FORM N-CSR
CERTIFIED SHAREHOLDER
REPORT
OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company
Act file number: 811-05379
Name of Registrant: Royce Focus Trust, Inc.
Address of Registrant:
1414 Avenue of the Americas
New York, NY 10019
Name and address of agent for service: | John E. Denneen, Esquire | |
1414 Avenue of the Americas | ||
New York, NY 10019 |
Registrants telephone number, including
area code: (212) 486-1445
Date of fiscal year end: December 31
Date of reporting
period: January 1, 2007 December 31, 2007
Item 1: Reports to Shareholders
Royce Value Trust Royce Micro-Cap Trust Royce Focus Trust |
ANNUAL REVIEW AND REPORT TO STOCKHOLDERS |
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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 funds 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 | ||||
n | 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. |
n | The fixed capital structure allows permanent leverage to be employed as a means to enhance capital appreciation potential. |
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n | 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. |
n | Unlike Royces 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. |
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n | 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. |
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. |
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Why Dividend Reinvestment Is Important | |
A very important component of an investors 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 13, 15 and 17. For additional information on the Funds Distribution Reinvestment and Cash Purchase Options and the benefits for stockholders, please see page 19 or visit our website at www.roycefunds.com. | |
This page is not part of the 2007 Annual Report to Stockholders |
Table of Contents | |
Annual Review | |
Performance Table | 2 |
Letter to Our Stockholders | 3 |
Annual Report to Stockholders | 10 |
For more than 30 years, we have used a value approach to invest in smaller-cap securities. We focus primarily on the quality of a companys balance sheet, its ability to generate free cash flow and other measures of profitability or sound financial condition. At times, we may also look at other factors, such as a companys unrecognized asset values, its future growth prospects or its turnaround potential following an earnings disappointment or other business difficulties. We then use these factors to assess the companys 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.
This page is not part of the 2007 Annual Report to Stockholders | 1
Average Annual NAV Total Returns | Through December 31, 2007 | |||||||||||
Royce | Royce | Royce | ||||||||||
Value Trust | Micro-Cap Trust | Focus Trust | Russell 2000 | |||||||||
Fourth Quarter 2007* | -2.62 | % | -4.47 | % | -3.64 | % | -4.58 | % | ||||
JulyDecember 2007* | -4.36 | -7.86 | -3.21 | -7.53 | ||||||||
One-Year | 5.04 | 0.64 | 12.22 | -1.57 | ||||||||
Three-Year | 10.81 | 9.58 | 13.90 | 6.80 | ||||||||
Five-Year | 18.40 | 19.42 | 24.15 | 16.25 | ||||||||
10-Year | 11.77 | 11.97 | 13.28 | 7.08 | ||||||||
15-Year | 13.17 | n/a | n/a | 10.10 | ||||||||
20-Year | 13.78 | n/a | n/a | 11.34 | ||||||||
Since Inception | 12.60 | 13.53 | 14.15 | | ||||||||
Inception Date | 11/26/86 | 12/14/93 | 11/1/96** | | ||||||||
2 | This page is not part of the 2007 Annual Report to Stockholders
This page is not part of the 2007 Annual Report to Stockholders | 3 |
For most of our portfolio managers, the security selection process begins with an examination of a companys balance sheet. As our analysis proceeds, other important measures quickly follow, such as a companys earnings history (particularly if the firm is not posting positive earnings at the time of our review) and its ability to generate free cash flow. Additional factors come into play as well, with each of our portfolio managers and analysts emphasizing different metrics as they evaluate businesses. Of course, regardless of where the emphasis on particular metrics falls, our managers are looking for indicators of strong absolute value. One companys financial profile may look terrific relative to its industry peers or to other companies in the stock market, but that does not necessarily make it a compelling value. Similarly, its stock price may be attractively low when compared to others in the same or a similar business or to other stocks in the market as a whole, but that alone will not make the stock a potential purchase candidate. In our security analysis process, a company must stand or fall on its own merits. Continued on page 6... |
Letter to Our Stockholders
the fatalism was more than understandable. As the market
crept toward the end of the year, it seemed to be just a matter of time before
reality caught up with the bearish perceptions. We were not surprised, therefore,
by the 15% correction from the small-cap peak on 7/13/07 that occurred on January
4th and were not too panicked by the official arrival of the small-cap bear on
January 17th. In fact, few of the concerns about the market or the economy
look groundless to us, even if our collective stoicism leads us to exchange worry
for more work on finding attractively valued smaller companies. Long ago we accepted
that we are powerless over when or if a bear market comes. We can only resolve
to maintain our discipline and keep scouring the small-cap market for potential
opportunity. In this context of pessimism, then, we find ourselves in the contrarian position of feeling fairly sanguine about the state of equities, particularly over the long term, and also confidenthowever guardedlyabout the next three to five years. In that spirit, we would like to advance the idea that the worst of the markets decline is behind us as of this writing. Our optimism about the next few years is based in part on the speed with which information moves. Because bad news travels so quickly, the effects hit stocks hard and fast. We believe that the market has thus worked through the bulk of the distress caused by subprime woes, the credit crunch and the prospect of recession. While we are always focused on downside risk, we are just as excited about promising long-term opportunities that we see in certain smaller stocks in the current market. We understand that no investor enjoys these periods in which so many companies seem to be struggling and returns are falling further into negative territory. At the same time, declines, corrections and even the occasional bear market are part of the price of doing business in the stock market, especially if one is in it for the long haul, as we are. And it is precisely at such risky moments that we seek opportunity as so many others are avoiding it. As the saying goes, Pain is inevitable, but misery is optional. We have always believed that uncovering opportunity in poor market conditions is one of the most effective ways to build strong absolute long-term performance. Does Papa Bear Look Small? The market leadership issue needs no reality check, being clear to all who take time to look. Large-cap stocks, as measured by the S&P 500, outperformed their small-cap counterparts, as measured by the Russell 2000, for the calendar year. The large-cap index posted a gain of 5.5% versus a loss of 1.6% for the small-cap index in 2007. The S&P 500 built its lead with three consecutive quarters of relatively higher returns between the end of March and the end of December, including the difficult second half of 2007, during which the S&P 500 fell only 1.4% while the Russell 2000 lost 7.5%. Meanwhile, the Nasdaq Composite fared best of all three indices for the calendar year, gaining 9.9%, a noteworthy absolute and relative showing. However, the Nasdaq Composite also remained 47.5% shy of its March 2000 high as of 12/31/07, while the Russell 2000 and S&P 500 both finished 2007 ahead of their respective March 2000 highs. The Russell 2000 also held an edge over the S&P 500 for |
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4 | This page is not part of the 2007 Annual Report to Stockholders |
the five- and 10-year periods ended 12/31/07, while the large-cap index outperformed
for the corresponding one- and three-year periods. |
Our longer-term outlook for smaller stocks is positive; we continue to see the likelihood of frequent leadership rotation and narrow performance spreads in the intermediate term; and we believe that active small-cap management focused on quality should do fine in a market in which we expect that trait to be rewarded across capitalization ranges. | |
Polar Opposites | ||
For anyone
focused on the performance of the Russell 2000 Value index in 2007, it must have felt
as if it was just a matter of time before the bear emerged from hibernation and grabbed hold
of the market as a whole. Small-cap growth investors, on the other hand, may have reached
a different conclusion about the state of the stock market. After a long period of outperforming
its small-cap growth siblingoften dramaticallythe small-cap value index fell
behind in 2007. It was subtle at first, with the Russell 2000 Value index narrowly underperforming
the Russell 2000 Growth index in the first quarter (+1.5% versus +2.5%), before falling
further behind in the second (+2.3% versus +6.7%). Things grew stranger in the third
quarter, when small-cap value fell 6.3% while small-cap growth eked out a marginal gain.
(Historically, the Russell 2000 Value index has outperformed in most down market periods.)
Finally, during the similarly volatile fourth quarter, the Russell 2000 Value index was
down 7.3% versus a loss of 2.1% for the Russell 2000 Growth index, completing
its clean quarterly sweep for the calendar year, while also notching another short-term
outperformance in a period of falling share prices. |
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This page is not part of the 2007 Annual Report to Stockholders | 5 |
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Letter to Our Stockholders When one adjusts ones perspective to reach beyond 2007, the picture begins to make sense. Although small-cap stocks as a whole began an impressive
rally following the small-cap market trough on 10/9/02, the roots of strong performance for the Russell 2000 Value index actually reach back to the Russell 2000s
peak on 3/9/00. Although most equity indices large and small suffered dramatic declines from their respective March 2000 peaks
through 10/9/02, the Russell 2000 Value index managed a cumulative gain of 2.0% during the same period. Once the wider small-cap rally |
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kicked off, the small-cap value index held its performance edge through the new
small-cap high on 7/13/07 (see table). Our belief in cyclicality and reversion to the mean permeates the way that we view all market categories, so the Russell 2000 Value indexs underperformance in 2007 was hardly a shock, especially since we had seen a fair amount of promising opportunities in small-cap growth stocks in the years prior to 2007. Current anxieties seem to have led as many investors into growth stocksample liquidity and the potential for growth in a depressed economy are a seductive combinationas they have into large-cap stocks. However, the Russell 2000 Value index held on to its long-term advantage, beating the Russell 2000 Growth index for the 10-, 15-, 20- and 25-year periods ended 12/31/07. |
INDEX PERFORMANCE
IN POST-BUBBLE PERIOD Cumulative Total Returns During Small-Cap Decline and Subsequent Rally |
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3/9/00-10/9/02 | 10/9/02-7/13/07 | ||||||||||||
Russell 2000 | -44.1 | % | 177.1 | % | |||||||||
Russell 2000 Value | 2.0 | 183.9 | |||||||||||
Russell 2000 Growth | -68.4 | 169.7 | |||||||||||
S&P 500 | -42.6 | 117.9 | |||||||||||
Nasdaq Composite | -77.9 | 143.0 | |||||||||||
Bear with Us |
6 | This page is not part of the 2007 Annual Report to Stockholders |
outperformed the Russell 2000 on an NAV basis for the one-, three-, five- and 10-year
periods ended 12/31/07. |
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Two thousand seven was a difficult year, at least in its second half. Owing to our
belief that down market performance is a key indicator of a portfolios strength, we were generally satisfied
with the years results. Our confidence as we look forward is also high, as we are now seeing plentiful opportunities in both the domestic and
international markets. Weve been involved in overseas investing to one degree or another for many years. American companies
with substantial global business have also been included in several portfolios for
just as long, so a more global outlook is not really new for us. The most important
lesson we learned from buying non-U.S. companies over the years is that a good business
looks the same in Italy or England as it does here in the States. The business models and
metrics are similar, and today nearly all publicly traded companies publish their
relevant information in English. As large as the domestic smaller stock market is,
it is dwarfed by the size of the international small-cap marketplace. To us, this
really represents the best of two worldsa domestic universe that we still feel
great about and an international arena that we think is a source of enormous potential.
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As large as the domestic smaller stock market is, it is dwarfed by the size of the international small-cap marketplace. To us, this really represents the best of two worldsa domestic universe that we still feel great about and an international arena that we think is a source of enormous potential. |
This page is not part of the 2007 Annual Report to Stockholders | 7 |
experiencing earnings trouble, we |
Letter to Our Stockholders
Our view is that both the severity and span
of a recession are likely to be fairly benign. More importantly, the reasoning
behind our confidence in the long-term prospects for stocks, particularly smaller
companies, has to do with the extremity of the sell-off that began in 2007s
second half and picked up steam in January 2008, which showed many equity investors
behaving as if the recession were already well under way. Still, with the
likelihood of recession strong (regardless of how bad one thinks it may be), we thought
it would be useful to look at the performance of smaller companies in recent
periods of economic slowdown. Looking at the four recessions that have occurred
since the Russell 2000s inception in 1979 shows two interesting trends:
First, the performance records for small- and large-cap stocks are mixed, most
likely because shifts in equity returns began prior to the official recognition
of each recessions start. Second, the recessions have in general been short-lived (see the table below). |
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SMALL-CAP VERSUS LARGE-CAP PERFORMANCE DURING RECESSIONS | ||||||||||||
Cumulative Total Returns During Small-Cap Decline and Subsequent Rally | ||||||||||||
Recession Begin Date | Recession End Date | Length in Months | S&P 500 | Russell 2000 | ||||||||
1/31/80 | 7/31/80 | 6 | 9.6 | % | 7.5 | % | ||||||
7/31/81 | 11/30/82 | 16 | 14.2 | 14.8 | ||||||||
7/31/90 | 3/31/91 | 8 | 8.0 | 7.7 | ||||||||
3/31/01 | 11/30/01 | 8 | -0.9 | 3.2 | ||||||||
8 | This page is not part of the 2007 Annual Report to Stockholders |
Exit, Pursued by a Bear What, then, does all of this portend for small-cap investors? Within our selection universe, it seems reasonable to expect growth to provide near-term outperformance. However, over longer-term periods, we believe that value will eventually resume its historical dominance. The Russell 2000 Value index outperformed the Russell 2000 Growth index more than 93% of the time when viewed over five-year time horizons through 12/31/07. In any case, we populate our portfolios with what we deem to be attractively priced companies drawn from the entire asset classregardless of whether they are classified as value or growth. Of greater significance to ussince we do not attach value or growth labels to the stocks that we ownis the idea that smaller companies retain two unique features: historical outperformance during normal- and low-return periods for equities and a more broad-based acceptance by all types of investors, something that was not the case at the beginning of this decade. Down markets and recessions are each as inevitable as they are unpleasant. They are also finite. We think that the fourth quarter of 2007 and the events of January 2008 represented an overreaction to a slowdown in consumer spending and the economy as a whole. The market, in other words, has in many ways already responded to the recessionand in our view has overestimated its severitywhich is why we suspect that equity returns should improve before the economy does. In the meantime, we are looking ahead and seeing opportunities that look very promising to us. Several discrete areas of our marketplace look attractively oversold in our eyes, so we are working to capture what we see as compelling values today in the hopes of a profitable long-term experience in the years to come. |
Of great significance to us is the idea
that that smaller companies retain two unique features: historical outperformance during normal- and low-return periods for equities and a more broad-based acceptance by all types of investors, something that was not the case at the beginning of this decade. |
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Sincerely, |
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Charles M. Royce | W. Whitney George | Jack E. Fockler, Jr. | |||||
President | Vice President | Vice President | |||||
January 31, 2008 |
This page is not part of the 2007 Annual Report to Stockholders | 9 |
Table of Contents | ||||||||||||||||||||
Annual Report to Stockholders |
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Directors and Officers | 11 | |||||||||||||||||||
Managers Discussions of Fund Performance | ||||||||||||||||||||
Royce Value Trust | 12 | |||||||||||||||||||
Royce Micro-Cap Trust | 14 | |||||||||||||||||||
Royce Focus Trust | 16 | |||||||||||||||||||
History Since Inception | 18 | |||||||||||||||||||
Distribution Reinvestment and Cash Purchase Options | 19 | |||||||||||||||||||
Schedules of Investments and Other Financial Statements | ||||||||||||||||||||
Royce Value Trust | 20 | |||||||||||||||||||
Royce Micro-Cap Trust | 36 | |||||||||||||||||||
Royce Focus Trust | 51 | |||||||||||||||||||
Notes to Performance and Other Important Information | 62 | |||||||||||||||||||
Stockholder Meeting Results | 63 | |||||||||||||||||||
10 | 2007 Annual Report to Stockholders |
Directors and Officers |
All Directors and Officers may be reached c/o The Royce Funds, 1414 Avenue of the Americas, New York, NY 10019 |
Charles M. Royce, Director*, President | |
Age: 68 | Number of Funds Overseen: 27 | Tenure: Since 1986 | |
Non-Royce Directorships: Director of Technology Investment Capital Corp. | |
Principal Occupation(s)
During Past Five Years: President, Chief Investment Officer and Member of Board
of Managers of Royce & Associates, LLC (Royce), the Trusts investment adviser. |
|
Mark R. Fetting, Director* | |
Age: 53 | Number of Funds Overseen: 41 | Tenure: Since 2001 | |
Non-Royce
Directorships: Director/Trustee of registered investment companies constituting
the 14 Legg Mason Funds. |
|
Principal Occupation(s) During Past Five Years: President and Chief Executive
Officer of Legg Mason, Inc.; Member of Board of Managers of Royce. Mr.
Fettings prior business experience includes having served as Senior Executive
Vice President of Legg Mason, Inc.; Division President and Senior Officer,
Prudential Financial Group, Inc. and related companies; Partner, Greenwich
Associates and Vice President, T. Rowe Price Group, Inc. |
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Donald R. Dwight, Director | |
Age: 76 | Number of Funds Overseen: 27 | Tenure: Since 1998 | |
Non-Royce Directorships: None | |
Principal Occupation(s) During Past Five Years: President of Dwight Partners,
Inc., corporate communications consultant; Chairman (from 1982 to March
1998) and Chairman Emeritus (since March 1998) of Newspapers of New
England, Inc. Mr. Dwights prior experience includes having served as
Lieutenant Governor of the Commonwealth of Massachusetts, as President
and Publisher of Minneapolis Star and Tribune Company and as a Trustee of
the registered investment companies constituting the Eaton Vance Funds. |
|
Richard M. Galkin, Director | |
Age: 69 | Number of Funds Overseen: 27 | Tenure: Since 1986 | |
Non-Royce Directorships: None | |
Principal Occupation(s) During Past Five Years: Private investor. Mr. Galkins
prior business experience includes having served as President of Richard M.
Galkin Associates, Inc., telecommunications consultants, President of
Manhattan Cable Television (a subsidiary of Time, Inc.), President of
Haverhills Inc. (another Time, Inc. subsidiary), President of Rhode Island
Cable Television and Senior Vice President of Satellite Television Corp. (a
subsidiary of Comsat). |
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Stephen L. Isaacs, Director | |
Age: 68 | Number of Funds Overseen: 27 | Tenure: Since 1989 | |
Non-Royce Directorships: None | |
Principal Occupation(s) During Past Five Years: President of The Center for
Health and Social Policy (since September 1996); Attorney and President of
Health Policy Associates, Inc., consultants. Mr. Isaacss prior business experience
includes having served as Director of Columbia University Development Law and
Policy Program and Professor at Columbia University (until August 1996). |
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William L. Koke, Director | |
Age: 73 | Number of Funds Overseen: 27 | Tenure: Since 1996 | |
Non-Royce Directorships: None | |
Principal Occupation(s) During Past Five Years: Private investor. Mr. Kokes
prior business experience includes having served as President of Shoreline
Financial Consultants, Director of Financial Relations of SONAT, Inc.,
Treasurer of Ward Foods, Inc. and President of CFC, Inc. |
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Arthur S. Mehlman, Director | |
Age: 65 | Number of Funds Overseen: 41 | Tenure: Since 2004 | |
Non-Royce
Directorships: Director/Trustee of registered investment companies constituting
the 14 Legg Mason Funds and Director of Municipal Mortgage & Equity, LLC. |
|
Principal Occupation(s) During Past Five Years: Director of The League for
People with Disabilities, Inc.; Director of University of Maryland Foundation
(non-profits). Formerly: Director of University of Maryland College Park
Foundation (non-profit) (from 1998 to 2005); Partner, KPMG LLP (international
accounting firm) (from 1972 to 2002); Director of Maryland Business
Roundtable for Education (from July 1984 to June 2002). |
David L. Meister, Director |
Age: 68 | Number of Funds Overseen: 27 | Tenure: Since 1986 |
Non-Royce Directorships: None |
Principal Occupation(s) During Past Five Years: Consultant. Chairman and
Chief Executive Officer of The Tennis Channel (from June 2000 to March
2005). Mr. Meisters prior business experience includes having served as
Chief Executive Officer of Seniorlife.com, a consultant to the communications
industry, President of Financial News Network, Senior Vice President of
HBO, President of Time-Life Films and Head of Broadcasting for Major
League Baseball. |
G. Peter OBrien, Director |
Age: 62 | Number of Funds Overseen: 41 | Tenure: Since 2001 |
Non-Royce
Directorships: Director/Trustee of registered investment companies constituting
the 14 Legg Mason Funds; Director of Technology Investment Capital Corp. |
Principal Occupation(s) During Past Five Years: Trustee Emeritus of Colgate
University (since 2005); Board Member of Hill House, Inc. (since 1999);
Formerly: Trustee of Colgate University (from 1996 to 2005), President of
Hill House, Inc. (from 2001 to 2005) and Managing Director/Equity Capital
Markets Group of Merrill Lynch & Co. (from 1971 to 1999). |
John D. Diederich, Vice President and Treasurer |
Age: 56 | Tenure: Since 2001 |
Principal Occupation(s) During Past Five Years: Chief Operating Officer,
Managing Director and member of the Board of Managers of Royce; Chief
Financial Officer of Royce; Director of Administration of the Trust; and
President of RFS, having been employed by Royce since April 1993. |
Jack E. Fockler, Jr., Vice President |
Age: 49 | Tenure: Since 1995 |
Principal Occupation(s) During Past Five Years: Managing Director and Vice
President of Royce, and Vice President of RFS, having been employed by
Royce since October 1989. |
W. Whitney George, Vice President |
Age: 49 | Tenure: Since 1995 |
Principal Occupation(s) During Past Five Years: Managing Director and Vice
President of Royce, having been employed by Royce since October 1991. |
Daniel A. OByrne, Vice President and Assistant Secretary |
Age: 45 | Tenure: Since 1994 |
Principal Occupation(s) During Past Five Years: Principal and Vice President
of Royce, having been employed by Royce since October 1986. |
John E. Denneen, Secretary and Chief Legal Officer |
Age: 40 | Tenure: 1996-2001 and Since April 2002 |
Principal Occupation(s) During Past Five Years: General Counsel
(Deputy General Counsel prior to 2003), Principal,
Chief Legal and Compliance Officer and Secretary of Royce; Secretary and
Chief Legal Officer of The Royce Funds. |
Lisa Curcio, Chief Compliance Officer |
Age: 48 | Tenure: Since 2004 |
Principal Occupation(s) During Past Five Years: Chief Compliance Officer of
The Royce Funds (since October 2004); Compliance Officer of Royce (since
June 2004); Vice President, The Bank of New York (from February 2001 to
June 2004). |
* Interested Director. |
2007 Annual Report to Stockholders | 11 |
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AVERAGE ANNUAL NAV TOTAL RETURNS |
|||||||||
Fourth Quarter 2007* |
-2.62 | % | |||||||
JulyDecember 2007* |
-4.36 | ||||||||
One-Year |
5.04 | ||||||||
Three-Year |
10.81 | ||||||||
Five-Year |
18.40 | ||||||||
10-Year |
11.77 | ||||||||
15-Year |
13.17 | ||||||||
20-Year |
13.78 | ||||||||
Since Inception (11/26/86) |
12.60 | ||||||||
* Not annualized. | |||||||||
CALENDAR YEAR NAV TOTAL RETURNS |
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Year |
RVT | Year | RVT | ||||||
2007 |
5.0 | % | 1998 | 3.3 | % | ||||
2006 |
19.5 | 1997 | 27.5 | ||||||
2005 |
8.4 | 1996 | 15.5 | ||||||
2004 |
21.4 | 1995 | 21.6 | ||||||
2003 |
40.8 | 1994 | 0.1 | ||||||
2002 |
-15.6 | 1993 | 17.3 | ||||||
2001 |
15.2 | 1992 | 19.3 | ||||||
2000 |
16.6 | 1991 | 38.4 | ||||||
1999 |
11.7 | 1990 | -13.8 | ||||||
TOP 10 POSITIONS |
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AllianceBernstein Holding L.P. |
2.1 | % | |||||||
Ritchie Bros. Auctioneers |
2.0 | ||||||||
PAREXEL International |
1.3 | ||||||||
Sothebys |
1.2 | ||||||||
SEACOR Holdings |
1.2 | ||||||||
Lincoln Electric Holdings |
1.1 | ||||||||
Advent Software |
1.1 | ||||||||
Exterran Holdings |
1.1 | ||||||||
Ash Grove Cement Cl. B |
1.1 | ||||||||
Rofin-Sinar Technologies |
1.0 | ||||||||
PORTFOLIO SECTOR BREAKDOWN |
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Technology |
23.3 | % | |||||||
Industrial Products |
19.3 | ||||||||
Industrial Services |
15.2 | ||||||||
Financial Services |
13.7 | ||||||||
Financial Intermediaries |
11.7 | ||||||||
Natural Resources |
9.9 | ||||||||
Health |
7.6 | ||||||||
Consumer Products |
4.9 | ||||||||
Consumer Services |
3.7 | ||||||||
Diversified Investment Companies |
0.2 | ||||||||
Utilities |
0.2 | ||||||||
Miscellaneous |
3.7 | ||||||||
Bond and Preferred Stock |
0.3 | ||||||||
Cash and Cash Equivalents |
4.9 | ||||||||
Managers Discussion Royce Value Trusts (RVT) diversified portfolio of small- and micro-cap stocks posted solid results during 2007, though many investors seemed not to notice. For the calendar year, the Fund was up 5.0% on a net asset value (NAV) basis and down 8.2% on a market price basis versus a 1.6% loss for the Russell 2000 and a 0.2% loss for the S&P SmallCap 600. We were very pleased with RVTs calendar-year NAV result, though we were obviously disappointed by its market price showing. Much of the disparity between the Funds NAV and market price results in 2007 can be traced back to the sizeable premium at which the Fund traded at the end of 2006 versus the discount at which its shares traded at the end of 2007. Certainly market sentiment began to turn against smaller stocks as 2007 wore on, even as our efforts in RVTs portfolio told a different story. On an NAV basis, the Fund was ahead of both of its small-cap benchmarks in the first half, although its market price return trailed. Down 1.8% on an NAV basis in the third quarter, RVT bested the Russell 2000, which lost 3.1%, and tied the S&P 600, while its market price loss of 7.6% trailed. The years final quarter saw a reversal of this performance pattern. RVT lost 2.6% on an NAV basis, but only 1.3% on a market price basis, both results better than the Russell 2000s 4.6% loss and the S&P 600s decline of 6.5%. We place considerable emphasis on down-market performance, so the Funds relative edge on an NAV basis in the second half was especially gratifying to us, as was its relative strength from the small-cap peak on 7/13/07 through 12/31/07, a period in which RVT was down 7.0% versus losses of 9.9% for the Russell 2000 and 10.8% for the S&P 600. (The Fund was down 10.4% on a market price basis during this same period.) |
||||||
RVT again provided
strong absolute and relative results over market-cycle and other long-term periods.
