Interim / Quarterly Report • Jun 30, 2018
Interim / Quarterly Report
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Semi-Annual Report for the six-month period ended 30 June 2018
Prepared in accordance with FSA Regulation no. 5/2018
(this is a translation from the official Romanian version)
| Company Information. | 2 |
|---|---|
| Overview | 5 |
| Significant Events | 7 |
| Analysis of the Activity of the Fund | 16 |
| Financial Statements Analysis. | 27 |
| Annex 1 | Condensed Interim Financial Statements for the six-month period ended 30 June 2018, prepared in accordance with IAS 34 Interim Financial Reporting and applying the Financial Supervisory Authority ("FSA") Norm no. 39/ 28 December 2015, regarding the approval of the accounting regulations in accordance with International Financial reporting Standards ("IFRS"), applicable to the entities authorised, regulated and supervised by the FSA – Financial Investments and Instruments Sector |
|
|---|---|---|
| ("Norm 39/2015"). | 32 | |
| Annex 2 | Statement of Assets and Obligations of Fondul Proprietatea SA as at 29 June 2018, prepared in accordance with CNVM Regulation 4/2010 (Annex no. 4) |
62 |
| Annex 3 | Statement of the persons responsible | 66 |
| Annex 4 | Investment Management Agreement in force as at 30 June 2018. | 67 |
| Annex 5 | Documents regarding changes in administration and management structures of the Fund during the six-month period ended 30 June 2018. |
94 |
| Annex 6 | Investment Policy Statement in force as at 30 June 2018. | 104 |
| Change % H1 2018 vs |
Change % H1 2018 vs |
|||||
|---|---|---|---|---|---|---|
| NAV* and share price developments | Notes | H1 2018 | H1 2017 | YE 2017 | H1 2017 | YE 2017 |
| Total shareholders' equity (RON million) | 9,781.0 | 10,520.3 | 10,790.2 | -7.0% | -9.4% | |
| Total NAV (RON million) | a | 9,781.2 | 10,570.3 | 10,790.4 | -7.5% | -9.4% |
| NAV per share (RON) | a | 1.3294 | 1.1953 | 1.2375 | ||
| NAV per share change in the period (%) | b | +7.4% | +0.7% | +4.3% | ||
| NAV per share total return in the period (%) | h | +13.1% | +9.2% | +13.1% | ||
| Share price as at the end of the period (RON) | 0.8840 | 0.8300 | 0.8640 | |||
| Share price low (RON) | c | 0.8830 | 0.8000 | 0.8000 | ||
| Share price high (RON) | c | 0.9740 | 0.9250 | 0.9250 | ||
| Share price change in the period (%) | b | +2.3% | +4.4% | +8.7% | ||
| Share price total return in the period (%) | i | +10.0% | +16.7% | +21.5% | ||
| Share price discount to NAV as at the end of the period (%) |
e | 33.5% | 30.6% | 30.2% | ||
| Average discount for the period (%) | e | 27.3% | 26.8% | 28.0% | ||
| Average daily share turnover (RON million) | d, k | 9.4 | 8.4 | 6.9 | +11.9% | +36.2% |
| GDR price as at the end of the period (USD) | 11.30 | 10.40 | 11.45 | |||
| GDR price low (USD) | f | 11.20 | 9.40 | 9.40 | ||
| GDR price high (USD) | f | 12.80 | 11.45 | 11.45 | ||
| GDR price change in the period (%) | b | -1.3% | +10.6% | +21.8% | ||
| GDR price total return in the period (%) | b, j | +5.5% | +23.4% | +35.9% | ||
| GDR price discount to NAV as at the end of the period (%) |
e | 31.9% | 30.5% | 28.0% | ||
| Average GDR price discount for the period (%) | e | 27.2% | 26.0% | 27.4% | ||
| Average daily GDR turnover (USD million) | g, l | 2.0 | 1.5 | 1.0 | +33.3 | +100.0% |
The following table shows a summary of the Fund's financial information:
Source: Fondul Proprietatea
*Net Asset Value ("NAV") for the end of each period was computed in the last working day of the month.
| Share capital information | 30 June 2018 | 30 June 2017 | 31 December 2017 |
|---|---|---|---|
| Issued share capital (RON) | 4,771,610,196.08 | 5,238,521,987.92 | 4,854,034,784.56 |
| Paid in share capital (RON) | 4,582,427,774.08 | 5,049,339,565.92 | 4,664,852,362.56 |
| Number of shares in issue | 9,176,173,454 | 10,074,080,746 | 9,334,682,278 |
| Number of paid shares | 8,812,361,104 | 9,710,268,396 | 8,970,869,928 |
| Nominal value per share (RON) | 0.52 | 0.52 | 0.52 |
| Primary listing | Bucharest Stock Exchange |
|---|---|
| Since | 25 January 2011 |
| Secondary listing | London Stock Exchange |
| Since | 29 April 2015 |
| Bucharest Stock Exchange symbol | FP |
| London Stock Exchange symbol | FP. |
| Bloomberg ticker on BVB | FP RO |
| Bloomberg ticker on LSE | FP/ LI |
| Reuters ticker on BVB | FP.BX |
| Reuters ticker on LSE | FPq.L |
| ISIN | ROFPTAACNOR5 |
| Financial Supervisory Authority register no |
PJR09SIIR/400006/18.08.2010 |
| LEI code | 549300PVO1VWBFH3DO07 |
| CIVM registration no | AC-4522-3/12.07.2018 |
| Shareholder categories | % of subscribed share capital |
% of paid-in share capital |
% of voting rights1 |
|---|---|---|---|
| The Bank of New York Mellon (GDRs)2 | 29.38% | 30.57% | 37.21% |
| Foreign institutional shareholders | 16.05% | 16.70% | 20.36% |
| Romanian private individuals | 15.74% | 16.38% | 19.96% |
| Romanian institutional shareholders | 15.24% | 15.86% | 19.33% |
| Foreign private individuals | 2.40% | 2.50% | 3.05% |
| Romanian State represented by Ministry of Public Finance3 | 0.07% | 0.07% | 0.09% |
| Treasury shares4 | 17.22% | 17.92% | - |
| Unpaid shares5 | 3.90% | - | - |
Source: Depozitarul Central SA (Romanian central depositary)
*The structure above does not reflect yet the share capital decrease which was effective starting with 29 June 2018, as its implementation with Depozitarul Central SA was ongoing as at the end of June 2018 and was implemented on 18 July 2018.
As at 30 June 2018, the Fund had 6,220 shareholders and the total number of voting rights was 7,359,472,244.
| Shareholder | Latest ownership disclosure |
% of voting rights |
|---|---|---|
| Elliott Associates | 28 February 2018 | 9.11% |
| NN Group | 27 March 2017 | 5.02% |
Source: ownership disclosures submitted by shareholders
Address: 78-80 Buzesti Street (7th floor), District 1, postal code 011017, Bucharest, Romania.
Web: www.fondulproprietatea.ro
E-mail: [email protected]
Telephone: +40 21 200 9600
Fax: +40 21 200 9631/32
1 The unpaid shares of the Romanian State, represented by the Ministry of Public Finance, and the treasury shares held by Fondul Proprietatea were not taken into consideration at the calculation of the total number of voting rights
2 Fondul Proprietatea held 75,447 global depository receipts as at 30 June 2018 (3,772,350 shares equivalent)
3 The percentage represents the paid shares; the percentage of subscribed share capital of Romanian State represented by Ministry of Public Finance is 3.97%, including the unpaid shares
4 1,607,625,334 treasury shares acquired by the Fund in the seventh, eighth and ninth buy-back programmes, based on settlement date (960,312,834 ordinary shares acquired and 647,312,500 shares corresponding to GDRs acquired, converted into shares), out of which 158,508,824 shares were cancelled starting with 29 June 2018, but the implementation with Depozitarul Central S.A. was ongoing and was implemented on 18 July 2018
5 Shares unpaid by Romanian State represented by Ministry of Public Finance
Franklin Templeton International Services S.à r.l, as Sole Director and AIFM of Fondul Proprietatea presents the results of the Fund in accordance with IFRS for the six-month period ended 30 June 2018, with an unaudited net profit of RON 789.8 million, as compared to the unaudited net profit for the half-year ended 30 June 2017 of RON 709.3 million.
The main contribution to the profit recorded during the first six months of 2018 was the gross dividend income of RON 532.6 million and the net gain from equity instruments at fair value through profit and loss amounting to RON 293.9 million, principally generated by OMV Petrom SA, as a result of the positive evolution of the share price for this company during the period (RON 195.4 million, share price increase of 12.1% compared to 31 December 2017). For more details, please see the section Financial Statements Analysis.
Total shareholders' equity was RON 9,781.0 million as at 30 June 2018, and decreased by 9.4% compared to the value of RON 10,790.2 million as at 31 December 2017.
The Fund reported a Net Asset Value of RON 9,781.2 million as at 29 June 2018 and a Net Asset Value per Share ("NAV per share") of RON 1.3294 (a positive NAV per Share total return of 13.1% compared to 31 December 2017).
In the half year ended 30 June 2018, the BVB outperformed the largest markets in Central Europe, in both local currency and EUR terms, as shown in the table below:
| % change in H1 2018 | in local currency | in EUR |
|---|---|---|
| BET-XT (Romania) | +2.39% | +2.47% |
| PX (Czech Republic) | -1.29% | -3.01% |
| ATX (Austria) | -4.80% | -4.80% |
| BUX (Hungary) | -8.25% | -13.58% |
| WIG20 (Poland) | -13.23% | -17.22% |
Source: Bloomberg
The discount of the Fund's share price to NAV was 33.5% as at 29 June 2018, based on the NAV as at the same date. In the half year ended 30 June 2018, the discount calculated according with the Investment Policy Statement ranged between 23.8% and 32.3%.
The following table shows a summary of the Fund's performance in the first two quarters of 2018:
| NAV* and share price developments | Notes | Q2 2018 | Q1 2018 |
|---|---|---|---|
| Total NAV (RON million) | a | 9,781.2 | 9,839.0 |
| Total NAV change in the period (%) | b | -0.6% | +7.2% |
| NAV per share (RON) | a | 1.3294 | 1.3270 |
| NAV per share total return in the period (%) | b, d | +5.5% | +7.2% |
| Share price as at the end of the period (RON) | 0.8840 | 0.9340 | |
| Share price total return in the period (%) | b, e | +1.8% | +8.1% |
| Share price discount to NAV as at the end of the period (%) | c | 33.5% | 29.6% |
| GDR price as at the end of the period (USD) | 11.30 | 12.6 | |
| GDR price total return in the period (%) | b, f | -4.1% | +10.0% |
| GDR price discount to NAV as at the end of the period (%) | c | 31.9% | 28.3% |
Source: Fondul Proprietatea
*NAV for the end of each period was computed in the last working day of the month.
d. The NAV per Share Total Return is calculated in RON by geometrically linking total returns for all intermediate periods when official NAV is published. Each total return for a single period is calculated using the following formula: the NAV per share at the end of the period plus any cash distribution during the period, dividing the resulting sum by the official NAV per share at the beginning of the period. The resulting single period total returns are geometrically linked to result in the overall total return. The Fund uses this indicator as it is directly related to the performance objectives of the Fund included in the IPS
e. The Share Price Total Return is calculated in RON by geometrically linking daily total returns. Daily total return is calculated as the closing price at the end of the day, plus any cash distributions on that day, dividing the resulting sum by the closing price of the previous day. The resulting single period total returns are geometrically linked to result in the overall total return. The Fund uses this indicator as it is directly related to the performance objectives of the Fund included in the IPS
Average Daily Turnover in the six-month period ended 30 June 2018 (RON million)
Note: the values include the Fund's tender offer from February 2018, of RON 610.4 million for the 652.8 million shares acquired on BVB and RON 511.1 million for the 547.2 million shares equivalent to the GDRs acquired on LSE, based on the RON/ USD exchange rate at the transaction date, as communicated by the National Bank of Romania Source: BVB, Bloomberg
Source: BVB
Note: The discount is calculated in accordance with the IPS, i.e. the discount between FP shares closing price on BVB for each trading day and the latest published NAV per share at the date of calculation
Note: As at 29 June 2018, FP GDRs were trading on LSE at a 2.34% premium to FP share price on BVB. Source: BVB, LSE, for the period 29 April 2015 – 29 June 2018
Source: BVB, Bloomberg, for the period 29 April 2015 – 29 June 2018
Note: The discount is calculated in accordance with the IPS, i.e. the discount between FP shares closing price on BVB for each trading day and the latest published NAV per share at the date of calculation
According to 2018 Management Agreement in force starting with 1 April 2018, the first Reporting Period of the mandate is from 1 January until 31 December 2018 and every subsequent Reporting Period shall be from 1 January until 31 December of the following year.
In accordance with the Fund's IPS, there are two performance objectives that the AIFM is aiming to achieve. The NAV objective refers to a higher adjusted NAV1 per share in the last day of the Reporting Period, than the
1 Summarizing the provisions of the IPS, the adjusted NAV for a given date is calculated as the sum of: (i) the reported NAV as at the end of the Reporting Period; (ii) any distributions to shareholders, being either dividend or non-dividend ones (i.e. in the last case following reductions of the par value of the shares and distribution to the shareholders), implemented after the end of the previous Reporting Period, and (iii) any distribution fee and any transaction/ distribution costs relating to either dividend or nondividend distributions including buy-backs of shares/ GDRs/ depositary interests executed through daily acquisitions or public tenders after the end of the previous Reporting
reported NAV as at the end of the previous Reporting period. For the avoidance of doubt, the term "previous Reporting Period", when applied to the first Reporting Period under 2018 Management Agreement, is to be understood as being the last Reporting Period derived from either the current or the previous management agreement (i.e. 30 June 2017).
The discount objective implies the discount between the closing price of the Fund's shares and the latest reported NAV per share to be equal to, or lower than 15%, in at least 2/3 of the trading days in the Reporting Period.
As at 29 June 2018, the adjusted NAV per share was 17.3% higher than the 30 June 2017 NAV per share of RON 1.1953.
| NAV Objective | Amount RON | Details |
|---|---|---|
| Total NAV as at 29 June 2018 | 9,781,152,530 | |
| Dividend distribution from 2017 profits | 499,976,344 Dividend distribution approved by shareholders during 26 April 2018 GSM, based on eligible shares as at dividend record date - 11 June 2018 (total issued shares less unpaid shares less shares bought-back and held by the Fund) |
|
| Costs related to buy-backs after 30 June 2017, until 29 June 2018 |
13,856,790 Fees related to eighth buy-back programme after 30 June 2017; ninth buy-back programme, including the FSA fees of 1% of the tender offer value, and excluding the distribution fees for buy-backs |
|
| Distribution fees for buy-backs performed after 30 June 2017 |
14,109,914 Distribution fees for buy-backs, including the tender offer within the ninth buy-back programme |
|
| Distribution fees for dividends after 30 June 2017 | 4,999,763 Distribution fees for distributions to shareholders in the form of dividends |
|
| Costs related to the returns of capital after 30 June 2017, until 29 June 2018 |
27,097 Fees charged by the Central Depositary and Paying Agent for the payments performed after 30 June 2017 |
|
| Total Adjusted NAV as at 29 June 2018 | 10,314,122,438 | |
| Number of Fund's paid shares, less treasury shares and GDRs held as at 29 June 2018 |
7,357,367,396 | |
| Adjusted NAV per share as at 29 June 2018 | 1.4019 | |
| NAV per share as at 30 June 2017 | 1.1953 | |
| Difference | 0.2066 | |
| % | 17.28% | |
| Source: Fondul Proprietatea |
Discount Objective – First reporting period (interim monitoring)
In the period between 1 January 2018 and 29 June 2018, the discount to NAV was greater than 15%, for both shares and GDRs.
| Discount as at 29 June 2018 |
Minimum discount in the interim monitoring period |
Maximum discount in the interim monitoring period |
Average discount for the interim monitoring period |
|---|---|---|---|
| 32.2% | 23.8% | 32.3% | 27.3% |
Source: Fondul Proprietatea
The AIFM and the Investment Manager will continue their efforts to reduce the discount to NAV as we firmly believe that the Fund's shares should be trading at a significantly lower discount than the current levels, given the quality of the underlying portfolio assets, our track record in working with the portfolio companies to improve efficiency and profitability, the attractive dividend yield, the ongoing buy-back programmes and our transparency, disclosure, and proactive investor relations efforts.
Period. The adjusted NAV per share is equal to the adjusted NAV divided by the total number of the Fund's paid shares, less FP ordinary shares bought back and less equivalent in FP ordinary shares of FP GDRs acquired and not yet converted into FP ordinary shares, on the last day of the Reporting Period. For more details, please refer to the IPS available on the Fund's webpage.
1 The daily discount is calculated in accordance with the IPS, i.e. the discount between the FP shares closing price on the BVB for each trading day and the latest reported NAV per share at the date of calculation.
In the first six months of the year, in our efforts to increase the visibility and the profile of the Fund, as well as the local capital market, and Romania, to a broader international institutional investor base, the Fund's management team participated in 7 regional emerging and frontier market conferences in the United States, the United Kingdom, Hungary, and Singapore and met with 60 investment professionals interested in finding out more details about the Fund and its equity story, and in receiving updates on the Fund, its corporate actions, and the main portfolio holdings, as well as on the Romanian macro-economic environment.
During this period, we also organised 9 road-shows in the United Kingdom, Croatia, the United States, and South Africa. During the road-shows, the Investment Manager participated in individual and group meetings with representatives of 78 international institutional investment firms, both current shareholders and potential investors.
On 1 and 2 March we organised in collaboration with WOOD & Company the fifth edition of the "Romania Investor Days in London" event. 83 representatives from 43 international investments firm, with assets under management of over EUR 2,000 billion, and 43 representatives from 17 Romanian companies, listed or candidates for IPOs, participated in the event. During the event, over 244 individual and group meetings were held between the investors and the management teams of the Romanian companies present at the event.
On 16 February, we organised a conference call to present and discuss the 2017 annual results, and on 15 May the conference call to present the Q1 2018 results. Over 20 analysts and investors participated, on average, to the calls, and received information regarding the financial results published on the same days.
Furthermore, during the first half, we organised 22 additional meetings with analysts, brokers, current and prospective investors, and held 17 conference calls with institutional investors and analysts covering Fondul Proprietatea, interested in the latest developments regarding the Fund's corporate actions, and its portfolio companies.
Communication between the Investment Manager and investors remains our top priority as we aim to ensure that investors are informed about the latest developments and obtain their feedback as we continue to focus on maximising shareholder value.
The GDR facility is limited to one-third of the Fund's subscribed share capital under the Romanian securities regulations, or 62,231,215 GDRs as at 30 June 2018, each GDR representing 50 shares. As at 30 June 2018, 29.38% of the Fund's issued shares were held by The Bank of New York Mellon, the GDR depositary bank, accounting for 37.21% of the voting rights. Out of these, there were 55,052,711 GDRs issued as at 30 June 2018, representing 88.46% of the GDR facility. The difference is represented by shares held by The Bank of New York Mellon that were not converted in GDRs as at 30 June 2018.
On 4 July 2016 the Fund has contracted a revolving committed credit facility for a maximum amount of RON 1 billion from BRD Groupe Société Générale SA, with an availability period of one year, which was extended until 4 July 2018. The purpose of the credit facility was for general corporate use, including share buy-backs and distributions to shareholders, but excluding investments.
On 29 June 2018 the Fund extended the existing credit facility for a two-year period, until 29 June 2020. The permitted use of the credit facility is for general corporate and operational use, and has a new maximum committed amount of RON 400 million; the Fund may access, subject to the Bank's approval and in accordance with the provisions of the credit facility, additional financing in excess of the said committed amount, without exceeding a total amount of RON 600 million at any given time. The Fund did not use the credit facility during the half year ended 30 June 2018 and the outstanding balance is nil.
1 The structure above does not reflect the share capital decrease effective starting with 29 June 2018, as its implementation with Depozitarul Central S.A. was ongoing as at the end of June 2018 and finalised on 18 July 2018. The new limit of GDR facility after this change is 61,174,489 GDRs
During the 26 September 2017 GSM the shareholders approved the decrease of the subscribed share capital of the Fund from RON 4,854,034,784.56 to RON 4,771,610,196.08 pursuant to the cancellation of 158,508,824 own shares (having a par value of RON 0.52) acquired by the Fund during the seventh and eight buy-back programmes.
The FSA endorsed through Endorsement no. 163/ 30 May 2018, the share capital decrease. With effect from 29 June 2018, the Trade Registry registered the Resolution no. 4/ 26 September 2017 of the Fund's Extraordinary General Shareholders' Meeting ("EGM") for approving the share capital decrease.
Consequently, as of 29 June 2018 the new value of the Fund's subscribed share capital is RON 4,771,610,196.08 (divided into 9,176,173,454 shares with a nominal value of RON 0.52 per share), while the value of the paid-up share capital is RON 4,582,427,774.08 (divided into 8,812,361,104 shares with a nominal value of RON 0.52 per share).
Following this decrease, the limit for the ongoing ninth buy-back programme increased to a maximum number of 1,761,024,502 shares. As at 29 June, the Fund may repurchase up to 380,240,982 shares during the ongoing buyback programme.
During the 26 April 2018 GSM the shareholders approved the coverage of the negative reserves of RON 256,073,589 resulted from the cancellation of treasury shares as follows:
On 26 April 2018 shareholders approved the distribution of a gross dividend of RON 0.0678 per share, with Exdate 8 June 2018 and Registration date 11 June 2018. The Fund started the payment of dividends on 29 June 2018 and by 30 June 2018 shareholders had collected over 90% of the total dividend distribution of RON 500.0 million.
With effect from 2015, for the distributions to shareholders, the payments are performed through Romanian Central Depositary, according to the legislation in force, as follows:
Also, as an important notice to shareholders, this dividend payment is subject to the general statute of limitation. As such, shareholders may request the payments only within a three-year term starting with the Payment Date, namely by 29 June 2021.
During the first six months of 2018, the Fund bought back a total number of 1,361,624,192 own shares within the ninth buy-back programme (out of which 775,318,592 ordinary shares and 586,305,600 ordinary shares corresponding to GDRs), representing 14.6% of the total issued shares as at 31 December 2017, for a total acquisition value of RON 1,272,552,138, excluding transaction costs.
The total number of own shares (including GDRs) held by the Fund as at 30 June 2018 is 1,454,993,708 shares, having a total nominal value of RON 756,596,728.16 (RON 0.52 per share), which will be proposed for cancellation during the following general meetings of shareholders.
During the first six months of 2018 the Fund converted 11,650,665 of the GDRs acquired during the period into 582,533,250 ordinary shares. As at 30 June 2018, the Fund held 75,447 GDRs.
The table below shows a summary of the buy-back programmes during the six-month period ended 30 June 2018 (information based on the transaction date):
| Equivalent | ||||
|---|---|---|---|---|
| shares of | ||||
| Programme | Description | No of shares | GDRs | Total no of shares |
| 7th | Opening balance as at 1 January 2018 | 90,849,151 | - | 90,849,151 |
| Cancelations | (90,849,151) | - | (90,849,151) | |
| Closing balance as at 30 June 2018 | - | - | - | |
| 8th | Opening balance as at 1 January 2018 | 141,869,861 | - | 141,869,861 |
| Cancelations | (67,659,673) | - | (67,659,673) | |
| Closing balance as at 30 June 2018 | 74,210,188 | - | 74,210,188 | |
| 9th | Opening balance as at 1 January 2018 | 19,159,328 | - | 19,159,328 |
| Acquisitions | 775,318,592 | 586,305,600 | 1,361,624,192 | |
| Conversions during the period | 582,533,250 | (582,533,250) | - | |
| Closing balance as at 30 June 2018 | 1,377,011,170 | 3,772,350 | 1,380,783,520 | |
| Weighted average price (RON per share; USD per GDR) |
0.9333 | 12.3551 | ||
| Total shares in balance as at 30 June 2018 | 1,451,221,358 | 3,772,350 |
On 15 December 2017 the Fund submitted to the FSA an application for endorsement of a tender offer to accelerate the ninth buy-back programme. Under this tender offer the Fund intended to repurchase up to 1,200,000,000 shares from its shareholders, in the form of both shares and GDRs.
The daily execution of the ninth buy-back programme, with respect to the shares on the BVB and GDRs on the LSE was suspended starting with 11 December 2017.
WOOD & Company Financial Services a.s. has been engaged as intermediary in relation to the purchase of shares. Jefferies International Limited and WOOD & Company Financial Services a.s. have been engaged as dealer managers and The Bank of New York Mellon has been appointed as tender agent in relation to the purchase of the GDRs.
On 10 January 2018, the FSA approved the Fund's application for the tender offer. The subscription period was from 18 January until 23 February 2018, and the purchase price was RON 0.9350 per share and the USD equivalent of RON 46.75 per GDR.
On 23 February 2018, the Investment Manager announced the results of the tender offer: total subscriptions of 4,853,201,369 shares representing 404% of the Offer (2,640,228,469 in the form of shares and 2,212,972,900 shares in the form of GDRs, namely 44,259,458 GDRs).
Under this tender offer, the Fund repurchased 1,200,000,000 shares (652,821,500 in the form of shares and 547,178,500 shares in the form of GDRs, namely 10,943,570 GDRs) at a purchase price of RON 0.9350 per share and the USD equivalent of RON 46.75 per GDR, computed in accordance with the terms and conditions of the offer documentation.
The daily execution of the ninth buy-back programme restarted on 7 March.
The Fund recognises the treasury shares (repurchases of own shares and/ or GDRs) at trade date as a deduction to shareholders' equity (in an equity reserve account). Treasury shares are recorded at acquisition cost, including brokerage fees, distribution fees and other transaction costs directly related to their acquisition.
Upon completion of all legal and regulatory requirements, the treasury shares are cancelled and netted off against the share capital and/ or other reserves. The details on the accounting treatment to be applied for the registration and cancellation of treasury shares can be found in the FSA Norm 39/ 2015, article 75.
At the cancellation date, only a reallocation between the equity accounts is booked, without any impact on profit or loss or additional total shareholders' equity decrease. A negative equity element arises upon cancelation of the shares acquired in a buy-back programme, where the acquisition price is higher than the nominal value, but this does not generate an additional shareholder's equity decrease.
