TWO SIDES ARE FIGHTING BUT IT'S THE BSE THAT LOSES The Great Hullabaloo around the dividends of the Proprietatea Fund

• The Proprietatea Fund announces the payment of dividends, according to schedule

The anger which some shareholders of the Proprietatea Fund are angry with lawyer Ioana Sfîrăială, comes from the fact that she allegedly blocked the distribution of dividends through legal nitpicking, might be the result of a mistake in the notifications provided by "Franklin Templeton" (which still counts as the manager of the Proprietatea Fund), or of a mistaken assessment of the actions which the lawyer made, or of the bureaucratic mix-up of the Trade Registry, considering that Sfîrăială claims she did nothing to block the distribution of dividends.

In the communiqués published on the website of the BSE, "Franklin Templeton" claims that Sfîrăială "is trying to block the allocation of the profit for last year", approved by shareholders on April 25th, 2012, but Sfîrăială denies it, in a press release which the BURSA newspaper was the only one to publish, and which the BSE did not publish.

In not publishing it, the BSE uses a regulation which stipulates that issuers' communiqués must be published, but, by eliminating the information coming in from one of the parties involved in the conflict, the outcome is that investors are asymmetrically informed, and have to read the BURSA newspaper to get the full story.

And this circumstance influences the price of the stock, meaning that the BSE once again proves its uselessness when it comes to the price discovery of a stock.

Like we've said on other occasions, it sometimes takes hours or even days before reports from the companies listed on the BSE are received or published, which most of the time is inexcusable.

In reality, the law does not stipulate a precise delay for publishing those reports, using a rather vague wording: "within the shortest delays".

This turn of phrase was used because (aside from other aspects) the lawmakers also considered the fact that the staff of the BSE must check the authenticity and accuracy of the reports, to the extent possible.

In this case, the rivalry between "Franklin Templeton" and lawyer Ioana Sfîrăială is notorious: in December 2011, the lawyer obtained a court ruling which invalidated the decision by which Franklin Templeton had been appointed as manager of the Fund (the latter appealed this decision, and the hearing for the appeal is today, June 14th, 2012); Sfîrăială subsequently challenged the decisions of the General Shareholder Meeting of the Proprietatea Fund, claiming that "Franklin Templeton" was not the rightful manager of the Fund.

The success of the lawsuit against "Franklin Templeton" makes Sfîrăială means that the BSE can't ignore without distorting the market, as her communiqués are just as important as those of "Franklin Templeton").

Meaning that the passiveness of the BSE, in that regard, using the regulations as an excuse, simply means it isn't operating properly, showing its lack of interest in the services it provides.

It is unclear who is right - Templeton or Sfîrăială - but it is clear who isn't: the BSE.

In this case, when two sides are fighting, it's the third one that loses.

• POST SCRIPTUM

I await the usual angry retorts on www.bursa.ro, from the investors who in fact have no real way of knowing who blocked their dividends: Sfîrăială, Templeton or the Trade Registry?

MAKE

• Not knowing what they're talking about

At the last minute, before the paper went to the printers', "Franklin Templeton" announced that, since the CNVM has nothing against it, it will distribute the dividends of the Proprietatea Fund before the registration with the Trade Registry.

I'll bet the CNVM has nothing against it: the CNVM doesn't have anything to do with the Law 31, which governs the distribution of dividends.

Just one more occasion when "Franklin Templeton" shows it is clueless.

F.G.

• The "Franklin Templeton" versus Ioana Sfîrăială conflict

While the BSE and the CNVM are not doing anything to make things clearer on the state of the conflict between "Franklin Templeton" and Ioana Sfîrăială, concerning the dispute over the payout of the dividends for 2011, the lawyers consulted by BURSA warned about some mistakes in the documents.

Stock market regulator, CNVM, is reviewing the situation, but for now, it can't render a verdict.

• Franklin Templeton: The payment of the dividends will begin on June 29th, even though the decision of the shareholders has not yet been registered with the Trade Registry

Last night, Franklin Templeton announced that it would begin the payment of dividends on June 29th, 2012, as proposed by Franklin Templeton and already approved by the shareholders in the General Shareholder Meeting of April 25th, 2012.

The decision is motivated by the fact that the manager of the Fund has honored all his obligations when it comes to the registration of the decision of the shareholders with the Trade Registry, as well as the fact that the Romanian National Securities Commission (CNVM) has confirmed that it has no objections to the proposal of the Fund to pay dividends before the registration of the decision of the shareholders number 10/2012 was completed, according to the communiqué sent to the BSE yesterday.

