Lazard Global Active Funds plc Interim Report and Unaudited Financial Statements For the financial period ended 30 September 2015 Contents Directors and Other Information .................................................................................... 4 Investment Managers’ Reports ...................................................................................... 6 Statement of Comprehensive Income ......................................................................... 40 Statement of Financial Position ................................................................................... 46 Statement of Changes in Net Assets attributable to Redeemable Participating Shareholders ........................................................................................... 52 Notes to the Financial Statements ............................................................................... 58 Portfolios of Investments ............................................................................................. 92 Statements of Major Changes in Investments ........................................................... 126 LAZARD GLOBAL ACTIVE FUNDS PLC Lazard Global Active Funds plc Period ended 30 September 2015 3 Directors and Other Information Registered Office Investment Managers (continued) 6th Floor Lazard Gulf Limited 2 Grand Canal Square Dubai International Financial Centre Dublin 2 Level 2, Gate Village 1 IRELAND Sheikh Zayed Road Street Manager P.O. Box 506644 DUBAI Lazard Fund Managers (Ireland) Limited 6th Floor Lazard MENA Fund 2 Grand Canal Square Lazard Asset Management (Singapore) Pte. Limited Dublin 2 1 Raffles Place IRELAND #15-02 One Raffles Place Tower 1 Investment Managers SINGAPORE 048616 Lazard Asset Management Limited Lazard Asia Ex-Japan Strategic Equity Fund 50 Stratton Street Custodian London W1J 8LL ENGLAND BNY Mellon Trust Company (Ireland) Limited Guild House Lazard UK Equity Fund Guild Street Lazard European Equity Fund IFSC Lazard Pan European Equity Fund Dublin 1 Lazard Global Strategic Equity Fund IRELAND Lazard Asset Management LLC Administrator, Registrar and Transfer Agent 30 Rockefeller Plaza New York NY 10020 BNY Mellon Investment Servicing (International) Limited UNITED STATES OF AMERICA Riverside Two Sir John Rogerson’s Quay Lazard Global Managed Volatility Fund Grand Canal Dock Lazard Global Equity Select Fund Dublin 2 Lazard Global Equity Income Fund IRELAND Lazard Pan-European Small Cap Fund * Lazard Thematic Global Ex-Japan Fund Directors Lazard Thematic Global Fund Michael Allen (British)** Lazard Emerging World Fund Gavin Caldwell (Irish)* Lazard Emerging Markets Equity Fund John Donohoe (Irish)* / ** Lazard Emerging Markets Core Equity Fund Andreas Hübner (German) Lazard Developing Markets Equity Fund Daniel Morrissey (Irish)* / ** Lazard Global Fixed Income Fund William Smith (British) * See Note 15 * Independent Directors Lazard Japan Asset Management K.K. ** Member of the Audit Committee Akasaka Twin Tower Annex (ATT) All Directors are Non-Executive Level 7, 2-11-7 Akasaka Promoter Minato – Ku Lazard Asset Management Limited Tokyo, 107-0052 50 Stratton Street JAPAN London W1J 8LL Lazard Japanese Strategic Equity Fund ENGLAND Lazard Asset Management Pacific Co. Distributors Level 39, Gateway Building Lazard Asset Management Limited 1 Macquarie Place 50 Stratton Street Sydney NSW 2000 London W1J 8LL AUSTRALIA ENGLAND Lazard Global Listed Infrastructure Equity Fund Lazard Asset Management (Deutschland) GmbH Lazard Global Equity Franchise Fund Neue Mainzer Strasse 75 Lazard Asset Management (Deutschland) GmbH 60311 Frankfurt am Main Neue Mainzer Strasse 75 GERMANY 60311 Frankfurt am Main GERMANY LAZARD GLOBAL ACTIVE FUNDS PLC Lazard Sterling High Quality Bond Fund Lazard Global Active Funds plc Period ended 30 September 2015 4 Directors and Other Information (continued) Legal Advisers as to Irish Law Paying Agent in Switzerland William Fry NBP Neue Privat Bank AG 2 Grand Canal Square Limmatquai 1/am Bellevue Dublin 2 P.O. Box IRELAND CH-8022 Zürich Legal Advisers as to English Law SWITZERLAND MacFarlanes LLP Authorised Representative in Switzerland 20 Cursitor Street ACOLIN Fund Services AG London EC4A 1LT Stadelhoferstrasse 18 ENGLAND CH-8001 Zürich Secretary SWITZERLAND Wilton Secretarial Limited 6th Floor 2 Grand Canal Square Dublin 2 IRELAND Independent Auditors PricewaterhouseCoopers Chartered Accountants and Registered Auditors One Spencer Dock North Wall Quay Dublin 1 IRELAND LAZARD GLOBAL ACTIVE FUNDS PLC Lazard Global Active Funds plc Period ended 30 September 2015 5 Investment Managers’ Report Lazard UK Equity Fund Investment Review Over the six month period ending 30 September 2015, the Lazard UK Equity Fund returned -7.4%, in Sterling terms against the FTSE