29th Nov 2013 14:55
The World Trust Fund
Unaudited Half-Yearly Report
September 30th, 2013
Financial Highlights
for the six months ended September 30th, 2013
|
| US$ | £ | |||
| Net Asset Value per share as at September 30th, 2013 | Diluted: 3.99 | Diluted: 2.47 | |||
| Change in diluted Net Asset Value per share | Diluted 6.3% | Diluted 0.0% | |||
| Share price as at September 30th, 2013 | 3.55 | 2.20 | |||
| Increase in share price | 6.7% | 0.2% | |||
| Increase in MSCI AC World Index | 7.5% | 0.8% | |||
| Total Net Asset as at September 30th, 2013 | 162.7m | 100.5m |
Corporate Information
Directors
Philip R. McLoughlin (Chairman)
Duncan Budge *†
James Cave *††
Howard Myles **†
Alexander E. Zagoreos
* 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.A. 49, avenue J.F. Kennedy L-1855 Luxembourg | State Street Bank Luxembourg S.A. 49,avenue J.F.Kennedy L-1855 Luxembourg | ||
| Registered Office | Financial Adviser and Broker | ||
| State Street Bank Luxembourg S.A. 49, avenue J.F. Kennedy L-1855 Luxembourg | Westhouse Securities Limited Heron Tower 110 Bishopsgate London EC2N 4AY United Kingdom |
| Manager | Company Secretary | ||
| Lazard Asset Management LLC 30 Rockefeller Plaza New York, NY 10112 USA. | Capita Company Secretarial Services Beaufort House 51 New North Road Exeter EX4 4EP United Kingdom | ||
| Approved Statutory Auditor | Website | ||
| Deloitte Audit Société à responsabilité limitée 560, rue de Neudorf L-2220 Luxembourg | www.theworldtrustfund.com |
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 available on the Fund’s website www.theworldtrustfund.com.
● The Annual General Meeting of Shareholders is held in Luxembourg each year at 3 p.m on the third Tuesday in August or, if any such day is not a business day for banks in Luxembourg, on the next following business day. Notices of General Meetings, including their agenda, time and place and containing details of attendance, quorum and majority requirements under Luxembourg law, will be sent to the registered address of Shareholders not less than 21 days before the date of the Meeting.
● Annual reports (including audited accounts) will be posted to Shareholders not less than 21 days before the day fixed for the Annual General Meeting at which they are to be considered.
● A dividend has not been paid since the Fund’s inception.
● The Shares of the Fund are listed on the main market of the London Stock Exchange. The quotation is published daily in the London edition of the “Financial Times” under “Investment Companies”, and also on Bloomberg.
● The Fund currently conducts its affairs so that the shares and warrants issued by the Fund can be recommended by IFAs to ordinary retail investors in accordance with the FCA’s rules in relation to non-mainstream investment products and intends to do so for the foreseeable future. The shares and warrants are excluded from the FCA’s restrictions which apply to non-mainstream investment products because the returns to investors are predominantly based on shares and/or debentures.
Directors’ Responsibility Statement
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 September 30th, 2013 and for the financial period then ended; and
● the Manager’s Review 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; and
● the financial statements 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 that could have material effect on the financial position or performance of the Fund.
On behalf of the Board
Philip R. McLoughlin
Chairman
November 29th, 2013
Investment Objective
The Fund seeks to achieve long-term capital appreciation by investing primarily in a diversified portfolio of companies whose shares trade at a discount to the underlying net asset value.
The Fund measures its performance against the MSCI All Country World Index. However the Fund is not managed to a benchmark; the index is utilised for performance comparison purposes only.
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 managements to take steps to enhance shareholder value and seeks to take a constructive and active role to help to reduce the discount at which the shares of the underlying companies trade.
Risk Diversification
The Fund seeks to provide broad exposure to the markets through holding a diversified portfolio of investment companies, including closed-end funds, investment trusts, holding companies and similarly traded companies.
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. In future the Board may determine to increase the amount of gearing that the Manager is authorised to use to an amount not to exceed 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 the risk of complete loss of value of any short position.
Manager’s Review
For the six months from April 1, 2013 to September 30, 2013
Market Review
To taper or not to taper, that is the question gripping financial markets worldwide. In early June, the US Federal Reserve Chairman Bernanke announced a potential tapering of quantitative easing, or scaling back the Fed’s bond buying program to reduce liquidity in financial markets. In September, however, the Fed held off the expected tapering. Global equity markets followed a roller coaster ride over the period, with a deep sell-off in the second quarter and a steady rally during the third quarter. We are living in an era of unprecedented global monetary easing, when major central banks, such as the Fed, the European Central Bank, Bank of England, and Bank of Japan, are competing to print money in an attempt to power up economies, and investors know that the party will sooner or later come to an end. Concerns over growth in the emerging markets, elections and political stability in Europe, and political impasse in Washington added to market jitters. However, an improving economic picture in China and a sense of an improving economic environment, particularly in Europe helped markets. Global equity markets, measured by the MSCI All Country World Index, declined 0.4% in the second quarter and recovered 7.9% in the third quarter, returning 7.5% for the six-month period, all in U.S. dollar terms
Performance
During the period, the Fund’s fully diluted net asset value in US Dollar terms rose 6.3%, compared to an increase of 7.5% in the Fund’s reference benchmark, the MSCI All Country World Index. The Fund’s fully diluted net asset value in U.S dollar terms since April 1st, 2012 rose 18.5% compared to a rise of 18.8% in the Fund’s reference benchmark over the same period.
