The Financial Supervision Commission (FSC) performs regular ongoing inspections of the received financial and reporting information by all public companies whose securities are admitted to trading on a regulated market, including Gradus AD. For the period during which the company is public from 2018 to date, no violations of the legislation relating to the activities of public companies have been identified. Until the acquisition of public status, the activity performed by Gradus AD and its subsidiaries is not subject to supervision by the FSC.

From August 2018 to the end of April 2021 the total traded volume of shares in the company’s capital is 10,147,628.00 shares, lowest price of BGN 1.35 and highest price of BGN 1.85 The book value of one share of Gradus AD as of 31 March 2021 is BGN 1.30. The price of one share of the same company at the closing of the market on 05.05.2021 is BGN 1.56, and as of – 07.05.2021 – about BGN 1.45, i.e. there is a decrease of 6.4%. The above does not give grounds for suspicion of fraud or irregularities in the sale of shares of the company on the Bulgarian Stock Exchange AD.

During the period in which Gradus AD was a public company, the FSC did not receive any complaints or signals from persons who had invested in the company’s securities.

The shares of Gradus AD have been traded on the Bulgarian Stock Exchange AD since mid-2018, and in compliance with the regulatory requirements they have been admitted to trading on the regulated market on the basis of a prospectus approved by the Financial Supervision Commission. The Prospectus has been prepared for public offering of an issue of shares in the amount of up to 55,555,556 ordinary, registered, dematerialized, freely transferable shares with a nominal value of BGN 1 each. The offer covers up to 27,777,778 new shares offered for subscription with the capital increase of Gradus AD (new shares) and up to 27,777,778 existing shares (existing shares). In addition, the supply manager has the right to distribute an additional 6,638,888 shares (over allotted shares). It is envisaged that the final issue value of the shares will be determined at an auction in the price range of a minimum amount of BGN 1.80 and a maximum amount of BGN 2.35 per share.

In each procedure for confirmation of a prospectus for public offering of securities, the FSC is guided by the main objectives of financial supervision, namely:

 ensuring protection of investors in securities, including by ensuring conditions for raising their awareness of the capital market

 ensuring conditions for the development of a fair, open and efficient capital market and

 maintaining stability and public confidence in it.

When confirming a prospectus for public offering of securities, the FSC should establish its compliance with the requirements of the Public Offering of Securities Act (POSA), its implementing regulations and directly applicable European legislation, as well as ensure the disclosure prospectus of the entire required information for making an informed investment decision. In the procedure for confirming a prospectus, the provision of complete and accurate information should be established, which is necessary according to the specific features of the issuer and the securities offered to the public for investors to accurately assess economic and financial condition, assets and liabilities, financial results, prospects for development of the issuer, as well as the rights related to the securities. The scope of the necessary information to be disclosed in the prospectus is defined in the directly applicable European legislation, and according to the national legislation in the process of approving the prospectus includes both checking the availability of the required information and assessing the accuracy and completeness of the statement. in the prospectus information.

In reviewing the content of the prospectus, the FSC is guided by the above objectives of its financial supervision, and not by the specific characteristics of an issuer or the specifics of its activities.

The application for confirmation of a prospectus for an initial public offering of shares issued by Gradus AD was submitted to the FSC in April 2018, and at its meeting the FSC reviewed the submitted prospectus and decided to require the applicant to remedy some deficiencies and inconsistencies in the content of the prospectus within one month.

The FSC requested the adjustment and supplementation of the prospectus in order to ensure maximum disclosure of data on the financial position of the issuer and its group and the risks associated with its activities in order to enable investors to have the necessary information before deciding whether to invest in the proposed securities. In order to enable potential investors to make an informed and motivated investment decision and as far as the minimum issue value of BGN 1.80 and the maximum price of new shares of BGN 2.35 are higher than the book value of one share before the capital increase, the FSC requested to provide a detailed justification of the price range for determining the issue value of the shares.

