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: 811-04875
 
Name of Registrant: Royce Value Trust, Inc.
 
Address of Registrant: 745 Fifth Avenue
New York, NY 10151
 

Name and address of agent for service:   John E. Denneen, Esquire
    745 Fifth Avenue
    New York, NY 10151

Registrant’s telephone number, including area code: (212) 508-4500
Date of fiscal year end: December 31
Date of reporting period: January 1, 2012 – December 31, 2012
 


Item 1. Reports to Shareholders.

 

ANNUAL
REVIEW AND REPORT

TO STOCKHOLDERS

 

Royce Value Trust

Royce Micro-Cap Trust

Royce Focus Trust
     
 
 
 
 


www.roycefunds.com





A Few Words on Closed-End Funds


Royce & Associates, LLC manages three closed-end funds: Royce Value Trust, the first small-cap value closed-end fund offering; Royce Micro-Cap Trust, the only micro-cap closed-end fund; and Royce Focus Trust, a closed-end fund that invests in a limited number of primarily small-cap companies.
 
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. This is in contrast to open-end mutual funds, in which the fund sells and redeems its shares on a continuous basis.

A Closed-End Fund Offers Several Distinct Advantages Not Available from an Open-End Fund Structure
   
Since a closed-end fund does not issue redeemable securities or offer its securities on a continuous basis, it does not need to liquidate securities or hold uninvested assets to meet investor demands for cash redemptions, as an open-end fund must.
   
In a closed-end fund, not having to meet investor redemption requests or invest at inopportune times is ideal 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 more freely in less liquid portfolio securities because it is not subject to potential stockholder redemption demands. This is particularly beneficial for Royce-managed closed-end funds, which invest in small- and micro-cap securities.
   
The fixed capital structure allows permanent leverage to be employed as a means to enhance capital appreciation potential.
   
Unlike Royce’s open-end funds, our closed-end funds are able to distribute capital gains on a quarterly basis. Each of the Funds has adopted a quarterly distribution policy for its common stock. Please see page 16-18 for more details.
   
We believe that the closed-end fund structure is very suitable for the long-term investor who understands the benefits of a stable pool of capital.

Why Dividend Reinvestment Is Important
A very important component of an investor’s total return comes from the reinvestment of distributions. By reinvesting distributions, our investors can maintain an undiluted investment in a Fund. To get a fair idea of the impact of reinvested distributions, please see the charts on pages 11, 13, and 15. For additional information on the Funds’ Distribution Reinvestment and Cash Purchase Options and the benefits for stockholders, please see page 18 or visit our website at www.roycefunds.com.

This page is not part of the 2012 Annual Report to Stockholders



Table of Contents  

   
Annual Review  

   
Performance Table 2
   
Letter to Our Stockholders 3
   
2012: In Quotes 63
   
Postscript: The Lessons of 40 years 64

   
Annual Report to Stockholders 9
   
   
 
   
For 40 years, we have used a value approach to invest in small-cap securities. We focus primarily on the quality of a company’s balance sheet, its ability to generate free cash flow, and other measures of profitability or sound financial condition. We then use these factors to assess the company’s current worth, basing the assessment on either what we believe a knowledgeable buyer might pay to acquire the entire company or what we think the value of the company should be in the stock market.
   
   
   

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Performance Table  


NAV Average Annual Total Returns   Through December 31, 2012

    Royce   Royce   Royce   Russell   Russell   Russell
    Value Trust   Micro-Cap Trust   Focus Trust   2000 Index   Microcap Index   2500 Index

One-Year     15.41 %     17.34 %     11.42 %     16.35 %     19.75 %     17.88 %

Five-Year     1.23       2.15       1.38       3.56       1.46       4.34  

10-Year     9.48       10.45       12.19       9.72       8.42       10.49  

15-Year     8.14       8.60       9.17       5.89       n.a.       7.43  

20-Year     10.06       n.a.       n.a.       8.43       n.a.       9.89  

25-Year     11.15       n.a.       n.a.       9.74       n.a.       11.14  

Since Inception     10.33       10.42       10.04       n.a.       n.a.       n.a.  

Inception Date   11/26/86   12/14/93   11/1/961     n.a.       n.a.       n.a.  

1 Date Royce & Associates, LLC assumed investment management responsibility for the Fund.


Important Performance and Risk Information
All performance information in this Review and Report reflects past performance, is presented on a total return basis, 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.roycefunds.com. Certain immaterial adjustments were made to the net assets of Royce Micro-Cap Trust at 12/31/12 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. All indexes referenced are unmanaged and capitalization-weighted. Each indexes’s returns include net reinvested dividends and/or interest income. 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 2500 Index is an index of the 2,500 smallest publicly traded U.S. companies in the Russell 3000 Index.

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Letter to Our Stockholders

 
 
 

Men can do nothing without the make-believe of a beginning.
– George Eliot


See a Little Light

   
When seeing out one year and ushering in another, it is important to remember that the calendar, useful though it may be, provides only one way of tracking time. Some people, for example, choose to look to spring for a new beginning, while others, more habituated to the rhythms of the school year, prefer the arrival of fall. The stock market, in all its caprice and unpredictability, most often eschews 12-month spans in favor of its own irregularly paced seasons. So we find ourselves, as we look back on 2012 and peer ahead to 2013, at one of those curious, familiar junctures when the calendar compels a shift that the market seems to have anticipated months before. From our perspective as active small-cap managers, the recent market cycle change was something of a watershed. In fact, it seems very likely to us that the 2012 small-cap low on June 4 signaled the end of the closely correlated, range-bound cycle of the last few years, a cycle that created ample disappointments for those of us committed to high quality, risk management, and long-term absolute returns. It is not yet clear that this June low will prove as auspicious as it looks to us at this writing. Suffice it to say that major market inflection points seldom do any of us the favor of announcing their arrival.
  From our perspective as active small-
cap managers, the recent market cycle
change was something of a watershed.
In fact, it seems very likely to us that the
2012 small-cap low on June 4 signaled
the end of the closely correlated, range-
bound cycle of the last few years, a cycle
that created ample disappointments for
those of us committed to high quality,
risk management, and long-term
absolute returns.

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Charles M. Royce, President



One of the most interesting recent
developments in the equity markets,
particularly in the small-cap space,
has been the persistent disparity
in performance between high- and
low-quality companies. Over longer
periods of time, higher-quality
companies have differentiated
themselves from a performance
standpoint, especially compared
to the lower quality segments of
the market. While the aftermath
of the financial crisis altered this
script, there are signs that the
dynamic is changing.

Historically, lower-quality companies
have tended to demonstrate their
most robust outperformance when
markets are in the initial recovery
phase following a recession or bear
market low. However, once economies
and markets move from recovery to
expansion, the rate of change in these
inputs begins to slow while leadership
tends to rotate back to higher-
quality companies, whose business
fundamentals are more compelling.





Continued on page 6...
    Letter to Our Stockholders

     It is equally important to emphasize that our new-found sanguine attitude is contingent on seeing in 2013 more of what we saw in the second half of 2012, particularly in last year’s closing months. During this period, investors were looking more closely at companies that possess sustainable quality in the form of strong balance sheets, high returns on invested capital, steady earnings, and reasonable dividends while paying a bit less attention to high-yield instruments, copiously leveraged stocks, and explosive growth surprises. We want to stress the extremely cautious nature of our optimism. The resurgence of quality off the June low was not decisive and has been thus far short lived. However, in our view, it did mark a subtle and significant shift that grew more pronounced in the fourth quarter, most notably in October and November when share prices went wobbly from the impact of Hurricane Sandy and the aftermath of the elections, which included periods of recurrent anxiety over the then-looming fiscal cliff.
     Quality shone through in this more uncertain period. Throughout most of our first 35 years of managing portfolios, this resilience would have been unexceptional, and hardly worth mentioning, because quality companies have historically defended well. However, since the spring of 2010—and even more dramatically since the April 2011 small-cap high—little of what worked historically has enjoyed success. This has made the last five years—the last three particularly—among the most frustrating periods of our 40 years in business. With retrospective clarity, perhaps we should have suspected that something was amiss, or at least historically aberrant, when stocks rebounded so quickly and dynamically from the March 2009 bottom. Considering that the recession which began in 2007 was made far worse by the global financial crisis in the fall of 2008, the market’s surge may have been too much too soon, welcome though it was.
     In any event, investors soon became more than a little wary, shuffling in and out of stocks with little regard for business fundamentals and too much for macro headlines, nearly all of them negative. Unable to establish any clear direction, the market sputtered as it rose and wheezed as it stumbled. It often seemed as though many of the investors who were frantically shoving money in and pulling it out again weeks, days, or hours later were the same people decrying the mercurial nature of asset prices and questioning whether equities were any longer a viable investment option. Along the way, results for passive investment approaches began to outpace those of an ever-larger number of active managers. So it is with a large measure of relief that we bid a tentative and hopeful good-bye to all that as we look ahead to better, more stable days.


The Wall of Worry
An old adage has it that “the market climbs a wall of worry” during those times when stocks behave bullishly in the face of negative news or perceptions. It seems clear to us that in 2012, the market scaled just such a wall. Consider the following: For the most part, the bearish second quarter eroded, but did not undo, the gains achieved in the first. The year’s final six months found many investors still behaving coolly toward equities and a host of large-scale economic and fiscal issues yet to be fully worked through. As the year closed, a fiscal cliff deal had yet to be reached, various European nations continued to flirt with financial peril, and China was still growing
 
 
       

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at a slower pace than in previous boom years. In addition, there was a typically contentious presidential election preceded by a disastrous hurricane that swept through the world’s financial capital. Yet the market ultimately shrugged off most of these concerns.
     Share prices did not skyrocket following the June 4 small-cap low. July, in fact, saw a downturn for most stocks. But August and September were highly rewarding months that enabled equities to rally decisively enough to post impressive third-quarter results. For the quarter, the small-cap Russell 2000 Index gained 5.3% while the large-cap S&P 500 and Russell 1000 Indexes were up 6.4% and 6.3%, respectively, and the more tech-oriented Nasdaq Composite climbed 6.2%. Following the strong third quarter, equities took a bit of breather in October, before rallying again in November and December, which repeated to some degree the third quarter’s pattern, though with far more modest or slightly negative results. For the fourth quarter, the Russell 2000 was up 1.9%, the Russell 1000 rose 0.1%, the S&P 500 was off 0.4%, and the Nasdaq Composite fell 3.1%.
     The end result was a strong calendar year, especially compared to 2011, with each major equity index posting double-digit returns. In 2012, the Russell 2000 gained 16.3%, the S&P 500 rose 16.0%, the Russell 1000 was up 16.4%, and the Nasdaq Composite increased 15.9%. Three-year returns for the major indexes were also strong, with each again posting double-digit average annual total returns. For the three-year period ended December 31, 2012, the Russell 2000 led with a gain of 12.2%. The Russell 2000, Russell 1000, and S&P 500 each finished the year within 2.5% of their respective highs established during 2012’s third quarter, while the Nasdaq Composite remained 40.2% below its peak from March 10, 2000.
     Non-U.S. equities also enjoyed a strong second half after starting the year with generally lower gains when stacked against their domestic cousins. The Russell Global ex-U.S. Small Cap Index climbed 8.3% in the third quarter, while the Russell Global ex-U.S. Large Cap Index rose 7.7%. In contrast to the domestic indexes, these strong third-quarter performances were followed by consistently positive results in the fourth quarter. The Russell Global ex-U.S. Small Cap Index was up 4.8% versus a gain of 5.8% for the Russell Global ex-U.S. Large Cap Index. For the full year small-caps were the leaders, with the Russell Global ex-U.S. Small Cap Index gaining 18.8% while the Russell Global ex-U.S. Large Cap Index was up 17.0%. So while the perception persists that non-U.S. markets are a mess—a perception based on the uncertain debt and currency situations in Europe and slower-than-desired growth in developing countries—the reality is that stocks across the globe finished the year with highly attractive results.
     Shifting back stateside finds that micro-cap stocks enjoyed a very strong year. After finishing the first half with an enviable 13.0% return, the Russell Microcap Index climbed 5.9% in the third quarter and was essentially flat in the fourth, up 0.04%, which gave the index a 19.7% increase in 2012. Mid-cap stocks also experienced robust results for the calendar year—the Russell Midcap Index was up 17.3% in 2012.

  An old adage has it that “the market
climbs a wall of worry” during those
times when stocks behave bullishly
in the face of negative news or
perceptions. It seems clear to us
that in 2012 the market scaled just
such a wall.

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  However, the four rounds of QE
have created an extended tailwind
for low-quality companies. Highly
levered businesses—a low-quality
attribute from our standpoint—have
benefited from the sharp drop in the
cost of capital that has accompanied
the Fed’s bond buying programs.
Access to capital has simultaneously
improved, allowing weaker companies
to stave off potential financing
challenges. This is particularly
relevant in the smaller company space
where financing is often tenuous.
Interestingly, companies with large
net cash positions have also lagged
as that cash has been viewed as an
unproductive asset that generates
little or no return, even though it
provides a healthy margin of safety
and is often the result of profitability.
Even allowing for strong second-half
results, high-quality small-caps look
highly attractive to us relative to
both their lower-quality counterparts
and their high-quality peers in the
large-cap space.

The drop in market volatility back
to pre-crisis levels, as measured
by the VIX, has contributed to the
relative strength of low-quality
companies. Investors’ appetite for
riskier assets tends to correlate with
sharp moves—both up and down—in
volatility. As the more violent swings
in the market dissipated, investors
were increasingly willing to embrace
the added risk associated with
lower quality enterprises.


Continued on page 8...
 
 
 
Letter to Our Stockholders

 
Good-Bye to All That (We Hope)
Calendar-year results for our closed-end funds fell a bit short of our expectations on a relative basis, even as all three of the portfolios finished the year with both solid second-half performances and more-than-respectable absolute returns. Certainly some holdings drew a benefit from the market’s suddenly renewed affection for quality characteristics. Results as a whole therefore left us frustrated yet hopeful, for the reasons outlined above.
     We have previously discussed the reasons for recent performance disappointments, but they are worth recapping for what we would like to think will be the last time, at least for a while. Beginning with 2007’s recession and moving through the global financial crisis into the early days of June 2012, the markets were highly volatile, closely correlated, and frequently disappointing. This pattern could first be seen emerging in the spring of 2010 and was cast in harder material by the small-cap high on April 29, 2011. So while the one- and three-year numbers for the major domestic indexes were strong through the end of 2012, investors continue to be leery of the market, most probably owing to its lack of a sustainable course, bullish or bearish, especially in the roughly 13-month period between the April 2011 high and the 2012 low in early June. More importantly, this cycle of high correlation often proved difficult for our closed-end portfolios.

