THE
ROYCE
FUNDS
Value Investing in Small Companies For Over 20 Years
ROYCE VALUE TRUST
ROYCE MICRO-CAP TRUST
ROYCE GLOBAL TRUST
1997 Semi-Annual Report
<PAGE>
A FEW WORDS ON CLOSED-END FUNDS
- -------------------------------------------------------------------------------
Royce & Associates manages three 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; and Royce
Global Trust, a closed-end fund we began managing on November 1,
1996.
A closed-end fund is an investment company whose shares are listed
on a stock exchange or are traded in the over-the counter market.
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 determined by the fund's
Board of Directors and approved by its stockholders. A closed-end
fund raises cash for investment by issuing a fixed number of shares
through initial public offerings and periodic rights offerings.
Investors wanting to buy or sell shares of a publicly traded
closed-end fund after the offerings must do so on a stock exchange
or Nasdaq market, as with any publicly traded stock. This is in
contrast to open-end mutual funds where 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
nor 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.
* Not having to meet investor redemption requests or invest at
inopportune times is ideal for value managers who tend 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 for enhancing capital appreciation
potential.
* Unlike open-end funds, our closed-end funds are able to
distribute capital gains on a quarterly basis.
We believe that the closed-end fund structure is very suitable for
the long-term investor. It is especially appropriate for the
sophisticated 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 the Fund. To get a
fair idea of the impact of reinvested distributions on Royce Value
Trust's (RVT) stockholder returns, please see the chart on page 8.
For additional information on the Funds' Distribution Reinvestment
and Cash Purchase Options and the benefits for stockholders, see
page 15.
- -------------------------------------------------------------------------------
<PAGE>
SEMI-ANNUAL REPORT REFERENCE GUIDE
ROYCE VALUE TRUST'S MARKET PRICE TOTAL RETURN WAS UP OVER
209% FOR THE LAST 10 YEARS. 8
ROYCE VALUE TRUST HAS OUTPERFORMED THE RUSSELL 2000 ON BOTH
AN ABSOLUTE AND A RISK-ADJUSTED BASIS OVER THE LAST TEN YEARS. 8
ROYCE MICRO-CAP TRUST HAS PROVIDED A 16.2% NAV AVERAGE
ANNUAL TOTAL RETURN SINCE ITS INCEPTION. 10
ROYCE MICRO-CAP TRUST HAS OUTPERFORMED THE RUSSELL 2000 ON
BOTH AN ABSOLUTE AND A RISK-ADJUSTED BASIS SINCE ITS INCEPTION
(12/14/93). 10
ROYCE GLOBAL TRUST IS UP 20.5% ON A NAV BASIS SINCE WE
ASSUMED INVESTMENT MANAGEMENT ON NOVEMBER 1, 1996. 12
ROYCE GLOBAL TRUST'S OFFICERS PURCHASED 63,700 SHARES DURING
THE SECOND QUARTER AND NOW OWN 600,300 SHARES OR 7.5% OF
THE OUTSTANDING STOCK OF THE FUND. 12
POSTSCRIPT: ALL THAT JAZZ. INSIDE BACK COVER
SCHEDULES OF INVESTMENTS AND FINANCIAL STATEMENTS. SEE ENCLOSURE
NOTEWORTHY DEVELOPMENTS
On August 7, 1997, ROYCE VALUE TRUST announced a quarterly distribution policy
targeted at 9% per annum on the Fund's Common Stock.
On July 2, 1997, ROYCE MICRO-CAP TRUST issued 1,600,000 shares of its 7.75%
Preferred Stock at $25 per share through Smith Barney and PaineWebber. This was
the second such offering for Royce closed-end funds, with Royce Value Trust
having issued 2,400,000 shares of its 8% Preferred Stock at $25 per share in
August 1996 through underwriters led by Morgan Stanley.
On August 20, 1997, ROYCE GLOBAL TRUST'S Board authorized a similar offering of
800,000 shares of preferred stock at $25 per share through Smith Barney. The
Fund expects to proceed with the offering early this fall.
Royce will waive the portion of its investment advisery fee attributable to a
Fund's issuance of preferred stock for any month when the Fund's average annual
total return from the date of original issue fails to exceed the preferred stock
annual dividend rate.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NAV PERFORMANCE RESULTS
Year-To-Date Since
Fund (Inception) Return 1-Year Inception
- ---------------- -----------------------------------------
<S> <C> <C> <C>
Royce Value Trust (11/26/86) 13.1% 22.3% 13.3%
- --------------------------------------------------------------------------------
Royce Micro-Cap Trust (12/14/93) 11.9% 17.6% 16.2%
- --------------------------------------------------------------------------------
Royce Global Trust (11/1/96)* 15.2% N/A 20.5%**
- --------------------------------------------------------------------------------
</TABLE>
*Date Royce & Assoc. assumed investment management
** Not annualized
<PAGE>
LETTER TO OUR STOCKHOLDERS
[Photo of Charles M. Royce]
Charles M. Royce, President
[SIDEBAR]
The small-cap world has evolved dramatically during the last ten to fifteen
years, especially in terms of capitalization. When we began managing money in
the early '70's, small-cap was a much less efficient sector; but today, all that
has changed. The small-cap market now behaves more like the large-cap market.
Small and micro-cap are distinct markets, which require distinct strategies. The
idea of two distinct markets inside small-cap is one that we believe will be the
party line in another half dozen years.
[END SIDEBAR]
[Drawing of father in conversation with child]
Drawing by Weber; Copyright 1997
The New Yorker Magazine, Inc.
BIGGER WAS BETTER . . .
In light of 1997's results to date, investors in small-cap funds
are probably asking similar questions to that posed in the cartoon. Performance
in the first six months resembled that of the last half of 1996. Investors'
preference for easy-to-trade securities enabled larger, more well-known stocks
to perform better, even within the small-cap universe.
After a sluggish start, small-cap securities came roaring back in
the second quarter, posting their best results since 1991. They, however, still
trailed their large company counterparts, which provided impressive second
quarter results to go along with their solid early 1997 returns. For the first
six months, the Russell 2000 Index of small company stocks was up 10.2% versus
a gain of 20.6% for the large-cap oriented S&P 500 Index. The disparity between
large and small-cap is even more dramatic for the one-year period ended June 30,
1997: 34.7% for the S&P 500 versus 16.3% for the Russell 2000. In fact, this is
the widest margin of outperformance by the S&P 500 since the Russell 2000's
inception in 1979. COINCIDENTALLY, THE PREVIOUS TWO PERIODS OF SUBSTANTIAL
SMALL-CAP, ONE-YEAR UNDERPERFORMANCE (APRIL '87 AND MAY '90) OCCURRED JUST PRIOR
TO THE LAST TWO GENERAL MARKET DECLINES. Although periods of large-cap
dominance are not unusual, the magnitude of the current outperformance is almost
unprecedented. Over the last three and one-half calendar years, the S&P 500 has
provided a 23.1% average annual total return versus 14.8% for the Russell 2000.
While not matching the S&P 500, recent small-cap returns, as
measured by the Russell 2000, are excellent in both the absolute and the
historical contexts. It is hard to imagine how anyone who invested in a sector
that produced average annual total returns for the one, five, ten and
fifteen-year periods of 16.3%, 17.9%, 11.1% and 15.1%, respectively, would be
disappointed. It is only through the lens of relative performance that one can
find fault.
2 | THE ROYCE FUNDS SEMI-ANNUAL REPORT 1997
<PAGE>
...AND SO WAS VALUE
Over the last twelve months, small-cap investors experienced
greater volatility than in recent years. Increased volatility tends to benefit
value investing, as evidenced by year-to-date and one-year performance results.
Despite strong returns in May for growth stocks within the Russell 2000,
sparked by a decline in interest rates in mid-April, value stocks within the
small-cap index retained the performance edge that began in the second half of
1996. Through the first six months of 1997, the Russell 2000 Value Index was up
14.8% versus a gain of 5.2% for the Russell 2000 Growth Index. This performance
disparity is even more evident when reviewing the last twelve months. We believe
that the higher level of volatility will continue within the small-cap sector.
This favors our value approach, which takes advantage of price fluctuations.
WE ARE PLEASED TO REPORT SOLID ABSOLUTE AND RELATIVE SIX AND
TWELVE-MONTH RESULTS. FOR A COMPLETE DISCUSSION OF HOW WE DID, INCLUDING BOTH
PERFORMANCE AND PORTFOLIO DIAGNOSTICS, PLEASE SEE PAGES 8-13.
SMALL-CAP AIN'T WHAT IT USED TO BE
It has been documented by Ibbotson and Associates that small-cap
companies have outperformed their larger counterparts by approximately 2%
annually, on average, since 1926. This performance premium is known as the
"small-cap effect." While this is not an every year occurrence and 2% per annum
may not seem like much, the results are eye-popping when one compounds this
differential over the last 70 years! Even though this performance rule of thumb
is generally accepted, we believe that it can be misleading. The index utilized
to calculate the small-cap effect includes only the "smallest" of small-cap
companies, those in the 9th and 10th deciles of market capitalization. Today,
this roughly equates to companies under $300 million in market capitalization.
In contrast, the world has generally redefined small-cap to include companies
under $1 billion. WHAT HAS BEEN LABELED A SMALL-CAP EFFECT SHOULD IN FACT NOW BE
VIEWED AS A MICRO-CAP PHENOMENON. This has important implications for all
investors.
The case for two distinct markets--small and micro-cap--is
apparent in other ways as well. The annual rebalancing of the Russell 2000 in
June produced an estimated 30% increase in the index's weighted average market
cap ($609 million versus $468 million at 6/30/96), and for the second year in a
row, no companies with market caps below $100 million were included in the
reconstituted index. Also, according to Morningstar, there are now over 500
small-cap mutual funds, totaling approximately $100 billion in assets. AS THE
WORLD GETS SMALLER, SMALL-CAP STOCKS ARE GETTING BIGGER, AND MICRO-CAP STOCKS
ARE GETTING MORE INTERESTING.
NO SMOKE, NO MIRRORS
Just recently, one of our children asked a question that parents
often hear, "WHAT EXACTLY DO YOU DO?" This question is posed to us frequently by
shareholders and investment advisers as well, and it often leads to more
questions. We thought it would be useful to employ a "Q and A" format to
communicate our core beliefs, which have been developed over the last 25 years,
principally by Chuck Royce.
[drawing of a man speaking to boy]
Copyright 1997 John M. Melton
THE ROYCE FUNDS SEMI-ANNUAL REPORT 1997 | 3
<PAGE>
[SIDEBAR]
Within the small-cap market ($300 million to $1 billion), we utilize a
concentrated approach. We focus our efforts on identifying those forty to fifty
companies that we believe will give us the absolute best performance in this
slightly more efficient area.
The micro-cap area (below $300 million) is really what the small-cap area was
twenty years ago, in that these stocks represent the last frontier of domestic
equity opportunity. We use a diversified approach because of liquidity
constraints and the higher-than-usual volatility in this sector. [END SIDEBAR]
[BEGIN PULL QUOTE]
. . . an organized and intensive process that includes interviewing a company's
customers, competitors and suppliers. This "detective work" universally is not
done on Wall Street.
[END PULL QUOTE]
In the exchange that follows, Whitney George and Jack Fockler
discuss some of these tenets. Whitney joined our firm six years ago as a "maitre
d'" serving on the front line of our investment activity. Whitney's talent and
steady contributions have enabled him to move to chef status as a portfolio
manager in our "restaurant." Jack joined us eight years ago primarily working
with clients. Jack's and Whitney's responsibilities have expanded into a central
role; both are now managing directors. We hope this helps you become more
familiar with our investment philosophy.
WHAT DO YOU LOOK FOR IN A COMPANY? Essentially, we are interested in three
things--strong balance sheets, strong evidence of success and strong prospects.
Small and micro-cap entities can be very fragile; and, as a result, we look for
companies that can survive during times that are difficult for their products or
their particular industry as a whole. We maintain primary focus on internal
returns: namely, return on assets and return on invested capital. Both measures
provide a deeper insight into a company's health. In essence, we seek growing
businesses that produce free cash flow.
IS A COMPANY'S ANNUAL REPORT WORTH READING? One of the most important and under
appreciated sources of information is the annual report. We are enthusiastic and
diligent readers of annual reports and not just for the numbers. We look for the
obvious and the not-so-obvious signals that a CEO or Chairman is sending in the
various discussions. We look at what is being said and not said, and compare
what we find to previous years' reports. Dog-eared annual reports are our
standard.
DO YOU CONSIDER THE QUANTITATIVE OR QUALITATIVE ASPECTS OF YOUR RESEARCH TO BE
THE MOST IMPORTANT? While quantitative research remains the cornerstone of our
process, it is the qualitative aspects that take on an increasingly important
role. Information is readily available to everyone, so being the fastest reader
or collector of documents no longer affords the advantage it once did. The
non-quantitative effort is where we add value, and it is also the most fun.
WHAT DO YOU WANT TO ACCOMPLISH WHEN YOU MEET WITH COMPANY MANAGEMENT TEAMS? We
listen carefully to their plans, aspirations and dreams for the business. The
research process begins as we assess their credibility and that of their plans.
As careful investors, we must be able to trust management.
HOW DO YOU CONFIRM THEIR ASPIRATIONS AND DREAMS? Management meetings are just a
starting point. It's very important to be able to validate what we have been
told. We
[BEGIN PULL QUOTE]
One of the most important and under appreciated sources of information is the
annual report.
[END PULL QUOTE]
4 | THE ROYCE FUNDS SEMI-ANNUAL REPORT 1997
<PAGE>
do this through an organized and intensive process that includes interviewing a
company's customers, competitors and suppliers. This "detective work"
universally is not done on Wall Street.
ARE THERE CERTAIN STANDARDS THAT YOU LOOK FOR WHEN YOU TALK TO MANAGEMENT?
Honesty is paramount, both in actions and thought processes. We try to
understand motivations and make certain management's intentions are consistent
with ours. We look for confirmation of integrity in all corporate actions. We
spend considerable time reviewing proxies for conflicts and governance issues
that others often gloss over.
HOW DO YOU FIND NEW IDEAS FOR THE PORTFOLIOS? We are open-minded and
non-discriminating about how new ideas find their way into the firm. We think of
ourselves as "shop-a-holics" when it comes to finding a new name, and we are
prepared to talk to anyone or look anywhere to learn about an idea. This means
shopping at Wall Street "supermarkets," regional firms and research boutiques.
We even go to "garage sales" where there is no analytical coverage. But, at the
end of the day, we are exceptionally discriminating about our purchases.
DO YOU INVEST IN INITIAL PUBLIC OFFERINGS (IPOS)? We do significant analyses of
IPOs, although this does not necessarily mean that we are significant investors.
While IPOs represent a wonderful source of new ideas, our interest in them tends
to be six to eighteen months following the initial offering, when the prices are
more to our liking.
DO YOU INVEST IN TECHNOLOGY STOCKS? While we believe the technology sector is a
vibrant and important part of our economy, we view the investment opportunity
somewhat differently. Most of the attention in this sector is on cutting-edge
companies. While this is an exciting and potentially rewarding area, it is also
very difficult. These companies tend to be consumers, not producers, of cash,
and it's hard for us to feel comfortable that the financial characteristics we
are looking for will be in place five years from now. Our preferred type of
technology investment, while not on the front line, is able to deliver
comparable growth without the inherent risk. Electronics distributors are a
good example of a low-risk way to participate in what has historically been a
high-risk sector.
HOW DIFFICULT IS IT TO KEEP TRACK OF NAMES IN THE PORTFOLIOS? It is not as big a
project as one might think. The business world does not change as rapidly as the
stock market. While a company's stock price may change daily, earnings are only
reported quarterly, and the balance sheet evolves even more slowly. We combine a
running evaluation of these slower developments with a very disciplined and
rigorous tracking process that continually focuses on the relationship of
"private worth" to market price.
[BEGIN PULL QUOTE]
We spend considerable time reviewing proxies for conflicts and governance issues
that others often gloss over.
{END PULL QUOTE]
[BEGIN PULL QUOTE]
While IPOs represent a wonderful source of new ideas, our interest in them tends
to be six to eighteen months following the initial offering, when the prices are
more to our liking.
[END PULL QUOTE]
THE ROYCE FUNDS SEMI-ANNUAL REPORT 1997 | 5
<PAGE>
[SIDEBAR]
Value works because markets are cyclical. We think of ourselves as risk
managers. It is not a fruitful idea to focus only on risk.
We're committed to the idea of finding stocks that we believe can double in
value over approximately a four-year time frame while keeping risk levels
relatively low.
[END SIDEBAR]
HOW DO ROYCE ANALYSTS INTERACT WITH THE PORTFOLIO MANAGERS? We sit together in
an open environment that encourages constant dialogue; there are no offices in
which to hide. Our analysts generally work together in teams; multiple eyes
reduce nearsightedness. They are not industry specialists, but generalists. This
is in contrast to most firms, which organize their research effort around
specific industries and designate analysts to cover narrow niches. The problem
with industry analysts is that they tend to fall in love with their sectors.
We want our analysts to be able to recognize good companies,
regardless of sector. We require written records of our thought processes; this
minimizes the human tendency to reinvent a story as circumstances change.
HOW IMPORTANT IS TRADING EXECUTION? Execution is critical to successful
small-cap investing because costs are higher than in the large-cap market.
Indeed, spreads of 5% or more between a stock's bid and ask price are not
uncommon. Daily trading volume is often low, demanding significant patience on
the part of the trader/buyer. Many a good large-cap manager who ventures into
the small and micro-cap universes becomes immediately frustrated by the trading
nuances of the sector. We work hard at this part of our business and believe
that our 20+ years of experience give us an edge.
