Annual Report • Dec 31, 2017
Annual Report
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PREPARED IN ACCORDANCE WITH LAW NO 297/2004, CNVM REGULATION NO 1/2006 AND FSA NORM NO 39/2015
(this is a translation from the official Romanian version)
| Company Information | 2 |
|---|---|
| Sole Director's Letter to Shareholders. | 6 |
| Presentation and Activity of the Fund 16 | |
| General Information 16 Buy-back Programmes 23 Analysis of the Portfolio of the Fund 26 Risk Management Key Financial Highlights of the Fund 42 |
38 |
| Market for Securities Issued by the Fund 44 | |
| Trading of the Fund's Shares 44 Distributions to Shareholders 45 Profit appropriation proposal |
48 |
| Corporate Governance of the Fund Overview. Corporate Governance of the Fund |
49 49 49 |
| Financial Statements Analysis | 67 |
| Subsequent Events | 73 |
| Annex 1 | Financial Statements for the year ended 31 December 2017, prepared in accordance with the International Financial | |
|---|---|---|
| Reporting Standards as endorsed by the European Union ("IFRS") and applying the Financial Supervisory Authority ("FSA") | ||
| Norm no. 39/ 2015, regarding the approval of the accounting regulations in accordance with IFRS, applicable to the entities | ||
| authorised, regulated and supervised by FSA – Financial Investments and Instruments Sector | 75 | |
| Annex 2 | Statement of Assets and Obligations of Fondul Proprietatea SA as at 31 December 2017, prepared in accordance with | |
| CNVM Regulation 4/2010 (Annex no.4) 128 | ||
| Annex 3 | Statement of Persons Responsible | 132 |
| Annex 4 | The Constitutive Act of Fondul Proprietatea SA in force as at 31 December 2017 | 133 |
| Annex 5 | Major contracts concluded by Fondul Proprietatea during 2017 151 | |
| Annex 5.1 Tender Offer Document. 151 | ||
| Annex 6 | Compliance with the corporate governance requirements. | 174 |
| 31 December | 31 December | 31 December | Change % YE 2017 vs |
||
|---|---|---|---|---|---|
| NAV* and share price developments | Notes | 2017 | 2016 | 2015 | YE 2016 |
| Total shareholders' equity (RON million) | 10,790.2 | 11,386.0 | 12,053.1 | -5.2% | |
| Total NAV (RON million) | a, m | 10,790.4 | 11,427.4 | 12,087.8 | -5.6% |
| NAV per share (RON) | a, m | 1.2375 | 1.1865 | 1.1564 | |
| NAV per share change in the period (%) | b | +4.3% | +2.6% | -4.6% | |
| NAV per share total return in the period (%) | h | +13.1% | +7.3% | -0.6% | |
| Share price as at the end of the period (RON) | 0.8640 | 0.7950 | 0.8100 | ||
| Share price low (RON) | c | 0.8000 | 0.6780 | 0.7250 | |
| Share price high (RON) | c | 0.9250 | 0.8100 | 0.9270 | |
| Share price change in the period (%) | b | +8.7% | -1.9% | -9.6% | |
| Share price total return in the period (%) | i | +21.5% | +4.9% | -4.1% | |
| Share price discount to NAV as at the end of the period (%) |
e | 30.2% | 33.0% | 30.0% | |
| Average discount for the period (%) | e | 28.0% | 32.1% | 29.1% | |
| Average daily share turnover (RON million) | d, k | 6.9 | 6.7 | 8.1 | +3.0% |
| GDR price as at the end of the period (USD) | 11.4500 | 9.4000 | 9.9000 | ||
| GDR price low (USD) | f | 9.4000 | 8.5000 | 9.4500 | |
| GDR price high (USD) | f | 11.4500 | 10.6500 | 11.5500 | |
| GDR price change in the period (%) | b | +21.8% | -5.1% | -13.5% | |
| GDR price total return in the period (%) | b, j | +35.9% | +1.2% | -8.5% | |
| GDR price discount to NAV as at the end of the period (%) |
e | 28.0% | 31.8% | 29.0% | |
| Average GDR price discount for the period (%) | e | 27.4% | 30.0% | 29.2% | |
| Average daily GDR turnover (USD million) | g, l | 1.0 | 0.9 | 1.5 | +11.1% |
The following table shows a summary of the financial information of the Fund:
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 | 31 December 2017* | 31 December 2016 | 31 December 2015 |
|---|---|---|---|
| Issued share capital (RON) | 4,854,034,784.56 | 9,168,314,116.70 | 10,074,080,745.90 |
| Paid in share capital (RON) | 4,664,852,362.56 | 8,859,073,619.20 | 9,746,649,630.90 |
| Number of shares in issue | 9,334,682,278 | 10,786,251,902 | 11,193,423,051 |
| Number of paid shares | 8,970,869,928 | 10,422,439,552 | 10,829,610,701 |
| Nominal value per share (RON) | 0.52 | 0.85 | 0.90 |
*Note: the following changes in the Fund's share capital took place in 2017:
On 18 January 2017, the Trade Registry registered Resolution no. 7/11 October 2016 of the Fund's Extraordinary General Shareholders Meeting ("EGM") for approving the decrease of the subscribed share capital from RON 9,168,314,116.70 to RON 8,562,968,634.10, pursuant to the cancellation of 712,171,156 own shares acquired by the Fund during the sixth buy-back programme, endorsed by the Financial Supervisory Authority ("FSA") through the Endorsement no. 1/12 January 2017.
On 24 March 2017 the Trade Registry registered Resolution no 10/31 October 2016 of the Fund's EGM for approving the subscribed share capital decrease from RON 8,562,968,634.10 to RON 5,742,226,025.22, through the reduction of the nominal value of the shares from RON 0.85 to RON 0.62, for the coverage of the cumulated accounting losses as reflected in the Fund's financial statements as at 31 December 2015 in amount of RON 2,473,157,471.66 and through the reduction of the nominal value of the Fund's shares from RON 0.62 to RON 0.57, as a result of the approved shareholders cash distribution of RON 0.05 per share, endorsed by the FSA through Endorsement 79/22 March 2017.
On 16 June 2017 the Trade Registry registered Resolution no 1/28 February 2017 of the Fund's EGM for approving the subscribed share capital decrease from RON 5,742,226,025.22 to RON 5,238,521,987.92, through the reduction of the nominal value of the shares from RON 0.57 to RON 0.52, as a result of the approved shareholders cash distribution of RON 0.05 per share, endorsed by the FSA through Endorsement 362/12 June 2017.
On 29 November 2017, the Trade Registry registered Resolution no. 3/3 May 2017 of the Fund's EGM for approving the decrease of the subscribed share capital from RON 5,238,521,987.92 to RON 4,854,034,784.56, pursuant to the cancellation of 739,398,468 own shares acquired by the Fund during the seventh buy-back programme, endorsed by the Financial Supervisory Authority ("FSA") through the Endorsement no. 1166/23 November 2017
The following table shows a summary of the Fund's performance by each quarter of 2017:
| NAV* and share price developments | Notes | Q4 2017 | Q3 2017 | Q2 2017 | Q1 2017 |
|---|---|---|---|---|---|
| Total NAV (RON million) | a, g | 10,790.4 | 10,605.9 | 10,570.3 | 10,689.5 |
| Total NAV change in the period (%) | +1.7% | +0.3% | -1.1% | -6.5% | |
| NAV per share (RON) | a, g | 1.2375 | 1.2078 | 1.1953 | 1.1943 |
| NAV per share total return in the period (%) | b, d | +2.5% | +1.1% | +4.2% | +4.9% |
| Share price as at the end of the period (RON) | 0.8640 | 0.8450 | 0.8300 | 0.8880 | |
| Share price total return in the period (%) | b, e | +2.3% | +1.8% | -1.20% | +18.1% |
| Share price discount to NAV as at the end of the period (%) | c | 30.2% | 30.0% | 30.6% | 25.6% |
| GDR price as at the end of the period (USD) | 11.45 | 11.05 | 10.40 | 10.50 | |
| GDR price total return in the period (%) | b, f | +3.6% | +6.3% | +4.6% | +18.0% |
| GDR price discount to NAV as at the end of the period (%) | c | 28.0% | 28.7% | 30.5% | 25.1% |
Source: Fondul Proprietatea
*Net Asset Value ("NAV") for the end of each period was computed in the last working day of the month.
| 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-4522-2/13.12.2017 |
| % of subscribed share capital |
% of paid-in share capital |
% of voting rights1 |
|---|---|---|
| 35.62% | 37.07% | 38.14% |
| 19.57% | 20.36% | 20.95% |
| 17.63% | 18.35% | 18.88% |
| 17.37% | 18.07% | 18.59% |
| 3.15% | 3.28% | 3.38% |
| 0.06% | 0.06% | 0.06% |
| 2.70% | 2.81% | |
| 3.90% | - | - |
Source: Depozitarul Central SA ("Romanian Central Depositary")
As at 31 December 2017, there were 6,522 shareholders and the total number of voting rights was 8,718,991,588.
| Shareholder | Latest ownership disclosure |
% of voting rights |
|---|---|---|
| Elliott Associates | 24 November 2017 | 14.89% |
| City of London Investment Mgmt. | 5 April 2016 | 5.04% |
| NN Group | 27 March 2017 | 5.02% |
Source: ownership disclosure 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 no global depository receipts as at 31 December 2017
3 The percentage represents the paid shares; the percentage of subscribed share capital of Romanian State represented by Ministry of Public Finance is 3.96%, including the unpaid shares 4 251,878,340 treasury shares acquired by the Fund in the seventh, eighth and ninth buy-back programmes, based on settlement date (187,099,090 ordinary shares acquired and 64,779,250 shares corresponding to GDRs acquired, converted into shares)
5 Shares unpaid by Romanian State represented by Ministry of Public Finance
Our focus throughout 2017 has remained unwavered on protecting and creating shareholder value for the Fund's shareholders through our active management approach, close supervision of the portfolio companies, and a constant focus on value-enhancing corporate actions. In 2017, the Fund's NAV per share total return was 13.1% and the Fund's share price cumulative performance was 21.5%. The discount of the Fund's share price to the NAV ranged between a high of 35.7%1 and a low of 23.9%1 , and ended the year at 29.1%1 . On the LSE, the total return for the GDR was 35.9% and the discount varied between a high of 35.5%1 and a record low of 22.4%1 , and ended the year at 26.9%1 . The GDRs traded at an average premium of 2.4% over the local shares for most of the year.
We are delighted about the positive returns we have been able to generate on the NAV and on the share price for our shareholders, but we are unhappy with the discount level. Reducing the discount to NAV below 15% remains one of our key objectives for 2018 and to that end, we will continue with the actions which are under our control such as share buy-backs and cash distributions. In order for this objective to be achieved, a better visibility on the timeline for the Initial Public Offerings of Hidroelectrica SA and Aeroporturi Bucuresti SA ("Bucharest Airports") will be key.
| In 2017, the BVB had a positive performance but underperformed the largest markets in Central Europe, in both | |
|---|---|
| local currency and EUR terms, as shown in the table below: |
| % change in 2017 | in local currency | in EUR |
|---|---|---|
| WIG20 (Poland) | 26.35% | 33.32% |
| ATX (Austria) | 30.62% | 30.62% |
| BUX (Hungary) | 23.04% | 22.52% |
| PX (Czech Republic) | 16.99% | 23.79% |
| BET-XT (Romania) | 14.48% | 11.42% |
Source: Bloomberg
We provide details on the portfolio management on a monthly basis via Factsheets and also via the Quarterly Results Reports. We encourage you to read the full details given in the section Analysis of the Portfolio of the Fund.
1 Calculated as the discount between FP share closing price on BVB/ FP GDR closing price on LSE using the latest available published NAV per share at the date of calculation
Some of the key highlights for 2017 are:
As per the statutory financial statements prepared in accordance with the IFRS, the Fund recorded a net profit for the financial year ended 31 December 2017 of RON 1,289,896,039. In accordance with the Companies law, the Fund is obliged to make transfers to the legal reserves until those reserves reach a value equivalent to 20% of the value of the issued share capital of Fondul Proprietatea. Following the 2017 transfer of RON 64,494,802, the value of those reserves is RON 330,578,801 (representing 7.09% of the issued share capital as at 31 December 2017).
The Fund's Sole Director proposal, subject for GSM approval in accordance with the legislation in force, for the appropriation of the net accounting profit for the 2017 financial year in an amount of RON 1,289,896,039 is as follows:
Seven years after the listing on the BVB on 25 January 2011, the Fund continues to be among the most actively traded companies:
On 29 April 2015 the Fund was listed on the Specialist Fund Market of the LSE, through Global Depositary Receipts. During the second year of trading on LSE:
According with the Management Agreement currently in force, the first Reporting Period was from 1 July 2015 until 30 June 2016 and afterwards every subsequent year was defined from 1 July until 30 June of the next year (the "Reporting Period"). Consequently, the last reporting period ended 30 June 2017.
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, namely as at 30 June 2017, compared to the reported NAV per share as at 30 June 2015, i.e. higher than RON 1.1851 per share. 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 from 1 July 2016 to 30 June 2017.
During the 26 September 2017 GSM, the shareholders approved the key commercial terms of the new Management Agreement and the reference to the new reporting period will be detailed in the new Management Agreement which will be subject to shareholders' approval in the 14 February 2018 GSM.
1 The adjusted NAV for a given date is calculated as the sum of: (1) the reported NAV as at the end of the reporting period, (2) any returns to shareholders, following reductions of the share capital (return of nominal value) implemented after 30 June 2015, and (3) any distribution fee and any transaction costs relating to non-dividend distributions including buy-backs of shares and/ or GDRs executed after 30 June 2015. The adjusted NAV per share is 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.
As at 30 June 2017, the adjusted NAV per share was 15.30% higher than the 30 June 2015 NAV per share of RON 1.1851.
| NAV Objective | Amount RON | Details |
|---|---|---|
| Total NAV as at 30 June 2017 | 10,570,251,408 | |
| Costs related to the 2015, 2016 and 2017 returns of capital after 30 June 2015, until 30 June 2017 |
57,414 Fees charged by the Central Depositary and Paying Agent for the payments performed after 30 June 2015 (for the 2015; 2016 and 2017 returns of capital) |
|
| Costs related to buy-backs after 30 June 2015, until 30 June 2017 |
14,883,473 Fees related to fifth buy-back programme after 30 June 2015, sixth and seventh buy-back programmes (including the FSA fees of 1% of the tender offer value) and eight buy-back programme starting 30 May 2017 |
|
| Distribution fees after 30 June 2015, until 30 June 2017 |
56,176,582 Distribution fees for distributions to shareholders after 30 June 2015 |
|
| 2016 Return of capital to shareholders | 516,886,344 Payment started in June 2016 | |
| March 2017 Return of capital to shareholders | 480,543,496 Effective as of 24 March 2017; payment date 27 March 2017 | |
| June 2017 Return of capital to shareholders | 443,502,747 Effective as of 16 June 2017; payment date 30 June 2017 | |
| Total Adjusted NAV as at 30 June 2017 | 12,082,301,465 | |
| Number of Fund's paid shares, less treasury shares and GDRs held as at 30 June 2017 |
8,842,846,464 | |
| Adjusted NAV per share as at 30 June 2017 | 1.3664 | |
| NAV per share as at 30 June 2015 | 1.1851 | |
| Difference | 0.1813 | |
| % | 15.30% |
Source: Fondul Proprietatea
In the period between 1 July 2016 and 30 June 2017 the discount to NAV was greater than 15%, for both shares and GDRs.
| Discount at 30 June 2017 | Minimum discount in the Reporting Period |
Maximum discount in the Reporting Period |
Average discount for the Reporting Period |
|---|---|---|---|
| 35.12% | 23.85% | 35.67% | 29.17% |
Source: Fondul Proprietatea
In the period between 1 July 2017 and 31 December 2017, the discount to NAV was greater than 15%, for both shares and GDRs.
| Discount at 29 December 2017 |
Minimum discount in the Reporting Period |
Maximum discount in the Reporting Period |
Average discount for the Reporting Period |
|---|---|---|---|
| 29.1% | 26.8% | 34.3% | 29.3% |
Source: Fondul Proprietatea
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.
The AIFM and the Investment Manager will continue its 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 cash distribution yield for 2017 of over 11%1 , the ongoing buy-back programmes and our transparency, disclosure, and proactive investor relations efforts.
In 2017, 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 to 16 regional and global emerging and frontier market conferences in London, Zurs, Budapest, New York, Stegersbach, and Prague, and met with over 170 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 the year, we also organised 16 road-shows in the United Kingdom, South Africa, US and UAE. During the road-shows, the Investment Manager participated in individual and group meetings with representatives of over 130 international institutional investment firms, both current shareholders and potential investors.
On 1 and 2 March we organised, in collaboration with WOOD & Company, the 4th edition of the "Romania Investor Days in London" event. 87 representatives from 50 international investments firm, with assets under management of over EUR 2,000 billion, and 46 representatives from 20 Romanian companies, listed or candidates for being listed, participated to the event.
The first part of the first day of the event featured presentations and speeches from the British Ambassador to Romania, the Ambassador of Romania to the United Kingdom, the Deputy Governor of the National Bank of Romania, the Chief Economist of WOOD & Company, the Manager of the Strategy and Financial Stability Directorate within the Financial Supervisory Authority, the Head of the Treasury from the Ministry of Public Finances, and the CEO of FTIML. During the event, over 162 individual and group meetings were held between the investors and the management teams of the Romanian corporates present at the conference.
On 19 April, we organized, in collaboration with Auerbach Grayson, Bucharest Stock Exchange, BCR and Erste Bank, the 4th edition of the Romania Investor Day in New York event. 41 investors from 29 investment management firms, with assets under management of over USD 2,000 billion, and 13 Romanian companies with 28 representatives participated to the event, and to the 127 company meetings, including 1-on-1, and group meetings. Also, during the event, we had a plenary session, with speeches from the Consul General of Romania to the United States of America, the Head of Treasury Ministry of Public Finances, and the Deputy Governor of National Bank of Romania.
Between 6 to 8 September, we organized the 10th edition of the Fondul Proprietatea Analyst and Investor Days event in Bucharest. 100 representatives from 67 local and foreign institutional investors (with over EUR 1,000 billion collectively in assets under management) participated to the event. Also, representatives of local authorities (Romanian National Bank, Regulatory Authority for Energy), as well as of the Romanian Government, International Monetary Fund, the US and UK Embassies in Romania, corporates, journalists and other related parties joined the event, bringing the total number of attendees to over 190. The investors had the opportunity to visit one of the most important assets in the Fund's portfolio, and also to be updated on the Romanian economy in general, on the energy sector and the local capital markets environment.
During the first day of the event, the guests visited the third largest asset in the Fund's portfolio – the Bucharest Airports company, namely the 2 airports of the company: Baneasa and Otopeni. The first half of the second day was dedicated to 3 panels on Romanian macroeconomics, energy sector and capital market, with speakers from the National Bank of Romania, International Monetary Fund, ING Bank, Romanian Regulatory Authority on Energy, OMV Petrom SA, Nuclearelectrica SA, A.T. Kearney, EBRD, BCR Pension Funds, BRD Asset Management, WOOD & Co, and Fondul Proprietatea. The US and UK ambassadors, and the Minister of Economy delivered speeches at the conference.
In the second part of the day and the entire day on 8 September, we organized together with WOOD & Company the Frontier Investor Days conference. 366 investor meetings – individual and group meetings - were organized
1 The cash distribution yield was calculated considering the March and June 2017 special cash distributions of RON 0.05 per share each and the average closing share price on BVB, for the period.
between the institutional investors and the 43 representatives of the 23 corporates present at the event, Romanian listed companies, but also foreign corporates from other Frontier markets: Georgia, Slovenia, and Croatia.
As part of our communication strategy to update the institutional investors and analysts covering Fondul Proprietatea on the Fund's results, the latest events involving the Fund and its portfolio companies, and the planned corporate actions, we organised the 2016 preliminary results, 2017 first quarter, 2017 first half, and 2017 third quarter results conference calls, where, on average, 40 investors and analysts participated.
Furthermore, during the year, we organised 56 additional meetings with analysts, brokers, current and prospective investors, as well as 36 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.
During the year, in our efforts to update the retail investors on the latest developments regarding the Fund, we sent three letters to the Fund's shareholders in February, June, and December.
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.
Following the self-assessment conducted, the AIFM informs the shareholders and investors that the Fund is fully compliant with the provisions of the Corporate Governance Code of BVB, and with the FSA Regulation no. 2/2016 on the application of the principles of corporate governance by the entities authorised, regulated and supervised by the FSA.
The GDR facility is limited to one-third of the Fund's subscribed share capital under the Romanian securities regulations or 62,231,215GDRs as at 31 December 2017, each GDR representing 50 shares. As at 31 December 2017, 35.62% of the Fund's issued shares were converted into GDRs, accounting for 38.14% of the voting rights.
The Bank of New York Mellon, the depositary bank of the GDRs, has notified that the total GDR holdings have reached the limit for GDR issuance, of one third of the Fund's issued share capital, according to regulations in force. As at 31 December 2017 there were 66,506,969 GDRs issued, representing 106.87% of the GDR facility.
During the year ended 31 December 2017, the Fund bought back a total number of 911,940,087 own shares in the seventh, eighth and ninth buy-back programmes (out of which 577,589,887 ordinary shares and 334,350,200 ordinary shares corresponding to GDRs), representing 8.5% of the total issued shares as at 31 December 2016, for a total acquisition value of RON 819,687,620, excluding transaction costs.
The total number of own shares (including GDR's) held by the Fund as at 31 December 2017 is 251,878,340 shares, having a total nominal value of RON 130,976,737 (RON 0.52 per share), which are in process of being cancelled or will be proposed to be cancelled during the next general meeting of shareholders.
In 2017, the Fund converted 6,687,004 of the GDRs acquired during the year into 334,350,200 ordinary shares.
As at 31 December 2017, the Fund held no global depository receipts.
The table below presents the details regarding the buy-back programmes ongoing during the period ended 31 December 2017:
| Programme | Start date | End date | Limit | Status |
|---|---|---|---|---|
| 7th | 29-Sep-16 | 26-May-17 | All the outstanding treasury shares (acquired | Finalised |
| 8th | 30-May-17 | 10-Nov-17 | during this programme and/ or previous ones) do not exceed 10% of the issued share capital |
Finalised |
| at the relevant time | ||||
| 9th | 14-Nov-17 | Valid for a maximum period of 18 months as of the date when this shareholders' resolution is published in the Official Gazette of Romania |
All the outstanding treasury shares (acquired during this programme and/ or previous ones) do not exceed 20% of the issued share capital at the relevant time |
On-going |
The table below presents the summary of the share capital changes occurred in 2017:
| Description of share capital process | Effective date | Subscribed share capital (RON) |
Issued shares after implementation |
Nominal value (RON) |
|---|---|---|---|---|
| Partial share cancellation after the sixth buy-back programme |
18 January 2017 | 8,562,968,634.10 | 10,074,080,746 | 0.85 |
| The share capital decrease for covering of the accounting losses and for cash distributions to shareholders |
24 March 2017 | 5,742,226,025.22 | 10,074,080,746 | 0.57 |
| The share capital decrease for annual cash distributions to shareholders |
16 June 2017 | 5,238,521,987.92 | 10,074,080,746 | 0.52 |
| Partial share cancellation for the seventh buy-back programme |
29 November 2017 | 4,854,034,784.56 | 9,334,682,278 | 0.52 |
| Partial share cancellation for the seventh buy-back programme and eight buy-back programme |
Share capital is expected to be effective during 2018. |
4,771,610,196.08 | 9,176,173,454 | 0.52 |
During 2017 the Fund performed two cash distributions to shareholders in the form of Return of Capital:
The FSA Endorsement no. 79/ 22 March 2017 of the new Constitutive Act reflecting the share capital decrease was received on 22 March 2017. On 24 March 2017, the Trade Registry registered the Resolution no. 10/2016 of the Fund's EGM for approving the subscribed share capital through the reduction of the nominal value of the Fund's shares from RON 0.85 to RON 0.57. In accordance with the Fund's accounting policy, the share capital decrease operation was recorded in the accounting system on the same day, at the Trade Registry registration date, of 24 March 2017 and incorporates two operations (coverage of accounting losses and distribution to shareholders).
Therefore, with effect from 24 March 2017, the new value of the Fund's subscribed share capital was RON 5,742,226,025.22, being divided into 10,074,080,746 shares with a nominal value of RON 0.57 per share. The value of the paid-in share capital of the Fund was RON 5,534,852,985.72, being divided into 9,710,268,396 shares with a nominal value of RON 0.57 per share.
The shareholders registered with the Romanian Central Depositary as at 7 March 2017 have the right to receive RON 0.05 per share, proportionally with their participation in the paid-in share capital of the Fund. The payment of the capital return started on 27 March 2017 (the Payment Date), the next working day after the accounting operation for covering accounting losses was registered in the accounting books of the Fund.
By 31 December 2017, the shareholders have collected over 98.8% of the total distribution of RON 480.5 million.
The FSA Endorsement no. 362/ 12 June 2017 of the new Constitutive Act reflecting the share capital decrease was received on 12 June 2017. On 16 June 2017, the Trade Registry registered the Resolution no. 1/28 February 2017 of the Fund's EGM for approving the subscribed share capital through the reduction of the nominal value of the Fund's shares from RON 0.57 to RON 0.52. In accordance with the Fund's accounting policy, the share capital decrease operation was recorded on the same day in the accounting system.
Therefore, with effect from 16 June 2017, the new value of the Fund's subscribed share capital is RON 5,238,521,987.92, being divided into 10,074,080,746 shares with a nominal value of RON 0.52 per share. The value of the paid-in share capital of the Fund is RON 5,049,339,565.92, being divided into 9,710,268,396 shares with a nominal value of RON 0.52 per share.
The shareholders registered with the Romanian Central Depositary as at 12 June 2017 have the right to receive RON 0.05 per share, proportionally with their participation in the paid-in share capital of the Fund. The payment of the capital return started on 30 June 2017 (the Payment Date).
By 31 December 2017, shareholders have collected over 97.7% of the total distribution of RON 443.5 million.
As an important notice to shareholders, the payment of the amounts due to the Fund's shareholders related to the 27 March 2017 and 30 June 2017 cash distributions is subject to the general statute of limitation. As such, the shareholders may request these payments only within a three year term with effect from the Payment Date, namely until 27 March 2020 for the 27 March 2017 cash distribution, and 30 June 2020 for the 30 June 2017 cash distribution.
Starting September 2017, several portfolio companies controlled by the Romanian state approved the distribution of special dividends, thus resulting the following gross amounts for the Fund in accordance with its shareholding:
| Portfolio company | Gross amounts |
|---|---|
| (RON million) | |
| Hidroelectrica SA | 130.6 |
| Bucharest Airports SA | 40.0 |
| Conpet SA | 5.2 |
| Nuclearelectrica SA | 10.0 |
| CN Administratia Porturilor Dunarii Maritime SA | 0.2 |
| Total | 186.0 |
The amounts above were fully collected by the Fund as at 31 December 2017. For more details, please refer to the Analysis of the activity of the Fund - Update on the largest 10 portfolio holdings section.
In August, the Investment Manager of Fondul Proprietatea announced that it initiated a competitive process aimed at potential disposals of the Fund's holdings in E-Distributie Muntenia, E-Distributie Banat, E-Distributie Dobrogea, Enel Energie, Enel Energie Muntenia and Engie Romania. The process is managed by Ithuba Capital AG acting as the Fund's sole financial adviser in connection with the envisaged transactions.
In September, the Investment Manager of Fondul Proprietatea announced that it is reviewing strategic options regarding its ownership interest in Hidroelectrica SA, and appointed Citigroup Global Markets Limited and UBS Limited as financial advisers in connection with the envisaged transaction.
The Fund is reviewing strategic options regarding its stake in the Company, and has appointed UniCredit as financial advisor in connection with a possible transaction.
During September the Fund sold 1.454 billion shares in OMV Petrom SA through an accelerated book building offer at an agreed selling price of RON 0.2750 / share, the gross proceeds of the transaction amounting to RON 399,850,000. The remaining holding in OMV Petrom SA is 9.9985% as at 31 December 2017.
Goldman Sachs International, WOOD & Company Financial Services, A.S. and Banca Comercială Română acted as Joint Bookrunners for this transaction.
On 1 November 2017 the Investment Manager announced that the Fund sold its entire holdings in the subsidiaries of Societatea Energetică Electrica SA ("Electrica").
The total value of the transaction amounts to RON 752,031,841 and its details are described below:
Societatea de Distribuție a Energiei Electrice Transilvania Nord SA (SDEE Transilvania Nord SA) was sold to Electrica and Societatea de Distribuție a Energiei Electrice Muntenia Nord SA (SDEE Muntenia Nord SA) for an aggregated selling price of RON 201,702,667;
SDDEE Muntenia Nord SA was sold to Electrica and Societatea de Distribuție a Energiei Electrice Transilvania Sud SA (SDEE Transilvania Sud SA) for an aggregated selling price of RON 209,744,928;
During November 2017, the Fund also collected the outstanding balance of the dividends in amount of RON 97.9 million distributed by the Electrica subsidiaries.
Romania has been the best performing economy in the European Union in 2017. Currently, the economy is estimated to have grown by 6.5%, a much faster pace than initially expected, driven mainly by domestic consumption. For 2018, the GDP is expected to maintain a solid growth momentum estimated at 4.8%, closer to the economy's real potential. The private consumption should continue to be the main driver of the GDP growth, stimulated by the increase in the minimum wage, public and private sector salaries and pensions.
The macroeconomic fundamentals continue to be positive – in 2017 the public debt was less than 40% of the GDP, and the budget deficit has been kept under control, below the 3% threshold. Unemployment continued to shrink to less than 5.0%. However, the high GDP growth rate along with the current strong fundamentals, and regional and global positive perspectives should be sustained by a more stable political environment.
Further increasing budgetary expenses and continuing to disregard the corporate governance legislation can result in a significant deterioration of the investors sentiment, with implications not only to the financial sector, but to the overall economy. It is important for the fight against corruption to continue, as it should lead to further governance improvement and increased efficiency of state institutions, which are the backbone to economic activity.
Sectors where we remain positive on growth potential are energy, transport, IT, banking, constructions, agriculture and healthcare. The IT and agriculture, for example, have an increasing share in the GDP, driven by the strong network infrastructure, low costs, and highly skilled workforce in the first and by further absorption of EU funds in the latter.
Listing companies on stock exchange represents the key driver in developing the local capital market. New companies on the stock exchange would not only boost the liquidity and attract new investors, but would also ensure a higher exposure of the pension funds to the local capital markets (their maximum exposure limit in equities is up to 35% vs. current equity exposure of around 20%), as well as continued growth of mutual funds sector. The new listings should contribute decisively to the upgrade of the local capital market to emerging market status from the current frontier one.
As we look to generate further value for the Fund's shareholders and not only meet, but exceed the performance objectives included in the IPS (discount of 15% or less and a higher adjusted NAV per share), we will continue to actively manage the Fund, work closely with the Government to ensure the state controlled companies ("SOEs") in the Fund's portfolio continue the strong performance path registered in the past years, and the progress in the listing of the largest companies in the Fund's portfolio which are prepared for an Initial Public Offering: Hidroelectrica SA, and Bucharest Airports.
Economic growth and further efficiency gains should continue to enhance the profitability of these assets and contribute to a higher dividend income for the Fund. Furthermore, value-enhancing corporate actions, such as share buy-backs and cash distributions to shareholders, and continued promotion of the Fund and of the Romanian capital market, should allow the Fund's NAV to be better reflected in the share price.
We are confident that our active, bottom-up investment process will allow us to continue delivering the best longterm results for our shareholders and we look forward to the opportunities ahead for Fondul Proprietatea.
Last but not least, we would like to take this opportunity to invite shareholders to attend the Annual General Shareholders Meeting to be held in Bucharest on 26 April 2018, starting with 3pm, at "JW Marriott" hotel, "Salon Constanta" room, 90 Calea 13 Septembrie street, 5th district, where you will have the opportunity to receive the latest updates about the Fund.
Grzegorz Maciej Konieczny Johan Meyer Permanent Representative of FTIS in relation Permanent Representative of FTIS in relation to Fondul Proprietatea SA to Fondul Proprietatea SA CEO of FTIML Co-CEO of FTIML Director of Specialty Strategies for the Portfolio Manager, Emerging Markets Templeton Emerging Markets Group
Fondul Proprietatea is a Romanian legal entity, incorporated as a joint stock closed-end investment company. The Fund is registered with the FSA in the category "Other Organisations for Collective Investments – AOPC" and has been listed on the regulated market of BVB since 25 January 2011 and on the Specialist Fund Market of the LSE since 29 April 2015.
The main activities of the Fund according to the National Statistics Classification of Economic Activities in Romania ("CAEN") and the Fund's own Constitutive Act are the business of operating mutual funds and other similar financial entities (CAEN reference 643) and the main activity is financial investments (CAEN reference 6430).
Considering the legal requirements to implement the AIFM Directive the shareholders of the Fund approved, on 29 October 2015, the change of the management structure and the termination of FTIML mandate as Fund Manager and Sole Director, with the mutual consent of both parties, starting with 1 April 2016. Subsequent to the termination, the Fund appointed Franklin Templeton International Services S.à r.l as its Sole Director and AIFM under AIFM Directive and local implementation regulations, and executed a new Management Agreement in order to reach AIFM Directive compliance (FTIS mandate commenced on 1 April 2016). As part of the new management structure, FTIS delegated the role of Investment Manager and certain administrative functions to FTIML.
The Fund was incorporated by the Romanian state in 2005 as a joint stock company with the initial purpose of providing compensation to individuals whose real property assets were illegally confiscated by the Romanian State during the Communist regime, and which could no longer be returned in kind to those individuals.
The Fund's original Constitutive Act was enacted by Government Decision no. 1481/2005 regarding the incorporation of Fondul Proprietatea, which established that the Fund would be an undertaking for collective investments organised as a closed-end investment company. However, the Fund was officially registered by CNVM (currently FSA) as a closed-end investment company only in 2010 (by CNVM Decision no. 34/18 August 2010).
The initial sole shareholder of the Fund was the Romanian state. Since the Fund's launch, the shares have been awarded by the National Authority for Property Restitution to individuals legally entitled to receive compensation from the Romanian state and who chose to convert their compensation entitlements into shares issued by the Fund.
As a result of the compensation and conversion process, the Romanian state's participation in the share capital of the Fund has decreased to 369,470,398 shares as at 31 December 2017, out of which 5,658,048 paid shares. However, the Romanian state's participation in the share capital of the Fund increased during 2017 with 969,581 paid shares as a result of a correction made by Depozitarul Central SA (the correction refers to a double registration in shareholders' register of one compensation title issued by National Authority for Restitution Property in December 2010).
Starting 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 entered into force confirming that the Romanian state will no longer use the compensation scheme for Fondul Proprietatea shares in future.
The Fund's investment objective as set out in the IPS is the maximisation of returns and per-share capital appreciation via investments mainly in Romanian equities and equity-linked securities.
The Fund's IPS is drafted by the AIFM with the observance of the investment limits set forth in the applicable laws and regulations and in the Constitutive Act. According to the current IPS, the AIFM shall, in the absence of investment opportunities offering better returns for shareholders, use all or a significant part of the proceeds from dividends and disposal of portfolio companies to implement measures aimed at maximising cash returns to the Fund's shareholders and fulfilling the Fund's performance objectives.
According to the current Romanian legislation, the Fund may only invest in the following assets:
The investments made by the Fund are subject to the following limits:
The Fund will inform investors of breaches to the investment policy by publishing current reports.
The investment policy of the Fund is established by the AIFM, with the observance of the investment limits provided by the legal provisions in force and of the Constitutive Act, and it is in line with the IPS as approved by shareholders..
The AIFM provides for analysis to the Fund's Board of Nominees the strategy in accordance with the investment policy before it is submitted for GSM approval. The Board of Nominees' opinion on the proposed strategy is presented to the AIFM and to the GSM.
The IPS sets the prudential rules concerning the investment policy of the Fund and presents the investment goals, objectives and the decision-making process for selecting investments in accordance with the investment objectives.
As at 31 December 2017 the Fund had no employees. Given that the Fund is administrated by the AIFM, it is not expected that the Fund will have any employees in the future.
During 2017 the Fund had no branches.
As at 31 December 2017, the Fund controlled the following companies, which under Romanian applicable laws qualify as subsidiaries of the Fund, all of which are incorporated and operate in Romania. In the Sole Director's opinion, none of these subsidiaries qualifies as a significant subsidiary.
| Name | Ownership interest |
|---|---|
| Alcom SA | 72% |
| Comsig SA | 70% |
| Zirom SA | 100% |
None of the subsidiaries of the Fund holds shares in the Fund as at 31 December 2017, based on the information made available to the Fund.
During the year the Fund sold its entire holding in Primcom SA.
There was no corporate reorganisation of the Fund or its subsidiaries in 2017.
The Fund operates in accordance with the provisions of the following main laws and regulations:
The Fund is implementing IFRS 9 'Financial instruments', which will replace IAS 39 "Financial Instruments: Recognition and Measurement" starting with 1 January 2018. Additional disclosures and expected impact compared to previously recognized amounts are included in the Fund's annual IFRS financial statements for the year ended 31 December 2017 and further analysis will be provided in subsequent reports for 2018.
The evolution of the shareholder structure during the last six years is illustrated by the following chart:
On 11 October 2016 the shareholders approved the cancelation of the remaining 712,171,156 shares repurchased by the Fund during the sixth buy-back programme during 2016. The FSA endorsed through Endorsement no. 1/ 12 January 2017, the decrease of the subscribed share capital of the Fund, following the cancellation of 712,171,156 shares repurchased by the Fund during the sixth buy-back programme in 2016. With effect from 18 January 2017, the Trade Registry registered the Resolution no. 7/ 11 October 2016 of the Fund's EGM for approving the decrease of the Fund's subscribed share capital from RON 9,168,314,116.70 to RON 8,562,968,634.10, being divided into 10,074,080,746 shares.
In the 31 October 2016 GSM, the Fund's shareholders approved the decrease of the share capital from RON 8,562,968,634.10 to RON 5,742,226,025.22 by reducing the nominal value of the shares from RON 0.85 to RON 0.57 for covering the cumulated accounting losses in the amount of RON 2,473,157,471.66 using: RON 156,118,900.08 from Other reserves and RON 2,317,038,571.58 from the registered capital, and for distribution to shareholders of RON 0.05 per share.
The FSA endorsement of the new Constitutive Act reflecting the share capital decrease was received on 22 March 2017 and the resolution was registered with the Trade Registry on 24 March 2017 (the share capital decrease was effective starting with 24 March 2017).
During 28 February 2017 GSM, the Fund's shareholders approved the decrease of the share capital from RON 5,742,226,025.22 to RON 5,238,521,987.92 by reducing the nominal value of the shares from RON 0.57 to RON 0.52 for distribution to shareholders of RON 0.05 per share.
The FSA endorsement of the new Constitutive Act reflecting the share capital decrease was received on 12 June 2017 and the resolution was registered with the Trade Registry on 16 June 2017 (the share capital decrease was effective starting with 16 June 2017).
On 3 May 2017 the shareholders approved the cancelation of 739,398,468 shares repurchased by the Fund during the seventh buy-back programme. The FSA endorsed through Endorsement no. 1166 / 23 November 2017, the decrease of the subscribed share capital of the Fund, following the cancellation of 739,398,468 shares repurchased by the Fund during the seventh buy-back programme. With effect from 29 November 2017, the Trade Registry registered the Resolution no. 3/ 3 May 2017 of the Fund's EGM for approving the decrease of the Fund's
subscribed share capital from RON 5,238,521,987.92 to RON 4,854,034,784.56, being divided into 9,334,682,278 shares.
On 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 Fondul Proprietatea during the seventh and eight buy-back programmes.
The subscribed share capital decrease approved by shareholders on 26 September 2017 will take place on the basis of Article 207 paragraph 1 letter (c) of Law no. 31/1990 and will be effective after all of the following conditions are met:
As at 31 December 2017 two out of four conditions mentioned above were met and the process is still on-going.
The following table presents information with respect to the main events during the period from 1 January 2011 until 31 December 2017, which have changed the amount of the issued share capital of the Fund:
| Structure of the share capital after event | |||||
|---|---|---|---|---|---|
| Date | Reason | Issued share capital (RON) |
Paid share capital (RON) |
Issued shares (Shares) |
Paid shares (Shares) |
| 1 January 2011 | Opening balance | 13,778,392,208.00 13,778,392,208.00 13,778,392,208 13,778,392,208 | |||
| 24 February 2014 | The cancelation of the shares acquired during the first buy-back programme |
13,538,087,407.00 13,172,832,785.00 13,538,087,407 13,172,832,785 | |||
| 25 June 2014 | The decrease for annual cash distributions to shareholders |
12,861,183,036.65 12,515,396,724.25 13,538,087,407 13,174,101,815 | |||
| 26 September 2014 The cancelation of the shares acquired during the second buy-back programme |
11,815,279,886.85 11,469,656,813.90 12,437,136,723 12,073,322,962 | ||||
| 27 January 2015 | The cancelation of the shares acquired during the third buy-back programme |
11,575,064,733.65 11,229,443,001.15 12,184,278,667 11,820,466,317 | |||
| 31 May 2015 | The decrease for annual cash distributions to shareholders |
10,965,850,800.30 10,638,419,685.30 12,184,278,667 11,820,466,317 | |||
| 12 August 2015 | The cancelation of the shares acquired during the fourth buy-back programme |
10,074,080,745.90 | 9,746,649,630.90 11,193,423,051 10,829,610,701 | ||
| 14 March 2016 | The cancelation of the shares acquired during the fifth buy-back programme |
9,869,265,720.90 | 9,541,834,605.90 10,965,850,801 10,602,038,451 | ||
| 9 June 2016 | The decrease for annual cash distributions to shareholders |
9,320,973,180.85 | 9,011,732,683.35 10,965,850,801 10,602,038,451 | ||
| 26 October 2016 | The partial cancelation of the shares acquired during the sixth buy-back programme |
9,168,314,116.70 | 8,859,073,619.20 10,786,251,902 10,422,439,552 | ||
| 18 January 2017 | The partial cancelation of the shares acquired during the sixth buy-back programme |
8,562,968,634.10 | 8,253,728,136.60 10,074,080,746 9,710,268,396 | ||
| 24 March 2017 | The decrease for covering accumulated accounting loss and for an extraordinary cash distributions to shareholders |
5,742,226,025.22 | 5,534,852,985.72 10,074,080,746 9,710,268,396 | ||
| 16 June 2017 | The decrease for annual cash distributions to shareholders |
5,238,521,987.92 | 5,049,339,565.92 10,074,080,746 9,710,268,396 | ||
| 29 November 2017 | The partial cancelation of the shares acquired during the seventh buy-back programme |
4,854,034,784.56 | 4,664,852,362.56 9,334,682,278 | 8,970,869,928 | |
| 31 December 2017 | Closing balance | 4,854,034,784.56 | 4,664,852,362.56 9,334,682,278 | 8,970,869,928 |
During 2017 there were several changes in the Constitutive Act of the Fund, as follows:
According to legislation in force, all the changes to the Constitutive Act enter into force after FSA endorsement.
During 2017, the management agreement in force was the Management Agreement concluded between the Fund and FTIS as AIFM on 2 November 2015, which entered into force on 1 April 2016 with a duration of 2 years.
The Management Agreement in force starting with 1 April 2016 is part of the plan for implementing AIFM Directive for Fondul Proprietatea – the plan involved the following actions:
According to the FSA Board Resolution from 27 January 2016, the Management Agreement executed between Fondul Proprietatea and an AIFM authorized in other European country does not require the FSA's endorsement prior to entering into force. Furthermore, for the Management Agreement executed for Fondul Proprietatea the FSA considers that the Commission de Surveillance du Sector Financier of Luxemburg, as the competent authority of the AIFM home state member, with oversight obligations in respect of the management performed by FTIS.
During 26 September 2017 GSM the Fund's shareholders approved:
| 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 capitalization 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 draft of the Management Agreement containing the key commercial points mentioned above is on the 14 February 2018 GSM. For further details please see Subsequent events section.
The main resolutions approved by shareholders during the 28 February GSM were the following:
The main shareholders resolutions approved during the annual GSM on 25 April were the following:
During the EGM held on 3 May, the shareholders approved with a high majority, the decrease of the subscribed share capital of the Fund from RON 5,238,521,987.92 to RON 4,854,034,784.56 pursuant to the cancellation of 739,398,468 own shares (having a par value of RON 0.52) acquired by Fondul Proprietatea during the seventh buyback programme.
The main resolutions approved by shareholders during the 26 September GSM were the following:
The main resolutions of the shareholders at the 26 October GSM were the following:
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. The availability period of the facility was for one year with the possibility to extend it with the same period.
The purpose of the credit facility is for general corporate use, including share buy-backs and distributions to shareholders, but excluding investments.
On 10 May 2017, the Fund announced that it has decided to extend the existing credit facility of RON 1 billion with BRD - Groupe Société Générale SA with 1 year, until 4 July 2018, within the same terms and conditions.
In July 2017 the Fund fully repaid the RON 237 million previously drawn from the credit facility concluded with BRD Groupe Société Générale SA. The interest related to the drawing amounted to RON 152,997.
As at 31 December 2017, there are no outstanding amounts drawn from the credit facility.
The Fund had no bonds or other debt securities in issue during 2017.
The eight buy-back programmes were completed since listing. Please see below the details regarding the buy-back programmes performed by the Fund since 2011:
| No. of Shares | ||||
|---|---|---|---|---|
| repurchased | ||||
| Programme | Period | (Million shares) | Tender offer Cancellation of Shares | |
| First | May-September 2011 | 240.3 | N/A Completed | |
| Second | April-December 2013 | 1,100.9 | October – November | Completed |
| 2013 | ||||
| Third | March-July 2014 | 252.9 | N/A Completed | |
| Fourth | October 2014-February | 990.8 November – December | Completed | |
| 2015 | 2014 | |||
| Fifth | February – July 2015 | 227.5 | N/A Completed | |
| Sixth | September 2015 – | 891.7 | August – September | Completed |
| September 2016 | 2016 | |||
| Seventh | September 2016 – May | 830.2 | February – March | Partially canceled. Proposal for cancellation of |
| 2017 | 2017 | remaining shares was approved by | ||
| shareholders, and is in process to be completed | ||||
| during 2018. | ||||
| Eight | May – November 2017 | 141.9 | N/A Proposal for cancellation approved by | |
| shareholders, and is in the process to be | ||||
| completed during 2018. The cancelation of the | ||||
| remaining shares in the eighth buy-back | ||||
| programme will be subject to shareholders | ||||
| approval during 2018. | ||||
| Ninth | November 2017 - ongoing | 19.2 | N/A The cancelation of the shares will be subject to shareholders approval during 2018. |
|
| TOTAL | 4,695.4 | |||
The chart below presents the evolution of the discount and the trading price by reference to the buy-back programmes and returns of capital implemented:
During the year ended 31 December 2017, the Fund bought back a total number of 911,940,087 own shares in the seventh, eighth and ninth buy-back programme (out of which 577,589,887 ordinary shares and 334,350,200 ordinary shares corresponding to GDRs), representing 8.5% of the total issued shares as at 31 December 2016, for a total acquisition value of RON 819,687,620, excluding transaction costs.
The total number of own shares (including GDR's) held by the Fund as at 31 December 2017 is 251,878,340 own shares, having a total nominal value of RON 130,976,737 (RON 0.52 per share), which are in process of being cancelled or will be proposed to be cancelled during the next general meeting of shareholders.
In 2017, the Fund converted 6,687,004 of the GDRs acquired during the period into 334,350,200 ordinary shares.
As at 31 December 2017, the Fund held no GDRs.
