Georgia Capital Plc Annual Report 2022

FY2022 Annual Report · Georgia Capital Plc

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ANNUAL REPORT 2022

CREATING VALUE BY CAPTURING
CAPITAL-LIGHT INVESTMENT
OPPORTUNITIES

Georgia Capital PLC

A PLATFORM FOR
INVESTING IN, UPSCALING
AND MONETISING LARGE
OPPORTUNITY BUSINESSES
IN GEORGIA

Photo Caucasus mountains landscape
in Svaneti region, Georgia.

Georgia Capital PLC (“Georgia Capital” or
“GCAP” or “the Company” – LSE: CGEO LN)
is a platform for buying, building and
developing businesses in Georgia and
monetising investments, as they mature.
Georgia Capital PLC holds 100% of the
share capital of JSC Georgia Capital (“JSC
GCAP”), which together make up a group of
companies (the “Group” or “GCAP HoldCo”).

The Group’s primary business is to develop or buy
businesses, help them develop their management and
institutionalise their businesses that can further develop
mainly on their own, either with continued oversight or
independently. The Group’s focus is typically on larger-
scale investment opportunities in Georgia, which have
the potential to reach at least GEL 300 million equity value
over three to five years from the initial investment and
to monetise them through exits, as investments mature.
Georgia Capital manages its portfolio companies
individually and does not focus on achieving intergroup
synergies. The Group does not have capital commitments
or a primary mandate to deploy funds or divest assets
within a specific time frame. As such, it focuses on
shareholder returns and on opportunities which meet
its investment return and growth criteria.

CHAIRMAN AND CEO STATEMENT
Read our Chairman and CEO Statement on pages 16 to 18

STRATEGY
Read about Georgia Capital Strategy on pages 20 to 23

PORTFOLIO
Read about our portfolio companies on pages 38 to 63

For more information on Georgia Capital visit:
georgiacapital.ge

STRATEGIC REVIEW
Overview

Performance Highlights

Value Creation

2022 in Brief

16 Chairman and CEO Statement

Our Business

20 Georgia Capital Strategy

24 Market and Industry Overview

32 Capital Allocation and Managing Portfolio Companies

36 Our Management Team

38 Our Portfolio Overview

64 S172 Statement

68 Risk Management

73 Risk Overview

82 Resources and Responsibilities

Discussion of Results

96 Alternative Performance Measures

99 Reconciliation of Adjusted IFRS Measures to IFRS Figures

101 Valuation Methodology

103 Financial Review

GOVERNANCE

124 Directors’ Governance Statement

126 Board of Directors

128 Corporate Governance Framework

137

Investment Committee Report

139 Audit and Valuation Committee Report

145 Directors’ Remuneration Report

164 Nomination Committee Report

167 Statement of Directors’ Responsibilities

168 Directors’ Report

FINANCIAL STATEMENTS

171

Independent Auditor’s Report

177 Statement of Financial Position

178 Statement of Profit or Loss and Comprehensive Income

179 Statement of Changes in Equity

180 Statement of Cash Flows

181 Notes to the Financial Statements

ADDITIONAL INFORMATION

211 Abbreviations

212 References

213 Glossary

214 Shareholder Information

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PERFORMANCE HIGHLIGHTS

GEORGIA CAPITAL NAV OVERVIEW

GEORGIA CAPITAL PERFORMANCE (GEL MILLION)

NAV per share (GEL)

65.56 +4.0% y-o-y

NAV per share (GBP)

20.12 +33.2% y-o-y

Net Asset Value (NAV) (GEL million)

2,817 -2.3% y-o-y

Total portfolio value (GEL million)

3,199 -11.5% y-o-y

Liquid assets and loans issued (GEL million)

NCC1 ratio

439 +2.8% y-o-y

21.1% -10.8 ppts y-o-y

PORTFOLIO BREAKDOWN (GEL MILLION)

LISTED AND OBSERVABLE
PORTFOLIO

PRIVATE
PORTFOLIO

Value: 985
30.8% of the total portfolio value

Value: 2,213
69.2% of the total portfolio value

LARGE PORTFOLIO COMPANIES
Value: 1,438; 44.9% of the total portfolio value

TOTAL PORTFOLIO VALUE CREATION1

34 -95.5% y-o-y

LISTED AND OBSERVABLE

PRIVATE BUSINESSES

206 +25.4% y-o-y

(172) NMF

190

BANK OF
GEORGIA
+15.9% y-o-y

WATER
UTILITY
NMF

(71)

LARGE PORTFOLIO
COMPANIES
NMF

INVESTMENT STAGE
PORTFOLIO COMPANIES
NMF

(114)

OTHER PORTFOLIO
COMPANIES
NMF

BANK OF GEORGIA

RETAIL (PHARMACY)

HOSPITALS2

Value: 830
26.0% of the total

Value: 725
22.7% of the total

Value: 433
13.5% of the total

INSURANCE
(P&C AND MEDICAL)

Value: 280
8.8% of the total

INVESTMENT STAGE PORTFOLIO COMPANIES
Value: 501; 15.7% of the total portfolio value

Investments2

196 NMF

Dividend income

94 +26.2% y-o-y

Buybacks3

83 NMF

Net income

1 -99.8% y-o-y

Divestments

(558) NMF

WATER UTILITY

Value: 155
4.8% of the total

RENEWABLE
ENERGY

Value: 225
7.0% of the total

EDUCATION

Value: 164
5.1% of the total

CLINICS AND
DIAGNOSTICS2

Value: 112
3.5% of the total

OTHER
BUSINESSES

Value: 274
8.6% of the total

OUR STRATEGY
Read about our Strategy on page 20

1 Please see definition in glossary on page 213.
2 As presented elsewhere in this report, in 2022, the healthcare services business was split into two individual businesses (hospitals, and clinics and diagnostics) given the

differences in their stage of development.

1 The detailed value creation drivers for each business are described on pages 103-122 in the results section of this report.
2
3

Includes the conversion of GEL 170 million issued loans to our private businesses into equity.
Includes both the buybacks under the share buyback and cancellation programme and for the management trust.

Certain financial measures presented in the Strategic Review are taken from unaudited management accounts. The figures from the management accounts are alternative
performance measures (APMs) and are described on page 96, and the differences from, and the reconciliation to, the IFRS audited accounts are presented on pages 99 to 100.

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PERFORMANCE HIGHLIGHTS CONTINUED

PRIVATE PORTFOLIO COMPANIES’ PERFORMANCE HIGHLIGHTS (UNAUDITED)1

Listed and observable portfolio companies

Private large portfolio companies

Our 2022 performance reflects the high level of resilience of our portfolio companies, bolstered by the outstanding growth of the Georgian economy,
which has enabled Georgia Capital to deliver substantial progress and value creation in 2022.

Aggregated revenue (GEL million)

Aggregated EBITDA (GEL million)

+7.6%

-5.5%

1,767

338

170

1,260

1,902

484

165

1,252

257
21

171

243

153

2021

2022

2021

2022

Large portfolio companies

Investment stage portfolio companies

Other portfolio companies

Large portfolio companies

Investment stage portfolio companies

Other portfolio companies

Aggregated net operating cash flow (GEL million)

Aggregated cash balances of private businesses (GEL million)

-16.5%

-2.1%

Water Utility
The water utility business is a regulated
monopoly in Tbilisi and the surrounding
area, where it provides water and
wastewater services to 1.4 million
residents representing more than
one-third of Georgia’s population and
c.39,900 legal entities. The water utility
business also operates hydro power
plants (HPPs) with a total installed
capacity of 149MW. In 2022, Georgia
Capital completed the sale of an 80%
equity interest in the business to
FCC Aqualia (“Aqualia”) for a cash
consideration of US$ 180 million.
As a consequence, GCAP owns
a 20% interest in the business as of
31 December 2022 (31 December
2021: 100%), which remains subject to
the ongoing put/call option structure.
Please see further details on page 12.

Bank of Georgia
Bank of Georgia Group PLC (“Bank of
Georgia” or “BoG” or “BoGG” – LSE:
BGEO LN) is a UK incorporated holding
company, comprising a) retail banking
and payment services, and b)
corporate banking and investment
banking operations in Georgia. BoG
expects to benefit from superior growth
of the Georgian economy through both
its retail banking and corporate and
investment banking services and aims
to deliver on its strategy and key
medium-term objectives – at least
20% return on average equity (ROAE)
and c.10% growth of its loan book.
BoG targets to maintain a 30%-50%
dividend/share buyback payout ratio
through regular and progressive
semi-annual capital distributions.
BoG’s Annual Report 2022, when
published, will be available at
www.bankofgeorgiagroup.com. As
of 31 December 2022, Georgia Capital
owns a 20.6% non-voting equity stake
in BoG (31 December 2021: 19.9%).

Hospitals
The hospitals business is the largest
healthcare market participant in
Georgia. The business is comprised
of 16 referral hospitals with a total of
2,524 beds, providing secondary and
tertiary level healthcare services across
Georgia. As of 31 December 2022, the
hospitals business is 100% owned by
Georgia Capital (31 December 2021:
100%).

Retail (Pharmacy)
The retail (pharmacy) business is the
largest pharmaceuticals retailer and
wholesaler in Georgia, with a 35%
market share by revenue. The business
consists of a retail pharmacy chain
and a wholesale business that sells
pharmaceuticals and medical supplies
to hospitals and pharmacies. The
business operates a total of 372
pharmacies (of which 362 are in
Georgia and ten are in Armenia) and
12 franchise stores. GCAP owns a 77%
stake in the retail (pharmacy) business
as of 31 December 2022 (31 December
2021: 67%).

The P&C insurance business is a
leading player in the local insurance
market with a 27.4% market share in
P&C insurance based on gross
premiums as of 30 September 2022.
The P&C Insurance business also
offers a variety of non-P&C products
such as life insurance.
Our medical insurance business
is one of the country’s largest private
medical insurers, with a 19% market
share based on 9M22 net insurance
premiums. The business offers a variety
of medical insurance products primarily
to Georgian corporate and retail clients
and (selectively) to state entities.

Insurance
The insurance business comprises a)
property and casualty (P&C) insurance
business, and b) medical insurance
business. GCAP owns a 100% stake in
the business as of 31 December 2022
(31 December 2021: 100%).

247

206

317

310

Private investment stage portfolio companies

2021

2022

2021

2022

Organic transition to revenue growth strategy from previously adopted cash preservation strategy

Renewable Energy
The renewable energy business
operates three wholly-owned
commissioned renewable assets:
30MW Mestiachala HPP, 20MW
Hydrolea HPPs and 21MW Qartli wind
farm. In addition, a pipeline of up to
172MW projects are in a varying stage
of development. The renewable energy
business is 100% owned by Georgia
Capital as of 31 December 2022
(31 December 2021: 100%).

Education
Our education business currently
combines majority stakes in four
private school brands operating across
five campuses, acquired in 2019-2021:
British-Georgian Academy and British
International School of Tbilisi (70%
stake), the leading schools in the
premium and international segments;
Buckswood International School (80%
stake), well-positioned in the midscale
segment and Green School (80%-90%
ownership), well-positioned in the
affordable segment.

Clinics and Diagnostics
The clinics business is the largest
market participant on Georgia’s
outpatient market, with 21% market
share by number of registered patients.
The clinics and diagnostics business
comprises two segments: 1) Clinics:
19 community clinics with 353 beds
(providing outpatient and basic
inpatient healthcare services),
17 polyclinics (providing outpatient
diagnostic and treatment services),
and 17 lab retail points at GPC
pharmacies; and

2) Diagnostics, operating the largest
laboratory in the entire Caucasus
region – “Mega Lab”. As of
31 December 2022, the clinics and
diagnostics business is 100% owned
by Georgia Capital (31 December 2021:
100%).

1 The portfolio companies’ performance highlights include aggregated stand-alone unaudited IFRS results for our portfolio companies, which can be viewed as APMs for Georgia
Capital, since Georgia Capital does not consolidate its subsidiaries, but instead measures them at fair value under IFRS. In the Strategic Review, various stand-alone figures
other than those derived from our NAV statement for the individual portfolio companies and the discussion of their business developments are derived from their separate,
individual unaudited IFRS accounts. Private portfolio companies’ performance highlights are presented excluding the water utility business.

PORTFOLIO COMPANIES
Read more about our Portfolio Companies on pages 38-63

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VALUE CREATION

DEFENSIVE, NON-CYCLICAL, HIGH-QUALITY ASSETS WITH STRONG AND GROWING CASH FLOW STREAMS
c.90% OF THE TOTAL PORTFOLIO IS VALUED EXTERNALLY AS AT 31 DECEMBER 2022

AT 31-DEC-22

PORTFOLIO
VALUE

VALUE CREATION
IN 2022

MULTIPLE OF
INVESTED CAPITAL
(MOIC) UNREALISED

10.0x

3.6x2

4.5x

1.8x

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BANK OF
GEORGIA

WATER UTILITY

LARGE
PORTFOLIO
COMPANIES
CLOSE TO GEL
300MLN+ IN VALUE

INVESTMENT
STAGE
PORTFOLIO
COMPANIES
WITH POTENTIAL
TO BECOME GEL
300MLN+ IN VALUE

GEL million

830

GEL million

155

GEL million

190

GEL million

1,438

GEL million

(71)

GEL million

502

GEL million

OTHER
PORTFOLIO
COMPANIES
LIMITED POTENTIAL
TO BECOME GEL
300MLN+ IN VALUE

GEL million

274

GEL million

(114)

TOTAL
PORTFOLIO

GEL million

3,199

GEL million

Photo View of Tbilisi, capital of Georgia.

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OWNERSHIP

VALUATION METHODOLOGY HIGHLIGHTS1

Bank of Georgia (BoG)

20.6% LSE

Water Utility

20% Pre-agreed put option multiple

Retail (Pharmacy)

Hospitals

Insurance

Renewable Energy

Education

Clinics and Diagnostics

Valued externally (combination of DCF and market approaches)

77%

100%

70%-90%

Valued externally (combination of DCF and market approaches)

100%

1 The detailed valuation methodology is described on pages 101-102

of this report.
In 2022, Georgia Capital completed the sale of an 80% equity
interest in the water utility business for a cash consideration of US$
180 million. The sale valuation translates into 2.7x MOIC in US$, of
which 2.2x is realised (3.6x MOIC in GEL, of which 3.0x is realised).
See page 12 for details.

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2022 IN BRIEF

UPDATE OF OUR STRATEGY, ANNOUNCED AT OUR 2022 INVESTOR DAY
In 2022, the Group introduced its updated strategy, where Georgia Capital will focus on:

01. INVESTING IN
CAPITAL-LIGHT
OPPORTUNITIES ONLY

02. ADAPTING THE
CAPITAL MANAGEMENT
FRAMEWORK

03. PUTTING ESG
AT THE CORE OF THE
GROUP’S STRATEGY

Photo Svaneti, Georgia.

01. INVESTING IN CAPITAL-LIGHT OPPORTUNITIES ONLY

02. ADAPTING THE CAPITAL MANAGEMENT FRAMEWORK

In 2022, the Group introduced a Net Capital Commitment Navigation Tool, which is an integral part of GCAP’s existing 360-degree framework
and drives the Group’s share buyback and investment decisions (see page 32 for details). NCC represents an aggregated view of all confirmed,
agreed and expected capital outflows at the GCAP holding company level. An NCC ratio (NCC as a percentage of the total portfolio value)
between 15%-40% will lead to tactical share buybacks/investments, whilst an NCC ratio below 15% is expected to generate more meaningful
share buybacks/investments.

Monetise

STRONG VALUE CREATION POTENTIAL WITHOUT SIGNIFICANT CAPITAL COMMITMENTS

• Georgia Capital will continue to invest in Georgia in sectors not

requiring intensive capital commitments.

• GCAP will also enable its large and capital-light portfolio companies

to explore regional growth opportunities, such as the recent
expansion of the retail (pharmacy) business into Armenia and
Azerbaijan.
In capital heavy industries, Georgia Capital will seek to manage
third-party money and/or establish partnerships.

•

In addition, the minimum potential exit threshold required for business
investment was reduced from GEL 500+ million to GEL 300+ million
as our experience has demonstrated that businesses with a GEL 300+
million equity value in Georgia are very attractive to potential investors.
We believe the new targeted exit threshold will increase the liquidity
of our portfolio companies and improve the exit opportunities.

Invest in
capital-light
large opportunities
in Georgia

Grow businesses to equity
value of GEL 300mln+

MAPPING EXISTING PORTFOLIO TO THE REGIONAL GROWTH OPPORTUNITIES

Large

Capital-light

Current regional
expansion potential

Long-term regional
expansion potential

LARGE
PORTFOLIO
COMPANIES

INVESTMENT
STAGE
PORTFOLIO
COMPANIES

Hospitals

Retail
(Pharmacy)

Insurance
(P&C and Medical)

Renewable Energy

Education

Clinics and
Diagnostics

Strong track record in tapping big opportunities with small investments by consolidating fragmented industries,
especially in service-oriented sectors

US$ million

Cash and liquid funds
Loans issued
Gross debt
Net debt (1)
Guarantees issued (2)
Net debt and guarantees issued (3) = (1) + (2)

Planned investments (4)

of which, planned investments in Renewable Energy
of which, planned investments in Education

Announced buybacks (5)
Contingency/liquidity buffer (6)
Total planned investments, announced buybacks and

contingency/liquidity buffer (7) = (4) + (5) + (6)

Net capital commitment (3) + (7)

Portfolio value

NCC ratio

31-Dec-211

Change

31-Dec-22

87.9
7.0
(367.3)
(272.4)
(17.9)
(290.2)

(42.6)
(32.9)
(9.7)
(3.0)
(50.0)

(95.6)

(385.8)

1,210.3

73.4%
42.8%
-17.4%
-48.2%
-61.7%
-49.1%

22.9%
-8.6%
NMF
NMF
NMF

7.0%

-35.2%

-2.2%

31.9%

-10.8 ppts

152.4
9.9
(303.3)
(141.0)
(6.8)
(147.8)

(52.3)
(30.1)
(22.3)
–
(50.0)

(102.3)

(250.1)

1,183.8

21.1%

1 Loans issued balance and portfolio value as at 31 December 2021 reflect the retrospective conversions of the loans issued to our other businesses into equity.

DE-RISKING GCAP
BY DELEVERAGING
Deleveraging the Group’s balance sheet,
at a time of potential economic and regional
instabilities, is a key priority to safeguard
our portfolio, and enable the Group to
take advantage of attractive investment
opportunities that may arise as a result
of those instabilities.

• The Group targets to bring down the

•

NCC ratio below 15% by December 2025
and maintain it at the targeted level over
the economic cycle.
In light of a worldwide rising interest rate
environment, we are targeting to reduce
the balance of “net debt and guarantees
issued” close to zero over the medium term.

NCC AND NCC RATIO DEVELOPMENT OVERVIEW1

345.7

42.5%

365.9

39.8%

385.8

31.9%

250.1

21.1%

31-Dec-19

31-Dec-20

31-Dec-21

31-Dec-22

NCC ratio

Net capital commitment (US$ million)

178.02

15.0%

Over the
cycle target

1 Reflect the retrospective conversion of the loans issued to our real estate and beverages businesses into equity.
2 Assuming the application of the 15% NCC ratio target to the total portfolio value as at 31 December 2022.

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2022 IN BRIEF CONTINUED

02. ADAPTING THE CAPITAL MANAGEMENT FRAMEWORK CONTINUED

03. PUTTING ESG AT THE CORE OF GCAP’S STRATEGY

DELEVERAGING ACROSS OUR PRIVATE PORTFOLIO

In line with the Group’s capital management frameworks, individual leverage targets for the private portfolio companies were developed.

ADJUSTED NET DEBT/EBITDA

31-Dec-21

Change

31-Dec-22

LARGE
PORTFOLIO
COMPANIES

INVESTMENT
STAGE
PORTFOLIO
COMPANIES

Retail (Pharmacy)1

Hospitals

1.9x

2.2x

Insurance
(P&C and Medical)

No leverage

Renewable Energy2

Education

Clinics and
Diagnostics

8.0x

1.6x

1.9x

-0.3x

+1.2x

NMF

-1.6x

-0.4x

+3.4x

Target
(over the cycle)

Up to 1.5x

Up to 2.0x

1.6x

3.4x

No leverage

6.4x

1.2x

5.3x

Up to 6.0x

Up to 2.5x

Up to 2.0x

Figures for Retail (Pharmacy), Hospitals and Clinics and Diagnostics are given excluding IFRS 16 effects; net debt/EBITDA is adjusted for capital commitments.

Includes the application of the minority buyout agreement.

1
2 Renewable energy ratio is calculated in US$ terms.

As the largest employer in the Georgian private sector, our Group and portfolio companies are trusted with improving the future of our community
by building the sustainable businesses of tomorrow. We have a strong track record of investing and managing our portfolio responsibly, facilitated
by operating according to our clear and proven governance model and an extensive network of top-quality talent. Our approach to environmental,
social and governance (ESG) matters is reflected in the strategy and management principles of our portfolio companies, all of which adhere to
sound ESG standards, as well as local policies and regulations.

LARGEST EMPLOYER IN THE GEORGIAN
PRIVATE SECTOR

WE INVEST IN INDUSTRIES WHICH HAVE POSITIVE
IMPACT ON PEOPLE AND PLANET

Male
25%

OVER

19,000

EMPLOYEES AT THE
GROUP AND PORTFOLIO
COMPANY LEVELS

Our healthcare businesses contribute to the development
of the Georgian healthcare system and the well-being of
our society as a whole.

Our education business makes a significant contribution
to Georgia’s education system and the development of
the country’s younger generation.

Female
75%

Through a number of green projects, our renewable energy
business supports climate change mitigation, natural
resources conservation and pollution prevention.

Our auto service business is directly engaged in the
reduction of greenhouse gas (GHG) emissions.

AGGREGATED LEVERAGE OVERVIEW ACROSS OUR LARGE AND INVESTMENT STAGE PORTFOLIO COMPANIES

The Group is committed to enhancing its ESG monitoring and reporting framework, in line with internationally accepted standards, and continues
to ensure the incorporation of relevant ESG practices into both GCAP HoldCo and portfolio company operations.

Despite headwinds from COVID-19 and the Russia-Ukraine war, the leverage profile across
our large and investment stage portfolio companies improved over the last two years.

ADJUSTED1 NET DEBT/EBITDA DEVELOPMENT OVERVIEW

3.2x

3.1x

2.6x

2.4x

2.6x

2.8x

2.6x

N
O
L
L
M
L
E
G

598

586

516

534

603

131

472

624

89
535

528

93
435

184

186

197

224

235

223

206

Dec 19

Jun 20

Dec 20

Jun 21

Dec 212

Jun 222

Dec 222

LTM EBITDA

Adjusted net debt1

Adjusted net debt/EBITDA

Minority buyout agreement at Retail (Pharmacy)

Figures for Hospitals, Retail (Pharmacy) and Clinics and Diagnostics are given excluding IFRS 16 effects.

1 Adjusted for capital commitments.
2

Includes the application of the minority buyout agreement in the retail (pharmacy) business.

At the 2022 Investor Day, Georgia Capital introduced its strategic priority to set measurable ESG targets at both GCAP HoldCo and portfolio company
levels, which has been executed as set out in detail later in this report and in our Sustainability Report.

GHG emissions reduction
targets at GCAP HoldCo
and portfolio company levels

30%

Reduction of Scope 1 and 2
emissions by 2030

95%

Reduction of Scope 1 and 2
emissions by 2050 and becoming
Net-Zero

For the details on environmental targets
please refer to the section “Metrics and
targets” in our TCFD disclosures on
page 94.

Photo Zhinvali Reservoir, Dusheti Municipality, Georgia.

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2022 IN BRIEF CONTINUED

COMPLETION OF THE WATER UTILITY BUSINESS SALE

In 2022, Georgia Capital successfully completed the sale of an 80% equity interest in the
water utility business to Aqualia for a cash consideration of US$ 180 million. The disposal
represents our most significant monetisation event to date and marks the completion of
the full investment cycle for one of our large portfolio businesses: from acquisition and
development, to cash exit.

VALIDATING OUR STRATEGY THROUGH THE SUCCESSFUL SALE OF THE
WATER UTILITY BUSINESS

DELIVERING ON OUR KEY STRATEGIC PRIORITY TO DISPOSE OF ONE OF OUR LARGE PORTFOLIO COMPANIES

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+226% premium to the initial investment value

697

8.9x

VALUE
GROWTH

483

EV/EBITDA
multiple

Exit value
(December 2021)

214

4.3x2

Investment
cost1
(2014-2016)

GEL 97.1 million dividends collected from the water utility business since acquisition

1 A 25% equity interest in
the water utility business
was acquired in 2014,
and the remaining 75%
in 2016.

2 Represents the multiple

at an acquisition of a 75%
interest in the water utility
business in 2016.

• The sale valuation translates into 2.7x MOIC in US$ (3.6x MOIC in GEL) and 20% internal rate of return (IRR) in US$ (27% IRR in GEL).
• The disposal brought a high-quality international investor and excellent industry expertise into Georgia.

The disposal of an 80% equity interest in the water utility business was implemented via a two-staged process:

• The first stage of the transaction, which considered the initial sale of a
65% equity interest in Georgia Global Utilities JSC (GGU), the holding
company for GCAP’s water utility business and the operational
renewable energy assets (representing an 80% economic interest in
the water utility business), was successfully completed on 3 February
2022 with the receipt of full sales proceeds and transfer of respective
shares of GGU to Aqualia.

• The second stage of the transaction was conditional upon

(a) obtaining antitrust clearance and (b) the redemption of GGU’s
US$ 250 million 7.750% Eurobond due 2025, which took place in
September 2022. Both of these conditions have been satisfied. The
Eurobond was redeemed in part by way of US$ 90 million financing
provided by Georgia Capital. Out of US$ 90 million, a US$ 80 million
shareholder loan from GCAP was repaid by the business in October
2022, from the proceeds of a US$ 80 million green secured bond
placement on the local market, as discussed in more detail on
page 13 of this report.

As a consequence, Georgia Capital now owns 100% of the renewable energy assets previously held by GGU, and a 20% interest in the water
utility business, which remains subject to the ongoing put/call option structure between Georgia Capital and Aqualia. GCAP’s put option will be
exercisable in 2025-2026 while Aqualia’s call option will be exercisable on the date of expiry of the put option in 2026 and expiring six months
thereafter. The exercise price of the put and call options are set at 8.25x and 8.90x EV/EBITDA multiple, respectively, based on the normalised
EBITDA and net debt of the business.

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MILESTONE TRANSACTIONS ON THE GEORGIAN CAPITAL MARKET

In 2022, our renewable energy and housing development businesses successfully
completed bond placements on the Georgian capital market. The transactions, completed
during challenging debt capital market conditions, represent milestone achievements for
the businesses and once again demonstrates our superior access to capital.

Renewable Energy
Our renewable energy business closed a US$ 80 million
green secured bond offering, which represents the
largest-ever corporate bond placement in Georgia. The
notes are US$-denominated with 5-year bullet maturity
(callable after two years) and carry a 7.00% coupon.
The proceeds of the notes were fully used to refinance
the shareholder loan from GCAP, provided for redeeming
the renewable energy business’ portion of GGU’s
US$ 250 million 7.75% Eurobond.

The issuance was supplemented by a second-party opinion
from Sustainalytics, a leading provider of ESG research and
analysis, for its Green Bond Framework. Galt and Taggart
JSC and TBC Capital LLC acted as placement agents for
the transaction. The issuance was supported by long-
standing partners of the business – the Dutch Development
Bank (Nederlandse Financierings-Maatschappij voor
Ontwikkelingslanden N.V. (“FMO”)), the Asian Development
Bank (ADB), the International Finance Corporation (IFC), and
the European Bank for Reconstruction and Development
(EBRD). FMO, ADB and IFC acted as anchor banks for
the transaction.

Housing Development
Our housing development business issued a US$ 35 million
2-year bond, carrying an 8.5% coupon. Full proceeds of
the notes were used to refinance the 3-year 7.5% coupon
US$ 35 million local bonds that matured on 7 October 2022.

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2022 IN BRIEF CONTINUED

BUYBACK OF GCAP EUROBONDS

In October 2022, we conducted a Modified Dutch Auction (MDA) through which we
bought back US$ 29 million GCAP Eurobonds. The purchase price was set at US$ 880 per
US$ 1,000 in principal amount of the notes. In addition to the tendered amount, we had
accumulated US$ 87 million GCAP Eurobonds through repurchases on the open market.
Upon completion of the MDA we cancelled US$ 65 million notes, decreasing our
outstanding gross debt balance to US$ 300 million and leaving US$ 51 million GCAP
Eurobonds in our treasury. The transaction is in line with our key strategic priority
to deleverage Georgia Capital’s balance sheet.

STRONG PROGRESS ON OUR KEY STRATEGIC PRIORITY OF DELEVERAGING GCAP

GCAP EUROBOND BUYBACKS OVERVIEW
(US$ million)

365

(87)

(29)

Total repurchased: 116
of which, cancelled: 65

300

51
held in treasury

249

Principal
amount

On-market
buybacks

Repurchased
through MDA

Eurobonds
at 31-Dec-22

CORPORATE CREDIT RATINGS

In 2022, our corporate credit ratings were upgraded
by Moody’s and Standard & Poor’s (S&P), reflecting
the ongoing strong liquidity at GCAP level and a robust
balance sheet and capital allocation management.

MOODY’S

UP FROM B2

S&P

B+

UP FROM B

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THE SHARE BUYBACK AND CANCELLATION PROGRAMME IN 2022

In 2022, 2,252,341 shares were repurchased under the US$ 25 million share buyback
and cancellation programme. The total value of shares repurchased amounted to
GEL 54.3 million (US$ 18.1 million). Since the commencement of the buyback programme
in August 2021, 3,075,923 shares have been repurchased and cancelled, corresponding
to GEL 76.2 million (US$ 25.0 million) in value.

Since its commencement in August 2021, c.7%
of issued capital has been repurchased under
the US$ 25 million share buyback and cancellation
programme as of 31 December 2022.

2021
US$ 7.0mln

TOTAL

25.0

US$ MILLION

2022
US$ 18.1mln

NUMBER OF ISSUED SHARES DEVELOPMENT OVERVIEW
(Million)

Georgia Healthcare Group (GHG)
share exchange facility

-4.8%

39.4

38.1

40.2

47.9

47.1

44.8

29-May-18
(Demerger)

Dec-18

Dec-19

Dec-20

Dec-21

Dec-22

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CHAIRMAN AND CEO STATEMENT

Irakli Gilauri
Chairman and
Chief Executive Officer

Dear Fellow Shareholders,

disposal of more capital intense, or low
ROIC, businesses.

is fully prepared to withstand any potential
sidewinds from the external environment.

This is my fifth annual letter to Georgia Capital
shareholders, and I am writing it against the
backdrop of the continued devastating impact
of the Russia-Ukraine war. It was unimaginable
to me, when I wrote last year’s annual letter, that
12 months later I would still be writing about an
ongoing conflict, and a time of such significant
continued regional and geopolitical uncertainty.
Our thoughts and prayers continue to focus on
a swift resolution to the hostilities.

In February 2022, at the beginning of the war in
Ukraine, we expected to see a significant and
negative impact on all the regional economies,
with resilience being the watch word for all
countries and company managers and policy
makers. We always believed that Georgia
Capital, with its strong mix of business
investments in defensive sectors, and very
well managed and conservatively positioned
operating companies, was well positioned to
withstand the potential pressures of slower
regional economic growth, and this proved
to be the case as the events of 2022 unfolded.
Our portfolio has demonstrated strong resilience
and robustness.

From the start, our aim has been to invest
in high quality businesses with great market
positions, high returns and the ability to deliver
sustainable earnings growth. This aim
continued to guide us in 2022 and will continue
to do so in the future. As Georgia Capital has
evolved as an investment business during
the last few years of significant geopolitical
challenge, the Board and Investment
Committee have kept a vigilant watch on
ensuring that we maintain our core focus on
the conservative management of our portfolio
companies. In doing so, we have deleveraged
the business from the high debt levels we had
prior to the global pandemic-related slowdown
and the recent escalation of regional tensions.
In addition, our investment strategy has been
to continue investing in capital light and capital
efficient businesses, whilst considering the

The discount of our share price to our NAV
per share has widened over the last 12 months,
however, the increase in our NAV per share,
particularly in GBP terms, has exceeded the
growth in our share price, and this has made
the attractiveness for us to invest in Georgian
businesses more challenging when compared
to buying back our own shares. Notwithstanding
the recent significant impacts of the global
COVID pandemic and the Russia-Ukraine war,
our NAV per share in GBP terms increased by
33.2% to GBP 20.12 over the last twelve
months, and in the four year period from the
end of 2018 by 54.2%, an 11.4% compound
annual growth rate.

Our macroeconomic environment
From a macroeconomic perspective, 2022
delivered a second consecutive year of
double-digit growth, with real GDP expanding
by an estimated 10.1% y-o-y in 2022, following
a 10.5% growth in 2021. On the external side,
strong foreign demand throughout the year
was supplemented by substantial remittance
inflows, with money transfers up by 86% y-o-y
in 2022. Merchandise exports grew by 32%
y-o-y, and tourism revenues reached 108%
of 2019 levels in 2022, including 135% in 2H22,
reflecting the global resumption of travel as well
as significant inward migration, especially from
neighbouring countries.

Our strategy during 2023 is to continue reducing
leverage, de-risking the business by refinancing
our Eurobond, due to mature in 2024, and then
over time develop your Company into a
sustainable permanent capital vehicle, seeking
to invest mainly in capital efficient/capital light
sectors and opportunities. In doing so, the
Board believes that reducing our net capital
commitment (NCC) ratio to below 15% will
enable meaningful share buybacks/capital
repatriations to take place.

I speak every year of Georgia Capital’s three
fundamental enablers on which our strategic
thinking remains focused – our commitment
to achieving the highest standards of corporate
governance, which is a foundation of superior
access to capital, and attracting and developing
of highly talented management teams.

During 2022, your Company saw the benefit
of these fundamental enablers as, despite the
challenging external environment, we were able
to continue achieving our key strategic priorities
and increase our NAV per share by 4%
year-on-year, whilst ensuring that we manage
our businesses conservatively, prioritise the
deleveraging of the business and maintain high
levels of liquidity. This ensures that the business

Surging foreign currency inflows resulted in
a record high current account surplus of 6%
of GDP in 3Q22, and an overall deficit of 2.7%
of GDP in 9M22, Georgia’s lowest on record.
Foreign Direct Investment (FDI) inflows totalled
US$ 1.7 billion, or 9.6% of GDP, in 9M22,
up 100% y-o-y. On the domestic side, credit
expansion has also been robust despite rising
interest rates, as the commercial bank loan
portfolio grew by 12.1% y-o-y as of December
2022 (on a constant currency basis).
Additionally, while fiscal support has
moderated, Georgia’s fiscal stance remains
expansionary, with current expenditures
growing by 9% and capital expenditures
expanding by 22% y-o-y in 2022. As the
economy strengthened, the unemployment
rate reached a historic low of 17.3% in 2022.

Despite the US dollar (US$) strengthening
globally, the GEL has sustained its appreciation
trend since mid-2021 and, compared to the
beginning of 2022, has appreciated by 19.6%
against the US$ as of 17 March 2023. This
appreciation is driven by growing demand
for Georgian exports, substantially increased
remittance and migration inflows, robust
economic activity, tight monetary policy and the
strong tourism recovery. Moreover, GEL has

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“WE ALWAYS BELIEVED THAT GEORGIA CAPITAL, WITH ITS STRONG MIX
OF BUSINESS INVESTMENTS IN DEFENSIVE SECTORS, AND VERY WELL
MANAGED AND CONSERVATIVELY POSITIONED OPERATING COMPANIES,
WAS WELL POSITIONED TO WITHSTAND THE POTENTIAL PRESSURES OF
SLOWER REGIONAL ECONOMIC GROWTH, AND THIS PROVED TO BE THE
CASE AS THE EVENTS OF 2022 UNFOLDED.”

appreciated not only against US$ but against
a basket of all major trading partners, with the
real effective exchange rate (REER) reaching a
historic high in December 2022, up 15% y-o-y.

The fiscal deficit is projected to have shrunk to
around 3.1% of GDP in 2022, as a result of the
higher-than-expected growth, and is expected
to return to under 3% of GDP in 2023, while
public debt is projected to have fallen to under
40% of GDP, below pre-pandemic levels, by
the end of 2022. The National Bank of Georgia
(NBG) has maintained a tight monetary stance
with the refinancing rate set at 11% since March
2022, reaffirming its commitment to pursue
tight monetary policy until the current
inflationary pressures subside. Inflation was
9.8% in December 2022 (11.9% on average in
2022) and 9.4% in January 2023, back to single
digits following a peak of 13.9% in January
2022, and is expected to continue decelerating
gradually in 2023.

As the length and the outcome of the war in
Ukraine remain uncertain, the medium-long
term effects on global and regional
macroeconomic developments remain unclear.
Despite substantial uncertainty enduring,
Georgia’s medium-term growth is projected
to remain close to its potential level of 5%,
according to the International Monetary Fund
(IMF), positioning the country as one of the
top performers in the region. In the short run,
Georgia’s external position is strong, as foreign
currency inflows have been surging from
multiple sources, resulting in a record-high
current account surplus, FDI has risen and
official reserve assets have reached a record
high of US$ 4.9 billion by the end of 2022,
providing ample cover.

Delivering on our strategic priorities
This Annual Report will go into greater detail
later, but let me highlight here how we delivered
on our strategic priorities in 2022.

Looking back, 2022 was an eventful year for
the Group.

1) In what was a challenging global

environment, we successfully completed
the sale of an 80% interest in the water
utility business to a high-quality international
strategic investor for US$ 180 million.
The disposal marked the completion
of the full investment cycle for one of our
large portfolio businesses and created
substantial value for our shareholders.

2) Our renewable energy and housing

development businesses closed milestone
transactions on the Georgian capital market,
and once again validated our superior
access to capital. The US$ 80 million green
secured bond offering by our renewable
energy business represented the largest-
ever corporate bond placement in Georgia.

3) Buybacks and cancellation of GCAP

Eurobonds demonstrated strong progress
on our key strategic priority of deleveraging
GCAP. Through the end of 2022, we
repurchased US$ 116 million GCAP
Eurobonds, of which US$ 65 million
were cancelled following a Modified Dutch
Auction (MDA) in 4Q22. These positive
developments in our leverage profile,
coupled with our robust balance sheet
and capital allocation processes, led to a
10.8 ppts decrease in the NCC ratio in 2022.
This also resulted in an upgrade in our
corporate credit ratings to “B1” by Moody’s
and “B+” by S&P (from “B2” and “B”,
respectively).

4) During 2022, under the US$ 25 million

share buyback and cancellation programme,
we repurchased 2,252,341 shares for a
total consideration of GEL 54.3 million
(US$ 18.1 million). This brings the total
number of shares bought back and
cancelled to 6.4% of issued capital since
we launched the programme in August 2021.

Proposed transfer from LSE premium
to LSE standard listing
In February 2022, we put forward to our
shareholders a proposal to transfer Georgia
Capital to a London Stock Exchange standard
listing, which we consider is more suited to
the Company’s size and strategy and will help
GCAP better achieve its strategic goals and
produce greater value for shareholders. In
particular, the transfer is expected to eliminate
transaction delays and costs associated with
regulatory class tests and ensure a more
seamless execution of significant transactions,
such as disposals/exits from portfolio
companies. This will also enable your Company
to minimise its dependency on market
capitalisation fluctuations, especially in the
current challenging market conditions, as
our market capitalisation will no longer be the
main factor in determining class test related
transaction execution paths. The proposed
transfer will also provide greater flexibility to
execute meaningful share buybacks, including
the ability to repurchase more than 15% of our
issued equity capital without the requirement
to make a tender offer. At a General Meeting on
14 March 2023, shareholders overwhelmingly
approved this transaction, and we expect the
transfer to a standard listing to become
effective on 13 April 2023.

Capital allocation and dividends
During 2022, we allocated capital in three areas
of business investment, and this translated into
investment of GEL 53.4 million predominantly
in our investment stage businesses:
• GEL 6.3 million was allocated to the

education business;

• GEL 27.4 million was allocated to the
renewable energy business for the
conversion of a US$ 10 million shareholder
loan into equity; and

• GEL 19.2 million was allocated to the

housing development business for bridge
financing purposes.

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CHAIRMAN AND CEO STATEMENT CONTINUED

During 2022, Georgia Capital collected
GEL 93.9 million in dividends (2021: GEL 74.4
million), of which GEL 40.9 million was received
from Bank of Georgia, GEL 16.0 million from
retail (pharmacy), GEL 13.0 million from
hospitals, GEL 14.7 million from P&C insurance,
GEL 1.0 million from medical insurance, and
GEL 8.2 million from the renewable energy
businesses. Looking forward to 2023, we
currently expect a significant uplift to
approximately GEL 150-160 million in
dividends from our portfolio companies.

Value creation
Our portfolio value decreased by 11.5% to
GEL 3.2 billion during the year, mainly reflecting
the disposal of an 80% interest in the water
utility business, partially offset by strong
growth in BoG’s value.

Our listed investment – Bank of Georgia –
continued to deliver its recent track record of
exceptional performance, with an annualised
ROAE of 32.4%, even excluding some net
one-off gains, and particularly strong 43.2%
deposit growth and 12.9% loan book growth,
on a constant-currency basis, during 2022.
The Bank is clearly making significant progress
in its digital transformation, which is leading
to strong customer franchise and revenue
generation growth. Reflecting the strong
performance alongside the economic recovery,
BoG’s share price increased by 56.2% in 2022,
strongly supporting our NAV growth with
GEL 190 million value creation. In addition, the
Bank has a strong capital repatriation policy,
including share buybacks and regular
dividends and, on 15 February 2023, the Bank
announced its board’s intention to recommend
a final dividend for 2022 of GEL 5.80 per
ordinary share at the Bank’s 2022 Annual
General Meeting. This will make a total dividend
paid in respect of the Bank’s 2022 earnings of
GEL 7.65 per share. In addition, in 2022 the
Bank completed a GEL 112.7 million share
buyback and cancellation programme and
has announced, in February 2023, a further
buyback programme totalling up to
GEL 148 million.

The operating performance of our various
private portfolio investments was solid, as
evidenced by the aggregated revenue growth
across the private portfolio of 7.6%, despite
the impact of some external factors during
2022, particularly in the hospitals business
which resulted in a reduction in EBITDA in
2022 of 5.5%.

This reflects the net impact of the healthy
performance in our non-healthcare businesses
and the dampening effect of the gradual
organic return to a pre-pandemic environment
for our hospitals and clinics and diagnostics
businesses. Substantially lower COVID cases
in Georgia led to the suspension of COVID
contracts by the Government in March 2022
which, together with the sale of one of our
hospitals in April 2022 and the temporary
closure of another hospital towards the end
of the year due to mandatory renovation works,
impacted the y-o-y revenue and EBITDA
growth of our hospitals business

The individual performances of our private
businesses are described in greater detail
later in this report.

The strength of our people
I spend a great deal of my time mentoring
and working with what is already an extremely
talented group of business managers.
Our management and people continue to
be the core foundation of Georgia Capital’s
business performance.

I have written in many previous Annual Letters
that we will never invest in businesses unless
we have certainty that we have the very highest
calibre of people to run them. That commitment
remains as steadfast as ever, and I am
delighted that the quality of people throughout
the organisation continues to exceed my
expectations. My thanks to each and every one
of our employees for their continuing focus and
commitment to Georgia Capital.

Environmental, social and governance
We have put environmental, social and
governance (ESG) issues at the forefront of our
strategy and our commitment to the increasing
importance of the ESG issues that we all face
remains undimmed. There is significantly more
detail later in this report and in our Sustainability
Report with regard to the good progress we
are making and we remain committed to
providing more information to highlight our
good work on ESG matters. We have a strong
track record on governance issues and this
track record will continue as we move to the
LSE standard listing.

We invest in businesses and industries
that have a positive impact on people
and our planet:
• Our healthcare businesses contribute
significantly to the development of the
Georgian healthcare system, and the
general well-being of Georgian society.

• Our education business significantly

supports Georgia’s education system
and the development of the country’s
younger generation.

• Our renewable energy business, through
a number of green projects, supports
Georgia’s climate change mitigation,
natural resources conservation and
pollution prevention.

• Our auto services business is directly

engaged in the reduction of greenhouse
gas emissions.

Our measurable ESG targets, which are being
successfully achieved, are set out later in this
report and in our Sustainability Report.

Outlook
Against the backdrop of a volatile environment,
the strong performance of our portfolio
companies coupled with our focus on
improving the strength of our balance sheet
and capital allocation management were
instrumental to our robust 2022 results. We
have made strong progress in deleveraging the
business towards our targeted NCC ratio of
15%, while consistently growing NAV per share
on the back of capital light and sustainable
investments. Looking ahead, with greater
flexibility and the more cost-effective structure
that transferring to a standard listing is
expected to bring, I believe that Georgia
Capital is extremely well-positioned to deliver
consistent NAV per share growth over the
medium to long term, while also continuing
to make significant progress on our key
strategic priorities.

This Strategic Report as set out on pages
2 to 122 was approved by the Board of
Directors on 23 March 2023 and signed
on behalf by Irakli Gilauri, Chairman and
Chief Executive Officer.

Irakli Gilauri
Chairman and CEO
23 March 2023

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Photo Caucasian mountains on the way to Koruldi
Lake, Svaneti region of Georgia.

Strategic ReviewOur BusinessGovernanceAdditional InformationStrategic ReviewDiscussion of ResultsFinancial StatementsStrategic ReviewOverview

GEORGIA CAPITAL STRATEGY

GEORGIA CAPITAL STRATEGY IS BASED ON
THREE FUNDAMENTAL ENABLERS:

1 SUPERIOR ACCESS TO CAPITAL1

• Only Group of its size and scale focused on investing

in and developing businesses in Georgia.

• Uniquely positioned given access to capital in a small

frontier economy:
– c.US$ 500 million raised in equity at LSE.
– Issued six Eurobonds totalling US$ 1.8 billion.
– US$ 3+ billion raised from IFIs (EBRD, IFC, etc.).

1 Figures and statements in this section include the track record of our

predecessor company BGEO, prior to the 2018 demerger.

2 ACCESS TO GOOD MANAGEMENT

• Highly experienced senior management team, which grew BGEO

Group (predecessor company) by c.33 times in asset size between
2005 and 2017.

• Reputation among talented managers as the “best group to work for”.
• Attracted talents have demonstrated a solid track record of

successful delivery.

• Proven track record in turning around companies and growing

them efficiently.

• Proven track record in monetising investments through cash exits.
• A platform for entrepreneurs to build institutions (entrepreneurship

culture):
– If we do not have the right people, then we do not invest,

no matter the attractiveness of the opportunity.

3 COMMITMENT TO ACHIEVING THE

HIGHEST LEVEL OF CORPORATE GOVERNANCE

• Strong Board comprised mainly of independent Directors with

extensive international experience.

