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RNS
Lazard World Trust Fund  -  WTR   

Half-year Report

Released 16:28 05-Dec-2017

RNS Number : 4740Y
Lazard World Trust Fund
05 December 2017
 

Lazard World Trust Fund

Unaudited Half-Yearly Report

September 30th, 2017

 

Financial Highlights for the six months ended September 30th, 2017

 


US Dollar (US$)

 

Pounds Sterling (£)

 

Percentage Change (total return)

 

%

%

Change in Net Asset Value Per share

 

14.2

6.4

Change in MSCI All Country World Index ex USA

 

12.3

4.7

Share Price

 

22.0

14.0

Net Asset Value & Share Price as of September 30th, 2017

 

US$

£

Net Asset Value (per share)

 

5.24

3.91

Share Price

 

4.90

3.66

Discount

(6.3%)

(6.3%)

 

Look-through discount

(29.7%)

(29.7%)

 

Total Net Asset as of September 30th, 2017

 

US$

(million)

£

(million)

Total Net Assets

 

190.5

142.2

Dividend per share

Cents

Pence

Six months to September 30th, 2017

6.83

5.10

Interim Dividend to be paid January 16th, 2018

 

8.70

6.49

 

The dividend policy is to pay 3.5% of the Net Asset Value at the start of each financial year, paid in two equal instalments.

 

Note: The rate of exchange used to calculate the figures that appear above is the rate of exchange as at September 30th, 2017: US$ 1.34 per £1.

 

Corporate Information

 

Directors

 

Philip R. McLoughlin* (Chairman)

Duncan Budge *†

James Cave *††

Tony Morrongiello*†

Howard Myles**†

 

* Member of the Audit Committee

** Chairman of the Audit Committee

† Member of the Nominations Committee

†† Chairman of the Nominations Committee



Domiciliary, Registrar, Transfer and

Administrative Agent

 

Custodian, Listing and Paying Agent

State Street Bank Luxembourg S.C.A.

49, avenue J.F. Kennedy

L-1855 Luxembourg

 

State Street Bank Luxembourg S.C.A.

49,avenue J.F.Kennedy

L-1855 Luxembourg

 

Registered Office

Financial Adviser and Broker

State Street Bank Luxembourg S.C.A.

49, avenue J.F. Kennedy

L-1855 Luxembourg

 

Cenkos Securities plc

6.7.8 Tokenhouse Yard

London EC2R 7AS

United Kingdom

 

Manager and Non-EU AIFM

Company Secretary

Lazard Asset Management LLC

30 Rockefeller Plaza

New York, NY 10112 U.S.A.

Link Company Matters Limited

6th Floor

65 Gresham Street

London EC2V 7NQ

United Kingdom

 

Cabinet de Révision agréé

Website and email

Deloitte Audit Société à responsabilité limitée

560, rue de Neudorf

L-2220 Luxembourg

 

www.lazardworldtrustfund.com

lazardworldtrustfund@linkgroup.co.uk

Legal Advisors

Elvinger Hoss Prussen

2, Place Winston Churchill

L-1340 Luxembourg

 

Stephenson Harwood LLP

1 Finsbury Circus

London EC2M 7SH

United Kingdom

 

General Information

 

•        NAV stands for Net Asset Value and represents shareholders' funds expressed as an amount per individual share. Shareholders' funds are the total value of the Fund's assets at current market value less its liabilities.

 

•        The Net Asset Value per Share is expressed in US Dollars ("US$") and, since October 30th, 2009 the Fund's shares are 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 audited annual reports are made available at the Registered Office of the Fund and are posted to each registered Shareholder.

 

•        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 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.

 

•        Annual Reports (including audited accounts) will be mailed to Shareholders not less than 21 days before the day fixed for the Annual General Meeting at which they are to be considered.

 

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

 

•        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.

 

•        An interim dividend of 6.4925p per share has been declared in respect of the year to March 31st, 2018, which is payable on January 16th, 2018, to Shareholders who appear on the register on December 15th, 2017 with an ex-dividend date of December 14th, 2017. Including the final dividend for the year to March 31st, 2017 the total dividend paid or payable during the financial year to March 31st, 2018 is 11.5925p per share or 3.2% of the Fund's share price as at September 30th, 2017 (366p).

