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RNS
Lazard World Trust Fund  -  WTR   

Annual Financial Report

Released 07:00 18-Jul-2017

RNS Number : 3005L
Lazard World Trust Fund
18 July 2017
 

Lazard World Trust Fund

Final Results

March 31st, 2017

 

Financial Highlights

for the year ended March 31st, 2017

 

Percentage Change (total return)

US Dollar (US$)

UK Sterling (£)

 

%

%

Net Asset Value ('NAV') per share

15.0

32.1

MSCI All Country World Index (ex USA)

13.1

30.0

Share Price

21.0

38.7

 

Net Asset Value & Share Price

US$

£

Net Asset Value (per share)

4.65

3.71

Share Price

4.13

3.30

 

Total Net Assets as of March 31st, 2017

US$

£

 

(million)

(million)

Total Net Assets

169.0

134.9

 

Dividend per share

US$

UK

 

cents

pence

Final - Proposed

6.39

5.10

Interim - Paid

6.61

5.10

Total paid for year to March 31st, 2017

12.78

10.20

Total paid for year to March 31st, 2016

9.28

6.40

Percentage increase in the dividend paid 2016 v 2017

38%

59%

 

Note: The rate of exchange used to calculate the figures that appear on this page is the rate of exchange as at

March 31st, 2017; US$ 1.2529 per £1, other than the figures for past dividends which are calculated at the rates

then applying.

 

INVESTMENT OBJECTIVE

Lazard World Trust Fund (the 'Fund') seeks to achieve long-term capital appreciation by investing primarily in companies whose shares trade at a discount to their underlying Net Asset Value. The Fund measures its performance principally against the MSCI All Countries World (ex US) Index, although Lazard Asset Management LLC (the 'Manager') seeks to achieve the highest possible risk-adjusted returns and the allocation of the Fund's assets will normally diverge substantially from the Index.

 

INVESTMENT POLICY

Asset Allocation

The Fund invests in closed-end funds, investment trusts, holding companies and other comparable companies whose shares are listed or traded on international exchanges and are generally at a discount to their underlying Net Asset Value. The Fund seeks actively to encourage boards and management teams to take steps to enhance shareholder value and seeks to take a constructive and active role to help reduce the discount at which the shares of portfolio companies trade.

 

Risk Diversification

The Fund seeks to provide broad exposure to equity markets through holding a diversified portfolio of closed-end investment companies including holding companies and comparable quoted companies that typically trade at a discount to their intrinsic value.

 

Dividend Policy

The Fund pays dividends twice a year that together amount to a total annual dividend equivalent to 3.5% of the Net Asset Value at the start of each financial year. For the year ended March 31st, 2017 this resulted in total dividend payments of 10.2p per share. For the financial year ended March 31st, 2018 this will amount to a total dividend payment of 12.985p.

 

Gearing and Hedging

The Fund may use gearing (the ability to borrow), and the level of gearing may vary from time to time. The Board has authorised the Manager to use gearing up to 15% of the Fund's Net Asset Value. The Board has the power to increase the amount of gearing that the Manager is authorised to use up to 25% of the Fund's Net Asset Value. Shareholders should note that gearing increases the scale of any profits or losses.

 

The Fund is permitted to seek to hedge long positions by selling short stock indices, stocks, and shares of exchange-traded funds or closed-end funds up to 100% of the Fund's Net Asset Value. The Fund may also hedge its currency exposure against the US Dollar. Shareholders should note that the use of such techniques involves risks, including potentially significant larger losses on short positions than long positions.

 

CHAIRMAN'S STATEMENT

 

I am pleased to present the annual report and accounts for the Lazard World Trust Fund (the 'Fund') for the year ended March 31st, 2017. The Fund's net asset value per share at year-end was US$ 4.65 representing a total return of 15.0% over the period. This result compares favourably with the Fund's benchmark, the MSCI All Country World Index ex-US., which increased 13.1% and the Fund's reference benchmark, the MSCI All Country World Index, which increased 15.0% for the year.

 

It is important to note that the Fund is not managed with the objective of correlating to any one index. To that end the Manager is permitted to invest no more than 20% of the Fund's net assets in U.S. securities. The Fund is invested in a concentrated portfolio of securities where the manager has a high degree of conviction that each will provide a meaningful contribution to the Fund's performance.

 

Last year at an Extraordinary General Meeting on the recommendation of the Board, shareholders approved renaming the Fund to Lazard World Trust Fund. The Board's belief was that this change was important to identify to shareholders and investors that Lazard Asset Management, a major global asset manager and the Fund's original sponsor, had been its investment adviser since its inception. Importantly, while the Fund's total net assets are faily small at approximately US$169 million, the investment team at Lazard which advises the Fund also manages a total of approximately US$5 billion using the same discount asset management strategy. Lazard has a staff of over 300 investment professionals around the world providing analysis and research to support this strategy.

 

An important component of the Manager's strategy is to realise value from corporate governance and other actions taken by the Fund's portfolio companies which are intended to reduce discounts or provide special distributions and which in turn create value for our shareholders. The Manager actively encourages such corporate actions some of which are described in the Manager's review in this report.

 

The Board appointed Cenkos Securities plc as its broker and financial adviser on May 31st, 2017 and is initially working with Cenkos to improve liquidity in the Fund's shares and expand the shareholder register. As detailed in previous shareholder reports, the Fund has taken several steps in the past two years to expand investor awareness of the Fund with the ultimate goal of increasing share liquidity and achieving compliance with the UK Financial Conduct Authority's Listing Rules with respect to the number of shares in public hands (as defined in the Rules). The Board is keenly focused on this issue and intends to continue these efforts.

 

In respect to the year ended March 31st, 2017 the Fund's dividends amounted to 10.2 pence per share, paid in two equal instalments. The second dividend, as a final dividend for the year, is subject to shareholder approval at the forthcoming Annual General Meeting. For the fiscal year ending March 31st, 2018 the dividend policy calls for a distribution of an amount equal to 3.5% of the Fund's Net Asset Value at the end of the previous financial year. This will result in the payment of a total dividend of 12.985 pence per share (based on the Net Asset Value of £3.71 at the year ended on March 31st, 2017), again payable in two equal instalments. In addition, as approved by shareholders at an Extraordinary General Meeting the Fund completed a tender offer for 10% of its shares on September 29th, 2016 at a price of £3.22 per share.

 

In accordance with past practice, the Board will again seek shareholder approval at the Annual General Meeting to acquire up to 14.99% of the Fund's shares through market purchases. Such purchases will only be made if the Board considers that they will be in the interests of the shareholders generally. At the Annual General Meeting shareholders will also have the opportunity to consider the annual continuation vote and the Remuneration Policy which has not been changed since the last time the Remuneration Policy was put to shareholder vote in 2014. The Board recommends voting in favour of the continuation vote, the buy-back resolution and the Remuneration Policy.

 

The Board continues its strong support for the Fund's strategy and the Manager's execution of that strategy. As always I welcome any correspondence from shareholders.

 

Philip R. McLoughlin

Chairman

 

July 17th, 2017

 

 

MANAGER'S REVIEW

for the year ended March 31st, 2017

 

Market and Fund Performance Review

"Surprise and disbelief" are two words often used in describing events in the Fund's past fiscal year. The United Kingdom's vote to leave the European Union (Brexit) and Donald Trumps election as the U.S. President were both regarded as unlikely events that could pose large structural risks. Yet global equity markets were remarkably resilient in the wake of these outcomes, with most major equity markets gaining over the past 12 months.

