S.C. Fondul Proprietatea SA · BVB:FP
S.C. Fondul Proprietatea SA — Fondul Proprietatea — Investor Presentation (September 2016)
62 slides from S.C. Fondul Proprietatea SA's investor presentation, September 2016
Slide 1: Fondul Proprietatea – September 2016 Performance Report
Fondul Proprietatea – September 2016 Performance Report This material is intended solely for the recipient and should not be reproduced, copied or re-transmitted. Not for public use.
Slide 2: Disclaimer
Disclaimer This presentation is made solely to the intended recipient and should not be distributed to, or acted upon by, any other person. It is for general information only and reflects the personal views of the presenter. Nothing herein is intended to constitute advice on investment, legal or tax
Slide 3: Performance Report
Performance Report This material is intended solely for the recipient and should not be reproduced, copied or re-transmitted. Not for public use.
Slide 4: Content of the Performance Report
Content of the Performance Report – According to the IMA in force • The report on the fulfillment of the Discount Objective • The report on the fulfillment of the NAV Objective • The report on the fulfillment of the obligations regarding DCM • Summary of the regulatory issues affecting the performan
Slide 5: Fondul Proprietatea Structure – since 1 April 2016
FONDUL PROPRIETATEA 4 Fondul Proprietatea Structure – since 1 April 2016 Fondul Proprietatea Board of Nominees 1) Alternative Investment Fund Manager 2) Sole Director FTIS Retains responsibility for Risk Management 1) Portfolio Management (AIFMD delegation) FTIML Bucharest 2) Administrative Services
Slide 6: Primary Roles and Responsibilities of FTIS S.à r.l. – Management Company
Primary Roles and Responsibilities of FTIS S.à r.l. – Management Company Responsibilities of the AIFM: • Risk Management • Investment Management (Oversight of delegated portfolio management to FTIML Branch) • Valuation • Due Diligence on the Depositary (BRD Groupe Societe Generale) • Reporting oblig
Slide 7: AIFMD
AIFMD • FTIS Sarl’s primary responsibility is to monitor and highlight any material issues in respect of the risk management of Fondul Proprietatea, the oversight of portfolio management delegated to Franklin Templeton Investment Management Limited, new regulatory developments and any other matter w
Slide 8: Management Strategy
FUND INFORMATION 7 Management Strategy Investment Investment Strategy: Performance Objective: • No new investments until the discount Objectives (IPS): • Maximization of narrows significantly • Discount of 15% or less returns and per- • Active management and engagement with for at least two thirds o
Slide 9: Historical NAV, Share Price and GDR Performance
Historical NAV, Share Price and GDR Performance Cumulative Performance (RON) Since Performance 2011 2012 2013 2014 2015 Q1 2016 YTD2 Inception2 NAV (0.47)% 8.91% 13.29% 1.39% (0.60)% (4.84)% 3.53% 28.14% Ordinary Share (30.32)% 38.30% 61.34% 14.53% (4.06)% (4.81)% (4.21)% 63.66% Price GDR N/A N/A N/
Slide 10: FP Share Price (RON) and Discount (%)
FUND INFORMATION FP Share Price (RON) and Discount (%) 0.8500 66% 0.6500 49% 0.4500 32% 0.2500 15% 1/11 5/11 9/11 12/11 4/12 7/12 11/12 3/13 6/13 10/13 1/14 5/14 9/14 12/14 4/15 8/15 11/15 3/16 6/16 Discount Share Price RON Source: BVB, for the period 25 January 2011 – 30 June 2015. This material is
Slide 11: Report on the Discount Objective
Report on the Discount Objective This material is intended solely for the recipient and should not be reproduced, copied or re-transmitted. Not for public use.