Franklin Templeton also says: "In order to avoid any doubt, we mention that the Trade Registry continues to refuse the registration of the decision of shareholders concerning the payment of the dividends, given the request for intervention submitted by Mrs. Sfîrăială, as well as the fact that the Manager of the Fund will continue to protect the interests of the Fund in order to remedy this issue".

On May 16th, "Franklin Templeton" told t he shareholders of the Proprietatea Fund that Ioana Sfîrăială is trying to block the allocation of last year's profit, which was approved by the shareholders on April 25th, 2012.

"As a result, the payment of dividends may only take place after the registration of the shareholder decisions with the Trade Registry", the communiqué of the Proprietatea Fund says (see in the insert, the communiqués of Franklin Templeton concerning this case).

On May 24th, Franklin Templeton said: "Ioana Sfîrăială submitted with the Trade Registry a request for intervention (no. 608325/02.05.2012) by which she requested that none of the decisions of the shareholders which were concerned by our request numbered 606456/of April 27th, 2012 be registered. We emphasize that the Fund asked the Trade Registry, through the request no. 606456 /April 27th, 2012, to register the following shareholder decisions:

a. The decision no. 9 of April 25th, 2012, of the Ordinary General Shareholder Meeting (AGOA) concerning the approval of the annual activity report of the sole manager for the year 2011 and the financial statements for the year 2011,

b. The decision no. 10 of April 25th, 2012 of the Ordinary General Shareholder Meeting (AGOA) by which the distribution of the dividends for the 2011 fiscal year was approved,

c. The decision no. 11 of April 25th, 2012 of the Ordinary General Shareholder Meeting (AGOA) to ratify the Decisions of the Ordinary General Shareholder Meeting (AGOA) no. 8 and 9 of September 6th, 2010,

d. The decision no. 12 of April 25th, 2012 of the Ordinary General Shareholder Meeting (AGOA) to ratify the Decisions no. 8 and 9 of September 6th, 2010 of the Ordinary General Shareholder Meetings (AGOA)".

At the time, the representatives of Franklin Templeton were saying: "We emphasize that Ioana Sfîrăială has not withdrawn her request to block the registration with the Trade Registry of the decision of the Ordinary General Shareholder Meeting no. 10 of April 25th, 2012 by which the distribution of the dividends for the 2011 fiscal year was approved. We mention that in order to abandon a request to block the registration of a decision of the Ordinary General Shareholder Meeting, Ioana Sfîrăială must submit a request with the Court of Bucharest, according to art. 246 of the Civil Procedure Code".

• Ioana Sfîrăială: \"The communiqués of Franklin Templeton deliberately mislead shareholders and create panic\"

On May 23rd, 2012, Ioana Sfîrăială sent to the Bucharest Stock Exchange and the CNVM, a communiqué in order to provide "accurate information to the shareholders of the Proprietatea Fund".

That communiqué said: "We did not make any request for intervention with the Trade Registry of Bucharest against the decision of the General Shareholder Meeting of the Proprietatea Fund no. 10/25.04.2012 to < approve the dividend of 0.03854 lei/share >, and as a result this decision was not < blocked >. At the moment, the Court of Bucharest does not have on the docket any kind of lawsuit against the payment of dividends by the Proprietatea Fund to its shareholders".

In the opinion of Mrs. Sfîrăială, the communiqués of "Franklin Templeton" are trying to mislead the shareholders of the Proprietatea Fund and to create panic among shareholders".

This communiqué was not published on the website of the Bucharest Stock Exchange.

• Sfîrăială: "The BSE keeps disseminating inaccurate information"

On May 24th, 2012, the lawyer sent another address to the BSE, in which she mentions that the BSE keeps disseminating erroneous data, even though it has been informed about the real situation of the problems which the Proprietatea Fund is referring to in its communiqués.

Ioana Sfîrăială was also asking that her name no longer be used in the communiqués without her prior permission, and that her position sent one day earlier be published.

"If you will not honor this legal and justified request, I will consider that the position of your institution violates my right to a good and honorable public image and I will sue you for damages, also requesting an injunction when it comes to publishing information about me". (See the notices of Ioana Sfîrăială on the www.bursa.ro website).

• BSE: The Exchange provides information within the limits of the applicable legal provisions

On May 28th, 2012, the BSE notified Ioana Sfîrăială that the information it is providing is the one it is required by law to provide, and advised her to talk to the CNVM, an authority which can ask issuers for "information it deems necessary, in order to protect investors and to ensure an adequate functioning of the market".

The BSE denied the allegations of Ioana Sfîrăială as well as "any kind of dissuasion intended to make the BSE violate the existing legislation".

