INTERVIEW Gabriel Filimon, SAI Muntenia: "I do not consider myself at war with anybody"

Reporter: How do you view the changes in the life of SIF Muntenia which happened this year? Some of the shareholders treat you like you were public enemy number one and are making various accusations against you using terms like "the siphoning of the SIFs". How would you comment on these accusations?

Gabriel Filimon: The change in the holding cap at the SIFs, from 1% to 5% of the share capital was bound to result in changes. This was becoming predictable for any investor familiar with the situation of the SIFs. Everyone, including the people inside the companies, was expecting and still expect changes.

The management teams and the employees have a certain age and it is absolutely normal for a wave of change to appear, but it also depends on how and where this change occurs.

Of course, it needs to be done while fully complying with the legal framework. Any kind of deviation results in a chain of compromises. Which can be harmful not only for the company itself, but for the stock market in general as well.

Reporter: This also lays the foundation for disputes.

Gabriel Filimon: That is precisely why we have the market regulator, the Romanian National Securities Commission, which is supposed to oversee, and take steps to correct any irregularities. We have about a month of activity left of this year, and the changes are good.

We have presented part of the changes in our reports to the market. They were intended to mobilize us and to cause us to be very careful to be compliant with the legal framework.

Speaking chronologically, I have been contacted by some of the shareholders which have expressed their discontent and we responded to their wishes, by having SAI Muntenia Invest, be the one to call, on their own initiative, a new General Shareholder Meeting at SIF Muntenia, after the one concerning the balance sheet (ed. note: where some of the shareholders have asked for a greater dividend), with items on the agenda resulting from their demands. Regardless of whether they were discussed directly with the director, through me or my colleagues, or they were manifested in the General Shareholder of April, we have drawn our conclusion. If people weren't happy with the return of the investment, we said that we could distribute a higher dividend using the reserves, because we had them.

I did not siphon off money. I did not forge the financial statements, like it is hinted through various claims. We are being audited by one of the "Big Four" companies, KPMG. I find it hard to believe that somebody is questioning the integrity of KPMG, if, at the end of the day, they doubted SAI Muntenia Invest, the manager of the SIF. Thus, we had solutions.

They've wanted the change of the accounting policy. We agreed to it, because the law allows it, and the General Shareholder Meeting has approved it.

Reporter: Do you have anything to blame yourself for, in your activity?

Gabriel Filimon: Honestly, I've never thought about feeling guilty over anything, because I did not have time to review my history, which I would say it is far too recent to evaluate. On principle, I feel at ease with myself, because first of all, I have complied with the law, I have protected, in every manner possible, the interests of the company and of the shareholders.

Certainly, during the activity of every man, I am not speaking about the institution, there are times when the best decision out of several has to be chosen. I've tried to make sure that such decisions were not made by one man, but that they would instead be made collectively and based on solid, timely arguments to support them, when it came to evaluating the opoportunity of the investment. We sought not to be accused of having made bets, because that is not the intention of the SIFs.

The SIFs are investors, not speculators.

Beyond that, anybody can question anything.

Reporter: Are you worried about anything at this moment, or are you upset at the accusations being brought against you, in public?

Gabriel Filimon: The only accusations that can upset me are those that have no correct and true justifications, and they prove to be biased, with interests behind them, which eventually, upon careful analysis, could even be proven to go against the interests of the company. But it's only from that point of view.

Other than that, in the General Shareholder Meeting, in the meetings, we argue, we have different opinions, but that doesn't mean that we have to become enemies, and stop greeting each other when we meet in the street.

Reporter: So you still greet Mr. Gheorghe Iaciu (ed. note: a shareholder with a stake of 5% in SIF Muntenia) when you meet him in the street?

Gabriel Filimon: Of course. I've even had a meeting with Mr. Iaciu. He is an individual, an investor, who has mobilized his own funds, on his own behalf.

However, there are also institutional investors, who have mobilized amounts which clearly exceed the investment of Mr. Iaciu. We are keeping in touch with them.

We have no problem with the people who criticize us, but let's see who is right, those criticisms may not stand up to the accurate information, but instead they rely on interpretations, on rumors.

I want to tell you that SIF Muntenia is not the only SIF that had received business offers from many investors, regardless of whether they are individuals or companies. We have reviewed all of them. Some of them we have taken under consideration from the beginning, others we rejected outright.

Reporter: Can you give us some examples?

Gabriel Filimon: Investment proposals to join various projects, whether they were in alternative energy, plants and factories, or financial restructurings. Some of them we have invested in, others we didn't. We were unable to please everybody. Hence the opposition we have encountered. We also have the human factor, which, depending on the character, manifests itself in different manners.

