MANAGEMENT REPORT
FOR THE ACTIVITY
OF
“SOFIA COMMERCE PAWNSHOPS” JSC
FOR 2016
27 March 2017
MANAGEMENT REPORT OF “SOFIA COMMERCE PAWNSHOPS”JSC FOR 2016
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This report has been prepared respectively with the requirements of Art. 33,
Para. 3 of the Accountancy Act; Art. 100 of the Public Offering of Securities
Act; Regulation N2 of the Financial Supervision Commission; Para. 7 of the
Public Offering of Securities Act (POSA) and Annex №10 to Art. 32, Para 1,
item 2, art. 35, Para 1, item 2, art. 41, Para 1, item 2.
MANAGEMENT REPORT OF “SOFIA COMMERCE PAWNSHOPS”JSC FOR 2016
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CONTENT:
I . GENERAL INFORMATION FOR “SOFIA COMMERCE PAWNSHOPS” JSC……3
1.Corporate status: ............................................................................................................. 3
2. Mission and values .......................................................................................................... 4
4. Society and membership in organizations .................................................................. 4
5. Summary of 2016 ............................................................................................................. 5
6. Organizational structure ................................................................................................. 7
ІI. DEVELOPMENT OF THE ACTIVITY AND CONDITION OF "SOFIA COMMERCE
PAWNSHOPS”JSC ..................................................................................................................... 7
1. Development of the company ..................................................................................... 7
2. Liquidity ............................................................................................................................. 9
3. Rentability ....................................................................................................................... 10
4. Capital resources .......................................................................................................... 12
5. Results from the activity ................................................................................................ 12
ІIІ. ALL IMPORTANT EVENTS OCCURRING AFTER THE DATE OF THE ANNUAL FINANCIAL
STATEMENT ............................................................................................................................... 18
ІV. IMPORTANT RESEARCHES AND DEVELOPMENTS ............................................................ 18
V. POSSIBLE FUTURE PROGRESS OF THE COMPANY ............................................................. 18
VI. INFORMATION FOR THE ACQUISITION OF OWN SHARES REQUIRED BY THE ORDER OF
ART. 187E OF THE COMMERCE LAW ...................................................................................... 19
VII. PRESENCE OF BRANCHES OF THE COMPANY ............................................................... 19
VIII. FINANCIAL INSTRUMENTS USED BY THE COMPANY ..................................................... 19
IX. INFORMATION PURSUANT TO ANNEX №10 OF ORDINANCE NO. 2 OF THE FSC DATED
17 SEPTEMBER 2003 ................................................................................................................. 20
X. CORPORATE GOVERNANCE STATEMENT UNDER THE PUBLIC OFFERING OF SECURITIES
ACT ........................................................................................................................................... 30
XI. INFORMATION PURSUANT TO ANNEX 11 OF ORDINANCE NO. 2 OF FSC DATED 17
SEPTEMBER 2003 ...................................................................................................................... 30
XII. INFORMATION UNDER ART. 247, PARAGRAPH 2 OF THE COMMERCE ACT ............... 34
MANAGEMENT REPORT OF “SOFIA COMMERCE PAWNSHOPS”JSC FOR 2016
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I. General information for “Sofia Commerce Pawnshops” JSC
1. CORPORATE STATUS:
”Sofia Commerce Pawnshops” JSC is a joint-stock company with an ID number [EIK]
131459062 in the Commercial Register at the Registry Agency, domiciled in the city of
Sofia and having its registered office at floor 3, 74 Ralevitza Street, region of
Manastirski Livadi, 1404, Sofia with tell: 0700 848 and site: www.sofcom.bg
“Sofia Commerce Pawnshops” JSC is the only one joint-stock company, whose
shares are traded in Bulgarian Stock Exchange. The Company operates the biggest
chain of pawn shops in Bulgaria, which provide a loan against a pledge of movable
property. At the beginning of 2017 the company owns over 119 pawnshops in the
whole country.
There are over 150 people, working at the Company’s structure. During its years of
development, „Sofia Commerce Pawnshops” JSC acquires experience and
professionalism in the non-banking market of Bulgaria.
„Sofia Commerce Pawnshops” JSC is the only one public company of pawnshops in
Bulgaria, whose bonds are offered freely at the Bulgarian Stock Exchange. Each
MANAGEMENT REPORT OF “SOFIA COMMERCE PAWNSHOPS”JSC FOR 2016
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pawnshop of SOFCOM accepts wide range of movables for security, such as jewelry,
valuables, televisions, video equipment, music devices, expensive household
appliances,etc.
2. MISSION AND VALUES
“Sofia Commerce Pawnshops” JSC is striving to become the largest and most
successful chain of pawnshops, not only in Bulgaria, but also on the Balkan Peninsula.
The company wants to be one of the leading companies on the Bulgarian Stock
Exchange, through hybrid financial instruments, which bring guaranteed yield.
3. VISION
Every citizen of Bulgaria has access to easy, risk-free financing near him.
4. SOCIETY AND MEMBERSHIP IN ORGANIZATIONS
Association of Pawnbrokers in Bulgaria
Bulgarian Stock Exchange - Sofia AD
Central Depository AD
Financial Supervision Commission
MANAGEMENT REPORT OF “SOFIA COMMERCE PAWNSHOPS”JSC FOR 2016
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5. SUMMARY OF 2016
Despite the intensified competition and the factor of the variable and restless
environment of international financial markets, “Sofia Commerce Pawnshops” JSC
still continues to report good financial results in 2016 and to justify the trust of clients
and contractors.
The company still remains the largest chain of pawnshops in the country with
investments of Bulgarian capital. For another year “Sofia Commerce Pawnshops”
JSC is still with an established reputation of a loyal partner, who precisely fulfill its
commitments and of a serious public company, that responds correctly in time of the
dynamically changing environment.
The management has continued to focus on balanced moderate risk growth to
keep maintaining high quality service and search for new markets.