 

British equity markets initially tumbled due to Brexit, but have since recovered to all-time highs. When the Trump presidency became reality, investors focused on the prospect of higher economic growth in the United States, with the stimulative impact of certain stated policies, including lower taxes, less regulation, and higher infrastructure spending. China was in crisis at this time last year, with the economy slowing down and great concern over its financial markets and its currency. A year later, the Chinese economy has rebounded and its currency has strengthened on the back of increased fiscal spending, a renewed infrastructure investment push, deregulation, and tax cuts. Developed Europe and Japan both continued their rebound, with Japan, for the first time in many years, announcing its fourth consecutive quarter of positive economic growth. Strong corporate profits were registered in both regions.

 

Fund Performance Review (all figures in US Dollars)

For the fiscal year ended March 31st, 2017 the Fund's net asset value total return per share increased by 15.0%, compared with a gain of 13.1% for the MSCI All World ex-US total return. The Fund's share price in US dollars gained 21.0% over the fiscal year.

 

Investments in global and emerging Asia-focused investment companies were the primary drivers of the Fund's performance over the year. Global investments including International Biotechnology Trust (+28.8%) and private equity/alternative investments, HarbourVest Global Private Equity (+17.8%) and Tetragon Financial (+33.9%), contributed significantly to returns. In emerging Asia, China-focused investments performed strongly, led by Macau Property Opportunities Fund (+27.7%) and Fidelity China Special Situations (+25.9%). Frontier markets investments also contributed, with S.C. Fondul Proprietatea (Romania) rising more than 23% and VinaCapital Vietnam Opportunity Fund up nearly 40%.

 

Investments in emerging Europe and Latin America were the main detractors from performance. A failed military coup in Turkey followed by continued political uncertainty sent equity markets lower by 16%, and Turkey-focused holding company, Haci Omer Sabanci Holdings AS fell nearly 20%. In Latin America, Brazil-focused private equity fund, GP Investments, fell by less than 1%, compared with local Brazilian equities which rallied 43%. Marwyn Value Investors Limited fell by 33.7% over the year due to the significant increase in its discount but has since partly recovered.

 

A number of our holdings went through corporate actions, which benefited the Fund, as disclosed below.

 

Percentage Change  (*Annualised)

 

Share Data to March 31st, 2017

6 Months

1 Year

3 Years*

5 Years*

10 Years*

In GBP
Lazard World Trust Fund Share Price

15.5%

38.7%

17.2%

12.6%

4.6%

Lazard World Trust Fund NAV

12.8%

32.1%

15.9%

13.0%

4.7%

In US$
Lazard World Trust Fund Share Price

11.6%

21.0%

6.6%

7.2%

0.0%

Lazard World Trust Fund NAV

8.6%

15.0%

5.3%

7.6%

0.1%

 

Lazard World Trust Fund Share Price, NAV & Discount

Mar 31st,

2017

Sep 30th,

2016

Mar 31st,

2016

Share price (in GBP)

£3.30

£2.91

£2.46

Share Price (in US$)

$4.13

$3.77

$3.54

NAV (in GBP)

£3.71

£3.35

£2.90

NAV (in US$)

$4.65

$4.35

$4.17

Discount to NAV

-11.0%

-13.3%

-15.1%

 

Portfolio Review

 

Top 10 holdings

% of

Portfolio

Naspers Ltd

7.2

HarbourVest Global Private Equity Ltd

6.5

Fidelity China Special Situations Plc

5.9

JPMorgan Japanese Investment Trust Plc

4.6

First Pacific Company Ltd

4.5

JPMorgan Emerging Markets Investment Trust Plc

4.4

JPMorgan Japan Smaller Companies Trust Plc

4.4

Vinacapital Vietnam Opportunity Fund Ltd

4.4

Jardine Strategic Holdings Ltd

4.3

BlackRock Resources & Commodities Strategy Trust

4.1

Total    

50.3

 

The Fund has a concentrated portfolio, with the top 10 holdings exceeding 50% of assets.

 

Top 5 Contributors and Detractors for the year ended March 31st, 2017


 

Top 5 Contributors to Returns (NAV)

 

 

 

Company

Average Portfolio

Weight

(%)

 

Total Return (%)

 

Contribution

to Return (%)

Naspers Ltd

7.1

23.4

1.6

Jardine Strategic Holdings Ltd

3.7

41.9

1.5

VinaCapital Vietnam Opportunity Fund Ltd

4.0

38.7

1.4

Tetragon Financial Group Ltd

3.6

33.9

1.3

HarbourVest Global Private Equity Ltd

5.8

17.9

1.3

 

Naspers Ltd, listed in South Africa, delivered strong returns, driven by the robust results of its mix of e-commerce, online gaming and social networking investments. The company's share price lagged the underlying listed businesses, causing its discount to widen. Jardine Strategic Holdings Ltd saw a turnaround in several of its core investments and its share price was supported by its inclusion in the MSCI Hong Kong index, despite the company being listed in Singapore. VinaCapital Vietnam Opportunity Fund Ltd, listed in London, benefited from the successful disposals of some of its underlying assets. Tetragon Financial Group Ltd, listed in London and Netherlands, continued its transformation over the last 12 months, as its management team continued to be proactive in reaching out to investors and showing a determination to take action aimed at lowering the wide discount implied in its share price. HarbourVest Global Private Equity Ltd (HVPE), listed in London, benefited from significant discount compression as the company transitioned from a lesser known company traded on the Euronext Amsterdam with poor liquidity, to a London main market listing, and its inclusion in the FTSE 250 Index and FTSE All-Share Index. HVPE reported a record year with respect to M&A activity and IPO events related to its underlying investments. In a sign of increased activism in the listed private equity space HVPE made a successful bid late last year for the entire portfolio of SVG Capital, valued at over $1 billion.

 

Top 5 Detractors from Returns (NAV)

Company

Average

Portfolio Weight

(%)

Total

Return

(%)

Contribution

to Return

(%)

Marwyn Value Investors Ltd

1.9

-33.7

Haci Omer Sabanci Holding AS

1.0

-19.5

-0.3

China Everbright Ltd

0.9

-6.3

-0.2

China Fund Inc.

                         0.2

-6.0

-0.1

JPMorgan European Smaller Companies Trust Plc

3.7

6.4

-0.1

 

Marwyn Value Investors Ltd has been a disappointing investment over the near term driven mainly by significant discount expansion (its discount widened from 19% to 38% over the period) and the market is paying little attention to its over 25% cash position. Haci Omer Sabanci Holdings AS suffered with the negative sentiment toward Turkey and poor stock market returns following the attempted coup last summer. The core holdings of banking and energy assets, and its discount of over 30%, make the investment attractive. China Fund Inc. and China Everbright Ltd were two relatively small allocations that were fully sold early in the period, both had been hurt by general market conditions in China, as well as poor returns of their underlying financial investments and discount widening. JPMorgan European Smaller Companies Trust Plc performed poorly due to the market's negative reaction to small cap investment post Brexit, and the residual impact on the discount which widened by nearly 3%.