 

Regulatory Disclosure

 

Related Party Transactions

During the six months to September 30th, 2017 no new transactions with related parties were undertaken. Full details of the Fund's existing related party transactions can be found in Note 14 below.

 

Principal Risks and Uncertainties

Key risks faced by the Fund relate to poor investment and strategic decisions resulting in poor fund performance; a change in circumstances of the Manager resulting in the Manager's inability to carry out its duties; gearing risk which may exaggerate any fall in the value of the Fund's assets; hedging risk, which may increase the risk of significantly larger losses on short positions than long positions; discount volatility - the Fund's share price may fall disproportionately to the Fund's Net Asset Value; reputational - failure to keep current and potential investors informed of the Fund's performance and development could lower investor confidence. A detailed explanation of the Risks and Uncertainties facing the Fund can be found on pages 15 under the heading 'Principal risks and uncertainties' in the Report and Accounts for the year ended March 31st, 2017.

 

Directors' Responsibility Statement

 

In accordance with Rules 4.2.7R and 4.2.8R of the Disclosure Guidance and Transparency Rules of the United Kingdom Financial Conduct Authority, the Directors confirm that, to the best of their knowledge:

 

·           the unaudited financial half-yearly report, which has 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 September 30th, 2017 and for the financial period then ended;

·           the Manager's Review includes a fair review of the development and performance of the business and the position of the Fund;

·           the Directors' Statement of Principal Risks and Uncertainties shown above is a fair review for the remainder of the financial year; and

·           the unaudited half-yearly report include a fair review of any related party transactions that have materially affected the financial position or the performance of the Fund and any changes to the related party transactions described in the last Annual Report including

 

On behalf of the Board

 

Philip R. McLoughlin

Chairman

December 5th, 2017

 

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 Country World ex USA Index, although Lazard Asset Management LLC (the 'Manager') seeks to achieve the highest possible long term 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 per share.

 

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 of

Directors of the Fund has authorised the Manager to use gearing of up to 15% of the Fund's Net Asset Value. The Board of Directors of the Fund 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 significantly larger losses on short positions than long positions.

 

Manager's Review

For the six months from April 1st, 2017 to September 30th, 2017

 

Market and Fund Performance Review

 

The turning point for the European markets came when Emmanuel Macron, who unabashedly touted globalization, was elected French president. Concerns about the future of the post-Brexit European Union appear to have subsided. European economies recovered and European markets posted strong performance. Globally, all 45 countries tracked by the OECD had positive economic growth this year, and 33 countries experienced accelerating growth.

 

Global equity stocks performed strongly over the period, despite the political tensions and threats of a North Korean nuclear exchange, the looming trade wars between the United States and countries such as China, Mexico and Canada and the prospect of interest rate rises from the Fed, Bank of England and Bank of Canada.

 

Fund Performance Review (all figures in US dollars)

 

For the half year period ended September 30th, 2017, the Fund's Net Asset Value (NAV) per share rose 14.2%, compared with a gain of 12.3% for the MSCI All World ex-US Index. The Fund's share price, as traded on the London Stock Exchange, increased by 22.0% over the six-month period.

 

Investments in developed Europe and emerging Asia were the primary drivers of the Fund's performance. In Europe, France-based private equity specialist, Eurazeo, rose 44.8%, helped by the solid performance of its underlying businesses and narrowing of its discount. In addition, small cap investments performed well, led by JPMorgan European Smaller Companies (+27.7%) and UK focused Henderson Smaller Companies (+22.5%). In emerging Asia, China-focused investments were the best performers with Naspers (+25.6%), Fidelity China Special Situations (+20.4%) and Morgan Stanley China A Share Fund (+24.3%) leading the way.

 

Over the same period, a few investments performed poorly. Macau Opportunities fell by 6.5%, mainly due to its discount widening by more than 12.0%. GP Investments, a Brazil-based private equity investment, declined by 11.2%, though nearly all of the negative return came from its discount widening by 10.0%. JZ Capital, an investment in United States and European micro-cap companies, lost 2.7% with nearly half (1.2%) resulting from discount widening. These three investments each trade at a discount wider than 32% and remain attractive investments.