The table below shows a summary of the buy-back programmes during the year ended 31 December 2017 (information based on the transaction date):
| Equivalent | % of the | ||||
|---|---|---|---|---|---|
| shares of | Total no of | Fund's issued | |||
| Programme | Description | No of shares | GDRs | shares | share capital* |
| Opening balance as at | |||||
| 6th | 1 January 2017 | 712,171,156 | - | 712,171,156 | |
| Acquisitions | - | - | - | ||
| Cancelations | (712,171,156) | - | (712,171,156) | ||
| Closing balance as at | |||||
| 31 December 2017 | - | - | - | 8.13% | |
| Weighted average share price | |||||
| (RON/share ; USD/share) | 0.8156 | 10.5221 | |||
| Opening balance as at | |||||
| 7th | 1 January 2017 | 79,336,721 | - | 79,336,721 | |
| Acquisitions | 463,817,448 | 287,093,450 | 750,910,898 | ||
| Converted during the period | 287,093,450 | (287,093,450) | |||
| Cancelations | (739,398,468) | - | (739,398,468) | ||
| Closing balance as at | |||||
| 31 December 2017 | 90,849,151 | - | 90,849,151 | 8.24% | |
| Weighted average share price | |||||
| (RON/share ; USD/share) | 0.8956 | 10.7528 | |||
| 8th | Opening balance (30 May 2017) | - | - | - | |
| Acquisitions | 99,817,011 | 42,052,850 | 141,869,861 | ||
| Converted during the period | 42,052,850 | (42,052,850) | - | ||
| Closing balance as at | |||||
| 31 December 2017 | 141,869,861 | - | 141,869,861 | 1.41% | |
| Weighted average share price | |||||
| (RON/share ; USD/share) | 0.8591 | 10.8805 | |||
| 9th | Opening balance (14 November 2017) | - | - | - | |
| Acquisitions | 13,955,428 | 5,203,900 | 19,159,328 | ||
| Converted during the period | 5,203,900 | (5,203,900) | |||
| Closing balance as at | |||||
| 31 December 2017 | 19,159,328 | - | 19,159,328 | 1.17% | |
| Weighted average share price | |||||
| (RON/share ; USD/share) | 0.8414 | 10.7555 | |||
| TOTAL balance of treasury shares as at | |||||
| 31 December 2017 | 251,878,340 | - | 251,878,340 |
*Based on the share capital at the end of the programme (for 6th, 7th and 8th buy-back programmes) or at the end of the reporting period for the 9th buy-back programme.
On 27 January 2017 the Fund submitted for approval to the FSA, an application for a tender offer for the acquisition of own shares in relation to the seventh buy-back programme. The Fund engaged:
On 8 February 2017, the FSA approved the Fund's application for the public tender offer within the seventh buyback programme for the acquisition of up to 640,000,000 shares – the Tender Offer Document can be found in Annex 5 to this report. The subscription period was from 15 February 2017 until 20 March 2017, and the purchase price was RON 0.91 per share and the USD equivalent of RON 45.50 per GDR. The Fund acquired all 640,000,000 shares (370,679,050 in the form of ordinary shares and 269,320,950 shares in the form of GDRs, respectively 5,386,419 GDRs) and resumed the acquisitions of treasury shares within the seven buy-back programme through daily buy-backs on 27 March 2017.
On 15 December 2017, the Fund submitted for approval to the FSA, an application for a tender offer for the acquisition of own shares in relation to the ninth buy-back programme. The Fund engaged:
Under this tender offer, the Fund intends to repurchase up to 1,200,000,000 shares (both in the form of shares and GDRs) from its shareholders.
The daily execution of the ninth buy-back programme with respect to shares on the BVB and GDRs on the LSE was suspended starting with 11 December 2017.
For further details please see Subsequent events section.
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. The table below presents the equity impact of the buy-back programmes ongoing during 2017:
| - All amounts are in RON - | |||
|---|---|---|---|
| Shares acquired in 2017 | Buy-back program 7 | Buy-back program 8 | Buy-back program 9 |
| Acquisition cost | 681,189,100 | 122,347,450 | 16,151,070 |
| Total costs directly related to transactions, | |||
| out of which: | 8,784,900 | 1,766,801 | 178,323 |
| Brokerage fees | 310,826 | 24,469 | 3,230 |
| FSA fees | 5,873,267 | 53,099 | 7,045 |
| Stock Exchange fees (BSE and LSE) | 762,170 | 34,301 | 4,895 |
| Central Depositary fees | 35,651 | 7,289 | 998 |
| Other professional fees | 520,598 | 4,471 | 683 |
| Other costs | 13,262,522 | 1,643,172 | 161,470 |
| Interest costs | 0 | 0 | 0 |
| Distribution fees* | 13,262,522 | 1,643,172 | 161,470 |
| Total buybacks impact on equity | 701,954,135 | 124,114,251 | 16,329,392 |
* FTIS distribution fees related to buy-backs which are recognised directly in equity together with the underlying shares
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. During the period, the nominal value decreased below the acquisition price first on 24 March 2017 when the share capital decrease was implemented. All subsequent acquisitions in 7th, 8th and 9th buy-back programmes were made at an acquisition price higher than the nominal value. The table below shows the negative reserve arising on cancelation of shares.
| Buy-back program 7 | Buy-back program 8 | Buy-back program 9 | ||
|---|---|---|---|---|
| Number of shares cancelled during 2017 |
(1) | 739,398,468 | - | - |
| Total costs (including transaction costs and other costs) (RON) |
(2) | 682,500,639 | - | - |
| Less the impact of Nominal Value decrease (RON)* |
(3) | (41,939,847) | - | - |
| Accounting value of the cancelled treasury shares as at 29 Nov 2017 (the cancellation date) (RON) |
(4)=(2)+(3) | 640,560,792 | - | - |
| Correspondent Nominal Value at the cancelation date (NV = RON 0.52 per share) (RON) |
(5) = (1)*NV | 384,487,203 | - | - |
| Negative equity reserve on the cancelation (RON) |
(6)=(5)-(4) | (256,073,589) |
| Buy-back program 7 | Buy-back program 8 | Buy-back program 9 | ||
|---|---|---|---|---|
| Balance of shares to be cancelled | (1) | 90,849,151 | 141,869,861 | 19,159,328 |
| Total costs (including transaction costs and other costs) (RON) |
(2) | 82,852,612 | 124,114,252 | 16,329,392 |
| Less the impact of Nominal Value decrease (RON)** |
(3) | (4,542,458) | (498,291) | |
| Estimated accounting value of the cancelled treasury shares as at 31 Dec 2017 (RON) |
(4)=(2)+(3) | 78,310,154 | 123,615,961 | 16,329,392 |
| Correspondent Nominal Value (NV = RON 0.52 per share) as at 31 December 2017 (RON) |
(5) = (1)*NV | 47,241,559 | 73,772,328 | 9,962,851 |
| Estimated negative equity reserve on the cancelation date (RON) |
(6)=(5)-(4) | (31,068,595) | (49,843,633) | (6,366,541) |
* for shares cancelled and in balance at each nominal value decrease in 2017: 1) 99,398,468 shares at 24 March 2017 and 2) 739,398,468 shares at 16 June 2017 ** 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)
Article 75 from Norm 39/2015 mentions that the negative balance arising on the cancellation of equity instruments may be covered from retained earnings and other equity elements, in accordance with the resolution of the General Shareholders Meeting.
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 31 December 2016 to 31 December 2017:
Source: Fondul Proprietatea, based on NAV reports submitted to the FSA, computed for the last working day of the month
The grey section within March and June, represents the impact of the 2017 cash distributions per share, approved by shareholders in October 2016 and in February 2017, and recorded in March and June 2017, following FSA's endorsement of the share capital decreases (Endorsement no. 79/ 22 March 2017 and no 362/12 June 2017), and following the registration at Trade Register on 24 March 2017, respectively 16 June 2017, which resulted in a corresponding reduction of the NAV per share.
During the first quarter of 2017, the NAV per share had an overall increase of 0.7% 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 295.4 million or RON 0.0307 per share) and due to the seventh buy-back programme carried out by the Fund during this period.
During the second quarter of 2017, the NAV per share had an increase of 0.1% compared with the end of the previous quarter, mainly due to the recording of 2016 dividend receivables from portfolio companies, and due to the seventh and eight buy-back programmes carried out by the Fund during this period and, netted off by the negative impact of the decrease in the share prices of certain listed holdings, principally OMV Petrom SA (impact on the Fund's NAV of RON 28.5 million or RON 0.0032 per share).
During the second quarter of 2017, only one update in the valuation of the Fund's unlisted holdings was performed, i.e. the valuation report for Posta Romana SA, with an impact of RON 2.0 million or RON 0.0002 per share as compared with 31 December 2016. The valuation was performed with the assistance of independent valuators, i.e. KPMG Advisory, in accordance with International Valuation Standards.
During the third quarter of 2017, the NAV per share had an overall increase of 1.0% compared with the end of the previous quarter, mainly due to special dividend receivables from portfolio companies, 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 18.8 million or RON 0.0021 per share) and due to the eight buy-back programme carried out by the Fund during this period, netted off by the negative impact arising from the updated valuation for the Fund's holdings in Electrica subsidiaries.
During the third quarter, only one update in the valuation of the Fund's unlisted holdings was performed for the Fund's holdings in Electrica subsidiaries. The valuation was performed at the transaction aggregated value stipulated in the Memorandum of Understanding concluded with Electrica SA on 14 July 2017. The previous total value of the holdings in Electrica subsidiaries was RON 877.4 million while the current value as per the aggregated value in the Memorandum of Understanding was RON 752.0 million. In addition, an amount of RON 97.9 million dividends receivable from Electrica subsidiaries is booked as at 30 September 2017. The overall impact is of RON 27.4 million or RON 0.0028 per share, as compared with 31 December 2016.
During the last quarter of 2017 the NAV per share increased by 2.5%, mainly due to the update of the independent valuation of unlisted portfolio companies and due to the positive impact of the eighth and ninth buy-back programme carried out by the Fund during the quarter.
Valuation updates in accordance with International Valuation Standards for 16 unlisted holdings were prepared, representing 99.7% of the total unlisted portfolio, with the assistance of KPMG Advisory. The overall impact was an increase of RON 170.5 million or RON 0.0160 per share, compared to the 29 November 2017 NAV, as detailed in the table below:
| No. | Portfolio company name | Value in 29 Dec 2017 NAV (RON million) |
Value in 29 Nov 2017 NAV (RON million) |
Impact on Total NAV (RON million) |
% 29 Dec 2017 NAV vs. 29 Nov 2017 NAV |
Impact on NAV per share1 (RON) |
|---|---|---|---|---|---|---|
| 1 | Hidroelectrica SA | 3,566.0 | 3,384.0 | 182.0 | 5.4% | 0.0171 |
| 2 | CN Aeroporturi Bucuresti SA | 774.0 | 761.0 | 13.0 | 1.7% | 0.0012 |
| 3 | E-Distributie Banat SA | 545.0 | 599.9 | (54.9) | -9.2% | (0.0052) |
| 4 | Engie Romania SA | 472.0 | 453.4 | 18.6 | 4.1% | 0.0017 |
| 5 | E-Distributie Muntenia SA | 419.0 | 449.4 | (30.4) | -6.8% | (0.0029) |
| 6 | E-Distributie Dobrogea SA | 342.0 | 380.2 | (38.2) | -10.0% | (0.0036) |
| 7 | Societatea Nationala a Sarii SA | 233.0 | 181.0 | 52.0 | 28.7% | 0.0049 |
| 8 | CN Administratia Porturilor Maritime SA |
230.0 | 216.0 | 14.0 | 6.5% | 0.0013 |
| 9 | ENEL Energie Muntenia SA | 61.0 | 70.3 | (9.3) | -13.2% | (0.0009) |
| 10 | ENEL Energie SA | 57.0 | 75.5 | (18.5) | -24.5% | (0.0017) |
| 11 | Posta Romana SA | 35.0 | 45.0 | (10.0) | -22.2% | (0.0009) |
| 12 | Complexul Energetic Oltenia SA | 32.0 | - | 32.0 | 100.0% | 0.0030 |
| 13 | Zirom SA | 26.8 | 25.5 | 1.3 | 5.1% | 0.0001 |
| 14 | Aeroportul International Timisoara - Traian Vuia SA |
22.0 | 3.6 | 18.4 | 511.1% | 0.0017 |
| 15 | Aeroportul International Mihail Kogalniceanu - Constanta SA |
2.4 | 1.7 | 0.7 | 41.2% | 0.0001 |
| 16 | Plafar SA | 2.0 | 2.2 | (0.2) | -9.1% | (0.0000) |
| TOTAL | 6,819.2 | 6,648.7 | 170.5 | 2.6% | 0.0160 |
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 86.0% of the Fund's NAV as at 29 December 2017. As at that date, the portfolio was composed of holdings in 37 companies (10 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 treasury bills and 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 provisions.
Source: Fondul Proprietatea, data as at 29 December 2017
1 Computed based on the number of shares used in NAV per share computation as at 29 November 2017
The portfolio remains heavily weighted in power, oil and gas sectors (approx. 68.3% of the NAV), through a number of listed and unlisted Romanian companies
Source: Fondul Proprietatea, data as at 29 December 2017
Source: Fondul Proprietatea, data as at 29 December 2017
The largest unlisted holding is Hidroelectrica SA (33.0% of the NAV)
Source: Fondul Proprietatea, data as at 29 December 2017; the chart reflects the company NAV value as a % in total NAV value of unlisted holdings
The largest listed holding is OMV Petrom SA (15.0% of the NAV)
Source: Fondul Proprietatea, data as at 29 December 2017; the chart reflects the company NAV value as a % in total NAV value of listed holdings
| No | Name | Fund's stake (%) | Value as at 29 December 20171 (RON million) |
% of NAV as at 29 December 20171 |
|---|---|---|---|---|
| 1 | Hidroelectrica SA | 19.94% | 3,566.0 | 33.0% |
| 2 | OMV Petrom SA | 9.99% | 1,619.8 | 15.0% |
| 3 | CN Aeroporturi Bucuresti SA | 20.00% | 774.0 | 7.2% |
| 4 | E-Distributie Banat SA | 24.12% | 545.0 | 5.1% |
| 5 | Engie Romania SA | 11.99% | 472.0 | 4.4% |
| 6 | E-Distributie Muntenia SA | 12.00% | 419.0 | 3.9% |
| 7 | E-Distributie Dobrogea SA | 24.09% | 342.0 | 3.2% |
| 8 | BRD Groupe Société Générale SA | 3.17% | 285.6 | 2.6% |
| 9 | Alro SA | 10.21% | 238.3 | 2.2% |
| 10 | Societatea Nationala a Sarii SA | 48.99% | 233.0 | 2.2% |
| Top 10 equity holdings | 8,494.7 | 78.8% | ||
| Total equity holdings | 9,278.2 | 86.0% | ||
| Net cash and receivables | 1,512.2 | 14.0% | ||
| Total NAV | 10,790.4 | 100.0% |
Source: Fondul Proprietatea, based on NAV reports submitted to FSA (29 December 2017 NAV report) 1Rounded to one decimal
On 27 July 2017 the Fund subscribed to the share capital increase of Zirom SA with a cash contribution of RON 2,720,000, which became effective as of 1 August 2017, the registration date at the Romanian Trade Register.
During the year the Fund sold its entire holdings in Oil Terminal SA, Primcom SA, Cetatea SA, Banca Transilvania SA and in the subsidiaries of Societatea Energetică Electrica SA and part of its holdings in BRD Societe Generale and OMV Petrom (see section "Strategic options for some portfolio companies announced by the Fund during 2017").
The proposed timetable for the gradual elimination of the regulated electricity prices for non-household consumers and for household consumers is according with the table below:
| Non-household consumers – % acquisition from the |
Household consumers – % acquisition from the |
|
|---|---|---|
| Starting date | competitive market | competitive market |
| 01.01.2013 | 30 | - |
| 01.04.2013 | 45 | - |
| 01.07.2013 | 65 | 10 |
| 01.09.2013 | 85 | 10 |
| 01.01.2014 | 100 | 20 |
| 01.07.2014 | 100 | 30 |
| 01.01.2015 | 100 | 40 |
| 01.07.2015 | 100 | 50 |
| 01.01.2016 | 100 | 60 |
| 01.07.2016 | 100 | 70 |
| 01.01.2017 | 100 | 80 |
| 01.07.2017 | - | 90 |
| 31.12.2017 | - | 100 |
Source: ANRE webpage
Bloomberg, Hidroelectrica SA
Note: Day Ahead Market – monthly average for base load
| January - August 2017 | January - August 2016 | % change | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Total Production | Import | Total | Production | Import | Total Production | Import | |||
| Net coal | 4,788.3 | 4,291.5 | 496.8 | 4,316.0 | 3,821.6 | 494.4 | 10.90 | 12.30 | 0.50 |
| Crude oil | 10,166.8 | 3,136.5 | 7,030.3 | 10,080.4 | 3,280.0 | 6,800.4 | 0.90 | (4.40) | 3.40 |
| Usable natural gas | 8,288.3 | 7,580.4 | 707.9 | 7,634.2 | 6,768.4 | 865.8 | 8.60 | 12.00 | (18.20) |
| Hidro, nuclear, and import energy | 4,749.5 | 4,449.0 | 300.5 | 5,027.8 | 4,735.1 | 292.7 | (5.50) | (6.00) | 2.70 |
| Import oil products | 2,800.5 | - | 2,800.5 | - | - | - 100.00 | - | 100.00 | |
| Others | 440.2 | - | 440.2 | 2,984.1 | - | 2,984.1 (85.20) | - | (85.20) | |
| Total resources | 31,233.6 | 19,457.4 | 11,776.2 | 30,042.5 | 18,605.1 | 11,437.4 | 4.0 | 4.6 | 3.0 |
Source: National Institute of Statistics webpage
Gas prices for industrial consumers have been fully liberalized since 1 January 2015, while prices for household consumers have also been fully liberalized on 1 April 2017.
| Alro SA | |
|---|---|
| --------- | -- |
| Budget | Budget | ||||
|---|---|---|---|---|---|
| RON million | 2015 | 2016 | 2017* | 2017** | 2018** |
| Turnover | 2,422.8 2,302.8 2,466.0 | 2,417.2 | 2,595.8 | ||
| Operating profit | 185.9 | 166.7 | 396.8 | 270.2 | 280.4 |
| Net profit/ (loss) | (0.02) | 71.5 | 317.7 | 167.9 | 199.8 |
| Dividends* | - | 67.2 | n.a. | - | - |
Source: Consolidated IFRS financial statements
*Individual 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/April: The company reported a consolidated net profit of RON 71.5 million compared to a very small loss last year. Turnover reached RON 2,302.8 million, down 4.9% y.o.y due to lower average yearly aluminium LME prices (USD 1,605 / tonne in 2016 vs. USD 1,661 / tonne in 2015) but also to changes in the mix of products sold. Gross margin for the period reached RON 367.7 million, down 9.3% y.o.y. and operating profit of RON 166.7 million, down 10.3% y.o.y.
April: the company shareholders approved the distribution of dividends corresponding to a pay-out ratio of 100% of the 2016 net profit, based on individual financial statements.
May: On a stand-alone basis, Alro reported for the first quarter of 2017, a net profit of RON 77.7 million, compared to RON 27.3 million during the similar period of the previous year. During the period, sales advanced by 12.3% y.o.y. to RON 633.6 million on the back of higher benchmark aluminum prices (average aluminum LME prices during the period advanced 22.1% y.o.y. to USD 1.851 per tonne), appreciation of the USD against the RON, as well as improved sales structure (during the period, the volume of processed aluminum sales increased by c. 2,000 tones compared to the similar period of the previous year). Operating profit for the period reached RON 103.7 million, up 4.6 times y.o.y.
August: For the first six months of the year, ALRO group reported a consolidated net profit attributable to the shareholders of the parent of RON 186.7 million compared to RON 35.2 million during the similar period of the previous year. Total sales advanced during H1 2017 by 14.5% y.o.y to RON 1,378.2 million on the back of the 21.8% y.o.y increase during the period of average benchmark aluminium LME prices to USD 1, 880 / tonne. In volume terms, sales of processed aluminum products advanced by 3.4% y.o.y. to approximate 56.4 thousand tonnes, while sales of primary aluminum products decreased by 4.8% y.o.y. to approximate 62.2 thousand tonnes. For H1 2017, EBITDA reported by the group reached RON 291.6 million, up 113.2% y.o.y.
November: Shareholders approved the extension until November 2020 of the maturity of the USD 137 million credit line concluded on December 2015 for an initial period of two years by the company with a syndicate of banks. Shareholders also approved the increase of the facility with a new credit line worth USD 30 million to be used by the company for the issuance of letters of credit and letters of guarantee.
November: On a stand-alone basis, Alro reported for the first nine months of 2017, a net profit of RON 223.4 million, compared to RON 63.8 million during the similar period of the previous year. During the period, sales advanced by 18.0% y.o.y. to RON 1,861.8 million on the back of higher benchmark aluminum prices (average aluminum LME prices during the period advanced 24.2% y.o.y. to USD 1.924 per tonne) and improved sales volumes (during the period, the volume of processed aluminum sales increased by 7.4% y.o.y to 62,361 tonnes while sales volumes of primary aluminium advanced by 1.0% y.o.y to 115,156 tonnes). Operating profit for the period reached RON 273.5 million, up 2.5 times y.o.y.
February 2018: The company reported an unconsolidated net profit in 2017 of RON 317.7 million compared to RON 67.2 million in 2016. Turnover reached RON 2,466.0 million, up 15.9% y.o.y on the back of the positive evolution of aluminium prices on international markets (average benchmark LME aluminium prices reached USD 1,969 / tonne in 2017 vs. USD 1,605 / tonne in 2016) and higher sales volumes of processed aluminium products which reached 82,000 tonnes (vs. 77,000 tonnes in 2016), more than offsetting the 3,000 tonnes decline to 151,000 tone registered in the volume primary aluminium sales. Gross profit for the year stood at RON 532.4 million, up 82.1% y.o.y. while operating profit reached RON 396,8 million, up 2.3 times compared to the 2016 level.
| Budget | Budget | ||||
|---|---|---|---|---|---|
| RON million | 2015* | 2016 | 2017*** | 2016** | 2017** |
| Operating income | 2,595.2 | 2,777.6 | 2,785.9 | Around 5% | Around 4% |
| increase | increase | ||||
| Net operating profit | 1,209.9 | 1,390.1 | 1,312.6 | Around 5% | Around 5% |
| increase | increase | ||||
| Further | Further | ||||
| Net cost of risk | (658.2) | (483.5) | 359.5 | normalisation | normalisation |
| trajectory | trajectory | ||||
| Net profit | 467.2 | 763.5 | 1,414.6 | n.a. | Improvements |
| Dividends | 223.0 | 508.7 | 1,145.7**** | - | - |
Source: Consolidated IFRS financial statements
*Restated values
** Budgeted figures based on individual IFRS financial statements
*** Preliminary consolidated IFRS financial statements
**** Board proposal subject to GSM approval
March / April: The bank reported a consolidated net profit for the year 2016 of RON 763.5 million compared to a net profit of RON 467.2 million in 2015. The net banking income increased by 7.0% y.o.y to RON 2,777.6 million driven by the improvement in the net interest income (+4.6% vs. 2015 to RON 1,586.5 million), higher net fee and commission income (+3.1% vs. 2015 to RON 772.7million ) and the Visa Europe transaction gain recorded in the second quarter. According to the bank, excluding non-recurring elements, the net banking income advanced by 3.0% y.o.y. During the period, the general operating expenses marginally increased by 0.2% y.o.y to RON 1,387.6 million, leading to a net operating profit of RON 1,390.1 million, representing an increase of 14.9% y.o.y. Net cost of risk decreased by 26.5% y.o.y. to RON 483.5 million. Shareholders approved the Board recommendations of a dividend per share of RON 0.73 corresponding to a pay-out ratio of 70% of the 2016 bank stand-alone net profit.
May: The bank reported a consolidated net profit for Q1 2017 of RON 329.9 million compared to a net profit of RON 72.9 million during the similar period of the previous year. The net banking income increased by 0.4% y.o.y to RON 650.1 million as the growth in net interest income exceeded the decrease in net fees and commissions. During the period, the general operating expenses decreased by 5.1% y.o.y. driven by lower Bank Deposit Guarantee and Resolution Fund contributions leading to a net operating profit of RON 266.0 million, up 9.6% y.o.y. During Q1 2017, the bank reported a positive net cost of risk of RON 124 million compared to a provision charge of RON 152 million in Q1 2016 on the back of recoveries on non-retail defaulted exposure coupled with the recognition of material insurance indemnities.
August: For the first six months of 2017 the bank reported a consolidated net profit attributable to equity holders of the parent of RON 744.1 million compared to a net profit of RON 378.0 million during the similar period of 2016. While reported net banking income decreased by 6.4% y.o.y. to RON 1,341.6 million , adjusting for significant non-recurring elements booked in the first half of 2016 (gain from available for sale securities and VISA Europe transaction which totalled RON 121.0 million), BRD Group's net banking income increased by 2.1% y.o.y. During the period general operating expenses increase by 2.1% y.o.y. to RON 720.4 million, leading to a net operating profit of RON 621.2 million, representing a decrease of 14.7% y.o.y. In the first half of 2017 the bank reported a positive net cost of risk of RON 269.8 million compared to a provision charge of RON 282.4 million during H1 2016, driven by the recognition of insurance indemnities, recoveries on non-retail defaulted portfolios and gains on sale of non-performing loans portfolios.
November: BRD Group's consolidated net profit for the first nine months of 2017 registered an increase of 75.8% yoy. to RON 1,065.5 billion as compared to RON 606.1 million in the same period of the last year. Reported net banking income for the period decreased by approximately 2.4% y.o.y. to RON 2,060.7 million, however adjusting for non-recurring items (gain of VISA transaction in 2016 and gains on Available for Sale instruments) net banking income advanced by 3.4% y.o.y. During the period general operating expenses of the bank increased by 3.0 % y.o.y. to RON 1,063.2 million, leading to a net operating profit of RON 997.4 million, representing a decrease of 7.5% y.o.y.. During the period, the Group registered a positive net cost of risk of RON 271.0 million compared to a provision charge of RON 361.8 million for the same period of the previous year due to the recognition of insurance indemnities, recoveries on non-retail defaulted portfolios and gain on sale of nonperforming loans. At the end of September 2017, the bank's consolidated loan book and finance lease portfolio reached RON 30.7 billion, up nearly 7.7% year- to- date.
February 2018: The bank reported a preliminary 2017 consolidated net profit of RON 1,414.6 million, up 85.3% y.o.y. leading to return on equity of 20.1% compared to 11.8% in the previous year. Reported net banking income inched up 0.3% y.o.y. to RON 2,785.9 million and advanced by 4.9 % y.o.y. when adjusted for non-recurring items. During 2017, general operating expenses advanced by 6.2% y.o.y on the back of higher rising labour costs and higher IT investments, leading to a net operating profit of RON 1,312.7 million, down 5.6% y.o.y. According to the bank, during the 4th quarter, it recorded an exceptional charge of RON 29 million corresponding to transformation costs anticipated over the next three years. Over the full year 2017, the bank generated a positive net cost of risk of RON 359.5 million compared to a provision charge of RON 483.5 million in 2016 driven by recoveries on non-retail customers, recognition of insurance indemnities, and gain on sale of non-performing loans portfolio. At the end of 2017, the bank's consolidated net loan book and finance lease portfolio reached RON 29.6 billion, up nearly 6.4% y.o.y.
February 2018: The bank announced that the Board of Directors will recommend shareholders to approve in the annual general shareholders meeting a total dividend corresponding to a pay-out ratio of 83% out of the bank's 2017 unconsolidated net profit. According to preliminary financial results, BRD – Groupe Société Générale SA reported on a stand-alone basis a net profit of RON 1,380.3 million, up. 89.5% y.o.y.
| Budget | Budget | |||||
|---|---|---|---|---|---|---|
| RON million | 2015 | 2016 | H1 2016 | H1 2017 | 2016 | 2017 |
| Total revenue | 783.4 | 910.3 | 416.0 | 497.0 | 842.9 | 983.2 |
| Operating profit | 213.5 | 276.6 | 145.7 | 176.9 | 127.4 | 225.7 |
| Net profit | 178.8 | 234.5 | 122.2 | 150.3 | 104.8 | 185.9 |
| Dividends | 137.1 | 214.8 | n.a. | n.a. | 55.4 | 95.9 |
Source: Financial statements prepared in accordance with applicable Romanian Accounting Regulations
March: The number of passengers serviced in the first 2 months of 2017 increased by 21.5% compared to the same period of 2016, reaching 1.66 million passengers. The numbers of aircraft movements increased by 8.3% to 18,069 while the cargo traffic increased by 4.5% to 5,010 tonnes.
April: Mr Bogdan Mandrescu was appointed as interim General Manager following the expiration of the mandate of Mr Liviu Radu on 18 April 2017. Mr Mandrescu is an interim member of the company's Board since 2016 and was briefly interim President of the Board during 2017.
May: The number of passengers serviced in the first 5 months of 2017 increased by 21.2% compared to the same period of 2016, reaching 4.75 million passengers.
June: the number of passengers increased by 16.6% in the first 6 months of 2017 compared to the same period from 2016, reaching 5.91 million passengers. The number of aircraft movements increased by 9% to 55,739.
August: During the first 6 months of 2017 total revenues increased 19.5% to RON 497 million and net profit increased 23% to 150.3 million, compared to the same period of 2016. The strong evolution was largely driven by the continued strong increase of passenger traffic, which reached 20.4% to 5.9 million passengers in the first 6 months of 2017.
September: Shareholders approved the distribution of an additional RON 200 million as special dividends, out of which RON 160 million to the Ministry of Transports and RON 40 million to Fondul Proprietatea.
December: The increasing trend in the number of passengers was maintained during the last quarter of 2017, as the total traffic for the entire year increased by 16.8%, to 12.8 million passengers.
| RON million | 2015 | 2016 | Budget 2016 |
Budget 2017 |
|---|---|---|---|---|
| Operating revenue | 635.2 | 557.8 | 491.6 | 483.6 |
| Operating profit | 181.5 | 107.8 | 175.6 | 233.3 |
| Net profit | 157.9 | 93.6 | 143.3 | 72.8 |
| Dividends | 69.7 | 37.0 | - | - |
Source: Financial statements prepared in accordance with applicable Romanian Accounting Regulations
January: Starting 1 January 2017, the regulated electricity distribution tariffs decreased on average by 9.0% (based on ANRE Order no. 108 published on 19 December 2016).
July: The company appointed a new board member proposed by Enel, Mrs Cinzia Bonfantoni, following the resignation of Mrs Mina Kolarova.
Note: the comment below applies to all Fund's holdings in E-Distributie Muntenia SA, E-Distributie Banat SA, E-Distributie Dobrogea SA, Enel Energie SA, Enel Energie Muntenia SA and Engie Romania SA
August: the Investment Manager of Fondul Proprietatea announced that it initiated a competitive process aimed at potential disposals of the Fund's holdings in E-Distributie Muntenia SA, E-Distributie Banat SA, E-Distributie Dobrogea SA, Enel Energie SA, Enel Energie Muntenia SA and Engie Romania SA. The process is managed by Ithuba Capital AG acting as the Fund's sole financial adviser in connection with the envisaged transactions.
December: 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).
| Budget | Budget | |||
|---|---|---|---|---|
| RON million | 2015 | 2016 | 2016 | 2017 |
| Operating revenue | 541.3 | 480.3 | 420.6 | 414.1 |
| Operating profit | 136.3 | 84.8 | 129.7 | 184.0 |
| Net profit | 114.8 | 73.5 | 97.3 | 53.8 |
| Dividends | 50.0 | 27.4 | - | - |
Source: Financial statements prepared in accordance with applicable Romanian Accounting Regulations
January: Starting 1 January 2017, the regulated electricity distribution tariffs decreased on average by 6.4% (based on ANRE Order no. 109 published on 19 December 2016).
July: The company appointed a new board member proposed by Enel, Mrs Cinzia Bonfantoni, following the resignation of Mrs Mina Kolarova.
December: 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).
| Budget | Budget | |||
|---|---|---|---|---|
| RON million | 2015 | 2016 | 2016 | 2017 |
| Operating revenue | 1,030.9 | 921.7 | 753.4 | 848.7 |
| Operating profit | 256.3 | 178.5 | 189.9 | 417.4 |
| Net profit | 237.9 | 151.7 | 151.0 | 156.8 |
| Dividends | - | - | - | - |
Source: Financial statements prepared in accordance with applicable Romanian Accounting Regulations
January: Starting 1 January 2017, the regulated electricity distribution tariffs decreased on average by 8.4% (based on ANRE Order no. 107 published on 19 December 2016).
March: Georgios Stassis, Romania country manager of Enel, announced that its subsidiary Enel Investment Holding will pay EUR 401.0 million for an additional 13.57% stake in E-Distributie Muntenia and Enel Energie Muntenia following the exercise of the PUT option by SAPE. The amount paid by Enel was set by the International Court of Arbitration in February 2017.
July: The company registered the finalization of the transfer of shares (13.57% stake) from SAPE to Enel Investment Holding following the exercise of the PUT option by SAPE.
December: 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).
| Budget | Budget | |||
|---|---|---|---|---|
| RON million | 2015 | 2016 | 2016* | 2017* |
| Turnover | 4,416.4 | 4,498.0 | 4,314.3 | 4,018.7 |
| Operating profit | 474.9 | 450.6 | 405.6 | 358.9 |
| Net profit | 378.5 | 363.8 | 328.7 | 289.4 |
| Dividends** | - | 110.9 | - | - |
Source: Consolidated IFRS financial statements
*Budgeted figures are on a consolidated basis **Dividends are based on the separate IFRS financial statements
March: The company appointed two new board members, Razvan-Ionut Pataliu and Marius Viorel Stanciu, following the request coming from the Ministry of Energy. They replaced Vlad Vasiliu and Valeriu Stefan Ivan who were revoked.
April: Shareholders approved the mandate of the board of directors for another 4 years. The members of the board are: Eric Stab, Etienne Jacolin, Marleen Delvaux, Olivier Bloeyart, Razvan Ionut Pataliu, Aurelia Carmen Slate and Alexandru Georgescu Popescu.
April: According to ANRE Order no. 22/2017, with effect from 1 April 2017 the regulated supply tariffs for households were decreased on average by approximately 0.7%.
January 2018: 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%.
| H1 | H1 | |||
|---|---|---|---|---|
| RON million | 2015 | 2016 | 2016 | 2017 |
| Turnover | 3,183.2 | 3,338.0 | 1,615.8 | 1,705.1 |
| Operating profit | 1,127.4 | 1,540.3 | 748.3 | 844.4 |
| Net profit | 899.4 | 1,227.7 | 567.9 | 716.7 |
| Dividends | 675.1 | 1,035.7 | - | - |
Source: Financial statements prepared in accordance with applicable Romanian Accounting Regulations
April: Shareholders decided on 19 April to appoint Mr Dorin Liviu Nistoran, Ms Ioana Andreea Lambru, Mr Gheorghe Gabriel Gheorghe, Mr Laurentiu Dan Tudor, Mr Horia Marian Gambutean, Ms Andreea Negru Ciobanu and Ms Oana Truta (FTIML employee) as Board members for a 4 month mandate.
June: the Fund requested the revocation of Ms Ioana Andreea Lambru, Mr Laurentiu Dan Tudor, Mr Horia Marian Gambuteanu, Ms Andreea Negru Ciobanu as members of the Board following breaches of the Code of Ethics and the corporate governance principles while attempting to appoint new members of the directorate.
July: Shareholders appointed Mr. Radu Cojocaru, Mr Karoly Borbely and Ms Oana Truta as members of the Supervisory Board following resignations of some previous Board members.
July: The Fond requested the revocation of Mr Karoly Borbely as member of the Board following breaches of the Code of Ethics and the corporate governance principles while appointing new members of the directorate.
July: The supervisory Board appointed a new Directorate composed of Bogdan Nicolae Badea, Marian Bratu and Mihai Val Zdru. The Fond requested a litigation to be brought against the Supervisory Board members that appointed the Directorate by breaching the Code of Ethics and the corporate governance principles while appointing the new members of the Directorate.
September: the Investment Manager of Fondul Proprietatea announced that it is reviewing strategic options regarding its ownership interest in Hidroelectrica SA and appointed as financial adviser in connection with the envisaged transaction Citigroup Global Markets Limited and UBS Limited.
| RON million | 2015 | 2016 | 9 months 2016 |
9 months 2017 |
Budget 2016 |
Budget 2017 |
|---|---|---|---|---|---|---|
| Sales | 18,145.0 16,246.9 | 11,953.0 | 14,293.5 10,764.0 | 13,487.0 | ||
| Operating profit/ (loss) | (529.8) | 1,469.3 | 1,141.0 | 2,450.2 | 62.0 | 1,851.0 |
| Net profit/ (loss) | (689.7) | 1,037.7 | 877.0 | 1,847.7 | 199.0 | 1,827.0 |
| Dividends* | - | 849.7 | n.a. | n.a. | - | - |
Source: Consolidated IFRS financial statements *Based on separate IFRS financial statements
February: OMV Petrom announced the start of an investment of EUR 60 million in a new polyfuels unit to be built in the Petrobrazi Refinery. Expected to be completed in 2019, the unit will allow conversion of LPG components into gasoline and middle distillates, which will allow for a shift in production of up to 50,000 tonnes of gasoline and middle distillates from LPG components.
February: The company's Executive Board presented a comprehensive strategy update, which includes a shift towards developing growth options by exploring internal opportunities but also regional expansion through acquisitions and partnerships. For more details please see the company's presentation on OMV Petrom Website.
May: The company reported the financial results for the first quarter of 2017. The highlights include: sales increased by 27.5% compared to the same period of 2016 to RON 4,652.6 million, operating profit increased by 130.9% compared to the same period of 2016 to RON 798.3 million and net profit increased to RON 618.1 million from RON 288.2 million. The increase of the Q1 2017 operating results were mainly due to increased oil prices and higher retail demand for fuels and were also supported by fiscal easing in Romania, in particular the elimination of the tax on special constructions starting January 2017.
July: Operations were resumed at the Brazi power plant on 5 July, following the closure for several months due to a steam turbine transformer in April 2017.
July: OMV Petrom announced that it has signed the contract for the sale of their wind powered electricity production assets, known as Dorobantu Wind Park. The buyer is Transeastern Power B.V. while the transaction value is EUR 23 million. The completion of the transaction is subject to procedural conditions, such as approval from the Competition Council, which is expected by the end of the year.
August: The company reported the financial results for the first half of 2017. The highlights include: sales increase by 25.4% compared to the same period of 2016 to RON 9,261.1 million, operating profit increase by 178.7% compared to the same period of 2016 to RON 1,577.3 million and net profit increased to RON 1,210.3 million from RON 408.3 million. The increase of the operating results were mainly due to higher sales revenue due to an increase of 36% of realized oil price, the elimination of the tax on special constructions starting 2017 and lower exploration expenses following lower write-offs of exploration assets.
October: The company published a trading update for Q3 2017, highlights include a 4.6% decline of hydrocarbon production to 166 thousand barrels of oil equivalent ("boe") per day, 3.3% decline of hydrocarbon sales to 14.6 million boe, 17.8% increase in average realized oil price to USD 44.05 and a strong increase of the indicator refining margin to 8.75% compared to 5.96% in Q3 2016.
October: The company announced that Mr Mihai Busuioc has resigned from the Supervisory Board of the Company. He had been appointed in April 2017 following the recommendation of the Ministry of Energy. Sevil Shhaideh was appointed as an interim member of the Supervisory Board as well as member of the Audit
Committee and member of the Presidential and Nomination Committee, following Mihai Busuioc's waiver of his mandate in the above mentioned positions.
November: The company reported the financial results for the 9-month period ended 30 September 2017. The highlights include: the sales increase by 19.6% compared to the same period of 2016 to RON 14,293.5 million, operating profit increase by 114.7% compared to the same period of 2016 to RON 2,450.2 million and net profit increased to RON 1,847.7 million. The increase of the operating results were mainly due to higher sales volumes supported by higher oil and natural gas prices, increased petroleum product sales volumes, partially offset by lower sales volumes of natural gas and electricity.
January 2018: Recent events: 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 is will replace Mariana Gheorghe, for the remaining term of the mandate granted to Mariana Gheorghe which was until 16 April 2019.
| H1 | H1 | Budget | Budget | |||
|---|---|---|---|---|---|---|
| RON million | 2015 | 2016 | 2016 | 2017 | 2016 | 2017 |
| Operating revenue | 319.1 | 315.0 | 146.2 | 183.4 | 329.7 | 338.4 |
| Operating profit | 27.5 | 43.3 | 33.6 | 57.4 | 69.5 | 57.5 |
| Net profit | 15.8 | 30.1 | 26.0 | 47.8 | 57.3 | 48.2 |
| Dividends | - | 28.1 | - | - | 45.4 | 48.2 |
Source: Financial statements prepared in accordance with applicable Romanian Accounting Regulations
July: the Fund is reviewing strategic options regarding its stake in the Company, and has appointed UniCredit as financial advisor in connection with a possible transaction.
August: The company released the results for the first six months of 2017: revenues of RON 183.4 million (increased by 25.4% compared to the same period of 2016) operating profit of RON 57.4 million (increased by 70.8% compared to the same period of 2016) and net profit of RON 47.8 million (increased by 83.8% compared to the same period of 2016). The increase in revenues and profitability was due to the uplift in selling prices to the main clients and also to a better cost management although the overall quantities remained flat. The company is currently going through a restructuring which will lead to further improvements in profitability in the next years.
The following companies from the Fund's portfolio are under bankruptcy, insolvency or reorganisation procedure:
The holdings in these companies are reflected at zero in the NAV. Forsev SA is not reflected as a portfolio company: the Fund has recorded a receivable for the uncollected value of the shares in Forsev SA for which an impairment adjustment was recorded according to the provisions of the legislation in force, following the delisting of the company after RASDAQ market was closed.
The Fund's investing activities expose it to various types of risks that are associated with the financial instruments and with the markets in which it invests. The most important types of financial risks to which the Fund is exposed to are: market risk, credit risk and liquidity risk. The management monitors the potential adverse effects associated with these risk factors on the financial performance of the Fund. Starting 29 September 2010 the Fund management implemented financial risk management procedures consistent with those applied globally by Franklin Templeton Investments.
Market risk is the risk that changes in market prices and rates, such as equity prices, interest rates and foreign exchange rates will affect the Fund's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable levels, while optimising return.
Equity price risk is the risk that the value of an equity instrument will fluctuate as a result of changes in market prices, whether caused by factors specific to the issuer or factors affecting all instruments traded in the market. Equity price risk arises from changes in the value of equity investments and is the primary risk impacting the Fund. Diversification across securities and industries, is the primary technique for mitigating equity price risk. The companies in which the Fund holds equity instruments operate in different industries. The Fund has concentrated exposures to the "Oil and gas", "Power and gas utilities: distribution and supply" and "Power utilities: generation" sectors.
Most of the assets are non-interest bearing. The interest bearing financial assets (deposits and government securities) generally have short-term maturities: deposits generally up to 3 months, treasury bills and government bonds up to 12 months. As a result, the Fund has a limited exposure to variations in interest rates.
Fund's exposure to currency risk is insignificant. The Fund held current accounts, receivables and payables denominated in foreign currencies (EUR, USD or GBP), but the balances were immaterial during the reporting period. During 2017 the Fund did not hold any equity investment denominated in other currency than RON.
Credit risk is the risk of financial loss to the Fund if counterparties to financial instruments fail to meet their contractual obligations, and arises principally from cash and deposits with banks, treasury bills, government bonds and other receivables.
For government securities held, the credit risk is assessed as low to moderate, given that the issuer is the Romanian State through the Ministry of Public Finance.
Cash held by the Fund that is not invested in portfolio companies or government securities may be placed in shortterm bank deposits. The Sole Director implemented a formal policy regarding bank counterparty risks and limits. The Fund only establishes new deposits with financial institutions where the institution or the institution's corporate parent has a credit rating above investment grade (BBB- or better). The counterparty credit risk is also diversified by allocating the cash and cash equivalents across several banks. The selection of financial institutions as deposit takers was made and the exposure limits were decided upon based on their credit ratings. The Fund has no significant credit risk from dividend receivables as at 31 December 2017 and 31 December 2016.
Liquidity risk is the risk that the Fund will not be able to meet its financial obligations as they fall due. The Fund's approach to managing liquidity is to ensure that it has sufficient liquidity to meet its liabilities when they fall due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Fund's reputation. As a closed end investment fund, liquidity risks attributable to the Fund are less significant than for an open-end fund.
The Fund's equity investments include unlisted instruments issued by companies domiciled in Romania, which are not traded in a regulated market and generally may be considered be illiquid. Liquidity can vary during time and from market to market and some investments may take longer to sell. As a result, the Fund may not be able to sell
in short time certain investments in order to meet its liquidity requirements, or to respond to specific events such as deterioration in the credit worthiness of any particular issuer.
Also, not all shares listed on BVB are considered liquid due to insufficient volumes of transactions. The Fund prudently manages liquidity risk by maintaining sufficient liquid assets to finance current liabilities. FTIML reviews liquidity at the time of making each investment decision and monitors the evolving liquidity profile of the portfolio regularly.
Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Fund's processes, service providers, technology and infrastructure, and from external factors other than credit, market and liquidity risks such as those arising from legal and regulatory requirements and generally accepted standards of corporate behaviour. Operational risks arise from all of the Fund's operations. The Fund's objective in managing operational risk is to maintain a proper balance between limitation of financial losses and damage to the Fund's reputation with the overall cost effectiveness, avoiding control procedures that restrict initiative and creativity.
While uncertainty still exists within the European political environment regarding the direction of fiscal politics, responding central bank action and final outcome of the Brexit, equity markets will be exposed to continued volatility especially with regards to countries with strong ties to Europe. Commodity markets have stabilised to an extent and even recovered in some areas, but given uncertainty regarding global trade relationships and increasing protectionism further volatility can be expected.
Both political uncertainty and fluctuation in commodity prices, particularly in the energy sector, can have an impact on the Romanian economy and consequently also on the Fund's portfolio companies. Management cannot predict all developments which could have an impact on the Romanian economy and consequently what effect, if any, they could have on the performance of the Fund and its financial statements. Management cannot reliably estimate the effects on the Fund's financial position of any further deterioration in the liquidity of the financial markets and devaluation of financial assets influenced by the increased volatility in the equity and currency markets.
The existence, operation and the initial structure of the Fund's portfolio are regulated by primary legislation, as well as by secondary legislation such as government decisions and FSA/ CNVM regulations. Hence, it may not be ruled out that the current legal framework might change so as to directly affect the Fund and its shareholders. This risk is sustained by the legislative history of the past few years that reveals a series of laws which have
changed also the Fund's portfolio composition. Such legal changes would have to be carried out in compliance with the constitutional principles regulating the guarantee of the private property.
Notwithstanding the general principle described above, the numerous instances where the relevant institutional structures have ruled on the unconstitutionality of certain laws, prove that the risk of legislative changes which may adversely affect the Fund and which may be passed in breach of the Constitution may not be ruled out.
FTIS and FTIML have implemented internal policies and procedures to ensure that timely and accurate disclosure regarding the Fund is made on all material matters, including the financial position, performance, ownership and governance of the Fund. In addition, strict internal rules, designed to protect the Fund's interests, have been established in the areas of financial reporting, internal control and risk management.
Pursuant to article 62 of Law 297/2004, FTIS and FTIML have established a Compliance department responsible for managing the compliance risk of the AIFM and of the Fund with the applicable legislation as well as with the internal policies and procedures. The registered Compliance Officer is part of Global Compliance team and member of Franklin Templeton International Compliance Department and reports directly to the Luxembourg Compliance Manager – Global Compliance.
The Compliance department is responsible for providing regulatory guidance, advice and compliance training to operational departments, assisting them in managing the reputational risk in relation to legal and regulatory requirements and codes of conduct and performing second level compliance controls.
The Fund, FTIS and FTIML are covered by relevant policies, procedures and global good standing practices already implemented within the Franklin Templeton Investment group as required by regulatory requirements. FTIS has implemented a specific Risk Management Policy applicable to the Fund. The purpose of this policy document is to outline the main business processes in place and how they are applied for the Fund and to establish an effective risk framework which observes regulatory requirements, and thereby enhances the governance structure throughout the business.
