2013 was 10.6%.
     Six of the Fund’s eight equity sectors contributed positively to calendar-year performance. Information Technology led by a wide margin, followed by notable net gains from the Consumer Staples, Financials, and Consumer Discretionary sectors. Materials was the Fund’s most significant detractor, with most losses coming from the metals & mining industry. This group accounted for all five of FUND’s five-largest detractors, as well as seven of its top 10.

  GOOD IDEAS THAT WORKED
  Top Contributors to 2013 Performance1  

Western Digital   3.67%

Nu Skin Enterprises Cl. A   3.57   

GameStop Corporation Cl. A   1.86   

Helmerich & Payne   1.53   

Microsoft Corporation   1.51   

1 Includes dividends    
     
Important Performance and Risk Information
All performance information reflects past performance, is presented on a total return basis, and reflects the reinvestment of distributions. Past performance is no guarantee of future results. Current performance may be higher or lower than performance quoted. Returns as of the most recent month-end may be obtained at www.roycefunds.com. The market price of the Fund’s shares will fluctuate, so that shares may be worth more or less than their original cost when sold. The Fund normally invests primarily in small-cap companies, which may involve considerably more risk than investing in a more diversified portfolio of larger-cap companies. Regarding the two “Good Ideas” tables shown above, the sum of all contributors to, and all detractors from, performance for all securities in the portfolio would approximate the Fund’s performance for 2013.

14  |  2013 Annual Report to Stockholders



Performance and Portfolio Review


Plummeting revenue and share prices were mostly the result of significant drops in silver and gold prices in 2013—36% and 28%, respectively—as well as increased operating costs for many mining companies. In many cases, valuations have reached what we view as rock-bottom levels that have not been seen since the late 2008-early 2009 lows. For the most part, we have chosen to hold those companies that we think look best positioned for an eventual turnaround. We sold our positions in Allied Nevada Gold and Newmont Mining and added shares of Seabridge Gold and Fresnillo. We also held on to our shares in Pretium Resources.
     Irvine, C.A.-based Western Digital was FUND’s top contributor and a number one position at year-end. One of two firms that dominate disk drive production worldwide, Western Digital’s core business—solutions for the collection, storage, management, and protection of digital content—grabbed our attention back in 2010 when we first began building a position in the portfolio. The company made some smart acquisitions in 2013, including Virident, sTec, and VeloBit, which strengthened its position in the hard disk drive and flash technology markets. A developer and distributor of personal care skin products worldwide, Nu Skin Enterprises was the Fund’s second-largest contributor to 2013 performance. Its share price gained momentum from stronger-than-anticipated third-quarter earnings and improved full-year guidance for 2013 in October, driven by the success of a limited-time offer for its new weight management system, helped its share price gain momentum. We took gains throughout much of the year. GameStop Corporation is a video game retailer that sells new and pre-owned gaming products, including hardware and software. In contrast to Wall Street’s prediction that GameStop would be the next Blockbuster Video, we have long been attracted to the company’s management and buy-sell-trade model. Earlier in the year, announcements came from Microsoft and Sony that each would be introducing updated gaming consoles mollified worries. In addition to the updated consoles, the company’s video game exchange business should continue to thrive as new games are introduced with the release of the new consoles and older games from outdated systems should be harder to find. The firm also enjoyed increased net sales in the third quarter and saw high demand for the new consoles. We reduced our position in 2013.

  GOOD IDEAS AT THE TIME
  Top Detractors from 2013 Performance1  


Allied Nevada Gold -2.15%

Seabridge Gold -1.13   

Pretium Resources -1.10   

Fresnillo -0.99   

Newmont Mining -0.81   

1 Net of dividends
 
MARKET PRICE PERFORMANCE HISTORY SINCE INCEPTION (11/1/96)3 through 12/31/13

1 Reflects the cumulative total return experience of a continuous common stockholder who reinvested all distributions and fully participated in the primary subscription of the 2005 rights offering.

2 Reflects the actual market price of one share as it traded on Nasdaq.

3 Royce & Associates assumed investment management responsibility for the Fund on 11/1/96.

 
FUND INFORMATION AND PORTFOLIO DIAGNOSTICS

Fund Total Net Assets $191 million   

Number of Holdings 52   

Turnover Rate 23%   

Symbol  
   Market Price FUND   
   NAV XFUNX   

Average Market Capitalization1 $6,747 million   

Weighted Average P/E Ratio2,3 16.7x   

Weighted Average P/B Ratio2 2.1x   

U.S. Investments (% of Net Assets) 71.2%   

Non-U.S. Investments (% of Net Assets) 26.7%   

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

2  Harmonic Average. This weighted calculation evaluates a portfolio as if it were a single stock and measures it overall. It compares the total market value of the portfolio to the portfolio’s share in the earnings, or book value, as the case may be, of its underlying stocks.

3  The Fund’s P/E ratio calculation excludes companies with zero or negative earnings (13% of portfolio holdings as of 12/31/13).

 

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





 



2013 Annual Report to Stockholders  |  15



Royce Global Value Trust

 


CUMULATIVE NAV TOTAL RETURN
Through 12/31/13
Since Inception (10/17/13)1         2.76 %  

1 Not annualized  
       
TOP 10 POSITIONS % of Net Assets  

Stallergenes   1.7 %  

New World Department Store China   1.6    

Lazard Cl. A   1.6    

Midland Holdings   1.6    

Television Broadcasts   1.6    

Mayr-Melnhof Karton   1.6    

Semperit AG Holding   1.6    

Vaisala Cl. A   1.6    

Daphne International Holdings   1.5    

Lewis Group   1.4    

                     
PORTFOLIO SECTOR BREAKDOWN % of Net Assets  

Consumer Discretionary   18.2 %  

Industrials   15.7    

Materials   13.5    

Information Technology   12.8    

Financials   12.8    

Health Care   7.1    

Energy   2.0    

Consumer Staples   2.0    

Cash and Cash Equivalents   15.9    

 
 
 

 
Manager’s Discussion
Royce Global Value Trust (RGT), our newest offering, rose 2.8% on an NAV (net asset value) basis in its inaugural performance period versus a 3.3% gain for its benchmark, the Russell Global Small Cap Index, for the same period, which ran from October 17, 2013 through the end of 2013. We were pleased with the portfolio’s early showing, especially considering that as 2013 closed, RGT held a relatively large cash percentage. These results also come with a caveat, however—we believe that such a short-term span is not terribly relevant in evaluating any investment’s merits. This period covered most of the year’s bullish fourth quarter, which was generally less robust for non-U.S. stocks than it was for their domestic cousins. Results for both RGT and its benchmark reflected this.
     The Fund came into existence as a spin-off from Royce Value Trust (RVT) in which the distribution of shares of RGT to its stockholders was done at the rate of one share of Global Trust common stock for every seven shares of RVT common stock owned. RGT’s investment goal is long-term growth of capital. The Fund invests in a broadly diversified portfolio of both U.S. and non-U.S. small-cap stocks. Chuck Royce manages the Fund while Royce veterans Chris Flynn and David Nadel serve as assistant portfolio managers. We are very excited to be introducing a closed-end portfolio that seeks to take advantage of the growing opportunities among global small-caps, which we think remain outstanding. The Fund finished 2013 with 97 equity holdings and approximately 84% of its common stock positions were invested in countries located outside the U.S., which nonetheless remained the nation to which the portfolio had the most exposure at the end of December. RGT also had a good-sized amount of exposure to Hong Kong, Canada, Japan, the UK, and France at year-end.
     The portfolio’s best-performing equity sectors were also two of its largest at the end of 2013—Industrials and Information Technology. Financials, Health Care, and Materials rounded out the list of sectors that posted net gains while Energy was flat and Consumer Staples and Consumer Discretionary each posted comparably modest net losses for the opening performance period. Trading companies & distributors, from the Industrials sector, led all of RGT’s industry groups by a sizable margin, though the electronic equipment,

  GOOD IDEAS THAT WORKED
  Top Contributors to 2013 Performance1  

AerCap Holdings   0.86%

GrafTech International   0.36   

Vaisala Cl. A   0.33   

EPS Corporation   0.31   

Lazard Cl. A   0.28   

1 Includes dividends    
     
Important Performance and Risk Information
All performance information reflects past performance, is presented on a total return basis, and reflects the reinvestment of distributions. Past performance is no guarantee of future results. Current performance may be higher or lower than performance quoted. Returns as of the most recent month-end may be obtained at www.roycefunds.com. The Fund invests primarily in securities of small-cap 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. The Fund invests primarily in securities of small-cap 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. The market price of the Fund’s shares will fluctuate, so that shares may be worth more or less than their original cost when sold. The Fund normally invests primarily in small-cap companies, which may involve considerably more risk than investing in a more diversified portfolio of larger-cap companies. Regarding the two “Good Ideas” tables shown above, the sum of all contributors to, and all detractors from, performance for all securities in the portfolio would approximate the Fund’s performance for 2013.

16  |  2013 Annual Report to Stockholders



Performance and Portfolio Review


instruments & components group and capital markets stocks also chipped in with good-sized gains. Among those groups that detracted from results, the textiles, apparel & luxury goods group led, followed by net losses for construction & engineering companies and the metals & mining group.
     AerCap Holdings led all of the Fund’s top contributors by a wide margin. The Netherlands-based company has a global business in aircraft leasing and aviation finance. It share price soared in mid-December on news that it would be buying American International Group’s International Lease Finance, which stood to make AerCap the world’s second-largest aircraft lessor. We sold our position in the dramatic run-up. GrafTech International is a long-time Royce favorite. It’s a U.S. business that manufactures synthetic and natural graphite and carbon based products that are used to produce steel. The company had been enduring slowing demand for steel and capacity utilization before announcing plans for a turnaround that focuses on profitability, cash flow, and growth while also offering a sturdier outlook for steel demand in 2014.
     Shanghai-based Daphne International Holdings led all of the portfolio’s “Good Ideas at the Time” by a wide margin. In December, we used its slumping share price to add to our position. The overall slowdown in the Chinese economy has taken its toll on Daphne’s business as lower levels of consumer spending in particular caused sales and revenues to decline. The company is a Chinese footwear maker and retailer that sells Aerosole shoes in China. Its strong management and market position gave us confidence in the company’s long-term potential, though we recognize that this investment is likely to require patience. We had less confidence in the long-term prospects for Ekornes, a Norwegian home furnishings manufacturer that specializes in recliners and sofas. Declining sales and revenues left us less comfortable, so we reduced our position.
     Daily NAVs (net asset values) for the Fund are available on our website and online through most ticker symbol lookup services, as well as on broker terminals under the symbol XRGTX. The Fund trades on the New York Stock Exchange under the symbol RGT. Of course, investors should consider the Fund’s investment objectives, risks, fees, charges, and expenses carefully before investing.

  GOOD IDEAS AT THE TIME
  Top Detractors from 2013 Performance1  


Daphne International Holdings -0.37%

Ekornes -0.19   

Mardin Cimento Sanayii -0.17   

Raubex Group -0.17   

Fresnillo -0.15   

1 Net of dividends
 
 
FUND INFORMATION AND PORTFOLIO DIAGNOSTICS

Fund Total Net Assets $103 million   

Number of Holdings 97   

Turnover Rate 7%   

Symbol  
   Market Price RGT   
   NAV XRGTX   

Average Market Capitalization1 $1,230 million   

Weighted Average P/E Ratio2,3 16.4x   

Weighted Average P/B Ratio2 2.0x   

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

2  Harmonic Average. This weighted calculation evaluates a portfolio as if it were a single stock and measures it overall. It compares the total market value of the portfolio to the portfolio’s share in the earnings or book value, as the case may be, of its underlying stocks.

3  The Fund’s P/E ratio calculation excludes companies with zero or negative earnings (12% of portfolio holdings as of 12/31/13).

 



PORTFOLIO COUNTRY BREAKDOWN1,2
% of Net Assets


United States 15.7%

Hong Kong 10.6   

Canada 7.5   

Japan 7.1   

United Kingdom 6.3   

France 5.4   

South Africa 4.2   

Austria 3.2   

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

2013 Annual Report to Stockholders  |  17



History Since Inception


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

      Amount     Purchase           NAV     Market
History
    Invested     Price1     Shares     Value2     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                
 
12/31/13           $ 21,922               13,771     $ 250,219     $ 220,474
 

1  The purchase price used for annual distribution totals is a weighted average of the distribution reinvestment prices for the year.

2  Other than for initial purchase, values are stated as of December 31 of the year indicated, after reinvestment of distributions.

3  Includes a return of capital.

4  Includes Royce Global Value Trust spin-off of $1.40 per share.



18  |  2013 Annual Report to Stockholders





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.

      Amount     Purchase           NAV     Market
History
    Invested     Price1     Shares     Value2     Value2
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                
 
12/31/13           $ 8,900               5,886     $ 83,110     $ 74,222
 
Royce Focus Trust
10/31/96     Initial Purchase     $ 4,375     $ 4.375       1,000     $ 5,280     $ 4,375
12/31/96                                     5,520       4,594
12/5/97     Distribution $0.53               5.250       101       6,650       5,574
12/31/98                                     6,199       5,367
12/6/99     Distribution $0.145               4.750       34       6,742       5,356
12/6/00     Distribution $0.34               5.563       69       8,151       6,848
12/6/01     Distribution $0.14               6.010       28       8,969       8,193
12/6/02     Distribution $0.09               5.640       19       7,844       6,956
12/8/03     Distribution $0.62               8.250       94       12,105       11,406
2004     Annual distribution total $1.74               9.325       259       15,639       16,794
5/6/05     Rights offering       2,669       8.340       320                
2005     Annual distribution total $1.21               9.470       249       21,208       20,709
2006     Annual distribution total $1.57               9.860       357       24,668       27,020
2007     Annual distribution total $2.01               9.159       573       27,679       27,834
2008     Annual distribution total $0.473               6.535       228       15,856       15,323
3/11/09     Distribution $0.093               3.830       78       24,408       21,579
12/31/10                                     29,726       25,806
2011     Annual distribution total $0.413               6.894       207       26,614       22,784
2012     Annual distribution total $0.46               6.686       255       29,652       25,549
2013     Annual distribution total $0.40               7.222       219                
 
12/31/13           $ 7,044               4,090     $ 35,501     $ 31,166
 
Royce Global Value Trust
10/17/13     Initial Purchase     $ 8,975     $ 8.975       1,000     $ 9,780     $ 8,975
 
12/31/13           $ 8,975               1,000     $ 10,050     $ 8,890

1  The purchase price used for annual distribution totals is a weighted average of the distribution reinvestment prices for the year.

2  Other than for initial purchase, values are stated as of December 31 of the year indicated, after reinvestment of distributions.

3  Includes a return of capital.


2013 Annual Report to Stockholders  |  19


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 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, RMT and FUND 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 is absorbing all commissions on optional cash purchases under the Plans through December 31, 2014.

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, RMT and FUND 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 is absorbing all commissions on optional sales under the Plans through December 31, 2014. 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.).


20  |  2013 Annual Report to Stockholders



Royce Value Trust December 31, 2013

   
Schedule of Investments  
   
    SHARES     VALUE  
COMMON STOCKS – 93.2%              
               
Consumer Discretionary – 11.4%              
Auto Components - 0.5%              

Cooper Tire & Rubber

  41,500     $ 997,660  

Drew Industries

  18,091       926,259  

Gentex Corporation 1

  76,300       2,517,137  

Lear Corporation

  14,000       1,133,580  

Minth Group

  356,100       739,359  
         
 
            6,313,995  
         
 
Automobiles - 0.9%              

Thor Industries 1

  117,600       6,495,048  

Winnebago Industries 2

  211,400       5,802,930  
         
 
            12,297,978  
         
 
Distributors - 1.0%              

Genuine Parts

  7,700       640,563  

LKQ Corporation 2

  297,200       9,777,880  

Weyco Group

  97,992       2,883,905  
         
 
            13,302,348  
         
 
Diversified Consumer Services - 1.1%              

Benesse Holdings

  32,500       1,303,888  

Career Education 2

  28,900       164,730  

MegaStudy

  15,000       1,107,216  

Regis Corporation 1

  233,800       3,392,438  

Sotheby’s 1

  118,700       6,314,840  

Strayer Education 2

  7,000       241,290  

Universal Technical Institute

  125,432       1,744,759  
         
 
            14,269,161  
         
 
Hotels, Restaurants & Leisure - 0.2%              

Ambassadors Group

  32,100       149,265  

Carrianna Group Holdings

  570,200       123,536  

CEC Entertainment

  60,900       2,696,652  

Tropicana Entertainment 2,3

  6,000       103,500  
         
 
            3,072,953  
         
 
Household Durables - 2.4%              

Ekornes

  60,000       813,645  

Ethan Allen Interiors

  320,800       9,758,736  

Forbo Holding

  1,500       1,281,318  

Hanssem

  49,100       2,340,200  

Harman International Industries 1

  77,300       6,327,005  

Mohawk Industries 1,2,4

  53,400       7,951,260  

NVR 2

  3,100       3,180,631  
         
 
            31,652,795  
         
 
Internet & Catalog Retail - 0.2%              

Manutan International

  20,000       1,259,315  

Takkt

  40,000       742,328  
         
 
            2,001,643  
         
 
Leisure Equipment & Products - 0.3%              

Beneteau 2

  50,000       933,412  

Nautilus 2

  138,400       1,166,712  

Shimano

  13,400       1,149,008  
         
 
            3,249,132  
         
 
Media - 1.3%              

Global Mediacom

  4,753,000       742,046  

Media Chinese International

  5,079,400       1,511,957  

Morningstar 1

  84,600       6,606,414  

Pico Far East Holdings

  6,517,000       2,277,584  

Television Broadcasts

  479,800       3,198,955  

Wiley (John) & Sons Cl. A

  58,300       3,218,160  
         
 
            17,555,116  
         
 
Multiline Retail - 0.3%              

Dollar Tree 2

  11,850       668,577  

Golden Eagle Retail Group

  933,300       1,232,476  

New World Department Store China

  4,215,700       2,370,356  
         
 
            4,271,409  
         
 
Specialty Retail - 1.9%              

Advance Auto Parts

  6,700       741,556  

Aeropostale 2

  10,000       90,900  

American Eagle Outfitters

  70,900       1,020,960  

Asahi Company

  49,300       687,232  

Ascena Retail Group 1,2

  121,100       2,562,476  

Beter Bed Holding

  49,300       1,194,006  

Bonjour Holdings

  5,892,000       1,284,124  

Children’s Place Retail Stores 2

  9,300       529,821  

DSW Cl. A

  19,800       846,054  

Finish Line (The) Cl. A

  21,900       616,923  

GameStop Corporation Cl. A

  17,900       881,754  

Genesco 2

  25,700       1,877,642  

Hour Glass (The)

  75,000       99,251  

Lewis Group

  200,000       1,351,764  

L’Occitane International

  400,000       852,172  

Luk Fook Holdings (International)

  48,400       184,130  

Oriental Watch Holdings

  543,000       143,553  

OSIM International

  1,200,000       2,187,091  

Ross Stores

  4,730       354,419  

Stein Mart

  167,800       2,256,910  

Systemax 2

  194,000       2,182,500  

TravelCenters of America LLC 2

  11,600       112,984  

West Marine 2

  131,100       1,865,553  

Wet Seal (The) Cl. A 2

  63,200       172,536  
         
 
            24,096,311  
         
 
Textiles, Apparel & Luxury Goods - 1.3%              

Daphne International Holdings

  5,887,600       2,649,849  

Gildan Activewear

  7,200       383,832  

Grendene

  175,000       1,341,846  

J.G. Boswell Company 3

  2,292       2,016,960  

Makalot Industrial

  160,000       864,328  

Pacific Textiles Holdings

  2,420,000       3,688,844  

Stella International Holdings

  467,000       1,190,039  

Texwinca Holdings

  26,300       27,676  

Van de Velde

  27,500       1,377,075  

Wolverine World Wide 1

  95,000       3,226,200  
         
 
            16,766,649  
         
 
Total (Cost $99,621,045)           148,849,490  
         
 
               
Consumer Staples – 1.1%              
Beverages - 0.0%              

Crimson Wine Group 2,3

  8,925       78,897  
         
 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.   2013 Annual Report to Stockholders  |  21



Royce Value Trust

 
Schedule of Investments
 
    SHARES     VALUE  
Consumer Staples (continued)              
Food & Staples Retailing - 0.1%              

FamilyMart

  27,800     $ 1,268,436  
         
 
Food Products - 1.0%              

Alico

  27,000       1,049,490  

Cal-Maine Foods

  39,948       2,406,068  

Seneca Foods Cl. A 2

  148,103       4,723,005  

Seneca Foods Cl. B 2

  13,751       401,254  

Super Group

  280,000       843,139  

Tootsie Roll Industries

  130,520       4,247,121  

Waterloo Investment Holdings 2,5

  598,676       89,203  
         
 
            13,759,280  
         
 
Total (Cost $10,355,125)           15,106,613  
         
 
               
Diversified Investment Companies – 0.3%              
Closed-End Funds - 0.3%              

Central Fund of Canada Cl. A 1

  289,800       3,839,850  

RIT Capital Partners

  13,500       281,677  
         
 
Total (Cost $4,445,531)           4,121,527  
         
 
               
Energy – 4.4%              
Energy Equipment & Services - 3.5%              

Cal Dive International 2

  456,250       917,062  

Era Group 1,2,4

  13,100       404,266  

Helmerich & Payne 1

  125,300       10,535,224  

ION Geophysical 2

  361,500       1,192,950  

Key Energy Services 2

  58,500       462,150  

Oil States International 2

  45,023       4,579,740  

Pason Systems

  115,500       2,498,649  

SEACOR Holdings 1,2

  93,775       8,552,280  

Steel Excel 2,3

  156,880       4,627,960  

Superior Energy Services 1,2

  40,300       1,072,383  

TGS-NOPEC Geophysical

  80,300       2,128,871  

Tidewater

  64,300       3,811,061  

Trican Well Service

  65,200       796,701  

Unit Corporation 2

  88,500       4,568,370  
         
 
            46,147,667  
         
 
Oil, Gas & Consumable Fuels - 0.9%              

Africa Oil 2

  74,800       649,945  

Cimarex Energy 1

  61,300       6,430,983  

Contango Oil & Gas 2

  8,700       411,162  

Green Plains Renewable Energy

  7,800       151,242  

Lundin Petroleum 2

  24,100       469,871  

Resolute Energy 1,2

  317,234       2,864,623  
         
 
            10,977,826  
         
 
Total (Cost $44,227,343)           57,125,493  
         
 
               
Financials – 12.4%              
Capital Markets - 5.4%              

Affiliated Managers Group 1,2

  34,700       7,525,736  

AllianceBernstein Holding L.P. 1,4

  142,000       3,030,280  

AP Alternative Assets L.P. 2

  64,752       1,829,244  

Artisan Partners Asset Management Cl. A

  45,900       2,992,221  

ASA Gold and Precious Metals

  188,601       2,312,248  

Ashmore Group

  566,000       3,761,255  

Aurelius

  9,300       377,423  

Cowen Group 2

  853,458       3,337,021  

Eaton Vance 1

  81,000       3,465,990  

Federated Investors Cl. B 1,4

  384,200       11,064,960  

GAMCO Investors Cl. A

  28,900       2,513,433  

Jupiter Fund Management

  75,000       478,155  

Lazard Cl. A

  114,800       5,202,736  

MVC Capital

  254,200       3,431,700  

Paris Orleans

  33,513       820,648  

RHJ International 2

  520,000       2,639,692  

SEI Investments

  231,500       8,039,995  

Sprott

  590,000       1,455,213  

U.S. Global Investors Cl. A

  661,751       1,680,848  

Value Partners Group

  4,503,000       3,490,067  

Westwood Holdings Group

  23,460       1,452,409  
         
 
            70,901,274  
         
 
Commercial Banks - 1.7%              

Bank of N.T. Butterfield & Son

  1,784,161       2,658,400  

Farmers & Merchants Bank of Long

             

Beach 3

  1,200       6,240,000  

Fauquier Bankshares

  160,800       2,196,528  

First Citizens BancShares Cl. A

  36,527       8,132,006  

Mechanics Bank 3

  200       2,570,000  
         
 
            21,796,934  
         
 
Consumer Finance - 0.0%              

EZCORP Cl. A 2

  13,000       151,970  
         
 
Diversified Financial Services - 0.6%              

Banca Finnat Euramerica

  560,000       244,214  

HF2 Financial Management Cl. A 2

  292,300       2,972,691  

Moody’s Corporation

  9,530       747,819  

Pargesa Holding

  4,300       346,584  

PICO Holdings 2

  67,500       1,559,925  

Sofina

  19,000       2,163,989  
         
 
            8,035,222  
         
 
Insurance - 2.4%              

Alleghany Corporation 2

  6,499       2,599,340  

eHealth 2

  27,350       1,271,502  

E-L Financial

  16,500       11,028,477  

Erie Indemnity Cl. A 1

  50,000       3,656,000  

Independence Holding Company

  349,423       4,713,716  

Platinum Underwriters Holdings

  56,900       3,486,832  

Primerica

  95,000       4,076,450  

Validus Holdings

  14,100       568,089  
         
 
            31,400,406  
         
 
Real Estate Management & Development - 1.9%              

Consolidated-Tomoka Land

  60,564       2,197,867  

Forestar Group 1,2,4

  102,000       2,169,540  

Kennedy-Wilson Holdings

  97,100       2,160,475  

Midland Holdings

  5,027,100       2,424,636  

St. Joe Company (The) 1,2,4

  167,000       3,204,730  

Tejon Ranch 2

  342,600       12,593,976  
         
 
            24,751,224  
         
 
Thrifts & Mortgage Finance - 0.4%              

Timberland Bancorp 6

  444,200       4,273,204  

22  |  2013 Annual Report to Stockholders   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.



