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Value Catalyst Fund (VCF)

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Friday 28 March, 2008

Value Catalyst Fund

Interim Results

Value Catalyst Fund Limited (The)
28 March 2008

The Value Catalyst Fund Limited
Unaudited Interim Report
For the Period from 1st July, 2007  to 31st December, 2007

Investment Manager's Report

For the six months ended 31st December, 2007 the Net Asset Value ('NAV') of The
Value Catalyst Fund ('VCF' or the 'Company') fell by 5.09% (with dividends
reinvested). For the twelve months to the 31st December, 2007 the NAV grew by
13.22% (with dividends reinvested) and for the period from inception to the 31st
December, 2007 the Company's NAV has increased by 178.29% (again, with dividends

Current market conditions are reflecting the uncertain position of banks' and
financial institutions' balance sheets and just how much they have overindulged
in previous years. The well documented capital injections or emergency rights
issues have helped, but the extent of their off balance sheet commitments
continues to amaze. This is a big problem. Clearly management has been more
concerned with their bonuses than the stability of their establishments, so much
so that they have risked the business for their own short term gain. Never trade
against someone's incentive is a good rule to remember, even for CEOs of large
financials. They have also introduced a mind blowing degree of leverage and
complexity that will take many years to work out. It has only been the central
banks' mindset to keep the financial system liquid at all costs that has averted
an even worse problem but the inevitable higher real cost of money and higher
risk premiums looks like the next phase. It's also the historical norm too, so
over the next year we are expecting tighter credit markets to remain, a higher
real cost of money and higher risk premiums.

In such conditions it is vital to be able to hold management accountable for
their actions if need be. We will continue to be an active investor ensuring
that management is always held to account by its shareholders and see the year
ahead as one of many opportunities for well financed and stable companies, of
which we hope The Value Catalyst is certainly one.

While we are a hedge fund, VCF is not market neutral and we will continue to
take market exposure where we feel we are being rewarded for it, and we will
continue to maintain low levels of leverage so that we can take advantage of
opportunities when they arise.

Update: Implenia AG

It is somewhat ironic to receive criticism from the Swiss about disclosure. It
is also yet another example of how far management will go to protect their
position. Where else could management seriously attempt to disenfranchise an
international investor who had abided by the rules as they stood when the
investment was made? We will pursue this attempted disenfranchisement not just
for our benefit, but for all shareholders in Implenia and in Swiss companies

CFDs are international instruments widely used by international investors in
international markets that should be well understood by the regulators
responsible for those markets. We have quite openly stated that disclosure rules
should be changed so that CFD disclosure is the same as it is for ordinary
shares, BUT, until that happens no investor can possibly be under any obligation
in any market other than to adhere to the law as it exists at the time.

The changes in Swiss disclosure became law in December 2007. We had declared our
full stake in Implenia long before that. The problem is that for some reason the
Swiss Banking Commission is trying to apply the law changes retrospectively and
is refusing to accept, or even listen to, arguments as to what a CFD actually is
and what it is internationally accepted to be. The Swiss Banking Commission has
shown a poor understanding of international markets.

Even under the new Swiss disclosure rules, it doesn't seem clear how the
disclosure of CFDs would work in practice. Is it only in the context of a
takeover or are CFDs always notifiable as equivalents to shares? There seems
also to be disagreement on views between the Banking Commission and the
Disclosure Office of the Swiss Stock Exchange - as we were advised by the
Disclosure Office - not even the experts seem to know!


Implenia was formed following the merger of two leading Swiss construction
companies in early 2006. It provides general contracting, industrial and
commercial construction services as well as real estate development. With a
market cap of approximately $600m, Implenia has a high quality balance sheet, as
well as a land bank with substantial value potential. Due to its attractive
positioning in Switzerland - Implenia is the undisputed market leader at around
3x the size of its closest rival - it is of strategic interest for leading
European contractors.

Across all funds, Laxey owns approximately 38% having steadily increased the
stake since we first became invested in early 2006. On 2nd November, 2007,
having amassed more than a 33 1/3% stake, we announced a mandatory cash bid for
Implenia at CHF33.23 per share.

The Implenia board considers our actions hostile and continues to refuse to
properly register the full voting rights of our holding beyond a 4.9% stake.
Furthermore, the Swiss Federal Banking Commission has ruled that Laxey Partners
violated disclosure rules when building our stake but we strongly disagree.

