N-CSRS 1 e71408_rgt-ncsrs.htm

 

UNITED STATES  

SECURITIES AND EXCHANGE COMMISSION  

Washington, D.C. 20549

 

FORM N-CSR

 

CERTIFIED SHAREHOLDER REPORT  

OF  

REGISTERED MANAGEMENT INVESTMENT COMPANIES

 

Investment Company Act File Number: 811-22532

 

Name of Registrant: Royce Global Value Trust, Inc.

 

Address of Registrant: 745 Fifth Avenue 

New York, NY 10151

 

Name and address of agent for service:

John E. Denneen, Esq.  

745 Fifth Avenue

New York, NY 10151 

 

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

Date of fiscal year end: December 31, 2020 

Date of reporting period: January 1, 2020 – June 30, 2020

 

 

Item 1. Reports to Shareholders.

 

 

Royce Closed-End Funds 2020 Semiannual

Review and Report to Stockholders

June 30, 2020

Royce Global Value Trust

Royce Micro-Cap Trust

Royce Value Trust

Beginning on January 1, 2021, as permitted by regulations adopted by the U.S. Securities and Exchange Commission, paper copies of the Funds’ shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports from the Funds or from your financial intermediary (such as a broker-dealer or bank). Instead, the reports will be made available on the Funds’ website (www.royceinvest.com), and you will be notified by mail each time a report is posted and provided with a website link to access the report. If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Funds electronically anytime by contacting your financial intermediary or, if you are a direct investor with the Funds, by calling 1-800-841-1180. Beginning on January 1, 2019, you may elect to receive all future reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports. If you invest directly with the Funds, you can call 1-800-841-1180 to let the Funds know you wish to continue receiving paper copies of your shareholder reports. Your election to receive reports in paper will apply to all Funds held in your account if you invest through your financial intermediary or all Funds held with our fund complex if you invest directly with the Funds.

 

 

 

 

 

A Few Words on Closed-End Funds

 

Royce Investment Partners manages three closed-end funds: Royce Global Value Trust, which invests primarily in companies with headquarters outside of the United States; Royce Micro-Cap Trust, which invests primarily in micro-cap securities; and Royce Value Trust, which invests primarily in small-cap securities. A closed-end fund is an investment company whose shares are listed and traded on a stock exchange. Like all investment companies, including open-end mutual funds, the assets of a closed-end fund are professionally managed in accordance with the investment objectives and policies approved by the fund’s Board of Directors. A closed-end fund raises cash for investment by issuing a fixed number of shares through initial and other public offerings that may include shelf offerings and periodic rights offerings. Proceeds from the offerings are invested in an actively managed portfolio of securities. Investors wanting to buy or sell shares of a publicly traded closed-end fund after the offerings must do so on a stock exchange, as with any publicly traded stock. Shares of closed-end funds frequently trade at a discount to their net asset value. This is in contrast to open-end mutual funds, which sell and redeem their shares at net asset value on a continuous basis.

 

A Closed-End Fund Can Offer Several Distinct Advantages

 

A closed-end fund does not issue redeemable securities or offer its securities on a continuous basis, so it does not need to liquidate securities or hold uninvested assets to meet investor demands for cash redemptions.

 

In a closed-end fund, not having to meet investor redemption requests or invest at inopportune times can be effective for value managers who attempt to buy stocks when prices are depressed and sell securities when prices are high.

 

A closed-end fund may invest in less liquid portfolio securities because it is not subject to potential stockholder redemption demands. This is potentially beneficial for Royce-managed closed-end funds, with significant investments in small- and micro-cap securities.

 

The fixed capital structure allows permanent leverage to be employed as a means to enhance capital appreciation potential.

 

Royce Micro-Cap Trust and Royce Value Trust distribute capital gains, if any, on a quarterly basis. Each of these Funds has adopted a quarterly distribution policy for its common stock.

 

We believe that the closed-end fund structure can be an appropriate investment for a long-term investor who understands the benefits of a more stable pool of capital.

 

Why Dividend Reinvestment Is Important

 

A very important component of an investor’s total return comes from the reinvestment of distributions. By reinvesting distributions, our investors can maintain an undiluted investment in a Fund. To get a fair idea of the impact of reinvested distributions, please see the charts on pages 56 and 57. For additional information on the Funds’ Distribution Reinvestment and Cash Purchase Options and the benefits for stockholders, please see page 58 or visit our website at www.royceinvest.com.

 

Managed Distribution Policy

 

The Board of Directors of each of Royce Micro-Cap Trust and Royce Value Trust has authorized a managed distribution policy (“MDP”). Under the MDP, Royce Micro-Cap Trust and Royce Value Trust pay quarterly distributions at an annual rate of 7% of the average of the prior four quarter-end net asset values, with the fourth quarter being the greater of these annualized rates or the distribution required by IRS regulations. With each distribution, the Fund will issue a notice to its stockholders and an accompanying press release that provides detailed information regarding the amount and composition of the distribution (including whether any portion of the distribution represents a return of capital) and other information required by a Fund’s MDP. You should not draw any conclusions about a Fund’s investment performance from the amount of distributions or from the terms of a Fund’s MDP. A Fund’s Board of Directors may amend or terminate the MDP at any time without prior notice to stockholders; however, at this time there are no reasonably foreseeable circumstances that might cause the termination of any of the MDPs.

 

This page is not part of the 2020 Semiannual Report to Stockholders

 

 

 

 

 

 

Table of Contents

 

 

Semiannual Review  
   
Letter to Our Stockholders 2
   
Performance 7
   
   
Semiannual Report to Stockholders  
   
Royce Global Value Trust  
   
Manager’s Discussion of Fund Performance 8
   
Schedule of Investments 10
   
Other Financial Statements 13
   
Royce Micro-Cap Trust  
   
Managers’ Discussion of Fund Performance 22
   
Schedule of Investments 24
   
Other Financial Statements 29
   
Royce Value Trust  
   
Manager’s Discussion of Fund Performance 38
   
Schedule of Investments 40
   
Other Financial Statements 46
   
History Since Inception 56
   
Distribution Reinvestment and Cash Purchase Options 58
   
Directors and Officers 59
   
Board Approval of Current Investment Advisory Agreements 60
   
Board Approval of New Investment Advisory Agreements 63
   
Notes to Performance and Other Important Information 66

 

 

 

This page is not part of the 2020 Semiannual Report to Stockholders

 

 

 

 

 

 

Letter to Our Stockholders

 

 

 

THE LONGEST HALF

 

Before delving into our usual analysis of the small-cap market, we first want to offer our deepest sympathies to all those affected by the coronavirus and to extend an equal measure of gratitude to the many essential workers who have done so much to help us all in various ways during this period of pandemic-induced difficulties. We are also grateful for all of the extraordinary efforts by our Royce colleagues, as they have been working diligently to keep our company operating at full strength while working from home.

 

The first half of 2020 was as turbulent a six-month period as we have seen in nearly 50 years of small-cap asset management. The Russell 2000 Index experienced the worst quarter in its own 40-year history in 1Q20, losing 30.6%, before rebounding to enjoy its third best in the second quarter, when it advanced 25.4%. As wide as the distance is between them, these numbers fail to fully capture the extremes. The Russell 2000 fell 41.5% from 2/20/20-3/18/20 before advancing 46.0% from March’s 2020 low through the end of June. Comparable levels of the same volatility could be seen across other capitalization ranges and geographies as the world reeled from the devastating effects of the COVID-19 pandemic, which has wreaked havoc on public health and the global economy.

From our perspective as experienced small-cap specialists, the most interesting element about the market’s V-shaped pattern since mid-February was that stocks behaved in a manner that was simultaneously anomalous and familiar. Like the public health crisis that engendered the initial decline, the speed and depth with which equities fell was indeed unprecedented. The pace and height of the subsequent rebound has been surpassed only once before, in the spring of 2009. Yet the overall pattern is one that we have seen before. Deep bear markets have historically been followed by vibrant comebacks. The range of returns along market cap parameters added to the familiar tenor. After losing more in the first quarter, small- and micro-cap stocks roared back to outpace their large-cap counterparts in the second. Moreover, factors such as cyclicality and perceived riskiness also performed in line with our expectations through most of the first half of 2020.

 

One notable exception, at least for a short time, was the underperformance of cyclical stocks within small-cap early in the recovery period. This temporary disadvantage may have been an unintended consequence of the Fed’s decision to put enough liquidity into the capital markets to rebuild stability and restore the financial system to something resembling normal operations as the markets were plunging. Yet these moves—which in our view were entirely



 

Past performance is no guarantee of future results.

 

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LETTER TO OUR STOCKHOLDERS

 

appropriate and necessary—also appeared to shift higher-growth companies into pole position in small-cap, leaving cyclicals to play catch-up into the middle of May, nearly two months after the nascent upswing. Since cyclicals historically make strong moves off market bottoms (especially when accompanied by improving economic data, as was the case this year), we were somewhat surprised. Cyclicals more than made up for their slow start, however, by nearly doubling the return for defensives from mid-May through the end of June, up 18.1% versus 9.5%. Needless to say, a result in the high teens over six weeks is an impressive move under any circumstances.

 

DISSECTING THE DISCONNECT

 

The more immediate, and for many more vexing matter, however, is the disconnect between a weakened economy and a robust, albeit highly volatile, U.S. equity market. It’s always a cause for concern for some when the market appears out of sync with the economy. But in the midst of a public health crisis, one that’s led to sorrow for many and challenges for all, the contrast becomes particularly stark. We understand why many people, including a number of skilled and experienced investors, have serious misgivings about the overall upward direction of the stock market during a pandemic. However, we think these objections ultimately rest on two misconceptions.

 

The first is the idea that stock prices are a barometer of current corporate health. Yet stocks are almost never priced based on what’s happening today. The market’s tendency is to look forward to what is most likely to happen one, two, or even three years down the road. In other words, the market’s behavior is rooted in expectations of corporate profitability. So in spite of the currently long list of challenges we face, the market is anticipating a recovering economy over the next couple of years. Equally important, investors are confident that most companies’ profits will be higher over the next year or two, which should boost the value of their shares.

 

The second misconception is that equities are independent of other financial conditions. Yet stocks are, after all, financial assets. As such, conditions in the financial markets affect their prices. With interest rates at all-time lows, it makes sense that stocks would be

selling at higher prices. Lower rates typically make equities appear more attractive compared to other investments. The Fed’s decision to provide ample liquidity to the financial markets and maintain interest rates at close to zero should support rising stock prices because plentiful amounts of capital are available for investment, and there are relatively few attractive alternatives. The current strong and stable state of the equity markets helps to explain why “Don’t Fight the Fed” is such a reliable adage.

 

THE CASE FOR SMALL-CAPS IN FIVE CHARTS

 

Our overall outlook for small-caps, then, is cautiously optimistic. In large part, this is because we expect the economy will continue to recover over the next few years, spurring profit growth as it does. We also think that small-caps continue to look relatively more attractive than most other areas of the market. Its recent robust run notwithstanding, the Russell 2000 was down 13.0% in 2020’s first half versus a loss of 2.8% for the large-cap Russell 1000 Index. Similarly, the Nasdaq made new all-time highs in this year’s rebound while the small-cap index finished June 2020 14.9% below its August 2018 peak.

