Sfîrăială has another go at Templeton

With its buyback offer in full swing, the Proprietatea Fund has been dealt a new blow by the Bucharest Court of Appeal, which has decided to invalidate a decision of the shareholders of the Fund, by which Franklin Templeton was appointed as the manager of the Fund.

On Monday, the Court has admitted the appeal filed by lawyer Ioana Sfîrăială, minority shareholder of the Fund, against a civil ruling of December 2011 and has declared as invalid the decision of the Extraordinary General Shareholder Meeting no. 5/November 29th, 2010, by which the Articles of Incorporation of the Proprietatea Fund were being amended.

The Court of Appeal has also denied the requests for intervention filed by Manchester Securities Corp. and Georgia Palade van Dusen.

Ioana Sfîrăială told us: "After Monday's ruling of the Court of Appeal, what should have already happened should occur, meaning that the ASF should acknowledge the fact that the Proprietatea Fund has no representative, suspend all the decisions made so far, including the buyback offer. So far, the CNVM has responded that Franklin Templeton is acting based on this decision of the General Shareholder Meeting (ed. note: the one of November 2010), which has now been canceled by the Court of Appeal. After this, they will probably invoke the next decisions. All the while, the money is leaving, and the Fund is left an empty shell. The decision lies with the ASF, which is however a politicized institution. FP has changed its law firm and it is now being represented by Nestor Nestor Diculescu Kingston Petersen (ed. note: where Ana Diculescu Şova, the step-mother of minister Dan Şova, is a partner). The rulings in many lawsuits won by the Proprietatea Fund were rendered in a rapid-fire manner, based on orders from above".

In response, the representatives of FT told us that the decision of the Court of Appeal has no impact on the buy-back program. They has also confirmed that NNDKP represents the Fund in some lawsuits, including the one lost in the Court of Appeal on Monday.

Lawyer Ioana Sfîrăială, a minority shareholder of the Proprietatea Fund, also got the Court of Appeal last year to invalidate a decision of the General Shareholder Meeting of the Proprietatea Fund made in September 2010 by which Franklin Templeton had been appointed as manager.

The lawyer has claimed procedural reasons, namely the fact that the project to amend the articles of incorporation was not published within the legal delays, 30 days prior to the General Shareholder Meeting.

However, on every iteration of the General Shareholder Meeting, the shareholders of the Proprietatea Fund have ratified the decisions of the previous meetings, whereas Ioana Sfărăială disputed them, claiming that those meetings had been summoned by Franklin Templeton, which did not have any right to do so. Thus, there are still dozens of lawsuits ongoing on the appointment of the manager of the Fund. FP announced in several press releases that it has won some of those lawsuits.

In a press release sent yesterday to the Bucharest Stock Exchange, the Proprietatea Fund has announced that "it is necessary to see the full ruling of the Court of Appeal of Bucharest before we can comment on the effects (if applicable) of this decision, because at this time only the solution is available. The representatives of the Fund also state: "Nevertheless, in order to avoid any confusion, the manager of the Fund would like to emphasize that the Articles of Incorporation of the Fund have been amended, ratified and approved again by the shareholders in the extraordinary general shareholder meetings of November 2011, April 2012, November 2012 and April 2013. Thus, subject to reviewing the entire decision, the cancellation should not require the amendment of the Articles of Incorporation of the Fund currently in effect".

Attorney Antonie Popescu yesterday wrote, in a press release, that "through the decision of the General Shareholder Meeting (which was cancelled on Monday), Franklin Templeton was initiating the long line of General Shareholder Meetings by which it is attempting to avoid compliance with the court ruling which invalidates the decision appointing it as manager of the Fund on September 6th, 2010".

Mr. Popescu said: "After the pronunciation of the Court Ruling by which the Decisions of the General Shareholder Meetings of September 6th, 2010, Franklin Templeton claimed that the General Shareholder Meeting no. 5 of 5/November 29th, 2010 was the one indicated by Franklin Templeton as the one by which he was appointed as administrator and by which the Fund switched from a dual management system to the unified management system, a stance which has been constantly backed by the CNVM and the ASF".

