Fondul Proprietatea : Quarterly report as at 31 March 2024

Fondul

Proprietatea SA

Quarterly Report for the quarter ended 31 March 2024

This is a translation from the official Romanian version.

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Quarterly Report for the quarter ended 31 March 2024

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CONTENTS

List of Abbreviations	3
Activity of the Fund	5
Net Asset Value	15
Portfolio	17
Corporate Strategy	27
Financial Information	31
Subsequent Events	38

Annexes

Annex 1 Condensed Interim Financial Statements for the three-month period ended 31 March 2024, prepared in accordance with IAS 34 Interim Financial Reporting and applying the FSA Norm no. 39/ 2015, regarding the approval of the accounting regulations in accordance with IFRS, applicable to the entities authorised, regulated, and supervised by the FSA - Financial Investments and Instruments Sector and to the Fund for Investors Compensation

Annex 2 Statement of Assets and Obligations of Fondul Proprietatea SA as at 31 March 2024,

prepared in accordance with FSA Regulation no. 7/2020 (Annex no. 11)

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Quarterly Report for the quarter ended 31 March 2024

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List of Abbreviations

	Directive 2013/34/EU of the European Parliament and of the Council of 26 June
Accounting Directive	2013 on the annual financial statements, consolidated financial statements and
related reports of certain types of undertakings, amending Directive 2006/43/EC of
	the European Parliament and of the Council and repealing Council Directives
	78/660/EEC and 83/349/EEC, with subsequent amendments
AIF	Alternative Investment Fund
AIF Law	Romanian Law no. 243/2019 on the regulation of alternative investment funds and
amending and supplementing certain normative acts
AIF Regulation	Regulation no. 7/2020 on the authorisation and functioning of alternative
investment funds, issued by the Financial Supervisory Authority
AIFM	Alternative Investment Fund Manager
AIFM Directive	Directive 2011/61/EU on Alternative Investment Fund Managers
ATS	Alternative Trading System
BoN	Board of Nominees of Fondul Proprietatea SA
BVB	Bucharest Stock Exchange
CAEN	Classification of Economic Activities in Romania
CEAM	Centralised Electricity Acquisition Mechanism
CE Oltenia	Complexul Energetic Oltenia SA
CIIF	Certification of Registration of Financial Instruments
	Directive (EU) 2022/2464 of the European Parliament and of the Council of 14
CSRD	December 2022 amending Regulation (EU) No 537/2014, Directive 2004/109/EC,
Directive 2006/43/EC and Directive 2013/34/EU, as regards corporate sustainability
	reporting
Depositary Bank/	BRD - Groupe Societe Generale SA
Depositary
Depozitarul Central SA	Romanian Central Depositary
EGM	Extraordinary General Shareholders Meeting
ESG	Environmental, Social and Governance
EU	European Union
Fondul Proprietatea/ the	Fondul Proprietatea SA
Fund/ FP
FSA	Romanian Financial Supervisory Authority
FT	Franklin Templeton
FTIS/ AIFM/ Sole Director/	Franklin Templeton International Services S.à r.l.
Fund Manager
GDP	Gross Domestic Product
GDR	Global Depositary Receipt
GEO	Government Emergency Ordinance
GEO no. 27/2023	GEO no. 27/2023 regarding amendments of some normative acts in the energy
field, as well as for the establishment of some exemptions
	GEO no. 32/2024 for the amendment and completion of GEO no. 27/2022 regarding
GEO no. 32/2024	measures applicable to final customers in the electricity and natural gas market
during the period 1 April 2022 - 31 March 2023, as well as for the amendment and
	completion of certain legal acts in the energy sector and adopting certain
	measures in the energy sector
GRI	Global Reporting Initiative
GSM	General Shareholders Meeting
IFRS	International Financial Reporting Standards as endorsed by the European Union
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Quarterly Report for the quarter ended 31 March 2024

