IMPORTANT!!! This document contains an English language translation of the Bulgarian prospectus prepared in the Bulgarian language, pursuant to and in compliance with Bulgarian law (the “Prospectus”), which Bulgarian Prospectus was filed with the Bulgarian Financial Supervision Commission/Комисия за финансов надзор (“FSC”) and was approved by the FSC with resolution No. 601-E/21.07.2015. This document is for information purposes only and should not be relied upon. This is not an offering circular, information memorandum or any other form of offering document. SIRMA GROUP HOLDING JSC (the “Issuer”) and ELANA TRADING JSC (the “Investment Intermediary”), make no representation or warranty, express or implied, as to the fairness, accuracy, completeness or correctness of this English translation, and neither the Issuer nor the Investment Intermediary accept any responsibility or liability whatsoever for any loss or damage however arising from any use of this translation or its contents or arising in connection with it. This English translation of the Prospectus is not an official translation. This translation is for information purposes only and is not a substitute for the Prospectus. The only official version of the Prospectus is the Bulgarian version which has been approved by the competent body of the issuer and prepared and published according to Bulgarian law and regulations. Any discrepancies or differences between the Prospectus and this translation are not binding and the Prospectus shall prevail. The Prospectus can be found in printed form at the head office of the Issuer and the Investment Intermediary, and in electronic form on the websites of the Issuer (www.sirma.com/bg/) and the Investment Intermediary (www.elana.net). The prospectus should be read in its entirety. This English translation has not been filed or published according to Bulgarian law. Accordingly, any authorised recipient should refer only to the official Bulgarian version of the Prospectus before making an investment decision and seek appropriate professional advice before investing in any securities. This English translation does not contain or constitute, and should not be relied upon as, an offer or invitation to make an offer or to acquire any securities in any jurisdiction. By accessing this document you acknowledge, accept and agree to the foregoing. This translation is not for publication or any distribution, directly or indirectly, in whole or in part, in or into the United States, Canada, Australia or Japan. These materials are not an offer of securities for sale in the United States, Canada, Australia or Japan. Securities may not be offered or sold in the United States in absence of registration with the U.S. Securities And Exchange Commission or an exemption from registration under the U.S. Securities Act of 1933, as amended. SIRMA GROUP HOLDING JSC does not intend to register any part of the offering in the United States or to conduct a public offering of securities in the United States.
Transcript
IMPORTANT!!!
This document contains an English language translation of the Bulgarian prospectus prepared in the Bulgarian language,
pursuant to and in compliance with Bulgarian law (the “Prospectus”), which Bulgarian Prospectus was filed with the
Bulgarian Financial Supervision Commission/Комисия за финансов надзор (“FSC”) and was approved by the FSC with
resolution No. 601-E/21.07.2015.
This document is for information purposes only and should not be relied upon.
This is not an offering circular, information memorandum or any other form of offering document. SIRMA GROUP HOLDING
JSC (the “Issuer”) and ELANA TRADING JSC (the “Investment Intermediary”), make no representation or warranty, express
or implied, as to the fairness, accuracy, completeness or correctness of this English translation, and neither the Issuer nor
the Investment Intermediary accept any responsibility or liability whatsoever for any loss or damage however arising from
any use of this translation or its contents or arising in connection with it.
This English translation of the Prospectus is not an official translation. This translation is for information purposes only and
is not a substitute for the Prospectus. The only official version of the Prospectus is the Bulgarian version which has been
approved by the competent body of the issuer and prepared and published according to Bulgarian law and regulations. Any
discrepancies or differences between the Prospectus and this translation are not binding and the Prospectus shall prevail.
The Prospectus can be found in printed form at the head office of the Issuer and the Investment Intermediary, and in
electronic form on the websites of the Issuer (www.sirma.com/bg/) and the Investment Intermediary (www.elana.net). The
prospectus should be read in its entirety.
This English translation has not been filed or published according to Bulgarian law. Accordingly, any authorised recipient
should refer only to the official Bulgarian version of the Prospectus before making an investment decision and seek
appropriate professional advice before investing in any securities.
This English translation does not contain or constitute, and should not be relied upon as, an offer or invitation to make an
offer or to acquire any securities in any jurisdiction.
By accessing this document you acknowledge, accept and agree to the foregoing.
This translation is not for publication or any distribution, directly or indirectly, in whole or in part, in or into the United
States, Canada, Australia or Japan. These materials are not an offer of securities for sale in the United States, Canada,
Australia or Japan. Securities may not be offered or sold in the United States in absence of registration with the U.S.
Securities And Exchange Commission or an exemption from registration under the U.S. Securities Act of 1933, as amended.
SIRMA GROUP HOLDING JSC does not intend to register any part of the offering in the United States or to conduct a public
THIRD PART FROM THE PROSPECTUS FOR INITIAL PUBLIC OFFERING OF UP TO 18,491,858
SHARES
А.1 THE PROSPECTUS OF SIRMA GROUP HOLDING JSC CONTAINS ALL THE INFORMATION, NECESSARY FOR AN INVESTMENT DECISION, INCLUDING THE MAIN RISKS
FOR THE COMPANY AND ITS ACTIVITY. THE SUMMARY SHALL BE PERCEIVED AS AN INTRODUCTION TO THE PROSPECTUS. ANY DECISION TO INVEST IN THE SECURITIES
SHALL BE BASED ON EXAMINATION OF THE ENTIRE PROSPECTUS. ALL INVESTORS ARE ADVISED TO READ BOTH THE REGISTRATION DOCUMENT AND THE SECURITIES
NOTE BEFORE ADOPTING AN INVESTMENT DECISION. THE REGISTRATION DOCUMENT WITH THE SECURITIES NOTE AND THE RESUME COMPILE THE PROSPECTUS
FOR THE IPO. THE PROSPECTUS CONSISTS OF THE COMPLETE INFORMATION, WHICH, IN LINE WITH THE SPECIFIC CHARACTERISTICS OF THE COMPANY AND THE
SHARES, OFFERED THROUGH THE IPO, IS NECESSARY FOR ALL INVESTORS TO ARRIVE AT A PRECISE VALUATION OF THE ECONOMIC AND THE FINANCIAL STATE, THE
ASSETS AND THE LIABILITIES, THE FINANCIAL RESULTS, THE DEVELOPMENT PROSPECTS OF THE COMPANY, AS WELL AS WITH THE RIGHTS, CONNECTED TO THE
SHARES. ANY INVESTMENT IN SECURITIES IS RELATED TO CERTAIN RISKS. THE MAIN RISKS, RELATED TO SIRMA GROUP HOLDING JSC AND ITS ACTIVITIES, ARE ENLISTED
IN THE CURRENT SUMMARY, ITEM D “RISKS”.