The table below shows the movement of the negative reserves during the first six months of 2018:
| Opening balance of the negative reserve as at 1 January 2018 (audited) | 256,073,589 |
|---|---|
| Coverage of negative reserves according with GSM Resolution no 7 / 26 April 2018 | (256,073,589) |
| Negative equity reserve arising on the cancelation of the remaining balance of | |
| shares acquired during 7th buyback programme (on 29 June 2018) according to | 31,068,596 |
| EGM resolution no. 4/26 September 2017 | |
| Negative equity reserve arising on the partial cancelation of the shares acquired | |
| during 8th buyback programme (on 29 June 2018) according to EGM resolution no. | 24,396,485 |
| 4/26 September 2017 | |
| Closing balance of the negative equity reserve at 30 June 2018 | 55,465,081 |
The table below shows additional details on the negative reserves booked during the period and the estimated negative reserve that will arise upon the cancelation of the treasury shares in balance as at 30 June 2018:
| Buy-back | Buy-back | Buy-back | ||
|---|---|---|---|---|
| programme 7 | programme 8 | programme 9 | ||
| Number of shares cancelled during H1 2018 | (1) | 90,849,151 | 67,659,673 | - |
| Total costs (including transaction costs and other costs) (RON) |
(2) | 82,852,613 | 60,077,806 | - |
| Less the impact of the Nominal Value decrease (RON)* | (3) | (4,542,458) | (498,291) | - |
| Accounting value of the cancelled treasury shares as at cancellation date (RON) |
(4)=(2)+(3) | 78,310,155 | 59,579,515 | - |
| Correspondent Nominal Value at the cancelation date (NV = RON 0.52 per share) (RON) |
(5) = (1)*NV | 47,241,559 | 35,183,030 | - |
| Negative equity reserve on the cancelation (RON) | (6)=(5)-(4) | (31,068,596) | (24,396,485) | - |
| Negative reserve that will arise on cancelation of the treasury shares in balance as at 30 June 2018 |
Buy-back programme 7 |
Buy-back programme 8 |
Buy-back programme 9 |
|
| Number of shares to be cancelled | (1) | - | 74,210,188 | 1,380,783,520 |
| Total costs as at 30 June 2018 (including transaction costs and other costs) (RON) |
(2) | - | 64,034,586 | 1,315,392,782 |
| Less the impact of nominal value decrease (RON)** | (3) | - | - | - |
| Accounting value of the treasury shares to be cancelled in the future, as at 30 June 2018 (RON) |
(4)=(2)+(3) | - | 64,034,586 | 1,315,392,782 |
| Correspondent nominal value (NV= RON 0.52 per share) as at 30 June 2018 (RON) |
(5)=(1)*NV | - | 38,589,298 | 718,007,430 |
| Estimated negative reserve to be booked on cancelation (RON) |
(6)=(5)-(4) | - | (25,445,288) | (597,385,352) |
* for the shares in balance as at 16 June 2017 (for 7th buy-back program the remaining shares were 90,849,151 shares and for 8th buy-back program were 9,965,829 shares) ** there was no share capital decrease through the reduction of the nominal value for the treasury shares in balance as at 30 June 2018
The coverage of the negative reserve balance reflected in the audited financial statements for the financial year ending 31 December 2018 will be subject to shareholders' approval during the 2019 annual GSM.
Article 75 from Norm 39/2015 mentions that the negative balance arising on the cancellation of equity instruments may be covered from the retained earnings and other equity elements, in accordance with the resolution of the General Shareholders Meeting. As at 30 June 2018, the Fund's equity elements that could be used to cover the negative reserve are sufficient and include retained earnings and share capital.
The management structure was maintained the same as at 31 December 2017 – the only change operated was the new two-year mandate of Franklin Templeton International Services S.à r.l. as Alternative Investment Fund Manager starting with 1 April 2018.
The permanent representatives of the Fund during reporting period were:
The main resolutions approved by the Fund's shareholders during the 14 February 2018 GSM were the following:
| Commercial terms | Main provisions |
|---|---|
| Base Fee per Year | • 0.60% • Discount 15% – 20%, + 0.05%, i.e. Base Fee Rate = 0.65% • Discount < 15%, + 0.05%, i.e. Base Fee Rate = 0.70% |
| Consideration for the Base Fee | • Weighted average market capitalisation of the Fund |
| Distribution Fee for all cash distributions (including buy-backs) | • 1.00% applied to the value of the distributions |
| Consideration for the Distribution Fee | • Share buy-backs • GDR buy-backs • Public tender buy-backs • Return of share capital • Dividends |
| Duration | • 2 years |
| Continuation vote | • Annually, each April |
The main resolutions approved by the Fund's shareholders during the 26 April 2018 GSM were the following:
the ratification of all legal acts concluded, adopted or issued on behalf of the Fund, as well as of any management/ administration measures adopted, implemented, approved or concluded during the 2017 financial year, along with the discharge of the AIFM for any liability for its administration during the 2017 financial year
the approval to cover the negative reserves incurred in the 2017 financial year derived from the cancelation of treasury shares
In June 2018 the valuations for Hidroelectrica SA, CN Aeroporturi Bucuresti SA and Societatea Nationala a Sarii SA were updated with the assistance of the independent valuer KPMG Advisory, in accordance with International Valuation Standards. The valuation date was 31 March 2018 and the reports also considered certain subsequent corporate actions (such as dividends approved). The overall impact was an increase of RON 7.0 million compared to 31 May 2018. For more details please see section NAV Methodology.
During the first six months of 2018 the Fund recorded RON 532.6 million dividend receivables from portfolio companies. Same as in 2017, the Government requested the state owned companies to have a dividend pay-out ratio of 90%.
The main point on the agenda for the 4 September 2018 GSM refers to the approval of the decrease of the subscribed share capital of Fondul Proprietatea from RON 4,771,610,196.08 to RON 4,733,020,898.32 pursuant to the cancellation of 74,210,188 own shares acquired by Fondul Proprietatea during the eighth buy-back programme.
The key performance indicator of the Fund is its Net Asset Value. The Fund is required to publish a monthly net asset value per share in accordance with local rules issued by the capital market regulator, no later than 15 calendar days after the reporting month end.
All NAV reports are published on the Fund's website at www.fondulproprietatea.ro, together with the share price and discount information.
CNVM Regulation no. 4/2010, as subsequently amended, allows the NAV calculation based on best international practice suitable for a listed closed-end fund.
Listed securities are valued either at closing market prices if listed on regulated markets, or reference prices if listed on an Alternative Trading System ("ATS"). In case of shares listed on ATS the reference price is considered to be the average price.
Illiquid or unlisted securities are valued using either the value of shareholders' equity, as per the latest available annual financial statements, proportionally with the stake held, or at fair value according to International Valuation Standards which permit fair valuation.
The shares in the companies under insolvency or reorganisation procedures are valued either at zero or at the value provided with the assistance of independent valuators, using the valuation methods in accordance with the International Valuation Standards. The shares in companies under a judicial liquidation procedure or any other liquidation procedures, as well as in companies under temporary or final suspension of operation, are valued at zero until the procedure is finalised.
The treasury shares acquired through buy-backs are excluded from the number of shares used in the NAV per share computation. Due to the fact that in substance the Fund's GDRs are similar to the ordinary shares to which they correspond, in the computation of the number of shares used in the calculation of the NAV per share, the equivalent number of shares corresponding to the GDRs bought back and held by the Fund as at NAV reporting date are also deducted, together with the number of ordinary own shares bought back and held.
The following chart shows information on the monthly published NAVs per share for the period 29 December 2017 to 29 June 2018:
Source: Fondul Proprietatea, based on NAV reports submitted to the FSA, computed for the last working day of the month
During the first quarter of 2018, the NAV per share had an upward trend compared with the end of the previous year, mainly due to the positive share price evolution of the Fund's listed holdings, principally OMV Petrom SA (impact on the Fund's NAV of RON 181.2 million or RON 0.0208 per share) and due to the ninth buy-back programme tender offer carried by the Fund during this period.
During the second quarter of 2018 the NAV per share had an increase of 0.2% compared with the end of the previous quarter, mainly due to the recording of 2017 dividend receivables from portfolio companies and due to the ninth buy-back programme carried out by the Fund during this period, netted off by the dividends payable approved by shareholders during the 2018 Annual GSM.
In June 2018 the Fund performed valuation updates for certain unlisted holdings. The valuation was performed with the assistance of the independent valuator KPMG Advisory, in accordance with International Valuation Standards. The valuation date was 31 March 2018 and the reports for Hidroelectrica SA and CN Aeroporturi Bucuresti SA also considered the dividends approved after valuation date. The overall impact was an increase of RON 7.0 million or RON 0.0009 per share, compared to 31 May 2018:
| No. | Portfolio company name | Value in 29 June 2018 NAV (RON million) |
Value in 31 May 2018 NAV (RON million) |
Impact on Total NAV (RON million) |
% 29 June 2018 NAV vs. 31 May 2018 NAV |
Impact on NAV per share1 (RON) |
|---|---|---|---|---|---|---|
| 1 | Hidroelectrica SA | 3,531 | 3,566 | (35) | -1.0% | (0.0047) |
| 2 | CN Aeroporturi Bucuresti SA | 791 | 774 | 17 | +2.2% | 0.0023 |
| 3 | Societatea Nationala a Sarii SA* | 258 | 233 | 25 | +10.7% | 0.0034 |
| TOTAL | 4,580 | 4,573 | 7 | +0.2% | 0.0009 |
*does not include the impact of dividend distribution
The Fund's Investment Objective is the maximisation of returns and per-share capital appreciation via investments mainly in Romanian equities and equity-linked securities. The equity exposure amounted to 96.1% of the Fund's NAV as at 29 June 2018. As at that date, the portfolio was composed of holdings in 35 companies (8 listed and 27 unlisted), a combination of privately held and state-controlled entities.
• Net cash and receivables includes bank deposits, current bank accounts, short-term bonds, dividend receivables, as well as other receivables and assets, net of all liabilities (including liabilities to shareholders related to the returns of capital and dividend distribution) and provisions.
Source: Fondul Proprietatea, data as at 29 June 2018, % in total NAV
| Power utilities: generation……………. 38.1% |
|---|
| Power&Gas Utilities: distrib,supply……. 19.4% |
| Oil & Gas……………………………… 18.6% |
| Infrastructure…….…………………… 11.3% |
| Aluminium………………………………… 3.2% |
| Others…………………………………… 5.5% |
| Net Cash and Receivables……………. 3.9% |
• The portfolio remains heavily weighted in power, oil and gas sectors (approx. 76.1% of the NAV), through a number of listed and unlisted Romanian companies
Source: Fondul Proprietatea, data as at 29 June 2018, % in total NAV
1 Computed based on the number of shares used in NAV per share computation as at 31 May 2018
Source: Fondul Proprietatea, data as at 29 June 2018, % in total NAV
• The largest unlisted holding is Hidroelectrica SA (36.1% of the NAV)
Source: Fondul Proprietatea, data as at 29 June 2018; the chart reflects the company NAV value as a % in total NAV value of unlisted holdings
| OMV Petrom SA……………………… 71.1% | |
|---|---|
| Alro SA…………………………………. 12.2% | |
| BRD Groupe Societe Generale SA…. 8.6% | |
| Nuclearelectrica SA…………….…… 6.3% | |
| Romaero SA……………………………. 1.3% | |
| Others………………………………… 0.5% |
• The largest listed holding is OMV Petrom SA (18.6% of the NAV)
Source: Fondul Proprietatea, data as at 29 June 2018; the chart reflects the company NAV value as a % in total NAV value of listed holdings
1 Note: the value of total listed shares compared to total assets of the Fund is 25.8%
| No | Name | Fund's stake (%) | Value as at 29 June 20181 (RON million) |
% of NAV as at 29 June 20181 |
|---|---|---|---|---|
| 1 | Hidroelectrica SA | 19.94% | 3,531.0 | 36.1% |
| 2 | OMV Petrom SA | 9.99% | 1,815.2 | 18.6% |
| 3 | CN Aeroporturi Bucuresti SA | 20.00% | 791.0 | 8.1% |
| 4 | E-Distributie Banat SA | 24.12% | 545.0 | 5.6% |
| 5 | Engie Romania SA | 11.99% | 472.0 | 4.8% |
| 6 | E-Distributie Muntenia SA | 12.00% | 419.0 | 4.3% |
| 7 | E-Distributie Dobrogea SA | 24.09% | 342.0 | 3.5% |
| 8 | Alro SA | 10.21% | 311.2 | 3.2% |
| 9 | Societatea Nationala a Sarii SA | 48.99% | 258.0 | 2.6% |
| 10 | CN Administratia Porturilor Maritime SA | 19.99% | 230.0 | 2.4% |
| Top 10 equity holdings | 8,714.4 | 89.2% | ||
| Total equity holdings | 9,402.9 | 96.1% | ||
| Net cash and receivables | 378.3 | 3.9% | ||
| Total NAV | 9,781.2 | 100.0% |
Source: Fondul Proprietatea, based on NAV reports submitted to FSA (29 June 2018 NAV report) 1Rounded to one decimal
During the first six months of 2018, a number of 14 companies in the Fund's portfolio declared dividends for financial year 2017. The total amount booked during the period is RON 532.6 million and the most significant amounts relate to OMV Petrom SA and Hidroelectrica SA.
For more details regarding dividend income, please refer to section Financial Statement Analysis.
During the first six months of 2018 the Fund sold part of the holdings in Nuclearelectrica SA and BRD Societe Generale and the entire holdings in Conpet SA and Palace SA.
In February 2018 the Fund subscribed to the share capital increase of Hidroelectrica SA with a cash contribution of RON 148,120, which became effective on 21 May 2018, at the registration with the Romanian Trade Register.
In May 2018 the Fund subscribed to the share capital increase of Zirom SA with a cash contribution of RON 2,350,000, which became effective on 22 May 2018, the registration with the Romanian Trade Register.
Electricity prices (EUR/ MWh)
Source: Bloomberg, Hidroelectrica SA Note: Day Ahead Market – monthly average for base load
| January - May 2018 | January - May 2017 | % change | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Total | Production | Import | Total | Production | Import | Total Production | Import | ||
| Net coal | 1,919.3 | 1,739.0 | 180.3 | 2,020.8 | 1,866.0 | 154.8 | (5.0) | (6.8) | 16.5 |
| Crude oil | 4,855.1 | 1,394.4 | 3,460.7 | 4,277.2 | 1,436.6 | 2,840.6 | 13.5 | (2.9) | 21.8 |
| Usable natural gas | 4,113.9 | 3,495.6 | 618.3 | 3,987.4 | 3,442.2 | 545.2 | 3.2 | 1.6 | 13.4 |
| Hidro, nuclear, and import energy | 2,250.3 | 2,151.0 | 99.3 | 2,185.7 | 2,058.4 | 127.3 | 3.0 | 4.5 | (22.0) |
| Import oil products | 992.5 | - | 992.5 | 1,105.4 | - | 1,105.4 | (10.2) | - | (10.2) |
| Others | 174.1 | - | 174.1 | 203.3 | - | 203.3 | (14.4) | - | (14.4) |
| Total resources | 14,305.2 | 8,780.0 | 5,525.2 | 13,779.8 | 8,803.2 | 4,976.6 | 3.8 | (0.3) | 11.0 |
Source: National Institute of Statistics webpage
| H1 | H1 | Budget | Budget | |||
|---|---|---|---|---|---|---|
| RON million | 2016 | 2017 | 2017 | 2018 | 2017* | 2018* |
| Turnover | 2,302.8 | 2,726.3 | 1,378.2 | 1,563.6 | 2,417.2 | 2,595.8 |
| Operating profit | 166.7 | 438.9 | 227.6 | 211.1 | 270.2 | 280.4 |
| Net profit/ (loss) | 71.5 | 391.1 | 186.8 | 154.2 | 167.9 | 199.8 |
| Dividends | 67.2 | 317.7 | - | - | - | - |
Source: Consolidated IFRS financial statements
*Budgeted figures do not include any change in the fair value of the derivative embedded in the electricity purchase contract concluded with Hidroelectrica SA. Budget refers to Alro SA individual financial statements. The amounts were converted from USD to RON using the RON/ USD National Bank of Romania exchange rate at budget publishing date (i.e. 23 March 2017/22 December 2017)
March: On a consolidated basis, Alro reported an audited net profit of RON 391.1 million for 2017, as compared to RON 71.5 million in 2016, while consolidated sales advanced by 18.4% y.o.y. to RON 2.73 billion, on the back of a strong LME environment and higher volumes. Sales volumes of primary aluminium products decreased by 3.3% y.o.y. to approximate 122.6 thousand tones (vs. 126.7 thousands tones in 2016) while sales volumes of processed aluminium products advanced 6.8% y.o.y. to 107.5 thousands tones (vs 100.6 thousands tones in 2016).
April: Based on the Board's recommendation, shareholders approved a gross dividend per share of RON 0.53523, out of unconsolidated, distributable net profit.
June: On 26 June the Company announced that its major shareholders, Vimetco N.V. and Conef S.A., intend to proceed with a public offering for up to 383.8 million shares (approximately 53.8% of the share capital of the company) during 2 – 16 July 2018.
July: On 20 July the company announced that the conditions for successfully closing the secondary public offering by Vimetco N.V. and Conef S.A. were not met.
August: the company reported consolidated financial results for the first half of 2018. Net profit during the period reached RON 154.2 million, down 17.5% y.o.y. while operating profit decreased by only 7.3% y.o.y. to RON 211.1 million and turnover advanced by 13.5% y.o.y. to RON 1.6 billion. During the first half of 2018 total volume of primary aluminium sales reached 67,000 tonnes, up 8.1% y.o.y. while the volume of processed aluminium sales stood at 56,000 tonnes, similar to the first half of 2017. During the period, the company benefitted from higher benchmark LME aluminium prices (average aluminium London Metal Exchange prices of USD 2,209 per tonne over the first half of 2018, up 17.5% y.o.y), but was negatively affected by the depreciation of the USD against the RON.
| Budget | Budget | |||
|---|---|---|---|---|
| RON million | 2016 | 2017 | 2017 | 2018 |
| Operating revenue | 314.0 | 330.5 | 315.0 | 325.9 |
| Operating profit | 54.8 | 93.8 | 64.0 | 75.1 |
| Net profit | 36.8 | 79.7 | 50.1 | 61.9 |
| Dividends | 55.0 | 20.3 | 25.1 | 16.5 |
Source: Financial statements prepared in accordance with applicable Romanian Accounting Regulations
April: The shareholders appointed Mr Dan Tivilichi, Ms Gabriela Murgeanu and Mr Daniel Naftali as board members for a 4 year period. Mr. Dan Tivilichi has been General Manager of the company since September 2016, first with an interim mandate and as of October 2017 with a 4 year mandate. Ms. Gabriela Murgeanu is a civil servant with the Ministry of Transport with responsibilities related to the naval sector, while Mr. Naftali has been proposed by Fondul Proprietatea.
June: The company reported for 2017 financial year a turnover of RON 302.5 million compared to RON 289.8 million in 2016 and a net profit of RON 79.7 million compared to RON 36.8 million in 2016. Total annual through put in 2017 was 58.4 million tones, slightly down compared to RON 59.4 million tones in 2016. The shareholders approved the distribution of a total gross dividend of RON 20.3 million.
| RON million | 2016 | 2017 | Budget 2017 |
Budget 2018 |
|---|---|---|---|---|
| Total revenue | 910.3 | 1,076.5 | 983.2 | 1,215.3 |
| Operating profit | 276.6 | 393.3 | 225.7 | 428.3 |
| Net profit | 234.5 | 337.5 | 185.9 | 368.3 |
| Dividends | 214.8 | 305.9 | 95.9 | 187.6 |
Source: Financial statements prepared in accordance with applicable Romanian Accounting Regulations
June: In H1 2018 the passenger traffic increased by 7.1% up to 6.34 million passengers, while aircraft movements increased by 4.76% to 57,800. The board of directors and the CEO are appointed with interim mandates and the selection process according with Government Emergency Ordinance no. 109/2011 was not started yet.
August: the company reported the financial results for H1 2018. The highlights include: operating revenues of RON 458.2 million (+11.7% y.o.y.), operating profit of RON 225.4 million (+51.2% y.o.y.) and net profit of RON 192.3 million (+56.8% y.o.y.). The good financial results were on the back of the increase in passengers number that reached 6.3 million (+ 7.1% y.o.y.).
| Budget | Budget 2018 |
||
|---|---|---|---|
| 557.8 | 550.5 | 483.6* | 446.7** |
| 107.8 | 87.4 | 90.4 | 74.4 |
| 93.6 | 82.8 | 72.8 | 66.4 |
| 37.0 | 31.9 | - | - |
| 2016 | 2017 | 2017 |
Source: Financial statements prepared in accordance with applicable Romanian Accounting Regulations
*Revenue from operating activity
**Electrical business revenue
January: Starting 1 January 2018, the regulated electricity distribution tariffs decreased on average by 0.9% (based on ANRE Order no. 113 published on 12 December 2017).
April: ANRE issued for public consultation the decision related to the regulatory framework for the next 5 years starting 2019. The proposal is for the regulated rate of the return to be reduced to 5.07% from the current level of 7.7%. A final decision related to the entire regulatory framework under which the distribution companies will operate in the next 5 years is expected to be taken by the end of the year.
| Budget | Budget | |||
|---|---|---|---|---|
| RON million | 2016 | 2017 | 2017 | 2018 |
| Operating revenue | 480.3 | 475.3 | 414.1* | 401.2** |
| Operating profit (EBIT) | 84.8 | 56.6 | 68.4 | 52.5 |
| Net profit | 73.5 | 49.5 | 53.8 | 44.5 |
| Dividends | 27.4 | 17.7 | - | - |
Source: Financial statements prepared in accordance with applicable Romanian Accounting Regulations
*Revenue from operating activity **Electrical business revenue
January: Starting 1 January 2018, the regulated electricity distribution tariffs increased on average by 2.0% (based on ANRE Order no. 111 published on 12 December 2017).
February: Company appointed two new board members proposed by SAPE, Valerica Draniceanu and Alexandru Iulian Bocai, following the expiration of the board member mandates for Elena Voicu and Cornel Bobalca.
April: ANRE issued for public consultation the decision related to the regulatory framework for the next 5 years starting 2019. The proposal is for the regulated rate of the return to be reduced to 5.07% from the current level of 7.7%. A final decision is expected to be taken by the end of the year.
| Budget | Budget | |||
|---|---|---|---|---|
| RON million | 2016 | 2017 | 2017 | 2018 |
| Operating revenue | 921.7 | 856.6 | 848.7* | 717.9** |
| Operating profit (EBIT) | 178.5 | 77.3 | 185.0 | 97.7 |
| Net profit | 151.7 | 85.9 | 156.8 | 96.6 |
| Dividends | - | - | - | - |
Source: Financial statements prepared in accordance with applicable Romanian Accounting Regulations
*Revenue from operating activity
**Electrical business revenue
January: Starting 1 January 2018, the regulated electricity distribution tariffs increased on average by 0.8% (based on ANRE Order no. 112 published on 12 December 2017).
April: ANRE issued for public consultation the decision related to the regulatory framework for the next 5 years starting 2019. The proposal is for the regulated rate of the return to be reduced to 5.07% from the current level of 7.7%. A final decision is expected to be taken by the end of the year.
| Budget | Budget | |||
|---|---|---|---|---|
| RON million | 2016 | 2017 | 2017 | 2018 |
| Turnover | 4,473.1 | 4,839.9 | 4,018.7 | 4,718.3 |
| Operating profit | 453.0 | 422.9 | 358.9 | 273.9 |
| Net profit | 366.7 | 343.1 | 289.4 | 227.5 |
| Dividends* | 110.9 | 168.6 | - | - |
Source: Consolidated IFRS financial statements (2016 figures are restated)
Budgeted figures are on a consolidated basis
*Dividends are based on the separate financial statements
January: According to ANRE Order no. 1/2018, with effect from 10 January 2018 the regulated supply tariffs for households were increased on average by approximately 6.1%.
April: According to ANRE Order no. 60/2018, with effect from 1 April 2018 the regulated supply tariffs for households were increased on average by approximately 9.8%.
May: ANRE issued for public consultation the methodological principles of the regulatory framework for the distribution business for the next 5 years. The proposal is for the regulated rate of the return to be reduced to 5.07% (same as for electricity) from the current level of 8.52%. A final decision is expected to be taken by the end of the year.
| H1 | H1 | |||
|---|---|---|---|---|
| RON million | 2016 | 2017 | 2017 | 2018 |
| Turnover | 3,338.0 | 3,253.6 | 1,705.1 | 1,992.2 |
| Operating profit | 1,540.3 | 1,581.8 | 844.4 | 1,130.8 |
| Net profit | 1,227.7 | 1,359.6 | 716.7 | 961.6 |
| Dividends | 1,035.7 | 1,134.4 | - | - |
Source: Financial statements prepared in accordance with applicable Romanian Accounting Regulations
March: Total revenues increased by 9% in Q1 2018 versus Q1 2017 to RON 987 million while net profit increased by 23.1% to RON 485 million vs. RON 394 million for the same period last year.
May: During the general shareholders' meeting held on 5 May 2018, the Government approved the extension of the interim Board for an additional 4 month period. The Ministry of Energy mandated the Board to implement the selection of a Board according to Law's 111/2016 provisions.
August: during the first six months of the year, the company had a net profit of RON 961.6 million, 34.2% higher compared with the same period of the previous year. During the first six months of the year, Hidroelectrica distributed 90% from the historic 2017 profit in the form of dividends.
| H1 | H1 | Budget | Budget | |||
|---|---|---|---|---|---|---|
| RON million | 2016* | 2017 | 2017 | 2018 | 2017 | 2018 |
| Sales | 16,646.6 | 19,435.1 | 9,261.1 | 9,850.7 | 13,487.0 | 13,680.0 |
| Operating profit/ (loss) | 1,476.2 | 3,270.4 | 1,577.3 | 1,781.3 | 1,851.0 | 2,936.0 |
| Net profit/ (loss) | 1,037.7 | 2,489.3 | 1,210.3 | 1,288.1 | 1,827.0 | 2,582.0 |
| Dividends** | 849.7 | 1,132.9 | - | - | - | - |
Source: Consolidated IFRS financial statements
*Restated figures
**Based on separate IFRS financial statements
January: on 9 January 2018 the Supervisory Board of OMV Petrom decided to appoint Christina Verchere as the new President of the Executive Board and CEO. She replaced Mariana Gheorghe for the remaining term of the mandate granted to Mariana Gheorghe which was until 16 April 2019.
February: the Executive Board made an initial proposal regarding gross dividend distribution for the 2017 financial year of RON 0.02 per share.
March: Mr. Johann Pleininger has notified the waiver of his mandate as member of the Supervisory Board of OMV Petrom, effective starting 26 April 2018.