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INS	Romanian National Institute of Statistics
IMF	International Monetary Fund
IPO	Initial Public Offering
IPS	Investment Policy Statement
Law no. 24/2017	Law no. 24/2017 on issuers of financial instruments and market operations
LSE	London Stock Exchange
NAV	Net Asset Value
NBR	National Bank of Romania
	FSA Norm no. 39/ 2015 regarding the approval of the accounting regulations in
Norm no. 39/ 2015	accordance with IFRS, applicable to the entities authorised, regulated, and
supervised by the FSA - Financial Investments and Instruments Sector and to the
	Fund for Investor Compensation
Norm no. 4/2024	FSA Norm 4/2024 for amending Norm no. 39/ 2015
OGM	Ordinary General Shareholders Meeting
Order no. 85/2024	Ministry of Finance Order no. 85/2024 for the regulation of sustainability reporting
issues
Q1/ Q2/ Q3/ Q4	First/ second/ third/ fourth quarter
REGS	Main market (Regular) of Bucharest Stock Exchange
Salrom	Societatea Nationala a Sarii SA
SFDR	Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27
November 2019 on sustainability related disclosures in the financial services sector
	Regulation (EU) 2020/852 of the European Parliament and of the Council of 18
Taxonomy Regulation	June 2020 on the establishment of a framework to facilitate sustainable
	investment and amending Regulation (EU) 2019/2088

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Quarterly Report for the quarter ended 31 March 2024

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Activity of the Fund

The Fund

Fondul Proprietatea was incorporated on 28 December 2005 as a joint stock company operating as a closed-end investment company. The duration of Fondul Proprietatea is until 31 December 2031 and this may be extended by the EGM with additional periods of 5 years each.

The Fund is registered with the Bucharest Trade Register under the number J40/21901/2005 and has the sole registration code 18253260.

The main activities of the Fund according to the National Statistics CAEN and the Fund's own Constitutive Act are the business of operating mutual funds and other similar financial entities (CAEN reference 643) and the main activity is financial investments (CAEN reference 6430).

On 28 January 2022, FSA authorised Fondul Proprietatea as an AIF closed-end type intended to retail investors, with BRD - Groupe Societe Generale as depositary. The Fund is registered within the FSA Register - Section 9 - 'Alternative Investment Funds' under no. PJR09FIAIR/400018 as Alternative Investment Fund intended for retail investors.

The Fund's investment objective is the maximisation of returns to shareholders and the increase of the net asset value per share via investments mainly in Romanian equities and equity-linked securities.

Since 25 January 2011, the Fund's shares have been listed on BVB. Since 29 April 2015, the Fund's GDRs issued by The Bank of New York Mellon as GDR Depositary, having the Fund's shares as support, have been listed on the Specialist Fund Market of LSE.

Share information

Primary listing	Bucharest Stock Exchange - since 25 January 2011
Secondary listing	London Stock Exchange - since 29 April 2015
BVB symbol	FP
LSE symbol	FP.
Bloomberg ticker on BVB	FP RO
Bloomberg ticker on LSE	FP/ LI
Reuters ticker on BVB	FP.BX
Reuters ticker on LSE	FPq.L
ISIN	ROFPTAACNOR5
FSA register no	PJR09FIAIR/400018/28.01.2022
LEI code	549300PVO1VWBFH3DO07
CIIF registration no	AC-4522-10/16.10.2023

Management of the Fund

Franklin Templeton has been the Sole Director of the Fund starting 29 September 2010, with successive mandates of two or four years.

Management Agreement in force during 1 April 2022 - 31 March 2024

During the quarter ended 31 March 2024, the Fund was managed by FTIS as its Sole Director and AIFM under the AIFM Directive and local implementation regulations, based on the Management Agreement in force between 1 April 2022 - 31 March 2024. The portfolio management and the administrative activities are performed by FTIS via its Bucharest Branch.

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Quarterly Report for the quarter ended 31 March 2024

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The table below presents the key commercial terms of the Management Agreement in force during 1 April 2022 - 31 March 2024:

	Base Fee per year		•	0.45%
	Consideration for the Base Fee		• Weighted average market capitalisation of the Fund
			• 2.50% applied to the value of the distributions during 1 April
	Distribution Fee for all distributions			2022 - 31 March 2023
		• 1.75% applied to the value of the distributions during 1 April
				2023 - 31 March 2024
			• Share buy-backs and GDR buy-backs
	Consideration for the Distribution Fee		•	Public tender buy-backs
			• Return of share capital and dividends
	Duration		•	2 years

Management Agreement for the period 1 April 2024 - 31 March 2025

During 25 September 2023 GSM the shareholders approved the renewal of FTIS mandate as Sole Director and AIFM of the Fund for a duration of 1 year (1 April 2024 - 31 March 2025).