As at 31st December, 2007 your Company had a 6.17% economic interest in Implenia
AG, worth $34,832,358, 12.52% of the Company's NAV.


ASA Ltd is a Bermuda incorporated closed-end management investment company that
invests in the stocks of companies conducting, as a major part of their
business, gold mining and related activities.

ASA may be US listed but it is governed by Bermudan law, which is very similar
to UK Company law (i.e. shareholder friendly). Two years ago ASA's lacklustre
performance was challenged by a US shareholder who tried but ultimately failed
to force the board of ASA to change tack. Since then, however, the shareholder
register has changed substantially to one which we believe will be much more
likely to support change.

Accordingly, Andrew Pegge of Laxey Partners (as well as two others, Phil
Goldstein and Julian Reid) has been put forward to the ASA board with a mandate
to implement a tender offer. ASA responded by launching the same weak defence
they did two years ago against the US shareholder who agitated for change. At
the same time the SEC has compelled ASA to correct and reissue their tax
assessment, and also to reset the record and meeting date to thwart the
company's attempts at gerrymandering.

The AGM is on the 8th of April and we are hopeful of a positive outcome.

As at 31st December, 2007 your Company had a 2.09% economic interest in ASA,
worth $15,130,087, 5.44% of the Company's NAV.

Charles Voegele ('CV')

Charles Voegele is an international clothing retailer based in Switzerland. It
has branches and distribution centres in Switzerland, Germany, Austria, the
Benelux and Eastern Europe.

In August 2007, Charles Voegele announced its half year financial results with
its restructuring in the Benelux region and Germany being less advanced than
anticipated. As a result and in combination with the recent slowdown in consumer
sentiment, the share price has suffered in recent months. While the business is
fundamentally sound and profitable, Laxey believes Charles Voegele is not even
close to realizing its true potential that could be achieved with an improved
and sharpened commercial strategy.

On 26th February, Laxey, together with funds managed by Cheyne Capital and
Sterling Strategic Value, formed a concert party currently representing 20.6% of
capital and votes. In light of the upcoming AGM the group has contacted the CV
board in order that certain resolutions be proposed to shareholders.

Across all funds, Laxey Partners has declared a 10.4% stake. We highlight the
company's good retail presence and reach across Europe and continue to work with
management to better reflect Charles Voegele's fundamentals in its share price.

As at 31st December, 2007 your Company had a 1.67% economic interest in Charles
Voegele, worth $12,060,025, 4.34% of the Company's NAV.

Eaglet Investment Trust PLC ('Eaglet')

A UK incorporated closed-end fund, Eaglet had a mandate to invest in a
diversified portfolio of quoted companies with market caps of below £150m and
produce returns in excess of the Extended Hoare Govett Smaller Companies Index
(ex investment trusts).

The once top performing fund in its sector, Eaglet had until the time of its
re-organisation last December, struggled to manage the discount at which its
shares had been trading to NAV.

Laxey Partners was part of a consortium that called for Eaglet to overhaul its
structure and strategy, via the election of three new representatives to the
Eaglet board at the company's AGM.

Ahead of the AGM, the Eaglet board put forward an alternative resolution - a
100% cash exit or roll over option into Gartmore Growth Opportunities PLC (Laxey
re-organised Gartmore in 2004).

The incumbent board's resolution was rejected, the new directors were elected
and Eaglet is changing its investment policy so that it begins to invest in UK
listed shares which are identified as having patterns of directors' dealing (as
this suggests that following such signals will lead to superior investment
performance). Existing shareholders will also be given the opportunity to exit
in a tender offer expected at the end of Q1, 2008.

As at 31st December, 2007 your Company had a 2.05% economic interest in Eaglet,
worth $2,768,168, 1.00% of the Company's NAV.

Update: New Germany Fund, Inc

New Germany Fund, Inc. is a non-diversified closed-end management investment
company incorporated in the USA. The fund pursues investments in German
equities; mostly small and mid-cap.

Laxey Partners was a member of the Coalition for Shareholder Democracy along
with Phil Goldstein, the veteran American activist, and Karpus. The coalition
was formed in response to the New Germany board repeatedly ignoring passed
resolutions to open-end the fund and failing to recognise the successful
election of new directors.

