29 Jun 2016 07:00
Lazard World Trust Fund (the "Fund")
Proposed tender offer, change of benchmark and dividend policy
Introduction
On 15 April 2016 the Board announced a proposal to change the name of the Fund from The World Trust Fund to Lazard World Trust Fund and shareholders approved the change at the subsequent Extraordinary General Meeting. The Board believes that including the name of the investment manager in the name of the Fund will help with the marketing of the Fund and attracting additional demand for the Fund's shares. In particular, Lazard Asset Management has a strong reputation, a long and successful performance record and is therefore well known and regarded by the investment community.
Further to the change of name of the Fund, the Board is pleased to propose a number of other initiatives which it believes will be of benefit to shareholders and potential investors as set out below.
Dividend Policy
The Fund announced two years ago that it intended to commence paying dividends, for the first time in the Fund's history. The Fund was one of the few funds in the global growth sector which did not pay any dividend and a number of potential investors questioned why this was the case. While the Fund's primary investment objective is to achieve long term capital appreciation, the income the Fund receives is usually in excess of the Fund's operating costs and therefore the Fund adopted a policy of paying out, by way of dividend, substantially all of the investment income, net of the Fund's operating costs (excluding performance fees).
The Board recognises that yield and particularly visibility of yield is important to a number of investors and therefore proposes to change its dividend policy to pay an aggregate dividend per share each financial year, subject to Luxembourg Law, amounting to 3.5 per cent. of the net asset value per share of the Fund at the start of each financial year.
Accordingly, for the current year ending 31 March 2017 the Board proposes to pay aggregate dividends of 10.2p per share. This is equivalent to 3.5 per cent. of the net asset value per share of 290.3p as at 31 March 2016 and a yield of 4.1 per cent. based on a current share price of 247.75p. Dividends each year are expected to be paid in two equal instalments in January and (subject to approval by shareholders at the Annual General Meeting) in August. It is important to note that the implementation of this policy will have no effect on the mandate of the Fund's Investment Manager with respect to managing the portfolio.
Consistent with this new policy, when the Board announces the final results for the year ended 31 March 2016 (which is expected to be in July) it expects to declare a final dividend in relation to that year of 5.4p per share, making aggregate dividends for the year of 6.4p per share.
Proposed Change of Benchmark
The Fund's current benchmark is the MSCI All Countries World Index which the Fund adopted in 2010. At the suggestion of shareholders the Fund proposes to change the benchmark to the MSCI All Countries (ex US) Index following shareholder approval in General Meeting. The intention of the change is that the MSCI All Countries (ex US) Index should reflect better the results of the Fund on a comparative basis. The Fund's Investment Manager has historically favoured investing in emerging markets and in recent years this area has represented a very substantial proportion of the Fund's assets, despite the MSCI All Countries World Index having the US as a very significant component of the benchmark. Consequently the Fund introduced the MSCI All Countries (ex US) Index as a reference benchmark two years ago. It is intended that following shareholder approval of the change to the Fund's formal benchmark the MSCI All Countries World Index will also be disclosed as a reference benchmark.
As the Board has pointed out in the past, the Fund is not managed with the intention of having a close correlation to a benchmark and the proposed change in benchmark is not expected to see a material change in the investment approach. While there will continue to be no geographic restrictions within the investment policy, the Board has authorised the Investment Manager to have the flexibility to continue to invest in the US market up to a maximum of 20 per cent. of the Fund's gross assets at the time an investment is made.
Proposed Tender Offer
Following receipt of the requisite shareholder approvals the Fund acquired shares from shareholders by way of tender offers in both 2013 and 2014. Although no tender offer was put forward in 2015 the Board has decided to propose that the Fund will (subject to receiving the necessary approvals) offer to purchase, by way of tender offer, up to 10 per cent. of the Fund's issued share capital at a 2 per cent. discount to net asset value per share, less the costs and expenses of the tender offer. The Fund will be preparing the necessary tender offer documentation to seek shareholder consent and a further announcement containing full details of the tender offer will be made in due course.
Enquiries:
Stockdale Securities Limited 020 7601 6118
Alastair Moreton
Rose Ramsden