The management agreement for the period 1 April 2024 - 31 March 2025, under substantially same terms as the previous Management Agreement and in line with the current IPS of the Fund, was approved by shareholders during 26 March 2024 GSM. The main change relates to the increase of the base fee rate from 0.45% in the Management Agreement until 31 March 2024 to 1.35% in the Management Agreement starting 1 April 2024. All the documentation related to the 26 March 2024 GSM is available on the Fund's website, section Investor Relations -GSM Information.

The table below presents the key commercial terms of the Management Agreement in force during 1 April 2024 - 31 March 2025:

Base Fee per year	•	1.35%
Consideration for the Base Fee	• Weighted average market capitalisation of the Fund
Distribution Fee for all distributions	• 1.75% applied to the value of the distributions
	• Share buy-backs and GDR buy-backs
Consideration for the Distribution Fee	•	Public tender buy-backs
	• Return of share capital and dividends
Duration	•	1 year

Appointment of a new Sole Director starting 1 April 2025

During 25 September 2023 GSM the shareholders also approved that the BoN should launch a transparent and competitive selection procedure for the appointment of a new Sole Director starting 1 April 2025, based on investment expertise and experience, in accordance with the legal provisions in force. The shareholders also approved that the BoN is empowered to establish new terms and conditions for the evaluation and remuneration of the fund manager, corresponding to the new objectives, in line with international best practices and present them for approval by the GSM.

For more details on this topic, please see the update provided by the Board of Nominees on the Fund's website, section FAQs - Selection of a new Fund Manager - Board of Nominees update as of 4 March 2024.

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Quarterly Report for the quarter ended 31 March 2024

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Shareholder structure

Shareholder structure as at 31 March 2024

	% of subscribed		% of total
Shareholder categories1	and paid-up	% of total	exercisable
	share capital	voting rights	voting rights
Treasury shares2	37.26%	37.26%	-
Romanian institutional shareholders	24.83%	24.83%	39.58%
Romanian private individuals	23.68%	23.68%	37.74%
Romanian State represented by Ministry of Finance	6.54%	6.54%	10.43%
Foreign private individuals	3.48%	3.48%	5.55%
Foreign institutional shareholders	2.14%	2.14%	3.40%
The Bank of New York Mellon (GDRs)3	2.07%	2.07%	3.30%

Source: Depozitarul Central SA

1. Information provided based on settlement date of transactions. The suspended voting rights related to the Fund's treasury shares acquired under the buyback programmes, either in the form of shares and/or GDRs, were not included in the computation of the exercisable voting rights.
2. 2,112,378,889 treasury shares acquired in 2023 within the 14th buyback program (either in the form of shares and/or GDRs)
3. The shares underlying the GDRs issued by the Bank of New York Mellon are held in the name of the Bank of New York Mellon and for the account of the GDRs holders. Out of BNY holding, the GDRs held by Fondul Proprietatea were excluded, namely 0 GDRs (0 shares equivalent - the Fund did not hold any GDR as at 31 March 2024).

As at 31 March 2024, the Fund had 22,795 shareholders. The total number of voting rights was 5,668,806,128, out of which a total of 3,556,427,239 exercisable voting rights.

Largest shareholders - based on ownership disclosures submitted by shareholders

According to Art. 71(1) of Law no. 24/2017, if a shareholder acquires or disposes of shares from an issuer listed on a regulated market, having attached voting rights, the shareholder must notify the issuer about the percentage of voting rights held following the acquisition or disposal in discussion, when the percentage reaches, exceeds or falls below one of the thresholds: 5%, 10%, 15%, 20%, 25%, 33%, 50% and 75%.

As a result of this legal requirement, the Fund has received ownership disclosures from shareholders as per the table below - the information is presented based on the data included in the notification at the respective dates, while the voting rights percentage at 31 March 2024 might be different.

