SIF operate tens of millions of euros in adjustments for assetsPublish date: 13-02-2009
The SIFs (financial investment companies) will set aside several tens of millions of euros in reserves for the amortisation of the depreciation of the financial investments made over the last few years. These adjustments are higher than the entire last year's profit in some cases, as a result of the severe declines on the Stock Exchange, SIFs' managers say.
The adjustments are, however, small compared with the value of the net assets of the SIFs, which totalled 1.45 billion euros at the end of last year.
SIF Muntenia (SIF4), the only SIF to have announced its preliminary results for 2008 posted reserve-related expenses made for the depreciation of the financial assets in its portfolio of almost 63 million RON (about 17 million euros), five times higher than in the previous year, and worth over half of the gross 2008 profit of SIF, which stood at 109 million RON (29.6 million euros). SIF Muntenia has made few investments in shares compared with the other SIFs in recent years, focusing instead on fixed-income instruments.
These amortisations for the depreciation of the SIFs' assets are the equivalent of the writedowns (accounting losses caused by the drop in the asset value below the market value) registered by most of the financial institutions on the international markets in the past year and a half. The writedowns of some foreign financial institutions, such as Lehman Brothers caused them to go bankrupt or led to significant interventions of their respective states to provide them with additional capital. The SIFs, however, still have enough reserves to cover such losses.
"Those amortisations are actually some reserves for amortisations set up as a result of the decline of the market value of the SIF Muntenia assets below their acquisition value. They reflect some prudentiality-related accounting requirements and absorb some future losses. Such reserves are reversible, that is when the market rebounds they become revenues again. They were not used in other years because the market was growing," says Petre Szel, SIF Muntenia chairman.
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