LEM decided to be modify the evaluation policy of its assets in the balance sheet. From this period on we will present our results with purchase prices instead of market prices but consider depreciations.
There is a whole discussion ongoing at CAPX about reporting and evaluation of listed companies. Independently of that we have our own needs. As liquidity is not always given in the titles we have in our portfolio it makes little sense to present the assets with marketprices. They wouldn't be relevent if we suddenly would be forced to sell our shares as share prices would dump. Also price fluctations can be very important which are complicating interpretation.
A system which only considers purchase prices is much more meaningful, especially if coupled with depreciations. That is nothing new and is normally applied in a similar way in RL. And that is exactly what we will do for LEM. In the report we will list the titles we have in our portfolio and their values expressed as purchase prices. The balance sheet becomes then much more balanced and together with the depreciations the investor receives a much better impression about the financial situation of LEM.
If it would come to a liquidation, the difference between realised sell price and purchase price minus accumulated depreciations will then reflect the liquidation dividend an investor might expect to receive.
Our NAV will be smaller for next period, because of this evaluation change, however, that is just a theoretical value. In the mid- and long run, the investors will profit as the new system lead to greater transparency. The new scheme permits us to be build up a more robust base for further expansion.
The financial report for LEM for October 2011 will follow on 28th October 2011. It shall incorporate already the new portfolio evaluation method.
Greetz
Cas
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