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World Trust Fund (WTR)

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Wednesday 10 August, 2011

World Trust Fund

Proposed Bonus Issue of Warrants

Proposed Bonus Issue of Warrants

World Trust Fund

For immediate release on 10 August 2011

The World Trust Fund

Proposed Bonus Issue of Warrants, the adoption of new Articles of Incorporation, the cancellation of Shares held in treasury and Notice of Extraordinary General Meeting

Further to the Company's announcement on 23 May 2011 of a proposed bonus issue of warrants to existing shareholders, the Board has today published a circular and a prospectus containing details of these proposals. The text of the Chairman’s letter extracted from the circular is set out below.

Introduction

Further to the Company’s announcement on 23 May 2011 that the Board was considering proposals for a bonus issue of Warrants to existing Shareholders, the Board has today announced details of the Bonus Issue, which will require, amongst other things, the adoption of new Articles of Incorporation. The Bonus Issue is conditional on the passing of the Bonus Issue Resolution to be proposed at the Extraordinary General Meeting of the Company to be held on 31 August 2011, as well as the admission of the Warrants to a standard listing on the Official List and to trading on the main market of the London Stock Exchange.

In addition, the Board proposes that the Shares currently held by the Company in treasury be cancelled. Such cancellation is conditional on the passing of the Cancellation Resolution to be proposed at the Extraordinary General Meeting.

The purpose of this document is to provide you with details and to explain the benefits of the Bonus Issue and to set out the reasons why the Directors are recommending that you vote in favour of the Resolutions at the Extraordinary General Meeting.

The Bonus Issue

The Company is proposing to issue Warrants to Qualifying Shareholders on the basis of one Warrant for every five Existing Shares held on the Record Date, subject to the passing of the Bonus Issue Resolution and Admission. Fractions of Warrants will not be allotted or issued and entitlements will be rounded down to the nearest whole number of Warrants.

Each Warrant will confer the right (but not the obligation) to subscribe for one Share upon exercise of the Subscription Rights and on payment of the Subscription Price, as set out below.

Warrantholders shall be entitled to exercise their Subscription Rights in cash on any Subscription Date from March 2012 to March 2014, inclusive, after which the Subscription Rights will lapse. A “Subscription Date” in any year shall be the last Business Day of March and the last Business Day of September. The Shares arising on exercise will be allotted not later than 10 Business Days after the relevant Subscription Date.

Qualifying Shareholders’ entitlements will be assessed against the Register on the Record Date, which is expected to be 5.00 p.m. on 31 August 2011.

Warrants will rank equally with each other and will not carry the right to receive any dividends from the Company or the right to attend and vote at general meetings of the Company.

The terms and conditions attaching to the Warrants are described at Part 3 of this document.

The Subscription Price will be equal to the unaudited published NAV per Share as at 5.00 p.m. on 31 August 2011, plus a percentage premium to such amount, rounded up to the nearest whole cent, as follows:

(a) if exercised on the Subscription Dates up to and including the last Business Day in March 2013 – a 1 per cent. premium to such NAV per Share; and

(b) if exercised on the Subscription Dates in September 2013 and March 2014 – a 10 per cent. premium to such NAV per Share.

The NAV for the purpose of calculating the Subscription Prices will be the unaudited value of the Company’s assets calculated in accordance with the Company’s accounting policies (including revenue items for the current financial year) less all prior charges and other creditors at their fair value (including the costs of the Bonus Issue). Prior charges include all loans and overdrafts that are to be used for investment purposes.

The Warrant Instrument provides that the Subscription Prices are subject to adjustment upon the occurrence of certain corporate events by or affecting the Company before March 2014. The relevant corporate events include consolidations or sub-divisions of share capital, pre-emptive offers of securities to Shareholders, takeover offers and the liquidation of the Company. Such adjustments serve to protect either the intrinsic value or the time value of the Warrants, or both.

