EGMS Jan 13/14, 2016

Transcription

1 EGMS Jan 13/14, Approval of the activity report of the board of directors regarding the status of the implementation of multiannual strategy and investments made ( Investment Policies Statement, approved by OGMS no. 8/ ; Activity Program 2015, approved by OGMS no ); Consultation regarding the milestones of 2016 Activity Program and the mandate of the Board of Directors to draft the 2016 Activity Program.

2 3 Status of the implementation of Multiannual Strategy and the investments made. Shareholders consultation regarding 2016 Activity Program 3.1. Status of the multiannual implementation strategy / Our Goals 2015 Activity program (approved by the shareholders in the GMS/ ) has been based on a strategy of mixed resource assignment towards the share market and the simultaneous implementation of some private equity investment projects to insure the sustainability of SIF Moldova s activity and the satisfaction of shareholders interests, both on the short and long term. CORE Portfolio offers increase potential as the capital market evolves and liquidity of SIF Moldova assets, representing the generating pillar of new investment sources. The continuation of assets portfolio reconfiguration for the purpose of increasing the average and long term potential has continued, in agreement with the specifications of each portfolio and the evolution of the macro-economic environment: Majority Holdings Portfolio with a private equity -type approach that involves the development of some existent majority holdings (real estate, agriculture) and new investments through specialized entities in the sectors where factors considered to be generators of sustainable increase (population consumption) cumulatively meet, as shown by the consumption indicators forecast and the increase of disposable incomes, development/ rethinking of agriculture especially value-added agriculture, niche agriculture, in which Romania can strengthen its competitive advantage. SELL Portfolio continuation of the restructure/ sell of historically held companies. 2

3 3.1. Status of multianual stragety implementation / Our Goals Majority Holdings Portfolio Concepts/ Selection Criteria The idea behind the Majority Holdings Portfolio is to enter the investment policy within the prudential limitations defined by specific regulations and insure the transparency in the communication with shareholders, as envisioned in the Corporate Governance Code. The operational framework of companies in this portfolio is conceived through gradual capital increase, by shareholder s contributions and credit. As investment projects are implemented and developed, it is estimated that there will be a need to draw financing resources through listings on the capital market. Selection criteria for investment projects The reality we live in, after the financial crisis, a reality characterized by interests reaching historic minimal values, the risk of managing a monetary mass dramatically increased through liquidities injunctions of FED and ECB, sudden and unsustainable rise of some assets classes (bonds, shares on some markets) requires a rethinking of investment grounds. In this context, SIF Moldova considers that the exposure on direct investments in the real investments though private equity type investments in fields in which Romania has experience and proven expertise, supported by request and included in Romania s National Development Strategy represents the right answer to the need to generate higher yield for the shareholders, given the continuous yield decrease from monetary markets or the increase of this market s volatility. A sustainable IRR through operation and /or valorification, improved through the access of bank credits. A competent management to develop the purchased company. Control possibilities for the risks associated to the project and field of activity. 3

4 3.1. Status of the multiannual implementation strategy / Our Goals Majority Holdings Portfolio Concept According to the 2015 Activity Program (approved in GMS/ ), the equivalent of mil EUR will be assigned for investment in the majority holdings Portfolio, namely 67%, with the possibility for recalibration, depending on the opportunities offered on the market. The total amount of the investments above will not exceed 10% of the total managed assets. According to the investment policy statement and the 2014 and 2015 Activity Program (materials approved by GMS 2014 and 2015) SIF Moldova has an investment strategy for the development of the Majority Holdings portfolio, characterized by: Project implementation in various activity sectors and business development through specialized companies (companies setup by SIF from within the group) and/or on companies from SIF Moldova s historic portfolio. Private equity type approaches that involve the development of existent majority holdings (real estate, agricultural machines), as well as new investments through specialized entities; investment decisions with a high degree of maturity/ impact on expected profits on average and long time. 4

