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
1
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
2
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
EU
European Union
FATCA
The Foreign Account Tax Compliance Act
Fondul Proprietatea/ the Fund/ FP
Fondul Proprietatea SA
FSA
Romanian Financial Supervisory Authority
FT
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
H1
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
3
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
TO
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
4
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%
1
, 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%
1
and a low of 9.71%
1
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%
1
and a low of 13.67%
1
and ended the year at 15.54%
1
. 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%
-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.
1
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
5
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
th
Tender Offer
1/20
Start of the 11
th
buy-back
programme
7/20
Gross dividend distribution of
RON 418.0 million
12/20
Completion of the 11
th
buy-
back programme/
Completion of the 9
th
Tender Offer/
Finalise the sale of
entire holding in
Nuclearelectrica SA
11/20
Approval of the 12
th
buy-back programme
9/20
Completion of the 8
th
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
6
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
1
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
1
Summarizing the provisions of the IPS, the adjusted NAV for a given date is calculated as the sum of: (i) the reported NAV as at the end of the Reporting Period; (ii) any
distributions to shareholders, being either dividend or non-dividend ones (i.e. in the last case following reductions of the par value of the shares and distribution to the
shareholders), implemented after the end of the previous Reporting Period, and (iii) any distribution fee and any transaction/ distribution costs relating to either dividend or 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
7
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
1
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%
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.
1
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
8
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
9
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
February 2020
E-Distributie Muntenia SA
188.0
February 2020
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
10
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
1
.
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
2
.
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
3
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,
1
International Monetary Fund – World Economic Outlook – January 2021
2
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.
3
International Monetary Fund – World Economic Outlook – October 2020
FONDUL PROPRIETATEA SA
Fondul Proprietatea SA Annual Sole Director’s Report 2020
11
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
12
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
13
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
FP
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
1
Source: Depozitarul Central SA
1
Information provided based on settlement date of transactions
2
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
3
Fondul Proprietatea held zero GDRs as at 31 December 2020
4
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
2
Romanian institutional shareholders
31.41%
33.08%
37.44%
The Bank of New York Mellon (GDRs)
3
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
4
11.07%
11.65%
-
FONDUL PROPRIETATEA SA
Fondul Proprietatea SA Annual Sole Director’s Report 2020
14
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
0.52
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)
a
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)
a
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 (%)
g
+2.2%
+31.2%
+19.9%
Share price as at the end of the period (RON)
b
1.4500
1.2100
0.8830
Share price low in the period (RON)
b
0.9980
0.8000
0.8400
FONDUL PROPRIETATEA SA
Fondul Proprietatea SA Annual Sole Director’s Report 2020
15
NAV* and share price developments**
Notes
31 December
2020
31 December
2019
31 December
2018
Share price high in the period (RON)
b
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 (%)
h
+26.4%
+49.1%
+9.9%
Share price discount to NAV as at the end of the period (%)
d
14.6%
30.2%
37.4%
Average share price discount in the period (%)
d
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)
e
17.1000
13.7000
10.5000
GDR price low in the period (USD)
e
11.2000
9.6500
10.3000
GDR price high in the period (USD)
e
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 (%)
i
+31.1%
+41.4%
-1.9%
GDR price discount to NAV as at the end of the period (%)
d
20.1%
32.7%
39.3%
Average GDR price discount in the period (%)
d
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)
a
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)
a
1.4515
1.5622
1.5881
1.6974
NAV per share total return in the period (%)
g
-16.3%
+12.4%
+1.7%
+6.9%
Share price as at the end of the period (RON)
b
1.1100
1.2600
1.2950
1.4500
Share price total return in the period (%)
h
-8.3%
+19.8%
+2.8%
+12.0%
Share price discount to NAV as at the end of the period (%)
d
23.5%
19.3%
18.5%
14.6%
GDR price as at the end of the period (USD)
e
12.1000
14.4000
15.5000
17.1000
GDR price total return in the period (%)
i
-11.7%
+25.0%
+7.6%
+10.3%
GDR price discount to NAV as at the end of the period (%)
d
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
16
Contact Details
Address: 78-80 Buzesti Street (7th floor), District 1, Postal Code 011017, Bucharest, Romania.
