0000950117-95-000334.txt : 19950905 0000950117-95-000334.hdr.sgml : 19950905 ACCESSION NUMBER: 0000950117-95-000334 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950901 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ROYCE VALUE TRUST INC CENTRAL INDEX KEY: 0000804116 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 133356097 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-04875 FILM NUMBER: 95570045 BUSINESS ADDRESS: STREET 1: 1414 AVE OF THE AMERICAS 9TH FL CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2123557311 MAIL ADDRESS: STREET 1: 1414 AVENUE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10019 N-30D 1 ROYCE VALUE TRUST Royce Value Trust SEMI-ANNUAL REPORT JUNE 30, 1995 Royce Value Trust, Inc. 1414 Avenue of the Americas New York, NY 10019 (212) 355-7311 (800) 221-4268 Dear Shareholder: If the Dow Jones Industrial Average were to continue its first half pace, it would top 30,000 in the year 2000! Something to think about. THE NUMBERS . . . UP, UP AND AWAY The first half of 1995 was the best six month period for the S&P 500 since the opening two quarters of 1991. Up 20.2%, the S&P 500 bested both major small company indices, the Russell 2000 and the S&P Small Cap 600, which were up 14.4% and 14.7%, respectively. Royce Value Trust, Inc. ('RVT') was up 7.5% for the quarter and 13.4% for the first half of 1995 on a net asset value basis. This is in keeping with RVT's historical range of capturing 80% to 100% of small-cap index returns during dramatic updrafts. As a market cycle matures, a turn away from growth and momentum to less exciting, low valuation stocks usually takes place. This type of period is generally favorable to RVT's style of investing. For the 1-year, 3-year and 5-year periods ended June 30, 1995, RVT provided average annual NAV total returns of 17.4%, 15.4% and 13.7%, respectively. SMALL-CAP STOCKS -- LAGGING THEIR WAY TO NEW HIGHS In the movie Star Wars, Luke Skywalker is told to 'Let The Force Be With You.' The force in the first six months of 1995 was clearly with large-cap, globally oriented stocks. The drop in the U.S. dollar and the submerging of many 'emerging' markets created a renewed interest in domestic, large-cap equities, pushing the popular Dow Jones Industrial Average and S&P 500 indices to a long string of new highs. In contrast, small-caps struggled to keep up. The Russell 2000 index of small-cap stocks finally eclipsed its previous high (March 18, 1994) in early June. In spite of the June surge, small-caps still lag their large-cap counterparts. WE HAD OUR 'SOX' KNOCKED OFF Contributing to the first half's spectacular market returns was a meteoric rise in technology stocks. The Philadelphia Semiconductor Index ('SOX') was up over 100% in the last twelve months. WEEKLY PRICE GRAPH FOR 'SOX' (PHILA. SEMICONDUCTOR INDEX 6/94 - 6/95) [GRAPH] [Chart showing increase in Philadelphia Semiconductor Index from June 30, 1994 to June 30, 1995, with 1 year percentage change equalling 104.3%, and 6/30/94 and 6/30/95 closes being 119.46 and 244.01, respectively.] The current atmosphere of euphoria suggests that memories of the 'high tech, high wreck' experience that occurred with the last technology stock run-up in 1983 (and subsequent collapse) have been erased. Although small-cap technology stocks are popular and available, it has never been a market segment to which we have committed significant amounts of capital. 1 Imagine if the auto industry, in order to compete, had to produce more fuel-efficient, easier-to-drive cars every year while cutting prices in half. Or better yet, consider the airline industry which has a long record of high unit growth but, as an industry, has yet to make the first dime in profits. We feel that both examples are analogous to the pressures that many companies face in the technology sector. The rate of product obsolescence rendered by scientific advancement has made it difficult for many technology companies to maintain competitive advantages and generate attractive long-term returns on capital. Successful high technology companies require staggering amounts of product innovation, incredible pricing power and uninterrupted earnings per share gains - very hard to accomplish and very rare, indeed. For those companies that slip in the competition, turnarounds are highly unusual. What these enterprises may lack in retained earnings, they often make up in richly priced common stocks. For anyone feeling depressed about missing the recent high-tech stock run-up, we thought we would share some interesting investment trivia which runs counter to popular current assumptions:
AVERAGE ANNUAL PERFORMANCE RESULTS (12/31/79 - 6/30/95) S&P S&P RUSSELL RUSSELL 2000 500 TECHNOLOGY 2000 TECHNOLOGY ---- ---------- ------- ------------ 15.3% 12.9% 13.6% 11.5%
IN SPITE OF THE RECENT STELLAR MARKET PERFORMANCE AND ENORMOUS UNIT GROWTH, TECHNOLOGY STOCKS HAVE ACTUALLY BEEN A DRAG ON THE LAST 15+ YEARS OF PERFORMANCE FOR BOTH THE S&P 500 AND THE RUSSELL 2000. History provides additional perspective on these exceptionally emotional phases of the market. Past 'bubbles' have reflected obsessions like the 'tulip mania' in the 17th century, the 'Nifty Fifty' in the early '70s, the energy stock bonanza of the early '80s and the 1991 biotech stock craze. In each of these bubbles, the money made by those smart enough to invest early was only exceeded by the amount of money lost by those who invested late. We believe that the appropriate way to participate in the technology sector is to invest in companies who serve or benefit from the industry. It was the suppliers of the picks and shovels, not the speculators, who made money during the California gold rush. Our approach to the technology sector is similar. [ILLUSTRATION] [Cartoon showing miners standing in line to purchase picks and shovels.] WHAT WE DO Royce Value Trust uses a risk averse approach to invest in the securities of small-cap companies. The investment approach attempts to understand and value a company's 'private worth.' Private worth is what we believe the company would bring if the entire enterprise were sold in a private transaction to a knowledgeable buyer. The price we will pay for a security must be significantly under our appraisal of its private worth. The consistent use of this discipline, applied to less well-known securities, is the source of our performance. NO OTHER PLACE WE WOULD RATHER BE The Fund focuses on companies with market caps below $1 billion. Although our orientation is small-cap, the picking universe 2 is by no means small. Currently, more than 7,000 securities, representing over $900 billion in total market capitalization, fall within our range. We believe small-cap stocks, especially at the low end of the capitalization range, are generally less-known and, therefore, less likely to be understood and properly priced by investors. HOW IT WORKS Investment returns in undervalued small-cap companies can be unpredictable, out-of-sync with the market and generally frustrating. Specific returns in any given period are related to individual securities and market conditions. Nevertheless, we expect in any period to have our share of winners and to see a few laggards. WINNERS Our most recent successes are depicted in the table that follows. During the first half of 1995, each contributed substantially to our performance and are representative of our approach to investing. Some of RVT's BEST PERFORMERS, as measured by dollar impact, were:
SECURITY % GAIN ------------------------------------ -------- Indigo, N.V. 201% Comdisco, Inc. 31% Atlantic Southeast Airlines, Inc. 94% Claire's Stores, Inc. 51% Diagnostic Products Corp. 39%
Atlantic Southeast Airlines, Comdisco and Claire's Stores were relatively large investments in stocks we knew well and are highly regarded in their respective industries. In each case, we made investments when business conditions were difficult and Wall Street expectations were low. Since the beginning of the year, the airline industry, in the case of Atlantic Southeast Airlines, the computer leasing business, in the case of Comdisco and the retail environment, in the case of Claire's Stores, have improved modestly. However, the investment community's opinion of these companies has changed radically and they are now viewed as high quality growth stocks. The story behind the fantastic 201% gain in Indigo is slightly different. Indigo was an investment we made in a new technology company at a brief moment when such investments were suspect. Initially billed as a hot new issue, Indigo's first weeks of trading were anything but that. This company went public at $20 per share and proceeded to drop by one-third. Always on the lookout for fallen angels, we invested aggressively in this 'broken deal' about a year ago. As the markets improved, particularly in technology shares, others discovered Indigo's revolutionary new products. The rest is now history, for we sold the last of our Indigo shares north of $50 per share. MORE PATIENCE REQUIRED One happy by-product of a bull market is that most of your stocks go up. There are always a few exceptions. Our laggards generally fall into two categories: undervalued companies that got cheaper (caught the flu) and those in intensive care (with pneumonia). Fortunately, our five WORST PERFORMERS, as measured by dollar impact, fall into the first category:
SECURITY % LOSS -------------------------------------- ------- Thomaston Mills, Inc. 21% Ethan Allen Interiors, Inc. 19% Transnational Re Corp. 15% K-Swiss, Inc. 34% Velcro Industries, N.V. 15%