The percentage premia applying upon exercise and the resulting Subscription Prices reflect the Board’s confidence in the Company’s medium to long term prospects, which if realised should enable holders of Warrants to exercise their Subscription Rights and acquire Shares on favourable terms in the future.

It is expected that an announcement setting out the Subscription Prices will be made on 1 September 2011. The Board has the discretion to postpone the date on which the Subscription Prices will be calculated and announced and shall do so in the event that it considers it in the best interests of Shareholders to do so.

The principal reason for proposing the Bonus Issue is that the Board views it as a favourable method of increasing the funds available to the Company to invest in appropriate investments and assist in the growth of the investment portfolio of the Company.

The Directors believe the Bonus Issue of Warrants will have the following advantages:

  • Qualifying Shareholders will receive securities which they may convert into Shares at a predetermined price in order to benefit from any future growth in the Company;
  • Qualifying Shareholders will receive securities with a monetary value which may be traded in a similar fashion to their Existing Shares or converted into Shares;
  • on any exercise of the Subscription Rights, the capital base of the Company will increase, allowing operating costs to be spread across a larger number of Shares, which should cause the total expense ratio to fall; and
  • following the exercise of any Subscription Rights, the Company will have an increased number of Shares in issue, which may in due course improve the liquidity in the market for its Shares.

The implementation of the Bonus Issue will require Shareholders to approve the Bonus Issue Resolution which will be proposed at the Extraordinary General Meeting as a special resolution. If passed, the Bonus Issue Resolution will:

(a) approve the adoption of Revised Articles to allow for the issue of the Warrants and additionally to update the Articles to reflect changes in law and regulation; and

(b) authorise the Directors to issue Shares on a non-pre-emptive basis in the context of the authorised capital and at the relevant Subscription Price pursuant to the exercise of the rights attaching to the Warrants.

Revised Articles of Incorporation

If the Bonus Issue Resolution is approved, the Revised Articles will be adopted to replace the Existing Articles. The Revised Articles will remove provisions that would be in conflict with the Bonus Issue and will also reflect certain other changes to law and regulation, but otherwise will be substantially identical to the Existing Articles. A summary of the proposed changes to the Articles of Incorporation is set out at Part 2 of this document.

The Revised Articles will be on display at the registered office of the Company, 49 Avenue J.F. Kennedy, L-1855 Luxembourg, and at the offices of Stephenson Harwood, 1 Finsbury Circus, London EC2M 7SH, from the date of this document until the end of the Extraordinary General Meeting and at the Extraordinary General Meeting itself for the duration of the meeting and for at least 15 minutes prior to the meeting. The Revised Articles are also available upon request free of charge at the registered office of the Company.

Proposal to reduce the Company’s share capital and to amend the Articles accordingly

The Company currently holds 6,179,287 Shares in treasury, equal to 10.26 per cent of the Company’s issued share capital. The Board proposes to reduce the Company's share capital by cancelling all of the Shares held by the Company in treasury. The transaction will have no effect on a Shareholder’s holding of Shares. Consequently, the Board also proposes to alter paragraph 1 in Article 5 of the Company’s Articles (as amended) to reflect the reduction of share capital.

Accordingly, the Cancellation Resolution will be proposed at the Extraordinary General Meeting of the Company to reduce its capital and to make a consequential amendment to the Articles, which will be proposed at the Extraordinary General Meeting as a special resolution.

Continuation vote

Under the Company’s Articles, the Company is required to propose a continuation vote as an ordinary resolution at every Annual General Meeting. If a continuation vote is not passed the Directors are required to convene a general meeting within four months of the relevant Annual General Meeting at which proposals for the winding up or other reconstruction of the Company will be considered.

The last continuation vote took place in August 2010 and the next is due at the Annual General Meeting to be held in August 2011, shortly before the Extraordinary General Meeting to approve the Bonus Issue. In the unlikely event that Shareholders do not pass the continuation vote at the forthcoming Annual General Meeting the Board would withdraw the Notice of Extraordinary General Meeting by sending a further letter to all Shareholders.

