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Final Results

30th Jul 2018 07:00

RNS Number : 0797W
Lazard World Trust Fund
30 July 2018
 

Lazard World Trust Fund

Final Results

March 31st, 2018

 

Financial Highlights

for the year ended March 31st, 2018

 

Percentage Change (total return)

US Dollar (US$ / USD)

UK Sterling (£)

%

%

Net Asset Value ('NAV') per share

20.9

7.7

MSCI All Country World (ex US) Index

16.53

3.87

Share Price

25.6

12.1

 

Net Asset Value & Share Price

US$

£

Net Asset Value (per share)

5.45

3.89

Share Price

5.04

3.59

 

Total Net Assets as of March 31st, 2018

US$ (million)

£ (million)

Total Net Assets

198.4

141.4

 

Dividend per share

US cents

Pence

First Quarterly Dividend

8.19

6.49

Interim - Paid

9.15

6.49

Total paid for year to March 31st, 2018

18.22

13.00

Total paid for year to March 31st, 2017

12.78

10.20

Percentage increase in the dividend paid 2017 v 2018

42.57%

27.45%

 

Note: The rate of exchange used to calculate the figures that appear on this page is the rate of exchange as at March 29th, 2018; US$1.4030 per £1.

 

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 US) Index (the '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 and holding companies and comparable quoted companies that typically trade at a discount to their intrinsic value.

 

Dividend Policy

On 27 April 2018 the Board announced a revision to its dividend policy which is effective for the financial year commencing 1 April 2018. Under the new policy, it is the Fund's intention to pay a total annual dividend equivalent to 6% of the Net Asset Value calculated at the start of each financial year, payable in equal quarterly installments over the course of that year. During the year to March 31st, 2018 the dividend policy was to pay dividends twice a year that together amount to a total annual dividend equivalent to 3% of the Net Asset Value at the start of each financial year. For the year ended March 31st, 2018 this resulted in total dividend payments of 12.985p per share. For the financial year ended March 31st, 2019, under the new dividend policy, this will amount to a total dividend payment of 23.34p.

 

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 for Lazard World Trust Fund for the year ended March 31, 2018. The Fund's net asset value per share at year-end was $5.45 representing a total return of 20.9% over the period. This result compares favorably with the Fund's benchmark, the MSCI All Country World Index ex-U.S., which increased 16.5% and the Fund's reference benchmark, the MSCI All Country World Index, which increased 14.8% for the year.

 

It is important to note that the Fund is not managed with an objective of correlating to a specific index. 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. It is also important to note that the Manager is permitted to invest no more than 20% of the Fund's net assets in U.S. securities.

 

The Board continues to focus on strategies to increase liquidity in the Fund's shares, manage the discount and broaden the appeal of the Fund to potential new investors. Past initiatives, which have been reported in previous annual reports, include introducing a dividend and a subsequent increase in that dividend; engaging Edison Investment Research to prepare market research on the Fund and assist in efforts to expand awareness of the Fund in the retail market; and the rebranding of the Fund to Lazard World Trust Fund to make clear that a major manager of international assets not only was the original sponsor of the Fund but has been its investment manager since the Fund's inception.

 

It is important to note that the Fund has a highly concentrated shareholder register. For some time more than half of the outstanding shares of the Fund have been owned by institutional money management firms who invest in closed-end funds as part of their overall investment strategy. From time to time, these firms may execute transactions in substantial amounts of Fund shares based on their evaluation of value and discount but more frequently there is little trading in the Fund's shares by these institutional holders which reduces the market volume and therefore the availability of shares to investors considering the purchase of Fund shares. It is in this context that the Board continues its efforts to create shareholder value by seeking to expand liquidity, manage the discount and increase visibility and interest among potential new investors.

 

This year we have undertaken several further initiatives.

 

We have engaged a second research and marketing firm, Kepler Partners, to further assist in developing awareness of the Fund in the retail marketplace by preparing research reports and supporting the Fund's marketing efforts.

 

We have adopted a revised dividend policy, effective for the fiscal year commencing April 1, 2018 pursuant to which the Fund will pay a total annual dividend equivalent to 6% of the net asset value of the Fund calculated at the start of each financial year, payable in equal quarterly installments over the course of that year. Dividend payments may be funded from capital reserves to the extent that current year's income and revenue reserves are insufficient.