5 3.1. Status of multiannual strategy implementation / What we have achieved Investment Process Limit abidance/ Compliance Analyzed / implemented projects Are according to the directions and principles presented in 2015 Activity Programme approved by the shareholders (OGM of ). Were presented to the shareholders through current and periodical reports, and through the notification the General Balance Meeting 2014, 2015) For the transparency of the activity, (without any legal obligation) we have chosen to be entered as Group (ASF Resolution no. 352/ At present SIF Moldova is the mother company of the SIF Moldova Group complrised of 11 brnaches, of which 3 are indirect holdings of SIF Moldova, being setup by the branches where SIF Moldova Are subjected to the internal control missions of the conformity departments (infernal verification, internal audit, risk management) for the period: 1. Investments made in branches The control reports have covered the activity carried out between (30.09) Conclusions: all legal regulations and incidental internal regulations (investment support and approval; implementation of approved investment decisions, investment reporting, investment monitoring) Their reports and conclusions (approved by the Board of Directors) have been reported to ASF and tax, Deloitte Audit 2. Monitoring investments closing legal and prudential limits and operational risks management method. Control reports targeted all issuers closing the holding limits ( ) Conclusions: There are no legal limits exceeded on the status reporting dates For the cases when the holding limits are passively exceeded, case that is not legally regulated, mechanisms have been set up along with internal management measures (for example TLV share holding). Regarding SIF holdings: 1. no exceeding of legal limits were identified; 2. the holdings are managed from the perspective of abiding by the 5% legal limit and incidental provisions regarding concentrated holdings (Art of Law no297/2004, CNVM Regulation no.6/2012) The reports and their conclusions (Approved by the Board of Directors) have been communicated to ASF and tax auditor, Deloitte Audit 5

6 3.1. Multianual implementation strategy status/ What we have achieved Evolution of the portfolio Other assets 16.44% SELL 7.74% Majority holdings 10.75% CORE 65.07% End of 2015 estimate Other assets 12.07% SELL 7.74% Majority holdings 10.75% CORE 69.44% Oct 2015 Other assets 13.78% SELL 8.46% Majority holdings 5.59% (% of total assets value ) Other assets 11.98% SELL 7.35% Majority holdings 6.05% CORE 72.17% End of 2014 CORE 74.62% H Changing the weights for both "CORE" and majority ownership portfolio was made as a result of the reallocation of the liquidity generated by the asset portfolio and the evolutions registered by the quotations of the securities listed at the BSE. This process exactly describes the strategy, that is to assign assets from classes with a low yield (cash or historic investments minority, difficult to monitor, many in companies in various stages of insolvency/ reorganization/bankruptcy) to CORE classes (which allow dividend stability and predictability, transparency and liquidity) and Majority Holdings (which insure high yield under controlled and assumed risk conditions). 6

7 3.1. Status of multiannual strategy implementation / What we have achieved Decision-making process On the level of the executive management, in 2015 the Management Committee has been set up again in 2015 with the assignment of responsibilities on the operational level: President CEO general coordination of the activity and direct coordination of the support/ conformity departments, Vice President Deputy CEO coordination of the Investments Management Department CORE, SELL portfolios and Transaction activity, Management Committee Manager Coordination of Majority Holdings Portfolio. The dual management principles were included in the unitary management structure through the control of the executive management, including, through the increase of role of Consultations Committees of the Board of Directors on assigned fields, namely: investment policies and strategies- The Investment Strategies Policy Committee, policies that aim to improve the structure of the organization, human resources, remuneration Nomination Committee, policies regarding financial reporting, internal/external audit and risk management Audit Committee. The monitoring of the investments closing legal and prudential limits and operational risks management methods investments in branches and methods of decision-making have been the object of some certifications / verifications/ internal verification made by conformity departments (Internal Control, Internal Audit, Risk Management) both in real time, during the investment process, and afterwards, and the conclusions were that all legal and incidental internal regulations were abided by. Conclusions of the reports: TLV share holdings were targeted regarding the abidance by the 10% legal holding limit, a limit that can be increased up to max. 40% of total SIF Moldova assets and shares with SIFs regarding the abidance by the legal holding limit of 5% of share capital. Analysis of the meeting of conformity obligations for the investments made by SIF Moldova in braches Approved branch investment decisions have been implemented within the limits and conditions approved by the competent decision bodies (Board of Directors, GMS, specialized companies); through instruments implemented by SIF Moldova the obligations imposed through the Articles of Incorporation, Management Contracts, mandate contracts in GMSs, reports set on the level of the SIF Moldova Group are periodically monitored. Independent Evaluations In order to insure the quality of the management of assets under the application of some risk management policies, evaluation activities have been contacted for areas such as: 1. Internal audit and risk management (Deloitte Audit Report- 2014, 2015)- the auditor s recommendations have been implemented. 2. IT Risk Evaluation (Deloitte Audit Report )- the auditor s recommendations are / (being) implemented Institutional certification 1. Quality management system (ISO 9001 URS / annual certification) 2. IT Security Management System (ISO URS / annual certification) 7