The World Trust Fund share price, as traded on the London Stock Exchange in Pounds Sterling, gained 0.2% over the period, compared to an increase in the benchmark index of 0.8%.
The Fund’s performance was negatively impacted by investment exposure to the emerging markets which severely underperformed the developed markets. This was compounded by our underweight position in the strong performing market of the U.S. The Fund has been underweight the U.S., which is nearly 50% of the benchmark, for geographical diversification purposes, as well as lack of decent discounts. Within the emerging markets, the Fund’s overweight exposures in markets including China, Philippines, India, Indonesia, Russia, and Turkey, detracted from returns.
European investments performed well, with strong performances from Eurazeo in France, which rose 35.6%, and Swiss Helvetia Fund, which gained 16.4%. Small cap investments also performed well, as JPMorgan European Smaller Companies Trust, up 30.2% and Henderson Smaller Companies Investment Trust, up 24.9% drove returns higher. Global sector investments in technology and biotechnology performed well, with RCM Technology Trust rising 40.3%, BB Biotech gaining 25.1% and International Biotechnology Trust up 34.6%.
Corporate governance initiatives, as outlined later in this report, added value. Five of our investments conducted tender offers for shareholders. One key example is the tender offer conducted by China Merchants Direct Investments. The Fund sold part of our holdings in July at a price of HK 20.9, nearly double the company’s share price of HK 10.7, as quoted on the Hong Kong Stock Exchange.
World Trust Fund Share Prive, NAV & Discount
| Share Data | September 30th, 2013 | March 31st, 2013 | September 30th, 2012 | ||||
| GBP Values Share Price NAV Diluted NAV Undiluted | £2.20 £2.47 £2.52 | £2.19 £2.47 £2.56 | £1.87 £2.10 £2.12 | ||||
| USD Values Share Price* |
US$3.55 |
US$3.33 |
US$3.02 | ||||
| NAV Diluted ( | US$3.99 | US$3.76 | US$3.39 | ||||
| NAV Undiluted* | US$4.09 | US$3.89 | US$3.42 | ||||
| Discount to NAV* | (11.00)% | (11.30)% | (10.80)% |
*Converted into U.S. dollars using foreign exchange rates as determined by the Administrator.
The Portfolio
| Weight | |||
| Top 10 holdings as of September 30th, 2013 | % | ||
| First Pacific Company | 7.1 | ||
| General American Investors Company | 6.3 | ||
| JPMorgan European Smaller Companies Trust | 5.6 | ||
| Citic Securities | 5.6 | ||
| Eurazeo | 5.3 | ||
| JPMorgan Emerging Markets Investment Trust | 4.3 | ||
| Swiss Helvetia Fund | 4.3 | ||
| JPMorgan Japanese Investment Trust | 4.3 | ||
| Tri-Continental Corp | 4.1 | ||
| BB Biotech | 4.1 | ||
| Total (Top 10) | 51.0 |
The following list identifies the top five contributors and detractors by performance over the six-month period ended September 30th, 2013.
Top Five Contributors to Returns (NAV)
| Company | Average Portfolio Weight % | Total Return % | Contribution to Return % | ||||
| Eurazeo | 4.8 | 35.6 | 1.5 | ||||
| JPMorgan European Smaller Companies Inv Trust | 5.1 | 30.1 | 1.4 | ||||
| JPMorgan Japanese Investment Trust | 4.0 | 28.1 | 1.1 | ||||
| RCM Technology Trust | 2.8 | 40.3 | 1.0 | ||||
| BB Biotech | 3.7 | 25.1 | 0.9 |
Top Five Detractors from Returns (NAV)
| Company | Average Portfolio Weight % | Total Return % | Contribution to Return % | ||||
| First Pacific Co. | 8.1 | (15.1) | (1.5) | ||||
| Jardine Strategic Hldgs | 3.9 | (14.3) | (0.7) | ||||
| China Everbright | 3.5 | (16.1) | (0.7) | ||||
| ASA Gold & Precious Metals | 0.9 | (31.2) | (0.6) | ||||
| Haci Omer Sabanci Holding | 1.9 | (17.7) | (0.4) |
Top Ten Country Weightings as of September 30th, 2013
Based on exposures of the underlying holdings within the investments held by the Fund.
| Country | % World Trust Fund Portfolio | % MSCI All Country World Index | |||
| United States | 14.6 | 47.5 | |||
| Japan China Switzerland | 10.8 9.7 9.3 | 8.1 2.1 3.4 | |||
| United Kingdom | 8.3 | 8.2 | |||
| Philippines | 5.0 | 0.1 | |||
| France Singapore India Indonesia | 5.0 3.8 3.0 2.6 | 3.7 0.6 0.7 0.3 |
Sector Weights as of September 30th, 2013
Based on exposures of the underlying holdings within the investments held by the Fund.