According to the Code of the Exchange, "the BSE declines any kind of obligation or liability towards the Issuer or Third Parties, concerning the authenticity, completeness and accuracy of the information provided by them and distributed by the BSE".

The notice sent to the BSE also states: "On May 23rd, 2012, the BSE did not receive any notice having Sfîrăială Ioana as its sender, and in the process of providing information, the BSE receives and disseminates only the reports sent by / received from the Issuers, aside from the legal exceptions. Since the case you mention does not fall under the aforementioned exceptions, the BSE can not grant you your request".

But Ioana Sfîrăială sent us evidence that the BSE confirmed having received her fax sent on May 23rd, 2012. (See the documents on www.bursa.ro).

She claims that it is normal for the BSE not to make any serious efforts to keep shareholders accurately informed, since the Board of the Exchange includes Matjaz Schroll, Executive Director, Templeton Emerging Markets Group and Narcisa Oprea, lawyer at "Schoenherr si Asociaţii", which provided legal counsel to "Elliot", the biggest shareholder of the Proprietatea Fund.

• Ioana Sfîrăială has a proof from the registry of the Court, which confirms that she did not challenge the distribution of dividends

On May 30th, Ioana Sfîrăială sent a certificate from the registry of the Bucharest Court (available on www.bursa.ro), which, according to her, proves that "no intervention was made against the Decision of the General Extraordinary Shareholder Meeting no. 10/of April 25th, 2012, concerning the distribution of the profits, as the shareholders are misleadingly < informed > on the website of the BSE".

Ioana Sfîrăială mentions that regardless of who the author of the inaccurate information appearing on the website of the BSE may be, the BSE itself is itself liable, "meaning that for a potential market manipulation it is not just the issuers which answer, as the representatives of the BSE claim, but the BSE itself as well, as the Code of the BSE you mention is not binding to me nor is it applicable in the case of committing some deeds incriminated by the legislation in that field".

However, the Court Registry certificate contains a mistake: it refers to the AGEA (Extraordinary General Shareholder Meeting), even though it mentions the decisions no. 9, 11 and 12 of the General Ordinary Shareholder Meeting (AGOA) of April 25th, 2012.

Ioana Sfîrăială says that this is a mistake of the Court, but that the information in the file of the case is recorded correctly.

Lawyer Sfîrăială also said that the only reason she did not challenge the decision to pay dividends, neither now nor in the past, was the consideration she has for the individual shareholders of the Proprietatea Fund, for whom the latter was the only form of compensation available for the properties seized by the Communist state.

• Cristian Duţescu: The lawyers of Franklin Templeton should have clarified the problem and to insist on registering the decisions which were not concerned by the request for intervention

Lawyer Cristian Duţescu believes that the court registry certificate presented by Ioana Sfîrăială, contains a material error.

He explained: "The certificate discusses the decisions of the Extraordinary General Shareholder Meeting. There is no mention of the Decisions of the Ordinary General Shareholder Meeting. On the other hand, the issues which the certificate refers to were included on the agenda of the Extraordinary General Shareholder Meeting and were the object of the Decision of the Extraordinary General Shareholder Meeting. Without being peremptory about it, I believe that the certificate from the court registry contains a material error. If the Decision no. 10 of April 25th, 2012 concerning the dividends hasn't been challenged, then it should have been registered with the Trade Registry and published in the Official Gazette. In practice, if Ioana Sfîrăială is right and she did not challenge the decision no. 10 of the Extraordinary General Shareholder Meeting, I believe that what actually happened goes something like this: the lawyers of Franklin Templeton drafted a request for the registration of all the decisions, the request for intervention was submitted by Ioana Sfîrăială and the director of the Trade Registry sent that single request for registration, with all the related documents and with the request for intervention to the court. No one noticed that not all the decisions have been challenged or bothered to register the decisions which hadn't been challenged, and they sent to the court only the documentation pertaining to the Decision of the General Shareholder Meeting which had been challenged".

In the opinion of Mr. Duţescu, if that is indeed what happened, the lawyers of Franklin Templeton should have clarified the problem and demanded the registration with the Trade Registry of the decisions of the shareholder meeting which hadn't been challenged in court, i.e. the ones which weren't concerned by the request for intervention.

This may be the fault of the head of the Trade Registry, and perhaps of the lawyers of Franklin Templeton who did not mention that there were several decisions, some of which were concerned by the intervention of Ioana Sfîrăială, and others which hadn't been challenged in court, the aforementioned lawyer said.

Cristian Duţescu considers that Franklin Templeton needs to reveal a Court registry certificate which would show the specific decisions of the General Shareholder Meeting which have been challenged.

