DIVIDENDS IF, IF, IF... The "Proprietatea" Fund in Wonderland

Ştefania Ciocîrlan

The shareholders of the Proprietatea Fund may receive dividends for 2008, after the fund"s managers announced 476 million lei in profit, following the revision of the accounting reporting methodology, according to the recent Ordinance 11/2009 of the National Securities Commission. However some minor legal obstacles stand in the way of shareholder happiness.

The requirements of the law need to be fulfilled by the end of March, to allow the inclusion of the proposal to pay dividends on the Agenda of the General Shareholders" Assembly which is scheduled at the end of April.

According to the law, the Fund may not pay dividends because its net assets lost 24% of their worth (down to 10.9 billion lei) because of depreciation. However, this situation could be worked around, if two essential requirements were met, the Fund"s manager said yesterday.

"If we find that the net assets have depreciated, then the share capital will have to be reduced or replenished, before we begin redistributing dividends", Daniela Lulache, general manager of the Fund, said yesterday. "It would be difficult to complete the share capital with approximately 3.5 billion lei, which is why, in the General shareholders assembly in April, we will suggest reducing the share capital by cutting the face value of shares from 1 leu to 0.76 lei".

Far from being an easy solution, this complicates things, because so far, the Fund"s share capital has not been fully paid in.

"The Romanian state still has to pay in another 560 million lei to the Fund"s share capital or to transfer some of its properties over to the Fund"s portfolio", Daniela Lulache said.

"The 560 million lei are the equivalent of shares the Romanian state subscribed when the Fund was created, but which haven"t been paid in yet", the Fund"s general manager said, who also said: "These 560 million are the balance between the initially appraised value of the Fund"s assets and the value determined through a subsequent appraisal".

The way out of this situation might come from the Romanian State as well, as the Fund"s management is hoping to see an Emergency Ordinance by which the Romanian state, who is also a majority shareholder of the Fund, would cancel the 560 million shares which it hasn"t paid in yet.

"The Fund may sue the State and request its forced execution, in order to coerce it into paying in the 560 million lei, but this could take 2-3 years", Mrs. Lulache explained, who also said that based on the informal talks she had with representative of the Ministry of Finances, she is confident that the Emergency Ordinance will be passed in due course.

"We hope that this Ordinance will be passed by the end of the month, which would allow us to summon the General Shareholders Assembly at the end of April and propose the reduction of the share capital", Fund officials said.

Even if all these conditions were met, the Fund"s shareholders would still have to wait a few months before they could cash their dividends.

The Manager of the Fund said: "The meeting of the shareholders is scheduled for April, so, if our proposal is accepted, its implementation might take two months. We may only begin distributing dividends in summer".

Given the current shareholders structure, the Romanian State would be the biggest winner if the Fund were to pay dividends, as it is a majority shareholder and therefore has the most votes on the board. Thus, the state might receive 180 million lei in dividends for 2008, as the dividend may reach 2 bani/share.