2012 NAV TOTAL RETURNS FOR THE ROYCE FUNDS VS.
RUSSELL 2000, RUSSELL MICROCAP AND THE RUSSELL 2500
as of 12/31/12

1
Certain immaterial adjustments were made to the net assets of Royce Micro-Cap Trust at 12/31/12 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.

     Throughout this time, we remained patient and disciplined, resolutely searching for companies that met our standards for quality and attractive valuation while investors grew more interested in other matters. On the one hand, they sought safety in fixed income instruments, utilities, or high-yielding vehicles such as REITs and MLPs; on the other hand they looked

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for fast, dramatic growth, which most often came from highly leveraged companies in which we take no interest. For our part, we continued to see many companies across several sector and industry groups that answered to our preferred combination of quality and value. However, many of the largest company, industry and/or sector weightings in some portfolios have fared poorest, including those in the Energy, Materials, and Information Technology sectors. While all of this has been frustrating, none of it has changed the way in which we invest or construct portfolios. As we said in our Semiannual Review and Report, patience and discipline are not virtues to which we pay lip service. Our investment horizon will remain squarely focused on the long term, as it has for 40 years.

New Cycle, New Balance
The recent era of low rates and ample liquidity has not changed our view of the importance of strong balance sheets, high returns on invested capital, cash flow, or dividends. Many small-cap companies that possess any number of these characteristics underperformed the Russell 2000 in 2010, 2011, and the first half of 2012, which definitely hampered the effectiveness of our disciplined approach. This can be seen in the Funds’ three-, five-year, and in the case of Royce Value Trust, even 10-year, results. We did not enjoy watching certain portfolio favorites languish. But not once did we consider changing our core principles. We knew that we were in a highly anomalous market, one that we may not see again for more than a generation. So we stayed patient and consistent while we waited for the cycle to shift.
     Our contention is that quality stocks underperformed through much of the recent cycle of correlation owing to both the zero-interest-rate policies that the Fed has implemented over the last few years and the related rounds of quantitative easing. With interest rates so low, companies were finding it very easy to restructure debt or take on more of it. The price companies were paying to do so was miniscule, so investors acted accordingly by rewarding a number of fast-growing, highly leveraged businesses while often ignoring those with strong balance sheets. In an environment where the cost of debt has been virtually nil, low-debt companies lost their traditional advantage. (Our Sidebar, piece provides some more details.) However, we also suspect that we have reached a stage where this advantage is diminishing because rates have been historically low for a few years now and monetary stimulus no longer has the same dramatic impact it had with the first two or three rounds of quantitative easing. In addition to their stalwart second-half returns, we think this is a good sign for high-quality small-cap stocks.


A Quality Cycle?
As correlation continues to abate, we expect to see more opportunities for quality stocks to flourish. This is ultimately why we were not surprised by the market’s strength in the second half, even with ample ongoing uncertainty. We feel confident that the market has entered a cycle

  We did not enjoy watching certain
portfolio favorites languish. But not
once did we consider changing our
core principles. We knew that we
were in a highly anomalous market,
one that we may not see again for
more than a generation. So we stayed
patient and consistent while we
waited for the cycle to shift.

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  The current preference for passive
strategies and ETFs at the expense of
active management has also played
a role. Within small-cap, active
managers, especially those with a
long-term orientation, tend to have
a quality bias in their portfolios,
while passive index vehicles,
especially those meant to replicate
the Russell 2000, have no bias other
than market cap and therefore have
a higher weighting in lower-quality
companies. Persistent redemptions
of actively managed funds combined
with modest inflows to ETFs have
further distorted the low quality/high
performance differential.

The key question, then, is when will
this change? It is our view that it may
already have begun. Interest rates,
while at historic lows, cannot fall
much lower. In fact, each successive
round of quantitative easing is
exerting less and less pressure on
rates while at the same time raising
the specter of increased inflation
down the road. While liquidity should
remain abundant, the rate of change
in the cost of capital has clearly
peaked. By the same token, the rate
of decline in market volatility has
significantly slowed with the VIX now
back to its long-run averages. And
while the global economy continues to
grow, GDP statistics are anything but
robust. Low-quality companies have
had an extended moment in the sun,
but it is our strong belief that we are
entering a new era for quality.



 
 
 
Letter to Our Stockholders

 


in which stock picking matters. Our optimism, cautious as it is, is bolstered by the fact that in the years ahead earnings growth can accelerate for small caps and should be robust as the economy continues to improve. While many companies are hesitant about capital expenditures, those issues have more to do with timing. That is, businesses were not willing to start spending until the President and Congress struck a deal. Yet our meetings with management teams have convinced us that there is no question about their willingness to invest.
     In this context, it is worth mentioning that the tax and stimulus deal that was struck early in January still left important matters such as infrastructure spending, entitlements, and the next debt ceiling increase unresolved. So there will be opportunities for political intransigence to potentially affect the markets in 2013, and it will be interesting to see how investors respond to additional rounds of fiscal gridlock. Our thought is that greater levels of attention to business fundamentals will remain high. We believe that equities will continue their positive performance into 2013, that quality-oriented companies and active management approaches, especially within the small-cap universe, will continue their resurgence, and that non-U.S. small-caps will continue to surprise on the upside. We are very happy to say that it looks like a new, more historically typical cycle has begun.
           
  Sincerely        
           
     
    Charles M. Royce   W. Whitney George   Jack E. Fockler, Jr.
    President   Vice President           Vice President       
           
  January 31, 2013

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Table of Contents  

   
Annual Report to Stockholders  

Managers’ Discussions of Fund Performance  
   
Royce Value Trust 10
   
Royce Micro-Cap Trust 12
   
Royce Focus Trust 14

History Since Inception 16
   
Distribution Reinvestment and Cash Purchase Options 18
   
Schedules of Investments and Other Financial Statements  
   
Royce Value Trust 19
   
Royce Micro-Cap Trust 35
   
Royce Focus Trust 50
   
Directors and Officers 60
   
Notes to Performance and Other Important Information 61
   
   
 
   

The Royce Funds 2012 Annual Report to Stockholders   |  9



Royce Value Trust

 


AVERAGE ANNUAL NAV TOTAL RETURNS
Through 12/31/12

July-December 20121   10.87 %  

One-Year         15.41    

Three-Year         10.58    

Five-Year         1.23    

10-Year         9.48    

15-Year         8.14    

20-Year         10.06    

25-Year         11.15    

Since Inception (11/26/86)         10.33    

1 Not annualized  
       
CALENDAR YEAR NAV TOTAL RETURNS  

Year   RVT     Year     RVT    

2012   15.4 %   2004     21.4 %  

2011   -10.1     2003     40.8    

2010   30.3     2002     -15.6    

2009   44.6     2001     15.2    

2008   -45.6     2000     16.6    

2007   5.0     1999     11.7    

2006   19.5     1998     3.3    

2005   8.4     1997     27.5    

                     
TOP 10 POSITIONS % of Net Assets  

HEICO Corporation   1.1 %  

Carter’s   1.0    

Mohawk Industries   1.0    

Coherent   1.0    

Lincoln Electric Holdings   1.0    

Advisory Board (The)   1.0    

Nordson Corporation   1.0    

Reliance Steel & Aluminum   0.9    

PAREXEL International   0.9    

E-L Financial   0.8    

                     
PORTFOLIO SECTOR BREAKDOWN % of Net Assets  

Industrials   27.8 %  

Information Technology   19.6    

Financials   17.8    

Consumer Discretionary   13.9    

Materials   8.1    

Health Care   6.5    

Energy   5.1    

Consumer Staples   2.1    

Telecommunication Services   0.7    

Diversified Investment Companies   0.4    

Miscellaneous   3.8    

Preferred Stock   0.1    

Borrowings Under Revolving Credit Agreement Less Cash and Cash Equivalents   -5.9    

 
 
 

 
Manager’s Discussion
Strong results in the final six months of 2012 helped Royce Value Trust (RVT) to enjoy a strong year on an absolute basis even as it came up a bit short on a relative scale. RVT gained 15.4% on an NAV (net asset value) basis and 16.2% on a market price basis in 2012 compared to gains of 16.3% for both of its unleveraged small-cap benchmarks, the Russell 2000 and S&P SmallCap 600 Indexes.
     The Fund enjoyed full participation in the rally that enlivened the year’s first quarter, up 13.9% on an NAV basis and 14.7% on a market price basis versus 12.4% for the Russell 2000 and 12.0% for the S&P SmallCap 600. This relative advantage was lost, however, once stock prices began to decline following a small-cap high on March 26. Investors once again shifted from bullish to bearish based on a now-familiar set of macro headlines concerning European debt and the pace of global economic growth, particularly in the U.S. and China. RVT fell hard in the second quarter, down 8.6% on an NAV basis and 8.9% on a market price basis versus respective declines of 3.5% and 3.6% for the Russell 2000 and S&P SmallCap 600.
     Small-cap stocks reached their low for the year on June 4, 2012, though it would not be until July and August that the presence of a rally began to be felt. Though not as dynamic as the first quarter’s bull run, the third quarter was the year’s second shift into an up phase. The Fund once more did well as share prices climbed, gaining 5.1% on an NAV basis and 6.3% based on market price while the Russell 2000 was up 5.3% and the S&P SmallCap 600 rose 5.4%. For stocks as a whole, the fourth quarter was a more mixed period. Investors did their best to make sense of the effects of Hurricane Sandy, the elections, the looming fiscal cliff, and another round of quantitative easing announced by the Fed in mid-December. This muted the performance of RVT’s benchmarks—the Russell 2000 was up 1.9% in the fourth quarter while the S&P SmallCap 600 rose 2.2%. The Fund handily outpaced each benchmark for the same period, up 5.5% on an NAV basis and 4.6% on a market price basis. This gave the Fund an NAV advantage for the second half and from the 2012 small-cap low on June 4 through the end of December. For this period, RVT gained 17.4% on an NAV basis (+15.6% based on market price) versus respective gains of 16.3% and 15.8% for the Russell 2000 and S&P SmallCap 600.
     Longer-term relative results were mixed, with some key pockets of strength. From the small-cap trough on March 9, 2009 through December 31, 2012, RVT was up 187.2% on an NAV basis and 207.0% on a market price basis versus a gain of 160.9% for the Russell 2000 and 174.6% for the S&P SmallCap 600. On an NAV basis, the Fund outperformed both benchmarks for

  GOOD IDEAS THAT WORKED
  Top Contributors to 2012 Performance1  

Nordson Corporation   0.45%

Mohawk Industries   0.44   

MAXIMUS   0.36   

Carter’s   0.34   

PAREXEL International   0.31   

1 Includes dividends    
     
Important Performance and Risk Information
All performance information reflects past performance, is presented on a total return basis, 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.roycefunds.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 micro-cap companies, which may involve considerably more risk than investing in a more diversified portfolio of larger-cap companies. Regarding the two “Good Ideas” 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 performance for 2012.

10  |  The Royce Funds 2012 Annual Report to Stockholders



Performance and Portfolio Review


the 15-, 25-year, and since inception (11/26/86) periods ended December 31, 2012. (The Fund also beat the Russell 2000 on both an NAV and market price basis for the 15-, 20-, 25-year, and since inception periods.) RVT’s NAV average annual total return since inception was 10.3%.
     Nordson Corporation, part of the machinery group in the top-performing Industrials sector, was the Fund’s top contributor in 2012. The company has what we think is a highly attractive niche business making customized systems that apply adhesives, sealants, and coatings to consumer and industrial products during the manufacturing process. The company announced a 20% increase in its fiscal fourth quarter dividend in July, which not only excited investors, but also marked the 49th consecutive year in which it increased its dividend. We trimmed our position in August. The recovery in the housing industry spurred the rapidly rising stock price of Mohawk Industries in 2012, which in turn led us to take gains in February, May, November, and December. This conservatively capitalized company produces floor coverings for the residential and commercial markets. In addition to its robust earnings growth, investors seemed to like its aggressive attempts to capture market share by acquiring smaller competitors.
     Shares of PMFG, a business we have owned since 1990, fell nearly 80% between its early February high and its 2012 low in late November, driven in large part by issuing a secondary offering priced at a sizable discount to its stock. As a manufacturer of custom products primarily for the natural gas industry, the company was also adversely affected by declining gas prices, increased expenses, and project delays, all of which hurt earnings. Fond of its growing business and attractive valuation, we increased our stake between February and September. Major Drilling Group International provides contract drilling services for the metals industry. Although the firm continued to operate profitably, revenue and earnings were hurt as precious metals miners pared back development projects. This in turn seemed to spark fears of a possible decrease in demand for its services. We added to our stake in 2012 before reducing it somewhat in early January 2013.

  GOOD IDEAS AT THE TIME
  Top Detractors from 2012 Performance1  


PMFG -0.31%

Major Drilling Group International -0.19   

GrafTech International -0.15   

ADTRAN -0.14   

Sapient Corporation -0.13   

1 Net of dividends
 
MARKET PRICE PERFORMANCE HISTORY SINCE INCEPTION (11/26/86) through 12/31/12

1 Reflects the cumulative total return of an investment made by a stockholder who purchased one share at inception ($10.00 IPO), reinvested all annual distributions and fully participated in primary subscriptions of the Fund’s rights offerings.

2 Reflects the actual market price of one share as it traded on the NYSE.

 
FUND INFORMATION AND PORTFOLIO DIAGNOSTICS

Fund Total Net Assets $1,082 million   

Number of Holdings 478   

Turnover Rate 25%   

Symbol  
   Market Price RVT   
   NAV XRVTX   

Net Leverage1 6%   

Average Market Capitalization2 $1,430 million   

Weighted Average P/E Ratio3,4 15.2x   

Weighted Average P/B Ratio3 1.6x   

U.S. Investments (% of Net Assets) 79.6%   

Non-U.S. Investments (% of Net Assets) 26.3%   

1 Net leverage is the percentage, in excess of 100%, of the total value of equity type investments, divided by net assets.

2  Geometric 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.

3  Harmonic 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.

4  The Fund’s P/E ratio calculation excludes companies with zero or negative earnings (10% of portfolio holdings as of 12/31/12).