From the previous small-cap market peak on 3/9/00 through 12/31/07, the Fund
was up 143.1% on an NAV basis, versus 39.5% for the Russell 2000 and 89.6% for the
S&P 600. During the mostly bullish phase from the small-cap market trough
on 10/9/02 through 12/31/07, the Fund gained 176.8% compared to a gain of 149.5%
for the Russell 2000 and 143.1% for the S&P 600. In addition, on an NAV
basis RVT held a performance advantage over each of its benchmarks for the one-,
three-, five-, 10-, 15-, 20-year and since inception (11/26/86) periods ended
12/31/07. In all but the one- and three-year periods, |
||||||
GOOD IDEAS THAT WORKED |
||||||
Ritchie Bros. Auctioneers | $9,318,969 | |||||
Peerless Manufacturing | 8,449,137 | |||||
PAREXEL International | 6,063,821 | |||||
Exterran Holdings | 5,862,255 | |||||
GAMCO Investors Cl. A | 5,052,996 | |||||
*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 recent month-end may be obtained at www.roycefunds.com. The market price of the Funds 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 that may involve considerably more risk than investing in a more diversified portfolio of larger-cap companies. Standard deviation is a statistical measure within which a funds total returns have varied over time. The greater the standard deviation, the greater a funds volatility. |
12 | 2007 Annual Report to Stockholders
Performance and Portfolio Review the Funds market price returns also outpaced those of its benchmarks. RVTs NAV average annual total return since inception was 12.6%. The Industrial Products sector led the Fund in dollar-based net gains that nearly doubled those of Industrial Services, the Funds next best-performing sector on a dollar basis. The worldwide boom in large-scale infrastructure construction, particularly in China, continued to give many industrial companies a boost. We enjoyed success with industrial auctioneer Ritchie Bros. Auctioneers, which we have owned in the Funds portfolio since 1998. Its growing business had many investors bidding for shares, so we reduced our stake in December. Peerless Manufacturing makes filtration and air pollution abatement products. Growing earnings in a more environmentally conscious world seemed to draw investors to the stock. We trimmed our position in November. Impressive net gains also came from holdings in other sectors. PAREXEL International is a bio-pharmaceutical services company that provides contract research, medical marketing, consulting, informatics, and advanced technology products and services to the pharmaceutical, biotechnology, and medical device industries worldwide. Its growing business and strong earnings helped its stock price stay healthy for most of 2007, including the volatile second half. GAMCO Investors was another strong second-half performer. The firm offers an array of asset management services to a variety of clients. We think that its a well-managed firm, and also like its steady, positive earnings and dividend payout. |
|||
Bimini Capital
Management is a real estate investment trust (REIT) that invests primarily
in residential mortgage-related securities. Its stock price predictably fell during
the subprime crisis. We sold our shares in October. Newport Corporation, which
makes laser-based and photonic products, saw its price slide throughout the year
amidst lower-than-expected profits in its fiscal first, second and third quarters
in 2007. The departure of some veteran executives did little to help. |
|||
GOOD IDEAS AT THE TIME |
|||
Bimini Capital Management Cl. A | $6,168,275 | ||
Newport Corporation | 4,832,352 | ||
Jazz Technologies (Units) | 3,658,750 | ||
BearingPoint | 3,526,363 | ||
Adaptec | 3,307,648 | ||
*Net of dividends | |||
1Reflects the cumulative total return of an investment made by a stockholder who purchased one share at inception ($10.00 IPO), reinvested all annual distributions as indicated and fully participated in primary subscriptions of the Funds rights offerings. |
|||
2Reflects the actual market price of one share as it traded on the NYSE. |
FUND INFORMATION AND PORTFOLIO DIAGNOSTICS |
|||||||
Fund Net Assets | 1,185 million | ||||||
Symbol | |||||||
Market Price | RVT | ||||||
NAV | XRVTX | ||||||
Net Leverage | 14% | ||||||
Turnover Rate | 26% | ||||||
Average Market Capitalization* |
$1,184 million | ||||||
Weighted Average P/E Ratio** | 18.1x | ||||||
Weighted Average P/B Ratio | 2.2x | ||||||
Weighted Average Portfolio Yield | 1.2% | ||||||
Net leverage is the percentage, in excess of 100%, of the total value of equity type investments, divided by net assets, excluding preferred stock. |
|||||||
*Geometrically calculated | |||||||
**The Funds P/E ratio calculation excludes companies with zero or negative earnings (9% of portfolio holdings as of 12/31/07). |
|||||||
CAPITAL STRUCTURE Publicly Traded Securities Outstanding at 12/31/07 at NAV or Liquidation Value |
|||||||
60.0 million shares of Common Stock |
$1,185 million | ||||||
5.90% Cumulative Preferred Stock |
$220 million | ||||||
RISK/RETURN COMPARISON Five-Year Period Ended 12/31/07 |
|||||||
Average Annual Total Return |
Standard Deviation | Return Efficiency* |
|||||
RTV (NAV) | 18.40% | 13.58 | 1.35 | ||||
Russell 2000 | 16.25 | 14.44 | 1.13 | ||||
2007 Annual Report to Stockholders | 13
|
|||||||||
AVERAGE ANNUAL NAV TOTAL RETURNS |
|||||||||
Fourth Quarter 2007* |
-4.47 | % | |||||||
July-December 2007* |
-7.86 | ||||||||
One-Year |
0.64 | ||||||||
Three-Year |
9.58 | ||||||||
Five-Year |
19.42 | ||||||||
10-Year |
11.97 | ||||||||
Since Inception (12/14/93) |
13.53 | ||||||||
* Not annualized. | |||||||||
CALENDAR YEAR NAV TOTAL RETURNS |
|||||||||
Year |
RMT | Year | RMT | ||||||
2007 |
0.6 | % | 2000 | 10.9 | % | ||||
2006 |
22.5 | 1999 | 12.7 | ||||||
2005 |
6.8 | 1998 | -4.1 | ||||||
2004 |
18.7 | 1997 | 27.1 | ||||||
2003 |
55.5 | 1996 | 16.6 | ||||||
2002 |
-13.8 | 1995 | 22.9 | ||||||
2001 |
23.4 | 1994 | 5.0 | ||||||
TOP 10 POSITIONS |
|||||||||
Sapient Corporation |
1.3 | % | |||||||
Seneca Foods Cl. B |
1.3 | ||||||||
Pegasystems |
1.2 | ||||||||
PAREXEL International |
1.2 | ||||||||
Tennant Company |
1.2 | ||||||||
ASA |
1.1 | ||||||||
MVC Capital |
1.1 | ||||||||
Exponent |
1.1 | ||||||||
Peerless Manufacturing |
1.1 | ||||||||
Weyco Group |
1.0 | ||||||||
PORTFOLIO SECTOR BREAKDOWN |
|||||||||
Technology |
23.2 | % | |||||||
Industrial Products |
16.2 | ||||||||
Health |
14.9 | ||||||||
Industrial Services |
14.7 | ||||||||
Natural Resources |
10.6 | ||||||||
Financial Intermediaries |
9.1 | ||||||||
Financial Services |
6.7 | ||||||||
Consumer Products |
5.5 | ||||||||
Consumer Services |
4.3 | ||||||||
Diversified Investment Companies |
1.8 | ||||||||
Miscellaneous |
4.9 | ||||||||
Preferred Stock |
0.5 | ||||||||
Cash and Cash Equivalents |
5.7 | ||||||||
Managers Discussion The miserable 2007 that most micro-cap stocks endured could be seen in the years market price performance of Royce Micro-Cap Trust (RMT). However, little of this misery could be seen in the Funds calendar-year net asset value (NAV) performance. RMT more than held its own on a net asset value (NAV) basis, up 0.6% versus a decline of 1.6% for its small-cap benchmark, the Russell 2000. Although we were certainly disappointed that the Fund was down 20.1% on a market basis for the same period, we were pleased with the Funds NAV results during 2007. Its worth noting that at the end of 2006, RMT was trading at a good-sized premium that became a discount before the end of 2007. Market sentiment turned against smaller stocks, especially micro-caps, as 2007 turned more bearish, even as our work in RMTs portfolio showed that not all micro-caps capitulated to the bear during latter half of the year. A strong first halfup 9.2% on an NAV basis, though down 2.9% on a market basiscertainly helped the Fund to establish ground versus the Russell 2000 for the calendar year. The Funds showings over market cycle and other long-term performance periods remained strong. From the previous small-cap market peak on 3/9/00 through 12/31/07, RMC gained 148.8% on an NAV basis, and 164.3% on a market price basis versus a gain of 39.5% for the Russell 2000. During the generally more positive period from the small-cap market trough on 10/9/02 through 12/31/07, RMT was up an impressive 188.0%, on an NAV basis and 180.9% on a market price basis, while the Russell 2000 gained 149.5%. RMT outpaced the Russell 2000 on an NAV basis for the one-, three-, five-, 10-year and since inception (12/14/93) periods, and on a market price basis for the 5-, 10-year, and since-inception periods ended 12/31/07. The Funds NAV average annual total return since inception was 13.5%. |
||||||
During the first half of 2007,
we noted a performance disparity within the micro-cap sector, which helped the
Funds performance. In general, higher returns came from larger, more established
micro-cap companies. As the credit crunch reared its head in the second half,
those micro-caps with better creditworthiness drew favor from investors. This
development also benefited calendar-year results. It seemed clear to us by the end
of 2007 |
||||||
GOOD IDEAS THAT WORKED |
||||||
OneSource Services | $2,806,923 | |||||
Peerless Manufacturing | 2,434,940 | |||||
PAREXEL International | 2,046,123 | |||||
Green Mountain Coffee Roasters | 1,865,472 | |||||
Sapient Corporation | 1,660,000 | |||||
*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 recent month-end may be obtained at www.roycefunds.com. The market price of the Funds 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. Standard deviation is a statistical measure within which a funds total returns have varied over time. The greater the standard deviation, the greater a funds volatility. |
14 | 2007 Annual Report to Stockholders
Performance and Portfolio Review that our preference for conservatively capitalized, quality micro-cap businesses was a sound strategy, both in an absolute sense and in the context of a market that bestowed little favor on micro-cap stocks. We also benefited by having little exposure to financial and real estate companies and only modest exposure to consumer businesses that suffered most during 2007, although that modest exposure could not prevent Consumer Services from posting the most significant net dollar-based losses in the portfolio during 2007. The bulk of sectors declines came from retail stores. Stein Marts stores offer fashion merchandise in the United States. Weak sales and disappointing earnings were the story throughout 2007, particularly in the second half when we added to our position. Financial Intermediaries also disappointed. First Acceptance Corporation is a regional automobile insurer specializing in policies for drivers with poor payment and/or driving histories. Higher-than-anticipated accident rates led to a loss in the firms fiscal fourth quarter, which caused its share price to crash in September. Bimini Capital Management is a real estate investment trust (REIT) that invests primarily in residential mortgage-related securities. Its stock price predictably fell during the subprime crisis. We sold our shares in October. |
|||
The Funds best-performing sectors on
a dollar basis were areas that we have long believed house quality micro-cap
companies, and that belief was validated in 2007Industrial Products, Natural
Resources and Industrial Services. Cleaning and maintenance company OneSource
Services drew the attention of a larger company that acquired it at an attractive
premium in November. Peerless Manufacturing manufactures filtration and air
pollution abatement products. Growing earnings in a more environmentally conscious
world seemed to draw investors to the stock. We trimmed our position between
July and December. |
|||
GOOD IDEAS AT THE TIME |
|||
First Acceptance | $1,679,633 | ||
Jupitermedia Corporation | 1,458,780 | ||
Bimini Capital Management Cl. A | 1,425,007 | ||
Stein Mart | 1,359,206 | ||
InPhonic | 1,342,542 | ||
*Net of dividends | |||
1Reflects the cumulative total return of an investment made
by a stockholder who purchased one share at inception ($7.50 IPO), reinvested
distributions as indicated and fully participated in the primary subscription
of the 1994 rights offering. |
|||
2Reflects the actual market price of one share as
it traded on Nasdaq and, beginning 12/1/03, on the NYSE. |
FUND INFORMATION AND PORTFOLIO DIAGNOSTICS |
|||||||
Fund Net Assets | $331 million | ||||||
Symbol | |||||||
Market Price | RMT | ||||||
NAV | XOTCX | ||||||
Net Leverage | 12% | ||||||
Turnover Rate | 41% | ||||||
Average Market Capitalization* |
$293 million | ||||||
Weighted Average P/E Ratio** | 17.4x | ||||||
Weighted Average P/B Ratio | 1.7x | ||||||
Weighted Average Portfolio Yield | 0.9% | ||||||
*Geometrically calculated | |||||||
**The Funds P/E ratio calculation excludes companies with zero or negative earnings (3% of portfolio holdings as of 12/31/07). |
|||||||
CAPITAL STRUCTURE Publicly Traded Securities Outstanding at 12/31/07 at NAV or Liquidation Value |
|||||||
24.6 million shares of Common Stock |
$331 million | ||||||
6.00% Cumulative Preferred Stock |
$60 million | ||||||
RISK/RETURN COMPARISON Five-Year Period Ended 12/31/07 |
|||||||
Average Annual Total Return |
Standard Deviation | Return Efficiency* |
|||||
RMT (NAV) | 19.42% | 14.37 | 1.35 | ||||
Russell 2000 | 16.25 | 14.44 | 1.13 | ||||
2007 Annual Report to Stockholders | 15
|
|||||||||
AVERAGE ANNUAL NAV TOTAL RETURNS |
|||||||||
Fourth Quarter 2007* |
-3.64 | % | |||||||
JulyDecember 2007* |
-3.21 | ||||||||
One-Year |
12.22 | ||||||||
Three-Year |
13.90 | ||||||||
Five-Year |
24.15 | ||||||||
10-Year |
13.28 | ||||||||
Since Inception (11/1/96) |
14.15 | ||||||||
* Not annualized. | |||||||||
Royce & Associates assumed investment management responsibility for the Fund on 11/1/96. | |||||||||
CALENDAR YEAR NAV TOTAL RETURNS |
|||||||||
Year |
FUND | Year | FUND | ||||||
2007 |
12.2 | % | 2001 | 10.0 | % | ||||
2006 |
16.3 | 2000 | 20.9 | ||||||
2005 |
13.3 | 1999 | 8.7 | ||||||
2004 |
29.2 | 1998 | -6.8 | ||||||
2003 |
54.3 | 1997 | 20.5 | ||||||
2002 |
-12.5 | ||||||||
TOP 10 POSITIONS |
|||||||||
Australian Government 7.5% Bond |
5.4 | % | |||||||
New Zealand Government 6.00% Bond |
4.6 | ||||||||
South Africa Government 10.00% Bond |
3.5 | ||||||||
Unit Corporation |
3.4 | ||||||||
Metal Management |
3.3 | ||||||||
Trican Well Service |
3.3 | ||||||||
Reliance Steel & Aluminum |
3.3 | ||||||||
Thor Industries |
3.2 | ||||||||
Schnitzer Steel Industries Cl. A |
3.1 | ||||||||
Lincoln Electric Holdings |
3.0 | ||||||||
PORTFOLIO SECTOR BREAKDOWN |
|||||||||
Natural Resources |
26.7 | % | |||||||
Industrial Products |
21.6 | ||||||||
Consumer Products |
13.1 | ||||||||
Industrial Services |
9.7 | ||||||||
Technology |
6.2 | ||||||||
Financial Intermediaries |
4.7 | ||||||||
Health |
4.7 | ||||||||
Financial Services |
1.5 | ||||||||
Bonds |
13.5 | ||||||||
Cash and Cash Equivalents |
13.4 | ||||||||
Managers Discussion A dynamic first half and relatively stable second half added up to a very successful year for Royce Focus Trust (FUND) on both an absolute and relative basis. For the calendar year, FUND gained 12.2% on a net asset value (NAV) basis and 3.0% on a market price basis, both results well ahead of its small-cap benchmark, the Russell 2000, which lost 1.6% in 2007. After posting impressive first-half returnsup 15.9% on a net asset value (NAV) basis and 8.6% on a market price basis, versus the Russell 2000s gain of 6.5%, for the same periodthe Fund managed well amid the third quarters volatility. FUND was up 0.4% on an NAV basis and down 5.3% on a market price basis while its benchmark declined 3.1%. The fourth quarter saw more widespread losses in the market as a whole, though small-cap stocks continued to be among the hardest hit. The Russell 2000 lost 4.6% between October and December, while the Fund was down 3.6% on an NAV basis and up 0.1% on a market price basis. The portfolios down-market strength can best be seen in its performance from the small-cap peak on 7/13/07 through 12/31/07, when it lost 7.4% on an NAV basis and 7.8% on a market price basis while the Russell 2000 fell 9.9%. |
||||||
From the previous small-cap market peak on 3/9/00 through 12/31/07, FUND returned
237.2% on an NAV basis and 305.2% on a market price basis, versus a 39.5%
result for the small-cap index. The Fund also handily outpaced the Russell 2000
during the bullish phase from the small-cap market trough on 10/9/02 through
12/31/07, gaining 254.5% on an NAV basis and 277.9% on a market price basis,
while the Russell 2000 was up 149.5% for the same period. These strong market
cycle results played a major role in FUNDs outperformance of the benchmark
over calendar-based periods. On both an NAV and market price basis, the Funds
limited portfolio of primarily small-cap stocks beat the index for the one-,
three-, five-, 10- year and since-inception of our management (11/1/96) periods
ended 12/31/07. FUNDs NAV average annual total return since the inception
of our management was 14.2%. Although five sectors posted net losses, declines on a dollar basis were small. At the individual holding level, KKR Financial disappointed. The firm is run by experienced investment bankers whose business plan appealed to our contrarian nature when we first heard it in spring 2007. KKR Financial was ready for the calamitous collapse of the subprime |
||||||
GOOD IDEAS THAT WORKED |
||||||
Schnitzer Steel Industries Cl. A | $3,691,814 | |||||
IPSCO | 3,396,454 | |||||
Florida Rock Industries | 2,290,728 | |||||
Chaparral Steel | 2,085,186 | |||||
Woodward Governor | 2,075,208 | |||||
*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 recent month-end may be obtained at www.roycefunds.com. The market price of the Funds 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. Standard deviation is a statistical measure within which a funds total returns have varied over time. The greater the standard deviation, the greater a funds volatility. |
16 | 2007 Annual Report to Stockholders
Performance and Portfolio Review market and related credit crunch. They held ample highest-grade mortgage paper with which to weather the predicted storm. What the firmand wefailed to account for was how difficult life would be even for parties holding high-quality debt in the current environment. Their mortgage holdings were suddenly devalued and the companys levered positions only exacerbated its difficulties. In the otherwise-profitable precious metals and mining industry within the Natural Resources sector, Gammon Gold also showed net losses for the year. Lower-than-expected production at this early stage producer seemed to keep investors away in 2007. We sold some shares in October before purchasing more shares in November, mostly content to wait for operational improvements. The Funds strongest dollar-based net gains came from the Industrial Products sector, which more than tripled the net gain of the next best-performing sector, Natural Resources. Each of the Funds top five performersand seven of its top tenwere Industrial Products holdings. After posting stronger-than-expected fiscal third-quarter earnings in July, the share price of recycling and scrap metal business Schnitzer Steel Industries began to soar, though it moved a little |
|||
closer to earth in the fourth quarter. We trimmed our position from September
through December. Canadian steel production and fabrication company IPSCO first
attracted our attention in 2004 with its pristine balance sheet, strong history
of earnings and high returns on capital. It was also the target of the urge
to merge. Earlier this year, several larger firms began looking at the firm
as a potential acquisition, with Swedish business SSAB finally closing the
deal in May. We sold our shares between April and May. We first began to buy shares
of construction aggregates company Florida Rock Industries in other Royce-managed
portfolios more than 20 years ago and have had a position in FUNDs portfolio
since 1998. In February 2007, the company was acquired by a larger competitor
at a substantial premium. We finished selling our stake in April. |
|||
GOOD IDEAS AT THE TIME |
|||
KKR Financial | $2,108,348 | ||
Gammon Gold | 1,823,204 | ||
Knight Capital Group Cl. A | 1,346,523 | ||
Arkansas Best | 1,137,072 | ||
Winnebago Industries | 1,098,220 | ||
*Net of dividends | |||
1Royce
& Associates assumed investment management responsibility for the Fund on 11/1/96. |
|||
2Reflects the cumulative total return experience of a continuous common stockholder
who reinvested all distributions as indicated and fully participated in the primary subscription of the 2005 rights offering. |
|||
3Reflects the actual market price of
one share as it traded on Nasdaq. |
FUND INFORMATION AND PORTFOLIO DIAGNOSTICS |
|||||||
Fund Net Assets | $166 million | ||||||
Symbol | |||||||
Market Price | FUND | ||||||
NAV | XFUNX | ||||||
Net Leverage | 2% | ||||||
Turnover Rate | 62% | ||||||
Average Market Capitalization* |
$1,290 million | ||||||
Weighted Average P/E Ratio** | 12.4x | ||||||
Weighted Average P/B Ratio | 2.4x | ||||||
Weighted Average Portfolio Yield | 4.0% | ||||||
Net leverage is the percentage, in excess of 100%, of the total value of equity type investments, divided by net assets, excluding preferred stock. |
|||||||
*Geometrically calculated | |||||||
**The Funds P/E ratio calculation excludes companies with zero or negative earnings (10% of portfolio holdings as of 12/31/07). |
|||||||
CAPITAL STRUCTURE Publicly Traded Securities Outstanding at 12/31/07 at NAV or Liquidation Value |
|||||||
18.6 million shares of Common Stock |
$166 million | ||||||
6.00% Cumulative Preferred Stock |
$25 million | ||||||
RISK/RETURN COMPARISON Five-Year Period Ended 12/31/07 |
|||||||
Average Annual Total Return |
Standard Deviation | Return Efficiency* |
|||||
FUND (NAV) | 24.15% | 15.56 | 1.55 | ||||
Russell 2000 | 16.25 | 14.44 | 1.13 | ||||
2007 Annual Report to Stockholders | 17
The following table details the share accumulations by an initial investor in the Funds who reinvested all distributions (including fractional shares) and participated fully in primary subscriptions for each of the rights offerings. Full participation in distribution reinvestments and rights offerings 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 | Price* | Shares | Value** | Value** | |||||||||||||
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 | |||||||||||||||
12/31/07 | $ | 21,922 | 8,889 | $ | 175,469 | $ | 165,158 | |||||||||||
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 | |||||||||||||||
12/31/07 | $ | 8,900 | 3,836 | $ | 51,709 | $ | 45,802 | |||||||||||
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 | |||||||||||||||
12/31/07 | $ | 7,044 | 3,103 | $ | 27,679 | $ | 27,834 | |||||||||||
* | Beginning with the 1997 (RVT), 2002 (RMT) and 2004 (FUND) distributions, the purchase price of distributions is a weighted average of the distribution reinvestment | |
prices for the year. | ||
** | Other than for initial purchase, values are stated as of December 31 of the year indicated, after reinvestment of distributions. |
18 | 2007 Annual Report to Stockholders
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 Funds 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, 2008. |
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. |
2007 Annual Report to Stockholders | 19
Schedule of Investments |
SHARES | VALUE | |||||
COMMON STOCKS 113.4% | ||||||
Consumer Products 4.9% | ||||||
Apparel, Shoes and Accessories - 1.8% | ||||||
Brown Shoe Company |
15,600 | $ | 236,652 | |||
Kenneth Cole Productions Cl. A |
35,000 | 612,150 | ||||
Columbia Sportswear |
34,600 | 1,525,514 | ||||
Delta Apparel b |
580,760 | 4,152,434 | ||||
5,800 | 165,010 | |||||
K-Swiss Cl. A |
110,000 | 1,991,000 | ||||
Lazare Kaplan International a |
103,600 | 842,268 | ||||
Polo Ralph Lauren Cl. A |
12,500 | 772,375 | ||||
19,000 | 163,020 | |||||
5,500 | 107,305 | |||||
Tandy Brands Accessories |
13,200 | 128,700 | ||||
5,000 | 90,400 | |||||
Tods |
30,000 | 2,091,909 | ||||
4,900 | 170,520 | |||||
Weyco Group |
307,992 | 8,469,780 | ||||
21,519,037 | ||||||
Collectibles - 0.6% | ||||||
175,000 | 1,177,750 | |||||
RC2 Corporation a |
132,600 | 3,722,082 | ||||
Russ Berrie & Company a |
124,300 | 2,033,548 | ||||
6,933,380 | ||||||
Food/Beverage/Tobacco - 0.2% | ||||||
37,800 | 1,209,600 | |||||
Hershey Creamery |
709 | 1,471,175 | ||||
2,680,775 | ||||||
Health, Beauty and Nutrition - 0.1% | ||||||
5,000 | 134,900 | |||||
194,600 | 1,761,130 | |||||
1,896,030 | ||||||
Home Furnishing and Appliances - 1.5% | ||||||
Aaron Rents |
4,500 | 86,580 | ||||