 

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

 

Fund Data/Information

 


September 30th,

March 31st,

September 30th,


2017

2017

2016

Share Price (£)  

3.66

3.30

2.91

NAV (£)  

3.91

3.71

3.35

Share Price (US$)*  

4.90

4.13

3.77

NAV (US$)*  

5.24

4.65

4.35

Discount to NAV* 

(6.4%)

(11.0%)

(13.3%)

 

 

The Portfolio

 


Net Assets

Discounts

Top 10 Holdings

%

%




Fidelity China Special Situations

6.0

(14.0)

Naspers

6.0

(36.1)

Eurazeo

5.1

(5.1)

JPMorgan Japanese

4.8

(11.6)

JPMorgan Japan Smaller Companies

4.6

(12.1)

JPMorgan Emerging Markets

4.6

(11.2)

First Pacific

4.4

(40.2)

VinaCapital Vietnam Opportunity

4.3

(18.9)

Fondul Proprietatea

4.1

(28.7)

Investor AB

4.1

(19.2)

 

 

Top Five Contributors to Returns (NAV)

 

Security

Weight %

Total

Return %

Contribution to

Return %

Naspers  

6.4

25.6

1.9

Eurazeo

4.5

44.8

1.7

Fidelity China Special Situations

5.9

20.4

1.2

Morgan Stanley (MS) China A Share 

3.7

24.2

0.8

JPMorgan Japanese

4.7

17.0

0.8

 

Naspers, listed in South Africa, delivered strong returns, driven by the robust results of its mix of e-commerce, online

gaming and social networking businesses. The company's underlying investments performed even more strongly and,

as a result, the discount on Naspers widened by more than 7.0%. Shares of Eurazeo, listed in France, rallied strongly as investors responded to improvements in the performance of its investee companies and drove its discount narrower by more than 16.0%. Fidelity China Special Situations benefited from its portfolio of Chinese new economy stocks. MS China A Share performed strongly, as domestic Chinese equities, or A shares as they are called, rallied on rising corporate earnings and robust economic growth. JPMorgan Japanese bounced back strongly, with key holdings such as Keyence delivering strong returns.

 

Top Five Detractors from Returns (NAV)

 

Security

Weight %

Total

Return %

Contribution to

Return %

GP Investments

1.5

(11.2)

(0.2)

Macau Property Opportunities

1.3

(6.4)

(0.1)

JZ Capital Partners

1.5

(2.7)

(0.1)

SoftBank

0.6

(2.7)

-

Templeton Dragon Fund

0.4

0.6

-

 

Macau Property Opportunities and GP Investments fell primarily due to discount widening of more than 10.0% as the underlying businesses performed well, but investor sentiment remained depressed. JZ Capital Partners and SoftBank Group both fell as a result of lacklustre performance and widening discounts. Templeton Dragon was a disappointing underperformer.

 

Top Ten Country Weights as of September 30th, 2017

 




Country

Lazard World Trust Fund

MSCI All Country World


Portfolio

Ex USA Index


%

%

China 

16.0

7.1

Japan

12.3

15.9

United States

12.2

-

United Kingdom

7.7

12.3

France

6.0

7.5

Hong Kong

4.5

2.4

India 

4.4

2.0

Vietnam   

4.0

-

Romania

3.6

-

Sweden

3.2

2.0




 

Portfolio Hedging and Gearing

 

During the period, the Fund initiated two short positions as a hedge to protect gains and against market downside risks.

 

•        10% short position in MSCI Emerging Markets ETF to hedge part of the Fund's 33% exposure to emerging and frontier markets. Over the period this protection delivered 0.5% negative contribution.

•        6% hedge on the euro to hedge most of the Fund's exposure to the currency following its 11% outperformance against the US dollar. This position was closed during the period under review with a profit.

•        At the end of the period, the Fund did not have any material gearing.

 

Corporate Governance Initiatives and Restructuring

 

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 period:

 

•        Tender offers: JPEL Private Equity (18.7% share buyback at 16% above market prices); Swiss Helvetia (10% tender at 98% of NAV). Prospect Japan Fund was 100% acquired by Prospect Co in Japan, with the issuance of new shares, which valued the company at a premium to NAV.

•        Significant distributions to shareholders: Fondul Proprietatea 5.5% capital distribution, while VinaCapital Vietnam Opportunity introduced a new dividend policy with a twice-yearly distribution of least 1% of NAV.

 

Discounts

 

During the six months period to September 30th, 2017 the Fund's discount to NAV averaged 11.1%, ranging from 14.2% to 4.3%.

