CUNDILL VALUE & CUNDILL SECURITY FUND'S
PETER CUNDILL & TIM MCELVAINE
(continued from preceding page)

OID: Any others?
   McElvaine: Nord Est [NORP.PA/Fr] is an interesting one. It trades at around FF130 per share. And I know you'll be pleased to know that our average cost is around FF138 and that we've paid up to FF140.

OID: A good start. Tell us about it.
   Cundill: It's basically a holding company controlled by Paribas -- which owns roughly 42% of its 14-odd million shares. Nord Est has sold off a number of its holdings. So it's now left with a packaging business plus cash. And it's trading below net cash. So you get the packaging business for nothing.

OID: And the fundamentals?
   McElvaine: We estimate that Nord Est's book value is about FF180 and that its NAV is FF190 as of year end.

OID: What's so exciting about that?
   Cundill: Two things: First, it's basically trading at less than net-net -- again, with most of that net-net being cash.

OID: And you don't think it always will.
   Cundill: Not at all. Second, I talked to the guy at Paribas who has responsibility for the Nord Est file. And he said, "We've done all of the tough work. We're continuing to tidy it up. And sometime in the near future," although he didn't put a time frame certain on it, he said, "we'll try to figure out what we'll do -- whether we'll sell it, make an acquisition or dividend out the cash. It's been cleaned up quite a bit already. And by the time we're done, it'll be cleaned up a lot more."

OID: Meaning?
   McElvaine: Meaning that Nord Est owns shares in a number of investment companies that will be liquidated during the next couple of years.

OID: And you base that on...
   McElvaine: On the fact that Paribas owns about 42% of Nord Est and that this is the type of asset that Paribas has been shedding -- i.e., non-financial.
   But, actually, we don't have a tremendous amount of information on Nord Est...

OID: You invest that way, too?!
   McElvaine: It's not available. However, from what we've been able to determine, totaling the NAV of the investment companies they own plus their net cash gives them an estimated total NAV of FF130 per share.

OID: Which is right at the current share price.
   McElvaine: Correct. Then you're left with a significant packaging company -- Emballage -- with about FF2.2 billion of sales in a number of different businesses including manufacturing cardboard and sample cases for perfumes and cosmetics.

OID: Or FF156 per share of sales for free.
   McElvaine: Exactly. And aside from that business, Nord Est is extremely liquid. About FF40 is in cash. Another FF10 is in a company that holds some warehouses and industrial sites that will be liquidated over time. And then another FF60 is in various investment companies that we value at net asset value -- i.e., what they could be liquidated for today (which, incidentally, is the company's stated intention).
   And then they have another FF20 in other assets -- although we're not entirely sure what they are. But we've been told that they'll be converted into cash at a price similar to their carrying value.

OID: Gotcha.
   McElvaine: And Nord Est's management says that they'd like to use that cash to focus more on the packaging business and to make acquisitions in that area.

OID: Save the negatives for last.
   McElvaine: It may not be a negative at all. The guy who is now running Nord Est used to be in charge of Reynaud's international operations. So we're just watching with curiosity. But, again, we own it for free.

OID: And you're hoping management won't prove it to be worth less than nothing.
   McElvaine: Yep. Some might say we're betting on this guy's ability to deploy cash in a reasonable manner. And I wouldn't necessarily disagree. That certainly isn't a risk that one should feel particularly comfortable taking.
   However, we figure he could overpay by 100% for any businesses he acquires and we'd still wind up with an NAV equal to the current stock price.

OID: There's that good old margin of safety again.
   Cundill: Yes.

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