"I think it is important that this aspect be clarified quickly, because we are talking about the most liquid issuer in Romania, which generates significant volumes (while also having an exceptional free-float)", the lawyer said.

• Duţescu: The BSE can ask Franklin Templeton to clarify the situation; The CNVM must investigate whether market abuse has occurred

Mr. Duţescu also said: "On May 16th, Franklin Templeton announced that Ioana Sfîrăială has initiated the blocking of the Decision of the General Shareholder Meeting concerning the distribution of dividends. According to the Market Operator Code of the BSE, Title II art. 99 letter j), in order to keep the investors informed, the issuer should have notified the BSE of any action taken against it which could potentially affect the price. According to art. 79 of the same Title II, the < Information provided by the Issuer must be certain, accurate and sufficient. If that is not the case, upon the recommendation of the BSE, the Issuer will modify/amend the report/communiqué in question >.

By reviewing the text of the current report of the Proprietatea Fund of May 16th, it clearly results that Franklin Templeton informs shareholders and investors that Ioana Sfîrăială < is trying to block > the registration of the decision concerning dividends and then accurately states that the payment of dividends can only be made after the registration of the decision.

The text of the BSE Code, does not prove that the BSE is required to ask the issuers for documents or other evidence to prove the information transmitted through the current reports. I believe that, when controversies arise against the accuracy of specific information, the BSE should ask for such clarifications. We had a similar situation with < Argus >, when I was representing SIF5 and, at the time, the BSE, after being sent the documents which proved the accuracy of the information sent by the administrators in office, decided to publish the reports they drafted. I think that in this case as well, it would be necessary for the BSE to ask the Proprietatea Fund to prove that the decision of the Ordinary General Shareholder Meeting no. 10 of April 25th was challenged. Therefore, the position of the BSE is within the limits of the Code of the BSE, but the BSE can play an active part and ask Franklin Templeton to clarify the situation.

On the other hand, the BSE has no responsibility when it comes to the text of the information sent by the legal representatives of an issuer (starting off with the assumption that Franklin Templeton is the legal representative). If the text of the communiqué of May 16th, 2012 concerning the attempt to block the Decision of the General Shareholder Meeting concerning the dividends is untrue or whether the public statements made by Ioana Sfîrăială in the mass-media that she did not challenge the Decision of the Ordinary General Shareholder Meeting concerning the payment of dividends) are untrue, then the CNVM needs to review whether we are in the presence of a market abuse or not, by checking whether this falls under the incidence of art. 244 parag.5 letter. c) of the Law no. 297/2004".

• Gheorghe Piperea: The manager of the Proprietatea creates even more confusion, instead of reducing it

In the opinion of lawyer Gheorghe Piperea, the situation should first of all be clarified by the Proprietatea Fund, through its manager: "Naturally, the regulated market (BSE) and the regulator authority (CNVM) should somehow explain the legal situation; or I for one see that, given the pride of the lawyers of the Proprietatea Fund, the manager of the Proprietatea Fund doesn't eliminate the confusion, but adds to it instead, and the intervention of the BSE and of the CNVM, also raises big questions".

Mr. Piperea has the following take on the situation: "The court registry certificate shows that Mrs. Sfîrăială filed a request for intervention concerning the making of mentions in the Trade Registry, submitted by the Proprietatea Fund. According to the law, if an intervention request of this nature is submitted (by which the intervening party challenges something about the request for mentions), the case of the mention becomes an administrative case and gets sent to the Court, to resolve the intervention. Basically, once the file gets sent to the Court, the registration of the mention is blocked (a similar effect to the suspension of the General Shareholder Meeting through a presidential ordinance). Even though the effects of a General Shareholder Meeting are not, de plano, dependent on the registration with the Trade Registry of a mention concerning the General Shareholder Meeting, nevertheless, without a mention, the decisions of the General Shareholder Meeting are not binding to third parties. For instance, they are not binding to the Tax Administration".

Gheorghe Piperea considers that "the proceedings for annulment of the decision of the General Shareholder Meeting which takes place in parallel with the demand for intervention; the first action concerns the General Shareholder meeting in itself (and is not suspensive in relation to the effects of the General Shareholder Meeting), the second action (intervention) concerns the request for the registration of the mention concerning the General Shareholder Meeting (and blocks the binding towards the third parties of the General Shareholder Meeting)".

At the end of December 2011, Ioana Sfîrăială got a ruling of the court which annuls the decision of the General Shareholder Meeting of the Proprietatea Fund by which Franklin Templeton had been appointed as manager of the company. The Proprietatea Fund appealed the decision of the Court of First Instance, with the next hearing set for June 14th, 2012.