 

DOWN MARKET PERFORMANCE COMPARISON
All Down Periods of 7.5% or Greater
Over the Last 7 Years, in Percentages (%)





 



The Royce Funds 2012 Annual Report to Stockholders  |  11



Royce Micro-Cap Trust

 


AVERAGE ANNUAL NAV TOTAL RETURNS
Through 12/31/12

July-December 20121   10.20 %  

One-Year         17.34    

Three-Year         11.65    

Five-Year         2.15    

10-Year         10.45    

15-Year         8.60    

Since Inception (12/14/93)         10.42    

1 Not annualized  
       
CALENDAR YEAR NAV TOTAL RETURNS  

Year   RMT     Year     RMT    

2012   17.3 %   2004     18.7 %  

2011   -7.7     2003     55.5    

2010   28.5     2002     -13.8    

2009   46.5     2001     23.4    

2008   -45.5     2000     10.9    

2007   0.6     1999     12.7    

2006   22.5     1998     -4.1    

2005   6.8     1997     27.1    

                     
TOP 10 POSITIONS % of Net Assets  

Kennedy-Wilson Holdings   2.0 %  

Integrated Electrical Services   1.6    

Quaker Chemical   1.3    

Virtus Investment Partners   1.3    

Seneca Foods   1.3    

Tennant Company   1.3    

Advisory Board (The)   1.2    

America’s Car-Mart   1.2    

Flexsteel Industries   1.2    

Sapient Corporation   1.2    

                     
PORTFOLIO SECTOR BREAKDOWN % of Net Assets  

Industrials   27.7 %  

Information Technology   24.6    

Financials   17.8    

Consumer Discretionary   10.4    

Materials   9.2    

Health Care   7.7    

Energy   4.1    

Consumer Staples   3.2    

Utilities   0.1    

Miscellaneous   4.5    

Preferred Stock   0.4    

Borrowings Under Revolving Credit Agreement Less Cash and Cash Equivalents   -9.7    

 
 
 

 
Manager’s Discussion
The strong year for micro-cap stocks was reflected in the calendar-year results for Royce Micro-Cap Trust (RMT). The Fund was up 17.3% on an NAV (net asset value) basis and 14.0% on a market price basis in 2012 compared to 16.3% for its unleveraged small-cap benchmark, the Russell 2000 Index, and 19.8% for the unleveraged Russell Microcap Index.
     Stocks as a whole took off fast in 2012, building on a rally that began in early October 2011 and making for a pleasant and bullish opening quarter. The Fund gained 11.4% on an NAV basis and 8.8% on a market price basis compared to a 12.4% increase for its benchmark and a gain of 15.3% for the microcap index. The rally lost steam after small-caps reached a first-half high on March 26, derailed for the third straight year by the same three concerns: sovereign debt in Europe and the pace of economic growth in the U.S. and China. These anxieties drove share prices down through most of the second quarter, with May seeing the largest losses. RMT fell 4.4% on an NAV basis and 3.8% based on its market price in the second quarter. That same period saw the Russell 2000 lose 3.5% while the Russell Microcap lost 2.0%.
     Although the third quarter saw a resumption of bullish behavior, it was a more moderately paced run than what the market enjoyed during the first quarter. After reaching a 2012 low on June 4, share prices crept upward. For the third quarter, the Fund rose 6.8% on an NAV basis and 7.3% on a market price basis compared to a 5.3% increase for the Russell 2000 and a gain of 5.9% for the unleveraged Russell Microcap. The fourth quarter was a bit more volatile as investors tried to sort out the ramifications of Hurricane Sandy, the aftermath of the elections, the potential effects of the fiscal cliff, and a fourth round of quantitative easing. The Russell 2000 was up 1.9% and the Russell Microcap gained 0.04% while the Fund climbed 3.2% on an NAV basis and 1.4% based on market price for the year’s final quarter.
     The Fund’s strong year helped it to build on previous relative advantages over longer-term time frames. From the small-cap trough on March 9, 2009 through December 31, 2012, RMT gained 197.8% on an NAV basis and 214.7% on a market price basis versus a gain of 160.9% for the Russell 2000 and 160.4% for the Russell Microcap. On both an NAV and market price basis, the Fund was ahead of each index for the 10-year period ended December 31, 2012 while it also outperformed the Russell 2000 for the 15-year and since inception (12/14/93) periods as well. (Data for the Russell Microcap only goes back to 2000.) RMT’s NAV average annual total return since inception was 10.4%.
     Eight of the Fund’s nine equity sectors made positive contributions in 2012 while net losses for Energy—the portfolio’s lone detractor—were relatively modest. Financials and Industrials led

  GOOD IDEAS THAT WORKED
  Top Contributors to 2012 Performance1  

Integrated Electrical Services   0.91%

Celsion Corporation   0.90   

Acadia Pharmaceuticals   0.78   

Kennedy-Wilson Holdings   0.66   

Virtus Investment Partners   0.59   

1 Includes dividends    
     
Important Performance and Risk Information
All performance information reflects past performance, is presented on a total return basis, 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.roycefunds.com. Certain immaterial adjustments were made to the net assets of Royce Micro-Cap Trust at 12/31/12 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 investing in a more diversified portfolio of larger-cap companies. Regarding the two “Good Ideas” 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 performance for 2012.

12  |  The Royce Funds 2012 Annual Report to Stockholders



Performance and Portfolio Review


by a sizable margin while Consumer Discretionary, Health Care, and Information Technology also posted notable net gains. In fact, RMT’s underweight in Health Care did not stop the sector from making a meaningful positive impact—two of the Fund’s top three contributors hailed from that sector. Cancer drug developer Celsion Corporation made progress toward FDA approval for its liver cancer treatment ThermoDox, which helped its shares to soar and led us to begin reducing our position in July. During November and December we sold our position in Acadia Pharmaceuticals. Its price shot up late in November after the company announced the success of its drug Pimavanserin in treating psychosis in patients with Parkinson’s disease.
     We also trimmed our stake in top contributor Integrated Electrical Services in October as its price rose. The company provides electrical contracting and maintenance services to the commercial, industrial, residential, and power line markets and also offers data communication services that include the installation of wiring for computer networks and fiber optic telecommunications systems. Its ongoing progress back to profitability seemed to attract investors, especially in the second half.
     The stock price of PMFG, a business we have owned since 1994 in RMT’s portfolio, fell nearly 80% between its early February high and its 2012 low in late November, driven in large part by issuing a secondary offering priced at a sizable discount to its stock. As a manufacturer of custom products primarily for the natural gas industry, the company was also affected by declining gas prices, increased expenses, and project delays, all of which hurt earnings. Still believing in its niche business and increasingly attractive valuation, we increased our stake between February and June. Tough times for the energy industry, disappointing earnings, and insider selling back in March all helped to drive investors away from Dawson Geophysical. The company acquires and processes three-dimensional seismic data used to analyze subsurface geological conditions for potential oil and natural gas reserves. Its margins remained solid, and it boasts what we think is a highly attractive niche business, so we were happy to hold our shares throughout 2012.

  GOOD IDEAS AT THE TIME
  Top Detractors from 2012 Performance1  


PMFG -0.47%

Dawson Geophysical -0.28   

Chelsea Therapeutics International -0.25   

Sapient Corporation -0.24   

ChinaCast Education -0.22   

1 Net of dividends
 
MARKET PRICE PERFORMANCE HISTORY SINCE INCEPTION (12/14/93) through 12/31/12

1 Reflects the cumulative total return of an investment made by a stockholder who purchased one share at inception ($7.50 IPO), reinvested distributions and fully participated in the primary subscription of the 1994 rights offering.

2 Reflects the actual market price of one share as it traded on the NYSE and, prior to 12/1/03, on the Nasdaq.

 
FUND INFORMATION AND PORTFOLIO DIAGNOSTICS

Fund Total Net Assets $319 million   

Number of Holdings 332   

Turnover Rate 28%   

Symbol  
   Market Price RMT   
   NAV XOTCX   

Net Leverage1 10%   

Average Market Capitalization2 $350 million   

Weighted Average P/E Ratio3,4 15.6   

Weighted Average P/B Ratio3 1.4x   

U.S. Investments (% of Net Assets) 96.6%   

Non-U.S. Investments (% of Net Assets) 13.1%   

1 Net leverage is the percentage, in excess of 100%, of the total value of equity type investments, divided by net assets.

2  Geometric 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.

3  Harmonic 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.

4  The Fund’s P/E ratio calculation excludes companies with zero or negative earnings (25% of portfolio holdings as of 12/31/12).

 

DOWN MARKET PERFORMANCE COMPARISON
All Down Periods of 7.5% or Greater
Over the Last 7 Years, in Percentages (%)





 



The Royce Funds 2012 Annual Report to Stockholders  |  13



Royce Focus Trust

 


AVERAGE ANNUAL NAV TOTAL RETURNS
Through 12/31/12

July-December 20121   11.50 %  

One-Year         11.42    

Three-Year         6.69    

Five-Year         1.38    

10-Year         12.19    

15-Year         9.17    

Since Inception (11/1/96)2         10.04    

1 Not annualized  
2 Royce & Associates assumed investment management responsibility for the Fund on 11/1/96.
       
CALENDAR YEAR NAV TOTAL RETURNS  

Year   FUND     Year     FUND    

2012   11.4 %   2004     29.3 %  

2011   -10.5     2003     54.3    

2010   21.8     2002     -12.5    

2009   54.0     2001     10.0    

2008   -42.7     2000     20.9    

2007   12.2     1999     8.7    

2006   15.8     1998     -6.8    

2005   13.3     1997     20.5    

                     
TOP 10 POSITIONS % of Net Assets  

Western Digital   3.9 %  

Analog Devices   3.3    

Berkshire Hathaway Cl. B   3.3    

Microsoft Corporation   3.3    

Mosaic Company (The)   3.1    

Franklin Resources   3.1    

Helmerich & Payne   2.9    

Exxon Mobil   2.9    

Buckle (The)   2.7    

Apple   2.6    

                     
PORTFOLIO SECTOR BREAKDOWN % of Net Assets  

Materials   29.6 %  

Information Technology   18.1    

Financials   15.9    

Energy   13.1    

Consumer Discretionary   7.5    

Industrials   7.0    

Consumer Staples   4.9    

Health Care   2.0    

Cash and Cash Equivalents   1.9    

 
 
 

 
Manager’s Discussion
We were very pleased with the strong second half turned in by Royce Focus Trust (FUND), even if it was not quite strong enough to give the Fund an advantage over its new benchmark for the calendar year. In 2012, FUND rose 11.4% on an NAV (net asset value) basis and 12.1% on a market price basis versus 17.9% for its new unleveraged benchmark, the Russell 2500 Index, and 16.3% for the similarly unleveraged Russell 2000 Index.
     The year began on a positive note by extending the rally that began off the October 3, 2011 small-cap low. In the bullish first quarter of 2012, the Fund rose 11.0% on an NAV basis and 12.0% on a market price basis. While by each measure these were strong absolute showings, the Fund lagged both the Russell 2500, which was up 13.0%, and the Russell 2000, which rose 12.4%. Any hopes that the nearly six-month bull phase might keep running based on the slowly improving U.S. economy were dashed following an early small-cap high on March 26, 2012. Driving investors away from stocks was another round of macro worries, including anxiety over European debt and currency issues and the strength of the U.S. and Chinese economies. The effect on stock prices was predictably negative, hitting many of the Fund’s most heavily weighted, economically sensitive sectors hardest. The Fund fell 10.0% on an NAV basis and 8.3% on a market price basis in the second quarter, while for the same period the Russell 2500 lost 4.1% and the Russell 2000 fell 3.5%.
     Following the June 4, 2012 small-cap low, the market shook loose of the bear. The Fund’s relative results also began to improve substantially. For the third quarter, FUND climbed 10.1% on an NAV basis and 8.4% on a market price basis, in both cases beating the Russell 2500 (+5.6%) and the Russell 2000 (+5.3%). For most small-cap and mid-cap stocks the fourth quarter was slightly rockier, particularly from mid-September through mid-November. The Fund gave up some ground to both indexes in the fourth quarter, gaining 1.3% in NAV and 0.7% in market price while the Russell 2500 rose 3.1% and the Russell 2000 was up 1.9%. Yet FUND outpaced both indexes for the second half of 2012 on both an NAV (+11.5%) and market price (+9.2%) basis. The Russell 2500 was up 8.8% during this same period, while the Russell 2000 increased 7.2%.
     During the most recent full market cycle period that ran from the previous small-cap peak on July 13, 2007 through the small-cap peak on April 29, 2011, the Fund increased 10.2% on an NAV basis versus 9.2% for its new benchmark and 6.6% for the Russell 2000. On an NAV and market price basis, FUND beat both indexes for the 10-year, 15-year, and

  GOOD IDEAS THAT WORKED
  Top Contributors to 2012 Performance1  

Westlake Chemical   1.68%

Western Digital   1.25   

Franklin Resources   1.02   

Stella-Jones   0.85   

Analog Devices   0.76   

1 Includes dividends    
     
Important Performance and Risk Information
All performance information reflects past performance, is presented on a total return basis, 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.roycefunds.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 normally invests primarily in small-cap companies, which may involve considerably more risk than investing in a more diversified portfolio of larger-cap companies. Regarding the two “Good Ideas” 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 performance for 2012.

14  |  The Royce Funds 2012 Annual Report to Stockholders



Performance and Portfolio Review


since inception of Royce’s management (11/1/96) periods ended December 31, 2012. The Fund’s average annual NAV total return for the since inception of our management period was 10.0%.
     Westlake Chemical manufactures basic chemicals, vinyls, polymers, fabricated building products, plastics, and high-end plastic films used to wrap food. Natural gas is a feedstock for much of what it produces, which gave it a huge cost advantage thanks to slumping gas prices. A founder-controlled business with conservative and intelligent management, we think its ongoing prospects remain very strong, especially in light of the fact that it has yet to see much benefit from the reviving housing industry. We did, however, take gains in August as its stock price was climbing. Top holding Western Digital makes hard drives and related products. Its stock was quite volatile in 2012, though it was relatively more stable in the second half. After announcing in April that its disk prices were lower than they had been at the beginning of the year, its shares tumbled. The company bought back shares in the aftermath, which is nearly always a positive sign to us. The firm’s earnings then surprised on the upside for the next two quarters, giving a boost to its stock price. Liking its ongoing prospects as a leader in its field, we were happy to hold a large position at the end of 2012.
     Major Drilling Group International provides contract drilling services for the metals industry. Although the firm continued to operate profitably, revenue and earnings were hurt as precious metals miners pared back development projects. This in turn seemed to spark fears of a possible decrease in demand for its services. This looked to us like a case of guilt by association, so we built our position in June, August, and September. We have owned shares of steel and scrap metal recycler Schnitzer Steel Industries since 2004. Demand for recycled metals slackened amid the slow pace of growth in the U.S. Excess capacity, lower-than-normal spring scrap flows, and margins compressed from increases in raw materials and transport costs have all driven investors to keep selling while we continued to hold our shares in anticipation of a rebound in global industrial activity that we think will spark demand.

  GOOD IDEAS AT THE TIME
  Top Detractors from 2012 Performance1  


Major Drilling Group International -0.75%

Schnitzer Steel Industries Cl. A -0.60   

Sprott -0.55   

Trican Well Service -0.53   

Newmont Mining -0.48   

1 Net of dividends
 
MARKET PRICE PERFORMANCE HISTORY SINCE INCEPTION (11/1/96)3 through 12/31/12

1 Reflects the cumulative total return experience of a continuous common stockholder who reinvested all distributions and fully participated in the primary subscription of the 2005 rights offering.