I can't, on a human level, deal with all the issues, and as a result, criticisms arise. I find them absolutely normal, and I am a calm individual, I do not react impulsively.

I would like to go back to the first question and tell you that change is necessary, and it will occur within the SAI. Out of the all the bad that surrounds us, you have to learn to extract all the good. I personally think that the SAI is a great benefit for SIF4. It shouldn't be destroyed. It can be destructured, it can be refreshed with young people, there can be partnerships with well-known foreign management companies.

Reporter: Should we take it that you can see a change at SAI Muntenia, but not a change of the bylaws of SIF Muntenia, to eliminate SAI Muntenia?

Gabriel Filimon: I see changes everywhere. I can only afford to speak more extensively about the ones I can influence, and less about the others.

For example, at the SIF, I can propose changes, but the decision to implement them rests with the shareholders. I, as administrator, have no issue with them, if the decisions are made in a correct legal framework.

As for the restructuring of the SAI, I am in charge for now, and similarly, I can propose various changes to the shareholders of the SAI: structure, policy, the organization and management actions.

But the changes to the articles of incorporation do not depend on me. They can only be made by an Extraordinary General Shareholder Meeting, and I don't see that being possible at SIF4 in less than two-three years.

SIF4 has over 6 million shareholders. The first 300 shareholders, in the order of their holdings, hold about 40% of the SIF. Out of the over six million shareholders present, only shareholders who own about 46-47% cash in their dividends at their own request. Thus, the ones who own over 50% are the so called "inert" shareholders. Those who aren't going to bother to collect their dividends will clearly not bother to do it in the General Shareholder Meeting or on other occasions.

The biggest attendance in an Ordinary General Shareholder Meeting was at the one held in July, of 33%. In order to get an attendance rate of 50% for an Extraordinary General Shareholder Meeting, regardless of what's on the agenda, it is harder to do at SIF Muntenia. With the other SIFs, it's easier.

Reporter: How would you comment on the legal conflicts SIF4 is involved in?

Gabriel Filimon: Let's see what we are talking about. There are conflicts between the shareholders and there are conflicts started by the shareholders in relation to the company, but which in my opinion, at the present time are also caused by the conflicts between the shareholders. So far, there is no direct conflict between the SAI and anybody else. Just to make it all clear.

There isn't even any conflict with the CRA. I, as an administrator, I am not allowed to have conflicts with the shareholders. I am required to ensure that the interests of the company are upheld, by ensuring that the legal framework is complied with. The moment the legal framework is exceeded, it is my duty to intervene, because in doing so, I am defending the interests of the shareholders. Of course, if I find that this violation comes from a shareholder or a partner of the SIF, I have to take action, but that doesn't mean I have a conflict with that party.

For example, through the press releases and the reports we have published, we have notified the CNVM, and the market, that the representatives of the shareholders have exceeded the boundaries of the law and that, through abuse, they are causing possible image and operational problems. We have taken the steps to halt these trends. The only consistent action of the Council of the Representatives of Shareholders elected in July was that they started maing notifications to the banks, and prevented us from accessing our accounts. That was not alright at all. We had to mobilize and quickly explain the whole situation. The problem has been solved. We did not cause a big scandal, but we did complain to the CNVM.

Reporter: What was the reaction of the CNVM?

Gabriel Filimon: They did nothing! When it comes to any irregularity we have complained about, we received no response from the CNVM. And it's been a while since we filed our complaints. But it is not my job to judge the CNVM.

With the Council of the Representatives of Shareholders we began working and we have cooperated until they have begun overstepping the legal limits. We have sent them notifications, repeatedly, but things escalated, from their side, of course. I've said once that "we did not do anything else but defend ourselves", but I did not mean the SAI, because it is not the SAI that is under attack. Even though everyone is talking about a "war" between the SAI and the shareholders, I am not at war with anybody. I don't consider myself at war with anybody.

If I did not take measures against those who are harming the company, by exceeding the legal framework, I would also be liable, from a legal point of view.

People say I am guilty of "siphoning off money", but if I may, I have seen no proof for that purpose. Anybody can say anything.

Reporter: What exactly does KPMG audit at the moment? Does that include the companies in the portfolio?

Gabriel Filimon: Starting in 2009, we have applied an accounting policy based on IFRS standards. The audit was conducted by KPMG, to the highest standards, in my opinion. Of course, there is always room for improvement.

Through this policy, we have a consolidation of financial statements with the companies where we have majority holdings and with the companies where we have agreed with the auditor that we have an influence in, even though we are not majority shareholders.

In an initial phase, each company had its own auditor. But, in the consolidation process, KPMG would come in and verify the reports. Meanwhile we have agreed, in compliance with the legal framework, to replace the auditors in question with KPMG, meaning that the companies would bear their own audit costs, instead of the SIF, because the audit was performed twice anyway and thus money would be spent twice for the same goal.