The Sole Director oversees risk based on the Compliance Monitoring Plan. The risk assessment is a critical element of compliance oversight and monitoring program. The compliance monitoring programme is updated annually with the issues reported monthly by the executive management. The high risk areas are monitored at least annually to reflect the results of the final risk assessment for each year.
In respect of the portfolio monitoring activity, Franklin Templeton Investment Management Limited United Kingdom has implemented procedures and controls which are designed to ensure that all assets are managed prudently and in accordance with client mandates. In addition Franklin Templeton has a dedicated Investment Compliance team of specialists who are responsible for the rigorous day-to-day monitoring of all client accounts, including Fondul Proprietatea, against the agreed investment guidelines and constraints.
The front office trade management system has embedded compliance functionality which enables investment restrictions, regulatory and internal requirements to be included within the system. All trade orders (with the exception of foreign exchange trades and certain debt and derivative security trades) are automatically checked against the relevant investment restrictions in the system prior to trading.
Post trade compliance checks are automatically run overnight for all portfolios against the investment restrictions included within the trade management system. Any exceptions are investigated and cleared by Franklin Templeton Investment Compliance team. Investment restrictions that cannot be automated are reviewed periodically.
All active and passive breaches are reported to the relevant investment managers and operating departments. Corrective action is taken as necessary to address and resolve any issues. Trading errors are monitored by the Global Compliance department of Franklin Templeton.
The Global Compliance department of Franklin Templeton produces monthly reports which provide details on significant compliance matters and initiatives, updates on monitoring activities and current complaints and breaches. These reports are circulated to the relevant senior management.
The European and Middle East Risk Committee of Franklin Templeton provides the oversight framework for risk management processes and is made up of senior management from the business areas and key risk and control functions. Meeting quarterly, it reviews risk reports and input from business management and maintains a detailed register of risk items and resolutions.
The Board of Directors of FTIML United Kingdom and the Board of FTIS Lux provide oversight, being aware of the risk management practices and their deployment within the firm, staying apprised of significant risks and management responses.
Franklin Templeton's approach is to use a dedicated team of risk management specialists who are independent of the portfolio managers and provide robust risk and performance analytics and unbiased perspective on the risks and exposure in the portfolios.
The current risk profile of the Fund, including the risks the Fund is or may be exposed to, is described above in the Financial Risk Management section.
The AIFM of the Company has established a permanent risk management function to ensure that effective risk management policies and procedures are in place and to monitor the risks and compliance with risk limits. The AIFM has a risk management process document filed with the regulator of the AIFM and risk management policies which cover the risks associated with the Fund and the adequacy and effectiveness of this framework is reviewed and approved at least annually. Regular reporting is prepared and reviewed by the AIFM Senior Management.
For each relevant risk area, risk limits are set by the AIFM which take into account the objectives, strategy and risk profile of the Fund. These limits are monitored regularly as required by the nature of the risk area, and the sensitivity of the portfolio to key risks is undertaken periodically as appropriate to ascertain the impact of changes in key variables to the Fund.
An important part of the Fund's assets consist of unlisted securities. The portfolio also has a large exposure to the Oil and Gas and Energy sector. The principal risks in relation to the Fund are therefore market risk (including security price risk, interest risk and sector concentration risk) credit risk, and liquidity risk. Further details in
relation to the nature and extent of these risks are already described in more detail in the Financial Risk Management section of the IFRS Financial Statements, Annex 1 to this report.
Diversification and concentration limits are set for market risk and are monitored daily.
Amongst other measures considered regularly by the Investment Manager, the AIFM is assessing and monitoring market risk through relative Value at Risk (VaR) calculated using the Monte Carlo approach. VaR is a statistical risk measure that estimates the potential portfolio loss from adverse market moves in an ordinary market environment. VaR analysis reflects the interdependencies between risk variables, unlike a traditional sensitivity analysis. VaR can be defined as the predicted loss a portfolio can experience at a specified confidence level (e.g. 99%) over a given period of time (e.g. 20 days).
The VaR calculations are based on a confidence level of 99% with a holding period of not greater than 1 month (20 days) and a historical observation period of not less than 1 year (250 days). A 99% 1 month VaR means that the expectation is that 99% of the time over a 1 month period the Fund will lose less than this number in percentage terms. Therefore, higher VaR numbers indicate higher risk.
The AIFM uses the relative VaR methodology and calculates this figure for the portion of the portfolio that has observable prices in a regulated market (securities listed on the stock exchange). Relative VaR is simply the absolute VaR of the portfolio divided by the absolute VaR of the benchmark. The benchmark that is used is the one that is most representative of the AIF's strategy and likely risk exposures.
It is noted that the use of this VaR methodology, as any other statistical risk measure, has limitations. There is some probability that the loss could be greater than the VaR amounts and therefore the AIFM can neither guarantee that losses will not exceed the indicated VaR, nor that losses in excess of the VaR amounts will not occur more frequently. Risk statistics are subject to fluctuations and historical figures may not reflect current or future portfolio characteristics.
The AIFM assesses on a regular basis the sensitivity of the Fund's portfolio in relation to a general market drop of the MSCI Romania Index, the MSCI Emerging Markets index and the MSCI Frontier Markets Index.
Fund's equity trading activity is conducted on a Delivery versus Payment basis ("DVP") with approved counterparties only, minimising counterparty exposure. Any counterparty is subject to a review and approval process prior to any trading activity. The risk function of the AIFM prepares and assesses counterparty exposure reports regularly and reviews reporting provided by FTIs Counterparty Credit Committee. As of 31 December 2017 Fondul Proprietatea is subject to counterparty risk arising from cash balances held with banks.
As at 31 December 2017, no assets held by the Fund were subject to special arrangements arising from their illiquid nature.
There are no new arrangements for managing the liquidity/liquidity risk of the Fund.
The Fund's closed-end structure has relatively low liquidity requirements, reducing the impact of potential illiquidity in the portfolio. The risk function of the AIFM performs a regular assessment of the asset liquidity status using liquidity market data from different sources to ensure that the portfolio is sufficiently liquid in normal and exceptional market conditions.
Shares in the Fund are not redeemable and shareholders do not have the right to require their shares to be purchased by the Fund. Accordingly, the general liquidity management policies ensure that the Fund's portfolio is sufficiently liquid to meet the following main obligations:
If required, the Fund has access to a borrowing facility which is an additional mitigation factor for liquidity risk.
| RON million | 31 Dec 2017 | 30 Sep 2017 | 30 Jun 2017 | 31 Mar 2017 | 31 Dec 2016 |
|---|---|---|---|---|---|
| Current accounts* | 19.2 | 22.8 | 58.4 | 36.2 | 5.8 |
| Bank deposits | 1,276.6 | 573.0 | 84.9 | 155.3 | 305.3 |
| Treasury bills and short-term government bonds | 242.2 | 145.3 | 84.9 | 149.1 | 1,110.0 |
| Total liabilities** | (35.6) | (46.1) | (324.3) | (89.1) | (47.2) |
| Net cash & cash equivalents | 1,502.4 | 695.0 | (96.1) | 251.5 | 1,373.9 |
| Net Assets Value | 10,790.4 | 10,605.9 | 10,570.3 | 10,689.5 | 11,427.4 |
| % net cash & cash equivalents in NAV | 14.0% | 6.6% | -0.9% | 2.4% | 12.0% |
*Current accounts include also the distribution amount for March 2017, respectively June 2017 return of capital to shareholders transferred to the distribution current bank account
**Total liabilities exclude provisions, and for 30 June 2017, include the outstanding loan amount
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 current accounts, bank deposits and treasury bills and short-term government bonds and the increase of total liabilities during the year ended 31 December 2017, please see section Financial Statements Analysis.
The total expense ratio of the Fund as at 31 December 2017 was 0.92%, and excluding transaction related expenses this was 0.84% (2016: 1.17%, and excluding transaction related expenses this was 0.87%). The ratio is calculated by dividing the relevant expenses by the average month-end NAV of the year. For the purpose of this calculation, expenses do not include foreign exchange losses, cost of equity investments disposed of, impairment adjustments, interest expenses, fair value adjustments, expenses with amortisation and provisions and income tax expenses.
The lower total expense ratio in 2017 is mainly due to the lower level of Fund's transaction related expenses and to the lower average NAV for 2017 (please see Financial Statements Analysis section for more details on the Fund 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 realised gains/ losses from transactions with financial instruments. The changes in fair value of the equity investments in the Fund portfolio are recognised either in profit or loss (in case of subsidiaries and associates) or in equity (in case of all the other equity instruments).
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 31 December 2017 the Fund's exposure to Romanian equities accounted for 86.0%% of the NAV, the difference of 14.0% 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 14.5% during 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 capitalization weighted index of the most liquid companies listed at 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.
Source: Bloomberg
Further information on the Fund's financial results can be found in the Financial Statements Analysis section.
Capital expenditure comprises the costs for the acquisition or upgrade of the intangible assets of the Fund.
The intangible assets of the Fund include the website costs, the value of the licences, the implementation costs and the updates of the Fund's accounting and reporting software, net of the accumulated amortisation.
Since 25 January 2011, the Fund's shares have been listed in the Tier I category of the regulated market of the BVB under ISIN number ROFPTAACNOR5, and market symbol FP.
The shareholders' register of the Fund is maintained, in accordance with the provisions of the regulations in force, by an independent registrar, Depozitarul Central SA ("Central Depositary"), with the registered office in Bucuresti, 34-36 Carol I Avenue, 3rd, 8th and 9th Floors, 2nd District.
Starting 29 April 2015, the Fund's GDRs are listed on the Specialist Fund Market of the LSE under the market symbol "FP.". The Bank of New York Mellon was appointed by the Fund to act as depositary bank in relation to the GDR facility.
Average Daily Turnover in 2017 (RON million)
Source: BVB, Bloomberg *Accelerated bookbuilding offering
Fund's Share Price and Discount History (RON per share)
Note: The 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 published NAV per share at the date of calculation
Note: As at 31 December 2017, FP GDRs were trading on LSE at a 3.15% premium to the FP share price on BVB. Source: BVB, LSE, for the period 29 April 2015 – 31 December 2017
Source: BVB, Bloomberg, for the period 29 April 2015 – 31 December 2017
Note: The 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 published NAV per share at the date of calculation
FTIS and FTIML remain committed to returning cash to shareholders on an annual basis (subject to applicable law and necessary approvals), and has amended the Fund's Annual Cash Distribution Policy as follows:
"In the absence of exceptional market conditions or circumstances, and subject to any restrictions under Romanian legal or tax regulations and subject to available funding, the Investment Manager intends to recommend a cash distribution related to each financial year equivalent to: 100% of the sum of the Fund's dividend income from portfolio companies, plus interest on cash balances, less expenses and taxation and less compulsory allocations to reserves according to the regulations in force, in each case for that year, but not less than RON 0.05 per share.
The cash distributions would be paid to shareholders in the form of a return of capital (by decreasing the nominal value per share) and / or in the form of dividends, in each case subject to any restrictions under Romanian legal or tax regulations.
In the case of dividend distributions (where permitted by applicable law), the distributable amount will be assessed based on audited financial information.
In the case of a return of capital, the distributable amount will be based on a best estimate according to the latest management accounts at the time of proposing the resolution.
Unpaid and treasury shares will not be entitled to receive cash distributions."
The Annual Cash Distribution Policy does not limit additional cash returns and share buy-backs that can be recommended by the Sole Director and by Investment Manager separately, subject to available funding and depending on the discount level, in accordance with the IPS.
The Annual Cash Distribution Policy is published on the Fund's webpage.
Key information on the Fund's distributions history is included in the table below:
| Description | Paid in | Gross distribution declared (RON) |
Gross distribution per share (RON) |
Total number of shares* |
Status of distribution payment (%) |
Deadline for distribution collection by shareholders |
|---|---|---|---|---|---|---|
| 2006 Dividend | 2007 | 36,076,046 | 0.00250 | 14,240,540,675 | 30 June 2012 (Status of limitation occurred) |
|
| 2007 Dividend | 2008 | 89,997,678 | 0.00660 | 13,644,179,910 | 30 June 2012 (Status of limitation occurred) |
|
| 2008-2009 Dividend (aggregate) |
2010 | 1,124,316,804 | 0.08160 | 13,778,392,208 | 11 October 2013 (Status of limitation occurred) |
|
| 2010 Dividend | 2011 | 432,729,046 | 0.03141 | 13,776,792,208 | 30 June 2014 (Status of limitation occurred) |
|
| 2011 Dividend | 2012 | 507,658,517 | 0.03854 | 13,172,250,055 | 30 June 2015 (Status of limitation occurred) |
|
| 2012 Dividend | 2013 | 536,437,206 | 0.04089 | 13,119,031,695 | 28 June 2016 (Status of limitation occurred) |
|
| Distribution - Return of capital |
2014 | 601,325,852 | 0.05000 | 12,026,517,031 | 25 July 2017 (Status of limitation occurred) |
|
| Distribution - Return of capital |
2015 | 534,322,868 | 0.05000 | 10,686,457,366 | > 99% | 29 June 2018 |
| Distribution - Return of capital |
2016 | 516,886,344 | 0.05000 | 10,337,726,877 | > 99% | 27 June 2019 |
| Distribution - Return of capital |
March 2017 |
480,543,496 | 0.05000 | 9,610,869,928 | >98% | 27 March 2020 |
| Distribution - Return of capital |
June 2017 |
443,502,747 | 0.05000 | 8,870,054,948 | >97% | 30 June 2020 |
* Number of shares defined as (1) the number of shares in issue, less (2) any unpaid shares and less (3) any treasury shares acquired via buy-backs (in the form of ordinary shares or GDRs corresponding to ordinary shares) at the registration date decided upon by the GSM approving the dividend distribution or return of capital.
The FSA Endorsement no. 79/ 22 March 2017 of the new Constitutive Act reflecting the share capital decrease was received on 22 March 2017. On 24 March 2017, the Trade Registry registered the Resolution no. 10/2016 of the Fund's EGM for approving the subscribed share capital through the reduction of the nominal value of the Fund's shares from RON 0.85 to RON 0.57. In accordance with the Fund's accounting policy, the share capital decrease operation was recorded in the accounting system in the same day, at the Trade Registry registration date, of 24 March 2017 and incorporates two operations (first operation was the coverage of accounting losses and the second one was distributions to shareholders).
Therefore, with effect from 24 March 2017, the new value of the Fund's subscribed share capital was RON 5,742,226,025.22, being divided into 10,074,080,746 shares with a nominal value of RON 0.57 per share. The value of the paid-in share capital of the Fund was RON 5,534,852,985.72, being divided into 9,710,268,396 shares with a nominal value of RON 0.57 per share.
The shareholders registered with the Romanian Central Depositary as at 7 March 2017 had the right to receive RON 0.05 per share, proportionally with their participation in the paid-in share capital of the Fund. The payment of the capital return started on 27 March 2017 (the Payment Date), the next working day after the accounting operation for covering accounting losses was registered in the accounting books of the Fund.
By 31 December 2017, shareholders have collected over 98.8% of the total distribution of RON 480.5 million.
The FSA Endorsement no. 362/ 12 June 2017 of the new Constitutive Act reflecting the share capital decrease was received on 12 June 2017. On 16 June 2017, the Trade Registry registered the Resolution no. 1/28 February 2017 of the Fund's EGM for approving the subscribed share capital through the reduction of the nominal value of the Fund's shares from RON 0.57 to RON 0.52. In accordance with the Fund's accounting policy, the share capital decrease operation was recorded on the same date in the accounting system.
Therefore, with effect from 16 June 2017, the new value of the Fund's subscribed share capital is RON 5,238,521,987.92, being divided into 10,074,080,746 shares with a nominal value of RON 0.52 per share. The value of the paid-in share capital of the Fund is RON 5,049,339,565.92, being divided into 9,710,268,396 shares with a nominal value of RON 0.52 per share.
The shareholders registered with Romanian Central Depositary as at 12 June 2017 have the right to receive RON 0.05 per share, proportionally with their participation in the paid-in share capital of the Fund. The payment of the capital return started on 30 June 2017 (the Payment Date).
By 31 December 2017, shareholders have collected over 97.7% of the total distribution of RON 443.5 million.
With effect from 2015, for the distribution to shareholders, the payments are performed through the Romanian Central Depositary, according to the legislation in force, as follows:
As an important notice to shareholders, the payment of the amounts due to the Fund's shareholders related to the 27 March 2017 and 30 June 2017 cash distributions is subject to the general statute of limitation. As such, the shareholders may request these payments only within a three year term with effect from the Payment Date, namely until 27 March 2020 for the 27 March 2017 cash distribution and 30 June 2020 for e 30 June 2017 cash distribution.
During 2015 and 2016 the Fund performed two cash distributions to shareholders:
During the 21 January 2015 GSM, the Fund's shareholders approved the return to shareholders of RON 0.05 per share, following the share capital decrease through the reduction of the nominal value of the Fund's share from RON 0.95 to RON 0.90.
The shareholders registered in the shareholders' registry with the Central Depositary on 24 June 2015 have the right to receive RON 0.05 per share, proportionally with their participation in the paid-in share capital of the Fund. The payment started on 29 June 2015. By 31 December 2017, shareholders have collected 99.7% of the total distribution.
The payment of the amounts due to the Fund's shareholders related to the 2015 cash distributions is subject to the general statute of limitation. As such, the shareholders may request these payments only within a three year term with effect from the payment date, namely until 29 June 2018.
During the 27 January 2016 GSM, the Fund's shareholders approved the return to shareholders of RON 0.05 per share, following the share capital decrease through the reduction of the nominal value of the Fund's share from RON 0.90 to RON 0.85.
The shareholders registered in the shareholders' registry with the Central Depositary on 6 June 2016 have the right to receive RON 0.05 per share, proportionally with their participation in the paid-in share capital of the Fund. The payment started on 27 June 2016. By 31 December 2017, shareholders have collected 99.4% of the total distribution.
The payment of the amounts due to the Fund's shareholders related to the 2016 cash distributions is subject to the general statute of limitation. As such, the shareholders may request these payments only within a three year term with effect from the payment date, namely until 27 June 2019.
As per the statutory financial statements prepared in accordance with the IFRS, the Fund recorded a net profit for the financial year ended 31 December 2017 of RON 1,289,896,039. In accordance with the Companies law, the Fund is obliged to make transfers to the legal reserves until those reserves reach a value equivalent to 20% of the value of the issued share capital of Fondul Proprietatea. Following the 2017 transfer of RON 64,494,802, the value of those reserves is RON 330,578,801 (i.e. 7.09% of the issued share capital).
The Fund's Sole Director proposal, subject for GSM approval in accordance with the legislation in force, for the appropriation of the net accounting profit for the 2017 financial year in an amount of RON 1,289,896,039 is as follows:
The Fund has a clear and transparent corporate governance framework concluded in 2011 that was updated and enhanced in the subsequent periods in order to meet new demands and opportunities. The framework is published on the Fund's website and presents clearly, for public reference, the main characteristics of the Fund's corporate governance structure, the functions of the Board of Nominees and of the Fund's Sole Director, as well as their powers and responsibilities.
In order to enhance shareholder confidence, the Fund has implemented a transparent decision making process, based on clear rules. This contributes to the protection of shareholders' rights, improving the overall performance of the Fund, offering better access to capital and risk mitigation.
The Fund lends great importance to the principles of good corporate governance and, coinciding with its listing at the start of 2011, has adhered to the BVB Code of Corporate Governance.
In September 2015 BVB issued the new Corporate Governance Code applicable starting 4 January 2016. Following the self-assessment conducted by the Fund, the AIFM informs the shareholders and investors that the Fund is fully compliant with the provisions of the new Corporate Governance Code of BVB.
For more details regarding the compliance with the provisions of the new Corporate Governance Code of BVB please see Annex 6 Compliance with the corporate governance requirements.
In March 2016 the FSA issued Regulation no. 2/2016 on the application of the principles of corporate governance by the entities authorised, regulated and supervised by the FSA. Following the self-assessment conducted by the Fund, the AIFM informs the shareholders and investors that the Fund is fully compliant with the provisions of the principles of corporate governance applicable to the entities authorised, regulated and supervised by the FSA.
For more details regarding the compliance with the requirements provisions of the principles of corporate governance by the entities authorised, regulated and supervised by the Financial Supervisory Authority, please see Annex 6 Compliance with the corporate governance requirements.
In September 2010, a one-tier system of governance was implemented at the Fund's level, as a result of the implementation of the rules established by the Government Ordinance no. 81/2007. Although the Fund is currently administrated under a one-tier system, the role of the Board of Nominees is similar to the role of a Supervisory Board, with a few exceptions.
Since adopting the one-tier system, the Fund is administrated by the Sole Director.
The powers and duties of the above mentioned bodies are described in a number of official documents:
In accordance with best corporate governance practice, the Fund is managed in a climate of transparency, based on open discussions between FTIS, FTIML and the Board of Nominees.
FTIS, FTIML, their employees and the members of the Board of Nominees have a duty of care and loyalty towards the Fund. Hence, FTIS, FTIML and the Board of Nominees pass their resolutions as required for the welfare of the Fund, primarily in consideration of the interests of shareholders and investors.
The Fund implemented all recommendations of the new Corporate Governance Code of BVB and it has in place the following policies:
Any GSM shall be convened by the Sole Director whenever necessary, with the prior approval of the Board of Nominees, in accordance with the provisions of the law. The date of the meeting may not be less than 30 (thirty) calendar days after publishing the convening notice in the Official Gazette of Romania Part IV. The convening notice shall be published in the Official Gazette of Romania, Part IV, and in one of the widely distributed newspapers in Romania.
In exceptional cases, when the Fund's interest requires it, the Board of Nominees may convene the GSM. Any convening notice will be sent to BVB and FSA in accordance with the capital markets regulations. Any convening notice will also be published on the Fund's website in the GSM section, together with any explanatory document related to items included on the meeting agenda.
The annual financial statements are made available starting with the date of the convening notice of the Annual Ordinary General Shareholders Meeting ("OGM"), convened to resolve upon them.
The GSM is usually chaired by one of the legal representatives of the Sole Director, who may designate another person to chair the assembly. The chairman of the Meeting designates two or more technical secretaries to verify the fulfilment of the formalities required by law for the carrying out of the Meeting and for drafting the minutes thereof.
The minutes, signed by the Chairman and by the technical secretaries, shall ascertain the fulfilment of the formalities relating to the convening notice, the date and place of the Meeting, the agenda, the shareholders present, the number of shares, a summary of the issues discussed, the resolutions passed and, upon the request of the shareholders, the statements made by such shareholders during the meeting.
The resolutions of the GSM shall be drafted pursuant to the minutes and shall be signed by the person empowered by the shareholders to do this. In observance of the capital market regulations, the resolutions of the GSM will be disseminated to BVB and FSA within 24 hours after the event. The resolutions will also be made available on the Fund's website under the respective GSM section.
The main duties of the OGM are the following:
g) to rule over the management of the AIFM and to evaluate his/ her performances and to discharge him/ her from its management,
h) to decide on the action in a court of law against the AIFM or, as the case may be, against the financial auditor, for damages caused to Fondul Proprietatea;
The EGM is entitled to decide mainly upon:
During 2017, there were 7 GSMs, and 5 EGM resolutions and 7 OGM resolutions were issued.
EGM and OGM resolutions are published on the Fund's webpage.
The Board of Nominees consists of five members appointed by the OGM in accordance with the provisions of the Constitutive Act in force.
The Board of Nominees has sufficient members in order to effectively supervise, scrutinise and evaluate the activity of the Sole Director and the fair treatment of all the shareholders.
The composition of the Board of Nominees is balanced so as to enable it to take well-informed decisions. The decision-making process is a collective responsibility of the Board, which remains fully liable for decisions taken within its field of competence.
An independent member is defined as one who does not maintain, nor has recently maintained, directly or indirectly, any business relationship with the Fund or persons linked to the Fund, or shareholders of the Fund, of such significance as to potentially influence them.
The Board of Nominees ensures that consultative committees (Nomination and Remuneration Committee and Audit and Valuation Committee) are constituted to examine specific topics chosen by the Board and to report to the Board. At least one independent Board of Nominees member sits on each such committee. The mandate of each member of the Board of Nominees imposes the same type of restrictions around confidentiality of information and the same type of reporting and consent requirements on the individual's ability to personally trade in the Fund's shares as the restrictions that are in place for the staff of FTIS and FTIML. Beginning with year 2016 the Fund implemented the annual evaluation of the members of the Board in order to fully comply with the BVB Corporate Governance Code.
The members of the Board of Nominees may be shareholders of the Fund.
The structure of the Board of Nominees as at 31 December 2017 was the following:
| Name | Position | Mandate until |
|---|---|---|
| Mr Sorin-Mihai Mîndruţescu | Chairman | 30 September 2019 |
| Mr Mark Gitenstein | Member | 30 September 2019 |
| Mr Julian Rupert Francis Healy | Member | 5 April 2018 |
| Mr Steven Cornelis van Groningen | Member | 14 April 2018 |
| Mr Piotr Rymaszewski | Member | 5 April 2018 |
During 2017 there were no changes in the structure of the Board of Nominees. However, considering the fact that the mandates for Mr Rymaszewski, Mr Healy and Mr van Groningen end in April 2018, the shareholders are invited to express their votes during the 14 February 2018 GSM for appointing three members of the Board of Nominees. For further details please see Subsequent Events.
There were 14 meetings of the Board of Nominees in 2017, as follows:
During 2017, the Board of Nominees issued a total number of 66 resolutions.
Mr Sorin-Mihai Mîndruţescu is the Chairman of the Board of Nominees. Mr Mîndruţescu has extensive experience in corporate finance and in the banking industry. From 1994 until 2001, he held various senior positions in a number of large Romanian credit institutions. From 2009 until 2012, Mr Mîndruţescu was Chairman of the Board of Directors of the American Chamber of Commerce Romania (AmCham). Currently, Mr Mîndruţescu is a managing director with Oracle Romania. Mr Mîndruţescu holds MBA qualifications from both The University of Edinburgh Management School and ENCP School of International Management in Paris. Mr Mîndruţescu is member of the Board of Nominees starting with 29 September 2010.
As at 31 December 2017, Mr Mîndruţescu held no shares issued by the Fund. Mr Mîndruţescu is an independent member.
Mr Mark Gitenstein is a senior counsel in the Government & Global Trade practice in Mayer Brown's Washington DC office. He was appointed in 2009 by President Barack Obama to serve as the United States Ambassador to Romania, completing his term of service at the end of 2012. As US Ambassador to Romania, he worked to strengthen relations with Romania on a variety of issues. He actively promoted deeper development of Romania's equity markets, as well as a fair and transparent business environment for all investors. He also encouraged greater private sector involvement in state owned enterprises, including the introduction of a corporate governance code for state owned enterprises. Before undertaking his ambassadorial role, Mr Mark Gitenstein spent two decades as a partner at Mayer Brown. Additionally, he was a non-resident senior fellow in governance studies at the Brookings Institution, where he specialised in issues related to national security and civil liberties. Before joining Mayer Brown, Mr Mark Gitenstein served for 17 years on the staff of the US Senate Judiciary and Intelligence committees, 13 of those years working for Senator Joe Biden. He is the author of Matters of Principle, an award winning book on his experience managing the Judiciary Committee staff during the confirmation battle over the nomination of Robert Bork to the Supreme Court. Mr Gitenstein serves as President of the Biden Foundation. Mr Gitenstein is member of the Board of Nominees starting with 23 April 2013.
As at 31 December 2017, Mr Gitenstein held no shares issued by the Fund. Mr Gitenstein is an independent member.
Mr Julian Healy has long and extensive experience of banking and investment management in emerging markets and particularly in Central and Eastern Europe. He is a Member of the Institute of Chartered Accountants in England and Wales. Mr Healy also acts as a non-executive director in a number of other companies. Mr Healy chairs the Audit and Valuation Committee. Mr Healy has been a member of the Board of Nominees since 5 April 2012.
As at 31 December 2017, Mr Healy held no shares issued by the Fund. Mr. Healy is an independent member.
Mr Steven Cornelis van Groningen has extensive experience in banking and is the President and CEO of Raiffeisen Bank SA Romania. Mr van Groningen previously held senior management positions in ABN AMRO Bank (in Romania, Russia and Hungary). Mr van Groningen is a former president of the Foreign Investors Council in Romania and former president of The Council of Banking Employers in Romania. Mr van Groningen is member of the Board of Nominees starting with 13 April 2012.
As at 31 December 2017 Mr van Groningen held 522,708 shares issued by the Fund. Mr van Groningen is an independent member
Mr Piotr Rymaszewski has experience in finance, turnaround, real estate and law. He is a CEO of Octava Asset Management Sp. z o.o. and Octava SA, a company listed on the Warsaw Stock Exchange. Starting with 2017 he is Independent Non-Executive Director in Digi Communications N.V., company listed on Bucharest Stock Exchange. Mr Rymaszewski also acts as a nonexecutive director of a number of both listed and unlisted companies, representing institutional investors. Mr Rymaszewski is member of the Board of Nominees since 5 April 2012.
As at 31 December 2017 Mr Rymaszewski held no shares issued by the Fund. Mr. Rymaszewski is an independent member.
The main duties of the Board of Nominees include:
6) Receiving from the AIFM for analysis the strategy and the development policies of Fondul Proprietatea, before these are submitted for approval to the GSM, and presenting an opinion to the AIFM and to the GSM regarding such;
7) Receiving from the AIFM for analysis and approval the framework for carrying out Fondul Proprietatea operations, as well as any other Fondul Proprietatea regulations issued by AIFM according to legal provisions in force, capital market rules and regulations;
The Board of Nominee shall draft and present to the GSM an annual report regarding the monitoring activity performed or a monitoring report for another period agreed by the GSM;
For more details regarding the activity of the Board of Nominees during 2017, please see the annual activity report of the Board, available on the Fund's webpage in the Investor Relations – GSM Information section.
A permanent Audit and Valuation Committee composed of four Board of Nominees members was established to provide assistance to the governing bodies of the Fund in the area of internal control and financial reporting. This committee reviews the annual financial statements and the proposal for profit distribution, as well as performs other activities under the new European audit regulation. In addition, the Audit and Valuation Committee analyses the proposal for appointing the independent financial auditor, who is appointed by shareholders at an OGM.
The Committee also supervises the Fund's risk management strategy and its financial performance and assesses any issues brought to its attention by the internal auditor.
The Sole Director reports to the Audit and Valuation Committee at least once a year on the audit plan and on any material relevant matters.
The Audit and Valuation Committee includes members that have the necessary expertise in the area of financial audit and accounting. As at 31 December 2017 the members of the Audit and Valuation Committee were Mr Julian Healy (as Chairman), Mr Steven van Groningen, Mr Sorin Mîndruţescu and Mr Piotr Rymaszewski.
A Nomination and Remuneration Committee composed of three Board of Nominees members was established to provide assistance to the governing bodies of the Fund in the area of nomination and changes in remuneration.
As at 31 December 2017 the Nomination and Remuneration Committee members were Mr Sorin Mîndruţescu (as Chairman), Mr Mark Gitenstein, and Mr Piotr Rymaszewski.
The Sole Director of the Fund is Franklin Templeton International Services S.à r.l., a société à responsabilité limitée qualifying as an alternative investment fund manager under Article 101-1 of the Luxembourg Act of 17 December 2010 concerning undertakings for collective investment, as amended from time to time, whose registered office is located at 8A rue Albert Borschette, L-1246 Luxembourg and registered with the Luxembourg Register of Commerce and Companies under number B 36.979.
The Sole Director is appointed and/ or revoked by the OGM.
The duration of the mandate as the AIFM and Sole Director of the Fund is of 2 years.
The Sole Director issues decisions regularly and whenever necessary for the daily operations of the Fund.
Currently, the Fund is managed by FTIS as Sole Director. FTIS has delegated the role of Investment Manager as well as certain administrative functions to FTIML. For details regarding the delegated activities please read Delegated management functions section.
The Sole Director is responsible for the Fund's executive management. FTIS as Sole Director and AIFM, as well as FTIML as Investment Manager act in the best interests of the Fund and protect the general interests of the shareholders.
In June 2009, the Fund nominated Franklin Templeton Investment Management Limited United Kingdom as winner of the international tender procedure organised by the Fund for the selection of the Fund's Investment Manager and Sole Director.
With effect from 29 September 2010, Franklin Templeton Investment Management Limited United Kingdom, Bucharest Branch took over as the Sole Director of the Fund for a period of 4 years.
On 28 April 2014, the shareholders of the Fund approved the renewal of the mandate of the Fund Manager and Sole Director for two years beginning with 30 September 2014.
In order to comply with Law 74/2015 implementing the AIFM Directive, on 29 October 2015, the GSM approved the appointment of Franklin Templeton International Services S.à r.l., as the AIFM and Sole Director of the Fund for a mandate of two years starting 1 April 2016.
Neither FTIS nor FTIML had any agreement, understanding or family relationship with the shareholders responsible for appointing it to the position of Sole Director and Investment Manager. On 31 December 2017 neither FTIS nor FTIML held any shares issued by the Fund.
Franklin Templeton Investment Management Limited United Kingdom is authorised and regulated by the UK Financial Conduct Authority and is registered as a foreign investment adviser with the United States Securities and Exchange Commission.
Treating customers fairly is one of the core values of Franklin Templeton Investments ("FTI"). Preferential treatment among clients is strictly prohibited. Aiming to ensure fair treatment to any client or investor, FTI has developed and implemented a number of policies and procedures. Both FTIS and FTIML apply FTI global best practices to meet its regulatory obligations and comply with laws and regulations.
These include:
Code of Ethics to which all employees are bound;
As provided by the Constitutive Act, the Management Agreement and the IPS, the main duties of FTIS performed under the control of the GSM and the monitoring of the Board of Nominees, are:
individually or cumulatively during a financial year, 20% of the total value of the non-current assets of Fondul Proprietatea, less receivables;
The Sole Director coordinates the strategy of the Fund.
The Sole Director ensures that the provisions of the relevant European and Romanian capital markets legislation are complied with and implemented by the Fund, as presented above within this section. Likewise, the Sole Director ensures the implementation and operation of an accounting, risk management and internal controlling system which meets the requirements of the Fund.
The employees of the Sole Director qualified as insiders and the persons closely related to them and to the Sole Director have the duty to report to the Sole Director and to the FSA any and all trading/ business performed for their own account with (i) shares or other securities issued by the Fund and admitted for trading on regulated markets; and/ or (ii) derivative financial instruments relating to securities issued by the Fund and/ or (iii) any other instruments relating thereto.
The Sole Director has the duty to disclose immediately to the Board of Nominees any material personal interests it may have in the transactions of the Fund as well as all other conflicts of interest.
Sole Director conducts all business according to the principle that it must manage any conflicts of interest fairly between itself and the Fund. The Franklin Templeton group has group-wide policies for managing conflicts of interest and ensuring the ethical conduct of its entire staff which apply to the Sole Director. These policies were designed to evidence compliance with the conflicts of interest requirements as set out in the European Markets in Financial Instruments Directive of 2004 and were also submitted to FSA during the course of the Sole Director's licensing application.
All business transactions between the Fund and the Sole Director as well as persons or companies closely related to them must comply with the normal industry standards and applicable corporate regulations.
During 2017, the Sole Director issued 59 resolutions on all matters requiring its approval in accordance with the Constitutive Act.
As at 31 December 2017, Craig Blair, Denise Voss, Mike Sommer, Grzegorz Maciej Konieczny, Johan Meyer, and Oana Valentina Truţa are the permanent representatives of the Fund (for updates regarding permanent representatives of the Fund, please see Subsequent Events section).
Grzegorz Konieczny is CEO of FTIML Romania, Executive Vice President FTIML, and the Director of Specialty Strategies for the Templeton Emerging Markets Group. In this capacity, he focuses on Fondul Proprietatea (the largest closed-end investment fund in Romania and one of the largest London listed closed-end funds), additional specialised country and regional strategies, as well as private equity strategies, providing guidance and thought
leadership, coordinating appropriate resources and coverage as well as leveraging the group's expertise to add value across products within the strategies. Prior to joining Franklin Templeton in 1995, Mr. Konieczny was the director of Capital Market Transactions at Bank Gdanski, one of the largest financial institutions in Poland at the time. Mr. Konieczny holds a master's degree in economics and foreign trade from the University of Gdansk (Poland) and an investment advisor license from the Polish Securities and Exchange Commission. Mr. Konieczny speaks Polish, English and Russian.
As at 31 December 2017 Mr Konieczny held no shares issued by the Fund.
Johan Meyer, Co-CEO Romania Franklin Templeton Investment Management Limited UK Bucharest Branch, joined Franklin Templeton Investments in 2004. Prior to his role in Romania, he was Managing Director South Africa, and the Director of Africa Strategy for Templeton Emerging Markets Group. In this capacity, he was responsible for setting the overall strategy for his respective area, providing guidance and thought leadership, coordinating appropriate resources and coverage, and leveraging the group's expertise to add value across products within the strategy. Effective from 1 November 2016 he was appointed Co-CEO of Franklin Templeton Investment Management Limited UK Bucharest Branch and Co- Portfolio Manager of Fondul Proprietatea. Mr. Meyer holds Bachelors of Commerce and Bachelors of Commerce (Honours) degrees both with specialization in economics from the University of Pretoria. He speaks English and Afrikaans.
As at 31 December 2017, Mr Meyer held no shares issued by the Fund.
Oana Valentina Truţa has experience in investment management and portfolio analysis. Ms Truţa earned a bachelor's degree in Finance and Insurance from the Babes Bolyai University in Cluj-Napoca and a master's degree in Quantitative Economics and Finance from the same university. Prior to joining Franklin Templeton Ms Truţa has acted as an investment analyst at Interdealer Capital Invest. She joined the Bucharest office of Franklin Templeton in 2010. As at 31 December 2017, Ms Truţa held no shares issued by the Fund.
Craig Blair is a Director and Conducting Officer for FTIS in Luxembourg, where he has worked since 2004. During this period, Mr Blair held a number of roles within the organisation in the fund administration department. Mr Blair holds an MBA from Manchester Business School is a Member of the Chartered Institute of Management Accountants and holds a Law degree from Leicester University.
As at 31 December 2017, Mr Blair held no shares issued by the Fund.
Denise Voss is a conducting officer and director of FTIS, Franklin Templeton Investments' Luxembourg based management company, managing both UCITS (undertakings for the collective investment of transferable securities) and AIFs. Ms Voss joined Franklin Templeton Investments in 1995 where she served as a general manager of the Luxembourg subsidiary until December 2005. Between 2006 and 2013, she held the role of conducting officer of Franklin Templeton Investments' Luxembourg-domiciled UCITS. Prior to joining Franklin Templeton Investments, Ms Voss worked in the audit division of Coopers & Lybrand in Boston, USA and Luxembourg, for over nine years. Ms Voss holds a Massachusetts Certified Public Accountant license and obtained an undergraduate degree from Tufts University, as well as a master degree in accountancy from Bentley College. She is Chairman of the Association of the Luxembourg Fund Industry ("ALFI") and has been a member of the ALFI board of directors since 2007. Ms. Voss is also past chairman of the European Fund and Asset Management Association (EFAMA) Investor Education working group.
As at 31 December 2017 Ms Voss held no shares issued by the Fund.
Mike Sommer is a conducting officer and the Head of Risk Management of Franklin Templeton International Services S.à r.l., the Luxembourg-based UCITS Management Company and Alternative Investment Fund Manager of Franklin Templeton Investments, and is responsible for the implementation and ongoing execution of the risk management function. Being part of a global organisation he also provides advice to other Franklin Templeton entities with respect to regulatory risk management topics. Prior to his current role he worked within Franklin Templeton's Global Compliance Department which he joined in 2007. Mr. Sommer is an active member of ALFI risk management working groups where he leverages his 16 years of experience in the financial industry including roles in the external audit and banking sectors.
As at 31 December 2017 Mr Sommer held no shares issued by the Fund.
At the date of this report, Grzegorz Maciej Konieczny, Johan Meyer, and Oana Valentina Truţa are the legal representatives of the Investment Manager, each of them having full management powers in this regard.
Effective on 1 November 2016, Mr Johan Meyer was appointed as Co-CEO of FTIML and Co-Portfolio Manager of Fondul Proprietatea. Mr Meyer's focus is on supporting Mr. Grzegorz Maciej Konieczny, CEO of FTIML and PM of Fondul Proprietatea on portfolio side as a co-CEO and co-PM level.
Starting with 1 April 2018, Mr Johan Meyer will be the CEO of FTIMLa. For further details please see Subsequent Events.
The fees due to FTIS in accordance with the 2015 MA, including the Base Fee and the Distribution Fee, are calculated in RON and paid EUR in compliance with the provisions below. The amount calculated in RON is converted into EUR using the official exchange rate for RON to EUR published by National Bank of Romania for the last day of the period invoiced.
Base Fee Rate multiplied by the notional amount, multiplied by the number of calendar days during the applicable Calculation Period divided by 365
where:
Base Fee Rate = 60 basis points per year;
1 basis point = 0.0001; and
Notional amount = the market capitalisation of the Fund, which is defined as:
(a) the number of the Fund's paid shares considered on daily basis, minus
(b) the weighted average over the applicable calculation period of the number of the Fund settled own shares together with the number of the Fund equivalent ordinary shares represented by GDRs, in each case where those shares or GDRs are held by the Fund as treasury shares
(c) then multiplying the resulting number by the weighted average market price of the Fund's shares calculated for the applicable calculation period. The "weighted average market price" is computed based on the daily average market prices of the Fund's shares and corresponding daily volumes, as published by BVB on 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 is an aggregation of the computation for each sub-period.
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 is the rate applied for the prior trading day.
(a) 200 basis points of the total non-dividend distributions (including, without limitation, repurchases of own shares, repurchases of GDRs and returns of share capital) made available up to and including 31 March 2017;
(b) 150 basis points of total non-dividend distributions (including, without limitation, repurchases of own shares, repurchases of GDRs and returns of share capital) made available from 1 April 2017 up to and including 30 September 2017; and
(c) 100 basis points of total non-dividend distributions (including, without limitation, repurchases of own shares, repurchases of GDRs and returns of share capital) made available from 1 October 2017 up to and including 1 April 2018.
Reference is made to distributions being "made available" to clarify that any failure on the part of any shareholder to collect, or to take the necessary steps to facilitate the receipt of, these distributions does not result in any adjustment of the calculation of the Distribution Fee due to the AIFM. The calculation of the Distribution Fee is made when such distributions become available to shareholders (e.g. payment start date). In case of a repurchase of own shares or of GDRs, the calculation of the Distribution Fee is made at the date when the own shares repurchase transactions or GDRs transactions are settled. For GDRs transactions, the Distribution fee is computed taking into account the official exchange rate published by the National Bank of Romania for the date of settlement of GDRs transactions.
(a) The Base Fee is paid by the Fund quarterly, based on the invoices to be issued by the AIFM within twenty (20) business days following the end of the quarter for which payment is to be made.
(b) The Distribution Fee is paid by the Fund quarterly, based on the invoices to be issued by the AIFM within twenty (20) business days following the end of the quarter for which the Distribution Fee was calculated.
(c) The invoices for the Base Fee and the Distribution Fee are submitted to the Depositary Bank.
(d) The AIFM provides to the Board of Nominees quarterly and on an annual basis and upon reasonable request of the Board of Nominees a detailed report regarding the fees collected under the 2015 MA, in the form reasonably required by the Board of Nominees.
(e) The payment of each fee is made within 30 business days of the receipt of the applicable invoice.
The payment of the Base Fee and the Distribution Fee is arranged by the AIFM only after the verification and certification by the Depositary Bank 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.
In order to comply with Articles 21 (2) (e) and (21) (2) (f) of the AIFM Directive (Law 74/2015), details of the Remuneration Policy of the AIFM and amounts attributable to the Fund are available to existing shareholders upon request at the registered office of the AIFM.
The AIFM will maintain at all times the capital requirements and insurance required under AIFM Directive and national legislation.
The AIFM has in place the following insurance:
(a) Professional liability to provide against any failure to duly perform the 2015 MA;
(b) Fidelity bond to provide against any failure to account to the Fund for any money or investments.
FTIS has delegated the role of Investment Manager as well as certain administrative functions to FTIML.
The delegation of the portfolio management allows FTIML, among others, to:
provide legal representation), in accordance with the Constitutive Act, the IPS and the relevant legislation and regulations in force;
The delegation of the administration services allows FTIML, among others, to:
The rights of the Fund's minority shareholders are adequately protected according to the relevant domestic legislation.
The Fund is committed to communicate with its shareholders effectively and actively and ensure that all shareholders have equal access to public information.
According to the provision of the Constitutive Act in force (Annex 4 to this report), each share issued by the Fund which is rightfully owned and paid in by a shareholder carries the following rights: (i) voting right at the GSM, (ii) right to elect and revoke the members of the Board of Nominees as well as to elect and revoke the Sole Director and (iii) right to participate in the distribution of profits.
Currently, the Constitutive Act does not specify any further special conditions on such rights than those specified by the law.
The Romanian legislation imposes various restrictions regarding the unpaid shares and as a result, as long as the Romanian state has unpaid shares, it has no voting rights for those unpaid shares and has no right to receive dividends or return of capital in relation to them.
With respect to the right to receive dividends, the Constitutive Act set out that the Fund's net profit shall be distributed based on the resolution of the GSM, each shareholder being entitled to receive dividends proportionally with the number of paid in shares held in the Fund's share capital. Pursuant to the Companies' Law, the payment of dividends shall be carried out no later than 6 months from the approval of the annual financial statements for the previous year, under penalty of default interest payment.
Other than as presented above, no rights, preference or restrictions are attached to the shares. Pursuant to the Companies' Law, as a rule, the shares issued by a company entitle each holder to equal rights. Such rights mainly refer to the shareholders' involvement in the operations of a company and the resulting benefits and are regulated by the applicable laws. Shareholders must exercise their rights in good faith, without breaching the interest of other shareholders or that of the company. The Fund ensures a fair treatment of investors and, there is no preferential treatment for any investor.
The Fund is committed to encourage shareholders to participate in GSMs, to fully exercise their rights, and to raise questions concerning items debated during such meetings. GSMs enable and encourage dialogue between the shareholders and the Fund and its representatives. The Fund encourages its shareholders to take part in meetings, and those who cannot attend are able to vote in absence by sending the votes to the Fund's headquarters, using the voting bulletin for the votes by correspondence made available by the Fund at the headquarters and/ or on the Fund's website.
Furthermore, the Fund ensures that its shareholders have access to relevant material information, so as to allow them to fully exercise their rights. The Fund has a dedicated section on its website (the GSM Documentation section in the Investor Relations page) that can be easily identified and accessed. This information typically includes: the time and place of meetings; information on how to exercise voting rights, including the proxy process with relevant forms; meeting agendas, as well as detailed documents relating to specific agenda items and draft of shareholders resolutions.
The Investment Manager has established a dedicated investor relations team. This experienced team is responsible for handling relationships with both private and institutional investors locally and abroad.
In conclusion, currently the Fund observes the one paid share, one vote, and one dividend principle. There are no shares conferring the right to more than one vote or preference shares.
Shareholders holding at least 5% of the paid in share capital may ask for calling of a GSM. Such shareholders have also the right to add new items on the agenda of a GSM, provided such proposals are accompanied by a justification or a draft resolution proposed for approval and copies of the identification documents of the shareholders who make the proposals.
Proposals with respect to adding new items on the agenda of such GSM can be submitted at the Fund's headquarters, or by e-mail having attached an extended electronic signature, in compliance with Law no. 455/2001 on digital signature.
Likewise, the shareholders holding at least 5% of the paid in share capital are entitled to propose revised versions of resolutions for the items listed on the agenda or proposed by other shareholders to be added on the agenda of such GSM.
The shareholders may attend in person or may be represented in the GSMs either by their legal representatives or by representatives having a special proxy, based on the special proxy template made available by the Fund. Such proxy template may be obtained from the Fund's headquarters and/ or can be found on the Fund's website, under the respective GSM section item.
The shareholders of the Fund, regardless of the stake of the share capital held, may submit written questions with respect to the items on the agenda of the GSMs. The shareholders may also send such questions by e-mail. The answers will be provided during the GSM based on public information or non-public and non-material information.