Following the Bonus Issue, some or all of the Warrants may still be outstanding at the time of subsequent continuation votes in 2012 and 2013. Warrants do not carry the right to attend and vote at any general meeting of the Company, including any meeting convened to consider a continuation vote. In the event that the continuation vote in either 2012 or 2013 is not passed and the Company is wound up or restructured, the entitlement of Warrantholders will be calculated in accordance with the rights attaching to the Warrants.

Broadly, this means that if the Company is wound-up, each Warrantholder shall be treated as if immediately before the date of such resolution their Subscription Rights had been exercisable and had been exercised in full (but at the reduced Subscription Price (if applicable) determined in accordance with paragraph 2.11 of Part 3 of this document) and shall accordingly be entitled to receive out of the assets available for distribution in the liquidation pari passu with the Shareholders such a sum as they would have received had they been the holder of the Shares to which they would have become entitled by virtue of subscription on such terms after deducting a sum per Share equal to such Subscription Price.

Admission and dealings

The Warrants may be issued either in certificated or uncertificated form. No temporary documents of title will be issued. Transfers of Warrants will be certified against the Register.

All documents or remittances sent by or to Shareholders will be sent through the post at the risk of the Shareholder.

Applications will be made to the UK Listing Authority for the Warrants to be admitted to a standard listing on the Official List and to the London Stock Exchange for such shares to be admitted to trading on its market for listed securities. It is expected that Admission will occur, and that dealings will commence, on 6 September 2011. On Admission, the Warrants will confer rights to subscribe for new Shares representing, in aggregate, 20 per cent. of the then issued ordinary share capital of the Company.

The Shares resulting from the exercise of the Subscription Rights will rank pari passu with the Shares then in issue (save for any dividends or other distributions declared, made or paid on the Shares by reference to a record date prior to the allotment of the relevant Shares).

Overseas Shareholders

The issue of the Warrants, and the issue of Shares upon exercise of the Subscription Rights attached to Warrants, to persons who have a registered or mailing address in countries outside of the United Kingdom or Luxembourg may be affected by the law or regulatory requirements of the relevant jurisdiction.

The Warrants to be issued under the Bonus Issue are not being issued to Excluded Overseas Shareholders.

The Board will issue any Warrants due under the Bonus Issue to Excluded Overseas Shareholders to the Company's market maker who will use its reasonable endeavours to sell such Warrants. The proceeds of sale will be paid to the Excluded Overseas Shareholders entitled to them save that entitlements of less than US$5.00 will be retained by the Company for its own account.

Notwithstanding any other provision of this document the Company reserves the right to permit any Shareholder to take up Warrants under the Bonus Issue if the Company, in its sole and absolute discretion, is satisfied at any time prior to the Extraordinary General Meeting that the transaction in question is exempt from, or not subject to the legislation or regulations giving rise to, the restrictions in question.

Any Shareholder who is in any doubt as to his position should consult an appropriate independent professional adviser without delay.

Taxation

The attention of Shareholders is drawn to the summary of Luxembourg and United Kingdom tax matters set out in paragraph 11 of Part V of the Prospectus. Shareholders who are in any doubt about their tax position or who may be subject to tax in a jurisdiction other than Luxembourg or the United Kingdom should consult their professional adviser.

Costs of the Proposals

The Company’s expenses in connection with the Proposals are estimated to amount to approximately £350,000 (exclusive of VAT, if any). In the event that the Proposals do not proceed, it is estimated that the Company could incur approximately £220,000 of irrecoverable costs.

