Fondul Proprietatea - Audit Report / Information 2020

549300PVO1VWBFH3DO07-2020-12-31

Fondul Proprietatea SA

Annual Sole Director’s Report

For the Financial Year Ended

31 December 2020

(this is a translation from the official Romanian version)

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

Contents

List of Abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Sole Director’s Letter to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Company Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

The Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Shareholder Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Share Capital Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Summary of Financial Results. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Contact Details. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Presentation and Activity of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Market for Securities Issued by the Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Buy-back Programmes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Distributions to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

NAV Methodology and NAV Evolution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Investment Strategy and Portfolio Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Energy Sector Updates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Update on the Largest 10 Portfolio Holdings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Key Financial Highlights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

Risk Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

Overview of Main Risks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

Internal Control and Risk Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Risk Management Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

Liquidity Risk. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Leverage under AIFM Directive Considerations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Corporate Governance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

Management Structure of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

General Shareholders Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

Board of Nominees and the Consultative Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

The Sole Director and AIFM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

The Depositary of the Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

Other Aspects. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

Financial Statements Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

Subsequent Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

Annexes

Annex 1 Financial Statements for the year ended 31 December 2020, prepared in accordance with the International Financial

Reporting Standards as endorsed by the European Union and applying the Financial Supervisory Authority Norm 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

Annex 2 Statement of Assets and Obligations of Fondul Proprietatea SA as at 31 December 2020, prepared in accordance with

CNVM Regulation 4/2010 (Annex no.4)

Annex 3 Statement of persons responsible

Annex 4 The Constitutive Act of Fondul Proprietatea SA in force as at 31 December 2020

Annex 5 Compliance with the corporate governance requirements

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

List of Abbreviations

AIF

Alternative Investment Fund

AIF Law

Romanian Law no. 243/2019 on the regulation of alternative investment funds and amending and

supplementing certain normative acts

AIF Regulation

Regulation no. 7/2020 on the authorisation and function of alternative investment funds, issued by

the Financial Supervisory Authority

AIFM

Alternative Investment Fund Manager

AIFM Directive

Directive 2011/61/EU on Alternative Investment Fund Managers

ALFI

Association of the Luxembourg Fund Industry

AML

Anti-Money Laundering

ANAR

National Authority of Romanian Waters (ro: Administratia Nationala Apele Romane)

ANRE

Romanian Energy Regulatory Authority

ASPAAS

Romanian Authority for Public Monitoring of the Statutory Audit Activity

ATS

Alternative Trading System

Brexit

The withdrawal of the United Kingdom from the European Union

BVB

Bucharest Stock Exchange

CAEN

Classification of Economic Activities in Romania

CNVM

National Securities Commission (currently FSA)

Companies’ Law

Law 31/1990 regarding companies, with subsequent amendments

DCM

Discount Control Mechanism

Depozitarul Central SA

Romanian Central Depositary

Depositary Bank/ Depositary

BRD – Groupe Societe Generale SA

EGM

Extraordinary General Shareholders Meeting

ESG

Environmental, Social and Governance

European Union

FATCA

The Foreign Account Tax Compliance Act

Fondul Proprietatea/ the Fund/ FP

Fondul Proprietatea SA

FSA

Romanian Financial Supervisory Authority

Franklin Templeton

FTIML

Franklin Templeton Investment Management Limited United Kingdom, Bucharest Branch

FTIS/ Alternative Investment Fund

Manager/ Sole Director

Franklin Templeton International Services S.à r.l.

GDP

Gross Domestic Product

GDPR

Regulation (EU) 2016/679 of the European Parliament and of the Council on the protection of

natural persons with regard to the processing of personal data and on the free movement of such

data (General Data Protection Regulation)

GDR

Global Depositary Receipt

GEO

Government Emergency Ordinance

GEO 114/2018

GEO 114/29 December 2018 on the implementation of certain measures in the field of public

investments and of fiscal

budgetary measures and the amendment and completion of certain

normative acts

GEO 1/2020

GEO 1/9 January 2020 regarding some fiscal-budgetary measures and the amendment and

completion of some normative acts

GEO 74/2020

GEO 74/ 19 May 2020 for modifying Romanian Energy Law no. 123/2012

GSM

General Shareholders Meeting

First semester

IFRS

International Financial Reporting Standards as endorsed by the European Union

IMF

International Monetary Fund

IPS

Investment Policy Statement

LSE

London Stock Exchange

MiFID II

Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets

in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU

NAV

Net Asset Value

Q1/ Q2/ Q3/ Q4

First/ second/ third/ fourth quarter of the year respectively

OCR

Ongoing charge ratio

OGM

Ordinary General Shareholders Meeting

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

PRIIPs

Packaged retail and insurance-based investment products

REGS

Main market (Regular) of Bucharest Stock Exchange

RRR

Regulatory Rate of Return

SFDR

Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019

on sustainabilityǦrelated disclosures in the financial services sector

SRD II

Shareholders Rights Directive II - Directive (EU) 2017/828 of the European Parliament and of the

Council of 17 May 2017 amending Directive 2007/36/EC as regards the encouragement of long-

term shareholder engagement

Tender Offer

UCI

Undertakings for Collective Investment

UCITS

Undertakings for Collective Investment in Transferable Securities

Water Law

Romanian Water Law no. 107/1996

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

Sole Director’s Letter to Shareholders

Dear Shareholders,

Our focus throughout 2020 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. During this extremely challenging year, our efforts were directed

towards protecting the underlying portfolio companies from the negative effects of the COVID-19 pandemic which

generated a severe decline of the financial markets around the world in the first part of the year. We are happy to

see the strong performance registered by the Fund’s share price in the second part of the year, following the

rebound of global stock markets, which led to a historical high level of the share price of RON 1.4500 per share

registered on 30 December 2020, and also the lowest discount to the NAV, of 9.71%

, on the same day.

In 2020, the Fund’s NAV per share total return was 2.21% and the Fund’s share price cumulative performance was

26.44%. The discount of the Fund’s share price to the NAV ranged between a high of 39.96%

and a low of 9.71%

which was also the closing value of the year. On the LSE, the total return for the GDR was 31.13% and the

discount varied between a high of 39.54%

and a low of 13.67%

and ended the year at 15.54%

. The average

annual discount for ordinary shares was 21.06%, while for GDRs was 22.16%.

We are pleased that we managed to generate positive returns on the NAV and on the share price for our

shareholders, despite the unprecedent overall economic uncertainties. We will continue our efforts to create

shareholder value, with share buy-backs and cash distributions as key actions that are under our control.

Source: Fondul Proprietatea, based on NAV reports submitted to FSA

Market Environment

In 2020, in the context of COVID-19 pandemic, BVB recorded the lowest decrease in EUR terms compared to the

largest markets in Central Europe, and second lowest decrease in local currency, respectively, as shown in the table

below:

% change in 2020

in local currency

in EUR

BUX (Hungary)

-3.98%

-17.33%

BET-XT (Romania)

-4.73%

-6.33%

WIG20 (Poland)

-7.73%

-14.22%

PX (Czech Republic)

-7.93%

-10.79%

ATX (Austria)

-12.76%

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 Investment Strategy and Portfolio

Analysis.

Calculated as the discount between FP share closing price on BVB - REGS/ FP GDR closing price on LSE and the latest available published NAV per share at the date of calculation

1.00

1.35

1.70

2.05

2.40

1/19 3/19 5/19 7/19 9/19 11/19 1/20 3/20 5/20 7/20 9/20 11/20

NAV Distribution Adjusted NAV

12/20

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

Key Events and Activities in 2020

Some of the key highlights for 2020 are:

x Completion of the eleventh buy-back programme for 797.96 million shares. The total value of the programme

excluding transaction costs was RON 1.07 billion, and the average share price was RON 1.3347 per share;

x Gross dividend distribution of RON 418.0 million to shareholders for the 2019 financial year;

x Completion of 3 tender offers for 585 million shares (374 million in the form of shares and 211 million in the

form of GDRs), at a purchase price of RON 1.39 per share and the USD equivalent of RON 69.50 per GDR,

executed in order to accelerate the eleventh buy-back programme;

x Continued efforts to promote the Fund and raise its visibility, as well as the visibility of the Romanian capital

market, the local companies (listed or candidates for being listed), and of Romania in general, in online

conferences and events;

x Key shareholders’ approvals during 2020:

- The cancelation of the shares bought-back by the Fund during 2019;

- The new Investment Policy Statement, in force starting 23 July 2020;

- The distribution of a gross dividend of RON 0.0642 per share for the 2019 financial year, as proposed by

the Sole Director;

- The approval of several changes of the Constitutive Act (a part of them were endorsed by the FSA during

2020, and other in February 2021)

- The appointment of two new Board of Nominees members

- The approval of the twelfth buy-back programme to repurchase a maximum number of 800 million shares,

between 1 January 2021 - 31 December 2021.

Coverage of the accounting losses and dividend distribution

The Fund incurred an accounting loss of RON 102,978,968 for the financial year ended 31 December 2020. The

accounting loss will be covered from 2016 unallocated profit, subject to shareholders’ approval.

Although there is no distributable profit as per the statutory annual financial statements for the year ended 31

December 2020, the Sole Director remains committed to ensure an annual cash distribution to the Fund’s

shareholders. Thus, once the coverage of the accounting loss mentioned above (which legally impedes any

distribution) is approved by the Fund’s shareholders, the Sole Director’s proposal, subject to shareholders’

approval, is a cash distribution of RON 0.072 per share from 2016 and 2017 unallocated profits.

Trading on the Bucharest Stock Exchange

Almost ten years after the listing on the BVB on 25 January 2011, the Fund continues to be among the most

actively traded companies:

x 1.45 billion shares were traded on the BVB last year, equivalent to 21.2% of the Fund’s paid shares as at 31

December 2020;

x The value of trading in Fondul Proprietatea shares reached approximately RON 1.84 billion (EUR 378.5

million) in 2020. The total trading value since the listing exceeds RON 26.5 billion (EUR 5.4 billion);

3/20

Completion of the 7

Tender Offer

1/20

Start of the 11

buy-back

programme

7/20

Gross dividend distribution of

RON 418.0 million

12/20

Completion of the 11

buy-

back programme/

Completion of the 9

Tender Offer/

Finalise the sale of

entire holding in

Nuclearelectrica SA

11/20

Approval of the 12

buy-back programme

9/20

Completion of the 8

Tender Offer/

Sale of

1.7 billion shares in

OMV Petrom

SA under an accelerated bookbuild offering

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

x After almost ten years since its listing, the Fund continued to be among the most liquid stocks on BVB, with an

average daily trading volume in 2020 of 5.8 million shares, i.e. 14.7% of the total daily equity turnover on

BVB.

Trading on the London Stock Exchange

On 29 April 2015, the Fund was listed on the Specialist Fund Market of the LSE, through Global Depositary

Receipts. During the fifth year of trading on LSE, 13.0 million GDRs were traded, for a total value of USD 192.8

million/ RON 764.7 million.

Performance Objectives

According to the Management Agreement in force starting with 1 April 2020, the First Reporting Period of the

mandate is from 1 January until 31 December 2020 and the Second Reporting Period is from 1 January until 31

December 2021.

In accordance with the Fund’s IPS, there are two performance objectives that the AIFM is aiming to achieve. The

NAV objective refers to an Adjusted NAV

per share in the last day of the Reporting Period higher than the

reported NAV per share as at the end of the previous Reporting Period. The discount objective implies the discount

between the closing price of the Fund’s shares on BVB – REGS 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.

NAV Objective – First reporting period

The Adjusted NAV per share as at 31 December 2020 was 2.13% higher than the 31 December 2019 NAV per

share of RON 1.7339.

NAV Objective

Amount RON

Details

Total NAV as 31 December 2020

10,266,911,904

Dividend gross distribution from 2019 profit

417,965,383

Dividend distribution of RON 0.0642 per share, with Ex-date

9 June 2020, Registration date 10 June 2020 and Payment

date 1 July 2020

Costs related to buy-backs after 31 December 2019

10,760,452

Fees related to the eleventh buy-back programme, excluding

the distribution fees for buy

backs (includes mainly the FSA

fee of 1% of the three tender offers value finalised in March,

September and December 2020)

Distribution fees for buy-backs performed after 31

December 2019

10,674,300

Distribution fees for the eleventh buy-back programme

Distribution fees for cash distributions after 31

December 2019

4,179,654

Distribution fee for the dividend distribution from 2019 profits

Costs related to the returns of capital and dividends

after 31 December 2019

27,741

Fees charged by the Central Depositary and Paying Agent

for returns of capital and dividends

Total Adjusted NAV as at 31 December 2020

10,710,519,434

Number of Fund's paid shares, less treasury shares

and GDRs held as at 31 December 2020

6,048,384,617

Adjusted NAV per share as at 31 December 2020

1.7709

NAV per share as at 31 December 2019

1.7339

Difference

0.0370

+2.13%

Source: Fondul Proprietatea

The COVID-19 pandemic generated a severe decline of the financial markets around the world, impacting certain

holdings in the Fund’s portfolio significantly. The total NAV as at 31 December 2020 was 13.5% lower compared

to the end of 2019, while the NAV per share dropped by 2.1% over the same period. OMV Petrom SA, the largest

listed holding in the portfolio recorded a share price decrease of 18.7% with a total NAV impact of RON 529.9

Summarizing the provisions of the IPS, the adjusted NAV for a given date is calculated as the sum of: (i) the reported NAV as at the end of the Reporting Period; (ii) any

distributions to shareholders, being either dividend or non-dividend ones (i.e. in the last case following reductions of the par value of the shares and distribution to the

shareholders), implemented after the end of the previous Reporting Period, and (iii) any distribution fee and any transaction/ distribution costs relating to either dividend or non-

dividend distributions including buy-backs of shares/ GDRs/ depositary interests executed through daily acquisitions or public tenders after the end of the previous Reporting

Period. The adjusted NAV per share is equal to the adjusted NAV divided by the total number of the Fund’s paid shares, less FP ordinary shares bought back and less

equivalent in FP ordinary shares of FP GDRs acquired and not yet converted into FP ordinary shares, on the last day of the Reporting Period. For more details, please refer to

the IPS available on the Fund’s webpage.

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

million. Additionally, the value of unlisted holdings decreased by RON 787.9 million following the valuation

update at the end of December 2020. The valuations include the effect of annual and special dividends distributed

to the Fund by the unlisted companies subject to valuation, amounting to RON 1.0 billion in 2020. Despite this

challenging context, the Fund met the NAV objective for 2020, as the Adjusted NAV per share as at 31 December

2020 was 2.1% higher than the NAV per share as at 31 December 2019.

The Sole Director is committed to its continued efforts towards protecting shareholders’ value and to implement

the necessary measures in accordance with the IPS to address this volatile environment. The Sole Director

proposed, and shareholders approved during the 28 April 2020 shareholders meeting a cash dividend distribution

of RON 0.0642 per share with payment date on 1 July. Also, the Sole Director will propose for shareholders’

approval during the 2021 Annual GSM a cash distribution of RON 0.072.

The eleventh buy-back programme was finalised at the end of 2020, including three tender offers for 585 million

shares in total. The twelfth buyback programme for maximum 800 million shares, applicable for 2021, was

approved by shareholders during the 13 November 2020 GSM. Our proactive investor relations program continues

online during this period, organising numerous conference calls with current and potential investors of the Fund.

We also work closely with the management of portfolio companies and support them in identifying the most

suitable actions to tackle the current challenges and protect the company’s value.

Discount Objective – First reporting period

In the period between 1 January 2020 and 31 December 2020, the share price discount to NAV was lower than or

equal to 15% in 9.24% of the trading days.

Discount Evolution

Discount as at

31 December 2020

Minimum discount during the

monitoring period

Maximum discount during

the monitoring period

Average discount during the

monitoring period

9.71%

39.96%

21.06%

Source: Fondul Proprietatea

The AIFM will continue its efforts to reduce the discount to NAV as we firmly believe that the Fund’s shares

should be trading at a lower discount than the current levels, given the quality of the underlying portfolio assets,

our track record in working with the portfolio companies to improve efficiency and profitability, the attractive

dividend yield, the ongoing buy-back programmes and our transparency, disclosure, and proactive investor

relations efforts.

Investor Relations Update

During the year, in our efforts to increase the visibility and the profile of the Fund, as well as the local capital

market, and Romania, to a broader international institutional investor base, the Fund’s management team organised

2 road-shows in the UK and the United States and met with 24 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 macroeconomic environment.

Between 26 – 27 February we organised in collaboration with WOOD & Company the seventh edition of the

“Romania Investor Days in London” event. 78 representatives from 45 international investments firms, with assets

under management of over EUR 2,000 billion, and 45 representatives from 18 Romanian companies, listed or

candidates for IPOs, participated in the event. During the event, 204 individual and group meetings were held

between the investors and the management teams of the Romanian companies present at the event.

Following the outbreak of COVID-19 pandemic and subsequent travel restrictions in March, investor meetings and

conferences moved online. Therefore, during the year, we participated to 13 institutional investor online

conferences organised by brokers and investment banks, during which we had calls with 134 representatives from

international asset managers and brokers and discussed the impact of the COVID-19 pandemic on the operations of

the main portfolio holdings, as well as the main measures taken so far by the companies’ management, latest

regulatory developments in Romania, ongoing and future corporate actions for the Fund.

Furthermore, during the same period, we had 66 additional conference calls with analysts, brokers, current and

prospective investors interested in the latest developments regarding the Fund and its portfolio companies.

The daily discount is calculated in accordance with the IPS, i.e. the discount between the FP shares closing price on the BVB – REGS for each trading day and the latest

reported NAV per share at the date of calculation.

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

As part of our communication strategy to update the institutional investors and analysts covering Fondul

Proprietatea on its financial results, the latest events involving the Fund and its portfolio companies, and the

planned corporate actions, we organised the 2019 results, 2020 first quarter, 2020 first half, and 2020 third quarter

results conference calls, with 24 analysts and investors participating on average to the calls.

Communication between the AIFM and investors remains our top priority as we aim to ensure that investors are

informed about the latest developments and obtain feedback as we continue to focus on maximising shareholder

value.

Corporate Governance

Following the self-assessment conducted, the AIFM informs the shareholders and the investors that the Fund is

fully compliant with the provisions of the Corporate Governance Code of BVB.

GDR Facility Update

The GDR facility is limited to one-third of the Fund’s subscribed share capital under the Romanian securities

regulations, or 48,067,721 GDRs as at 31 December 2020, each GDR representing 50 shares. As at 31 December

2020, 1,491,146,200 of the Fund’s issued shares were held by The Bank of New York Mellon, the GDR depositary

bank, accounting for 29,882,924 GDRs, representing 62.2% of the GDR facility.

Credit Facility Agreement

The Fund had in place a credit facility from BRD Groupe Societe Generale SA expiring on 29 June 2020. The

facility was extended until 29 June 2022, having the same committed amount of RON 45 million. The credit

facility is for general corporate and operational use. The Fund may access, subject to bank’s approval and in

accordance with the provisions of the credit facility, additional financing in excess of the said committed amount,

without exceeding a total amount of RON 100 million at any given time.

The Fund did not use the credit facility during 2020 and the outstanding balance is nil.

Changes in Board of Nominees Composition

On 27 July 2020, Mrs. Vivian Nicoli has resigned from her positions held within the Fund’s Board of Nominees

and Consultative Committees due to Mrs. Nicoli’s intention to take on other commitments, with effective date of

the resignation 1 September 2020. On 23 September 2020, as an implementation of the succession planning, Mr.

Steven van Groningen has resigned from his positions held within the Fund’s Board of Nominees and Consultative

Committees with effective date 13 November 2020.

During the 13 November 2020 GSM, two new members of the Board were appointed for a mandate of 3 years -

Mrs. Ilinca von Derenthall (mandate started on 26 November 2020) and Mr. Ciprian Ladunca (mandate started on

16 November 2020).

Buy-back Programmes

During 2020 the Fund completed the cancellation process of the shares acquired within the tenth buy-back

programme and acquired shares within the eleventh buy-back programme, which will be proposed for cancellation

to shareholders during 2021. As at 31 December 2020 the Fund held 797,961,287 own shares, corresponding to the

eleventh buy-back programme, which was finalised on 31 December 2020.

The twelfth buy-back programme was approved by shareholders during the 13 November 2020 GSM, for a total

number of 800 million shares in the form of ordinary shares and GDRs, at a price that cannot be lower than RON

0.2 per share or higher than RON 2 per share, to be implemented during the financial year 2021.

Share Capital Decrease Process in 2020

On 30 September 2020, the Fund finalised the decrease of the subscribed share capital from RON

3,959,264,762.44 to RON 3,749,282,292.08 pursuant to the cancellation of 403,812,443 own shares acquired

during the tenth buy-back programme, which was endorsed by the FSA through Endorsement no. 189/10

September 2020.

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

2019 Dividend Distribution

On 28 April 2020, the shareholders approved the distribution of a gross dividend of RON 0.0642 per share, with

Ex-date on 9 June 2020 and Registration date on 10 June 2020. The Fund started the payment of dividends on 1

July 2020. The payments of the distributions to shareholders are performed through the Romanian Central

Depositary, according to the legislation in force, as follows:

a) for shareholders having a custodian/ brokerage account, directly by the respective custodian bank or broker;

b) for all other shareholders:

(i) by the Central Depositary, through BRD Groupe Societe Generale (acting as Payment Agent), for bank

transfers when the supporting documentation required by the Central Depositary, along with a payment

request, have been submitted

(ii) by the Payment Agent for cash payments at any of its agencies, or by bank transfer (when the supporting

documentation required by the Payment Agent and a payment request were submitted to the Payment Agent)

Also, as an important notice to shareholders, this dividend payment is subject to the general statute of

limitation. As such, shareholders may request the payments only within a three-year term starting with the

Payment Date, namely by 1 July 2023.

Special Dividends Received from Portfolio Companies

In 2020 several portfolio companies controlled by the Romanian state approved the distribution of special

dividends. Thus, the following gross amounts were approved for the Fund in accordance with its shareholding in

each company:

Portfolio company

Gross amounts

(RON million)

Date of recording in

accounting

Collection date

E-Distributie Banat SA

213.8

February 2020

E-Distributie Muntenia SA

188.0

February 2020

Hidroelectrica SA

149.6

May 2020

September 2020

E-Distributie Dobrogea SA

121.1

February 2020

February/ August 2020

Enel Energie Muntenia SA

10.6

September 2020

October 2020

Total

683.1

Source: Fondul Proprietatea

For more details, please refer to the section Investment Strategy and Portfolio Analysis.

Impact of COVID-19 Pandemic on the Fund’s Activity and Outlook for 2021

Overview

On 11 March 2020, the World Health Organisation declared the epidemic of COVID-19 a pandemic. On 16 March

2020, the President of Romania declared the State of Emergency over COVID-19 outbreak. This was initially

announced for a period of 30 days and was subsequently extended by another month to 14 May 2020.

Various Military Ordinances have been issued since 16 March setting numerous restrictions with the objective of

limiting the virus spread: closure of schools, prohibition of movement outside home or household barring some

exceptions, severely restricted domestic and international travel, enforcing additional disinfection measures, etc.

Starting 15 May 2020, the State of Emergency was replaced with the state of alert and most of the restrictions were

relaxed to a certain extent. The authorities might impose additional restrictions depending on the evolution of the

pandemic context.

The Government has also implemented various measures to help the economy deal with COVID-19 pandemic

effects, ensure social protection for vulnerable categories, and prepare the health system: extended guarantees for

companies taking loans for investments and working capital, covering the costs with technical unemployment for

companies that suspend their operations due to the pandemic, procurement of medical equipment and medical

protection equipment, additional bonuses to healthcare sector employees, acquisition of hygiene goods, and the

possibility to suspend mortgage and consumer loan payments until 31 December 2020, as well as other measures.

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

Economic impact

The widespread nature of the COVID-19 outbreak and the measures taken to contain the spread continue to have a

significant impact on global economic activity and it is likely to reverberate for several quarters.

The global economy is recovering from the severe drop during the Great Lockdown in April. But with the COVID-

19 pandemic continuing to spread, some countries are reinstating partial lockdowns to protect susceptible

populations.

Although recent vaccine approvals have raised hopes of a turnaround in the pandemic later in 2021, renewed waves

and new variants of the virus pose concerns for the outlook. Amid exceptional uncertainty, the global economy is

projected to grow 5.5% in 2021 and 4.2% in 2022

Many countries have taken decisive steps, such as prompt monetary and fiscal policy responses. Central banks in

the United States and Europe have started cutting interest rates and the National Bank of Romania has also joined

the trend and has adjusted the monetary policy to lower interest rates.

Overall, the quantum of the fiscal and monetary policy response to mitigate the impact of the situation is

unprecedented. Governments across the world, Romania included, have taken numerous actions to support their

economies, from extended unemployment benefits to packages targeting small businesses, hospitals and healthcare

centres, which have increased budgetary constraints in the short term.

In addition, on 21 July 2020 the EU leaders approved the post-pandemic recovery package and the Multiannual

Financial Framework. According to the President Klaus Iohannis, Romania will receive EUR 79.9 billion from

the EU for economic recovery and infrastructure development and the funds will be used to rebuild the country’s

infrastructure, build hospitals and schools, and modernise public systems; a significant amount will be used for

economic recovery

It is expected that the Romanian economy will experience a correction in 2020, depending on the evolution of the

pandemic and the new restrictions that might be imposed. The IMF

estimates that Romania's GDP could contract

by 4.8% in 2020 and forecasts a GDP growth of 4.6% in 2021. In this context, the current account deficit could

widen to 5.3% of GDP, and the unemployment rate increase to 7.9% in 2020.

Regarding the economic sectors, we expect HoReCa to continue to be heavily impacted until later in 2021.

Transport businesses, especially air travel and airports, should also continue to be under pressure during the health

crisis. The IT sector and logistics should benefit during this period and positively contribute to growth.

The capital markets of affected countries, including the BVB, recorded large corrections in the first quarter of

2020, with BET-XT index declining by 23.2% at 31 March 2020 compared to the end of 2019. However, these also

tend to provide opportunities for return over the long term, as corrections have been a routine occurrence

throughout financial market history. BET-XT value increased by 24.1% at 31 December 2020 compared to 31

March 2020, reducing the overall decrease for 2020 at 4.7% compared to the end of 2019. We stress once again

that Hidroelectrica SA could be the turning point the local market has been waiting for the last decade. Given the

recent political statements, we are optimistic that Hidroelectrica SA listing could be completed in 2021.

The oil price and energy prices in general, have declined sharply in Q2 2020. Uncertainty and concerns persist in

relation to the duration and severity of the economic crisis and the impact on consumption generated by the

pandemic. However, a recovery trend became ever more visible during H2 2020, especially for gas and power

prices.

According to latest available data from Transelectrica, in 2020 the electricity consumption in Romania declined

by 3.4% y.o.y. After a sharp 11.3% y.o.y. decline during Q2, with most industrial consumers reducing activity or

shutting down facilities during the initial phase of the lockdown, the gradual easing of restrictions contributed to a

recovery of electricity demand during H2 2020. According to Transelectrica SA, the electricity consumption during

Q4 2020 was up 1.6% y.o.y. Consumption dynamics impacted electricity prices, over the full year the average

baseload electricity prices on the Day Ahead Market were down 19.9% y.o.y. to RON 191 per MWh, while over

Q4 2020 baseload day ahead electricity prices advanced 8.7% y.o.y. to RON 241.4 per MWh. On the other hand,

International Monetary Fund – World Economic Outlook – January 2021

https://www.romania-insider.com/ro-eur-80-bln-eu-recovery-fund-jul-

2002#:~:text=Romania%20will%20receive%20EUR%2079.9,said%20on%20Tuesday%2C%20July%2021.

International Monetary Fund – World Economic Outlook – October 2020

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

the volume weighted average of prices resulted from bilateral contracts with delivery in 2020 traded on forward

markets administrated by OPCOM was up 7.2% y.o.y to RON 254.4 per MWh.

On the gas side, gas consumption jumped by 9% y.o.y. in Q4 2020, mainly due to gas-to-power conversion and

fertilisers industries, boosted by lower gas prices. Colder weather also contributed to the surge in gas demand,

according to OMV Petrom. European gas prices, as reflected by Central European Gas Hub, started to recover in

the third quarter. At a level of EUR 13.8 per MWh in Q4 2020, they were approximately 50% higher compared to

the previous quarter, and 6% higher y.o.y. Global oil prices also continued to recover in Q4 2020, as Brent prices

averaged USD 44 per barrel, 2% up quarter-on-quarter, but still 30% down year-on-year.

Consumption has rebound gradually as restrictions were lifted. The fact that the Romanian economy is to a very

large extent consumption-driven has proven to be a major vulnerability in this period.

We believe that the most important challenges for Romania in 2021 are: the health crisis until herd immunity is

achieved, the COVID-19 vaccination campaign, and the fiscal consolidation. The top opportunities in our view are:

the EU recovery funds, which should start to be disbursed this year, the boost in domestic demand in case of

successful vaccination campaign, and the historically low interest rate environment for both public and private

investments.

It is difficult to predict what the global or Romanian economy will look in 2021, as there are still many unknown

factors at the moment. What we do see through the uncertainty ahead is that the combination of swift fiscal and

monetary actions, on the one hand, and the good economic fundamentals, on the other, can provide the foundation

for the resumption of growth once the pandemic is under control.

Portfolio impact

Given the current economic context as a result of COVID-19 pandemic, which caused a significant drop of stock

exchanges around the world, the Fund has performed an assessment of the related impact on the valuation of

unlisted holdings in the portfolio. KPMG Romania has assisted with the preparation of an analysis of multiples’

evolution between 30 September 2019 and 31 March 2020/ 30 April 2020/ 29 May 2020. Using the updated

multiples’ values and the same methodology and computation algorithms as in the latest available valuation report,

the values for 12 unlisted holdings (accounting for more than 99% of the total unlisted portfolio as at 28 February

2020) have been updated for 31 March 2020/ 30 April 2020/ 29 May 2020 reporting.

The fully updated valuation reports for 8 largest unlisted holdings were prepared for 30 June 2020 reporting with

the assistance of KPMG Advisory. The valuation date was 31 May 2020 and the reports considered all relevant

subsequent events until 30 June 2020 (e.g. such as dividend distributions). The total impact was a decrease in value

of unlisted holdings with 15.3%/ RON 1.26 billion in 30 June 2020 NAV compared to 31 December 2019 NAV;

the valuation included the effect of annual and special dividends distributed by the unlisted companies subject to

the valuation update during the first six months of 2020, amounting to RON 940.0 million.

The Fund prepared updated valuation reports for all the unlisted holdings in the portfolio for 31 December 2020

reporting, with the assistance of KPMG Advisory and Darian DRS. The valuation date was 31 October 2020 and

the reports also considered the related subsequent events until 31 December 2020. The total impact following the

valuation update process was an increase of RON 476.5 million in 31 December 2020 NAV compared to 27

November 2020 NAV, mainly related to Hidroelectrica SA, CN Aeroporturi Bucuresti SA and Engie Romania SA.

During this volatile and uncertain period the Fund will continue to closely monitor the evolution of financial

markets and that of the specific industries the unlisted holdings operate in, and for each NAV reporting date would

assess if an updated valuation is required.

Impact on operations and business continuity

The Sole Director has taken a number of precautionary measures to limit the impact of COVID-

19 on the Fund’s

activity. The business continuity plan has been activated to protect and minimise risk to employees, while also

ensuring no disruption to business operations and management of Fondul Proprietatea. The Sole Director has a

robust and regularly tested work-from-home capability and 90% of Bucharest employees have worked remotely

since 16 March. The Fund’s business operations continue to be fully functional. The Sole Director has also

temporarily suspended all business travel. At its headquarters, additional hygiene and disinfection measures have

been implemented.

The communication with the Fund’s shareholders takes place smoothly in the new circumstances: the Sole Director

continues to provide regular updates to them via current reports, conference calls, usual calls, e-mails and updates

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

on the Fund’s website. The only restriction that temporarily applies is that shareholders are no longer able to visit

the Fund’s office.

The Sole Director does not envisage difficulties for the Fund in fulfilling commitments to shareholders and

obligations to third parties, the current and estimated future cash flows being sufficient to cover the payments and

the ongoing distributions to shareholders during the year.

Maximising shareholder value in 2021

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 in the

Fund’s portfolio continue the strong performance path registered in the past years, and the progress in the listing of

Hidroelectrica SA.

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 long-

term results for our shareholders and we look forward to the opportunities ahead for Fondul Proprietatea.

Annual General Shareholders Meeting

Last but not least, we would like to take this opportunity to invite shareholders to attend the Annual General

Shareholders Meeting convened for 28 April 2021 at “Athénée Palace Hilton Bucharest” Hotel, Le Diplomate

Salon, 1-3 Episcopiei Street, Sector 1, Bucharest, 010292, Romania where you will have the opportunity to receive

the latest updates about the Fund. The agenda of the Annual General Shareholders Meeting and support documents

are published on www.fondulproprietatea.ro.

However, if legal restrictions are imposed by public authorities regarding the attendance of public meetings due to

potential pandemic risk, according to the legislation issued between the publication of this report and the date

when the shareholders meeting is held, the Sole Director may impose additional conditions for attending the

meeting in order to follow the legal provisions in force at that time. Such additional conditions are not considered a

prohibition to attend the meeting, considering that in such exceptional circumstances, the Sole Director will take

all measures to ensure the shareholders’ right to add new points on the agenda and to vote. The Sole Director

kindly asks shareholders to follow the Fund’s website and the Bucharest Stock Exchange website as it will

announce any updates on this matter by means of current reports.

Johan Meyer

CEO of FTIS Bucharest Branch, Portfolio Manager of Fondul Proprietatea SA

Permanent Representative of FTIS in relation to Fondul Proprietatea SA

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

Company Information

The Company

Fondul Proprietatea was incorporated on 28 December 2005 as a joint stock company operating as a closed-end

investment company. The Fund is registered with the Bucharest Trade Register under the number J40/21901/2005

and has the sole registration code 18253260. The Fund’s investment objective is the maximisation of returns to

shareholders and the increase of the net asset value per share via investments mainly in Romanian equities and

equity-linked securities.

During 2020, the Fund was managed by FTIS as its Sole Director and AIFM under the AIFM Directive and local

implementation regulations, based on both the Management Agreement in force between 1 April 2018 and 31

March 2020 (according to 14 February 2018 GSM Resolution) and the new Management Agreement in force

during the period 1 April 2020 – 31 March 2022 (according to 28 June 2019 GSM Resolution). Until 30 November

2020, FTIS had delegated the role of Investment Manager, as well as certain administrative functions to FTIML.

Starting with 1 December 2020, the activity carried out by FTIML UK via its Bucharest Branch through the

delegation agreement ceased by agreement of the parties. Therefore, as of this date, the portfolio management and

the administrative activities previously delegated to FTIML Bucharest Branch are performed by FTIS via its

Bucharest Branch.

Since 25 January 2011, the Fund’s shares have been listed on BVB. Since 29 April 2015, the Fund’s GDRs issued

by The Bank of New York Mellon as GDR Depositary, having the Fund’s shares as support, have been listed on the

Specialist Fund Market of LSE. The Fund's shares are not registered for distribution in other jurisdictions than

Romania.

Share information

Primary listing

Bucharest Stock Exchange – since 25 January 2011

Secondary listing

London Stock Exchange – since 29 April 2015

BVB symbol

LSE 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

FSA register no

PJR09SIIR/400006/18.08.2010

LEI code

549300PVO1VWBFH3DO07

CIVM registration no

AC-4522-6/14.10.2020

Source: Fondul Proprietatea

Shareholder Information

Shareholder structure as at 31 December 2020

Source: Depozitarul Central SA

Information provided based on settlement date of transactions

The unpaid shares of the Romanian State, represented by the Ministry of Public Finance, and the treasury shares held by FP were not taken into consideration at the

calculation of the total number of voting rights

Fondul Proprietatea held zero GDRs as at 31 December 2020

797,961,287 treasury shares acquired in the eleventh buyback program

Shareholder categories

% of subscribed

share capital

% of paid-

in share

capital

% of voting

rights

Romanian institutional shareholders

31.41%

33.08%

37.44%

The Bank of New York Mellon (GDRs)

20.68%

21.78%

24.65%

Romanian private individuals

17.49%

18.42%

20.85%

Foreign institutional shareholders

11.24%

11.84%

13.40%

Foreign private individuals

2.97%

3.13%

3.55%

Romanian State represented by Ministry of Public Finance

5.14%

0.10%

0.11%

Treasury shares

11.07%

11.65%

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

As at 31 December 2020, the Fund had 7,228 shareholders and the total number of voting rights was

6,048,384,617.

Largest Shareholders

Shareholder

Latest ownership

disclosure

% of voting

rights

NN Group

6 March 2020

10.01%

Anchorage Capital Group LLC

21 September 2018

6.69%

Allianz-Tiriac private pension funds

1 July 2019

5.05%

Source: ownership disclosures submitted by shareholders

Disclosure of holdings during the period

On 9 March 2020, the Fund announced that Fondul de Pensii Facultative NN Activ, Fondul de Pensii Facultative

NN Optim, Fondul de Pensii Administrat Privat NN and NN Investment Partners B.V. have sent an aggregate

disclosure of holdings over 10% of the total voting rights in the Fund, according to which, by virtue of acting in

concert, they held together as of 6 March 2020, a number of 685,469,767 voting rights, representing 10.01% of the

total number of voting rights in the Fund.

Share Capital Information

Share capital information

31 December 2020

31 December 2019

31 December 2018

Issued share capital (RON)

3,749,282,292.08

3,959,264,762.44

4,733,020,898.32

Paid in share capital (RON)

3,560,099,870.08

3,770,082,340.44

4,543,838,476.32

Number of shares in issue

7,210,158,254

7,613,970,697

9,101,963,266

Number of paid shares

6,846,345,904

7,250,158,347

8,738,150,916

Nominal value per share (RON)

0.52

Source: Fondul Proprietatea

Note: on 30 September 2020, the Trade Registry registered Resolution no. 2/28 April 2020 of the Fund’s EGM for approving the decrease of the subscribed share capital from

RON 3,959,264,762.44 to RON 3,749,282,292.08 pursuant to the cancellation of 403,812,443 own shares acquired during the tenth buy-back programme, endorsed by the

FSA through Endorsement no. 189/10 September 2020.

Summary of Financial Results

The table below presents the audited results of the Fund in accordance with IFRS for the financial year ended 31

December 2020:

RON million

31 December 2020

31 December 2019

(Loss)/ Profit for the year ended

(103.0)

3,129.9

Shareholders’ equity

10,266.9

11,871.5

Source: IFRS financial statements of the Fund

The main contributor to the loss recorded in 2020 was the negative net change in fair value of the Fund’s equity

investments as result of COVID-19 pandemic impact on the economic activity and capital markets (RON 1.24

billion), partially netted off by the gross dividend income from portfolio companies (RON 1.22 billion). For more

details, please see section “Financial Statements Analysis”.

The tables below show a summary of the Fund’s financial performance for the last 3 years and during each quarter

of 2020:

NAV* and share price developments**

Notes

31 December

2020

31 December

2019

31 December

2018

Total shareholders’ equity at the end of the period (RON million)

10,266.9

11,871.5

9,828.4

Total shareholders’ equity change in period (%)

-13.5%

+20.8%

-8.9%

Total NAV at the end of the period (RON million)

10,266.9

11,871.5

10,219.4

Total NAV change in period (%)

-13.5%

+16.2%

-5.3%

NAV per share at the end of the period (RON)

1.6974

1.7339

1.4095

NAV per share change in the period (%)

-2.1%

+23.0%

+13.9%

NAV per share total return in the period (%)

+2.2%

+31.2%

+19.9%

Share price as at the end of the period (RON)

1.4500

1.2100

0.8830

Share price low in the period (RON)

0.9980

0.8000

0.8400

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

NAV* and share price developments**

Notes

31 December

2020

31 December

2019

31 December

2018

Share price high in the period (RON)

1.4500

1.2100

0.9740

Share price change in the period (%)

+19.8%

+37.0%

+2.2%

Share price total return in the period (%)

+26.4%

+49.1%

+9.9%

Share price discount to NAV as at the end of the period (%)

14.6%

30.2%

37.4%

Average share price discount in the period (%)

21.1%

29.4%

29.5%

Average daily share turnover in the period (RON million)

c, j

7.4

5.6

6.4

GDR price as at the end of the period (USD)

17.1000

13.7000

10.5000

GDR price low in the period (USD)

11.2000

9.6500

10.3000

GDR price high in the period (USD)

17.3000

13.9000

12.8000

GDR price change in the period (%)

+24.8%

+30.5%

-8.3%

GDR price total return in the period (%)

+31.1%

+41.4%

-1.9%

GDR price discount to NAV as at the end of the period (%)

20.1%

32.7%

39.3%

Average GDR price discount in the period (%)

22.2%

30.4%

29.5%

Average daily GDR turnover in the period (USD million)

f, j

0.8

0.7

1.7

Source: Fondul Proprietatea, BVB (for shares), LSE and Bloomberg (for GDRs)

* NAV for the end of each period was computed in the last working day of the month

** Period should be read as year 2020/ year 2019/ year 2018, respectively

NAV* and share price developments**

Notes

Q1 2020

Q2 2020

Q3 2020

Q4 2020

Total NAV at the end of the period (RON million)

9,585.8

10,141.4

9,909.1

10,266.9

Total NAV change in the period (%)

-19.3%

+5.8%

-2.3%

+3.6%

NAV per share at the end of the period (RON)

1.4515

1.5622

1.5881

1.6974

NAV per share total return in the period (%)

-16.3%

+12.4%

+1.7%

+6.9%

Share price as at the end of the period (RON)

1.1100

1.2600

1.2950

1.4500

Share price total return in the period (%)

-8.3%

+19.8%

+2.8%

+12.0%

Share price discount to NAV as at the end of the period (%)

23.5%

19.3%

18.5%

14.6%

GDR price as at the end of the period (USD)

12.1000

14.4000

15.5000

17.1000

GDR price total return in the period (%)

-11.7%

+25.0%

+7.6%

+10.3%

GDR price discount to NAV as at the end of the period (%)

26.7%

20.3%

18.8%

20.1%

Source: Fondul Proprietatea, BVB (for shares), LSE and Bloomberg (for GDRs)

* NAV for the end of each period was computed in the last working day of the month

** Period should be read as Q1 2020/ Q2 2020/ Q3 2020/ Q4 2020, respectively

Notes:

a. Prepared based on local rules issued by the capital market regulator

b. Source: BVB - REGS market - Closing prices

c. Source: BVB

d. Share Price/ GDR Price discount to NAV as at the end of the period (%) is calculated as the discount between FP share closing price on BVB -

REGS/ FP GDR closing price on LSE on the last trading day of the period and the NAV per share at the end of the period; the average discount

is calculated according to IPS, using the latest published NAV per share at the date of calculation

e. Source: Bloomberg/ LSE - Closing prices

f. Source: FP and Bloomberg/ LSE

g. The NAV per Share Total Return is calculated in RON by geometrically linking total returns for all intermediate periods when official NAV is

published. Each total return for a single period is calculated using the following formula: the NAV per share at the end of the period plus any cash

distribution during the period, dividing the resulting sum by the official NAV per share at the beginning of the period. The resulting single period

total returns are geometrically linked to result in the overall total return. The Fund uses this indicator as it is directly related to the performance

objectives of the Fund included in the IPS

h. The Share Price Total Return is calculated in RON by geometrically linking daily total returns. Daily total return is calculated as the closing price

at the end of the day, plus any cash distributions on that day, dividing the resulting sum by the closing price of the previous day. The resulting

single period total returns are geometrically linked to result in the overall total return. The Fund uses this indicator as it is directly related to the

performance objectives of the Fund included in the IPS

i. The GDR Price Total Return is calculated in USD by geometrically linking daily total returns. Daily total return is calculated as the closing price at

the end of the day, plus any cash distributions on that day, dividing the resulting sum by the closing price of the previous day. The resulting single

period total returns are geometrically linked to result in the overall total return. The Fund uses this indicator as it is directly related to the

performance objectives of the Fund included in the IPS

j. Including the tender offers carried by the Fund in March 2020/ September 2020/ December 2020/ August 2019/ February 2018

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

Contact Details

Address: 78-80 Buzesti Street (7th floor), District 1, Postal Code 011017, Bucharest, Romania.

Web: www.fondulproprietatea.ro

E-mail: [email protected]

[email protected]

Telephone: +40 21 200 9600

Fax: +40 21 200 9631/32

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

Presentation and Activity of the Fund

General Information

Main activities of Fondul Proprietatea

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 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).

Management of Fondul Proprietatea

During 2020, the Fund was managed by FTIS as its Sole Director and AIFM under the AIFM Directive and local

implementation regulations, based on both the Management Agreement in force between 1 April 2018 and 31

March 2020 (according to 14 February 2018 GSM Resolution) and the new Management Agreement in force

during the period 1 April 2020 – 31 March 2022 (according to 28 June 2019 GSM Resolution). Until 30 November

2020, FTIS had delegated the role of Investment Manager, as well as certain administrative functions to FTIML.

Starting with 1 December 2020, the activity carried out by FTIML UK via its Bucharest Branch through the

delegation agreement ceased by agreement of the parties. Therefore, as of this date, the portfolio management and

the administrative activities delegated before to FTIML UK Bucharest Branch are performed by FTIS via its

Bucharest Branch.

Incorporation of the Fund

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 abusively confiscated by the Romanian

State during the communist regime, and which could no longer be returned in kind to those individuals.

The Fund’s initial Constitutive Act was enacted by Government Decision 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 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 entitled to receive compensation from the

Romanian state and who chose to convert their compensation entitlements into shares issued by the Fund.

Starting 15 March 2013, the date when GEO 4/2012 regarding the application of certain provisions of Law

247/2005 entered into force, the compensation process was suspended. In January 2015, the Law 10/2015 entered

into force, confirming that the Romanian state will no longer use the compensation scheme for Fondul Proprietatea

shares in future.

As at 31 December 2020 the Romanian state’s participation in the share capital of the Fund was of 370,456,198

shares, out of which 6,643,848 paid shares.

Investment policy and investment restrictions

The Fund's investment objective as set out in the IPS is the maximisation of returns to shareholders and the increase

of the net asset value per share, through investments predominantly in Romanian equities and equity linked

securities, subject to legislation and regulations in force. 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.

The changes to the IPS approved by shareholders during 28 April 2020 EGM entered into force on 23 July 2020.

The AIF Law entered into force on 23 January 2020, repealing, among others, a number of the relevant provisions

regulating the Fund starting with 23 July 2020. All investment restrictions are published on the Fund webpage, in

Investments - Investment Strategy section. The IPS of

the Fund currently in force is published on the Fund’s

webpage in section About the Fund – Fund overview – Corporate Governance.

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

In addition to the above, according to the IPS, under normal market conditions, the Fund should have at least 80%

of its net assets invested in Romanian equity and equity-linked securities.

Also, according to the Fund’s Prospectus, the Fund may hold money market instruments only in financial

institutions rated “Investment grade” and may only invest in corporate bonds rated “Investment grade”.

The investment policy of the Fund is established by the AIFM, with the observance of the Constitutive Act and of

the investment limits provided by the legal provisions in force and it is in line with the IPS approved by

shareholders. The Fund will inform investors of breaches to the IPS by publishing current reports.

The AIFM provides the strategy in accordance with the investment policy for analysis to the Fund’s Board of

Nominees 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.

Employees of the Fund

As at 31 December 2020 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.

Subsidiaries

As at 31 December 2020, 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%

Source: Fondul Proprietatea

None of the subsidiaries of the Fund holds shares in the Fund as at 31 December 2020, based on the information

made available to the Fund. Comsig SA is in administrative liquidation process. There was no corporate

reorganisation of the Fund or its subsidiaries in 2020.

Branches

During 2020 the Fund had no branches.

Governing legislation

The Fund operates in accordance with the provisions of the following main laws and regulations:

x Law no. 31/1990 regarding companies, with subsequent amendments;

x Law no. 82/1991 Accounting Law;

x Law no. 297/2004 regarding the capital market, with subsequent amendments;

x Law no. 247/2005 regarding the reforms in the sectors of justice and property as well as certain related

measures, with subsequent amendments;

x 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;

x Law no. 74/2015 on alternative investment fund managers;

x Law no. 24/2017 on issuers of financial instruments and market operations;

x Law no. 162/2017 regarding the statutory audit of annual financial statements and annual consolidated financial

statements and on amending other pronouncements;

x Law no. 126/2018 on the markets of financial instruments;

x Law no. 129/2019 on anti-money laundering and counter-terrorist financing and for amending other

regulations;

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

x Law no. 243/2019 on the regulation of alternative investment funds and supplementing certain acts;

x Government Decision no. 1481/2005 regarding the incorporation of Fondul Proprietatea;

x Government Emergency Ordinance no. 81/2007 for the acceleration of the compensation procedure related to

the real estate abusively confiscated, with subsequent amendments;

x CNVM Regulation no. 6/2009 on the exercise of certain rights of the shareholders in the general shareholders

meetings of companies;

x CNVM Regulation no. 4/2010 regarding the registration with the CNVM and operation of Fondul Proprietatea,

as well as trading of shares issued, with subsequent amendments;

x Regulation (EU) no. 231/2013 of 19 December 2012 supplementing Directive 2011/61/EU of the European

Parliament and of the Council with regard to exemptions, general operating conditions, depositaries, leverage,

transparency and supervision;

x Regulation (EU) no. 537/2014 of the European Parliament and of the Council of 16 April 2014 on specific

requirements regarding statutory audit of public-interest entities and repealing Commission Decision

2005/909/EC;

x Regulation (EU) no. 1212/ 2018 of the European Parliament and of the Council of 3 September 2018 laying

down minimum requirements implementing the provisions of Directive 2007/36/EC of the European

Parliament and of the Council as regards shareholder identification, the transmission of information and the

facilitation of the exercise of shareholders rights;

x 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, with subsequent amendments;

x FSA Norm no. 13/2019 on the framework for the statutory financial audit of the entities authorised, regulated

and supervised by the FSA, as subsequently amended;

x FSA Regulation no. 10/2015 regarding the alternative investment funds management;

x FSA Regulation no. 2/2016 on the application of the principles of corporate governance by the entities

authorised, regulated and supervised by the FSA, with subsequent changes;

x FSA Regulation no. 5/2018 regarding the issuers of financial instruments and market operations;

x FSA Regulation no. 12/2018 on the implementation of certain provisions of Regulation (EU) No. 1286/ 2014

on key information documents for structured and insurance-based individual investment products;

x FSA Regulation no. 13/2019 on implementing the measures related to anti-money laundering and counter-

terrorist financing within the financial sectors supervised by the FSA;

x FSA Regulation no. 7/2020 on the authorisation and function of alternative investment funds.

Regulatory Updates

New AIF Law

The AIF Law entered into force on 23 January 2020, repealing, among others, a number of the relevant provisions

of Law 247/2005 regulating the Fund, starting with 23 July 2020. According to the AIF Law, the Fund is expressly

qualified as an AIF oriented to retail investors and had to comply with three types of legal requirements:

x amendment of the Fund’s constitutive documents in line with the AIF Law – already approved by shareholders

during the 28 April 2020 GSM and new changes were put for shareholders vote for the GSM that took place on

14 January 2021 due to some additional recommendations from the FSA; according to Romanian regulations in

force the changes of the Constitutive Act will enter into force after the FSA endorsement and registration with

the Trade Registry;

x application for authorisation of the Fund by the FSA as an AIF addressed to retail investors – the

documentation has been filed on 22 July 2020 and the FSA registration process is ongoing;

x alignment of the Fund’s activity with the provisions of the AIF Law – finalised.

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

From the date of the entry into force of the AIF Law, the Fund is subject to specific limitations on the permitted

investments, as detailed under Article 35 of the AIF Law. For a transitional period of six months after the entry into

force of the AIF Law (i.e. until 23 July 2020), in addition to the specific limitations on the permitted investments

detailed under Article 35 of the AIF Law, the Fund was also subject to the limitations on the permitted investments

set out under Article 7¹ of Law no. 247/2005. All investment restrictions are published on the Fund webpage in the

Investments - Investment Strategy section.

FSA AIF Regulation for implementing the AIF Law

The AIF Regulation was published in the Official Gazette of Romania on 24 April 2020 and it sets the rules for the

registration of the Fund as an AIF. On 22 July 2020, the Fund applied and filed the entire documentation for

registering as an AIF addressed to retail investors. According to the AIF Law, the FSA shall decide on the issuance

of the authorisation as an AIF within maximum 60 days from the registration of the application and submission of

complete documents - based on the last communication received from FSA the application part related to the

Constitutive Act changes is under review and few changes need to be done in the application documentation. The

AIFM will update the investors on the registration process as an alternative investment fund.

SRD II implementation process

On 29 July 2020, the Romanian law transposing SRD II was published in the Official Gazette of Romania and

entered into force on 28 August 2020. By means of this law, certain new elements are introduced, such as the

remuneration report and policy, while shareholder rights are strengthened for more transparent corporate

governance. The shareholders approved several changes to the Constitutive Act during 13 November 2020 GSM

and the changes were partially endorsed by the FSA in February 2021. According to Romanian regulations in force

the changes of the Constitutive Act will enter into force after FSA endorsement and registration with Trade

Registry.

Romanian state prohibited from selling shares in Romanian companies for two years

In August 2020, the Romanian Parliament enacted Law 173/2020 regarding certain measures for protecting

national interest within the economic activity. The law entered into force on 16 August 2020, banning the sale of

shareholdings owned by the Romanian state in national companies, banks or other companies in which the state is a

shareholder, irrespective of the ownership percentage, for the next two years. Ownership transfers that commenced

before the entry into force of the law are suspended for a two-year term. Even though this suspension will not apply

to finalised privatisations, these restrictions will likely impact the Romanian market. The law is likely to complicate

the long-awaited listing of energy producer Hidroelectrica SA, Romania's most valuable state company, and other

ongoing sales of companies where the state holds shares. On 5 October 2020 entered into force the GEO no.

166/2020 setting exceptions from Law 173/2020. On 3 February 2021, the Government proposed for Parliament’s

approval a new draft of law that repeals the requirements in Law 173/2020 regarding the state prohibition to sell

shares in Romanian companies. The draft is in Parliament for legislative procedure. There is not indicated a time

estimation for having the draft of law in force.

Changes in Romanian Water Law

During 2020, the Parliament approved several changes to the Water Law which entered into force on 13 July 2020

while the Romanian Government changed the Water Law starting with 31 December 2020. According to these

changes, all owners of water installations that collect underground or surface waters are required to install water

metering devices within 6 months calculated from 13 July 2020. Failure to comply with this requirement, even for

well justified technical reasons, could lead to the obligation to pay the water contribution to ANAR at the level of

the maximum authorised flow.

For the purpose of calculating the water volume used by its hydropower plants to produce electricity Hidroelectrica

SA has been using an indirect calculation method based on the electricity volume produced by each hydro-unit.

Hidroelectrica SA management considers it technically unfeasible to install standard water meters as required by

the law, given the size and the variety of technical specifications of its power plants. The Romanian Water Law is

currently in the process of being amended in the Parliament – for more details please see Subsequent events section.

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

Shareholding and share capital changes

Evolution of the shareholder structure

The evolution of the shareholder structure is illustrated in the following chart:

Source: Romanian Central Depository, based on issued share capital until 31 July 2011, based on paid share capital starting 31 July 2011

Disclosure of holdings during the period

On 9 March 2020, the Fund announced that Fondul de Pensii Facultative NN Activ, Fondul de Pensii Facultative

NN Optim, Fondul de Pensii Administrat Privat NN and NN Investment Partners B.V. have sent an aggregate

disclosure of holdings over 10% of the total voting rights in the Fund, according to which, by virtue of acting in

concert, they held together as of 6 March 2020, a number of 685,469,767 voting rights, representing 10.01% of the

total number of voting rights in the Fund.

Evolution of the Fund's share capital since listing

The following table presents information with respect to the main events during the period from 1 January 2011

until 31 December 2020, which have changed the amount of the issued share capital of the Fund:

Date

Reason

Structure of the share capital after event

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

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

31%

36%

29%

21%

20%

21%

18%

16%

19%

18%

10%

14%

43%

54%

55%

53%

25%

22%

21%

16%

15%

13%

17%

14%

13%

11%

12%

35%

37%

30%

29%

28%

25%

28%

26%

25%

23%

22%

9% 9%

11%

13%

14%

18%

17%

19%

20%

22%

27%

30%

31%

33%

2% 2%

10%

18%

19%

21%

10%

14%

12%

12/10

12/11 12/12 12/13 12/14 12/15 12/16 12/17 12/18 3/19 6/19 9/19 12/19 3/20 6/20 9/20

12/20

Treasury Shares

Romanian Institutionals

The Bank of New York Mellon (depository bank for Global Depository Receipts)

Foreign Institutionals

Foreign Individuals

Romanian Individuals

Romanian State

39%

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

Date

Reason

Structure of the share capital after event

Issued share

capital (RON)

Paid share capital

(RON)

Issued shares

(Shares)

Paid shares

(Shares)

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 accounting loss

and for an extraordinary cash distribution 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

29 June 2018

The partial cancelation of the shares

acquired during the seventh and eighth buy-

back programmes

4,771,610,196.08

4,582,427,774.08

9,176,173,454

8,812,361,104

28 December 2018

The partial cancelation of the shares

acquired during the eighth buy

-back

programme

4,733,020,898.32

4,543,838,476.32

9,101,963,266

8,738,150,916

15 October 2019

The cancelation of the shares acquired

during the ninth buy-back programme

3,959,264,762.44

3,770,082,340.44

7,613,970,697

7,250,158,347

30 September 2020

The cancelation of the shares acquired

during the tenth buy-back programme

3,749,282,292.08

3,560,099,870.08

7,210,158,254

6,846,345,904

31 December 2020

Closing

balance

3,749,282,292.08

3,560,099,870.08

7,210,158,254

6,846,345,904

Source: Fondul Proprietatea

Share capital decrease process

On 30 September 2020, the Trade Registry registered Resolution no. 2/28 April 2020 of the Fund’s EGM for

approving the decrease of the subscribed share capital from RON 3,959,264,762.44 to RON 3,749,282,292.08

pursuant to the cancellation of 403,812,443 own shares acquired during the tenth buy-back programme, endorsed

by the FSA through Endorsement no. 189/10 September 2020.

The share capital decrease took place based on Article 207 (1) (c) of Companies’ Law no. 31/1990 and is effective

starting with 30 September 2020. At the same date, the Fund recorded a negative reserve in amount of RON

236,026,121 and the details regarding the coverage of this are included below.

Changes to the Constitutive Act

During 2020 shareholders approved two rounds of changes to the Constitutive Act for implementing the changes

of legislation that entered into force during 2020. The Constitutive Act as of 31 December 2020 is attached as

Annex 4 to this Annual Report. The Constitutive Act in force of the Fund is published on the website of the Fund.

For more details regarding the changes to the Constitutive Act after 31 December 2020, please see section

Subsequent events.

Management Agreement in force during 2020

During the first quarter of 2020 the Fund was managed under the Management Agreement concluded between the

Fund and FTIS as AIFM on 14 February 2018, which entered into force on 1 April 2018 with a duration of 2 years

(1 April 2018 – 31 March 2020). Starting with 1 April 2020, the Fund is managed under the Management

Agreement approved during 28 June 2019 GSM, with a duration of 2 years (1 April 2020 – 31 March 2022), under

the same key commercial terms as the previous one.