8 3.1. Status of multiannual strategy implementation / What we have achieved Approves Approves Approves Approves Management Committee President GMS Board Towards implementation Towards implementation To be approved in the Board Vicepresident Flow: analysis authorization approval Implementation Authorization Portof 2 CORE+ Portof 3 SELL (Approves/ signs fundamental notes and representation mandates) To be approved To be approved in the BD Authorization Portof 1 - Majority Holdings (Approves/ signs fundamental notes and representation mandates) Manager To be approved Investment Policies and Strategies Committee Investment Committee Authorizes/ issues recommendations To be authorized in case the limits of the investment strategies/ prudential limits are close. Authorizes fundamental notes. To be implemented Financial Legal Compliance Risk Investment Management Dept. To be authorized To be authorized To be implemented To be authorized Majority Holdings portfolio CORE portfolio SELL portfolio Transactions Drafts fundamental notes + representation mandates Drafts fundamental notes + representation mandates Drafts fundamental notes + representation mandates Implements transactions 8

9 2016 Activity Program Outlook Investment policy aims to increase the value of the managed assets on the long term, constantly generate yield from transactions and dividends through the continuous optimization of assets. Key Elements Dividend policy- The Board of Directors maintains its predictable dividend policy, announced in the Investment Policy Statement namely in the absence of extraordinary market circumstances, 9

10 2016 Activity Programme Outlook Investment policy / Assets structure Strategic objective for the exposure of SIF Moldova on listed shares will be insured through the orientation of the companies in the Majority Holdings portfolio towards the share capital through ATS listing, for the purpose of drawing development resources, by coopting other investors. The exposure on the energy and utilities sectors will be maintained, as this is able to supply constant and predictable liquidities. Financial-banking sector, which in 2015 showed a real stability through crediting restart, remains a focus of SIF Moldova that has already assigned important resources in a solid bank, undergoing a constant development process after the absorption of another local player. In 2016, investments in the Majority Holdings Portfolio will focus on the real-estate sector given the average and long-term increase potential of this sector. The residential development of some key real estate properties in SIF Moldova will be the main focus. Part of the investment process will be represented by the development of already implemented projects (investments for upgrading /extension etc.) 10

11 2016 Activity Program Outlook CORE Portfolio Core Portfolio (defined based on liquidity and assets performance on the average and long term) insures the remuneration of invested capital through dividends and capitalizes the capital market increase potential. Strategic exposure on the two key structure, energy and financial, with the given adjustments/issuer, total or partial, are possible depending on the results of some performance optimization techniques and yield/risk analysis. Other assets 30.56% Other CORE titles 2.42% TEL 1.65% TGN 4.83% SNG 1.73% ARS 3.98% SIF5 3.07% SIF4 2.11% SNP 4.36% TLV 39.48% BIO 2.40% FP 3.81% Oct 2015 OTHER ASSETS 29.19% ATE TITLURI CORE 3.10% TEL 2.13% TGN 5.02% ARS 2.96% SNG 2.39% (% of total assets value) SIF5 3.42% SIF4 2.51% SNP 6.26% TLV 29.68% BIO 2.68% FP 10.66% End of 2014 Non- UCITS investments There have been implemented policies regarding the benefiting from the possibility of buying non UCITS, the SIFs being able to have the same investment alternatives as the other non-ucits (FP) - according to ASF decision no 23 / Feb 5, 2014 investments in this category are defined as shortterm/medium investments, of a speculative nature, following the coverage of the liquidity risk and the portfolio diversification There were made on the basis of the multi-annual strategy and on the recommendations of the Investment Policy and strategy Committee Legal holdings limits are not exceeded 11

12 2016 Activity Program Outlook The financial sector exposure has increased to 46.94% (40.15% at the end of 2014) OTHER ASSETS 12.07% TLV 39.48% BVB 0.73% OTHER SECTORS 40.99% Oct 2015 OTHER TITLES 0.31% SIF3 0.62% SIF5 3.07% SIF4 2.11% BRD 0.40% EXIM 0.22% OTHER ASSETS 14.33% OTHER SECTORS 46.00% End of 2014 (% of total assets value) OTHER TITLES 0.35% BRK 0.13% TLV 29.48% BRD 2.90% BVB 0.92% SIF4 2.49% SIF5 3.40% Operations carried out between , have resulted in the increase of the exposure on issuer Banca Transilvania of total assets of SIF Moldova, in accordance to the 2015 Activity Program. Later evolution of Banca Transilvania Share (TLV) has confirmed SIF Moldova estimates/ expectance, the issuer significantly contributing to the performance of the portfolio. Banca Transilvania (TLV) exposure will continue in 2016, due to the share increase potential, based on the large quantity of cash and the cash equivalents held (1/3 of assets) and the increase of own capitals, following the registration of the 1,564 billion lei profit resulted from the purchase of Volksbank. These evolutions can create the premises for dividend distribution for For the purpose of abiding by legal and prudential limits, SIF Moldova has implemented an internal mechanism to manage the exposure influenced by TLV tile quotation fluctuation. 12