HOW DO YOU WEIGH YOUR OWN EVALUATIONS VERSUS THOSE OF OUTSIDE ANALYSTS? It's
only through doing your own work that you're able to develop confidence and
conviction. Much of Wall Street's research is directed toward those companies
that provide opportunities for making money through trading or investment
banking. While we use outside research, it is for general context purposes only.
WHAT HAPPENS WHEN A STOCK THAT YOU LIKE GOES DOWN IN PRICE? This gives us a
reason to go back and review the work to gain an understanding as to why the
stock has declined. If we find we have missed something, then we re-evaluate how
bad the situation is and how much is already reflected in the price. Hopefully,
the outcome is higher conviction coinciding with a more attractive purchase
price. We are not afraid to average down (buy more shares at lower prices) when
our conviction level is in place.
HOW DOES ONE AVOID UNDERPERFORMANCE? It's not clear that one can avoid
underperformance in the short-run because the greatest opportunities come when
conditions are at their worst. We try to address this by being realistic in
terms of our holding period, which is generally four years on average, and by
[BEGIN PULL QUOTE]
Our analysts generally work together in teams; multiple eyes reduce
nearsightedness.
[END PULL QUOTE]
[BEGIN PULL QUOTE]
It's only through doing your own work that you're able to develop confidence and
conviction.
[END PULL QUOTE]
6 | THE ROYCE FUNDS SEMI-ANNUAL REPORT 1997
<PAGE>
recognizing that this year's poor performer may be the stock that everyone wants
to own several years later. Stock selection and performance are not related in
the short-term.
WHAT SHOULD BE EXPECTED FROM AN INVESTMENT MANAGER? Investors should look for a
return that is reasonable and an approach that stresses absolute, not relative,
performance goals. Although relative performance comparisons are useful, they
should not drive the evaluation process; you cannot eat from the table of
relative performance. We also think managers should communicate openly, sharing
their successes, failures and expectations with their investors.
[Drawing of The Road Ahead]
Copyright 1997 John M. Melton
[Photo of Fockler, George, Royce]
Jack Fockler, Whitney George, Chuck Royce
THE ROAD AHEAD
While the last two and one-half calendar years have produced only
one down quarter for small-cap stocks, there is plenty of evidence to suggest
the road ahead will be different. Since May '96 volatility has been higher in
the small and micro-cap sectors, usually a prelude to lower returns. We believe
that active management and a value orientation are especially appropriate in
this more volatile environment. Although large-cap stocks have been market
leaders for over three years, we do not believe that this is a permanent
condition. The market's preference for large and liquid securities will run its
course as it has before.
Although absolute returns for the market are likely to diminish
following this extraordinary return period, we remain excited about near and
long-term prospects for our risk-averse style of investing. Your continued
confidence is appreciated.
Sincerely,
/s/ Charles M. Royce /s/ W. Whitney George /s/ Jack E. Fockler, Jr.
Charles M. Royce W. Whitney George Jack E. Fockler, Jr.
President Vice President Vice President
July 25, 1997
- -------------------------------------------------------------------------------
We want to pay tribute to our friend and colleague, Tom Ebright, who passed away
on July 14, 1997. For over sixteen years, Tom was a substantial contributor and
valued partner of our firm. He is survived by his wife, Joyce, his two
daughters, Jennifer and Ellen, and many shareholders and friends who knew and
loved Tom.
- -------------------------------------------------------------------------------
THE ROYCE FUNDS SEMI-ANNUAL REPORT 1997 | 7
<PAGE>
ROYCE VALUE TRUST
- --------------------------------------------------------------------------------
[SIDEBAR]
WHAT WE DO ROYCE VALUE TRUST ("RVT") is a closed-end fund that invests primarily
in small and micro-cap companies using a disciplined value approach.
HOW WE DID ROYCE VALUE TRUST combined a solid first quarter start with a strong
second quarter showing to conclude the first six months of 1997 up 13.1% on a
NAV basis. This compares to returns of 10.2% and 11.6% for the small-cap
oriented Russell 2000 and S&P 600, respectively. RVT also enjoyed a NAV
performance edge over both indices in the one-year period (22.3% vs. 16.3% and
21.7%) as well. The Fund, with $497 million in assets, is the largest and oldest
small-cap value closed-end fund. Average annual NAV total return for the 10+
years that we have managed the Fund was 13.3%, ahead of both the Russell 2000
(12.4%) and the S&P 600 (11.3%), respectively.
Since the small-cap sector has always been more volatile, we believe that paying
attention to risk is critical to delivering above average, long-term returns.
Risk is typically evaluated in terms of uncertainty, which measures fund
volatility through standard deviation and beta, and also in terms of possibility
of loss, which measures actual down market performance. RVT's risk-averse
orientation has resulted in low risk rankings and superior NAV down market
performance versus small-cap indices.
[END SIDEBAR]
<TABLE>
<CAPTION>
NAV
TOTAL RETURNS
THROUGH 6/30/97
====================================
<S> <C>
1997 (through 6/30) 13.1%
- ------------------------------------
1-Year 22.3%
- ------------------------------------
3-Year Average Annual 18.3%
- ------------------------------------
5-Year Average Annual 16.8%
- ------------------------------------
10-Year Average Annual 13.0%
- ------------------------------------
Since Inception* 13.3%
Average Annual
- ------------------------------------
</TABLE>
*Inception date was 11/26/86.
DOWN MARKET
PERFORMANCE
COMPARISON
(ALL DOWN PERIODS OF 7.5% OR GREATER)
IN PERCENTAGES (%)
[BAR GRAPH]
<TABLE>
<CAPTION>
================================================
RVT (NAV) Russell 2000
<S> <C> <C>
8/25/87 -
10/28/87 -26.6 -39.2
- ------------------------------------------------
10/9/89 -
10/30/90 -22.0 -34.3
- ------------------------------------------------
2/12/92 -
7/8/92 -2.1 -12.6
- ------------------------------------------------
3/18/94 -
12/9/94 -5.3 -13.3
- ------------------------------------------------
5/22/96 -
7/24/96 -6.6 -15.6
- ------------------------------------------------
1/22/97 -
4/25/97 -3.1 -9.2
- ------------------------------------------------
</TABLE>
Royce Value Trust's risk-averse investment orientation
has resulted in strong relative returns in down markets.
[ ] RVT (NAV)
[ ] Russell 2000
RISK/RETURN COMPARISON
TEN-YEAR PERIOD ENDED 6/30/97
<TABLE>
<CAPTION>
Average Annual Standard
Total Return Deviation RUR
========================================================
<S> <C> <C> <C>
RVT (NAV) 13.0% 12.2 1.07
- --------------------------------------------------------
S&P 600 10.7% 18.1 0.59
- --------------------------------------------------------
Russell 2000 11.1% 18.1 0.62
- --------------------------------------------------------
</TABLE>
Over the last ten years, ROYCE VALUE TRUST
HAS OUTPERFORMED THE S&P 600
AND RUSSELL 2000 on BOTH
an absolute and a risk-adjusted basis.
RVT Market Price - Actual vs. Adjusted*
Mkt Price Total Returns
From Incept. = 190.1%
10 Years = 209.5%
5 Years = 93.4%
3 Years = 51.4%
[LINE CHART]
<TABLE>
<CAPTION>
Actual Adjusted Actual Adjusted Actual Adjusted
Market Market Market Market Market Market
Price Price Price Price Price Price
=======================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
11/26/86 10.00 10.00 6/30/90 9.63 11.61 3/31/94 12.25 19.16
12/31/86 9.88 9.88 9/30/90 7.88 9.53 6/30/94 12.25 19.16
3/31/87 9.63 9.63 12/31/90 8.13 10.23 9/30/94 12.00 18.76
6/30/87 9.38 9.37 3/31/91 10.38 13.05 12/31/94 11.00 19.00
9/30/87 9.25 9.25 6/30/91 10.00 12.58 3/31/95 11.38 19.65
12/31/87 6.75 7.26 9/30/91 9.88 12.46 6/30/95 12.00 20.73
3/31/88 8.13 8.73 12/31/91 10.38 13.83 9/30/95 13.50 23.33
6/30/88 8.63 9.27 3/31/92 11.50 15.33 12/31/95 11.88 22.91
9/30/88 8.88 9.54 6/30/92 11.25 15.00 3/31/96 12.25 23.63
12/31/88 8.13 9.25 9/30/92 11.38 15.19 6/30/96 12.38 23.87
3/31/89 8.88 10.10 12/31/92 12.25 17.54 9/30/96 12.63 24.35
6/30/89 9.25 10.53 3/31/93 13.00 18.61 12/31/96 12.63 26.64
9/30/89 9.63 10.99 6/30/93 13.13 18.79 3/31/97 11.75 24.79
12/31/89 9.50 11.46 9/30/93 13.75 19.75 6/30/97 $13.75 $29.01
3/31/90 $9.25 $11.16 12/31/93 $12.88 $20.13
- ---------------------------------
</TABLE>
[RULE] Actual Market Price [RULE] Adjusted Market Price
*Reflects market price total return experience of a continuous shareholder who
reinvested all distribution and fully participated in primary rights offerings.
This graph illustrates the market price change from IPO of $10 per share on
11/26/86.
THE REGULAR REINVESTMENT OF DISTRIBUTIONS HAS HAD A SIGNIFICANT
IMPACT ON STOCKHOLDER RETURNS.
8 | THE ROYCE FUNDS SEMI-ANNUAL REPORT 1997
<PAGE>
PERFORMANCE & PORTFOLIO REVIEW
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PORTFOLIO
DIAGNOSTICS
============================================
<S> <C>
Median Market Cap $298 million
- --------------------------------------------
Weighted Average P/E Ratio 15.5x
- --------------------------------------------
Weighted Average P/B Ratio 1.6x
- --------------------------------------------
Weighted Average Yield 1.2%
- --------------------------------------------
Net Assets $497 million
- --------------------------------------------
Turnover Rate 12%
- --------------------------------------------
Net Leverage 10%
- --------------------------------------------
Symbol RVT
- --------------------------------------------
</TABLE>
The Fund's P/E and P/B ratios remained low.
<TABLE>
<CAPTION>
TOP TEN
POSITIONS
% OF NET ASSETS
============================================
<S> <C> <C>
1. Stanhome 1.2
- --------------------------------------------
2. Wesco Financial 1.2
- --------------------------------------------
3. PXRE Corporation 1.1
- --------------------------------------------
4. Marshall Industries 1.0
- --------------------------------------------
5. MacDermid 1.0
- --------------------------------------------
6. Florida Rock Industries 1.0
- --------------------------------------------
7. Trenwick Group 1.0
- --------------------------------------------
8. Ash Grove Cement Company Cl. B 0.9
- --------------------------------------------
9. Woodward Governor Company 0.9
- --------------------------------------------
10. Alleghany Corporation 0.9
- --------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PORTFOLIO INDUSTRY
BREAKDOWN
% OF NET ASSETS*
============================================
<S> <C>
Industrial Products 23
- --------------------------------------------
Financial Intermediaries 17
- --------------------------------------------
Consumer Products 16
- --------------------------------------------
Industrial Services 13
- --------------------------------------------
Technology 8
- --------------------------------------------
Financial Services 7
- --------------------------------------------
Retail 5
- --------------------------------------------
Natural Resources 4
- --------------------------------------------
Consumer Services 4
- --------------------------------------------
Health 3
- --------------------------------------------
</TABLE>
*Excludes cash and cash equivalents.
<TABLE>
<CAPTION>
GOOD IDEAS THAT WORKED
============================================
REALIZED AND
SECURITY UNREALIZED GAIN
- --------------------------------------------
<S> <C>
Wesco Financial $2,746,152
- --------------------------------------------
MacDermid 2,115,514
- --------------------------------------------
Merrill Corporation 1,334,825
- --------------------------------------------
Electroglas 1,168,757
- --------------------------------------------
Rykoff-Sexton 1,105,509
- --------------------------------------------
</TABLE>
During 1997's first half, the above companies made the largest positive
contributions, in dollar terms, to our overall performance. Among these winners,
there were no examples of hot new issues, high-priced takeovers or momentum
miracles. Rather, our top five performers emerged from a series of long-term
investment decisions. We built our positions when business conditions were
difficult and other investors had voted negatively on future prospects.
<TABLE>
<CAPTION>
GOOD IDEAS AT THE TIME
============================================
REALIZED AND
SECURITY UNREALIZED LOSS
- --------------------------------------------
<S> <C>
Midwest Grain Products $708,363
- --------------------------------------------
The Rival Company 654,194
- --------------------------------------------
Farmer Bros. 552,097
- --------------------------------------------
Lifetime Hoan Corporation 410,844
- --------------------------------------------
Catherines Stores Corporation 371,700
- --------------------------------------------
</TABLE>
Even the best small-cap companies can have periods of declining performance. We
believe if their balance sheets are strong and they have a history of high
internal returns, these companies will recover. We are generally well-rewarded
for our persistence, although market price rebounds can take longer than we
anticipated. Occasionally, we elect to redeploy the assets into other
opportunities. The above companies had the largest negative impact on the Fund's
performance in the first half of 1997.
THE ROYCE FUNDS SEMI-ANNUAL REPORT 1997 | 9
<PAGE>
ROYCE MICRO-CAP TRUST
- --------------------------------------------------------------------------------
[SIDEBAR]
WHAT WE DO ROYCE MICRO-CAP TRUST ("OTCM") is a closed-end fund that uses a
disciplined value approach to invest primarily in companies with market
capitalizations below $300 million. The buying opportunities in this sector have
more potential for higher returns than any other in the domestic equity market
due to limited institutional attention and research coverage.
HOW WE DID After more than holding its own in the difficult first quarter, ROYCE
MICRO-CAP TRUST enjoyed a strong second quarter and finished the first half up
11.9% on a NAV basis. This compares to a 10.2% total return for the Russell 2000
index of small-cap companies for the same time period. OTCM also enjoyed a NAV
performance edge over this small-cap index in the one-year (17.6% vs. 16.3%) and
since inception (16.2% vs. 15.7%) periods as well. The Fund, with $128 million
in net assets at June 30, remains the only closed-end micro-cap fund.
We strongly believe that managing risk is a key component to delivering
above average returns in this volatile sector of the small cap market. Risk is
typically evaluated in terms of uncertainty, which measures fund volatility
through standard deviation and beta, and also in terms of possibility of loss,
which measures actual down market performance. Royce Micro-Cap Trust's
risk-averse orientation has resulted in low risk rankings and solid down market
performance versus the Russell 2000.
On July 2, 1997, the Fund issued 1,600,000 shares of 7.75% Cumulative
Preferred Stock, at $25 per share. The shares are listed on the American Stock
Exchange and began trading on July 10th. A prospectus is available by calling
the Fund's office at (800) 221-4268.
[END SIDEBAR]
<TABLE>
<CAPTION>
NAV
TOTAL RETURNS
THROUGH 6/30/97
============================================
<S> <C>
1997 (through 6/30) 11.9%
- --------------------------------------------
1-Year 17.6%
- --------------------------------------------
3-Year Average Annual 18.9%
- --------------------------------------------
Since Inception (12/14/93) 16.2%
Average Annual
- --------------------------------------------
</TABLE>
DOWN MARKET
PERFORMANCE
COMPARISON
(ALL DOWN PERIODS OF 7.5% OR GREATER)
IN PERCENTAGES (%)
[BAR GRAPH]
<TABLE>
<CAPTION>
==========================================
Royce Micro-Cap Russell 2000
<S> <C> <C>
2/12/92 -
7/8/92 -1.5 -12.6
- ------------------------------------------
3/18/94 -
12/9/94 -4.4 -13.3
- ------------------------------------------
5/22/96 -
7/24/96 -8.7 -15.6
- ------------------------------------------
1/22/97 -
4/25/97 -5.1 -9.2
- ------------------------------------------
</TABLE>
Royce Micro-Cap's risk-averse investment orientation has resulted in strong
relative returns in down markets.
[ ] Royce Micro-Cap
[ ] Russell 2000
RISK/RETURN COMPARISON
FROM INCEPTION (12/14/93) THROUGH 6/30/97
<TABLE>
<CAPTION>
Average Annual Standard
Total Return Deviation RUR
=======================================================
<S> <C> <C> <C>
OTCM (NAV) 16.2% 8.6 1.89
- -------------------------------------------------------
Russell 2000 15.7% 13.1 1.20
- -------------------------------------------------------
</TABLE>
Since its inception, ROYCE MICRO-CAP TRUST
HAS OUTPERFORMED THE RUSSELL 2000
on BOTH an absolute
and a risk-adjusted basis.
OTCM Market Price - Actual vs. Adjusted*
Mkt Price Total Returns
From Incept. = 41.2%
3 Years = 56.8%
1 Year = 15.3%
[LINE CHART]
<TABLE>
<CAPTION>
Actual Adjusted
Market Market
Price Price
==================================
<S> <C> <C>
12/14/93 7.50 7.50
6.50 6.50
6/30/94 6.75 6.75
7.00 7.00
12/31/94 7.00 7.11
6.88 6.98
6/30/95 7.38 7.49
8.38 8.51
12/31/95 8.00 8.52
7.75 8.25
6/30/96 8.63 9.18
8.00 8.52
12/31/96 8.25 9.71
7.63 8.97
6/30/97 9.00 10.59
- ----------------------------------
</TABLE>
[RULE] Actual Market Price [RULE] Adjusted Market Price
*Reflects market price total return experience of a continuous shareholder who
reinvested all distribution and fully participated in the 1994 rights offering.