 

Along with relatively more attractive small-cap prices, we also see the financially healthy state of many small-cap companies. We examined performance for the Russell 2000 compared to the index’s trailing 12-month cash flow per share from the peak on 8/31/18 through 6/30/20. Our analysis, seen below, showed that cash flow per share has made steady positive progress that accelerated to a more robust pace near the end of this nearly two-year period, while small-cap performance lagged this metric over the same period.

 

 

Russell 2000 Performance vs Trailing 12-month Cash Flow Per Share Percent Change from 8/31/18 Peak as of 6/30/20

 

 

 

Trailing 12-Month Cash Flow Per Share is calculated as the after-tax earnings of a company plus depreciation on a per-share basis. It is often used to measure a company’s financial strength.



 

Past performance is no guarantee of future results.

 

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LETTER TO OUR STOCKHOLDERS

 

Taking a look at the asset class’s longer-term history paints an equally compelling picture. For example, during the subsequent two-year periods following its last major declines—the Internet Bubble and the Financial Crisis—small-caps recovered significantly more than they did during the first half of 2020.

  

Small-Cap’s Bear-Market Rebounds
Russell 2000 subsequent two-year periods following troughs
 

 

Also supporting the idea that small-caps have room to run is the five-year average annual total return for the Russell 2000 at the end of June—which was 4.3%. This result is well below both the rolling monthly five-year average of 10.5% for the small-cap index since its inception and its 9.6% average annual five-year return following lower-return periods.

 

The subsequent five-year returns following periods of low Russell 2000 returns have on average been very attractive. Most important in our view, small-caps averaged a 13.8% subsequent five-year annualized return when trailing performance was in the 0-5% range, as it was at the end of June 2020.

 

 

Subsequent 5-Year Returns Based on Prior 5-Year Return Ranges Russell 2000 Since Inception From 12/31/78 through 6/30/20

 

 

Trailing Russell 2000 Five-Year Return Range (12/31/78 through 6/30/20)

 

Coincident with small-cap’s lower return pattern over the last five years has been relative underperformance versus large-cap stocks.

While leadership between small-caps and large-caps has rotated over the last several decades, the degree of current large-cap performance is unusual. (For longer-term studies we use CRSP (Center for Research in Security Prices) indexes, whose small-cap proxy, the CRSP 6-10, has a longer history than the Russell 2000.) Since the end of 1945 through June 30th of this year, the CRSP 6-10 led the CRSP 1-5, its large-cap counterpart, with a rolling monthly average annual five-year return of 12.8% for the former compared with 11.3% for the latter. However, for the five-year period ended 6/30/20, small-cap trailed large-cap by 5.9% as the CRSP 6-10 advanced 4.8% versus a gain of 10.7% for the CRSP 1-5. This degree of small-cap underperformance is notable, as it has happened in only 13%, 107 out of 835, of all five-year periods. What happened next is equally if not more interesting: when the CRSP 6-10 lagged the CRSP 1-5 by at least 5.5%, small-cap subsequently rebounded to beat large-cap in 83% of the subsequent five-year periods—86 out of 103 times. We anticipate a rotation in leadership not simply because extreme performance spreads between asset classes and/or indexes tend to be followed by reversals but also due to small-cap’s longstanding edge over large-caps following bear markets and in particular during economic rebounds.

 

Further, our chosen asset class was in an even rarer state at the end of June, one that bolsters our confidence in both its absolute and relative performance prospects. For the one-year period ended 6/30/20, the Russell 2000 was down 6.6% versus a gain of 7.5% for the Russell 1000. How unusual is this combination of a negative return for small-cap and a positive result for large-cap over a 12-month span? Over the last 20 years, it’s happened about 10% of the time, in only 23 out of 229 monthly rolling periods. Even more important is what typically happens next.

 

Small-cap stocks have rebounded resoundingly over the subsequent 12-month periods, beating large-cap 81% of the time and posting an average one-year return of 19.0% versus 16.8% for large-caps.



 

Past performance is no guarantee of future results.

 

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LETTER TO OUR STOCKHOLDERS

 

 

Small-Caps Have Rebounded Following the Rare Concurrence of a Negative 12-Month Return for Small-Cap with a Positive Return for Large-Cap Trailing 1-Year Periods from 6/30/00 to 6/30/20

 

 

 

Of course, our strategies each focus selectively, concentrating on more than just the overall small-cap market. Their differences notwithstanding, each has an overall tilt toward economically sensitive cyclical sectors, with most weighted heavily in Industrials and Information Technology while others, such as our dividend value portfolios, typically have much more exposure to Financials than technology companies. Regardless of each strategy’s areas of focus, we think these three sectors offer a broad and diverse selection of companies with attractive attributes.

 

As has been the case with small-cap value and growth, cyclicals have been lagging their defensive counterparts over the last several years. However, the U.S. economy appears to have bottomed in April. The monthly ISM (Institute for Supply Management) manufacturing index began to climb again in May and rose by a highly encouraging 9.5 points between May and June, from 43.1 to 52.6. This was also significant in that a number more than 50 indicates expanding growth in manufacturing orders and production. Moreover, the U.S. housing market continues to grow, showing remarkable resilience in the face of the pandemic. The all-important U.S. consumer remains something of a wild card considering the still uncertain state of public health. However, if consumer spending continues to trend positively, as it did during May, then the economy should grow more quickly. In addition to a global economic recovery, cyclicals would benefit from a weaker dollar, a dose of inflation, and earnings growth—as would value stocks.

Within this optimistic scenario, the valuation picture is also critical as it forms an integral part of the case for small-cap cyclicals. As a whole, small-cap valuations appear far more reasonable than those of large-caps. Within small-cap, cyclicals look much cheaper than defensive stocks. To be sure, at the end of June they were at their cheapest in more than 20 years compared to defensives, based on our preferred valuation metric, the Russell 2000’s relative median EV/EBIT (Enterprise Value divided by Earnings Before Interest & Taxes, excluding companies with negative EBIT).

 

 

Russell 2000 Relative Median EV/EBIT (Ex Negative EBIT)
From 6/30/00 to 6/30/20

 

 

 

EV/EBIT: Enterprise Value/Earnings Before Interest and Taxes. Cyclical is defined as follows: Communication Services, Consumer Discretionary, Energy, Financials, Industrials, Information Technology, and Materials. Defensive: Consumer Staples, Health Care, Real Estate, Utilities. Source: FactSet

 

Why is all of this data important? While past performance patterns are never sure to repeat themselves, the economic growth periods that have followed recessions have disproportionately rewarded small-cap cyclical stocks throughout history.

 

IT’S THE VISTA, NOT THE VIEW

 

As we look forward, we have kept our scope squarely on the long run. However optimistic we are about the years ahead, the view of the next weeks and months remains foggy. Our confidence in an economic recovery and the likely rewards that would flow to small-cap cyclicals and select value stocks is therefore rooted in our perennial long-term perspective. Some market observers argue that equities could tread water through the end of this year before resuming an upward move in an improving economy. As plausible as this case is, we are not entirely convinced that evidence of a recovered economy is the only catalyst



 

Past performance is no guarantee of future results.

 

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LETTER TO OUR STOCKHOLDERS

 

Our habit of looking beyond the near term has opened up a brighter vista where we can see both the economy and corporate profits rebounding beyond the next several quarters.

 

that can keep share prices afloat. The second half of 2009 provides what may be an instructive example. After their recovery off the trough in March of that year, equities continued to advance through the end of December. Throughout the entire year of 2009, pessimism reigned, buoyed by anxieties about the seeming contradiction among rising stock prices, the underwhelming state of the global economy, and the fragility of the world’s financial system. Yet the market scaled that wall of worry with relative ease. Our own experience, both then and now, has taught us two lessons that are of particular relevance to the present moment: First, shocks are what have hurt stocks the most historically—known worries are often priced in fully or at least close to it; second, stocks often advance on economic news that is less grim, meaning that even slight improvements in economic data could be more than enough impetus to keep investors buying.

 

In fact, we think those more fatalistic investors may be surprised by how quickly earnings recover. Our current situation is unique in many ways. This is especially true for the markets and the economy where the struggles have been bred by a public health crisis as opposed

to financial excess or economic distress. The resulting short-term uncertainty and attendant market turbulence are allowing us to try taking advantage of two market dynamics that we believe play to the strengths of active management: high volatility and short-term thinking. And our own habit of looking beyond the near term has opened up a brighter vista where we can see both the economy and corporate profits rebounding beyond the next several quarters.

 

Finally, we want to share the news about three recent additions to our investment staff: Portfolio Manager Miles Lewis, CFA®; Senior Analyst and Director of International Research Mark Fischer; and Senior Analyst and Director of Strategic Research Jag Sriram, CFA®. All joined Royce during the second quarter of 2020, and their respective arrivals highlight the fact that, even in these challenging times, we are committed to adding skilled professionals to our firm. Miles, Mark, and Jag are important additions to our highly experienced investment team. We look forward to them contributing investment insights to our portfolios that benefit our investors.



 

Sincerely,    
     
   
     
Charles M. Royce Christopher D. Clark Francis D. Gannon
Chairman, Chief Executive Officer, and Co-Chief Investment Officer,
Royce Investment Partners Co-Chief Investment Officer, Royce Investment Partners
  Royce Investment Partners  
July 31, 2020    

 

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Performance

 

 

NAV Average Annual Total Returns

As of June 30, 2020 (%)

 

                    SINCE INCEPTION
  YTD¹ 1-YR 3-YR 5-YR 10-YR 15-YR 20-YR 25-YR 30-YR INCEPTION DATE
Royce Global Value Trust -6.91 2.46 4.97 6.41 N/A N/A N/A N/A N/A  5.02 10/17/13
Royce Micro-Cap Trust -6.21 0.80 4.08 5.27 10.53 7.25 8.91 9.95 N/A 10.06 12/14/93
Royce Value Trust -8.92 -0.60 4.19 6.82 10.30 7.16 8.35 9.57 10.10 10.04 11/26/86
INDEX                      
MSCI ACWI Small Cap Index -12.85 -5.54 1.43 3.67 8.61 6.89 6.85 7.30 N/A N/A N/A
Russell Microcap Index -11.21 -4.77 0.85 2.86 9.93 5.65 6.53 N/A N/A N/A N/A
Russell 2000 Index -12.98 -6.63 2.01 4.29 10.50 7.01 6.69 8.16 8.93 N/A N/A
1 Not annualized.