 

Geographic Allocation as of March 31st, 2017

The Fund has a concentrated portfolio of 33 holdings, with over half the Fund's assets invested in its top 10 holdings. However, in our view the Fund was broadly diversified in terms of regions and countries, based on exposures of the underlying holdings within the Fund's individual investments.

 

Regional, country and security allocations are the result of a bottom-up selection process, which is focused on identifying companies that trade at compelling discounts and are undervalued.

 

Top 5 Country Weights based on underlying exposure as of March 31st, 2017

Country

Lazard World Trust Fund

Portfolio (%)

MSCI All Country World

Index ex USA (%)

China

17.7

6.3

United States

15.6

0.0

Japan

11.5

16.3

United Kingdom 

7.2

12.4

India

5.6

2.1

 

Portfolio Hedging and Gearing

During the year, the Fund held two short positions designed as a hedge against downside market risks.

•     5% short position in S&P 500 ETF to hedge the Fund's exposure to the US market. The position was closed with a positive contribution to the Fund.

•     9% short position in FTSE Europe ETF to hedge the Fund's exposure to Europe. The position was closed with a positive contribution to the Fund.

•     5% short on the Japanese yen to hedge 50% of our underlying yen exposure. The position was closed with a positive contribution to the Fund.

 

At the end of the fiscal year, the Fund did not have any hedging positions, or any gearing.

 

Corporate Governance Initiatives and Restructing

The Fund holds investments trading at substantial discounts. The management team continues to interact with the boards and managements of portfolio companies to encourage corporate governance initiatives and restructuring measures designed to unlock value. The following events occurred during the year.

 

•     Tender offers: Tetragon Financial ($100m via a "Dutch auction" process), Fondul Proprietatea (6.7% Tender at 22% discount); JPEL Private Equity (18.7% share buyback at 16% above market prices); Swiss Helvetia (10% tender at 98% of NAV). Prospect Japan Fund (100% tender offer from Prospect at 52.7% premium to the closing price at the time of the announcement).

•     Significant distributions to shareholders: Fondul Proprietatea (5.8)% capital distribution.

•     Manager changes: The China Fund appointed Open Door Investment Management as the new manager, which remains subject to shareholder approval.

 

Discounts

The Fund's discount to NAV narrowed by 4.1% to end the year at 11.0%. It traded at an average discount of 13.4%, ranging from a high of 18.2%, to a low of 9.7%.

 

While the Fund shares traded at a discount of 11% to the net asset value, the Fund's underlying investments had an average look-through discount of 23.1%. Therefore for an investor in the Fund, every $1 invested represents a claim of approximately $1.46 worth of assets.

 

Outlook

The global investment environment has many risks, but continues to present opportunities. Dominating the headlines are geopolitical issues like nationalism, trade protectionism, military conflicts, and political uncertainty, as well as investors' concerns on stretched valuation in certain markets, and rapidly growing leverage in some governments and corporates. However, we are cautiously optimistic of the economic recovery and growth in Europe, Japan, emerging markets, and some smaller markets. Both valuation and discounts are attractive in these areas.

 

Lazard World Trust Fund pursues investment opportunities with attractive discounts on a global basis, with the ability to hedge equity and currency exposures.

 

Kun Deng, CFA

Lazard Asset Management LLC

Manager

 

July 17th, 2017

 

 

General Information

 

•     During the year under review the Fund changed its name to Lazard World Trust Fund (previously The World Trust Fund).

•     During the year under review the Fund changed its benchmark index to MSCI All Country World (ex US) Index from MSCI All Country World Index.

•     During the year under review the Fund undertook a Tender Offer of 10% of its shares in issue and on September 29th, 2016 it acquired 4,042,602 shares at a price of 322.1776 pence per share. The shares acquired were subsequently cancelled.

•     The Net Asset Value per Share is expressed in US Dollars ("US$") and, since October 30th, 2009 the Fund's Shares have been traded in Pounds Sterling ("£"). For information purposes only the Fund's Net Asset Value per Share since October 30th, 2009 is also reported in its Pounds Sterling equivalent.

•     Unaudited half-yearly reports and annual reports including audited financial statements are made available at the Registered Office of the Fund.

•     The Annual General Meeting of Shareholders is held in Luxembourg each year at 3 p.m. on the third Tuesday in August or, if any such day is not a business day for banks in Luxembourg, on the next following business day. Notices of General Meetings, including their agenda, time and place and containing details of attendance, quorum and majority requirements under Luxembourg law, will be sent to the registered address of Shareholders not less than 21 days before the date of the Meeting.

•     The shares of the Fund are listed on the main market of the London Stock Exchange and the Luxembourg Stock Exchange.

•     The Fund invests in securities of all jurisdictions. Its Shares trade in sterling but the Fund's activities are reported in US Dollars.

•     An interim dividend of 5.1 pence per share was paid on January 16th, 2017. A final dividend of 5.1 pence per share has been proposed in respect of the year ended March 31st, 2017 and following approval by shareholders at the Annual General Meeting will be payable on September 15th, 2017 to Shareholders who appear on the register on August 18th, 2017.

 

Statement of Net Assets (in US$)

 

As at

As at

Assets

March 31st, 2017

March 31st, 2016

Securities portfolio at market value (Cost: US$ 146,851,593)

169,311,788

170,196,248

Cash (see Note 2)

6,794

61,781

Receivable from broker in respect of securities sold short (see Note 13)

41

-

Income receivable on portfolio

225,208

35,905

Total assets

169,543,831

170,293,934

Liabilities

 

 

Loan payable (see Note 17)

-

1,200,000

Payable on purchases of investments

5,079

32,703

Other payable on short positions and bank liabilities (see Note 13)

17,500

7,386

Accrued expenses

501,389

471,320

Total liabilities

523,968

1,711,409

Total Net Assets

169,019,863

168,582,525

Number of shares outstanding excluding treasury shares (see Note 5)

36,383,493

40,426,095

Net Asset Value per share in US$ (see Note 2)

4.65

4.17

Equivalent Net Asset Value per share in £ (see Note 1)

3.71

2.90

Diluted Net Asset Value per share in US$*

4.65

4.17

Equivalent Diluted Net Asset Value per share in £*

3.71

2.90

 

* Diluted NAV is calculated after taking into account any outstanding warrants, which are assumed to be exercised by the shareholders.