December 31, 2013

 
    SHARES     VALUE  
Financials (continued)              
Thrifts & Mortgage Finance (continued)              

Vestin Realty Mortgage II 2

  214,230     $ 355,622  
         
 
            4,628,826  
         
 
Total (Cost $129,633,964)           161,665,856  
         
 
               
Health Care – 4.8%              
Biotechnology - 0.4%              

Genomic Health 2

  33,000       965,910  

Green Cross

  7,500       884,778  

Myriad Genetics 1,2,4

  140,650       2,950,837  

ZIOPHARM Oncology 1,2,4

  68,000       295,120  
         
 
            5,096,645  
         
 
Health Care Equipment & Supplies - 1.7%              

Allied Healthcare Products 2

  140,225       329,529  

Analogic Corporation 1

  38,875       3,442,770  

AngioDynamics 1,2

  52,123       895,994  

Atrion Corporation

  16,235       4,809,619  

bioMerieux

  8,500       891,859  

CONMED Corporation

  81,500       3,463,750  

DiaSorin

  20,000       937,952  

IDEXX Laboratories 1,2

  43,711       4,649,539  

Invacare Corporation

  27,000       626,670  

Kossan Rubber Industries

  610,406       805,054  

Nihon Kohden

  20,100       700,475  

Synergetics USA 1,2

  85,125       308,152  

Top Glove

  475,000       816,440  

Urologix 2,3

  142,648       25,677  
         
 
            22,703,480  
         
 
Health Care Providers & Services - 0.5%              

Bangkok Chain Hospital

  1,250,000       230,143  

Landauer 1

  75,500       3,972,055  

MWI Veterinary Supply 1,2

  10,000       1,705,900  

Schein (Henry) 2

  4,820       550,733  

VCA Antech 1,2

  21,500       674,240  
         
 
            7,133,071  
         
 
Life Sciences Tools & Services - 1.3%              

Bio-Rad Laboratories Cl. A 2

  19,688       2,433,634  

EPS Corporation

  758       993,296  

Furiex Pharmaceuticals 2

  4,400       184,844  

PAREXEL International 2

  165,800       7,490,844  

PerkinElmer 1

  39,000       1,607,970  

Techne Corporation

  46,614       4,412,947  
         
 
            17,123,535  
         
 
Pharmaceuticals - 0.9%              

Boiron

  20,000       1,409,817  

Kalbe Farma

  3,996,000       410,435  

Medicines Company (The) 2

  67,700       2,614,574  

Recordati

  90,000       1,295,083  

Santen Pharmaceutical

  26,000       1,210,996  

Stallergenes

  20,000       1,492,634  

Vetoquinol

  30,000       1,267,019  

Virbac

  6,500       1,388,700  
         
 
            11,089,258  
         
 
Total (Cost $36,469,322)           63,145,989  
         
 
               
Industrials – 28.5%              
Aerospace & Defense - 2.3%              

Alliant Techsystems 1

  1,800       219,024  

Cubic Corporation

  26,454       1,393,068  

Curtiss-Wright

  18,600       1,157,478  

Ducommun 2

  117,200       3,493,732  

HEICO Corporation 1

  262,938       15,237,257  

HEICO Corporation Cl. A

  80,808       3,403,633  

Hexcel Corporation 2

  47,500       2,122,775  

Moog Cl. A 2

  25,000       1,698,500  

Teledyne Technologies 2

  20,600       1,892,316  
         
 
            30,617,783  
         
 
Air Freight & Logistics - 1.8%              

Expeditors International of Washington

  162,050       7,170,712  

Forward Air

  209,750       9,210,123  

Hub Group Cl. A 1,2,4

  149,400       5,958,072  

UTi Worldwide

  100,400       1,763,024  
         
 
            24,101,931  
         
 
Building Products - 1.2%              

American Woodmark 2

  117,135       4,630,346  

Burnham Holdings Cl. B 3

  36,000       676,800  

Simpson Manufacturing

  275,300       10,111,769  
         
 
            15,418,915  
         
 
Commercial Services & Supplies - 2.3%              

Brink’s Company (The)

  206,320       7,043,765  

CompX International Cl. A

  211,100       2,972,288  

Copart 2

  178,360       6,536,894  

Kaba Holding

  3,000       1,457,878  

Kimball International Cl. B

  286,180       4,301,286  

Moshi Moshi Hotline

  11,700       125,210  

Ritchie Bros. Auctioneers 1

  325,384       7,461,055  

Tetra Tech 2

  18,900       528,822  
         
 
            30,427,198  
         
 
Construction & Engineering - 1.7%              

EMCOR Group

  149,400       6,340,536  

Foster Wheeler 2

  35,000       1,155,700  

Integrated Electrical Services 2

  351,960       1,897,064  

Jacobs Engineering Group 1,2

  93,620       5,897,124  

KBR

  198,393       6,326,753  
         
 
            21,617,177  
         
 
Electrical Equipment - 3.1%              

EnerSys

  43,400       3,041,906  

Franklin Electric

  209,200       9,338,688  

Global Power Equipment Group

  105,482       2,064,282  

GrafTech International 2

  327,938       3,682,744  

Graphite India

  261,700       338,469  

Hubbell Cl. B 1

  7,000       762,300  

Powell Industries

  92,400       6,189,876  

Preformed Line Products

  91,600       6,701,456  

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.   2013 Annual Report to Stockholders  |  23



Royce Value Trust


Schedule of Investments

      SHARES     VALUE  

Industrials (continued)

               

Electrical Equipment (continued)

               

Regal-Beloit

    100,000     $ 7,372,000  

Vicor 2

    42,402       569,035  
           
 
              40,060,756  
           
 

Industrial Conglomerates - 0.7%

               

Carlisle Companies 1

    24,200       1,921,480  

Raven Industries 1

    192,400       7,915,336  
           
 
              9,836,816  
           
 

Machinery - 9.2%

               

Astec Industries

    28,200       1,089,366  

Burckhardt Compression Holding

    8,400       3,681,856  

CB Industrial Product Holding

    189,000       185,221  

Chen Hsong Holdings

    1,159,000       361,706  

CIRCOR International

    45,600       3,683,568  

CLARCOR 1

    92,500       5,952,375  

Columbus McKinnon 2

    86,800       2,355,752  

Donaldson Company 1

    199,959       8,690,218  

EVA Precision Industrial Holdings

    3,476,000       488,611  

FAG Bearings India

    25,300       661,019  

Graco

    116,376       9,091,293  

Haitian International Holdings

    430,000       978,193  

IDEX Corporation

    67,400       4,977,490  

Kennametal 1

    202,100       10,523,347  

Lincoln Electric Holdings

    58,685       4,186,588  

Middleby Corporation 2

    19,500       4,679,415  

NN

    197,100       3,979,449  

Nordson Corporation

    24,296       1,805,193  

Pfeiffer Vacuum Technology

    5,000       680,490  

PMFG 2

    388,352       3,514,586  

Rational

    2,000       663,362  

RBC Bearings 2

    47,000       3,325,250  

Rotork

    30,000       1,425,773  

Sarin Technologies

    1,018,600       1,493,253  

Semperit AG Holding

    25,000       1,237,957  

Spirax-Sarco Engineering

    20,000       990,258  

Sun Hydraulics

    14,500       592,035  

Timken Company (The)

    41,700       2,296,419  

Valmont Industries

    44,000       6,561,280  

WABCO Holdings 2

    97,700       9,126,157  

Wabtec Corporation

    155,850       11,574,979  

Woodward 1

    208,400       9,505,124  
           
 
              120,357,583  
           
 

Marine - 0.5%

               

Clarkson

    42,900       1,421,515  

Kirby Corporation 1,2,4

    50,100       4,972,425  
           
 
              6,393,940  
           
 

Professional Services - 3.7%

               

Acacia Research

    55,341       804,658  

Advisory Board (The) 1,2,4

    150,277       9,568,137  

CRA International 2

    32,138       636,333  

Heidrick & Struggles International

    225,431       4,540,180  

JobStreet Corporation

    1,446,800       1,095,425  

ManpowerGroup

    91,000       7,813,260  

Nihon M&A Center

    19,700       1,326,303  

On Assignment 2

    350,400       12,235,968  

Robert Half International

    51,972       2,182,304  

Towers Watson & Co. Cl. A

    59,700       7,618,317  

TrueBlue 2

    32,700       843,006  
           
 
              48,663,891  
           
 

Road & Rail - 1.3%

               

Landstar System 1

    99,400       5,710,530  

Patriot Transportation Holding 2

    212,958       8,839,887  

Universal Truckload Services

    68,916       2,102,627  
           
 
              16,653,044  
           
 

Trading Companies & Distributors - 0.5%

               

Lawson Products 2

    5,100       62,475  

MISUMI Group

    47,500       1,490,718  

MSC Industrial Direct Cl. A 1

    61,948       5,009,735  
           
 
              6,562,928  
           
 

Transportation Infrastructure - 0.2%

               

Wesco Aircraft Holdings 2

    113,400       2,485,728  
           
 

Total (Cost $172,148,070)

            373,197,690  
           
 
                 

Information Technology – 18.2%

               

Communications Equipment - 0.9%

               

ADTRAN 1

    280,475       7,575,630  

Bel Fuse Cl. B

    14,063       299,682  

Comba Telecom Systems Holdings 2

    450,000       155,527  

Comtech Telecommunications 1

    30,000       945,600  

Emulex Corporation 2

    20,000       143,200  

EVS Broadcast Equipment

    20,000       1,292,882  

Plantronics

    9,711       451,076  

Sonus Networks 2

    424,000       1,335,600  
           
 
              12,199,197  
           
 

Computers & Peripherals - 0.8%

               

Diebold

    253,200       8,358,132  

Intevac 2

    20,000       148,600  

Western Digital 1

    24,230       2,032,897  

Xyratex

    5,600       74,424  
           
 
              10,614,053  
           
 

Electronic Equipment, Instruments & Components - 8.3%

     

Agilysys 2

    165,125       2,298,540  

Anixter International 1

    62,595       5,623,535  

Avnet

    16,400       723,404  

Benchmark Electronics 1,2

    156,900       3,621,252  

Broadway Industrial Group 2

    832,400       148,413  

Chroma ATE

    219,982       461,318  

Cognex Corporation 2

    139,600       5,329,928  

Coherent 2

    148,016       11,010,910  

Dolby Laboratories Cl. A 1,2

    90,400       3,485,824  

Domino Printing Sciences

    85,000       1,076,781  

DTS 2

    207,000       4,963,860  

FEI Company 1

    88,900       7,944,104  

FLIR Systems

    296,000       8,909,600  

Hollysys Automation Technologies 2

    49,482       936,694  

IPG Photonics 1,2,4

    78,020       6,055,132  

Maxwell Technologies 2

    101,677       790,030  

Methode Electronics

    11,147       381,116  

24  |  2013 Annual Report to Stockholders   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.



December 31, 2013

 

      SHARES     VALUE  

Information Technology (continued)

               

Electronic Equipment, Instruments & Components (continued)

     

National Instruments

    251,850     $ 8,064,237  

Newport Corporation 2

    523,500       9,459,645  

Perceptron

    357,700       4,961,299  

Plexus Corporation 2

    176,100       7,623,369  

Richardson Electronics

    469,832       5,337,292  

Rofin-Sinar Technologies 2

    240,888       6,508,794  

TTM Technologies 1,2

    211,400       1,813,812  

Vaisala Cl. A

    40,320       1,287,417  
           
 
              108,816,306  
           
 

Internet Software & Services - 0.9%

               

comScore 2

    85,384       2,442,836  

QuinStreet 2

    153,128       1,330,682  

RealNetworks 2

    162,350       1,225,743  

Support.com 2

    236,567       896,589  

ValueClick 2

    137,800       3,220,386  

Vistaprint 1,2,4

    52,000       2,956,200  
           
 
              12,072,436  
           
 

IT Services - 2.7%

               

Computer Task Group

    3,400       64,260  

Convergys Corporation

    121,000       2,547,050  

CSE Global

    779,500       472,537  

DST Systems

    8,600       780,364  

eClerx Services

    60,900       1,043,634  

Fiserv 2

    9,080       536,174  

Hackett Group (The)

    655,000       4,067,550  

Innodata 2

    89,973       220,434  

ManTech International Cl. A

    35,400       1,059,522  

MAXIMUS

    179,000       7,874,210  

NeuStar Cl. A 2

    29,287       1,460,250  

Sapient Corporation 2

    553,102       9,601,851  

Sykes Enterprises 2

    103,824       2,264,401  

Unisys Corporation 2

    94,000       3,155,580  
           
 
              35,147,817  
           
 

Office Electronics - 0.1%

               

Zebra Technologies Cl. A 1,2

    20,658       1,117,184  
           
 

Semiconductors & Semiconductor Equipment - 3.4%

     

Aixtron ADR 2

    37,758       548,246  

ATMI 2

    66,845       2,019,388  

Cabot Microelectronics 2

    24,909       1,138,341  

CEVA 2

    19,044       289,850  

Diodes 2

    234,750       5,530,710  

Entegris 2

    164,200       1,904,720  

Entropic Communications 2

    102,000       480,420  

Exar Corporation 2

    157,576       1,857,821  

Integrated Silicon Solution 2

    206,200       2,492,958  

International Rectifier 2

    185,000       4,822,950  

Miraial

    74,400       1,112,008  

MKS Instruments

    106,000       3,173,640  

Nanometrics 2

    105,300       2,005,965  

Power Integrations 1

    49,000       2,735,180  

Teradyne 1,2,4

    234,300       4,128,366  

Tessera Technologies

    44,000       867,240  

TriQuint Semiconductor 2

    675,467       5,633,395  

Veeco Instruments 1,2

    102,100       3,360,111  
           
 
              44,101,309  
           
 

Software - 1.1%

               

Accelrys 2

    21,455       204,681  

ANSYS 1,2,4

    95,000       8,284,000  

Aspen Technology 2

    42,100       1,759,780  

Blackbaud 1

    31,400       1,182,210  

Mentor Graphics

    9,453       227,534  

MICROS Systems 2

    19,900       1,141,663  

SimCorp

    20,000       787,423  

TeleNav 2

    43,597       287,304  
           
 
              13,874,595  
           
 

Total (Cost $154,744,381)

            237,942,897  
           
 
                 

Materials – 6.5%

               

Chemicals - 1.4%

               

Cabot Corporation 1

    58,000       2,981,200  

Fufeng Group

    300,000       122,642  

Hawkins

    86,178       3,204,960  

Huchems Fine Chemical

    73,856       1,679,579  

Intrepid Potash 1,2,4

    110,000       1,742,400  

LSB Industries 2

    25,500       1,046,010  

Minerals Technologies 1

    71,060       4,268,574  

OM Group 2

    33,500       1,219,735  

Valspar Corporation (The)

    1,200       85,548  

W.R. Grace & Co. 1,2

    17,500       1,730,225  
           
 
              18,080,873  
           
 

Construction Materials - 0.8%

               

Ash Grove Cement Cl. B 3

    50,518       9,901,528  

Mardin Cimento Sanayii

    500,000       991,159  
           
 
              10,892,687  
           
 

Containers & Packaging - 0.9%

               

Greif Cl. A

    137,344       7,196,825  

Mayr-Melnhof Karton

    38,000       4,704,892  
           
 
              11,901,717  
           
 

Metals & Mining - 3.2%

               

AuRico Gold

    132,000       483,120  

Central Steel & Wire 3

    5,262       3,893,880  

Fresnillo

    22,500       277,765  

Globe Specialty Metals

    20,000       360,200  

Hecla Mining

    890,000       2,741,200  

IAMGOLD Corporation

    510,000       1,698,300  

Kinross Gold

    24,600       107,748  

Kirkland Lake Gold 2

    90,000       217,745  

Maharashtra Seamless

    781,300       2,073,404  

Major Drilling Group International

    116,800       845,556  

Medusa Mining 2

    90,000       163,936  

Pan American Silver

    240,430       2,813,031  

Pretium Resources 2

    196,000       1,011,137  

Randgold Resources ADR

    8,000       502,480  

Reliance Steel & Aluminum 1

    154,820       11,741,549  

Saracen Mineral Holdings 2

    200,600       33,136  

Schnitzer Steel Industries Cl. A 1

    100,000       3,267,000  

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.   2013 Annual Report to Stockholders  |  25



Royce Value Trust December 31, 2013


Schedule of Investments
      SHARES     VALUE  

Materials (continued)

               

Metals & Mining (continued)

               

Sims Metal Management ADR 2,3

    16,000     $ 154,240  

Synalloy Corporation

    178,800       2,746,368  

Village Main Reef 2

    986,600       35,740  

Worthington Industries

    157,500       6,627,600  
           
 
              41,795,135  
           
 

Paper & Forest Products - 0.2%

               

Glatfelter

    10,800       298,512  

Qunxing Paper Holdings 5

    3,296,000       42,506  

Schweitzer-Mauduit International

    27,600       1,420,572  
           
 
              1,761,590  
           
 

Total (Cost $65,222,364)

            84,432,002  
           
 
                 

Telecommunication Services – 0.7%

               

Wireless Telecommunication Services - 0.7%

               

Telephone and Data Systems

    338,270       8,720,601  
           
 

Total (Cost $8,279,046)

            8,720,601  
           
 
                 

Miscellaneous 7 – 4.9%

               

Total (Cost $57,293,524)

            64,169,786  
           
 
                 

TOTAL COMMON STOCKS

               

(Cost $782,439,715)

            1,218,477,944  
           
 
                 

PREFERRED STOCK – 0.1%

               

Seneca Foods Conv. 2,5

               

(Cost $796,469)

    55,000       1,578,555  
           
 

REPURCHASE AGREEMENT – 14.7%

               

Fixed Income Clearing Corporation,
0.00% dated 12/31/13, due 1/2/14,
maturity value $191,909,000 (collateralized
by obligations of various U.S. Government
Agencies, 1.00% due 5/31/18, valued at
$195,750,000)
(Cost $191,909,000)

            191,909,000  
           
 
                 

TOTAL INVESTMENTS – 108.0%

               

(Cost $975,145,184)

            1,411,965,499  
                 

LIABILITIES LESS CASH

               

AND OTHER ASSETS – (8.0)%

            (104,136,210 )
           
 
                 

NET ASSETS – 100.0%

          $ 1,307,829,289  
           
 
   

New additions in 2013.
1
All or a portion of these securities were pledged as collateral in connection with the revolving credit agreement at December 31, 2013. Total market value of pledged securities at December 31, 2013, was $292,993,324.
2
Non-income producing.
3
These securities are defined as Level 2 securities due to fair value being based on quoted prices for similar securities. See Notes to Financial Statements.
4
At December 31, 2013, a portion of these securities were rehypothecated in connection with the Fund’s revolving credit agreement in the aggregate amount of $58,400,416.
5
Securities for which market quotations are not readily available represent 0.1% of net assets. These securities have been valued at their fair value under procedures approved by the Fund’s Board of Directors. These securities are defined as Level 3 securities due to the use of significant unobservable inputs in the determination of fair value. See Notes to Financial Statements.
6
At December 31, 2013, 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.
7
Includes securities first acquired in 2013 and less than 1% of net assets.
   
 
Bold indicates the Fund’s 20 largest equity holdings in terms of December 31, 2013, market value.
   
 
TAX INFORMATION: The cost of total investments for Federal income tax purposes was $970,034,475. At December 31, 2013, net unrealized appreciation for all securities was $441,931,024, consisting of aggregate gross unrealized appreciation of $484,622,277 and aggregate gross unrealized depreciation of $42,691,253. The primary difference between book and tax basis cost is the timing of the recognition of losses on securities sold.


26  |  2013 Annual Report to Stockholders   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.