 

Important Performance and Risk Information

 

All performance information in this Review and Report reflects past performance, is presented on a total return basis, net of the Fund’s investment advisory fee, and reflects the reinvestment of distributions. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when sold. Current performance may be higher or lower than performance quoted. Current month-end performance may be obtained at www.royceinvest.com. The Funds are closed-end registered investment companies whose respective shares of common stock may trade at a discount to the net asset value. Shares of each Fund’s common stock are also subject to the market risk of investing in the underlying portfolio securities held by each Fund. Each series of The Royce Fund is subject to market risk-the possibility that common stock prices will decline, sometimes sharply and unpredictably, over short or extended periods of time. Such declines may be caused by various factors, including market, financial, and economic conditions, governmental or central bank actions, and other factors, such as the recent COVID-19 pandemic, that may not be directly related to the issuer of a security held by a Fund. This pandemic could adversely affect global market, financial, and economic conditions in ways that cannot necessarily be foreseen. All indexes referenced are unmanaged and capitalization-weighted. Each index’s returns include net reinvested dividends and/or interest income. Source: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indexes or any securities or financial products. This report is not approved, endorsed, reviewed or produced by MSCI. None of the MSCI data is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Russell Investment Group is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Russell Investment Group. The Russell 2000 Index is an index of domestic small-cap stocks that measures the performance of the 2,000 smallest publicly traded U.S. companies in the Russell 3000 Index. The Russell Microcap Index includes 1,000 of the smallest securities in the small-cap Russell 2000 Index, along with the next smallest eligible securities as determined by Russell. The Russell Global Small Cap Index is an unmanaged, capitalization-weighted index of global small-cap stocks. The MSCI ACWI Small Cap Index is an unmanaged, capitalization-weighted index of global small-cap stocks. The performance of an index does not represent exactly any particular investment, as you cannot invest directly in an index. Royce Value, Micro-Cap, and Global Value Trust shares of common stock trade on the NYSE. Royce Fund Services, LLC (“RFS”) is a member of FINRA and files certain material with FINRA on behalf of each Fund. RFS is not an underwriter or distributor of any of the Funds.

 

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MANAGER’S DISCUSSION (UNAUDITED)

 

Royce Global Value Trust (RGT)

 

 

Chuck Royce

 

FUND PERFORMANCE

Royce Global Value Trust (“RGT”) fell 6.9% on an NAV (net asset value) basis and declined 1.0% based on market price for the year-to-date period ended 6/30/20, losing significantly less than its unleveraged benchmark, the MSCI ACWI Small Cap Index, which declined 12.8% for the same period. The Fund also outpaced the MSCI ACWI Small Cap Index on both a NAV and market price basis for the one-, three-, five-year, and since inception (10/17/13) periods ended 6/30/20.

 

WHAT WORKED… AND WHAT DIDN’T

Five of the 10 equity sectors in which the portfolio held investments finished 2020’s first half with losses. Industrials, RGT’s largest weighting, detracted most by a wide margin, followed by Energy and Consumer Discretionary. Conversely, Health Care contributed most to performance. Information Technology and Financials were also additive, rounding out the top three. Energy equipment & services (Energy) made the largest negative impact at the industry level, followed by professional services and machinery, both in Industrials. Capital markets (Financials) made an outsized positive impact at the industry level while metals & mining (Materials) and health care equipment & supplies (Health Care) also contributed.

Canada-based Computer Modelling Group, which is a software company that produces reservoir simulation software for the oil and gas industry, detracted most at the position level in 2020’s first half. Like many businesses with exposure to the energy industry, its stock fell mostly as a result of turmoil in the oil and gas markets. Surmising that current energy oversupply conditions may persist, we exited our position in RGT’s portfolio. Texas-based Kirby Corporation, which is a tank barge operator that transports bulk liquid products across the U.S., also hindered performance as revenue for the marine transportation business declined substantially in the first quarter of 2020. Citing the COVID-19-driven global recession, its potential impact on future demand, and highly volatile industry conditions, Kirby also withdrew full-year earnings guidance in May. Assured Guaranty, which provides municipal bond insurance and financial guarantees for infrastructure and structured financings, was the third-largest detractor as its large exposure to cities and states facing various fiscal stresses appeared to discourage investors.

Descartes Systems Group, which is a Canada-based technology company specializing in supply chain management and logistics software, as well as cloud-based services for logistics businesses, was the top performing position in 2020’s first half. The company reported fiscal fourth-quarter and full-year results in March that showed increases in revenue and earnings. Its growth has been driven by its Global Logistics Network (GLN) product, which is helping companies overcome supply chain issues wrought by the pandemic. Tel Aviv Stock Exchange was also additive to performance. In late May of 2020, the company reported robust growth in revenue and net profits. The exchange has remained fully operational throughout the pandemic and saw a substantial increase in trading volume as well as higher revenue from listing fees and increases in annual levies. Global investment management specialist Sprott consolidated its operations to focus solely on hard assets and found itself well positioned to benefit from the recent appreciation in gold prices.

Relative to the MSCI ACWI Small Cap Index, the Fund benefited from both stock selection and sector allocation, with the former having by far the higher impact. Financials was the top relative performing sector by a wide margin due to our savvy stock selection. Real Estate followed as a result of our lower weighting and, to a lesser degree, stock picks. The Fund’s cash position was also additive to relative performance. Conversely, our lower exposure to Health Care hindered performance, while ineffective stock picks hurt results in both Consumer Discretionary and, on a very modest level, Communication Services.

 

             
  Top Contributors to Performance     Top Detractors from Performance    
  Year-to-Date Through 6/30/20 (%)1     Year-to-Date Through 6/30/20 (%)2    
             
  Descartes Systems Group (The) 0.84   Computer Modelling Group -0.53  
  Tel Aviv Stock Exchange 0.75   Kirby Corporation -0.51  
  Sprott 0.69   Assured Guaranty -0.48  
  Alamos Gold Cl. A 0.67   Tegma Gestao Logistica -0.46  
  Virtu Financial Cl. A 0.50   Pason Systems -0.44  
  1 Includes dividends     2 Net of dividends    
             

 

CURRENT POSITIONING AND OUTLOOK

Though uncertainty and volatility will remain elevated until investors can better quantify the full economic impact of the coronavirus, the depth of various recessions, and the extent of structural economic damage, the global nature of the problem seems likely to receive a boost from an ongoing coordinated international response to rebuild confidence. Central banks appear willing to increase accommodation to ease any future economic disruptions even as fiscal policy takes center stage. Thus, despite near-term concerns, the building blocks are in place for an economic recovery that will benefit the more economically sensitive parts of the overall economy as supply-side shocks eventually wane and pent-up demand is released. As long-term investors, our goal is to take advantage of the volatility, as it always is during market dislocations. We continue to believe that the current backdrop should favor companies with sustainable business models, positive cash flows, and/or the potential for earnings strength and profitability. We are confident that the small-cap businesses we own, particularly those with low debt, solid cash flows, and capable management teams, are more likely to weather a more volatile and potentially lower-return environment than their weaker peers.

 

8 | 2020 Semiannual Report to Stockholders

 

 

 

 

 

 

PERFORMANCE AND PORTFOLIO REVIEW (UNAUDITED) SYMBOLS     MARKET PRICE RGT NAV XRGTX

 

 

Performance

Average Annual Total Return (%) Through 6/30/20

 

  JAN-JUN 20201 1-YR 3-YR 5-YR SINCE INCEPTION (10/17/13)
RGT (NAV) -6.91 2.46 4.97 6.41 5.02
1 Not Annualized

 

 

Market Price Performance History Since Inception (10/17/13)

Cumulative Performance of Investment1

 

  1-YR 5-YR 10-YR 15-YR 20-YR SINCE INCEPTION (10/17/13)
RGT 10.2% 46.6% N/A N/A N/A 38.3%

Reflects the cumulative performance experience of a continuous common stockholder who purchased one share at inception ($8.975 IPO) and reinvested all distributions.
Reflects the actual month-end market price movement of one share as it has traded on NYSE.

 

 

Morningstar Style Map™ As of 6/30/20

 

The Morningstar Style Map is the Morningstar Style Box™ with the center 75% of fund holdings plotted as the Morningstar Ownership Zone™. The Morningstar Style Box is designed to reveal a fund’s investment strategy. The Morningstar Ownership Zone provides detail about a portfolio’s investment style by showing the range of stock sizes and styles. The Ownership Zone is derived by plotting each stock in the portfolio within the proprietary Morningstar Style Box. Over time, the shape and location of a fund's ownership zone may vary. See page 66 for additional information.

 

 

Top 10 Positions  
% of Net Assets  
   
Tel Aviv Stock Exchange 2.8
IPH 2.1
Descartes Systems Group (The) 1.9
XP Power 1.8
Sprott 1.5
IMCD 1.5
SEI Investments 1.5
Amadeus Fire 1.4
Quaker Chemical 1.4
Alamos Gold Cl. A 1.3

 

 

Portfolio Sector Breakdown  
% of Net Assets  
   
Industrials 34.2
Information Technology 28.5
Financials 15.2
Health Care 8.3
Materials 7.3
Consumer Discretionary 2.6
Real Estate 2.5
Consumer Staples 1.9
Energy 1.3
Communication Services 1.3
Outstanding Line of Credit, Net of Cash and Cash Equivalents -3.1

 

 

Calendar Year Total Returns (%)  
   
YEAR RGT
2019 31.2
2018 -16.1
2017 31.1
2016 11.1
2015 -3.4
2014 -6.2

 

 

Portfolio Country Breakdown 1,2  
% of Net Assets  
   
United States 24.2
United Kingdom 16.1
Canada 12.6
Japan 10.2
Sweden 6.1
Germany 5.7
Australia 4.2
Switzerland 3.9
Israel 3.8
¹Represents countries that are 3% or more of net assets.
²Securities are categorized by the country of their headquarters.

 

 

Portfolio Diagnostics  
   
Fund Net Assets $133 million
Number of Holdings 154
Turnover Rate 39%
Net Asset Value $12.66
Market Price $11.57
Net Leverage1 3.1%
Average Market Capitalization 2 $1,751 million
Weighted Average P/E Ratio 3,4 27.9x
Weighted Average P/B Ratio 3 3.0x
Active Share 5 97%
1Net leverage is the percentage, in excess of 100%, of the total value of equity type investments, divided by net assets.
2Geometric Average. This weighted calculation uses each portfolio holding’s market cap in a way designed to not skew the effect of very large or small holdings; instead, it aims to better identify the portfolio’s center, which Royce believes offers a more accurate measure of average market cap than a simple mean or median.
3Harmonic Average. This weighted calculation evaluates a portfolio as if it were a single stock and measures it overall. It compares the total market value of the portfolio to the portfolio’s share in the earnings or book value, as the case may be, of its underlying stocks.
4The Fund’s P/E ratio calculation excludes companies with zero or negative earnings (14% of portfolio holdings as of 6/30/20).
5Active Share is the sum of the absolute values of the different weightings of each holding in the Fund versus each holding in the benchmark, divided by two.

