N-Q 1 e55161_rcf-nq.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED

MANAGEMENT INVESTMENT COMPANY

 

Investment Company Act File Number: 811-07537

 

Name of Fund:  Royce Capital Fund
Fund Address:  745 Fifth Avenue
  New York, NY 10151

 

Name and address of agent for service:

John E. Denneen, Esq.

Royce & Associates, LP

745 Fifth Avenue

New York, NY 10151

 

Registrant’s telephone number, including area code: (212) 508-4500

 

Date of fiscal year end: 12/31/2018

 

Date of reporting period: 3/31/2018

 

Item 1 – Schedule of Investments

 

 
 
    

SCHEDULES OF INVESTMENTS
ROYCE CAPITAL FUND - MICRO-CAP PORTFOLIO
MARCH 31, 2018 (UNAUDITED)

    SHARES     VALUE
COMMON STOCKS – 94.9%                
                 
Consumer Discretionary – 14.4%                
Auto Components - 3.4%                

Fox Factory Holding 1

     33,800     $ 1,179,620  

Standard Motor Products

     33,100       1,574,567  

Stoneridge 1

     78,800       2,174,880  

Unique Fabricating

     153,300       1,293,852  
               
              6,222,919  
               
Hotels, Restaurants & Leisure - 1.5%                

Del Taco Restaurants 1

     108,400       1,123,024  

Red Lion Hotels 1

     160,000       1,560,000  
               
              2,683,024  
               
Household Durables - 1.3%                

AV Homes 1

     70,000       1,298,500  

Cavco Industries 1

     6,704       1,164,820  
               
              2,463,320  
               
Internet & Direct Marketing Retail - 0.4%                

Gaia Cl. A 1

     47,300       733,150  
               
Leisure Products - 1.6%                

MCBC Holdings 1

     64,517       1,625,829  

Nautilus 1

     103,200       1,388,040  
               
              3,013,869  
               
Media - 0.9%                

New Media Investment Group

     95,000       1,628,300  
               
Specialty Retail - 4.0%                

Build-A-Bear Workshop 1

     132,500       1,212,375  

Citi Trends

     68,286       2,110,720  

Haverty Furniture

     66,300       1,335,945  

Kirkland’s 1

     103,000       998,070  

Shoe Carnival

     76,400       1,818,320  
               
              7,475,430  
               
Textiles, Apparel & Luxury Goods - 1.3%                

Culp

     30,649       936,327  

Vera Bradley 1

     129,300       1,371,873  
               
              2,308,200  
               
Total             26,528,212  
               
                 
Consumer Staples – 1.8%                
Beverages - 0.6%                

Primo Water 1

     93,600       1,096,056  
               
Food Products - 1.2%                

Farmer Bros. 1

     35,100       1,060,020  

John B. Sanfilippo & Son

     20,400       1,180,548  
               
              2,240,568  
               
Total             3,336,624  
               
                 
Energy – 5.8%                
Energy Equipment & Services - 4.4%                

Basic Energy Services 1

     54,500       786,980  

Gulf Island Fabrication

     92,634       657,701  

Independence Contract Drilling 1

     301,400       1,139,292  

Natural Gas Services Group 1

     57,000       1,359,450  

Newpark Resources 1

     166,400       1,347,840  

Profire Energy 1

     572,829       1,563,823  

Total Energy Services

     117,200       1,250,825  
               
              8,105,911  
               
Oil, Gas & Consumable Fuels - 1.4%                

Ardmore Shipping 1

     205,800       1,564,080  

Panhandle Oil and Gas Cl. A

     53,800       1,038,340  
               
              2,602,420  
               
Total             10,708,331  
               
                 
Financials – 15.7%                
Banks - 6.3%                

Allegiance Bancshares 1

     30,200       1,182,330  

Blue Hills Bancorp

     76,400       1,592,940  

Brookline Bancorp

     64,200       1,040,040  

Caribbean Investment Holdings 1

     1,751,547       491,593  

County Bancorp

     50,200       1,466,342  

First Connecticut Bancorp

     39,600       1,013,760  

HarborOne Bancorp 1

     77,200       1,363,352  

Midway Investments 1,2

     1,751,577       0  