	Shareholder		Latest ownership disclosure	% of voting rights
	Ministry of Finance		1 April 2022	5.97%
	NN Private Pension Funds		11 April 2022	11.24%
	Silver Point Capital Funds		5 April 2023	4.89%
	Allianz Tiriac pension funds and Allianz Tiriac		12 December 2023	4.13%
	Asigurari SA
	Metropolitan Life Pension Fund and Metropolitan		22 December 2023	4.74%
	Insurance

Source: ownership disclosures submitted by shareholders

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GDR facility

The GDR facility is limited to one-third of the Fund's subscribed share capital under the Romanian securities regulations, or 37,792,040 GDRs (1,889,602,000 shares equivalent) as at 31 March 2024, each GDR representing 50 shares. As at 31 March 2024, 117,514,850 of the Fund's issued shares were held by The Bank of New York Mellon, the GDR depositary bank, accounting for 2,350,297 GDRs, representing 6.2% of the GDR facility.

Share capital information

		31 March 2024	31 December 2023	31 March 2023
	Issued share capital (RON)	2,947,779,186.56	2,947,779,186.56	3,233,269,110.76
	Paid in share capital (RON)	2,947,779,186.56	2,947,779,186.56	3,233,269,110.76
	Number of shares in issue	5,668,806,128	5,668,806,128	6,217,825,213
	Number of paid shares	5,668,806,128	5,668,806,128	6,217,825,213
	Nominal value per share (RON)	0.52	0.52	0.52
Source: National Trade Registry

Capital markets

In the first quarter of 2024, BVB registered the strongest performance in both local currency and EUR terms compared to the largest markets in Central Europe, as shown in the table below:

% Change in Q1 2024	in RON	in EUR
BET-XT Index	9.78%	9.89%
BUX Index	7.86%	4.71%
PX Index	7.15%	4.55%
WIG20 Index	3.97%	4.90%
ATX Index	2.94%	2.94%

Source: Bloomberg

Average Daily Turnover (RON million)

16.8

13.5

9.0

6.7

5.4

Q1 2024

Q1 2023

7.6

4.1 3.7

	1.8			2.1		2.5	1.9	2.3	2.2
-					0.8			0.2	0.9
Hidroelectrica	FP	Banca	OMV	Romgaz	Electrica	BRD	Aquila Prod	One United
		Transilvania	Petrom						Properties

Source: BVB, Bloomberg

Note: The values for FP, OMV Petrom and Romgaz also include the GDR trading on LSE (OMV Petrom GDRs were delisted from LSE and their trading was cancelled on 26 October 2023). The values for FP include the tender offer settled in March 2023. The average daily turnover for Hidroelectrica SA in Q1 2023 is nil, as the first trading day on BVB was 12 July 2023.

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									Quarterly Report for the quarter ended 31 March 2024	9
Fund's Adjusted Share Price (RON/share) and Premium / (Discount) History (%)
0.60							Adjusted Share Price				Discount / Premium (%)			7%
0.50																			-1%
																			-9%
0.40																			-17%
0.30																			-25%
																			-33%
0.20																			-41%
0.10																			-49%
																		-57%
0.00																				-65%
01/11	01/12	12/12	11/13	10/14	10/15	09/16	08/17	07/18	07/19	06/20	05/21	05/22	04/23	03/24

Source: Bloomberg for Adjusted Share Price (price adjusted with cash distributions), Sole Director calculations for Discount / Premium

Note: The (discount) / premium is calculated in accordance with the IPS i.e. the (discount) / premium between the FP shares closing price on the BVB - REGS for each trading day and the latest published NAV per share at the date of calculation. However, the discount to NAV for the trading days 7-14 September 2023 was calculated based on the 31 August 2023 NAV (published on 15 September 2023), in order to eliminate the mismatch between the NAV per share and FP BVB market price that was adjusted on 7 September 2023 (the Ex-date of 29 September 2023 dividend distribution).

Performance objectives

According to the IPS in force, starting with 1 April 2022, the current reporting period for the performance objectives is from 1 January 2024 until 31 December 2024.

In accordance with the Fund's IPS, there are two performance objectives that the Sole Director is aiming to achieve. The NAV objective refers to an Adjusted NAV per share1 in the last day of the reporting period higher than the reported NAV per share as at the end of the previous reporting period. The discount objective implies the discount between the closing price of the Fund's shares on BVB - REGS and the latest reported NAV per share to be equal to, or lower than 15%, in at least 2/3 of the trading days in the reporting period.