April: Lacramioara Diaconu-Pintea waived her mandate as Executive Board Member responsible for Downstream Gas of OMV Petrom SA. Her waiver shall become effective on the date when her successor, Franck Neel, takes office, but in any event on 1 August 2018, at the latest.
Starting with 17 April, the Supervisory Board of OMV Petrom SA appointed Alina-Gabriela Popa as the new CFO, following the finalisation of the mandate as CFO of Stefan Waldner. The appointment will be effective starting 16 April 2019.
May: the company reported the financial results for the first quarter of 2018. The highlights include: sales increase by 4,8% compared to the same period of 2017 to RON 4,874.8 million, operating profit increased by 35.3% compared to the same period of 2017 to RON 1,080.0 million and net profit increased by 38.2% compared with the same period of 2017, to RON 854.1 million. The increase of Q1 2018 operating result was mainly due to higher sales revenue and cost optimisation.
June: Mr Radu-Sorin Caprau was appointed as the new Executive Board Member responsible for Downstream Oil Activity, replacing Mr Neil Anthony Morgan who has communicated his resignation on 30 May. The appointment will become effective starting 1 October 2018.
July: the company reported the financial results for the first half of 2018. The highlights include: sales increased by 6.4%compared to the same period of 2017 to RON 9,850.7 million, operating profit increase by 12.9% compared to the same period of 2017 to RON 1,781.3 million and net profit increase by 6.4%. The increase of sales was generated by higher crude oil and natural gas prices and higher electricity volumes sold, which compensated for the lower quantities of petroleum products and natural gas sold and lower selling prices for electricity.
| Budget | Budget | |||
|---|---|---|---|---|
| RON million | 2016 | 2017* | 2017 | 2018 |
| Operating revenue | 315.0 | 386.3 | 338.4 | 373.5 |
| Operating profit | 43.3 | 89.1 | 57.5 | 53.2 |
| Net profit | 30.1 | 74.3 | 48.2 | 42.3 |
| Dividends | 28.1 | - | 48.2 | 42.3 |
Source: Financial statements prepared in accordance with applicable Romanian Accounting Regulations
*unaudited figures
July: in the first half of 2018 the company recorded an increase in turnover of 8% compared to the same period of the previous year, up to RON 186.1 million, while the total revenues increase up to RON 197.2 million.
| RON million | 30 Jun 2018 | 31 Mar 2018 | 31 Dec 2017 |
|---|---|---|---|
| Current accounts* | 62.7 | 17.4 | 19.2 |
| Bank deposits | 68.7 | 292.4 | 1,276.6 |
| Treasury bills and short-term government bonds | 36.4 | 13.3 | 242.2 |
| Total liabilities** | (103.3) | (44.2) | (35.6) |
| Net cash and cash equivalents | 64.5 | 278.9 | 1,502.4 |
| Net Assets Value | 9,781.2 | 9,839.0 | 10,790.4 |
| Net cash and cash equivalents in NAV (%) | 0.7% | 2.8% | 13.9% |
*Current accounts include also the cash blocked for distributions (2016, 2017 and 2018 distribution amounts)
**Total liabilities less provisions
The table above shows the change in the net cash position of the Fund as a percentage of the NAV.
For more details regarding the decrease of bank deposits and treasury bills and short-term government bonds and the increase of total liabilities during the six-month period ended 30 June 2018, please see section Financial Statements Analysis.
The annualised total expense ratio of the Fund as at 30 June 2018 was 0.74% (31 December 2017: 0.92%) and excluding transaction related expenses this would be 0.72% (31 December 2017: 0.84%). This figure represents the annualised expenses of the Fund divided by the period average NAV. For the purpose of this calculation, expenses do not include foreign exchange losses, value of equity investments disposed of, impairment adjustments, interest expenses and commitment fees, fair value adjustments, expenses with amortisation and provisions and income tax expenses.
The difference between total annualised expense ratio as at 30 June 2018 and the total expense ratio at the end of 2017 was mainly due to lower level of management and administration fees and transaction related expenses in 2018. Please see section Financial Statements Analysis for more details on the Fund's expenses.
The income from operating activity mainly comprises the gross dividend income, the changes in fair value of financial instruments at fair value through profit or loss, interest income and the net gains/ losses from transactions with financial instruments. The changes in fair value of the equity investments in the Fund portfolio are recognised in profit or loss.
The income from operating activity is significantly influenced by the changes in the share price of listed portfolio companies, the performance of the portfolio companies and their decisions on dividend distributions, as well as by money market performance.
As at 30 June 2018, the Fund's exposure to Romanian equities accounted for 96.1% of the NAV, the positive difference of 3.9% being represented by the net cash and receivables.
The BET-XT index, which reflects the performance of the top 25 most liquid stocks listed on the Tier 1 of the BVB, increased by 2.4% during the first half of 2018 and by 5.4% compared to 30 June 2017.
BET-BK index reflects the price evolution of the Romanian and foreign companies traded on BVB's regulated market. Its methodology takes into consideration the transactions on the main market segment ("Regular"). BET-BK index is a free float market capitalisation weighted index of the most liquid companies listed on BVB's regulated market. BET-BK was designed to be used as a benchmark by asset managers and other institutional investors. The calculation methodology reflects the legal requirements and investment limits applying to investment funds. BET-BK decreased by 1.8% during the first half of 2018 and increased by 5.4% compared to 30 June 2017.
Source: Bloomberg
Source: Bloomberg
Further information on the Fund's financial results can be found in the Financial Statements Analysis section.
The following section presents details of the main risks and uncertainties that might affect the activity of the Fund and its liquidity during the next six months:
The new Offshore Law was adopted by the Parliament on 9 July 2018. Initial industry reactions are negative due to higher taxation compared to previous drafts discussed, with a direct impact on the profitability of the entities in scope. The main provisions of the law are:
The unaudited IFRS financial statements for the six-month period ended 30 June 2018, prepared in accordance with IAS 34 Interim Financial Reporting and applying the FSA Norm 39/2015 with subsequent amendments, are included in full in Annex 1 to this Report. The captions Statement of Financial Position and Statement of Comprehensive Income presented in the semi-annual report may differ from the ones included in the IFRS financial statements due to other regulatory requirements.
This section provides an overview of the Fund's financial position and performance for the six-month period ended 30 June 2018.
| RON million | 30 Jun 2018 |
31 Mar 2018 |
31 Dec 2017 |
30 Jun 2017 |
30 Jun 2018 vs 31 Dec 2017 |
30 Jun 2018 vs 30 Jun 2017 |
|---|---|---|---|---|---|---|
| Unaudited | Unaudited | Audited | Unaudited | (%) | (%) | |
| Cash and current accounts | 62.7 | 17.4 | 19.2 | 58.4 | ||
| Deposits with banks | 68.7 | 292.4 | 1,276.7 | 84.9 | ||
| Treasury bills | - | 13.3 | 46.3 | 70.0 | ||
| Government bonds | 36.5 | - | 195.9 | - | ||
| Dividend receivables | 300.2 | - | - | 353.1 | ||
| Equity investments | 9,402.9 | 9,549.7 | 9,278.2 | 9,381.1 | ||
| Non-current assets held for sale | - | - | - | 877.4 | ||
| Other assets | 14.3 | 11.2 | 10.7 | 20.5 | ||
| Total assets | 9,885.3 | 9,884.0 | 10,827.0 | 10,845.4 | -8.7% | -8.9% |
| Payables | 37.9 | 25.3 | 15.2 | 24.4 | ||
| Borrowings | - | - | - | 237.0 | ||
| Other liabilities | 66.4 | 19.8 | 21.6 | 63.7 | ||
| Total liabilities | 104.3 | 45.1 | 36.8 | 325.1 | +183.4% | -67.9% |
| Total equity | 9,781.0 | 9,838.9 | 10,790.2 | 10,520.3 | -9.4% | -7.0% |
| Total liabilities and equity | 9,885.3 | 9,884.0 | 10,827.0 | 10,845.4 | -8.7% | -8.9% |
The cash and cash equivalents of the Fund included term deposits with banks, government bonds and treasury bills issued by the Ministry of Public Finance of Romania. All instruments are denominated in RON and have maturities of up to one year.
The decrease in liquid assets by 89% during the six-month period ended 30 June 2018 was mainly due to the cash outflow for funding the Public Tender Offer settled during February (RON 1,134.8 million, including transaction costs) and the dividend distribution in June (RON 433.0 million net dividends paid until 30 June 2018), netted off by the inflows from the dividends collected from portfolio companies (RON 224.1 million) and by the proceeds from disposal of equity instruments (RON 171.6 million).
The increase in equity investments of RON 124.7 million in the six-month period ended 30 June 2018 is mainly due to the increase in OMV Petrom SA share price (RON 195.4 million) and Alro SA share price (RON 72.9 million), netted off by the disposal of portfolio companies (partial disposal of shares in BRD Groupe Societe Generale SA and Nuclearelectrica SA and disposal of entire holdings in Conpet SA and Palace SA, total impact RON 171.6 million).
Starting 1 January 2014, Fondul Proprietatea applies the Amendments to IFRS 10, IFRS 12 and IAS 27 - Investment Entities, the Fund being an investment entity. As a result, the Fund classifies and measures its investments in subsidiaries and associates as financial assets at fair value through profit or loss.
Starting 1 January 2018 the Fund adopted IFRS 9 and classified all its equity investments (other than subsidiaries and associates) as equity investments at fair value through profit or loss (the default option under IFRS 9). Additional disclosures and detailed analysis and comparison between the measurement category and the carrying amount of financial assets and liabilities in accordance with IAS 39 and IFRS 9 are included in the Fund's Condensed Interim IFRS Financial Statements for the six-month period ended 30 June 2018.
The equity investments at fair value through profit or loss are initially recognised at fair value and the transaction costs are recorded in profit or loss. They are subsequently measured at fair value with all changes in fair value accounted for through profit or loss. Equity investments at fair value through profit or loss are not subject to impairment testing.
As at 30 June 2018 substantially all the equity investments of the Fund were carried at fair value.
Listed shares traded in an active market are measured at fair value, using quoted prices in the active market for that instrument at the reporting date. A market is considered active if transactions for the asset take place with sufficient frequency and volume to provide pricing information on an on-going basis.
The fair value of unlisted shares and listed shares that are not traded in an active market, for which sufficient information is available, is estimated with the assistance of independent valuators, using valuation techniques, in accordance with IFRS 13 Fair Value Measurement and the International Valuation Standards (over 99% of the total unlisted portfolio).
The other equity investments that do not have a quoted price in an active market are measured at the values used in the calculation of the net asset value of the Fund, in accordance to the regulations issued by the FSA/ CNVM and reported on a monthly basis. These values are considered to be equivalent to fair value and this approach is applied to an insignificant part of the portfolio (less than 1% of the portfolio).
Capital expenditure comprises the costs for the acquisition and upgrade of the intangible assets of the Fund, which include the value of the licences, the implementation costs and the updates of the Fund's accounting and reporting software, net of the accumulated amortisation. In the first six months of 2018 the Fund incurred costs of RON 65,014 representing updates of the accounting and reporting software (in the first six months of 2017: nil).
| RON million | Q1 2018 | Q2 2018 | H1 2018 | H1 2017 |
|---|---|---|---|---|
| Unaudited | Unaudited | Unaudited | Unaudited | |
| Gross dividend income | - | 532.6 | 532.6 | 539.9 |
| Net gain/ (loss) from equity investments at fair value through profit or loss |
309.8 | (15.9) | 293.9 | 159.0 |
| Interest income | 2.6 | 1.9 | 4.5 | 7.3 |
| Reversal of impairment losses on receivables, net | - | 0.1 | 0.1 | 36.7 |
| Net gain on disposal of equity investments available for sale | n.a. | n.a. | n.a. | 21.0 |
| Other (expenses)/ income, net* | (0.7) | 7.7 | 7.0 | 2.5 |
| Net operating income | 311.7 | 526.4 | 838.1 | 766.4 |
| Administration fees recognised in profit and loss | (11.2) | (15.4) | (26.6) | (54.0) |
| Other operating expenses | (6.9) | (6.3) | (13.2) | (12.2) |
| Operating expenses | (18.1) | (21.7) | (39.8) | (66.2) |
| Profit before income tax | 293.6 | 504.7 | 798.3 | 700.2 |
| Income tax | - | (8.5) | (8.5) | 9.1 |
| Profit for the period | 293.6 | 496.2 | 789.8 | 709.3 |
| Other comprehensive income | - | - | - | 106.9 |
| Total comprehensive income for the period | 293.6 | 496.2 | 789.8 | 816.2 |
* Other income/ (expenses), net included mainly the net gain / (loss) from revaluation of government securities through profit or loss, net foreign exchange gain / (loss) and other operating income/ (expenses).
Gross dividend income for the six-month period ended 30 June 2018 included the dividend income earned from the Fund's portfolio companies, mainly from Hidroelectrica SA (RON 226.2 million), OMV Petrom SA (RON 113.3 million), CN Aeroporturi Bucuresti SA (RON 61.2 million), Alro SA (RON 39.0 million), BRD Groupe Societe Generale SA (RON 36.3 million), Engie Romania SA (RON 20.2 million) and Nuclearelectrica SA (RON 19.5 million).
The net gain from equity investments at fair value through profit or loss of RON 293.9 million in the first six months of 2018 was mainly generated by OMV Petrom SA and Alro SA, as a result of the positive share price evolution for these companies (RON 195.4 million, share price increase of 12.1% for OMV Petrom SA and RON 72.9 million, share price increase of 30.6% for Alro SA). The gain for the first six months of 2017 was also generated by OMV Petrom SA, as a result of the positive evolution of the share price for this company (RON 160.1 million, share price increase of 8.6%).
Interest income arose from deposits held with banks and from short-term government securities.
The reversal of impairment losses for the six-months ended 30 June 2017 relates to the receivable for the unpaid amounts from the Ministry of Public Finance. Following the reduction of the nominal value of the Fund's shares from RON 0.85 to RON 0.57 recorded in March 2017 and from RON 0.57 to RON 0.52 recorded in June 2017, the receivable for the unpaid amounts and the related impairment adjustments decreased accordingly, generating a positive impact in profit or loss of RON 36.4 million.
Administration fees recognised in profit and loss in the first six months of 2018 included the base fee of RON 21.6 million and distribution fee of RON 5.0 million (first six months of 2017: base fee of RON 24.1 million and distribution fee of RON 29.9 million). Starting with the financial statements for the year ended 31 December 2017, the distribution fee related to buy-backs is recognised directly in equity together with the value of the underlying shares. This change was not applied to the comparative amounts for the six months ended 30 June 2017, as the effect is not significant.
Additional details on the administration fees for the period and comparatives are presented below:
| RON million | H1 2018 | H1 2017 |
|---|---|---|
| Recognised in profit or loss | 26.6 | 54.0 |
| Base fee | 21.6 | 24.1 |
| Distribution fee for buy-back programmes | - | 13.7 |
| Distribution fee for return of capital/ dividends | 5.0 | 16.3 |
| Recognised in other comprehensive income | 12.8 | - |
| Distribution fee for buy-back programmes | 12.8 | - |
| Total administration fees | 39.4 | 54.0 |
In the first six months of 2017, the other comprehensive income mainly comprised the changes in fair value of available for sale equity investments (mainly Nuclearelectrica SA, BRD Groupe Societe Generale SA and Alro SA), net of related deferred tax. Starting 1 January 2018, all equity investments are classified as fair value through profit and loss, following implementation of IFRS 9.
The main categories of other operating expenses are detailed in the table below:
| RON million | Q1 2018 | Q2 2018 | H1 2018 | H1 2017 |
|---|---|---|---|---|
| Unaudited | Unaudited | Unaudited | Unaudited | |
| FSA monthly fees | 2.4 | 2.2 | 4.6 | 5.3 |
| Transactions costs | 0.5 | 0.5 | 1.0 | 0.1 |
| Depositary fees | 0.2 | 0.1 | 0.3 | 0.4 |
| Other expenses | 3.8 | 3.5 | 7.3 | 6.4 |
| Total other operating expenses | 6.9 | 6.3 | 13.2 | 12.2 |
In the first six months of 2018 and of 2017 other expenses caption comprised mainly legal and litigation assistance expenses, Board of Nominees remuneration and related expenses, portfolio valuation expenses, external audit expenses (which include also auditor fees charged for the reports performed according with the FSA requirements), PR and investor relation expenses.
| RON million | H1 2018 Unaudited |
H1 2017 Unaudited |
|---|---|---|
| Cash flows from operating activities | ||
| Disposal/ maturity of treasury bills and bonds | 94.6 | 1,386.9 |
| Dividends received (net of withholding tax) | 224.1 | 185.3 |
| Proceeds from disposal of equity investments | 171.6 | 29.0 |
| Interest received | 6.1 | 10.9 |
| Amounts collected from the depository Bank of the Fund's GDRs | 4.5 | - |
| Suppliers and other taxes and fees paid | (63.6) | (76.9) |
| Acquisition of treasury bills and bonds | (36.5) | (355.7) |
| Other payments, net | (3.2) | (1.2) |
| Net cash flows from operating activities | 397.6 | 1,178.3 |
| Cash flows from financing activities | ||
| Short term bank loans | - | 237.0 |
| Payments to shareholders related to the return of capital | (3.6) | (871.6) |
| Acquisition of treasury shares | (1,270.8) | (711.5) |
| Dividends paid (net of withholding tax) | (433.0) | - |
| Net cash flows used in financing activities | (1,707.4) | (1,346.1) |
| Net decrease in cash and cash equivalents | (1,309.8) | (167.8) |
| Cash and cash equivalents at the beginning of the period | 1,441.2 | 311.1 |
| Cash and cash equivalents at the end of the period | 131.4 | 143.3 |
| Cash and current accounts | 62.7 | 58.4 |
| Bank deposits with original maturities of less than three months | 68.7 | 84.9 |
| 131.4 | 143.3 |
In the first six months of 2018 the proceeds from disposal of equity investments were related to the disposal of the entire holdings in Palace SA and Conpet SA and partial disposals of BRD Groupe Societe Generale SA and Nuclearelectrica SA (in the first six months of 2017 - the entire holdings in Oil Terminal SA and Banca Transilvania SA).
Dividends paid included the net payments to shareholders regarding the dividend distribution of RON 0.0678 per share approved by shareholders during the 26 April 2018 GSM, with payment date 29 June 2018.
Payments to shareholders related to the return of capital in the first six months of 2017 included the payments related to the two share capital returns to shareholders of RON 0.05 per share each, in accordance with shareholders approvals.
Short term bank loans in the first six months of 2017 include the RON 237 million drawing from the credit facility from BRD, used for funding the distributions to shareholders.
Acquisition of treasury shares represent the acquisition cost and the brokerage fees related to the acquisition of the own shares bought back by the Fund in the buy-back programmes carried out during each period, both through buying ordinary shares on the BVB and GDRs on the LSE.
Payments to suppliers and other taxes and fees paid were higher in the first six months of 2017 compared with the first six months of 2018 mainly as a result of the expenses related to distribution fee for March 2017 distribution.
The transactions with related parties were performed in the normal course of business of the Fund and there were no significant transactions during the first half year of 2018. For more details, please see Annex 1 "Condensed Interim Financial Statements".
Franklin Templeton International Services S.à r.l acting in the capacity of Sole Director of Fondul Proprietatea SA
Calin Metes Catalin Cadaru 13 August 2018
Prepared by Permanent Representative Financial Reporting Manager
Prepared in accordance with IAS 34 Interim Financial Reporting and applying the Financial Supervisory Authority ("FSA") Norm no. 39/ 28 December 2015, regarding the approval of the accounting regulations in accordance with IFRS, applicable to the entities authorised, regulated and supervised by the FSA – Financial Investments and Instruments Sector ("Norm 39/2015")
(This is a translation from the official Romanian version)
| Condensed Statement of Comprehensive Income | 34 |
|---|---|
| Condensed Statement of Financial Position | 35 |
| Condensed Statement of Changes in Shareholders' Equity. | 36 |
| Condensed Statement of Cash Flows. | 38 |
| Notes to the Condensed Interim Financial Statements | 39 |
(all amounts are in RON unless otherwise stated)
| Note | 6 months ended 30 June 2018 |
6 months ended 30 June 2017 |
|
|---|---|---|---|
| Gross dividend income | 5 | 532,636,085 | 539,932,684 |
| Net gain from equity investments at fair value through profit or loss |
12 | 293,862,281 | 158,981,299 |
| Interest income | 4,455,013 | 7,272,798 | |
| Net gain/ (loss) from other financial instruments at fair value through profit or loss |
2,925,195 | (5,329,463) | |
| Other income, net | 4,583,392 | 7,346,635 | |
| Reversal of impairment losses on receivables, net | 120,846 | 36,725,659 | |
| Net foreign exchange gain/ (loss) | (516,489) | 522,817 | |
| Gain on disposal of equity investments classified as available for sale, net |
n/a | 20,975,361 | |
| Net operating income | 838,066,323 | 766,427,790 | |
| Operating expenses | 6 | (39,782,642) | (66,212,009) |
| Finance costs | 7 | (3,556) | (21,857) |
| Profit before income tax | 798,280,125 | 700,193,924 | |
| Income tax | 8 | (8,451,863) | 9,075,518 |
| Profit for the period | 789,828,262 | 709,269,442 | |
| Other comprehensive income | |||
| Net change in fair value of available for sale equity investments |
n/a | 138,418,268 | |
| Deferred tax on other comprehensive income | n/a | (10,903,127) | |
| Decrease in fair value reserve following the disposal of available for sale equity investments |
n/a | (20,556,873) | |
| Total other comprehensive income | - | 106,958,268 | |
| Total comprehensive income for the period | 789,828,262 | 816,227,710 | |
| Basic and diluted earnings per share | 9 | 0.1009 | 0.0769 |
These condensed interim financial statements were authorised for issue on 13 August 2018 by:
Franklin Templeton International Services S.à r.l. acting in the capacity of Sole Director of Fondul Proprietatea SA
| Prepared by |
|---|
| Catalin Cadaru |
| Financial Reporting Manager |
| Note | 30 June 2018 | 31 December 2017 | |
|---|---|---|---|
| Assets | |||
| Cash and current accounts | 10 | 62,701,836 | 19,173,567 |
| Deposits with banks | 10 | 68,733,693 | 1,276,669,452 |
| Treasury bills | - | 46,277,947 | |
| Government bonds | 36,453,246 | 195,923,820 | |
| Dividends receivable | 11 | 300,190,447 | - |
| Equity investments | 12 | 9,402,932,360 | 9,278,201,345 |
| Other assets | 14,266,475 | 10,710,812 | |
| Total assets | 9,885,278,057 | 10,826,956,943 | |
| Liabilities | |||
| Payable to shareholders | 14 (a) | 65,464,608 | 20,705,311 |
| Other liabilities and provisions | 14 (b) | 38,778,910 | 16,007,479 |
| Total liabilities | 104,243,518 | 36,712,790 | |
| Equity | |||
| Share capital | 15 (a) | 4,582,427,774 | 4,664,852,363 |
| Other reserves related to the unpaid share capital |
15 (a) | 189,182,422 | 189,182,422 |
| Fair value reserve on available for sale financial assets, net of deferred tax |
15 (b) | n/a | 4,248,175,069 |
| Other reserves | 15 (c) | 275,113,721 | 254,954,179 |
| Treasury shares | 15 (d) | (1,379,427,368) | (218,255,507) |
| Retained earnings | 6,113,737,990 | 1,651,335,627 | |
| Total equity | 9,781,034,539 | 10,790,244,153 | |
| Total liabilities and equity | 9,885,278,057 | 10,826,956,943 |
(all amounts are in RON unless otherwise stated)
| Share capital | Other reserves related to the unpaid share capital |
Fair value reserve on available for sale financial assets, net of deferred tax |
Other reserves | Treasury shares | Retained earnings | Total attributable to the equity holders of the Fund |
|
|---|---|---|---|---|---|---|---|
| Balance as at 1 January 2018 | 4,664,852,363 | 189,182,422 | 4,248,175,069 | 254,954,179 | (218,255,507) | 1,651,335,627 | 10,790,244,153 |
| Changes on initial application of IFRS 9 (see Note 3) | - | - | (4,248,175,069) | - | - | 4,248,175,069 | - |
| Restated balance as at 1 January 2018 | 4,664,852,363 | 189,182,422 | - | 254,954,179 | (218,255,507) | 5,899,510,696 | 10,790,244,153 |
| Profit for the period | - | - | - | - | - | 789,828,262 | 789,828,262 |
| Coverage of losses from cancellation of treasury shares | - | - | - | 75,624,623 | - | (75,624,623) | - |
| Total comprehensive income for the period | - | - | - | 75,624,623 | - | 714,203,639 | 789,828,262 |
| Transactions with owners, recorded directly in equity | |||||||
| Dividends declared | - | - | - | - | - | (499,976,345) | (499,976,345) |
| Acquisition of treasury shares | - | - | - | - | (1,299,061,531) | - | (1,299,061,531) |
| Cancellation of treasury shares | (82,424,589) | - | - | (55,465,081) | 137,889,670 | - | - |
| Total transactions with owners recorded directly in | |||||||
| equity | (82,424,589) | - | - | (55,465,081) | (1,161,171,861) | (499,976,345) | (1,799,037,876) |
| Balance as at 30 June 2018 | 4,582,427,774 | 189,182,422 | - | 275,113,721 | (1,379,427,368) | 6,113,737,990 | 9,781,034,539 |
(all amounts are in RON unless otherwise stated)
| Share capital | Fair value reserve on available for sale financial assets, net of deferred tax |
Other reserves | Treasury shares | Retained earnings | Total attributable to the equity holders of the Fund |
|
|---|---|---|---|---|---|---|
| Balance as at 1 January 2017 | 9,168,314,117 | 4,333,537,124 | 585,468,652 | (654,145,163) | (2,047,223,082) | 11,385,951,648 |
| Comprehensive income for the period | ||||||
| Profit for the period | - | - | - | - | 709,269,442 | 709,269,442 |
| Other comprehensive income | ||||||
| Net change in fair value of available for sale equity investments |
- | 138,418,268 | - | - | - | 138,418,268 |
| Decrease in fair value following the disposal of available for sale equity investments |
- | (20,556,873) | - | - | - | (20,556,873) |
| Deferred tax on other comprehensive income | - | (10,903,127) | - | - | - | (10,903,127) |
| Coverage of the cumulated accounting losses | (2,317,038,572) | - | (156,118,900) | - | 2,473,157,472 | - |
| Total other comprehensive income | (2,317,038,572) | 106,958,268 | (156,118,900) | - | 2,473,157,472 | 106,958,268 |
| Total comprehensive income for the period | (2,317,038,572) | 106,958,268 | (156,118,900) | - | 3,182,426,914 | 816,227,710 |
| Transactions with owners, recorded directly in equity | ||||||
| Decrease of the nominal value of the shares | (1,007,408,074) | - | - | 46,980,596 | - | (960,427,478) |
| Acquisition of treasury shares | - | - | - | (721,412,747) | - | (721,412,747) |
| Cancellation of treasury shares | (605,345,483) | - | 14,599,367 | 590,746,116 | - | - |
| Total transactions with owners recorded directly in equity |
(1,612,753,557) | - | 14,599,367 | (83,686,035) | - | (1,681,840,225) |
| Balance as at 30 June 2017 | 5,238,521,988 | 4,440,495,392 | 443,949,119 | (737,831,198) | 1,135,203,832 | 10,520,339,133 |
(all amounts are in RON unless otherwise stated)
| 6 months ended 30 June 2018 |
6 months ended 30 June 2017 |
|
|---|---|---|
| Cash flows from operating activities | ||
| Disposal/ maturity of treasury bills and bonds | 94,636,651 | 1,386,863,260 |
| Dividends received (net of withholding tax) | 224,066,552 | 185,272,798 |
| Proceeds from disposal of equity investments | 171,553,473 | 28,966,209 |
| Interest received | 6,096,335 | 10,896,471 |
| Amounts collected from the depository Bank of the Fund's GDRs | 4,518,246 | - |
| Suppliers and other taxes and fees paid | (63,613,639) | (76,911,743) |
| Acquisition of treasury bills and bonds | (36,480,654) | (355,691,547) |
| Other payments, net | (3,147,613) | (1,122,324) |
| Net cash flows from operating activities | 397,629,351 | 1,178,273,124 |
| Cash flows from financing activities | ||
| Short term bank loans | - | 237,000,000 |
| Payments to shareholders related to the return of capital | (3,573,590) | (871,556,172) |
| Acquisition cost of treasury shares | (1,270,832,418) | (711,513,691) |
| Dividends paid (net of withholding tax) | (432,991,286) | (5,243) |
| Net cash flows used in financing activities | (1,707,397,294) | (1,346,075,106) |
| Net decrease in cash and cash equivalents | (1,309,767,943) | (167,801,982) |
| Cash and cash equivalents at the beginning of the period | 1,441,188,216 | 311,105,488 |
| Cash and cash equivalents at the end of the period as per the Statement of Cash Flows |
131,420,273 | 143,303,506 |
| 30 June 2018 | 30 June 2017 | |
|---|---|---|
| Cash and current accounts (see Note 10) | 62,701,836 | 58,377,370 |
| Bank deposits with original maturities of less than three months (see Note 10) |
68,718,437 | 84,926,136 |
| 131,420,273 | 143,303,506 | |
| Interest accrued on bank deposits (see Note 10) | 15,256 | 1,152 |
| Treasury bills and government bonds with original maturities of more | ||
| than three months and less than one year | 36,453,246 | 69,962,600 |
| Total cash and current accounts, deposits with banks, treasury | ||
| bills and government bonds as per Statement of Financial Position |
167,888,775 | 213,267,258 |
(all amounts are in RON unless otherwise stated)
Fondul Proprietatea SA (referred to as "Fondul Proprietatea" or "the Fund") was incorporated as a joint stock company and is operating as an undertaking for collective investment, in the form of a closed end investment company, established in accordance with Law no. 247/2005 on the reform in the field of property and justice and other adjacent measures, as subsequently amended ("Law 247/2005") and registered in Bucharest on 28 December 2005. The address of the Fund's registered office is 78 - 80, Buzeşti Street, 7th Floor, District 1, Bucharest.
