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

OID: We see what you mean about Canadian retailers. But might we trouble you for one more idea?
   Cundill: At this year's annual meeting, I mentioned that several companies in the People's Republic of China had listed shares and that they'd gone straight down since.
   One of them is Brilliance China Automotive Holdings [CBA/NYSE]. Its subsidiary, Shenyang Automotive, makes mini vans using Toyota assembly and Toyota expertise. And, as recently as 1992, Brilliance was as high as $34.75. Today, it's trading at $3-7/8.

OID: Ouch.
   Cundill: It's true that its earnings have gone down. However, the net-net -- funnily enough -- when it was trading at $34 was $1.66. Today, with the stock at $3-7/8, the net-net's $3.30. It has no long term debt and still has a lot of cash. And at least for now, it's still making money -- albeit a lot less.

OID: And Morningstar International Stocks shows its book value as being $5+ as of December 31st.
   Cundill: Yep.

OID: Have you bought this one?
   Cundill: We have -- and just recently.

OID: Why is it down nearly 90%?
   Cundill: Net income in '92 was $18 million -- and now it's down to $4 million. But, more important, I think, is simply that the PRC was hot and people loved China then. That was when Barton Biggs wrote that wonderful piece about how he loved China.

OID: And the fact that capital expenditures exceeded cash flow the last three years probably doesn't help.
   Cundill: Nope.

OID: Although that may not be all that unusual for growth companies in capital intensive businesses -- although this one doesn't sound like it's been growing for the last few years...
   Cundill: We don't know if it will be a growth company or not. But it meets our tests.

OID: What else can you tell us about Brilliance?
   Cundill: Not a lot. If you'd like to get more details, you can get all you want from David Briggs in Vancouver.

OID: Regrettably, pages do not allow...
   Cundill: And while we're on the subject of the PRC, you may recall that I also mentioned Douglas Eu at this year's annual meeting as being a valuable member of our intelligence network. Well, we also own shares of his closed-end fund -- Jardine Fleming China Region Ltd. [JFC.AX/Aus]. As its name implies, it invests in Asia -- mostly in the PRC and Hong Kong -- and trades in Australia. And it's currently selling at a 32% discount to net asset value.

OID: And may we ask your cost?
   Cundill: I don't remember exactly what we've paid. But our cost is probably roughly where it's trading today. We don't own a lot of it -- because it's not a big fund.
   But it just seems to me we're buying a portfolio that's partially in the PRC that's probably cheap to begin with. And, then, we're buying it at a 32% discount.

OID: Because of concerns about 1997.
   Cundill: I don't know why. It just is. Interestingly, Eu runs another fund that's very similar that trades on the New York Stock Exchange with basically the same holdings. And, yet, that one often trades at a premium.

OID: Which, I imagine, speaks volumes.
   Cundill: I think so. But what do I know?

OID: Quite a bit if past features are any indication.
   Thanks for sharing your thoughts with us again this year.
   Cundill: My pleasure.

--OID                     

For additional information you may contact: Peter Cundill & Associates, Ltd. 1200 Sun Life Plaza 1100 Melville Street Vancouver, B.C. V6E 4A6 Canada (800) 663-0156 (Canada Only) (604) 685-4231

The preceding feature appeared in the August 8, 1996 edition of Outstanding Investor Digest.

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