64,100 | 1,639,037 | |||||
Ekornes |
110,000 | 1,933,701 | ||||
Ethan Allen Interiors |
50,800 | 1,447,800 | ||||
Hunter Douglas |
23,300 | 1,718,519 | ||||
Kimball International Cl. B |
286,180 | 3,920,666 | ||||
La-Z-Boy c |
68,200 | 540,826 | ||||
Lewis Group |
425,000 | 2,849,445 | ||||
Rational |
14,900 | 3,048,318 | ||||
10,000 | 334,400 | |||||
17,519,292 | ||||||
Household Products/Wares - 0.1% | ||||||
Blyth |
14,700 | 322,518 | ||||
Sports and Recreation - 0.6% | ||||||
Beneteau |
100,000 | 2,547,785 | ||||
Coachmen Industries c |
47,700 | 283,815 | ||||
Monaco Coach |
166,650 | 1,479,852 | ||||
Sturm, Ruger & Company a |
272,900 | 2,259,612 | ||||
Thor Industries |
26,100 | 992,061 | ||||
7,563,125 | ||||||
Total (Cost $49,543,275) | 58,434,157 | |||||
Consumer Services 3.7% | ||||||
Direct Marketing - 0.1% | ||||||
Takkt |
115,000 | 1,998,743 | ||||
SHARES | VALUE | |||||
Leisure and Entertainment - 0.1% | ||||||
15,000 | $ | 179,850 | ||||
Media and Broadcasting - 0.1% | ||||||
23,000 | 279,450 | |||||
36,600 | 931,470 | |||||
1,210,920 | ||||||
Online Commerce - 0.1% | ||||||
FTD Group |
55,000 | 708,400 | ||||
Restaurants and Lodgings - 0.9% | ||||||
6,600 | 84,150 | |||||
184,300 | 4,784,428 | |||||
18,600 | 68,820 | |||||
26,400 | 83,424 | |||||
90,000 | 1,735,200 | |||||
Steak n Shake a |
198,000 | 2,158,200 | ||||
Tim Hortons |
65,000 | 2,400,450 | ||||
11,314,672 | ||||||
Retail Stores - 2.3% | ||||||
95,400 | 1,197,270 | |||||
4,300 | 145,469 | |||||
27,000 | 105,300 | |||||
10,000 | 139,500 | |||||
Bulgari |
300,000 | 4,174,010 | ||||
50,000 | 987,500 | |||||
Charlotte Russe Holding a |
8,100 | 130,815 | ||||
Childrens Place Retail Stores a |
13,670 | 354,463 | ||||
8,700 | 163,212 | |||||
287,280 | 3,593,873 | |||||
Fielmann |
27,533 | 1,808,645 | ||||
Freds Cl. A |
50,000 | 481,500 | ||||
53,300 | 262,769 | |||||
5,300 | 161,438 | |||||
29,000 | 168,780 | |||||
95,000 | 756,200 | |||||
1,000,000 | 5,230,000 | |||||
Stein Mart |
182,800 | 866,472 | ||||
Tiffany & Co. |
125,000 | 5,753,750 | ||||
27,000 | 736,020 | |||||
West Marine a |
131,100 | 1,177,278 | ||||
162,000 | 377,460 | |||||
28,771,724 | ||||||
Other Consumer Services - 0.1% | ||||||
15,000 | 239,100 | |||||
Total (Cost $44,883,463) | 44,423,409 | |||||
Diversified Investment Companies 0.2% | ||||||
Closed-End Funds - 0.2% | ||||||
Central Fund of Canada Cl. A |
181,500 | 1,967,460 | ||||
Total (Cost $1,297,400) | 1,967,460 | |||||
Financial Intermediaries 11.7% | ||||||
Banking - 4.4% | ||||||
Ameriana Bancorp |
40,000 | 343,200 | ||||
BB Holdings a |
289,400 | 1,382,312 | ||||
BOK Financial |
164,227 | 8,490,536 | ||||
Banca Finnat Euramerica |
210,630 | 268,762 | ||||
Bank of N.T. Butterfield & Son |
371,250 | 6,775,313 | ||||
Bank Sarasin & Cie Cl. B |
125 | 589,217 |
20 | 2007 Annual Report to Stockholders | THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. |
December 31, 2007
SHARES | VALUE | |||||
Financial Intermediaries (continued) | ||||||
Banking (continued) | ||||||
Banque Privee Edmond de Rothschild |
17 | $ | 653,364 | |||
CFS Bancorp |
265,000 | 3,879,600 | ||||
Cadence Financial |
40,300 | 587,977 | ||||
Commercial National Financial |
54,900 | 1,033,218 | ||||
Farmers & Merchants Bank of Long Beach |
1,266 | 8,355,600 | ||||
Hawthorn Bancshares |
44,400 | 1,110,000 | ||||
Heritage Financial |
12,915 | 257,008 | ||||
HopFed Bancorp |
112,500 | 1,658,250 | ||||
Jefferson Bancshares |
32,226 | 325,483 | ||||
Mechanics Bank |
200 | 3,610,000 | ||||
147,599 | 980,057 | |||||
Old Point Financial |
25,000 | 508,750 | ||||
469,200 | 5,714,856 | |||||
Tompkins Financial |
17,545 | 680,746 | ||||
Vontobel Holding |
12,000 | 581,341 | ||||
W Holding Company |
935,400 | 1,131,834 | ||||
Whitney Holding |
40,500 | 1,059,075 | ||||
Wilber Corporation |
103,900 | 909,125 | ||||
Wilmington Trust |
31,000 | 1,091,200 | ||||
Yadkin Valley Financial |
3,800 | 58,026 | ||||
52,034,850 | ||||||
Insurance - 3.8% | ||||||
Alleghany Corporation a |
15,318 | 6,157,836 | ||||
Aspen Insurance Holdings |
64,000 | 1,845,760 | ||||
Erie Indemnity Cl. A |
139,900 | 7,259,411 | ||||
80,500 | 1,673,595 | |||||
IPC Holdings |
27,000 | 779,490 | ||||
Leucadia National |
44,940 | 2,116,674 | ||||
MBIA |
69,200 | 1,289,196 | ||||
Markel Corporation a |
7,200 | 3,535,920 | ||||
Montpelier Re Holdings |
66,000 | 1,122,660 | ||||
NYMAGIC |
85,200 | 1,970,676 | ||||
38,070 | 2,090,804 | |||||
RLI |
99,724 | 5,663,326 | ||||
Security Capital Assurance |
30,000 | 116,700 | ||||
Stewart Information Services |
103,800 | 2,708,142 | ||||
Wesco Financial |
4,750 | 1,933,250 | ||||
White Mountains Insurance Group |
9,000 | 4,626,450 | ||||
Zenith National Insurance |
2,000 | 89,460 | ||||
44,979,350 | ||||||
Real Estate Investment Trusts - 0.1% | ||||||
Gladstone Commercial |
34,700 | 608,638 | ||||
Securities Brokers - 2.2% | ||||||
200,100 | 236,118 | |||||
32,000 | 304,320 | |||||
5,000 | 98,400 | |||||
DundeeWealth |
33,300 | 606,988 | ||||
75,000 | 266,250 | |||||
290,600 | 2,783,948 | |||||
HQ AB |
24,000 | 638,989 | ||||
79,400 | 2,566,208 | |||||
30,400 | 1,446,736 | |||||
50,000 | 1,279,500 | |||||
229,700 | 3,307,680 | |||||
LaBranche & Co a |
137,000 | 690,480 | ||||
Lazard Cl. A |
176,700 | 7,188,156 |
SHARES | VALUE | |||||
optionsXpress Holdings |
53,000 | $ | 1,792,460 | |||
Phatra Securities |
575,000 | 583,832 | ||||
10,000 | 463,200 | |||||
Shinko Securities |
464,300 | 1,924,747 | ||||
26,178,012 | ||||||
Other Financial Intermediaries - 1.2% | ||||||
AP Alternative Assets L.P. |
298,600 | 4,463,068 | ||||
KKR Financial |
401,404 | 5,639,726 | ||||
KKR Private Equity Investors LLP |
105,000 | 1,910,503 | ||||
Kohlberg Capital |
179,900 | 2,158,800 | ||||
14,172,097 | ||||||
Total (Cost $111,770,228) | 137,972,947 | |||||
Financial Services 13.7% | ||||||
Diversified Financial Services - 1.3% | ||||||
18,870 | 241,347 | |||||
Centerline Holding Company |
59,600 | 454,152 | ||||
Close Brothers Group |
15,000 | 281,921 | ||||
12,200 | 121,756 | |||||
30,000 | 290,400 | |||||
950 | 43,728 | |||||
MarketAxess Holdings a |
67,000 | 859,610 | ||||
MoneyGram International |
387,300 | 5,952,801 | ||||
Municipal Mortgage & Equity |
40,300 | 598,052 | ||||
173,600 | 961,744 | |||||
Portfolio Recovery Associates |
69,100 | 2,741,197 | ||||
121,700 | 3,283,466 | |||||
15,830,174 | ||||||
Information and Processing - 1.8% | ||||||
Deluxe Corporation |
3,500 | 115,115 | ||||
FactSet Research Systems |
35,350 | 1,968,995 | ||||
Global Payments |
68,500 | 3,186,620 | ||||
Interactive Data |
134,300 | 4,433,243 | ||||
55,000 | 2,112,000 | |||||
14,420 | 123,579 | |||||
SEI Investments |
282,400 | 9,084,808 | ||||
21,024,360 | ||||||
Insurance Brokers - 1.3% | ||||||
Brown & Brown |
115,000 | 2,702,500 | ||||
Crawford & Company Cl. A a |
289,200 | 1,012,200 | ||||
Crawford & Company Cl. B a |
162,300 | 673,545 | ||||
25,000 | 802,750 | |||||
7,000 | 856,940 | |||||
Gallagher (Arthur J.) & Co. |
111,200 | 2,689,928 | ||||
Hilb Rogal & Hobbs |
155,050 | 6,290,379 | ||||
National Financial Partners |
22,000 | 1,003,420 | ||||
16,031,662 | ||||||
Investment Management - 8.7% | ||||||
Aberdeen Asset Management |
855,000 | 2,850,593 | ||||
ADDENDA Capital |
150,900 | 3,440,144 | ||||
15,600 | 1,832,376 | |||||
AllianceBernstein Holding L.P. |
333,100 | 25,065,775 | ||||
Anima |
700,000 | 2,172,692 | ||||
Ashmore Group |
80,000 | 424,532 | ||||
Australian Wealth Management |
231,000 | 508,802 | ||||
Azimut Holding |
40,000 | 512,870 | ||||
227,050 | 504,051 |
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. | 2007 Annual Report to Stockholders | 21 |
Royce Value Trust
Schedule of Investments |
SHARES | VALUE | |||||
Financial Services (continued) | ||||||
Investment Management (continued) | ||||||
Calamos Asset Management Cl. A |
45,000 | $ | 1,340,100 | |||
Candover Investments |
21,000 | 744,702 | ||||
CapMan Cl. B |
550,000 | 2,607,310 | ||||
Coronation Fund Managers |
250,000 | 297,436 | ||||
Deutsche Beteiligungs |
90,000 | 2,815,084 | ||||
Eaton Vance |
150,200 | 6,820,582 | ||||
Equity Trustees |
19,392 | 536,693 | ||||
Evercore Partners Cl. A |
283,100 | 6,100,805 | ||||
F&C Asset Management |
150,000 | 571,697 | ||||
Federated Investors Cl. B |
161,900 | 6,663,804 | ||||
Fiducian Portfolio Services |
150,000 | 363,039 | ||||
GAMCO Investors Cl. A |
158,600 | 10,975,120 | ||||
GP Investments BDR |
85,000 | 3,824,908 | ||||
Gimv |
12,200 | 829,317 | ||||
333,350 | 1,500,075 | |||||
JAFCO |
37,300 | 1,221,810 | ||||
MVC Capital |
473,200 | 7,637,448 | ||||
New Star Asset Management Group |
93,000 | 327,155 | ||||
Onex Corporation |
50,000 | 1,772,633 | ||||
Perpetual |
10,000 | 582,339 | ||||
RHJ International a |
177,500 | 2,899,795 | ||||
Rathbone Brothers |
24,500 | 510,301 | ||||
SPARX Group |
6,900 | 3,281,794 | ||||
Schroders |
21,000 | 540,357 | ||||
Trust Company |
55,000 | 564,806 | ||||
102,640,945 | ||||||
Specialty Finance - 0.6% | ||||||
216,601 | 4,477,143 | |||||
MCG Capital |
138,000 | 1,599,420 | ||||
NGP Capital Resources |
50,000 | 781,500 | ||||
6,858,063 | ||||||
Total (Cost $131,055,254) | 162,385,204 | |||||
Health 7.6% | ||||||
Commercial Services - 1.3% | ||||||
313,700 | 15,151,710 | |||||
Drugs and Biotech - 2.0% | ||||||
172,000 | 791,200 | |||||
10,000 | 231,400 | |||||
Biovail Corporation |
41,200 | 554,552 | ||||
155,000 | 4,133,850 | |||||
589,900 | 483,718 | |||||
150,000 | 111,000 | |||||
90,000 | 939,600 | |||||
51,500 | 1,469,810 | |||||
20,000 | 383,200 | |||||
100,000 | 1,498,000 | |||||
Mylan Laboratories c |
52,200 | 733,932 | ||||
50,000 | 2,321,000 | |||||
Origin Agritech a |
28,600 | 189,046 | ||||
Perrigo Company |
191,950 | 6,720,170 | ||||
383,000 | 555,350 | |||||
10,000 | 392,100 | |||||
QLT a |
114,070 | 504,189 | ||||
27,200 | 139,264 | |||||
582,000 | 1,146,540 | |||||
163,300 | 845,894 | |||||
24,143,815 | ||||||
SHARES | VALUE | |||||
Health Services - 1.1% | ||||||
Albany Molecular Research a |
85,000 | $ | 1,222,300 | |||
Cross Country Healthcare a |
30,000 | 427,200 | ||||
20,000 | 506,200 | |||||
Gentiva Health Services a |
30,150 | 574,056 | ||||
50,000 | 1,660,500 | |||||
Lincare Holdings a |
52,562 | 1,848,080 | ||||
MedQuist a |
73,893 | 694,594 | ||||
375,400 | 2,631,554 | |||||
Paramount Acquisition (Units) a |
280,000 | 2,142,000 | ||||
65,460 | 1,646,974 | |||||
13,353,458 | ||||||
Medical Products and Devices - 3.0% | ||||||
201,112 | 1,458,062 | |||||
10,000 | 480,500 | |||||
Atrion Corporation |
15,750 | 2,008,125 | ||||
Bruker BioSciences a |
370,200 | 4,923,660 | ||||
Coloplast Cl. B |
17,000 | 1,459,196 | ||||
81,500 | 1,883,465 | |||||
Golden Meditech |
113,600 | 50,339 | ||||
IDEXX Laboratories a |
158,000 | 9,263,540 | ||||
Invacare Corporation |
103,100 | 2,598,120 | ||||
STERIS Corporation |
98,600 | 2,843,624 | ||||
445,500 | 516,780 | |||||
Waters Corporation a |
75,990 | 6,008,529 | ||||
Young Innovations |
62,550 | 1,495,571 | ||||
40,400 | 1,079,488 | |||||
36,068,999 | ||||||
Personal Care - 0.2% | ||||||
Nutraceutical International a |
22,800 | 302,100 | ||||
38,900 | 1,442,412 | |||||
1,744,512 | ||||||
Total (Cost $54,659,716) | 90,462,494 | |||||
Industrial Products 19.3% | ||||||
Automotive - 1.6% |
||||||
158,100 | 6,727,155 | |||||
ElringKlinger |
20,000 | 2,485,463 | ||||
22,500 | 321,525 | |||||
International Textile Group a |
85,000 | 255,000 | ||||
375,000 | 7,882,500 | |||||
Quantam Fuel Systems |
||||||
15,500 | 7,440 | |||||
26,700 | 195,444 | |||||
Superior Industries International |
52,000 | 944,840 | ||||
18,819,367 | ||||||
Building Systems and Components - 1.3% | ||||||
4,100 | 164,451 | |||||
Decker Manufacturing |
6,022 | 207,759 | ||||
Heywood Williams Group a |
958,837 | 873,550 | ||||
NCI Building Systems a |
10,000 | 287,900 | ||||
Preformed Line Products |
91,600 | 5,450,200 | ||||
Simpson Manufacturing |
250,800 | 6,668,772 | ||||
Somfy |
6,000 | 1,756,197 | ||||
15,408,829 | ||||||
Construction Materials - 1.5% | ||||||
Ash Grove Cement Cl. B |
50,518 | 12,680,018 | ||||
Duratex |
61,000 | 1,476,542 | ||||
Nice |
200,000 | 1,066,144 |
22 | 2007 Annual Report to Stockholders | THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. |
December 31, 2007
SHARES | VALUE | |||||
Industrial Products (continued) | ||||||
Construction Materials (continued) | ||||||
Pretoria Portland Cement Company |
300,000 | $ | 1,916,049 | |||
25,000 | 894,750 | |||||
18,033,503 | ||||||
Industrial Components - 1.4% | ||||||
Barnes Group |
20,000 | 667,800 | ||||
CLARCOR |
83,500 | 3,170,495 | ||||
Donaldson Company |
92,800 | 4,304,064 | ||||
64,790 | 1,150,022 | |||||
PerkinElmer |
135,000 | 3,512,700 | ||||
Powell Industries a |
92,400 | 4,072,068 | ||||
II-VI a |
13,500 | 412,425 | ||||
17,289,574 | ||||||
Machinery - 6.8% | ||||||
Astec Industries a |
3,900 | 145,041 | ||||
Baldor Electric |
62,900 | 2,117,214 | ||||
Bell Equipment |
160,000 | 1,236,260 | ||||
Burnham Holdings Cl. B |
36,000 | 520,200 | ||||
243,500 | 6,104,545 | |||||
Diebold |
73,600 | 2,132,928 | ||||
Exco Technologies |
91,000 | 363,281 | ||||
Federal Signal |
58,600 | 657,492 | ||||
Franklin Electric |
104,800 | 4,010,696 | ||||
Graco |
106,825 | 3,980,299 | ||||
Hardinge |
26,193 | 439,519 | ||||
Haulotte Group |
20,000 | 593,769 | ||||
IDEX Corporation |
54,000 | 1,951,020 | ||||
23,000 | 467,130 | |||||
Lincoln Electric Holdings |
188,680 | 13,430,242 | ||||
Manitou BF |
65,000 | 2,972,798 | ||||
Mueller Water Products Cl. A |
72,500 | 690,200 | ||||
Nordson Corporation |
172,200 | 9,980,712 | ||||
OSG Corporation |
20,000 | 218,780 | ||||
Pfeiffer Vacuum Technology |
49,000 | 3,925,300 | ||||
256,000 | 12,316,160 | |||||
Takatori Corporation |
40,000 | 188,640 | ||||
Vacon |
50,000 | 2,026,232 | ||||
37,499 | 641,608 | |||||
Woodward Governor |
144,800 | 9,839,160 | ||||
80,949,226 | ||||||
Metal Fabrication and Distribution - 1.7% | ||||||
Commercial Metals |
36,600 | 1,077,870 | ||||
CompX International Cl. A |
292,300 | 4,273,426 | ||||
Gerdau Ameristeel |
61,100 | 868,842 | ||||
Kaydon Corporation |
150,800 | 8,224,632 | ||||
Metal Management |
3,500 | 159,355 | ||||
NN |
197,100 | 1,856,682 | ||||
45,000 | 1,955,700 | |||||
Reliance Steel & Aluminum |
25,920 | 1,404,864 | ||||
Sims Group |
860 | 20,155 | ||||
19,841,526 | ||||||
Miscellaneous Manufacturing - 3.0% | ||||||
Brady Corporation Cl. A |
228,400 | 8,014,556 | ||||
Matthews International Cl. A |
100,000 | 4,687,000 | ||||
28,700 | 3,266,060 | |||||
Myers Industries |
30,499 | 441,321 | ||||
Peerless Manufacturing a |
252,600 | 10,404,594 |
SHARES | VALUE | |||||
Raven Industries |
86,200 | $ | 3,309,218 | |||
Semperit AG Holding |
46,275 | 1,688,800 | ||||
Solar Integrated Technologies a |
75,000 | 149,279 | ||||
Synalloy Corporation |
198,800 | 3,417,372 | ||||
35,378,200 | ||||||
Paper and Packaging - 0.5% | ||||||
Guala Closures |
300,000 | 1,811,654 | ||||
Mayr-Melnhof Karton |
36,000 | 3,892,304 | ||||
Peak International a |
408,400 | 906,648 | ||||
6,610,606 | ||||||
Specialty Chemicals and Materials - 1.3% | ||||||
Aceto Corporation |
119,710 | 957,680 | ||||
American Vanguard |
26,666 | 462,655 | ||||
Cabot Corporation |
207,500 | 6,918,050 | ||||
6,400 | 101,696 | |||||
10,000 | 226,500 | |||||
Hawkins |
206,878 | 3,103,170 | ||||
Lydall a |
35,500 | 373,460 | ||||
Schulman (A.) |
143,100 | 3,083,805 | ||||
Sensient Technologies |
22,000 | 622,160 | ||||
Spartech Corporation |
5,000 | 70,500 | ||||
15,919,676 | ||||||
Textiles - 0.1% | ||||||
Unifi a |
145,100 | 351,142 | ||||
Other Industrial Products - 0.1% | ||||||
Distributed Energy Systems a |
32,000 | 12,800 | ||||
Total (Cost $118,482,732) | 228,614,449 | |||||
Industrial Services 15.2% | ||||||
Advertising and Publishing - 1.5% | ||||||
71,900 | 4,084,639 | |||||
510,000 | 4,136,100 | |||||
Lamar Advertising Cl. A |
38,000 | 1,826,660 | ||||
60,000 | 584,400 | |||||
130,000 | 4,535,700 | |||||
45,000 | 985,500 | |||||
150,000 | 1,050,000 | |||||
17,202,999 | ||||||
Commercial Services - 5.7% | ||||||
Allied Waste Industries a |
188,800 | 2,080,576 | ||||
Anacomp Cl. A a |
24,000 | 56,400 | ||||
30,000 | 369,000 | |||||
50,000 | 1,407,500 | |||||
5,000 | 34,200 | |||||
121,000 | 1,991,660 | |||||
106,500 | 1,640,100 | |||||
Diamond Management & |
||||||
Technology Consultants |
80,400 | 584,508 | ||||
5,000 | 82,350 | |||||
Forrester Research a |
40,300 | 1,129,206 | ||||
13,100 | 153,794 | |||||
Hewitt Associates Cl. A a |
208,720 | 7,991,889 | ||||
ITT Educational Services a |
72,000 | 6,139,440 | ||||
234,262 | 8,672,379 | |||||
Landauer |
117,900 | 6,113,115 | ||||
Learning Tree International a |
53,400 | 1,226,064 | ||||
MPS Group a |
564,600 | 6,176,724 |
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. | 2007 Annual Report to Stockholders | 23 |
Schedule of Investments |
SHARES | VALUE | |||||
Industrial Services (continued) | ||||||
Commercial Services (continued) | ||||||
MAXIMUS |
127,900 | $ | 4,938,219 | |||
Monster Worldwide a |
24,800 | 803,520 | ||||
New Horizons Worldwide a |
228,600 | 365,760 | ||||
Sothebys |
367,200 | 13,990,320 | ||||
53,000 | 385,840 | |||||
2,100 | 92,736 | |||||
TRC Companies a |
3,600 | 28,800 | ||||
8,200 | 174,414 | |||||
2,500 | 31,250 | |||||
Viad Corporation |
9,025 | 285,010 | ||||
30,000 | 1,064,700 | |||||
68,009,474 | ||||||
Engineering and Construction - 1.6% | ||||||
Boskalis Westminster |
40,000 | 2,429,948 | ||||
15,000 | 9,900 | |||||
9,800 | 484,610 | |||||
35,500 | 946,075 | |||||
6,500 | 153,595 | |||||
Fleetwood Enterprises a |
234,300 | 1,401,114 | ||||
137,000 | 2,027,600 | |||||
340,400 | 6,396,116 | |||||
KBR a |
140,000 | 5,432,000 | ||||
19,280,958 | ||||||
Food and Tobacco Processors - 0.4% | ||||||
Astral Foods |
10,000 | 222,251 | ||||
MGP Ingredients |
127,400 | 1,200,108 | ||||
10,000 | 268,700 | |||||
80,000 | 1,900,000 | |||||
13,251 | 293,642 | |||||
3,884,701 | ||||||
Industrial Distribution - 2.6% | ||||||
Central Steel & Wire |
6,062 | 3,788,750 | ||||
MSC Industrial Direct Cl. A |
74,300 | 3,006,921 | ||||
Manutan International |
6,445 | 546,249 | ||||
Ritchie Bros. Auctioneers |
286,400 | 23,685,280 | ||||
31,027,200 | ||||||
Printing - 0.1% | ||||||
Bowne & Co. |
68,100 | 1,198,560 | ||||
Transportation and Logistics - 3.3% | ||||||
Alexander & Baldwin |
60,000 | 3,099,600 | ||||
9,900 | 160,776 | |||||
20,100 | 1,089,822 | |||||
C. H. Robinson Worldwide |
80,000 | 4,329,600 | ||||
Forward Air |
269,750 | 8,408,107 | ||||
Frozen Food Express Industries |
286,635 | 1,691,146 | ||||
10,000 | 22,582 | |||||
174,400 | 4,635,552 | |||||
Landstar System |
96,200 | 4,054,830 | ||||
Patriot Transportation Holding a |
80,300 | 7,406,069 | ||||
UTI Worldwide |
112,900 | 2,212,840 | ||||
Universal Truckload Services a |
115,100 | 2,205,316 | ||||
39,316,240 | ||||||
Total (Cost $103,117,245) | 179,920,132 | |||||
SHARES | VALUE | |||||
Natural Resources 9.9% | ||||||
Energy Services - 5.1% | ||||||
29,400 | $ | 2,947,056 | ||||
50,000 | 662,000 | |||||
Carbo Ceramics |
155,200 | 5,773,440 | ||||
10,000 | 1,247,200 | |||||
Ensign Energy Services |
126,300 | 1,951,543 | ||||
326,000 | 1,489,820 | |||||
157,500 | 12,883,500 | |||||
Global Industries a |
54,500 | 1,167,390 | ||||
34,226 | 1,420,379 | |||||
Helmerich & Payne |
80,600 | 3,229,642 | ||||
464,500 | 7,329,810 | |||||
National Fuel Gas |
32,500 | 1,517,100 | ||||
Particle Drilling Technologies a |
61,500 | 158,670 | ||||
Pioneer Drilling a |
6,000 | 71,280 | ||||
147,000 | 13,632,780 | |||||
10,000 | 50,200 | |||||
68,000 | 1,058,760 | |||||
3,600 | 133,272 | |||||
103,800 | 3,974,502 | |||||
60,698,344 | ||||||
Oil and Gas - 1.1% | ||||||
Bill Barrett a |
50,000 | 2,093,500 | ||||
41,700 | 2,283,075 | |||||
Cimarex Energy |
145,490 | 6,187,690 | ||||
Falcon Oil & Gas a |
360,000 | 125,842 | ||||
Penn Virginia |
32,880 | 1,434,554 | ||||
61,400 | 0 | |||||
5,000 | 71,500 | |||||
330,800 | 241,484 | |||||
W&T Offshore |
25,000 | 749,000 | ||||
13,186,645 | ||||||
Precious Metals and Mining - 2.5% | ||||||
Agnico-Eagle Mines |
34,000 | 1,857,420 | ||||
Centerra Gold a |
30,000 | 382,086 | ||||
Etruscan Resources a |
745,900 | 1,677,793 | ||||
198,300 | 1,588,383 | |||||
175,000 | 553,000 | |||||
Hecla Mining a |
490,500 | 4,586,175 | ||||
IAMGOLD Corporation |
335,620 | 2,718,522 | ||||
189,000 | 1,013,040 | |||||
140,000 | 1,502,200 | |||||
110,286 | 2,029,262 | |||||
650,000 | 2,065,541 | |||||
Northam Platinum |
500,000 | 2,928,081 | ||||
Northgate Minerals a |
100,000 | 303,000 | ||||
NovaGold Resources a |
40,000 | 326,400 | ||||
41,000 | 1,432,130 | |||||
Randgold Resources ADR |
53,000 | 1,967,890 | ||||
Royal Gold |
34,400 | 1,049,888 | ||||
Yamana Gold |
171,635 | 2,220,957 | ||||
30,201,768 | ||||||
Real Estate - 1.2% | ||||||
Alico |
27,000 | 985,500 | ||||
Consolidated-Tomoka Land |
13,564 | 850,192 | ||||
75,200 | 2,528,224 |
24 | 2007 Annual Report to Stockholders | THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. |
December 31, 2007
SHARES | VALUE | |||||
Natural Resources (continued) | ||||||
Real Estate (continued) | ||||||
The St. Joe Company c |
180,100 | $ | 6,395,351 | |||
70,000 | 2,859,500 | |||||
13,618,767 | ||||||
Total (Cost $68,303,929) | 117,705,524 | |||||
Technology 23.3% | ||||||
Aerospace and Defense - 0.9% | ||||||
45,000 | 939,150 | |||||
2,400 | 58,080 | |||||
Astronics Corporation a |
52,400 | 2,227,000 | ||||
10,000 | 366,500 | |||||
Ducommun a |
117,200 | 4,453,600 | ||||
47,500 | 1,153,300 | |||||
Integral Systems |
39,876 | 927,516 | ||||
10,125,146 | ||||||
Components and Systems - 5.8% | ||||||
Analogic Corporation |
40,135 | 2,717,942 | ||||
Belden |
57,800 | 2,572,100 | ||||
208,200 | 3,691,386 | |||||
Checkpoint Systems a |
56,060 | 1,456,439 | ||||
2,000 | 43,680 | |||||
Dionex Corporation a |
81,000 | 6,711,660 | ||||
25,000 | 562,000 | |||||
105,500 | 3,550,075 | |||||
168,500 | 4,566,350 | |||||
47,500 | 1,250,200 | |||||
Imation Corporation |
15,700 | 329,700 | ||||
InFocus Corporation a |
228,100 | 415,142 | ||||
KEMET Corporation a |
95,600 | 633,828 | ||||
Methode Electronics |
50,000 | 822,000 | ||||
Nam Tai Electronics |
16,500 | 185,955 | ||||
592,200 | 7,574,238 | |||||
40,000 | 144,000 | |||||
397,400 | 4,200,518 | |||||
Plexus Corporation a |
325,700 | 8,552,882 | ||||
32,500 | 559,975 | |||||
Richardson Electronics |
116,700 | 818,067 | ||||
13,200 | 134,376 | |||||
221,400 | 2,581,524 | |||||
Technitrol |
311,200 | 8,894,096 | ||||
35,000 | 959,350 | |||||
186,000 | 2,122,260 | |||||
Zebra Technologies Cl. A a |
76,525 | 2,655,418 | ||||
68,705,161 | ||||||
Distribution - 0.8% | ||||||
Agilysys |
165,125 | 2,496,690 | ||||
Anixter International a |
61,795 | 3,847,975 | ||||
86,500 | 3,262,780 | |||||
9,607,445 | ||||||
Internet Software and Services - 1.3% | ||||||
87,200 | 527,560 | |||||
12,000 | 58,440 | |||||
173,500 | 2,271,115 | |||||
155,400 | 1,420,356 | |||||
CryptoLogic |
68,500 | 1,202,175 |
SHARES | VALUE | |||||
10,000 | $ | 177,700 | ||||
55,200 | 390,264 | |||||
144,890 | 1,206,934 | |||||
268,400 | 1,089,704 | |||||
43,420 | 919,201 | |||||
525,000 | 2,005,500 | |||||
8,300 | 50,547 | |||||
Lionbridge Technologies a |
37,500 | 133,125 | ||||
10,000 | 157,400 | |||||
256,900 | 1,564,521 | |||||
SkyTerra Communications a |
62,200 | 422,960 | ||||
Stamps.com a |
12,400 | 151,032 | ||||
SupportSoft a |
220,000 | 979,000 | ||||
24,800 | 932,728 | |||||
15,660,262 | ||||||
IT Services - 3.2% | ||||||
Alten a |
64,000 | 2,444,611 | ||||
answerthink a |
655,000 | 3,170,200 | ||||
529,100 | 1,497,353 | |||||
Black Box |
47,000 | 1,699,990 | ||||
10,000 | 447,700 | |||||
CIBER a |
10,000 | 61,100 | ||||
204,200 | 4,841,582 | |||||
101,100 | 559,083 | |||||
Gartner a |
213,000 | 3,740,280 | ||||
20,000 | 466,400 | |||||
165,100 | 2,228,850 | |||||
806,602 | 7,106,164 | |||||
Syntel |
152,679 | 5,881,195 | ||||
219,800 | 3,817,926 | |||||
25,900 | 336,441 | |||||
38,298,875 | ||||||
Semiconductors and Equipment - 4.6% | ||||||
42,200 | 172,176 | |||||
Advanced Energy Industries a |
19,500 | 255,060 | ||||
8,975 | 78,441 | |||||
Axcelis Technologies a |
135,000 | 621,000 | ||||
58,000 | 313,200 | |||||
Brooks Automation a |
15,152 | 200,158 | ||||
CEVA a |
31,666 | 385,375 | ||||
Cabot Microelectronics a |
131,200 | 4,711,392 | ||||
Cognex Corporation |
236,200 | 4,759,430 | ||||
115,000 | 1,403,000 | |||||
Diodes a |
297,450 | 8,944,321 | ||||
Dolby Laboratories Cl. A a |
173,900 | 8,646,308 | ||||
232,576 | 1,853,631 | |||||
Fairchild Semiconductor International a |
51,200 | 738,816 | ||||
Himax Technologies ADR |
121,000 | 516,670 | ||||
8,310 | 144,428 | |||||
23,900 | 270,309 | |||||
120,000 | 4,076,400 | |||||
57,450 | 835,323 | |||||
Jazz Technologies (Units) a |
