"Franklin Templeton" will be allowed to manage discretionarily 20% of the Proprietatea Fund

ADINA ARDELEANU, CRĂIŢA SIMIONESCU (Translated by Cosmin Ghidoveanu)
Ziarul BURSA #English Section / 24 noiembrie 2011

Grzegorz Konieczny: "The idea is to attract new investors, not to divert liquidity to another market".

Grzegorz Konieczny: "The idea is to attract new investors, not to divert liquidity to another market".

The objective of Franklin Templeton - getting the Proprietatea Fund listed in Warsaw in the first half of 2012

The small shareholders want to sue the Romanian government, as they consider that they were not fairly compensated

"Franklin Templeton" (FT), the manager of the Proprietatea Fund, will be able to discretionarily manage 20% of the total fixed assets of the fund, excluding receivables, instead of the 5% it was allowed until now, after the shareholders agreed to the proposal in yesterday's shareholder meeting.

The shareholders voted in favor of all the items on the agenda, with the exception of reducing the share capital of the Proprietatea Fund. In order for that particular proposal to be approved, a quorum of 50% was required, which was not reached. The proposal to reduce the share capital to 13.53 billion lei, from 13.77 billion lei, due to the cancellation of 240.3 million shares which were bought back by the company, will be discussed on Friday, in the second iteration of the General Shareholder Meeting.

Also approved yesterday was next year's budget. Franklin Templeton estimates a net profit of 442.5 million lei, 114% higher than the profit budgeted for this year. Franklin Templeton expects to earn 509.4 million lei through dividends, in 2012.

Grzegorz Konieczny, the manager of the Proprietatea Fund, said: "I have noticed that dividends are very important to our shareholders. We expect a dividend yield of 8% for this year's profit, which will of course be submitted for approval in the General Shareholder Meeting of April".

Konieczny: We stand by our recommendation to perform a secondary listing in Warsaw

Grzegorz Konieczny yesterday said that the secondary listing of the Proprietatea Fund in Warsaw in the first half of 2012, is a priority. According to him, several steps have already been taken towards that goal, but there is still a need for the approval of the CNVM. "There are a few concerns concerning the dual listing of the largest issuer on the Romanian market", he said. Grzegorz Konieczny added that experience has shown that the local markets benefit from companies which are listed on several markets. "The idea is to attract new investors, not to divert liquidity to another market", the manager of the Proprietatea Fund said.

Also approved yesterday was the proposal to have the number of shares be equal to the number of votes, as well as the introduction of the electronic vote.

Until now, the shareholders who owned less than 1% of the shares had the right to one vote per share. Stockholders whose stakes ranged between 1% and 3%, received one vote for every two shares owned, and those who owned 3% to 5% had one vote for every three shares owned. Owners who held more than 5% of the company received no votes at all.

Discussing the decision to change the voting system, Marius Murgu, the president of an association of former asset owners who are now shareholders of the Proprietatea Fund, said he would file a lawsuit to challenge that decision.

He said: "The major funds which entered the shareholder structure of the Proprietatea Fund are speculators, and from this day on, the Proprietatea Fund is theirs to do with as they please. The small shareholders were stripped of the last thing they had going for them. We are trying to get this item blocked in court. Whereas until now, the officials of the government were saying that they wanted to avoid a hostile takeover of the Fund, they simply don't care anymore. They did not even attend the General Shareholder Meeting."

He said that he wants the Fund to revert to the dual management system. "Franklin Templeton needs to manage the portfolio, and the management of the company must be provided by another team", he said. Marius Murgu also urged all the small shareholders to rally together to defend their interests.

Some of the smaller shareholders did not even know how the Proprietatea Fund performed this year

The small shareholders, who received shares in the Proprietatea Fund in compensation for the abusive seizures of assets which happened during the Communist regime, said that they are unhappy with the evolution of the stock. Yesterday, many of them didn't know anything about the earnings of the Fund, nor whether the number of shares they owned was significant or not, compared to the total number of shares issued by the Fund.

Ioan Maja, a shareholder of the Fund from Cluj, said: "I've been unhappy ever since the listing". He said: "We were compensated with shares at a price of 1 leu, and when they got listed they started off at 0.6 lei. Myself and several other shareholders, we have raised money to hire a lawyer in order to sue the government.

I am now being discriminated against, compared to the new shareholders who will receive their compensation at the average price which the shares have traded at during the last two months, which is way below 1 leu. No one can give us any explanation as to why a stock that was valued at 1 leu is now trading at 0.4 lei. I actually sold some of the shares, so I could at least get some of the money I was entitled to".

Another shareholder of the Proprietatea Fund expressed his discontent towards the manner in which the government awarded the compensation: "The Fund is a cesspit. Only the big shareholders have any reasons to vote, but us, the small shareholders, we are out of place when we go there. The Proprietatea Fund was a farce since the very beginning".

The shareholder said that he is not interested in the amendments made to the articles of incorporation or by the reduction of the share capital, but only in receiving the money that he is entitled to.

A lawyer advises the shareholders to sue the Romanian government

During yesterday's general shareholder meeting, lawyer Iulian Lepa, who won a lawsuit against the government pertaining to the compensation of former asset owners with shares in the Proprietatea Fund, advised shareholders to sue the government so they can recoup the difference between the amount they were entitled to receive and the value of the shares calculated according to their current price on the stock market.

"The law clearly states that any claim is only extinguished once it has been paid in full, not after only 45% of that amount has been paid", he said.

The lawyer said that he sued the Romanian government and that a definitive ruling has been rendered, by which the government was forced to honor its obligation to compensate the plaintiff in full, at the face value of the shares.

In order to compensate the former owners whose assets were abusively seized by the Communist regime, in 2005, the Government set up the Proprietatea Fund, which has interests in state owned companies, including in those operating in the energy sector. Electricity, oil and natural gas account for 86% of the assets of the Proprietatea Fund.

In January, the Fund was listed on the Bucharest Stock Exchange, after the government selected American company "Franklin Templeton" to manage the Proprietatea Fund.

Through the Ministry of Public Finance, the Romanian government still owned about 2.74% of the subscribed and paid in share capital of the Proprietatea Fund (FP), on November 11th, and 3.25% of the voting rights, respectively, according to a press release sent by the Proprietatea Fund to the Bucharest Stock Exchange.

On that date, institutional shareholders owned 40.03% of the subscribed and paid in capital. Romanian individual investors owned 36.26% of the share capital, Romanian institutional investors owned 11.14%, and non-resident individuals owned 9.83%.

On November 11th, "Manchester Securities" Corp. owned 8.65% of the subscribed and paid in share capital, and Georgia Palade van Dusen, the granddaughter of former industrialist Nicolae Malaxa, owned 6.57%.

Lawyer Iulian Lepa says he won a lawsuit brought against the Romanian government pertaining to the compensation in the form of stock in the Proprietatea Fund.

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