13 2016 Activity Program Outlook OTHER ASSETS 12.07% COTE 0.48% FP 3.81% SNP 4.36% SNG 1.73% Energy Sector exposure Weight in total assets on Oct 2015 of 17.07% (2014: 27.55%) TGN 4.43% TEL 1.69% OTHER TITLES 0.61% OTHER SECTORS 70.86% Oct 2015 Other assets 14.00% Quotas 0.43% FP 10.58% SNP 6.22% SNG 2.38% Other sectors 58.63% End of 2014 TGN 4.99% TEL 2.11% ELMA 0.49% OTHER TITLES 0.17% We estimate that the dividend income will remain at a level similar to that in 2015 based on solid companies and predicable dividend policies. The flow of constant and consistent dividends is an anchor of SIF Moldova s financial strategy, we aim to maintain the exposure in this sector, as long as the fundamental indicators remain attractive. (% of total assets value ) 13

14 2016 Activity Programme Outlook Majority Holding Portfolio Other assets 12.07% REAL ESTATE ASSET 4,23% TESATORIILE REUNITE 2,22% OPPORTUNITY CAPITAL 1,35% MECANICA CEAHLAU 1,12% AGRIBUSINESS CAPITAL 0,80% CASA 0,57% ASSET INVEST 0,23% REGAL 0,22% SELL 7.74% Majority Holdings 10.75% CORE 69.44% Oct 2015 Other assets 13.78% TESATORIILE REUNITE 2.62% REGAL 1.14% MECANICA CEAHLAU 0.97% CASA 0.56% ASSET INVEST 0.26% AGRIBUSINESS CAPITAL 0.01% REAL ESTATE ASSET 0.01% OPPORTUNITY CAPITAL 0.01% SELL 8.46% Majority Holdings 5.59% CORE 72.17% End of 2014 (% of total assets value) 14

15 2016 Activity Program Outlook Majority Holdings Portfolio Analysis Indicators Investments are based on the use of measurement methods generally used in the private equity sector: 1. Cash multiples 2. Internal Rate of Return (IRR) The condition to accept an investment is that the internal rate of return be higher than the investment financing cost (WACC). In 2015 we have invested in projects with IRR between 15.1 and 32%, over the minimum imposed by the 15% strategy. These profitability rates represent a substantial premium in comparison to the capital cost and capital market yield in the last 3-5 years. Our investment efforts in 2016 will also focus on obtaining an IRR of at least 15%. Risk analysis also includes a project sensitivity analysis. The sensitivity analysis determines the way the performance indicators (for example IRR) are evolving, depending on the variation of specific indicators. In order to improve IRR we have selected a resource mix including credits and capital contributions. We intend to continue this approach in 2016 as well. The yield /risk benchmarks of each investment will be carefully monitored by internal procedural structures. 15

16 2016 Activity Programme Outlook Majority Holdings Portfolio The investment project of REA consists in the construction and operation in association of Veranda Mall Commercial Center in Bucharest, in Obor-Colentina area. The investment falls into the proximity malls category, being located in a highly-populated area, with commercial traffic Real Estate Asset (REA) In order to implement the investment, SIF Moldova has subscribed to the increase of share capital of REA, the amount of 65,566,529 lei of which it paid the amount of 44,741,944 lei. REA has purchased on a number of 6,555,211 Prodplast Imobiliare (PPLI) shares worth 39,921,234.9 lei (for a price of 6.09 lei/share and a number of 643,859 NORD shares worth ,5 lei for a price of 7.5 lei/share). Through these purchases, REA has acquired shareholder quality in PPLI and NORD and entered an Agreement regarding the protection of the minor shareholder s rights For 2016 we are mainly focused on the residential development of some properties in SIF Moldova s portfolio. We consider that the come-back of the market is largely done, and with the constant increase of the demand for apartments at low prices with average areas, this sector qualifies for investments. 16