• Outstanding track record in institutionalising businesses
and creating independently run/managed institutions.
• Approximately 45 employees at the holding company level.
• Highly experienced management team in each portfolio company

with a strong measure of independence.

• Aligned shareholders’ and management’s interests by share

compensation:
– The Executive Director is solely remunerated by way of long-term

deferred shares (six-year vesting) and receives no cash
compensation.

– Salaries of the Company’s senior managers are heavily weighted
towards deferred share remuneration, and bonuses for senior
managers are paid in deferred shares rather than cash.

• High level of transparent reporting.
• Strong ESG practices.

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GEORGIA CAPITAL – A
PLATFORM FOR INVESTING IN,
UPSCALING AND MONETISING
LARGE OPPORTUNITY
BUSINESSES IN GEORGIA

• Developing and growing businesses to

the equity value of GEL 300 million to realise
proceeds through an exit, as investments
mature.

• LSE listed, with more than 90% institutional

shareholder base.

• Running an efficient cost structure with

no management or success fees.

Photo Paragliding over mountains of Gudauri, Georgia.

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GEORGIA CAPITAL STRATEGY CONTINUED

STRATEGIC PRIORITIES ANNOUNCED IN 2022

DELEVERAGING GCAP HOLDCO BY BRINGING DOWN
THE NCC RATIO BELOW 15% BY DECEMBER 2025.

REDUCE AND MAINTAIN PORTFOLIO COMPANIES’
LEVERAGE TO RESPECTIVE TARGETED LEVELS.

SET MEASURABLE ESG TARGETS AT BOTH GCAP
HOLDCO AND PORTFOLIO COMPANY LEVELS.

CONTINUED PROGRESS ON THE DIVESTMENT
OF “OTHER” PORTFOLIO COMPANIES.

•

“Other” portfolio companies comprise 8.6% of the total portfolio
value and include four subscale private businesses being the
auto service, beverages, housing development and hospitality
businesses.

• While a number of these businesses have interesting potential, the

Group currently believes that most will not offer the scalable growth
potential we seek. Absent a change in that assessment, the Group
is targeting to exit “Other” assets in a two to three-year period.

OUR LONG-TERM ASPIRATION

ACHIEVEMENT OF OUR STRATEGIC PRIORITIES WILL
ENABLE GCAP TO GRADUALLY TRANSFORM INTO A
SUSTAINABLE PERMANENT CAPITAL VEHICLE (PCV).

• Significantly reduced leverage at the GCAP HoldCo level.

• Capacity to redeploy our existing capital without the

need for new equity share issuance/raise.

• Consistent NAV per share growth on the back of resilient,

capital-light investments.

• Opportunity to return a significant portion of GCAP’s cash

inflows to our shareholders.

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Photo Batumi, Adjara, Georgia.

Strategic ReviewOur BusinessGovernanceAdditional InformationStrategic ReviewDiscussion of ResultsFinancial StatementsStrategic ReviewOverview

MARKET AND INDUSTRY OVERVIEW

SECOND CONSECUTIVE YEAR
OF DOUBLE-DIGIT REAL GDP GROWTH

Preliminary estimates of economic growth show the real economy expanding
by 10.1% y-o-y in 2022, following up on a 10.5% y-o-y growth in 2021. Rapid
expansion has been supported by macroeconomic developments on both the
external and domestic sides, with surging foreign currency inflows building
upon strong aggregate demand. Despite tightening financial conditions and
enduring substantial uncertainty in the global economy, the medium-term
outlook for Georgia remains strong. Exceptional growth has allowed the
seamless unwinding of fiscal policy support, as the Government balance
sheet has improved to pre-COVID levels, whilst the monetary stance remains
tight as inflation has begun descending.

Georgia is favourably placed among peers

Country

Armenia

Azerbaijan

Czech Republic

Georgia

Kazakhstan

Turkey

Uzbekistan

Photo Signagi city, Georgia.

Country rating

Fitch rating outlook

B+

BB+

AA-

BBB

BB-

Stable

Positive

Negative

Positive

Stable

Negative

Stable

Macroeconomic overview and outlook
2022 has been another year of exceptional
performance for the Georgian economy,
proving yet again that the macroeconomic
environment remains flexible and resilient
against exogenous shocks. The economy
delivered a second consecutive year of
double-digit expansion in 2022, finishing the
year as one of the top ten fastest-growing
economies according to the International
Monetary Fund (IMF) and the World Bank.
Preliminary estimates show annual growth
reaching 10.1% in 2022 after a 10.5% growth in
2021, driven by macroeconomic developments
on both the external and domestic sides.

Strong economic growth in 2022

10.1%

following a 10.5% growth in 2021

On the external side, strong foreign demand
throughout the year was supplemented by
an upswing in remittance inflows since the
beginning of the Russia-Ukraine war due to the
migration effect, with money transfers surging
by 86% y-o-y in 2022, predominantly due to
transfers from Russia. Merchandise exports
also continued robust performance, up by 32%
y-o-y in 2022, benefiting from improving terms
of trade, especially on the back of rising
commodity prices, and stronger demand from
neighbour countries as well as several new
markets. Moreover, tourism revenues reached

108% of respective 2019 levels as of 2022,
including 135% in 2H22, reflecting the global
resumption of travel as well as the migration
effect. On the domestic side, growth was aided
by continued credit expansion in both domestic
and foreign currencies across both retail and
business sectors, as the commercial bank loan
portfolio grew by 12.1% y-o-y as of December
2022 (without the exchange rate effect), despite
the tight monetary stance and globally rising
foreign currency interest rates. Additionally, while
fiscal support has moderated, the fiscal stance
remains expansionary, with current expenditures
growing by 9% y-o-y and capital expenditures
increasing by 22% y-o-y in 2022, facilitated by
a 28% surge in fiscal revenues.

As aggregate demand strengthened, imports
also accelerated substantially in 2022, growing
by 31% y-o-y. All of investment, consumer and
intermediate goods contributed to rising
external trade, as the trade deficit reached US$
7.6 billion, up 30% y-o-y. Importantly, domestic
exports (without re-exports) reached a record
high of US$ 3.7 billion in 2022, accounting for
66% of total exports and growing by 18.4%
y-o-y. The resilience of domestic exports has
been of particular importance in the past
couple of years, with domestic exports growing
by 3.6% y-o-y in 2020 despite total exports
falling by 12% y-o-y, and then growing by 30%
y-o-y in 2021. With strong merchandise export
performance aided by record-high remittance
inflows and rebounding tourism revenues,
the current account balance (CAB) reached
a record low of -2.7% of GDP in 9M22, down

from -10.2% in 9M21, with 3Q22 posting a
record-high current account surplus of 5.9%
of GDP. Foreign Direct Investment (FDI) inflows
also increased significantly in 2022, totalling
US$ 1.7 billion in 9M22, up over 100% y-o-y.

Strong rebound in tourism revenues in 2022

108%

compared to 2019

The unemployment rate reached 17.3%
in 2022, lowest since at least 2010 (most
up-to-date data begins from 2010 due to
switching to a new methodology). More than
66,000 jobs were added compared to the
beginning of the year, while the number of
people participating in the labour force
increased by 64,000, as the labour participation
rate increased above pre-pandemic levels.

The consolidated budget overall deficit was
GEL (1.8) billion in 2022, down 53% y-o-y,
with the annual deficit (IMF modified) planned
at -3.1% of GDP, down from -6.1% in 2021. The
operating balance also improved substantially,
growing from GEL (227) million in 2021 to
GEL 2.6 billion in 2022. Reduction in the fiscal
deficit was mostly attributed to high revenues
stemming from higher-than-expected
economic growth, with the consolidated
budget revenues growing by 28% y-o-y,
including a 30% y-o-y growth in tax revenues.
Strong revenue performance allowed current

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Real GDP growth

-10

-20

7.4%

6.4%

3.6%

4.4%

3.0%

2.9%

4.8% 4.8%

5.1%

10.4%

11.2%

10.3%

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021 9M21 9M22

Nominal GDP, GEL billion

Real GDP growth rate, y-o-y %

-6.8%

Current account balance (% of nominal GDP)

6.9% 7.5%

6.2% 5.9%

7.5% 7.7%

6.6%

6.3%

3.6%

10.3% 11.1% 10.3%

12.1%

-5.6%

-9.8%

-12.2%

-11.4%

-10.2%

-11.8%

-12.5%

-8.1%

-6.8%

-5.8%

-10.4% -10.2%

-12.5%

-10

-20

-30

18
16
14
12
10
8
6
4
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-2
-4
-6
-8

9.7%

-2.7%

2010

2011 2012

2013

2014

2015

2016

2017

2018

2019 2020

2021

9M21

9M22

Goods, net

Investment income, net

Services, net

Current transfers, net

Current account
FDI, inflows

Public finances (% of GDP)

60%

50%

40%

30%

20%

60.1%

-2.8% -2.7%

-3.0%

-2.7%

-2.3% -2.1%

47.6%

-3.1% -2.8%

-2.3%

-2.3% -2.2%

39.6%

-6.1%

29.8%

36.4%

2014 2015 2016 2017 2018

2019 2020 2021

2022F

2023F

2024F

2025F

2026F

-9.3%

23.5%

-10%

Overall Balance (% of GDP)

Total Public Debt (% of GDP)

External Public Debt (% of GDP)

(+9% y-o-y) and capital (+22% y-o-y)
expenditures to increase whilst cutting the
deficit in line with the fiscal consolidation plan,
although expenditure growth has itself
moderated. With the Government borrowing
in order to meet financing needs in 2020, the
general Government gross debt increased from
40.4% to 60.2% of GDP by the end of 2020 but
is expected to have fallen to below pre-COVID
levels at 39% of GDP by the end of 2022 as
GEL has strengthened and the economy
has rebounded. The improvement in the
Government balance sheet has thus
appropriately aided disinflation on the domestic
side and reduced vulnerabilities on the external
side. The external debt service to budget
revenues ratio fell to 6.5% in 2022 as opposed
to 19.4% in 2021 and a pre-crisis level of 9.6%
in 2019. In line with the Economic Liberty Act of
Georgia, which sets ceilings of 3% for the fiscal
deficit and 60% for debt while allowing for a
three-year grace period, the parliament has
ratified the 2023 budget law with the planned
deficit declining to 2.8% and planned debt
standing at 38.3% of GDP by the end of 2023.

As an established tourism destination, tourism
has been an increasingly important sector of
the Georgian economy and a major source
of FX inflows during the past few years,
significantly contributing to improving the CAB
and driving rising service exports. With borders
closed and international travel essentially
halted, the tourism sector, like elsewhere
around the world, came to a near-complete
standstill in Georgia in 2020. The number of
international visitors to Georgia increased on
average by 15% over 2012-2019 but fell by 81%
in 2020, rebounding by 7.7% y-o-y in 2021. In
2022 the tourism sector experienced significant
growth, as global resumption of travel was
compounded by the migration effect arising
after the Russian invasion of Ukraine. The
number of international travellers grew by 188%
y-o-y in 2022, reaching 58% of 2019 level, while
tourism revenues grew by 182% y-o-y, reaching
US$ 3.5 billion, or 108% of 2019 level. While
research indicates that migrants from Ukraine,
Belarus and Russia intend to remain in Georgia
for long-term stays, the outlook remains
uncertain as it is inevitably tied to the timing
and terms of the war resolution. However, travel
receipts rebounding to over 100% of 2019 level
despite the number of travellers only recovering
to 58% suggests that significant growth
potential remains.

The Georgian Lari (GEL) has sustained its
appreciation trend since mid-2021 and has
appreciated by 19.6% against the US dollar
(US$) compared to the beginning of 2022 as
of 17 March 2023, despite US$ strengthening
globally. With this, GEL has now strengthened
above pre-pandemic levels. On the external
side, GEL appreciation has been propelled by
very strong foreign currency inflows, driven by
a multitude of factors including improving terms
of trade, worldwide travel recovery, migrant
impact and growing demand for Georgian
exports (both goods and services), further

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MARKET AND INDUSTRY OVERVIEW CONTINUED

Inflation vs inflation target

16%

12%

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Headline inflation

Core inflation

Target

aided by rebounding economic activity, robust
foreign currency lending, ample FX liquidity in
the banking sector, the tight monetary stance
and improving market confidence on the
domestic side. GEL also appreciated against
the entire basket of trading partner currencies,
with the nominal effective exchange rate up by
25% y-o-y and the real effective exchange rate
up 15% y-o-y by the end of 2022, reaching
record-high levels.

Robust GEL strengthening

19.6%

appreciation against US$ compared to the
beginning of 2022 (as of 17 March 2023)

Average annual inflation was 11.9% in 2022,
significantly above the 3% target, but shrank to
9.8% in December 2022 and 9.4% in January
2023, back to single digits after decelerating
throughout the year since the peak of 13.9%
in January 2022. All major components
contributed to rising inflation in 2022, as the
Russian invasion of Ukraine exacerbated
existing supply-side effects and resulted in a
further surge of energy, food and commodity
prices. Despite GEL strengthening, imported
inflation was by far the most significant driver
of increasing prices on the back of the global
supply crunch. The National Bank of Georgia
(NBG) has maintained a tight monetary stance
with the refinancing rate set at 11% since March
2022, a cumulative hike of 300 basis points
since March 2021, reaffirming its commitment
to pursue tight policy until inflationary pressures
subside. NBG sold US$ 94 million and bought
US$ 80 million on foreign currency auctions in
2022, but also bought a net amount of US$ 580
million through direct participation in the foreign
exchange market, taking advantage of surging
FX inflows. Subsequently, official reserve assets
reached a record-high level of $4.9 billion by
the end of December 2022, up 15% y-o-y.

with strong fiscal and monetary discipline, as
the main driver behind the improved outlook.
A new three-year executive stand-by
arrangement worth US$ 280 million was
approved with the IMF in June 2022, focusing
on structural reforms and anchoring
macroeconomic policy.

The IMF revised Georgia’s GDP growth
forecast several times up to a final 10% in
2022 (December 2022 forecast), positioning
Georgia as one of the top ten fastest-growing
economies in the world. The IMF expects
inflation to decelerate close to the 3% target by
the end of 2023, while the medium-term growth
(2023-2027) projection stands at 5.0%, one of
the highest in the region. The great uncertainty
surrounding the resolution of the war, as well
as its medium-longer run effects, pose the
greatest threats to the medium-term outlook.

Medium-term (2023-2027) economic growth rate

One of the highest in the region (IMF,
December 2022)

Fiscal authorities have demonstrated
commitment to returning to neutral levels,
while NBG has declared to strictly adhere to
the inflation target and maintain a tight stance
until inflation and inflationary expectations
subside. The appropriate policy mix, combined
with the swift resurgence and improving
macroeconomic environment, has ensured that
the economy has remained resilient in the face
of the crises, although uncertainty persists.

The new three-year stand-by arrangement
with the IMF, signed in June 2022 following
the conclusion of a three-year EFF programme
in April 2021, is designed to maintain
macroeconomic stability and anchor policy
decisions. Although the Government doesn’t
intend to use the allocated US$ 280 million as
part of the new arrangement, the purpose of
the programme is to strengthen the agenda for
structural reforms and underscore confidence
in macroeconomic policymaking. In approving
the arrangement, the IMF executive board
underlined the resilience of the Georgian

economy and the appropriate policy mix
cushioning the impact of recent crises. The
first review under the stand-by arrangement
took place in December 2022, with the IMF
executive board noting that adverse spillovers
from Russia’s war in Ukraine has been limited
thus far, and positive economic developments
have been appropriately used to rebuild fiscal
and external buffers.

Reform-driven success
Georgia has carried out genuine economic
and structural improvements over the past
two decades. As a result, corruption has
decreased, productivity has been enhanced
and the economy has become more diversified,
supporting resilience against exogenous
shocks such as the global financial crisis and
the COVID-19 pandemic.

Georgia is consistently ranked as a top
performer in governance and doing business
indicators. With a ranking of 7th in Ease of
Doing Business in 2020 (World Bank, Doing
Business), Georgia has implemented an array
of reforms and is characterised as a top-
performing economy in the region in which
to start a business. Furthermore, Georgia is
ranked 1st out of 117 countries in the
International Budget Partnership’s 2021 Open
Budget Index, as well as 26th out of 180
countries by the Index of Economic Freedom
measured by the Heritage Foundation in 2021
and 29th out of 194 countries in Trace
International’s 2021 Matrix of Business Bribery
Risk. Georgia is on a par with the European
Union (EU) member states and top in the
Eastern Europe and Central Asia Region in
the 2020 Corruption Perception Index by
Transparency International.

The Economic Liberty Act, effective since
January 2014, ensures the continuation of a
credible fiscal framework for Georgia by capping
the fiscal deficit at 3% of GDP and public debt at
60% of GDP. However, the emergency escape
clause allows the Government to surpass the
thresholds temporarily in order to manage the
pandemic, with the law requiring a return to
the bounds within three years. The fiscal
consolidation plan has already been adopted by
the parliament as part of the new budget law.
The Economic Liberty Act also requires
electorates’ approval through a nationwide
referendum for imposing new taxes and raising
existing taxes, subject to certain exceptions.
Furthermore, as of January 2017, corporate
income tax for non-banking and non-insurance
corporations is now applicable to only
distributed profits; undistributed profits, which
are reinvested or retained, are exempted.
Georgia has one of the friendliest tax regimes
according to World Bank’s Doing Business 2020
report, having slashed the number of taxes from
21 in 2004 to just six currently. Commitment
towards structural reforms ensures constant
effort for improving the business environment,
the latest examples being the VAT reform

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(adopted in July 2020) and the new insolvency
framework (adopted in September 2020 and
into force since April 2021).

further positioning Georgia as an important
player in the EU energy policy.

Public debt down to

39% of GDP

by the end of 2022, below pre-COVID levels

Despite challenges arising from the pandemic,
structural reforms and large infrastructure
projects to promote Georgia as a transit and
tourism hub and enhance long-term growth
are still underway. A new pension law was
adopted in 2018, enhancing long-term fiscal
sustainability, supporting capital market
development, increasing the replacement
rate, narrowing the current account deficit
and boosting potential output. A new bill on
investment funds was adopted in 2020, in line
with international practice and harmonisation
obligations with EU law, providing an up-to-
date regulatory framework for investment
activity. The Government focuses on
addressing the shortcomings in employee
benefit schemes, further cutting non-essential
expenditures, consolidating public sector
institutions, making social and healthcare
spending more targeted, privatisation schemes
and increasing capital expenditure efficiency.
Within the responsible lending framework, NBG
took macroprudential measures to decrease
household indebtedness, enhance financial
stability and strengthen regulation, supporting
the financial system’s resilience to currency
fluctuations and FX-induced credit risks. A new
important reform adopting the framework for
issuing mortgage covered bonds was adopted
by the parliament in 2022, aiming to provide an
additional source for a relatively cheap and
stable source of financing for credit institutions.

A business-friendly environment, renowned
in the region for best-in-class governance,
well-developed infrastructure, stable energy
supply, flexible labour legislation, a stable and
profitable banking sector, strategic geography
connecting European, landlocked Central Asian
and Middle East countries, and preferential
trading agreements, support Georgia to
become a regional hub economy.

The Government’s ongoing infrastructure
investments and increased spending on roads,
energy, tourism and municipal infrastructure
will also reinforce the potential. To enhance
Georgia’s competitiveness, the Government
continues to strengthen integration in existing
international systems as well as new transit
routes. Georgia is a regional energy corridor. In
November 2019, the Georgian PM, alongside
the Turkish and Azerbaijani presidents, opened
the Trans-Anatolian Pipeline (TANAP), allowing
natural gas from Azerbaijan to be exported to
Europe through Georgia. In December 2022,
leaders of Azerbaijan, Georgia, Hungary and
Romania signed an agreement to build an
underwater electric cable in the Black Sea,

Georgia’s business-friendly environment,
coupled with its sustainable growth prospects,
attracted FDI on average 10% of GDP over
the past decade. These capital flows boosted
productivity and accelerated growth. Public
infrastructure projects were also instrumental
in driving growth, as well as better realising the
country’s potential in logistics, transport and
tourism. Faced with low domestic savings, FDI
is an important source of financing growth in
Georgia, as well as a reliable source of current
account deficit funding. In 9M22, total FDI
amounted to US$ 1.7 billion, up 100% y-o-y.
Major sectors attracting FDI were: real estate
(25% of the total), finance (19%) and energy
(19%). The share of reinvestment by foreign
companies in total FDI was 60% in 9M22,
on par with 2019’s 62%. The increasing share
of reinvestment indicates investors’ trust in
Georgia’s growth model and the success of the
profit tax reform introduced in 2017. Planned
investment and infrastructure programmes, a
rising number of free trade agreements (FTAs)
and a business-supportive environment will
support further FDI inflows in the medium term.

Free trade agreements
There have been significant changes in
Georgia’s export structure and destination
markets in recent years; however, Georgia has
not yet fully tapped into international markets.
One of the biggest changes in destination
markets has been a reorientation from the
Russian market after the 2005 embargo, as
the embargo forced Georgian producers to
redirect exports to other Commonwealth of
Independent States (CIS) countries, the EU and
the Middle East. Exports to Russia picked up
again in 2013 as Russia reopened its borders
to Georgian products. Another significant
change concerns the growing importance
of China as a Georgian export market, as the
FTA effective from January 2018 has brought
a major acceleration of exports to China.
Since 2013, Georgia’s developed logistics and
transport infrastructure has helped shore up
opportunities for new re-export commodities,
including copper and pharmaceuticals.
Domestic exports, which posted a positive
growth rate in 2020 despite a significant fall in
re-exports, have remained resilient throughout,
as explained above.

Together with established destinations,
improved access to new large markets,
such as the EU, China and Hong Kong,
could increase market penetration. There is
also scope for diversifying agricultural exports.
Georgia’s existing FTAs (with the EU, CIS,
EFTA, Turkey, China and Hong Kong) and
the prospective FTA with India, as well as an
agreement with Israel, offer significant upside
potential for Georgia’s exports.

The EU-Georgia Association Agreement, which
came into force in July 2016, and the related
DCFTA, effective since September 2014, have

laid the solid groundwork to improve governance,
strengthen the rule of law and provide more
economic opportunities by expanding the EU
market to Georgian goods and services. Closer
economic ties with the EU and trust in prudent
policymaking are also expected to attract foreign
investments to Georgia. Visa-free travel to the
EU, granted to Georgian passport holders in
March 2017, is another major success of the
Georgian foreign policy.

Following Ukraine’s plea to join the EU as it
battles Russia’s invasion, Georgia and Moldova
on 3 March 2022 submitted their applications to
join the EU. Georgia previously planned to apply
to join the EU in 2024. The European Council
granted a conditional European perspective to
all three countries, with Ukraine and Moldova
receiving the candidate status pre-emptively.
For Georgia, however, candidate status was
made subject to meeting a list of 12 conditions.
In February 2023, the European Commission
published analytical reports assessing the
stance of Georgia, Ukraine and Moldova with
respect to their alignment with the EU acquis
and offering guidance for the steps ahead.
The report for Georgia was widely regarded as
favourable, with the EU ambassador to Georgia
congratulating the Government for “a very
positive report”. Progress towards meeting the
conditions is nonetheless still required before
candidate status would be granted.

Georgia’s FTA with China, effective from
January 2018, and its FTA with Hong Kong,
effective from February 2019, have been
increasing opportunities to further accelerate
exporting markets and attract investors by
offering a business-friendly environment, strong
corporate governance standards and access
to a market of 2.8 billion customers. China
became the single largest destination country
for Georgian exports in 2020 and retained its
position in 2021, accounting for 13.2% of total
exports in 2022. China is also the largest
consumer of Georgian domestic exports,
responsible for a fifth of the total.

Individual sector overview
Banking
The banking sector has been one of the most
developed and fastest-growing sectors of the
Georgian economy. The banking sector’s asset
growth rate of 17.2% (ten-year CAGR) has far
outstripped the nominal GDP growth rate for the
same period. However, despite robust progress,
there are plenty of opportunities to further tap
into growth potential, as the financial market
remains at an early stage of development.
The sector has remained resilient in the face of
challenges brought by the COVID-19 shock and
the war in Ukraine, underscoring the robustness
of the banking system.

Fitch Ratings, which downgraded the outlook
on Georgian banks to negative in April 2020,
revised the outlook to stable in March 2021,
citing reduced pressure on the banks’ credit
profiles and the banks’ “intrinsic strength”.
The agency affirmed the stable outlook in June

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Photo Tobavarchkhili lake, in Samegrelo region, Georgia.

individual bank’s deposit concentration exceeds
specified norms.

The banking sector ended 2022 with record
net profits of GEL 2.1 billion, almost equal to
2021 profits (0.3% larger). Revenues reached
GEL 7.5 billion in 2022, up 25.6% y-o-y, while
total expenses reached GEL 5 billion, up 36.6%
y-o-y. Non-performing loans (IMF methodology)
reached 1.7% of total loans by the end of 2022,
compared to 1.9% at the end of 2021. Return
on assets was 3.8% (3.9% at the end of 2021)
and return on equity was 30.2% (34.4%), while
the average capital adequacy ratio was 20.3%
(19.6%) and the liquid asset ratio was 22.9%
(20.2%).

The loan portfolio proved extremely resilient in
2022, despite a tightened monetary stance and
rising foreign currency rates in the latter part of
the year, as credit to the economy increased by
12.1% y-o-y (excluding the exchange rate effect)
by the end of 2022, including a 16.5% growth in
GEL loans and a 8% growth in foreign currency
loans. Mortgage loans increased by 12.2%
by the end of the year, while business loans
increased by 10%. As for deposits, commercial
bank deposits increased by 30% by the end
of 2022 (without the exchange rate effect),
including a 27.4% growth in GEL deposits and
a 28.8% growth in foreign currency deposits
(without Government deposits).

2022, pointing that the leading banks are
characterised by “sound financial metrics”
and “adequate capital buffers”. Subsequently,
Fitch Ratings revised the sovereign credit rating
outlook for Georgia to positive in January 2023,
paving way for a potential outlook upgrade for
the banking sector.

In December 2022, the parliament adopted
changes in the corporate tax model for banks
(as well as credit unions and microfinance
organisations), setting the corporate tax rate at
20%, combining the previous 15% rate with the
5% dividend tax rate and abolishing the latter.
Moreover, commercial banks adopted
International Financial Reporting Standards
(IFRS) from January 2023, as laid out in NBG’s
2020-2022 supervisory strategy, aiming to
increase harmonisation with developed
countries. Parallel reporting will be maintained
until another decision is made by NBG.

In 2022, NBG began working on operationalising
a new bank recovery and resolution framework,
assisted by technical missions from IMF.
The mission noted that Georgia has made
“considerable progress” in developing for the
infrastructure necessary for an effective bank
recovery and resolution regime, and identified
several priorities in cooperation with authorities.
NBG also applied for membership in the Single
Euro Payment Area (SEPA), noting that SEPA
membership will increase the credibility of the
financial sector and simplify services for
Georgian citizens.

In January 2023, a new methodology was
published for defining systemically important
commercial banks and establishing a systemic
buffer for them, aiming to further increase the
system resilience. The updated methodology
defined three banks – Bank of Georgia, TBC
Bank and Liberty Bank – as systemically
important, setting a 2.5% buffer for the former
two and 1% for the latter. The decree contains
provisions for increasing the buffers in case an

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locally produced drugs on the market is c.14%
as opposed to only 5% in the early 2000s.
There are over 100 importers of pharmaceutical
products in Georgia, but approximately 70%
of all imports are performed by three
companies: GEPHA (approximately 25%), PSP
(approximately 23%) and Aversi (approximately
20%). Domestic production is represented by
over 50 companies and is dominated by two
players, with approximately 84% of the country’s
total production volume. Pharmaceuticals
market reforms have made it possible to create
a competitive marketplace in Georgia. These
have included the introduction of parallel imports
and automatic registration of medicines
recognised by international control bodies, such
as the U.S. Food and Drug Administration and
the European Medicines Agency, as well as
favourable regimes for setting up pharmacies
(0% VAT on medicines, absence of customs
duties and no price controls).

According to the new Government initiative,
from January 2022 Turkey has also been
added to the list of parallel import countries,
meaning companies would be allowed to
import, without further national authorisation,
all pharmaceutical products approved by the
Turkish regulator. The initiative aims to increase
the variety and accessibility of pharma
products in the country.

According to management’s estimates based
on third-party data, generics account for 73%
of the total market revenues, which is somewhat
higher than the EU average (c.50%). However,
there is still market opportunity for generics –
in the leading economies like Germany and the
UK, generics hold a dominant share of more
than 80% (in the reimbursed segment). Over the
Counter (OTC) segment in Georgia prevailed
over the last decade until 2014 when a
prescription requirement was introduced for
over 6,000 medicines. Currently, there is a nearly
equal split between OTC and prescription drugs.
Medicines and pharmaceutical products have a
significant contribution to trade turnover. Trade
of medicines packaged in measured doses is
a considerable source of income. Imports of
medicines were the fifth largest commodity
group, amounting to US$ 404 million (3.0%
of total imports), while export of medicines
was the eighth largest export commodity group,
amounting to US$ 109 million (2.0% of total
exports) in 2022, including US$ 88 million of
re-exports (4.7% of total re-exports).

Deposit dollarisation was 56% at the end of
2022, down from 60% at the end of 2021.
Loan dollarisation followed a similar trend, falling
below 50% for the first time and reaching 45%
by the end of 2022, down from 51% by the end
of 2020.

Retail (Pharmacy)
The pharmaceutical market in Georgia is highly
concentrated, with three major players holding
approximately 83% of the market share.
The Georgian pharmaceutical market is highly
dependent on imports. The share of number of

Also, effective from 15 January 2023, the
Ministry of Health, Labour and Social Affairs of
Georgia (the “Ministry”) implemented an External
Reference Pricing model on the pharmaceuticals
market, only related to prescribed medicines
that are financed by the State. Reference Pricing
is an approach where prices are set according
to the benchmark prices for the same or similar
medicines in comparable countries. According
to the new initiative, the Ministry introduced
the maximum retail price on targeted
pharmaceutical products, in two directions:
Generic and Original drugs. The price caps

are set based on the average of such medicine
prices in the following countries: Bulgaria, Latvia,
Macedonia and Montenegro.

medical tourism hub in the Caucasus region
and to further boost the growth of services
exports.

Currently, approximately 50 Generic drugs are
subject to the new regulation.

Hospitals and Clinics and Diagnostics
The Georgian healthcare industry experienced
important transformations during the last
decade. The key components of the national
healthcare reform were massive privatisation,
infrastructure upgrade, sector liberalisation,
introduction of Universal Health Care (UHC)
and wider accessibility to healthcare services
as the major outcome.

To address high private healthcare costs
and basic healthcare coverage for the entire
population, UHC was introduced in 2013
and replaced previous state-funded medical
insurance plans. New initiatives regarding the
reimbursement and differentiating coverage of
Universal Health Insurance were adopted in
2017. In November 2019, aiming to standardise
hospital reimbursement and limit healthcare
expenditures, the Georgian Government
introduced further changes to the UHC
reimbursement mechanism. The changes
mainly cover the Tbilisi and Kutaisi regions,
which had recently developed an oversupply
of beds as a result of the addition of a number
of small hospitals in recent years. The change
may also drive more rapid market consolidation
in Tbilisi and Kutaisi, improving service
efficiency and quality in the country.

In terms of health expenditure as a percentage
of GDP, Georgia achieved a level consistent
with that of major developed economies, at
approximately 8%, which is above most of its
peer emerging economies. However, there
still remains vast potential for further increase
since Georgia has one of the lowest per capita
expenditures on healthcare among the
benchmark countries. Healthcare spending
per capita is currently at a very low base of only
US$ 291, with annual outpatient encounters of
3.7 per capita, significantly lower than many
comparable countries. On average, 65% of
healthcare spending is funded by the private
sector. Notwithstanding a significant
improvement in the bed occupancy rate, from
30% in 2003 to 49.1% currently, there is still
potential for even higher efficiency in order
to align Georgia with best practices. The
occupancy rate in Georgia is far below EU
(77%) and CIS average (83.4%) indicators.
The Georgian healthcare market has shown
solid growth in recent years. According to
management’s estimates based on third-party
data, the total healthcare market grew by a
CAGR of 12% over 2011-2020 years and was
expected to grow at 8% in 2021. Outlook for
the healthcare sector is positive as increasing
disposable income and supportive Government
healthcare help domestic consumption to
increase. The growth of overnight visitors, in
line with significant improvement in healthcare
service quality, support Georgia to become a

To streamline the state funding financing in
healthcare and improve the reimbursement
process, the Georgian Government introduced
an initiative to implement a Diagnosis Related
Group (DRG) financing system. The DRG
system categorises inpatient case types that
are clinically similar and expected to use the
same or similar resources into groups by
applying various criteria (age, sex, intervention
needed, comorbidity, etc.). The roll-out of the
DRG system started on 1 November 2022 and
was in the testing phase until 1 January 2023.
While it is too early to estimate its impact on the
financial performance of our hospitals business,
the implementation of the DRG system aims to
increase the efficiency of state financing and
improve the quality of healthcare service on the
market. The system is expected to better reflect
inflation and other price pressures that are
present in the healthcare sector.

Property and Casualty (P&C) Insurance
From 2010 to 2021, the Georgian property
and casualty insurance sector grew by 299%,
with insurance revenue increasing to GEL 423
million. According to the Insurance State
Supervision Service of Georgia (the ISSSG), the
total value of gross written premiums increased
from GEL 113 million in 2010 to GEL 461 million
in 2021; an increase of 306%. The largest six
insurance providers in Georgia account for
approximately 80% of the market. The level
of insurance market penetration in Georgia
amounts to 1.29% (of which 0.8% is attributable
to the property and casualty insurance market)
as at 31 December 2021. This was lower than
insurance penetration in more developed
countries such as the United Kingdom,
France, Switzerland and Belgium, which had
penetration rates of 11.10%, 9.50%, 7.10%, and
5.80%, respectively, and was also lower than
penetration in neighbouring countries such as
Slovenia, Poland, Bulgaria, Turkey and Russia,
which had penetration rates of 5.00%, 2.50%,
2.40%, 1.30% and 1.30%, respectively. The
Georgian retail insurance market offers ample
room for growth, as most of its potential is yet
to be unlocked. Motor insurance accounts for
51% of the total retail insurance market in
Georgia, of which 14% represents border
Mandatory Third Party Liability (MTPL)
insurance, effective from March 2018.

Moreover, the motor insurance segment has
great potential to increase, as only 7% of
registered cars are insured on the local market.
The new law requiring local MTPL for all vehicles
registered in Georgia is expected to kick in and
significantly boost retail market penetration.

Medical Insurance
Over the past decade, the private medical
insurance market expanded significantly
compared with the 2006 figure, when only
40,000 Georgian citizens (or c.1% of the total
population) had a voluntary medical insurance

package, mostly provided as part of a corporate
benefits programme. There were 673,000
private health insurance (PHI) policies in force
by the end of September 2022. The corporate
segment accounts for the major portion of the
PHI market – 93.9% of all policies are acquired
by employers, and the rest (41,300) are
purchased by self-paying individuals. In Georgia,
PHI is primarily intended to provide value-added
services in the form of more extensive coverage
or more convenience for the patient.

Renewable Energy
In Georgia, electricity consumption has been
growing significantly for the last decade, in line
with GDP growth. Electricity demand for the last
decade has been growing on average by 5.1%.
The country was historically a net exporter of
electricity; however, due to sustained
consumption growth, the trend changed and
Georgia became a more import-dependent
country with ten months of electricity deficit
throughout the year. To support the
consumption growth, which is forecasted at
a minimum of 4.5% for the next decade, the
Government is promoting the development and
construction of domestic renewable capacities
through different support mechanisms, as well
as implementing reforms in the Georgian
energy market. Back in 2008, the power
generation market witnessed significant
changes to facilitate market liberalisation.
All HPPs constructed after August 2008 have
been deregulated, which served as a first step
towards the establishment of a free electricity
market. In 2014, the EU and Georgia signed an
Association Agreement and Georgia became
a full contracting party member of the Energy
Community. Further, the Electricity Law was
amended in June 2017, deregulating all HPPs
below 40MW and gradually moving the large
industrial consumers out of the regulated
pricing scheme to the free market. In the next
phase of deregulation, effective from May 2019,
big industrial customers with monthly electricity
consumption of at least 5GWh were required
to register as direct customers. Deregulation
continued in 2021 – all entities with monthly
consumption of more than 0.4GWh and with
35-110kV access lines were registered as direct
consumers. Also, since May 2022, HPPs with
a capacity of less than 65MW have been
deregulated. This process will continue in 2024
and the following years as well, further
increasing the share of the deregulated market.

At the end of December 2019, the Parliament of
Georgia has adopted the new Law on Energy
and Water Supply and the Law on Renewable
Energy Sources. The draft of the law on Energy
was prepared by the Energy Community
Secretariat, taking into account the specifics of
the Georgian energy market. In 2020 and 2021
several important laws were adopted to
prepare Georgia’s energy market for the
reforms in 2022-2023. The establishment of the
new energy exchange was a step forward to
the reform of the Georgian energy sector. In
December 2019, the Georgian Energy Exchange
was founded with 50%-50% co-participation of

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MARKET AND INDUSTRY OVERVIEW CONTINUED

Data provided in this section was collated from
the following sources unless stated otherwise:
• Geostat
• National Bank of Georgia
• Ministry of Finance of Georgia
• Georgian National Tourism Administration
Insurance State Supervision Service of
•
Georgia

• National Center for Disease Control and

Public Health
• Worldometers
• World Bank
•

International Monetary Fund

Georgian State Electro system and Electricity
System Commercial Operator. The Georgian
Energy Exchange will be responsible for
organising day-ahead, intraday and bilateral
markets through the software services of
consulting company “Nord Pool Consulting”.

Education
The private K-12 education industry in Georgia
is growing at a rate twice that of the nominal
GDP growth rate, at a compound annual
growth rate of 16% from 2013 to 2019 to reach
GEL 280 million, driven by both increasing
enrolments and rising tuition fees.

We believe there is a consolidation trend that
represents an opportunity in a fragmented
market. The number of private schools in the
Georgian market has decreased from 245 in
2011 to 214 in 2022 and at the same time, the
average private school size has increased from
212 learners per school to 297 learners per
school. Based on our estimation, the market
share of the ten largest players has increased
from 15% to 19% over the same period. Private
learners are consolidating in the four largest
cities with a population of over 100,000, namely
Tbilisi, Batumi, Kutaisi and Rustavi.

Management believes that the key growth
drivers will be the large gap in the quality of
public schools as compared to private schools
as well as increasing household income and
decreasing unemployment rates (prior to the
onset of the COVID-19 pandemic). Georgia
has the potential to grow private education
enrolment given the penetration levels achieved
in sub-Saharan Africa, Latin America and South
Asia, which were 16%, 20% and 44% in 2020,
respectively, compared to 10% for Georgia,
according to UNESCO. Lower average
spending per learner also indicates further
room for growth. Total private and public
spending per learner currently stands at
c.US$ 800, compared to the OECD average
of US$ 11,000. Total spending as a percentage
of GDP was 2.1% compared to the OECD
average of 4.3%.

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Photo Shaori Reservoir, Racha region.

Strategic ReviewOur BusinessGovernanceAdditional InformationStrategic ReviewDiscussion of ResultsFinancial StatementsStrategic ReviewOverview

CAPITAL ALLOCATION AND MANAGING PORTFOLIO COMPANIES

Georgia Capital does not have capital commitments or a primary
mandate to deploy funds or divest assets within a specific time frame.
It focuses on shareholder returns and on opportunities that meet its
investment return and growth criteria. In line with its capital allocation
strategy, the Group emphasises capital-light, larger-scale investment
opportunities in Georgia, which have the potential to reach at least
GEL 300 million equity value over three to five years and to be monetised
through exits as they mature. The Group believes that the superior exit
opportunities and improved liquidity associated with larger sized
investments will support the Group’s desire to reduce the current
discount to reported NAV per share.

Businesses operating in a frontier economy such as Georgia have limited
access to capital and management personnel. Consequently, those with
access to these limited resources can make investments in companies
which then provide an attractive risk return profile. The Directors seek
to generate value for its shareholders by: investing in opportunities in
Georgia that are currently not directly accessible to its shareholders;
changing management and governance structures; institutionalising and
scaling up the Company operations, often to benefit from consolidating
fragmented and underdeveloped markets; and unlocking value by exiting
these companies over time. The Group’s approach to investing and
managing companies entails the following principles:

Highly disciplined entry approach
The Georgian economy entered into a period of significant development
and growth approximately 15 years ago and different sectors and
businesses are therefore at early stages of formation.

Access to capital and management personnel is limited and as a result,
Georgia Capital can pursue attractive investment opportunities and
acquire assets on relatively attractive terms with a view to consolidating

fragmented and underdeveloped sectors of the economy, particularly
targeting high-multiple service industries, not requiring significant capital
commitments. The Group believes that in the long run Georgia will
become a service hub of the region. Since the Group is under no time
pressure to invest, it takes a selective and opportunistic approach to
new investments. The Group’s key principle is to buy assets at affordable
prices and to remain very disciplined in this regard. To evaluate new
acquisition opportunities Georgia Capital has developed a 360-degree
analysis framework.

360-degree analysis – a strong foundation for value creation
GCAP share price is at the core of decision-making when it comes to
new investments. The Group performs a 360-degree analysis each time
it makes a capital allocation decision and compares: a) the investment
opportunity versus buyback opportunity; and b) the sale opportunity
versus buyback opportunity. The Group intends to buy assets/
companies at a higher discount to their listed peers than GCAP’s fair
value discount. Georgia Capital is targeting to invest in opportunities
which produce greater returns than returns created by buying back
GCAP shares.

In 2022, the Group introduced an NCC (Net Capital Commitment)
Navigation Tool, which is an integral part of the GCAP’s existing
360-degree framework and drives the Group’s share buyback and
investment decisions. NCC represents an aggregated view of all
confirmed, agreed and expected capital outflows at the GCAP holding
company level. An NCC ratio (NCC as a percentage of the total portfolio
value) between 15%-40% guides us to tactical share buybacks/
investments, an NCC ratio below 15% would be expected to lead to
more meaningful share buybacks/investments, whilst a ratio above
40% would lead us to implement a cash preservation strategy as we
did during the active phases of the COVID-19 pandemic.

360-DEGREE FRAMEWORK – A STRONG FOUNDATION FOR VALUE CREATION

GCAP SHARE PRICE IS AT THE CORE OF OUR
INVESTMENT DECISION-MAKING

k opport u

c
a
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B

t y

360°
analysis

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NCC RATIO NAVIGATION TOOL

15%

40%

MEANINGFUL
BUYBACKS AND
INVESTMENTS

TACTICAL
BUYBACKS AND
INVESTMENTS

CASH
PRESERVATION
STRATEGY

Sale opportu n i

We perform 360-degree analysis each time we make
a capital allocation decision and compare:
•
• Sale opportunity vs. buyback opportunity

Investment opportunity vs. buyback opportunity

CAPITAL
ALLOCATIONS

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Since its inception, GCAP has bought back 6.4 million shares with
the total value of US$ 70 million under its buyback programmes. The
US$ 45 million share buyback programme, which commenced in June
2018, was completed in August 2019. Under the programme we bought
back 3,336,843 shares, of which 2,650,375 shares were cancelled and
686,468 shares were transferred to the management trust. In August
2019, Georgia Capital initiated a US$ 20 million share purchase
programme for the management trust. The management trust
programme has repurchased 1,550,084 shares. There was no buyback
programme in 2020 in light of the cash preservation strategy due to
COVID-19. In August 2021, Georgia Capital commenced a US$ 10 million
share buyback and cancellation programme, which was extended by
an additional US$ 15 million in 2022. Since the commencement of
the buyback programme in August 2021, 3,075,923 shares have been
repurchased and cancelled, corresponding to GEL 76.2 million
(US$ 25.0 million) in value.

The table below summarises GCAP’s share buybacks in 2022.

Georgia Capital’s share buyback highlights

In particular, it is crucial to set an exit strategy prior to making an
investment. A low investment entry point becomes even more important
in a small frontier economy, with limited exit opportunities. The Group
aims to have two potential liquidity events for each of its assets:
• The first exit: when entering a new industry Georgia Capital intends
to develop and grow portfolio companies. GCAP’s key focus areas
at the portfolio company level are the ability to grow operating cash
and to make efficient capital expenditure investments by targeting
an appropriate level of return on invested capital (ROIC). Once the
business reaches its late stage of development, GCAP expects to
pursue its first exit route, which envisages dividend flows for the
Group; and

• The second exit: as businesses mature, Georgia Capital normally
seeks to monetise its investment through appropriate exit options,
typically within five to ten years from initial investment.

The Chief Strategy Officer is responsible for overseeing the
establishment of structured exit processes for the portfolio companies,
as Georgia Capital is actively engaged in the price discovery of portfolio
assets held.

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Value of
shares
repurchased
(US$ million)

Number of
shares
repurchased
(million)

Focus on cash generation
Cash generation at both Georgia Capital and portfolio company level
is a key success factor for Georgia Capital.

Georgia Capital share buybacks

Of which, programme

Of which, management Trust

Number of Georgia Capital shares cancelled

27.9

18.1

9.8

3.5

2.3

1.2

2.3

Entering a new industry with a small ticket size
Another core principle of the Group’s investment philosophy is to be
mindful about the size of potential investments in new industries. Georgia
Capital typically starts with a small ticket size and tests and develops a
management track record before stepping up the investment.

Liquidity is important
In order for the strategy to succeed, GCAP must be disciplined in
unlocking the value of companies in which it invests and that it manages.

Focus on management development
By developing top talent in Georgia Capital the Group can add value for
the Company’s shareholders. Investing time in growing and developing
management continues to be critical for the success of the Group’s
strategy.

Good corporate governance
The Company believes that robust corporate governance is a source of
value creation for its shareholders. The Company believes that alignment
of the interests of shareholders and management by awarding long-term
deferred share awards to the Group’s senior executives enhances
value creation.

IRR AND MOIC ARE THE KEY DRIVERS FOR GCAP TO
INVEST IN NEW OPPORTUNITIES

ROIC IS AT THE CORE OF DECISION-MAKING WHEN
OUR PORTFOLIO COMPANIES ARE INVESTING OR
DIVESTING ASSETS/BUSINESSES

KEY MONEY MULTIPLES AT GCAP LEVEL

KEY METRIC FOR REINVESTMENT DECISION-MAKING
AT PORTFOLIO COMPANIES’ LEVEL

IRR

MOIC

ROIC
• ROIC should exceed weighted average cost

of capital (WACC) for new investments.

• Portfolio companies to continue divestment of

low ROIC and/or non-core assets and businesses
to enhance ROIC.

GCAP ROLE
VIS-À-VIS PORTFOLIO COMPANIES
• Approval of all capital allocation decisions: equity, debt, profit reinvestment, divestment, etc.
• Strategy setting, business plan approval and monitoring.
• Human capital (CEO and CFO) allocation and KPI setting.
• Approval and monitoring of the ESG strategy.

