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Royce Value Trust
3rd QUARTER REPORT
September 30, 1996
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Dear Stockholder:
After declining 15.5% from May 22 through July 24, small-cap stocks, as
measured by the Russell 2000*, staged a comeback, rallying 12.3% through quarter
end. However, unlike the large-cap oriented S&P 500* which made new highs near
the end of the third quarter, the Russell 2000 failed to reach the peak
established in the second quarter and now trails the large-cap index on a
year-to-date performance basis. For the quarter, the S&P 500 was up 3.1% versus
a 0.3% gain for the Russell 2000; year-to-date the S&P 500 is up 13.6% and the
Russell 2000 is up 10.7%. The S&P Small-Cap 600*, the Fund's relative
performance benchmark, had a strong quarterly showing, up 3.2%, and is now ahead
of both the Russell 2000 and the S&P 500 with a 14.8% year-to-date gain.
ROYCE VALUE TRUST ('RVT') MATCHED THE RUSSELL 2000 FOR THE THIRD QUARTER
POSTING A 0.4% NAV RETURN, AND YEAR-TO-DATE THROUGH SEPTEMBER 30, THE FUND WAS
UP 7.2% ON AN NAV BASIS. Contributing to the Fund's third quarter performance
were nice gains in office furniture manufacturer, Kimball International, home
furnishings manufacturer and retailer, Ethan Allen Interiors, and film
manufacturer and processor, Seattle Filmworks. Average annual NAV total returns
for the Fund for the 1-year, 5-year and since inception (11/26/86) periods were
8.1%, 14.8% and 12.1%, respectively.
NOVEMBER WILL MARK RVT'S 10-YEAR ANNIVERSARY. The Fund began with
approximately $100 million in net assets and, through appreciation, rights
offerings and the issuance of preferred stock, net assets now exceed $425
million. The Fund remains one of the few domestic, closed-end small-cap
offerings and one of only three, domestic closed-end equity funds with a fulcrum
(performance-based) management fee instead of a traditional fixed fee structure.
During the quarter, RVT completed a successful offering of 2.4 million
shares of Cumulative Preferred Stock. The 8% cumulative preferred, which was
sold at $25.00 per share, resulted in $58 million of net, new capital for the
Fund and no dilution for stockholders. As your investment advisor, we are
excited about the investment opportunities that the new capital will afford us.
If you would like any information on the preferred stock, please contact the
Fund's office at (800) 221-4268 for a prospectus.
We appreciate your continued support of the Fund and look forward to another
ten years together.
Sincerely,
CHARLES M. ROYCE Jack E. Fockler, Jr.
Charles M. Royce W. Whitney George
President Vice Presidents
October 15, 1996
* The Russell 2000, S&P 500, and S&P Small-Cap 600 are unmanaged indices and
include the reinvestment of dividends.
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PORTFOLIO SUMMARY
The following information is provided as a 'bird's eye' view of the RVT
portfolio at September 30, 1996.