|
| % World Trust Fund Portfolio | % MSCI All Country World Index | |||
| Consumer Discretionary | 9.6 | 11.9 | |||
| Consumer Staples | 7.3 | 10.0 | |||
| Energy | 2.9 | 9.9 | |||
| Financials | 22.7 | 21.5 | |||
| Health Care | 11.2 | 10.1 | |||
| Industrials | 16.6 | 10.8 | |||
| Information Technology | 8.2 | 12.1 | |||
| Materials | 6.1 | 6.3 | |||
| Telecommunication Services | 4.7 | 4.2 | |||
| Utilities | 0.2 | 3.3 | |||
| Other | 10.5 | - |
Regional, country and sector allocations are the result of our bottom-up stock selection process, which is focused on identifying companies that trade at compelling discounts and that own assets that are undervalued.
Portfolio Hedging
There was no portfolio hedging during the period.
Corporate Governance Initiatives and Restructuring
Over the six-month period, key Fund holdings announced or completed corporate governance initiatives and restructuring measures aimed at reducing discounts and enhancing shareholder value. These include closed-end fund tender offers, capital distributions, and discount management plans. Listed below are some examples.
Tender Offers: Five holdings conducted tender offers. Morgan Stanley Asia Pacific Fund, the Central Europe, Russia & Turkey Fund and the New Germany Fund each conducted a tender offer for 5% of the shares at a discount to NAV of 2%. The Fund was able to sell 6.2%, 7%, and 8.1% of its investments in these companies, respectively. JPMorgan European Smaller Companies Investment Trust conducted a tender offer for 5% of the shares at a discount to NAV of 3%.. China Merchants China Direct Investments tendered for 5% of outstanding shares at a discount of 10%, with the company trading at a discount of over 60%. Distribution: Tau Capital, as part of its ongoing liquidation process, distributed 30.0% of NAV to shareholders Discount Management : The Central Europe, Russia & Turkey Fund and New Germany Fund both reconfirmed the Board’s commitment to their discount management plan and announced the commencement of discount measurement periods, which begin in September and terminate in December.Discount
The Fund is listed on the London Stock Exchange and its shares, listed in Pounds Sterling, traded at an average discount of 11.4% during the six-month period, ranging from a high of 13.8% to a low of 8.5%. At the end of the period the Fund traded at a discount of 11.0%.
Both the Board and the manager actively monitor the Fund’s discount.
Outlook and Update
The stock market recovery for the developed markets, since the financial crisis low of March 2009, has been one of the most powerful in history, helped by unprecedented central bank liquidity worldwide. But where do we go from here? It is highly likely that the greatest fixed-income market rally we have seen over the last few years is ending, and according to the much talked “Great Rotation” theory, equities will be the beneficiaries. Market expectations point to continued economic recovery in 2014 which should be positively reflected in financial markets. We believe that the global liquidity picture will become more challenging and that upside from the developed markets will be limited. One of the constant factors in our investment process is valuation, and value in most developed markets is becoming less attractive, whereas emerging markets are cheap. In price to book terms, emerging markets are trading nearly a full standard deviation below the long-term average. In perspective, while the United States and European markets are at all-time highs or close to all time highs, many key emerging markets are still a fraction of the previous highs. The China Shanghai Index, for instance, is still down about 60% from highs reached in late 2007. The Fund focuses on undervalued markets, accessed by investments trading at discounts. The average discount of our investments is well over 20%. Unsettling as the world may be, we believe our investments offer high potential value.
Kun Deng, CFA
Lazard Asset Management LLC
Manager
November 29th, 2013
Statement of Net Assets (in US$)
| As at September 30th, 2013 | As at March 31st, 2013 | ||||
| Assets | |||||
| Securities portfolio at market value (Cost: US$ 130,301,183) | 162,946,776 | 182,071,762 | |||
| Cash | 67,544 | 22 | |||
| Income receivable on portfolio | 143,603 | 147,673 | |||
| Total assets | 163,157,923 | 182,219,457 | |||
| Liabilities | |||||
| Loan payable (see note 20) | - | 11,415,000 | |||
| Interest payable on bank liabilities | 114 | 30,261 | |||
| Accrued expenses | 456,986 | 469,493 | |||
| Total liabilities | 457,100 | 11,914,754 | |||
| Net Assets at the End of the Period | 162,700,823 | 170,304,703 | |||
| Number of Shares outstanding (see Note 6) | 39,814,308 | 43,830,187 | |||
| Net Asset Value per Share in US$ (see Note 1) | 4.09 | 3.89 | |||
| Equivalent Net Asset Value per Share in £ (see Note 1) | 2.52 | 2.56 | |||
| Diluted Net Asset Value per Share in US$* | 3.99 | 3.76 | |||
| Equivalent Diluted Net Asset Value per Share in £* | 2.47 | 2.47 |
* Diluted NAV is calculated after taking into account any outstanding warrants, which are assumed to be exercised by the Shareholders.