After much persistence from the Coalition, the New Germany board finally bowed
to shareholder pressure and announced a voluntary in specie tender, at which
Laxey tendered half its stake at 96% of NAV.

As at 31st December, 2007 your Company had a 1.38% economic interest in New
Germany Fund, worth $4,791,513, 1.72% of the Company's NAV.

New Zealand Investment Trust ('NZL')

A UK incorporated closed-end fund, NZL's aim was to provide shareholders with a
total return from investment in quoted securities in New Zealand and, to a
limited extent, Australia.

NZL used to be a very attractive vehicle for New Zealand residents until tax
changes were made to New Zealand law. The trust itself was also on count down to
a wind-up vote and the board was aware that the changes in tax law made NZL a
very unattractive prospect for New Zealand residents.

At the trust's AGM in May 2007 shareholders voted in line with the board's
recommendation that NZL not continue as an investment trust. Accordingly,
preliminary liquidation proposals and a roll over option into a successor
investment vehicle were presented to shareholders on the 28th of November last
year and again in greater detail on the 24th January, 2008.

The vote to voluntarily wind up NZL was passed and ratified at the end of
February with the cash proceeds received in mid March at approximately 99% of

As at 31st December, 2007 your Company had a 4.09% economic interest in New
Zealand Investment Trust, worth $3,457,682, 1.24% of the Company's NAV.

Update: Roto Smeets De Boer NV ('RSDB')

Based in the Netherlands and listed on Euronext, RSDB is a printer, processor
and reproducer of information supplied by third parties.

In November 2007, RSDB proposed to acquire Quebecor's European printing
division. However, Laxey and other major shareholders decided to vote against
the transaction at a specially convened EGM (in December 2007). The transaction
was rejected on the grounds of price. Since then, Quebecor has filed for
insolvency and RSDB may acquire parts of the business at a substantially lower
price than initially planned.

One to watch.

As at 31st December, 2007 your Company had a 4.86% economic interest in RSDB,
worth $7,290,799, 2.62% of the Company's NAV.

Update: Sambu Construction Company Limited ('Sambu')

A Korean company, Sambu specialises in government construction projects and
building office blocks, industrial plants, hotels, apartments, schools and
shopping malls.

Since our last update, Laxey Partners, which holds a 7.39% stake in Sambu, has
announced its intention to nominate a director to the Sambu board at the March
2008 AGM. We wish to elect our representative with the mandate that Sambu
develop its considerable land holdings, which include areas in Seoul's
prestigious Yeoksam-dong district.

We maintain that Sambu has numerous assets and an excellent business that our
research tells us is deeply discounted to its intrinsic value. To this end, we
believe that a more focused business strategy will unlock shareholder value.

The holding has produced an ROI of 82% since first investment to the 26th
February, 2008.

As at 31st December, 2007 your Company had a 2.13% economic interest in Sambu,
worth $8,742,126, 3.14% of the Company's NAV.

Update: TDG PLC

TDG PLC is one of Europe's leading logistics companies providing distribution,
storage and transport services in the UK and on the Continent.

The business has a strong asset base and benefits from the fast growth in global
trade. On 27th February we announced jointly with the company a possible cash
offer for TDG PLC at 275p per share, less the dividend declared on the same day
of 8.75p per share (so 266.25p per share cash bid).

Preconditions to proceeding to a formal offer are satisfactory due diligence,
financing and the recommendation of the TDG board. We are very excited about
TDG's prospects and this opportunity to back the management team and employees.

Across all funds, Laxey owns approximately 22% of TDG.

As at 31st December, 2007 your Company had 5.43% economic interest in TDG PLC,
worth $17,985,725, 6.47% of the Company's NAV.


Another Swiss based company, UMS is largely engaged in the development,
manufacture and marketing of products made from copper and copper alloys. The
company is split into various business segments which operate throughout
Germany, Switzerland, India, China, USA, Italy and France.

Our investment in UMS is long standing. Roger Buehler of Laxey Partners has been
a member of the UMS board since 2006. Laxey proactively supports the company in
the implementation of the industrial restructuring concept and its consolidation

One exciting initiative is the development of a new roof tile ('SolarTiles')
that is an intelligent and design-oriented solution in the field of renewable
energy for buildings.