 

Shareholders' Equity (in US$)

 

As at

As at

Capital and Reserves

March 31st, 2017

March 31st, 2016

Issued Share Capital: 46,635,770 Shares (including treasury shares)

at US$ 0.2 (see Note 5)

9,327,154

10,135,674

Share Premium

35,565,613

38,648,603

Legal Reserve (see Note 6)

1,866,348

1,866,348

Realised profit brought forward

120,612,800

119,302,143

Adjustment for Treasury Shares (see Note 5)

(31,834,815)

(31,834,815)

Interim Dividends paid (see Note 19)

(5,126,172)

(607,006)

Total Capital and Reserves

130,410,928

137,510,947

Net Investment Income for the financial year

1,571,472

5,868,250

Net Realised Gain for the financial year

15,670,880

9,225,806

Cumulative unrealised appreciation on securities

21,366,605

15,977,522

Unrealised (depreciation) on foreign exchange

(21)

-

Total Shareholders' Equity

169,019,863

168,582,525

 

Statement of Operations (in US$)

 

Income

For the year ended

March 31st, 2017

For the year ended

March 31st, 2016

Dividends, net (including return of capital) (see Note 2)

4,038,765

8,450,466

Interest on bank accounts

25,169

688

Total income

4,063,934

8,451,154

Expenses

 

 

Management fees and performance fees (see Note 3)

1,240,466

1,329,322

Directors' fees and expenses (see Note 9)

234,175

274,721

Professional fees (see Note 7)

358,580

281,547

Depositary fees (see Note 8)

158,077

167,412

Capita Asset Services Professional fees and expenses (see Note 10)

130,247

150,594

Interest and commitment fees

26,825

27,692

Administrative Agent costs

110,640

114,977

Taxe d'abonnement (see Note 4)

80,465

87,642

Other expenses (see Note 18)

152,987

148,997

Total expenses

2,492,462

2,582,904

Net Investment Income

1,571,472

5,868,250

 

Net Realised Gain/(Loss)

 

 

- on securities (net of prime brokerage fees amounted to US$ 10,400)

18,391,689

9,668,141

-  on forward foreign exchange contracts

705,696

(10,415)

- on foreign exchange

(3,426,505)

(431,920)

Total Net Realised Gain/(Loss)

15,670,880

9,225,806

 

Net Change in Unrealised Gain/(Loss)

For the year ended

March 31st, 2017

For the year ended

March 31st, 2016

- on securities

5,389,083

(29,576,212)

- on foreign exchange

(21)

1

Total Net Change in Unrealised Gain/(Loss)

5,389,062

(29,576,211)

Result of Operations*

22,631,414

(14,482,155)

 

* Result of Operations is the sum of Net Investment Income, Total Net Realised Gain/(Loss) and Total Change in Unrealised Gain/(Loss).

 

 

Statement of Changes in Net Assets (in US$)

 

 

As at

As at

 

March 31st, 2017

March 31st, 2016

Net Assets at the Beginning of the Year

168,582,525

185,675,393

Net investment income

1,571,472

5,868,250

Net realised gain on securities

18,391,689

9,668,141

Net realised gain/(loss) on forward foreign exchange contracts

705,696

(10,415)

Net realised (loss) on foreign exchange

(3,426,505)

(431,920)

Total net realised gain

15,670,880

9,225,806

Net change in unrealised gain/(loss) on securities

5,389,083

(29,576,212)

Net change in unrealised gain/(loss) on foreign exchange

(21)

1

Total net change in unrealised gain/(loss)

5,389,062

(29,576,211)

Repurchase of shares in treasury or via tender offer (see Note 5)

(16,915,385)

(140,331)

Tender offer expenses

(152,519)

-

Dividends paid (see Note 19)

(5,126,172)

(2,470,382)

Repurchase and Issue of Shares (including tender offer expenses)

(22,194,076)

(2,610,713)

Net Assets at the End of the Year

169,019,863

168,582,525

 

 

 

Statistical Information about the Fund (in US$)

 

 

 

 

 

March 31st, 2017

March 31st, 2016

March 31st, 2015

Total Net Assets

169,019,863

168,582,525

185,675,393

Net Asset Value per Share in US$ (see Note 2)

4.65

4.17

4.59

Equivalent Net Asset Value per Share in £ (see Note 1)

3.71

2.90

3.09

           

 

Statement of Changes in Shares Outstanding

For the Year Ended March 31st, 2017

 

Number of Shares Outstanding at the Beginning of the Year excluding treasury shares

40,426,095

Number of Shares Issued

-

Number of Shares Repurchased (see Note 5)

(4,042,602)

Number of Shares Outstanding at the End of the Year

36,383,493

 

Statement of Investments and Other Net Assets

March 31st, 2017

 

 

Number

of Shares

 Acquisition

cost

(US$)

 Market

value

(US$)

Currency

% of total

net assets

(US$)

Description

 

Investments in Securities

 

 

 

 

 

Transferable Securities admitted to an Official Stock Exchange Listing

 

 

 

 

 

 

Securities Held Long

 

 

 

 

 

Naspers Ltd

70,600

9,362,555

12,159,362

ZAR

7.19

HarbourVest Global Private Equity Ltd

724,826

8,907,646

11,065,230

£

6.55

Fidelity China Special Situations Plc

4,036,302

8,542,120

9,890,070

£

5.85

JPMorgan Japanese Investment Trust Plc

1,817,651

5,759,017

7,772,317

£

4.60

First Pacific Company Ltd

10,501,600

6,664,455

7,618,186

HKD

4.51

JPMorgan Emerging Markets Investment Trust Plc

784,130

3,090,986

7,450,367

£

4.41

JPMorgan Japan Smaller Companies Trust Plc

1,757,883

8,851,372

7,433,894

£

4.40

VinaCapital Vietnam Opportunity Fund Ltd

2,101,200

5,363,076

7,430,400

£

4.40

Jardine Strategic Holdings Ltd

171,242

5,166,890

7,192,279

US$

4.26

BlackRock Resources & Commodities Strategy Trust

804,986

6,550,640

6,922,880

US$

4.10

Eurazeo SA

103,387

3,290,465

6,808,510

EUR

4.03

General American Investors Co., Inc.

192,786

6,131,871

6,460,259

US$

3.82

Morgan Stanley China

312,400

7,962,884

6,004,328

US$

3.55

India Fund Inc.

211,200

4,858,817

5,364,480

US$

3.17

China Merchants China Direct Investments Ltd

3,569,439

7,712,320

5,334,701

HKD

3.16

Liberty All Star Equity Fund

933,800

4,899,664

5,098,548

US$

3.02

Henderson Smaller Companies Investment Trust Plc

525,417

2,809,129

4,641,245

£

2.75

Herald Investment Trust Plc

378,070

2,869,501

4,378,515

£

2.59

Prospect Japan Fund Ltd

3,776,192

4,402,948

4,250,327

US$

2.51

Investor AB

92,275

2,580,005

3,887,679

SEK

2.30

JPMorgan Eur Smaller Companies Trust Plc

840,814

1,509,671

3,521,147

£

2.08

JPEL Private Equity Ltd

2,581,049

2,530,336

3,285,237

US$

1.94

Fondul Proprietatea Fund

309,138 

3,021,449 

3,244,887 

US$ 

1.92 

Tetragon Financial Group Ltd

246,086

2,341,248

3,002,003

US$

1.78

International Biotechnology Trust Plc

387,676

959,995

2,897,056

£

1.71

GP Investments Ltd

1,278,300

2,664,631

2,694,940

BRL

1.59

Marwyn Value Investors Ltd

1,511,314

5,061,239

2,558,083

£

1.51

Macau Property Opportunities Fund Ltd

1,092,658

3,544,291

2,511,863

£

1.49

India Capital Growth Fund Ltd

2,173,800

1,992,058

2,443,579

£

1.45

Swiss Helvetia Fund Inc.