Slide 12: Discount Objective
Discount Objective • Objective – The discount between closing price and last reported NAV per share to be equal to or lower than 15%, in at least 2/3 of the trading days in the period 1 July 2015 – 30 June 2016 • Monthly Monitoring – 30 June 2016 – In the period 1 July 2015 – 30 June 2016, discount
Slide 13: Discount Objective – Evolution During the Reporting Period
FUND INFORMATION Discount Objective – Evolution During the Reporting Period 0.7550 40% 0.6700 35% 0.5850 30% 0.5000 25% 7/15 7/15 8/15 9/15 10/15 11/15 11/15 12/15 1/16 2/16 3/16 4/16 4/16 5/16 6/16 Discount Share Price RON Source: BVB, for the period 1 July 2015 – 30 June 2016. This material is int
Slide 14: Discount Objective – Measures Taken
Discount Objective – Measures Taken • Distributed RON 797.0 million to the Fund’s shareholders during 1 July 2015 – 30 June 2016 via: – Execution of the 5th and 6th buy-back programs to acquire approx. 10% of the outstanding shares, through daily share repurchases of up to 25% of the average daily t
Slide 15: Discount Objective – Creating Liquidity at the Portfolio Level
Discount Objective – Creating Liquidity at the Portfolio Level during the Reporting Period1 Amount RON Total Proceeds Collected on Disposals 1,624,115,940 Dividends Received (Collected) 441,607,778 Credit Facility (Committed and Uncommitted) 500,000,000 Total 2,565,723,718 Source: Fund Manager. 1. F
Slide 16: Discount Objective – Distributions to Shareholders
Discount Objective – Distributions to Shareholders 1 July 2015 – 30 June 2016 Distributions to shareholders in the Expenses related to % of the average period 1 July 2015 - distributions recorded % from the NAV as RON Total share price during the 30 June 2016 in the period 1 July at 30 June 2015 per
Slide 17: Discount Objective – Share Buybacks
Discount Objective – Share Buybacks No. of shares to Average Program Period Status be repurchased / % of the share price Broker Cancellation of shares Fund’s issued share capital (RON/share) Feb – Fifth Completed 227.6 mn/1.86% 0.85011 Wood & Co. Cancelled on 14 March 2016 Jul 2015 Wood & Co., Share
Slide 18: Discount Objective – Investor Relations
Discount Objective – Investor Relations Activity • New research coverage of the Fund: – December 2015: Liberum (UK) started covering the Fund – March 2016: InterCapital Securities (Croatia) started covering the Fund • During the period, the Fund Manager continue to actively promote Fondul Proprietat
Slide 19: Discount Objective – Secondary Listing on the London Stock Exchange
Discount Objective – Secondary Listing on the London Stock Exchange • The GDR facility of 1/3 of the outstanding shares reached capacity in a relatively short period of time (less than 9 months) • Large long-only mutual funds, endowments, closed end fund specialist investors, as well as hedge funds
Slide 20: Discount Objective - Fondul Proprietatea GDR Premium to the Local Shares
APPENDIX I Discount Objective - Fondul Proprietatea GDR Premium to the Local Shares USD • 3.5% Premium as at 30 June 2016 105 95 85 75 4/15 6/15 7/15 8/15 10/15 11/15 12/15 2/16 3/16 4/16 6/16 FP GDR FP Share Source: Bloomberg, for the period 29 April 2015 – 30 June 2016. 19 This material is intende
Slide 21: Report on the NAV Objective
Report on the NAV Objective This material is intended solely for the recipient and should not be reproduced, copied or re-transmitted. Not for public use.
Slide 22: NAV Objective
NAV Objective • Objective – The Adjusted NAV per share as at 30 June 2016, to be higher than the NAV per share as at 30 June 2015 (RON 1.1851 per share) • Monthly Monitoring – 30 June 2016 – Adjusted NAV as at 30 June 2016 is higher than the NAV per share as at 30 June 2015 NAV Objective Amount RON
Slide 23: Attribution to NAV Performance for the Reporting Period
Attribution to NAV Performance for the Reporting Period (30 June 2015 – 30 June 2016)1 TOP PERFORMERS Change in share price or NAV Total effect for the Weight in Company Status value per share for the period period 30.6.2015 – total NAV2 30.6.2015 – 30.6.2016 30.6.2016 Hidroelectrica S.A. Unlisted 2
Slide 24: NAV Objective – Major Equity Transactions
NAV Objective – Major Equity Transactions Completed Transactions Offering Transaction Value Investment Company Transaction Seller Comments Stake (RON mn) Consortium Selected Goldman Sachs, Wood Completed in October Romgaz ABO FP 4.15% 456.0 & Co, BCR 2015 Goldman Sachs, Wood Romgaz ABO FP 5.85% 541.