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 capitalisation of the Fund

Distribution Fee for all cash distributions

1.00% applied to the value of the distributions

Consideration for the Distribution Fee

Share buy-backs and GDR buy-backs

Public tender buy-backs

Return of share capital and dividends

Duration

2 years

Continuation vote

Annually, each April

Important GSM Resolutions during 2020

The main resolutions approved by the Fund’s shareholders during the GSMs in 2020 were the following:

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

x Several changes to Constitutive Act that partially entered into force on 24 July 2020 – the updated Constitutive

Act is published on the Fund’s website;

x Decrease of the subscribed share capital of the Fund from RON 3,959,264,762.44 to RON 3,749,282,292.08

following the cancellation of the 403,812,443 shares acquired within the tenth buy-back programme;

x Amended IPS as a result of changes in Romanian legislation with effective date 23 July 2020;

x Annual Activity Report of the AIFM for the period ended on 31 December 2019 and the financial statements;

x Coverage of the negative reserves incurred in 2019 from the cancelation of treasury shares;

x Net profit allocation and approval of a gross dividend of RON 0.0642 per share from 2019 year profit;

x Continuation vote for the current mandate of AIFM;

x Appointment of Deloitte Audit SRL as financial auditor of the Fund for 2021;

x Resolution for several changes of the Constitutive Act that will enter into force after FSA approval and

registration with the Trade Registry;

x Resolution for approving the buy-back programme for 2021 (the twelfth buy-back programme);

x Resolution for approving 2021 budget.

Changes of the credit facility agreement and issued debt in 2020

The Fund had in place a credit facility from BRD Groupe Societe Generale SA expiring on 29 June 2020. The

facility was extended until 29 June 2022, having the same committed amount of RON 45 million. The credit

facility is for general corporate and operational use. The Fund may access, subject to bank’s approval and in

accordance with the provisions of the credit facility, additional financing in excess of the said committed amount,

without exceeding a total amount of RON 100 million at any given time.

The Fund did not use the credit facility during 2020 and the outstanding balance is nil. The Fund had no bonds or

other debt securities in issue during 2020.

Market for Securities Issued by the Fund

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, with the registered office in Bucuresti, 34-36 Carol I Avenue, 3

, 8

and 9

Floors, 2

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 2020 (RON million)

Note: The values for FP, Electrica, OMV Petrom and Romgaz also include the GDR trading on LSE. The values for FP include the tender offers from March, September and

December 2020 and August 2019. The values for OMV Petrom include the 1.7 billion shares in sold by FP on 16 September 2020 under an accelerated bookbuild offering.

Source: BVB, Bloomberg

11.03

8.54

3.60

4.06

4.80

0.87

1.66

0.90

0.63

0.43

11.72

10.14

5.65

4.20

3.81

2.73

2.29

1.30

1.20

0.90

Banca Transilvania OMV Petrom BRD Electrica Transgaz

2019 2020

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

Fund’s Share Price and Discount History (RON per share)

Source: Bloomberg for Adjusted Share Price, Fondul Proprietatea for Discount

Note: The discount is calculated in accordance with the IPS i.e. the discount between the FP shares closing price on the BVB - REGS for each trading day and the latest

published NAV per share at the date of calculation

FP Share Price vs. FP GDR price (%)

Source: Bloomberg

After the significant drop registered by the global markets due to the outbreak of the COVID-19 pandemic in the

first part of the year, in the second half of 2020 the markets started recovering, and the Fond followed this trend.

As at 30 December 2020, the Fund’s share price registered the highest level since its listing on the BVB in January

2011, of RON 1.45 per share. On LSE the Fund’s GDR also reached the highest level since the listing in May

2015, of USD 17.30 per GDR on 21 December 2020.

16%

25%

34%

43%

0.6500

0.8500

1.0500

1.2500

1.4500

1.6500

1/19 2/19 4/19 6/19 8/19 10/19 11/19 1/20 3/20 5/20 7/20 8/20 10/20 12/20

Discount Adjusted Share Price

110

125

140

155

170

1/19 3/19 5/19 7/19 8/19 10/19 12/19 2/20 4/20 6/20 8/20 10/20

12/20

Share Price GDR Price

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

Buy-back Programmes

Overview of share buy-back programmes since listing

Programme

Period

No. of shares

repurchased

(million shares)

Tender offer

Cancellation of shares

First

May – Sep 2011

240.3

N/A

Completed

Second

Apr – Dec 2013

1,100.9

Oct – Nov 2013

Completed

Third

Mar – Jul 2014

252.9

N/A

Completed

Fourth

Oct 2014 – Feb 2015

990.8

Nov – Dec 2014

Completed

Fifth

Feb – Jul 2015

227.5

N/A

Completed

Sixth

Sep 2015 – Sep 2016

891.7

Aug – Sep 2016

Completed

Seventh

Sep 2016 – May 2017

830.2

Feb – Mar 2017

Completed

Eight

May – Nov 2017

141.9

N/A

Completed

Ninth

Nov 2017 – Dec 2018

1,488.0

Jan – Feb 2018

Completed

Tenth

Jan – Dec 2019

403.8

Jul – Aug 2019

Completed.

Eleventh

Jan – Dec 2020

798.0

Jan – Mar 2020/

July – Sep 2020/ Oct – Dec 2020

Finalised on 31 December 2020. Cancellation of

shares pending approval during April 2021 GSM

Twelfth

Jan – Dec 2021

N/A

Approved during 13 November 2020 GSM

TOTAL

7,366.0

Source: Fondul Proprietatea

Evolution of discount and buy-back programmes

The chart below presents the evolution of the discount and trading price by reference to the buy-back programmes

and dividend distributions implemented:

Source: Bloomberg for Adjusted Share Price, Fondul Proprietatea for Discount

Note: The discount is calculated in accordance with the IPS i.e. the discount between the FP shares closing price on the BVB - REGS for each trading day and the latest

published NAV per share at the date of calculation

The eleventh buy-back programme

During 15 November 2019 GSM, the shareholders approved the eleventh buy-back programme for a maximum

number of 800,000,000 shares and/ or equivalent GDRs corresponding to shares, starting with 1 January 2020 until

31 December 2020, at a price that cannot be lower than RON 0.2 per share or higher than RON 2 per share. The

shares repurchased during the buy-back programme will be cancelled. The Fund selected Auerbach-Grayson in

consortium with Swiss Capital to provide brokerage services for the programme. The Fund is allowed to buy back

daily up to 25% of the average daily volume of the Fund’s shares (in the form of ordinary shares or GDRs) on the

regulated market on which the purchase is carried out, calculated in accordance with the applicable law.

16%

25%

34%

43%

0.6500

0.8500

1.0500

1.2500

1.4500

1/19 2/19 4/19 6/19 8/19 10/19 11/19 1/20 3/20 5/20 7/20 8/20 10/20 12/20

Discount Adjusted Share Price

10th buy-back programme

Start of TO 6/

Dividend distribution for 2018 FY -

Ex date 7 June 2019

Completion

of TO 6

Dividend distribution for 2019 FY -

Ex date 9 June 2020

Start of

TO 8

Completion of

TO 8

Start of

TO 9

Completion

TO 9

11th buy-back programme

Start of

TO 7

Completion of

TO 7

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

During the year ended 31 December 2020, the Fund bought back a total number of 797,961,287 own shares within

the eleventh buy-back programme (out of which 555,481,637 ordinary shares and 242,479,650 shares

corresponding to GDRs), representing 11.1% of the total issued shares as at 31 December 2020, for a total

acquisition value of RON 1,065,008,456.86, excluding transaction costs. The total number of own shares (including

shares corresponding to GDRs) held by the Fund as at 31 December 2020 is 797,961,287 own shares, having a total

nominal value of RON 414,939,869.24 (RON 0.52 per share). During 2020 the Fund converted 4,849,593 GDRs

acquired into 242,479,650 ordinary shares. As at 31 December 2020, the Fund did not hold any GDR.

The table below shows a summary of the buy-back programmes during 2020:

Prog.

Description

No of shares*

Equivalent

shares of GDRs

Total no of

% of issued

share capital***

10th

Opening balance as at 1 January 2020

403,812,443

Acquisitions

Conversions

Cancellations

(403,812,443)

Closing balance as at 31 December 2020

Weighted average price

(RON per share; USD per GDR)**

1.0798

13.0730

1.0872

11th

Opening balance as at 1 January 2020

Acquisitions

555,481,637

242,479,650

797,961,287

Conversions

242,479,650

(242,479,650)

Closing balance as at 31 December 2020

797,961,287

11.1%

Weighted average price

(RON per share; USD per GDR)**

1.3247

16.3185

1.3347

Total

Total balance of treasury shares as at

31 December 2020

797,961,287

.1%

Source: Fondul Proprietatea

* Information presented based on the transaction date

** Weighted average price is calculated based on transaction price, excluding the related transaction costs, for the entire buy-back programme

***calculated as the total number of shares acquired within the programme (own shares and shares corresponding to GDRs) divided by the number of shares corresponding to

the issued share capital at the end of the programme (for completed programmes)/ at the reporting date (for ongoing programmes)

The tender offers within the eleventh buy-back programme

The table below presents details regarding the three tender offers completed by the Fund within the eleventh buy-

back programme:

First Tender Offer

March 2020

Second Tender Offer

September 2020

Third Tender offer

December 2020

Total no of shares acquired in the TO

200,000,000

220,000,000

165,000,000

Shares (ordinary)

124,478,000

147,747,650

101,774,750

Shares (corresponding to GDRs)

75,522,000

72,252,350

63,225,250

GDRs acquired

1,510,440

1,445,047

1,264,505

TO price per share (RON)

1.39

TO price per GDR (RON)

69.50

FX rate of the TO (RON/USD)

4.3302

4.1173

3.9978

TO price per GDR (USD)

16.0500

16.8800

17.3845

Daily buy-

backs suspension period

12 Dec 2019 -

23 Mar 2020

6 Jul - 22 Sep (shares)/ 23

Sep (GDRs) 2020

19 Oct – 31 Dec

2020

Dealer Managers

Swiss Capital SA and Auerbach Grayson

Intermediary for shares

Swiss Capital SA

Tender agent for GDRs

The Bank of New York Mellon

Date of application request to FSA

7 Jan 2020

17 Jul 2020

26 Oct 2020

FSA approval of the tender

22 Jan 2020

29 Jul 2020

4 Nov 2020

Subscription period

29 Jan - 13 Mar 2020

4 Aug - 9 Sep 2020

12 Nov - 16 Dec 2020

Total subscriptions, out of which

3,371,755,437

3,354,023,458

1,366,366,544

Ordinary shares

2,098,546,337

2,252,495,008

842,797,344

Shares corresponding to GDRs

1,273,209,100

1,101,528,450

523,569,200

Subscriptions % Offer

1,685.90%

1,524.55%

828.10%

Source: Fondul Proprietatea

Cancellation of shares acquired within the tenth buy-back programme

On 30 September 2020, the Trade Registry registered Resolution no. 2/28 April 2020 of the Fund’s EGM for

approving the decrease of the subscribed share capital from RON 3,959,264,762.44 to RON 3,749,282,292.08

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

pursuant to the cancellation of 403,812,443 own shares acquired during the tenth buy-back programme, endorsed

by the FSA through Endorsement no. 189/10 September 2020.

The twelfth buy-back programme

During 13 November 2020 GSM, the shareholders approved the twelfth buy-back programme for a maximum

number of 800,000,000 shares and/ or equivalent GDRs corresponding to shares, starting with 1 January 2021 until

31 December 2021, at a price that cannot be lower than RON 0.2 per share or higher than RON 2 per share. The

shares repurchased during the buy-back programme will be cancelled. The Fund selected Auerbach-Grayson in

consortium with Swiss Capital to provide brokerage services for the programme.

Impact of the buy-back programmes on the Fund’s equity

The Fund recognises the treasury shares (repurchases of own shares and GDRs) at trade date as a deduction from

shareholders’ equity (in an equity reserve account). Treasury shares are recorded at acquisition cost, including

brokerage fees, distribution fees and other transaction costs directly related to their acquisition.

Upon completion of all legal and regulatory requirements, the treasury shares are cancelled and netted off against

the share capital and/ or other reserves. The details on the accounting treatment to be applied for the registration

and cancellation of treasury shares can be found in the FSA Norm no. 39/2015, article 75.

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. At the cancellation date, only a reallocation between the equity accounts is booked, without any impact

on profit or loss and without generating additional shareholders’ equity decrease (the decrease is recorded at share

acquisition date).

Article 75 from Norm no. 39/2015 mentions that the negative balance arising on the cancellation of equity

instruments may be covered from the retained earnings and other equity elements, in accordance with the resolution

of the General Shareholders Meeting. As at 31 December 2020, the Fund’s equity elements that could be used to

cover the negative reserve are sufficient and include retained earnings, reserves and share capital.

Buy-back program 11 impact on equity during 2020

All amounts in RON

Acquisition cost

1,065,008,457

Total costs directly related to acquisition, out of which:

21,873,350

Distribution fees*

10,674,300

FSA fees

8,261,096

Stock Exchange fees (BVB and LSE)

1,200,151

Brokerage fees

1,127,761

Legal advisory fees

523,338

Central Depositary fees

62,548

Other professional fees

24,156

Total impact on equity of buy-back program 11 during 2020

1,086,881,807

Source: Fondul Proprietatea

*FTIS distribution fees related to buy-backs which are recognised directly in equity together with the acquisition cost of the underlying shares

Coverage of the negative reserves

The total negative reserves recorded by the Fund as at 31 December 2019 of RON 640,744,712 were related to the

cancellation of the shares acquired within the ninth buy-back programme. During the 28 April 2020 Annual GSM,

the shareholders approved the coverage of these negative reserves, as recorded in the annual audited IFRS financial

statements of the Fund, from other reserves allocated specifically for this purpose during the 2019 Annual GSM.

During 28 April 2020 Annual GSM, the shareholders approved the cancellation of the 403,812,443 treasury shares

repurchased within the tenth buy-back programme, which was completed on 30 September 2020. The shareholders

also approved the allocation RON 236,026,121 from 2019 audited profit to other reserves in order to be available

for covering the related negative reserves. The actual coverage of this negative reserve using the amount of RON

236,026,121 transferred to other reserves will be subject to shareholders’ approval during the 2021 annual

shareholders’ meeting.

The table below shows the movement of the negative reserves during 2020:

All amounts in RON

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

Opening balance of the negative reserve as at 1 January 2020 (audited)

640,744,712

Coverage of negative reserves according with GSM Resolution no. 2/ 28 April 2020

(640,744,712)

Negative equity reserve arising on the cancelation of the 10th buyback

programme shares according to EGM resolution no. 2/ 28 April 2020 (on 30 September 2020)

236,026,121

Closing balance of the negative equity reserve at 31 December 2020 (audited)

236,026,121

Source: Fondul Proprietatea

The table below shows additional details on the estimated negative reserve that will arise upon the cancelation of

the treasury shares in balance as at 31 December 2020:

Negative reserve that would arise on cancelation of the treasury shares in balance as at

31 December 2020

Buy-back

programme 11

Number of shares to be cancelled

(1)

797,961,287

Total costs (including transaction costs and other costs), representing the accounting value of the

shares to be cancelled in the future (RON)

(2)

1,086,881,807

Correspondent nominal value (NV \= RON 0.52 per share) (RON)

(3)=(1)*NV

414,939,869

Estimated negative reserve to be booked on cancelation (RON)

(4)=(3)-(2)

(671,941,938)

Source: Fondul Proprietatea

During the 28 April 2021 Annual GSM, the Fund’s Sole Director will propose the cancellation of the 797,961,287

treasury shares repurchased within the eleventh buy-back programme and would also recommend shareholders to

allocate RON 671,941,938 from the balance of distributions for which the statute of limitation occurred and from

the unallocated profit of the years 2017-2019 to other reserves in order to be available for covering the related

negative reserve. The actual coverage of this negative reserve using the amount of RON 671,941,938 transferred to

other reserves will be subject to shareholders’ approval during the annual shareholders’ meeting subsequent to the

completion of all cancellation steps.

Distributions to Shareholders

In order to comply with the requirements of Bucharest Stock Exchange Code of Corporate Governance and in

accordance with the IPS, Fondul Proprietatea SA adopted the Annual Cash Distribution Policy. The scope of the

policy is to set a series of guidelines and principles on the cash distributions made by the Fund. The Annual Cash

Distribution Policy is published on the Fund’s website, section About the Fund – Fund Overview – Corporate

Governance.

Distributions history

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

29 June 2018

(Status of limitation occurred)

Distribution - Return

of capital

2016

516,886,344

0.05000

10,337,726,877

27 June 2019

(Status of limitation occurred)

Distribution

Return

of capital

March

2017

480,543,496

0.05000

9,610,869,928

27 September 2020

(Status of

limitation

occurred)**

Distribution

Return

of capital

June

2017

443,502,747

0.05000

8,870,054,948

27 September 2020

(Status of limitation

occurred)**

2017 Dividend

June

2018

499,976,344

0.0678

7,374,282,346

99.3%

29 June 2021

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

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

2018 Dividend

July

2019

642,318,808

0.0903

7,113,165,099

97.3%

1 July 2022

2019 Dividend

July

2020

417,965,383

0.0642

6,510,364,222

96.4%

1 July 2023

Source: Fondul Proprietatea

* 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.

** Status of limitation was extended due to pandemic conditions; however, extended status of limitation occurred

2019 Dividend Distribution

On 28 April 2020, the shareholders approved the distribution of a gross dividend of RON 0.0642 per share, with

Ex-date on 9 June 2020 and Registration date on 10 June 2020. The Fund started the payment of dividends on 1

July 2020. The payments of the distributions to shareholders are performed through the Romanian Central

Depositary, according to the legislation in force, as follows:

a) for shareholders having a custodian/ brokerage account, directly by the respective custodian bank or broker;

b) for all other shareholders:

(i) by the Central Depositary, through BRD Groupe Societe Generale (acting as Payment Agent), for bank

transfers when the supporting documentation required by the Central Depositary, along with a payment

request, have been submitted

(ii) by the Payment Agent for cash payments at any of its agencies, or by bank transfer (when the supporting

documentation required by the Payment Agent and a payment request were submitted to the Payment Agent)

Also, as an important notice to shareholders, this dividend payment is subject to the general statute of

limitation. As such, shareholders may request the payments only within a three-year term starting with the

Payment Date, namely by 1 July 2023.

Previous distributions to shareholders with payment dates after 31 December 2020

1) Dividend distribution in June 2018

On 26 April 2018 shareholders approved the distribution of a gross dividend of RON 0.0678 per share, with Ex-

date 8 June 2018 and Registration date 11 June 2018. The Fund started the payment of dividends on 29 June 2018

and by 31 December 2020 shareholders had collected 99.3% of the total dividend distribution of RON 500.0

million. This dividend payment is subject to the general statute of limitation. As such, shareholders may request the

payments only within a three-year term starting with the Payment Date, namely by 29 June 2021.

2) Dividend distribution in July 2019

On 4 April 2019 shareholders approved the distribution of a gross dividend of RON 0.0903 per share, with Ex-date

on 7 June 2019 and Registration date on 10 June 2019. The Fund started the payment of dividends on 1 July 2019

and by 31 December 2020 shareholders had collected 97.3% of the total dividend distribution of RON 642.3

million. This dividend payment is subject to the general statute of limitation. As such, shareholders may request the

payments only within a three-year term starting with the Payment Date, namely by 1 July 2022.

2017 Returns of Capital

During 31 October 2016 GSM and 28 February 2017 GSM, the Fund’s shareholders approved 2 returns of capital

of RON 0.05 per share each, according to the following details:

Details

March 2017

Return of Capital

June 2017

Return of Capital

GSM Resolution

Resolution no. 10/31 October 2016

Resolution no. 1/28 February 2017

Registration date

7 March 2017

12 June 2017

Payment date

27 March 2017

30 June 2017

General statute of limitation until

27 March 2020

30 June 2020

Updated general statute of limitation limit date

27 September 2020

Source: Fondul Proprietatea

Considering the exceptional measures and the restrictions imposed by the authorities in the context of COVID-19

pandemic, the AIFM accepted to extend the period for paying unclaimed amounts for both returns of capital

mentioned above until 27 September 2020, after which the returns of capital were cancelled.

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

NAV Methodology and NAV Evolution

NAV Methodology

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 the 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.

Listed securities are valued either at closing market prices if listed on regulated markets, or at reference prices if

listed on an 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. The shares in the companies under insolvency or reorganisation procedures, 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 NAV per share calculation, the equivalent

number of shares corresponding to the GDRs bought back and held by the Fund as at NAV reporting date is also

deducted, together with the number of ordinary own shares bought back and held.

Changes to NAV reporting

Romanian AIF Law

and AIF Regulation became effective in 2020, requiring the Fund to apply for FSA

authorisation as an AIF and bringing various changes to the internal procedures of the Fund, including the NAV

reporting process. The current NAV calculation methodology did not require any significant change, as the

valuation rules for the portfolio instruments are mainly the same. Most of the amendments in the new AIF

legislation refer to:

x changes in the reporting templates provided by the regulator;

x new reporting requirements regarding leverage as part of the NAV reporting;

x certain changes in NAV reporting publication deadlines – both NAV calculation and the Annex containing the

detailed statement of investments, are to be published after FSA review.

However, the changes would be applicable to the Fund starting the date when the Fund’s registration process as an

alternative investment fund with the FSA is finalised.

NAV per share (RON per share)

The following chart shows information on the monthly NAV per share for the period 31 December 2019 to 31

December 2020:

Source: Fondul Proprietatea, based on NAV reports submitted to the FSA, computed for the last working day of the month

During the first quarter of 2020, the NAV per share had an overall decrease of 16.3% compared to the end of the

previous year, mainly due to the valuation update of the unlisted holdings in the portfolio (impact on the Fund’s

NAV of RON 1,035.8 million) and the negative share price evolution of the Fund’s listed holdings, principally

1.7339

1.7113

1.6623

1.4515

1.4561

1.5708

1.5622

1.5575

1.6061

1.5881

1.5751

1.606

1.6974

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

2.00

Dec 2019 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Dividend per share: 0.0642 RON

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

OMV Petrom SA (impact on the Fund’s NAV of RON 889.2 million) which were partially offset by the tender

offer within the eleventh buyback programme carried out by the Fund during this period.

In March 2020, the Fund engaged KPMG Romania to assist with the preparation of an analysis of market

multiples’ evolution between 30 September 2019 and 31 March 2020, based on which the values for 12 largest

unlisted holdings were updated, accounting for more than 99% of the total unlisted portfolio as at 28 February

2020. The total impact was a decrease of the unlisted holdings with 13.1%/ RON 1 billion in 31 March 2020 NAV

compared to 28 February 2020 NAV.

During the second quarter of 2020, the NAV per share had an overall increase of 7.6% compared to the end of the

first quarter, mainly due to the dividends recorded from portfolio companies during this period (RON 417.6

million), the valuation update of the unlisted holdings in the portfolio (impact on the Fund’s NAV of RON 217.5

million compared to 31 March 2020) and the positive share price evolution of the Fund’s listed holdings,

principally OMV Petrom SA (impact on the Fund’s NAV of RON 192.6 million compared to 31 March 2020) as

well as the eleventh buyback programme carried out by the Fund during this period. These were partially offset by

the dividend distribution of RON 0.0642 per share approved by shareholders during 28 April 2020 GSM (total

impact in Fund’s NAV of RON 418.0 million).

In June 2020, the Fund performed valuation updates for 8 unlisted holdings representing 97.9% from the Fund’s

total unlisted portfolio at 31 May 2020. The valuation was performed with the assistance of KPMG Advisory, in

accordance with International Valuation Standards. The valuation date was 31 May 2020 and the reports also

considered any relevant corporate actions until 30 June 2020 (e.g. dividend distributions). The total impact of the

valuation update was an increase of RON 217.5 million, compared to 31 March 2020 NAV/ a decrease of RON

1.26 billion compared to 31 December 2019 NAV. The valuation includes the effect of annual and special

dividends distributed by the respective unlisted companies which amount to RON 940.0 million during the first six

months of 2020.

Also, in April the Fund engaged Darian DRS to assist with the preparation of a valuation report for Alcom SA, a

company listed on BVB but last traded on 10 February 2017. The total impact of this change on the Fund’s NAV

was a decrease of RON 3.3 million compared to previous month.

During the third quarter of 2020, the NAV per share had an upward trend compared to the end of the previous

quarter, mainly due to the tender offer within the eleventh buy-back programme carried by the Fund during this

period. This was partially offset by the negative share price evolution of OMV Petrom SA (impact on the Fund’s

NAV of RON 443.9 million).

During the last quarter of 2020, the NAV per share increased by 6.9%, mainly due to the update of the unlisted

portfolio companies’ valuation.

Valuation updates in accordance with the International Valuation Standards were prepared for 19 unlisted holdings

with the assistance of KPMG Advisory and Darian DRS, representing 100% of the unlisted portfolio. The valuation

report for Alcom SA was also updated for year-end reporting. The valuation date was 31 October 2020, but the

valuations considered the subsequent developments until 31 December 2020.

The overall impact of the valuation adjustments on the unlisted holdings of the Fund is detailed in the table below:

No.

Portfolio company

Value in

31 Dec 2020 NAV

vs.

30 Sep

2020 NAV

31 Dec 2020

NAV

30 Sep 2020

NAV

RON million

Hidroelectrica SA

5,128.9

4,707.5

421.4

9.0%

CN Aeroporturi Bucuresti SA

624.1

735.8

(111.7)

-15.2%

Engie Romania SA

538.8

426.3

112.5

26.4%

E-Distributie Banat SA

272.7

252.6

20.1

8.0%

CN Administratia Porturilor Maritime SA

235.8

233.4

2.4

1.0%

E-Distributie Muntenia SA

227.8

212.7

15.1

7.1%

Societatea Nationala a Sarii SA

201.2

222.1

(20.9)

-9.4%

E-Distributie Dobrogea SA

177.2

164.7

12.5

7.6%

ENEL Energie SA

52.5

25.8

26.7

103.5%

ENEL Energie Muntenia SA

43.1

41.2

1.9

4.6%

Zirom SA

24.9

31.7

(6.8)

-21.5%

CN Administratia Canalelor Navigabile SA

17.8

14.9

2.9

19.5%

Posta Romana SA

13.1

10.7

2.4

22.4%

Alcom SA

8.9

6.1

2.8

45.9%

Aeroportul International Timisoara - Traian Vuia SA

6.4

11.4

(5.0)

-43.9%

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

No.

Portfolio company

Value in

31 Dec 2020 NAV

vs.

30 Sep

2020 NAV

31 Dec 2020

NAV

30 Sep 2020

NAV

RON million

CN Administratia Porturilor Dunarii Maritime SA

5.2

4.2

1.0

23.8%

Aeroportul International Mihail Kogalniceanu - Constanta SA

2.6

1.4

1.2

85.7%

CN Administratia Porturilor Dunarii Fluviale SA

2.3

1.7

0.6

35.3%

Plafar SA

1.9

1.7

0.2

11.8%

Complexul Energetic Oltenia SA

0.0%

TOTAL

7,585.2

7,105.9

479.3

6.7%

Source: Fondul Proprietatea, based on NAV reports submitted to FSA

Investment Strategy and Portfolio Analysis

The Fund’s investment objective is the maximisation of returns to shareholders and the increase of the net asset

value per share via investments mainly in Romanian equities and equity-linked securities. The equity exposure

amounted to 90.1% of the Fund’s NAV as at 31 December 2020. As at that date, the portfolio was composed of

holdings in 32 companies (6 listed and 26 unlisted), a combination of privately held and state-controlled entities.

Portfolio Structure – by Controlling Ownership

Source: Fondul Proprietatea, data as at 31 December 2020, % in total NAV

Net cash and receivables includes bank

deposits, current bank accounts, short-

term Government securities, dividend

receivables, as well as other receivables

and assets, net of all liabilities (including

liabilities to shareholders related to the

returns of capital and dividend

distributions) and provisions.

Portfolio Structure – by Sector

Source: Fondul Proprietatea, data as at 31 December 2020, % in total NAV

The portfolio remains heavily weighted in

power, oil and gas sectors (approx. 76.8

% of

the NAV), through several listed and unlisted

Romanian companies

State controlled entities…………………… 61.3%

Private entities……………………………… 28.8%

Net cash and receivables…………………. 9.9%

Power utilities: generation...……………. 50.0%

Oil & Gas………………………………… 14.0%

Power&Gas Utilities: distrib,supply……. 12.8%

Infrastructure…….…………...………….. 9.3%

Heavy industry…………………………… 2.2%

Others………………………………..…… 1.8%

Net Cash and Receivables……..……… 9.9%

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

Portfolio Structure – by Asset Type

Source: Fondul Proprietatea, data as at 31 December 2020, % in total NAV

Portfolio Structure – Unlisted holdings

The largest unlisted holding is

Hidroelectrica SA (49.96% of the NAV)

Source: Fondul Proprietatea, data as at 31 December 2020; the chart reflects the company NAV value as a % in total NAV value of unlisted holdings

Portfolio Structure – Listed holdings

The largest listed holding is OMV

Petrom SA (14.03% of the NAV)

Source: Fondul Proprietatea, data as at 31 December 2020; the chart reflects the company NAV value as a % in total NAV value of listed holdings

Key portfolio developments

Dividends

During 2020, 13 companies in the Fund’s portfolio declared dividends for the 2019 and 2018 financial years. In

addition, 5 companies declared special dividends. The total amount of gross dividend income recorded by the Fund

in 2020 is RON 1.2 billion, and the most significant amounts relate to Hidroelectrica SA, E-Distributie companies

and OMV Petrom SA. For more details regarding dividend income, please refer to section Financial Statements

Analysis.

Disposals

On 16 September 2020, the Fund sold 1.7 billion shares in OMV Petrom SA under an accelerated bookbuild

offering. The agreed selling price was RON 0.33 per share and the gross proceeds of the transaction amount to

RON 561 million. The Fund’s remaining participation in OMV Petrom SA after this transaction is of 6.9973% of

its share capital.

Unlisted Equities……………………… 73.8%

Listed Equities………………………… 16.3%

Net Cash and Receivables.…............. 9.9%

Hidroelectrica SA…………...……………… 67.7%

Enel Group companies…………………….. 10.2%

CN Aeroporturi Bucuresti SA……………… 8.2%

Engie Romania SA……………..…………… 7.1%

CN Administratia Porturilor Maritime SA …. 3.1%

Societatea Nationala a Sarii SA……………. 2.7%

Others…………………………….................. 1.0%

OMV Petrom SA…………………..…… 86.2%

Alro SA…………………………………… 9.8%

Romaero SA……………………………. 3.4%

Others…………………..……………….. 0.6%

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

Also, during 2020 the Fund sold its entire holding of 7.1% (as at 31 December 2019) in Nuclearelectrica SA.

Participation in share capital increases

In December 2019, the Fund subscribed to the share capital increase of Zirom SA with a cash contribution of RON

4.8 million which was effective on 8 January 2020, the date of registration with the Romanian Trade Register.

On 15 September 2020, the Fund subscribed to the share capital increase of Nuclearelectrica SA with a cash

contribution of RON 97,350. This was effective on 27 October 2020, the date of registration with the Romanian

Central Depositary.

On 12 November 2020, the Fund subscribed to the share capital increase of Hidroelectrica SA with a cash

contribution of RON 415,110, which was effective on 15 January 2021, at the registration date with the Romanian

Trade Register.

Energy Sector Updates

Updates on the regulatory requirements in the energy sector

In January 2020, the Government issued GEO 1/2020 in order to repel most of the fiscal package approved in 2018

through GEO 114/2018. The main provisions of the current form of the GEO with an impact on the Fund’s

portfolio are presented below:

x eliminating starting with January 2021 of regulated contracts for the supply of electricity by producers to

suppliers of last resort in connection to household consumption;

x 2% tax on turnover for companies in the electricity and gas sectors was eliminated. Subsequently, for 2020,

ANRE set a 0.1% contribution on the turnover for electricity producers, in line with the practice before the

adoption of OUG 114/2018;

x eliminating the RON 68 per MWh cap on gas prices for households and thermal energy producers that supply

heating to the centralised systems starting 1 July 2020, instead of 1 March 2022;

x the RRR for energy distribution companies was to be determined by ANRE and the provision from GEO

19/2019 which sets the rate at 6.9% were effective until the end of April 2020;

x the higher capital requirements for the Pillar II Pension fund managers were removed;

x the option to transfer from Pillar II to Pillar I (public pension system) was removed.

GEO 74/2020 for modifying Romanian Energy Law 123/2012

In May 2020, the Romanian Government amended Romanian Energy Law no. 123/2012 by GEO no. 74/2020. The

new GEO maintained the regulated market until 31 December 2020. According to the same GEO, the obligation to

supply electricity through regulated contracts applies to producers that employ dispatchable facilities with the

exception of generation units benefitting from support schemes, in the ascending order of the prices set by the

competent authority, for the entire household consumption benefitting from regulated tariffs such that regulated

tariffs would not exceed the levels at the time GEO no. 74/2020 entered into force.

To apply the new provisions of Law no. 123/2012, on 12 June 2020 ANRE adopted a new Methodology by Order

no. 88/2020, regarding the establishment of regulated tariffs and prices applied by suppliers of last resort to final

customers for the period 1 July 1 – 31 December 2020 and for the amendment of the framework for electricity sale

purchase agreement between electricity producers and suppliers of last resort. The methodology was applicable for

the period 1 July 2020 - 31 December 2020. According to an ANRE report, the total volume of electricity that had

to be sold by producers to suppliers of last resort based on regulated contracts during H2 2020 amounted to

approximately 3.98 TWh.

Other regulations

In December 2019 ANRE issued Order no. 216/ 11 December 2019 updating the methodology for the calculation

of the regulated electricity prices and quantities to be sold based on regulated contracts by producers to the

suppliers of last resort. The methodology was applied for the period 1 January 2020 - 31 December 2020 and

retained the cost +5% methodology for the calculation of regulated prices.

Details on regulated quantities and prices for the companies in the Fund’s portfolio for the period 1 January 2020 –

30 June 2020 are included below:

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

Company

Volume

Price

Hidroelectrica SA

1.84 TWh

RON 102.54 per MWh

Nuclearelectrica SA

1.09 TWh

RON 188.47 per MWh

CE Oltenia SA

0.05 TWh

RON 239.21 per MWh

Source: ANRE Decisions 2214, 2213, 2216, 2215, 2226, 2225 from 23 December 2019

Details regarding the regulated quantities and prices for the companies in the Fund’s portfolio for the period 1 July

2020 – 31 December 2020 are included in the table below:

Company

Volume

Price

Hidroelectrica SA

1.3 TWh

RON 115.99 per MWh

Nuclearelectrica SA

1.1 TWh

RON 182.63 per MWh

OMV Petrom SA

0.2 TWh

RON 222.78 per MWh

CE Oltenia SA

1.4 TWh

RON 249.60 per MWh

Source: ANRE Decisions 1074, 1075, 1076 and 1077 from 29 June 2020, ANRE monitoring reports

According to ANRE decision issued in December 2019 for OMV Petrom SA the regulated gas quantities for

households and thermal energy producers that supply heating to the centralised systems for January - March 2020

were the following:

Regulated natural gas quantity

Quantity (TWh)

Total regulated quantity, of which:

5.51

Regulated quantity for household consumers

4.52

Regulated quantity for thermal energy producers that supply heating to the centralised systems

0.99

Source: ANRE Decision no. 2101 from 12 December 2019

According to ANRE decision issued in March 2020 for OMV Petrom SA the regulated gas quantities for

households and thermal energy producers that supply heating to the centralised systems for April - June 2020 were

the following:

Regulated natural gas quantity

Quantity (TWh)

Total regulated quantity, of which:

5.05

Regulated quantity for household consumers

3.91

Regulated quantity for thermal energy producers that supply heating to the centralised systems

1.14

Source: ANRE Decision no. 463 from 23 March 2020

According to the ANRE orders, the specific electricity distribution tariffs for the companies in the Fund’s portfolio

operating in power distribution sector, applicable starting with 1 January 2021, compared to those applicable

starting 1 January 2020 and 16 January 2020, are the following:

Company

Voltage level

Tariffs starting

1 Jan 2020

(RON/MWh)

Tariffs starting

16 Jan 2020

(RON/MWh)

Tariffs starting

1 Jan 2021

(RON/MWh)

change

(%)

change

(%)

(1)

(2)

(3)

(3)/(1)-1

(3)/(2)-1

-Distributie

Banat

High Voltage

15.93

15.64

15.51

-2.64%

-0.83%

Medium Voltage

36.46

35.80

38.27

4.96%

6.90%

Low Voltage

109.54

107.57

107.81

-1.58%

0.22%

-Distributie

Dobrogea

High Voltage

20.56

20.21

20.17

-1.90%

-0.20%

Medium Voltage

41.29

40.58

42.80

3.66%

5.47%

Low Voltage

134.02

131.71

135.17

0.86%

2.63%

-Distributie

Muntenia

High Voltage

10.17

10.00

10.41

2.36%

4.10%

Medium Voltage

32.50

31.95

34.55

6.31%

8.14%

Low Voltage

115.67

113.67

112.22

-2.98%

-1.28%

Source: ANRE Orders 224, 225 and 226 from 17.12.2019, ANRE Orders no. 4, 5 and 6 from 15.01.2020, ANRE Orders no. 217, 218, 219 from 9.12.2020

The regulated electricity tariffs applied by the three suppliers of last resort in the Fund’s portfolio to the final

customers were approved by ANRE in June 2020, as follows:

Company

Voltage level

Tariffs starting

1 Jan 2020

(RON/kWh)

Tariffs starting

1 July 2020

(RON/kWh)

change

(%)

(1)

(2)

(2)/(1)-1

Enel Energie (Banat

Area)

Medium Voltage

0.3440

0.3357

-2.4%

Low Voltage

0.4535

0.4433

-2.3%

Enel Energie (Dobrogea

Area)

Medium Voltage

0.3315

0.3250

-1.9%

Low Voltage

0.4655

0.4567

-1.9%

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

Company

Voltage level

Tariffs starting

1 Jan 2020

(RON/kWh)

Tariffs starting

1 July 2020

(RON/kWh)

change

(%)

Enel Energie Muntenia

(South Muntenia Area)

Medium Voltage

0.3011

0.2936

-2.5%

Low Voltage

0.4168

0.4073

-2.3%

Engie Romania (South

Muntenia Area)

Medium Voltage

0.3503

0.3435

-1.9%

Low Voltage

0.4660

0.4571

-1.9%

Source: ANRE Orders no. 242/23.12.2019, 243/23.12.2019, 245/23.12.2019, 135/29.06.2020, 136/29.06.2020, and 139/29.06.2020

The gas distribution tariffs for Distrigaz Sud Retelele (a subsidiary of Engie Romania SA operating in gas

distribution sector) were approved by ANRE in June 2020, as follows:

Annual consumption (MWh)

Tariffs starting

1 Jul 2019 (RON/MWh)

Tariffs starting

1 Jul 2020 (RON/MWh)

change

(%)

(1)

(2)

(2)/(1)-1

between 0-280

31.49

30.24

-4.0%

between 280-2,800

29.66

28.49

-3.9%

between 2,800-28,000

28.27

27.16

-3.9%

between 28,000-280,000

21.78

20.94

-3.9%

higher than 280,000

14.74

14.18

-3.8%

clients benefitting from proximity distribution tariff

4.00

0.0%

Source: ANRE Orders no. 117/24.06.2019, and 125/24.06.2020.

According to ANRE’s Order no. 14/ 5 February 2020, the RRR for electricity and gas distribution companies

would be set by the regulator. The provision from GEO 19/2019 setting the rate at 6.9% was effective for the first

120 days of 2020. According to ANRE Order no. 75/6 May 2020 the new RRR level for electricity and gas

distribution companies is 6.39% until the end of 2023.

On 17 July 2020, ANRE issued Orders no. 143 and 144, respectively, requiring gas producers with an annual

output higher than 3 TWh to sell 40% of their gas production on centralised market between July 2020 - December

2022, following the full liberalisation of gas market beginning with 1 July 2020 (ANRE Order 23/27 March 2020).

On 24 July 2020, the President promulgated the Law no. 155/2020 amending and completing the electricity and

natural gas Law no. 123/2012, which introduces new requirements for natural gas suppliers, as follows: a tax of

90% is applied to the additional income of gas suppliers resulted as a difference between the acquisition cost and

the regulated gas price for producers of RON 68 per MWh until 30 June 2021. If the acquisition cost exceeds the

threshold of 68 RON/MWh, no tax is due.

According to ANRE’s Order no. 1/ 20 January 2021 and Order no. 3/ 20 January 2021 respectively, effective

starting with 1 February 2021, the regulator allows for electricity and gas distribution companies the following:

x to add 1% incentive above the current level of RRR for newly employed assets;

x to add an incentive of 2% to the current level of RRR for investments fully or partially financed through EU

grants.

Electricity prices (EUR/ MWh)

Source: Bloomberg

12/18 2/19 4/19 6/19 8/19 10/19 12/19 2/20 4/20 6/20 8/20 10/20

12/20

Romania (OPCOM) Hungary (HUPX) Germany (EPEX)

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

Energy resources (thousand tonnes barrels of oil equivalent)

January – December 2020

January – December 2019

% change

Total

Production

Import

Total

Production

Import

Total

Production

Import

Net coal

2,992.1

2,567.1

425.0

4,283.4

3,664.0

619.4

-30.1%

-29.9%

-31.4%

Crude oil

10,219.2

3,236.2

6,983.0

12,003.3

3,338.4

8,664.9

-14.9%

-3.1%

-19.4%

Usable natural gas

8,971.8

7,290.1

1,681.7

10,202.0

8,077.5

2,124.5

-12.1%

-9.7%

-20.8%

Hidro. nuclear. and import energy

5,542.2

4,888.5

653.7

5,295.2

4,855.7

439.5

+4.7%

+0.7%

+48.7%

Import oil products

3,309.6

2,970.0

+11.4%

Others

407.3

498.1

-18.2%

Total resources

31,442.2

17,981.9

13,460.3

35,252.0

19,935.6

15,316.4

-10.8%

-9.8%

-12.1%

Source: National Institute of Statistics webpage

Update on the Largest 10 Portfolio Holdings

Top 10 equity investments

Name

Fund's stake (%)

Value as at

31 December 2020

(RON million)

% of NAV

as at 31 December

2020

Hidroelectrica SA

19.94%

5,128.9

50.0%

OMV Petrom SA

7.00%

1,440.7

14.0%

CN Aeroporturi Bucuresti SA

20.00%

624.1

6.1%

Engie Romania SA

12.00%

538.8

5.3%

E-Distributie Banat SA

24.13%

272.7

2.7%

CN Administratia Porturilor Maritime SA

20.00%

235.8

2.3%

E-Distributie Muntenia SA

12.00%

227.8

2.2%

Societatea Nationala a Sarii SA

49.00%

201.2

2.0%

E-Distributie Dobrogea SA

24.09%

177.2

1.7%

Alro SA

10.21%

163.3

1.6%

Top 10 equity holdings

9,010.5

87.9%

Total equity holdings

9,246.7

90.1%

Net cash and receivables

1,020.2

9.9%

Total NAV

10,266.9

100.0%

Source: Fondul Proprietatea, based on NAV reports submitted to FSA

Rounded to one decimal

Hidroelectrica SA

RON million

2019

2020*

Revenues

4,177.2

3,787.6

Operating profit

1,975.3

1,686.0

Net profit

1,386.5

1,453.5

Dividends**

1,253.3

Source: Individual IFRS financial statements

*preliminary results

**do not include the special dividends declared by the company

April: According to the 2019 audited financial statements, in 2019 the company recorded revenues of RON

4,177.2 million, down 2.3% y.o.y, an operating profit of RON 1,975.3 million, down 10.7% y.o.y, a profit before

tax of RON 2,081.2 million, down 9.1% y.o.y and a net profit of RON 1,386.5 million, down 28.5% y.o.y. The

higher effective taxation rate was driven by the use of previously untaxed realised revaluation reserves for the

distribution of a special dividend in total amount of RON 1.0 billion and for covering the accounting losses of

RON 1.57 billion generated by value adjustments of historical complex investments. The company reported that

EBITDA stood at RON 2,934.3 million, down 6.2% y.o.y. Over the full year 2019, the volume of electricity sold

stood at 15.88 TWh, down compared to 17.86 TWh in 2018. The average realised price of energy sold in 2019

stood at RON 229.3/ MWh, up 8.8% y.o.y.

May: According to management, over the first three months of 2020, the company reported a turnover of RON

848.4 million, down 14.3% y.o.y, an EBITDA of RON 595.0 million, down 19.5% y.o.y, an operating profit of

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

RON 467.8 million, down 17.3% y.o.y, a profit before tax of RON 489.4 million, down 16.5% y.o.y and a net

profit of RON 430.3 million, down 13.6% y.o.y. Over the period, electricity sold reached 3.6 TWh, marginally up

1.1% y.o.y, out of which the electricity sold out of own production reached 3.3 TWh compared to 3.2 TWh during

Q1 2019. The average realised electricity selling price was down 16.2% y.o.y to RON 203.0/MWh, being

negatively impacted by the obligation of the company to sell over the period a total quantity of 1.1 TWh at the

regulated price of RON 102.5 per MWh as compared to only 0.2 TWh sold at the regulated price of RON 111.6/

MWh in Q1 2019. At the end of March 2020, the company’s net cash position stood at RON 2.34 billion.

May: Shareholders approved the payment of a RON 750 million special dividend out of retained earnings. The

payment deadline is 30 September 2020.

August: According to management, during H1 2020 total turnover of the company decreased by 23.3% y.o.y. to

RON 1,801.9 million, EBITDA declined by 25.9% y.o.y to RON 1,251.2 million, profit before tax was 31.1%

lower y.o.y, reaching RON 1,008.9 million, while net profit decreased by 10.6% y.o.y. to RON 805.5 million;

During the first six months of the year, the total energy sold out of own production was 6.94 TWh, down

compared to 8.98 TWh during H1 2019, while total energy sold reached 7.87 TWh, declining from 9.63 TWh

during H1 2019. The average realised electricity selling price was down 7.4% y.o.y to RON 200.8 per MWh, being

negatively impacted by the obligation of the company to sell during the first six months of the year through

regulated contracts 1.84TWh at the price of RON 102.54 per MWh compared to 1.23TWh at the price of RON

111.61 per MWh during the similar period of the previous year. At the end of June 2020, the company’s net cash

position stood at RON 2.82 billion.

October: According to management, during 9M 2020 total turnover of the company decreased by 15.8% y.o.y. to

RON 2,759.7 million, EBITDA declined by 19.5% y.o.y to RON 1,928.0 million, profit before tax was 21.3%

lower y.o.y, reaching RON 1,538.8 million, while net profit decreased by 3.9% y.o.y. to RON 1,264.2 million.

During 9M 2020, the total energy sold out of own production was 10.87 TWh, down compared to 12.04 TWh

during 9M 2019, while total energy sold reached 12.0 TWh, declining from 12.9 TWh the previous year.

During 9M 2020 the company sold a volume of 2.55 TWh of electricity through regulated contracts, compared to

1.48 TWh during 9M 2019. Over the same period, the average realised electricity selling price was down 9.0%

y.o.y to RON 205.3 per MWh. On the competitive segment of the electricity market the average realized price for

9M 2020 was RON 231.3 per MWh, compared to RON 240.3 per MWh in 9M 2019, while the average regulated

price at which the company sold electricity was RON 106.3 per MWh, down 4.8% y.o.y. At the end of September

2020, the company’s net cash position stood at RON 1.38 billion.

December: On 23 December 2020, Hidroelectrica SA and STEAG GmbH signed an agreement concerning the

purchase by Hidroelectrica SA of STEAG’s shares in Romanian subsidiaries Crucea Wind Farm and STEAG

Energie Romania following a competitive process which involved both local and international bidders. Crucea

Wind Farm is the entity that owns Crucea wind park located in Constanta county, Romania, which has an installed

capacity of 108 MW. STEAG Energie Romania is an operations and maintenance entity, providing its services

exclusively to Crucea Wind Farm. On 1 February 2021, the transaction was approved by the GSM of

Hidroelectrica SA. The transaction will complete in accordance with conditions stipulated in the agreement.

February 2021: According to the preliminary unaudited results provided by the management, during 2020 the

company registered a turnover of RON 3,788 million, down 8.7% y.o.y, an EBITDA of 2,698 million, down by

8.0% y.o.y, an operating profit of RON 1,686 million, down 14.6% y.o.y., a profit before tax of RON 1,764

million, down 15.2% y.o.y and a net profit of RON 1,453 million, up 4.8% y.o.y. Electricity delivered by the

company out of its own production reached 14.58 TWh, down 1.3% y.o.y, while total electricity sold reached

15.96 TWh, up 0.7% y.o.y. Over the period, the average realised selling price was down 6.6% y.o.y. to RON 214.1

per MWh. On the competitive segment of the electricity market, the average realised price was RON 238.6 per

MWh, down 1.6% y.o.y. During the 2020, the company delivered on the regulated market a total volume of

electricity of 3.15 TWh compared to 1.64 TWh in 2019, at an average price of RON 109.5 per MWh, down 3.0%

y.o.y. At the end of December, the company’s cash position stood at RON 2.08 billion.

COVID-19 considerations

In the context of COVID-19 pandemic, the company has implemented a number of measures aimed at protecting

the company personnel, ensuring the safety and continuity of operations and safeguarding the financial position of

the company. Among the measures outlined by management are the implementation of work from home measures

in shifts for a significant part of the administrative and support personnel, implementation of strict prevention and

social distancing measures for production departments, as well as close monitoring of company expenses.

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

OMV Petrom SA

RON million

2019

2020*

Budget

2019

Budget

2020

Sales

25,485.5

19,717.0

16,762.0

18,088.0

Operating profit

4,245.1

1,467.1

3,966.0

3,453.0

Net profit

3,634.7

1,291.0

3,202.0

2,815.0

Dividends**

1,756.0

Source: Consolidated IFRS financial statements/ Budgeted figures based on company’s budgets as approved by shareholders

*Preliminary results

**Based on separate IFRS financial statements

February: The company published the 2019 preliminary results. The highlights include: the company benefited

from higher sales volumes and prices for natural gas and higher sales volumes for petroleum products.

Consolidated sales increased by 14% in Q4 2019 compared to Q4 2018, despite lower selling prices for petroleum

products and lower sales volumes and prices for electricity. For the entire 2019, sales increased by 13.2% y.o.y,

while operating result of the group declined by 18.6% y.o.y to RON 4.2 billion from RON 5.2 billion in 2018. In

Q4 2019, Downstream Oil represented 48% of the consolidated sales, while Downstream Gas accounted for 27%

and Upstream for 25% (Upstream is largely sold intra group). Net income attributable to stockholders was RON

0.9 billion in Q4 2019 compared to RON 1.4 billion in Q4 2018. Company proposed a dividend of RON 0.031 per

share, up 15% y.o.y which represents a 48.3% pay-out ratio.

March: Shareholders approved the revocation of Mrs. Sevil Shhaideh and the appointment of Mr. Niculae Havrilet

as supervisory board member following the request from the Ministry of Economy, Energy and Business

Environment.

April: Shareholders approved the distribution of RON 1.76 billion as dividends (48% pay-out) and the Fund will

receive approx. RON 175.5 million.

The company released the Q1 2020 results. Clean CCS

1 operating result came 21% lower y.o.y while clean CCS1

net profit was down 28% y.o.y. Consolidated sales revenues increased by 12% compared to Q1 2019 supported by

higher volumes of natural gas, partially compensated by lower commodity prices and lower sales volumes of

electricity. Downstream Oil represented 63% of consolidated sales, while Downstream Gas accounted for 35% and

Upstream for 1% (sales in Upstream is largely intra-group sales rather than third party sales).

June: Company announced that it was selected as the winner of the open international tender held by the Ministry

of Economy and Sustainable Development of Georgia for the Offshore Block II in the Black Sea. Exploration

block covers a total area of 5,282 square km and a Product Sharing Contract could be signed in Q1 2021.

July: The company reported Q2 2020 consolidated sales declining by 33% y.o.y, due to the low oil and gas prices

environment. Clean CCS operating result of Downstream Oil decreased by 14% y.o.y to RON 292 million, due to

25% drop in retail sales volume, on the back of lockdown measures and 52% lower refining margin of USD

1.85/bbl. In this context, net income attributable to shareholders declined by 74% y.o.y in Q2 2020 and by 56% in

the first half of 2020 compared to the same period of 2019.

September: Following Mr. Peter Zeilinger’s waiver of his mandate, the company announced the appointment of

Mr. Christopher Veit as member of the Executive Board responsible for Upstream of OMV Petrom starting with 1

October 2020 until 16 April 2023. Mr. Veit studied Mechanical Engineering and holds a master’s degree in

Petroleum Engineering from the Mining University at Leoben. He began his career at OMV in 1986.

October: the company reported Q3 2020 consolidated sales declining by 26% y.o.y, due to the low oil and gas

prices environment. Upstream results remained negative but saw a significant improvement q.o.q. Clean CCS

(current cost of supply) operating result of Downstream Oil decreased by 36% y.o.y to RON 373 million, as the

refining margin dropped by 85% y.o.y. to just USD 0.94/bbl, and despite a significant recovery in retail sales,

which were almost flat y.o.y., after the lockdown was lifted during the summer. Power output picked up

significantly to 1.3 TWh, 30% higher y.o.y., and more than double compared to Q2. However, the anticipated

impairments of Upstream assets were booked together with other one-off negative adjustments. In this context, net

income attributable to shareholders turned negative in Q3 2020 and declined by 90% in the first nine months of

2020 compared to the same period of 2019.

February 2021: The company reported 2020 preliminary results. Consolidated sales decreased in Q4 2020 by 37%

y.o.y., negatively impacted by lower sales volumes and prices for petroleum products and natural gas, as well as

without one-off special effects and adjusted by the current cost of supply (CCS)

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

lower sales volumes for electricity, partially offset by higher prices for electricity. The Clean CCS Operating

Result of RON 467 million in Q4 2020 was lower by 58% y.o.y., mainly due to the negative evolution in

Upstream, triggered by lower crude oil and gas prices, and lower refining margins in Downstream Oil, partially

mitigated by better market conditions in the power sector for the Downstream Gas segment.

Full year 2020 net income attributable to shareholders was RON 1,291 million (2019: RON 3,635 million). The

Executive Board proposed a 2020 dividend per share of RON 0.031, the same as last year. This implies a dividend

pay-out ratio of 136%.

COVID-19 considerations

The 2020 budget of the company was prepared based on the following main assumptions:

x Average Brent oil price of USD 60/bbl; Management subsequently changed its guidance to USD 40/bbl and the

actual average price was USD 41.84/bbl.

x Refining margins to be above the level of 2019. Preliminary results point to a 38% y.o.y. decline to USD 2.9/bbl.

x Gas price expected to be below the level of 2019

Management presented the impact of low oil price market environment on company’s operation for 2020, thus:

x A decrease of 1 USD/bbl in Brent price is impacting the company by EUR 20 million;

x A decrease of 1 USD/bbl in refining margin is impacting the company by EUR 25 million;

x A 5 cents appreciation of USD against EUR is impacting the company by EUR 35 million;

x A decrease of 1 EUR/MWh in gas price is impacting the company by EUR 20 million.

Management included several updates in the preliminary FY 2020 report regarding the market environment in the

context of COVID-19 outbreak, as follows:

x Average Brent oil price expected to be at USD 50-55/bbl for 2021 (2020: USD 41.84/bbl), slightly above the

guidance in Q3 2020 report;

x Refining margins expected to be above USD 4/bbl, vs. previous assumption of around USD 3/bbl (2020: USD

2.9/bbl);

x Demand for oil products and power is expected to be above 2020, while demand for gas is expected to be broadly

similar to 2020.

OMV Petrom’s management also announced mid and long-term price assumptions review, as follows: average Brent

oil price expected to be at USD 60/bbl for 2022-2023 (from 2022: USD 70/bbl and 2023 75/bbl, respectively); for

2024-2029, the company expects a Brent oil price of USD 65/bbl (previously USD 75/bbl), and USD 60/bbl until

2035, respectively and USD 60/bbl going forward (from USD 75/bbl).

Consequently, price assumption revision triggered non-cash net impairments of RON 920 million before tax in Q3

2020. A reversal of impairment for Brazi power plant (ca. RON 480 million) due to improved outlook was also

booked.

CN Aeroporturi Bucuresti SA

RON million

2019

2020*

Budget

2019

Budget

2020**

Operating revenue

1,066.6

409.8

1,067.1

466.1

Operating profit

399.0

(128.1)

399.5

(137.4)

Net profit

359.6

(120.3)

318.5

(129.5)

Dividends***

183.5

162.7

Source: Individual IFRS financial statements/ Budgeted figures based on company’s budgets as approved by shareholders

*preliminary results

** restated

***do not include the special dividends declared by the company

January: The company reported that passengers’ traffic for 2019 reached 14.7 million (+6.4 % y.o.y.). The board

of directors appointed Mr. Florin Dimitrescu as General Manager following the resignation of the former General

Manager.

February: Following the resignation of Dan Gheorghe as board member of the company, Fondul Proprietatea

proposed, and subsequently shareholders approved, the appointment of Catalin Niculita as board member.

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

April: The majority shareholder proposed and voted for the appointment of Mr. Adrian Constantin Florescu and

Mr. Mircea Cristian Raicu as temporary board members.

June: The majority shareholder proposed and voted for the appointment of Mr. Corvin Nedelcu, Mr. Cosmin

Catalin Pestesan, Mr. Cosmin Florin Mihaltan and Mr. Gabriel Plaiasu as interim board members.

July: Shareholders approved the appointment of Mr. Catalin Niculita as temporary board member. The majority

shareholder proposed and voted for extending by 2 months the interim mandate of Mr. Mircea Cristian Raicu and

Mr. Adrian Constantin Florescu.

August: The company released H1 2020 financial results: operating revenues of RON 220.9 million (-56.6%

y.o.y.), EBIT of RON -30.8 million and net loss of RON 27.4 million.

October: The majority shareholder proposed and voted for new 4 months Board interim mandates for Mr. Mircea

Cristian Raicu and Mr. Adrian Constantin Florescu, and for extending by 2 months the interim mandate of Mr.

Corvin Nedelcu. The majority shareholder also voted to approve a revised 2020 budget, which envisages net losses

of RON 129.5 million. Operating revenues are seen coming down by 56.3% y.o.y., due to the drop in traffic, while

operating expenses are estimated to contract by just 9.6% y.o.y.

November: Shareholders approved the appointment of Mr. Catalin Diaconu as temporary board member. The

majority shareholder proposed and voted for extending by 2 months the interim mandate of Mr. Cosmin Florin

Mihaltan, Mr. Cosmin Catalin Pestesan and Mr. Gabriel Plaiasu. The company released 9M 2020 financial results:

operating revenues of RON 304.3 million (-61.3% y.o.y.), negative EBIT of RON -57.5 million and net loss of

RON 49.6 million. Passengers traffic was down by 66% y.o.y., to just 3.8 million passengers, and aircraft

movements also halved during the same period.

January 2021: The majority shareholder replaced five interim Board members with Mr. Cosmin Mircea, Mr.

Eduard Zevedei, Mr. Florin Tancu, Mr. Mugur Popescu and Mr. Adrian Preda. Mr. Cosmin Catalin Pestesan

replaced Mr. Florin Dimitrescu as General Manager, while retaining his interim Board mandate. Preliminary 2020

results point to a net loss of RON 120.3 million. Traffic was down by 70% in 2020 to 4.5 million passengers, and

the number of aircraft movements also halved compared to 2019.

COVID-19 considerations

The company has been heavily impacted by the current crisis: the number of passengers and flights have seen a

significant decline since the beginning of the COVID-19 pandemic. ACI Europe, the airport industry trade body,

reveals in a report from November 2020

that passenger traffic decreased by 73% during Q3 2020 and saw a

worsening trend in November with a drop of 83% compared to the same period in 2019.