2 Reflects the actual market price of one share as it traded on Nasdaq.

3 Royce & Associates assumed investment management responsibility for the Fund on 11/1/96.

 
FUND INFORMATION AND PORTFOLIO DIAGNOSTICS

Fund Total Net Assets $164 million   

Number of Holdings 52   

Turnover Rate 16%   

Symbol  
   Market Price FUND   
   NAV XFUNX   

Average Market Capitalization1 $5,492 million   

Weighted Average P/E Ratio2,3 14.1x   

Weighted Average P/B Ratio2 1.8x   

U.S. Investments (% of Net Assets) 71.4%   

Non-U.S. Investments (% of Net Assets) 26.7%   

1  Geometric 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.

2  Harmonic 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.

3  The Fund’s P/E ratio calculation excludes companies with zero or negative earnings (8% of portfolio holdings as of 12/31/12).

 

DOWN MARKET PERFORMANCE COMPARISON
All Down Periods of 7.5% or Greater
Over the Last 7 Years, in Percentages(%)





 



The Royce Funds 2012 Annual Report to Stockholders  |  15



History Since Inception


The following table details the share accumulations by an initial investor in the Funds who reinvested all distributions and participated fully in primary subscriptions for each of the rights offerings. Full participation in distribution reinvestments and rights offerings can maximize the returns available to a long-term investor. This table should be read in conjunction with the Performance and Portfolio Reviews of the Funds.

      Amount     Purchase           NAV     Market
History
    Invested     Price1     Shares     Value2     Value2
Royce Value Trust
11/26/86     Initial Purchase     $ 10,000     $ 10.000       1,000     $ 9,280     $ 10,000
10/15/87     Distribution $0.30               7.000       42                
12/31/87     Distribution $0.22               7.125       32       8,578       7,250
12/27/88     Distribution $0.51               8.625       63       10,529       9,238
9/22/89     Rights Offering       405       9.000       45                
12/29/89     Distribution $0.52               9.125       67       12,942       11,866
9/24/90     Rights Offering       457       7.375       62                
12/31/90     Distribution $0.32               8.000       52       11,713       11,074
9/23/91     Rights Offering       638       9.375       68                
12/31/91     Distribution $0.61               10.625       82       17,919       15,697
9/25/92     Rights Offering       825       11.000       75                
12/31/92     Distribution $0.90               12.500       114       21,999       20,874
9/27/93     Rights Offering       1,469       13.000       113                
12/31/93     Distribution $1.15               13.000       160       26,603       25,428
10/28/94     Rights Offering       1,103       11.250       98                
12/19/94     Distribution $1.05               11.375       191       27,939       24,905
11/3/95     Rights Offering       1,425       12.500       114                
12/7/95     Distribution $1.29               12.125       253       35,676       31,243
12/6/96     Distribution $1.15               12.250       247       41,213       36,335
1997     Annual distribution total $1.21               15.374       230       52,556       46,814
1998     Annual distribution total $1.54               14.311       347       54,313       47,506
1999     Annual distribution total $1.37               12.616       391       60,653       50,239
2000     Annual distribution total $1.48               13.972       424       70,711       61,648
2001     Annual distribution total $1.49               15.072       437       81,478       73,994
2002     Annual distribution total $1.51               14.903       494       68,770       68,927
1/28/03     Rights Offering       5,600       10.770       520                
2003     Annual distribution total $1.30               14.582       516       106,216       107,339
2004     Annual distribution total $1.55               17.604       568       128,955       139,094
2005     Annual distribution total $1.61               18.739       604       139,808       148,773
2006     Annual distribution total $1.78               19.696       693       167,063       179,945
2007     Annual distribution total $1.85               19.687       787       175,469       165,158
2008     Annual distribution total $1.723               12.307       1,294       95,415       85,435
3/11/09     Distribution $0.323               6.071       537       137,966       115,669
12/2/10     Distribution $0.03               13.850       23       179,730       156,203
2011     Annual distribution total $0.783               13.043       656       161,638       139,866
2012     Annual distribution total $0.80               13.063       714                
 
12/31/12           $ 21,922               12,113     $ 186,540     $ 162,556
 

1  The purchase price used for annual distribution totals is a weighted average of the distribution reinvestment prices for the year.

2  Other than for initial purchase, values are stated as of December 31 of the year indicated, after reinvestment of distributions.

3  Includes a return of capital.



16  |  The Royce Funds 2012 Annual Report to Stockholders





The following table details the share accumulations by an initial investor in the Funds who reinvested all distributions and participated fully in primary subscriptions for each of the rights offerings. Full participation in distribution reinvestments and rights offerings can maximize the returns available to a long-term investor. This table should be read in conjunction with the Performance and Portfolio Reviews of the Funds.

      Amount     Purchase           NAV     Market
History
    Invested     Price1     Shares     Value2     Value2
Royce Micro-Cap Trust
12/14/93     Initial Purchase     $ 7,500     $ 7.500       1,000     $ 7,250     $ 7,500
10/28/94     Rights Offering       1,400       7.000       200                
12/19/94     Distribution $0.05               6.750       9       9,163       8,462
12/7/95     Distribution $0.36               7.500       58       11,264       10,136
12/6/96     Distribution $0.80               7.625       133       13,132       11,550
12/5/97     Distribution $1.00               10.000       140       16,694       15,593
12/7/98     Distribution $0.29               8.625       52       16,016       14,129
12/6/99     Distribution $0.27               8.781       49       18,051       14,769
12/6/00     Distribution $1.72               8.469       333       20,016       17,026
12/6/01     Distribution $0.57               9.880       114       24,701       21,924
2002     Annual distribution total $0.80               9.518       180       21,297       19,142
2003     Annual distribution total $0.92               10.004       217       33,125       31,311
2004     Annual distribution total $1.33               13.350       257       39,320       41,788
2005     Annual distribution total $1.85               13.848       383       41,969       45,500
2006     Annual distribution total $1.55               14.246       354       51,385       57,647
2007     Annual distribution total $1.35               13.584       357       51,709       45,802
2008     Annual distribution total $1.193               8.237       578       28,205       24,807
3/11/09     Distribution $0.223               4.260       228       41,314       34,212
12/2/10     Distribution $0.08               9.400       40       53,094       45,884
2011     Annual distribution total $0.533               8.773       289       49,014       43,596
2012     Annual distribution total $0.51               9.084       285                
 
12/31/12           $ 8,900               5,256     $ 57,501     $ 49,669
 
Royce Focus Trust
10/31/96     Initial Purchase     $ 4,375     $ 4.375       1,000     $ 5,280     $ 4,375
12/31/96                                     5,520       4,594
12/5/97     Distribution $0.53               5.250       101       6,650       5,574
12/31/98                                     6,199       5,367
12/6/99     Distribution $0.145               4.750       34       6,742       5,356
12/6/00     Distribution $0.34               5.563       69       8,151       6,848
12/6/01     Distribution $0.14               6.010       28       8,969       8,193
12/6/02     Distribution $0.09               5.640       19       7,844       6,956
12/8/03     Distribution $0.62               8.250       94       12,105       11,406
2004     Annual distribution total $1.74               9.325       259       15,639       16,794
5/6/05     Rights offering       2,669       8.340       320                
2005     Annual distribution total $1.21               9.470       249       21,208       20,709
2006     Annual distribution total $1.57               9.860       357       24,668       27,020
2007     Annual distribution total $2.01               9.159       573       27,679       27,834
2008     Annual distribution total $0.473               6.535       228       15,856       15,323
3/11/09     Distribution $0.093               3.830       78       24,408       21,579
12/31/10                                     29,726       25,806
2011     Annual distribution total $0.413               6.894       207       26,614       22,784
2012     Annual distribution total $0.46               6.686       255                
 
12/31/12           $ 7,044               3,871     $ 29,652     $ 25,549
 

1  The purchase price used for annual distribution totals is a weighted average of the distribution reinvestment prices for the year.

2  Other than for initial purchase, values are stated as of December 31 of the year indicated, after reinvestment of distributions.

3  Includes a return of capital.


The Royce Funds 2012 Annual Report to Stockholders  |  17


Distribution Reinvestment and Cash Purchase Options


Why should I reinvest my distributions?
By reinvesting distributions, a stockholder can maintain an undiluted investment in the Fund. The regular reinvestment of distributions has a significant impact on stockholder returns. In contrast, the stockholder who takes distributions in cash is penalized when shares are issued below net asset value to other stockholders.


How does the reinvestment of distributions from the Royce closed-end funds work?
The Funds automatically issue shares in payment of distributions unless you indicate otherwise. The shares are generally issued at the lower of the market price or net asset value on the valuation date.

How does this apply to registered stockholders?
If your shares are registered directly with a Fund, your distributions are automatically reinvested unless you have otherwise instructed the Funds’ transfer agent, Computershare, in writing. A registered stockholder also has the option to receive the distribution in the form of a stock certificate or in cash if Computershare is properly notified.

What if my shares are held by a brokerage firm or a bank?
If your shares are held by a brokerage firm, bank, or other intermediary as the stockholder of record, you should contact your brokerage firm or bank to be certain that it is automatically reinvesting distributions on your behalf. If they are unable to reinvest distributions on your behalf, you should have your shares registered in your name in order to participate.

What other features are available for registered stockholders?
The Distribution Reinvestment and Cash Purchase Plans also allow registered stockholders to make optional cash purchases of shares of a Fund’s common stock directly through Computershare on a monthly basis, and to deposit certificates representing your Fund shares with Computershare for safekeeping. The Funds’ investment adviser is absorbing all commissions on optional cash purchases under the Plans through December 31, 2012.

How do the Plans work for registered stockholders?
Computershare maintains the accounts for registered stockholders in the Plans and sends written confirmation of all transactions in the account. Shares in the account of each participant will be held by Computershare in non-certificated form in the name of the participant, and each participant will be able to vote those shares at a stockholder meeting or by proxy. A participant may also send other stock certificates held by them to Computershare to be held in non-certificated form. There is no service fee charged to participants for reinvesting distributions. If a participant elects to sell shares from a Plan account, Computershare will deduct a $2.50 fee plus brokerage commissions from the sale transaction. If a nominee is the registered owner of your shares, the nominee will maintain the accounts on your behalf.

How can I get more information on the Plans?
You can call an Investor Services Representative at (800) 221-4268 or you can request a copy of the Plan for your Fund from Computershare. All correspondence (including notifications) should be directed to: [Name of Fund] Distribution Reinvestment and Cash Purchase Plan, c/o Computershare, PO Box 43010, Providence, RI 02940-3010, telephone (800) 426-5523.


18  |  The Royce Funds 2012 Annual Report to Stockholders



Royce Value Trust December 31, 2012

 
  Schedule of Investments

    SHARES     VALUE
             

COMMON STOCKS – 105.8%

           
             

Consumer Discretionary – 13.9%

           

Auto Components - 0.4%

           

China XD Plastics 1

  109,700     $ 421,248

Drew Industries

  46,591       1,502,560

Gentex Corporation 2

  97,700       1,838,714

Minth Group

  717,600       829,971
         
            4,592,493
         

Automobiles - 0.6%

           

Thor Industries 2

  77,500       2,900,825

Winnebago Industries 1

  222,500       3,811,425
         
            6,712,250
         

Distributors - 0.9%

           

LKQ Corporation 1

  368,000       7,764,800

Weyco Group

  97,992       2,289,093
         
            10,053,893
         

Diversified Consumer Services - 1.4%

           

Career Education 1

  28,900       101,728

MegaStudy

  39,150       2,885,627

Regis Corporation 2,3

  233,800       3,955,896

Sotheby’s 2

  206,500       6,942,530

Universal Technical Institute

  110,432       1,108,737
         
            14,994,518
         

Hotels, Restaurants & Leisure - 0.4%

           

CEC Entertainment

  64,100       2,127,479

Lotto24 1

  30,900       139,462

WMS Industries 1,2

  120,000       2,100,000
         
            4,366,941
         

Household Durables - 2.7%

           

Blyth

  34,200       531,810

Desarrolladora Homex ADR 1

  14,100       175,968

Ekornes

  125,000       2,084,504

Ethan Allen Interiors

  345,800       8,890,518

Hanssem

  39,100       678,880

Harman International Industries 2,3

  121,400       5,419,296

Mohawk Industries 1,2,3

  122,900       11,118,763
         
            28,899,739
         

Internet & Catalog Retail - 0.5%

           

Manutan International

  53,900       2,391,200

Takkt

  190,000       2,645,215
         
            5,036,415
         

Leisure Equipment & Products - 0.4%

           

Beneteau

  180,000       1,954,824

Shimano

  38,000       2,422,972
         
            4,377,796
         

Media - 1.0%

           

Morningstar 2

  98,900       6,213,887

Pico Far East Holdings

  11,679,000       3,489,994

Television Broadcasts

  135,000       1,013,340
         
            10,717,221
         

Multiline Retail - 0.5%

           

Dollar Tree 1

  22,000       892,320

New World Department Store China

  7,215,700       4,697,120
         
            5,589,440
         

Specialty Retail - 1.7%

           

Ascena Retail Group 1,2

  89,900       1,662,251

Christopher & Banks 1

  43,700       238,165

Dickson Concepts (International)

  934,300       497,189

Dover Saddlery 1

  17,821       58,809

GameStop Corporation Cl. A 2

  32,400       812,916

Guess? 2

  32,400       795,096

Lewis Group

  350,000       2,854,939

L’Occitane International

  100,000       317,989

Luk Fook Holdings (International)

  231,200       741,939

Men’s Wearhouse (The) 2

  44,700       1,392,852

Oriental Watch Holdings

  407,600       143,513

OSIM International

  1,400,000       1,990,669

Sa Sa International Holdings

  800,000       661,711

Stein Mart

  167,800       1,265,212

Systemax

  194,000       1,872,100

TravelCenters of America LLC 1

  27,600       129,720

USS

  12,000       1,243,854

West Marine 1

  131,100       1,409,325

Wet Seal (The) Cl. A 1

  75,200       207,552
         
            18,295,801
         

Textiles, Apparel & Luxury Goods - 3.4%

           

Anta Sports Products

  1,713,200       1,531,566

Carter’s 1,2,3

  204,100       11,358,165

Columbia Sportswear 2,3

  31,197       1,664,672

Daphne International Holdings

  1,660,100       2,299,653

Gildan Activewear

  20,000       731,600

Grendene

  250,000       2,025,886

J.G. Boswell Company 4

  2,292       1,870,249

K-Swiss Cl. A 1

  163,600       549,696

Pacific Textiles Holdings

  5,571,000       5,040,501

PVH

  4,600       510,646

Stella International Holdings

  633,700       1,717,839

Texwinca Holdings

  1,830,300       1,748,086

Van de Velde

  30,000       1,356,683

Wolverine World Wide 2

  100,000       4,098,000
         
            36,503,242
         

Total (Cost $115,105,364)

