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Royce Value Trust
1st QUARTER REPORT
March 31, 1995
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Dear Stockholder:
What a difference a year makes . . . from rising interest rates and falling
stock prices to falling interest rates and rising stock prices. During the first
quarter of 1995, the S&P 500 reached an all-time high and had its best showing
in four years. The quarter also marked the largest performance differential
between large-cap and small-cap stocks in an up market since the second quarter
of 1987. Small-cap stocks, which outperformed in February, lagged their large
company counterparts in both January and March. This is highly unusual given
that small-cap stocks have historically posted strong absolute and relative
performance results in the month of January. While large-cap indices like the
Dow Jones Industrial Average and the S&P 500 were making new highs seemingly
daily, small stocks (as measured by the Russell 2000) were struggling to reach
their high made one year earlier. In spite of the solid first quarter showing,
the Russell 2000 remains 3.8% below its all-time high.
Contributing to the considerable rise in domestic equity prices, and in
particular those in the Dow Jones Industrial Average and S&P 500, was a major
correction in many emerging markets. Significant declines in foreign stock
markets, most notably Mexico, produced a 'flight to quality' back into domestic,
large-cap securities. This trend was further fueled by a rapid decline in the
U.S. dollar against the currencies of our non North American trading partners.
Larger-cap issues with global exposure stand to benefit from the enhanced export
opportunities and favorable foreign currency translations that a cheap dollar
produces.
For the quarter, the large-cap oriented S&P 500* was up 9.7%, while the
small-cap oriented Russell 2000* and S&P 600* were up 4.6% and 4.7%,
respectively. ROYCE VALUE TRUST, INC. ('RVT') also enjoyed a strong absolute
quarter and finished ahead of both small-cap indices, UP 5.4% on an NAV basis.
As usual, our diversified portfolio contained its share of successes and
failures. Major positive contributions in the first quarter were made by core
holdings such as Diagnostic Products Corporation (+32%) and Comdisco, Inc.
(+16%) and one 'broken' IPO (initial public offering) turned darling, Indigo
N.V. (+130%). On the other hand, major holdings in Transnational Re Corp (-15%)
and Thomaston Mills, Inc. (-17%) declined, producing an attractive opportunity
for further investment in each.
As to the viability of the small-cap cycle, in spite of last year's slow
returns and the current relative underperformance, it appears to be intact. We
do believe, however, that the next part of the cycle will be different. With the
major downward trend in interest rates behind us, the next phase will probably
include more down periods and a higher level of volatility. Risk management will
play a key role in this phase. We remain committed to reducing volatility and
expect the Fund's risk profile, which remains one of the lowest among domestic
closed-end funds, as reported by Morningstar, to be a real benefit in this next
phase.
Your continued confidence is appreciated.
Yours faithfully,
CHARLES M. ROYCE Jack E. Fockler, Jr.
Charles M. Royce W. Whitney George
President Vice Presidents
April 21, 1995
* The S&P 500, Russell 2000 and S&P Small Cap 600 are unmanaged indices and
include the reinvestment of dividends.
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FUND HIGHLIGHTS
<TABLE>
<CAPTION>
March 31, 1995
--------------
<S> <C>
Net Assets........................................ $283,740,498
Net Asset Value Per Share......................... $13.01
Market Price Per Share............................ $11.375
Shares Outstanding................................ 21,806,476
</TABLE>
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FINANCIAL REVIEW
<TABLE>
<CAPTION>
Three Months One Year Three Years Five Years Inception*
Ended Ended Ended Ended To
3/31/95 3/31/95 3/31/95 3/31/95 3/31/95
------------ -------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NAV Total Return (a)...................................... 5.4% 7.9% 39.0% 84.1% 146.7%
Market Value Total Return (b)............................. 3.4 2.6 28.2 76.1 96.5
S&P 500 Index`D'.......................................... 9.7 15.6 35.1 71.7 160.8
Russell 2000`D'........................................... 4.6 5.5 34.5 73.9 118.7
S&P Small Cap 600`D'...................................... 4.7 5.3 34.3 69.4 85.0
</TABLE>
(a) Reflects the NAV experience of a continuous shareholder who reinvested all
distributions and who exercised all primary subscription rights.
(b) Reflects the market value experience of a continuous shareholder who
reinvested all distributions and who exercised all primary subscription
rights.
* Inception date -- 11/26/86
`D' The indices are unmanaged and include the reinvestment of all dividends.
Source: Frank Russell Co.