 

The Lazard World Trust Fund price, as traded on the London Stock Exchange, narrowed by 4.7% to end the period at a discount of 6.3% to the Fund's NAV per share. The Fund's underlying investments were priced at an average discount of 24.9% to their NAV. Adding the two discounts together, the Fund traded at a look-through discount of 29.7% as at period end, which implies that every dollar invested in the Fund would buy US$1.42 worth of assets as at that date.

 

Outlook

 

We believe the Fund is currently exposed to many exciting investment opportunities such as e-commerce and social media in China, micro companies in the United States, global leaders in Europe, sporting goods in Brazil, consumer companies in India and Vietnam and privatisations in Romania. Global economies are buoyant, corporate earnings are currently strong. The principal risks to the markets are central bank tightening, rising government deficits, growing corporate and individual leverages, heightened political tensions and alarming social upheavals.

 

On balance we continue to be cautiously optimistic. The Lazard World Trust Fund is a unique vehicle pursuing investment opportunities and attractive discounts on a global basis, with the ability to hedge equity and currency exposures.

 

Kun Deng, CFA

Lazard Asset Management LLC

Manager

 

December 5th, 2017

 

Statement of Net Assets (in US$)

 


As at

As at


September 30th, 2017

March 31st, 2017

Assets



Securities portfolio at market value (see Note 2) (Cost: US$ 154,782,507)

195,433,546

169,311,788

Cash (see Note 2) 

413,151

6,794

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

18,703,408

41

Receivable on sales of securities 

1,661,618

-

Unrealised gains on forward foreign exchange contracts (see Note 2)

83,009

-

Income receivable on portfolio 

194,212

225,208

Other receivable

2,895

-

Total assets 

 

216,491,839

 

169,543,831

 




Liabilities



Securities sold short at market value (Cost: US$ 18,660,458) (see Note 13)

19,478,907

-

Loan payable (see Note 17) 

5,987,000

-

Payable on purchases of investments

-

5,079

Other payable on short positions and bank liabilities 

-

17,500

Accrued expenses 

500,525

501,389

 

Total liabilities

25,966,432

523,968

 

Total Net Assets 

190,525,407

169,019,863




Number of Shares outstanding (see Note 5) 

36,383,493

36,383,493

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

5.24

4.65

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

3.91

3.71







 

Shareholders' Equity (in US$)









 


As at September 30th, 2017

As at March 31st, 2017

Capital and Reserves



Issued Shares Capital: 46,635,770 Shares (including treasury shares) at US$ 0.2 (see Note 5) 

9,327,154

9,327,154

Share Premium 

35,565,613

35,565,613

Legal Reserve (see Note 6)

1,866,348

1,866,348

Realised profit brought forward 

132,728,979

120,612,800

Adjustment for Treasury Shares (see Note 5) 

(31,834,815)

(31,834,815)

Interim dividends paid (see Note 19)

(2,402,410)

(5,126,172)




Total Capital and Reserves 

145,250,869

130,410,928




Net Investment Income for the financial year / period

944,243

1,571,472

Net realised Gain for the financial year / period

4,412,629

15,670,880

Cumulative unrealised appreciation on securities 

39,832,593

21,366,605

Unrealised (depreciation) on foreign exchange 

85,073

(21)




Total Shareholders' Equity 

190,525,407

169,019,863




 

 

Statement of Operations (in US$)










For the six months ended

For the year ended

For the six months ended

 

Income

September 30th, 2017

March 31st, 2017

September 30th, 2016

 





 

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

2,211,557

4,038,765

2,263,411

 

Interest on bank accounts

1,661

25,169

6,902

 





 

Total income

 

2,213,218

 

4,063,934

 

2,270,313

 





 

Expenses




 

 

Management fees (see Note 3)

686,211

1,240,466

647,044

 

 

Directors' fees and expenses (see Note 9)

126,491

234,175

137,462

 

Professional fees (see Note 7)

123,588

358,580

91,875

 

Depositary fees (see Note 8)

74,632

158,077

66,820

 

Company Secretarial fees and expenses (see Note 10)

71,809

130,247

84,792

 

Interest and commitment fees

20,246

26,825

14,663

 

Administrative Agent costs

59,738

110,640

54,720

 

Taxe d'abonnement (see Note 4)

46,517

80,465

40,200

 

Other expenses (see Note 19)

