GENERAL SHAREHOLDER MEETING AT THE PROPRIETATEA FUND "Templeton": Apres moi, le deluge

• Shares of the Proprietatea Fund, the fastest rise since the listing

Disregarding the lawyers' claims that that it has no right to manage the Proprietatea Fund, "Franklin Templeton" is minding its own business, summoning a General Shareholder Meeting, on April 4th, for discussing the proposals it has received - the increase of Templeton's fee for speeding up the liquidation of stakes in the Fund's portfolio, the listing on the Warsaw Stock Exchange and the replacement of the Board of Representatives.

Through the ruling of December 21st, 2011, the Court of Bucharest partially admitted the petition filed by lawyer Ioana Sfîrăială, claiming that the decision which amended the articles of incorporation of the Proprietatea Fund in order to appoint "Franklin Templeton" as manager of the Fund was fully null and void.

Yesterday, lawyer Ioana Sfîrăială said that the legal status of the "Franklin Templeton" does not grant it the right to "use several shareholders, who own more than 5% of the Proprietatea Fund, to summon the General Shareholder Meeting".

Mrs. Sfîrăială said she has no comment on the position of "Elliott Associates" (ed. note: which owns about 14% of the Proprietatea Fund and which has proposed the amendment of the management contract). She considers that the law firm which works for the Proprietatea Fund and for "Elliott Associates" should have explained to the shareholders the real legal status of the Proprietatea Fund and the fact that Franklin Templeton is no longer the manager of the Fund, instead of trying to create an appearance of legality where there isn't any.

According to some market sources, legal services of the Proprietatea Fund, as well as those of Elliott Associates are provided by law firm "Schonherr".

Yesterday, the shares of the Proprietatea Fund saw their biggest rise since the listing (5.17%), and reached an 11 month high of 0.59 lei/share.

• The agenda of the general shareholder meeting

In April, the shareholders of the Proprietatea Fund will discuss the proposal to amend the management contract of Franklin Templeton, more specifically when it comes to the fees paid to the latter.

In mid-February, American hedge fund "Elliott Associates", through "Manchester Securities", proposed that "Franklin Templeton" sell some of the assets of the Proprietatea Fund and distribute the proceeds to shareholders, with Franklin Templeton being awarded 1.5% of the proceeds of any such sales made in 2012 and 2013, and 1% starting in 2014.

"In the event the Client grants or offers, in a general manner additional distributions to all the shareholders (but only as long as these additional distributions are effectively granted or declared irrevocable) either by buying its own shares for the purpose of canceling them, or in the form of special dividends or other distributions, the customers will pay to the Asset Management company (ed. note: the manager of the Proprietatea Fund) an additional management fee", the aforementioned document states.

Grzegorz Konieczny, the manager of the Fund, considers that "Manchester Securities" is not requesting the sale of interests in the portfolio of the "Proprietatea Fund", and the proposal's only goal is to create a closer alignment between the interests of the shareholders and those of the Fund's manager.

Mrs. Sfîrăială said that she was expecting the agenda of the General Shareholder Meeting to include an item concerning dividends.

For this year, the manager of the Proprietatea Fund has proposed a dividend of 0.038 lei/share, up 21% over the previous year.

This year, the Proprietatea Fund is expected to pay out 523.5 million lei (120.4 million Euros) in dividends. The amount represents 96% of the entire net profit the Proprietatea Fund made last year -- 543.8 million lei (128.3 million Euros).

The Ordinary General Shareholder Meeting is also expected to decide the fate of the Committee of Representatives, after a group of four shareholders of the Proprietatea Fund, which include Georgia Palade van Dusen, proposed the replacement of the current members.

The same shareholders have requested the approval on principle of the listing of the Fund on the Warsaw Stock Exchange, an item which is included on the agenda of the Extraordinary General Shareholder Meeting. If the proposal gets voted, by May 31st, Franklin Templeton would have the obligation to establish all of the formalities needed for the listing.

The shareholders of the Proprietatea Fund are expected to decide on the reduction of the share capital by 1.77%, to 13.538 billion lei, "as a result of the cancellation of 240 million shares bought back by the Fund", according to the aforementioned document.

The share capital of the Proprietatea Fund could not be changed on the last general shareholder meeting, which was held in autumn last year, because the 50% quorum required to discuss the proposal to reduce the share capital was not met.

The agenda also includes a new amendment of the articles of incorporation of the Proprietatea Fund, as the shareholders will decide on new rules concerning the quorum and voting rights. Thus, the reduction of the share capital as a result of the acquisition of its own shares, followed by their cancellation or the exemption of the shareholders who did not fully pay in the unpaid shares, will require the presence of shareholders representing at least 25% of the voting rights on the first summoning and at least one fifth of the total number of voting rights, on the second summoning".

The current articles of incorporation stipulate that the decisions concerning the increase, the reduction of the share capital or the early dissolution of the Proprietatea Fund, according to the provisions of the law require the presence of at least half of the number of voting rights, on the first as well as on the second summoning.

In November 2011, the shareholders of the Proprietatea Fund have decided that "Franklin Templeton" will be granted the right to discretionarily manage 20% of the total fixed assets of the Fund, receivables excluded, thus going above 5%, as this change was reflected in the articles of incorporation.