Net Proceeds

Although there can be no certainty as to whether any or all of the Subscription Rights will be exercised, if the Bonus Issue proceeds and all of the Subscription Rights were exercised as at the first Subscription Date, the net proceeds that would arise on such exercise would be approximately US$33.0m, based on a NAV per Share of US$3.02 on 8 August 2011, the latest practicable date prior to the publication of this document, and assuming 10,807,612 Warrants are issued pursuant to the Bonus Issue. It should be noted, however, that the Subscription Prices will be calculated on 31 August 2011 and the above figures are for illustrative purposes only.

Extraordinary General Meeting

The Bonus Issue is conditional on, in addition to Admission, the approval by Shareholders of the Bonus Issue Resolution to be proposed at an Extraordinary General Meeting of the Company which has been convened for 31 August 2011. The cancellation of the Shares currently held in treasury is conditional on the approval by Shareholders of the Cancellation Resolution to be proposed at the Extraordinary General Meeting. The Board is recommending that Shareholders vote in favour of the Resolutions.

All Shareholders are entitled to attend and vote at the Extraordinary General Meeting. In accordance with the Articles, all Shareholders present in person or by proxy shall upon a show of hands have one vote and upon a poll shall have one vote in respect of every Share held. The Resolutions to be proposed at the Extraordinary General Meeting require the holders of 50 per cent. of the issued Share capital to be present (by person or by proxy) for the meeting to be quorate and a majority of two-thirds of the votes cast must be in favour in order for each Resolution to be passed.

In the event that the Extraordinary General Meeting is not quorate, a Reconvened EGM will be convened by the Board by way of separate notices published in accordance with Luxembourg law at which no quorum will be applicable. At the Reconvened EGM, the Resolutions will each be taken by a two-thirds majority of the votes validly cast, with abstentions, invalid and blank votes not being taken into account.

The formal notice convening the Extraordinary General Meeting is set out on pages 28 and 29 of this Circular.

Dilution

The issue of the Warrants will mean that the equivalent of 20 per cent. of the Company’s issued ordinary share capital is under option immediately following the Bonus Issue. On each occasion that Subscription Rights are exercised this will dilute the shareholding of any Shareholders who do not exercise a corresponding proportion of the Subscription Rights attaching to their Warrants or who have sold their Warrants. However, if a Shareholder continues to hold the Warrants issued to him pursuant to the Bonus Issue and exercises his Subscription Rights before their expiry, that Shareholder’s percentage interest in the Share capital of the Company will not ultimately be reduced below his percentage interest in the Share capital of the Company immediately prior to the Bonus Issue. If, as the Company would expect, the NAV per Share at the time of exercise of the Subscription Rights exceeds the applicable Subscription Price, the issue of the Shares upon such exercise will also have a dilutive effect on the NAV per Share. The extent of such dilution will depend on the number of Warrants which are converted on each occasion and the difference between the applicable Subscription Price and the NAV per Share prevailing at the time the new Shares are issued pursuant to the exercise of the Subscription Rights.

Action to be taken by Shareholders

Shareholders will find enclosed with this document a Form of Proxy for use in connection with the Extraordinary General Meeting. Whether or not you intend to be present at the Extraordinary General Meeting, you are requested to complete and return the Form of Proxy. A Form of Proxy completed for use in connection with the Extraordinary General Meeting will remain valid for the Reconvened EGM unless expressly revoked.

Shareholders are requested to complete and return their Form of Proxy for the Extraordinary General Meeting as soon as possible. To be valid, the Form of Proxy for use at the Extraordinary General Meeting must be completed and returned in accordance with the instructions printed thereon to State Street Bank Luxembourg S.A. (for the attention of Mr Silvano Del Rosso) at 49, avenue J.F. Kennedy, L-1855 Luxembourg so as to arrive not later than 10.00 a.m. on 29 August 2011 and, for use in connection with the Reconvened EGM, so as to arrive no later than 10.00 a.m. on 6 October 2011.

The return of the completed Form of Proxy will not affect your right as a Shareholder to attend the Extraordinary General Meeting or the Reconvened EGM (if applicable) and voting in person if you wish to do so.