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STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1995 Year Ended
(unaudited) December 31, 1994
------------------ -----------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Net investment income................................................. $ 161,195 $ 785,924
Net realized gain on investments...................................... 8,279,016 21,004,491
Net change in unrealized appreciation (depreciation) on investments... 6,268,427 (19,255,498)
------------------ -----------------
Increase in net assets resulting from operations...................... 14,708,638 2,534,917
Dividends paid from net investment income............................. -- (205,729)
Distributions paid from net realized gains............................ -- (21,395,807)
FROM CAPITAL STOCK TRANSACTIONS:
Increase in net assets from capital stock transactions................ -- 41,540,833
------------------ -----------------
INCREASE IN NET ASSETS.................................................. 14,708,638 22,474,214
NET ASSETS:
Beginning of period................................................... 269,031,860 246,557,646
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End of period......................................................... $283,740,498 $ 269,031,860
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</TABLE>
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COMPOSITION OF NET ASSETS
<TABLE>
<CAPTION>
March 31, 1995 % of Net
(unaudited) Assets
------------------ -----------
<S> <C> <C>
Common Stocks................................................................ $309,920,616 109.2%
Other Securities............................................................. 6,739,164 2.4
Notes Payable................................................................ (38,496,720) (13.6)
Cash and Other Assets Less Liabilities....................................... 5,577,438 2.0
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TOTAL NET ASSETS......................................................... $283,740,498 100.0%
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</TABLE>
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PORTFOLIO SUMMARY
The following information is provided as a 'bird's eye' view of the RVT
portfolio.
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WEIGHTED AVERAGES
<TABLE>
<S> <C>
Market Cap (Total Portfolio) $331 Million
Median Market Cap (Total Portfolio) $140 Million
P/E Ratio (100 Largest Positions) 13.1x
P/B Ratio (100 Largest Positions) 1.5x
Portfolio Yield (100 Largest Positions) 2.0%
</TABLE>
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TOP TWENTY POSITIONS
<TABLE>
<CAPTION>
Market
Value
----------
<S> <C> <C>
1. Comdisco, Inc. ........................... $4,766,850
2. Ash Grove Cement Company.................. 3,809,421
3. Baldwin & Lyons, Inc. Cl. B............... 3,719,625
4. Florida Rock Industries, Inc. ............ 3,675,700
5. Diagnostic Products Corporation........... 3,614,000
6. Exar Corporation.......................... 3,152,975
7. Transnational Re Corporation Cl. A........ 3,008,000
8. Offshore Logistics, Inc. ................. 2,941,900
9. Alleghany Corporation..................... 2,772,640
10. The Dress Barn, Inc. ..................... 2,761,200
11. Wesco Financial Corporation............... 2,580,000
12. Fab Industries, Inc. ..................... 2,541,825
13. Claire's Stores, Inc. .................... 2,552,625
14. The Standard Register Company............. 2,493,875
15. Mikasa, Inc. ............................. 2,476,275
16. National Bancorp of Alaska, Inc. ......... 2,476,058
17. Kimball International, Inc. Cl. B......... 2,466,850
18. Plenum Publishing Corporation............. 2,450,250
19. Puerto Rican Cement Company, Inc. ........ 2,448,763
20. NCH Corporation........................... 2,433,600
----------
</TABLE>
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ROYCE VALUE TRUST PHILOSOPHY
RVT concentrates on buying the securities of small capitalization companies.
RVT uses a strict fundamental approach, which emphasizes the understanding of
balance sheets, cash flows and internal rates of return.
RVT concentrates on understanding the private worth or value of a business.
RVT attempts to reduce the risks associated with small company ownership.
Market risk is lowered by using non-mainstream securities and company risk by
favoring excess cash flow and low-leverage firms. Valuation risk is lowered by
using strict pricing standards and portfolio risk by achieving wide
diversification.
The source of performance is the consistent use of strict value disciplines
applied to less well-known securities. The Fund will apply these principles from
year-to-year and attempt to avoid the opportunistic and fashionable investment
styles of the moment. We believe that our method, emphasizing patience and
value, comes the closest to an all-weather strategy in delivering consistent,
above average long-term returns.
NOTE:
The Board of Directors of the Fund has authorized the Fund to repurchase up to
300,000 shares of its common stock in open market and other transactions through
December 31, 1995. Such repurchases would be effected at a price per share which
is less than the then current net asset value, but not in excess of the then
prevailing market price.
The stockholders of the Fund have authorized the Board of Directors to offer an
opportunity to subscribe for additional shares of common stock of the Fund
through rights offerings at a price per share that may be less than the then
current net asset value of the Fund's common stock. The timing and terms of any
such offerings are left to the Board's discretion.
Royce Value Trust, Inc.
1414 Avenue of the Americas
New York, N.Y. 10019
800-221-4268
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STATEMENT OF DIFFERENCES
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The dagger symbol shall be expressed as 'D'