          150,139,749
         
             

Consumer Staples – 2.1%

           

Beverages - 0.0%

           

MGP Ingredients

  127,400       435,708
         

Food & Staples Retailing - 0.3%

           

FamilyMart

  76,000       3,128,478
         

Food Products - 1.8%

           

Alico

  27,000       989,010

Cal-Maine Foods

  28,248       1,136,135

First Resources

  307,100       511,588

Industrias Bachoco ADR

  3,000       83,760

Origin Agritech 1

  76,800       106,752

Seneca Foods Cl. A 1

  110,000       3,344,000

Seneca Foods Cl. B 1

  13,251       397,398

Super Group

  590,000       1,570,516

Tootsie Roll Industries

  322,058       8,347,743

Waterloo Investment Holdings 1,5

  598,676       87,526

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.   2012 Annual Report to Stockholders  |  19



Royce Value Trust

 
  Schedule of Investments

    SHARES     VALUE
             
Consumer Staples (continued)            
Food Products (continued)            

Westway Group

  380,000     $ 2,534,600
         
            19,109,028
         

Total (Cost $18,927,929)

          22,673,214
         

Diversified Investment Companies – 0.4%

           

Closed-End Funds - 0.4%

           

Central Fund of Canada Cl. A 2,3

  226,000       4,752,780
         

Total (Cost $2,031,251)

          4,752,780
         

Energy – 5.1%

           

Energy Equipment & Services - 4.4%

           

Cal Dive International 1

  456,250       789,312

CARBO Ceramics 2,3

  8,000       626,720

Ensign Energy Services

  225,100       3,478,222

Heckmann Corporation 1,2,3

  50,000       201,500

Helmerich & Payne 2,3

  125,100       7,006,851

ION Geophysical 1

  361,500       2,353,365

Oil States International 1,2,3

  103,823       7,427,497

Pason Systems

  105,800       1,824,138

SEACOR Holdings 2

  92,866       7,782,171

ShawCor Cl. A

  54,300       2,128,438

Steel Excel 1,4

  156,880       3,890,624

Superior Energy Services 1,2

  77,600       1,607,872

TETRA Technologies 1,2

  68,000       516,120

TGS-NOPEC Geophysical

  40,000       1,310,812

Tidewater

  36,000       1,608,480

Trican Well Service

  263,000       3,468,945

Unit Corporation 1

  34,000       1,531,700
         
            47,552,767
         

Oil, Gas & Consumable Fuels - 0.7%

           

Africa Oil 1

  74,800       525,638

Bill Barrett 1,2

  50,000       889,500

Cimarex Energy 2

  61,300       3,538,849

Green Plains Renewable Energy 1

  82,000       648,620

Resolute Energy 1,2

  201,134       1,635,219

VAALCO Energy 1,2

  33,300       288,045
         
            7,525,871
         

Total (Cost $47,035,152)

          55,078,638
         

Financials – 17.8%

           

Capital Markets - 9.0%

           

Affiliated Managers Group 1,2,3

  42,200       5,492,330

AllianceBernstein Holding L.P. 2

  514,600       8,969,478

AP Alternative Assets L.P. 1

  233,200       3,458,733

Artio Global Investors Cl. A

  433,000       822,700

ASA Gold and Precious Metals

  117,501       2,529,797

Ashmore Group

  831,000       4,805,107

Cowen Group 1

  1,274,458       3,122,422

Dubai Investments

  8,900,000       2,073,850

Eaton Vance 2

  85,300       2,716,805

Egyptian Financial Group-Hermes Holding Company 1

  51,625       89,451

FBR & Co. 1

  576,200       2,229,894

Federated Investors Cl. B 2,3

  224,700       4,545,681

GAMCO Investors Cl. A

  80,575       4,276,115

GFI Group 2

  166,247       538,640

GIMV

  35,000       1,759,934

Gleacher & Company 1

  200,000       150,000

Jupiter Fund Management

  75,000       348,103

KKR & Co. L.P.

  415,000       6,320,450

Lazard Cl. A

  206,100       6,150,024

MVC Capital

  254,200       3,088,530

Oppenheimer Holdings Cl. A

  75,000       1,295,250

Paris Orleans

  226,496       5,171,501

Partners Group Holding

  11,200       2,586,881

Reinet Investments 1

  164,948       3,008,098

Reinet Investments DR 1

  500,000       930,652

SEI Investments

  323,100       7,541,154

Sprott

  370,600       1,475,396

Value Partners Group

  7,071,900       4,747,299

VZ Holding

  5,984       754,759

Waddell & Reed Financial Cl. A 2

  139,300       4,850,426

Westwood Holdings Group

  23,460       959,514
         
            96,808,974
         

Commercial Banks - 1.8%

           

Bank of N.T. Butterfield & Son 1

  1,784,161       2,230,201

BCB Holdings 1

  598,676       211,523

Farmers & Merchants Bank of Long Beach

  1,200       5,172,000

Fauquier Bankshares

  160,800       1,913,520

First Citizens BancShares Cl. A

  45,527       7,443,665

Mechanics Bank

  200       2,150,000
         
            19,120,909
         

Diversified Financial Services - 1.3%

           

Banca Finnat Euramerica

  1,060,000       376,952

Leucadia National

  38,300       911,157

PICO Holdings 1

  67,500       1,368,225

RHJ International 1

  622,500       3,272,454

Sofina

  89,000       8,061,573
         
            13,990,361
         

Insurance - 3.1%

           

Alleghany Corporation 1,2

  8,999       3,018,444

Argo Group International Holdings 2

  18,200       611,338

E-L Financial

  20,900       9,139,942

Erie Indemnity Cl. A 2

  50,000       3,461,000

Independence Holding

  349,423       3,326,507

Platinum Underwriters Holdings

  161,900       7,447,400

Primerica

  170,000       5,101,700

ProAssurance Corporation

  44,000       1,856,360
         
            33,962,691
         

Real Estate Investment Trusts (REITs) - 0.0%

           

Vestin Realty Mortgage II 1

  214,230       314,918
         

Real Estate Management & Development - 2.2%

           

CBRE Group Cl. A 1,2

  24,200       481,580

Consolidated-Tomoka Land

  63,564       1,971,120

E-House China Holdings ADR

  585,161       2,399,160

Forestar Group 1,2

  222,000       3,847,260

20  |  2012 Annual Report to Stockholders   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.



December 31, 2012

 
  

    SHARES     VALUE
             
Financials (continued)            
Real Estate Management & Development (continued)            

Kennedy-Wilson Holdings

  191,000     $ 2,670,180

Midland Holdings

  2,398,600       1,164,775

St. Joe Company (The) 1,2,3

  167,000       3,854,360

Tejon Ranch 1

  279,900       7,859,592
         
            24,248,027
         

Thrifts & Mortgage Finance - 0.4%

           

CFS Bancorp

  150,000       936,000

Kearny Financial

  70,862       690,904

Timberland Bancorp 1,6

  444,200       3,082,748
         
            4,709,652
         

Total (Cost $200,748,625)

          193,155,532
         
             

Health Care – 6.5%

           

Biotechnology - 0.1%

           

Green Cross

  5,000       647,779
         

Health Care Equipment & Supplies - 2.2%

           

Allied Healthcare Products 1

  140,512       369,547

Analogic Corporation 2

  40,135       2,982,030

Atrion Corporation

  15,750       3,087,000

bioMerieux

  17,000       1,643,232

Carl Zeiss Meditec

  55,000       1,580,183

CONMED Corporation

  81,500       2,277,925

DiaSorin

  50,000       2,005,590

DynaVox Cl. A 1

  55,000       20,350

IDEXX Laboratories 1,2

  40,201       3,730,653

Kossan Rubber Industries

  647,568       711,365

Nihon Kohden

  25,100       761,049

Straumann Holding

  10,000       1,235,985

Top Glove

  375,000       691,512

Urologix 1

  142,648       97,001

Young Innovations

  66,447       2,618,676
         
            23,812,098
         

Health Care Providers & Services - 0.9%

           

Accretive Health 1

  160,000       1,849,600

Landauer 2

  75,500       4,621,355

MWI Veterinary Supply 1,2

  10,000       1,100,000

VCA Antech 1,2

  82,500       1,736,625

WellCare Health Plans 1

  15,400       749,826
         
            10,057,406
         

Life Sciences Tools & Services - 1.9%

           

Bio-Rad Laboratories Cl. A 1

  21,388       2,246,809

EPS Corporation

  612       1,568,052

Furiex Pharmaceuticals 1

  8,333       160,494

ICON ADR 1

  43,963       1,220,413

Luminex Corporation 1

  20,000       335,200

PAREXEL International 1

  312,400       9,243,916

PerkinElmer 2,3

  185,800       5,897,292
         
            20,672,176
         

Pharmaceuticals - 1.4%

           

Adcock Ingram Holdings

  300,000       1,911,099

Almirall

  200,000       1,964,882

Boiron

  55,000       1,897,321

Kalbe Farma

  4,000,000       441,704

Recordati

  300,000       2,748,609

Santen Pharmaceutical

  61,000       2,335,482

Vetoquinol

  50,000       1,753,108

Virbac

  10,000       1,977,333
         
            15,029,538
         

Total (Cost $43,447,204)

          70,218,997
         
             

Industrials – 27.8%

           

Aerospace & Defense - 1.8%

           

AeroVironment 1

  13,000       282,620

Alliant Techsystems 2

  8,000       495,680

Cubic Corporation

  11,800       566,046

Ducommun 1

  117,200       1,895,124

HEICO Corporation 2,3

  210,351       9,415,311

HEICO Corporation Cl. A

  64,647       2,067,411

Hexcel Corporation 1

  47,500       1,280,600

Moog Cl. A 1

  25,000       1,025,750

National Presto Industries

  3,000       207,300

Teledyne Technologies 1

  43,630       2,839,004
         
            20,074,846
         

Air Freight & Logistics - 1.4%

           

Forward Air

  209,750       7,343,348

Hub Group Cl. A 1,2,3

  149,400       5,019,840

UTi Worldwide

  175,000       2,345,000
         
            14,708,188
         

Building Products - 1.4%

           

American Woodmark 1

  123,335       3,431,180

Apogee Enterprises 2

  78,400       1,879,248

Burnham Holdings Cl. B 4

  36,000       507,600

Simpson Manufacturing

  275,300       9,027,087
         
            14,845,115
         

Commercial Services & Supplies - 2.5%

           

Brink’s Company (The)

  206,320       5,886,309

CompX International Cl. A

  185,300       2,581,229

Copart 1

  149,780       4,418,510

Kimball International Cl. B

  286,180       3,322,550

Moshi Moshi Hotline

  23,900       304,623

Ritchie Bros. Auctioneers 2,3

  297,800       6,221,042

Sykes Enterprises 1

  68,649       1,044,838

Tetra Tech 1

  119,900       3,171,355

TMS International Cl. A 1

  45,500       569,660
         
            27,520,116
         

Construction & Engineering - 1.8%

           

EMCOR Group

  199,400       6,901,234

Integrated Electrical Services 1

  266,349       1,241,186

Jacobs Engineering Group 1,2

  81,400       3,465,198

KBR

  180,000       5,385,600

MYR Group 1,2

  25,900       576,275

Raubex Group

  750,000       1,500,104
         
            19,069,597
         

Electrical Equipment - 3.1%

           

AZZ

  53,099       2,040,594

Belden

  57,800       2,600,422

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.   2012 Annual Report to Stockholders  |  21




Royce Value Trust

 
  Schedule of Investments

    SHARES     VALUE
             
Industrials (continued)            
Electrical Equipment (continued)            

Elektrobudowa

  16,392     $ 556,257

Franklin Electric

  104,600       6,502,982

GrafTech International 1

  590,587       5,545,612

Hubbell Cl. B 2

  7,000       592,410

Powell Industries 1

  92,400       3,837,372

Preformed Line Products

  91,600       5,442,872

Regal-Beloit

  100,000       7,047,000
         
            34,165,521
         

Industrial Conglomerates - 0.5%

           

Carlisle Companies 2

  10,400       611,104

Raven Industries 2

  199,000       5,245,640
         
            5,856,744
         

Machinery - 10.1%

           

Armstrong Industrial

  1,514,500       326,656

Astec Industries

  46,500       1,549,845

Burckhardt Compression Holding

  14,400       4,722,953

Chen Hsong Holdings

  1,615,000       493,456

CLARCOR 2

  92,500       4,419,650

Columbus McKinnon 1

  110,800       1,830,416

Donaldson Company 2,3

  185,600       6,095,104

EVA Precision Industrial Holdings

  3,476,000       576,067

FAG Bearings India

  29,500       923,579

Gardner Denver

  10,300       705,550

Graco

  116,376       5,992,200

IDEX Corporation

  67,400       3,136,122

Kennametal 2,3

  213,300       8,532,000

Lincoln Electric Holdings

  223,060       10,858,561

NN 1

  197,100       1,805,436

Nordson Corporation

  169,996       10,730,148

Pfeiffer Vacuum Technology

  17,000       2,058,527

PMFG 1

  388,352       3,530,120

Rational

  7,000       2,015,989

RBC Bearings 1

  47,000       2,353,290

Rotork

  30,000       1,244,131

Semperit AG Holding

  84,000       3,462,134

Spirax-Sarco Engineering

  65,000       2,443,806

Sun Hydraulics

  8,600       224,288

Timken Company (The)

  9,400       449,602

Valmont Industries

  44,500       6,076,475

WABCO Holdings 1

  103,800       6,766,722

Wabtec Corporation

  87,725       7,679,446

Woodward 2,3

  208,400       7,946,292
         
            108,948,565
         

Marine - 0.5%

           

Kirby Corporation 1,2

  80,000       4,951,200
         

Professional Services - 2.8%

           

Advisory Board (The) 1,2,3

  231,200       10,817,848

CRA International 1

  64,187       1,268,977

FTI Consulting 1,2

  7,850       259,050

JobStreet Corporation

  723,400       520,431

ManpowerGroup

  78,600       3,335,784

Michael Page International

  325,000       2,099,068

On Assignment 1

  375,400       7,613,112

Robert Half International

  136,100       4,330,702
         
            30,244,972
         

Road & Rail - 1.2%

           

Frozen Food Express Industries 1

  286,635       255,105

Landstar System 2

  99,400       5,214,524

Patriot Transportation Holding 1

  212,958       6,054,396

Universal Truckload Services

  55,000       1,003,750
         
            12,527,775
         

Trading Companies & Distributors - 0.6%

           

AerCap Holdings 1

  45,000       617,400

Lawson Products

  161,431       1,598,167

MSC Industrial Direct Cl. A 2

  59,548       4,488,728
         
            6,704,295
         

Transportation Infrastructure - 0.1%

           

Wesco Aircraft Holdings 1

  68,400       903,564
         

Total (Cost $167,135,935)

          300,520,498
         
             

Information Technology – 19.6%

           

Communications Equipment - 1.6%

           

AAC Technologies Holdings

  177,600       625,662

Acme Packet 1,2,3

  121,000       2,676,520

ADTRAN 2,3

  187,700       3,667,658

Bel Fuse Cl. A

  36,672       631,125

Cogo Group 1

  87,715       190,342

Comba Telecom Systems Holdings

  997,728       367,811

Comtech Telecommunications 2

  30,000       761,400

EVS Broadcast Equipment

  35,000       2,064,860

Globecomm Systems 1

  183,700       2,075,810

Sonus Networks 1

  1,124,000       1,910,800

Tellabs

  700,000       1,596,000

VTech Holdings

  47,050       528,645
         
            17,096,633
         

Computers & Peripherals - 0.9%

           

Asustek Computer

  50,000       564,587

Catcher Technology

  84,600       423,410

China Digital TV Holding Co. ADR

  5,000       8,400

Diebold

  151,600       4,640,476

Foxconn Technology

  85,155       268,152

Intermec 1

  23,000       226,780

Intevac 1

  57,450       262,547

QLogic Corporation 1

  24,100       234,493

Seagate Technology 2

  10,400       316,992

Simplo Technology

  104,630       528,489

SMART Technologies Cl. A 1

  75,000       118,500

STEC 1

  375,500       1,851,215

Western Digital 2

  10,400       441,896
         
            9,885,937
         

Electronic Equipment, Instruments & Components - 8.7%

           

Agilysys 1

  165,125       1,382,096

Anixter International 2

  61,795       3,953,644

Benchmark Electronics 1,2

  165,200       2,745,624

Broadway Industrial Group

  945,600       241,287

Chroma Ate

  269,982       601,004

22  |  2012 Annual Report to Stockholders   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.