Royce Value Trust   December 31, 2013


Statement of Assets and Liabilities        
         
ASSETS:        
Investments at value        

Non-Affiliated Companies (cost $777,803,618)

    $ 1,215,783,295

Affiliated Companies (cost $5,432,566)

      4,273,204

Total investments at value       1,220,056,499
Repurchase agreements (at cost and value)       191,909,000
Cash and foreign currency       18,085
Receivable for investments sold       7,196,684
Receivable for dividends and interest       1,626,534
Prepaid expenses and other assets       478,689

Total Assets

      1,421,285,491

LIABILITIES:        
Revolving credit agreement       110,000,000
Payable for investments purchased       2,357,951
Payable for investment advisory fee       797,907
Payable for interest expense       7,313
Accrued expenses       293,031

Total Liabilities

      113,456,202

Net Assets

    $ 1,307,829,289

ANALYSIS OF NET ASSETS:        
Paid-in capital - $0.001 par value per share; 71,974,264 shares outstanding (150,000,000 shares authorized)     $ 830,172,619
Undistributed net investment income (loss)       6,453,789
Accumulated net realized gain (loss) on investments and foreign currency       34,377,036
Net unrealized appreciation (depreciation) on investments and foreign currency       436,825,845

Net Assets (net asset value per share - $18.17)

    $ 1,307,829,289

Investments at identified cost

    $ 783,236,184

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 2013 Annual Report to Stockholders  |  27



Royce Value Trust   Year Ended December 31, 2013


Statement of Operations

INVESTMENT INCOME:          
Income:          

Dividends

         

Non-Affiliated Companies

    $ 18,543,812  

Affiliated Companies

      53,304  

Foreign withholding tax

      (813,797 )

Interest

      48,182  

Rehypothecation income

      397,874  

Total income       18,229,375  

Expenses:          

Investment advisory fees

      6,588,821  

Interest expense

      1,674,582  

Stockholder reports

      452,063  

Custody and transfer agent fees

      300,136  

Directors’ fees

      144,837  

Administrative and office facilities

      129,145  

Professional fees

      91,209  

Other expenses

      281,249  

Total expenses       9,662,042  
Compensating balance credits       (202 )

Net expenses       9,661,840  

Net investment income (loss)       8,567,535  

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:          
Net realized gain (loss):          

Investments

      171,576,941  

Foreign currency transactions

      (140,920 )
Net change in unrealized appreciation (depreciation):          

Investments and foreign currency translations

      191,159,619  

Other assets and liabilities denominated in foreign currency

      17,973  

Net realized and unrealized gain (loss) on investments and foreign currency       362,613,613  

NET INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS     $ 371,181,148  


28  |  2013 Annual Report to Stockholders THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.



Royce Value Trust


Statement of Changes in Net Assets Applicable to Common Stockholders

    Year ended   Year ended
    12/31/13   12/31/12
INVESTMENT OPERATIONS:                    
Net investment income (loss)     $ 8,567,535       $ 16,207,117  
Net realized gain (loss) on investments and foreign currency       171,436,021         62,897,553  
Net change in unrealized appreciation (depreciation) on investments and foreign currency       191,177,592         75,702,882  

Net increase (decrease) in net assets from investment operations       371,181,148         154,807,552  

DISTRIBUTIONS TO PREFERRED STOCKHOLDERS:                    
Net investment income               (2,356,525 )
Net realized gain on investments and foreign currency               (9,000,970 )

Total distributions to Preferred Stockholders               (11,357,495 )

NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS                    
   FROM INVESTMENT OPERATIONS       371,181,148         143,450,057  

DISTRIBUTIONS TO COMMON STOCKHOLDERS:                    
Net investment income       (7,723,525 )       (11,444,608 )
Net realized gain on investments and foreign currency       (148,307,278 )       (43,713,673 )

Total distributions to Common Stockholders       (156,030,803 )       (55,158,281 )

CAPITAL STOCK TRANSACTIONS:                    
Reinvestment of distributions to Common Stockholders       26,224,892         27,494,847  
Depreciation of securities contributed to Royce Global Value Trust spinoff       (15,972,444 )        

Total capital stock transactions       10,252,448         27,494,847  

NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS       225,402,793         115,786,623  

NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS:                    

Beginning of year

      1,082,426,496         966,639,873  

End of year (including undistributed net investment income (loss) of $6,453,789 at 12/31/13 and $2,818,184 at 12/31/12)

    $ 1,307,829,289       $ 1,082,426,496  

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 2013 Annual Report to Stockholders  |  29



Royce Value Trust


Statement of Cash Flows

CASH FLOWS FROM OPERATING ACTIVITIES:          
Net increase (decrease) in net assets from investment operations     $ 371,181,148  
Adjustments to reconcile net increase (decrease) in net assets from operations to net cash provided by operating activities:          

Purchases of long-term investments

      (409,153,816 )

Proceeds from sales and maturities of long-term investments

      703,361,694  

Net purchases, sales and maturities of short-term investments

      (117,262,000 )

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

      (671,297 )

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

      344,416  

Net change in unrealized appreciation (depreciation) on investments

      (191,159,619 )

Net realized gain on investments and foreign currency

      (171,436,021 )

Cash provided by operating activities       185,204,505  

CASH FLOWS FROM FINANCING ACTIVITIES:          
Net increase (decrease) in revolving credit agreement       (40,000,000 )
Distributions paid to Common Stockholders       (156,030,803 )
Reinvestment of distributions to Common Stockholders       26,224,892  
Depreciation of securities contributed to Royce Global Value Trust spinoff       (15,972,444 )

Cash used for financing activities       (185,778,355 )

INCREASE (DECREASE) IN CASH:       (573,850 )

Cash and foreign currency at beginning of year

      591,935  

Cash and foreign currency at end of year

    $ 18,085  

30  |  2013 Annual Report to Stockholders THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.



Royce Value Trust


Financial Highlights

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

    Years ended December 31,
   
    2013   2012   2011   2010   2009  

NET ASSET VALUE, BEGINNING OF PERIOD     $ 15.40       $ 14.18       $ 16.73       $ 12.87       $ 9.37  

INVESTMENT OPERATIONS:                                                  

Net investment income (loss)

      0.12         0.23         0.10         0.24         0.17  

Net realized and unrealized gain (loss) on investments and

                                                 

foreign currency

      4.89         2.02         (1.62 )       3.85         3.87  

Total investment operations

      5.01         2.25         (1.52 )       4.09         4.04  

DISTRIBUTIONS TO PREFERRED STOCKHOLDERS:                                                  

Net investment income

              (0.04 )       (0.03 )       (0.20 )       (0.18 )

Net realized gain on investments and foreign currency

              (0.13 )       (0.16 )                

Return of capital

                                      (0.02 )

Total distributions to Preferred Stockholders

              (0.17 )       (0.19 )       (0.20 )       (0.20 )

NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON

                                                 

STOCKHOLDERS FROM INVESTMENT OPERATIONS

      5.01         2.08         (1.71 )       3.89         3.84  

DISTRIBUTIONS TO COMMON STOCKHOLDERS:                                                  

Net investment income

      (0.11 )       (0.17 )       (0.08 )       (0.03 )        

Net realized gain on investments and foreign currency

      (2.08 )       (0.63 )       (0.43 )                

Return of capital

                      (0.27 )               (0.32 )

Total distributions to Common Stockholders

      (2.19 )       (0.80 )       (0.78 )       (0.03 )       (0.32 )

CAPITAL STOCK TRANSACTIONS:                                                  

Effect of reinvestment of distributions by Common Stockholders

      (0.05 )       (0.06 )       (0.06 )       (0.00 )       (0.02 )

Total capital stock transactions

      (0.05 )       (0.06 )       (0.06 )       (0.00 )       (0.02 )

NET ASSET VALUE, END OF PERIOD     $ 18.17       $ 15.40       $ 14.18       $ 16.73       $ 12.87  

MARKET VALUE, END OF PERIOD     $ 16.01       $ 13.42       $ 12.27       $ 14.54       $ 10.79  

TOTAL RETURN:1                                                  
Market Value       35.63 %       16.22 %       (10.46 )%       35.05 %       35.39 %
Net Asset Value       34.14 %       15.41 %       (10.06 )%       30.27 %       44.59 %
RATIOS BASED ON AVERAGE NET ASSETS APPLICABLE TO                                                  

COMMON STOCKHOLDERS:

                                                 

Investment advisory fee expense2

      0.54 %       0.56 %       0.86 %       0.11 %       0.00 %

Other operating expenses

      0.25 %       0.15 %       0.12 %       0.12 %       0.16 %
Total expenses (net)3       0.79 %       0.71 %       0.98 %       0.23 %       0.16 %
Expenses net of fee waivers and excluding interest expense       0.65 %       0.68 %       0.98 %       0.23 %       0.16 %
Expenses prior to fee waivers and balance credits       0.79 %       0.71 %       0.98 %       0.23 %       0.16 %
Expenses prior to fee waivers       0.79 %       0.71 %       0.98 %       0.23 %       0.16 %
Net investment income (loss)       0.70 %       1.57 %       0.63 %       1.69 %       1.66 %
SUPPLEMENTAL DATA:                                                  
Net Assets Applicable to Common Stockholders,                                                  

End of Period (in thousands)

    $ 1,307,829       $ 1,082,426       $ 966,640       $ 1,105,879       $ 849,777  
Liquidation Value of Preferred Stock,                                                  

End of Period (in thousands)

                        $ 220,000       $ 220,000       $ 220,000  
Portfolio Turnover Rate       33 %       25 %       26 %       30 %       31 %
PREFERRED STOCK:                                                  
Total shares outstanding                           8,800,000         8,800,000         8,800,000  
Asset coverage per share                         $ 134.88       $ 150.67       $ 121.57  
Liquidation preference per share                         $ 25.00       $ 25.00       $ 25.00  
Average month-end market value per share                         $ 25.37       $ 25.06       $ 23.18  
REVOLVING CREDIT AGREEMENT:                                                  
Asset coverage       1289 %       822 %                              
Asset coverage per $1,000     $ 12,889       $ 8,216                                


1

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

2

The investment advisory fee is calculated based on average net assets over a rolling 60-month basis, while the above ratios of investment advisory fee expenses are based on the average net assets applicable to Common Stockholders over a 12-month basis.

3

Expense ratios based on total average net assets including liquidation value of Preferred Stock were 0.60%, 0.82%, 0.18% and 0.12% for the years ended December 31, 2012, 2011, 2010 and 2009, respectively.


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 2013 Annual Report to Stockholders  |  31



Royce Value Trust

 
Notes to Financial Statements

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

Valuation of Investments:
     Securities are valued as of the close of trading on the New York Stock Exchange (NYSE) (generally 4:00 p.m. Eastern time) on the valuation date. Securities that trade on an exchange, and securities traded on Nasdaq's Electronic Bulletin Board, are valued at their last reported sales price or Nasdaq official closing price taken from the primary market in which each security trades or, if no sale is reported for such day, at their bid price. Other over-the-counter securities for which market quotations are readily available are valued at their highest bid price, 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, 2013. 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     $ 1,188,056,794       $ 30,289,441       $ 131,709       $ 1,218,477,944  
Preferred Stocks                       1,578,555         1,578,555  
Cash Equivalents               191,909,000                 191,909,000  

     For the year ended December 31, 2013, certain securities have transferred in and out of Level 1 and Level 2 measurements as a result of the fair value pricing procedures for international equities. The Fund recognizes transfers between levels as of the end of the reporting period. At December 31, 2013, securities valued at $8,989,917 were transferred from Level 1 to Level 2 and securities valued at $109,375,273 were transferred from Level 2 to Level 1 within the fair value hierarchy.

     Level 3 Reconciliation:
              Realized and Unrealized          
    Balance as of 12/31/12   Gain (Loss)1   Balance as of 12/31/13
Common Stocks     $ 263,067       $ (131,358 )     $ 131,709  
Preferred Stocks       1,504,800         73,755         1,578,555  

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.


32  |  2013 Annual Report to Stockholders    



Royce 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.

Foreign Currency:
     Net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, expiration of currency forward contracts, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities, including investments in securities at the end of the reporting period, as a result of changes in foreign currency exchange rates.

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

Distributions:
     The Fund pays quarterly distributions on the Fund’s Common Stock at the annual rate of 5% 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 1.25% of the rolling average or the distribution required by IRS regulations. Prior to November 15, 2012, distributions to Preferred Stockholders were accrued daily and paid quarterly. Distributions to Common Stockholders are recorded on ex-dividend date. Distributable capital gains and/or net investment income were first allocated to Preferred Stockholder distributions, with any excess allocable to Common Stockholders. If capital gains and/or net investment income were allocated to both Preferred and Common Stockholders, the tax character of such allocations was proportional. To the extent that distributions are not paid from long-term capital gains, net investment income or net short-term capital gains, they will represent a return of capital. Distributions are determined in accordance with income tax regulations that may differ from accounting principles generally accepted in the United States of America. Permanent book and tax differences relating to stockholder distributions will result in reclassifications within the capital accounts. Undistributed net investment income may include temporary book and tax basis differences, which will reverse in a subsequent period. Any taxable income or gain remaining undistributed at fiscal year end is distributed in the following year.
     On June 19, 2013, the Fund purchased 10,160 common shares of Royce Global Value Trust, Inc. (“RGT”) for $100,076. On October 18, 2013, the Fund contributed $99,899,924 in cash and securities in exchange for shares of RGT, and on the same date distributed all shares of RGT valued at $100,000,000 to Fund stockholders of record as of October 10, 2013, at the rate of one share of RGT for every seven shares of the Fund’s Common Stock outstanding. In connection with the spinoff of RGT, the securities contributed included $15,972,444 in unrealized depreciation.

Investment Transactions and Related Investment Income:
     Investment transactions are accounted for on the trade date. Dividend income is recorded on the ex-dividend date. Non-cash dividend income is recorded at the fair market value of the securities received. Interest income is recorded on an accrual basis. Premium and discounts on debt securities are amortized using the effective yield-to-maturity method. Realized gains and losses from investment transactions are determined on the basis of identified cost for book and tax purposes.

Expenses:
     The 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 Royce Funds are allocated by Royce & Associates, LLC (“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 1,699,025 and 2,103,737 shares of Common Stock as reinvestment of distributions by Common Stockholders for the years ended December 31, 2013 and December 31, 2012, respectively.

  2013 Annual Report to Stockholders  |  33



Royce Value Trust

 
Notes to Financial Statements (continued)

Borrowings:
     The Fund had entered into a $150,000,000 revolving credit agreement (the credit agreement) with BNP Paribas Prime Brokerage Inc. (BNPP) on November 14, 2012 and reduced this line to $110,000,000 on August 21, 2013. The Fund pays a commitment fee of 0.50% per annum on the unused portion of the credit agreement. The credit agreement has a 360-day rolling term that resets daily; however, if the Fund exceeds certain net asset value triggers, the credit agreement may convert to a 60-day rolling term that resets daily. The Fund is required to pledge portfolio securities as collateral in an amount up to two times the loan balance outstanding and has granted a security interest in the securities pledged to, and in favor of, BNPP 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 necessitating the sale of portfolio securities at potentially inopportune times. The credit agreement also permits, subject to certain conditions, BNPP 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 BNPP on demand. If BNPP fails to deliver the recalled security in a timely manner, the Fund will be compensated by BNPP for any fees or losses related to the failed delivery or, in the event a recalled security will not be returned by BNPP, the Fund, upon notice to BNPP, may reduce the loan balance outstanding by the amount of the recalled security failed to be returned. The Fund will receive a portion of the fees earned by BNPP in connection with the rehypothecation of portfolio securities.
     As of December 31, 2013, the Fund has outstanding borrowings of $110,000,000. During the year ended December 31, 2013, the Fund borrowed an average daily balance of $135,424,658 at a weighted average borrowing cost of 1.22%. As of December 31, 2013, the aggregate value of rehypothecated securities was $58,400,416. During the year ended December 31, 2013, the Fund earned $397,874 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 applicable to Common Stockholders, plus the liquidation value of outstanding Preferred Stock, for the rolling 60-month period ending with such month (the "performance period"). The Basic Fee for each month is increased or decreased at the rate of 1/12 of .05% for each percentage point that the investment performance of the Fund exceeds, or is exceeded by, the percentage change in the investment record of the S&P 600 for the performance period by more than two percentage points. The performance period for each such month is a rolling 60-month period ending with such month. The maximum increase or decrease in the Basic Fee for any month may not exceed 1/12 of .5%. Accordingly, for each month, the maximum monthly fee rate as adjusted for performance is 1/12 of 1.5% and is payable if the investment performance of the Fund exceeds the percentage change in the investment record of the S&P 600 by 12 or more percentage points for the performance period, and the minimum monthly fee rate as adjusted for performance is 1/12 of .5% and is payable if the percentage change in the investment record of the S&P 600 exceeds the investment performance of the Fund by 12 or more percentage points for the performance period.
     Notwithstanding the foregoing, Royce is not entitled to receive any fee for any month when the investment performance of the Fund for the rolling 36-month period ending with such month is negative. In the event that the Fund’s investment performance for such a performance period is less than zero, Royce will not be required to refund to the Fund any fee earned in respect of any prior performance period.
     For the twelve rolling 60-month periods in 2013, the Fund’s investment performance ranged from 3% to 29% below the investment performance of the S&P 600. Accordingly, the net investment advisory fee consisted of a Basic Fee of $11,158,067 and a net downward adjustment of $4,569,246 for the performance of the Fund relative to that of the S&P 600. For the year ended December 31, 2013, the Fund accrued and paid Royce investment advisory fees totaling $6,588,821.

Purchases and Sales of Investment Securities:
     For the year ended December 31, 2013, the costs of purchases and proceeds from sales of investment securities, other than short-term securities, amounted to $411,168,675 and $635,873,886, respectively.

Distributions to Stockholders:
  The tax character of distributions paid to common stockholders   The tax character of distributions paid to preferred stockholders
  during 2013 and 2012 was as follows:   during 2012 was as follows:
       
  Distributions paid from:   2013   2012   Distributions paid from:       2012
  Ordinary income     $ 32,048,727       $ 17,311,826     Ordinary income               $ 3,655,160  
  Long-term capital gain       123,982,076         37,846,455     Long-term capital gain                 7,990,784  
                           
        $ 156,030,803       $ 55,158,281                     $ 11,645,944  
       

34  |  2013 Annual Report to Stockholders    



Royce Value Trust

 
Notes to Financial Statements (continued)

Distributions to Stockholders (continued):
  As of December 31, 2013, the tax basis components of distributable earnings included in stockholders’ equity were as follows:

   
  Net unrealized appreciation (depreciation)     $ 441,936,581  
  Post October loss*       (36,769 )
  Undistributed ordinary income       7,731,090  
  Undistributed capital gains       28,025,768  
         
        $ 447,656,670  
   

*

Under the current tax law, capital losses and foreign currency losses after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. As of December 31, 2013, the Fund had $36,769 of post October currency losses.


     The difference between book and tax basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral on wash sales, partnership investments and the unrealized gains on Passive Foreign Investment Companies.
     For financial reporting purposes, capital accounts and distributions to stockholders are adjusted to reflect the tax character of permanent book/tax differences. These differences are primarily due to differing treatments of income and gains on various investment securities and foreign currency transactions held by the Fund, timing differences and different characterization of distributions made by the Fund. For the year ended December 31, 2013, the Fund recorded the following permanent reclassifications. Results of operations and net assets were not affected by these reclassifications.

 
  Undistributed Net   Accumulated Net     Paid-in  
  Investment Income   Realized Gain (Loss)     Capital  
  $2,791,594   $(2,342,883)     $(448,711)  
 

     Management has analyzed the Fund’s tax positions taken on federal income tax returns for all open tax years (2010-2013) and has concluded that as of December 31, 2013, no provision for income tax is required in the Fund’s financial statements.

Transactions in Affiliated Companies:
     An “Affiliated Company” as defined in the Investment Company Act of 1940, is a company in which a fund owns 5% or more of the company’s outstanding voting securities at any time during the period. The Fund effected the following transactions in shares of such companies for the year ended December 31, 2013:

    Shares   Market Value   Cost of   Cost of   Realized   Dividend   Shares   Market Value
Affiliated Company   12/31/12   12/31/12   Purchases   Sales   Gain (Loss)   Income   12/31/13   12/31/13
Timberland Bancorp   444,200   $3,082,748         $53,304   444,200   $4,273,204
        $3,082,748               $53,304       $4,273,204

  2013 Annual Report to Stockholders  |  35



Royce Value Trust  

 
Report of Independent Registered Public Accounting Firm

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

We have audited the accompanying statement of assets and liabilities of Royce Value Trust, Inc., (“Fund”) including the schedule of investments, as of December 31, 2013, and the related statement of operations and statement of cash flows for the year then ended, the statements of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2013, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Royce Value Trust, Inc. at December 31, 2013, 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 then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

TAIT, WELLER, & BAKER LLP

Philadelphia, Pennsylvania
February 19, 2014

36  |  2013 Annual Report to Stockholders  



Royce Micro-Cap Trust December 31, 2013

  Schedule of Investments

        SHARES     VALUE  
COMMON STOCKS – 103.9%                  
                   
Consumer Discretionary – 12.2%                  
Auto Components - 1.9%                  

China Zenix Auto International ADR 1

      50,000     $ 130,000  

Drew Industries 2

      93,700       4,797,440  

Fuel Systems Solutions 1

      76,000       1,054,120  

Motorcar Parts of America 1

      50,000       965,000  

Spartan Motors

      42,300       283,410  

Standard Motor Products

      30,400       1,118,720  
             
 
                8,348,690  
             
 
Distributors - 0.7%                  

Core-Mark Holding Company

      13,500       1,025,055  

Weyco Group

      59,600       1,754,028  
             
 
                2,779,083  
             
 
Diversified Consumer Services - 0.6%                  

Capella Education

      19,474       1,293,852  

Lincoln Educational Services

      64,000       318,720  

Spectrum Group International 1,3

      6,925       15,789  

Strayer Education 1

      31,000       1,068,570  
             
 
                2,696,931  
             
 
Household Durables - 2.7%                  

Cavco Industries 1

      3,091       212,352  

Ethan Allen Interiors 2

      81,600       2,482,272  

Flexsteel Industries

      125,700       3,862,761  

Koss Corporation

      73,400       376,175  

Lifetime Brands

      66,100       1,039,753  

Stanley Furniture 1

      93,468       358,917  

Universal Electronics 1

      92,100       3,509,931  
             
 
                11,842,161  
             
 
Internet & Catalog Retail - 0.0%                  

dELiA*s 1

      23,300       20,495  

Geeknet 1

      1,500       27,135  
             
 
                47,630  
             
 
Leisure Equipment & Products - 0.5%                  

Arctic Cat

      8,364       476,581  

LeapFrog Enterprises Cl. A 1,2

      65,800       522,452  

Nautilus 1

      121,900       1,027,617  
             
 
                2,026,650  
             
 
Media - 1.1%                  

Rentrak Corporation 1

      108,500       4,111,065  

Saga Communications Cl. A

      12,100       608,630  
             
 
                4,719,695  
             
 
Multiline Retail - 0.2%                  

Tuesday Morning 1

      61,400       979,944  
             
 
Specialty Retail - 2.9%                  

America’s Car-Mart 1,2,4

      83,500       3,526,205  

Cache 1

      168,500       914,955  

Destination Maternity

      57,100       1,706,148  

Kirkland’s 1

      2,800       66,276  

Lewis Group

      57,000       385,253  

Shoe Carnival 2

      30,528       885,617  

Stage Stores 2

      31,000       688,820  

Stein Mart 2

      178,900       2,406,205  

Systemax 1,2

      44,000       495,000  

West Marine 1

      101,600       1,445,768  
             
 
                12,520,247  
             
 
Textiles, Apparel & Luxury Goods - 1.6%                  

Crown Crafts

      197,800       1,536,906  

G-III Apparel Group 1,2

      9,700       715,763  

J.G. Boswell Company 3

      2,490       2,191,200  

Marimekko

      25,300       342,831  

Movado Group 2

      44,374       1,952,900  
             
 
                6,739,600  
             
 
Total (Cost $31,159,718)               52,700,631  
             
 
                   