Stewardship Financial

     92,000       1,030,400  

TriState Capital Holdings 1

     51,772       1,203,699  

Two River Bancorp

     69,100       1,247,255  
               
              11,631,711  
               
Capital Markets - 4.2%                

B. Riley Financial

     42,900       836,550  

Canaccord Genuity Group

     298,500       1,605,623  

GAIN Capital Holdings

     141,600       955,800  

Gluskin Sheff + Associates

     117,300       1,327,461  

Silvercrest Asset Management Group Cl. A

     103,900       1,579,280  

Westwood Holdings Group

     25,727       1,453,318  
               
              7,758,032  
               
Diversified Financial Services - 0.2%                

Waterloo Investment Holdings 1,2

     1,302,000       390,600  
               
Insurance - 0.7%                

Atlas Financial Holdings 1

     46,600       482,310  

Blue Capital Reinsurance Holdings

     75,292       918,562  
               
              1,400,872  
               
Thrifts & Mortgage Finance - 4.3%                

Beneficial Bancorp

     58,240       905,632  

Federal Agricultural Mortgage

     19,100       1,662,082  

Meridian Bancorp

     55,300       1,114,295  

PCSB Financial 1

     67,600       1,418,248  

Territorial Bancorp

     45,900       1,361,394  

Western New England Bancorp

     135,954       1,447,910  
               
              7,909,561  
               
Total             29,090,776  
               
                 
Health Care – 9.4%                
Biotechnology - 2.2%                

BioSpecifics Technologies 1

     31,500       1,396,710  

Progenics Pharmaceuticals 1

     173,800       1,296,548  

Zealand Pharma 1

     86,058       1,329,761  
               
              4,023,019  
               
               
Health Care Equipment & Supplies - 4.2%                

AtriCure 1

     84,600       1,735,992  

Chembio Diagnostics 1

     86,300       690,400  

CryoLife 1

     89,889       1,802,275  

OrthoPediatrics Corporation 1

     35,600       536,136  

Surmodics 1

     38,078       1,448,868  

Tactile Systems Technology 1,3

     50,300       1,599,540  
               
              7,813,211  
               
Life Sciences Tools & Services - 1.4%                

Harvard Bioscience 1

     319,068       1,595,340  

NeoGenomics 1,3

     99,400       811,104  

Quanterix Corporation 1

     12,500       213,000  
               
              2,619,444  
               
Pharmaceuticals - 1.6%                

BioDelivery Sciences International 1

     357,700       804,825  

Corium International 1,3

     118,700       1,361,489  

Paratek Pharmaceuticals 1

     61,800       803,400  

Synergetics USA (Rights) 1,2

     246,900       0  
               
              2,969,714  
               
Total             17,425,388  
               
                 
Industrials – 21.0%                
Aerospace & Defense - 1.5%                

Astronics Corporation 1

     28,545       1,064,729  

CPI Aerostructures 1

     174,344       1,699,854  
               
              2,764,583  
               
Commercial Services & Supplies - 1.8%                

Acme United

     45,065       939,154  

Heritage-Crystal Clean 1

     48,834       1,150,041  

Viad Corporation

     24,100       1,264,045  
               
              3,353,240  
               
Construction & Engineering - 0.8%                

Northwest Pipe 1

     84,700       1,465,310  
               
Electrical Equipment - 1.9%                

American Superconducter 1,3

     169,500       986,490  

Encore Wire

     33,400       1,893,780  

LSI Industries

     85,013       689,455  
               
              3,569,725  
               
Industrial Conglomerates - 0.6%                

Raven Industries

     32,900       1,153,145  
               
Machinery - 7.8%                

Alimak Group

     84,600       1,287,692  

Exco Technologies

     156,700       1,105,603  

FreightCar America 1

     79,691       1,067,859  

Global Brass and Copper Holdings

     39,900       1,334,655  

Graham Corporation

     66,720       1,429,142  

Greenbrier Companies (The)

