UKRAINE OPPORTUNITY TRUST PLC (THE): Interim Management Statement THE UKRAINE OPPORTUNITY TRUST PLC Interim Management Statement - 3 months to 30 September 2013 The Ukraine Opportunity Trust PLC (the "Company") presents its interim management statement for the period 1 July to 30 September 2013. This represents the Company's second interim management statement for the financial year ending 31 December 2013, as required by the UK Listing Authority's Disclosure and Transparency Rule 4.3. Investment Objective The Company's investment objective is to achieve long-term capital growth primarily from a diversified portfolio of companies incorporated, headquartered or domiciled in, or whose businesses are primarily carried on in Ukraine (including the non-Ukrainian holding companies of any such companies). Investments may be made in private equity, listed shares and money market investments. Review of the Period The Company has continued to post good results in what has been a lacklustre year for Ukrainian growth. The focus on the consumer has been to the Company's advantage as Food Master has continued to prosper, with sales particularly robust in the new redesigned Tarantino format, which has now opened sites in both Kyiv and Moscow. The Murakami sushi chain continues to expand and remains consistently profitable. Year-on-year, sales growth above 20 per cent in an effectively zero GDP growth environment is no mean feat and is an endorsement of the strength of the restaurant brands. Chalsen, the pharmacy chain has seen lower rates of sales growth, but here the main success has been a notable shift in gross and net profitability with the company now on track to post net profits over the leaner summer months, this bodes well for full-year numbers. Platinum Bank has had a solid year so far despite some volatility in the local interest rate market and this has allowed the Bank to grow both net loans and ultimately, book value. Korsando meanwhile has focussed on reducing administrative costs and the Company has commissioned another external report on the value of its real estate assets for year-end. The listed holdings were dominated by a mark-up and equally dramatic mark-down of Creative, the oil seeds crushing business. Creative has made good strides in bringing on its new storage and crushing capacity and in refinancing its considerable working capital needs in terms of the sunflower and soy purchases required for its new crushers. The stock remains illiquid however, marking up 70 per cent in Q1 and down 50 per cent in Q3. The main question for Ukraine in the last quarter of 2013 will be whether the country signs an association agreement with the EU at the November Summit in Vilnius. It seems that the political and corporate elites are combining to endorse the process of association. It will remain to be seen how much this process prompts further reforms and strengthens democratic development. Nevertheless, the lower tariffs and easier access to EU markets that ensue will undoubtedly be positive. Challenges will remain in terms of the Russian response to any agreement, although the recent purchase of 5bcm of gas by Ukrainian entity Ostchem from Gazprom significantly reduces the threat of an energy `war' this winter. The Ukraine also faces a very difficult funding environment in terms of a burgeoning current account deficit, a growing fiscal deficit, falling industrial production and a National Bank that seems intent on defending an informal peg of the Hryvnia to the Dollar. All this will test the nerves of investors, and it must be hoped that multilateral organisations such as the International Monetary Fund will take a sympathetic attitude to Ukraine after any association agreement is struck. Kyiv could help here by agreeing to raise household gas prices, a long-standing point of contention. If not, there will remain a significant risk of a forced devaluation at some point, albeit of a lesser degree than that of 2008/09. A 20 per cent devaluation might prove less disruptive than the 50 per cent move we saw five years ago but we would prefer a more managed process rather than the current Panglossian attitude of Government, that exudes optimism regardless of the circumstances. Portfolio Holdings Name Classification % of net % of net assets as at assets as at 30/09/13 30/06/13 Food Master (Anthoreal) Private Equity 40.7 38.9 Korsando Private Equity 26.4 25.1 PT Platinum Bank Private Equity 17.0 16.2 Vitalux (Chalsen Trade) Private Equity 7.9 7.6 Creative Industrial Group Listed Equity 3.8 7.2 Ekipazh Private Equity 1.0 1.0 Bank Nadra 2.5% Loan Fixed Income 0.8 0.8 10/04/18 Azovstal Iron & Steelworks Listed Equity 0.6 0.5 Centrenergo Listed Equity 0.5 0.6 Ukrproduct Group Listed Equity 0.4 0.3 Ukrsotbank Listed Equity 0.4 0.3 Zakhidenergo Listed Equity 0.2 0.1 Total Return Performance to 30 September 2013 6 month 1 year Since % % launch % NAV (5.80) (3.79) (42.59) Share Price (mid) 9.09 21.90 (73.00) General Information 30/09/13 30/06/13 Share price US$2.45 US$2.25 Net asset value per share including all US$5.31 US$5.56 revenue reserves Discount on net asset value 53.86% 59.53% Net assets US$19.39m US$20.33m Events Subsequent to the Quarter Ended 30 September 2013 In a portfolio update given on 14 November 2013, the following reference was made to the Company's holding in Korsando: "Every two years, a leading global property consultancy is employed to appraise the value of the Company's investment in Korsando. The Consultant's report, which the Board received on 12 November 2013, has concluded that this investment, which was valued at $5,111,534, is now worth $3,664,718. This will reduce the NAV per share by approximately $0.39." In a further portfolio update given earlier today, the following reference was made to the Company's holding in Platinum Bank: "Further to the announcement made on 14 November 2013, the Company, managed by FPP Asset Management LLP ("FPP"), today announces that it has sold its entire stake in Platinum Bank, a leading Ukrainian retail banking operation. The Company received US$7.66m for its stake, implying a cash-on-cash return of 36.5 per cent. This amount represents a gain of US$4.37m on our current carrying value and will add US$1.19 to NAV per share. The Company and FPP would like to thank the management of Platinum Bank for their contribution to the success of this outstanding franchise, building from its 2005 launch to the successful sale, and we wish them continued success with the Bank." Other than as stated above, the Directors are not aware of any significant events or transactions which have occurred between 30 September 2013 and the date of publication of this statement which have had a material impact on the financial position of the Company. This is an interim management statement and full details including the NAV, report and accounts and factsheets are available at www.ukrotrust.co.uk. The information provided in this statement should not be considered as a financial promotion. 19 November 2013 END -0- Nov/19/2013 12:18 GMT
UKRAINE OPPORTUNITY TRUST PLC (THE): Interim Management Statement
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