Consumer Staples – 2.4%                  
Beverages - 0.1%                  

Crimson Wine Group 1,3

      35,000       309,400  
             
 
Food & Staples Retailing - 0.2%                  

Arden Group Cl. A

      9,000       1,138,590  
             
 
Food Products - 1.9%                  

Armanino Foods of Distinction 3

      10,000       19,400  

Asian Citrus Holdings

      1,060,000       291,167  

Calavo Growers 2

      32,123       972,042  

Farmer Bros. 1

      45,000       1,046,700  

Griffin Land & Nurseries

      50,274       1,678,146  

Seneca Foods Cl. A 1,2

      51,400       1,639,146  

Seneca Foods Cl. B 1

      42,500       1,240,150  

SunOpta 1

      119,800       1,199,198  

Waterloo Investment Holdings 1,5

      806,207       120,125  
             
 
                8,206,074  
             
 
Personal Products - 0.2%                  

Inter Parfums 2

      24,800       888,088  
             
 
Total (Cost $6,984,432)               10,542,152  
             
 
Energy – 3.5%                  
Energy Equipment & Services - 2.7%                  

Dawson Geophysical 1

      53,213       1,799,664  

Geospace Technologies 1,2

      9,500       900,885  

Global Geophysical Services 1

      35,000       56,350  

Gulf Island Fabrication

      29,116       676,073  

Lamprell 1

      202,400       470,068  

Matrix Service 1,2

      49,800       1,218,606  

Newpark Resources 1

      64,500       792,705  

North American Energy Partners 1

      50,000       290,500  

Nuverra Environmental Solutions 1,2,4

      10,000       167,900  

Pason Systems

      125,000       2,704,166  

Pioneer Energy Services 1,2

      57,500       460,575  

Tesco Corporation 1,2

      54,800       1,083,944  

Willbros Group 1

      131,100       1,234,962  
             
 
                11,856,398  
             
 
Oil, Gas & Consumable Fuels - 0.8%                  

Approach Resources 1,2,4

      12,000       231,480  

Harvest Natural Resources 1

      13,176       59,555  

Resolute Energy 1,2

      102,100       921,963  

Sprott Resource

      91,800       200,495  

StealthGas 1

      74,500       759,155  

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 2013 Annual Report to Stockholders  |  37



Royce Micro-Cap Trust  


Schedule of Investments
        SHARES     VALUE  
Energy (continued)                  
Oil, Gas & Consumable Fuels (continued)                  

VAALCO Energy 1,2

      100,800     $ 694,512  

Warren Resources 1

      180,500       566,770  
             
 
                3,433,930  
             
 
Total (Cost $10,583,937)               15,290,328  
             
 
Financials – 16.1%                  
Capital Markets - 6.8%                  

ASA Gold and Precious Metals

      206,150       2,527,399  

Aurelius

      40,500       1,643,617  

Cowen Group 1

      396,200       1,549,142  

Diamond Hill Investment Group

      30,979       3,666,055  

Equity Trustees

      42,229       754,503  

Fiera Capital

      78,000       1,041,958  

INTL FCStone 1,2

      26,310       487,787  

JZ Capital Partners

      253,999       1,883,280  

MVC Capital

      131,200       1,771,200  

NGP Capital Resources

      180,011       1,344,682  

Queen City Investments 3

      948       1,052,280  

RHJ International 1

      348,000       1,766,563  

Silvercrest Asset Management Group Cl. A

      104,100       1,774,905  

Sprott

      622,200       1,534,633  

U.S. Global Investors Cl. A

      651,254       1,654,185  

Urbana Corporation 1

      237,600       413,801  

Virtus Investment Partners 1,2

      13,700       2,740,685  

Westwood Holdings Group 2

      29,800       1,844,918  
             
 
                29,451,593  
             
 
Commercial Banks - 1.3%                  

Bank of N.T. Butterfield & Son

      438,100       652,769  

BCB Holdings 1

      906,207       217,592  

Chemung Financial

      31,000       1,059,270  

Fauquier Bankshares

      140,200       1,915,132  

First Bancorp (The)

      40,200       700,284  

Peapack-Gladstone Financial

      53,606       1,023,874  
             
 
                5,568,921  
             
 
Consumer Finance - 0.8%                  

JGWPT Holdings Cl. A 1

      100,000       1,739,000  

Regional Management 1

      51,400       1,744,002  
             
 
                3,483,002  
             
 
Diversified Financial Services - 1.4%                  

Banca Finnat Euramerica

      1,310,000       571,287  

Bolsa Mexicana de Valores

      300,000       687,933  

GAIN Capital Holdings

      25,000       187,750  

HF2 Financial Management Cl. A 1

      207,700       2,112,309  

JSE

      95,400       816,038  

PICO Holdings 1,2

      45,700       1,056,127  

Warsaw Stock Exchange

      52,900       726,684  
             
 
                6,158,128  
             
 
Insurance - 2.0%                  

Hallmark Financial Services 1

      138,000       1,226,130  

Independence Holding Company

      105,380       1,421,576  

National Western Life Insurance Cl. A 2

      12,033       2,689,977  

State Auto Financial 2

      109,264       2,320,768  

United Fire Group 2

      38,603       1,106,362  
             
 
                8,764,813  
             
 
Real Estate Investment Trusts (REITs) - 0.4%                  

BRT Realty Trust 1

      228,681       1,616,775  
             
 
Real Estate Management & Development - 3.1%                  

Altisource Asset Management 1

      1,400       1,302,000  

AV Homes 1

      11,900       216,223  

Consolidated-Tomoka Land

      55,750       2,023,168  

E-House (China) Holdings ADR

      54,439       820,940  

Forestar Group 1,2

      53,000       1,127,310  

Kennedy-Wilson Holdings

      158,800       3,533,300  

Tejon Ranch 1,2,4

      112,162       4,123,075  

ZipRealty 1

      25,000       140,000  
             
 
                13,286,016  
             
 
Thrifts & Mortgage Finance - 0.3%                  

Alliance Bancorp, Inc. of Pennsylvania

      41,344       629,669  

BofI Holding 1,2

      11,962       938,180  
             
 
                1,567,849  
             
 
Total (Cost $51,431,453)               69,897,097  
             
 
Health Care – 8.7%                  
Biotechnology - 1.9%                  

Achillion Pharmaceuticals 1

      380,000       1,261,600  

ARIAD Pharmaceuticals 1

      224,102       1,528,375  

Celsion Corporation 1

      35,555       138,309  

Chelsea Therapeutics International 1

      120,000       531,600  

ChemoCentryx 1

      200,000       1,158,000  

Coronado Biosciences 1

      360,000       946,800  

Halozyme Therapeutics 1

      46,622       698,864  

Idenix Pharmaceuticals 1

      201,408       1,204,420  

ZIOPHARM Oncology 1,2,4

      230,000       998,200  
             
 
                8,466,168  
             
 
Health Care Equipment & Supplies - 4.3%                  

Allied Healthcare Products 1

      131,772       309,664  

AngioDynamics 1,2

      126,000       2,165,940  

Atrion Corporation

      12,157       3,601,511  

CryoLife

      41,973       465,481  

Cynosure Cl. A 1

      5,600       149,408  

DynaVox Cl. A 1,3

      20,000       2,400  

Exactech 1

      113,800       2,703,888  

Invacare Corporation 2

      126,100       2,926,781  

Medical Action Industries 1

      125,250       1,072,140  

STRATEC Biomedical

      14,000       582,609  

Synergetics USA 1,2

      62,850       227,517  

Syneron Medical 1

      69,200       851,160  

Trinity Biotech ADR Cl. A

      42,200       1,060,908  

Utah Medical Products

      42,300       2,417,868  
             
 
                18,537,275  
             
 
Health Care Providers & Services - 1.9%                  

Addus HomeCare 1

      39,400       884,530  

CorVel Corporation 1,2

      40,000       1,868,000  

Cross Country Healthcare 1

      157,200       1,568,856  

38  |  2013 Annual Report to Stockholders THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.



December 31, 2013


        SHARES     VALUE  
Health Care (continued)                  
Health Care Providers & Services (continued)                  

Gentiva Health Services 1,2

      23,000     $ 285,430  

PDI 1

      65,383       314,492  

PharMerica Corporation 1,2

      40,000       860,000  

Psychemedics Corporation

      67,300       988,637  

U.S. Physical Therapy

      38,457       1,355,994  
             
 
                8,125,939  
             
 
Health Care Technology - 0.1%                  

Computer Programs and Systems

      5,000       309,050  
             
 
Life Sciences Tools & Services - 0.5%                  

Affymetrix 1

      130,000       1,114,100  

Furiex Pharmaceuticals 1

      23,758       998,074  
             
 
                2,112,174  
             
 
Total (Cost $24,388,724)               37,550,606  
             
 
Industrials – 28.9%                  
Aerospace & Defense - 2.9%                  

AeroVironment 1,2

      15,900       463,167  

Astronics Corporation 1

      11,544       588,744  

Astronics Corporation Cl. B 1,3

      420       21,340  

Breeze-Eastern Corporation 1

      24,233       223,913  

CPI Aerostructures 1

      75,409       1,134,152  

Ducommun 1

      115,800       3,451,998  

HEICO Corporation 2,4

      44,275       2,565,736  

Innovative Solutions and Support 1

      157,828       1,150,566  

Kratos Defense & Security Solutions 1

      72,324       555,448  

SIFCO Industries

      45,800       1,285,606  

Sparton Corporation 1

      35,700       997,815  
             
 
                12,438,485  
             
 
Air Freight & Logistics - 0.1%                  

Pacer International 1

      35,000       289,100  
             
 
Building Products - 4.1%                  

AAON 2

      97,650       3,119,918  

American Woodmark 1,2

      64,800       2,561,544  

Apogee Enterprises

      57,900       2,079,189  

Burnham Holdings Cl. A 3

      118,709       2,231,729  

Griffon Corporation 2

      46,300       611,623  

Insteel Industries

      62,800       1,427,444  

Trex Company 1,2,4

      33,600       2,672,208  

WaterFurnace Renewable Energy

      128,300       2,897,545  
             
 
                17,601,200  
             
 
Commercial Services & Supplies - 1.9%                  

CompX International Cl. A

      107,500       1,513,600  

Heritage-Crystal Clean 1

      187,298       3,837,736  

Interface 2

      27,000       592,920  

Team 1,2,4

      56,940       2,410,840  
             
 
                8,355,096  
             
 
Construction & Engineering - 2.7%                  

Ameresco Cl. A 1

      122,000       1,178,520  

Integrated Electrical Services 1,6

      934,200       5,035,338  

Layne Christensen 1,2

      24,800       423,584  

MYR Group 1,2,4

      107,100       2,686,068  

Orbit Garant Drilling 1

      1,512,500       1,922,217  

Pike Corporation 1,2

      31,200       329,784  
             
 
                11,575,511  
             
 
Electrical Equipment - 2.1%                  

AZZ

      16,494       805,897  

Deswell Industries

      544,371       1,219,391  

Encore Wire 2

      15,000       813,000  

Global Power Equipment Group

      41,800       818,026  

Jinpan International

      35,000       301,700  

LSI Industries

      79,812       691,970  

Orion Energy Systems 1

      100,000       680,000  

Powell Industries 2

      35,750       2,394,892  

Preformed Line Products

      18,143       1,327,342  
             
 
                9,052,218  
             
 
Industrial Conglomerates - 1.0%                  

Raven Industries 2

      110,881       4,561,644  
             
 
Machinery - 7.4%                  

Alamo Group

      14,200       861,798  

American Railcar Industries

      50,415       2,306,486  

CIRCOR International 2

      15,100       1,219,778  

Columbus McKinnon 1

      9,650       261,901  

Douglas Dynamics

      50,000       841,000  

Eastern Company (The)

      39,750       632,820  

FAG Bearings India

      27,200       710,661  

Foster (L.B.) Company 2

      59,200       2,799,568  

FreightCar America

      16,300       433,906  

Graham Corporation

      44,800       1,625,792  

Hurco Companies

      52,666       1,317,177  

Kadant

      27,900       1,130,508  

Luxfer Holdings ADR

      60,200       1,255,772  

NN

      164,300       3,317,217  

PMFG 1

      223,245       2,020,367  

Sarin Technologies

      935,000       1,370,696  

Semperit AG Holding

      12,500       618,979  

Standex International 2

      17,500       1,100,400  

Sun Hydraulics 2

      108,287       4,421,358  

Tennant Company 2

      59,000       4,000,790  
             
 
                32,246,974  
             
 
Marine - 0.3%                  

Clarkson

      40,400       1,338,677  
             
 
Professional Services - 3.0%                  

Acacia Research

      58,800       854,952  

Advisory Board (The) 1,2,4

      33,423       2,128,042  

CBIZ 1

      47,000       428,640  

Exponent 2

      40,765       3,156,842  

GP Strategies 1,2

      21,385       637,059  

Heidrick & Struggles International

      117,768       2,371,847  

JobStreet Corporation

      100,000       75,714  

Kforce 2

      67,300       1,376,958  

RPX Corporation 1

      104,900       1,772,810  
             
 
                12,802,864  
             
 
Road & Rail - 2.1%                  

Marten Transport

      28,450       574,406  

Patriot Transportation Holding 1

      111,681       4,635,878  

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 2013 Annual Report to Stockholders  |  39



Royce Micro-Cap Trust  


Schedule of Investments

        SHARES     VALUE  
Industrials (continued)                  
Road & Rail (continued)                  

Universal Truckload Services

      134,200     $ 4,094,442  
             
 
                9,304,726  
             
 
Trading Companies & Distributors - 1.0%                  

Aceto Corporation

      72,219       1,806,197  

Houston Wire & Cable

      147,075       1,967,864  

Lawson Products 1

      50,269       615,795  
             
 
                4,389,856  
             
 
Transportation Infrastructure - 0.3%                  

Touax

      53,197       1,386,087  
             
 
Total (Cost $69,419,401)               125,342,438  
             
 
                   
Information Technology – 21.0%                  
Communications Equipment - 1.2%                  

Bel Fuse Cl. A

      67,705       1,314,831  

CalAmp Corporation 1

      30,200       844,694  

Ceragon Networks 1

      29,700       88,209  

ClearOne 1

      25,000       219,250  

Extreme Networks 1

      245,000       1,715,000  

KVH Industries 1

      4,000       52,120  

Oplink Communications 1

      35,251       655,669  

PCTEL

      44,100       422,037  

Sierra Wireless 1

      4,700       113,599  
             
 
                5,425,409  
             
 
Computers & Peripherals - 0.9%                  

Intevac 1

      253,000       1,879,790  

Qumu Corporation 1

      79,200       1,013,760  

TransAct Technologies

      78,600       984,858  
             
 
                3,878,408  
             
 
Electronic Equipment, Instruments & Components - 7.5%          

Agilysys 1

      198,987       2,769,899  

Domino Printing Sciences

      80,000       1,013,441  

DTS 1

      73,900       1,772,122  

Hollysys Automation Technologies 1

      189,600       3,589,128  

Inficon Holding

      3,600       1,387,254  

LRAD Corporation 1

      434,956       817,717  

Maxwell Technologies 1

      242,594       1,884,955  

Measurement Specialties 1

      1,600       97,104  

Mercury Systems 1

      10,900       119,355  

Mesa Laboratories

      61,689       4,847,522  

Newport Corporation 1,2

      115,400       2,085,278  

Orbotech 1

      6,500       87,880  

Parametric Sound 1,2,4

      25,000       346,250  

PC Connection

      47,300       1,175,405  

Pulse Electronics 1

      28,620       82,712  

Richardson Electronics

      300,900       3,418,224  

Rogers Corporation 1,2,4

      60,000       3,690,000  

TTM Technologies 1,2

      114,400       981,552  

Vishay Precision Group 1

      154,000       2,293,060  

Zygo Corporation 1,2

      15,100       223,178  
             
 
                32,682,036  
             
 
Internet Software & Services - 2.4%                  

Bitauto Holdings ADR 1

      50,000       1,598,000  

comScore 1

      74,000       2,117,140  

Marchex Cl. B 1

      95,000       821,750  

Mediabistro 1

      75,000       237,750  

QuinStreet 1

      108,900       946,341  

RealNetworks 1

      245,200       1,851,260  

Stamps.com 1,2

      9,100       383,110  

Support.com 1

      581,563       2,204,124  

United Online

      15,000       206,400  
             
 
                10,365,875  
             
 
IT Services - 3.2%                  

Cass Information Systems 2

      29,150       1,963,252  

Computer Task Group 2

      250,100       4,726,890  

CSE Global

      554,700       336,262  

eClerx Services

      25,100       430,135  

Forrester Research 2

      61,700       2,360,642  

Hackett Group (The)

      82,900       514,809  

Innodata 1

      334,453       819,410  

Sapient Corporation 1,2,4

      145,200       2,520,672  

Sykes Enterprises 1

      6,300       137,403  

Virtusa Corporation 1

      3,300       125,697  
             
 
                13,935,172  
             
 
Semiconductors & Semiconductor Equipment - 3.8%                  

Advanced Energy Industries 1,2

      41,600       950,976  

Amtech Systems 1

      72,900       507,384  

ATMI 1

      50,000       1,510,500  

CEVA 1

      98,122       1,493,417  

Entropic Communications 1

      295,247       1,390,614  

Exar Corporation 1,2,4

      233,208       2,749,522  

Integrated Silicon Solution 1

      27,467       332,076  

IXYS Corporation

      18,800       243,836  

Kulicke & Soffa Industries 1

      67,900       903,070  

LTX-Credence Corporation 1

      59,200       473,008  

Miraial

      22,030       329,268  

MoSys 1

      199,952       1,103,735  

Photronics 1

      95,000       857,850  

Rubicon Technology 1,2,4

      76,899       765,145  

Rudolph Technologies 1,2

      52,500       616,350  

Silicon Image 1

      160,600       987,690  

Silicon Motion Technology ADR

      64,000       905,600  

Ultratech 1

      5,300       153,700  
             
 
                16,273,741  
             
 
Software - 2.0%                  

ACI Worldwide 1,2,4

      27,300       1,774,500  

Actuate Corporation 1

      105,100       810,321  

American Software Cl. A

      114,696       1,132,050  

BSQUARE Corporation 1

      193,875       694,072  

Envivio 1

      550,000       1,870,000  

Pegasystems 2

      13,700       673,766  

SeaChange International 1

      126,600       1,539,456  
             
 
                8,494,165  
             
 
Total (Cost $59,993,965)               91,054,806  
             
 

40  |  2013 Annual Report to Stockholders THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.



December 31, 2013


        SHARES     VALUE  
Materials – 5.8%                  
Chemicals - 2.6%                  

Balchem Corporation 2

      63,375     $ 3,720,113  

Hawkins 2

      29,697       1,104,431  

KMG Chemicals

      33,400       564,126  

Landec Corporation 1

      75,610       916,393  

OM Group 1,2

      10,200       371,382  

Quaker Chemical 2

      57,600       4,439,232  
             
 
                11,115,677  
             
 
Construction Materials - 0.7%                  

Ash Grove Cement 3

      8,000       1,568,000  

Monarch Cement

      52,303       1,260,502  
             
 
                2,828,502  
             
 
Metals & Mining - 2.5%                  

AuRico Gold

      91,250       333,975  

Central Steel & Wire 3

      788       583,120  

Comstock Mining 1

      375,000       656,250  

Endeavour Mining 1

      278,900       126,027  

Exeter Resource 1

      196,500       104,145  

Geodrill 1

      177,700       123,792  

Haynes International 2

      28,201       1,557,823  

Hecla Mining

      44,518       137,115  

Horsehead Holding Corporation 1,2

      53,488       867,041  

MAG Silver 1

      74,750       385,710  

Major Drilling Group International

      316,000       2,287,635  

Materion Corporation

      50,000       1,542,500  

Midway Gold 1

      345,000       279,450  

Olympic Steel

      3,100       89,838  

RTI International Metals 1,2

      25,000       855,250  

Universal Stainless & Alloy Products 1

      30,300       1,092,618  
             
 
                11,022,289  
             
 
Paper & Forest Products - 0.0%                  

Qunxing Paper Holdings 5

      1,500,000       19,344  
             
 
Total (Cost $18,882,375)               24,985,812  
             
 
Telecommunication Services – 0.4%                  
Diversified Telecommunication Services - 0.4%                  

Global Telecom & Technology 1

      207,660       1,515,918  
             
 
Total (Cost $888,423)               1,515,918  
             
 
Utilities – 0.1%                  
Independent Power Producers & Energy Traders - 0.1%                  

Alterra Power 1

      450,000       124,971  

China Hydroelectric ADS 1

      73,100       195,908  
             
 
Total (Cost $754,613)               320,879  
             
 
Miscellaneous 7 – 4.8%                  
Total (Cost $18,374,484)               20,910,041  
             
 
TOTAL COMMON STOCKS                  

(Cost $292,861,525)

              450,110,708  
             
 
PREFERRED STOCK – 0.3%                  

Seneca Foods Conv. 1,3

                 

(Cost $578,719)

      45,409       1,406,771  
             
 
REPURCHASE AGREEMENT – 3.8%                  
Fixed Income Clearing Corporation,                  

0.00% dated 12/31/13, due 1/2/14,

                 

maturity value $16,401,000 (collateralized

                 

by obligations of various U.S. Government

                 

Agencies, 1.00% due 5/31/18, valued at

                 

$16,731,731)

                 

(Cost $16,401,000)

              16,401,000  
             
 
TOTAL INVESTMENTS – 108.0%                  

(Cost $309,841,244)

              467,918,479  
                   
LIABILITIES LESS CASH                  

AND OTHER ASSETS – (8.0)%

              (34,797,299 )
             
 
NET ASSETS – 100.0%             $ 433,121,180  
             
 

New additions in 2013.
1 Non-income producing.
2

All or a portion of these securities were pledged as collateral in connection with the revolving credit agreement at December 31, 2013. Total market value of pledged securities at December 31, 2013, was $128,560,324.

3

These securities are defined as Level 2 securities due to fair value being based on quoted prices for similar securities. See Notes to Financial Statements.

4

At December 31, 2013, a portion of these securities were rehypothecated in connection with the Fund’s revolving credit agreement in the aggregate amount of $22,052,415.

5

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.

6

At December 31, 2013, 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.

7 Includes securities first acquired in 2013 and less than 1% of net assets.
   
 

Bold indicates the Fund’s 20 largest equity holdings in terms of December 31, 2013, market value.

   
 

TAX INFORMATION: The cost of total investments for Federal income tax purposes was $312,338,544. At December 31, 2013, net unrealized appreciation for all securities was $155,579,935, consisting of aggregate gross unrealized appreciation of $172,281,045 and aggregate gross unrealized depreciation of $16,701,110. The primary difference between book and tax basis cost is the timing of the recognition of losses on securities sold.



THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 2013 Annual Report to Stockholders  |  41



Royce Micro-Cap Trust December 31, 2013


Statement of Assets and Liabilities

ASSETS:          
Investments at value          

Non-Affiliated Companies (cost $291,667,624)

    $ 446,482,141  

Affiliated Companies (cost $1,772,620)

      5,035,338  

Total investments at value       451,517,479  
Repurchase agreements (at cost and value)       16,401,000  
Cash and foreign currency       8,850  
Receivable for investments sold       10,759,100  
Receivable for dividends and interest       598,610  
Prepaid expenses and other assets       25,621  

Total Assets

      479,310,660  

LIABILITIES:          
Revolving credit agreement       45,000,000  
Payable for investments purchased       764,790  
Payable for investment advisory fee       303,368  
Payable for interest expense       2,992  
Accrued expenses       118,330  

Total Liabilities

      46,189,480  

Net Assets

    $ 433,121,180  

ANALYSIS OF NET ASSETS:          

Paid-in capital - $0.001 par value per share; 30,679,845 shares outstanding (150,000,000 shares authorized)

    $ 252,447,484  
Undistributed net investment income (loss)       (612,327 )
Accumulated net realized gain (loss) on investments and foreign currency       23,204,988  
Net unrealized appreciation (depreciation) on investments and foreign currency       158,081,035  

Net Assets (net asset value per share - $14.12)

    $ 433,121,180  

Investments at identified cost

    $ 293,440,244  

42  |  2013 Annual Report to Stockholders THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.



Royce Micro-Cap Trust Year Ended December 31, 2013


Statement of Operations

INVESTMENT INCOME:          
Income:          

Dividends

    $ 4,333,982  

Foreign withholding tax

      (99,173 )

Interest

      2,845  

Rehypothecation income

      195,338  

Total income       4,432,992  

Expenses:          

Investment advisory fees

      3,070,111  

Interest expense

      555,386  

Stockholder reports

      124,177  

Custody and transfer agent fees

      107,164  

Directors’ fees

      76,140  

Professional fees

      55,239  

Administrative and office facilities

      38,096  

Other expenses

      115,750  

Total expenses       4,142,063  
Compensating balance credits       (36 )

Net expenses       4,142,027  

Net investment income (loss)       290,965  

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:          
Net realized gain (loss):          

Investments in Non-Affiliated Companies

      55,513,962  

Investments in Affiliated Companies

      554,980  

Foreign currency transactions

      (17,851 )
Net change in unrealized appreciation (depreciation):          

Investments and foreign currency translations

      80,663,223  

Other assets and liabilities denominated in foreign currency

      16,655  

Net realized and unrealized gain (loss) on investments and foreign currency       136,730,969  

NET INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS     $ 137,021,934  


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 2013 Annual Report to Stockholders  |  43



Royce Micro-Cap Trust  


Statement of Changes in Net Assets Applicable to Common Stockholders

    Year ended   Year ended
    12/31/13   12/31/12
INVESTMENT OPERATIONS:                    
Net investment income (loss)     $ 290,965       $ 4,372,284  
Net realized gain (loss) on investments and foreign currency       56,051,091         23,276,212  
Net change in unrealized appreciation (depreciation) on investments and foreign currency       80,679,878         22,067,176  

Net increase (decrease) in net assets from investment operations       137,021,934         49,715,672  

DISTRIBUTIONS TO PREFERRED STOCKHOLDERS:                    
Net investment income               (514,703 )
Net realized gain on investments and foreign currency               (2,635,297 )

Total distributions to Preferred Stockholders               (3,150,000 )

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

FROM INVESTMENT OPERATIONS

      137,021,934         46,565,672  

DISTRIBUTIONS TO COMMON STOCKHOLDERS:                    
Net investment income       (933,371 )       (2,385,531 )
Net realized gain on investments and foreign currency       (39,825,192 )       (12,213,998 )

Total distributions to Common Stockholders       (40,758,563 )       (14,599,529 )

CAPITAL STOCK TRANSACTIONS:                    
Reinvestment of distributions to Common Stockholders       18,312,849         7,286,598  

Total capital stock transactions       18,312,849         7,286,598  

NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS       114,576,220         39,252,741  

NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS:                    

Beginning of year

      318,544,960         279,292,219  

End of year (including undistributed net investment income (loss) of $(612,327) at 12/31/13 and $(471,326) at 12/31/12)

    $ 433,121,180       $ 318,544,960  

44  |  2013 Annual Report to Stockholders THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.



Royce Micro-Cap Trust


Statement of Cash Flows

CASH FLOWS FROM OPERATING ACTIVITIES:          
Net increase (decrease) in net assets from investment operations     $ 137,021,934  

Adjustments to reconcile net increase (decrease) in net assets from operations to net cash provided by operating activities:

         

Purchases of long-term investments

      (113,837,283 )

Proceeds from sales and maturities of long-term investments

      139,976,544  

Net purchases, sales and maturities of short-term investments

      (3,726,000 )

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

      (466,606 )

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

      38,189  

Net change in unrealized appreciation (depreciation) on investments

      (80,663,223 )

Net realized gain on investments and foreign currency

      (56,051,091 )

Cash provided by operating activities       22,292,464  

CASH FLOWS FROM FINANCING ACTIVITIES:          
Distributions paid to Common Stockholders       (40,758,563 )
Reinvestment of distributions to Common Stockholders       18,312,849  

Cash used for financing activities       (22,445,714 )

INCREASE (DECREASE) IN CASH:       (153,250 )

Cash and foreign currency at beginning of year

      162,100  

Cash and foreign currency at end of year

    $ 8,850  

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 2013 Annual Report to Stockholders  |  45



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 December 31,
   
    2013   2012   2011   2010   2009

NET ASSET VALUE, BEGINNING OF PERIOD

    $ 10.93       $ 9.86       $ 11.34       $ 8.90       $ 6.39  

INVESTMENT OPERATIONS:

                                                 

Net investment income (loss)

      0.01         0.15         0.04         0.08         0.00  

Net realized and unrealized gain (loss) on investments and

                                                 

foreign currency

      4.64         1.58         (0.82 )       2.58         2.88  

Total investment operations

      4.65         1.73         (0.78 )       2.66         2.88  

DISTRIBUTIONS TO PREFERRED STOCKHOLDERS:

                                                 

Net investment income

              (0.02 )       (0.02 )       (0.10 )       (0.04 )

Net realized gain on investments and foreign currency

              (0.09 )       (0.11 )       (0.03 )        

Return of capital

                                      (0.09 )

Total distributions to Preferred Stockholders

              (0.11 )       (0.13 )       (0.13 )       (0.13 )

NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON

                                                 

STOCKHOLDERS FROM INVESTMENT OPERATIONS

      4.65         1.62         (0.91 )       2.53         2.75  

DISTRIBUTIONS TO COMMON STOCKHOLDERS:

                                                 

Net investment income

      (0.03 )       (0.08 )       (0.05 )       (0.06 )        

Net realized gain on investments and foreign currency

      (1.35 )       (0.43 )       (0.24 )       (0.02 )        

Return of capital

                      (0.24 )               (0.22 )

Total distributions to Common Stockholders

      (1.38 )       (0.51 )       (0.53 )       (0.08 )       (0.22 )

CAPITAL STOCK TRANSACTIONS:

                                                 

Effect of reinvestment of distributions by Common Stockholders

      (0.08 )       (0.04 )       (0.04 )       (0.01 )       (0.02 )

Total capital stock transactions

      (0.08 )       (0.04 )       (0.04 )       (0.01 )       (0.02 )

NET ASSET VALUE, END OF PERIOD

    $ 14.12       $ 10.93       $ 9.86       $ 11.34       $ 8.90  

MARKET VALUE, END OF PERIOD

    $ 12.61       $ 9.45       $ 8.77       $ 9.80       $ 7.37  

TOTAL RETURN:1

                                                 

Market Value

      49.42 %       13.95 %       (4.99 )%       34.10 %       37.91 %

Net Asset Value

      44.66 %       17.23 %       (7.69 )%       28.50 %       46.47 %

RATIOS BASED ON AVERAGE NET ASSETS APPLICABLE TO

                                                 

COMMON STOCKHOLDERS:

                                                 

Investment advisory fee expense2

      0.82 %       1.12 %       0.97 %       0.97 %       1.38 %

Other operating expenses

      0.29 %       0.18 %       0.15 %       0.15 %       0.21 %

Total expenses (net)3

      1.11 %       1.30 %       1.12 %       1.12 %       1.59 %

Expenses net of fee waivers and excluding interest expense

      0.96 %       1.27 %       1.12 %       1.12 %       1.59 %

Expenses prior to fee waivers and balance credits

      1.11 %       1.32 %       1.15 %       1.17 %       1.74 %

Expenses prior to fee waivers

      1.11 %       1.32 %       1.15 %       1.17 %       1.74 %

Net investment income (loss)

      0.08 %       1.46 %       0.40 %       0.84 %       0.02 %

SUPPLEMENTAL DATA:

                                                 

Net Assets Applicable to Common Stockholders,

                                                 

End of Period (in thousands)

    $ 433,121       $ 318,545       $ 279,292       $ 311,279       $ 243,156  

Liquidation Value of Preferred Stock,

                                                 

End of Period (in thousands)

                        $ 60,000       $ 60,000       $ 60,000  

Portfolio Turnover Rate

      29 %       28 %       30 %       27 %       30 %

PREFERRED STOCK:

                                                 

Total shares outstanding

                          2,400,000         2,400,000         2,400,000  

Asset coverage per share

                        $ 141.37       $ 154.70       $ 126.32  

Liquidation preference per share

                        $ 25.00       $ 25.00       $ 25.00  

Average month-end market value per share

                        $ 25.41       $ 25.11       $ 23.47  

REVOLVING CREDIT AGREEMENT:

                                                 

Asset coverage

      1062 %       808 %                              

Asset coverage per $1,000

    $ 10,625       $ 8,079                                


1
The Market Value Total Return is calculated assuming a purchase of Common Stock on the opening of the first business day and a sale on the closing of the last business day of each period. Dividends and distributions are assumed for the purposes of this calculation to be reinvested at prices obtained under the Fund’s Distribution Reinvestment and Cash Purchase Plan. Net Asset Value Total Return is calculated on the same basis, except that the Fund’s net asset value is used on the purchase and sale dates instead of market value.
2
The investment advisory fee is calculated based on average net assets over a rolling 36-month basis, while the above ratios of investment advisory fee expenses are based on the average net assets applicable to Common Stockholders over a 12-month basis.
3
Expense ratios based on total average net assets including liquidation value of Preferred Stock were 1.10%, 0.93%, 0.91% and 1.21% for the years ended December 31, 2012, 2011, 2010 and 2009, respectively.

46  |  2013 Annual Report to Stockholders THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.



Royce Micro-Cap Trust


Notes to Financial Statements

Summary of Significant Accounting Policies:

Royce Micro-Cap Trust, Inc. (the "Fund"), was incorporated under the laws of the State of Maryland on September 9, 1993, as a diversified closed-end investment company. 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.


Valuation of Investments:

Securities are valued as of the close of trading on the New York Stock Exchange (NYSE) (generally 4:00 p.m. Eastern time) on the valuation date. Securities that trade on an exchange, and securities traded on Nasdaq’s Electronic Bulletin Board, are valued at their last reported sales price or Nasdaq official closing price taken from the primary market in which each security trades or, if no sale is reported for such day, at their bid price. Other over-the-counter securities for which market quotations are readily available are valued at their highest bid price, 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, 2013. 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   $ 441,976,581     $ 7,994,658     $ 139,469     $ 450,110,708  
Preferred Stocks           1,406,771             1,406,771  
Cash Equivalents           16,401,000             16,401,000  

For the year ended December 31, 2013, certain securities have transferred in and out of Level 1 and Level 2 measurements as a result of the fair value pricing procedures for international equities. The Fund recognizes transfers between levels as of the end of the reporting period. At December 31, 2013, securities valued at $2,400 were transferred from Level 1 to Level 2 and securities valued at $17,536,036 were transferred from Level 2 to Level 1 within the fair value hierarchy.


     Level 3 Reconciliation:
            Realized and Unrealized        
    Balance as of 12/31/12   Gain (Loss)1   Balance as of 12/31/13
Common Stocks     $197,755       $(58,286)       $139,469  

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.

2013 Annual Report to Stockholders  |  47



Royce Micro-Cap 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.

Foreign Currency:
     Net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, expiration of currency forward contracts, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities, including investments in securities at the end of the reporting period, as a result of changes in foreign currency exchange rates.

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

Distributions:
     The Fund pays quarterly distributions on the Fund’s Common Stock at the annual rate of 5% 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 1.25% of the rolling average or the distribution required by IRS regulations. Prior to November 15, 2012, distributions to Preferred Stockholders were accrued daily and paid quarterly. Distributions to Common Stockholders are recorded on ex-dividend date. Distributable capital gains and/or net investment income were first allocated to Preferred Stockholder distributions, with any excess allocable to Common Stockholders. If capital gains and/or net investment income were allocated to both Preferred and Common Stockholders, the tax character of such allocations was proportional. To the extent that distributions are not paid from long-term capital gains, net investment income or net short-term capital gains, they will represent a return of capital. Distributions are determined in accordance with income tax regulations that may differ from accounting principles generally accepted in the United States of America. Permanent book and tax differences relating to stockholder distributions will result in reclassifications within the capital accounts. Undistributed net investment income may include temporary book and tax basis differences, which will reverse in a subsequent period. Any taxable income or gain remaining undistributed at fiscal year end is distributed in the following year.

Investment Transactions and Related Investment Income:
     Investment transactions are accounted for on the trade date. Dividend income is recorded on the ex-dividend date. Non-cash dividend income is recorded at the fair market value of the securities received. Interest income is recorded on an accrual basis. Premium and discounts on debt securities are amortized using the effective yield-to-maturity method. Realized gains and losses from investment transactions are determined on the basis of identified cost for book and tax purposes.

Expenses:
     The 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 Royce Funds are allocated by Royce & Associates, LLC (“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 1,542,544 and 804,089 shares of Common Stock as reinvestment of distributions by Common Stockholders for the years ended December 31, 2013 and December 31, 2012, respectively.


48  |  2013 Annual Report to Stockholders  



Royce Micro-Cap Trust


Notes to Financial Statements (continued)

Borrowings:
     The Fund has entered into a $45,000,000 revolving credit agreement (the credit agreement) with BNP Paribas Prime Brokerage Inc. (BNPP). The Fund pays a commitment fee of 0.50% per annum on the unused portion of the credit agreement. The credit agreement has a 360-day rolling term that resets daily; however, if the Fund exceeds certain net asset value triggers, the credit agreement may convert to a 60-day rolling term that resets daily. The Fund is required to pledge portfolio securities as collateral in an amount up to two times the loan balance outstanding and has granted a security interest in the securities pledged to, and in favor of, BNPP 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 necessitating the sale of portfolio securities at potentially inopportune times. The credit agreement also permits, subject to certain conditions, BNPP 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 BNPP on demand. If BNPP fails to deliver the recalled security in a timely manner, the Fund will be compensated by BNPP for any fees or losses related to the failed delivery or, in the event a recalled security will not be returned by BNPP, the Fund, upon notice to BNPP, may reduce the loan balance outstanding by the amount of the recalled security failed to be returned. The Fund will receive a portion of the fees earned by BNPP in connection with the rehypothecation of portfolio securities.
     As of December 31, 2013, the Fund has outstanding borrowings of $45,000,000. During the year ended December 31, 2013, the Fund borrowed an average daily balance of $45,000,000 at a weighted average borrowing cost of 1.22%. As of December 31, 2013, the aggregate value of rehypothecated securities was $22,052,415. During the year ended December 31, 2013, the Fund earned $195,338 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 applicable to Common Stockholders, plus the liquidation value of outstanding Preferred Stock, for the rolling 36-month period ending with such month (the "performance period"). The Basic Fee for each month is increased or decreased at the rate of 1/12 of .05% for each percentage point that the investment performance of the Fund exceeds, or is exceeded by, the percentage change in the investment record of the Russell 2000 for the performance period by more than two percentage points. The performance period for each such month is a rolling 36-month period ending with such month. The maximum increase or decrease in the Basic Fee for any month may not exceed 1/12 of .5%. Accordingly, for each month, the maximum monthly fee rate as adjusted for performance is 1/12 of 1.5% and is payable if the investment performance of the Fund exceeds the percentage change in the investment record of the Russell 2000 by 12 or more percentage points for the performance period, and the minimum monthly fee rate as adjusted for performance is 1/12 of .5% and is payable if the percentage change in the investment record of the Russell 2000 exceeds the investment performance of the Fund by 12 or more percentage points for the performance period.
     For the twelve rolling 36-month periods in 2013, the Fund’s investment performance ranged from 0% to 8% below the investment performance of the Russell 2000. Accordingly, the net investment advisory fee consisted of a Basic Fee of $3,537,031 and a net downward adjustment of $466,920 for the performance of the Fund relative to that of the Russell 2000. For the year ended December 31, 2013, the Fund accrued and paid Royce investment advisory fees totaling $3,070,111.

Purchases and Sales of Investment Securities:
     For the year ended December 31, 2013, the costs of purchases and proceeds from sales of investment securities, other than short-term securities, amounted to $114,418,931 and $146,034,188, respectively.

Distributions to Stockholders:
  The tax character of distributions paid to common stockholders   The tax character of distributions paid to preferred stockholders
  during 2013 and 2012 was as follows:   during 2012 was as follows:
       
  Distributions paid from:   2013   2012   Distributions paid from:       2012
  Ordinary income     $ 8,388,113       $ 6,023,066     Ordinary income               $ 1,332,543  
  Long-term capital gain       32,370,450         8,576,463     Long-term capital gain                 1,897,457  
                           
        $ 40,758,563       $ 14,599,529                     $ 3,230,000  
       

2013 Annual Report to Stockholders  |  49



Royce Micro-Cap Trust


Notes to Financial Statements (continued)

Distributions to Stockholders (continued):
     As of December 31, 2013, tax basis components of distributable earnings included in stockholders’ equity were as follows:


Net unrealized appreciation (depreciation)     $155,583,773  
Post October loss*     (8,733 )
Undistributed ordinary income     7,094,031  
Undistributed capital gains     18,004,625  
   
      $180,673,696  


*
Under the current tax law, capital losses and foreign currency losses after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. As of December 31, 2013, the Fund had $8,733 of post October currency losses.

     The difference between book and tax basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral on wash sales, partnership investments and the unrealized gains on Passive Foreign Investment Companies.
     For financial reporting purposes, capital accounts and distributions to stockholders are adjusted to reflect the tax character of permanent book/tax differences. These differences are primarily due to differing treatments of income and gains on various investment securities and foreign currency transactions held by the Fund, timing differences and different characterization of distributions made by the Fund. For the year ended December 31, 2013, the Fund recorded the following permanent reclassifications. Results of operations and net assets were not affected by these reclassifications.


Undistributed Net   Accumulated Net   Paid-in  
Investment Income   Realized Gain (Loss)   Capital  
$501,406   $(357,824)   $(143,582)  

     Management has analyzed the Fund’s tax positions taken on federal income tax returns for all open tax years (2010-2013) and has concluded that as of December 31, 2013, no provision for income tax is required in the Fund’s financial statements.

Transactions in Affiliated Companies:
     An “Affiliated Company” as defined in the Investment Company Act of 1940, is a company in which a fund owns 5% or more of the company’s outstanding voting securities at any time during the period. The Fund effected the following transactions in shares of such companies for the year ended December 31, 2013:

    Shares   Market Value   Cost of   Cost of   Realized   Dividend   Shares   Market Value
Affiliated Company   12/31/12   12/31/12   Purchases   Sales   Gain (Loss)   Income   12/31/13   12/31/13
Integrated Electrical Services   1,099,679   $5,124,504     $307,386   $554,980     934,200   $5,035,338
        $5,124,504           $554,980           $5,035,338

50  |  2013 Annual Report to Stockholders  



Royce Micro-Cap Trust


Report of Independent Registered Public Accounting Firm

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

We have audited the accompanying statement of assets and liabilities of Royce Micro-Cap Trust, Inc., (“Fund”) including the schedule of investments, as of December 31, 2013, and the related statement of operations and statement of cash flows for the year then ended, the statements of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2013, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Royce Micro-Cap Trust, Inc. at December 31, 2013, 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 then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

  TAIT, WELLER, & BAKER LLP

Philadelphia, Pennsylvania
February 19, 2014


2013 Annual Report to Stockholders  |  51



Royce Focus Trust

Schedule of Investments

      SHARES     VALUE  

COMMON STOCKS – 97.9%

               
                 

Consumer Discretionary – 11.2%

               

Automobiles - 3.0%

               

Thor Industries

    105,000     $ 5,799,150  
           
 

Household Durables - 1.7%

               

Garmin

    70,000       3,235,400  
           
 

Specialty Retail - 6.5%

               

Buckle (The)

    100,000       5,256,000  

GameStop Corporation Cl. A

    80,000       3,940,800  

Signet Jewelers

    40,000       3,148,000  
           
 
              12,344,800  
           
 

Total (Cost $14,404,909)

            21,379,350  
           
 
                 

Consumer Staples – 6.3%

               

Food Products - 4.1%

               

Cal-Maine Foods

    45,000       2,710,350  

Industrias Bachoco ADR

    85,000       3,422,950  

Sanderson Farms

    25,000       1,808,250  
           
 
              7,941,550  
           
 

Personal Products - 2.2%

               

Nu Skin Enterprises Cl. A

    30,000       4,146,600  
           
 

Total (Cost $6,169,138)

            12,088,150  
           
 
                 

Energy – 11.9%

               

Energy Equipment & Services - 8.7%

               

Helmerich & Payne

    80,000       6,726,400  

Pason Systems

    200,000       4,326,665  

Trican Well Service

    250,000       3,054,837  

Unit Corporation 1

    50,000       2,581,000  
           
 
              16,688,902  
           
 

Oil, Gas & Consumable Fuels - 3.2%

               

Exxon Mobil

    60,000       6,072,000  
           
 

Total (Cost $15,006,608)

            22,760,902  
           
 
                 

Financials – 18.7%

               

Capital Markets - 12.5%

               

Artisan Partners Asset Management Cl. A

    30,000       1,955,700  

Ashmore Group

    650,000       4,319,463  

Federated Investors Cl. B

    110,000       3,168,000  

Franklin Resources

    125,000       7,216,250  

Sprott

    1,600,000       3,946,340  

Value Partners Group

    4,300,000       3,332,731  
           
 
              23,938,484  
           
 

Diversified Financial Services - 3.7%

               

Berkshire Hathaway Cl. B 1

    60,000       7,113,600  
           
 

Real Estate Management & Development - 2.5%

               

Kennedy-Wilson Holdings

    215,000       4,783,750  
           
 

Total (Cost $25,239,000)

            35,835,834  
           
 
                 

Health Care – 3.7%

               

Biotechnology - 2.5%

               

Myriad Genetics 1,2

    230,000       4,825,400  
           
 

Pharmaceuticals - 1.2%

               

Medicines Company (The) 1

    60,000       2,317,200  
           
 

Total (Cost $7,664,835)

            7,142,600  
           
 
                 

Industrials – 8.7%

               

Construction & Engineering - 2.0%

               

Jacobs Engineering Group 1

    60,000       3,779,400  
           
 

Electrical Equipment - 0.9%

               

GrafTech International 1

    150,000       1,684,500  
           
 

Machinery - 3.0%

               

Lincoln Electric Holdings

    25,000       1,783,500  

Semperit AG Holding

    80,000       3,961,464  
           
 
              5,744,964  
           
 

Marine - 0.9%

               

Clarkson

    50,000       1,656,778  
           
 

Road & Rail - 1.9%

               

Patriot Transportation Holding 1

    90,000       3,735,900  
           
 

Total (Cost $11,663,014)

            16,601,542  
           
 
                 

Information Technology – 18.7%

               

Computers & Peripherals - 10.4%

               

Apple

    10,000       5,611,100  

SanDisk Corporation

    65,000       4,585,100  

Western Digital

    115,000       9,648,500  
           
 
              19,844,700  
           
 

Semiconductors & Semiconductor Equipment - 5.2%

   

Analog Devices

    35,000       1,782,550  

Cirrus Logic 1

    220,000       4,494,600  

MKS Instruments

    120,000       3,592,800  
           
 
              9,869,950  
           
 

Software - 3.1%

               

Microsoft Corporation

    160,000       5,988,800  
           
 

Total (Cost $23,924,094)

            35,703,450  
           
 
                 

Materials – 18.7%

               

Chemicals - 3.5%

               

Mosaic Company (The)

    90,000       4,254,300  

Westlake Chemical

    20,000       2,441,400  
           
 
              6,695,700  
           
 

Metals & Mining - 13.9%

               

Alamos Gold

    160,000       1,938,527  

Endeavour Mining 1

    450,000       203,342  

Fresnillo

    200,000       2,469,021  

Globe Specialty Metals

    200,000       3,602,000  

Major Drilling Group International

    250,000       1,809,838  

Nucor Corporation

    35,000       1,868,300  

Pan American Silver

    180,000       2,106,000  

Pretium Resources 1

    200,000       1,031,772  

Randgold Resources ADR

    50,000       3,140,500  

Reliance Steel & Aluminum

    60,000       4,550,400  

Schnitzer Steel Industries Cl. A

    75,000       2,450,250  

Seabridge Gold 1

    200,000       1,460,000  
           
 
              26,629,950  
           
 

52  |  2013 Annual Report to Stockholders THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.