805,000 | 1,408,750 | ||||
Kulicke & Soffa Industries a |
105,800 | 725,788 | ||||
Maxwell Technologies a |
21,500 | 177,805 | ||||
Micrel |
7,600 | 64,220 | ||||
12,000 | 330,840 | |||||
19,200 | 170,496 |
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. | 2007 Annual Report to Stockholders | 25 |
Schedule of Investments |
SHARES | VALUE | |||||
Technology (continued) | ||||||
Semiconductors and Equipment (continued) | ||||||
58,000 | $ | 1,084,600 | ||||
49,000 | 1,687,070 | |||||
200,000 | 364,000 | |||||
Semitool a |
50,000 | 434,000 | ||||
Staktek Holdings a |
184,700 | 356,471 | ||||
7,900 | 328,640 | |||||
17,300 | 113,488 | |||||
27,900 | 184,977 | |||||
Vaisala Cl. A |
90,000 | 4,676,314 | ||||
65,000 | 1,085,500 | |||||
270,000 | 1,015,200 | |||||
100,000 | 835,000 | |||||
53,968,597 | ||||||
Software - 4.2% | ||||||
ACI Worldwide a |
233,150 | 4,439,176 | ||||
100,000 | 4,146,000 | |||||
244,300 | 13,216,630 | |||||
Aspen Technology a |
27,100 | 439,562 | ||||
71,000 | 2,012,140 | |||||
65,610 | 1,035,326 | |||||
280,000 | 842,800 | |||||
Datasul |
150,000 | 1,586,811 | ||||
79,900 | 941,222 | |||||
99,900 | 2,043,954 | |||||
50,000 | 649,500 | |||||
119,400 | 5,232,108 | |||||
50,000 | 1,468,000 | |||||
Pegasystems |
25,000 | 298,250 | ||||
PLATO Learning a |
149,642 | 594,079 | ||||
30,500 | 1,027,240 | |||||
Renaissance Learning |
15,000 | 210,000 | ||||
SPSS a |
179,600 | 6,449,436 | ||||
82,600 | 2,155,034 | |||||
25,800 | 727,302 | |||||
40,000 | 782,000 | |||||
50,296,570 | ||||||
Telecommunications - 2.5% | ||||||
ADTRAN |
65,000 | 1,389,700 | ||||
2,584,100 | 8,734,258 | |||||
27,600 | 275,448 | |||||
Catapult Communications a |
87,100 | 657,605 | ||||
3,700 | 32,708 | |||||
3,500 | 56,385 | |||||
35,000 | 30,100 | |||||
298,600 | 5,231,472 | |||||
50,000 | 400,000 | |||||
Globecomm Systems a |
233,700 | 2,734,290 | ||||
40,000 | 4,038,000 | |||||
IDT Corporation |
108,400 | 856,360 | ||||
IDT Corporation Cl. B |
95,000 | 802,750 | ||||
401,341 | 1,220,077 | |||||
380,000 | 615,600 | |||||
4,300 | 69,660 | |||||
3,500 | 53,725 | |||||
191,000 | 733,440 | |||||
8,200 | 102,500 |
SHARES | VALUE | |||||
20,000 | $ | 160,400 | ||||
50,000 | 137,500 | |||||
850,000 | 994,500 | |||||
29,326,478 | ||||||
Total (Cost $215,679,104) | 275,988,534 | |||||
Utilities 0.2% | ||||||
CH Energy Group |
44,500 | 1,982,030 | ||||
Southern Union |
11,576 | 339,871 | ||||
Total (Cost $2,127,413) | 2,321,901 | |||||
Miscellaneous e 3.7% | ||||||
Total (Cost $45,763,150) | 5,071,856 | 43,453,014 | ||||
TOTAL COMMON STOCKS | ||||||
(Cost $946,682,909) |
1,343,649,225 | |||||
PREFERRED STOCKS 0.2% | ||||||
Duratex |
45,300 | 992,274 | ||||
85,000 | 1,816,875 | |||||
TOTAL PREFERRED STOCKS | ||||||
(Cost $2,098,530) |
2,809,149 | |||||
PRINCIPAL | ||||||
AMOUNT | ||||||
CORPORATE BOND 0.1% | ||||||
Dixie Group 7.00% |
||||||
Conv. Sub. Deb. due 5/15/12 |
$ | 352,000 | 330,880 | |||
(Cost $298,162) |
330,880 | |||||
REPURCHASE AGREEMENTS 8.0% | ||||||
State Street Bank & Trust Company, | ||||||
4.00% dated 12/31/07, due 1/2/08, |
||||||
maturity value $24,842,519 (collateralized |
||||||
by obligations of various U.S. Government |
||||||
Agencies, valued at $27,965,000) |
||||||
(Cost $24,837,000) |
24,837,000 | |||||
Lehman Brothers (Tri-Party), | ||||||
4.125% dated 12/31/07, due 1/2/08, |
||||||
maturity value $70,016,042 (collateralized |
||||||
by obligations of various U.S. Government |
||||||
Agencies, valued at $71,420,955) |
||||||
(Cost $70,000,000) |
70,000,000 | |||||
TOTAL REPURCHASE AGREEMENTS | ||||||
(Cost $94,837,000) |
94,837,000 | |||||
COLLATERAL RECEIVED FOR SECURITIES | ||||||
LOANED 13.2% |
||||||
Fannie Mae-Notes 5.20% | ||||||
due 9/18/12 |
2,317 | 2,352 | ||||
Federal National Mortgage Association-Bonds | ||||||
3.75%-5.50% |
||||||
due 7/25/08-2/16/12 |
84,536 | 85,955 | ||||
Freddie Mac-Notes 6.01% | ||||||
due 4/11/17 |
141,291 | 143,199 |
26 | 2007 Annual Report to Stockholders | THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. |
December 31, 2007
PRINCIPAL | ||||||||
AMOUNT | VALUE | |||||||
COLLATERAL RECEIVED FOR SECURITIES | ||||||||
LOANED (continued) |
||||||||
U.S. Treasury Bonds 2.00%-12.00% | ||||||||
due 8/15/13-4/15/29 |
$ | 47,496 | $ | 47,938 | ||||
U.S. Treasury Notes 0.875%-3.625% | ||||||||
due 11/15/08-1/15/17 |
361,382 | 364,001 | ||||||
U.S. Treasury Strip-Principal | ||||||||
due 11/15/18-11/15/21 |
7,082 | 7,082 | ||||||
Money Market Funds | ||||||||
State Street Navigator Securities Lending |
||||||||
Prime Portfolio (7 day yield-4.884%) |
156,104,190 | |||||||
(Cost $156,754,717) |
||||||||
156,754,717 | ||||||||
TOTAL INVESTMENTS 134.9% | ||||||||
(Cost $1,200,671,318) |
1,598,380,971 | |||||||
LIABILITIES LESS CASH | ||||||||
AND OTHER ASSETS (16.3)% |
(193,711,646 | ) | ||||||
PREFERRED STOCK (18.6)% | (220,000,000 | ) | ||||||
NET ASSETS APPLICABLE TO | ||||||||
COMMON STOCKHOLDERS 100.0% |
$ | 1,184,669,325 | ||||||
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. | 2007 Annual Report to Stockholders | 27 |
Royce Value Trust | December 31, 2007 |
Statement of Assets and Liabilities |
ASSETS: | ||||||||
Investments at value (including collateral on loaned securities)* | ||||||||
Non-Affiliated Companies (cost $1,095,966,865) |
$ | 1,493,676,681 | ||||||
Affiliated Companies (cost $9,867,453) |
9,867,290 | |||||||
Total investments at value | 1,503,543,971 | |||||||
Repurchase agreements (at cost and value) | 94,837,000 | |||||||
Cash and foreign currency | 65,126 | |||||||
Receivable for investments sold | 4,525,804 | |||||||
Receivable for dividends and interest | 1,159,259 | |||||||
Prepaid expenses and other assets | 219,267 | |||||||
Total Assets |
1,604,350,427 | |||||||
LIABILITIES: | ||||||||
Payable for collateral on loaned securities | 156,754,717 | |||||||
Payable for investments purchased | 40,867,310 | |||||||
Payable for investment advisory fee | 1,501,323 | |||||||
Preferred dividends accrued but not yet declared | 288,445 | |||||||
Accrued expenses | 269,307 | |||||||
Total Liabilities |
199,681,102 | |||||||
PREFERRED STOCK: | ||||||||
5.90% Cumulative Preferred Stock - $0.001 par value, $25 liquidation value per share; 8,800,000 shares outstanding | 220,000,000 | |||||||
Total Preferred Stock |
220,000,000 | |||||||
NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS | $ | 1,184,669,325 | ||||||
ANALYSIS OF NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS: | ||||||||
Common Stock paid-in capital - $0.001 par value per share; 60,008,412 shares outstanding (150,000,000 shares authorized) | $ | 770,137,285 | ||||||
Undistributed net investment income (loss) | (156,056 | ) | ||||||
Accumulated net realized gain (loss) on investments and foreign currency | 17,254,738 | |||||||
Net unrealized appreciation (depreciation) on investments and foreign currency | 397,721,807 | |||||||
Preferred dividends accrued but not yet declared | (288,449 | ) | ||||||
Net Assets applicable to Common Stockholders (net asset value per share - $19.74) |
$ | 1,184,669,325 | ||||||
*Investments at identified cost (including $156,754,717 of collateral on loaned securities) | $ | 1,105,834,318 | ||||||
Market value of loaned securities | 151,159,025 |
28 | 2007 Annual Report to Stockholders | THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. |
Royce Value Trust | Year Ended December 31, 2007 |
Statement of Operations |
INVESTMENT INCOME: | ||||||||
Income: | ||||||||
Dividends* |
||||||||
Non-Affiliated Companies |
$ | 12,758,425 | ||||||
Affiliated Companies |
51,750 | |||||||
Interest |
8,760,817 | |||||||
Securities lending |
652,471 | |||||||
Total income | 22,223,463 | |||||||
Expenses: | ||||||||
Investment advisory fees |
15,881,749 | |||||||
Stockholder reports |
381,343 | |||||||
Custody and transfer agent fees |
220,021 | |||||||
Directors fees |
119,574 | |||||||
Professional fees |
110,879 | |||||||
Administrative and office facilities expenses |
103,714 | |||||||
Other expenses |
172,860 | |||||||
Total expenses | 16,990,140 | |||||||
Compensating balance credits | (64,195 | ) | ||||||
Net expenses | 16,925,945 | |||||||
Net investment income (loss) | 5,297,518 | |||||||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY: | ||||||||
Net realized gain (loss) on investments and foreign currency | ||||||||
Non-Affiliated Companies |
116,339,798 | |||||||
Affiliated Companies |
5,343,533 | |||||||
Net change in unrealized appreciation (depreciation) on investments and foreign currency | (56,217,996 | ) | ||||||
Net realized and unrealized gain (loss) on investments and foreign currency | 65,465,335 | |||||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM INVESTMENT OPERATIONS | 70,762,853 | |||||||
DISTRIBUTIONS TO PREFERRED STOCKHOLDERS | (12,980,000 | ) | ||||||
NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS | ||||||||
RESULTING FROM INVESTMENT OPERATIONS |
$ | 57,782,853 | ||||||
* Net of foreign withholding tax of $266,251. |
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. | 2007 Annual Report to Stockholders | 29 |
Statement of Changes in Net Assets |
Year ended | Year ended | |||||||
12/31/07 | 12/31/06 | |||||||
INVESTMENT OPERATIONS: | ||||||||
Net investment income (loss) | $ | 5,297,518 | $ | 6,996,692 | ||||
Net realized gain (loss) on investments and foreign currency | 121,683,331 | 110,169,442 | ||||||
Net change in unrealized appreciation (depreciation) on investments and foreign currency | (56,217,996 | ) | 93,033,099 | |||||
Net increase (decrease) in net assets resulting from investment operations | 70,762,853 | 210,199,233 | ||||||
DISTRIBUTIONS TO PREFERRED STOCKHOLDERS: | ||||||||
Net investment income | (613,954 | ) | (1,020,228 | ) | ||||
Net realized gain on investments and foreign currency | (12,366,046 | ) | (11,959,772 | ) | ||||
Total distributions to Preferred Stockholders | (12,980,000 | ) | (12,980,000 | ) | ||||
NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS | ||||||||
RESULTING FROM INVESTMENT OPERATIONS |
57,782,853 | 197,219,233 | ||||||
DISTRIBUTIONS TO COMMON STOCKHOLDERS: | ||||||||
Net investment income | (5,095,420 | ) | (7,788,658 | ) | ||||
Net realized gain on investments and foreign currency | (102,630,144 | ) | (91,303,684 | ) | ||||
Total distributions to Common Stockholders | (107,725,564 | ) | (99,092,342 | ) | ||||
CAPITAL STOCK TRANSACTIONS: | ||||||||
Reinvestment of distributions to Common Stockholders | 54,184,473 | 50,180,586 | ||||||
Total capital stock transactions | 54,184,473 | 50,180,586 | ||||||
NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS | 4,241,762 | 148,307,477 | ||||||
NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS: | ||||||||
Beginning of year |
1,180,427,563 | 1,032,120,086 | ||||||
End of year (including undistributed net investment income (loss) of $(156,056) at 12/31/07 and | ||||||||
$(1,605,284) at 12/31/06) |
$ | 1,184,669,325 | $ | 1,180,427,563 |
30 | 2007 Annual Report to Stockholders | THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. |
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 Funds performance for the periods presented.
Years ended December 31, | ||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2003 | ||||||||||||||||
NET ASSET VALUE, BEGINNING OF PERIOD | $20.62 | $18.87 | $18.95 | $17.03 | $13.22 | |||||||||||||||
INVESTMENT OPERATIONS: | ||||||||||||||||||||
Net investment income (loss) |
0.09 | 0.13 | 0.01 | (0.08 | ) | (0.05 | ) | |||||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency |
1.13 | 3.63 | 1.75 | 3.81 | 5.64 | |||||||||||||||
Total investment operations |
1.22 | 3.76 | 1.76 | 3.73 | 5.59 | |||||||||||||||
DISTRIBUTIONS TO PREFERRED STOCKHOLDERS: | ||||||||||||||||||||
Net investment income |
(0.01 | ) | (0.02 | ) | | | | |||||||||||||
Net realized gain on investments and foreign currency |
(0.21 | ) | (0.21 | ) | (0.24 | ) | (0.26 | ) | (0.26 | ) | ||||||||||
Total distributions to Preferred Stockholders |
(0.22 | ) | (0.23 | ) | (0.24 | ) | (0.26 | ) | (0.26 | ) | ||||||||||
NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON | ||||||||||||||||||||
STOCKHOLDERS RESULTING FROM INVESTMENT OPERATIONS |
1.00 | 3.53 | 1.52 | 3.47 | 5.33 | |||||||||||||||
DISTRIBUTIONS TO COMMON STOCKHOLDERS: | ||||||||||||||||||||
Net investment income |
(0.09 | ) | (0.14 | ) | | | | |||||||||||||
Net realized gain on investments and foreign currency |
(1.76 | ) | (1.64 | ) | (1.61 | ) | (1.55 | ) | (1.30 | ) | ||||||||||
Total distributions to Common Stockholders |
(1.85 | ) | (1.78 | ) | (1.61 | ) | (1.55 | ) | (1.30 | ) | ||||||||||
CAPITAL STOCK TRANSACTIONS: | ||||||||||||||||||||
Effect of reinvestment of distributions by Common Stockholders |
(0.03 | ) | (0.00 | ) | 0.01 | 0.00 | (0.00 | ) | ||||||||||||
Effect of rights offering and Preferred Stock offering |
| | | | (0.22 | ) | ||||||||||||||
Total capital stock transactions |
(0.03 | ) | (0.00 | ) | 0.01 | 0.00 | (0.22 | ) | ||||||||||||
NET ASSET VALUE, END OF PERIOD | $19.74 | $20.62 | $18.87 | $18.95 | $17.03 | |||||||||||||||
MARKET VALUE, END OF PERIOD | $18.58 | $22.21 | $20.08 | $20.44 | $17.21 | |||||||||||||||
TOTAL RETURN (a): | ||||||||||||||||||||
Market Value | (8.21 | )% | 20.96 | % | 6.95 | % | 29.60 | % | 41.96 | % | ||||||||||
Net Asset Value | 5.04 | % | 19.50 | % | 8.41 | % | 21.42 | % | 40.80 | % | ||||||||||
RATIOS BASED ON AVERAGE NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS: |
||||||||||||||||||||
Total expenses (b,c) | 1.38 | % | 1.29 | % | 1.49 | % | 1.51 | % | 1.49 | % | ||||||||||
Management fee expense (d) |
1.29 | % | 1.20 | % | 1.37 | % | 1.39 | % | 1.34 | % | ||||||||||
Other operating expenses |
0.09 | % | 0.09 | % | 0.12 | % | 0.12 | % | 0.15 | % | ||||||||||
Net investment income (loss) | 0.43 | % | 0.62 | % | 0.03 | % | (0.50 | )% | (0.36 | )% | ||||||||||
SUPPLEMENTAL DATA: | ||||||||||||||||||||
Net Assets Applicable to Common Stockholders, | ||||||||||||||||||||
End of Period (in thousands) |
$1,184,669 | $1,180,428 | $1,032,120 | $993,304 | $850,773 | |||||||||||||||
Liquidation Value of Preferred Stock, | ||||||||||||||||||||
End of Period (in thousands) |
$220,000 | $220,000 | $220,000 | $220,000 | $220,000 | |||||||||||||||
Portfolio Turnover Rate | 26 | % | 21 | % | 31 | % | 30 | % | 23 | % | ||||||||||
PREFERRED STOCK: | ||||||||||||||||||||
Total shares outstanding | 8,800,000 | 8,800,000 | 8,800,000 | 8,800,000 | 8,800,000 | |||||||||||||||
Asset coverage per share | $159.62 | $159.14 | $142.29 | $137.88 | $121.68 | |||||||||||||||
Liquidation preference per share | $25.00 | $25.00 | $25.00 | $25.00 | $25.00 | |||||||||||||||
Average market value per share (e): | ||||||||||||||||||||
5.90% Cumulative |
$23.68 | $23.95 | $24.75 | $24.50 | $25.04 | |||||||||||||||
7.80% Cumulative |
| | | | $25.87 | |||||||||||||||
7.30% Tax-Advantaged Cumulative |
| | | | $25.53 | |||||||||||||||
(a) | 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 reported. Dividends and distributions are assumed for the purposes of
this calculation to be reinvested at prices obtained under the Funds Distribution
Reinvestment and Cash Purchase Plan. Net Asset Value Total Return is calculated
on the same basis, except that the Funds net asset value is used on the purchase
and sale dates instead of market value. |
|
(b) | Expense
ratios based on total average net assets including liquidation value of Preferred
Stock were 1.17%, 1.08%, 1.22%, 1.21%, and 1.19% for the years ended December 31,
2007, 2006, 2005, 2004 and 2003, respectively. |
|
(c) | Expense
ratios based on average net assets applicable to Common Stockholders: before waiver
of fees by the investment adviser would have been 1.62% for the year ended December
31, 2003; before waiver of fees and earnings credits would have been 1.38%, 1.29%,
1.49%, 1.51% and 1.62% for the years ended December 31, 2007, 2006, 2005, 2004 and
2003, respectively. |
|
(d) | The management
fee is calculated based on average net assets over a rolling 60-month basis, while
the above ratios of management fee expenses are based on the average net assets
applicable to Common Stockholders over a 12-month basis. |
|
(e) | The average
of month-end market values during the period that the Preferred Stock was outstanding. |
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. | 2007 Annual Report to Stockholders | 31 |
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. |
|
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 Nasdaqs 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. Securities for which market quotations are not readily available are valued at their fair value under procedures established by the Funds Board of Directors. 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 price of securities used by the Fund may differ from quoted or published prices for the same security. Bonds and other fixed income securities may be valued by reference to other securities with comparable ratings, interest rates and maturities, using established independent pricing services. Investments in money market funds are valued at net asset value per share. |
|
The Fund values its non-U.S. securities in U.S. dollars daily at the prevailing foreign currency exchange rates as quoted by a major bank. The effects of changes in foreign exchange rates on investments and other assets and liabilities are included with net realized and unrealized gains and losses on investments. |
Net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, expiration of currency forward contracts, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Funds 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. |
|
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. |
|
The Fund incurs direct and indirect expenses. Expenses directly attributable to the Fund are charged to the Funds operations, while expenses applicable to more than one of the Royce Funds are allocated equitably. Allocated personnel and occupancy costs related to The Royce Funds are included in administrative and office facilities expenses. 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. |
|
The Fund has an arrangement with its custodian bank, whereby a portion of the custodians fee is paid indirectly by credits earned on the Funds 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. |
|
As a qualified regulated investment company under Subchapter M of the Internal Revenue Code, the Fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. The Schedule of Investments includes information regarding income taxes under the caption Income Tax Information. |
|
The Fund currently has a policy of paying quarterly distributions on the Funds Common Stock. Distributions are currently being made at the annual rate of 9% of the rolling average of the prior four calendar quarter-end NAVs of the Funds Common Stock, with the fourth quarter distribution being the greater of 2.25% of the rolling average or the distribution required by IRS regulations. Distributions to Preferred Stockholders are accrued daily and paid quarterly and distributions to Common Stockholders are recorded on ex-dividend date. The Fund is required to allocate long-term capital gain distributions and other types of income proportionately to distributions made to holders of shares of Common Stock and Preferred Stock. 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 basis differences |
32 | 2007 Annual Report to Stockholders |
Notes to Financial Statements (continued) |
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. |
|
The Fund may enter into repurchase agreements with institutions that the Funds 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 the underlying securities. |
|
The Fund loans securities to qualified institutional investors for the purpose of realizing additional income. Collateral on all securities loaned for the Fund is accepted in cash and cash equivalents and invested temporarily by the custodian. The collateral is equal to 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 adopted Financial Accounting Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48) on June 29, 2007. FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. There was no material impact to the financial statements or disclosures thereto as a result of the adoption of this pronouncement. |
FASB Statement of Financial Accounting Standard No. 157, Fair Value Measurement (FAS 157), provides enhanced guidance for using fair value to measure assets and liabilities. The standard requires companies to provide expanded information about the assets and liabilities measured at fair value and the potential effect of these fair valuations on an entitys financial performance. Adoption of FAS 157 is required for fiscal years beginning after November 15, 2007. The standard is not expected to materially impact the amounts reported in the Funds financial statements, however, additional disclosures will be required in subsequent reports. |
|
The Fund issued 2,749,591 and 2,548,023 shares of Common Stock as reinvestment of distributions by Common Stockholders for the years ended December 31, 2007 and 2006, respectively. |
At December 31, 2007, 8,800,000 shares of 5.90% Cumulative Preferred Stock were outstanding. Commencing October 9, 2008 and thereafter, the Fund, at its option, may redeem the Cumulative Preferred Stock, in whole or in part, at the redemption price. The Cumulative Preferred Stock is classified outside of permanent equity (net assets |
applicable to Common Stockholders) in the accompanying financial statements in accordance with Emerging Issues Task Force (EITF) Topic D-98, Classification and Measurement of Redeemable Securities, that requires preferred securities that are redeemable for cash or other assets to be classified outside of permanent equity to the extent that the redemption is at a fixed or determinable price and at the option of the holder or upon the occurrence of an event that is not solely within the control of the issuer. |
The Fund is required to meet certain asset coverage tests with respect to the Cumulative Preferred Stock as required by the 1940 Act. In addition, pursuant to the Rating Agency Guidelines established by Moodys, the Fund is required to maintain a certain discounted asset coverage. If the Fund fails to meet these requirements and does not correct such failure, the Fund may be required to redeem, in part or in full, the Cumulative Preferred Stock at a redemption price of $25.00 per share, plus an amount equal to the accumulated and unpaid dividends, whether or not declared on such shares, in order to meet these requirements. Additionally, failure to meet the foregoing asset coverage requirements could restrict the Funds ability to pay dividends to Common Stockholders and could lead to sales of portfolio securities at inopportune times. The Fund has met these requirements since issuing the Cumulative Preferred Stock. |
|
As compensation for its services under the Investment Advisory Agreement, Royce & Associates, LLC (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 Funds month-end net assets applicable to Common Stockholders, plus the liquidation value of 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 Funds investment performance for such a performance |
2007 Annual Report to Stockholders | 33 |
Royce Value Trust | |
Notes to Financial Statements (continued) |
period
is less than zero, Royce will not be required to refund to the Fund any fee earned
in respect of any prior performance period. |
For the twelve rolling 60-month periods ended December 2007, the investment performance of the Fund exceeded the investment performance of the S&P 600 by 4% to 26%. Accordingly, the investment advisory fee consisted of a Basic Fee of $11,381,315 and an upward adjustment of $4,500,434 for performance of the Fund above that of the S&P 600. For the year ended December 31, 2007, the Fund accrued and paid Royce advisory fees totaling $15,881,749. |
Distributions
to Stockholders: The tax character of distributions paid to stockholders during 2007 and 2006 was as follows: |
Distributions paid from: |
2007 | 2006 | |||
Ordinary income |
$ | 18,081,695 | $ | 24,577,545 | |
Long-term capital gain |
102,623,869 | 87,494,797 | |||
$ | 120,705,564 | $ | 112,072,342 | ||
Undistributed net investment income |
$ | 2,699,239 | |||
Undistributed long-term capital gain |
18,405,497 | ||||
Unrealized appreciation |
393,723,283 | ||||
Post October currency loss* |
(7,530) | ||||
Accrued preferred distributions |
(288,449) | ||||
$ | 414,532,040 | ||||
*Under current tax law, capital and currency losses realized after October 31, and prior to the Funds fiscal year end, may be deferred as occurring on the first day of the following year.