Strategic ReviewOur BusinessGovernanceAdditional InformationStrategic ReviewDiscussion of ResultsFinancial StatementsStrategic ReviewOverview

CAPITAL ALLOCATION AND MANAGING PORTFOLIO COMPANIES CONTINUED

CAPITAL ALLOCATION OUTLOOK

Georgia Capital expects to allocate US$ 52.3 million net equity capital in the renewable energy and education businesses over the next three
to five years.

Other than already identified greenfield projects in the renewable energy and education businesses, the Group expects to focus on acquisitions.
By driving the development of these two businesses, the Group expects to realise at least 2.0x MOIC at each investment level, 20%+ IRR in the
renewable energy business and 25%+ IRR in the education business.

PLANNED INVESTMENTS FROM GCAP IN OUR INVESTMENT STAGE PORTFOLIO COMPANIES:

US$ 52.3

MILLION IN 2022

TOTAL NET INVESTMENT
IDENTIFIED FROM GCAP
OVER THE NEXT 3-5 YEARS.

Remaining investments as of 31-Dec-22
US$ million

22.3

30.1

Renewable Energy

Education

No investments are expected in the clinics and diagnostics business from GCAP.
Detailed information on the investments in these businesses are set out on pages 38-63 of this report.

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STRONG BALANCE SHEET AND CASH MANAGEMENT AT GEORGIA CAPITAL

Total cash and liquid funds

+73%

Cash
US$ 87mln

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45.0

40.5

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Dec-22

Total cash and
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152

US$ million

Marketable
securities
US$ 65mln

• Cash and liquid funds balance up 73.4% y-o-y at 31 December 2022, reflecting the cash receipt from the water utility business sale.
• Liquid asset buffer: Georgia Capital holds liquid assets of at least US$ 50 million at all times.

STRONG DIVIDEND INCOME FROM PORTFOLIO COMPANIES

DIVIDEND INCOME
PER SHARE (GEL)

1.6

+32.2%

2.1

ROBUST DIVIDEND
INCOME IN 2022

GEL MILLION IN 2022

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+26.2%

93.9

40.9

45.0

53.0

74.4

14.5

59.9

40.5

Dividends income

(GEL million)

BoG

Retail (Pharmacy)

Hospitals

P&C Insurance

Renewable Energy

Medical Insurance

Total

2022

40.9

16.0

13.0

14.7

8.2

1.0

93.91

2021

2022

Dividend income from listed companies

Dividend income from private companies

Total

ALIGNING OUR OPEX RATIO WITH NAV

Including the buyback dividend of GEL 29 million from BoG, the total
dividend income in 2022 stands at GEL 123 million.

CURRENT TARGET

c.2%

OF MARKET CAPITALISATION

TARGET FROM 2024

0.75%

OF NAV

Management fee expense ratio:

1.8% 2019
1.8% 2020

1.7% 2021
2.7% 2022

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OUR MANAGEMENT TEAM

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Irakli Gilauri, Chairman and CEO
Irakli Gilauri formerly served as the CEO of BGEO Group from 2011 to May 2018. He joined as CFO of Bank
of Georgia in 2004 and was appointed as Chairman of the Bank in September 2015, having previously served
as CEO of the Bank since May 2006. Formerly, he was an EBRD (European Bank for Reconstruction and
Development) banker. Mr Gilauri has up to 20 years of experience in banking, investment and finance. Over
the last decade, Irakli’s leadership has been instrumental in creating major players in a number of Georgian
industries, including banking, healthcare, utilities and energy, real estate, insurance and wine. Holds an MSc
in banking from Cass Business School and a certificate in winemaking from the University of California, Davis.

Avto Namicheishvili, Deputy CEO
In addition to his deputy CEO role at JSC Georgia Capital, Avto also serves as chairman of the Group’s renewable
energy, beverages, housing development and hospitality businesses. Formerly he was BGEO Group General
Counsel. He was General Counsel of the Bank of Georgia from 2007 to 2018 and has played a key role in all of
the Group’s equity and debt raises on the capital markets, and over 25 mergers and acquisitions. Prior, he was
a Partner at a leading Georgian law firm. Holds LLM in an international business law from Central European
University, Hungary.

Irakli Gogia, Portfolio Manager
CEO at Retail (pharmacy), Hospitals, Medical Insurance, and Clinics and Diagnostics businesses. Formerly
Deputy CEO, Finance at GHG. Prior to that Irakli was a deputy chairman of the supervisory board of Evex Medical
Corporation and Insurance Company Imedi L. He has ten years of experience in the financial industry. Previously,
he served as CFO of Insurance Company Aldagi and Liberty Consumer, prior to which he was a senior auditor at
Ernst & Young and Deloitte. Holds a Bachelor of Business Administration degree from the European School of
Management in Tbilisi.

Giorgi Alpaidze, Chief Financial Officer
Formerly BGEO Group CFO. Joined BGEO as Head of Group’s Finance, Funding and Investor Relations in 2016.
He has extensive international experience in banking, accounting and finance. Previously, he was a senior
manager in Ernst & Young LLP’s Greater New York City’s assurance practice. Holds a BBA from the European
School of Management in Georgia. US Certified Public Accountant.

Ia Gabunia, Chief Strategy Officer
Formerly Investment Director at Georgia Capital. Joined BGEO as an Investment Director in 2017. Ia has over
ten years of experience in banking and investment management. Prior to joining BGEO Ia served as Head of
Corporate Banking at Bank Republic, Société Générale Group. Previously, she held numerous executive
positions in leading Georgian companies. Ia holds a BSc degree from London School of Economics and
Political Science, UK.

Giorgi Ketiladze, Director, Investments
Formerly Investment Officer at BGEO Group. Joined BGEO in 2017. Previously, worked at Deutsche Bank
in Corporate Finance department and at KPMG consulting in Germany. Giorgi holds a master’s degree from
London Business School.

Nino Vakhvakhishvili, Chief Economist
Joined Georgia Capital in 2018. Before joining the Company, she spent over five years at the Macroeconomic
and Statistics Department at the National Bank of Georgia. Nino was IMF’s short-term expert and participated in
TA missions in East African countries (Rwanda, Tanzania) in 2019. She was a visiting lecturer at the University of
Georgia, conducted lectures on Macroeconomics during 2015-2019. Nino holds a master’s degree in economics
from the International School of Economics (ISET).

Levan Dadiani, General Counsel
Formerly Senior Group Lawyer at BGEO Group. Joined BGEO in 2012. Levan has an extensive experience in
commercial law, equity investments, corporate and project financing and energy projects. Previously, he was
a Partner at a leading Georgian law firm. Holds an LLM degree in International Business Law from University
of Texas at Austin, USA.

Photo Svaneti, Georgia, with Caucasus peaks in the background.

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OUR PORTFOLIO OVERVIEW
LISTED AND OBSERVABLE PORTFOLIO

BANKING

Overview
Bank of Georgia Group is a Georgia-focused banking business with an
impressive track record of delivering superior returns and maximising
shareholder value. Diversified revenue sources, a growing loan book,
robust asset quality, efficient cost performance and fee income growth
are the main drivers of Bank of Georgia Group’s profitability. JSC Bank of
Georgia, a systemically important and leading universal Georgian bank,
is the core entity of Bank of Georgia Group. It offers: a) retail banking
and payment services (Retail Banking), and b) corporate and investment
banking operations (Corporate and Investment Banking) in Georgia. BoG
is well-positioned to benefit from the growth of the Georgian economy
through both its Retail Banking and Corporate and Investment Banking
services and aims to deliver on its growth strategy with strong capital
and liquidity positions.

Bank of Georgia Group has two primary segments: Retail Banking and
Corporate and Investment Banking. In Retail Banking, the prominent
component of the banking business, BoG runs a client-centric digital
multi-brand offering with the aim of reaching the entire spectrum of
retail customers through its mass retail and affluent segment (through
its SOLO brand) and high-net-worth individuals (through its Wealth
Management private banking services in Georgia and internationally
through representative offices). Bank of Georgia is a digital banking and
payments leader, with a strong retail and corporate banking franchise
in Georgia. Focusing on customer satisfaction and enhancing its digital
and advanced analytics capabilities, BoG aims to increase customer
engagement and maintain its relevance in customers’ daily lives.
In addition, BoG serves micro, small and medium-sized enterprises
(MSME) under the Retail Banking business. In Corporate and Investment
Banking, given the scale, a rich portfolio of banking products and
services, and the industry and product expertise that it possesses,
BoG is a universal bank of choice and top-of-mind advisor for Georgian
corporates. In the brokerage business, under the Corporate and
Investment Banking business, BoG is focused on profitable growth,
through unlocking retail brokerage potential and fully digitalising
brokerage services.

Performance and strategy
Bank of Georgia Group delivered strong results in 2022. Excellent top
and bottom-line growth and outstanding ROAE were supported by the
improving macroeconomic environment in Georgia. Both Retail Banking
and Corporate and Investment Banking businesses delivered excellent
results. Lending activity was robust, operating income increased,
particularly net foreign currency gains and net fee and commission
income generation, and loan book quality remained strong in 2022. BoG
continued its focus on customer satisfaction, employee empowerment
and improving its digital banking and payments business franchise,
while maintaining a healthy cost to income structure. As a result, Bank
of Georgia Group delivered a ROAE of 32.4% (adjusted for one-offs) in
2022, while maintaining robust liquidity and capital positions.

Bank of Georgia Group’s medium-term strategic priorities are the
following:
• 20%+ ROAE.
• Loan book growth of c.10%.
• Robust capital management:

– Maintain regular progressive semi-annual dividend payouts:
aiming 30%-50% dividend/share buyback payout ratio;

– Under its ongoing share buyback and cancellation programme

the Bank repurchased 1,670,446 ordinary shares at a total cost of
GEL 112.7 million in 2022. The programme was further extended
to an additional GEL 148 million in February 2023.

– In 2022, BoG paid an interim dividend of GEL 1.85 per ordinary

share in respect of the period ended 30 June 2022.

– On 16 February 2023, the Bank announced its Board’s intention
to recommend a final dividend for 2022 of GEL 5.80 per ordinary
share at the Bank’s 2023 Annual General Meeting. This will make
a total dividend paid in respect of the Bank’s 2022 earnings of
GEL 7.65 per share.

INVESTMENT RATIONALE

OWNERSHIP

The first entity from Georgia to be listed on the premium segment of the Main
Market of the London Stock Exchange (LSE: BGEO), since February 2012.

High standards of transparency and governance.

Leading market position1 in Georgia by assets (37.8%), loans (36.1%),
client deposits (38.9%) and equity (34.7%) as at 31 December 2022.

Georgia Capital owns 20.6% of Bank of Georgia Group PLC, as of
31 December 2022. As long as Georgia Capital’s stake in BoG is greater
than 9.9%, it will exercise its voting rights in Bank of Georgia Group in
accordance with the votes cast by all other shareholders on all shareholder
votes at any general meeting.

Strongest retail banking franchise: 44% market share in deposits of
individuals, 39% market share in loans to individuals.

VALUE CREATION POTENTIAL

Digital leader in Georgian banking sector with a strong retail banking
franchise: 68.7% share of monthly active digital users in total active
individuals.

Loan book growth c.10%.

Regular progressive semi-annual capital distribution with 30%-50%
dividend/share buyback payout ratio.

Growing market: The banking sector’s assets growth rate at 23.2%
(CAGR over 2003-2022).

20%+ ROAE.

Sustainable growth combined with strong capital, liquidity and robust
profitability.

Outstanding ROAE performance.

PERFORMANCE TRACK RECORD1

Dividend record
GEL million

Payout ratio

3 6 %

3 3 %

3 4%

3 2 %

3 0 %

3 5% 2

3 7 % 2

102

122

124

188

267

184

GEL 267mln
final dividend
to be
recommended
for shareholder
approval

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

Total dividend paid for the year

Share buyback

Profits and ROAE3
GEL million

Return on average equity

26.4%

26.1%

13.0%

25.8%

32.4%

1,444

727

500

379

295

Loan book growth

27.0%

21.4%

22.0%

19.0%

18.9%

10.2%

19.8%

13.9%

12.9%

4.3%

2018

2019

2020

2021

2022

2018

2019

2020

2021

2022

Loan book growth (nominal)

Loan book growth (constant currency basis)

1 Market data based on standalone JSC Bank of Georgia accounts as of 31 December 2022 published by the NBG www.nbg.gov.ge.

1 Numbers are derived from the business’s unaudited IFRS accounts.
2 For the purpose of payout ratio calculation, total buyback amount is divided by outstanding shares before the beginning of the programme for the respective year.
3 2018, 2019 and 2022 ROAE is adjusted for one-offs.

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OUR PORTFOLIO OVERVIEW CONTINUED
LISTED AND OBSERVABLE PORTFOLIO CONTINUED

MARKET OPPORTUNITY

Banking sector assets, loans and deposits
GEL billions

CAGR 23.2%

3
.
1

7
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0

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3
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4

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2
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7
3

2
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3

6
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4
3

2
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7
4

7
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9
3

6
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6
2

3
2

3
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2
2

8
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2
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6
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1
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1

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

Assets

Deposits

Loans

Source: NBG

One of the lowest levels of non-performing loans (NPLs) worldwide, latest 2022
(NPLs to total gross loans)

0.5

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Source: IMF

1.9

2.1

2.2

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FINANCIAL METRICS1

Banking business loan book
(GEL million)

16,862 +4.3% y-o-y

Deposit portfolio
(GEL million)

18,261 +30.1% y-o-y

ROAE2

Net Interest Margin

32.4% +6.6 ppts y-o-y

5.4% +0.5 ppts y-o-y

Cost/Income2

32.0% -5.2 ppts y-o-y

NPL coverage adjusted
for discounted value of collateral

128.9% -18.8 ppts y-o-y

Tier 1 capital adequacy ratio

Liquidity coverage ratio

14.7% +1.5 ppts y-o-y

132.4% +8.4 ppts y-o-y

OPERATING METRICS

Number of monthly active retail
customers (thousands)

Number of monthly active digital
users, individual clients (thousands)

% of monthly active users in total
active individuals

Number of mobile and internet
banking transactions (millions)

1,632 +17.1% y-o-y

1,121 +31.5% y-o-y

68.7% +7.6 ppts y-o-y

174.1 +52.6% y-o-y

VALUATION HIGHLIGHTS

Stock price performance
GBP

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Implied multiple highlights at 31-Dec-22

LTM P/E

2.8x

-1.9x y-o-y

P/B

1.11x

NMF

GBP 26.05
as at
31-Dec-22

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1 Numbers are derived from the business’s unaudited IFRS accounts.
2 ROAE and Cost/Income ratios are adjusted for one-offs.

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OUR PORTFOLIO OVERVIEW CONTINUED
LISTED AND OBSERVABLE PORTFOLIO CONTINUED

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WATER UTILITY

The water utility business is a regulated natural monopoly in Tbilisi and
the surrounding area, providing water and wastewater supply services
to approximately 1.4 million residents and approximately 39,900 legal
entities. The business also operates hydro power plants (HPPs) with
a total installed capacity of 149MW. The water utility business uses a
portion of the power generated by its HPPs associated with the water
infrastructure for internal consumption at regulated electricity tariffs to
power its water distribution network, while the remaining electricity is
sold on the market. Revenues come from two main streams (water
and electricity sales), where the business benefits from both earning fair
regulatory returns on invested capital made in upgrading the water utility
network and average electricity sales price growth due to electricity
market deregulation in 2019.

In 2022, GCAP completed the sale of 80% interest in the water utility
business for total consideration of US$ 180 million as set out on page 12
of this report. In 2022, the remaining 20% equity interest in business was
valued by the application of pre-agreed put option multiple to the
normalised LTM EBITDA of the business, leading to GEL 15.6 million
value creation. As of 31 December 2022, the fair value of GCAP’s 20%
holding in the water utility business was assessed at GEL 155.0 million.

Value development overview1
GEL million

697

155

(558)

Equity value
31-Dec-21

Sale of 80%
equity interest

Application of
put option multiple

Equity value
31-Dec-22

GCAP and Aqualia have put and call options at pre-agreed multiples for the
minority 20% equity interest in the water utility business.

GCAP’S PUT OPTION

AQUALIA’S CALL OPTION

8.25x

EV/EBITDA

Exercisable in 2025-2026.

8.90x

EV/EBITDA

Exercisable on the date of
expiry of the put option in 2026
and expiring six months
thereafter.

PRIVATE LARGE PORTFOLIO COMPANIES

RETAIL (PHARMACY)

Overview
The retail (pharmacy) business is the largest pharmaceuticals retailer and
wholesaler in the country, with a c.35% market share by revenue. The
business consists of a retail pharmacy chain and a wholesale business
that sells pharmaceuticals and medical supplies to hospitals and other
pharmacies. The business operates two brands, Pharmadepot and
GPC, with a total of 372 pharmacies (of which 362 are in Georgia, and
ten are in Armenia) and 12 franchise stores.

Performance and strategy
The retail (pharmacy) business successfully continued the growth
of its retail segment. Continued expansion of the pharmacy chain and
franchise stores and improvement in the economic activities partially
offset the recalibration of product prices in 2022, triggered by the GEL’s
appreciation against the basket of foreign currencies (the FX effect is
directly transmitted into the pricing as c.70% of the inventory purchases
are denominated in foreign currencies). The decline in the wholesale
business line in 2022 was due to the continuing gradual transfer of the
hospitals business’ procurement department from pharma to hospitals
(which began in January 2021 and was completed in December 2022).

Going forward the business strategy is to deliver its targeted double-digit
compound annual growth rate in EBITDA over the next five years by
focusing on: the further expansion of its local pharmacy chains, where
in the last four years 92 new pharmacies were added; upgrading store
format of its GPC pharmacies to retail pharma drugstores that offer
an extensive range of health, beauty and perfume products, as well
as integrated health hub services incorporating lab retail points,
ophthalmology and dermatology cabinets; increasing sales from
e-commerce; commencement of the new growth projects related
to beauty and opticians; and international expansion.

The business already entered the beauty retail market by signing a
franchise agreement with The Body Shop, a leading British cosmetic,
skincare and perfume company, and Alain Afflelou SA, one of the
leading optical retailers in France. In 2022, in line with strategy to expand
the product mix at shop-in-shop model pharmacies, the business
signed a four-year exclusive sales agreement with Carter’s Inc (a major
American designer and marketer of children’s apparel). The business
operates five standalone The Body Shop stores and two Afflelou
opticians in Georgia, as well as shop-in-shop model in its GPC
pharmacies.

In line with its international expansion strategy, in 2022 the business
has expanded its GPC pharmacy chain in Armenia by adding six new
pharmacies and a new stand-alone The Body Shop store, arriving at
ten pharmacies and two The Body Shop stores in total. It also entered
Azerbaijan market in 2022 by opening its first The Body Shop store.

Effective from 15 January 2023, the Ministry of Health, Labour and Social
Affairs of Georgia (the “Ministry”) implemented an External Reference
Pricing model on the pharmaceuticals market, only related to prescribed
medicines that are financed by the State. Reference Pricing is an
approach where prices are set according to the benchmark prices for
the same or similar medicines in comparable countries. According to
the new initiative, the Ministry introduced the maximum retail price on
targeted pharmaceutical products, in two directions: Generic and
Original drugs. The price caps are set based on the average of such
medicine prices in the following countries: Bulgaria, Latvia, Macedonia
and Montenegro. In order to minimise the impact, the business intends
to renegotiate the contractual terms with its suppliers.

The business targets to maintain its EBITDA margin at 9%+ supported
by double-digit compound annual growth rate in its revenues and
EBITDA over the coming five years.

1 The detailed valuation overview and related drivers are described on pages 103-122 of this report.

INVESTMENT RATIONALE

VALUE CREATION POTENTIAL

Largest retailer in the country with over eight hundred thousand loyalty
card holders and over two million customer interactions per month.

Retail business with 95% out-of-pocket payment.

Supported by the country’s growing macroeconomic environment.

The largest player and purchaser of pharma products in the Georgian
market with a cost advantage due to the scale of operations: higher
discounts from manufacturers and elimination of distributor margins.

High-growth potential driven by growing macroeconomic environment,
expansion of the local and international chains, and adding highly
synergetic products and services.

OWNERSHIP

Georgia Capital owns 77%1 of the retail (pharmacy) business.

In October 2021, GHG signed a share purchase agreement to acquire the then remaining 33% minority interest in its retail (pharmacy) business by 2027. The buyout will be
executed in six annual tranches at a 5.25x EV/EBITDA multiple. The first tranche of 10% was acquired in 2022. The second tranche of 11% is expected to be acquired in 2023.
For details, please see page 12 of our Annual Report 2021.

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KEY FOCUS AREAS IN MEDIUM AND LONG TERM

FIVE-YEAR FINANCIAL TARGETS

Expanding retail footprint in Georgia
c.400 pharmacies

• c.80-100 new format GPC stores in

five years

• c.280-300 pharmadepot pharmacies in

five years

International expansion
Armenia, Azerbaijan, etc.

• c.30+ GPC stores in Armenia in five years
• Entering Azerbaijan market

2021-2026

Double-digit revenue CAGR

Increase sales from E-commerce
Georgia, Armenia and Azerbaijan

• c.GEL 80mln+ sales in Georgia in five years
• Operating e-commerce in Armenia and

Azerbaijan

Double-digit EBITDA CAGR

VALUATION HIGHLIGHTS1
Value development overview at 31-Dec-22
GEL million

958

(146)

(87)

725

Adjusted net debt to EBITDA2

1.9x

1.6x

<1.5x

Enterprise
value
31-Dec-22

Net debt including
lease liabilities

Minority
interest

Equity
value
31-Dec-22

31-Dec-21

31-Dec-22

Target

Supporting the core
Expanding the mix of synergetic
products and services

• Adding international franchises on different
beauty and other synergetic retail products

• Expanding highly synergetic product and

service mix in a new format GPC drugstores

• Adding lab collection points in GPC

pharmacies – c.100 points in five years
(currently 16)

9%+ EBITDA margin

Implied multiple highlights at 31-Dec-22

LTM EV/EBITDA

9.1x

LTM FCF/EV

4.5%

PERFORMANCE TRACK RECORD1
Revenue and EBITDA
GEL million
Number of pharmacies

255

270

300

313

614.7

679.4

518.6

450.3

349

782.4

372

789.9

Operating cash flow (excl. IFRS 16)
GEL million

80.0

77.1

66.1

53.1

32.8

38.9

52.2

65.3

70.4

76.2

76.9

16.2

2017

2018

2019

2020

2021

2022

2017

2018

2019

2020

2021

2022

Revenue

EBITDA, excluding IFRS 16

FINANCIAL METRICS1

Revenue
(GEL million)

789.9 +1.0% y-o-y

EBITDA excluding IFRS 16
(GEL million)

76.9 +1.0% y-o-y

Operating cash flow excluding
IFRS 16 (GEL million)

Free cash flow excluding IFRS 16
(GEL million)

77.1 -3.6% y-o-y

15.0 -76.3% y-o-y

Gross profit margin
(%)

29.3% +3.3 ppts y-o-y

EBITDA margin excluding
IFRS 16 (%)

9.7% NMF

EBITDA to cash conversion
excluding IFRS 16 (%)

100.2% -4.8 ppts y-o-y

Dividend paid to GCAP
(GEL million)

16.0 +39.8% y-o-y

OPERATING METRICS

Number of pharmacies

372 +24 over 2021

Number of bills issued (million)

Average bill size (GEL million)

Same store revenue growth (%)

31.0 +6.9% y-o-y

19.0 +0.6% y-o-y

-0.8% -11.4 ppts y-o-y

1 Numbers are derived from the business’s unaudited IFRS accounts.

1 The detailed valuation overview and related drivers are described on pages 103-122 of this report.
2

Included the application of the minority buyout agreement.

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HOSPITALS BUSINESS

Overview
Our hospitals business is the single largest healthcare market participant
accounting for around 15% of the country’s total hospital bed capacity,
as of 31 December 2022. The business operates 16 referral hospitals
with a total of 2,524 beds. These hospitals are located in Tbilisi and major
regional cities and provide secondary or tertiary-level outpatient and
inpatient diagnostic, surgical and treatment services.

Performance and strategy
Over the course of the last two years, the hospitals business was actively
engaged in supporting the COVID-19 pandemic response in Georgia
and mobilised seven hospitals to receive COVID patients, with a total
aggregate number of c.800 beds across the country. The Government
of Georgia fully reimbursed costs associated with COVID-19 treatments
and paid a fixed fee amount per bed designated for COVID patients. As
the COVID cases declined substantially in Georgia starting from 2022,
the Government suspended the COVID contracts with hospitals in
mid-March 2022. Restructuring the cost base of COVID hospitals,
and phasing out from Government contracts, temporarily suppressed
the business margins in 2022. The business expects to return to normal
operating levels starting from 2023.

Going forward the business will continue to focus on improving
operational and financial performance and delivering growth by
developing new strategic projects which include: developing a
commercial ambulance service (currently only state owned); developing
a high technology Oncology Centre in Tbilisi; creating Tbilisi Referral
Hospital as Georgia’s Transplantology Centre, adding a bone marrow
transplant unit, both paediatric and adult (currently offering liver and
kidney transplantology services); developing and enhancing aesthetic
services; resuming medical tourism strategy, previously on hold due to
the COVID pandemic; and expanding the number of clinical trials and
post-COVID programmes.

From the operational performance perspective, the business is focusing
on improving the capacity utilisation of hospitals, increasing patient and
employee satisfaction across the chain, and driving efficiency through
digitalisation of clinical processes.

These, together with the improved cash flow generation and allocating
resources to high ROIC-generating investments, will help the business
to achieve its goal to generate mid-teens compound annual growth rate
in EBITDA over the coming five years that is expected to support a 13%+
ROIC in the medium to long term.

From a clinical perspective, the business continues to grow a new
generation of doctors and nurses, while building robust clinical quality
management processes. The medium-term goals remain knowledge
and expertise advancement through education and professional
development of our physicians and nurses. Quality assurance through
the introduction and improvement of various activities and processes
at hospitals remains a top priority for us so that the business delivers
better care to its patients.

To streamline the state funding financing in healthcare and improve
the reimbursement process, the Georgian Government introduced
an initiative to implement a DRG financing system. The DRG system
categorises inpatient case types that are clinically similar and expected
to use the same or similar resources into groups by applying various
criteria (age, sex, intervention needed, comorbidity, etc.). The roll-out
of the DRG system started on 1 November 2022 and was in the testing
phase until 1 January 2023. While it is too early to estimate its impact on
the financial performance of our hospitals business, the implementation
of the DRG system aims to increase the efficiency of state financing and
improve the quality of healthcare services in the market. The system is
expected to better reflect inflation and other price pressures that are
present in the healthcare sector.

INVESTMENT RATIONALE

VALUE CREATION POTENTIAL

Very low base: healthcare services spending per capita only US$ 291
(EU average is US$ 3,211).

The single largest participant (next competitor has only 7% market share)
with a cost advantage due to the scale of operations.

Growing market: healthcare spending growth estimated at 8% CAGR
2018-2021.

High-growth potential driven by the opportunity to develop new services,
strategic directions and medical tourism.

In-depth knowledge of the local market: Strong business management
team – increased market share by beds from under 1% in 2009 to 15%
currently.

OWNERSHIP

Georgia Capital owns 100% of the hospitals business as at 31 December
2022 (31 December 2021: 100%).

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KEY FOCUS AREAS IN MEDIUM AND LONG TERM

FIVE-YEAR FINANCIAL TARGETS

Adding new services and strategic
projects

• Ambulance service, oncology centre,
transplantology centre, radiology hub,
medical tourism clinical trials, post-COVID
programmes

2021-2026

EBITDA CAGR 10%+

Quality projects

Digitalisation of clinical processes

Improve key operational data

• Nursing reform
• CRM development
• Quality education programmes

• Automation of clinical
processes in hospitals
• Digitalisation of clinical KPIs
• Use of statistical methods

•
Inpatient
• Outpatient
• Clinical
• Employee and customer satisfaction

EBITDA to operating cash c.85%+

ROIC: c.13%+

PERFORMANCE TRACK RECORD1
Net revenue and EBITDA
GEL million

265.2

246.5

230.2

318.3

288.7

Operating cash flow (excl. IFRS 16)
GEL million

60.1

56.3

57.0

68.6

70.0

65.6

50.7

74.2

52.7

2018

2019

2020

2021

2022

2018

2019

2020

2021

2022

Net revenue

EBITDA, excluding IFRS 16

28.6

MARKET OPPORTUNITY

State healthcare spending dynamics
GEL million

13%

10%

9% 9%

1,680

10%

1,043

343

681

305
710

329

760

349

829

841

964

800

820

2016

2017

2018

2019

2020 2021E 2022B

State healthcare spending – Other
State healthcare spending – UHC
Healthcare spending as a % of total state spending

Source: Ministry of Finance of Georgia.

Market share by number of beds2
GEL million

GCAP Hospitals

2,630

GCAP Clinics

520

State

Aversi

Vienna Insurance Group

Ghudushauri-Chachava

Ingorokva & Tbilisi Medical Institute

Gormedi

Inova

PSP

Other

1,281

883

764

523

410

388

175

234

Source: NCDC, data as of December 2021, excluding specialty beds.

15%

10,338

57%

• Since 2020, Government spending increased to manage the

• The largest healthcare service provider in Georgia: 15% market

COVID-19-related situation in the country.

share by number of hospital beds.

• Country’s expenditure on healthcare – 3.7% of GDP in 2020

• Covering three-quarters of Georgia’s population.

(from 2.4% in 2019).

• Government spending on healthcare accounts c.13% of total

budget in 2021.

1 Numbers are derived from the business’s unaudited IFRS accounts.
2 The number of beds for the hospitals and clinics businesses includes the beds mobilised for the COVID-19 patients.

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FINANCIAL METRICS1

Revenue
(GEL million)

288.7 -9.3% y-o-y

EBITDA margin excluding IFRS 16
(%)

18.0% -5.0 ppts y-o-y

EBITDA to cash conversion
excluding IFRS 16 (%)

54.2% -22.5 ppts y-o-y

Net debt
(GEL million)

178.2 +7.6% y-o-y

EBITDA excluding IFRS 16
(GEL million)

52.7 -29.0% y-o-y

Operating cash flow excluding
IFRS 16 (GEL million)

Free cash flow excluding IFRS 16
(GEL million)

Dividend paid to GCAP
(GEL million)

28.6 -49.9% y-o-y

11.1 -54.2% y-o-y

13.0 +12.7% y-o-y

OPERATING METRICS

Revenue per bed
(GEL)

115.2 -7.2% y-o-y

Number of referral
hospitals

16 -1 over 2021

Number of referral
beds

2,524 -72 over 2021

Referral hospital bed
occupancy rate (%)

54.3% -11.0 ppts y-o-y

VALUATION HIGHLIGHTS2

Value development overview at 31-Dec-22
GEL million

653

Net debt to EBITDA

3.4x

(188)

(32)

433

2.2x

<2.0x

Enterprise
value
31-Dec-22

Net debt including
lease liabilities

Minority
interest

Equity
value
31-Dec-22

31-Dec-21

31-Dec-22

Target

Implied multiple highlights (incl. IFRS 16) at 31-Dec-22

LTM EV/EBITDA2

12.2x

LTM FCF/EV

1.7%

INSURANCE

The insurance business comprises a) Property and Casualty (P&C) insurance business and b) medical insurance business.

P&C INSURANCE

Overview
Over nearly three decades in the Georgian property and casualty
insurance market, Aldagi has achieved almost universal brand
awareness, leading positions in retail insurance services, with the largest
product portfolio and exceptional financial strength. The company has
almost doubled its retail portfolio over the last four years, outperformed
market growth, delivered an average annual ROAE of c.32% in 2014-
2022 and consistently distributed dividends within a 50%-90% payout
ratio each year since 2014. Based on the latest available market data
as at 30 September 2022, Aldagi continues to be the most profitable
insurance company in the local market with a 42% share of the insurance
industry profit and a market share of 27% based on gross premiums
written1.

The current low level of insurance market penetration in Georgia (1.3%,
of which 0.8% relates to property and casualty insurance and 0.6% to
medical insurance) provides enormous potential for growth and Aldagi
is well-equipped to capture these opportunities. The company plans
to increase the P&C insurance business profitability by strategically
focusing on each of its three main business lines set out below:
• Retail customers. The Georgian retail insurance market offers

ample room for growth, as most of its potential is yet to be unlocked.
Motor insurance accounts for 56% of the total retail insurance market
in Georgia, of which 17% represents border MTPL insurance,
effective from March 2018. Moreover, the motor insurance segment
has great potential to increase, as only 7% of registered cars are
insured on the local market. A new law requiring local MTPL for all
vehicles registered in Georgia is expected be passed in the next few
years which will significantly boost retail market penetration. Overall,
Aldagi’s market share in voluntary retail insurance stands at 35% and
Aldagi expects to grow its retail segment concentration by developing
simple products for mass retail as well as developing a unique
customer experience through exclusive premium line services.
Aldagi aims to further strengthen customer retention and its market
leadership position by continued development of its digital insurance
platform.

• SME segment. Georgia’s insurance market for SMEs is currently

in its infancy. Aldagi sees significant potential to grow this segment
of the portfolio by developing tailor-made products and providing
them with established multi-channel distribution networks and digital
portals, created especially for SME clients. A separate SME sales
division was established by the end of 2019 as a part of this strategy.
As a result, Aldagi’s SME gross revenues have grown by 43% in
FY22 (from GEL 2.5 million to GEL 3.5 million).

• Large corporates. Although the level of insurance penetration

within the corporate segment is relatively high compared to retail
and SME segments, a combination of favourable Georgian
macroeconomic conditions, a good investment climate, stable
economic growth and an increase in infrastructure projects will
further increase customer demand for insurance products.

Performance and strategy
Despite the existing regional geopolitical situation, performance of the
business in FY22 was exceptional, reflecting extremely low dependence
on the Russian reinsurance market, which has already been substituted.
Revenue of the business was up by 13.9%, mainly reflecting the growth
in the credit life, agricultural and border MTPL insurance lines Loss
and combined ratios improved by 2.2 ppts and 1.1 ppts, respectively,
reflecting robust revenue growth, decrease in COVID-19-related credit
life insurance claims, as well as agricultural insurance claims and revised
underwriting practices in retail motor insurance portfolio.

Aldagi’s medium-term strategic focus remains unchanged. The business
targets to gain a strategic edge by focusing on underwriting excellence
and portfolio profitability backed by key five pillars: 1. Strengthening
customer retention; 2. Introducing new digital insurance products;
3. Improving customer experience; 4. Advancing employee recognition;
and 5. Getting ready for local MTPL insurance launch.

As part of the strategy, Aldagi has the following financial targets through
2023-2025:
• Market share of 25%-30%.
• ROAE of 20%-25%.
• Dividend payout of 50%-60%.
• Combined ratio of 80%-85%.
• Solvency ratio of 180%+.
• Retail concentration of 60%+.

1 Numbers are derived from the business’s unaudited IFRS accounts.
2 The detailed valuation overview and related drivers are described on pages 103-122 of this report.

1 Source: ISSSG.

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INVESTMENT RATIONALE

VALUE CREATION POTENTIAL

Significantly underpenetrated insurance market in Georgia
(0.8% penetration in property and casualty insurance market).

Market leader with a powerful distribution network of point of sale and
sales agents.

OWNERSHIP

Compulsory border MTPL effective from 1 March 2018.

Local MTPL is expected to kick in and provide access to untapped retail
CASCO insurance market with only 5% existing penetration.

Increasing footprint in untapped MSME sector, where Aldagi’s gross
revenues have grown by 43% in FY22 (from GEL 2.5 million to
GEL 3.5 million).

Digitalisation.

The P&C insurance business is 100% owned through Aldagi.

Undisputed leader in providing insurance solutions to corporate clients.

PERFORMANCE TRACK RECORD1

Earned premiums, gross
GEL million

Profit and dividend payout ratio
GEL million

C A G R +1 3 %

137

123

102

28%

37%

38%

34%

30%

25%

30%

C A G R +14%

11
64%

51%

61%

68%

55%

88%

82%

2014

2015

2016

2017

2018

2019

2020

2021

2022

2014

2015

2016

2017

20182

2019

2020

20212

2022

Profit

ROAE

Dividend payout ratio

MARKET OPPORTUNITY

Market share, YTD Sep-22
Gross Premiums Written

Insurance penetration and density3

27%

23%

17%

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11.1%

9.5%

5,273

4,140

6,610

7.1%

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5.8% 6.5%

3,032 3,313

5.0%

1,047

2.5%

451

2.4%

280

Georgian P&C
Penetration – 0.8%
Density – US$ 38

1.3% 1.3% 1.3%
160
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Source: Insurance State Supervision Service of Georgia

Insurance density, US$

Insurance penetration

Source: Swiss Re Institute

1 Numbers are derived from the business’s unaudited IFRS accounts.
2 Adjusted for non-recurring items.
3 Penetration and density are stated including healthcare insurance (as of latest available data).

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Market and Aldagi gross written premiums1
GEL million

36%

38%

39%

29%

28%

29%

442442

370370

380380

308308

195195

202202

228228

7070

7777

8888

9090

105105

110110

127127

2015

2016

2017

2018

2019

2020

2021

Market

Aldagi

Market share Source: Insurance State Supervision Service of Georgia

YTD Sep-22
Market Gross Premiums
GEL 384 million
Aldagi share 27%

CAGR 2015-2021
Market – 15%
Aldagi – 10%

FINANCIAL METRICS2

Earned premiums, gross
(GEL million)

137.5 +12.0% y-o-y

Dividend paid to GCAP
(GEL million)

14.7 -0.9% y-o-y

OPERATING METRICS

Combined ratio

79.7% -1.1 ppts y-o-y

Net income
(GEL million)

21.2 +16.2%y-o-y

ROAE3

29.5% +4.8 ppts y-o-y

Number of policies written
(corporate)

85,236 -2.6% y-o-y

Number of policies written
(retail)

165,773 +13.2% y-o-y

Number of claims
reported

16,522 -13.6% y-o-y

VALUATION HIGHLIGHTS3

Value and LTM P/E multiple development overview
GEL million

12.0x

212

10.7x

228

Net debt to EBITDA

No
Leverage

31-Dec-21

31-Dec-22

31-Dec-21

31-Dec-22

Target

GEL million, unless otherwise noted

31-Dec-22

31-Dec-21

Change

LTM net income4

Implied P/E multiple

Equity fair value

LTM ROAE5

21.2

10.7x

228.0

29.5%

17.6

12.0x

211.5

3.6

(1.3x)

16.5

24.7%

+4.8 ppts

1 Calculated in line with the market approach.
2 Numbers are derived from the business’s unaudited IFRS accounts.
3 The detailed valuation overview and related drivers are described on pages 103-122 of this report.
4 Adjusted for non-recurring items.
5 Calculated based on net income, adjusted for non-recurring items and average equity, adjusted for preferred shares.

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OUR PORTFOLIO OVERVIEW CONTINUED
PRIVATE LARGE PORTFOLIO COMPANIES CONTINUED

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MEDICAL INSURANCE

Overview
Our medical insurance business is one of Georgia’s largest providers of
private medical insurance, with a 19% market share based on 9M22 net
insurance premiums. The business has a wide distribution network and
offers a variety of medical insurance products primarily to Georgian
corporate and state entities and also to retail clients.

Performance and strategy
The modest growth in 2022 in earned premiums, reflects the combined
effect of an increase in the price of insurance policies and a decrease in
the number of insured clients for the same period.

The main focus for the medical insurance business is to increase its
number of insured customers and maintain the leading position in the
medical insurance market, while delivering profitable growth.

INVESTMENT RATIONALE

VALUE CREATION POTENTIAL

Being presented in whole healthcare ecosystem for any further potential
market structural changes.

The potential to increase its market share through growing book and
expanding in non-PMI products.

OWNERSHIP

The medical insurance business is 100% owned by Georgia Capital.

Competitive landscape, market share by net premium revenue1
GEL million

Key focus areas in medium and long term

19%

36%

14%

21%

Increase market
share by growing
the book

Increase
“managed
flow” through
customer-centric
process

Enhance gross
profit through
distribution
of non-PMI2
products to the
book – developing
“fee business”

Ardi

PSP

IC Group

Alpha

Other

GCAP’s
medical
insurance

Vienna
Insurance
Group

PERFORMANCE TRACK RECORD3

Revenue and net profit
GEL million

75.4

69.5

72.4

74.8

55.1

Combined ratio (%)

94.1%

16.8%

77.3%

96.1%

14.7%

81.4%

90.6%

17.6%

73.0%

97.4%

18.1%

79.3%

99.4%

18.5%

81.0%

2.9

4.4

6.4

3.8

3.4

2018

2019

2020

2021

2022

2018

2019

2020

2021

2022

Revenue

Net profit

Loss ratio

Expense ratio

FINANCIAL METRICS1

Net premiums earned
(GEL million)

74.8 +3.4% y-o-y

Combined ratio (%)

99.4% +2.0 ppts y-o-y

Dividend paid to GCAP
(GEL million)

1.0 -49.8% y-o-y

Loss ratio (%)

81.0% +1.7 ppts y-o-y

Net profit (GEL million)

3.4 -10.1% y-o-y

OPERATING METRICS

Number of insured

163,721 -0.9% y-o-y

Renewal rate (%)

77.4% -0.6 ppts y-o-y

VALUATION HIGHLIGHTS2

Value development overview at 31-Dec-22
GEL million

Net debt to EBITDA

No
Leverage

Enterprise value
31-Dec-22

Excess cash

Equity value
31-Dec-22

31-Dec-21

31-Dec-22

Target

Implied multiple highlights at 31-Dec-22

IMPLIED LTM P/E3

LTM ROAE (adjusted for non-recurring items)

10.6x

10.2%

Peer companies
• Powszechny Zaklad Ubezpieczen SA | Poland
• UNIQA Insurance Group AG | Austria
• Ageas SA/NV | Belgium

1
ISSSG as of 30 September 2022.
2 PMI – private medical insurance.
3 Numbers are derived from the business’s unaudited IFRS accounts.

1 Numbers are derived from the business’s unaudited IFRS accounts.
2 The detailed valuation overview and related drivers are described on pages 103-122 of this report.
3 Adjusted for the excess cash.

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RENEWABLE ENERGY PROJECTS OVERVIEW

Targeting to earn on average 10%+ US dollar ROICs from renewable energy projects

Commissioned/acquired projects

Mestiachala HPP

Hydrolea HPPs

Qartli Wind Farm

Total operating

Pipeline projects

Zoti HPP

Darchi HPP

Tbilisi Wind Farm

Kaspi Wind Farm

Total pipeline

Total

Capacity
factor

40%

64%

47%

43%

60%

38%

37%

PPA
expiration

1H34

1H22-2H28

1H30

PPA tariff,
US¢/kWh

5.5

5.5-5.6

6.5

TBD

5.1

5.7

TBD

Installed
capacity,

MWs

30.0

20.4

20.7

71.1

46.0

18.0

54.0

172.0

243.1

Note 1: Mestiachala HPP was commissioned in 1H19; Qartli Wind Farm and Hydrolea HPPs were acquired in 2H19 by GCAP. Target commissioning date of Darchi HPP is 1H24.
Note 2: PPA terms for Tbilisi and Kaspi WPPs are under the discussion with the Government of Georgia.

OUR PORTFOLIO OVERVIEW CONTINUED
INVESTMENT STAGE PORTFOLIO COMPANIES

RENEWABLE ENERGY

Overview
Our renewable energy business represents a leading platform for
developing and operating HPPs and wind power plants (WPPs) across
the country. The business operates commissioned renewable assets
with 71MW installed capacity in aggregate and with average capacity
factors of more than 40%: 30MW Mestiachala HPP, 20MW Hydrolea
HPPs and 21MW Qartli WPP. 30MW Mestiachala HPP was developed
and constructed by Renewable Energy, while the latter two assets
represent successful acquisitions made by the business at the end of
2019. All power plants (except for the Akhmeta HPP, whose PPA expired
in February 2022) benefit from long-term power purchase agreements
(PPAs) formed with the Government-backed entity, resulting in
predictable dollar-linked cash flows, as PPAs as well as market sales
are denominated in US dollars. The renewable energy business is
wholly-owned by Georgia Capital.

The renewable energy business aims to capitalise on favourable
electricity market conditions in Georgia, on the back of the ongoing
gradual harmonisation of the current energy market structure with EU
directives, leading to a more liquid, competitive and transparent market.
Following the electricity market deregulation in 2019, the Government
of Georgia adopted a new electricity market model concept in 2020,
creating the path towards launching day-ahead and intraday trading
markets in the coming years. Overall, the renewable energy business
expects planned reforms in the Georgian electricity market to have a
further positive impact on electricity sales prices.

Performance and strategy
The renewable energy business delivered a strong performance in FY22.
Revenue from electricity sales were up by 8.1% y-o-y to US$ 14.6 million.
Higher sales were backed by favourable weather conditions, which
resulted in higher electricity generation. Around 55% of electricity sales
were covered by PPAs with the Government, while the remaining was
supported by favourable market selling prices, which amounted to
US$ 46.1 MWh. The renewable energy business benefited from the
high EBITDA margin of 76.6% and as a result delivered US$ 11.2 million
EBITDA (up by 7.9% y-o-y). Cashflow from operating activities was up
12.9% y-o-y to US$ 11.3 million and EBITDA to cash conversion rate
was over 100%. Overall, on the back of solid financial performance
of the power generating assets, the business made US$ 2.8 million
dividend distribution to Georgia Capital.

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In October 2022, the renewable energy business successfully closed
a US$ 80 million green secured bond offering. The notes are US$-
denominated with 5-year bullet maturity (callable after two years)
and carry a 7.00% coupon (75 basis points improvement compared
to the previous notes issued by the business). The proceeds from the
transaction were fully used to refinance the shareholder loan from
GCAP. The issuance represents the first-ever green secured bond
placement and the largest corporate bond placement on the Georgian
capital market.

The renewable energy business plans to develop 172MW installed
capacity power plants in the medium term: Zoti HPP (46MW), Tbilisi and
Kaspi WPPs (108MW) and Darchi HPP (18MW). The business aims to
establish a renewable energy platform with growing dollar-linked cash
flows and solid profitability, expected to enable it to sponsor steadily
increasing dividend payouts while progressing against its medium-term
strategic priorities:
• Robust profitability with ~80% EBITDA margin.
• 10%+ ROIC in US$.
• ~100% EBITDA to cash-conversion rate.

MARKET OPPORTUNITY

Electricity consumption (TWh)

20.0

16.0

12.0

8.0

4.0

5.0% ave rage consumption grow th rate

9.3

9.4

9.7

8.4

10.2

10.4

11.9

11.0

12.6

12.8

12.2

13.8

14.2

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

INVESTMENT RATIONALE

OWNERSHIP

Electricity import and export dynamics (TWh)

Favourable supply-demand dynamics pushing the power prices up.

The renewable energy business is 100% owned by Georgia Capital.

Georgia is on track for the harmonisation of current energy market
structure with EU directives leading to a liquid, competitive and
transparent market.