In aggregate, our worst five performers set us back less than one percent. However, the best news is that we still have conviction that each of these companies represents solid investment value. With a little more patience, any one of these could make next year's winners list. 3 NO LONGER SMALL, UNKNOWN OR UNDER-OWNED THERE HAVE BEEN SOME EXTRAORDINARY DEVELOPMENTS IN THE SMALL-CAP SECTOR, BUT THEY ARE NOT WHAT YOU MAY THINK. Small-caps are no longer 'small' when compared to industry definitions of a decade ago. The upward bias (success) of the overall equity market has elevated the capitalization of small-cap stocks dramatically over the last ten years. For example, the weighted average market cap of the Russell 2000 index of small-cap issues has risen from $140 million in June 1985 to $410 million as of June 30, 1995. Morningstar, the leading independent mutual fund evaluation service, has devised a set of market capitalization parameters that places equity mutual funds into one of three capitalization boxes: small, medium or large. Portfolios with median market caps under $1 billion are considered small-cap. Although we do not have exact numbers, we believe the weighted average market cap in many of these funds is close to $1 billion, a more revealing picture of just how 'big' small-cap has become. TEN YEARS OF EXPLOSIVE GROWTH! [GRAPH] [Pictorial chart showing increase in number of small-cap funds and assets under management from 1984 to 1995; in 1995, 310 funds with $50 billion in assets.] Performance success and investor acceptance has translated into a significant flow of funds into the small-cap sector. In the mutual fund arena, there are now over 300 small-cap funds representing approximately $50 billion in assets. By contrast, there were only 24 small-cap funds with assets totaling $4 billion at the end of 1984. This over ten-fold increase in the number of small-cap funds and category assets has changed the playing field in a significant way. It is interesting to note that the majority of the funds have elected to focus their energies at the upper end of the Morningstar capitalization range ($500 million - $1 billion) where there is greater liquidity but, by definition, more competition. The growth in small company mutual funds and assets has dramatically decreased the number of unknown, inefficiently priced stocks at the upper end of the small-cap market. We have taken two countermeasures for the benefit of our investors. In the zone where most small-cap funds traffic ($500 million - $1 billion in market capitalization), we believe that a higher level of portfolio concentration is appropriate. This approach implies confidence in our non- quantitative and non-Wall Street research abilities. We believe that we are uniquely equipped to accomplish this task by virtue of our 20+ years of small-cap investment experience and our sizeable research effort. A second area of opportunity is at the other end of the capitalization range, the sector known as micro-cap. The micro-cap universe has the largest number of companies in which to invest, but the smallest number of institutional investors who do so. Currently, fewer than 10 mutual funds have a micro-cap charter. Micro-cap companies are the antithesis of what most professional small-cap investors are looking for - they are not well known, not well researched and their securities are not easy to buy and sell. These are precisely the conditions that breed undervalued securities. As an experienced institutional investor in a sector dominated by individuals, we believe that we have a particular advantage in micro-cap research and trading capabilities, key components for success. We believe that micro-caps offer 4 today the investment opportunities that small-caps did 15 years ago. We will continue to increase their weighting in the portfolio. [ILLUSTRATION] [Cartoon of fortune teller and customer] STAR GAZING In spite of the spectacular run-up by large-cap equities since the market lows of last December, there are several indications that small-cap stocks may soon resume a leadership role. June was the first month of small-cap outperformance since February, with the Russell 2000 up 5.2% versus a 2.4% return for the S&P 500. This performance momentum has continued into the first part of the third quarter, a good omen for small-cap issues. Also, now that the U.S. dollar has stopped declining against other major currencies, domestic small-cap stocks are competing on a level playing field. This has historically given small-cap stocks a performance edge. Finally, one has to wonder if the current level of low volatility is sustainable in light of the market's high returns. While we cannot explain this phenomena, we do not view this as a permanent condition. Since the last 10% market correction in 1990, the pay-off has been with investors who took the highest risk. We believe that over the next three years risk management will have a similar pay-off. WE REMAIN COMMITTED TO ACHIEVING ABOVE AVERAGE LONG-TERM RETURNS WITH THIS LOW RISK APPROACH. Your continued confidence is appreciated. Yours faithfully, CHARLES M. ROYCE Jack E. Fockler, Jr. Charles M. Royce W. Whitney George President Vice Presidents
July 31, 1995 Note: S&P 500, Russell 2000 and S&P 600 are unmanaged and include the reinvestment of dividends. 5 FUND HIGHLIGHTS June 30, 1995 -------------- Net Assets $305,362,309 Net Asset Value Per Share $13.99 Market Price Per Share $12.00 Shares Outstanding 21,806,476 -------------------------------------------------------------------------------- FINANCIAL REVIEW The table below represents the total returns of the Fund on two separate bases. NAV total return is the compound rate of return, using net asset values, on an amount invested in the Fund throughout the stated period and assumes reinvestment of dividend and capital gain distributions and primary participation in rights offerings. Stockholders are able to reinvest distributions, and purchase shares through rights offerings, at prices which have historically been below NAV, and without commission costs. NAV return is the most meaningful measurement of a continuous stockholder's progress. Market Value total return presents similar information, but values the Fund at market rather than NAV and therefore, reflects the actual experience of a stockholder, before commission costs, who bought and sold shares of the Fund at the beginning and ending dates.
NAV Market Value S&P Russell S&P Small- Total Return Total Return 500`D' 2000`D' Cap 600`D' ------------ ------------ ----------- --------- ---------- 3 months ended 6/30/95 7.5% 5.5% 9.5% 9.4% 9.5% 6 months ended 6/30/95 13.4 9.1 20.2 14.4 14.7 Annual Returns (ended December 31) 1994 1.1 -5.6 1.3 -1.8 -4.8 1993 17.9 14.8 10.0 18.9 18.8 1992 19.9 26.8 7.7 18.4 21.0 1991 39.5 35.3 30.5 46.1 48.5 1990 -13.1 -10.8 -3.2 -19.5 -23.7 Average Annual Total Returns (ended June 30, 1995) 3-Year 15.4% 11.4% 13.2% 16.4% 16.4% 5-Year 13.7 12.3 12.1 12.9 12.6 Since Inception* 12.0 8.9 13.0 10.7 8.5
`D' The S&P 500, Russell 2000 and S&P SmallCap 600 are unmanaged indices and include the reinvestment of dividends. Source: Frank Russell Co. * Inception date - November 26, 1986 The results presented in this report represent past performance and should not be considered representative of the 'total return' from an investment in the Fund today. They are provided only to give an historical perspective of the Fund. The investment return and net asset and market values of Fund shares will fluctuate, so that the shares may be worth more or less than their original cost when sold. 6 HISTORY SINCE INCEPTION The following table details the share accumulation history of an initial investor in the Fund who reinvested all distributions and participated fully in the rights offering. By reinvesting all distributions and fully participating in the rights offering, an investor maximizes his returns. This table should be read in conjunction with the Financial Review of the Fund (see page 6).
Amount Purchase NAV MKT History Invested Price Shares Value Value ------------------ -------- -------- ------ ------- ------- 11/26/86 Initial Purchase $10,000 $10.000 1,000 $ 9,280 $10,000 10/15/87 Distribution $.30 7.000 42 12/31/87 Distribution $.22 7.125 32 8,578 7,250 12/27/88 Distribution $.51 8.625 63 10,529 9,238 09/22/89 Rights Offering 405 9.000 45 12/29/89 Distribution $.52 9.125 67 12,942 11,866 09/24/90 Rights Offering 457 7.375 62 12/31/90 Distribution $.32 8.000 52 11,713 11,074 09/23/91 Rights Offering 638 9.375 68 12/31/91 Distribution $.61 10.625 82 17,919 15,697 09/25/92 Rights Offering 825 11.000 75 12/31/92 Distribution $.90 12.500 114 21,999 20,874 09/24/93 Rights Offering 1,469 13.000 113 12/31/93 Distribution $1.15 13.000 160 26,603 25,428 10/28/94 Rights Offering 1,103 11.250 98 12/19/94 Distribution $1.05 11.375 191 27,939 24,905 06/30/95 $14,897 2,264 $31,673 $27,168 ---------------------------------------------------------------------------------------------
The Board of Directors of the Fund has authorized the Fund to repurchase up to 300,000 shares of its common stock in open market and other transactions through December 31, 1995. Such repurchases would be effected at a price per share which is less than the then current net asset value, but not in excess of the then prevailing market price. ------------------------ The Board of Directors of the Fund is authorized to offer stockholders an opportunity to subscribe for additional shares of common stock of the Fund through rights offerings at a price per share that may be less than the then current net asset value of the Fund's common stock. The timing and terms of any such offerings are left to the Board's discretion. 7 PORTFOLIO SUMMARY The following information is provided as a 'bird's eye' view of the RVT portfolio. For a more complete picture, the full portfolio and accompanying financial statements should be read in their entirety.
