UKRAINE OPPORTUNITY TRUST PLC (THE): Interim Management Statement

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
 
 
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