This graph illustrates the market price change from IPO of $7.50 per share on
12/14/93.
THE REGULAR REINVESTMENT OF DISTRIBUTIONS HAS HAD A SIGNIFICANT IMPACT
ON STOCKHOLDER RETURNS.
10 | THE ROYCE FUNDS SEMI-ANNUAL REPORT 1997
<PAGE>
PERFORMANCE & PORTFOLIO REVIEW
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PORTFOLIO
DIAGNOSTICS
============================================
<S> <C>
Median Market Cap $146 million
- --------------------------------------------
Weighted Average P/E Ratio 14.3x
- --------------------------------------------
Weighted Average P/B Ratio 1.6x
- --------------------------------------------
Weighted Average Yield 1.1%
- --------------------------------------------
Net Assets $128 million
- --------------------------------------------
Turnover Rate 18%
- --------------------------------------------
Symbol OTCM
- --------------------------------------------
</TABLE>
The Fund's P/E and P/B ratios remained low.
<TABLE>
<CAPTION>
TOP TEN
POSITIONS
% OF NET ASSETS
============================================
<S> <C> <C>
1. Matthews International Cl. A 1.5
- --------------------------------------------
2. PXRE Corporation 1.5
- --------------------------------------------
3. Florida Rock Industries 1.5
- --------------------------------------------
4. Chemfab Corporation 1.3
- --------------------------------------------
5. Duff & Phelps Credit Rating 1.3
- --------------------------------------------
6. New England Business Service 1.2
- --------------------------------------------
7. Sevenson Environmental Services 1.2
- --------------------------------------------
8. Velcro Industries 1.2
- --------------------------------------------
9. Simpson Manufacturing Co. 1.2
- --------------------------------------------
10. Bassett Furniture Industries 1.2
- --------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PORTFOLIO INDUSTRY
BREAKDOWN
% OF NET ASSETS*
============================================
<S> <C>
Industrial Products 24
- --------------------------------------------
Consumer Products 21
- --------------------------------------------
Industrial Services 14
- --------------------------------------------
Technology 12
- --------------------------------------------
Financial Intermediaries 12
- --------------------------------------------
Financial Services 6
- --------------------------------------------
Retail 6
- --------------------------------------------
Natural Resources 3
- --------------------------------------------
Consumer Services 2
- --------------------------------------------
Health 1
- --------------------------------------------
</TABLE>
*Excludes cash and cash equivalents.
<TABLE>
<CAPTION>
GOOD IDEAS THAT WORKED
============================================
REALIZED AND
SECURITY UNREALIZED GAIN
- --------------------------------------------
<S> <C>
Willbros Group $592,076
- --------------------------------------------
Chemfab Corporation 564,900
- --------------------------------------------
Weyco Group 533,250
- --------------------------------------------
Matthews International Cl. A 437,250
- --------------------------------------------
Oshkosh B'Gosh Cl. A 432,267
- --------------------------------------------
</TABLE>
During 1997's first half, the above companies made the largest positive
contributions, in dollar terms, to our overall performance. Among these winners,
there were no examples of hot new issues, high-priced takeovers or momentum
miracles. Rather, our top five performers emerged from a series of long-term
investment decisions. We built our positions when business conditions were
difficult and other investors had voted negatively on future prospects.
<TABLE>
<CAPTION>
GOOD IDEAS AT THE TIME
============================================
REALIZED AND
SECURITY UNREALIZED LOSS
- --------------------------------------------
<S> <C>
Rush Enterprises $383,875
- --------------------------------------------
Catherines Stores Corporation 257,950
- --------------------------------------------
Guy F. Atkinson Company 237,725
- --------------------------------------------
Lifetime Hoan Corporation 231,923
- --------------------------------------------
The Rival Company 224,634
- --------------------------------------------
</TABLE>
Even the best small-cap companies can have periods of declining performance. We
believe if their balance sheets are strong and they have a history of high
internal returns, these companies will recover. We are generally well-rewarded
for our persistence, although market price rebounds can take longer than we
anticipated. Occasionally, we elect to redeploy the assets into other
opportunities. The above companies had the largest negative impact on the Fund's
performance in the first half of 1997.
THE ROYCE FUNDS SEMI-ANNUAL REPORT 1997 | 11
<PAGE>
ROYCE GLOBAL TRUST
- -------------------------------------------------------------------------------
[SIDEBAR]
WHAT WE DO ROYCE GLOBAL TRUST ("RGT") is a closed-end fund that invests
primarily in a limited number of domestic and foreign companies, selected using
a value approach. While it is not restricted as to stock market capitalization,
Royce focuses the Fund's investments primarily in small-cap companies with
significant business activities in the United States. Normally, at least 65% of
the assets will be invested in the securities of companies of at least three
countries, including the United States.
HOW WE DID ROYCE GLOBAL TRUST continued its winning ways into 1997. The Fund,
which was up 4.5% on a NAV total return basis in our first two months of
management, concluded the first six months of 1997 with a 15.2% NAV gain. This
compares favorably to the Russell 2000 index of small-cap, companies which was
up 10.2%. The Morgan Stanley World Index was up 15.4% for the same period. RGT's
NAV is up 20.5% since November 1, 1996, the day we assumed investment management
responsibility. The Fund's small-cap focus is an area of the market we know well
and one where we believe investment opportunities are more plentiful.
We waived our management fee until RGT's market price (adjusted for
distributions) closed at or above $5.28 (the NAV on 10/31/96) for 20 consecutive
trading days. This condition was satisfied on August 20, 1997.
We are enthused about the early results and remain committed to the Fund's
long term success.
[END SIDEBAR]
NAV
TOTAL RETURNS
THROUGH 6/30/97
<TABLE>
============================================
<S> <C>
1997 (through 6/30) 15.2%
- --------------------------------------------
1-Year 21.8%
- --------------------------------------------
10/31/96-6/30/97* 20.5%
- --------------------------------------------
</TABLE>
*Royce & Associates assumed investment management
responsibility for the Fund on 11/1/96.
Royce Global Trust (Line Graph)
Market Price - 6/21/96 - 6/30/97**
<TABLE>
<CAPTION>
Total Return for Period = 23.1% $5.00
============================================
<S> <C>
6/20/96 4.16
- --------------------------------------------
7/31/96 4.19
- --------------------------------------------
9/30/96 4.13
- --------------------------------------------
11/30/96 4.66
- --------------------------------------------
1/31/97 4.75
- --------------------------------------------
3/31/97 4.88
- --------------------------------------------
6/30/97 5.00
- --------------------------------------------
</TABLE>
**On 6/21/96, Royce & Associates formally
announced its intention to assume investment
management for the Fund.
RGT'S OFFICERS INCREASED OWNERSHIP COMMITMENT
An additional 63,700 RGT shares were purchased by the Fund's officers during the
second quarter.
Total officer ownership: 600,300 shares or 7.5% of the outstanding stock of the
Fund.
We believe it is important to have our capital invested side by side with yours.
12 | THE ROYCE FUNDS SEMI-ANNUAL REPORT 1997
<PAGE>
PERFORMANCE & PORTFOLIO REVIEW
-------------------------------------------------------------------------------
PORTFOLIO
DIAGNOSTICS
<TABLE>
============================================
<S> <C>
Median Market Cap $518 million
- --------------------------------------------
Weighted Average P/E Ratio 11.5x
- --------------------------------------------
Weighted Average P/B Ratio 1.9x
- --------------------------------------------
Weighted Average Yield 0.7%
- --------------------------------------------
Turnover Rate 34%
- --------------------------------------------
Top 3 Countries:
US (71%), Canada (8%), U.K. (6%)
- --------------------------------------------
Net Assets $51 million
- --------------------------------------------
Symbol FUND
- --------------------------------------------
</TABLE>
The Fund's P/E and P/B ratios remained low.
TOP TEN
POSITIONS
% OF NET ASSETS
<TABLE>
============================================
<S> <C> <C>
1. Velcro Industries 2.6
- --------------------------------------------
2. Stanhome 2.6
- --------------------------------------------
3. Marshall Industries 2.5
- --------------------------------------------
4. Stone & Webster 2.5
- --------------------------------------------
5. Leucadia National Corporation 2.4
- --------------------------------------------
6. PXRE Corporation 2.2
- --------------------------------------------
7. The Pioneer Group 2.2
- --------------------------------------------
8. Willis Corroon Group ADR 2.1
- --------------------------------------------
9. Trenwick Group 2.1
- --------------------------------------------
10. Willbros Group 2.1
- --------------------------------------------
</TABLE>
PORTFOLIO INDUSTRY BREAKDOWN
% OF NET ASSETS*
<TABLE>
============================================
<S> <C>
Industrial Services 19
- --------------------------------------------
Industrial Products 17
- --------------------------------------------
Consumer Products 14
- --------------------------------------------
Financial Services 13
- --------------------------------------------
Financial Intermediaries 10
- --------------------------------------------
Retail 9
- --------------------------------------------
Technology 6
- --------------------------------------------
Consumer Services 5
- --------------------------------------------
Health 4
- --------------------------------------------
Natural Resources 3
- --------------------------------------------
</TABLE>
*Excludes cash and cash equivalents.
GOOD IDEAS THAT WORKED
<TABLE>
<CAPTION>
============================================
REALIZED AND
SECURITY UNREALIZED GAIN
- --------------------------------------------
<S> <C>
Willbros Group $422,749
- --------------------------------------------
MacKenzie Financial 330,611
- --------------------------------------------
Velcro Industries 315,900
- --------------------------------------------
Oakley 312,322
- --------------------------------------------
Stone & Webster 295,475
- --------------------------------------------
</TABLE>
During 1997's first half, the above companies made the largest positive
contributions, in dollar terms, to our overall performance. Among these winners,
there were no examples of hot new issues, high-priced takeovers or momentum
miracles. Rather, our top five performers emerged from a series of decisions
consistent with our long-term investment orientation. Positions were built when
market prices were low, reflecting differing opinions on future prospects.
GOOD IDEAS AT THE TIME
<TABLE>
<CAPTION>
============================================
REALIZED AND
SECURITY UNREALIZED LOSS
- --------------------------------------------
<S> <C>
Semi-Tech Corporation Cl. A $266,250
- --------------------------------------------
Groupe AB ADR 259,710
- --------------------------------------------
InterTAN 109,298
- --------------------------------------------
Wellington Underwriting 108,663
- --------------------------------------------
Standard Commercial 77,467
- --------------------------------------------
</TABLE>
Even the best small-cap companies can have periods of declining performance. We
believe if their balance sheets are strong and they have a history of high
internal returns, these companies will recover. We are generally well-rewarded
for our persistence, although market price rebounds can take longer than we
anticipated. Occasionally, we elect to redeploy the assets into other
opportunities. The above companies had the largest negative impact on the Fund's
performance in the first half of 1997.
THE ROYCE FUNDS SEMI-ANNUAL REPORT 1997 | 13
<PAGE>
HISTORY SINCE INCEPTION
- -------------------------------------------------------------------------------
The following table details the share accumulations by an initial investor in
the Funds who reinvested all distributions (including fractional shares) and
participated fully in primary subscriptions for each of the rights offerings.
Full participation in distribution reinvestments and rights offerings maximizes
the returns available to an investor. This table should be read in conjunction
with the Performance Reviews of the Funds.
<TABLE>
<CAPTION>
AMOUNT PURCHASE NAV MKT
HISTORY INVESTED PRICE SHARES VALUE* VALUE*
------- -------- -------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
ROYCE VALUE TRUST
11/28/86 Initial Purchase $10,000 $10.000 1,000 $ 9,280 $10,000
10/15/87 Distribution $.30 7.000 42
12/31/87 Distribution $.22 7.125 32 8,578 7,250
12/27/88 Distribution $.51 8.625 63 10,529 9,238
9/22/89 Rights Offering 405 9.000 45
12/29/89 Distribution $.52 9.125 67 12,942 11,866
9/24/90 Rights Offering 457 7.375 62
12/31/90 Distribution $.32 8.000 52 11,713 11,074
9/23/91 Rights Offering 638 9.375 68
12/31/91 Distribution $.61 10.625 82 17,919 15,697
9/25/92 Rights Offering 825 11.000 75
12/31/92 Distribution $.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
- -----------------------------------------------------------------------------------------------------
6/30/97 $16,322 2,878 $46,595 $39,573
- -----------------------------------------------------------------------------------------------------
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 $.05 6.750 9 9,163 8,462
12/7/95 Distribution $.36 7.500 58 11,264 10,136
12/6/96 Distribution $.80 7.625 133 13,132 11,550
- -----------------------------------------------------------------------------------------------------
6/30/97 $ 8,900 1,400 $14,700 $12,600
- -----------------------------------------------------------------------------------------------------
ROYCE GLOBAL TRUST
10/31/96 Initial Purchase $ 4,375 $ 4.375 1,000 $ 5,280 $ 4,375
12/31/96 5,520 4,594
- -----------------------------------------------------------------------------------------------------
6/30/97 $ 4,375 1,000 $ 6,360 $ 5,000
- -----------------------------------------------------------------------------------------------------
</TABLE>
* Other than for initial purchase and 6/30/97, values are stated as of December
31 of the year indicated, after reinvestment of distributions.
THE ROYCE FUNDS SEMI-ANNUAL REPORT 1997 | 14
<PAGE>
DISTRIBUTION REINVESTMENT AND CASH PURCHASE OPTIONS FOR COMMON STOCKHOLDERS
- ---------------------------------------------------------------------------
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 because his interest is diluted through the issuance of
new shares.
HOW DOES THE REINVESTMENT OF DISTRIBUTIONS FROM THE ROYCE
CLOSED-END FUNDS WORK?
Simply put, it works by the Funds automatically issuing shares
in payment of distributions unless you indicate to the contrary.
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 State Street in writing. A registered stockholder also
has the option to receive the distribution in the form of a stock
certificate or in cash if State Street is properly notified.
WHAT IF MY SHARES ARE HELD BY A BROKERAGE FIRM OR A BANK?
If your shares are held in the name of a brokerage firm, bank,
or other intermediary as the stockholder of record, you should
contact your brokerage firm or bank to be certain that it is
automatically reinvesting distributions on your behalf. If they are
unable to reinvest distributions on your behalf, you should have
your shares registered in your name in order to participate.
WHAT OTHER FEATURES ARE AVAILABLE FOR REGISTERED STOCKHOLDERS?
The Distribution Reinvestment and Cash Purchase Plans also
allow registered stockholders to make optional cash purchases of
shares of a Fund's common stock directly through State Street on a
monthly basis, and to deposit certificates representing your Fund
shares with the State Street for safekeeping. The Funds' investment
adviser is absorbing all commissions on optional cash purchases
under the Plans through December 31, 1998.
HOW DO THE PLANS WORK FOR REGISTERED STOCKHOLDERS?
State Street 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 State Street in non-certificated form in the name of the
participant, and each participant will be able to vote those shares
at a shareholder meeting or by proxy. A participant may also send
other stock certificates held by them to State Street to be held in
non-certificated form. There is no service fee charged to
participants for reinvesting distributions. If a participant elects
to sell shares from a Plan account, State Street will deduct a $2.50
fee plus brokerage commissions from the sale transaction. 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 Investor Services representatives at (800)
221-4268 or you can request a copy of the Plan for your Fund from
State Street. All correspondence (including notifications) should be
directed to: [Name of Fund] Distribution Reinvestment and Cash
Purchase Plan, c/o State Street Bank and Trust Company, PO Box 8200,
Boston, MA 02266-8200, telephone (800) 426-5523.
15 | THE ROYCE FUNDS SEMI-ANNUAL REPORT 1997
<PAGE>
UPDATES & NOTES TO PERFORMANCE AND RISK INFORMATION
- -------------------------------------------------------------------------------
[graphic of a computer monitor displaying words THE ROYCE FUNDS]
THE ROYCE FUNDS UNVEILS AN UPDATED WEB SITE
We want to draw your attention to our newly enhanced internet web site
(www.roycefunds.com) where you can find out more about our small and micro-cap
open-end and closed-end fund offerings, obtain the most recent quarterly
performance, and review recent articles and Fund write-ups as well as up-to-the
minute topics.
ROYCE & ASSOCIATES, INC. NAME CHANGE (FORMERLY QUEST ADVISORY CORP.)
We recently announced a name change of the Funds' Investment Adviser, from
Quest Advisory Corp. to Royce & Associates, Inc. The new name change more
closely identifies the name of the Adviser with that of the Funds that it
manages and recognizes the important contributions of the Adviser's associates.
NOTES TO PERFORMANCE AND RISK INFORMATION
All performance information is presented on a total return basis and
reflects the reinvestment of distributions. Past performance is no guarantee of
future results. Share prices will fluctuate, so that shares may be worth more or
less than their original cost when sold.
Beta and standard deviation are measures of a fund's relative risk and are
calculated for the trailing 36-month period. Beta is a measure of sensitivity to
market movements compared to the unmanaged S&P 500 index, with the beta of the
S&P 500 equal to 1.00. A low beta means that a fund's market related volatility
has been low. 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 indices referred to in this report are
unmanaged indices of common stocks.
16 | THE ROYCE FUNDS SEMI-ANNUAL REPORT 1997
<PAGE>
[SIDEBAR]
So while the "bulls" of both basketball and the market may reach dazzling new
heights this year, we will continue to hone our approach and emphasize building
returns over the long term.