PORTFOLIO COMPOSITION % OF COMMON STOCKS VALUE % OF NET ASSETS --------------------------------------------------------------------------------------------- Top 100 Stocks 61.3% $ 203,643,858 66.7% Other Stocks 38.7 128,783,281 42.2 ------- -------------- ------- Common Stocks 100.0% 332,427,139 108.9 ------- ------- Bonds & Preferred Stocks 5,596,268 1.9 Investment Company Convertible Notes (38,519,582) (12.6) Cash and Other Net Assets 5,858,484 1.8 -------------- ------- Total Net Assets $ 305,362,309 100.0% -------------- ------- -------------- ------- PORTFOLIO DIAGNOSTICS --------------------------------------------------------------------------------------------- Weighted Average Market Capitalization (Total Portfolio) $355 Million Median Market Capitalization (Total Portfolio) $167 Million Weighted Average P/E Ratio (100 Largest Positions) 13.0x Weighted Average P/B Ratio (100 Largest Positions) 1.6x Weighted Average Portfolio Yield (100 Largest Positions) 1.7% COMMON STOCK SECTORS % OF NET ASSETS --------------------------------------------------------------------------------------------- Financial 27.3% Industrial Cyclicals 24.0 Services 17.6 Retail 10.5 Consumer Durables 9.1 Technology 6.5 Consumer Staples 5.9 Energy 5.2 Health 2.8 TOP TWENTY POSITIONS MARKET VALUE % OF NET ASSETS --------------------------------------------------------------------------------------------- 1 Comdisco, Inc. $5,306,513 1.7% 2 Ash Grove Cement Company 4,030,257 1.3 3 Exar Corporation 3,789,275 1.2 4 Florida Rock Industries, Inc. 3,535,525 1.2 5 Baldwin & Lyons, Inc. Cl. B 3,346,450 1.1 6 Claire's Stores, Inc. 3,286,063 1.1 7 Transnational Re Corporation Cl. A 3,017,400 1.0 8 Vallen Corporation 3,011,922 1.0 9 Alleghany Corporation 2,848,664 0.9 10 The Pioneer Group, Inc. 2,778,875 0.9 11 The Dress Barn, Inc. 2,761,200 0.9 12 Sturm, Ruger & Company, Inc. 2,727,450 0.9 13 Wesco Financial Corporation 2,714,375 0.9 14 The Standard Register Company 2,669,500 0.9 15 Fab Industries, Inc. 2,650,450 0.9 16 Puerto Rican Cement Company, Inc. 2,632,150 0.9 17 Kimball International, Inc. Cl. B 2,610,550 0.9 18 Diagnostic Products Corporation 2,544,050 0.8 19 Plenum Publishing Corporation 2,541,000 0.8 20 National Bancorp of Alaska, Inc. 2,538,270 0.8
8 ROYCE VALUE TRUST, INC. SCHEDULE OF INVESTMENTS AT JUNE 30, 1995 (unaudited) -------------------------------------------------------------------------------- COMMON STOCKS - 108.9%
Value Shares (Note 1) ------ -------- CONSUMER DURABLES - 9.1% 26,390 Allen Organ Company Cl. B............... $ 1,174,343 49,600 Arctco, Inc. ......... 582,800 95,536 *The First Years, Inc. ............... 1,934,604 41,000 Flexsteel Industries, Inc. ............... 420,250 99,400 Garan Incorporated.... 1,664,950 51,500 *Johnson Worldwide Associates, Inc. Cl. A................... 1,210,250 120,700 Juno Lighting, Inc. .. 1,931,200 95,800 Kimball International, Inc. Cl. B.......... 2,610,550 57,300 *`D'Kit Manufacturing Co. ................ 615,975 61,600 *Lazare Kaplan International, Inc................. 462,000 173,942 *Lifetime Hoan Corporation......... 1,956,848 54,700 Matthews International Corporation Cl. A... 1,025,625 23,000 National Presto Industries, Inc. ... 1,043,625 84,250 Rauch Industries, Inc. ............... 774,047 141,000 The Rival Company..... 2,079,750 30,700 Russ Berrie and Company, Inc. ...... 425,963 43,700 The Singer Company N.V. ............... 1,130,738 115,700 Skyline Corporation... 2,097,063 47,200 Stanhome Inc. ........ 1,557,600 83,600 Sturm, Ruger & Company, Inc. ...... 2,727,450 13,700 Thor Industries, Inc................. 270,575 10,000 Wellco Enterprises, Inc. ............... 155,000 ------------ 27,851,206 ------------ CONSUMER STAPLES - 5.9% 68,000 Alico, Inc. .......... 1,207,000 11,500 Farmer Bros. Co. ..... 1,408,750 12,900 Flowers Industries, Inc. ............... 254,775 24,500 Genesee Corporation Cl. B............... $ 943,250 25,300 Golden Enterprises, Inc. ............... 177,100 563 Hershey Creamery Company............. 928,950 52,200 *J & J Snack Foods Corp. .............. 659,025 148,400 K-Swiss Inc. Cl. A.... 1,929,200 109,700 Midwest Grain Products, Inc. ..... 2,029,450 99,600 *Pentech International, Inc. ............... 298,800 22,000 Reebok International Ltd. ............... 748,000 43,081 SL Industries, Inc. .. 220,790 4,050 Seaboard Corporation......... 1,046,925 168,400 The Stride Rite Corporation......... 1,747,150 5,150 Tootsie Roll Industries, Inc. Cl. A................... 356,638 129,500 *The Topps Company, Inc. ............... 809,375 35,600 Velcro Industries N.V. ............... 2,055,900 30,200 Weyco Group, Inc. .... 1,087,200 ------------ 17,908,278 ------------ ENERGY - 5.2% 144,200 *American Oilfield Divers, Inc. ....... 937,300 40,000 *Belden & Blake Corporation......... 650,000 21,900 *Tom Brown, Inc. ..... 325,763 76,100 Camco International Inc. ............... 1,778,838 87,500 *Cliffs Drilling Company............. 1,246,875 31,400 Devon Energy Corporation......... 675,100 28,000 *Gulfmark International Inc. ............... 525,000 112,900 *Hornbeck Offshore Services, Inc. ..... 1,778,175 64,200 Lufkin Industries, Inc. ............... 1,203,750
The accompanying notes are an integral part of the financial statements. 9 ROYCE VALUE TRUST, INC. SCHEDULE OF INVESTMENTS AT JUNE 30, 1995 (unaudited) --------------------------------------------------------------------------------
Value Shares (Note 1) ------ -------- ENERGY - (continued) 15,000 *Nabors Industries, Inc. ............... $ 123,750 111,950 *Noble Drilling Corporation......... 825,631 31,100 *Oceaneering International, Inc................. 276,013 166,400 *Offshore Logistics, Inc. ............... 2,329,600 49,800 Penn Virginia Corporation......... 1,400,625 17,500 *Pool Energy Services Co. ................ 144,375 111,700 *Reading & Bates Corporation......... 1,033,225 47,000 *Toreador Royalty Corporation......... 146,875 19,900 Western Gas Resources, Inc. ............... 343,275 ------------ 15,744,170 ------------ FINANCIAL - 27.3% 17,888 *Alleghany Corporation......... 2,848,664 50,750 ALLIED Group, Inc. ... 1,446,375 94,000 ALLIED Life Financial Corporation......... 1,621,500 184,600 AMRESCO, INC. ........ 1,730,625 45,474 Argonaut Group, Inc. ............... 1,443,800 36,856 *Avatar Holdings Inc................. 1,345,244 15,000 BHC Financial, Inc. ............... 245,625 215,900 Baldwin & Lyons, Inc. Cl. B............... 3,346,450 46,100 Belize Holdings Inc. ............... 737,600 50,000 *Benson Financial Corporation......... 662,500 64,400 W. R. Berkley Corp. .............. 2,286,200 121,200 E.W. Blanch Holdings, Inc. ............... 2,257,350 12,500 CB Bancshares, Inc. ............... 381,250 24,200 CMAC Investment Corporation......... 1,049,675 28,475 California Bancshares, Inc. ............... 597,975 83,500 Capitol Transamerica Corporation......... $ 1,607,375 174,700 Comdisco, Inc. ....... 5,306,513 95,518 The Commerce Group, Inc. ............... 1,707,384 7,800 Consolidated-Tomoka Land Co. ........... 105,300 4,141 County Bank Corp...... 207,050 61,600 DUFF & PHELPS CORPORATION......... 662,200 65,100 Eaton Vance Corp. .... 2,099,475 40,000 Fidelity National Financial, Inc. .... 600,000 215 The First National Bank of Anchorage... 324,650 38,500 Fremont General Corporation......... 928,813 40,900 Arthur J. Gallagher & Co. ................ 1,487,738 73,645 *`D'General Builders Corporation......... 36,823 114,000 *Gryphon Holdings Inc. ............... 1,852,500 28,015 Harleysville Group, Inc. ............... 700,375 202,475 Hilb, Rogal & Hamilton Company............. 2,530,938 31,081 Independence Holding Company............. 108,784 144,400 Intercargo Corporation......... 1,588,400 7,400 The John Nuveen Company............. 177,600 20,712 Keystone Heritage Group, Inc. ........ 533,334 42,100 Lehman Bros. Holdings Inc. ............... 920,938 27,800 Leucadia National Corporation......... 1,403,900 200 THE MECHANICS BANK.... 1,050,000 41,400 Mid Ocean Limited..... 1,309,275 33,500 *Mutual Assurance, Inc. ............... 1,005,000 23,800 NYMAGIC, INC. ........ 377,825 49,770 National Bancorp of Alaska, Inc. ....... 2,538,270 59,500 New England Investment Companies, L.P. .... 1,115,625