 

For the fiscal year ending March 31st, 2019, the revised dividend policy will result in the payment of a total dividend of 23.34 pence per share (based on the Net Asset Value of £3.89 as at March 31st, 2018), payable in 4 equal instalments, commencing with a dividend of 5.835 pence in relation to the quarter ended June 30th, 2018 which will be payable on September 7th, 2018 to shareholders who appear on the register on August 10th, 2018, with an ex-dividend date of August 9th, 2018.

 

With a view to limiting and avoiding wide fluctuations in the discount to the net asset value at which the shares trade in the market, we have authorized the Fund's broker, Cenkos, to purchase shares in the Fund under the Board's existing share buyback authority subject to certain criteria

 

Finally the Board acted to change the date of the Annual General Meeting from the third Wednesday in August to the third Thursday in September. This change was made in order to allow shareholders sufficient time to consider and submit their votes following the August holiday period. We hope that this change will increase the number of shareholders at the Annual General Meeting.

 

In accordance with past practices 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 to 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.

 

Philip R. McLoughlin

Chairman

 

July 27th, 2018

 

 

MANAGER'S REVIEW

for the year ended March 31st, 2018

 

Market Review

 

Global equity markets performed strongly over the year ended March 31st, 2018. While most markets traded below their all-time highs in the last months of the year, international equities rose more than 16%, led by emerging markets equities. Emerging markets performed well, mainly driven by investor optimism over higher anticipated global synchronized economic growth, and rising corporate earnings, overcoming uncertainty surrounding trade (including negotiations between the United States and Mexico on the North American Free Trade Agreement and trade tensions between the United States and China), elections, and political scandals (Brazil, Peru, Turkey, Korea). The potential US infrastructure spending programs and tax reductions helped push the US markets higher, and steady economic recovery in Japan and Europe buoyed those markets.

 

The developed markets seemed to end the period with rising concerns over inflation and interest rate increases. There was alarm over the looming possibilities of a global trade war, especially over the announced tariffs between China and the United States.

 

Fund Performance Review (all figures in US dollars)

 

For the fiscal year ended March 31st, 2018, Lazard World Trust Fund's net asset value per share increased by 20.9%, with the Fund price on the London Stock Exchange rising 25.6%, compared with a gain of 16.5% for the MSCI All Country World (ex-US) Index. The MSCI All Country World Index was up 14.8% during the period.

 

Investments in emerging Asia, developed Europe, and global investment companies were the primary drivers of the Fund's performance over the period. In emerging Asia, China-focused investments performed strongly, led by Naspers (+41.3%) and Fidelity China Special Situations (+38.6%). Developed Europe investments were led higher by French investment company, Eurazeo (+49.0%), and UK small cap specialist, Henderson Smaller Companies Investment Trust (+37.8%). Global investments, including small cap specialist, Herald Investment Trust (+38.3%), and private equity investment company, JPEL Private Equity (+78.4%), contributed significantly to returns.

 

Investments in Latin America and emerging Europe were the main detractors from performance. In Latin America, Brazil-focused private equity holding, GP Investments ("GP"), fell by 8.1%, compared to local Brazilian equities which rose more than 26%. The discount on GP is among the widest in the Fund, trading at a discount of 38%, which is 11% wider than in emerging markets generally. Turkey-focused holding company, Haci Omer Sabanci ("Sabanci") (-1.7%) fell marginally, mainly due to the discount expansion of over 4%. Sabanci traded on a discount of 37.3% at the end of the period.

 

In addition, a number of the Fund's holdings went through corporate actions, which benefited the Fund.

 

Lazard World Trust Fund Performance (*Annualised)

 

6 Months

1 Year

3 Years*

5 Years*

10 Years*

Since inception (1 July 1991)*

Share Price (in GBP)

-0.3%

12.1%

12.9%

12.2%

6.6%

7.3%

Fund NAV (in GBP)

1.2%

7.7%

10.6%

11.1%

6.2%

7.7%

Share Price (in USD)

4.4%

25.6%

10.8%

10.4%

3.0%

6.6%

Fund NAV (in USD)

5.6%

20.9%

8.5%

9.3%

2.5%

7.1%

 

Share Data

Mar 31st, 2018

Sep 30th, 2017

Mar 31st, 2017

Sep 30th, 2016

Mar 31st, 2016

Share price (in GBP)