December 31, 2013


      SHARES     VALUE  

Materials (continued)

               

Paper & Forest Products - 1.3%

               

Stella-Jones

    95,000     $ 2,437,044  
           
 

Total (Cost $36,446,489)

            35,762,694  
           
 
                 

TOTAL COMMON STOCKS

               

(Cost $140,518,087)

            187,274,522  
           
 
                 

REPURCHASE AGREEMENT – 2.1%

               

Fixed Income Clearing Corporation,

               

0.00% dated 12/31/13, due 1/2/14,

               

maturity value $4,055,000 (collateralized

               

by obligations of various U.S. Government

               

Agencies, 3.625% due 2/15/20, valued at

               

$4,139,888)

               

(Cost $4,055,000)

            4,055,000  
           
 
                 

COLLATERAL RECEIVED FOR SECURITIES

               

LOANED – 1.4%

               

Money Market Funds

               

Federated Government Obligations Fund

               

(7 day yield-0.0099%)

               

(Cost $2,712,329)

            2,712,329  
           
 
                 

TOTAL INVESTMENTS – 101.4%

               

(Cost $147,285,416)

            194,041,851  
                 

LIABILITIES LESS CASH

               

AND OTHER ASSETS – (1.4)%

            (2,606,225 )
           
 
                 

NET ASSETS – 100.0%

          $ 191,435,626  
           
 

New additions in 2013.
1
Non-income producing.
2
All or a portion of these securities were on loan at December 31, 2013. Total market value of loaned securities at December 31, 2013, was $2,677,866.
   
 
Bold indicates the Fund’s 20 largest equity holdings in terms of December 31, 2013, market value.
   
 
TAX INFORMATION: The cost of total investments for Federal income tax purposes was $147,578,093. At December 31, 2013, net unrealized appreciation for all securities was $46,463,758, consisting of aggregate gross unrealized appreciation of $56,323,152 and aggregate gross unrealized depreciation of $9,859,394. The primary difference between book and tax basis cost is the timing of the recognition of investments in publicly traded partnerships.


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 2013 Annual Report to Stockholders  |  53



Royce Focus Trust December 31, 2013


Statement of Assets and Liabilities

ASSETS:        

Total investments at value (including collateral on loaned securities)

    $ 189,986,851

Repurchase agreements (at cost and value)

      4,055,000

Cash and foreign currency

      31,638

Receivable for dividends and interest

      305,132

Prepaid expenses and other assets

      13,752

Total Assets

      194,392,373

LIABILITIES:

       

Payable for collateral on loaned securities

      2,712,329

Payable for investment advisory fee

      159,234

Accrued expenses

      85,184

Total Liabilities

      2,956,747

Net Assets

    $ 191,435,626

ANALYSIS OF NET ASSETS:

       

Paid-in capital - $0.001 par value per share; 22,055,895 shares outstanding (150,000,000 shares authorized)

    $ 142,301,723

Undistributed net investment income (loss)

      23,390

Accumulated net realized gain (loss) on investments and foreign currency

      2,352,929

Net unrealized appreciation (depreciation) on investments and foreign currency

      46,757,584

Net Assets (net asset value per share - $8.68)

    $ 191,435,626

Investments at identified cost (including $2,712,329 of collateral on loaned securities)

    $ 143,230,416

Market value of loaned securities

      2,677,866

54  |  2013 Annual Report to Stockholders THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.



Royce Focus Trust   Year Ended December 31, 2013


Statement of Operations

INVESTMENT INCOME:          
Income:          

Dividends

    $ 3,246,060  

Foreign withholding tax

      (109,754 )

Interest

      308  

Securities lending

      4,562  

Total income

      3,141,176  

Expenses:

         

Investment advisory fees

      1,745,067  

Stockholder reports

      80,546  

Custody and transfer agent fees

      63,017  

Directors’ fees

      48,545  

Professional fees

      40,680  

Administrative and office facilities

      18,460  

Other expenses

      38,055  

Total expenses

      2,034,370  

Compensating balance credits

      (37 )

Net expenses

      2,034,333  

Net investment income (loss)

      1,106,843  

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:

         

Net realized gain (loss):

         

Investments

      8,567,024  

Foreign currency transactions

      8,510  

Net change in unrealized appreciation (depreciation):

         

Investments and foreign currency translations

      21,818,040  

Other assets and liabilities denominated in foreign currency

      2,987  

Net realized and unrealized gain (loss) on investments and foreign currency

      30,396,561  

NET INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS

    $ 31,503,404  

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 2013 Annual Report to Stockholders  |  55



Royce Focus Trust


Statement of Changes in Net Assets Applicable to Common Stockholders

    Year ended   Year ended
    12/31/13   12/31/12
INVESTMENT OPERATIONS:                    
Net investment income (loss)     $ 1,106,843       $ 1,179,309  
Net realized gain (loss) on investments and foreign currency       8,575,534         10,385,671  
Net change in unrealized appreciation (depreciation) on investments and foreign currency       21,821,027         6,238,326  

Net increase (decrease) in net assets from investment operations       31,503,404         17,803,306  

DISTRIBUTIONS TO PREFERRED STOCKHOLDERS:                    
Net investment income               (119,929 )
Net realized gain on investments and foreign currency               (1,192,581 )

Total distributions to Preferred Stockholders               (1,312,510 )

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

FROM INVESTMENT OPERATIONS

      31,503,404         16,490,796  

DISTRIBUTIONS TO COMMON STOCKHOLDERS:                    
Net investment income       (993,984 )       (874,175 )
Net realized gain on investments and foreign currency       (7,656,872 )       (8,693,633 )

Total distributions to Common Stockholders       (8,650,856 )       (9,567,808 )

CAPITAL STOCK TRANSACTIONS:                    
Reinvestment of distributions to Common Stockholders       4,994,934         5,809,237  

Total capital stock transactions       4,994,934         5,809,237  

NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS       27,847,482         12,732,225  

NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS:                    

Beginning of year

      163,588,144         150,855,919  

End of year (including undistributed net investment income (loss) of $23,390 at 12/31/13 and $22,426 at 12/31/12)

    $ 191,435,626       $ 163,588,144  

56  |  2013 Annual Report to Stockholders THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.



Royce Focus 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 December 31,
   
    2013   2012   2011   2010   2009

NET ASSET VALUE, BEGINNING OF PERIOD

    $ 7.66       $ 7.36       $ 8.72       $ 7.16       $ 4.76  

INVESTMENT OPERATIONS:

                                                 

Net investment income (loss)

      0.05         0.06         0.02         (0.01 )       0.03  

Net realized and unrealized gain (loss) on investments and

                                                 

foreign currency

      1.40         0.81         (0.86 )       1.65         2.54  

Total investment operations

      1.45         0.87         (0.84 )       1.64         2.57  

DISTRIBUTIONS TO PREFERRED STOCKHOLDERS:

                                                 

Net investment income

              (0.01 )               (0.05 )       (0.08 )

Net realized gain on investments and foreign currency

              (0.06 )       (0.07 )       (0.03 )        

Total distributions to Preferred Stockholders

              (0.07 )       (0.07 )       (0.08 )       (0.08 )

NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS FROM INVESTMENT OPERATIONS

      1.45         0.80         (0.91 )       1.56         2.49  

DISTRIBUTIONS TO COMMON STOCKHOLDERS:

                                                 

Net investment income

      (0.05 )       (0.04 )                       (0.00 )

Net realized gain on investments and foreign currency

      (0.35 )       (0.42 )       (0.29 )                

Return of capital

                      (0.12 )               (0.09 )

Total distributions to Common Stockholders

      (0.40 )       (0.46 )       (0.41 )               (0.09 )

CAPITAL STOCK TRANSACTIONS:

                                                 

Effect of reinvestment of distributions by Common Stockholders

      (0.03 )       (0.04 )       (0.04 )               (0.00 )

Total capital stock transactions

      (0.03 )       (0.04 )       (0.04 )               (0.00 )

NET ASSET VALUE, END OF PERIOD

    $ 8.68       $ 7.66       $ 7.36       $ 8.72       $ 7.16  

MARKET VALUE, END OF PERIOD

    $ 7.62       $ 6.60       $ 6.30       $ 7.57       $ 6.33  

TOTAL RETURN:1

                                                 

Market Value

      21.99 %       12.14 %       (11.75 )%       19.59 %       40.84 %

Net Asset Value

      19.73 %       11.42 %       (10.51 )%       21.79 %       53.95 %

RATIOS BASED ON AVERAGE NET ASSETS APPLICABLE TO

                                                 

COMMON STOCKHOLDERS:

                                                 

Investment advisory fee expense

      1.00 %       1.14 %       1.15 %       1.17 %       1.16 %

Other operating expenses

      0.17 %       0.19 %       0.18 %       0.20 %       0.26 %

Total expenses (net)2

      1.17 %       1.33 %       1.33 %       1.37 %       1.42 %

Expenses prior to fee waivers and balance credits

      1.17 %       1.33 %       1.33 %       1.37 %       1.48 %

Expenses prior to fee waivers

      1.17 %       1.33 %       1.33 %       1.37 %       1.48 %

Net investment income (loss)

      0.63 %       0.74 %       0.27 %       (0.15 )%       0.49 %

SUPPLEMENTAL DATA:

                                                 

Net Assets Applicable to Common Stockholders,

                                                 

End of Period (in thousands)

    $ 191,436       $ 163,588       $ 150,856       $ 172,291       $ 141,497  

Liquidation Value of Preferred Stock,

                                                 

End of Period (in thousands)

                        $ 25,000       $ 25,000       $ 25,000  

Portfolio Turnover Rate

      23 %       16 %       33 %       36 %       46 %

PREFERRED STOCK:

                                                 

Total shares outstanding

                          1,000,000         1,000,000         1,000,000  

Asset coverage per share

                        $ 175.86       $ 197.29       $ 166.48  

Liquidation preference per share

                        $ 25.00       $ 25.00       $ 25.00  

Average month-end market value per share

                        $ 25.65       $ 25.38       $ 23.56  


1
The Market Value Total Return is calculated assuming a purchase of Common Stock on the opening of the first business day and a sale on the closing of the last business day of each period. Dividends and distributions are assumed for the purposes of this calculation to be reinvested at prices obtained under the Fund’s Distribution Reinvestment and Cash Purchase Plan. Net Asset Value Total Return is calculated on the same basis, except that the Fund’s net asset value is used on the purchase and sale dates instead of market value.
2
Expense ratios based on total average net assets including liquidation value of Preferred Stock were 1.17%, 1.16%, 1.17% and 1.16% for the years ended December 31, 2012, 2011, 2010 and 2009, respectively.

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 2013 Annual Report to Stockholders  |  57



Royce Focus Trust


Notes to Financial Statements

Summary of Significant Accounting Policies:

Royce Focus Trust, Inc. (the “Fund”), is a diversified closed-end investment company incorporated under the laws of the State of Maryland. The Fund commenced operations on March 2, 1988, and Royce & Associates, LLC (“Royce”) assumed investment management responsibility for the Fund on November 1, 1996.
     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.
     At December 31, 2013, officers, employees of Royce, Fund directors, the Royce retirement plans and other affiliates owned 28% of the Fund.


Valuation of Investments:

Securities are valued as of the close of trading on the New York Stock Exchange (NYSE) (generally 4:00 p.m. Eastern time) on the valuation date. Securities that trade on an exchange, and securities traded on Nasdaq’s Electronic Bulletin Board, are valued at their last reported sales price or Nasdaq official closing price taken from the primary market in which each security trades or, if no sale is reported for such day, at their bid price. Other over-the-counter securities for which market quotations are readily available are valued at their highest bid price, 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, 2013. 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   $ 187,274,522     $     $     $ 187,274,522  
Cash Equivalents     2,712,329       4,055,000             6,767,329  

     For the year ended December 31, 2013, certain securities have transferred in and out of Level 1 and Level 2 measurements as a result of the fair value pricing procedures for international equities. The Fund recognizes transfers between levels as of the end of the reporting period. At December 31, 2013, securities valued at $14,286,021 were transferred from Level 2 to Level 1 within the fair value hierarchy.

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.


58  |  2013 Annual Report to Stockholders  



Royce Focus Trust


Notes to Financial Statements (continued)

Foreign Currency:
     Net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, expiration of currency forward contracts, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities, including investments in securities at the end of the reporting period, as a result of changes in foreign currency exchange rates.

Securities Lending:
     The Fund loans securities through a lending agent to qualified institutional investors for the purpose of realizing additional income. Collateral for the Fund on all securities loaned is accepted in cash and cash equivalents and invested temporarily by the custodian. The collateral maintained is at least 100% of the current market value of the loaned securities. The market value of the loaned securities is determined at the close of business of the Fund and any additional required collateral is delivered to the Fund on the next business day. The Fund retains the risk of any loss on the securities on loan as well as incurring the potential loss on investments purchased with cash collateral received for securities lending. The Fund’s securities lending income consists of the income earned on investing cash collateral, plus any premium payments received for lending certain securities, less any rebates paid to borrowers and lending agent fees associated with the loan. The lending agent is not affiliated with Royce.
     The following table presents by financial instrument, the Fund’s assets and liabilities net of related collateral held by the Fund at December 31, 2013:

    Gross Amount of Assets and                
    Liabilities in the Statements of                
    Assets and Liabilities1   Collateral Received and Pledged   Net Amount
Securities on Loan/Collateral on Loaned Securities     $2,712,329       $(2,712,329)       $ –  

1
Absent an event of default, assets and liabilities are presented gross and not offset in the Statements of Assets and Liabilities.

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 5% 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 1.25% of the rolling average or the distribution required by IRS regulations. Prior to November 15, 2012, distributions to Preferred Stockholders were accrued daily and paid quarterly. Distributions to Common Stockholders are recorded on ex-dividend date. Distributable capital gains and/or net investment income were first allocated to Preferred Stockholder distributions, with any excess allocable to Common Stockholders. If capital gains and/or net investment income were allocated to both Preferred and Common Stockholders, the tax character of such allocations was proportional. To the extent that distributions are not paid from long-term capital gains, net investment income or net short-term capital gains, they will represent a return of capital. Distributions are determined in accordance with income tax regulations that may differ from accounting principles generally accepted in the United States of America. Permanent book and tax differences relating to stockholder distributions will result in reclassifications within the capital accounts. Undistributed net investment income may include temporary book and tax basis differences, which will reverse in a subsequent period. Any taxable income or gain remaining undistributed at fiscal year end is distributed in the following year.

Investment Transactions and Related Investment Income:
     Investment transactions are accounted for on the trade date. Dividend income is recorded on the ex-dividend date. Non-cash dividend income is recorded at the fair market value of the securities received. Interest income is recorded on an accrual basis. Premium and discounts on debt securities are amortized using the effective yield-to-maturity method. Realized gains and losses from investment transactions are determined on the basis of identified cost for book and tax purposes.

Expenses:
     The 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 Royce 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.


2013 Annual Report to Stockholders  |  59



Royce Focus Trust


Notes to Financial Statements (continued)

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 691,786 and 869,648 shares of Common Stock as reinvestment of distributions by Common Stockholders for the years ended December 31, 2013 and December 31, 2012, respectively.

Investment Advisory Agreement:
     The Investment Advisory Agreement between Royce and the Fund provides for fees to be paid at an annual rate of 1.0% of the Fund’s average daily net assets. For the year ended December 31, 2013, the Fund accrued and paid Royce investment advisory fees totaling $1,745,067.

Purchases and Sales of Investment Securities:
     For the year ended December 31, 2013, the costs of purchases and proceeds from sales of investment securities, other than short-term securities and collateral received for securities loaned, amounted to $39,743,071 and $43,289,278, respectively.

Distributions to Stockholders:
  The tax character of distributions paid to common stockholders   The tax character of distributions paid to preferred stockholders
  during 2013 and 2012 was as follows:   during 2012 was as follows:
       
  Distributions paid from:   2013   2012   Distributions paid from:       2012
  Ordinary income     $ 1,372,026       $ 1,960,249     Ordinary income               $ 275,745  
  Long-term capital gain       7,278,830         7,607,559     Long-term capital gain                 1,070,098  
                           
        $ 8,650,856       $ 9,567,808                     $ 1,345,843  
       

     As of December 31, 2013, the tax basis components of distributable earnings included in stockholders’ equity were as follows:

Net unrealized appreciation (depreciation)     $46,464,909  
Undistributed ordinary income     449,772  
Undistributed capital gains     2,219,222  
   
      $49,133,903  

     The difference between book and tax basis unrealized appreciation (depreciation) is attributable primarily to partnership investments.
     For financial reporting purposes, capital accounts and distributions to stockholders are adjusted to reflect the tax character of permanent book/tax differences. These differences are primarily due to differing treatments of income and gains on various investment securities and foreign currency transactions held by the Fund, timing differences and different characterization of distributions made by the Fund. For the year ended December 31, 2013, the Fund recorded the following permanent reclassifications. Results of operations and net assets were not affected by these reclassifications.

           

Undistributed Net   Accumulated Net   Paid-in  
Investment Income   Realized Gain (Loss)   Capital  
$(111,896)   $147,516   $(35,620)  

     Management has analyzed the Fund’s tax positions taken on federal income tax returns for all open tax years (2010-2013) and has concluded that as of December 31, 2013, no provision for income tax is required in the Fund’s financial statements.


60  |  2013 Annual Report to Stockholders  



Royce Focus Trust


Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of
Royce Focus Trust, Inc.
New York, New York

We have audited the accompanying statement of assets and liabilities of Royce Focus Trust, Inc., (“Fund”) including the schedule of investments, as of December 31, 2013, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2013, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Royce Focus Trust, Inc. at December 31, 2013, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

  TAIT, WELLER, & BAKER LLP

Philadelphia, Pennsylvania
February 19, 2014


2013 Annual Report to Stockholders  |  61



Royce Global Value Trust

 
   Schedule of Investments
 
        SHARES     VALUE  
COMMON STOCKS – 84.1%                  
                   
Australia – 0.2%                  

Imdex

      437,600     $ 242,255  
             
 
Total (Cost $570,253)               242,255  
             
 
Austria – 3.2%                  

Mayr-Melnhof Karton

      13,300       1,646,712  

Semperit AG Holding

      33,200       1,644,008  
             
 
Total (Cost $3,097,188)               3,290,720  
             
 
Belgium – 1.4%                  

RHJ International 1

      145,000       736,068  

Van de Velde

      13,436       672,814  
             
 
Total (Cost $3,181,151)               1,408,882  
             
 
Bermuda – 1.6%                  

Lazard Cl. A

      37,100       1,681,372  
             
 
Total (Cost $1,531,071)               1,681,372  
             
 
Brazil – 2.3%                  

CETIP - Mercados Organizados

      80,000       820,600  

LPS Brasil Consultoria de Imoveis

      140,000       856,882  

Totvs

      45,000       704,970  
             
 
Total (Cost $2,641,375)               2,382,452  
             
 
Canada – 7.5%                  

Agnico Eagle Mines

      30,000       791,400  

Alamos Gold

      60,000       726,948  

E-L Financial

      900       601,554  

Franco-Nevada Corporation

      24,000       977,760  

Major Drilling Group International

      196,500       1,422,532  

Ritchie Bros. Auctioneers

      55,500       1,272,615  

Sprott

      455,600       1,123,720  

Trican Well Service

      63,000       769,819  
             
 
Total (Cost $9,950,596)               7,686,348  
             
 
China – 2.3%                  

ANTA Sports Products

      245,000       303,947  

China XD Plastics 1

      94,200       495,492  

Daphne International Holdings

      3,500,000       1,575,255  
             
 
Total (Cost $4,281,778)               2,374,694  
             
 
Denmark – 1.5%                  

Chr Hansen

      16,500       655,406  

SimCorp

      23,000       905,537  
             
 
Total (Cost $1,409,806)               1,560,943  
             
 
Finland – 1.6%                  

Vaisala Cl. A

      50,000       1,596,499  
             
 
Total (Cost $2,319,480)               1,596,499  
             
 
France – 5.4%                  

Manutan International

      14,200       894,114  

Paris Orleans

      36,155       885,344  

Stallergenes

      23,350       1,742,650  

Vetoquinol

      32,188       1,359,427  

Virbac

      3,000       640,938  
             
 
Total (Cost $5,602,490)               5,522,473  
             
 
Germany – 1.5%                  

Aixtron ADR 1

      43,300       628,716  

LPKF Laser & Electronics

      35,500       907,398  
             
 
Total (Cost $1,919,691)               1,536,114  
             
 
Greece – 0.5%                  

Hellenic Exchanges

      48,000       528,269  
             
 
Total (Cost $504,904)               528,269  
             
 
Hong Kong – 10.6%                  

Luk Fook Holdings (International)

      120,100       456,901  

Media Chinese International

      2,000,000       595,329  

Midland Holdings

      3,481,600       1,679,221  

New World Department Store China

      3,006,700       1,690,573  

Oriental Watch Holdings

      2,223,000       587,693  

Pico Far East Holdings

      3,750,000       1,310,563  

Regent Manner International Holdings

      4,451,000       774,906  

Television Broadcasts

      250,000       1,666,817  

Texwinca Holdings

      1,102,000       1,159,656  

Value Partners Group

      1,246,700       966,260  
             
 
Total (Cost $11,885,004)               10,887,919  
             
 
Indonesia – 1.2%                  

Selamat Sempurna

      3,000,000       850,452  

Supra Boga Lestari

      7,048,500       382,252  
             
 
Total (Cost $1,328,353)               1,232,704  
             
 
Italy – 1.0%                  

De’Longhi

      62,000       1,012,432  
             
 
Total (Cost $948,384)               1,012,432  
             
 
Japan – 7.1%                  

EPS Corporation

      866       1,134,821  

FamilyMart

      22,200       1,012,924  

Freund Corporation

      30,000       455,797  

Miraial

      26,170       391,146  

MISUMI Group

      34,100       1,070,179  

Moshi Moshi Hotline

      41,900       448,403  

Relo Holdings

      16,000       818,916  

Santen Pharmaceutical

      20,000       931,536  

Shimano

      11,600       994,663  
             
 
Total (Cost $7,480,136)               7,258,385  
             
 
Malaysia – 1.3%                  

CB Industrial Product Holding

      550,000       539,002  

62  |  2013 Annual Report to Stockholders   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.