Favourable mix of merchant sales and government PPAs, providing high
visibility and significant upsides in cash flows.

Natural cashflow hedge with fully dollarised revenues.

Inherently green projects aligned with the international best practices
of environmental and social (E&S) standards.

VALUE CREATION POTENTIAL

Opportunity to establish a renewable energy platform with up to ~240MW
installed capacity over the medium term and capitalise on favourable
electricity market conditions.

Diversified portfolio of HPPs and WPPs with c.40%+ capacity factors,
benefiting from long-term fixed price PPAs formed with the Government-
backed entity.

Availability of competitive green funding from both international and local
financial markets.

High margins and dollar-linked cash flows.

Stable dividend provider capacity in the medium term.

Electricity exports

Electricity imports

TPP generation

Deficit

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• 21.5% of total consumption
produced by gas-fired
TPPs, 9.7% – imported.

• 2022 electricity

consumption up by 16.7%
and 3.1% from 2019 and
2020 respectively.
• More than 30% of

•

consumed electricity was
either import or generated
by gas-fired TPPs.
In 2022 weighted average
ESCO balancing price
reached 55.5 US$/MWh,
up by 12.7% y-o-y.

• 2022 net electricity deficit

stood at 3.9 TWh, whereas
in 2010, electricity surplus
was at 0.6 TWh.

Strategic ReviewOur BusinessGovernanceAdditional InformationStrategic ReviewDiscussion of ResultsFinancial StatementsStrategic ReviewOverview1.50.90.50.50.50.70.60.70.60.20.20.41.0(0.7)(2.2)(2.5)(1.8)(2.0)(2.4)(2.2)(2.2)(2.1)(2.8)(2.8)(2.4)(3.4)(0.2)(0.5)(0.6)(0.5)(0.8)(0.7)(0.5)(1.5)(1.5)(1.6)(1.6)(2.0)(1.5)0.6(1.8)(2.6)(1.8)(2.3)(2.4)(2.2)(3.0)(3.0)(4.2)(4.3)(4.0)(3.9)2010201120122013201420152016201720182019202020212022

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INVESTMENT STAGE PORTFOLIO COMPANIES CONTINUED

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FINANCIAL METRICS1

Revenue (US$ million)

14.6 +6.6% y-o-y

EBITDA (US$ million)

11.2 +7.9% y-o-y

OPERATING METRICS

EBITDA margin (%)

76.6% +0.9 ppts y-o-y

Dividend paid to GCAP (US$ million)

2.8 -55.2% y-o-y

Operating cash flow (US$ million)

11.3 +12.9% y-o-y

Electricity generation
(kWh million)

268.3 0.9% y-o-y

Average electricity sales
price per US¢/kWh

5.4 +7.1% y-o-y

VALUATION HIGHLIGHTS2

Value development overview at 31-Dec-22
US$ million

155

(72)

Enterprise value
31-Dec-22

Net debt

Equity value
31-Dec-22

Equity fair value composition at 31-Dec-22
US$ million

Pipeline
projects
18

TOTAL VALUE

Operational
assets
65

US$ million, unless otherwise noted

31-Dec-22

31-Dec-21

Change

Enterprise value (EV)

EBITDA3

Imp lied EV/EBITDA multiple

Investments at cost (EV)4

Net debt

Equity fair value

154.7

12.2

11.4x

15.1

(71.4)

83.3

138.3

11.3

11.1x

13.5

(82.3)

55.9

16.4

0.9

0.3x

1.6

10.9

27.4

Net debt to EBITDA5

8.0x

6.4x

<6.0x

31-Dec-21

31-Dec-22

Target

Peer companies
• BCPG Public Company Limited | Thailand
• ERG S.p.A | Italy
• Polenergia S.A. | Poland
• Terna Energy Societe Anonyme | Greece

1 Numbers are derived from the business’s unaudited IFRS accounts.
2 The detailed valuation overview and related drivers are described on pages 103-122 of this report.
3
4
5 Ratio is calculated in US$ terms.

Implied EV/EBITDA is calculated based on normalised LTM EBITDA.
Investments at cost include the pipeline projects.

EDUCATION

Overview
The private education market’s revenues across kindergarten to 12th
grade (K-12) in Georgia has grown at 12.6% CAGR over 2013-2022.
Currently, there are c.63,500 learners in private schools in Georgia,
representing 10% of the total school education market. The private
general education market enjoys growth in enrolments with CAGR
of 2.3% over 2013-2022 and rising tuition fees with CAGR of 9.1%
over 2013-2022.

Management expects that the private general education market will
increase by 1.5x in value over the next three years, driven by factors
such as the large gap in quality in public schools as compared to private
schools, growing household income and a decreasing unemployment
rate. Georgia has relatively low average annual spending per K-12
learner, creating further room for growth together with globally trending
demand on private K-12 education. Additionally, if the market grew at
pre-pandemic CAGR of 3.4%, there would have been c.67,600 learners
in private schools compared to c.60,300 in 2021, the decrease driven by
the pandemic. With COVID recovery and learners returning to school
facilities, we expect that these c.7,200 learners will return to private
schools in the short term, resulting in private market growth above
historic CAGR. Based on number of learners in 2022-2023 academic
year, the gap between market with pre-pandemic growth and actual
growth decreased from c.7,200 to c.6,400 learners.

The private general education market in Georgia is currently very
fragmented with an increasing average school size and 9% less schools
over the last decade. Currently, Georgia Capital is the largest player
on the market with a 5.8% market share in terms of learners, while the
second largest player holds 2.3%. Only 5% of private schools have
1,000+ learners, while 61% have less than 250 learners. Private school
learners are consolidated in four cities with populations larger than
100,000.

The education business is managed with a partnership model. The
business currently combines majority stakes in four private school
brands operating across five campuses, acquired in 2019-2021:
British-Georgian Academy and British International School of Tbilisi
(70% stake), the leading schools in the premium and international
segments; Buckswood International School (80% stake), well-positioned
in the mid-level segment; and Green School (80%-90% ownership1), the
leading school brand in affordable education segment. The education
business has expanded from the capacity in 2021 of 5,060 learners to
5,670 learners in 2022 through investments in capacity expansion of
the operational campuses of 1) Buckswood by 260 learners, and 2)
British-Georgian Academy by 350 learners.

All five schools have a combined utilisation rate of 73% compared to
62% last year, taking into account the new capacity addition of 610
learners in premium and midscale segments in 2022. We expect the
utilisation rate to return to 80%+ in the following years. Annual tuition
fees range from US$ 1,900 to US$ 18,400 across all three segments.

Performance and strategy
The business saw significant growth in 1st grader enrolments in
2022-2023 academic year with 99.6% growth y-o-y from 276 to 551
translating in a 98.4% utilisation rate. Overall, the total number of learners
was up by 32.2% y-o-y to 4,162 learners. Average cash collection rates
remained at last year’s levels and were in line with the schools’ cash
collection policies. This combined with enhanced revenue streams,
resulted in operating cash flow generation in the business being up
38.5% y-o-y in FY22.

The business has a strong platform to facilitate growth and scale to
become the leading integrated education player with up to 22,000
learners by 2025.

INVESTMENT RATIONALE

OWNERSHIP

Highly fragmented general education market with consolidation opportunity.

Majority stakes (70%-90%) across different schools.

Market with strong growth potential.

Low dependency on the Government.

High resilience to crisis.

Predictable and sticky revenue.

Strong profitability.

Capex efficient business.

High trading multiples.

Positive ESG impact.

VALUE CREATION POTENTIAL

Scaling up to capacity of 22,000 learners through expansion plans in
existing schools, greenfield projects and M&As by 2025.

Strong organic growth at existing schools is expected to drive solid
growth in run-rate EBITDA, on top of expansion plans and M&As.

Stable dividend provider capacity in the medium term.

1 80% equity stake in the campus acquired in 3Q19 and 90% in two campuses launched under the existing affordable brand in 3Q21.

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INVESTMENT STAGE PORTFOLIO COMPANIES CONTINUED

TARGETING FOR 2025…

…THROUGH

FINANCIAL METRICS1

EBITDA MARGIN
40%+

Currently: 30%+

EQUITY VALUE
GEL 0.5BLN

Currently: GEL 164mln

ROIC
20%+

Currently: 20%+

RAMP-UP OF
NEW CAPACITY
3-5 YEARS

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100
90
80
70
60
50
40
30
20
10
0

REMAINING GCAP
NEW EQUITY
INVESTMENT

US$ million

BUILT LEARNER
CAPACITY

thousand

EBITDA

GEL million

Revenue (GEL million)

42.6 +36.5% y-o-y

EBITDA (GEL million)

13.6 +34.8% y-o-y

EBITDA margin (%)

32.0% -0.4 ppts y-o-y

Operating cash flow (GEL million)

16.5 +38.5 % y-o-y

TOTAL BUILT LEARNER
CAPACITY, in thousands

21.9

TOTAL EBITDA,
in GEL mln

OPERATING METRICS

TOTAL REMAINING
INVESTMENT, in US$mln

Debt
Equity

Reinvestment

GCAP new equity investment

Minority equity investment

17
36
12

Currently operational campuses 5.7
2.4
Secured pipeline projects
13.8
M&A

Out of 21.9 capacity: 14.9 Affordable;
4.6 Midscale; 1.9 Premium; 0.6
International.

As of 2021-22 academic year
Organic growth

Currently operational campuses 21
12
9
9
20

Secured pipeline projects
M&A

• With new equity investment of US$ 22mln GCAP can expand to 22,000 learner capacity and

generate GEL 50mln EBITDA by 2025 through: 1) currently operational campuses, 2) secured
pipeline projects, and 3) M&A.

• Out of US$ 22mln new equity investment, US$ 21mln is attributable to M&A and US$ 1mln is attributable

•

to investments in secured pipeline projects with operational schools.
In addition to US$ 22mln new equity investment by GCAP, growth will be financed through, reinvestments,
debt, and equity contribution by minorities – total remaining investment for Education is US$ 53mln.

Capacity utilisation (%)

73.4% +11.2 ppts y-o-y

Number of learners

4,162 +32.2% y-o-y

Learner to teacher ratio

8.7 +9.7% y-o-y

VALUATION HIGHLIGHTS2

Value development overview 31-Dec-22
GEL million

218

Net debt to EBITDA

(16)

164

(54)

<2.5x

1.6x

1.2x

MARKET OPPORTUNITY

Number of learners in private K-12 market

Turnover of private K-12 market

9.3%

9.7%

10.0% 9.9% 10.1% 10.4% 10.7% 10.2% 9.7% 10.0%

51.6

53.9

55.4

56.1

57.6

60.8

63.2

61.9

60.3

63.5

2013

2014

2015

2016

2017

2018

Number of private learners, ’000

Total spending on K-12 education

2019

2020
% of total number of learners

2021

2022

600

500

400

300

200

100

12.6%
CAGR 2013-2022E

15.1%
CAGR 2022E-2025E

6.0

511

3.6

3.7

3.8

4.2

4.4

257 280 281 298

335

2.6

2.7

3.2

2.9

177

192

158

217

2.0

115

2013 2014 2015 2016 2017 2018 2019 2020

2021

2022E

2025E

Total revenue, GEL mln

Revenue per learner1, GEL ’000

Enterprise
value
31-Dec-22

Investment
at cost

Net
debt

Minority
interest

Equity
value
31-Dec-22

31-Dec-21

31-Dec-22

Target

GEL million, unless otherwise noted

31-Dec-22

31-Dec-21

Change

Enterprise value (EV)

EBITDA (LTM)3

Implied EV/EBITDA multiple

Net debt

Investments at cost

Total equity value
of GCAP’s share

218.2

12.9

16.9x

(16.3)

16.3

139.9

11.2

12.5x

(8.4)

34.9

78.4

1.7

4.4x

(7.9)

(18.6)

164.2

129.8

34.4

3.6%

14.8

3.9%

4.4% 4.3% 3.5% 3.7% 4.2% 3.8% 3.7%

4.4%

4.1% 3.6%

3.7% 3.3% 2.9% 3.6%

2.1%

13.4

12.5

11.3

10.5

10.2

9.9

9.7

9.4

9.2

8.6

7.9

7.6

7.5

7.0

4.5

0.8

Austria Germany

France

Italy

Portugal Slovenia Czech
Rep.

Total spend per learner, US$ ’000

Total spend as % of GDP

Spain

Estonia Poland Hungary Slovakia Lithuania

Latvia

Turkey Georgia

2022

Source: G&T, GCAP estimates, OECD, Ministry of Finance of Georgia (latest available data)

Demand for private education is trending globally, with growth
attributable to regions with lower spending on education.

1 Revenue per learner excludes kindergarten learners.

1 Numbers are derived from the business’s unaudited IFRS accounts.
2 The detailed valuation overview and related drivers are described on pages 103-122 of this report.
3 LTM EBITDAs used for valuation purposes includes functional currency adjustment in schools, where applicable.

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OUR PORTFOLIO OVERVIEW CONTINUED
INVESTMENT STAGE PORTFOLIO COMPANIES CONTINUED

CLINICS AND DIAGNOSTICS BUSINESS

Overview
Clinics
The clinics business incorporates 17 polyclinics and 19 community
clinics. Community clinics are located in regional towns and
municipalities, and provide outpatient and inpatient diagnostic, basic
surgical and treatment services to the local population. For complicated
cases, their primary goal is to stabilise the patient and redirect them to
the nearest referral hospital for secondary or tertiary care. Polyclinics
are located in Tbilisi and major regional cities and provide basic and
full-scale outpatient diagnostic and treatment services. The business
is the leader in the outpatient market with 21% market share by number
of registered patients.

Diagnostics
The diagnostics business was launched in 2018 by opening the largest
laboratory in the entire Caucasus region – “Mega Lab”. The multi-
disciplinary laboratory, equipped with the latest infrastructure and
state-of-the-art technology, covers 7,500 square metres. In addition to
basic laboratory tests, Mega Lab offers complex tests for oncology and
molecular lab, some of which have never been available in Georgia and
for which blood samples used to be sent abroad. On July 2022, Mega
Lab got the Joint Commission International (JCI) accreditation. JCI, the
highest healthcare accreditation body in the USA, ensures the correct
management of clinical processes. Its goal is to continuously improve
the quality and safety of patient care. Mega Lab is the first laboratory
in the Caucasus region with JCI accreditation and 38th worldwide.

Performance and strategy
The clinics business was actively engaged in supporting the COVID-19
pandemic response in Georgia, allocating 12 community clinics, with a
total of c.300 beds across the country. The Government of Georgia fully
reimbursed costs associated with COVID-19 treatments and paid a fixed
fee amount per bed designated for COVID patients. In March 2022,
similar to the hospitals business, the Government suspended the COVID
contracts with clinics which temporarily suppressed the business’ margins
and revenue. These are expected to get back to normal operating levels
starting from 2023. Decrease in diagnostics revenue is also attributable to
the reduced number of COVID cases in the country and the suspension
of Government contracts from March 2022 for COVID lab tests.

Going forward, the clinics business will continue to further increase
the base of registered customers, expand its polyclinics chain (two new
polyclinics were launched in 2022) and lab retail points (currently, 17 lab
collection points are held in GPC pharmacies), expand the presence of
medical and personal care services and develop distance channels such
as a call centre, web page and app, for greater customer convenience
and better user experience.

The diagnostics business will focus on increasing its utilisation (currently
at c.60%) through expansion of its retail chain, attracting more B2B
contracts and adding new services and technologies such as Next
Generation sequencing, while from a clinical perspective the business
will continue to provide the highest standards of clinical processes, and
in the long-term become a platform for education through an accredited
training centre, residency programme and scientific research and studies
centre.

The businesses target to deliver double-digit compound annual growth
rate in revenues and combined EBITDA of c.GEL 35-40 million over the
coming five years.

INVESTMENT RATIONALE

VALUE CREATION POTENTIAL

Very low base: Georgia still lags behind most of the developed countries
in terms of the number of outpatients visits per capita – at 3.7 (c.6.0 in
Europe).

The single largest participant with 21% by number of registered patient
(next competitor has 11% market share) with a cost advantage due to
the scale of operations.

Low Government expenditure on primary healthcare: The Government
is aiming to pay more attention to primary care in the future.

OWNERSHIP

Georgia Capital owns 100% of the clinics and diagnostics business
as at 31 December 2022 (100% as at 31 December 2021).

High-growth potential driven by the regulatory changes that aim to
increase Government financing on primary healthcare: only c.12% of
Government expenses goes on primary care from total Government
expense on healthcare.

High-growth potential driven by market consolidation through chain
expansion, adding new services and increasing customer base.

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KEY FOCUS AREAS IN THE MEDIUM AND LONG TERM

FIVE-YEAR FINANCIAL TARGETS

Combined financial targets for Clinics and Diagnostics: 2021-2026

Adding new services
Expansion of medical and personal care service presence

Geographic expansion
Adding new polyclinics and lab retail points

Developing distance channels
Best user experience

Adding customer base
Increased convenience and quality, increasing number of registered
patients; increasing provider insurance companies and corporate client base

Expansion of retail
Number of retail branches: c.15 in Georgia; tapping neighbouring countries

Attract B2B contracts
Total number of tests performed: c.5 million annually

Digitalisation

Double-digit revenue
CAGR

EBITDA
c.GEL 30+ million

ROIC: c.13.0%+

Double-digit revenue
and EBITDA CAGR

ROIC: c.20.0%+

Double-digit revenue
CAGR

EBITDA
c.GEL 35-40+ million

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PERFORMANCE TRACK RECORD1
Net revenue and EBITDA – Clinics
GEL million

70.5

65.8

44.2

46.3

37.8

5.9

Net revenue and EBITDA – Diagnostics
GEL million

30.4

20.5

14.5

8.9

9.4

14.1

9.0

5.1

0.2

1.8

7.3

0.7

2018

2019

2020

2021

9M22

2019

2020

2021

2022

Revenue

EBITDA, excluding IFRS 16

Revenue

EBITDA, excluding IFRS 16

Operating cash flow (excl. IFRS 16) – Clinics and Diagnostics
GEL million

21.4

12.4

3.3

2019

2020

2021

2022

7.0

1 Numbers are derived from the business’s unaudited IFRS accounts.

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OUR PORTFOLIO OVERVIEW CONTINUED
INVESTMENT STAGE PORTFOLIO COMPANIES CONTINUED

FINANCIAL METRICS1

Revenue
(GEL million)

80.6 -15.2% y-o-y

EBITDA margin excluding
IFRS 16 (%)

11.9% -10.5 ppts y-o-y

EBITDA to cash conversion
excluding IFRS 16 (%)

73.1% -27.0 ppts y-o-y

Net debt
(GEL million)

50.8 +24.2% y-o-y

EBITDA excluding IFRS 16
(GEL million)

Operating cash flow excluding
IFRS 16 (GEL million)

Free cash flow excluding IFRS 16
(GEL million)

9.6 -55.0% y-o-y

7.0 -67.1% y-o-y

(2.2) NMF

OPERATING METRICS – CLINICS

Number of
community clinics

19 NMF

Number of community
clinics beds

353 NMF

Number of
polyclinics

17 +2 over 2021

Number of registered patients
at polyclinics

615,664 +4.6% y-o-y

OPERATING METRICS – DIAGNOSTICS

Number of patients
served (’000)

981 -18.3% y-o-y

Number of tests
performed (’000)

2,426 -5.5% y-o-y

Average revenue
per test GEL

8.4 -28.8% y-o-y

Average number of tests
per patient

2.5 +15.7% y-o-y

VALUATION HIGHLIGHTS2

Value development overview at 31-Dec-22
GEL million

180

Net debt to EBITDA

5.3x

(64)

(4)

112

1.9x

<2.0x

Enterprise value
31-Dec-22

Net debt inc.
Lease liabilities

Minority
interest

Equity value
31-Dec-22

31-Dec-21

31-Dec-22

Target

Implied multiple highlight (incl. IFRS 16) at 31-Dec-22

LTM EV/EBITDA

16.5x

Instituto Hermes Pardini S.A. | Brazil

1 Numbers are derived from the business’s unaudited IFRS accounts.
2 The detailed valuation overview and related drivers are described on pages 103-122 of this report.

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OTHER PORTFOLIO COMPANIES

Overview
Georgia Capital’s other portfolio companies (8.6% of total portfolio value at 31 December 2022) consist of its auto service, beverages, housing
development, and hospitality businesses.

AUTO SERVICE

The Group’s auto service business includes a periodic technical
inspection (PTI) business, a car services and parts business under
the Amboli brand, and a secondary car trading business. The business
commenced the construction of PTI centres in the first half of 2018 and
launched the PTI business in March 2019 under the name Greenway
Georgia (GWG). As part of the Georgia-EU Association Agreement,
Georgia commenced the implementation of a mandatory vehicle
inspection programme in several phases, starting from January 2018.
In July 2018, GWG won a state tender to launch and operate 51 PTI lines
across Georgia with a ten-year licence. GWG is the only player on the
market with support from an international partner, Applus+, a Spanish
headquartered worldwide leader in testing, inspection and certification
services with a market presence in more than 70 countries. GWG
serviced 362,194 cars (of which, 289,452 were primary checks) in 2022,
giving it a market share of 37%. Georgia Capital acquired an 80%
interest in Amboli at the end of June 2019, increasing its shareholding
to 90% in February 2020. Amboli is an importer, distributor, wholesaler
and retailer of car consumables and spare parts with a c.8% share in
the target market, making it the second largest player in a highly
fragmented market.

HOUSING DEVELOPMENT

The Group’s housing development business is a leading real estate
developer in the Georgian real estate market, targeting mainly mass-
market customers by offering affordable, high quality and comfortable
housing. The business is wholly owned through Georgia Real Estate,
previously known as m2. The housing development business has
four ongoing projects, m3 Saburtalo (previously known as Digomi),
Nutsubidze, Mirtskhulava and Chkondideli (Sveti projects). In connection
with the m3 Saburtalo project, the business has sold 121,436 square
metres with US$ 114.5 million sales value as of 31 December 2022.
Regarding the three other projects, the business assumed responsibility
to support the completion of three suspended projects of the Sveti
construction company, adding 173,267 square metres of the sellable
area to its inventory. The projects are ongoing in three locations in Tbilisi
and the construction and development will continue for approximately
three years. The business started construction and sales for the Sveti
project in April 2020 and has sold 125,334 square metres with a
US$ 89.4 million sales value as of 31 December 2022. In 2022, the
housing development business successfully placed a US$ 35 million
bond on the local market, as discussed on page 13 of this report.

HOSPITALITY

The hospitality business has three operational hotels, Ramada Encore
Kazbegi Tbilisi, Ramada Encore Melikishvili and Gudauri Lodge, with
398 rooms. The business is wholly-owned through Georgia Real Estate.

BEVERAGES

The beverages business combines three business lines: a wine business,
a beer business and a distribution business. The wine business produces
and sells wine locally and exports it to 24 countries. The wine business
owns three top-class wineries across Kakheti’s three wine-making
regions and is in the top five wine producers by vineyard base in Georgia.
The vast majority of the vineyards grow Georgia’s flagship red wine grape,
Saperavi. The wine business sold 8.4 million bottles of wine in 2022, with
approximately 81% of sales coming from exports. The business has a
market share of 4.7% in the Georgian wine export market. The ongoing
war negatively impacted the wine business, which had significant
exposure to the Russian and Ukrainian markets (61% and 56% of the
FY21 and FY22 net revenues, respectively, were generated from sales
in these markets). The beer business produces beer and lemonade and
holds a ten-year exclusive license from Heineken to produce and sell
Heineken beer brands in Georgia. The beer business had c.22% market
share in 2022. The business’ brands include Heineken, ICY (its flagship
mainstream beer brand), Black Lion (the leading Georgian craft beer
producer which the Group acquired in 2018), Kazbegi, which was
acquired in 2019, Amstel and Krusovice beer, for which the business
acquired a licence in 2019, and Kayaki (the Group’s light beer brand).
In 2019, the business received a licence to brew commercial batches of
Heineken, and locally brewed Heineken beer has been available in stores
since August 2019. Starting from the second half of 2019, the beer
business relaunched its brands and improved its product mix, which
helped it to increase its share in the beer market and allowed the
business to achieve break-even EBITDA in the second half of 2019 and
positive EBITDA in 2021 and 2022. The business also started to export
its beer and lemonade brands to the international markets.

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S172 STATEMENT

Statement by the Directors on of their duties under Section 172 of the UK Companies Act 2006 (the “Act”)
In accordance with the requirements of section 172 of the Act, the Directors consider that, during the financial year ended 31 December 2022,
they have acted in a way that they consider, in good faith, would most likely promote the success of the Company for the benefit of its members,
having regard to the likely consequences of any decision in the long term and the broader interests of other stakeholders, as required by the Act.
Some examples of the Board’s engagement in 2022 are set out below.

The Directors have identified key stakeholders who are essential to the success of the Company: investors; employees; and the wider community
and the environment. Our key stakeholders and the primary ways which we engage with them are set out on pages 132-134. Stakeholder issues
are an integral part of the Board’s decision-making and we seek to embed this as part of overseeing the management of our portfolio companies.
The Company endeavours to balance any conflicting shareholder needs to ensure all are treated consistently and fairly.

Other steps the Board has taken to meet its Section 172 responsibilities can be seen in this report:

Section 172 factor

Examples

The likely consequences of any decision in the long term

Investment Committee Report

Interests of employees

Fostering the company’s business relationships with suppliers,
customers and others

Investment Committee Report

Corporate Governance Framework

Impact of operations on the community and the environment

Resources and Responsibilities

Page

137

128

Maintaining a reputation for high standards of business conduct

Resources and Responsibilities

Sustainability Report 2022

(see separate document)

Acting fairly between members of the company

Georgia Capital Strategy

Sustainability Report 2022

(see separate document)

The framework detailing the authority for decision-making, where the Board delegates to management, is discussed in the Company’s Corporate
Governance Framework on pages 128-136 and it mandates consideration of these stakeholder responsibility factors as a critical part of delegated
authorities.

The Board engages with certain stakeholders directly on certain issues, and their feedback is considered when we discuss and make decisions
relating to matters concerning the Board, such as financial and operational performance or strategic matters. This information is usually fed back
through presentations and reports to the Board, within Committee or Board meetings. More information on how Directors take into consideration
the interests of stakeholders can be found in the Directors’ Governance Statement on pages 124-125.

Principal decisions
We have processes in place to capture and consider stakeholders’ views (including the matters contained in Section 172 of the Act) and feed them
into Board decision-making.

Material business decisions considered by the Board include an analysis of stakeholder considerations, anticipated impact and the risk controls.
This is a rigorous process, which helps the Board to perform the duties outlined in section 172 of the Act and provides assurance to the Board that
potential impacts on stakeholders have been considered in the development of the proposal.

Set out below are some case studies of principal decisions that have been taken by the Board:

ENHANCED STRATEGY
FOR 2022 ONWARDS

The Group has introduced an updated
strategy, where Georgia Capital will focus
on: investing in capital-light opportunities
only; adapting its capital management
framework; and putting ESG at the core
of its strategy.

Key stakeholder interests considered:
Investors: the Group is able to take
•
advantage of attractive investment
opportunities.

• Local community and the environment:
our portfolio is concentrated across
structurally important industries in
Georgia, connecting Georgia Capital to
the country’s sustainable development,
through our investments in positive
impact businesses.

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Establishing ESG metrics and targets
on the Group and portfolio company
levels and further enhancing ESG
reporting

addresses the needs of all stakeholders
and the importance of the global challenges
of climate change.

For more details on the Company’s ESG
developments please see page 82 of this
report and the Company’s Sustainability
Report.

Key stakeholder interests considered:
•

Investors: strong ESG practices can
reduce investment risk, and transparent
disclosures can help investors make more
informed decisions.

• Local communities and non-governmental
organisations: ESG matters affect the
day-to-day lives of the people in our local
communities.

• Clients: we seek to uphold high ethical

standards end-to-end in the supply chain.

• Employees: aware of health and safety

risk management and take pride in being
part of our commitment to ESG.

During 2022, the Company enhanced its
TCFD disclosures and established metrics
and targets on the Group and portfolio
company levels, in line with best practices
and global sustainability standards.

To further enhance the ESG disclosure
transparency, Georgia Capital submitted
its first Carbon Disclosure Project (CDP)
climate change questionnaire.

A second standalone sustainability report has
been published alongside these accounts, for
FY22. The report contains the background
methodology and disclosures in line with the
TCFD recommendation. The Sustainability
Report 2022 can be found on the link:
https://georgiacapital.ge/ir/
sustainability-reports.

A key factor in determining how the Company
builds a sustainable business, that addresses
the wider concerns and needs of the
communities in which it operates, is the
execution of its ESG strategy. Our strategy
was adopted in 2021 and is aligned with the
portfolio companies’ strategies as detailed
in the Company’s Responsible Investment
Policy. It is our aim that this ESG strategy

Completion of second stage of
disposal of water utility business

On 31 December 2021, the Company
announced that its wholly-owned subsidiary
JSC Georgia Capital agreed to sell an initial
80% of its equity interest in the water utility
business to Aqualia, by way of a two-stage
transaction.

Both stages of the transaction were
successfully completed in 2022. For more
details on the transaction please see our
website: https://georgiacapital.ge/ir/
water-utility-disposal and page 12 of
this report.

The disposal is a Class 1 transaction and
therefore, in accordance with the UK Listing
Rules, key stakeholder interests were
considered:
•

Investors – the approval of the Company’s
shareholders was sought and obtained
at a General Meeting held on 31 January
2022. The necessary notice was provided
to shareholders by way of a shareholder
circular. The disposal realised US$ 180
million cash proceeds in February 2022
and created substantial value for our
shareholders and further validates
GCAP’s NAV. Shareholders approved
the transaction in a General Meeting
on 31 January 2022, with 100% votes
in favour.

Buyback of GCAP Eurobonds

In October 2022, we conducted a
Modified Dutch Auction (MDA) through
which we bought back US$ 29.2 million
GCAP Eurobonds. In addition to the
tendered amount, we had accumulated
US$ 87.0 million GCAP Eurobonds through
repurchases on the open market. Upon
completion of the MDA we cancelled
US$ 65.0 million notes.

For more details on the transaction please
see page 14 of this report.

Key stakeholder interests considered:
•

Investors – Upon completion of the MDA
US$ 65.0 million notes were cancelled,
decreasing the outstanding gross debt
balance to US$ 300.0 million and leaving
US$ 51.0 million GCAP Eurobonds in
treasury. The transaction enabled willing
debt investors to cash out and is in line

with the key strategic priority to
deleverage Georgia Capital’s balance
sheet and create significant value for
shareholders.

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S172 STATEMENT CONTINUED

Georgia Capital share buyback
and cancellation programme
(the “buyback programme”)

In line with Company’s capital allocation
programme, in August 2022, the Company
announced the extension of a US$ 25 million
buyback programme until 31 December 2022.

This decision was influenced by the
Company’s robust liquidity levels, supported
by a strong dividend income from the
portfolio companies and c.50% discount
to the reported NAV per share.

The purpose of the programme was to create
more value through share buybacks than we
could have through new investments, taking

into consideration the share price discount
to the reported NAV per share. Shares
repurchased were cancelled, reducing
the number of outstanding shares and
delivering greater per share value to the
remaining shareholders.

For more details on the transaction please
see page 15 of this report.

Key stakeholder interests considered:
Investors: balancing the desire of
•
shareholders for immediate returns
against the need to preserve liquidity
and ensure the sustainability of the
business. The maximum number
of shares that were allowed to be
repurchased is 6,944,294, being

the number of shares the Company
is authorised to repurchase under the
authority granted by the shareholders at
the 2022 Annual General Meeting (AGM).

Since the commencement of the buyback
programme in August 2021, 3,075,923
shares (6.4% of issued capital) have been
repurchased and cancelled. The total value
of shares amounted to GEL 76.2 million
(US$ 25.0 million).

Refinancing the portfolio companies

In October 2022, Georgian Renewable
Power Operations JSC (GRPO), the holding
company of the Group’s operational
renewable energy assets (previously owned
by Georgia Global Utilities JSC (GGU)),
successfully closed a US$ 80 million
green secured bond offering.

Also in October, JSC Georgia Real Estate
(GRE), the holding company of the Group’s
housing development and hospitality
businesses, successfully closed a
US$ 35 million local bond offering.

In September 2022, Georgia Healthcare
Group (GHG) and its 100% subsidiary JSC
Evex Hospitals (Evex) signed a US$ 35 million,
5-year financing package with European Bank
for Reconstruction and Development (EBRD).

For more details on these transactions please
see our website: https://georgiacapital.ge/
ir/news/georgia-healthcare-group-signs-
us-35-million-financing-package-ebrd
and pages 13 of this report.

Key stakeholder interests considered:
•

Investors, employees, local community and
the environment: it is crucial to the value
and sustainability of our businesses for our

investors and our employees that they be
financed at appropriate leverage ratios.
GRPO obtained a second-party opinion
from Sustainalytics, a leading provider of
ESG research and analysis, for its Green
Bond Framework. The issuance of the
first ever green secured bonds provides
significant contribution to the development
of the Georgian capital market.

The refinancing with EBRD highlights how
the Company still plays a significant role
in ensuring Georgia’s ability to fight the
COVID-19 pandemic. The Evex loan will
also contribute to the enhancement of
the Georgian healthcare infrastructure.

The Board continues to believe that, whilst recognising that the mechanism will evolve over time, the operation of the designated Non-Executive Director
for workforce engagement (DNED) has been and continues to be an effective means of engaging with the workforce, to help the Board understand the
matters that concern the workforce and their specific interests, whilst having regard to these in the decisions that are made at Board level.

Similarly, the informal and formal channels in which the Group has adopted to engage with its investors, the local communities and the environment,
through a variety of media platforms, has performed well and flexibly.

For the coming year, the Board will ensure that stakeholder engagement continues to develop and will embed effective and formal ways of
engagement with its various stakeholders, ensuring frequency of interaction is maintained and reviewed (where appropriate) over matters that are
considered material to the Group, such as its revised strategy and ESG considerations.

Photo Okatse Canyon, Imereti region of Georgia.

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RISK MANAGEMENT

We believe that effective risk management underpins the successful delivery of our strategy. We identify, evaluate,
manage and monitor the risks that we face through an integrated control framework supported by formal policies and
procedures, clearly delegated authority levels and comprehensive reporting. The Board confirms that our framework
has been in place throughout the year under review and to the date of approval of this Annual Report and is integrated
into both our business planning and viability assessment processes.

Overview
Our Board, supported by our Audit and Valuation and Investment
Committees and executive management, is ultimately responsible for the
Group’s risk management and internal controls with a view to maintaining
ongoing sustainability.

As an investor, Georgia Capital is in the business of taking risks in order
to achieve its targeted returns for investors and shareholders. The Board
approves the strategic objectives that determine the level and types of
risk that Georgia Capital is prepared to accept and reviews the Group’s
strategic objectives and risk appetite at least annually. We believe that,
in order to have an effective risk management framework, there needs
to be a strong risk management culture within the Group. We have
worked to ensure that managing risk is ingrained in our everyday
business activities. We seek to create an environment where there is
openness and transparency in how we make decisions and manage risks
and where business managers are accountable for the risk management
and internal control processes associated with their activities. Our culture
also aims to ensure that risk management is responsive, forward-looking
and consistent. Georgia Capital’s risk culture is built on rigorous and
comprehensive investment procedures and disciplined capital
management.

Risk appetite
Our risk appetite is defined by our strategic objectives. We invest capital
and develop businesses that will have strong capital returns. Georgia
Capital applies the following investment criteria:
• Geographic focus: only investing in and developing businesses in

Georgia, the country we know – a diversified, resilient, fast-growing
economy across the last decade.

• Focus on liquidity: the Group will be predominantly investing only in
capital-light, larger-scale investment opportunities in Georgia, which
have the potential to reach at least GEL 300 million equity value over
the next three to five years. The Group believes a larger size will
provide improved liquidity and superior exit opportunities, to support
the Group’s desire to reduce the current discount to reported NAV
per share.

• Sector focus: investing mostly in fragmented and underdeveloped
markets, particularly targeting high-multiple service industries.

• Return target: combination of the ROIC, MOIC, IRR and GCAP share
price value versus investments return is the key decision-making
matrix used in the investment decision-making process:
– MOIC and IRR are determined at GCAP level, as the Group

evaluates achievable money multiples with all acquisitions and
analyses them in combination with the expected IRR.

– ROIC is evaluated for financing projects and reinvestment at

each portfolio company level. Different yields are appropriate for
different industries. ROIC is at the core of decision-making when
the portfolio companies are investing or divesting assets or
businesses. ROIC should be more than WACC for new
investments. As part of ROIC enhancement initiatives across our
portfolio, our businesses are aiming to continue divestment of low
ROIC and/or non-core assets and businesses.

– GCAP share price is at the core of decision-making when it

comes to new investments. The Group performs 360-degree
analysis each time GCAP makes a capital allocation decision
and compares: a) the investment opportunity versus buyback
opportunity; and b) the sale opportunity versus buyback
opportunity. The Group intends to buy assets/companies at
a higher discount to their listed peers than GCAP’s fair value
discount. Georgia Capital is targeting to invest in opportunities
which produce greater returns than returns offered by buying
back GCAP shares.

Capital management
Georgia Capital adopts a highly disciplined approach to managing its
capital resources as follows:
• 360-degree analysis, when evaluating capital returns, new investment

opportunities or divestments.

• Georgia Capital allocates capital such that it does not depend on

premature sales of listed portfolio investments. Georgia Capital does
not have capital commitments or a primary mandate to deploy funds
or divest assets within a specific time frame. As such, it focuses on
shareholder returns and on opportunities which meet its investment
return and growth criteria.

• The Board regularly reviews any major investment and divestment

opportunities.

Our framework and approach to risk governance
The Board is responsible for setting the right tone and encouraging
characteristics and behaviours which support a strong risk culture and
effective risk management process across the Group. The Board’s
mandate includes determining the Group’s risk appetite and risk
tolerance as well as monitoring risk exposures to ensure that the nature
and extent of the main risks we face are consistent with our overall goals
and strategic objectives. Non-executive oversight is also exercised
through the Audit and Valuation Committee which focuses on upholding
standards of integrity, financial reporting and valuation framework, risk
management systems, going concern, internal control and assurance
frameworks. The Audit and Valuation Committee’s activities are
discussed further on pages 139 to 144. The Investment Committee
ensures a centralised process-led approach to investment and the
overriding priority is to protect the Group’s long-term viability and
reputation and produce sustainable, medium to long-term cash-to-cash
returns. The Investment Committee’s activities are discussed further on
pages 137 to 138.

At the Board, Committee and executive management levels, we develop
formal policies and procedures which set out the way in which risks are
systematically identified, assessed, quantified, managed and monitored.
Our Investment Committee, which has oversight of the investment
pipeline development and approves new investments, significant
portfolio changes and divestments, is integral to embedding our
institutional approach across the business. It ensures consistency and
compliance with Georgia Capital’s financial and strategic requirements,
cultural values and appropriate investment behaviours. Each business
participates in the risk management process by identifying the key risks
applicable to its business. The principal risks and uncertainties faced by
the Group are identified through this process, as are the emerging risks.

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On a day-to-day basis, management is responsible for the
implementation of the Group’s risk management and other internal
control policies and procedures. Based on our risk culture, managers
“own” the risks relevant to their respective function. For each risk
identified at any level of the business, the risk is measured and mitigated
(if possible) in accordance with our policies and procedures. Middle level
managers, both at each portfolio company and Georgia Capital level,
are required to report on identified risks and responses to such risks
on a consistent and frequent basis. Executive and senior management
regularly review the output from the bottom-up process by providing
independent challenge and assessing the implementation of the risk
management and internal control policies and procedures.

Our reporting process enables key risks and emerging risks to be
escalated to the appropriate level of authority and provides assurance to
the Committees and the Board. Key developments affecting our principal
risks and associated mitigating actions are reviewed quarterly (or more
often if necessary, on an ad hoc basis, outside of the regular reporting
process) by the Audit and Valuation and Investment Committees,
as appropriate, as well as the Board.

A description of emerging and principal risks and uncertainties, including
recent trends and outlook, as well as mitigation efforts, can be found on
pages 73 to 81 of the Strategic Review.

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Risk governance structure

BOARD

• Determines the Group’s risk appetite as part of strategy setting.
• Overall responsibility for maintaining a system of internal controls that ensures an effective risk management and oversight process across

the Group.

• Assisted by the Board Committees with specific responsibility for key risk management areas.

Audit and Valuation Committee

Investment Committee

Remuneration Committee

Nomination Committee

• Responsible for ensuring that
the Board has the necessary
skills, experience and
knowledge to enable the
Group to deliver its strategic
objectives.

• Leads the process for

appointing Directors and
senior management positions.

• Principal Committee for

managing the investment
entity subsidiaries and its
most material risks.

• Strict oversight of each step
of the investment lifecycle.

• Approves all investment,
divestment and material
portfolio decisions.

• Monitors investments against
original investment case.
• Ensures investments are in

line with the Group’s
investment policy and risk
appetite.

• Reviews and recommends
to the Board the Directors’
Remuneration Policy to ensure
that remuneration is designed
to promote the long-term
success of Georgia Capital
(and see that management
is appropriately rewarded
for their contribution to the
Group’s performance in the
context of wider market
conditions and shareholder
views).

• Approves variable

compensation schemes for
our investment professionals
that are in line with market
practice and enable the Group
to attract and retain the best
talent.

• Ensures that remuneration
is aligned with shareholder
returns.

• Responsible for managing
financial reporting risk and
internal control and the
relationship with the external
auditor.

• Reviews and challenges risk
management reports from
Group Finance and Internal
Audit.

• Specific and primary

responsibility for the Valuation
Policy and valuation of the
investment entity subsidiaries.

• Provides oversight and
challenge of underlying
assumptions on the valuation
of the private portfolio
companies (69.2% of portfolio
value at 31 December 2022).
All private large and
investment stage portfolio
companies (60.6% of the total
portfolio) are valued externally
by an independent valuation
company on a semi-annual
basis.

• Direct engagement with the

external auditors, who involve
their specialist valuations
team.

The Management Board is led by the Chief Executive Officer and has:
• Delegated responsibility for management of the Group.
• Delegated responsibility for investment decisions.
• Delegated responsibility for risk management.

MANAGEMENT BOARD

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Bodies implementing the risk management system
As mentioned on page 69, our Board is responsible for reviewing and
approving the Group’s system of internal control and its adequacy and
effectiveness. Controls are reviewed to ensure effective management
of strategic, financial, market and operational risks, amongst others.
Certain matters, including but not limited to the approval of major capital
expenditure, significant acquisitions or disposals and major contracts,
are reserved exclusively for the Board. The full schedule of matters
specifically reserved for the Board can be found on our
website at: https://georgiacapital.ge/governance/cgf/schedule.
With respect to other matters, the Board is often assisted by both the
Audit and Valuation and Investment Committees.

The Management Board has overall responsibility for the Group’s assets,
liabilities, risk management activities, respective policies and procedures.
In order to effectively implement the risk management system, the
Management Board delegates individual risk management functions
to each of the various decision-making and execution bodies within
the Group, as described below.

Internal Audit department
The Group has an established Internal Audit department, which is
responsible for the regular review/audit of the Group’s operations,
activities, systems and processes, in order to evaluate and provide
reasonable, independent and objective assurance and consulting
services designed to add value and improve the Group’s operations.

The Group’s Internal Audit department is independent of the
Management Board. The Head of the Group’s Internal Audit department
is appointed by, and has a direct reporting line to the Chairman of the
Audit and Valuation Committee. In 2022, the new Head of the Group’s
Internal Audit department was appointed. The Group’s Internal Audit
department discusses the results of all assessments with the Group’s
Management Board and reports its findings and recommendations
to the Group’s Audit and Valuation Committee.

The purpose of the Internal Audit department is to determine whether the
Group’s risk management, internal controls and corporate governance
processes, which are designed and implemented by the Management
Board, are adequate such that:
• material risks including strategic, market, liquidity and operational

risks, are appropriately identified, measured, assessed and managed
across the Group, including its outsourced activities;
interaction with the various internal governance groups occurs
appropriately;

•

• significant financial, managerial and operating information is accurate,

•

reliable and timely;
the Group and its employees act with integrity and their actions are in
compliance with the policies, standards, procedures and applicable
laws and regulations;
resources are acquired economically, used efficiently and protected
adequately;

• programmes, plans and objectives are achieved; and
• significant legislative or regulatory issues that impact the organisation

are recognised and addressed in a timely and proper manner.

In order to fulfil its function, the Group’s Internal Audit department
has unrestricted access to all the Group’s functions, records, property
and personnel.

Investment team
The Group’s investment team has formalised procedures of risk analysis.
As part of the procedures, qualitative and quantitative downside risks are
identified and measured and risk adjusted returns are assessed for the
investment opportunity.

For each capital allocation decision an independent risk team is formed
and no member of the risk team is involved in developing investment
thesis. The risk team identifies major risk areas of the proposed
investment, assesses potential impact if the risks materialise and
estimates returns based on stress test scenarios and sensitivity analysis.
The team also evaluates the fit of the investment within the Group’s
investment policy and challenges the executability of the proposed
business plan.

The risk analysis process involves desktop research as well as field
work, including interviewing sector experts and senior executives. ROIC
and equity IRR are the most common return metrics which are stressed
in the risk analysis. For every capital allocation decision, the risk team
issues a written capital allocation recommendation based on the risk
reward profile of the proposed investment.

Together with the investment thesis, the risk analysis is reviewed by the
Capital Allocation & Strategy committee, consisting of members of the
Group’s management team, which is responsible for recommending
investment decisions to the Board.

Legal department
The Legal department’s principal purposes are to ensure that the Group’s
activities conform to applicable legislation and to minimise losses from the
materialisation of legal risks. The Legal department is responsible for the
application and development of mechanisms for identifying legal risks in
the Group’s activities in a timely manner, the monitoring and investigation
of the Group’s activities in order to identify any legal risks, the planning
and implementation of all necessary actions for the elimination of
identified legal risks, participation in legal proceedings on behalf of
the Group where necessary and the investigation of possibilities for
increasing the effectiveness of the Group’s legal documentation and
its implementation in the Group’s daily activities. The Legal department
is also responsible for providing legal support to structural units of
the Group.

Finance department
The Group’s risk management system is implemented primarily by the
Finance department, which is supervised by the Chief Financial Officer
and is responsible for the Financial Risks Management function. It
implements the Group’s financial and tax risks policies by ensuring
compliance with: liquidity management thresholds; limits on possible
losses from the foreign currency risks; tax legislation; and all financial
policies and procedures set by the Management Board. The Finance
department, which reports to the Management Board, also focuses
on the Group’s relationship with the tax authorities, provides practical
advice and tax optimisation plans for the Group and also assesses
the entire Group’s tax risks and exposures.