Engie Romania SA

RON million

2018

2019

Budget

2019

Budget

2020

Turnover

5,791.3

6,794.6

6,664.3

7,611.2

Operating profit

485.7

433.7

360.9

271.4

Net profit

428.7

385.2

313.2

241.8

Dividends*

136.8

100.7

Source: Consolidated IFRS financial statements/ Budgeted figures based on company’s budgets as approved by shareholders, on a consolidated basis

*Dividends are based on the separate financial statements

December: Engie announced the acquisition of a photovoltaic park with a total installed capacity of 9.3 MW

located in Harghita County, previously owned by Ever Solar, a subsidiary of the German group Soventix and

Alpine Solar.

E-Distributie Banat SA

RON million

2018

2019

Budget

2019

Budget

2020

Operating revenue

533.7

550.8

516.7

565.1

Operating profit (EBIT)

(213.2)

149.2

(31.2)

(1.7)

Net profit

(211.9)

167.7

(16.5)

(5.9)

Dividends

Source: Financial statements in accordance with applicable Romanian accounting regulations/ Budgeted figures based on company’s budgets as approved by shareholders

https://www.aci-europe.org/44-industry-data/40-airport-traffic.html

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

February: the shareholders of the company approved a distribution of special dividends in total amount of RON

886.2 million from retained earnings.

October: Enel S.p.A. published the 9M 2020 financial results for the global group

. For Romania it reported an

EBITDA of EUR 100 million for the infrastructure and networks’ segment (distribution), 15% higher compared to

the same period of 2019. For the retail segment (supply), in the first 9M of 2020 EBITDA stood at EUR 62 million

vs. EUR 4 million at 30 September 2019.

December: ANRE published the regulated tariffs applicable starting with 1 January 2021. On average, the tariffs

were increased by 1.63% (for more details on tariffs please see section Energy Sector Updates).

CN Administratia Porturilor Maritime SA

RON million

2019

2020*

Budget

2019

Budget

2020

Operating revenue

369.0

385.6

352.3

380.0

Operating profit

117.0

160.9

75.5

96.3

Net profit

108.2

146.4

64.7

95.7

Dividends

27.5

17.2

25.1

Source: Financial statements in accordance with applicable Romanian accounting regulations/ Budgeted figures based on company’s budgets as approved by shareholders

*preliminary results

May: According to the audited financial statements, in 2019 the company reported operating revenues of RON

369.0 million, up 6.8% y.o.y, operating profit of RON 117.0 million, up 22.1% y.o.y and a net profit of RON

108.2 million, up 42.9% y.o.y. The company’s reported EBITDA reached RON 163.5 million, up 23% y.o.y. At

the end of December 2019, the company had a cash position of RON 555.5 million. According to the company, the

total volume of goods operated reached 66.6 million tones, up 8.64% y.o.y, driven by a 18.7% y.o.y. increase in

the volume of cereals, to 21.3 million tones.

August: The company released H1 2020 financial results reporting operating revenues of RON 208.5 million (up

17.8% y.o.y.), operating profit of RON 97.4 million, up 29.0% y.o.y and net profit of RON 90.5 million, up 24.6%

y.o.y. Rent revenues were main positive driver for the top line. However, volumes of goods operated through

Constanta port were down 3.4% y.o.y. to 29.7 million tons, mainly due to decline in the volume of crude oil,

petroleum products and ferrous and non-ferrous minerals, while cereals volume advanced by 38% y.o.y. to 11.3

million tons. Steep decline in third party costs drove 25% y.o.y. surge in profitability.

December: Former deputy CEO, Mr Florin Goidea, was appointed as CEO as a result of a selection process. His

mandate would end in H1 2022.

February 2021: According to the preliminary 2020 results, sales were down y.o.y. by around 1.4% to RON 345.2

million, although traffic declined by 9.3% y.o.y. to 60.4 million tones, the reduction in traffic being driven mainly

by crude oil and petroleum products, which registered a decline of 18.5% y.o.y to 11.7 million tones. Preliminary

net profit for the year stands at RON 146.4 million, up 35.3% y.o.y. The boost in profitability was supported

by significantly lower provisions, but we stress out that the final level of provisions will be established only by the

audited financial statements.

COVID-19 considerations

In the context of COVID-19 pandemic, the company has implemented a number of measures aimed at protecting

the company personnel, ensuring the safety and continuity of operations and safeguarding the financial position of

the company.

E-Distributie Muntenia SA

RON million

2018

2019

Budget

2019

Budget

2020

Operating revenue

909.6

993.8

866.4

989.3

Operating profit (EBIT)

(137.8)

60.3

30.5

90.8

Net profit

(114.9)

96.7

35.2

106.9

Dividends

Source: Financial statements in accordance with applicable Romanian accounting regulations/ Budgeted figures based on company’s budgets as approved by shareholders

Based on consolidated figures at Enel Group level, prepared according to IFRS

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

February: the shareholders of the company approved a distribution of special dividends in total amount of RON

1,566.3 million from retained earnings.

October: Enel S.p.A. published the 9M 2020 financial results for the global group

. For Romania it reported an

EBITDA of EUR 100 million for the infrastructure and networks’ segment (distribution), 15% higher compared to

the same period of 2019. For the retail segment (supply), in the first 9M of 2020 EBITDA stood at EUR 62 million

vs. EUR 4 million at 30 September 2019.

December: ANRE published the regulated tariffs applicable starting with 1 January 2021. On average, the tariffs

were increased by 1% (for more details on tariffs please see section Energy Sector Updates).

Societatea Nationala a Sarii SA (Salrom)

RON million

2018*

2019

H1 2019

H1 2020

Budget

2019

Budget

2020

Revised

Budget

2020

Operating revenue

436.9

469.2

209.0

127.7

411.9

396.2

322.8

Operating profit

93.5

84.6

57.7

3.1

63.7

69.3

25.9

Net profit

76.4

77.0

48.8

4.1

62.2

59.8

23.7

Dividends

76.4

40.4

62.2

59.8

23.7

Source: IFRS financial statements/ Budgeted figures based on company’s budgets as approved by shareholders

*restated

January: The majority shareholder proposed and voted for Mr Ionica Simbanu as temporary board member.

March: Following the resignation of Mr Dan Gheorghe as board member of the company, Fondul Proprietatea

proposed, and subsequently shareholders approved, the appointment of Mr Catalin Niculita as board member. The

majority shareholder proposed and voted for Mr Nicolae Tulici and Mr Lucian Petrica Rusu as temporary board

members.

May: The majority shareholder proposed and voted for Mr Nicolae Tulici and Mr Catalin Paraschiv as temporary

board members.

July: Fondul Proprietatea proposed and appointed through cumulative voting Ms Simona Fatu and Mr Catalin

Niculita as board members. The majority shareholder proposed and voted for Mr Nicolae Tulici, Mr. Catalin

Paraschiv and Mr. Lucian Rusu Petrica and as temporary board members.

The company released H1 2020 financial results: operating revenues of RON 127.7 million (-38.9% y.o.y.),

EBITDA of RON 14.0 million (-80% y.o.y.), EBIT of RON 3.1 million (-94.6% y.o.y.) and net profit of RON 4.1

million (-91.6% y.o.y.).

October: the Fund proposed and voted for extending by 2 months the interim mandate of Ms. Simona Fatu and Mr.

Catalin Niculita. The majority shareholder proposed and voted for extending by 2 months the interim mandate of

Mr. Nicolae Tulici, Mr. Catalin Paraschiv and Mr. Lucian Rusu Petrica.

The company revised the 2020 Budget adjusting operating revenues downwards by 18.5% compared to initial

2020 Budget (-31.2% vs. 2019 actual results) and net profit by 60.4% vs initial 2020 Budget (-69.2% vs. 2019

actual results).

December: Fondul Proprietatea proposed and appointed through cumulative voting Ms Simona Fatu and Ms

Simona Ochian as board members. The majority shareholder proposed and voted for Mr Nicolae Tulici, Mr

Catalin Paraschiv and Mr Lucian Rusu Petrica and as temporary board members. The mandates started on 8

January 2021 for a period of 4 months.

E-Distributie Dobrogea SA

RON million

2018

2019

Budget

2019

Budget

2020

Operating revenue

483.7

506.4

459.0

528.6

Operating profit (EBIT)

(143.2)

81.8

(47.4)

18.0

Net profit

(143.3)

87.6

(32.6)

4.0

Dividends

Source: Financial statements in accordance with applicable Romanian accounting regulations/ Budgeted figures based on company’s budgets as approved by shareholders

Based on consolidated figures at Enel Group level, prepared according to IFRS

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

February: the shareholders of the company approved a distribution of special dividends in total amount of RON

502.8 million from retained earnings.

October: Enel S.p.A. published the 9M 2020 financial results for the global group

. For Romania it reported an

EBITDA of EUR 100 million for the infrastructure and networks’ segment (distribution), 15% higher compared to

the same period of 2019. For the retail segment (supply), in the first 9M of 2020 EBITDA stood at EUR 62 million

vs. EUR 4 million at 30 September 2019.

December: ANRE published the regulated tariffs applicable starting with 1 January 2021. On average, the tariffs

were increased by 2.93% (for more details on tariffs please see section Energy Sector Updates).

Alro SA

RON million

2018

2019

9M 2019

9M 2020

Budget

2019*

Budget

2020*

Operating revenue

2,982.5

2,777.8

2,162.4

1,942.0

2,870.8

2,432.5

Operating profit

361.8

99.2

126.0

355.1

122.7

139.2

Net profit/loss

235.3

(67.2)

(22.7)

273.4

53.0

60.2

Dividends

326.6

Source: Consolidated IFRS financial statements/ Budgeted figures based on company’s budgets as approved by shareholders

*Computed using the NBR USD/RON FX rate as at 31 December 2019 for 2019 values/ as at 31 December 2020 for 2020 values

November: Alro reported 9M 2020 financial results, as follows: operating revenue was down by 10.2% y.o.y. at RON

1,942.0 million during 9M 2020, due to the slowdown in demand experienced during this period, which was further

reflected in the overall output levels. LME aluminium prices declined by 9.5% y.o.y. at USD 1,633 per tonne during

January-September 2020. EBIT almost tripled, reaching RON 355.1 million for 9M 2020 vs. RON 126.0 million

during 9M 2019. Alro Group reported a net profit of RON 273.4 million during 9M 2020 vs. a net loss of RON 22.7

million in 9M 2019, mainly due the one-off recognised as state aid scheme, amounting to RON 557.9 million, out of

which RON 249.9 million was paid in September 2020.

COVID-19 considerations

Alro SA succeeded in maintaining production units fully operational and in order to prevent COVID-19 spreading

the company implemented protocols and operational, administrative and health procedures in its locations

designed to protect the health of its employees and ensure a chain of continuous supply for its customers.

Bankruptcies, insolvencies and reorganisations

The following companies from the Fund’s portfolio are under bankruptcy, insolvency or reorganisation procedures:

x Gerovital Cosmetics SA (sole registration code 334493) is a company under bankruptcy procedure starting

with 6 January 2010, according to the decision issued by the Bucharest Court related to the file 22491/3/2007;

x Romplumb SA (sole registration code 2206334) is a company under bankruptcy procedure starting with 15

September 2017, according to the decision issued by the Maramures Court related to the file 729/100/2012;

x Simtex SA (sole registration code 324490) is a company under judicial reorganisation procedure starting with

10 December 2008, according to the decision issued by the Bucharest Court related to the file 5768/3/2008;

x Salubriserv SA (sole registration code 7774360) is a company in judicial reorganisation procedure according

to the decision issued by the Mures Court related to the file 108/1371/2015 on 22 December 2016;

x World Trade Center Bucharest SA (sole registration code 364354) is a company under insolvency procedure

starting with 8 June 2010, according to the decision issued by the Bucharest Court related to the file

45619/3/2011.

The holdings in these companies are reflected at zero in the NAV reporting.

Forsev SA (sole registration code 1605710) is a company under bankruptcy starting with 18 December 2019,

according to the decision issued by the Mehedinti Court related to the file 7883/101/2015. 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 according to the provisions of the legislation in force, following the delisting of the company after

RASDAQ market was closed, for which an impairment adjustment was recorded.

Based on consolidated figures at Enel Group level, prepared according to IFRS

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

Key Financial Highlights

Evolution of liquid assets

RON million

31 Dec 2020

30 Sep 2020

30 Jun 2020

31 Mar 2020

31 Dec 2019

Current accounts*

34.4

36.0

431.3

25.9

31.9

Bank deposits

660.0

955.8

139.5

641.6

338.4

Treasury bills and government bonds

380.3

168.6

152.0

137.3

Dividend receivables

10.6

436.1

24.2

Total liabilities**

(54.6)

(153.7)

(466.5)

(55.8)

(49.0)

Liquid assets less liabilities

1,020.1

1,017.3

692.4

635.9

458.6

Net Assets Value

10,266.9

9,909.2

10,141.4

9,585.8

11,871.4

% Liquid assets less liabilities in NAV

9.9%

10.3%

6.8%

6.6%

3.9%

*Current accounts include also the cash blocked for distributions to shareholders

**Total liabilities less provisions

The table above shows the change in the net liquid assets of the Fund as a percentage of the NAV.

The current accounts and total liabilities positions as at 30 June 2020 are significant as a result of the annual

dividend distribution approved by shareholders during the 28 April 2020 GSM, with payment date 1 July 2020. The

large amount of liquid assets at 30 September 2020 is mainly related to the collection of dividends from portfolio

companies and to the accelerated bookbuild offering of OMV Petrom SA shares carried by the Fund in September

2020.

As at 31 December 2020, the bank deposits,

treasury bills and government bonds captions are significant mainly

due to the cash inflows from the disposal of the entire holding in Nuclearelectrica SA, partially offset by the third

buyback tender offer finalised by the Fund in December 2020.

For more details regarding the liquid asset evolution during 2020 please see section Financial Statements Analysis.

Cost Ratios of the Fund

The Ongoing Charge Ratio of the Fund represents the annual percentage impact in shareholder returns of the

recurring operational expenses and is calculated as the total ongoing charges for the year divided by the average

monthly net asset value of the Fund during the year.

For the purpose of this calculation, expenses do not include foreign exchange losses, value of equity investments

disposed of, impairment adjustments, fair value adjustments, expenses with provisions and income tax expenses.

The Fund elected to use this alternative performance measure due to the fact that applying an industry standard

approach to the calculation of ongoing charges creates consistent and comparable data across the sector. Although

the OCR figure is based on historical information, it provides shareholders with an indication of the likely level of

costs that will be incurred in managing the Fund in the future.

The OCR of the Fund as at 31 December 2020 was 0.88% and including transaction related expenses this was

0.94% (2019: 0.75% and including transaction related expenses this was 0.76%). The Total Expense Ratio of the

Fund recorded the same value as OCR for both 31 December 2020 and 31 December 2019.

The higher OCR level was mainly due to the higher level of management and administration fees in 2020 compared

to 2019 (RON 65.9 million in 2020 vs. RON 54.7 million in 2019) and due to the decrease with 2.8% in average

NAV in 2020 compared to 2019.

Performance fees

According to the Management Agreement in force the Base fee payable by the Fund to the AIFM is calculated as

Base Fee Rate multiplied by the notional amount, multiplied by the number of calendar days during the calculation

period, divided by 365. The standard Base Fee Rate is 60 basis points per year. In certain conditions detailed below

an additional Base Fee, representing a Performance fee, becomes payable.

x For each day in a calculation period when the share price discount

to NAV is below or equal to 20%, but above

15%, an additional Base Fee Rate of 5 basis points per year becomes payable (i.e. the Base Fee Rate becomes 65

basis points per year for the applicable days in the relevant period);

The daily discount is calculated in accordance with the IPS, i.e. the discount between the FP shares closing price on the BVB – REGS for each trading day and the latest

reported NAV per share at the date of calculation.

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

x For each day in a calculation period when the share price discount

to NAV is equal to or below 15%, a further

additional Base Fee Rate of 5 basis points per year becomes payable (i.e. the Base Fee Rate becomes 70 basis

points per year for the applicable days in the relevant period).

The Performance fees recorded by the Fund in 2020 as a result of the Fund’s share price discount to NAV lowering

below 20%/ 15% in certain trading days amounted to RON 1.96 million (2019: nil).

Income from operating activity

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 of the Fund are

recognised in profit or loss.

The income from operating activity is significantly influenced by the changes in the share price of listed portfolio

companies, the performance of the portfolio companies and their decisions on dividend distributions, as well as by

money market performance. As at 31 December 2020 the Fund’s exposure to Romanian equities accounted for

90.1% of the NAV, the difference of 9.9% being represented by the net cash and receivables.

The BET-XT index, which reflects the performance of the top 25 most traded companies listed on BVB’s

Regulated Market, including the financial investment companies (SIFs), decreased by 4.7% during 2020 compared

to the end of 2019.

BET-BK index is a free float market capitalisation weighted index of the Romanian and foreign stocks listed on

BVB’s regulated market with the highest free-float market capitalisation adjusted with liquidity factors. BET-BK

was designed to be used as a benchmark by asset managers and other institutional investors. The calculation

methodology reflects on legal requirements and investment limits applying to investment funds. BET-BK

decreased by 1.3% during 2020 compared to the end of 2019.

BET-XT index evolution

Source: Bloomberg

BET-BK index evolution

Source: Bloomberg

Further information on the Fund’s financial results can be found in the Financial Statements Analysis section.

630

705

780

855

930

1/19 2/19 4/19 6/19 7/19 9/19 10/19 12/19 2/20 3/20 5/20 7/20 8/20 10/20 12/20

1,330

1,480

1,630

1,780

1,930

2,080

1/19 2/19 4/19 6/19 7/19 9/19 10/19 12/19 2/20 3/20 5/20 7/20 8/20 10/20 12/20

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

Risk Management

Overview of Main Risks

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 financial risks the Fund is exposed to are market risk,

valuation risk and credit risk. The management monitors the potential adverse effects on the financial performance

of the Fund associated with these risk factors. In addition, non-financial risks such as operational risks, legal,

regulatory risks and cyber risks are monitored and mitigated where possible. Starting 29 September 2010, the Fund

Management implemented financial risk management procedures consistent with those applied globally by

Franklin Templeton.

Description of risk

Mitigating action

Risks related to

COVID-19 pandemic

The widespread nature of the COVID

19 outbreak and

the measures taken to contain the spread have a

significant impact on global economic and local

Romanian activity and are likely to reverberate for

several quarters.

The evolution of the

pandemic and the accompanying

governmental actions will have a continuing impact

on the Fund’s companies and their financial situation

and will impact the overall performance of the Fund,

possibly leading to increased price volatility.

Since most holdings of the Fund are not listed and do

not have observable market prices, the risk of

estimation uncertainty regarding valuation also

increased.

There are also amplified risks with respect to the

Fund’s operations including increased risks connected

to cyber

security, as well as increased uncertainty with

respect to legal and regulatory implications driven by

governmental actions to contain the virus or limit

economic impact for the wider population.

The risks associated with the pandemic affect all areas

the Fund’s investments as well as operations.

Fund Management and Board of Nominees are

reviewing and discussing the situation regularly,

including a review of the portfolio, risk management

and business continuity. The AIFM regularly reports

on the statu

s of operations.

The Fund ensures ongoing communication with

investors including current reports, investor calls, and

updates on the website.

Company valuations are thoroughly tested with

respect to relevance and impact from the pandemic.

Mitigation strat

egies apply as detailed within the

specific areas of risk.

Market risk

Changes in market prices and rates, such as security

prices, changes in interest rates or foreign exchange

rates will affect the Fund’s income or the value of its

holdings.

The

Fund implements market risk management

techniques to manage and control market risk

exposures, keeping them within acceptable levels,

while optimising return. The AIFM has an ongoing

risk management framework in compliance with

requirements of the AIFM Dir

ective.

Security price risk and valuation risk

Fluctuations in the value of a security instrument 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, can negatively affect

the Fund’s income or value of its holdings.

Securities without a readily available market price,

such as the Fund’s unlisted holdings, are exposed to

uncertainties coming from the valuation of the

securities prices, from factors such as the choice of

Diversification across securities and industries is the

primary technique for mitigating equity price risk. All

potential investments undergo a thorough due

diligence process. Portfolio management reviews the

risk/ return profiles of portfolio assets on a regular

basis. A detailed pricing policy ensures adequate

valuation of the unlisted holdings. Independent

valuations are reviewed by Franklin Templeton’s Fair

Valua

tion Committee.

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

Description of risk

Mitigating action

valuation model, parameter uncertainty and timeliness

of parameter estimates.

Sector concentration risk

Large portfolio exposure to a specific industry sector

or group of companies expose the Fund to

concentration risk and can cause overall Fund

performance to be negatively affected by the

performance of a specific

sector.

Diversification and concentration limits are set and

monitored periodically. The companies in which the

Fund holds equity instruments operate in different

industries, however the Fund has concentrated

exposures to the Energy sector (“Oil and gas” and

“Power utilities”). Regular review is performed

assessing sector by sector risk and return contribution.

Corporate governance risk

Poorly managed companies in the Fund’s portfolio

can negatively affect the Fund’s performance due to

missing professional skills and missing experience in

the industry the company operates in.

The portfolio management team is actively involved

with portfolio companies, promoting and enhancing

high standards of good corporate governance.

Share price discount to NAV risk

Shares of the Fund are traded on the Bucharest and

London stock exchanges. Market participants

expectations may cause the shares of the Fund to trade

at a premium or discount to the NAV per share of the

Fund. Investor returns may be positively or negatively

affected by such market factors.

The Fund has implemented several measures to reduce

the discount to NAV, including an attractive dividend

yield, ongoing buy

-back programs as well as

transparency, disclosure, and proactive investor

relation efforts. A discount objective and related DCM

are part of the IPS.

Credit and Counterparty risk

There is a risk of financial loss to the Fund if

counterparties to financial instruments fail to meet

their contractual obligations; it arises principally from

cash and depos

its with banks, treasury bills,

government bonds and other receivables.

Cash and short

term money market instruments are

diversified across counterparties. An internal Credit

Counterparty Committee oversees the selection and

approval of authorised counterparties. The committee

meets periodically and reviews current exposure,

credit limits and ratings for counterparties. The

committee has the power to assign a counterparty to a

“watch list” or “restricted list” thereby limiting or

preventing further trades w

ith it.

Liquidity risk

The Fund might not be able to meet its financial

obligations as they fall due.

The Fund’s equity investments include unlisted

instruments issued by companies domiciled in

Romania, which are not traded on a regulated market

and generally may be considered illiquid. As a result,

the Fund may not be able to sell certain investments

within the time constraints imposed by its own

liquidity requirements, or to respond to specific events

such as deterioration in the creditworthiness of

particular issuer.

As a closed end investment fund, liquidity risk of the

Fund is less significant than for an open

end fund, as

shareholders do not have the option to redeem their

holdings. The Fund’s approach to managing liquidity

is to ensure that it

has sufficient liquid assets 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 Fund’s assets are periodically

monitored for their liquidity levels under both normal

and stressed market conditions.

Operational and Cyber risk

The Fund might incur 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 such as those

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. The

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

Description of risk

Mitigating action

arising from legal and regulatory requirements and

generally accepted standards of corporate behaviour.

Failure or breach of information technology systems

and security may entail risk of financial loss,

disruption to operations or damage to the reputation of

the Fund. Operational risks arise from all the Fund’s

operations.

Fund has in place an operational monitoring system,

documented through policies and procedures, which

ensures escalation and r

emediation of potential

operational issues. The information technology

framework is designed to mitigate the risk of a cyber

security breach.

dedicated Cyber Security Program

aims to monitor, identify and respond to cyber

attacks

and external threats. Th

e operational monitoring

system covers all teams involved with the operations

of the Fund.

Legal and Regulatory risk

The existence, operation and the initial set

up of the

Fund are regulated by local and European regulations.

Such regulations may be subject to change or subject

of some local interpretations and may directly affect

the Fund and its shareholders.

This risk is sustained by the legislative history of the

past years that reveals a series of laws which have also

changed the Fund’s portfolio composition.

Representatives of the Fund consult with external

agencies and law firms with the aim to anticipate

potential regulatory changes and interpretations and

assess their impact on the Fund. In doing so the Fund

strives to optimise its operational efficiency under

current and upcoming regulations.

Franklin Templeton has internal policies promoting

compliance with be

st practices and regulations.

Source: Fondul Proprietatea

Internal Control and Risk Management

Franklin Templeton has implemented internal policies and procedures for the Fund to ensure that timely and

accurate disclosure is made on all material compliance matters, including the investment restriction breaches,

NAV, errors, financial position, performance, ownership and governance. 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.

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

exposures in the portfolios.

Franklin Templeton has established Compliance departments responsible for managing the compliance risk of the

AIFM and of the Fund, considering the applicable legislation as well as the internal policies and procedures. The

Compliance Officer in charge of Fondul Proprietatea is part of Regulatory Compliance team, is member of Franklin

Templeton International Compliance Team and reports directly to the Luxembourg Compliance Director. 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 and FTIS are covered by relevant policies, procedures and global good standing practices implemented

within the Franklin Templeton group as required by regulatory requirements.

FTIS has implemented a specific Risk Management Policy applicable to the Fund. The purpose of this policy is to

outline the main business processes in place and to establish an effective risk framework which observes regulatory

requirements, and thereby enhances the governance structure throughout the business.

Franklin Templeton oversees the key risks based on the multi-annual Regulatory Compliance Monitoring Plan. The

risk assessment is a critical element of the compliance oversight and monitoring program. The high-risk areas are

reviewed at least annually to reflect the results of the final risk assessment for each year.

In respect of the portfolio monitoring activity, Franklin Templeton 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 accounts, including Fondul Proprietatea, against the agreed investment

guidelines and constraints.

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

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, Regulatory Compliance and

operating departments. Corrective action is taken as necessary to address and resolve any issues. Trading errors are

monitored by the Investment Compliance department of Franklin Templeton. Regulatory Compliance produces

monthly reports providing details on material compliance matters and initiatives, updates on monitoring activities

and current client 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

The Board of FTIS provide oversight, being aware of the risk management practices and their deployment within

the firm, staying apprised of significant risks and management responses.

Risk Management Systems

The AIFM 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 considering 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. Diversification and concentration limits are set for the management of market risk and are monitored

daily.

An important part of the Fund’s assets consists 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, valuation risk

and credit risk. Further details in relation to the nature and extent of these risks are presented above in Overview of

Main Risks section and in the IFRS financial statements of the Fund, Annex 1 to this report.

Amongst other measures considered regularly, 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 portfolio using observable prices

for listed securities and proxies for the unlisted holdings. Relative VaR is simply the absolute VaR of the portfolio

divided by the absolute VaR of the benchmark. The benchmark used is the one that is most representative of the

Fund’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

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

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 local and global markets,

commodities, as well as historical scenarios.

The Fund’s equity trading activity is conducted on a Delivery versus Payment basis 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 the reporting provided by FT Counterparty Credit Committee.

No risk limits set by the AIFM have been exceeded or were likely to be exceeded during 2020.

Liquidity Risk

As at 31 December 2020, the Fund held 73.8% of the NAV in unlisted securities. There were no assets subject to

special arrangements arising from their illiquid nature.

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.

The Fund’s shares 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 the Fund's portfolio is

sufficiently liquid to meet the following main obligations:

x the Fund's operating and financing expenses: in practice, these expenses are typically covered by dividends

received from the Fund's holdings; and

x the potential need to repay borrowings at short notice, which might require to be met by the sale of liquid assets.

If required, the Fund has access to a borrowing facility from BRD – Groupe Societe Generale SA until 29 June

2022 for a maximum amount of RON 45 million, which is an additional mitigation factor for liquidity risk.

Leverage under AIFM Directive Considerations

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 utilise its short-term borrowing facility for investment purposes nor is using derivatives to hedge

any risks as of 31 December 2020. The use of derivative financial instruments is permitted.

The maximum incremental level of leverage which the AIFM is entitled to employ on behalf of the Fund for

AIFM Directive 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.

There was no change to the level of leverage applied for AIFM Directive monitoring and reporting purposes

since 1 January 2020.

Therefore, the actual level of leverage recorded under the requirements of AIFM Directive for 31 December

2020 is 1.00 (or 100.00%) using the “commitment” method and 0.9134 (or 91.34%) under the “gross” method.

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

Corporate Governance

Overview

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.

Compliance with the provisions of the Corporate Governance Code issued by BVB and other corporate

governance principles

The Fund lends great importance to the principles of good corporate governance and coinciding with its listing at

the beginning of 2011, has adhered to the BVB Code of Corporate Governance.

Following the self-assessment conducted, the AIFM informs the shareholders and investors that the Fund is fully

compliant with the provisions of the current Corporate Governance Code of BVB.

The Fund is subject to the regulatory framework for the application of the principles of corporate governance at the

entities authorised, regulated and supervised by the FSA, as approved by FSA Regulation 2/2016.

For more details please see Annex 5 Compliance with the corporate governance requirements.

Management Structure of the Fund

Corporate bodies

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 Romanian legislation in force, in order to allow the appointment of the

Fund Manager as Sole Director of the Fund. 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.

The powers and duties of the above-mentioned bodies are described in a number of official documents, available on

the Fund’s website at https://www.fondulproprietatea.ro/about-fund/fund-overview/corporate-governance:

x The Constitutive Act of the Fund, together with all shareholders resolutions that modified the Constitutive Act;

x The Management Agreement, signed between the Fund and FTIS in 2019;

x The IPS; and

x Other internal regulations.

Commitment to follow the principles of corporate governance

In accordance with best corporate governance practices, the Fund is managed in a climate of transparency, based on

open discussions between FTIS and the Board of Nominees.

FTIS, its employees and the members of the Board of Nominees have a duty of care and loyalty towards the Fund.

Hence, FTIS 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 corporate governance principles and has in place:

x The Code of Ethics;

x The Annual Cash Distribution Policy;

x The Nomination and Remuneration Policy;

x The Forecast Policy; and

x The Policy regarding Related Parties Transactions.

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

General Shareholders Meeting

Overview

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. 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

OGM, convened to resolve upon them.

General Shareholders Meeting organisation

The GSM is usually chaired by one of the permanent 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

presence, 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.

General Shareholders Meeting main duties

The main duties of the OGM are the following:

a) to discuss, approve and amend the annual financial statements after reviewing the reports of the AIFM and

financial auditor;

b) to establish the distribution of the net profit and to establish the dividends;

c) to appoint the members of the Board of Nominees and to cancel their appointment;

d) to appoint the AIFM in accordance with the law and to cancel its appointment;

e) to appoint and cancel the appointment of the financial auditor and to set the minimum duration of the

financial audit agreement;

f) to set the remuneration level of the members of the Board of Nominees, the AIFM and of the financial

auditor for financial audit services for the ongoing financial year;

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 the Fund;

i) to approve the strategy and the development policies of the Fund;

j) to approve the annual budget for the following financial year;

k) to decide upon the pledge, lease or creation of movable securities or mortgages on the assets of Fondul

Proprietatea;

l) to approve significant related parties’ transactions, if their value is greater than 5% of the net asset value, at

the proposal of the AIFM;

m) to decide on any other aspects regarding Fondul Proprietatea, according to the legal duties.

The EGM is entitled to decide mainly upon:

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

a) set-up or closing of some secondary units: branches, agencies, representative offices or other such units

with no legal personality;

b) share capital increase;

c) share capital decrease or re-completion thereof by issuing new shares;

d) conversion of shares from one category to another;

e) conversion of a category of bonds to another category or to shares;

f) issue new bonds;

g) approval of the admission for trading and selection of the regulated market on which Fondul Proprietatea

shares will be traded;

h) the execution of contracts for acquiring, selling, exchanging or for creating pledges, having as subject non-

current assets of the Fund, whose value exceeds, individually or cumulatively during a financial year, 20%

of the total value of the non-current assets of the Fund, less receivables;

i) change of the management system of Fondul Proprietatea;

j) limitation or cancellation of the preference right of the shareholders;

k) approval of the IPS;

l) any other amendment of the Constitutive Act or any other resolution requiring the approval of the EGM.

During 2020, there were 4 GSMs, and 5 EGM resolutions and 8 OGM resolutions were issued. EGM and OGM

resolutions are published on the Fund’s webpage.

The Fund’s shareholders rights

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 as at 31 December 2020 (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 sets 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 Law 24/2017, the payment of

dividends shall be carried out no later than 6 months from the date of the GSM approving the dividend distribution.

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.

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

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 (Investor Relations - GSM

Documentation) 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 AIFM has established a dedicated experienced investor relations team, responsible for handling relationship

with both private and institutional investors, locally and abroad.

In conclusion, the Fund currently 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 made 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 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 for the agenda of the GSM.

The shareholders may attend the GSMs in person or may be represented 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 shareholders’ interest.

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 shareholder resolution may be filed at any time.

Fees, charges and expenses which are directly or indirectly borne by investors

Please see section “Key Financial Highlights” for more details regarding the ongoing charge ratio of the Fund and

section “Financial Statements Analysis” for 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.

Increase of the share capital of the Fund

The share capital of the Fund can be increased with EGM approval, in accordance with the provisions of Romanian

law:

x by issuing new shares in exchange for cash contributions, based on the offering documentation approved

according to legislation in force;

x by incorporation of reserves, except for legal reserves and of the reserves created out of the revaluation of the

patrimony, as well as of the benefits and issuing premiums.

The share capital increase shall be registered at the Trade Register Office, on the basis of the resolution of the

Fund’s GSM.

The share capital cannot be increased by issuing new shares if there are outstanding unpaid shares in the share

capital of the Fund.

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

Board of Nominees and the Consultative Committees

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 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.

Beginning with 2016, the Fund implemented the Board members annual evaluation – for more details please see

section Nomination and Remuneration Committee below.

The members of the Board of Nominees may be shareholders of the Fund.

Composition of Board of Nominees and activities during 2020

The structure of the Board of Nominees as at 31 December 2020 was the following:

Name

Position

First

appointment

date

Current

mandate

until

Length of

service

Board of

Nominees

meetings

attendance

Audit and

Valuation

Committee

meetings

attendance

Nomination and

Remuneration

Committee

meetings

attendance

Mr Piotr

Rymaszewski

Chairman of the Board

and Chairman of

Nomination and

Remuneration Committee

5 Apr

2012

5 Apr 2021

8 years and 8

months

17/17

5/5

Mr Mark

Gitenstein

Member

of the Board

23 Apr 2013

Sep 2022

7 years and 8

months

13/17

3/5

5/5

Julian

Healy

Chairman of Audit and

Valuation Committee and

Member of the Board

21 Mar 2012

5 Apr 2021

8 years and 9

months

17/17

5/5

Mr Ciprian

Ladunca

Member

of the Board

16 Nov 2020

16 Nov 2023

month

2/2

1/1

0/0

Mrs Ilinca von

Derenthall

Member

of the Board

26 Nov

2020

26 Nov 2023

1 month

1/1

0/0

Source: Fondul Proprietatea

Two members of the Board of Nominees will have served for nine years as members of the Board during 2021 and

as a result, a plan for succession is under way, a shareholders meeting being planned to take place on 24 March

2021.

On 27 July 2020, Mrs. Vivian Nicoli has resigned from her positions held within the Fund’s Board of Nominees

and Consultative Committees, with effective date 1 September 2020. On 23 September 2020, as an implementation

of the succession planning, Mr. Steven van Groningen has resigned from his positions held within the Fund’s

Board of Nominees and Consultative Committees with effective date 13 November 2020.

During the 13 November 2020 GSM, two new members of the Board were appointed for a mandate of 3 years -

Mrs. Ilinca von Derenthall (mandate started on 26 November 2020) and Mr. Ciprian Ladunca (mandate started on

16 November 2020).

During 2020 there were:

x 17 formal meetings of the Board of Nominees;

x 6 meetings of the Audit and Valuation Committee;

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

x 5 meetings of Nomination and Remuneration Committee.

There were also informal conference calls and meetings during the year for discussing current subjects regarding

the Fund’s activity.

Mr. Piotr Rymaszewski is the Chairman of the Board and he has an extensive experience in finance, turnaround,

real estate and law. He is a CEO of Onyx Asset Management (formerly Octava Asset Management Sp. z o.o.) and

Octava SA, a company listed on the Warsaw Stock Exchange. Starting with 2017 he is an independent non-

executive Director in Digi Communications N.V., company listed on BVB.

As at 31 December 2020 Mr Rymaszewski held no shares issued by the Fund. Mr. Rymaszewski is an independent

member.

Mr. Mark Gitenstein is a senior counsel in the Government and 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 then 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 and is founder of a Romanian diaspora organisation in the United States, Alianta, which

seeks to improve Romania’s image in the US and strengthen the Romanian-American alliance.

As at 31 December 2020, Mr Gitenstein held 400 GDRs having as support shares issued by the Fund. Mr

Gitenstein is an independent member.

Mr. Julian Healy has long and extensive experience in 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.

As at 31 December 2020, Mr Healy held no shares issued by the Fund. Mr. Healy is an independent member.

Mr. Ciprian Ladunca has long and extensive experience in financial institutions and various industries, being an

advocate for good corporate governance and corporate finance best practices. He is a certified accountant under

Romanian legislation. Mr Ladunca also acts as a trusted advisor and non-executive director in a number of other

companies.

As at 31 December 2020, Mr Ladunca held 20,000 shares issued by the Fund. Mr. Ladunca is an independent

member.

Mrs. Ilinca von Derenthall is an experienced finance professional with an international executive career in

financial audit, investment banking and wealth management. Mrs. von Derenthall was active in Germany and

Romania and currently works out of Vienna, Austria. Her knowledge of doing business and knotting strong

personal ties comprises Central and South-Eastern Europe. Mrs. Derenthall also acts as a non-executive director

and supervisor of the board of directors in a number of other companies.

As at 31 December 2020, Mrs. Derenthall held no shares issued by the Fund. Mrs. Derenthall is an independent

member.

Duties of Board of Nominees

The main duties of the Board of Nominees include:

1) Requesting, if necessary, the insertion of supplementary matters in the text of the GSM calling notice,

following the information received from the AIFM with regard to the summoning of the OGM or EGM;

2) Receiving from the AIFM the answers to the written requests submitted by shareholders before the GSM date,

on topics regarding Fund activity;

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

3) Receiving from the AIFM the annual financial statements, the annual activity report presented by the AIFM

and the financial auditors’ report, before being made available to shareholders and analysing them, in order to

formulate an opinion to be presented to both the AIFM and to the GSM;

4) Receiving from the AIFM for analysis the annual report and the management policy of Fondul Proprietatea and

presenting an opinion to the AIFM and to the GSM regarding such;

5) Receiving from the AIFM for analysis the annual budget, before it is submitted for approval to the GSM and

presenting an opinion to the AIFM and to the GSM regarding such;

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 the AIFM according to legal

provisions in force, capital market rules and regulations;

8) Receiving from the AIFM for analysis the proposal to the OGM for concluding the financial audit agreement

and presenting an opinion to the AIFM and to the GSM regarding such;

9) Reviewing on a regular basis the IPS of Fondul Proprietatea and presenting an opinion to the GSM at any time

it deems necessary, but in any case, at least once a year to the Annual OGM;

10) Receiving the internal auditor’s report and presenting an opinion to the AIFM and to the GSM regarding such;

11) Monitoring the following, based on information and reports received from the AIFM:

x the list of all portfolio investments and percentage breakdown by each investment type;

x the list of major transactions implemented in the Fund portfolio for the period under review;

x the total profit of the portfolio and comparison of profit with the appropriate market benchmark;

x comparison of the obtained profit with the initial objective;

x the extent of compliance with the investment policy, as well as any variations and actions taken to obtain the

correct results;

x the performance evaluation report.

The Board of Nominees 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;

12) Representing the GSM in relation with the AIFM regarding the communication between the two corporate

bodies, except for the cases expressly regulated by the Constitutive Act regarding the direct communication

between the GSM and the AIFM;

13) Verifying the report of the AIFM and permanently overseeing the management of the Fund, verifying if the

operations carried out by the AIFM are following the applicable law, the Constitutive Act or any relevant

resolution of the GSM;

14) Calling upon the GSM, under the conditions of art. 13 paragraphs (11) and (14) of the Constitutive Act;

15) Participating to the GSM and presenting the reports in all cases provided by the Constitutive Act or regarding

any issue it deems to be relevant for the GSM;

16) Proposes to the GSM the prior approval or rejection of the execution of contracts for acquiring, selling,

exchanging or for creating pledges, having as subject non-current assets of the Fund, whose value exceeds,

individually or cumulatively during a financial year, 20% of the total value of the non-current assets of the

Fund, less receivables;

17) Recommending to the GSM the termination of the management contract for the case when the Board of

Nominees considers this is to the benefit of the shareholders;

18) Recommending to the GSM on any other issues the Board of Nominees considers relevant to the shareholders;

19) Recommending to the EGM the appointment of the public offer intermediate and his remuneration, following

the proposal of the AIFM, when it becomes necessary that such a company is appointed, related to the

admission to trading of Fondul Proprietatea;

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

20) Approving the delegation by the AIFM of certain activities. The delegation will be in force after the approval

of FSA, where required by legislation in force;

21) Monitoring the AIFM performance in accordance with the Management Agreement.

For more details regarding the activity of the Board of Nominees during 2020, please see the annual activity report

of the Board, available on the Fund’s webpage in the Investor Relations – GSM Information section.

Committees

Audit and Valuation Committee

A permanent Audit and Valuation Committee composed of five Board of Nominees members was established to

help 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 and performs other activities under

the 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 per year on the internal 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 2020 the members of the Audit and Valuation Committee were Mr Julian

Healy (as Chairman), Mr Mark Gitenstein, Mr Piotr Rymaszewski, Mr. Ciprian Ladunca and Mrs. Ilinca von

Derenthall.

Nomination and Remuneration Committee

A Nomination and Remuneration Committee composed of five Board of Nominees members was established to

help the governing bodies of the Fund in the area of nomination and changes in remuneration.

As at 31 December 2020 the Nomination and Remuneration Committee members were Mr Piotr Rymaszewski (as

Chairman), Mr Mark Gitenstein, Mr Julian Healy, Mr. Ciprian Ladunca and Mrs. Ilinca von Derenthall.

The Nomination and Remuneration Committee fully implemented the requirements of the remuneration policy,

undertaking an annual evaluation of members of the Board of Nominees and of the Committees. The independence

of each member of the Board of Nominees has also been analysed. During 2020, the Chairman led the evaluation

process which included the completion of questionnaires and discussions between the Nomination and

Remuneration Committee and each member of the Board of Nominees and of Committees. The experience, balance

of skills, diversity and knowledge of the Board of Nominees was considered as well as Board effectiveness, role

and structure.

Formal performance evaluations will continue to take place at least annually. The Nomination and Remuneration

Committee considers succession planning as part of its responsibilities, making recommendations to the Board of

Nominees and shareholders when required. Two members of the Board of Nominees will have served for nine

years as members of the Board during the next year. As a result, a plan for succession is under way.

The Sole Director and AIFM

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.

FTIS qualifies as an AIFM under Chapter 2 of the Luxembourg Law of 12 July 2013 on alternative investment

fund managers and is entitled to carry out services in Romania in accordance with the Law 74/2015 being

registered with the registry kept by the FSA and is authorised to carry out the management of a fund such as Fondul

Proprietatea (including, without limitation, risk management and portfolio management).

The Sole Director is appointed and revoked by the OGM. The duration of the current mandate as the AIFM and

Sole Director of the Fund is of 2 years starting 1 April 2020.

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

The Sole Director issues decisions regularly and whenever necessary for the daily operations of the Fund. The Sole

Director is responsible for the Fund’s executive management. FTIS as Sole Director and AIFM acts in the best

interest of the Fund and protect the general interests of the shareholders.

In June 2009, Franklin Templeton Investment Management Limited United Kingdom was designated the winner of

the international tender procedure organised by the Fund for the selection of the Fund’s Investment Manager and

Sole Director. Franklin Templeton Investment Management Limited United Kingdom, Bucharest Branch was the

Sole Director of the Fund between 29 September 2010 and 31 March 2016.

In order to comply with the AIFM Directive, FTIS was appointed as the AIFM and Sole Director of the Fund for a

mandate of two years starting 1 April 2016. On 14 February 2018 the shareholders of the Fund approved the

renewal of the mandate of FTIS, as the AIFM and Sole Director of the Fund for a new mandate of two years

starting 1 April 2018 and on 28 June 2019 the shareholders of the Fund approved the renewal of the mandate of

FTIS, as the AIFM and Sole Director of the Fund for a new mandate of two years starting 1 April 2020.

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/ AIFM.

On 31 December 2020 FTIS, the current AIFM of the Fund, does not hold any shares issued by the Fund.

Treating customers fairly is one of the core values of Franklin Templeton Investments. Preferential treatment

among clients is strictly prohibited. Aiming to ensure fair treatment to any client or investor, FT has developed and

implemented several policies and procedures. FTIS applies FT global best practices to meet regulatory obligations

and comply with laws and regulations.

These include:

x Code of Ethics and Business Conduct that summarizes the values, principles and business practices guiding the

FT business conduct and also provides a set of basic principles to guide Covered Persons (all officers, directors,

employees and temporary employees of Franklin Resources, Inc. and all of its United States and non-U.S.

subsidiaries and affiliates), regarding the minimum ethical requirements expected from them;

x Conflicts of Interest Policy to evidence compliance with conflicts of interest requirements as provided by

MiFID II;

x Data Protection Policy to ensure that business operations comply with the Data Protection Regulation;

x Anti-Bribery Policy to ensure that employees of FTIS comply with the U.S. Foreign Corrupt Practices Act and

applicable anti-bribery and anti-corruption regulations of the local jurisdictions where FTIS operates;

x Compliance Policy and Charter, which sets the compliance framework, describing the generic compliance and

regulatory requirements and the consequences of failure to comply;

x Personal Investments and Insider Trading Policy designed to prevent Franklin Templeton employees from

engaging in prohibited insider trading and to fairly disclose non-public information;

x Gifts and Entertainment Compliance Policy, intended to deter providers of gifts or entertainment from seeking

or receiving special favours from employees of Franklin Templeton;

x Regular staff training on compliance and related matters;

x Reinforcement of corporate values which focus on acting in the client’s best interests, with integrity and

confidentiality.

The main duties of the Sole Director

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 monitored by the Board of Nominees, are:

x fulfilling the necessary and useful operations to achieve the Fund’s business objective, except for the operations

reserved by the law for the GSM, having all the obligations attributed to it by the applicable law;

x establishing a reference date for shareholders entitled to vote within the GSM, under the law, and drafting the

text of GSM calling notice, after obtaining the prior approval of the Board of Nominees and after adding to the

agenda the matters requested by the Board of Nominees;

x giving responses on the aspects concerning the business of Fondul Proprietatea, upon the written request

submitted by any shareholder before the date of the GSM, after obtaining the prior approval of the Board of

Nominees;

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

x ensuring that a copy of or extract of the GSM minutes is given to any shareholder upon his request; making

available to shareholders the financial statements of the Fund and the reports of the AIFM and of the financial

auditors, after the announcement of the Annual OGM is published;

x preparing the annual financial statements, drafting the annual activity report, examining the financial auditors’

report, presenting them to the Board of Nominees before submitting such documents to the GSM and making

proposals on the distribution of the profit to the GSM, after obtaining the prior approval of the Board of

Nominees;

x managing the relationship with Romanian Central Depository with regard to its shareholders register functions;

x preparing an annual report on the management and business policy of Fondul Proprietatea, to be presented to

the Board of Nominees for approval prior to its submission to the GSM;

x proposing to the Board of Nominees for prior approval and further, to the GSM for final approval, the annual

budget and business plan;

x proposing to the Board of Nominees for the prior approval and further, to the GSM for final approval, the

general strategy in accordance with the IPS;

x implementing the IPS and achieving a proper balance between profits and the risks related to the Fondul

Proprietatea portfolio;

x informing the Board of Nominees periodically on any significant changes in the activities and portfolio

structure of the Fund;

x approving the outsourcing of certain activities, within the limits of the approved budget; delegating the

execution of certain activities, with the prior endorsement of the FSA, where required by applicable legislation;

x submitting to the approval of the EGM the execution of contracts for acquiring, selling, exchanging or for

creating pledges, having as subject non-current assets of the Fund, whose value exceeds, individually or

cumulatively during a financial year, 20% of the total value of the non-current assets of the Fund, less

receivables;

x entering into contracts for acquiring, selling, exchanging or for creating pledges, having as subject non-current

assets of the Fund, whose value does not exceed, individually or cumulatively during a financial year, 20% of

the total value of the non-current assets of the Fund, less receivables, without the GSM approval;

x proposing to the OGM the conclusion of the financial audit agreement according to the legal provisions in

force, upon obtaining the prior approval of the Board of Nominees;

x approving the internal audit procedure and the internal audit plan;

x deciding on the relocation of the registered office, provided that the registered office shall always be registered

in Romania;

x making available to the Board of Nominees the reports and other necessary documents for exercising the

monitoring duties, in accordance with the Constitutive Act;

x informing at once the Board of Nominees of any litigation or infringement of legislation regarding the AIFM,

any operation that might represent an infringement to the IPS and about the plans/ correction measures for

approaching these matters;

x calling the GSM to decide whenever an issue appears on which the Board of Nominees has a disagreement with

the AIFM, which cannot be resolved amiably;

x proposing to the Board of Nominees the EGM recommendation for the appointment of the investment firm/

investment bank who shall manage a public offer, as well as its remuneration, when it becomes necessary that

such a company is appointed related to the admission to trading of Fondul Proprietatea.

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 control system

which meets the requirements of the Fund.

The employees of the Sole Director and the persons closely related to them and to the Sole Director qualify as

insiders and 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

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

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. Franklin Templeton organisation 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 conflict of interest requirements as set out in MiFID II and were also

submitted to FSA during 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 2020, the Sole Director issued 42 resolutions on all matters requiring its approval in accordance with the

Constitutive Act.

Permanent representatives of the Sole Director

As at 31 December 2020, Eric Bedell, Craig Blair, John Hosie, Rafal Kwasny, Calin Metes, Johan Meyer, Daniel

Naftali, Luis Perez and Boris Petrovic are the permanent representatives of the Sole Director, with Johan Meyer

being also the portfolio manager of the Fund.

Eric Bedell is a Conducting Officer for FTIS, overseeing IT, Cybersecurity and Privacy activities, managing both

UCITS and AIFs. Mr Bedell joined Franklin Templeton Investments in 2018 as Global Data Protection Officer. In

May 2019, he took a role of conducting officer of Franklin Templeton Investments' Luxembourg-domiciled

UCITS. Prior to joining Franklin Templeton Investments, Mr. Bedell worked in Luxembourg for 20 years for

different companies acting in roles ranging from IT Security Officer to Managing Director of an IT Security

solutions company. Mr. Bedell holds several certifications such as: PECB CDPO and ISO27001 LI. He is co-

chairing the ALFI - Cybersecurity Communication group and is co-chairing the Association pour la Protection des

Données Luxembourgeoise awareness group.

As at 31 December 2020, Mr Bedell held no shares issued by the Fund.

Craig Blair is General Manager, Conducting Officer and Board Member of Franklin Templeton International

Services S.à r.l. Mr. Blair has worked in the global financial services industry for over 16 years, holding various

responsibilities in the Luxembourg, UK, Irish, Eastern European and Brazilian asset management industries. As

Head of FTIS, he is responsible for the day-to-day operations of the corporate entity and EU wide branch structure

and leads a team of nine conducting officers that ensure management services and delegation oversight

responsibilities are performed for a number of UCITS and AIFs. He has a broad knowledge of fund governance

practices in open and closed end fund vehicles, including former experience as a designated person for an Irish self-

managed investment company, as well as extensive experience of servicing boards and board committees of

globally distributing SICAV and FTSE listed investment trust vehicles. He currently also sits on the Board of ALFI

and co-chairs the ALFI Management Company Technical Committee.

As at 31 December 2020, Mr Blair held no shares issued by the Fund.

John Hosie is the Conducting Officer responsible for Administration and Valuation for FTIS. Mr. Hosie joined

Franklin Templeton Investments in 2001, holding roles within Fund Administration and the Program Management

Office prior to taking up his current role as Conducting Officer and Director of Fund Administration Luxembourg

in September 2018. Mr. Hosie holds a B.A. Honors Degree in Business Management from Napier University in

Edinburgh.

As at 31 December 2020, Mr Hosie held no shares issued by the Fund.

Rafal Kwasny is Conducting Officer and Head of Transfer Agency in Europe, Middle East and Africa at FTIS. He

has over 20 years of experience in financial services and prior to moving to asset management he worked on the

asset servicers’ side leading Businesses, Product Management and Operations in Luxembourg, Ireland and Poland,

working for HSBC, BNP Paribas Securities Services, Citibank and UniCredit Group. He is also the co-Chairman of

the ALFI Transfer Agency and Distribution Operations Forum and Steering Committee. Mr Kwasny holds an

Executive MBA degree from College of Business at the University of Illinois.

As at 31 December 2020, Mr Kwasny held no shares issued by the Fund.

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

Calin Metes is a deputy CEO of FTIS Bucharest Branch and one of the two deputy portfolio managers for Fondul

Proprietatea. Mr. Metes focuses on investment functions related to the Fondul Proprietatea business as well as on

any other Franklin Templeton investments in Romania. He has more than 15 years of experience, out of which 11

with Franklin Templeton. Prior to that, Mr Metes was portfolio manager at Raiffeisen Asset Management and held

the position of investment analyst at Finas Invest. Mr Metes holds a master's degree in Banking and Capital

Markets, a master's degree in Management of Political Organisations, a BA in Banking and Stock Exchanges and a

BA in Political Sciences, all from Babes-Bolyai University in Cluj Napoca. Mr. Metes holds the Chartered

Financial Analyst

designation.

As at 31 December 2020, Mr Metes held no shares issued by the Fund.

Johan Meyer is the CEO of FTIS Bucharest Branch and the Portfolio Manager of Fondul Proprietatea. He 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. Mr Meyer holds Bachelor of Commerce and Bachelor of Commerce (Honours) degrees both with

specialisation in economics from the University of Pretoria. He speaks English and Afrikaans.

As at 31 December 2020, Mr Meyer held no shares issued by the Fund.

Daniel Naftali is one of one of the two deputy portfolio managers for Fondul Proprietatea. He joined Franklin

Templeton in 2010. He has 15 years of experience, out of which 11 within Franklin Templeton. Prior to joining

Franklin Templeton, Mr. Naftali acted as an investment analyst at Raiffeisen Asset Management Romania, and

equity analyst at Alpha Finance Romania. Mr Naftali holds a MSc degree in International Securities, Investment

and Banking from the ICMA Centre, Henley Business School – University of Reading, UK, a master's degree in

Banking and Insurance form the University of Orleans, France, and a MSc and BSc in Finance and Banking from

the Academy of Economic Studies in Bucharest. He also is a CAIA Charter holder.

As at 31 December 2020, Mr Naftali held no shares issued by the Fund.

Luis Perez is the Conducting Officer in charge of Compliance and AML/ Combating the Financing of Terrorism

for FTIS. Mr. Perez joined Franklin Templeton Investments in 2006, where he served successively as the registered

Compliance Officer and AML Reporting Officer of FTIS, Head of Compliance Europe and Head of Compliance

Europe, Middle East, Africa and India until his nomination as Conducting Officer in 2019. Prior to joining FTIS,

Mr. Perez worked as a business cycle analyst at the University of Louvain, Belgium, in the Audit Division of

Arthur Andersen Luxembourg, as the Head of Regulatory Reporting and Investment Compliance for State Street

Luxembourg and as the registered Compliance officer of The Bank of New York (Luxembourg), totalling 30 years

of industry experience. Mr. Perez holds a M.A. in Economics from the University of Louvain-La-Neuve, Belgium.

As at 31 December 2020 Mr Perez held no shares issued by the Fund.

Boris Petrovic is the Conducting Officer coordinating Risk Management, Senior Risk Manager at FTIS, based in

Frankfurt. Mr. Petrovic has 8 years of experience at Franklin Templeton as the lead risk manager for European and

Middle Eastern equity strategies and overseeing the European equity risk operations team. Mr. Petrovic has 15

years of experience in the financial industry, as risk manager for an insurance asset management company, as a risk

manager on the equity derivatives trading desk of a large German bank and working in risk management for a

company offering hedge fund solutions. Mr. Petrovic holds a Diploma in Mathematics from the University of

Freiburg (Germany) with a specialization in Financial Mathematics, Certified Financial Analyst (CFA) designation

from the CFA Institute and Financial Risk Manager (FRM) designation from GARP.

As at 31 December 2020 Mr Petrovic held no shares issued by the Fund.

The remuneration of the Sole Director

The fees due to AIFM are approved by shareholders and are part of the management agreements. The fees payable

to the AIFM 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 in the last banking day of the period invoiced.

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

The Base Fee is calculated according to the following formula:

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

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 to 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.

The Distribution Fee is calculated as follows:

100 basis points of the distributions made available to shareholders, where distributions means:

(a) repurchases of Fund shares;

(b) repurchases of Fund GDRs and/ or depositary interests;

(d) returns of share capital.

The calculation of the Distribution Fee is made when such distributions become available to shareholders. In case

of a repurchase of own shares or GDRs, the calculation of the Distribution Fee is made at the date when the own

shares repurchase transactions or own GDRs repurchase transactions are settled (i.e. settlement date).

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.

Any failure on the part of any shareholder to collect, or to take the necessary steps to facilitate the receipt of the

distributions made available will not result in any adjustment of the calculation of the Distribution Fee due to the

AIFM.

Payments

(a) The Base Fee is paid by the Fund quarterly, based on the invoices 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 issued by the AIFM within twenty

(20) business days following the end of the quarter for which the Distribution Fee was calculated.

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

(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, 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.

Verification

The payment of the Base Fee and the Distribution Fee is arranged 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.

Remuneration Policy of the AIFM

FTIS, as AIFM, has a remuneration policy in place applicable to the AIFs under its management. The costs

described within this section represent the remuneration costs borne by the AIFM and do not represent an

additional cost for the Fund. The policy has been designed to discourage excessive risk taking, integrating in its

performance management systems the risk criteria specific to the business units it covers. The policy has a

governance structure aimed at preventing internal conflicts of interests.

The AIFM fully implemented the remuneration policy during 2020 – a summary of this is available at the link:

https://www.franklintempleton.lu/download/en-lu/common/ilrkbd6k/FTIS-Remuneration_Statement_Final.pdf.

There are procedures in place for the preparation, update, review and approval of the policy as well as for

communication and implementation of the policy. Senior management, human resources, internal audit and other

functions are involved in this process and the policy is approved by FTIS.

Fixed remuneration is defined as base salary plus other benefits which may include pension contributions, life

insurance premiums or private medical insurance premiums. Levels of fixed remuneration are set with reference to

job complexity, level of responsibility, performance and benchmarking data; these levels are reviewed on a

periodical basis.

Variable remuneration is defined as annual bonuses, long term awards in the form of performance share grants, or

bonus payments. The levels of variable remuneration are set with reference to overall corporate and business unit

performance, as well as individual performance.

The full Remuneration Policy of the AIFM is available at the registered office of the AIFM. Details regarding the

remuneration paid by FTIS during the year ended 30 September 2020 (the financial year of the FTIS is ending on

30 September and the figures are presented as such) are included in the table below:

Name

Amount (EUR)

No. of beneficiaries

Total remuneration for the financial year ended 30 September 2020, out of which:

652,241

196

Fixed remuneration paid by FTIS to members of staff

470,945

196

Variable remuneration paid by FTIS to members of staff, except for performance fees

181,296

182

Variable remuneration representing performance fees

Source: FTIS

Name

Amount (EUR)

Details regarding the remuneration for the financial year ended 30 September 2020

Remuneration paid to members of the board of directors or of the supervisory board

19,537

Remuneration paid to senior management (Key decision makers)

161,067

Remuneration paid to members of staff with control responsibilities (compliance, risk management, internal

audit, etc.)