Shareholders’ Equity (in US$)
| As at September 30th, 2013 | As at March 31st, 2013 | ||||
| Capital and Reserves | |||||
| Original Capital: 93,317,380 Shares at US$ 0.2 (see Note 6) | 18,663,476 | 18,663,476 | |||
| Share Premium | 70,220,782 | 70,220,782 | |||
| Legal Reserve (see Note 7) | 1,866,348 | 1,866,348 | |||
| Profit brought forward | 167,052,457 | 159,158,142 | |||
| Cost of 10,211,277 Shares held in Treasury (see Note 6) | (31,694,484) | (31,694,484) | |||
| Cost of 3,013,575 Warrants issued (see Note 6) | 9,733,847 | 10,985 | |||
| Cost of 46,305,370 Shares cancelled (see Note 6) | (98,307,717) | (72,145,032) | |||
| Total Capital and Reserves | 137,534,709 | 146,080,217 | |||
| Repurchase of 1,334,756 Warrants (issued 1991) | (8,631,613) | (8,631,613) | |||
| Net realised profit for the Period | 1,149,618 | 7,894,315 | |||
| Unrealised appreciation on securities | 32,645,593 | 24,960,577 | |||
| Unrealised appreciation on foreign exchange | 2,516 | 1,207 | |||
| Total Shareholders’ Equity | 162,700,823 | 170,304,703 |
Statement of Operations (in US$)
| For the six months ended September 30th, 2013 | For the year ended March 31st, 2013 | For the six months ended September 30th, 2012 | |||||
| Income | |||||||
| Dividends, net (including return of capital) | 1,881,756 | 4,794,379 | 2,297,945 | ||||
| Interest on bank accounts | - | - | 255 | ||||
| Other income | 22,094 | - | - | ||||
| Total income | 1,903,850 | 4,794,379 | 2,298,200 | ||||
| Expenses | |||||||
| Management fees (see Note 3) | 656,698 | 1,254,009 | 605,974 | ||||
| Directors’ fees and expenses (see Note 10) | 148,727 | 344,021 | 194,876 | ||||
| Professional fees (see Note 8) | 145,150 | 161,068 | 92,258 | ||||
| Custodian fees (see Note 9) | 91,677 | 142,741 | 65,590 | ||||
| Company Secretarial fees and expenses (see Note 11) | 66,313 | 123,913 | 59,794 | ||||
| Central administration costs | 59,770 | 107,963 | 56,409 | ||||
| Taxe d’abonnement (see Note 4) | 42,311 | 85,167 | 41,851 | ||||
| Interest paid | 15,513 | 58,682 | 12,415 | ||||
| Other expenses | 67,329 | 124,140 | 69,121 | ||||
| Total expenses | 1,293,488 | 2,401,704 | 1,198,288 | ||||
| Net Investment Income | 610,362 | 2,392,675 | 1,099,912 |
| Net Realised Gain/Loss | |||||||
| - on securities | 500,758 | 5,910,957 | 2,699,770 | ||||
| - on forward foreign exchange contracts | 9,253 | (39,457) | 5,008 | ||||
| - on foreign exchange | 29,245 | (369,860) | (11,970) | ||||
| Total Net Realised Gain | 539,256 | 5,501,640 | 2,692,808 |
| For the six months ended September 30th | For the year ended March 31st | For the six months ended September 30th | |||||
| 2013 | 2013 | 2012 | |||||
| Change in Unrealised Gain/loss | |||||||
| - on securities | 7,685,016 | 13,146,038 | (2,593,080) | ||||
| - on foreign exchange | 1,309 | (163) | (1,905) | ||||
| Total Change in Unrealised Gain/(Loss) |
7,686,325 |
13,145,875 |
(2,594,985) | ||||
| Result of Operations* | 8,835,943 | 21,040,190 | 1,197,735 |
* 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 | ||||
| September 30th, 2013 | March 31st, 2013 | ||||
| Net Assets at the Beginning of the Period | 170,304,703 | 167,280,872 | |||
| Net investment income | 610,362 | 2,392,675 | |||
| Net realised gain on securities | 500,758 | 5,910,957 | |||
| Net realised gain/(loss) on forward foreign exchange contracts | 9,253 | (39,457) | |||
| Net realised gain/(loss) on foreign exchange | 29,245 | (369,860) | |||
| Total net realised gain | 539,256 | 5,501,640 | |||
| Change in unrealised gain on securities | 7,685,016 | 13,146,038 | |||
| Change in unrealised gain/(loss) on foreign exchange | 1,309 | (163) | |||
| Total change in unrealised loss | 7,686,325 | 13,145,875 | |||
| Repurchase and issue of Shares (including tender offer expenses) | (16,439,823) | (18,016,359) | |||
| Net Assets at the End of the Period | 162,700,823 | 170,304,703 |
Statistical Information about the Fund (in US$)
| September 30th, 2013 | March 31st, 2013 | September 30th, 2012 | |||||
| Total Net Assets | 162,700,823 | 170,304,703 | 167,778,225 | ||||
| Net Asset Value per Share in US$ (see Note 1) |
4.09 |
3.89 |
3.42 | ||||
| Equivalent Net Asset Value per Share in £ (see Note 1) |
2.52 |
2.56 |
2.12 |
Statement of Changes in Shares Outstanding
For the Six Months Ended September 30th, 2013 (See Note 6)
| Number of Shares Outstanding at the Beginning of the Period | 43,830,187 | ||
| Number of Shares Issued | 3,010,174 | ||
| Number of Shares Repurchased (see Note 5) | (7,026,053) | ||
