SIF MOLDOVA DEMANDS: The replacement of the management of the Stock Exchange and the expansion of the market

• The open letter of SIF Moldova

As a shareholder of the Bucharest Stock Exchange S.A. we persist in reiterating the request addressed to all of its shareholders to focus their efforts on the development of the BSE and the development of the overall Romanian stock market.

In this context, we feel that the failure to meet the necessary quorum for the making of the decisions at the General Shareholder Meeting of 27th/28th of June 2013 is the consequence of timid and unconvincing actions of the Board of the Exchange, of the lack of vision and initiative in the structuring of some concrete proposals addressed to the shareholders. The deficiencies of the BSE in its communication with the Financial Oversight Authority (ASF) and the other institutions of the capital market, the hesitations in making a clear and determined commitment of the board of the BSE have led, at least at the present time, to the impossibility of the creation of the Central Counterparty (CCP), with long term consequences for the evolution of the Romanian stock market, keeping it in the fringe market category.

We also view the exit of a significant institutional investor from the BSE as a negative signal concerning the management and the performance of the company.

At the same time, the deficit of communication with the shareholders has shown itself in the process for the appointment of the new CEO of the Bucharest Stock Exchange, which was publicly announced on 01.07.2013.

We do however praise the merits of Mr. Ludwik Sobolewski throughout the time when he held important positions in the management of the Warsaw Stock Exchange, which became the largest Stock Exchange in Central and Eastern Europe, a result which mostly came on the back of the cooperation with the Polish government in the privatization of the major companies through the stock market, using IPOs.

From that point of view, and given the experience of the new CEO of the BSE, we reiterate the support for reaching the goals that we consider as essential for the development of the BSE:

- The amendment of the bylaws of the BSE to reduce the quorum for the General Shareholder Meetings of the Shareholders would streamline the decision-making process.

- The modification of the management form of the BSE by switching to the dual management system, all this in the context of the implementation of the corporate management systems amid the expected cooperation with the EBRD towards developing the corporate governance practices.

- The creation of the Central Counterparty remains a top goal for handling the counterparty credit risk and as a result of the Romanian stock market, acceding to the emerging status market, facilitating access of the major companies/investment firms to the Romanian market, etc.

- Empowering the Board of Directors /DG to reinforce the cooperation with the specialized institutions of the state (the OPSPI) with a view of conducting as many IPOs as possible, which would help the development of the BSE, as well as the development and the increase of the performance of the listed companies.

- The drafting of a strategy for the development of the Romanian stock market harmonized with the current projects of the Financial Supervision Authority - ASF (the regulation of the RASDAQ market, the revision of the law no. 297/2004 to get it in line with the European legislation, the trading of mortgage bonds, the elimination of any restrictions imposed on the free trading of the stock of certain issuers - for example: SIFs, etc.) and with the regional projects (CESEE).

With the conviction that our request, which is in line with positions expressed by stock market specialists, will be correctly construed, we remain open to any constructive proposals to reach the shared goals of the BSE and of the overall Romanian stock market.

Yours respectfully, Dr. eng. economist Costel Ceocea, President and CEO

• The response of the BSE

- The Board of Directors of the BSE has proposed to the shareholders of the BSE and still supports the objectives proposed by SIF Moldova. These objectives were on the agenda of the General Shareholder Meetings which were held throughout this year. As for the cooperation with the institutions of the market towards increasing its liquidity and supporting the public offers through the Stock Market, this is a permanent activity of the Board of the Exchange and of its representatives.

- As for the business policy, the Board of Directors of the BSE has not only supported the creation of the Central Counterparty, but has also allocated significant resources for the argumentation of this project. Thus, since the participation of the BSE in the creation of the Central Counterparty exceeds the competences of the Board of the Exchange, the Extraordinary General Shareholder Meeting has been summoned to approve this project. The proposal of the Board of the Exchange is supported by a solid argumentation which presented the necessity of the project, its benefits, the costs of setting up the Central Counterparty, as well as the projections for the profitability of the reviewed investments in the context of the strategic component of this project.

- Seeing the existence of deadlock in the decision-making process of the extraordinary General Shareholder Meeting of the shareholders of the BSE, the Board of Directors of the Exchange has submitted for approval, on two separate occasions, the proposal for the structural reform of the articles of incorporation, a reformation which not only includes the reduction of the quorums which would allow the shareholders which are actively involved in the running of the company to promote the strategic projects of the BSE, but also several amendments intended to facilitate the exercising by the shareholders of the BSE of their rights.

- Acknowledging the proposals of the shareholders of the BSE, the Board of the Exchange will propose to them the switch to the dual management system, considering the decision of the General Shareholder Meeting of the BSE of April 2013. We also mention the fact that the Board of the Exchange has made every effort, within the limits of the law and of the corporate governance framework, such as by significantly simplifying the formalities required for voting, in order to encourage the participation of the shareholders of the BSE in the General Shareholder Meetings, efforts which so far have yielded no results when it comes to the extraordinary shareholder meetings, a situation which could have negative effects on the development of the BSE, but which is something that is not under the control of the Board of Directors, but of its shareholders.

- Also, the Council of the Exchange supports the institutions of the state and the OPSPI when it comes to conducting the public offerings through the stock market, actively promoting the privatization program. In fact, the protocol concluded with the OPSPI intended to allow the making of the privatization program through the stock market is conducted through sustained workshop sessions with the companies which will be listed, with the end goal of adequately preparing them for conducting the IPOs and for their future status of listed companies.

- Also, the BSE and the EBRD have launched the project concerning the corporate governance framework of the Romanian stock market, which will benefit every stock market player, including the BSE itself due to it being listed.

- We remain faithful to all our goals to promote and develop the Romanian stock market and on the next meeting, the Board of Directors of the BSE will discuss the requests of SIF Moldova.