22,888

Remuneration paid to members of staff whose actions have a material impact on the risk profile of the

Fund

Total

203,492

Source: FTIS

Potential professional liability risks for AIFM

The AIFM will always maintain 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 management agreement;

(b) Fidelity bond to provide against any failure to account to the Fund for any money or investments.

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

Brexit Impact on the Fund’s Activity

The UK left the European Union at 23:00 GMT on 31 January 2020. The transition period took place between

31 January and 31 December 2020.

During the transition period the EU incorporated issuers admitted to trading on a UK market, continued to be able

to prepare the financial statements in accordance with IFRS as endorsed by the EU. This will continue after the end

of the transition period because the UK Government made an equivalence direction that determines that EU-

endorsed IFRS are considered equivalent to UK-adopted international accounting standards for the purpose of

preparing financial statements. As a result, from financial reporting perspective, there is no impact on the Fund

both during the transition period and after that, as it would continue to prepare its financial statements in

accordance with IFRS as endorsed by the EU.

The Fund is regulated as an AIF under Romanian law, with its AIFM being a Luxembourg company. In light of the

UK Temporary Permissions Regime that allows up to a three-year extension of current “passporting” for the AIFM

into the UK, we expect that the UK Financial Conduct Authority will continue to recognise the marketing activities

for Fondul Proprietatea in UK at least until the end of 2022.

The Fund invests the majority of its assets in Romania and even if Brexit has generated a degree of uncertainty, in

light of the nature of the Fund’s business and the regulatory arrangements described above, the AIFM is of the

opinion that Brexit would not have a significant impact on the Fund.

The Depositary of the Fund

The Fund has appointed BRD – Groupe Societe Generale SA 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 three-year term and was extended during 2019

for another three years until 20 May 2022.

The Depositary has the following main obligations under the agreement in place:

x Physically safeguards all the Fund’s financial instruments which can be physically delivered or registered or

held in an account directly or indirectly in the name of the Depositary and are transferable securities including

those which embed derivatives, money market instruments or units of collective investment undertakings (the

Custody Assets);

x Verifies the ownership of, and maintain records on, all assets which do not qualify as Custody Assets and

which, in accordance with applicable national law, are only directly registered in the name of the Fund with the

issuer itself or its agent, such as a registrar or a transfer agent, based on the documents supplied by the Fund, as

well as on external evidence (the Non-Custody Assets);

x Keeps in custody the Custody Assets belonging to the Fund, separately from the Depositary’s assets or other

funds’ assets, and registers them separately thus, as to be identifiable as the Fund’s property;

x 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;

x 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;

x Certifies the existence and the value of the net assets, and the unit value of the net assets, and transmits it to the

Fund and to the FSA, within the terms, form, conditions and regular intervals established by the regulations;

x Makes the payment of the equivalent value of the financial instruments or participation interests purchased by

the Fund, makes the payment of all the financial duties, including the payment of interests, taxes, fees and other

operational costs of the Fund, makes payments for any other purposes, according to the proper instructions

received from the Fund;

x Validates and certifies the calculation of the AIFM for the fees owed by the Fund to it;

x Provides proxy voting services upon request and according to the instructions received;

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

x Carries out any other activities provided by laws and regulations as part of its responsibility.

Liability in case of safe-keeping of Custody Assets:

x In case of loss of a Custody Asset by the Depositary or by a third party to whom the custody was delegated by

the Depositary, the Depositary shall be liable to the Fund in the conditions set forth by Article 21 (12) and (13)

of AIFM Directive as such were transposed by Article 20 (13) and (14) of Law 74/2015, as well as by Articles

100 and 101 of EU Regulation 231/2013. In such conditions, unless the Depositary proves the existence of an

exoneration cause set forth by the EU Regulation 231/2013, the Depositary shall return to the Fund identical

Custody Asset or a custody asset with a corresponding value within maximum five business days upon the

Fund’s or the AIFM’s request;

x In case of other damages produced by the Depositary in connection with safe-keeping of Custody Assets other

than losses of such Custody Assets, the Depositary shall not be liable towards the Fund for its actions or

inactions in relation to these obligations as long as they respect the legal provisions and the damages are not

due to the Depositary’s negligence, fraud, breach of agreement, bad faith or wilful default.

Liability in case of safe-keeping of Non-Custody Assets and other duties of the Depositary:

x With respect to all duties other than the safe-keeping of Custody Assets, the Depositary shall not be liable

towards the Fund for its actions or inactions in relation to these obligations, as long as they respect the legal

provisions, and, in addition, the Depositary shall not bear any prejudice or expense resulting from such action

or inaction, except in the case where these are due to the Depositary’s negligence, fraud, breach of agreement,

bad faith or wilful default;

x The Depositary shall not be liable for the incompleteness or illegality of any investment made by third parties

on behalf of the Fund’s account and received by the Depositary from them or in case the investment is no

longer valid or is fraudulent, either by reason of invalidity, forgery, falsity, incompleteness or otherwise except

in so far as such situation results from the negligence, wilful default, bad faith, breach of agreement or fraud on

the part of the Depositary;

x The Depositary shall not be liable to the Fund or any third party for any indirect consequential or special

damages, including loss of profits or business opportunity, arising in connection with the agreement;

x Except as set out in the agreement concluded with the Fund and applicable law, the Depository expressly

disclaims all obligations to the Fund.

Other Aspects

The auditor of the Fund

The auditor of the Fund for the year ended 31 December 2020 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 of ASPAAS with number 25.

The Foreign Account Tax Compliance Act

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 complies with all reporting requirements imposed by FATCA provisions.

Packaged retail and insurance-based investment products

Packaged retail investment and insurance products 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.

The key information documents for Fondul Proprietatea are published on the webpage of the Fund.

Market Abuse Regulation

EU Regulation 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

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

criminal sanctions for market abuse were published in the Official Journal of the European Union on 12 June 2014

and apply as of 3 July 2016.

The Market Abuse Regulation aims at enhancing market integrity and investor protection. AIFM updated the

internal regulations applicable to the Fund in order to implement the Market Abuse Regulation.

Gender and nationality diversity

The Fund and FTIS support gender and ethnic diversity and promotion of women in management positions.

Franklin Templeton culture is founded on diversity, inclusion, and empowerment and the selection policy is to

appoint the best qualified person for the job, considering factors such as diversity of gender, experience and

qualification. As a global company, Franklin Templeton believes it benefits from the unique skills and experiences

of an inclusive workforce made up of employees who span different generations, capabilities and cultural

identification.

There is one female member in the Board of Nominees, and FTIS have women involved in the management of the

Fund. Also, people from more than 12 different nationalities are involved in the management of the Fund, this

being in line with the diversity of the shareholders of the Fund.

Treatment of corporate information

The members of the Board of Nominees and all employees of FTIS shall keep confidential any documents and

information acquired in the performance of their duties.

General Data Protection Regulation

The Fund has fully implemented GDPR and there have not been identified any issues during 2020.

SFDR implementation

The European Union has set in motion an ambitious legislative programme to make environmental, social and

governance concerns a central plank of regulation in the financial services industry. As part of this package, the

Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability-

related disclosures in the financial services sector (SFDR) was published in December 2019 and should be

implemented until March 2021.

The AIFM has implemented a policy for integrating sustainability risks and opportunities into their research,

analysis and investment decision-making processes.

Sustainability risk means an environmental, social, or governance event or condition, that, if it occurs, could

potentially or actually cause a material negative impact on the value of the Fund’s investments. Sustainability risks

can either represent a risk on their own or have an impact on other risks such as market risks, operational risks,

liquidity risks or counterparty risks.

Sustainability risks are important elements to consider in order to enhance long-term risk adjusted returns for

investors and determine specific Fund’s strategy risks and opportunities. Integration of sustainability risk may vary

depending on the Fund’s strategy, assets and/ or portfolio composition. The AIFM makes use of specific

methodologies and databases into which environmental, social, and governance data from external research

companies, as well as own research results, are incorporated. Assessment of sustainability risks is complex and

may be based on ESG data, which is difficult to obtain and incomplete, estimated, out of date or otherwise

materially inaccurate. Even when identified, there can be no guarantee that these data will be correctly assessed.

To the extent that a sustainability risk occurs, or occurs in a manner that is not anticipated by the AIFM’s models,

there may be a sudden, material negative impact on the value of an investment, and hence on the NAV. Such

negative impact may have an equivalent negative impact on the market price for shares traded on BVB or on GDRs

traded on LSE.

Conflicts of interests

FTIS adopted operating solutions suitable to facilitate the identification and adequate handling of any situations in

which an employee has an actual or potential conflict between the interest of the Fund and his/ her own or on

behalf of third parties. FTIS adopted operating solutions suitable for the adequate handling of any issues arising

from related party transactions.

The Board of Nominees has also set strict rules for potential conflicts of interests in the Code of Ethics.

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

Financial Statements Analysis

The audited financial statements for the year ended 31 December 2020, prepared in accordance with IFRS and

applying the FSA Norm 39/2015 with subsequent amendments, are included in full in Annex 1 to this report. The

captions in the Statement of Financial Position and Statement of Comprehensive Income presented in the Annual

Report may differ from the ones included in the IFRS financial statements due to other regulatory requirements.

This section provides an overview of the Fund’s financial position and performance for the year ended

31 December 2020. The analysis presents the main developments during 2020, for more details regarding the

comparative amounts from previous period, please see the corresponding section in Annex 1 IFRS Financial

Statements.

Statement of Financial Position

RON million

31 December

2020

31 December

2019

31 December

2018

31 Dec 2020 vs.

31 Dec 2019 (%)

Audited

Cash and current accounts

34.4

31.9

19.6

Deposits with banks

660.0

338.4

187.1

Treasury bills

49.6

Government bonds

380.3

137.3

131.6

Dividend receivables

137.0

Equity investments

9,246.7

11,413.1

9,337.4

Other assets

0.6

0.3

1.5

Total assets

10,322.0

11,921.0

9,863.8

-13.4%

Payables

19.8

16.7

14.8

Other liabilities

35.3

32.8

20.6

Total liabilities

55.1

49.5

35.4

11.3%

Total equity

10,266.9

11,871.5

9,828.4

-13.5%

Total liabilities and equity

10,322.0

11,921.0

9,863.8

-13.4%

Source: IFRS financial statements

Overview

The cash and cash equivalents of the Fund in 2020, included term deposits with banks, treasury bills and

government bonds. All instruments are denominated in RON and have maturities of up to one year.

The increase in liquid assets by 111.7% during 2020 is mainly due to the cash inflows from the dividends collected

from portfolio companies (RON 1,207.9 million) and the proceeds from disposal of equity investments of RON

920.6 million which were offset by the payments for the acquisition of own shares within the eleventh buy-back

programme (RON 1,065.2 million), including the tender offers finalised in March, September and December and

by the payments to shareholders regarding cash distributions in total amount of RON 398.0 million.

The net decrease in equity investments of RON 2,166.4 million during 2020 was mainly generated by:

x the decrease in the value of unlisted holdings by RON 787.9 million following the valuation update

process at the end of the year, mainly generated by the decrease of CN Aeroporturi Bucuresti SA (total

impact RON 398.8 million), E-Distributie companies (total impact RON 591.6 million) and Societatea

Nationala a Sarii (total impact RON 74.2 million), partially netted off by the increase in value for

Hidroelectrica SA (total impact RON 242.4 million);

x the disposal of 1.7 billion shares in OMV Petrom SA under an accelerated bookbuild offering and the

disposal of the entire holding in Nuclearelectrica SA (total impact RON 920.6 million);

x the negative evolution of OMV Petrom SA share price, the largest listed holding (total impact RON 529.9

million, share price decrease of 18.7%).

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

Equity investments

Classification and measurement of equity investments

Starting 1 January 2014, Fondul Proprietatea applies the Amendments to IFRS 10, IFRS 12 and IAS 27 -

Investment Entities, the Fund being an investment entity. As a result, the Fund classifies and measures its

investments in subsidiaries and associates as financial assets at fair value through profit or loss.

Starting 1 January 2018, the Fund adopted IFRS 9 and classified all its equity investments as equity investments at

fair value through profit or loss (the default option under IFRS 9).

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.

Valuation

As at 31 December 2020 all the equity investments of the Fund were carried at fair value.

Listed shares are measured at fair value using quoted prices for that instrument at the reporting date.

The fair value of unlisted shares is determined and approved by the Fund’s Sole Director using valuation

techniques in accordance with International Valuation Standards, based on independently appraised valuation

reports.

The holdings in companies in liquidation, dissolution, bankruptcy, companies in insolvency or reorganisation are

valued at nil.

Capital Expenditure

Capital expenditure comprises the costs for the acquisition and upgrade of the intangible assets of the Fund, which

include the value of the licences, the implementation costs and the updates of the accounting and reporting

software, net of the accumulated amortisation. During 2020 and 2019 the Fund did not incur any capital

expenditure costs.

Statement of Comprehensive Income

RON

million

2020

Audited

2019

Audited

2018

Audited

Gross dividend income

1,218.7

942.9

776.2

Net unrealised (loss)/ gain from equity investments at fair value through

profit or loss

(1,103.2)

2,260.3

225.3

Net realised (loss)/ gain from disposal of equity investments at fair value

through profit or loss

(142.6)

9.9

4.5

Interest income

14.0

9.9

9.8

(Impairment losses)/ Reversal of impairment losses on receivables, net

(0.2)

(10.3)

0.2

Other income, net*

3.2

3.4

2.9

Net operating (loss)/ income

(10.1)

3,216.1

1,018.9

Administration fees recognised in profit or loss

(55.2)

(50.3)

(46.8)

Other operating expenses

(27.1)

(25.6)

(26.5)

Operating expenses

(82.3)

(75.9)

(73.3)

Finance costs

(0.1)

(0.4)

(0.3)

(Loss)/ Profit before income tax

(92.5)

3,139.8

945.3

Income tax expense

(10.5)

(9.9)

(10.2)

(Loss)/ Profit for the year

(103.0)

3,129.9

935.1

Other comprehensive income

Total comprehensive income for the year

(103.0)

3,129.9

935.1

Source: IFRS financial statements

* Other income, net included mainly the net gain/ (loss) from revaluation of government securities at fair value, net foreign exchange gain/ (loss), annual income from the

depositary bank of the Fund’s GDRs and other operating income/ (expenses).

Gross dividend income for the year ended 31 December 2020 mainly included the dividend income earned from

from E-Distributie companies (RON 522.9 million), Hidroelectrica SA (RON 399.5 million) and OMV Petrom SA

(RON 175.6 million).

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

The net unrealised loss from equity investments at fair value through profit or loss for 2020 of RON 1,103.2

million was generated by the negative change in fair value of the Fund’s holdings as result of the negative impact

of the COVID-19 pandemic on the economic activity and global capital markets. This was mainly related to the

holdings in CN Aeroporturi Bucuresti SA (RON 398.8 million), OMV Petrom SA (RON 331.0 million), E-

Distributie Banat SA (RON 246.6 million), E-Distributie Muntenia SA (RON 200.7 million), and E-Distributie

Dobrogea SA (RON 144.3 million), partially netted off by the increase in Hidroelectrica SA fair value (RON 242.4

million) as a result of the company’s strong performance.

The net realised loss from disposal of equity investments at fair value through profit or loss for 2020 was

generated by the partial disposal of OMV Petrom SA holding (realised loss of RON 198.9 million) and by the

disposal of the entire holding in Nuclearelectrica SA (realised gain of RON 56.3 million).

Interest income arose from deposits held with banks and from short-term government securities.

Additional details on the administration fees for 2020 and comparatives are presented below:

RON million

2020

Audited

2019

Audited

2018

Audited

Recognised in profit or loss

55.2

50.3

46.8

Base fee

49.0

43.9

41.8

Distribution fee for dividends

4.2

6.4

5.0

Performance fee

2.0

Recognised in other comprehensive income

10.7

4.4

13.7

Distribution fee for buy-back programmes

10.7

4.4

13.7

Total administration fees

65.9

54.7

60.5

Source: IFRS financial statements

The increase in the base fee in 2020 compared to 2019 was mainly as a result of the increase in the Fund’s share

price on BVB while the increase in the distribution fee for buy-back programmes was as a result of the three tender

offers finalised in March, September and December 2020 (for 585.0 million shares in total) vs. only one tender in

August 2019 (for 150 million shares).

The distribution fee for dividend distribution is lower in 2020 compared to 2019 as a result of the lower dividend

per share distributed by the Fund in 2020.

The performance fees recorded in 2020 are as a result of the Fund’s share price discount to NAV lowering below

15%/20% in certain trading days.

Other operating expenses

The main categories of other operating expenses are detailed in the table below:

RON mill

ion

2020

Audited

2019

Audited

2018

Audited

FSA monthly fees

9.4

9.8

9.3

Transaction costs

5.5

1.5

1.4

Depositary fees

0.6

0.7

0.6

Other expenses

11.6

13.6

15.2

Other operating expenses

27.1

25.6

26.5

Source: IFRS financial statements

In 2020, other expenses caption comprised mainly legal and litigation assistance expenses, Board of Nominees

remuneration and related expenses, portfolio valuation expenses, expenses with external audit, investor relations

expenses and PR expenses.

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

Statement of Cash Flows

RON million

2020

Audited

2019

Audited

2018

Audited

Cash flows from operating activities

Dividends received (net of withholding tax)

1,207.9

1,059.7

629.2

Proceeds from disposal of equity investments

920.6

200.9

173.0

Proceeds from transactions with treasury bills and bonds

253.0

188.6

129.9

Interest received

12.3

9.5

11.2

Amounts collected from the depository Bank of the Fund's GDRs

4.2

3.9

4.5

Acquisitions of treasury bills and bonds

(530.3)

(174.5)

(151.6)

Suppliers and other taxes and fees paid

(114.1)

(103.2)

(114.3)

Subscriptions to share capital increase of portfolio companies

(0.5)

(6.3)

(2.5)

Other payments, net

(1.2)

(1.4)

(0.9)

Net cash flows from operating activities

1,751.9

1,177.2

678.5

Cash flows from financing activities

Acquisition cost of treasury shares

(1,065.2)

(440.4)

(1,369.7)

Dividends paid (net of withholding tax)

(395.3)

(599.8)

(469.8)

Payments to shareholders related to the return of capital

(2.7)

(3.1)

(7.5)

Payment of interest and fees related to the short-term bank loans

(0.1)

(0.5)

(0.3)

Net cash flows used in financing activities

(1,463.3)

(1,043.8)

(1,847.3)

Net increase/ (decrease) in cash and cash equivalents

288.6

133.4

(1,168.8)

Cash and cash equivalents at the beginning of the year

405.7

272.3

1,441.1

Cash and cash equivalents at the end of the year

694.3

405.7

272.3

31 December

2020

Audited

31 December

2019

Audited

31 December

2018

Audited

Cash and current accounts

34.4

31.9

19.6

Bank deposits with original maturities of less than three months

659.9

338.3

187.1

Treasury bills and government bonds with original maturities of less than

three months

35.6

65.7

694.3

405.8

272.4

Source: IFRS financial statements

During 2020 the proceeds from disposal of equity investments were related to the disposal of the entire holding

in Nuclearelectrica SA and of the partial disposal of the shares in OMV Petrom SA.

Dividends paid for 2020 included the net payments to shareholders regarding the dividend distribution of RON

0.0642 per share approved by shareholders during the 28 April 2020 GSM, with payment date 1 July 2020.

Acquisition cost of treasury shares represent the acquisition cost of own shares bought back by the Fund within

the buy-back programmes carried during each period, through buying ordinary shares on BVB and GDRs on LSE.

For more details, please see section “Buy-back Programmes”.

Related Party Transactions

The transactions with related parties were performed in the normal course of business. For more details, please see

Annex 1 “IFRS Financial Statements” Note 18.

FONDUL PROPRIETATEA SA

Fondul Proprietatea SA Annual Sole Director’s Report 2020

Subsequent Events

Resolutions adopted by shareholders during the 14 January 2021 GSM

On 14 January 2021, the shareholders approved a resolution for several changes to the Constitutive Act that will

enter into force after FSA approval and registration with the Trade Registry;

Updates regarding the Fund’s application to FSA for registering as an AIF

In February 2021, the FSA sent several comments for the documents filed in the Fund’s application for registering

as an AIF, related to the draft of prospectus and its annexes, the rules of the Fund and the PRIIPS Key Information

Document. The AIFM is updating the documentation and will file the new set of documents after the publication of

this report.

Changes in FTIS Bucharest Branch management

On 9 February 2021, the AIFM informed investors of the following changes in FTIS Bucharest Branch

management:

x Mr. Calin Metes was promoted to Deputy CEO for investment activities of the AIFM for Romanian

business and Deputy Portfolio Manager of the Fund;

x Mr. Marius Dan was promoted to Deputy CEO for corporate strategy activities of the AIFM for Romanian

business and the Fund;

x Mr. Daniel Naftali was promoted to Deputy Portfolio Manager of the Fund.

Mr. Calin Metes, Mr. Marius Dan and Mr. Daniel Naftali will continue to report to Mr. Johan Meyer, CEO of the

AIFM for Romanian business and Portfolio Manager of the Fund.

Subsequent changes in Romanian Water Law

Following the latest changes approved in December 2020, further amendments to Romanian Water Law are

currently debated in Parliament, with a potential impact on the activity of Hidroelectrica SA. On 8 February 2021,

the Senate as first chamber discussing the amendments, approved a change that would allow Hidroelectrica SA to

continue to use indirect methods for determining the water volumes as before July 2020 (i.e. cancelling the effects

of the changes in legislation adopted after July 2020). The next legislative steps are to have the amendments

discussed and approved by the Chamber of Deputies as decisional chamber, promulgated by the Romanian

President, and published in the Official Gazette of Romania. The entire legislative process involves several

mandatory steps and the final wording of the law cannot be predicted.

The changes in legislation are estimated to be effective after the date of publication of this report. The Fund is

monitoring the legislative process in Parliament as well as Hidroelectrica SA ongoing discussions with ANAR in

order to be able to assess any potential impact on the company.

Signatures:

22 February 2021

Johan Meyer

Permanent Representative

Franklin Templeton International Services S.à r.l. acting in the capacity of Sole Director of Fondul Proprietatea SA

Prepared by

Catalin Cadaru

Financial Reporting Manager

Franklin Templeton International Services S.à r.l. Bucharest Branch

FONDUL PROPRIETATEA SA

Annual financial statements for the year ended 31 December 2020

Annex 1

FONDUL PROPRIETATEA SA

ANNUAL FINANCIAL STATEMENTS

FOR THE YEAR ENDED

31 DECEMBER 2020

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”)

FONDUL PROPRIETATEA SA

Annual financial statements for the year ended 31 December 2020

Contents

Independent Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . .. . . . . . . . . . . . . . . . .

Statement of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Statement of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Statement of Changes in Shareholders’ Equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . .

. . . . . . .

Statement of Cash Flows. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . .

Notes to the Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . .. . . . . . . . . . . . . .

Deloitte Audit S.R.L.

Clădirea The Mark

Tower

Calea Griviței nr. 82

-98

Sector 1, 010735

București, România

Tel: +40 21 222 16 61

Fax: +40 21 222 16 60

www.deloitte.ro

Numele Deloitte se referă la organizația Deloitte Touche Tohmatsu Limited, o companie cu răspundere limitată din Marea Britanie, la firmele membre ale acesteia, în cadrul căreia

fiecare firmă membră este o persoană juridică independentă. Pentru o descriere amănunțită a structurii legale a Deloitte Touche Tohmatsu Limited și a firmelor membre, vă rugăm să

accesați www.deloitte.com/ro/despre.

INDEPENDENT AUDITOR’S REPORT

To the Shareholders,

Fondul Proprietatea S.A.

Report on the Audit of the Financial Statements

Opinion

We have audited the financial statements of Fondul Proprietatea S.A. (the “Fund”), with registered office in 78-80 Buzesti

street, District 1, Bucharest, Romania, identified by unique tax registration code 18253260, which comprise the statement of

financial position as at December 31, 2020, and the statement of comprehensive income, statement of changes in equity and

statement of cash flows for the year then ended, including a summary of significant accounting policies and notes to the

financial statements.

The financial statements as at December 31, 2020 are identified as follows:

x Total Equity RON 10,266,919,426

x Net loss for the financial year RON (102,978,968)

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the

Fund as at December 31, 2020, and its financial performance and its cash flows for the year then ended in accordance with

International Financial Reporting Standards (IFRSs) as adopted by European Union and applying 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 authorized, regulated and supervised by the FSA - Financial Investments and Instruments

Sector (referred to herein as “FSA Norm no. 39 / 2015”).

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs), Regulation (EU) No. 537/2014 of the

European Parliament and the Council (forth named “the Regulation”) and Law 162/2017 regarding statutory audit of the

annual financial statements (“the Law”). Our responsibilities under those standards are further described in the Auditor’s

Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Fund in

accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA

Code), in accordance with ethical requirements relevant for the audit of the financial statements in Romania including the

Regulation and the Law and we have fulfilled our other ethical responsibilities in accordance with these requirements and the

IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our

opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial

statements of the current period. These matters were addressed in the context of our audit of the financial statements as a

whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key

Audit Matter

How our audit addressed the matter

Valuation of equity investments

Refer to note 1

4 to the financial statements. The

Fund’s investment in equity investments represents

% 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.

The determination of fair value for the Level 3 equity

investments, representing

83% 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, wit

h a significant part of them

being state owned companies. These valuations have

been performed as of

October 31, 2020.

The COVID

19 pandemic has resulted in an increase in

the uncertainty of assumptions underlying the

economic outlook.

This combined with varying

government responses, has raised the complexity of

significant judgement and estimates when determining

the fair value for unlisted companies in which the Fund

holds participation.

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 testing of the design

and

implementation 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.

We have also assessed the Fund

management’s analyses for the period subsequent to the date of the

valuation reports (i.e. from 3

1 October 2020 to 31 December 2020

), in

order to identify significant events which may have a significant

impact on the fair value of the equity investments. We have assessed

the accuracy of the changes in fair value that have been reflected in

the financial statements.

We have also analyzed how the evaluations

related to the selected sample reflected the impact of COVID

-19 on

the

economic sector of which the Fund's investments are part.

We have 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.

Reporting Requirements Concerning the Annual Sole Director’s Report

The Sole Director is responsible for preparation and presentation of the other information. The other information comprises

the Sole Director’s report, but does not include the financial statements and our auditor’s report thereon.

Our opinion on the financial statements does not cover the other information and, unless otherwise explicitly mentioned in

our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements for the year ended December 31, 2020, our responsibility is to read

the other information and, in doing so, consider whether the other information is materially inconsistent with the financial

statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

With respect to the Sole Director’s report, we read it and report if this has been prepared, in all material respects, in

accordance with the provisions of FSA Norm no. 39 / 2015, article no. 8-13.

On the sole basis of the procedures performed within the audit of the financial statements, in our opinion:

a) the information included in the Sole Director’s report for the financial year for which the financial statements have

been prepared is consistent, in all material respects, with these financial statements;

b) the Sole Director’s report has been prepared, in all material respects, in accordance with the provisions of

FSA Norm no. 39 / 2015, article no. 8-13.

Moreover, based on our knowledge and understanding concerning the Fund and its environment gained during the audit on

the financial statements prepared as at December 31, 2020, we are required to report if we have identified a material

misstatement of this Sole Director’s report. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS and

applying FSA Norm no. 39 / 2015, and for such internal control as management determines is necessary to enable the

preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Fund’s ability to continue as a going

concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless

management either intends to liquidate the Fund or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Fund’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material

misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable

assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always

detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,

individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the

basis of these financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism

throughout the audit. We also:

x Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design

and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to

provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for

one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the

override of internal control.

x Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are

appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's

internal control.

x Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related

disclosures made by management.

x Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the

audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant

doubt on the Fund’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are

required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such

disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the

date of our auditor’s report. However, future events or conditions may cause the Fund to cease to continue as a going

concern.

x Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and

whether the financial statements represent the underlying transactions and events in a manner that achieves fair

presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the

audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements

regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought

to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most

significance in the audit of the financial statements of the current period and are therefore the key audit matters. We

describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when,

in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse

consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

Requirements for audits of public interest entities

We have been appointed by the General Assembly of Shareholders on September 4, 2019 to audit the financial statements of

Fondul Proprietatea S.A. for the financial year ended December 31, 2020. The uninterrupted total duration of our

commitment is 14 years, covering the financial years ended December 31, 2007 until December 31, 2020.

We confirm that:

x Our audit opinion is consistent with the additional report submitted to the Audit Committee of the Fund that we issued

the same date we issued this report. Also, in conducting our audit, we have retained our independence from the audited

entity.

x No non-audit services referred to in Article 5 (1) of EU Regulation No. 537 / 2014 were provided.

The engagement partner on the audit resulting in this independent auditor’s report is Irina Dobre.

Report on compliance with the Commission Delegated Regulation (EU) 2018/815 (“European Single Electronic Format Regulatory

Technical Standard“ or “ESEF ”)

We have undertaken a reasonable assurance engagement on the compliance with Commission Delegated Regulation (EU)

2019/815 on the European single electronic format ("ESEF Regulation") for the financial statements included in the annual

financial report in XHTML format (“Digital file”) prepared by Fondul Proprietatea S.A.

(i) Fondul Proprietatea’s Management Responsibility for the Digital file prepared in compliance with the ESEF

Fondul Proprietatea’s management is responsible for preparing digital file that comply with the ESEF. This responsibility includes:

x the design, implementation and maintenance of internal controls relevant to the application of the ESEF

x preparation of financial statements contained in the annual report in the current XHTML format;

x ensuring consistency between the digital file and the financial statements to be submitted in accordance with

FSA Norm no. 39 / 2015;

(ii) Our Responsibility

Our responsibility is to express a conclusion on whether the financial statements included in the annual financial report complies in

all material respects with the requirements of ESEF based on the evidence we have obtained. We conducted our reasonable

assurance engagement in accordance with International Standard on Assurance Engagements 3000 (Revised), Assurance

Engagements Other than Audits or Reviews of Historical Financial Information (ISAE 3000) issued by the International Auditing and

Assurance Standards Board.

A reasonable assurance engagement in accordance with ISAE 3000 involves performing procedures to obtain evidence about

compliance with ESEF. The nature, timing and extend of procedures selected depend on the auditor’s judgment, including the

assessment of the risks of material departures from the requirements set out in ESEF, whether due to fraud or error. A reasonable

assurance engagement includes:

x obtaining an understanding of Fondul Proprietatea’s process for preparation of the digital file in accordance with ESEF,

including relevant internal controls;

x reconciling the digital file with the audited financial statements of Fondul Proprietatea to be submitted in accordance

with FSA Norm no. 39 / 2015;

evaluate if all financial statements contained in the annual report have been prepared in a valid XHTML format;

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our conclusion.

Conclusion

In our opinion, the financial statements for the year ended 31 December 2020 included in the annual financial report in the digital

file comply in all materials respects with the requirements of ESEF Regulation.

In this section, we do not express an audit opinion, review conclusion or any other assurance conclusion on the financial

statements. Our audit opinion relating to the financial statements of Fondul Proprietatea S.A. for the year ended 31 December

2020 is set out in the section Report on the audit of the financial statements above.

Irina Dobre, Audit Partner

For

signature, please refer to the original

Romanian version.

Registered in the Electronic Public Register of Financial

Auditors and Audit Firms under no. AF 3344

On behalf of:

DELOITTE AUDIT SRL

Registered in the Electronic Public Register of Financial

Auditors and Audit Firms under no. FA 25

The Mark Building, 84-98 and 100-102 Calea Grivitei,

Floor and 9

Floor, District 1

Bucharest, Romania

February 22, 2021

FONDUL PROPRIETATEA SA

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2020

(all amounts are in RON unless otherwise stated)

Annual financial statements for the year ended 31 December 2020

Note

Year ended

31 December 2020

Year ended

31 December 2019

Gross dividend income

1,218,657,007

942,894,907

Interest income

14,038,979

9,867,055

Other income, net

4,301,573

3,938,407

Net (loss)/gain from equity investments at fair

value through profit or loss

(1,245,837,059)

2,270,241,487

Net foreign exchange loss

(1,117,671)

(510,220)

Impairment losses on receivables, net

4(b) iv)

(170,681)

(10,345,916)

Net operating (loss)/income

(10,127,852)

3,216,085,720

Operating expenses

(82,251,945)

(75,879,626)

Finance costs

(76,500)

(437,667)

(Loss)/Profit before income tax

(92,456,297)

3,139,768,427

Withholding tax on the dividend income

(10,522,671)

(9,897,515)

(Loss)/Profit for the period

(102,978,968)

3,129,870,912

Other comprehensive income

Total comprehensive income for the period

(102,978,968)

3,129,870,912

Basic and diluted (loss)/earnings per share

(0.0159)

0.4436

The annual financial statements were authorised for issue on 22 February 2021 by:

Franklin Templeton International Services S.à r.l., in its capacity of alternative investment fund manager of

Fondul Proprietatea SA

Johan Meyer

Permanent Representative

Prepared by:

Catalin Cadaru

Financial Reporting Manager

The notes on pages 13 to 52 are an integral part of these annual financial statements.

FONDUL PROPRIETATEA SA

STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2020

(all amounts are in RON unless otherwise stated)

Annual financial statements for the year ended 31 December 2020

Note

31 December 2020

31 December 2019

Assets

Cash and current accounts

174,667

83,551

Distributions bank accounts

34,255,963

31,799,616

Deposits with banks

659,982,573

338,381,995

Government bonds

4(b) iii)

380,268,285

137,303,498

Equity investments

9,246,709,268

11,413,083,382

Other assets

613,444

332,386

Total assets

10,322,004,200

11,920,984,428

Liabilities

Payable to shareholders

15 (a)

34,380,437

31,988,947

Other liabilities and provisions

15 (b)

20,704,337

17,543,492

Total liabilities

55,084,774

49,532,439

Equity

Paid share capital

16 (a)

3,560,099,870

3,770,082,341

Reserves related to the unpaid share

capital

16 (b)

189,182,422

Other reserves

16 (c)

539,400,224

536,545,225

Treasury shares

16 (d)

(1,086,443,209)

(446,008,591)

Retained earnings

7,064,680,119

7,821,650,592

Total equity

10,266,919,426

11,871,451,989

Total liabilities and equity

10,322,004,200

11,920,984,428

The notes on pages 13 to 52 are an integral part of these annual financial statements.

FONDUL PROPRIETATEA SA

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEAR ENDED 31 DECEMBER 2020

(all amounts are in RON unless otherwise stated)

Annual financial statements for the year ended 31 December 2020

Share capital

Reserves

related to the

unpaid share

capital

Other reserves

Treasury

Retained

earnings

Total attributable

to the equity

holders of the

Fund

Balance as at 1 January 2020

3,770,082,341

189,182,422

536,545,225

(446,008,591)

7,821,650,592

11,871,451,989

Loss for the period

(102,978,968)

Profit appropriation to other reserves

236,026,121

(236,026,121)

Other comprehensive income

Total comprehensive income for the

period

236,026,121

(339,005,089)

(102,978,968)

Transactions with owners, recorded

directly in equity

Dividends declared

(417,965,384)

Acquisition of treasury shares

(1,086,443,209)

Cancellation of treasury shares

(209,982,471)

(236,026,120)

446,008,591

Distributions for which the statute of

limitation occurred

2,854,998

Total transactions with owners

recorded directly in equity

(209,982,471)

(233,171,122)

(640,434,618)

(417,965,384)

(1,501,553,595)

Balance as at 31 December 2020

3,560,099,870

189,182,422

539,400,224

(1,086,443,209)

7,064,680,119

10,266,919,426

The notes on pages 13 to 52 are an integral part of these annual financial statements.

FONDUL PROPRIETATEA SA

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEAR ENDED 31 DECEMBER 2020

(all amounts are in RON unless otherwise stated)

Annual financial statements for the year ended 31 December 2020

Share capital

Reserves related

to the unpaid

share capital

Other reserves

Treasury

Retained

earnings

Total

attributable to the

equity holders of

the Fund

Balance as at 1 January 2019

4,543,838,477

189,182,422

297,678,692

(1,414,500,848)

6,212,247,115

9,828,445,858

Profit for the period

3,129,870,912

Coverage of losses from cancellation of

treasury shares

80,910,369

(80,910,369)

Profit appropriation to other reserves

640,744,712

(640,744,712)

Other comprehensive income

Total comprehensive income for the

period

721,655,081

2,408,215,831

3,129,870,912

Transactions with owners, recorded

directly in equity

Dividends declared

(642,318,808)

Transfer to legal reserves

156,493,546

(156,493,546)

Acquisition of treasury shares

(446,008,591)

Cancellation of treasury shares

(773,756,136)

(640,744,712)

1,414,500,848

Distributions for which the statute of

limitation occurred

1,462,618

Total transactions with owners

recorded directly in equity

(773,756,136)

(482,788,548)

968,492,257

(798,812,354)

(1,086,864,781)

Balance as at 31 December 2019

3,770,082,341

189,182,422

536,545,225

(446,008,591)

7,821,650,592

11,871,451,989

The notes on pages 13 to 52 are an integral part of these annual financial statements.

FONDUL PROPRIETATEA SA

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2020

(all amounts are in RON unless otherwise stated)

Annual financial statements for the year ended 31 December 2020

Year ended

31 December 2020

Year ended

31 December 2019

Cash flows from operating activities

Dividends received (net of withholding tax)

1,207,910,543

1,059,655,125

Proceeds from disposal of equity investments

920,634,404

200,906,333

Proceeds from transactions with treasury bills and bonds

252,957,872

188,627,069

Interest received

12,328,285

9,539,497

Amounts collected from the depository Bank of the Fund's

GDRs

4,215,191

3,903,730

Acquisition of treasury bills and bonds

(530,280,208)

(174,521,938)

Suppliers and other taxes and fees paid

(114,065,852)

(103,234,951)

Subscriptions to share capital increase of portfolio companies

(512,460)

(6,330,030)

Other payments, net

(1,310,131)

(1,366,555)

Net cash flows from operating activities

1,751,877,644

1,177,178,280

Cash flows from financing activities

Acquisition cost of treasury shares

(1,065,217,543)

(440,362,147)

Dividends paid (net of withholding tax)

(395,298,925)

(599,767,099)

Payments to shareholders related to the return of capital

(2,717,792)

(3,142,228)

Payment of fees related to the short term bank loans

(74,950)

(486,578)

Net cash flows used in financing activities

(1,463,309,210)

(1,043,758,052)

Net increase in cash and cash equivalents

288,568,434

133,420,228

Cash and cash equivalents at the beginning of the period

405,776,121

272,355,893

Cash and cash equivalents at the end of the period as per

the Statement of Cash Flows

694,344,555

405,776,121

Reconciliation of Statement of Cash Flows with the equivalent items reported in the Statement of

Financial Position

31 December 2020

31 December 2019

Cash and current accounts (see Note 12)

174,667

83,551

Distributions bank accounts (see Note 12)

34,255,963

31,799,616

Bank deposits with original maturities of less than three

months (see Note 12)

659,913,925

338,295,751

Government bonds with original maturities of less than three

months

35,597,203

694,344,555

405,776,121

Interest accrued on bank deposits (see Note 12)

68,648

86,244

Government bonds with original maturities of more than

three months and less than one year (see Note 4 b))

380,268,285

101,706,295

Total cash and current accounts, deposits with banks,

treasury bills and government bonds as per Statement of

Financial Position

1,074,681,488

507,568,660

The notes on pages 13 to 52 are an integral part of these annual financial statements.

FONDUL PROPRIETATEA SA

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020

(all amounts are in RON unless otherwise stated)

Annual financial statements for the year ended 31 December 2020

General information

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.

Starting 1 April 2016, Fondul Proprietatea is an alternative investment fund as defined by the Alternative

Investment Fund Managers Directive and by the Romanian legislation.

The Fund undertakes its activities in accordance with Law 24/2017 on issuers of financial instruments and

market operations, Law 74/2015 regarding Alternative Investment Fund Managers, Law 247/2005, Law

297/2004 regarding the capital market, as subsequently amended, Law 243/2019 regulating the alternative

investment funds and amending and supplementing certain normative acts and Companies Law 31/1990

republished as subsequently amended and it is an entity authorised, regulated and supervised by the FSA, as

an issuer. Until 2013, FSA (the financial market supervisory authority) was known as the National Securities

Commission. In accordance with its Constitutive Act, the main activity of the Fund is the management and

administration of its portfolio.

The Fund was initially established to allow the payment in shares equivalent of the compensation due 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 compensation process was

suspended and starting January 2015, the Romanian State decided to use a different compensation scheme

that no longer involves the payment in Fondul Proprietatea shares equivalent.

Starting with 1 April 2016 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 and local implementation regulations. The FTIS’

mandate is for a period of two years and current mandate was approved in June 2019 for the period 1 April

2020 – 31 March 2022. The next mandate for the period 1 April 2022 – 31 March 2024 will be discussed and

proposed for shareholders’ approval during 2021.

Until 30 November 2020, FTIS had delegated the role of Investment Manager, as well as certain

administrative functions to Franklin Templeton Investment Management Limited United Kingdom,

Bucharest Branch (“FTIML”). Starting 1 December 2020, the activity carried out by FTIML through the

delegation agreement ceased by mutual consent of the parties. Therefore, starting this date, the portfolio

management and the administrative activities previously delegated to FTIML are performed by FTIS through

its Bucharest Branch.

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.

FONDUL PROPRIETATEA SA

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020

(all amounts are in RON unless otherwise stated)

Annual financial statements for the year ended 31 December 2020

Basis of preparation

(a) Statement of compliance

These financial statements are the annual statutory financial statements of Fondul Proprietatea for the year

ended 31 December 2020 prepared in accordance with the International Financial Reporting Standards as

adopted by the European Union and applying the FSA Norm 39/2015. These financial statements are

available starting with 23 February 2021, on the Fund’s official webpage, www.fondulproprietatea.ro , and at

the Fund’s registered office.

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 2020 and continues to meet them.

In determining whether the Fund meets the criteria from the definition of an investment entity, the

management considered the investments portfolio structure and the Fund’s investment objective. Aspects

considered in making this judgement were the fact that the Fund has more than one investment, more

investors neither of which are related parties of the Fund and the ownership interests from its portfolio are in

the form of equity. The Fund’s investment objective is also a typical one for an investment entity,

respectively the maximization of returns to shareholders and the increase of the net asset value per share via

investments mainly in Romanian equities and equity-linked securities. The Fund’s management analysis

considered also other relevant factors, including the fact that almost all Fund’s investments are accounted for

using the fair value model.

(b) Basis of measurement

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 the 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.

(d) Foreign currency

Transactions in foreign currency are translated into the functional currency of the Fund at the exchange rate

at the date of the transactions. 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 are not subsequently remeasured.

The exchange rates of the main foreign currencies, published by the National Bank of Romania at 31

December 2020 were as follows: 4.8694 RON/EUR, 3.9660 RON/USD and 5.4201 RON/GBP (31

December 2019: 4.7793 RON/EUR, 4.2608 RON/USD and 5.6088 RON/GBP).

(e) Use of estimates

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.

FONDUL PROPRIETATEA SA

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020

(all amounts are in RON unless otherwise stated)

Annual financial statements for the year ended 31 December 2020

2. Basis of preparation (continued)

(e ) Use of estimates (continued)

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 annual financial

statements are included in the following notes:

x Note 4 – Risk management;

x Note 13 – Deferred tax;

x Note 14 – Equity investments;

x Note 17 – Contingencies.

(f) The impact of the COVID-19 pandemic on the Fund’s financial position

Due to the negative impact of the COVID-19 pandemic on the global economic activity and global financial

markets, the financial position and performance of the Fund was and may also be affected in the future as

well, especially by the negative change in fair value of the Fund’s holdings which is recorded in profit or

loss and also by the decrease of income from dividends received from portfolio companies.

During 2020, the Fund’s Sole Director performed a periodic analysis of multiples values of publicly traded

peer companies and adjusted the value of unlisted holdings accordingly, where the case. At the financial

year-end, the values of all unlisted portfolio holdings were updated based on the latest valuation reports

prepared by the independent valuers. Further details on the fair value adjustments are presented in Note 5.

The Fund’s Sole Director will continue to closely monitor the evolution of the economic environment and

the effects of the economic measures applied on a national and international level.

However, an accurate quantification of the further impact is difficult to estimate due to limited availability

of the information, high volatility and uncertainties existing in the market. Nevertheless, the Fund’s Sole

Director does not estimate difficulties in fulfilling the Fund’s commitments to shareholders and obligations

to third parties, the current and estimated future cash flows being sufficient to cover the payments to third

parties and the distributions to shareholders.

Additional information on the impact of the COVID-19 pandemic on the Fund is included in Note 4 “Risk

management” and Note 14 “Equity investments”.

Significant accounting policies

The significant accounting policies applied in these annual financial statements are the same as those applied

in the Fund’s financial statements for the year ended 31 December 2019 and have been applied consistently

to all periods presented in these annual financial statements.

(a) Subsidiaries and associates

Subsidiaries are entities controlled by the Fund. The Fund controls an investee when it 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 several 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.

FONDUL PROPRIETATEA SA

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020

(all amounts are in RON unless otherwise stated)

Annual financial statements for the year ended 31 December 2020

3. Significant accounting policies (continued)

(a) Subsidiaries and associates (continued)

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 2020 and 31 December 2019, there were three portfolio companies, which met the

criteria for classification as subsidiaries, and two portfolio companies which met the criteria for classification

as associates. The lists of subsidiaries and associates as at 31 December 2020 and 31 December 2019 are

disclosed in Note 18 (b) and (c).

(b) Financial assets and liabilities

i) Recognition

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

ii) Classification

x Financial assets at fair value through profit or loss

As result of the adoption of IFRS 9, as at 1 January 2018 the Fund classified all its equity investments as

equity investments at fair value through profit or loss (the default option under IFRS 9).

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.

x Financial assets and liabilities at amortised cost

Financial assets and liabilities are measured at amortised cost using the effective interest method, less any

impairment losses (of financial assets). Financial assets and liabilities at amortised cost include cash and

current accounts, deposits with banks, dividends receivable, payables to shareholders, amounts due to service

suppliers and other receivables and payables.

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.

x Financial assets reclassified as non-current assets held for sale

See accounting policy 3(c) for details.

iii) Derecognition

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.

FONDUL PROPRIETATEA SA

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020

(all amounts are in RON unless otherwise stated)

Annual financial statements for the year ended 31 December 2020

3. Significant accounting policies (continued)

(b) Financial assets and liabilities (continued)

iv) Offsetting

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.

v) Fair value measurement

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 and approved by

the Fund’s Sole Director, based on independently appraised valuation reports, using valuation techniques in

accordance with International Valuation Standards.

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 consider 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.

vi) Identification and measurement of impairment

The Fund recognises a loss allowance for expected credit losses on investments in debt instruments that are

measured at amortised cost or on other receivables. No impairment loss is recognised for the Fund’s

investments in equity instruments. The amount of expected credit losses is updated at each reporting date to

reflect changes in credit risk since initial recognition of the respective financial instrument.

The Fund recognises lifetime expected credit losses when there has been a significant increase in credit risk

since the initial recognition of the instrument. If, on the other hand, the credit risk on the financial

instrument has not increased significantly since initial recognition, the Fund measures the loss allowance

for that financial instrument at an amount equal to 12 months expected credit losses. The Fund’s assessment

of whether lifetime expected credit losses should be recognised is based on significant increases in the

likelihood or risk of a default occurring since initial recognition instead of on evidence of a financial asset

being credit-impaired at the reporting date or an actual default occurring.

Lifetime expected credit losses represent the expected credit losses that will result from all possible default

events over the expected life of a financial instrument. In contrast, 12 months expected credit losses

represents the portion of lifetime expected credit losses that is expected to result from default events on a

financial instrument that are possible within 12 months after the reporting date.

FONDUL PROPRIETATEA SA

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020

(all amounts are in RON unless otherwise stated)

Annual financial statements for the year ended 31 December 2020

3. Significant accounting policies (continued)

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 IFRS 9 Financial Instruments 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

2020 and 31 December 2019.

(d) Cash and current accounts and deposits with banks

Cash and current accounts 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.

(e) Share capital

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.

(f) Treasury shares

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.

FONDUL PROPRIETATEA SA

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020

(all amounts are in RON unless otherwise stated)

Annual financial statements for the year ended 31 December 2020

3. Significant accounting policies (continued)

(g) Provisions

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.

(h) Dividend income

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.

(i) Interest income and expense

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.

(j) Gains and losses from disposal of equity investments

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 consideration received

(including any new asset obtained less any new liability assumed) and the carrying amount of the financial

asset at the disposal date.

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 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, if any, are presented in the statement of comprehensive income under the caption “Realised net

gains/(losses) from disposal of non-current assets held for sale”.

FONDUL PROPRIETATEA SA

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020

(all amounts are in RON unless otherwise stated)

Annual financial statements for the year ended 31 December 2020

3. Significant accounting policies (continued)

(k) Foreign currency gains and losses

Foreign currency gains and losses are recognised in profit or loss on a net basis and include the realised and

unrealised foreign exchange differences. The Fund’s investments and most part of its transactions are

denominated in RON.

(l) Expenses

All expenses are recognised in profit or loss on an accrual basis.

(m) Income tax

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.

The deferred tax is the amount of future income taxes expected to be payable (recoverable) in respect of

taxable temporary differences.

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 2020 and 2019, 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.

(n) Distributions to shareholders

According to the Fund’s cash distribution policy, the distributions to shareholders may comprise dividend

distributions and returns of capital, subject to corporate approvals, legal provisions in force and existence of

financial resources.

FONDUL PROPRIETATEA SA

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020

(all amounts are in RON unless otherwise stated)

Annual financial statements for the year ended 31 December 2020

3. Significant accounting policies (continued)

(n) Distributions to shareholders (continued)

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 legal 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 except for specific instances that are individually assessed.

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.

(o) Basic and diluted earnings per share

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 time-weighting 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 2020 and 31 December 2019, none of the Fund’s issued shares or other instruments had

dilutive effect, therefore basic and diluted earnings per share are the same.

(p) Board of Nominees members’ benefits

The Fund has no employees, but from the benefits point of view, the members of the Board of Nominees

have the same fiscal 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 as part of the remunerations.

The members of the Board of Nominees are members of the pension plan of the Romanian State except those

members who are registered as contributors in other countries from the European Union and provided to the

Fund the certificates required according to the applicable legislation in force. The Fund does not operate any

pension plan or post-retirement benefits plan and therefore has no obligations regarding pensions.

(q) Standards and interpretations effective in the current year

The following new standards, amendments to the existing standards and new interpretations issued by the

International Accounting Standards Board (IASB) and adopted by the European Union, relevant to the Fund,

are effective for the current reporting period:

x Amendments to IAS 1 “Presentation of Financial Statements” and IAS 8 “Accounting Policies, Changes

in Accounting Estimates and Errors” - Definition of Material - adopted by the EU on 29 November 2019

(effective for annual periods beginning on or after 1 January 2020);

x Amendments to IFRS 9 “Financial Instruments”, IAS 39 “Financial Instruments: Recognition and

Measurement” and IFRS 7 “Financial Instruments: Disclosures” - Interest Rate Benchmark Reform -

adopted by the EU on 15 January 2020 (effective for annual periods beginning on or after 1 January 2020);

x Amendments to References to the Conceptual Framework in IFRS Standards adopted by the EU on 29

November 2019 (effective for annual periods beginning on or after 1 January 2020).

FONDUL PROPRIETATEA SA

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020

(all amounts are in RON unless otherwise stated)

Annual financial statements for the year ended 31 December 2020

3. Significant accounting policies (continued)

(q) Standards and interpretations effective in the current year (continued)

The Fund’s accounting policies are updated on a regular basis in order to comply with the effective

standards. The adoption of these new standards, amendments to the existing standards and interpretation has

not led to any material changes in the Fund’s financial statements.

(r) Standards and interpretations issued by the IASB and adopted by the EU but not yet effective

At the date of authorisation of these annual financial statements, the following amendments to the existing

standards issued by IASB and adopted by the EU are not yet effective:

x Amendments to IFRS 9 “Financial Instruments”, IAS 39 “Financial Instruments: Recognition and

Measurement”, IFRS 7 “Financial Instruments: Disclosures”, IFRS 4 “Insurance Contracts” and IFRS 16

“Leases” Phase 2 - adopted by the EU on 13 January 2021 (effective for annual periods beginning on or

after 1 January 2021).

The Fund anticipates that none of these will have a material impact on its annual financial statements in the

year of initial application. The Fund will apply these standards starting with their effective date.

(s) Standards and interpretations issued by the IASB but not yet adopted by the EU

At the date of authorisation of these annual financial statements, IFRSs as adopted by the EU do not

significantly differ from regulations adopted by the IASB except for the following standards and

amendments to the existing standards relevant to the Fund, which were not endorsed as at the reporting date

of these financial statements:

x Amendments to IAS 1 “Presentation of Financial Statements” - Classification of Liabilities as Current

or Non-Current (effective for annual periods beginning on or after 1 January 2023);

x Amendments to IAS 37 “Provisions, Contingent Liabilities and Contingent Assets” - Onerous Contracts

- Cost of Fulfilling a Contract (effective for annual periods beginning on or after 1 January 2022);

x Amendments to IFRS 10 “Consolidated Financial Statements” and IAS 28 “Investments in Associates

and Joint Ventures” - Sale or Contribution of Assets between an Investor and its Associate or Joint

Venture and further amendments (effective date deferred indefinitely until the research project on the

equity method has been concluded);

x Amendments to various standards due to “Improvements to IFRSs (cycle 2018 -2020)” resulting from

the annual improvement project of IFRS (IFRS 1, IFRS 9, IFRS 16 and IAS 41) primarily with a view

to removing inconsistencies and clarifying wording. The amendments to IFRS 1, IFRS 9 and IAS 41 are

effective for annual periods beginning on or after 1 January 2022. The amendment to IFRS 16 only

regards an illustrative example, so no effective date is stated.

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.

Risk management

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 FTIS.

FONDUL PROPRIETATEA SA

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020

(all amounts are in RON unless otherwise stated)

Annual financial statements for the year ended 31 December 2020

4. Risk management (continued)

(a) Market risk

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.

(i) Equity price risk

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 it is the primary risk impacting

the Fund. Diversification across securities and industries, to the extent possible, 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”, “Oil and gas” and

“Power and gas utilities: distribution and supply” sectors.

The Fund’s exposure to industries is detailed below:

31 December 2020

31 December 2019

Power utilities: generation

5,128,900,000

5,189,786,742

Oil and gas

1,440,749,726

2,531,605,991

Power and gas utilities: distribution, supply

1,312,100,000

1,849,700,000

Infrastructure

950,292,324

1,338,147,171

Heavy industry

226,084,700

307,105,400

Aluminum

163,261,759

170,550,231

Postal services

13,100,000

11,500,000

Others

12,220,759

14,687,847

9,246,709,268

11,413,083,382

As at 31 December 2020, the listed and liquid investments represented 17% (31 December 2019: 26%) of the

total Fund’s equity investments. As at 31 December 2020, the Fund’s listed liquid holdings are in amount of

RON 1,604,011,486 (31 December 2019: RON 3,005,442,964) and represent investments in companies

listed on Bucharest Stock Exchange which are included in the BET-BK index. For these investments, a ten

per cent increase in the BET-BK index at 31 December 2020 would impact profit or loss and would

determine an increase in equity of RON 181,869,994 (31 December 2019: RON 323,233,053). An equal

change in the opposite direction as at 31 December 2020 would impact profit or loss and would determine a

decrease in equity by RON 181,869,994 (31 December 2019: RON 323,233,053). This analysis assumes that

all other variables remain constant.

The Fund’s equity investments also include both unlisted instruments issued by companies domiciled in

Romania and listed but not liquid instruments, both of which representing 83% of total equity investments as

at 31 December 2020 (74% of total equity investments as at 31 December 2019). Although Fund’s

management believes that its estimates of fair value for these equity investments are appropriate, the use of

different methodologies or assumptions could lead to different measurement of fair value. Changing one or

more of the inputs used to reasonably determine alternative assumptions would have the following effects on

the profit or loss:

FONDUL PROPRIETATEA SA

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020

(all amounts are in RON unless otherwise stated)

Annual financial statements for the year ended 31 December 2020

4. Risk management (continued)

(a) Market risk (continued)

(i) Equity price risk (continued)

Valuation techniques used

Change in the significant unobservable inputs used

in the valuation as at 31 December 2020

Impact on the

profit or loss

Market approach -

comparable companies

(based on EBITDA multiple)

EBITDA multiple increase by 10%

598,377,340

EBITDA multiple decrease by 10%

(598,377,340)

Discount for lack of marketability increase by 10%

(109,397,261)

Discount for lack of marketability decrease by 10%

109,397,261

Income approach -

discounted cash flow method

EBITDA margin increase by 10%

250,540,000

EBITDA margin decrease by 10%

(125,320,000)

Weighted average cost of capital increase with 0.50%

(56,570,000)

Weighted average cost of capital decrease with 0.50%

120,150,000

Long-term revenue growth rate increase with 0.50%

91,650,000

Long-term revenue growth rate decrease with 0.50%

(43,210,000)

The above sensitivity analysis was performed for the equity investments representing 97% of the total

unlisted and illiquid portfolio and took into account the most relevant unobservable inputs impacting the

holdings values and their reasonable possible variance. The analysis assumes that all other variables remain

constant.

(ii) Interest rate risk

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 risk profile of the Fund’s interest-bearing financial instruments is:

Fixed rate instruments

31 December 2020

31 December 2019

Bank deposits with original maturities of less

than three months

659,913,925

338,295,751

Government bonds

369,955,045

134,732,025

1,029,868,970

473,027,776

The above balances of fixed rate instruments do not include the related accrued interest.

(iii) Currency risk

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 2020, the local currency depreciated compared to the EUR (from 4.7793 RON/EUR at 31 December

2019 to 4.8694 RON/EUR at 31 December 2020) and appreciated compared to the USD (from 4.2608

RON/USD at 31 December 2019 to 3.9660 RON/USD at 31 December 2020) and to the GBP (from 5.6088

RON/GBP at 31 December 2019 to 5.4201 RON/GBP at 31 December 2020).

The Fund’s exposure to currency risk was as follows:

FONDUL PROPRIETATEA SA

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020

(all amounts are in RON unless otherwise stated)

Annual financial statements for the year ended 31 December 2020

4. Risk management (continued)

(a) Market risk (continued)

(iii) Currency risk (continued)

RON

31 December 2020

31 December 2019

Monetary assets

Petty cash

114

Cash and current accounts

69,819

73,169

Distributions bank accounts

34,255,963

31,799,616

Deposits with banks

659,982,573

338,381,995

Government bonds

380,268,285

137,303,498

Other financial assets

445,140

30,030

1,075,021,894

507,588,422

Monetary liabilities

Other financial liabilities

(35,684,999)

(33,034,313)

1,039,336,895

474,554,109

EUR (in RON equivalent)

31 December 2020

31 December 2019

Monetary assets

Current accounts with banks

2,971

3,905

Monetary liabilities

Other financial liabilities

(16,447,827)

(13,431,153)

(16,444,856)

(13,427,248)

USD (in RON equivalent)

31 December 2020

31 December 2019

Monetary assets

Current accounts with banks

99,253

2,804

Monetary liabilities

Other financial liabilities

(475,920)

(512,325)

(376,667)

(509,521)

GBP (in RON equivalent)

31 December 2020

31 December 2019

Monetary assets

Current accounts with banks

2,510

3,559

Monetary liabilities

Other financial liabilities

(39,695)

(37,185)

3,559

FONDUL PROPRIETATEA SA

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020

(all amounts are in RON unless otherwise stated)

Annual financial statements for the year ended 31 December 2020

4. Risk management (continued)

(a) Market risk (continued)

(iii) Currency risk (continued)

A ten percent strengthening of the RON against the EUR, USD and GBP respectively as at 31 December

2020 and 31 December 2019 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 2020

31 December 2019

EUR

1,644,486

1,342,725

USD

37,667

50,952

GBP

3,719

(356)

As at 31 December 2020 and 31 December 2019, the Fund did not hold any equity investment denominated

in a currency other than RON.