     21,600       1,085,400  

Kadant

     17,831       1,685,029  

Kornit Digital 1,3

     93,600       1,207,440  

Lindsay Corporation

     16,700       1,527,048  

Lydall 1

     33,300       1,606,725  

Sun Hydraulics

     21,100       1,130,116  
               
              14,466,709  
               
Marine - 0.9%                

Clarkson

     38,100       1,615,519  
               
               
Professional Services - 4.7%                

CRA International

     25,906       1,354,625  

GP Strategies 1

     54,408       1,232,341  

Heidrick & Struggles International

     59,900       1,871,875  

Kforce

     51,800       1,401,190  

Navigant Consulting 1

     60,100       1,156,324  

Resources Connection

     103,954       1,684,055  
               
              8,700,410  
               
Road & Rail - 1.0%                

Marten Transport

     78,841       1,797,575  
               
Total             38,886,216  
               
                 
Information Technology – 18.9%                
Communications Equipment - 0.8%                

Digi International 1

     76,700       790,010  

EMCORE Corporation 1

     134,300       765,510  
               
              1,555,520  
               
Electronic Equipment, Instruments & Components - 5.2%                

Airgain 1,3

     63,500       491,490  

CUI Global 1

     298,762       776,781  

ePlus 1

     14,692       1,141,569  

Fabrinet 1

     45,569       1,429,955  

Mesa Laboratories

     8,600       1,276,584  

Novanta 1

     25,100       1,308,965  

PC Connection

     61,200       1,530,000  

Vishay Precision Group 1

     55,400       1,725,710  
               
              9,681,054  
               
Internet Software & Services - 1.6%                

Amber Road 1

     143,300       1,275,370  

QuinStreet 1

     128,300       1,638,391  
               
              2,913,761  
               
IT Services - 1.4%                

Cass Information Systems

     23,540       1,400,865  

Computer Task Group 1

     137,342       1,124,831  
               
              2,525,696  
               
Semiconductors & Semiconductor Equipment - 5.9%                

Brooks Automation

     41,000       1,110,280  

Everspin Technologies 1

     92,500       698,375  

Nanometrics 1

     52,700       1,417,630  

NeoPhotonics Corporation 1

     218,600       1,497,410  

Photronics 1

     182,600       1,506,450  

Rudolph Technologies 1

     56,893       1,575,936  

Silicon Motion Technology ADR

     26,900       1,294,428  

Ultra Clean Holdings 1

     62,000       1,193,500  

Xcerra Corporation 1

     53,500       623,275  
               
              10,917,284  
               
Software - 2.9%                

Attunity 1

     205,200       1,539,000  

Computer Modelling Group

     121,100       873,225  

QAD Cl. A

     52,600       2,190,790  

SeaChange International 1

     293,700       795,927  
               
              5,398,942  
               
Technology Hardware, Storage & Peripherals - 1.1%                

AstroNova

     24,400       378,200  

Intevac 1

     123,500       852,150  

Super Micro Computer 1

     45,511       773,687  
               
              2,004,037  
               
Total             34,996,294  
               
                 
Materials – 4.9%                
Chemicals - 1.9%                

FutureFuel Corporation

     71,200       853,688  

Quaker Chemical

     7,588       1,124,010  

Trecora Resources 1

     116,100       1,578,960  
               
              3,556,658  
               
Construction Materials - 0.5%                

U.S. Concrete 1

     16,600       1,002,640  
               
Metals & Mining - 2.5%                

Haynes International

     44,670       1,657,704  

Major Drilling Group International 1

     233,700       1,208,089  

McEwen Mining

     221,296       460,296  

Schnitzer Steel Industries Cl. A

     37,500       1,213,125  
               
              4,539,214  
               
Total             9,098,512  
               
                 
Real Estate – 2.4%                
Equity Real Estate Investment Trusts (REITs) - 0.8%                

Community Healthcare Trust

     53,100       1,366,794  
               
Real Estate Management & Development - 1.6%                

FRP Holdings 1

     23,440       1,312,640  

Marcus & Millichap 1

     46,000       1,658,760  
               
              2,971,400  
               
Total             4,338,194  
               
                 
Telecommunication Services – 0.6%                
Diversified Telecommunication Services - 0.6%                

ORBCOMM 1

     117,500       1,100,975  
               
Total             1,100,975  
               
                 
TOTAL COMMON STOCKS                

(Cost $140,172,459)

             175,509,522  
               
                 
REPURCHASE AGREEMENT – 5.1%                
Fixed Income Clearing Corporation,                

0.28% dated 3/29/18, due 4/2/18,

                

maturity value $9,364,291 (collateralized

                

by obligations of various U.S. Government

                

Agencies, 2.00% due 10/5/22, valued at $9,555,762)

                

(Cost $9,364,000)

             9,364,000  
               
                 
COLLATERAL RECEIVED FOR SECURITIES                

LOANED – 1.7%

                
Money Market Funds                

Federated Government Obligations Fund

                