According to the lawyer, the decision of the Court of Appeal "proves that the entire structure built by Franklin Templeton is illegal and artificial and that in reality, in connivance with the ASF, it is attempting to preserve its position as the manager of the Proprietatea Fund".

The lawyer considers that the decisions made by Franklin Templeton, by appropriating the role of manager, are harming the minority shareholders of the Fund. The lawyer presents as evidence of that claim "the sale of the assets of the Fund at undervalued prices, which it (ed. note: Franklin Templeton) then buys directly or through proxies, and the fact that it has so far collected approximately 26 million Euros in fees".

Franklin Templeton repeatedly spoke out against Ioana Sfîrăială, and even announced that it intends to demand that she bear the litigation costs.

Last year, upon the decision of the Court of Appeal to invalidate the General Shareholder Meeting of September 6th 2010, Greg Konieczny, Fund Manager of the Proprietatea Fund, said: "It is regrettable that a single shareholder is looking to use the judicial system to delay and to interfere with the implementation of the decisions made by a comprehensive majority of the shareholders of the Fund. Nevertheless, we have to note that the decision of the court was based on a strictly procedural argument, and only the decisions of the General Shareholder Meeting which were approved in September 2010 were mentioned. Since that date, the shareholders of the Fund have expressed and confirmed their intentions concerning the management of the Fund several times through other decisions and have even reiterated their approval for the decisions made in the General Shareholder Meeting of September 2010. We will continue to comply with these decisions and to manage the Fund in compliance with our management contract and with the Articles of Incorporation in effect".

So far, the Court of Appeal did issue a ruling in favor of the Proprietatea Fund, in its match against Sfîrăială. In January, The Court of Appeal of Bucharest denied the appeal of Ioana Sfîrăială, upholding the ruling of the Court, which ruled that the decision of the shareholders of April 4th 2012 should be registered with the Trade Registry, by which the new Articles of Incorporation of the Fund were approved, which confirms Franklin Templeton as the manager of the Proprietatea Fund.

• Brokers expect great interest in the buyback program of the Proprietatea Fund

The shareholders of the Proprietatea Fund have placed buy orders for 2,746,551,633 shares (approximately 20% of the Proprietatea Fund), as part of the offer to buy back shares at the price of 1 leu, conducted by the Fund, according to brokers.

Grigore Chiş, the managing director of SSIF Broker, expects almost all the shareholders to participate in this program.

Mihai Mureşian, head of trading at Intercapital Invest, expects greater interest in that regard and also anticipates that most of the shares will be put up for sale in the stock buyback program.

On the other hand, Rareş Nilaş, CEO of BT Securities, considers that there are shareholders that are not aware of the buyback program and others that are not interested in selling. "Many people are waiting to see what will happen", said Mr. Nilaş, who said that in the last days of the IPO there could be more orders to sell the shares in the offering.

The Proprietatea Fund intends to buy back up to 600,000,000 shares paid in full through this public offer, at a price of 1 leu/share, representing 4.3546% of its share capital.

The public offer is aimed at any individuals or companies that own shares in the Proprietatea Fund throughout its duration.

The acquisition of shares by the Proprietatea Fund in the Offer is part of the buyback program approved through the Decision of the General Extraordinary Shareholder Meeting no. 4/2012 of April 25th 2012, in order to reduce the share capital. Once the Public Offer is completed, the issuer intends to cancel the bought back shares and to reduce its share capital with the book value of the canceled shares.

The second buyback program approved by the shareholders of the Proprietatea Fund began after the Fund won its lawsuit against Ioana Sfîrăială in court. FP subsequently received the approval of the ASF to speed up the process through a buyback offer.

The quotation of the Proprietatea Fund stagnated yesterday, at a price of 0.805 lei/share, the all-time high, for a volume of 14.5 million shares, half of the volume seen on the previous day.