(b) Credit and counterparty risk

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.

(i) Cash and deposits with banks

As at 31 December 2020, the Fund’s maximum exposure to credit risk from cash and deposits with banks

was RON 694,413,089 (31 December 2019: RON 370,265,048).

Cash and deposits with banks are held with the following banks:

Cash and deposits held with banks

31 December 2020

31 December 2019

Citi Bank

237,332,282

36,532,565

ING Bank

141,017,436

85,019,692

Banca Comerciala Romana

135,870,871

121,599,961

Unicredit Bank

135,816,579

85,004,808

BRD - Groupe Societe Generale

44,374,853

42,106,015

Raiffeisen Bank

1,068

2,007

694,413,089

370,265,048

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 “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 was made and the exposure limits were

decided upon based on their credit ratings.

All current accounts and deposit balances are assessed to have low credit risk as they are held with reputable

banking institutions.

(ii) Treasury bills

During 2020 and 2019 the Fund invested in treasury bills, but all of them have the maturity date during the

year, therefore the balances as at 31 December 2020 and 31 December 2019 are nil. These items are assessed

to have low credit risk being issued by the Ministry of Public Finance of Romania.

FONDUL PROPRIETATEA SA

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020

(all amounts are in RON unless otherwise stated)

Annual financial statements for the year ended 31 December 2020

4. Risk management (continued)

(b) Credit and counterparty risk (continued)

(iii) Government bonds

As at 31 December 2020, the Fund’s maximum exposure to credit risk from government bonds was RON

380,268,285 (31 December 2019: RON 137,303,498). These items are assessed to have low credit risk being

issued by the Ministry of Public Finance of Romania.

As at 31 December 2020, the Fund held the following government bonds, denominated in RON, which have

original maturities of less than one year:

ISI

Value as at

No. of units

Coupon

rate

Maturity date

31 December 2020

RO1521DBN041

249,205,686

48,520

3.25%

22-Mar-2021

RO1121DBN032

131,062,599

12,500

5.95%

11-Jun-2021

Total

380,268,285

As at 31 December 2019, the Fund held the following government bonds, denominated in RON, which have

original maturity of less than one year:

ISIN

Value as at

31 December 2019

No. of units

Coupon

rate

Maturity

date

RO1620DBN017

137,303,498

27,000

2.25%

26-Feb-2020

Total

137,303,498

(iv) Other assets

As at 31 December 2020 and 31 December 2019, the Fund did not have significant credit risk from other

assets.

As at 31 December 2019, the Fund has a dividend receivable in total amount of RON 11,379,669, for which a

corresponding impairment adjustment was recorded, mainly comprising the outstanding dividend from CN

Aeroporturi Bucuresti SA of RON 10,668,574. The dividend receivable from CN Aeroporturi Bucuresti SA

was written-off from the accounting on 31 December 2020 due to the very low probability to be received by

the Fund considering the lack of a decision of CN Aeroporturi Bucuresti shareholders clarifying the source of

dividend distribution.

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 Fund’s equity investments include unlisted instruments issued by companies domiciled in Romania which

may be considered illiquid and listed but not liquid instruments (respectively 83% of total equity investments

as at 31 December 2020 and 74% of total equity investments as at 31 December 2019). Not all shares listed

on the Bucharest Stock Exchange are considered liquid due to insufficient volumes of transactions. Liquidity

can vary over 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 some of its investments in these instruments within the time constraints imposed

by its own 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. The Fund prudently manages liquidity risk by maintaining an optimal

level of liquid assets to finance current liabilities.

The following tables present the split of the Fund’s financial assets and financial liabilities by residual

maturities:

FONDUL PROPRIETATEA SA

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020

(all amounts are in RON unless otherwise stated)

Annual financial statements for the year ended 31 December 2020

4. Risk management (continued)

31 December 2020

Less than 1

month

1 to 3 months

3 to 12

months

No fixed

maturity

Total

Financial assets

Cash and current accounts

174,667

Distributions bank

accounts

34,255,963

Deposits with banks

659,982,573

Government bonds

249,205,686

131,062,599

380,268,285

Equity investments

9,246,709,268

Other financial assets

445,140

694,858,343

249,205,686

131,062,599

9,246,709,268

10,321,835,896

Financial liabilities

Other financial liabilities

52,648,441

31 December 2019

Less than 1

month

1 to 3 months

3 to 12

months

No fixed

maturity

Total

Financial assets

Cash and current accounts

83,551

Distributions bank

accounts

31,799,616

Deposits with banks

338,381,995

Government bonds

137,303,498

Equity investments

11,413,083,382

Other financial assets

30,030

370,295,192

137,303,498

11,413,083,382

11,920,682,072

Financial liabilities

Other financial liabilities

46,977,791

(d) Taxation risk

The Fund had to comply with the Romanian tax legislation in force and with any direct applicable tax

legislation issued by the European Union. Interpretation of the text and practical implementation procedures

of the 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 several 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 and may extend not only to tax matters but to other legal and regulatory matters

in which the applicable agency may be interested. It is possible that the Fund will be subject to regular controls

as new laws and regulations are issued.

The frequent changes of Romanian tax legislation without observing the transparency rules also increase the

uncertainty and tax risk.

FONDUL PROPRIETATEA SA

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020

(all amounts are in RON unless otherwise stated)

Annual financial statements for the year ended 31 December 2020

4. Risk management (continued)

(e) Operating environment

Equity markets may be exposed to temporary higher levels of volatility triggered by uncertainty surrounding

political events either locally or globally. Such events may in particular affect the oil and energy sectors, which

represent an important part of the Fund’s portfolio. Commodity markets may as well experience prolonged

volatility given the uncertainty regarding global trade relationships and increasing protectionism.

Both political uncertainty and fluctuation in commodity prices, particularly in the energy sector, can have an

impact on the Romanian economy and consequently on the Fund’s portfolio companies.

The widespread nature of the COVID-19 outbreak and the measures taken to contain the spread continue to

have a significant impact on global economic activity and this is likely to reverberate for the next period. Many

countries have taken decisive steps, such as prompt monetary and fiscal policy responses. Central banks in the

United States and Europe cut the interest rates and the National Bank of Romania has also joined the trend and

has adjusted the monetary policy to lower interest rates. The quantum of the fiscal and monetary policy

response to mitigate the impact of the situation is unprecedented. Governments across the world, Romania

included, are taking numerous actions to support their economies, from extended unemployment benefits to

packages targeting small businesses, hospitals and healthcare centres, which will lead to increased budgetary

constraints in the short term.

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.

(f) Operational risk

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 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 and overall cost effectiveness, avoiding control

procedures that restrict initiative and creativity.

(g) Capital management

The Fund’s policy is to maintain a strong capital base to sustain shareholders’ confidence and future

developments.

The Fund’s shareholders’ equity comprises share capital, reserves and retained earnings, net of treasury shares.

The shareholders’ equity was RON 10,266,919,426 at 31 December 2020 (31 December 2019: RON

11,871,451,989).

The Fund is not subject to externally imposed capital requirements.

FONDUL PROPRIETATEA SA

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020

(all amounts are in RON unless otherwise stated)

Annual financial statements for the year ended 31 December 2020

Financial assets and financial liabilities

Accounting classifications and fair values

The table below presents the carrying amounts and fair values of the Fund’s financial assets and financial

liabilities:

Other

financial

assets at

amortised cost

Fair value

through profit

or loss

Other financial

liabilities at

amortised cost

Total carrying

amount

Fair value

31 December 2020

Cash and current

accounts

174,667

Distributions bank

accounts

34,255,963

Deposits with banks

659,982,573

Government bonds

380,268,285

Equity investments

9,246,709,268

Other financial

assets

445,140

Other financial

liabilities

(52,648,441)

694,858,343

9,626,977,553

(52,648,441)

10,269,187,455

Other

financial

assets at

amortised cost

Fair value

through profit

or loss

Other

financial

liabilities at

amortised cost

Total carrying

amount

Fair value

31 December 2019

Cash and current

accounts

83,551

Distributions bank

accounts

31,799,616

Deposits with banks

338,381,995

Government bonds

137,303,498

Equity investments

11,413,083,382

Other financial

assets

30,030

Other financial

liabilities

(46,977,791)

370,295,192

11,550,386,880

(46,977,791)

11,873,704,281

FONDUL PROPRIETATEA SA

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020

(all amounts are in RON unless otherwise stated)

Annual financial statements for the year ended 31 December 2020

Gross dividend income

Year ended

31 December 2020

Year ended

31 December 2019

Hidroelectrica SA

399,532,431

558,165,909

E-Distributie Banat SA

213,812,923

E-Distributie Muntenia SA

187,961,077

OMV Petrom SA

175,569,990

152,915,798

E-Distributie Dobrogea SA

121,130,893

CN Aeroporturi Bucuresti SA

36,700,452

93,039,412

Nuclearelectrica SA

34,883,435

26,728,073

Societatea Nationala a Sarii SA

19,803,298

37,428,152

Engie Romania SA

12,084,098

16,411,668

ENEL Energie Muntenia SA

10,586,397

CN Administratia Porturilor Maritime SA

5,492,149

3,676,101

Alcom SA

275,360

1,602,858

Alro SA

33,349,130

BRD Groupe Societe Generale SA

18,306,434

Other

824,504

1,271,372

1,218,657,007

942,894,907

The dividend income was subject to 5% Romanian withholding tax in 2020 and 2019. In cases where the

relevant shareholding of the Fund was above 10% of total share capital of the paying company, for at least one

year prior to the dividend distribution date, a withholding tax exemption is applied.

According to the Annual Cash Distribution Policy of the Fund, the special cash distributions received from

portfolio companies are not subject to Fund’s dividend distribution to shareholders. The Fund Manager may

propose the distribution to shareholders of such amounts after considering the on-going measures imposed by

the Discount Control Mechanism and the available cash. For the purpose of the Annual Cash Distribution Policy

of the Fund, the special cash distributions are the amounts distributed by the portfolio companies from other

sources than the annual net profit included in the latest annual financial statements. From the total gross

dividend income for the year ended 31 December 2020 a total amount of RON 683,070,542 represent special

cash distributions (year ended 31 December 2019: RON 259,341,245).

Net (loss)/gain from equity investments at fair value through profit or loss

Year ended

31 December 2020

Year ended

31 December 2019

Unrealised loss from equity investments at fair

value through profit or loss

(1,432,785,224)

(98,827,836)

Unrealised gain from equity investments at fair

value through profit or loss

329,597,853

2,359,136,734

Realised loss from equity investments at fair value

through profit or loss

(198,900,000)

Realised gain from equity investments at fair value

through profit or loss

56,250,312

9,932,589

Total

(1,245,837,059)

2,270,241,487

FONDUL PROPRIETATEA SA

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020

(all amounts are in RON unless otherwise stated)

Annual financial statements for the year ended 31 December 2020

7. Net (loss)/gain from equity investments at fair value through profit or loss (continued)

The unrealised loss from equity investments at fair value through profit or loss for the year ended 31 December

2020 was generated by the negative change in fair value of the Fund’s holdings. These negative changes were

triggered by the negative impact of the COVID-19 pandemic on the economic activity and global capital

markets, but also by the decrease in value of certain Fund’s unlisted portfolio companies as a result of special

dividends declared by these companies (as for example, E-Distributie companies and Hidroelectrica SA). The

most significant decreases of fair value were recorded by the holdings in E-Distributie group (total unrealised

loss of RON 591,600,000), OMV Petrom SA (unrealised loss of RON 529,856,264) and CN Aeroporturi

Bucuresti SA (unrealised loss of RON 398,800,000).

The unrealised gain from equity investments at fair value through profit or loss for the year ended 31 December

2020 was mainly generated by the change in fair value for the holding in Hidroelectrica SA (unrealised gain of

RON 242,400,000).

The unrealised gain from equity investments at fair value through profit or loss for the year ended 31 December

2019 was mainly generated by the change in fair value for the holding in Hidroelectrica SA (unrealised gain of

RON 1,001,500,000) and OMV Petrom SA (unrealised gain of RON 838,205,116), as a result of the strong

performance of these companies.

The realised loss and gain 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 the last annual financial statements date. For the year ended 31 December 2020, these were generated by

the partial disposal of the holding in OMV Petrom SA (realised loss of RON 198,900,000) and disposal of the

entire holding in Nuclearelectrica SA (realised gain of RON 56,250,312).

The realised gain from disposal of equity investments at fair value through profit or loss for the year ended 31

December 2019 was generated by the disposal of the entire holding in BRD Groupe Societe Generale SA

(realised gain of RON 9,932,589).

Operating expenses

Year ended

31 December 2020

Year ended

31 December 2019

Administration fees (i)

55,232,614

50,297,447

FSA monthly fees (ii)

9,384,781

9,801,000

Third party services (iii)

9,001,599

10,618,654

Intermediaries and other fees related to disposal

of portfolio holdings (iv)

5,515,939

1,501,030

BON remunerations and related taxes (v)

1,376,217

1,407,175

Depositary bank fee

569,074

672,860

Other operating expenses

1,171,721

1,581,460

82,251,945

75,879,626

(i) Administration fees

The administration fees include the base fee and the distribution fee. The distribution fee related to dividend

distributions to shareholders is recognised through profit or loss while the distribution fee related to the buy-

backs is recognised directly in equity as buy-backs acquisition cost. An additional base fee of 0.05% is payable

to FTIS as performance fee when the discount of the Fund’s share price to net asset value per share is below or

equal to 20% but above 15% and a further 0.05% when the discount is equal or below 15%.

The administration fees recorded during the year ended 31 December 2020 and the year ended 31 December

2019 are presented in the table below:

FONDUL PROPRIETATEA SA

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020

(all amounts are in RON unless otherwise stated)

Annual financial statements for the year ended 31 December 2020

8. Operating expenses (continued)

Year ended

31 December 2020

Year ended

31 December 2019

Base fee

49,089,707

43,853,105

Distribution fee related to dividend distributions to

shareholders

4,183,001

6,423,188

Performance fee

1,959,906

21,154

Administration fees recognised in profit or loss

55,232,614

50,297,447

Distribution fees related to buy-backs recognised in

equity

10,674,300

4,402,209

Total administration fees

65,906,914

54,699,656

The administration fees are invoiced and paid on a quarterly basis.

(ii) FSA monthly fees

During 2020 and 2019, the FSA fee was 0.0078% per month applied on the total net asset value. For the

period 1 April – 14 May 2020, FSA granted a 25% discount on the monthly fees to all market issuers as result

of the emergency state declared due the COVID-19 pandemic.

(iii) Third party services

Third party services recorded during the period included the following categories of expenses:

Year ended

31 December 2020

Year ended

31 December 2019

Legal consultancy and litigation assistance

4,083,794

5,108,475

Portfolio valuation services

1,630,453

1,297,291

Financial auditor’s fees

651,912

615,899

Board of Nominees accommodation, transport and

insurance costs

416,858

638,637

Investors' relations expenses

396,314

845,075

Public relations services

368,324

299,916

Tax compliance and advisory services

351,514

377,319

Regulatory and compliance expenses

323,510

273,584

Other services

778,920

1,162,458

9,001,599

10,618,654

The financial audit fees are recorded in the year they relate to. The financial auditor of Fondul Proprietatea for

the years 2020 and 2019 was Deloitte Audit SRL.

The total audit fees for the audit of the 2020 annual statutory financial statements, prepared in accordance

with IFRS, amount approximately to RON 530,863, including VAT. In addition, during 2020 Deloitte Audit

SRL provided other assurance and non-audit services specifically requested by the Financial Supervisory

Authority, for a total fee of RON 121,049, including VAT.

The total audit fees for the audit of the 2019 annual statutory financial statements, prepared in accordance

with IFRS, amount approximately to RON 496,582, including VAT. In addition, during 2019 Deloitte Audit

SRL provided other assurance and non-audit services specifically requested by the Financial Supervisory

Authority, for a total fee of RON 119,317, including VAT.

(iv) Intermediaries and other fees related to disposal of portfolio holdings

Intermediaries and other fees related to the disposal of portfolio holdings for the year ended 31 December

2020 and the year ended 31 December 2019 mainly include the brokerage fees related to the disposal of the

listed holdings on the stock exchange market and expenses recorded in relation to the consultancy services for

the potential disposals of certain unlisted holdings.

FONDUL PROPRIETATEA SA

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020

(all amounts are in RON unless otherwise stated)

Annual financial statements for the year ended 31 December 2020

8. Operating expenses (continued)

(v) BON remunerations and related taxes

Remunerations and related taxes included the remunerations paid to the members of the Board of Nominees

as well as the related taxes and contributions payable to the Romanian State budget (see Note 18 (a) for

further details).

Finance cost

On 29 June 2020, the Fund extended the credit facility concluded with BRD - Groupe Societe Generale SA

for a period of another two years, until 29 June 2022. The credit facility is for general corporate and

operational use and has a committed amount of RON 45,000,000. The Fund may access, subject to bank’s

approval and in accordance with the provisions of the credit facility agreement, additional financing in excess

of the said committed amount, without exceeding a total amount of RON 100,000,000 at any given time.

The Fund did not use the credit facility during the year ended 31 December 2020 and the year ended 31

December 2019. The finance costs for the year ended 31 December 2020 of RON 76,500 (the year ended 31

December 2019: RON 437,667) comprise the commitment fee on undrawn amounts from the credit facility.

There are no outstanding amounts from the credit facility as at 31 December 2020 and 31 December 2019.

Income tax

No current tax expense and no deferred tax were recorded during the year ended 31 December 2020 and the

year ended 31 December 2019.

Year ended

31 December 2020

Year ended

31 December 2019

Reconciliation of effective tax rate

Net (loss)/profit for the period

(102,978,968)

3,129,870,912

Withholding tax on the dividend income

(10,522,671)

(9,897,515)

(Loss) /Profit excluding income tax

(92,456,297)

3,139,768,427

Income tax benefit/(expense) using the standard

tax rate (16%)

14,793,008

(502,362,948)

Impact on the income tax of:

Taxation applied on dividend income

184,462,450

140,965,670

Non-taxable income (other than dividend income)

266,851,876

291,322,079

Non-deductible expenses

(396,084,675)

(92,478,984)

Elements similar to revenues (taxable equity items)

(456,800)

(234,019)

Fiscal result impact in the current period

(80,088,530)

127,851,720

Profit appropriation to legal reserves

25,038,967

Tax on income (i.e. withholding tax on the

dividend income)

(10,522,671)

(9,897,515)

The fiscal result impact as at 31 December 2020 of RON 80,088,530 included in the table above represents

the unrecognised deferred tax for the tax losses recorded for the year ended 31 December 2020 (see Note 13

for further details). The fiscal impact as at 31 December 2019 of RON 127,851,720 represents the current tax

on profit for the year ended 31 December 2019 which was offset by the Fund’s tax losses carried forward.

As at 31 December 2020 and 31 December 2019 there is no income tax due or to be recovered from the State

Budget by the Fund.

See Note 13 Deferred tax for details regarding the deferred tax computation and recognition.

FONDUL PROPRIETATEA SA

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020

(all amounts are in RON unless otherwise stated)

Annual financial statements for the year ended 31 December 2020

Basic and diluted (loss)/earnings per share

Basic (loss)/earnings per share is calculated by dividing the loss or 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

2020 and 31 December 2019, none of the Fund’s issued shares or other instruments had dilutive effect,

therefore basic and diluted (loss)/earnings per share are the same.

Year ended

31 December 2020

Year ended

31 December 2019

(Loss)/Profit for the period

(102,978,968)

3,129,870,912

Weighted average number of ordinary shares

6,496,260,041

7,056,072,680

Basic and diluted (loss)/earnings per share

(0.0159)

0.4436

Cash and current accounts and deposits with banks

31 December 2020

31 December 2019

Petty cash

114

Current accounts with banks

174,553

83,437

Distributions bank accounts

34,255,963

31,799,616

Cash and current accounts

34,430,630

31,883,167

31 December 2020

31 December 2019

Bank deposits with original maturities of less

than three months

659,913,925

338,295,751

Interest accrued on bank deposits

68,648

86,244

Deposits with banks

659,982,573

338,381,995

The cash held in 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, except for specific instances that are individually

assessed.

Deferred tax

As at 31 December 2020 and 31 December 2019 there is no difference between the carrying amount and tax

base of assets and liabilities that could result in amounts that are deductible/ taxable when determining taxable

profit or tax loss of future periods. In consequence, as at 31 December 2020 and 31 December 2019, the net

deferred tax position is nil as the Fund did not recognise any deferred tax asset or deferred tax liability.

As at 31 December 2020 the unused fiscal loss carried forward amounts to RON 3,420,608,901 (31 December

2019: RON 2,920,055,589) out of which RON 2,920,055,589 will expire on 31 December 2022 and RON

500,553,312 will expire on 31 December 2027.

As at 31 December 2020 and 31 December 2019 the Fund did not recognise any deferred tax asset for the

unused tax losses carried forward as there is a high probability that there will be insufficient future taxable

profit against which the loss carried forward can be utilised.

The effective tax rate used to calculate the deferred tax position of the Fund is 16% (standard tax rate).

There was no movement in the deferred tax position during the year ended 31 December 2020 and the year

ended 31 December 2019. The deferred tax balances during both these periods were zero.

FONDUL PROPRIETATEA SA

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020

(all amounts are in RON unless otherwise stated)

Annual financial statements for the year ended 31 December 2020

Equity investments

All Fund’s equity investments are classified at fair value through profit or loss.

The equity instruments of the Fund are valued at fair value as follows:

x At fair value, determined either by reference to published prices on the stock exchange where shares are

traded (listed securities) or assessed using valuation techniques in accordance with International Valuation

Standards (unlisted securities);

x Valued at nil, for holdings in companies in liquidation, dissolution, bankruptcy, insolvency, judicial

reorganisation or which ceased their activity.

The movement in the carrying amounts of equity investments at fair value through profit or loss during the year

ended 31 December 2020 and the year ended 31 December 2019 is presented below:

Year ended

31 December 2020

Year ended

31 December 2019

Opening balance

11,413,083,382

9,337,440,399

Net (loss)/gain from equity investments at fair

value through profit or loss (see Note 7)

(1,245,837,059)

2,270,241,487

Disposals

(920,634,405)

(200,898,504)

Subscriptions to share capital increase of portfolio

companies

97,350

6,300,000

Closing balance

9,246,709,268

11,413,083,382

Disposals

During the year ended 31 December 2020, the Fund sold part of its holdings in OMV Petrom SA and the entire

holding in Nuclearelectrica SA.

During the year ended 31 December 2019, the Fund sold its entire holding in BRD Groupe Societe Generale

SA.

Portfolio

As at 31 December 2020 and 31 December 2019 the Fund’s portfolio comprised the following holdings:

31 December 2020

31 December 2019

Hidroelectrica SA

5,128,900,000

4,886,500,000

OMV Petrom SA

1,440,749,726

2,531,605,991

CN Aeroporturi Bucuresti SA

624,100,000

1,022,900,000

Engie Romania SA

538,800,000

512,400,000

E-Distributie Banat SA

272,700,000

519,300,000

Administratia Porturilor Maritime SA

235,800,000

248,700,000

E-Distributie Muntenia SA

227,800,000

428,500,000

Societatea Nationala a Sarii SA

201,200,000

275,400,000

E-Distributie Dobrogea SA

177,200,000

321,500,000

Alro SA

163,261,759

170,550,231

Romaero SA

56,140,375

30,431,231

Enel Energie SA

52,500,000

26,300,000

Enel Energie Muntenia SA

43,100,000

41,700,000

Zirom SA

24,884,700

31,705,400

CN Administratia Canalelor Navigabile SA

17,751,740

14,899,840

Nuclearelectrica SA

303,286,742

Other

41,820,968

47,403,947

Total equity investments

9,246,709,268

11,413,083,382

FONDUL PROPRIETATEA SA

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020

(all amounts are in RON unless otherwise stated)

Annual financial statements for the year ended 31 December 2020

14. Equity investments (continued)

None of the equity investments are pledged as collateral for liabilities.

Fair value hierarchy

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:

x Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities that the Fund can

access at the measurement date;

x Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability,

either directly (i.e. as prices) or indirectly (i.e. derived from prices);

x Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

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:

31 December 2020

Level 1

Level 2

Level 3

Total

Equity investments:

1,604,011,486

7,642,697,782

9,246,709,268

Power utilities: generation

5,128,900,000

Oil and gas

1,440,749,726

Power and gas utilities:

distribution, supply

1,312,100,000

Infrastructure

950,292,324

Heavy industry

226,084,700

Aluminum

163,261,759

Postal services

13,100,000

Other

12,220,759

Government bonds

380,268,285

Total

1,984,279,771

7,642,697,782

9,626,977,553

31 December 2019

Level 1

Level 2

Level 3

Total

Equity investments:

3,005,442,964

8,407,640,418

11,413,083,382

Power utilities: generation

303,286,742

4,886,500,000

5,189,786,742

Power and gas utilities:

distribution, supply

1,849,700,000

Oil and gas

2,531,605,991

Infrastructure

1,338,147,171

Heavy industry

307,105,400

Aluminum

170,550,231

Postal services

11,500,000

Other

14,687,847

Government bonds

137,303,498

Total

3,142,746,462

8,407,640,418

11,550,386,880

FONDUL PROPRIETATEA SA

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020

(all amounts are in RON unless otherwise stated)

Annual financial statements for the year ended 31 December 2020

14. Equity investments (continued)

The fair value hierarchy for the other assets and liabilities which are not classified at fair value through profit

or loss but for which the fair value amount was disclosed in these annual financial statements (see Note 5), is

either Level 1, respectively for cash and cash equivalents and other financial liabilities or Level 3,

respectively for all other financial assets.

The table below presents the movement in Level 3 equity investments during the year ended 31 December

2020 and the year ended 31 December 2019:

Year ended

31 December 2020

Year ended

31 December 2019

Opening balance

8,407,640,418

7,055,038,913

Net unrealised (loss)/gain recognised in profit or loss

(764,942,636)

1,346,301,505

Subscriptions to share capital increase of portfolio

companies

6,300,000

Transfers in/(out) of Level 3

Closing balance

7,642,697,782

8,407,640,418

The level in the fair value hierarchy within which the fair value measurement is classified is determined based

on the lowest level input that is significant to the fair value measurement. For this purpose, the significance of

an input is assessed against the fair value measurement in its entirety.

If a fair value measurement uses observable inputs that require significant adjustments based on unobservable

inputs, that financial instrument is classified on Level 3. Assessing the significance of an 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, the equity investments valuations were performed 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 at 31 December 2020, the fair value for 85% of the Level 3 equity investments (31 December 2019: for 96%

of the Level 3 equity investments) was determined by applying the market comparison technique using

comparable trading multiples for EBITDA, while the fair value for almost 15% of the Level 3 equity

investments (31 December 2019: for almost 4% of the Level 3 equity investments) was determined by applying

the income approach using the discounted cash flow method.

In 2020, the valuation technique used for the valuation of the holdings in the airports and the maritime ports

companies (part of the investments in the infrastructure sector) was changed from the market approach -

comparable companies, which was used in the previous years, to income approach method, mainly due to the

following reasons:

x Market multiples of the companies in the airports peer group have significantly varied over the last twelve

months as the companies were severely impacted by the COVID-19 crisis thus displaying high levels of

volatility.

x The restrictions due to COVID-19 are not aligned in all countries and airports may be affected differently

considering their level of cash, debt, size, number of passengers.

x Industry analyses indicate that worldwide maritime ports were differently affected by the COVID-19

pandemic, depending on the specificity of their activities. There is no information related to how this is

reflected in the level for multiples of each comparable companies in the peer group.

x Despite the worldwide impact of COVID-19 on marine industry, the Fund’s holding in the Romanian

maritime ports (i.e. Constanta Ports) displayed a stable evolution during the first half of 2020, as the

company’s operations mainly relate to maritime traffic of goods and not passengers.

FONDUL PROPRIETATEA SA

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020

(all amounts are in RON unless otherwise stated)

Annual financial statements for the year ended 31 December 2020

14. Equity investments (continued)

The valuation reports were prepared as at 31 October 2020 (for 31 December 2019: as at 30 September 2019),

based on financial information available for the companies under valuation at the respective dates.

Given the current context of the COVID-19 pandemic, the valuations are based on prevailing market,

economic and other conditions at the valuation date and correspond with a period of significant volatility in

global financial markets and widespread macro-economic uncertainty. To the extent possible, these conditions

were reflected in the valuation. However, the factors driving these conditions can change over relatively short

periods of time. The impact of any subsequent changes in these conditions on the global economy and

financial markets generally, and on the Fund’s portfolio holdings specifically, could impact the estimated fair

values in the future, either positively or negatively. In light of the spread of the coronavirus and the

emergence to find some solutions, the existing uncertainty regarding the impact for businesses could persist

for sometime. As a result, the current valuation may not have identified, or reliably quantified the impact of

all such uncertainties and implications.

The Fund’s management has analysed the period between the date of the valuation reports and the date when

these annual financial statements were authorised for issue and 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 annual financial statements.

Based on the analysis of market multiples evolution between 31 October 2020 and 31 December 2020,

generally, it resulted that all multiples followed an increasing trend, the main drivers including: the decrease

in yields, the descending trend in market risk premiums and additional factors related to market excitement

due to improved perspectives regarding COVID-19. In addition, for the power generation sector, the increase

in the price of CO

certificates was noted as a potential factor for the market multiples increase.

The Fund’s Sole Director believes that the fair values of the equity investments presented in these financial

statements represent the best estimates under the current conditions and based on available information.

Considering the economic uncertainties, the increased economic risk and the strong volatility existing in the

capital markets due to the negative impact of the COVID-19 pandemic, the Fund’s Sole Director closely

monitors the evolution of the economic environment and the effects of the economic measures on the Fund’s

portfolio companies. The Fund’s Sole Director will perform a periodic analysis of multiples values of publicly

traded peers companies and will adjust the value of unlisted holdings accordingly, if the case.

The Fund has an established control framework with respect to the measurement of fair values. This framework

includes a valuation department and a valuation committee, both independent of portfolio management which

have overall responsibility for fair value measurements.

The economic uncertainties are expected to continue in the foreseeable future and consequently, 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 annual 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 consider these

factors in pricing a transaction.

For the financial investments classified as Level 1, the Fund had adequate information available with respect

to active markets, with sufficient trading volume, for obtaining accurate prices.

The following tables set out information about the significant unobservable inputs used at 31 December 2020

and 31 December 2019 in measuring equity instruments classified as Level 3 in the fair value hierarchy:

FONDUL PROPRIETATEA SA

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020

(all amounts are in RON unless otherwise stated)

Annual financial statements for the year ended 31 December 2020

14. Equity investments (continued)

Financial

assets

Fair value as at

31 December 2020

Valuation

technique

Unobservable inputs

range (weighted

average)

Relationship of unobservable

inputs to fair value

Total

7,642,697,782

Unlisted

equity

instruments

6,466,280,349

Market approach

comparable

companies

(based on

EBITDA

multiple)

EBITDA multiple ranging

from

4.45 - 9.83 (9.00

)

Discount for lack of

marketability: 14.7% or

20%

(14.72%)

The higher the EBITDA multiple, the

higher the fair value.

The lower discount for lack of

marketability, the higher the fair

value.

Unlisted

equity

instruments

and Listed

illiquid equity

instruments

1,105,747,229

Income

approach

discounted cash

flow method

Weighted average cost

of capital

ranging from

10.4

0% - 14.50%

(11.24

Discount for lack of

marketability

ranging

from

9.6% - 16.3%

(14.

67%)

Discount for lack of

control: 0% or 17% or

18.8% or 19.1% or

26.7%

(17.91%)

Long

-term revenue

growth rate: 2% or 2.5%

(2%)

The lower the weighted average cost

of capital, the higher the

fair value.

The lower the discount for the lack of

marketability, the higher the fair

value.

The lower the discount for the lack of

control, the higher the fair value.

The higher the long

term revenue

growth rate, the higher the fair value.

Unlisted

equity

instruments

10,700,000

Market approach

comparable

companies

(based on Price

/Earnings

multiple)

Price/Earnings value:

8.09

(8.09)

Discount for lack of

marketability: 24

.0%

(24.

0%)

The higher the Price /Earnings

multiple, the higher the f

air value.

The lower the discount for the lack of

marketability, the higher the fair

value.

Unlisted

equity

instruments

Market approach

comparable

companies

(based on

Revenue

multiple)

Revenue multiple: 0.35

(0.

35)

Irrespective of the evolution of the

unobservable inputs, the value of this

investment is zero due to the

negative equity value of this

company generated by a high level

of net debts.

Listed illiquid

equity

instruments

57,570,204

Bucharest Stock

Exchange

reference price

The

se 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 Financial Supervisory Authority.

FONDUL PROPRIETATEA SA

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020

(all amounts are in RON unless otherwise stated)

Annual financial statements for the year ended 31 December 2020

14. Equity investments (continued)

Financial

assets

Fair value as at

31 December 2019

Valuation

technique

Unobservable inputs

range (weighted

average)

Relationship of unobservable

inputs to fair value

Total

8,407,640,418

Unlisted

equity

instruments

8,042,522,140

Market approach

comparable

companies

(based on

EBITDA

multiple)

EBITDA multiple ranging

from 4.84

10.64 (9.29)

Discount for lack of

marketability: 14.7% or

20% (14.71%)

The higher the EBITDA multiple, the

higher the fair value.

The lower discount for lack of

marketability, the higher the fair

value.

Unlisted

equity

instruments

308,780,200

Income

approach

discounted cash

flow method

Weighted average cost

of capital: 12.09% or

12.90% or 13.40%

(12.95%)

Discount for lack of

marketability: 12% or

14.6% or 16.2%

(14.75%)

Discount for lack of

control: 0% or 19.1% or

24.9% (17.17%)

Long

-term revenue

growth rate: 2% (2%)

The lower the weighted average cost

of capital, the higher the fair value.

The lower the discount for the lack of

marketability, the higher the fair

value.

The lower the discount for the lack of

control, the higher the fair value.

The higher the long

term revenue

growth rate, the higher the fair value.

Unlisted

equity

instruments

11,500,000

Market approach

comparable

companies

(based on Price

/Earnings

multiple)

Price/Earnings value:

8.79 (8.79)

Discount for lack of

marketability: 24.2%

(24.2%)

The higher the Price /Earnings

multiple, the higher the f

air value.

The lower the discount for the lack of

marketability, the higher the fair

value.

Unlisted

equity

instruments

1,393,800

Market approach

comparable

companies

(based on

Price/Book value

multiple)

Price/Book value: 0.29

(0.29)

Discount for

lack of

marketability: 14.7%

(14.7%)

The higher Price/ Book value

multiple, the higher the fair value.

The lower discount for lack of

marketability, the higher the fair

value.

Unlisted

equity

instruments

Market approach

comparable

companies

(based on

Revenue

multiple)

Revenue multiple: 0.49

(0.49)

Irrespective of the evolution of the

unobservable inputs, the value of this

investment is zero due to the

negative equity value of this

company generated by a high level

of net debts.

Listed illiquid

equity

instruments

43,444,278

Bucharest Stock

Exchange

reference 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.

As at 31 December 2020 and 31 December 2019, the Fund’s investments in companies in liquidation,

dissolution, bankruptcy, insolvency, judicial reorganisation or which ceased their activity are valued at nil.

FONDUL PROPRIETATEA SA

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020

(all amounts are in RON unless otherwise stated)

Annual financial statements for the year ended 31 December 2020

14. Equity investments (continued)

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”): Price/Earnings ratio is a market prospect ratio that calculates the market

value of an investment relative to its earnings by comparing the market price per share by the earnings per

share. It shows what the market is willing to pay for an investment based on its current earnings. Investors

often use this ratio to evaluate what an investment's fair market value should be by predicting future earnings

per share.

Price/Book value multiple: often expressed simply as price-to-book, this multiple measures a company's

market price in relation to its book value (net assets). It reflects how many times the book value per share

investors are ready to pay for a share. The Price/Book value multiple varies dramatically between industries.

A company that requires more assets (e.g. a manufacturing company with factory space and machinery) will

generally post a significantly lower price to book than a company whose earnings come from the provision of

a service (e.g. a consulting firm).

Liabilities

(a) Payable to shareholders

31 December 2020

31 December 2019

Net dividends payable to shareholders

34,228,491

26,264,210

Returns of capital due to shareholders

151,946

5,724,737

Payable to shareholders

34,380,437

31,988,947

FONDUL PROPRIETATEA SA

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020

(all amounts are in RON unless otherwise stated)

Annual financial statements for the year ended 31 December 2020

15. Liabilities (continued)

(a) Payable to shareholders (continued)

The movement during the period is presented in the table below:

Year ended

31 December 2020

Year ended

31 December 2019

Opening balance

31,988,947

19,657,190

Gross distributions approved during the period

417,965,383

642,318,809

Dividend withholding tax due to State Budget for

the distributions approved during the period

(14,702,177)

(25,615,106)

Payments of net distributions performed from the

dedicated bank accounts

(398,016,717)

(602,909,327)

Distributions for which the statute of limitation

occurred

(2,854,999)

(1,462,618)

Closing balance

34,380,437

31,988,947

(b) Other liabilities and provisions

31 December 2020

31 December 2019

Administration fees

16,447,827

12,907,820

Provision for litigations

856,247

Financial Supervisory Authority fees

778,355

840,591

Tax on dividends due to State Budget

772,075

762,056

Intermediaries and other transactions fees related to

disposal of portfolio holdings

1,035,658

Other liabilities

1,849,833

1,141,120

20,704,337

17,543,492

Shareholders’ equity

(a) Share capital

The movement in the paid share capital is presented below:

Year ended

31 December 2020

Year ended

31 December 2019

Opening balance

3,770,082,341

4,543,838,477

Cancellation of treasury shares

(209,982,471)

(773,756,136)

Closing balance

3,560,099,870

3,770,082,341

During the year ended 31 December 2020, the paid in share capital of the Fund decreased by RON 209,982,471

following the cancellation on 30 September 2020 of 403,812,443 treasury shares acquired by the Fund within

the tenth buyback programme.

During the year ended 31 December 2019, the paid in share capital of the Fund decreased by RON 773,756,136

following the cancellation on 15 October 2019 of 1,487,992,569 treasury shares acquired by the Fund within

the ninth buy-back programme.

FONDUL PROPRIETATEA SA

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020

(all amounts are in RON unless otherwise stated)

Annual financial statements for the year ended 31 December 2020

16. Shareholders’ equity (continued)

(a) Share capital (continued)

The table below presents the Fund’s shares balance and their nominal value:

31 December 2020

31 December 2019

Number of shares in issue

7,210,158,254

7,613,970,697

Number of paid shares

6,846,345,904

7,250,158,347

Number of unpaid shares

363,812,350

Nominal value per share (RON)

0.52

The shareholders structure as at 31 December 2020 was as follows:

Shareholder categories

% of subscribed

share capital

% of paid share

capital

Romanian institutional investors

31.41%

33.08%

The Bank of New York Mellon (depository

bank for the Fund’s GDRs)

20.68%

21.78%

Romanian private individuals

17.49%

18.42%

Foreign institutional investors

11.24%

11.84%

Foreign private individuals

2.97%

3.13%

Romanian State

0.09%

0.10%

Treasury shares

11.07%

11.65%

Unpaid shares (see Note 16(b))

5.05%

Total

100.00%

Source: Depozitarul Central SA (Central Depositary)

(b) Reserves related to the unpaid share capital

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, which were initially recorded as paid

share capital (based on Law 247/2005) and in 2011 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 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 receivable related to the unpaid amounts from the Romanian State is fully impaired.

FONDUL PROPRIETATEA SA

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020

(all amounts are in RON unless otherwise stated)

Annual financial statements for the year ended 31 December 2020

16. Shareholders’ equity (continued)

31 December 2020

31 December 2019

Legal reserve

533,826,946

Other reserves

236,026,121

640,744,712

Distributions for which the statute of

limitation occurred

5,573,278

2,718,279

Losses from cancellation of treasury shares

(negative equity reserves)

(236,026,121)

(640,744,712)

539,400,224

536,545,225

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 the Fund incurred an accounting loss for the year ended 31 December

2020, there was no amount transferred to the legal reserve in 2020. As at 31 December 2019, an amount of

RON 156,493,546, representing 5% of the 2019 profit was transferred to the legal reserve (profit before

income tax of RON 3,129,870,912).

The Fund’s Sole Director proposed to shareholders and the shareholders approved at the 4 April 2019 General

Shareholders’ Meeting the allocation of a total amount of RON 640,744,712 to other reserves as follows:

x RON 233,482,390 from 2018 profit,

x RON 407,262,322 from 2017 profit remained under unallocated retained earnings.

In April 2020, the amounts allocated to other reserves mentioned above were used to cover the negative

reserves recorded from cancellation of shares acquired during the ninth buy-back programme, according to

the resolution of the Fund’s GSM held on 28 April 2020. At the same time, the Fund’s shareholders’

approved during 28 April 2020 General Shareholders’ Meeting, the allocation of an amount of RON

236,026,121 from 2019 profit to other reserves in order to be available for covering the negative reserves

estimated to arise from cancellation of shares acquired during the tenth buy-back programme.

Losses from cancellation of treasury shares comprise the negative 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 retained earnings and other equity elements, in accordance with the resolution of the

General Shareholders Meeting.

Starting with January 2017, the Fund’s share nominal value was constantly lower than its market price,

situation which did not change up to the date of these financial statements. All buy-backs performed after this

date were made at an acquisition price higher than the nominal value and consequently all cancellations of

treasury shares acquired through the buy-back programmes generated negative reserves.

The table below shows the changes in the negative reserves recorded as result of the losses from cancellation

of treasury shares during the year ended 31 December 2020:

1 January 2020

640,744,712

Coverage of the negative balance existing as at 31 December 2019 from other

reserves

, according to Resolution no.2 of 28 April 2020 Ordinary General

Shareholders’ Meeting

(640,744,712)

Negative equity reserve arising on the cancellation of shares acquired during the 10

buy

-back programme (recorded on 30 September 2020

) according to share capital

decrease

Resolution no. 2 of 28 April 2020 Extraordinary General Shareholders’

Meeting

236,

026,121

31 December 2020

236,026,121

FONDUL PROPRIETATEA SA

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020

(all amounts are in RON unless otherwise stated)

Annual financial statements for the year ended 31 December 2020

Shareholders’ equity (continued)

The table below shows the changes in the negative reserves recorded as result of the losses from cancellation

of treasury shares during the year ended 31 December 2019:

1 January 2019

80,910,369

Coverage of the negative balance existing as at 31 December 2018 from 2016

unallocated profit remained under retained earnings,

according to Resolution no.2 of 4

April 2019 Ordinary General Shareholders’ Meeting

(80,910,369)

Negative equity reserve arising on the cancellation of shares acquired

during the 9

buy-

back programme (recorded on 15 October 2019) according to share capital decrease

Resolution no. 2 of 4 April 2019 Extraordinary General Shareholders’ Meeting

640,744,712

31 December 2019

640,744,712

(d) Treasury shares

The table below summarises the details regarding the eleventh buy-back programme, respectively the buy-

back programme carried during 2020:

GSM date approving the

buy-back programme

Starting

date

Completion

date

Acquisition price range

as approved by GSM

Eleventh buy-back

programme

15-Nov-2019

1-Jan-2020

31-Dec-2020

RON 0.2 - 2 per share

The eleventh buy-back programme refers to the acquisition by the Fund of a maximum number of

800,000,000 shares and/or equivalent global depository receipts corresponding to the Fund’s shares.

The movement in the number of treasury shares (including the equivalent shares of GDRs bought-back)

during the year ended 31 December 2020 and the year ended 31 December 2019 is presented in the tables

below:

Opening balance

1 January 2020

Acquisitions

during the

period

Cancellations

during the

period

Closing balance

31 December 2020

Tenth buy-back

403,812,443

(403,812,443)

Eleventh buy-back

797,961,287

403,812,443

797,961,287

(403,812,443)

797,961,287

Opening balance

1 January 2019

Acquisitions

during the

period

Cancellations

during the

period

Closing balance

31 December 2019

Ninth buy-back

1,487,992,569

(1,487,992,569)

Tenth buy-back

403,812,443

1,487,992,569

403,812,443

(1,487,992,569)

403,812,443

The movement of treasury shares carrying amounts during the year ended 31 December 2020 and the year

ended 31 December 2019 is presented in the tables below:

FONDUL PROPRIETATEA SA

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020

(all amounts are in RON unless otherwise stated)

Annual financial statements for the year ended 31 December 2020

Shareholders’ equity (continued)

(d) Treasury shares (continued)

Opening balance

1 January

2020

Cost of treasury

shares acquired

Cancellation of

treasury shares

Closing balance

31 December 2020

Tenth buy-back

446,008,591

(446,008,591)

Eleventh buy-back

1,086,443,209

446,008,591

1,086,443,209

(446,008,591)

1,086,443,209

Opening balance

1 January 2019

Cost of treasury

shares acquired

Cancellation of

treasury shares

Closing balance

31 December 2019

Ninth buy-back

1,414,500,848

(1,414,500,848)

Tenth buy-back

446,008,591

1,414,500,848

446,008,591

(1,414,500,848)

446,008,591

(e) Dividend distribution approved during 2020

During the 28 April 2020 GSM, the Fund’s shareholders approved the distribution of a gross dividend of

RON 0.0642 per share, in relation to 2019 statutory profit.

The shareholders which appear as registered in the shareholders’ registry with the Central Depositary at 10

June 2020 have the right to receive a gross dividend of RON 0.0642 per share, proportionally with their

participation in the paid in share capital of the Fund. The payment started on 1 July 2020 and by the

authorisation date of these annual financial statements, shareholders had collected over 96% of the total

distribution.

(f) Accounting loss coverage

As per these annual financial statements, prepared in accordance with the IFRS, the Fund incurred an

accounting loss of RON 102,978,968 for the financial year ended 31 December 2020. The main contributor

to the accounting loss was the negative change in fair values of the Fund’s holdings which includes the

negative impact of the COVID-19 pandemic on economic activity and global financial markets. The net loss

from equity investments at fair value through profit or loss was partially offset by the gross dividend income

from portfolio companies recorded during the year. The accounting loss will be covered from 2016

unallocated profit, subject to shareholders’ approval.

(g) Dividend distribution proposal for 2021

Although there is no distributable profit according to the Fund’s statutory annual financial statements for the

year ended 31 December 2020, the Fund’s Sole Director remains committed to ensure an annual cash

distribution to the Fund’s shareholders. Thus, once the coverage of the accounting loss mentioned above

(which legally impedes any distribution) is approved by the Fund’s shareholders, the Fund’s Sole Director

proposal, subject to shareholders’ approval, is a cash distribution of RON 0.072 per share from 2016 and

2017 unallocated profits.

Contingencies

Litigations

At 31 December 2020, the Fund was involved in certain litigations, either as defendant or claimant. After

analysing 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.

FONDUL PROPRIETATEA SA

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020

(all amounts are in RON unless otherwise stated)

Annual financial statements for the year ended 31 December 2020

Contingencies (continued)

Other contingencies

Other contingencies of the Fund included the receivables from World Trade Center Bucuresti SA, as detailed

below.

Title II, Article 4 of Government Emergency Ordinance no. 81/2007 stipulated the transfer of World Trade

Center Bucuresti SA receivables 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.

Between 2008 and 2010 the Fund recovered from World Trade Center Bucuresti 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 Bucuresti SA, the above amounts were recognised on receipt basis in the Fund’s financial

statements.

In August 2013, World Trade Center Bucuresti SA filed a claim against the Fund asking the Fund to pay back

all the amounts received through the enforcement procedure during 2010 and 2011 (EUR 148,701, USD

10,131 and RON 8,829,663).

On 7 July 2016, the Bucharest Court admitted the claim filed by World Trade Center Bucuresti 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 Bucuresti SA. The Court decision is irrevocable.

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 18 February 2020, the Court ruled in favour of the Fund in the case started against the Romanian State,

represented by Ministry of Public Finance, for recovering the contributions of the Romanian State to the share

capital of the Fund. The decision was issued in the first stage and Ministry of Public Finance appealed it. On

18 September 2020, Bucharest Court of Appeal admitted the appeal of Ministry of Public Finance. The

decision of Bucharest Court of Appeal may be challenged with the second appeal by the Fund within 15 days

from the day when the decision is communicated to the Fund. The decision of Bucharest Court of Appeal was

not received by the Fund until the reporting date of these financial statements.

Related parties

(a) Key management

(i) Board of Nominees (“BON”)

Year ended

31 December 2020

Year ended

31 December 2019

Total Fund's cost with BON remuneration, out of which:

1,376,217

1,407,175

- Net remuneration paid to BON members

987,464

997,977

- Related taxes and contributions payable to State Budget

388,753

409,198

There were no loans to or other transactions between the Fund and the members of the Board of Nominees

neither in 2020 nor in 2019.

There are no post-employment, long term or termination benefits related to the remuneration of the members

of the Board of Nominees.

On 27 July 2020 Mrs. Vivian Nicoli has resigned from her positions held within the Fund’s Board of Nominees

and Consultative Committees due to Mrs. Nicoli’s intention to take on other commitments. The effective date

of the resignation was 1 September 2020.

FONDUL PROPRIETATEA SA

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020

(all amounts are in RON unless otherwise stated)

Annual financial statements for the year ended 31 December 2020

18. Related parties (continued)

(a) Key management (continued)

(i) Board of Nominees (continued)

On 23 September 2020 Mr. Steven van Groningen has resigned from his positions held within the Fund’s

Board of Nominees and Consultative Committees. The effective date of the resignation was 13 November

2020.

During the 13 November 2020 GSM, two new members of the Board of Nominees were appointed for a

mandate of 3 years: Mrs. Ilinca von Derenthall (mandate started on 26 November 2020) and Mr. Ciprian

Ladunca (mandate started on 16 November 2020).

(ii) Sole Director and Investment Manager

FTIS is the Sole Director and Alternative Investment Fund Manager of the Fund starting with 1 April 2016.

The initial mandate was for a two-year period and this was renewed for another two years starting with 1

April 2018. During the 28 June 2019 General Shareholders Meeting, the Fund’s shareholders approved a new

mandate of FTIS as AIFM and Sole Director of the Fund for the period 1 April 2020 – 31 March 2022. Until

30 November 2020, FTIS had delegated the role of Investment Manager, as well as certain administrative

functions to FTIML. Starting 1 December 2020, the activity carried out by FTIML through the delegation

agreement ceased by mutual consent of the parties. Starting this date, the portfolio management and the

administrative activities previously delegated to FTIML are performed by FTIS through its Bucharest Branch.

The transactions carried out between the Fund and FTIS Luxemburg were the following:

Transactions

Year ended

31 December 2020

Year ended

31 December 2019

Administration fees

65,906,915

54,699,656

The transactions carried out between the Fund and FTIS Bucharest Branch were the following:

Transactions

Year ended

31 December 2020

Year ended

31 December 2019

Rent expense charged to the Fund

7,463

Operating cost charged to the Fund

2,083

9,546

The transactions carried out between the Fund and FTIML were the following:

Transactions

Year ended

31 December 2020

Year ended

31 December 2019

Rent expense charged to the Fund

70,922

75,906

Operating cost charged to the Fund

24,498

27,568

95,421

103,474

During the year ended 31 December 2020, the Fund also recorded RON 443,812 representing expenses

incurred by FTIML on its behalf (year ended 31 December 2019: RON 988,236). These expenses were

primarily related to promotional activities for the Fund (investor relations). The recharge of these expenses to

the Fund followed the provisions of the management agreement in place at the respective moment and was

subject to Board of Nominees’ approval.

FONDUL PROPRIETATEA SA

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020

(all amounts are in RON unless otherwise stated)

Annual financial statements for the year ended 31 December 2020

18. Related parties (continued)

(a) Key management (continued)

(ii) Sole Director and Investment Manager (continued)

The outstanding liabilities owed by the Fund were as follows:

Amounts due to:

31 December 2020

31 December 2019

FTIS Luxembourg

16,447,827

12,907,820

FTIS Bucharest Branch

9,546

FTIML Bucharest Branch

144,334

16,457,372

13,052,155

There are no other elements of compensation for key management besides those described above.

(b) Subsidiaries

The Fund had the following subsidiaries, all of which are incorporated in Romania:

31 December 2020

31 December 2019

Ownership interest

Zirom SA

100%

Alcom SA

72%

Comsig SA

70%

On 8 January 2020, the registration with Romanian Trade Register of the share capital increase of Zirom SA

performed in December 2019 was completed.

In June 2020, the Fund recorded and collected from Alcom SA a dividend of RON 275,360.

During 2019, the Fund recorded and collected from Alcom SA dividends in total amount of RON 1,602,858

and participated in the cash share capital increase of Zirom SA, subscribing 150,000 new shares, at the

nominal value of RON 10 per share (in total of RON 1,500,000).

As at 31 December 2020 and 31 December 2019, Comsig SA was in administrative liquidation process.

The fair value of investments in subsidiaries is presented in the table below:

31 December 2020

31 December 2019

Zirom SA

24,884,700

31,705,400

Alcom SA

8,863,429

11,493,897

Comsig SA

33,748,129

43,199,297

As at 31 December 2020 and 31 December 2019, the Fund has no commitment to provide financial or other

support to its subsidiaries, including commitments to assist the subsidiaries in obtaining financial support.

FONDUL PROPRIETATEA SA

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020

(all amounts are in RON unless otherwise stated)

Annual financial statements for the year ended 31 December 2020

18. Related parties (continued)

As at 31 December 2020 and 31 December 2019 the Fund had two associates, both incorporated in Romania:

31 December 2020

31 December 2019

Ownership interest

Societatea Nationala a Sarii SA

49%

Plafar SA

49%

The transactions carried out between the Fund and its associates were the following:

Year ended

31 December 2020

Year ended

31 December 2019

Gross dividend income

Societatea Nationala a Sarii SA

19,803,298

37,428,152

Plafar SA

100,097

89,964

Dividends received

Year ended

31 December 2020

Year ended

31 December 2019

Societatea Nationala a Sarii SA

19,803,298

37,428,152

Plafar SA

100,097

89,964

As at 31 December 2020, the balance due by Societatea Nationala a Sarii SA to the Fund amounted RON

7,178 (31 December 2019: RON 6,804) and comprised the outstanding dividend receivable of RON 6,378 (31

December 2019: RON 6,378) and the penalties for delay payment of dividends of RON 800 (31 December

2019: RON 426). The outstanding balance due by Societatea Nationala a Sarii SA to the Fund is fully

impaired.

Subsequent events

a) Resolutions adopted by shareholders during the 14 January 2021 General Shareholders’

Meeting

On 14 January 2021 the shareholders approved several changes of the Constitutive Act that will enter into force

after FSA approval and registration with the Trade Registry.

b) Changes in Romanian Water Law (Law no. 107/1996)

During 2020, the Parliament approved several changes to the Water Law which entered into force on 13 July

2020 while the Romanian Government changed the Water Law starting with 31 December 2020. According to

these changes, all owners of water installations that collect underground or surface waters are required to install

water metering devices within 6 months calculated from 13 July 2020. This law has a direct impact on the

activity of Hidroelectrica SA, the biggest Fund’s portfolio holding. For the purpose of calculating the water

volume used by its hydropower plants to produce electricity, Hidroelectrica SA has been using an indirect

calculation method based on the electricity volume produced by each hydro-unit. Hidroelectrica’s management

considers that it is technically unfeasible to install standard water meters as required by the law, given the size

and the variety of technical specifications of its power plants.

Following the latest changes approved in December 2020, further amendments to Romanian Water Law are

currently debated in Parliament. On 8 February 2021, the Senate as first chamber discussing the amendments,

approved a change that would allow Hidroelectrica SA to continue to use indirect methods for determining the

water volumes as before July 2020 (i.e. cancelling the effects of the changes in legislation adopted after July

2020). The next legislative step is to have the amendments discussed and approved by the Chamber of Deputies

as decisional chamber, promulgated by the Romanian President, and published in the Official Gazette of

Romania.

FONDUL PROPRIETATEA SA

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020

(all amounts are in RON unless otherwise stated)

Annual financial statements for the year ended 31 December 2020

19. Subsequent events (continued)

The entire legislative process involves several mandatory steps and the final wording of the law cannot be

predicted. The Fund is monitoring the legislation process in Parliament and the ongoing discussions of

Hidroelelctrica’s management with National Authority of Romanian Waters in order to be able to assess any

potential impact on this portfolio company. The changes in legislation are estimated to be effective after the

date of publication of these annual financial statements.