Web: www.fondulproprietatea.ro
E-mail: office@fondulproprietatea.ro
investor.relations@fondulproprietatea.ro
Telephone: +40 21 200 9600
Fax: +40 21 200 9631/32
FONDUL PROPRIETATEA SA
Fondul Proprietatea SA Annual Sole Director’s Report 2020
17
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
18
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
19
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
20
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
21
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
13,778,392,208.00
13,778,392,208
13,778,392,208
24 February 2014
The cancelation of the shares acquired
during the first buy-back programme
13,538,087,407.00
13,172,832,785.00
13,538,087,407
13,172,832,785
25 June 2014
The decrease for annual cash distributions
to shareholders
12,861,183,036.65
12,515,396,724.25
13,538,087,407
13,174,101,815
26 September 2014
The cancelation of the shares acquired
during the second buy-back programme
11,815,279,886.85
11,469,656,813.90
12,437,136,723
12,073,322,962
27 January 2015
The cancelation of the shares acquired
during the third buy-back programme
11,575,064,733.65
11,229,443,001.15
12,184,278,667
11,820,466,317
31 May 2015
The decrease for annual cash distributions
to shareholders
10,965,850,800.30
10,638,419,685.30
12,184,278,667
11,820,466,317
12 August 2015
The cancelation of the shares acquired
during the fourth buy-back programme
10,074,080,745.90
9,746,649,630.90
11,193,423,051
10,829,610,701
14 March 2016
The cancelation of the shares acquired
during the fifth buy-back programme
9,869,265,720.90
9,541,834,605.90
10,965,850,801
10,602,038,451
9 June 2016
The decrease for annual cash distributions
to shareholders
9,320,973,180.85
9,011,732,683.35
10,965,850,801
10,602,038,451
26 October 2016
The partial cancelation of the shares
acquired during the sixth
buy-back
programme
9,168,314,116.70
8,859,073,619.20
10,786,251,902
10,422,439,552
31%
36%
29%
21%
20%
21%
18%
18%
16%
16%
16%
16%
19%
19%
18%
18%
18%
10%
10%
6%
5%
6%
4%
3%
3%
3%
3%
2%
3%
3%
3%
3%
3%
3%
14%
43%
54%
55%
53%
25%
22%
21%
16%
15%
15%
13%
17%
14%
13%
11%
12%
35%
37%
30%
29%
28%
25%
28%
26%
25%
23%
22%
6%
9% 9%
9%
11%
13%
14%
18%
17%
19%
20%
22%
27%
30%
31%
31%
33%
2% 2%
10%
10%
3%
8%
3%
18%
18%
19%
21%
6%
9%
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
22
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
x
0.60%
x
Discount 15% – 20%, + 0.05%, i.e. Base Fee Rate = 0.65%
x
Discount < 15%, + 0.05%, i.e. Base Fee Rate = 0.70%
Consideration for the Base Fee
x
Weighted average market capitalisation of the Fund
Distribution Fee for all cash distributions
x
1.00% applied to the value of the distributions
Consideration for the Distribution Fee
x
Share buy-backs and GDR buy-backs
x
Public tender buy-backs
x
Return of share capital and dividends
Duration
x
2 years
Continuation vote
x
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
23
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
rd
, 8
th
and 9
th
Floors, 2
nd
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
24
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.
7%
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
80
95
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
25
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.
7%
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
of
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
26
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
shares
% of issued
share capital***
10th
Opening balance as at 1 January 2020
403,812,443
-
403,812,443
Acquisitions
-
-
-
Conversions
-
-
-
Cancellations
(403,812,443)
-
(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
-
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
-
797,961,287
11
.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
1.39
1.39
TO price per GDR (RON)
69.50
69.50
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
27
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
28
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
29
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
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
30
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
31
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
Value in
31 Dec 2020 NAV
vs.
30 Sep
2020 NAV
31 Dec 2020
NAV
30 Sep 2020
NAV
RON million
RON million
RON million
%
1
Hidroelectrica SA
5,128.9
4,707.5
421.4
9.0%
2
CN Aeroporturi Bucuresti SA
624.1
735.8
(111.7)
-15.2%
3
Engie Romania SA
538.8
426.3
112.5
26.4%
4
E-Distributie Banat SA
272.7
252.6
20.1
8.0%
5
CN Administratia Porturilor Maritime SA
235.8
233.4
2.4
1.0%
6
E-Distributie Muntenia SA
227.8
212.7
15.1
7.1%
7
Societatea Nationala a Sarii SA
201.2
222.1
(20.9)
-9.4%
8
E-Distributie Dobrogea SA
177.2
164.7
12.5
7.6%
9
ENEL Energie SA
52.5
25.8
26.7
103.5%
10
ENEL Energie Muntenia SA
43.1
41.2
1.9
4.6%
11
Zirom SA
24.9
31.7
(6.8)
-21.5%
12
CN Administratia Canalelor Navigabile SA
17.8
14.9
2.9
19.5%
13
Posta Romana SA
13.1
10.7
2.4
22.4%
14
Alcom SA
8.9
6.1
2.8
45.9%
15
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
32
No.
Portfolio company
Value in
Value in
31 Dec 2020 NAV
vs.