59,743

152,987

77,261

 

Total expenses

 

1,268,975

 

2,492,462

 

1,214,837

 

Net Investment Income

944,243

1,571,472

1,055,476

 

 

Net Realised Gain/(Loss)




 

- on securities (net of prime brokerage fees amounting to US$ 7,822)

5,225,806

18,391,689

11,099,847

 

- on forward foreign exchange contracts

10,683

705,696

(28,955)

 

- on foreign exchange

(823,860)

(3,426,505)

(890,108)

 

- on dividend repayable on short positions

-

-

(86,602)

 





 

Total Net Realised Gain\Loss

4,412,629

15,670,880

10,094,182

 





 

Net Change in Unrealised Gain/(Loss)




 

- on securities

18,465,988

5,389,083

(1,804,221)

 

- on foreign exchange

85,094

(21)

(227)

 





 

Total Change in Unrealised Gain\Loss

18,551,082

5,389,062

(1,804,448)

 





 

Result of Operations*

23,907,954

22,631,414

9,345,210

 










 

* 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$)

 



For six months ended September 30th, 2017


For the year ended

 March 31st, 2017

Net Assets at the Beginning of the Period / Year


169,019,863


168,582,525






Net investment income/


944,243


1,571,472






Net realised gain on securities


5,225,806


18,391,689

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


10,683


705,696

Net realised (loss) on foreign exchange


(823,860)


(3,426,505)










Total net realised gain


4,412,629


15,670,880






Change in unrealised gain/(loss) on securities


18,465,988


5,389,083

Change in unrealised gain/(loss) on foreign exchange


85,094







Total change in unrealised gain


18,551,082


5,389,062






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


-


(16,915,385)

Tender offer expenses


-


(152,519)

Dividends paid (see Note 19)


(2,402,410)







Repurchase and Issue of Shares (including tender offer expenses)


(2,402,410)







Net Assets at the End of the Period


190,525,407


169,019,863

 

 

 

 

 

Statistical Information about the Fund (in US$)










September 30th, 2017


March 31st, 2017


March 31st, 2016

 

Total Net Assets


 

190,525,407


 

169,019,863


168,582,525

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


 

5.24


 

4.65


4.17

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


 

3.91


 

3.71


2.90








Statement of Changes in Shares Outstanding




 

For the Period Ended September 30th, 2017



 

Number of Shares Outstanding at the Beginning of the Period (excluding treasury shares)


36,383,493

 

Number of Shares Issued


-

 

Number of Shares Repurchased (see note 5)


-

 

Number of Shares Outstanding at the End of the Period


36,383,493

 

 

Statement of Investments and Other Net Assets

September 30th, 2017

 

Description

Number of

Shares

Acquisition

Cost

Market

value

Currency

 % of total

net assets




(US$)

(US$)



Investments in Securities






Transferable Securities admitted to an Official Stock Exchange Listing

Fidelity China Special Situations PLC

3,920,302

8,296,627

11,400,473

£

5.98

Naspers Ltd, N Shares

52,200

6,917,610

11,394,836

ZAR

5.98

Eurazeo SA

108,556

3,290,435

9,708,535

EUR

5.10

JPMorgan Japanese Investment Trust PLC

1,817,651

5,759,017

9,070,070

£

4.76

JPMorgan Japan Smaller Companies Trust PLC

1,757,883

8,851,372

8,786,376

£

4.61

JPMorgan Emerging Markets Investment Trust PLC

784,130

3,090,986

8,719,331

£

4.58

First Pacific Company Ltd

10,501,600

6,664,455

8,381,843

HKD

4.40

VinaCapital Vietnam Opportunity Fund Ltd

2,056,203

5,248,226

8,180,815

£

4.29

Fondul Proprietatea SA/Fund

709,211

7,387,923

7,836,805

US$

4.11

Investor AB, B Shares

157,208

5,617,496

7,783,497

SEK

4.09

Altaba, Inc.

114,400

6,585,175

7,577,856

US$

3.98

Morgan Stanley China, A Shares Fund, Inc.

312,400

7,962,884

7,453,864

US$

3.91

Jardine Strategic Holdings Ltd

171,242

5,166,890

7,408,825

US$

3.89

BlackRock Resources & Commodities Strategy Trust

804,986

6,550,640

7,156,326

US$

3.76

China Merchants China Direct Investments Ltd

3,569,439

7,712,320

5,976,676

HKD

3.14

Wendel SA

36,027

5,445,578

5,839,053

EUR

3.06

The India Fund, Inc.