A word on SolarTiles...

Made of copper alloys, SolarTiles can be fitted to replace existing roof tiles.
They are hollow to permit liquid to circulate through them which can then serve
as either a heating or cooling device. Generally, if only a fraction of a roof
is covered with SolarTiles the vast majority of a building's energy needs can be
met and in addition to lowered energy bills, they do not require much

This innovation will clearly raise the profile of the company.

UMS is a good example of how shareholder engagement can positively help and
support transforming a company.

Implenia, take note!

As at 31st December, 2007 your Company had a 7.75% economic interest in UMS,
worth $11,738,572, 4.22% of the Company's NAV.

US Special Opps Trust PLC ('USPI')

A UK incorporated split capital investment trust that aims to provide capital
growth and high income from investment in the equities and convertibles issued
by US smaller companies and high income investment trusts.

As an alternative to the May 2008 wind-up, the previous board of USPI had
proposed a partial tender and an extension to the trust's existence of seven
years. Alarm bells started ringing when the seven year extension was justified
by a statement that the portfolio of investments was still some 2-3 years short
of maturity and more time was needed!

We did not consider this to be an acceptable alternative and in collaboration
with other concerned shareholders, the composition of the USPI board has changed
dramatically. Accordingly, Andrew Pegge and two other shareholder
representatives have been appointed to the USPI board to oversee an orderly
wind-down of the portfolio that will hopefully enable full value to be

As at 31st December, 2007 your Company had a 1.60% economic interest in USPI,
worth $2,913,315, 1.05% of the Company's NAV.

Income Statement (Unaudited)

For the period from 1st July, 2007 to 31st December, 2007
                                                   Note        2007         2006
                                                                US$          US$

Income                                                     5,986,622   3,851,053

Interest                                                   1,465,850     670,605
Net realised gains on realisation of financial            12,542,184  23,693,977
assets and liabilities at fair value through the
profit and loss

Net unrealised (losses)/gains on financial              (23,007,714)  13,622,913
assets and liabilities other than currency 
forwards at fair value through the profit and loss

Net unrealised losses on currency forwards at            (1,659,301) (1,839,463)
fair value through the profit and loss
                                                        -----------  -----------
Total investment (expense)/income                        (4,672,359)  39,999,085
                                                        ------------ -----------

Dividends payable on short positions                         409,236     409,215
Investment management fee                                  1,055,698   2,676,956
Performance fee                                                    -   2,931,039
Administration fee                                           246,275     207,476
Audit fees                                                    15,399      16,455
Directors' fees                                               59,505      52,494
Other expenses                                        7      799,949     733,560
Interest expense                                           6,976,841   5,456,348
                                                        ------------  ----------
Total expenses                                             9,562,903  12,483,543
                                                        ------------  ----------
Net (loss)/profit                                       (14,235,262)  27,515,542
                                                        ============  ==========

(Loss)/earnings per ordinary share                        
Basic and fully diluted                                    US$(0.11)     US$0.22
                                                        ============  ==========

Balance Sheet (Unaudited)
As at 31st December, 2007

                                      31st December,   30th June, 31st December,
                                                2007         2007           2006
                                                 US$          US$            US$
Investment funds - long                  177,198,861  155,855,950    142,757,708
Investment funds - long swaps              4,638,566   10,993,051     10,040,811
Investment funds - short swaps                     -      136,673              -
Equities - long                          204,048,716  273,628,909    197,413,157
Equities - long swaps                         60,504      969,188              -
Equities - short swaps                        85,007       20,467              -
Equities - warrants                          378,193            -        110,050
Index swaps - short                        1,134,323       49,059              -
Debt securities                              264,460      136,307         22,799
Futures - long                                     -            -              -
Futures - short                              361,676       64,652         56,963
Amounts receivable on currency             2,837,531    3,709,082      3,479,029
Cash at bank and brokers                  10,750,078      234,299      5,220,906
Cash held as margin at brokers            45,975,048   57,456,973     24,648,534
Amounts due from outstanding sale            253,457    3,974,779      1,725,242
Other debtors and accrued income           2,300,424    1,535,978        619,103
Loans receivable                           2,945,588    2,723,784              -
                                         -----------  -----------    -----------
Total assets                             453,232,432  511,489,151    386,094,302
                                         ===========  ===========    ===========