December 31, 2012

 
  

    SHARES     VALUE
             
Information Technology (continued)            
Electronic Equipment, Instruments & Components (continued)            

Cognex Corporation

  179,900     $ 6,623,918

Coherent

  219,500       11,111,090

Dolby Laboratories Cl. A 2

  149,600       4,387,768

DTS 1

  207,000       3,456,900

FARO Technologies 1,2

  32,300       1,152,464

FEI Company 2

  93,200       5,168,872

FLIR Systems

  246,000       5,488,260

Hana Microelectronics

  708,100       529,108

Hollysys Automation Technologies 1

  63,927       758,813

Inficon Holding

  1,100       263,804

IPG Photonics 2

  64,420       4,293,593

Molex 2

  72,600       1,984,158

National Instruments

  251,850       6,500,249

Newport Corporation 1

  523,500       7,041,075

Perceptron

  357,700       2,110,430

Plexus Corporation 1

  176,100       4,543,380

Richardson Electronics

  333,912       3,779,884

Rofin-Sinar Technologies 1

  305,400       6,621,072

Tech Data 1,2,3

  91,300       4,156,889

TTM Technologies 1,2

  211,400       1,944,880

Vaisala Cl. A

  161,680       3,396,064
         
            94,236,326
         

Internet Software & Services - 0.9%

           

Active Network 1

  21,500       105,565

Perficient 1

  10,000       117,800

RealNetworks 1

  61,350       463,806

ValueClick 1

  145,000       2,814,450

VistaPrint 1,2,3

  187,000       6,144,820
         
            9,646,441
         

IT Services - 2.5%

           

Convergys Corporation

  121,000       1,985,610

CSE Global

  1,792,100       1,154,241

eClerx Services

  35,900       449,784

Forrester Research 2

  20,100       538,680

Hackett Group

  655,000       2,803,400

ManTech International Cl. A

  35,400       918,276

MAXIMUS

  94,200       5,955,324

MoneyGram International 1,2

  164,962       2,192,345

NeuStar Cl. A 1

  39,287       1,647,304

Sapient Corporation 1

  706,602       7,461,717

Unisys Corporation 1

  94,000       1,626,200
         
            26,732,881
         

Office Electronics - 0.1%

           

Zebra Technologies Cl. A 1,2

  23,058       905,718
         

Semiconductors & Semiconductor Equipment - 3.3%

           

Aixtron ADR

  88,258       1,054,683

Analog Devices 2

  11,200       471,072

ASM Pacific Technology

  15,000       184,128

ATMI 1

  92,215       1,925,449

BE Semiconductor Industries 4

  58,000       429,200

Cabot Microelectronics

  35,209       1,250,272

Diodes 1

  252,450       4,380,008

Exar Corporation 1

  157,576       1,402,426

Integrated Silicon Solution 1

  180,200       1,621,800

International Rectifier 1

  330,000       5,850,900

Intersil Corporation Cl. A 2

  190,000       1,575,100

Miraial

  26,170       492,972

Nanometrics 1,2

  159,400       2,298,548

Power Integrations 2

  49,000       1,646,890

RDA Microelectronics ADR

  94,800       1,019,100

Teradyne 1,2,3

  287,200       4,850,808

TriQuint Semiconductor 1

  670,000       3,242,800

Veeco Instruments 1,2

  88,000       2,597,760
         
            36,293,916
         

Software - 1.6%

           

ACI Worldwide 1,2,3

  131,150       5,729,943

ANSYS 1,2,3

  105,600       7,111,104

Aspen Technology 1

  42,100       1,163,644

Blackbaud 2

  31,400       716,862

Majesco Entertainment 1

  36,255       38,068

SimCorp

  10,000       2,238,521
         
            16,998,142
         

Total (Cost $184,774,858)

          211,795,994
         

Materials – 8.1%

           

Chemicals - 1.7%

           

Cabot Corporation 2,3

  67,200       2,673,888

Hawkins

  86,178       3,329,918

Huchems Fine Chemical

  40,056       968,496

Intrepid Potash 2

  131,766       2,805,298

KMG Chemicals

  33,274       584,624

LSB Industries 1

  49,849       1,765,652

Minerals Technologies 2

  57,860       2,309,771

Mosaic Company (The) 2

  16,000       906,080

Victrex

  85,000       2,293,983

W.R. Grace & Co. 1,2

  17,200       1,156,356
         
            18,794,066
         

Construction Materials - 0.9%

           

Ash Grove Cement Cl. B 4

  50,518       7,628,218

Cemex ADR 1,2

  30,000       296,100

Mardin Cimento Sanayii

  500,000       1,496,783
         
            9,421,101
         

Containers & Packaging - 1.1%

           

Greif Cl. A 2

  90,844       4,042,558

Mayr-Melnhof Karton

  70,000       7,508,986
         
            11,551,544
         

Metals & Mining - 4.4%

           

Allied Nevada Gold 1,2

  23,600       711,068

AuRico Gold 1

  258,300       2,112,894

Central Steel & Wire 4

  6,062       4,032,745

Cliffs Natural Resources

  22,300       859,888

Endeavour Mining 1

  300,000       624,309

Fresnillo

  25,000       775,720

Globe Specialty Metals

  45,600       627,000

Hecla Mining

  300,000       1,749,000

Hochschild Mining

  250,000       1,942,513

Kimber Resources 1

  560,000       212,800

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.   2012 Annual Report to Stockholders  |  23




Royce Value Trust December 31, 2012

 
  Schedule of Investments

    SHARES     VALUE
             
Materials (continued)              
Metals & Mining (continued)              

Maharashtra Seamless

  330,000     $ 1,627,119  

Major Drilling Group International

  399,600       3,936,946  

Medusa Mining

  250,000       1,441,982  

Pretium Resources 1

  39,000       515,190  

Randgold Resources ADR

  33,000       3,275,250  

Reliance Steel & Aluminum 2,3

  160,720       9,980,712  

Schnitzer Steel Industries Cl. A 2

  100,000       3,033,000  

Silvercorp Metals 2

  116,500       596,480  

Sims Metal Management ADR

  219,167       2,160,987  

Synalloy Corporation

  178,800       2,345,856  

Worthington Industries

  185,000       4,808,150  
         
 
            47,369,609  
         
 
Paper & Forest Products - 0.0%              

Qunxing Paper Holdings 5

  3,296,000       175,541  
         
 
Total (Cost $70,926,378)           87,311,861  
         
 
Telecommunication Services – 0.7%              
Wireless Telecommunication Services - 0.7%              

Telephone and Data Systems

  338,270       7,489,298  
         
 
Total (Cost $8,279,046)           7,489,298  
         
 
Miscellaneous 7 – 3.8%              
Total (Cost $41,383,240)           41,610,785  
         
 
TOTAL COMMON STOCKS              

(Cost $899,794,982)

          1,144,747,346  
         
 
PREFERRED STOCK – 0.1%              

Seneca Foods Conv. 1,5

             

(Cost $796,469)

  55,000       1,504,800  
         
 
REPURCHASE AGREEMENT – 6.9%              
Fixed Income Clearing Corporation,              

0.10% dated 12/31/12, due 1/2/13,

maturity value $74,647,415 (collateralized

by obligations of various U.S. Government

Agencies, 0.25% due 9/6/13, valued at $76,140,056)

(Cost $74,647,000)

          74,647,000  
         
 
TOTAL INVESTMENTS – 112.8%              

(Cost $975,238,451)

          1,220,899,146  
               
LIABILITIES LESS CASH              

AND OTHER ASSETS – (12.8)%

          (138,472,650 )
         
 
NET ASSETS – 100.0%         $ 1,082,426,496  
         
 


New additions in 2012.
1 Non-income producing.
2

All or a portion of these securities were pledged as collateral in connection with the revolving credit agreement at December 31, 2012. Total market value of pledged securities at December 31, 2012, was $343,415,150.

3

At December 31, 2012, a portion of these securities were rehypothecated in connection with the Fund’s revolving credit agreement in the aggregate amount of $146,902,041.

4

These securities are defined as Level 2 securities due to fair value being based on quoted prices for similar securities. See Notes to Financial Statements.

5

Securities for which market quotations are not readily available represent 0.2% 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.

6

At December 31, 2012, the Fund owned 5% or more of the Company’s outstanding voting securities thereby making the Company an Affiliated Company as that term is defined in the Investment Company Act of 1940. See Notes to Financial Statements.

7

Includes securities first acquired in 2012 and less than 1% of net assets.

   
 

Bold indicates the Fund’s 20 largest equity holdings in terms of December 31, 2012, market value.

   
 

TAX INFORMATION: The cost of total investments for Federal income tax purposes was $971,980,024. At December 31, 2012, net unrealized appreciation for all securities was $248,919,122, consisting of aggregate gross unrealized appreciation of $342,393,387 and aggregate gross unrealized depreciation of $93,474,265. The primary difference between book and tax basis cost is the timing of the recognition of losses on securities sold.



24  |  2012 Annual Report to Stockholders   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.



Royce Value Trust December 31, 2012

 
  Statement of Assets and Liabilities

ASSETS:          
Investments at value          

Non-Affiliated Companies (cost $895,158,885)

    $ 1,143,169,398  

Affiliated Companies (cost $5,432,566)

      3,082,748  
 
Total investments at value       1,146,252,146  
Repurchase agreements (at cost and value)       74,647,000  
Cash and foreign currency       591,935  
Receivable for investments sold       10,598,415  
Receivable for dividends and interest       961,580  
Prepaid expenses and other assets       472,346  
 

Total Assets

      1,233,523,422  
 
LIABILITIES:          
Revolving credit agreement       150,000,000  
Payable for investments purchased       343,091  
Payable for investment advisory fee       476,587  
Payable for interest expense       21,000  
Accrued expenses       256,248  
 

Total Liabilities

      151,096,926  
 

Net Assets

    $ 1,082,426,496  
 
ANALYSIS OF NET ASSETS:          
Paid-in capital - $0.001 par value per share; 70,275,231 shares outstanding (150,000,000 shares authorized)     $ 820,368,882  
Undistributed net investment income (loss)       2,818,184  
Accumulated net realized gain (loss) on investments and foreign currency       13,591,177  
Net unrealized appreciation (depreciation) on investments and foreign currency       245,648,253  
 

Net Assets (net asset value per share - $15.40)

    $ 1,082,426,496  
 

Investments at identified cost

    $ 900,591,451  

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.   2012 Annual Report to Stockholders  |  25




Royce Value Trust Year Ended December 31, 2012

 
  Statement of Operations

INVESTMENT INCOME:          
Income:          

Dividends 1

    $ 22,870,207  

Interest

      105,418  

Rehypothecation income

      38,430  

Securities lending

      526,743  
 
Total income       23,540,798  
 
Expenses:          

Investment advisory fees

      5,838,929  

Stockholder reports

      403,494  

Custody and transfer agent fees

      345,803  

Interest expense

      252,048  

Administrative and office facilities

      149,691  

Professional fees

      145,456  

Directors’ fees

      129,647  

Other expenses

      118,684  
 

Total expenses

      7,383,752  

Compensating balance credits

      (71 )

Fees waived by investment adviser

      (50,000 )
 

Net expenses

      7,333,681  
 

Net investment income (loss)

      16,207,117  
 

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:

         

Net realized gain (loss):

         

Investments

      63,037,316  

Foreign currency transactions

      (139,763 )

Net change in unrealized appreciation (depreciation):

         

Investments and foreign currency translations

      75,703,358  

Other assets and liabilities denominated in foreign currency

      (476 )
 

Net realized and unrealized gain (loss) on investments and foreign currency

      138,600,435  
 

NET INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS

      154,807,552  
 

DISTRIBUTIONS TO PREFERRED STOCKHOLDERS

      (11,357,495 )
 

NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS

         

FROM INVESTMENT OPERATIONS

    $ 143,450,057  

1 Net of foreign withholding tax of $620,073.

26  |  2012 Annual Report to Stockholders   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.