 

Important Performance and Risk Information

 

All performance information reflects past performance, is presented on a total return basis, net of the Fund’s investment advisory fee, and reflects the reinvestment of distributions. Past performance is no guarantee of future results. Current performance may be higher or lower than performance quoted. Returns as of the most recent month-end may be obtained at www.royceinvest.com. The market price of the Fund’s shares will fluctuate, so that shares may be worth more or less than their original cost when sold. The Fund invests primarily in securities of small- and mid-cap companies, which may involve considerably more risk than investments in securities of larger-cap companies. The Fund’s broadly diversified portfolio does not ensure a profit or guarantee against loss. From time to time, the Fund may invest a significant portion of its net assets in foreign securities, which may involve political, economic, currency and other risks not encountered in U.S. investments. Regarding the “Top Contributors” and “Top Detractors” tables shown above, the sum of all contributors to, and all detractors from, performance for all securities in the portfolio would approximate the Fund’s year-to-date performance for 2020.

 

2020 Semiannual Report to Stockholders | 9

 

 

 

 

 

 

Royce Global Value Trust

 

Schedule of Investments        
Common Stocks – 103.1%          
    SHARES    VALUE 
            
ARGENTINA – 0.2%          
Bioceres Crop Solutions 1   50,000   $303,000 
Total (Cost $288,504)        303,000 
           
AUSTRALIA – 4.2%          
Bravura Solutions   114,200    358,321 
Cochlear   7,900    1,030,792 
IPH   549,447    2,835,790 
Steadfast Group   206,000    478,354 
Technology One   147,200    895,065 
Total (Cost $4,727,804)        5,598,322 
           
BERMUDA – 0.8%          
Assured Guaranty 2   21,700    529,697 
Bank of N.T. Butterfield & Son   19,600    478,044 
Total (Cost $1,780,717)        1,007,741 
           
BRAZIL – 1.9%          
B3-Brasil, Bolsa, Balcao   40,100    406,228 
Linx   134,000    624,402 
TOTVS   282,185    1,201,262 
YDUQS Participacoes   49,400    305,678 
Total (Cost $1,965,672)        2,537,570 
           
CANADA – 12.6%          
Agnico Eagle Mines 2,3   10,000    640,600 
Alamos Gold Cl. A   192,000    1,790,454 
Altus Group   33,400    1,003,525 
AutoCanada   43,000    338,907 
CAE    46,100    747,733 
Centerra Gold    78,000    870,433 
Descartes Systems Group (The) 1,2   47,000    2,486,300 
FirstService Corporation   11,100    1,118,325 
Major Drilling Group International 1   336,000    1,061,756 
Morneau Shepell   46,000    1,073,762 
Pan American Silver 2   31,800    966,402 
Park Lawn   54,000    891,780 
Pason Systems   98,500    538,354 
People Corporation 1   39,700    264,062 
Sprott   57,260    2,057,834 
TMX Group   9,200    909,632 
Total (Cost $14,577,245)        16,759,859 
           
CHINA – 0.7%          
A-Living Services   173,100    873,474 
Total (Cost $253,191)        873,474 
           
DENMARK – 1.1%          
Chr. Hansen Holding   6,800    700,949 
SimCorp   6,600    711,067 
Total (Cost $1,147,985)        1,412,016 
           
FRANCE – 2.0%          
Esker   7,900    1,039,600 
Gaztransport Et Technigaz   11,200    852,691 
Interparfums 1   17,600    786,685 
Total (Cost $2,066,998)        2,678,976 
           
GERMANY – 5.7%          
Amadeus Fire 1   15,400    1,909,120 
Carl Zeiss Meditec 1   11,700    1,140,025 
CompuGroup Medical   12,300    967,204 

Deutsche Konsum REIT   36,500   724,805 
Medios 1   20,900    895,112 
MorphoSys 1   6,000    757,892 
PATRIZIA   18,200    440,583 
STRATEC   7,100    693,728 
Total (Cost $5,449,902)        7,528,469 
           
GREECE – 0.9%          
Mytilineos   32,700    268,664 
Sarantis   102,800    946,135 
Total (Cost $1,304,554)        1,214,799 
           
ICELAND – 0.7%          
Ossur   138,400    917,677 
Total (Cost $913,879)        917,677 
           
INDIA – 0.7%          
AIA Engineering   41,600    886,255 
Total (Cost $932,730)        886,255 
           
INDONESIA – 0.3%          
Selamat Sempurna   5,500,000    405,029 
Total (Cost $513,090)        405,029 
           
ISLE OF MAN – 0.3%          
Strix Group    175,700    419,516 
Total (Cost $381,982)        419,516 
           
ISRAEL – 3.8%          
Nova Measuring Instruments 1,2   27,600    1,330,044 
Tel Aviv Stock Exchange   819,400    3,674,127 
Total (Cost $2,507,971)        5,004,171 
           
ITALY – 1.6%          
Avio 1   21,800    373,312 
Carel Industries   59,100    1,084,099 
DiaSorin   1,800    344,319 
Gruppo MutuiOnline   12,800    273,315 
Total (Cost $1,342,945)        2,075,045 
           
JAPAN – 10.2%          
Advantest Corporation   19,800    1,124,657 
As One   9,500    1,037,560 
Benefit One   48,100    966,111 
Daifuku   13,900    1,214,406 
eGuarantee   27,000    637,635 
Fukui Computer Holdings   37,800    964,814 
Harmonic Drive Systems   15,200    833,451 
Meitec Corporation   20,000    962,803 
Morningstar Japan KK   262,200    965,537 
Nihon M&A Center   13,600    614,331 
NSD   56,600    965,266 
Prestige International   112,200    842,992 
SCSK   8,300    403,306 
TechnoPro Holdings   6,500    376,326 
TKC Corporation   23,400    1,238,780 
Zenkoku Hosho   10,000    375,820 
Total (Cost $10,098,290)        13,523,795 

 

10 | 2020 Semiannual Report to Stockholders THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS

 

 

 

 

June 30, 2020 (unaudited)

 

Schedule of Investments (continued)          
           
    SHARES    VALUE 
           
LUXEMBOURG – 0.3%          
Eurofins Scientific 1   700   $438,833 
Total (Cost $356,784)        438,833 
           
MEXICO – 0.4%          
Becle   253,900    488,038 
Total (Cost $427,664)        488,038 
           
NETHERLANDS – 1.5%          
IMCD   21,100    1,980,872 
Total (Cost $1,486,822)        1,980,872 
           
NEW ZEALAND – 0.7%          
Fisher & Paykel Healthcare   43,500    1,005,942 
Total (Cost $311,343)        1,005,942 
           
SINGAPORE – 1.8%          
Midas Holdings 1,4   400,000    0 
XP Power 1   53,400    2,356,625 
Total (Cost $1,734,782)        2,356,625 
           
SOUTH AFRICA – 0.3%          
Transaction Capital 1   365,700    391,823 
Total (Cost $460,480)        391,823 
           
SWEDEN – 6.1%          
Bravida Holding 1   105,100    1,003,071 
BTS Group 1   27,400    574,449 
Bufab 1   86,600    910,037 
Dometic Group 1   60,400    540,699 
Hexpol 1   60,800    449,601 
Karnov Group    213,600    1,271,669 
Lagercrantz Group   57,300    887,258 
Loomis Cl. B 1   15,000    357,865 
Mycronic   93,700    1,764,658 
OEM International Cl. B 1   16,500    424,748 
Total (Cost $7,161,353)        8,184,055 
           
SWITZERLAND – 3.9%          
Forbo Holding   300    434,002 
Inficon Holding   900    697,308 
Kardex Holding   8,500    1,548,150 
LEM Holding   450    664,641 
VAT Group   5,100    929,812 
VZ Holding   12,600    940,867 
Total (Cost $3,434,320)        5,214,780 
           
UNITED KINGDOM – 16.1%          
Abcam   50,600    835,030 
Ashmore Group   315,000    1,625,905 
CentralNic Group1   730,300    784,790 
Clarkson 1   15,600    435,000 
Computacenter 1   21,500    436,695 
Diploma 1   40,500    903,702 
DiscoverIE Group 1   173,300    1,099,020 
Eckoh   677,100    528,422 
FDM Group Holdings 1   90,100    1,014,916 
Ferroglobe (Warranty Insurance Trust) 1,4   41,100    0 
Halma   38,300    1,091,492 
HomeServe   71,600    1,156,555 
Ibstock 1   181,300    403,570 
Keystone Law Group 1   171,500    1,041,127 

Learning Technologies Group 1   693,800    1,056,990 
Marlowe 1   218,800    1,366,207 
Midwich Group 1   84,900    421,489 
Mortgage Advice Bureau Holdings   119,300    890,953 
Polypipe Group 1   202,100    1,082,236 
Porvair   71,100    491,784 
Restore 1   203,700    909,912 
RWS Holdings   88,800    658,669 
Softcat 1   34,800    469,609 
Spirax-Sarco Engineering   8,700    1,074,119 
SThree 1   422,900    1,416,981 
YouGov    30,000    286,003 
Total (Cost $19,912,384)        21,481,176 
           
UNITED STATES – 24.2%          
Air Lease Cl. A 2   30,330    888,366 
APi Group 1   101,500    1,233,225 
BOK Financial 2,3   12,700    716,788 
Brooks Automation 2   10,800    477,792 
Cabot Microelectronics 2   10,300    1,437,262 
Chicken Soup For The Soul Entertainment Cl. A 1   20,000    138,200 
CIRCOR International 1,2   56,700    1,444,716 
Cognex Corporation 2   10,748    641,870 
Coherent 1,2   9,100    1,191,918 
Colfax Corporation 1,2,3   42,900    1,196,910 
Diodes 1,2   20,500    1,039,350 
ESCO Technologies 2   11,000    929,830 
FARO Technologies 1,2,3   14,500    777,200 
Helios Technologies 2   24,639    917,803 
Innospec 2,3   12,457    962,303 
Kadant 2   7,800    777,348 
KBR 2,3   64,600    1,456,730 
Kirby Corporation 1,2   21,000    1,124,760 
Lindblad Expeditions Holdings 1   43,000    331,960 
Lindsay Corporation 2,3   6,850    631,638 
Manhattan Associates 1,2,3   12,400    1,168,080 
Mesa Laboratories 2   4,300    932,240 
Morningstar 2   9,400    1,325,118 
National Instruments 2   15,200    588,392 
Onto Innovation 1,2   31,145    1,060,176 
PAR Technology 1,2   38,391    1,149,043 
ProAssurance Corporation   75,000    1,085,250 
Quaker Chemical 2,3   9,969    1,850,745 
SEACOR Holdings 1,2   10,100    286,032 
SEACOR Marine Holdings 1,2   20,309    51,788 
SEI Investments 2   35,700    1,962,786 
Tennant Company 2   11,600    754,116 
Upland Software 1,2   33,100    1,150,556 
Webster Financial 2   19,700    563,617 
Total (Cost $28,394,183)        32,243,908 
           
URUGUAY – 0.1%          
Arcos Dorados Holdings Cl. A 2   46,800    196,092 
Total (Cost $351,426)        196,092 
           
TOTAL COMMON STOCKS          
(Cost $114,285,000)        137,127,858 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS 2020 Semiannual Report to Stockholders | 11

 

 

 

 

Royce Global Value Trust June 30, 2020 (unaudited)

 

Schedule of Investments (continued)     
      
    VALUE 
      
REPURCHASE AGREEMENT– 2.9%     
Fixed Income Clearing Corporation, 0.00% dated 6/30/20, due 7/1/20, maturity value $3,841,000 (collateralized by obligations of various U.S. Government Agencies, 2.125% due 11/30/24, valued at $3,917,908)
(Cost $3,841,000)  $3,841,000 
      
TOTAL INVESTMENTS – 106.0%     
(Cost $118,126,000)   140,968,858 
      
LIABILITIES LESS CASH AND OTHER ASSETS – (6.0)%   (7,987,569)
      
NET ASSETS – 100.0%  $132,981,289 

  

New additions in 2020.  
1 Non-income producing.
2 All or a portion of these securities were pledged as collateral in connection with the Fund’s revolving credit agreement at June 30, 2020. Total market value of pledged securities at June 30, 2020, was $22,357,060.
3 At June 30, 2020, a portion of these securities were rehypothecated in connection with the Fund’s revolving credit agreement in the aggregate amount of $5,833,032.
4 Securities for which market quotations are not readily available represent 0.0% of net assets. These securities have been valued at their fair value under procedures approved by the Fund’s Board of Directors. These securities are defined as Level 3 securities due to the use of significant unobservable inputs in the determination of fair value. See Notes to Financial Statements.