[END SIDEBAR]
POSTSCRIPT
- -------------------------------------------------------------------------------
[graphic of basketball between a pair of hands]
ALL THAT JAZZ
This year's National Basketball Association Championship Finals pitted the
high-flying exploits of Michael Jordan and the Chicago Bulls against the Utah
Jazz. The appearance this year of the Jazz represented the culmination of over a
decade's work for two of the game's premier players, John Stockton and league
MVP Karl Malone. To achieve a consistent level of success, these two players
have relied on a style of play that is the complete antithesis of Jordan & Co.'s
acrobatic airborne style. The Jazz are patient; they rely on the fundamentals of
intelligent ballhandling and passing, smart shot selection and tough defense.
Their two stalwarts, Stockton & Malone, specialize in one of basketball's
oldest and most reliable plays, the pick and roll. Stockton dribbles the ball
toward the 6'10" Malone, who sets the "pick," standing in the way of the player
defending the smaller, quicker Stockton, in effect taking that opponent out of
the play. Malone then "rolls" toward the basket to receive a pass from Stockton
and make an easy score. This formula has been confounding the team's opponents
for years, in spite of the fact that every team the Jazz plays knows what is
coming. The key to the duo's success lies in their execution, in their ability
to master a fundamentally sound approach.
You might describe the fundamental approach we bring to small-cap value
investing as our version of the pick and roll. Whether in basketball or stock
selection, each approach hinges on two elements working closely in sync with one
another to achieve success. We employ the "pick" on small-cap stocks with the
"roll" toward a disciplined value approach. Consistent application over the
years may have made what we do predictable, but we have been no less successful
for being so. For over twenty years, we have emphasized the fundamentals of
investing when looking for small company stocks. As value investing continues to
"score points" with solid returns in 1997, we are witnessing what looks like a
return to a period of higher volatility. This environment gives us the
"home-court advantage," as a more volatile market demands active management and
closer attention to risk factors. The importance we place on a company's
financial characteristics at the time of purchase is the essential element to
our risk-averse value approach.
<PAGE>
Why Value Investors Rely on
THE ROYCE FUNDS
^ ONE OF THE MOST WELL-RESPECTED AND OLDEST SMALL-CAP INVESTMENT MANAGERS
WITH A VALUE ORIENTATION -- We are an independent small-cap manager with
over 20 years of investment management experience. Based in New York, ROYCE
has more than $2 billion in total assets under management -- all focused on
small and micro-cap value investing. We offer a full range of small-cap,
open-end mutual funds and closed-end funds, providing investors and
advisors with a wide variety of small-cap alternatives.
^ DEDICATED PROFESSIONALS WITH A SINGULAR FOCUS -- Over the last 20 years, we
have built substantial trading and research relationships in an attempt to
provide stockholders with the best possible small-cap portfolios available.
Our time-tested investment approach is supported by 12 professionals.
Charles M. Royce, Chief Investment Officer, remains the primary portfolio
manager.
^ REALISTIC EXPECTATIONS AND CONSISTENT RESULTS -- ROYCE VALUE TRUST and
ROYCE MICRO-CAP TRUST are consistently ranked among the "lowest risk"
domestic equity closed-end funds available. We offer a systematic and
disciplined investment approach that avoids style and capitalization drift.
All the funds seek to provide above average full market cycle total returns
with below average risk.
^ CO-OWNERSHIP OF FUNDS -- We believe it is important for our employees'
financial interests to be congruent with our stockholders' financial
interests. The Firm's officers and employees currently have more than $30
million invested in the Funds.
VALUE INVESTING IN SMALL COMPANIES FOR OVER 20 YEARS
-----------------
For General Information, Adviser Services
Additional Report Copies For Fund Material, Performance Updates,
(800) 221-4268 (800) 59-ROYCE (597-6923)
Stockholder Services
(800) 426-5523
State Street Bank and Trust Company E-mail: [email protected]
Custodian, Transfer Agent and Registrar Web address: www.roycefunds.com
1-800-426-5523
The Royce Funds 1414 Avenue of the Americas New York, NY 10019
<PAGE>
Royce Value Trust
Financial Statements
June 30, 1997
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ROYCE VALUE TRUST, INC.
- -------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS JUNE 30, 1997 (UNAUDITED)
- -------------------------------------------------------------------------------
COMMON STOCKS -- 94.9%
SHARES VALUE
------ -----
CONSUMER PRODUCTS -- 14.6%
[dbldag]Allen Organ Company Cl. B 67,769 $ 2,702,289
Bassett Furniture Industries 120,087 3,399,963
Burnham Corporation Cl. A 32,600 1,173,600
Burnham Corporation Cl. B 18,000 648,000
Conso Products Co.* 117,375 1,437,844
A.T. Cross Company Cl. A 23,700 302,175
Ethan Allen Interiors 46,500 2,650,500
Farmer Bros. 24,100 3,060,700
First Years 68,072 1,446,530
Flexsteel Industries 91,400 1,073,950
Fossil* 10,000 177,500
Garan Incorporated 140,300 2,823,538
Gibson Greetings* 92,600 2,083,500
Hershey Creamery Company 643 1,086,670
J & J Snack Foods Corp.* 52,200 802,575
Johnson Worldwide Associates Cl. A* 193,300 2,488,737
Juno Lighting 132,200 2,148,250
K-Swiss Cl. A 177,900 2,801,925
La-Z-Boy 9,400 338,400
Lazare Kaplan International* 117,600 1,969,800
Lifetime Hoan Corporation* 212,669 1,860,854
Marisa Christina* 189,000 1,771,875
Matthews International Cl. A 54,700 1,996,550
Midwest Grain Products* 222,650 2,950,113
National Presto Industries 17,600 709,500
Oshkosh B'Gosh Cl. A 82,300 1,790,025
The Rival Company 118,500 1,747,875
Seaboard Corporation 4,050 1,069,200
Seattle FilmWorks* 126,787 1,521,444
Skyline Corporation 133,400 3,284,975
The L. S. Starrett Company Cl. A 73,700 2,349,187
Steck-Vaughn Publishing* 55,919 754,907
Sturm, Ruger & Company 130,500 2,561,062
Thomaston Mills Cl. A 160,400 1,503,750
Thor Industries 133,300 3,315,838
The Topps Company* 518,100 2,169,544
Velcro Industries 52,600 4,313,200
WLR Foods 20,105 163,353
Weyco Group 30,200 1,963,000
------------
72,412,698
------------
CONSUMER SERVICES -- 3.0%
Bowl America Cl. A 55,100 392,588
Buffets* 224,550 1,894,641
Comair Holdings 81,000 2,242,687
Jenny Craig* 161,600 1,121,100
Grey Advertising 13,417 4,427,610
International Dairy Queen Cl. A* 101,200 2,428,800
Shoney's* 182,300 1,082,406
True North Communications 58,000 1,435,500
------------
15,025,332
------------
FINANCIAL INTERMEDIARIES -- 16.4%
Alleghany Corporation* 20,505 4,459,838
ALLIED Group 94,125 3,576,750
SHARES VALUE
------ -----
ALLIED Life Financial 94,000 $ 1,856,500
BHI Corporation 53,700 1,181,400
Baker, Fentress & Company 66,102 1,305,514
Baldwin & Lyons Cl. B 126,000 2,850,750
Capitol Transamerica 120,075 3,272,044
The Commerce Group 130,018 3,201,693
The First National Bank of Anchorage 1,050 1,884,750
Fremont General Corporation 54,750 2,203,688
Fund American Enterprises
Holdings 7,500 787,500
Gryphon Holdings* 143,800 2,228,900
Highlands Insurance Group* 128,000 2,576,000
Independence Holding Company 56,664 570,181
Intercargo Corporation 143,100 1,681,425
Keystone Heritage Group 13,615 428,022
Lawyers Title 117,500 2,217,813
Legg Mason 10,000 538,125
Leucadia National Corporation 109,300 3,381,469
Markel Corporation* 4,200 537,600
The Mechanics Bank 200 1,520,000
Medical Assurance* 47,696 1,937,650
NYMAGIC 57,100 1,177,687
National Bancorp of Alaska 34,270 2,895,815
Nobel Insurance 119,500 1,777,563
Oriental Financial Group 54,720 1,545,840
Orion Capital Corporation 44,687 3,295,666
PXRE Corporation 178,710 5,495,332
Pennsylvania Manufacturers Cl. A 197,400 3,059,700
Piper Jaffray Companies 93,800 1,922,900
RLI Corp. 19,250 701,422
Raymond James Financial 5,000 136,875
Titan Holdings 40,516 962,255
Trenwick Group 125,850 4,719,375
Wesco Financial 17,800 5,789,450
Zenith National Insurance 139,200 3,758,400
------------
81,435,892
------------
FINANCIAL SERVICES -- 6.4%
E.W. Blanch Holdings 105,900 2,826,206
Crawford & Company Cl. A 155,250 2,386,969
Crawford & Company Cl. B 75,300 1,223,625
Eaton Vance Corp. 111,800 3,109,438
Erie Indemnity Company Cl. A 6,500 255,125
Arthur J. Gallagher & Co. 96,900 3,657,975
Hilb, Rogal & Hamilton 202,475 3,442,075
Investors Financial Services 39,059 1,855,302
The John Nuveen Company Cl. A 21,400 668,750
New England Investment
Companies, L.P. 59,500 1,539,563
Old Guard Group 169,000 2,545,563
Phoenix Duff & Phelps 157,900 1,164,513
The Pioneer Group 127,800 2,939,400
SEI Investments Company 21,200 511,450
U.S. Global Investors Cl. A* 249,205 521,773
Willis Corroon Group ADR+ 265,200 2,966,925
------------
31,614,652
------------
THE ROYCE FUNDS SEMI-ANNUAL REPORT 1997 | 3
<PAGE>
ROYCE VALUE TRUST, INC.
- -------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS JUNE 30, 1997 (UNAUDITED)
- -------------------------------------------------------------------------------
SHARES VALUE
------ -----
HEALTH -- 2.0%
Diagnostic Products 25,200 $ 795,375
Haemonetics Corporation* 211,000 4,035,375
Life Technologies 65,450 1,816,237
Marquette Medical Systems* 37,500 825,000
Nitinol Medical Technologies* 114,600 1,733,325
Spacelabs Medical* 32,200 821,100
-------------
10,026,412
-------------
INDUSTRIAL PRODUCTS -- 21.3%
American Filtrona 65,000 2,665,000
Ameron International 18,000 1,019,250
Ash Grove Cement Company Cl. B 77,518 4,651,080
BHA Group 51,909 960,317
Baldor Electric Company 16,500 487,781
Blessings Corporation 160,900 1,669,337
W. H. Brady Cl. A 83,100 2,409,900
Carbo Ceramics 45,100 1,228,975
Cascade Corp. 47,000 907,688
Central Steel & Wire Company 3,699 2,330,370
Chemfab Corporation* 132,219 2,776,599
CLARCOR 19,700 487,575
ConBraCo Industries 7,630 3,738,700
Curtiss-Wright Corporation 56,300 3,279,475
Decker Manufacturing 6,022 252,924
Delta Woodside Industries* 125,400 846,450
Fab Industries 98,000 3,068,625
Falcon Products 86,300 1,159,656
Federal Signal Corporation 9,000 226,125
[dbldag]General Builders* 73,645 46,028
P. H. Glatfelter Company 93,700 1,874,000
Hawkins Chemical 133,117 1,098,215
International Aluminum 68,600 1,817,900
Kaydon Corporation 85,700 4,252,862
Kimball International Cl. B 85,900 3,457,475
Knape & Vogt Manufacturing 79,750 1,276,000
LeaRonal 59,650 1,700,025
Lilly Industries Cl. A 183,483 3,692,595
The Lincoln Electric Company 11,990 419,650
The Lincoln Electric
Company Cl. A 70,300 2,688,975
Liqui-Box Corporation 72,378 2,442,758
MacDermid 108,777 4,990,145
Mine Safety Appliances 21,700 1,312,850
Paul Mueller Company 53,200 2,028,250
Nordson Corporation 23,000 1,477,750
Oil-Dri Corporation of America 37,600 603,950
Oregon Steel Mills 83,800 1,670,762
Oshkosh Truck Corporation Cl. B 121,600 1,732,800
[dbldag]Peerless Mfg. Co. 79,300 852,475
Penn Engineering and
Manufacturing 132,600 2,602,275
Penn Engineering and
Manufacturing Cl. A 34,800 665,550
Preformed Line Products 41,300 1,796,550
Puerto Rican Cement Company 94,900 3,090,181
Quaker Chemical 92,450 1,606,319
SHARES VALUE
------ -----
Robroy Industries Cl. A 51,270 $ 794,685
Shorewood Packaging* 82,600 1,879,150
Simpson Manufacturing Co.* 126,700 3,357,550
The Standard Register Company 126,200 3,864,875
Tecumseh Products Company Cl. A 33,300 1,993,837
Thermal Industries* 42,586 638,790
Unifi 47,800 1,786,525
Versa Technologies 78,200 1,231,650
Wellman 25,000 434,375
Woodward Governor Company 126,800 4,564,800
Zero Corporation 70,800 1,858,500
-------------
105,766,904
-------------
INDUSTRIAL SERVICES -- 11.9%
Aceto Corporation 33,340 487,598
Air Express International 64,712 2,572,302
AirNet Systems* 92,100 1,508,137
Arnold Industries 233,648 3,972,016
Guy F. Atkinson Company* 102,200 713,803
Bowne & Co. 43,600 1,520,550
Circle International Group 125,825 3,318,634
Dames & Moore 32,800 405,900
Devon Group* 5,000 178,750
DIMON Incorporated 103,200 2,734,800
Ennis Business Forms 191,900 1,847,038
FCA International * 194,500 316,901
Fisher Companies 7,648 971,296
Frozen Food Express Industries 265,135 2,286,789
Insituform Technologies Cl. A* 182,100 1,115,362
Kenan Transport 40,500 825,188
Lufkin Industries 88,700 2,328,375
Merrill Corporation 99,800 3,630,225
Nabors Industries* 10,000 250,000
New England Business Service 95,000 2,499,688
Nichols Research Corporation* 15,950 334,950
Perini Corporation* 88,300 651,212
Pittston Burlington Group 57,100 1,605,938
Plenum Publishing Corporation 77,600 2,987,600
Rykoff-Sexton 148,900 3,471,231
Sevenson Environmental Services 132,200 2,577,900
Standard Commercial* 145,472 2,527,576
Stone & Webster 76,300 3,257,056
TBC Corporation* 148,000 1,239,500
Treadco 97,100 958,862
The Turner Corporation* 59,800 934,375
Vallen Corporation* 199,329 3,637,754
Willbros Group* 101,000 1,603,375
-------------
59,270,681
-------------
NATURAL RESOURCES -- 3.7%
Alico 72,700 1,426,738
Belden & Blake* 30,000 810,000
Tom Brown* 47,000 998,750
CalMat 194,900 4,190,350
Consolidated-Tomoka Land Co. 7,800 126,750
Devon Energy 10,000 367,500
FRP Properties* 119,900 3,237,300
4 | THE ROYCE FUNDS SEMI-ANNUAL REPORT 1997
<PAGE>
ROYCE VALUE TRUST, INC.
- -------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS JUNE 30, 1997 (UNAUDITED)
- -------------------------------------------------------------------------------
SHARES VALUE
------ -----
NATURAL RESOURCES -- (continued)
Florida Rock Industries 121,300 $ 4,927,812
MK Gold Company* 188,200 294,062
Toreador Royalty Corporation* 97,100 309,506
Vornado Realty Trust 21,450 1,547,081
--------------
18,235,849
--------------
RETAIL -- 4.7%
The Buckle* 44,600 1,025,800
Catherines Stores Corporation* 212,400 796,500
Cato Corporation Cl. A 133,700 726,994
Charming Shoppes* 387,400 2,021,744
Claire's Stores 30,900 540,750
Deb Shops 133,900 535,600
The Dress Barn* 110,700 2,158,650
Family Dollar Stores 54,800 1,493,300
Frederick's of Hollywood Cl. B 38,896 230,945
Little Switzerland* 80,000 480,000
Mikasa 97,600 1,390,800
Pier 1 Imports 47,405 1,256,232
Sotheby's Holdings Cl. A 155,100 2,617,313
Stanhome 184,000 6,049,000
Suzy Shier 10,000 65,173
The Talbots 52,400 1,781,600
--------------
23,170,401
--------------
TECHNOLOGY -- 6.2%
Communications Systems 32,000 456,000
DH Technology* 63,900 1,038,375
Dionex Corporation* 42,400 2,173,000
Electroglas* 78,600 1,979,737
Exar Corporation* 106,650 2,292,975
Giga-tronics* 57,100 399,700
Hach Company 32,150 634,962
IFR Systems* 16,089 301,669
ILC Technology* 79,200 851,400
Integral Systems* 26,300 861,325
Landauer 117,900 2,733,806
MacNeal-Schwendler 43,200 469,800
Marshall Industries* 136,000 5,066,000
Mosaix* 10,000 136,250
National Computer Systems 126,200 3,360,075
National Instruments Corp.* 5,000 176,250
Newport Corporation 50,900 572,625
Phoenix Technologies* 61,200 795,600
Pioneer-Standard Electronics 56,025 756,338
Richardson Electronics 173,500 1,442,219
[dbldag]Sage Laboratories 104,000 1,326,000
TECHNOLOGY -- (continued) SHARES VALUE
------ -----
Scitex Corporation 222,700 $ 1,962,544
Technical Communications* 58,800 525,525
Woodhead Industries 39,300 741,787
--------------
31,053,962
--------------
MISCELLANEOUS -- 4.7% 23,566,688
--------------
TOTAL COMMON STOCKS
(Cost $330,847,814) 471,579,471
--------------
PREFERRED STOCK -- 0.1%
Bird Corp. $1.85 Conv.