£3.59

£3.66

£3.30

£2.91

£2.46

Share Price (in USD)

£3.89

£3.91

£3.71

£3.35

£2.90

NAV (in GBP)

$5.04

$4.90

$4.13

$3.77

$3.54

NAV (in USD)

$5.45

$5.24

$4.65

$4.35

$4.17

Discount to NAV

-7.6%

-6.3%

-11.0%

-13.3%

-15.1%

 

Portfolio Review

 

Top 10 holdings as of March 31st, 2018

% of

Portfolio

Altaba

6.4

Fidelity China Special Situations

6.1

JPMorgan Japanese

5.7

JPMorgan Japan Smaller Companies

5.3

VinaCapital Vietnam Opportunity

5.1

JPMorgan Emerging Markets

4.7

Morgan Stanley China A Share

4.7

Investor AB

4.6

S.C. Fondul Proprietatea GDR

4.5

Naspers

4.4

Total

51.2

 

The Fund has a concentrated portfolio, with the top 10 holdings exceeding 51% of assets.

 

Top 5 Contributors and Detractors for the year ended March 31st, 2018

Top 5 Contributors to Returns (NAV)

 

Company

Average Portfolio Weight (%)

Total Return (%)

Contribution

to Return (%)

Naspers

5.7

41.3

2.9

Fidelity China Special Situations

6.1

38.6

2.1

Eurazeo

4.2

49.0

2.0

JPMorgan Japanese

4.9

47.0

2.0

JPMorgan Japan Smaller Companies

4.7

41.9

1.7

 

Naspers, listed in South Africa, delivered solid returns, driven by the robust results of its Chinese investments of e-commerce, online gaming, mobile payments, and social networking, and also its global investments. The company's strong share price performance actually lagged behind that of its underlying investments, most of which are listed. Fidelity China Special Situations generated strong returns, driven by its investments in the New China sectors of technology, e-commerce, consumer, and services. Eurazeo had strong operating results, attractive new investments, and a successful leadership transition. It was also helped by its discount narrowing. JPMorgan Japanese (JFJ) and JPMorgan Japan Smaller Companies (JPS) both outperformed the strong equity market in Japan.

 

Top 5 Detractors from Returns (NAV)

 

Company

Average Portfolio Weight (%)

Total Return (%)

Contribution

to Return (%)

First Pacific

3.8

-23.4

-0.5

Jardine Strategic

3.7

-8.0

-0.3

GP Investments

1.3

-8.1

-0.1

SoftBank

0.9

-9.7

-0.1

JZ Capital Partners

1.6

-2.9

-0.1

 

All five holdings in the table above suffered from significant discount widening, in addition to the issues facing each of the investments. First Pacific fell due to lack of progress on asset disposal. Though First Pacific's consumer and infrastructure businesses were solid, the performance of the telecom business was disappointing. Shares of Jardine Strategic, a Singapore-listed holding company, fell on disappointing results from one of its biggest investments, Dairy Farms, although its CEO is taking steps to right the ship. GP Investments, a Brazil-focused private equity specialist, suffered from the country's political scandals. The unlisted holdings, making up nearly half of its underlying portfolio, are valued well below cost, despite the expected potential IPOs or trade sales which could provide a boost to underlying values. Softbank, a Japanese holding company with investments in mobile and fixed-line telecom, e-commerce, and technology services, was impacted by uncertainty over merger talks between one of its major holdings, Sprint, and competitor T-Mobile. JZ Capital Partners, a private equity investment company specializing in United States and European microcap, and real estate, announced it was discontinuing its dividend policy and instead adopting a new share buyback policy. The buyback never happened, disappointing investors.

 

Geographic Allocation as of March 31st, 2018

 

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, as shown in the following chart, 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, 2018

 

Lazard World Trust Fund Portfolio (%)

MSCI All Country World (ex US) Index (%)

Country

China

21.5

7.6

Japan

14.2

16.8

United Kingdom

8.2

11.8

United States

7.9

-

France

5.3

7.5

Hong Kong

4.1

2.5

 

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 44% exposure to emerging markets. Over the period this protection delivered 0.8% negative contribution. This position was closed during the period.

 

· 6% hedge on the Euro to hedge the Fund's exposure to the currency following its previous strong performance against the US Dollar. Over the period this protection delivered positive contribution. This position was closed during the period.