“Sofia Commerce Pawnshops” JSC has continued to implement the American and
European management model. A number of studies have been achieved for
optimizing and improving the internal and external communication in the company
and also for consolidation of the brand on the Bulgarian market.
Some of the campaigns conducted in 2016:
PR initiatives
A new corporate identity
Optimizing the internal processes
In 2016, the Company prepared a new strategy for the exterior and interior of each
store, as well as changing the whole corporate identity. The Company policy has
changed and new values have been imposed.
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In order to benefit from the trend at online selling, the Company has created a
project to improve the existing online web store, where all customers have direct
access to the goods available at the individual stores of the company’s chain in
Bulgaria in order to reach even more consumers.
The web address of the online store is: http://vtora-upotreba.org/
In order to be closer to its clients, „Sofia Commerce Pawnshops” JSC continues with
the product: Long-distance pawnshop. This is a service for people who can’t
physically reach some of our stores. To do this, we provide a consultant, who works
on a mobile pawnshop.
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6. ORGANIZATIONAL STRUCTURE
ІI. DEVELOPMENT OF THE ACTIVITY AND CONDITION OF "SOFIA
COMMERCE PAWNSHOPS”JSC
1. DEVELOPMENT OF THE COMPANY
“Sofia Commerce Pawnshops” JSC is founded in 1993 and is operating on the
domestic market. The company has over 20 years experience in the field of the
financial intermediation and has a well established name in the industry.
The company is managing over 110 pawnshops in Bulgaria.
At the end of 2003 the company has opened 40 pawnshops, at the end of 2004 their
total number is 62 and at the beginning of 2016 the company owns over 110
pawnshops in the whole country.
The number of stores is monitored continuously and monthly. The Company is
opening, closing and purchasing new stores in order to get larger market share and
higher profits.
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In 2005 “Sofia Commerce Pawnshops” JSC was transformed into a public company,
and since 2007, its shares are traded on the Bulgarian Stock Exchange.
The main revenues of the Company are formed by interest, fees and penalties on
the granted loans.
Year 2013 г. 2014 г. 2015г. 2016 г.
Profit (in thousands of BGN) 5056 5230 5465 5405
Amount of credits granted (BGN) 55648938 55695119 58997427 59877885
For 2016 the Company has granted loans for the amount of 5 9877885 BGN, which is
an increase with nearly 4% than the previous year.
MANAGEMENT REPORT OF “SOFIA COMMERCE PAWNSHOPS”JSC FOR 2016
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In the past 2016 the Company has started an optimization of its internal processes.
The monthly market analysis continues, on the basis of which the Company
continues to close down and opens new stores in order to maximize profits and
consolidate profitable market positions.
The accounting information system, which covers 100% of the pawnshops in the
country, operates effectively in 2016. It has been updated and adjusted to optimize
the analysis and control of each store.
2. LIQUIDITY
The Company has generated sufficient amount of money in order to meet its cash
needs.
The cash flows, generated by the Company, depend on the amount of the
granted loans, the interest condition on them, the degree of collectability and
the possibility of realization, the value of the pledged property on uncollectible
loans.
The main ways for increasing the sales, for purchasing new stores and generating
a larger cash flow are increasing the capacity of the granted loans through a
MANAGEMENT REPORT OF “SOFIA COMMERCE PAWNSHOPS”JSC FOR 2016
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new pricing policy, building a corporate identity and with a strengthened online
presence.
Year 2013 2014 2015 2016
Short-term assets (in thousands of BGN) 12610 10856 12327 9060
Short-term liabilities (in thousands of BGN) 436 280 3034 332
Short-term receivables (in thousands of BGN) 5042 6298 7411 5742
Finances (in thousands of BGN) 7568 4554 4261 3318
Current obligations (in thousands of BGN) 436 280 3034 332
Coefficient of general liquidity 28,92 38,77 4,06 27.29
Coefficient of fast liquidity 28,92 38,76 3,85 27.29
Coefficient of immediate liquidity 17,36 16,26 1,40 9.99
Coefficient of absolute liquidity 17,36 16,26 1,40 9.99
Until the date of preparation of this report, the Company has not been exposed to
price, credit, liquidity risk or cash flow risk.
3. RENTABILITY
RENTABILITY INDICATORS:
Year 2013 2014 2015 2016
Financial result (in thousands of BGN) 868,00 667,00 805,00 1296
Net Income (in thousands of BGN) 5056,00 5230,00 5465,00 5152
Equity (in thousands of BGN) 11085,00 11458,00 9785,00 9972
Liabilities (in thousands of BGN) 3380,00 3253,00 3124,00 446
Total Assets (in thousands of BGN) 14465,00 14711,00 12909,00 10418
Coefficient of rentability of profits 0,17 0,13 0,15 0.25
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The Company has kept a proper rentability coefficient.
COEFFICIENT OF RENTABILITY OF PROFITS:
The coefficient of rentability gives information about the financial result, which is
generated by one BGN income.
Coefficient of rentability of equity 0,08 0,06 0,08 0.13
Coefficient of rentability of liabilities 0,26 0,21 0,26 2.9
Coefficient of capitalization of assets 0,06 0,05 0,06 0,12
Year 2013 2014 2015 2016
Profits (in thousands of BGN) 5056 5230 5465 5152
Net financial result (in thousands of
BGN)
868
667
805
1296
Coefficient of rentability 0,17 0,13 0,15 0,25
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4. CAPITAL RESOURCES
From 31 June 2016 the amount of the capital of the Company is 2 601 154 BGN.
The Company has issued two classes of shares as follows:
1. 2 400 000 (two million four hundred thousand) number of ordinary,
dematerialized, registered shares with voting rights at General Meeting of the
Company. 180,000 of the voting shares are owned by “Sofia Commerce –
Pawnshops” JSC and pursuant to Art. 187a, Para. 3 of the Commercial Law,
the Company can’t pursuit voting rights on these shares until their transfer.
Because of that the ordinary shares with voting rights are 2 220 000.