| Number of Shares Outstanding at the End of the Period | 39,814,308 |
Statement of Investments and Other Net Assets
September 30th, 2013
| Description | Number of | Acquisition | Market | Currency | % of total | ||||||
| Shares | Cost | value | net assets | ||||||||
| (US$) | (US$) | (US$) | |||||||||
| Investments in Securities | |||||||||||
| Transferable Securities admitted to an Official Stock Exchange Listing | |||||||||||
| Securities Held Long | |||||||||||
| First Pacific Company | 10,501,600 | 6,664,455 | 11,603,903 | HKD | 7.13 | ||||||
| General American Investors Company | 298,831 | 8,488,160 | 10,202,090 | US$ | 6.27 | ||||||
| JP Morgan European Smaller Companies Trust |
558,698 |
5,015,678 |
9,189,484 |
£ |
5.64 | ||||||
| CITIC Securities Company | 4,534,500 | 9,277,537 | 9,073,794 | HKD | 5.58 | ||||||
| Eurazeo | 133,450 | 3,997,893 | 8,568,329 | EUR | 5.27 | ||||||
| JP Morgan Emerging Markets Investment Trust |
775,993 |
3,019,335 |
7,053,877 |
£ |
4.33 | ||||||
| Swiss Helvetia Fund | 496,043 | 6,856,771 | 7,053,732 | US$ | 4.34 | ||||||
| JP Morgan Japanese Investment Trust | 1,817,651 | 5,759,017 | 7,010,737 | £ | 4.31 | ||||||
| Tri-Continental Corp. | 367,710 | 5,815,254 | 6,736,447 | US$ | 4.14 | ||||||
| BB Biotech | 47,539 | 4,085,051 | 6,702,297 | CHF | 4.12 | ||||||
| Jardine Strategic Holdings | 168,574 | 5,077,098 | 5,706,230 | US$ | 3.51 | ||||||
| RCM Technology Trust | 693,175 | 2,226,594 | 5,509,912 | £ | 3.39 | ||||||
| China Everbright | 3,792,000 | 4,120,758 | 4,967,408 | HKD | 3.05 | ||||||
| JP Morgan Japan Smaller Companies Trust |
1,464,903 |
7,961,979 |
4,837,927 |
£ |
2.97 | ||||||
| The Henderson Smaller Companies Investment Trust |
525,417 |
2,809,129 |
4,304,026 |
£ |
2.65 | ||||||
| Aberdeen Emerging Markets Smaller Company Opportunities Fund |
218,796 |
2,954,395 |
4,257,770 |
US$ |
2.62 | ||||||
| Prospect Japan Fund | 3,776,192 | 4,402,948 | 4,210,454 | US$ | 2.59 | ||||||
| China Merchants China Direct Investments |
3,033,439 |
6,752,891 |
4,192,739 |
HKD |
2.58 | ||||||
| Invesco Perpetual UK Smaller Companies Investment Trust |
845,122 |
2,997,461 |
4,104,507 |
£ |
2.52 | ||||||
| Herald Investment Trust | 378,070 | 2,869,501 | 3,898,809 | £ | 2.40 | ||||||
| Advance Developing Markets Fund | 561,599 | 1,437,048 | 3,818,527 | £ | 2.35 | ||||||
| BlackRock World Mining Trust | 484,845 | 3,936,538 | 3,793,499 | £ | 2.33 | ||||||
| Investor | 123,409 | 2,520,172 | 3,744,496 | SEK | 2.30 | ||||||
| International Biotechnology Trust |
695,408 |
1,305,301 |
3,225,408 |
£ |
1.98 | ||||||
| British Empire Securities and General Trust |
408,579 |
3,048,815 |
3,208,027 |
£ |
1.97 | ||||||
| Haci Omer Sabanci Holding | 541,026 | 2,705,325 | 2,614,002 | TRY | 1.61 | ||||||
| Clough Global Opportunities Fund | 194,124 | 2,050,267 | 2,498,376 | US$ | 1.53 | ||||||
| Morgan Stanley Asia Pacific Fund | 147,356 | 1,848,128 | 2,466,740 | US$ | 1.52 | ||||||
| F&C Private Equity Fund | 711,279 | 2,505,495 | 2,400,857 | £ | 1.48 | ||||||
| Central Europe Russia and Turkey Fund |
69,519 |
2,892,337 |
2,253,806 |
US$ |
1.38 | ||||||
| North Atlantic Smaller Companies Investment Trust |
32,100 |
542,468 |
771,706 |
£ |
0.47 | ||||||
| Tau Capital | 419,643 | 419,643 | 127,991 | US$ | 0.08 | ||||||
| 126,363,442 | 160,107,907 | 98.41 | |||||||||
| Description | Number of Shares | Acquisition Cost (US$) | Market Value (US$) | Currency | % of total Net assets (US$) | ||||||||
| Other Transferable Securities | |||||||||||||
| Money Market Instrument | |||||||||||||
| State Street Institutional Investment Trust |
2,838,869 |
2,838,869 |
2,838,869 |
US$ |
1.74 | ||||||||
| Companies in Liquidation* | |||||||||||||
| Dexion Equity Alternative1 | 1,004,992 | - | - | £ | 0.00 | ||||||||
| Advance UK Trust | 275,518 | - | - | £ | 0.00 | ||||||||
| Italy Fund | 195,906 | - | - | US$ | 0.00 | ||||||||
| Trans Balkan Investments | 61,400 | 1,098,872 | - | £ | 0.00 | ||||||||
| Total Investments in Securities | 130,301,183 | 162,946,776 |
| 100.15 | |||||||||
| Other Net Assets/Liabilities** | (245,953) | (0.15) | |||||||||||
| Net Assets at the end of the period | 162,700,823 | 100.00 | |||||||||||
| Currency Exposure of Portfolio | |||||||||||||
| Pound Sterling (£) | 63,127,303 | 38.74 | |||||||||||
| United States Dollar (US$) | 48,352,505 | 29.67 | |||||||||||
| Hong Kong Dollar (HKD) | 29,837,844 | 18.31 | |||||||||||
| European Euro (EUR) | 8,568,329 | 5.26 | |||||||||||
| Swiss Francs (CHF) | 6,702,297 | 4.11 | |||||||||||