151,981

2,101,264

1,762,980

US$

1.04

Haci Omer Sabanci Holding AS

541,026

2,705,325

1,488,088

TRY

0.88

JZ Capital Partners Ltd

199,387

1,287,745

1,379,107

£

0.82

Africa Opportunity Fund Ltd

420,000

257,108

265,650

US$

0.16

 

 

145,752,721

168,218,197

 

99.54

               

 

Description

Number

of Shares

Acquisition

cost

(US$)

Market

value

(US$)

Currency

 % of total

net assets

(US$)

 

 

Other Transferable Securities

 

 

 

 

 

Money Market Instrument

 

 

 

 

 

State Street Institutional Investment Trust   

1,093,591

1,093,591

1,093,591

 US$

0.65

Companies in Liquidation*

 

 

 

 

 

Italy Fund Inc.

195,906

-

-

US$

0.00

Trans Balkan Investments Ltd

61,400

1,098,872

-

£

0.00

Advance UK Trust Plc

275,518

-

-

£

0.00

Dexion Equity Alternative Ltd

1,004,992

-

-

£

0.00

 

 

 

 

 

 

Total Investments in Securities

 

147,945,184

169,311,788

 

100.19

Other Net Assets/Liabilities

 

 

(291,925)

 

(0.19)

 

 

 

 

 

 

Total Net Assets

 

 

169,019,863

 

100

 

 

 

 

Currency Exposure
of Portfolio**

% of the portfolio

Currency Exposure of Portfolio

 

 

Pound Sterling (£)

75,372,873

44.52

United States Dollar (US$)

53,947,449

31.86

Hong Kong Dollar (HKD)

12,952,887

7.65

South Africa Rand (ZAR)

12,159,362

7.18

Euro (EUR)

6,808,510

4.02

Swedish Krona (SEK)

3,887,679

2.30

Brazilian Real (BRL)

2,694,940

1.59

Turkish Lira (TRY)

1,488,088

0.88

Total

169,311,788

100.00

 

*   The acquisition cost of shares in liquidation is offset by distributions received.

**  The underlying currency may vary significantly

 

Notes to the Financial Statements

March 31st, 2017

 

Note 1 - General

Lazard World Trust Fund (the "Fund"), previously known as the The World Trust Fund, is an investment company with limited liability organised as a 'société anonyme' under the laws of the Grand Duchy of Luxembourg and is governed by part II of the Luxembourg Law of December 17th, 2010 as amended on Undertakings for Collective Investment, the amended Law of August 10th, 1915 on commercial companies and the Law of July 12th, 2013 on Alternative Investment Fund Managers ("AIFM").

 

At an Extraordinary General Meeting held on May 9th, 2016 the Fund changed its name to Lazard World Trust Fund. The Fund was incorporated in Luxembourg on June 20th, 1991 for an unlimited duration. The Fund's Articles of Incorporation (the "Articles") have been published in the 'Mémorial C, Recueil des Sociétés et Associations'.

 

The Fund's investment objective is to achieve long-term capital appreciation, by investing primarily in companies whose shares trade at a discount to their underlying Net Asset Value ("NAV"). At an Extraordinary General Meeting held on September 20th, 2016 the Fund adopted a new benchmark, MSCI All Countries ("AC") (ex US) Index against which it measures its performance. However, the Manager seeks to achieve the highest possible risk-adjusted returns and the allocation of the Fund's assets will normally diverge substantially from the Index. The Fund invests in a diversified portfolio of investment companies, including closed-end funds, investment trusts, holding companies and similarly traded companies, thereby spreading investment risk and reducing stock specific risk.

 

The currency in which the Fund's Shares are traded was changed from US$ to £ on October 30th, 2009.

 

The equivalent NAV per share in £ represents the NAV per share in US$ converted with the exchange rate at March 31st, 2017 (Note 2).

 

The Fund has appointed Lazard Asset Management LLC (the "Manager") as its non-EU AIFM within the meaning of 1(48) of the AIFM Law dated July 12th, 2013. Pursuant to the Management Agreement, the Manager is responsible on a day to-day basis under the supervision of the Board of Directors of the Fund for providing investment management and risk management services in respect of the Fund in accordance with the investment objectives of the Fund.

 

The Directors consider that the Company has adequate resources to enable it to continue in operational existence for the foreseeable future. Accordingly, the Directors believe that it is appropriate to adopt the going concern basis in preparing the Company's financial statements.

 

Note 2 - Significant Accounting Policies

a)   Presentation of Accounts

 

The financial statements are presented in accordance with generally accepted accounting principles and with the legal and regulatory requirements relating to the preparation of the financial statements as prescribed by the Luxembourg authorities for Luxembourg investment companies. The Fund keeps its books and records in US$.

 

b) Valuation

 

1)   The NAV per share is calculated in accordance with Article 22 of the Articles on each Valuation Date (as defined in the Articles).

 

The NAV per share is determined by dividing the Net Assets of the Fund, being the value of its assets less liabilities, by the number of shares then in issue.

 

2)   In calculating the NAV per share, income and expenditure are treated as accruing from day to day and the Articles provide, inter alia, that:

(i)   securities which are quoted or dealt in on any stock exchange or other regulated market are valued at the settlement or closing price on the last full business day on which such exchange or market is open for trading preceding the applicable Valuation Date. As of March 31st 2017, all securities were valued at unadjusted quoted prices; 

(ii)   if securities are quoted, listed, traded or dealt on more than one stock exchange or regulated market, the Board of Directors of the Fund (the "Board") may select for the purposes of valuation the stock exchange or regulated market which they consider provides the fairest criterion of value for the relevant securities;

(iii)  if securities are not quoted or dealt on any stock exchange or regulated market or if, with respect to securities quoted or dealt on any stock exchange or dealt on any regulated market, the price as determined pursuant to paragraph (i) above is not representative of the fair market value of the relevant securities, the value of such securities will be determined by reference to their reasonably foreseeable sales price determined prudently and in good faith by the Board.

 

3)   Investments in securities are recorded at cost on trade date basis. Realised gains or losses on securities sold are computed on an average cost basis.

 

4)   The value of cash in hand or on deposit, bills and notes payable on presentation, accounts due, prepaid expenses and dividends and interest declared and fallen due but not yet received generally consists of the nominal value of such assets. However, in the event that it seems improbable that such value can be realised, the value is determined by deducting a sum which the Board considers appropriate to reflect the realisable value of such asset.

 

5)   Foreign currencies: monetary assets and liabilities denominated in foreign currencies in the Statement of Net Assets are translated into US$ at the rates of exchange ruling at the end of the financial year. Transactions in foreign currencies are recorded in US$ based on the exchange rates applicable at the date of the transactions.

 

The following significant exchange rates have been applied for the conversion of monetary assets and liabilities denominated in foreign currencies into US$ as of March 31st, 2017:

 

 

 

 

US$

1

BRL

Brazilian Real

0.319427586

1

EUR

Euro

1.066799803

1

GBP

Pound Sterling

1.252900465

1

HKD

Hong Kong Dollar

0.128675288

1

KRW

South Korean Won

0.000894214

1

SEK

Swedish Krona

0.111599047

1

TRY

Turkish Lira

0.275144795

1

ZAR

South African Rand

0.074536476

 

c)   Income Recognition

 

Dividend income is recorded on an accrual basis and interest income is accrued on a daily basis, net of any withholding taxes in the relevant country.

 

d)    Forward Foreign Exchange Contracts

The Fund may, for the purpose of hedging currency risks, enter into forward exchange contracts.