(7 day yield-1.5219%)

                

(Cost $3,171,715)

             3,171,715  
               
                 
TOTAL INVESTMENTS – 101.7%                

(Cost $152,708,174)

             188,045,237  
                 
LIABILITIES LESS CASH                

AND OTHER ASSETS – (1.7)%

             (3,167,372 )
               
                 
NET ASSETS – 100.0%           $ 184,877,865  
               

SCHEDULES OF INVESTMENTS
ROYCE CAPITAL FUND - SMALL-CAP PORTFOLIO
MARCH 31, 2018 (UNAUDITED)

    SHARES     VALUE
COMMON STOCKS – 94.3%                
                 
Consumer Discretionary – 15.3%                
Auto Components - 3.0%                

Gentex Corporation

     301,616     $ 6,943,200  

Stoneridge 1

     251,663       6,945,899  
               
              13,889,099  
               
Automobiles - 0.7%                

Thor Industries

     26,600       3,063,522  
               
Hotels, Restaurants & Leisure - 0.5%                

Cheesecake Factory

     46,815       2,257,420  
               
Household Durables - 3.2%                

Bassett Furniture Industries

     120,915       3,669,770  

Flexsteel Industries

     105,743       4,185,308  

La-Z-Boy

     237,986       7,127,681  
               
              14,982,759  
               
Media - 1.5%                

Saga Communications Cl. A

     192,885       7,184,966  
               
Specialty Retail - 5.4%                

American Eagle Outfitters

     462,865       9,224,899  

DSW Cl. A

     341,093       7,660,949  

Shoe Carnival

     348,621       8,297,180  
               
              25,183,028  
               
Textiles, Apparel & Luxury Goods - 1.0%                

Steven Madden

     109,471       4,805,777  
               
Total             71,366,571  
               
                 
Consumer Staples – 2.1%                
Food & Staples Retailing - 2.1%                

Village Super Market Cl. A

     373,579       9,851,278  
               
Total             9,851,278  
               
                 
Energy – 2.7%                
Energy Equipment & Services - 2.7%                

Helmerich & Payne

     82,700       5,504,512  

Unit Corporation 1

     350,513       6,926,137  
               
Total             12,430,649  
               
                 
Financials – 21.8%                
Banks - 9.4%                

Ames National

     131,080       3,604,700  

Bar Harbor Bankshares

     27,819       771,143  

Camden National

     156,382       6,958,999  

City Holding Company

     66,267       4,543,265  

CNB Financial

     182,326       5,303,863  

Codorus Valley Bancorp

     52,201       1,467,892  

Landmark Bancorp

     37,694       1,093,126  

MidWestOne Financial Group

     210,535       7,008,710  

National Bankshares

     133,941       6,034,042  

Northrim BanCorp

     140,681       4,860,529  

Unity Bancorp

     98,103       2,158,266  
               
              43,804,535  
               
Capital Markets - 4.3%                

Federated Investors Cl. B

     270,786       9,044,253  

Houlihan Lokey Cl. A

     95,769       4,271,297  

Moelis & Company Cl. A

     129,220       6,570,837  
               
              19,886,387  
               
Diversified Financial Services - 0.1%                

FGL Holdings 1,3

     71,800       728,770  
               
Insurance - 3.2%                

James River Group Holdings

     202,962       7,199,062  

Kingstone Companies

     113,188       1,901,559  

Reinsurance Group of America

     37,236       5,734,344  
               
              14,834,965  
               
Thrifts & Mortgage Finance - 4.8%                

Genworth MI Canada

     348,650       11,095,316  

Southern Missouri Bancorp

     36,600       1,339,560  

Timberland Bancorp

     100,968       3,069,427  

TrustCo Bank Corp. NY

     796,702       6,732,132  
               
              22,236,435  
               
Total             101,491,092  
               
                 
Health Care – 1.9%                
Health Care Providers & Services - 1.9%                

AMN Healthcare Services 1,3

     77,963       4,424,400  

Ensign Group (The)