 

Securities of Global/International Funds are categorized by the country of their headquarters.

 

Bold indicates the Fund’s 20 largest equity holdings in terms of June 30, 2020, market value.

 

TAX INFORMATION: The cost of total investments for Federal income tax purposes was $118,149,668. At June 30, 2020, net unrealized appreciation for all securities was $22,819,190 consisting of aggregate gross unrealized appreciation of $29,901,726 and aggregate gross unrealized depreciation of $7,082,536. The primary cause of the difference between book and tax basis cost is the timing of the recognition of losses on securities sold.

 

12 | 2020 Semiannual Report to Stockholders THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS

 

 

 

 

 

Royce Global Value Trust June 30, 2020 (unaudited)

 

 

Statement of Assets and Liabilities

 

ASSETS:    
Investments at value  $137,127,858 
Repurchase agreements (at cost and value)   3,841,000 
Cash   769 
Foreign currency (cost $2,256)   2,249 
Receivable for dividends   251,864 
Prepaid expenses and other assets   18,201 
Total Assets   141,241,941 
LIABILITIES:     
Revolving credit agreement   8,000,000 
Payable for investments purchased   86,004 
Payable for investment advisory fee   108,555 
Payable for directors' fees   6,251 
Payable for interest expense   8,404 
Accrued expenses   51,326 
Deferred capital gains tax   112 
Total Liabilities   8,260,652 
Net Assets  $132,981,289 
ANALYSIS OF NET ASSETS:     
Paid-in capital - $0.001 par value per share; 10,503,468 shares outstanding (150,000,000 shares authorized)  $118,349,286 
Total distributable earnings (loss)   14,632,003 
Net Assets (net asset value per share - $12.66)  $132,981,289 
Investments at identified cost  $114,285,000 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS 2020 Semiannual Report to Stockholders | 13

 

 

 

 

 

 

Royce Global Value Trust Six Months Ended June 30, 2020 (unaudited)

 

 

Statement of Operations

 

INVESTMENT INCOME:    
INCOME:    
Dividends  $952,321 
Foreign withholding tax   (80,228)
Interest   5,005 
Rehypothecation income   69 
Total income   877,167 
EXPENSES:     
Investment advisory fees   623,773 
Interest expense   81,814 
Custody and transfer agent fees   51,270 
Stockholder reports   37,689 
Administrative and office facilities   36,735 
Professional fees   20,433 
Directors' fees   11,606 
Other expenses   13,591 
Total expenses   876,911 
Net investment income (loss)   256 
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:     
NET REALIZED GAIN (LOSS):     
Investments   (2,817,700)
Foreign currency transactions   (78,609)
NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION):     
Investments   (6,936,848)
Other assets and liabilities denominated in foreign currency   3,969 
Net realized and unrealized gain (loss) on investments and foreign currency   (9,829,188)
NET INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS  $(9,828,932)

 

14  | 2020 Semiannual Report to Stockholders THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS

 

 

 

 

 

 

Royce Global Value Trust 

 

 

Statement of Changes in Net Assets

 

   SIX MONTHS ENDED
6/30/20
(UNAUDITED)
   YEAR ENDED 12/31/19 
         
INVESTMENT OPERATIONS:          
Net investment income (loss)  $256   $584,483 
Net realized gain (loss) on investments and foreign currency   (2,896,309)   5,430,859 
Net change in unrealized appreciation (depreciation) on investments and foreign currency   (6,932,879)   27,923,370 
Net increase (decrease) in net assets from investment operations   (9,828,932)   33,938,712 

DISTRIBUTIONS:

Total distributable earnings

       (628,921)
Total distributions       (628,921)

CAPITAL STOCK TRANSACTIONS:

Reinvestment of distributions

       246,799 
Total capital stock transactions       246,799 
Net Increase (Decrease) In Net Assets   (9,828,932)   33,556,590 
NET ASSETS:          
Beginning of period   142,810,221    109,253,631 
End of period  $132,981,289   $142,810,221 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS 2020 Semiannual Report to Stockholders | 15

 

 

 

 

 

 

Royce Global Value Trust Six Months Ended June 30, 2020 (unaudited)

 

 

Statement of Cash Flows

 

CASH FLOWS FROM OPERATING ACTIVITIES:    
Net increase (decrease) in net assets from investment operations  $(9,828,932)
Adjustments to reconcile net increase (decrease) in net assets from investment operations to net cash provided by operating activities:     
Purchases of long-term investments   (54,497,495)
Proceeds from sales and maturities of long-term investments   50,072,127 
Net purchases, sales and maturities of short-term investments   4,512,000 
Net (increase) decrease in dividends and interest receivable and other assets   29,989 
Net increase (decrease) in interest expense payable, accrued expenses and other liabilities   (39,716)
Net change in unrealized appreciation (depreciation) on investments   6,936,848 
Net realized gain (loss) on investments   2,817,700 
Net cash provided by operating activities   2,521 
CASH FLOWS FROM FINANCING ACTIVITIES:     
Distributions    
Reinvestment of distributions    
Net cash used for financing activities    
INCREASE (DECREASE) IN CASH:   2,521 
Cash and foreign currency at beginning of period   497 
Cash and foreign currency at end of period  $3,018 

 

Supplemental disclosure of cash flow information:

For the six months ended June 30, 2020, the Fund paid $93,136 in interest expense.

 

16  | 2020 Semiannual Report to Stockholders THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS

 

 

 

 

 

 

Royce Global Value Trust

 

 

Financial Highlights

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

 

   SIX MONTHS   YEARS ENDED 
   ENDED 6/30/20
(UNAUDITED)
   12/31/19   12/31/18   12/31/17   12/31/16   12/31/15 
Net Asset Value, Beginning of Period  $13.60   $10.42   $12.48   $9.62   $8.81   $9.25 
INVESTMENT OPERATIONS:                              
Net investment income (loss)   0.00    0.06    0.04    0.02    0.06    0.10 
Net realized and unrealized gain (loss) on investments and foreign currency   (0.94)   3.18    (2.06)   2.96    0.90    (0.43)
Net increase (decrease) in net assets from investment operations   (0.94)   3.24    (2.02)   2.98    0.96    (0.33)
DISTRIBUTIONS:                              
Net investment income       (0.06)   (0.04)   (0.11)   (0.14)   (0.10)
Net realized gain on investments and foreign currency                        
Total distributions       (0.06)   (0.04)   (0.11)   (0.14)   (0.10)
CAPITAL STOCK TRANSACTIONS:                              
Effect of reinvestment of distributions by Common Stockholders       (0.00)   (0.00)   (0.01)   (0.01)   (0.01)
Total capital stock transactions       (0.00)   (0.00)   (0.01)   (0.01)   (0.01)
Net Asset Value, End of Period  $12.66   $13.60   $10.42   $12.48   $9.62   $8.81 
Market Value, End of Period  $11.57   $11.69   $8.88   $10.81   $8.04   $7.45 
TOTAL RETURN:1                              
Net Asset Value   (6.91)%2   31.20%   (16.11)%   31.07%   11.12%   (3.44)%
Market Value   (1.03)%2   32.33%   (17.50)%   35.96%   9.77%   (6.06)%
RATIOS BASED ON AVERAGE NET ASSETS:                              
Investment advisory fee expense   1.00%3   1.00%   1.25%   1.25%   1.25%   1.25%
Other operating expenses   0.41%3   0.50%   0.49%   0.42%   0.46%   0.43%
Total expenses (net)   1.41%3   1.50%   1.74%   1.67%   1.71%   1.68%
Expenses excluding interest expense   1.27%3   1.29%   1.53%   1.52%   1.57%   1.58%
Expenses prior to balance credits   1.41%3   1.50%   1.74%   1.67%   1.71%   1.68%
Net investment income (loss)   0.00%3   0.46%   0.30%   0.21%   0.69%   1.03%
SUPPLEMENTAL DATA:                              
Net Assets, End of Period (in thousands)  $132,981   $142,810   $109,254   $130,526   $100,228   $91,174 
Portfolio Turnover Rate   39%   48%   57%   34%   59%   65%
REVOLVING CREDIT AGREEMENT:                              
Asset coverage   1762%   1885%   1466%   1732%   1353%   1240%
Asset coverage per $1,000   17,623    18,851    14,657    17,316    13,528    12,397 

 

1The Market Value Total Return is calculated assuming a purchase of Common Stock on the opening of the first business day and a sale on the closing of the last business day of each period. Dividends and distributions are assumed for the purposes of this calculation to be reinvested at prices obtained under the Fund’s Distribution Reinvestment and Cash Purchase Plan. Net Asset Value Total Return is calculated on the same basis, except that the Fund’s net asset value is used on the purchase, sale and dividend reinvestment dates instead of market value.
2Not annualized
3Annualized

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS 2020 Semiannual Report to Stockholders  |  17

 

 

 

 

 

 

Royce Global Value Trust

 

Notes to Financial Statements (unaudited)

 

Summary of Significant Accounting Policies

Royce Global Value Trust, Inc. (the “Fund”), is a diversified closed-end investment company that was incorporated under the laws of the State of Maryland on February 14, 2011. The Fund commenced operations on October 18, 2013.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standard Codification Topic 946 “Financial Services-Investment Companies.”

Royce & Associates, LP, the Fund’s investment adviser, primarily conducts business using the name Royce Investment Partners (“Royce”).

 

VALUATION OF INVESTMENTS:

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

Various inputs are used in determining the value of the Fund’s investments, as noted above. These inputs are summarized in the three broad levels below:

Level 1 – quoted prices in active markets for identical securities.