December 31, 2013

 
        SHARES     VALUE  
Malaysia (continued)                  

Silverlake Axis

      1,102,000     $ 768,461  
             
 
Total (Cost $1,242,347)               1,307,463  
             
 
Mexico – 1.3%                  

Bolsa Mexicana de Valores

      255,000       584,743  

Fresnillo

      65,000       802,432  
             
 
Total (Cost $1,556,701)               1,387,175  
             
 
Norway – 2.4%                  

Ekornes

      86,842       1,177,643  

TGS-NOPEC Geophysical

      50,000       1,325,573  
             
 
Total (Cost $3,282,466)               2,503,216  
             
 
Philippines – 0.6%                  

Universal Robina

      255,000       649,817  
             
 
Total (Cost $743,522)               649,817  
             
 
Singapore – 0.9%                  

Hour Glass (The)

      325,000       430,089  

Pan-United Corporation

      644,000       489,908  
             
 
Total (Cost $975,297)               919,997  
             
 
South Africa – 4.2%                  

Blue Label Telecoms

      750,000       607,721  

JSE

      70,000       598,770  

Lewis Group

      218,000       1,473,422  

Nampak

      214,000       836,416  

Raubex Group

      375,300       778,148  
             
 
Total (Cost $5,047,693)               4,294,477  
             
 
Switzerland – 1.3%                  

Forbo Holding

      1,550       1,324,029  
             
 
Total (Cost $1,231,471)               1,324,029  
             
 
Turkey – 1.2%                  

Mardin Cimento Sanayii

      600,000       1,189,390  
             
 
Total (Cost $2,546,772)               1,189,390  
             
 
United Kingdom – 6.3%                  

Ashmore Group

      185,000       1,229,385  

Clarkson

      23,000       762,118  

Consort Medical

      91,200       1,445,286  

E2V Technologies

      260,000       645,820  

Elementis

      151,000       672,380  

Rotork

      12,900       613,082  

Spirax-Sarco Engineering

      21,350       1,057,101  
             
 
Total (Cost $6,097,876)               6,425,172  
             
 
United States – 15.7%                  

Bel Fuse Cl. A

      36,672       712,170  

Cabot Corporation

      10,200       524,280  

Commercial Metals

      42,000       853,860  

Diebold

      27,200       897,872  

Diodes 1

      30,000       706,800  

EnerSys

      10,700       749,963  

Expeditors International of Washington

      15,900       703,575  

Fairchild Semiconductor International 1

      49,200       656,820  

GrafTech International 1

      58,600       658,078  

Greif Cl. A

      20,000       1,048,000  

International Rectifier 1

      25,000       651,750  

KBR

      20,000       637,800  

MKS Instruments

      14,000       419,160  

Nanometrics 1

      44,500       847,725  

Rofin-Sinar Technologies 1

      35,000       945,700  

Schnitzer Steel Industries Cl. A

      19,100       623,997  

Sims Metal Management ADR 1,2

      87,975       848,079  

Sun Hydraulics

      15,139       618,125  

UTi Worldwide

      74,600       1,309,976  

Valmont Industries

      6,650       991,648  

WaterFurnace Renewable Energy

      32,700       738,501  
             
 
Total (Cost $17,967,565)               16,143,879  
             
 
TOTAL COMMON STOCKS                  

(Cost $99,343,370)

              86,347,076  
             
 
REPURCHASE AGREEMENT – 14.1%                  
Fixed Income Clearing Corporation,

0.00% dated 12/31/13, due 1/2/14,

maturity value $14,488,000 (collateralized

by obligations of various U.S. Government

Agencies, 1.00% due 5/31/18, valued at

$14,779,125)

                 

(Cost $14,488,000)

              14,488,000  
             
 
                   
TOTAL INVESTMENTS – 98.2%                  

(Cost $113,831,370)

              100,835,076  
                   
CASH AND OTHER ASSETS                  

LESS LIABILITIES – 1.8%

              1,848,622  
             
 
                   
NET ASSETS – 100.0%             $ 102,683,698  
             
 

1 Non-income producing.
2

This security is defined as a Level 2 security 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, 2013, market value.
TAX INFORMATION:
The cost of total investments for Federal income tax purposes was $113,915,509. At December 31, 2013, net unrealized depreciation for all securities was $13,080,433, consisting of aggregate gross unrealized appreciation of $2,058,184 and aggregate gross unrealized depreciation of $15,138,617. The primary difference between book and tax basis cost is the timing of the recognition of losses on securities sold.



THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 2013 Annual Report to Stockholders  |  63



Royce Global Value Trust   December 31, 2013

     
   Statement of Assets and Liabilities
     
ASSETS:          
Total investments at value     $ 86,347,076  
Repurchase agreements (at cost and value)       14,488,000  
Cash and foreign currency       143,570  
Receivable for investments sold       2,425,673  
Receivable for dividends and interest       99,445  

Total Assets

      103,503,764  

LIABILITIES:          
Payable for investments purchased       653,149  
Payable for investment advisory fee       106,399  
Accrued expenses       60,518  

Total Liabilities

      820,066  

Net Assets

    $ 102,683,698  

ANALYSIS OF NET ASSETS:          
Paid-in capital - $0.001 par value per share; 10,220,251 shares outstanding (150,000,000 shares authorized)     $ 115,972,444  
Undistributed net investment income (loss)       (16,988 )
Accumulated net realized gain (loss) on investments and foreign currency       (273,889 )
Net unrealized appreciation (depreciation) on investments and foreign currency       (12,997,869 )

Net Assets (net asset value per share - $10.05)

    $ 102,683,698  

Investments at identified cost

    $ 99,343,370  

64  |  2013 Annual Report to Stockholders   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.



Royce Global Value Trust   Period Ended December 31, 2013

     
   Statement of Operations
     
INVESTMENT INCOME:          
Income:          

Dividends

    $ 332,041  

Foreign withholding tax

      (25,027 )

Total income       307,014  

Expenses:          

Investment advisory fees

      257,322  

Professional fees

      27,201  

Custody and transfer agent fees

      20,131  

Stockholder reports

      12,422  

Directors’ fees

      4,527  

Administrative and office facilities

      2,352  

Other expenses

      9,798  

Total expenses       333,753  
Compensating balance credits       (35 )

Net expenses       333,718  

Net investment income (loss)       (26,704 )

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:          
Net realized gain (loss):          

Investments

      (273,889 )

Foreign currency transactions

      9,716  
Net change in unrealized appreciation (depreciation):          

Investments and foreign currency translations

      2,976,150  

Other assets and liabilities denominated in foreign currency

      (1,575 )

Net realized and unrealized gain (loss) on investments and foreign currency       2,710,402  

NET INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS     $ 2,683,698  

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 2013 Annual Report to Stockholders  |  65



Royce Global Value Trust

 
   Statement of Changes in Net Assets
 
      Period ended  
      12/31/13 1  
INVESTMENT OPERATIONS:          
Net investment income (loss)     $ (26,704 )
Net realized gain (loss) on investments and foreign currency       (264,173 )
Net change in unrealized appreciation (depreciation) on investments and foreign currency       2,974,575  

Net increase (decrease) in net assets from investment operations       2,683,698  

DISTRIBUTIONS:          
Net investment income        
Net realized gain on investments and foreign currency        

Total distributions        

CAPITAL STOCK TRANSACTIONS:          
Common shares issued in spinoff from Royce Value Trust       100,000,000  

Total capital stock transactions       100,000,000  

NET INCREASE (DECREASE) IN NET ASSETS       102,683,698  

NET ASSETS:          

Beginning of period

       

End of period (including undistributed net investment income (loss) of $(16,988) at 12/31/13)

    $ 102,683,698  

1 The Fund commenced operations on October 18, 2013.


66  |  2013 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 period presented.

    Period ended
    12/31/13

NET ASSET VALUE, BEGINNING OF PERIOD     $ 9.78  

INVESTMENT OPERATIONS:          

Net investment income (loss)

      (0.00 )

Net realized and unrealized gain (loss) on investments and
foreign currency

      0.27  

Net increase (decrease) in net assets from investment operations

      0.27  

DISTRIBUTIONS:          

Net investment income

       

Net realized gain on investments and foreign currency

       

Total distributions

       

NET ASSET VALUE, END OF PERIOD     $ 10.05  

MARKET VALUE, END OF PERIOD     $ 8.89  

TOTAL RETURN:1          
Market Value       (0.95 )%2
Net Asset Value       2.76 %2
RATIOS BASED ON AVERAGE NET ASSETS:          

Investment advisory fee expense

      1.25 %3

Other operating expenses

      0.37 %3
Total expenses (net)       1.62 %3
Expenses prior to fee waivers and balance credits       1.62 %3
Expenses prior to fee waivers       1.62 %3
Net investment income (loss)       (0.13 )%3
SUPPLEMENTAL DATA:          
Net Assets End of Period (in thousands)     $ 102,684  
Portfolio Turnover Rate       7 %

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 the period. Net Asset Value Total Return is calculated on the same basis, except that the Fund’s net asset value is used on the purchase and sale dates instead of market value.

2

Not annualized

3

Annualized


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 2013 Annual Report to Stockholders  |  67



Royce Global Value Trust

 
  Notes to Financial Statements

Summary of Significant Accounting Policies:
     Royce Global Value Trust, Inc. (the "Fund"), is incorporated under the laws of the State of Maryland as a diversified closed-end investment company and registered under the 1940 Act, whose objective is long-term growth of capital. The Fund commenced operations on October 18, 2013. The Fund had no operations prior to October 18, 2013, other than the sale of 10,160 common shares for $100,076 to Royce Value Trust, Inc. (“RVT”). On October 18, 2013, RVT contributed $99,899,924 in cash and securities in exchange for shares of the Fund, and on the same date distributed such shares to RVT holders of record as of October 10, 2013 at the rate of one share of the Fund for every seven shares of RVT Common Stock outstanding.
     The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

Valuation of Investments:
     Securities are valued as of the close of trading on the New York Stock Exchange (NYSE) (generally 4:00 p.m. Eastern time) on the valuation date. Securities that trade on an exchange, and securities traded on Nasdaq's Electronic Bulletin Board, are valued at their last reported sales price or Nasdaq official closing price taken from the primary market in which each security trades or, if no sale is reported for such day, at their bid price. Other over-the-counter securities for which market quotations are readily available are valued at their highest bid price, 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, 2013. 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     $ 85,498,997       $ 848,079       $       $ 86,347,076  
Cash Equivalents               14,488,000                 14,488,000  

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.


68  |  2013 Annual Report to Stockholders    



Royce Global Value Trust

 
  Notes to Financial Statements (continued)

Foreign Currency:
     Net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, expiration of currency forward contracts, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities, including investments in securities at the end of the reporting period, as a result of changes in foreign currency exchange rates.

Distributions and Taxes:
     As a qualified regulated investment company under Subchapter M of the Internal Revenue Code, the Fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. The Schedule of Investments includes information regarding income taxes under the caption “Tax Information”.
     The Fund pays any dividends and capital gain distributions annually in December. Because federal income tax regulations differ from generally accepted accounting principles, income and capital gain distributions determined in accordance with tax regulations may differ from net investment income and realized gains recognized for financial reporting purposes. Accordingly, the character of distributions and composition of net assets for tax purposes differ from those reflected in the accompanying financial statements.

Investment Transactions and Related Investment Income:
     Investment transactions are accounted for on the trade date. Dividend income is recorded on the ex-dividend date. Non-cash dividend income is recorded at the fair market value of the securities received. Interest income is recorded on an accrual basis. Premium and discounts on debt securities are amortized using the effective yield-to-maturity method. Realized gains and losses from investment transactions are determined on the basis of identified cost for book and tax purposes.

Expenses:
     The 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 Royce Funds are allocated by Royce & Associates, LLC (“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 10,221,251 shares of Common Stock in spinoff from RVT for the period ended December 31, 2013. Securities contributed by RVT included $15,972,444 in unrealized depreciation.

Investment Advisory Agreement:
     The Investment Advisory Agreement between Royce and the Fund provides for fees to be paid at an annual rate of 1.25% of the Fund’s average daily net assets. For the period ended December 31, 2013, the Fund accrued and paid Royce investment advisory fees totaling $257,322.

Purchases and Sales of Investment Securities:
     For the period ended December 31, 2013, the costs of purchases and proceeds from sales of investment securities, other than short-term securities, amounted to $46,686,034 and $4,749,807, respectively.

Distributions to Stockholders:
  As of December 31, 2013, the tax basis components of distributable earnings included in stockholders’ equity were as follows:
                 
  Net unrealized appreciation (depreciation)     $ (13,082,008 )                                  
  Post October loss*       (196,613 )                                  
  Undistributed ordinary income       22,827                                    
  Capital loss carryforward       (32,952 )                                  
                                     
        $ (13,288,746 )                                  
                 

*

Under the current tax law, capital losses and foreign currency losses after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. As of December 31, 2013, the Fund had $196,613 of post October currency losses.
The difference between book and tax basis unrealized appreciation (depreciation) is attributable primarily to partnership investments.


    2013 Annual Report to Stockholders  |  69



Royce Global Value Trust

 
  Notes to Financial Statements (continued)

Distributions to Stockholders (continued):
     For financial reporting purposes, capital accounts and distributions to stockholders are adjusted to reflect the tax character of permanent book/tax differences. These differences are primarily due to differing treatments of income and gains on various investment securities and foreign currency transactions held by the Fund, timing differences and different characterization of distributions made by the Fund. For the period ended December 31, 2013, the Fund recorded the following permanent reclassifications. Results of operations and net assets were not affected by these reclassifications.

 
  Undistributed Net   Accumulated Net
  Investment Income   Realized Gain (Loss)
  $9,716   $(9,716)
 

     Management has analyzed the Fund’s tax positions taken on federal income tax returns for all open tax years (2013) and has concluded that as of December 31, 2013, no provision for income tax is required in the Fund’s financial statements.


70  |  2013 Annual Report to Stockholders    



Royce Global Value Trust  

 
  Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of
Royce Global Value Trust, Inc.
New York, New York

We have audited the accompanying statement of assets and liabilities of Royce Global Value Trust, Inc., (“Fund”) including the schedule of investments, as of December 31, 2013, and the related statement of operations, the statements of changes in net assets and the financial highlights for the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2013, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Royce Global Value Trust, Inc. at December 31, 2013, the results of its operations, the changes in its net assets and the financial highlights for the period then ended, in conformity with accounting principles generally accepted in the United States of America.

TAIT, WELLER, & BAKER LLP

Philadelphia, Pennsylvania
February 19, 2014

    2013 Annual Report to Stockholders  |  71



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, President
Age: 74 | Number of Funds Overseen: 34 | Tenure: Since 1982
Non-Royce Directorships: Director of TICC Capital Corp.

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

W. Whitney George, Director1, Vice President
Age: 55 | Number of Funds Overseen: 34 | Tenure: Since September 2013
Non-Royce Directorships: None

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


Patricia W. Chadwick, Director
Age: 65 | Number of Funds Overseen: 34 | Tenure: Since 2009
Non-Royce Directorships: Trustee of ING Mutual Funds and Director of Wisconsin Energy Corp.

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

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

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

Stephen L. Isaacs, Director
Age: 74 | Number of Funds Overseen: 34 | Tenure: Since 1989
Non-Royce Directorships: None

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

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

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

David L. Meister, Director
Age: 74 | Number of Funds Overseen: 34 | Tenure: Since 1982
Non-Royce Directorships: None

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

G. Peter O’Brien, Director
Age: 68 | Number of Funds Overseen: 48 | Tenure: Since 2001
Non-Royce Directorships: Director/Trustee of registered investment companies constituting the 14 Legg Mason Funds; Director of TICC Capital Corp.

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


John D. Diederich, Vice President and Treasurer
Age: 62 | Tenure: Since 2001

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

Jack E. Fockler, Jr., Vice President
Age: 55 | Tenure: Since 1995

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

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

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

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

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

Lisa Curcio, Chief Compliance Officer
Age: 54 | 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.

Directors will hold office until their successors have been duly elected and qualified or until their earlier resignation or removal.

72  |  2013 Annual Report to Stockholders



Notes to Performance and Other Important Information

The thoughts expressed in this Review and Report concerning recent market movements and future prospects for small company stocks are solely the opinion of Royce at December 31, 2013, and, of course, historical market trends are not necessarily indicative of future market movements. Statements regarding the future prospects for particular securities held in the Funds’ portfolios and Royce’s investment intentions with respect to those securities reflect Royce’s opinions as of December 31, 2013 and are subject to change at any time without notice. There can be no assurance that securities mentioned in this Review and Report will be included in any Royce-managed portfolio in the future. Investments in securities of micro-cap, small-cap and/or mid-cap companies may involve considerably more risk than investments in securities of larger-cap companies. All publicly released material information is always disclosed by the Funds on the website at www.roycefunds.com.
   Sector weightings are determined using the Global Industry Classification Standard (“GICS”). GICS was developed by, and is the exclusive property of, Standard & Poor’s Financial Services LLC (“S&P”) and MSCI Inc. (“MSCI”). GICS is the trademark of S&P and MSCI. “Global Industry Classification Standard (GICS)” and “GICS Direct” are service marks of S&P and MSCI.
   All indexes referred to are unmanaged and capitalization weighted. Each index’s returns include net reinvested dividends and/or interest income. Russell Investment Group is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. Russell® is a trademark of Russell Investment Group. The Russell 2000 Index is an index of domestic small-cap stocks. It measures the performance of the 2,000 smallest publicly traded U.S. companies in the Russell 3000 Index. The Russell 2500 is an index of 2,500 smallest publicly traded U.S. companies in the Russell 3000 Index. The Russell Microcap Index includes 1,000 of the smallest securities in the Russell 2000 Index along with the next smallest eligible securities as determined by Russell. The Russell 1000 Index is an index of domestic large-cap stocks. It measures the performance of the 1,000 largest publicly traded companies in the Russell 3000 Index. The Russell Midcap Index measures the performance of the mid-cap segment of the U.S. equity universe. It includes approximately 800 of the smallest securities in the Russell 1000 Index. The Russell Global Small Cap Index is an unmanaged, capitalization-weighted index of global small-cap stocks. The Russell Global ex-U.S. Large Cap Index is an index of global large-cap stocks, excluding the United States. The Russell Global ex-U.S. Small Cap Index is an index of global small-cap stocks, excluding the United States. The CBOE Volatility Index (VIX) measures market expectations of near-term volatility conveyed by S&P 500 stock index option prices. The S&P 500 and SmallCap 600 are indexes of U.S. large- and small-cap stocks, respectively, selected by Standard & Poor’s based on market size, liquidity, and industry grouping, among other factors. The Nasdaq Composite is an index of the more than 3,000 common equities listed on the Nasdaq stock exchange. The performance of an index does not represent exactly any particular investment, as you cannot invest directly in an index. Returns for the market indexes used in this report were based on information supplied to Royce by Russell Investments.
   The Price-Earnings, or P/E, Ratio is calculated by dividing a company’s share price by its trailing 12-month earnings-per share (EPS). The Price-to-Book, or P/B, Ratio is calculated by dividing a company’s share price by its book value per share. The Sharpe Ratio is calculated for a specified period by dividing a fund’s annualized excess returns by its annualized standard deviation. The higher the Sharpe Ratio, the better the fund’s historical risk-adjusted performance. Standard deviation is a statistical measure within which a fund’s total returns have varied over time. The greater the standard deviation, the greater a fund’s volatility. The Royce Funds is a service mark of The Royce Funds. Distributor: Royce Fund Services, Inc.

Forward-Looking Statements
This material contains forward-looking statements within the meaning of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve risks and uncertainties, including, among others, statements as to:
the Funds’ future operating results
the prospects of the Funds’ portfolio companies
the impact of investments that the Funds have made or may make
the dependence of the Funds’ future success on the general economy and its impact on the companies and industries in which the Funds invest, and
the ability of the Funds’ portfolio companies to achieve their objectives.
This Review and Report uses words such as “anticipates,” “believes,” “expects,” “future,” “intends,” and similar expressions to identify forward-looking statements. Actual results may differ materially from those projected in the forward-looking statements for any reason.
   The Royce Funds have based the forward-looking statements included in this Review and Report on information available to us on the date of the report, and we assume no obligation to update any such forward-looking statements. Although The Royce Funds undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make through future stockholder communications or reports.

Authorized Share Transactions
Royce Value Trust, Royce Micro-Cap Trust, Royce Focus Trust and Royce Global 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, 2014. 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 Value Trust, Royce Micro-Cap Trust, Royce Focus Trust and Royce Global 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 Royce Value Trust and Royce Micro-Cap Trust and to Nasdaq for Royce Focus Trust, respectively, the annual certification of the Funds’ Chief Executive Officer that he is not aware of any violation of the NYSE’s or Nasdaq’s Corporate Governance 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, 2013, filed with the Securities and Exchange Commission.


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

Form N-Q Filing
The Funds file their complete schedules of investments with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the SEC’s website at www.sec.gov. The Royce Funds’ holdings are also on the Funds’ website approximately 15 to 20 days after each calendar quarter end and remain available until the next quarter’s holdings are posted. The Funds’ Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. To find out more about this public service, call the SEC at (800) 732-0330. The Funds’ complete schedules of investments are updated quarterly, and are available at www.roycefunds.com.

2013 Annual Report to Stockholders  |  73



Results of Stockholders Meeting

Royce Value Trust, Inc.
At the 2013 Special Meeting of Stockholders held on September 5, 2013, the following votes were cast in favor of, cast against, abstained from voting or were uninstructed on the following proposals:

  PROPOSAL   FOR   WITHHOLD   ABSTAIN   UNINSTRUCTED  
 

1. To consider and vote upon a proposal to contribute approximately $100 million of Royce Value Trust, Inc.’s (“Value Trust”) assets to Royce Global Value Trust, Inc., a newly-organized, diversified, closed-end management investment company, and to distribute to Value Trust common stockholders shares of common stock of Royce Global Value Trust, Inc.