Fondul Proprietatea is an alternative investment fund starting 1 April 2016.
The Fund undertakes its activities in accordance with Law 247/2005, Law 297/2004 regarding the capital market, as subsequently amended ("Law 297/2004"), Law 31/1990 regarding companies, republished as subsequently amended ("Law 31/1990"), and Law 74/2015 regarding Alternative Investment Fund Managers ("Law 74/2015") and it is an entity authorised, regulated and supervised by the FSA, formerly known as the National Securities Commission ("CNVM").
In accordance with its Constitutive Act, the main activity of the Fund is the management and administration of its portfolio.
The Fund was established to allow the payment in shares equivalent to the compensation payable in respect of abusive expropriations undertaken by the Romanian State during the communist period, when properties were not returned in kind. Beginning with 15 March 2013, the date when Government Emergency Ordinance no. 4/2012 entered into force, the compensation process was suspended. In January 2015 the Law no. 10/2015 on amending Title VII of Law no. 247/2005 regarding the reforms in the sectors of justice and property, as well as certain related measures, with subsequent amendments ("Law 10/2015") entered into force confirming that the Romanian State will no longer use the compensation scheme using Fondul Proprietatea shares.
The Fund is managed by Franklin Templeton International Services S.à r.l. ("FTIS") as its Sole Director and Alternative Investment Fund Manager ("AIFM") under the Directive 2011/61/EU on Alternative Investment Fund Managers ("AIFM Directive") and local implementation regulations. The initial FTIS' mandate for a period of two years commenced on 1 April 2016 and expired on 31 March 2018. On 14 February 2018, the Fund's shareholders approved the renewal of FTIS' mandate for another 2 years starting with 1 April 2018 under a new Management Agreement which became effective starting with the same date (i.e. 1 April 2018). Under both agreements FTIS has delegated the role of Investment Manager as well as certain administrative functions to Franklin Templeton Investment Management Limited United Kingdom, Bucharest Branch ("FTIML" or "Investment Manager") for the entire duration of its mandate as AIFM.
Starting with 29 September 2010 until 31 March 2016, the Sole Director of the Fund was FTIML.
Since 25 January 2011, Fondul Proprietatea has been a listed company on the spot regulated market managed by the Bucharest Stock Exchange in Tier I shares of the Equity Sector of the market (renamed as of 5 January 2015 as Premium Tier shares), under ISIN number ROFPTAACNOR5 with the market symbol "FP".
Since 29 April 2015, the Fund's Global Depositary Receipts ("GDR") have been listed on the London Stock Exchange – Specialist Fund Market, under ISIN number US34460G1067, with the market symbol "FP.". The Bank of New York Mellon has been appointed by the Fund to act as depositary bank in relation to the GDR facility. The GDR facility is limited to one-third of the Fund's subscribed share capital under the Romanian securities regulations, each GDR representing 50 shares, and the currency of the GDRs is the US dollar.
These condensed interim financial statements for the six-month period ended 30 June 2018 are not audited.
(all amounts are in RON unless otherwise stated)
These condensed interim financial statements for the six-month period ended 30 June 2018 have been prepared in accordance with IAS 34 Interim financial reporting and applying the FSA Norm 39/2015. These condensed interim financial statements should be read in conjunction with the annual financial statements for the year ended 31 December 2017, prepared in accordance with IFRS.
The Fund is an investment entity and does not consolidate its subsidiaries as it applies IFRS 10, IFRS 12 and IAS 27 (Investment Entities). In consequence, the Fund does not prepare consolidated financial statements, the separate financial statements being the Fund's only financial statements. The Fund has reassessed the criteria for being an investment entity for the six-month period ended 30 June 2018 and continues to meet them.
These condensed interim financial statements have been prepared on a fair value basis for the main part of the Fund's assets (equity investments, treasury bills and government bonds, respectively), and on the historical cost or amortised cost basis for the rest of the items included in the financial statements.
These condensed interim financial statements are prepared and presented in Romanian Lei (RON), which is the Fund's functional and presentation currency. All financial information presented in RON has been rounded to the nearest unit.
The preparation of these condensed interim financial statements in accordance with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.
Information and critical judgements in applying accounting policies with significant areas of estimation uncertainty that have the most significant impact on the amounts recognised in these condensed interim financial statements are included in the following notes:
Except for the changes related to the adoption of IFRS 9 Financial Instruments ("IFRS 9") described below, the accounting policies applied in these condensed interim financial statements are the same as those applied in the Fund's financial statements for the year ended 31 December 2017 and have been applied consistently to all periods presented in these condensed interim financial statements.
IFRS 9 replaces the existing guidance in IAS 39 "Financial Instruments: Recognition and Measurement" and includes revised guidance on the classification and measurement of financial instruments, a new expected credit loss model for calculating impairment on financial assets and new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from IAS 39.
(all amounts are in RON unless otherwise stated)
The Fund adopted IFRS 9 with the date of initial application 1 January 2018. The Fund holds the following types of financial instruments that fall under the scope of IFRS 9: equity investments, government bonds, treasury bills, cash and current accounts, deposits with banks and other assets and liabilities. Following the analysis performed, the Fund decided to classify starting with the date of initial application of IFRS 9, all its equity investments as equity investments at fair value through profit or loss (the default option under IFRS 9).
There was no change in the carrying amounts of financial assets and liabilities upon transition to IFRS 9 on 1 January 2018 compared to their previous measurement in accordance with IAS 39. The classification and the carrying amount of the financial assets and liabilities in accordance with IAS 39 and IFRS 9 at 1 January 2018 are presented below:
| IAS 39 | (31 December 2017) | IFRS 9 | (1 January 2018) | |
|---|---|---|---|---|
| Instrument type | Measurement category |
Carrying amount |
Measurement category |
Carrying amount |
| Subsidiaries and associates |
Fair value through profit or loss |
271,735,746 | Fair value through profit or loss |
271,735,746 |
| Equity investments at fair value through profit or loss |
Fair value through profit or loss |
1,619,774,750 | Fair value through profit or loss |
1,619,774,750 |
| Other equity investments | Available for sale | 7,386,690,849 | Fair value through profit or loss |
7,386,690,849 |
| Cash and current accounts and deposits with banks |
Loans and receivables |
1,295,843,019 | Amortised cost | 1,295,843,019 |
| Treasury bills | Fair value through profit or loss |
46,277,947 | Fair value through profit or loss |
46,277,947 |
| Government bonds | Fair value through profit or loss |
195,923,820 | Fair value through profit or loss |
195,923,820 |
| Other financial assets | Loans and receivables |
1,647,570 | Amortised cost | 1,647,570 |
| Other liabilities | Other financial liabilities at amortised cost |
(35,000,138) | Other financial liabilities at amortised cost |
(35,000,138) |
As result of the adoption of IFRS 9, as at 1 January 2018 (the date of initial application), the fair value reserve on available for sale financial assets net of the related deferred tax in total amount of RON 4,248,175,069 was transferred to retained earnings.
In accordance with the transitional provisions of IFRS 9, the Fund through its Sole Director, FTIS, elected to not restate prior periods.
The table below presents the carrying amounts and fair values of the Fund's financial assets and financial liabilities:
| Other financial | Other financial | |||||
|---|---|---|---|---|---|---|
| assets at | Fair value through | liabilities at | Total carrying | |||
| amortised cost | profit or loss | amortised cost | amount | Fair value | ||
| 30 June 2018 | ||||||
| Cash and current accounts | 62,701,836 | - | - | 62,701,836 | 62,701,836 | |
| Deposits with banks | 68,733,693 | - | - | 68,733,693 | 68,733,693 | |
| Government bonds | - | 36,453,246 | - | 36,453,246 | 36,453,246 | |
| Dividends receivable | 300,190,447 | - | - | 300,190,447 | 300,190,447 | |
| Equity investments | - | 9,402,932,360 | - | 9,402,932,360 | 9,402,932,360 | |
| Other financial assets | 1,695,852 | 3,502,419 | - | 5,198,271 | 5,198,271 | |
| Other financial liabilities | - | - | (83,988,121) | (83,988,121) | (83,988,121) | |
| 433,321,828 | 9,442,888,025 | (83,988,121) | 9,792,221,732 | 9,792,221,732 | ||
| Other financial | ||||||
| Loans and | Fair value through | liabilities at | Total carrying | |||
| receivables | Available for sale | profit or loss | amortised cost | amount | Fair value | |
| 31 December 2017 | ||||||
| Cash and current accounts | 19,173,567 | - | - | - | 19,173,567 | 19,173,567 |
| Deposits with banks | 1,276,669,452 | - | - | - | 1,276,669,452 | 1,276,669,452 |
| Treasury bills | - | - | 46,277,947 | - | 46,277,947 | 46,277,947 |
| Government bonds | - | - | 195,923,820 | - | 195,923,820 | 195,923,820 |
| Equity investments | - | 7,386,690,849 | 1,891,510,496 | - | 9,278,201,345 | 9,278,201,345 |
| Other financial assets | 1,647,570 | - | - | - | 1,647,570 | 1,647,570 |
| Other financial liabilities | - | - | - | (35,000,138) | (35,000,138) | (35,000,138) |
| 1,297,490,589 | 7,386,690,849 | 2,133,712,263 | (35,000,138) | 10,782,893,563 | 10,782,893,563 |
(all amounts are in RON unless otherwise stated)
| 6 months ended | 6 months ended | |
|---|---|---|
| 30 June 2018 | 30 June 2017 | |
| Hidroelectrica SA | 226,245,815 | 206,556,210 |
| OMV Petrom SA | 113,270,962 | 106,763,221 |
| CN Aeroporturi Bucuresti SA | 61,193,113 | 42,955,766 |
| Alro SA | 39,010,085 | 6,863,554 |
| BRD Groupe Societe Generale SA | 36,314,743 | 18,515,323 |
| Engie Romania SA | 20,232,568 | 13,308,134 |
| Nuclearelectrica SA | 19,451,565 | 9,044,766 |
| E-Distributie Banat SA | 7,694,517 | 8,922,810 |
| E-Distributie Dobrogea SA | 4,269,700 | 6,604,290 |
| CN Administratia Porturilor Maritime SA | 4,054,314 | 11,008,410 |
| Electrica Furnizare SA | - | 34,807,451 |
| SDEE Transilvania Nord SA | - | 22,115,641 |
| SDEE Transilvania Sud SA | - | 21,708,184 |
| SDEE Muntenia Nord SA | - | 19,336,883 |
| Conpet SA | - | 8,695,227 |
| Others | 898,703 | 2,726,814 |
| 532,636,085 | 539,932,684 |
The dividend income was subject to 5% Romanian withholding tax in 2018 and 2017. In cases where the relevant shareholding of the Fund was above 10% of total share capital of the paying company, for at least one year prior to the dividend distribution date, a withholding tax exemption was applied.
| 6 months ended 30 June 2018 |
6 months ended 30 June 2017 |
|
|---|---|---|
| Administration fees | 26,586,807 | 54,033,776 |
| Third party services | 5,621,284 | 4,763,889 |
| FSA monthly fees | 4,641,174 | 5,301,183 |
| Intermediaries and other fees related to disposal of portfolio holdings |
983,433 | 81,333 |
| BON remunerations and related taxes | 723,690 | 719,075 |
| Depositary bank fee | 317,879 | 382,734 |
| Other operating expenses | 908,375 | 930,019 |
| 39,782,642 | 66,212,009 |
The total administration fees for the six-month period ended 30 June 2018 included the base fee of RON 21,587,043 (six-month period ended 30 June 2017: RON 24,068,901) and the distribution fee of RON 17,769,034 out of which RON 12,769,270 was related to the buybacks and thus recognised directly in equity as buybacks acquisition cost (six-month period ended 30 June 2017: RON 29,964,875 out of which RON 13,701,463 represented distribution fee related to the buybacks). Starting with the financial statements for the year ended 31 December 2017, the distribution fee related to buybacks is recognised directly in equity together with the underlying shares. This change was not applied on the comparative amounts as at 30 June 2017 as the effect is not significant. The administration fees are invoiced and paid on a quarterly basis.
Third party services mainly include legal and litigation assistance, valuation services in relation to the Fund's portfolio, the financial auditor's fees, investor's relations expenses and other expenses related to the Board of Nominees as accommodation, transport and insurance costs.
(all amounts are in RON unless otherwise stated)
During the six-month period ended 30 June 2018 and the six-month period ended 30 June 2017, the FSA fee was 0.0078% per month applied on the total net asset value.
On 4 July 2016, the Fund contracted a revolving committed credit facility for a maximum amount of RON 1 billion from BRD - Groupe Societe Generale SA. The initial availability period of the facility was for one year and on 10 May 2017 it was extended for a subsequent year, respectively until 4 July 2018. On 29 June 2018, the Fund extended the existing credit facility concluded with BRD - Groupe Societe Generale SA for a period of two years, until 29 June 2020.
The permitted use of the credit facility is for general corporate and operational use, and has a new maximum committed amount of RON 400,000,000. The Fund may access, subject to the bank's approval and in accordance with the provisions of the credit facility agreement, additional financing in excess of the committed amount, without exceeding a total amount of RON 600,000,000 at any given time.
The finance costs of RON 3,556 for the six-month period ended 30 June 2018 comprised the commitment fee on undrawn amounts from the credit facility.
The finance costs of RON 21,857 for the six-month period ended 30 June 2017 comprise the accrued interest expense on the amount of RON 237,000,000 drawn from the credit facility on 27 June 2017 and repaid on 25 July 2017. The amount drew was used for the funding of June 2017 return of capital to shareholders.
There are no outstanding amounts from the credit facility as at 30 June 2018 and 31 December 2017.
There was no current profit tax recorded during the six-month period ended 30 June 2018 and the six-month period ended 30 June 2017. The income tax recorded during the six-month period ended 30 June 2018 of RON 8,451,863 relates to the withholding tax on the Fund's dividends received from portfolio companies (six-month period ended 30 June 2017: RON 1,827,608 was related to the Fund's dividends received from portfolio companies).
There was no deferred tax recognised in profit or loss during the six-month period ended 30 June 2018 (six-month period ended 30 June 2017: net deferred income tax of RON 10,903,126 related to the fiscal loss).
The effective tax rate used to calculate the deferred tax position of the Fund was 16% (standard tax rate).
(all amounts are in RON unless otherwise stated)
| 6 months ended | 6 months ended | |
|---|---|---|
| 30 June 2018 | 30 June 2017 | |
| Reconciliation of effective tax rate | ||
| Net profit for the period | 789,828,262 | 709,269,442 |
| Income tax | (8,451,863) | 9,075,518 |
| Profit excluding income tax | 798,280,125 | 700,193,924 |
| Income tax using the standard tax rate (16%) | (127,724,820) | (112,031,028) |
| Impact on the income tax expense of: | ||
| Taxation applied on dividend income | (8,451,863) | (1,827,608) |
| Elements similar to revenues (taxable equity items) |
(33,615,519) | (9,852,794) |
| Non-taxable income | 148,399,852 | 293,152,001 |
| Non-deductible expenses | (51,889,624) | (185,700,885) |
| Fiscal result impact in the current period | 64,830,111 | 14,432,706 |
| Deferred tax movement during the period | - | 10,903,126 |
| Income tax | (8,451,863) | 9,075,518 |
See Note 13 Deferred tax for details regarding the deferred tax computation and recognition.
Basic earnings per share is calculated by dividing the profit for the period by the weighted average number of ordinary paid shares in issue during the period, excluding the average number of ordinary shares purchased by the Fund and held as treasury shares based on their settlement date. As at 30 June 2018 and 30 June 2017, none of the Fund's issued shares or other instruments had dilutive effect, therefore basic and diluted earnings per share are the same.
| 6 months ended | 6 months ended | |
|---|---|---|
| 30 June 2018 | 30 June 2017 | |
| Profit for the period | 789,828,262 | 709,269,442 |
| Weighted average number of ordinary shares | 7,829,747,139 | 9,217,472,993 |
| Basic and diluted earnings per share | 0.1009 | 0.0769 |
| 30 June 2018 | 31 December 2017 | |
|---|---|---|
| Petty cash | 83 | 973 |
| Current accounts with banks | 1,238,073 | 80,094 |
| Distributions bank accounts | 61,463,680 | 19,092,500 |
| Cash and current accounts | 62,701,836 | 19,173,567 |
(all amounts are in RON unless otherwise stated)
| 30 June 2018 | 31 December 2017 | |
|---|---|---|
| Bank deposits with original maturities of less | ||
| than three months | 68,718,437 | 1,275,849,317 |
| Interest accrued on bank deposits | 15,256 | 820,135 |
| Deposits with banks | 68,733,693 | 1,276,669,452 |
The cash held with the distributions bank accounts can only be used for payments to shareholders. As at 30 June 2018, distributions bank accounts comprises an amount of RON 1,585,362 for which the payment invalidation date was on 2 July 2018. Such payments are subject to a general statute of limitation, respectively the shareholders may request the payments only within a three-year term starting with the distribution payment date.
| 30 June 2018 | 31 December 2017 | |
|---|---|---|
| Dividends receivable | ||
| Hidroelectrica SA | 226,245,815 | - |
| CN Aeroporturi Bucuresti SA | 61,193,113 | - |
| E-Distributie Banat SA | 7,694,517 | - |
| E-Distributie Dobrogea SA | 4,269,700 | - |
| Other dividends receivable | 1,873,046 | 1,158,522 |
| 301,276,191 | 1,158,522 | |
| Impairment loss allowance | (1,085,744) | (1,158,522) |
| 300,190,447 | - |
As a result of the application of IFRS 9 starting 1 January 2018, the Fund changed its accounting policies classifying all its equity investments at fair value through profit or loss. The AIFM and the Investment Manager of the Fund elected to not restate prior periods.
Before 1 January 2018, the Fund's investments in subsidiaries and associates and equity investments previously classified as subsidiaries and associates were classified and measured at fair value through profit or loss while the other Fund's investments in equity instruments were classified as available for sale financial assets and measured at fair value through other comprehensive income.
Substantially all equity instruments of the Fund are valued at the fair value as follows:
(all amounts are in RON unless otherwise stated)
The movement in the carrying amounts of equity investments in the first six months of 2018 and the first six months of 2017 is presented below:
| Equity investments at fair value through profit or loss |
Equity investments available for sale |
Total equity investments |
|
|---|---|---|---|
| 1 January 2018 | 1,891,510,496 | 7,386,690,849 | 9,278,201,345 |
| Reclassification following the adoption of IFRS 9 (see Note 3) |
7,386,690,849 | (7,386,690,849) | - |
| Net gain from equity investments at fair value through profit or loss (i) |
293,862,281 | - | 293,862,281 |
| Subscriptions to share capital increase of portfolio companies |
2,498,120 | - | 2,498,120 |
| Disposals (ii) | (171,629,386) | - | (171,629,386) |
| 30 June 2018 | 9,402,932,360 | - | 9,402,932,360 |
| Equity investments at fair value through profit or loss |
Equity investments available for sale |
Total equity investments |
|
|---|---|---|---|
| 1 January 2017 | 2,086,956,567 | 7,905,226,677 | 9,992,183,244 |
| Reclassification to non-current assets held | |||
| for sale (iii) | - | (877,423,000) | (877,423,000) |
| Net change in fair value of available for | |||
| sale equity investments (recorded in other | |||
| comprehensive income) | - | 135,921,463 | 135,921,463 |
| Net gain from equity investments at fair | |||
| value through profit or loss (i) | 158,981,299 | - | 158,981,299 |
| Subscriptions to share capital increase of | |||
| portfolio companies | - | 33,580 | 33,580 |
| Disposals (ii) | - | (28,629,054) | (28,629,054) |
| 30 June 2017 | 2,245,937,866 | 7,135,129,666 | 9,381,067,532 |
The net gain from equity investments at fair value through profit or loss for the six-month period ended 30 June 2018 of RON 293,862,281 (for the six-month period ended 30 June 2017: RON 158,981,299) was mainly generated by the change in fair value for the holding in OMV Petrom SA, as a result of the increase of this company's share price during the respective period.
During the six-month period ended 30 June 2018, the Fund sold its entire holdings in Conpet SA and Palace SA and part of its holdings in Nuclearelectrica SA and BRD Groupe Societe Generale SA.
During the six-month period ended 30 June 2017, the Fund sold its entire holding in Oil Terminal SA and its holding in Banca Transilvania SA.
(all amounts are in RON unless otherwise stated)
There were no financial instruments classified as non-current assets held for sale as at 30 June 2018.
As at 30 June 2017, based on the assessment made by the Fund, all the criteria for classifying as held-for-sale the holdings in SDEE Muntenia Nord SA, SDEE Transilvania Sud SA, SDEE Transilvania Nord SA and Electrica Furnizare SA required by IFRS 5 were met and consequently these holdings were reclassified from equity investments available for sale category to non-current assets held for sale.
As at 30 June 2018 and 31 December 2017 the Fund's portfolio comprised the following holdings:
| 30 June 2018 | 31 December 2017 | |
|---|---|---|
| Hidroelectrica SA | 3,531,000,000 | 3,566,000,000 |
| OMV Petrom SA | 1,815,167,159 | 1,619,774,750 |
| CN Aeroporturi Bucuresti SA | 791,000,000 | 774,000,000 |
| E-Distributie Banat SA | 545,000,000 | 545,000,000 |
| Engie Romania SA | 472,000,000 | 472,000,000 |
| E-Distributie Muntenia SA | 419,000,000 | 419,000,000 |
| E-Distributie Dobrogea SA | 342,000,000 | 342,000,000 |
| Alro SA | 311,217,729 | 238,333,015 |
| Societatea Nationala a Sarii SA | 258,000,000 | 233,000,000 |
| Administratia Porturilor Maritime SA | 230,000,000 | 230,000,000 |
| BRD Groupe Societe Generale SA | 219,778,316 | 285,646,454 |
| Nuclearelectrica SA | 160,960,125 | 197,340,343 |
| Enel Energie Muntenia SA | 61,000,000 | 61,000,000 |
| Enel Energie SA | 57,000,000 | 57,000,000 |
| Posta Romana SA | 35,000,000 | 35,000,000 |
| Romaero SA | 33,841,628 | 30,168,893 |
| Complexul Energetic Oltenia SA | 32,000,000 | 32,000,000 |
| Zirom SA | 26,839,000 | 26,839,000 |
| Conpet SA | - | 52,121,980 |
| Other | 62,128,403 | 61,976,910 |
| Total equity investments | 9,402,932,360 | 9,278,201,345 |
Except for the Fund's investments in subsidiaries (i.e. Alcom SA, Comsig SA, Zirom SA), associates (i.e. Societatea Nationala a Sarii SA, Plafar SA) and equity investments previously classified as associates (i.e. OMV Petrom SA), all other investments were classified as equity investments available for sale as at 31 December 2017.
There was no change in the carrying amounts of financial assets and liabilities upon transition to IFRS 9 on 1 January 2018 compared to their previous measurement category in accordance with IAS 39.