THE FSC HAS APPROVED THE BULGARIAN VERSION OF THE PROSPECTUS WITH ITS DECISION № 601-E/21.07.2015, BUT IS NOT LIABLE FOR THE EXACTNESS
OF THE INFORMATION PRESENTED INSIDE.
THE MEMBERS OF THE BOARD OF DIRECTORS OF SIRMA GROUP HOLDING JSC SHALL BE RESPONSIBLE FOR THE DAMAGES CAUSED BY FALSE, MISLEADING OR
INCOMPLETE DATA IN THE SUMMARY. ELANA TRADING INC, BEING AUTHORIZED FOR THE PREPARATION OF PROSPECTUS AS AN INVESTMENT INTERMEDIARY, SHALL BE JOINTLY LIABLE FOR DAMAGES CAUSED BY FALSE, MISLEADING OR INCOMPLETE DATA IN THE SUMMARY. THE COMPILER OF THE ANNUAL FINANCIAL
STATEMENTS OF SIRMA GROUP HOLDING JSC SHALL BEAR JOINT RESPONSIBILITY WITH THE PERSONS UNDER THE PRECEDING SENTENCE FOR DAMAGES CAUSED
BY FALSE, MISLEADING OR INCOMPLETE DATA IN THE FINANCIAL STATEMENTS OF SIRMA GROUP HOLDING JSC. THE REGISTERED AUDITOR SHALL BE HELD
RESPONSIBLE FOR DAMAGES CAUSED BY THE AUDITED FINANCIAL STATEMENTS OF THE ISSUER.
CIVIL RESPONSIBILITY IS HELD ONLY BY THE INDIVIDUALS, WHO PREPARED THE SUMMARY, INCLUDING ITS TRANSALATION, IN CASE IT IS MISLEADING, INACURATE, INCONSISTENT WITH THE REMAINING PARTS OF THE PROSPECTUS OR, READ TOGETHER WITH THE OTHER PARTS DOES NOT PROVIDE KEY INFORMATION, WHICH TO
AID INVESTORS WHILE DECIDING ON THE INVESTMENT IN SUCH SECURIIES.
ANY CLAIMANT, THAT HAS PRESENTED A CLAIM TO THE CONTENT OF THE PROSPECTUS, MAY DECIDE, IN LINE WITH THE RELATIVE NATIONAL LEGISLATION, TO BEAR
THE TRANSLATION OF THE PROSPECTUS EXPENSES PRIOR THE START OF THE COURT PROCEEDINGS. THE INDIVIDUALS, THAT HAVE PREPARED THE SUMMARY, INCLUDING ITS TRANSALATION, SHALL BEAR RESPONSIBILITY FOR DAMAGES CAUSED BY FALSE, MISLEADING OR INCONSISTENT WITH THE REMAINING PARTS OF
THE PROSPECTUS.
А. 2 ELANA TRADING INC., AS THE ENTITY RESPONSIBLE FOR PROSPECTUS PREPARATION, GRANTS CONSENT FOR ITS USE IN A CONSECUTIVE SALE OR RESALE OR THE
ULTIMATE PLACEMENT OF THE SECURITIES, CONDUCTED BY FINANCIAL INTERMEDIARIES WITHIN THE OFFERING PERIOD (THE OFFERING). THE OFFERING STARTS FROM THE LATEST OF THE FOLLOWING EVENT: DATE OF PUBLISHING OF THE ANNOUNCEMENT IN THE COMMERCIAL REGISTER AND IN THE
APPOINTED TWO DAILY NEWSPAPERS, ON THE WEBPAGES OF THE ISSUER AND THE INVESTMENT INTERMEDIARY, AUTHORISED FOR THE OFFERING. IN THE CASE OF
SIRMA GROUP HOLDING JSC, ALL DOCUMENTS WILL BE PUBLISHED ON THE WEBPAGE OF FINANCIAL GROUP ELANA, NAMELY: WWW.ELANA.NET. SHARES
SUBSCRIPTION INITIATES AFTER THE EXPIRATION OF 7 DAYS FROM THE FIRST DATE OF OFFERING. THE DURATION OF THE TERM FOR OFFERS ACCEPTANCE WILL BE
30 DAYS. THERE ARE NO OTHER CONDITIONS THAT REFLECT ELANA’S CONSENT TOWARDS THE USE OF THE PROSPECTUS. INFORMATION WITH REGARD TO THE CONDITIONS AND THE PARAMETERS OF THE OFFER FROM EACH FINANCIAL INTERMEDIARY SHALL BE GIVEN IN THE MOMENT
OF THE OFFER PRESENTATION FROM THE RESPECTIVE FINANCIAL INTERMEDIARY.
The name of the Company is Sirma Group Holding JSC.
B.2 THE DOMICILE AND LEGAL FORM OF THE ISSUER, THE LEGISLATION UNDER WHICH THE ISSUER OPERATES AND ITS COUNTRY OF INCORPORATION.
Sirma Group Holding Jsc was registered in the Bulgarian Commercial Register on 25.04.2008 with Unified Identification Code: 200101236, with headquarters and management address: Sofia 1784, area Mladost, 135 Tzarigradsko shousse blvd. The Company’s name was changed on 23.03.2009 of SGH Jsc to Sirma Group Holding Jsc. The Company is not limited to a certain period of existence.