Should the questions require elaborate answers, a Q&A (questions and answers) form will be made available on the Fund's website. The disclosure of commercially sensitive information that could result in a loss or competitive disadvantage for the Fund will be avoided when providing the answers, in order to protect the interest of our shareholders.
A shareholder who was absent at a GSM or has voted against a certain resolution and has requested that its vote against the resolution is registered in the minutes of that GSM is entitled to challenge such resolution within 15 days as of its publication in the Official Gazette of Romania, Part IV. Also, claims regarding an absolute nullity of a shareholders resolution may be filed at any time.
Please see section "Key Financial Highlights of the Fund" for more details regarding the total expense ratio of the Fund and section "Financial Statements Analysis" more information regarding the Sole Director remuneration.
The brokerage fees and other costs incurred by investors in acquiring the Fund's shares vary depending on the specific contractual agreements concluded between the investors and the intermediaries.
The share capital of the Fund can be increase with the approval of the EGM, in accordance with the provisions of the Romanian law:
a) by issuing new shares in exchange for cash contributions, based on the offering documentation approved according to legislation in force;
b) by incorporation of reserves, except for the legal reserves and the reserves set-up out of the revaluation of the patrimony, as well as out of the benefits and issuing premiums.
The share capital increase shall be registered at the Trade Register Office, on the basis of the decision made by the Fund's GSM.
The share capital cannot be increased by increasing the nominal value of existing shares or by issuing new shares as long as there are unpaid existing shares in the share capital of the Fund.
The Fund has appointed BRD-Groupe Société Générale SA (the "Depositary Bank"/ the "Depositary") as its depositary and custodian, to hold and transfer the Fund's assets, and to certify the Fund NAV, and the computation of the AIFM fees through a depositary and custody agreement which entered into force on 20 May 2016 for a threeyear term.
The Depositary has the following obligations under the agreement in place:
Settles the transactions with Custody Assets and Non-Custody Assets of the Fund in and from the Fund's accounts, according to the instructions received from the Fund and in accordance with the applicable Central Depositary's regulations;
Collects the interests and other income related to the Custody Assets and exercises the rights conferred by such Custody Assets, in accordance with the proper instructions received from the Fund. The Depositary assists the Fund in recovering the difference of tax on dividends withheld by the issuers (in case of investments abroad or in Romania), according to the tax treaties in force;
Liability in case of safe-keeping of Custody Assets:
Liability in case of safe-keeping of Non-Custody Assets and other duties of the Depositary:
The auditor of the Fund for the year ended 31 December 2017 is Deloitte Audit SRL, registered with the Trade Registry under no. J40/6775/1995, having Sole Registration Code 7756924, member of the Chamber of Financial Auditors of Romania and registered in the Public Registry of Financial Auditors and the duration of the financial audit agreement is for the period starting with 26 October 2017 and 31 August 2020.
FATCA is a United States federal law that requires United States persons, including individuals who live outside the United States, to report their financial accounts held outside of the US, and requires foreign financial institutions to report to the Internal Revenue Service about their US clients.
Romania, like most of the European countries, concluded an intergovernmental agreement to facilitate the implementation of FATCA requirements.
The Fund start implementing FATCA in 2017.
Packaged retail investment and insurance products (PRIIPs) are at the core of the retail investment market. In order to tackle any potential shortcomings, the EU has adopted a regulation on PRIIPs, which obliges those who produce or sell investment products to provide investors with key information documents (KIDs).
The KIDs for Fondul Proprietatea are published on the webpage of the Fund and on the webpage of Franklin Templeton Romania.
Regulation No 596/2014 on market abuse, repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC and Directive 2014/57/EU on criminal sanctions for market abuse (CS MAD) were published in the Official Journal of the European Union on 12 June 2014 and applies as of 3 July 2016.
MAR aims at enhancing market integrity and investor protection.
AIFM updated the internal regulations applicable to the Fund in order to implement MAR.
The Fund, FTIS and FTIML supports gender diversity and promotion of women in management positions.
While there are currently no female members of the Board of Nominees, the FTIS and FTIML have women involved in management of the Fund.
More than 45% of the members with key positions in FTIS and FTIML involved in management of the Fund are women and the overall proportion of women in the structure of FTIML is approximately 47%.
Also there are people involved in management of the Fund from more than 8 different nationalities, being in line with the diversity of the shareholders of the Fund.
The leverage definition under AIFM Directive is wider than the traditional gearing definition applied. In accordance with the Regulation (EU) 231/2013 leverage is any method which increases the Fund's exposure, including the borrowing of cash and the use of derivatives. It is expressed as a percentage of Fund's exposure to its net asset value and is calculated on both a gross and commitment method.
Under the gross method, exposure represents the sum of the Fund's positions (including all holdings like ordinary shares) after deduction of cash balances and cash equivalents, without taking account of any hedging or netting arrangements. Under the commitment method, exposure is calculated without the deduction of cash balances and cash equivalents and after certain hedging and netting positions are offset against each other if applicable.
The Fund may not utilize its short term borrowing facility for investment purposes nor is the Investment Manager using derivatives to hedge any risks as of 31 December 2017. The use of Financial Derivative Instruments is permitted.
The maximum incremental level of leverage which the AIFM is entitled to employ on behalf of the Fund for AIFMD monitoring and reporting purposes is 50% which, considering 100% of long assets held in the portfolio, relates to a ratio of 1.5 (or 150%) for both the gross method and the commitment method. The leverage limits are set by the AIFM and are in line with the maximum leverage levels permitted in the Fund's Constitutive Act.
There was no change to the level of leverage applied for AIFMD monitoring and reporting purposes since 1 January 2017.
Therefore the actual level of leverage recorded under the requirements of AIFMD for 31 December 2017 is 1.00 (or 100.03%) using the "commitment" method and 0.98 (or 97.86%) of the "gross" method. The ratio for the gross method is below 1 given that cash and cash equivalents are deducted as required by the relevant regulation.
FTIS and FTIML adopted operating solutions suitable to facilitate the identification and adequate handling of any situations in which a member of the Board of Nominees or an employee of the FTIS/ FTIML has an actual or potential conflict of interest between the interest of the Fund and his/ her own or on behalf of third parties. FTIS/ FTIML adopt operating solutions suitable for the adequate handling of any issues arising from related parties transactions.
The members of the Board of Nominees and all employees of FTIS/ FTIML shall keep confidential any documents and information acquired in the performance of their duties.
The audited financial statements for the year ended 31 December 2017, prepared in compliance with IFRS, are included in full in Annex 1 to this report.
This section provides an overview on the main elements of the Fund's financial position and performance for the period ended 31 December 2017.
| RON million | 31 December 2017 |
31 December 2016 |
31 December 2015 |
31 December 2017 vs. 31 December 2016 |
|---|---|---|---|---|
| Audited | Audited | Audited | (%) | |
| Cash and current accounts | 19.2 | 5.8 | 0.6 | |
| Deposits with banks | 1,276.7 | 305.3 | 197.8 | |
| Treasury bills | 46.3 | 781.4 | 20.0 | |
| Government bonds | 195.9 | 328.6 | 59.0 | |
| Equity investments | 9,278.2 | 9,992.2 | 11,800.7 | |
| Other assets | 10.7 | 20.8 | 29.6 | |
| Total assets | 10,827.0 | 11,434.1 | 12,107.7 | -5.3% |
| Payables | 15.2 | 27.1 | 18.7 | |
| Other liabilities | 21.6 | 21.0 | 35.9 | |
| Total liabilities | 36.8 | 48.1 | 54.6 | -23.5% |
| Total equity | 10,790.2 | 11,386.0 | 12,053.1 | -5.2% |
| Total liabilities and equity | 10,827.0 | 11,434.1 | 12,107.7 | -5.3% |
The short term assets 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 overall increase in liquidity assets in 2017 is mainly due to the cash inflows from the disposal of portfolio companies (mainly in the subsidiaries of Electrica and part of OMV Petrom SA) in amount of RON 1,231.3 million and the dividends collected from portfolio companies during the period in amount of RON 737.6 million, net of tax. These were netted off mainly by the cash outflows in respect of the return of capital to shareholders (RON 910.5 million) and for funding the own shares acquired within the seven, eight and nine buy-back programmes (RON 819.2 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. The other equity investments are classified as available for sale financial assets.
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.
The equity investments classified as available for sale are measured at fair value, with the changes in fair value recognised in other comprehensive income (equity). On derecognition of an available for sale equity investment, the cumulative gain or loss previously recognised in other comprehensive income is transferred to profit or loss.
Impairment losses on available for sale equity investments are recognised in profit or loss and are not reversed through profit or loss. If, in a subsequent period, the fair value of an impaired available for sale equity investment increases, it is recognised in other comprehensive income (equity).
The Fund is implementing IFRS 9 'Financial instruments', which will replace IAS 39 "Financial Instruments: Recognition and Measurement" starting with 1 January 2018. Additional disclosures and expected impact compared to previously recognized amounts are included in the Fund's annual IFRS financial statements for the year ended 31 December 2017 and further analysis will be provided in subsequent reports for 2018.
As at 31 December 2017 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).
Equity investments that do not have a quoted price in an active market and whose fair value cannot be reliably estimated 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.
The net decrease of equity investments of RON 714.0 million for the year ended 31 December 2017 is mainly due to the disposal of certain portfolio companies (please see section Key portfolio Developments during the period with total impact RON 1,247.3 million), which was offset by the net increase in the value of unlisted equity investment following the update valuations (please see section Analysis of the portfolio of the Fund - RON 170.5 million and by the increase in value of equity investments, mainly OMV Petrom SA (increase in share price of 9.6%).
| RON million | 2017 | 2016 | 2015 |
|---|---|---|---|
| Audited | Audited | Audited | |
| Gross dividend income | 740.4 | 353.1 | 569.3 |
| Net realised gain / (loss) from disposal of non-current assets held for sale | 330.6 | (127.5) | - |
| Net unrealised gain/ (loss) from equity investments at fair value through profit or loss |
222.8 | (377.8) | (1,244.0) |
| Net gain on disposal of equity investments classified as available for sale | 38.5 | 926.0 | 344.8 |
| Reversal of impairment losses on receivables, net | 36.4 | 17.9 | 17.6 |
| Interest income | 11.9 | 7.9 | 3.9 |
| Net realised gain / (loss) from equity investments at fair value through profit or loss |
(1.4) | - | 3.2 |
| Impairment losses on equity investments classified as available for sale | (8.0) | (122.4) | (90.5) |
| Other income/ (expenses), net* | 0.9 | (0.5) | 1.8 |
| Net operating income/ (loss) | 1,372.1 | 676.7 | (393.9) |
| Administration fees recognised in profit and loss | (63.0) | (70.6) | (68.3) |
| Other operating expenses | (34.5) | (61.5) | (56.8) |
| Operating expenses | (97.5) | (132.1) | (125.1) |
| Finance costs | (0.2) | (0.3) | (2.5) |
| Profit/ (Loss) before income tax | 1,274.4 | 544.3 | (521.5) |
| Income tax expense | 15.5 | (97.3) | (43.6) |
| Profit/ (Loss) for the year | 1,289.9 | 447.0 | (565.1) |
| Other comprehensive income | (85.4) | 100.7 | 212.4 |
| Total comprehensive income for the year | 1,204.5 | 547.7 | (352.7) |
* Other items of income/ (expense), net included mainly the net 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 year ended 31 December 2017 comprised the dividend income earned from the Fund's portfolio companies, mainly from Hidroelectrica SA (RON 206.6 million), OMV Petrom SA (RON 106.8 million), CN Aeroporturi Bucuresti SA (RON 43.0 million), Electrica Furnizare SA (RON 34.8 million), Electrica Distributie Transilvania Nord SA (RON 22.1 million), Electrica Distributie Muntenia Nord SA (RON 19.3 million) and Electrica Distributie Transilvania Sud SA (RON 21.7 million).
The increase of gross dividend income compared with 2016 relates to the special dividends distributed in September – December 2017 by state controlled entities, namely Hidroelectrica SA and CN Aeroporturi Bucuresti SA, in amount of RON 130.6 million, and RON 40 million respectively.
The net realised gain from disposal of non-current assets held for sale for the year end 31 December 2017 is represented by:
The net unrealised gain from equity investments at fair value through profit or loss for 2017 of RON 222.8 million was mainly generated by OMV Petrom SA, as a result of the positive evolution of the share price for this company during the year end 31 December 2017 (RON 176.5 million, share price increase of 9.6%).
The net gain on disposal of equity investments classified as available for sale represents the difference between the proceeds from disposals and the carrying amount of the equity investments as at disposal date, plus the net unrealised gain related to these investments transferred from other comprehensive income to profit or loss upon their derecognition.
During 2017, the Fund sold its entire holdings in Oil Terminal SA, Banca Transilvania SA and Cetatea SA and part of its holding in BRD Groupe Societe Generale SA. The net gain on disposal of these equity investments classified as available for sale was RON 38.5 million, representing the difference between the gross proceeds from disposals (RON 74.9 million) and the carrying values of the equity investments as at disposal date (RON 74.4 million), plus the net unrealised gain related to these investments disposed, recycled from equity (other comprehensive income) to profit or loss upon their derecognition (RON 38.0 million).
The reversal of impairment losses for 2017 relates mainly to the receivable for the unpaid share capital amounts from the Romanian State represented by 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 (registered on 24 March 2017) and from RON 0.57 to RON 0.52 (registered on 16 June 2017), the receivable for the unpaid amounts and the related impairment adjustment decreased accordingly, generating a positive impact in the profit or loss account of RON 36.4 million.
Interest income is related to the deposits held with banks and to the short-term government securities.
In performing the impairment test for the available for sale equity investments, the Fund considers all relevant factors, such as: significant or prolonged decline in fair value below cost, market and industry conditions, to the extent that they influence the recoverable amount of the equity investment, financial conditions and near-term prospects of the issuer, any specific adverse events that may influence the issuer's operations and recent losses of the issuer. Impairment losses on equity investments classified as available for sale caption for year ended 31 December 2017 relates to the holding in Posta Romana (RON 8.0 million).
The total administration fees expenses in 2017 included the base fee of RON 46.8 million (in 2016: RON 46.8 million) and the distribution fee for return of capital of RON 16.2 million (in 2016: RON 23.8 million out of which RON 13.5 million represented distribution fee related to the buy-backs). Starting 2017, the distribution fee related to buy-backs is recognised directly in equity together with the underlying shares (RON 15.1 million). This change was not applied retrospectively as the effect on the comparative amounts is not significant. The higher distribution fee in 2017 compared to 2016 was due to the fees invoiced for the higher distributions made available to the Fund's shareholders in 2017, respectively for the special return of capital performed in March 2017 of RON 0.05 per share for which the payment started on 27 March 2017.
The other comprehensive income mainly comprised the changes in fair value of equity investments classified as available for sale, net of related deferred tax, where applicable. As at 31 December 2017, the change in fair value of these equity investments is of RON 315.8 million and the decrease in the fair value reserve due to the disposal of the equity investments available for sale during the year, is of RON 383.1 million, mainly generated following the disposal of Electrica subsidiaries.
The main categories of other operating expenses are detailed in the table below:
| RON million | 2017 | 2016 | 2015 |
|---|---|---|---|
| Audited | Audited | Audited | |
| Transaction costs | 8.4 | 33.2 | 8.9 |
| FSA monthly fees | 10.2 | 10.7 | 11.5 |
| Depositary fees | 0.7 | 0.8 | 1.3 |
| Secondary listing expenses | - | - | 16.6 |
| Other expenses | 15.2 | 16.8 | 18.5 |
| Other operating expenses | 34.5 | 61.5 | 56.8 |
Intermediaries and other fees related to disposal of portfolio holdings were lower in 2017 as compared to 2016, mostly as a result of the lower value of disposal transactions carried out by the Fund during 2017.
Other expenses mainly comprise litigation assistance and legal advisory expenses, Board of Nominees remuneration and related taxes, public relations and investor' relations expenses, internal and external audit expenses and GSM organisation related expenses.
| RON million | 2017 Audited |
2016 Audited |
2015 Audited |
|---|---|---|---|
| Cash flows from operating activities | |||
| Proceeds from disposal of equity investments | 1,231.9 | 2,116.7 | 465.8 |
| Disposals/ maturity of treasury bills and bonds | 1,505.7 | 611.0 | 529.6 |
| Dividends received (net of withholding tax) | 737.6 | 351.3 | 567.5 |
| Interest received | 13.6 | 4.6 | 5.5 |
| Amounts collected from the depository Bank of the Fund's GDRs | 7.1 | 3.7 | - |
| Maturity/ (Creation) of bank deposits with original maturities of more than three months |
- | - | 25.0 |
| Acquisitions of treasury bills and bonds | (501.1) | (1,645.7) | (416.1) |
| Suppliers and other taxes and fees paid | (130.4) | (127.1) | (126.9) |
| Subscriptions to share capital increase of portfolio companies | (2.7) | (4.3) | (2.6) |
| Other receipts/ (payments), net | (1.7) | 0.2 | (0.4) |
| Net cash flows from operating activities | 2,860.0 | 1,310.4 | 1,047.4 |
| Cash flows from financing activities | |||
| Short term bank loans drawings | 237.0 | - | 450.0 |
| Acquisition of treasury shares | (819.2) | (674.2) | (392.3) |
| Payments to shareholders related to the return of capital | (910.5) | (512.5) | (522.8) |
| Payment in relation with lost litigations | - | (10.7) | - |
| Payment of interest and fees related to the short term bank loans | (0.2) | (0.3) | (2.5) |
| Dividends paid (including related taxes) | - | (0.1) | (3.3) |
| Repayment of short term bank loans | (237.0) | - | (450.0) |
| Payments to Central Depositary in relation with 2015 return of capital to shareholders |
- | - | (19.2) |
| Net cash flows used in financing activities | (1,729.9) | (1,197.8) | (940.1) |
| Net increase in cash and cash equivalents | 1,130.1 | 112.6 | 107.3 |
| Cash and cash equivalents at the beginning of the year | 311.1 | 198.5 | 91.2 |
| Cash and cash equivalents at the end of the year | 1,441.2 | 311.1 | 198.5 |
| 31 December 2017 |
31 December 2016 |
31 December 2015 |
|
|---|---|---|---|
| Cash | 19.2 | 5.8 | 0.6 |
| Bank deposits with original maturities of less than three months | 1,275.8 | 305.3 | 197.9 |
| Treasury bills and government bonds with original maturities of less than three months |
146.2 | - | - |
| 1,441.2 | 311.1 | 198.5 |
During 2017 the proceeds from disposal of equity investments were related mainly to the disposal of the shares in several portfolio companies: entire holdings in Oil Terminal SA, Primcom SA, Cetatea SA, Banca Transilvania SA and entire holdings in the subsidiaries of Electrica and part of its holdings in BRD Societe Generale and OMV Petrom SA.
Payments to shareholders related to the return of capital in 2017, 2016 and 2015 included the payments related to the return of the RON 0.05 per share to the shareholders following the decrease of the Fund's share capital by reducing the nominal value of shares from RON 0.95 per share to RON 0.90 per share in 2015, from RON 0.90 per share to RON 0.85 per share in 2016 and from RON 0.62 to RON 0.57 in March 2017 and from RON 0.57 to RON 0.52 in June 2017.
Short term bank loans drawings in 2017 is represented by the amount of RON 237 million drawn on 27 June from the credit facility contracted from BRD-Groupe Societé Generale SA which was entirely reimbursed on 25 July 2017 (repayment of short term bank loans) for funding the June 2017 distribution to shareholders. Payment of interest and fees related to the short term bank loans comprise the interest expense on the amount drawn from this credit facility.
The transactions with the related parties were performed in the normal course of business of the Fund.
The Fund has the following subsidiaries, all of which are incorporated in Romania:
| Subsidiary | Ownership interest 31 December 2017 |
Ownership interest 31 December 2016 |
|---|---|---|
| Alcom SA | 72% | 72% |
| Comsig SA | 70% | 70% |
| Zirom SA | 100% | 100% |
In April 2017, the shareholders of Comsig SA approved the dissolution of the company. As at the reporting date Comsig SA is in liquidation process.
In August 2017, the Fund participated in the cash share capital increase of Zirom SA subscribing 272,000 new shares respectively, at the nominal value of RON 10 per share (in total of RON 2,720,000).
In September 2017, the Fund sold its entire holding in Primcom SA.
The Fund has the following associates, all of them incorporated in Romania:
| Associate | Ownership interest 31 December 2017 |
Ownership interest 31 December 2016 |
|---|---|---|
| Societatea Nationala a Sarii SA | 49% | 49% |
| Plafar SA | 49% | 49% |
During 2017, the Fund recorded and collected from Societatea Nationala a Sarii SA a dividend of RON 13,760,169.
The Fund did not carry out any transactions with its associates during 2017.
FTIS is both the alternative investment fund manager and sole director of the Fund. FTIS delegated the role of Investment Manager as well as certain administrative functions to FTIML.
The transactions carried between the Fund and FTIS were the following:
| RON million | 2017 | 2016 |
|---|---|---|
| Administration fees | 78.1 | 58.0 |
During 2017, the Fund recorded the following expenses payable to FTIS: administration fees RON 78.1 million, out of which base fees in amount of RON 46.8 million and the distribution fees in amount of RON 31.3 million
The transactions carried between the Fund and FTIML were the following:
| RON million | 2017 | 2016 |
|---|---|---|
| Administration fees | - | 12.6 |
| Rental and Operating Expenses | 0.1 | 0.1 |
| Total | 0.1 | 12.7 |
During 2017, the Fund also recorded RON 1.5 million representing expenses incurred by the FTIML on its behalf (2016: RON 1.5 million). 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 agreements and was subject to Board of Nominees' approval.
During 2016, the Fund recorded the following expenses payable to FTIML: Administration fees RON 12.6 million, out of which base fees in amount of RON 11.8 million and the distribution fees in amount of RON 0.8 million, rent expense RON 66.0 thousand and related operating costs RON 23.8 thousand.
The outstanding liabilities owed by the Fund were as follows:
| RON million | 31 December 2017 | 31 December 2016 |
|---|---|---|
| FTIS | 11.7 | 12.9 |
| FTIML | 0.1 | 0.2 |
| Total | 11.8 | 13.1 |
On 15 December 2017 the Fund submitted an application for endorsement of a tender offer to accelerate the ninth buy-back programme to the FSA for approval. Under this tender offer, the Fund intends to repurchase up to 1,200,000,000 shares from its shareholders, both in the form of shares and GDRs.
As such, the daily execution of the ninth buy-back programme, with respect to the shares on the Bucharest Stock Exchange and GDRs on the London Stock Exchange 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 is from 18 January 2018 until 23 February 2018, and the purchase price is RON 0.9350 per share and the USD equivalent of RON 46.75 per GDR.
With effect from 1 April 2018 Johan Meyer will become sole lead portfolio manager for the Fund, continuing his role as legal representative of Franklin Templeton Investment Management Ltd. United Kingdom Bucharest Branch and permanent representative for the Fund.
Accordingly, from 1 April 2018 the management of the Fund will have the following structure:
The main resolutions of the Fund's shareholders at the 14 February 2018 GSM were the following:
During 14 February 2018 GSM, the shareholders approved the new Management Agreement that will enter in force on 1 April 2018, containing the following key commercial terms:
| 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 capitalization of the Fund |
| Distribution Fee for all cash distributions (including | | 1.00% applied to the value of the distributions |
| buy-backs) | ||
| 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 new Management Agreement was executed on 14 February 2018.
During 14 February 2018 GSM shareholders decided to appoint three members in the Board of Nominees of Fondul Proprietatea following the expiration of three mandates, as follows:
The mandates of the new members are for a period of three (3) years onwards.
Franklin Templeton International Services S.à r.l acting in the capacity of Sole Director of Fondul Proprietatea
Oana Truta Catalin Cadaru Permanent Representative Financial Reporting Manager
Prepared by
14 February 2018
Prepared in accordance with the International Financial Reporting Standards as adopted by the European Union ("IFRS") 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)
| Independent Auditor's Report. | 77 |
|---|---|
| Statement of Comprehensive Income | 82 |
| Statement of Financial Position | 83 |
| Statement of Changes in Shareholders' Equity. | 84 |
| Statement of Cash Flows | 86 |
| Notes to the Financial Statements | 87 |
| The financial statements as at December 31, 2017 are identified as follows: | |
|---|---|
| Total Equity | 10,790,244,153 RON |
| Net profit for the financial year | 1.289.896.039 RON |
| Key audit matter | How our audit addressed the matter |
|---|---|
| Valuation of equity investments | |
| Refer to note 16 to the financial statements. The Fund's investment in equity investments represents 86% of the total assets of the Fund. This was a key area of focus In our audit due to the complexity involved in valuing some of these investments, the significance of the judgments and estimates included in the valuation, as well as the reflection of the changes in fair value in the financial statements. The determination of fair value for the Level 3 equity investments, representing 74% of the Fund's total equity Investments, Involves significant judgments and a high degree of estimates made by the independent valuators appointed by the Fund. These investments represent participations held by the Fund in unlisted Romanian companies, with a significant part of them being state owned companies. The valuation of a significant part of the unlisted equity investments has been performed as of 30 September 2017, by independent valuators appointed by the Fund. However this is not regarded as a delegation of responsibility for the valuations, ultimately responsible for the valuation is the Sole Director (referred here as "management") of the Fund. As required by IFRS, in the situation where a decrease in equity investments classified as Available for Sale ("AFS") occurs, management is required to make an assessment regarding whether the valuation decrease is a temporary one or is an impairment in nature. Depending on this assessment, the change in fair value of the equity Investments is either reflected in other comprehensive Income or in profit or loss. Accordingly, valuation and accounting of equity investments is considered to be a key audit matter. |
We have assessed the key controls over the valuation process of the Fund's equity Investments. Our evaluation of the design. implementation and operating effectiveness of the controls provided a basis for us to continue with the planned nature, timing and extent of our detailed audit procedures. For the material listed equity investments, we have assessed the frequency of the trading in order to identify illiquid equity securities and we have assessed the accuracy of the closing share market price. For a sample of unquoted equity investments with significant valuation inputs, we involved our own Internal valuation specialists to critically assess the valuation methodology, assumptions and Inputs used by the external valuators. The results of our Independent analyses are consistent with the ones included in the valuation reports. We have also assessed the Fund management's analyses for the period subsequent to the date of the valuation reports (i.e. from 30 September 2017 to 31 December 2017), in order to identify significant events which may have a significant impact on the fair value of the equity investments. We have also assessed the accuracy of the changes in fair value that have been reflected in the financial statements. For a sample of AFS equity investments, we have analysed where a decrease in fair value occurred and we have assessed whether this has been properly accounted for In accordance with the IFRS requirements and the accounting policies of the Fund. We have also considered whether the financial statements appropriately reflect all material disclosures in relation to equity Investments. We assessed the presentation of the fair value hierarchy policy and disclosures regarding significant unobservable inputs against disclosures of IFRS 13 Fair Value Measurement. |
| Note | Year ended 31 December 2017 |
Year ended 31 December 2016 |
|
|---|---|---|---|
| Gross dividend income | 6 | 740,360,617 | 353,070,538 |
| Realised gain/ (loss) from disposal of non-current assets held for sale |
9 | 330,594,143 | (127,542,995) |
| Net gain / (loss) from equity investments at fair value through profit or loss |
7 | 221,324,058 | (377,839,664) |
| Gain on disposal of equity investments classified as available for sale, net |
8 | 38,527,851 | 925,976,144 |
| Reversal of impairment losses on receivables, net | 19(a) | 36,378,838 | 17,917,700 |
| Interest income | 11,919,865 | 7,941,346 | |
| Net foreign exchange gain | 570,507 | 871,278 | |
| Impairment losses on equity investments classified as available for sale |
16 | (8,000,000) | (122,383,338) |
| Other income / (expenses), net | 376,178 | (1,344,102) | |
| Net operating income | 1,372,052,057 | 676,666,907 | |
| Operating expenses | 10 | (97,492,044) | (132,115,263) |
| Finance costs | 11 | (152,997) | (323,438) |
| Profit before income tax | 1,274,407,016 | 544,228,206 | |
| Income tax / (expense) | 12 | 15,489,023 | (97,258,350) |
| Profit for the year | 1,289,896,039 | 446,969,856 | |
| Other comprehensive income | |||
| Net change in fair value of available for sale equity investments |
16 | 315,822,981 | 987,353,576 |
| Deferred tax on other comprehensive income | 17 | (18,059,165) | 95,361,591 |
| Decrease in fair value reserve following the disposal of available for sale equity investments |
(383,125,871) | (981,988,443) | |
| Total other comprehensive income | (85,362,055) | 100,726,724 | |
| Total comprehensive income for the period | 1,204,533,984 | 547,696,580 | |
| Basic and diluted earnings per share | 13 | 0.1434 | 0.0440 |
The annual financial statements were authorised for issue on 14 February 2018 by:
Franklin Templeton International Services S.à r.l. acting in the capacity of Sole Director of Fondul Proprietatea SA
| Prepared by | |
|---|---|
| Oana Truta | Catalin Cadaru |
| Permanent Representative | Financial Reporting Manager |
| Note | 31 December 2017 | 31 December 2016 | |
|---|---|---|---|
| Assets | |||
| Cash and current accounts | 14 | 19,173,567 | 5,781,621 |
| Deposits with banks | 14 | 1,276,669,452 | 305,337,134 |
| Treasury bills | 15 | 46,277,947 | 781,445,213 |
| Government bonds | 15 | 195,923,820 | 328,638,303 |
| Equity investments | 16 | 9,278,201,345 | 9,992,183,244 |
| Other assets | 10,710,812 | 20,728,167 | |
| Total assets | 10,826,956,943 | 11,434,113,682 | |
| Liabilities | |||
| Payable to shareholders | 18 (a) | 20,705,311 | 20,208,049 |
| Other liabilities and provisions | 18 (b) | 16,007,479 | 27,953,985 |
| Total liabilities | 36,712,790 | 48,162,034 | |
| Equity | |||
| Share capital | 19 (a) | 4,664,852,363 | 9,168,314,117 |
| Other reserves related to the unpaid share capital |
19 (a) | 189,182,422 | - |
| Fair value reserve on available for sale | 19 (b) | 4,248,175,069 | 4,333,537,124 |
| financial assets, net of deferred tax | |||
| Other reserves | 19 (c) | 254,954,179 | 585,468,652 |
| Treasury shares | 19 (d) | (218,255,507) | (654,145,163) |
| Retained earnings | 19 (f),(g) | 1,651,335,627 | (2,047,223,082) |
| Total equity | 10,790,244,153 | 11,385,951,648 | |
| Total liabilities and equity | 10,826,956,943 | 11,434,113,682 |
(all amounts are in RON unless otherwise stated)
| Sh ita l are ca p |
Ot her re ser ves rel d t he id ate o t un pa ita sha l re cap (se 19 ) e N ote |
Fa ir v alu e r ese rve ail ab le f on av or sal e f ina nci al of ets et ass , n def ed tax err |
Ot her re ser ves |
Tr sh eas ury are s |
tai rni Re ned ea ng s |
To tal rib ble th att uta to e ity of ho lde equ rs the Fu nd |
|
|---|---|---|---|---|---|---|---|
| Ba lan 1 J 20 17 at ce as an ua ry |
9, 168 31 4, 117 , |
- | 4, 333 537 124 , , |
585 468 652 , , |
( 654 145 163 ) , , |
( 2, 047 223 082 ) , , |
11, 38 5, 95 1, 648 |
| Co reh ive in e f the rio d mp ens com or pe fit for th Pro e y ear |
- | - | - | - | - | 1, 28 9, 896 039 , |
1, 289 896 039 , , |
| Ot nsi inc he ehe r c om pr ve om e Ne t ch e in fa ir v alu f av aila ble fo ale uit ang e o r s eq y inv est nts me |
- | - | 31 5, 822 98 1 , |
- | - | - | 31 5, 822 98 1 , |
| De in fa ir v alu fo llo win the di sal of cre ase e r ese rve g spo ilab le f sal ity in tm ent ava or e e qu ves s |
- | - | ( 383 125 87 1) , , |
- | - | - | ( 383 125 87 1) , , |
| fer red her reh ive in De tax ot on co mp ens com e |
- | - | ( ) 18, 059 165 , |
- | - | - | ( 18, 059 165 ) , |
| Co of th ula ted nti los ver age e c um ac cou ng ses |
( 2, 317 03 8, 572 ) , |
- | - | ( 156 118 900 ) , , |
- | 2, 47 3, 157 472 , |
- |
| ive in To tal ot her reh co mp ens com e |
( 2, 317 038 572 ) , , |
- | ( 85, 362 055 ) , |
( 156 118 900 ) , , |
- | 2, 473 157 472 , , |
( 85, 36 2, 055 ) |
| To tal reh ive in e f the rio d co mp ens com or pe |
( 2, 317 038 572 ) , , |
- | ( 85, 362 055 ) , |
( 156 118 900 ) , , |
- | 3, 763 053 51 1 , , |
1, 204 533 984 , , |
| Tr tio wi th rde d d ire ctl in ity an sac ns ow ner s, r eco y equ (se ) e N 19 ote |
|||||||
| of th ina l v alu f th har De cre ase e n om e o e s es |
( 1, 007 40 8, 074 ) , |
- | - | - | 46 980 596 , , |
- | ( 960 42 7, 47 8) , |
| nsf o l l re Tra er t ega sev es |
- | - | - | 64 494 802 , , |
- | ( 64 494 802 ) , , |
- |
| isit ion of sha Ac tre qu asu ry res |
- | - | - | - | ( 830 41 713 ) 7, , |
- | ( 830 41 7, 713 ) , |
| llat ion of sha Ca tre nce asu ry res |
( 989 832 686 ) , , |
- | - | ( 24 1, 474 222 ) , |
1, 21 9, 326 773 , |
- | ( 11, 980 135 ) , |
| Di stri bu tio for wh ich th f li mi ion red tatu te o tat ns e s oc cur |
- | - | - | 2, 583 847 , |
- | - | 2, 583 847 , |
| To tal tio wi th rde d d ire ctl in tr an sac ns ow ner s r eco y ity equ |
( 1, 997 24 0, 760 ) , |
- | - | ( 174 39 5, 573 ) , |
435 889 656 , , |
( 64, 494 802 ) , |
( 1, 800 24 1, 479 ) , |
| ion ad jus lat ed the id sha ital Pre tat tm ent to sen re un pa re cap (se ) e N 19 ote |
( 189 182 422 ) , , |
189 182 422 , , |
- | - | - | - | - |
| 31 r 2 017 Ba lan at De be ce as cem |
4, 664 852 363 , , |
189 182 422 , , |
4, 248 175 069 , , |
254 954 179 , , |
( 218 255 507 ) , , |
1, 65 1, 33 5, 627 |
10, 790 244 153 , , |
(all amounts are in RON unless otherwise stated)
| Sh ita l ar e c ap |
Fa ir lue va re ser ve ail ab le for le on av sa fin cia l a ts, t an sse ne of de fer red ta x |
Ot he r r ese rv es |
Tr sh ea su ry ar es |
Re tai d e nin ne ar gs |
T l a ibu tab le ota ttr the uit to eq y ho lde of the Fu nd rs |
|
|---|---|---|---|---|---|---|
| 1 J 20 16 Ba lan at ce as an ua ry |
10 07 4, 08 0, 74 6 , |
4, 23 2, 81 0, 40 0 |
52 7, 39 7, 88 6 |
( 5) 30 8, 03 9, 34 |
( 2) 2, 47 3, 15 7, 47 |
12 05 3, 09 2, 21 5 , |
| Co reh siv e i e f the rio d mp en nc om or pe Pro fit for th e y ear |
- | - | - | - | 44 6, 96 9, 85 6 |
44 6, 96 9, 85 6 |
| Ot he eh siv e i r c om pr en nc om e |
||||||
| ha in fai alu f a ila b le for le ity Ne t c ng e r v e o va sa equ inv est nts me |
- | 98 7, 35 3, 57 6 |
- | - | - | 98 35 3, 6 7, 57 |
| in fa ir v alu fo llo ing th d isp l o f a ila b le for De cre ase e e osa va w |
||||||
| le ity in stm ts sa equ ve en |
- | ( ) 98 1, 98 8, 44 3 |
- | - | - | ( 98 1, 98 8, 44 3) |
| De fer d t he he ive in ot re ax on r c om pre ns co me |
- | 95 36 1, 59 1 , |
- | - | - | 95 36 1, 59 1 , |
| To tal he eh siv e i ot r c om pr en nc om e |
- | 10 0, 72 6, 72 4 |
- | - | - | 10 0, 72 6, 72 4 |
| To tal reh siv e i e f the rio d co mp en nc om or pe |
- | 10 0, 72 6, 72 4 |
- | - | 44 6, 96 9, 85 6 |
54 69 6, 58 0 7, |
| Tr tio ith rd ed di tly in uit (se an sac ns w ow ne rs, re co rec eq y e 19) No te |
||||||
| De f th ina l v alu f th ha cre ase o e n om e o e s res |
( 54 8, 29 2, 54 0 ) |
- | - | 13 21 5, 57 9 , |
- | ( 53 5, 07 6, 96 1) |
| fer le l re Tr to an s ga sev es |
- | - | 22 34 8, 49 3 , |
( 22 34 8, 49 3 ) , |
- | |
| is itio f tr ha Ac qu n o eas ury s res |
- | - | - | ( 68 1, 07 3, 21 3 ) |
- | ( 68 1, 07 3, 21 3) |
| Ca lla tio f tr ha nc e n o eas ury s res |
( 35 7, 47 4, 08 9 ) |
- | 35 72 2, 27 3 , |
32 1, 75 1, 81 6 |
- | - |
| Di ide nd for hic h t he f li mi ion d st atu te tat rre v s w o oc cu |
- | - | - | - | 1, 31 3, 02 7 |
1, 31 3, 02 7 |
| To tal tio ith de d d ire ctl in tr an sac ns w ow ne rs rec or y |
||||||
| uit eq y |
( 90 5, 76 6, 62 9) |
- | 58 07 0, 76 6 , |
( 34 6, 10 5, 81 8) |
( 21 03 5, 46 6) , |
( 1, 21 4, 83 7, 14 7) |
| Ba lan 31 D mb 20 16 at ce as ece er |
9, 16 8, 31 4, 11 7 |
4, 33 3, 53 7, 12 4 |
58 5, 46 8, 65 2 |
( 65 4, 14 5, 16 3) |
( 2, 04 7, 22 3, 08 2) |
11 38 5, 95 1, 64 8 , |
(all amounts are in RON unless otherwise stated)
| Year ended | Year ended | |
|---|---|---|
| Cash flows from operating activities | 31 December 2017 | 31 December 2016 |
| Disposal/ maturity of treasury bills and bonds | 1,505,745,830 | 610,996,894 |
| Dividends received (net of withholding tax) | 737,600,467 | 351,347,029 |
| Proceeds from disposal of equity investments | 1,231,878,640 | 2,116,737,768 |
| Interest received | 13,556,969 | 4,625,646 |
| Amounts collected from the depository Bank of the Fund's GDRs | 7,088,990 | 3,745,192 |
| Acquisition of treasury bills and bonds | (501,089,955) | (1,645,703,304) |
| Suppliers and other taxes and fees paid | (130,374,830) | (127,069,610) |
| Subscriptions to share capital increase of portfolio companies | (2,720,000) | (4,303,730) |
| Other (payments) / receipts, net | (1,662,615) | 87,522 |
| Net cash flows from operating activities | 2,860,023,496 | 1,310,463,407 |
| Cash flows from financing activities | ||
| Short term bank loans drawings | 237,000,000 | - |
| Payments to shareholders related to the return of capital | (910,534,840) | (512,486,449) |
| Acquisition cost of treasury shares | (819,215,106) | (674,226,861) |
| Repayment of short term bank loans | (237,000,000) | - |
| Payment of interest and fees related to the short term bank loans | (152,997) | (323,438) |
| Dividends paid (including related taxes) | (37,825) | (47,297) |
| Payment in relation with lost litigations | - | (10,741,322) |
| Net cash flows used in financing activities | (1,729,940,768) | (1,197,825,367) |
| Net increase in cash and cash equivalents | 1,130,082,728 | 112,638,040 |
| Cash and cash equivalents at the beginning of the period | 311,105,488 | 198,467,448 |
| Cash and cash equivalents at the end of the period as per Statement of Cash Flows |
1,441,188,216 | 311,105,488 |
| 31 December 2017 | 31 December 2016 | |
|---|---|---|
| Cash and current accounts (see Note 14 ) | 19,173,567 | 5,781,621 |
| Bank deposits with original maturities of less than three months (see Note 14 ) |
1,275,849,317 | 305,323,867 |
| Treasury bills and government bonds with original maturities of less than three months |
146,165,332 | - |
| 1,441,188,216 | 311,105,488 | |
| Interest accrued on bank deposits (see Note 14) | 820,135 | 13,267 |
| Fair value changes related to the Government securities in balance | 327,398 | (6,854,904) |
| Treasury bills and government bonds with original maturities of more | ||
| than three months and less than one year | 95,709,037 | 1,116,938,420 |
| Total cash and current accounts, deposits with banks, Treasury bills and government bonds as per Statement of Financial |
1,538,044,786 | 1,421,202,271 |
| Position |
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, based on the Management Agreement executed in 2015 in order to comply with the AIFM Directive. FTIS mandate commenced on 1 April 2016. 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 financial statements are the annual statutory financial statements of Fondul Proprietatea for the year ended 31 December 2017 prepared in accordance with the International Financial Reporting Standards as adopted by the European Union and applying the FSA Norm no. 39/ 2015.
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 year ended 31 December 2017 and continues to meet them.
These annual 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 a historical cost or amortised cost basis for the rest of the items included in the financial statements.
These annual 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.
Transactions in foreign currency are translated into the functional currency of the Fund at the exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currency at the reporting date are translated into the functional currency at the exchange rate at that date. Non-monetary assets and liabilities denominated in foreign currency that are measured at fair value are translated into the functional currency at the exchange rate at the date of the transaction and not subsequently remeasured.
The exchange rates of the main foreign currencies, published by the National Bank of Romania at 31 December 2017 were as follows: 4.6597 RON/EUR, 3.8915 RON/USD and 5.2530 RON/GBP (31 December 2016: 4.5411 RON/EUR, 4.3033 RON/USD and 5.2961 RON/GBP).
The preparation of the annual 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 financial statements, are included in the following notes:
The accounting policies applied in these annual financial statements have been applied consistently to all years presented in these annual financial statements.
Subsidiaries are entities controlled by the Fund. The Fund controls an investee when the Fund is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.
Associates are those entities in which the Fund has significant influence over the financial and operating policies, but not control or joint control. The existence of significant influence is assessed, in each reporting year, by analysing the ownership structure of the companies in which the Fund holds 20% or more of the voting power of the investee, their articles of incorporation and the Fund's power to participate in the financial and operating policy decisions of the investee.
However, the Fund does not exercise significant influence in a number of companies in which it holds between 20% and 50% of the voting power, where the Fund's rights as minority shareholder are protective in nature, and not participative and where the major shareholder, or a group of shareholders holding majority ownership of the investee, operate without regard to the views of the Fund.
Also, in situations where the Fund holds less than 20% of the voting power of an investee, but it is a significant shareholder and demonstrates that it has significant influence through Board representation and participates in the policy making decisions, the investee is considered an associate.
As at 31 December 2017, there were three portfolio companies which met the criteria for classification as subsidiaries (31 December 2016: four portfolio companies classified as subsidiaries) and two portfolio companies which met the criteria for classification as associates (31 December 2016: two portfolio companies classified as associates). The lists of subsidiaries and associates as at 31 December 2017 and 31 December 2016 are disclosed in Note 21 (b) and (c).
The Fund recognises financial assets and liabilities on the date it becomes a party to the contractual provisions of the instrument. The Fund applies trade date accounting.
Financial assets and liabilities are recognised initially at fair value plus, in case of financial assets and financial liabilities not measured at fair value through profit or loss, any directly attributable transaction costs (including brokerage fees).
Mergers of portfolio companies are recognised at the date when the merger is registered with the Trade Register.
See accounting policies 3(c), (d), (e) and (g).
The Fund derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or when it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred.
The Fund derecognises a financial liability when its contractual obligations are discharged, cancelled or have expired.
For equity investments, realised gains or losses on derecognition are determined using the weighted average cost method and for treasury bills and government bonds using the "first-in-first-out" ("FIFO") method.
Financial assets and liabilities are offset and the net amount is presented in the statement of financial position when, and only when, the Fund has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.
Income and expenses are presented on a net basis only when permitted by the accounting standards, or for gains and losses arising from a group of similar transactions.
The amortised cost of a financial asset or liability is the amount at which the financial asset or liability is measured at initial recognition, minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initial amount recognised and the maturity amount, minus any reduction for impairment.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal market, or in its absence, in the most advantageous market to which the Fund has access at that date.
When available, the Fund measures the fair value of an equity instrument using quoted prices in an active market for that instrument at the reporting date. A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The fair values of equity instruments that are not traded in an active market are determined with the assistance of independent valuers, using valuation techniques (for the main part of the portfolio).
The Fund uses a variety of methods and makes assumptions that are based on the market conditions existing at each reporting date. Valuation techniques used are recognised as standard within the industry and include the use of comparable recent arm's length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and other valuation techniques commonly used by market participants, making maximum use of observable market inputs and relying as little as possible on entity-specific inputs. Some of the inputs to these models may not be observable in the market and are therefore estimated based on various assumptions.
The valuation techniques selected incorporate all the factors that market participants would take into account in pricing a transaction.
The output of a valuation model is always an estimate/ an approximation of a fair value that cannot be determined with certainty, and valuation techniques employed may not fully reflect all factors relevant to the positions the Fund holds. Therefore, where appropriate, the valuations are adjusted to reflect additional factors, including model risk, liquidity risk and counterparty risk.
At each reporting date, the Fund assesses whether there is objective evidence that financial assets are impaired. Financial assets are impaired when objective evidence demonstrates that a loss event has occurred after the initial recognition of the asset, and that the loss event has an impact on the future cash flows of the asset, that can be estimated reliably. The impairment losses recorded by the Fund mainly relates to the equity investments available for sale.
Impairment losses on assets carried at amortised cost are measured as the difference between the carrying amount of the financial asset and the present value of the estimated future cash flows discounted at the asset's original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance account. Interest on the impaired asset continues to be recognised through the unwinding of the discount. When a subsequent event causes the amount of the impairment loss to decrease, the decrease in the impairment loss is reversed through profit or loss.
Impairment losses on available for sale equity investments are recognised by transferring the cumulative loss that has been recognised in equity (other comprehensive income) to profit or loss, which is calculated as the difference between the acquisition cost and the current fair value, less any impairment loss previously recognised in profit or loss. If, in a subsequent year, the fair value of an impaired equity investment increases, the recovery is recognised in equity (other comprehensive income).
For assessing which equity investments are impaired, the Fund considers all relevant factors, such as: significant or prolonged decline in fair value below cost, market and industry conditions, to the extent that they influence the recoverable amount of the investment, financial conditions and near-term prospects of the issuer, any specific adverse events that may influence the issuer's operations, recent losses of the issuer, qualified independent auditor's report on the issuer's most recent financial statements, etc.
Financial assets at fair value through profit or loss are initially recognised at fair value and transaction costs are recorded in profit or loss. Subsequent measurement is at fair value and all changes in fair value are accounted for through profit or loss. Financial assets at fair value through profit or loss are not subject to the review for impairment.
The Fund being an investment entity has classified and measured its investments in subsidiaries and associates as financial assets at fair value through profit or loss. If an investment no longer meets the criteria for classification as a subsidiary or associate, the Fund continues to classify and measure it as a financial asset at fair value through profit or loss. The other equity investments are classified as available for sale financial assets.
The Fund's investments in government bonds and in short-term treasury bills may also be classified as financial assets at fair value through profit or loss.
The Fund's investments in treasury bills may be classified as available for sale financial assets.
The Fund's investments in equity instruments, other than subsidiaries and associates and equity investments previously classified as subsidiaries and associates are classified as available for sale financial assets and are measured at fair value through other comprehensive income. Changes therein, other than impairment losses, are recognised in equity (other comprehensive income).