The accompanying notes are an integral part of the financial statements. 10 ROYCE VALUE TRUST, INC. SCHEDULE OF INVESTMENTS AT JUNE 30, 1995 (unaudited) --------------------------------------------------------------------------------
Value Shares (Note 1) ------ -------- FINANCIAL - (continued) 39,300 The Newhall Land and Farming Company..... $ 545,288 114,500 Nobel Insurance Limited............. 1,180,781 30,000 Oriental Federal Savings Bank........ 570,000 55,987 Orion Capital Corporation......... 2,183,493 129,400 Pennsylvania Manufacturers Corporation......... 2,005,700 103,400 The Pioneer Group, Inc. ............... 2,778,875 7,000 Piper Jaffray Companies Inc. ..... 105,875 47,212 Poe & Brown, Inc. .... 1,097,679 12,900 T. Rowe Price Associates, Inc. ... 496,650 19,250 RLI Corp. ............ 437,938 69,600 Raymond James Financial, Inc. .... 1,348,500 68,500 Reliance Group Holdings, Inc. ..... 445,250 15,356 *Reliance Group Holdings, Inc. ..... 28,793 27,700 Student Loan Corporation......... 744,438 45,000 Susquehanna Bancshares, Inc. ... 1,057,500 36,750 TITAN Holdings, Inc. ............... 445,594 5,000 Transatlantic Holdings, Inc. ..... 325,000 150,400 *Transnational Re Corporation Cl. A... 3,017,400 55,500 Trenwick Group Inc. ............... 2,358,750 26,200 U. S. Trust Corp. .... 1,886,400 79,800 *Vista Resources, Inc. ............... 1,615,950 7,550 Vornado Realty Trust............... 263,306 21,500 Wesco Financial Corporation......... 2,714,375 73,100 **Willis Corroon Group plc ADR............. 877,200 24,500 Zenith National Insurance Corp. .... 526,750 ------------ 83,344,403 ------------ HEALTH - 2.8% 69,700 Diagnostic Products Corporation......... $ 2,544,050 89,200 *HAEMONETICS CORPORATION......... 1,717,100 43,100 Jones Medical Industries, Inc. ... 479,488 104,800 Life Technologies, Inc. ............... 2,358,000 47,200 *Spacelabs Medical, Inc. ............... 1,197,700 25,000 *Sullivan Dental Products, Inc. ..... 267,750 ------------ 8,564,088 ------------ INDUSTRIAL CYCLICALS - 24.0% 25,900 Aceto Corporation..... 382,025 2,501 R. P. Adams Company, Inc. ............... 47,519 50,200 American Filtrona Corporation......... 1,480,900 21,900 Ameron, Inc. ......... 793,875 45,000 *Art's-Way Manufacturing Co., Inc. ............... 270,000 16,450 Ash Grove Cement Company Cl. A....... 1,200,850 38,759 Ash Grove Cement Company Cl. B....... 2,829,407 13,500 Guy F. Atkinson Company of California.......... 126,563 12,900 BHA Group, Inc. ...... 161,250 15,300 *Banister Foundation Inc. ............... 131,963 25,200 *Bird Corp. .......... 173,250 116,600 Blessings Corporation......... 1,457,500 27,700 W. H. Brady Co. Cl. A................... 1,869,750 24,000 Burnham Corporation Cl. A............... 684,000 18,000 Burnham Corporation Cl. B............... 513,000 55,800 CalMat Co. ........... 1,157,850 36,400 Cascade Corp. ........ 582,400 71,646 *Chemfab Corporation......... 1,173,203 19,700 CLARCOR Inc. ......... 450,638 77,600 Cohu, Inc. ........... 1,813,900 2,000 ConBraCo Industries, Inc. ............... 1,000,000
The accompanying notes are an integral part of the financial statements. 11 ROYCE VALUE TRUST, INC. SCHEDULE OF INVESTMENTS AT JUNE 30, 1995 (unaudited) --------------------------------------------------------------------------------
Value Shares (Note 1) ------ -------- INDUSTRIAL CYCLICALS - (continued) 53,400 Curtiss-Wright Corporation......... $ 2,382,975 6,022 Decker Manufacturing Corporation......... 242,386 46,500 Delta Woodside Industries, Inc. ... 354,563 19,432 *Detection Systems, Inc. ............... 133,595 297,900 *DeVlieg-Bullard, Inc. ............... 409,613 86,900 Fab Industries, Inc. ............... 2,650,450 161,400 *Figgie International Inc. Cl. A.......... 1,392,075 124,600 Florida Rock Industries, Inc. ... 3,535,525 25,000 *Fruit of the Loom, Inc. Cl. A.......... 528,125 30,300 Gilbert Associates, Inc. Cl. A.......... 393,900 85,700 P. H. Glatfelter Company............. 1,724,713 24,300 Gleason Corporation... 537,638 24,800 Gorman-Rupp Company... 359,600 30,600 Greif Bros. Corporation Cl. A... 715,275 125,000 *Group Technologies Corporation......... 578,125 25,000 Haskel International, Inc. Cl. A.......... 175,000 119,019 Hawkins Chemical, Inc. ............... 803,378 23,800 *Insituform Technologies, Inc. ............... 315,350 43,600 International Aluminum Corporation......... 1,384,300 58,900 Kaman Corporation Cl. A................... 750,975 60,800 *Kinark Corporation... 190,000 79,750 Knape & Vogt Manufacturing Company............. 1,196,250 12,900 *Kreisler Manufacturing Corp. .............. 91,913 82,850 LeaRonal, Inc. ....... 1,750,206 143,983 Lilly Industries, Inc. Cl. A............... $ 1,691,800 53,900 *The Lincoln Electric Company............. 1,617,000 16,078 Liqui-Box Corporation......... 514,496 12,038 *`D'The Logan Clay Products Company.... 252,798 68,200 *MK Gold Company...... 238,700 39,553 MacDermid, Incorporated........ 1,819,438 20,100 Mine Safety Appliances Company............. 1,065,300 32,300 Paul Mueller Company............. 1,017,450 14,500 Nordson Corporation... 790,250 37,600 Oil-Dri Corporation of America............. 559,300 63,700 Oshkosh Truck Corporation Cl. B... 788,288 57,800 Peerless Mfg. Co. .... 628,575 10,000 *Pegasus Gold Inc. ... 101,250 1,000 Penn Engineering and Manufacturing Corp. .............. 75,500 75,800 *Perini Corporation... 776,950 33,400 Precision Castparts Corp. .............. 1,173,175 29,300 Preformed Line Products Company.... 981,550 86,300 Puerto Rican Cement Company, Inc. ...... 2,632,150 103,750 Quaker Chemical Corporation......... 1,685,938 51,270 Robroy Industries, Inc. Cl. A.......... 845,955 22,500 Roper Industries, Inc. ............... 787,500 5,000 *SPS Technologies, Inc. ............... 188,125 31,100 *Shorewood Packaging Corporation......... 454,838 103,600 *Simpson Manufacturing Co., Inc. .......... 1,256,150
The accompanying notes are an integral part of the financial statements. 12 ROYCE VALUE TRUST, INC. SCHEDULE OF INVESTMENTS AT JUNE 30, 1995 (unaudited) --------------------------------------------------------------------------------
Value Shares (Note 1) ------ -------- INDUSTRIAL CYCLICALS - (continued) 59,500 The L. S. Starrett Company Cl. A....... $ 1,346,188 11,400 Tecumseh Products Company Cl. A....... 501,600 44,286 Thermal Industries, Inc. ............... 437,324 158,400 Thomaston Mills, Inc. Cl. A............... 1,980,000 2,000 Thomaston Mills, Inc. Cl. B............... 27,250 67,000 *Total Containment, Inc. ............... 711,875 59,800 *The Turner Corporation......... 598,000 4,308 United Screw and Bolt Corporation......... 258,480 73,700 Versa Technologies, Inc. ............... 1,068,650 10,700 Wausau Paper Mills Company............. 244,094 39,300 Woodhead Industries, Inc. ............... 540,375 33,800 Woodward Governor Company............. 2,129,400 46,100 Zero Corporation...... 691,500 ------------ 73,372,985 ------------ RETAIL - 10.5% 10,000 *Alexander's, Inc. ... 555,000 44,100 Blair Corporation..... 1,515,938 25,900 *The Buckle, Inc. .... 404,688 202,400 *CATHERINES STORES CORPORATION......... 2,251,700 134,600 Charming Shoppes, Inc. ............... 706,650 181,300 Claire's Stores, Inc. ............... 3,286,063 173,800 *The Clothestime, Inc. ............... 499,675 73,000 *Crown Books Corporation......... 821,250 17,400 Dart Group Corporation Cl. A............... 1,468,125 130,400 Deb Shops Inc. ....... 423,800 283,200 *The Dress Barn, Inc................. 2,761,200 124,400 *Ethan Allen Interiors Inc. ............... $ 2,208,100 110,100 Family Dollar Stores, Inc. ............... 1,623,975 80,500 Frederick's of Hollywood, Inc. Cl. A................... 412,563 154,400 Frederick's of Hollywood, Inc. Cl. B................... 694,800 37,000 *InterTAN Inc. ....... 277,500 75,800 *Little Switzerland, Inc. ............... 331,625 10,000 *Mac Frugal's Bargains - Close-outs Inc. .... 175,000 20,000 Melville Corporation......... 685,000 144,600 *Mikasa, Inc. ........ 2,150,925 44,257 *Monro Muffler Brake, Inc. ............... 641,727 49,000 *Orchard Supply Hardware Stores Corporation......... 551,250 15,900 Oshkosh B'Gosh, Inc. Cl. A............... 254,400 9,000 Oshkosh B'Gosh, Inc. Cl. B............... 146,250 143,205 Pier 1 Imports, Inc. ............... 1,324,646 168,600 *Stein Mart, Inc. .... 2,276,100 27,183 Strawbridge & Clothier Cl. A............... 543,660 111,600 *Suzy Shier Limited... 548,303 51,500 Tiffany & Co. ........ 1,751,000 172,100 *The Wet Seal, Inc. Cl. A............... 795,963 ------------ 32,086,876 ------------ SERVICES - 17.6% 41,500 AAR CORP. ............ 741,813 79,712 Air Express International Corporation......... 1,873,232 65,100 *American City Business Journals, Inc. ............... 1,432,200 79,748 Arnold Industries, Inc. ............... 1,395,590