Level 2 – other significant observable inputs (including quoted prices for similar securities, foreign securities that may be fair valued and repurchase agreements). The table below includes all Level 2 securities. Any Level 2 securities with values based on quoted prices for similar securities would be noted in the Schedule of Investments.

Level 3 – significant unobservable inputs (including last trade price before trading was suspended, or at a discount thereto for lack of marketability or otherwise, market price information regarding other securities, information received from the company and/or published documents, including SEC filings and financial statements, or other publicly available information).

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

The following is a summary of the inputs used to value the Fund’s investments as of June 30, 2020. For a detailed breakout of common stocks by country, please refer to the Schedule of Investments.

 

  LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
Common Stocks $54,866,253 $82,261,605 $ 0 $137,127,858
Repurchase Agreement 3,841,000 3,841,000

 

Level 3 Reconciliation:

  BALANCE AS OF 12/31/19 PURCHASES SALES REALIZED GAIN (LOSS) UNREALIZED GAIN (LOSS) 1 BALANCE AS OF 6/30/20
Common Stocks $ 0 $ – $ – $ – $ – $ 0
1The net change in unrealized appreciation (depreciation) is included in the accompanying Statement of Operations. Change in unrealized appreciation (depreciation) includes net unrealized appreciation (depreciation) resulting from changes in investment values during the reporting period and the reversal of previously recorded unrealized appreciation (depreciation) when gains or losses are realized. Net realized gain (loss) from investments and foreign currency transactions is included in the accompanying Statement of Operations.

 

18 | 2020 Semiannual Report to Stockholders

 

 

 

 

Royce Global Value Trust

 

Notes to Financial Statements (unaudited) (continued)

 

REPURCHASE AGREEMENTS:

The Fund may enter into repurchase agreements with institutions that the Fund’s investment adviser has determined are creditworthy. The Fund restricts repurchase agreements to maturities of no more than seven days. Securities pledged as collateral for repurchase agreements, which are held until maturity of the repurchase agreements, are marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest). Repurchase agreements could involve certain risks in the event of default or insolvency of the counter-party, including possible delays or restrictions upon the ability of the Fund to dispose of its underlying securities. The remaining contractual maturity of the repurchase agreement held by the Fund at June 30, 2020 is overnight and continuous.

 

FOREIGN CURRENCY:

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

The Fund does not isolate that portion of the results of operations resulting from fluctuations in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.

 

DISTRIBUTIONS AND TAXES:

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

The Fund pays any dividends and capital gain distributions annually in December. Because federal income tax regulations differ from generally accepted accounting principles, income and capital gain distributions determined in accordance with tax regulations may differ from net investment income and realized gains recognized for financial reporting purposes. Accordingly, the character of distributions and composition of net assets for tax purposes differ from those reflected in the accompanying financial statements.

 

CAPITAL GAINS TAXES:

The Fund is subject to a tax imposed on short-term capital gains on securities of issuers domiciled in certain countries. The Fund records an estimated deferred tax liability for gains in these securities that have been held for less than one year. This amount, if any, is reported as deferred capital gains tax in the accompanying Statement of Assets and Liabilities, assuming those positions were disposed of at the end of the period.

 

INVESTMENT TRANSACTIONS AND RELATED INVESTMENT INCOME:

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

 

EXPENSES:

The Fund incurs direct and indirect expenses. Expenses directly attributable to the Fund are charged to the Fund’s operations, while expenses applicable to more than one of the Royce Funds are allocated equitably. Certain personnel, occupancy costs and other administrative expenses related to the Funds are allocated by Royce under an administration agreement and are included in administrative and office facilities and professional fees.

 

COMPENSATING BALANCE CREDITS:

The Fund has an arrangement with its custodian bank, whereby a portion of the custodian's fee is paid indirectly by credits earned on the Fund's cash on deposit with the bank. This deposit arrangement is an alternative to purchasing overnight investments. Conversely, the Fund pays interest to the custodian on any cash overdrafts, to the extent they are not offset by credits earned on positive cash balances.

 

Capital Stock:

The Fund issued 21,442 shares of Common Stock as reinvestment of distributions for the year ended December 31, 2019.

 

2020 Semiannual Report to Stockholders | 19

 

 

 

 

Royce Global Value Trust

Notes to Financial Statements (unaudited) (continued)

 

Borrowings:

The Fund is party to a revolving credit agreement (the credit agreement) with BNP Paribas Prime Brokerage International, Limited (BNPPI). The Fund pays a commitment fee of 0.50% per annum on the unused portion of the then-current maximum amount that may be borrowed by the Fund under the credit agreement. The credit agreement has a 179-day rolling term that resets daily. The Fund is required to pledge portfolio securities as collateral in an amount up to two times the loan balance outstanding, or as otherwise required by applicable regulatory standards, and has granted a security interest in the securities pledged to, and in favor of, BNPPI as security for the loan balance outstanding. If the Fund fails to meet certain requirements, or comply with other financial covenants set forth in the credit agreement, the Fund may be required to repay immediately, in part or in full, the loan balance outstanding under the credit agreement, which may necessitate the sale of portfolio securities at potentially inopportune times. BNPPI may terminate the credit agreement upon certain ratings downgrades of its corporate parent, which would result in the Fund’s entire loan balance becoming immediately due and payable. The occurrence of such ratings downgrades may necessitate the sale of portfolio securities at potentially inopportune times. BNPPI may also terminate the credit agreement upon sixty (60) calendar days’ prior written notice to the Fund in the event the Fund’s net asset value per share as of the close of business on the last business day of any calendar month declines by thirty-five percent (35%) or more from the Fund’s net asset value per share as of the close of business on the last business day of the immediately preceding calendar month.

The credit agreement also permits, subject to certain conditions, BNPPI to rehypothecate portfolio securities pledged by the Fund up to the amount of the loan balance outstanding. The Fund continues to receive payments in lieu of dividends and interest on rehypothecated securities. The Fund also has the right under the credit agreement to recall the rehypothecated securities from BNPPI on demand. If BNPPI fails to deliver the recalled security in a timely manner, the Fund is compensated by BNPPI for any fees or losses related to the failed delivery or, in the event a recalled security is not returned by BNPPI, the Fund, upon notice to BNPPI, may reduce the loan balance outstanding by the value of the recalled security failed to be returned. The Fund receives a portion of the fees earned by BNPPI in connection with the rehypothecation of portfolio securities.

The current maximum amount the Fund may borrow under the credit agreement is $8,000,000. The Fund has the right to reduce the maximum amount it can borrow under the credit agreement upon one (1) business day’s prior written notice to BNPPI. In addition, the Fund and BNPPI may agree to increase the maximum amount the Fund can borrow under the credit agreement, which amount may not exceed $15,000,000.

As of June 30, 2020, the Fund has outstanding borrowings of $8,000,000. During the six months ended June 30, 2020, the Fund borrowed an average daily balance of $8,000,000 at a weighted average borrowing cost of 2.02%. The maximum amount outstanding during the six months ended June 30, 2020, was $8,000,000. As of June 30, 2020, the aggregate value of rehypothecated securities was $5,833,032. During the six months ended June 30, 2020, the Fund earned $69 in fees from rehypothecated securities.

Investment Advisory Agreement:

The investment advisory agreement between Royce and the Fund provides for fees to be paid at an annual rate of 1.00% of the Fund’s average daily net assets. For the six months ended June 30, 2020, the Fund expensed Royce investment advisory fees totaling $623,773.

Purchases and Sales of Investment Securities:

For the six months ended June 30, 2020, the costs of purchases and proceeds from sales of investment securities, other than short-term securities, amounted to $53,058,216 and $49,183,118, respectively.

Cross trades were executed by the Fund pursuant to Rule 17a-7 under the 1940 Act. Cross trading is the buying or selling of portfolio securities between funds to which Royce serves as investment adviser. The Fund’s Chief Compliance Officer reviews such transactions each quarter for compliance with the requirements and restrictions set forth by Rule 17a-7, and reports the results of her review to the Board of Directors. Cross trades for the six months ended June 30, 2020, were as follows:

 

COSTS OF PURCHASES PROCEEDS FROM SALES REALIZED GAIN (LOSS)  
$402,067 $1,898,723 $(251,076)  

 

20 | 2020 Semiannual Report to Stockholders

 

 

 

 

Royce Global Value Trust

Notes to Financial Statements (unaudited) (continued)

 

Subsequent Events:

On July 31, 2020, Franklin Resources, Inc. (“Franklin Resources”) acquired Legg Mason, Inc. (“Legg Mason”) in an all-cash transaction. Royce was an indirect, majority-owned subsidiary of Legg Mason prior to the transaction. As a result of the transaction, Royce, the investment adviser to the Fund, became an indirect, majority-owned subsidiary of Franklin Resources. Under the Investment Company Act of 1940 (the “1940 Act”), consummation of the transaction automatically terminated the investment advisory agreement that was in place for the Fund prior to the transaction (referred to herein as the “Prior Agreement”). Because the Fund’s stockholders had not yet approved a new investment advisory agreement in accordance with the requirements of the 1940 Act prior to the completion of the transaction, an interim investment advisory agreement between Royce and the Fund (the “Interim Agreement”) went into effect upon the closing of the transaction. The Interim Agreement, which was approved by the Board of Directors of the Fund (the “Board”), allows Royce to continue providing services to the Fund while stockholder approval of a new investment advisory agreement continues to be sought.

The terms of the Interim Agreement are substantially identical to those of the Prior Agreement, except for the term and escrow provisions described below. The Interim Agreement will continue in effect for a term ending on the earlier of 150 days from the closing of the transaction (the “150-day period”) or when the Fund’s stockholders approve a new investment advisory agreement. Pursuant to Rule 15a-4 under the 1940 Act, compensation earned by Royce under the Interim Agreement will be held in an interest-bearing escrow account. If the Fund’s stockholders approve a new investment advisory agreement prior to the end of the 150-day period, the amount held in the escrow account under the Interim Agreement will be paid to Royce. If the Fund’s stockholders do not approve a new investment advisory agreement prior to the end of the 150-day period, the Board will consider what further action to take consistent with its duties under applicable law, and Royce will be paid the lesser of its costs incurred in performing its services under the Interim Agreement or the total amount of the escrow account, plus interest earned. Thereafter, the Board would either negotiate a new investment advisory agreement with an advisory organization selected by the Board or make other appropriate arrangements.

Royce will continue to operate as an independent investment organization with its own brand after completion of the transaction. There are no changes planned to the management of the organization or investment teams at Royce as a result of the transaction.