The equity investments of the Fund are valued as follows:
valued at nil, for holdings in companies in liquidation, dissolution, bankruptcy or with negative shareholders' equity; companies in insolvency or reorganisation are valued either at nil or at the value estimated with the assistance of an independent valuer.
An asset is classified as a non-current asset held for sale and presented separately in the statement of financial position when the following criteria are met: the Fund is committed to selling the asset, an active plan of sale has commenced, the asset is actively marketed for sale at a price that is reasonable in relation to its current fair value and the sale is expected to be completed within twelve months without significant changes to the plan. According to IFRS 5 Non-current Assets Held for Sale and Discontinued Operations the instruments in the scope of IAS 39 Financial Instruments: Recognition and Measurement continue to be measured according to this standard after the reclassification as non-current assets held for sale. The disclosures in the financial statements for non-current assets held for sale are in accordance to IFRS 5.
There were no assets in the Fund's portfolio classified as non-current assets held for sale as at 31 December 2017 and 31 December 2016.
Cash and current amounts include petty cash and current accounts held with banks. Deposits with banks include deposits with original maturities of less than one year. Cash and current accounts and deposits with banks are carried at amortised cost, which approximate their fair value.
Deposits with banks, Government bonds and treasury bills with original maturities of less than three months are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.
Other financial assets and liabilities are measured at amortised cost using the effective interest method, less any impairment losses (of financial assets).
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effect. The share capital accounting presentation and measurement are generally following the legal requirements. Due to the complexity of the legal framework and necessary approvals with respect to share capital transactions, only successful completion of the legal steps can trigger the accounting recognition.
The Fund recognises the treasury shares (repurchases of own shares) at trade date as a deduction to shareholders' equity. Treasury shares are recorded at acquisition cost, including brokerage fees and other transaction costs directly related to the acquisition.
The GDRs bought back by the Fund are accounted for exactly as the own ordinary shares repurchased, as a deduction to shareholders' equity. This is the result of the application of substance over form principle, due to the fact that buy-back via GDRs is only a technical/ legal form of the transaction, the substance of the transaction being that the Fund buys back its own shares, giving the same rights to both the holders of the Fund's ordinary shares and to the holders of the Fund's GDRs, to take part in the buy-back programmes carried out by the Fund.
The cancellation of treasury shares is performed in accordance with the shareholder's approval after all legal requirements are fulfilled. At cancellation, the treasury shares balance is netted off against the share capital and reserves.
The cancellation of treasury shares may trigger gains or losses, depending on the treasury shares' acquisition value as compared to their nominal value. The gains or losses resulted from the cancellation of the treasury shares are directly recognised within the shareholders 'equity and distinctively presented in the notes to the financial statements.
A provision is recognised if, as a result of a past event, the Fund has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are estimated by discounting the expected future cash outflows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.
Dividend income related to listed equity investments is recognised in profit or loss on the ex-dividend date. Dividend distributions from unlisted equity investments are recognised in profit or loss as dividend income when declared, at the date when the dividend distribution is approved by the General Shareholders Meeting ("GSM") of the respective company.
When the Fund receives or chooses to receive dividends in the form of additional shares rather than cash, the dividend income is recognised for the amount of the cash dividend alternative, with the corresponding debit treated as an additional investment.
When bonus shares are received with no cash alternative and if only certain shareholders are granted additional shares, these are measured at fair value and a corresponding amount of dividend income is recognised. However, if all shareholders receive bonus shares in proportion to their shareholdings, no dividend income is recognised as the fair value of the Fund's interest is unaffected by the bonus share issue.
For overdue dividend receivables, the Fund initiates legal recovery measures (conciliation, litigations, etc.). The Fund is entitled to charge penalties for overdue amounts from net dividends, applying the legal penalty interest rate according to the legislation in force. Penalty income on dividends is recognised when collection is virtually certain.
Dividend income is presented gross of dividend withholding taxes, which are separately recognised as income tax expense. Dividend withholding taxes are calculated in accordance with the provisions of the Romanian Fiscal Code.
Interest income and expense are recognised in profit or loss using the effective interest method. The effective interest rate is the rate that exactly discounts the estimated future cash payments and receipts through the expected life of the financial asset or liability (or, where appropriate, a shorter period) to the carrying amount of the financial asset or liability.
Interest income relates to current accounts, deposits held with banks, treasury bills and government bonds. In case of financial assets at fair value through profit or loss, the Fund's accounting policy is to record the accrued interest income separately from the changes in fair value.
Gains and losses from the disposal of equity investments are recognised in profit or loss at the date of derecognising the financial asset and are calculated as the difference between the carrying amount of the financial asset at the disposal date and the sum of (i) the consideration received (including any new asset obtained less any new liability assumed) and (ii) any cumulative gain or loss that had been previously recognised in other comprehensive income (in case of available for sale financial assets).
The realised gains and losses from the disposal of equity investments classified as financial assets at fair value through profit or loss are presented in the statement of comprehensive income under the caption "Net gain / (loss) from equity investments at fair value through profit or loss", together with the unrealised gains and losses from the change in the fair value of these instruments.
The realised gains and losses from the disposal of equity investments classified as non-current assets held for sale are presented in the statement of comprehensive income under the caption "Realised gain/ (loss) from disposal of non-current assets held for sale".
Foreign currency gains and losses are recognised in profit or loss on a net basis and include the realised and unrealised foreign exchange differences. Most of the Fund's investments and transactions are denominated in RON.
All expenses are recognised in profit or loss on an accrual basis.
Income tax expense comprises current and deferred tax. Current tax also includes dividend withholding taxes.
Income tax expense is recognised in profit or loss except to the extent that it relates to items recognised in equity (other comprehensive income), in which case it is recognised in equity (other comprehensive income).
Current tax is the amount of income taxes payable (recoverable) in respect of the taxable profit (tax loss) for the reporting year. Current tax for current and prior years is, to the extent unpaid, recognised as a liability. If the amount already paid in respect of current and prior years exceeds the amount due for those years, the excess is recognised as an asset.
Temporary differences are differences between the carrying amount of an asset or liability in the statement of financial position and its tax base.
Deferred tax liabilities are the amounts of income taxes payable in future years in respect of taxable temporary differences.
Deferred tax assets are the amounts of income taxes recoverable in future years in respect of: (a) deductible temporary differences; and (b) the carry forward of unused tax losses. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, which intend to settle current tax liabilities and assets on a net basis or whose tax assets and liabilities will be realised simultaneously.
Deferred tax is measured at the tax rates that are expected to be applied in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting year.
The effect on deferred tax of any changes in tax rates is charged to profit or loss, except to the extent that it relates to items previously recognised in equity (other comprehensive income), which are recognised in equity (other comprehensive income).
During 2017 and 2016, the applicable standard tax rate was 16%. The applicable dividend withholding tax was nil in case of holdings over 10% of the total share capital of the issuer, held for an uninterrupted period of at least one year and 5% in case of the other holdings.
According to the Fund's policy, the distributions to shareholders may comprise dividend distributions and returns of capital.
Dividends declared by the Fund are recorded as dividend payable at the date when these are approved by the Fund's GSM, as this is the date when from legally point of view, the Fund's liability to shareholders arises.
Returns of capital declared by the Fund are recorded as payable at the date when all legal requirements and substantive conditions stipulated in the Fund's GSM resolution approving the respective distribution are met.
According to the provisions of the legislation in force, the statute of limitation occurs three years after the date when the respective distribution commenced. Starting with the date when the statute of limitation occurred, the shareholders are no longer entitled to collect the respective distribution.
At the date when the statute of limitation for distributions occurs, the Fund records the value of the outstanding uncollected distribution through retained earnings or reserves, as applicable.
Basic and diluted earnings/ (loss) per share is calculated by dividing the profit or loss for the year by the weighted average number of ordinary paid shares in issue during the year, excluding the average number of ordinary shares purchased by the Fund and held as treasury shares. The weighted average number of ordinary shares outstanding during the year is the number of ordinary paid shares outstanding at the beginning of the year, adjusted by the number of ordinary shares bought back during the year (based on their settlement date) multiplied by a timeweighting factor. The time-weighting factor is the number of days that the shares are outstanding as a proportion of the total number of days in the reporting year.
As at 31 December 2017 and 31 December 2016, none of the Fund's issued shares or other instruments had dilutive effect, therefore basic and diluted earnings/ (loss) per share are the same.
The Fund has no employees, but from the benefits point of view, the members of the Board of Nominees have the same legal treatment as employees, as they have mandate agreements (as opposed to labour agreements). During the normal course of business, the Fund makes payments due to the state health and social security funds related to the remuneration of the members of the Board of Nominees in accordance with the regulations in force. Such costs are recognised in profit or loss together with the related remunerations.
All members of the Board of Nominees are members of the pension plan of the Romanian State. The Fund does not operate any pension plan or post-retirement benefits plan and therefore has no obligations regarding pensions.
The following amendments to the existing standards and new interpretations issued by the International Accounting Standards Board ("IASB") and adopted by the European Union ("EU") effective for the current financial year are applicable to the Fund:
The Fund considers that the adoption of these standards, revisions and interpretations has not led to any material changes in its annual financial statements.
As at the reporting date of these financial statements the following standards, amendments to the existing standards and interpretations issued by the IASB and adopted by the EU, applicable to the Fund, were in issue but not yet effective:
IFRS 9 "Financial Instruments" - adopted by the EU on 22 November 2016 (effective for annual periods beginning on or after 1 January 2018),
IFRS 16 "Leases" – adopted by the EU on 31 October 2017 (effective for annual periods beginning on or after 1 January 2019).
With the exception of IFRS 9, the Fund anticipates that the adoption of these standards, amendments to the existing standards and interpretations will have no material impact on its annual financial statements in the year of initial application.
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.
The Fund will adopt IFRS 9 with the date of initial application as of 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).
| Instrument type | Original classification under IAS 39 | New classification under IFRS 9 |
|---|---|---|
| Subsidiaries and associates | Fair value through profit and loss | Fair value through profit and loss |
| Equity investments at fair value through profit and loss |
Fair value through profit and loss | Fair value through profit and loss |
| Other equity investments | Available for sale | Fair value through profit and loss |
| Cash and current accounts and deposits with banks |
Loans and receivables | Amortised cost |
| Treasury bills | Fair value through profit and loss | Fair value through profit and loss |
| Government bonds | Fair value through profit and loss | Fair value through profit and loss |
| Other financial assets | Loans and receivables | Amortised cost |
| Other liabilities | Other financial liabilities at amortised cost |
Other financial liabilities at amortised cost |
The following table summarises the classification and measurement changes to the Fund's financial instruments starting with 1 January 2018:
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 will be transferred to retained earnings.
The adoption of IFRS 9 will have no impact on the measurement basis of the financial assets and liabilities.
In accordance with the transitional provisions of IFRS 9, the Fund elected to not restate prior periods.
At the reporting date, IFRSs as adopted by the EU do not significantly differ from regulations adopted by the IASB except for the following standards, amendments to the existing standards and interpretations, which are applicable to the Fund and which were not endorsed as at the date of authorisation of these financial statements:
The Fund estimates that the adoption of these new standards and amendments to the existing standards will have no material impact on its annual financial statements in the year of initial application.
The Fund's investment portfolio comprises listed and unlisted equity investments.
The Fund's investing activities expose it to various types of risks that are associated with the financial instruments and with the markets in which it invests. The most important types of financial risks to which the Fund is exposed are market risk, credit risk and liquidity risk.
The management of the Fund implemented financial risk management procedures consistent with those applied globally by Franklin Templeton Investments.
Market risk is the risk that changes in market prices and rates, such as equity prices, interest rates and foreign exchange rates will affect the Fund's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.
Equity price risk is the risk that the value of an equity instrument will fluctuate as a result of changes in market prices, whether caused by factors specific to its issuer or factors affecting all instruments traded in the market.
Equity price risk arises from changes in the value of equity investments and is the primary risk impacting the Fund. Diversification across securities and industries, to the possible extent, is the primary technique for mitigating equity price risk. The companies in which the Fund holds equity instruments operate in different industries. The Fund has concentrated exposures to the "Power utilities: generation", "Power and gas utilities: distribution and supply" and "Oil and gas" sectors.
The Fund's exposure to industries is detailed below:
(i) Equity price risk (continued)
| 31 December 2017 | 31 December 2016 | |
|---|---|---|
| Power utilities: generation | 3,795,340,343 | 3,515,697,271 |
| Power and gas utilities: distribution, supply | 1,896,000,000 | 2,906,123,000 |
| Oil and gas | 1,671,896,731 | 1,861,146,234 |
| Infrastructure | 1,080,590,262 | 1,025,475,601 |
| Banks | 285,646,454 | 321,881,504 |
| Heavy industry | 259,839,000 | 206,512,000 |
| Aluminium | 238,333,015 | 85,275,115 |
| Postal services | 35,000,000 | 43,000,000 |
| Others | 15,555,540 | 27,072,519 |
| 9,278,201,345 | 9,992,183,244 |
As at 31 December 2017, the Fund has equity investments of RON 2,393,216,543 listed on the Bucharest Stock Exchange, which are included in the BET-BK index (31 December 2016: RON 2,311,258,823).
For the listed liquid investments, a ten per cent increase in the BET-BK index at 31 December 2017 would have increased equity by RON 264,943,722 (31 December 2016: RON 248,771,155) out of which impact on other comprehensive income would be RON 81,747,197 (31 December 2016: RON 55,758,198) and impact on profit or loss would be RON 183,196,524 (31 December 2016: RON 193,012,957).
An equal change in the opposite direction as at 31 December 2017 would have decreased equity by RON 264,943,722 (31 December 2016: RON 248,771,155) out of which impact on other comprehensive income would be RON 81,747,197 (31 December 2016: RON 55,758,198) and impact on profit or loss would be RON 183,196,524 (31 December 2016: RON 193,012,957).
This analysis assumes that all other variables remain constant.
The Fund places cash into fixed rate bank deposits and short-term government securities with fixed interest rates and original maturities of up to one year. Any potential reasonable movement in interest rates would have an immaterial effect on the Fund.
At the reporting date the interest rate profile of the Fund's interest-bearing financial instruments was:
| Fixed rate instruments | 31 December 2017 | 31 December 2016 |
|---|---|---|
| Bank deposits with original maturities of less than three months |
1,275,849,317 | 305,323,867 |
| Treasury bills | 46,186,986 | 780,835,666 |
| Government bonds | 190,022,923 | 318,145,700 |
| 1,512,059,226 | 1,404,305,233 |
The above balances of fixed rate instruments do not include the related accrued interest.
The Fund's exposure to currency risk is not significant. The Fund held current accounts with banks and receivables and payables denominated in foreign currencies (EUR, USD and GBP), but the balances were immaterial during the reporting period.
During 2017, the local currency depreciated compared to the EUR (from 4.5411 RON/EUR at 31 December 2016 to 4.6597 RON/EUR at 31 December 2017) and appreciated compared to the USD (from 4.3033 RON/USD at 31 December 2016 to 3.8915 RON/USD at 31 December 2017) and compared to the GBP (from 5.2961 RON/GBP at 31 December 2016 to 5.2530 RON/GBP at 31 December 2017).
The Fund's exposure to currency risk was as follows:
| RON | 31 December 2017 | 31 December 2016 |
|---|---|---|
| Monetary assets | ||
| Petty cash | 973 | 984 |
| Current accounts with banks | 19,166,449 | 5,777,046 |
| Deposits with banks | 1,276,669,452 | 305,337,134 |
| Treasury bills | 46,277,947 | 781,445,213 |
| Government bonds | 195,923,820 | 328,638,303 |
| Other financial assets | 1,647,570 | 12,078,624 |
| 1,539,686,211 | 1,433,277,304 | |
| Monetary liabilities | ||
| Other financial liabilities | (33,286,515) | (26,954,936) |
| 1,506,399,696 | 1,406,322,368 | |
| EUR (in RON equivalent) | 31 December 2017 | 31 December 2016 |
| Monetary assets | ||
| Current accounts with banks | 3,130 | 1,010 |
| Monetary liabilities | ||
| Other financial liabilities | - | (16,978,256) |
| 3,130 | (16,977,246) | |
| USD (in RON equivalent) Monetary assets |
31 December 2017 | 31 December 2016 |
| Current accounts with banks | 1,289 | 1,002 |
| Monetary liabilities | ||
| Other financial liabilities | (1,294,602) | (2,496,039) |
| (1,293,313) | (2,495,037) | |
| GBP (in RON equivalent) | ||
| Monetary assets | ||
| Current accounts with banks | 1,726 | 1,579 |
| Monetary liabilities | ||
| Other financial liabilities | (419,021) | - |
| (417,295) | 1,579 |
A ten percent strengthening of the RON against the EUR, USD and GBP respectively as at 31 December 2017 and 31 December 2016 would have the following impact on profit or loss (the analysis assumes that all other variables remain constant), impact expressed in RON:
| Profit / (loss) | 31 December 2017 | 31 December 2016 |
|---|---|---|
| EUR | (313) | 1,697,725 |
| USD | 129,331 | 249,504 |
| GBP | 41,730 | (158) |
As at 31 December 2017 and 31 December 2016, the Fund did not hold any equity investment denominated in a currency other than RON therefore there would be no impact on equity of a ten percent strengthening or depreciation of the RON against the foreign currencies.
Credit risk is the risk of financial loss to the Fund if counterparties to financial instruments fail to meet their contractual obligations, and arises principally from cash and deposits with banks, treasury bills, government bonds and other receivables.
The Fund's maximum exposure to credit risk from cash and deposits with banks was RON 1,295,842,046 at 31 December 2017 (31 December 2016: RON 311,117,771). Cash and deposits with banks are held with the following banks:
| 31 December 2017 | 31 December 2016 | |
|---|---|---|
| Cash and deposits held with banks | ||
| ING Bank | 287,260,773 | 33,117,340 |
| BCR | 236,967,376 | 79,160,558 |
| Unicredit Bank | 228,496,332 | 43,101,294 |
| BRD - Groupe Societe Generale | 206,980,370 | 108,932,497 |
| Citi Bank | 197,369,145 | 46,805,019 |
| Raiffeisen Bank | 138,768,050 | 1,063 |
| 1,295,842,046 | 311,117,771 |
Current accounts and deposits are held with banks in Romania. The management of the Fund implemented a formal policy regarding bank counterparty risks and limits. The Fund only establishes new deposits with financial institutions where the institution or the institution's corporate parent has a credit rating above investment grade (BBB- or better). The counterparty credit risk is also diversified by allocating the cash and cash equivalents across several banks. The selection of financial institutions as deposit takers was made and the exposure limits were decided upon based on their credit ratings.
The Fund's maximum exposure to credit risk from treasury bills was RON 46,277,947 as at 31 December 2017 (31 December 2016: RON 781,445,213).
As of 31 December 2017, the Fund held the following discount treasury bills, denominated in RON:
(ii) Treasury bills (continued)
| ISIN | Value as at 31 December 2017 |
No. of units | Interest rate |
Maturity date |
|---|---|---|---|---|
| RO1718CTN013 | 13,293,337 | 2,670 | 0.75% | 25-Jul-18 |
| RO1718CTN0C3 | 32,984,610 | 6,600 | 1.87% | 10-Jan-18 |
| Total | 46,277,947 |
As of 31 December 2016, the Fund held the following discount treasury bills, denominated in RON:
| ISIN | Value as at 31 December 2016 |
No. of units |
Interest rate interval |
Maturity date |
|---|---|---|---|---|
| RO1617CTN017 | 274,957,072 | 55,000 | 0.30% - 0.36% | 18-Jan-17 |
| RO1617CTN033 | 196,928,823 | 39,400 | 0.33% - 0.38% | 06-Feb-17 |
| RO1617CTN066 | 74,917,911 | 15,000 | 0.42% | 05-Apr-17 |
| RO1617CTN074 | 107,834,239 | 21,600 | 0.42% - 0.45% | 08-May-17 |
| RO1617CTN090 | 49,868,827 | 10,000 | 0.64% | 29-May-17 |
| RO1617CTN0B7 | 16,993,726 | 3,400 | 0.35% | 08-Feb-17 |
| RO1617CTN0E1 | 59,944,615 | 12,000 | 0.36% - 0.56% | 20-Mar-17 |
| Total | 781,445,213 |
The Fund's maximum exposure to credit risk from government bonds was RON 195,923,820 as at 31 December 2017 (31 December 2016: RON 328,638,303).
As at 31 December 2017, the Fund held the following government bonds, denominated in RON:
| ISIN | Value as at 31 December |
No. of units | Coupon rate |
Maturity date |
|---|---|---|---|---|
| 2017 | ||||
| RO1418DBN040 | 195,923,820 | 37,978 | 3.25% | 17-Jan-18 |
| Total | 195,923,820 |
As at 31 December 2016, the Fund held the following government bonds, denominated in RON:
| ISIN | Value as at 31 December 2016 |
No. of units | Coupon rate |
Maturity date |
|---|---|---|---|---|
| RO0717DBN038 | 223,271,166 | 21,000 | 6.75% | 11-Jun-17 |
| RO1217DBN046 | 105,367,137 | 10,000 | 5.90% | 26-Jul-17 |
| Total | 328,638,303 |
As at 31 December 2017, the Fund has a net receivable from the Romanian Central Depositary in relation to 2015 return of capital to shareholders for an amount of RON 1,612,518 (31 December 2016: RON 12,042,813). As at 31 December 2017, the Fund had overpayments to be recovered from the State Budget related to income tax of RON 7,330,440 (31 December 2016: RON 7,330,440). The Fund has no significant credit risk from dividends receivable as at 31 December 2017 and 31 December 2016.
Liquidity risk is the risk that the Fund will not be able to meet its financial obligations as they fall due. The Fund's approach to managing liquidity risk is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when they fall due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Fund's reputation. The following tables present the split of the Fund's financial assets and financial liabilities by residual maturities:
| Less than 1 month | 1 to 3 months | 3 to 12 months No fixed maturity | Total | ||
|---|---|---|---|---|---|
| 31 December 2017 | |||||
| Financial assets | |||||
| Cash and current accounts | 19,173,567 | - | - | - | 19,173,567 |
| Deposits with banks | 1,276,669,452 | - | - | - | 1,276,669,452 |
| Treasury bills | 32,984,610 | - | 13,293,337 | - | 46,277,947 |
| Government bonds | 195,923,820 | - | - | - | 195,923,820 |
| Equity investments at fair value | |||||
| through profit and loss | - | - | - | 1,891,510,496 | 1,891,510,496 |
| Equity investments available for | |||||
| sale | - | - | - | 7,386,690,849 | 7,386,690,849 |
| Other financial assets | 1,647,570 | - | - | - | 1,647,570 |
| 1,526,399,019 | - | 13,293,337 | 9,278,201,345 | 10,817,893,701 | |
| Financial liabilities | |||||
| Other financial liabilities | 35,000,138 | - | - | - | 35,000,138 |
| 35,000,138 | - | - | - | 35,000,138 | |
| Less than 1 month | 1 to 3 months | 3 to 12 months No fixed maturity | Total | ||
| 31 December 2016 Financial assets |
|||||
| Cash and current accounts | 5,781,621 | - | - | - | 5,781,621 |
| Deposits with banks | 305,337,134 | - | - | - | 305,337,134 |
| Treasury bills | 274,957,072 | 273,867,164 | 232,620,977 | - | 781,445,213 |
| Government bonds | - | - | 328,638,303 | - | 328,638,303 |
| Equity investments at fair value | |||||
| through profit and loss | - | - | - | 2,086,956,567 | 2,086,956,567 |
| Equity investments available for | |||||
| sale | - | - | - | 7,905,226,677 | 7,905,226,677 |
| Other financial assets | 12,078,624 | - | - | - | 12,078,624 |
| 598,154,451 | 273,867,164 | 561,259,280 | 9,992,183,244 | 11,425,464,139 | |
| Financial liabilities | |||||
| Other financial liabilities | 41,962,841 | - | - | - | 41,962,841 |
The Fund's equity investments include unlisted instruments and listed but not liquid instruments (respectively 74% of total equity investments as at 31 December 2017 and 76% as at 31 December 2016) which are not traded in a regulated market and generally may be considered to be illiquid. As a result, the Fund may not be able to quickly sell some of its investments in these instruments in order to meet its liquidity requirements, or to respond to specific events such as deterioration in the credit worthiness of any particular issuer. As a closed ended investment fund, liquidity risks attributable to the Fund are less significant than for an open ended fund. Not all shares listed on the Bucharest Stock Exchange are considered liquid due to insufficient volumes of transactions. The Fund prudently manages liquidity risk by maintaining sufficient liquid assets to finance current liabilities.
The Fund had to conform to European Union legislation from 1 January 2007 when Romania became a member of the European Union.
Interpretation of the text and practical implementation procedures of the EU tax regulations could vary, and there is a risk that certain transactions, for example, could be viewed differently by the tax authorities as compared to the Fund's treatment.
Furthermore, the Romanian Government has a number of agencies that are authorised to conduct audits (controls) of companies operating in Romania. These controls are similar in nature to tax audits performed by tax authorities in many countries, but may extend not only to tax matters but to other legal and regulatory matters in which the applicable agency may be interested. It is likely that the Fund will continue to be subject to regular controls as new laws and regulations are issued.
While uncertainty still exists within the European political environment regarding the direction of fiscal politics, responding central bank action and the possibility of a future breakup of the European Union, equity markets will be exposed to continued volatility, especially with regards to countries with strong ties to Europe. Commodity markets have stabilised to an extent and even recovered in some areas, but given uncertainty regarding global trade relationships and increasing protectionism, further volatility can be expected.
Both political uncertainty and fluctuation in commodity prices, particularly in the energy sector, can have an impact on the Romanian economy and consequently the Fund's portfolio companies. Management cannot predict all developments which could have an impact on the Romanian economy and consequently what effect, if any, they could have on the performance of the Fund and its financial statements. Management cannot reliably estimate the effects on the Fund's financial statements of any further deterioration in the liquidity of the financial markets and devaluation of financial assets influenced by the increased volatility in the equity and currency markets.
Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Fund's processes, service providers, technology and infrastructure, and from external factors other than credit, market and liquidity risks, such as those arising from legal and regulatory requirements and generally accepted standards of corporate behaviour. Operational risks arise from all of the Fund's operations.
The Fund's objective is to manage operational risk so as to balance the avoidance of financial losses and damage to the Fund's reputation with overall cost effectiveness and to avoid control procedures that restrict initiative and creativity.
The Fund's policy is to maintain a strong capital base so as to maintain shareholders' confidence and to sustain future developments.
The Fund's shareholders' equity comprises share capital, fair value reserve, other reserves and retained earnings, net of treasury shares. The shareholders' equity was RON 10,790,244,153 at 31 December 2017 (31 December 2016: RON 11,385,951,648). There is no significant difference between the Fund's shareholders' equity presented in these annual financial statements and the net asset value calculation in accordance with the regulations issued by the FSA.
The Fund was not subject to externally imposed capital requirements.
For financial instruments not measured at fair value such as cash and current accounts, deposits with banks, dividends, other financial assets and other financial liabilities, the Fund assessed that their carrying amount is a reasonable approximation of their fair value.
The table below presents the carrying amounts and fair values of the Fund's financial assets and financial liabilities:
| Lo d an s a n iv b les re ce a |
Av i fo la b le le a r s a |
A fa ir t lu va e f i t hr h t o ou g p ro r lo ss |
O f in ia t he l r an c ia i i ies l b l t t a ise d t t am or co s |
in To ta l c ar ry g t am ou n |
ir Fa lu va e |
|
|---|---|---|---|---|---|---|
| 3 1 De be 2 0 1 7 ce m r |
||||||
| Ca h a d c t a nt s n ur ren cc ou s |
1 9, 1 7 3, 5 6 7 |
- | - | - | 1 9, 1 7 3, 5 6 7 |
1 9, 1 7 3, 5 6 7 |
| its it h ba ks De p os w n |
1, 2 6, 6 6 9, 4 2 7 5 |
- | - | - | 1, 2 6, 6 6 9, 4 2 7 5 |
1, 2 6, 6 6 9, 4 2 7 5 |
| b i l ls Tr ea su ry |
- | - | 4 6, 2 7 7, 9 4 7 |
- | 4 6, 2 7 7, 9 4 7 |
4 6, 2 7 7, 9 4 7 |
| Go bo ds nt ve rn me n |
- | - | 1 9 5, 9 2 3, 8 2 0 |
- | 1 9 5, 9 2 3, 8 2 0 |
1 9 5, 9 2 3, 8 2 0 |
| Eq ity inv tm ts u es en |
- | 7, 3 8 6, 6 9 0, 8 4 9 |
1, 8 9 1, 5 1 0, 4 9 6 |
- | 9, 2 7 8, 2 0 1, 3 4 5 |
9, 2 7 8, 2 0 1, 3 4 5 |
| O he f in ia l a t ts r an c sse |
1, 6 4 0 7, 5 7 |
- | - | - | 1, 6 4 0 7, 5 7 |
1, 6 4 0 7, 5 7 |
| he f in ia l l ia b i l it ies O t r an c |
- | - | - | ( ) 3 5, 0 0 0, 1 3 8 |
( ) 3 5, 0 0 0, 1 3 8 |
( ) 3 5, 0 0 0, 1 3 8 |
| 1, 2 9 7, 4 9 0, 5 8 9 |
7, 3 8 6, 6 9 0, 8 4 9 |
2, 1 3 3, 7 1 2, 2 6 3 |
( 3 5, 0 0 0, 1 3 8 ) |
1 0, 7 8 2, 8 9 3, 5 6 3 |
1 0, 7 8 2, 8 9 3, 5 6 3 |
|
| Lo d an s a n |
A fa ir lu t va e f i t hr h p t o ou g ro r |
O f in ia he l t r an c ia i i ies l b l t t a |
in To ta l c ar ry g |
| Lo d an s a n |
hr h p f i t t o ou g ro r |
l ia b i l i ies t t a |
To l c in ta ar ry g |
|||
|---|---|---|---|---|---|---|
| iv b les re ce a |
Av i la b le fo le a r s a |
lo ss |
ise d t t am or co s |
t am ou n |
Fa ir lu va e |
|
| 3 1 2 0 1 6 De be ce m r |
||||||
| Ca h a d c t a nt s n ur ren cc ou s |
5, 7 8 1, 6 2 1 |
- | - | - | 5, 7 8 1, 6 2 1 |
5, 7 8 1, 6 2 1 |
| its it h ba ks De p os w n |
3 0 3 3 1 3 4 5, 7, |
- | - | - | 3 0 3 3 1 3 4 5, 7, |
3 0 3 3 1 3 4 5, 7, |
| b i l ls Tr ea su ry |
- | 2 0 9, 9 8, 2 9 6 5 |
1, 4 8 6, 9 1 5 7 7 |
- | 8 1, 4 4 2 1 3 7 5, |
8 1, 4 4 2 1 3 7 5, |
| Go bo ds nt ve rn me n |
- | - | 3 2 8, 6 3 8, 3 0 3 |
- | 3 2 8, 6 3 8, 3 0 3 |
3 2 8, 6 3 8, 3 0 3 |
| ity inv Eq tm ts u es en |
- | 7, 9 0 5, 2 2 6, 6 7 7 |
2, 0 8 6, 9 5 6, 5 6 7 |
- | 9, 9 9 2, 1 8 3, 2 4 4 |
9, 9 9 2, 1 8 3, 2 4 4 |
| Ot he f ina ia l a ts r nc sse |
1 2, 0 8, 6 2 4 7 |
- | - | - | 1 2, 0 8, 6 2 4 7 |
1 2, 0 8, 6 2 4 7 |
| Ot he f ina ia l l ia b i l it ies r nc |
- | - | - | ( 4 6, 4 2 9, 2 3 1 ) |
( 4 6, 4 2 9, 2 3 1 ) |
( 4 6, 4 2 9, 2 3 1 ) |
| 3 2 3, 1 9 7, 3 7 9 |
8, 1 1 5, 1 8 4, 9 7 3 |
2, 9 8 7, 0 8 1, 7 8 7 |
( 4 6, 4 2 9, 2 3 1 ) |
1 1, 3 7 9, 0 3 4, 9 0 8 |
1 1, 3 7 9, 0 3 4, 9 0 8 |
| Year ended | Year ended | |
|---|---|---|
| 31 December 2017 | 31 December 2016 | |
| Hidroelectrica SA | 337,188,756 | 134,644,264 |
| OMV Petrom SA | 106,763,221 | - |
| CN Aeroporturi Bucuresti SA | 82,955,766 | 27,413,946 |
| Electrica Furnizare SA | 34,807,451 | 24,523,212 |
| SDEE Transilvania Nord SA | 22,115,631 | 27,959,777 |
| SDEE Transilvania Sud SA | 21,708,184 | 26,344,928 |
| SDEE Muntenia Nord SA | 19,336,885 | 26,895,798 |
| Nuclearelectrica SA | 19,044,047 | 9,044,766 |
| BRD Groupe Societe Generale SA | 18,515,323 | 8,116,306 |
| Conpet SA | 13,843,476 | 3,827,813 |
| Societatea Nationala a Sarii SA | 13,760,169 | - |
| Engie Romania SA | 13,308,134 | - |
| CN Administratia Porturilor Maritime SA | 11,008,413 | 14,076,910 |
| E-Distributie Banat SA | 8,922,811 | 16,815,423 |
| Alro SA | 6,863,554 | - |
| E-Distributie Dobrogea SA | 6,604,280 | 12,044,439 |
| Banca Transilvania SA | - | 16,687,884 |
| Enel Energie SA | - | 2,089,651 |
| Others | 3,614,516 | 2,585,421 |
| 740,360,617 | 353,070,538 |
The dividend income was subject to 5% withholding tax in 2017 and 2016. In accordance with the Romanian Fiscal Code, in cases where the relevant shareholding of the Fund was larger than 10% of total issued shares of the portfolio company, for at least one year prior to the dividend distribution date, no withholding tax was due.
| Year ended 31 December 2017 |
Year ended 31 December 2016 |
|
|---|---|---|
| Unrealised net gain/ (loss) from equity | ||
| investments at fair value through profit or loss | 222,752,094 | (377,839,664) |
| Realised net loss from disposal of equity | ||
| investments at fair value through profit or loss | (1,428,036) | - |
| Total | 221,324,058 | (377,839,664) |
The unrealised net gain from equity investments at fair value through profit or loss for the year ended 31 December 2017 (year ended 31 December 2016: unrealised net loss) was mainly generated by the change in fair value for the holding in OMV Petrom SA, as a result of the increase (during 2016: decrease) of this company's share price during the year.
The realised net loss from disposal of equity investments at fair value through profit or loss was calculated as the difference between the proceeds from the disposal and the fair value of the equity investments disposed of at disposal date. In September 2017, the Fund sold its entire holding in Primcom SA.
This caption does not include the realised net gain or loss from the equity instruments at fair value through profit or loss, which were reclassified as non-current assets held for sale (see Note 9 Realised gain/ (loss) from disposal of non-current assets held for sale for further details).
During 2017, the Fund sold its entire holdings in Oil Terminal SA, Banca Transilvania SA and Cetatea SA and part of its holding in BRD Groupe Societe Generale SA . The net gain on disposal of these equity investments was RON 38,527,851, representing the difference between the gross proceeds from disposals (RON 74,896,672) and the carrying values of the equity investments as at disposal date (RON 74,360,549), plus the net unrealised gain related to these investments disposed, recycled from equity (other comprehensive income) to profit or loss upon their derecognition (RON 37,991,728).
During 2016, the Fund sold its entire holdings in Romgaz SA, E.ON Distributie Romania SA and E.ON Energie Romania SA and part of its holdings in Banca Transilvania SA and BRD Groupe Societe Generale SA. The net gain on disposal of these equity investments was RON 925,976,144, representing the difference between the proceeds from disposals (RON 1,355,481,374) and the carrying values of the equity investments as at disposal date (RON 1,411,493,673), plus the net unrealised gain related to the investments disposed, recycled from other comprehensive income to profit or loss upon their derecognition (RON 981,988,443).
This caption does not include the net gain or loss of equity instruments available for sale, which were reclassified as non-current assets held for sale (see Note 9 Realised gain/ (loss) from disposal of non-current assets held for sale for further details).
On 14 July 2017 the Fund has publicly announced that it has signed a Memorandum of Understanding with Electrica SA for the disposal of its holdings in SDEE Muntenia Nord SA, SDEE Transilvania Sud SA, SDEE Transilvania Nord SA and Electrica Furnizare SA ("Electrica subsidiaries"). Consequently, the Fund reclassified, in accordance with IFRS 5 requirements, its holdings in Electrica subsidiaries, as non-current assets held for sale. The Fund's holdings in Electrica subsidiaries were sold to Electrica SA together with all the rights attached to them under the applicable law, including the right to receive dividends, except for those related to the financial year ending on 31 December 2016 in total amount of RON 97,968,151, which were collected by the Fund during November 2017, as already approved by the General Meeting of Shareholders of the Electrica subsidiaries on 17 May 2017. The transaction was completed in November 2017 and the aggregated value of the transaction amounted to RON 752,031,841. The net gain on disposal of these non-current assets held for sale was RON 345,134,143, representing the difference between the proceeds from disposals (RON 752,031,841) and the carrying values of the equity investments as at disposal date (RON 752,031,841), plus the net unrealised gain related to the investments disposed, recycled from other comprehensive income to profit or loss upon their derecognition (RON 345,134,143).
During September 2017, the Fund publicly announced that it had taken the decision to proceed with the partial sale of the investment in OMV Petrom SA (respectively 1,454,000,000 shares representing approximately 2.6% of OMV Petrom SA's share capital) through an accelerated bookbuild offering. Consequently, the Fund reclassified, in accordance with IFRS 5 requirements, the part of the holding in OMV Petrom SA subject to the bookbuild offering, as non-current assets held for sale. The offering was completed in September 2017 and the gross proceeds received from the disposal amounted to RON 399,850,000. The realised loss from the partial sale of the investment in OMV Petrom SA was RON 14,540,000, representing the difference between the total proceeds from this disposal (RON 399,850,000) and the fair value at the reclassification date of this investment as noncurrent assets held for sale (RON 414,390,000).
The realised loss from the disposal of the non-current assets held for sale for the year ended 31 December 2016 in amount of RON 127,542,995 represents the difference between the proceeds from the partial disposal through an accelerated bookbuild offering of OMV Petrom SA (RON 760,885,431) and the fair value at the reclassification date of the non-current assets held for sale disposed of (RON 888,428,426).
There were no equity investments classified as non-current assets held for sale as at 31 December 2017 and 31 December 2016.
| Year ended | Year ended | |
|---|---|---|
| 31 December 2017 | 31 December 2016 | |
| Administration fees | 63,049,843 | 70,609,840 |
| Third party services | 11,765,181 | 12,365,174 |
| FSA monthly fees | 10,214,108 | 10,739,051 |
| Intermediaries and other fees related to disposal of portfolio holdings |
8,433,839 | 33,203,453 |
| Remunerations and related taxes | 1,445,075 | 1,410,173 |
| Depositary bank fee | 698,373 | 813,139 |
| Penalties | - | 1,312,439 |
| Other operating expenses | 1,885,625 | 1,661,994 |
| 97,492,044 | 132,115,263 |
The total administration fees in 2017 included the base fee of RON 46,780,186 (2016: RON 46,804,234) and the distribution fee of RON 16,269,657 (2016: RON 23,805,606 out of which RON 13,469,409 represented distribution fee related to the buybacks). Starting 2017, the distribution fee related to buybacks (RON 15,067,165) is recognised directly in equity together with the underlying shares. This change was not applied retrospectively as the effect on the comparative amounts is not significant. The higher distribution fee in 2017 compared to 2016 was due to the fees invoiced for the higher distributions made available to the Fund's shareholders in 2017, respectively for the special return of capital performed in March 2017 of RON 0.05 per share for which the payment started on 27 March 2017.
The administration fees are invoiced and paid on a quarterly basis.
Third party services mainly include legal consulting services, notary fees, services related to the promotional activities of the Fund, valuation services in relation to the Fund's portfolio and also, the financial auditor's fees.
The audit fees are recorded in the year when the services are provided. The financial auditor of Fondul Proprietatea for the years 2017 and 2016 was Deloitte Audit SRL.
The total audit fees for the audit of the 2017 annual statutory financial statements, prepared in accordance with IFRS amount approximately to RON 469,718, including VAT. In addition, during 2017 Deloitte Audit SRL provided other assurance and non-audit services specifically requested by the Financial Supervisory Authority, for a total fee of RON 390,869, including VAT.
The total audit fees for the audit of the 2016 annual statutory financial statements, prepared in accordance with IFRS, were approximately RON 455,712, including VAT. In addition, in 2016 Deloitte Tax SRL provided tax advisory services, for total fees of RON 20,356, including VAT.
The FSA's monthly fees slightly decreased due to the decrease of the Fund's total net asset value, on which these fees are calculated. During 2017 and 2016, the FSA fee was 0.0078% per month applied on the total net asset value.
Intermediaries and other fees related to the disposal of portfolio holdings for the year ended 31 December 2017 mainly include expenses recorded in relation to the partial sale of the investment in OMV Petrom SA, through a secondary public offering and to the disposal of entire holdings in Electrica subsidiaries.
Intermediaries and other fees related to the disposal of portfolio holdings for the year ended 31 December 2016 mainly include expenses recorded in relation to the partial sale of the investment in OMV Petrom SA, through a secondary public offering, the partial disposal of holdings in Banca Transilvania SA and BRD - Groupe Societe Generale SA and the disposal of the entire holding in Romgaz SA on the open market.
Remunerations and related taxes included the remunerations paid to the members of the Board of Nominees and to the special administrator appointed for Hidroelectrica SA (a portfolio company in insolvency until 21 June 2016) as required by the insolvency legislation in force as well as the related taxes and contributions payable to the Romanian State budget, as follows:
| Year ended 31 December 2017 |
Year ended 31 December 2016 |
|
|---|---|---|
| Members of the Board of Nominees | 1,200,000 | 1,200,000 |
| Special administrator appointed in portfolio companies in insolvency |
- | 7,531 |
| Contributions to social security fund | 184,390 | 139,788 |
| Contributions to health insurance fund | 60,685 | 62,854 |
| 1,445,075 | 1,410,173 |
The depositary bank fee mainly decreased due to the decrease of the Fund's total net asset value on which part of these fees are calculated and due to the decrease in the custody fees for the Fund's listed portfolio as a result of the decrease of the listed portfolio amount following the disposals of listed participations during the year.
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. The purpose of this credit facility is for general corporate use, including share buy-backs, but excluding the purchase of investments.
On 27 June 2017 the Fund drew for the first time an amount of RON 237,000,000 from the total credit facility which was used for the funding of June 2017 return of capital to shareholders. On 25 July 2017, the Fund reimbursed the entire amount drew from the credit facility contracted from BRD-Groupe Societé Generale SA and the related interest. The finance costs included in the Statement of Comprehensive Income for the year ended 31 December 2017 comprise the interest expense on the amount drawn from this credit facility.
In 2016, the finance costs category comprised the commitment fee on undrawn amounts from the credit facility concluded by Fondul Proprietatea with Citibank Europe Plc, Dublin – Romania Branch which was terminated on 8 July 2016 with the mutual consent of both parties.
There are no outstanding amounts from the credit facility as at 31 December 2017 and 31 December 2016.
| Year ended | Year ended | |
|---|---|---|
| 31 December 2017 | 31 December 2016 | |
| Current tax expense | ||
| Current tax (16%) | - | - |
| Dividend withholding tax | (2,570,142) | (1,896,759) |
| (2,570,142) | (1,896,759) | |
| Deferred tax related to: | ||
| Equity investments | 226,577,749 | (228,172,318) |
| Fiscal loss | (208,518,584) | 132,810,727 |
| 18,059,165 | (95,361,591) | |
| Income tax / (expense) | 15,489,023 | (97,258,350) |
The effective tax rate used to calculate the deferred tax position of the Fund was 16% (standard tax rate).
| Year ended 31 December 2017 |
Year ended 31 December 2016 |
|
|---|---|---|
| Reconciliation of effective tax rate | ||
| Net Profit for the period | 1,289,896,039 | 446,969,856 |
| Income tax / (expense) | 15,489,023 | (97,258,350) |
| Profit excluding income tax | 1,274,407,016 | 544,228,206 |
| Income tax using the standard tax rate (16%) | (203,905,123) | (87,076,513) |
| Impact on the income tax expense of: | ||
| Taxation applied on dividend income | 115,887,556 | 54,594,527 |
| Elements similar to revenues (taxable equity items) |
(10,266,210) | (128,074,289) |
| Profit appropriation to legal reserves | 10,174,695 | 3,575,759 |
| Non-taxable income | 558,274,595 | 823,055,594 |
| Non-deductible expenses | (481,847,390) | (869,610,466) |
| Fiscal result impact in the current period | 9,111,734 | 201,638,628 |
| Deferred tax movement during the period | 18,059,166 | (95,361,590) |
| Income tax / (expense) | 15,489,023 | (97,258,350) |
The net deferred tax liability on equity investments recorded through the equity reserve during 2017 was of RON 18,059,165 (2016: net deferred tax liability decrease recorded through the equity reserve in amount of RON 95,361,591).
See Note 17 Deferred tax for details regarding the deferred tax computation and recognition.
Basic earnings per share ("EPS") 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 31 December 2017 and 31 December 2016, none of the Fund's issued shares or other instruments had dilutive effect, therefore basic and diluted earnings/ (loss) per share are the same.
| Year ended | Year ended | |
|---|---|---|
| 31 December 2017 | 31 December 2016 | |
| Profit for the period | 1,289,896,039 | 446,969,856 |
| Weighted average number of ordinary shares | 8,995,904,682 | 10,158,242,746 |
| Basic and diluted earnings per share | 0.1434 | 0.0440 |
| 31 December 2017 | 31 December 2016 | |
|---|---|---|
| Petty cash | 973 | 984 |
| Current accounts with banks | 80,094 | 77,514 |
| Distributions bank accounts | 19,092,500 | 5,703,123 |
| Cash and current accounts | 19,173,567 | 5,781,621 |
| 31 December 2017 | 31 December 2016 | |
| Bank deposits with original maturities of less than three months |
1,275,849,317 | 300,761,789 |
| Overnight deposit related to the distribution bank account |
- | 4,562,078 |
| Interest accrued on bank deposits | 820,135 | 13,267 |
| Deposits with banks | 1,276,669,452 | 305,337,134 |
The overnight deposits and cash held with the distributions bank accounts can only be used for payments to shareholders. 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.
During 2017 and 2016, the Fund acquired discount treasury bills denominated in RON, issued by the Ministry of Public Finance of Romania. The treasury bills balance as at 31 December 2017 amounted to RON 46,277,947 (31 December 2016: RON 781,445,213) and comprises treasury bills with remaining maturities of less than one year, with implicit interest rates (based on the yield to maturity for the respective issue) ranging between 0.75% – 1.87% per year (31 December 2016: interest rate ranging between 0.30% – 0.64% per year).
During 2017 and 2016, the Fund acquired coupon government bonds, denominated in RON, issued by the Ministry of Public Finance of Romania. The government bonds as at 31 December 2017 amounted to RON 195,923,820 (31 December 2016: RON 328,638,303) and have remaining maturities of less than one year and coupon rate of 3.25% per year (31 December 2016: coupon rates ranging between 5.90% and 6.75% per year).
In accordance with Law 247/2005, as amended by Government Emergency Ordinance no. 209/2005, the Fund received, at its establishment on 28 December 2005, shares in 117 companies as a contribution in kind from the Romanian State, as sole shareholder.
In June 2007, Government Emergency Ordinance no. 81/2007 for the acceleration of the procedure for granting compensations for the property abusively nationalised came into force, in accordance with which:
The valuation of the shares contributed by the Romanian State in December 2005 and June 2007 was performed in October 2007 by an independent valuer (Finevex SRL Constanta), who followed the valuation methodology set forth by Law 247/2005. The value of the shareholdings, as determined by the valuer, represented the cost (initial value) of the equity investments.