The accompanying notes are an integral part of the financial statements. 13 ROYCE VALUE TRUST, INC. SCHEDULE OF INVESTMENTS AT JUNE 30, 1995 (unaudited) --------------------------------------------------------------------------------
Value Shares (Note 1) ------ -------- SERVICES - (continued) 82,800 Atlantic Southeast Airlines, Inc. ..... $ 2,494,350 83,309 *Bell Industries, Inc. ............... 1,780,730 52,700 Bowl America Incorporated Cl. A................... 415,013 5,000 Cracker Barrel Old Country Store, Inc. ............... 103,125 23,700 *Jenny Craig, Inc. ... 195,525 100,100 Crawford & Company Cl. A................... 1,726,725 31,800 Crawford & Company Cl. B................... 536,625 115,600 Dames & Moore......... 1,502,800 93,800 Ennis Business Forms, Inc. ............... 1,160,775 99,700 *FRP Properties, Inc. ............... 2,143,550 152,800 *FCA International Ltd. ............... 344,776 2,600 Fisher Companies Inc. ............... 188,500 16,900 Florida East Coast Industries, Inc. ... 1,246,375 58,800 *Fresh America Corp. .............. 308,700 220,935 Frozen Food Express Industries, Inc. ... 2,140,308 5,000 *GC Companies, Inc. ............... 163,750 11,617 Grey Advertising Inc. ............... 2,230,464 20,304 *Hardinge Inc. ....... 388,314 41,325 The Harper Group...... 692,194 10,000 *Hirsh International Corp. Cl. A......... 160,000 27,500 *IHOP Corp. .......... 708,125 42,600 *International Dairy Queen, Inc. Cl...... 830,700 92,850 *JOULE' Inc. ......... 185,700 10,000 *KLLM Transport Services, Inc. ..... 120,000 39,500 Kenan Transport Company............. 790,000 40,300 Lawson Products, Inc. ............... 1,067,950 46,200 McClatchy Newspapers, Inc. Cl. A.......... $ 1,022,175 123,700 Merrill Corporation... 2,350,300 85,000 *MovieFone, Inc. Cl. A................... 371,875 38,400 NCH Corporation....... 2,208,000 13,500 New England Business Service, Inc. ...... 266,625 9,300 *Nichols Research Corporation......... 159,263 9,900 *Payco American Corporation......... 76,725 72,600 Plenum Publishing Corporation......... 2,541,000 173,500 Richardson Electronics, Ltd. .. 1,257,875 3,000 *Robert Half International Inc. ............... 76,875 78,500 *Rollins Environmental Services, Inc. ..... 372,875 18,000 Rykoff-Sexton, Inc. .. 317,250 76,350 *SEATTLE FILMWORKS, Inc. ............... 1,297,950 166,900 Sotheby's Holdings, Inc. Cl. A.......... 2,274,013 140,500 The Standard Register Company............. 2,669,500 30,000 *Steck-Vaughn Publishing Corporation......... 262,500 52,600 Stone & Webster, Inc. ............... 1,551,700 107,500 *TBC Corporation...... 1,155,625 24,000 Treadco, Inc. ........ 336,000 61,100 *The Union Corporation......... 969,963 167,329 *Vallen Corporation... 3,011,922 ------------ 53,617,920 ------------ TECHNOLOGY - 6.5% 82,800 Astro-Med, Inc. ...... 947,025 39,081 BEI Electronics, Inc. ............... 283,337
The accompanying notes are an integral part of the financial statements. 14 ROYCE VALUE TRUST, INC. SCHEDULE OF INVESTMENTS AT JUNE 30, 1995 (unaudited) --------------------------------------------------------------------------------
Value Shares (Note 1) ------ -------- TECHNOLOGY - (continued) 14,500 *Bolt Beranek And Newman Inc. ........ $ 396,938 11,000 *CEM Corporation...... 137,500 129,605 *CSP Inc. ............ 972,038 32,000 Communications Systems, Inc. ...... 552,000 50,200 *Comptek Research, Inc. ............... 903,600 16,200 *Dionex Corporation... 741,150 128,450 *Exar Corporation..... 3,789,275 57,100 *Giga-tronics Incorporated........ 442,525 15,000 Hach Company.......... 202,500 35,289 *IFR Systems, Inc. ... 414,646 58,400 *ILC Technology, Inc. ............... 540,200 6,200 *Indigo N.V. ......... 310,000 26,300 *Integral Systems, Inc. ............... 723,250 27,800 Joslyn Corporation.... 729,750 105,000 Landauer Inc ......... 1,981,875 94,000 *MDL Information Systems, Inc. ...... 1,398,250 14,725 Modern Controls, Inc. ............... 134,366 1,000 *National Instruments Corporation......... 17,750 28,500 Newport Corporation... 267,188 31,200 *Phoenix Technologies Ltd. ............... 335,400 67,200 *Programming & Systems, Inc. ...... 16,800 20,800 *`D'Sage Laboratories, Inc. ............... 1,331,200 91,100 Scitex Corporation Limited............. 1,958,650 47,500 *Technical Communications Corporation......... 320,625 ------------ 19,847,838 ------------ UTILITIES - 0.0% 10,000 *Digital Systems International, Inc. ............... $ 89,375 ------------ Total Common Stocks (Cost $261,721,704)....... 332,427,139 ------------ PREFERRED STOCKS - .4% 3,000 Bird Corp. $1.85 Conv. .............. 56,250 10,000 Cliffs Drilling Company $2.3125 Conv. Ex. .......... 283,750 41,000 Manville Corporation $1 Ser. B Cum. ..... 1,025,000 ------------ Total Preferred Stocks (Cost $900,908)..... 1,365,000 ------------ CORPORATE BONDS - 1.4%
Principal Amount ---------- $ 380,000 Ag Services of America, Inc. 7% Conv. Deb. due 5/31/03............. 402,800 824,000 Dixie Yarns, Inc. 7% Conv. Sub. Deb. due 5/15/12............. 613,880 300,000 Figgie International Inc. 9.875% Sr. Nt. due 10/1/99......... 285,000 1,500,000 National Education Corporation 6.5% Conv. Sub. Deb. due 5/15/11............. 975,000 149,000 Pier 1 Imports, Inc. 6.875% Conv. Sub. Deb. due 4/01/02.... 148,255 314,000 Reliance Group Holdings, Inc. 9% Sr. Note due 11/15/00............ 309,683
The accompanying notes are an integral part of the financial statements. 15 ROYCE VALUE TRUST, INC. SCHEDULE OF INVESTMENTS AT JUNE 30, 1995 (unaudited) --------------------------------------------------------------------------------
Principal Value Amount (Note 1) ---------- ------------ CORPORATE BONDS - (continued) 1,073,000 Richardson Electronics, Ltd. 7.25% Conv. Sub. Deb. due 12/15/06... $ 858,400 690,000 Waterhouse Investors Services, Inc. 6% Conv. Sub. Deb. due 12/15/03............ 638,250 ------------ Total Corporate Bonds (Cost $3,664,298)... 4,231,268 ------------ REPURCHASE AGREEMENT - 2.9% State Street Bank and Trust Company, 5.50% due 7/3/95, collateralized by U.S. Treasury Obligation, 7.50% due 1/31/97, valued at $9,000,336 (Cost $9,000,000)...................... $ 9,000,000 ------------ TOTAL INVESTMENTS - 113.6% (COST $275,286,910).................... 347,023,407 LIABILITIES LESS CASH AND OTHER ASSETS - (13.6%)................. (41,661,098) ------------ NET ASSETS - 100.0%................ $305,362,309 ------------ ------------
* Non-income producing. ** American Depository Receipt. `D' At June 30, 1995, the Fund owned 5% or more of the Company's outstanding shares thereby making the Company an affiliated person as that term is defined in the Investment Company Act of 1940. INCOME TAX INFORMATION -- The cost for federal income tax purposes was $275,289,578. At June 30, 1995, net unrealized appreciation for all securities was $71,733,829, consisting of aggregate gross unrealized appreciation of $83,593,015 and aggregate gross unrealized depreciation of $11,859,186. The accompanying notes are an integral part of the financial statements. 16 ROYCE VALUE TRUST, INC. STATEMENT OF ASSETS AND LIABILITIES (unaudited) --------------------------------------------------------------------------------
