Fund Performance

Royce Global Value Trust (NYSE: RGT) gained 5.6% on an NAV (net asset value) basis and 3.4% on a market price basis for the year-to-date period ended June 30, 2015, lagging its benchmark, the Russell Global Small Cap Index, which advanced 6.4% for the same period. For most U.S. stocks, 2015 started on a discouraging note while non-U.S. equities had more mixed results. We were disappointed to see the Fund shed more value than the benchmark in January, lag in the bullish February, in which results were driven largely by U.S. and European equities, and fall back into the red in March. In the first quarter, Global Value Trust was up 0.6% on an NAV basis and 0.1% on a market price basis versus 3.9% for the index.

The Fund's fortunes shifted in the opening month of the second quarter, when it held a generous lead over the global small-cap index on an NAV basis (+5.7% versus +2.3%). Unfortunately, this advantage did not last, and the Fund fell behind during May, when returns were lower though positive, and June, which turned decidedly bearish late in the month thanks to the Greek default and the quickening pace of decline for Chinese stocks. Global Value Trust, however, hung on to its relative edge thanks to its terrific April. For the second quarter, the Fund rose 4.9% on an NAV basis and 3.2% on a market price basis, outpacing the benchmark, which advanced 2.4% for the same period. While the Fund's initial results have been underwhelming on both an absolute and relative basis, we remain confident that our disciplined, bottom-up approach can be successful.

What Worked... And What Didn't

Of the Fund's eight equity sectors, Financials and Industrials— followed by Consumer Discretionary—led performance in the semiannual period. We were pleased that the first of these groups also achieved better results than the sector did within the portfolio's benchmark while the second had a modestly negative impact relative to the benchmark. Three other sectors—Information Technology, Materials, and Health Care—had a more pronounced adverse effect on relative results. The first two were the largest detractors on an absolute basis as well. The Fund's two biggest net losses at the position level came from Information Technology and are based in Germany. Aixtron engineers and manufactures metal organic chemical vapor deposition (MOVD) systems used to produce compound semiconductor layer structures for use in LED, laser, solar cell, and other applications. Its stock has been mostly trending downward over the last couple of years and began to fall more steadily late in 2014 and into 2015 as growth in revenues and earnings remained poor. We sold our position in mid-March. LPKF Laser & Electronics develops specialized mechanical engineering products for electronics production, the automotive industry, and in the manufacture of solar cells. After a disappointing 2014, its shares rallied briefly in February only to begin falling again in March after a disappointing first-quarter report led to a wave of selling. We reduced our position in the first half.

At the country level, holdings in the U.S. and Brazil had the largest negative impact on results in the first half. Net losses were somewhat mitigated, however, by holdings in Japan, the U.K., and Hong Kong. The advantage for the third of those nations was largely due to a position in the capital markets industry. Also a top-10 position at the end of June, Value Partners Group is a Hong Kong-based asset manager with a value orientation similar to our own. Its shares benefited from the meteoric rise in the Hong Kong and Shanghai markets in early May before cooling off with the bear market for Chinese stocks in June. We were pleased to see growth in its assets under management and improved performance and management fees, all of which helped its earnings. We trimmed our position before the correction. London-based Clarkson was the Fund's biggest position at the end of June and second-largest contributor to performance in the first six months of 2015. An investment holding company whose subsidiaries provide integrated shipping services worldwide, its stock began to rise in February and did well through the remainder of 2015's first half. Strong results for fiscal 2014, which were well ahead of market expectations, and a double-digit growth outlook helped drive performance. The company's entrance into the FTSE 250 index on the London Stock Exchange in mid-April, a move which mandates that U.K. index funds invest in the stock, also played a part.

Current Positioning and Outlook

As the global economy continues to recover, we continue to look for opportunities in several sectors and regions. At the end of the semiannual period Global Value Trust had substantial overweights in Industrials and Materials while also having greater exposure than its benchmark to Consumer Discretionary and Financials. At the country level the portfolio had far less exposure to the U.S. while having significantly greater exposure to the U.K., Canada, France, Hong Kong, Switzerland, Germany, and Brazil.

Average Annual Total Returns as of Quarter-End 6/30/15 (%)

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

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