Initially, Law 247/2005 included a specific mechanism, whereby each time an in kind share capital increase in a state owned company occurred, Fondul Proprietatea was to receive shares in those companies as payment of the unpaid share capital of the Fund. Thus, an off-set mechanism was created to ensure the payment of the unpaid participations of the Romanian State in Fondul Proprietatea.
Beginning with 15 March 2013, the date when Government Emergency Ordinance no. 4/2012 entered into force, the compensation process was suspended, but the payment mechanism was maintained. In January 2015, Law 10/2015 entered into force, repealing the above payment mechanism. Law 10/2015 also repealed the provisions regarding the ability of the Romanian State to adjust the share capital of the Fund according to the unfolding of the compensation procedures.
The equity investments of the Fund are classified either as financial assets at fair value through profit or loss or as available for sale financial assets. The equity instruments of the Fund are valued as follows:
The movement in the carrying amounts of equity investments in 2017 and 2016 is presented below:
| 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 |
| Subscriptions to share capital increase of portfolio companies |
2,720,000 | 33,580 | 2,753,580 |
| Disposals | (6,528,164) | (74,360,549) | (80,888,713) |
| Impairment losses | - | (8,000,000) | (8,000,000) |
| Reclassification to non-current assets held for sale (see Note 9 ) |
(414,390,000) | (752,031,841) | (1,166,421,841) |
| Net change in fair value of available for sale equity investments (recorded in other comprehensive income) |
- | 315,822,981 | 315,822,981 |
| Net gain from equity investments at fair value through profit or loss |
222,752,094 | - | 222,752,094 |
| 31 December 2017 | 1,891,510,497 | 7,386,690,848 | 9,278,201,345 |
| Equity investments at fair value through profit or loss |
Equity investments available for sale |
Total equity investments |
|
| 1 January 2016 | 3,349,024,657 | 8,451,679,962 | 11,800,704,619 |
| Subscriptions to share capital increase of portfolio companies |
4,200,000 | 70,150 | 4,270,150 |
| Disposals | - | (1,411,493,673) | (1,411,493,673) |
| Impairment losses | - | (122,383,338) | (122,383,338) |
| Reclassification to non-current assets held for sale (see Note 9) |
(888,428,426) | - | (888,428,426) |
| Net change in fair value of available for sale equity investments (recorded in other comprehensive income) |
- | 987,353,576 | 987,353,576 |
| Net loss from equity investments at fair value through profit or loss |
(377,839,664) | - | (377,839,664) |
| 31 December 2016 | 2,086,956,567 | 7,905,226,677 | 9,992,183,244 |
During 2017, the Fund contributed cash to the share capital increase of Zirom SA with a total amount of RON 2,720,000.
In December 2016, the Fund contributed cash to the share capital increase of Hidroelectrica SA with a total amount of RON 33,580, but the registration with the Trade Register was finalised and recorded in 2017.
During 2017, the Fund sold its entire holding in Oil Terminal SA, Banca Transilvania SA, Primcom SA and Cetatea SA as well as, a part of its holding in BRD Groupe Societe Generale.
The Fund's holdings in SDEE Muntenia Nord SA, SDEE Transilvania Sud SA, SDEE Transilvania Nord SA, Electrica Furnizare SA and part of the holding in OMV Petrom SA were reclassified as non-current assets held for sale during 2017, the disposal transactions being also completed in 2017 (for more details see Note 9).
During 2017, the Fund recorded impairment losses in amount of RON 8,000,000 for the Fund's holding in Posta Romana SA.
During 2016, the Fund recorded impairment losses in amount of RON 122,383,338, the most significant being the impairment loss for the Fund's holding in Complexul Energetic Oltenia SA (RON 62,840,000), Nuclearelectrica SA (RON 44,264,535) and Posta Romana (RON 12,894,726).
The structure of the Fund's portfolio was the following:
| 31 December 2017 | 31 December 2016 | |
|---|---|---|
| Equity investments at fair value through | ||
| profit or loss | ||
| OMV Petrom SA | 1,619,774,750 | 1,857,680,048 |
| Societatea Nationala a Sarii SA | 233,000,000 | 181,000,000 |
| Zirom SA | 26,839,000 | 25,512,000 |
| Primcom SA | - | 10,225,757 |
| Other | 11,896,746 | 12,538,762 |
| 1,891,510,496 | 2,086,956,567 | |
| Equity investments available for sale | 31 December 2017 | 31 December 2016 |
| Hidroelectrica SA | 3,566,000,000 | 3,384,000,000 |
| CN Aeroporturi Bucuresti SA | 774,000,000 | 761,000,000 |
| E-Distributie Banat SA | 545,000,000 | 599,900,000 |
| Engie Romania SA | 472,000,000 | 453,400,000 |
| E-Distributie Muntenia SA | 419,000,000 | 449,400,000 |
| E-Distributie Dobrogea SA | 342,000,000 | 380,200,000 |
| BRD Groupe Societe Generale SA | 285,646,454 | 301,317,857 |
| Alro SA | 238,333,015 | 85,275,115 |
| Administratia Porturilor Maritime SA | 230,000,000 | 216,000,000 |
| Nuclearelectrica SA | 197,340,343 | 131,697,271 |
| Enel Energie Muntenia SA | 61,000,000 | 70,300,000 |
| Enel Energie SA | 57,000,000 | 75,500,000 |
| Posta Romana SA | 35,000,000 | 43,000,000 |
| Conpet SA | 52,121,980 | - |
| Complexul Energetic Oltenia SA | 32,000,000 | - |
| Romaero SA | 30,168,893 | 21,708,486 |
| SDEE Muntenia Nord SA | - | 255,200,000 |
| SDEE Transilvania Sud SA | - | 246,200,000 |
| SDEE Transilvania Nord SA | - | 208,300,000 |
| Electrica Furnizare SA | - | 167,723,000 |
| Other | 50,080,164 | 55,104,948 |
| 7,386,690,849 | 7,905,226,677 | |
| Total equity investments | 9,278,201,345 | 9,992,183,244 |
None of the equity investments are pledged as collateral for liabilities.
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 | 2,393,216,543 | - | 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 | |
| Level 1 | Level 2 | Level 3 | Total | |
|---|---|---|---|---|
| Equity investments | 2,400,000,124 | - | 7,592,183,120 | 9,992,183,244 |
| Treasury bills | 781,445,213 | - | - | 781,445,213 |
| Government bonds | 328,638,303 | - | - | 328,638,303 |
| 3,510,083,640 | - | 7,592,183,120 | 11,102,266,760 |
The table below presents the movement in Level 3 equity investments for 2017 and 2016:
| 12 months ended 31 December 2017 |
12 months ended 31 December 2016 |
|
|---|---|---|
| Opening balance | 7,592,183,120 | 7,272,679,522 |
| Net gain/(loss) recognised in profit or loss | 38,267,392 | (80,074,041) |
| Net change in fair value recorded in other comprehensive income | 10,684,549 | 1,032,207,489 |
| Subscriptions to share capital increase of portfolio companies | 2,753,580 | 4,270,150 |
| Disposals | (758,903,839) | (636,900,000) |
| Transfers in/(out) of Level 3 | - | - |
| Closing balance | 6,884,984,802 | 7,592,183,120 |
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 as 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.
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 (31 December 2016: as at 30 September 2016), based on financial information available for the companies under valuation at the respective date, 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 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 financial statements.
For the equity 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 31 December 2017, unlisted equity investments and listed illiquid equity investments with a total carrying amount of RON 6,884,984,802 (31 December 2016: RON 7,592,183,120), were classified as Level 3 of the fair value hierarchy. Out of this, an amount of RON 3,908,505,337 represents the total net change in fair value recognised in equity (other comprehensive income) as at 31 December 2017 (31 December 2016: RON 4,243,179,925). 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 31 December 2017 and 31 December 2016 in measuring equity instruments classified as Level 3 in the fair value hierarchy:
| 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. |
| Financial assets |
Fair value as at 31 December 2016 |
Valuation technique |
Unobservable inputs range (weighted average) |
Relationship of unobservable inputs to fair value |
|
|---|---|---|---|---|---|
| Total | 7,592,183,120 | ||||
| Unlisted equity |
7,270,749,000 | Market approach - comparable |
EBITDA multiple ranging from 4.22 to 11.4 (7.77) |
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 |
208,669,000 | Income approach - discounted cash flow method |
Weighted average cost of capital: 11.29% or 12.05% or 12.18% (12.06%) |
The lower the weighted average cost of capital, the higher the fair value. |
|
| Discount for lack of marketability: 12% or 14.6% or 17% (14.87%) |
The lower the discount for the lack of marketability, the higher the fair value. |
||||
| Discount for lack of control: 0% or 18% or 26.50% (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 equity |
43,000,000 | Market approach - comparable |
Price/Earnings value: 14.75 (14.75) |
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 |
1,696,000 | Market approach - comparable |
Price/Book value: 0.48 (0.48) |
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 |
46,026,408 | 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 |
22,042,712 | 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.
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 drastically 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 /(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 |
| Deductible temporary differences |
Related deferred tax asset /(liability), out of which: |
Recognised deferred tax asset/(liability) |
Not recognised deferred tax asset |
|
|---|---|---|---|---|
| 31 December 2016 | ||||
| Equity investments | (1,513,338,145) | (242,134,103) | (242,134,103) | - |
| Fiscal loss carried forward | 3,971,704,557 | 635,472,729 | 242,134,103 | 393,338,626 |
| 2,458,366,412 | 393,338,626 | - | 393,338,626 |
The effective tax rate used to calculate the deferred tax position of the Fund was 16% (standard tax rate).
The movement in the deferred tax position is presented in the tables below:
| Balance at 1 January 2017 |
Recognised in profit or loss |
Recognised in equity (other comprehensive income) |
Balance at 31 December 2017 |
|
|---|---|---|---|---|
| Equity investments | (242,134,103) | 226,577,749 | (18,059,165) | (33,615,519) |
| Fiscal loss carried forward | 242,134,103 | (208,518,584) | - | 33,615,519 |
| - | 18,059,165 - | 18,059,165 | - | |
| Balance at 1 January 2016 |
Recognised in profit or loss |
Recognised in equity (other comprehensive income) |
Balance at 31 December 2016 |
|
| Equity investments Fiscal loss carried forward |
(109,323,376) 109,323,376 |
(228,172,318) 132,810,727 |
95,361,591 - |
(242,134,103) 242,134,103 |
| - | (95,361,591) | 95,361,591 | - |
As at 31 December 2017 and 31 December 2016, the net deferred tax position is nil due to the fact that the Fund recognised a deferred tax asset for the unused tax losses carried forward, only to the level of the deferred tax liability arising from the taxable temporary differences. The deferred tax is recognised either in profit or loss or other comprehensive income, depending on the nature of the corresponding item.
The payable to shareholders caption comprises the amounts due to shareholders related to the returns of capital in total amount of RON 20,705,311 (31 December 2016: RON 20,208,049).
The movement during the period is presented in the table below:
| 2017 | 2016 | |
|---|---|---|
| 1 January | 20,208,049 | 22,972,691 |
| Distributions started during the period | 924,046,244 | 516,886,344 |
| Payments performed during the period | (910,534,840) | (512,486,449) |
| Payments related to 2015 return of capital performed directly by Central Depositary from the amount transferred by the Fund in their account in 2015 |
(10,430,295) | (7,164,536) |
| Distributions for which the statute of limitation occurred |
(2,583,847) | - |
| 31 December | 20,705,311 | 20,208,049 |
| (b) Other liabilities and provisions | ||
| 31 December 2017 | 31 December 2016 | |
| Administration fees | 11,752,658 | 12,907,804 |
| Intermediaries and other transactions fees related to disposal of portfolio holdings |
1,236,632 | 11,654,707 |
| Provision for litigations | 856,247 | 856,247 |
| Financial Supervisory Authority fees | 829,634 | 861,361 |
| Payables related to treasury shares under settlement |
- | 287,824 |
| Other liabilities | 1,332,308 | 1,386,042 |
| 16,007,479 | 27,953,985 |
Intermediaries and other transactions fees related to the disposal of portfolio holdings mainly comprise brokerage fees as well as the legal consulting, notary fees, marketing and promotional services and miscellaneous out of pocket expenses incurred by the intermediaries according to their agreements.
The following changes in the share capital were recorded during 2017:
(i) the subscribed share capital decreased from RON 8,562,968,634.10 to RON 6,245,930,062.52 following the reduction of the par value of the shares from RON 0.85 to RON 0.62 in order to cover the cumulated accounting losses stated in 2015 financial statements, according to the 31 October 2016 General Shareholders' Meeting ("GSM") resolution (total impact on the share capital of RON 2,317,038,572);
(ii) the subscribed share capital decreased from RON 6,245,930,062.52 to RON 5,742,226,025.22 following the reduction of the shares from RON 0.62 to RON 0.57 in order to perform a special distribution to shareholders, respectively a special return of capital of 0.05 RON per share, proportionally with their participation to the paid share capital (total impact on the share capital of RON 503,704,037).
The movements in the share capital components are presented below:
| Share capital paid-in | Share capital unpaid |
Total share capital | |
|---|---|---|---|
| 31 December 2015 | 9,746,649,631 | 327,431,115 | 10,074,080,746 |
| Decrease of the nominal value of the shares |
(530,101,923) | (18,190,617) | (548,292,540) |
| Cancellation of treasury shares | (357,474,089) | - | (357,474,089) |
| 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 |
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. This adjustment was recorded in the financial statements only for the 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.
The Fund recorded an impairment adjustment for the entire receivable related to the unpaid amounts from the Romanian State. Following the reduction of the nominal value of the Fund's shares on 24 March 2017 and 16 June 2017, the receivable related to the unpaid amounts from the Romanian State and the related impairment adjustment decreased accordingly and had an impact in profit or loss account of RON 36,381,235.
The below table presents the balances of number of shares and their nominal value as result of the above changes:
| 31 December 2017 | 31 December 2016 | |
|---|---|---|
| Number of shares in issue | 9,334,682,278 | 10,786,251,902 |
| Number of paid shares | 8,970,869,928 | 10,422,439,552 |
| Number of unpaid shares | 363,812,350 | 363,812,350 |
| Nominal value per share (RON) | 0.52 | 0.85 |
The shareholder structure as at 31 December 2017 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) |
35.62% | 37.07% |
| Foreign institutional investors | 19.57% | 20.36% |
| Romanian institutional investors | 17.63% | 18.35% |
| Romanian private individuals | 17.37% | 18.07% |
| Foreign private individuals | 3.15% | 3.28% |
| Romanian State | 0.06% | 0.06% |
| Treasury shares | 2.70% | 2.81% |
| Unpaid shares | 3.90% | - |
| Total | 100% | 100% |
Source: Depozitarul Central SA
The fair value reserve of RON 4,248,175,069 as at 31 December 2017 (31 December 2016: RON 4,333,537,124) is comprised of the cumulative net change in the fair value of the available for sale financial assets recognised in other comprehensive income, until the investments are derecognised or impaired, net of the related deferred tax recognised through equity.
| 31 December 2017 | 31 December 2016 | |
|---|---|---|
| Legal reserve | 330,578,802 | 266,084,000 |
| Gains from cancellation of treasury shares | 177,865,119 | 199,085,096 |
| Losses from cancellation of treasury shares | (256,073,589) | - |
| Distributions for which the statute of limitation occurred |
2,583,847 | - |
| Part of 2006 and 2007 profits allocated to other reserves |
- | 120,299,556 |
| 254,954,179 | 585,468,652 |
As required by the Romanian Companies' Law, a minimum 5% of the profit for the year must be transferred to the legal reserve until the reserve equals 20% of the issued share capital. The legal reserve cannot be used for distributions to shareholders.
As at 31 December 2017, an amount of RON 64,494,802, representing 5% of the 2017 profit (profit before current profit tax of RON 1,289,896,039), was transferred to the legal reserve. As at 31 December 2016, an amount of RON 22,348,493, representing 5% of the 2016 profit (profit before current profit tax of RON 446,969,856), was transferred to the legal reserve.
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. This amount may be used for corporate actions in accordance with the applicable legislation.
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 meeting of shareholders.
On 24 March 2017, the Fund used the entire amount of RON 120,299,556 representing 2006 and 2007 profits allocated to reserves and an amount of RON 35,819,344 from the gains from cancellation of treasury shares to cover its accumulated accounting losses stated in the 2015 financial statements, according to the 31 October 2016 GSM resolution.
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.
The table below summarises the buy-back programmes performed during 2017:
| GSM date approving the | Acquisition price range as | |||
|---|---|---|---|---|
| Programme | buy-back programme | Starting date | Completion date | approved by GSM |
| Seventh buy-back | 29-Oct-2015 | 29-Sep-2016 | 26-May-2017 | 0.2 - 2 RON per share |
| Eighth buy-back | 11-Oct-2016 | 30-May-2017 | 10-Nov-2017 | 0.2 - 2 RON per share |
| Ninth buy-back | 26-Oct-2017 | 14-Nov-2017 | ongoing | 0.2 - 2 RON per share |
The maximum number of shares that can be repurchased within the seventh buy-back and within the eighth buyback has to be computed so that all the outstanding treasury shares acquired during the respective programme and/or with the previous ones, do not exceed 10% of the issued share capital at the relevant time.
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 2017 and 2016 is presented in the below tables:
| 2017 | Treasury shares number - opening balance |
Acquisitions during 2017 |
Cancellations during 2017 |
Treasury shares number - closing balance |
|---|---|---|---|---|
| Sixth buy-back | 712,171,156 | - | (712,171,156) | - |
| Seventh buy-back | 79,336,721 | 750,910,898 | (739,398,468) | 90,849,151 |
| Eighth buy-back | - | 141,869,861 | - | 141,869,861 |
| Ninth buy-back | - | 19,159,328 | - | 19,159,328 |
| 791,507,877 | 911,940,087 | (1,451,569,624) | 251,878,340 |
| 2016 | Treasury shares number - opening balance |
Acquisitions during 2016 |
Cancellations during 2016 |
Treasury shares number - closing balance |
|---|---|---|---|---|
| Fifth buy-back | 227,572,250 | - | (227,572,250) | - |
| Sixth buy-back | 149,649,624 | 742,120,431 | (179,598,899) | 712,171,156 |
| Seventh buy-back | - | 79,336,721 | - | 79,336,721 |
| 377,221,874 | 821,457,152 | (407,171,149) | 791,507,877 |
The movement in the buy-back programmes balances during 2017 and 2016 is presented in the below tables:
| 2017 | Opening balance |
Acquisition of treasury shares |
Cancellation of treasury shares |
Decrease of the nominal value of the shares |
Closing balance |
|---|---|---|---|---|---|
| Sixth buy-back | 590,746,115 | - | (590,746,115) | - | - |
| Seventh buy-back | 63,399,048 | 689,974,069 | (628,580,657) | (46,482,304) | 78,310,155 |
| Eighth buy-back | - | 124,114,252 | - | (498,291) | 123,615,960 |
| Ninth buy-back | - | 16,329,392 | - | - | 16,329,392 |
| 654,145,163 | 830,417,713 | (1,219,326,773) | (46,980,596) | 218,255,507 |
| 2016 | Opening balance |
Acquisition of treasury shares |
Cancellation of treasury shares |
Decrease of the nominal value of the shares |
Closing balance |
|---|---|---|---|---|---|
| Fifth buy-back | 186,541,855 | - | (186,541,855) | - | - |
| Sixth buy-back | 121,497,490 | 617,674,165 | (135,209,961) | (13,215,579) | 590,746,115 |
| Seventh buy-back | - | 63,399,048 | - | - | 63,399,048 |
| 308,039,345 | 681,073,213 | (321,751,816) | (13,215,579) | 654,145,163 |
At the 31 October 2016 GSM, the Fund's shareholders approved the special return to shareholders of RON 0.05 per share, following the share capital decrease through the reduction of the nominal value of the Fund's share. The shareholders' resolution was published in the Official Gazette of Romania on 16 November 2016 and the endorsement by the FSA of the new Constitutive Act reflecting the share capital decrease was received on 22 March 2017. On 24 March 2017, the Trade Registry registered the 31 October 2016 GSM Resolution for approving the subscribed share capital decrease.
The shareholders registered in the shareholders' registry with the Central Depositary on 7 March 2017 (the Registration Date) have the right to receive RON 0.05 per share, proportionally with their participation in the paid in share capital of the Fund. The payment started on 27 March 2017 and by the end of 31 December 2017, shareholders had collected almost 99% of the total distribution of RON 480,543,496.
At the 28 February 2017 GSM, the Fund's shareholders approved the return to shareholders of RON 0.05 per share, following the subscribed share capital decrease from RON 5,742,226,025.22 to RON 5,238,521,987.92 through the reduction of the nominal value of Fund's share from RON 0.57 to RON 0.52. The shareholders resolution was published in the Official Gazette of Romania on 13 March 2017 and the endorsement by the FSA of the new Constitutive Act reflecting the share capital decrease was received on 16 June 2017.
The shareholders registered in the shareholders' registry with the Central Depositary on 12 June 2017 have the right to receive RON 0.05 per share, proportionally with their participation in the paid in share capital of the Fund. The payment started on 30 June 2017 and by the end of 31 December 2017, shareholders had collected almost 98% of the total distribution of RON 443,502,747.
According to the shareholders' resolution of the 31 October 2016 GSM, the cumulated accounting losses as stated in the 2015 financial statements for an amount of RON 2,473,157,472 were covered from other reserves (RON 156,118,900) and from registered share capital (RON 2,317,038,572), through the decrease of the subscribed share capital of the Fund from RON 8,562,968,634.10 to RON 6,245,930,062.52 by reducing the par value of the shares from RON 0.85 to RON 0.62. The subscribed share capital decrease and respectively the coverage of the accounting losses have been recorded in the accounting on 24 March 2017, respectively the date when the Trade Registry registered the 31 October 2016 GSM Resolution for approving the subscribed share capital decrease based on the FSA endorsement received on 22 March 2017.
As per these annual financial statements, prepared in accordance with the IFRS, the Fund recorded a net profit for the financial year ended 31 December 2017 of RON 1,289,896,039. The Fund's Sole Director proposal, subject for GSM approval in accordance with the legislation in force, for the appropriation of the net accounting profit for the 2017 financial year in an amount of RON 1,289,896,039 is as follows:
As at 31 December 2017, 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 as received 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 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 decision and the Court set the next hearing for 26 February 2018.
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 is currently suspended until a final Court decision is taken in relation with the file mentioned above.
| Year ended 31 December 2017 |
Year ended 31 December 2016 |
|
|---|---|---|
| Remunerations | ||
| Members of the Board of Nominees | 1,200,000 | 1,200,000 |
There were no loans to or other transactions between the Fund and the members of the Board of Nominees during 2017 or 2016.
FTIML was both the Fund Investment Manager and Sole Director of the Fund until 31 March 2016. Starting with 1 April 2016, considering the legal requirements to implement the AIFM Directive, the mandate of FTIML was terminated and FTIS was appointed as Sole Director and Alternative Investment Fund Manager. FTIS delegated the role of investment manager as well as certain administrative functions to FTIML.
The transactions carried out between the Fund and FTIS were the following:
| Year ended | Year ended | |
|---|---|---|
| Transactions | 31 December 2017 | 31 December 2016 |
| Administration fees | 78,117,008 | 58,041,993 |
The transactions carried out between the Fund and FTIML were the following:
| Year ended | Year ended | |
|---|---|---|
| Transactions | 31 December 2017 | 31 December 2016 |
| Administration fees | - | 12,567,847 |
| Rental expense | 70,265 | 65,977 |
| Operating cost | 24,398 | 23,761 |
| 94,663 | 12,657,585 |
During 2017, the Fund also recorded RON 1,583,604 representing expenses incurred by FTIML on its behalf (2016: RON 1,520,423). 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 agreements and was subject to Board of Nominees' approval.
The outstanding liabilities owed by the Fund were as follows:
| Amounts due to: | 31 December 2017 | 31 December 2016 |
|---|---|---|
| FTIS | 11,752,658 | 12,907,804 |
| FTIML | 69,752 | 193,120 |
| 11,822,410 | 13,100,924 |
There are no other elements of compensation for key management besides those described above.
The Fund had the following subsidiaries, all of which are incorporated in Romania:
| 31 December 2017 | 31 December 2016 | |
|---|---|---|
| Ownership interest | ||
| Zirom SA | 100% | 100% |
| Alcom SA | 72% | 72% |
| Comsig SA | 70% | 70% |
| Primcom SA | 0% | 75% |
In April 2017, the shareholders of Comsig SA approved the dissolution of the company. As at the reporting date of these financial statements, Comsig SA is in administrative liquidation process.
In August 2017, the Fund participated in the cash share capital increase of Zirom SA subscribing 272,000 new shares respectively, at the nominal value of RON 10 per share (in total of RON 2,720,000).
In September 2017, the Fund sold its entire holding in Primcom SA.
In March and August 2016, the Fund participated in the cash share capital increases of Zirom SA subscribing 300,000 and 120,000 new shares respectively, at the nominal value of RON 10 per share (in total of RON 3,000,000 and RON 1,200,000 respectively).
On 5 July 2016, Primcom SA finalised the registration within the Romanian Central Depositary of its share capital decrease by RON 18,768.90 through the cancellation of 187,689 shares according with the resolution of the General Shareholders Meeting held on 17 March 2016. The number of shares owned by Fondul Proprietatea in Primcom SA, respectively 1,275,032 shares did not change, but the holding percentage increased from 68% to 75%.
The fair value of investments in subsidiaries is presented in the table below:
| 31 December 2017 | 31 December 2016 | |
|---|---|---|
| Zirom SA | 26,839,000 | 25,512,000 |
| Alcom SA | 9,906,746 | 10,133,492 |
| Comsig SA | - | 248,269 |
| Primcom SA | - | 10,225,757 |
| 36,745,746 | 46,119,518 |
As at 31 December 2017, 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.
During 2017, the Fund did not record or receive any dividends from its subsidiaries while during 2016 the Fund recorded and received a dividend of RON 1,719,653 from Comsig SA.
As at 31 December 2017 and 31 December 2016 the Fund had two associates, all of them incorporated in Romania:
| 31 December 2017 | 31 December 2016 | |
|---|---|---|
| Ownership interest | ||
| Societatea Nationala a Sarii SA | 49% | 49% |
| Plafar SA | 49% | 49% |
During 2017, the Fund recorded and collected from Societatea Nationala a Sarii SA a dividend of RON 13,760,169.
The Fund did not carry out any transactions with its associates during 2016.
On 15 December 2017 the Fund submitted an application for endorsement of a tender offer to accelerate the ninth buy-back programme to the FSA for approval. Under this tender offer, the Fund intends to repurchase up to 1,200,000,000 shares from its shareholders, both in the form of shares and GDRs.
As such, the daily execution of the ninth buy-back programme, with respect to the shares on the Bucharest Stock Exchange and GDRs on the London Stock Exchange 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 is from 18 January 2018 until 23 February 2018, and the purchase price is RON 0.9350 per share and the USD equivalent of RON 46.75 per GDR.
Statement of Assets and Obligations of Fondul Proprietatea SA as at 29 December 2017, prepared in accordance with CNVM Regulation 4/2010 (Annex no. 4)
| Item | ber 20 16 em |
29 Dec ber 20 17 em |
Diff ere nce s |
|||||||
|---|---|---|---|---|---|---|---|---|---|---|
| % o f th et e n |
30 Dec % o f th e |
% o f th e |
% o f th e |
|||||||
| et ass |
l as tota set |
Cur ren cy |
Lei | net set as |
l as tota set |
Cur ren cy |
Lei | Lei | ||
| I. | Tot al a ts sse |
100 .420 3% |
100 .000 0% |
11,4 75,3 58,7 24.0 4 |
100 .337 2% |
100 .000 0% |
10,8 26,8 27,8 68.0 9 |
(64 8,53 0,85 5.95 ) |
||
| 1 | Sec urit ies and rke t in t of wh ich :* stru nts mo ney ma me , ou |
24. 642 1% |
24.5 389 % |
2,8 15,9 29,8 74.9 9 |
24.3 997 % |
24.3 177 % |
2,63 2,84 0,97 9.68 |
(183 ,088 ,895 .31) |
||
| 1.1. | uriti nd m arke t ins ad mitt ed o ded gula ted ket from Ro ia, o f wh ich: trum ents r tra ut o sec es a one y m on a re mar man |
24. 642 1% |
24.5 389 % |
- | 2,8 15,9 29,8 74.9 9 |
24.3 997 % |
24.3 177 % |
- | 2,6 32,8 40, 979 .68 |
(183 ,088 ,895 .31) |
| 1.1. 1 lis ted sha trad ed i n th e la st 3 0 tr adin g d res ays |
21. 678 0% |
21. 587 3% |
- | 2,4 77,2 13,0 80. 14 |
22. 490 7% |
22. 415 2% |
- | 2,4 26, 855 ,05 9.7 1 |
(50, 358 ,02 0.43 ) |
|
| 1.1. 2 lis ted sha not trad ed i n th e la st 3 0 tr adin g d res ays |
0.08 87% |
0.08 83% |
- | 10,1 33,4 92. 11 |
0.09 36% |
0.09 32% |
- | 10, 095 ,91 6.20 |
(37, 575 .91) |
|
| 3 G 1.1. ent bon ds ove rnm |
2.8 754 % |
2.8 633 % |
- | 328 ,583 ,302 .74 |
1.81 54% |
1.80 93% |
- | 195 ,89 0,00 3.7 7 |
(132 7) ,69 3,29 8.9 |
|
| 4 al lotm righ dmi tted trad ing ulat ed m ark 1.1. ent ts n ot a at et on a reg |
- | - | - | - | - | - | - | - | - | |
| 1.2. | uriti nd m arke t ins ad mitt ed o ded gula ted ket from ber f trum ents r tra stat ut o sec es a one y m on a re mar a m em e, o whi ch: |
- | - | - | - | - | - | - | - | - |
| 1.2. 1 lis ted sha trad ed i n th e la st 3 0 tr adin g d res ays |
- | - | - | - | - | - | - | - | - | |
| 1.2. 2 lis ted sha not trad ed i n th e la st 3 0 tr adin g d res ays |
- | - | - | - | - | - | - | - | - | |
| 1.3. | fro uriti nd m arke t ins trum ents ad mitt ed o stoc k ex cha sta te n ot a mbe got iate sec es a one y m n a nge m a me r or ne s noth late d m arke t fro mbe r, th gula r ba sis and is r gniz ed a nd sta te n ot a at o ates on a er r egu m a me per on a re eco ned he p ubli d by the Fin ial S rvis Aut hor ity ( "FS A".) to t ope c, a ppr ove anc upe ory |
- | - | - | - | - | - | - | - | - |
| 2 | New iss ued uriti sec es |
- | - | - | - | - | - | - | - | - |
| Oth ritie d m arke t ins ntio ned 18 7 le a) of t he Reg ulat ion 15/2 004 trum ents at art. tter t er s ecu s an one y m me no. , ou |
||||||||||
| 3 | of w hich : |
66.0 359 % |
65.7 595 % |
- | 7,54 6,14 7,06 3.97 |
63.4 009 % |
63. 187 9% |
- | 6,8 41,2 41,2 62.8 2 |
(704 ,905 ,801 .15) |
| - sh t ad mitt ed a t tra ding gula ted ket are s no on a re mar |
66.0 359 % |
65. 759 5% |
- | 7,54 6,14 7,06 3.9 7 |
63.4 009 % |
63. 187 9% |
- | 6,8 41,2 41,2 62.8 2 |
(704 15) ,90 5,8 01. |
|
| 4 | of w Ban k de its, out hich pos : |
2.67 21% |
2.66 09% |
305 ,335 ,16 1.21 |
11.8 307 % |
11.7 910 % |
1,27 6,58 7,19 7.95 |
971 ,252 ,036 .74 |
||
| 4.1 | ban k de its m ade wit h cr edit ins titut ions fro m R nia pos oma |
2.6 721 % |
2.6 609 % |
- | 305 ,33 5,1 61.2 1 |
11.8 307 % |
11.7 910 % |
- | 1,2 76,5 87, 197 .95 |
971 ,252 ,03 6.74 |
| - in RO N |
2.6 721 % |
2.6 609 % |
305 ,33 5,1 61.2 1 |
11.8 307 % |
11.7 910 % |
1,27 6,58 7,19 7.95 |
971 ,252 ,03 6.74 |
|||
| - in eur o |
- | - | - | - | - | - | - | - | - | |
| 4.2 | ban k de its m ade wit h cr edit ins titut ions fro n E U s tate pos m a |
- | - | - | - | - | - | - | - | - |
| 4.3 | ban k de its m ade wit h cr edit ins titut ions fro EU stat pos m a n n on- e |
- | - | - | - | - | - | - | - | - |
| 5 | Der ivat ives fina ncia l ins trum ents tra ded gula ted rket on a re ma |
- | - | - | - | - | - | - | - | - |
| 6 | Cur t of rent ts a nd p etty h ou whi ch: acc oun cas |
0.05 06% |
0.05 04% |
5,78 1,68 6.46 |
0.17 77% |
0.17 71% |
19,1 73,6 42. 78 |
13,3 91,9 56.3 2 |
||
| - in RO N |
0.05 06% |
0.05 04% |
- | 5,7 78,0 94. 78 |
0.1 777 % |
0.1 771 % |
- | 19, 167 ,49 7.50 |
13,3 89,4 02. 72 |
|
| - in eur o |
0.00 00% |
0.00 00% |
EUR 2 22. 45 |
1,01 0.1 7 |
0.00 00% |
0.00 00% |
EUR 671 .64 |
3,12 9.64 |
2,1 19.4 7 |
|
| - in USD |
0.00 00% |
0.00 00% |
USD 2 32.9 2 |
1,00 2.32 |
0.00 00% |
0.00 00% |
USD 331 .35 |
1,28 9.45 |
287 .13 |
|
| - in GB P |
0.00 00% |
0.00 00% |
GB P 298 .18 |
1,57 9.19 |
0.00 00% |
0.00 00% |
GB P 328 .61 |
1,72 6.19 |
147 .00 |
|
| 7 | Mon arke t ins trum ents , oth tha n th tra ded gula ted rket cord ing to a rt. 1 01 . (1) lett ) ey m ers ose on a re ma , ac par er g /20 of L 297 04 ard ing the ital rket , wi th s ubs ent add ition d a dme nts, out of whi ch: aw no. reg cap ma equ s an men |
6.83 82% |
6.80 99% |
- | 781 ,436 ,770 .50 |
0.42 89% |
0.42 74% |
- | 46, 273 ,974 .68 |
(735 ,162 ,795 .82) |
| - Tr bills wit h or igin al m ritie s of les s th atu 1 ye eas ury an ar |
6.83 82% |
6.80 99% |
- | 781 ,43 6,7 70.5 0 |
0.42 89% |
0.42 74% |
- | 46, 273 ,974 .68 |
(735 .82) ,162 ,795 |
|
| 8 | Par ticip atio n tit les of O CIU d/o r of UC ITS (A. O.P .C./ O. P.C .V.M .) an |
- | - | - | - | - | - | - | - | - |
| 9 | Oth f wh ich: ts o ut o er a sse |
0.18 14% |
0.18 06% |
- | 20, 728 ,166 .91 |
0.09 93% |
0.09 89% |
- | 10,7 10,8 10.1 8 |
(10 ,017 ,356 .73) |
| ceiv able enti the nsfe rred Cen tral Dep osit for 2 015 of c apit al a nd n aid t tra to ret ot y et p - re rep res ng am oun ary urn to / coll d by sha reh olde ntil the end of the iod ecte rs u per |
0.10 54% |
0.10 49% |
- | 12,0 42,8 12.7 0 |
0.0 150 % |
0.0 149 % |
- | 1,6 12,5 18.0 0 |
(10, 430 ,294 .70) |
|
| Sta - tax divi den ds t o be red from the te B udg et on rec ove |
0.00 61% |
0.00 60% |
- | 692 ,48 9.0 0 |
0.00 68% |
0.00 67% |
- | 730 ,314 .00 |
37,8 25. 00 |
|
| Sta - tax fit to be d fr the te B udg et on pro reco vere om |
0.06 41% |
0.06 39% |
- | 7,33 0,44 0.00 |
0.06 79% |
0.06 77% |
- | 7,3 30,4 40. 00 |
- | |
| - int ible sets ang as |
0.00 48% |
0.00 48% |
- | 548 ,80 6.76 |
0.00 70% |
0.00 70% |
- | 75 6,60 3.69 |
207 ,79 6.93 |
|
| - ad for inta ngib le a ents ts van ce p aym sse |
- | - | - | - | 0.00 02% |
0.00 02% |
- | 19 ,332 .26 |
19,3 32.2 6 |
|
| her ivab les - ot rece |
0.00 03% |
0.00 03% |
- | 35,8 11.2 4 |
0.00 01% |
0.00 01% |
- | 15,7 20. 00 |
(20, 091 .24) |
|
| - in RO N |
0.00 03% |
0.00 03% |
- | 35,8 11.2 4 |
0.00 01% |
0.00 01% |
- | 15,7 20. 00 |
(20, 091 .24) |
|
| - in EUR |
- | - | - | - | - | - | EUR - |
- | - | |
| USD - in |
- | - | - | - | - | - | USD - |
- | - | |
| id e - pr epa xpe nse s |
0.00 07% |
0.00 07% |
- | 77,8 07.2 1 |
0.00 23% |
0.00 23% |
- | 245 ,882 .23 |
168 ,075 .02 |
|
| II. | Tot al l iab iliti es |
0.42 01% |
0.4 184 % |
48,0 07,3 43.5 7 |
0.3 372 % |
0.3 363 % |
36,4 09,5 34.2 9 |
(11 ,597 ,809 .28) |
||
| 1 | Liab ilitie s in rel atio ith t he p of fee s du the inv ny ( S.A .I.) ents e to estm ent t co n w aym man age men mpa |
0.1 119 % |
0.1 114 % |
- | 12,7 82,4 12.5 6 |
0.10 66% |
0.10 63% |
- | 11,5 06, 104 .96 |
(1,2 76,3 07.6 0) |
| 2 | Liab ilitie late d to the fee yab le to the de itary ba nk s re s pa pos |
0.00 06% |
0.00 06% |
- | 66,2 04.5 4 |
0.00 04% |
0.00 04% |
- | 50,0 31.9 6 |
(16 ,172 .58) |
| 3 | Liab ilitie late d to the fee yab le to inte diar ies s re s pa rme |
0.05 61% |
0.05 58% |
- | 6,40 6,65 9.99 |
0.0 111 % |
0.0 111 % |
- | 1,19 7,28 6.95 |
(5,2 09,3 73.0 4) |
| 4 | Liab ilitie late d to issio nd o the r ba nk s ices s re co mm ns a erv |
- | - | - | - | - | - | - | - | - |
| 5 | Inte rest able pay |
- | - | - | - | - | - | - | - | - |
| 6 | Liab ilitie late d to iss osts s re uan ce c |
- | - | - | - | - | - | - | - | - |
| 7 | Liab ilitie s in rel atio ith t he f /co issio o F SA ns t n w ees mm |
0.00 73% |
0.00 73% |
- | 833 ,574 .93 |
0.00 72% |
0.00 72% |
- | 776 ,109 .30 |
(57 ,465 .63) |
| 8 | Liab ilitie late d to dit f s re au ees |
- | - | - | - | - | - | - | - | - |
| 9 | Oth er L iabi litie ut o f wh ich: s, o |
0.24 43% |
0.24 33% |
- | 27, 918 ,49 1.55 |
0.2 119 % |
0.2 113 % |
- | 22, 880 ,00 1.12 |
(5,0 38,4 90.4 3) |
| - lia bilit ies rela ted to th turn of ital e re cap |
0.1 768 % |
0.1 761 % |
- | 20,2 08,0 48. 75 |
0.19 18% |
0.19 12% |
- | 20, 705 ,31 0.85 |
497 ,262 .10 |
|
| ovis ions - pr |
0.00 75% |
0.00 75% |
- | 856 ,24 7.22 |
0.00 79% |
0.00 79% |
- | 856 ,24 7.22 |
- | |
Fondul Proprietatea SA Annual Sole Director's Report 2017 128
| Item | 30 Dec ber 20 16 29 Dec ber 20 17 em em |
Diff ere nce s |
|||||||
|---|---|---|---|---|---|---|---|---|---|
| f th % o et e n |
f th % o e |
f th % o e |
f th % o e |
||||||
| et ass |
l as tota set |
Cur ren cy |
Lei | net set as |
l as tota set |
Cur ren cy |
Lei | Lei | |
| - lia bilit ies rela ted to b uyb ack der lem sett ent s un |
0.00 25% |
0.00 25% |
- | 287 ,82 3.53 |
- | - | - | - | (28 7,82 3.53 ) |
| tion d re late d co ntrib utio - re mun era s an ns |
0.00 03% |
0.00 03% |
- | 31,9 50. 00 |
0.00 04% |
0.00 04% |
- | 40, 065 .00 |
8,1 15.0 0 |
| her liab ilitie t of whi ch: - ot s ou |
0.05 72% |
0.05 69% |
- | 6,53 4,42 2.0 5 |
0.0 118 % |
0.0 118 % |
- | 1,2 78,3 78.0 5 |
(5,2 56, 044 .00) |
| - in RO N |
0.05 58% |
0.05 56% |
- | 6,3 74,5 91.3 2 |
0.00 70% |
0.00 70% |
- | 762 ,042 .01 |
(5,6 12,5 49.3 1) |
| - in USD |
0.00 09% |
0.00 09% |
USD 25 ,00 7.00 |
107 ,612 .62 |
0.00 09% |
0.00 09% |
USD 25 ,00 7.00 |
97,3 14.7 4 |
(10, 297 .88) |
| - in eur o |
0.00 05% |
0.00 05% |
EUR 11 ,49 9.0 0 |
52,2 18.1 1 |
- | - | EUR - |
- | (52, .11) 218 |
| - in GB P |
0.00 00% |
0.00 00% |
GB P - |
- | 0.00 39% |
0.00 39% |
GB P 7 9,76 8.0 0 |
419 ,02 1.30 |
419 ,02 1.30 |
| III. Net As Va lue (I - II) set |
100 .000 0% |
99.5 816 % |
11,4 27,3 51,3 80.4 7 |
100 .000 0% |
99. 663 7% |
10,7 90,4 18,3 33.8 0 |
(63 6,93 3,04 6.67 ) |
* = Includes also the value of holdings in companies admitted to trading on AeRo market (alternative regulated market)
| Item | 29 Dec ber 20 17 em |
30 Dec ber 20 16 em |
Diff ere nce s |
|---|---|---|---|
| Net As Va lue set |
10,7 90,4 18,3 33.8 0 |
11,4 27,3 51,3 80.4 7 |
(63 ) 6,93 3,04 6.67 |
| Num ber of o and ing sha utst res |
8,7 18,9 91,5 88 |
9,63 0,93 1,67 5 |
(91 7) 1,94 0,08 |
| Uni valu tary t as set ne e |
1.23 75 |
1.18 65 |
0.05 10 |
1.1listed shares traded in the last 30 trading days
| Sta ke i n F ond ul |
Sta ke i n F ond ul |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Dat f th e la st e o |
No. of sha res |
Nom ina l |
Sha re |
Sta ke i n th e |
Pro prie tal tate a to |
Pro prie tate et a n |
||||
| Issu er |
Sym bol |
trad ing ssio se n |
hel d |
val ue |
val ue |
Tot al v alu e |
issu er's pita l ca |
et ass |
et ass |
Eva luat ion tho d me |
| Alro Sla tina SA |
ALR | 29/ Dec /20 17 |
72,8 84,7 14 |
0.5 | 3.27 00 |
238 ,333 ,014 .78 |
10.2 1% |
2.2 013 % |
2.2 087 % |
Clo sing pri ce |
| BRD -Gr e S ocie te G rale SA oup ene |
BRD | 29/ Dec /20 17 |
22, 143 ,136 |
1 | 12.9 000 |
285 ,646 ,454 .40 |
3.17 % |
2.63 83% |
2.64 72% |
Clo sing pri ce |
| Con pet SA |
CO TE |
29/ Dec /20 17 |
524 ,366 |
3.3 | 99.4 000 |
52, 121 ,980 .40 |
6.05 % |
0.48 14% |
0.48 30% |
Clo sing pri ce |
| IOR SA |
IOR B |
29/ /20 Dec 17 |
2,62 2,2 73 |
0.1 | 0.30 00 |
786 ,68 1.90 |
2.8 1% |
0.00 73% |
0.00 73% |
Ref pri Av rice ere nce ce - era ge p |
| OM V P m S A etro |
SN P |
29/ Dec /20 17 |
5,66 3,54 8,07 8 |
0.1 | 0.28 60 |
1,61 9,77 4,75 0.3 1 |
9.99 % |
14.9 608 % |
15.0 112 % |
Clo sing pri ce |
| Pala ce S A |
PAC Y |
29/ Dec /20 17 |
5,83 2,4 82 |
0.1 | 0.46 00 |
2,6 82,9 41. 72 |
15.4 2% |
0.02 48% |
0.02 49% |
Ref pri Av rice ere nce ce - era ge p |
| Rom o S A aer |
RO RX |
29/ Dec /20 17 |
1,31 1,69 1 |
2.5 | 23.0 000 |
30, 168 ,893 .00 |
20.9 9% |
0.27 86% |
0.27 96% |
Ref pri Av rice ere nce ce - era ge p |
| Nuc lear elec trica SA |
SN N |
29/ Dec /20 17 |
27,4 08,3 81 |
10 | 7.20 00 |
197 ,340 ,343 .20 |
9.09 % |
1.82 27% |
1.82 88% |
Clo sing pri ce |
| Tot al |
2,42 6,85 5,05 9.7 1 |
22.4 152 % |
22. 490 7% |
| Dat f th e la st e o |
No. of sha res |
Nom ina l |
Sta ke i n th e |
Sta ke i n F ond ul Pro prie tal tate a to |
Sta ke i n F ond ul Pro prie tate et a n |
|||||
|---|---|---|---|---|---|---|---|---|---|---|
| Issu er |
Sym bol |
trad ing ssio se n |
hel d |
val ue |
Sha alu re v e |
Tot al v alu e |
issu er's pita l ca |
et ass |
et ass |
Eva luat ion tho d me |
| Alc SA om |
ALC Q |
10/F eb/2 017 |
89,2 49 |
2.5 | 111 .00 12 |
9,90 6,74 6.10 |
71.8 9% |
0.09 15% |
0.09 18% |
Sha reh olde rs' e quit of 31 Dec emb er 2 016 y as |
| Mec on S A |
ME CP |
4/O ct/2 017 |
60,0 54 |
11.6 | 3.15 00 |
189 ,170 .10 |
12.5 1% |
0.00 17% |
0.00 18% |
Fair lue (Las ding pri ce) t tra va |
| Tot al |
10,0 95,9 16.2 0 |
0.09 32% |
0.0 936 % |
Unlisted shares
| Acq uis itio rice n p (tot rice of |
Sta ke i n F ond ul |
Sta ke i n F ond ul |
||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| No. of sha res |
Dat f e o |
al p uis itio f acq n o |
Sta ke i n th e |
Pro prie tate a to tal |
Pro prie tate et a n |
|||||
| Issu er |
hel d |
uis itio n * acq |
)** sha res |
Sha alu re v e |
Tot al v alu e |
issu pita er's l ca |
et ass |
et ass |
Com y st atu pan s |
ion Eva luat tho d me |
| Aer rtul Inte rnat iona l Mi hail Ko galn icea opo nu |
Unl iste d co nies , in mpa |
/ sh (Va Fair lue lue er i nde den t va luat or's va are as p pen |
||||||||
| - Co SA nsta nta |
23, 159 |
19/J ul/2 005 |
1,4 90,8 98 |
105 .401 7 |
2,4 40, 997 .97 |
20. 00% |
0.0 225 % |
0.0 226 % |
fun ctio n |
Sep ber 7) rt as at 30 tem 201 repo |
| Aer rtul Inte iona l Tim isoa Tra ian rnat opo ra - |
Unl iste d co nies , in mpa |
Fair lue / sh (Va lue er i nde den luat or's t va va are as p pen |
||||||||
| Vui a S A |
32,0 16 |
19/J ul/2 005 |
2,6 52,5 88 |
687 .156 4 |
21, 999 ,999 .30 |
20. 00% |
0.2 032 % |
0.2 039 % |
fun ctio n |
30 Sep ber 201 7) rt as at tem repo |
| BAT Se rvic e S A |
194 ,022 |
19/J ul/2 005 |
656 ,686 |
0.0 000 |
0.00 | 33. 00% |
0.00 00% |
0.00 00% |
Ban krup tcy |
Pric ed a t ze ro |
| Fair lue / sh (Sh hold ers' uity of 31 va are are eq as |
||||||||||
| Unl iste d co nies , in mpa |
ed/ Dec ber 201 6 ad just ed w ith d ivid end s de clar em |
|||||||||
| CN Adm inis ia C lelo r Na viga bile SA trat ana |
203 ,160 |
19/J ul/2 005 |
15,1 94,2 09 |
77. 027 2 |
15, 648 ,845 .95 |
20. 00% |
0.14 45% |
0.14 50% |
fun ctio n |
sha re) |
| Fair lue / sh (Sh hold ers' uity of 31 va are are eq as |
||||||||||
| CN Adm inis ia P rilor Du ii Fl uvia le trat ortu nar |
Unl iste d co nies , in mpa |
Dec ber 201 6 ad just ed w ith d ivid end s de clar ed/ em |
||||||||
| SA | 27,5 54 |
19/J ul/2 005 |
675 ,810 |
127 .558 6 |
3,5 14,7 49.6 6 |
20. 00% |
0.0 325 % |
0.0 326 % |
fun ctio n |
sha re) |
| Fair lue / sh (Sh hold ers' uity of 31 va are are eq as |
||||||||||
| CN Adm inis trat ia P ortu rilor Du ii M arit ime nar SA |
37 | 19/J ul/2 005 |
71 | 132 .635 2 |
73.7 4 |
20. 00% |
0.0 260 % |
0.0 261 % |
Unl iste d co nies , in mpa fun ctio |
ed/ Dec ber 201 6 ad just ed w ith d ivid end s de clar em sha |
| 21,2 | 1,3 51,6 |
2,8 16,7 |
n Unl iste d co nies , in |
re) Fair lue / sh (Va lue er i nde den luat or's t va va are |
||||||
| CN Adm inis ia P rilor Ma ritim e S A trat ortu |
2,65 8,12 8 |
19/J ul/2 005 |
65,5 11,4 44 |
86. 527 0 |
229 ,999 ,84 1.46 |
19. 99% |
2.12 44% |
2.13 15% |
mpa fun ctio n |
as p pen 30 Sep ber 201 7) rt as at tem |
| Unl iste d co nies , in mpa |
repo Fair lue / sh (Va lue er i nde den luat or's t va va are as p pen |
|||||||||
| CN Aer i Bu sti S A * rtur opo cure |
2,87 5,44 3 |
5/F eb/2 010 |
131 ,168 ,263 |
269 .175 9 |
773 ,999 ,957 .42 |
20. 00% |
7.14 89% |
7.17 30% |
fun ctio n |
30 Sep ber 201 7) rt as at tem repo |
| Unl iste d co nies , in mpa |
Fair lue / sh (Va lue er i nde den t va luat or's va are as p pen |
|||||||||
| Com ic O ia S plex ul E get lten A ner |
27,3 87,9 40 |
31/ /20 May 12 |
670 ,353 ,852 |
1.1 683 |
31, 997 ,330 .30 |
21. 55% |
0.29 55% |
0.29 65% |
fun ctio n |
Sep 7) rt as at 30 tem ber 201 repo |
| Com SA sig |
75,6 55 |
19/J ul/2 005 |
132 ,633 |
0.0 000 |
0.00 | 69. 94% |
0.00 00% |
0.00 00% |
Liq uida tion |
Pric ed a t ze ro |
| Unl iste d co nies , in mpa |
Fair lue / sh (Va lue er i nde den luat or's t va va are as p pen |
|||||||||
| E-D istri buti e B t SA ana |
9,22 0,64 4 |
19/J ul/2 005 |
141 ,578 ,929 |
59. 106 5 |
544 ,999 ,994 .59 |
24. 12% |
5.03 38% |
5.05 08% |
fun ctio n |
30 Sep ber 201 7) rt as at tem repo |
| Unl iste d co nies , in mpa |
Fair lue / sh (Va lue er i nde den luat or's t va va are as p pen |
|||||||||
| E-D istri buti e D obr a S A oge |
6,75 3,12 7 |
19/J ul/2 005 |
114 ,760 ,053 |
50. 643 2 |
341 ,999 ,96 1.29 |
24. 09% |
3.15 88% |
3.16 95% |
fun ctio n |
30 Sep ber 201 7) rt as at tem repo |
| Unl iste d co nies , in mpa |
Fair lue / sh (Va lue er i nde den t va luat or's va are as p pen |
|||||||||
| SA E-D istri buti e M unte nia |
3,25 6,39 6 |
19/J ul/2 005 |
107 ,277 ,263 |
128 .669 8 |
418 ,999 ,822 .04 |
12. 00% |
3.87 00% |
3.88 31% |
fun ctio n |
Sep 7) rt as at 30 tem ber 201 repo |
| Unl iste d co nies , in mpa |
Fair lue / sh (Va lue er i nde den luat or's t va va are as p pen |
|||||||||
| Ene l En ie M nia SA unte erg |
444 ,054 |
19/J ul/2 005 |
2,83 3,76 9 |
137 .370 6 |
60, 999 ,964 .41 |
12. 00% |
0.56 34% |
0.56 53% |
fun ctio n |
Sep ber 7) rt as at 30 tem 201 repo |
| Unl iste d co nies , in mpa |
Fair lue / sh (Va lue er i nde den luat or's t va va are as p pen |
|||||||||
| Ene l En ie S A erg |
1,68 0,00 0 |
19/J ul/2 005 |
26, 124 ,808 |
33. 928 5 |
56, 999 ,880 .00 |
12. 00% |
0.52 65% |
0.52 82% |
fun ctio n |
30 Sep ber 201 7) rt as at tem repo |
| Unl iste d co nies , in mpa |
Fair lue / sh (Va lue er i nde den t va luat or's va are as p pen |
|||||||||
| SA Eng ie R nia oma |
2,3 90,6 98 |
19/J ul/2 005 |
62,6 10,8 12 |
197 .431 8 |
471 ,999 ,809 .40 |
11. 99% |
4.35 95% |
4.3 742 % |
fun ctio n |
Sep 7) rt as at 30 tem ber 201 repo |
| Ger al C s S ovit etic A osm |
1,35 0,98 8 |
19/J ul/2 005 |
340 ,996 |
0.0 000 |
0.00 | 9.76 % |
0.00 00% |
0.00 00% |
Ban krup tcy |
Pric ed a t ze ro |
| SA | 19/J ul/2 |
Unl iste d co nies , in mpa |
Fair lue / sh (Va lue er i nde den luat or's t va va are as p pen |
|||||||
| Hid lect rica roe |
89,3 81,5 93 |
005 | 3,1 07,7 01,5 76 |
39. 896 3 |
3,5 65,9 94,8 48.8 1 |
19. 94% |
32. 936 7% |
33. 047 8% |
fun ctio n |
30 Sep ber 201 7) rt as at tem repo / sh |
| Plaf ar S A |
132 ,784 |
28/J un/2 007 |
3,16 0,32 9 |
14. 986 7 |
1,9 89,9 93.9 7 |
48. 99% |
0.0 184 % |
0.0 184 % |
Unl iste d co nies , in mpa fun ctio n |
Fair lue (Va lue er i nde den luat or's t va va are as p pen 30 Sep ber 201 7) rt as at tem |
| Unl iste d co nies , in |
repo Fair lue / sh (Va lue er i nde den t va luat or's va are |
|||||||||
| na S Pos ta R A oma |
14,8 71,9 47 |
19/J ul/2 005 |
84,6 64,3 80 |
2.3 534 |
34, 999 ,640 .07 |
25. 00% |
0.32 33% |
0.32 44% |
mpa fun ctio n |
as p pen Sep 7) rt as at 30 tem ber 201 repo |
| b S Rom plum A |
1,59 5,52 0 |
28/J un/2 007 |
19,2 49,2 19 |
0.00 00 |
0.00 | 33. 26% |
0.00 00% |
0.00 00% |
Ban krup tcy |
Pric ed a t ze ro |
| Sal ubr iser v S A |
43,2 63 |
19/J ul/2 005 |
207 ,60 1 |
0.0 000 |
0.00 | 17. 48% |
0.00 00% |
0.00 00% |
Jud icia l reo nisa tion rga |
Pric ed a t ze ro |
| Sim SA tex |
132 ,859 |
28/J un/2 007 |
3,05 9,85 8 |
0.0 000 |
0.00 | 30. 00% |
0.00 00% |
0.00 00% |
Jur idic al re anis atio org n |
Pric ed a t ze ro |
| Unl iste d co nies , in mpa |
Fair lue / sh (Va lue er i nde den luat or's t va va are as p pen |
|||||||||
| Soc ieta Nat iona la a Sa rii S A tea |
2,0 05,8 84 |
28/J un/2 007 |
76,3 47, 715 |
116 .158 2 |
232 ,999 ,874 .85 |
48. 99% |
2.15 21% |
2.15 93% |
fun ctio n |
30 Sep ber 201 7) rt as at tem repo |
| Wo rld T rad e C ente r Bu sti S A cure |
198 ,860 |
19/J ul/2 005 |
42,4 59 |
0.0 000 |
0.00 | 19. 90% |
0.00 00% |
0.00 00% |
Inso lven cy |
Pric ed a t ze ro |
| Unl iste d co nies , in mpa |
ro ( of fina for Pric ed a t ze lack ual ncia l sta tem ents ann |
|||||||||
| Wo rld T rad e H l SA ote |
17,9 12 |
19/J ul/2 005 |
17,9 12 |
0.0 000 |
0.00 | 19. 90% |
0.00 00% |
0.00 00% |
fun ctio n |
the ded Dec ber 6) 31 201 yea r-en em |
| Unl iste d co nies , in mpa |
Fair lue / sh (Va lue er i nde den luat or's t va va are as p pen |
|||||||||
| Ziro m S A |
5,67 7,08 3 |
28/J un/2 007 |
56,5 58,0 72 |
4.7 276 |
26, 838 ,977 .59 |
100 .00% |
0.24 79% |
0.24 87% |
fun ctio n |
30 Sep ber 201 7) rt as at tem repo |
| Tot al |
4,69 5,72 3,80 5 |
6,84 1,24 1,26 2.82 |
63. 187 9% |
63. 400 9% |
Legend:
* = where the date of acquisition is shown as earlier than Fondul Proprietatea's date of incorporation (28 December 2005), the date of acquisition 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.