| Swedish Krona (SEK) | 3,744,496 | 2.30 | |||||||||||
| Turkish Lira (TRY) | 2,614,002 | 1.61 | |||||||||||
| Total | 162,946,776 | 100.00 | |||||||||||
* Shares in liquidation and held at zero value where the cost has been reduced to nil as a result of a distribution, unless otherwise advised by the liquidator.
** Other net assets/liabilities are denominated in US$.
1 Security is in liquidation; the acquisition costs of the security have been reduced by the amount of the interim liquidation payments received by the Fund; (US$1,612,860).
Notes to the Financial Statements September 30th, 2013
Note 1 – General
The World Trust Fund (the “Fund”) is an investment company with limited liability organised as a «société anonyme» under the laws of the Grand Duchy of Luxembourg and is governed by part II of the Luxembourg law of December 17th, 2010 on Collective Investment Undertakings.
The Fund was incorporated in Luxembourg on June 20th, 1991 for an unlimited duration. The Fund’s Articles of Incorporation (the “Articles”) have been published in the ‘Mémorial C, Recueil des Sociétés et Associations’.
The Fund’s primary investment objective is to achieve long-term capital appreciation, primarily through investments in closed-end funds, investment trusts, holding companies, and other similarly traded companies whose shares are listed or traded on international exchanges, and generally at a discount to net asset value.
The currency in which the Fund’s Shares are traded was changed from US$ to £ Sterling on October 30th, 2009.
The equivalent Net Asset Value (‘’NAV’’) per Share in £ Sterling represents the NAV per Share in US$ converted with the exchange rate at September 30th, 2013 (Note 2).
Note 2 – Significant Accounting Policies
a) Presentation of Accounts
The financial statements are presented in conformity with the legal and regulatory requirements in Luxembourg relating to investment funds. 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;
(ii) if securities are quoted, listed, traded or dealt on more than one stock exchange or regulated market, the Board of Directors (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; and
(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.
3) Purchases of securities are recorded at cost. 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.
The value of any cash on hand or on deposit, bills and demand notes and accounts receivables, prepaid expenses, cash dividends and interest declared or accrued as aforesaid and not yet received shall be deemed to be the full amount thereof, unless in any case the same is unlikely to be paid or received in full, in which case the value thereof shall be arrived at after making such discount as the Fund may consider appropriate in such case to reflect the true value thereof.
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 as of September 30th, 2013:
| US$ | |||||
| CHF | Swiss Francs | 1.105766573 | |||
| EUR | Euro | 1.352850456 | |||
| £ | Pound Sterling | 1.618900993 | |||
| HKD | Hong Kong Dollar | 0.128934102 | |||
| KRW | South Korean Won | 0.000930514 | |||
| SEK | Swedish Krona | 0.155600853 | |||
| TRY | Turkish Lira | 0.495037252 |
c) Income Recognition
Interest and dividend income is recorded on an accrual basis, net of any withholding taxes in the relevant country.
Note 3 – Management and Performance Related Fees
The Manager is entitled to receive a fee at the rate of 0.75% per annum calculated each quarter on the basis of the daily NAV per Share during the relevant quarter and paid quarterly.
At each fiscal year end, the appreciation over the previous 2 year period of the Fund against the Benchmark with net reinvested dividends is calculated and converted into a per annum rate. If the rate of appreciation of the Fund so calculated (the “Actual Rate”) exceeds by more than 5% the rate of appreciation of the Benchmark so calculated (the “Reference Rate”), the Manager shall be entitled to a performance related fee at the rate of:
(i) 5% of the amount by which the NAV per Share has exceeded by 5% or more, but by less than 10%, and
(ii) 10% of the amount by which the NAV per Share has exceeded by 10% or more, but by less than 15%, and
(iii) 15% of the amount by which the NAV per Share has exceeded by 15% or more, but by less than 20%, and
(iv) 20% of the amount by which the NAV per Share has exceeded by 20% or more;
(in each case) per annum the compound growth rate of the Benchmark during the two preceding years, provided that the growth of the Benchmark during such period is positive.