June 30, 1995 ------------ ASSETS: Investments at value (identified cost $275,286,910) (Note 1)............................... $347,023,407 Cash....................................................................................... 377,131 Receivable for investments sold............................................................ 1,260,835 Receivable for dividends and interest...................................................... 584,041 Prepaid expenses and other assets.......................................................... 52,778 ------------ TOTAL ASSETS............................................................................. 349,298,192 ------------ LIABILITIES: Notes payable (Note 2)..................................................................... 38,519,582 Payable for investments purchased.......................................................... 4,999,719 Investment advisory fee payable (Note 3)................................................... 271,743 Accrued expenses........................................................................... 144,839 ------------ TOTAL LIABILITIES........................................................................ 43,935,883 ------------ NET ASSETS............................................................................... $305,362,309 ------------ ------------ ANALYSIS OF NET ASSETS: Undistributed net investment income........................................................ $ 575,930 Accumulated net realized gain on investments............................................... 15,564,879 Net unrealized appreciation on investments................................................. 71,736,497 Capital Stock (21,806,476 shares outstanding) (Note 5)..................................... 21,806 Additional paid-in capital................................................................. 217,463,197 ------------ NET ASSETS............................................................................... $305,362,309 ------------ ------------ PRICING OF SHARES: Net asset value per share, assuming conversion of Notes ($345,362,309[div]24,692,479 fully converted shares) (Note 2)............................................................... $13.99 ------ ------
STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------------------------------------------
Six Months Year ended ended June 30, 1995 December 31, (unaudited) 1994 ------------- ------------ FROM INVESTMENT ACTIVITIES: Net investment income.................................................. $ 335,655 $ 785,924 Net realized gain on investments....................................... 15,940,821 21,004,491 Net unrealized appreciation/depreciation on investments................ 20,053,973 (19,255,498) ------------- ------------ Increase in net assets resulting from operations....................... 36,330,449 2,534,917 Dividends paid from net investment income.............................. -- (205,729) Distributions paid from net realized gains............................. -- (21,395,807) FROM CAPITAL STOCK TRANSACTIONS: Increase in net assets from capital stock transactions (Note 5)........ -- 41,540,833 ------------- ------------ Increase in net assets................................................. 36,330,449 22,474,214 NET ASSETS: Beginning of period.................................................... 269,031,860 246,557,646 ------------- ------------ End of period (including undistributed net investment income of $575,930 and $240,275, respectively)................................. $ 305,362,309 $269,031,860 ------------- ------------ ------------- ------------
The accompanying notes are an integral part of the financial statements. 17 ROYCE VALUE TRUST, INC. STATEMENT OF CASH FLOWS (unaudited) --------------------------------------------------------------------------------
Six Months ended June 30, 1995 ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Investment income received............................................................... $ 3,440,128 Interest paid............................................................................ (2,300,000) Payment of operating expenses............................................................ (1,898,685) Purchase of investments.................................................................. (71,276,648) Proceeds from sales and maturities of investments........................................ 72,359,404 ------------- Cash from operating activities...................................................... 324,199 Cash at beginning of period......................................................... 52,932 ------------- Cash at end of period............................................................... $ 377,131 ------------- ------------- RECONCILIATION OF NET INCREASE IN NET ASSETS FROM OPERATIONS TO CASH FROM OPERATING ACTIVITIES: Net increase in net assets resulting from operations..................................... $ 36,330,449 Net increase in investments.............................................................. (23,527,477) Net increase in unrealized appreciation on investments................................... (20,053,973) Decrease in dividends and interest receivable............................................ 77,807 Decrease in receivable for investments sold.............................................. 6,707,535 Accretion of organization costs.......................................................... 81,812 Decrease in interest payable on Notes.................................................... (1,150,000) Increase in payable for investments purchased............................................ 1,964,899 Net decrease in accrued expenses and other assets........................................ (106,853) ------------- Cash from operating activities...................................................... $ 324,199 ------------- -------------
The accompanying notes are an integral part of the financial statements. 18 ROYCE VALUE TRUST, INC. STATEMENT OF OPERATIONS (unaudited) --------------------------------------------------------------------------------
Six Months ended June 30, 1995 ------------- INVESTMENT INCOME: Income: Dividends............................................................................... $ 2,879,681 Interest................................................................................ 482,640 ------------- Total Income.................................................................. 3,362,321 ------------- Expenses: Investment advisory fee (Note 2)........................................................ 1,578,270 Interest expense (Note 2)............................................................... 1,150,000 Amortization of underwriting discount and offering costs (Note 2)....................... 81,812 Custodian and transfer agent fees....................................................... 64,436 Administrative and clerical............................................................. 56,422 Legal and auditing fees................................................................. 50,633 Stockholder reports and notices......................................................... 29,820 Directors' fees......................................................................... 26,788 Supplies and postage.................................................................... 22,580 Federal and state registration fees..................................................... 14,842 Facilities and office space............................................................. 13,685 Fee waived by adviser (Note 3).......................................................... (62,622) ------------- Total Expenses................................................................ 3,026,666 ------------- Net Investment Income......................................................... 335,655 ------------- REALIZED AND UNREALIZED GAIN ON INVESTMENTS: Net realized gain on investments............................................................ 15,940,821 Net unrealized appreciation on investments.................................................. 20,053,973 ------------- Net realized and unrealized gain on investments............................................. 35,994,794 ------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................................ $ 36,330,449 ------------- -------------
The accompanying notes are an integral part of the financial statements. 19 ROYCE VALUE TRUST, INC. FINANCIAL HIGHLIGHTS -------------------------------------------------------------------------------- This table is presented to show selected data for a share outstanding throughout each period, and to assist stockholders in evaluating the Fund's performance over the last five years.