     169,720       4,463,636  
               
Total             8,888,036  
               
                 
Industrials – 23.1%                
Airlines - 5.0%                

Allegiant Travel

     30,500       5,262,775  

Hawaiian Holdings

     220,355       8,527,739  

Spirit Airlines 1,3

     250,153       9,450,780  
               
              23,241,294  
               
Building Products - 2.0%                

American Woodmark 1

     28,241       2,780,326  

Apogee Enterprises

     154,971       6,717,993  
               
              9,498,319  
               
Commercial Services & Supplies - 2.8%                

Herman Miller

     197,853       6,321,403  

Kimball International Cl. B

     404,547       6,893,481  
               
              13,214,884  
               
Construction & Engineering - 0.5%                

Comfort Systems USA

     55,969       2,308,721  
               
Electrical Equipment - 1.5%                

EnerSys

     101,700       7,054,929  
               
Machinery - 5.4%                

Alamo Group

     20,442       2,246,576  

Blue Bird 1

     93,624       2,218,889  

Federal Signal

     104,045       2,291,071  

Miller Industries

     337,372       8,434,300  

Wabash National

     472,198       9,826,440  
               
              25,017,276  
               
Professional Services - 4.5%                

Heidrick & Struggles International

     194,920       6,091,250  

Kforce

     70,500       1,907,025  

Korn/Ferry International

     88,872       4,584,906  

Robert Half International

     78,200       4,526,998  

TrueBlue 1

     160,371       4,153,609  
               
              21,263,788  
               
Road & Rail - 1.4%                

Old Dominion Freight Line

     15,704       2,308,017  

Saia 1

     30,461       2,289,144  

Werner Enterprises

     47,961       1,750,577  
               
              6,347,738  
               
Total             107,946,949  
               
                 
Information Technology – 25.3%                
Communications Equipment - 0.4%                

NETGEAR 1,3

     34,271       1,960,301  
               
Electronic Equipment, Instruments & Components - 16.4%                

Benchmark Electronics

     241,935       7,221,760  

Celestica 1

     996,472       10,313,485  

Electro Scientific Industries 1

     227,009       4,388,084  

Fabrinet 1

     357,660       11,223,371  

Insight Enterprises 1

     301,278       10,523,641  

Methode Electronics

     177,103       6,924,727  

PC Connection

     415,077       10,376,925  

Sanmina Corporation 1

     165,236       4,320,921  

Vishay Intertechnology

     599,599       11,152,541  
               
              76,445,455  
               
IT Services - 1.3%                

Convergys Corporation

     280,700       6,349,434  
               
Semiconductors & Semiconductor Equipment - 5.7%                

Cohu

     85,415       1,948,316  

Kulicke & Soffa Industries 1

     452,426       11,315,175  

MKS Instruments

     38,391       4,439,919  

Silicon Motion Technology ADR

     104,800       5,042,976  

Xcerra Corporation 1

     320,200       3,730,330  
               
              26,476,716  
               
Technology Hardware, Storage & Peripherals - 1.5%                

Super Micro Computer 1

     409,752       6,965,784  
               
Total             118,197,690  
               
                 
Real Estate – 1.5%                
Real Estate Management & Development - 1.5%                

Marcus & Millichap 1

     191,486       6,904,985  
               
Total             6,904,985  
               
                 
Utilities – 0.6%                
Gas Utilities - 0.6%                

Star Group L.P.

     286,278       2,676,699  
               
Total             2,676,699  
               
                 
TOTAL COMMON STOCKS                

(Cost $375,785,721)

             439,753,949  
               
                 
REPURCHASE AGREEMENT – 6.0%                
Fixed Income Clearing Corporation,                

0.28% dated 3/29/18, due 4/2/18,

                

maturity value $27,821,866 (collateralized

                

by obligations of various U.S. Government

                

Agencies, 0.125% due 7/15/22, valued at $28,381,908)

                

(Cost $27,821,000)

             27,821,000  
               
                 
TOTAL INVESTMENTS – 100.3%                

(Cost $403,606,721)

             467,574,949  
                 
LIABILITIES LESS CASH                

AND OTHER ASSETS – (0.3)%

             (1,325,306 )
               
                 
NET ASSETS – 100.0%           $ 466,249,643  
               

1 Non-income producing.
2
Securities for which market quotations are not readily available represent 0.2% of net assets for Royce Micro-Cap Portfolio. These securities have been valued at their fair value under procedures approved by the Fund’s Board of Trustees. These securities are defined as Level 3 securities due to the use of significant unobservable inputs in the determination of fair value.
3
All or a portion of these securities were on loan at March 31, 2018.