 

At the end of the period, the Fund did not have any short or hedging positions and was not geared.

 

Corporate Governance Initiatives and Restructing

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

 

· Tender offers: JPEL Private Equity (18.7% share buyback at 16% above market prices, followed by distributions of 6.7% and 17.1% of NAV); S.C Fondul Proprietatea (tender offer of 13.4% of shares plus over 8% share buyback); Swiss Helvetia (10% tender at 98% of NAV in which the Fund tendered 16% of shares as not all shareholders participated); Tetragon Financial (tender offer at a 33% discount to NAV, adding approximately US$ 0.33 to NAV).

 

· Discount Management Plan: Naspers sold a 2% stake in Tencent, amounting to more than US$ 10 billion, aiming to reduce its discount and improve capital efficiency.

 

· Restructurings: Prospect Japan Fund was 100% acquired by Prospect Co in Japan, with the issuance of new shares, which valued the company at a significant premium to NAV. Swiss Helvetia improved its Board governance changing from a super majority needed to change bylaws to a simple majority as well as the annual re-election of its Board members.

 

· Distributions: Macau Property Opportunity Fund announced the sale of Senado Square (20% of NAV) at a 14% Premium and 541% gain and its intention to distribute the capital as a part of its planned liquidation; VinaCapital Vietnam Opportunity introduced a new dividend policy with a twice-yearly distribution of least 1% of NAV.

 

Discounts

The Fund's discount to NAV narrowed to 7.6% from 11% at the start of the period. It traded at an average discount of 8.8% during the year, ranging from a high of 14.2%, to a low of 1.9%.

 

Whilst the Fund's shares traded at a discount of 7.6% to its net asset value, the Fund's underlying investments had an average look-through discount of 24.0%. Therefore for an investor, every US$1 allocated in the Fund was invested in assets valued at US$ 1.49.

 

Outlook

Going forward, we believe the global investment environment will be more volatile. While economic issues persist - including elevated valuations in several major markets, increasing leverage, and changing interest rate regimes - geopolitical issues, such as nationalism, trade protectionism, military conflicts, and political uncertainty in various parts of the world are increasingly dominating headlines. We are likely to experience market corrections that may be signficiant, but we continue to remain cautiously optimistic that a volatile environment will present opportunities that our investment team can take advantage of on behalf of the Fund, as it has done since 1991. The global economy continues to grow, with many economies having not only recovered but making steady progress towards economic expansion. Against this backdrop, the Fund remains invested in attractively placed companies focused on compelling areas of global equity markets.

 

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

 

July 27th, 2018

 

 

General Information

 

· 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.

· 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 6.4925 pence per share was paid on June 8th, 2018. The first quarterly dividend of 5.835 pence per share will be paid in respect of the year ended March 31st, 2019 on September 7th, 2018 to Shareholders who appear on the register on August 10th, 2018, with an ex-dividend date of August 9th, 2018.

 

Statement of Net Assets (in US$)

As at

As at

Assets

March 31st, 2018

March 31st, 2017

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

198,701,502

169,311,788

Cash (see Note 2)

330

6,794

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

275,442

41

Income receivable on portfolio

53,965

225,208

Total assets

199,031,239

169,543,831

Liabilities

Payable on purchases of investments

-

5,079

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

-

17,500

Accrued expenses

594,923

501,389

Total liabilities

594,923

523,968

Total Net Assets

198,436,316

169,019,863

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

36,383,493

36,383,493

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

5.45

4.65

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

3.89

3.71

Diluted Net Asset Value per share in US$*

5.45

4.65

Equivalent Diluted Net Asset Value per share in £*

3.89

3.71

 

* Diluted NAV is calculated after taking into account any outstanding warrants, which are assumed to be exercised by the shareholders. There are currently no warrants in issue.