As a result of the FSC’s request, the prospectus states that the minimum and maximum emission values are determined on the basis of a comprehensive analysis, including financial indicators, expected development of the group, risk factors, global and regional macroeconomic development, etc., as well as the desire of the issuer Gradus AD to achieve a diversified investor base. It is specified that the performed financial analysis includes generally accepted methods, including the method of market multiples of analogue companies, the method of discounted cash flows, the method of discounted dividends. Information was presented that the market multiple method identified a group of 15 companies operating within Europe, emerging markets and globally, which are focused on the main business of the group, namely the production of chicken and meat products. For this group the P/E (price per share to earnings per share), EV/EBITDA (value of the company to earnings before interest, taxes and depreciation) and P/B (market capitalization to equity) indicators were calculated. The median values of these indicators are stated to be 10.36 for P/E, 8.20 for EV/EBITDA and 1.77 for P /B. It is stated that the determination of the minimum issue value is based on the weighted average share value of BGN 1.88, received on these three indicators, and this price is further consistent with the issuer’s desire to achieve a broad investor base. It is indicated that the above supply interval is consistent with the triple appraisal expertise for valuation of the non-monetary contribution of the subsidiaries in the capital of Gradus AD, according to which the maximum appraisal of in-kind contributions amounts to BGN 544 million or BGN 2.46 per share, as again the maximum issue value is in accordance with the wishes of the issuer Gradus AD and the market conditions.

The Financial Supervision Commission is not and could not be a party to the public offering, nor is it able to independently determine or confirm the issue value of the shares determined by the issuer. The directly applicable European legislation requires the prospectus to disclose the price at which the securities will be offered, or, if the price has not been determined in advance, the method for determining the offer price. The applicable legislation does not require the regulatory body to determine the issue value of securities, which is within the sole discretion of their issuer. A number of factors are important in determining the issue value of a share in a public offering, including, but not limited to, historical financial information and the current financial position of the company. That is why the turnover realized by the company does not have a direct impact on the issue price of one share of the company. In the specific case, the determined price range of the offer is a result of an assessment of the company by the market multiples approach of analogous companies, the method of discounted cash flows and the method of discounted dividends. The price range is in accordance with the performed triple appraisal expertise for appraisal of the non-monetary contribution of the subsidiaries in the capital of Gradus AD. This valuation was prepared by three independent appraisers appointed by the Registry Agency, it is final and the responsibility for its preparation lies with the appraisers who prepared it. In the exercise of its powers, the Financial Supervision Commission has requested detailed information on how the specified price range is formed and has provided disclosure of this information in the prospectus.

Gradus AD was established on 28.11.2017 and owns and manages the following subsidiaries, forming the Gradus economic group: Millennium 2000 EOOD; Lora-2004 EOOD; Gradus-1 EOOD; Zhuliv EOOD; Gradus-98 AD and Gradus-3 AD. Until the acquisition of public status, the activity performed by the Gradus economic group companies is not subject to supervision by the FSC.

The prospectus presents financial information for supervisory purposes, which is prepared in order to show what would be the financial result of Gradus AD if the company was established on 01.01.2017 and held the same number of shares / units of Gradus -1 EOOD, Gradus-3 AD, Millennium 2000 EOOD, Gradus-98 AD, Zhuliv EOOD and Lora-2004 EOOD, as it holds as of 31.12.2017. When compiling the unaudited financial information for supervisory purposes, the audited consolidated annual financial statements of Gradus AD and the audited annual financial statements as of 31.12. 2017 of Gradus -1 EOOD, Gradus-3 AD, Millennium 2000 EOOD, Gradus-98 AD, Juliv EOOD and Lora-2004 EOOD were used, as all listed annual financial statements have been prepared in accordance with International Financial Reporting Standards. The FSC also received the audited financial statements of the subsidiaries of Gradus AD for the three-year period of historical financial information.

The financial information for supervisory purposes has been prepared in accordance with the accounting policies adopted by the issuer Gradus AD in the audited annual consolidated financial statements for the period ended 31 December 2017.

The content of the prospectus for public offering of shares of Gradus AD includes a report dated 30.03.2018 on the assurance of the independent auditor on the compilation of financial information for supervisory purposes, included in the prospectus prepared by Krasimira Radeva, registered auditor and manager of Baker Tilly Klitou and Partners OOD, which contains a statement that:

 (a) the unaudited financial information for supervisory purposes has been compiled, in all material respects, according to the applicable criteria described in the accompanying explanatory notes; and

(b) the basis for preparing the unaudited financial information for supervisory purposes is in accordance with the company’s accounting policies.