Discount Objective - interim monitoring

In the period 1 January 2024 - 31 March 2024, the discount to NAV was above 15% in all trading days.

	Discount at	Discount at	Average Discount	Discount Range
	3 Jan 2024	29 Mar 2024	3 Jan - 29 Mar 2024	3 Jan - 29 Mar 2024
FP share	-18.6%	-20.8%	-21.7%	min -16.4%/ max -29.3%
FP GDR	-20.0%	-24.6%	-24.2%	min -20.0%/ max -29.7%

Source: Sole Director calculations

Note: discount is calculated according to the IPS, based on the latest published NAV per share available for the day of the calculation

1 The adjusted NAV for a given date is calculated as the sum of: (i) the reported NAV as at the end of the Reporting Period; (ii) any distributions to shareholders, being either dividend or non-dividend ones (i.e. in the last case following reductions of the par value of the shares and distribution to the shareholders), implemented after the end of the previous Reporting Period, and (iii) any distribution fee and any transaction/ distribution costs relating to either dividend or non-dividend distributions including buy-backs of shares/ GDRs/ depositary interests executed through daily acquisitions or public tenders after the end of the previous Reporting Period. The adjusted NAV per share is equal to the adjusted NAV divided by the total number of the Fund's paid shares, less FP ordinary shares bought back and less equivalent in FP ordinary shares of FP GDRs acquired and not yet converted into FP ordinary shares, on the last day of the Reporting Period. For more details, please refer to the IPS available on the Fund's webpage.

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Quarterly Report for the quarter ended 31 March 2024

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It is the Sole Director's intention to continue its efforts to minimise the discount to NAV through close collaboration with underlying portfolio companies to improve governance, efficiency, and profitability, as well as ongoing implementation of the Discount Control Mechanism, transparent communication, and disclosure, supported by proactive investor relations.

NAV Objective - interim monitoring

The Adjusted NAV per share as at 31 March 2024 was RON 0.6569 per share, 0.59% lower than the 31 December 2023 NAV per share of RON 0.6608.

NAV Objective	Amount RON	Details
Total NAV as at 31 Mar 2024	2,336,376,273
Other costs related to buy-backs starting 1 Jan 2024	17,640	Fees related to the 14th buy-back
		programme invoiced after 31 Dec
		2023, excluding the distribution
		fees for buy-backs
Other costs related to dividends paid starting 1 Jan	2,575	Central Depositary and Paying
2024		Agent fees
Dividend distributions starting 1 Jan 2024	-	No dividend distribution in Q1 2024
Distribution fees for dividend distributions	-	No dividend distribution in Q1 2024
performed starting 1 Jan 2024
Distribution fees for buy-backs starting 1 Jan 2024	-	No buy-backs in Q1 2024
Total Adjusted NAV as at 31 Mar 2024	2,336,396,488
Number of paid shares, less treasury shares and	3,556,427,239
GDRs held as at 31 Mar 2024
Adjusted NAV per share as at 31 Mar 2024	0.6569
NAV per share as at 31 Dec 2023	0.6608
Difference	(0.0039)
%	-0.59%

Source: Sole Director calculations

During 13 February 2024 the shareholders approved the 15th buyback programme for 1 billion shares - for more details regarding the start of the programme, please see section Subsequent events.

Also, the Sole Director proposed a special dividend distribution of RON 0.06 per share with payment date on 7 June 2024, subject to shareholders approval during 30 April 2024 Annual GSM - for more details please see section Subsequent events.

Investor relations

In the first three months of the year, in our efforts to increase the visibility and the profile of the Fund, as well as the local capital market, and Romania, to a broader international institutional investor base, the Fund's management team organised one road-show in Cluj and met with retail investors interested in finding out more details about Fondul Proprietatea and its equity story, and in receiving updates on the Fund, its corporate actions, and the main portfolio holdings, as well as on the Romanian macroeconomic environment.

During the first quarter, we also participated in one investor conference in Bucharest.

On 29 February we organised Fondul Proprietatea 2023 Preliminary Annual results Conference Call with institutional investors and financial analysts, where 14 professionals participated.

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