Share capital                                  1,420        1,361          1,361
Share premium                            154,115,454  141,579,776    141,572,265
Retained earnings                        124,012,974  152,392,241    104,847,634
                                         -----------  -----------    -----------
Total shareholders' funds                278,129,848  293,973,378    246,421,260
                                         -----------  -----------    -----------

Investment funds - short                   3,618,666   13,378,791     13,197,551
Investment funds - short swaps                     -      428,840        241,349
Investment funds - long swaps              8,893,026    1,507,431        721,315
Equities - long swaps                      2,383,195      822,181              -
Equities - short                          12,582,157   20,377,652     14,709,060
Equities - short swaps                     2,231,732    3,059,130      2,858,612
Index swaps - short                          523,511      279,360      1,187,449
Futures - short                            1,190,045    1,412,024      1,284,473
Amounts payable on currency forwards       3,948,267    3,160,517      7,058,543
Overdrawn balances at brokers            137,886,034  157,692,846     92,253,331
Amounts due for outstanding purchase         768,988      571,834        502,737
Other creditors and accrued expenses       1,076,963   14,825,167      5,658,622
                                         -----------  -----------    -----------
Total liabilities                        175,102,584  217,515,773    139,673,042
                                         -----------  -----------    -----------
Total liabilities and equity             453,232,432  511,489,151    386,094,302
                                         ===========  ===========    ===========

Net asset value per ordinary share           US$2.11      US$2.33        US$1.95

Statement of Changes in Net Assets (Unaudited)
For the period from 1st July, 2007 to 31st December, 2007
                                                               2007         2006
                                                              Total        Total
                                                                US$          US$

Balance at 1st July                                     293,973,378  222,645,169
(Decrease)/increase in net assets arising from         (14,235,262)   27,515,542
Dividend                                               (14,144,005) (10,239,760)
Issue of ordinary shares                                 12,535,737    6,500,309
                                                       ------------ ------------
Balance at 31st December                                278,129,848  246,421,260
                                                       ============ ============

Significant non-cash transactions: dividends amounting to US$10,997,595 were
reinvested in shares.

Cash Flow Statement (Unaudited)
For the period from 1st July, 2007 to 31st December, 2007
                                                              2007          2006
                                                               US$           US$

Operating activities                                  (14,235,262)    27,515,542

Net (loss)/gain arising from operations
Adjustments:                                          (12,542,184)  (23,693,977)

Net realised gains on investments
Net movement in unrealised depreciation/(appreciation)  
- investments                                           23,007,714  (13,622,913)
Net movement in unrealised depreciation on:              
- currency forwards                                      1,659,301     1,839,463
(Increase)/decrease in debtors                           (764,346)     1,070,917
Increase in loans receivable                             (221,804)             -
Decrease in creditors                                 (13,748,204)     (163,162)
                                                      ------------  ------------
Net cash outflow from operating activities            (16,844,785)   (7,054,130)
                                                      ------------ -------------
Investing activities                                 

Purchase of investments                              (214,583,748) (235,264,988)
Sale of investments                                    251,877,467   319,305,078
Decrease in cash held as margin                         11,481,925     2,465,879
                                                     ------------- -------------
Net cash inflow from investing activities               48,775,644    86,505,969
                                                     ------------- -------------
Financing activities                                   
Dividend paid                                          (3,146,410)   (3,739,451)
Issue of shares                                          1,538,142             -
Net cash outflow from financing activities             (1,608,268)   (3,739,451)
                                                     ------------- -------------
Increase in cash and cash equivalents                   30,322,591    75,712,388
                                                     ============= =============

Cash and cash equivalents at the beginning of the    (157,458,547) (162,744,813)
period                                               ------------- -------------
Cash and cash equivalents at the end of the period   (127,135,956)  (87,032,425)
                                                     ============= =============

Notes to the Financial Statements (Unaudited)
For the period from 1st July, 2007 to 31st December, 2007

1.       Accounting policy

The interim financial statements have been prepared in accordance with
International Accounting Standard 34: Interim financial reporting. Accounting
policies have been applied on a consistent basis with those adopted for the last
full financial year.