)RQGXO3URSULHWDWHD6$



)RQGXO3URSULHWDWHD6$6WDWHPHQWRI$VVHWVDQG2EOL

DWLRQVDVDW 'HFHPEHUSUHSDUHGLQDFFRUGDQFHZLWK&1905H

XODWLRQ 



$QQH[

6WDWHPHQWRI$VVHWVDQG2EOLJDWLRQVRI)RQGXO3URSULHWDWHD6$DVDW'HFHPEHUSUHSDUHGLQDFFRUGDQFHZLWK&1905HJXODWLRQ$QQH[QR



,WHP

'HFHPEHU 'HFHPEHU 'LIIHUHQFHV

521



RIWKHQHW

DVVHW

RIWKHWRWDO

DVVHW

&XUUHQF\ 521 RIWKHQHW

DVVHW

RIWKHWRWDO

DVVHW

&XUUHQF\ 521



, 7RWDODVVHWV       

 6HFXULWLHVDQGPRQH

PDUNHWLQVWUXPHQWVRXWRIZKLFK      













VHFXULWLHVDQGPRQH\PDUNHWLQVWUXPHQWVDGPLWWHGRUWUDGHGRQDUHJXODWHGPDUNHWIURP

5RPDQLDRXWRIZKLFK

   

    

 1.1.1 listed shares traded in the last 30 trading days 25.5857% 25.4788% - 3,037,393,345.00 16.1838% 16.0970% - 1,661,581,690.23 (1,375,811,654.77)

 1.1.2 listed shares not traded in the last 30 trading days 0.0968% 0.0964% - 11,493,896.77 0.0863% 0.0859% - 8,863,425.29 (2,630,471.48)

 1.1.3 Government bond

1.1567% 1.1518% - 137,303,497.60 3.7038% 3.6840% - 380,268,284.92 242,964,787.32

1.1.4 allotment rights not admitted at trading on a regulated market   -    -  





VHFXULWLHVDQGPRQH\PDUNHWLQVWUXPHQWVDGPLWWHGRUWUDGHGRQDUHJXODWHGPDUNHWIURPD

PHPEHUVWDWHRXWRIZKLFK

        

 1.2.1 listed shares traded in the last 30 trading days         

 1.2.2 listed shares not traded in the last 30 tradin

        





VHFXULWLHVDQGPRQH\PDUNHWLQVWUXPHQWVDGPLWWHGRQDVWRFNH[FKDQJHIURPDVWDWHQRWD

PHPEHURUQHJRWLDWHVRQDQRWKHUUHJXODWHGPDUNHWIURPDVWDWHQRWDPHPEHUWKDWRSHUDWHV

RQDUHJXODUEDVLVDQGLVUHFRJQL]HGDQGRSHQHGWRWKHSXEOLFDSSURYHGE\WKH)LQDQFLDO

6XSHUYLVRU\$XWKRULW\)6$

        

 1HZLVVXHGVHFXULWLHV         

 2WKHUVHFXULWLHVDQGPRQH\PDUNHWLQVWUXPHQWVPHQWLRQHGDWDUWOHWWHUDRIWKH

XODWLRQQRRXWRIZKLFK

        

- shares not admitted at trading on a regulated market 70.4565% 70.1617% - 8,364,189,591.93 73.7930% 73.3967% - 7,576,256,630.47 (787,932,961.46)

 %DQNGHSRVLWVRXWRIZKLFK       

4.1

EDQNGHSRVLWVPDGHZLWKFUHGLWLQVWLWXWLRQVIURP5RPDQLD         

- in RO

2.8502% 2.8383% - 338,381,995.05 6.4282% 6.3937% 659,982,573.15 321,600,578.10

- in euro   -    -  

4.2

bank deposits made with credit institutions from an EU state   -    -  

4.3

bank deposits made with credit institutions from an non-EU state   -    -  

 'HULYDWLYHVILQDQFLDOLQVWUXPHQWVWUDGHGRQDUHJXODWHGPDUNHW   -    -  

 &XUUHQWDFFRXQWVDQGSHWW

FDVKRXWRIZKLFK       

 - in RON 0.2686% 0.2674% - 31,872,899.07 0.3343% 0.3325% - 34,325,895.24 2,452,996.17

 - in euro 0.0000% 0.0000% EUR 817.05 3,904.93 0.0000% 0.0000% EUR 610.18 2,971.21 (933.72)

 - in USD 0.0000% 0.0000% USD 658.17 2,804.33 0.0010% 0.0010% USD 25,026.0

99,253.2

96,448.9

 - in GBP 0.0000% 0.0000% GBP 634.49 3,558.73 0.0000% 0.0000% GBP 463.12 2,510.16 (1,048.57)

 0RQH\PDUNHWLQVWUXPHQWVRWKHUVWKDQWKRVHWUDGHGRQDUHJXODWHGPDUNHWDFFRUGLQJWRDUW

SDUOHWWHUJRI/DZQRUHJDUGLQJWKHFDSLWDOPDUNHWZLWKVXEVHTXHQW

DGGLWLRQVDQGDPHQGPHQWVRXWRIZKLFK

        

- Treasury bills with original maturities of less than 1 year         

 3DUWLFLSDWLRQWLWOHVRI2&,8DQGRURI8&,76$23&23&90         

 2WKHUDVVHWVRXWRIZKLFK       -  

 - net dividend receivable from Romanian companies 0.0000% 0.0000% - -     

 - receivables related to the cash contributions to the share capital increases performed by

portfolio companies

0.0003% 0.0003% - 30,030.00 0.0043% 0.0042% - 445,140.00 415,110.00

 - tax on dividends to be recovered from the State Budget 0.0029% 0.0029% - 348,524.00 0.0034% 0.0033% - 348,524.00 -

 - intan

ible assets 0.0014% 0.0014% - 161,372.47 0.0000% 0.0000% - -

(

161,372.47

)



 - advance payments for intangible assets 0.0000% 0.0000% - 0.0003% 0.0002% - 28,384.79 28,384.79

 - other receivables out of which: 0.0003% 0.0002% - 45,163.46 0.0002% 0.0001% - 5,180.00 (39,983.46)

 - in RO

0.0003% 0.0002% - 45,163.46 0.0001% 0.0001% - 5,180.00

(

39,983.46

)



 - prepaid expenses 0.0008% 0.0008% - 89,711.73 0.0013% 0.0013% - 135,793.59 46,081.86

  

,, 7RWDOOLDELOLWLHV       

 /LDELOLWLHVLQUHODWLRQZLWKWKHSD\PHQWVRIIHHVGXHWRWKHLQYHVWPHQWPDQDJHPHQWFRPSDQ\



6$,





        

 /LDELOLWLHVUHODWHGWRWKHIHHVSD\DEOHWRWKHGHSRVLWDU\EDQN         

 /LDELOLWLHVUHODWHGWRWKHIHHVSD\DEOHWRLQWHUPHGLDULHV         

 /LDELOLWLHVUHODWHGWRFRPPLVVLRQVDQGRWKHUEDQNVHUYLFHV         

 ,QWHUHVWSD\DEOH         

 /LDELOLWLHVUHODWHGWRLVVXDQFHFRVWV         

)RQGXO3URSULHWDWHD6$



DWLRQVDVDW 'HFHPEHUSUHSDUHGLQDFFRUGDQFHZLWK&1905H

XODWLRQ 



,WHP

'HFHPEHU 'HFHPEHU 'LIIHUHQFHV

521



RIWKHQHW

DVVHW

RIWKHWRWDO

DVVHW

&XUUHQF\ 521 RIWKHQHW

DVVHW

RIWKHWRWDO

DVVHW

&XUUHQF\ 521



 /LDELOLWLHVLQUHODWLRQZLWKWKHIHHVFRPPLVVLRQVWR)6$         

 /LDELOLWLHVUHODWHGWRDXGLWIHHV         

 2WKHU/LDELOLWLHVRXWRIZKLFK         

 - liabilities to the Fund's shareholders related to the dividend distribution 0.2212% 0.2203% - 26,264,210.09 0.3334% 0.3316% - 34,228,490.76 7,964,280.67

 - liabilities related to the return of capital 0.0482% 0.0480% - 5,724,736.70 0.0015% 0.0015% - 151,945.60 (5,572,791.10)

 - liabilities related to Government securities under settlement - - - - 0.0000% 0.0000% - - -

 - provisions 0.0072% 0.0072% - 856,247.22 0.0083% 0.0083% - 856,247.22 -

 - liabilities related to buybacks under settlement 0.0000% 0.0000% - - - - - - -

 - remunerations and related contributions 0.0003% 0.0003% - 34,857.00 0.0003% 0.0003% - 34,857.0

 - VAT payable to State Budget 0.0005% 0.0005% - 60,896.06 0.0000% 0.0000% - 904.81 (59,991.25)

 - tax on dividends payable to State Budget 0.0094% 0.0093% - 1,110,580.00 0.0110% 0.0110% - 1,120,599.00 10,019.00

 - other liabilities out of which: 0.0084% 0.0082% - 978,224.27 0.0108% 0.0107% - 1,107,500.47 129,276.20

 - in RON 0.0084% 0.0082% - 978,224.27 0.0108% 0.0107% - 1,107,500.47 129,276.20

 - in EUR - - - - - - - - -

,,, 1HW$VVHW9DOXH,,,       

 ,QFOXGHVDOVRWKHYDOXHRIKROGLQJVLQFRPSDQLHVDGPLWWHGWRWUDGLQJRQ$H5RPDUNHWDOWHUQDWLYHUHJXODWHGPDUNHW

8QLWDU\1HW$VVHW9DOXH

,WHP 'HFHPEHU 'HFHPEHU 'LIIHUHQFHV



1HW$VVHW9DOXH   

1XPEHURIRXWVWDQGLQ

VKDUHV  







8QLWDU\QHWDVVHWYDOXH   

'(7$,/('67$7(0(172),19(670(176$6$7'HFHPEHU

6HFXULWLHVDGPLWWHGRUWUDGHGRQDUHJXODWHGPDUNHWLQ5RPDQLDRXWRIZKLFK

 OLVWHGVKDUHVWUDGHGLQWKHODVWWUDGLQJGD\V

,VVXHU 6\PERO

'DWHRIWKHODVW

WUDGLQJVHVVLRQ

1RRIVKDUHV

KHOG

1RPLQDO

YDOXH

6KDUH

YDOXH 7RWDOYDOXH

6WDNHLQWKH

LVVXHUV

FDSLWDO

6WDNHLQ)RQGXO

3URSULHWDWHD

WRWDODVVHW

6WDNHLQ

)RQGXO

3URSULHWDWHD

QHWDVVHW (YDOXDWLRQPHWKRG

$OUR6ODWLQD6$ $/5 'HF        &ORVLQ

SULFH

,256$ ,25% 'HF        5HIHUHQFHSULFH$YHUDJHSULFH

0HFRQ6$ 0(&3 'HF        5HIHUHQFHSULFH$YHUDJHSULFH

2093HWURP6$ 613 'HF        &ORVLQJSULFH

5RPDHUR6$ 525; 'HF        5HIHUHQFHSULFH $YHUD

HSULFH

7RWDO   



 OLVWHGVKDUHVEXWQRWWUDGHGLQWKHODVWWUDGLQJGD\V

,VVXHU 6\PERO

'DWHRIWKHODVW

WUDGLQJVHVVLRQ

1RRIVKDUHV

KHOG

1RPLQDO

YDOXH

6KDUH

YDOXH 7RWDOYDOXH

6WDNHLQWKH

LVVXHUVFDSLWDO

6WDNHLQ)RQGXO

3URSULHWDWHDWRWDO

DVVHW

6WDNHLQ)RQGXO

3URSULHWDWHDQHW

DVVHW (YDOXDWLRQPHWKRG

$OFRP6$ $/&4 )HE        )DLUYDOXHVKDUH9DOXHEDVHGRQYDOXDWLRQUHSRUWDV

DW2FWREHU

7RWDO







 



)RQGXO3URSULHWDWHD6$



DWLRQVDVDW 'HFHPEHUSUHSDUHGLQDFFRUGDQFHZLWK&1905H

XODWLRQ 



,QVWUXPHQWVPHQWLRQHGDWDUWOHWWHUDRIWKH5HJXODWLRQQRRXWRIZKLFK

8QOLVWHGVKDUHV

,VVXHU

1RRIVKDUHV

KHOG

'DWHRIDFTXLVLWLRQ



$FTXLVLWLRQSULFH

WRWDOSULFHRI

DFTXLVLWLRQRI

VKDUHV



 6KDUHYDOXH 7RWDOYDOXH

6WDNHLQ

WKH

LVVXHUV

FDSLWDO

6WDNHLQ

)RQGXO

3URSULHWDWHD

WRWDODVVHW

6WDNHLQ

)RQGXO

3URSULHWDWHD

QHWDVVHW &RPSDQ

VWDWXV (YDOXDWLRQ PHWKRG

$HURSRUWXO,QWHUQDWLRQDO0LKDLO

.RJDOQLFHDQX&RQVWDQWD6$

 -XO       8QOLVWHGFRPSDQLHVLQ

IXQFWLRQ

)DLUYDOXHVKDUH9DOXHEDVHGRQ

YDOXDWLRQUHSRUWDVDW2FWREHU

$HURSRUWXO,QWHUQDWLRQDO

7LPLVRDUD7UDLDQ9XLD6$

 -XO       8QOLVWHGFRPSDQLHVLQ

IXQFWLRQ

)DLUYDOXHVKDUH9DOXHEDVHGRQ

YDOXDWLRQUHSRUWDVDW2FWREHU

&1$GPLQLVWUDWLD&DQDOHORU

1DYLJDELOH6$

 -XO       8QOLVWHGFRPSDQLHVLQ

IXQFWLRQ

)DLUYDOXHVKDUH9DOXHEDVHGRQ

YDOXDWLRQUHSRUWDVDW2FWREHU

&1$GPLQLVWUDWLD3RUWXULORU

'XQDULL)OXYLDOH6$

 -XO       8QOLVWHGFRPSDQLHVLQ

IXQFWLRQ

)DLUYDOXHVKDUH9DOXHEDVHGRQ

YDOXDWLRQUHSRUWDVDW2FWREHU

&1$GPLQLVWUDWLD3RUWXULORU

'XQDULL0DULWLPH6$

 -XO       8QOLVWHGFRPSDQLHVLQ

IXQFWLRQ

)DLUYDOXHVKDUH9DOXHEDVHGRQ

YDOXDWLRQUHSRUWDVDW2FWREHU

&1$GPLQLVWUDWLD3RUWXULORU

0DULWLPH6$

 -XO       8QOLVWHGFRPSDQLHVLQ

IXQFWLRQ

)DLUYDOXHVKDUH9DOXHEDVHGRQ

YDOXDWLRQUHSRUWDVDW2FWREHU

&1$HURSRUWXUL%XFXUHVWL6$



 )HE       8QOLVWHGFRPSDQLHVLQ

IXQFWLRQ

)DLUYDOXHVKDUH9DOXHEDVHGRQ

YDOXDWLRQUHSRUWDVDW2FWREHU

&RPSOH[XO(QHUJHWLF2OWHQLD

6$

 0D\       8QOLVWHGFRPSDQLHVLQ

IXQFWLRQ

)DLUYDOXHVKDUH9DOXHEDVHGRQ

YDOXDWLRQUHSRUWDVDW2FWREHU

&RPVLJ6$  -XO       $GPLQLVWUDWLYH

OLTXLGDWLRQ

3ULFHGDW]HUR

('LVWULEXWLH%DQDW6$  -XO       8QOLVWHGFRPSDQLHVLQ

IXQFWLRQ

)DLUYDOXHVKDUH9DOXHEDVHGRQ

YDOXDWLRQUHSRUWDVDW2FWREHU





('LVWULEXWLH'REURJHD6$  -XO       8QOLVWHGFRPSDQLHVLQ

IXQFWLRQ

)DLUYDOXHVKDUH9DOXHEDVHGRQ

YDOXDWLRQUHSRUWDVDW2FWREHU

('LVWULEXWLH0XQWHQLD6$  -XO       8QOLVWHGFRPSDQLHVLQ

IXQFWLRQ

)DLUYDOXHVKDUH9DOXHEDVHGRQ

YDOXDWLRQUHSRUWDVDW2FWREHU

(QHO(QHUJLH0XQWHQLD6$  -XO       8QOLVWHGFRPSDQLHVLQ

IXQFWLRQ

)DLUYDOXHVKDUH9DOXHEDVHGRQ

YDOXDWLRQUHSRUWDVDW2FWREHU

(QHO(QHUJLH6$  -XO       8QOLVWHGFRPSDQLHVLQ

IXQFWLRQ

)DLUYDOXHVKDUH9DOXHEDVHGRQ

YDOXDWLRQUHSRUWDVDW2FWREHU

(QJLH5RPDQLD6$  -XO       8QOLVWHGFRPSDQLHVLQ

IXQFWLRQ

)DLUYDOXHVKDUH9DOXHEDVHGRQ

YDOXDWLRQUHSRUWDVDW2FWREHU

*HURYLWDO&RVPHWLFV6$  -XO       %DQNUXSWF\ 3ULFHGDW]HUR

+LGURHOHFWULFD6$  -XO       8QOLVWHGFRPSDQLHVLQ

IXQFWLRQ

)DLUYDOXHVKDUH9DOXHEDVHGRQ

YDOXDWLRQUHSRUWDVDW2FWREHU





3ODIDU6$  -XQ       8QOLVWHGFRPSDQLHVLQ

IXQFWLRQ

)DLUYDOXHVKDUH9DOXHEDVHGRQ

YDOXDWLRQUHSRUWDVDW2FWREHU





3RVWD5RPDQD6$  -XO       8QOLVWHGFRPSDQLHVLQ

IXQFWLRQ

)DLUYDOXHVKDUH9DOXHEDVHGRQ

YDOXDWLRQUHSRUWDVDW2FWREHU

5RPSOXPE6$  -XQ       %DQNUXSWF\ 3ULFHGDW]HUR

6DOXEULVHUY6$  -XO       -XGLFLDOUHRUJDQL]DWLRQ 3ULFHGDW]HUR

6LPWH[6$  -XQ       -XULGLFDOUHRU

DQL]DWLRQ 3ULFHGDW]HUR

6RFLHWDWHD1DWLRQDODD6DULL

6$

 -XQ       8QOLVWHGFRPSDQLHVLQ

IXQFWLRQ

)DLUYDOXHVKDUH9DOXHEDVHGRQ

YDOXDWLRQUHSRUWDVDW2FWREHU

:RUOG7UDGH&HQWHU%XFXUHVWL

6$

 -XO       ,QVROYHQF\ 3ULFHGDW]HUR

:RUOG7UDGH+RWHO6$  -XO       8QOLVWHGFRPSDQLHVLQ

IXQFWLRQ

3ULFHGDW]HURODFNRIDQQXDOILQDQFLDO

VWDWHPHQWVIRUWKHODVWILQDQFLDO\HDUV

LQFOXGLQJWKHILQDQFLDOVWDWHPHQWVIRUWKH

\HDUHQGHG'HFHPEHUODVW

DYDLODEOHILQDQFLDOVWDWHPHQWVDUHWKRVHIRU

WKH\HDUHQGHG'HFHPEHU

\=LURP6$  -XQ       8QOLVWHGFRPSDQLHVLQ

IXQFWLRQ

)DLUYDOXHVKDUH9DOXHEDVHGRQ

YDOXDWLRQUHSRUWDVDW2FWREHU

  

7RWDO 



 



 



/HJHQG

 ZKHUHWKHGDWHRIDFTXLVLWLRQLVVKRZQDVHDUOLHUWKDQWKH)XQGVGDWHRILQFRUSRUDWLRQ'HFHPEHUWKHGDWHRIDFTXLVLWLRQUHIHUVWRWKHGDWHRISXEOLVKLQJLQWKH2IILFLDO*D]HWWHRI/DZQR-XO\ZKLFKGHWHUPLQHGWKDWWKHVHLQYHVWPHQWVZRXOGEHWUDQVIHUUHGWRWKH)XQGRQLWVIXWXUH

LQFRUSRUDWLRQ

 7KHDFTXLVLWLRQSULFHLQFOXGHVWKHLQLWLDOYDOXHRIWKH)XQGVILQDOSRUWIROLRRIVKDUHVFRQWULEXWHGE\WKH5RPDQLDQ6WDWHLQ'HFHPEHUDQG-XQHGHWHUPLQHGEDVHGRQWKHYDOXDWLRQSHUIRUPHGLQ2FWREHUE\DQLQGHSHQGHQWYDOXHU)LQHYH[65/&RQVWDQWDDQGWKHVXEVHTXHQWVXEVFULSWLRQVWRVKDUH

FDSLWDOLQFUHDVHRISRUWIROLRFRPSDQLHVLIWKHFDVHUHVSHFWLYHO\WKHFRQWULEXWLRQLQFDVKOHVVWKHGLVSRVDOVLIWKHFDVH7KH)XQGGLGQRWSHUIRUPDQ\DFTXLVLWLRQRIXQOLVWHGVKDUHVIURPLWVLQFRUSRUDWLRQGDWHXQWLOQRZ7KHDFTXLVLWLRQSULFHGRHVQRWLQFOXGHWKHERQXVVKDUHVUHFHLYHGE\WKH)XQGIROORZLQJWKHVKDUH

FDSLWDOLQFUHDVHRISRUWIROLRFRPSDQLHVSURSRUWLRQDOO\WRLWVKROGLQJDVWKHVHGRQRWTXDOLI\DVFRVWLQDFFRUGDQFHZLWKWKH,)56EDVLVRIDFFRXQWLQJ

 FRPSDQ\UHVXOWLQJIURPWKHPHUJHURI&1$HURSRUWXO,QWHUQDWLRQDO+HQUL&RDQGD%XFXUHVWL6$DQG61$HURSRUWXO,QWHUQDWLRQDO%XFXUHVWL%DQHDVD$XUHO9ODLFX6$

 FRPSDQ\UHVXOWLQJIURPWKHPHUJHURI&RPSOH[XO(QHUJHWLF7XUFHQL6$&RPSOH[XO(QHUJHWLF&UDLRYD6$&RPSOH[XO(QHUJHWLF5RYLQDUL6$6RFLHWDWHD1DWLRQDODD/LJQLWXOXL2OWHQLD6$



)RQGXO3URSULHWDWHD6$



DWLRQVDVDW 'HFHPEHUSUHSDUHGLQDFFRUGDQFHZLWK&1905H

XODWLRQ 



%RQGVRURWKHUGHEWLQVWUXPHQWVLVVXHGRUJXDUDQWHHGE\WKHVWDWHRUFHQWUDOSXEOLFDGPLQLVWUDWLRQDXWKRULWLHV

*RYHUQPHQWERQGV

,VVXHU ,6,1FRGH

1RRI

LQVWUXPHQWV

'DWHRI

DFTXLVLWLRQ

&RXSRQ

GDWH 'XH'DWH ,QLWLDO9DOXH

'DLO\

LQWHUHVW

&XPXODWHG

LQWHUHVW

&XPXODWHG

GLVFRXQW

SUHPLXP

0DUNHW

SULFH

5HIHUHQFH

FRPSRVLWH

SULFH &XUUHQWYDOXH

6WDNHLQ

)3WRWDO

DVVHWV

6WDNHLQ

)3QHW

DVVHW

DOXDWLRQPHWKRG

0LQLVWU\RI)LQDQFH 52'%1  6HS -XQ -XQ         



)DLUYDOXHUHIHUHQFHFRPSRVLWHSULFH

SXEOLVKHGE\5HXWHUVLQFOXGLQJWKH

FXPXODWHGLQWHUHVW



0LQLVWU\RI)LQDQFH 52'%1  2FW -XQ -XQ        

0LQLVWU\RI)LQDQFH 52'%1  1RY -XQ -XQ        

0LQLVWU\RI)LQDQFH 52'%1  6HS 0DU 0DU        

0LQLVWU\RI)LQDQFH 52'%1  6HS 0DU 0DU        

0LQLVWU\RI)LQDQFH 52'%1  2FW 0DU 0DU        

0LQLVWU\RI)LQDQFH 52'%1  1RY 0DU 0DU        

0LQLVWU\RI)LQDQFH 52'%1  1RY 0DU 0DU        

7RWDO

 

   



%DQNGHSRVLWV

1DPHRIWKHEDQN 6WDUWLQJGDWH 0DWXULW\GDWH ,QLWLDOYDOXH 'DLO\LQWHUHVW &XPXODWLYHLQWHUHVW &XUUHQWYDOXH

6WDNHLQ)RQGXO

3URSULHWDWHDWRWDO

DVVHW

6WDNHLQ)RQGXO

3URSULHWDWHDQHW

DVVHW (YDOXDWLRQPHWKRG

&,7,%DQN 'HF -DQ      

%DQNGHSRVLWYDOXHFXPXODWHGZLWKWKHGDLO\UHODWHG

LQWHUHVWIRUWKHSHULRGIURPVWDUWLQJGDWH



8QLFUHGLW7LULDF%DQN 'HF -DQ      

%DQFD&RPHUFLDOD5RPDQD 'HF -DQ      

&,7,%DQN 'HF -DQ      

,1*%$1. 'HF -DQ      

%5'*URXSH6RFLHWH*HQHUDOH 'HF -DQ      

7RWDO     



(YROXWLRQRIWKHQHWDVVHWDQGWKHQHWDVVHWXQLWDU\YDOXHLQWKHODVW\HDUV



 'HFHPEHU 'HFHPEHU 'HFHPEHU

1HW$VVHW   

1$9VKDUH   



)UDQNOLQ7HPSOHWRQ,QWHUQDWLRQDO6HUYLFHV6jUODFWLQJLQLWVFDSDFLW\RI$OWHUQDWLYH,QYHVWPHQW

)XQG0DQDJHURI)RQGXO3URSULHWDWHD6$

%5'*URXSH6RFLHWH*HQHUDOH

 

-RKDQ0H\HU 9LFWRU6WUkPEHL

3HUPDQHQWUHSUHVHQWDWLYH 0DQDJHU'HSRVLWDU\'HSDUWPHQW



)21'8/35235,(7$7($6$

6WDWHPHQWRISHUVRQVUHVSRQVLEOH 



$QQH[



6WDWHPHQWRISHUVRQVUHVSRQVLEOH

3URYLVLRQVRI$FFRXQWLQJ/DZQR$UWDQG

)6$5HJXODWLRQQR$UWSDU$OHWWHUF

7KHDQQXDOILQDQFLDOVWDWHPHQWVIRUWKHILQDQFLDO\HDU'HFHPEHUSUHSDUHGIRU

(QWLW\)RQGXO3URSULHWDWHD6$

$GGUHVV%XFKDUHVW'LVWULFW±%X]HúWL6WUHHWWK)ORRU

7UDGH5HJLVWU\1XPEHU-

)RUPRISURSHUW\MRLQWRZQHUVKLSZLWKSXEOLFFDSLWDOXQGHUGRPHVWLFDQGIRUHLJQSXEOLFDQGSULYDWH

FDSLWDOFRPSDQLHV

&$(1FRGHDQGQDPH³7UXVWVIXQGVDQGVLPLODUILQDQFLDOHQWLWLHV´

6ROH5HJLVWUDWLRQ&RGH

7KHXQGHUVLJQHG-RKDQ0H\HU3HUPDQHQW5HSUHVHQWDWLYHZLWK)UDQNOLQ7HPSOHWRQ,QWHUQDWLRQDO6HUYLFHV6jUODV

6ROH'LUHFWRURI)RQGXO3URSULHWDWHD6$DQG&DGDUX&DWDOLQ)LQDQFLDOUHSRUWLQJPDQDJHUXQGHUWDNHWKH

UHVSRQVLELOLW\IRUWKHSUHSDUDWLRQRIWKHDQQXDOILQDQFLDOVWDWHPHQWVDVDW'HFHPEHUDQGFRQILUPWKDW

D WKHDFFRXQWLQJSROLFLHVXVHGIRUWKHSUHSDUDWLRQRIWKHDQQXDOILQDQFLDOVWDWHPHQWVDUHLQFRPSOLDQFHZLWK

WKHDSSOLFDEOHDFFRXQWLQJUHJXODWLRQV

E WKHDQQXDOILQDQFLDOVWDWHPHQWVJLYHDWUXHDQGIDLUYLHZRIWKHILQDQFLDOSRVLWLRQDQGSHUIRUPDQFH

LQFOXGLQJWKHDVVHWVOLDELOLWLHVDQGSURILWRUORVVDQGRIRWKHULQIRUPDWLRQUHJDUGLQJWKHEXVLQHVV

FRQGXFWHG

F WKHFRPSDQ\LVFRQGXFWLQJLWVEXVLQHVVRQDJRLQJFRQFHUQEDVLV

G WKH$QQXDO6ROH'LUHFWRU¶V5HSRUWRI)UDQNOLQ7HPSOHWRQ,QWHUQDWLRQDO6HUYLFHV6jUOUHJDUGLQJWKH

PDQDJHPHQWDQGDGPLQLVWUDWLRQRI)RQGXO3URSULHWDWHD6$IRUWKH\HDULQFOXGHVDQDFFXUDWH

RYHUYLHZRIWKHGHYHORSPHQWVDQGSHUIRUPDQFHRI)RQGXO3URSULHWDWHD6$DVZHOODVDGHVFULSWLRQRIWKH

PDLQULVNVDQGXQFHUWDLQWLHVUHODWHGWRWKHEXVLQHVV



-RKDQ0H\HU

3HUPDQHQW5HSUHVHQWDWLYH

)UDQNOLQ7HPSOHWRQ,QWHUQDWLRQDO6HUYLFHV6jUODFWLQJLQWKHFDSDFLW\RI6ROH'LUHFWRURI)RQGXO3URSULHWDWHD6$





&DWDOLQ&DGDUX

)LQDQFLDO5HSRUWLQJ0DQDJHU

)UDQNOLQ7HPSOHWRQ,QWHUQDWLRQDO6HUYLFHV6jUO%XFKDUHVW%UDQFK



FONDULPROPRIETATEASA



&RQVWLWXWLYH$FWRI)RQGXO3URSULHWDWHD6$LQIRUFHDVDW'HFHPEHU 



$QQH[



&RQVWLWXWLYH$FWRI)RQGXO3URSULHWDWHD6$

LQIRUFHDVDW'HFHPEHU



&2167,787,9($&7,1)25&(83'$7('$6$76(37(0%(5



&+$37(5,

1DPHRIWKHFRPSDQ\OHJDOIRUPKHDGTXDUWHUVDQGGXUDWLRQ



$57,&/(

1DPHRIWKH&RPSDQ\



7KHQDPHRIWKH&RPSDQ\LV)RQGXO3URSULHWDWHD6$

$OOLQYRLFHVRIIHUVRUGHUVWDULIIVSURVSHFWXVHVDQGRWKHUGRFXPHQWVXVHGLQEXVLQHVVLVVXHGE\WKH&RPSDQ\VKDOO

LQGLFDWHWKHQDPHWKHOHJDOIRUPWKHUHJLVWHUHGRIILFHWKHUHJLVWUDWLRQQXPEHUZLWKWKH&RPPHUFLDO5HJLVWU\DQGWKH

VROHUHJLVWUDWLRQFRGH&8,WKHVXEVFULEHGVKDUHFDSLWDODQGWKHSDLGVKDUHFDSLWDO´



$57,&/(

/HJDOIRUPRIWKHFRPSDQ\



)RQGXO3URSULHWDWHD6$KHUHLQDIWHUUHIHUUHGWRDV)RQGXO3URSULHWDWHDLVD5RPDQLDQOHJDOSHUVRQVHWXSDVD

MRLQWVWRFNFRPSDQ\

)RQGXO3URSULHWDWHDLVRUJDQL]HGRSHUDWHVDQGFHDVHVLWVDFWLYLW\XQGHUWKHOHJDOSURYLVLRQVLQIRUFH

)RQGXO3URSULHWDWHDLVVHWXSDVDQDOWHUQDWLYHLQYHVWPHQWIXQG$,)DGGUHVVHGWRUHWDLOLQYHVWRUVFRQVWLWXWHGDV

LQYHVWPHQWFRPSDQ\RIWKHFORVHGHQGW\SH



$57,&/(

&RPSDQ\KHDGTXDUWHUV



7KHUHJLVWHUHG RIILFHRI )RQGXO3URSULHWDWHDLV ORFDWHGLQ%XFKDUHVW %X]HVWL6WUHHW IORRU

6HFWRUWKH

KHDGTXDUWHUV PD\ EH FKDQJHG WR DQ\ RWKHU ORFDWLRQ LQ 5RPDQLD E\ GHFLVLRQ RI WKH DVVHW PDQDJHPHQW FRPSDQ\

$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHUDFFRUGLQJWRDUWLFOHSDUDJUDSK[LL

7KH&RPSDQ\PD\VHWXSVHFRQGDU\KHDGTXDUWHUVVXFKDVEUDQFKHVUHSUHVHQWDWLYHRIILFHVZRUNLQJSRLQWVRURWKHU

XQLWVZLWKQROHJDOSHUVRQDOLW\XQGHUWKHWHUPVSURYLGHGE\ODZ



$57,&/(

&RPSDQ\GXUDWLRQ



7KHGXUDWLRQRI)RQGXO3URSULHWDWHDLVXQOLPLWHG



&+$37(5,,

3XUSRVHDQGEXVLQHVVREMHFWRIWKHFRPSDQ\



$57,&/(

&RPSDQ\SXUSRVH



7KHSXUSRVHRI)RQGXO3URSULHWDWHDLVWKHPDQDJHPHQWDQGDGPLQLVWUDWLRQRIWKHSRUWIROLR.

FONDULPROPRIETATEASA



&RQVWLWXWLYH$FWRI)RQGXO3URSULHWDWHD6$LQIRUFHDVDW'HFHPEHU 



$57,&/(

%XVLQHVVREMHFW



)RQGXO3URSULHWDWHDKDVDVPDLQREMHFWRIDFWLYLW\WKHPDQDJHPHQWDQGDGPLQLVWUDWLRQRIWKHSRUWIROLR

7KHPDLQGRPDLQRIDFWLYLW\RI)RQGXO3URSULHWDWHDLVWKHRQHGHVFULEHGE\&$(1&RGH±PXWXDOIXQGVDQG

RWKHUVLPLODUILQDQFLDOHQWLWLHVDQGWKHPDLQDFWLYLW\LVILQDQFLDOLQYHVWPHQWV&$(1&RGH

7KHEXVLQHVVREMHFWRI)RQGXO3URSULHWDWHDLVWKHIROORZLQJ

DPDQDJHPHQWDQGDGPLQLVWUDWLRQRIWKHSRUWIROLR

ERWKHUDGGLWLRQDODQGDGMDFHQWDFWLYLWLHVDFFRUGLQJWRWKHUHJXODWLRQVLQIRUFH



&+$37(5,,,

6KDUHFDSLWDOVKDUHV



$57,&/(

6KDUHFDSLWDO



 7KH VXEVFULEHG VKDUH FDSLWDO RI )RQGXO 3URSULHWDWHD LV LQ WKH DPRXQW RI 521  GLYLGHG LQ

RUGLQDU\QRPLQDWLYHVKDUHVKDYLQJDQRPLQDOYDOXHRI521HDFK

7KHLGHQWLILFDWLRQGDWDRIHDFKVKDUHKROGHUWKHFRQWULEXWLRQWRWKHVKDUHFDSLWDORIHDFKVKDUHKROGHUWKHQXPEHURI

VKDUHVWRZKLFKDVKDUHKROGHULVHQWLWOHGWRDQGWKHSDUWLFLSDWLRQTXRWDRXWRIWKHWRWDOVKDUHFDSLWDODUHLQFOXGHGLQWKH

VKDUHKROGHUV¶UHJLVWHUNHSWE\DFRPSXWHUL]HGV\VWHPE\WKH&HQWUDO'HSRVLWRU\

7KHFDSDFLW\RIVKDUHKROGHURI)RQGXO3URSULHWDWHDDVZHOODVLQWKHFDVHRIOHJDOSHUVRQVRUHQWLWLHVZLWKRXWOHJDO

SHUVRQDOLW\WKHFDSDFLW\RIOHJDOUHSUHVHQWDWLYHRIWKDWUHVSHFWLYHVKDUHKROGHULVHVWDEOLVKHGRQWKHEDVLVRIWKHOLVWRI

VKDUHKROGHUVIURPWKHUHIHUHQFHUHJLVWUDWLRQGDWHUHFHLYHGE\)RQGXO3URSULHWDWHDIURP'HSR]LWDUXO&HQWUDO6$RUDV

WKH FDVH PD\ EH IRU GDWHV GLIIHUHQW IURP WKH UHIHUHQFHUHJLVWUDWLRQ GDWH RQ WKH EDVLV RI WKH IROORZLQJ GRFXPHQWV

VXEPLWWHGWR)RQGXO3URSULHWDWHDE\WKH VKDUHKROGHUDQGLVVXHGE\'HSR]LWDUXO&HQWUDO 6$RUE\WKHSDUWLFLSDQWVDV

GHILQHGE\WKHDSSOLFDEOHODZVDQGUHJXODWLRQVZKLFKSURYLGHVFXVWRG\VHUYLFHVDWKHVWDWHPHQWRIDFFRXQWVKRZLQJ

WKHFDSDFLW\RIVKDUHKROGHUDQGWKHQXPEHURIVKDUHVKHOGEGRFXPHQWVHYLGHQFLQJWKHUHJLVWUDWLRQRIWKHLQIRUPDWLRQ

RQWKHOHJDOUHSUHVHQWDWLYHZLWK'HSR]LWDUXO&HQWUDO6$UHVSHFWLYHSDUWLFLSDQWV



$57,&/(

6KDUHFDSLWDOLQFUHDVHDQGGHFUHDVH



7KHH[WUDRUGLQDU\JHQHUDOPHHWLQJRIWKHVKDUHKROGHUVVKDOOGHFLGHXQGHUWKHFRQGLWLRQVRIWKHODZRQWKHVKDUH

FDSLWDOLQFUHDVHDQGGHFUHDVHRI)RQGXO3URSULHWDWHDLQDFFRUGDQFHZLWKWKHSURYLVLRQVRIDUWOHWWHUFDQGGRI

WKLVFRQVWLWXWLYHDFW

7KHVKDUHFDSLWDOPD\EHLQFUHDVHGLQDFFRUGDQFHZLWKWKHSURYLVLRQVRIWKHODZ

DE\LVVXLQJQHZVKDUHVLQH[FKDQJHIRUFDVKFRQWULEXWLRQV

EE\ LQFRUSRUDWLQJUHVHUYHV H[FHSW IRUWKH OHJDO UHVHUYHVDQG RIWKH UHVHUYHV FUHDWHG RXWRI WKH UHHYDOXDWLRQ RI WKH

SDWULPRQ\DVZHOODVRIWKHEHQHILWVDQGLVVXLQJSUHPLXPV

7KHVKDUHFDSLWDOLQFUHDVHVWDWHGIRULQSDUDJUDSKVKDOOEHUHJLVWHUHGDWWKH7UDGH5HJLVWHU2IILFHRQWKHEDVLVRI

WKHGHFLVLRQPDGHE\WKH*HQHUDO0HHWLQJRIWKH6KDUHKROGHUVRI)RQGXO3URSULHWDWHD

$Q\VKDUHFDSLWDOGHFUHDVHVKDOOEHSHUIRUPHGLQDFFRUGDQFHZLWKWKHSURYLVLRQVRIWKHODZ

7KHVKDUHFDSLWDOPD\EHGHFUHDVHGE\

DGHFUHDVLQJWKHQXPEHURIVKDUHV

EGHFUHDVLQJWKHQRPLQDOYDOXHRIVKDUHVDQG

FRWKHUPHDQVSURYLGHGE\WKHODZ

,QFDVHWKH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHUQRWLFHVWKDWGXHWRDFFUXHGORVVHVWKHDPRXQWRIWKHQHWDVVHWV

HVWDEOLVKHGDVWKHGLIIHUHQFHEHWZHHQWKHWRWDODVVHWVDQGWRWDOOLDELOLWLHVRI)RQGXO3URSULHWDWHDLVOHVVWKDQKDOIRIWKH

YDOXH RI WKH VXEVFULEHG VKDUH FDSLWDO )XQG 0DQDJHU LV ERXQG WR FDOO WKH H[WUDRUGLQDU\ JHQHUDO PHHWLQJ RI WKH

VKDUHKROGHUV ZKLFK ZLOO GHFLGH LI )RQGXO 3URSULHWDWHD UHTXLUHV WR EH GLVVROYHG ,Q FDVH WKH H[WUDRUGLQDU\ JHQHUDO

PHHWLQJRIWKHVKDUHKROGHUVGRHVQRWGHFLGHWKHGLVVROXWLRQRI)RQGXO3URSULHWDWHDWKHQ)RQGXO3URSULHWDWHDLVERXQGWR

 

FONDULPROPRIETATEASA



&RQVWLWXWLYH$FWRI)RQGXO3URSULHWDWHD6$LQIRUFHDVDW'HFHPEHU 



SURFHHGDWWKHODWHVWE\WKHWHUPLQDWLRQRIWKHILVFDO\HDUVXEVHTXHQWWRWKHRQHLQZKLFKWKHORVVHVZHUHGHWHUPLQHGWR

DVKDUHFDSLWDOGHFUHDVHZLWKDQDPRXQWDWOHDVWHTXDOWRWKDWRIWKHORVVHVZKLFKFRXOGQRWEHFRYHUHGE\UHVHUYHVLQ

FDVHLQWKLVWLPHWKHQHWDVVHWVRI)RQGXO3URSULHWDWHDZHUHQRWUHFRQVWLWXWHGXSWRDYDOXHDWOHDVWHTXDOWRKDOIRIWKH

VKDUHFDSLWDO

 6KDUH FDSLWDO GHFUHDVH VKDOO EH SHUIRUPHG RQO\ DIWHU WZR PRQWKV DV RI WKH SXEOLFDWLRQ LQ WKH 2IILFLDO *D]HWWH RI

5RPDQLD3DUW,9RIWKHUHVROXWLRQRIWKHH[WUDRUGLQDU\JHQHUDOPHHWLQJRIWKHVKDUHKROGHUV



$57,&/(

6KDUHV



 7KH VKDUHV RI )RQGXO 3URSULHWDWHD DUH QRPLQDWLYH RI HTXDO YDOXH LVVXHG LQ GHPDWHULDOL]HG IRUP HVWDEOLVKHG E\

UHJLVWUDWLRQLQWKHDFFRXQWDQGJUDQWVHTXDOULJKWVWRWKHLUKROGHUVXQGHUWKHFRQGLWLRQVSURYLGHGE\DUW

7KHQRPLQDOYDOXHRIDVKDUHLV521

7KH VKDUHVDUH LQGLYLVLEOHZLWK UHVSHFW WR)RQGXO 3URSULHWDWHDDFNQRZOHGJLQJRQO\ RQHKROGHU IRUHDFK VKDUH,Q

FDVH D VKDUH EHFRPHV WKH SURSHUW\ RI PRUH SHUVRQV )RQGXO 3URSULHWDWHD  WKH &HQWUDO 'HSRVLWRU\ LV QRW ERXQG WR

UHJLVWHUWKHWUDQVIHUDVORQJDVWKRVHSHUVRQVZLOOQRWDSSRLQWDVROHUHSUHVHQWDWLYHWRH[HUFLVHWKHULJKWVDULVLQJIURPWKH

VKDUH

7KHSDUWLDORUWRWDOWUDQVIHURIWKHVKDUHVDPRQJVWWKHVKDUHKROGHUVRUWKLUGSDUWLHVLVGRQHDFFRUGLQJWRWKHWHUPV

FRQGLWLRQVDQGSURFHGXUHSURYLGHGE\ODZ

 )RQGXO 3URSULHWDWHD PD\ EX\ EDFN LWV RZQ VKDUHV LQ DFFRUGDQFH ZLWK WKH FRQGLWLRQV ODLG GRZQ LQ OHJLVODWLRQ LQ

IRUFH

 7KH ULJKW WR GLYLGHQGV DUH KHOG E\ WKH VKDUHKROGHUV UHJLVWHUHG LQ WKH VKDUHKROGHUV¶ UHJLVWHU DFFRUGLQJ WR WKH

DSSOLFDEOHOHJDODQGRUUHJXODWRU\SURYLVLRQV



$57,&/(

%RQGV



)RQGXO3URSULHWDWHDLVDXWKRUL]HGWRLVVXHERQGVLQDFFRUGDQFHZLWKWKHSURYLVLRQVRIWKHODZ)RQGXO3URSULHWDWHDLVQRW

DOORZHGWRFRQFOXGHORDQDJUHHPHQWVIRULQYHVWPHQWUHDVRQV



$57,&/(

5LJKWVDQGREOLJDWLRQVDULVLQJIURPVKDUHV



(DFKVKDUHIXOO\SDLGE\WKHVKDUHKROGHUVDFFRUGLQJWRWKHODZJUDQWVWKHPWKHULJKWWRYRWHLQWKHJHQHUDOPHHWLQJ

RIWKHVKDUHKROGHUVDFFRUGLQJWRWKHSURYLVLRQVRISDUDJUDSKWKHULJKWWRHOHFWDQGWREHHOHFWHGLQWKHPDQDJHPHQW

ERGLHVWKHULJKWWRWDNHSDUWLQWKHSURILWGLVWULEXWLRQDFFRUGLQJWRWKHSURYLVLRQVRIWKLVFRQVWLWXWLYHDFWDQGWKHOHJDO

GLVSRVLWLRQVUHVSHFWLYHO\RWKHUULJKWVSURYLGHGE\WKHFRQVWLWXWLYHDFW

7KHVKDUHVLVVXHGE\)RQGXO3URSULHWDWHDJUDQWWKHULJKWWRYRWHHDFKVKDUHJUDQWVRQHYRWLQJULJKW

+ROGLQJRQHVKDUHLPSOLHVWKHULJKWIXODGKHVLRQWRWKLVFRQVWLWXWLYHDFW

7KHULJKWVDQGREOLJDWLRQVIROORZWKHVKDUHVLQFDVHRZQHUVKLSWKHUHRISDVVHVWRDQRWKHUSHUVRQ



&+$37(5,9

*HQHUDOPHHWLQJRIWKHVKDUHKROGHUV



$57,&/(

*HQHUDOPHHWLQJVRIWKHVKDUHKROGHUV



7KHJHQHUDOPHHWLQJRIWKHVKDUHKROGHUVPD\EHRUGLQDU\DQGH[WUDRUGLQDU\

7KHRUGLQDU\JHQHUDOPHHWLQJRIWKHVKDUHKROGHUVKDVWKHIROORZLQJFRPSHWHQFLHVGXWLHVDQGIXQFWLRQV

D WR GLVFXVV DSSURYH DQG DPHQG WKH DQQXDO ILQDQFLDO VWDWHPHQWV DIWHU UHYLHZLQJ WKH UHSRUWV RI WKH $OWHUQDWLYH

,QYHVWPHQW)XQG0DQDJHUDQGILQDQFLDODXGLWRU



FONDULPROPRIETATEASA



&RQVWLWXWLYH$FWRI)RQGXO3URSULHWDWHD6$LQIRUFHDVDW'HFHPEHU 



EWRHVWDEOLVKWKHGLVWULEXWLRQRIWKHQHWSURILWDQGWRHVWDEOLVKWKHGLYLGHQGV

FWRDSSRLQWWKHPHPEHUVRIWKH%RDUGRI1RPLQHHV³%R1´DQGWRFDQFHOWKHLUDSSRLQWPHQW

GWRDSSRLQWWKH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHULQDFFRUGDQFHZLWKWKHODZDQGWRFDQFHOLWVDSSRLQWPHQW

HWRDSSRLQWDQGFDQFHOWKHDSSRLQWPHQWRIWKHILQDQFLDODXGLWRUDQGWRVHWWKHPLQLPXPGXUDWLRQRIWKHILQDQFLDODXGLW

DJUHHPHQW

IWRVHWWKHOHYHORIWKHUHPXQHUDWLRQRIWKHPHPEHUVRIWKH%RDUG RI 1RPLQHHV WKH $OWHUQDWLYH ,QYHVWPHQW )XQG

0DQDJHUDQGRIWKHILQDQFLDODXGLWRUIRUILQDQFLDODXGLWVHUYLFHVIRUWKHRQJRLQJILVFDO\HDU

JWRUXOHRYHUWKHPDQDJHPHQWRIWKH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHUDQGWRHYDOXDWHKLVKHUSHUIRUPDQFHVDQG

WRGLVFKDUJHKLPKHUIURPLWVPDQDJHPHQW

KWRGHFLGHRQWKHDFWLRQLQDFRXUWRIODZDJDLQVWWKH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHURUDVWKHFDVHPD\EH

DJDLQVWWKHILQDQFLDODXGLWIRUGDPDJHVFDXVHGWR)RQGXO3URSULHWDWHD

LWRDSSURYHWKHVWUDWHJLHVDQGWKHGHYHORSPHQWSROLFLHVRI)RQGXO3URSULHWDWHD

MWRHVWDEOLVKWKHDQQXDOLQFRPHDQGH[SHQGLWXUHEXGJHWIRUWKHIROORZLQJILQDQFLDO\HDU

N WR GHFLGH XSRQ WKH SOHGJH OHDVH RU WKH FUHDWLRQ RI WKH PRYDEOH VHFXULWLHV RU PRUWJDJHV RQ WKH DVVHWV RI )RQGXO

3URSULHWDWHD

O WR DSSURYH VLJQLILFDQW UHODWHG SDUWLHV¶ WUDQVDFWLRQV LI WKHLU YDOXH LV JUHDWHU WKDQ  RI WKH QHW DVVHW YDOXH DW WKH

SURSRVDORIWKH$,)0

PWRGHFLGHRQDQ\RWKHUDVSHFWVUHJDUGLQJ)RQGXO3URSULHWDWHDDFFRUGLQJWRWKHOHJDOGXWLHV

7KHH[WUDRUGLQDU\JHQHUDOPHHWLQJRIWKHVKDUHKROGHUVLVHQWLWOHGWRGHFLGHRQWKHIROORZLQJ

DVHWXSRUFORVLQJRIVRPHVHFRQGDU\XQLWVEUDQFKHVDJHQFLHVUHSUHVHQWDWLYHRIILFHVRURWKHUVXFKXQLWVZLWKQROHJDO

SHUVRQDOLW\

EVKDUHFDSLWDOLQFUHDVH

FVKDUHFDSLWDOGHFUHDVHRUUHFRPSOHWLRQWKHUHRIE\LVVXLQJQHZVKDUHV

GFRQYHUVLRQRIVKDUHVIURPRQHFDWHJRU\WRDQRWKHU

HFRQYHUVLRQRIDFDWHJRU\RIERQGVWRDQRWKHUFDWHJRU\RUWRVKDUHV

ILVVXHQHZERQGV

JDSSURYHVWKHDGPLVVLRQIRUWUDGLQJDQGQRPLQDWHVWKHUHJXODWHGPDUNHWRQZKLFKWKHVKDUHVRI)RQGXO3URSULHWDWHD

ZLOOEHWUDGHG

KWKHH[HFXWLRQRIFRQWUDFWVIRUDFTXLULQJVHOOLQJH[FKDQJLQJRUIRUFUHDWLQJSOHGJHVKDYLQJDVVXEMHFWQRQFXUUHQW

DVVHWVRI)RQGXO3URSULHWDWHDZKRVHYDOXHH[FHHGVLQGLYLGXDOO\RUFXPXODWLYHO\GXULQJDILQDQFLDO\HDURIWKH

WRWDOYDOXHRIWKHQRQFXUUHQWDVVHWVRI)RQGXO3URSULHWDWHDOHVVUHFHLYDEOHV

LFKDQJHRIWKHPDQDJHPHQWV\VWHPRI)RQGXO3URSULHWDWHD

MOLPLWDWLRQRUFDQFHOODWLRQRIWKHSUHIHUHQFHULJKWRIWKHVKDUHKROGHUV

NDSSURYHVWKH,QYHVWPHQW3ROLF\6WDWHPHQW

O DQ\ RWKHU DPHQGPHQW RI WKH FRQVWLWXWLYH DFW RU DQ\ RWKHU UHVROXWLRQ UHTXLULQJ WKH DSSURYDO RI WKH H[WUDRUGLQDU\

JHQHUDOPHHWLQJRIWKHVKDUHKROGHUVDFFRUGLQJWRDSSOLFDEOHODZRUWRWKLV&RQVWLWXWLYH$FW



$57,&/(

6XPPRQLQJWKHJHQHUDOPHHWLQJRIWKHVKDUHKROGHUV



7KHJHQHUDOPHHWLQJRIWKHVKDUHKROGHUVLVFDOOHGE\WKH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHUZKHQHYHUUHTXLUHG

3ULRU WR WKH FRQYRFDWLRQ RI WKH JHQHUDO PHHWLQJ RI WKH VKDUHKROGHUV WKH $OWHUQDWLYH ,QYHVWPHQW )XQG 0DQDJHU VKDOO

FRPPXQLFDWH WR WKH %RDUG RI 1RPLQHHV WKH LQWHQWLRQ WR FDOO WKH JHQHUDO PHHWLQJ DQG VKDOO LQWURGXFH RQ WKH OLVW RI

PDWWHUVIRUWKHPHHWLQJDOOPDWWHUVUHTXHVWHGE\WKH%RDUGRI1RPLQHHV

7KHRUGLQDU\JHQHUDOPHHWLQJRIWKHVKDUHKROGHUVPHHWVDWOHDVWRQFHD\HDUZLWKLQPRQWKVIURPWKHHQGRIWKH

ILQDQFLDO\HDU

7KHGDWHRIWKHPHHWLQJPD\QRWEHOHVVWKDQGD\VIURPWKHSXEOLFDWLRQRIWKHFRQYRFDWLRQLQWKH2IILFLDO*D]HWWH

RI5RPDQLD3DUW,9

 7KH JHQHUDO PHHWLQJ RI WKH VKDUHKROGHUV HLWKHU RUGLQDU\ RU H[WUDRUGLQDU\ VKDOO EH FDOOHG ZKHQHYHU UHTXLUHG

DFFRUGLQJWRWKHOHJDOSURYLVLRQVLQIRUFHDQGZLWKWKHGLVSRVLWLRQVRIWKHFRQVWLWXWLYHDFWE\SXEOLFDWLRQRIWKHFDOOLQJ

QRWLFHLQWKH2IILFLDO*D]HWWHRI5RPDQLD3DUW,9DQGDQDWLRQDOGDLO\QHZVSDSHURULQDORFDOQHZVSDSHUODUJHO\UHDG

LQWKHORFDOLW\ZKHUHWKHKHDGTXDUWHURIWKHFRPSDQ\UHVLGHVDWOHDVWGD\VSULRUWRWKHSURSRVHGGDWHRIPHHWLQJ



FONDULPROPRIETATEASA



&RQVWLWXWLYH$FWRI)RQGXO3URSULHWDWHD6$LQIRUFHDVDW'HFHPEHU 



 2QH RU PRUH VKDUHKROGHUV LQGLYLGXDOO\ RU MRLQWO\ UHSUHVHQWLQJ DW OHDVW  RI WKH VKDUH FDSLWDO RI )RQGXO

3URSULHWDWHD PD\ UHTXHVW WKH $OWHUQDWLYH ,QYHVWPHQW )XQG 0DQDJHU E\ D ZULWWHQ DGGUHVV VLJQHG E\ WKH KROGHUV WR

LQWURGXFHLQWKHDJHQGDQHZPDWWHUVZLWKLQGD\VRIWKHSXEOLFDWLRQRIWKHFDOOLQJQRWLFH

 7KH FDOOLQJ QRWLFH DQ\ RWKHU PDWWHU DGGHG WR WKH DJHQGD DW WKH UHTXHVW RI WKH VKDUHKROGHUV RU RI WKH %RDUG RI

1RPLQHHVWKHDQQXDOILQDQFLDOVWDWHPHQWVWKHDQQXDOUHSRUWRIWKH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHUWKHUHSRUWRI

WKH%RDUG RI1RPLQHHV DV ZHOODV WKH SURSRVDOWR GLVWULEXWHGLYLGHQGV DUHPDGHDYDLODEOH WRWKH VKDUHKROGHUV DWWKH

KHDGTXDUWHUVRI)RQGXO3URSULHWDWHDDW WKHGDWHRI FRQYRFDWLRQRIWKHJHQHUDOPHHWLQJDQGDUHDOVR SXEOLVKHGRQWKH

LQWHUQHW SDJH IRU IUHH DFFHVV WR LQIRUPDWLRQ E\ WKH VKDUHKROGHUV 8SRQ UHTXHVW FRSLHV RI WKHVH GRFXPHQWV VKDOO EH

LVVXHGWRWKHVKDUHKROGHUV

 7KH FDOOLQJ QRWLFH LQFOXGHV WKH SODFH KRXU DQG GDWH RI WKH JHQHUDO PHHWLQJ RI WKH VKDUHKROGHUV DV ZHOO DV WKH

DJHQGDH[SUHVVO\PHQWLRQLQJDOOPDWWHUVWKDWZLOOEHVXEMHFWWRGHEDWHDQGDOOPDWWHUVUHTXLUHGE\WKHDSSOLFDEOHODZ

 ,Q FDVH WKH DJHQGD LQFOXGHV SURSRVDOV WR DPHQG WKH FRQVWLWXWLYH DFW WKH QRWLFH VKDOO LQFOXGH WKH IXOO WH[W RI WKH

SURSRVDOV ,Q FDVH WKH DJHQGD LQFOXGHV WKH DSSRLQWPHQW RI WKH PHPEHUV RI WKH %RDUG RI 1RPLQHHV WKH QRWLFH VKDOO

PHQWLRQWKDWWKHOLVWLQFOXGLQJLQIRUPDWLRQUHJDUGLQJWKHQDPHWKHUHVLGHQFHDQGSURIHVVLRQDOWUDLQLQJRIWKHSHUVRQV

SURSRVHGIRUWKHSRVLWLRQRIPHPEHURIWKH%RDUGRI1RPLQHHVLVDYDLODEOHWRWKHVKDUHKROGHUVWREHIXUWKHUUHYLHZHG

DQGFRPSOHWHGE\VKDUHKROGHUV

 7KH QRWLFH IRU WKH ILUVW JHQHUDO PHHWLQJ RI WKH VKDUHKROGHUV PD\ SURYLGH DOVR WKH GD\ DQG KRXU RI WKH VHFRQG

PHHWLQJKDYLQJWKHVDPHDJHQGDDVWKHILUVWLQRUGHUWRFRYHUWKHVLWXDWLRQLQZKLFKWKHILUVWPHHWLQJFDQQRWWDNHSODFH

LIWKHTXRUXPLVQRWEHLQJPHW

7KHJHQHUDOPHHWLQJRIWKHVKDUHKROGHUVVKDOOPHHWDWWKHKHDGTXDUWHUVRI)RQGXO3URSULHWDWHDRULQDQRWKHUSODFH

LQGLFDWHGLQWKHQRWLFH

 7KH %RDUG RI 1RPLQHHV PD\ UHTXHVW WR WKH $OWHUQDWLYH ,QYHVWPHQW )XQG 0DQDJHU WKH FDOOLQJ RI WKH JHQHUDO

PHHWLQJDQG LIWKH )XQG0DQDJHUGRHV QRW REVHUYHWKH ZULWWHQUHTXHVW RIWKH %RDUGRI 1RPLQHHV ZLWKLQ ZRUNLQJ

GD\VIURPUHFHLYLQJLWWKH%RDUGRI1RPLQHHVPD\FDOOXSRQWKHJHQHUDOPHHWLQJRIWKHVKDUHKROGHUVE\IROORZLQJWKH

VDPHSURFHGXUHVDVVHWRXWLQWKLV$UWLFOH

7KHFKDLUSHUVRQRI%RDUGRI1RPLQHHVPD\UHTXHVWWRWKH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHUWKHFDOOLQJRIWKH

JHQHUDOPHHWLQJDFFRUGLQJWRDUWLFOHSDUDJUDSKVHFRQGVHQWHQFH

7KH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHULPPHGLDWHO\FDOOWKHJHQHUDOPHHWLQJRIWKHVKDUHKROGHUVXSRQZULWWHQ

UHTXHVW RI WKH VKDUHKROGHUV LQGLYLGXDOO\ RU MRLQWO\ UHSUHVHQWLQJ DW OHDVW  RI WKH VKDUH FDSLWDO LQ FDVH WKH UHTXHVW

LQFOXGHVGLVSRVLWLRQVWKDWIDOOXQGHUWKHUHVSRQVLELOLW\RIWKHJHQHUDOPHHWLQJRIVKDUHKROGHUV

,QWKHFDVHSURYLGHGE\SDUDJUDSKWKHJHQHUDOPHHWLQJRIWKHVKDUHKROGHUVVKDOOEHFDOOHGZLWKLQDWPRVW

FDOHQGDU GD\V DQG VKDOO PHHW ZLWKLQ DW PRVW  FDOHQGDU GD\V DV RI WKH GDWH ZKHQ WKH $OWHUQDWLYH ,QYHVWPHQW )XQG

0DQDJHUUHFHLYHGWKHUHTXHVWRIWKHVKDUHKROGHUV

,QWKHVLWXDWLRQSURYLGHGE\SDUDJUDSKVDQGLQFDVHWKH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHUGRHVQRW

FDOOWKHJHQHUDOPHHWLQJRIVKDUHKROGHUVWKHVKDUHKROGHUVZKRUHTXHVWHGWKHFDOOLQJRIWKHJHQHUDOPHHWLQJPD\UHTXHVW

WKH VDPH WR WKH %RDUG RI 1RPLQHHV 6KRXOG WKH %RDUG RI 1RPLQHHV LV DOVR QRW UHVSRQGLQJ WR WKHLU UHTXHVW LQ 

ZRUNLQJ GD\V IURP WKH UHFHLSW RI WKH UHTXHVW WKH FRXUW RI ODZ IURP WKH KHDGTXDUWHUV RI )RQGXO 3URSULHWDWHD E\

VXPPRQLQJ WKH $OWHUQDWLYH ,QYHVWPHQW )XQG 0DQDJHU PD\ DXWKRUL]H WKH FDOOLQJ RI WKH JHQHUDO PHHWLQJ E\ WKH

VKDUHKROGHUVZKLFKIRUPXODWHGWKHUHTXHVW



$57,&/(

2UJDQL]DWLRQRIWKHJHQHUDOPHHWLQJRIWKHVKDUHKROGHUV



,4XRUXPDQGYRWLQJULJKWV



8SRQWKHILUVWFDOOLQJIRUWKHYDOLGLW\RIWKHGHOLEHUDWLRQVRIWKHRUGLQDU\JHQHUDOPHHWLQJRIWKHVKDUHKROGHUVLWLV

UHTXLUHGWKDWWKHVKDUHKROGHUVUHSUHVHQWLQJDWOHDVWDIRXUWKRIWKHWRWDOVKDUHVZLWKULJKWWRYRWHWRDWWHQG7KHGHFLVLRQV

RI WKH RUGLQDU\ JHQHUDO PHHWLQJ RI WKH VKDUHKROGHUV DUH WDNHQ ZLWK WKH PDMRULW\ RI YRWHV KHOG E\ WKH VKDUHKROGHUV

DWWHQGLQJRUEHLQJUHSUHVHQWHG

,QFDVHWKHRUGLQDU\JHQHUDOPHHWLQJRIWKHVKDUHKROGHUVFDQQRWRSHUDWHGXHWRODFNRITXRUXPXQGHUSDUDJUDSK

WKHPHHWLQJWKDWZLOOPHHWXSRQDVHFRQGFRQYRFDWLRQPD\GHOLEHUDWHRQWKHLWHPVLQFOXGHGLQWKHDJHQGDRIWKHILUVW

PHHWLQJLUUHVSHFWLYHRIWKHPHWTXRUXPWDNLQJGHFLVLRQE\PDMRULW\RIWKHH[SUHVVHGYRWHV



FONDULPROPRIETATEASA



&RQVWLWXWLYH$FWRI)RQGXO3URSULHWDWHD6$LQIRUFHDVDW'HFHPEHU 



 )RU WKH YDOLGLW\ RI WKH GHOLEHUDWLRQV RI WKH H[WUDRUGLQDU\ JHQHUDO PHHWLQJ RI WKH VKDUHKROGHUV WKH IROORZLQJ DUH

UHTXLUHG

D XSRQ WKH ILUVW FRQYRFDWLRQ WKH DWWHQGDQFH RI WKH VKDUHKROGHUV UHSUHVHQWLQJ DW OHDVW D IRXUWK RI WKH VKDUHV KDYLQJ

YRWLQJ ULJKWV DQG WKH GHFLVLRQV DUH WDNHQ ZLWK PDMRULW\ RI YRWHV KHOG E\ WKH VKDUHKROGHUV DWWHQGLQJ RU EHLQJ

UHSUHVHQWHG

EXSRQWKHVHFRQGFRQYRFDWLRQWKHJHQHUDOPHHWLQJRIWKHVKDUHKROGHUVPD\GHOLEHUDWHRQWKHLWHPVLQFOXGHGLQWKH

DJHQGDRIWKHILUVWPHHWLQJLQWKHSUHVHQFHRIWKHVKDUHKROGHUVUHSUHVHQWLQJDWOHDVWRQHILIWKRIWKHWRWDOQXPEHURIWKH

VKDUHV KDYLQJ YRWLQJ ULJKWV WDNLQJ GHFLVLRQV E\ PDMRULW\ RI YRWHV KHOG E\ WKH VKDUHKROGHUV DWWHQGLQJ RU EHLQJ

UHSUHVHQWHG

7KHDWWHQGDQFHRIVKDUHKROGHUVUHSUHVHQWLQJDWOHDVWRIWKHWRWDOQXPEHURIWKHYRWLQJULJKWVERWKDWWKHILUVW

DQG WKH VHFRQG FRQYRFDWLRQ LV UHTXLUHG IRU WKH YDOLGLW\ RI GHOLEHUDWLRQV RI WKH H[WUDRUGLQDU\ JHQHUDO PHHWLQJ RI WKH

VKDUHKROGHUVWRDGRSWDGHFLVLRQUHJDUGLQJ

LDVKDUHFDSLWDOLQFUHDVH

LLWKHDQWLFLSDWHGGLVVROXWLRQRI)RQGXO3URSULHWDWHDPDGHXQGHUWKHFRQGLWLRQVRIWKHODZ

)RUWKHYDOLGLW\RIWKHGHOLEHUDWLRQRIWKHH[WUDRUGLQDU\JHQHUDOPHHWLQJRIVKDUHKROGHUVUHJDUGLQJDVKDUHFDSLWDO

GHFUHDVHWKHDWWHQGDQFHRIWKHVKDUHKROGHUVUHSUHVHQWLQJ

LDWOHDVWDIRXUWKRIWKHVKDUHVKDYLQJYRWLQJULJKWVXSRQWKHILUVWFRQYRFDWLRQDQG

LLDWOHDVWRQHILIWKRIWKHWRWDOQXPEHURIWKHVKDUHVKDYLQJYRWLQJULJKWVXSRQWKHVHFRQGFRQYRFDWLRQLVUHTXLUHG

7KHGHFLVLRQWRDPHQGWKHPDLQEXVLQHVVREMHFWRI)RQGXO3URSULHWDWHDWRGHFUHDVHRULQFUHDVHWKHVKDUHFDSLWDOWR

FKDQJH WKH OHJDO IRUP WR PHUJH GHPHUJH RU GLVVROXWH LV WDNHQ ZLWK D PDMRULW\ RI DW OHDVW WZR WKLUGV RI WKH YRWLQJ

ULJKWVUHODWHGWRWKHVKDUHVKDYLQJYRWLQJULJKWVRIWKHVKDUHKROGHUVDWWHQGLQJRUEHLQJUHSUHVHQWHG



,,3URFHGXUHRIWKHPHHWLQJV



2QWKHGD\DQGKRXUHVWDEOLVKHGLQWKHFRQYRFDWLRQWKHJHQHUDOPHHWLQJRIWKHVKDUHKROGHUVVKDOOEHRSHQHGE\WKH

SHUPDQHQWUHSUHVHQWDWLYHRIWKH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHURULQLWVDEVHQFHE\WKHRQHKROGLQJLWVSODFH

7KH SHUPDQHQW UHSUHVHQWDWLYH RI WKH $OWHUQDWLYH ,QYHVWPHQW )XQG 0DQDJHU RU D SHUVRQ DSSRLQWHG E\ LW VKDOO EH WKH

FKDLUPDQRIWKHPHHWLQJ7KHPHPEHUVRIWKH%RDUGRI1RPLQHHVVKDOOSDUWLFLSDWHDWWKHPHHWLQJVDVZHOO

7KHJHQHUDOPHHWLQJVKDOOHOHFWIURPDPRQJVWWKHDWWHQGLQJVKDUHKROGHUVXSWRVHFUHWDULHVZKRZLOOFKHFNWKH

DWWHQGDQFHOLVWRIWKHVKDUHKROGHUVLQGLFDWLQJWKHVKDUHFDSLWDOUHSUHVHQWHGE\HDFKRIWKHPWKHPLQXWHVGUDZQXSE\

WKHWHFKQLFDOVHFUHWDU\WRGHWHUPLQHWKHQXPEHURIWKHVXEPLWWHGVKDUHVDQGWKHIXOILOPHQWRIWKHIRUPDOLWLHVUHTXHVWHG

E\ODZDQGE\WKHFRQVWLWXWLYHDFWIRUKROGLQJWKHJHQHUDOPHHWLQJRIWKHVKDUHKROGHUV

$PLQXWHRIWKHPHHWLQJVLJQHGE\WKHSUHVLGHQWDQGE\6HFUHWDULHVVKDOOGHWHUPLQHWKHIXOILOPHQWRIWKHFDOOLQJ

IRUPDOLWLHVWKHGDWHDQGSODFHRIWKHJHQHUDOPHHWLQJRIWKHVKDUHKROGHUVDWWHQGLQJVKDUHKROGHUVWKHPHPEHUVRIWKH

%RDUGRI1RPLQHHVSUHVHQWWKHQXPEHURIVKDUHVDVXPPDU\RIWKHGHEDWHVWKHGHFLVLRQVWDNHQDQGXSRQUHTXHVWRI

WKHVKDUHKROGHUVWKHVWDWHPHQWVPDGHWKHUHE\LQWKHPHHWLQJ

7KHGRFXPHQWVUHIHUULQJWRWKHFRQYRFDWLRQDQGWKHVKDUHKROGHUV¶DWWHQGLQJOLVWVKDOOEHDWWDFKHGWRHDFKPLQXWH

 7KH SHUPDQHQW UHSUHVHQWDWLYH RI WKH $OWHUQDWLYH ,QYHVWPHQW )XQG 0DQDJHU PD\ DSSRLQW IURP DPRQJVW WKH

HPSOR\HHV RI WKH $OWHUQDWLYH ,QYHVWPHQW )XQG 0DQDJHU RQH RU PRUH WHFKQLFDO VHFUHWDULHV WR IXOILO WKHLU GXWLHV

DFFRUGLQJWRWKHOHJDOSURYLVLRQV

7KHGHFLVLRQVRIWKHJHQHUDOPHHWLQJVRIWKHVKDUHKROGHUVDUHGUDZQXSEDVHGRQWKHPLQXWHVDQGLVVLJQHGE\WKH

SHUPDQHQWUHSUHVHQWDWLYHRIWKH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHURUE\DSHUVRQDSSRLQWHGWKHUHE\7KHPLQXWHV

VKDOOEHUHFRUGHGLQWKHJHQHUDOPHHWLQJVRIWKHVKDUHKROGHUV¶UHJLVWHU

&RQVLGHULQJWKHH[WUHPHO\ODUJHQXPEHURIVKDUHKROGHUVRI)RQGXO3URSULHWDWHDWKHVKDUHKROGHUVPD\SDUWLFLSDWHLQ

SHUVRQE\SUR[\ZLWKDVSHFLDOSRZHURIDWWRUQH\RUPD\H[SUHVVWKHLUYRWLQJULJKWE\FRUUHVSRQGHQFHRUE\HOHFWURQLF

YRWLQJWKHSURFHGXUHV DQGIRUPV IRUWKHSUR[\FRUUHVSRQGHQFH DQGHOHFWURQLFYRWLQJ VKDOOEHVHWE\WKH$OWHUQDWLYH

,QYHVWPHQW)XQG0DQDJHULQDFFRUGDQFHZLWKWKHDSSOLFDEOHOHJLVODWLRQDQGDUHPDGHDYDLODEOHWRWKHVKDUHKROGHUVDW

OHDVWE\WKHGDWHRISXEOLVKLQJRIFRQYHQLQJQRWLFHIRUJHQHUDOPHHWLQJRIVKDUHKROGHUV

 &RQVLGHULQJ WKH LQWURGXFWLRQ RI WKH YRWLQJ ULJKW E\ FRUUHVSRQGHQFH ZKLFK ULJKW PD\ EH H[HUFLVHG DQG LW LV

UHFRPPHQGHG WR EH H[HUFLVHG E\ DQ\ RI WKH VKDUHKROGHUV WKH VWD

WXWRU\ TXRUXP WKDW QHHGV WR EH PHW IRU WKH YDOLG

KROGLQJRIDQ\W\SHRIJHQHUDOPHHWLQJRIWKHVKDUHKROGHUVLVFDOFXODWHGE\LQFOXGLQJWKHYRWHVGHHPHGYDOLGO\VHQWE\

FRUUHVSRQGHQFH



FONDULPROPRIETATEASA



&RQVWLWXWLYH$FWRI)RQGXO3URSULHWDWHD6$LQIRUFHDVDW'HFHPEHU 



$OVRLQWKHFDVHRIWKHYRWHE\FRUUHVSRQGHQFHHDFKVKDUHKROGHULVHQWLWOHGWRSURQRXQFHKLPVHOILQZULWLQJZLWK

UHVSHFWWRWKHLVVXHVLQFOXGHGLQWKHDJHQGDFDVWLQJDYRWHIRUDJDLQVWRUDEVWDLQHG7KHH[SUHVVHGYRWHVWKDWDUH

QRWFDQFHOOHGDUHFRQVLGHUHG

$OOVKDUHKROGHUVZKRDWWKHUHIHUHQFHGDWHDUHUHJLVWHUHGLQWKHVKDUHKROGHUV¶UHJLVWHUNHSWDFFRUGLQJWRWKHODZ

KDYHWKHULJKWWRSDUWLFLSDWHWRWKHJHQHUDOPHHWLQJVRIWKHVKDUHKROGHUV

 ,Q RUGHU WR HQVXUH WKH HIIHFWLYH DQG UHDO SRVVLELOLW\ RI DOO VKDUHKROGHUV WR EH LQIRUPHG RQ WKH FRQWHQWV RI WKH

GRFXPHQWVDQGWKHSURSRVDOVRIWKHRQHVUHTXLULQJWKHRUJDQL]DWLRQRIWKHJHQHUDOPHHWLQJRIWKHVKDUHKROGHUVE\FDUH

RIWKH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHUVXFKZLOOEHDYDLODEOHDWWKHKHDGTXDUWHUVRI)RQGXO3URSULHWDWHDDVZHOO

DVRQWKHLQWHUQHWSDJHRI)RQGXO3URSULHWDWHDDWOHDVWGD\VSULRUWRWKHGDWHSURYLGHGIRUKROGLQJWKHPHHWLQJ,QWKH

FDVHWKHFDOOLQJRIWKHJHQHUDOPHHWLQJLVPDGHE\WKH%RDUGRI1RPLQHHVWKH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHU

KDV WKH REOLJDWLRQWR IXOILO DOO WKH DERYHPHQWLRQHG IRUPDOLWLHV DW WKH UHTXHVW RI WKH %RDUG RI 1RPLQHHV ,Q FDVH WKH

FRPPXQLFDWLRQ ZLWK WKH VKDUHKROGHU LV QRW UHDOL]HG LQ WKLV ZD\ IRU REMHFWLYH UHDVRQV WKH %RDUG RI 1RPLQHHV PD\

DQQRXQFHLQWKHFDOOLQJQRWLFHDGLIIHUHQWDGGUHVVWKDQWKHUHJLVWHUHGDGGUHVVRI)RQGXO3URSULHWDWHDZKHUHWKHDERYH

PHQWLRQHG GRFXPHQWV ZLOO EH PDGH SXEOLF RQ WKH ZHEVLWH RI )RQGXO 3URSULHWDWHD LQ DFFRUGDQFH ZLWK WKH DSSOLFDEOH

OHJLVODWLRQ

,QWKHDGVLQIRUPLQJRQWKHFRQYRFDWLRQRIWKHJHQHUDOPHHWLQJRIVKDUHKROGHUVRI)RQGXO3URSULHWDWHDLWZLOOEH

LQGLFDWHGE\WKH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHUWKHUHIHUHQFHGDWHLQUHODWLRQWRZKLFKWKHVKDUHKROGHUVZLOOEH

HQWLWOHGWRSDUWLFLSDWHDQGYRWH$OVRWKHGDWHE\ZKHQWKHVKDUHKROGHUVPD\VHQGWKHLUYRWHVDVZHOODVWKHSURFHGXUH

IRU YRWLQJ E\ FRUUHVSRQGHQFH UHJDUGLQJ DQ\ RI WKH LVVXHV VXEMHFW WR DSSURYDO VKDOO DOVR EH VHW ,I WKH FDOOLQJ RI WKH

JHQHUDOPHHWLQJLVPDGHDWWKHUHTXHVWRIWKH%RDUGRI1RPLQHHVWKHDERYHPHQWLRQHGGXWLHVVKDOOEHIXOILOOHGE\WKH

%RDUG RI 1RPLQHHV 7KH GHDGOLQH E\ ZKHQ YRWHV E\ FRUUHVSRQGHQFH PD\ EH UHJLVWHUHG DW OHDVW  ZRUNLQJ GD\V

VXEVHTXHQW WR WKH GDWH RI SXEOLFDWLRQ RI WKH LQIRUPDWLYH PDWHULDO DQG LV SULRU WR WKH FRQYRFDWLRQ GDWH RI WKH JHQHUDO

PHHWLQJRIWKHVKDUHKROGHUE\DWOHDVWKRXUV

7KHYRWHVRIWKHVKDUHKROGHUVZLOOEHVHQWHOHFWURQLFDOO\RUE\OHWWHUWRWKHKHDGTXDUWHUVRI)RQGXO3URSULHWDWHDLQD

FOHDUDQGSUHFLVHIRUPQRWLQJIRUDJDLQVWRUDEVWDLQHGLQUHODWLRQWRHDFKLVVXHVXEMHFWWRDSSURYDOIRUZKLFKWKH

VKDUHKROGHULQWHQGVWRFDVWDYRWH

7KHYRWHVWUDQVPLWWHGHOHFWURQLFDOO\VKDOOEHFDQFHOOHGLIWKH\GRQRWREVHUYHWKHSURFHGXUHVHWE\WKH$OWHUQDWLYH

,QYHVWPHQW)XQG0DQDJHUGUDZQXSDFFRUGLQJWRWKH)LQDQFLDO6XSHUYLVRU\$XWKRULW\UHJXODWLRQVDQGVXFKYRWHVZLOO

QRWEHWDNHQLQWRFRQVLGHUDWLRQLQFDOFXODWLQJWKHDWWHQGLQJTXRUXP



,,, ([HUFLVLQJWKHYRWLQJULJKWLQWKHJHQHUDOPHHWLQJRIWKHVKDUHKROGHUV



7KHVKDUHKROGHUVPD\EHUHSUHVHQWHGLQHDFKJHQHUDOPHHWLQJE\RWKHUVKDUHKROGHUVRUE\WKLUGSDUWLHVVXEMHFWWR

HYLGHQFHWKDWYRWLQJDXWKRULW\KDVEHHQGHOHJDWHGE\WKHVKDUHKROGHUIRUWKDWSDUWLFXODUJHQHUDOPHHWLQJ

7KHGHFLVLRQVRIWKHJHQHUDOPHHWLQJVRIWKHVKDUHKROGHUVDUHWDNHQE\RSHQYRWHH[FHSWIRUWKHFDVHVWKHODZRU

WKLVFRQVWLWXWLYHDFWGRHVQRWSURYLGHGLIIHUHQWO\

 2QO\ WKH VKDUHKROGHUV UHJLVWHUHG LQ WKH FRPSDQ\ VKDUHKROGHUV¶ UHJLVWHU DW WKH UHIHUHQFH GDWH HVWDEOLVKHG E\ WKH

$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHURUWKH%RDUGRI1RPLQHHVDVWKHFDVHPD\EHZKHQFDOOLQJWKHJHQHUDOPHHWLQJ

RIWKHVKDUHKROGHUVVKDOOEHHQWLWOHGWRSDUWLFLSDWHWRWKHPHHWLQJDQGYRWHDIWHUSURYLQJWKHLULGHQWLW\

6HFUHWYRWHLVFRPSXOVRU\IRUHOHFWLQJDQGUHYRNLQJWKH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHUWKHPHPEHUVRIWKH

%RDUG RI 1RPLQHHV WKH ILQDQFLDO DXGLWRUV DQG IRU WDNLQJ VRPH PHDVXUHVGHFLVLRQV UHJDUGLQJ WKH OLDELOLW\ RI WKH

$OWHUQDWLYH,QYHVWPHQW )XQG 0DQDJHU RU RIWKH PHPEHUV RI WKH %RDUG RI1RPLQHHV DQG RI WKH ILQDQFLDO DXGLWRUVRI

)RQGXO3URSULHWDWHD

7KHSURFHGXUHVUHIHUULQJWRWKHVHFUHWYRWHZKHUHDSSOLFDEOHZLOOEHDSSURYHGE\WKH$OWHUQDWLYH,QYHVWPHQW)XQG

0DQDJHUDQGZLOOEHPDGHSXEOLFRQWKHZHEVLWHRI)RQGXO3URSULHWDWHDDWWKHGDWHRIFRQYHQLQJQRWLFHDWOHDVWE\WKH

GDWHRISXEOLVKLQJRIFRQYHQLQJQRWLFHIRUJHQHUDOPHHWLQJRIVKDUHKROGHUV

 7KH GHFLVLRQV RI WKH JHQHUDO PHHWLQJ RI WKH VKDUHKROGHUV DUH ELQGLQJ IRU DOO VKDUHKROGHUV HYHQ IRU WKH DEVHQW

VKDUHKROGHUVRUZKRYRWHGDJDLQVWRUDEVWDLQHG

7KHVKDUHKROGHUVZKRGRQRWKDYHFDSDFLW\WRDFWDVZHOODVWKHOHJDOHQWLWLHVPD\EHUHSUHVHQWHGE\WKHLUOHJDO

UHSUHVHQWDWLYHVZKRLQWKHLUWXUQPD\JUDQWSRZHURIDWWRUQH\WRRWKHUSHUVRQVIRUWKDWSDUWLFXODUJHQHUDOPHHWLQJRI

WKHVKDUHKROGHUV



FONDULPROPRIETATEASA



&RQVWLWXWLYH$FWRI)RQGXO3URSULHWDWHD6$LQIRUFHDVDW'HFHPEHU 



&+$37(59

7KH%RDUGRI1RPLQHHV



$57,&/(

2UJDQLVDWLRQ



7KHRUGLQDU\JHQHUDOPHHWLQJRIWKHVKDUHKROGHUVVKDOODSSRLQWWKH%RDUGRI1RPLQHHVIRUPHGRIPHPEHUVDQG

VKDOOHVWDEOLVKWKHLUUHPXQHUDWLRQ

$Q\VKDUHKROGHUZLOOKDYHWKHULJKWWRPDNHSURSRVDOVRQWKHPHPEHUVRIWKH%RDUGRI1RPLQHHV7KHQRPLQDWLRQ

ZLOOEHDFFRPSDQLHGE\WKHTXHVWLRQQDLUHUHJDUGLQJWKHLQGHSHQGHQFHRIWKHFDQGLGDWHFRPSOHWHGDQG VLJQHGE\WKH

FDQGLGDWH ZKRVH WHPSODWH VKDOO EH DYDLODEOH LQ WKH LQIRUPDWLYH PDWHULDOV IROORZLQJ WKDW WKLV TXHVWLRQQDLUH ZLOO EH

EURXJKWWRWKHDWWHQWLRQRIWKHVKDUHKROGHUV7KHPHPEHUVRIWKH%RDUGRI1RPLQHHVPD\ EHVKDUHKROGHUVRI)RQGXO

3URSULHWDWHDRURWKHUSHUVRQVGHVLJQDWHGE\WKHVKDUHKROGHUVDQGWKH\PXVWKDYHWKHSURSHUH[SHULHQFHDQGNQRZOHGJH

LQRUGHUWREHDEOHWRUHFHLYHWKH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHUUHSRUWVDQGRIWKHFRQVXOWDQWVDQGEDVHGRQWKH

LQIRUPDWLRQUHFHLYHGMXGJHWKHPHULWVRIWKHPDQDJHPHQWRI)RQGXO3URSULHWDWHDZLWKLQWKHOLPLWVRIWKHREMHFWLYHVDQG

SULQFLSOHVVHW E\WKH LQYHVWPHQWSROLF\ DV ZHOODV E\ WKHDSSOLFDEOH ODZVDQG UHJXODWLRQV$OVR WKHPHPEHUV RI WKH

%RDUGRI1RPLQHHVKDYHWREHTXDOLILHGSURSHUO\LQRUGHUWRGHFLGHLIWKHUHLVQHHGZLWKWKHVXSSRUWRIDQLQGHSHQGHQW

FRQVXOWDQWLIWKHWUDQVDFWLRQVSURSRVHGE\WKH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHUQHHGLQJWKHDSSURYDORIWKH%RDUG

RI1RPLQHHVDUHPDGHWRWKHDGYDQWDJHRIWKHVKDUHKROGHUV

7KHPDQGDWHRIWKHPHPEHUVRIWKH%RDUGRI1RPLQHHVLVRI\HDUVSHULRGWREHH[WHQGHGE\ULJKWE\WKHILUVW

PHHWLQJRIWKH*HQHUDO0HHWLQJRIWKH6KDUHKROGHUV

7KH%RDUGRI1RPLQHHVHOHFWVIURPDPRQJVWLWVPHPEHUVDFKDLUPDQRIWKH%RDUG 



$57,&/(

)XQFWLRQLQJ



 7KH PHHWLQJV RI WKH %RDUG RI 1RPLQHHV DUH KHOG DW OHDVW RQFH HYHU\ TXDUWHU KRZHYHU WKH\ PD\ EH FDOOHG XSRQ

ZKHQHYHUQHHGHG7KHFDOOIRUWKHPHHWLQJRIWKH%RDUGRI1RPLQHHVLVPDGHE\WKHFKDLUPDQDQ\RILWVPHPEHUVRU

XSRQWKHUHTXHVWRIWKH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHU7KH%RDUGRI1RPLQHHVVKDOOPHHWLQDWPRVWGD\VDV

RIWKHFDOOLQJ

 7KH &KDLUSHUVRQ RI WKH %RDUG RI 1RPLQHHV RU GXULQJ KLVKHU DEVHQFH D PHPEHU RI WKH %RDUG RI 1RPLQHHV

DSSRLQWHGWKURXJKYRWHE\WKHRWKHUPHPEHUVWRFKDLUWKHPHHWLQJHQVXUHVWKHSURSHUXQIROGLQJRIWKHPHHWLQJV7KH

PHHWLQJVRIWKH%RDUGRI1RPLQHHVVKDOOEHKHOGDWWKHKHDGTXDUWHUVRI)RQGXO3URSULHWDWHDRUDWVXFKRWKHUORFDWLRQDV

PD\ EH DJUHHG DPRQJ WKH PHPEHUV RI WKH %RDUG RI 1RPLQHHV RU E\ PHDQV RI HOHFWURQLF FRPPXQLFDWLRQV HJ

WHOHSKRQHYLGHRFRQIHUHQFH

7KH%RDUGRI1RPLQHHVWDNHVYDOLGGHFLVLRQVSURYLGHGWKHDEVROXWHPDMRULW\RILWVPHPEHUV7KHPHPEHUVRIWKH

%RDUGRI1RPLQHHVPD\EHUHSUHVHQWHGWRWKHPHHWLQJVRIWKH%RDUGRI1RPLQHHVRQO\E\RWKHUPHPEHUVRIWKH%RDUG

RI 1RPLQHHV RQ WKH EDVLV RI D VSHFLDO ZULWWHQ HPSRZHUPHQW SUHVHQWHG LQ LWV RULJLQDO IRUP DW WKH EHJLQQLQJ RI WKH

PHHWLQJ2QHPHPEHURIWKH%RDUGRI1RPLQHHVPD\UHSUHVHQWRQO\RQHDEVHQWPHPEHU7KHGHFLVLRQVRIWKH%RDUGRI

1RPLQHHV VKDOO EH WDNHQ ZLWK WKH DEVROXWH PDMRULW\ RI WKH YRWHV RI LWV PHPEHUV DQG DUH VLJQHG E\ DOO WKH PHPEHUV

ZKLFK SDUWLFLSDWHG WR WKH PHHWLQJ ,I VRPH RI WKH PHPEHUV RI WKH %RDUG RI 1RPLQHHV KDYH EHHQ UHSUHVHQWHG WKH

HPSRZHUPHQWZLOOEHDQQH[HGWRWKHPLQXWHRIWKHPHHWLQJ

,IWKHDEVROXWHPDMRULW\FRQGLWLRQFDQQRWEHIXOILOOHGWRKDYHWKHTXRUXPIRUWDNLQJDGHFLVLRQWKHFKDLUSHUVRQRIWKH

%RDUGRI1RPLQHHVVKDOOJLYHQRWLFHIRUDVHFRQGPHHWLQJRI%RDUGRI1RPLQHHVKDYLQJWKHVDPHDJHQGDDVWKHILUVW

LQRUGHUWRGLVFXVVWKLVDJHQGD,IWKHDEVROXWHPDMRULW\FRQGLWLRQFDQQRWEHIXOILOOHGWRKDYHWKHTXRUXPIRUWDNLQJD

GHFLVLRQIRU WKUHH FRQVHFXWLYH WLPHV WKH FKDLUSHUVRQRI WKH %RDUGRI 1RPLQHHV VKDOO DVNWKH $OWHUQDWLYH ,QYHVWPHQW

)XQG 0DQDJHU WR FRQYRNH WKH JHQHUDO PHHWLQJ RI WKH VKDUHKROGHUV LQ RUGHU WR SURSHUO\ GHFLGH RQ WKH UHVSHFWLYH

GHFLVLRQVLQFDVHWKDWWKH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHUGRHVQRWFRQYRNHLWDQ\RIWKHPHPEHUVRIWKH%RDUG

RIQRPLQHHVZLOOEHLQKLVULJKWWRFRQYRNHWKHJHQHUDOPHHWLQJ



FONDULPROPRIETATEASA



&RQVWLWXWLYH$FWRI)RQGXO3URSULHWDWHD6$LQIRUFHDVDW'HFHPEHU 



 ,Q FDVH RI YDFDQF\ RI WKH VHDW RI RQH RU PRUH PHPEHUV RI WKH %RDUG RI 1RPLQHHV WKH JHQHUDO PHHWLQJ RI WKH

VKDUHKROGHUVVKDOOLPPHGLDWHO\FRQYRNHIRUWKHDSSRLQWPHQWRIQHZPHPEHUV)RUWKHSHULRGLQWLPHE\WKHGHFLVLRQRI

WKH JHQHUDO PHHWLQJ WKH RWKHU PHPEHUV RI WKH %RDUG RI 1RPLQHHV ZLOO QRPLQDWH PHPEHUV DG LQWHULP WR IXOILO WKH

YDFDQWSRVLWLRQV7KHGHFLVLRQRIWKH%RDUGRI1RPLQHHVRQQRPLQDWLQJPHPEHUVDGLQWHULPZLOOEHFRPPXQLFDWHGWR

WKH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHUWKHDXGLWRUDQGZLOOEHILOHGZLWKWKH7UDGH5HJLVWHU



$57,&/(

$WWULEXWLRQVRIWKH%RDUGRI1RPLQHHV



7KH%RDUGRI1RPLQHHVKDVWKHIROORZLQJVGXWLHVDQGIXQFWLRQV



)ROORZLQJWKHLQIRUPDWLRQUHFHLYHGIURPWKH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHUZLWKUHJDUGWRWKHVXPPRQLQJ

RIWKHRUGLQDU\DQGRUH[WUDRUGLQDU\JHQHUDOPHHWLQJRIWKHVKDUHKROGHUVUHTXHVWVLILWGHHPVQHFHVVDU\WKHLQVHUWLRQRI

VXSSOHPHQWDU\PDWWHUVLQWKHWH[WRIWKHFDOOLQJQRWLFHRIWKHJHQHUDOPHHWLQJRIVKDUHKROGHUV

 5HFHLYHV IURP WKH $OWHUQDWLYH ,QYHVWPHQW )XQG 0DQDJHU WKH LQIRUPDWLRQ LQ FRQQHFWLRQ ZLWK WKH DQVZHUV WR WKH

ZULWWHQ UHTXHVWV VXEPLWWHG EHIRUH WKH GDWH RI WKH JHQHUDO PHHWLQJ RI WKH VKDUHKROGHUV E\ WKH VKDUHKROGHUV RQ WRSLFV

UHJDUGLQJ)RQGXO3URSULHWDWHD¶VDFWLYLW\

5HFHLYHVIURPWKH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHUWKHDQQXDOILQDQFLDOVWDWHPHQWVWKHDQQXDODFWLYLW\UHSRUW

SUHVHQWHGE\WKH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHUDQGWKHILQDQFLDODXGLWRUV¶UHSRUWEHIRUHEHLQJPDGHDYDLODEOH

WR WKH VKDUHKROGHUV DQG DQDO\VHV WKHP EHLQJ DEOH WR IRUPXODWH DQ RSLQLRQ WR EH SUHVHQWHG WR ERWK WKH $OWHUQDWLYH

,QYHVWPHQW)XQG0DQDJHUDQGWKHJHQHUDOPHHWLQJ

5HFHLYHVIURPWKH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHUIRUDQDO\VLVWKHDQQXDOUHSRUWDQGWKHPDQDJHPHQWSROLF\

RI)RQGXO3URSULHWDWHDDQGSUHVHQWVDQRSLQLRQWRWKH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHUDQGWRWKHJHQHUDOPHHWLQJ

RIWKHVKDUHKROGHUVUHJDUGLQJVXFK

 5HFHLYHV IURP WKH $OWHUQDWLYH ,QYHVWPHQW )XQG 0DQDJHU IRU DQDO\VLV WKH \HDUO\ LQFRPH DQG H[SHQGLWXUH EXGJHW

EHIRUHLWLVVXEPLWWHGWRWKHDSSURYDORIWKHJHQHUDOPHHWLQJRIVKDUHKROGHUVDQGSUHVHQWVDQRSLQLRQWRWKH$OWHUQDWLYH

,QYHVWPHQW)XQG0DQDJHUDQGWRWKHJHQHUDOPHHWLQJRIWKHVKDUHKROGHUVUHJDUGLQJVXFK

5HFHLYHV IURPWKH $OWHUQDWLYH ,QYHVWPHQW)XQG0DQDJHU IRU DQDO\VLVWKH VWUDWHJ\ LQ DFFRUGDQFHZLWKWKH )RQGXO

3URSULHWDWHD¶VLQYHVWPHQWSROLF\EHIRUHWREHVXEPLWWHGWRWKHDSSURYDORIWKHJHQHUDOPHHWLQJRIWKHVKDUHKROGHUVDQG

SUHVHQWVDQRSLQLRQWRWKH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHUDQGWRWKHJHQHUDOPHHWLQJRIWKHVKDUHKROGHUV

5HFHLYHVIURPWKH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHUIRUDQDO\VLVDQGDSSURYHVWKHIUDPHZRUNIRUFDUU\LQJRXW

)RQGXO 3URSULHWDWHD¶ V RSHUDWLRQV DV ZHOO DV DQ\ RWKHU )RQGXO 3URSULHWDWHD¶V UHJXODWLRQV LVVXHG E\ $OWHUQDWLYH

,QYHVWPHQW)XQG0DQDJHUDFFRUGLQJWROHJDOSURYLVLRQVLQIRUFHFDSLWDOPDUNHWUXOHVDQGUHJXODWLRQV

5HFHLYHVIURPWKH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHUIRUDQDO\VLVWKHSURSRVDOWRWKHRUGLQDU\JHQHUDOPHHWLQJ

RI WKH VKDUHKROGHUV IRU WKH FRQFOXVLRQ RI WKH ILQDQFLDO DXGLW DJUHHPHQW DQG SUHVHQWV DQ RSLQLRQ WR WKH $OWHUQDWLYH

,QYHVWPHQW)XQG0DQDJHUDQGWRWKHJHQHUDOPHHWLQJRIWKHVKDUHKROGHUV

5HYLHZVRQDUHJXODUEDVLVWKHLQYHVWPHQWSROLF\RI)RQGXO3URSULHWDWHDDQGSUHVHQWVDQRSLQLRQWRWKH$OWHUQDWLYH

,QYHVWPHQW)XQG0DQDJHUDQGWRWKHJHQHUDOPHHWLQJRIWKHVKDUHKROGHUVDVDQ\WLPHLWGHHPVQHFHVVDU\EXWLQDQ\

FDVHDWOHDVWRQFHD\HDUWRWKHDQQXDORUGLQDU\PHHWLQJ

5HFHLYHVWKHUHSRUW RIWKHLQWHUQDO DXGLWRUDQGSUHVHQWVDQRSLQLRQWR WKH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHU

DQGWRWKHJHQHUDOPHHWLQJRIWKHVKDUHKROGHUV

 0RQLWRUV WKH IROORZLQJ EDVHG RQ LQIRUPDWLRQ DQG UHSRUWV UHFHLYHG IURP WKH $OWHUQDWLYH ,QYHVWPHQW )XQG

0DQDJHU

x WKHOLVWRIDOOSRUWIROLRLQYHVWPHQWVDQGSHUFHQWDJHEUHDNGRZQ

E\HDFKLQYHVWPHQWW\SH

x DOLVWRIPDMRUWUDQVDFWLRQVRFFXUULQJLQWKH)RQGXO3URSULHWDWHDSRUWIROLRIRUWKHSHULRGXQGHUUHYLHZ

x WKHWRWDOSURILWRIWKHSRUWIROLRFRPSDQLHVDQGFRPSDULVRQZLWKWKHDSSURSULDWHPDUNHWEHQFKPDUN

x FRPSDULVRQRIWKHREWDLQHGSURILWZLWKWKHLQLWLDOREMHFWLYH

x WKH H[WHQW RI FRPSOLDQFH ZLWK WKH LQYHVWPHQW SROLF\ LQFOXGLQJ VSHFLILFDOO\ WKH GHJUHH WR ZKLFK DQ\

SHUIRUPDQFHREMHFWLYHVVHWRXWWKHUHLQDUHDFKLHYHGDVZHOODVDQ\YDULDWLRQVDQGDFWLRQVWDNHQWRDFKLHYHVXFK

REMHFWLYHVDQGLPSURYHLQYHVWPHQWUHVXOWV

x WKHSHUIRUPDQFHHYDOXDWLRQUHSRUW

FONDULPROPRIETATEASA



&RQVWLWXWLYH$FWRI)RQGXO3URSULHWDWHD6$LQIRUFHDVDW'HFHPEHU 



7KH%RDUGRI1RPLQHHVVKDOOGUDIWDQGSUHVHQWWRWKHJHQHUDOPHHWLQJRIWKHVKDUHKROGHUVDQDQQXDOUHSRUWUHJDUGLQJ

WKH PRQLWRULQJ DFWLYLW\ SHUIRUPHG RU D PRQLWRULQJ UHSRUW IRU DQRWKHU SHULRG DJUHHG E\ WKH JHQHUDO PHHWLQJ RI

VKDUHKROGHUV

5HSUHVHQWVWKHJHQHUDOPHHWLQJRIWKHVKDUHKROGHUVLQUHODWLRQZLWKWKH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHUIURP

WKHFRPPXQLFDWLRQ SRLQWRI YLHZEHWZHHQ WKHWZR FRUSRUDWHERGLHV H[FHSWIRU WKHFDVHV H[SUHVVO\ UHJXODWHGE\ WKLV

FRQVWLWXWLYHDFWDVDGLUHFWFRPPXQLFDWLRQEHWZHHQWKHJHQHUDOPHHWLQJDQGWKH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHU

9HULILHVWKHUHSRUWRIWKH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHUDQGWKHH[HUFLVHRIWKHSHUPDQHQWPRQLWRULQJRYHU

WKH PDQDJHPHQW RI )RQGXO 3URSULHWDWHD E\ WKH $OWHUQDWLYH ,QYHVWPHQW )XQG 0DQDJHU DQG YHULILHV LI WKH RSHUDWLRQV

FDUULHGRQE\WKH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHUDUHLQFRPSOLDQFHZLWKWKHDSSOLFDEOHODZWKHFRQVWLWXWLYHDFW

DQGRUZLWKDQ\UHOHYDQWGHFLVLRQRIWKHJHQHUDOPHHWLQJRIWKHVKDUHKROGHUV

8QGHUWKHFRQGLWLRQVRIDUWSDUDJUDSKVDQGFDOOVXSRQWKHJHQHUDOPHHWLQJRIWKHVKDUHKROGHUV

3DUWLFLSDWHVWRWKHPHHWLQJVRIWKHJHQHUDOVKDUHKROGHUV¶PHHWLQJVDQGSUHVHQWVLQWKLVPHHWLQJUHSRUWVLQDOOFDVHV

SURYLGHGE\WKLVFRQVWLWXWLYHDFWRUZLWKUHJDUGWRDQ\LVVXHLWGHHPVWREHUHOHYDQWIRUWKHVKDUHKROGHUV

3URSRVHVWRWKHJHQHUDOPHHWLQJRIVKDUHKROGHUVWKHSULRUDSSURYDORUUHMHFWLRQRIWKHH[HFXWLRQRIFRQWUDFWVIRU

DFTXLULQJ VHOOLQJ H[FKDQJLQJ RU IRU FUHDWLQJ SOHGJHV KDYLQJ DV VXEMHFW QRQFXUUHQW DVVHWV RI )RQGXO 3URSULHWDWHD

ZKRVHYDOXHH[FHHGVLQGLYLGXDOO\ RUFXPXODWLYHO\GXULQJ D ILQDQFLDO\HDURI WKHWRWDOYDOXH RI WKHQRQFXUUHQW

DVVHWVRI)RQGXO3URSULHWDWHDOHVVUHFHLYDEOHV

5HFRPPHQGVWRWKH*HQHUDO0HHWLQJRIWKH6KDUHKROGHUVWKHWHUPLQDWLRQRIWKHPDQDJHPHQWFRQWUDFWIRUWKHFDVH

ZKHQWKH%RDUGRI1RPLQHHVLVFRQVLGHUHGLVWRWKHEHQHILWRIWKHVKDUHKROGHUV

5HFRPPHQGVWRWKHJHQHUDOPHHWLQJRIWKHVKDUHKROGHUVRQDQ\RWKHULVVXHVWKH%RDUGRI1RPLQHHVLVFRQVLGHUHG

UHOHYDQWWRWKHVKDUHKROGHUV

 )ROORZLQJ RI SURSRVDO RI $OWHUQDWLYH ,QYHVWPHQW )XQG 0DQDJHU UHFRPPHQGV WR WKH ([WUDRUGLQDU\ *HQHUDO

0HHWLQJRIWKH6KDUHKROGHUVWKHDSSRLQWPHQWRIWKHSXEOLFRIIHULQWHUPHGLDWHDVZHOODVRQKLVUHPXQHUDWLRQZKHQLW

ZLOOEHFRPHQHFHVVDU\WKDWVXFKDFRPSDQ\EHDSSRLQWHGUHODWHGWRWKHDGPLVVLRQWRWUDGLQJRI)RQGXO3URSULHWDWHD

$SSURYHVWKHGHOHJDWLRQE\WKH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHURIFHUWDLQDFWLYLWLHV7KHGHOHJDWLRQVKDOOEH

HIIHFWLYHLQDFFRUGDQFHZLWKWKHOHJDOSURYLVLRQVLQIRUFH

 ,V UHVSRQVLEOH IRU PRQLWRULQJ WKH $OWHUQDWLYH ,QYHVWPHQW )XQG 0DQDJHU SHUIRUPDQFH DFFRUGLQJ WR WKH

0DQDJHPHQW$JUHHPHQ





$57,&/(

7KHREOLJDWLRQVRIWKHPHPEHUVRIWKH%RDUGRI1RPLQHHV



 7KH PHPEHUV RI WKH %RDUG RI 1RPLQHHV KDYH GLOLJHQFH DQG OR\DOW\ GXWLHV WRZDUGV WKH VKDUHKROGHUV RI )RQGXO

3URSULHWDWHD

7KHPHPEHUVRIWKH%RDUGRI1RPLQHHVDUHKHOGOLDEOHWRZDUGVWKHJHQHUDOPHHWLQJRIWKHVKDUHKROGHUVRI)RQGXO

3URSULHWDWHDLQDFFRUGDQFHZLWKWKHPDQGDWHUXOHV7KHGHFLVLRQVRIWKHPHPEHUVRIWKH%RDUGRI1RPLQHHVZLOOEH

WDNHQDIWHUGXHHQTXLULHVLQWRWKHUHOHYDQWFLUFXPVWDQFHVH[LVWLQJDWWKHVSHFLILFPRPHQWDWZKLFKVXFKGHFLVLRQVKDYH

EHHQWDNHQ

7KHPHPEHUVRIWKH%RDUGRI1RPLQHHVFDQQRWGLVFORVHWKHFRQILGHQWLDOLQIRUPDWLRQDQGWKHFRPPHUFLDOVHFUHWVRI

)RQGXO 3URSULHWDWHD WR ZKLFK WKRVH SHUVRQV KDYH DFFHVV 6XFK REOLJDWLRQ UHPDLQV LQ IRUFH DV ZHOO DV DIWHU WKH

WHUPLQDWLRQRIWKHPDQGDWH

 ,I D PHPEHU RI WKH %RDUG RI 1RPLQHHV KDV GLUHFWO\ RU LQGLUHFWO\ DGYHUVH LQWHUHVW WR WKH LQWHUHVW RI )RQGXO

3URSULHWDWHDLQ D FHUWDLQ RSHUDWLRQ WKDWPHPEHU PXVW JLYH QRWLFHRI VXFK VLWXDWLRQ WR WKH RWKHUPHPEHUV DQG WR WKH

LQWHUQDODXGLWRUVDQGQRWWDNHSDUWLQDQ\GHOLEHUDWLRQUHJDUGLQJWKDWRSHUDWLRQ

 7KH VDPH REOLJDWLRQ PXVW EH REVHUYHG E\ WKH PHPEHU RI WKH %RDUG RI 1RPLQHHV ZKR DFNQRZOHGJHV WKDW LQ D

FHUWDLQRSHUDWLRQKLVKHUZLIHRUKXVEDQGUHODWLYHRUUHODWHGSHUVRQVE\WKH

JUDGHLQFOXVLYHDUHLQWHUHVWHG

 7KH SURKLELWLRQV VWLSXODWHG LQ SDUDJUDSKV  DQG  UHJDUGLQJ WKH SDUWLFLSDWLRQ GHOLEHUDWLRQ DQG YRWLQJ RI WKH

PHPEHUVRIWKH%RDUGRI1RPLQHHVDUHQRWDSSOLFDEOHLIWKHYRWHUHIHUVWR

DWKHRIIHURIVKDUHVRUREOLJDWLRQVRI)RQGXO3URSULHWDWHDIRUVXEVFULSWLRQWRDPHPEHURIWKH%RDUGRI1RPLQHHVRU

WRWKHSHUVRQVPHQWLRQHGLQSDUDJUDSK

E WKH JUDQWLQJ E\ D PHPEHU RI WKH %RDUG RI 1RPLQHHV RU E\ WKH SHUVRQV PHQWLRQHG LQ SDUDJUDSK  RI D ORDQ RU

HVWDEOLVKLQJDJXDUDQWHHLQIDYRXURI)RQGXO3URSULHWDWHD



FONDULPROPRIETATEASA



&RQVWLWXWLYH$FWRI)RQGXO3URSULHWDWHD6$LQIRUFHDVDW'HFHPEHU 



7KHPHPEHURIWKH%RDUGRI1RPLQHHVQRWREVHUYLQJWKHSURYLVLRQVRISDUDJUDSKVDQGLVKHOGOLDEOHIRUWKH

GDPDJHVFDXVHGWR)RQGXO3URSULHWDWHD

 ,W LV IRUELGGHQ WKH FUHGLWLQJ E\ WKH )RQGXO 3URSULHWDWHD RI WKH PHPEHUV RI WKH %RDUG RI 1RPLQHHV WKURXJK

RSHUDWLRQVVXFKDV

DJUDQWLQJORDQV

E JUDQWLQJ ILQDQFLDO IDFLOLWLHV IRU RU DIWHU WKH FRQFOXVLRQ E\ )RQGXO 3URSULHWDWHD ZLWK WKH PHPEHUV RI GHOLYHU\

RSHUDWLRQVRIJRRGVSURYLGLQJRIVHUYLFHVRUSHUIRUPDQFHRIZRUNV

F GLUHFW RU LQGLUHFW JXDUDQWHH LQ ZKROH RU LQ SDUW RI DQ\ ORDQV JUDQWHG WR WKH PHPEHU RI WKH %RDUG RI 1RPLQHHV

FRQFRPLWDQWRUDIWHUJUDQWLQJWKHORDQ

GGLUHFWRULQGLUHFWJXDUDQWHHLQZKROHRULQSDUWRISHUIRUPDQFHE\WKHPHPEHUVRIDQ\RWKHUSHUVRQDOREOLJDWLRQRI

WKRVHWRZDUGVWKLUGSDUWLHV

HGLUHFWRULQGLUHFWJXDUDQWHHLQZKROHRULQSDUWRIDQ\UHFHLYDEOHVKDYLQJDVREMHFWDORDQJUDQWHGE\DWKLUGSDUW\WR

WKHPHPEHUVRIWKH%RDUGRI1RPLQHHVRURWKHUSHUVRQDOVHUYLFHRIWKRVHPHPEHUV

7KHSURYLVLRQVRISDUDJUDSKDUHDSSOLFDEOHDQGWKHRSHUDWLRQVLQZKLFKWKHKXVEDQGRUZLIHUHODWLYHVRUUHODWHG

SHUVRQV E\ WKH 

 JUDGH LQFOXVLYH RI WKH PHPEHUV RI WKH %RDUG RI 1RPLQHHV DUH LQWHUHVWHG DOVR LI WKH RSHUDWLRQ

FRQFHUQLQJDFLYLORUDFRPPHUFLDOFRPSDQ\DWZKLFKRQHRIWKHSHUVRQVDERYHPHQWLRQHGLVGLUHFWRURUKROGVVROHO\RU

WRJHWKHUZLWKRQHRIWKHSHUVRQVDERYHPHQWLRQHGDTXRWDRIDWOHDVWRIWKHYDOXHRIWKHVXEVFULEHGVKDUHFDSLWDO.

 7KH SURYLVLRQV RI SDUDJUDSK  DUH QRW DSSOLFDEOH IRU WKH FDVH ZKHQ WKH RSHUDWLRQ LV FRQFOXGHG E\ )RQGXO

3URSULHWDWHD GXULQJ LWV FXUUHQW EXVLQHVV DQG WKH FODXVHV RI WKH RSHUDWLRQV DUH QRW PRUH IDYRXUDEOH WR WKH SHUVRQV

VSHFLILHGLQSDUDJUDSKVDQGWKDQWKHRQHVXVXDOO\SUDFWLFHGE\)RQGXO3URSULHWDWHDWRZDUGVWKLUGSDUWLHV

 7KH %RDUG RI 1RPLQHHV VKDOO SURPSWO\ GHFLGH RQ DOO UHTXHVWV IRU DSSURYDO IURP WKH $OWHUQDWLYH ,QYHVWPHQW

)XQG0DQDJHUZLWKLQDUHDVRQDEOHWLPHIUDPHWRDOORZWKH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHUWRFRPSO\ZLWKLWV

RZQREOLJDWLRQV



&+$37(59,

3URYLVLRQVUHJDUGLQJWKHFRPSDQ\¶VPDQDJHPHQW



$57,&/(

2UJDQLVDWLRQ



6KDUHKROGHUVRI)RQGXO3URSULHWDWHDGHVLJQDWHWKH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHU$,)0IRUWKHSXUSRVHRI

PDQDJLQJLW7KH$,)0KDVDOVRWKHVROHGLUHFWRUUROH

 7KH $OWHUQDWLYH ,QYHVWPHQW )XQG 0DQDJHU LV HOHFWHG E\ WKH JHQHUDO PHHWLQJ RI WKH VKDUHKROGHUV ZLWK WKH

REVHUYDQFHRIWKHOHJDOSURYLVLRQVDQGRIWKLVFRQVWLWXWLYHDFW

7KHPDQGDWHRIWKH$,)0LVRI\HDUV7KH$,)0ZLOOFDOODQ2UGLQDU\*HQHUDO0HHWLQJRI6KDUHKROGHUVWREH

KHOGDWOHDVWPRQWKVEHIRUHWKHH[SLU\RIWKHPDQGDWHRIWKH$,)0DQGZLOOHQVXUHWKDWWKHDJHQGDIRUVXFKPHHWLQJ

ZLOOLQFOXGHSRLQWVJUDQWLQJWKHRSWLRQVWRLDSSURYHWKHUHQHZDORIWKH$,)0¶VPDQGDWHDQGLLDSSRLQWDQHZ$,)0

LQ DFFRUGDQFH ZLWK WKH OHJDO SURYLVLRQV LQ IRUFH ZLWK WKH VKDUHKROGHUV EHLQJ JUDQWHG WKH RSSRUWXQLW\ WR SURSRVH

FDQGLGDWHV IRU VXFK SRVLWLRQ WKH DJHQGD ZLOO DOVR LQFOXGH SURYLVLRQV IRU WKH DXWKRUL]DWLRQ RI WKH QHJRWLDWLRQ DQG

H[HFXWLRQ RI WKH UHOHYDQW LQYHVWPHQW PDQDJHPHQW DJUHHPHQW DQG IXOILOPHQW RI DOO UHOHYDQW IRUPDOLWLHV IRU WKH

DXWKRUL]DWLRQDQGOHJDOFRPSOHWLRQRIVXFKDSSRLQWPHQW

7KH$,)0PXVWH[SUHVVO\DFFHSWVXFKSRVLWLRQE\H[HFXWLQJWKHPDQDJHPHQWDJUHHPHQWDQGPXVWKDYHLQSODFH

SURIHVVLRQDOOLDELOLW\LQVXUDQFH

7KH0DQDJHPHQW$JUHHPHQWFDQEHPRGLILHGRUUHSODFHGLQDFFRUGDQFHZLWKDUWLFOHVDQGZLWKWKHDSSURYDO

RIWKHVKDUHKROGHUV$Q\UHSODFHPHQWGRFXPHQWRUDGGHQGXPRIWKH0DQDJHPHQW$JUHHPHQWZLOOEHVLJQHGRQEHKDOI

RI )RQGXO 3URSULHWDWHD E\ WKH FKDLUPDQ RI WKH %RDUG RI 1RPLQHHV RU E\ D PHPEHU RI WKH %RDUG RI 1RPLQHHV

HPSRZHUHGE\WKHFKDLUPDQ





FONDULPROPRIETATEASA



&RQVWLWXWLYH$FWRI)RQGXO3URSULHWDWHD6$LQIRUFHDVDW'HFHPEHU 



$57,&/(

)XQFWLRQLQJ



7KH $OWHUQDWLYH ,QYHVWPHQW )XQG 0DQDJHU VKDOO DSSRLQW D QDWXUDO SHUVRQ DV LWV SHUPDQHQW UHSUHVHQWDWLYH 7KH

$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHUFDQFKDQJHWKHSHUPDQHQWUHSUHVHQWDWLYHVLQDFFRUGDQFHZLWKWKHDSSOLFDEOHODZ

$OOFKDQJHVZLOOEHUHJLVWHUHGZLWKWKH7UDGH5HJLVWU\



$57,&/(

$WWULEXWLRQVRIWKH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHU



7KHPDQDJHPHQWRI)RQGXO3URSULHWDWHDLVHQVXUHGE\WKH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHUZKLFKIXOILOVWKH

QHFHVVDU\DQGXVHIXORSHUDWLRQVIRUWKHIXOILOPHQWRIWKHFRPSDQ\¶VEXVLQHVVREMHFWH[FHSWRIWKHRSHUDWLRQVUHVHUYHG

E\WKHODZIRUWKHJHQHUDOPHHWLQJRIWKHVKDUHKROGHUVDQGKDVDOOWKHREOLJDWLRQVDWWULEXWHGWRLWE\WKHDSSOLFDEOHODZ

7KH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHUH[HUFLVHVLWVDWWULEXWLRQVXQGHUWKHFRQWURORIWKHJHQHUDOPHHWLQJRIWKH

VKDUHKROGHUVDQGWKHPRQLWRULQJRIWKH%RDUGRI1RPLQHHVDFFRUGLQJWRDUWLFOH

,QDGGLWLRQWRWKHGXWLHVSURYLGHGE\WKHDSSOLFDEOHODZWKH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHUVKDOOSURSRVHIRU

WKH SULRU DSSURYDO RI WKH %RDUG RI 1RPLQHHV DQG IXUWKHU RI WKH JHQHUDO PHHWLQJ RI WKH VKDUHKROGHUV RI )RQGXO

3URSULHWDWHDWKHJHQHUDOVWUDWHJ\LQDFFRUGDQFHZLWKWKHLQYHVWPHQWSROLF\RI)RQGXO3URSULHWDWHDDQGLWLVUHVSRQVLEOH

IRUWKHLPSOHPHQWDWLRQRIWKHLQYHVWPHQWSROLF\DQGIRUDFKLHYLQJDSURSHUEDODQFHEHWZHHQWKHSURILWVDQGWKHULVNV

UHODWHGWRWKH)RQGXO3URSULHWDWHDSRUWIROLR7KH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHUXQGHUWDNHVWRLQIRUPWKH%RDUG