The difference between book basis and tax basis unrealized appreciation is attributable
primarily to the tax deferral on wash sales and the unrealized gains on investments
in 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, 2007, the Fund
recorded the following permanent reclassifications, which relate primarily to the
current net operating losses. Results of operations and net assets were not affected
by these reclassifications.
Undistributed | Accumulated | |||
Net Investment | Net Realized | Paid-in | ||
Income | Gain (Loss) | Capital | ||
$1,861,084 | $(2,778,414) | $917,330 | ||
Purchases and Sales of Investment Securities: |
For the year
ended December 31, 2007, the cost of purchases and proceeds from sales of investment
securities, other than short-term securities and collateral
received for securities loaned, amounted to $342,412,126 and $336,738,969, respectively. |
Transactions in Shares of 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 companys outstanding
voting securities at any time during the period. The Fund effected the following
transactions in shares of such companies during the year ended December 31, 2007: |
Shares | Market Value | Cost of | Cost of | Realized | Dividend | Shares | Market Value | ||||||||||||||||
Affiliated Company | 12/31/06 | 12/31/06 | Purchases | Sales | Gain (Loss) | Income | 12/31/07 | 12/31/07 | |||||||||||||||
Delta Apparel | | | $ | 4,129,137 | | | | 580,760 | $ | 4,152,434 | |||||||||||||
Highbury Financial* | | | 2,579,878 | $ | 1,098,137 | $ | 26,215 | | |||||||||||||||
Synalloy Corporation* | 345,000 | $ | 6,361,800 | | 761,702 | 5,317,318 | $ | 51,750 | |||||||||||||||
Timberland Bancorp | | | 5,738,316 | | | | 469,200 | 5,714,856 | |||||||||||||||
$ | 6,361,800 | $ | 5,343,533 | $ | 51,750 | $ | 9,867,290 |
* | Not an Affiliated Company at December 31, 2007. |
34 | 2007 Annual Report to Stockholders |
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, 2007, and the related statement
of operations for the year then ended, the statement 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 Funds 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 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 Funds 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, 2007 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. as of December 31, 2007, the results
of its operations 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 22, 2008 |
2007 Annual Report to Stockholders | 35 |
Schedule of Investments |
SHARES | VALUE | ||||
COMMON STOCKS 111.9% | |||||
Consumer Products 5.5% | |||||
Apparel, Shoes and Accessories - 2.0% | |||||
42,900 | $ | 116,259 | |||
Hartmarx Corporation a |
70,000 | 238,700 | |||
14,200 | 0 | ||||
Lazare Kaplan International a |
151,700 | 1,233,321 | |||
Steven Madden a |
21,750 | 435,000 | |||
17,400 | 302,760 | ||||
192,100 | 309,281 | ||||
14,400 | 307,440 | ||||
Weyco Group |
120,000 | 3,300,000 | |||
Yamato International |
40,000 | 275,768 | |||
6,518,529 | |||||
Food/Beverage/Tobacco - 0.9% | |||||
76,800 | 3,125,760 | ||||
Home Furnishing and Appliances - 1.6% | |||||
50,000 | 126,500 | ||||
Cobra Electronics |
10,000 | 47,800 | |||
7,000 | 178,990 | ||||
Flexsteel Industries |
213,500 | 2,562,000 | |||
Lifetime Brands |
42,054 | 545,861 | |||
387,800 | 1,822,660 | ||||
10,000 | 53,500 | ||||
5,337,311 | |||||
Household Products/Wares - 0.3% | |||||
100,000 | 998,000 | ||||
Sports and Recreation - 0.6% | |||||
51,600 | 235,296 | ||||
Monaco Coach |
142,400 | 1,264,512 | |||
Sturm, Ruger & Company a |
45,000 | 372,600 | |||
1,872,408 | |||||
Other Consumer Products - 0.1% | |||||
105,300 | 509,652 | ||||
Total (Cost $13,301,888) | 18,361,660 | ||||
Consumer Services 4.3% | |||||
Direct Marketing - 0.1% | |||||
10,200 | 42,534 | ||||
Leisure and Entertainment - 0.3% | |||||
Ambassadors Group |
15,000 | 274,650 | |||
Ambassadors International c |
6,100 | 88,938 | |||
5,000 | 40,200 | ||||
IMAX Corporation a |
25,000 | 170,500 | |||
28,200 | 308,508 | ||||
20,000 | 166,800 | ||||
1,049,596 | |||||
Media and Broadcasting - 0.3% | |||||
42,700 | 263,459 | ||||
100,000 | 582,000 | ||||
845,459 | |||||
Online Commerce - 0.3% | |||||
FTD Group |
55,000 | 708,400 | |||
26,000 | 242,060 | ||||
950,460 | |||||
SHARES | VALUE | ||||
Restaurants and Lodgings - 0.1% | |||||
800 | $ | 10,200 | |||
111,700 | 250,208 | ||||
44,300 | 163,910 | ||||
424,318 | |||||
Retail Stores - 3.1% | |||||
A.C. Moore Arts & Crafts a |
40,000 | 550,000 | |||
200,000 | 2,510,000 | ||||
Buckle (The) |
35,250 | 1,163,250 | |||
49,300 | 687,735 | ||||
Cache a |
19,200 | 179,328 | |||
Casual Male Retail Group a |
28,800 | 149,184 | |||
Cato Corporation Cl. A |
68,100 | 1,066,446 | |||
Charlotte Russe Holding a |
28,800 | 465,120 | |||
35,300 | 205,446 | ||||
76,700 | 489,346 | ||||
Stein Mart |
198,900 | 942,786 | |||
142,000 | 1,275,160 | ||||
301,000 | 701,330 | ||||
10,385,131 | |||||
Other Consumer Services - 0.1% | |||||
25,200 | 401,688 | ||||
Total (Cost $14,490,585) | 14,099,186 | ||||
Diversified Investment Companies 1.8% | |||||
Closed-End Funds - 1.8% | |||||
ASA |
48,900 | 3,675,813 | |||
Central Fund of Canada Cl. A |
207,000 | 2,243,880 | |||
Total (Cost $2,675,077) | 5,919,693 | ||||
Financial Intermediaries 9.1% | |||||
Banking - 4.5% | |||||
100,000 | 715,000 | ||||
Bancorp (The) a |
50,000 | 673,000 | |||
BB Holdings a |
390,000 | 1,862,825 | |||
Chemung Financial |
40,000 | 1,122,000 | |||
Fauquier Bankshares |
160,800 | 2,741,640 | |||
First National Lincoln |
40,200 | 588,528 | |||
66,200 | 285,322 | ||||
Lakeland Financial |
45,000 | 940,500 | |||
Meta Financial Group |
44,800 | 1,828,736 | |||
34,000 | 225,760 | ||||
Peapack-Gladstone Financial |
29,000 | 717,750 | |||
Queen City Investments |
948 | 953,688 | |||
Quest Capital |
30,000 | 82,071 | |||
Sterling Bancorp |
32,869 | 448,333 | |||
Sterling Financial |
7,779 | 130,609 | |||
114,200 | 669,212 | ||||
Wilber Corporation |
89,550 | 783,563 | |||
14,768,537 | |||||
Insurance - 1.6% | |||||
AmCOMP a |
5,600 | 52,360 | |||
American Safety Insurance Holdings a |
20,000 | 393,000 | |||
124,000 | 970,920 | ||||
First Acceptance a |
258,405 | 1,090,469 | |||
Independence Holding |
33,534 | 424,205 |
36 | 2007 Annual Report to Stockholders | THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. |
SHARES | VALUE | ||||
Financial Intermediaries (continued) | |||||
Insurance (continued) | |||||
NYMAGIC |
65,400 | $ | 1,512,702 | ||
15,200 | 988,000 | ||||
5,431,656 | |||||
Real Estate Investment Trusts - 0.2% | |||||
180,000 | 675,000 | ||||
Securities Brokers - 2.8% | |||||
95,000 | 112,100 | ||||
123,600 | 1,175,436 | ||||
5,000 | 365,600 | ||||
International Assets Holding a |
113,900 | 3,074,161 | |||
Sanders Morris Harris Group |
186,000 | 1,906,500 | |||
38,733 | 2,036,194 | ||||
20,100 | 275,973 | ||||
30,000 | 426,300 | ||||
9,372,264 | |||||
Total (Cost $23,106,640) | 30,247,457 | ||||
Financial Services 6.7% | |||||
Diversified Financial Services - 0.5% | |||||
123,700 | 1,587,071 | ||||
Information and Processing - 0.1% | |||||
46,100 | 395,077 | ||||
Insurance Brokers - 0.4% | |||||
50,000 | 175,000 | ||||
211,265 | 392,953 | ||||
Western Financial Group |
148,000 | 788,773 | |||
1,356,726 | |||||
Investment Management - 4.2% | |||||
ADDENDA Capital |
131,700 | 3,002,432 | |||
406,500 | 902,430 | ||||
Epoch Holding Corporation |
211,500 | 3,172,500 | |||
Hennessy Advisors |
24,750 | 297,000 | |||
MVC Capital |
226,200 | 3,650,868 | |||
Sceptre Investment Counsel |
78,000 | 817,975 | |||
UTEK Corporation |
50,000 | 660,000 | |||
Westwood Holdings Group |
31,900 | 1,199,440 | |||
13,702,645 | |||||
Special Purpose Acquisition Corporation - 1.2% | |||||
Alternative Asset Management |
|||||
Acquisition (Units) a |
250,000 | 2,600,000 | |||
44,200 | 401,336 | ||||
170,000 | 950,300 | ||||
3,951,636 | |||||
Specialty Finance - 0.3% | |||||
NGP Capital Resources |
68,080 | 1,064,090 | |||
Total (Cost $17,965,823) | 22,057,245 | ||||
Health 14.9% | |||||
Commercial Services - 1.4% | |||||
45,200 | 219,220 | ||||
PDI a |
66,800 | 625,916 | |||
80,900 | 3,907,470 | ||||
4,752,606 | |||||
Drugs and Biotech - 5.2% | |||||
10,000 | 110,700 | ||||
123,600 | 777,444 | ||||
400,000 | 644,000 |
SHARES | VALUE | ||||
Barrier Therapeutics a |
31,300 | $ | 123,322 | ||
160,000 | 988,800 | ||||
Cambrex Corporation |
16,000 | 134,080 | |||
Caraco Pharmaceutical Laboratories a |
14,650 | 251,246 | |||
21,000 | 187,320 | ||||
Cell Genesys a |
58,000 | 133,400 | |||
Cerus Corporation a |
179,600 | 1,169,196 | |||
25,000 | 238,750 | ||||
44,100 | 283,563 | ||||
57,600 | 119,232 | ||||
Dyax Corporation a |
47,300 | 173,118 | |||
163,200 | 445,536 | ||||
401,000 | 625,560 | ||||
196,700 | 145,558 | ||||
140,000 | 205,800 | ||||
Hi-Tech Pharmacal a |
43,630 | 423,647 | |||
24,000 | 99,600 | ||||
40,000 | 121,200 | ||||
17,900 | 258,655 | ||||
14,575 | 236,698 | ||||
Mannkind Corporation a |
10,000 | 79,600 | |||
73,400 | 524,076 | ||||
25,000 | 1,160,500 | ||||
2,700 | 10,260 | ||||
250,000 | 457,500 | ||||
36,000 | 60,840 | ||||
78,000 | 390,000 | ||||
184,388 | 1,218,805 | ||||
25,000 | 980,250 | ||||
10,000 | 130,900 | ||||
72,000 | 820,800 | ||||
52,000 | 389,480 | ||||
86,000 | 440,320 | ||||
57,600 | 309,888 | ||||
220,000 | 803,000 | ||||
815,600 | 244,680 | ||||
145,800 | 521,964 | ||||
128,000 | 893,440 | ||||
17,332,728 | |||||
Health Services - 2.2% | |||||
Albany Molecular Research a |
30,000 | 431,400 | |||
53,900 | 518,518 | ||||
BML |
30,000 | 479,328 | |||
Bio-Imaging Technologies a |
19,100 | 154,901 | |||
40,125 | 923,677 | ||||
Gentiva Health Services a |
23,000 | 437,920 | |||
11,900 | 395,199 | ||||
88,600 | 152,392 | ||||
18,000 | 442,080 | ||||
38,900 | 261,797 | ||||
61,100 | 428,311 | ||||
100,000 | 1,388,000 | ||||
22,000 | 496,320 | ||||
41,000 | 703,970 | ||||
U.S. Physical Therapy a |
10,000 | 143,700 | |||
7,357,513 | |||||
Medical Products and Devices - 5.9% | |||||
15,000 | 233,100 | ||||
Allied Healthcare Products a |
273,500 | 1,982,875 |
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. | 2007 Annual Report to Stockholders | 37 |
Schedule of Investments |
SHARES | VALUE | ||||
Health (continued) | |||||
Medical Products and Devices (continued) | |||||
14,000 | $ | 266,560 | |||
Anika Therapeutics a |
17,000 | 246,840 | |||
Atrion Corporation |
4,000 | 510,000 | |||
79,400 | 436,700 | ||||
Caliper Life Sciences a |
50,000 | 276,500 | |||
Cardiac Science a |
26,243 | 212,306 | |||
3,900 | 90,129 | ||||
18,700 | 293,590 | ||||
Del Global Technologies a |
461,301 | 1,337,773 | |||
24,666 | 97,184 | ||||
113,100 | 2,346,825 | ||||
Golden Meditech |
24,100 | 10,679 | |||
64,400 | 295,596 | ||||
Kensey Nash a |
26,650 | 797,368 | |||
125,250 | 2,611,463 | ||||
Merit Medical Systems a |
8,700 | 120,930 | |||
17,000 | 95,540 | ||||
21,500 | 197,800 | ||||
28,000 | 1,623,160 | ||||
65,000 | 87,750 | ||||
PLC Systems a |
105,200 | 45,236 | |||
Possis Medical a |
28,600 | 416,988 | |||
Shamir Optical Industry |
7,500 | 75,000 | |||
Synovis Life Technologies a |
20,000 | 391,000 | |||
Thermage a |
132,000 | 762,960 | |||
20,000 | 206,400 | ||||
Utah Medical Products |
42,300 | 1,257,156 | |||
29,100 | 525,837 | ||||
Young Innovations |
66,050 | 1,579,256 | |||
19,430,501 | |||||
Personal Care - 0.2% | |||||
20,000 | 342,800 | ||||
Nutraceutical International a |
15,000 | 198,750 | |||
541,550 | |||||
Total (Cost $39,693,480) | 49,414,898 | ||||
Industrial Products 16.2% | |||||
Automotive - 0.8% | |||||
7,600 | 110,200 | ||||
22,800 | 479,256 | ||||
Noble International |
24,000 | 391,440 | |||
50,600 | 370,392 | ||||
Spartan Motors |
6,300 | 48,132 | |||
Strattec Security |
28,300 | 1,172,469 | |||
Wescast Industries Cl. A |
12,900 | 114,458 | |||
2,686,347 | |||||
Building Systems and Components - 1.0% | |||||
AAON |
94,500 | 1,872,990 | |||
Bunka Shutter Company |
90,000 | 386,273 | |||
LSI Industries |
65,412 | 1,190,498 | |||
3,449,761 | |||||
Construction Materials - 1.7% | |||||
Ash Grove Cement |
8,000 | 2,008,000 | |||
Monarch Cement |
50,410 | 1,524,903 | |||
Trex Company a |
250,000 | 2,127,500 | |||
5,660,403 | |||||
SHARES | VALUE | ||||
Industrial Components - 2.2% | |||||
53,000 | $ | 350,330 | |||
Deswell Industries |
105,300 | 637,065 | |||
50,500 | 545,400 | ||||
Ladish Company a |
10,000 | 431,900 | |||
Planar Systems a |
142,000 | 908,800 | |||
Powell Industries a |
46,800 | 2,062,476 | |||
Tech/Ops Sevcon |
76,200 | 571,500 | |||
II-VI a |
20,000 | 611,000 | |||
105,200 | 1,310,792 | ||||
7,429,263 | |||||
Machinery - 4.7% | |||||
84,800 | 1,174,480 | ||||
187,500 | 412,500 | ||||
Alamo Group |
38,600 | 699,432 | |||
40,200 | 1,495,038 | ||||
23,200 | 191,864 | ||||
Burnham Holdings Cl. A |
95,000 | 1,372,750 | |||
200,000 | 326,000 | ||||
1,500 | 19,170 | ||||
Eastern Company (The) |
39,750 | 729,015 | |||
Gehl Company a |
20,000 | 320,800 | |||
Gorman-Rupp Company |
5,273 | 164,502 | |||
Hurco Companies a |
14,900 | 650,385 | |||
K-Tron International a |
5,800 | 691,650 | |||
14,100 | 418,347 | ||||
Keithley Instruments |
14,000 | 135,520 | |||
LeCroy Corporation a |
2,000 | 19,220 | |||
MTS Systems |
10,000 | 426,700 | |||
Mueller (Paul) Company |
9,650 | 468,025 | |||
Sun Hydraulics |
58,425 | 1,474,063 | |||
T-3 Energy Services a |
2,000 | 94,020 | |||
Tennant Company |
88,200 | 3,906,378 | |||
25,000 | 327,500 | ||||
15,517,359 | |||||
Metal Fabrication and Distribution - 0.8% | |||||
Encore Wire |
15,000 | 238,800 | |||
Insteel Industries |
400 | 4,692 | |||
NN |
114,300 | 1,076,706 | |||
Olympic Steel |
11,000 | 348,810 | |||
Samuel Manu-Tech |
2,500 | 26,825 | |||
26,997 | 960,283 | ||||
2,656,116 | |||||
Miscellaneous Manufacturing - 2.5% | |||||
GP Strategies a |
35,000 | 372,750 | |||
Peerless Manufacturing a |
84,400 | 3,476,436 | |||
Quixote Corporation |
33,300 | 632,367 | |||
Raven Industries |
73,000 | 2,802,470 | |||
Synalloy Corporation |
58,200 | 1,000,458 | |||
8,284,481 | |||||
Paper and Packaging - 0.1% | |||||
23,200 | 173,768 | ||||
Pumps, Valves and Bearings - 0.4% | |||||
CIRCOR International |
28,000 | 1,298,080 | |||
Specialty Chemicals and Materials - 1.9% | |||||
Aceto Corporation |
323,619 | 2,588,952 | |||
American Vanguard |
9,333 | 161,928 | |||
Balchem Corporation |
33,750 | 755,325 |
38 | 2007 Annual Report to Stockholders | THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. |
SHARES | VALUE | ||||
Industrial Products (continued) | |||||
Specialty Chemicals and Materials (continued) | |||||
Hawkins |
118,167 | $ | 1,772,505 | ||
3,000 | 71,400 | ||||
20,000 | 498,000 | ||||
Park Electrochemical |
10,000 | 282,400 | |||
6,130,510 | |||||
Textiles - 0.1% | |||||
Unifi a |
100,000 | 242,000 | |||
Total (Cost $33,190,211) | 53,528,088 | ||||
Industrial Services 14.7% | |||||
Advertising and Publishing - 0.6% | |||||
21,200 | 543,568 | ||||
20,000 | 292,200 | ||||
Journal Register |
105,600 | 185,856 | |||
28,200 | 121,260 | ||||
125,000 | 875,000 | ||||
2,017,884 | |||||
Commercial Services - 5.4% | |||||
50,000 | 615,000 | ||||
87,000 | 853,470 | ||||
25,000 | 703,750 | ||||
Carlisle Group a |
188,800 | 475,445 | |||
120,000 | 253,200 | ||||
Collectors Universe |
23,200 | 286,288 | |||
Diamond Management & |
|||||
Technology Consultants |
138,100 | 1,003,987 | |||
21,000 | 174,090 | ||||
Forrester Research a |
101,500 | 2,844,030 | |||
102,400 | 2,867,200 | ||||
Gevity HR |
63,400 | 487,546 | |||
60,000 | 60,000 | ||||
113,200 | 952,012 | ||||
55,000 | 536,250 | ||||
Landauer |
21,300 | 1,104,405 | |||
Metalico a |
12,700 | 137,668 | |||
43,300 | 592,344 | ||||
31,300 | 182,479 | ||||
Team a |
4,400 | 160,952 | |||
89,400 | 1,632,444 | ||||
26,300 | 225,391 | ||||
Westaff a |
362,500 | 1,450,000 | |||
Willdan Group a |
40,100 | 275,888 | |||
17,873,839 | |||||
Engineering and Construction - 3.7% | |||||
Cavco Industries a |
9,400 | 318,096 | |||
Exponent a |
130,600 | 3,531,424 | |||
222,400 | 1,983,808 | ||||
Hanfeng Evergreen a |
17,900 | 264,796 | |||
35,500 | 503,035 | ||||
56,400 | 834,720 | ||||
122,000 | 2,292,380 | ||||
Modtech Holdings a |
71,800 | 63,902 | |||
Nobility Homes |
13,800 | 251,850 | |||
480,000 | 960,000 | ||||
Skyline Corporation |
32,100 | 942,135 | |||
12,300 | 268,386 | ||||
12,214,532 | |||||
SHARES | VALUE | ||||
Food and Tobacco Processors - 1.7% | |||||
Cal-Maine Foods |
50,000 | $ | 1,326,500 | ||
Farmer Bros. |
42,400 | 974,776 | |||
Galaxy Nutritional Foods a |
432,600 | 112,476 | |||
10,000 | 97,500 | ||||
ML Macadamia Orchards L.P. |
120,200 | 418,296 | |||
Seneca Foods Cl. A a |
62,500 | 1,484,375 | |||
42,500 | 941,800 | ||||
8,580 | 114,543 | ||||
5,470,266 | |||||
Industrial Distribution - 0.5% | |||||
Central Steel & Wire |
1,088 | 680,000 | |||
Lawson Products |
19,500 | 739,440 | |||
Toshin Group Company |
14,200 | 294,484 | |||
1,713,924 | |||||
Printing - 1.1% | |||||
121,200 | 716,292 | ||||
Bowne & Co. |
66,500 | 1,170,400 | |||
Champion Industries |
23,500 | 106,220 | |||
Courier Corporation |
27,950 | 922,629 | |||
Ennis |
9,700 | 174,600 | |||
Schawk |
38,900 | 603,728 | |||
3,693,869 | |||||
Transportation and Logistics - 1.7% | |||||
100,000 | 418,000 | ||||
Forward Air |
50,700 | 1,580,319 | |||
Frozen Food Express Industries |
92,000 | 542,800 | |||
MAIR Holdings a |
8,600 | 39,818 | |||
21,450 | 299,228 | ||||
Patriot Transportation Holding a |
3,000 | 276,690 | |||
Universal Truckload Services a |
134,200 | 2,571,272 | |||
22,321 | 68,079 | ||||
5,796,206 | |||||
Total (Cost $33,225,666) | 48,780,520 | ||||
Natural Resources 10.6% | |||||
Energy Services - 4.4% | |||||
38,650 | 251,225 | ||||
55,000 | 3,061,300 | ||||
115,000 | 525,550 | ||||
2,400 | 86,496 | ||||
16,400 | 217,956 | ||||
Gulf Island Fabrication |
34,016 | 1,078,647 | |||
55,400 | 2,592,166 | ||||
43,500 | 686,430 | ||||
Particle Drilling Technologies a |
40,000 | 103,200 | |||
Pason Systems |
209,200 | 2,647,457 | |||
Pioneer Drilling a |
7,500 | 89,100 | |||
67,600 | 2,588,404 | ||||
World Energy Solutions a |
869,400 | 704,717 | |||
14,632,648 | |||||
Oil and Gas - 1.3% | |||||
Bonavista Energy Trust |
44,600 | 1,287,907 | |||
33,200 | 493,020 | ||||
Cano Petroleum a |
45,200 | 311,428 | |||
124,900 | 327,238 | ||||
Nuvista Energy a |
121,000 | 1,606,059 | |||
104,200 | 0 |
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. | 2007 Annual Report to Stockholders | 39 |
Schedule of Investments |
SHARES | VALUE | ||||
Natural Resources (continued) | |||||
Oil and Gas (continued) | |||||
291,200 | $ | 212,576 | |||
4,238,228 | |||||
Precious Metals and Mining - 3.5% | |||||
Allied Nevada Gold |
134,250 | 836,377 | |||
197,000 | 766,330 | ||||
15,500 | 573,810 | ||||
Central African Gold a |
89,790 | 50,066 | |||
Chesapeake Gold a |
20,000 | 166,979 | |||
Duluth Metals a |
87,500 | 265,971 | |||
Endeavour Mining Capital |
337,000 | 3,018,471 | |||
Endeavour Silver a |
50,000 | 198,500 | |||
Entree Gold a |
177,900 | 444,750 | |||
83,836 | 671,526 | ||||
168,100 | 531,196 | ||||
186,300 | 1,015,335 | ||||
Midway Gold a |
227,500 | 885,151 | |||
Minefinders Corporation a |
36,000 | 406,800 | |||
141,200 | 718,708 | ||||
Northgate Minerals a |
270,000 | 818,100 | |||
11,100 | 138,528 | ||||
50,000 | 251,000 | ||||
11,757,598 | |||||
Real Estate - 1.4% | |||||
16,500 | 127,710 | ||||
HomeFed Corporation a |
11,352 | 683,958 | |||
Kennedy-Wilson a |
21,500 | 907,300 | |||
PICO Holdings a |
45,700 | 1,536,434 | |||
Pope Resources L.P. |
33,000 | 1,410,750 | |||
4,666,152 | |||||
Total (Cost $17,912,562) | 35,294,626 | ||||
Technology 23.2% | |||||
Aerospace and Defense - 2.8% | |||||
13,800 | 333,960 | ||||
Astronics Corporation a |
26,400 | 1,122,000 | |||
Ducommun a |
72,100 | 2,739,800 | |||
HEICO Corporation |
41,600 | 2,266,368 | |||
HEICO Corporation Cl. A |
24,160 | 1,029,216 | |||
Integral Systems |
48,310 | 1,123,691 | |||
45,800 | 770,814 | ||||
9,385,849 | |||||
Components and Systems - 2.7% | |||||
99,350 | 892,163 | ||||
122,581 | 817,615 | ||||
Excel Technology a |
91,900 | 2,490,490 | |||
3,200 | 5,984 | ||||
MOCON |
15,600 | 177,372 | |||
Optex Company |
35,000 | 522,106 | |||
30,000 | 402,000 | ||||
Richardson Electronics |
139,350 | 976,844 | |||
20,000 | 519,000 | ||||
37,900 | 126,586 | ||||
10,000 | 53,500 | ||||
Spectrum Control a |
16,100 | 247,940 | |||
TTM Technologies a |
124,700 | 1,454,002 |
SHARES | VALUE | ||||
TransAct Technologies a |
78,600 | $ | 376,494 | ||
9,062,096 | |||||
Distribution - 0.5% | |||||
Agilysys |
90,000 | 1,360,800 | |||
40,000 | 278,000 | ||||
1,638,800 | |||||
Internet Software and Services - 2.0% | |||||
32,700 | 291,684 | ||||
49,200 | 206,640 | ||||
185,000 | 2,186,700 | ||||
190,000 | 771,400 | ||||
355,800 | 1,359,156 | ||||
131,500 | 466,825 | ||||
NIC |
26,800 | 226,192 | |||
Stamps.com a |
80,000 | 974,400 | |||
6,482,997 | |||||
IT Services - 5.1% | |||||
28,000 | 507,360 | ||||
182,662 | 1,116,065 | ||||
24,800 | 588,008 | ||||
Computer Task Group a |
471,361 | 2,606,626 | |||
273,400 | 2,315,698 | ||||
58,000 | 374,680 | ||||
500,000 | 4,405,000 | ||||
Syntel |
54,300 | 2,091,636 | |||
TriZetto Group (The) a |
145,200 | 2,522,124 | |||
31,300 | 406,587 | ||||
16,933,784 | |||||
Semiconductors and Equipment - 2.6% | |||||
128,900 | 525,912 | ||||
Cascade Microtech a |
55,037 | 560,277 | |||
CEVA a |
29,800 | 362,666 | |||
Cohu |
17,800 | 272,340 | |||
281,700 | 473,256 | ||||
121,208 | 966,028 | ||||
Ikanos Communications a |
38,700 | 208,206 | |||
40,550 | 589,597 | ||||
Jinpan International |
9,650 | 298,185 | |||
Maxwell Technologies a |
37,400 | 309,298 | |||
Melco Holdings |
30,000 | 469,629 | |||
22,000 | 216,920 | ||||
77,200 | 169,840 | ||||
PDF Solutions a |
25,000 | 225,250 | |||
Photronics a |
29,750 | 370,982 | |||
20,000 | 66,000 | ||||
Rudolph Technologies a |
12,500 | 141,500 | |||
Semitool a |
25,500 | 221,340 | |||
54,200 | 355,552 | ||||
Virage Logic a |
180,000 | 1,503,000 | |||
188,700 | 135,883 | ||||
8,441,661 | |||||
Software - 4.7% | |||||
ACI Worldwide a |
97,600 | 1,858,304 | |||
Aladdin Knowledge Systems a |
27,300 | 713,349 | |||
70,000 | 210,700 | ||||
48,300 | 676,200 | ||||
170,000 | 470,900 | ||||
66,000 | 582,120 |
40 | 2007 Annual Report to Stockholders | THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. |
SHARES | VALUE | ||||
Technology (continued) | |||||
Software (continued) | |||||
38,300 | $ | 536,200 | |||
Evans & Sutherland Computer a |
73,500 | 91,875 | |||
Fundtech a |
51,000 | 681,360 | |||
35,000 | 365,750 | ||||
59,500 | 1,217,370 | ||||
429,300 | 566,676 | ||||
Pegasystems |
330,200 | 3,939,286 | |||
43,000 | 935,250 | ||||
PLATO Learning a |
160,000 | 635,200 | |||
Renaissance Learning |
2,365 | 33,110 | |||
41,800 | 1,501,038 | ||||
20,000 | 144,600 | ||||
10,000 | 36,100 | ||||
94,852 | 239,976 | ||||
9,000 | 12,600 | ||||
15,447,964 | |||||
Telecommunications - 2.8% | |||||
Anaren a |
30,900 | 509,541 | |||
Atlantic Tele-Network |
4,100 | 138,498 | |||
Captaris a |
43,300 | 187,056 | |||
Communications Systems |
10,700 | 127,223 | |||
300,000 | 750,000 | ||||
11,500 | 40,710 | ||||
68,500 | 71,925 | ||||
NMS Communications a |
630,000 | 1,020,600 | |||
North Pittsburgh Systems c |
23,200 | 526,408 | |||
35,100 | 289,575 | ||||
PC-Tel a |
44,100 | 302,526 | |||
Performance Technologies a |
41,250 | 226,875 | |||
Radyne a |
25,520 | 234,784 | |||
REMEC |
143,387 | 150,556 | |||
24,782 | 116,723 | ||||
13,600 | 245,616 | ||||
130,517 | 587,327 | ||||
76,812 | 2,644,637 | ||||
247,400 | 183,076 | ||||
911,600 | 1,066,572 | ||||
9,420,228 | |||||
Total (Cost $51,293,032) | 76,813,379 | ||||
Miscellaneous e 4.9% | |||||
Total (Cost $17,084,309) | 16,383,911 | ||||
TOTAL COMMON STOCKS | |||||
(Cost $263,939,273) |
370,900,663 | ||||
PREFERRED STOCK 0.5% | |||||
Seneca Foods Conv. a |
75,409 | 1,734,407 | |||
(Cost $943,607) |
1,734,407 | ||||
VALUE | ||||||
REPURCHASE AGREEMENTS 8.7% | ||||||
State Street Bank & Trust Company, |
||||||
4.00% dated 12/31/07, due 1/2/08, |
||||||
maturity value $8,734,941 (collateralized |
||||||
by obligations of various U.S. Government |
||||||
Agencies, valued at $8,955,600) |
||||||
(Cost $8,733,000) |
$ 8,733,000 | |||||
Lehman Brothers (Tri-Party), |
||||||
4.125% dated 12/31/07, due 1/2/08, |
||||||
maturity value $20,004,583 (collateralized |
||||||
by obligations of various U.S. Government |
||||||
Agencies, valued at $20,407,014) |
||||||
(Cost $20,000,000) |
20,000,000 | |||||
TOTAL REPURCHASE AGREEMENTS | ||||||
(Cost $28,733,000) |
28,733,000 | |||||
PRINCIPAL | ||||||
AMOUNT | ||||||
COLLATERAL RECEIVED FOR SECURITIES LOANED 10.9% |
||||||
Fannie Mae-Notes 5.125%-5.20% |
||||||
due 7/13/09-9/18/12 |
$46,103 | 46,794 | ||||
Federal Home Loan Bank-Bonds 4.875% |
||||||
due 3/5/08 |
1,322 | 1,342 | ||||
Federal National Mortgage Association-Bonds |
||||||
3.75%-5.50 |
||||||
due 7/25/08-2/16/12 |
11,694 | 11,856 | ||||
Freddie Mac-Notes 6.01% |
||||||
due 4/11/17 |
618 | 627 | ||||
U.S. Treasury Bonds 2.375%-12.00% |
||||||
due 8/15/13-1/15/27 |
940 | 950 | ||||
U.S. Treasury Notes 2.375% |
||||||
due 4/15/11 |
6 | 6 | ||||
Money Market Funds |
||||||
State Street Navigator Securities Lending |
||||||
Prime Portfolio (7 day yield-4.884%) |
35,983,277 | |||||
TOTAL COLLATERAL RECEIVED FOR SECURITIES LOANED |
||||||
(Cost $36,044,852) |
36,044,852 | |||||
TOTAL INVESTMENTS 132.0% | ||||||
(Cost $329,660,732) |
437,412,922 | |||||
LIABILITIES LESS CASH AND OTHER ASSETS (13.9)% | (45,937,406 | ) | ||||
PREFERRED STOCK (18.1)% | (60,000,000 | ) | ||||
NET ASSETS
APPLICABLE TO |
$ | 331,475,516 | ||||
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. | 2007 Annual Report to Stockholders | 41 |
Royce Micro-Cap Trust | December 31, 2007 |
Schedule of Investments |
INCOME TAX INFORMATION: The cost of total investments for Federal income tax purposes was $334,738,628. At December 31, 2007, net unrealized appreciation for all securities was $102,674,294 consisting of aggregate gross unrealized appreciation of $132,624,923 and aggregate gross unrealized depreciation of $29,950,629. The primary differences in book and tax basis cost is the timing of the recognition of losses on securities sold and mark-to-market of Passive Foreign Investment Companies.