 

In a forward foreign exchange contract, the Fund agrees to receive or deliver a fixed quantity of one currency for another, at a pre-determined price at a future date. Purchases and sales of forward foreign exchange contracts having the same notional value, settlement date and counterparty and right to settle net are generally offset (which result in a net foreign currency position of zero with the counterparty) and any realised gains or losses are recognised on trade date plus one.

 

The market value of forward foreign exchange contracts is based on the price at which a new forward foreign exchange contract of the same notional value, currency and maturity could be affected at the close of business in the principal currency markets in which these currencies are traded. That change in unrealised gains and losses are included in the statement of operations.

 

e) Transaction Fees

For the year ended March 31st, 2017, the Fund incurred transaction fees related to purchase and sale of transferable securities for US$ 206,372.

 

The transaction costs include broker fees, settlement fees, taxes and other charges.

 

Note 3 - Management and Performance Related Fees

The Manager is entitled to receive, under the terms of the Management Agreement, a fee at the rate of 0.75% per annum calculated each quarter by reference to the average weekly NAV during the relevant quarter. The fee will accrue daily and will be paid quarterly in arrears.

 

At an Extraordinary General Meeting held on September 20th, 2016 the Fund adopted a new Amended and Restated Investment Management Agrement which was amended to reflect that the New Benchmark Index (MSCI All Country World Index (ex US)) should be the reference benchmark for calculating performance fees from April 1stt, 2016.

 

The objective of the performance fee arrangements in the management agreement is to provide an incentive to the Manager by rewarding outperformance over the medium to longer term. The basis of the performance fee is therefore a rolling two year period over which the growth in the Net Asset Value of the Company must exceed the increase in the Index (the "Hurdle").

 

For the purposes of this amended performance-fee calculation, "Hurdle" means: (i) in respect of the Performance Period ending March 31st, 2017, the percentage increase in the Current Benchmark Index in respect of the 12 months ended March 31st, 2016 plus the percentage increase in the New Benchmark Index in respect of the 12 months ended March 31st, 2017 (pro-rated in the event that the Amended and Restated Investment Management Agreement is terminated prior to that date); and (ii) in respect of all subsequent Performance Periods, the percentage increase in the New Benchmark Index during the relevant Performance Period. "Performance Period" refers to: (i) the period of the two years preceding the end of the accounting period of the Company; or (ii) if the Amended and Restated Investment Management Agreement is terminated other than at the end of an accounting period of the Company, the period between: (a) the commencement of the penultimate accounting period of the Company; and (b) the date of termination.

 

Pursuant to the terms of the Amended and Restated Investment Management Agreement, the Company shall pay the Manager a performance-related fee at the rate of:

(i)   5% of the amount by which the increase in the Net Asset Value (expressed as a percentage) has exceeded the Hurdle by 5% or more but by less than 10% during the Performance Period per annum;

(ii)   10% of the amount by which the increase in the Net Asset Value (expressed as a percentage) has exceeded the Hurdle by 10% or more, but by less than 15% during the Performance Period per annum;

(iii)  15% of the amount by which the increase in the Net Asset Value (expressed as a percentage) has exceeded the Hurdle by 15% or more, but by less than 20% during the Performance Period per annum;

(iv)  20% of the amount by which the increase in the Net Asset Value (expressed as percentage) has exceeded the Hurdle by 20% or more during the Performance Period per annum;

in each case multiplied by the Net Asset Value as at the end of the relevant Performance Period and provided that the Hurdle is positive. If the Hurdle is negative, the Manager shall not be due a performance fee if the Net Asset Value performance is negative even though it exceeds the Hurdle during the relevant Performance Period.

 

For the year ended March 31st, 2017, there was no performance fee payable by the Fund.

 

Out of its fees, the Manager will pay its own expenses and those of any investment advisers retained by it. The Manager's contract can be terminated by providing 3 months' notice.

 

Note 4 - Taxes

As a Luxembourg investment company, under present laws the Fund is not subject to income taxes in Luxembourg. Irrecoverable taxes may be withheld at the source on dividends and interest received on investment securities.

 

According to the Law of December 17th, 2010 as amended, the Fund is subject to Luxembourg subscription duty ("taxe d'abonnement") at the rate of 0.05% per annum of its Net Assets, such tax being payable quarterly on the basis of the Total Net Assets of the Fund at the end of the relevant quarter.

 

Pursuant to the Law of December 17th, 2010 as amended, the net assets invested in other investment companies already subject to Luxembourg subscription duty are exempt from this tax.

 

Note 5 - Capital

At an Extraordinary General Meeting held on May 9th, 2016 shareholders approved an amendment of article 5.1 of the Articles to reflect the successive capital reductions resulting from the tender offers and capital increases resulting from the exercise of their subscription rights by warrant holders with respect to the subscription dates arisen on March 30th, 2012, September 28th, 2012, March 28th, 2013, September 30th, 2013 and March 30th, 2014 so that article 5.1 of the Articles shall now read as follows:

 

" The Corporation has an issued capital of ten million one hundred thirty-five thousand six hundred seventy-four United States Dollars and forty cents (US$ 10,135,674.40) consisting of fifty million six hundred seventy-eight thousand three hundred and seventy-two (50,678,372) shares of a nominal value of twenty United States cents (US$ 0.20) each".

 

On September 29th, 2016 the Fund repurchased for cancellation a total of 4,042,602 ordinary shares at a tender price of

322.1776 pence per share.

 

As at March 31st, 2017 the Fund's issued share capital at the year-end was 46,635,770 Ordinary Shares, of which

36,383,493 Ordinary Shares have voting rights and 10,252,277 Ordinary Shares were held in Treasury without voting rights.

 

Note 6 - Legal Reserve

In accordance with Luxembourg requirements, at least 5% of the annual net profit must be transferred to a legal reserve.

 

This requirement is satisfied when the reserve is equal to 10% of issued share capital.

 

The legal reserve is not available for distribution.

 

Note 7 - Professional Fees

For year ended March 30th, 2017, the professional fees of US$ 358,580 were incurred principally due to the following:

 

legal fees paid to Stephenson Harwood LLP, and Elvinger Hoss and Prussen;

investor advisory paid to Edison Investment Research;

retainer fees paid to Stockdale Securities;

audit fees paid to Deloitte Audit Société à responsabilité limitée; and

non-audit fees paid to Deloitte Audit Société à responsabilité limitée.

 

Note 8 - Depositary Fees

The Depositary Bank (State Street Bank Luxembourg S.C.A.) receives, under the terms of the Custodian Agreement, fees for its services at rates to be agreed from time to time between the Fund and the Depositary Bank in accordance with Luxembourg practice.

 

Note 9 - Directors' Fees and Expenses

Each of the Directors is paid a fee for their services at such a rate as the Board had determined provided that the aggregate of such fees shall not exceed US$ 500,000 per annum (pursuant to the resolution of the Annual General Meeting held on August 16th, 2016) or such higher amount as may from time to time be determined by the Shareholders in General Meeting.

 

The Directors may also be paid all reasonable travelling, hotel and other expenses properly incurred by them in the course of their duties relating to the Fund and relate primarily to the Board meetings held in Europe and the United States.