Six Months Ended June Years Ended December 31, 30, 1995 --------------------------------------------------- (unaudited) 1994 1993 1992 1991 1990 ------------- ------- ------- ------- ------- ------ NET ASSET VALUE, BEGINNING OF PERIOD............................. $ 12.34 $ 13.47 $ 12.50 $ 11.23 $ 8.58 $10.35 INCOME FROM INVESTMENT OPERATIONS: Net investment income............ 0.02 0.04 0.09 0.15 0.17 0.17 Net gains or losses on investments (realized and unrealized)................... 1.64 0.09 2.12 2.12 3.20 (1.49) ------------- ------- ------- ------- ------- ------ Total from investment operations.................. 1.66 0.13 2.21 2.27 3.37 (1.32) ------------- ------- ------- ------- ------- ------ LESS DISTRIBUTIONS: Dividends (from net investment income)....................... -- (0.01) (0.09) (0.15) (0.17) (0.17) Distributions (from capital gains)........................ -- (1.04) (1.06) (0.75) (0.44) (0.15) ------------- ------- ------- ------- ------- ------ Total distributions........... -- (1.05) (1.15) (0.90) (0.61) (0.32) ------------- ------- ------- ------- ------- ------ CAPITAL STOCK TRANSACTIONS: Effect of rights offering........ -- (0.14) (0.08) (0.06) (0.10) (0.08) Effect of reinvestment of distributions................. -- (0.07) (0.01) (0.04) (0.01) (0.05) Effect of potential conversion of Notes (a)..................... (0.01) -- -- -- -- -- ------------- ------- ------- ------- ------- ------ Total capital stock transactions................ (0.01) (0.21) (0.09) (0.10) (0.11) (0.13) ------------- ------- ------- ------- ------- ------ NET ASSET VALUE, END OF PERIOD (A)... $ 13.99 $ 12.34 $ 13.47 $ 12.50 $ 11.23 $ 8.58 ------------- ------- ------- ------- ------- ------ ------------- ------- ------- ------- ------- ------ MARKET VALUE, END OF PERIOD.......... $ 12.00 $ 11.00 $12.875 $ 12.25 $10.375 $8.125 ------------- ------- ------- ------- ------- ------ ------------- ------- ------- ------- ------- ------ TOTAL RETURN (B): Net Asset Value (a).............. 13.4% 1.1% 17.9% 19.9% 39.5% -13.1 Market Value..................... 9.1% -5.6% 14.8% 26.8% 35.3% -10.8 RATIOS/SUPPLEMENTAL DATA: Net Assets, End of Period (in thousands)......................... $305,362 $269,032 $246,558 $202,483 $166,550 $118,308 Ratio of Expenses to Average Net Assets (including management fee and interest expense).............. 2.1%* 2.0% 1.3% 0.8% 0.8% 0.9% Ratio of Management Fee to Average Net Assets......................... 1.1%* 1.2% 1.1% 0.5% 0.4% 0.4% Ratio of Interest Expense to Average Net Assets......................... 0.8%* 0.5% -- -- -- -- Ratio of Net Investment Income to Average Net Assets................. 0.2%* 0.3% 0.7% 1.3% 1.5% 1.8% Portfolio Turnover Rate.............. 19% 35% 33% 40% 34% 28%
------------ (a) For periods ended after June 22, 1994, Net Asset Value per share and Net Asset Value Total Return are calculated assuming the Notes have been fully converted unless the effect of doing so would result in a higher Net Asset Value per share than would be calculated without such assumption. (b) The Net Asset Value and Market Value Total Return assume a continuous stockholder who reinvested all net investment income dividends and capital gain distributions and fully exercised all rights issued. * Annualized. The accompanying notes are an integral part of the financial statements. 20 ROYCE VALUE TRUST, INC. NOTES TO FINANCIAL STATEMENTS (unaudited) -------------------------------------------------------------------------------- NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Royce Value Trust, Inc. (the 'Fund') was incorporated under the laws of the State of Maryland on July 1, 1986 as a diversified closed-end investment company. The Fund commenced operations on November 26, 1986. Valuation of investments: Securities listed on an exchange or on the Nasdaq National Market System are valued on the basis of the last reported sale prior to the time the valuation is made or, if no sale is reported for such day, at their bid price for exchange-listed securities and at the average of their bid and asked prices for Nasdaq securities. Quotations are taken from the market where the security is primarily traded. Other over-the-counter securities for which market quotations are readily available are valued at their bid price. Securities for which market quotations are not readily available are valued at their fair value under procedures established and supervised by the Fund's Board of Directors. Bonds and other fixed income securities may be valued by reference to other securities with comparable ratings, interest rates and maturities, using established independent pricing services. Investment transactions and related investment income: Investment transactions are accounted for on the trade date and dividend income is recorded on the ex-dividend date. Interest income is recorded on the accrual basis. Realized gains and losses from investment transactions and unrealized appreciation and depreciation of investments are determined on the basis of identified cost for book and tax purposes. Taxes: As a qualified regulated investment company under Subchapter M of the Internal Revenue Code, the Fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. The schedule of investments includes information regarding income taxes under the caption 'Income Tax Information'. Distributions: Dividend and capital gain distributions are recorded on the ex-dividend date and paid annually in December. Dividend and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to paid-in capital and may affect net investment income per share. Undistributed net investment income may include temporary book and tax basis differences which will reverse in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. Repurchase agreements: The Fund enters into repurchase agreements with respect to its portfolio securities solely with State Street Bank and Trust Company ('SSB&T'), the custodian of its assets. The Fund restricts repurchase agreements to maturities of no more than seven days. Securities pledged as collateral for repurchase agreements are held by SSB&T until maturity of the repurchase agreements. Repurchase agreements could involve certain risks in the event of default or insolvency of SSB&T, including possible delays or restrictions upon the ability of the Fund to dispose of the underlying securities. Net Asset Value: Net asset value per share is calculated assuming that the Investment Company Convertible Notes outstanding have been converted into shares of Common Stock, unless the effect of doing so would result in a higher net asset value per share than would be calculated without such assumption. 21 ROYCE VALUE TRUST, INC. NOTES TO FINANCIAL STATEMENTS (unaudited) (continued) -------------------------------------------------------------------------------- NOTE 2. INVESTMENT COMPANY CONVERTIBLE NOTES: The Fund issued $40,000,000 aggregate principal amount of Investment Company Convertible Notes (the 'Notes') on June 22, 1994. The Fund received proceeds of $38,350,000 after the deduction of the underwriting discount and offering costs incurred by the Fund in connection with the issuance of the Notes. The underwriting discount and the offering costs of $1,200,000 and $450,000, respectively, are being amortized over the term of the Notes. The Notes, which are unsecured obligations of the Fund, mature on June 30, 2004 and bear interest payable on June 30 and December 31 of each year commencing with June 30, 1994 at the rate of 5 2/4% per annum. The Notes have an Aaa rating from Moody's Investor Service, Inc. ('Moody's'). The Notes are convertible into shares of Common Stock of the Fund at the option of the holder, at any time prior to maturity, except during the period from the second trading day prior to the ex-dividend date through the record date for distributions to stockholders each year and unless previously redeemed at the option of the Fund. The initial conversion price was $14.00 per share. The conversion price at June 30, 1995 is $13.86. This conversion price is subject to an annual net adjustment involving an escalation of 6.75% and a reduction for the impact on net asset value per share of distributions to stockholders. Under the Investment Company Act of 1940, the Fund is required to maintain an asset coverage of at least 300% for the Notes. In addition, the Indenture governing the Notes requires the Fund to maintain a certain discounted asset coverage for its portfolio that equals or exceeds the Note Basic Maintenance Amount under the guidelines established by Moody's. The Fund has met these requirements since the issuance of the Notes. Commencing July 1, 1997, and any time thereafter prior to maturity, the Fund may, at its option, redeem the Notes in whole or in part for cash at a price equal to 100% of their principal amount, together with accrued interest thereon. Prior to July 1, 1997, the Fund will have the option to redeem the Notes for cash at a price equal to 100% of their principal amount, together with accrued interest, only if a redemption is necessary for the Fund to maintain the required asset coverage for the Notes and/or continue to qualify as a regulated investment company. On July 1, 1999, if the average market price per $1,000 principal amount of Notes for the 45 trading days ending May 31, 1999 is less than $950, the Fund will either call all of the Notes for redemption or reset one or more of the terms of the Notes so that the market value of the Notes is at or as close as possible to par. NOTE 3. INVESTMENT ADVISORY AGREEMENT: Under the Investment Advisory Agreement between Quest Advisory Corp. ('Quest') and the Fund, the Basic Fee is a monthly fee equal to 1/12 of 1% (1% on an annualized basis) of the average of the total net assets of the Fund at the end of each month included in the applicable performance period, which is a rolling 36 month period ending with the most recent calendar month. The Basic Fee for such monthly period is subject to increase or decrease, depending on the extent, if any, by which the investment performance of the Fund exceeds by more than 2 percentage points, or is exceeded by more than 1 percentage point by, the percentage change in the investment record of the S&P 500 for such performance period. For each percentage point in excess of two (2) that the investment performance of the Fund exceeds the percentage change in the investment record of the S&P 500, such Basic Fee is increased at the rate of 1/12 of .05%. For each percentage point in excess of one (1) that the percentage change in the investment record of the S&P 500 exceeds the investment performance of the Fund, such Basic Fee is decreased at the rate of 1/12 of .1%. 22 ROYCE VALUE TRUST, INC. NOTES TO FINANCIAL STATEMENTS (unaudited) (continued) -------------------------------------------------------------------------------- The maximum increase or decrease in the Basic Fee for any month may not exceed 1/12 of .5%. Accordingly, the maximum monthly fee rate as adjusted for performance 1/12 of 1.5% and would be payable if the investment performance of the Fund exceeds the percentage change in the investment record of the S&P 500 by 12 or more percentage points for the performance period, the minimum monthly fee rate as adjusted for performance is 1/12 of .5% and would be payable if the percentage change in the investment record of the S&P 500 exceeded the investment performance of the Fund by 6 or more percentage points for the performance period. The Investment Advisory Agreement also provides that Quest will not be entitled to receive any fees for any performance period in which the investment performance of the Fund, rounded to the nearest whole point, is less than zero. In the event that the Fund's investment performance for a performance period, rounded to the nearest whole point, is less than zero, Quest will not be required to refund to the Fund any fees earned for any prior performance period. In calculating the investment performance of the Fund and the percentage change in the investment record of the S&P 500, all dividends and other distributions during the performance period are treated as having been reinvested and gain (loss) from transactions in Fund shares is eliminated. Fractions of a percentage point are rounded to the nearest whole point (to the higher whole point if exactly one-half). For the six months ended June 30, 1995, the Fund paid Quest advisory fees totalling $1,515,648, net of $62,622 voluntarily waived by Quest. NOTE 4. TRANSACTIONS IN SHARES OF AFFILIATED COMPANIES: An 'Affiliated Company', as defined in the Investment Company Act of 1940, is a company in which the Fund owns at least 5% of the company's outstanding voting securities. The Fund effected the following transactions in shares of such companies during the six months ended June 30, 1995.
