Romanian investment fund Fondul Proprietatea (FP) ended 2014 with a record net profit of EUR 228 million, up by 48% compared to 2013, when the company's profit amounted to EUR 151.1 million.

Most of this profit came from dividends paid by companies in which FP holds stakes, as well as from the fund’s asset sales, which reached EUR 240 million in 2014. The fund sold several significant stakes last year, in gas producer Romgaz, electricity transport company Transelectrica and oil pipe operator Conpet.

The fund’s profit is less relevant for investors, as fund manager Franklin Templeton convinced FP’s shareholders to give up on dividends. In return, FP will repay them some of the fund’s share capital, amounting to RON 0.5 per share, which is tax free, unlike dividends which are taxed with a 16% flat rate in Romania.

Fondul Proprietatea’s net asset value amounted to EUR 2.95 billion at the end of December, down by 11.8% from EUR 3.35 billion in December last year, according to a report sent by FP to the Bucharest Stock Exchange (BVB).

This was mainly influenced by the decline registered by OMV Petrom shares, which went down by 13% last year. The 19% stake held in OMV Petrom is FP’s largest individual holding, representing a third of its net asset value. Part of the fund’s net asset decline was also determined by the payments made by the fund to its own shareholders, either via capital returns or via share repurchase programs.

Fondul Proprietatea last year cancelled 1.34 billion of its own shares, which it had bought back in previous years and started a new buyback program for 990 million of its owns shares. As part of this program, the fund also made a buyback offer for 750 million shares, paying EUR 186 million to shareholders. The price in the offer was higher than the market price by about 18%.

These buyback programs are aimed at reducing the discount for which the fund’s shares are traded on the Bucharest Stock Exchange (BVB) compared to its net asset value per share, which is the main indicator investors follow.

FP’s shares are currently trading at RON 0.84/share, as of Friday, January 16, compared to a NAV per share of RON 1.2125/share, on December 31, 2014. This stands for a 30% discount.

Andrei Chirileasa, andrei@romania-insider.com