211,200

4,858,817

5,649,600

US$

2.97

Henderson Smaller Companies Investment Trust PLC

525,417

2,809,129

5,577,141

£

2.93

HarbourVest Global Private Equity Ltd

343,170

4,217,339

5,568,921

£

2.92

Herald Investment Trust Plc

378,070

2,869,501

5,568,128

£

2.92

Templeton Dragon Fund, Inc.

251,439

5,649,369

5,229,931

US$

2.74

JPMorgan European Smaller Companies Trust Plc

840,814

1,509,671

4,436,627

£

2.33

Prospect Co Ltd

9,331,480

4,352,112

4,315,192

JPY

2.26

Marwyn Value Investors Ltd

1,511,314

5,061,239

3,411,983

£

1.79

JZ Capital Partners Ltd

493,859

3,407,874

3,293,986

£

1.73

Tetragon Financial Group Ltd

246,086

2,341,248

3,126,202

US$

1.64

India Capital Growth Fund Ltd

2,173,800

1,992,058

2,837,496

£

1.49

JPEL Private Equity Ltd

2,097,252

2,530,336

2,805,014

US$

1.47

GP Investments Ltd

1,300,000

2,712,324

2,397,108

BRL

1.26

Macau Property Opportunities Fund Ltd

1,092,658

3,544,291

2,342,557

£

1.23

Haci Omer Sabanci Holding AS

821,426

3,549,861

2,311,340

TRY

1.21

SoftBank Group Corp

22,500

1,887,872

1,818,678

JPY

0.95

International Biotechnology Trust Plc

194,977

482,818

1,582,355

£

0.83

Africa Opportunity Fund Ltd

420,000

257,108

296,100

US$

0.16

Swiss Helvetia Fund Inc.

14,253

197,060

181,298

US$

0.10

Novus Holdings Ltd

18,055

4,846

8,708

ZAR

0.00







Securities Sold Short






iShares MSCI Emerging Markets ETF

(434,700)

(18,660,458)

(19,478,907)

US$

(10.22)



136,122,049

175,954,639


92.35

Other Transferable Securities






Companies in Liquidation






Italy Fund Inc.

195,906

-

-

US$

0.00

Advance UK Trust PLC

275,518

-

-

£

0.00

Dexion Equity Alternative Ltd

1,004,992

-

-

£

0.00













Total Investments in Securities  


136,122,049

175,954,639


92.35

Other Net Assets/Liabilities 



14,570,768


7.65

Total Net Assets 



190,525,407


100.00










 

Currency Exposure of Portfolio


% of the portfolio

 







 

Pound Sterling (£)



80,776,259


45.91

 

United States Dollar (US$)



35,242,914


20.03

 

Euro (EUR)



15,547,588


8.84

 

Hong Kong Dollar (HKD)



14,358,519


8.16

 

South Africa Rand (ZAR)



11,403,544


6.48

 

Swedish Krona (SEK)



7,783,497


4.42

 

Japanese Yen (JPY)



6,133,870


3.49

 

Brazilian Real (BRL)



2,397,108


1.36

 

Turkish Lira (TRY)



2,311,340


1.31

 







 







 

Total



175,954,639


100.00

 

 

 

 

 

Notes to the Financial Statements September 30th, 2017

Note 1 - General

Lazard World Trust Fund (the "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").

 

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 Country World Index ("AC") (ex USA) 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

September 30th, 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 Board of Directors of the Fund 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 September 30th, 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 period. 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 September 30th, 2017:

 






US$

1

BRL


Brazilian Real


0.315741282

1

EUR


Euro

1.181900378

1

GBP


Pound Sterling

1.339999384

1

JPY


Japanese Yen

0.008886914

1

HKD


Hong Kong Dollar

0.128014747

1

KRW


South Korean Won

0.000873096

1

SEK


Swedish Krona

0.122776216

1

TRY


Turkish Lira

0.280666302

1

ZAR


South African Rand

0.073862063






 

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 Currency 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 period ended September 30th, 2017, the Fund incurred transaction fees related to purchase and sale of transferable securities for US$ 86,886.

