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Value Catalyst Fund (VCF)

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Monday 14 February, 2011

Value Catalyst Fund

Update on Proposals for the Reorganisation

RNS Number : 1363B
Value Catalyst Fund Limited (The)
14 February 2011



14 February 2011


The Value Catalyst Fund Limited

("VCF" or "the Company")




Further to the Company's announcement of 14 December 2010, your Board wishes to update Shareholders on its proposals for the reorganisation of the Company. Subject to shareholder approval it is intended that the Company's portfolio will be divided into two separate pools of assets - a continuation pool and a realisation pool - according to Shareholder elections. The proposals will provide an opportunity for Shareholders to continue being invested in the Company with regular realisation opportunities at Net Asset Value ("NAV"), whilst also offering those Shareholders desiring an earlier potential exit the ability to realise their investment in accordance with an orderly realisation programme.


Your Board was pleased to note that Shareholders voted in favour of the continuation of the Company for a further five years at the last annual general meeting of the Company, but regardless wishes to offer Shareholders new liquidity options. Historically, the Ordinary Shares have traded at times on a significant discount to NAV and despite the size of the Company; the liquidity in the Ordinary Shares has not been good. As such, the Board would like to see both continuing and realising Shareholders offered a structure which reduces any discount to NAV and provides regular realisation opportunities at around NAV level.  The Board has therefore formulated proposals which the Directors believe will maximise the options available to Shareholders and these in summary comprise:


·      an invitation to Shareholders to remain invested in a Company focussed on generating value from investing in undervalued asset based companies including closed-ended and property companies and discounted opportunities, whilst having an opportunity to realise their investment at NAV on a six monthly basis following the expiry of an initial twelve month period;

·      an opportunity for Shareholders desiring to exit their investment in the Company to rollover their investment (being the assets attributable to such holders' interests in Ordinary Shares) into a realisation pool of assets, to be realised over time in accordance with an orderly realisation programme which will seek to return capital to Shareholders in stages, as soon as is practicable;

·      the division of the Company's portfolio of assets into two separate pools of assets - a continuation pool and a realisation pool - based upon the NAV attributable to the elections for each pool (subject to the deduction of the costs and expenses of the reorganisation pool from the realisation pool);

·      the redesignation of Ordinary Shares attributable to the elections for the realisation pool as Realisation Shares;

·      the adoption of an amended and restated memorandum and articles of association of the Company to reflect the reorganisation and, in particular, establishing the rights attaching to the Realisation Shares; and

·      the cancellation of the admission of Shares to trading on AIM.



The Company performed very well ahead of the credit crisis, but during the credit crisis suffered from being geared and holding large strategic stakes. As an activist fund such positions are part of the investment process and your Company was pleased to realise a substantial position, DouglasBay Capital PLC ("DBAY"), last year which resulted in an uplift of 22.95 % to the NAV, demonstrating the hidden value in the portfolio. For the 12 months to 31 December 2010 the NAV increased 19.41%. The full value of DBAY has not been recognised in the NAV yet as they are awaiting European Commission competition clearance and there is substantial potential in your Company's other major investments. Even with the credit crisis effects and the conservative valuation of certain positions within the portfolio, the NAV of your Company has increased by 21.02% with distributions re-invested, since inception until 31 January 2011, against a fall of 11.58 % in the S&P and a fall of 1.77 % in the FTSE ($US) over the same period.


A circular containing proposals outlined above will be posted to Shareholders as soon as practicable.



Azhic Basirov / Siobhan Sergeant

Smith & Williamson Corporate Finance Limited

Tel +44 (0)20 7131 4000



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