Slide 25: Changes in the Valuations of Portfolio Companies (I)
NAV Objective – Changes in the Valuations of Portfolio Companies (I) Listed / Value of FP holding Value of FP holding Comments on disposals & Portfolio company Unlisted as at 30 June 2015 as at 30 June 2016 participation in share capital increase 30 June 2016 OMV Petrom SA Listed 4,054,934,501.30 2,
Slide 26: Changes in the Valuations of Portfolio Companies (II)
NAV Objective – Changes in the Valuations of Portfolio Companies (II) Listed / Unlisted Value of FP holding Value of FP holding Comments on disposals & Portfolio company 30 June 2016 as at 30 June 2015 as at 30 June 2016 participation in share capital increase Partially disposed [74,771,163 shares]
Slide 27: Changes in the Valuations of Portfolio Companies (III)
NAV Objective – Changes in the Valuations of Portfolio Companies (III) Comments on disposals & Listed / Unlisted Value of FP holding Value of FP holding Portfolio company participation in share capital 30 June 2016 as at 30 June 2015 as at 30 June 2016 increase Romaero SA Listed 17,707,828.50 23,610
Slide 28: Changes in the Valuations of Portfolio Companies (IV)
NAV Objective – Changes in the Valuations of Portfolio Companies (IV) Listed / Unlisted Value of FP holding Value of FP holding Comments on disposals & Portfolio company 30 June 2016 as at 30 June 2015 as at 30 June 2016 participation in share capital increase Cetatea SA Unlisted 336,886.39 349,328.
Slide 29: Actions to Protect and Increase Value of the Portfolio Companies (I)
Actions to Protect and Increase Value of the Portfolio Companies (I) • Encouraged management to continue with investor relations efforts and to participate to more investor events and management road-shows OMV Petrom • Continued to actively support a fair and balanced taxation regime for the oil and
Slide 30: Actions to Protect and Increase Value of the Portfolio Companies (II)
Actions to Protect and Increase Value of the Portfolio Companies (II) • Successfully negotiated and executed the exit from the shareholders structure of both E.ON Distributie Romania and E.ON Energie Romania, operation completed in 29 June 2016 E.ON Companies • Took a constant activist stance on sev
Slide 31: Actions to Protect and Increase Value of the Portfolio Companies (III)
Actions to Protect and Increase Value of the Portfolio Companies (III) • Worked with 2 separate interim Boards and the interim General Manager to continue improving the company’s profitability through cost management and initiatives aimed at opening new routes and enhance non-aeronautical revenues •
Slide 32: Actions to Protect and Increase Value of the Portfolio Companies (IV)
Actions to Protect and Increase Value of the Portfolio Companies (IV) • Successfully replaced, after several attempts, in December 2015, the general manager of the company, who took value destructive management decisions in the past. The company’s CFO who had been selected according with law 109 was
Slide 33: Actions to Protect and Increase Value of the Portfolio Companies (V)
Actions to Protect and Increase Value of the Portfolio Companies (V) • Worked closely with the management team to improve operations: drafting an updated commercial policy which lead to an increase of the client base and better pricing for their products, and helped the company with legal advisory i
Slide 34: Actions to Protect and Increase Value of the Portfolio Companies (VI)
Actions to Protect and Increase Value of the Portfolio Companies (VI) • Continued to return cash to the shareholders: in December 2015, the Fund sold 152,156 shares in Primcom Primcom SA, at the price of RON 30 per share, within the buy-back program carried by the Company • Engaged with the majority
Slide 35: Actions to Protect and Increase Value of the Portfolio Companies (VII)
Actions to Protect and Increase Value of the Portfolio Companies (VII) • Rejected the 2015 financial statements which showed the company making a loss even though Administratia Canalelor operationally it was a very good year for the company. The financial statements were restated, Navigabile some un
Slide 36: Actions to Protect and Increase Value of the Portfolio Companies (VIII)
Actions to Protect and Increase Value of the Portfolio Companies (VIII) • Worked with the Ministry of Public Finance on the changes to the Ordinance 109 proposed by the Government. Ordinance 109 was approved by a law (Law no. 111/2016) in June 2016 General Actions • Continued monitoring the implemen
Slide 37: Top 20 Portfolio Holdings – Key Financials
Top 20 Portfolio Holdings – Key Financials EBITDA (RON mn) Net Profit (RON mn) Top 20 Holdings1 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 Hidroelectrica SA 873.6 707.3 2,008.3 2,189.3 2,100.2 6.5 (508.0) 718.8 941.5 899.4 OMV Petrom SA 7,524.3 8,270.2 9,313.0 8,145.0 6,231.1 3,758.6 3,946.1
Slide 38: Report on the Obligations regarding the Discount Control Mechanism
Report on the Obligations regarding the Discount Control Mechanism This material is intended solely for the recipient and should not be reproduced, copied or re-transmitted. Not for public use.