 

          The transaction costs include broker fees, settlement fees, taxes and other charges. That amount is included in the custodian fees (note 8 to the Accounts).

 

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.

 

The Company and the Manager entered into the Amended and Restated Investment Management Agreement which has been amended to reflect that the New Benchmark Index (MSCI All Country World Index ex USA) is the reference benchmark for calculating performance fees from April 1st, 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 even if the Net Asset Value performance exceeds the Hurdle during the relevant Performance Period.

 

For the period ended September 30th, 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 either party 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

 

As at September 30th, 2017, the Fund's issued share capital 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$ 123,588 were incurred principally due to the following:

 

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

•           investor advisory paid to Edison Investment Research;

•           final retainer fees paid to Stockdale Securities and retainer fees paid to Cenkos Securities;

•           audit fees paid to Deloitte 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 Depositary 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, 2017 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 meeting held in Europe and United States.

 

The fees paid after tax to each Director for the period ended September 30th, 2017 were as follows:

 




£


Duncan Budge


12,500


James Cave


12,500


Philip R. McLoughlin


17,500


Tony Morrongiello


12,500


Howard Myles 


15,000


 

The aggregate fees (including 'Administration des Contributions Directes') paid to Directors of the Fund amounted to US$ 88,953. The aggregate expense reimbursement to Directors of the Fund amounted to US$ 37,538. 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 period ended September 30th, 2017, the Company Secretarial fees and expenses of US$ 71,809 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 engaged in the following forward foreign exchange contract:

 

Currency purchased

Purchase

Currency sold

Sale

Maturity

Unrealised Gain/(loss) in US$

 

USD

11,481,000

EUR

9,632,479

25/10/2017

83,009

 

Total Forward Foreign Exchange Contract

83,009

.

The counterparty for the unique forward foreign exchange contract was State Street Bank & Trust.


As of the date of this report, the Fund was not engaged in any outstanding currency contract.

 

Note 12 - Securities Lending

 

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

 

Note 13 - Short Positions

 

During the six month period ended September 30th, 2017, short sales of exchange traded funds were executed and the market value of the short sales of exchange traded funds at September 30th, 2017 amounted to US$ 19,478,907.

The Fund has partially collateralised with the Broker these short positions through a cash payment which amounted to

US$ 18,703,408 at September 30th, 2017.

 

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



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:

 


Holding

Percentage of Voting Rights

Percentage of Voting Rights

Date of announcement



(excluding treasury shares)1

(including treasury shares)2


Lazard Asset Management LLC

7,453,444

20.49%

15.98%

26 July 2017

1607 Capital Partners LLC

6,041,725

16.61%

12.96%

3 October 2017

City of London

5,026,726

13.82%

10.8%

5 December 2017

Ironside

4,716,704

12.96%

10.11%

8 August 2017

Wells Capital Management Inc.

4,159,728

11.43%

8.92%

4 September 2017

Weiss Asset Management LP

1,598,656 (including 700,000 held as a CFD

4.39%

 

3.43%

5 December 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).

 

 

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 advisors on an appropriate strategy for the Company to address this situation.

 

Note 16 - Ongoing Charges

 

For the period ended September 30th, 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 1.41%

 

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 September 30th, 2017, the Fund had no borrowings. Loan payable: US$5,987,000.

 

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 in the period:

 


Period ended September 30th, 2017

Year ended March 31st, 2017


Per share (p)

$


Per share (p)

$

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

                             

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


5.1

Dividend paid on 15/09/2017 (ex date 17/08/2017)

                                       

Total

5.1

2,402,410


10.5

5,126,172

 

On July 17th, 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 for the financial year to March 31st, 2017 of 5.1 pence was paid on September 15th, 2017 to shareholders who appeared on the register on August 18th, 2017.

 

Note 20 - Changes in the Investment Portfolio

 

For the period ended September 30th, 2017, the total movements occurred in the securities portfolio are the following:

 

Purchases

(US$)

Sales

(US$)

Realised

Gain/(Loss)

(US$)

Unrealised

Gain/(Loss)

(US$)

76,008,837

92,226,097

5,225,806

39,832,593

 

 

In addition, the changes in the investment portfolio during the period are available at the registered office of the Fund without any charge.

 

Note 21 - Subsequent Events

 

There were no material events after the period end.

 

 

National Storage Mechanism

 

A copy of the Half Yearly Report 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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