2. 201 154 (two hundred and one thousand one hundred and fifty-four) number
of preferred, registered, dematerialized shares entitled to one vote at the
General Meeting of the Company.
3. The total amount of voting shares in the General Meeting of the Company is 2
421 154 from total 2 601 154 number of voting shares, issued by the Company.
5. RESULTS FROM THE ACTI VITY
Revenue of “Sofia Commerce – Pawnshops” JSC
The revenue structure includes the following components: interest, tax and penalty
income, income from the sales, income from sales of services and financial income.
The breakdown by type of revenue is as follows:
Structure of the revenue of “Sofia Commerce – Pawnshops” JSC:
Year 2013 2014 2015 2016
Interest, tax and penalty income (in thousands
of BGN)
5039
5210
5435
5096
Income from the sales (in thousands of BGN) 0 1 0 0
Income from sales of services (in thousands of
BGN)
1
0
0
7
Other profits (in thousands of BGN) 16 19 30 49
Financial profits (in thousands of BGN) 0 0 0 253
Total revenue (in thousands of BGN) 5056 5230 5465 5405
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In 2016 "Sofia Commerce - Pawnshops" AD revenues had decreased. The total
revenue is BGN 5,405,000 compared to BGN 5465,000 for 2015.
The coefficient of efficiency provides info on the expenses, which were spent in order
to be achieved one BGN income.
Coefficient of efficiency of revenue:
Year 2013 2014 2015 2016
Profits (in thousands of BGN) 5056 5230 5465 5405
Expenses (in thousands of BGN) 4076 4470 4557 3973
Coefficient of efficiency of revenue 0.81 0.85 0.83 0.74
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6. Expenses of the Company
Expenses of “Sofia Commerce – Pawnshops” JSC
Year 2013 2014 2015 2016
Expenses (in thousands of
BGN)
4076 4470 4557 3973
Growth -0,15 0,10 0,10 -0,13
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The structure of expenses includes the following components: material costs, external
service costs, staff costs, amortization costs, other costs and financial costs.
Structure of expenses of “Sofia Commerce – Pawnshops” JSC
Year 2013 2014 2015 2016
Material costs (in thousands of BGN) 104 94 65 71
External service costs (in thousands of BGN) 684 664 611 542
Staff costs (in thousands of BGN) 2986 3021 2628 2923
Amortization costs (in thousands of BGN) 49 47 47 44
Other and also impartment of assets (in
thousands of BGN)
225 259 393 69
Financial costs (in thousands of BGN) 28 385 813 324
Total expenses (in thousands of BGN) 4076 4470 4557 3973
The expenses for external services were reduced, because of a renegotiation of
better conditions.
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Year 2013 2014 2015 2016
Costs for duty assets under 700 BGN (in thousands of
BGN)
32 38 23 25
Other costs for materials (in thousands of BGN) 72 56 42 46
Total costs for materials (in thousands of BGN) 104 94 65 71
Telecommunication costs (in thousands of BGN) 98 87 68 30
Costs for office rents (in thousands of BGN) 365 373 308 271
Other costs (in thousands of BGN) 17 25 38 2
Costs for security (in thousands of BGN) 69 65 52 77
Costs for other professional services (in thousands of
BGN)
114 108 142 156
Cost for fees (in thousands of BGN) 21 6 3 8
Total costs for external services (in thousands of
BGN)
684 664 611 542
Costs for staff’s salaries (in thousands of BGN) 2703 2751 2405 2707
Costs for social security (in thousands of BGN) 269 257 208 201
Costs for obligations for staff’s retirement (in
thousands of BGN)
14 13 15 15
Total costs for staff (in thousands of BGN) 2986 3021 2628 2923
Indicators of financial autonomy and indebtedness:
Year 2013 2014 2015 2016
Equity (in thousands of BGN) 11085 11458 9785 9972
Liabilities (in thousands of BGN) 3380 3253 3124 446
Coefficient of financial autonomy 3,28 3,52 3,13 22.36
Coefficient of indebtedness 0,30 0,28 0,32 0,04
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Analysis of financial and non-financial main indicators, associated with the economy activity
of the Company, including information about questions with reference to ecology and
employees.
The information is presented in the annual financial statements and the additional
explanations.
The ratio Revenue/Expenses for 2016 has remained the same. The condition is
illustrated in the following table and graphic:
Year 2013 2014 2015 2016
Revenue (in thousands of BGN) 5056 5230 5465 5405
Expenses (in thousands of BGN) 4076 4470 4557 3973
Coefficient of efficiency 1.24 1.17 1.20 1.36
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ІIІ. ALL IMPORTANT EVENTS OCCURRING AFTER THE DATE OF THE
ANNUAL FINANCIAL STATEMENT
There aren’t important events after the Annual Financial Statement.
ІV. IMPORTANT RESEARCHES AND DEVELOPMENTS
Due to its subject of performed activity, the Company does not do research or
development work.
V. POSSIBLE FUTURE PROGRESS OF THE COMPANY
In 2017 "Sofia Commerce - Pawnshops" JSC will consider the global economic
situation and the situation in the country. New financial instrument is not foreseen.
The company will work mainly to optimize its activity and to maintain its expansion
policy in Sofia and other cities.
The Company will emphasize on new vision, employees training and imposing the
new corporate identity.
The optimization of the company's internal processes will continue in order to
maximize the profits.
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The planned economic policy for 2017 intends to conform the progress of the
Company to the conjuncture of the market and the economic situation.
It is planned pawnshops without perspective and with bad operational indicators to
be closed and the opening of new ones to be restricted. The Company will supervise
on the fastest possible realization of lost bets and for reducing all unnecessary costs.
The overall ideology of the economic policy in 2016 will be subject to maximum
optimization of the activity and preservation of the achieved market share
participation.
The entire ideology of the economic policy in 2017 will be subject of the maximum
optimization of the activity and also keeping the already achieved market share.
