(* 17th December 2012: following a request from Elite Advisers' solicitors – Mischon de Reya – this post has been removed on the grounds of confidentiality.)
We are more than happy to help you with your research and provide Liv-ex Mid Prices – the only pricing measure we allow to be used for fund valuations – in those cases where it is appropriate.
I also noted that you quoted a number of Liv-ex Market Prices in your recent letter (19 Oct) out of context*. These are not prices that we supplied and they should not be used for the purposes you applied them to. We have never pertained to be able to provide mark-to-market valuations for wines such as Latour Pomerol 1961. We would refuse to do so if asked. The only Liv-ex Mid Price that was correctly used in your communication was that for Lafite 2009 (€744).
Valuing wines using the Liv-ex Market Price (essentially a best merchant price) is a gross distortion of Liv-ex’s valuation process. The full details of our valuation logic are detailed in this recent blog post (see here: http://www.blog.liv-ex.com/2012/10/liv-ex-valuations-explained.html). I have also attached the full logic for your consideration. If you would like to use Liv-ex Mid Prices for a benchmarking project, I would be happy to supply them to you, or to Ernst & Young.'
Extract from email from Jack Hibberd to Christian Roger (7.11.2012)
Please ensure that no other Liv-ex price data (be that “Liv-ex Transaction” or “Liv-ex Market Price”) is used. The publication of any other price would both misrepresent our data and contravene the Terms and Conditions of your Liv-ex Cellar Watch membership.'
Hibberd sent the mid-price data for 'all of those wines in your portfolio where there is sufficient data available to perform a robust valuation' with this email.
Quote from EA letter: 11.12.12:
Original wooden packaging, levels into neck or better, capsules original and undamaged, labels clean and undamaged. No stock re-imported or carrying strip labels from Asia, USA or non-European regions.
Extract from Deloitte's auditors report for the year 2010:
Given the 'emphasis of matter' it would appear that the physical checks Deloitte carry out as auditors on the wine stock in Switzerland may be quite limited in scope.
Quote from EA letter: 11.12.12:
I have had some replies through Brunswick, in particular this afternoon. However, questions about the provenance of the old wines and the role of Wine Experts Ltd have gone unanswered by Elite Advisers.'
The view of Sarah Clar-Boson, Palladio Alternative Research Group
Extracts from the letter from Elite Advisers to investors (19th October 2012) outlining Nobles Crus ability to strike a good deal and the benefits of using wine-searcher for valuations:
With the exception of the crisis of March 2009 the valuations have yet to be put to a real test as there have so far been relatively few redemptions as the 2011 Nobles Crus report indicates.
During 2011 4.2% of the wine fund (total bottles on 31.12.11: 36,322 bottles) was sold and achieved a price 1.39% above NC's valuation. With the exception of a parcel of 1995 Lafite all the wines sold were from the 2000 vintage or later.
Taking the 23 different wines sold the total sale price was 15% above the purchase price. With respect to individual wines sold there was, however, a wide variation between the % profit and loss. 60 bottles of 2006 Pavie was sold at 24% below the purchase price, while 12 bottles of 2006 Les Forts de Latour were sold at 200% above the purchase price.
I would be more reassured if wines when added to the fund were valued at cost or very close to cost. Better to have a conservative valuation than one that may prove to be over-optimistic. Buying at below other merchants' prices and then valuing at retail as described in the letter to investors (19.11.2012), does provide an immediate boost for the valuation of the fund when new wines are added. The as yet unanswered 100€ million + question is will Nobles Crus valuations prove to be accurate, robust and credible when faced with significant redemptions? That is a worry!