None of the equity investments are pledged as collateral for liabilities.
(all amounts are in RON unless otherwise stated)
The Fund classifies the fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurement, the levels of the fair value hierarchy being defined as follows:
The table below presents the classification of the financial instruments carried at fair value by fair value hierarchy level, based on the inputs used in making the measurement:
| Level 1 | Level 2 | Level 3 | Total | |
|---|---|---|---|---|
| Equity investments | 2,507,123,328 | - | 6,895,809,032 | 9,402,932,360 |
| Government bonds | 36,453,246 | - | - | 36,453,246 |
| 2,543,576,574 | - | 6,895,809,032 | 9,439,385,606 |
| Level 1 | Level 2 | Level 3 | Total | |
|---|---|---|---|---|
| Equity investments | 2,393,216,543 | - | 6,884,984,802 | 9,278,201,345 |
| Treasury bills | 46,277,947 | - | - | 46,277,947 |
| Government bonds | 195,923,820 | - | - | 195,923,820 |
| 2,635,418,310 | - | 6,884,984,802 | 9,520,403,112 | |
The table below presents the movement in Level 3 equity investments during the first six months of 2018 and the first six months of 2017:
| 6 months ended |
6 months ended |
|
|---|---|---|
| 30 June 2018 |
30 June 2017 |
|
| Opening balance | 6,884,984,802 | 7,592,183,120 |
| Net unrealised gain/(loss) recognised in profit or loss |
11,009,052 | (1,163,533) |
| Net change in fair value recorded in other comprehensive income | - | 9,398,377 |
| Subscriptions to share capital increase of portfolio companies | 2,498,120 | 33,580 |
| Disposals | (2,682,942) | - |
| Transfers in/ (out) of Level 3 |
- | - |
| Closing balance | 6,895,809,032 | 7,600,451,544 |
The level in the fair value hierarchy within which the fair value measurement is classified is determined on the basis of the lowest level input that is significant to the fair value measurement. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety.
If a fair value measurement uses observable inputs that require significant adjustments based on unobservable inputs, that financial instrument is classified on Level 3. Assessing the significance of a particular input to the fair value measurement in its entirety requires significant judgment, considering factors specific to the asset. The Fund considers observable data to be market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary and provided by independent sources that are actively involved in the relevant market.
(all amounts are in RON unless otherwise stated)
For Level 3, a majority of the equity investments valuations were performed with the assistance of independent valuers, based on financial information provided by the Fund, using valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs, which ensures that the underlying data is accurate, and that appropriate inputs were used in the valuation.
As the valuation reports were prepared as at 30 September 2017, except for the valuation reports for the holding in Hidroelectrica SA, CN Aeroporturi Bucuresti SA and Societatea Nationala a Sarii SA which were prepared as at 31 March 2018 (for 30 June 2017: as at 30 September 2016, except for the valuation report for the holding in Posta Romana SA which was prepared as at 31 December 2016), based on financial information available for the companies under valuation at the respective dates, the Fund's management has analysed the period between the date of the valuation reports and the reporting date. There was no information known or available to the Fund's management which may have significant impact on the fair values of the equity investments as at the reporting date, as they are presented in these condensed interim financial statements.
Fair value estimates obtained from models are adjusted for any other factors, such as liquidity risk or model uncertainties, to the extent that the Fund believes that a third party market participant would take into account these factors in pricing a transaction.
As a result of strong volatility in the capital markets and severe restrictions in the credit markets both globally and in Romania, notwithstanding any potential economic stabilisation measures that may be put into place by the Romanian State, economic uncertainties arose surrounding the continual availability and cost of credit for the Fund's counterparties, the future development of the market and demand for goods and services they produce. These economic uncertainties are expected to continue in the foreseeable future and, as a consequence, there is a possibility that the assets of the Fund are not recovered at their carrying amounts in the ordinary course of business. A corresponding impact on the Fund's profitability cannot be estimated reliably as of the date of these condensed interim financial statements.
For the financial investments classified as Level 1, the Fund had adequate information available with respect to active markets, with sufficient trading volume, for obtaining accurate prices.
As at 30 June 2018, unlisted equity investments and listed illiquid equity investments with a total carrying amount of RON 6,895,809,032 (31 December 2017: RON 6,884,984,802 out of which RON 3,908,505,337 represented the total net change in fair value recognised in equity), were classified as Level 3 of the fair value hierarchy. Out of the total value of the equity investments classified as Level 3 of the fair value hierarchy, 99% were assessed with the assistance of an independent valuer, using valuation methods in accordance with the International Valuation Standards and 1% were determined based on values used in the calculation of the net asset value of the Fund as at that date, calculated in accordance with the regulations issued by the FSA/CNVM.
The following table sets out information about the significant unobservable inputs used at 30 June 2018 and 31 December 2017 in measuring equity instruments classified as Level 3 in the fair value hierarchy:
(all amounts are in RON unless otherwise stated)
| Financial assets |
Fair value as at 30 June 2018 |
Valuation technique |
Unobservable inputs range (weighted average) |
Relationship of unobservable inputs to fair value |
|
|---|---|---|---|---|---|
| Total | 6,895,809,032 | ||||
| Unlisted equity |
6,470,000,000 | Market approach - comparable |
EBITDA multiple ranging from 4.46 - 10.92 (8.06) |
The higher the EBITDA multiple, the higher the fair value. |
|
| instruments | companies (based on EBITDA multiple) |
Discount for lack of marketability: 15% (15%) |
The lower discount for lack of marketability, the higher the fair value. |
||
| Unlisted equity instruments |
286,829,000 | Income approach - discounted cash flow method |
Weighted average cost of capital: 12.69% or 13.50% or 13.82% (13.52%) |
The lower the weighted average cost of capital, the higher the fair value. |
|
| Discount for lack of marketability: 12% or 15% or 17% (15.17%) |
The lower the discount for the lack of marketability, the higher the fair value. |
||||
| Discount for lack of control: 0% or 18% or 26% (24%) |
The lower the discount for the lack of control, the higher the fair value. |
||||
| Long-term revenue growth rate: 1.5% or 2% (1.95%) |
The higher the long-term revenue growth rate, the higher the fair value. |
||||
| Unlisted equity |
35,000,000 | Market approach - comparable |
Price/Earnings value: 13.34 (13.34) |
The higher the Price /Earnings multiple, the higher the fair value. |
|
| instruments | companies (based on Price /Earnings multiple) |
Discount for lack of marketability: 24.4% (24.4%) |
The lower the discount for the lack of marketability, the higher the fair value. |
||
| Unlisted equity |
32,000,000 | Market approach - comparable |
Revenue multiple: 0.78 (0.78) |
The higher the Revenue multiple, the higher the fair value. |
|
| instruments | companies (based on Revenue multiple) |
Discount for lack of marketability: 15% (15%) |
The lower the discount for the lack of marketability, the higher the fair value. |
||
| Unlisted equity |
2,441,000 | Market approach - comparable |
Price/Book value: 0.46 (0.46) |
The higher Price/ Book value multiple, the higher the fair value. |
|
| instruments | companies (based on Price/Book value multiple) |
Discount for lack of marketability: 15% (15%) |
The lower discount for lack of marketability, the higher the fair value. |
||
| Listed illiquid equity instruments |
47,472,570 | Bucharest Stock Exchange reference price - Average price |
These shares are traded infrequently and have little price transparency. Fair values for these equity instruments were considered to be those used in the calculation of the net asset value of the Fund, in accordance with the regulations issued by the FSA/ CNVM. |
||
| Unlisted equity instruments |
22,066,462 | Fair values for these equity instruments were considered to be those used in the calculation of the net asset value of the Fund, in accordance with the regulations issued by the FSA/ CNVM, primarily based on the value of the shareholders' equity of the issuer extracted from its latest annual financial statements. |
(all amounts are in RON unless otherwise stated)
| Financial assets |
Fair value as at 31 December 2017 |
Valuation technique |
Unobservable inputs range (weighted average) |
Relationship of unobservable inputs to fair value |
|
|---|---|---|---|---|---|
| Total | 6,884,984,802 | ||||
| Unlisted equity |
6,488,000,000 | Market approach - comparable |
EBITDA multiple ranging from 4.46 - 10.93 (8.35) |
The higher the EBITDA multiple, the higher the fair value. |
|
| instruments | companies (based on EBITDA multiple) |
Discount for lack of marketability: 15% (15%) |
The lower discount for lack of marketability, the higher the fair value. |
||
| Unlisted equity instruments |
261,829,000 | Income approach - discounted cash flow method |
Weighted average cost of capital: 12.69% or 13.24% or 13.82% (13.30%) |
The lower the weighted average cost of capital, the higher the fair value. |
|
| Discount for lack of marketability: 12% or 15% or 17% (15.18%) |
The lower the discount for the lack of marketability, the higher the fair value. |
||||
| Discount for lack of control: 0% or 18% or 26% (23%) |
The lower the discount for the lack of control, the higher the fair value. |
||||
| Long-term revenue growth rate: 1.5% (1.5%) |
The higher the long-term revenue growth rate, the higher the fair value. |
||||
| Unlisted 35,000,000 equity |
Market approach - comparable |
Price/Earnings value: 13.34 (13.34) |
The higher the Price /Earnings multiple, the higher the fair value. |
||
| instruments | companies (based on Price /Earnings multiple) |
Discount for lack of marketability: 24.4% (24.4%) |
The lower the discount for the lack of marketability, the higher the fair value. |
||
| Unlisted equity |
32,000,000 | Market approach - comparable |
Revenue multiple: 0.78 (0.78) |
The higher the Revenue multiple, the higher the fair value. |
|
| instruments | companies (based on Revenue multiple) |
Discount for lack of marketability: 15% (15%) |
The lower the discount for the lack of marketability, the higher the fair value. |
||
| Unlisted equity |
2,441,000 | Market approach - comparable |
Price/Book value: 0.46 (0.46) |
The higher Price/ Book value multiple, the higher the fair value. |
|
| instruments | companies (based on Price/Book value multiple) |
Discount for lack of marketability: 15% (15%) |
The lower discount for lack of marketability, the higher the fair value. |
||
| Listed illiquid equity instruments |
43,734,433 | Bucharest Stock Exchange reference price - Average price |
These shares are traded infrequently and have little price transparency. Fair values for these equity instruments were considered to be those used in the calculation of the net asset value of the Fund, in accordance with the regulations issued by the FSA/ CNVM. |
||
| Unlisted equity instruments |
21,980,369 | Fair values for these equity instruments were considered to be those used in the calculation of the net asset value of the Fund, in accordance with the regulations issued by the FSA/ CNVM, primarily based on the value of the shareholders' equity of the issuer extracted from its latest annual financial statements. |
Significant unobservable inputs are the following:
Revenue multiple: is a tool used to appraise businesses based on market comparison to similar public companies. Revenue based business value estimation may be preferred to earnings multiple valuation whenever there is uncertainty regarding some of a company's expenses. The most common tendency is to value a firm based on its sales whenever this number is the most direct indication of a company's earning capacity.
(all amounts are in RON unless otherwise stated)
EBITDA multiple: represents the most relevant multiple used when pricing investments and it is calculated using information from comparable public companies (similar geographic location, industry size, target markets and other factors that valuers consider to be reasonable). The traded multiples for comparable companies are determined by dividing the enterprise value of a company by its EBITDA and further discounted for considerations such as the lack of marketability and other differences between the comparable peer group and specific company.
Discount for lack of marketability: represents the discount applied to the comparable market multiples to reflect the liquidity differences between a portfolio company relative to its comparable peer group. Valuers estimate the discount for lack of marketability based on their professional judgement after considering market liquidity conditions and company-specific factors.
Discount for lack of control: represents the discount applied to reflect the absence of the power of control considered under the discounted cash flow method, in order to derive the value of a minority shareholding in the equity of subject companies.
Weighted average cost of capital: represents the calculation of a company's cost of capital in nominal terms (including inflation), based on the Capital Asset Pricing Model. All capital sources (shares, bonds and any other long-term debts) are included in a weighted average cost of capital calculation.
Price/Earnings multiple ("P/E"): the Price/Earnings ratio is a market prospect ratio that calculates the market value of an investment relative to its earnings by comparing the market price per share by the earnings per share. It shows what the market is willing to pay for an investment based on its current earnings. Investors often use this ratio to evaluate what an investment's fair market value should be by predicting future earnings per share.
Price/Book value multiple: often expressed simply as price-to-book, this multiple measures a company's market price in relation to its book value (net assets). It reflects how many times the book value per share investors are ready to pay for a share. The Price/Book value multiple varies dramatically between industries. A company that requires more assets (e.g. a manufacturing company with factory space and machinery) will generally post a significantly lower price to book than a company whose earnings come from the provision of a service (e.g. a consulting firm).
| Deductible temporary differences |
Related deferred tax asset, out of which: |
Recognised deferred tax asset |
Not recognised deferred tax asset |
|
|---|---|---|---|---|
| 30 June 2018 | ||||
| Fiscal loss carried | ||||
| forward | 3,509,568,069 | 561,530,891 | - | 561,530,891 |
| Deductible temporary differences |
Related deferred tax asset/ (liability), out of which: |
Recognised deferred tax asset/ (liability) |
Not recognised deferred tax asset |
|
| 31 December 2017 | ||||
| Equity investments | (210,096,993) | (33,615,519) | (33,615,519) | - |
| Fiscal loss carried | ||||
| forward | 3,914,756,220 | 626,360,995 | 33,615,519 | 592,745,476 |
| 3,704,659,227 | 592,745,476 | - | 592,745,476 |
The effective tax rate used to calculate the deferred tax position of the Fund was 16% (standard tax rate).
(all amounts are in RON unless otherwise stated)
The movement in the deferred tax position is presented in the tables below:
| 6 months ended 30 June 2018 |
Balance at 1 January 2018 |
Reversed through profit or | loss Balance at 30 June 2018 | |
|---|---|---|---|---|
| Equity investments Fiscal loss carried |
(33,615,519) | 33,615,519 | - | |
| forward | 33,615,519 | (33,615,519) | - | |
| - | - | - | ||
| 6 months ended | Balance at 1 January | Recognised in equity (other comprehensive |
Balance at 30 June | |
| 30 June 2017 | 2017 Recognised in profit or loss | income) | 2017 | |
| Equity investments | (242,134,103) | - | (10,903,127) | (253,037,230) |
| Fiscal loss carried | ||||
| forward | 242,134,103 | 10,903,127 | - | 253,037,230 |
| - | 10,903,127 | (10,903,127) | - |
As at 30 June 2018, the net deferred tax position is nil as the Fund did not recognise any deferred tax asset or deferred tax liability.
As at 31 December 2017, the Fund recognised in profit or loss a deferred tax asset for the unused tax losses carried forward, only to the level of the deferred tax liability recognised in other comprehensive income arising from the taxable temporary differences on equity investments.
The payable to shareholders as at 30 June 2018 in amount of RON 65,464,608 (31 December 2017: RON 20,705,311) comprises the amounts due to shareholders related to the returns of capital of RON 17,099,399 (31 December 2017: RON 20,705,311) and to the dividends due to shareholders in total amount of RON 48,365,209 (31 December 2017: nil).
The movement during the period is presented in the table below:
| 6 months ended 30 June 2018 |
6 months ended 30 June 2017 |
|---|---|
| 20,208,049 | |
| 499,976,345 | 924,046,244 |
| (18,619,848) | - |
| (436,564,876) | (871,556,172) |
| (32,324) | (9,857,612) |
| 65,464,608 | 62,840,509 |
| 20,705,311 |
(all amounts are in RON unless otherwise stated)
| 30 June 2018 | 31 December 2017 | |
|---|---|---|
| Dividend withholding tax due to State Budget | 18,619,848 | - |
| Administration fees | 15,935,714 | 11,752,658 |
| Payables related to treasury shares under settlement |
1,862,027 | - |
| Provision for litigations | 856,247 | 856,247 |
| Financial Supervisory Authority fees | 750,274 | 829,634 |
| Intermediaries and other transactions fees related to disposal of portfolio holdings |
481,363 | 1,236,632 |
| Other liabilities | 273,437 | 1,332,308 |
| 38,778,910 | 16,007,479 |
On 29 June 2018, the paid in share capital of the Fund decreased by RON 82,424,588.48 following the cancellation of 158,508,824 treasury shares acquired by the Fund, respectively 90,849,151 shares repurchased within the seventh buyback programme and 67,659,673 shares repurchased within the eighth buyback programme.
The movements in the share capital components are presented below:
| Share capital paid-in | Share capital unpaid | Total share capital | |
|---|---|---|---|
| 31 December 2016 | 8,859,073,619 | 309,240,498 | 9,168,314,117 |
| Coverage of the cumulated accounting | |||
| losses | (2,233,361,731) | (83,676,841) | (2,317,038,572) |
| Decrease of the nominal value of the | |||
| shares | (971,026,839) | (36,381,235) | (1,007,408,074) |
| Cancellation of treasury shares | (989,832,686) | - | (989,832,686) |
| Total as per Trade Registry evidence | 4,664,852,363 | 189,182,422 | 4,854,034,785 |
| Presentation adjustment related to the | |||
| unpaid share capital | - | (189,182,422) | (189,182,422) |
| 31 December 2017 | 4,664,852,363 | - | 4,664,852,363 |
| Cancellation of treasury shares | (82,424,589) | - | (82,424,589) |
| 30 June 2018 | 4,582,427,774 | - | 4,582,427,774 |
Unpaid share capital represents the nominal value of certain contributions due to the Fund by the Romanian State, represented by the Ministry of Public Finance as shareholder, that were recorded in previous years as paid in share capital (based on Law 247/2005) and subsequently were considered unpaid following the final results of several litigations that took place in the past. Holders of unpaid shares are not entitled to vote or to receive dividends or other cash distributions, until the matters are legally clarified. Due to the fact that there are no clear provisions regarding the unpaid share capital in the special legislation related to the Fund and that according to the general framework provided by the Companies' Law the deadline for the payment by the Romanian State represented by Ministry of Public Finance of the unpaid share capital expired, the Fund recorded a presentation adjustment as at 31 December 2017 for the entire balance of unpaid share capital against other reserves.
(all amounts are in RON unless otherwise stated)
This adjustment was recorded in the financial statements only for presentation purpose, while the actual cancellation of the unpaid share capital in the accounting will follow the legal requirements and will be booked only after the successful completion of the necessary legal steps and only if the cancelation of shares will be the solution agreed with the Romanian State represented by the Ministry of Public Finance.
The receivable related to the unpaid amounts from the Romanian State is fully impaired.
The table below presents the shares balance and their nominal value:
| 30 June 2018 | 31 December 2017 | |
|---|---|---|
| Number of shares in issue | 9,176,173,454 | 9,334,682,278 |
| Number of paid shares | 8,812,361,104 | 8,970,869,928 |
| Number of unpaid shares | 363,812,350 | 363,812,350 |
| Nominal value per share (RON) | 0.52 | 0.52 |
The shareholder structure as at 30 June 2018 was as follows:
| Shareholder categories* | % of subscribed share capital |
% of paid-in share capital |
|---|---|---|
| The Bank of New York Mellon (depository bank for the Fund's GDRs) |
29.38% | 30.57% |
| Foreign institutional investors | 16.05% | 16.70% |
| Romanian institutional investors | 15.24% | 15.86% |
| Romanian private individuals | 15.74% | 16.38% |
| Foreign private individuals | 2.40% | 2.50% |
| Romanian State | 0.07% | 0.07% |
| Treasury shares | 17.22% | 17.92% |
| Unpaid shares | 3.90% | - |
| Total | 100% | 100% |
Source: Depozitarul Central SA
* this structure does not reflect the share capital decrease which was effective starting with 29 June 2018, because its implementation with Depozitarul Central SA was finalised on 18 July 2018
The fair value reserve of RON 4,248,175,069 as at 31 December 2017 comprising the cumulative net change in the fair value of the available for sale financial assets, recognised in other comprehensive income, net of the related deferred tax recognised through equity, was transferred to retained earnings on 1 January 2018, the date of initial application of IFRS 9, respectively the date from which the Fund classified all its equity investments as equity investments at fair value through profit or loss.
| 30 June 2018 | 31 December 2017 | |
|---|---|---|
| Legal reserve | 330,578,802 | 330,578,802 |
| Losses from cancellation of treasury shares | (55,465,081) | (256,073,589) |
| Gains from cancellation of treasury shares | - | 177,865,119 |
| Distributions for which the statute of limitation occurred |
- | 2,583,847 |
| 275,113,721 | 254,954,179 | |
(all amounts are in RON unless otherwise stated)
The legal reserve cannot be used for distributions to shareholders.
Losses from cancellation of treasury shares comprise the reserves related to the losses on the cancellation of treasury shares acquired at an acquisition value higher than the nominal value. This amount may be covered from the retained earnings and other equity elements, in accordance with the resolution of the General Shareholders Meeting ("GSM").
The Fund's Sole Director proposed to shareholders and the shareholders approved the coverage of the losses from cancellation of treasury shares (negative reserves) in amount of RON 256,073,589 at 26 April 2018 General Shareholders' Meeting as follows:
The table below shows the changes in the negative reserves recorded as result of the losses from cancellation of treasury shares during the six-month period ended 30 June 2018:
| 1 January 2018 | 256,073,589 |
|---|---|
| Coverage of negative balance according to Resolution of 26 April 2018 GSM |
(256,073,589) |
| Negative equity reserve arising on the cancellation of the remaining balance of |
|
| shares acquired during 7th buyback programme (recorded on 29 June 2018) | |
| according to GSM Resolution no. 4/26 September 2017 | 31,068,596 |
| Negative equity reserve arising on the partial cancellation of the shares acquired | |
| during 8th buyback programme (recorded on 29 June 2018) according to GSM | |
| Resolution no. 4/26 September 2017 | 24,396,485 |
| 30 June 2018 |
55,465,081 |
During six-month period ended 30 June 2017 the Fund did not recorded any negative reserve in the accounting.
Gains from cancellation of treasury shares comprise the reserves related to the net gain on the cancellation of treasury shares acquired at an acquisition value lower than the nominal value.
The buy-back transactions can only be applied to fully paid shares or GDRs corresponding to the shares of the Fund. All buy-back programmes carried out by the Fund are aimed at decreasing the share capital, in accordance with the shareholders' approval. The implementation of the buy-back programmes is subject to the availability of the necessary cash.
During the first six months of 2018 the Fund continued the ninth buy-back programme started on 14 November 2017.
The table below summarises the details regarding the ninth buy-back programme, respectively the buy-back programme valid during the six-month period ended 30 June 2018:
| GSM date approving the | Acquisition price range as | |||
|---|---|---|---|---|
| Programme | buy-back programme | Starting date | Completion date | approved by GSM |
| Ninth buy-back | 26-Oct-2017 | 14-Nov-2017 | ongoing | 0.2 - 2 RON per share |
(all amounts are in RON unless otherwise stated)
The maximum number of shares that can be repurchased within the ninth buy-back has to be computed so that all outstanding treasury shares acquired during this programme and/or with the previous ones, do not exceed 20% of the issued share capital at the relevant time.
The movement in the number of treasury shares (including the equivalent shares of GDRs bought-back) during the first six months of 2018 and the first six months of 2017 is presented in the table below:
| Acquisitions | Cancellations | |||
|---|---|---|---|---|
| Opening balance | during the | during the | Closing balance | |
| 1 Jan 2018 | period | period | 30 June 2018 |
|
| Seventh buy-back | 90,849,151 | - | 90,849,151 | - |
| Eighth buy-back | 141,869,861 | - | 67,659,673 | 74,210,188 |
| Ninth buy-back | 19,159,328 | 1,361,624,192 | - | 1,380,783,520 |
| 251,878,340 | 1,361,624,192 | 158,508,824 | 1,454,993,708 | |
| Opening balance 1 Jan 2017 |
Acquisitions during the period |
Cancellations during the period |
Closing balance 30 June 2017 |
|
| Sixth buy-back | 712,171,156 | - | 712,171,156 | - |
| Seventh buy-back | 79,336,721 | 750,910,898 | - | 830,247,619 |
| Eighth buy-back | - | 37,174,313 | - | 37,174,313 |
| 791,507,877 | 788,085,211 | 712,171,156 | 867,421,932 |
The movement in the treasury shares carrying amounts during the first six months of 2018 and the first six months of 2017 is presented in the table below:
| Opening balance Cost of treasury 1 Jan 2018 shares acquired |
Cancellation of treasury shares |
Closing balance 30 June 2018 |
|||
|---|---|---|---|---|---|
| Seventh buy-back | 78,310,155 | - | (78,310,155) | - | |
| Eighth buy-back | 123,615,960 | - | (59,579,515) | 64,036,445 | |
| Ninth buy-back | 16,329,392 | 1,299,061,531 | - | 1,315,390,923 | |
| 218,255,507 | 1,299,061,531 | (137,889,670) | 1,379,427,368 | ||
| Opening balance 1 Jan 2017 |
Cost of treasury shares acquired |
Cancellation of treasury shares |
Decrease of the nominal value of the shares |
Closing balance 30 June 2017 |
|
| Sixth buy-back | 590,746,116 | - | (590,746,116) | - - |
|
| Seventh buy-back | 63,399,047 | 688,691,681 | - | (46,482,304) | 705,608,424 |
| Eighth buy-back | - | 32,721,065 | - | (498,291) | 32,222,774 |
| 654,145,163 | 721,412,746 | (590,746,116) | (46,980,595) | 737,831,198 |
(all amounts are in RON unless otherwise stated)
During the 26 April 2018 GSM, the Fund's shareholders approved the distribution of a gross dividend of RON 0.0678 per share, in relation to 2017 statutory profits.
The shareholders registered in the shareholders' registry with the Central Depositary on 11 June 2018 have the right to receive a gross dividend of RON 0.0678 per share, proportionally with their participation in the paid in share capital of the Fund. The payment started on 29 June 2018 and by 30 June 2018, shareholders had collected over 90% of the total distribution.
As at 30 June 2018, the Fund was involved in certain litigations, either as defendant or claimant. According to the requirements of IAS 37 Provisions, Contingent Liabilities and Contingent Assets the Fund considers that there are no litigations which may have significant effects on the Fund's financial position or profitability.
Other contingencies of the Fund included the receivables from World Trade Center București SA, as detailed below.
Title II, Article 4 of Government Emergency Ordinance no. 81/2007 stipulates the transfer of receivables from World Trade Center București SA from the Authority for State Assets Recovery to the Fund, amounting to USD 68,814,198 (including the original principal and related interest and penalties) on 29 June 2007.