For the six months ended September 30th, 2013, 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.
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 amended law of December 17th, 2010, 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.
However, the value of investments in other investment companies already subject to Luxembourg subscription duty is no longer subject to this tax.
Note 5 – Repurchases of Shares
During the six months ended September 30th, 2013 the Fund made the following repurchase of its Shares (tender offer):
| Date | Shares | Price per | |||
| Share (£) | |||||
| August 12th, 2013 | 7,026,053 | 2.3848 | |||
| 7,026,053 |
Note 6 – Capital
The Fund has authorised Share capital of US$ 30,000,000 represented by 150,000,000 Shares of a par value of US$ 0.2 each.
The initial subscribed capital amounted to US$ 45,000 and was represented by 45,000 Units (each Unit consists of five Shares and one Warrant).
All Shares have been fully paid in cash of US$45,000 together with total issue premiums of US$ 180,000.
On September 27th, 1991 the Board decided to increase the capital to US$ 17,777,490 by the issue of 8,888,745 additional Shares and 1,773,249 additional Warrants attached thereto, against payment in cash of a total of US$ 17,732,490 and a total Share premium of US$ 66,496,838. This increase was approved by notarial deed dated October 18th, 1991.
The Warrant holders could exercise their subscription rights in any of the years 1996 to 2001 inclusive. Each Warrant gave the right to subscribe to one Share at a price of US$ 10.
By a resolution of the meeting of the Board dated June 6th, 2002 the Board decided to increase the capital by creation of 442,993 new Shares of US$ 2 each, with a Share premium of US$ 3,543,944. All the 442,993 Shares had been entirely subscribed and fully paid in cash, so that the amount of US$ 4,429,930 was received by the Fund.
The balance of the Warrants had been converted into Shares in accordance with the prospectus.
The Fund is required by Luxembourg law to transfer 5% of its yearly net profits to a non distributable legal reserve until such reserve amounts to 10% of the Fund’s nominal Share capital. This reserve is not available for dividend distribution.
.
At an Extraordinary General Meeting (EGM) of the Fund held on June 27th, 2008 the Fund was granted the authority to make market purchases of up to 10% of its issued Share capital. Three further resolutions were proposed at this EGM, but since the requisite quorum was not obtained, a second EGM was held on July 31st, 2008, at which the following resolutions were proposed and duly passed:
1. reducing the Fund’s Share capital by cancelling the 3,170,003 Ordinary Shares held in Treasury and amending the Articles of Incorporation (“Articles”) accordingly;
2. amending Article 20 of the Articles in order to comply with the Listing Rules and the price at which Ordinary Shares may be bought back by the Fund; and
3. amending the Articles in order to reflect a number of updates to the Luxembourg law of August 10th, 1915 concerning commercial companies.
On July 16th, 2008 and August 22nd , 2008 the Fund purchased for cancellation 90,000 and 50,000 Ordinary Shares respectively.
At an EGM of the Fund held on February 2nd, 2010 the following resolutions were proposed and unanimously passed:
1. subdivision of the Share capital of the Fund so that Shareholders receive 10 New Ordinary Shares of nominal value US$ 0.2 each in exchange for each existing Share;
2. amending Article 20 of the Articles to reflect the amendments of the Luxembourg law of August 10th, 1915 concerning commercial companies in relation to share buy backs; and
3. granting the Board authority to repurchase up to 14.99% of the Fund’s issued Share capital, provided that certain conditions are met.
From February 3rd, 2010 following the subdivision, the Fund’s Share capital amounted to 60,217,350 Ordinary Shares.
On August 31st, 2011 the Share capital of the Fund was reduced, by a resolution at the EGM, cancelling 6,179,287 shares held in Treasury.
On September 9th, 2011, the Fund issued 10,807,612 warrants by way of a bonus issue to shareholders on a one for five basis.
Each Warrant confers the right, exercisable by notice to the Fund which may be given semi-annually on the last business day in March and September between March 2012 and March 2014, inclusive, to subscribe, on the relevant date, for one share of the Fund at a Subscription Price of US$3.23 (if exercised on the Subscription Dates up to and including the last business day in March 2013) and US$3.51 (if exercised on the Subscription Dates in September 2013 and March 2014).
On April 11th, 2012, following the exercise of Warrants, the Board approved the issue and allotment of 2,701 Ordinary Shares, which were listed and admitted to trading on the London Stock Exchange on April 18th, 2012.
On October 12th, 2012, following the exercise of Warrants, the Board approved the issue and allotment of 700 Ordinary Shares, which were listed and admitted to trading on the London Stock Exchange on October 18th, 2012.
On April 4th, 2013, following the exercise of Warrants, the Board approved the issue and allotment of 3,010,174 Ordinary Shares, which were listed and admitted to trading on the London Stock Exchange on April 11th, 2013.
On August 2nd, 2013, shareholders approved a tender offer of up to 15 % of the Fund’s shares in issue at a 2% discount to diluted net asset value per share (less the costs and expenses of the tender offer). Accordingly, on August 12th, 2013 the Fund repurchased for cancellation a total of 7,026,053 ordinary shares at a tender price of 238.4841 pence per share.