 

Shareholders' Equity (in US$)

As at

As at

Capital and Reserves

March 31st, 2018

March 31st, 2017

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

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 20)

(5,597,708)

(5,126,172)

Total Capital and Reserves

142,055,571

130,410,928

Net Investment Income for the financial year

4,311,592

1,571,472

Net Realised Gain for the financial year

8,228,424

15,670,880

Cumulative unrealised appreciation on securities

43,840,737

21,366,605

Unrealised (depreciation) on foreign exchange

(8)

(21)

Total Shareholders' Equity

198,436,316

169,019,863

 

Statement of Operations (in US$)

 

Income

For the year ended

March 31st, 2018

For the year ended

March 31st, 2017

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

6,894,440

4,038,765

Interest on bank accounts

21,073

25,169

Total income

6,915,513

4,063,934

 

Expenses

Management fees and performance fees (see Note 3)

1,436,719

1,240,466

Directors' fees and expenses (see Note 9)

254,768

234,175

Professional fees (see Note 7)

239,551

358,580

Depositary fees (see Note 8)

89,345

158,077

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

132,519

130,247

Interest and commitment fees

73,645

26,825

Administrative Agent costs

133,559

110,640

Taxe d'abonnement (see Note 4)

98,563

80,465

Other expenses (see Note 18)

145,242

152,987

Total expenses

2,603,921

2,492,462

Net Investment Income

 

Net Realised Gain/(Loss)

- on securities (net of prime brokerage fees amounted to US$ 0)

8,596,894

18,391,689

- on forward foreign exchange contracts

194,879

705,696

- on foreign exchange

(563,349)

(3,426,505)

Total Net Realised Gain/(Loss)

8,228,424

15,670,880

 

Net Change in Unrealised Gain/(Loss)

For the year ended

March 31st, 2018

For the year ended

March 31st, 2017

- on securities

22,474,132

5,389,083

- on foreign exchange

13

(21)

Total Net Change in Unrealised Gain/(Loss)

22,474,145

5,389,062

Result of Operations*

35,014,161

22,631,414

 

* 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, 2018

March 31st, 2017

Net Assets at the Beginning of the Year

169,019,863

168,582,525

Net investment income

4,311,592

1,571,472

Net realised gain on securities

8,596,894

18,391,689

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

194,879

705,696

Net realised (loss) on foreign exchange

(563,349)

(3,426,505)

Total net realised gain

8,228,424

15,670,880

Net change in unrealised gain/(loss) on securities

22,474,132

5,389,083

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

13

(21)

Total net change in unrealised gain/(loss)

22,474,145

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)

(5,597,708)

(5,126,172)

Repurchase and Issue of Shares (including tender offer expenses and dividends paid)

(5,597,708)

(22,194,076)

Net Assets at the End of the Year

198,436,316

169,019,863

Statistical Information about the Fund (in US$)

March 31st, 2018

March 31st, 2017

March 31st, 2016

Total Net Assets

198,436,316

169,019,863

168,582,525

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

5.45

4.65

4.17

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

3.89

3.71

2.90

 

Statement of Changes in Shares Outstanding

For the Year Ended March 31st, 2018

 

Number of Shares Outstanding at the Beginning of the Year 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 Year

36,383,493

 

Statement of Investments and Other Net Assets

March 31st, 2018

 

Description

Number of Shares

Acquistion cost (US$)

Market value (US$)

Currency

% of total net assets

Investments in Securities

Transferable Securities admitted to an Official Stock Exchange Listing

 

Securities Held Long

Altaba Inc.

171,400

11,062,486

12,690,456

US$

6.40

Fidelity China Special Situations Plc

3,585,303

7,587,661

12,044,893

£

6.07

JPMorgan Japanese Investment Trust Plc

1,817,651

5,759,017

11,294,962

£

5.69

JPMorgan Japan Smaller Companies Trust Plc

1,757,883

8,851,372

10,556,843

£

5.32

VinaCapital Vietnam Opportunity Fund Ltd

2,046,495

5,223,447

10,042,330

£

5.06

JPMorgan Emerging Markets Investment Trust Plc

784,130

3,090,986

9,383,469

£

4.73

Morgan Stanley China

376,688

9,491,752

9,379,531

US$

4.73

Investor AB

203,808

7,713,277

9,072,072

SEK

4.57

Fondul Proprietatea Fund

709,211

7,387,923

8,936,059

US$

4.50

Naspers Ltd

35,516

5,346,379

8,699,880

ZAR

4.38

Wendel

46,909

7,280,930

7,322,035

EUR

3.69

BlackRock Resources & Commodities Strategy Trust

804,986

6,550,640

7,148,276

US$

3.60

Jardine Strategic Holdings Ltd

171,242

5,166,890

6,588,318

US$

3.32

Henderson Smaller Companies Investment Trust Plc

525,417

2,809,129

6,243,849

£

3.15

Herald Investment Trust Plc

378,070

2,869,501

6,050,758

£

3.05

China Merchants China Direct Investments Ltd

3,569,439

7,712,320

5,977,190

HKD

3.01

HarbourVest Global Private Equity Ltd

343,170

4,217,339

5,752,473

£

2.90

Eurazeo SA

59,601

1,806,563

5,488,222

EUR

2.77

India Fund Inc.