17 2016 Activity Programme Outlook Majority Holdings Portfolio The company s objective is the selection of projects from the agricultural field that would lead to the achievement of profitability of business and capital increase indicators. The main activity of the company has been carried out by Agrointens. The purchase of a blueberry farm by Agrointens has had the purpose of obtaining icome through specialized and professional management and later sale at high prices. The advantages of such a crop are based on its long exploitation term (40 to 50 years), high tolerange to diseases and pests, as well as high production yield. Agribusiness Capital The investment in the intensive blueberry crop has been based on the average and long term increase potential of this type of crop. In 2015 SIF Moldova has participated to the increase of the share capital with the amount of 10,453,259 lei. Agribusiness Capital has financed the investment project Blueberry Farm, increasing the share capital of Agrointens SRL. The results of the 2015 harvesting campaign have confirmed the expectations foreseen in the financial forecasts (income as of : 3,083,367 lei that is a net profit of 1,182,717 lei). The company s management estimates that a 3 mil lei EBITDA will be reached in 3 years, that is an annual yield of 30%. The agricultural sector remains one of interest for SIF Moldova in 2016 as well. For investments in the agricultural field we estimate an important increase potential (farms, plantations, land with high income generation potential). Agribusiness Capital S.A. Analysis projects for the purchase of some agricultural assets, with the purpose of managing them professionally and their sale at higher prices. 17

18 2016 Activity Programme Outlook Majority Holdings Portfolio The research focused mainly of Romanian hotel market, that is locations in mountain resorts with high tourist attraction or large financial and business centers. In 2015 SIF Moldova subscribed to the increase of the share capital of Opportunity Capital SA the amount of 19,476,248 lei of which it paid up 5,471,248 lei, for the purpose of financing an investment in the hotel field. In 2015 Opportunity Capital SA forecasts a new share capital increase of 15 mil lei for the purchase of another asset. Opportunity Capital The tourism sector has an increase potential in the following years based on the economic increase and the increase of people s incomes (arrivals registered in tourist units in September 2015 have increased by 18,5% in comparison to those in September 2014 while the registered overnighting have increased by 16,9% in comparison to those in September 2014, source: National Institute of Statistics. In 2016, we will continue the opportunist approach towards various fields of activity, depending on the potential. In particular, we are analyzing companies undergoing restructuring, transformation opportunities and added value creation through new management. The investments of this company will focus on distress businesses with increase / extension potential, less real estate and agri-business. The target businesses will be characterized by products / services with a defined competitive advantage, temporary capital needs for development and a specialized management team with experience in the field. 18

19 2016 Activity Programme Outlook 2016 Investment Budget Milestones 20% limit applied to fixed assets, less balance receivables Abidance by conditionings/ Legal limits 20% limit of total assets in closed companies The more restrictive limit shall apply Strengthening of the investment projects implemented in year Investment projects milestones Development of a residential project on a company in SIF Moldova s Portfolio, located in urban areas with rising development / request potential. Analisys of other investment projects who meet the yield/risk criteria, with average and long-term impact on the increase of the defined portfolio performance. 19

20 2016 Activity Program Outlook Dividend/share (lei) Total dividends to be paid (mn lei) Dividend policy Total dividend fund : 401 mil lei The dividends that SIF Moldova has offered over the last years have largely exeeded the yield offered by bank deposits on a downwards patch tendency over the last years due to the monetary relaxation policty adopted by NBR. Consequently, in the context of the share markets volatility, the Board of Directors aims to find an optimum balance between the need to insure resources for the support of investment programs taht are to be developed in 2016, the expectaions of the shareholders on the short run, that is the distribution of dividents and the expectations of the shareholders on the long term, namely the of NAV and implicitely, the increase of the price. 20

21 References/Sources: Board Reports SIF Moldova 2014, Q1 2015, S1 2015, Q (periodical reports issued to BVB/ ASF as per financial communication calendar) Investment Policies Statements approved by OGMS resolution no. 8/ ; 2015 Activity Program, approved by OGMS resolution no.7/ ; Internal regulations ASF approval no. 238/ ; Corporate Governance Code revised edition Feb 2015, approved by the Board on ; Internal Audit, Internal Control, Management Risk Current Report - regarding the compliance, documentation, transaction initiation, performance monitoring and transparency obligations for investments made in issuers closing allowed investment limits (approved by the Board ; conveyed to ASF) Internal Audit, Internal Control, Management Risk Current Report - monitoring of investments bordering legal and prudential limits and operational risks management method Annex 5.2. to Q Board Report (approved by Board ; conveyed to ASF) Internal Audit, Internal Control, Management Risk Current Report - analysis of the compliance obligations for investments made by SIF Moldova in its branches between Annex 5.2. to Q Board Report (approved by the Board on ; conveyed to ASF) 21

22 Resolutions Project 1. Approves the activity report of the Board of Directors regarding the status of the implementation of multiannual strategy in agreement with the Investment Policies Statement (approved by. AGOA Decision no. 8/ ) and with the 2015 Activity Program (Approved by OGMS Decision no. 7/ ). 2. Following the consultation of shareholders, it is mandated the Board of Directors for the program activities in 2016, based on the milestones presented at the EGMS. 22