The Finance department also manages foreign currency exchange,
money market and derivatives operations and monitors compliance
with the limits set by the Management Board for these operations.
The Finance department is also responsible for the management of
the long-term and short-term liquidity and cash flow and monitors the
volumes of cash on the Group’s accounts for the purposes of sufficiency.
Further, the Finance department actively monitors performance of
portfolio companies on a regular basis and delivers daily NAV
development reports, weekly liquidity reports and monthly management
reports to the Management Board.

The Management Board reviews the performance of each portfolio
business company on a monthly basis and takes actions, as necessary.

IFRS technical accounting group
The IFRS technical accounting group, part of the Finance department,
is responsible for monitoring the Group’s compliance with relevant
International Financial Reporting Standards (IFRS). The IFRS technical
accounting group is involved in the development process of the Group’s
accounting policies by leading new accounting standards implementation
projects, monitoring new IFRS developments, and preparing an impact
assessment on reporting, systems and processes across the Group.

In order to increase the understanding of IFRS, the IFRS technical
accounting group delivers training on new IFRS standards, issues
Group accounting policies, produces general guidance memos on the
application of IFRS and memoranda on complex, one-off transactions
and also prepares quarterly reports to the Audit and Valuation Committee
summarising material transactions across the Group, with respective
financial impact.

Valuation workgroup
The Group has established a valuation workgroup, consisting of
members of the Finance department, which is responsible for the
development and oversight of fair value assessment of the Group’s
private portfolio companies at each reporting date. The workgroup
engages third-party professionals to assist with the fair value
determination of large and investment stage investments (44.9% and
15.7% of total portfolio value at 31 December 2022, respectively) in order
to provide more transparency of Georgia Capital’s portfolio valuations.

The oversight of the third-party professionals is within the scope of
the valuation workgroup. The valuation workgroup also estimates fair
values of other portfolio companies (8.6% of total portfolio value at
31 December 2022) in-house by applying an appropriate valuation
technique in compliance with IFRS 13. The workgroup reports to the
Management Board. In order to ensure compliance with IFRS 13
requirements, increase the transparency of valuation and to ensure that
a consistent approach is applied in similar facts and circumstances, the
workgroup developed a Valuation Policy and monitors compliance
across all investments. The applied valuation methodology makes use
of market-based information, is consistent with models generally used
by market participants and is applied consistently from period to period,
except where a change would result in a better estimation of fair value.
The workgroup recommends fair values of private portfolio investments
at each reporting date and prepares quarterly valuation reports for the
Management Board and the Audit and Valuation Committee, describing
valuation techniques applied and inputs used, with particular focus on
the assumptions supporting the unquoted investments, any valuation
uncertainties and the proposed disclosure in the financial statements.
The valuation workgroup applies care in exercising judgement and
making necessary estimates due to uncertainties inherent in estimating
fair value for private companies.

Internal control
Georgia Capital’s internal control over financial reporting is focused
primarily on ensuring efficient and reliable control of valuation of private
portfolio companies. With respect to internal control over financial
reporting, our financial procedures include a range of system,
transactional and management oversight controls. The board and
management of each private portfolio company is responsible for
ensuring the efficiency of the private portfolio company’s internal control
structures, risk management and financial reporting. The private portfolio
companies’ boards ensure that Georgia Capital’s Board receives
information on any issues that could affect Georgia Capital’s business
or financial reporting. Our businesses prepare detailed monthly
management reports that include analyses of their results along
with comparisons, relevant strategic plans, budgets, forecasts
and prior results.

These are presented to and reviewed by executive management.
Each quarter, the CFO of the Group and other members of the Finance
department discuss financial reporting, valuations and associated
internal controls with the Audit and Valuation Committee, which reports
significant findings to the Board. The Audit and Valuation Committee
also reviews the quarterly, half-year and full-year financial statements
and corresponding press releases and provides feedback to the Board.
The external and internal auditors attend each Audit and Valuation
Committee meeting and the Audit and Valuation Committee meets
regularly both with and without management present.

Going Concern Statement
The Group’s business activities, objectives and strategy, principal risks
and uncertainties in achieving its objectives and performance are set out
on pages 2 to 122. Comprehensive going concern assessment analysis
is disclosed in Note 2 within the IFRS financial statements. The Directors
have made an assessment of the Group’s ability to continue as a going
concern and are satisfied that Georgia Capital has the resources to
continue as a going concern for a period of at least 12 months from
when the financial statements are authorised for issue, i.e. the period
ending 31 March 2024. After making enquiries, the Directors confirm
that they have a reasonable expectation that the Group has adequate
resources to continue in operational existence and, therefore, the
Directors consider it appropriate to adopt the going concern basis
of accounting in preparing the financial statements.

Viability Statement
In accordance with the Corporate Governance Code, the Directors are
required to assess the prospects of the Company to meet its liabilities
by taking into account its current position and principal risks. Georgia
Capital runs an in-depth annual business planning process, involving
both the management of portfolio companies and Group management
with Board input and oversight. In line with the UK Corporate
Governance Code, the process includes a viability assessment
conducted by the Board over a three-year period beginning 1 January
2023, being the first day after the end of the financial year to which this
report relates. In determining the appropriate period over which to make
their assessment, the Directors considered: the duration of strategic
plans and financial forecasts; the diverse nature of the Group’s activities;
the evolving nature of the regulatory environment in which the Group’s
businesses operate; the inherent uncertainty surrounding future capital
allocation projections; and the Group’s objective, in line with its updated
strategy. A period of three years beyond the balance sheet date was
therefore considered the most appropriate viability period for the Group.

In order to consider the Group’s viability, the Board considered a number
of key factors, including:
•
•

the Board’s risk appetite;
the Group’s business model and strategy as set out on pages 8
to 36;
the Group’s principal and emerging risks and uncertainties, principally
those related to regional instability, the war in Ukraine, portfolio
company strategic and execution risk, investment risk, adverse
economic conditions, the depreciation of the Lari, lack of liquidity,
and climate change-related risk, and how these risks and
uncertainties are managed, as set out on pages 73 to 81;
the effectiveness of our risk management framework and internal
control processes; and

•

• stress testing, as described on the next page.

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RISK OVERVIEW

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The key factors on the previous page have been reviewed in the context
of our current position and strategic plan. Since there are no legal
guarantees or constructive commitments in place for Georgia Capital to
fund losses or activities at portfolio companies’ level (with the exception
of a financial guarantee of EUR 6.4 million issued to a portfolio company
owned by JSC Georgia Capital), a stress test analysis was prepared on
a holding company level.

The viability assessment involved a risk identification process which
included recognition of the principal risks to viability (risks that could
impair the Group’s business model, future performance, solvency or
liquidity), excluding risks not sufficiently severe over the period of
assessment for the Group. The principal risks and uncertainties identified
by the Group are regional instability, regulatory, investment, liquidity,
portfolio company strategic and execution, and currency and
macroeconomic environment-related risks. Further, the Group has
identified climate change-related risk as an emerging risk.

We also identified other risks which, while not necessarily severe in
themselves, could escalate when combined with others.

For those risks considered sufficiently severe to affect our viability,
we performed stress testing for the assessment period, which involved
modelling the impact of a combination of severe and plausible risks in
separate and combined adverse scenarios. The stress test scenario
was then reviewed against the Group’s current and projected liquidity
position. The Group prepared a single reasonable worst case scenario
which assumes the inability of private portfolio companies to pay
dividends or meet any other obligations towards the holding company,
the reason for which could be economic consequences of regional
instability, the war in Ukraine, GEL depreciation against the US dollar,
market competition and/or operational underperformance. Supported
by strong operating performance in 2021, the Bank of Georgia restored
payment of dividends to shareholders and announced a dividend policy
providing for a 30%-50% payout ratio. In 2023, BoG announced that it
intends to recommend a final dividend of GEL 5.80 per share, which
together with the interim dividend of GEL 1.85 per share paid would
make a total of GEL 7.65 per share for 2022.

On that basis, the stress case scenario includes dividend payments from
the listed asset. The Directors also considered the maturity of Eurobonds
issued by the Group which are due in 1Q24. GCAP has repurchased
US$ 116 million Eurobonds, out of which US$ 65 million was cancelled.
As of 31 December 2022, outstanding gross balance of Eurobonds
issued was US$ 300 million, leaving US$ 51 million repurchased notes
in treasury. In addition, the Group has repurchased US$ 20 million
Eurobonds so far in 2023 as of 17 March 2023. Directors remain
confident that given the Group’s track record of proven access to capital
even during market turbulence, the Group will be able to roll over the
US$ 300 million Eurobonds. The Group demonstrated its superior
access to capital through the successful placement of US$ 65 million
Eurobonds in March 2021.

The Directors have also satisfied themselves that existing cash and highly
liquid debt and equity investment securities will be sufficient to cover
the expected cash outflows of the holding companies for the viability
assessment period. They have also collected necessary evidence to
support the statement below in terms of the effectiveness of the Group’s
risk management framework and internal control processes in place to
mitigate risk. As at 31 December 2022, Georgia Capital holds GEL 439
million assets across cash, marketable debt securities and loans issued
to portfolio companies. Additionally, the Group also holds GEL 830
million equity securities of London Stock Exchange listed BoGG PLC
as at 31 December 2022. In 1H22, the Group received US$ 180 million
sale proceeds from successful completion of the water utility business
sale transaction. Therefore, in a worst-case scenario, with risks modelled
to materialise simultaneously and for a sustained period of time, the
likelihood of the Group having insufficient resources to meet its financial
obligations is very low. Based on the analysis described above, the
Directors confirm that they have a reasonable expectation that the Group
will be able to continue operation and meet its liabilities as they fall due
over the three-year period from 1 January 2023 to 31 December 2025.

Understanding our risks
We continuously monitor our internal and external environment to ensure that any new principal or emerging risk is identified in a timely manner
and responded to appropriately. The Directors have carried out a robust assessment of the principal and emerging risks facing the Group, including
those that would threaten its business model, future performance, solvency or liquidity. We define our principal risks as those that have the potential
to impact the delivery of our strategic objectives materially. We also monitor risks which include new and emerging risks which may have the potential
to become principal risks but are not yet considered to be so. Emerging risks usually have large uncertain outcomes which may become certain in
the longer term (beyond one year) and which could have a material effect on the business strategy if they were to occur.

Principal risks and uncertainties
The table below describes the principal risks and uncertainties faced by the Group and their potential impact, as well as the trends and outlook
associated with these risks and the mitigating actions we take to address these risks. If any of the following risks were to occur, the Group’s business,
financial condition, results of operations or prospects could be materially affected. The risks and uncertainties described below may not be the only
ones the Group faces. The order in which the principal risks and uncertainties appear does not denote their order of priority. Additional risks and
uncertainties, including those that the Group is currently not aware of or deems immaterial, may also result in decreased revenues, incurred
expenses or other events that could result in a decline in the value of the Group’s securities.

PRINCIPAL RISK/
UNCERTAINTY

The Georgian economy and our business may be adversely affected by regional tensions. Georgia shares
borders with Russia, Azerbaijan, Armenia and Turkey, and has two breakaway territories, Abkhazia and the
Tskhinvali/South Ossetia regions. In addition to strong political and geographic influences, regional countries
are highly linked to Georgian economy representing its significant historical trading partners.

REGIONAL INSTABILITY RISK

KEY DRIVERS/TRENDS

Following a significant Russian military build-up near the Russia-Ukraine border and months of rising tensions,
Russian troops crossed the border on 24 February 2022, and the situation escalated into a war. In response to
the invasion, all G-7 countries, the EU and many other countries have announced severe economic sanctions
on Russia, including selected high-profile Russian banks, Russian entities and Russian individuals. At the start of
the war, there was a significant depreciation of the Russian Ruble against foreign currencies, although the Ruble
has since recovered. The market value of Russian securities has also decreased significantly. As the situation
grinds on, the already steep humanitarian costs and economic losses for Ukraine, Russia and the rest of the
world are likely to deepen. Ukraine and Russia are particularly important trade partners of Georgia, and spillover
risks remain. The length and outcome of the war are clearly uncertain, but it is possible that the negative impact
of the war will become more pronounced in the medium to longer term and could continue to have a material
impact on market confidence, affecting all regional countries. Various tensions have also existed between Russia
and Georgia for more than 15 years, and the two countries also had a brief armed conflict in 2008, which led to
Russia’s control of the two breakaway territories. Finally, there has also been ongoing geopolitical tension,
political instability, economic instability and military conflict between other regional countries, with the latest
flare-up culminating in a six-week war (September-November 2020) between Armenia and Azerbaijan over the
disputed Nagorno-Karabakh region. Despite the peace agreement, skirmishes are reported to have occurred
on several occasions, most recently in September 2022. The continuation or escalation of the war, political
instability, geopolitical conflict, the economic decline of Georgia’s trading partners and any further tension
with Russia, including border and territorial disputes, may have a negative impact on the political or economic
stability of Georgia, which in turn may affect our business unfavourably, including putting adverse pressure on
our business model, our revenues, our financial position and the valuations of our listed and private portfolio
companies.

The Russian invasion of Ukraine has resulted in extraordinary economic disruption, as market confidence has
plunged, unprecedented sanctions have been imposed upon the Russian economy, food and energy prices
have surged and spillover risks have been substantially aggravated, with further economic consequences to
follow as the situation develops. While food and energy prices have been relatively stabilising since 2H22,
markets remain highly unpredictable in light of the ongoing conflict.

The war has negatively affected the operating performance of our wine (c.60% sales exposure to Russia and
Ukraine in 2021) and housing development businesses (significant growth in construction materials costs).
The magnitude of the impact on these businesses cannot be reliably measured at this stage. Due to their size,
however, it is not expected to be material overall for the Group (the value of the wine and housing development
business represented approximately 2% of the total portfolio value as at 31 December 2022).

Regional instabilities also affected the discount rates and listed peer multiples used in our DCF and multiple-
based valuation assessments. Discount rates were up by 2.0-3.0 ppts on average in 2022, while the listed peer
multiples demonstrated a declining trend. These developments are reflected in the private portfolio companies’
valuations in 2022, as described earlier in this report.

While GCAP’s exposure to liquid funds such as debt securities issued by affected countries is not material,
our Insurance business’ investment results were negatively affected during the first half of the year. As the war
is still waging, it is impossible to reliably assess the impact this may have on the Group’s business as there is
uncertainty over the magnitude of the impact on the economy in general.

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CORONAVIRUS (COVID-19) RISK

KEY DRIVERS/TRENDS
CONTINUED

MITIGATION

Although a ceasefire agreement ended the six-week Armenia-Azerbaijan war in November 2020, the conflict has
not been conclusively resolved. Russian peacekeeping forces were deployed for an initial period of five years.
Despite peacekeeping efforts, tensions flared up again in September 2022, resulting in a high number of
fatalities on both sides and risking another major escalation. The EU has deployed civilian monitors on the
Armenian side of the border, aiming to aid in keeping peace. The risks of a further flare-up depend on the
success of the peacekeeping mission. The war has also worsened the economic and political outlook for
Armenia, an important trading partner of Georgia, and created significant spillover risks in the region, with
the rising influence of Russia and Turkey altering the regional balance. Risks of aggressive action remain
particularly elevated in light of the changing status-quo following the Russian invasion of Ukraine.

Russia imposed economic sanctions on Georgia in 2006, and conflict between the countries escalated in 2008
when Russian forces crossed Georgian borders and recognised the independence of Abkhazia and the
Tskhinvali/South Ossetia regions. Russian troops continue to occupy the regions, and tensions between Russia
and Georgia persist. The introduction of a preferential trade regime between Georgia and the EU in 2016, the
European Parliament’s approval of a proposal on visa liberalisation for Georgia in 2017, and Georgia’s recently
attaining “European perspective” for EU candidacy could potentially intensify tensions between the countries.
Russia banned direct flights in July 2019 and recommended stopping the sale of holiday packages to Georgia.
The decision was made in response to anti-Putin protests in Tbilisi, which started after a member of the Russian
parliament addressed the Georgian parliament in Russian from the speaker’s chair. Sanctions were imposed
on several Russian individuals and entities in March 2021 by the US and the EU, relating to the use of chemical
weapons against Russian opposition figure Alexei Navalny, amplifying tensions in the region.

The Group actively monitors significant developments in the region and risks related to political instability and
the Georgian Government’s response thereto. It also develops responsive strategies and action plans of its own.
The Georgian export market shifted significantly away from the Russian market after Russia’s 2006 embargo,
and the Group participated in that shift. In 2022, Russia accounted for 12% of Georgian exports, as opposed
to 17.8% in 2005.

Since the beginning of the war, the migration effect from Russia, Ukraine and Belarus has altered the composition
of foreign currency inflows from remittances and international visitors. The migration effect has resulted in an 86%
y-o-y increase in remittance inflows in 2022, including a fivefold increase up to US$ 2.2 billion from Russia. Moreover,
international travel receipts have increased substantially from the three countries. With most of the migrants expected
to have arrived for long-term stays, it is currently impossible to estimate the long-term impact of the migration effect.
Whilst elevated foreign currency inflows effectively constitute rising external demand in the short run, the medium to
long-term effects remain highly uncertain, depending on the timing and terms of the eventual conclusion of the war
in Ukraine. Despite this surge in foreign currency inflows predominantly from Russia, both remittance inflows and
tourism receipts remain diversified, with the EU having emerged as the top foreign currency provider since 2019
before the Russia-Ukraine war. As travel resumes globally, it is hoped that the rising trend of tourism revenues
from the EU will continue.

While financial market turbulence and geopolitical tensions affect regional trading partners, Georgia’s preferential
trading regimes, including DCFTA with the EU and FTA with China, support the country’s resilience against regional
external shocks. Enhancing linkages with the EU market will further be supported by a new recovery plan for Eastern
Partnership countries, including ambitious investments in improved connectivity and unlocked potential to get full
benefits from the DCFTA. Following Ukraine’s plea to join the EU as it battles Russia’s invasion, Georgia and Moldova
on 3 March 2022 submitted their applications to join the EU. Georgia previously planned to apply to join the
European Union in 2024. The European Council granted a conditional European perspective to all three countries,
with Ukraine and Moldova receiving the candidate status pre-emptively and Georgia set to receive that status as the
conditions are satisfied. The Georgian parliament has begun working on adopting the Council recommendations.
In February 2023, the European Commission published analytical reports assessing the stance of Georgia, Ukraine
and Moldova with respect to their alignment with the EU acquis and offering guidance for the steps ahead. The
report for Georgia was widely regarded as favourable, with the EU ambassador to Georgia congratulating the
Government for “a very positive report”.

Merchandise exports also remain diversified, relatively insulating foreign demand from regional risks, and new
destination countries have emerged as top trading partners in 2022, such as Peru, Kazakhstan and Kyrgyzstan.
China has kept the position of the top destination country for Georgian exports in 2022 since claiming the position
in 2020, accounting for 13.2% of total exports in 2022 (14.5% in 2021), as well as being the largest destination
country of domestically produced Georgian exports with a 18.8% share (18.6% in 2021).

PRINCIPAL RISK/
UNCERTAINTY

KEY DRIVERS/TRENDS

The Georgian Government took significant actions at the early stage of the COVID-19 outbreak, with border
checks and travel restrictions followed by the first lockdown in March-May 2020. After gradually lifting
restrictions since late April, the epidemiological situation worsened in Autumn, and a two-month partial
lockdown was imposed spanning the period from end-November 2020 to February 2021. Since February, the
economy fully reopened for the better part of the year. Despite new COVID-19 cases rising again periodically,
most notably in August and November 2021, as well as at the beginning of 2022 due to the spread of the
Omicron variant, no new major restrictions have been imposed.

As discussed below, lockdown and other significant restrictions had a serious adverse effect on almost all of our
businesses, and as the virus is still considered a pandemic, any new serious outbreak of COVID-19 or a similar
pandemic that required significant new restrictions could do so again.

• Our hospitals and clinics and diagnostics businesses faced a number of COVID-19 related risks, among

these are:
– The health of our own medical personnel affected businesses’ ability to continue to deliver their services,
and they were on the front line, especially in the event of a renewed outbreak or a new, vaccine-resistant
variant;

– Adjusting to the new mix between COVID-19 related care and other care as COVID-19 recedes. Currently,

our hospitals and clinics and diagnostics businesses are experiencing an organic transition to the
post-pandemic economy. Suspension of COVID contracts by the Government in 1Q22 and restructuring
of the cost base of COVID facilities temporarily impacted the performance of the hospitals and clinics
businesses, while substantially lower COVID cases during the quarter resulted in a significant decrease
in diagnostics business revenues. The growth is expected to rebound in the coming quarters as the
businesses pass through the transition period.

• The Group’s education business was also significantly affected in 2020 by the lockdown and subsequent

restrictive measures and adjusted to distance learning which involved offering tuition discounts and rollovers
of fees for transportation and catering services. Given the improved epidemiological developments in Georgia,
the schools provided on-campus learning during most of 2021. Schools in Tbilisi were reopened from
15 February 2021 and continued on-campus learning till the end of the year, except for September. During
the distance learning period, schools offered 15%-25% discounts for tuition fees and rollover of fees for
transportation/catering services. While the education business seems to have developed a model for coping
with COVID-type restrictions, it is not as effective, attractive and profitable when distance learning is imposed.

• The Group’s hospitality business is the business that has been most affected by the COVID-19 outbreak,
reflecting pandemic-related uncertainties in the tourism and real estate sectors. We reacted quickly to the
change in the environment and are in the process of exiting from this business (we have already exited from
the commercial real estate business, which was also significantly affected by the pandemic). Any serious
deterioration of the epidemiological situation could adversely affect our ability to sell the remaining properties
at attractive prices.

Although vaccine development and the ongoing immunisation process have raised hopes of global recovery,
exceptional uncertainty persists with respect to new COVID variants and vaccine take-up rates. The coronavirus
has proven to be a significant challenge for the Georgian economy, especially the tourism sector. While tourism
revenues have displayed signs of rebounding, a significantly delayed recovery in tourism revenues or a major fall
in foreign investment sentiment would impact growth prospects substantially, raising the risk premium and
upsetting the balance of payments.

Furthermore, there can be no assurance on the effectiveness of Government measures in preventing the
further spread of COVID-19, reducing its negative economic impact or that more restrictive measures will not
be introduced, any of which could have a material adverse effect on macroeconomic conditions and, in turn,
the Group’s business.

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RISK OVERVIEW CONTINUED

CORONAVIRUS (COVID-19) RISK CONTINUED

CURRENCY AND MACROECONOMIC ENVIRONMENT RISKS

MITIGATION

The Georgian economy remains vulnerable to external shocks due to a mix of its historically high current
account deficit, low domestic savings rate and high level of dollarisation. The external balance deteriorated
following the onset of the COVID-19 pandemic, with the current account deficit amounting to 12.5% of GDP in
2020, as tourism revenues, a major source of foreign currency inflows, evaporated. However, in 2021 the deficit
improved to 10% of GDP and in 9M22 reached a record low of -2.7% of GDP, including a record high 5.9%
surplus in 3Q22, as external inflows have accelerated significantly, with the migration effect supplementing
higher external demand from neighbour countries. Major sources of financing the current account deficit are
remittance inflows (up 86% y-o-y in 2022), merchandise exports (up 32% y-o-y), including a particularly strong
performance from domestic merchandise exports (up 18.4% y-o-y), and tourism revenues (108% of respective
2019 levels in 2022, including 135% in 2H22). The National Bank of Georgia (NBG) sold US$ 94 million and
bought US$ 80 million on foreign currency auctions in 2022, but also bought a net amount of US$ 580 million
through direct participation in the foreign exchange market, taking advantage of surging FX inflows.
Subsequently, official reserve assets reached a record-high level of US$ 4.9 billion by the end of December 2022,
up 15% y-o-y.

A large part of Georgia Capital’s portfolio is concentrated across defensive countercyclical sectors: healthcare
and retail (pharmacy) businesses. Georgia Capital has a strong liquidity position, with GEL 439 million liquid
assets and loans issued as of 31 December 2022. We are also satisfied that Georgia Capital’s liquidity forecast
adequately accounts for the novel coronavirus risk. Further, Georgia Capital does not have capital commitments
or a primary mandate to deploy funds or divest assets within a specific time frame. Therefore, capital allocations
to portfolio companies may be suspended, if needed. The Group identified the following mitigating actions in
2020: suspension of capital allocations together with optimisation of cash operating expenses. However, the
improved epidemiological environment and strong economic recovery during 2021, have allowed for a smooth
and gradual transition from the cash accumulation and preservation strategy, implemented in 2020 as our
response to the pandemic, towards capturing business growth opportunities across all our businesses.

PRINCIPAL RISK/
UNCERTAINTY

Unfavourable dynamics of major macroeconomic variables, including depreciation of the Lari against the
US dollar may have a material impact on the Group’s performance.

KEY DRIVERS/TRENDS

The Group’s operations are primarily located in, and most of its revenue is sourced from Georgia. Factors such
as GDP, inflation, interest and currency exchange rates, as well as unemployment, personal income, tourist
numbers and the financial situation of companies can have a material impact on customer demand for its
products and services.

The Lari floats freely against major currencies. After depreciating in 2020 due to capital outflows from the
emerging and frontier markets, a sudden stop in tourism revenues and shrinking merchandise exports, as
well as rapidly deteriorating expectations, the Lari has gained back a lot of ground, appreciating to higher than
pre-COVID levels by the end of 2022. Following a period of stabilisation, the Lari began strengthening since
mid-May 2021 and continued strengthening into 2022, appreciating by 19.6% compared to the beginning of
2022 as of 17 March 2023. Currency appreciation has been aided by surging foreign currency inflows, driven
by the migrant effect, strong external demand, improving terms of trade and worldwide travel resumption, as
well as tight monetary policy, stronger than expected economic growth, foreign currency lending and improved
expectations. Following rate cuts in 2020 to respond to the COVID-19 shock, NBG reversed the stance and
hiked the policy rate by 300 basis points cumulatively since March 2021 to 11% as of February 2023, responding
to high inflation and subsequent rising inflationary expectations. With COVID-19-induced supply-side
bottlenecks and rising costs exacerbated by global food, energy and commodity prices surging to record-high
levels after the Russian invasion of Ukraine, inflation was elevated throughout 2022 in Georgia like elsewhere
around the world, but has begun decelerating and is expected to continue descent in 2023. According to
preliminary Government projections, the fiscal deficit fell to -3.1% of GDP in 2022, and public debt fell to under
40% of GDP, aiding disinflation on the domestic side and reducing vulnerabilities on the external side.

On the macro-level, the free-floating exchange rate works well as a shock absorber, but on the micro-level,
the currency fluctuation has affected and may continue to adversely affect the Group’s results. There is a risk
that the Group incurs material losses or loses material amounts of revenue and, consequently, deteriorates its
solvency in a specific currency or group of currencies due to the fluctuation of exchange rates. The risk is mainly
caused by significant open foreign currency positions in the balance sheets.

Real GDP continued rapid growth in 2022, with the economy growing by 10.1% y-o-y in 2022 following a 10.5%
expansion in 2021, finishing among top 10 performers around the world with respect to economic growth in
2022 according to IMF and the World Bank. The above-mentioned external factors as well as strong domestic
demand, continued credit expansion and moderated but still expansionary fiscal policy have all been supporting
economic growth. The current account reached a record high surplus of 5.9% of GDP in 3Q22 as a result of
surging foreign currency inflows from remittances, merchandise exports and tourism receipts, despite rising
imports as a result of strong economic activity. Foreign direct investments also increased substantially
throughout the year, totalling US$ 1.7 billion in 9M22, up by 100% y-o-y.

As a result of the improved macroeconomic environment, Fitch Ratings revised Georgia’s sovereign credit rating
outlook to positive from stable in January 2023. The agency cited macroeconomic performance, including
“exceptionally strong” GDP growth coupled with strong fiscal and monetary discipline, as the main driver behind
the improved outlook. A new three-year executive stand-by arrangement worth US$ 280 million was approved
with the IMF in June 2022, focusing on structural reforms and anchoring macroeconomic policy.

MITIGATION

The Group continually monitors market conditions, reviews market changes and also performs stress and
scenario testing to test its position under adverse economic conditions, including adverse currency movements.

The currency risk management process is an integral part of the Group’s activities; currency risk is managed
through regular and frequent monitoring of the Group’s currency positions and through the timely and efficient
elaboration of responsive actions and measures. Senior management reviews the overall currency positions of
the Group several times during the year and elaborates on respective overall currency strategies; the Finance
department monitors the daily currency position for stand-alone Georgia Capital, weekly currency positions on
a portfolio company level and manages short-term liquidity of the Group across different currencies. Control
procedures involve regular monitoring and control of the currency gap and currency positions, running currency
sensitivity tests and elaborating response actions/steps based on the results of the tests.

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RISK OVERVIEW CONTINUED

REGULATORY AND LEGAL RISKS

LIQUIDITY RISK

PRINCIPAL RISK/
UNCERTAINTY

The Group owns businesses operating across a wide range of industries: banking, healthcare, retail (pharmacy)
and distribution, property and casualty insurance, medical insurance, real estate, water utility and electric power
generation, hydro and wind power, beverages, education and auto service. Many of these industries are highly
regulated. The regulatory environment continues to evolve, and we cannot predict what additional regulatory
changes will be introduced in the future or the impact they may have on our operations.

Georgia Capital and its businesses may be adversely affected by risks related to litigations arising from time
to time in the ordinary course of business.

KEY DRIVERS/TRENDS

Each of our businesses is subject to different regulators and regulation. Legislation in certain industries, such as
banking, healthcare, energy, insurance and utilities is continuously evolving. Different changes, including but not
limited to governmental funding, licensing and accreditation requirements and tariff structures, may adversely
affect our businesses.

MITIGATION

Except as disclosed on page 208, there were no governmental, legal or arbitration proceedings (including any
such proceedings which are pending or threatened of which GCAP is aware) during the 12 months preceding
the date of this document which may have, or have had in the recent past, significant effects on either GCAP
and/or its portfolio companies’ financial position or profitability.

MITIGATION

Continued investment in our people and processes enable us to meet our current regulatory requirements and
means that we are well-placed to respond to any future changes in regulation. Further, our investment portfolio
is well diversified, limiting exposure to particular industry-specific regulatory risks.

In line with our integrated control framework, we carefully evaluate the impact of legislative and regulatory
changes as part of our formal risk identification and assessment processes and, to the extent possible,
proactively participate in the drafting of relevant legislation. As part of this process, we engage where possible
in constructive dialogue with regulatory bodies and seek external advice on potential changes to legislation.
We then develop appropriate policies, procedures and controls as required to fulfil our compliance obligations.
Our compliance framework, at all levels, is subject to regular review by Internal Audit and external assurance
providers.

Our integrated control framework also ensures the application and development of mechanisms for identifying
legal risks in the Group’s activities in a timely manner, the monitoring and investigation of the Group’s activities
in order to identify any legal risks, the planning and implementation of all necessary actions for the elimination
of identified legal risks, participation in legal proceedings on behalf of the Group where necessary and the
investigation of possibilities for increasing the effectiveness of the Group’s legal documentation and its
implementation in the Group’s daily activities. The framework also considers the engagement of the external
legal advisors, when appropriate.

The Group may be adversely affected by risks in respect of specific investment decisions.

INVESTMENT RISK

An inappropriate investment decision might lead to poor performance. Investment risks include inadequate
research and due diligence of new acquisitions and bad timing of the execution of both acquisition and
divestment decisions. The valuation of investments can be volatile in line with the market developments.

The Group manages investment risk with established procedures and a thorough evaluation of target
acquisitions. Investment opportunities are subject to rigorous appraisal and a multi-stage approval process.
Target entry and exit event prices are monitored and updated regularly in relation to market conditions and
strategic aims. The Group performs due diligence on each target acquisition including on financial and legal
matters. Subject to an evaluation of the due diligence results an acceptable price and funding structure is
determined, and the pricing, funding and future integration plan is presented to the Investment Committee
(consisting of the full Board) for approval. The Committee reviews and approves or rejects proposals for
development, acquisition and sale of investments and decides on all major new business initiatives, especially
those requiring a significant capital allocation. The Investment Committee focuses on both investment strategy
and exit processes, while also actively managing exit strategies in light of the prevailing market conditions.

PRINCIPAL RISK/
UNCERTAINTY

KEY DRIVERS/TRENDS

MITIGATION

PRINCIPAL RISK/
UNCERTAINTY

Risk that liabilities cannot be met, or new investments made, due to a lack of liquidity. Such risk can arise from
not being able to sell an investment due to lack of demand from the market, from suspension of dividends from
portfolio companies, from not holding cash or being able to raise debt.

KEY DRIVERS/TRENDS

The Group predominantly invests in private portfolio businesses, potentially making the investments difficult to
monetise at any given point in time. There is a risk that the Group will not be able to meet its financial obligations
and liabilities on time due to a lack of cash or liquid assets or the inability to generate sufficient liquidity to meet
payment obligations. This may be caused by numerous factors, such as: the inability to refinance long-term
liabilities; suspended dividend inflows from the investment entity subsidiaries; excessive investments in long-term
assets and a resulting mismatch in the availability of funding to meet liabilities; or failure to comply with the
creditor covenants causing a default.

The liquidity management process is a regular process, where the framework is approved by the Board and is
monitored by senior management and the Chief Financial Officer. The framework models the ability of the Group
to fund under both normal conditions (Base Case) and during stressed situations. This approach is designed to
ensure that the funding framework is sufficiently flexible to ensure liquidity under a wide range of market
conditions. The Finance department monitors certain liquidity measures on a daily basis and actively analyses
and manages liquidity weekly. Senior management is involved at least once a month and the Board on a
quarterly basis. Such monitoring involves a review of the composition of the cash buffer, potential cash outflows
and management’s readiness to meet such commitments. It also serves as a tool to revisit the portfolio
composition and take necessary measures, if required. JSC Georgia Capital successfully issued US$ 300 million
bonds in March 2018, which was followed by a US$ 65 million tap issuance on 16 March 2021. GCAP has
adopted the following measures to manage its standalone credit profile:
• GCAP depends on dividend inflows from its portfolio companies, on its ability to sell its listed securities on

the public markets at favourable prices, and on its ability over the longer term to monetise its private portfolio
investments. To limit this dependency, the Group has adopted a policy to maintain a cash buffer of at least
US$ 50 million in highly-liquid assets in order to always have sufficient capacity for potential downside
scenarios as well as for potential acquisition opportunities. Additionally, the Group will maintain at least
US$ 50 million in marketable securities which can be converted into cash within three to four weeks
(this includes BoG shares).

• Recourse debt and guarantees are limited at GCAP and at each portfolio company level.

In May 2022, the Group adapted the capital management framework, with significant prominence being given
to deleveraging. Deleveraging the Group’s balance sheet, at a time of significant potential economic and regional
instabilities, is a key priority to safeguard our portfolio, and enables the Group to take advantage of attractive
investment opportunities that may arise as a result of those instabilities. The Group has introduced an NCC
Ratio Navigation Tool, which will drive the Group’s share buyback and investment policy; an NCC ratio between
15%-40% will lead to tactical share buybacks/investments, whilst an NCC ratio below 15% is expected to
generate more meaningful share buybacks/investments. The Group targets the bringing down the NCC ratio
below 15% by December 2025. The deleveraging strategy was also implemented across our private portfolio
companies, where individual leverage targets have been developed.

In 2022, GCAP’s corporate credit ratings were upgraded to “B1” by Moody’s and “B+” by S&P (from “B2” and
“B”, respectively).

In October 2022, Georgia Capital conducted a Modified Dutch Auction (MDA) through which the Group
bought back US$ 29 million GCAP Eurobonds. In addition to the tendered amount, GCAP had accumulated
US$ 87 million GCAP Eurobonds through repurchases on the open market. Upon completion of the MDA
US$ 65 million notes were cancelled, decreasing CGAP’s outstanding gross debt balance to US$ 300 million
and leaving US$ 51 million GCAP Eurobonds in the treasury. The transaction is in line with Georgia Capital’s
key strategic priority to deleverage Georgia Capital’s balance sheet.

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RISK OVERVIEW CONTINUED

PORTFOLIO COMPANY STRATEGIC AND EXECUTION RISKS

PRINCIPAL RISK/
UNCERTAINTY

Market conditions may adversely impact our strategy and all our businesses have their own risks specific to their
industry. Our businesses have growth and expansion strategies and we face execution risk in implementing
these strategies.

The Group will normally seek to monetise its investments, primarily through strategic sale, typically within five to
ten years from acquisition, and we face market and execution risk in connection with exits at reasonable prices.

KEY DRIVERS/TRENDS

Each of our private portfolio companies and our listed assets (Bank of Georgia) face its own risks. These include
risks inherent to their industry, or to their industry particularly in Georgia, and each faces significant competition.
They also face the principal risks and uncertainties referred to in this table.

MITIGATION

Macroeconomic conditions, the financial and economic environment and other market conditions in international
capital markets may limit the Group’s ability to achieve a partial or full exit from its existing or future businesses
at reasonable prices. It may not be possible or desirable to divest, including because suitable buyers cannot be
found at the appropriate times, or because of difficulties in obtaining favourable terms or prices, or because the
Group has failed to act at the appropriate time.

For each business, we focus on building a strong management team and have successfully been able to do so
thus far. Management succession planning is regularly on the agenda for the Nomination Committee which
reports to the Board on this matter. The Board closely monitors the implementation of strategy, financial and
operational performance, risk management and internal control framework, and corporate governance of our
businesses. We hold management accountable for meeting targets.

For each industry in which we operate, we closely monitor industry trends, market conditions and the regulatory
environment. We have also sought, and continue to seek, advice from professionals with global experience in
relevant industries. We carry our private portfolio companies at fair value in our NAV Statement. The valuations
are audited, increasing the credibility of fair valuation and limiting the risk of mispricing the asset. In addition, the
valuation of private large and investment portfolio companies (60.6% of total portfolio value) is performed by an
independent valuation company on a semi-annual basis.

The Group has a strong track record of growth and has accessed the capital markets on multiple occasions
as part of the BGEO Group PLC, prior to the demerger in May 2018. JSC Georgia Capital, the Georgian holding
company of the Group’s businesses, successfully priced a US$ 65 million tap issue under the Group’s existing
US$ 300 million 6.125% senior unsecured notes due 2024, listed on the Global Exchange Market of the Irish
Stock Exchange. Our acquisition history has also been successful, and we have been able to integrate
businesses due to our strong management with integration experience.

In 2022, GCAP successfully completed the water utility business disposal, which represents our most significant
monetisation event to date and marks the completion of the full investment cycle for one of our large portfolio
businesses as set out on page 12 of this report.

In October 2022, our renewable energy and housing development businesses successfully completed bond
placements on the Georgian capital market, once again demonstrating our superior access to capital (see page
13 for details).

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Emerging risks
The Group’s risks are continually reassessed and reviewed through a horizon scanning process, with escalation and reporting to the Board.
The horizon scanning process fully considers all relevant internal and external factors, and is designed to consider and capture the following risks:
current risks which have not yet fully crystallised and which the Group do not have previous known experience of against which they can be assessed,
and risks which are expected to crystallise in future periods, typically beyond one year.

Since 2021, the Group has identified climate change as an emerging risk. Since the Group’s businesses are very much dependent on such climate
elements as precipitation, wind speed and air temperature, the Group’s development will be affected by climate change. This is critical to protecting
and enhancing the value of our assets and we monitor our governance and risk management framework to ensure that sustainability-related risks
in our portfolio remain an important part of our agenda and are treated as a priority by our portfolio company management teams.

Risks and opportunities of our portfolio companies from climate change are discussed on pages 91-92 of this report. Our portfolio companies’
approach and the mitigants to climate risk are discussed further under Resources and Responsibilities section on pages 82-94 and pages 39-46
of the Sustainability Report.

Potential UK regulatory changes affecting UK listed companies and other UK public interest entities is identified as a possible emerging risk. This may
include changes in UK corporate governance requirements, adding additional responsibilities to our existing legal and regulatory compliance risk.

The Group has also identified cyber security as an emerging risk, due to the increasing sophistication of hackers and in turn, the likelihood a data
security breach occurring. A cyber security incident can result in unauthorised access to, or misuse of, our information systems, technology, or data.
This could lead to leakage of sensitive information, disruption of operations and reputational damage.

In March 2023, the government proposed a new law on registration of foreign agents. The proposed law was widely criticized by many sectors
of society and led to large demonstrations that ultimately led to the withdrawal of the proposal. In light of this most recent discord, the Group has
identified Georgian political polarisation as an emerging risk.

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RESOURCES AND RESPONSIBILITIES

ESG (“ENVIRONMENTAL, SOCIAL AND GOVERNANCE”)
PRINCIPLES LIE AT THE HEART OF OUR BUSINESS

In order to effectively manage the Group’s direct and indirect impact on
society and the environment, the Board of Directors have adopted a Code of
Conduct and Ethics, as well as policies that relate to environmental and social
matters, responsible investing, employees, anti-corruption and anti-bribery.
We invite you to read more about these initiatives in the sections below and in
conjunction with our Sustainability Report and the rest of the Annual Report.
The non-financial information detailed under section 414CB of the Companies
Act 2006, which aims to provide material and relevant information on the
developments in Georgia Capital PLC’s ESG practices for the financial year
ending 31 December 2022, is also cross referenced below.

Photo Kazbegi, Georgia.

Task Force on Climate-related Financial
Disclosures (TCFD)
The Group has complied with the requirements of LR 9.8.6R
by including climate-related disclosures consistent with the
TCFD recommendations and recommended disclosures.

TCFD disclosures on the pages 89-94 present the
Company’s perspective on four core pillars of governance,
strategy, risk management and metrics and targets related
to climate-change mitigation.

Further detailed information can be found in our
Sustainability Report, a supplement to our Annual Report
which enables the Group to provide more detailed and
comprehensive reporting of our ESG operations in
alignment with the TCFD recommendations and
recommended disclosures.

Our Sustainability Report is available on our website:
https://georgiacapital.ge/ir/sustainability-reports.

Copies of the Company’s policies can be found on our
website: https://georgiacapital.ge/governance/
cgf/policies.

As a Group, we are committed to a long-term investment
strategy and building effective relationships with those
businesses in which we invest. We maintain close
relationships with the management of our private portfolio
companies and as a consequence of our involved
investment style, we manage our portfolio companies in the
best interests of our shareholders and other stakeholders,
fostering long-term relationships by providing high returns
on investment. Additionally, we seek to contribute to wider
society by encouraging the continuous development of
our employees and contributing to the economic and
social welfare of local communities while taking our
carbon footprint into account.

With a portfolio of GEL 3.2 billion, we recognise that our
decisions have the potential to impact a broad range of
stakeholders, particularly within Georgia. Although as
an investment holding company with c.45 employees,
Georgia Capital has a limited direct impact on the
environment and the community in which it operates,
we understand that the indirect impact of our investment
undertakings may be an important consideration for our
stakeholders. To ensure the Group’s commitment to
sustainable finance, and as an integral component of
responsible corporate governance, we follow our
Environmental and Social Policy. The Group is committed
to conducting its business in an environmentally, socially
responsible and sustainable manner in order to reduce the
environmental impact of its operations, while at the same
time improving social performance to enhance long-term
returns to its shareholders. Georgia Capital is also dedicated
to achieving its strategic and investment objectives while
behaving responsibly as an employer and as an international
corporate citizen.

KEY
TAKEAWAYS

Updated strategy
At the 2022 Investor
Day, Georgia Capital
presented its updated
strategy, which
considered the
enhancement of ESG
matters in the Group’s
core operations.

Delivery on the
strategic priority
Georgia Capital
delivered on its
strategic priority of
setting measurable
ESG targets and
established the
ESG action plan.

Committing to the
Net-Zero Initiative
In 2022, Georgia
Capital committed to
the Net-Zero Initiative
and expressed its
willingness to reach
Net-Zero across
Scope 1 and 2
emissions at both
GCAP HoldCo and
portfolio company
levels by 2050.

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Non-Financial Information Statement
The Company is required to disclose certain information on the way we operate and manage social and environmental challenges. The following
table summarises where you can find further information on each of the key areas of disclosure. Information on our policies can be found on our
website at: https://georgiacapital.ge/governance/cgf/policies.

Reporting requirement

Further detail

Social matters

Promoting local community

Sponsorship and charity

Promoting and enhancing a healthy lifestyle

Sustainable procurement

Employee matters

Our employees

Talent attraction, training and development

Diversity

Human Rights Policy

Code of Conduct and Ethics

Annual Report
page reference

Sustainability Report
page reference

Relevant policies

Page 84

Page 85

Page 86

Page 12

Environmental and Social Policy

Page 13

Responsible Investment Policy

Page 15

Page 26

Page 17

Page 18

Page 21

Page 27

Code of Conduct and Ethics

Diversity Policy

Whistleblowing Policy

Human Rights Policy

Anti-Bribery and
Anti-Corruption Policy

Environmental matters Emission disclosure and calculation

Page 87

Page 30

Environmental and Social Policy

methodology

Measures undertaken to improve the
energy efficiency

Page 88

Page 33

Responsible Investment Policy

INVESTING IN SOCIALLY AND
ENVIRONMENTALLY ORIENTED
INDUSTRIES
Our Group and portfolio companies, as the
largest employer in the Georgian private
sector, are trusted to improve the future of our
community by building sustainable businesses
for tomorrow. We have a strong track record
of investing and managing our portfolio
responsibly, facilitated by operating according
to our clear and proven governance model
and an extensive network of top-quality talent.

Our approach to ESG matters is reflected in
the strategy and management principles of
our portfolio companies, all of which adhere to
sound ESG standards, as well as local policies
and regulations. We have been supportive of
investments in socially and environmentally-
oriented businesses since 2008, when our
businesses first entered the healthcare market
with the aim of modernising the healthcare
infrastructure, closing service gaps in the
country and increasing overall quality of
care. As a result, we have contributed to
the development of the Georgian healthcare
system and our society. Today our healthcare
businesses are market leaders in the country
in each operating segment: Hospitals,
accounting for 15% of the county’s total
hospital bed capacity; Clinics, with 21% by
registered patients; Retail (Pharmacy), with
35% market share by revenue; and medical
insurance, with 19% market share based on
9M22 net insurance premiums.

Currently we invest in two key sectors that
benefit the sustainable development of Georgia:
renewable energy and education. Our
renewable energy business has contributed to

the transition towards a more sustainable and
lower-carbon economy in Georgia. Through its
green projects, the business has supported
climate change mitigation, natural resources
conservation and pollution prevention. Going
forward, the launch of hydro and wind power
plants will enhance our renewable energy
business’ contribution to green energy
production development.

Our education business has made a significant
contribution to the country’s education system
and society. We acknowledge the importance
and the substantial positive impact of quality
education on society and are committed to
responsibly conducting our business activities
and supporting sustainable economic growth.
Despite being a small share of our total
portfolio, our subscale portfolio companies
have a substantial positive impact on ESG
matters. Our PTI business represents the
largest network of mandatory periodic technical
inspections throughout Georgia, accounting
for 37% of the existing market. The business
is directly engaged in GHG emissions and
road accidents reduction in the country.

