Bogdan Drăgoi is proposing stock buybacks without any intention to carry them out

• Between 2017-2020, at SIF Banat-Crişana the decision was made to buy back 67.5 million shares, but only 5 million have been bought back

• Drăgoi and Lakis have not provided any explanation on why the shares have not been bought back

• We are seeing a national level fraud and it is unacceptable that the institutions of the state have yet to take firm measures

I have been a shareholder in the SIFs which have come under the control of Bogdan Drăgoi and Najib El Lakis since 1996. And there are millions of Romanian shareholders like me.

Once Mr. Drăgoi came over to SIF Banat Crişana (SIF1), a novel, but fraudulent practice started being used on the Romanian stock market. The scheme has indirectly comprised SIF Muntenia (SIF4), because its manager is SAI Muntenia, a company owned by SIF1. I will hereinafter write about this practice which has caused losses to me, as well as to all the other shareholders, including the pension funds which millions of Romanians have deposits with.

• The NAVPS to price discount is at a 60% record high because of the lack of confidence in the management of SIF1

In July 2015, Bogdan Drăgoi was hired as CEO of SIF1 and shortly after, he initiated a practice, apparently without any explanation: he proposed every year stock buybacks without any real intention to carry them out. More specifically, between 2017-2020 total buybacks of 67.5 million shares were proposed and voted. But only 5 million of those were carried out, of which 2.3 million have been offered to the management (most of them to Mr. Drăgoi himself). Therefore, only 2.7 million shares have been bought back in the shareholders' interest! And in all of these years, SIF1 shareholders have not received any dividends. On the other hand, the management of SIF1, who theoretically should be working for the shareholders of the fund, have received wages plus free stock. In a word, more than all of the shareholders of SIF1 combined.

I kept wondering what the more than 62 million shares were not bought back, as approved in the General Shareholder Meetings!? Given that in all these years the shares of SIF1 have traded at a NAVPS discount of at least 40%, their buyback would have been a good deal for the company. This NAVPS discount is currently at a record 60%, due to the lack of investor confidence in the management of SIF1.

• Messrs. Drăgoi and Lakis have used the SIFs patrimony in their own personal interest, to accumulate power through votes bought using the shareholders' money

Messrs. Domnii Drăgoi and Lakis have not provided any explanation for the fact that the shares have never been bought back. We only know that they have preferred to buy shares in the SIFs using investors' money, including in SIF1, but not directly and transparently, but through proxy funds. The explanation is simple: they have used the SIFs patrimony to accumulate power through votes using the shareholders' money. Nothing in the interest of true investors. This practice blatantly violates law 31/1990 of companies. Had it been legal, other listed companies would have probably done the same. In fact, the scheme to buy back shares is nothing but an epic defrauding of investors' trust since back in 2016!

• Over the last few years, pension funds' holdings in SIF Banat-Crişana has constantly decreased

Still, why has Mr. Drăgoi proposed the buyback of 20 million shares in 2017, 17.5 million shares in 2018, 15 million in 2019 and another 15 million in 2020, (in total 67.5 million shares), if he had no intention of honoring the shareholders' vote? He could have proposed buying back just 5 million shares from the start, which is the number of shares bought back over five years. The only plausible explanation concerns the media effect. The buyback intention was to create in the market the impression (the pension funds have been particularly targeted) that Mr. Drăgoi sides with investors. But investors have caught on quickly that the scheme of buying back shares is merely a trick. As a result, over the last few years, pension fund holdings in SIF1 have constantly shrunk.

I am sure you remember how Mr. Drăgoi was lamenting in the press that pension funds only buy shares, and don't sell them. Well, that is not the case of SIF1 shares! Here, as well as in the other two SIFs controlled by Msrs. Drăgoi and Lakis, the pension funds have not been doing much buying. They have sold a lot though, probably having had enough of their fraudulent practices.

• The buyback proposals have been used for the creation of a positive, but fictitious media perception!

"When searching the internet for «SIF Banat -Crişana stock buybacks» one can find many press releases and articles about how SIF1, led by Messrs. Drăgoi and Lakis, IS SET TO buy back tens of millions of its own shares in the interest of investors. But the failure to follow through on these decisions to buy back shares is not reported anywhere", the investor says. No earlier than last year, in April, a significant buyback was voted on in SIF4 (also controlled by Messrs. Drăgoi and Lakis). But nothing was executed! Apparently the application of the same scheme was decided!

Essentially we are dealing with a manipulation of the market via the media. The proposals and the votes for the stock buybacks in the general shareholder meetings were used for the creation of a positive, but fictitious media perception! Perhaps Messrs. Drăgoi and Lakis think that the perception of 'beloved leaders' of the SIFs, who make stock buybacks for the shareholders, will help them to avoid serious trouble with the public authorities. Mr. Lakis had serious problems in the past: in December 2014 he was arrested by the DIICOT on several charges, including stock market manipulation. He was actually convicted. Despite this episode, the actions that Mr. Lakis was convicted for are still being committed at SIF1, as well as at SIF4, in a slightly changed form. So far, the creation of a positive media perception to head off potential problems seems to be working!

• The causing of losses to millions of shareholders is the most significant aspect of this story

If it weren't for BURSA, I am certain that all of these facts would have been buried and people (with the exception of investors in the SIFs) would have believed that Mssrs. Drăgoi and Lakis actually have the backing of real investors. There probably would have been no reporting on this scheme which involves buybacks that get announced but almost never carried out.

The things I have described here are not speculation. They are part of the report of the Board of SIF1 for 2020 on pages 65-67, "Stock buyback programs. Stock Option Plan" https://www.sif1.ro/wp-content/aga/2021/aprilie/Raportul-administratorilor-2020+anexe2-6.pdf

The causing of losses to millions of investors is the most significant aspect of this story. We are seeing a national level fraud and it is unacceptable that the institutions of the state have yet to take firm measures. I am talking about measures meant to protect the rights of the millions of shareholders in the SIFs, as well as of the investors in the pension funds that have major holdings in the SIFs.