The Company will work towards purchasing already existing rival pawnshop chains in
order to invest the funds, raised by the bond issue. New stores will be purchased.
A serious international expansion of the Company in our neighboring countries is
expected. A “New Markets” strategy is being created. It is possible competitive
chains to be bought and the Company to be expanded in the form of a franchise.
There is information about current projects in the Prospectus, published on the FSC
website at www.fsc.bg, on the "BULGARIAN STOCK EXCHANGE - Sofia" AD at
http://bse-sofia.bg/, as well as on the Company's website - www.sofcom.bg.
VI. INFORMATION FOR THE ACQUISITION OF OWN SHARES REQUIRED
BY THE ORDER OF ART. 187E OF THE COMMERCE LAW
During the reporting period it was not performed. During previous reporting periods,
the Company has repurchased a total of 180,000 ordinary shares.
VII. PRESENCE OF BRANCHES OF THE COMPANY
"SOFIA COMMERCE - PAWNSHOPS” JSC has not created and registered branches in
2016.
VIII. FINANCIAL INSTRUMENTS USED BY THE COMPANY
Issue of preferred shares of 400 000 shares with ISIN BG1200002068, which were
transferred to the issue of dematerialized shares with ISIN BG1100053054 of 2 000 000
pieces. (the issue of ordinary shares) and deregistered.
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Ordinary shares allowed for trading on the Regulated Market of "BSE-Sofia" AD, the
ISIN code of the issue is BG1100053054 - currently 2 400 000 pieces.
A new issue of preferred shares allowed for trading on the Regulated Market of "BSE-
Sofia" AD, the ISIN code of the issue is BG1200002167 - currently 201 154 pieces.
Issue convertible bonds with ISIN BG2100021133vhave been paid at the date of
payment and deregistered.
IX. INFORMATION PURSUANT TO ANNEX №10 OF ORDINANCE NO . 2 OF THE FSC
DATED 17 SEPTEMBER 2003
1. Information given in value and quantity indicators about the main categories of
goods, products and/or services provided, indicating their share in the sales revenues
of the issuer and the changes that have occurred during the accounting year.
This information is provided in Chapter I and Chapter II of the current management
report.
2. Information about significant deals.
No significant deals have been made during 2016.
3. Information about deals concluded between the issuer and related parties during the
reporting period, proposals for such deals as well as deals that are outside of the
Company’s usual activity or significantly deviated from the market conditions on
which the issuer or its subsidiary is a part with indication of the value of the deal and
any additional information about the assessment needed for the impact on the
financial position of the issuer.
There are no deals, that have been concluded between the issuer and related
parties during the reviewed period.
In 2016, no proposals were made in order to enter into related party transactions or
ones that significantly are deviated from the market conditions on which the
Company is a part.
Until 1st of January 2016, the Company holds one investment in a financial asset
(shares). The investment has been acquired in December 2015 on an active market,
which is why the Company has assumed that its acquisition cost is a good
MANAGEMENT REPORT OF “SOFIA COMMERCE PAWNSHOPS”JSC FOR 2016
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approximation of its fair value as of 31st December 2015. In February 2016, the
Company sold this investment at a price similar to its balance amount.
As of 31st December 2016 The Company has no investments in securities traded on
an active market.
4. Information about events and indicators with an unusual nature for the issuer, that
have a material impact on its activities and its realized revenues and expenses;
impact assessment on results in the current year.
On 8th April 2016 a regular Annual General Meeting of the Shareholders was held, on
which the shareholders decided that the issue of preferred shares would be
transformed into ordinary shares and that the two issues would be duly merged
without changing the capital.
On 2nd August 2016 successfully completed a procedure for public offering of shares
from the capital increase of “Sofia Commerce – Pawnshops” JSC. There were
subscribed and paid shares of 201 154 preferred, registered, dematerialized shares
entitled to one vote at the General Meeting of the Company, with nominal value of
the shares - BGN 1, issuing - BGN 5.
The preferred shares of the Company grant to their holders a right to a cumulative,
guaranteed, fixed dividend amounting to 12% of the issue value of the preferred
share on an annual basis for a period of 5 years.
The issue of convertible bonds issued by the Company (ISIN BG2100021133) were
duly paid at maturity (13.12.2016) and de-registered.
As of 27th December 2016, the issue of shares with ISIN code BG1100053054, stock
exchange code 6SOA, issued by “Sofia Commerce - Pawnshops” JSC, are traded on
the Standard segment, on the BSE Main Market. From the same date, the Board of
Directors of BSE - Sofia JSC has registered “IP South Market” JSC as a market maker
for the issue of shares issued by “Sofia Commerce – Pawnshops” JSC - Sofia, ISIN
code: BG1100053054, BSE Code: 6SOA, with a term of the contract: 1 (one) year.
On the issuer’s management opinion, the mentioned events have had a positive
effect on the Company’s performance over the reviewed period.
5. Information about off-balance-sheet transactions - nature and business purpose,
indication of the financial impact of transactions on the business, if the risk and
benefits of those transactions are material to the issuer and if disclosure of such
information is material to the assessment of the financial position of the issuer.
In 2016, there are no transactions to be carried out off-balance sheet by the
Company. The Company has no conditional engagements.
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6. Information about shareholding of the issuer, its main investments in the country and
abroad (in securities, financial instruments, intangible assets and real estate) as well
as investments in share securities outside its economic group and the sources/ways of
financing.
The issuer has no subsidiaries.
7. Information about the loan contracts, concluded by the issuer, its subsidiary or parent
company in the capacity of borrowers, including loan terms and conditions, including
the payment deadlines, as well as information on guarantees and commitments.
In 2016, the Company did not enter into transactions as a borrower.
8. Information about the borrowing contracts, concluded by the issuer, its subsidiary or
parent company in the capacity of lenders, including lending of guarantees of any
kind, including related parties, with specific terms, including the final terms for paying
and the purpose for which they were granted.