B.3 A DESCRIPTION OF, AND KEY FACTORS RELATING TO, THE NATURE OF THE ISSUER’S CURRENT OPERATIONS AND ITS PRINCIPAL ACTIVITIES, STATING
THE MAIN CATEGORIES OF PRODUCTS SOLD AND/OR SERVICES PERFORMED AND IDENTIFICATION OF THE PRINCIPAL MARKETS IN WHICH THE
ISSUER COMPETES
Sirma Group Holding JSC is the largest Bulgarian ICT group. Since 1992 the Issuer transforms innovative ideas and know-how in successful knowledge enterprises. The Company is a holding company that invests in technology businesses, manages them strategically and operationally, provides its subsidiaries with administrative, marketing and financial services. These services can be summarized in the following areas:
Strategic management;
Financial management and administrative services; and
General operations management, incl. human resources management, marketing and brand management.
Companies within the Group have historically accumulated great expertise, both in the implementation of various technological projects related to software and hardware developments, and business knowledge in many industries whereby the companies have delivered client projects or invested in R&D.
B.4А A DESCRIPTION OF THE MOST SIGNIFICANT RECENT TRENDS AFFECTING THE ISSUER AND THE INDUSTRIES IN WHICH IT OPERATES.
Software industry is among the few sectors that didn’t suffer during the economic and debt crisis. On the contrary, year after year the sector reports stable revenue growth, new jobs opens, highly qualified specialists are sought and new major foreign investors enter the market.
The software industry forms 1.74% of the Bulgaria’s GDP. This shows the estimated results from the annual survey of the Barometer for the software industry of the Bulgarian Association of Software Companies (BASCOM) for 2014. The estimates of the organization are that the revenues of companies in the sector will increase by 15% this year compared to the previous one and will reach 1.37 billion BGN (see chart below). About 60% of the sales are from export, as the main markets are the US, Canada and Western Europe.
The main concerns continue to be associated with the hot issue in recent years for lack of sufficient and well trained staff. The strong development of the IT sector begins to exceed the capabilities of the Bulgarian education to offer educated specialists. The companies in the software industry started pretty intensive and in cooperation with universities to develop junior experts in the field of IT, who are subsequently hired. However, these measures taken by private companies obviously are not sufficient since BASCOM is calling for a longer-term strategy in education, through which enough specialists with basic skills are prepared.
The sector has its own specifics - it’s mainly export-oriented, the companies are medium size and investments are rarely measured in tens of millions of levs, but rather in opening new jobs. Experts in this field are the most highly paid in Bulgaria for many years, so that any new investment of an established player or a foreign company that opens its subsidiary in the country, means that well trained staff with good salaries is sought. Good geographical location, availability of qualified specialists and low operating costs are among the main factors attracting major IT giants to invest in the country. So it is no surprise that on the first places in top 20 largest software developers are the local R&D units of large and established players such as German SAP and American VMware. In the list is also the Bulgarian "Telerik", judging by results from previous years.
B.5 IF THE ISSUER IS PART OF A GROUP, A DESCRIPTION OF THE GROUP AND THE ISSUER’S POSITION WITHIN THE GROUP.
Under s. 1, p. 7 of Ordinance no. 2 of September 17, 2003 on the prospectuses to be published when securities are offered to the public or admitted to trading on a regulated market and on disclosure of information by the public companies and the other issuers of securities (Art. Amend. - SG. 82 in 2007), "ECONOMIC GROUP" consists of the parent company and its subsidiaries.
Sirma Solutions JSC, Sofia, UIC: 040529004
SIRMA GROUP HOLDING JSC SUMMARY
3
Ontotext JSC, Sofia, UIC: 200356710
EngView Systems Sofia JSC, Sofia, UIC: 201277917
Sirma ITT JSC, Sofia, UIC: 200421236
Flash Media JSC, Sofia, UIC: 202444956
Subsidiaries of Sirma Solutions JSC:
Sirma Business Consulting JSC, Sofia, UIC: 175445129
Daticum JSC, Sofia, UIC: 200558943
Sirma ISG JSC, Sofia, UIC: 201580558
Sirma USA, UIC: 4757972
S&G Technology Services Limited, UK, reg. number 8165885
Subsidiaries of Ontotext JSC:
Ontotext USA - USA, Delaware, corporate number: 4888154
Sunsidiary of EngView Systems Sofia JSC:
Engview Systems Latin America - Sistema E Servicos Ltda
Associated companies:
GMG Systems Inc., USA, 14439 Katalina Street
E-Dom Management, Sofia, UIC: 201657264
Sirma Mobile, Sofia, UIC: 200558943
Companies established under Establishment agrrement:
Consortium Gravis-Sirma
Sirma Interconsult, a company under the Obligations and Contract Act
Sirma, a company under the Obligations and Contract Act
Sirma PI, a company under the Obligations and Contract Act
B.6 IN SO FAR AS IS KNOWN TO THE ISSUER, THE NAME OF ANY PERSON WHO, DIRECTLY OR INDIRECTLY, HAS AN INTEREST IN THE ISSUER’S CAPITAL
OR VOTING RIGHTS WHICH IS NOTIFIABLE UNDER THE ISSUER’S NATIONAL LAW, TOGETHER WITH THE AMOUNT OF EACH SUCH PERSON’S INTEREST. DIFFERENT VOTING RIGHTS IF ANY. PRESENCE OF CONTROL.
At the date of this document, there are individuals who are not members of the Board of Directors of the Issuer and directly owned more than 5% of the capital of the Issuer:
1. Veselin Antchev Kirov, with business address: Banishora district, Sofia, Bulgaria, holding directly 5,250,686 shares with a nominal value of BGN 1 each, representing 10.54% of the share capital of the Company;
2. Krasimir Nevelinov Bozhkov, with business address: 1 Temenuga Str., Sofia, Bulgaria, holding directly 5,250,686 shares with a nominal value of BGN 1 each, representing 10.54% of the share capital of the Company;
3. Ognian Plamenov Chernokozhev, with business address: 2A Simeon Pironkov Str., Sofia, Bulgaria, holding directly 3,727,730 shares with a nominal value of BGN 1 each, representing 7.48% of the share capital of the Company;
4. Yavor Liudmilov Dzhonev, with business address: 3 Dimityr Shishmanov Str., Sofia, Bulgaria, holding directly 35,250,686 shares with a nominal value of BGN 1 each, representing 10.54% of the share capital of the Company;
At the date of this document, there are no individuals, which possess indirectly more than 5% of the share capital of the Company.