42 | 2007 Annual Report to Stockholders | THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. |
Royce Micro-Cap Trust | December 31, 2007 | |||
Statement of Assets and Liabilities |
ASSETS: | ||||
Investments at value (including collateral on loaned securities)* | ||||
Non-Affiliated Companies (cost $299,421,466) |
$ | 407,777,492 | ||
Affiliated Companies (cost $1,506,266) |
902,430 | |||
Total investments at value | 408,679,922 | |||
Repurchase agreements (at cost and value) | 28,733,000 | |||
Cash and foreign currency | 847 | |||
Receivable for investments sold | 3,707,650 | |||
Receivable for dividends and interest | 381,873 | |||
Prepaid expenses | 20,681 | |||
Total Assets |
441,523,973 | |||
LIABILITIES: | ||||
Payable for collateral on loaned securities | 36,044,852 | |||
Payable for investments purchased | 13,375,389 | |||
Payable for investment advisory fee | 431,673 | |||
Preferred dividends accrued but not yet declared | 80,000 | |||
Accrued expenses | 116,543 | |||
Total Liabilities |
50,048,457 | |||
PREFERRED STOCK: | ||||
6.00% Cumulative Preferred Stock - $0.001 par value, $25 liquidation value per share; 2,400,000 shares outstanding | 60,000,000 | |||
Total Preferred Stock |
60,000,000 | |||
NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS | $ | 331,475,516 | ||
ANALYSIS OF NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS: | ||||
Common Stock paid-in capital - $0.001 par value per share; 24,591,100 shares outstanding (150,000,000 shares authorized) | $ | 222,052,678 | ||
Undistributed net investment income (loss) | (1,435,509 | ) | ||
Accumulated net realized gain (loss) on investments and foreign currency | 3,186,799 | |||
Net unrealized appreciation (depreciation) on investments and foreign currency | 107,751,548 | |||
Preferred dividends accrued but not yet declared | (80,000 | ) | ||
Net Assets applicable to Common Stockholders (net asset value per share - $13.48) |
$ | 331,475,516 | ||
*Investments at identified cost (including $36,044,852 of collateral on loaned securities) |
$ | 300,927,732 | ||
Market value of loaned securities |
34,390,777 |
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. | 2007 Annual Report to Stockholders | 43 |
Royce Micro-Cap Trust | Year Ended December 31, 2007 | |
Statement of Operations |
INVESTMENT INCOME: | ||||
Income: | ||||
Dividends* |
||||
Non-Affiliated Companies |
$ | 3,303,530 | ||
Affiliated Companies |
| |||
Interest |
1,478,336 | |||
Securities lending |
484,508 | |||
Total income | 5,266,374 | |||
Expenses: | ||||
Investment advisory fees |
5,092,955 | |||
Stockholder reports |
133,402 | |||
Custody and transfer agent fees |
75,833 | |||
Directors fees |
56,196 | |||
Professional fees |
54,027 | |||
Administrative and office facilities expenses |
29,792 | |||
Other expenses |
60,452 | |||
Total expenses | 5,502,657 | |||
Compensating balance credits | (1,853 | ) | ||
Net expenses | 5,500,804 | |||
Net investment income (loss) | (234,430 | ) | ||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY: | ||||
Net realized gain (loss) on investments and foreign currency | ||||
Non-Affiliated Companies |
33,643,099 | |||
Affiliated Companies |
(839,302 | ) | ||
Net change in unrealized appreciation (depreciation) on investments foreign currency | (27,184,286 | ) | ||
Net realized and unrealized gain (loss) on investments and foreign currency | 5,619,511 | |||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM INVESTMENT OPERATIONS | 5,385,081 | |||
DISTRIBUTIONS TO PREFERRED STOCKHOLDERS | (3,600,000 | ) | ||
NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS | ||||
RESULTING FROM INVESTMENT OPERATIONS |
$ | 1,785,081 | ||
*Net of foreign withholding tax of $63,404. |
44 | 2007 Annual Report to Stockholders | THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. |
Royce Micro-Cap Trust |
Statement of Changes in Net Assets |
Year ended | Year ended | |||||||
12/31/07 | 12/31/06 | |||||||
INVESTMENT OPERATIONS: | ||||||||
Net investment income (loss) | $ | (234,430 | ) | $ | 167,273 | |||
Net realized gain (loss) on investments and foreign currency | 32,803,797 | 40,340,273 | ||||||
Net change in unrealized appreciation (depreciation) on investments and foreign currency | (27,184,286 | ) | 27,839,554 | |||||
Net increase (decrease) in net assets resulting from investment operations | 5,385,081 | 68,347,100 | ||||||
DISTRIBUTIONS TO PREFERRED STOCKHOLDERS: | ||||||||
Net investment income | (224,280 | ) | (475,560 | ) | ||||
Net realized gain on investments and foreign currency | (3,375,720 | ) | (3,124,440 | ) | ||||
Total distributions to Preferred Stockholders | (3,600,000 | ) | (3,600,000 | ) | ||||
NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS RESULTING FROM INVESTMENT OPERATIONS |
1,785,081 | 64,747,100 | ||||||
DISTRIBUTIONS TO COMMON STOCKHOLDERS: | ||||||||
Net investment income | (1,991,543 | ) | (4,585,208 | ) | ||||
Net realized gain on investments and foreign currency | (29,975,444 | ) | (30,124,923 | ) | ||||
Total distributions to Common Stockholders | (31,966,987 | ) | (34,710,131 | ) | ||||
CAPITAL STOCK TRANSACTIONS: | ||||||||
Reinvestment of distributions to Common Stockholders | 17,975,152 | 19,926,104 | ||||||
Total capital stock transactions | 17,975,152 | 19,926,104 | ||||||
NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS | (12,206,754 | ) | 49,963,073 | |||||
NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS: | ||||||||
Beginning of period |
343,682,270 | 293,719,197 | ||||||
End of period (including undistributed net investment income (loss) of $(1,435,509) at 12/31/07 and $(2,725,894) at 12/31/06) |
$ | 331,475,516 | $ | 343,682,270 |
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. | 2007 Annual Report to Stockholders | 45 |
Royce Micro-Cap 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 Funds performance for the periods presented.
Years ended December 31, | ||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2003 | ||||||||||||||||
NET ASSET VALUE, BEGINNING OF PERIOD | $14.77 | $13.43 | $14.34 | $13.33 | $9.39 | |||||||||||||||
INVESTMENT OPERATIONS: | ||||||||||||||||||||
Net investment income (loss) |
(0.00 | ) | 0.01 | (0.03 | ) | (0.08 | ) | (0.09 | ) | |||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency |
0.24 | 3.04 | 1.14 | 2.62 | 5.28 | |||||||||||||||
Total investment operations |
0.24 | 3.05 | 1.11 | 2.54 | 5.19 | |||||||||||||||
DISTRIBUTIONS TO PREFERRED STOCKHOLDERS: | ||||||||||||||||||||
Net investment income |
(0.01 | ) | (0.02 | ) | | | | |||||||||||||
Net realized gain on investments and foreign currency |
(0.14 | ) | (0.14 | ) | (0.17 | ) | (0.19 | ) | (0.18 | ) | ||||||||||
Total distributions to Preferred Stockholders |
(0.15 | ) | (0.16 | ) | (0.17 | ) | (0.19 | ) | (0.18 | ) | ||||||||||
NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS RESULTING FROM INVESTMENT OPERATIONS |
0.09 | 2.89 | 0.94 | 2.35 | 5.01 | |||||||||||||||
DISTRIBUTIONS TO COMMON STOCKHOLDERS: | ||||||||||||||||||||
Net investment income |
(0.08 | ) | (0.20 | ) | | | | |||||||||||||
Net realized gain on investments and foreign currency |
(1.27 | ) | (1.35 | ) | (1.85 | ) | (1.33 | ) | (0.92 | ) | ||||||||||
Total distributions to Common Stockholders |
(1.35 | ) | (1.55 | ) | (1.85 | ) | (1.33 | ) | (0.92 | ) | ||||||||||
CAPITAL STOCK TRANSACTIONS: | ||||||||||||||||||||
Effect of reinvestment of distributions by Common Stockholders |
(0.03 | ) | (0.00 | ) | 0.00 | (0.01 | ) | (0.04 | ) | |||||||||||
Effect of Preferred Stock offering |
| | | | (0.11 | ) | ||||||||||||||
Total capital stock transactions |
(0.03 | ) | (0.00 | ) | 0.00 | (0.01 | ) | (0.15 | ) | |||||||||||
NET ASSET VALUE, END OF PERIOD | $13.48 | $14.77 | $13.43 | $14.34 | $13.33 | |||||||||||||||
MARKET VALUE, END OF PERIOD | $11.94 | $16.57 | $14.56 | $15.24 | $12.60 | |||||||||||||||
TOTAL RETURN (a): | ||||||||||||||||||||
Market Value | (20.54 | )% | 26.72 | % | 8.90 | % | 33.44 | % | 63.58 | % | ||||||||||
Net Asset Value | 0.64 | % | 22.46 | % | 6.75 | % | 18.69 | % | 55.55 | % | ||||||||||
RATIOS BASED ON AVERAGE NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS: |
||||||||||||||||||||
Total expenses (b,c) | 1.56 | % | 1.64 | % | 1.63 | % | 1.62 | % | 1.82 | % | ||||||||||
Management fee expense (d) |
1.44 | % | 1.49 | % | 1.43 | % | 1.43 | % | 1.59 | % | ||||||||||
Other operating expenses |
0.12 | % | 0.15 | % | 0.20 | % | 0.19 | % | 0.23 | % | ||||||||||
Net investment income (loss) | (0.07 | )% | 0.05 | % | (0.27 | )% | (0.56 | )% | (0.82 | )% | ||||||||||
SUPPLEMENTAL DATA: | ||||||||||||||||||||
Net Assets Applicable to Common Stockholders, | ||||||||||||||||||||
End of Period (in thousands) |
$331,476 | $343,682 | $293,719 | $290,364 | $253,425 | |||||||||||||||
Liquidation Value of Preferred Stock, | ||||||||||||||||||||
End of Period (in thousands) |
$60,000 | $60,000 | $60,000 | $60,000 | $60,000 | |||||||||||||||
Portfolio Turnover Rate | 41 | % | 34 | % | 46 | % | 32 | % | 26 | % | ||||||||||
PREFERRED STOCK: | ||||||||||||||||||||
Total shares outstanding | 2,400,000 | 2,400,000 | 2,400,000 | 2,400,000 | 2,400,000 | |||||||||||||||
Asset coverage per share | $163.11 | $168.20 | $147.38 | $145.98 | $130.59 | |||||||||||||||
Liquidation preference per share | $25.00 | $25.00 | $25.00 | $25.00 | $25.00 | |||||||||||||||
Average market value per share (e): | ||||||||||||||||||||
6.00% Cumulative |
$24.06 | $24.15 | $24.97 | $24.66 | $25.37 | |||||||||||||||
7.75% Cumulative |
| | | | $25.70 | |||||||||||||||
46 | 2007 Annual Report to Stockholders | THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. |
Royce Micro-Cap Trust |
Notes to Financial Statements |
Summary of Significant Accounting Policies: |
Royce Micro-Cap
Trust, Inc. (the Fund) was incorporated under the laws of the State
of Maryland on September 9, 1993 as a diversified closed-end investment company.
The Fund commenced operations on December 14, 1993. 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 Nasdaqs 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. Securities for which
market quotations are not readily available are valued at their fair value under
procedures established by the Funds Board of Directors. 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 price of securities used by the Fund may
differ from quoted or published prices for the same security. Bonds and other fixed
income securities may be valued by reference to other securities with comparable
ratings, interest rates and maturities, using established independent pricing services.
Investments in money market funds are valued at net asset value per share. |
Foreign Currency: |
The Fund values
its non-U.S. securities in U.S. dollars daily at the prevailing foreign currency
exchange rates as quoted by a major bank. The effects of changes in foreign exchange
rates on investments and other assets and liabilities are included with net realized
and unrealized gains and losses on investments. Net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, expiration of currency forward contracts, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Funds 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. |
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 Funds operations, while expenses applicable to more than one of the
Royce Funds are allocated equitably. Allocated personnel and occupancy costs related
to The Royce Funds are included in administrative and office facilities expenses.
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. |
Compensating Balance Credits: |
The Fund has
an arrangement with its custodian bank, whereby a portion of the custodians
fee is paid indirectly by credits earned on the Funds 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. |
Taxes: |
As a qualified
regulated investment company under Subchapter M of the Internal Revenue Code, the
Fund is not subject to income taxes to the extent that it distributes substantially
all of its taxable income for its fiscal year. The Schedule of Investments includes
information regarding income taxes under the caption Income Tax Information. |
Distributions: |
The Fund currently
has a policy of paying quarterly distributions on the Funds Common Stock.
Distributions are currently being made at the annual rate of 9% of the rolling average
of the prior four calendar quarter-end NAVs of the Funds Common Stock, with
the fourth quarter distribution being the greater of 2.25% of the rolling average
or the distribution required by IRS regulations. Distributions to Preferred Stockholders
are accrued daily and paid quarterly and distributions to Common Stockholders are
recorded on ex-dividend date. The Fund is required to allocate long-term capital
gain distributions and other types of income proportionately to distributions made
to holders of shares of Common Stock and Preferred Stock. 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 |
2007 Annual Report to Stockholders | 47 |
Royce Micro-Cap Trust |
Notes to Financial Statements (continued) |
that may differ
from accounting principles generally accepted in the United States of America. Permanent
book and tax basis 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. |
Repurchase Agreements: |
The Fund may
enter into repurchase agreements with institutions that the Funds 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 the underlying securities. |
Securities Lending: |
The Fund loans
securities to qualified institutional investors for the purpose of realizing additional
income. Collateral on all securities loaned for the Fund is accepted in cash and
cash equivalents and invested temporarily by the custodian. The collateral is equal
to 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. |
Recent Accounting Pronouncements: |
The Fund adopted
Financial Accounting Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48) on June
29, 2007. FIN 48 provides guidance for how uncertain tax positions should be recognized,
measured, presented and disclosed in the financial statements. There was no material
impact to the financial statements or disclosures thereto as a result of the adoption
of this pronouncement. |
FASB Statement
of Financial Accounting Standard No. 157, Fair Value Measurement (FAS
157), provides enhanced guidance for using fair value to measure assets and
liabilities. The standard requires companies to provide expanded information about
the assets and liabilities measured at fair value and the potential effect of these
fair valuations on an entitys financial performance. Adoption of FAS 157 is
required for fiscal years beginning after November 15, 2007. The standard is not
expected to materially impact the amounts reported in the Funds financial
statements, however, additional disclosures will be required in subsequent reports. |
Capital Stock: |
The Fund issued
1,320,682 and 1,401,367 shares of Common Stock as reinvestment of distributions
by Common Stockholders for the years ended December 31, 2007 and 2006, respectively. |
48 | 2007 Annual Report to Stockholders |
At December
31, 2007, 2,400,000 shares of 6.00% Cumulative Preferred Stock were outstanding.
Commencing October 16, 2008 and thereafter, the Fund, at its option, may redeem
the Cumulative Preferred Stock, in whole or in part, at the redemption price. The
Cumulative Preferred Stock is classified outside of permanent equity (net assets
applicable to Common Stockholders) in the accompanying financial statements in accordance
with Emerging Issues Task Force (EITF) Topic D-98, Classification and Measurement
of Redeemable Securities, that requires preferred securities that are redeemable
for cash or other assets to be classified outside of permanent equity to the extent
that the redemption is at a fixed or determinable price and at the option of the
holder or upon the occurrence of an event that is not solely within the control
of the issuer. |
The Fund is
required to meet certain asset coverage tests with respect to the Cumulative Preferred
Stock as required by the 1940 Act. In addition, pursuant to the Rating Agency Guidelines
established by Moodys, the Fund is required to maintain a certain discounted
asset coverage. If the Fund fails to meet these requirements and does not correct
such failure, the Fund may be required to redeem, in part or in full, the Cumulative
Preferred Stock at a redemption price of $25.00 per share, plus an amount equal to
the accumulated and unpaid dividends, whether or not declared on such shares, in
order to meet these requirements. Additionally, failure to meet the foregoing asset
coverage requirements could restrict the Funds ability to pay dividends to
Common Stockholders and could lead to sales of portfolio securities at inopportune
times. The Fund has met these requirements since issuing the Cumulative Preferred
Stock. |
Investment Advisory Agreement: |
As compensation
for its services under the Investment Advisory Agreement, Royce & Associates,
LLC (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 Russell 2000. |
The Basic
Fee is a monthly fee equal to 1/12 of 1% (1% on an annualized basis) of the average
of the Funds month-end net assets applicable to Common Stockholders, plus
the liquidation value of Preferred Stock, for the rolling 36-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 Russell 2000 for the performance period by
more than two percentage points. The performance period for each such month is a
rolling 36-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 Russell 2000 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 Russell 2000 exceeds |
Royce Micro-Cap Trust |
Notes to Financial Statements (unaudited) (continued) |
the investment
performance of the Fund by 12 or more percentage points for the performance period. |
Royce has
voluntarily committed to waive the portion of its investment advisory fee attributable
to an issue of the Funds Preferred Stock for any month in which the Funds
average annual NAV total return since issuance of the Preferred Stock fails to exceed
the applicable Preferred Stocks dividend rate. |
For the twelve
rolling 36-month periods ending December 2007, the investment performance of the
Fund exceeded the investment performance of the Russell 2000 by 8% to 13%. Accordingly,
the investment advisory fee consisted of a Basic Fee of $3,714,236 and an upward
adjustment of $1,378,719 for performance of the Fund above that of the Russell 2000.
For the year ended December 31, 2007, the Fund accrued and paid Royce advisory fees
totaling $5,092,955. |
Distributions to Stockholders:
The tax character of distributions paid to stockholders during 2007 and 2006 was
as follows:
Distributions paid from: | 2007 | 2006 | ||||
Ordinary income | $ | 2,532,369 | $ | 12,220,932 | ||
Long-term capital gain | 33,034,618 | 26,089,199 | ||||
$ | 35,566,987 | $ | 38,310,131 | |||
As of December 31, 2007, the tax basis components of distributable earnings included in stockholders equity were as follows:
Undistributed net investment income | $ | 2,331,609 | ||
Undistributed long-term capital gain | 5,216,680 | |||
Unrealized appreciation | 102,674,294 | |||
Post October currency loss* | (719,745 | ) | ||
Accrued preferred distributions | (80,000 | ) | ||
$ | 109,422,838 | |||
* | Under current tax law, capital and currency losses realized after October 31, and prior to the Funds fiscal year end, may be deferred as occurring on the first day of the following fiscal year. |
The difference between book basis and tax basis unrealized appreciation is attributable primarily to the tax deferral on wash sales and the unrealized gains on investments in 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, 2007, the Fund recorded the following permanent reclassifications, which relate primarily to the current net operating losses. Results of operations and net assets were not affected by these reclassifications. |
Undistributed | Accumulated | |||||||
Net Investment | Net Realized | Paid-in | ||||||
Income | Gain (Loss) | Capital | ||||||
$3,740,638 | $(3,532,042) | $(208,596) | ||||||
Shares | Market Value | Cost of | Cost of | Realized | Dividend | Shares | Market Value | ||||||||||||||||||||||||
Affiliated Company | 12/31/06 | 12/31/06 | Purchases | Sales | Gain (Loss) | Income | 12/31/07 | 12/31/07 | |||||||||||||||||||||||
BKF Capital Group | 406,500 | $ | 1,361,775 | | | | | 406,500 | $902,430 | ||||||||||||||||||||||
Highbury Financial* | 580,400 | 3,383,732 | | $ | 3,419,180 | $ | (839,302 | ) | | ||||||||||||||||||||||
$ | 4,745,507 | $ | (839,302 | ) | | $902,430 | |||||||||||||||||||||||||
*Not an Affiliated Company at December 31, 2007. |
2007 Annual Report to Stockholders | 49 |
Royce Micro-Cap Trust |
Report of Independent Registered Public Accounting Firm |
To the Board of Directors and Stockholders
of
Royce Micro-Cap Trust, Inc.
New York, New York
We have audited
the accompanying statement of assets and liabilities of Royce Micro-Cap Trust, Inc.