Tax Information:
At March 31, 2018, net unrealized appreciation (depreciation) based on identified cost for tax purposes was as follows:

        Net Unrealized          
        Appreciation   Gross Unrealized  
               
    Tax Basis Cost   (Depreciation)   Appreciation   Depreciation  
 
Micro-Cap Portfolio   $ 152,741,317   $ 35,303,920   $ 50,164,438   $ 14,860,518  
Small-Cap Portfolio   405,393,436   62,181,513   76,310,450   14,128,937  

The primary cause of the difference between book and tax basis cost is the timing of the recognition of losses on securities sold.

Valuation of Investments:
Investment transactions are accounted for on the trade date. Securities are valued as of the close of trading on the New York Stock Exchange (NYSE) (generally 4:00 p.m. Eastern time) on the valuation date. Securities that trade on an exchange, and securities traded on Nasdaq’s Electronic Bulletin Board, are valued at their last reported sales price or Nasdaq official closing price taken from the primary market in which each security trades or, if no sale is reported for such day, at their highest bid price. Other over-the-counter securities for which market quotations are readily available are valued at their highest bid price, except in the case of some bonds and other fixed income securities which may be valued by reference to other securities with comparable ratings, interest rates and maturities, using established independent pricing services. The Funds value their non-U.S. dollar denominated securities in U.S. dollars daily at the prevailing foreign currency exchange rates as quoted by a major bank. Securities for which market quotations are not readily available are valued at their fair value in accordance with the provisions of the 1940 Act, under procedures approved by the Fund’s Board of Trustees, and are reported as Level 3 securities. As a general principle, the fair value of a security is the amount which the Fund might reasonably expect to receive for the security upon its current sale. However, in light of the judgment involved in fair valuations, there can be no assurance that a fair value assigned to a particular security will be the amount which the Fund might be able to receive upon its current sale. In addition, if, between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that are significant and may make the closing price unreliable, a Fund may fair value the security. The Funds use an independent pricing service to provide fair value estimates for relevant non-U.S. equity securities on days when the U.S. market volatility exceeds a certain threshold. This pricing service uses proprietary correlations it has developed between the movement of prices of non-U.S. equity securities and indices of U.S.-traded securities, futures contracts and other indications to estimate the fair value of relevant non-U.S. securities. When fair value pricing is employed, the prices of securities used by a Fund may differ from quoted or published prices for the same security. Investments in money market funds are valued at net asset value per share.

Various inputs are used in determining the value of each Fund’s investments, as noted above. These inputs are summarized in the three broad levels below:
  Level 1  – 
quoted prices in active markets for identical securities.
  Level 2  – 
other significant observable inputs (including quoted prices for similar securities, foreign securities that may be fair valued and repurchase agreements). The table below includes all Level 2 securities. Any Level 2 securities with values based on quoted prices for similar securities would be noted in the Schedules of Investments.
  Level 3  – 
significant unobservable inputs (including last trade price before trading was suspended, or at a discount thereto for lack of marketability or otherwise, market price information regarding other securities, information received from the company and/or published documents, including SEC filings and financial statements, or other publicly available information).
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

The following is a summary of the inputs used to value each Fund’s investments as of March 31, 2018. For a detailed breakout of common stocks by sector classification, please refer to the Schedules of Investments.

      Level 1       Level 2       Level 3       Total  
 
Micro-Cap Portfolio                                
Common Stocks   $ 170,394,358     $ 4,724,564     $ 390,600     $ 175,509,522  
Cash Equivalents     3,171,715       9,364,000       –       12,535,715  
Small-Cap Portfolio                                
Common Stocks     439,753,949       –       –       439,753,949  
Cash Equivalents     –       27,821,000       –       27,821,000  

Certain securities have transferred in and out of Level 1 and Level 2 measurements during the reporting period. The Funds recognize transfers between levels as of the end of the reporting period. For the three months ended March 31, 2018, securities valued at $491,592 were transferred from Level 1 to Level 2 for Royce Micro-Cap Portfolio within the fair value hierarchy.

Level 3 Reconciliation:

    Balance as of 12/31/17   Purchases   Unrealized Gain (Loss)   Balance as of 3/31/18  
 
Micro-Cap Portfolio                  
Common Stocks   $390,600   $ –   $ –   $390,600  

The following table summarizes the valuation techniques used and unobservable inputs approved by the Valuation Committee to determine the fair value of certain Level 3 investments. The table does not include Level 3 investments with values derived utilizing prices from prior transactions or third party pricing information with adjustments (e.g. broker quotes, pricing services, net asset values).