Purchases Sales ------------------ --------------- Realized Dividend Affiliated Company Shares Cost Shares Cost Gain/Loss Income ------------------ ------ -------- ------ ----- --------- -------- General Builders Corporation................... -- -- -- -- -- -- Kit Manufacturing Co........................... 24,100 $262,088 -- -- -- -- The Logan Clay Products Company................ -- -- -- -- -- -- Sage Laboratories, Inc......................... -- -- -- -- -- --
NOTE 5. FUND SHARES: At June 30, 1995, there were 150,000,000 shares of common stock and 50,000,000 shares of preferred stock, $.001 par value, authorized. Only common stock has been issued, and transactions were as follows:
Six Months Ended Year Ended June 30, 1995 December 31, 1993 ------------------- ------------------------ Shares Amount Shares Amount --------- ------- --------- ----------- Net proceeds from rights offerings................... -- -- 1,119,159 $12,590,539 Dividends and distributions reinvested in additional shares............................................. -- -- 2,381,336 28,950,294
NOTE 6. PURCHASES AND SALES OF SECURITIES: For the six months ended June 30, 1995, the cost of purchases and the proceeds from sales of investment securities, other than short-term securities, amounted to $64,241,547 and $59,654,890, respectively. 23 ROYCE VALUE TRUST, INC. NOTES TO FINANCIAL STATEMENTS (unaudited) (continued) -------------------------------------------------------------------------------- NOTE 7. QUARTERLY RESULTS OF OPERATIONS:
Net Realized and Increase (Decrease) Unrealized Gain in Net Assets Net Investment (Loss) on Resulting from Investment Income Income Investments Operations ------------------ ---------------- ------------------- ------------------- Per Per Per Per 1995 Total Share Total Share Total Share Total Share ----------------- ---------- ----- -------- ----- ----------- ----- ----------- ----- March 31......... $1,748,732 $0.08 $161,195 $0.01 $14,547,443 $0.66 $14,708,638 $0.67 June 30.......... 1,613,589 0.07 174,460 0.01 21,447,351 0.98 21,621,811 0.99 ---------- ----- -------- ----- ----------- ----- ----------- ----- $3,362,321 $0.15 $335,655 $0.02 $35,994,794 $1.64 $36,330,449 $1.66 ---------- ----- -------- ----- ----------- ----- ----------- ----- ---------- ----- -------- ----- ----------- ----- ----------- ----- 1994 ----------------- March 31......... $1,267,705 $0.07 $288,569 $0.01 ($2,911,824) ($0.15) ($2,623,255) ($0.13) June 30.......... 1,235,331 0.06 273,029 0.01 (8,890,935) (0.46) (2,794,258) (0.14) September 30..... 1,637,652 0.08 77,308 0.01 22,441,970 1.15 16,129,579 0.83 December 31...... 1,914,577 0.10 147,018 0.01 (8,890,218) (0.45) (8,177,149) (0.43) ---------- ----- -------- ----- ----------- ----- ----------- ----- $6,055,265 $0.31 $785,924 $0.04 $ 1,748,993 $0.09 $ 2,534,917 $0.13 ---------- ----- -------- ----- ----------- ----- ----------- ----- ---------- ----- -------- ----- ----------- ----- ----------- -----
At the Annual Meeting of Shareholders held on June 28, 1995, Fund stockholders elected directors and ratified the Board's selection of the Fund's independent public accountant for 1995, as follows:
NAME OF DIRECTOR/ VOTES VOTES VOTES CAST BROKER OTHER PROPOSAL CAST FOR ABSTAINED AGAINST NON-VOTES ----------------------------------------- ---------- --------- ---------- --------- Charles M. Royce 14,564,444 95,809 N/A 583 Thomas R. Ebright 14,564,444 95,809 N/A 583 Richard M. Galkin 14,564,444 95,809 N/A 583 Stephen L. Isaacs 14,564,444 95,809 N/A 583 David L. Meister 14,564,444 95,809 N/A 583 Ratification of independent public accountant 14,541,985 80,132 38,136 583
24 DISTRIBUTION REINVESTMENT PLAN WHAT IS THE DISTRIBUTION REINVESTMENT PLAN? Distributions of net investment income, if any, and capital gains are normally made in December. The Fund's Distribution Reinvestment Plan (the 'Plan') offers you an automatic way to reinvest your dividends and capital gains distributions in additional shares of the Fund, increasing your holdings in the Fund. Reinvestment of the annual distribution is done at market price, without commissions. The number of shares to be issued to a stockholder will be determined by dividing the amount of the distribution payable to the stockholder by the last reported sale price of a share of the Fund's common stock on the valuation date, which follows the record date. HOW DO REGISTERED STOCKHOLDERS PARTICIPATE IN THE PLAN? If your shares are registered directly with the Fund, you are automatically a participant in the Plan unless you have instructed the Plan Agent in writing otherwise. The Plan Agent must receive the instructions not less than 10 days prior to the record date for a distribution in order to be effective for that distribution. A registered stockholder may also receive the distribution in the form of a stock certificate for the full shares and a check for the fractional share if the Plan Agent is properly notified. Stockholders who elect to not participate in the Plan will receive all distributions in cash paid by check mailed directly to the stockholder by State Street Bank and Trust Company, dividend paying agent and Plan Agent. WHAT IF MY SHARES ARE HELD BY A BROKERAGE FIRM, BANK OR OTHER NOMINEE? If your shares are held in the name of a brokerage firm, bank, or other nominee as the stockholder of record, we still expect them to automatically participate in the Plan on your behalf. Please consult with your brokerage firm, bank or other nominee to be certain that it is participating in the Plan on your behalf. If your nominee is unable to participate on your behalf, you should instruct your nominee to have your shares registered in your name in order to participate. HOW WILL I KNOW HOW MANY SHARES I HAVE? The Plan Agent maintains the accounts for registered stockholders in the Plan and sends written confirmation of all transactions in the account, including information needed by participants for personal and tax records. Shares in the account of each participant will be held by the Plan Agent in non-certificated form in the name of the participant, and each participant will be able to vote those shares at a shareholder meeting or by proxy. A participant may also send other stock certificates held by them to the Plan Agent to be held in non-certificated form. There is no service fee charged to participants for reinvesting distributions. The Plan Agent's fees for the processing of the distribution reinvestment are paid for by the Fund. A participant may terminate his account under the Plan by written notice to the Plan Agent. Termination will be effective as described in the Plan. If a participant elects to sell his shares before the Plan is terminated, the Plan Agent will deduct a $2.50 fee plus brokerage commissions from the sale transaction. If a nominee is the registered owner of your shares, the nominee will maintain the accounts on your behalf. WHAT IF I NEED MORE INFORMATION? You may obtain more detailed information by requesting a copy of the Plan from the Plan Agent. All correspondence (including notifications) should be directed to: Royce Value Trust, Inc. Distribution Reinvestment Plan, c/o State Street Bank and Trust Company, PO Box 8200, Boston MA 02266-8200, (800) 426-5523. 25 OFFICERS Charles M. Royce, President and Treasurer Jack E. Fockler, Jr., Vice President W. Whitney George, Vice President Daniel A. O'Byrne, Vice President & Assistant Secretary Susan I. Grant, Secretary INDEPENDENT ACCOUNTANTS Ernst & Young LLP CUSTODIAN, TRANSFER AGENT AND REGISTRAR State Street Bank and Trust Company DIRECTORS Thomas R. Ebright Quest Advisory Corp., Vice President Royce, Ebright & Associates, Inc., President Richard M. Galkin Richard M. Galkin Associates Inc., President Stephen L. Isaacs Columbia University Development Law and Policy Program, Director; Attorney David L. Meister Communications Industry, Consultant Charles M. Royce Quest Advisory Corp., President Royce Value Trust, Inc. Semi-Annual Report 1995 1414 Avenue of the Americas New York, New York 10019 (800) 221-4268 STATEMENT OF DIFFERENCES The dagger symbol shall be expressed as ......... 'D' The divisions symbol shall be expressed as ...... [div]