Bonds or other debt instruments issued or guaranteed by the state or central public administration authorities
| bi lls wi th dis Tr eas ury |
nt cou |
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Ser ies and mb nu er |
No. of |
Sta ke i n F ond ul Pro prie tal tate a to |
Sta ke i n F ond ul Pro prie tate et a n |
||||||||
| of t he issu e |
inst ent rum s |
Dat f ac qui siti e o on |
Mat urit y d ate |
Init ial v alu e |
Dai ly in tere st |
Cum ulat ive inte t res |
Cur lue t va ren |
et ass |
et ass |
I dia ry B ank nte rme |
Eva luat ion tho d me |
| Acq uisi tion pri late d w ith ce c umu |
|||||||||||
| RO 8CT N01 171 3 |
6,60 0 |
23/ Nov /20 17 |
10/J an/2 018 |
32, 919 ,630 .48 |
1,7 09.9 9 |
61, 559 .63 |
32, 981 ,190 .11 |
0.30 46% |
0.3 057 % |
CIT I Ba nk |
the rela ted inte rest sin ce t he |
| RO 8CT N0C 171 3 |
2,6 70 |
25/ Sep /20 17 |
25/J ul/2 018 |
13, 267 ,355 .49 |
276 .40 |
25,4 29. 08 |
13, 292 ,784 .57 |
0.12 28% |
0.12 32% |
ca C Ban rcia la R ome om ana |
uisi tion da te acq |
| Tot al |
46,2 73,9 74.6 8 |
0.42 74% |
0.4 289 % |
| Mar ket pric e / |
Sta ke i n |
Sta ke i n |
||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| No. of |
Dat f e o |
Cou pon |
Dai ly |
Cum ulat ed |
Cum ulat ed |
Ref ere nce |
FP l tota |
FP net |
||||||
| Issu er |
ISIN de co |
inst ent rum s |
uis itio acq n |
dat e |
Due Da te |
Init ial V alu e |
inte t res |
inte t res |
dis nt/p ium cou rem |
ite pric com pos e |
Cur lue t va ren |
ets ass |
et ass |
Eva luat ion tho d me |
| Min istry of FIna nce |
RO 141 8DB N04 0 |
10,0 00 |
2/A ug/2 017 |
17/J an/2 018 |
17/J an/2 018 |
50,0 00,0 00.0 0 |
4,45 2.06 |
1,54 4,86 3.02 |
0.00 | 100 .070 0% |
51,5 79,8 63.0 2 |
0.47 64% |
0.47 80% |
Fair lue (ref va ere nce |
| Min istry of FIna nce |
RO 141 8DB N04 0 |
6,00 0 |
25/ Sep /20 17 |
17/J an/2 018 |
17/J an/2 018 |
30,0 00,0 00.0 0 |
2,67 1.23 |
926 ,917 .81 |
0.00 | 100 .070 0% |
30,9 47, 917 .81 |
0.28 58% |
0.2 868 % |
ite p rice com pos |
| Min istry of FIna nce |
RO 141 8DB N04 0 |
6,37 8 |
24/ Nov /20 17 |
17/J an/2 018 |
17/J an/2 018 |
31,8 90,0 00.0 0 |
2,83 9.52 |
985 ,313 .63 |
0.00 | 100 .070 0% |
32,8 97,6 36.6 3 |
0.30 39% |
0.30 49% |
pub lish ed by R eute rs, |
| Min istry of FIna nce |
RO 141 8DB N04 0 |
3,60 0 |
6/D ec/2 017 |
17/J an/2 018 |
17/J an/2 018 |
18,0 00,0 00.0 0 |
1,60 2.74 |
556 ,150 .69 |
0.00 | 100 .070 0% |
18,5 68,7 50.6 9 |
0.17 15% |
0.17 21% |
incl udin g th mul ated e cu |
| of Min istry FIna nce |
RO 141 8DB N04 0 |
12,0 00 |
11/D ec/2 017 |
17/J an/2 018 |
17/J an/2 018 |
60,0 00,0 00.0 0 |
5,34 2.47 |
1,85 3,83 5.62 |
0.00 | 100 .070 0% |
61,8 95,8 35.6 2 |
0.57 17% |
0.57 36% |
inte ) rest |
| Tot al |
195 ,890 ,003 .77 |
1.8 093 % |
1.8 154 % |
| Sta rtin g |
Mat urit y |
Sta ke i n F ond ul |
Sta ke i n F ond ul |
||||||
|---|---|---|---|---|---|---|---|---|---|
| Nam f th e b ank e o |
dat e |
dat e |
Init ial v alu e |
Dai ly in tere st |
Cum ulat ive inte t res |
Cur lue t va ren |
Pro prie tal tate a to et ass |
Pro prie tate et a t a n sse |
Eva luat ion tho d me |
| Uni cred it Ti riac Ba nk |
2/N ov/2 017 |
3/Ja n/20 18 |
50,0 00,0 00.0 0 |
1,73 6.1 1 |
100 ,694 .44 |
50, 100 ,694 .44 |
0.46 27% |
0.46 43% |
|
| Ban ca C rcia la R ome oma na |
2/N ov/2 017 |
3/Ja n/20 18 |
103 ,700 ,000 .00 |
4,0 61.5 8 |
235 ,57 1.83 |
103 ,935 ,57 1.83 |
0.96 00% |
0.96 32% |
|
| Rai ffeis Ban k en |
11/D ec/2 017 |
11/J an/2 018 |
72,7 00,0 00.0 0 |
3,02 9.17 |
57,5 54. 17 |
72,7 57,5 54. 17 |
0.67 20% |
0.67 43% |
|
| Uni cred it Ti riac Ba nk |
13/D ec/2 017 |
3/Ja n/20 18 |
89,8 00,0 00.0 0 |
3,1 18.0 5 |
53,0 06.9 4 |
89,8 53,0 06.9 4 |
0.82 99% |
0.83 27% |
|
| ING BA NK |
13/D ec/2 017 |
3/Ja n/20 18 |
89,8 00,0 00.0 0 |
2,74 3.89 |
46, 646 .11 |
89,8 46, 646 .11 |
0.82 99% |
0.83 27% |
|
| Ban ca C rcia la R ome oma na |
15/D ec/2 017 |
15/J an/2 018 |
44,4 00,0 00.0 0 |
1,85 0.00 |
27, 750 .00 |
44,4 27,7 50.0 0 |
0.4 103 % |
0.4 117 % |
|
| ING BA NK |
18/D ec/2 017 |
8/Ja n/20 18 |
85, 100 ,000 .00 |
2,48 2.0 8 |
29, 785 .00 |
85, 129 ,785 .00 |
0.78 63% |
0.78 89% |
|
| CIT I Ba nk |
18/D ec/2 017 |
8/Ja n/20 18 |
85, 100 ,000 .00 |
2,60 0.27 |
31,2 03.3 3 |
85, 131 ,203 .33 |
0.78 63% |
0.78 90% |
Ban k de it va lue ulat ed w ith t he d aily pos cum |
| Uni cred it Ti riac Ba nk |
20/ Dec /20 17 |
3/Ja n/20 18 |
88,5 00,0 00.0 0 |
2,7 04. 17 |
27, 041 .67 |
88,5 27, 041 .67 |
0.8 177 % |
0.82 04% |
rela ted inte for the riod fro ing date rest tart pe m s |
| Ban ca C rcia la R ome oma na |
21/ Dec /20 17 |
11/J an/2 018 |
88,5 00,0 00.0 0 |
3,3 18.7 5 |
29, 868 .75 |
88,5 29, 868 .75 |
0.8 177 % |
0.82 04% |
|
| G pe S te G BRD ocie rale rou ene |
21/ /20 Dec 17 |
3/Ja n/20 18 |
112 ,200 ,000 .00 |
2,33 7.50 |
21, 037 .50 |
112 ,22 1,03 7.50 |
1.03 65% |
1.04 00% |
|
| CIT I Ba nk |
22/ /20 Dec 17 |
3/Ja n/20 18 |
112 ,200 ,000 .00 |
3,1 16.6 6 |
24, 933 .33 |
112 ,224 ,933 .33 |
1.03 65% |
1.04 00% |
|
| ING BA NK |
22/ /20 Dec 17 |
3/Ja n/20 18 |
112 ,200 ,000 .00 |
5,92 1.66 |
47,3 73.3 3 |
112 ,247 ,373 .33 |
1.03 68% |
1.04 03% |
|
| BRD G pe S ocie te G rale rou ene |
27/ Dec /20 17 |
4/Ja n/20 18 |
66,2 00,0 00.0 0 |
1,28 7.23 |
3,86 1.67 |
66,2 03,8 61.6 7 |
0.6 115 % |
0.6 135 % |
|
| Rai ffeis Ban k en |
28/ Dec /20 17 |
4/Ja n/20 18 |
66,0 00,0 00.0 0 |
733 .34 |
1,46 6.67 |
66,0 01,4 66.6 7 |
0.60 96% |
0.6 117 % |
|
| BRD G pe S ocie te G rale rou ene |
29/ Dec /20 17 |
3/Ja n/20 18 |
9,44 9,3 16.5 9 |
86.6 2 |
86.6 2 |
9,44 9,40 3.2 1 |
0.08 73% |
0.08 76% |
|
| Tot al |
1,27 6,58 7,19 7.95 |
11.7 910 % |
11. 830 7% |
| 31 Dec ber 20 15 em |
30 Dec ber 20 16 em |
29 Dec ber 201 7 em |
|
|---|---|---|---|
| Net As set |
12,0 93,4 56, 192 .73 |
11,4 27,3 51,3 80.4 7 |
10,7 90,4 18,3 33.8 0 |
| NAV /sha re |
1.15 70 |
1.18 65 |
1.23 75 |
Franklin Templeton Investment Management Ltd United Kingdom Bucharest Branch, acting as Investment Manager on behalf of FONDUL PROPRIETATEA SA BRD Groupe Societe Generale
Oana Truta 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 CNVM Regulations no. 1/2006, Art.1121 , par. 1, letter c
The semi-annual financial statements as at 31 December 2017 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 "Trusts, funds and similar financial entities"
Sole Registration Code: 18253260
The undersigned, Oana Truta, Permanent Representative with Franklin Templeton International Services S.à r.l as Sole Director, and Cadaru Catalin, Financial reporting manager, undertake the responsibility for the preparation of the annual financial statements as at 31 December 2017 and confirm that:
Oana Truta Catalin Cadaru
Permanent Representative Financial Reporting Manager
Name of the company, legal form, headquarters and duration
The duration of Fondul Proprietatea is unlimited.
c) other means provided by the law.
Fondul Proprietatea is authorized to issue bonds in accordance with the provisions of the law. Fondul Proprietatea is not allowed to conclude loan agreements for investment reasons.
(13) The Alternative Investment Fund Manager immediately call the general meeting of the shareholders, upon written request of the shareholders, individually or jointly, representing at least 5% of the share capital, in case the request includes dispositions that fall under the responsibility of the general meeting of shareholders.
(14) In the case provided by paragraph (13), the general meeting of the shareholders shall be called within at most 30 calendar days and shall meet within at most 60 calendar days as of the date when the Alternative Investment Fund Manager received the request of the shareholders.
(7) On the day and hour established in the convocation, the general meeting of the shareholders shall be opened by the permanent representative of the Alternative Investment Fund Manager or, in its absence, by the one holding its place. A legal representative of the Alternative Investment Fund Manager or a person appointed by the legal representative of the Fund Manager shall be the chairman of the meeting. The members of the Board of Nominees shall participate at the meetings, as well.
(20) The votes transmitted electronically shall be cancelled if they do not observe the procedure set by the Alternative Investment Fund Manager drawn up according to the Financial Supervisory Authority regulations and such votes will not be taken into consideration in calculating the attending quorum.
Attributions of the Board of Nominees
The Board of Nominees has the followings duties and functions:
(4) Receives from the Alternative Investment Fund Manager for analysis the annual report and the management policy of Fondul Proprietatea and presents an opinion to the Alternative Investment Fund Manager and to the general meeting of the shareholders regarding such;
(5) Receives from the Alternative Investment Fund Manager for analysis the yearly income and expenditure budget before it is submitted to the approval of the general meeting of shareholders and presents an opinion to the Alternative Investment Fund Manager and to the general meeting of the shareholders regarding such;
(17) Recommends to the General Meeting of the Shareholders the termination of the management contract for the case when the Board of Nominees is considered is to the benefit of the shareholders.
(18) Recommends to the general meeting of the shareholders on any other issues the Board of Nominees is considered relevant to the shareholders.
operation concerning a civil or a commercial company at which one of the persons above mentioned is director or holds, solely or together with one of the persons above mentioned, a quota of at least 20% of the value of the subscribed share capital.
The Alternative Investment Fund Manager shall appoint a natural person as its permanent representative. The Alternative Investment Fund Manager can change the permanent representatives in accordance with the applicable law. All changes will be registered with the Trade Registry.
Attributions of the Alternative Investment Fund Manager
(xi) propose to the ordinary general meeting of the shareholders the conclusion of the financial audit agreement according to the legal provisions in force, upon obtaining the prior approval of the Board of Nominees, as well as approve the procedure of internal audit and the audit plan;
(xii) decide the relocation of the registered office, provided that the registered office shall at all times be registered in Romania;
For the fulfilment of the business object and in accordance with the attributions established, Fondul Proprietatea uses the financial sources established pursuant to the law, banking credits and other financial sources. Fondul Proprietatea is not allowed to conclude loan agreements for investment reasons.
The financial year begins on 1st of January and terminates on 31st December of each year.
(1) The accounting is kept in Romanian language and in national currency.
(2) Fondul Proprietatea must draft the annual financial statements according to legal previsions in force.
Fondul Proprietatea shall maintain, by care of the Alternative Investment Fund Manager and internal auditors, all registries provided by the law. The shareholders registry is kept by the Central Depository.
(1) Fondul Proprietatea may set-up, solely or together with other Romanian or foreign natural persons or legal entities, other companies or legal entities, according to the law and to this constitutive act.
(2) The conditions for the participation of Fondul Proprietatea at the setting-up of new legal entities shall be regulated by the constitutive acts, which to be approved by the general meeting of the shareholders.
The calculation method of the net asset is made according to the legal provisions in force.
(1) The Alternative Investment Fund Manager, respectively its permanent representative shall cumulatively fulfil with the minimum requirements regarding the integrity, qualification and professional experience provided in the legislation and in other specific provisions; the identity of the Alternative Investment Fund Manager is the one registered with the National Office of Trade Registry, based on the decision of the general meeting of the shareholders regarding its election.
The litigations of any type shall be amiably resolved and if this is not possible, they shall be solved by the competent arbitral or judicial courts.
The provisions of this constitutive act are completed by the provisions of Company Law No. 31/1990, republished, as further amended and completed, and other applicable legal provisions in force as well as by the provisions of the capital market legislation governing the issuers whose shares are admitted on trading.
This document has been approved by the Romanian Financial Supervisory Authority (the "FSA") as a tender offer document (the "Tender Offer Document") in accordance with Romanian Law no. 297/2004 on capital markets as further amended (the "Capital Markets Law") and Regulation no. 1/2006 on issuers and operations with securities issued by the Romanian National Securities Commission, as further amended ("Regulation no. 1/2006").
This Tender Offer Document has been approved by the FSA but has not been, and will not be, approved by or notified to the United Kingdom Financial Conduct Authority or any other competent authority of the European Economic Area.
This Tender Offer Document relates to a tender offer (the "Tender Offer") by Fondul Proprietatea S.A., a joint stock company incorporated under the laws of Romania (the "Bidder" or the "Issuer", as applicable) for existing fully paid up ordinary shares with, on the date hereof, a nominal value of RON 0.85 each in its share capital (the "Shares"). The Shares are subject to a reduction of nominal value which may occur prior to the expiry of the Tender Offer. The Tender Offer comprises a tender offer for up to 640,000,000 Shares in the form of Shares and/or global depositary receipts which represent the Shares (the "GDRs" and, together with the Shares, the "Securities"). The Shares are admitted to trading on the spot regulated market operated by Bursa de Valori Bucuresti S.A. (the "Bucharest Stock Exchange" or "BSE") under the market symbol "FP". The GDRs have no nominal value and are admitted to trading on the Specialist Fund Market (the "SFM") of the London Stock Exchange (the "LSE") under the market symbol "FP.". One GDR represents an interest in 50 Shares.
The purchase price (the "Purchase Price") of the Securities is equal to RON 0.91 per Share and the USD equivalent of RON 45.50 per GDR, respectively. Investors tendering GDRs should note that the Purchase Price for the GDRs will be paid in US dollars at the exchange rate commercially available to the Bidder, at the Bidder's absolute discretion, for exchanging one RON into USD on the Trade Date provided that such rate shall be no higher than the rate for exchanging one RON into USD published by the National Bank of Romania at 1:00 p.m. (Eastern European Time) on the Trade Date plus 0.5 per cent. (the "Exchange Rate"). No assurance can be given as to the National Bank of Romania US Dollar/RON exchange rate that will be published at 1:00 p.m. (Eastern European Time) on the Trade Date.
The Tender Offer will commence on 15 February 2017 and will expire at 12:00 p.m. (Eastern European Time) / 10:00 a.m. (Greenwich Mean Time) on 20 March 2017 (the "Expiration Deadline") (the "Offer Period"). Please note that Euroclear Bank N.V./S.A. ("Euroclear") and Clearstream Banking, Société Anonyme ("Clearstream" and, together with and Euroclear, the "Clearing Systems"), their respective participants and the brokers or other securities intermediaries through which GDRs are held will establish their own cut-off dates and times for the tender of the GDRs, which will be earlier than the Expiration Deadline. The Tender Offer may be extended at any time without cause, subject to publication of a supplement to this Tender Offer in accordance with applicable law.
The Tender Offer is being made to holders of Shares and GDRs resident in the United States in reliance on, and in compliance with, Section 14(e) of the U.S. Securities Exchange Act of 1934 (the "Exchange Act") and Regulation 14E thereunder.
The date of this Tender Offer Document is 8 February 2017
THE APPROVAL VISA ON THE TENDER OFFER DOCUMENT SHALL NOT BE CONSTRUED AS A GUARANTEE OR ANY KIND OF ASSESSMENT BY THE FSA WITH RESPECT TO THE OPPORTUNITY, ADVANTAGES OR DISADVANTAGES, PROFIT OR RISKS INVOLVED IN ACCEPTING THE TENDER OFFER, WHICH IS SUBJECT TO THE APPROVAL DECISION. THE APPROVAL DECISION CERTIFIES ONLY THE COMPLIANCE OF THE TENDER OFFER DOCUMENT WITH THE LEGAL REQUIREMENTS AND THE NORMS ADOPTED FOR THE APPLICATION THEREOF.
The information contained in this Tender Offer Document is addressed exclusively to the holders of Shares and GDRs (each an "Investor"). The tender and purchase of Securities will be carried out exclusively in accordance with the procedures set forth in this Tender Offer Document and pursuant the Capital Markets Law and Regulation no. 1/2006.
This Tender Offer does not constitute an offer to buy or the solicitation of an offer to sell Securities in any circumstances in which such Tender Offer or solicitation is unlawful. In those jurisdictions where the laws require this Tender Offer to be made by a licensed broker or dealer, this Tender Offer shall be deemed to be made on behalf of the Bidder by one or more registered brokers or dealers licensed under the laws of such jurisdiction. The Bidder is not making this Tender Offer to, and will not accept any tendered Securities from, any Investor in any jurisdiction where it would be illegal to do so.
Investors who desire to tender all or any portion of their Shares or GDRs, or both, as the case may be, should carefully read and follow the procedures outlined under Section 12 "Participation in the Tender Offer".
In order to be validly submitted for tender, Shares tendered in the Tender Offer must be blocked by the relevant Investor in the relevant account at the Authorised Participant (as defined below) or the relevant custodian of the Investor (as the case may be) from the date the relevant tender of Shares is made until the earlier of the Trade Date and the date on which the Investor validly withdraws its tender, as applicable.
GDRs tendered in the Tender Offer will be blocked in the relevant account at the relevant Clearing System from the date the relevant tender of Securities is made until the earlier of the time of completion of settlement for GDRs in the Tender Offer and the date on which the Investor validly withdraws its tender, as applicable, it being understood, however, that the Clearing Systems may impose their own cut off times with respect to the ability of Investors to revoke their instructions to tender.
Developing markets such as Romania are subject to greater risks than more developed markets. As a result, tendering Investors should familiarise themselves with such risks as well as make their own assessment of the merits and risks involved in participating in the Tender Offer, including investment, tax, legal and accounting matters.
None of Goldman Sachs International ("Goldman Sachs"), WOOD & Company Financial Services a.s. ("WOOD & Co." or the "Intermediary" and, together with Goldman Sachs, the "Dealer Managers") or The Bank of New York Mellon as GDR tender agent (the "GDR Tender Agent") and GDR depositary (the "GDR Depositary") (nor their respective directors, officers, employees or affiliates) makes any representation whatsoever regarding this Tender Offer Document or the Tender Offer, and none of the Bidder, its Board of Nominees or management, the Intermediary, the Dealer Managers, the GDR Tender Agent or the GDR Depositary (nor their respective directors, officers, employees or affiliates) makes any recommendation to any Investor as to whether to tender or refrain from tendering Shares or GDRs. No person has been authorised to make any recommendation on behalf of the Bidder, its Board of Nominees or management, the Intermediary, the Dealer Managers, the GDR Tender Agent or the GDR Depositary as to whether Investors should tender or refrain from tendering their Shares or GDRs pursuant to this Tender Offer or to make any representation or to give any information in connection with this Tender Offer other than as contained herein. If made or given, any such recommendation, representation or information must not be relied upon as having been authorized by the Bidder, its Board of Nominees or management, the Intermediary, the Dealer Managers, the GDR Tender Agent or the GDR Depositary. Investors are urged to evaluate carefully all information in this Tender Offer Document, the Acceptance Form and other related materials and consult their own investment and tax advisors and make their own decisions as to whether to tender or refrain from tendering their Securities.
Neither the delivery of this Tender Offer Document nor any purchase of Securities will, under any circumstances, imply that the information contained in this Tender Offer Document is current as of any time subsequent to the date the Tender Offer Document or, without prejudice to the Bidder's obligations under the Capital Markets Law and Regulation 1/2006, that there has been no change in the information since the date of this Tender Offer Document or in the affairs of the Issuer since the date of this Tender Offer Document.
The Bidder accepts responsibility for the information contained in this Tender Offer Document. To the best of the Bidder's knowledge (having taken all reasonable care to ensure that such is the case), the information contained in this Tender Offer Document is in accordance with the facts and does not omit anything likely to affect the import of such information. None of the Dealer Managers or the Intermediary accepts any responsibility whatsoever for the contents of this Tender Offer Document or for any other statement made or purported to be made by it or any of them or on its or their behalf in connection with the Issuer or the Securities. Each of the Dealer Managers and the Intermediary accordingly disclaims, to the fullest extent permitted by applicable law, all and any liability whether arising in tort or contract or otherwise which it might otherwise have in respect of this Tender Offer Document or any such statement.
The Dealer Managers have been engaged by the Bidder to act as dealer managers with respect to the Tender Offer. The Bidder has also entered into an intermediation agreement with the Intermediary in respect of the tender of Shares. In addition, the Bidder has engaged The Bank of New York Mellon to act as GDR Tender Agent with respect to GDRs tendered in the Tender Offer. Investors tendering Shares pursuant to this Tender offer will be required to tender through the Intermediary or Authorised Participants (as defined below). Investors tendering GDRs will be required to tender through the relevant Clearing System to the GDR Tender Agent. The Dealer Managers, the Intermediary and their respective affiliates may contact and communicate with Institutional Investors (as defined below) regarding the Tender Offer and will not take any action in relation to, nor have any liability or responsibility for, communications with Retail Investors (as defined below) regarding the Tender Offer.
Investors should be aware that the sale of Securities and receipt of the Purchase Price pursuant to this Tender Offer may have certain tax consequences, and are urged to consult at their own expense their tax advisors with respect to those consequences in considering this Tender Offer.
To the extent permissible under applicable securities laws, each of the Dealer Managers, the Intermediary and their affiliates may from time to time purchase, or enter into arrangements to purchase, Shares or GDRs either as principal or agent before and during the Offer Period. The Bidder does not intend to purchase Shares or GDRs, other than as disclosed in the Tender Offer Document or pursuant to this Tender Offer, during the period in which this Tender Offer is open for submission of tenders. In addition, in accordance with and pursuant to Rule 14e-5(b) of the Exchange Act, affiliates of the Bidder that do not comprise the Bidder's consolidated group and over which the Bidder does not exercise control and their respective nominees or brokers (acting as agents) may from time to time make purchases of, or arrangements to purchase, Shares or GDRs other than pursuant to the Tender Offer, before or during the Offer Period, so long as those acquisitions or arrangements comply with the provisions of the exemption provided under Rule 14e-5 of the Exchange Act. These purchases may occur either in the open market at prevailing prices or in private transactions at negotiated prices. Information about such purchases will be disclosed as and if required by applicable securities laws.
Questions and requests for information in respect of the tendering procedures for GDRs may be directed to the GDR Tender Agent at the following e-mail address: [email protected].
This Tender Offer Document shall be made available, as follows:
In this Tender Offer Document, all references to "RON" are to the lawful currency of Romania, all references to "US dollar" and "USD" are to the lawful currency of the United States.
The communication of the Tender Offer, this Tender Offer Document and any other documents or materials relating to the Tender Offer is not being made, and such documents and/or materials have not been approved, by an authorised person for the purposes of section 21 of the Financial Services and Markets Act 2000. Accordingly, such documents and/or materials are not being distributed to, and must not be passed on to, the general public in the United Kingdom. The Tender Offer and the communication of such documents and/or materials are only addressed to and directed at persons in the United Kingdom who (i) are persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "Order"), (ii) are persons who are high net worth entities falling within Article 49(2)(a) to (d) of the Order, or (iii) are otherwise persons to whom the Tender Offer and/or such documents and/or materials may otherwise lawfully be communicated (all such persons together being referred to as "relevant persons"). Neither the Tender Offer nor the Tender Offer Document must be acted on or relied on in the United Kingdom, by persons who are not relevant persons. The Tender Offer is available only to relevant persons in the United Kingdom and will be engaged in only with such persons.
The Tender Offer is being made to Investors resident in the United States in reliance on, and compliance with, Section 14(e) of the Exchange Act and Regulation 14E thereunder.
Neither the United States Securities and Exchange Commission (the "SEC") nor any U.S. state securities commission or regulatory authority has approved or disapproved of this Tender Offer, passed upon the fairness or merits of this Tender Offer or determined whether this Tender Offer Document is accurate or complete. Any representation to the contrary is a criminal offence in the United States.
The Tender Offer is being made for the securities of a Romanian company and is subject to Romanian disclosure requirements, which are different from certain U.S. disclosure requirements. U.S. Investors should be aware that this Tender Offer Document has been prepared in accordance with the format and style of a Romanian tender offer document, which differ from the format and style of a U.S. tender offer document.
| 1. | TIMETABLE OF EXPECTED EVENTS 1 | |
|---|---|---|
| 2. | RISK FACTORS AND OTHER CONSIDERATIONS 2 | |
| 3. | THE ISSUER 4 | |
| 4. | THE BIDDER 7 | |
| 5. | PERSONS ACTING IN CONCERT WITH THE BIDDER 7 | |
| 6. | NUMBER OF THE ISSUER'S SHARES HELD BY THE BIDDER (IN THE FORM | |
| OF SHARES OR GDRS) 7 | ||
| 7. | NUMBER AND CLASS OF SECURITIES SUBJECT TO THE TENDER OFFER 7 | |
| 8. | PURPOSE OF THIS TENDER OFFER 8 | |
| 9. | PURCHASE PRICE UNDER THE TENDER OFFER 8 | |
| 10. | TENDER OFFER PERIOD 9 | |
| 11. | AMENDMENT OF THE TENDER OFFER 10 | |
| 12. | PARTICIPATION IN THE TENDER OFFER 10 | |
| 13. | ALLOCATION 18 | |
| 14. | PAYMENT 19 | |
| 15. | THE SOURCE AND SIZE OF THE BIDDER'S FUNDS FOR THE PAYMENT | |
| OF THE PURCHASE PRICE 20 | ||
| 16. | GENERAL INFORMATION 20 |
The times, dates and events shown in this table are subject to change at the absolute discretion of the Bidder:
| TIME AND DATE | EVENT |
|---|---|
| T-26 Business Days | Announcement of the Tender Offer |
| Publication of the Tender Offer Document | |
| T-22 Business Days | Commencement of the Offer Period |
| T | Expiration Deadline at 12:00 p.m. (Eastern European Time) / 10:00 a.m. (Greenwich Mean Time) – deadline for submission of tenders of Shares and/or GDRs |
| Please note that Euroclear and Clearstream ( together with Euroclear, the "Clearing Systems"), their respective participants and the brokers or other securities intermediaries through which GDRs are held will establish their own cut-off dates and times for the tender of the GDRs, which will be earlier than the Expiration Deadline |
|
| Allocation Date - announcement of the allocation ratio | |
| T+1 Business Day | Trade Date - announcement of the Exchange Rate; execution of trades with respect to the Shares accepted for purchase after allocation |
| T+2 Business Day | Payment of the Purchase Price by the Bidder for GDRs accepted for purchase by the Bidder after application of the allocation ratio, in US dollars to the GDR Tender Agent. |
| The GDR Tender Agent will, as soon as practicable on or after [T+2 Business Days] but no later than [T+3 Business Days], (i) pay that price to the Clearing Systems for further distribution to Investors who have validly tendered GDRs in the Tender Offer and whose GDRs have been accepted for purchase in the Tender Offer and (ii) instruct the Clearing Systems to transfer the corresponding GDRs to the account indicated by the Bidder for this purpose. |
|
| T+3 Business Days | Shares Settlement Date - Payment of the Purchase Price by the Bidder to Investors for Shares accepted for purchase after allocation, in RON, and receipt by the Bidder of the corresponding Shares as part of settlement (delivery versus payment in the clearing and settlement system of Depozitarul Central S.A. (the "Central Depositary") |
| Announcement of completion of the Tender Offer (upon completion of settlement procedures in relation to trades with respect to Shares and GDRs accepted for purchase by the Bidder after allocation) |
Before making a decision with respect to the Tender Offer, Investors should carefully consider, in addition to the other information contained in this Tender Offer Document, the following:
Blocking of Securities. When considering whether to tender Securities pursuant to the Tender Offer, Investors should take into account that restrictions on the transfer of Securities by Investors will apply from the time of such tender or submission. An Investor must, on tendering Shares in the Tender Offer, agree that the relevant Shares will be blocked in the relevant account at the Authorised Participant (as defined below) or the relevant custodian of the Investor (as the case may be) from the date the relevant tender of Shares is made until the Trade Date or until the Investor validly withdraws its tender, as applicable. An Investor must, on tendering GDRs in the Tender Offer, agree that the relevant GDRs will be blocked in the relevant account at the relevant Clearing System from the date the relevant tender of GDRs is made until the earlier of the time of completion of settlement of the Tender Offer and the date on which the Investor validly withdraws its tender, as applicable, it being understood, however, that the Clearing Systems may only permit Investors to withdraw their instructions to tender until the applicable Clearing System's own cut off times.
Responsibility for complying with the procedures of the Tender Offer. Investors are responsible for complying with all the procedures for tendering Securities required pursuant to this Tender Offer. None of the Bidder, the Intermediary, the Dealer Managers, the GDR Tender Agent nor the GDR Depositary assumes any responsibility for informing Investors of irregularities with respect to any tender instruction made in connection with the Tender Offer.
Compliance with offer restrictions. Investors are referred to the offer restrictions and the acknowledgements, representations, warranties and undertakings which Investors will be deemed to make on tendering Securities in the Tender Offer. Non-compliance with these could result in, among other things, the unwinding of trades and/or civil or criminal liability.
Taxation. Investors should be aware that the sale of Securities and receipt of the Purchase Price pursuant to this Tender Offer may be subject to fiscal taxes, fees and commissions of the brokers, intermediaries, relevant market institutions involved and bank transfer fees. The Bidder is not responsible for withholding or payment of and will not withhold or pay any taxes or other governmental charges or fiscal duties in relation to the Purchase Price payable to Investors. The Bidder is neither responsible for the payment of any transaction fees and charges nor other charges and commissions payable by Investors who have sold Securities pursuant to the Tender Offer. Consequently, Investors should consult at their own expense their tax advisors with respect to those consequences in considering this Tender Offer.
Other purchases of Securities. Whether or not the purchase of any Securities pursuant to the Tender Offer is completed, the Bidder and its respective affiliates may, to the extent permitted by applicable law (including Rule 14e-5 under the Exchange Act), acquire (from time to time after the Tender Offer) securities in the Issuer, including through open market purchases, privately negotiated transactions, tender offers, exchange offers or otherwise. Such purchases may be on such terms and at such prices as the parties may determine, which may be more or less than the prices to be paid pursuant to the Tender Offer and could be for cash or other consideration or otherwise on terms more or less favourable than those contemplated by the Tender Offer.
Proportionate interest of the Issuer's major shareholders may increase following the Tender Offer. Should the Issuer's major shareholders decide not to tender Securities held by them in the Tender Offer, while other Investors tender Shares or GDRs representing the Maximum Number of Shares, the major shareholders' respective proportionate equity interest as a percentage of the Issuer's outstanding share capital will increase following the cancellation of the Securities acquired by the Bidder in the Tender Offer and the corresponding share capital decrease.
The Issuer is expected to publish financial data during the Offer Period. In particular, the Issuer expects to publish during such period:
(i) its preliminary and final financial results for the year ended 31 December 2016. The preliminary financial results will be published on 15 February 2017; the final annual financial results will be available on the Issuer's website at the time of convening the Issuer's annual shareholders' meeting (see below);
(ii) its monthly NAV reports at the end of January and February 2017. The NAV report for January 2017 will be published no later than 15 February 2017 and the NAV report for February 2017 will be published no later than 15 March 2017; and
(iii) its NAV report in the event of a share capital decrease. The related NAV Reports with respect to the share capital decreases approved by shareholders on 11 October 2016 and 31 October 2016 must be published within 15 days as of the registration of the relevant general shareholders' meeting resolution with the Trade Registry (more information related to such decreases may be found on the Issuer's website at http://www.fondulproprietatea.ro/investor-relations/gsm-information). The NAV Report for the share capital decrease approved on 11 October 2016 was published on 1 February 2017.
While the Bidder expects that such financial results and the NAV report for January 2017 will reflect a situation broadly in line with the one shown in the NAV report for December 2016, published by the Issuer on 13 January 2017 (and the NAV Report for the share capital decrease approved on 11 October 2016 and published on 1 February 2017), there is no certainty whether this will be the case or whether the additional NAV reports, for February 2017 and arising at the time of the share capital decrease, will reflect such a situation. All financial information and NAV reports of the Issuer are publicly available and can be found on the Issuer's website (www.fondulproprietatea.ro).
The Issuer envisages, as per its financial calendar available on
http://www.bvb.ro/FinancialInstruments/Details/FinancialInstrumentsDetails.aspx?s=FP to have the annual shareholders' meeting on 25 April 2017 ("Annual GSM"). The Annual GSM must be convened with at least 30 calendar days' notice and, at which, it will decide, among others, on the approval of the annual financial results for the period ended 31 December 2016. The summoning of the Annual GSM is envisaged to be made on or about 7 March 2017, therefore within the Offer Period. At the time of the convening, the Issuer must also make available on its website, as part of the Annual GSM documentation, a copy of the relevant annual financial results.
The company whose Securities are being offered for repurchase under the Tender Offer is Fondul Proprietatea S.A., identified according to the following data:
| Legal form: | Joint stock company, registered and operating under Romanian law |
|---|---|
| as an alternative investment fund (as defined by Law 74/2015 | |
| regarding alternative investment fund managers) | |
| Registered office: | 78-80 Buzesti Street (7th floor), District 1, Postal Code 011017, |
| Bucharest, Romania | |
| Fiscal code: | 18253260 |
| Registration number at the Trade | J40/21901/2005 |
| Registry: | |
| Main business object: | NACE code 6430 - financial investments |
| Share capital: | Subscribed share capital (as registered with the FSA and Central |
| Depositary, as at 2 February 2017): RON 8,562,968,634.10, | |
| divided into 10,074,080,746 ordinary shares, issued in | |
| dematerialized form, with each share having a nominal value of | |
| RON 0.85 and granting equal rights to its owner. |
| Paid up share capital (as registered with the FSA and Central Depositary, as at 2 February 2017): RON 8,253,728,136.60 divided into 9,710,268,396 ordinary shares, issued in dematerialized form, with each share having a nominal value of RON 0.85 and granting equal rights to its owner. The difference between subscribed and paid up share capital (that is to say, unpaid share capital) represents the net value of certain contributions due from the Romanian State represented by the Ministry of Public Finance, as shareholder, to the Issuer. The holders of unpaid shares are not entitled to participate in the Tender Offer with respect to such unpaid shares. |
|---|
| The following are expected changes in subscribed and paid up |
| share capital during the Offer Period: |
| Decrease of Issuer's subscribed share capital as a result of reduction |
| in par value |
| On 31 October 2016, the extraordinary general shareholders' |
| meeting of the Issuer approved the decrease of the Issuer's |
| subscribed share capital from RON 8,562,968,634.10 to RON |
| 5,742,226,025.22 by the reduction of the nominal value of the |
| shares of the Issuer from RON 0.85 to RON 0.57 for the purpose of |
| (i) covering some accounting losses; and (ii) the distribution to |
| shareholders of the amount of 0.05 RON per share. Full details of |
| the resolution can be found on the Issuer's website at |
| http://www.fondulproprietatea.ro/investor-relations/gsm |
| information/gsm-decisions. |
| This decrease will be effective after the following conditions are |
| satisfied: (i) the shareholders' resolution approving the share capital |
| decrease is published in the Official Gazette of Romania, Part IV for at least two months; (ii) the FSA endorses the amendment of the |
| Constitutive Act of the Issuer as approved by the shareholders |
| during such shareholders' meeting, and (iii) the shareholders' |
| resolution approving the share capital decrease of 31 October 2016 |
| is registered with the Trade Registry. The Issuer expects these |
| conditions to be satisfied in March 2017. |
| Since the decrease in the share capital above-mentioned is a |
| reduction in the nominal value of the shares, only the subscribed |
| and paid up share capital will be affected, while the number of |
| issued and paid up shares will remain the same. After this share |
| capital decrease is effective, the FSA is required to issue a new |
| securities registration certificate reflecting the changes in the |
| subscribed and paid up share capital and the Central Depositary is |
| also required to register the changes, registration which can occur |
| within the Offer Period. |
According to the shareholders' structure evidenced by the Central Depositary at 2 February 2017, the share capital of the Issuer was held by legal entities, excluding the GDR Depositary (42.37 per cent) and by natural persons (21.35 per cent). Another 36.28 per cent of the Issuer's share capital was held in the form of GDRs through The Bank of New York Mellon, as GDR Depositary.