Royce Value Trust

 
  Statement of Changes in Net Assets Applicable to Common Stockholders

    Year ended   Year ended
    12/31/12   12/31/11

INVESTMENT OPERATIONS:

                   

Net investment income (loss)

    $ 16,207,117       $ 6,739,838  

Net realized gain (loss) on investments and foreign currency

      62,897,553         35,713,778  

Net change in unrealized appreciation (depreciation) on investments and foreign currency

      75,702,882         (143,670,265 )
 

Net increase (decrease) in net assets from investment operations

      154,807,552         (101,216,649 )
 

DISTRIBUTIONS TO PREFERRED STOCKHOLDERS:

                   

Net investment income

      (2,356,525 )       (2,024,508 )

Net realized gain on investments and foreign currency

      (9,000,970 )       (10,955,492 )
 

Total distributions to Preferred Stockholders

      (11,357,495 )       (12,980,000 )
 

NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS

                   

FROM INVESTMENT OPERATIONS

      143,450,057         (114,196,649 )
 

DISTRIBUTIONS TO COMMON STOCKHOLDERS:

                   

Net investment income

      (11,444,608 )       (5,275,650 )

Net realized gain on investments and foreign currency

      (43,713,673 )       (28,548,829 )

Return of capital

              (18,288,444 )
 

Total distributions to Common Stockholders

      (55,158,281 )       (52,112,923 )
 

CAPITAL STOCK TRANSACTIONS:

                   

Reinvestment of distributions to Common Stockholders

      27,494,847         27,070,308  
 

Total capital stock transactions

      27,494,847         27,070,308  
 

NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS

      115,786,623         (139,239,264 )
 

NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS:

                   

Beginning of year

      966,639,873         1,105,879,137  
 

End of year (including undistributed net investment income (loss) of $2,818,184 at 12/31/12 and

                   

$2,529,467 at 12/31/11)

    $ 1,082,426,496       $ 966,639,873  


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.   2012 Annual Report to Stockholders  |  27



Royce Value Trust  

 
  Statement of Cash Flows

CASH FLOWS FROM OPERATING ACTIVITIES:          

Net increase (decrease) in net assets from investment operations

    $ 154,807,552  

Adjustments to reconcile net increase (decrease) in net assets from operations to net cash provided by operating activities:

         

Purchases of long-term investments

      (297,587,829 )

Proceeds from sales and maturities of long-term investments

      381,488,198  

Net purchases, sales and maturities of short-term investments

      9,436,000  

Net (increase) decrease in dividends and interest receivable and other assets

      228,801  

Net increase (decrease) in interest expense payable, accrued expenses and other liabilities

      (28,453 )

Net change in unrealized appreciation (depreciation) on investments

      (75,703,358 )

Net realized gain on investments and foreign currency

      (62,897,553 )
 

Cash provided by operating activities

      109,743,358  
 

CASH FLOW FROM FINANCING ACTIVITIES:

         

Net increase (decrease) in revolving credit agreement

      150,000,000  

Liquidation of Preferred Stock

      (220,000,000 )

Distributions paid to Preferred Stockholders

      (11,645,944 )

Distributions paid to Common Stockholders

      (55,158,281 )

Reinvestment of distributions to Common Stockholders

      27,494,847  
 

Cash used for financing activities

      (109,309,378 )
 

INCREASE (DECREASE) IN CASH:

      433,980  
 

Cash and foreign currency at beginning of year

      157,955  
 

Cash and foreign currency at end of year

    $ 591,935  

28  |  2012 Annual Report to Stockholders   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.



Royce Value Trust

 
  Financial Highlights

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

    Years ended December 31,
     
    2012   2011   2010   2009   2008
 
NET ASSET VALUE, BEGINNING OF PERIOD     $ 14.18       $ 16.73       $ 12.87       $ 9.37       $ 19.74  
 
INVESTMENT OPERATIONS:                                                  

Net investment income (loss)

      0.23         0.10         0.24         0.17         0.14  

Net realized and unrealized gain (loss) on investments and foreign currency

      2.02         (1.62 )       3.85         3.87         (8.50 )
 

Total investment operations

      2.25         (1.52 )       4.09         4.04         (8.36 )
 
DISTRIBUTIONS TO PREFERRED STOCKHOLDERS:                                                  

Net investment income

      (0.04 )       (0.03 )       (0.20 )       (0.18 )       (0.01 )

Net realized gain on investments and foreign currency

      (0.13 )       (0.16 )       –              –              (0.20 )

Return of capital

      –              –              –              (0.02 )       –       
 

Total distributions to Preferred Stockholders

      (0.17 )       (0.19 )       (0.20 )       (0.20 )       (0.21 )
 

NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS FROM INVESTMENT OPERATIONS

      2.08         (1.71 )       3.89         3.84         (8.57 )
 
DISTRIBUTIONS TO COMMON STOCKHOLDERS:                                                  

Net investment income

      (0.17 )       (0.08 )       (0.03 )       –              (0.06 )

Net realized gain on investments and foreign currency

      (0.63 )       (0.43 )       –              –              (1.18 )

Return of capital

      –              (0.27 )       –              (0.32 )       (0.48 )
 

Total distributions to Common Stockholders

      (0.80 )       (0.78 )       (0.03 )       (0.32 )       (1.72 )
 
CAPITAL STOCK TRANSACTIONS:                                                  

Effect of reinvestment of distributions by Common Stockholders

      (0.06 )       (0.06 )       (0.00 )       (0.02 )       (0.08 )
 

Total capital stock transactions

      (0.06 )       (0.06 )       (0.00 )       (0.02 )       (0.08 )
 
NET ASSET VALUE, END OF PERIOD     $ 15.40       $ 14.18       $ 16.73       $ 12.87       $ 9.37  
 
MARKET VALUE, END OF PERIOD     $ 13.42       $ 12.27       $ 14.54       $ 10.79       $ 8.39  
 
TOTAL RETURN:1                                                  
Market Value       16.22 %       (10.46 )%       35.05 %       35.39 %       (48.27 )%
Net Asset Value       15.41 %       (10.06 )%       30.27 %       44.59 %       (45.62 )%

RATIOS BASED ON AVERAGE NET ASSETS APPLICABLE TO

                                                 

COMMON STOCKHOLDERS:

                                                 

Investment advisory fee expense 2

      0.56 %       0.86 %       0.11 %       0.00 %       1.27 %

Other operating expenses

      0.15 %       0.12 %       0.12 %       0.16 %       0.12 %

Total expenses (net) 3

      0.71 %       0.98 %       0.23 %       0.16 %       1.39 %

Expenses net of fee waivers and excluding interest expense

      0.68 %       0.98 %       0.23 %       0.16 %       1.39 %

Expenses prior to fee waivers and balance credits

      0.71 %       0.98 %       0.23 %       0.16 %       1.39 %

Expenses prior to fee waivers

      0.71 %       0.98 %       0.23 %       0.16 %       1.39 %

Net investment income (loss)

      1.57 %       0.63 %       1.69 %       1.66 %       0.94 %

SUPPLEMENTAL DATA:

                                                 

Net Assets Applicable to Common Stockholders,

                                                 

End of Period (in thousands)

    $ 1,082,426       $ 966,640       $ 1,105,879       $ 849,777       $ 603,234  
Liquidation Value of Preferred Stock,                                                  

End of Period (in thousands)

              $ 220,000       $ 220,000       $ 220,000       $ 220,000  

Portfolio Turnover Rate

      25 %       26 %       30 %       31 %       25 %

PREFERRED STOCK:

                                                 

Total shares outstanding

                8,800,000         8,800,000         8,800,000         8,800,000  

Asset coverage per share

              $ 134.88       $ 150.67       $ 121.57       $ 93.55  

Liquidation preference per share

              $ 25.00       $ 25.00       $ 25.00       $ 25.00  

Average month-end market value per share

              $ 25.37       $ 25.06       $ 23.18       $ 22.51  

REVOLVING CREDIT AGREEMENT:

                                                 

Asset coverage

      822 %                                        

Asset coverage per $1,000

    $ 8,216                                          

1

The 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 and sale dates instead of market value.

2

The investment advisory fee is calculated based on average net assets over a rolling 60-month basis, while the above ratios of investment advisory fee expenses are based on the average net assets applicable to Common Stockholders over a 12-month basis.

3

Expense ratios based on total average net assets including liquidation value of Preferred Stock were 0.60%, 0.82%, 0.18%, 0.12% and 1.13% for the years ended December 31, 2012, 2011, 2010, 2009 and 2008, respectively.


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.   2012 Annual Report to Stockholders  |  29



Royce Value Trust

 
  Notes to Financial Statements

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.
     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.

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 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. Level 2 securities with values based on quoted prices for similar securities are 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 December 31, 2012. For a detailed breakout of common stocks by sector classification, please refer to the Schedule of Investments.

    Level 1   Level 2   Level 3   Total
Common Stocks     $ 892,590,687       $ 251,893,592       $ 263,067       $ 1,144,747,346  
Preferred Stocks                       1,504,800         1,504,800  
Cash Equivalents               74,647,000                 74,647,000  

     For the year ended December 31, 2012, certain securities have transferred in and out of Level 1 and Level 2 measurements as a result of the fair value pricing procedures for international equities. The Fund recognizes transfers between levels as of the end of the reporting period. At December 31, 2012, securities valued at $1,328,435 were transferred from Level 2 to Level 1 within the fair value hierarchy.

     Level 3 Reconciliation:
                        Realized and Unrealized          
    Balance as of 12/31/11   Sales   Gain (Loss) 1   Balance as of 12/31/12
Common Stocks     $ 1,701,029       $ 456,781       $ (981,181 )     $ 263,067  
Preferred Stocks       1,278,090                 226,710         1,504,800  

1

The 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.


30  |  2012 Annual Report to Stockholders    



Royce Value Trust

 
  Notes to Financial Statements (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.

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, including investments in securities at the end of the reporting period, as a result of changes in foreign currency exchange rates.

Securities Lending:
     The Fund loans securities through a lending agent to qualified institutional investors for the purpose of realizing additional income. Collateral for the Fund on all securities loaned is accepted in cash and cash equivalents and invested temporarily by the custodian. The collateral maintained is at least 100% of the current market value of the loaned securities. The market value of the loaned securities is determined at the close of business of the Fund and any additional required collateral is delivered to the Fund on the next business day. The Fund retains the risk of any loss on the securities on loan as well as incurring the potential loss on investments purchased with cash collateral received for securities lending. The Fund’s securities lending income consists of the income earned on investing cash collateral, plus any premium payments received for lending certain securities, less any rebates paid to borrowers and lending agent fees associated with the loan. The lending agent is not affiliated with Royce.

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”.

Distributions:
     The Fund pays quarterly distributions on the Fund’s Common Stock at the annual rate of 5% of the rolling average of the prior four calendar quarter-end NAVs of the Fund’s Common Stock, with the fourth quarter distribution being the greater of 1.25% of the rolling average or the distribution required by IRS regulations. Prior to November 15, 2012, distributions to Preferred Stockholders were accrued daily and paid quarterly. Distributions to Common Stockholders are recorded on ex-dividend date. Distributable capital gains and/or net investment income were first allocated to Preferred Stockholder distributions, with any excess allocable to Common Stockholders. If capital gains and/or net investment income are allocated to both Preferred and Common Stockholders, the tax character of such allocations is proportional. To the extent that distributions are not paid from long-term capital gains, net investment income or net short-term capital gains, they will represent a return of capital. Distributions are determined in accordance with income tax regulations that may differ from accounting principles generally accepted in the United States of America. Permanent book and tax differences relating to stockholder distributions will result in reclassifications within the capital accounts. 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 undistributed at fiscal year end is distributed in the following year.

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. Premium 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 Royce Funds are allocated by Royce & Associates, LLC (“Royce”) under an administration agreement and are included in administrative and office facilities and professional fees. The Fund has adopted a deferred fee agreement that allows the Directors to defer the receipt of all or a portion of directors’ fees otherwise payable. The deferred fees are invested in certain Royce Funds until distributed in accordance with the agreement.

  2012 Annual Report to Stockholders  |  31



Royce Value Trust

 
  Notes to Financial Statements (continued)

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 2,103,737 and 2,076,969 shares of Common Stock as reinvestment of distributions by Common Stockholders for the years ended December 31, 2012 and December 31, 2011, respectively.
     On November 15, 2012, the Fund redeemed all (8,800,000 shares) of its then outstanding 5.90% Cumulative Preferred Stock at the redemption price of $25.00 per share plus accumulated and unpaid dividends through the redemption date of $0.217153 per share.

Borrowings:
     The Fund entered into a $150,000,000 revolving credit agreement (the credit agreement) with BNP Paribas Prime Brokerage Inc. (BNPP) on November 14, 2012. The Fund pays a commitment fee of 0.50% per annum on the unused portion of the credit agreement. The credit agreement has a 360-day rolling term that resets daily; however, if the Fund exceeds certain net asset value triggers, the credit agreement may convert to a 60-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 and has granted a security interest in the securities pledged to, and in favor of, BNPP as security for the loan balance outstanding. If the Fund fails to meet certain requirements, or maintain other financial covenants required under the credit agreement, the Fund may be required to repay immediately, in part or in full, the loan balance outstanding under the credit agreement necessitating the sale of portfolio securities at potentially inopportune times. The credit agreement also permits, subject to certain conditions, BNPP 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 BNPP on demand. If BNPP fails to deliver the recalled security in a timely manner, the Fund will be compensated by BNPP for any fees or losses related to the failed delivery or, in the event a recalled security will not be returned by BNPP, the Fund, upon notice to BNPP, may reduce the loan balance outstanding by the amount of the recalled security failed to be returned. The Fund will receive a portion of the fees earned by BNPP in connection with the rehypothecation of portfolio securities.
     As of December 31, 2012, the Fund has outstanding borrowings of $150,000,000. During the period ended December 31, 2012, for which borrowings were outstanding, the Fund borrowed an average daily balance of $150,000,000 at a weighted average borrowing cost of 1.26%. As of December 31, 2012, the aggregate value of rehypothecated securities was $146,902,041. During the period ended December 31, 2012, the Fund earned $38,430 in fees from rehypothecated securities.

Investment Advisory Agreement:
     As compensation for its services under the Investment Advisory Agreement, Royce receives a fee comprised of a Basic Fee (“Basic Fee”) and an adjustment to the Basic Fee based on the investment performance of the Fund in relation to the investment record of the S&P SmallCap 600 Index (“S&P 600").
     The Basic Fee is a monthly fee equal to 1/12 of 1% (1% on an annualized basis) of the average of the Fund’s month-end net assets applicable to Common Stockholders, plus the liquidation value of outstanding Preferred Stock, for the rolling 60-month period ending with such month (the "performance period"). The Basic Fee for each month is increased or decreased at the rate of 1/12 of .05% for each percentage point that the investment performance of the Fund exceeds, or is exceeded by, the percentage change in the investment record of the S&P 600 for the performance period by more than two percentage points. The performance period for each such month is a rolling 60-month period ending with such month. The maximum increase or decrease in the Basic Fee for any month may not exceed 1/12 of .5%. Accordingly, for each month, the maximum monthly fee rate as adjusted for performance is 1/12 of 1.5% and is payable if the investment performance of the Fund exceeds the percentage change in the investment record of the S&P 600 by 12 or more percentage points for the performance period, and the minimum monthly fee rate as adjusted for performance is 1/12 of .5% and is payable if the percentage change in the investment record of the S&P 600 exceeds the investment performance of the Fund by 12 or more percentage points for the performance period.
     Notwithstanding the foregoing, Royce is not entitled to receive any fee for any month when the investment performance of the Fund for the rolling 36-month period ending with such month is negative. In the event that the Fund’s investment performance for such a performance period is less than zero, Royce will not be required to refund to the Fund any fee earned in respect of any prior performance period.
     Royce has voluntarily committed to waive the portion of its investment advisory fee attributable to an issue of the Fund’s Preferred Stock for any month in which the Fund’s average annual NAV total return since issuance of the Preferred Stock fails to exceed the applicable Preferred Stock’s dividend rate.