ALIGNING OUR FOOTPRINT WITH
THE SUSTAINABLE FUTURE
At the 2022 Investor Day, Georgia Capital
presented its updated strategy, which
considered the enhancement of ESG matters
in the Group’s core operations. GCAP also
introduced its strategic priority of setting
measurable ESG targets at both GCAP HoldCo
and portfolio company levels; this initiative has
been successfully executed over the course
of 2022.

In order to deliver on its strategy and drive
change toward a sustainable future, in 2022,

Georgia Capital and its portfolio companies
deployed resources for developing relevant
ESG roadmaps for GCAP HoldCo and portfolio
companies. The process considered
a comprehensive analysis of the relevant
ESG frameworks and guidelines, as well as
determining the materiality of ESG matters
across business operations.

As part of the comprehensive analysis of
the frameworks and regular discussions with
international experts, Georgia Capital achieved
its strategic priority of setting measurable
ESG targets, which are based on the Net-Zero
Initiative, and established the ESG action plan.

For details regarding the target-setting process
please refer to pages 6-8 in our Sustainability
Report 2022 or the “Metrics and targets”
section in our TCFD disclosures on page 94.

In 2022, the Group submitted its first
CDP climate-change questionnaire and
demonstrated its willingness enhance the
ESG transparency on well-established
ESG platforms.

At the portfolio company level, our renewable
energy business successfully placed
US$ 80 million green secured bonds on the
local market. The second-party opinion was
obtained by a leading provider of ESG research
and analysis, which approved the framework
and acknowledged its capacity of increasing
the renewable energy share in Georgia. This is
the second successful issuance of green
bonds from the business.

For details on our recent ESG developments
please refer to pages 6-10 of our Sustainability
Report.

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RESOURCES AND RESPONSIBILITIES CONTINUED

GOVERNANCE
Georgia Capital recognises the importance
of maintaining sound corporate governance
practices and supports high standards of
corporate governance in delivering value to
our stakeholders. For full details of our
governance structure and processes, please
see the Corporate Governance section of the
Annual Report.

Our Responsible Investment Policy is integrated
into the investment and portfolio management
processes and procedures and is supported
by enhanced due diligence questionnaires.
This Policy covers Georgia Capital’s
responsible investment approach and ongoing
monitoring of ESG re-assessments of portfolio
companies. Georgia Capital monitors the
portfolio companies’ ESG performance and
uses its resources to encourage the adoption
of ESG best practices. It is supplemented with
an Environmental and Social Policy. Through
the Responsible Investment Policy, ESG
considerations are embedded into the deal
process, from the initial investment stage to
active ownership. Details on how we implement
the Responsible Investment Policy can be
found in our Sustainability Report.

In 2022, the Company engaged Amandla UK
Limited (Amandla) to facilitate a review of the
Board’s effectiveness. The review was intended
to look more closely at boardroom dynamics.

The assessment included a series of qualitative
diagnostic interviews designed to ascertain
from each of the Board members several
different components:
1. The individual strengths of each member.
2. The areas which other Board members felt

there could be a greater contribution.

3. The dynamics in the team that allowed for

healthy challenge and debate.

4. The areas that might need attention.

Amandla observed a Board meeting and
concluded that the atmosphere was healthy.
Amandla also concluded that the diversity
of thought and experience met industry
standards, and in terms of oversight the
Board was fit for purpose.

SOCIAL MATTERS
Promoting local community
The Group considers the interests of its main
stakeholders, including the local communities
and the impact on the wider Georgian
community, when developing the strategy
and the processes to improve its operations.
We adhere to our Environmental and Social
Policy and we strive to contribute to society
through our business activities by developing
and investing in socially-oriented products
and services, implementing responsible
approaches to our business operations,
sponsorship and charitable activities.

Georgia Capital and its portfolio investments
are committed to playing a positive role in our
local community, as shown in the case studies
in the Sustainability Report.

Sponsorship and charity
In 2022, the Group and its portfolio companies
spent a total of GEL 2.6 million in financing
sponsorship and charitable activities. As part
of the sponsorship and charitable activities,
the Group continues to focus on promoting
and enhancing access to education, conserving
nature, supporting people with disabilities and
special needs, and facilitating innovative
projects that focus on social good. The
sponsorship and charity activities encourage
partnerships with various foundations and
non-governmental organisations to deliver
sustainable results and bring positive change.
In doing so, we follow our undertakings in
respect of social and community matters as
set out in our Environmental and Social Policy.

Georgia Capital continued to support the
Fulbright programme in 2022 and covered
the education and travel expenses of one
high-achieving student. The selected winner
was given the opportunity to pursue a master’s
degree at a top US university.

In 2022, Georgia Capital continued the
sponsorship programme to support the
Caucasus Nature Fund (CNF), whose purpose
is nature protection in the South Caucasus. The
fund helps to support the effective long-term
management of the nature in the biologically
rich, protected territories of Armenia, Azerbaijan
and Georgia. GCAP contributes GEL 10,000
annually under the programme.

In 2022, our portfolio companies contributed
approximately GEL 1.4 million for the support
of the Ukrainian citizens, impacted by the
Russia-Ukraine war.

For more information on our portfolio
companies’ charitable activities please refer
to our Sustainability Report.

Total sponsorship and charitable expenditure
of the Group and portfolio companies in 2022
(GEL million)

GEL 0.8mln

TOTAL

2.6

GEL 1.8mln

Sponsorship
Charity

Promoting and enhancing a
healthy lifestyle
Georgia Capital acknowledges the importance
of a healthy lifestyle for its employees. Ensuring
the safety of the workplace and providing
healthy working conditions are amongst the
Group’s fundamental HR management
principles. The Group pays particular attention
to preventative measures, such as conducting
regular staff training and medical check-ups,
certifying workplaces and promoting a healthy
lifestyle. In line with its principles, Georgia
Capital has engaged a safety consultancy
company, which provides a dedicated safety
inspector. The inspector conducted a safety
audit, gave recommendations and delivered
staff training. Our safety consultant provides
systematic monitoring to ensure compliance
with globally accepted standards.

Georgia Capital is aware of the damaging
impact of stress and anxiety on the individual.
It is Company practice to hold workshops to
check on employee’s mental health and to
offer face-to-face counselling. Employees are
encouraged to express their mental health
concerns in an open manner and seek
assistance. We provide the opportunity for a
flexible work schedule and remote and hybrid
working arrangements. Respective teams at
GCAP track the workload of the employees
to identify if hiring additional staff is required.

Sustainable procurement
At Georgia Capital, we strive to exercise good
corporate citizenship and we take into account
the ESG practices of our suppliers. A large
majority of GCAP’s suppliers are professional
advisors and consultants, predominantly
blue-chip, reputable international organisations
with sound ESG policies and procedures,
which, therefore, have lower exposure to
ESG-related risks. However, our existing
policies and procedures ensure that an
appropriate level of due diligence is conducted
on prospective suppliers before they are
appointed, or any expenditure is committed.
The nature of due diligence is determined on a
case-by-case basis, however, as a general rule,
the procedure safeguards the assessment of
risks associated with bribery and corruption,
information and data security, human rights
and employment practices, and other material
aspects as determined during the assessment.

Georgia Capital aims to work with suppliers
whose ESG practices are in line with our
sustainability goals.

In 2022, significant items for Georgia Capital
procurement expenditures were audit, valuation
and compliance services, as well as services
sourced from professional consultations and
IR services. The breakdown of expenditures
by type of suppliers is provided in the graph.

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Expenses by type of suppliers at
Georgia Capital level (FY22)

Insurance and
other services
25%

Audit, valuation
and compliance
services
30%

Legal
advisors
18%

Professional
consultations
and IR services
28%

Modern slavery
The Group has zero tolerance against modern
slavery and human trafficking. We believe in
doing business ethically, transparently and
in full compliance with all applicable laws and
regulations. Even though we are an investment
holding company and the risk of modern
slavery and human trafficking at our own
business operations is low, we recognise that
our supply chain could potentially pose such
risks. A large majority of GCAP’s suppliers
are professional advisors and consultants,
predominantly blue-chip, reputable international
organisations with sound ESG policies and
procedures, which therefore, have lower
exposure to ESG-related risks. Our existing
policies and procedures ensure that an
appropriate level of due diligence is conducted
on prospective suppliers before they are
appointed, or any expenditure is committed.

We note that in accordance with our
Responsible Investment Policy, we expressly
do not invest in businesses which have
activities involving forced or child labour.
Evaluation of risk is carried out at the pre-
investment or pre-engagement stage through
due diligence and control, and with post-
investment implementation and management
of risk through monitoring and reporting
predominantly by the Legal and Finance
departments, who report to the Management
Board and ultimately the Board of Directors.

EMPLOYEE MATTERS
Our employees
Recruiting, developing and retaining talent is
one of our most important priorities. We work
towards that objective by communicating openly
with our employees, providing training and
opportunities for career advancement,
rewarding our employees fairly and encouraging
employees to give direct feedback to senior
management. We recognise the importance of
providing a supportive working environment with
a healthy work-life balance for all our employees,
both at the holding company level and across
our portfolio companies. A key factor in our
success is a cohesive and professional team,
capable of accomplishing the Group’s

objectives. We are committed to attracting
and identifying the best professionals, caring
and planning for their needs, investing in their
development and fostering their commitment.
The Group developed and implemented human
resource (HR) policies and procedures which
promote the key principles, areas, approaches
and methods that are crucial for building
Human Capital Management systems at each
business level and at Georgia Capital level in
line with the above-mentioned policies.

We maintain a Group-wide Code of Conduct
and Ethics for our employees and other
effective HR policies and procedures covering
matters such as:
• Staff administration, compensation

and benefits.

• Recruitment, development and training.
• Diversity and anti-nepotism.
• Succession planning, departure

and dismissal.

• Grievances.

We are committed to employee engagement
and we believe that effective communication is
key. We strive to provide our employees with a
continuous flow of information, which includes
our corporate culture, the Group’s strategy and
performance, risks relating to its performance,
such as financial and economic factors, and
our policies and procedures. We provide
information in a number of ways, including via
managers, presentations, email, intranet and
regular off-site meetings. There are feedback
systems, such as employee satisfaction
surveys and a designated Non-Executive
Director for workforce engagement at the
Board level, which ensure that the opinions
of our employees are taken into account
when making decisions that are likely to
affect their interests.

In 2022, we conducted our third employee
satisfaction survey at the holding company
level. According to the survey results, more
than 92% of the participants enjoy working at
Georgia Capital, more than 85% believe that
their job responsibilities match their strengths,
and more than 85% are highly or moderately
satisfied with career growth opportunities at the
Company. Survey participants also provided
their recommendations on the following topics:
1. What Georgia Capital must continue to do;
2. What Georgia Capital must stop doing; and
3. What Georgia Capital must start doing.

The results of the survey were fed back to
management.

Despite the cessation of the pandemic,
Georgia Capital maintains a hybrid working
environment, since the practice showed that
the hybrid approach fostered the well-being
of the employees.

Georgia Capital values the exchange of
upward, downward and peer feedback
when it comes to performance management.

Through the performance evaluation and talent
management process, several staff members
were promoted in 2022.

In 2022, the Group conducted various team
building activities. In October, the Group’s
middle and upper management teams
participated in strategic meetings in Rome,
which apart from the discussion sessions
included the city tour and attendance at a
football game. In December, a two-day off-site
event was organised in which management
updated Georgia Capital’s staff on its strategy
and goals. The off-site event also included
various networking events.

Talent attraction, training
and development
Sustained development of the Group’s
businesses requires the strengthening of
the teams, both by using the Group’s own
significant internal resources through staff
development and rotation and by attracting
external candidates. Our Recruitment Policy
and relevant control procedures ensure an
unbiased hiring process that provides equal
employment opportunities for all candidates.
All employees at Georgia Capital are engaged
under an employment contract and we do not
use zero hours contracts.

To attract young talent, we actively partner
with leading Georgian business schools and
universities, participate in job fairs and run
extensive internships locally and internationally.
Georgia Capital continues its talent acquisition
project for its Investment Officer positions
which was launched in 2016.

To manage our employees in a way that best
supports our business strategy and their
professional growth, we seek to help them
contribute to business performance through
personal and professional development.

In recent years we created a programme for
the Investment department which helped
participants to grasp new developments in
the field and refresh their knowledge. In 2022,
Georgia Capital expanded its strategy team.
To help the newcomers adapt to the new
working environment, our strategy team
had comprehensive introductory and
cross-department meetings.

In addition to specific training courses, regular
workshops are held in the Company which
are linked to more complex matters, such as
business approaches and the best practices
in related fields. Besides in-house training,
Georgia Capital provides designated training
and certification programmes for various
departments through third-party resources.

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RESOURCES AND RESPONSIBILITIES CONTINUED

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For details on how our portfolio companies train and enable the continuous development of their
employees, please read our Sustainability Report.

Total number and rate of GCAP’s new
employee hires and employee turnover (%)

New hires New hires rate

Full turnover

Turnover rate

2021

2022

Diversity
Georgia Capital is fully committed to providing
equal opportunities as an employer and
prohibits unlawful and unfair discrimination.
We believe that there are great benefits to be
gained from having a diverse workforce. We
seek to ensure that our corporate culture and
policies, particularly our HR policies, create an
inclusive work environment that helps to bring
out the best in our employees. Georgia
Capital’s Diversity Policy establishes a
commitment to eliminating unlawful and unfair
discrimination and values the differences that
a diverse workforce brings to the organisation.
The Board embraces diversity in all its forms.
In line with Georgia Capital’s Diversity Policy,
diversity of gender, social and ethnic
backgrounds, age, disability, race, religion or
belief, sex or sexual orientation, cognitive and
personal strengths and balance in terms of
skills, experience, independence and
knowledge, amongst other factors, will be
taken into consideration when seeking to make
any new appointment within the business,
whether an employee, client, supplier or
contractor. On 31 December 2022, Georgia
Capital had a total of 48 employees, of which
28 are female, and 20 are male.

We are supportive of the ambition shown in
the Parker Review regarding ethnic diversity.
The Board is currently in line with
recommendations for UK boards, with Board

10%

12%

member Maria Chatti-Gautier of Syrian heritage
(Middle Eastern) and therefore representing
an ethnically diverse background. We are also
supportive of the Hampton-Alexander Review
and the FTSE Women Leaders Review
regarding gender diversity, and seek to apply the
UK Corporate Governance Code in this respect.
We will continue to examine ways in which we
can increase female and ethnic representation
at Board and senior management levels.
However, the Board recognises the importance
of all forms of diversity, and remains committed
to striving for further progress in the space.

Human Rights Policy
The Human Resources Policy is an integral part
of the employee on-boarding package at each
business level with updates communicated
electronically.

The Human Rights Policy is part of the Human
Resources Policy and covers the following:
• Equal opportunities and anti-discrimination.
• Work environment free of harassment.
• Grievance Policy.

We recognise the importance of observing
human rights and are committed to
implementing socially responsible business
practices. Our Human Rights Policy establishes
priorities and puts control procedures in place
to provide equal opportunities and prevent
discrimination or harassment on any grounds,

GENDER DIVERSITY

Board of Directors at Georgia Capital PLC1

Management at Georgia Capital1

2022

2021

2022

2021

Female

Male

Female

Male

All employees at Georgia Capital2

All employees at the Group and portfolio levels3

2022

2021

19,114

2022

14,376

4,738

2021

14,648

6,901

Female

Male

Female

Male

1 The Chairman and CEO is included in the both categories: “Board of Directors at Georgia Capital PLC” and

“Management at Georgia Capital”.

2 Employee numbers are presented at Georgia Capital JSC and Georgia Capital PLC levels.
3 Excluding temporary employees.

including disabilities. The policy applies to all
employees and includes procedures in relation
to employment processes, training and
development, procedures on recruitment and
on the continuity of employment of employees
who become disabled during their employment.

Code of Conduct and Ethics, and
Anti-Bribery and Anti-Corruption Policy
The Group has a Code of Conduct and Ethics,
as well as an Anti-Bribery and Anti-Corruption
Policy, which are applicable to the Group
companies. As an organisation that is fully
committed to the prevention of bribery and
corruption, the Group ensures that appropriate
internal controls are in place and operating
effectively.

Anti-Bribery and Anti-Corruption Policy
enforcement processes include:
• an anonymous whistleblowing hotline;
• an internal whistleblowing process;
• disclosure of gifts or other benefits,

including hospitality offered to, or received
by, the Group’s personnel;

• voluntary disclosure of corrupt conduct;
•

third-party screening to identify the level of
risk third parties might pose;
informing the banks/partners/counterparties
about anti-corruption and anti-bribery
principles before commencement of
business relations;

•

• ensuring that anti-bribery and anti-corruption
clauses are incorporated in the agreements
with customers and third parties;
• ensuring that anti-bribery and anti-
corruption matters are included in
contractual agreements with partners/
counterparties; and

• online training programme aiming to raise

awareness of corruption and bribery issues
among employees.

As part of the Group’s third-party screening to
identify the level of risk which third parties might
pose, the Group carries out due diligence such
as indirect investigations, which include general
research of the activities undertaken by the
proposed business partners, research into
their reputation and information on whether the
company is a related party. The Compliance
Officers (the General Counsel and UK General
Counsel) have the authority to conduct periodic
compliance checks of the operations of the
Group. We are pleased to confirm that there
have been no instances of violation of the
Anti-Bribery and Anti-Corruption Policy in 2022.

ENVIRONMENTAL MATTERS
Committing to the Principles of
the UN Global Compact
In February 2022, we became a signatory
of the UN Global Compact and officially
expressed our commitment to its ten Principles,
which are then sub-divided into 17 Sustainable
Development Goals (SDGs). Georgia Capital
introduced an initiative to align the portfolio
companies’ performance with the UN SDGs,
which requires our portfolio companies to
determine relevant SDGs and implement
respective procedures to track their progress
towards the identified goals.

For the individual SDGs of our portfolio
companies please refer to page 29 in our
Sustainability Report.

Emission disclosure and
calculation methodology
Reporting methodology
In preparing our emissions data, we have used
the World Resources Institute/World Business
Council for Sustainable Development (WRI/
WBCSD), Greenhouse Gas Protocol: A
Corporate Accounting and Reporting Standard
(revised edition 2016) as a reference source.
We have also used the most recent Georgian
electricity conversion factor taken from the JRC
Guidebook – “How to Develop a Sustainable
Energy and Climate Action Plan in the Eastern
Partnership Countries”, European Commission,
Ispra, 2018, JRC113659. Further conversion
factors have been taken from the UK
Government’s “Greenhouse Gas Conversion
Factors for Company Reporting 2022”. Energy

consumption is disclosed in line with SECR
requirements. The emissions disclosures are
also prepared in accordance with the TCFD
requirements.

Overview of organisation
The operations of Georgia Capital in London
and Tbilisi itself have relatively low energy
consumption. However, we recognise the
evolving significance of emissions disclosures
in the investment community and in line with
our commitment to increasing transparency,
we voluntarily disclose emissions for JSC
Georgia Capital (intermediate Georgian holding
company) and its portfolio investments. We
have reported on all the emission sources listed
under the Companies Act 2006 (Strategic
Report and Directors’ Report) Regulations 2013
and the Companies (Directors’ Report) and
Limited Liability Partnerships (Energy and
Carbon Report) Regulations 2018 (Scopes 1
and 2). Additionally, we have reported on those
emissions under Scope 3 that are applicable to
our businesses’ direct operations. All reported
sources fall within our consolidated financial
statements. We do not have responsibility for
any emission sources that are not included in
our consolidated financial statements.

What we report:
The Group’s “central” operations
Our reported data is collected in respect of
the Group, including our offices and facilities in
London and Tbilisi. Data on emissions resulting
from travel is reported for business-related
travel only but excludes commuting. As we
do not have any joint ventures, sub-leased
properties or offshore emissions, these have

not been included within the reported figures.
The data has been obtained from the Group’s
locations using both invoices and site meter
readings. Our leased office in the UK operates
with only three employees and the annual
consumption is less than 5MWh (in 2022, the
UK office’s annual consumption was 3.5MWh,
and for 2021, 4.1MWh), the costs of which are
included within the lease fees. The electricity
consumption of the UK office is included in
the Scope 2 emissions calculation.

The Group’s portfolio
Data from our portfolio companies’ Scope 1,
2 and 31 emissions have been aggregated
and presented as a separate line item under
Scope 3 emissions in accordance with the
Greenhouse Gas Protocol. Scope 3 emissions
for the year ended 31 December 2019,
31 December 2020 and 31 December 2021
have been updated retrospectively to reflect
our approach. These have been reported for all
our private investments, where the Group holds
a controlling stake. Emissions from Water Utility
as well as Bank of Georgia have not been
included in the calculations. BoG, as a UK
listed company discloses Scope 1, 2 and 3
emissions in its annual filings, available at:
https://bankofgeorgiagroup.com/reports/
annual.

Emissions
Due to the impact of the coronavirus pandemic,
the consumption of energy, and therefore
emissions, by the Group and its portfolio
companies have been atypical for almost
two years during 2020 and 2021.

Summary of GHG disclosure:
The table below summarises the various elements of our disclosure and details the particular GHG emissions and whether they are included
or excluded.

Element

Description

Included/Excluded

Scope 1 – Static fossil fuel

Combustion of fossil fuels, e.g. natural gas,
fuel oils, diesel and petrol, in stationary
equipment at owned and controlled sites.

Excluded – No such processes/equipment owned or operated by
Group.

Scope 1 – Mobile fossil fuel Combustion of petrol, diesel and aviation

Business travel has been included.

fuel in owned/operated vehicles.

Scope 1 – Other emissions

Process emissions and refrigerant leakage. Excluded – No such processes/equipment owned or operated by

Scope 2 – Consumption of
electricity

Consumption of electricity.

Group.

Included – Used electricity at owned and controlled sites using the most
recent Georgia electricity conversion factor taken from the JRC
Guidebook – How to Develop a Sustainable Energy and Climate Action
Plan in the Eastern Partnership Countries, European Commission, Ispra,
2018, JRC113659. Also included are emissions of the UK office.

Scope 2 – Consumption of
thermal energy

Direct consumption of heat, steam or
cooling generated by others.

Excluded – No such thermal energy supplies are consumed by the
Group.

Scope 3

Combustion of petrol, diesel and
aviation fuel in vehicles owned and
operated by others.

Investments

Included – Air business travel (short-haul and long-haul); information on
the class of travel is unavailable, hence, we used an “average passenger”
conversion factor, with Radiative Forcing (RF).
Included – Ground transportation, including taxis, coaches, trains, etc.
owned and operated by others.
Excluded – emissions from staff commuting at GCAP HoldCo level.

Included – Scope 1, 2 and 31 of our portfolio companies where we have
a majority stake.

1 Portfolio company Scope 3 emissions reported for business travel and employee commuting.

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Total greenhouse gas emissions (tonnes CO2e)

Data for the period beginning 1 January 2020 and ended 31 December 2022

Scope 1 – Static fossil fuel (emissions fuel combustion and facility operations)
Scope 1 – Mobile fossil fuel
Scope 2 (emissions from electricity, heat, steam and cooling purchased for own use)
Scope 3

Of which, air travel and ground transportation provided by third parties plus electricity,
heat/steam, cooling provided within lease and service agreements
Of which, investment portfolio Scope 1, 2 and 31

Total greenhouse gas emissions
FTEs at GCAP HoldCo level
Total greenhouse gas emissions per FTE2 (GCAP HoldCo)
FTEs at GCAP HoldCo and portfolio company levels
Total GHG emissions per FTE2 (GCAP HoldCo and portfolio company levels)

2020

–
59
2
38,074
12

38,062
38,136
44
866.7
20,314
1.88

2021

–
60
3
40,579
5

40,574
40,642
43
945.2
21,549
1.89

2022

–
66
4
28,109
78

28,031
28,179
48
587.1
19,114
1.47

Investment portfolio companies’ total Scope 1 and 2 emissions are: 32,125 tCO2e in 2020, 31,292 tCO2e in 2021 and 22,759 tCO2e in 2022.

1
2 FTE is stated excluding temporary employees.

SECR Report
This report has been produced in accordance with the UK Government’s policy on Streamlined Energy and Carbon Reporting (SECR). As determined
by the Greenhouse Gas Protocol, the scope and boundary of the GHG emissions herein relate to those where we have operational control, i.e. those
relating to our corporate offices in both London and Tbilisi.

Greenhouse gas emissions and energy data
The following table reports upon GHG and energy data for the period December 2021 to December 2022. The prior reporting year has been
included for comparative purposes.

Energy consumption (in kilowatt hours, kWh)

Prior reporting year (2021)

Current reporting year (2022)

Purchased electricity
Gas combustion
Transport fuel
Refrigerants
Total energy consumption (kWh)3

27,852
–
199,457
–
227,309

34,272
–
219,355
–
253,627

Emissions (per metric tons of CO2 equivalent, tCO2e)

Total (2021)

Scope

Total (2022)

Scope

Purchased electricity
Gas combustion
Transport4
Refrigerant emissions
Total gross emissions
Intensity ratio (tCO2e per FTE)

2.6
–
3
–
5.5
1.57

2
1
3
2
–

3.6
–
76
–
79.5
3.08

2
1
3
2
–

Quantification and reporting methodology
The GHG and energy data presented above has been collated, calculated, and presented using methodology following the Greenhouse Gas
Reporting Protocol, and uses the 2022 Government Emission Conversion Factors for Company Reporting.

Intensity ratio
The intensity ratio used in the table above displays total gross emissions (tCO2e) per FTE.

Our environmental activities
Measures undertaken to improve energy efficiency
Over the last periods, Georgia Capital has introduced and implemented energy-efficient solutions to further reduce energy consumption by conducting
various activities across the Group and portfolio companies. Our portfolio companies continue to implement energy-saving solutions, such as LED
lights and other energy-efficient equipment, such as boilers and heating ventilation and air conditioning systems. Our housing development business
pioneered the introduction of energy-efficient construction materials and our clinics business also joined in energy efficiency initiatives as one of the
clinics switched to a solar power system (a renewable energy source). To minimise emissions and further contribute to eco-friendly energy consumption,
two clinics replaced a diesel-powered heating system with a gas heating system. In our education business, one of our schools successfully
introduced solar panels and our other educational infrastructures will follow in due course. Our beverages business reduced energy consumption
and carbon footprint through its CO2 recovery plant, alongside the wastewater treatment plant. In addition, the company also introduced the
Green Fridge policy which reduces the carbon footprint of cooling bottled and canned products.

Details of environmental activities of our portfolio companies are reported in our Sustainability Report at https://georgiacapital.ge/ir/
sustainability-reports.

3 Scope 1 and Scope 2 consumption data is converted in kWh. For the distance (km) conversion into kWh, we used a conversion factor for an average size car.
4 Transport emissions represent 1) business travel in employee-owned vehicles where the firm is responsible for purchasing the fuel, and 2) business travel in company

owned vehicles.

TASK FORCE ON CLIMATE-RELATED
FINANCIAL DISCLOSURES (TCFD)

The following section reflects Georgia Capital’s response to the TCFD recommendations.
The disclosures have been prepared in line with the all-sector guidance and, where
applicable, reflect the supplementary recommendations for the asset managers. In this
section, we present the Company’s perspective on four core pillars of governance,
strategy, risk management and metrics and targets related to climate-change mitigation.

GOVERNANCE

Board oversight
The Board is entrusted with providing oversight
of climate-related risks and opportunities, aided
by the Audit and Valuation Committee and the
Investment Committee members which
includes all Board members. These two
Committees have responsibility for assessing
and managing climate-related risks and
opportunities in relation to GCAP’s direct
operations and to our portfolio companies,
as it affects matters within their remit.

Current, future and emerging risks are included
within the standing item, “Discussion of risks”,
of the Audit and Valuation Committee and
Board agendas. Risks, including those relating
to climate change, are discussed, and
implications for future strategy are considered,
semi-annually, in line with the annual and
semi-annual reports.

In 2022, the Board supported the initiative of
incorporating ESG as one of the core pillars
of GCAP’s strategy.

STRATEGY

In support of the evaluation of climate-related
risks and opportunities that may be present,
a review of GCAP’s direct operations and a
macro-level review of the portfolio companies’
operations were completed. The process was
followed by a comprehensive quantitative
assessment, specifically on GHG inventory
management.

It is considered that indirect climate-related risks
within the portfolio companies will be more
significant than those present within the Group’s
operations. An early-stage scenario analysis
was completed as part of the process towards
understanding how the climate impacts
identified in the qualitative assessment could
present as financial risks to GCAP under
different plausible future scenarios. The findings
and potential material risk implications of such
findings (examples of which are provided below
in the section “Scenario analysis of plausible
futures”) will inform future strategy. However,
it is noted that the current strategy already
incorporates some consideration of climate
change aspects (e.g. GCAP’s focus upon

The Chief Financial Officer and Director of
Investments report on monitoring of identified
financial and climate-related risks and
significant changes through its regular reports
to the Management Board. Risks are escalated
to the Audit and Valuation Committee.

The Board and management work together
to develop and review the GCAP investment
strategy and consider, among other aspects,
climate-related issues. They are also
responsible for setting a wide range of
corporate policies and objectives, among
them environmental and social policies, and
for monitoring performance against objectives
and targets.

The Board also reviewed the alignment of
GCAP’s portfolio operations with the UN
sustainable development goals and supported
the enhancement of ESG transparency. In 2022
GCAP submitted the first climate change
questionnaire to the CDP platform. Selected
Board members were also involved in the
submission process.

The Board is responsible for the approval of the
climate-related metrics and targets that have
been established by GCAP in 2022. It is also
responsible for ensuring progress against
agreed metrics and targets.

Management oversight
Within the management team, the Chief
Financial Officer, supported by the finance
team, is responsible for identifying risks,
including climate change risks, in relation to the
investment portfolio and including these in the
valuation process. The Director of Investments,
supported by the Investment Officers, is
responsible for identifying specific risks and
opportunities at the initial investment stage.

renewable energy, 7.0% share of the portfolio
at 31 December 2022).

Scenario analysis of plausible futures
Network for Greening the Financial System
(NGFS1) was chosen for their relevance to the
finance sector and to allow for comparability.
Climate change scenarios for the Republic of
Georgia were explored as follows:
• Current Policies/(Business as Usual (BAU))

(policy ambition of >3°C by 2025).
• Delayed transition to net zero (policy

ambition of 1.8°C by 2050).

• Orderly transition to net-zero (1.5°C by 2050).

GCAP invests over a three to five year horizon.
With this in mind, scenario outputs were
considered by GCAP in the short term (year
2025), medium term (year 2030) and long term
(year 2050).

Each NGFS scenario explores a different set of
assumptions for how climate policy, emissions
and temperatures evolve. The scenario

descriptions using the REMIND-MAgPIE
2.1-4.2 model are as follows:
• Current Policies (or BAU) where the

modelled temperature in 2050 exceeds 3°C.
This scenario is dominated by physical risks
due to the resulting climate and weather
pattern changes. Transition risks are muted
as regulators and technology are not being
driven to change beyond current plans.
Georgia will experience a reduction in the
overall volume of precipitation across the
country, including a reduction in the volume
of snowfall. Gradual snow melt will be
replaced by more intense rainfall run-off.
This will result in landscape instability and
heightened flood risk with the potential for
infrastructure to be overwhelmed. In
addition, there is an expectation of an
increasing frequency of heat waves.
• Delayed Transition 1.8°C where the

temperature rise is around 2°C by 2050.
Physical risks as described under the
Current Policies scenario are still likely.
Delayed transition implies that society
remains slow to act but there is a more

1 www.ngfs.net. Network for Greening the Financial System NGFS Climate Scenarios for Central Banks and Supervisors June 2021.

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urgent response in the 2030s. Consequently,
transition risks, especially those relating to
regulation, occur mid-2030s and are swiftly
implemented (not gradually or phased),
for example, fuel use and carbon pricing.
Technology will continue to evolve because
R&D generally occurs over 10-15-year
horizons, while consumer preferences and
reputation may have more of an influence.

• Net Zero 1.5°C consistent with a

temperature rise of 1.5°C, reflecting early,
planned policy action. Transition risks will
dominate this scenario in relation to
regulation, technology and products. There
is an expectation of rapid obsolescence of
fossil fuel technologies and technology
advancements that will contribute to the
transition. Consumer preferences towards
sustainable choices and reputation will drive
changes in market demand. While physical
risk profiles remain broadly similar up to
2030 they are lower than in other scenarios
after this date.

Carbon prices (including taxation measures)
are a key policy instrument for incentivising
carbon emissions reduction. There is a
direct relationship between the ambition
(and stringency) of policies and the cost
of emissions. The cost of emissions is also
sensitive to the timing and implementation of
the policies, the distribution of policies across
all industrial sectors and the available
technology, for example for CO2 removal.

The carbon price in Georgia is a key variable in
determining the future climate-related financial
risk for GCAP. The projected carbon price over
the short, medium and long term under the
three plausible scenarios is shown in Table 1.

Table 1: Modelled carbon price for Georgia
(US$/tonne)

NGFS modelled scenario

Year 2025

Year 2030

Year 2035

Year 2050

Current Policies
Delayed transition 1.8°C
Net Zero 1.5°C

3
<1
148

3
<1
204

3
224
272

4
497
603

Projected carbon price

Under Current Policies, there is little change
in the carbon price. However, there is a sharp
increase in the carbon price occurring in about
2030-2035 under the Delayed Transition 1.8°C
scenario. Under the Net Zero 1.5°C scenario,
a carbon price in Georgia of US$ 204/tonnes
by 2030 is projected.

Based on the early-stage scenario modelling
initial tables of potentially material climate-
related financial risks and opportunities for
each scenario were prepared.

An example summary table of the Delayed
Transition 1.8°C scenario is presented as
Table 2. In this example scenario, the increasing
carbon price is likely to be material to each of
the portfolio companies either directly or
through their supply chains. In addition,
potential financial impacts under this scenario
may also arise associated with:
• Acute physical events, for example, from
increased flooding or land instability due
to intense rainfall on operations or physical
assets;

• Chronic physical changes to climate,

such as increased average temperatures
affecting the condition or habitability of
real estate assets, the physical condition

of distribution networks, and/or community
health;

• Adaptation of operations or assets to

mitigate the effect of physical or transition
risks. In this example, transition risks and,
in particular, opportunities for the GCAP
investment strategy and portfolio may be
driven by the Georgian Nationally
Determined Contributions and the Georgian
2030 Climate Change Strategy and Action
Plan (CCSAP) Strategy.

It is noted that under the plausible scenarios
analysis, there will be little difference in the
physical outcomes between Current Policies
and Delayed Transition 1.8°C before 2050. But
under the Delayed Transition 1.8°C scenario,
there is significant potential for variation in
near-term policy action which will introduce
great uncertainty for businesses.

A narrative summary of qualitatively identified
macro-level risks and opportunities under
the Delayed Transition 1.8°C scenario and
the potential impact of these risks is provided
below. For each portfolio company, examples
are given which are considered to have the
potential to be material to the portfolio
company, if not to the portfolio as a whole.

Table 2: Portfolio 2022: Qualitative presence of potential climate-related physical or transition risks under Delayed Transition 1.8°C

Portfolio company (% value of total portfolio)

Risk

Opp.

Risk

Opp.

Risk

Opp.

Risk

Opp.

Risk

Opp.

Risk

Opp.

Physical risks1

Transition risks2

Acute

Chronic

Legal/
regulation

Market

Reputation

Technology/
digital

Bank of Georgia (26.0%)

Water Utility (4.8%)

Renewable Energy (7.0%)

Healthcare businesses: Hospitals (13.5%) and
Clinics and Diagnostics (3.5%)

Retail (Pharmacy) (22.7%)

Medical Insurance (1.6%)

P&C Insurance (7.1%)

Education (5.1%)

Auto Service

Beverages (Beer and Wine)

Housing Development and Hospitality

Key: The red blocks indicate potentially material risk areas and the blue blocks indicate potentially material opportunities for each of the portfolio companies.

White areas indicate that neither material risks nor material opportunities are anticipated.

1 Physical risks and opportunities are those that occur due to the physical manifestation of climate change – as chronic long-term climate changes or as acute episodic weather events.
2 Transition risks and opportunities are those related to the transition to a low carbon economy including legal/regulatory risks such as carbon prices, market supply and demand,

reputation and technology (e.g. disrupters, improvements and replacement of technology that support the transition to a low carbon economy).

The percentage value of the portfolio company
within the portfolio is provided as a broad
indicator of likely weighting.

Bank of Georgia (26.0% of total portfolio)
• Risks – Within the medium term, the rapid

implementation of climate policy and
regulation may result in sharply increasing
direct regulatory expenses in relation to
fixed assets such as the Bank’s retail
outlets.

• Opportunities – In the short term, and
in mitigation, the Bank is already in the
advanced stages of implementing energy
efficiency programmes within its real estate
(retail, office and data centres). By
anticipating compliance with regulations
relating to fuel efficiency standards,
emissions-reducing regulations and building
efficiency compliance, the Bank will
minimise costs in relation to regulations.
In addition, it will lower energy expenditure
and generate a financial benefit, especially
where renewable energy is utilised.
Additionally, the Bank has adopted digital
technology to enable all forms of digital
banking, potentially further reducing the
need for fixed assets.

Since 2021, Bank of Georgia Group PLC
completes its own TCFD assessments. The
results are available publicly in Bank of Georgia
Group PLC’s Annual Report and Accounts
which can be viewed or downloaded at:
https://bankofgeorgiagroup.com/reports/
annual.

Retail (Pharmacy) (22.7% of total
portfolio)
• Risks – The principal risks arise from

physical aspects of climate change and may
impact the physical assets. Transition risks
are considered to mainly relate to carbon
pricing and the effect this will have on the
supply chain, for example, the purchase of
drugs and medicines. As the carbon price
rapidly increases post-2030 (medium term)
the prices of goods will increase. While this
will be felt across the market and will not
be unique to the portfolio, given the leading
market share, this could result in reputational
risk arising from consumer perception.
• Opportunities – There is a regulation
opportunity for the retail (pharmacy)
business. Being an early adopter of fuel
efficiency standards, emissions-reducing
regulations and building efficiency
compliance will reduce overall running
costs in the medium term. Good energy
management and the use of renewable
energy will not only lower energy
expenditure and generate a financial benefit
but will also reduce the carbon footprint of
the operations.

Healthcare businesses – Hospitals, and
Clinics and Diagnostics (17.1% of total
portfolio)
• Risks – a delayed transition, it is anticipated
that in the medium-term carbon prices will
remain low. After 2030, carbon prices may

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rise quickly year-on-year towards 2050.
The implications of this will be financially
more severe for carbon-intensive products,
services and operations. This will result in
increased costs of purchase relating to
medical equipment and supplies,
particularly those originating out-of-country.

• Opportunities – In the short to medium

term, commitment to a low-carbon portfolio
(for example, low carbon hospitals) could
have material benefits. A reduction in the
portfolio’s carbon intensity will mitigate
future costs associated with increasing
carbon prices.

Medical Insurance (1.6% of total
portfolio)
• Risks – An increase in medical insurance

claims may arise from both acute short-term
weather conditions (flooding and, in some
regions, landslides and heatwaves) and
long-term chronic changes in weather
such as increased average temperatures,
impacting health. Failure of infrastructure
may cause longer-term ill health from
waterborne diseases. There is also a risk
that the Government introduces a policy
for insurers to maintain policy cover for the
“uninsurable”, the costs of which may not
be possible to pass on to the insured.
• Opportunities – Encouraging customers
to prepare to be resilient with respect to
climate risks, for example through premium
incentives to have healthy lifestyles, may
contribute positively to the business
reputation and customer base.

P&C Insurance (7.1% of total portfolio)
• Risks – Carbon pricing is a fundamental
component of the EU’s climate change
agenda. Under the Delayed Transition 1.8°C
scenario, carbon pricing is expected to rise
sharply after 2030 (medium term). This will
see a progressive rise in the cost of

carbon-intensive products and services,
logistics, distribution and any other
operations within the supply chain
associated with high-carbon emissions.
This will have implications for the cost of
insurance, which may be passed on to the
customer. Beginning with transition risks,
some lines of business may see changes
in claims patterns as government policy
and regulation relating to carbon emissions
evolve. This might result in fluctuating loss
ratios and profitability. The steep rise in
carbon prices can lead to reduced
profitability, obsolete assets and
impairments in sectors that are difficult
to decarbonise and where additional
costs cannot be passed on to customers.
The transition will shift demand toward
low-carbon technologies and create new
opportunities for companies that provide
innovative solutions and are able to reduce
their emissions more efficiently than
competitors. Failure to manage potentially
detrimental impacts will result in damage
to a company’s reputation.

• Opportunities – Opportunities will likely
arise from energy efficiency regulation
which will force customers to upgrade their
homes and vehicles and may require new
product offerings. Commercial opportunities
are also likely to arise by creating targeted
products that address climate change and
energy transition.

Water Utility (4.8% of total portfolio)
• Risks – Acute physical risks may impact
utility assets. For example, in the short to
medium term, extreme rain events may
overwhelm infrastructure, causing damaged
water treatment and sewage treatment
plants. Pipelines are also at risk from such
events, as the overall integrity is placed
under pressure. These will require greater
increased maintenance and repair costs.

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Landslides in more remote locations could
cause further damage and may block
access in some areas.

• Opportunities – In the medium term,

decarbonisation of operations will enable
the water utility operations to limit the cost
consequences of carbon pricing and
provide an advantage over more
carbon-intensive competition.

Renewable Energy (7.0% of total
portfolio)
• Risks – In the short to medium term,

the infrastructure and transmission lines
are clearly at risk from physical risks such
as landslides, or extreme heat impacting
the integrity of lines or pipes. However, for
each of the HPPs and WPPs, the business
has taken steps to improve the resilience
of infrastructure to changes in climate.
• Opportunities – The renewable energy
business generates electricity using
renewable sources, and there are a number
of policy and Government incentives for
solar wind and hydropower generation
in Georgia as part of the Georgian 2030
CCSAP. Renewable energy sources are
considered to be the future of energy and
are valued higher than traditional electricity
generation companies.

Education (5.1% of total portfolio)
• Risks – The potentially material risks relate
to transition type risks, in particular energy
and air quality regulations, that may be
introduced under this scenario at short
notice in the medium term. Schools may
be expected to retrofit heating and cooling
measures/equipment to meet regulations.
In addition, energy requirements may arise
in response to air conditioner use during
prolonged heatwaves for example. These
risks are expected for all real estate.

Auto Service
• Risks – Currently, vehicles on the market

and in use in Georgia are mainly diesel and
petrol-fuelled. Initially, in the short term,
there will be a gradual switch to electric
vehicles. After 2030, there will likely be a
significant increase in the use of electric
vehicles, abruptly reducing the need for
emissions checks. Additionally, the
anticipated rise of carbon pricing and
adoption of border adjustment mechanisms
after 2030 will affect Amboli’s supply chain
and trade of car consumables and parts.
There will likely be an abrupt rise in
distribution and retail costs as a result
of increases in carbon pricing.

• Opportunities – In the short to medium
term, there may be stricter emissions
requirements. This may mean that more
vehicles will need to be emissions-checked
more regularly or be modified, causing
demand at PTI centres.

Beverages
• Risks – In addition to physical risks
(reduced rain, high intensity events,
prolonged heatwaves) affecting hops and
grape production, the main identified risk
relates to regulatory transition risk. In
particular, carbon prices and border taxes
such as the EU Carbon Border Adjustment
Mechanism will adversely affect the prices
of both incoming goods and exported
products.

Housing Development and Hospitality
• Risks – Physical risks to property will occur.
These include deterioration of asset integrity
due to flooding or extreme heat. In the
medium term (post-2030) assets that are not
energy efficient will be hit by energy efficiency
regulation for retrofitting and increased
energy costs due to carbon pricing.

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• Opportunities – Early adoption of fuel

efficiency standards, emissions-reducing
regulations and building efficiency
compliance will reduce longer-term costs
relating to regulations including a reduction
in potential declines.

As stated previously, GCAP’s period of
investing is between three to five years,
which is within the short-term horizon of the
scenarios. Management is taking climate
change risk into consideration when
determining its investment strategy. We expect
further emphasis to be placed upon climate
resilience as our understanding of climate-
related risks and opportunities matures.
Management is also taking into consideration
the resilience of its portfolio with respect to
climate change risks as part of the portfolio
strategy. This is described further in the Risk
Management section within TCFD disclosures,
on page 93.

Climate change is also reflected in the valuation
assessments of the portfolio companies, as
described in the Risk Management section
within TCFD disclosures, on page 93. Going
forward we will be exploring how to further
incorporate climate change risk into our
portfolio valuations. This may include an
assessment of the influence of the projected
carbon price under different scenarios, on the
valuation of the portfolio. In addition, the use
of shadow carbon pricing might be reviewed.

Other identified potential risks and
opportunities are evaluated by the investment
and finance teams in discussion with the
portfolio companies to determine their financial
materiality (impact on financial performance
including revenues and expenditures, and
impact on the financial position, assets and
liabilities, capital and financing).

RISK MANAGEMENT

Climate change risk has been recognised
by GCAP as an emerging risk. The risk
management approaches for the initial
investment stage and the existing portfolio
companies are provided below.

Investment stage
In 2022, the investment risk management
process was updated to include consideration
of climate-related risks, in line with the
implementation of the Responsible Investment
Policy. Procedures for identifying, describing
and managing environmental and social risks
and impacts (including those associated with
climate change) have been incorporated into
the investment process from the initial
investment, through to the holding period.

GCAP has a staged approach to investment
appraisal which becomes progressively more
detailed. At the early stages of appraisal, the
potential investment is screened against the
GCAP Exclusion List. This list excludes
businesses that generate more than 10% of
their revenues from fossil fuels. Subsequent
appraisal stages include evaluation of the
carbon and energy emissions, as well as
business strategy and plan elements in relation
to carbon and energy management. These
plan elements will consider alignment with the
Georgian Government Climate Goals and
incorporate the shadow carbon price.

Current portfolio
Climate change, and the risks relating to
climate change, is reflected in the valuation
assessments of the portfolio companies. Equity
investments in Georgia Capital’s portfolio
companies are measured at fair values at each
reporting date in accordance with IFRS 13,
Fair Value Measurement. Private large and
investment stage portfolio companies are
valued by applying a combination of an income
approach (DCF) and a market approach (listed
peer multiples and, in some cases, precedent
transactions) in line with International Private
Equity Valuation (IPEV) guidelines and
methodology. Under the discounted cash flow
(DCF) valuation method, fair value is estimated
by deriving the present value of the business
using reasonable assumptions of expected
future cash flows and the terminal value, and
the appropriate risk-adjusted discount rate that
quantifies the risk inherent to the business. The
discount rate is estimated with reference to the
market risk-free rate, a risk-adjusted premium
and information specific to the business or
market sector, which consequently reflects the
climate change-related considerations of the
business. Market approach valuation
methodology involves the application of a listed
peer group earnings multiple to the earnings of
the business and is appropriate for investments
in established businesses and for which the

Company can determine a group of listed
companies with similar characteristics.
GCAP identifies the peer group for each equity
investment taking into consideration points of
similarity with the investment such as industry,
business model, size of the company,
economic and regulatory factors, growth
prospects (higher growth rate) and risk profiles
(including the climate change risk). Valuation
assessments of the large and investment stage
portfolio companies are performed by an
independent valuation firm on a semi-annual
basis. Climate change risk is factored in the
valuation assessments. Climate change risk
is also embedded in the valuation of the other
portfolio companies as set out in the Valuation
Methodology on page 101 of the Annual Report
2022.

