"Franklin Templeton" is losing its patience

• Mark Mobius: We want to take over the management of the Proprietatea Fund as soon as possible

The management of "Franklin Templeton", the American company which was selected almost one year ago to manage the Proprietatea Fund, is beginning to lose its patience at the snail"s pace of the Romanian authorities in solving the legal formalities needed to allow the transfer of the fund"s management.

It is for the first time since being awarded the contract that the management of "Franklin Templeton" publicly warns that the process of appointing the management of the Proprietatea Fund needs to be sped up.

Last week, "Franklin Templeton" renewed its offer for the management of the Proprietatea Fund for another six months.

Mark Mobius, the chairman of Franklin Templeton, said, in the beginning of last week, that speeding up the legal formalities would be beneficial for the Romanian state as well, by allowing the fund to pay out dividends for 2008 and 2009: "We want to take over the management of the Fund as soon as possible. On a global level, we are now seeing a window of opportunity which it would be a shame to miss given the cash that the Proprietatea Fund has available. The state itself would earn about 600 million lei if the amendments to the Decree 81/2007 were approved and the dividends for the last two years were distributed". Mark Mobius also warns about the risk that the parliamentary holiday would prevent the adoption of the methodology for the listing of the Fund and would lead to the cancellation of 500 million shares that the state has subscribed but has not yet paid in.

The cancellation of the unpaid shares would allow the payment of dividends that has been blocked over the last two years.

Until the takeover of the management of the Proprietatea Fund by the new administrator, the Government needs to approve a draft decree concerning the new articles of incorporation of the Fund, which was last week validated by the Romanian Securities Commission (CNVM).

The new articles of incorporation includes provisions concerning the type of administration and the appointment of the company "Franklin Templeton" as administrator of the Proprietatea Fund.

After the adoption of the law, the directors of the Fund would have to summon a General Meeting of Shareholders, in order to carry out all the necessary formalities to transfer the management of the fund to "Franklin Templeton".

The American company claims that its actions taken to take over the management of the Fund have so far cost it around 3 million dollars.

"Franklin Templeton" has recently opened a headquarters close to the Calea Victoriei, and subsequently hired and trained several analysts.

"We can be very patient ...We are aware of the fact that taking over the management of the Fund could take a while, we had a similar experience in Vietnam where we waited three years on an investment...", Mark Mobius said.

His statement however implies precisely the opposite - the Americans are running out of patience.

• Dwindling optimism

The managers of Franklin Templeton are not as optimistic as they were two months ago that the Fund would be listed on the Stock Exchange by the end of the year.

Mark Mobius warns that the listing of the Fund also depends on the date that its management would be handed over to "Franklin Templeton", which in turn depends on the Romanian authorities not dragging their feet. "It is highly unlikely that the listing of the Proprietatea Fund will happen this year. If the members of the parliament go on holiday before passing the amendments, this could cause us to be appointed as managers of the Fund and effectively begin work on Christmas", said Mark Mobius, who stressed that this would be harmful for the Romanian state and for the small shareholders of the Fund.

The head of "Franklin Templeton" also says that he is in favor of the listing of the Fund by way of an IPO, even though one of the amendments to the "Ordnance 81" removes the obligation of listing the Fund using that specific procedure: "Personally I would like to list just 20% of the Fund, to allow us to raise around USD 500 million. Preparing an IPO takes a lot of time, if one wants to meet the requirements for being listed in Tokyo, New York or London. The cash from the IPO would allow us to finance other companies in the portfolio that we could then list on the stock exchange and thus help develop the Romanian stock market", Mark Mobius.

The listing of the Fund would bring more transparency not only when it comes to the operations of the companies in its portfolio, but concerning its shareholder structure as well, as it is unknown who its shareholders are.