 

2020 Semiannual Report to Stockholders | 21

 

 

 

 

 

MANAGERS’ DISCUSSION (UNAUDITED)

 

Royce Micro-Cap Trust (RMT)

 

 

Chuck Royce

Brendan Hartmann, Chris Flynn,
Jim Stoeffel

 

FUND PERFORMANCE

Royce Micro-Cap Trust (“RMT”) fell 6.2% on an NAV (net asset value) basis and declined 11.0% based on market price compared to respective losses of 13.0% and 11.2% for RMT’s unleveraged benchmarks, the Russell Microcap and Russell 2000 Indexes, for the same period. The Fund also outpaced the Russell Microcap on an NAV and market price basis for the one-, three-, five-, 10-, 20-year, and since inception (12/14/93) periods ended 6/30/20.

 

WHAT WORKED… AND WHAT DIDN’T

Only four of the 11 equity sectors in which the Fund held investments finished 2020’s first half in the black. Energy detracted most from performance by a large margin, followed by Industrials and Consumer Discretionary. Health Care made the most sizable positive impact, and Materials and Information Technology were also additive to results. Two of the Fund’s worst performing industries came from Energy: energy equipment & services and oil, gas & consumable fuels. Machinery (Industrials) also hampered performance. Conversely, two of the best performing industries came from Health Care: biotechnology and health care technology. Sandwiched in the middle to round out the top three was aerospace & defense (Industrials).

 

The worst performing position in 2020’s first half was Houston-based Bristow Group, which provides helicopter transportation services primarily to the offshore oil and gas industry. Demand for its helicopters has slackened as lower oil and gas prices have curtailed drilling and exploration. Lindblad Expeditions Holdings, which provides expedition cruising and adventure travel services, also detracted as its industry continued to be hit especially hard by substantial restrictions on travel created by the coronavirus, which included the firm’s decision in March to cease all operations until it would again be safe for its guests and crews. SEACOR Marine Holdings provides marine and support transportation services to offshore oil and natural gas and wind farm facilities worldwide. When reporting fiscal first-quarter results in May, the company said that it expects a deeper impact on revenues through the rest of the year as a result of COVID-19 and reduced activity from its oil and gas customers due to lower commodity prices.

 

Virgin Galactic Holdings was the top performing position for the year-to-date period ended 6/30/20. The company develops commercial spacecrafts and aims to provide suborbital spaceflights to space tourists and suborbital launches for space science missions. Though still not profitable, Virgin Galactic signed a Space Act Agreement with NASA in early May to produce a supersonic aircraft for non-military applications, which we think bodes well for the company. Arcturus Therapeutics Holdings is a biotech company focused on the discovery, development, and commercialization of therapeutics for rare diseases with a focus on RNA. The stock surged when the company announced it was working on a vaccine for the coronavirus. Simulations Plus develops absorption, metabolism, distribution, excretion, and toxicity modeling and simulation software for multiple industries, including pharmaceuticals, biotechnology, cosmetics, and food ingredients. The company reported that 1Q20 organic revenues grew by 22%, its third consecutive quarter of growth of more than 20%, which led to increased investor optimism about its ongoing prospects.

 

Relative to the Russell 2000 Index, performance was driven by stock selection, though sector allocation was also additive. Financials was the top performing sector by a large margin, with results driven by savvy stock selection and, to a lesser degree, our lower weighting. Stock picks and lower exposure to Real Estate were also additive to performance, while stock selection drove positive performance in Materials. Conversely, our overexposure to Energy hampered relative results. Our lower weighting and ineffective stock picks also hurt performance in Health Care and Consumer Discretionary.

 

         
  Top Contributors to Performance   Top Detractors from Performance  
  Year-to-Date Through 6/30/20 (%)1     Year-to-Date Through 6/30/20 (%)2  
           
  Virgin Galactic Holdings 1.48   Bristow Group -0.77  
  Arcturus Therapeutics Holdings 1.23   Lindblad Expeditions Holdings -0.77  
  Simulations Plus 0.95   SEACOR Marine Holdings -0.74  
  Sandstorm Gold 0.82   Computer Modelling Group -0.58  
  Sprott 0.80   Heritage-Crystal Clean -0.50  
  1 Includes dividends     2 Net of dividends    
             

 

CURRENT POSITIONING AND OUTLOOK

We are seeking to take advantage of two dynamics in the current market that we believe play to the strengths of active management: high volatility and short-term thinking. While uncertainty about the near-term outlook is real, we expect both the economy and corporate profits to rebound beyond the next several quarters. Our portfolio positioning is still most heavily weighted in cyclical areas, specifically in Industrials and Information Technology. In the former sector, we have several machinery companies while in Information Technology, our largest weightings are in the semiconductors & semiconductor equipment group and the electronic equipment, instruments & components industry. We also maintained a sizable exposure to capital markets stocks, which are part of Financials, and health care equipment & supplies. We are optimistic about the prospects for micro-cap stocks over the intermediate term, particularly those companies with cyclical exposure and/or solid industry positions and better balance sheets. These are the stocks with which we have sought to populate the portfolio.

 

22 | 2020 Semiannual Report to Stockholders

 

 

 

 

 

 

PERFORMANCE AND PORTFOLIO REVIEW (UNAUDITED) SYMBOLS   MARKET PRICE RMT NAV XOTCX

 

 

Performance

Average Annual Total Return (%) Through 6/30/20

  JAN-JUN 20201 1-YR 3-YR 5-YR 10-YR 15-YR 20-YR 25-YR SINCE INCEPTION
(12/14/93)
RMT (NAV) -6.21 0.80 4.08 5.27 10.53 7.25 8.91 9.95 10.06

1 Not Annualized

 

 

Market Price Performance History Since Inception (12/14/93)

Cumulative Performance of Investment1

 

  1-YR 5-YR 10-YR 15-YR 20-YR SINCE INCEPTION (12/14/93)
RMT -3.9% 27.0% 173.2% 133.9% 463.9% 939.3%

 

 

 

1Reflects the cumulative performance experience of a continuous common stockholder who purchased one share at inception ($7.50 IPO), reinvested all distributions and fully participated in the primary subscription of the Fund’s 1994 rights offering.
2Reflects the actual month-end market price movement of one share as it has traded on NYSE and, prior to 12/1/03, on the Nasdaq.

 

 

Morningstar Style Map™ As of 6/30/20

 

 

 

The Morningstar Style Map is the Morningstar Style Box™ with the center 75% of fund holdings plotted as the Morningstar Ownership Zone™. The Morningstar Style Box is designed to reveal a fund’s investment strategy. The Morningstar Ownership Zone provides detail about a portfolio’s investment style by showing the range of stock sizes and styles. The Ownership Zone is derived by plotting each stock in the portfolio within the proprietary Morningstar Style Box. Over time, the shape and location of a fund’s ownership zone may vary. See page 66 for additional information.

 

 

Top 10 Positions  
% of Net Assets  
   
Mesa Laboratories 3.1
PAR Technology 2.5
Sandstorm Gold 2.1
nLIGHT 2.0
CIRCOR International 1.9
Sprott 1.7
Simulations Plus 1.6
Zealand Pharma 1.4
Upland Software 1.4
Real Matters 1.3

 

 

Portfolio Sector Breakdown  
% of Net Assets  
   
Information Technology 22.2
Industrials 20.6
Health Care 17.4
Financials 12.3
Consumer Discretionary 9.6
Materials 6.6
Energy 5.8
Real Estate 3.9
Consumer Staples 2.3
Communication Services 1.8
Utilities 0.4
Outstanding Line of Credit, Net of Cash and Cash Equivalents -2.9

 

 

 

Calendar Year Total Returns (%)

 

YEAR RMT
2019 22.4
2018 -11.6
2017 17.7
2016 22.0
2015 -11.7
2014 3.5
2013 44.5
2012 17.3
2011 -7.7
2010 28.5
2009 46.5
2008 -45.5
2007 0.6
2006 22.5
2005 6.8

 

 

 

Portfolio Diagnostics

 

Fund Net Assets $369 million
Number of Holdings 324
Turnover Rate 11%
Net Asset Value $8.56
Market Price $7.20
Net Leverage1 2.9%
Average Market Capitalization 2 $505 million
Weighted Average P/B Ratio 3 2.1x
Active Share 4 95%
U.S. Investments (% of Net Assets) 79.0%
Non-U.S. Investments (% of Net Assets) 23.9%
1Net leverage is the percentage, in excess of 100%, of the total value of equity type investments, divided by net assets.
2Geometric Average. This weighted calculation uses each portfolio holding’s market cap in a way designed to not skew the effect of very large or small holdings; instead, it aims to better identify the portfolio’s center, which Royce believes offers a more accurate measure of average market cap than a simple mean or median.
3Harmonic Average. This weighted calculation evaluates a portfolio as if it were a single stock and measures it overall. It compares the total market value of the portfolio to the portfolio’s share in the earnings or book value, as the case may be, of its underlying stocks.
4Active Share is the sum of the absolute values of the different weightings of each holding in the Fund versus each holding in the benchmark, divided by two.

 

Important Performance and Risk Information

 

All performance information reflects past performance, is presented on a total return basis, net of the Fund’s investment advisory fee, and reflects the reinvestment of distributions. Past performance is no guarantee of future results. Current performance may be higher or lower than performance quoted. Returns as of the most recent month-end may be obtained at www.royceinvest.com. Certain immaterial adjustments were made to the net assets of Royce Micro-Cap Trust at 6/30/19 for financial reporting purposes, and as a result the net asset value originally calculated on that date and the total return based on that net asset value differs from the adjusted net asset value and total return reported in the Financial Highlights. The market price of the Fund’s shares will fluctuate, so that shares may be worth more or less than their original cost when sold. The Fund normally invests in micro-cap companies, which may involve considerably more risk than investments in securities of larger-cap companies. The Fund’s broadly diversified portfolio does not ensure a profit or guarantee against loss. From time to time, the Fund may invest a significant portion of its net assets in foreign securities, which may involve political, economic, currency and other risks not encountered in U.S. investments. Regarding the “Top Contributors” and “Top Detractors” tables shown above, the sum of all contributors to, and all detractors from, performance for all securities in the portfolio would approximate the Fund’s year-to-date performance for 2020.