(Cost $371,659) 23,750 $ 415,625
--------------
PRINCIPAL
AMOUNT
----------
CORPORATE BONDS -- 1.7%
Dixie Group 7.00% Conv. Sub.
Deb. due 5/15/12 $ 824,000 702,460
International Semi-Tech 0% Sr.
Disc. Note due 8/15/03 6,158,000 3,679,405
Richardson Electronics 8.25%
Conv. Sub. Deb. due 6/15/06 2,049,000 1,762,140
Richardson Electronics 7.25%
Conv. Sub. Deb. due 12/15/06 419,000 318,440
Shoney's 0% Sub. Conv. Deb.
due 4/11/04 4,146,000 1,746,503
Thorn Apple Valley 9.00%
Conv. Sub. Deb. due 1/04/07 100,000 104,000
--------------
TOTAL CORPORATE BONDS
(Cost $7,797,477) 8,312,948
--------------
REPURCHASE AGREEMENT -- 11.5%
State Street Bank & Trust Company,
5.15% dated 6/30/97, due 07/01/97,
maturity value $57,008,154
(collateralized by U.S. Treasury Notes,
6% due 5/31/98, valued at $58,141,235)
(Cost $57,000,000) 57,000,000
--------------
TOTAL INVESTMENTS -- 108.2%
(Cost $396,016,950) 537,308,044
LIABILITIES LESS CASH AND
OTHER ASSETS -- (8.2)% (40,594,361)
--------------
NET ASSETS -- 100.0% $ 496,713,683
==============
- -------------------------------------------------------------------------------
* Non-income producing.
+ American Depository Receipt.
[DBLDAG] At June 30, 1997, the Fund owned 5% or more of the Company's
outstanding shares thereby making the Company an affiliated person as
that term is defined in the Investment Company Act of 1940.
INCOME TAX INFORMATION: The cost of total investments for federal income tax
purposes was $396,016,950. At June 30, 1997, net unrealized appreciation for
all securities was $141,291,094, consisting of aggregate gross unrealized
appreciation of $152,291,896 and aggregate gross unrealized depreciation of
$11,000,802.
The accompanying notes are an integral part
of the financial statements.
THE ROYCE FUNDS SEMI-ANNUAL REPORT 1997 | 5
<PAGE>
ROYCE VALUE TRUST, INC.
- -------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1997 (UNAUDITED)
- -------------------------------------------------------------------------------
ASSETS:
Investments at value (identified cost $339,016,950) $ 480,308,044
Repurchase agreement (at cost and value) 57,000,000
Cash 878,244
Receivable for investments sold 690,488
Receivable for dividends and interest 573,390
Prepaid expenses and other assets 65,742
- --------------------------------------------------------------- --------------
Total Assets 539,515,908
- --------------------------------------------------------------- --------------
LIABILITIES:
Notes payable 38,849,994
Preferred dividend accrued but not yet declared 2,400,000
Payable for investments purchased 1,286,976
Payable for investment advisory fee 139,889
Accrued expenses 125,366
- --------------------------------------------------------------- --------------
Total Liabilities 42,802,225
- --------------------------------------------------------------- --------------
Net Assets $ 496,713,683
=============================================================== ==============
Net Assets applicable to Preferred Stock at a liquidation
value of $25 per share $ 60,000,000
=============================================================== ==============
Net assets applicable to Common Stock at a net asset value
per share which assumes conversion of
Notes -- $16.19 $ 436,713,683
=============================================================== ==============
SUMMARY OF STOCKHOLDERS' EQUITY:
8% Cumulative Preferred Stock -- par value $0.001 per share;
2,400,000 shares outstanding 2,400
Common Stock -- par value $0.001 per share;
26,348,378 shares outstanding 26,348
Additional paid-in capital 330,836,574
Undistributed net investment income 4,131,036
Accumulated net realized gain on investments 22,826,231
Preferred dividend accrued but not yet declared (2,400,000)
Net unrealized appreciation on investments 141,291,094
- --------------------------------------------------------------- --------------
Net Assets $ 496,713,683
=============================================================== ==============
The accompanying notes are an integral part
of the financial statements.
- -------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31,
INVESTMENT OPERATIONS: (UNAUDITED) 1996
-----------------------------------
<S> <C> <C>
Net investment income $ 2,838,629 $ 4,559,614
Net realized gain on investments 12,512,931 33,673,949
Net change in unrealized appreciation on investments 41,925,451 18,650,893
- --------------------------------------------------------------------------------- ------------ -------------
Net increase in net assets from investment operations 57,277,011 56,884,456
- --------------------------------------------------------------------------------- ------------ -------------
DISTRIBUTIONS TO PREFERRED STOCKHOLDERS:
Net investment income -- (218,400)
Net realized gain on investments -- (1,504,800)
Preferred dividend accrued but not yet declared (2,400,000) --
- --------------------------------------------------------------------------------- ------------ -------------
Total distributions to Preferred Stockholders (2,400,000) (1,723,200)
- --------------------------------------------------------------------------------- ------------ -------------
DISTRIBUTIONS TO COMMON STOCKHOLDERS:
Net investment income -- (3,626,059)
Net realized gain on investments -- (24,935,360)
- --------------------------------------------------------------------------------- ------------ -------------
Total distributions to Common Stockholders -- (28,561,419)
- --------------------------------------------------------------------------------- ------------ -------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from shares issued for distributions reinvested by Common Stockholders -- 18,526,484
Net proceeds from issuance of Preferred stock -- 57,740,000
- --------------------------------------------------------------------------------- ------------ -------------
Total capital stock transactions -- 76,266,484
- --------------------------------------------------------------------------------- ------------ -------------
NET INCREASE IN NET ASSETS 54,877,011 102,866,321
NET ASSETS:
Beginning of period 441,836,672 338,970,351
- --------------------------------------------------------------------------------- ------------ -------------
End of period (including undistributed net investment income of $4,131,036 and
$1,292,408, respectively) $496,713,683 $ 441,836,672
================================================================================= ============ =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
6 | THE ROYCE FUNDS SEMI-ANNUAL REPORT 1997
<PAGE>
ROYCE VALUE TRUST, INC.
- -------------------------------------------------------------------------------
STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
- -------------------------------------------------------------------------------
INVESTMENT INCOME:
INCOME:
Dividends $3,646,951
Interest 1,748,668
- --------------------------------------------------------------------------
Total Income 5,395,619
- --------------------------------------------------------------------------
EXPENSES:
Interest expense 1,150,000
Investment advisory fees 843,455
Administrative and office facilities expenses 151,759
Amortization of underwriting discount and offering costs 81,812
Custodian and transfer agent fees 79,203
Professional fees 28,589
Directors' fees 26,468
Other expenses 236,610
- --------------------------------------------------------------------------
Total Expenses 2,597,896
Fees Waived by Investment Adviser (40,906)
- --------------------------------------------------------------------------
Net Expenses 2,556,990
- --------------------------------------------------------------------------
Net Investment Income 2,838,629
- --------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 12,512,931
Net change in unrealized appreciation on investments 41,925,451
- --------------------------------------------------------------------------
Net realized and unrealized gain on investments 54,438,382
- --------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM INVESTMENT OPERATIONS $57,277,011
==========================================================================
STATEMENT OF CASH FLOWS SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
- -------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Investment income received $ 5,580,423
Interest paid on Notes (1,150,000)
Payment of operating expenses (1,317,282)
Purchases of investments (130,207,784)
Proceeds from sales and maturities of investments 127,972,887
- --------------------------------------------------------------------------
Cash provided from operating activities 878,244
Cash at beginning of period --
- --------------------------------------------------------------------------
Cash at end of period $ 878,244
==========================================================================
RECONCILIATION OF NET INCREASE IN NET ASSETS FROM INVESTMENT
OPERATIONS TO CASH PROVIDED FROM OPERATING ACTIVITIES:
Net increase in net assets from investment operations 57,277,011
Net increase in investments (16,043,602)
Net increase in unrealized appreciation on investments (41,925,451)
Decrease in dividends and interest receivable 184,805
Decrease in receivable for investments sold 386,720
Accretion of offering costs on Notes 81,812
Increase in payable for investments purchased 909,053
Increase in accrued expenses and other assets 7,896
- --------------------------------------------------------------------------
Cash provided from operating activities $ 878,244
==========================================================================
The accompanying notes are an integral part of the financial statements.
THE ROYCE FUNDS SEMI-ANNUAL REPORT 1997 | 7
<PAGE>
ROYCE VALUE TRUST, INC.
- -------------------------------------------------------------------------------
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.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1997
(UNAUDITED)
--------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $14.32
- -------------------------------------------------------------------------------
INVESTMENT OPERATIONS (A):
Net investment income 0.10
Net realized and unrealized gain on investments 1.86
- -------------------------------------------------------------------------------
Total from investment operations 1.96
- -------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO PREFERRED STOCKHOLDERS:
Net investment income --
Net realized gain on investments --
Preferred dividend accrued but not yet declared (0.09)
- -------------------------------------------------------------------------------
Total dividends and distributions to Preferred Stockholders (0.09)
- -------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO COMMON STOCKHOLDERS:
Net investment income --
Net realized gain on investments --
- -------------------------------------------------------------------------------
Total dividends and distributions to Common Stockholders --
- -------------------------------------------------------------------------------
CAPITAL STOCK TRANSACTIONS:
Effect of rights offering --
Effect of reinvestment of distributions by Common Stockholders --
- -------------------------------------------------------------------------------
Total capital stock transactions --
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD (A) $16.19
===============================================================================
MARKET VALUE, END OF PERIOD $13.750
===============================================================================
TOTAL RETURN (B):
Net Asset Value (A) 13.1%
Market Value 8.9%
RATIOS BASED ON AVERAGE NET ASSETS:
Total expenses (C) 1.14**
Management fee expense 0.36**
Interest expense 0.51**
Other operating expenses 0.27**
Net investment income 1.26**
SUPPLEMENTAL DATA:
Net Assets, End of Period (in thousands) $496,714
Portfolio Turnover Rate 12%
Average Commission Rate Paid+ $0.0633
NOTES:
Total amount outstanding (in thousands) $40,000
Asset coverage per note 1,339%
Average market value per note (D) $100.61
PREFERRED STOCK:
Total shares outstanding 2,400,000
Asset coverage per share 536%
Liquidation preference per share $25.00
Average market value per share (D) $25.08
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------
1996 1995 1994 1993 1992
--------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $13.56 $12.34 $13.47 $12.50 $11.23
- -------------------------------------------------------------- --------- -------- -------- -------- ---------
INVESTMENT OPERATIONS (A):
Net investment income 0.26 0.04 0.04 0.09 0.15
Net realized and unrealized gain on investments 2.48 2.70 0.09 2.12 2.12
- -------------------------------------------------------------- --------- -------- -------- -------- ---------
Total from investment operations 2.74 2.74 0.13 2.21 2.27
- -------------------------------------------------------------- --------- -------- -------- -------- ---------
DIVIDENDS AND DISTRIBUTIONS TO PREFERRED STOCKHOLDERS:
Net investment income (0.09) -- -- -- --
Net realized gain on investments (0.63) -- -- -- --
Preferred dividend accrued but not yet declared -- -- -- -- --
- -------------------------------------------------------------- --------- -------- -------- -------- ---------
Total dividends and distributions to Preferred Stockholders (0.72) -- -- -- --
- -------------------------------------------------------------- --------- -------- -------- -------- ---------
DIVIDENDS AND DISTRIBUTIONS TO COMMON STOCKHOLDERS:
Net investment income (0.15) (0.03) (0.01) (0.09) (0.15)
Net realized gain on investments (1.00) (1.26) (1.04) (1.06) (0.75)
- -------------------------------------------------------------- --------- -------- -------- -------- ---------
Total dividends and distributions to Common Stockholders (1.15) (1.29) (1.05) (1.15) (0.90)
- -------------------------------------------------------------- --------- -------- -------- -------- ---------
CAPITAL STOCK TRANSACTIONS:
Effect of rights offering -- (0.12) (0.14) (0.08) (0.06)
Effect of reinvestment of distributions by Common Stockholders (0.11) (0.11) (0.07)* (0.01) (0.04)
- -------------------------------------------------------------- --------- -------- -------- -------- ---------
Total capital stock transactions (0.11) (0.23) (0.21) (0.09) (0.10)
- -------------------------------------------------------------- --------- -------- -------- -------- ---------
NET ASSET VALUE, END OF PERIOD (A) $14.32 $13.56 $12.34 $13.47 $12.50
============================================================== ========== ======== ======== ========= =========
MARKET VALUE, END OF PERIOD $12.625 $11.875 $11.000 $12.875 $12.250
============================================================== ========== ======== ======== ========= =========
TOTAL RETURN (B):
Net Asset Value (A) 15.5% 22.6% 1.1% 17.9% 19.9%
Market Value 16.3% 20.5% (5.6)% 14.8% 26.8%
RATIOS BASED ON AVERAGE NET ASSETS:
Total expenses (C) 1.20% 2.01% 2.01% 1.33% 0.81%
Management fee expense 0.36% 0.97% 1.21% 1.09% 0.53%
Interest expense 0.60% 0.75% 0.46% -- --
Other operating expenses 0.24% 0.29% 0.34% 0.24% 0.28%
Net investment income 1.19% 0.34% 0.31% 0.74% 1.31%
SUPPLEMENTAL DATA:
Net Assets, End of Period (in thousands) $441,837 $338,970 $269,032 $246,558 $202,483
Portfolio Turnover Rate 34% 32% 35% 33% 40%
Average Commission Rate Paid+ $0.0574 -- -- -- --
NOTES:
Total amount outstanding (in thousands) $40,000 $40,000 $40,000 -- --
Asset coverage per note 1,202% 944% 769% -- --
Average market value per note (D) $100.68 $96.92 $95.62 -- --
PREFERRED STOCK:
Total shares outstanding 2,400,000 -- -- -- --
Asset coverage per share 481% -- -- -- --
Liquidation preference per share $25.00 -- -- -- --
Average market value per share (D) $25.20 -- -- -- --
</TABLE>
- --------------------------------------------------------------------------
(a) Commencing June 21, 1995, net asset value per share, net asset value total
return and income from investment operations are calculated assuming the
notes are fully converted except when the effect of doing so results in a
higher net asset value per share than would be calculated without such
assumption. If it were assumed the notes had not been converted, the net
asset value per share would have been increased by $0.38 at June 30, 1997,
and $0.17 and $0.09 at December 31, 1996 and 1995, respectively.
(b) The net asset value and market value total return assume a continuous common
stockholder who reinvested all net investment income dividends and capital
gain distributions and fully participated in primary rights offerings.
(c) Expense ratios before waiver of fees by the investment adviser would have
been 1.16% for the six months ended June 30, 1997, and 1.22%, 2.04% and
2.02% for the years ended December 31, 1996, 1995 and 1994, respectively.
(d) The average of all month-end market values during the period.
* Includes distributions paid January 31, 1994 and distributions paid December
30, 1994.
+ For fiscal years beginning on or after October 1, 1995, the fund is required
to disclose its average commission rate paid per share for purchases and
sales of investments.
** Annualized.
8 | THE ROYCE FUNDS SEMI-ANNUAL REPORT 1997
<PAGE>
ROYCE VALUE TRUST, INC.
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- -------------------------------------------------------------------------------
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Royce Value Trust, Inc. ("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 generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
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 listed on an exchange or on the Nasdaq National Market System
are valued on the basis of the last reported sale prior to the time the
valuation is made or, if no sale is reported for such day, at their bid price
for exchange-listed securities and at the average of their bid and asked
prices for Nasdaq securities. Quotations are taken from the market where the
security is primarily traded. Other over-the-counter securities for which
market quotations are readily available are valued at their bid price.
Securities for which market quotations are not readily available are valued at
their fair value under procedures established and supervised by the Fund's
Board of Directors. Bonds and other fixed income securities may be valued by
reference to other securities with comparable ratings, interest rates and
maturities, using established independent pricing services.
INVESTMENT TRANSACTIONS AND RELATED INVESTMENT INCOME:
Investment transactions are accounted for on the trade date and dividend
income is recorded on the ex-dividend date. Interest income is recorded on the
accrual basis. Realized gains and losses from investment transactions and
unrealized appreciation and depreciation of investments are determined on the
basis of identified cost for book and tax purposes.
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 "Income Tax Information".
DISTRIBUTIONS:
Dividend and capital gain distributions paid to Preferred Stockholders are
recorded on an accrual basis and distributions paid to Common Stockholders are
recorded on the ex-dividend date. These distributions are determined in
accordance with income tax regulations which may differ from generally
accepted accounting principles. Permanent book and tax basis differences
relating to stockholder distributions will result in reclassification to
paid-in capital and may affect net investment income per share. 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 at fiscal year end is distributed in the following year.
REPURCHASE AGREEMENTS:
The Fund enters into repurchase agreements with respect to its portfolio
securities solely with State Street Bank and Trust Company ("SSB&T"), the
custodian of its assets. The Fund restricts repurchase agreements to
maturities of no more than seven days. Securities pledged as collateral for
repurchase agreements are held by SSB&T until maturity of the repurchase
agreements. Repurchase agreements could involve certain risks in the event of
default or insolvency of SSB&T, including possible delays or restrictions upon
the ability of the Fund to dispose of the underlying securities.