The main shareholders of the Issuer have identical rights. All Shares of Sirma Group Holding Jsco are ordinary, dematerialized and give equal rights to their holders.
The Issuer is not aware of any control exercised over its activity..
B.7 SELECTED HISTORICAL KEY FINANCIAL INFORMATION REGARDING THE ISSUER
The presented selected financial data for the Company is based on the audited annual consolidated and individual financial statements as of 31.12.2012, 31.12.2013 and to 31.12.2014 and unaudited consolidated and individual interim financial statements as of 31.03.2015. The financial reports are prepared under IFRS and are implemented as an integral part of this prospectus.
SIRMA GROUP HOLDING JSC SUMMARY
4
Table 1. Consolidated financial information from the financial statements for the period 2012-31.03.2015
Table 1.1.Individual financial information from the financial statements for the period 2012-31.03.2015
* - The Annual General Shareholders Meeting of the Issuer held in 2014 decided to distribute dividend of BGN 100,000 of the net profit for 2013. The amount is not paid at the date of this document;
** - 2012 data is corrected in the 2013 audited consolidated annual financial report;
Source: Sirma Group Holding
B.8 SELECTED KEY PRO FORMA FINANCIAL INFORMATION, IDENTIFIED AS SUCH
The current pro forma financial information is arranged and presented in relation to the implemented restructuring posted in the Commercial Register on October, 23rd 2014. During the restructuring, the property designated as a set of rights, obligations and factual relations is set apart from the total property of Sirma Group Holding JSC. The separated property is transferred to the newly established company, which became the legal successor of the restructured company for this part of its property.
Resulting from the separation, SG Investment JSC, UIC: 203266702 was established with headquarters and permanent address: Sofia, Tsarigradsko Shosse blvd. №135. The main points of interest of the company are: developing, selling, implementing, training and coproducing software products, acquisition and sale of shares in Bulgarian and foreign companies and any other activity permitted by the law.
The newly established company has share capital amounting to BGN 2,918,720, divided into 2,918,720 shares, each having a nominal value of BGN 1. The capital of the newly established company is formed entirely at the expense of the proceeds of Sirma Group Holding JSC. Based on the estimations of a licensed independent appraiser, the total value of the property amounts to BGN 2,918,720, divided as follows:
1. Holding 100% of the share capital of Sirma Media JSC, UIC 200272963, with an estimated value of BGN 832,479. 2. Holding 82.45% of the share capital of Pirina Technologies JSC, UIC 175149906, with an estimated value of BGN
59,132 3. Four software modules with total value amounting to BGN 2,017,487, namely:
X-Package Designer - CAD/CAM software for packaging design;
X-Package Synergy – software for creating libraries of parametrical packages;
Indicators (in kBGN) 2012** 2013 2014 3/31/2014 3/31/2015
Net profit per share 0.0003 0.0055 0.0106 0.0009 0.0006
Total assets 79,104 80,101 58,112 80,095 58,176
Total l iabilities 1,670 2,261 3,347 2,188 3,383
Equity 77,434 77,840 54,765 77,907 54,793
Share capital 73,341 73,341 49,837 73,341 49,837
Dividend - 100 - - -
Dividend per share (DVP) - 0.001 - - -
SIRMA GROUP HOLDING JSC SUMMARY
5
X-Package Project Organizer - PDM (Product Data Management) system for the structuring of the working processes in the company;
X-Measure - system for planar research.
As a result of the restructuring, the capital of the issuer loses BGN 49,837,156 of its value through the cancellation of 23,503,662 shares. The decrease results from the calculated fair value of the shares of Sirma Group Holding JSC from two independent appraisers. The shareholding structure of the company remains unchanged as a result of the separation, as much as the shareholding structure of the restructured company and that of the newly established company fully reflect each other.
THE PRESENT PRO FORMA FINANCIAL INFORMATION AIMS TO PRESENT THE RELATIVE FINANCIAL SITUATION OF THE ISSUER FOR THE CURRENT
FINANCIAL PERIOD AND THE ANNUAL FINANCIAL PERIOD, ENDING CLOSEST TO THE RESTRUCTURING. IT IS PREPARED SOLELY FOR ILLUSTRATION
PURPOSES AND DUE TO ITS NATURE, IT EXAMINES A HYPOTHETICAL SITUATION, WHICH DOESN’T REPRESENT ACTUAL FINANCIAL INFORMATION
OR COMPANY RESULTS.
Table 2. Pro forma annual financial information for 2013, 2014 and as of 31.03.2015
Source: Sirma Group Holding
B.9 NOT APPLICABLE
B.10 A DESCRIPTION OF THE NATURE OF ANY QUALIFICATIONS IN THE AUDIT REPORT ON THE HISTORICAL FINANCIAL INFORMATION
For the period covered by the historical financial information there is no qualified opinion expressed on the audited financial statements of the Company.
B.11 SUFFICIENT WORKING CAPITAL
The Issuer conducts its basic operations using its own capital and borrowings. By the time this document is being written, the registered share capital of Sirma Group Holding JSC amounts to BGN 49,837,156.
The issuer has obligations to financial institutions as both an individual debtor and a guarantor for loans given to its subsidiaries. Information for all current liabilities of the company is presented in the following table:
At this stage, Sirma Group Holding JSC, and most of its subsidiaries are not planning any substantial alterations in the use of external borrowings, necessary to successfully carry out their activities- mainly bank loans for working capital and targeted funding of investment activities, including lease and grant schemes.
With the current offering the Issuer seeks to raise additional funds for the implementation of specified projects.
SECTION C – SECURITIES
C.1 A DESCRIPTION OF THE TYPE AND THE CLASS OF THE SECURITIES BEING OFFERED AND/OR ADMITTED TO TRADING, INCLUDING ANY SECURITY
IDENTIFICATION NUMBER.