32  |  2012 Annual Report to Stockholders    



Royce Value Trust

 
  Notes to Financial Statements (continued)

Investment Advisory Agreement (continued):
     For the twelve rolling 60-month periods in 2012, the Fund’s investment performance ranged from 12% to 24% below the investment performance of the S&P 600. Accordingly, the net investment advisory fee consisted of a Basic Fee of $11,677,855 and a net downward adjustment of $5,838,926 for the performance of the Fund relative to that of the S&P 600. Additionally, Royce voluntarily waived a portion of its investment advisory fee ($50,000) attributable to issues of the Fund’s Preferred Stock for those months in which the Fund’s average annual NAV total return failed to exceed the applicable Preferred Stock’s dividend rate. For the year ended December 31, 2012, the Fund accrued and paid Royce investment advisory fees totaling $5,788,929.

Purchases and Sales of Investment Securities:
     For the year ended December 31, 2012, the costs of purchases and proceeds from sales of investment securities, other than short-term securities and collateral received for securities loaned, amounted to $291,365,428 and $391,096,851, respectively.

Distributions to Stockholders:
  The tax character of distributions paid to common stockholders   The tax character of distributions paid to preferred stockholders
  during 2012 and 2011 was as follows:   during 2012 and 2011 was as follows:
       
  Distributions paid from:   2012   2011   Distributions paid from:   2012   2011
  Ordinary income     $ 17,311,826       $ 6,285,946     Ordinary income     $ 3,655,160       $ 2,412,205  
  Long-term capital gain       37,846,455         27,538,533     Long-term capital gain       7,990,784         10,567,795  
       
  Return of capital               18,288,444           $ 11,645,944       $ 12,980,000  
           
        $ 55,158,281       $ 52,112,923                          
       

  As of December 31, 2012, the tax basis components of distributable earnings included in stockholders’ equity were as follows:
   
  Net unrealized appreciation (depreciation)     $ 248,906,706  
  Undistributed ordinary income       2,542,673  
  Undistributed capital gains       10,608,235  
         
        $ 262,057,614  
   

     The difference between book and tax basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral on wash sales, partnership investments and the unrealized gains on Passive Foreign Investment Companies.
     For financial reporting purposes, capital accounts and distributions to stockholders are adjusted to reflect the tax character of permanent book/tax differences. These differences are primarily due to differing treatments of income and gains on various investment securities and foreign currency transactions held by the Fund, timing differences and different characterization of distributions made by the Fund. For the year ended December 31, 2012, the Fund recorded the following permanent reclassifications. Results of operations and net assets were not affected by these reclassifications.

 
  Undistributed Net   Accumulated Net     Paid-in  
  Investment Income   Realized Gain (Loss)     Capital  
  $(2,057,417)   $2,101,976     $(44,559)  
 

     Management has analyzed the Fund’s tax positions taken on federal income tax returns for all open tax years (2009-2012) and has concluded that as of December 31, 2012, no provision for income tax is required in the Fund’s financial statements.

Transactions in Affiliated Companies:
     An “Affiliated Company” as defined in the Investment Company Act of 1940, is a company in which a fund owns 5% or more of the company’s outstanding voting securities at any time during the period. The Fund effected the following transactions in shares of such companies for year ended December 31, 2012:

    Shares   Market Value   Cost of   Cost of   Realized   Dividend   Shares   Market Value
Affiliated Company   12/31/11   12/31/11   Purchases   Sales   Gain (Loss)   Income   12/31/12   12/31/12
Timberland Bancorp   444,200   $1,710,170           444,200   $3,082,748
        $1,710,170                       $3,082,748

  2012 Annual Report to Stockholders  |  33



Royce Value Trust  

 
  Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of
Royce Value Trust, Inc.
New York, New York

We have audited the accompanying statement of assets and liabilities of Royce Value Trust, Inc., (“Fund”) including the schedule of investments, as of December 31, 2012, and the related statement of operations and statement of cash flows for the year then ended, the statements of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2012, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Royce Value Trust, Inc. at December 31, 2012, the results of its operations and its cash flows for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

TAIT, WELLER, & BAKER LLP

Philadelphia, Pennsylvania
February 25, 2013

34  |  2012 Annual Report to Stockholders  



Royce Micro-Cap Trust December 31, 2012

 
  Schedule of Investments

    SHARES     VALUE
             
COMMON STOCKS – 109.3%            
             
Consumer Discretionary – 10.4%            

Auto Components - 1.7%

           

China XD Plastics 1

  102,400     $ 393,216

China Zenix Auto International ADR

  50,000       149,500

Drew Industries 2

  109,900       3,544,275

Fuel Systems Solutions 1

  76,000       1,117,200

Spartan Motors

  41,000       202,130
         
            5,406,321
         

Distributors - 0.4%

           

Weyco Group

  48,000       1,121,280
         

Diversified Consumer Services - 0.1%

           

Lincoln Educational Services

  64,000       357,760

Spectrum Group International 1,3

  6,925       11,773
         
            369,533
         

Household Durables - 3.1%

           

Cavco Industries 1

  3,091       154,488

Ethan Allen Interiors 2

  81,600       2,097,936

Flexsteel Industries

  172,500       3,700,125

Koss Corporation

  73,400       353,054

Natuzzi ADR 1

  409,800       786,816

Skullcandy 1

  29,700       231,363

Universal Electronics 1

  137,400       2,658,690
         
            9,982,472
         

Internet & Catalog Retail - 0.1%

           

Geeknet 1

  1,500       24,150

U.S. Auto Parts Network 1

  140,900       257,847
         
            281,997
         

Leisure Equipment & Products - 0.1%

           

Leapfrog Enterprises Cl. A 1,2

  32,800       283,064

Sturm, Ruger & Co. 2

  3,200       145,280
         
            428,344
         

Media - 0.6%

           

Rentrak Corporation 1

  101,400       1,976,286
         

Specialty Retail - 2.7%

           

America’s Car-Mart 1,2,4

  92,800       3,760,256

Lewis Group

  57,000       464,947

Oriental Watch Holdings

  372,400       131,119

Shoe Carnival 2

  30,728       629,617

Stage Stores 2

  14,600       361,788

Stein Mart 2

  178,900       1,348,906

Systemax 2

  84,000       810,600

West Marine 1

  86,000       924,500

Wet Seal (The) Cl. A 1

  87,679       241,994
         
            8,673,727
         

Textiles, Apparel & Luxury Goods - 1.6%

           

G-III Apparel Group 1,2

  8,100       277,263

J.G. Boswell Company 3

  2,490       2,031,815

K-Swiss Cl. A 1

  72,400       243,264

Marimekko

  25,300       477,940

Movado Group 2

  49,274       1,511,726

True Religion Apparel 2

  19,300       490,606
         
            5,032,614
         

Total (Cost $24,563,431)

          33,272,574
         

Consumer Staples – 3.2%

           

Food & Staples Retailing - 0.5%

           

Arden Group Cl. A

  16,000       1,439,520
         

Food Products - 2.5%

           

Asian Citrus Holdings

  1,060,000       504,296

Calavo Growers 2

  26,200       660,502

Farmer Bros. 1

  41,400       597,402

Griffin Land & Nurseries

  70,274       1,897,398

Origin Agritech 1

  121,488       168,868

Seneca Foods Cl. A 1,2

  51,400       1,562,560

Seneca Foods Cl. B 1

  42,500       1,274,575

Waterloo Investment Holdings 1,5

  806,207       117,867

Westway Group

  195,000       1,300,650
         
            8,084,118
         

Personal Products - 0.2%

           

Inter Parfums 2

  33,900       659,694
         

Total (Cost $8,520,373)

          10,183,332
         

Energy – 4.1%

           

Energy Equipment & Services - 3.0%

           

Dawson Geophysical 1

  53,213       1,403,759

Geospace Technologies 1,2

  14,260       1,267,286

Global Geophysical Services 1

  35,000       134,750

Gulf Island Fabrication

  29,116       699,658

Heckmann Corporation 1,2,4

  200,000       806,000

Lamprell

  202,400       308,768

Matrix Service 1,2

  50,600       581,900

North American Energy Partners 1

  50,000       170,000

Pason Systems

  139,200       2,400,000

Pioneer Energy Services 1,2

  57,500       417,450

Tesco Corporation 1,2

  50,000       569,500

Willbros Group 1

  131,100       702,696
         
            9,461,767
         

Oil, Gas & Consumable Fuels - 1.1%

           

Approach Resources 1,2

  12,000       300,120

Resolute Energy 1,2

  102,100       830,073

Sprott Resource

  172,600       754,811

VAALCO Energy 1,2

  88,600       766,390

Warren Resources 1

  290,000       814,900
         
            3,466,294
         

Total (Cost $10,191,829)

          12,928,061
         

Financials – 17.8%

           

Capital Markets - 6.3%

           

ASA Gold and Precious Metals

  45,000       968,850

Cowen Group 1

  600,600       1,471,470

Diamond Hill Investment Group

  34,479       2,339,745

Duff & Phelps Cl. A 2

  93,000       1,452,660

FBR & Co. 1

  215,000       832,050

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.   2012 Annual Report to Stockholders  |  35




Royce Micro-Cap Trust

 
  Schedule of Investments

    SHARES     VALUE
             
Financials (continued)            
Capital Markets (continued)            

Fiera Capital

  78,000     $ 584,196

INTL FCStone 1,2

  26,310       458,057

JZ Capital Partners

  373,999       2,685,432

MVC Capital

  151,200       1,837,080

NGP Capital Resources

  170,752       1,232,829

Queen City Investments 3

  948       949,934

U.S. Global Investors Cl. A

  91,500       366,915

Urbana Corporation 1

  237,600       226,923

Virtus Investment Partners 1,2,4

  35,000       4,232,900

Westwood Holdings Group 2

  8,800       359,920
         
            19,998,961
         

Commercial Banks - 1.6%

           

BCB Holdings 1

  806,207       284,847

Chemung Financial

  40,000       1,200,000

Fauquier Bankshares

  140,200       1,668,380

First Bancorp

  40,200       662,094

Peapack-Gladstone Financial

  88,868       1,251,262
         
            5,066,583
         

Consumer Finance - 0.2%

           

Regional Management 1

  51,400       850,670
         

Diversified Financial Services - 1.3%

           

Banca Finnat Euramerica

  1,310,000       465,855

Bolsa Mexicana de Valores

  300,000       756,597

GAIN Capital Holdings

  25,000       102,250

PICO Holdings 1,2

  45,700       926,339

RHJ International 1

  348,000       1,829,420
         
            4,080,461
         

Insurance - 2.6%

           

Hallmark Financial Services 1

  138,000       1,295,820

Independence Holding

  105,380       1,003,218

National Western Life Insurance Company
Cl. A 2

  14,033       2,213,565

State Auto Financial 2

  139,264       2,080,604

United Fire Group 2

  73,603       1,607,490
         
            8,200,697
         

Real Estate Investment Trusts (REITs) - 0.5%

   

BRT Realty Trust 1

  228,681       1,495,574
         

Real Estate Management & Development - 4.4%

   

Consolidated-Tomoka Land

  62,750       1,945,877

Forestar Group 1,2,4

  143,000       2,478,190

Kennedy-Wilson Holdings

  465,358       6,505,705

Tejon Ranch 1,2,4

  112,162       3,149,509

ZipRealty 1

  25,000       70,000
         
            14,149,281
         

Thrifts & Mortgage Finance - 0.9%

           

Alliance Bancorp, Inc. of Pennsylvania

  41,344       525,069

BofI Holding 1,2,4

  85,562       2,384,613
         
            2,909,682
         

Total (Cost $46,331,468)

          56,751,909
         

Health Care – 7.7%

           

Biotechnology - 1.0%

           

Celsion Corporation 1

  220,000       1,801,800

Chelsea Therapeutics International 1

  710,000       539,600

Halozyme Therapeutics 1

  81,622       547,684

3SBio ADR 1

  15,000       204,600
         
            3,093,684
         

Health Care Equipment & Supplies - 4.2%

           

Allied Healthcare Products 1

  180,029       473,476

AngioDynamics 1,2

  170,000       1,868,300

Atrion Corporation

  7,557       1,481,172

CryoLife

  50,573       315,070

DynaVox Cl. A 1

  20,000       7,400

Exactech 1

  111,000       1,881,450

Invacare Corporation 2

  42,500       692,750

Medical Action Industries 1

  125,250       336,923

STRATEC Biomedical

  14,000       698,939

Syneron Medical 1

  69,200       599,964

Theragenics Corporation 1

  202,377       321,779

Trinity Biotech ADR

  49,100       708,022

Utah Medical Products

  42,300       1,524,915

Young Innovations

  61,450       2,421,745
         
            13,331,905
         

Health Care Providers & Services - 1.7%

           

CorVel Corporation 1,2

  20,000       896,600

Cross Country Healthcare 1

  323,200       1,551,360

Gentiva Health Services 1,2

  23,000       231,150

PDI 1

  65,383       496,911

PharMerica Corporation 1,2

  40,000       569,600

Psychemedics Corporation

  67,300       723,475

U.S. Physical Therapy

  35,857       987,501
         
            5,456,597
         

Life Sciences Tools & Services - 0.3%

           

Affymetrix 1

  150,000       475,500

Furiex Pharmaceuticals 1

  23,758       457,579
         
            933,079
         

Pharmaceuticals - 0.5%

           

Hi-Tech Pharmacal 2

  44,500       1,556,610
         

Total (Cost $21,099,889)

          24,371,875
         
             

Industrials – 27.7%

           

Aerospace & Defense - 2.4%

           

AeroVironment 1

  24,900       541,326

Astronics Corporation 1

  40,844       934,511

CPI Aerostructures 1

  33,935       339,689

Ducommun 1

  78,700       1,272,579

HEICO Corporation 2

  65,625       2,937,375

Innovative Solutions and Support

  177,090       609,189

Kratos Defense & Security Solutions 1

  72,324       363,790

SIFCO Industries

  45,800       721,350
         
            7,719,809
         

Air Freight & Logistics - 0.6%

           

Forward Air 2

  50,700       1,775,007

Pacer International 1

  35,000       136,500
         
            1,911,507
         

36  |  2012 Annual Report to Stockholders   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.



December 31, 2012

 
  

    SHARES     VALUE