(Fund) including the schedule of investments, as of December 31, 2007,
and the related statement of operations for the year then ended, the statement 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 Funds 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 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 Funds 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, 2007 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 Micro-Cap Trust, Inc. as of December 31, 2007, the results of its operations 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 22, 2008 |
50 | 2007 Annual Report to Stockholders |
Royce Focus Trust | December 31, 2007 | |
Schedule of Investments |
SHARES | VALUE | ||||||
COMMON STOCKS 88.2% |
|||||||
Consumer Products 13.1% |
|||||||
Apparel, Shoes and Accessories - 3.5% |
|||||||
75,000 | $ | 3,148,500 | |||||
150,000 | 2,712,000 | ||||||
5,860,500 | |||||||
Health, Beauty and Nutrition - 2.0% |
|||||||
Nu Skin Enterprises Cl. A |
200,000 | 3,286,000 | |||||
Home Furnishing and Appliances - 1.9% |
|||||||
Rational |
15,000 | 3,068,777 | |||||
Sports and Recreation - 5.7% |
|||||||
Thor Industries |
140,000 | 5,321,400 | |||||
Winnebago Industries |
200,000 | 4,204,000 | |||||
9,525,400 | |||||||
Total (Cost $20,009,658) |
21,740,677 | ||||||
Financial Intermediaries 4.7% |
|||||||
Banking - 1.1% |
|||||||
BB Holdings a |
400,000 | 1,910,590 | |||||
Securities Brokers - 2.6% |
|||||||
300,000 | 4,320,000 | ||||||
Other Financial Intermediaries - 1.0% |
|||||||
KKR Financial |
116,632 | 1,638,680 | |||||
Total (Cost $7,371,214) |
7,869,270 | ||||||
Financial Services 1.5% |
|||||||
Investment Management - 1.5% |
|||||||
U.S. Global Investors Cl. A |
150,000 | 2,499,000 | |||||
Total (Cost $2,385,434) |
2,499,000 | ||||||
Health 4.7% |
|||||||
Drugs and Biotech - 2.8% |
|||||||
90,000 | 2,400,300 | ||||||
499,400 | 1,513,182 | ||||||
249,700 | 676,687 | ||||||
4,590,169 | |||||||
Medical Products and Devices - 1.9% |
|||||||
302,300 | 1,671,719 | ||||||
Possis Medical a |
100,000 | 1,458,000 | |||||
3,129,719 | |||||||
Total (Cost $7,520,476) |
7,719,888 | ||||||
Industrial Products 21.6% |
|||||||
Building Systems and Components - 2.2% |
|||||||
Simpson Manufacturing |
140,000 | 3,722,600 | |||||
Machinery - 7.9% |
|||||||
Kennametal |
60,000 | 2,271,600 | |||||
Lincoln Electric Holdings |
70,000 | 4,982,600 | |||||
Pfeiffer Vacuum Technology |
30,000 | 2,403,245 | |||||
Woodward Governor |
50,000 | 3,397,500 | |||||
13,054,945 | |||||||
SHARES | VALUE | ||||||
Metal Fabrication and Distribution - 11.5% |
|||||||
Dynamic Materials |
50,000 | $ | 2,945,000 | ||||
Metal Management |
120,000 | 5,463,600 | |||||
Reliance Steel & Aluminum |
100,000 | 5,420,000 | |||||
Schnitzer Steel Industries Cl. A |
75,000 | 5,184,750 | |||||
19,013,350 | |||||||
Total (Cost $17,434,403) |
35,790,895 | ||||||
Industrial Services 9.7% |
|||||||
Commercial Services - 6.6% |
|||||||
60,000 | 2,856,600 | ||||||
Corinthian Colleges a |
120,000 | 1,848,000 | |||||
100,000 | 1,882,000 | ||||||
LECG Corporation a |
180,000 | 2,710,800 | |||||
Universal Technical Institute a |
100,100 | 1,701,700 | |||||
10,999,100 | |||||||
Food and Tobacco Processors - 2.0% |
|||||||
Sanderson Farms |
100,000 | 3,378,000 | |||||
Transportation and Logistics - 1.1% |
|||||||
Arkansas Best |
80,000 | 1,755,200 | |||||
Total (Cost $17,209,327) |
16,132,300 | ||||||
Natural Resources 26.7% |
|||||||
Energy Services - 9.0% |
|||||||
Ensign Energy Services |
240,000 | 3,708,394 | |||||
Pason Systems |
180,000 | 2,277,927 | |||||
Tesco Corporation a |
120,000 | 3,440,400 | |||||
Trican Well Service |
280,000 | 5,455,595 | |||||
14,882,316 | |||||||
Oil and Gas - 3.4% |
|||||||
Unit Corporation a |
120,000 | 5,550,000 | |||||
Precious Metals and Mining - 14.3% |
|||||||
Allied Nevada Gold |
250,000 | 1,557,500 | |||||
Endeavour Mining Capital |
500,000 | 4,478,444 | |||||
270,000 | 2,686,500 | ||||||
250,000 | 2,002,500 | ||||||
350,000 | 3,755,500 | ||||||
140,000 | 4,890,200 | ||||||
120,000 | 4,383,600 | ||||||
23,754,244 | |||||||
Total (Cost $29,901,858) |
44,186,560 | ||||||
Technology 6.2% |
|||||||
Semiconductors and Equipment - 2.3% |
|||||||
200,000 | 3,828,000 | ||||||
Software - 1.0% |
|||||||
39,953 | 1,750,741 | ||||||
Telecommunications - 2.9% |
|||||||
ADTRAN |
75,000 | 1,603,500 | |||||
180,100 | 3,155,352 | ||||||
4,758,852 | |||||||
Total (Cost $7,725,138) |
10,337,593 | ||||||
TOTAL COMMON STOCKS |
|||||||
(Cost $109,557,508) |
146,276,183 | ||||||
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. | 2007 Annual Report to Stockholders | 51 |
Royce Focus Trust | December 31, 2007 | |
Schedule of Investments |
PRINCIPAL | |||||||
AMOUNT | VALUE | ||||||
GOVERNMENT BONDS 13.5% |
|||||||
(Principal Amount shown in local currency) | |||||||
Australia Government Bond |
|||||||
7.50% due 9/15/09 |
$10,000,000 | $ | 8,871,705 | ||||
New Zealand Government Bond |
|||||||
6.00% due 7/15/08 |
10,000,000 | 7,633,511 | |||||
South Africa Government Bond |
|||||||
10.00% due 2/28/09 |
40,000,000 | 5,833,105 | |||||
TOTAL GOVERNMENT BONDS |
|||||||
(Cost $20,503,645) |
22,338,321 | ||||||
REPURCHASE AGREEMENT 13.1% |
|||||||
State Street Bank & Trust Company, | |||||||
4.00% dated 12/31/07, due 1/2/08, |
|||||||
maturity value $21,753,833 (collateralized |
|||||||
by obligations of various U.S. Government |
|||||||
Agencies, valued at $22,295,600) |
|||||||
(Cost $21,749,000) |
21,749,000 | ||||||
VALUE | |||||||
COLLATERAL RECEIVED FOR SECURITIES LOANED 11.5% |
|||||||
Money Market Funds |
|||||||
State Street Navigator Securities Lending |
|||||||
Prime Portfolio (7 day yield-4.884%) |
|||||||
(Cost $19,094,783) |
$ | 19,094,783 | |||||
TOTAL INVESTMENTS 126.3% |
|||||||
(Cost $170,904,936) |
209,458,287 | ||||||
LIABILITIES LESS CASH |
(18,650,879 | ) | |||||
PREFERRED STOCK (15.1)% |
(25,000,000 | ) | |||||
NET ASSETS APPLICABLE TO |
$ | 165,807,408 | |||||
52 | 2007 Annual Report to Stockholders | THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. |
Royce Focus Trust | December 31, 2007 | |
Statement of Assets and Liabilities |
ASSETS: | ||||
Investments at value (including collateral on loaned securities)* | $ | 187,709,287 | ||
Repurchase agreement (at cost and value) | 21,749,000 | |||
Cash and foreign currency | 161 | |||
Receivable for dividends and interest | 700,935 | |||
Prepaid expenses | 15,778 | |||
Total Assets |
210,175,161 | |||
LIABILITIES: | ||||
Payable for collateral on loaned securities | 19,094,783 | |||
Payable for investment advisory fee | 164,400 | |||
Preferred dividends accrued but not yet declared | 33,333 | |||
Accrued expenses | 75,237 | |||
Total Liabilities |
19,367,753 | |||
PREFERRED STOCK: | ||||
6.00% Cumulative Preferred Stock - $0.001 par value, $25 liquidation value per share; 1,000,000 shares outstanding |
25,000,000 | |||
Total Preferred Stock |
25,000,000 | |||
NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS | $ | 165,807,408 | ||
ANALYSIS OF NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS: | ||||
Common Stock paid-in capital - $0.001 par value per share; 18,595,320 shares outstanding (100,000,000 shares authorized) |
$ | 129,411,594 | ||
Undistributed net investment income (loss) | (4,782,842 | ) | ||
Accumulated net realized gain (loss) on investments and foreign currency |
2,653,204 | |||
Net unrealized appreciation (depreciation) on investments and foreign currency |
38,558,785 | |||
Preferred dividends accrued but not yet declared | (33,333 | ) | ||
Net Assets applicable to Common Stockholders (net asset value per share - $8.92) |
$ | 165,807,408 | ||
*Investments at identified cost (including $19,094,783 of collateral on loaned securities) |
$ | 149,155,936 | ||
Market value of loaned securities | 18,233,561 |
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. | 2007 Annual Report to Stockholders | 53 |
Royce Focus Trust | Year Ended December 31, 2007 | |
Statement of Operations |
INVESTMENT INCOME: | ||||
Income: | ||||
Interest* |
$ | 3,118,847 | ||
Dividends** |
1,154,342 | |||
Securities lending |
20,273 | |||
Total income |
4,293,462 | |||
Expenses: | ||||
Investment advisory fees |
2,003,117 | |||
Stockholder reports |
66,356 | |||
Custody and transfer agent fees |
55,042 | |||
Professional fees |
41,410 | |||
Directors fees |
27,688 | |||
Administrative and office facilities expenses |
14,041 | |||
Other expenses |
99,165 | |||
Total expenses | 2,306,819 | |||
Compensating balance credits | (1,851 | ) | ||
Net expenses | 2,304,968 | |||
Net investment income (loss) | 1,988,494 | |||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY: |
||||
Net realized gain (loss) on investments and foreign currency |
29,154,418 | |||
Net change in unrealized appreciation (depreciation) on investments and foreign currency |
(10,391,522 | ) | ||
Net realized and unrealized gain (loss) on investments and foreign currency |
18,762,896 | |||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM INVESTMENT OPERATIONS |
20,751,390 | |||
DISTRIBUTIONS TO PREFERRED STOCKHOLDERS | (1,500,000 | ) | ||
NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS RESULTING FROM INVESTMENT OPERATIONS |
$ | 19,251,390 | ||
* Net of foreign withholding tax of $51,151. | ||||
** Net of foreign withholding tax of $32,419. |
54 | 2007 Annual Report to Stockholders | THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. |
Royce Focus Trust |
Statement of Changes in Net Assets |
Year ended | Year ended | ||||||||
12/31/07 | 12/31/06 | ||||||||
INVESTMENT OPERATIONS: | |||||||||
Net investment income (loss) | $ | 1,988,494 | $ | 2,368,567 | |||||
Net realized gain (loss) on investments | 29,154,418 | 20,546,074 | |||||||
Net change in unrealized appreciation (depreciation) on investments and foreign currency |
(10,391,522 | ) | 1,820,291 | ||||||
Net increase (decrease) in net assets resulting from investment operations |
20,751,390 | 24,734,932 | |||||||
DISTRIBUTIONS TO PREFERRED STOCKHOLDERS: | |||||||||
Net investment income | (331,350 | ) | (187,800 | ) | |||||
Net realized gain on investments and foreign currency |
(1,168,650 | ) | (1,312,200 | ) | |||||
Total distributions to Preferred Stockholders | (1,500,000 | ) | (1,500,000 | ) | |||||
NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS RESULTING FROM INVESTMENT OPERATIONS |
19,251,390 | 23,234,932 | |||||||
DISTRIBUTIONS TO COMMON STOCKHOLDERS: | |||||||||
Net investment income | (7,385,265 | ) | (2,950,803 | ) | |||||
Net realized gain on investments and foreign currency |
(26,047,361 | ) | (20,617,913 | ) | |||||
Total distributions to Common Stockholders | (33,432,626 | ) | (23,568,716 | ) | |||||
CAPITAL STOCK TRANSACTIONS: | |||||||||
Reinvestment of distributions to Common Stockholders |
21,421,393 | 15,657,293 | |||||||
Total capital stock transactions | 21,421,393 | 15,657,293 | |||||||
NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS |
7,240,157 | 15,323,509 | |||||||
NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS: | |||||||||
Beginning of period |
158,567,251 | 143,243,742 | |||||||
End of period (including undistributed net investment income (loss) of $(4,782,842) at 12/31/07 and $(517,355) at 12/31/06) |
$ | 165,807,408 | $ | 158,567,251 |
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. | 2007 Annual Report to Stockholders | 55 |
Royce Focus 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 Funds performance
for the periods presented. |
Years ended December 31, | ||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2003 | ||||||||||||||||
NET ASSET VALUE, BEGINNING OF PERIOD | $9.75 | $9.76 | $9.75 | $9.00 | $6.27 | |||||||||||||||
INVESTMENT OPERATIONS: | ||||||||||||||||||||
Net investment income (loss) |
0.15 | 0.16 | 0.06 | 0.02 | 0.08 | |||||||||||||||
Net realized and unrealized gain (loss) on investments and foreign currency |
1.12 | 1.50 | 1.44 | 2.63 | 3.57 | |||||||||||||||
Total investment operations |
1.27 | 1.66 | 1.50 | 2.65 | 3.65 | |||||||||||||||
DISTRIBUTIONS TO PREFERRED STOCKHOLDERS: | ||||||||||||||||||||
Net investment income |
(0.02 | ) | (0.01 | ) | (0.01 | ) | (0.00 | ) | (0.02 | ) | ||||||||||
Net realized gain on investments and foreign currency |
(0.07 | ) | (0.09 | ) | (0.11 | ) | (0.15 | ) | (0.14 | ) | ||||||||||
Total distributions to Preferred Stockholders |
(0.09 | ) | (0.10 | ) | (0.12 | ) | (0.15 | ) | (0.16 | ) | ||||||||||
NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON |
||||||||||||||||||||
STOCKHOLDERS RESULTING FROM INVESTMENT OPERATIONS |
1.18 | 1.56 | 1.38 | 2.50 | 3.49 | |||||||||||||||
DISTRIBUTIONS TO COMMON STOCKHOLDERS: | ||||||||||||||||||||
Net investment income |
(0.44 | ) | (0.20 | ) | (0.06 | ) | (0.02 | ) | (0.06 | ) | ||||||||||
Net realized gain on investments and foreign currency |
(1.57 | ) | (1.37 | ) | (1.15 | ) | (1.72 | ) | (0.56 | ) | ||||||||||
Total distributions to Common Stockholders |
(2.01 | ) | (1.57 | ) | (1.21 | ) | (1.74 | ) | (0.62 | ) | ||||||||||
CAPITAL STOCK TRANSACTIONS: | ||||||||||||||||||||
Effect of reinvestment of distributions by Common Stockholders |
(0.00 | ) | (0.00 | ) | (0.03 | ) | (0.01 | ) | (0.03 | ) | ||||||||||
Effect of rights offering and Preferred Stock offering |
| | (0.13 | ) | | (0.11 | ) | |||||||||||||
Total capital stock transactions |
(0.00 | ) | (0.00 | ) | (0.16 | ) | (0.01 | ) | (0.14 | ) | ||||||||||
NET ASSET VALUE, END OF PERIOD | $8.92 | $9.75 | $9.76 | $9.75 | $9.00 | |||||||||||||||
MARKET VALUE, END OF PERIOD | $8.97 | $10.68 | $9.53 | $10.47 | $8.48 | |||||||||||||||
TOTAL RETURN (a): | ||||||||||||||||||||
Market Value | 3.02 | % | 30.50 | % | 3.03 | % | 47.26 | % | 63.98 | % | ||||||||||
Net Asset Value | 12.22 | % | 16.33 | % | 13.31 | % | 29.21 | % | 54.33 | % | ||||||||||
RATIOS BASED ON AVERAGE NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS: |
||||||||||||||||||||
Total expenses (b,c) | 1.31 | % | 1.36 | % | 1.48 | % | 1.53 | % | 1.57 | % | ||||||||||
Management fee expense |
1.14 | % | 1.16 | % | 1.21 | % | 1.27 | % | 1.14 | % | ||||||||||
Other operating expenses |
0.17 | % | 0.20 | % | 0.27 | % | 0.26 | % | 0.43 | % | ||||||||||
Net investment income (loss) | 1.13 | % | 1.54 | % | 0.63 | % | 0.24 | % | 1.07 | % | ||||||||||
SUPPLEMENTAL DATA: | ||||||||||||||||||||
Net Assets Applicable to Common Stockholders, | ||||||||||||||||||||
End of Period (in thousands) |
$165,807 | $158,567 | $143,244 | $105,853 | $87,012 | |||||||||||||||
Liquidation Value of Preferred Stock, | ||||||||||||||||||||
End of Period (in thousands) |
$25,000 | $25,000 | $25,000 | $25,000 | $25,000 | |||||||||||||||
Portfolio Turnover Rate | 62 | % | 30 | % | 42 | % | 52 | % | 49 | % | ||||||||||
PREFERRED STOCK: | ||||||||||||||||||||
Total shares outstanding | 1,000,000 | 1,000,000 | 1,000,000 | 1,000,000 | 1,000,000 | |||||||||||||||
Asset coverage per share | $190.81 | $183.57 | $168.24 | $130.85 | $112.01 | |||||||||||||||
Liquidation preference per share | $25.00 | $25.00 | $25.00 | $25.00 | $25.00 | |||||||||||||||
Average market value per share (d): | ||||||||||||||||||||
6.00% Cumulative |
$24.37 | $24.98 | $25.38 | $24.83 | $25.45 | |||||||||||||||
7.45% Cumulative |
| | | | $25.53 | |||||||||||||||
56 | 2007 Annual Report to Stockholders | THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. |
Notes to Financial Statements |
Summary of Significant Accounting Policies: |
Royce Focus Trust, Inc. (the Fund) is a diversified closed-end investment company. The Fund commenced operations on March 2, 1988 and Royce & Associates, LLC (Royce) assumed investment management responsibility for the Fund on November 1, 1996. |
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 Nasdaqs 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. Securities for which market quotations are not readily available are valued at their fair value under procedures established by the Funds Board of Directors. 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 price of securities used by the Fund may differ from quoted or published prices for the same security. Bonds and other fixed income securities may be valued by reference to other securities with comparable ratings, interest rates and maturities, using established independent pricing services. Investments in money market funds are valued at net asset value per share. |
Foreign Currency: |
The Fund values its non-U.S. securities in U.S. dollars daily at the prevailing foreign currency exchange rates as quoted by a major bank. The effects of changes in foreign exchange rates on investments and other assets and liabilities are included with net realized and unrealized gains and losses on investments. |
Net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, expiration of currency forward contracts, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Funds 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. |
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 Funds operations, while expenses applicable to more than one of the Royce Funds are allocated equitably. Allocated personnel and occupancy costs related to The Royce Funds are included in administrative and office facilities expenses. 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. |
Compensating Balance Credits: |
The Fund has an arrangement with its custodian bank, whereby a portion of the custodians fee is paid indirectly by credits earned on the Funds 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. |
Taxes: |
As a qualified regulated investment company under Subchapter M of the Internal Revenue Code, the Fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. The Schedule of Investments includes information regarding income taxes under the caption Income Tax Information. |
Distributions: |
The Fund currently has a policy of paying quarterly distributions on the Funds Common Stock. Distributions are currently being made at the annual rate of 5% of the rolling average of the prior four calendar quarter-end NAVs of the Funds Common Stock, with the fourth quarter distribution being the greater of 1.25% of the rolling average or the distribution required by IRS regulations. Distributions to Preferred Stockholders are accrued daily and paid quarterly and distributions to Common Stockholders are recorded on ex-dividend date. The Fund is required to allocate long-term capital gain distributions and other types of income proportionately to distributions made to holders of shares of Common Stock and Preferred Stock. 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. |
2007 Annual Report to Stockholders | 57 |
Notes to Financial Statements (continued) |
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 basis 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. |
Repurchase Agreements: |
The Fund may enter into repurchase agreements with institutions that the Funds 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 the underlying securities. |
Securities Lending: |
The Fund loans securities to qualified institutional investors for the purpose of realizing additional income. Collateral on all securities loaned for the Fund is accepted in cash and cash equivalents and invested temporarily by the custodian. The collateral is equal to 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. |
Recent Accounting Pronouncements: |
The Fund adopted Financial Accounting Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48) on June 29, 2007. FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. There was no material impact to the financial statements or disclosures thereto as a result of the adoption of this pronouncement. |
FASB Statement of Financial Accounting Standard No. 157, Fair Value Measurement (FAS 157), provides enhanced guidance for using fair value to measure assets and liabilities. The standard requires companies to provide expanded information about the assets and liabilities measured at fair value and the potential effect of these fair valuations on an entitys financial performance. Adoption of FAS 157 is required for fiscal years beginning after November 15, 2007. The standard is not expected to materially impact the amounts reported in the Funds financial statements, however, additional disclosures will be required in subsequent reports. |
Capital Stock: |
The Fund issued 2,332,768 and 1,587,885 shares of Common Stock as reinvestment of distributions by Common Stockholders for the years ended December 31, 2007 and 2006, respectively. |
At December 31, 2007, 1,000,000 shares of 6.00% Cumulative Preferred Stock were outstanding. Commencing October 17, 2008 and thereafter, the Fund, at its option, may redeem the Cumulative Preferred Stock, in whole or in part, at the redemption price. The Cumulative Preferred Stock is classified outside of permanent equity (net assets applicable to Common Stockholders) in the accompanying financial statements in accordance with Emerging Issues Task Force (EITF) Topic D-98, Classification and Measurement of Redeemable Securities, that requires preferred securities that are redeemable for cash or other assets to be classified outside of permanent equity to the extent that the redemption is at a fixed or determinable price and at the option of the holder or upon the occurrence of an event that is not solely within the control of the issuer. |
The Fund is required to meet certain asset coverage tests with respect to the Cumulative Preferred Stock as required by the 1940 Act. In addition, pursuant to the Rating Agency Guidelines established by Moodys, the Fund is required to maintain a certain discounted asset coverage. If the Fund fails to meet these requirements and does not correct such failure, the Fund may be required to redeem, in part or in full, the Cumulative Preferred Stock at a redemption price of $25.00 per share, plus an amount equal to the accumulated and unpaid dividends, whether or not declared on such shares, in order to meet these requirements. Additionally, failure to meet the foregoing asset coverage requirements could restrict the Funds ability to pay dividends to Common Stockholders and could lead to sales of portfolio securities at inopportune times. The Fund has met these requirements since issuing the Cumulative Preferred Stock. |
Investment Advisory Agreement: |
The Investment Advisory Agreement between Royce and the Fund provides for fees to be paid at an annual rate of 1.0% of the Funds average daily net assets applicable to Common Stockholders plus the liquidation value of Preferred Stock. Royce has voluntarily committed to waive the portion of its investment advisory fee attributable to an issue of the Funds Preferred Stock for any month in which the Funds average annual NAV total return since issuance of the Preferred Stock fails to exceed the applicable Preferred Stocks dividend rate. For the year ended December 31, 2007, the Fund accrued and paid Royce advisory fees totaling $2,003,117. |
58 | 2007 Annual Report to Stockholders |
Notes to Financial Statements (continued) |
Distributions to Stockholders: |
The tax character of distributions paid to stockholders during 2007 and 2006 was as follows: |
Distributions paid from: | 2007 | 2006 | ||||||
Ordinary income | $ | 8,488,626 | $ | 4,915,975 | ||||
Long-term capital gain | 26,444,000 | 20,152,741 | ||||||
$ | 34,932,626 | $ | 25,068,716 | |||||
As of December 31, 2007, the tax basis components of distributable earnings included in stockholders equity were as follows:
Undistributed net investment income | $ | 1,409,092 | ||||||
Undistributed long-term capital gain | 2,447,222 | |||||||
Unrealized appreciation | 32,572,833 | |||||||
Accrued preferred distributions | (33,333 | ) | ||||||
$ | 36,395,814 | |||||||
Undistributed | Accumulated | ||||||
Net Investment | Net Realized | Paid-in | |||||
Income | Gain (Loss) | Capital | |||||
$1,462,634 | $(1,427,470) | $(35,164) | |||||
Purchases and Sales of Investment Securities: |
For the year ended December 31, 2007, the cost of purchases and proceeds from sales of investment securities, other than short-term securities and collateral received for securities loaned, amounted to $99,118,411 and $98,707,884, respectively. |
2007 Annual Report to Stockholders | 59 |
Report of Independent Registered Public Accounting Firm |
To the Board of Directors and Stockholders
of
Royce Focus Trust, Inc.
New York, New York
We have audited the accompanying statement of assets and liabilities of Royce Focus Trust, Inc. (Fund) including the schedule of investments, as of December 31, 2007, and the related statement of operations for the year then ended, the statement 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 Funds 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 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 Funds 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, 2007 by correspondence with the custodian. 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 Focus Trust, Inc. as of December 31, 2007, the results of its operations 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 22, 2008 |
60 | 2007 Annual Report to Stockholders |
This Page Left Intentionally Blank |
Notes to Performance and Other Important Information |
The thoughts expressed in this Review and Report concerning recent market
movements and future prospects for small company stocks are solely the opinion of
Royce at December 31, 2007, and, of course, historical market trends are not necessarily
indicative of future market movements. Statements regarding the future prospects
for particular securities held in the Funds portfolios and Royces investment
intentions with respect to those securities reflect Royces opinions as of
December 31, 2007 and are subject to change at any time without notice. There can
be no assurance that securities mentioned in this Review and Report will
be included in any Royce-managed portfolio in the future. The Funds invest primarily
in securities of micro-, small- and mid-cap companies, that may involve considerably
more risk than investments of larger-cap companies. All publicly released material
information is always disclosed by the Funds on the website at www.roycefunds.com. |
|
Standard deviation is a statistical measure within which a funds total returns
have varied over time. The greater the standard deviation, the greater a funds
volatility. |
|
The Russell 2000 is an index of domestic small-cap stocks. It measures the performance
of the 2,000 smallest publicly traded U.S. companies in the Russell 3000 index.