INVESTMENT COMPANY CONVERTIBLE NOTES:
The Fund issued $40,000,000 aggregate principal amount of Investment
Company Convertible Notes ("Notes") on June 22, 1994. The Fund received
proceeds of $38,350,000 after the deduction of the underwriting discount and
offering costs incurred by the Fund in connection with the issuance of the
Notes. The underwriting discount and the offering costs of $1,200,000 and
$450,000, respectively, are being accreted on a straight line basis over the
term of the Notes.
The Notes, which are unsecured obligations of the Fund, mature on June 30,
2004 and bear interest payable on June 30 and December 31 of each year at the
rate of 5-3/4% per annum. The Notes have an Aaa rating from Moody's Investors
Service, Inc. ("Moody's").
The Notes are convertible into shares of Common Stock of the Fund at the
option of the holder, at any time prior to maturity, except during the period
from the second trading day prior to the ex-dividend date through the record
date unless an earlier date is selected by the Fund, and unless previously
redeemed at the option of the Fund. The conversion price at June 30, 1997 is
$13.19 per share. This conversion price is subject to an annual net adjustment
involving an escalation of 6.75% and a reduction for the impact on net asset
value per share of distributions to Common Stockholders.
Under the Investment Company Act of 1940, the Fund is required to maintain
an asset coverage of at least 300% for the Notes. In addition, the Indenture
governing the Notes requires the Fund to maintain a certain discounted asset
coverage for its portfolio
THE ROYCE FUNDS SEMI-ANNUAL REPORT 1997 | 9
<PAGE>
ROYCE VALUE TRUST, INC.
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- -------------------------------------------------------------------------------
that equals or exceeds the Basic Maintenance Amount under the guidelines
established by Moody's. The Fund has met these requirements since the issuance
of the Notes.
Commencing July 1, 1997, and any time thereafter prior to maturity, the
Fund may, at its option, redeem the Notes in whole or in part for cash at a
price equal to 100% of their principal amount, together with accrued interest
thereon. Prior to July 1, 1997, the Fund had the option to redeem the Notes
for cash at a price equal to 100% of their principal amount, together with
accrued interest, only if a redemption was necessary for the Fund to maintain
the required asset coverage for the Notes and/or continue to qualify as a
regulated investment company.
On July 1, 1999, if the average market price per $1,000 principal amount
of Notes for the 45 trading days ending May 31, 1999 is less than $950, the
Fund will either call all of the Notes for redemption or reset one or more of
the terms of the Notes so that the market value of the Notes is at or as close
as possible to par.
CAPITAL STOCK:
On August 23, 1996, the Fund issued and sold 2,400,000 shares of its 8%
Cumulative Preferred Stock. The stock has a liquidation preference of $25.00
per share plus an amount equal to accumulated and unpaid dividends to the date
of distributions.
Dividends on the Cumulative Preferred Stock are payable when, as and if
declared by the Board of Directors of the Fund, out of funds legally available
annually on December 23 in each year to the holders of record on the preceding
December 6.
The Fund is required to allocate long-term capital gain distributions and
other types of income proportionately among holders of shares of Common Stock,
Preferred Stock and Noteholders (to the extent they receive constructive
distributions). To the extent that dividends on the shares of Preferred Stock
are not paid from long-term capital gains, they will be paid from ordinary
income or net short-term capital gains or will represent a return of capital.
The Fund issued shares of Common Stock as reinvestment of dividends and
distributions by common stockholders totaling 1,512,360 for the year ended
December 31, 1996.
INVESTMENT ADVISORY AGREEMENT:
As compensation for its services under the Investment Advisory Agreement,
Royce & Associates, Inc. ("Royce") (formerly Quest Advisory Corp.) 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 600. Prior to July 1, 1996, the Fund's investment
performance was measured against the record of the Standard & Poor's 500
Composite Stock Price Index over a rolling period of 36 months. The present
Investment Advisory Agreement provides that, for the 18 month period from July
1, 1996 to December 31, 1997, the monthly fee payable to Royce will be the
lower of the fee calculated under it or the fee that would have been payable
to Royce for the month involved under the prior investment advisory agreement.
Beginning with the month of July 1997 and for each succeeding month under
the present Agreement, the Basic Fee will be a monthly fee equal to 1/12 of 1%
(1% on an annualized basis) of the average of the net assets of the Fund at
the end of each month included in the applicable performance period. The
performance period for each such month will be from July 1, 1996 to the most
recent month-end, until the Investment Advisory Agreement has been in effect
for 60 full calendar months, when it will become a rolling 60 month period
ending with the most recent calendar month.
The Basic Fee for each such month will be increased or decreased at the
rate of 1/12 of .05% per percentage point, depending on the extent, if any, by
which the investment performance of the Fund exceeds by more than two
percentage points, or is exceeded by more than two percentage points by, the
percentage change in the investment record of the S&P 600 for the performance
period. The maximum increase or decrease in the Basic Fee for any month may
not exceed 1/12 of .5%. Accordingly, for each month, commencing with the month
of July 1997, the maximum monthly fee rate as adjusted for performance will be
1/12 of 1.5% and will be 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 will be 1/12 of .5% and will be 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.
For the period from July 1, 1996 through June 30, 1997 under the present
Agreement, the Basic Fee is calculated as a monthly fee equal to 1/12 of 1% of
the net assets of the Fund at the end of each month in such period. The
performance period relating to such period is from July 1, 1996 through June
30, 1997. The Basic Fee for such period was also subject to increase or
decrease as set forth in the preceding paragraph, with the rate of such
increase or decrease being applied on an annualized basis. The maximum increase
or decrease in the Basic Fee for such period did not exceed .5%.
10 | THE ROYCE FUNDS SEMI-ANNUAL REPORT 1997
<PAGE>
ROYCE VALUE TRUST, INC.
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- -------------------------------------------------------------------------------
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 on an absolute basis. 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 six months ended June 30, 1997, the Fund accrued and paid Royce
advisory fees totaling $802,549, which is net of $40,906 voluntarily waived
by Royce.
TRANSACTIONS IN SHARES OF AFFILIATED COMPANIES:
An "Affiliated Company", as defined in the Investment Company Act of 1940,
is a company in which the Fund owns at least 5% of the company's outstanding
voting securities. The Fund effected the following transactions in shares of
such companies during the six months ended June 30, 1997.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Purchases Sales
--------------------- ---------------------
Realized Dividend
Affiliated Company Shares Cost Shares Cost Gain/Loss Income
- --------------------------- -------- ---------- -------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Allen Organ Company Cl. B -- -- 11,400 $460,975 $(13,540) $45,126
General Builders -- -- -- -- -- --
Peerless Mfg. Co. 21,500 $215,000 -- -- -- $28,900
Sage Laboratories -- -- -- -- -- $10,400
- -----------------------------------------------------------------------------------------------------
</TABLE>
PURCHASES AND SALES OF INVESTMENT SECURITIES:
For the six months ended June 30, 1997, the cost of purchases and proceeds
from sales of investment securities, other than short-term securities,
amounted to $74,118,131 and $52,886,167, respectively.
THE ROYCE FUNDS SEMI-ANNUAL REPORT 1997 | 11
<PAGE>
ROYCE MICRO-CAP TRUST, INC.
- -------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS JUNE 30, 1997 (UNAUDITED)
- -------------------------------------------------------------------------------
COMMON STOCKS -- 95.2%
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C>
CONSUMER PRODUCTS -- 19.2%
Aldila* 205,300 $ 1,141,981
Bassett Furniture Industries 52,800 1,494,900
Conso Products Co.* 53,300 652,925
Eskimo Pie Corporation 5,000 60,625
Farmer Bros. 5,000 635,000
Garan Incorporated 53,200 1,070,650
Gibson Greetings* 37,000 832,500
Golden Enterprises 80,600 574,275
Haggar Corp. 22,000 280,500
Johnson Worldwide Associates Cl. A* 67,100 863,912
Juno Lighting 57,500 934,375
Justin Industries 15,500 197,625
K-Swiss Cl. A 27,800 437,850
Kit Manufacturing Co.* 32,000 304,000
Kleinert's* 14,200 243,175
Lifetime Hoan Corporation* 120,054 1,050,473
Marisa Christina* 58,100 544,687
Matthews International Cl. A 53,000 1,934,500
Midwest Grain Products* 67,600 895,700
Mity-Lite* 23,400 324,675
Nobility Homes* 7,500 90,000
Oshkosh B'Gosh Cl. A 65,900 1,433,325
The Rival Company 39,000 575,250
Skyline Corporation 32,100 790,462
The Smithfield Companies 40,400 444,400
Steck-Vaughn Publishing* 42,881 578,893
Thor Industries 36,800 915,400
The Topps Company* 226,800 949,725
Toy Biz* 89,700 740,025
Velcro Industries 18,300 1,500,600
WLR Foods 21,110 171,519
Wellco Enterprises 25,500 315,563
Weyco Group 22,800 1,482,000
------------
24,461,490
------------
CONSUMER SERVICES -- 1.5%
Cornell Corrections 61,200 1,009,800
Jenny Craig* 84,700 587,606
IHOP Corp.* 10,000 310,000
------------
1,907,406
------------
FINANCIAL INTERMEDIARIES -- 11.3%
ALLIED Life Financial 43,600 861,100
BHI Corporation 29,400 646,800
Baldwin & Lyons Cl. B 28,024 634,043
Capitol Transamerica 32,265 879,221
Desert Community Bank 26,300 496,412
Gryphon Holdings* 38,200 592,100
Hanmi Bank* 5,209 83,995
Independence Holding Company 35,800 360,238
Intercargo Corporation 38,600 453,550
Iron and Glass Bancorp 17,000 697,000
Lawyers Title 32,900 620,987
Medical Assurance* 18,349 745,428
NYMAGIC 20,000 412,500
Nobel Insurance 87,700 1,304,538
Oriental Financial Group 27,000 762,750
PXRE Corporation 62,364 1,917,693
SHARES VALUE
------ -----
Pennsylvania Manufacturers Cl. A 56,609 $ 877,440
Piper Jaffray Companies 14,400 295,200
Resurgence Properties 98,000 698,250
Titan Holdings 17,676 419,805
Trenwick Group 16,650 624,375
------------
14,383,425
------------
FINANCIAL SERVICES -- 5.8%
E.W. Blanch Holdings 48,200 1,286,337
Duff & Phelps Credit Rating 54,900 1,667,588
Eaton Vance Corp. 37,200 1,034,625
Hilb, Rogal & Hamilton 50,300 855,100
Investors Financial Services 8,045 382,138
Old Guard Group 66,300 998,644
Phoenix Duff & Phelps 156,000 1,150,500
------------
7,374,932
------------
HEALTH -- 0.8%
Hauser* 26,800 144,050
Nitinol Medical Technologies* 63,600 961,950
------------
1,106,000
------------
INDUSTRIAL PRODUCTS -- 21.2%
AFC Cable Systems* 15,800 426,600
American Buildings Company* 35,700 963,900
American Filtrona 24,600 1,008,600
[dbldag] Art's-Way Manufacturing* 69,000 534,750
Ash Grove Cement Company 20,000 1,200,000
Atchison Casting* 40,000 665,000
BHA Group 54,021 999,388
Blessings Corporation 48,800 506,300
CFC International* 78,200 762,450
Carbo Ceramics 36,700 1,000,075
Chemfab Corporation* 80,700 1,694,700
Curtiss-Wright Corporation 17,500 1,019,375
DeVlieg-Bullard* 62,500 214,844
Fab Industries 42,500 1,330,781
Falcon Products 55,000 739,062
Hawkins Chemical 102,067 842,053
C. H. Heist* 42,000 280,875
International Aluminum 19,300 511,450
LSI Industries 25,900 349,650
Liqui-Box Corporation 15,000 506,250
MacDermid 13,577 622,845
Paul Mueller Company 16,650 634,781
Myers Industries 47,900 808,312
NN Ball and Roller 65,600 820,000
Oshkosh Truck Corporation Cl. B 47,100 671,175
Peerless Mfg. Co. 31,600 339,700
Penn Engineering and
Manufacturing 54,700 1,073,488
Penn Engineering and
Manufacturing Cl. A 11,900 227,587
Pioneer Metals* 1,570 392,500
Puerto Rican Cement Company 26,500 862,906
Simpson Manufacturing Co.* 56,500 1,497,250
Special Metals Corporation 33,000 643,500
Synalloy Corporation 56,800 1,001,100
Thermal Industries* 58,700 880,500
Todd Shipyards Corporation* 38,200 157,575
</TABLE>
12 | THE ROYCE FUNDS SEMI-ANNUAL REPORT 1997
<PAGE>
ROYCE MICRO-CAP TRUST, INC.
- -------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS JUNE 30, 1997 (UNAUDITED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C>
INDUSTRIAL PRODUCTS -- (continued)
Versa Technologies 37,900 $ 596,925
Vertex Communications* 10,000 267,500
-------------
27,053,747
-------------
INDUSTRIAL SERVICES -- 12.9%
Aceto Corporation 34,250 500,906
AirNet Systems* 71,200 1,165,900
Guy F. Atkinson Company* 85,200 595,069
Circle International Group 18,500 487,938
Dailey Petroleum Services 48,400 326,700
Devcon International* 80,100 370,463
Devon Group* 7,500 268,125
Ennis Business Forms 58,100 559,212
Frozen Food Express Industries 136,500 1,177,313
Insituform Technologies Cl. A* 87,400 535,325
Jaco Electronics* 21,600 155,250
Kenan Transport 24,800 505,300
Lufkin Industries 28,300 742,875
Merrill Corporation 20,400 742,050
New England Business Service 60,300 1,586,644
Plenum Publishing Corporation 22,100 850,850
Queen City Investments* 948 322,320
Rush Enterprises* 73,200 457,500
Sevenson Environmental Services 78,200 1,524,900
Standard Commercial* 62,022 1,077,632
Vallen Corporation* 55,500 1,012,875
Willbros Group* 92,900 1,474,788
-------------
16,439,935
-------------
NATURAL RESOURCES -- 2.9%
Alamco* 16,400 252,150
Alico 5,200 102,050
FRP Properties* 27,700 747,900
Florida Rock Industries 45,800 1,860,625
MK Gold Company* 101,600 158,750
PetroCorp Incorporated* 70,500 616,875
-------------
3,738,350
-------------
RETAIL -- 4.7%
Brookstone* 33,000 280,500
The Buckle* 10,700 246,100
Catherines Stores Corporation* 147,400 552,750
Cato Corporation Cl. A 103,700 563,869
Chico's FAS* 59,400 315,562
The Dress Barn* 41,900 817,050
Lillian Vernon 24,900 420,187
Ruby Tuesday* 31,000 695,563
Sterling Electronics* 22,800 290,700
Suzy Shier 156,800 1,021,905
SHARES VALUE
------ -----
RETAIL -- (continued)
Urban Outfitters* 60,000 $ 840,000
-------------
6,044,186
-------------
TECHNOLOGY -- 9.8%
BGS Systems, Inc. 43,000 1,182,500
CEM Corporation* 75,700 652,912
CSP* 78,400 583,100
Cerprobe Corporation* 28,500 370,500
Control Devices 50,000 637,500
DH Technology* 88,000 1,430,000
Figgie International Cl. B* 21,300 268,913
Giga-tronics* 40,482 283,374
ILC Technology* 98,800 1,062,100
Integral Systems* 15,400 504,350
Kronos* 15,000 412,500
Landauer 44,400 1,029,525
Modern Controls 24,600 332,100
Newport Corporation 60,300 678,375
PCD* 40,000 700,000
Praegitzer Industries* 35,000 389,375
Richardson Electronics 123,500 1,026,594
Sage Laboratories 14,500 184,875
Woodhead Industries 40,000 755,000
-------------
12,483,593
-------------
UTILITIES -- 0.2%
Southwest Water Company 18,104 221,774
-------------
MISCELLANEOUS -- 4.9% 6,286,237
-------------
TOTAL COMMON STOCKS
(Cost $92,892,348) 121,501,075
-------------
REPURCHASE AGREEMENT -- 3.9%
State Street Bank & Trust Company, 5.15%
dated 6/30/97, due 07/01/97, maturity
value $5,000,715 (collateralized by U.S.
Treasury Notes, 6.0% due 5/31/98, valued at
$5,100,197)
(Cost $5,000,000) 5,000,000
-------------
TOTAL INVESTMENTS -- 99.1%
(Cost $97,892,348) 126,501,075
CASH AND OTHER ASSETS LESS
LIABILITIES -- 0.9% 1,139,392
-------------
NET ASSETS -- 100.0% $127,640,467
=============
</TABLE>
- --------------------------------------------------------------------------------
* Non-income producing.
[dbldag] At June 30, 1997, the Fund owned 5% or more of the Company's
outstanding shares thereby making the Company an affiliated person as
that term is defined in the Investment Company Act of 1940.
INCOME TAX INFORMATION: The cost of total investments for federal income tax
purposes was $97,892,348. At June 30, 1997, net unrealized appreciation for all
securities amounted to $28,608,727, consisting of aggregate gross unrealized
appreciation of $31,166,056 and aggregate gross unrealized depreciation of
$2,557,329.
The accompanying notes are an integral part
of the financial statements.
THE ROYCE FUNDS SEMI-ANNUAL REPORT 1997 | 13
<PAGE>
ROYCE MICRO-CAP TRUST, INC.