During 2008 through 2010, the Fund recovered from World Trade Center București SA, USD 510,131, EUR 148,701 and RON 8,724,888. Given the uncertainties regarding the recoverability of the amounts due by World Trade Center București SA, the above amounts were recognised on receipt basis in the Fund's financial statements.
In August 2013, World Trade Center București SA filed a claim against the Fund asking the Fund to pay back all the amounts received through the enforcement procedure during 2010 and 2011 (EUR 148,701, USD 10,131 and RON 8,829,663). The amounts recovered from the enforcement procedure were originally accounted for by the Fund as contributions of the Romanian State to the share capital of the Fund, decreasing the receivable related to the unpaid capital.
Consequently, these amounts are to be recovered by the Fund from the Romanian State (being accounted for as a receivable over this shareholder of the Fund, for which an impairment adjustment was recorded), while the legal interest was recorded as an expense with provisions for litigations.
On 7 July 2016, the Bucharest Court admitted the claim filed by World Trade Center București SA and obliged Fondul Proprietatea to pay back the amounts recovered from the enforcement procedure (EUR 148,701, USD 10,131 and RON 8,829,663) and the related legal interest calculated for these amounts. During the period from July to August 2016, the Fund performed the payment of these amounts and the related legal interest to World Trade Center București SA. The Fund appealed the above decision but the Court rejected it, making the decision irrevocable.
The related file started by the Fund against the Romanian State being represented by Ministry of Public Finance for recovering the contributions of the Romanian State to the share capital of the Fund was initially suspended, waiting the Court's final decision in relation with the file mentioned above. Considering the above decision the Court reactivated this file and the next hearing will be on 18 September 2018.
(all amounts are in RON unless otherwise stated)
| 6 months ended 30 June 2018 |
6 months ended 30 June 2017 |
|
|---|---|---|
| Remunerations | ||
| Members of the Board of Nominees | 723,690 | 600,000 |
Following the taxation changes regarding salaries and other income assimilated to salaries starting 1 January 2018, respectively the transfer of the social contributions from employers to employees, the Fund's shareholders approved during 14 February 2018 GSM, the increase starting with 1 January 2018 of the gross remuneration paid to the Board of Nominees in order that the level of net remuneration per each member of the Board of Nominees to remain the same as in December 2017.
There were no loans to or other transactions between the Fund and the members of the Board of Nominees in the first six months of 2018 or in the first six months of 2017.
FTIS is the Sole Director and Alternative Investment Fund Manager of the Fund starting with 1 April 2016. The role of investment manager as well as certain administrative functions have been delegated by FTIS to FTIML.
The transactions carried out between the Fund and FTIS were the following:
| 6 months ended | 6 months ended | |
|---|---|---|
| Transactions | 30 June 2018 | 30 June 2017 |
| Administration fees | 39,356,076 | 54,033,776 |
The transactions carried out between the Fund and FTIML were the following:
| 6 months ended | 6 months ended | |
|---|---|---|
| Transactions | 30 June 2018 | 30 June 2017 |
| Rental expense | 41,397 | 33,251 |
| Operating cost | 13,056 | 12,027 |
| 54,453 | 45,278 |
During the first six months of 2018, the Fund also recorded RON 534,592 representing expenses incurred by FTIML on its behalf (six-month period ended 30 June 2017: RON 746,091). These expenses were primarily related to promotional activities for the Fund (investor relations). The recharge of these expenses to the Fund followed the provisions of the management agreement in place at the respective moment and was subject to Board of Nominees' approval.
The outstanding liabilities owed by the Fund were as follows:
| Amounts due to: | 30 June 2018 | 31 December 2017 |
|---|---|---|
| FTIS | 15,935,714 | 11,752,658 |
| FTIML | - | 69,752 |
| 15,935,714 | 11,822,410 |
There are no other elements of compensation for key management besides those described above.
(all amounts are in RON unless otherwise stated)
The Fund had the following subsidiaries, all of which are incorporated in Romania:
| 30 June 2018 | 31 December 2017 | |
|---|---|---|
| Ownership interest | ||
| Zirom SA | 100% | 100% |
| Alcom SA | 72% | 72% |
| Comsig SA | 70% | 70% |
During the first six months of 2018, the Fund participated in the cash share capital increase of Zirom SA, subscribing 235,000 new shares, at the nominal value of RON 10 per share (in total of RON 2,350,000).
During the first six months of 2017, the Fund did not carry out any transaction with its subsidiaries.
In April 2017, the shareholders of Comsig SA approved the dissolution of the company. As at the reporting date of these condensed interim financial statements, Comsig SA is in administrative liquidation process.
The fair value of investments in subsidiaries is presented in the table below:
| 30 June 2018 | 31 December 2017 |
|---|---|
| 26,839,000 | 26,839,000 |
| 12,832,632 | 9,906,746 |
| - | |
| 39,671,632 | 36,745,746 |
| - |
As at 30 June 2018, the Fund has no commitment or intention to provide financial or other support to its subsidiaries, including commitments or intentions to assist the subsidiaries in obtaining financial support.
As at 30 June 2018 and 31 December 2017 the Fund had two associates, both of them incorporated in Romania:
| 30 June 2018 | 31 December 2017 | |
|---|---|---|
| Ownership interest | ||
| Societatea Nationala a Sarii SA | 49% | 49% |
| Plafar SA | 49% | 49% |
The Fund did not carry out any transaction with its associates in the first six months of 2018 or in the first six months of 2017.
On 19 July 2018 the Fund published the convening notice for the Extraordinary General Shareholders' Meeting to be held on 4 September 2018 having on the agenda the approval of the decrease of the subscribed share capital from RON 4,771,610,196.08 to RON 4,733,020,898.32 as a result of the cancelation of 74,210,188 own shares repurchased during the eighth buy-back programme.
| 29 December 2017 29 June 2018 % of the net % of the total Currency Lei % of the net % of the total Currency Lei Lei asset asset asset asset I. Total assets 100.3372% 100.0000% 10,826,827,868.09 101.0643% 100.0000% 9,885,263,261.73 (941,564,606.36) 1 Securities and money market instruments, out of which:* 24.3997% 24.3177% 2,632,840,979.68 26.4901% 26.2112% 2,591,043,774.59 (41,797,205.09) 1.1. securities and money market instruments admitted or traded on a regulated market from Romania, out of 24.3997% 24.3177% - 2,632,840,979.68 26.4901% 26.2112% - 2,591,043,774.59 (41,797,205.09) which: 1.1.1 listed shares traded in the last 30 trading days 22.4907% 22.4152% - 2,426,855,059.71 25.9803% 25.7067% - 2,541,174,737.94 114,319,678.23 1.1.2 listed shares not traded in the last 30 trading days 0.0936% 0.0932% - 10,095,916.20 0.1372% 0.1358% - 13,421,160.97 3,325,244.77 1.1.3 Government bonds 1.8154% 1.8093% - 195,890,003.77 0.3726% 0.3687% - 36,447,875.68 (159,442,128.09) 1.1.4 allotment rights not admitted at trading on a regulated market - - - - - - - - - 1.2. securities and money market instruments admitted or traded on a regulated market from a member state, out - - - - - - - - - of which: 1.2.1 listed shares traded in the last 30 trading days - - - - - - - - - 1.2.2 listed shares not traded in the last 30 trading days - - - - - - - - - 1.3. securities and money market instruments admitted on a stock exchange from a state not a member or - - - - - - - - - negotiates on another regulated market from a state not a member, that operates on a regular basis and is recognized and opened to the public, approved by the Financial Supervisory Authority ("FSA".) 2 New issued securities - - - - - - - - - 3 Other securities and money market instruments mentioned at art. 187 letter a) of the Regulation no.15/2004, 63.4009% 63.1879% - 6,841,241,262.82 70.0154% 69.2782% - 6,848,328,945.43 7,087,682.61 out of which: - shares not admitted at trading on a regulated market 63.4009% 63.1879% - 6,841,241,262.82 70.0154% 69.2782% - 6,848,328,945.43 7,087,682.61 4 Bank deposits, out of which: 11.8307% 11.7910% 1,276,587,197.95 0.7026% 0.6954% 68,729,172.97 (1,207,858,024.98) 4.1. bank deposits made with credit institutions from Romania 11.8307% 11.7910% - 1,276,587,197.95 0.7026% 0.6954% - 68,729,172.97 (1,207,858,024.98) - in RON 11.8307% 11.7910% 1,276,587,197.95 0.7026% 0.6954% 68,729,172.97 (1,207,858,024.98) - in euro - - - - - - - - - 4.2. bank deposits made with credit institutions from an EU state - - - - - - - - - 4.3. bank deposits made with credit institutions from an non-EU state - - - - - - - - - 5 Derivatives financial instruments traded on a regulated market - - - - - - - - - 6 Current accounts and petty cash out of which: 0.1777% 0.1771% 19,173,642.78 0.6410% 0.6342% 62,701,911.92 43,528,269.14 - in RON 0.1777% 0.1771% - 19,167,497.50 0.6291% 0.6225% - 61,537,394.43 42,369,896.93 - in euro 0.0000% 0.0000% EUR 671.64 3,129.64 0.0000% 0.0000% EUR 453.68 2,114.65 (1,014.99) - in USD 0.0000% 0.0000% USD 331.35 1,289.45 0.0119% 0.0117% USD 289,964.48 1,160,814.80 1,159,525.35 - in GBP 0.0000% 0.0000% GBP 328.61 1,726.19 0.0000% 0.0000% GBP 301.76 1,588.04 (138.15) 7 Money market instruments, others than those traded on a regulated market, according to art. 101 par. (1) letter 0.4289% 0.4274% - 46,273,974.68 0.0000% 0.0000% - - (46,273,974.68) g) of Law no. 297/2004 regarding the capital market, with subsequent additions and amendments, out of which: - Treasury bills with original maturities of less than 1 year 0.4289% 0.4274% - 46,273,974.68 0.0000% 0.0000% - - (46,273,974.68) 8 Participation titles of OCIU and/or of UCITS (A.O.P.C./ O.P.C.V.M.) - - - - - - - - - 9 Other assets out of which: 0.0993% 0.0989% - 10,710,810.18 3.2152% 3.1810% - 314,459,456.82 303,748,646.64 - net dividend receivable from Romanian companies - - - - 3.0691% 3.0367% - 300,190,447.35 300,190,447.35 - receivable representing the amount transferred to Central Depositary for 2015 return of capital and not yet 0.0150% 0.0149% - 1,612,518.00 0.0162% 0.0160% - 1,580,193.80 (32,324.20) paid to / collected by shareholders until the end of the period - receivables related to transactions under settlement - - - - 0.0012% 0.0011% - 112,275.00 112,275.00 - tax on dividends to be recovered from the State Budget 0.0068% 0.0067% - 730,314.00 0.0075% 0.0074% - 730,314.00 - - tax on profit to be recovered from the State Budget 0.0679% 0.0677% - 7,330,440.00 0.0749% 0.0742% - 7,330,440.00 - - intangible assets 0.0070% 0.0070% - 756,603.69 0.0061% 0.0059% - 591,622.27 (164,981.42) - advance payments for intangible assets 0.0002% 0.0002% - 19,332.26 0.0002% 0.0002% - 19,332.26 - - other receivables out of which: 0.0001% 0.0001% - 15,720.00 0.0359% 0.0355% - 3,508,678.85 3,492,958.85 - in RON 0.0001% 0.0001% - 15,720.00 0.0359% 0.0355% - 3,508,678.85 3,492,958.85 - prepaid expenses 0.0023% 0.0023% - 245,882.23 0.0041% 0.0040% - 396,153.29 150,271.06 II. Total liabilities 0.3372% 0.3363% 36,409,534.29 1.0643% 1.0532% 104,110,731.66 67,701,197.37 1 Liabilities in relation with the payments of fees due to the investment management company (S.A.I.) 0.1066% 0.1063% - 11,506,104.96 0.1618% 0.1601% - 15,828,770.19 4,322,665.23 2 Liabilities related to the fees payable to the depositary bank 0.0004% 0.0004% - 50,031.96 0.0005% 0.0005% - 49,125.02 (906.94) 3 Liabilities related to the fees payable to intermediaries 0.0111% 0.0111% - 1,197,286.95 0.0049% 0.0049% - 481,363.20 (715,923.75) 4 Liabilities related to commissions and other bank services - - - - - - - - - 5 Interest payable - - - - - - - - - 6 Liabilities related to issuance costs - - - - - - - - - 7 Liabilities in relation with the fees/commissions to FSA 0.0072% 0.0072% - 776,109.30 0.0074% 0.0073% - 725,265.03 (50,844.27) 8 Liabilities related to audit fees - - - - - - - - - 9 Other Liabilities, out of which: 0.2119% 0.2113% - 22,880,001.12 0.8897% 0.8804% - 87,026,208.22 64,146,207.10 - liabilities to the Fund's shareholders related to the dividend distribution - - - - 0.4945% 0.4893% - 48,365,209.12 48,365,209.12 |
||||||
|---|---|---|---|---|---|---|
| Item | Differences | |||||
| Item | 29 December 2017 | 29 June 2018 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| % of the net | % of the total | Currency | Lei % of the net | % of the total | Currency | Lei | Differences Lei |
||
| asset | asset | asset | asset | ||||||
| - liabilities related to the return of capital | 0.1918% | 0.1912% | - | 20,705,310.85 | 0.1748% | 0.1730% | - | 17,099,398.50 | (3,605,912.35) |
| - provisions | 0.0079% | 0.0079% | - | 856,247.22 | 0.0088% | 0.0087% | - | 856,247.22 | - |
| - liabilities related to buybacks under settlement | 0.0000% | 0.0000% | - | - | 0.0190% | 0.0188% | - | 1,862,027.48 | 1,862,027.48 |
| - remunerations and related contributions | 0.0004% | 0.0004% | - | 40,065.00 | 0.0004% | 0.0004% | - | 42,215.00 | 2,150.00 |
| - VAT payable to State Budget | - | - | - | - | 0.0000% | 0.0000% | - | 1,057.31 | 1,057.31 |
| - tax on dividends payable to State Budget | - | - | - | - | 0.1904% | 0.1884% | - | 18,619,848.30 | 18,619,848.30 |
| - other liabilities out of which: | 0.0118% | 0.0118% | - | 1,278,378.05 | 0.0018% | 0.0018% | - | 180,205.29 | (1,098,172.76) |
| - in RON | 0.0070% | 0.0070% | - | 762,042.01 | 0.0015% | 0.0015% | - | 149,081.48 | (612,960.53) |
| - in USD | 0.0009% | 0.0009% USD 25,007.00 | 97,314.74 | - | - | - | - | (97,314.74) | |
| - in GBP | 0.0039% | 0.0039% GBP 79,768.00 | 419,021.30 | 0.0003% | 0.0003% | GBP 5,914.15 | 31,123.81 | (387,897.49) | |
| III. Net Asset Value (I - II) |
100.0000% | 99.6637% | 10,790,418,333.80 | 100.0000% | 98.9468% | 9,781,152,530.07 | (1,009,265,803.73) |
* = Includes also the value of holdings in companies admitted to trading on AeRo market (alternative regulated market)
| Item | 29 June 2018 | 29 December 2017 | Differences |
|---|---|---|---|
| Net Asset Value | 9,781,152,530.07 | 10,790,418,333.80 | (1,009,265,803.73) |
| Number of outstanding shares | 7,357,367,396 | 8,718,991,588 | (1,361,624,192) |
| Unitary net asset value | 1.3294 | 1.2375 | 0.0919 |
1.1 listed shares traded in the last 30 trading days
| Stake in Fondul | Stake in Fondul | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Date of the last | No. of shares | Nominal | Share | Stake in the | Proprietatea total | Proprietatea net | ||||
| Issuer | Symbol | trading session | held | value | value | Total value | issuer's capital | asset | asset | Evaluation method |
| Alro Slatina SA | ALR | 29/Jun/2018 | 72,884,714 | 0.5 | 4.2700 | 311,217,728.78 | 10.21% | 3.1483% | 3.1818% | Closing price |
| BRD-Groupe Societe Generale SA | BRD | 29/Jun/2018 | 16,751,396 | 1 | 13.1200 | 219,778,315.52 | 2.40% | 2.2233% | 2.2470% | Closing price |
| IOR SA | IORB | 26/Jun/2018 | 2,622,273 | 0.1 | 0.0800 | 209,781.84 | 2.51% | 0.0021% | 0.0021% | Reference price - Average price |
| OMV Petrom SA | SNP | 29/Jun/2018 | 5,663,548,078 | 0.1 | 0.3205 | 1,815,167,159.00 | 9.99% | 18.3624% | 18.5578% | Closing price |
| Romaero SA | RORX | 18/Jun/2018 | 1,311,691 | 2.5 | 25.8000 | 33,841,627.80 | 20.03% | 0.3423% | 0.3460% | Reference price - Average price |
| Nuclearelectrica SA | SNN | 29/Jun/2018 | 21,461,350 | 10 | 7.5000 | 160,960,125.00 | 7.11% | 1.6283% | 1.6456% | Closing price |
| Total | 2,541,174,737.94 | 25.7067% | 25.9803% |
| Stake in Fondul | Stake in Fondul | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Date of the last | No. of shares | Nominal | Share | Stake in the | Proprietatea total | Proprietatea net | ||||
| Issuer | Symbol | trading session | held | value | value | Total value | issuer's capital | asset | asset | Evaluation method |
| Alcom SA | ALCQ | 10/Feb/2017 | 89,249 | 2.5 | 143.7846 | 12,832,631.77 | 71.89% | 0.1298% | 0.1312% | Shareholders' equity as of 31 December 2017 |
| Mecon SA | MECP | 27/Apr/2018 | 60,054 | 11.6 | 9.8000 | 588,529.20 | 12.51% | 0.0060% | 0.0060% | Fair value (Last trading price) |
| Total | 13,421,160.97 | 0.1358% | 0.1372% |
Unlisted shares
| (total price of the Stake in Fondul Stake in Fondul No. of shares Date of acquisition of Share issuer's Proprietatea Proprietatea net Issuer held acquisition shares) value Total value capital total asset asset Company status Evaluation method Aeroportul International Mihail 23,159 19/Jul/2005 1,490,898 105.4017 2,440,997.97 20.00% 0.0247% 0.0250% Unlisted companies, in Fair value / share (Value as per independent Kogalniceanu - Constanta SA function valuator's report as at 30 September 2017) Aeroportul International Timisoara - Traian 32,016 19-iul.-2005 2,652,588 687.1564 21,999,999.30 20.00% 0.2226% 0.2249% Unlisted companies, in Fair value / share (Value as per independent Vuia SA function valuator's report as at 30 September 2017) BAT Service SA 194,022 19-iul.-2005 656,686 0.0000 0.00 33.00% 0.0000% 0.0000% Bankruptcy Priced at zero CN Administratia Canalelor Navigabile SA 203,160 19/Jul/2005 15,194,209 78.9335 16,036,129.86 20.00% 0.1622% 0.1639% Unlisted companies, in Fair value / share (Shareholders' equity as of 31 function December 2017 adjusted with dividends declared/ share) CN Administratia Porturilor Dunarii Fluviale 27,554 19/Jul/2005 675,810 133.3266 3,673,681.14 20.00% 0.0372% 0.0376% Unlisted companies, in Fair value / share (Shareholders' equity as of 31 SA function December 2017 adjusted with dividends declared/ share) CN Administratia Porturilor Dunarii Maritime 21,237 19/Jul/2005 1,351,671 110.9691 2,356,650.78 20.00% 0.0238% 0.0241% Unlisted companies, in Fair value / share (Shareholders' equity as of 31 SA function December 2017 adjusted with dividends declared/ share) CN Administratia Porturilor Maritime SA 2,658,128 19/Jul/2005 65,511,444 86.5270 229,999,841.46 19.99% 2.3267% 2.3515% Unlisted companies, in Fair value / share (Value as per independent function valuator's report as at 30 September 2017) CN Aeroporturi Bucuresti SA 2,875,443 5/Feb/2010 131,168,263 275.0880 790,999,863.98 20.00% 8.0018% 8.0870% Unlisted companies, in Fair value / share (Value as per independent function valuator's report as at 31 March 2018) Complexul Energetic Oltenia SA** 27,387,940 31/May/2012 670,353,852 1.1683 31,997,330.30 21.55% 0.3237% 0.3271% Unlisted companies, in Fair value / share (Value as per independent function valuator's report as at 30 September 2017) Comsig SA 75,655 19/Jul/2005 132,633 0.0000 0.00 69.94% 0.0000% 0.0000% Liquidation Priced at zero E-Distributie Banat SA 9,220,644 19/Jul/2005 141,578,929 59.1065 544,999,994.59 24.12% 5.5133% 5.5719% Unlisted companies, in Fair value / share (Value as per independent function valuator's report as at 30 September 2017) E-Distributie Dobrogea SA 6,753,127 19/Jul/2005 114,760,053 50.6432 341,999,961.29 24.09% 3.4597% 3.4965% Unlisted companies, in Fair value / share (Value as per independent function valuator's report as at 30 September 2017) E-Distributie Muntenia SA 3,256,396 19/Jul/2005 107,277,263 128.6698 418,999,822.04 12.00% 4.2386% 4.2837% Unlisted companies, in Fair value / share (Value as per independent function valuator's report as at 30 September 2017) Enel Energie Muntenia SA 444,054 19/Jul/2005 2,833,769 137.3706 60,999,964.41 12.00% 0.6171% 0.6236% Unlisted companies, in Fair value / share (Value as per independent function valuator's report as at 30 September 2017) Enel Energie SA 1,680,000 19/Jul/2005 26,124,808 33.9285 56,999,880.00 12.00% 0.5766% 0.5828% Unlisted companies, in Fair value / share (Value as per independent function valuator's report as at 30 September 2017) Engie Romania SA 2,390,698 19/Jul/2005 62,610,812 197.4318 471,999,809.40 11.99% 4.7748% 4.8256% Unlisted companies, in Fair value / share (Value as per independent function valuator's report as at 30 September 2017) Gerovital Cosmetics SA 1,350,988 19/Jul/2005 340,996 0.0000 0.00 9.76% 0.0000% 0.0000% Bankruptcy Priced at zero Hidroelectrica SA 89,396,405 19/Jul/2005 3,107,849,696 39.4982 3,530,997,083.97 19.94% 35.7198% 36.1000% Unlisted companies, in Fair value / share (Value as per independent function valuator's report as at 31 March 2018) Plafar SA 132,784 28/Jun/2007 3,160,329 14.9867 1,989,993.97 48.99% 0.0201% 0.0203% Unlisted companies, in Fair value / share (Value as per independent function valuator's report as at 30 September 2017) Posta Romana SA 14,871,947 19/Jul/2005 84,664,380 2.3534 34,999,640.07 25.00% 0.3541% 0.3578% Unlisted companies, in Fair value / share (Value as per independent function valuator's report as at 30 September 2017) Romplumb SA 1,595,520 28/Jun/2007 19,249,219 0.0000 0.00 33.26% 0.0000% 0.0000% Bankruptcy Priced at zero Salubriserv SA 43,263 19/Jul/2005 207,601 0.0000 0.00 17.48% 0.0000% 0.0000% Judicial reorganisation Priced at zero |
|
|---|---|
| Simtex SA 132,859 28/Jun/2007 3,059,858 0.0000 0.00 30.00% 0.0000% 0.0000% Juridical reorganisation Priced at zero |
|
| Societatea Nationala a Sarii SA 2,005,884 28/Jun/2007 76,347,715 128.6215 257,999,808.91 48.99% 2.6099% 2.6377% Unlisted companies, in Fair value / share (Value as per independent function valuator's report as at 31 March 2018) |
|
| World Trade Center Bucuresti SA 198,860 19/Jul/2005 42,459 0.0000 0.00 19.90% 0.0000% 0.0000% Insolvency Priced at zero |
|
| World Trade Hotel SA 17,912 19/Jul/2005 17,912 0.0000 0.00 19.90% 0.0000% 0.0000% Unlisted companies, in Priced at zero (lack of annual financial statements for function the year-ended 31 December 2016) |
|
| Zirom SA 5,912,083 28/Jun/2007 58,908,072 4.5396 26,838,491.99 100.00% 0.2715% 0.2744% Unlisted companies, in Fair value / share (Value as per independent function valuator's report as at 30 September 2017) |
|
| Total 4,698,221,925 6,848,328,945.43 69.2782% 70.0154% |
* = where the date of acquisition is shown as earlier than Fondul Proprietatea's date of incorporation (28 December 2005), the date of acquistion refers to the date of publishing in the Official Gazette of Law no. 247 / 19 July 2005, which determined that these investments would be transferred to Fondul Proprietatea on its future incorporation.
** = The acquisition price includes the initial value of Fondul Proprietatea's final portfolio of shares contributed by the Romanian State in December 2005 and June 2007 determined based on the valuation performed in October 2007 by an independent valuer (Finevex SRL Constanta) and the subscriptions to share capital increase of portfolio companies, if the case, (both in cash and in form of free of charge shares received) less the disposals (if the case). Fondul Proprietatea did not perform any acquisition of unlisted shares from its incorporation date until now.
*** = company resulting from the merger of CN "Aeroportul International Henri Coanda - Bucuresti" S.A. and S.N. "Aeroportul International Bucuresti Baneasa - Aurel Vlaicu" S.A.
**** = company resulting from the merger of Complexul Energetic Turceni S.A., Complexul Energetic Craiova S.A., Complexul Energetic Rovinari S.A., Societatea Nationala a Lignitului Oltenia S.A.