The activity of the Company is providing of short-term loans against consideration
(interest and charges). Loans are granted under contracts against a pledge of
movable property.
As of 31st December 2016, the activity is carried out in 112 stores around the country
(on 31st December 2015 they were 119) and the employees, working at the
Company are 153 (on 31st December 2015 they were 173).
9. Information about the use of funds from the committing of new issue of securities
during the reporting period.
The offering of the new issue of preferred shares was carried out with the purpose of
raising capital for the potential acquisition of specific stores with attractive location
of competitive chains of pawnshops in Bulgaria (without planning to acquire
competing companies).
In addition, the funds will be used to extend the loan portfolio of the Company. The
allocation of funds planned under the Prospectus is:
82 % for potential acquisition of competitive stores in
Bulgaria;
18 % cash turnover for expanding the credit portfolio.
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As far as they were recorded, the minimum number of shares was subscribed to a
successful subscription - more than 200,000 shares, the proceeds will be used in
compliance with the Prospectus for the acquisition of competitive stores in Bulgaria.
Currently the management of the Company is in the process of considering potential
stores to expand its chain.
10. An analysis of the ratio between the financial results, published in the financial
statement for the financial year and the previously published forecasts of those results.
The company has not published forecasts of the financial results.
11. Analysis and evaluation of the policy regarding the management of the financial
resources, indicating the possibilities for servicing the obligations, the possible threats
and measures that the issuer has taken or is about to take for their elimination.
The company generates sufficient cash to meet its cash needs. The cash flows
generated by the Company depend on the volume of the granted loans, the
interest rate on them, the degree of collectability and the realization, the value of
the pledged property on uncollectible loans.
The main ways to increase sales and to generate a larger cash flow are increasing
the capacity of the granted loans through a new pricing policy, building a corporate
identity and strengthened online presence.
Year: 2013 2014 2015 2016
Short-term assets (in thousands of BGN) 12610 10856 12327 9869
Short-term liabilities (in thousands of BGN) 436 280 3034 331
Short - term receivables (in thousands of BGN) 5042 6298 7411 5742
Cash (in thousands of BGN) 7568 4554 4261 3318
Current obligations (in thousands of BGN) 436 280 3034 331
Total liquidity ratio 28,92 38,77 4,06 27.37
Rapid liquidity ratio 28,92 38,76 3,85 27.37
MANAGEMENT REPORT OF “SOFIA COMMERCE PAWNSHOPS”JSC FOR 2016
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Immediate liquidity ratio
17,36
16,26
1,40
10.02
Absolute liquidity ratio
17,36
16,26
1,40
10.02
Until the date of preparation of this document, the Company has not been exposed
to price, credit, liquidity risk or cash flow risk.
12. Assessment of the possibilities for realization of the investment intentions with
indication of the amount of available funds and reflection of possible changes in the
structure of financing of this activity
On the opinion of the Company's management, the cash turnover is sufficient to
cover Company’s current needs. As far as the minimum number of shares has been
subscribed, in order for the subscription to be successful - more than 200,000 shares,
the proceeds will be used in accordance with the Prospectus for the acquisition of
competitive stores in Bulgaria. Currently the management of the Company is in the
process of considering potential stores to expand its chain.
The Company strives to optimize the implementation of the goals and strategies,
which have been set, while preserving the rate of return of the capital.
In short and medium term, the Company does not expect a change in the structure
of financing its activities.
13. Information about changes during the reporting period in the main management
principles of the issuer and its economic group.
In 2016 there were no changes in the Company's main management principles.
14. Information about the main characteristics of the internal control system and risk
management system, applied by the issuer in the process of preparing the financial
statements.
The financial statements of the Company are prepared respectively with the
Bulgarian legislation and the applicable international accounting standards.
MANAGEMENT REPORT OF “SOFIA COMMERCE PAWNSHOPS”JSC FOR 2016
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Due to legislative changes in 2016, public interest entities under § 1 (22) (a) of the
Supplementary Provisions of the Accountancy Act (what the Company stands for)
include in their activity report a corporate management statement with content
according to Art. 100n, Para. 8 of the Public Offering of Securities Act, which is
presented as a separate report, published together with this activity report.
The reports are certified by an independent auditor, who confirms their accordance
with the Bulgarian legislation and the applicable accounting standards and presents
a declaration with content under Art. 100n, Para. 4, item 3 of POSA.
In regard to the risk management system, bets are valued at a reduced cost and
taken as such only highly liquid, with the propose of quickly selling, in case of non-
serviced loans.
In the course of its usual business, the company is exposed to various financial risks,
the most important of which are: market risk (including currency risk, fair value risk
and price risk), credit risk, liquidity risk and interest-bond cash flow risk.
Because of this the risk management is focused on the difficulties in predicting the
financial markets and achieving minimization of the potential negative effects,
which may affect the financial results and the condition of the Company. Financial
risks are currently identified, measured and monitored using different control
mechanisms, established for determining adequate prices for the Company's
products and loan capital.
Company risk management is currently conducted by the Financial and Accounting
Department according to the policy, determined by the Board of Directors, which
has developed the general principles of general financial risk management, on the
basis of which were made procedures for the management of the specific risks such
as currency, price, interest, credit and liquidity.
The various types of risks to which the company is exposed in the course of its
business operations and the approach taken to manage those risks are described
below.
Loans are guaranteed only with liquid bets - black goods, precious metal products.
Price risk
The price risk may be expressed in unfavorable changes in the prices of the services,
offered by the company and in the change in the amount of the expenses for the
activity. Due to the specificity of the company's activity, price risk is directly related
to the interest rates the company provides for loans (the cost of the loan) and their
dynamics. Another manifestation of the price risk is related to a change in the
amount of the expenses for carrying out the activity. In particular, there is a minimal
risk of rising costs at a faster rate than revenue.
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Credit risk
Credit risk is typical for each credit lending company due to the specific nature of its
activity. Preliminary customer surveys through the established database as well as
through organized access to other similar databases, creditworthiness analysis,
current solvency control and borrower development limit and control the degree of
credit risk of the Company.