Slide 39: DCM Provisions
DCM Provisions • According to Article 9 of the Management Agreement under AIFMD, as approved by the Fund’s Shareholders on 29 October 2015, which commenced on 1 April 2016: “FUND MANAGER PERFORMANCE OBJECTIVES. ANNUAL REPORTING 9.1. For the duration of this Management Agreement, the Fund Manager mus
Slide 40: Discount Control during Q2 of 2016
Discount Control during Q2 of 2016 (the new IMA into force) • If the discount stays above 15% for more than half of the trading days in Q2 2016, the Fund Manager will call a Board meeting to discuss the DCM • The Board meeting took place on 7 June 2016 • First calculation period based on the new IMA
Slide 41: Ongoing DCM Measures (I)
Ongoing DCM Measures: • Cash Distributions: the Fund Manager proposed and shareholders approved the cash distribution for 2016 (to shareholders registered as at 6 June 2016 of RON 0.05/share, proportionally with their participation to the paid-up share capital of Fondul Proprietatea SA; payment star
Slide 42: Ongoing DCM Measures (II)
Ongoing DCM Measures: • Credit facility: starting with July 2016, there is a new credit facility of RON 1 billion from BRD – Groupe Societe Generale • Investor Relations Activities: – In April, we organized the 3rd Romania Investor Day event in New York, where 41 investment professionals participate
Slide 43: DCM Techniques based on the Current IPS (I)
DCM Techniques based on the Current IPS (I) • 6th Buy-back Programme ongoing Recommendation of buy-back programs of the Fund’s shares and GDRs • 7th Buy-back Programme approved by shareholders (it will expire in May 2017) • 8th Buy-back Programme will be on the October GSM agenda Reduction of the no
Slide 44: DCM Techniques based on the Current IPS (II)
DCM Techniques based on the Current IPS (II) • IPO for Hidroelectrica pending – the banks have signed the EL and the project is expected to commence as the court decided in June 2016 on Hidroelectrica exiting Increasing the share of the listed the insolvency – target execution Q4 2016 (delayed proba
Slide 45: Summary of the Regulatory Issues Affecting the Performance
Summary of the Regulatory Issues Affecting the Performance during the Reporting Period This material is intended solely for the recipient and should not be reproduced, copied or re-transmitted. Not for public use.
Slide 46: Summary of Regulatory Changes and Issues
Summary of Regulatory Changes and Issues • FSA including the Fund under the new AIFMD legislation • Delays in implementation of Corporate Governance Legislation (OUG 109/2011) Regulatory issues • Delays in the IPO calendar of the SOEs affecting the Performance during the reporting period • Hidroelec
Slide 47: Summary of the Market Conditions Affecting the Performance
Summary of the Market Conditions Affecting the Performance during the Reporting Period This material is intended solely for the recipient and should not be reproduced, copied or re-transmitted. Not for public use.
Slide 48: Summary of Market Conditions
Summary of Market Conditions • General Risks • Oil Prices • Electricity Prices Market Conditions Affecting the Performance during the Reporting • Market Sentiment in Emerging and Frontier Markets Period • Volatility in developed markets • Brexit • Performance of the BVB This material is intended sol
Slide 49: General Risks
General Risks • The Fund's investments are concentrated in a limited number of industry sectors • Risks related to the oil, gas industry and electricity sectors • Risks related to poor performance of poorly managed companies in the Fund's portfolio • Potential difficulties in implementing the Fund's
Slide 50: Oil Prices
FUND INFORMATION 49 Oil Prices 65 55 • (18.73)% for WTI Crude Oil • (21.87)% for Brent Oil 45 35 25 7/15 7/15 8/15 9/15 10/15 11/15 12/15 1/16 2/16 3/16 4/16 5/16 6/16 WTI Crude Oil Brent Oil Source: Bloomberg, for the period 1 July 2015 – 30 June 2016. This material is intended solely for the recip
Slide 51: Electricity Prices
