INVESTORS ARE RETHINKING THEIR STRATEGIES FOR THE ROMANIAN MARKET Almost 4% of the Proprietatea Fund has changed ownership

• "Deal" trades with shares of the Proprietatea Fund have raised the liquidity of the BSE to levels which have never been seen in almost two years

The frequent trades negotiated with the "star" stocks listed on the BSE, noticed lately, show that some investors are rethinking their strategy, some analysts consider.

Over the last few months, "deal" trades involving the shares of the Proprietatea Fund happened almost every week, transfers which help lift the low turnover of the BSE.

The average of the daily trades on the Bucharest Stock Exchange has climbed somewhat, when the negotiated deals with 3.8% of the Proprietatea Fund took turnover to 308.5 million lei (68.3 million Euros), the maximum of the last 21 months.

The three deals involving shares of the Proprietatea Fund amounted to 282.1 million lei (62.5 million Euros). The trades were made at prices ranging between 0.53 lei and 0.529 lei.

The sellers and the buyers of the transferred deals were not yet reported, but analysts have suggested several scenarios.

• One possibility: the parties involved are investment funds, perhaps managed by the same company

Considering the rather large block of shares which was traded, Marcel Murgoci, director of operations at "Estinvest" Focşani, thinks there are two possible scenarios: - the parties involved are investment funds which are possibly managed by the same asset management company or - the seller is a foreign investment fund which wanted to sell its stake so it can make its exit from the Romanian market, with the buyer being a domestic fund.

"Let's also not forget the other trades on the DEAL market, which could be connected with one of the parties involved in the Deal with the Proprietatea Fund", Marcel Murgoci also said.

• Shares in exchange for warrants, another possibility

Other brokers consider that the operations could be part of an exchange of shares against some warrants.

Some transfers of shares in exchange for warrants were made in September between City of London, the second largest shareholder of the Proprietatea Fund and RBS Bank. At the time, RBS Bank acquired shares of the Proprietatea Fund for which it issued warrants which were transferred to City of London.

• "The Deal trades which happened lately could also be justified by the decisions of two brokerage firms to exit the Romanian market"

Andrei Rădulescu, an analyst at SSIF Broker, thinks that the Deal trades which happened lately could also be the result of the decisions made by two brokerage firms (ed. note: ING and Unicredit CAIB) to abandon their operations in Romania.

Andrei Rădulescu also said: "Since the beginning of the domestic political crisis, this summer, we have seen a severe turnover drop on the domestic stock market, as an expression of the deterioration of the domestic investment climate. Also, significant international risks remain, such as the < fiscal cliff > issue in the United States, or the persistence of the sovereign debt crisis.

As a result, some of the investors with exposure to the Bucharest stock market are rethinking their strategy. On the stock market, this is visible through the < deal > trades with the stocks of the main companies listed in the last two months (for example, the Proprietatea Fund)".

The shareholders of the Proprietatea Fund are being summoned on November 23rd/26th to reconfirm the appointment of Franklin Templeton as manager of the Fund and to ratify all the decisions made in the General Shareholder Meetings since the appointment of Franklin Templeton as manager of the Fund in September 2010.

On October 10th, the Bucharest Court of Appeal ruled the annulment of a decision of the General Shareholder Meeting of the Fund of September 2010, by which Franklin Templeton was appointed as manager of the Proprietatea Fund. The ruling is final, but Franklin Templeton announced that an extraordinary avenue of attack can be formulated, and that it will inform the shareholders and investors whether it would decide to take additional legal measures.

American hedge fund Elliott Associates, the largest shareholder of the Proprietatea Fund, owns 15.33% of the shares.

The second largest institutional investor in the Proprietatea Fund is investment management company City of London, which owns 9.43% of the shares of the Fund. City of London holds 4.18% of the Fund in stock and warrants issued by RBS for 5.25% of the shares of the Proprietatea Fund.