Liquidity risk
Liquidity risk refers to the risk that the company may not have sufficient funds to meet
its obligations or to meet increased demand for its services. The company strives to
provide external sources of funding - bank loans, refinancing or debt securities
issuance. Regularly tracking market trends allows timely management responses and
effective solutions to meet increased demand.
Cash flow risk
Cash flow risk refers to fluctuations in the amount of future cash flows, generated by
the Company's operations. For “Sofia Commerce – Pawnshops” JSC there is no
significant cash flow risk at the reporting date.
15. Information about changes in management and supervisory management during the
reporting financial year.
There have been no changes in management and supervisory management in 2016.
16. Information about the amount of remuneration, rewards and/or benefits of each
member of the management and supervisory management for the accounting
financial year paid by the issuer and its subsidiaries, regardless of whether they were
included in the issuer's costs or are coming from distribution of profits including:
Amounts received and non-monetary remuneration
Contingent or deferred wages arising during the year, even if the
remuneration is due at a later date
Amount due from the issuer or its subsidiaries for the payment of pensions,
retirement compensations or other similar compensations
In 2016, the remuneration received in total by the members of the Board of Directors
is BGN 597,000 - gross remuneration.
MANAGEMENT REPORT OF “SOFIA COMMERCE PAWNSHOPS”JSC FOR 2016
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For the reporting period, the General Meeting of Shareholders of “Sofia Commerce –
Pawnshops” JSC has defined a constant remuneration, which has been paid as
follows:
To Mrs. Irena Todorova Vacheva, as executive member of the Board of
Directors of the Company, has been paid a remuneration of BGN
63,000;
To Mr. Todor Angelov Vachev, as the Chairman of the Board of
Directors of the Company, has been paid a remuneration of BGN
60,000. In his capacity of expert at financial and economic analyzes
appointed under a labor contract, Mr. Todor Vachev has received
BGN 390,000.
Mr. Vladimir Delchev Vladimirov, as an independent member of the
Board of Directors of the Company, has been paid a remuneration of
BGN 84,000.
17. Information about the shares of the issuer held by the members of the management
and supervisory management, procurators and senior management, including the
shares held by each of them individually and as a percentage of the shares of each
class, as well as options provided by the issuer on its securities - the type and size of
the securities on which the options are set, purchase price, if any, and term of options.
Todor Angelov Vachev - Chairman of the Board of Directors of the Issuer holds
directly 19.73% and indirectly (through his daughter Irena Todorova Vacheva, which
owns 3.3% and through his son Chavdar-Angel Todorov Vachev, who holds 3.96%) –
a total of 26 , 98%. The ratio of the shares held to the total number of preferred and
ordinary shares (2,601,154) is 24.90%.
Irena Todorova Vacheva - Executive Director of the Issuer - holds directly 3.3% and
indirectly (through her father Todor Angelov Vachev, who owns 19.73% and brother-
Chavdar-Angel Todorov Vachev, who holds 3.96%) - a total of 26.98%. The ratio of
the shares held to the total number of preferred and ordinary shares (2,601,154) is
24.90%.
The Company did not provide the members of the Board of Directors with options on
its securities. There are no employee participation arrangements in the issuer's
capital, including through issuance of shares, options or other securities of the issuer.
Members of the Board of Directors of the Company do not have rights other than the
right of each shareholder to acquire shares and bonds of the Company.
18. Information about the arrangements known to the company (including after the end
of the financial year), as a result of which in the future there may be changes in the
relative share of shares or bonds held by current shareholders or bondholders.
There are not any known arrangements by the Company.
MANAGEMENT REPORT OF “SOFIA COMMERCE PAWNSHOPS”JSC FOR 2016
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19. Information about pending court, administrative or arbitration proceedings
concerning liabilities or receivables of the issuer amounting to at least 10 percent of its
equity; if the total value of the liabilities or receivables of the issuer in all initiated
proceedings exceeds 10 per cent of its own capital, information shall be presented for
each case separately.
Until 31st December 2016, the Company does not have any pending litigation,
administrative or arbitration proceedings concerning liabilities or receivables of at
least 10 per cent of its own capital.
20. Information about the Investor Relations Director, including telephone and
correspondence address:
Investor Relations Director: Yasena Evgenieva Zasheva
Address: Sofia, Dianabad, bl. 58, atelier № 6,
Phone: 0897963214
E-mail: [email protected]
21. Changes in the share price of the Company
Preference shares – SOFIA COMMERCE
Source: data from Info stock (http://www.infostock.bg/infostock/control/graphics/SOFCOM)
This issue of preferred shares matures on a prospectus on 20th April 2016 and has
merged with the issue of ordinary shares of the Company.
MANAGEMENT REPORT OF “SOFIA COMMERCE PAWNSHOPS”JSC FOR 2016
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Ordinary shares – SOFCOM2
Source: data from Info stock (http://www.infostock.bg/infostock/control/graphics/SOFCOM2)
Ordinary shares of the company are traded on BSE - Sofia on 27.06.2007. For the
reporting period the price of ordinary shares ranges between BGN 5.10 and BGN 3.12
per share.
Preference shares - a new 2016 issue - 6SOP
Source: data from Info stock (http://www.infostock.bg/infostock/control/graphics/6SOP)
MANAGEMENT REPORT OF “SOFIA COMMERCE PAWNSHOPS”JSC FOR 2016
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The preferred stock price varies between BGN 5.00 and BGN 4.70 per share.
As of 27th December 2016, the issue of shares with ISIN code BG1100053054, stock
exchange code 6SOA, issued by “Sofia Commerce - Pawnshops” JSC, are traded on
the Standard segment, on the BSE Main Market. From the same date, the Board of
Directors of BSE - Sofia JSC has registered “IP South Market” JSC as a market maker
for the issue of shares issued by “Sofia Commerce – Pawnshops” JSC - Sofia, ISIN
code: BG1100053054, BSE Code: 6SOA, with a term of the contract: 1 (one) year.