Legend:
Bonds or other debt instruments issued or guaranteed by the state or central public administration authorities
| Issuer | ISIN code | No. of instruments |
Date of acquisition |
Coupon date |
Due Date | Initial Value | Daily interest |
Cumulated interest |
Cumulated discount/premium |
Market price / Reference composite price |
Current value | Stake in FP total assets |
Stake in FP net asset |
Evaluation method |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Ministry of Finance | RO1318DBN034 | 3,500 | 23/Apr/2018 | 28/Nov/2018 | 28/Nov/2018 | 35,000,000.00 | 5,369.86 | 1,149,150.68 | 0.00 | 100.8535% | 36,447,875.68 | 0.3687% | 0.3726% | Fair value (reference composite price published by Reuters, including the cumulated interest) |
| Total | 36,447,875.68 | 0.3687% | 0.3726% |
| Starting | Stake in Fondul | Stake in Fondul Proprietatea | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Name of the bank | date | Maturity date | Initial value | Daily interest | Cumulative interest | Current value | Proprietatea total asset | net asset | Evaluation method |
| ING BANK | 26/Jun/2018 | 11/Jul/2018 | 9,750,000.00 | 636.45 | 2,545.83 | 9,752,545.83 | 0.0987% | 0.0997% | |
| Unicredit Tiriac Bank | 26/Jun/2018 | 11/Jul/2018 | 9,750,000.00 | 731.25 | 2,925.00 | 9,752,925.00 | 0.0987% | 0.0997% | |
| Banca Comerciala Romana | 26/Jun/2018 | 3/Jul/2018 | 9,750,000.00 | 704.17 | 2,816.67 | 9,752,816.67 | 0.0987% | 0.0997% | Bank deposit value cumulated with the daily |
| BRD Groupe Societe Generale | 29/Jun/2018 | 2/Jul/2018 | 25,600,000.00 | 1,564.44 | 1,564.44 | 25,601,564.44 | 0.2590% | 0.2617% | related interest for the period from starting date |
| BRD Groupe Societe Generale | 29/Jun/2018 | 2/Jul/2018 | 3,800,000.00 | 232.22 | 232.22 | 3,800,232.22 | 0.0384% | 0.0389% | |
| BRD Groupe Societe Generale | 29/Jun/2018 | 2/Jul/2018 | 10,068,437.16 | 651.65 | 651.65 | 10,069,088.81 | 0.1019% | 0.1029% | |
| Total | 68,729,172.97 | 0.6954% | 0.7026% |
| 30 December 2016 | 29 December 2017 | 29 June 2018 | |
|---|---|---|---|
| Net Asset | 11,427,351,380.47 | 10,790,418,333.80 | 9,781,152,530.07 |
| NAV/share | 1.1865 | 1.2375 | 1.3294 |
Franklin Templeton International Services S.à r.l acting in the capacity of Sole Director of FONDUL PROPRIETATEA SA BRD Groupe Societe Generale
Calin Metes Marius Nechifor Claudia Ionescu Victor Strâmbei Legal representative Compliance Officer Director Manager Depositary Department
Provisions of Art.30 of Accounting Law no. 82/1991 and
FSA Regulation no. 5/2018, Art.223, par. B (1), letter c
The semi-annual financial statements as at 30 June 2018 prepared for:
Entity: Fondul Proprietatea SA
Address: Bucharest, District 1, 78–80, Buzeşti Street, 7th Floor
Trade Registry Number: J40/21901/28.12.2005
Form of property: 22 (joint ownership with public capital under 50%, domestic and foreign public and private capital companies)
CAEN code and name: 6430 "Mutual funds and similar financial entities"
Sole Registration Code: 18253260
The undersigned, Calin Metes, Permanent Representative with Franklin Templeton International Services S.à r.l as Sole Director of Fondul Proprietatea SA, and Cadaru Catalin, Financial reporting manager, undertake the responsibility for the preparation of the semi-annual financial statements as at 30 June 2018 and confirm that:
Franklin Templeton International Services S.à r.l acting in the capacity of Sole Director of Fondul Proprietatea SA
Calin Metes Catalin Cadaru
Permanent Representative Financial Reporting Manager
FRANKLIN TEMPLETON INTERNATIONAL SERVICES S.À R.L., a société à responsabilité limitée qualifying as an alternative investment fund manager ("AIFM") under Article 101-1 of the Luxembourg law of 17 December 2010 on undertakings for collective investment, as amended ("UCI Act"), whose registered office is located at 8A rue Albert Borschette, L-1246 Luxembourg and which is registered with the Luxembourg Registre de Commerce et des Sociétés under number 36.979 and in the Register kept by the Romanian Financial Supervisory Authority (the "Fund Manager") ("Administrator" in Romanian language) duly represented by Mr. Craig Blair and Mr. Mike Sommer; and
FONDUL PROPRIETATEA S.A. of Buzesti St. 78-80, 1st District, Bucharest municipality, Romania (the "Customer"/ the "Fund"/ "FP") duly represented by Mr. Sorin Mîndruțescu.
In this Management Agreement, the following capitalised terms shall, unless the context otherwise requires or it is otherwise provided, have the following meanings:
Account means the account maintained by the depositary and sub-custodian(s), as the Customer has notified in writing to the Fund Manager;
Affiliate means, with respect to any person, any other person directly or indirectly controlling, directly or indirectly controlled by, or under common control with such person;
AIFM means an alternative investment fund manager.
AIFM Act means the Luxembourg Act of 12 July 2013 on alternative investment fund managers for implementing the AIFMD;
AIFMD means Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on alternative investment fund managers;
AIFM Law means Law no. 74/2015 on managers of alternative investment funds implementing the AIFMD in Romania;
AIFM Rules means the set of rules formed by (a) the AIFMD, (b) the Commission Delegated Regulation (EU) No 231/2013 of 19 December 2012 supplementing the AIFMD, (c) any binding guideline or other delegated act and regulation issued from time to time by the EU relevant authorities pursuant to any national laws and regulations (such as the AIFM Act or AIFM Law), and (d) any national laws and regulations enacted in connection with the implementation of the rules listed in paragraphs (a) to (c) above which are applicable to this Management Agreement;
Associated Company (when used in relation to the Fund Manager) means any company which is an Affiliate of the Fund Manager;
BoN means the Board of Nominees ("Comitetul Reprezentantilor" in Romanian language) which monitors the activity of the Fund Manager, appointed by the GSM and under direct supervision of the GSM;
BoN Review Report has the meaning ascribed to such term in clause 9.6;
Calculation Period means a calendar quarter, each consisting of a three-month period; the four calendar quarters that make up the year shall be: January, February and March (the first quarter, or Q1); April, May and June
(the second quarter, or Q2); July, August and September (the third quarter, or Q3); and October, November and December (the fourth quarter, or Q4);
Central Depositary means a legal person established as a joint-stock company, authorised and supervised by the FSA, performing deposit, registration, clearing and settlement services for transactions with financial instruments and related activities;
CNVM means the Romanian National Securities Commission, having the duties established in the Government Emergency Ordinance no. 25/2002 on the approval of the By-laws of the National Securities Commission; in April 2013 the CNVM was reorganized as the FSA;
Companies Law means Law no. 31/1990 on companies;
Compulsory Rules means prescriptive rules of law (referred to in Luxembourg law as "règles d'ordre public" and in Romania as "reguli de ordine publica") from which the Parties may not be relieved by way of agreement, whether or not these rules result from the AIFM Rules and irrespective of their national or EU origin and nature;
Constitutive Act means the Articles of Incorporation of the Customer;
Control means, in relation to any person, the power of another person, directly or indirectly, to secure that the affairs of such person are conducted in accordance with the wishes of that other person, (a) by means of the holding of shares or the possession of voting power in relation to that or any other person, or (b) by virtue of any powers conferred by the constitutional or corporate documents, or by contract or any other document or other legal relationship, or by applicable law, regulating that or any other person;
CSSF means Commission de Surveillance du Secteur Financier, the Luxembourg financial supervisory authority;
Customer means "Fondul Proprietatea" S.A., a closed - end investment company established in 2005 by the Romanian Government in accordance with, among others, Law no. 247/2005, and operating in accordance with the Constitutive Act;
Damages mean any and all losses, claims, liabilities, damages, taxes or expenses;
Delegate means any entity to which the Fund Manager delegates or outsources any of its obligations under this Management Agreement, including, without limitation, the Investment Manager;
Data Protection Laws mean the set of rules formed by (a) the Data Protection Directive 95/46/EC on the protection of individuals with regard to the processing of personal data and on the free movement of such data, (b) Law 677/2001 on protection of individuals with regard to the processing of personal data and on the free movement of such data implementing in Romania Directive 95/46/EC, (c) any binding guideline or other delegated act and regulation issued from time to time by the EU relevant authorities or competent national authorities pursuant to any national laws and regulations (such as Law 677/2001) and (d) any national laws and regulations enacted in connection with the implementation of the rules listed under (a) to (c) above or other legislation which replaces or amends the same, which are applicable to this Management Agreement including, without limitation, and as of the date of its application, Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (the "General Data Protection Regulation");
DCM has the meaning ascribed to such term in clause 9.2;
Depositary is the entity or branch of an entity registered with the FSA, authorised to hold and safeguard financial assets of collective investment undertakings in accordance with the provisions of the AIFM Law, appointed by the Customer and in the deposit of which are entrusted for safekeeping all assets of the Customer;
Discount means, in respect of a day, an amount calculated by subtracting the closing price of the Fund's shares on the Bucharest Stock Exchange on REGS for such day from the NAV per share then most recently published by the Fund Manager and dividing the result by such most recently published NAV per share;
Discount Objective has the meaning ascribed to such term in the IPS;
Dispute has the meaning ascribed to such term in clause 19.2(a);
EGM means the Extraordinary General Meeting of the Customer's Shareholders;
and, as of their application date:
Force Majeure Event means, in relation to any party, any act, event or circumstance, the cause of which is not of such party's making nor within that party's reasonable control, including without limitation (to the extent not of that party's making nor within that party's reasonable control) act of God, war, hostilities (whether or not war has been declared), terrorist acts, acts of any civil or military authority, governmental or regulatory direction or restriction, suspension or withdrawal of licences or consents from other reasons than the negligence of the Fund Manager, currency restrictions, market conditions affecting the execution or settlement of transactions or the value of assets, failure or breakdown in communications, the failure of any relevant exchange or clearing house, riot, insurrection, civil commotion, public demonstration, sabotage, acts of vandalism, fire, flood, earthquake, extreme weather conditions, epidemic or pandemic, explosion, aircraft crashes or things falling from aircraft, release of ionising radiation or contamination by radioactivity, chemical or biological contamination, the order of any court or governmental or regulatory authority, delay in transportation or communications, breakage of or accidental damage to equipment, any strike, lock-out or other industrial trade dispute (not involving solely the employees of that party), structural shift or subsidence;
FSA means the Romanian Financial Supervisory Authority, having the duties established in the Government Emergency Ordinance no. 93/2012;
FundManager's Group means the Fund Manager and its Associated Companies.
GEO no. 81/2007 means the Emergency Government Ordinance no. 81/2007 for the acceleration of the procedure on granting damages in relation to assets abusively taken;
GEO no. 32/2012 means the Emergency Government Ordinance no. 32/2012;
GSM means the General Meeting of the Customer's Shareholders;
Indemnified Party means the Customer, its officers (but not the Sole Director), employees, agents and representatives;
Investment Manager means a member of the Fund Manager's Group qualified or capable of undertaking the functions with which it has been entrusted pursuant to the delegation agreement including investment management.
IPS means the "Investment Policy Statement", i.e. the investment objectives and parameters governing investment decisions over the Portfolio which the Fund Manager has proposed and the GSM has approved;
Law no. 297/2004 means the Capital Market Law no. 297/2004;
Law no. 24/2017 means Law no. 24/2017 on issuers of financial instruments and market operations;
Law no. 247/2005 means the Law no. 247/2005 regarding the property and judicial reform, as well as adjacent measures;
Management Agreement means this Management Agreement entered into between the Customer and the Fund Manager;
Member State means the Member States of the European Union and the other States which belong to the European Economic Area;
MiFID II Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU;
NAV means the net asset value of the Customer, which is determined according to CNVM Regulation no. 4/2010;
NAV Objective has the meaning ascribed to such term in the IPS;
New Appointment Date means, in relation to the appointment of a new fund manager and sole director, or, in the event the Customer becomes an internally managed alternative investment fund, new directors of the Customer being appointed following termination of this Management Agreement, the later of: (i) the date when the new or, if decided by the Customer, interim, fund manager and sole director, or, as the case may be, new directors, are registered with the Trade Registry or any other competent authority as per the applicable legal provisions; and (ii) the date when the FSA issues its approval in relation to the appointment of the new, or, if decided by the Customer, interim, sole director and fund manager as the case may be, new directors, if such approval is legally required and, (iii) the date when all other mandatory legal requirements for the replacement of the Fund Manager have been satisfied, and, in each of the cases under paragraphs (i), (ii) and (iii), being effective on the date that the Fund Manager received notice (or ought reasonably to have received notice) of the event;
April GSM has the meaning ascribed to such term in clause 9.3;
OGM means the Ordinary General Meeting of the Customer's Shareholders;
Party means any of the Customer or the Fund Manager;
Performance Objectives has the meaning ascribed to such term in clause 9.1;
Performance Report has the meaning ascribed to such term in clause 9.4;
Portfolio means the portfolio of assets of the Customer, including uninvested cash designated from time to time by the Customer as subject to the management of the Fund Manager pursuant to this Management Agreement;
Reporting Period has the meaning ascribed to such term in clause 9.4;
RMS has the meaning ascribed to such term in Annex 2 (Specific duties and obligations);
Sole Director means the legal person appointed by the GSM to manage the Customer, within the limits provided by the applicable Romanian law, the Constitutive Act and the decisions of the GSM. For the purposes of this Management Agreement, any reference to the Sole Director is a reference to the Fund Manager;
Soft Dollar Practices mean arrangements under which assets or services, other than execution of securities transactions, are obtained by a fund manager from or through a broker in exchange for the fund manager directing to the respective broker trades concluded on behalf of the undertaking for collective investment managed by that fund manager;
Termination Notice means a termination notice given by the Customer or the Fund Manager, as per clause 13;
Termination Notice Date means the date when a Termination Notice is given, as per clause 13;
Trading Day means any day on which trading in shares may be carried out on Bucharest Stock Exchange, in accordance with the rules of the Bucharest Stock Exchange.
The scope of this Management Agreement is to appoint the Fund Manager as the Sole Director of the Customer and AIFM of the Customer and to establish the parties' rights and obligations in relation to each such appointment.
By this Management Agreement, the Customer appoints the Fund Manager as the Sole Director of the Customer and also as its alternative investment fund manager.
The Fund Manager accepts its appointment as Sole Director of the Customer and as alternative investment fund manager upon the terms of this Management Agreement.
reports to the BoN before submitting such documents to the GSM for approval, and making proposals on the distribution of the profit, after obtaining the prior approval of the BoN, if required;
The following activities to be carried out by the Fund Manager based on the aforementioned paragraphs qualify for the purpose of AIFM Rules as administration activities, respectively (a) legal and fund management accounting services in the case of sub-clauses 6.5.3, 6.5.6, 6.5.8, 6.5.9, 6.5.10, 6.5.11, 6.5.12, 6.5.14, 6.5.15, 6.5.18 and 6.5.19; (b) customer inquiries in the case of sub-clauses 6.5.4, 6.5.5, 6.5.16 and 6.5.17, and (c) maintenance of unit/ shareholder register in the case of sub-clause 6.5.7.
any time such delegation without the prior approval of the Customer in respect of such termination, provided that the Fund Manager notifies to the Customer reasonably in advance of such termination.
6.17. The Fund Manager will maintain at all times the capital requirements and insurance required under AIFM Rules.
The transactions to be effected in relation to the Portfolio are subject to the legal regulations in force, including the Companies Law no. 31/1990, Law no. 297/2004, Law no. 24/2017 the AIFM Rules and other applicable regulations, as well as Law no. 247/2005, GEO no. 81/2007, the Constitutive Act as well as any other applicable legislation or regulation replacing, amending or completing the same.
Manager of the Customer pursuant to the previous Management Agreement (in force between 1 April 2016 and 31 March 2018).
10.5.1. An overview of Best Execution Policy at the level of the Fund Manager's Group can be found at: http://www.franklintempleton.co.uk/en_GB/adviser/company/regulatory-information. The Customer confirms that it has read and understood the Best Execution Policy Overview – as available on the specified address at the date of this agreement. Notwithstanding the foregoing, the Customer considers and the Fund Manager agrees that the Best Execution Policy must be read and understood together with all applicable requirements imposed under MiFID II regulation in force. The Customer agrees that the Fund Manager may trade outside of a regulated market or multilateral trading facility.
10.5.2. In effecting transactions for the Portfolio companies, the Fund Manager will at all times comply with the Fund Manager's Group Best Execution Policy, as specified in Art.10.5.1 above, and in particular will act in the best interests of the Customer and comply with any applicable obligations regarding best execution under the applicable regulations in force.
ensure that all matters relating to the Portfolio and the Customer will be kept strictly confidential. Before the Fund Manager discloses confidential information under paragraph (a) above, it shall inform the Customer to this end. The Fund Manager shall procure that the Delegate provides to the Customer a confidentiality undertaking in the relevant delegation agreement in respect of all matters relating to the Portfolio, its role as a Delegate, in form and substance acceptable to the BoN.
13.3 The Fund Manager may terminate this Management Agreement and resign its mandate as Sole Director with six months' prior written notice. Not later than five business days following the Termination Notice Date, but subject to timely approval of the GSM agenda by the BoN, the Fund Manager will call the OGM having on the agenda the approval of the procedure for the selection of a new Sole Director and Fund Manager. Such procedure will be prepared by the Fund Manager and agreed with the BoN before its submission to an OGM for approval.
13.4 The Fund Manager may terminate this Management Agreement and resign its mandate as Sole Director by as much prior written notice to the Customer as is reasonably practicable, if:
15.1. Subject to the provisions of Clause 13, the duration of this Management Agreement and of the Fund Manager and the Sole Director mandates contained in this Management Agreement is for a period of two years, simultaneously starting on 1 April 2018.
(a) If addressed to the Fund Manager:
Address:
Premium Point Building
78-80 Buzeşti Street, 7th -8th floor, Bucharest
District 1, Postal Code 011017
Fax: (021) 200 96 31/32
To the attention of: Mr. Grzegorz Maciej Konieczny / Mr. Johan Meyer
(b) If addressed to the Customer:
At the contact details provided by the representative of the Customer.
17.1. The Fund Manager is liable for any Damages suffered by the Customer as a result of:
(e) wilful default in performing this Management Agreement;
(f) negligence in the performance of this Management Agreement's obligations; or
For avoidance of doubt, the Fund Manager's liability under this clause 17.1 shall not exclude or limit its liability for death or personal injury caused by the Fund Manager's negligence; or fraud or fraudulent misrepresentation.
(iv) the Fund Manager will provide evidence that it has taken all reasonable steps necessary to mitigate such Damages, including by advising the Customer in writing against such instructions, prior to the notification mentioned at point (i) above.
17.5. Subject to observance of clause 6.17, the Fund Manager will maintain the following insurance:
(v) neither the Fund Manager, the Investment Manager nor any Associated Company who acts as a Delegate in accordance with clause 14.3 is the subject of any regulatory or governmental actions, claims or investigations relevant to its investment management activities which could impair its ability to carry out the terms of this Management Agreement;
(vi) neither the Fund Manager nor any of its subsidiaries, Associated Companies, divisions or other affiliates involved with the affairs of the Customer has ever had its registration revoked, suspended or its activities restricted;
The Fund Manager shall notify the Customer forthwith of any event or matter, which would, if these warranties were repeated, render them untrue, inaccurate or misleading.
21.1 The Fund Manager stores on its computer system and processes personal data in connection with the implementation of its mandate. The Customer authorises the Fund Manager to perform such data processing and recognises that the Fund Manager is free to use the data, but only for the purposes of performing this Management Agreement and of the implementation of its mandate in accordance with the law.
with the National Supervisory Authority for Personal Data Processing, before any transmission, storage and processing in the said additional countries takes place.
21.4. Data is kept for the duration of the contractual relationship and may be kept for the maximum period legally possible, if any, following the termination of this relationship.
This Management Agreement will be signed in the English and Romanian language and executed in 3 originals, one for the Fund Manager and two for the Customer.
This Management Agreement is executed as of the date mentioned on its cover page:
by FONDUL PROPRIETATEA SA as duly represented by:
______________________________ Name: Sorin Mihai MÎNDRUȚESCU
Position: Chairman of the Board of Nominees
Execution date: ____ February 2018
on the one part;
and by FRANKLIN TEMPLETON INTERNATIONAL SERVICES S.À R.L. as represented by:
Name: Craig BLAIR Position: Director Execution date: ____ February 2018
______________________________
and
Name: Mike SOMMER
Position: Director
Execution date: ____ February 2018
_____________________________
on the other part.
The fees due to the Fund Manager in accordance with Clause 10 of this Management Agreement shall be calculated in RON and invoiced and paid in Euro by the Customer in compliance with the following: the amount calculated in RON will be converted into Euro using the official exchange rate for RON to Euro published by National Bank of Romania in the last banking day of the period invoiced.
The fees shall be calculated as (i) a Base Fee, and (ii) a Distribution Fee, in each case as set out below and in respect of each Calculation Period.
A base fee (the "Base Fee") shall be calculated as follows:
Base Fee Rate multiplied by the notional amount, multiplied by the number of calendar days during the applicable Calculation Period divided by 365,
where:
the "Base Fee Rate" = 60 basis points per year;
1 basis point = 0.0001; and
the "notional amount" is the market capitalization of the Customer, which is defined as:
The "weighted average market price" shall be computed based on the daily average market prices of the Customer's shares and corresponding daily volumes, as published by Bucharest Stock Exchange REGS section.
If the number of shares relevant for the computation of the Base Fee described above in (a) and (b) changes over the Calculation Period, the Base Fee will be an aggregation of the computation for each sub-period.
"Sub-period" is defined as the number of days between two trading dates. The calculation in each sub-periods starts on the settlement date of the first transaction (or the beginning of the mandate) and shall end on the date prior to the settlement date of the next transaction (or the end of the mandate).
For each day in a Calculation Period for which the Base Fee is to be calculated, when the Discount is below or equal to 20%, but above 15%, an additional Base Fee Rate of 5 basis points per year shall become payable (i.e. the Base Fee Rate referred to in the calculation above shall become 65 basis points per year for the applicable days in the relevant period).
For each day in a Calculation Period for which the Base Fee is to be calculated, when the Discount is equal or below 15%, a further additional Base Fee Rate of 5 basis points per year shall become payable (i.e. the Base Fee Rate referred to in the calculation above shall become 70 basis points per year for the applicable days in the relevant period).
As the Base Fee (including any additional fee determined under the previous two paragraphs) is computed using the number of days in a calendar year (365 days), the Base Fee Rate used for non-trading days will be the rate applied for the prior trading day.
It is recognized that distributions beneficial to shareholders would reduce the notional amount upon which the Base Fee is calculated. To reward the Fund Manager for arranging such distributions, a fee shall be calculated as follows (an amount so calculated in respect of a particular period a "Distribution Fee"): 100 basis points of distributions made available from 1 April 2018 up to and including 31 March 2020.
"Distributions" means:
The calculation of the Distribution Fee shall be made when such distributions become available to shareholders. In case of a repurchase of own shares or of FP GDRs, the calculation of the Distribution Fee shall be made at the date when the own shares repurchase transactions or FP GDRs transactions are settled (i.e. settlement date).
For FP GDRs transactions, the Distribution fee will be computed taken into account the official exchange rate published by the National Bank of Romania for the date of settlement of FP GDRs transactions.
Any failure on the part of any shareholder to collect, or to take the necessary steps to facilitate the receipt of the distributions made available will not result in any adjustment of the calculation of the Distribution Fee due to the Fund Manager.
The payment of the Base Fee and the Distribution Fee shall be arranged only after the verification and certification by the Depositary of the correctness of the following amounts used in the calculation of those fees: the notional amount, the value of distributions, and all the other items used in calculation of the fees, as well as the methods for determining the fees.
Without prejudice to the obligations of the Fund Manager specified in the Management Agreement, the below is a non-exhaustive list of additional specific duties and obligations the Fund Manager undertakes to provide.
The Fund Manager shall provide portfolio management services to the Customer as mentioned in Clause 6 of the Management Agreement.
The Fund Manager shall provide risk management services to the Customer in order to assess the exposure of the Customer to market, liquidity and counterparty risks and the exposure of the Customer to all other relevant risks, including operational risks which may be material for the Customer, subject to and in accordance with the terms and provisions of this Management Agreement, the applicable AIFM Rules and any applicable circular to be issued by the CSSF (the "CSSF Circular"), and the risk management systems implemented by the Fund Manager, as may be amended and supplemented from time to time (the "RMS").
The Fund Manager shall have and perform the following powers and duties:
In addition, the Fund Manager shall at least:
The Fund Manager shall set a maximum level of leverage which it may employ on behalf of the Customer as well as the extent of the right to reuse collateral or guarantee that could be granted under the leveraging arrangement (if any), taking into account all elements as required by the applicable legislation including the AIFM Rules, Constitutive Act and IPS.
The Fund Manager shall have and perform the following duties:
The Fund Manager, in its capacity as Sole Director, shall undertake in the name of the Customer the necessary administrative work required by the applicable legislation and the Constitutive Act and the IPS. The Fund Manager, in its capacity as Sole Director, shall have and perform the following powers and duties:
The Fund Manager is in charge of marketing the shares of the Customer globally. For the avoidance of doubt, the Fund Manager must carry out any notification or other formalities contemplated in Articles 29 and 30 of the AIFM Act or the equivalent provisions in legislation in another relevant Member State, where required in view of the marketing of the Customer's shares in any Member State which has implemented the AIFMD, as defined in the AIFM Act.
Headquarters: 78-80 Buzesti Street, 7th floor, 1st district, Bucharest, registered with the Trade Register under number J40/21901/2005, fiscal registration code 18253260
Today, 14 February 2018, 12:00 o'clock (Romanian time), the shareholders of Fondul Proprietatea S.A. ("the Fund") have met during the Shareholders' Ordinary General Meeting ("OGM") of the Fund, at its first summoning, at "Radisson Blu" Hotel, 63-81 Calea Victoriei Street, Atlas Room, 1st District, Bucharest, 010065, Romania, the OGM being opened by its Chairman, namely Mr. Johan Meyer, in his capacity of permanent representative of Franklin Templeton International Services S.À R.L., a société à responsabilité limitée qualifying as an alternative investment fund manager under article 5 of the Luxembourg law of 12 July 2013 on alternative investment fund managers, authorized by the Commission de Surveillance du Secteur Financier under no. A00000154/21 November 2013, whose registered office is located at 8a, rue Albert Borschette, L-1246 Luxembourg, registered with the Luxembourg register of commerce and companies under number B36.979, registered with the Romanian Financial Supervisory Authority under number PJM07.1AFIASMDLUX0037/10 March 2016, in its capacity of alternative investment fund manager and sole director of Fondul Proprietatea S.A..
Following debates, the Fund's shareholders decide as follows:
I. The appointment of Mr. JULIAN RUPERT FRANCIS HEALY as a member of the Board of Nominees following the expiration of the mandate of Mr. JULIAN RUPERT FRANCIS HEALY on 5 April 2018; the mandate of the new member is valid for a period of three (3) years and shall produce its effects starting with the said date onwards, subject to the acceptance of the mandate by the newly appointed member.