Understanding the relationship and potential
impact of climate change and its associated
risks across different risk categories was a
priority for GCAP risk management during
2022 as climate risk continued to be integrated
into the risk management framework.

Evaluating macro-level risks:
For each of the portfolio companies, a
macro-level review has been completed within
the scenarios and time horizons (short, medium
and long). The process included among other
activities:
•

review of the scenarios selection and
identified risks and opportunities with
the portfolio companies;

• application of the carbon prices to investee

•

emission profiles to establish the impact;
and
further discussion with the portfolio
companies on how carbon price may be
used to influence their strategy and impact
on their business plans going forward –
including the cost of supplied materials,
ability to pass through costs and potential
capex among other aspects.

The NGFS modelling scenarios will be re-run
annually to assess changes if any, that may
occur in response to global or Republic of
Georgia commitments and policies towards
climate change.

Monitoring and reporting:
Environment (including climate) and social risks
and opportunities are managed through regular
semi-annual engagement with the portfolio
companies. Topics cover a range of aspects
under the headings of Governance, Policies,
Social, Environment, Carbon and Energy
Management, and Suppliers.

Capacity building:
Where appropriate, GCAP will support portfolio
companies in training and upskilling Investment
Managers with respect to climate change
terminology, risks and opportunities during
2023 and beyond.

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RESOURCES AND RESPONSIBILITIES CONTINUED
TCFD CONTINUED

METRICS AND TARGETS

In 2022, Georgia Capital committed to the
Net-Zero Initiative and expressed its willingness
to reach Net-Zero across Scope 1 and 2
emissions at both GCAP HoldCo and portfolio
company levels by 2050.

In May 2022, GCAP commenced the ESG
target-setting initiative with the goal of setting
GHG emission reduction targets. Over a
four-month period, GCAP conducted
comprehensive research on relevant ESG
standards, frameworks and guidelines, and
engaged in discussions with global experts
on different environmental platforms.

In September, GCAP, with its portfolio
companies, engaged in comprehensive
individual and group workshops where the
ESG frameworks were discussed and
participants shared their progress towards
setting individual environmental targets. Some
of the portfolio companies also engaged local
third-party experts in the target-setting initiative
to ensure the effectiveness of the process.

Through its ESG targets, GCAP supports
climate change mitigation, natural resources
conservation and pollution prevention, thereby
contributing to the transition towards a more
sustainable and lower-carbon economy
in Georgia.

GHG inventory
Measuring GHGs is the initial step in preventing
the global warming.

GCAP has collated Scope 1, 2 and limited
Scope 3 GHG emissions over the past few years.

In 2020 we focused on emissions derived from
GCAP operations (Scope 1, 2 and limited 3).

We reported on the emission sources listed
under the Companies Act 2006 (Strategic
Report and Directors’ Report) Regulations 2013
and the Companies (Directors’ Report) and
Limited Liability Partnerships (Energy and
Carbon Report) Regulations 2018 (Scopes 1
and 2). Additionally, we reported on those
emissions under Scope 3 that are under
our control and applicable to our business.
All sources reported in 2020 fell within our
consolidated financial statements.

Since 2021, in accordance with the
Greenhouse Gas Protocol and aligning with
TCFD, we have taken the opportunity to
present elements of the emissions derived
from our portfolio companies (outside our
consolidated financial statements). We
aggregate and present portfolio companies’
Scope 1, 2 and 3 emissions under our Scope
3. The data set has been re-reported for 2020.

GCAP considers that all material categories of
Scope 3 have been included in our emissions
calculation. For further details, please refer
to the emission disclosure and calculation
methodology, on page 87 of the Annual Report.

GHG reduction targets
Georgia Capital commits to reducing total
Scope 1 and Scope 2 emissions by 30% by
2030 compared to the base year 2022 and by
95% by 2050, ultimately becoming Net-Zero.

2022 has been chosen as a base year for two
major reasons:
•

In 2022, the disposal of the majority equity
stake in the water utility business was
completed, which significantly changed
the GHG emission composition.

• The 2022 year reflects the normalisation
of economic activities compared to the
abnormal environment in 2020-2021 years
due to COVID-19-related implications.

In 2022, the full GHG inventory analysis
revealed that the portfolio companies’ GHG
emissions accounted for 99.5% of the Group
and portfolio companies’ aggregated
emissions, which were derived from the
following sources:
• Combustion of natural gas (Scope 1) –

33% of the total GHG emissions.

• Combustion of petrol and diesel (Scope 1) –

25% of the total GHG emissions.

• Consumption of electricity (Scope 2) –

23% of the total GHG emissions.

• Other emissions (Scope 3) – 19% of the

total GHG emissions.

GHG emissions reduction roadmaps were
developed at both the GCAP holdCo and
portfolio business’ levels to support GCAP in
transferring to a low-carbon economy,
consequently lowering its environmental footprint.

The roadmap captures the fundamental
activities to minimise any adverse impact on the
environment, whilst simultaneously highlighting
benefits for the Group and its portfolio
companies:
• c.80% of the Georgian electricity is sourced
from the renewable energy power, having
relatively modest adverse impact on the
environment.

• GCAP’s updated strategy of having

considerable exposure to capital-light
portfolio companies provides a chance to
progressively transition to a low-carbon
economy.

Target1

KPIs

GHG emissions reduction targets

Base year

2022

Target by
2030

Target by
2050

Reach Net-Zero across
Scope 1 and 2 emissions
at both GCAP HoldCo and
portfolio company levels
by 2050

Reduce GCAP HoldCo Scope 1 and 2 emissions

70 TCO2e

30%

95%

Reduce GCAP’s Scope 3 emissions:

* Reduce portfolio companies’ Scope 1 and 2 emissions

* Offset the GCAP HoldCo’s direct Scope 3 emissions2 that cannot
be avoided or reduced further, starting from 2030.

22,759 TCO2e
78 TCO2e

30%

Yes

95%

Yes

Implement Net-Zero awareness campaigns across the Group and its portfolio companies;

Georgia Capital plans to reduce its direct GHG emissions by:
•
• Organise annual ESG workshops with the portfolio companies;
• Replace the natural gas heating systems with efficient electric heating solutions;
• Promote electric vehicle deployment in order to reduce the consumption of petrol and diesel; and
• Gradually transfer electricity consumption to 100% renewable energy, either by installing renewable energy

solutions at our facilities or purchasing electricity from renewable energy providers.

1 Since GCAP’s portfolio is subject to regular asset rotation, the targets may be recalibrated in the future.
2 Emissions related to air travel and ground transportation provided by third parties and electricity, heat/steam, cooling provided within lease and service agreements.

Photo Snowcapped mountain Ushba, Svaneti, Georgia.

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ALTERNATIVE PERFORMANCE MEASURES

Alternative Performance Measures
(APMs) overview
Management assesses the Group’s
performance using a variety of measures that
are not specifically defined under IFRS and are,
therefore, referred to as APMs internally and
throughout this document. Management
monitors the Group’s performance on a regular
basis based on developments in the Income
Statement and NAV Statement prepared
under the methodologies described below.
Management believes that such statements
provide an important view on Georgia Capital’s
strategy and helpful insights into management’s
decision-making. Management dedicates
time to ensuring that the Group’s APMs are
reported in a consistent and transparent way in
accordance with the European Securities and
Markets Authority (ESMA) published guidelines.

Under IFRS 10, Georgia Capital PLC meets
the “investment entity” definition and does not
consolidate its portfolio companies, instead
the investments are measured at fair value.

Our Group level discussion is, therefore, based
on the IFRS 10 investment entity accounts.

The NAV Statement, as included in the notes
to the IFRS financial statements, summarises
the Group’s equity value and drivers of related
changes between the reporting periods.
Georgia Capital holds a single investment –
in JSC Georgia Capital (an investment entity
on its own) – which in turn owns a portfolio
of investments, each measured at fair value.
Georgia Capital measures its investment in
JSC Georgia Capital at fair value through
profit and loss, estimated with reference to
JSC Georgia Capital’s own portfolio value
as offset against its net debt.

The Income Statement presents the Group’s
results of operations for the reporting period.
As we conduct most of our operations through
JSC Georgia Capital, through which we hold
our portfolio companies, the IFRS results
provide little transparency on the underlying
trends. To enable a comprehensive view of the
combined operations of Georgia Capital PLC
and JSC Georgia Capital (together referred to
herein as “GCAP”) as if it were one holding
company, we adjust the accounts (“adjusted
IFRS 10 Income Statement”). A full reconciliation
of the adjusted Income Statement to the IFRS
Income Statement is provided on page 99.

Additionally, for the majority of our portfolio
companies the fair value of our equity investment
is determined by the application of a market
approach (listed peer multiples and precedent
transactions) and an income approach (DCF).
Under the market approach, listed peer group
earnings multiples are applied to the trailing
12-month (LTM) stand-alone IFRS earnings of
the relevant business. Under the DCF valuation
method, fair value is estimated by deriving the
present value of the business using reasonable
assumptions of expected future cash flows

and the terminal value, and the appropriate
risk-adjusted discount rate that quantifies the
risk inherent to the business. As such, the
stand-alone IFRS results and developments
behind IFRS earnings of our portfolio companies
are key drivers in their valuations. Following the
Group discussion, we therefore also present
unaudited IFRS financial statements for each
portfolio company and a related brief results
discussion.

Our adjusted IFRS 10 Income Statement and
the stand-alone IFRS results for our portfolio
companies may be viewed as APMs.

Net asset value (NAV) Statement
The Group makes indirect investments in
portfolio companies, held through intermediate
Georgian holding company, JSC Georgia
Capital, which is the principal subsidiary of
Georgia Capital PLC. The application of IFRS
10 requires us to fair value the intermediate
holding company JSC Georgia Capital. This fair
value approach, applied at the intermediate
holding company level, effectively obscures the
performance of our equity capital investments
and associated transactions occurring in the
intermediate holding company. The financial
effect from the valuation of the underlying
portfolio companies are aggregated into a
single value. The breakdown of the value of
JSC Georgia Capital is presented in Note
12 within the IFRS financial statements. To
maintain transparency in our report and aid
understanding we present a NAV Statement
and respective reconciliation to the IFRS
Balance Sheet in Note 5 (Segment information)
of the IFRS financial statements. NAV disclosed
under the NAV Statement is the same as IFRS
equity value as at 31 December 2022. The NAV
Statement is simply a “look through” of the
IFRS 10 Balance Sheet to present the
underlying performance.

The NAV Statement breaks down NAV into its
components and provides roll-forward of the
related changes between the reporting periods,
including a snapshot of the Group’s financial
position at the opening and closing dates.
The NAV Statement provides a value of Georgia
Capital that management uses as a tool for
measuring its investment performance.
Management closely monitors NAV in
connection with capital allocation decisions.
The following methodology underlies the
presentation of the NAV for period-end dates:
• NAV is calculated at stand-alone GCAP level,
which represents the aggregation of the
stand-alone assets and liabilities of Georgia
Capital PLC and JSC Georgia Capital.
• Holdings in listed and private portfolio
companies are carried based on the
following methodology:
– Listed portfolio companies are carried
at the period-end market values based
on closing share prices on respective
stock exchanges.

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– Private portfolio companies are carried

at fair value based on a valuation
technique believed to be most
appropriate to that investment as
described in the valuation methodology
on page 101.

– NAV per share represents total NAV

divided by the number of outstanding
shares at the end of the period, i.e. the
number of issued shares at the end of
the period less unawarded shares in
GCAP’s management trust.

Management Income Statement
The Income Statement is an aggregation of
GCAP’s stand-alone Profit and Loss Statement
and fair value change of portfolio companies
during the reporting period. The following
methodology underlies the preparation of the
Income Statement:
• The top part of the Income Statement

(GCAP net operating income) represents the
aggregation of the two stand-alone holding
company accounts, which we call GCAP
(i.e. the UK holding company Georgia
Capital PLC and the Georgian holding
company JSC Georgia Capital), the
performance of which reflects the net result
of a) dividend income accrual based on
distributed or declared annual dividend
proceeds from portfolio companies during
the reporting period, b) interest income on
liquid funds and loans issued, c) interest
expenses on debt incurred at GCAP level
(which consists of the bonds issued) and
d) expenses incurred at GCAP level.
• Fair value change of portfolio companies

(total investment return) represents fair value
changes in the value of portfolio companies
during the reporting period, as valued in the
period-end NAV Statement. A detailed
valuation methodology is described on page
101. We view fair value changes of portfolio
companies as a metric to measure the total
investment return of Georgia Capital’s
holdings, which itself reflects value creation
for shareholders.

• Following the aggregation of GCAP net

operating income and total investment return,
we arrive at management income before
foreign exchange movements for the period.
• Below the income before foreign exchange
movements line, to arrive at management
net income, we present GCAP gains or
losses from foreign exchange movements
and other costs such as non-recurring or
transactions costs if there are any in a
reportable period.

The table below lists all the APMs used within
the Annual Report.

Read more
on page 145

Board size, composition and independence
The Board is comprised of seven Directors, six of whom are Independent
Non-Executive Directors, and one executive Chairman – Irakli Gilauri,
who also acts as the Company CEO. The responsibilities of the Board
can be viewed on page 129.

Full Director biographies can also be found here:
https://georgiacapital.ge/governance/board.

We consider that a diversity of skills, backgrounds, knowledge,
experience, geographic location, nationalities, age and gender is
important to effectively govern the business. The Board and its
Nomination Committee work to ensure that the Board continues
to have the right balance of skills, experience, independence and
knowledge necessary to discharge its responsibilities in accordance
with the highest standards of governance.

Board appointments are made based on recommendations received
from the Nomination Committee. In making these appointments, the
Nomination Committee ensures that appointments and succession
plans are made based on merit as well as other objective criteria, whilst
ensuring the Board maintains the right balance of skills and knowledge
needed to address its specific needs. Due consideration is also given
to diversity in the wider sense, and the benefits that stem from having
a diverse Board.

We believe our overall size and composition to be appropriate, having
regard, in particular, to the independence of character and integrity of
all of the Directors. As disclosed in the standard listing circular, following
the proposed transfer to a standard listing the Company is considering
implementing a reduction in the size of its Board from 7 to 5 members.
Any such reduction in the size of the Board is not intended to impact
appropriate standards of reporting and/or GCAP’s corporate governance.
The Board believes that, as a result of the transfer to a standard listing,
the 5 member Board would be well suited to discharge its duties of
overseeing the Company’s continuing obligations and leading the
Company’s success in the most optimal and cost-effective way.

Each of our Non-Executive Directors occupies, and/or has previously
occupied, senior positions in a broad range of relevant associated
industries, bringing valuable external perspective to the Board’s
deliberations through their experience and insight from other sectors
enabling them to contribute significantly to decision-making. Some of
these skills include:
• Banking, investment and finance sector experience.
• Leadership knowledge.
• Understanding of local and international strategic and

commercial issues.
Investor market knowledge.

•
• Experience of stakeholder engagement.
• Understanding of governance practices and regulatory framework.
• Familiarity with Georgian political, economic and cultural context.
• Experience of investment execution, exit strategies and private equity.
The relationship between Directors ensures that no individual,

or group of individuals, is able to dominate the decision-making process,
independence of thought is maintained, and no undue reliance is placed
on any individual.

Kim Bradley and Jyrki Talvitie will not be seeking re-election to the Board
at the forthcoming AGM and therefore will cease to be a Director of the
Company from the conclusion of the AGM. At the time of this report, we
have assessed the independence of each of the Non-Executive Directors
and are of the opinion that each acts in an independent and objective
manner. We consider that, under the Code, all of our Non-Executive
Directors are independent and free from any relationship that could
impair their judgement.

Our governance structure
We understand our responsibility to shareholders and stakeholders.
We are dedicated to delivering shareholder value over the long term and
promoting the success of the Company for the benefit of all shareholders
through the management of the Group’s business.

The Georgia Capital Board is assisted in fulfilling its responsibilities by
four Committees: Investment, Audit and Valuation, Nomination and
Remuneration. The Terms of Reference are approved by each
Committee and the Board and reviewed annually, and can be found at:
https://georgiacapital.ge/governance/cgf/terms.

For further information about the Committees see the Investment
Committee report on page 137, the Audit and Valuation Committee
report on page 139, the Remuneration Committee report on page 145
and the Nomination Committee report on page 164.

The Board is responsible to shareholders for creating and delivering
shareholder value over the long term through the oversight of the
Group’s operations. Among our responsibilities are setting and
overseeing the execution of the Group’s strategy within a framework of
effective risk management and internal controls, demonstrating ethical
leadership and upholding best practice corporate governance.

All decisions are made through Directors exercising independent
objective judgement, and following open and rigorous challenge.
While our ultimate focus is long-term growth, the Company also needs to
deliver on short-term objectives and we seek to ensure that management
strikes the right balance between the two.

Each Director also recognises their statutory duty to consider and
represent the Company’s various stakeholders in its deliberations and
decision-making. You can read more about how Directors had regard
to their duties under section 172(1) of the Companies Act 2006 and how
Directors performed these duties on page 64 of the Strategic Report.

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128

Matters Reserved for the Board
In order to ensure that we meet our responsibilities, specific key
decisions have been reserved for approval by the Board.

The key matters reserved to the Board are:
• The Group’s long-term objectives and strategy.
• Shareholder engagement and general meetings.
• Overall corporate governance arrangements including Board and

Committee composition, Committee Terms of Reference, Directors’
independence and conflicts of interest.
Internal controls, governance and risk management frameworks.

•
• Changes to the corporate or capital structure of the Company.
• Annual Report and Accounts, and financial and regulatory

announcements.

• Significant changes in accounting policies or practices.
• Annual budgets and financial expenditure.

Operation of the Board
We maintain a corporate calendar which sets out rolling agenda items
that must be considered during the year. This annual schedule of items
ensures that all matters are given due consideration and are reviewed
at the appropriate point in the financial and regulatory cycle.

The Chairman/CEO receives regular input from the Non-Executive
Directors ahead of each Board meeting in order to ensure that any
matters they have raised are on the agenda to be discussed at the
meeting. The Senior Independent Non-Executive Director supports the
Chairman in his role, acts as an intermediary for other Non-Executive
Directors when necessary and liaises with the Non-Executive Directors
outside of the Board and Committee meetings. The Senior Independent
Non-Executive Director met with the Non-Executive Directors without
the Chairman present at least once during the year to appraise the
Chairman’s performance.

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A full formal schedule of matters specifically reserved for the
Board can be found on our website at:
https://georgiacapital.ge/governance/cgf/schedule.

Outside of these matters, the Board delegates authority for the day-to-day
management of the business to the CEO. The CEO delegates aspects
of his own authority, as permitted under the corporate governance
framework, to the Management Board.

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CORPORATE GOVERNANCE FRAMEWORK CONTINUED

Board activities during 2022
Details of the areas that the Board considered this year are set out below and comprise:

Board and Committee meeting attendance
Details of Board and Committee meeting attendance in 2022 are as follows:

Strategy

Governance, assurance
and risk management

Financial reporting

• Ongoing consideration of the Company’s strategy, including new strategy as announced on Investor Day,
and the approval of the Modified Dutch Auction intended to deleverage the Company’s balance sheet.

• Regularly assessed portfolio company composition.
• Approved capital allocations to and discussed the capital allocation outlook for portfolio companies.
• Reviewed Group and portfolio company performance against strategy.
• Regularly reviewed the Georgian and regional political and economic climate, particularly in light of the conflict

between Russia and Ukraine.

• Continued with share buyback and cancellation programme of US$ 25 million, under which 3,075,923 shares

were repurchased (6.4% of issued capital).

• Reviewed the ESG matters, TCFD reporting and ESG target-setting implementation processes.

• Focused on high level governance issues and developments that may have an effect on the Company strategy.
• Received reports from different Committees.
• Conducted an externally facilitated Board evaluation looking at Board effectiveness and process.
• Considered external legislative and governance developments, including on diversity.
• Considered the proxy voting agency approaches and the impact on the Company.
• Reviewed and approved governance documents, including Terms of Reference for the Audit and Valuation

Committee, Remuneration Committee, Nomination Committee and Investment Committee, and Group level
policies.

• Received reports on the financial performance of the Group.
• On the recommendation of the Audit and Valuation Committee, reviewed and approved financial reporting

including approval of accounts, notice of AGM, half year and full year announcements, and trading updates
to the market.

ESG

Succession

• See separate Sustainability Report.

• Board and Committee succession planning.
• CEO succession plan.

Stakeholders

• Considered and implemented s172 duties:

– Re-confirmed identity of key stakeholder groups.
– Considered how Board decisions impact the interests and priorities of each group.
– Actively engaged with different stakeholders.

Investment matters

• Endorsed the work undertaken by the Investment Committee. See report on pages 137 to 138 for further

detail.

Standing items

Each quarter the following topics are usually discussed in the Board meeting:
• Financial update (with formal financial results announcements and trading updates to the market typically

being approved in separate phone meetings).

• Monitoring of financial performance against budget.
• Macroeconomic developments, including a focus on both the Georgian and regional markets.
• An assessment of current and potential future risks to the Company.
• Regulatory and legislative updates, including corporate governance as appropriate.
• Updates from the Committee meetings, typically including at least an Audit and Valuation Committee report

on accounting issues and valuations and Internal Audit.

• Business updates from selected portfolio companies. The entire Board sits on the Investment Committee,

and every meeting reviews the capital allocation pipeline and takes action as necessary on new investments
or divestments.

Members

Irakli Gilauri

David Morrison

Kim Bradley

Massimo Gesua’ sive Salvadori

Neil Janin

Jyrki Talvitie

Maria Chatti-Gautier

Caroline Brown

Board

Audit and Valuation
Committee

Nomination
Committee

Remuneration
Committee

Investment
Committee

4/4 Scheduled
5/5 Ad hoc

2/2 Scheduled
3/3 Ad Hoc

4/4 Scheduled
5/5 Ad hoc

2/2 Scheduled
2/2 Ad Hoc

n/a

4/4 Scheduled
6/6 Ad hoc

n/a

3/3 Scheduled
1/1 Ad hoc

3/3

n/a

3/3

n/a

1/1

3/3

n/a

3/3

n/a

3/3

n/a

3/3

2/2

3/3

1/1

1 Kim Bradley stepped down as a member of the Nomination and Remuneration Committees on 20 December 2022.
2 Neil Janin joined the Board and the Nomination and Remuneration Committees on 17 October, and the Investment Committee on 20 December 2022.
3 Caroline Brown stepped down as a member of the Board and its Committees from the conclusion of the AGM on 20 May 2022.

For Board and Committee meetings, Directors’ attendance is expressed as the number of meetings attended out of the number that each Director
was eligible to attend.

Purpose, culture and values
The Board has a responsibility for the overall purpose, culture and values
of the Company and their pursuit/development is at the core of each
Board meeting.

The Board believes that there are three features of success that will
allow the Company to capitalise on the fast-growing Georgian economy:
access to capital, access to management and strong corporate
governance. Our culture and values are designed to strengthen all
of these.

Purpose
Georgia Capital’s purpose is to provide investors with an opportunity
to invest in the historically fast-growing Georgian economy by giving
them access to attractive investments with long-term growth potential.
The Company then seeks to develop these into viable independent
businesses on which value can be realised through sale or otherwise.
By investing in Georgia to create multiple strong private companies/
institutions, we will foster Georgia’s development and help it succeed.

Culture
The Board continued to focus on developing, monitoring and assessing
corporate culture and thinking about the ways in which our culture might
serve as a long-term differentiator, both in terms of strategy and of
recruitment and retention. We are proud of the culture that we have
within Georgia Capital and recognise it is important to articulate this
culture, drive it and ensure that it permeates the entire business.

Helping Georgia to succeed is at the heart of Georgia Capital, and during
the year the Board looked closely at our mission, vision and values and
how we could reinforce this in shaping the Company’s long-term
strategy. The Board is of the view that this will benefit all of the
Company’s stakeholders.

In order to create strong private business institutions, we will continue
with our plan to develop our leaders so that they become future
entrepreneurs of Georgia, through personal and professional
development. The Chairman/CEO met regularly with key management

personnel at Georgia Capital to share this vision and coordinate the
Group’s actions and priorities. The Chairman/CEO and Georgia Capital’s
key management personnel monitored portfolio companies’
performance on at least a monthly basis, also reinforcing key messages.
These messages are cascaded down from the management team to
the wider employees.

We plan to develop our culture further in line with our purpose,
by better aligning the business leaders’ incentives to our value creation
and realisation goals and by establishing metrics such as training data
or absentee rates, that we can use to begin to form a benchmark. Finally,
we will continue to monitor and assess how well our culture and values
are embedded across all parts of the Company.

Values
Being entrepreneurial:
We believe our current culture is entrepreneurial in nature, and this is
something that is grounded in our ability to see and seize opportunities
and to develop business strategies whilst remaining disciplined and
rational. All of our portfolio companies have been founded or substantially
developed by entrepreneurs, and this is at the core of what we do.
Our objective moving forward is to empower our people, continue to
develop this spirit and pursue the execution excellence in our businesses.

Having a learning mindset:
We believe we are developing a learning mindset as part of our wider
culture; however, we recognise that we need to improve the ways in
which we communicate give, provide feedback, and help our people
to develop. We approach this by looking at ways we can mentor and
coach people throughout the organisation, and we aim to create an
environment where independent thinking and curiosity are encouraged.

Maintaining the high standard of ethics:
This has been an aspect of our culture that we have maintained since
our inception, and it is a priority of ours to ensure it stays this way.
In order to maintain a high ethical, we will draw on principles of
transparency and accountability and seek to maintain high standards
of corporate governance.

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Creating a culture relies on the participation and leadership of our Board
of Directors, as this vision can then be communicated through executive
management and onward to the wider businesses. By setting the tone at
the top, establishing the core values of the Company and demonstrating
our leadership, we are creating a culture that clearly sets an expectation
that every employee acts ethically and transparently in all of their
dealings. This, in turn, fosters an environment where business and
compliance are interlinked.

The process for evaluating the Chairman’s performance:
Given his role as Chairman and CEO, Irakli Gilauri’s performance was
evaluated. In addition, the full Board met to consider the Remuneration
Committee’s recommendations and Mr Gilauri’s performance as Board
Chairman. David Morrison as the Senior Independent Non-Executive
Director led the overall review. The CEO was not present during the full
Board’s discussions around his own performance. The Board also
reached consensus on his performance as Chairman as reflected in the
favourable Board self-evaluation and the decision to recommend the
maintenance of the current combined role of Chairman/CEO as
discussed above.

The Board’s objectives for 2023 are:
• Monitoring the implementation of the updated strategy and

continuing to adjust as necessary;

• Addressing the uncertainties created by the Russia-Ukraine war as

the regional tensions continue;

• Keeping ESG at the forefront of our decision-making, and monitoring
and enhancing Key Performance Indicators relating to climate change
risks and opportunities;

• Maintaining focus on succession planning;
• Monitoring and assessing culture and how this aligns with our

purpose, values and strategy; and

• Assuring continued active shareholder and stakeholder engagement.

Succession planning:
Board appointments and senior management
As reported in previous years, we believe that effective succession
planning mitigates the risks associated with the departure or absence
of well-qualified and experienced individuals. We recognise this, and
our aim is to ensure that the Board and management are always well
resourced with the right people in terms of skills and experience, in order
to effectively and successfully deliver our strategy. We also recognise
that continued tenure brings a depth of Company-specific knowledge
that is important to retain.

The Board’s Nomination Committee is responsible for both Director
and senior management succession planning. There is a formal, rigorous
and transparent procedure for the appointment of new Directors to the
Board, including a review of other significant commitments Directors
may have and, typically, a period of service in a board advisory role.

More detail on the role and performance of the Nomination Committee
is on pages 164 to 166.

Non-Executive Directors’ terms of appointment
On appointment, our Non-Executive Directors are provided with a
letter which sets out the terms and conditions of their directorship,
including the fees payable and the expected time commitment. Each
Non-Executive Director is expected to commit approximately 25-35 days
per year to the role. An additional time commitment is required to fulfil
their roles as Board Committee members and/or Board Committee
Chairmen, as applicable. Having reviewed all Directors’ current time
commitments, we are confident that all Non-Executive Directors are
sufficiently able to dedicate the amount of time necessary to contribute
effectively to the Board.

The letters of appointment for our Non-Executive Directors are available
for inspection at our Company’s registered office address during normal
business hours.

Prior to accepting any external appointments, Directors are required to
seek the Board’s approval. The Board believes that the other external
directorships/positions held provide the Directors with valuable expertise
which enhances their ability to act as a Non-Executive Director of the
Company. Despite our Non-Executive Directors holding external
directorships and other external positions, the Board believes they still
have sufficient time to devote to their duties as a Director of the Company.
In order to form a view of this, we conduct an annual review of individual
Director’s conflicts, which is recorded in the Conflicts of Interest Register,
and as part of the review we consider other appointments held by
each Director.

Stakeholder engagement
The Code reinforces and expands the requirements of the UK Companies
Act for directors to remain mindful of their duties to consider the interests
of key stakeholders The Board understands the importance of effective
engagement with stakeholders to gain an understanding of the issues
that relate to each stakeholder and those that impact the Company so
that the Board can appropriately consider these views and their
concerns when having Board discussions, when considering the
long-term success of the Company.

The Board has structured its meeting agendas to take account of each
of the provisions in s172 of the Companies Act 2006, and focused on
long-term value generation opportunities, considering political and
macroeconomic circumstances and stakeholder considerations.
Shareholders’ considerations are sought out and then incorporated into
our discussions and decisions. For example, members of the Board and
management participated in more than 500 online and physical investor
meetings. The Company was able to arrange an Investor Day as well as
organise several investor road shows this year.

The table on pages 133-134 sets out our key relationships with
stakeholders and how we have engaged with them over the financial
year. The table also shows examples of how we have considered our
stakeholders when making key decisions and how this has influenced
certain decisions.

More information about how the Directors have discharged their duty
under s172 of the Companies Act 2006 is available in the Strategic
Report, on pages 64-67.

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Key stakeholders

Activities undertaken throughout year

Investors

Investor Relations team

Types of engagement:
• Meetings with the Chairman/CEO
• Meetings and calls with the Advisor to the CEO
•
• London Stock Exchange announcements
•
•
• Corporate website with investor section
• AGM
• Quarterly results
• Senior Independent Non-Executive Director as an

Investor Day
Investor roadshows

intermediary

• Meeting with Committee Chairs and other Non-Executive

Directors
• Annual Report

How the Board engages with investors:
We will engage with shareholders through the Company’s
forthcoming AGM to be held in May 2023 but will also
continue to communicate with shareholders on important
developments throughout the year. Our quarterly results are
supported by a combination of presentations and conference
call briefings, as was the announcement of our annual results
in February 2023.

The Company has established a comprehensive shareholder
engagement programme and encourages an open and
transparent dialogue with existing and potential shareholders.
For example, our UK General Counsel and our Company
Secretary also have an ongoing dialogue with shareholder
advisory groups and proxy voting agencies.

The Company was able to organise the Investor Day and
several investor road show visits this year.

Following the publication of the shareholder circular to
transfer the Company’s listing from the Premium Listing
segment to the Standard Listing segment of the LSE in
February 2023, the Company organised an investor road
show to consult with major shareholders.

How this stakeholder group influenced the Committee/Board agenda
and decision-making

• The Board receives feedback from investors at our

Investor Days and during meetings about how they view
Georgia Capital within the wider market. Raised matters
of interest are then discussed at Board meetings. At our
2022 Investor Day, we received direct feedback that
investors liked the enhanced focus on liquidity in particular,
which formed a key aspect of the new strategy.
• The Board receives feedback from investors via the

Chairman/CEO and the CFO who are in regular contact
with the Company’s major shareholders. This feedback
informs the Board’s decision-making.

• The Chairman/CEO, the CFO, the Advisor to the CEO and
the Head of Investor Relations each provide a standing
invitation to shareholders to meet and discuss any matters
they wish to raise.

• The SID acts as an intermediary for shareholders.
• Committee Chairs also make themselves available to
answer questions from investors. The Non-Executive
Directors attend regular Investor Days and are available
to answer questions.

• The Chairman has overall responsibility for ensuring that
the Board understands the views of major shareholders.
The Board is regularly kept informed of these views by
the Chairman as well as executive management and
the Investor Relations team and, to the extent deemed
appropriate, the Company has taken active steps to adopt
different ways of working in response to feedback
received from shareholders and other stakeholders.
Informal feedback from analysts and the Company’s
corporate advisors is also shared with the Board.
• We hold regular meetings with JSC Georgia Capital’s

existing bondholders and actively engage with potential
lenders to discuss our funding strategy. The Chairman/
CEO, Senior Independent Non-Executive Director and
members of the Board make themselves available to meet
with institutional investors when requested.

• Our comprehensive investor website

https://georgiacapital.ge is updated and reviewed
on a regular basis to ensure that information, including
matters relating to sustainability, is up to date. It provides
shareholders with access to the Company’s results, press
releases, investor presentations, analyst reports, details
on our corporate governance and corporate and social
responsibility framework and our leadership, as well as
other information relevant to our shareholders. We also
ensure that shareholders can access details of the
Company’s results and other news releases through the
London Stock Exchange’s Regulatory News Service.

• Please refer to the Resources and Responsibilities section
on page 82 of this report and the Sustainability Report
for further details on investor-led engagement activities
carried out throughout the year and the output of that
engagement.

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Key stakeholders

Activities undertaken throughout year

How this stakeholder group influenced the Committee/Board agenda
and decision-making

Employees

Types of engagement:
• Nominated Non-Executive Director
• Regular town halls
• Off-site and on-site meetings
• Feedback systems, e.g. employee satisfaction surveys

• Employee surveys are conducted across the portfolio
companies, and this year we conducted an employee
survey at the holding company level. Since the survey,
actions have been taken on some of the most important
issues raised by employees.

at our businesses

How the Board engages with employees:
The Board is encouraged to engage with employees outside
of formal channels, and workforce engagement includes visits
to sites and portfolio company offices. Details of these visits
are fed back to the Board so they are aware of any issues.

We believe that communicating with our employees is vital
and we provide information in a number of ways, including
via managers, presentations, email, intranet and regular
off-site meetings. We communicate information about our
corporate culture, the Company’s strategy and performance,
risks relating to its performance, such as financial and
economic factors, and our policies and procedures.

The Board has oversight of whistleblowing and routinely
receives reports arising from its operation.

• Management has been instructed to ensure that proposals
to the Board and Investment Committee are made in line
with stakeholders’ interests.

• The Nomination Committee continue to look at succession
planning and are conscious of ensuring a diverse pipeline
for the future.

• Please refer to the Resources and Responsibilities section
on page 82 of this report and the Sustainability Report for
further details on workforce engagement activities carried
out throughout the year, and the output of that
engagement.

• Board agendas from time to time consider governmental
issues that influence the wider Georgian market, which
can influence key investment decisions.
Investments are made in local businesses that will be
beneficial to the Georgian economy. This is evidenced
in the Company’s Responsible Investment Policy.

•

• Please refer to the Resources and Responsibilities section
on page 82 of this report and the Sustainability Report
for further details on community engagement activities
carried out throughout the year, and the output of that
engagement.

Wider community
and the
environment

Investments to support diversified economy

Types of engagement:
•
• Engagement with local communities
• Education
• Corporate website
• Volunteering

How the Board engages with the wider community:
The Group considers the interests of its main stakeholders
when developing the strategy and the processes to improve
its operations. Investing in local businesses helps us to
diversify and modernise the Georgian economy, and this
can be seen in the development of our different portfolio
companies.

Our hospitals and clinics and diagnostics businesses are
driving the modernisation and improvement of healthcare in
the country. Our renewable energy business is involved in
infrastructure programmes and ongoing structural market
reforms. Our auto service business contributes to overall
cleaner air and improved vehicle safety.

The Company believes that educating young people is
extremely important for the development of the community
as a whole. Georgia Capital is investing in schools to give
more learners access to high-quality education and facilities.

As part of our sponsorship and charitable activities, the
Group acts to conserve nature, promote and enhance access
to education and supports people with disabilities and special
needs. Our Senior Independent Non-Executive Director
volunteers as Chairman of the Caucasus Nature Fund,
a charitable foundation providing financial and technical
support to Georgia’s national parks.

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Directors’ responsibilities
Statements explaining the responsibilities of the Directors for preparing
the Annual Report and consolidated and separate financial statements
can be found on page 167 of this Annual Report.

A further statement is provided confirming that the Board considers the
Annual Report, taken as a whole, is fair, balanced and understandable
and provides the information necessary for shareholders to assess the
Company’s position and performance, business model and strategy.

Division of responsibilities
The Board has adopted written statements setting out the respective
responsibilities of the Chairman, Senior Independent Non-Executive
Director and Non-Executive Directors. Biographies for the Board
members are set out on pages 126 and 127. A summary of the
responsibilities of the Directors is set out below.

Chairman
• Guardian of the Board’s decision-making process.
• Ensures the Board as a whole plays a full and constructive part in

strategic decision-making.

• Sets the Board agenda.
• Ensures the Board receives accurate, timely and clear information.
• Shapes the boardroom culture and sets clear expectations.
• Ensures a formal and rigorous evaluation of the Board takes place

each year.

• Develops the Group’s strategy and commercial objectives.
• Leads communication with stakeholders.
• As CEO, is responsible for the operational and strategic management

of the Group and for running the Group’s business.

Senior Independent Non-Executive Director
• Provides a sounding board for the Chair and serves as a trusted

intermediary for the other Directors.

• Responsibility for an orderly succession process for the Chairman.
• Available to Non-Executive Directors and shareholders if they have

concerns which normal channels fail to resolve.

• Meets with other Non-Executive Directors for an annual appraisal

of the Chairman’s performance.

Non-Executive Directors
• Provide constructive challenge and specialist advice.
• Provide strategic guidance.
• Take into account the views of shareholders and other stakeholders.
• Scrutinise the performance of management.

Internal controls and risk management
The Company has a comprehensive system of internal controls in place,
designed to ensure that risks are mitigated and that the Company’s
objectives are attained. The Board is accountable for reviewing and
approving the effectiveness of internal controls operated by the
Company, including financial, operational and compliance controls, and
risk management. The Board recognises its responsibility in respect of
the Company’s risk management process and system of internal control
and oversees the activities of the Company’s external auditors and the
Group’s risk management function (supported by the Audit and Valuation
Committee), as such the Board conducts a review of its internal controls
and risk management framework on an annual basis (including one in
the current year of reporting).

A review of the Company’s risk management approach is further
discussed in the Strategic Report on pages 68 to 72.

For details on the management and mitigation of each principal risk
see pages 73 to 81.

The Group’s Viability Statement is detailed on pages 71.

Please refer to pages 139-144 for further detail in relation to the role
of the Audit and Valuation Committee.

The Group’s governance structure for risk management is illustrated on
pages 68 to 72.

Board induction, ongoing training, professional development
and independent advice
Board members are advised by the Company Secretary and the UK
General Counsel of the legal and regulatory obligations of a Director
of a company listed on the London Stock Exchange. All Directors have
access to the advice of the Company Secretary and the UK General
Counsel, as well as independent professional advice at the Company’s
expense, on any matter relating to their responsibilities. Details on
induction, ongoing training and professional development for Board
members are provided in the report of the Nomination Committee,
see pages 164-166.

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Company Secretary
The Board has appointed Link Company Matters Limited to act as
Company Secretary to Georgia Capital PLC. Link Company Matters
Limited is one of the UK’s largest professional services secretarial teams.

Re-election of Directors
All Directors are required under the Code to be elected or re-elected by
shareholders at the Company’s AGM in May 2023. The Board has set
out in its Notice of Annual General Meeting the qualifications of each
Director and support for election as applicable.

Workforce engagement
Directors regularly visit different sites and offices of portfolio companies
(as mentioned elsewhere in the report). Due to the COVID-19 pandemic,
this was not possible for most of 2020 and 2021, however, we were able
to return to in-person site visits in 2022. Additionally, two of the quarterly
Board meetings were held in Georgia, and dinners were organised with
the management teams of holding company and the portfolio
companies, allowing for informal and open exchange.

As Georgia Capital is a relatively small holding company with a diverse
number of portfolio companies, and given the relative independence
of these companies, the steps and tools used to encourage employee
engagement are developed within the companies themselves, and
shared with other portfolio companies as required, as oppose to a
“top-down” approach directed by Georgia Capital.

The Board recognises the importance of engaging with its workforce
and does so through a combination of informal and formal channels.
Kim Bradley will remain as the designated Non-Executive Director for
employee engagement up until the 2023 AGM. A replacement for Kim is
currently under consideration by the Nomination Committee. Mr Bradley
was appointed due his history of engagement with portfolio companies
in addition to the holding company, his relevant skillset, previous
commercial experience and his ability to engage positively with
stakeholders in different operational segments across the Group.

During 2022, mostly in the days before and after Board meetings,
Mr Bradley was able to hold in-person meetings in Georgia with business
leaders from the majority of the portfolio companies, on a company-by-
company basis, with the purpose of providing the leaders with a forum
in which to raise any matters, and to further understand how employee
engagement culture was progressing in-house. Constructive
conversations were held on workforce matters, morale, turnover and the
business leaders’ engagement with their employees. Mr Bradley and the
business leaders also discussed how the leaders themselves worked to
foster a spirit of open dialogue on workforce matters and build a strong
working culture within their organisations. Mr Bradley was encouraged
by the positive developments within the portfolio companies’ workplace
culture, and that this had largely been achieved independently of
top-down directives from Georgia Capital. Mr Bradley also met with
members of the holding company informally over coffee, at dinners
and during walk-arounds of the office to allow them to offer their views
and support channels of communication between the Board and
Georgia Capital’s workforce.

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INVESTMENT COMMITTEE REPORT

In order to ensure a two-way communication platform and an effective
means by which the views of the workforce can be included in the
Board’s decision-making, the DNED is responsible for reporting any
insights gleaned from any workforce engagement at Board meetings.
Mr Bradley noted that off-site visits and similar in-person events were
important in facilitating informal exchange between the Board and the
workforce, and also between management and the wider workforce.
The increase of post-pandemic socialising has also been beneficial
to the exchange of views between the different levels of the business,
allowing for easier communication and feeding of views from employees
up the management chain.

Please refer to the Resources and Responsibilities section on page 82 of
this report and the Sustainability Report for further details on workforce
engagement activities carried out throughout the year, and the output
of that engagement.

Georgia Capital: As our people are our main asset, we invest a lot
to help engage and motivate our staff. The Company has a small head
office (c.45 people) and we encourage an open-door policy – staff can
approach management at any time with any concern.

In 2022, attendance at the office was voluntary. For our employees who
decided to work from the office, we ensured that they were able to work
in a safe environment, following local legislation and guidance. Distance
and hybrid working environments facilitated staff engagement through
online platforms. Regular meetings organised by the CEO were held
with senior and middle management. Messages from these meetings
were cascaded down to all employees.

At our regular Board and Committee meetings, interaction with a number
GCAP holding company personnel occurs naturally as part of the
meeting where they present to the Board and/or participate in the
discussion. The DNED, SID and other Non-Executive Directors also
“walk the halls” during their visits and engage informally with the team.

Annual General Meeting
The Notice of Annual General Meeting is circulated to all shareholders
at least 20 working days prior to such meeting. All shareholders are
invited to attend the AGM, where there is an opportunity for individual
shareholders to question the Chairman and the Chairs of the principal
Board Committees.

After the AGM, shareholders can talk informally with the Directors.

As recommended by the Code, all resolutions proposed at the 2023
AGM will be voted on separately and the voting results will be announced
to the London Stock Exchange and made available on the Company’s
website as soon as practicable after the meeting. These will include all
votes cast for and against and those withheld, together with all proxies
lodged prior to the meeting. In the event that 20% or more of votes
are cast against a resolution, an explanation will be provided in the
announcement to the London Stock Exchange of the actions the
Company will be taking to address shareholders’ concerns. A follow
up announcement would then be made within six months of the AGM
regarding feedback received from shareholders and the subsequent
actions taken by the Company.

See page 213 for further shareholder information and page 126 for
further information on shareholder engagement.

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Diversity Policy
We value diversity in all forms in accordance with our Diversity Policy.
More information on the Company’s Diversity Policy, its objectives,
implementation and results can be found on page 86.

For further information, please see the Company Diversity Policy, which
can be found at https://georgiacapital.ge/governance/cgf/policies.

For a breakdown of the gender diversity figures for the Company,
please refer to the Resources and Responsibilities section on page 86
of this report.

INDEPENDENT AND
OBJECTIVE REVIEW
AND CHALLENGE OF THE
GROUP’S INVESTMENTS

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Kim Bradley
Chairman of the
Investment Committee

Dear Shareholders
I am delighted to report on the work of the Investment Committee (the
Committee) during 2022. The Investment Committee was established to
provide an independent and objective review of investment opportunities
and performance, within the scope of its Terms of Reference.

Composition
The composition of the Investment Committee is a matter for the
Board, on the recommendation of the Nomination Committee and
in consultation with the Chairman of the Investment Committee.
Presently, all Directors are members of the Investment Committee.

The Investment Committee is central to the Company’s investment
process. It plays the key role in making decisions on portfolio investments
and exits and managing all aspects of investment policy and strategy.
It scrutinises, challenges and ultimately either approves or disapproves
investment and divestment proposals and initiatives, including significant
add-on investment for the existing portfolio companies. It also considers
the commercial terms of Major Transactions1 and reviews the pipeline
of investment opportunities ensuring that management retains strategic
focus. The Committee is also a key part of Georgia Capital’s corporate
governance framework – all Directors are members of the Investment
Committee, which is chaired by me, an Independent Non-Executive
Director, and not by the Chairman/CEO.

This year, the Committee focused on reviewing the strategies and
business plans of some of the portfolio companies as well as a number
of proposals from management. The Committee also oversaw the
implementation of the Company’s Responsible Investment Policy
and will play a key role in ensuring it is adhered to going forward.

In addition, the Committee assisted with the implementation of the
Group’s updated 2022 strategy, details of which can be found in the
Strategic Review in this report.

Kim Bradley
Chairman of the Investment Committee
23 March 2023

At the time of writing, the composition of the Investment Committee
is under review.