X. CORPORATE GOVERNANCE STATEMENT UNDER THE PUBLIC OFFERING OF
SECURIT IES ACT
Due to legislative changes in 2016, public interest entities under § 1 (22) (a) of the
Supplementary Provisions of the Accountancy Act (what the Company stands for)
include in their activity report a corporate governance statement with content
according to Art. 100n, para. 8 of the Public Offering of Securities Act, which is
presented as a separate report published together with this activity report.
“Sofia Commerce – Pawnshops” JSC complies to the principles of the National
Corporate Governance Code (established in 2007 and approved by the National
Corporate Governance Commission, as amended in February 2012 and April 2016)
and carries out its activities in accordance with its ordinances. Compliance with the
Code is subject to the "comply or explain" principle, which means that the Code's
recommendations are respected and when there is a deviation or non-compliance,
the management explains the reasons for it.
By decision № 461 dated 30.06.2016, the Deputy Chairperson of the FSC, in charge of
the Investment Activity Supervision Division, approved the NCGC as a corporate
governance code under Art. 100n, para. 7, item 1 in relation to para. 8, item 1 of
POSA. "Sofia Commerce - Pawnshops" JSC will observe the principles of the National
Corporate Governance Code (established in 2007 and endorsed by the National
Corporate Governance Commission, as amended in February 2012 and April 2016)
and will operate in accordance with its ordinances.
XI. INFORMATION PURSUANT TO ANNEX 11 OF ORDINANCE NO . 2 OF FSC DATED
17 SEPTEMBER 2003
1. Structure of the company's capital, including securities not admitted to trading on a
regulated market in the Republic of Bulgaria or another Member State, indicating the
different classes of shares, rights and obligations pertaining to each of the classes of
shares and the share of the total capital , which makes up each class
MANAGEMENT REPORT OF “SOFIA COMMERCE PAWNSHOPS”JSC FOR 2016
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By 31 December 2016, the share capital was paid in full and amounted to BGN 2 601
thousand, divided into two classes:
1) 92.27% of the capital is distributed to 2 400 000 (two million and four hundred
thousand) ordinary, registered, dematerialized shares with voting rights at the
General Meeting of the Company. 180,000 of the voting shares are owned by
“Sofia Commerce – Pawnshops” JSC and on the grounds of Art. 187a, Para. 3
of the Commercial Law the Company shall not exercise the right to vote on
these shares until their transfer. In view of this, ordinary voting shares are 2
220 000.
2) 07.73% of the capital is distributed in 201 154 (two hundred and one thousand
one hundred and fifty-four) preferred, registered, dematerialized shares
entitled to one vote at the General Meeting of the Company. The preferred
shares of the Company grant to their holders a right to a guaranteed, fixed
dividend amounting to 12% of the issue value of the preferred share on an
annual basis for a period of 5 years. The dividend on preference shares is
cumulative, so even if it is not paid during the due year, it is due to the
shareholders, as on the date of conversion into ordinary shares, the Company
is obliged to pay all cumulated and unpaid dividends.
2. Restrictions on the transfer of securities such as restrictions on the holding of securities
or the need to obtain approval from the company or other shareholder.
There are no restrictions on the transfer of the securities, incl. restrictions on the
possession of securities or the need to obtain approval from the Company or
other shareholder.
3. Information about the direct or indirect holding of 5 percent or more of the voting
rights in the Company's General Meeting, including details of the shareholders, the
size of their shareholding and the way in which the shares are held (31.12.2016)
Todor Angelov Vachev - directly 19.73% and indirectly (through his daughter
Irena Todorova Vacheva, who owns 3.3% and through his son Chavdar-Angel
Todorov Vachev, who owns 3.96%) - a total of 26.98%. The ratio of the shares
held to the total number of preferred and ordinary shares (2,601,154) is
24.90%.
Irena Todorova Vacheva - directly 3.3% and indirectly (through her father
Todor Angelov Vachev who owns 19.73% and brother-Chavdar-Angel
Todorov Vachev, who holds 3.96%) - a total of 26.98%. The ratio of the shares
held to the total number of preferred and ordinary shares (2,601,154) is
24.90%.
MANAGEMENT REPORT OF “SOFIA COMMERCE PAWNSHOPS”JSC FOR 2016
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Chavdar-Angel Todorov Vachev - directly owns 3.96% (through his father
Todor Angelov Vachev, who owns 19.73% and through his sister - Irena
Todorova Vacheva - 3.3%) - a total of 26.98%. The ratio of the shares held to
the total number of preferred and ordinary shares (2,601,154) is 24.90%.
Kaloyan Ivanov Lenkov - 14.90%. The ratio of the shares held to the total
number of preferred and ordinary shares (2,601,154) is 13.81%.
Chavdar Hristov Gerasimov - 15.41%. The ratio of the shares held to the total
number of preferred and ordinary shares (2,601,154) is 14.22%.
“Sofia Commerce – Pawnshops” JSC, Sofia - 7.5%, 180 000 pcs. redeemed
ordinary shares that do not have voting rights in the GA's decisions. The ratio
of the shares held to the total number of preferred and ordinary shares
(2,601,154) is 6.92%.
“ID ELANA HIGH FOUNDATION FUND” JSC, Sofia, 4 Kuzman Shapkarev str. /Pop
Andrew/, - 6,56%, 13,200 pcs. preferred shares from the issue of preferred
shares of "Sofia Commerce - Pawnshops" JSC. The ratio of the shares held to
the total number of preferred and ordinary shares (2,601,154) is 0.51%.
SOUTH MARKET MAXIMUM FUND, Plovdiv, 92 Vasil Aprilov Blvd. - 9.94% 20 000
pcs. preferred shares from the issue of preferred shares of "Sofia Commerce -
Pawn Shops" JSC, the ratio of the shares held to the total number of preferred
and ordinary shares (2,601,154) is 0.77%.