 

The fees paid after tax to each Director for the year ended March 31st, 2017 were as follows:

 

 

£

Duncan Budge

25,000

James Cave

25,000

Philip R. McLoughlin

35,000

Tony Morrongiello

25,000

Howard Myles

30,000

 

The aggregate fees (including 'Administration des Contributions Directes') paid to Directors of the Fund amounted to US$ 188,332. The aggregate expense reimbursement to Directors of the Fund amounted to US$ 45,843. These fees relate to fees incurred as a result of the Directors' attendance at Board meetings. The exchange rate that has been applied for the conversion was the prevailing spot exchange at the time when the fees or expenses were paid to Directors.

 

Note 10 - Company Secretarial Fees and Expenses

For the year ended March 31st, 2017, the Company Secretarial fees and expenses of US$ 130,247 include charges related to the maintenance of the Fund's website, printing fees and the administration of the Fund's Custody Share Register.

 

Note 11 - Commitments

As of the date of the report, the Fund was not engaged in any forward foreign exchange contracts or currency options.

 

Note 12 - Securities Lending

As of the date of the report, the Fund had no securities lending facility in place.

 

Note 13 - Short Positions

As of the closing date, the Fund had no open short positions.

 

Note 14 - Beneficial Interests of the Directors and Related Parties in the Share Capital

As of the date of the report, the beneficial interests of the Directors and related parties in the Share capital of the Fund are the following:

 

Beneficial Interests

Directors

in Ordinary shares

Philip R. McLoughlin (Chairman)

37,000

Duncan Budge

-

James Cave

-

Howard Myles

-

Tony Morrongiello

-

 

 

Manager

 

Kun Deng

243,240

 

 

Note 15 - Substantial Shareholdings

As of the date of the report, the Board had been informed of the following interests in the Shares of the Fund:

Name

Holding

% of Voting Rights (excluding treasury shares) 1

% of Voting rights (including treasury shares)2

Date of Notification

1607 Capital Partners

7,910,739

21.74%

16.96%

20 March 2017

Lazard Asset Management

7,741,267

21.28%

16.60%

21 June 2017

Wells Capital Management

5,488,261

15.08%

11.77%

23 December 2015

City of London

3,636,997

10.00%

7.80%

6 February 2017

Ironside Partners

4,716,704

(of which 2,350,000 is held via CFD)

12.96% (or 6.50%

excluding CFD)

10.11% (5.07%

excluding CFD)

16 February 2017

Credit Suisse 3

2,350,000

6.46%

5.04%

10 February 2017

 

1 Percentage based on voting rights of 36,383,493.

2 Percentage based on voting rights of 46,635,770 (including 10,252,277 Shares held in Treasury).

3 Duplication because Credit Suisse's holding represents the Ironside position which is held via CFDs.

 

All issued Shares of the Fund are on deposit with a registered clearing house and, accordingly, with the exception of those Shareholdings of which the Board has been notified, the Board is not in a position to state the exact size of any Shareholdings in the Fund. However, in light of the shareholder notifications referred to above the number of shares in public hands remains lower than the 25% requirement set out in the Financial Conduct Authority's Listing Rules. The Fund has notified the Financial Conduct Authority of this breach and is consulting with its advisers on an appropriate strategy for the Company to address this situation.

 

 

Note 16 - Ongoing Charges

For the year ended March 31st, 2017 the Ongoing Charges were calculated using the following formula:

 

Annualised Ongoing Charges / Average net assets undiluted x 100 = Ongoing Charges % where:

 

•     the annualised ongoing charges contain the management fees, professional fees, directors' fees and expenses, depositary fees, Company Secretarial fees and expenses, central administration costs and other expenses (printing, postage, annual fees); and

 

•     the average net assets undiluted represent the arithmetic mean of the total net assets over the period; and

 

•     taxe d'abonnement and interest paid are not included in the ongoing charges.

 

Ongoing Charges 1.45%

 

Note 17 - Line of Credit Advanced

The Fund has an unsecured US$ 25 million Line of Credit Agreement (the "Agreement") with Citibank, N.A. Interest on borrowings is payable at the Federal Funds rate plus 1.25%, on an annualised basis. Under the Agreement, the Fund has also agreed to pay a 0.10% per annum commitment fee.

 

As of March 31st, 2017, the Fund had no borrowings under the Agreement.

 

Note 18 - Other Expenses

Other Expenses include printing fees, association fees, exchange fees, Directors' and Officers' insurance, website costs

and other miscellaneous expenses.

 

Note 19 - Dividends on Ordinary Shares

Dividends declared and paid during the year:

 

 

Year ended

March 31st, 2017

Year ended

March 31st, 2016

 

Per share (p)

$

Per share (p)

$

Dividend paid on 18/09/2015 (ex date 20/08/2015)

-

-

2.9

1,863,376

Dividend paid on 15/01/2016 (ex date 17/12/2015)

-

-

1.0

607,006

Dividend paid on 16/09/2016 (ex date 18/08/2016)

5.4

2,864,501

-

-

Dividend paid on 16/01/2017 (ex date 15/12/2016)

5.1

2,261,671

-

-

Total

10.5

5,126,172

3.9

2,470,382

 

On June 29th, 2017, the Board reviewed the dividend calculation and confirmed that the Fund had adequate resources to pay the proposed final dividend of 5.1 pence per share (excluding the treasury shares). The final dividend will be paid on September 15th, 2017 to registered shareholders who appear on the register on August 18th, 2017.

 

The Board had proposed an interim dividend, in respect of the current financial year, of 5.1p per share which was paid on January 16th, 2017, to shareholders who appeared on the register on December 16th, 2016.

 

Note 20 - Changes in the Investment Portfolio

 

For the year ended March 31st, 2017, the total movements occurred in the securities portfolio are the following:

 

Purchases

Sales

Realized

Unrealised

(US$)

(US$)

Gain/(Loss)

Gain/(Loss)

 

 

(US$)

(US$)

163,835,484

186,086,549

18,391,689

21,366,605

 

In addition, the changes in the investment portfolio during the year are available at the registered office of the Fund without

any charge.

 

Note 21 - Subsequent Events

There were no subsequent events to report.

 

 

PRINCIPAL RISKS AND UNCERTAINTIES

 

Investment & Strategy

The Fund may underperform its benchmark as a result of poor stock selection or as a result of the Fund or portfolio investments being geared in a falling market.

 

All Board meetings are attended by the Manager, where reports on portfolio performance and strategy are provided.

 

The Fund invests in a diversified portfolio of closed-end investment companies, including investment trusts and holding companies, thereby spreading investment risk and reducing stock specific risk. The Board reviews the performance of the Manager on a regular basis.

 

Manager

Lazard Asset Management LLC has been the Manager of the Fund since its launch in 1991. Should the current Manager not be in a position to continue its management of the Fund, performance, liquidity and shareholder confidence may be impacted.

 

Lazard Asset Management LLC is a diversified, global investment platform with over 300 investment personnel worldwide and total funds under management as at March 31st, 2017 of US$ 194 billion, of which US$ 5 billion is in Discounted Asset Strategies. The Board is kept informed of succession planning by the Manager and is made aware of any changes in key personnel.

 

Gearing

The use of gearing (the ability to borrow) increases the possibilities for profit and the risk of loss. In addition, the level of interest rates in effect at the times of such borrowings will affect the operating results of the Fund.