In line with the decision of the general assembly of the company and the one of the board of directors, subject of this offering is a total of 18 491 858 shares, face value bgn 1 each, out of which up to 16,000,000 common, dematerialized, freely transferable and registered shares from the capital increase of the Company (“New shares”), and up to 2,491,858 common, dematerialized, freely transferable, registered and existing shares (“Existing shares”), ownership of all shareholders in Sirma Group Holding JSC (“Selling Shareholders”).
All shares, subject of this offering, will be subsequently listed on bse where will be traded.
All shares have a face value of bgn 1 and represent one class: common, dematerialized, freely transferable and registered and give their holders equal rights, namely: voting and dividend right and right to liquidation stake proportional to their nominal value.
The ISIN code of the company’s shares is BG1100032140.
C.2 CURRENCY OF THE SECURITIES ISSUE
The currency of the securities offered is BGN.
C.3 THE NUMBER OF SHARES ISSUED AND FULLY PAID AND ISSUED BUT NOT FULLY PAID. THE PAR VALUE PER SHARE.
As of the date of this document, the share capital of the Issuer is BGN 49,837,156, divided into 49,837,156 common shares with equal rights to shareholders. All shares are with nominal value of BGN 1.00 and are fully paid.
C.4 A DESCRIPTION OF THE RIGHTS ATTACHED TO THE SECURITIES.
Each subscribed share entitles its holder with two major groups of rights – tangible and intangible:
The tangible shareholders rights are the right to dividend and the right of a liquidation stake:
Right to dividend - the right to dividend is a basic tangible right of a shareholder, which translates into the right to receive a share of the net profit of the Company in proportion to its stake in the capital of the same, subject to conditions specified in the law - General Meeting of Shareholders decision for a dividend distribution, audited annual financial statements and specific decision of the General Meeting on the allocation of profits.
Right to a liquidation stake – the right to a liquidation stake is a basic tangible right of a shareholder expressing the right to receive a proportion of the remaining property of the Company upon termination of the Company through liquidation.
The intangible shareholders rights can be separated in three groups: management, controlling and protective rights:
Management: right to vote and right to participate in company’s management.
Controlling: right to information;
Protective: right to appeal against decisions of company’s bodies, right to request the appointment of statutory auditors, and minority rights.
Additional shareholders rights: right to subscribe new shares in capital increase, and right of a preferential acquisition of securities.
Minority rights: Individuals and/or entities holding together or separately at least 5 percent of the capital of a public company, in case of inaction of the governing bodies, which threatens the interests of the company, may file lawsuits on behalf of the company against third parties. The company is summoned as a party to this case. Shareholders, that hold shares representing at least 5% of the capital of the company for more than three months, may request the board of directors to convene a general meeting.
C.5 A DESCRIPTION OF ANY RESTRICTIONS ON THE FREE TRANSFERABILITY OF THE SECURITIES.
According to the articles of Sirma Group Holding JSC, all shares of the Company form one class - ordinary, dematerialized, freely transferable shares with the right to vote. The articles does not provide for restrictions on the exercise of share rights. The transfer of shares between shareholders and third parties shall be implemented freely, subject to the provisions of the Bulgarian legislation. The transfer of shares takes effect upon the registration of that transfer in the Central Depository.
C.6 APPLICATION FOR ADMISSION TO TRADING ON A REGULATED MARKET
Upon а successful offering, Elana Trading shall provide Sirma Group Holding JSC with a list indicating the number of subscribed new shares as the list shall be submitted with the Commercial Register and Central Depository. Upon registration of the capital increase and the new shares in the Commercial Register, Central Depository will register the new shares and will open new or credit existing accounts of the investors with the subscribed and paid new shares. The new shares will be charged to the investors’ accounts with their investment intermediary by which the subscription rights have been exercised.
Immediately upon caoital increase registration with the Commercial Register, the Issuer shall submit for issue registration with the Central Depository and with the Financial Supervision Commission, then the Issuer will submit with the Bulgarian Stock Exchange for admission for trading of the new shares. The first trading day shall be determined by the Board of Directors of BSE, following the registration of the new issue. In this regard, the securities offered by this document shall be a subject of an application for admission to trading on a regulated market, namely the BSE.
SIRMA GROUP HOLDING JSC SUMMARY
7
C.7 A DESCRIPTION OF DIVIDEND POLICY
The company pays out dividends to its shareholders, as the amount of the dividend is determined on the General Meeting of the Shareholders. The current shareholders of the Issuer intend to vote for the paying out of dividends amounting to 20% to 40% of the income in the future.
SECTION D – RISKS
D.1 KEY INFORMATION ON THE KEY RISKS THAT ARE SPECIFIC TO THE ISSUER OR ITS INDUSTRY
GENERAL RISKS arise from changes in the overall economic environment and, in particular, fluctuations in the financial markets. Systematic risks cannot be diversified since all businesses in the country are exposed to them.
ECONOMIC GROWTH: The correlation between economic growth and external debt of the country has direct impact on the formation and evolution of the market conditions and investment climate.
POLITICAL RISK: This is the risk arising from the political processes in the country - the risk of political instability, changes in management principles, legislation and economic policy. Political risk is directly related to the likelihood of unfavorable changes in direction of the government's long-term policy, as a result there is a risk of adverse changes in the business climate.
CREDIT RISK: Credit risk of the country is connected to the state's ability to repay its obligations regularly.
CURRENCY RISK: The essence of this risk lies in the possibility of a sharp depreciation of the local currency, and thus revenue for operators in the country to be affected by changes in the exchange rate of the BGN against other currencies.
INTEREST RATE RISK: The interest rat risk is connected to the increase of the interest rates, thus the interest expenses, which directly influences the net profit of any entity.
RISK OF INFLATION: This is the risk of increase in the general prices level.
RISK OF UNFAVORABLE CHANGES IN TAX AND OTHER LAWS: Taxes paid by Bulgarian companies include withholding taxes, local taxes, corporate profit tax, value added tax, excise duties, import and export duties and property taxes. The taxation system in Bulgaria is still developing as a result of which inconsistency may occur as a result of enforcement at both state and local level.