211,200

4,858,817

5,201,856

US$

2.62

JPMorgan Eur Smaller Companies Trust Plc

840,814

1,509,671

4,796,269

£

2.42

First Pacific Company Ltd

8,473,600

5,377,459

4,625,995

HKD

2.33

JZ Capital Partners Ltd

493,859

3,407,874

3,291,106

£

1.66

Tetragon Financial Group Ltd

246,086

2,341,248

3,188,018

US$

1.61

Macau Property Opportunities Fund Ltd

1,092,658

3,544,291

3,052,215

£

1.54

SoftBank Group

35,900

2,951,426

2,674,145

JPY

1.35

Marwyn Value Investors Ltd

1,511,314

5,061,239

2,672,717

£

1.35

JPEL Private Equity Ltd

1,737,805

2,467,683

2,566,738

US$

1.29

GP Investments Ltd

1,300,000

2,712,324

2,500,417

BRL

1.26

India Capital Growth Fund Ltd

1,960,024

1,796,154

2,489,102

£

1.25

Haci Omer Sabanci Holding AS

821,426

3,549,861

2,184,141

TRY

1.10

Atlantis Japan Growth Fund Ltd

624,513

1,517,117

1,992,636

£

1.00

International Biotechnology Trust Plc

166,321

411,857

1,283,207

£

0.65

Africa Opportunity Fund Ltd

420,000

257,108

342,300

US$

0.17

151,691,741

195,532,478

98.54

 

 

Description

Number

Acquisition

Market

Currency

 % of total

of Shares

cost

value

net assets

(US$)

(US$)

(US$)

Other Transferable Securities

Money Market Instrument

State Street Institutional Investment Trust

3,169,024

3,169,024

3,169,024

US$

1.60

Companies in Liquidation*

Italy Fund Inc.

195,906

-

-

US$

0.00

Dexion Equity Alternative Ltd

1,004,992

-

-

£

0.00

Total Investments in Securities

154,860,765

198,701,502

100.13

Other Net Assets/Liabilities

(265,186)

(0.13)

Total Net Assets

198,426,316

100.00

 

 

Currency Exposureof Portfolio**

% of the portfolio

Currency Exposure of Portfolio

Pound Sterling (£)

90,946,829

45.76

United States Dollar (US$)

59,210,576

29.80

Euro (EUR)

12,810,257

6.45

Hong Kong Dollar (HKD)

10,603,185

5.34

Swedish Krona (SEK)

9,072,072

4.56

South Africa Rand (ZAR)

8,699,880

4.38

Japanese Yen (JPY)

2,674,145

1.35

Brazilian Real (BRL)

2,500,417

1.26

Turkish Lira (TRY)

2,184,141

1.10

Total

198,701,502

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, 2018

 

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 29th, 2018 (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, 2018, 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 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 29th, 2018:

 

US$

1

BRL

Brazilian Real

0.302897212

1

EUR

Euro

1.230449692

1

GBP

Pound Sterling

1.403000738

1

HKD

Hong Kong Dollar

0.127418564

1

JPY

Japanese Yen

0.009398055

1

SEK

Swedish Krona

0.119763348

1

TRY

Turkish Lira

0.253466150

1

ZAR

South African Rand

0.084468377

 

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, 2018, the Fund incurred transaction fees related to purchase and sale of transferable securities for US$ 200,350.