All Share Index return of -7.1%.1 Market Review Equity markets were volatile throughout the period under review, with concerns over commodity prices and a slowdown in China spooking investors. In spite of this, a number of positive factors in Europe and the UK helped to underpin economic growth. Wages have been increasing at the fastest pace for more than six years, with average pay across the economy up by 2.9% between May and July compared with the same period a year ago. The prospect of an increase in interest rates has been pushed out again, with the base rate now expected to rise by just 0.25% over the next 12 months. At the start of 2015, the UK recorded an annualised growth rate of 2.9%; this has fallen back to 2.4% in the latest report, indicating that growth is slowing slightly. While the economy is still holding up, the comparative strength of Sterling is a challenge for UK companies’ significant overseas earnings: moreover, the strength of Sterling shows no signs of abating in 2016. Portfolio Review What Contributed to Returns: • Stock selection in industrials, consumer services and basic materials contributed positively to performance. In basic materials, holding chemicals business Synthomer Plc was beneficial as its shares performed well after interim results showed strong growth in profits. • Not holding mining company Glencore Finance Europe SA made the largest individual contribution to relative returns; its share price fell significantly as a result of declining commodity prices. • SABMiller Plc was one of our strongest performers as its share price rose strongly on the news that it had been approached by Anheuser-Busch InBev NV as a takeover target. What Detracted from Returns: • Stock selection in the consumer goods and utilities sectors detracted from relative returns. Our positioning in the health care sector also cost some performance. • Not holding certain defensive stocks, whose stable businesses help them to perform better in challenging environments hurt relative returns given the volatile market conditions. These included National Grid Plc, Imperial Tobacco and Reckitt Benckiser. • A larger-than-index exposure to GKN Holdings Plc, which manufactures automotive and aerospace components, also detracted from performance. Investors appeared to react badly to GKN Holdings Plc’s plans to acquire Fokker, with the aim of augmenting its aerospace business. Outlook Despite US and global equities heading for their worst quarter since 2011, our outlook for UK equities remains positive. Driven by low borrowing costs, as well as a lack of inflation and lacklustre global growth, mergers and acquisition activity has past its 2006 peak and should continue to support equity markets. We recognise there are many economic headwinds; including uncertainty over the timing of when the US central banks will start to raise interest rates, weakness in emerging markets, stalled growth in China, falling oil prices and the commodity rout. However, the valuations of select UK companies are attractive, as is their capacity for dividend payments. All data contained herein are sourced by Lazard Asset Management Limited unless otherwise noted as at 30 September 2015. 1 Source: Morningstar Direct, Cumulative Growth, Bid Price to Bid Price, Gross Income Reinvested, Net of Fees, in Sterling terms, Retail Share Class to 30 September 2015. Fund Manager: Lloyd Whitworth and team. Figures refer to past performance and past performance is not a reliable indicator of future results. Lazard Asset Management Limited September 2015 LAZARD GLOBAL ACTIVE FUNDS PLC Lazard Global Active Funds plc Period ended 30 September 2015 6 Investment Managers’ Report (continued) Lazard Japanese Strategic Equity Fund Investment Review Over the six month period ending 30 September 2015 the Lazard Japanese Strategic Equity Fund (the “Fund”) returned -7.2%, in Japanese Yen terms against the Tokyo Stock Exchange Price Index (TOPIX) return of -7.7%.1 Market Review It was a period of two halves for the Japanese equity market. Shares rallied over the second quarter amid evidence of an improvement in Japan’s economic performance: Japan’s economy grew at an annualised pace of 3.9% in the first three months of the year, helped by a pick-up in business spending and strong exports to the US and China. Signs that the weak Japanese Yen, which fell to a 12-year low against the US dollar, was starting to boost company profits also boosted share prices. However, worries that a slowing Chinese economy and falling commodity prices could cause a worldwide recession weighed on sentiment in the third quarter, causing Japanese equities to lose all of their second-quarter gains and more. Weak domestic economic data also weighed on the market as second-quarter economic