Investment Strategy

Investment Objective

FP’s investment objective is the maximization of returns to shareholders and the increase of the net asset value per share via investments mainly in Romanian equities and equity-linked securities.

Performance Objectives

Discount Objective

The discount between the closing price for each Trading Day on the Bucharest Stock Exchange (the “Trading Day”) of the shares issued by FP and the latest reported NAV per Share should be equal to or lower than 15% in at least two thirds of the Trading Days during the Reporting Period (as defined in the IMA) (the “Discount Objective”).

NAV Objective

The Fund Manager should achieve a level of Adjusted NAV per Share (as defined below) higher than the reported NAV as at the end of the previous Reporting Period (term used herein as defined in the IMA) (the “NAV Objective”). For the avoidance of doubt, the term “previous Reporting Period”, when applied to a first Reporting Period under the IMA, is to be understood as being the last Reporting Period derived from either the current or the previous IMA. The adjusted NAV (the “Adjusted NAV”) for a given date will be calculated as the sum of:

  • the reported NAV as at the end of the Reporting Period;
  • any distributions to shareholders, being either dividend or non-dividend ones (i.e. in this last case following reductions of the par value of the shares and distribution of the decreasing amount to the shareholders), implemented after the end of the previous Reporting Period, and
  • any Distribution Fee (as defined in the IMA) and any transaction and/or distribution costs relating to either dividend or non-dividend distributions including buy-backs of shares and/or Global Depositary Receipts (“GDRs”) and/or depositary interests executed, through daily acquisitions or public tenders, after the end of the previous Reporting Period.

The Adjusted NAV per Share will be equal to the Adjusted NAV divided by the total number of the Fund’s paid shares, less treasury shares (FP ordinary shares bought back) and less equivalent in FP ordinary shares of FP GDRs acquired and not yet converted into FP ordinary shares, on the last day of the Reporting Period (the “Adjusted NAV per Share”).

Portfolio Analysis

The Fund has holdings ranging from 1% to 100% in a portfolio heavily weighted in the Power, Oil and Gas sectors. At inception, the Government transferred into the Fund shares in listed and unlisted securities. Some of the legacy holdings are still part of the Fund’s portfolio.

There are no restrictions on which sectors the Fund can invest in, or on the amount which can be invested in any individual sector.

Active Management

In the short to medium term, our key priority is to unlock the long-term value of the underlying portfolio holdings through active management. A primary focus will be to ensure that strong corporate governance principles are followed by portfolio companies which in our view will benefit both the underlying companies and other stakeholders. Some of the actions through which value can be unlocked, include:

  • Introducing proper corporate governance practices and streamlining decision-making processes for the underlying portfolio companies.
  • Working to ensure proper corporate governance standards in the activity of the underlying companies through the Fund representation on their Boards of Directors.
  • Advising portfolio companies’ management on improvement measures to increase efficiency, profitability and transparency of state-controlled companies.
  • Bringing foreign expertise and additional financing to portfolio companies.
  • Further improving transparency in the Fund through improved disclosure related to unlisted portfolio companies.
  • Supporting and advising management on planned IPOs and SPOs of the underlying state-controlled companies.

We are firm believers that the listing of state-owned companies and secondary public offerings of these companies will be beneficial to the Government, the Romanian capital market, and ultimately the shareholders of the Fund. The Fund Manager is committed to doing everything in its power in this regard and will support all appropriate initiatives of the Romanian Government to privatize the state controlled companies.

More details on the Fund’s investment and performance objectives, investment limits and restrictions etc., can be found in the Fund’s Investment Policy Statement.