VESELIN TANEV DYAKOV - 12,35%, 24 850 pcs. preferred shares from the issue
of preferred shares of "Sofia Commerce - Pawnshops" JSC; The ratio of the
shares held to the total number of preference shares and ordinary shares
(2,601,154) is 0.96%.
PLAMEN FERDINAN VESELINOV - 14.15%, 314 304 ordinary pieces shares, the
ratio of the sum of preferred and ordinary shares to the total amount of shares
of the company, which is 2 601 154 pcs. is 12.08%.
4. Details of shareholders with special control rights and a description of these rights.
The Company has no shareholders with special control rights.
5. The control system for exercising the right to vote in cases where employees of the
company are also its shareholders and when the control is not directly exercised by
them
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Beyond the limitations of Art. 220 of the Commercial Act and the
requirements of the Ordinance on the minimum content of power of attorney
for representation of a shareholder in the General Meeting of the Company
whose shares were subject to public offering, “Sofia Commerce – Pawnshops”
JSC does not have a special control system in the exercise of the voting right
in cases where the employees of the company are also its shareholders and
when the control is not exercised directly by them.
6. Limitations on voting rights, such as limitations on the voting rights of shareholders with
a certain percentage or number of votes, the time limit for the exercise of voting rights
or systems where, with the cooperation of the company, the financial rights attaching
to the shares are separated from the ownerships of stocks
There are no restrictions on voting rights. The deadlines for exercising voting
rights are in accordance with the provisions of the Public Offering of Securities
Act.
7. Agreements between shareholders who are known to the company and which may
result in restrictions on the transfer of shares or voting rights.
The Company does not have information on agreements between
shareholders that may result in restrictions on the transfer of shares or voting
rights.
8. The ordinances on the appointment and dismissal of the members of the
management of the Company and on the amendments and additions to the Statute.
"Sofia Commerce - Pawnshops" JSC has a one-tier management system. The
management of the Company is the General Meeting of Shareholders and
the Board of Directors. The Board of Directors of the Company is elected by
the General Meeting for a period of 5 (five) years, the first Board of Directors
being elected for a term of three (three) years. Members of the Council may
be re-elected without restrictions. Upon the expiry of their term of service, the
members of the Board of Directors shall continue to perform their functions,
until the General Assembly elects a new Board.
According to the Company's Articles of Association, the Board of Directors is
elected by a simple majority of the capital presented to the General Meeting
of Shareholders. Members of the Council may be re-elected without
restrictions. Upon the expiry of their term of service, the members of the Board
of Directors shall continue to perform their functions until the General
Assembly elects a new Board.
MANAGEMENT REPORT OF “SOFIA COMMERCE PAWNSHOPS”JSC FOR 2016
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The Articles of Association shall be amended by the General Meeting by a
majority of 2/3 of the voting shares represented at the General Meeting.
The rules are detailed in the Articles of Association of the Company, which are
published in the electronic file of the Company in the Commercial Register -
http://www.brra.bg, enabling all third parties to get acquainted with it.
9. The powers of the management of the Company, including the right to take decisions
on the issuance and redemption of shares of the Company.
The powers of the Board of Directors are described in Art. 36 of the Articles of
Association of the Company and are related to the current management of the
activity.
At present, the Board of Directors is empowered by a GMS decision of 29.06.2015
concerning the calendar years 2016 and 2017, whereby up to 3% of the voting
shares (preferred and ordinary) within the calendar year, but not more than 10% in
total. The decision was entered in the Commercial Register on 03.07.2015
During previous reporting periods, the Company carried out redemption of a total of
180,000 ordinary shares and, on the grounds of Art. 187a, Para. 3 of the Commercial
Law the Company shall not exercise the right to vote on these shares until their
transfer.
By decision of the General Meeting of Shareholders dated April 8, 2016, the Board of
Directors has the power to issue shares and bonds.
XII. INFORMATION UNDER ART. 247, PARAGRAPH 2 OF THE COMMERCE ACT
1. Information on the remuneration received collectively during the year by the
members of the boards.
In 2016 the remuneration received in total by the members of the Board of Directors
amounted to BGN 597,000 - gross remuneration.
2. Information on the company's shares and bonds acquired, held and transferred by
members of the Board during the year.
In 2016 there were no acquired and transferred shares and bonds from the members
of the Board of Directors of the Company.
3. Information on the rights of board members to acquire shares and bonds of the
Company
MANAGEMENT REPORT OF “SOFIA COMMERCE PAWNSHOPS”JSC FOR 2016
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The Articles of Association of the Company do not provide for special rights of the
members of the Board of Directors in the acquisition of shares and bonds of the
Company.
4. Information on the participation of board members in commercial companies as
unlimited liability partners, the holding of more than 25 per cent of the capital of
another company and their participation in the management of other companies or
cooperatives such as procurators, managers or board members.
During the reviewed period, the members' shares in commercial companies were as
follows:
Company: Type of connectivity:
“Emotion” Ltd. Irena Vacheva - manager and owner of capital
"KARATE-PERFECT – Todor Vachev - registered as a sole trader
TODOR VACHEV" ST.
"HOLDING BULGARIAN Vladimir Vladimirov - Executive Director since
STATE RAW" EAD 14.02.2017
5. Information about the contracts under Art. 240b of the Commercial Code concluded
during the year.
In 2016 there are no contracts between the Company and the members of the
Board of Directors or persons related to them under Art. 240b of the Commercial
Law.
6. Planned economic policy over the next year, including expected investment and staff
development, expected return on investment and company development as well as
transactions, that are essential to the Company's operations.
At present, the management of the Company is in the process of considering
potential stores to expand its chain. The management continues the monthly market
analysis, on the basis of which the Company continues to close and opens new
stores in order to maximize profits and consolidate profitable market positions.
________________________________
Irena Vacheva
/C.E.O of “Sofia Commerce – Pawnshops” JSC/
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