- -------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1997 (UNAUDITED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments at value (identified cost $92,892,348) $121,501,075
Repurchase agreement (at cost and value) 5,000,000
Cash 883,375
Receivable for investments sold 506,550
Receivable for dividends and interest 97,182
Prepaid expenses and other assets 60,247
- ---------------------------------------------------------------------------
Total Assets 128,048,429
- ---------------------------------------------------------------------------
LIABILITIES:
Payable for investments purchased 291,450
Payable for investment advisory fees 41,452
Payable for administration fees 9,286
Accrued expenses 65,774
- ---------------------------------------------------------------------------
Total Liabilities 407,962
- ---------------------------------------------------------------------------
Net Assets $127,640,467
===========================================================================
ANALYSIS OF NET ASSETS:
Undistributed net investment income $ 447,013
Accumulated net realized gain on investments 10,461,552
Net unrealized appreciation on investments 28,608,727
Capital stock 12,154
Additional paid-in capital 88,111,021
- ---------------------------------------------------------------------------
Net Assets $127,640,467
===========================================================================
PRICING OF SHARES:
Net asset value per share $10.50
($127,640,467 [divided by] 12,153,511 shares outstanding)
===========================================================================
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31,
(UNAUDITED) 1996
INVESTMENT OPERATIONS: --------------- --------------
<S> <C> <C>
Net investment income $ 599,621 $ 947,752
Net realized gain on investments 5,751,659 12,128,883
Net change in unrealized appreciation on investments 7,336,165 2,989,227
- ---------------------------------------------------------------- -------------- ------------
Net increase in net assets from investment operations 13,687,445 16,065,862
- ---------------------------------------------------------------- -------------- ------------
DIVIDENDS AND DISTRIBUTIONS:
Net investment income -- (1,125,801)
Net realized gain on investments -- (7,880,607)
- ---------------------------------------------------------------- -------------- ------------
Total dividends and distributions -- (9,006,408)
- ---------------------------------------------------------------- -------------- ------------
CAPITAL STOCK TRANSACTIONS:
Dividend and distribution reinvestment -- 6,828,202
- ---------------------------------------------------------------- -------------- ------------
NET INCREASE IN NET ASSETS 13,687,445 13,887,656
NET ASSETS:
Beginning of period 113,953,022 100,065,366
- ---------------------------------------------------------------- -------------- ------------
End of period (Including undistributed net investment
income of $447,013 at June 30, 1997 and distributions
in excess of net investment income of $152,608 at
December 31, 1996) $127,640,467 $113,953,022
================================================================ ============== ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 | THE ROYCE FUNDS SEMI-ANNUAL REPORT 1997
<PAGE>
ROYCE MICRO-CAP TRUST, INC.
- -------------------------------------------------------------------------------
STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C>
INCOME:
Dividends $ 920,087
Interest 177,704
- ----------------------------------------------------- ------------
Total Income 1,097,791
- ------------------------------------------------------ ------------
EXPENSES:
Investment advisory fees 240,253
Administration fees 54,044
Custodian and transfer agent fees 40,560
Administrative and office facilities expenses 38,842
Professional fees 15,725
Directors' fees 9,541
Other expenses 99,205
- ------------------------------------------------------ ------------
Total Expenses 498,170
- ------------------------------------------------------ ------------
Net Investment Income 599,621
- ------------------------------------------------------ ------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 5,751,659
Net change in unrealized appreciation on investments 7,336,165
- ------------------------------------------------------ ------------
Net realized and unrealized gain on investments 13,087,824
- ------------------------------------------------------ ------------
NET INCREASE IN NET ASSETS FROM INVESTMENT OPERATIONS $13,687,445
====================================================== ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
THE ROYCE FUNDS SEMI-ANNUAL REPORT 1997 | 15
<PAGE>
ROYCE MICRO-CAP TRUST, INC.
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
This table is presented to show selected data for a share outstanding
throughout each period, and to assist stockholders in evaluating the Fund's
performance for the periods presented.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED FOR THE PERIOD
JUNE 30, 1997 YEAR ENDED DECEMBER 31, DECEMBER 14, 1993*
--------------- ------------------------------------- THROUGH
(UNAUDITED) 1996 1995 1994 DECEMBER 31, 1993
--------------- ------------ ------------ ----------- ------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $9.38 $8.89 $7.58 $7.27 $7.25
- ----------------------------------------------- -------- -------- -------- ------- -------
INVESTMENT OPERATIONS:
Net investment income 0.05 0.09 0.02 0.01 --
Net realized and unrealized gain on investments 1.07 1.32 1.69 0.41 0.02
- ----------------------------------------------- -------- -------- -------- ------- -------
Total from investment operations 1.12 1.41 1.71 0.42 0.02
- ----------------------------------------------- -------- -------- -------- ------- -------
DIVIDENDS AND DISTRIBUTIONS:
Net investment income -- (0.10) (0.02) (0.02) --
Net realized gain on investments -- (0.70) (0.34) (0.03) --
- ----------------------------------------------- -------- -------- -------- ------- -------
Total dividends and distributions -- (0.80) (0.36) (0.05) --
- ----------------------------------------------- -------- -------- -------- ------- -------
CAPITAL STOCK TRANSACTIONS:
Effect of rights offering -- -- -- (0.06) --
Effect of reinvestment of distributions -- (0.12) (0.04) -- --
- ----------------------------------------------- -------- -------- -------- ------- -------
Total capital stock transactions -- (0.12) (0.04) (0.06) --
- ----------------------------------------------- -------- -------- -------- ------- -------
NET ASSET VALUE, END OF PERIOD $10.50 $9.38 $8.89 $7.58 $7.27
=============================================== ======== ======== ======== ======= =======
MARKET VALUE, END OF PERIOD $8.984 $8.25 $8.00 $7.00 $7.50
=============================================== ======== ======== ======== ======= =======
TOTAL RETURN (A):
Net Asset Value 11.9% 16.6% 22.9% 6.0% 0.3%
Market Value 8.9% 13.9% 19.8% (5.1)% 0.0%
RATIOS BASED ON AVERAGE NET ASSETS:
Total expenses 0.86%** 0.85% 1.36% 1.88% 1.92%(b)**
Management fee expense 0.41%** 0.47% 0.77% 1.20% 0.00%
Other operating expenses 0.45%** 0.38% 0.59% 0.68% 1.92%(b)**
Net investment income (loss) 1.03%** 0.88% 0.26% 0.21% (0.06)%**
SUPPLEMENTAL DATA:
Net Assets, End of Period (in thousands) $127,640 $113,953 $100,065 $82,534 $71,126
Portfolio Turnover Rate 18% 51% 51% 23% 0%
Average Commission Rate Paid+ $0.0597 $0.0485 -- -- --
</TABLE>
- --------------------------------------------------------------------------
* Commencement of operations.
** Annualized.
(a) The Net Asset Value and Market Value total returns assume a continuous
stockholder who reinvested all net investment income dividends and capital
gain distributions and fully participated in primary rights offerings.
(b) Presented after waiver by the Investment Adviser and Administrator. For the
period ended December 31, 1993, the ratio of expenses to average net assets
would have been 2.12%, absent such waivers.
+ For fiscal years beginning on or after October 1, 1995, the Fund is required
to disclose its average commission rate paid per share for purchases and
sales of investments.
16 | THE ROYCE FUNDS SEMI-ANNUAL REPORT 1997
<PAGE>
ROYCE MICRO-CAP TRUST, INC.
- --------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Royce Micro-Cap Trust, Inc. ("Fund"), is a closed-end, diversified
management investment company registered under the Investment Company Act of
1940 and was incorporated under the laws of the State of Maryland on September
9, 1993. The Fund commenced operations on December 14, 1993.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates.
VALUATION OF INVESTMENTS:
Securities listed on an exchange or on the Nasdaq National Market System
are valued on the basis of the last reported sale prior to the time the
valuation is made or, if no sale is reported for such day, at their bid price
for exchange-listed securities and at the average of their bid and asked
prices for Nasdaq securities. Quotations are taken from the market where the
security is primarily traded. Other over-the-counter securities for which
market quotations are readily available are valued at their bid price.
Securities for which market quotations are not readily available are valued at
their fair value under procedures established and supervised by the Fund's
Board of Directors. Bonds and other fixed income securities may be valued by
reference to other securities with comparable ratings, interest rates and
maturities, using established independent pricing services.
INVESTMENT TRANSACTIONS AND RELATED INVESTMENT INCOME:
Investment transactions are accounted for on the trade date and dividend
income is recorded on the ex-dividend date. Interest income is recorded on the
accrual basis. Realized gains and losses from investment transactions and
unrealized appreciation and depreciation are determined on the basis of
identified cost for book and tax purposes.
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 "Income Tax Information".
DISTRIBUTIONS:
Any dividend and capital gain distributions are recorded on the
ex-dividend date and paid annually in December. These distributions are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. Permanent book and tax basis
differences relating to shareholder distributions will result in
reclassification to paid-in capital and may affect net investment income per
share. 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 at fiscal year end is distributed in the following
year.
REPURCHASE AGREEMENTS:
The Fund enters into repurchase agreements with respect to its portfolio
securities solely with State Street Bank and Trust Company ("SSB&T"), the
custodian of its assets. The Fund restricts repurchase agreements to
maturities of no more than seven days. Securities pledged as collateral for
repurchase agreements are held by SSB&T until maturity of the repurchase
agreement. Repurchase agreements could involve certain risks in the event of
default or insolvency of SSB&T, including possible delays or restrictions upon
the ability of the Fund to dispose of the underlying securities.
ORGANIZATIONAL EXPENSES:
Costs of $70,000 incurred by the Fund in connection with its organization
have been deferred and are being amortized on a straight line basis over a
five year period from the date the Fund commenced operations.
INVESTMENT ADVISORY AGREEMENT:
As compensation for its services under the Investment Advisory Agreement,
Royce & Associates, Inc. ("Royce") (formerly Quest Advisory Corp.) 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 Index for certain prescribed performance periods, as
described below.
The Basic Fee is a monthly fee equal to 1/12 of 1% (1% on an annualized
basis) of the average of the net assets of the Fund at the end of each month
included in a period consisting of the rolling 36 months ending with such
month. The performance period for each such month is from January 1, 1997 to
the most recent month-end, until the Investment Advisory Agreement has been in
effect for 36 full calendar months, when the performance period will become a
rolling 36 month period ending with such month.
THE ROYCE FUNDS SEMI-ANNUAL REPORT 1997 | 17
<PAGE>
ROYCE MICRO-CAP TRUST, INC.
- --------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------
The Basic Fee for each such month may be increased or decreased at the rate
of 1/12 of .5% per percentage point, depending on the extent, if any, by which
the investment performance of the Fund exceeds by more than two percentage
points, or is exceeded by more than two percentage points by, the percentage
change in the investment record of the Russell 2000 Index for the performance
period. 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 would be payable if the
investment performance of the Fund exceeded the percentage change in the
investment record of the Russell 2000 Index 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 would be payable if the percentage change in the
investment record of the Russell 2000 Index exceeded the investment performance
of the Fund by 12 or more percentage points for the performance period.
In order to avoid the impact of short-term differences between the
investment performance of the Fund and the record of the Russell 2000 Index,
Royce will not collect any accrued portion of the Basic Fee, as adjusted for
performance, in excess of .5% until January 1998.
The present Investment Advisory Agreement replaced a similar investment
advisory agreement between the Fund and Royce, under which the Fund's
investment performance was measured against the record of the Nasdaq Composite
over a rolling period of up to 36 months. The present Investment Advisory
Agreement provides that, for the 18 month period from January 1, 1997 to June
30, 1998, the monthly fee payble to Royce will be the lower of the fee
calculated under such Agreement or the fee that would have been payable to
Royce for the month involved under the prior agreement.
For the six months ended June 30, 1997, the Fund paid Royce advisory fees
totaling $240,253.
ADMINISTRATION AGREEMENT:
Under the Administration Agreement with the Fund, Mitchell Hutchins Asset
Management Inc. (the "Administrator") serves as the Administrator. In
accordance with the Administration Agreement, the Administrator performs or
assists in certain aspects of the Fund's operations. As compensation for its
services, the Administrator is paid an annual fee, payable monthly, of $50,000
plus 0.05% on the first $125 million of the Fund's average daily net assets,
and 0.03% of average daily net assets exceeding $125 million.
CAPITAL STOCK:
At June 30, 1997, there were 150,000,000 shares of common stock, $0.001
par value, authorized. There were no capital stock transactions for the six
months ended June 30, 1997. Capital stock transactions were as follows:
<TABLE>
<CAPTION>
Six months ended
June 30, 1997 Year ended
(unaudited) December 31, 1996
------------------- -----------------------
Shares Amount Shares Amount
-------- -------- --------- -----------
<S> <C> <C> <C> <C>
Dividend and distribution reinvestment -- -- 895,501 $6,828,202
</TABLE>
On July 2, 1997, the Fund issued 1,600,000 shares of 7.75% Cumulative
Preferred Stock at $25 per share. The Shares are listed on the American Stock
Exchange and began trading on July 10, 1997.
TRANSACTIONS IN SHARES OF AFFILIATED COMPANIES:
An "Affiliated Company", as defined in the Investment Company Act of 1940
is a company in which the Fund owns at least 5% of the company's outstanding
voting securities. The Fund effected the following transactions in shares of
such companies during the six months ended June 30, 1997.
<TABLE>
<CAPTION>
Purchases Sales
--------------------- ----------------- Realized
Affiliated Company Shares Cost Shares Cost Gain/Loss Dividend Income
- ------------------------- -------- ---------- -------- ------ ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Art's-Way Manufacturing 45,000 $264,375 -- -- -- --
</TABLE>
PURCHASES AND SALES OF INVESTMENT SECURITIES:
For the six months ended June 30, 1997, the cost of purchases and the
proceeds from the sales of investment securities, other than short-term
securities, amounted to $24,896,746 and $19,735,636, respectively.
18 | THE ROYCE FUNDS SEMI-ANNUAL REPORT 1997
<PAGE>
ROYCE GLOBAL TRUST, INC.
- -------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS JUNE 30, 1997 (UNAUDITED)
- -------------------------------------------------------------------------------
COMMON STOCKS -- 83.0%
SHARES VALUE
------ -----
CONSUMER PRODUCTS -- 10.7%
Coca-Cola FEMSA ADR 6,000 $ 309,750
Johnson Worldwide Associates Cl. A* 43,700 562,638
Lazare Kaplan International* 52,800 884,400
Oakley* 45,000 632,812
Semi-Tech Corporation Cl. A 177,500 388,281
The Topps Company* 163,400 684,238
Universal Corporation 20,000 635,000
Velcro Industries 16,200 1,328,400
------------
5,425,519
------------
CONSUMER SERVICES -- 4.6%
Groupe AB ADR 64,000 544,000
Grupo Televisa GDR* 10,000 303,750
International Dairy Queen Cl. A* 35,000 840,000
Ryanair Holdings ADR 20,000 542,500
True North Communications 5,000 123,750
------------
2,354,000
------------
FINANCIAL INTERMEDIARIES -- 8.7%
BHI 32,400 712,800
Barclays ADR 2,000 158,500
Leucadia National Corporation 39,200 1,212,750
Oriental Financial Group 5,000 141,250
PXRE Corporation 36,000 1,107,000
Trenwick Group 28,650 1,074,375
------------
4,406,675
------------
FINANCIAL SERVICES -- 10.6%
Amvescap ADR 5,000 291,250
E.W. Blanch Holdings 12,000 320,250
Duff & Phelps Credit Rating 10,000 303,750
Arthur J. Gallagher & Co. 5,000 188,750
Lexington Global Asset Managers* 11,300 77,687
MacKenzie Financial 45,700 936,136
Phoenix Duff & Phelps 20,000 147,500
The Pioneer Group 48,000 1,104,000
Wellington Underwriting 515,770 936,214
Willis Corroon Group ADR 96,400 1,078,475
------------
5,384,012
------------
HEALTH -- 3.3%
Haemonetics Corporation* 43,800 837,675
Marquette Medical Systems* 37,500 825,000
------------
1,662,675
------------
INDUSTRIAL PRODUCTS -- 14.1%
BHA Group 4,730 87,505
Carbo Ceramics 32,000 872,000
Kaydon Corporation 14,500 719,563
The Lincoln Electric Company Cl. A 10,000 382,500
Mercer International 50,500 479,750
Nordson Corporation 8,700 558,975
SHARES VALUE
------ -----
Penn Engineering and
Manufacturing Cl. A 32,800 $ 627,300
Puerto Rican Cement Company 20,000 651,250
Schweitzer-Mauduit International 1,500 56,250
Shorewood Packaging* 20,000 455,000
Simpson Manufacturing Co.* 16,600 439,900
Tecumseh Products Company Cl. B 10,400 586,300
Unifi 18,500 691,437
Woodward Governor Company 16,000 576,000
------------
7,183,730
------------
INDUSTRIAL SERVICES -- 15.8%
APT Satellite Holdings ADR 10,000 126,250
Air Express International 7,000 278,250
Circle International Group 10,600 279,575
Cordiant ADR 22,800 141,075
DIMON Incorporated 30,500 808,250
Elamex* 5,000 48,750
Insituform Technologies Cl. A* 27,000 165,375
Morrison Knudsen* 67,400 918,325
The Olsten Corporation 35,000 680,313
Peak International 62,500 750,000
Pittston Burlington Group 29,000 815,625
Standard Commercial* 43,531 756,351
Stone & Webster 29,200 1,246,475
Willbros Group* 65,800 1,044,575
------------
8,059,189
------------
NATURAL RESOURCES -- 2.4%
Denbury Resources* 40,200 673,350
Dreco Energy Services Cl. A* 5,000 262,500
MK Gold Company* 203,500 317,969
------------
1,253,819
------------
RETAIL -- 8.0%
Amway Asia Pacific 2,000 87,250
Amway Japan ADR 17,100 296,044
Sotheby's Holdings Cl. A 44,300 747,563
Stanhome 40,200 1,321,575
Suzy Shier 127,800 832,905
The Talbots 22,500 765,000
------------
4,050,337
------------
TECHNOLOGY -- 4.8%
CEM Corporation* 46,400 400,200
Industri-Matematik International 7,000 113,750
Marshall Industries* 34,300 1,277,675
National Computer Systems 24,600 654,975
------------
2,446,600
------------
TOTAL COMMON STOCKS
(Cost $36,566,170) 42,226,556
------------
THE ROYCE FUNDS SEMI-ANNUAL REPORT 1997 | 19
<PAGE>
ROYCE GLOBAL TRUST, INC.