The Russell 2000 Value and Growth indices consist of the respective value and growth
stocks within the Russell 2000 as determined by Russell Investments. The S&P
500 and S&P SmallCap 600 are indices of U.S. large- and small-cap stocks,
respectively, selected by Standard & Poors based on market size, liquidity
and industry grouping, among other factors. The Nasdaq Composite is an index of
the more than 3,000 common equities listed on the Nasdaq stock exchange. Returns
for the market indices used in this Review and Report were based on information
supplied to Royce by Russell Investments and Morningstar. Royce has not independently
verified the above described information. The Royce Funds is a service mark
of The Royce Funds. |
|
Forward-Looking Statements | |
This material contains forward-looking statements within the meaning of the Securities
Exchange Act of 1934, as amended (the Exchange Act), that involve risks
and uncertainties, including, among others, statements as to: |
|
| the Funds future operating results |
| the prospects of the Funds portfolio companies |
| the impact of investments that the Funds have made or may make |
| the dependence
of the Funds future success on the general economy and its impact on the companies
and industries in which the Funds invest, and |
| the ability of the Funds portfolio companies to achieve their objectives. |
62 | 2007 Annual Report to Stockholders |
This Review
and Report uses words such as anticipates, believes,
expects, future, intends, and similar expressions
to identify forward-looking statements. Actual results may differ materially from
those projected in the forward-looking statements for any reason. |
The Royce Funds
have based the forward-looking statements included in this Review and Report
on information available to us on the date of the report, and we assume no obligation
to update any such forward-looking statements. Although The Royce Funds undertake
no obligation to revise or update any forward-looking statements, whether as a result
of new information, future events or otherwise, you are advised to consult any additional
disclosures that we may make through future stockholder communications or reports. |
Authorized Share Transactions |
Royce Value
Trust, Royce Micro-Cap Trust and Royce Focus Trust may each repurchase up to 5%
of the issued and outstanding shares of its respective common stock and up to 10%
of the issued and outstanding shares of its respective preferred stock during the
year ending December 31, 2008. Any such repurchases would take place at then prevailing
prices in the open market or in other transactions. Common stock repurchases would
be effected at a price per share that is less than the shares then current
net asset value, and preferred stock repurchases would be effected at a price per
share that is less than the shares liquidation value. |
Royce Value
Trust, Royce Micro-Cap Trust and Royce Focus Trust are also authorized to offer
their common stockholders an opportunity to subscribe for additional shares of their
common stock through rights offerings at a price per share that may be less than
the shares then current net asset value. The timing and terms of any such
offerings are within each Boards discretion. |
Annual Certifications |
As required,
the Funds have submitted to the New York Stock Exchange (NYSE) for Royce
Value Trust and Royce Micro-Cap Trust and to Nasdaq for Royce Focus Trust, respectively,
the annual certification of the Funds Chief Executive Officer that he is not
aware of any violation of the NYSEs or Nasdaqs Corporate Governance
listing standards. The Funds also have included the certification of the Funds
Chief Executive Officer and Chief Financial Officer required by section 302 of the
Sarbanes-Oxley Act of 2002 as exhibits to the Funds form N-CSR for the period
ended December 31, 2007, filed with the Securities and Exchange Commission. |
Proxy Voting | ||
A copy of
the policies and procedures that The Royce Funds use to determine how to vote proxies
relating to portfolio securities and information regarding how each of The Royce
Funds voted proxies relating to portfolio securities during the most recent 12-month
period ended June 30 is available, without charge, on the Royce Funds website
at www.roycefunds.com, by calling 1-800-221-4268 (toll-free) and on the website
of the Securities and Exchange Commission (SEC), at www.sec.gov. |
||
Form N-Q Filing | ||
The Funds
file their complete schedules of investments with the SEC for the first and third
quarters of each fiscal year on Form N-Q. The Funds Forms N-Q are available
on The Royce Funds website at www.roycefunds.com and on the SECs website
at www.sec.gov. The Funds Forms N-Q may also be reviewed and copied at the
SECs Public Reference Room in Washington, D.C. To find out more about this
public service, call the SEC at 1-800-732-0330. The Funds complete schedules
of investments are updated quarterly, and are available at www.roycefunds.com. |
Royce Value Trust, Inc.
At the
2007 Annual Meeting of Stockholders held on September 27, 2007, the Funds
stockholders elected five Directors, consisting of:
VOTES FOR | VOTES WITHHELD | ||||
*Mark R. Fetting |
61,717,604 | 671,331 | |||
*Richard M. Galkin |
61,661,286 | 727,649 | |||
*Arthur S. Mehlman |
61,671,315 | 717,620 | |||
**William L. Koke |
8,016,585 | 96,279 | |||
**David L. Meister |
8,021,286 | 91,578 | |||
Royce Micro-Cap Trust, Inc.
At
the 2007 Annual Meeting of Stockholders held on September 27, 2007, the Funds
stockholders elected five Directors, consisting of:
VOTES FOR | VOTES WITHHELD | ||||
*Mark R. Fetting |
23,686,138 | 254,671 | |||
*Richard M. Galkin |
23,660,133 | 280,676 | |||
*Arthur S. Mehlman |
23,668,200 | 272,609 | |||
**William L. Koke |
2,222,960 | 36,866 | |||
**David L. Meister |
2,218,705 | 41,121 | |||
Royce Focus Trust, Inc.
At the
2007 Annual Meeting of Stockholders held on September 27, 2007, the Funds
stockholders elected five Directors, consisting of:
VOTES FOR | VOTES WITHHELD | ||||
*Mark R. Fetting |
14,233,685 | 120,839 | |||
*Richard M. Galkin |
14,231,985 | 122,539 | |||
*Arthur S. Mehlman |
14,232,588 | 121,936 | |||
**Stephen L. Isaacs |
929,145 | 5,150 | |||
**David L. Meister |
929,345 | 4,950 | |||
2007 Annual Report to Stockholders | 63 |
This Page Left Intentionally Blank |
Postscript: Survival of the Fittest? Its Not All Relative. |
At the heart of every reality showcertainly every successful onelies a competition. Often, the contest pits people against each other in a situation in which no contestant has any expertise, sometimes partnering them, as on Dancing With The Stars, with someone who does. On Survivor, of course, the formula relies on something like a slightly stage-managed version of Lord of the Flies re-written for a grown-up, though not necessarily mature, cast of characters. The Apprentice has featured earnest young business professionalsand more recently celebritiescompeting to impress Donald Trump and in the process learn lessons about The American Way of Doing Business that apparently only Mr. Trump can impart. |
than a seasons worth of 22 first-run episodes. Victorious portfolio
managers are often themselves treated as quasi-celebrities in fawning magazine or television profiles. |
Regardless of the format, winning at any cost remains the goal, preferably with a generous dose of backstabbing, betrayal and tears along the path to victory. Having very good-looking participants doesnt hurt, either, making it somewhat obvious that for many reality TV stars, the real goal is celebrity. A well-received stint on a reality series can mean the beginning (or the resumption) of a career devoted to endeavors that traffic in the more explicitly fictional fare of movies and traditional TV. (And if American Idol has taught us anything, its that being eliminated from the contest is no bar to future success. Even if one falls well short of the requisite 15-minute allotment, being famous is often one well-publicized, wildly off-key performance away.) |
Yet even in Survivor, there are plenty of elements that do not really fit with our work. For example, we have often made use of time arbitrage, in which we look for situations where a companys declining stock price has been decoupled from its intrinsic value. This is important for us because we seek absolute value in the stocks that we buy, as well as in the performance that we hope to produce. There is no contest for us in these searches. In other words, we are not looking at companies that look good compared to their peers, or that possess financial characteristics that are bigger/better/faster etc. than others in a similar business. Potential portfolio selections must survive on their own merits. |
Of course, theres nothing new about people willing to publicly embarrass themselves for fun and profit of one sort or another. That element is not what we find interesting in the ongoing popularity of reality TV. Whats intriguing to us is how readily mutual fund management lends itself to reality-TV analogies. Mutual fund performance is often discussed in a similar, short-term, winner-take-all context. The emphasis in many accounts of successful portfolio performancewhether a funds own or in the mediasits squarely on the idea of winners and losers, occasionally over a time period no longer |
Our goal is strong absolute performance over full market cycles and other long-term periods. Winning the performance battle would be wonderful, but our true objective lies elsewhere, where our only opponent is the absolute criteria that we long ago established for ourselves. |
The same ethos governs our performance standards. We certainly
have no qualms about any of The Royce Funds outperforming either their respective
benchmark index or their similarly managed peers. However, our goal is strong absolute performance over full market cycles and other long-term periods. Winning
the performance battle would be wonderful, but our true objective lies
elsewhere, where our only opponent is the absolute criteria that we long ago established
for ourselves.
|
This page is not part of the 2007 Annual Report to Stockholders
Wealth Of Experience
With approximately $30 billion in open- and closed-end fund assets under management, Royce &
Associates is committed to the same small-company investing principles that have served us well for
more than 30 years. Charles M. Royce, our Chief Investment Officer, enjoys one of the longest tenures
of any active mutual fund manager. Royces investment staff includes 12 Portfolio Managers, as well
as nine assistant portfolio managers and analysts, and seven traders.
Multiple Funds, Common Focus
Our goal is to offer both individual and institutional investors the best available small-cap value
portfolios. Unlike a lot of mutual fund groups with broad product offerings, we have chosen to
concentrate on small-company value investing by providing investors with a range of funds that take
full advantage of this large and diverse sector.
Consistent Discipline
Our approach emphasizes paying close attention to risk and maintaining the same discipline, regardless
of market movements and trends. The price we pay for a security must be significantly below our appraisal
of its current worth. This requires a thorough analysis of the financial and business dynamics of an
enterprise, as though we were purchasing the entire company.
Co-Ownership Of Funds
It is important that our employees and shareholders share a common financial goal; our officers,
employees and their families currently have approximately $123 million invested in The Royce Funds.
|
|||||
General Information | Advisor Services | ||||
Additional Report Copies | For Fund Materials, Performance Updates, | ||||
and Fund Inquiries | Account Inquiries | ||||
(800) 221-4268 | (800) 33-ROYCE (337-6923) | ||||
Computershare | Broker/Dealer Services | ||||
Transfer Agent and Registrar | For Fund Materials and Performance Updates | ||||
(800) 426-5523 | (800) 59-ROYCE (597-6923) | ||||
www.roycefunds.com |
|||||
TheRoyceFunds |
CE-REP-1207 | ||||
Item 2: Code(s) of Ethics As of the end of the period covered by this report, the Registrant had adopted a code of ethics, as defined in Item 2 of Form N-CSR, applicable to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of this code of ethics is filed as an exhibit to this Form N-CSR. No substantive amendments were approved or waivers were granted to this code of ethics during the period covered by this report.
Item 3: Audit Committee Financial Expert | ||
(a)(1) | The Board
of Directors of the Registrant has determined that it has an audit committee financial
expert. |
|
(a)(2) | Arthur S.
Mehlman was designated by the Board of Directors as the Registrants Audit
Committee Financial Expert, effective April 15, 2004. Mr. Mehlman is independent as defined under Item 3 of Form N-CSR. |
Item 4: Principal Accountant Fees and Services. | ||
(a) | Audit Fees: | |
Year ended December 31, 2007 - $24,600 | ||
Year ended December 31, 2006 - $23,600 | ||
(b) | Audit-Related Fees: | |
Year ended December 31, 2007 - $1,500 Preparation of reports to rating agency for Preferred Stock | ||
Year ended December 31, 2006 - $1,500 Preparation of reports to rating agency for Preferred Stock | ||
(c) | Tax Fees: | |
Year ended December 31, 2007 - $6,000 - Preparation of tax returns | ||
Year ended December 31, 2006 - $5,000 - Preparation of tax returns | ||
(d) | All Other Fees: | |
Year ended December 31, 2007 - $0 | ||
Year ended December 31, 2006 - $0 | ||
(e)(1) Annual Pre-Approval: On an annual basis, the Registrants independent auditor submits to the Audit Committee a schedule of proposed audit, audit-related, tax and other non-audit services to be rendered to the Registrant and/or investment adviser(s) for the following year that require pre-approval by the Audit Committee. This schedule provides a description of each type of service that is expected to require pre-approval and the maximum fees that can be paid for each such service without further Audit Committee approval. The Audit Committee then reviews and determines whether to approve the types of scheduled services and the projected fees for them. Any subsequent revision to already pre-approved services or fees (including fee increases) are presented for consideration at the next regularly scheduled Audit Committee meeting, as needed.
If subsequent to the annual pre-approval of services and fees by the Audit Committee, the Registrant or one of its affiliates determines that it would like to engage the Registrants independent auditor to perform a service not already pre-approved, the request is to be submitted to the Registrants Chief Financial Officer, and if he or she determines that the service fits within the independence guidelines (e.g., it is not a prohibited service), he or she will then arrange for a discussion of the proposed service and fee to be included on the agenda for the next regularly scheduled Audit Committee meeting so that pre-approval can be considered.
Interim Pre-Approval: If, in the judgment of the Registrants Chief Financial Officer, a proposed engagement needs to commence before the next regularly scheduled Audit Committee meeting, he or she shall submit a written summary of the proposed engagement to all members of the Audit Committee, outlining the services, the estimated maximum cost, the category of the services (e.g., audit, audit-related, tax or other) and the rationale for engaging the Registrants independent auditor to perform the services. To the extent the proposed engagement involves audit, audit-related or tax services, any individual member of the Audit Committee who is an independent Board member is authorized to pre-approve the engagement. To the extent the proposed engagement involves non-audit services other than audit-related or tax, the Chairman of the Audit Committee is authorized to pre-approve the engagement. The Registrants Chief Financial Officer will arrange for this interim review and
coordinate with the appropriate member(s) of the Committee. The independent auditor may not commence the engagement under consideration until the Registrants Chief Financial Officer has informed the auditor in writing that pre-approval has been obtained from the Audit Committee or an individual member who is an independent Board member. The member of the Audit Committee who pre-approves any engagements in between regularly scheduled Audit Committee meetings is to report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next regularly scheduled meeting.
(e)(2) | Not Applicable | |
(f) | Not Applicable | |
(g) | Year ended December 31, 2007 - $7,500 | |
Year ended December 31, 2006 - $6,500 | ||
(h) | No such services were rendered during 2007 or 2006. |
Item 5: The Registrant has a separately
designated standing audit committee established in accordance with Section 3(a)(58)(A)
of the Securities Exchange Act of 1934. Donald R. Dwight, Richard M. Galkin, Stephen
L. Isaacs, William L. Koke, Arthur S. Mehlman, David L. Meister and G. Peter OBrien
are members of the Registrants audit committee.
Item 6: Not Applicable.
Item 7:
June 5, 2003 | ||
As amended on April 14, 2005, | ||
February 28, 2006, March 12, 2007 | ||
And May 14, 2007 | ||
Royce & Associates Proxy Voting Guidelines and Procedures
These procedures apply to Royce & Associates, LLC (Royce) and all funds and other client accounts for which it is responsible for voting proxies, including all open and closed-end registered investment companies (The Royce Funds), limited partnerships, limited liability companies, separate accounts, other accounts for which it acts as investment adviser and any accounts for which it acts as sub-adviser that have delegated proxy voting authority to Royce. The Boards of Trustees/Directors of The Royce Funds (the Boards) have delegated all proxy voting decisions to Royce subject to these policies and procedures.
Receipt of Proxy Material. Under the continuous oversight of the Head of Administration or his designee is responsible for monitoring receipt of all proxies and ensuring that proxies are received for all securities for which Royce has proxy voting responsibility. All proxy materials are logged in upon receipt by Royces Librarian
Voting of Proxies. Once proxy material has been logged in by Royces Librarian, it is then promptly reviewed by the designated Administrative Assistant to evaluate the issues presented. Regularly recurring matters are usually voted as recommended by the issuers board of directors or management. The Head of Administration or his designee, in consultation with the Chief Investment Officer, develops and updates a list of matters Royce treats as regularly recurring and is responsible for ensuring that the designated Administrative Assistant has an up-to-date list of these matters at all times, including instructions from Royces Chief Investment Officer on how to vote on those matters on behalf of Royce clients. Examples of regularly recurring matters include non-contested elections of directors and non-contested approval of independent auditors. Non-regularly recurring matters are brought to the attention of the portfolio manager(s) for the account(s) involved by the designated Administrative Assistant, and, after giving some consideration to advisories from Proxy Master (a service provided by Institutional Shareholder Services), the portfolio manager directs that such matters be voted in a way that he or she believes should better protect or enhance the value of the investment. If the portfolio manager determines that information concerning any proxy requires analysis, is missing or incomplete, he or she then gives the proxy to an analyst or another portfolio manager for review and analysis.
a. | From time
to time, it is possible that one Royce portfolio manager will decide (i) to vote
shares held in client accounts he or she manages differently from the vote of another
Royce portfolio manager whose client accounts hold the same security or (ii) to
abstain from voting on behalf of client accounts he or she manages when another
Royce portfolio manager is casting votes on behalf of other Royce client accounts. |
|
The designated
Administrative Assistant reviews all proxy votes collected from Royces portfolio
managers prior to such votes being cast. If any difference exists among the voting
instructions given by Royces portfolio managers, as described above, the designated
Administrative Assistant then presents these proposed votes to the Head of Administration
or his designee and the Chief Investment Officer. The Chief Investment Officer,
after consulting with the relevant portfolio managers, either reconciles the votes
or authorizes the casting of differing votes by different portfolio managers. The
Head of Administration or his designee maintains a log of all votes for which different
portfolio managers have cast differing votes, that describes the rationale for allowing
such differing votes and contains the initials of both the Chief Investment Officer
and Head of Administration or his designee allowing such differing votes. The Head
of Administration or his designee performs a weekly review of all votes cast by
Royce to confirm that any conflicting votes were properly handled in accordance
with the above-described procedures. |
||
b. | There are
many circumstances that might cause Royce to vote against an issuers board
of directors or management proposal. These would include, among others,
excessive compensation, unusual management stock options, preferential voting and
poison pills. The portfolio managers decide these issues on a case-by-case basis
as described above. |
|
c. | A portfolio
manager may, on occasion, determine to abstain from voting a proxy or a specific
proxy item when he or she concludes that the potential benefit of voting is outweighed
by the cost, when it is not in the client accounts best interest to vote. |
|
d. | When a
client has authorized Royce to vote proxies on its behalf, Royce will generally
not accept instructions from the clients regarding how to vote proxies. |
|
e. | If a security
is on loan under The Royce Funds Securities Lending Program with State Street
Bank and Trust Company (Loaned Securities), the Head of Administration
or his designee will recall the Loaned Securities and request that they be delivered
within the customary settlement period after the notice, to permit the exercise
of their voting rights if the number of shares of the security on loan would have
a material effect on The Royce Funds voting power at the up-coming stockholder
meeting. A material effect is defined as any case where the Loaned Securities are
1% or more of a class of a companys outstanding equity securities. Monthly,
the Head of Administration or his designee will review the summary of this activity
by State Street. A quarterly report detailing any exceptions that occur in recalling
Loaned Securities will be given to the Boards. |
Custodian banks are authorized to release all shares held for Royce client account portfolios to Automated Data Processing Corporation (ADP) for voting, utilizing ADPs Proxy Edge software system. Substantially all portfolio companies utilize ADP to collect their proxy votes. However, for the limited number of portfolio companies that do not utilize ADP, Royce attempts to register at least a portion of its clients holdings as a physical shareholder in order to ensure its receipt of a physical proxy.
Under the continuous oversight of the Head of Administration or his designee, the designated Administrative Assistant is responsible for voting all proxies in a timely manner. Votes are returned to ADP using Proxy Edge as ballots are received, generally two weeks before the scheduled meeting date. The issuer can thus see that the shares were voted, but the actual vote cast is not released to the company until 4pm on the day before the meeting. If proxies must be mailed, they go out at least ten business days before the meeting date.
Conflicts of Interest. The designated Administrative Assistant reviews reports generated by Royces portfolio management system (Quest PMS) that set forth by record date, any security held in a Royce client account which is issued by a (i) public company that is, or a known affiliate of which is, a separate account client of Royce (including sub-advisory relationships), (ii) public company, or a known affiliate of a public company, that has invested in a privately-offered pooled vehicle managed by Royce or (iii) public company, or a known affiliate of a
public company, by which the spouse of a Royce employee or an immediate family member of a Royce employee living in the household of such employee is employed, for the purpose of identifying any potential proxy votes that could present a conflict of interest for Royce. The Head of Administration or his designee develops and updates the list of such public companies or their known affiliates which is used by Quest PMS to generate these daily reports. This list also contains information regarding the source of any potential conflict relating to such companies. Potential conflicts identified on the conflicts reports are brought to the attention of the Head of Administration or his designee by the designated Administrative Assistant, who then reviews them to determine if business or personal relationships exist between Royce, its officers, managers or employees and the company that could present a material conflict of interest. Any such identified material conflicts are voted by Royce in accordance with the recommendation given by an independent third party research firm (Institutional Shareholder Services). The Head of Administration or his designee maintains a log of all such conflicts identified, the analysis of the conflict and the vote ultimately cast. Each entry in this log is signed by the Chief Investment Officer before the relevant votes are cast.
Recordkeeping. A record of the issues and how they are voted is stored in the Proxy Edge system. Copies of all physically executed proxy cards, all proxy statements and any other documents created or reviewed that are material to making a decision on how to vote proxies are retained in the Company File maintained by Royces Librarian.
Item 8: (a)(1) Portfolio Managers of Closed-End Management Investment Companies (information as of December 31, 2007)
Name |
Title |
Length of Service |
Principal Occupation(s) During Past 5 Years |
W. Whitney George |
Vice President and Portfolio Manager of the Registrant |
Since 1991 |
Managing Director, Vice President and Senior Portfolio Manager of Royce & Associates, LLC (Royce), investment adviser to the Registrant; Vice President of the Registrant, Royce Value Trust, Inc., Royce Micro-Cap Trust, Inc., Royce Focus Trust, Inc., The Royce Fund and Royce Capital Fund (collectively, The Royce Funds). |
(a)(2) Other Accounts Managed by Portfolio Manager and Potential Conflicts of Interest (information as of December 31, 2007)
Other Accounts
Number of Accounts |
Value of Managed |
|||
Managed for which |
Accounts for which |
|||
Number of |
Total |
Advisory Fee is |
Advisory Fee is |
|
Type of Account |
Accounts Managed |
Assets Managed |
Performance-Based |
Performance Based |
Registered investment companies |
10 |
$14,622,124,248 |
1 |
$5,785,626 |
Private pooled investment vehicles |
3 |
$278,995,287 |
1 |
$112,228,035 |
Other accounts* |
1 |
$23,995,287 |
- |
- |
*Other accounts include all other accounts managed by the Portfolio Manager in either a professional or personal capacity except for personal accounts subject to pre-approval and reporting requirements under the Registrants Rule 17j-1 Code of Ethics. |
the securities based upon the accounts level of participation in the order. Royce may under certain circumstances allocate securities in a manner other than pro-rata if it determines that the allocation is fair and equitable under the circumstances and does not discriminate against any account.
As described below, there is a revenue-based component of the Portfolio Managers Performance Bonus and the Portfolio Manager also receives a Firm Bonus based on revenues (adjusted for certain imputed expenses) generated by Royce. In addition, the Portfolio Manager receives a bonus based on Royces retained pre-tax profits from operations. As a result, the Portfolio Manager may receive a greater relative benefit from activities that increase the value to Royce of The Royce Funds and/or other Royce client accounts, including, but not limited to, increases in sales of the Registrants shares and assets under management.
Also, as described above, the Portfolio Manager generally manages more than one client account, including, among others, registered investment company accounts, separate accounts and private pooled accounts managed on behalf of institutions (e.g., pension funds, endowments and foundations) and for high-net-worth individuals. The appearance of a conflict of interest may arise where Royce has an incentive, such as a performance-based management fee (or any other variation in the level of fees payable by The Royce Funds or other Royce client accounts to Royce), which relates to the management of one or more of The Royce Funds or accounts with respect to which the Portfolio Manager has day-to-day management responsibilities. One registered investment company account managed by the Portfolio Manager, Royce Global Select Fund, pays Royce a performance-based fee.
Finally, conflicts of interest may arise when the Portfolio Manager personally buys, holds or sells securities held or to be purchased or sold for the Registrant or other Royce client account or personally buys, holds or sells the shares of one or more of The Royce Funds. To address this, Royce has adopted a written Code of Ethics designed to prevent and detect personal trading activities that may interfere or conflict with client interests (including Registrant shareholders interests). Royce generally does not permit its Portfolio Managers to purchase small- or micro-cap securities in their personal investment portfolios.
Royce and The Royce Funds have adopted certain compliance procedures which are designed to address the above-described types of conflicts. However, there is no guarantee that such procedures will detect each and every situation in which a conflict arises.
(a)(3) Description of Portfolio Manager Compensation Structure (information as of December 31, 2007)
Royce seeks to maintain a compensation program that is competitively positioned to attract and retain high-caliber investment professionals. The Portfolio Manager receives from Royce a base salary, a Performance Bonus and a benefits package. The Portfolio Managers compensation is reviewed and may be modified from time to time as appropriate to reflect changes in the market, as well as to adjust the factors used to determine bonuses. The Portfolio Managers compensation consists of the following elements:
- | BASE SALARY. The Portfolio Manager is paid a base salary. In setting the base salary, Royce seeks to be competitive in light of the Portfolio Managers experience and responsibilities. |
- | PERFORMANCE BONUS. The Portfolio Manager receives a quarterly Performance Bonus that is asset-based, or revenue-based and therefore in part based on the value of the accounts net assets, determined with reference to each of the registered investment company and other client accounts managed by him. Except as described below, the revenue-based Performance Bonus applicable to the registered investment company accounts managed by the Portfolio Manager is subject to upward or downward adjustment or elimination based on a combination of 3-year and 5-year risk-adjusted pre-tax returns of such accounts relative to all small-cap objective funds with three years of history tracked by Morningstar (as of December 31, 2007 there were 362 such Funds tracked by Morningstar) and the 5-year absolute returns of such accounts relative to 5-year U.S. Treasury Notes. The Performance Bonus applicable to non-registered investment company accounts managed by the Portfolio Manager and to Royce Global Select Fund is not subject to a performance-related adjustment. |
Payment of the Performance Bonus may be deferred as described below, and any amounts deferred are forfeitable, if the Portfolio Manager is terminated by Royce with or without cause or resigns. The amount of the deferred Performance Bonus will appreciate or depreciate during the deferral period, based on the total return performance of one or more Royce-managed registered investment company accounts selected by the Portfolio Manager at the beginning of
the deferral period. The amount deferred will depend on the Portfolio Managers total direct, indirect beneficial and deferred unvested bonus investments in the Royce registered investment company account for which he or she is receiving portfolio management compensation.
- | FIRM BONUS. The Portfolio Manager receives a quarterly bonus based on Royces net revenues. |
- | BENEFIT PACKAGE. The Portfolio Manager also receives benefits standard for all Royce employees, including health care and other insurance benefits, and participation in Royces 401(k) Plan and Money Purchase Pension Plan. From time to time, on a purely discretionary basis, the Portfolio Manager may also receive options to acquire stock in Royces parent company, Legg Mason, Inc. Those options typically represent a relatively small portion of a Portfolio Managers overall compensation. |
The Portfolio Manager, in addition to the above-described compensation, also receives a bonus based on Royces retained pre-tax operating profit. This bonus, along with the Performance Bonus and Firm Bonus, generally represents the most significant element of the Portfolio Managers compensation. The Portfolio Manager also receives bonuses from Royce relating to the sale of Royce to Legg Mason, Inc. on October 1, 2001. Such bonuses are payable pursuant to an Employment Agreement entered into by the Portfolio Manager and Royce in connection with the sale.
(a)(4) Dollar Range of Equity Securities in Registrant Beneficially Owned by Portfolio Manager (information as of December 31, 2007)
The following table shows the dollar range of the Registrants shares owned beneficially and of record by the Portfolio Manager, including investments by his immediately family members sharing the same household and amounts invested through retirement and deferred compensation plans.
Item 9: Not Applicable.
Item 10: Not Applicable.
Item 11: Controls and Procedures.
(a) Disclosure Controls and Procedures.
The Principal Executive and Financial Officers concluded that the Registrants Disclosure Controls and Procedures are effective based on their evaluation
of the Disclosure Controls and Procedures as of a date within 90 days of the filing
date of this report.
(b) Internal Control over Financial Reporting.
There were no significant changes in Registrants internal control over financial
reporting or in other factors that could significantly affect this control subsequent
to the date of the evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses during the second fiscal quarter of the period
covered by this report.
(a)(2) Separate certifications by the Registrants Principal Executive Officer and Principal Financial Officer as required by
Rule 30a-2(a) under the Investment Company Act of 1940.
(a)(3) Not Applicable
(b) Separate certifications by the Registrants Principal Executive Officer and Principal Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(b) under the Investment Company Act of 1940.
Pursuant to the requirements of the Securities
Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
ROYCE FOCUS TRUST, INC.
BY: | /s/Charles M. Royce |
Charles M. Royce | |
President | |
Date: March 4, 2008 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
ROYCE FOCUS TRUST, INC. | ROYCE FOCUS TRUST, INC. | |||
BY: | /s/Charles M. Royce | BY: | /s/John D. Diederich | |
Charles M. Royce | John D. Diederich | |||
President | Chief Financial Officer | |||
Date: March 4, 2008 | Date: March 4, 2008 |