RISK OF FORCE MAJEURE: Force majeure events such as natural disasters, sabotage, and outbreak of war, acts of terrorism, and others can lead to unpredictable changes in investors' attitude.
NON-SYTEMATIC RISKS are associated with general investment risks specific to the Company and the industry. Non-systematic risks can be divided into two types: sector risk, uncertainty concerning the development of the industry as a whole and Company risk arising from the specifics of the particular company.
SECTOR RISK: The Company is exposed to various risks, including: 1) risks, applicable to the information and communications technologies (ICT); and 2) risks, specific to the Company itself.
SPECIFIC COMPANY RISK: The main risk of Sirma Group Holding Jsc is associated with the reduction of solvent demand of the products offered by the Company, and changes in the conditions for the provision of these services.
OPERATIONAL RISK: Operational risks are associated with the management of the company and can be expressed as making wrong decisions for the ongoing investment and liquidity management of the company from the management team, inability of the management team to launch the implementation of planned projects or lack of adequate personnel, leaving of key employees, and failure to appoint new ones, etc.
CREDIT RISK: This is the potential inability of a company to meet its credit obligations on time.
INTEREST RATE RISK: Interest rate risk refers to the potential adverse impact of changes in market interest rates on the profits of Sirma Group Holding Jsc.
LIQUIDITY RISK: Liquidity risk refers to the risk that Issuer would not have sufficient funds to meet its obligations.
CURRENCY RISK: Currency risk is associated with obtaining financial resources or revenues denominated in currencies other than the one under which the expenses incurred. Provided there is a need of using the volatile exchange rate between two currencies, this would create conditions for generating losses.
RISK FROM INTENSIVE COMPETITION: The Group’s activities are under pressure from intensive competition from local players, as well as from international corporations.
SIRMA GROUP HOLDING JSC SUMMARY
8
RISK ASSOCIATED WITH TECHNOLOGY CHANGES AND NEW PRODUCTS DEVELOPMENT: The ICT sector is characterized by rapid development of new solutions and technologies that shorten product life cycles. Therefore, the future success of the Issuer will largely depend on its ability to incorporate the latest technological solutions in its products and services.
RISK ASSOCIATED WITH AN INCREASE IN LABOUR COSTS: Labour costs typically account for over 70% of the overall costs. Given the large share of labour costs in overall costs, an increase in wages may melt away the achieved profitability margins, and therefore may have an adverse effect on the results of the Group.
RISK ASSOCIATED WITH AN INCREASE IN LABOUR COSTS: The Group's success depends on proper strategy for workforce planning and its allocation in accordance with the overall strategy. Changes in staffing levels can result in a discrepancy between costs and revenues of the Group.
RISK OF UNAUTHORIZED DISCLOSURE OF CONFIDENTIAL INFORMATION: Strictly confidential information related to topics such as strategy, new technology, mergers and acquisitions, unpublished financial results, or personal data may be prematurely, intentionally or unintentionally revealed. Such actions could have an adverse effect on Group’s position in the market. RISK OF HACKER ATTACKS: Issuer’s cloud services could be hacked, as a result of which they may become unavailable or not work properly. INTELLECTUAL PROPERTY PROTECTION: The conservation and protection of the Group’s intellectual property is crucial for its success. The Group uses a variety of tools to identify and control potential risks, and to protect its intellectual property. Such measures include applying for patents and trademarks, and registration of other marks and copyrights in order to prevent copyright and trademarks breach. RISK OF ENTERING INTO TRANSACTIONS WITH RELATED PARTIES WITH TERMS VARYING FROM THE MARKET: The Issuer is part of an economic group. The risk of transactions with companies of the Group, whose terms vary from market at the time the transaction is eliminated so far as the Issuer strives to maintain transparent policy with regard to relations and treatment of associated companies. RISK OF FAILURE OF THE IPO: The possible failure of the offering would negatively affect the prospects of the Issuer, while the same would delay implementation of the planned investment. RISK OF ASSET IMPAIRMENT: Risk of asset impairment is associated with the reduction of the carrying value of the assets of the Company. Possible impairment of tangible and / or intangible assets could lead to the need for accounting loss from this impairment. RISK OF INADEQUATE ASSET VALUATION: The main part of the assets of the Issuer, as well as the other companies of its group, are intangible due to the nature of its business. Their carrying value reflects the costs incurred for their acquisition, incl. development and assessment of the Issuer's incorporated potential for development (expected economic benefits). In the era of information technology and its extremely speedy development, a product (an intangible asset) can be extremely successful, and whereby its carrying value is significantly lower than its market value. RISK OF COMPETITIVE ACTIVITY: The risk of competition is the power key employees of the Issuer or its related company or another company in the case of separation or division to start performing in competition to the services and / or products offered by the Group.
D.3 KEY INFORMATION ON THE KEY RISKS THAT ARE SPECIFIC TO THE SECURITIES
Potential investors should carefully read and consider the information about risks, adjacent to investments in securities, as well as to consider any investment in line with their risk adversity in relation to the expected return, the investment horizon, investment limitations and goals.
PRICE RISK: After a successful IPO and registration for trading, the stock price of the shares is determined by the supply and demand, and that price may rise or fall.
RISK OF INFLATION: The risk of inflation is connected to the probability of increase of the common price levels in the economy, leading to decrease in the purchasing power in local currency.
LIQUIDITY RISK: The liquidity risk is derived from the uncertainty of the presence of active market demand of the securities for a certain period of time.
CURRENCY RISK: The currency risk, which is attributed to the shares of the Company, is derived from the fact that they are denominated in BGN. The change in the currency rate towards another currency would alter the return that the investors expect to receive, comparing it with the return of a different investment in a different currency.
NO GUARANTEE FOR ANNUAL DIVIDEND PAYMENT: The financial result of the Company depends on many factors, including the skills and professionalism of the management team, the development of the market in which the Company operates, the economic development of the country and the region, etc.