                      Impact to Valuation  
      Fair Value at   Valuation   Unobservable       From an Increase in  
      3/31/18   Technique(s)   Input(s)   Range Average   Input1  
 
Micro-Cap Portfolio                        
          Discounted Present Value   Liquidity          
Common Stocks     $390,600   Balance Sheet Analysis   Discount   30%-40%   Decrease  

1
This column represents the directional change in the fair value of the Level 3 investments that would result in an increase from the corresponding unobservable input. A decrease to the unobservable input would have the opposite effect. Significant increases and decreases in these unobservable inputs in isolation could result in significantly higher or lower fair value measurements.

Repurchase Agreements:
The Funds may enter into repurchase agreements with institutions that the Funds’ investment adviser has determined are creditworthy. Each Fund restricts repurchase agreements to maturities of no more than seven days. Securities pledged as collateral for repurchase agreements, which are held until maturity of the repurchase agreements, are marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest). Repurchase agreements could involve certain risks in the event of default or insolvency of the counter-party, including possible delays or restrictions upon the ability of each Fund to dispose of its underlying securities. The remaining contractual maturities of repurchase agreements held by the Funds at March 31, 2018 are overnight and continuous.

Securities Lending:
The Funds loan securities through a lending agent to qualified institutional investors for the purpose of realizing additional income. Collateral for the Funds on all securities loaned is accepted in cash and cash equivalents and invested temporarily by the custodian, as well as non-cash collateral which includes short and long-term U.S. Treasuries. The collateral maintained is at least 100% of the current market value of the loaned securities. The market value of the loaned securities is determined at the close of business of the Funds and any additional required collateral is delivered to the Funds on the next business day. The Funds retain the risk of any loss on the securities on loan as well as incurring the potential loss on investments purchased with cash collateral received for securities lending. In the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings. If the borrower fails to return loaned securities, and cash collateral being maintained by the borrower is insufficient to cover the value of loaned securities and provided such collateral insufficiency is not the result of investment losses, the lending agent has agreed to pay the amount of the shortfall to the Funds or, at the option of the lending agent, to replace the securities. In the event of the bankruptcy of the borrower, the Funds could experience delay in recovering the loaned securities or only recover cash or a security of equivalent value. Loans of securities generally do not have stated maturity dates, and the Funds may recall a security at any time. The Funds’ securities lending income consists of the income earned on investing cash collateral, plus any premium payments received for lending certain securities, less any rebates paid to borrowers and lending agent fees associated with the loan. The lending agent is not affiliated with Royce. The market value of non-cash collateral held by the Funds at March 31, 2018 was $3,102,165 for Micro-Cap Portfolio and $12,530,709 for Small-Cap Portfolio.

Other information regarding the Fund is available in the Fund’s most recent Prospectus and Report to Shareholders. This information is available through The Royce Funds (www.roycefunds.com) and on the Securities and Exchange Commission’s website (www.sec.gov).

 
 

Item 2 - Controls and Procedures

(a) The Registrant’s principal executive and principal financial officers have concluded, based on their evaluation of the Registrant’s disclosure controls and procedures as of a date within 90 days of the filing date of this report (as required by Rule 30a-3(b) under the Investment Company Act of 1940 (the “Act”)), that the Registrant’s disclosure controls and procedures (as defined by Rule 30a-3(c) under the Act) are reasonably designed to ensure that information required to be disclosed by the Registrant on Form N-Q is recorded, processed, summarized and reported within the required time periods and that information required to be disclosed by the Registrant in the reports that it files or submits on Form N-Q is accumulated and communicated to the Registrant’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

 

(b) There were no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) during the Registrant’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting.

 

Item 3 – Exhibits

Certifications pursuant to Rule 30a-2(a) under the Act are attached hereto.

 

SIGNATURES

 

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

 

Royce Capital Fund

By:

 

/s/ Christopher D. Clark

Christopher D. Clark

President, Royce Capital Fund

Date: May 29, 2018

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

 

By:

 

/s/ Christopher D. Clark

Christopher D. Clark

President, Royce Capital Fund

Date: May 29, 2018

 

By:

 

/s/ Peter K. Hoglund

Peter K. Hoglund

Treasurer, Royce Capital Fund

Date: May 29, 2018