For the year-to-date period ended June 30, 2014 Royce Global Value Trust climbed 5.6% on an NAV (net asset value basis) and 5.9% on a market price basis, essentially sandwiching its benchmark, the Russell Global Small Cap Index, which was up 5.7% for the same period. We were pleased with the Fund’s performance. While slightly shy of its benchmark on an NAV basis, first-half results nonetheless bolstered our confidence in the Fund's prospects for strong absolute results going forward. The Fund came into existence as a spin-off from Royce Value Trust at the rate of one share of Global Trust common stock for every seven shares of RVT common stock owned. the Fund's investment goal is long-term growth of capital. The Fund invests in a broadly diversified portfolio of both U.S. and non-U.S. small-cap stocks. Chuck Royce manages the Fund while Royce veterans Chris Flynn and David Nadel serve as assistant portfolio managers.

Although most non-U.S. markets did not match the feverish pace of their small-cap stateside cousins in 2013, they did fine on an NAV basis before going on to enjoy a stronger first half of 2014.

For the first quarter, the Fund rose 1.4% on an absolute basis and 1.0% on market price basis. A strengthening Europe helped to compensate for a generally less robust Asia during the first few months of 2014. There were notable contributions from portfolio holdings in Canada, France, and Italy in the first quarter as well as trouble spots for positions headquartered in Hong Kong and the U.S. For the second quarter, returns were stronger both here in the U.S. and abroad, the latter helped by a recovery for many Asian companies. This was most noticeable for positions headquartered in Japan, which overcame first-quarter net losses to post a significant contribution for both the second quarter and semiannual period. Portfolio holdings in Canada also enjoyed a strong second quarter, helped by net gains in a number of industries. Global Value Trust was thus able to take advantage of the market’s growing strength, increasing 4.1% for the second quarter on an NAV basis and 4.8% on a market price basis. (The Russell Global Small Cap Index grew 3.3% for the same period.) The Fund’s cumulative NAV return from inception (10/17/13) through June 30, 2014 was 8.5%.

All of the Fund’s nine equity sectors finished the first half in positive territory, with Financials, Information Technology, and Materials making the largest positive contributions. At the industry level, second-quarter strength was apparent, with the capital markets, auto components, household durables, and semiconductors & semiconductor equipment groups leading in the first half. Detracting most from first-half results at the industry level were air freight & logistics companies, media stocks, and multiline retailers. Coming from the first of these three groups, New Jersey-based UTi Worldwide is a global supply chain logistics services and solutions company that operates on multiple platforms helping a variety of industries. Its business was hurt by lower freight-forwarding volumes and pricing as well as by delays in collecting receivables. All of this caused the company to violate its debt covenants, resulting in an expensive and dilutive recapitalization. We chose to hold shares in the hope of a turnaround. We built our position in Pico Far East Holdings, a Hong Kong-based business that makes displays for companies presenting at conventions. We like that major global brands such as Mercedes Benz, Lexus, and Citibank trust the company to accurately portray their brand images. The slowdown in China’s economy hurt Pico Far East Holdings business, but management keeps a close eye on costs and focuses on the long term, traits that inspire our confidence.

The Fund’s top contributing stock was top-five position CETIP-Mercados Organizados, which organizes the over-the-counter (OTC) markets in Brazil. The company offers an electronic platform for conducting online transactions, such as auctions and government bond trading, corporate bonds, and fixed income securities. CETIP also provides central securities depository, outsourcing, market data, and risk management services. Its shares rose on what we suspect was a flight to company quality in Brazil’s first-half bear market. De’Longhi is an Italian company which owns a collection of consumer brands in the domestic appliance market, such as coffee makers, food processors, electric ovens, kettles, toasters, and more. Its stock performance in the first half of 2014 was largely generated in the first quarter after reporting solid earnings for 2013. It also benefited from investors’ generally increased risk appetite for Italian stocks. We trimmed our stake throughout the first half. The oldest private bank in Argentina and the nation’s third largest, BBVA Banco Frances ADR has posted both strong earnings and given an improved outlook so far in 2014, both of which seemed to attract more investors to its shares. We began to sell our shares of specialty chemical company China XD Plastics in May when improved revenues and earnings led to a spike in its stock, which then corrected amid questions about the veracity of its reported results.

Average Annual Total Returns as of Quarter-End 6/30/14 (%)

Current month-end performance may be obtained from our Prices and Performance page.

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