SIRMA GROUP HOLDING JSC SUMMARY
9
RISK FROM DILUTION OF SHARES’ VALUE: Риск The risk from the decrease in profit per share and its balance value as a result from converting of issued bonds and warrants or exercising of issued options, as well as a result from the issuance of new ordinary shares with an issue price lower than the balance price per share.
RISK FROM A CHANGE IN THE TAXATION REGIME ON SECURITIES INVESTMENTS: The potential risk from a change in the taxation regime on securities investments is connected to a change in the current regime of taxation of such instruments.
SECTION E – OFFER
E.1 THE TOTAL NET PROCEEDS AND AN ESTIMATE OF THE TOTAL EXPENSES OF THE ISSUE/OFFER, INCLUDING ESTIMATED
EXPENSES CHARGED TO THE INVESTOR BY THE ISSUER OR THE OFFEROR
In case of subscription and payment of the maximum quantity shares offered (16 million units), the net proceedings for the Issuer will amount to BGN 18,696,040. In case of subscription and payment of the minimum quantity shares offered (8 million units), pursuant to the decision of the general meeting of the Company, the net proceedings for the Issuer will amount to BGN 9,436,440. The expenses for the public offering are variable depending on the size of the capital increase. The estimated costs of the Issuer at the minimum IPO size amount to BGN 163,560.
No expenses accounted by the Issuer are envisaged for the investors. The Investment Intermediary shall not collect any fees from the potential investors for their participation in the current offer. Any potential investor, who decides to submit and Order through a different authorized intermediary, shall inquire the conditions and fees of the respective intermediary.
E.2 REASONS FOR THE OFFER, USE OF PROCEEDS, ESTIMATED NET AMOUNT OF THE PROCEEDS
This IPO will be carried out based on the decision of the general meeting of shareholders of Sirma Group Holding Jsco held on 04.12.2014 and decision of the Board of Directors of the Company from 15.12.2014. The management of the Issuer intends to use the net proceeds from the capital increase towards implementation of the contemplated investments. Specific projects will be undertaken dependant on the result from the public offering
In case of subscription and payment of the maximum quantity shares offered (16 million units), the net proceedings for the Issuer will amount to BGN 18,696,040. In case of subscription and payment of the minimum quantity shares offered (8 million units), pursuant to the decision of the general meeting of the Company, the net proceedings for the Issuer will amount to BGN 9,436,440.
E.3 A DESCRIPTION OF THE TERMS AND CONDITIONS OF THE OFFER.
Subject of the public offering are up to 18,491,858 (eighteen million four hundred and ninety-one thousand eight hundred fifty-eight) ordinary shares, of which 16,000,000 (sixteen million) New Shares and up to 2,491,858 (two million four hundred and ninety-one thousand eight hundred fifty-eight) Existing shares.
The IPO will be successful only if at least 8,000,000 (eight million) New shares are subscribed and paid. The capital of the Issuer will be increased by the amount of the subscribed shares. Each New share has a par value of BGN 1 (one) and issue price range from a minimum price BGN 1.20 to a maximum price of BGN 1.65 each, in which case the Issuer’s share capital will be increased by the value of the subscribed shares.
No deviation above the upper threshold of the issue of New shares is possible. The offered number of shares cannot be reduced, but may be increased only in the case of oversubscription through a "green-shoe" option.
The offered securities has a BGN 1 (one) par value each and issue price range from a minimum price BGN 1.20 to a maximum price of BGN 1.65 each.
Start and duration of the Subscription: The first day of the Subscription is the first working day following the expiration of 7 calendar days from the last date on which the Announcement was published in any of the above places. Purchase Orders (Orders) will be accepted within thirty calendar days from this date, every day - from 09.00 to 16.00.
Types of Orders: Two types of Orders will be accepted:
• Limit is the order for subscription (purchase) of shares with defined share price. Limit Orders may be executed in part; and
• Market is the order for subscription of shares, which contains only total amount in BGN or total number of shares, that the respective investors wishes to subscribe. That order can also be executed partially or fully.
The submission of an Order is considered confirmation that the investor:
SIRMA GROUP HOLDING JSC SUMMARY
10
• Has read the Prospectus and has accepted the terms and conditions of the Offering;
• Gives his/her consent to receive lesser than the stated in his/her Order number of shares, or to receive no shares in line with the conditions, stated in this Securities Note;
• Agrees to receive New shares in a ratio with Existing shares, which is defined by the Issuer and the Investment Intermediary;
• Agrees to transfer the amount, equal to the allotted shares multiplied by the Price and together with all fees and commissions, connected to the Offering, following the instructions of the Investment Intermediary; and
• Agrees that if the due amount for the allotted shares has not entered the escrow account until the Last Date for Payment (including), he/she will not receive any shares and will not be entitled to any claims to the Issuer and the Investment Intermediary.
Orders may be submitted in the specified offices of the authorized Investment Intermediary, personally or through a proxy. Orders (completed and signed by the investor) can be submitted through other licensed investment intermediary which transmits them to the authorized Investment Intermediary within the terms of the Offering referred to in this document.
Announcement of the Price per share (Price): The Price will be announced on the first working day after the deadline for Orders submission. The Offering will be deemed unsuccessful should the submitted Orders does not cover the minimum amount of New Shares offered. In that case, the Issuer shall notify the relevant institutions and the public about the outcome of the Offering pursuant to item. 5.9. below. In case of unsuccessful Offering, no Price will be announced.
Calculation of the number of Existing shares to be sold: In the event that the total amount of subscribed shares submitted at the price level of the announced Price exceeds the maximum number of New Shares, set by the shareholders, the Selling shareholders will have 5 working days after the announcement of the Price to submit with the Investment Intermediary their written statement. By doing so, they will declare their wish to sell up to 5% of their Existing shares by the announced Price.
Allocation of Existing shares: Existing shares will be allotted on the first working day after the deadline for submission of written statements by the Selling shareholders.
Announcement of the Allotment list: The Allotment list will be announced on the business day following the day of allotment of existing shares, if such are to be distributed. Otherwise, the Allotment list will be announced on the day of the announcement of the Price.
Last date for payment of any subscribed shares is the end of the third business day after the announcement of the Allotment list for the distribution of the Offered shares.