30 Sep
2020 NAV
31 Dec 2020
NAV
30 Sep 2020
NAV
RON million
RON million
RON million
%
16
CN Administratia Porturilor Dunarii Maritime SA
5.2
4.2
1.0
23.8%
17
Aeroportul International Mihail Kogalniceanu - Constanta SA
2.6
1.4
1.2
85.7%
18
CN Administratia Porturilor Dunarii Fluviale SA
2.3
1.7
0.6
35.3%
19
Plafar SA
1.9
1.7
0.2
11.8%
20
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
x
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
x
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
33
Portfolio Structure – by Asset Type
Source: Fondul Proprietatea, data as at 31 December 2020, % in total NAV
Portfolio Structure – Unlisted holdings
x
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
x
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
34
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
35
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
E
-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%
E
-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%
E
-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
36
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
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
0
10
20
30
40
50
60
70
80
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
37
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
-
3,309.6
2,970.0
-
2,970.0
+11.4%
-
+11.4%
Others
407.3
-
407.3
498.1
-
498.1
-18.2%
-
-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
No
Name
Fund's stake (%)
Value as at
31 December 2020
1
(RON million)
% of NAV
as at 31 December
2020
1
1
Hidroelectrica SA
19.94%
5,128.9
50.0%
2
OMV Petrom SA
7.00%
1,440.7
14.0%
3
CN Aeroporturi Bucuresti SA
20.00%
624.1
6.1%
4
Engie Romania SA
12.00%
538.8
5.3%
5
E-Distributie Banat SA
24.13%
272.7
2.7%
6
CN Administratia Porturilor Maritime SA
20.00%
235.8
2.3%
7
E-Distributie Muntenia SA
12.00%
227.8
2.2%
8
Societatea Nationala a Sarii SA
49.00%
201.2
2.0%
9
E-Distributie Dobrogea SA
24.09%
177.2
1.7%
10
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
1
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
38
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
39
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
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
1
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
40
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
41
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
1
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
1
https://www.aci-europe.org/44-industry-data/40-airport-traffic.html
FONDUL PROPRIETATEA SA
Fondul Proprietatea SA Annual Sole Director’s Report 2020
42
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
1
. 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
1
Based on consolidated figures at Enel Group level, prepared according to IFRS
FONDUL PROPRIETATEA SA
Fondul Proprietatea SA Annual Sole Director’s Report 2020
43
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
1
. 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
1
Based on consolidated figures at Enel Group level, prepared according to IFRS
FONDUL PROPRIETATEA SA
Fondul Proprietatea SA Annual Sole Director’s Report 2020
44
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
1
. 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.
1
Based on consolidated figures at Enel Group level, prepared according to IFRS
FONDUL PROPRIETATEA SA
Fondul Proprietatea SA Annual Sole Director’s Report 2020
45
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
1
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);
1
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
46
x For each day in a calculation period when the share price discount
1
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
47
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
of
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
48
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
a
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
49
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.
A
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
50
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
register of risk items and resolutions.
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
51
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
52
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
53
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
54
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
55
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
56
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
5/5
Mr Mark
Gitenstein
Member
of the Board
23 Apr 2013
29
Sep 2022
7 years and 8
months
13/17
3/5
5/5
Mr
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
5/5
Mr Ciprian
Ladunca
Member
of the Board
16 Nov 2020
16 Nov 2023
1
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
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
57
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
58
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
59
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
60
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
61
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
62
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
63
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
64
1. 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
(c) then multiplying the resulting number by the weighted average market price of the Fund’s shares calculated for
the applicable calculation period. The “weighted average market price” is computed based on the daily average
market prices of the Fund’s shares and corresponding daily volumes, as published by BVB on REGS section.
If the number of shares relevant for the computation of the Base Fee described above in (a) and (b) changes over
the calculation period, the Base Fee is an aggregation of the computation for each sub-period.
For each day in a calculation period for which the Base Fee is to be calculated, when the Discount is below or equal
to 20%, but above 15%, an additional Base Fee Rate of 5 basis points per year shall become payable (i.e. the Base
Fee Rate referred to in the calculation above shall become 65 basis points per year for the applicable days in the
relevant period).
For each day in a calculation period for which the Base Fee is to be calculated, when the Discount is equal 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.
2. 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;
(c) dividends; and
(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.
3. 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.
(c) The invoices for the Base Fee and the Distribution Fee are submitted to the Depositary Bank.
FONDUL PROPRIETATEA SA
Fondul Proprietatea SA Annual Sole Director’s Report 2020
65
(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.
4. 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
66
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
67
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
68
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
69
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
Audited
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
70
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
71
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
72
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
73
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
1
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
2
Contents
Independent Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . .. . . . . . . . . . . . . . . . .
3
Statement of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8
Statement of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9
Statement of Changes in Shareholders’ Equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . .
. . . . . . .
10
Statement of Cash Flows. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . .
12
Notes to the Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . .. . . . . . . . . . . . . .
13
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
1
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
1. 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.
2. 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)
3. 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
4. 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
5. 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.
2
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
9
0
% 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
6. 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.