As at September 30th, 2012 the Fund’s issued Share capital consisted of 50,025,585 Ordinary Shares, of which 39,814,308 Ordinary Shares were with voting rights and 10,211,277 Ordinary Shares held in Treasury were without voting rights.
Note 7 – Legal Reserve
In accordance in Luxembourg requirements, at least 5% of the annual net profit must be transferred to a legal reserve. This requirement is satisfied when the reserve is equal to 10% of issued Share Capital.
The legal reserve is not available for distribution.
Note 8 – Professional Fees
For the six months ended September 30th, 2013, the professional fees of US$ 145,150 were incurred principally to the following:
● legal fees paid to Stephenson Harwood, Elvinger Hoss and Prusser, Wilmer Hale and Schulte, Roth & Zabel LLP;
● retainer fees paid to Westhouse Securities;
● audit fees paid to Deliotte.
Note 9 – Custodian Fees
The Custodian 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 Custodian in accordance with Luxembourg practice.
Note 10 – Directors’ Fees and Expenses
Each of the Directors is paid a fee for his services at such a rate as the Board has determined provided that the aggregate of such fees shall not exceed US$ 500,000 per annum (in respect of the resolution of the Annual General Meeting held on August 21st, 2012) 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.
The fees due to each Director for the six months ended September 30th, 2013 were as follows:
| Duncan Budge | £12,500 | ||
| James A. Cave | £12,500 | ||
| Philip R. McLoughlin | £17,500 | ||
| Howard Myles | £15,000 | ||
| Alexander E. Zagoreos | £12,500 |
Note 11 – Company Secretarial Fees and Expenses
For the six months ended September 30th, 2013, the Company Secretarial fees and expenses of US$ 66,313 reflect the half year of the corporate secretarial services, which included charges related to the maintenance of the Fund’s website as well as for periodic administration of the Fund’s Depositary Interest Register.
Note 12 – Commitments
Occasionally, the Fund will hedge its currency exposure against the US$. This will be done in expectation of the US$ strengthening against other currencies, and only for hedging purposes.
As of the date of the report the Fund was not engaged in any forward exchange contracts or currency options.
Note 13 – Securities Lending
As of the date of the report the Fund had no securities lending facility in place.
Note 14 – Short Positions
During the six months ended September 30th, 2013, no shorts sales of exchange traded funds or other instruments were executed.
Note 15 – Beneficial Interest of the Directors and Related Parties in the Share Capital
As at the date of the report, the beneficial interests of the Directors and related parties in the Share Capital and newly issued Warrants of the Fund are the following:
| Beneficial | |||||
| Shares | Warrants | ||||
| Directors | |||||
| Philip R. McLoughlin (Chairman) | 35,000 | 2,000 | |||
| Duncan Budge | - | - | |||
| James A. Cave | - | - | |||
| Howard Myles | - | - | |||
| Alexander E. Zagoreos | 577,750 | 115,550 | |||
| Manager | |||||
| Kun Deng, CFA | 243,240 | - |
Note 16 – Directors’ Interest in Significant Contracts
Alexander E. Zagoreos is a Senior Advisor to Lazard Asset Management LLC.
Note 17 – Substantial Shareholdings
As of the date of the report, the Board had been informed of the following interests in the Shares of the Fund:
| Shares | Percentage of Issued Capital (excluding treasury shares) - FSA Denominator¹ | Percentage of Issued Capital (including treasury shares) - Luxembourg Denominator² | |||||
| City of London Investment Management Co. | 10,731,932 | 22.91% | 18.81% | ||||
| Lazard Asset Management | 10,307,809 | 25.89% | 20.60% | ||||
| 1607 Capital partners LLC | 8,617,472 | 21.64% | 17.23% |
¹ Percentage based on voting rights 39,814,308.
² Percentage based on total shares in issue of 50,025,585 (including 10,211,277 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.
Note 18 – Changes of the Investment Portfolio
The changes in the investment portfolio during the period of the report are available from the registered office of the Fund without any charge.
Note 19 – Ongoing Charges
For the six months ended September 30th, 2013, the Ongoing Charges were calculated using the following formula:
Semi-Annualised Ongoing Charges/Average net assets undiluted x 100/2 = Ongoing Charges % where:
• the semi-annualised ongoing charges contain the management fees and professional fees, directors’ fees and expenses, custodian fees, company secretarial fees, central administration costs and other expenses (printing, postage, semi-annual fees).
• the average net assets undiluted represent the arithmetic mean of the total net assets over the period; and
• taxe d’abonnement, interest paid and other expenses are not included in the ongoing charges.
Ongoing Charges 1.71%
Note 20 – 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 fee on the amount of the commitment.
As of September 30th, 2013, the Fund had no borrowings under the Agreement.
Note 21 – Subsequent Events
Since September 30th, 2013 the Fund has made no repurchases of its Ordinary Shares and no Warrants have been approved by the Board.
The Fund’s issued Ordinary Shares capital consists of 50,025,585 Ordinary Shares with voting rights (including 10,211,277 Ordinary Shares which are held in Treasury).
The total number of Warrants remaining in issue is 7,794,037.
Copyright Business Wire 2013
Related Shares:
WTR.L