End of Offering: The Offering will end after the payment of the subscribed shares in line with the preceding paragraph.
E.4 A DESCRIPTION OF ANY INTEREST THAT IS MATERIAL TO THE ISSUE/OFFER INCLUDING CONFLICTING INTERESTS.
There is no material interest for the issue offered, nor a potential conflict of interest in place.
SIRMA GROUP HOLDING JSC SUMMARY
11
E.5 NAME OF THE PERSON OR ENTITY OFFERING TO SELL THE SECURITY. LOCK-UP AGREEMENTS: THE PARTIES INVOLVED; AND INDICATION OF THE
PERIOD OF THE LOCK UP.
Within the Offering an additional "green shoe" option for over-allotment is placed. This option is provided by the Selling Shareholders and amounts to 5% of the capital of the Issuer or to 2,491,858 the number of the Existing shares. All Selling Shareholders are individuals who are long-term employees and managers in the Issuer or its subsidiaries.
Table 3. Amount of Existing shares for each shareholder
As of the date of this document, all current shareholders of the Issuer agree keep their shares outside the terms of the current offer within 6 months from the first day of trading of the Company's shares on the Bulgarian Stock Exchange.
E.6 THE AMOUNT AND PERCENTAGE OF IMMEDIATE DILUTION RESULTING FROM THE OFFER
Prior to the current Offering and as of March 31st 2015 the net consolidated balance value per share is equal to BGN 1.757.
According to the calculated values, the minimum issue price of the new shares (BGN 1.20) is lower than the book value per share on consolidated basis before the increase (BGN 1.757) and thus there is a dilution of the Company's capital concerning the book value per share and amounting to 31.69%. The book value per share after the increase amounts to BGN 1.614 at maximal initial public offering and to BGN 1.677 at minimal IPO, and there is a reduction in the balance value by respectively 8.14% and 4.54% in both cases.
To calculate the immediate dilution for shareholders who will not participate in the capital increase of the Company the ratio between the number of newly issued shares and the total number of shares after the increase is calculated. Thus, in case of minimal initial public offering, each shareholder not involved in the subscription of new shares, will dilute his/her stake by 13.83%, while in case of maximum IPO by 24.30%.
№ Name Family name
Number of
shares
possessed
Max amount of
shares for the green
shoe option
1 Asen Nelchinov 422,248 21,112
2 Atanas Kiryakov 5,250,686 262,534
3 Boryana Stoimenova 162,728 8,136
4 Valentin Vachkov 340,443 17,022
5 Veselin Denchev 75,603 3,780
6 Veselin Kirov 5,250,686 262,534
7 Vladimir Alexiev 2,177,483 108,874
8 Deyan Nenov 518,757 25,938
9 Georgi Marinov 5,250,686 262,534
10 Krasimir Bozhkov 5,250,686 262,534
11 Marin Dimitrov 210,946 10,547
12 Mladen Alexiev 51,840 2,592
13 Momchil Zarev 254,367 12,718
14 Ognyan Chernokozhev 3,727,730 186,387
15 Rosen Varbanov 2,156,687 107,834
16 Rumen Harsev 104,269 5,213
17 Svetla Varbanova 104,269 5,213
18 Stanislav Ivanov 257,268 12,863
19 Stanislav Jordanov 370,060 18,503
20 Tzvetan Alexiev 5,250,686 262,534
21 Chavdar Dimitrov 5,250,686 262,534
22 Yavor Dzhonev 5,250,686 262,534
23 Petar Konyarov 1,649,288 82,464
24 Radka Peneva 498,365 24,918
SIRMA GROUP HOLDING JSC SUMMARY
12
E.7 ESTIMATED EXPENSES CHARGED TO THE INVESTOR BY THE ISSUER OR THE OFFEROR.
No expenses accounted by the Issuer are envisaged for the investors. The Investment Intermediary shall not collect any fees from the potential investors for their participation in the current offer. Any potential investor, who decides to submit and Order through a different authorized intermediary, shall inquire the conditions and fees of the respective intermediary.
After a successful IPO and shares registration for trading on the stock exchange, all investors shall pay trading expenses, including broker’s remuneration and other fees, not included in that remuneration (fees of BSE-Sofia and Central Depository).
INFORMATION WITH REGARD TO THE PLACE, TIME AND MANNER TO WHICH ADDITIONAL INFORMATION MAY BE OBTAINED, INCLUDING
ADDRESS, PHONE NUMBER, WORKING HOURS AND POINT OF CONTACT
Additional information for “Sirma Group Holding” JSC may be obtained any working day on the following addresses:
“Sirma Group Holding” JSC - Sofia, 135 Tzarigradsko Shousse blvd., fl. 3, point of contact: Stefan Kiryakov, phone: (02) 976 83 10, working hours from 9 a.m. till 5 p.m.
“Elana Trading” Inc. - г Sofia, 5 Lachezar Stanchev str., Sopharma Business Towers, tower B, fl. 12, phone: +359 (2) 81 000 97; point of contact: Ivan Iliev.
All documents can be also obtained from the Bulgarian Stock Exchange – Sofia AD upon admission of the shares to be traded on the regulated market.
The content of this document should not be considered as legal, financial, business or tax advice. To receive such advice, each potential investor should consult their own legal, financial, or tax advisor. If you have any doubt about the contents of this document, you should consult a stockbroker, bank manager, lawyer, accountant or other financial advisor. You should be aware that share price may fall as well as rise in value.
SIRMA GROUP HOLDING JSC SUMMARY
13
THE SUMMARY WAS PREPARED BY:
___________________
MIROSLAV STOYANOV
DIRECTOR „INVESTMENT BANKING”
___________________
IVAN ILIEV
EXPERT „INVESTMENT BANKING”
THE UNDERSIGNED INDIVIDUALS IN THEIR CAPACITY OF REPRESENTATIVES OF THE COMPANY AND THE INVESTMENT INTERMEDIARY
ELANA TRADING INC, DECLARE THAT THE SUMMARY CORRESPONDS TO THE PROVISIONS OF THE LAW.