Beneficial owners of Shares in the Company who are not listed in the Company’s register of Shareholders but who wish to participate in the Extraordinary General Meeting, and/or their agents, should provide a signed copy of the enclosed letter of representation when requesting admittance to the Extraordinary General Meeting or attach the enclosed letter to the Form of Proxy to be returned to the above mentioned address no later than 10.00 a.m. on 29 August 2011.

Action to be taken by holders of Depository Interests

Depository Interest Holders will find enclosed with this document a Form of Direction for use in connection with the Extraordinary General Meeting. Depository Interest Holders are requested to complete and return their Form of Direction for the Extraordinary General Meeting as soon as possible. To be valid, the Form of Direction for use at the Extraordinary General Meeting must be completed and returned in accordance with the instructions printed thereon to Capita Registrars, PXS, 34 Beckenham Road, Beckenham, Kent BR3 4TU by no later than 72 hours before the time fixed for the meeting or any adjourned meeting.

The return of the completed Form of Direction will not preclude you from attending the Extraordinary General Meeting or the Reconvened EGM (if applicable) and voting in person if you wish to do so providing a letter of corporate representation has been requested from the Depository.

Recommendation

The Directors consider the Resolutions set out in the Notice of Extraordinary General Meeting to be in the best interests of the Company and the Shareholders as a whole. Accordingly, the Directors unanimously recommend that Shareholders vote in favour of such Resolutions, as they intend to do in respect of their own personal beneficial shareholdings, amounting to, in aggregate 1,037,750 Shares, representing 1.92 per cent. of the current issued Share capital of the Company (excluding Shares held in treasury).

Yours faithfully,

Philip R. McLoughlin
Chairman

Expected timetable of principal events

    2011
Circular and Prospectus posted to Shareholders 10 August
Latest time and date for receipt of Forms of Direction from Depository Interest Holders 10.00 a.m. on 26 August
Latest time and date for receipt of Forms of Proxy 10.00 a.m. on 29 August
Extraordinary General Meeting to approve the Proposals 10.00 a.m. on 31 August
If the quorum requirements are met at the EGM
Record Date for the Bonus Issue 5.00 p.m. on 31 August
Subscription Prices of Warrants calculated 5.00 p.m. on 31 August
Announcement of Subscription Prices 1 September
Admission of the Warrants to a standard listing on the Official List of the UK Listing Authority and to trading on the London Stock Exchange’s main market for listed securities 8.00 a.m. on 6 September
CREST accounts credited (where applicable) with Warrants 6 September
If the quorum requirements are not met at the EGM
First publication of notice of Reconvened EGM 1 September
Second publication of notice of Reconvened EGM 19 September
Reconvened EGM 10 October
Record Date for the Bonus Issue 5.00 p.m. on 10 October
Subscription Prices of Warrants calculated 5.00 p.m. on 10 October
Announcement of Subscription Prices 11 October
Admission of the Warrants to a standard listing on the Official List of the UK Listing Authority and to trading on the London Stock Exchange’s main market for listed securities 14 October
CREST accounts credited (where applicable) with Warrants 14 October

Notes:
(1) The times and dates set out in the expected timetable of principal events above may be adjusted by the Company, in which event details of the new times and dates will be notified, as required, to the UK Listing Authority and the London Stock Exchange and, where appropriate, to Shareholders.
(2) All references to time in this document are to London time.

Terms used and not defined in this announcement bear the meaning given to them in the Circular dated 10 August 2011.

Copies of the Circular and the Prospectus have been submitted to the National Storage Mechanism and will shortly be available for inspection at:
www.Hemscott.com/nsm.do

Enquiries:

Westhouse Securities Limited
Alastair Moreton
Hannah Young
+ 44 (0)20 7601 6118
 
State Street Bank Luxembourg
Isabelle Charlier
+ 352 46 40 10 7068

Listing Category: Premium – Equity Closed-ended Investment Fund