The changes took place gradually, because there were contracts in place which could not be abusively terminated.

At the moment, KPMG is the auditor of the most important companies in the portfolio.

Reporter: How do you see the future development of SIF4 Muntenia? Which do you think should be the avenues of action for ensuring satisfactory returns, like the shareholders have requested?

Gabriel Filimon: At the present time, there are two directions of actions promoted by the shareholders of the SIF.

One is that of the contesters, which are looking for a controlled liquidation, presented and packaged in statements that make it sound like a good idea.

Of course the shareholders want higher returns. But for that, given the crisis situation, where we are not talking about development, but by recession, by reorganizations, you have to sell. In other words you lose substance. That means controlled liquidation, for the sole purpose of increasing short term returns.

The others, who are mostly institutional shareholders, want development in the medium and long term. Since in this period of crisis, the only ones who can support projects, which in turn would help economic growth in this country, are banks, the banks' funds, foreign investment funds and the SIFs. There aren't others. There are also strategic investors, but they select specific areas.

If the SIFs get liquidated in a controlled manner, the direction of investments in projects which will grow and bring in profits after 3 to 7 years.

This is the activity that the institutional investors I was talking about are interested in. Private pension funds are the most interested in it, because they have a guaranteed, increasing income, and their managers say that they would no longer have what to invest in if the SIFs disappeared.

At the present time, on the stock market, we have the SIFs, we have BRD, we have the Proprietatea Fund, and that's about it. At the Proprietatea Fund, the liquidation was stated as the goal of the shareholders. So, what do we do with the money?

It is normal for these shareholders to militate for the development of the SIFs.

Basically, what we have here is a fight between two concepts. That of hedge funds, "bite and run", where profit is all that matters, as quickly as possible, and that of those who have an interest in development over the medium and long term.

Thus, I think that we have explained what we keep reminding in our annual reports, namely that the SIF is a balanced fund. It needs its assets to increase, and that can only happen through investments, and it also needs to make a profit, namely to pay dividends. If it does one to the detriment of the other, the balance is broken.

I think that the balance needs to be maintained. I think that this is what is fair to the shareholders, not destruction.

That is how I hope it will be, but for that I need to convince the shareholders that what I am proposing is better than what the others want.

Reporter: Do the parliamentary elections influence you in any way?

Gabriel Filimon: No. The elections can't influence us more than they do other players on the financial market. Aside from the possible partners which we previously mentioned, there is also the state, through the Government and through the European grants, which we should be using as much as possible. Everybody is talking about that. I have involved the SIF in two-three projects involving European grants. For exameple, Avicola Bucharest has attracted European funds twice. Another project is "Valea cu peşti" (Fish valley).

Of course there is an influence of parliamentary elections, but not one like the one that all political "observers" are talking about, that is "the Government gets changed, the Parliament gets changed, the management of the SIFs gets replaced". It's not like that! The influence is caused by the management of the government and the electoral actions, which would allow a cooperaation on projects.

Reporter: The elections from Sibex which will take place next week are probably quite important to you. SIF Muntenia has a 5% stake in the company, and you stepped down from its management this autumn.

Gabriel Filimon: I stepped down before the scandal with Mr. Cristian Sima, due to various reasons. One was that I had to focus on the SIF, on this challenge that the shareholders have thrown my way. That's how I look at it. It is a challenge to pay attention to the compliance and protection of the interests of shareholders.

Reporter: Do you support anybody for the elections of Sibex?

Gabriel Filimon: We support Grigore Chiş, who comes from Broker Cluj, a company in which we have a significant stake. We also support Valentin Ionescu, the representative proposed by SIF2 Moldova.

Reporter: Do you think it is possible to reinvigorate Sibex and develop its business?

Gabriel Filimon: We wouldn't have invested there otherwise; I wouldn't have gone on the Board of Directors personally. But now I see the development of Sibex differently than I used to two years ago, and not necessarily due to the Sima scandal. This has only influenced its image. Sima did not get the opportunity to considerably affect the financial situation of the Exchange or of the companies in the group- the Clearing House and the Depository. These are mere speculations. There were several members on the Board of Directors and we have opposed several proposals made by Mr. Sima.

I see the development differentlu due to the outlook for the stock market itself, both Romanian and regional. The Sibiu Exchange is an exchange for derivatives and structured products, there is a potential to increase the number and variety of this type of products, which is an activity where the Bucharest Stock Exchange does not really excel.

I for one have always been the supporter of a merger, which doesn't necessarily have to be physical. You can have a central management and two entities, a spot and a derivatives and structured products market.