- -------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS JUNE 30, 1997 (UNAUDITED)
- -------------------------------------------------------------------------------
VALUE
------
CORPORATE BOND -- 1.6%
International Semi-Tech, principal
amount $1,325,000, 11.50%
Sr. Disc. Note due 8/15/03
(Cost $814,375) $ 791,687
------------
U.S. TREASURY OBLIGATION -- 7.9%
U.S. Treasury Notes, principal
amount $4,000,000, 6.00%
due 11/30/97
(Cost $3,985,646) 4,006,880
------------
VALUE
------
TOTAL INVESTMENTS -- 92.5%
(Cost $41,366,191) $47,025,123
CASH AND OTHER ASSETS LESS
LIABILITIES -- 7.5% 3,814,170
------------
NET ASSETS -- 100.0% $50,839,293
============
- -------------------------------------------------------------------------
* Non-income producing.
The abbreviations ADR and GDR refer to American Depository Receipt and Global
Depository Receipt, respectively.
INCOME TAX INFORMATION: The cost of total investments for federal income tax
purposes was $41,366,191. At June 30, 1997, net unrealized appreciation for all
securities amounted to $5,658,932, consisting of aggregate gross unrealized
appreciation of $6,715,211 and aggregate gross unrealized depreciation of
$1,056,279.
The accompanying notes are an integral part of the financial statements.
20 | THE ROYCE FUNDS SEMI-ANNUAL REPORT 1997
<PAGE>
ROYCE GLOBAL TRUST, INC.
- -------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1997 (UNAUDITED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments at value (identified cost $41,366,191) $47,025,123
Cash 311,151
Receivable for investments sold 4,151,898
Receivable for dividends and interest 81,621
Prepaid expenses and other assets 6,966
- ---------------------------------------------------------------------------------- ------------
Total Assets 51,576,759
- ---------------------------------------------------------------------------------- ------------
LIABILITIES:
Payable for investments purchased 687,910
Accrued expenses 49,556
- ---------------------------------------------------------------------------------- ------------
Total Liabilities 737,466
- ---------------------------------------------------------------------------------- ------------
Net Assets $50,839,293
================================================================================== ============
ANALYSIS OF NET ASSETS:
Undistributed net investment income $ 1,191,440
Accumulated net realized gain on investments and foreign currency 3,995,308
Net unrealized appreciation on investments and foreign currency 5,658,983
Capital Stock 79,984
Additional paid-in capital 39,913,578
- ---------------------------------------------------------------------------------- ------------
Net Assets $50,839,293
================================================================================== ============
PRICING OF SHARES:
Net asset value per share ($50,839,293 [divided by] 7,998,419 shares outstanding) $6.36
================================================================================== ============
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
===================================
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31,
(UNAUDITED) 1996
INVESTMENT OPERATIONS: ------------------ ----------------
<S> <C> <C>
Net investment income $ 357,665 $ 760,943
Net realized gain on investments and foreign currency 1,932,778 3,733,788
Net change in unrealized appreciation on investments and foreign currency 4,394,552 (1,218,086)
- ----------------------------------------------------------------------------------------- ------------ -------------
Net increase in net assets from investment operations 6,684,995 3,276,645
- ----------------------------------------------------------------------------------------- ------------ -------------
CAPITAL STOCK TRANSACTIONS:
Common Stock repurchased -- (507,185)
- ----------------------------------------------------------------------------------------- ------------ -------------
NET INCREASE IN NET ASSETS 6,684,995 2,769,460
NET ASSETS:
Beginning of period 44,154,298 41,384,838
- ----------------------------------------------------------------------------------------- ------------ -------------
End of period (including undistributed net investment income of $1,191,440 and $833,775,
respectively) $50,839,293 $44,154,298
========================================================================================= =========== =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
THE ROYCE FUNDS SEMI-ANNUAL REPORT 1997 | 21
<PAGE>
ROYCE GLOBAL TRUST, INC.
- -------------------------------------------------------------------------------
STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
- -------------------------------------------------------------------------------
INVESTMENT INCOME:
INCOME:
Dividends $284,634
Interest 218,034
- ----------------------------------------------------------- ----------
Total Income 502,668
- ----------------------------------------------------------- ----------
EXPENSES:
Investment advisory fees 226,989
Professional fees 48,694
Custodian and transfer agent fees 25,049
Administrative and office facilities expenses 15,126
Directors' fees 13,012
Other expenses 43,122
- ----------------------------------------------------------- ----------
Total Expenses 371,992
Fees Waived by Investment Adviser (226,989)
- ----------------------------------------------------------- ----------
Net Expenses 145,003
- ----------------------------------------------------------- ----------
Net Investment Income 357,665
- ----------------------------------------------------------- ----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND
FOREIGN CURRENCY:
Net realized gain on investments and foreign currency 1,932,778
Net change in unrealized appreciation on investments and
foreign currency 4,394,552
- ----------------------------------------------------------- ----------
Net realized and unrealized gain on investments and
foreign currency 6,327,330
- ----------------------------------------------------------- ----------
NET INCREASE IN NET ASSETS FROM INVESTMENT OPERATIONS $6,684,995
=========================================================== ==========
The accompanying notes are an integral part of the financial statements.
22 | THE ROYCE FUNDS SEMI-ANNUAL REPORT 1997
<PAGE>
ROYCE GLOBAL TRUST, INC.
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
This table is presented to show selected data for a share outstanding
throughout each period, and to assist stockholders in evaluating the Fund's
performance for the periods presented.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1997
--------------
(UNAUDITED)
--------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $5.52
- ------------------------------------------------------------- ---------
INVESTMENT OPERATIONS:
Net investment income 0.04
Net realized and unrealized gain on investments and foreign
currency 0.80
- ------------------------------------------------------------ ---------
Total from investment operations 0.84
- ------------------------------------------------------------- ---------
DIVIDENDS AND DISTRIBUTIONS:
Net investment income --
Net realized gain on investments and foreign currency --
Other sources --
- ------------------------------------------------------------- ---------
Total dividends and distributions --
- ------------------------------------------------------------- ---------
CAPITAL STOCK TRANSACTIONS: --
- ------------------------------------------------------------- ---------
NET ASSET VALUE, END OF PERIOD $6.36
============================================================= =========
MARKET VALUE, END OF PERIOD $5.00
============================================================= =========
TOTAL RETURN (a):
Net Asset Value 15.2%
Market Value 8.8%
RATIOS BASED ON AVERAGE NET ASSETS:
Total expenses (b) 0.64%*
Management fee expense 0.00%*
Other operating expenses 0.64%*
Net investment income 1.58%*
SUPPLEMENTAL DATA:
Net Assets, End of Period (in thousands) $50,839
Portfolio Turnover Rate 34%
Average Commission Rate Paid+ $0.0623
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $5.09 $4.70 $5.24 $4.99 $6.01
- ------------------------------------------------------------- ------- ------- --------- ------- -------
INVESTMENT OPERATIONS:
Net investment income 0.06 0.13 0.19 0.04 0.04
Net realized and unrealized gain on investments and foreign
currency 0.35 0.36 (0.62) 0.46 (0.64)
- ------------------------------------------------------------ ------- ------- --------- ------- -------
Total from investment operations 0.41 0.49 (0.43) 0.50 (0.60)
- ------------------------------------------------------------- ------- ------- --------- ------- -------
DIVIDENDS AND DISTRIBUTIONS:
Net investment income -- (0.16) (0.11) (0.03) (0.02)
Net realized gain on investments and foreign currency -- (0.01) -- (0.22) (0.05)
Other sources -- -- -- -- (0.35)
- ------------------------------------------------------------- ------- ------- --------- ------- -------
Total dividends and distributions -- (0.17) (0.11) (0.25) (0.42)
- ------------------------------------------------------------- ------- ------- --------- ------- -------
CAPITAL STOCK TRANSACTIONS: 0.02 0.07 -- -- --
- ------------------------------------------------------------- ------- ------- --------- ------- -------
NET ASSET VALUE, END OF PERIOD $5.52 $5.09 $4.70 $5.24 $4.99
============================================================= ======= ======= ========= ======= =======
MARKET VALUE, END OF PERIOD $4.59 $4.19 $3.56 $4.31 $4.06
============================================================= ======= ======= ========= ======= =======
TOTAL RETURN (a):
Net Asset Value -- -- -- -- --
Market Value 9.6% 22.3% (17.4)% 9.3% (3.3)%
RATIOS BASED ON AVERAGE NET ASSETS:
Total expenses (b) 1.91% 2.14% 2.27% 2.43% 2.21%
Management fee expense 0.83% 1.00% 1.00% 1.00% 1.00%
Other operating expenses 1.08% 1.14% 1.27% 1.43% 1.21%
Net investment income 1.80% 2.80% 3.81% 0.74% 0.67%
SUPPLEMENTAL DATA:
Net Assets, End of Period (in thousands) $44,154 $41,385 $ 41,106 $45,839 $43,615
Portfolio Turnover Rate 159% 76% 483% 445% 267%
Average Commission Rate Paid+ $0.0396 -- -- -- --
</TABLE>
- -------------------------------------------------------------------------------
(a) The Net Asset Value and Market Value Total Returns assume a continuous
stockholder who reinvested all net investment income dividends and capital
gain distributions and fully participated in primary rights offerings.
(b) Expense ratios are shown after fee waivers by the investment adviser. for
the periods ended June 30, 1997 and December 31, 1996, the expense ratios
before the waivers would have been 1.64% and 2.08%, respectively.
+ For fiscal years beginning on or after October 1, 1995, the Fund is required
to disclose its average commission rate paid per share for purchases and
sales of investments.
* Annualized.
THE ROYCE FUNDS SEMI-ANNUAL REPORT 1997 | 23
<PAGE>
ROYCE GLOBAL TRUST, INC.
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- -------------------------------------------------------------------------------
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Royce Global Trust, Inc. ("Fund"), formerly named All Seasons Global Fund,
Inc., is a closed-end, diversified management investment company registered
under the Investment Company Act of 1940. The Fund commenced operations on
March 2, 1988.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
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 listed on an exchange or on the Nasdaq National Market System
are valued on the basis of the last reported sale prior to the time the
valuation is made or, if no sale is reported for such day, at their bid price
for exchange-listed securities and at the average of their bid and asked
prices for Nasdaq securities. Quotations are taken from the market where the
security is primarily traded. Other over-the-counter securities for which
market quotations are readily available are valued at their bid price.
Securities for which market quotations are not readily available are valued at
their fair value under procedures established and supervised by the Fund's
Board of Directors. Bonds and other fixed income securities may be valued by
reference to other securities with comparable ratings, interest rates and
maturities, using established independent pricing services.
FOREIGN CURRENCY:
The Fund does not isolate that portion of the results of operations which
result from changes in foreign exchange rates on investments from the portion
arising from changes in market prices of securities held. Such fluctuations
are included with net realized and unrealized gains and losses on investments.
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, 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 fiscal year end, as a result of changes in the exchange rates.
INVESTMENT TRANSACTIONS AND RELATED INVESTMENT INCOME:
Investment transactions are accounted for on the trade date and dividend
income is recorded on the ex-dividend date. Interest income is recorded on the
accrual basis. Realized gains and losses from investment transactions and
unrealized appreciation and depreciation are determined on the basis of
identified cost for book and tax purposes.
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 "Income Tax Information".
DISTRIBUTIONS:
Any dividend and capital gain distributions are recorded on the
ex-dividend date and paid annually in December. These distributions are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. Permanent book and tax basis
differences relating to shareholder distributions will result in
reclassification to paid-in capital and may affect net investment income per
share. 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 at fiscal year end is distributed in the following
year.
REPURCHASE AGREEMENTS:
The Fund enters into repurchase agreements with respect to its portfolio
securities solely with State Street Bank and Trust Company ("SSB&T"), the
custodian of its assets. The Fund restricts repurchase agreements to
maturities of no more than seven days. Securities pledged as collateral for
repurchase agreements are held by SSB&T until maturity of the repurchase
agreement. Repurchase agreements could involve certain risks in the event of
default or insolvency of SSB&T, including possible delays or restrictions upon
the ability of the Fund to dispose of the underlying securities.
24 | THE ROYCE FUNDS SEMI-ANNUAL REPORT 1997
<PAGE>
ROYCE GLOBAL TRUST, INC.
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- -------------------------------------------------------------------------------
INVESTMENT ADVISORY AGREEMENT:
The Investment Advisory Agreement between Royce & Associates, Inc.
("Royce") (formerly Quest Advisory Corp.) and the Fund, provides for fees at
an annual rate of 1.0% of the average daily net assets of the Fund. For the
six months ended June 30, 1997, Royce waived the total advisory fee of
$226,989. Royce has voluntarily committed to waive its fee until the Fund's
market price has closed on the Nasdaq National Market at or above $5.28, the
Net Asset Value per share of the Fund on October 31, 1996.
CAPITAL STOCK:
For the year ended December 31, 1996, the Fund repurchased 125,038 of
common stock at an average market price per share of $4.02 and a weighted
average discount from net asset value of 22.5% per share. The cost of the
repurchased shares was $507,185.
PURCHASES AND SALES OF INVESTMENT SECURITIES:
For the six months ended June 30, 1997, the cost of purchases and proceeds
from sales of investment securities, other than short-term securities,
amounted to $18,484,787 and $14,473,579, respectively.
THE ROYCE FUNDS SEMI-ANNUAL REPORT 1997 | 25
<PAGE>
STOCKHOLDER MEETING RESULTS
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
ROYCE VALUE TRUST, INC.
At the 1997 Annual Meeting of Stockholders held on April 29, 1997, the
Fund's stockholders approved: (i) the election of the board of directors,
consisting of (a) Charles M. Royce, (b) Thomas R. Ebright, (c) Richard M.
Galkin, (d) Stephen L. Isaacs, and (e) David L. Meister; (ii) two changes in
the Fund's fundamental investment policies; and (iii) the selection of
accountants.
<TABLE>
<CAPTION>
Common Stock Common Stock Common Stock
and Preferred and Preferred and Preferred
Stock Voting Stock Voting Stock Voting Preferred Stock Preferred Stock Preferred Stock
Together As A Together As A Together As A Voting As A Voting As A Voting As A
Single Class - Single Class - Single Class - Separate Class - Separate Class - Separate Class -
Votes For Votes Against Votes Abstained Votes for Votes Against Votes Abstained
---------------- ---------------- ----------------- ------------------ ------------------ -----------------
<S> <C> <C> <C> <C> <C> <C>
(i) (a) 17,007,810 N/A 363,762 N/A N/A N/A
(b) N/A N/A N/A 1,443,040 N/A 24,891
(c) 16,862,027 N/A 509,545 N/A N/A N/A
(d) 16,856,202 N/A 515,371 N/A N/A N/A
(e) N/A N/A N/A 1,440,040 N/A 27,891
(ii) 12,873,207 3,314,233 520,986 1,290,662 37,905 30,676
(iii) 16,969,108 85,093 317,371 N/A N/A N/A
</TABLE>
ROYCE MICRO-CAP TRUST, INC.
At the 1997 Annual Meeting of Stockholders held on April 29, 1997, the
Fund's stockholders approved: (i) the election of the board of directors,
consisting of (a) Charles M. Royce, (b) Thomas R. Ebright, (c) Richard M.
Galkin, (d) Stephen L. Isaacs, and (e) David L. Meister; (ii) a change in the
Fund's fundamental investment policies; and (iii) the selection of accountants.
<TABLE>
<CAPTION>
Votes Cast For Votes Cast Against Votes Abstained
---------------- -------------------- ----------------
<S> <C> <C> <C>
(i) (a) 7,307,536 N/A 176,377
(b) 7,267,131 N/A 216,782
(c) 7,268,524 N/A 215,390
(d) 7,265,182 N/A 218,732
(e) 7,266,434 N/A 217,480
(ii) 5,311,945 377,522 188,611
(iii) 7,318,682 46,819 118,413
</TABLE>
ROYCE GLOBAL TRUST, INC.
At the 1997 Annual Meeting of Stockholders held on May 13, 1997, the
Fund's stockholders approved: (i) the election of the board of directors,
consisting of (a) Charles M. Royce, (b) Richard M. Galkin, (c) Stephen L.
Isaacs, and (d) David L. Meister; and (ii) the selection of accountants.
<TABLE>
<CAPTION>
Votes Cast For Votes Cast Against Votes Abstained
---------------- -------------------- ----------------
<S> <C> <C> <C>
(i) (a) 5,712,170 N/A 1,133,724
(b) 5,707,810 N/A 1,138,084
(c) 5,703,480 N/A 1,142,414
(d) 5,705,541 N/A 1,140,353
(ii) 6,756,112 60,658 29,124
</TABLE>
26 | THE ROYCE FUNDS SEMI-ANNUAL REPORT 1997