In the proceedings for confirmation of the prospectus for public offering of shares of Gradus AD, the FSC has established compliance of the prepared prospectus with the requirements of the POSA, the bylaws on its implementation and the current Regulation EC No. 809/2004, as well as disclosure in the prospectus of all the information required under the current Regulation No. EC № 809/2004, which is a prerequisite for making an informed investment decision.

By Decision No. 542-E of 28.05.2018, the FSC approved the prospectus for public offering of an issue of up to 55,555,556 (fifty-five million five hundred and fifty-five thousand five hundred and fifty-six) ordinary, dematerialized, registered, freely transferable shares with a nominal value of BGN 1 each, of which up to 27,777,778 (twenty-seven million seven hundred seventy-seven thousand seven hundred seventy-eight) new shares to be issued as a result of capital increase of Gradus AD, Stara Zagora and up to 27,777,778 (twenty-seven million seven hundred and seventy-seven thousand seven hundred and seventy-eight) existing shares, with an issue value determined in the price range of BGN 1.80. (minimum issue value) up to BGN 2.35 (maximum issue value) and with ISIN code BG1100002184, as well as for public offering of up to 6,638,888 over allotted shares of the capital of Gradus AD, according to decisions of 29.12.2017 and 26.03.2018 of the General Meeting of the shareholders of Gradus AD and a decision of 30.01.2018 of the Board of Directors of the company.

Gradus AD has conducted a marketing campaign, including an investment presentation, a TV commercial, as well as Internet advertising aimed at potential investors. As a result of the marketing campaign, the information about the public offering reaches a wide range of investors, each of whom makes an independent choice whether to invest or not. The initial public offering of up to 55,555,556 shares of Gradus AD ended successfully on 19.06.2018, with 22,608,710 new shares subscribed and paid. as well as 22,608,710 existing shares, with an issue value of BGN 1.80 each. The public offering took place on the Bulgarian Stock Exchange AD, Segment for initial public offering, through the mechanism Initial Public Offering Auction (“IPO Auction”). All investors who subscribed for shares in the auction for public offering of shares of Gradus AD have participated under equal conditions in the offering within the set deadlines and the pre-announced price range. The final issue value of the shares in the amount of BGN 1.80 per share determined as a result of the auction is the same for both individual investors and institutional investors.

On 25.06.2018, BGN 81,391,356 were received to the accumulation account of Gradus AD, representing: BGN 40,695,678 as funds from the initial public offering of shares from the increase of the company’s capital and BGN 40,695,678 funds from the initial public offering of existing shares of the company.

The registered capital of Gradus AD, Stara Zagora at the time of issuing the confirmation of the prospectus for initial public offering of shares from capital increase amounts to BGN 221,000,000, divided into 221,000,000 ordinary, registered, dematerialized, freely transferable voting shares and with a nominal value of BGN 1.00 each, as a result of the issuance of 22,608,710 new shares of the same class, with a nominal value of BGN 1.00 each, under the conditions of initial public offering, the company’s capital has been increased to BGN 243,608,710, divided into 243,608,710. ordinary, registered, dematerialized, freely transferable voting shares with a nominal value of BGN 1.00 / share. The capital increase was entered in the commercial register on 17.07.2018, in view of which, pursuant to Art. 110, para. 3, first sentence in connection with para. 1, item 1 of the POSA, Gradus AD, Stara Zagora became a public company.

As can be seen from the Share Registration Act issued by Central Depository AD, the proposed 45,217,420 shares (including newly issued and existing shares) have been subscribed by 1,135 persons (81 legal entities, including mutual funds and pension funds, as well as by 1,054 individuals).

During the initial public offering of shares of Gradus AD no violations were found, as all applicable to the date of its implementation requirements of applicable law were met. The information disclosed in the prospectus for initial public offering of shares issued by Gradus AD is in full compliance with the requirements of the applicable legislation, as the prospectus indicates the persons responsible for the completeness and accuracy of the data presented in the prospectus.

The Financial Supervision Commission acted on its own initiative and assigned an inspection of the activity of the public company Gradus AD regarding the observance of the applicable special legislation from the moment of acquiring the status of a public company. In case the FSC receives additional information, data and / or documents relevant to the inspection, they will be analysed and the results of the analysis will be included in the inspection.