orilsk Nickel.

Dobriy den'

You may recall various touting of the stocks of Russia's industries on an "exchange" identified as Russian Trading System (RTS).

To date there remain no opportunities to sell such shares short, so investors can only bet on the ''upside''. While various ''report'' about Russia's markets speak enthusiastically about ''undervalued'' opportunities, the realities are sometimes revealed in other ways.

For example, with respect to Norilsk Nickel there is information published that claims that until May 1996 it was managed not by the management but by the government. It states the Government supplied Norilsk's products to the global market through ''a string of intermediaries'', depriving itself of significant profits and the scheme permitted the former management to hide the company's profits.

Interpreted into English this means they sold the exports for well below world market prices and let the brokers representing Norilsk deposit the difference to accounts other then those of the company. In the ''western world'' we call that embezzlement.

Yeltsin's reacted by granting more than $1 billion dollars in ''tax forgiveness'' to Norilsk. Well actually it was reported that that was in partial (or perhaps total) repayment of the expenses they had incurred in supporting his presidential campaign. Interesting though that the president can grant tax relieef on an individual basis without legislation.

The company says it has changed its trade policy by focusing on selling to end-users and cutting out intermediaries. Apparently that includes legitimate intermediaries who have helped Norilsk establish a customer base world-wide.

On October 31, the Board of Directors meeting adopted a long-term plan of restructuring involving the formation of six subsidiaries out of Norilsk, Talnakhskoye Mining, Metallurgical Factory, Norilsktorg, ASK Tes, Norilsk Association of Communal Service and Norilskstroy. All of them will be open JSC's, each specializing in one field: production, refinery, building, trading, etc. Norilsk states the the aim of restructuring is to make these companies financially independent, which will improve control of expenses.

The company has not indicated whether it will restructure its stockholder arrangements as well.

A completely new company ''Norilsktsvetmetobrabotka'' is to deal with making products out of Norilsk metal production. No indication is given as to the terms upon which this company will have access to Norilsk metal production.

Since all financial problems were caused by ''former management'' Norilsk seems to feel the matter, relative to shareholders has been settled. Russia does not have a ''derivative action'' option.

Norilsk's present low stock price of $6.30 is claimed to be caused by other matters such as a distribution of 10% of the company to employees at a ''preferential'' price of $1.00. Well that could definitely do it.

Meanwhile, The Securities & Exchange Commission having approved the filing of American Depository Receipts by Russian companies, ADRs of Russian companies, particularly oil, are doing very well. A $1 billion dollar Eurobond issue by Russia, managed by among others J.P. Morgan, has been oversubscribed. The yield is 345 basis points above the yield on 5 year U.S. Treasury Notes. Standard & Poor gave the bonds a rating slightly below Mexico but above Brazil.

In my opinion everyone is getting carried away here. So I ask again. Does anyone know where I can sell ''short''.

Duma Group:
Norilsk Shares Offered for Half Price.

MOSCOW 1997-10-20. The starting price of a 38 percent stake in Arctic mining and smelting giant Norilsk Nickel, sold at a competition on Aug. 5, was roughly half what it should have been, according to a State Duma working group set up to investigate the results of auctions for the sale of shares in major companies.

Experts, some of them from the Duma, reckon the Norilsk Nickel package should have started at ECU 274 million rather than the ECU 131 million asked at the time, said Yevgeny Ischenko, the working group's coordinator.

The shares were actually sold for ECU 236 million, still way below their minimum value, Ischenko said.

Ischenko said also that the inquiry team was not happy with the way bidders were admitted to the sale.

The company that bought the shares, Swift -- a member of the Unexim-MFK group -- entered its $500-million deposit to bid on the accounts of the MFK-Moscow Partners company, he said.

"The link between the two was plain to see, and it was as if Swift had deposited the money with itself and had not put its own capital up to make the deposit," Ischenko continued.

The competition contained other irregularities, but the aforementioned are sufficient to appeal to a court to have the results of the Norilsk Nickel share sale invalidated, he said.