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Trust Insider: top trusts for the brave in Eastern Europe

by James Carthew on Jun 11, 2014 at 13:48

All four were launched in the heady days of 2005-2007 and it would be fair to say that they have turned out to be dreadful investments. Aurora Russia is in the process of liquidating its portfolio and is handing back £8.5 million to shareholders by tendering for 40% of its share capital. It has another £9 million in reserve and two investments – a bank, Unistream, and a DIY retail business, Superstroy. It trades on a discount of about 18% currently but I would not be surprised if this widened out a little following the tender.

Tau Capital was launched to invest in Kazakhstan and neighbouring countries. It went into wind-up mode in July 2012 with the aim of selling off everything within 24 months. We should be coming to the end of the process now.

Tau has just handed back $5.5 million to shareholders and has only two investments left – Stopharm and Lucent Petroleum  – and the directors have written down the value of the investment in Lucent to zero so everything now hinges on what happens to Stopharm which, when Tau last talked about it, was having problems with its working capital. After the asset write downs, Tau isn’t on a massive discount so, again, I’m not too sure the rating will hold up.

Ukraine Opportunity was caught, like many other funds, by the credit crunch but, from about September last year, its fortunes started to improve. It sold its stake in one of its holdings, Platinum Bank and delivered a 17% increase in its NAV over 2013 but was then hit by the events in Crimea.

The board seem relatively sanguine about the situation and, if things do not worsen from here, it might be cheap – trading as it does on close to a 50% discount. One for the very brave perhaps.

Reconstruction Capital II – which I mentioned last week and was the trigger for this article - is also trading on a sizeable discount. It is focused on investments based in Romania. Its manager is aiming to make disposals from its private equity portfolio but is finding it tough.

The fund is indebted to its fund manager and needs to address this situation. I am not sure it is worth a closer look until it has sorted out its finances.

James Carthew is a director at Marten & Co

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