The Issuer was incorporated on 28 December 2005 as a joint stock company and was subsequently authorized by the National Securities Commission as a closed-end investment company. The Issuer is registered with the
FSA under number PJR09SIIR/400006/18.08.2010. Following the implementation of Directive 2011/61/EU (the "AIFM Directive") on alternative investment fund managers into Romanian legislation through Law 74/2015, the Issuer qualifies as an alternative investment fund.
The business object of the Issuer is portfolio management. The Issuer's investment objective consists of the maximisation of returns and per-share capital appreciation through investments mainly in Romanian equities and equity-linked securities.
In order to comply with the Law 74/2015 implementing the AIFM Directive, on 29 October 2015, the general meeting of the Issuer's shareholders approved the appointment of Franklin Templeton International Services S.À R.L., a société à responsabilité limitée, qualified as an alternative investment fund manager under the laws of Luxembourg, as the alternative investment fund manager and as the sole director of the Issuer for a mandate of two years as of 1 April 2016.
The Issuer's contact details are the following:
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
The Shares are admitted to trading on the spot regulated market operated by the Bucharest Stock Exchange and the GDRs are admitted to trading on the SFM of the LSE.
The following chart shows the evolution of the price of the Shares, expressed in RON, during the last 12 months prior to, and including, 26 January 2017 (being the trading date immediately preceding the date of submission of this Tender Offer Document to the FSA):
The following chart shows the evolution of the price of the GDRs, expressed in USD, during the last 12 months prior to, and including, 26 January 2017 (being the trading date immediately preceding the date of submission of this Tender Offer Document to the FSA):
The closing price of the Shares and GDRs on 26 January 2017 (being the trading date immediately preceding the date of submission of this Tender Offer Document to the FSA) was RON 0.8640 per Share and USD 10.2500 per GDR, respectively.
Please refer to Section 3 ("The Issuer") above.
The Bidder is not aware of the existence of any persons acting in concert with it in relation to the Issuer. "Persons acting in concert" has the meaning ascribed under the Capital Markets Law.
According to the statements of account issued by the Central Depositary and by BRD Groupe Société Générale (the Bidder's custodian), as at 2 February 2017 the Bidder holds 99,398,468 Shares (99,148,468 in the form of Shares and 250,000 in the form of GDRs (i.e. 5,000 GDRs)).
The Bidder intends to acquire through the Tender Offer up to 640,000,000 fully paid Shares in the form of Shares and/or GDRs (which, for the avoidance of any doubt, do not include Shares or GDRs already owned by the Bidder on the date of this Tender Offer Document) (the "Maximum Number of Shares").
If an Investor is a holder of both Shares and GDRs, the Investor may (but is not obligated to) tender all of its Securities, or any portion or combination of Securities, using the appropriate procedures described below for each type of Security (please refer to Section 12 "Participation in the Tender Offer"). Alternatively, an Investor may choose to tender none of its Securities (in which case no action on such Investor's part is required), or tender only one type of security (Shares or GDRs) even if the Investor holds both types of Securities.
The following table provides information with respect to the Securities as at 2 February 2017:
| Securities types |
Identification Codes/Numbers | Listing Venue | Number of fully paid up Securities |
|---|---|---|---|
| Shares | ISIN: ROFPTAACNOR5 | Bucharest Stock Exchange |
9,710,268,396* |
| Trading symbol: FP | |||
| GDRs | Common Code: 121643294 ISIN: US34460G1067 CUSIP: 34460G 106 SEDOL: BWV69Y7 Trading symbol: FP. |
Specialist Fund Market of the London Stock Exchange |
73,105,672 |
This Tender Offer is part of the buy-back programme authorized by the resolution of the extraordinary general meeting of shareholders of the Bidder no. 9 held on 29 October 2015 and published with the Official Gazette of Romania, Part IV, no. 6682 on 26 November 2015 the purpose of which is the decrease of the Bidder's share capital. The buy-back programme has been authorised for a period of 18 months from 26 November 2015.
After the closing of the Tender Offer, the Bidder intends to cancel the GDRs purchased in the Tender Offer in exchange for the underlying Shares and subsequently, subject to approval of the shareholders, cancel all the purchased Shares (whether initially purchased in the form of Shares or GDRs) and decrease its share capital by the corresponding nominal value, at the time of cancellation of such cancelled Shares.
The price per Share to be paid by the Bidder within the Tender Offer is RON 0.91 per Share and the USD equivalent of RON 45.50 per GDR, as applicable (the "Purchase Price"). The Purchase Price for the Shares will be paid in RON. The Purchase Price for the GDRs will be paid in US dollars at the Exchange Rate. No assurance can be given as to the National Bank of Romania US Dollar/RON exchange rate that will be published on the Trade Date.
The Purchase Price in RON was established according to the Capital Markets Law and Regulation no. 1/2006. According to the provisions of Regulation no. 1/2006, the price in a tender offer of shares should be equal to at least the higher of:
The highest price paid by the Bidder for GDRs during the Relevant Period is USD 10.1000 per GDR, while the volume weighted average price per GDR for the same period is USD 9.5538 per GDR.
The total Purchase Price payable under the Tender Offer (the "Offer Value") will be equal to the number of purchased Shares (in the form of Shares or GDRs) in the Tender Offer multiplied by the applicable Purchase Price in RON.
The Bidder may, at its sole discretion increase the Purchase Price during the Tender Offer according to the procedure described in Section 11 "Amendment of the Tender Offer" of this Tender Offer Document. In this situation, any Investors who have validly accepted the Tender Offer before the amendment of the Purchase Price will receive the increased Purchase Price.
This Tender Offer will be open for a period of twenty-three (23) Business Days. The Tender Offer will commence on 15 February 2017 and will expire on the Expiration Deadline, which is at 12:00 p.m. (Eastern European Time) / 10:00 a.m. Greenwich Mean Time on 20 March 2017 (the "Offer Period").
"Business Day" means a day on which banks are open for business in Romania, the UK and the US. For the avoidance of any doubt, 20 February 2017 is not a Business Day and, as a consequence, no tender of Securities will be accepted on such day.
The Clearing Systems, their respective participants and the brokers or other securities intermediaries through which GDR holders hold their GDRs will establish their own cut-off dates and times for the tender and/or revocation of the GDRs, which will be earlier than the Expiration Deadline.
The Offer Period may be extended by the Bidder according to the procedure described in Section 11 "Amendment of the Tender Offer" of this Tender Offer Document. Throughout its duration, the Tender Offer is irrevocable, and may not be terminated by, the Bidder. On expiry of the Expiration Deadline, the Tender Offer becomes obsolete.
During the Offer Period, the Bidder may amend the initial terms and conditions of the Tender Offer, provided that:
(c) the amendment shall be made available to Investors through publication of an announcement under the same procedure as that used for the publication of the Tender Offer Document.
Any request to amend the Tender Offer Document must be submitted to the FSA for approval not later than one (1) Business Day prior to the Expiration Deadline.
Any amendment to the Tender Offer Document once approved by the FSA is valid from the date of its publication.
In the event of an increase in the Purchase Price, all Investors who have agreed to tender their Securities to the Bidder pursuant to the terms of the Tender Offer shall receive the increased Purchase Price in respect of all Securities actually purchased by the Bidder.
The Bidder reserves the right, at any time or from time to time, to postpone the Expiration Deadline (as a result of an amendment to the Tender Offer Document or otherwise) to a later date and time as announced by the Bidder, subject to applicable law (including Rule 14e-l under the Exchange Act) and, in any case, without extending the Offer Period beyond 50 Business Days. During any postponement of the Expiration Deadline (as a result of an amendment to the Tender Offer Document or otherwise), all Securities previously tendered in the Tender Offer will remain subject to the Tender Offer and may, subject to the terms and conditions to the consummation of the Tender Offer, be accepted for purchase by the Bidder. If the Bidder postpones the Expiration Deadline (as a result of an amendment to the Tender Offer Document or otherwise), the Bidder will
provide written notice of such change to the GDR Tender Agent and will disseminate a supplement to this Tender Offer Document or issue a press release, as necessary.
Investors who desire to tender all or any portion of their Securities pursuant to this Tender Offer must follow the procedures set forth in this Section.
Section 13(e) of the Exchange Act and Rule 14e-4 promulgated thereunder make it unlawful for any person acting alone or in concert with others, directly or indirectly, to tender securities for such person's own account unless at the time of tender and at the Expiration Deadline such person has a "net long position" in a number of securities that is equal to or greater than the amount tendered and will deliver or cause to be delivered such securities for the purpose of tendering to the Bidder within the period specified in this Tender Offer. Rule 14e-4 also provides a similar restriction applicable to the tender or guarantee of a tender on behalf of another person. A tender of securities made pursuant to any method of delivery set forth in this Tender Offer will constitute the tendering Investor's acceptance of the terms and conditions of this Tender Offer, as well as the tendering Investor's representation and warranty to the Bidder that (i) such Investor has a "net long position" in a number of securities at least equal to the securities being tendered within the meaning of Rule 14e-4, and (ii) such tender of securities complies with Rule 14e-4. The Bidder's acceptance for purchase of Shares and GDRs tendered pursuant to this Tender Offer will constitute a binding agreement between the tendering Investor and the Bidder upon the terms and subject to the conditions of this Tender Offer and, including the participating Investor's representation that the Investor has a net long position in the Shares or GDRs, as the case may be, being tendered for purchase within the meaning of Rule 14e-4 and that the request to tender such Shares or GDRs, as the case may be, complies with Rule 14e-4.
The Tender Offer for Shares shall be carried out exclusively through the trading systems operated by the BSE.
Institutional Investors may tender their Shares (i) through the Intermediary, during its regular business hours of each Business Day within the Offer Period, from Monday to Friday; and (ii) at the registered office of any Eligible Participant, during the regular business hours of the respective Eligible Participant on each Business Day within the Offer Period, from Monday to Friday.
Retail Investors may tender their Shares only at the registered office of any Eligible Participant, during the regular business hours of such Eligible Participant on each Business Day within the Offer Period, from Monday to Friday.
For the purposes of this Tender Offer Document:
"Eligible Participants" means any intermediaries (other than the Intermediary), which are investment firms or credit institutions qualified as participants to the trading system of the BSE, and which (a) have signed and submitted to the Intermediary an irrevocable and unconditional undertaking (the "Engagement Letter") to observe the terms and conditions of the Tender Offer and applicable laws and (b) have been granted access to the market segment of the BSE used for the Tender Offer.
"Institutional Investors" means "qualified investors" as such term is defined under the Capital Markets Law.
"Retail Investors" means Investors other than Institutional Investors.
Investors may tender their Shares in the Tender Offer in accordance with the terms of this Tender Offer Document by filling in and signing the share purchase agreement (the "Acceptance Form") made available to interested Investors by the Intermediary or any Eligible Participant (the Intermediary together with the Eligible Participant, the "Authorised Participants") at their respective registered offices and by delivering before the Expiration Deadline, all necessary documents, at the respective registered offices.
Signed and completed Acceptance Forms may be submitted with any Authorised Participant only prior to the Expiration Deadline.
Each Investor tendering Shares in the Tender Offer may only tender such number of Shares in respect of which it is a registered owner on the date of submission of the Acceptance Form to any Authorised Participant in the Tender Offer. Each Authorised Participant undertakes to verify, upon receiving each Acceptance Form, with the accompanying documents that the number of Shares proposed to be tendered by each Investor as set out in the Acceptance Form does not exceed the number of Shares held at that time by the respective Investor, which are registered in an account opened with the respective Authorised Participant or with the relevant custodian of the Investor (as the case may be). Each Authorised Participant may only validate the tenders made by an Investor and place the corresponding sell order into the trading system of the BSE after it has performed the above described verifying process. Each Authorised Participant is liable for any loss or damages caused to the Bidder or any third parties, directly or indirectly, by the failure to comply with the above described process in respect of the tenders validly submitted to such Authorised Participant.
If an Investor has concluded a valid brokerage contract with an Authorised Participant, such Investor may send to the respective Authorised Participant a standard sale order in respect of the Shares proposed to be sold in the Tender Offer, without being required to submit any other additional documentation except for the evidence of ownership of the Shares in the form of a statement of account issued by its custodian. In such case, the relevant Authorised Participant will fill in the Acceptance Form on behalf of the respective Investor.
If an Investor has not concluded a valid brokerage contract with an Authorised Participant, the Acceptance Form must be accompanied by any other documents requested by the Authorised Participant for the purpose of carrying out its duty to comply with "know your client" rules, based on applicable regulation and its internal policies and requirements for client identification.
Documents in a language other than Romanian or English, submitted by an Investor must be accompanied by a translation thereof into Romanian or English.
If (a) an Acceptance Form contains factual or legal errors or is not accompanied by the required documentation and/or (b) any Shares intended to be sold in the Tender Offer by an Investor (i) are restricted in any way from transfer and such restriction is registered with the Central Depositary, the Authorised Participant or the relevant custodian of the Investor (as the case may be) and/or (ii) are expressed to be subject to any options or other rights in favour of a third party and/or (iii) are not held in an account of the Investor and/or (iv) the number of Shares indicated in the Acceptance Form exceeds the number of Shares actually held by the Investor, the relevant Acceptance Forms shall be deemed null and void for the entire number of shares mentioned in it and shall not be validated by the Authorised Participant.
Immediately after the validation of an Acceptance Form from an Investor, the relevant Authorised Participant will block the Shares tendered by that Investor. Each Authorised Participant is required to take all the necessary measures to ensure an effective blocking of the tendered Shares into the relevant accounts opened by the Investor with the respective Authorised Participant. If the Investor holds the Shares, which are tendered, through a custodian, the Investor shall instruct its custodian to block the tendered Shares until the Trade Date (as defined below). Each custodian of the Investors tendering Shares in the Tender Offer is required to take all necessary measures to ensure an effective blocking of the tendered Shares into the relevant accounts opened by the Investor with the respective custodian. Consequently such Investor will not be able to transfer, dispose of, or otherwise deal in, the Shares that have been tendered, except where it has validly submitted a tender withdrawal request (a "Revocation Form") (see Section 12.4 "Withdrawal of tenders").
Any tendered Shares that are not withdrawn and that are not accepted for purchase under the Tender Offer as a result of the pro-rata allocation will be unblocked by the Authorised Participant/custodian after acceptance of the tendered Shares on the Allocation Date (as defined below).
All tendered Shares that are not withdrawn and that are accepted in the Tender Offer shall be unblocked on the Allocation Date for transfer immediately prior to and for the purpose of the registration of the trades in the trading system of the BSE.
Each Authorised Participant must inform Investors tendering their Shares through such Authorised Participant of the terms and conditions of the Tender Offer and each of them is exclusively liable for carrying out the trades in connection with this Tender Offer in compliance with this Tender Offer Document and the FSA regulations.
For the avoidance of doubt, the Authorised Participants are liable also for the completion of the settlement of the trades carried out pursuant to the orders collected, validated and registered by such Authorised Parties in the BSE systems and corresponding payments to Investors.
By tendering their Shares through an Authorised Participant, each Investor tendering Shares will be deemed to represent, warrant and agree as follows:
(j) It represents, warrants and confirms that: (a) it is not a Sanctioned Person (as defined below) (other than solely by virtue of its or its controlling persons' inclusion in: (1) the most current "Sectoral Sanctions Identifications" list (which as of the date hereof can be found at: http://www.treasury.gov/resourcecenter/sanctions/SDN-List/Pages/ssi_list.aspx (the "SSI List"), (2) Annexes III, IV, V and VI of Council Regulation No.833/2014, as amended by Council Regulation No.960/2014 (the "EU Annexes"), or (3) any other list maintained by a Sanctions Authority, with similar effect to the SSI List or the EU Annexes); (b) it is not acting on behalf, or for the benefit, of a Sanctioned Person; and (c) it will not use, directly or indirectly, the proceeds received by it from the sale of its securities pursuant to this Tender Offer for the purpose of financing or making funds available directly or indirectly to or for the benefit of any Sanctioned Person, to the extent such financing or provision of funds would be prohibited by Sanctions.
For the purposes of this Tender Offer Document:
None of the Bidder, its Board of Nominees or management, the Dealer Managers or the Intermediary or any other person is or will be obligated to give any notice of any defect or irregularity in any tender, and none of them will incur any liability for failure to give any such notice.
Investors who intend to tender all or any portion of their GDRs pursuant to this Tender Offer Document must follow the procedures set forth in this Section 12.3 "Participation of Investors tendering GDRs". An Investor holding GDRs (or a direct participant of Euroclear or Clearstream, as the case may be, holding GDRs on behalf of such Investor) must tender through either Euroclear or Clearstream, as the case may be.
GDRs tendered in the Tender Offer will be blocked in the relevant account at the relevant Clearing System from the date the relevant tender of Securities is made until the time of completion of settlement of the Tender Offer or until the Investor validly withdraws its tender (see Section 12.4 "Withdrawal if tenders").
Please note that the Clearing Systems, their respective participants and the brokers or other securities intermediaries through which GDRs are held will establish their own cut-off dates and times for the tender and/or withdrawal of the GDRs, which will be earlier than the Expiration Deadline. Investors should contact the broker or other securities intermediary through which they hold GDRs to determine the cut-off dates and times that apply to them.
By tendering their GDRs through the submission of an electronic instruction in accordance with the requirements of Euroclear or Clearstream, as applicable, each Investor tendering GDRs will be deemed to represent, warrant and agree as follows:
(h) It hereby requests that any GDRs not accepted for purchase that are held through Euroclear or Clearstream be unblocked.
(i) It represents, warrants and undertakes that it has observed the laws of all relevant jurisdictions, obtained all requisite governmental, exchange control or other required consents, complied with all requisite formalities in connection with any tender of any GDRs, in any jurisdiction and that it has not taken or omitted to take any action in breach of the terms of this Tender Offer Document or the related materials or which will or may result in the Bidder or any other person acting in breach of the legal or regulatory requirements of any such jurisdiction in connection with this Tender Offer or tender of GDRs in connection therewith.
Tenders submitted in the Tender Offer may be withdrawn by Investors no later than the Expiration Deadline, it being understood, however, that in relation to GDRs, the Clearing Systems may impose their own cut off times with respect to the ability of Investors to withdraw their instructions to tender. Investors that hold through an intermediary are advised to check with such entity when it would require receipt of instructions to revoke a tender of GDRs in the Offer in order to meet the deadline. For the avoidance of doubt, any Investor who does
not exercise any such right of revocation in the manner specified above shall be deemed to have maintained its tender and its original instruction will remain effective.
Investors may withdraw their tender by filling in a Revocation Form at the unit where the tender was submitted.
The Bidder shall determine those Securities that will be accepted for purchase under the Tender Offer on the Business Day falling on the Expiration Deadline (the "Allocation Date").
The total number of Shares tendered and not withdrawn in the Tender Offer (in the form of Shares and GDRs) by Investors ("Aggregated Tendered Shares") will be determined by aggregating (i) the total number of Shares tendered and not withdrawn in the form of Shares and (ii) the total number of Shares tendered and not withdrawn in the form of GDRs (noting that each GDR represents 50 Shares). The total number of Shares tendered and not withdrawn in the form of Shares will be the sum of Shares corresponding to the sale orders entered by the Authorised Participants in the market for special operations – POF - of the BSE, by 6:00 p.m. (Eastern European Time) on the last day of the Offer Period. The total number of Shares tendered in the form of GDRs will be the number of GDRs tendered and not withdrawn by the Expiration Deadline, as communicated by the GDR Tender Agent, multiplied by 50.
If the Aggregated Tendered Shares exceed the Maximum Number of Shares, the tendered and not withdrawn Shares and GDRs will be purchased by the Bidder on a pro-rata basis according to the number of Shares validly tendered and not withdrawn by each of the tendering Investors (including Shares in the form of GDRs) (with adjustments where necessary to avoid the purchase of a fractional Security from any Investor). The allocation ratio will be calculated by dividing the Maximum Number of Shares by the Aggregated Tendered Shares.
The allocation ratio will be made public on the Allocation Date, including via the Bucharest Stock Exchange electronic system and Regulatory Information Service in the United Kingdom.
Any Investor, which validly tenders Securities in the Tender Offer, will sell such number of Shares, tendered in the form of Shares and/or GDRs, as accepted for tender by the Bidder following the pro-rata allocation and possible adjustments.
As a first step, in the case of Shares tendered and not withdrawn in the form of GDRs through the GDR Tender Agent, the allocation ratio will be applied to the number of Shares in the form of GDRs communicated by the GDR Tender Agent (which, for this purpose will be deemed as a single instruction to tender GDRs). If the resulting number of Shares allocated to the number of GDRs tendered through and communicated by the GDR Tender Agent after the pro-rata allocation is not a whole number which is a multiple of 50, the number of Shares allocated to the GDR Tender Agent shall be rounded down to the immediately lower whole number which is also a multiple of 50. Any remaining Shares as a result of such rounding down will be allocated to Investors tendering Shares as described below.
As a second step, in the case of Investors tendering Shares in the Tender Offer, if the resulting number of Shares allocated to such Investor after the pro-rata allocation is not a whole number, the number of Shares allocated to the relevant Investor shall be rounded down to the immediately lower whole number.
For the purpose of allocating any remaining Shares resulting from the rounding down related to the two steps described above, Investors who validly tendered Shares shall be ranked in decreasing order of the number of Shares for which they validly tendered and which were not withdrawn and, if one or more Investors tendered the same number of Shares they will be ranked in increasing order based on the time stamp in the Bucharest Stock Exchange electronic system associated with their trading order. The remaining Shares shall be then allocated on the basis of one per Investor (but so that the number of Shares allocated in aggregate to an Investor does not exceed the number of Shares initially tendered by such Investor), starting with the largest allocation, until the remaining Shares are fully allocated.
For the avoidance of doubt, an Investor owning more than the Maximum Number of Shares is entitled to tender in the Tender Offer up to the total number of Shares held by such Investor and such number of Shares will be considered in the total number of Shares tendered in the Tender Offer when assessing the pro-rata allocation. The number of Shares that will be sold under this Tender Offer by the respective Investor shall be calculated by
applying the allocation ratio to the number of Shares tendered in the Tender Offer. Acceptances are not allowed for fractional Securities.
The Clearing Systems and participants in those systems will make appropriate adjustments to the number of GDRs accepted for purchase in the Tender Offer (rounding up or down, as appropriate) so as to avoid the acceptance of fractional GDRs for purchase in the Tender Offer. If any validly tendered and not withdrawn GDRs are not purchased under this Tender Offer, such GDRs will be unblocked by the relevant Clearing System on the account of the Investor tendering GDRs.
Investors validly tendering Securities in the Tender Offer in accordance with the terms of this Tender Offer Document shall receive the Purchase Price corresponding to the number of Securities accepted for tender, less any taxes or other governmental charges, fiscal duties, any commissions and transaction fees charged by the brokers, intermediaries, relevant market institutions or any applicable bank transfer fees. No Investor will be entitled to any payment of accrued or other interest with respect to the Purchase Price under any circumstances.
The Bidder shall not be liable for the payment of any transaction fees and charges or other charges and commissions payable by Investors who have sold Securities pursuant to the Tender Offer.
The Bidder is not responsible for withholding or payment of and will not withhold or pay any taxes or other governmental charges or fiscal duties in relation to the Purchase Price payable to Investors who have sold Securities in the Tender Offer. Each Investor should seek independent advice from its legal, tax or financial advisors and shall duly comply with any tax obligations which may arise in respect of the income derived in connection with the Securities sold pursuant to the Tender Offer.
The trades for Shares in the Tender Offer will take place on the Business Day immediately following the Expiration Deadline (the "Trade Date"). The settlement of the trades relating to the Shares in the Tender Offer shall occur on the second Business Day following the Trade Date (the "Shares Settlement Date"). Payment of the Purchase Price by the Bidder to Investors for Shares accepted for purchase after allocation shall be made in RON, as part of settlement (delivery versus payment in the clearing and settlement system of the Central Depositary).
For the avoidance of any doubt, in case of Investors that have elected in the corresponding Acceptance Form to receive payment other than by bank transfer, the Authorised Participants (through which such Investors tendered their Shares) shall transfer the corresponding Purchase Price received from the Bidder no later than the Business Day immediately following the Shares Settlement Date.
Each Investor will receive payment of the Purchase Price corresponding to the number of Shares accepted for tender pursuant to the Tender Offer in accordance with the option specified by the Investor in the Acceptance Form, less any taxes or other governmental charges, fiscal duties, any commissions and transaction fees charged by the brokers, intermediaries, relevant market institutions or any applicable bank transfer fees.
The Bidder will, no later than two (2) Business Days following the Expiration Deadline, remit the aggregate Purchase Price for all GDRs to be purchased by the Bidder pursuant to the Tender Offer in US dollars to the GDR Tender Agent. The GDR Tender Agent will, as soon as practicable, pay that price to the Clearing Systems for further distribution to the Investors who have validly tendered GDRs in the Tender Offer and whose GDRs have been accepted for purchase in the Tender Offer pro-rata to the number of GDRs validly tendered by the relevant tendering Investor. The Purchase Price for GDRs accepted for tender, after deduction or payment of any taxes or other governmental charges, fiscal duties, any commissions and transaction fees charged by the brokers, intermediaries, relevant market institutions or
any applicable bank transfer fees, shall be paid to Investors through the procedures of the relevant Clearing System. Investors tendering GDRs will not receive any other form of compensation during this period of time or in the event of a delay in the delivery of the corresponding Purchase Price to the Investors (subject to Rule 14e-1(c) under the Exchange Act).
The Bidder will use its own funds to pay the Purchase Price in connection with this Tender Offer. The Bidder has deposited with the Intermediary's account the guarantee of 30 per cent of the Offer value, required in accordance with Regulation no. 1/2006.
The Tender Offer has been authorized by the resolution of the extraordinary general shareholders' meeting of the Bidder no. 9 of 29 October 2015 published with the Official Gazette of Romania Part IV no. 6682 dated 26 November 2015 and is part of the buy-back programme whose purpose is the decrease of the Bidder's share capital.
After the closing of the Tender Offer, the Bidder intends to cancel the GDRs purchased in the Tender Offer in exchange for the underlying Shares and subsequently cancel all the purchased Shares (whether initially purchased in the form of Shares or GDRs) and decrease its share capital by the corresponding nominal value of such cancelled Shares.
The Tender Offer Document shall be made available to the public free of charge, as follows:
(a) In hard copy, at the Bidder's registered office, respectively 78-80 Buzesti Street (7th floor), District 1, Postal Code 011017, Bucharest, Romania, telephone +4021.200.96.00, starting with the date of publication of the Tender Offer announcement; and
(b) in electronic form, on the website of the Bucharest Stock Exchange (www.bvb.ro), as well as on the Bidder's website (www.fondulproprietatea.ro).
The Bidder has entered into an intermediation agreement dated 27 January 2017 with the Intermediary for the purposes of the Tender Offer. Institutional Investors tendering Shares pursuant to the Tender Offer will be required to tender Shares through the Intermediary or any Eligible Participant, while Retail Investors tendering Shares will be required to tender Shares through any Eligible Participant.
The Bidder has entered into a GDR tender agent agreement dated on or around the announcement of this Tender Offer Document with The Bank of New York Mellon for the purposes of the Tender Offer. Investors tendering GDRs pursuant to this Tender Offer will be required to tender GDRs to The Bank of New York Mellon in its capacity as GDR Tender Agent.
The Bidder has engaged Goldman Sachs and Wood & Co. to act as Dealer Managers. The Bidder has entered into a dealer manager agreement dated on or around the announcement of this Tender Offer Document with the Dealer Managers.
The Dealer Managers and their respective affiliates may contact and communicate with Institutional Investors regarding the Tender Offer and may request brokerage houses, custodians, nominees, fiduciaries and others to forward this Tender Offer Document and related materials to such Institutional Investors.
| Bidder | Intermediary | |||||
|---|---|---|---|---|---|---|
Johan MEYER
_________________________
Fondul Proprietatea SA WOOD & Company Financial Services a.s.
Bogdan Campianu
_________________________
Franklin Templeton International Services S.À R.L., as Sole Director of FONDUL PROPRIETATEA S.A.
| Co de Pr isi ov on s |
Co lie mp s |
Do t es no ly /pa rtia lly co mp lie co mp s |
Re fo as on r n on lia co mp nc e |
|---|---|---|---|
| A.1 . T he Fu nd has int al r ula tion wh ich inc lud of ref / re nsi bili ties fo r B rd a nd key nt f tion f th e F und ter ern eg es ms ere nce spo oa m ana ge me unc s o |
X | ||
| for f co nfli f in of otif of A.2 . P isio th nt o ct o ter est e in clu ded in the int al r ula tion . In t, t he mb th e B rd s hou ld n the Bo ard rov ns e m ana ge me ar ern eg an y e ven me ers oa y nfli of inte hic h h ise aris nd sho uld fra in f kin in the dis sio n ( inc lud ing by t b ein wh th is d cts t w ta art ent t any co res ave ar n o r m ay e, a re rom g p cus no g p res ere oes no de r th ing ) a nd fro otin n th do tion of luti the iss wh ich ive ise h c onf lict of int eet ate to st. ren e m no n-q uor m v g o e a p a r eso on on ue g s r suc ere |
X | ||
| A.3 . T he Bo ard of No min ha s fi mb ees ve me ers |
X | ||
| A.4 . A ll m be f th e B rd o f N ine utiv Fo mb of the Bo ard of No min e in de de Ea ch ind nde be r of th e B rd nt. nt m em rs o oa om es are no n-e xec e. ur me ers ees ar pen epe em oa of No min bm itte d a de cla ion th he is i nde de t th of his min atio n fo lec tion -ele ctio ell wh ch e in his rat at nt a ent sta tus ees su pen e m om no r e or re n a s w as en any ang aris by de nst rat ing th nd wh ich he is sid d in de de nt i ha ter d ju dge nt i tice es, mo e g rou on con ere pen n c rac an me n p rac |
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| A.5 . A Bo ard be r's oth rela tive ly p ofe ssi l co itm nd , in clu din utiv nd tive Bo ard siti in ent ent nts m em er erm an pr ona mm s a eng age me g e xec e a non -ex ecu po ons ies d n for ofit ins titu tion hou ld b e d isc los ed sha reh old d to tial inv be for intm d d urin his / h nda ot- to ten est ent te. com pan an -pr s, s ers an po ors e a ppo an g er ma |
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| A.6 . A mb of t he Bo ard sh ld s ubm it to th e B rd, info atio rela tion shi ith ha reh old wh o h old s d irec tly ind irec tly, sh ting ny me er ou oa rm n o n a ny p w a s er or are s re pre sen han of all ing rig hts . T his ob liga tion kin d o f re lati hip wh ich affe he itio f th be n is s d eci ded by th e B rd. re t 5% vot ct t mo co nce rns an y ons m ay pos n o e m em r o sue oa |
X | ||
| A.7 . T he Fu nd has inte d a Bo ard nsi ble fo rtin the rk o f th e B rd. tar ap po se cre y re spo r su ppo g wo oa |
X | ||
| A.8 . T he l re rt in for wh eth lua tion of the Bo ard ha s ta ken lac nde r th e le ade rsh ip o f th hai the No min atio nd Re atio an nua po ms on er an eva p e u e c rm an or n a mu ner n Co itte nd , i f it has ariz e k ion ints d c han sul ting fro m i t. T he Fu nd has licy rdin the alu atio f th e B rd tain ing th act mm e a , su mm ey po an ges re a po re ga g ev n o oa con e iter ia a nd fre of the alu atio pu rpo se, cr que ncy ev n p roc ess |
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| A.9 . T he l re ain s in for tion th be r of ing f th e B rd a nd the itte du ring th da by di s ( in p rt c ont eet ast at ten tor an nua po ma on e n um m s o oa co mm es e p ye ar, nce rec ers on and in abs ia) and of the Bo ard d c mit n th eir ivit ies ent ort tee act a rep an om s o |
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| A.1 0 T he l re ain s in for tion th ise mb of t he ind nde be f th e B rd of No min rt c ont nt m an nua po ma on e p rec nu er epe em rs o oa ees |
X | ||
| Co A.1 1. T he Bo ard of No min the No min atio nd Re ion itte e fo ed of tive hic h w ill l ead th fo r th e A IFM t u rat ees se p n a mu ne mm rm non -ex ecu s, w e p roc ess intm nd ke nda tion th e B rd. Th ajo rity of the be f th e N ina tion d R ion Co itte ind nde ent s to rat nt. ap po s a ma rec om me oa e m m em rs o om an em une mm e a re epe |
X | ||
| f N Co of t B.1 Th e B rd o ine set th e A udi t a nd Va lua tion itte ll m be rs b ein cut ive d t he jor ity hem be ing ind nde nt. Th ajo rity oa om es up mm e, a em g n on- exe an ma epe e m of mb , in clu din the ch air n, h deq ual ific atio ele th e f tion nd nsi bili ties of the itte e. T he cha irm of t he uat t to me ers g ma ave pr ove n a n a e q n r van unc s a res po co mm an Au dit Co itte e h ad udi ting ntin rien uat mm as pro ven eq e a or ac cou g e xpe ce. |
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| Co B.2 . T he Au dit and Va lua tion itte e is ch aire d b n in de de nt n tive be mm y a pen on -ex ecu m em r. |
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| Co B.3 . A its nsi bili ties , th e A udi t a nd Va lua tion itte nde rta kes l as ent of the ste f in ter nal ntr ol. mo ng res po mm e u an an nua ses sm sy m o co |
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| effe of t fu f ri B.4 . T he nt c ide rs t he ctiv and the int al a udi nct ion , th deq sk ent d in ter l co ntr ol r rts to t he Au dit ass ess me ons ene ss sc ope ern e a uac y o ma nag em an na epo Co and Va lua tion itte ent 's r ive nd effe ctiv in d ling wi th ide ntif ied int al c ont rol fail ing kne nd sub mis sio f mm e, ma nag em esp ons nes s a ene ss ea ern s o r w ea sse s a n o rele he Bo ard t re rts to t van po |
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| Co onf f in of t B.5 . T he Au dit and Va lua tion itte evi lict ter est s in tra ctio he Fu nd and its bsi dia ries wi th rela ted rtie mm e r ew s c s o nsa ns su pa s. |
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| B.6 . T he Au dit and Va lua tion Co itte val the eff icie of the int al c rol d o f th isk uat ont tem nt s tem mm e e es ncy ern sys an e r m ana ge me ys |
X | ||
| B.7 . T he Au dit and Va lua tion Co itte itor s th lica tion of d g rall ted nda rds of inte l au diti . T he Au dit and Va lua tion sta tut sta mm e m on e a pp ory an ene y a cce p rna ng Co itte ive nd lua th of t he inte l au dit tes rts tea mm e r ece s a eva e r epo rna m. |
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| B.8 . T he Au dit and Va lua tion Co itte ide s th e B rd a al o r ad -ho rts. mm e p rov oa nnu c re po |
X |
| Co de Pr isi ov on s |
Co lie mp s |
Do t es no ly /pa rtia lly co mp lie co mp s |
Re fo as on r n on lia co mp nc e |
|---|---|---|---|
| B.9 . N ha reh old be ive ndu ref oth sha reh old wi th ard ctio and ade by th e F und wi th s har eho lde nd to tra nts o s er ma y g n u e p ere nce ov er er ers reg nsa ns ag ree me m rs a the ir r ela ted rtie pa s. |
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| B.1 0. T he Fu nd has in lac late d p ctio ed art tra p e a re y nsa n p roc ure |
X | ||
| B.1 1. T he inte l au dits ied t by l di vis ion d b inin n in de de hird ity. te str uct eta nt t rty ent rna ar e c arr ou a sep ara ura an y r g a pen -pa |
X | ||
| B.1 2. T he fulf ilm of the re f tion f th e in l au dit ivit ies , al l re ovi ded the Bo ard via th e A udi nd Va lua tion Co itte re t ent ter act rts to t a o e nsu co unc s o na po are pr mm e. |
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| C.1 . T he Fu nd has blis hed ion licy its bsi and inc lud e in its l re atio th e im lem atio f th is p olic rat te rt a tat ent ent pu a rem une po on we an nua po re mu ner n s em on p n o y du ring th al p erio d u nde vie e a nnu r re w. |
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| D.1 . In ad diti info tion ired by leg al p isio th e F und inc lud its ebs ite a d ed ica ted Inv Re lati ctio n, b oth in Ro nia nd to rat est on rma re qu rov ns, es on cor po e w or ons se ma n a En lish ith all rele t in for tion of inte t fo r in s, i ncl udi tor g , w van ma res ves ng : |
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| D.1 .1. Pri nci l co ula tion he Co itut ive Ac ral sha reh old ing du rat s: t nst t, g eet pa rpo e r eg ene ers m pr oce res ; |
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| D.1 .2. Pro fes sio nal CV f th be f its rnin bod ies , B rd mb er's he rof ion al c mit , in clu din utiv nd tive Bo ard ot nts s o e m em rs o go ve g oa me r p ess om me g e xec e a non -ex ecu itio in c ies d n for ofit ins titu tion ot- pos ns om pan an -pr s; |
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| D.1 .3. Cu nd riod ic r (qu erly mi- l an d a al r rts) lea ide d a t ite D.8 inc lud ing ith det aile d nt ort rts art at st a nt ort rre rep s a pe epo , se an nua nnu epo s p rov m cu rre rep s w – – info tion late d to lian wit h th e C ode of BV B; rma re no n-c om p ce |
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| info of s D.1 .4. De tail ed tion late d to ral etin ha reh old rma re ge ne me gs ers ; |
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| D.1 .5. Info tion rat ts, h a ent of div ide nds d o the r d istr ibu tion s to sh hol de oth nts lea din to t he uis itio r lim itat ion rma on co rpo e e ven suc s p aym an are rs, or er eve g acq n o of rig hts of ha reh old inc lud ing th e d ead line nd inc ip les lied h o ion s. S uch inf atio hou ld b ubl ish ed wit hin tim efr hat ab les to rat e t a s er, s a pr ap p suc pe orm n s e p a am en inv ke inv nt d eci sio est to est ors ma me ns; |
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| of inf D.1 .6. Th nd tac t d ata wh ho uld be ab le t ide kn led ble atio t; e n am e a con a p ers on o s o p rov ow gea orm n o n r eq ues |
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| D.1 Co tion s (e IR ion ly r lts ion tc.) fina nci al s s (q rly, mi- l, a al) dito .7. rate nta tat ter tat tat ent rte rts rpo pr ese .g. pre sen s, q uar esu pre sen s, e em ua se an nua nnu , au r re po , and l re rts. an nua po |
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| D.2 . T he Fu nd has l ca sh dis trib utio olic t of di tion s th e F und int end s to fo llow rdin the dis trib utio f n et fit. Th al c ash an an nua n p y, a s a se rec re ga g n o pro e a nnu dis trib utio olic is p ubl ish ed the ebs ite. rat n p y on co rpo e w |
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| D.3 . T he Fu nd has ad ted licy wi th fo s. T he for olic is p ubl ish ed the ebs ite. t to ast st p rat op a po res pec rec eca y on co rpo e w |
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| D.4 . T he rule f g ral etin of s ha reh old do ict the rtic ipa tion of sha reh old in ral etin and th cis ing of the ir r ig hts t re str s o ene me gs ers no pa ers ge ne me gs e e xer Am end of the les sh ld t ake eff th arl ies f th ral etin f sh hol de nts ect , at t, a ext me ru ou e e s o e n ge ne me g o are rs. |
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| D.5 . T he al a udi hou ld a nd the sh hol de rs' etin wh the ir r d t he ext tor tte rts nte ern s s are me gs en epo are pr ese re. |
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| D.6 . T he of the Fu nd he l ge ral etin f sh hol de br ief f th e in l co ols d s ign ific ris k ent ts t o t nt o ter ntr ant ma nag em pre sen an nua ne me g o are rs a ass ess me na an ll a inio iss bje luti he ral etin ent ste ct t at t ma nag em sy m, as we s o p ns on ues su o r eso on ge ne me g. |
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| D.7 . A fes sio l, c ulta nt, ert fin ial lys t m rtic ipa te in t he sha reh old ' m eet ing ior inv itat ion fro m t he ent of the Fu nd ny pro na ons exp or anc ana ay pa ers up on pr ma nag em Ac dite d jo alis als icip in the ral etin f sh hol de unl th f th e F und de cid oth ise ts m art ate nt o cre urn ay o p ge ne me g o are rs, ess e m ana ge me es erw |
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| D.8 . T he rly and mi- l fin ial s in clu de info tion in bot h R ian d E lish rdin the ke driv inf lue nci the tivi f th e F und rte ort ty o qua se an nua anc rep rma om an an ng re ga g ers ng ac y |
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| D.9 . T he Fu nd ise t le fo etin / co nfe cal ls w ith lys nd inv ch r. T he info atio ed the asi is blis hed ast ts a est ent org an s a ur me gs ren ce ana ors ea yea rm n p res on se occ ons pu the Fu nd' ebs ite. on s w |
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| D.1 0. If th e F und riou s fo of isti nd cul al e ion tivi ties , ed tion al o ien tific tivi ties d c ide he ulti imp rts art tur ort rs t act su ppo va rms c a xpr ess , sp ac uca r sc ac , an ons res ng on the in ativ and etit ive f th e F und f its bu sin iss ion d d lop it p ubl ish the licy idin its ivit in t his rt o nt s tra teg act nov ene ss co mp nes s o pa ess m an eve me y, es po gu g y ar ea |
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| fo of of Ru les r th lic ati th rin cip les rat e a pp on e p co rpo e g ov ern an ce |
Co lie mp s |
/pa Do t c ly rtia lly es no om p lie co mp s |
fo Re as on r n on lia co mp nc e |
|---|---|---|---|
| 1. T he Fu nd def ine d in its ins of inc tion d in nal lici the nsi bili ties of the e b od ies th e im lem atio nd tru nts ter rat ent me orp ora an po es re spo co rpo on p n a lian wit h th rinc ip les of rat com p ce e p cor po e g ove rna nce |
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| 2. T he inte l po lici lay do th fun ctio nd sib iliti of t he tive d ive te tru ctu ete cut rna es wn e c orp ora gov ern anc e s res ns, co mp nce s a res pon es non -ex ecu an exe , / se nio ent nt. ma nag em r m ana ge me |
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| 3. T he l re f th e F und ha de dic d c hap th at d ribe th ele s in ctio ith the lica tion of the inc ip les of rt o ate ter t ev ent an nua po s a esc e r van co nne n w ap p pr fin rat ring the ial cor po e g ove rna nce , oc cur ov er anc yea r. |
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| 4. T he Fu nd has nic atio ith the rtie ed r in for tion tra teg to a com mu n s y w pa s c onc ern ens ure pr ope ma |
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| 5. T he of the bal e b utiv nd tive be hat all of str uct nt a etw o t ure m ana ge me ssu res a anc ee n e xec e a non -ex ecu m em rs s no pe rso n o r sm gro up pe rso ns infl th e d eci sio aki uen ces n-m ng pro ces s. |
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| 6. T he Bo ard of No min is ed lea thr nth itor th erf f th e M f th e F und at st e s to nt o ees con ven ve ry ee mo m on e p orm anc e o ana ge me |
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| 7. T he tive d t he ive nt/ ior larl evi s th olic ies th e f ina nci al r rtin inte l co ol a nd cut ent ntr non -ex ecu an exe m ana ge me sen ma nag em re gu y r ew e p on epo g, rna risk ad ted by th e F und nt s tem m ana ge me ys op |
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| 8. In f ulfi llin its dut ies , th e B rd o f N ine is a ssi d b ulta tive itte for inf atio ario ics bje o d eci sio aki ste top ct t g oa om es y c ons co mm es orm n o n v us su n-m ng |
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| / re 9. T he sul ive itte sub mit the Bo ard of No min rks the ics d b it. tat to rts to tru ste con co mm es ees wo po on p en y |
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| 10. Th inte l pr du / p olic ies / re lati of the Fu nd for th ele ctio f a lica tion s fo r th of the tive nt/ ere a re rna oce res gu ons e s n o pp e p ers ons ex ecu m ana ge me ior intm of al o f th xis ting and ent ent ate sen ma nag em , ap po new pe rso ns or ren ew e e m s. |
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| 11. Th f th e F und the ntin rof ion al t rain ing of the tive nt/ ior th it e ffic ien tly nt o ent at e m ana ge me en sur es co uou s p ess ex ecu m ana ge me sen ma nag em so rfo its ta sks pe rms |
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| Ke fun ctio tab lish ed inta in t he isa tion al s f th e F und lian ith the lica ble lati 12. to tru ctu t w y ns are es so as ma org an re o co mp ap p re gu ons |
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| f N ffic f th of f 13. Th e B rd o ine ula rly iew s th ien and dat e in ter nal ntr ol s tem the Fu nd to rigo nt o oa om es reg rev e e cy up e o co ys ens ure a rou s m ana ge me the ris ks hic h th e F und is d. to w exp ose |
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| 14. Th e A udi nd Va lua tion Co itte ake nda tion th e B rd o f N ine the lec tion intm d r lac of the t a s to ent ent mm e m s re com me oa om es on se , ap po an ep em fina nci al a udi d o n th d c ond itio of his ion tor e te rat , an rms an ns re mu ne |
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| 15. Th evi t le nd s th he ion lici nsi ith eff icie risk nt r ast at t rat ste nt w nt nt. e m ana ge me ew s a on ce a y ea r a ens ure rem une po es are co an m ana ge me |
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| of of 16. Th rat ion licy th e F und is set t in th e in ter nal lati rdin the im lem ent atio nd lian wit h t he inc ip les e r em une po ou re gu ons re ga g p n a com p ce pr rat cor po e g ove rna nce |
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| 17. Th e B rd o f N ine has ad ted ced fo r th e id ific atio nd ttle f a flic t of int ent nt o st. oa om es op a pro ure n a pro pe r se me ny con ere |
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| Th ive nt/ ior iate , in for th e B rd o f N ine of a flic t of int nd doe 18. cut ent st a ot e exe m ana ge me sen ma nag em , as ap pro pr ms oa om es ny con ere s n rtic ipa te in t he dec isio aki hic h is late d to th tat f co nfli ct. pa n-m ng pro ces s w re e s e o |
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| 19. Th e B rd o f N ine lys at lea st o r th ffic ien of t he risk nt s tem of the Fu nd oa om es ana es nce a y ea e e cy m ana ge me ys |
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| . T he Fu nd has du fo r th e id ific atio d m f th ign ific ris ks hic h it is, it is l ike ly be ed 20 ent ent nt o ant to w to pr oce res n, a sse ssm an ana ge me e s or , ex pos |
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| . T he Fu nd' nt h in p lac lea tion lan s fo r b usi inu ity and fo itua tion 21 ont s m ana ge me as e c r ac p nes s c r a ny em erg enc y s s. |
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