RI 1RPLQHHV UHJXODUO\ DQG DV DQG ZKHQ UHTXLUHG E\ WKH %RDUG RI 1RPLQHHV DERXW DQ\ VLJQLILFDQW FKDQJHV LQ WKH

DFWLYLWLHVRI)RQGXO3URSULHWDWHDDQGZLWKLQWKHVWUXFWXUHRILWVSRUWIROLR

,QH[FHVVRIWKHGXWLHVSURYLGHGE\WKHDSSOLFDEOHODZWKH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHUVKDOOEHOLDEOHWR

LHVWDEOLVKD UHIHUHQFHGDWH IRUVKDUHKROGHUVHQWLWOHGWR YRWHZLWKLQWKHJHQHUDOPHHWLQJXQGHUWKHODZ DQG

GUDIWWKHWH[WRIWKHDQQRXQFHPHQWRQWKHFRQYRFDWLRQRIWKHJHQHUDOPHHWLQJDIWHUREWDLQLQJWKHSULRUDSSURYDORIWKH

%RDUGRI1RPLQHHVDQGDIWHULWDGGHGWRWKHDJHQGDWKHPDWWHUVUHTXHVWHGE\WKH%RDUGRI1RPLQHHV

LL XSRQ WKH ZULWWHQ UHTXHVW RI DQ\ VKDUHKROGHU VXEPLWWHG EHIRUHWKHGDWHRIWKHJHQHUDOPHHWLQJRIWKH

VKDUHKROGHUV WR JLYH UHVSRQVHV DIWHU REWDLQLQJ WKH SULRU DSSURYDO RI WKH %RDUG RI 1RPLQHHV UHJDUGLQJ WKH DVSHFWV

FRQFHUQLQJWKHEXVLQHVVRI)RQGXO3URSULHWDWHD

LLL HQVXUH WKDW LI UHTXHVWHG E\ DQ\ RI WKH VKDUHKROGHUV D FRS\ RI RU H[WUDFW RI WKH PLQXWHV RI WKH JHQHUDO

PHHWLQJ VKDOO EH JLYHQ WR WKHP DQG DOVR DIWHU WKH DQQRXQFHPHQW RI WKH RUGLQDU\ DQQXDO JHQHUDO PHHWLQJ RI WKH

VKDUHKROGHUVLVSXEOLVKHGPDNHDYDLODEOHWRWKHVKDUHKROGHUVWKHILQDQFLDOVWDWHPHQWVRIWKHFRPSDQ\DQGWKHUHSRUWVRI

WKH$,)0DQGRIWKHFRPSDQ\¶VILQDQFLDODXGLWRUV

LY SUHSDUH WKH DQQXDO ILQDQFLDO VWDWHPHQWV GUDIW WKH DQQXDO DFWLYLW\ UHSRUW H[DPLQH WKH ILQDQFLDO DXGLWRUV¶

UHSRUW SUHVHQW WKHP WR WKH %RDUG RI 1RPLQHHV EHIRUH VXEPLWWLQJ VXFK GRFXPHQWV WR WKH JHQHUDO PHHWLQJ RI WKH

VKDUHKROGHUV DQG PDNH SURSRVDOV RQ WKH GLVWULEXWLRQ RI WKH SURILW WR WKH JHQHUDO PHHWLQJ RI WKH VKDUHKROGHUV DIWHU

REWDLQLQJWKHSULRUDSSURYDORIWKH%RDUGRI1RPLQHHV

YPDQDJHVWKHUHODWLRQVKLSZLWKWKH&HQWUDO'HSRVLWRU\ZLWKUHJDUGWRLWVVKDUHKROGHUVUHJLVWHUIXQFWLRQV

YL SUHSDUH DQ DQQXDO UHSRUW RQ WKH PDQDJHPHQW DQG WKH EXVLQHVV SROLF\ RI )RQGXO 3URSULHWDWHD WR EH

SUHVHQWHGWRWKH%RDUGRI1RPLQHHVIRUDSSURYDOSULRUWRLWVVXEPLVVLRQWRWKHJHQHUDOPHHWLQJRIWKHVKDUHKROGHUV

YLL SURSRVHV IRU WKH SULRU DSSURYDO RI WKH %RDUG RI 1RPLQHHV DQG IXUWKHU RI WKH JHQHUDO PHHWLQJ RI WKH

VKDUHKROGHUVRIWKH\HDUO\LQFRPHDQGH[SHQGLWXUHEXGJHWDQGEXVLQHVVSODQ

YLLLDSSURYHVWKHRXWVRXUFLQJRIFHUWDLQDFWLYLWLHVZLWKLQWKHOLPLWVRIWKHDSSURYHGEXGJHWUHVSHFWLYHO\WKH

GHOHJDWLRQRIWKHSHUIRUPDQFHRIFHUWDLQDFWLYLWLHVVXEMHFWWRWKHREVHUYDQFHRIWKHDSSOLFDEOHOHJLVODWLRQ

L[ EDVHG RQ WKH SURSRVDO RI WKH %RDUG RI 1RPLQHHV WR VXEPLW WR WKH DSSURYDO RI WKH H[WUDRUGLQDU\ JHQHUDO

PHHWLQJRIVKDUHKROGHUVWKHH[HFXWLRQRIFRQWUDFWVIRUDFTXLULQJVHOOLQJH[FKDQJLQJRUIRUFUHDWLQJSOHGJHVKDYLQJDV

VXEMHFWQRQFXUUHQWDVVHWVRI)RQGXO3URSULHWDWHDZKRVHYDOXHH[FHHGVLQGLYLGXDOO\RUFXPXODWLYHO\GXULQJDILQDQFLDO

\HDURIWKHWRWDOYDOXHRIWKHQRQFXUUHQWDVVHWVRI)RQGXO3URSULHWDWHDOHVVUHFHLYDEOHV



FONDULPROPRIETATEASA



&RQVWLWXWLYH$FWRI)RQGXO3URSULHWDWHD6$LQIRUFHDVDW'HFHPEHU 



[H[HFXWHFRQWUDFWVIRUDFTXLULQJVHOOLQJH[FKDQJLQJRUIRUFUHDWLQJSOHGJHVKDYLQJDVVXEMHFWQRQFXUUHQW

DVVHWVRI)RQGXO3URSULHWDWHDZKRVHYDOXHGRHVQRWH[FHHGLQGLYLGXDOO\RUFXPXODWLYHO\GXULQJDILQDQFLDO\HDU

RIWKHWRWDOYDOXHRIWKHQRQFXUUHQWDVVHWVRI)RQGXO3URSULHWDWHDOHVVUHFHLYDEOHVZLWKRXWWKHDSSURYDORIWKHRUGLQDU\

RUH[WUDRUGLQDU\JHQHUDOVKDUHKROGHUV¶PHHWLQJ

[LSURSRVHWRWKHRUGLQDU\JHQHUDOPHHWLQJRIWKHVKDUHKROGHUVWKHFRQFOXVLRQRIWKHILQDQFLDODXGLWDJUHHPHQW

DFFRUGLQJ WR WKH OHJDO SURYLVLRQV LQ IRUFH XSRQ REWDLQLQJ WKH SULRU DSSURYDO RI WKH %RDUG RI 1RPLQHHV DV ZHOO DV

DSSURYHWKHSURFHGXUHRILQWHUQDODXGLWDQGWKHDXGLWSODQ

[LL GHFLGH WKH UHORFDWLRQ RI WKH UHJLVWHUHG RIILFH SURYLGHG WKDW WKH UHJLVWHUHG RIILFH VKDOO DW DOO WLPHV EH

UHJLVWHUHGLQ5RPDQLD

[LLLPDNHDYDLODEOHWRWKH%RDUGRI1RPLQHHVWKHUHSRUWVDVZHOODVRWKHUQHFHVVDU\GRFXPHQWVIRUH[HUFLVLQJ

WKHPRQLWRULQJGXWLHVLQDFFRUGDQFHZLWKDUWSDUDJUDSK

[LY LQIRUP DW RQFH WKH %RDUG RI 1RPLQHHV RI DQ\ OLWLJDWLRQ RU LQIULQJHPHQW RI OHJLVODWLRQ UHJDUGLQJ

$OWHUQDWLYH ,QYHVWPHQW )XQG 0DQDJHU DQ\ RSHUDWLRQ ZKLFK PLJKW EH DQ LQIULQJHPHQW WR WKH LQYHVWPHQW SROLF\ DQG

DERXWWKHSODQVFRUUHFWLRQPHDVXUHVIRUDSSURDFKLQJWKHVHPDWWHUV

[YDVNIRUWKHFDOOLQJRIWKHJHQHUDOPHHWLQJZKLFKVKDOOGHFLGHSURSHUO\ZKHQHYHUDQLVVXHDSSHDUVRQZKLFK

WKH%RDUGRI1RPLQHHVKDVDGLVDJUHHPHQWZLWKWKH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHUZKLFKFDQQRWEHUHVROYHG

DPLDEO\

[YL SURSRVHV WR %RDUG RI 1RPLQHHV WKH UHFRPPHQGDWLRQ IRU WKH ([WUDRUGLQDU\ *HQHUDO 0HHWLQJ RI WKH

6KDUHKROGHUVIRUWKHDSSRLQWPHQWRIWKHLQYHVWPHQWILUPLQYHVWPHQWEDQNZKRVKDOOPDQDJHDSXEOLFRIIHUDVZHOODV

RQ LWV UHPXQHUDWLRQ ZKHQ LW ZLOO EHFRPH QHFHVVDU\ WKDW VXFK D FRPSDQ\ EH DSSRLQWHG UHODWHG WR WKH DGPLVVLRQ WR

WUDGLQJRI)RQGXO3URSULHWDWHD

[YLL DSSURYH DQ\ UHODWHG SDUWLHV WUDQVDFWLRQV DQG LI WKH UHODWHG SDUWLHV WUDQVDFWLRQV¶ YDOXH LV JUHDWHU WKDQ

RIWKHQHWDVVHWYDOXHWRDVNIRUWKH%RDUGRI1RPLQHHV¶DSSURYDODQGLIWKHUHODWHGSDUWLHVWUDQVDFWLRQV¶YDOXH

LVJUHDWHUWKDQRIWKHQHWDVVHWYDOXHWRFRQYHQHWKH*60

 )RU WKH DYRLGDQFH RI DQ\ GRXEW LQ IXOILOOLQJ WKH REOLJDWLRQV OLVWHG XQGHU SDUDJUDSK  RI WKLV $UWLFOH  WKH

$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHUDFWVPDLQO\LQLWVFDSDFLW\DVVROHGLUHFWRUDFFRUGLQJWRWKHDSSOLFDEOH5RPDQLDQ

OHJLVODWLRQ



$57,&/(

7KHREOLJDWLRQVRIWKH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHU



7KH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHUKDVDGLOLJHQFHDQGOR\DOW\GXW\WRZDUGV)RQGXO3URSULHWDWHD6XFKGXW\

LVH[HUFLVHGWDNLQJLQWRFRQVLGHUDWLRQWKHLQWHUHVWRIWKHVKDUHKROGHUVJHQHUDOO\DQGQRWRIVRPHRIWKHP

 7KH $OWHUQDWLYH ,QYHVWPHQW )XQG 0DQDJHU LV KHOG OLDEOH WRZDUGV )RQGXO 3URSULHWDWHD DFFRUGLQJ WR WKH ODZ 7KH

GHFLVLRQV RI WKH $OWHUQDWLYH ,QYHVWPHQW )XQG 0DQDJHU DUH WDNHQ DIWHU GXH HQTXLULHV UHJDUGLQJ WKH UHOHYDQW

FLUFXPVWDQFHVH[LVWLQJDWWKHPRPHQWRIZKLFKWKRVHGHFLVLRQVDUHWDNHQ

 7KH $OWHUQDWLYH ,QYHVWPHQW )XQG 0DQDJHU FDQQRW GLVFORVH FRQILGHQWLDO LQIRUPDWLRQ RU FRPPHUFLDO VHFUHWV RI

)RQGXO3URSULHWDWHDWRZKLFKLWKDVDFFHVV6XFKREOLJDWLRQUHPDLQVDOVRDIWHUWKHWHUPLQDWLRQRIWKHPDQGDWH

,IWKH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHUUHVSHFWLYHO\LWVSHUPDQHQWUHSUHVHQWDWLYHDQGLWVHPSOR\HHVKDYHLQD

FHUWDLQ RSHUDWLRQ GLUHFWO\ RU LQGLUHFWO\ DGYHUVH LQWHUHVW WR WKH LQWHUHVW RI )RQGXO 3URSULHWDWHD WKH $OWHUQDWLYH

,QYHVWPHQW)XQG0DQDJHUPXVWJLYHQRWLFHWRWKHLQWHUQDODXGLWRUVDQG%RDUGRI1RPLQHHVRIWKLVLVVXHDQGQRWWDNH

SDUWLQDQ\GHOLEHUDWLRQFRQFHUQLQJWKHVSHFLILFVLWXDWLRQ

7KHVDPHREOLJDWLRQPXVWEHREVHUYHGE\WKH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHUUHVSHFWLYHO\E\LWVSHUPDQHQW

UHSUHVHQWDWLYHDQGLWVHPSOR\HHVLILQDFHUWDLQRSHUDWLRQLVEHLQJDZDUHWKDWDQDIILOLDWHRIWKH$OWHUQDWLYH,QYHVWPHQW

)XQG0DQDJHURUWKHZLIHRUKXVEDQGUHODWLYHVRUUHODWHGSHUVRQVE\WKH

JUDGHLQFOXVLYHRIWKHUHSUHVHQWDWLYHDQGLWV

HPSOR\HHVDUHLQWHUHVWHG



$57,&/(

5HSUHVHQWDWLRQRI)RQGXO3URSULHWDWHD



 ,Q UHODWLRQV ZLWK WKLUG SDUWLHV )RQGXO 3URSULHWDWHD LV UHSUHVHQWHG E\ WKH $OWHUQDWLYH ,QYHVWPHQW )XQG 0DQDJHU

UHVSHFWLYHO\E\LWVSHUPDQHQWUHSUHVHQWDWLYH



FONDULPROPRIETATEASA



&RQVWLWXWLYH$FWRI)RQGXO3URSULHWDWHD6$LQIRUFHDVDW'HFHPEHU 



 7KH $OWHUQDWLYH ,QYHVWPHQW )XQG 0DQDJHU PD\ GHOHJDWH WKH UHSUHVHQWDWLYH SRZHUV LQ DFFRUGDQFH ZLWK WKH

DSSOLFDEOHODZ



&+$37(59,,

7KHDXGLWRI)RQGXO3URSULHWDWHD



$57,&/(

7KHLQWHUQDODXGLWRUVDQGWKHILQDQFLDODXGLW



7KHILQDQFLDOVWDWHPHQWVRI)RQGXO3URSULHWDWHDDUHVXEMHFWWRILQDQFLDODXGLWLQDFFRUGDQFHZLWKWKHDSSOLFDEOHODZV

DQGUHJXODWLRQV $OVR)RQGXO 3URSULHWDWHDVKDOO RUJDQLVH LWVLQWHUQDODXGLW LQ DFFRUGDQFHZLWK WKH OHJDOSURYLVLRQV LQ

IRUFH

 $Q LQWHUQDO DXGLW GHSDUWPHQW VKDOO EH RUJDQLVHG ZLWKLQ )RQGXO 3URSULHWDWHD KDYLQJ DWWULEXWLRQV RI REMHFWLYH

H[DPLQDWLRQVRIWKHFRPSDQ\¶VDJJUHJDWHEXVLQHVVIRUWKHSXUSRVHRISURYLGLQJDQLQGHSHQGHQWHYDOXDWLRQRIWKHULVN

PDQDJHPHQWFRQWURODQGOHDGLQJGHYHORSPHQWRIWKHFRPSDQ\7KH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHUFDQGHFLGH

WKDWLQWHUQDODXGLWZRUNFDQEHRXWVRXUFHGLQZKLFKFDVHLWZLOOUXQLWRQDFRQWUDFWXDOEDVLVLQDFFRUGDQFHZLWKWKH

DSSOLFDEOHOHJDOSURYLVLRQV

 7KH LQWHUQDO DXGLW LV LQGHSHQGHQW RI WKH PDQDJHPHQW RI )RQGXO 3URSULHWDWHD DQG WKH LQWHUQDO DXGLWRUV VKDOO

REMHFWLYHO\H[HUFLVHWKLVDFWLYLW\

7KHLQWHUQDODXGLWVKDOOHYDOXDWHDQGVKDOOSURSRVHWKHLPSURYHPHQWRIWKHULVNPDQDJHPHQWWKHFRQWURODQGLQWHUQDO

UXOHVZLWKLQ)RQGXO3URSULHWDWHD.

7KHLQWHUQDODXGLWRUVVKDOOQRWEHVXEMHFWRIDQ\LQWHUIHUHQFHLQGHWHUPLQLQJWKHSXUSRVHRIWKHLQWHUQDODXGLWDQGLQ

H[HUFLVLQJWKHLUDFWLYLW\

7KHLQWHUQDODXGLWRUVVKDOOKDYHDQLPSDUWLDOFRUUHFWDWWLWXGHDQGVKDOODYRLGWKHFRQIOLFWVRILQWHUHVW

7KHLQWHUQDO DXGLW VKDOOWUDQVPLW WKH SODQVRI WKHLQWHUQDODXGLWDFWLYLW\DQGWKH QHFHVVDU\UHVRXUFHV LQFOXVLYHWKH

VLJQLILFDQWLQWHULPFKDQJHVWRWKH%RDUGRI1RPLQHHVIRULQIRUPDWLRQDVZHOODVWRWKH$OWHUQDWLYH,QYHVWPHQW)XQG

0DQDJHUIRUDSSURYDOZLWKLQWKHOLPLWVRILWVFRPSHWHQFLHV

7KHLQWHUQDODXGLWVKDOOHVWDEOLVKWKHSROLFLHVDQGSURFHGXUHVIRUH[HUFLVLQJWKHLQWHUQDODXGLWDFWLYLW\ZLWKLQ)RQGXO

3URSULHWDWHD FRPSULVLQJ DPRQJVW RWKHUV WKH DQDO\VLV RI WKH GHFLVLRQV WDNHQ E\ WKH FRPSDQ\¶V PDQDJHPHQW DQG WKH

FRQWURO RI WKHLU FRPSOLDQFH ZLWK WKH VWDWXWRU\ UHTXLUHPHQWV DQGRU ZLWK RWKHU GRFXPHQWV DSSURYHG E\ WKH JHQHUDO

PHHWLQJRIWKHVKDUHKROGHUV

7KHLQWHUQDODXGLWVKDOOFRRUGLQDWHLWVDFWLYLW\ZLWKWKHILQDQFLDODXGLWRULQRUGHUWRHQVXUHWKHSURSHUIXOILOPHQWRI

WKHDXGLWREMHFWLYHVDQGWRPLQLPL]HDQ\GXSOLFDWLRQRIDWWULEXWLRQV

 7KH LQWHUQDO DXGLW VKDOO SUHVHQW SHULRGLFDO UHSRUWV WR WKH %RDUG RI 1RPLQHHV RI )RQGXO 3URSULHWDWHD DQG WKH

$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHUUHJDUGLQJWKHSXUSRVHRIWKHLQWHUQDODXGLWDFWLYLW\DXWKRULW\UHVSRQVLELOLW\DQG

SHUIRUPDQFHDFFRUGLQJWRLWVLQWHUQDODXGLWSODQ7KHUHSRUWVVKDOOLQFOXGHDOVRWKHVLJQLILFDQWULVNVDQGDVSHFWVRIWKH

FRQWURO DQG PDQDJHPHQW DV ZHOO DV RWKHU QHFHVVDU\ SUREOHPV RU DV UHTXHVWHG E\ WKH %RDUG RI 1RPLQHHV DQG WKH

$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHU

 7KH LQWHUQDO DXGLW VKDOO YHULI\ LI WKH PDQDJHPHQW RI )RQGXO 3URSULHWDWHD KDV WDNHQ DSSURSULDWH PHDVXUHV

FRQFHUQLQJWKH UHSRUWHGVLJQLILFDQW ULVNV RULI WKH$OWHUQDWLYH,QYHVWPHQW)XQG 0DQDJHUKDV DFFHSWHGWKH ULVN RIQRW

WDNLQJ DQ\ PHDVXUH DQG VKDOO LQIRUP WKH %RDUG RI 1RPLQHHV DQG WKH JHQHUDO PHHWLQJ RI WKH VKDUHKROGHUV LI WKH

$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHUKDVDFFHSWHGWKHUHSRUWHGVLJQLILFDQWULVNV

7KHLQWHUQDODXGLWVKDOOHVWDEOLVKWKHSURFHGXUHVIRUPRQLWRULQJWKHLPSOHPHQWDWLRQRIWKHPHDVXUHVWDNHQE\WKH

PDQDJHPHQWRI)RQGXO3URSULHWDWHD

 7KH LQWHUQDO DXGLWRUV VKDOO QRWLI\ WKH %RDUG RI 1RPLQHHV DQG WKH $OWHUQDWLYH ,QYHVWPHQW )XQG 0DQDJHUV ZLWK

UHVSHFWWRDQ\IODZVLQWKHPDQDJHPHQWRUEUHDFKHVRIWKHOHJDOSURYLVLRQVRURIWKHFRQVWLWXWLYHDFWZKHUHVXFKDUH

LGHQWLILHGE\WKHLQWHUQDODXGLWRUVWKHVLJQLILFDQWFDVHVVKDOOEHQRWLILHGWRWKHJHQHUDOPHHWLQJRIWKHVKDUHKROGHUV

 7KH LQWHUQDO DXGLWRUV VKDOO WDNH LQWR FRQVLGHUDWLRQ WKH FRPSODLQWV RI WKH VKDUHKROGHUV ZKHQ GUDIWLQJ WKH UHSRUWV

DGGUHVVHGWRWKHJHQHUDOPHHWLQJRIWKHVKDUHKROGHUV

7KHDWWULEXWLRQVGXWLHVDQGWKHIXQFWLRQLQJZD\RIWKHLQWHUQDODXGLWRUVDVZHOODVWKHLUULJKWVDQGREOLJDWLRQVDUH

FRPSOHWHGZLWKWKHOHJDOSURYLVLRQVLQWKLVDUHD



FONDULPROPRIETATEASA



&RQVWLWXWLYH$FWRI)RQGXO3URSULHWDWHD6$LQIRUFHDVDW'HFHPEHU 



&+$37(59,,,

%XVLQHVVRI)RQGXO3URSULHWDWHD



$57,&/(

)LQDQFLQJLWVRZQEXVLQHVV



)RUWKHIXOILOPHQWRIWKHEXVLQHVVREMHFWDQGLQDFFRUGDQFHZLWKWKHDWWULEXWLRQVHVWDEOLVKHG)RQGXO3URSULHWDWHDXVHV

WKHILQDQFLDOVRXUFHVHVWDEOLVKHGSXUVXDQWWRWKHODZEDQNLQJFUHGLWVDQGRWKHUILQDQFLDOVRXUFHV)RQGXO3URSULHWDWHDLV

QRWDOORZHGWRFRQFOXGHORDQDJUHHPHQWVIRULQYHVWPHQWUHDVRQV



$57,&/(

)LQDQFLDO\HDU



7KHILQDQFLDO\HDUEHJLQVRQ-DQXDU\DQGWHUPLQDWHVRQ'HFHPEHURIHDFK\HDU



$57,&/(

$FFRXQWLQJHYLGHQFHDQGDQQXDOILQDQFLDOVWDWHPHQWV



7KHDFFRXQWLQJLVNHSWLQ5RPDQLDQODQJXDJHDQGLQQDWLRQDOFXUUHQF\

 )RQGXO 3URSULHWDWHD PXVW GUDIW WKH DQQXDO ILQDQFLDO VWDWHPHQWV DFFRUGLQJ WR OHJDO SURYLVLRQV LQ IRUFH DQG WR WKH

DSSOLFDEOHDFFRXQWLQJDQGILQDQFLDOUHSRUWLQJVWDQGDUGV



$57,&/(

&DOFXODWLRQDQGGLVWULEXWLRQRIWKHSURILW



7KHUHVXOWRIWKHILQDQFLDO\HDULVGHWHUPLQHGDWWKHHQGRIWKH\HDUDQGUHSUHVHQWVWKHILQDOEDODQFHRIWKHSURILWDQG

ORVVDFFRXQW

7KHSURILWRI)RQGXO3URSULHWDWHDDIWHUWKHSD\PHQWRIWKHSURILWWD[VKDOOEHGLVWULEXWHGDFFRUGLQJWRWKHGHFLVLRQRI

WKHJHQHUDOPHHWLQJRIWKHVKDUHKROGHUVDQGWRWKHOHJDOSURYLVLRQVLQIRUFH

)RQGXO3URSULHWDWHDFUHDWHVOHJDOUHVHUYHVDQGRWKHUUHVHUYHVSXUVXDQWWRWKHODZ

7KHSD\PHQWRIGLYLGHQGVRZHGWRWKHVKDUHKROGHUVLVPDGHE\)RQGXO3URSULHWDWHDDFFRUGLQJWRWKHODZ

7KHGLYLGHQGVDUHGLVWULEXWHGEHWZHHQWKHVKDUHKROGHUVSURSRUWLRQDOZLWKWKHQXPEHURIKHOGVKDUHV

,QFDVHRIORVVRIWKHQHWDVVHWWKHJHQHUDOPHHWLQJRIWKHVKDUHKROGHUVVKDOODQDO\VHWKHFDXVHVDQGGHFLGHSURSHUO\

DFFR

GLQJWRWKHODZ



$57,&/(

5HJLVWULHV



)RQGXO3URSULHWDWHDVKDOOPDLQWDLQE\FDUHRIWKH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHUDOOUHJLVWULHVSURYLGHGE\WKH

ODZ7KHVKDUHKROGHUVUHJLVWU\LVNHSWE\WKH&HQWUDO'HSRVLWRU\6$



&+$37(5,;

$VVRFLDWLRQFKDQJHRIWKHOHJDOIRUPGLVVROXWLRQDQGOLTXLGDWLRQOLWLJDWLRQ



$57,&/(

$VVRFLDWLRQ



)RQGXO3URSULHWDWHDPD\VHWXSVROHO\RUWRJHWKHUZLWKRWKHU5RPDQLDQRUIRUHLJQQDWXUDOSHUVRQVRUOHJDOHQWLWLHV

RWKHUFRPSDQLHVRUOHJDOHQWLWLHVDFFRUGLQJWRWKHODZDQGWRWKLVFRQVWLWXWLYHDFW



FONDULPROPRIETATEASA



&RQVWLWXWLYH$FWRI)RQGXO3URSULHWDWHD6$LQIRUFHDVDW'HFHPEHU 



7KHFRQGLWLRQVIRUWKHSDUWLFLSDWLRQRI)RQGXO3URSULHWDWHDDWWKHVHWWLQJXSRIQHZOHJDOHQWLWLHVVKDOOEHUHJXODWHG

E\WKHFRQVWLWXWLYHDFWVZKLFKWREHDSSURYHGE\WKHJHQHUDOPHHWLQJRIWKHVKDUHKROGHUV



$57,&/(

'LVVROXWLRQ



7KHGLVVROXWLRQRI)RQGXO3URSULHWDWHDVKDOOWDNHSODFHLQWKHIROORZLQJFDVHV

DLPSRVVLELOLW\RISHUIRUPLQJWKHFRPSDQ\¶VEXVLQHVVREMHFW

EGHFODULQJWKHFRPSDQ\¶VQXOOLW\

FE\GHFLVLRQRIWKHH[WUDRUGLQDU\JHQHUDOPHHWLQJRIWKHVKDUHKROGHUVLQDFFRUGDQFHZLWKDUWLFOHSDUDJUDSKV

DQG

GDVFRQVHTXHQFHRIORVVHVLIWKHQHWDVVHWYDOXHGHWHUPLQHGDVGLIIHUHQFHEHWZHHQWKHWRWDODVVHWDQGFRPSDQ\¶V

GHEWVUHSUHVHQWVOHVVWKDQKDOIRIWKHYDOXHRIWKHVXEVFULEHGVKDUHFDSLWDODQGLIQRWODWHUWKDQWKHWHUPLQDWLRQRI

WKHILQDQFLDO\HDUVXEVHTXHQWWRWKHRQHGXULQJZKLFKWKHORVVHVKDYHEHHQDVFHUWDLQHGWKHJHQHUDOPHHWLQJRIWKH

VKDUHKROGHUVIDLOVWRGHFUHDVHWKHVKDUHFDSLWDOZLWKDQDPRXQWDWOHDVWHTXDOZLWKWKHRQHRIORVVHVZKLFKFRXOGQRW

EHFRYHUHGIURPUHVHUYHVRUWRUHFRQVWLWXWHWKHFRPSDQ\¶VQHWDVVHWXSWRWKHYDOXHDWOHDVWHTXDOZLWKKDOIRIWKH

VXEVFULEHGVKDUHFDSLWDO

HRSHQLQJRIWKHEDQNUXSWF\SURFHGXUH

IWKHQXPEHURIVKDUHKROGHUVUHGXFHVXQGHUWKHOHJDOPLQLPXP

JRWKHUFDXVHVSURYLGHGE\WKHODZRUE\WKLVFRQVWLWXWLYHDFW

 7KH GLVVROXWLRQ RI )RQGXO 3URSULHWDWHD FDQQRW WDNH SODFH EHIRUH WKH ILQDOLVDWLRQ RI WKH SURFHGXUHV IRU JUDQWLQJ

LQGHPQLWLHVWRWKHULJKWIXOSHUVRQV

7KHGLVVROXWLRQGHFLVLRQRI)RQGXO3URSULHWDWHDPXVWEHUHJLVWHUHGZLWKWKHFRPPHUFLDOUHJLVWU\DQGSXEOLVKHGLQ

WKH2IILFLDO*D]HWWHRI5RPDQLD3D

W,9



$57,&/(

/LTXLGDWLRQ



7KHGLVVROXWLRQRI)RQGXO3URSULHWDWHDKDVDVFRQVHTXHQFHWKHRSHQLQJRIWKHOLTXLGDWLRQSURFHGXUH

7KHOLTXLGDWLRQRI)RQGXO3URSULHWDWHDDQGGLVWULEXWLRQRIWKHSDWULPRQ\DUHPDGHLQDFFRUGDQFHZLWKWKHODZ



$57,&/(

&DOFXODWLRQPHWKRGRIWKHQHWDVVHW



7KHFDOFXODWLRQPHWKRGRIWKHQHWDVVHWLVPDGHDFFRUGLQJWRWKHOHJDOSURYLVLRQVLQIRUFH



$57,&/(

3UXGHQWLDOUXOHVFRQFHUQLQJWKHLQYHVWPHQWSROLF\



 7KH LQYHVWPHQW SROLF\ LV HVWDEOLVKHG E\ WKH $OWHUQDWLYH ,QYHVWPHQW )XQG 0DQDJHU ZLWK WKH REVHUYDQFH RI WKH

LQYHVWPHQWOLPLWDWLRQSURYLGHGE\WKHOHJDOSURYLVLRQVLQIRUFHDQGRIWKLV&RQVWLWXWLYH$FW

)RQGXO3URSULHWDWHDVKDOOEHVXEMHFWWRWKHLQYHVWPHQWUHVWULFWLRQVSURYLGHGXQGHU/DZQRRQDOWHUQDWLYH

LQYHVWPHQWIXQGV DQGIRU WKHDPHQGPHQW DQGFRPSOHWLRQ RIRWKHUOHJLVODWLRQ DVZHOO DVDQ\RWKHU DSSOLFDEOH ODZ RU

UHJXODWLRQ

6XEMHFWWRWKHWHUPVRIWKLV&RQVWLWXWLYH$FWRIWKH0DQDJHPHQW$JUHHPHQWDQGWKHDSSOLFDEOHODZDOOGHFLVLRQVLQ

UHODWLRQWRWKHDFTXLVLWLRQRIGLVSRVDORIDQGH[HUFLVHRIDOOULJKWVDQGREOLJDWLRQVLQUHODWLRQWRWKHDVVHWVRI)RQGXO

3URSULHWDWHDVKDOOEHDWWKHVROHGLVFUHWLRQRIWKH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHU

3UXGHQWLDOUXOHVFRQFHUQLQJWKHLQYHVWPHQWSROLF\ZLOOEHDSSURYHGE\WKHVKDUHKROGHUVWKURXJK,QYHVWPHQW3ROLF\

6WD

HPHQW



FONDULPROPRIETATEASA



&RQVWLWXWLYH$FWRI)RQGXO3URSULHWDWHD6$LQIRUFHDVDW'HFHPEHU 



$57,&/(

&RQGLWLRQVIRUWKHUHSODFHPHQWRIWKHGHSRVLWDU\



)RQGXO3URSULHWDWHDVKDOOFRQFOXGHDGHSRVLWDU\DJUHHPHQWZLWKDGHSRVLWDU\OHJDOHQWLW\DXWKRULVHGDQGVXSHUYLVHG

E\ WKH )LQDQFLDO 6XSHUYLVRU\ $XWKRULW\ ZKLFK SHUIRUPV WKH GHSRVLWDU\ RSHUDWLRQV RI VHFXULWLHV DV ZHOO DV DQ\

RSHUDWLRQV LQ FRQQHFWLRQ ZLWK WKRVH 7KH DFWLYLWLHV WR EH GHYHORSHG E\ WKH GHSRVLWDU\ DQG WKH FRQGLWLRQV IRU LWV

UHSODFHPHQWVKDOOEHSURYLGHGLQWKHGHSRVLWDU\DJUHHPHQW

7KHGHSRVLWDU\DJUHHPHQWVKDOOPDQGDWRULO\LQFOXGHFODXVHVUHODWHGWRWKHUHSODFHPHQWRIWKHGHSRVLWDU\DQGUXOHV

IRU HQVXULQJ VKDUHKROGHUV¶ SURWHFWLRQ LQ VXFK VLWXDWLRQV DV ZHOO DV RWKHU PDQGDWRU\ FODXVHV LQ DFFRUGDQFH ZLWK WKH

DSSOLFDEOHUHJXODWLRQV



$57,&/(

,GHQWLW\UHTXLUHPHQWVUHJDUGLQJWKHTXDOLILFDWLRQSURIHVVLRQDOH[SHULHQFHDQGLQWHJULW\RIWKHPDQDJHPHQWPHPEHUV



7KH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHUUHVSHFWLYHO\LWVSHUPDQHQWUHSUHVHQWDWLYHVKDOOFXPXODWLYHO\IXOILOZLWK

WKHPLQLPXPUHTXLUHPHQWVUHJDUGLQJWKHLQWHJULW\TXDOLILFDWLRQDQGSURIHVVLRQDOH[SHULHQFHSURYLGHGLQWKHOHJLVODWLRQ

DQGLQRWKHUVSHFLILFSURYLVLRQVWKHLGHQWLW\RIWKH$OWHUQDWLYH,QYHVWPHQW)XQG0DQDJHULVWKHRQHUHJLVWHUHGZLWKWKH

1DWLRQDO 2IILFH RI 7UDGH 5HJLVWU\ EDVHG RQ WKH GHFLVLRQ RI WKH JHQHUDO PHHWLQJ RI WKH VKDUHKROGHUV UHJDUGLQJ LWV

HOHFWLRQ



$57,&/(

/LWLJDWLRQV



7KHOLWLJDWLRQVRIDQ\W\SHVKDOOEHDPLDEO\UHVROYHGDQGLIWKLVLVQRWSRVVLEOHWKH\VKDOOEHVROYHGE\WKHFRPSHWHQW

DUELWUDORUMXGLFLDOFRXUWV



&+$37(5;

)LQDOSURYLVLRQV



$57,&/(

)LQDOSURYLVLRQV



7KHSURYLVLRQVRIWKLVFRQVWLWXWLYHDFWDUHFRPSOHWHGE\WKHSURYLVLRQVRI&RPSDQ\/DZ1RUHSXEOLVKHGDV

IXUWKHUDPHQGHGDQGFRPSOHWHGDQGRWKHUDSSOLFDEOHOHJDOSURYLVLRQVLQIRUFHDVZHOODVE\WKHSURYLVLRQVRIWKHFDSLWDO

PDUNHWOHJLVODWLRQJRYHUQLQJWKHLVVXHUVZKRVH VKDUHVDUHDGPLWWHGRQWUDGLQJ



)21'8/35235,(7$7($6$

&RPSOLDQFHZLWKWKHFRUSRUDWH

RYHUQDQFHUHTXLUHPHQWV 



$QQH[&RPSOLDQFHZLWKWKHFRUSRUDWHJRYHUQDQFHUHTXLUHPHQWV

Compliance with the provisions of the Corporate Governance Code issued by the BVB

&RGH3URYLVLRQV &RPSOLHV 'RHVQRW

FRPSO\SDUWLDOO\

FRPSOLHV

5HDVRQIRUQRQ

FRPSOLDQFH

$7KH)XQGKDVWKH&RQVWLWXWLYH$FWDQGWKHLQWHUQDOUHJXODWLRQZKLFKLQFOXGHVWHUPVRIUHIHUHQFHUHVSRQVLELOLWLHVIRU%RDUGDQGIRUWKHVROHGLUHFWRU



9

$3URYLVLRQVIRUWKHPDQDJHPHQWRIFRQIOLFWRILQWHUHVWDUHLQFOXGHGLQWKHLQWHUQDOUHJXODWLRQ,QDQ\HYHQWWKHPHPEHUVRIWKH%RDUGVKRXOGQRWLI\WKH%RDUGRI

DQ\FRQIOLFWVRILQWHUHVWZKLFKKDYHDULVHQRUPD\DULVHDQGVKRXOGUHIUDLQIURPWDNLQJSDUWLQWKHGLVFXVVLRQLQFOXGLQJE\QRWEHLQJSUHVHQWZKHUHWKLVGRHVQRW

UHQGHUWKHPHHWLQJQRQTXRUDWHDQGIURPYRWLQJRQWKHDGRSWLRQRIDUHVROXWLRQRQWKHLVVXHZKLFKJLYHVULVHWRVXFKFRQIOLFWRILQWHUHVW



9

$7KH%RDUGRI1RPLQHHVKDVILYHPHPEHUV



9

$$OOPHPEHUVRIWKH%RDUGRI1RPLQHHVDUHQRQH[HFXWLYHDQGLQGHSHQGHQW(DFKPHPEHURIWKH%RDUGRI1RPLQHHVVXEPLWWHGDGHFODUDWLRQWKDWKHLV

LQGHSHQGHQWDWWKHPRPHQWRIKLVQRPLQDWLRQIRUHOHFWLRQRUUHHOHFWLRQDVZHOODVZKHQDQ\FKDQJHLQKLVVWDWXVDULVHVE\GHPRQVWUDWLQJWKHJURXQGRQZKLFKKHLV

FRQVLGHUHGLQGHSHQGHQWLQFKDUDFWHUDQGMXGJHPHQWLQSUDFWLFH



9 

$$%RDUGPHPEHU¶VRWKHUUHODWLYHO\SHUPDQHQWSURIHVVLRQDOFRPPLWPHQWVDQGHQJDJHPHQWVLQFOXGLQJH[HFXWLYHDQGQRQH[HFXWLYH%RDUGSRVLWLRQVLQ

FRPSDQLHVDQGQRWIRUSURILWLQVWLWXWLRQVVKRXOGEHGLVFORVHGWRVKDUHKROGHUVDQGWRSRWHQWLDOLQYHVWRUVEHIRUHDSSRLQWPHQWDQGGXULQJKLVKHUPDQGDWH



9

$$Q\PHPEHURIWKH%RDUGVKRXOGVXEPLWWRWKH%RDUGLQIRUPDWLRQRQDQ\UHODWLRQVKLSZLWKDVKDUHKROGHUZKRKROGVGLUHFWO\RULQGLUHFWO\VKDUHVUHSUHVHQWLQJ

PRUHWKDQRIDOOYRWLQJULJKWV7KLVREOLJDWLRQFRQFHUQVDQ\NLQGRIUHODWLRQVKLSZKLFKPD\DIIHFWWKHSRVLWLRQRIWKHPHPEHURQLVVXHVGHFLGHGE\WKH%RDUG



9

$7KH)XQGKDVDSSRLQWHGD%RDUGVHFUHWDU\UHVSRQVLEOHIRUVXSSRUWLQJWKHZRUNRIWKH%RDUG



9

$7KHDQQXDOUHSRUWLQIRUPVRQZKHWKHUDQHYDOXDWLRQRIWKH%RDUGKDVWDNHQSODFHXQGHUWKHOHDGHUVKLSRIWKHFKDLUPDQRUWKH1RPLQDWLRQDQG5HPXQHUDWLRQ

&RPPLWWHHDQGLILWKDVVXPPDUL]HNH\DFWLRQSRLQWVDQGFKDQJHVUHVXOWLQJIURPLW7KH)XQGKDVDSROLF\UHJDUGLQJWKHHYDOXDWLRQRIWKH%RDUGFRQWDLQLQJWKH

SXUSRVHFULWHULDDQGIUHTXHQF\RIWKHHYDOXDWLRQSURFHVV



9

$7KHDQQXDOUHSRUWFRQWDLQVLQIRUPDWLRQRQWKHQXPEHURIPHHWLQJVRIWKH%RDUGDQGWKHFRPPLWWHHVGXULQJWKHSDVW\HDUDWWHQGDQFHE\HDFKPHPEHULQ

SHUVRQDQGLQDEVHQWLDDQGDUHSRUWRIWKH%RDUGDQGFRPPLWWHHVRQWKHLUDFWLYLWLHV



9

$7KHDQQXDOUHSRUWFRQWDLQVLQIRUPDWLRQRQWKHSUHFLVHQXPEHURIWKHLQGHSHQGHQWPHPEHUVRIWKH%RDUGRI1RPLQHHV



9

$7KH%RDUGRI1RPLQHHVVHWXSWKH1RPLQDWLRQDQG5HPXQHUDWLRQ&RPPLWWHHIRUPHGRIQRQH[HFXWLYHVZKLFKZLOOOHDGWKHSURFHVVIRUWKH$,)0

DSSRLQWPHQWVDQGPDNHUHFRPPHQGDWLRQVWRWKH%RDUG$OOPHPEHUVRIWKH1RPLQDWLRQDQG5HPXQHUDWLRQ&RPPLWWHHDUHLQGHSHQGHQW



9

%7KH%RDUGRI1RPLQHHVVHWXSWKH$XGLWDQG9DOXDWLRQ&RPPLWWHHDOOPHPEHUVEHLQJQRQH[HFXWLYHDQGLQGHSHQGHQW7KHPDMRULW\RIPHPEHUVLQFOXGLQJWKH

FKDLUPDQKDYHSURYHQDQDGHTXDWHTXDOLILFDWLRQUHOHYDQWWRWKHIXQFWLRQVDQGUHVSRQVLELOLWLHVRIWKHFRPPLWWHH7KHFKDLUPDQRIWKH$XGLW&RPPLWWHHKDVSURYHQ

DGHTXDWHDXGLWLQJRUDFFRXQWLQJH[SHULHQFH

9

%7KH$XGLWDQG9DOXDWLRQ&RPPLWWHHLVFKDLUHGE\DQLQGHSHQGHQWQRQH[HFXWLYHPHPEHU



9

%$PRQJLWVUHVSRQVLELOLWLHVWKH$XGLWDQG9DOXDWLRQ&RPPLWWHHXQGHUWDNHVDQDQQXDODVVHVVPHQWRIWKHV\VWHPRILQWHUQDOFRQWURO



9

%7KHDVVHVVPHQWFRQVLGHUVWKHHIIHFWLYHQHVVDQGVFRSHRIWKHLQWHUQDODXGLWIXQFWLRQWKHDGHTXDF\RIULVNPDQDJHPHQWDQGLQWHUQDOFRQWUROUHSRUWVWRWKH$XGLW

DQG9DOXDWLRQ&RPPLWWHHPDQDJHPHQW¶VUHVSRQVLYHQHVVDQGHIIHFWLYHQHVVLQGHDOLQJZLWKLGHQWLILHGLQWHUQDOFRQWUROIDLOLQJVRUZHDNQHVVHVDQGVXEPLVVLRQRI

UHOHYDQWUHSRUWVWRWKH%RDUG



9

%7KH$XGLWDQG9DOXDWLRQ&RPPLWWHHUHYLHZVFRQIOLFWVRILQWHUHVWVLQWUDQVDFWLRQVRIWKH)XQGDQGLWVVXEVLGLDULHVZLWKUHODWHGSDUWLHV



9

%7KH$XGLWDQG9DOXDWLRQ&RPPLWWHHHYDOXDWHVWKHHIILFLHQF\RIWKHLQWHUQDOFRQWUROV\VWHPDQGRIWKHULVNPDQDJHPHQWV\VWHP



9

%7KH$XGLWDQG9DOXDWLRQ&RPPLWWHHPRQLWRUVWKHDSSOLFDWLRQRIVWDWXWRU\DQGJHQHUDOO\DFFHSWHGVWDQGDUGVRILQWHUQDODXGLWLQJ7KH$XGLWDQG9DOXDWLRQ

&RPPLWWHHUHFHLYHVDQGHYDOXDWHVWKHUHSRUWVRIWKHLQWHUQDODXGLWWHDP



9

)21'8/35235,(7$7($6$

RYHUQDQFHUHTXLUHPHQWV 



&RGH3URYLVLRQV &RPSOLHV 'RHVQRW

FRPSO\SDUWLDOO\

FRPSOLHV

5HDVRQIRUQRQ

FRPSOLDQFH

%7KH$XGLWDQG9DOXDWLRQ&RPPLWWHHSURYLGHVWKH%RDUGDQQXDORUDGKRFUHSRUWV



9

%1RVKDUHKROGHUPD\EHJLYHQXQGXHSUHIHUHQFHRYHURWKHUVKDUHKROGHUVZLWKUHJDUGWRWUDQVDFWLRQVDQGDJUHHPHQWVPDGHE\WKH)XQGZLWKVKDUHKROGHUVDQG

WKHLUUHODWHGSDUWLHV



9

%7KH)XQGKDVLQSODFHDUHODWHGSDUW\WUDQVDFWLRQSURFHGXUH



9

%7KHLQWHUQDODXGLWVDUHFDUULHGRXWE\DVHSDUDWHVWUXFWXUDOGLYLVLRQDQGE\UHWDLQLQJDQLQGHSHQGHQWWKLUGSDUW\HQWLW\



9

%7RHQVXUHWKHIXOILOPHQWRIWKHFRUHIXQFWLRQVRIWKHLQWHUQDODXGLWDFWLYLWLHVDOOUHSRUWVDUHSURYLGHGWRWKH%RDUGYLDWKH$XGLWDQG9DOXDWLRQ&RPPLWWHH



9

&7KH)XQGKDVSXEOLVKHGDUHPXQHUDWLRQSROLF\RQLWVZHEVLWHDQGLQFOXGHLQLWVDQQXDOUHSRUWDUHPXQHUDWLRQVWDWHPHQWRQWKHLPSOHPHQWDWLRQRIWKLVSROLF\

GXULQJWKHDQQXDOSHULRGXQGHUUHYLHZ



9

',QDGGLWLRQWRLQIRUPDWLRQUHTXLUHGE\OHJDOSURYLVLRQVWKH)XQGLQFOXGHVRQLWVFRUSRUDWHZHEVLWHDGHGLFDWHG,QYHVWRU5HODWLRQVVHFWLRQERWKLQ5RPDQLDQDQG

(QJOLVKZLWKDOOUHOHYDQWLQIRUPDWLRQRILQWHUHVWIRULQYHVWRUVLQFOXGLQJ



9

'3ULQFLSDOFRUSRUDWHUHJXODWLRQVWKH&RQVWLWXWLYH$FWJHQHUDOVKDUHKROGHUVPHHWLQJSURFHGXUHV



9

'3URIHVVLRQDO&9VRIWKHPHPEHUVRILWVJRYHUQLQJERGLHV%RDUGPHPEHU¶VRWKHUSURIHVVLRQDOFRPPLWPHQWVLQFOXGLQJH[HFXWLYHDQGQRQH[HFXWLYH%RDUG

SRVLWLRQVLQFRPSDQLHVDQGQRWIRUSURILWLQVWLWXWLRQV



9

'&XUUHQWUHSRUWVDQGSHULRGLFUHSRUWVTXDUWHUO\VHPLDQQXDODQGDQQXDOUHSRUWV±DWOHDVWDVSURYLGHGDWLWHP'±LQFOXGLQJFXUUHQWUHSRUWVZLWKGHWDLOHG

LQIRUPDWLRQUHODWHGWRQRQFRPSOLDQFHZLWKWKH&RGHRI%9%



9

''HWDLOHGLQIRUPDWLRQUHODWHGWRJHQHUDOPHHWLQJVRIVKDUHKROGHUV



9

',QIRUPDWLRQRQFRUSRUDWHHYHQWVVXFKDVSD\PHQWRIGLYLGHQGVDQGRWKHUGLVWULEXWLRQVWRVKDUHKROGHUVRURWKHUHYHQWVOHDGLQJWRWKHDFTXLVLWLRQRUOLPLWDWLRQ

RIULJKWVRIDVKDUHKROGHULQFOXGLQJWKHGHDGOLQHVDQGSULQFLSOHVDSSOLHGWRVXFKRSHUDWLRQV6XFKLQIRUPDWLRQVKRXOGEHSXEOLVKHGZLWKLQDWLPHIUDPHWKDWHQDEOHV

LQYHVWRUVWRPDNHLQYHVWPHQWGHFLVLRQV



9

'7KHQDPHDQGFRQWDFWGDWDRIDSHUVRQZKRVKRXOGEHDEOHWRSURYLGHNQRZOHGJHDEOHLQIRUPDWLRQRQUHTXHVW



9

'&RUSRUDWHSUHVHQWDWLRQVHJ,5SUHVHQWDWLRQVTXDUWHUO\UHVXOWVSUHVHQWDWLRQVHWFILQDQFLDOVWDWHPHQWVTXDUWHUO\VHPLDQQXDODQQXDODXGLWRUUHSRUWV

DQGDQQXDOUHSRUWV



9

'7KH)XQGKDVDQDQQXDOFDVKGLVWULEXWLRQSROLF\DVDVHWRIGLUHFWLRQVWKH)XQGLQWHQGVWRIROORZUHJDUGLQJWKHGLVWULEXWLRQRIQHWSURILW7KHDQQXDOFDVK

GLVWULEXWLRQSROLF\LVSXEOLVKHGRQWKHFRUSRUDWHZHEVLWH



9

'7KH)XQGKDVDGRSWHGDSROLF\ZLWKUHVSHFWWRIRUHFDVWV7KHIRUHFDVWSROLF\LVSXEOLVKHGRQWKHFRUSRUDWHZHEVLWH



9

'7KHUXOHVRIJHQHUDOPHHWLQJVRIVKDUHKROGHUVGRQRWUHVWULFWWKHSDUWLFLSDWLRQRIVKDUHKROGHUVLQJHQHUDOPHHWLQJVDQGWKHH[HUFLVLQJRIWKHLUULJKWV

$PHQGPHQWVRIWKHUXOHVVKRXOGWDNHHIIHFWDWWKHHDUOLHVWDVRIWKHQH[WJHQHUDOPHHWLQJRIVKDUHKROGHUV



9

'7KHH[WHUQDODXGLWRUVVKRXOGDWWHQGWKHVKDUHKROGHUV¶PHHWLQJVZKHQWKHLUUHSRUWVDUHSUHVHQWHGWKHUH



9

'7KHPDQDJHPHQWRIWKH)XQGSUHVHQWVWRWKHDQQXDOJHQHUDOPHHWLQJRIVKDUHKROGHUVDEULHIDVVHVVPHQWRIWKHLQWHUQDOFRQWUROVDQGVLJQLILFDQWULVN

PDQDJHPHQWV\VWHPDVZHOODVRSLQLRQVRQLVVXHVVXEMHFWWRUHVROXWLRQDWWKHJHQHUDOPHHWLQJ



9

'$Q\SURIHVVLRQDOFRQVXOWDQWH[SHUWRUILQDQFLDODQDO\VWPD\SDUWLFLSDWHLQWKHVKDUHKROGHUV¶PHHWLQJXSRQSULRULQYLWDWLRQIURPWKHPDQDJHPHQWRIWKH)XQG

$FFUHGLWHGMRXUQDOLVWVPD\DOVRSDUWLFLSDWHLQWKHJHQHUDOPHHWLQJRIVKDUHKROGHUVXQOHVVWKHPDQDJHPHQWRIWKH)XQGGHFLGHVRWKHUZLVH



9

'7KHTXDUWHUO\DQGVHPLDQQXDOILQDQFLDOUHSRUWVLQFOXGHLQIRUPDWLRQLQERWK5RPDQLDQDQG(QJOLVKUHJDUGLQJWKHNH\GULYHUVLQIOXHQFLQJWKHDFWLYLW\RIWKH)XQG



9

'7KH)XQGRUJDQLVHVDWOHDVWIRXUPHHWLQJVFRQIHUHQFHFDOOVZLWKDQDO\VWVDQGLQYHVWRUVHDFK\HDU7KHLQIRUPDWLRQSUHVHQWHGRQWKHVHRFFDVLRQVLVSXEOLVKHG

RQWKH)XQG¶VZHEVLWH



9

',IWKH)XQGVXSSRUWVYDULRXVIRUPVRIDUWLVWLFDQGFXOWXUDOH[SUHVVLRQVSRUWDFWLYLWLHVHGXFDWLRQDORUVFLHQWLILFDFWLYLWLHVDQGFRQVLGHUVWKHUHVXOWLQJLPSDFWRQ

WKHLQQRYDWLYHQHVVDQGFRPSHWLWLYHQHVVRIWKH)XQGSDUWRILWVEXVLQHVVPLVVLRQDQGGHYHORSPHQWVWUDWHJ\LWSXEOLVKHVWKHSROLF\JXLGLQJLWVDFWLYLW\LQWKLVDUHD



9



)21'8/35235,(7$7($6$

RYHUQDQFHUHTXLUHPHQWV 



Compliance with the provisions of the FSA Regulation no. 2/2016

5HJXODWLRQ3URYLVLRQV &RPSOLHV 'RHVQRW

FRPSO\SDUWLDOO\

FRPSOLHV

5HDVRQIRUQRQ

FRPSOLDQFH

7KH)XQGPHQWLRQHGLQWKH&RQVWLWXWLYH$FWWKHEDVLFUHVSRQVLELOLWLHVRIWKH%RDUGRI1RPLQHHVUHJDUGLQJWKHLPSOHPHQWDWLRQDQGREVHUYDQFHRIWKHSULQFLSOHVRI

FRUSRUDWHJRYHUQDQFH



9

7KH&RQVWLWXWLYH$FWDQGWKHLQWHUQDOUHJXODWLRQVGHILQHWKHVWUXFWXUHVRIFRUSRUDWHJRYHUQDQFHWKHIXQFWLRQVFRPSHWHQFLHVDQGUHVSRQVLELOLWLHVRIWKH%RDUGRI

1RPLQHHVDQGWKRVHRIWKHVROHDGPLQLVWUDWRU

9

7KH)XQGVDQQXDOILQDQFLDOVWDWHPHQWVDUHDQQH[HGWRWKHDQQXDOUHSRUW7KHDQQXDOUHSRUWRIWKH1RPLQDWLRQDQG5HPXQHUDWLRQ&RPPLWWHHLVDSXEOLF

GRFXPHQWVWDUWLQJZLWKDQGWKHDQQXDOUHSRUWIRUWKHSHULRGHQGLQJRQ'HFHPEHUZLOOEHWKHVXEMHFWRIWKHVKDUHKROGHUVYRWHDWWKHJHQHUDOPHHWLQJ

RIVKDUHKROGHUVWREHKHOGLQ$SULO7KHDQQXDOUHSRUWIRULQFOXGHVH[SODQDWLRQVUHJDUGLQJWKHHYHQWVUHOHYDQWLQUHODWLRQWRWKHDSSOLFDWLRQRIWKHSULQFLSOHV

RIFRUSRUDWHJRYHUQDQFHUHFRUGHGGXULQJWKHILQDQFLDO\HDU



9 

7KH)XQGKDVGHYHORSHGDQGLPSOHPHQWHGDFRPPXQLFDWLRQVWUDWHJ\ZLWKVWDNHKROGHUVWRHQVXUHDGHTXDWHLQIRUPDWLRQ 9 

7KHPDQDJHPHQWVWUXFWXUHLQYROYLQJWKH%RDUGRI1RPLQHHVDQGWKHVROHDGPLQLVWUDWRUHQVXUHVDVDSSURSULDWHDEDODQFHEHWZHHQH[HFXWLYHDQGQRQH[HFXWLYH

PHPEHUVVRWKDWQRSHUVRQRUVPDOOJURXSRISHRSOHLQIOXHQFHVWKHGHFLVLRQPDNLQJSURFHVV

9 

7KH%RDUGRI1RPLQHHVPHHWVDWOHDVWRQFHHYHU\PRQWKVWRPRQLWRUWKH)XQG¶VDFWLYLWLHV 9 

7KH%RDUGRI1RPLQHHVDQGWKHVROHGLUHFWRUUHJXODUO\UHYLHZWKHSROLFLHVRQILQDQFLDOUHSRUWLQJLQWHUQDOFRQWURODQGWKHULVNPDQDJHPHQWV\VWHPDGRSWHGE\WKH

)XQG

9 

,QLWVDFWLYLW\WKH%RDUGRI1RPLQHHVKDVWKHVXSSRUWRID1RPLQDWLRQDQG5HPXQHUDWLRQ&RPPLWWHHWKDWLVVXHVUHFRPPHQGDWLRQV 9 

7KH1RPLQDWLRQDQG5HPXQHUDWLRQ&RPPLWWHHVXEPLWVDQQXDOUHSRUWVRQLWVDFWLYLW\WRWKH%RDUGRI1RPLQHHV 9 

,QLWVDFWLYLW\WKH&RPPLWWHHRI5HSUHVHQWDWLYHVKDVWKHVXSSRUWRIWKH$XGLWDQG9DOXDWLRQ&RPPLWWHHWKDWLVVXHVUHFRPPHQGDWLRQVRQYDULRXVWRSLFVWKDWDUH

WKHVXEMHFWRIWKHGHFLVLRQPDNLQJSURFHVV

9 

7KHDGYLVRU\FRPPLWWHHVVKDOOVXEPLWWRWKH%RDUGRI1RPLQHHVWKHGRFXPHQWDWLRQDQGWKHUHSRUWVRQWKHPDWWHUVHQWUXVWHGWRLW 9 

,QWKH5HPXQHUDWLRQDQG1RPLQDWLRQ3ROLF\RIWKH)XQGWKHUHDUHSURYLVLRQVUHJDUGLQJWKHVHOHFWLRQRIFDQGLGDFLHVIRUWKHPHPEHUVRIWKH%RDUGRI1RPLQHHV

IRUWKHVROHDGPLQLVWUDWRUDVZHOODVUHJDUGLQJWKHLUPDQGDWH

9 

7KHIXQGHQVXUHVWKDWWKHPHPEHUVRIWKHPDQDJHPHQWRIWKHVROHGLUHFWRUEHQHILWIURPSURIHVVLRQDOWUDLQLQJVRWKDWWKH\FDQIXOILOWKHLUGXWLHVHIILFLHQWO\ 9 

7KHNH\IXQFWLRQVDUHHVWDEOLVKHGLQVXFKDZD\DVWREHDSSURSULDWHWRWKHRUJDQL]DWLRQDOVWUXFWXUHRIWKH)XQGDQGLQDFFRUGDQFHZLWKWKHUHJXODWLRQV

DSSOLFDEOHWRLW

9 

)21'8/35235,(7$7($6$

RYHUQDQFHUHTXLUHPHQWV 



5HJXODWLRQ3URYLVLRQV &RPSOLHV 'RHVQRW

FRPSO\SDUWLDOO\

FRPSOLHV

5HDVRQIRUQRQ

FRPSOLDQFH

7KH%RDUGRI1RPLQHHVVKDOOSHULRGLFDOO\UHYLHZWKHHIIHFWLYHQHVVRIWKH)XQG¶VLQWHUQDOFRQWUROV\VWHPDQGKRZLWLVXSGDWHGWRHQVXUHULJRURXVULVN

PDQDJHPHQWWRZKLFKWKH)XQGLVH[SRVHG

9 

7KH$XGLWDQG9DOXDWLRQ&RPPLWWHHPDNHVUHFRPPHQGDWLRQVWRWKH%RDUGRI1RPLQHHVUHJDUGLQJWKHVHOHFWLRQDSSRLQWPHQWDQGUHSODFHPHQWRIWKHILQDQFLDO

DXGLWRUDVZHOODVWKHWHUPVDQGFRQGLWLRQVRIKLVUHPXQHUDWLRQ

9 

7KH%RDUGRI1RPLQHHVUHYLHZVDWOHDVWRQFHD\HDUDQGHQVXUHVWKDWUHPXQHUDWLRQSROLFLHVDUHFRQVLVWHQWDQGKDYHHIIHFWLYHULVNPDQDJHPHQW 9 

7KH)XQG¶V5HPXQHUDWLRQDQG1RPLQDWLRQ3ROLF\LVDUHJXODWLRQWKDWDLPVWRLPSOHPHQWDQGFRPSO\ZLWKWKHSULQFLSOHVRIFRUSRUDWHJRYHUQDQFH 9 

7KH%RDUGRI1RPLQHHVDGRSWHGWKH&RGHRI(WKLFVLQRUGHUWRLGHQWLI\DQGDGHTXDWHO\UHVROYHVLWXDWLRQVRIFRQIOLFWRILQWHUHVW 9 

7KHVROHGLUHFWRUVKDOOLQIRUPWKH%RDUGRI1RPLQHHVRISRWHQWLDORUFRQVXPHGFRQIOLFWVRILQWHUHVWLQZKLFKKHVKHPD\EHLVLQYROYHGLQWKHFRQGLWLRQVRIWKHLU

RFFXUUHQFHDQGVKDOOQRWSDUWLFLSDWHLQWKHGHFLVLRQPDNLQJSURFHVVUHODWHGWRWKHFRQIOLFWVWDWXVLIWKHVHVWUXFWXUHVRUSHUVRQVDUHLQYROYHGLQWKHFRQIOLFWVWDWXV

9 

7KH%RDUGRI1RPLQHHVUHYLHZVDWOHDVWRQFHD\HDUWKHHIILFLHQF\RIWKH)XQGVULVNPDQDJHPHQWV\VWHP 9 

7KH)XQGKDVGHYHORSHGSURFHGXUHVIRULGHQWLI\LQJDVVHVVLQJDQGPDQDJLQJVLJQLILFDQWULVNVWRZKLFKLWLVRUPD\EHH[SRVHG 9 

7KHVROHGLUHFWRUKDVFOHDUDFWLRQSODQVWRHQVXUHEXVLQHVVFRQWLQXLW\DQGHPHUJHQFLHV 9 

7KHVXEVLGLDU\ERDUGDSSOLHVSULQFLSOHVDQGSROLFLHVRILQWHUQDOJRYHUQDQFHVLPLODUWRWKRVHRIWKHSDUHQWFRPSDQ\XQOHVVWKHUHDUHRWKHUOHJDOUHTXLUHPHQWVWKDW

OHDGWRWKHHVWDEOLVKPHQWRILWVRZQSROLFLHV

,WGRHVQRWDSSO\EHFDXVHWKH)XQGKDVQRVXEVLGLDULHV



Fondul Proprietatea SA

Premium Point (7th Floor)

78-80 Buzesti Street, 1st District

Bucharest 011017

Romania

AI assistant

Fondul Proprietatea Audit Report / Information 2020

2288_10-k_2021-03-22_3b9dfd57-45cf-4179-a368-138f82182c93.html

AI assistant

Fondul Proprietatea — Audit Report / Information 2020

2288_10-k_2021-03-22_3b9dfd57-45cf-4179-a368-138f82182c93.html

More from Fondul Proprietatea

Fondul Proprietatea Audit Report / Information 2020