Comparative figures

The comparative figures shown in the Income Statement, the Statement of Changes
in Net Assets and the Cash Flow Statement relate to the corresponding interim
period for the preceding financial year, 1st July, 2006 to 31st December, 2006.
Necessary changes have been made to the prior year figures to ensure that the
comparative figures are relevant.

2.       Investments
                                   31st December,   30th June,    31st December,
                                             2007         2007              2006
                                              US$          US$               US$

Long positions:                           
Market value                          375,313,079  439,253,791       349,623,210
Cost                                  314,923,874  348,766,297       284,722,459
Short positions:                          
Market value                          (18,565,105) (38,664,945)     (33,421,531)

Proceeds                              (16,645,503) (29,654,768)     (22,703,410)

All of the Company's investments are classified as held for trading.

3. Issued Share capital
                                                  Period ended      Period ended
                                                31st December,    31st December,
                                                          2007              2006
                                                           US$               US$

Ordinary shares of US$0.00001 each                       

At 1st July                                              1,261             1,227
Issued during period                                         7                 -
Issued on account of dividend reinvestment                  52                34
                                                         -----             -----
At 31st December                                         1,320             1,261
                                                         -----             -----

Founder shares of US$1 each                                100               100
                                                         -----             -----
At 31st December
Total issued share capital                               1,420             1,361
                                                         =====             =====

                                                  Period ended      Period ended
                                                31st December,    31st December,
                                                          2007              2006

Number of ordinary shares                                  

At 1st July                                           1,261,731        1,227,789
Issued during period                                      7,009                -
Issued on account of 100:1 Stock split              125,605,260                -
Issued on account of dividend reinvestment            5,249,198           33,887
                                                    -----------        ---------
                                                    132,123,198        1,261,676
                                                    ===========        =========
Number of founder shares                                   
At 31st December                                            100              100
                                                    ===========        =========

Following a special resolution in the Annual General Meeting dated 21 November
2007, the Company issued 100 new ordinary shares of US$0.00001 each for every
ordinary share of US$0.001 each. The Directors considered having a large
number of ordinary shares with a lower market value will serve to improve the
marketability and liquidity of the shares. Net asset value per ordinary share as
of 30th June 2007 and 31st December 2006 have been recalculated to ensure that
the comparative figures are relevant.

4.       Share premium
                                                   Period ended     Period ended
                                                 31st December,   31st December,
                                                           2007             2006
                                                            US$              US$

At 1st July                                         141,579,776      135,071,990
Relating to issues                                   12,535,678        6,500,275
                                                    -----------      -----------
At 31st December                                    154,115,454      141,572,265
                                                    ===========      ===========

5. Retained earnings
                                                   Period ended     Period ended
                                                 31st December,   31st December,
                                                           2007             2006
                                                            US$              US$

At 1st July                                         152,392,241       87,571,852
Operating (loss)/profit for the period             (14,235,262)       27,515,542
Dividend                                           (14,144,005)     (10,239,760)
                                                   ------------     ------------
At 31st December                                    124,012,974      104,847,634
                                                   ============     ============

6.       Dividend

2007 Dividend (in respect of year ended 30th June, 2007)                     US$
Paid 30th November, 2007
Dividend of US$11.21 per ordinary share (pre stock split)             14,144,005

2006 Dividend (in respect of year ended 30th June, 2006)                     US$
Paid 30th September, 2006
Dividend of US$8.34 per ordinary share (pre stock split)              10,239,760

7.       Other expenses 
                                                   Period ended     Period ended
                                                 31st December,   31st December,
                                                           2007             2006
                                                            US$              US$

Legal and professional fees                             716,599          638,559
Insurance                                                49,313           65,630
Miscellaneous expenses                                   34,037           29,371
                                                       --------         --------
                                                        799,949          733,560
                                                       ========         ========
8.       Gearing

Gearing, or leverage, is the percentage of borrowing compared to the percentage
of assets. For The Value Catalyst Fund Limited this borrowing should not exceed
200% of the Net Asset Value.

9.       Copies of interim statements

Copies of the interim statement will be sent to shareholders. Further copies
will be available from HSBC Securities Services (Isle of Man) Limited, 12/13
Hill Street, Douglas, Isle of Man IM1 1EF.

                      This information is provided by RNS
            The company news service from the London Stock Exchange

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