  33,980,953   5,055,935   814,781   2,899,147  
 

2. To consider and vote upon a proposal to amend an investment restriction of Value Trust, which currently states that Value Trust may not “[u]nderwrite the securities of other issuers, or invest in restricted securities unless such securities are redeemable shares issued by money market funds registered under the [Investment Company Act of 1940, as amended],” to state that Value Trust may not “[u]nderwrite the securities of other issuers, except insofar as the Fund may be deemed an underwriter under the Securities Act of 1933, as amended, in selling portfolio securities and in connection with mergers, acquisitions, spin-off transactions and other reorganization transactions involving the Fund.”

  33,852,593   5,016,674   982,403   2,899,147  
 

At the 2013 Annual Meeting of Stockholders held on September 25, 2013, the Fund’s stockholders elected four Directors, consisting of:

    VOTES FOR   VOTES WITHHELD  
 

W. Whitney George

  55,528,349   2,580,304  
 

Arthur S. Mehlman

  55,868,110   2,240,543  
 

Patricia W. Chadwick

  55,423,639   2,685,014  
 

David L. Meister

  55,424,206   2,684,447  
 

Royce Micro-Cap Trust, Inc.
At the 2013 Annual Meeting of Stockholders held on September 25, 2013, the Fund’s stockholders elected four Directors, consisting of:

    VOTES FOR   VOTES WITHHELD  
 

W. Whitney George

  23,631,935   487,219  
 

Arthur S. Mehlman

  23,595,755   523,399  
 

Patricia W. Chadwick

  23,600,348   518,806  
 

David L. Meister

  25,559,793   559,361  
 

Royce Focus Trust, Inc.
At the 2013 Annual Meeting of Stockholders held on September 25, 2013, the Fund’s stockholders elected four Directors, consisting of:

    VOTES FOR   VOTES WITHHELD  
 

W. Whitney George

  17,072,186   194,727  
 

Arthur S. Mehlman

  17,072,823   194,090  
 

Stephen L. Isaacs

  17,072,306   194,607  
 

David L. Meister

  17,051,034   215,879  
 

74  |  2013 Annual Report to Stockholders



2013 In Quotes


Points to Ponder

Supply will be constrained, and demand will be strong, coming from corporate buyers and individual and institutional investors, who will begin to reallocate funds toward the equity market and out of bonds. There will be a great migration or great rotation, or whatever you want to call it. It will intensify as the year continues.
–Brian Rodgers, Barron’s, January 26, 2013

While absolute skill tends to improve, relative skill tends to become more uniform. In plain words, that means that the difference between the best and the average is less than what it used to be. So, the best hitter in baseball is closer to an average player today than was the case 50 years ago.
–Michael Mauboussin, Morningstar Advisor, April/May 2013

Solid companies selling at depressed prices have consistently helped generations of the world’s most successful investors preserve capital, minimize risk, and achieve long-term, market-trampling returns.
–Rex Moore, The Motley Fool, May 24, 2013

Over the long term, while there is no perfect predictor, the only factor that has decent predictive power is, “What price am I paying against fundamentals?”

–Cliff Asness, Barron’s, August 31, 2013

In Absolute Agreement


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

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

Most risk management is really just advanced contingency planning and disciplining yourself to realize that, given enough time, very low probability events not only can happen, but they absolutely will happen.

–Lloyd Blankfein, CNBC, July 25, 2013

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

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

We are different from most fund managers in how we think about risk. To most managers, and most fund evaluation services, risk is defined either as volatility of returns or deviation from the S&P returns. We define risk as losing money.

–Bill Nygren, Oakmark Funds Third Quarter 2013 Report

Adopt simple rules and stick to them.

–Benjamin Graham

Cocktail Conversation


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

–Barton Biggs, Diary of a Hedgehog

There are two elephants in the room that no one wants to talk about: inflation and higher rates.

–David Winters, Barron’s, March 23, 2013

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

–Longleaf Partners Fund, First Quarter 2013 Report

Value investing works because it is contrary to naïve strategies of other investors, which include extrapolating past earnings growth too far into the future and assuming that a well-run company will always be a good investment, regardless of price.

–Josef Lakonishok, Institutional Investor, May 12, 2013

Markets can remain irrational a lot longer than you and I can remain solvent.

–John Maynard Keynes

Timeless Tidbits


Incompetence is the disease of idiots. Overconfidence is the mistake of experts… Incompetence irritates me. Overconfidence terrifies me.

–Malcolm Gladwell

There are more fools among buyers than among sellers.

–Proverb

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

–Ayn Rand

Things turn out best for people who make the best of the way things turn out.

–John Wooden


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

This page is not part of the 2013 Annual Report to Stockholders  |  75








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76  |  This page is not part of the 2013 Annual Report to Stockholders



It’s a Small World

Co-Chief Investment Officer and Managing Director Francis Gannon looks at the geographic sources of small-cap revenues and discusses Royce’s expansion into international investing.

There have always been generalizations about the economy and the stock market. Many possess a degree of truth, but at least an equal number are just as often exaggerated, misunderstood, or just plain wrong. This is particularly true when it comes to the small-cap asset class. Considering the barrage of macro headlines that have affected global stock markets over the last several years, we thought it would be worthwhile to once again examine the state of international small-caps and the effect of international revenues on recent small-cap performance.
     These issues interest us for two related reasons: Many of the cyclical sectors in which we routinely find bargains that we like—industrials, information technology, energy, and materials—often derive a sizable chunk of their respective revenues from outside the U.S. We also have been expanding our activities in non-U.S. investing over the last several years. All of this makes the state of international investing particularly interesting to us.
     Earlier in 2013, some observers claimed that because many companies in the small-cap Russell 2000 Index are more closely tied to domestic growth, the index was able to hold an advantage over its large-cap counterparts. (This advantage held true for the year as a whole—small-cap led the domestic indexes, and all had higher returns than their non-U.S. counterparts.) The argument developed the idea that greater stateside focus benefited smaller companies particularly earlier this year when investors were worried about economic growth in Europe and Asia.
     2013’s results notwithstanding, others see a greater focus on the U.S. as a potential disadvantage, believing that the typically higher percentage of domestically generated revenue for small companies may keep them from enjoying the benefits of faster-growing foreign economies.

     We examine the source of revenues for each company that we look at, though we are only concerned with their geographic origin if our analysis suggests that location is a potential threat to their sustainability. However, we suspect that the weighted average percentage of revenue being generated outside of the U.S. for many of our portfolios that invest primarily in U.S. smaller companies would be greater than that of the Russell 2000.
     This is in large part a matter of what we choose to own versus what we do not—a clear benefit of active management in our view. For example, we are generally underweight, or do not own, utilities, real estate investment trusts, and small banks, all of which make up a good-sized portion of the Russell 2000 and generate most of their income domestically. At the same time, we have greater exposure to more cyclical areas of the market that are more closely tied to the global economy, such as information technology, industrials, materials, and energy.
     Over the last 15 years, we have expanded our search for undervalued companies by moving beyond our borders. Our initial forays into international investing generally involved companies headquartered abroad that had a strong U.S. presence. We then began to expand our scope to include companies with sizable operations outside the U.S. Our commitment to international investing is rooted in the Royce tradition aiming to capitalize on market inefficiencies to generate strong absolute returns while actively managing risk.
     In addition, we embrace the idea that quality is a global concept that transcends borders. The same attributes that we seek in smaller U.S. companies—strong balance sheets, an established record of profitability, high returns on invested capital, and the ability to generate free cash flow—can be found in international businesses. This is why investing in non-U.S. companies has become an important part of our asset management efforts.



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

This page is not part of the 2013 Annual Report to Stockholders



 
     
     
     
     
     
   
   
   
   
   
   
   
   
   
   
   
   
 

About The Royce Funds

Wealth Of Experience
With approximately $39 billion in total assets under management, Royce & Associates is committed to the same small-company investing principles that have served us well for more than 40 years. Charles M. Royce, our President, enjoys one of the longest tenures of any active mutual fund manager. Royce’s investment staff also includes 22 Portfolio Managers and analysts, and nine traders.


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

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


Co-Ownership Of Funds
It is important that our employees and shareholders share a common financial goal; our officers, employees, and their families currently have approximately $200 million invested in The Royce Funds.

 

     
   
                             
                             
                             
  Contact Us  
  General Information
Additional Report Copies
and Prospectus Inquiries
(800) 221-4268
   RIA/BD Services
Fund Materials and
Performance Updates
(800) 33-ROYCE (337-6923)
   Broker/Dealer Services
Fund Materials and
Performance Updates
(800) 59-ROYCE (597-6923)
   Computershare
Transfer Agent
and Registrar
(800) 426-5523
              
                                    
                                         



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

Item 3.   Audit Committee Financial Expert.

(a)(1) The Board of Directors of the Registrant has determined that it has an audit committee financial expert.
   
(a)(2) Arthur S. Mehlman and Patricia W. Chadwick were designated by the Board of Directors as the Registrant’s Audit Committee Financial Experts, effective April 15, 2004 and April 8, 2010, respectively. Mr. Mehlman and Ms. Chadwick are “independent” as defined under Item 3 of Form N-CSR.
   
Item 4.    Principal Accountant Fees and Services.
   
(a) Audit Fees:
  Year ended December 31, 2013 - $42,500
  Year ended December 31, 2012 - $41,500
   
(b) Audit-Related Fees:
  Year ended December 31, 2013 - $0
  Year ended December 31, 2012 - $0
   
(c) Tax Fees:
  Year ended December 31, 2013 - $7,100 - Preparation of tax returns
  Year ended December 31, 2012 - $7,000 - Preparation of tax returns
   
(d) All Other Fees:
  Year ended December 31, 2013 - $0
  Year ended December 31, 2012 - $0

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

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

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



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

(e)(2) Not Applicable
   
(f) Not Applicable
   
(g) Year ended December 31, 2013 - $7,100
  Year ended December 31, 2012 - $7,000
   
(h) No such services were rendered during 2013 or 2012.

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

Item 6.   Investments.
(a) See Item 1.

(b) Not applicable.

Item 7.   Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

  June 5, 2003, as amended
  through October 22, 2009

Royce & Associates Proxy Voting Guidelines and Procedures

These procedures apply to Royce & Associates, LLC (“Royce”) and all funds and other client accounts for which it is responsible for voting proxies, including all open and closed-end registered investment companies (“The Royce Funds”), limited partnerships, limited liability companies, separate accounts, other accounts for which it acts as investment adviser and any accounts for which it acts as sub-adviser that have delegated proxy voting authority to Royce. Such authority is determined at the inception of each client account and generally: (i) is specifically authorized in the applicable investment management agreement or other written instrument or (ii) where not specifically authorized, is granted to Royce where general investment discretion is given to it in the applicable investment management agreement. The Boards of Trustees/Directors of The Royce Funds (the “Boards”) have delegated all proxy voting decisions to Royce subject to these policies and procedures. Notwithstanding the above, from time to time the Boards may reserve voting authority for specific securities.

Receipt of Proxy Material.    Under the continuous oversight of the Head of Administration, an Administrative Assistant designated by him is responsible for monitoring receipt of all proxies and ensuring that proxies are received for all securities for which Royce has proxy voting responsibility. All proxy materials are logged in upon receipt by Royce’s Librarian.

Voting of Proxies.    Once proxy material has been logged in by Royce’s Librarian, it is then promptly reviewed by the designated Administrative Assistant to evaluate the issues presented. Regularly recurring matters are usually voted as recommended by the issuer’s board of directors or “management.” The Head of Administration or his designee, in consultation with the Chief Investment Officer, develops and updates a list of matters Royce treats as “regularly recurring” and is responsible for ensuring that the designated Administrative Assistant has an up-to-date list of these matters at all times, including instructions from Royce’s Chief Investment Officer on how to vote on



those matters on behalf of Royce clients. Examples of “regularly recurring” matters include non-contested elections of directors and non-contested approval of independent auditors. Non-“regularly recurring” matters are brought to the attention of the portfolio manager(s) for the account(s) involved by the designated Administrative Assistant, and, after giving some consideration to advisories from Glass Lewis & Co., an independent third party research firm, the portfolio manager directs that such matters be voted in a way that he or she believes should better protect or enhance the value of the investment. If the portfolio manager determines that information concerning any proxy requires analysis, is missing or incomplete, he or she then gives the proxy to an analyst or another portfolio manager for review and analysis.

a.  
From time to time, it is possible that one Royce portfolio manager will decide (i) to vote shares held in client accounts he or she manages differently from the vote of another Royce portfolio manager whose client accounts hold the same security or (ii) to abstain from voting on behalf of client accounts he or she manages when another Royce portfolio manager is casting votes on behalf of other Royce client accounts.
     
   
The designated Administrative Assistant reviews all proxy votes collected from Royce’s portfolio managers prior to such votes being cast. If any difference exists among the voting instructions given by Royce’s portfolio managers, as described above, the designated Administrative Assistant then presents these proposed votes to the Head of Administration, or his designee, and the Chief Investment Officer. The Chief Investment Officer, after consulting with the relevant portfolio managers, either reconciles the votes or authorizes the casting of differing votes by different portfolio managers. The Head of Administration, or his designee, maintains a log of all votes for which different portfolio managers have cast differing votes, that describes the rationale for allowing such differing votes and contains the initials of both the Chief Investment Officer and Head of Administration, or his designee, allowing such differing votes. The Head of Administration, or his designee, performs a weekly review of all votes cast by Royce to confirm that any conflicting votes were properly handled in accordance with the above-described procedures.
     
b.  
There are many circumstances that might cause Royce to vote against an issuer’s board of directors or “management” proposal. These would include, among others, excessive compensation, unusual management stock options, preferential voting and poison pills. The portfolio managers decide these issues on a case-by-case basis as described above.
     
c.  
A portfolio manager may, on occasion, determine to abstain from voting a proxy or a specific proxy item when he or she concludes that the potential benefit of voting is outweighed by the cost, when it is not in the client account’s best interest to vote.
     
d.  
When a client has authorized Royce to vote proxies on its behalf, Royce will generally not accept instructions from the clients regarding how to vote proxies.
     
e.   If a security is on loan under The Royce Funds’ Securities Lending Program with State Street Bank and Trust Company (“Loaned Securities”), the Head of Administration, or his designee, will recall the Loaned Securities and request that they be delivered within the customary settlement period after the notice, to permit the exercise of their voting rights if the number of shares of the security on loan would have a material effect on The Royce Funds’ voting power at the up-coming stockholder meeting. A material effect is defined as any case where the Loaned Securities are 1% or more of a class of a company’s outstanding equity securities. Monthly, the Head of Administration or his designee will review the summary of this activity by State Street. A quarterly report detailing any exceptions that occur in recalling Loaned Securities will be given to the Boards.

Custodian banks are authorized to release all proxy ballots held for Royce client account portfolios to Glass Lewis & Co. for voting, utilizing the Viewpoint proxy voting platform. Substantially all portfolio companies utilize Broadridge to collect their proxy votes. Under the continuous oversight of the Head of Administration, or his designee, the designated Administrative Assistant is responsible for voting all proxies in a timely manner. Votes are returned to Broadridge using Viewpoint



as ballots are received, generally two weeks before the scheduled meeting date. The issuer can thus see that the shares were voted, but the actual vote cast is not released to the company until 4:00 pm on the day before the meeting. If proxies must be mailed, they go out at least ten business days before the meeting date.

Conflicts of Interest.    The designated Administrative Assistant reviews reports generated by Royce’s portfolio management system (“Quest PMS”) that set forth by record date, any security held in a Royce client account which is issued by a (i) public company that is, or a known affiliate of which is, a separate account client of Royce (including sub-advisory relationships), (ii) public company, or a known affiliate of a public company, that has invested in a privately-offered pooled vehicle managed by Royce or (iii) public company, or a known affiliate of a public company, by which the spouse of a Royce employee or an immediate family member of a Royce employee living in the household of such employee is employed, for the purpose of identifying any potential proxy votes that could present a conflict of interest for Royce. The Head of Administration, or his designee, develops and updates the list of such public companies or their known affiliates which is used by Quest PMS to generate these daily reports. This list also contains information regarding the source of any potential conflict relating to such companies. Potential conflicts identified on the “conflicts reports” are brought to the attention of the Head of Administration or his designee by the designated Administrative Assistant. An R&A Compliance Officer then reviews them to determine if business or personal relationships exist between Royce, its officers, managers or employees and the company that could present a material conflict of interest. Any such identified material conflicts are voted by Royce in accordance with the recommendation given by an independent third party research firm (Glass Lewis & Co.). The Head of Administration or his designee maintains a log of all such conflicts identified, the analysis of the conflict and the vote ultimately cast. Each entry in this log is signed by the Chief Investment Officer before the relevant votes are cast.

Recordkeeping.    A record of the issues and how they are voted is stored in the Viewpoint system. Copies of all physically executed proxy cards, all proxy statements (with it being permissible to rely on proxy statements filed and available on Edgar) and any other documents created or reviewed that are material to making a decision on how to vote proxies are retained in the Company File maintained by Royce’s Librarian in an easily accessible place for a period of not less than six years from the end of the fiscal year during which the last entry was made on such record, the first two years at Royce’s office. In addition, copies of each written client request for information on how Royce voted proxies on behalf of that client, and a copy of any written response by Royce to any (written or oral) client request for information on how Royce voted proxies on behalf of that client will be maintained by Royce’s Head of Administration and/or Royce’s Director of Alternative Investments, or their designee (depending on who received such request) for a period of not less than six years from the end of the fiscal year during which the last entry was made on such record, the first two years at Royce’s office. Royce’s Compliance Department shall maintain a copy of any proxy voting policies and procedures in effect at any time within the last five years.

Disclosure.    Royce’s proxy voting procedures will be disclosed to clients upon commencement of a client account. Thereafter, proxy voting records and procedures are generally disclosed to those clients for which Royce has authority to vote proxies as set forth below:

-  
The Royce Funds – proxy voting records are disclosed annually on Form N-PX (with such voting records also available at www.roycefunds.com). Proxy voting procedures are available in the Statement of Additional Information for the open-end funds, in the annual report on Form N-CSR for the closed-end funds and at www.roycefunds.com.
-  
Limited Liability Company and Limited Partnership Accounts – proxy voting records are disclosed to members/partners upon request and proxy voting procedures (along with a summary thereof) are provided to members/partners annually (and are available at www.roycefunds.com).
-  
Separate Accounts – proxy voting records and procedures are disclosed to separate account clients annually.



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, 2013)

Name Title Length of Service Principal Occupation(s) During Past 5 Years
Charles M. Royce President and member of the Board of Directors of the Registrant Since 1986 President and member of the Board of Managers of Royce & Associates, LLC (“Royce”), investment adviser to the Registrant, President and member of the boards of directors/trustees of the Registrant, Royce Focus Trust, Inc., Royce Micro-Cap Trust, Inc. (“RMT”), Royce Global Value Trust, Inc. ,The Royce Fund , and Royce Capital Fund (collectively, “The Royce Funds”).
Christopher 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).
David A. Nadel Assistant Portfolio Manager* Since April 1, 2007 Assistant Portfolio Manager of the Registrant (since April 1, 2007); Director of International Research at Royce (since 2010); Portfolio Manager and Senior Analyst at Royce( since 2006); Senior Portfolio Manager at Neuberger Berman Inc. (2004-2006); and Senior Analyst at Pequot Capital Management, Inc. (2001-2003).
Lauren A. Romeo Assistant Portfolio Manager* Since May 1, 2009 Assistant Portfolio of the Registrant (since May 1, 2009); Portfolio Manager and Analyst at Royce (since 2004); Portfolio Manager at Dalton, Grenier, Hartman & Maher (since 2001); an Analyst with Legg Mason Funds Management (2000-2001); and an Analyst with T. Rowe Price Group (1996-2000).

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



(a)(2) Other Accounts Managed by Portfolio Manager and Potential Conflicts of Interest (information as of December 31, 2013)

Other Accounts
Name of
Portfolio
Manager
Type of Account Number of
Accounts
Managed
Total Assets Managed Number of
Accounts
Managed for which
Advisory Fee is
Performance-Based
Value of
Managed
Accounts for
which
Advisory Fee is
Performance Based
Charles M. Royce          
  Registered investment companies 18 $23,394,982,777 2 $1,740,939,664
  Private pooled investment vehicles 2 $       36,829,025 1 $    32,991,193
  Other accounts* 12 $       56,715,645 - -
           
Christopher E. Flynn          
  Registered investment companies 4 $7,483,408,777 2 $1,740,939,664
  Private pooled investment vehicles - - - -
  Other accounts* - - - -
           
David A. Nadel          
  Registered investment companies 8 $3,081,308,447 1 $1,307,821,976
  Private pooled investment vehicles 2 $     7,356,746 - -
  Other accounts* - - - -
           
Lauren A. Romeo          
  Registered investment companies 6 $17,186,988,745 1 $1,307,821,976
  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 & Associates, LLC (“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, 2013)

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, Performance-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.
   
-
PERFORMANCE-RELATED VARIABLE COMPENSATION. Each Portfolio Manager receives quarterly Performance-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 Performance-Related Variable Compensation received by Charles M. Royce that relates to each of the Registrant and RMT is performance-based fee revenue. For all Portfolio Managers, the Performance-Related Variable Compensation applicable to the registered investment company accounts managed by the Portfolio Manager is subject to downward adjustment or elimination based on a combination of 3-year, 5-year risk and 10-year risk-adjusted pre-tax returns of such accounts relative to all small-cap objective funds with three years of history tracked by Morningstar (as of December 31, 2013 there were 379 such Funds tracked by Morningstar), the 5-year absolute returns of such accounts relative to 5-year U.S. Treasury Notes and absolute returns over the prior full market cycle and current cycle to date vs. the accounts’ benchmark. The Performance-Related Variable Compensation applicable to non-registered investment company accounts managed by a Portfolio Manager is not subject to performance-related adjustment.

Payment of the Performance-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 Performance-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 account for which he or she is receiving portfolio management compensation.

-
FIRM-RELATED VARIABLE COMPENSATION. Each Portfolio Manager receives quarterly variable compensation based on Royce’s net revenues.

-
BENEFIT PACKAGE. Each Portfolio Manager also receives 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 Managers’ overall compensation.

Charles M. Royce, in addition to the above-described compensation, also receive variable compensation based on Royce’s retained pre-tax operating profit. This variable compensation, along with the Performance-Related Variable Compensation and Firm-Related Variable Compensation, generally represents the most significant element of Mr. Royce’s compensation. A portion of the above-described compensation payable to Mr. Royce relates to his responsibilities as Royce’s Chief Executive Officer and President of The Royce Funds.



(a)(4) Dollar Range of Equity Securities in Registrant Beneficially Owned by Portfolio Manager (information as of December 31, 2013)

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
Christopher E. Flynn $100,001 to $500,000
David A. Nadel None
Lauren A. Romeo $100,001 to $500,000

(b) Not Applicable

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

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

Item 11.   Controls and Procedures.

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

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

Item 12.   Exhibits. Attached hereto.

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

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

(a)(3) Not Applicable

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



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

ROYCE VALUE TRUST, INC.

BY: /s/ Charles M. Royce
  Charles M. Royce
  President

Date: March 5, 2014

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/ Charles M. Royce   BY: /s/ John D. Diederich
  Charles M. Royce     John D. Diederich
  President     Chief Financial Officer
         
Date: March 5, 2014   Date: March 5, 2014