APPENDIX IV 50 Electricity Prices Electricity prices (EUR/MWh) 50 40 • (11.35)% for OPCOM • (6.05)% for HUPX • (25.02)% for EPEX 30 20 7/15 7/15 8/15 9/15 10/15 11/15 12/15 1/16 2/16 3/16 4/16 5/16 Romania Hungary Germany (OPCOM) (HUPX) (EPEX) Source: Hidroelectrica, Bloomberg, as at 30 June 2016. N
Slide 52: Electricity Market
PORTFOLIO PERFORMANCE 51 Electricity Market Consumption (average hourly values) 7,426 7,016 6,903 6,985 6,816 6,455 6,562 6,235 6,240 6,190 6,215 5,962 7/15 8/15 9/15 10/15 11/15 12/15 1/16 2/16 3/16 4/16 5/16 6/16 Day Ahead Market Prices (RON/MWh) 183 174 140 128 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Source:
Slide 53: Hidroelectrica – Financial Performance
FONDUL PROPRIETATEA 52 Hidroelectrica – Financial Performance • On 21 June 21 2016 the company exited the insolvency Pre-tax cumulated profit (RON mn) procedure by the decision of the syndic judge. • The company is run by an interim Supervisory Board 1,158 1,110 composed of 7 members, and an interim
Slide 54: Romania vs. MSCI Eastern Europe vs. Frontier Markets vs. World
APPENDIX IV 53 Romania vs. MSCI Eastern Europe vs. Frontier Markets vs. World % (USD) 110 100 90 80 70 60 7/15 7/15 8/15 8/15 9/15 10/15 10/15 11/15 12/15 12/15 1/16 2/16 2/16 3/16 4/16 4/16 5/16 6/16 6/16 BET Index (USD) MSCI World MSCI Emerging Eastern Europe MSCI Frontier Markets Index Source: Bl
Slide 55: FP Share Price vs. Romgaz and Petrom Share Prices
APPENDIX IV 54 FP Share Price vs. Romgaz and Petrom Share Prices % (USD) 100 90 80 70 60 50 7/15 7/15 8/15 8/15 9/15 10/15 10/15 11/15 12/15 12/15 1/16 2/16 2/16 3/16 4/16 4/16 5/16 6/16 6/16 FP Shares FP GDR Romgaz OMV Petrom Source: Bloomberg, as at 30 June 2016. This material is intended solely f
Slide 56: OMV Petrom – Financial Performance
APPENDIX I 55 OMV Petrom – Financial Performance Financial and Operational highlights H1 2015 H1 2016 %YoY Sales (mn RON) 8,811 7,192 (18)% Downstream Oil 6,474 5,032 (22)% Downstream Gas 2,248 2,114 (6)% Clean EBIT (excl. extraordinary items) 1,251 638 (49)% EBIT (mn RON) 1,280 561 (56)% Upstream 6
Slide 57: OMV Petrom – Share Price Performance
APPENDIX I 56 OMV Petrom – Share Price Performance % (USD) 120 100 80 60 40 7/15 8/15 9/15 10/15 12/15 1/16 2/16 4/16 5/16 6/16 OMV Petrom Brent Oil Emerging Markets Oil and Gas Index MOL OMV Source: Bloomberg, for the period 1 July 2015 - 30 June 2016. This material is intended solely for the recip
Slide 58: FP Share Price and NAV Performance vs. MSCI Romania vs. BET Index
APPENDIX IV 57 FP Share Price and NAV Performance vs. MSCI Romania vs. BET Index % (USD) 105 100 95 90 85 80 7/15 7/15 8/15 8/15 9/15 10/15 10/15 11/15 12/15 12/15 1/16 2/16 2/16 3/16 4/16 4/16 5/16 6/16 6/16 FP NAV FP Share Price FP GDR MSCI Romania BET Index Source: Bloomberg, as at 30 June 2016.
Slide 59: Other Developments during the Reporting Period
Other Developments during the Reporting Period This material is intended solely for the recipient and should not be reproduced, copied or re-transmitted. Not for public use.
Slide 60: Challenges (I)
Challenges (I) • The significant decrease in the oil prices globally led to a delay in the envisaged Delay of a potential transaction with OMV Petrom shares transaction with OMV Petrom shares • The Fund publicly announced its intention to reduce its stake in OMV Petrom from 19% to below 15% • The In
Slide 61: Challenges (II)
Challenges (II) • The negotiations with Electrica S.A. to sell the Fund’s stake in the 4 subsidiaries have failed, as announced in March 2016 due to a low offer from Electrica (RON Failed negotiations with 684 million compared to the Fund’s NAV of RON 841 million) Electrica • The Fund is now waiting
Slide 62: Fondul Proprietatea contact details
Fondul Proprietatea Premium Point Buzesti Street 78-80, 1st District Bucharest 011017 www.fondulproprietatea.ro This material is intended solely for the recipient and should not be reproduced, copied or re-transmitted. Not for public use.
Fondul Proprietatea — Investor Presentation (September 2016) on 6ix