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WEIGHTED AVERAGES
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<CAPTION>
<S> <C> <C>
Market Capitalization (Total Portfolio) $363 Million
Median Market Capitalization (Total
Portfolio) $265 Million
P/E Ratio (100 Largest Positions) 13.6x
P/B Ratio (100 Largest Positions) 1.6x
Portfolio Yield (100 Largest Positions) 2.0%
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TOP TWENTY POSITIONS
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<CAPTION>
Market
Value
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<C> <S> <C>
1. Ash Grove Cement Company Cl. B............ $4,399,147
2. The Standard Register Company............. 4,290,163
3. Kimball International, Inc. Cl. B......... 4,160,600
4. Marshall Industries....................... 4,097,000
5. Comdisco, Inc. ........................... 4,009,294
6. Stanhome, Inc. ........................... 3,952,988
7. Ethan Allen Interiors Inc. ............... 3,871,950
8. Zenith National Insurance Corp. .......... 3,793,200
9. Wesco Financial Corporation............... 3,741,000
10. Florida Rock Industries, Inc. ............ 3,646,913
11. Family Dollar Stores, Inc. ............... 3,612,263
12. Vallen Corporation........................ 3,488,258
13. Richardson Electronics, Ltd. ............. 3,485,800
14. Pennsylvania Manufacturers Corporation Cl.
A......................................... 3,431,750
15. Lilly Industries, Inc. Cl. A.............. 3,382,905
16. Haemonetics Corporation................... 3,382,500
17. MacDermid, Incorporated................... 3,354,001
18. Velcro Industries N.V. ................... 3,348,150
19. Farmer Bros. Co. ......................... 3,322,000
20. Arnold Industries, Inc. .................. 3,317,706
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FUND HIGHLIGHTS
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<CAPTION>
September 30, 1996
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<S> <C>
Net Asset Value Per Share.......................... $ 14.53
Market Price Per Share............................. $ 12.625
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TOTAL RETURN PERFORMANCE
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<CAPTION>
NAV Market Value
Total Total S&P S&P Small- Russell
Return(a) Return(b) 500`D' Cap 600`D' 2000`D'
------------- ------------- ------- ----------- --------
<S> <C> <C> <C> <C> <C>
3 months ended 9/30/96.................................... 0.4% 2.0% 3.1% 3.2% 0.3%
9 months ended 9/30/96.................................... 7.2 6.3 13.6 14.8 10.7
Annual Returns (ended December 31)
1995...................................................... 22.6 20.5 37.5 30.0 28.4
1994...................................................... 1.1 - 5.6 1.3 - 4.8 - 1.8
1993...................................................... 17.9 14.8 10.0 18.8 18.9
1992...................................................... 19.9 26.8 7.7 21.0 18.4
1991...................................................... 39.5 35.3 30.5 48.5 46.1
Average Annual Total Returns (ended September 30, 1996)
1-Year.................................................... 8.1 4.4 20.4 15.3 13.1
3-Year.................................................... 11.4 7.2 17.4 13.1 12.8
5-Year.................................................... 14.8 14.4 15.2 17.0 15.8
Since Inception*.......................................... 12.1 9.5 14.2 10.3 11.7
</TABLE>
(a) Reflects the NAV experience of a continuous shareholder who reinvested all
distributions and fully participated in primary rights offerings.
(b) Reflects the market value experience of a continuous shareholder who
reinvested all distributions and fully participated in primary rights
offerings.
* Inception date -- 11/26/86
'D' The indices are unmanaged and include the reinvestment of dividends.
Source: Frank Russell Co.
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STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
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<CAPTION>
Nine Months Ended
Three Months Ended September 30,
September 30, 1996 1996
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<S> <C> <C>
INVESTMENT OPERATIONS:
Net investment income................................................. $ 1,149,346 $ 2,753,173
Net realized gain on investments...................................... 4,127,458 23,361,594
Net change in unrealized appreciation on investments.................. (1,649,774) 2,970,116
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Net increase in net assets resulting from investment operations..... 3,627,030 29,084,883
DIVIDENDS AND DISTRIBUTIONS:
Preferred stock dividend accrued but not yet declared................. (512,850) (512,850)
CAPITAL STOCK TRANSACTIONS:
Net proceeds from issuance of preferred stock......................... 57,740,000 57,740,000
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NET INCREASE IN NET ASSETS.............................................. 60,854,180 86,312,033
NET ASSETS:
Beginning of period................................................... 364,428,204 338,970,351
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End of period......................................................... $425,282,384 $425,282,384
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</TABLE>
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PORTFOLIO COMPOSITION
<TABLE>
<CAPTION>
September 30, 1996 % of
(unaudited) Total Investments
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<S> <C> <C>
Common Stocks.......................................................... $401,379,651 86.3%
Bonds and Preferred Stock.............................................. 7,009,893 1.5
Repurchase Agreement................................................... 57,000,000 12.2
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TOTAL INVESTMENTS.................................................... $465,389,544 100.0%
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The results presented in this report represent past performance and should not
be considered representative of the 'total return' from an investment in the
Fund today. They are provided only to give an historical perspective of the
Fund. The investment return and net asset and market values of Fund shares will
fluctuate, so that the shares may be worth more or less than their original cost
when sold.
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ROYCE VALUE TRUST PHILOSOPHY
RVT concentrates on buying the securities of small capitalization companies.
RVT uses a strict fundamental value 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 for delivering consistent,
above average long-term returns.
NOTE:
The Board of Directors has given the Fund's management the discretionary
authority to cause the Fund to repurchase up to 300,000 shares of its common
stock in open market and other transactions through December 31, 1996. 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 Board of Directors of the Fund is authorized to offer stockholders 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
STATEMENT OF DIFFERENCES
The dagger symbol shall be expressed as 'D'.