This item is adopted by secret vote with 4,102,199,350 votes representing 99.76% of the validly casted votes, in accordance with Article 14 (1), second paragraph of the Constitutive Act corroborated with Article 112 (1), second paragraph of Law no. 31/1990. The casted votes were recorded as follows: 4,102,199,350 votes "for" and 9,520,209 votes "against". There were also registered 157,860,546 votes "not given".
II. In accordance with Article 1292 of Regulation no. 1/2006, the approval of 14 March 2018 as the Ex – Date, computed in accordance with the provisions of Article 2 paragraph (2) letter f1) of Regulation no. 1/2006, and 15 March 2018 as the Registration Date, computed in accordance with the provisions of Article 86 paragraph (1) of Issuers' Law.
As they are not applicable to this OGM, the shareholders do not decide on the date of the guaranteed participation, as defined by Article 2 letter f1) of Regulation no. 6/2009, and on the Payment Date, as defined by Article 2 letter g) of Regulation no. 6/2009.
This item is adopted with 4,265,367,223 votes representing 99.94% of the validly casted votes, in accordance with Article 14 (1), second paragraph of the Constitutive Act corroborated with Article 112 (1), second paragraph of Law no. 31/1990. The casted votes were recorded as follows: 4,265,367,223 votes "for" and 2,403,991 votes "against". There were also registered: 911,655 abstains and 451,021 votes "not given".
III. The empowerment, with authority to be substituted, of Johan Meyer to sign the shareholders' resolutions, as well as any other documents in connection therewith, and to carry out all procedures and formalities set out by law for the purpose of implementing the shareholders' resolution, including formalities for publication and registration thereof with the Trade Registry or with any other public institution.
This item is adopted with 4,266,278,878 votes representing 99.94% of the validly casted votes, in accordance with Article 14 (1), second paragraph of the Constitutive Act corroborated with Article 112 (1), second paragraph of Law no. 31/1990. The casted votes were recorded as follows: 4,266,278,878 votes "for" and 2,403,991 votes "against". There were also registered 897,236 votes "not given".
This decision is drafted and signed on behalf of the shareholders by:
Johan Meyer Chairman
_______________________ Vlad Neacșu Meeting secretary
________________________
_______________________ Valeriu Ioniță
Technical secretary
Headquarters: 78-80 Buzesti Street, 7th floor, 1st district, Bucharest, registered with the Trade Register under number J40/21901/2005, fiscal registration code 18253260
Today, 14 February 2018, 12:00 o'clock (Romanian time), the shareholders of Fondul Proprietatea S.A. ("the Fund") have met during the Shareholders' Ordinary General Meeting ("OGM") of the Fund, at its first summoning, at "Radisson Blu" Hotel, 63-81 Calea Victoriei Street, Atlas Room, 1st District, Bucharest, 010065, Romania, the OGM being opened by its Chairman, namely Mr. Johan Meyer, in his capacity of permanent representative of Franklin Templeton International Services S.À R.L., a société à responsabilité limitée qualifying as an alternative investment fund manager under article 5 of the Luxembourg law of 12 July 2013 on alternative investment fund managers, authorized by the Commission de Surveillance du Secteur Financier under no. A00000154/21 November 2013, whose registered office is located at 8a, rue Albert Borschette, L-1246 Luxembourg, registered with the Luxembourg register of commerce and companies under number B36.979, registered with the Romanian Financial Supervisory Authority under number PJM07.1AFIASMDLUX0037/10 March 2016, in its capacity of alternative investment fund manager and sole director of Fondul Proprietatea S.A..
Following debates, the Fund's shareholders decide as follows:
I. The appointment of Mr. PIOTR RYMASZEWSKI as a member of the Board of Nominees following the expiration of the mandate of Mr. PIOTR RYMASZEWSKI on 5 April 2018; the mandate of the new member is valid for a period of three (3) years and shall produce its effects starting with the said date onwards, subject to the acceptance of the mandate by the newly appointed member.
This item is adopted by secret vote with 3,820,415,831 votes representing 98.99% of the validly casted votes, in accordance with Article 14 (1), second paragraph of the Constitutive Act corroborated with Article 112 (1), second paragraph of Law no. 31/1990. The casted votes were recorded as follows: 3,820,415,831 votes "for" and 38,719,097 votes "against". There were also registered: 205,451,807 abstains and 204,993,370 votes "not given".
II. In accordance with Article 1292 of Regulation no. 1/2006, the approval of 14 March 2018 as the Ex – Date, computed in accordance with the provisions of Article 2 paragraph (2) letter f1) of Regulation no. 1/2006, and 15 March 2018 as the Registration Date, computed in accordance with the provisions of Article 86 paragraph (1) of Issuers' Law. As they are not applicable to this OGM, the shareholders do not decide on the date of the guaranteed participation, as defined by Article 2 letter f1) of Regulation no. 6/2009, and on the Payment Date, as defined by Article 2 letter g) of Regulation no. 6/2009.
This item is adopted with 4,265,367,223 votes representing 99.94% of the validly casted votes, in accordance with Article 14 (1), second paragraph of the Constitutive Act corroborated with Article 112 (1), second paragraph of Law no. 31/1990. The casted votes were recorded as follows: 4,265,367,223 votes "for" and 2,403,991 votes "against". There were also registered: 911,655 abstains and 451,021 votes "not given".
III. The empowerment, with authority to be substituted, of Johan Meyer to sign the shareholders' resolutions, as well as any other documents in connection therewith, and to carry out all procedures and formalities set out by law for the purpose of implementing the shareholders' resolution, including formalities for publication and registration thereof with the Trade Registry or with any other public institution.
This item is adopted with 4,266,278,878 votes representing 99.94% of the validly casted votes, in accordance with Article 14 (1), second paragraph of the Constitutive Act corroborated with Article 112 (1), second paragraph of Law no. 31/1990. The casted votes were recorded as follows: 4,266,278,878 votes "for" and 2,403,991 votes "against". There were also registered 897,236 votes "not given".
This decision is drafted and signed on behalf of the shareholders by:
Johan Meyer Chairman
Vlad Neacșu Meeting secretary
________________________
_______________________
_______________________
Valeriu Ioniță Technical secretary
Headquarters: 78-80 Buzesti Street, 7th floor, 1st district, Bucharest, registered with the Trade Register under number J40/21901/2005, fiscal registration code 18253260
Today, 14 February 2018, 12:00 o'clock (Romanian time), the shareholders of Fondul Proprietatea S.A. ("the Fund") have met during the Shareholders' Ordinary General Meeting ("OGM") of the Fund, at its first summoning, at "Radisson Blu" Hotel, 63-81 Calea Victoriei Street, Atlas Room, 1st District, Bucharest, 010065, Romania, the OGM being opened by its Chairman, namely Mr. Johan Meyer, in his capacity of permanent representative of Franklin Templeton International Services S.À R.L., a société à responsabilité limitée qualifying as an alternative investment fund manager under article 5 of the Luxembourg law of 12 July 2013 on alternative investment fund managers, authorized by the Commission de Surveillance du Secteur Financier under no. A00000154/21 November 2013, whose registered office is located at 8a, rue Albert Borschette, L-1246 Luxembourg, registered with the Luxembourg register of commerce and companies under number B36.979, registered with the Romanian Financial Supervisory Authority under number PJM07.1AFIASMDLUX0037/10 March 2016, in its capacity of alternative investment fund manager and sole director of Fondul Proprietatea S.A..
Whereas:
Following debates, the Fund's shareholders decide as follows:
I. The appointment of Mr. STEVEN CORNELIS VAN GRONINGEN as a member of the Board of Nominees following the expiration of the mandate of Mr. STEVEN CORNELIS VAN GRONINGEN on 14 April 2018; the mandate of the new member is valid for a period of three (3) years and shall produce its effects starting with the said date onwards, subject to the acceptance of the mandate by the newly appointed member.
This item is adopted by secret vote with 4,041,018,829 votes representing 99.26% of the validly casted votes, in accordance with Article 14 (1), second paragraph of the Constitutive Act corroborated with Article 112 (1), second paragraph of Law no. 31/1990. The casted votes were recorded as follows: 4,041,018,829 votes "for" and 30,036,479 votes "against". There were also registered: 558,614 abstains and 197,966,183 votes "not given".
II. In accordance with Article 1292 of Regulation no. 1/2006, the approval of 14 March 2018 as the Ex – Date, computed in accordance with the provisions of Article 2 paragraph (2) letter f1) of Regulation no. 1/2006, and 15 March 2018 as the Registration Date, computed in accordance with the provisions of Article 86 paragraph (1) of Issuers' Law.
As they are not applicable to this OGM, the shareholders do not decide on the date of the guaranteed participation, as defined by Article 2 letter f1) of Regulation no. 6/2009, and on the Payment Date, as defined by Article 2 letter g) of Regulation no. 6/2009.
This item is adopted with 4,265,367,223 votes representing 99.94% of the validly casted votes, in accordance with Article 14 (1), second paragraph of the Constitutive Act corroborated with Article 112 (1), second paragraph of Law no. 31/1990. The casted votes were recorded as follows: 4,265,367,223 votes "for" and 2,403,991 votes "against". There were also registered: 911,655 abstains and 451,021 votes "not given".
III. The empowerment, with authority to be substituted, of Johan Meyer to sign the shareholders' resolutions, as well as any other documents in connection therewith, and to carry out all procedures and formalities set out by law for the purpose of implementing the shareholders' resolution, including formalities for publication and registration thereof with the Trade Registry or with any other public institution.
This item is adopted with 4,266,278,878 votes representing 99.94% of the validly casted votes, in accordance with Article 14 (1), second paragraph of the Constitutive Act corroborated with Article 112 (1), second paragraph of Law no. 31/1990. The casted votes were recorded as follows: 4,266,278,878 votes "for" and 2,403,991 votes "against". There were also registered 897,236 votes "not given".
This decision is drafted and signed on behalf of the shareholders by:
________________________ Johan Meyer Chairman
Vlad Neacșu Meeting secretary
_______________________
_______________________ Valeriu Ioniță
Technical secretary
Headquarters: 78-80 Buzesti Street, 7th floor, 1st district, Bucharest, registered with the Trade Register under number J40/21901/2005, fiscal registration code 18253260
Today, 14 February 2018, 12:00 o'clock (Romanian time), the shareholders of Fondul Proprietatea S.A. ("the Fund") have met during the Shareholders' Ordinary General Meeting ("OGM") of the Fund, at its first ummoning, at "Radisson Blu" Hotel, 63-81 Calea Victoriei Street, Atlas Room, 1st District, Bucharest, 010065, Romania, the OGM being opened by its Chairman, namely Mr. Johan Meyer, in his capacity of permanent representative of Franklin Templeton International Services S.À R.L., a société à responsabilité limitée qualifying as an alternative investment fund manager under article 5 of the Luxembourg law of 12 July 2013 on alternative investment fund managers, authorized by the Commission de Surveillance du Secteur Financier under no. A00000154/21 November 2013, whose registered office is located at 8a, rue Albert Borschette, L-1246 Luxembourg, registered with the Luxembourg register of commerce and companies under number B36.979, registered with the Romanian Financial Supervisory Authority under number PJM07.1AFIASMDLUX0037/10 March 2016, in its capacity of alternative investment fund manager and sole director of Fondul Proprietatea S.A..
Following debates, the Fund's shareholders decide as follows:
I. The approval of the increase of the gross monthly remuneration for each member of the Board of Nominees to RON 24,123/month, starting with 1 January 2018. The mandate agreements will be amended accordingly. Mr. Johan Meyer is empowered to sign the addenda (draft of which is presented in the supporting documentation) to the mandate agreements with the members of the Board of Nominees, for and on behalf of Fondul Proprietatea S.A..
This item is adopted with 4,048,287,313 votes representing 99.61% of the validly casted votes, in accordance with Article 14 (1), second paragraph of the Constitutive Act corroborated with Article 112 (1), second paragraph of Law no. 31/1990. The casted votes were recorded as follows: 4,048,287,313 votes "for" and 15,830,134 votes "against". There were also registered: 205,011,637 abstains and 451,021 votes "not given".
II. In accordance with Article 1292 of Regulation no. 1/2006, the approval of 14 March 2018 as the Ex – Date, computed in accordance with the provisions of Article 2 paragraph (2) letter f1) of Regulation no. 1/2006, and 15 March 2018 as the Registration Date, computed in accordance with the provisions of Article 86 paragraph (1) of Issuers' Law.
As they are not applicable to this OGM, the shareholders do not decide on the date of the guaranteed participation, as defined by Article 2 letter f1) of Regulation no. 6/2009, and on the Payment Date, as defined by Article 2 letter g) of Regulation no. 6/2009.
This item is adopted with 4,265,367,223 votes representing 99.94% of the validly casted votes, in accordance with Article 14 (1), second paragraph of the Constitutive Act corroborated with Article 112 (1), second paragraph of Law no. 31/1990. The casted votes were recorded as follows: 4,265,367,223 votes "for" and 2,403,991 votes "against". There were also registered: 911,655 abstains and 451,021 votes "not given".
III. The empowerment, with authority to be substituted, of Johan Meyer to sign the shareholders' resolutions, as well as any other documents in connection therewith, and to carry out all procedures and formalities set out by law for the purpose of implementing the shareholders' resolution, including formalities for publication and registration thereof with the Trade Registry or with any other public institution.
This item is adopted with 4,266,278,878 votes representing 99.94% of the validly casted votes, in accordance with Article 14 (1), second paragraph of the Constitutive Act corroborated with Article 112 (1), second paragraph of Law no. 31/1990. The casted votes were recorded as follows: 4,266,278,878 votes "for" and 2,403,991 votes "against". There were also registered 897,236 votes "not given".
This decision is drafted and signed on behalf of the shareholders by:
Johan Meyer Chairman
Vlad Neacșu Meeting secretary
________________________
_______________________
_______________________ Valeriu Ioniță
Technical secretary
The undersigned Franklin Templeton International Services S.À R.L. ("FTIS"), a société à responsabilité limitée qualifying as an alternative investment fund manager under article 5 of the Luxembourg law of 12 July 2013 on alternative investment fund managers, authorized by the Commission de Surveillance du Secteur Financier under no. A00000154/21 November 2013, whose registered office is located at 8a, rue Albert Borschette, L-1246 Luxembourg, registered with the Luxembourg register of commerce and companies under number B36.979, registered with the Romanian Financial Supervisory Authority under number PJM07.1AFIASMDLUX0037/10 March 2016, in its capacity of alternative investment fund manager and sole director of FONDUL PROPRIETATEA S.A., a joint-stock company incorporated under the laws of Romania, qualifying as an alternative investment fund, with its headquarters in Bucharest, 78-80 Buzeşti Street, 7th floor, 1st District, Romania, registered with the Trade Registry under no. J40/21901/2005, Sole Registration Code 18253260 ("Fondul Proprietatea"),
Issued on this day of 31 May 2018 in three (3) original counterparts by Franklin Templeton International Services S.À.R.L., in its capacity of Sole Director of FONDUL PROPRIETATEA S.A.
_________________ Denise Voss FTIS' Board Member and Conducting Officer
Mike Sommer FTIS' Conducting Officer
_________________
Headquarters: 78-80 Buzești St, 7th floor, sector 1, Bucharest, Romania, Registered with the Trade Registry under number J40/21901/2005, fiscal registration code 18253260
Today, 14 February 2018, 11:00 o'clock (Romanian time), the shareholders of Fondul Proprietatea S.A. ("the Fund") have met during the Shareholders' Extraordinary General Meeting ("EGM") of the Fund, at its first summoning, at "Radisson Blu" Hotel, 63-81 Calea Victoriei Street, Atlas Room, 1st District, Bucharest, 010065, Romania, the EGM being opened by its Chairman, namely Mr. Johan Meyer , in his capacity of permanent representative of Franklin Templeton International Services S.À R.L., a société à responsabilité limitée qualifying as an alternative investment fund manager under article 5 of the Luxembourg law of 12 July 2013 on alternative investment fund managers, authorized by the Commission de Surveillance du Secteur Financier under no. A00000154/21 November 2013, whose registered office is located at 8a, rue Albert Borschette, L-1246 Luxembourg, registered with the Luxembourg register of commerce and companies under number B36.979, registered with the Romanian Financial Supervisory Authority under number PJM07.1AFIASMDLUX0037/10 March 2016, In its capacity of alternative investment fund manager and sole director of Fondul Proprietatea S.A. ("Sole Director").
Following debates, the Fund's shareholders decide as follows.
I. The approval of the new Investment Policy Statement, as described in the supporting materials and in the annex herein. If approved by the shareholders, the new Investment Policy Statement will be in force starting with 1 April 2018. It is however hereby acknowledged that if the new Investment Policy Statement will not be approved by shareholders, this will represent a positive feedback from shareholders on implementing the investment options described under point (1) of EGM agenda, and the Fund Manager will make further proposals for changing the necessary documents and implementing such options for the shareholders' approval in future assemblies.
This item is adopted with 4,270,241,456 votes representing 99.20% of the total votes held by the present or represented shareholders, in accordance with Article 14 (3) letter (a), second paragraph of the Constitutive Act corroborated with Article 115 (2), first paragraph of Law no. 31/1990. The votes were recorded as follows:
As they are not applicable to this EGM, the shareholders do not decide on the date of the guaranteed participation, as defined by Article 2 letter f1) of Regulation no. 6/2009, and on the Payment Date, as defined by Article 2 letter g) of Regulation no. 6/2009.
This item is adopted with 4,273,426,616 votes representing 99.27% of the total votes held by the present or represented shareholders, in accordance with Article 14 (3) letter (a), second paragraph of the Constitutive Act corroborated with Article 115 (2), first paragraph of Law no. 31/1990. The votes were recorded as follows:
4,273,426,616 votes "for";
1,644,696 votes "against";
27,687,350 abstains;
This item is adopted with 4,272,538,831 votes representing 99.25% of the total votes held by the present or represented shareholders, in accordance with Article 14 (3) letter (a), second paragraph of the Constitutive Act corroborated with Article 115 (2), first paragraph of Law no. 31/1990. The votes were recorded as follows:
________________________
_______________________
_______________________
This decision is drafted and signed on behalf of the shareholders by:
Johan Meyer Chairman
Vlad Neacșu Meeting secretary
Valeriu Ioniță Technical secretary Annex – The New Investment Policy Statement as described in the supporting materials and during the Shareholders' Extraordinary General Meeting of the Fund of 14 February 2018
This investment policy statement (hereinafter referred to as the "Investment Policy Statement" or "IPS") sets the prudential rules concerning the investment policy of Fondul Proprietatea S.A. (hereinafter referred to as "Fondul Proprietatea" or "FP") and presents the investment goals, objectives and the decision-making process for selecting investments in accordance with the investment objectives.
The IPS provides criteria against which investment results will be measured and serves as a review document to monitor, evaluate and compare the performance of the Fund Manager on a regular basis.
The IPS shall be reviewed when needed by the Fund Manager together with the Board of Nominees, in accordance with the provisions of FP's Constitutive Act and the applicable legal provisions.
The IPS is set forth within the legal framework established by Title VII of Law 247/2005 and any related and ancillary legislation in force, and, in accordance with FP's Constitutive Act, the Extraordinary General Shareholders' Meeting is responsible for approval of the IPS.
A. Fund Manager. The Fund Manager is appointed by the General Shareholders Meeting and performs its activity based on a Management Agreement entered into between Fondul Proprietatea and the Fund Manager (hereinafter referred to as the "IMA").
The Fund Manager has the power to make all decisions concerning the investments to be made by Fondul Proprietatea, in accordance with the restrictions provided in this IPS, the Constitutive Act of Fondul Proprietatea, the IMA and applicable laws and regulations.
B. Board of Nominees. The Board of Nominees monitors the activity of the Fund Manager and represents the shareholders in relation to the Fund Manager. The exact roles and responsibilities of the Board of Nominees are detailed in the Constitutive Act of Fondul Proprietatea.
C. General Shareholders Meeting. The General Shareholders Meeting is the supreme corporate body of Fondul Proprietatea. Certain transactions performed by Fondul Proprietatea require the prior approval of the General Shareholders Meeting, in accordance with the Constitutive Act and the applicable legislation.
FP's investment objective is the maximization of returns to shareholders and the increase of the net asset value per share via investments mainly in Romanian equities and equity-linked securities.
The discount between the closing price for each Trading Day on the Bucharest Stock Exchange (the "Trading Day") of the shares issued by FP and the latest reported NAV per Share should be equal to or lower than 15% in at least two thirds of the Trading Days during the Reporting Period (as defined in the IMA) (the "Discount Objective").
The Fund Manager should achieve a level of Adjusted NAV per Share (as defined below) higher than the reported NAV as at the end of the previous Reporting Period (term used herein as defined in the IMA) (the "NAV Objective"). For the avoidance of doubt, the term "previous Reporting Period", when applied to a first Reporting Period under the IMA, is to be understood as being the last Reporting Period derived from either the current or the previous IMA.
The adjusted NAV (the "Adjusted NAV") for a given date will be calculated as the sum of:
The Adjusted NAV per Share will be equal to the Adjusted NAV divided by the total number of the Fund's paid shares, less treasury shares (FP ordinary shares bought back) and less equivalent in FP ordinary shares of FP GDRs acquired and not yet converted into FP ordinary shares, on the last day of the Reporting Period (the "Adjusted NAV per Share").
The Board of Nominees and the General Shareholders Meeting will review the performance of the Fund Manager, on an annual basis, for the period of time established as the Reporting Period (as defined and further detailed in the IMA).
A Discount Control Mechanism ("DCM") will be applied by the Fund Manager, as set out below, in order to seek to meet the Discount Objective. In the absence of investment opportunities offering better returns for shareholders, or if the discount to NAV per share is wider than 15% for more than 50% of the Trading Days in any 3 month financial quarter, the Fund Manager will use all or a significant part of the proceeds from annual dividends, additional special cash distributions performed by portfolio companies and the cash inflows from the disposal of portfolio companies to implement measures aimed at maximizing cash returns to shareholders and fulfilling the Performance Objectives. Discount management techniques to meet the Performance Objectives and apply the DCM may include (but are not limited to) the following:
In order to achieve the objectives in the IPS, the Fund Manager should pay attention to:
clarity of the Fund Manager's investment strategy and how it contributes to achieving the main investment objectives;
active engagement with the portfolio companies in order to increase their value, and
The Fund Manager is responsible for proper balancing of risk and expected returns.
The Fund Manager should implement appropriate tools and processes in order to monitor operational and investment risks and to respond to developments in a timely fashion.
The investment policy will observe the prudential limits of investments provided for by the applicable laws and regulations in force and the Constitutive Act of FP.
Under normal market conditions, the Fund should have at least 80% of its net assets invested in Romanian equity and equity-linked securities.
Investments limits, include but are not limited to the following:
* Shares received from Romanian State on the basis of Law No. 247/2005 are exempted from the general rules on allocation. Where the Fund acquires further securities in the same issuer as securities received from Romanian State, the general rules on allocation shall apply to the newly acquired securities only. For the calculation of the ownership limit for securities not admitted to trade, shall be excluded from the value of assets not admitted to trade the value of securities not admitted to trade owed from the Romanian State on the basis of Law No. 247/2005. Therefore, any part of the current Fondul Proprietatea Portfolio (as it has been set up, on securities not admitted to trade owed from the Romanian State on the basis of Law No. 247/2005 and including the modifications made by GEO No. 81/2007) shall be exempted from the general rules on allocation. However, any new acquisition made by the Fund shall observe the general rules on allocation. Until decrease of its participation in the relevant listed issuers, the Fund is prohibited to acquire further securities in the same issuer as securities received from Romanian State, except for the exercise of the subscription rights related to the Fund's preference rights where the excess of the relevant investment limit should not last for more than 120 calendar days.
All investment restrictions are available on Fondul Proprietatea website, Investment Policy Statement Section.
Subject to applicable legal provisions in force and the FP Constitutive Act, all decisions regarding sector and security selection, portfolio construction, timing of buy or sell transactions and choice of venue and structure of transaction are delegated to the Fund Manager.
Subject to the applicable legal provisions and FP's Constitutive Act, the Fund Manager on behalf of the Fund, may buy, sell, exchange, exercise all rights, has a good and valid title to sell and transfer any rights and to enter into conditional contractual liabilities. This includes, without limitation, the power to enter into derivatives and to negotiate and execute loan agreements, repurchase agreements and/ or securities lending agreements, to purchase GDRs or depositary interests corresponding to shares of the Fund in accordance with the legal applicable provisions in force and FP's Constitutive Act, also taking into account the cases when a prior approval of the Extraordinary General Shareholders Meeting is needed.
Transactions which involve a broker acting as a "principal", where the broker is also the investment manager (or an affiliate of such investment manager) who makes the transaction (or an affiliate of such investment manager) are not permitted.
Transactions should be executed at the lowest possible cost (including commissions, efficiency of execution and the impact of the market) and best execution should be provided at all times.
Cash allocation is made by the Fund Manager, based on market conditions. It should be aimed at reducing risks to the Portfolio.
Valuation of assets shall be made in accordance with the legislation and regulations in force and in accordance with the internal regulations of Fondul Proprietatea.
The Fund Manager assumes the management over the Customer and its entire Portfolio, subject to the terms of the IPS and the IMA.
The Fund Manager is subject to the limitations set out by this IPS, the Constitutive Act of Fondul Proprietatea and the existing applicable legal provisions in force.
The Fund Manager can delegate the management of the portfolio and the administrative activities according to legislation and regulations in force and the limitations included IMA and the Constitutive Act.
The Fund Manager shall maintain adequate liquidity in order to at least meet the following requirements:
The duration of Fondul Proprietatea is not limited in time.
The FP is established as a commercial undertaking and is subject to corporate tax in accordance with the Romanian Fiscal Code. In managing the investment portfolio and seeking to achieve the objectives, the Fund Manager shall have due regard to the potential impact of tax legislation and regulations.
The FP shall not invest in any other type of asset class, except those specifically mentioned in the applicable legislation and the Constitutive Act. The use of derivatives is permitted subject to the limitations contained in applicable legislation in force. Short selling of securities is prohibited.
Borrowing is allowed only in accordance with the applicable legislation and regulations and FP's Constitutive Act.
The IPS shall be reviewed on regular basis by the Fund manager and Board of Nominees in order to ensure that it remains consistent with overall objectives of FP.
Any changes to the investment policy proposed by the Fund Manager and/or the Board of Nominees shall be approved by the General Shareholders Meeting, with observance of investment limits provided in the applicable legislation in force.
Fondul Proprietatea SA Premium Point (7th Floor) 78-80 Buzesti Street, 1st District Bucharest 011017 Romania
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