 

The Board has the power to increase the amount of gearing that the Manager is authorised to use up to 25% of the Fund's Net Asset Value. The Board monitors and discusses the appropriate level of gearing at each meeting.  The Fund's policy on gearing is disclosed above.

 

Hedging

The use of hedging (the practice of investing to reduce the risk of adverse price movements in an asset by offsetting a position in a related security) increases the risk of potentially significantly larger losses on short positions than long positions.

 

The Fund is permitted to seek to hedge long positions by selling short stock indices, stocks, and shares of exchange traded funds or closed-end funds up to 100% of the Fund's Net Asset Value. The Fund may also hedge its currency exposure against the US Dollar.

 

The Board monitors and discusses the Fund's hedging positions and the appropriate level of hedging at each meeting. The Fund's policy on hedging is disclosed above.

 

Discount volatility

Discounts can fluctuate significantly both in absolute terms and relative to companies in the Fund's peer group.

 

The Board actively monitors the discount.

 

The Board will review the average discount on a regular basis and where, in the opinion of the Board and taking into account factors such as market conditions and the discounts of comparable funds, the Company's discount is higher than desired, the Board will consider what action to take. Such action may include share buy backs and/or tender offers. Any proposals for tender offers are at the discretion of the Board and in exercising such discretion the Board will take into account factors such as the level of discount at which the Fund has traded, the performance of the Fund, opportunities for new investments and the views of shareholders.

 

Reputational

Failure to keep current and potential investors informed of the Fund's performance and development could result in fewer shares being traded in the Fund on a daily basis, a reduction in share price and also lower investor confidence.

 

The Manager and Cenkos Securities Limited (the 'Broker') have been instructed by the Board to maintain frequent communication with current shareholders and potential investors. The Fund makes announcements through a Regulatory Information Service in accordance with the requirements of the UKLA Listing Rules and copies of all announcements are uploaded on to the Fund's website, www.lazardworldtrustfund.com.

 

Viability Statement

In accordance with Principle 21 of the Association of Investment Companies Code of Corporate Governance published in February 2015 (the 'AIC Code') the Directors have assessed the prospects of the Fund over a 3-year period to March 31st, 2020. The Directors believe that this period is appropriate because it would provide the management team at Lazard the time needed to successfully unlock value of the Fund's underlying portfolio.

 

In its assessment of the viability of the Fund, the Directors have considered each of the Fund's principal risks and uncertainties including the total collapse of one or more of the Fund's significant holdings together with the Fund's income and expenditure projections, lack of gearing and assets that are easily realisable that can be sold to meet funding requirements.

 

Following the Board's detailed analysis, it has concluded that, based on the Fund's current position, the principal risks that it faces and their potential impact on its future development and prospects, there is a reasonable expectation that the Fund will be able to continue in operation and meet its liabilities as they fall due over the 3-year period to March 31st, 2020.

 

 

RELATED PARTY TRANSACTIONS

Related party transactions and Directors' interests in contracts and agreements are disclosed in Notes 3, 9 and 14 to the financial statements detailed above.

 

Investment Management

Throughout the financial year under review, investment management services were provided by Lazard Asset Management LLC.

 

The Manager was appointed on July 1st, 1991. Under the terms of the management agreement either party may terminate the agreement by giving three months' prior written notice. Pursuant to this agreement, the Manager is entitled to an annual management fee of 0.75% of the value of the net assets of the Fund, payable quarterly in arrears. In addition, depending on results, the Manager may earn a performance fee calculated over a two year period. Further information is disclosed in Note 3 to the financial statements.

 

Corporate social responsibility

The Fund has no employees and the Board comprises solely non-executive Directors. In carrying out its activities and in relationships with suppliers and stakeholders, the Fund aims to conduct itself responsibly, ethically and fairly.

 

Substantial share interests

The substantial interests in Shares of the Fund disclosed or known to the Board are shown in Note 15 to the financial statements.

 

Going Concern

The Directors have reviewed the liquidity of the Fund's portfolio and the Fund's ability to meet its obligations as they fall due for a period of at least 12 months from the date that these financial statements were approved. On the basis of that review and after due consideration of the balance sheet and activities of the Fund and the Fund's assets, liabilities, commitments and financial resources, the Directors have concluded that the Fund has adequate resources to continue in operational existence for the foreseeable future. For this reason, they have adopted the going concern basis in preparing the financial statements.

 

DIRECTORS' RESPONSIBILITY STATEMENT

The Directors are responsible for preparing this Report and the Financial Statements in accordance with applicable law and regulations.

 

Directors are required to prepare financial statements for each financial year. The financial statements are required by law to give a true and fair view of the state of affairs of the Fund and the financial performance and cash flows of the Fund for that year.

 

In preparing those financial statements, the Directors are required to:

 

•     select suitable accounting policies and then apply them consistently;

 

•     make judgements and estimates that are reasonable and prudent;

 

•     present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

 

•     state whether applicable regulations have been followed, subject to any material departures disclosed and explained in the financial statements; and

 

•     prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Fund will continue in business.

 

The Directors are responsible for keeping adequate accounting records which disclose with reasonable accuracy at any time the financial position of the Fund and to enable them to ensure that the financial statements comply with the applicable law.

 

The Directors are also responsible for ensuring that the Directors' Report and other information in the annual report is prepared in accordance with applicable law and regulations. They also have responsibility for safeguarding the assets of the Fund and for taking such steps as are reasonably open to them to prevent and detect fraud and other irregularities. The Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs and profit or loss of the Fund.

 

The Directors confirm that, to the best of their knowledge:

 

•     the financial statements, which have been prepared in accordance with the applicable set of accounting standards (being the legal and regulatory requirements in Luxembourg relating to investment funds) give a true and fair view of the assets, liabilities, financial position and profit or loss of the Fund as at March 31st, 2017 and for the financial year then ended; and

 

•     the annual report includes a fair review of the development and performance of the business and the position of the Fund, together with a description of the principal risks and uncertainties that it faces.

 

The Directors confirm that, so far as they are each aware, there is no relevant audit information of which the Fund's Auditor is unaware; and each Director has taken all the steps that ought to have been taken as a Director to make himself aware of any relevant audit information and to establish that the Fund's Auditor is aware of that information.

 

The Directors consider the annual report and audited financial statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the company's performance, business model and strategy.

 

On behalf of the Board

 

Philip R. McLoughlin

Chairman

July 17th, 2017

 

Annual General Meeting

 

The Annual General Meeting of the Fund will take place at the Fund's registered office at 49, avenue J.F. Kennedy, L-1855 Luxembourg on August 16th, 2017 at 3.00pm (Luxembourg time).

 

The Board is of the opinion that the passing of all resolutions being put to the AGM would be in the interest of the Fund and therefore recommend that shareholders vote in favour of the resolutions set out in the Notice of the Meeting.

 

National Storage Mechanism

 

A copy of the Annual Report and Financial Statements will be submitted shortly to the National Storage Mechanism ("NSM") and will be available for inspection at the NSM, which is situated at: www.morningstar.co.uk/uk/nsm.

 

ENDS

 

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on this announcement (or any other website) is incorporated into, or forms part of, this announcement.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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Annual Financial Report - RNS