 

2020 Semiannual Report to Stockholders | 23

 

 

 

 

 

 

Royce Micro-Cap Trust

 

Schedule of Investments        
Common Stocks – 102.9%        
   SHARES   VALUE 
         
COMMUNICATION SERVICES – 1.8%          
DIVERSIFIED TELECOMMUNICATION SERVICES - 0.1%          
Ooma 1   14,300   $235,664 
ORBCOMM 1   65,000    250,250 
         485,914 
ENTERTAINMENT - 0.8%          
Chicken Soup For The Soul Entertainment Cl. A 1   331,800    2,292,738 
Gaia Cl. A 1,2,3   100,000    838,000 
         3,130,738 
INTERACTIVE MEDIA & SERVICES - 0.6%          
Eventbrite Cl. A 1   22,000    188,540 
QuinStreet 1   198,600    2,077,356 
         2,265,896 
MEDIA - 0.3%          
comScore 1   297,195    921,305 
Total (Cost $10,783,791)        6,803,853 
           
CONSUMER DISCRETIONARY – 9.6%          
AUTO COMPONENTS - 1.6%          
Exco Technologies   6,000    29,611 
Fox Factory Holding 1   3,000    247,830 
Motorcar Parts of America 1   54,800    968,316 
Sebang Global Battery   50,500    1,277,933 
Standard Motor Products   50,860    2,095,432 
Stoneridge 1,2,3   57,600    1,190,016 
         5,809,138 
DIVERSIFIED CONSUMER SERVICES - 2.3%          
Aspen Group 1   141,520    1,280,756 
Collectors Universe 2,3   98,900    3,390,292 
Park Lawn   50,000    825,722 
Universal Technical Institute 1   445,000    3,092,750 
         8,589,520 
HOTELS, RESTAURANTS & LEISURE - 1.4%          
Century Casinos 1   222,500    923,375 
GAN 1   33,900    862,755 
Inspired Entertainment 1   50,000    145,000 
Lindblad Expeditions Holdings 1   331,168    2,556,617 
Red Lion Hotels 1   324,671    756,483 
         5,244,230 
HOUSEHOLD DURABLES - 1.2%          
Cavco Industries 1,2   8,600    1,658,510 
Legacy Housing 1   100,000    1,422,000 
Lifetime Brands 2   119,294    801,656 
Purple Innovation 1   8,500    153,000 
Universal Electronics 1   6,100    285,602 
         4,320,768 
INTERNET & DIRECT MARKETING RETAIL - 0.6%          
Rubicon Project (The) 1   289,500    1,930,965 
Trxade Group 1   20,700    126,684 
Yatra Online 1   105,000    71,316 
         2,128,965 
LEISURE PRODUCTS - 0.6%          
Clarus Corporation   175,335    2,030,379 
MasterCraft Boat Holdings 1   10,200    194,310 
         2,224,689 
SPECIALTY RETAIL - 1.2%          
AutoCanada   440,000    3,467,885 
Barnes & Noble Education 1   80,000    128,000 
Destination XL Group 1   50,000    32,515 
Lazydays Holdings 1   30,000    261,300 
OneWater Marine Cl. A 1   1,200    29,136 
Shoe Carnival 2   23,716    694,167 
Stage Stores 1,4   15,000    1,050 
         4,614,053 
TEXTILES, APPAREL & LUXURY GOODS - 0.7%          
Crown Crafts   86,359    421,432 
Culp   23,100    198,891 
J G Boswell Company 4   2,490    1,215,120 
YGM Trading   2,564,600    761,058 
         2,596,501 
Total (Cost $42,316,970)        35,527,864 
           
CONSUMER STAPLES – 2.3%          
BEVERAGES - 0.5%          
Crimson Wine Group 1,4   58,124    310,963 
Eastside Distilling 1   23,000    33,580 
MGP Ingredients   26,500    972,683 
Primo Water   26,791    368,376 
         1,685,602 
FOOD PRODUCTS - 1.6%          
Farmer Bros. 1,2,3   31,300    229,742 
John B Sanfilippo & Son 2   7,900    674,107 
Landec Corporation 1,2   75,610    601,856 
RiceBran Technologies 1   50,000    41,395 
Seneca Foods Cl. A 1,2   81,087    2,741,551 
Seneca Foods Cl. B 1   40,400    1,282,700 
SunOpta 1   50,000    235,000 
         5,806,351 
HOUSEHOLD PRODUCTS - 0.1%          
Central Garden & Pet 1   12,000    431,880 
PERSONAL PRODUCTS - 0.1%          
e.l.f. Beauty 1   28,300    539,681 
Total (Cost $6,667,111)        8,463,514 
           
ENERGY – 5.8%          
ENERGY EQUIPMENT & SERVICES - 2.7%          
Aspen Aerogels 1   101,785    669,745 
Bristow Group 1,2,3   127,900    1,781,647 
CES Energy Solutions   25,000    19,888 
Computer Modelling Group   639,775    2,238,459 
Dawson Geophysical 1   77,336    111,364 
Geospace Technologies 1,2   9,500    71,440 
Hornbeck Offshore Services 1,2,4   460,000    5,980 
Independence Contract Drilling 1   5,000    19,450 
Matrix Service 1,2   38,000    369,360 
Nabors Industries   680    25,174 
North American Construction Group   50,000    313,000 
Pason Systems   232,200    1,269,095 
Profire Energy 1   175,000    145,793 
SEACOR Marine Holdings 1,2   216,957    553,240 
TerraVest Industries   199,000    2,220,720 
         9,814,355 
OIL, GAS & CONSUMABLE FUELS - 3.1%          
Ardmore Shipping   161,300    700,042 
Brigham Minerals Cl. A   220,000    2,717,000 
Dorchester Minerals L.P.   153,963    1,967,647 
Dorian LPG 1   163,138    1,262,688 
GeoPark   87,318    854,843 

 

24  |  2020 Semiannual Report to Stockholders THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS

 

 

 

 

 

 

June 30, 2020 (unaudited)

 

Schedule of Investments (continued)          
           
    SHARES    VALUE 
           
ENERGY (continued)          
OIL, GAS & CONSUMABLE FUELS (continued)          
Navigator Holdings 1   175,000   $1,125,250 
Ring Energy 1   50,000    58,000 
Sabine Royalty Trust 2   82,648    2,291,003 
StealthGas 1   229,664    638,466 
         11,614,939 
Total (Cost $36,353,854)        21,429,294 
           
FINANCIALS – 12.3%          
BANKS - 1.3%          
Bryn Mawr Bank   25,000    691,500 
Caribbean Investment Holdings   735,635    369,221 
Chemung Financial   31,000    846,300 
Fauquier Bankshares 2   133,200    1,984,680 
Live Oak Bancshares 2   30,900    448,359 
Midway Investments 1,5   735,647    0 
TriState Capital Holdings 1   28,900    454,019 
         4,794,079 
CAPITAL MARKETS - 8.4%          
ASA Gold and Precious Metals   171,150    2,998,548 
Ashford 1   10,000    101,500 
B. Riley Financial   27,500    598,400 
Bolsa Mexicana de Valores   1,068,000    2,001,295 
Canaccord Genuity Group   203,300    1,034,769 
Donnelley Financial Solutions 1   50,000    420,000 
Fiera Capital Cl. A   78,000    545,816 
GAIN Capital Holdings 2   25,000    150,500 
Great Elm Capital Group 1   566,700    1,320,411 
JZ Capital Partners 1   50,000    55,698 
Manning & Napier Cl. A   136,600    390,676 
MVC Capital   219,900    1,435,947 
Portman Ridge Finance   22,039    24,243 
Silvercrest Asset Management Group Cl. A   224,100    2,848,311 
Sprott   176,453    6,341,442 
StoneX Group 1,2,3   69,327    3,812,985 
Tel Aviv Stock Exchange   343,000    1,537,986 
U.S. Global Investors Cl. A 2   439,454    830,568 
Urbana Corporation   237,600    413,035 
Value Line 2,3   74,574    2,012,752 
VNV Global SDR 1   100,000    741,560 
Warsaw Stock Exchange   52,900    558,752 
Westaim Corporation 1   500,000    762,375 
         30,937,569 
CONSUMER FINANCE - 0.4%          
Currency Exchange International 1   7,000    62,647 
EZCORP Cl. A 1,2,3   201,000    1,266,300 
         1,328,947 
DIVERSIFIED FINANCIAL SERVICES - 0.5%          
ECN Capital   556,000    1,580,848 
Waterloo Investment Holdings 1,5   806,000    201,500 
         1,782,348 
INSURANCE - 1.1%          
Benefytt Technologies Cl. A 1,2   13,600    278,256 
Hallmark Financial Services 1,2   114,000    397,860 
Trupanion 1,2,3   82,300    3,513,387 
         4,189,503 
INVESTMENT COMPANIES - 0.6%          
Oaktree Acquisition (Units) 1   200,000    2,140,000 
Total (Cost $46,717,750)        45,172,446 
           
HEALTH CARE – 17.4%          
BIOTECHNOLOGY - 3.8%          
Abeona Therapeutics 1,2   142,221    414,574 
Arcturus Therapeutics Holdings 1,2   79,836    3,731,535 
BioSpecifics Technologies 1   8,900    545,392 
CareDx 1   18,900    669,627 
Idera Pharmaceuticals 1   58,061    103,929 
Larimar Therapeutics 1,2   28,064    360,623 
Neoleukin Therapeutics 1,2   145,397    2,413,590 
Theratechnologies 1   10,000    20,109 
Zealand Pharma 1   153,015    5,267,056 
Zealand Pharma ADR 1   10,000    350,000 
         13,876,435 
HEALTH CARE EQUIPMENT & SUPPLIES - 7.5%          
Apyx Medical 1   11,700    64,935 
AtriCure 1,2   15,000    674,250 
Atrion Corporation 2   4,689    2,986,940 
BioLife Solutions 1   21,400    349,890 
Chembio Diagnostics 1   135,800    441,350 
CryoLife 1   4,600    88,182 
CryoPort 1   9,600    290,400 
GenMark Diagnostics 1   12,000    176,520 
LeMaitre Vascular   8,800    232,320 
Mesa Laboratories 2   52,000    11,273,600 
Misonix 1   46,400    629,648 
OraSure Technologies 1,2   50,000    581,500 
OrthoPediatrics Corporation 1   17,200    752,672 
Oxford Immunotec Global 1   5,200    67,600 
Profound Medical 1   8,500    143,941 
Semler Scientific 1,4   22,400    1,028,160 
SI-BONE 1   14,300    227,942 
STRATEC   14,000    1,367,915 
Surmodics 1,2   79,800    3,450,552 
Tactile Systems Technology 1   3,000    124,290 
TearLab Corporation 1,4   8,500    478 
Utah Medical Products   33,000    2,924,460 
         27,877,545 
HEALTH CARE PROVIDERS & SERVICES - 1.9%          
AAC Holdings 1,4   89,400    2,950 
BioTelemetry 1   17,279    780,838 
CRH Medical 1   475,000    993,666 
Cross Country Healthcare 1   130,800    805,728 
Joint Corp. (The) 1   9,700    148,119 
National Research 2   46,668    2,716,544 
PetIQ Cl. A 1,2,3   25,000    871,000 
Psychemedics Corporation 2   37,500    206,250 
Sharps Compliance 1   40,500    284,715 
Surgery Partners 1   13,000    150,410 
         6,960,220 
HEALTH CARE TECHNOLOGY - 2.4%          
OptimizeRx Corporation 1   14,900    194,147 
Simulations Plus 2   100,670    6,022,079 
Tabula Rasa HealthCare 1,2   38,400    2,101,632 
Vocera Communications 1   33,100    701,720 
         9,019,578 
LIFE SCIENCES TOOLS & SERVICES - 1.1%          
Harvard Bioscience 1   117,200    363,320 
Quanterix Corporation 1   130,800    3,582,612 
         3,945,932 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS 2020 Semiannual Report to Stockholders  |  25

 

 

 

 

 

 

Royce Micro-Cap Trust

 

Schedule of Investments (continued)          
           
    SHARES    VALUE