 

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 Agreement which was amended to reflect that the New Benchmark Index (MSCI All Country World Index (ex US)). The New Benchmark Index shall be 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, 2018, the percentage increase in the Current Benchmark Index in respect of the 12 months ended March 31st, 2017 plus the percentage increase in the New Benchmark Index in respect of the 12 months ended March 31st, 2018 (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:

 

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, 2018, 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, 2018 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, 2018, the professional fees of US$ 239,551 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;

· corporate broking fees for Cenkos Securities plc;

· 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, 2018 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$ 183,865. The aggregate expense reimbursement to Directors of the Fund amounted to US$ 70,903. The fees relate to fees incurred as a result of the Board's attendance at each Board meeting. 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, 2018, the Company Secretarial fees and expenses of US$ 132,279 include charges related to the maintenance of the Fund's website, printing fees, shareholder analysis 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

Shares

Percentage of Issued Capital (excluding treasury shares) - FCA denominator 1

Percentage of Issued Capital (including treasury shares) - Luxembourg denominator 2

Date of Notification

City of London Investment Management

8,383,114

23

18

May 4th, 2018

1607 Capital Partners LLC

6,041,725

16.6

13

October 3rd, 2017

Ironside Partners LLP

6,022,0003

16.6

12.9

January 15th, 2018

Wells Capital Management Inc.

4,722,925

13

10.1

March 21st, 2018

 

1 Percentage based on voting rights of 34,418,493.

2 Percentage based on voting rights of 46,635,770 (including 12,217,277 Shares held in Treasury).

3 Including 1,305,296 shares held as Contract for Difference.

 

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.

 

Note 16 - Ongoing Charges

For the year ended March 31st, 2018 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 1.30%

 

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, 2018, 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, 2018

Year ended

March 31st, 2017

Per share (p)

$

Per share (p)

$

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

-

-

5.4

2,864,501

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

-

-

5.1

2,261,671

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

5.1

2,864,501

-

-

Dividend paid on 16/01/2018 (ex date 14/12/2017)

6.5

3,195,298

-

-

Total

11.6

5,597,708

10.5

5,126,172

 

On April 27th, 2018 the Board announced that it would pay a second dividend of 6.4925p per share in respect of the year to March 31st, 2018, which was paid on 8 June 2018 to shareholders who appeared on the register on May 11th, 2018 with an ex-dividend date of May 10th, 2018.

 

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 5.1p per share (excluding treasury shares). The final dividend for the financial year to March 31st, 2017 of 5.1p was paid on September 15th, 2017 to shareholders who appeared on the register on August 17th, 2017. The Board had proposed an interim dividend, in respect of 2017/18, of 6.5p per share which was paid on January 16th, 2018 to shareholders who appeared on the register on December 15th, 2017.

 

Note 20 - Changes in the Investment Portfolio

 

For the year ended March 31st, 2018, the total movements occurred in the securities portfolio are the following:

 

Purchases

Sales

Realized

Unrealised

(US$)

(US$)

Gain/(Loss)

Gain/(Loss)

(US$)

(US$)

173,769,208

174,887,171

8,596,894

43,840,737

 

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

 

Subsequent to the year end the following buy-backs for treasury have taken place:

Date

Number Bought-back

Price Paid per Share

(£)

June 1st, 2018

30,000

3.800

June 5th, 2018

500,000

3.849

June 6th, 2018

150,000

3.825

June 15th, 2018

100,000

3.860

July 6th, 2018

160,000

3.715

July 10th, 2018

100,000

3.760

July 11th, 2018

315,000

3.720

July 17th, 2018

100,000

3.750

July 24th, 2018

184,000

3.800

July 25th, 2018

325,000

3.800

July 26th, 2018

540,000

3.810

 

 

Following the above purchases the Company's issued share capital consists of 46,635,770 Ordinary shares of US$ 0.20, of which 33,878,493 Ordinary Shares have voting rights and 12,757,277 Ordinary Shares are held in Treasury without voting rights.

 

 

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, 2018 of US$ 226.1 billion, of which US$ 5.4 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.

 

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, 2021. The Directors believe that this period is appropriate because this is the typical market cycle providing the management team at Lazard the time required to successfully realise 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.

 

In accordance with the Company's Articles of Association, the continuation resolution will be put to shareholders on an annual basis which will require in excess of 50% of votes cast, to be cast in favour in order to pass. The Board are mindful that, at the 2017 Annual General Meeting, 48.6% of votes cast were cast against the Company's continuation. Subject to the passing of this resolution at the Annual General Meetings to be held during the following 3 year period, the Board 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 forthcoming 3-year period to March 31st, 2021.

 

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, 2018 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 27th, 2018

 

Annual General Meeting ("AGM")

 

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 September 20th, 2018 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 news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.
 
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