Key purpose and responsibilities
The Investment Committee is responsible for managing all aspects
of investment policy and its strategy for the Company and provides
oversight of the Company’s investments within strategy and risk
frameworks. In addition, the Investment Committee’s responsibilities
include:
• selecting investment opportunities based upon recommendations
of the executive management; such recommendations to be based
upon in-depth, rigorous analysis (of business plans, financial
statements, projections, risks and rewards, fit with the Company’s
strategy, etc.) as well as the legal structure of the investment;

• ensuring that the Company’s Responsible Investment Policy is applied;
• considering divestment opportunities based upon the

recommendations of the executive management team; such
recommendations to be based upon the review of the potential
divestment target, assessment of the potential buyer universe,
analysis of the optimal transaction structure and a detailed outline
of institutionalised sales process to be followed;
reviewing the material commercial and legal terms of relevant
Major Transactions;

•

• assessing the risks and rewards and general attractiveness and

suitability of proposed Major Transactions;

• where it deems appropriate, making investment recommendations

and providing ongoing guidance on pricing, contractual negotiations
and other considerations prior to signing;
reviewing each Major Transaction and its development at least twice
per year, or more often if necessary; and

•

• ensuring that management has the appropriate plans and controls
in place, with the necessary resources and capability to manage
the investment risk framework.

“Major Transaction” is an investment opportunity, acquisition or disposal which is in excess of GBP 2.5 million.

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AUDIT AND VALUATION COMMITTEE REPORT

Key activities
The Investment Committee’s role is to provide oversight of investment
activity and challenge management where appropriate. As reported
elsewhere in this Annual Report on page 129 an important part of this
process is the visits to portfolio companies and the meetings with senior
management that take place throughout the year, which gives members
of the Committee real insight into the operations and is fundamental to
the Board’s approach to corporate governance. The Committee
continued to revisit in detail the business plans and strategy of certain
portfolio companies with particular attention on the impact of the current
macroeconomic climate.

Elsewhere in this Annual Report, you will read about how the Company
is responding to climate change and its new disclosures on Climate
change risks, opportunities and overall climate change matters.
The Committee has been driving this beyond the requirements,
and in February 2022 approved a new Responsible Investment Policy.
The Policy is integrated into our investment and portfolio management
processes and procedures. This enables environmental and social
aspects to be captured where they may directly or indirectly affect
corporate and portfolio company performance or impact stakeholders.
The policy is available on website at
https://georgiacapital.ge/governance/cgf/policies.

The Committee reviewed the local bond issuances by JSC Georgia Real
Estate (US$ 35 million) and Georgian Renewable Power Operations JSC
(US$ 80 million). The transactions, completed during challenging debt
capital market conditions, represent milestone achievements for the
businesses. More details on these transactions are set out on page 13
of this report.

The Committee also reviewed the Modified Dutch Auction, conducted
by JSC Georgia Capital, through which it bought back US$ 29.2 million
Eurobonds. In addition to the tendered amount, it had accumulated
US$ 87.0 million Eurobonds through repurchases on the open market
in 2022.

The Committee reviewed the performance and valuation of the
investments in the beer and wine businesses, education, retail and
banking sectors. Each of these reviews included a detailed review of
the respective markets in which these businesses operate. An important
component of these reviews is monitoring of the exit opportunities and
where appropriate, an exit strategy.

During the year, the Company’s cash investments amounted to
GEL 53.4 million, of which:
• GEL 6.3 million was invested in the education business, in line with

The disposal realised US$ 180 million cash proceeds in February 2022
and created substantial value for our shareholders. This also further
validates GCAP’s NAV and marks the delivery of the Company’s key
strategic priority, announced in November 2020, to dispose of one
of our large businesses. At the same time, proceeds from the sale
also have a significant positive impact on the Group’s leverage profile.

During the year, the Committee has received regular briefings on the
impact of the war between Russia and Ukraine, which began in February
2022. The conflict has created significant uncertainties in the economic
environment in the region and beyond. However, with limited direct
exposure to Russia or Ukraine, our portfolio of high-quality and defensive
companies has remained resilient in the face of geopolitical tensions.

In the Strategic Report (page 64), you will find a description of how the
Directors discharge their duties under section 172 of the Companies Act
2006 when making decisions such as these. It is also worth noting that
at each of its quarterly meetings the Investment Committee receives
a detailed update on the regional and Georgian economy and the
prevailing political and societal climate. This information is crucial
to the Investment Committee’s decision-making process.

Since the last Annual Report was published, an external evaluation
of the effectiveness of the Board was undertaken which encompassed
the Investment Committee. The evaluation concluded that there was
appropriate supervision, challenge and robust discussion.

Despite the continued strong recovery of the Georgian economy during
2022, we expect 2023 to still be a challenging year as the uncertainties
around political and economic risks still remain.

Priorities for 2023
• Closely monitor and collaborate with portfolio companies on recovery

pace, given uncertainty over continued fiscal stimulus in 2022.
• Disciplined exits of the subscale portfolio companies over the next

two to three years.

• Ongoing in-depth review of portfolio businesses and investment

monitoring meetings that will complement the Investment
Committee’s annual oversight.
• Focus on operational execution.
• Focus on how investments are performing against the basis on which

approval was given.

• Deleveraging GCAP HoldCo by bringing down the NCC ratio below

15% by December 2025.

• Reduce and maintain portfolio companies’ leverage to respective

targeted levels.

• Ensuring portfolio monitoring and review metrics remain valid

GCAP’s capital allocation outlook.

and appropriate.

• GEL 19.2 million was allocated to the housing development business

• Review the Responsible Investment Policy.

for the bridge financing of the business.

• GEL 27.4 million represents the conversion of the US$ 10 million
shareholder loan to the renewable energy business into equity.

The investments in 2022 also include GEL 142.6 million in loans
converted into equity, primarily to our beverage and real estate
businesses, and GEL 27.4 million in the conversion of a US$ 10 million
shareholder loan to the renewable energy business.

In 2022, the Committee was regularly updated and consulted on the
underlying operating performances across the Company’s private
portfolio, noting that it remained solid. In addition, the Committee
considered an acquisition in the education business which was expected
to complete in 2023.

Under the Committee’s oversight, the Company also demonstrated
progress on the divestment of assets. In 2022, the Company successfully
completed the disposal of an 80% stake in the water utility business,
which represents our most significant monetisation event to date and
marks the completion of the full investment cycle for one of our large
portfolio businesses: from acquisition and development to cash exit.

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138

COMMITMENT TO
COMPREHENSIVE
AND TRANSPARENT
REPORTING

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David Morrison
Chairman of the Audit
and Valuation Committee

Dear Shareholders,
I am pleased to present the Audit and Valuation Committee’s
(the Committee) report for the year ended 31 December 2022.

The Committee devotes significant time to its tasks and met 10 times
during the year. Our principal focus in 2022 was oversight of valuations
of private portfolio companies and related valuation policies and
procedures. The Committee reviewed in detail quarterly, half-yearly
and annual valuations of the Company’s private portfolio companies
and monitored compliance with the Valuation Policy and fair value
measurements under IFRS 13.

I reported last year that the Committee conducted a full tender process
for the provision of external audit and audit-related services at the
beginning of 2022. The tender exercise and subsequent appointment
of PwC is discussed in detail later in this report.

Through the Head of Internal Audit, the Committee, along with
management, oversees the Internal Audit functions of the GHG
businesses (Hospitals, Retail (pharmacy), Medical Insurance and Clinics
and Diagnostics). A new Head of Internal Audit, Giorgi Berishvili, was
appointed during the year and the Committee oversaw the appointment
process and worked with Mr Berishvili to further develop the Internal
Audit function.

Other important areas of focus in 2022 included consideration/
monitoring of the financial reporting implications of the disposal of the
water utility business, and the implications of the Russia-Ukraine war
and the residual impact of the COVID-19 pandemic on the valuations of
the Company’s unquoted investments. Although the Georgian economy
has demonstrated great resilience in 2022, tensions in our region
continue to present challenges.

Kim Bradley will not be seeking re-election at the 2023 AGM and the
composition of the Committee from that date is under consideration
by the Nomination Committee. We were pleased to be able to hold
some meetings in person in 2022 following almost two years of travel
restrictions due to the COVID-19 pandemic. Further details about our
work are set out on the pages 140-144.

David Morrison
Chairman of the Audit and Valuation Committee
23 March 2023

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Introduction and key purposes and responsibilities
This report outlines the functioning and activities of the Committee
during the reporting period, including an overview of the key areas
of activity and principal topics covered at each Committee meeting.

On behalf of the Board, the Committee monitors the integrity of the
Company’s Annual Report and Accounts and oversees the conduct of
financial reporting and the valuation process that drives it. The Company
is an investment entity as defined in IFRS 10 and, as a result, measures
its investments in portfolio companies at fair value (through profit or loss)
instead of consolidating them. The Committee also oversees internal
controls, risk management and Internal Audit, and supervises the work
of our external auditor.

The Chairman of the Committee reports to the Board on how it has
discharged its responsibilities at a subsequent Board meeting and
makes recommendations to the Board. Details of the Committee’s
roles and responsibilities are outlined in the Committee’s Terms of
Reference. These Terms of Reference are subject to annual review.

Composition and operations of the Committee
The Committee members are David Morrison (Chairman), Kim Bradley
and Massimo Gesua’ sive Salvadori, all of whom are Independent
Non-Executive Directors. Caroline Brown ceased to be a director
following the 2022 AGM and Kim Bradley joined the Committee on
the same date.

For the purposes of the Code and of Disclosure, Guidance and
Transparency Rule 7.1, the Board is satisfied that all members of the

Activities of the Committee in 2022
The table below summarises the Committee’s activity during 2022.

Area of focus

Core activities

Committee have recent and relevant financial experience and the
Committee as a whole has competence relevant to the sector in which
the Company operates. Please refer to the detailed biographies of the
Committee members on pages 126-127, which include their financial
experience and reasons for appointment to the Board and the
Committee.

The meeting attendance of the Audit and Valuation Committee can
be seen on page 131. The Company Secretary is Secretary to the
Committee and attends all meetings. Meetings are also attended by the
Chief Financial Officer, the Head of Technical Accounting and Valuation,
the Head of Finance and the Head of Internal Audit.

In addition, representatives of PwC, the Company’s external auditor, are
invited to attend several meetings of the Committee each year. On some
occasions, invitations to attend are extended to other members of the
Board and management where necessary, to provide a deeper level of
insight into key issues and developments. The Committee also meets
each year with the external auditor and the Head of Internal Audit without
management present to allow discussion of any issues of concern in
greater detail.

The Committee works on a planned programme of activities focused
on key events in the annual financial reporting cycle and standing items
that it considers regularly under its Terms of Reference. The Committee
also reacts to business developments as they arise. Mr Morrison will be
available at the AGM to respond to any questions from shareholders
that may be raised on the Committee’s activities.

Financial reporting • Reviewed the appropriateness and disclosure of accounting policies and practices.

• Reviewed the Annual Report and Accounts content and advised the Board on whether the Annual Report was fair,

balanced and understandable.

• Reviewed the Company’s annual and interim financial statements and quarterly accounts relating to the Company’s
financial performance, including the significant financial reporting policies and judgements contained in them and,
in particular, the valuation of portfolio companies (see below).

• Reviewed and recommended to the Board for its approval the Going Concern and Viability Statements.
• Reviewed overall presentation of APMs, evaluated clarity of reconciliations and challenged the nature of adjusting items.
• Reviewed the accounting for the Modified Dutch Auction executed by JSC Georgia Capital to repurchase and cancel

a portion of its outstanding Eurobond, maturing in March 2024.

• Reviewed the Company’s Sustainability Report and TCFD disclosures and referred it to the Board for approval.

Valuation

• Ensured that the Valuation Policy is continuously and consistently applied.
• Ensured that the Valuation Policy complies with IFRS 13, Fair Value Measurement, and with the obligations within any

agreements in place, legislation, regulations, guidance and other policies of the Company.

• Reviewed quarterly, half-yearly and annual valuations of the Company’s portfolio investments in light of recent market

developments and the future business plans of portfolio companies, including for the large and investment stage private
portfolio companies, summaries prepared and presented to it by management of reports by an independent valuation
firm, and monitored the compliance with the Valuation Policy and IFRS 13.

• Considered the extent of valuation disclosure in the Company’s annual and interim reports.

Risk and control
environment

• Reviewed and assessed the effectiveness of GCAP internal controls and risk management processes.
• Reviewed IFRS 10 requirements and ensured that the Company continues to meet the definition of investment entity.
• Reviewed the results of risk identification and assessment work performed by management.
• Reviewed the Board’s approach to assessing the Company’s long-term viability.
• Reviewed reports from the external auditor where they have looked at internal controls as part of the annual audit

process.

• Reviewed the Company’s principal risks and uncertainties statement included in the Annual Report and supporting

stress test scenarios.

• Regularly monitored the internal and external environment to ensure that any new or emerging risk is identified in a

timely manner and responded to appropriately. As a result of the principal risks assessment, no new risks relating to
the Company or the portfolio businesses were identified. Risks relating to COVID-19 and the Russia-Ukraine war were
monitored regularly throughout the year.

Area of focus

Core activities

Internal Audit

External audit

Governance

• Reviewed reports of internal audits, monitored action points and addressed actions arising from audit visits.
• Reviewed and approved the 2022 Internal Audit Plan.
• Monitored and reviewed (i) the effectiveness of the Company’s Internal Audit function via a quality assessment report
which examines the Internal Audit function for conformance with mandatory internal audit training requirements,
whether the Audit Committee and management expectations of Internal Audit are being met, and opportunities for
improvements are identified; and (ii) implementation of the enhanced Internal Audit function agreed with Internal Audit.

• Approved the annual budget for the Internal Audit function.
• Reviewed the Internal Audit Charter.

• Completed an external audit tender process for 2022 leading to the appointment of PwC.
• Monitored the effectiveness and performance of PwC.
• Reviewed and confirmed the objectivity and independence of the external auditor.
• Reviewed the 2022 Audit Plan including the approach, scope and risk assessments and significant audit risks.
• Agreed the terms of the external auditor’s engagement and fees.
• Approved the policy for non-audit fees.

• Reviewed governance processes in place to oversee the valuation of portfolio companies.
• Reviewed and approved the Terms of Reference of the Audit and Valuation Committee.
• Reviewed and approved the Whistleblowing, Anti-Bribery and Anti-Corruption and Non-Audit Services Policies.
• Evaluated the effectiveness of the Committee.

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Significant accounting
and financial judgement
matters considered

How the Committee addressed the matter

Portfolio company
fair value estimation
and disclosure

Reviewed quarterly, half-yearly and annual valuations of the Company’s portfolio investments presented to it by
management. Reviewed and challenged assumptions and judgements applied by management and third-party valuation
experts and the appropriateness of their scope of work.

The Committee considered and challenged whether management followed appropriate valuation standards as reflected
in the Valuation Policy and used appropriate judgement. The Committee considered in discussions with the external
auditor the methods used to account for significant or unusual valuations where different approaches are possible (unusual
valuations include first-time valuations of the greenfield projects and valuation of the private portfolio companies at sale
price). The Committee also challenged the implications relating to climate change, the impact of the Russia-Ukraine war
and global macroeconomic trends in the valuations of the Company’s portfolio investments. As a result, the Committee
was satisfied with the appropriateness of valuation methods used and the reasonableness of assumptions and judgements
applied in valuation.

The Committee considered management’s assessment of the Company’s ability to continue as a going concern and its
long-term viability taking into consideration the ongoing impact of global macroeconomic trends and the Russia-Ukraine
war. The Committee reviewed and challenged the inputs and assumptions made during the assessment and ensured that
disclosures in the Annual Report and Accounts are appropriate. The Committee was satisfied with the reasonableness of
the inputs and assumptions made during the assessment, as well as the sufficiency and appropriateness of disclosures.

Going concern
and viability

Investment entity
status

The committee continued assessing the Company’s compliance with IFRS 10 criteria for meeting investment entity status.
In making this assessment, the Committee considered each criteria and characteristic described in IFRS 10, as well as
developments during the year, and is satisfied that the Company continues to meet the definition of an investment entity
as of 31 December 2022.

Fair, balanced and
understandable
reporting

See below.

Key activity highlights:
Financial reporting and valuation
The following discussion adds colour to the summary of the activities
described in the table above. In each area of activity, the Committee
considered the financial implications of a number of business
developments, with a major focus on the impact of difficult global
and regional economic conditions and the Russia-Ukraine war.

A principal responsibility of the Committee is to consider significant areas
of complexity, judgement and estimation that have been applied in the
preparation of the financial statements. This includes ensuring that the
Annual Report and Accounts and the quarterly and half-year reporting,
taken as a whole, are fair, balanced and understandable and comply
with disclosure requirements as discussed in greater detail below.

During 2022, the Committee received detailed reporting from the
external auditor in respect of key areas of audit focus and these were
in some instances discussed without management present. In addition,
regular reports were received from the CFO on the financials and internal
controls and where appropriate, reports and feedback from internal and

external advisors were presented to the Committee to enhance the
quality of our reporting.

As the investment portfolio comprises a number of private companies,
the Audit and Valuation Committee and our external auditors spend a
significant amount of time considering and challenging management’s
valuations. The assessment of fair value is subjective and requires a
number of significant and complex judgements to be made by
management. In 2022, the Committee oversaw the independent
valuations, performed by third-party valuation experts, establishing fair
value ranges for all large and investment stage private portfolio
companies, of which the renewable energy and education businesses
were valued by a third-party valuation firm for the first time. For these
businesses, the valuation methodology applied by the independent
experts was reviewed in detail by the Committee, as well as key
assumptions used and the most appropriate point in the established
range was selected for each business. For the “other” private portfolio
companies, the Committee reviewed and challenged the valuation inputs
selected by management as for prior periods. With the external auditors,
the Committee reviewed in detail both (i) the auditors’ assessment of the

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methodologies applied by the independent valuation company for
the large and investment stage private portfolio companies and by
management for the “other” assets, and (ii) the basis for their
independent assessment of the valuations. The Committee also ensured
that the valuations reflected climate change, the impact of the Russia-
Ukraine war and global and regional economic trends, as well as the
future business plans of portfolio companies.

Full details on our valuation policies and procedures which are overseen
by the Committee can be found on page 71 (please see valuation
workgroup) and page 101 (please see valuation methodology). The
Committee also reviewed and challenged the inputs used in the valuation
of the water utility business. Following the disposal of an 80% stake, the
fair value of the remaining 20% interest in the business was assessed by
the application of the pre-agreed put option multiple to the normalised
LTM EBITDA of the business.

Management, under the supervision of the Committee, considers the
suitability of the accounting policies which have been adopted, ensuring
that key reporting estimates and judgements were appropriate, including
the assessment of appropriateness of continuing the investment entity
accounting, and ensuring that the external auditors were afforded timely
and full access to relevant information.

Using our own independent knowledge of the Company and its portfolio
investments, but also taking into account the external auditor’s
assessment of risk, the Committee has, where necessary, challenged
the actions, estimates and judgements of management in relation to

the preparation of the financial statements. When considering financial
reporting, the Committee assesses compliance with relevant accounting
standards, regulations and governance codes. In particular, the
Committee continues its robust review of going concern and viability
assessments under a number of scenarios.

Fair, balanced and understandable reporting
The Committee reviewed quarterly, half-yearly and annual financial
statements, and performance updates and assessed whether they
provide a true and fair view of the Group’s affairs at the end of the period
as well as provide shareholders with the necessary information in a fair,
balanced and understandable way in order to enable them to assess
the Group’s position, performance, business model and strategy.

As part of that review, the Committee considered the APMs used by
the Company, challenged management and is satisfied that these are
appropriate. It also considered the prominence of the APMs in the
reporting. The Committee confirmed that the requirements of the
Disclosure, Guidance and Transparency Rules and the mandatory
guidelines issued by the European Securities and Markets Authority on
APMs were met and the reconciliation between the APMs and the IFRS
results was clear, balanced, and understandable. You can read more
about APMs, including the applicable IFRS reconciliations, on pages
96-100 of the Annual Report. In reviewing the 2022 Annual Report and
Accounts, the Committee considered whether, taken as a whole, it is fair,
balanced and understandable and provides the information necessary
for shareholders to assess the Company’s performance, business
model and strategy.

When forming its opinion, the Committee considered the following questions in order to encourage challenge and assess whether the Annual Report
was fair, balanced and understandable:

Is the Annual Report
fair?

Is the whole story presented?

•
• Have any sensitive material areas been omitted?
• Are the KPIs disclosed at an appropriate level based on the financial reporting?

Is the Annual Report
balanced?

•
•
•

Is there a good level of consistency between the front and back sections of the Annual Report?
Is the Annual Report a document for shareholders and other stakeholders?
Is there good level of balance between IFRS figures and alternative performance measures?

Is the Annual Report
understandable?

Is there a clear and understandable framework to the report?
Is the Annual Report presented in straightforward language and a user-friendly and easy to understand manner?

•
•
• Does the Annual Report provide sufficient information to understand the Group’s performance, business and strategy,

as well as its corporate governance and risk management frameworks?

In making this assessment, we:
• satisfied ourselves that there was a robust process of review

•

and challenge at different levels within the Group to ensure balance
and consistency;
reviewed several drafts of the 2022 Annual Report and Accounts and
directly reviewed the overall messages and tone of the Annual Report
with the CEO and CFO; and

• considered other information regarding the Group’s performance
and business presented to the Board during the period, both from
management and the external auditor.

After consideration of all this information, we are satisfied that, when
taken as a whole, the Annual Report and Accounts is fair, balanced
and understandable, and provides the information necessary for
shareholders to assess the Group’s performance, business model
and strategy.

Risk management and control environment; Internal Audit
The Committee assists the Board in fulfilling its responsibility to review
the adequacy and effectiveness of the controls over reporting and risk.
Where areas for improvement are identified, the Committee ensures
that there are the correct processes in place to effectively take action
to address them. Further information on risk management and internal
controls can be found on pages 68-72.

The Committee is supported by a number of sources of internal
assurance within the Group in order to discharge its responsibilities.
As part of the regular reporting from the Chief Financial Officer and
the finance team regarding the operating performance of the portfolio
companies, the strength of the internal control environment is
considered. Management also provides updates on how risks,
for example, bribery and information security, are managed within
particular business areas, and updates are presented to the Board
or the Committee as appropriate. Further, during the year, the Internal
Audit function continued to assist management to perform certain
risk identification and assessment activities at the private portfolio
companies, the results of which were presented and discussed
at the Committee meetings.

The Committee monitors the scope and effectiveness of the Group’s
Internal Audit function. It also reviews, approves and oversees the
Internal Audit Plan, which is designed using a risk-based approach
aligned with the overall strategy of the Group. Throughout the year,
we received regular reports from Internal Audit on the progress of the
Internal Audit Plan and on the audits themselves, including significant
findings as well as the corrective measures recommended to
management. We also reviewed and monitored management’s
responsiveness to the corrective measures and found that, in general,
management accepted recommendations and used them as a basis
to improve processes. Following almost two years of meeting and travel

142

restrictions that hindered the Internal Audit programme, the programme
is now back on track. The Committee also reviewed the new Head of
Internal Audit’s proposals to enhance the effectiveness of the Internal
Audit function and to raise its profile across the Group.

Throughout the year, the Committee also reviews the regular interim
reports from the external auditor, which include the external auditor’s
observations on risk management and internal financial controls
identified as part of its audit.

The processes described above ensure that the effectiveness of the
controls is reviewed on an ongoing basis, and we are pleased to report
that no significant weaknesses in our risk management processes or
internal controls were identified this year.

Internal Audit effectiveness
As noted above, the Committee continued, on behalf of the Board,
to oversee the Internal Audit function, which serves as independent
assurance over the adequacy of the systems and processes of risk
management and control across the Company.

The Head of Internal Audit has direct access to the Committee and
the opportunity to discuss matters with the Committee without other
members of management present. We also monitor the resources
dedicated to Internal Audit as well as the relevant qualifications and
experience of the team.

We reviewed the effectiveness of the Internal Audit department by
considering progress against the agreed plan, taking into account the
need to respond to changes in the Group’s business and the external
environment. During the year, Internal Audit provided assurance across
a range of areas, including compliance process in Georgia Capital, sales
and accounts receivable in beverages, inventory and cash management
in auto services, corporate sales in pharmacy, and procurement and
human resource cycles in various portfolio companies. We also
considered the quality of the reporting by Internal Audit to the Committee
and the ability of Internal Audit to address unsatisfactory results. On this
basis, we concluded that the Internal Audit function is effective and
respected by management, and that it conforms to the standards set by
the Institute of Internal Auditors. The standards applied to Internal Audit
are the “International Standards for the Professional Practice of Internal
Auditing” (Standards) contained in the “International Professional
Practices Framework” (IPPF) issued by the Institute of Internal Auditors
(IIA). These require Internal Audit functions to develop and maintain a
Quality assurance and Improvement Program which includes a periodic
independent Quality Assessment of Internal Audit at least once every
five years and ongoing internal monitoring of the performance of the
Internal Audit activity. The Committee has endorsed a plan by the new
Head of Internal Audit to have an external assessment of the Internal
Audit function completed by the end of 2023.

External audit
Oversight of the relationship between Georgia Capital and the external
auditor is one of the Committee’s key responsibilities. With respect to our
responsibilities for the external audit process on behalf of the Board, we:
• approved the annual Audit Plan, which included setting the areas

of responsibility, scope of the audit and key risks identified;

• oversaw the audit engagement, including the degree to which the
external auditor was able to assess key accounting and audit
judgements;
reviewed the findings of the external audit with the external auditor,
including the level of errors identified during the audit;

•

• monitored management’s responsiveness to the external auditor’s

•

findings and recommendations;
reviewed the qualifications, expertise and resources of the external
auditor;

• monitored the external auditor’s independence, objectivity and

compliance with ethical, professional and regulatory requirements;
recommended the appointment of the external auditor; and
reviewed audit fees.

•
•

Audit tender
PwC was appointed by shareholders at the 2022 AGM as the Group’s
statutory auditor for a three-year period, following a competitive tender
process conducted for the provision of external audit services for three
years (2022, 2023 and 2024) beginning with the review of Financial
Statements for six months ending 30 June 2022. This process was
fully described in the Audit and Valuation Committee report in the 2021
Annual Report (page 141). Prior to the appointment of PwC at the 2022
AGM, the Group’s auditor was Ernst & Young.

For the audit of the Financial Statements in this Annual Report, the
Company complied with the mandatory audit processes, including
The Statutory Audit Services for Large Companies Market Investigation
(Mandatory Use of Competitive Tender Processes and Audit Committee
Responsibilities) Order 2014 (“CMA Order”), and the Committee
complied with the responsibility provisions set out in the CMA Order
relating to: (a) putting the audit services engagement on tender every
ten years; and (b) strengthening the accountability of the external
auditors to the Committee, including: requiring that only the Committee
is permitted to agree to the external auditors’ fees and scope of services;
influence the appointment of the audit engagement partner; make
recommendations regarding the appointment of auditors; and authorise
the auditors to carry out non-audit services.

Auditor effectiveness
We have an established framework for assessing the effectiveness
of the external audit process. This includes:
• a review of the Audit Plan, including the materiality level set by

•

the auditor and the process they have adopted to identify financial
statements risks and key areas of audit focus;
regular communications between the external auditor and both the
Committee and management, including discussion of regular papers
prepared by management and the external auditor;
regular discussions with the external auditor (without management
present) and management (without the external auditor present)
in order to discuss the external audit process;

• a review of the final audit report, noting key areas of auditor

judgement and the reasoning behind the conclusions reached; and

• a review of the annual FRC Audit Quality Inspection Report of the

external auditor.

As referenced in the Company’s last annual report, an assessment of
the effectiveness of the external auditor was carried out during the 2022
audit through the use of a questionnaire completed by all Committee
members and also the Chief Financial Officer, members of the finance
team and the Company Secretary. The questionnaire addressed a
number of issues including:
•

the quality of the auditors’ involvement and their understanding
of the Company;

• co-ordination between the London and Tbilisi offices;
• governance and independence;
• audit scope, planning and execution; and
• quality of the challenge to management and the Committee from

the external auditor.

Following which, the Group went through an audit re-tender process.
On completion of the audit process for this financial year, the Committee
will seek to undergo a similar audit effectiveness review exercise.

The Chairman engages directly with the relevant PwC audit Lead
Partner, Allan McGrath.

An example of where PwC has demonstrated notable professional
scepticism and challenge has been on the valuation methodology
for auditing the valuations of the Group’s portfolio companies.

Auditor independence
The Committee has the responsibility for developing, implementing and
monitoring policies and procedures on the use of the external auditor
for non-audit services, which help to ensure that the external auditor

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maintains the necessary degree of independence and objectivity.
This is supported by the Company’s Non-Audit Services Policy.

The Committee has undertaken a formal assessment of PwC’s
independence, which included a review of: a report from PwC describing
their arrangements to identify, report and manage any conflicts of
interest, and their policies and procedures for maintaining independence
and monitoring compliance with relevant requirements; and the value
of non-audit services provided by PwC. PwC has confirmed that they
believe they remained independent throughout the year from the date
of their appointment at the May 2022 AGM, within the meaning of the
regulations on this matter and in accordance with their professional
standards.

Non-Audit Services Policy
The Committee reviewed the Non-Audit Services Policy during 2022,
safeguarding the external auditor’s independence and objectivity.
The provision of non-audit services by our external auditors aligns with
the Revised Ethical Standard. Any work other than for audit or review of
interim statements to be undertaken by the external auditor now requires
authorisation by the Committee except in very narrow circumstances.
The Group’s Non-Audit Services Policy is available on our website at:
https://georgiacapital.ge/governance/cgf/policies.

The ratio of non-audit fees to audit fees for 2022 is 0:1. As indicated in
Note 9 of the audited IFRS financial statements for 2022, the total fees
paid to the external auditor for the year ended 31 December 2022 was
GEL 1.6 million. The Committee is of the view that engaging PwC on
occasions for non-audit work is likely to be the most efficient method
of having those particular services delivered to the Company, and does
not consider this work would compromise the independence of the
external auditor.

Continuing education and training
The entire Board has received training on the Code, and often receives
information and regulatory updates that could impact the work of the
Committee. The Committee received updates on UK regulatory audit
reforms and were informed of the International Private Equity and
Venture Capital Valuation (IPEV) guideline alterations.

Priorities for 2023
Our priorities for 2023 include among others, continued focus on:
• monitoring new and emerging risks, including the Group’s continued

response to the war in Ukraine;

• monitoring compliance with the Group’s valuation policy, individual
portfolio company valuations and the effectiveness of external
valuations;

• monitoring the financial reporting implications of strategic actions
taken by the Group, including dispositions and acquisitions;
• ensuring continued integrity and balance in the Group’s financial

reporting;

• monitoring the control environment and its appropriate roll-out

at the various portfolio companies;

• development of the Internal Audit function around the new Head

INNOVATIVE ALIGNMENT
OF REMUNERATION
WITH SHAREHOLDERS’
INTERESTS AND
EXPERIENCE

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of Internal Audit;
review compliance with TCFD requirements and referred these
matters to the Board, where necessary;
following developments on the planned enactment of legislation
in the UK around audit and corporate governance reform;
• continuing to build a good working relationship with PwC; and
•

review and incorporate, where possible, the FRC’s publication of
a consultation on a draft minimum standard for audit committees.

Compliance
During 2022, the Company complied with the CMA Order and the Code.

David Morrison
Chairman of the Audit and Valuation Committee
23 March 2023

Governance
Whistleblowing, conflicts of interest, anti-bribery and anti-
corruption
The Committee conducts an annual review of the Company’s policies in
its remit, and it is the responsibility of the Committee to ensure that there
is a robust governance framework and effective procedures are in place.

This included a review of the Whistleblowing Policy. Under the Code,
it is the responsibility of the Board to have oversight of whistleblowing
within the Company and accordingly, following its review of the policy
the Committee made an appropriate recommendation to the Board.

The Committee is responsible for the Conflicts Authorisation Policy
through which we assess actual and potential conflicts of interest
and assist the Board in its review of the permissibility of such conflicts.
The Board continues to monitor potential conflicts of interest, and
recommends to the Board to consider whether these should be
authorised.

The Committee keeps under review the Group’s Anti-Bribery and
Anti-Corruption Policy and procedures and receives reports from
management on a regular basis in relation to any actual or potential
wrongdoing. There were no significant findings in 2022.

Committee effectiveness review
Since the last Annual Report was published, an external evaluation
of the effectiveness of the Board was undertaken which encompassed
the Audit and Valuation Committee. The effectiveness evaluation
concluded that there was appropriate supervision and challenge.

Jyrki Talvitie
Chairman of the
Remuneration Committee

Dear Shareholders
I am pleased to present the Directors’ Remuneration Report for the year
ended 31 December 2022, which was a renewal year for our Directors’
Remuneration Policy.

Directors’ Remuneration Policy renewed
Further to strong support by shareholders of the 2019 Directors’
Remuneration Policy, as disclosed in last year’s Annual Report we did not
make any substantial changes to the 2022 Directors’ Remuneration Policy.

(as compensation vests in tranches, the shareholding is built up
organically). Shareholding requirements are to be maintained for
two years’ post-employment.

• Both fixed salary and variable compensation vest over several years

and Irakli Gilauri has no cash salary and no cash bonus.

• Malus and clawback provisions are consistent with best practice.
Unusually, malus may also be triggered in certain circumstances
over the salary shares.

The Remuneration Committee was pleased that the Directors’
Remuneration Policy received 94% approval at the 2022 AGM.

The Directors’ Remuneration Report also received 94% approval at the
2022 AGM. The Committee has been strongly encouraged by this level
of shareholder support.

Overview of remuneration structure
We believe that our Executive Director should fully share the shareholder
experience and are pleased that our shareholders strongly supported at
the 2022 AGM that our highly unusual shareholder-aligned approach to
remuneration should be retained.

Our Executive Director Irakli Gilauri’s salary, as well as his performance-
based remuneration, is comprised of deferred shares alone. Salary and
the maximum opportunity for the performance-based remuneration
(discretionary deferred shares) are set in a number of shares. By setting
a fixed number of shares (rather than a cash figure) our Executive
Director salary is aligned with the share price performance of the
Company and ensures that the Executive Director will not (unlike in
other companies) receive a windfall gain by receiving a higher number
of shares when awarded at a lower share price.

The renewed Policy retains the same number of shares for salary and
for the maximum opportunity as presented to shareholders for their
approval three years ago – there was no increase in salary nor incentive
in the 2022 Policy.

The structure of the Policy follows relevant guidance including:
• Executive pension contributed by the Company to be the same as for
employees (although our Executive Director Irakli Gilauri has waived
his pension entitlement).

• Shareholding guidelines with an equivalent of 200% of salary

Our Group’s purpose is to provide investors with an opportunity to invest
in the historically fast-growing Georgian economy by giving them access
to attractive investments with long-term grown potential. Through our
unusual and innovative structure which remunerates our Executive
Director solely in deferred shares, our shareholder interests’ and
experience are strongly aligned with those of our Executive Director
and our Executive Director is also similarly invested in the Georgian
economy and our investment companies.

Our values are being entrepreneurial, having a learning mindset and
maintaining the highest standard of ethics including by setting the tone
at the top. The structure encourages the Executive Director to be
entrepreneurial and to grow the Group according to high standards
(on the basis that a short-termist view negatively impacts share price in
the medium to long term), so that the value of his remuneration increases
in line with that of the Company share price. Additionally, as part of the
Executive Director’s discretionary deferred share opportunity, we include
a cultural KPI covering active mentoring and personal development.

Enhanced disclosure on remuneration matters
We continued to take into account shareholder and stakeholder feedback
in disclosing more detail on the KPIs. In response to stakeholder feedback
on the Policy in the lead up to the 2022 AGM, we noted that while the
Committee retains discretion under the Policy, including to override
formulaic outcomes in accordance with the UK Corporate Governance
Code, since the 2020 Annual Report we have disclosed (i) threshold,
target and outperformance targets, and (ii) the weighting, for each KPI.
The enhanced disclosure of these measures contrast to when the Policy
was last submitted for shareholder approval in 2019.

In line with increasing market practice we also disclose our mechanisms
of enforcement of the malus and clawback. The malus and clawback
triggers are set out in the Executive Director’s contract.

144

145

Strategic ReviewOur BusinessGovernanceAdditional InformationStrategic ReviewDiscussion of ResultsFinancial StatementsStrategic ReviewOverview

DIRECTORS’ REMUNERATION REPORT CONTINUED

What’s in this report
This Annual Report on Remuneration includes the Annual Statement by the Chair of the Remuneration Committee, describes the implementation
of Georgia Capital PLC Directors’ Remuneration Policy, includes a Summary of the Director’s Remuneration Policy approved at the 2022 AGM
and discloses the amounts earned relating to the year ended 31 December 2022.

The report complies with the provisions of the Companies Act 2006 and Schedule 8 of The Large and Medium-sized Companies and Groups
(Accounts and Reports) Regulations 2008. The report has been prepared in line with the recommendations of the Code and the requirements
of the FCA Listing Rules.

Furthermore, under the rules of the share plan, the trustee may cause
shares to lapse (malus) or to be recovered (clawback) including in
accordance with the provisions of the Executive Director’s contract.
Lastly, as part of each grant process, the Executive Director signs a
confirmation that they agree to be bound by the terms and conditions
set out in the rules of the share plan, including the malus and clawback
provisions.

Similarly, the Committee also confirms that the 200% shareholding
requirement to be built up and held for two years’ post-employment,
is included as an express provision in Irakli Gilauri’s contract, and further
unvested shares (remuneration vests in tranches) are held in the
employee benefit trust.

Non-Executive Directors’ fees
The renewed Policy did not propose any changes to the section covering
the approach to Non-Executive Directors fees. The previous changes
made to the Audit and Valuation Committee fees (which reflected their
additional responsibilities following the expansion of the Committee
(from an Audit Committee to an Audit and Valuation Committee) on
31 December 2019), the suspension of the increased fee until 2021 to
reflect the impact of COVID-19, and the suspension of the Nomination
Committee’s member fees during 2020 to reflect the impact of
COVID-19, were covered in the 2020 and the 2021 Directors’
Remuneration Reports.

Fees paid in 2022 took into account the changes in Board and
Committee membership during the year as covered in the Governance
section on pages 156.

2022 performance outcomes
The Committee considered the CEO’s performance during 2022,
which was an eventful year for the Group. The Committee noted that
the impact of the Russia-Ukraine war, which broke out in February 2022,
forced the Company to change priorities and strategy in preparation
for the negative effects of the conflict in its region. Adjusted priorities
included reducing Ukrainian/Russian risk within the Group, deleveraging,
cutting costs and securing funding for the portfolio companies.

Within this challenging environment, the Group successfully completed
the sale of an 80% interest in the water utility business to a high-quality
international strategic investor for US$ 180 million. The disposal marked
the completion of the full investment cycle for one of its large portfolio
businesses and created substantial value for shareholders.

The renewable energy and housing development businesses closed
milestone transactions on the Georgian capital market, and validated the
Group’s superior access to capital. At the same time, the US$ 80 million
green secured bond offering by its renewable energy business
represented the largest-ever corporate bond placement in Georgia.

Buybacks and cancellation of GCAP Eurobonds demonstrated strong
progress on the key strategic priority of deleveraging GCAP. By the end
of 2022, the Group repurchased US$ 116 million GCAP Eurobonds, of
which US$ 65 million notes were cancelled following a Modified Dutch
Auction. These positive developments in the leverage profile, coupled
with our robust balance sheet and capital allocation processes, led to
a 10.8 ppts decrease in the NCC ratio in 2022. This also resulted in an

upgrade in corporate credit ratings to “B1” by Moody’s and “B+” by S&P
(from “B2” and “B”, respectively).

As a result of the war, valuations were severely affected as we increased
portfolio company WACCs across the board by around 2% and peer
company multiples contracted accordingly. The significant strengthening
of the local currency, Georgian Lari (GEL), caused in part by the inflow of
migrants and related money inflows, also brought unexpected effects.

In March 2022, the Georgian Government without prior warning decided
to end the usage of dedicated hospitals as COVID hospitals earlier than
expected, leaving the industry to deal with adjustment periods to normal
usage of the hospitals of up to nine months and caused our hospitals
business to underperform against budgets.

Overall, handling of the adverse market conditions and refocusing
on minimising the effects of the Russian-Ukraine war were outstanding.
Key areas within Mr Gilauri’s control reflected outperformance of the
targets. With a steady WACC and without the unexpected strong
performance of the GEL, the total KPI performance assessment would
have been over 85%.

The Committee took the stakeholder experience into account, including
the US$ 25 million share buyback and cancellation programme, under
which the Group repurchased 2,252,341 shares for a total consideration
of GEL 54.3 million (US$ 18.1 million) during 2022. This brings the total
number of shares bought back and cancelled to 6.4% of issued capital
since the programme launched in August 2021.

They were also pleased to note that employee salaries had increased
more than (and bonuses decreased less than) those of the Executive
Director during 2022 – average employees’ cash salaries increased
by 4.1% and share salaries increased by 20.6% year-on-year (while the
CEO’s salary remained static). Employee’s average bonus decreased
year-on-year (-16%) but the CEO’s bonus decreased more year-on-year
(-35%).

The Remuneration Committee determined that the Executive Director
would receive only 120,000 deferred shares (which corresponds to a
discounted value of US$ 669,376) in respect of FY22 as opposed to
200,000 deferred shares (which corresponds to a discounted value of
US$ 1,044,998) that the Executive Director received in respect to FY21
as part of his discretionary deferred share remuneration. This represents
a decrease of 80,000 deferred shares and a 35% reduction to his bonus
year-on-year. In determining the number of discretionary deferred shares
to be awarded to the Executive Director, the Remuneration Committee
took into account all of the circumstances, including (but not limited to)
the performance of the Executive Director, including in respect of the
adjusted priorities, and the change to the circumstances.

The Remuneration Committee retains discretion to avoid formulaic
outcomes and to assess the overall reasonableness of the rewards.
The Committee determined it would be unfair, in the circumstances
of the war, to hold the CEO strictly to the KPIs based on pre-war
assumptions, and that a small amount of discretion was appropriate
in the circumstances to recognise the CEO’s personal contribution and
to ensure that he was fairly compensated for FY22 especially noting that
the Executive Director would have achieved over 85% of his discretionary

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146

deferred share bonus opportunity had the Company decided not to
adjust the WACC. As such, the Remuneration Committee determined
to increase the CEO’s discretionary deferred share remuneration (his
bonus) by only 4.5% to 60% of the maximum discretionary deferred
shares opportunity (which amounted to an additional 9,000 deferred
shares being granted). As noted above, the Executive Director still
received 80,000 fewer deferred shares in 2022 than the number
awarded in 2021.

For his performance in financial year 2022, the Remuneration Committee
determined to award Irakli Gilauri 120,000 deferred shares (60% of
maximum opportunity) which will vest over four years and are subject
to a further one year holding period. The explanation of how this has
been decided is set out in section “Basis for determining Mr Gilauri’s
discretionary share compensation in respect of 2022” below.

Other Remuneration Committee activities and workforce
engagement
During 2022 the Committee received updates on wider market trends,
a market overview of remuneration practices, and insight into topics
which were the most pertinent to our investors.

In October 2022, the Board announced that Irakli Gilauri’s contract,
which was due to expire in May 2023, had been extended to
31 December 2025. The Senior Independent Non-Executive Director
noted in the announcement that Mr Gilauri has led Georgia Capital since
its demerger from BGEO Group PLC in 2018 and during this time he has
developed the Company into a unique institutional investment business
in Georgia, with an excellent track record in accessing and developing
high-quality management talent, accessing international capital markets,
maintaining high standards of governance, finding attractive new
investment opportunities and successfully monetising a mature portfolio
company – our water utility business. The Board were pleased that
Georgia Capital will continue to benefit from Mr Gilauri’s experience,
knowledge of the local business environment, his enthusiasm and
commitment.

The Committee noted that Irakli Gilauri was not awarded a salary
increase in 2022 and that there had been no increase to the salary of
Irakli Gilauri since the Company had been listed in 2018 (indeed there
was a decrease from the predecessor company).

The UK General Counsel updated the Committee on stakeholder
matters, including market-wide letters and updated guidelines of proxy
agencies. The Committee noted that the market expected restraint on
annual increases to executive salary, and was pleased that the Company
was aligned to market expectations on such matters. Feedback from
and analysis of the small percentage of investors who voted against
the Policy or the Report was considered by the Committee.

While the portfolio companies do not form part of the workforce of the
holding companies, the Committee considered the wider workforce
policies in 2022 and employee compensation. This covered salaries,
pension, benefits, leave and working hours, training and development
and number of staff by salary band. This was covered at the holding
company level and the Committee considered the same for the main
portfolio businesses including Healthcare businesses (Hospitals and
Clinics and Diagnostics), Utilities and Renewables, Insurance, Wine,
Beer, Distribution, Real Estate and Education.

The Committee noted that one of the portfolio companies had a shorter
paid maternity leave policy than others and requested that this be
investigated during 2023.

Kim Bradley is the Company’s designated Non-Executive Director
for workforce engagement, and was a member of the Remuneration
Committee until late December 2022. Employees were able to raise
matters relating to the workforce (including remuneration) through
Mr Bradley. Further details on how the Board engages with its workforce
can be found on page 135 in the Corporate Governance Framework
section. There are only c.45 employees at the holding company level.

Average employees’ cash salaries increased by 4.1% and share salaries
increased by 20.6% year-on-year, and employee’s average bonus
decreased by 16% year-on-year.

An update to the current remuneration model and structure for
Georgia Capital employees was approved in 2022, including levels of
management discretion around roles and a new role of Senior Director
within management. The Committee also noted that some salaries
had remained unchanged in the preceding years, and approved that
employee remuneration structures and amounts be increased in 2023
accordingly, reflecting rising inflation.

As detailed in the Group’s Sustainability Report, the Group is currently
further developing its understanding of climate change and approach
to ESG. This helps the Board to understand and inform the Company’s
developing approach. The Committee noted the market increase in
the use of ESG KPIs, but also investor sentiment that any ESG metrics
should be measurable, linked to strategy and material to the Company
and should not be used to increase overall quantum, and so in 2022
continued to be cautious regarding implementing specific ESG KPIs.
The Remuneration Committee is considering further whether to
incorporate ESG KPI in the Executive Director’s remuneration structure
moving forward, taking into account the group’s new key strategic
priorities.

The Committee recognises however that the correlation between ESG
and the share price of companies is becoming increasingly established.
From a remuneration perspective, the Committee notes that the majority
of compensation delivered to its executive management is in shares,
or phantom (proxy) shares, which are deferred for several years. The
Committee also retains ultimate discretion over performance-based
remuneration. Therefore, the incentive structure for executive
management is naturally geared towards the medium to long-term
success of our Group and does not raise ESG risks (or other material
risks) by inadvertently motivating irresponsible behaviour.

An external evaluation of the effectiveness of the Board was undertaken
by Amandla UK Limited (Amandla) in 2022 which encompassed the
Remuneration Committee. The evaluation concluded that there was
appropriate supervision. The Board and its members also underwent
in depth evaluations. Further details are set out on page 166.

Jyrki Talvitie
Chairman of the Remuneration Committee
23 March 2023

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DIRECTORS’ REMUNERATION REPORT CONTINUED

How the Remuneration Committee addressed the factors in provision 40 of the Code
The Remuneration Committee considered the requirements of the Code in determining the remuneration structure and Policy, taking each of the
factors of provision 40 of the Code in turn:

Principle

Clarity

Simplicity

Risk

Predictability

Proportionality

Approach

Remuneration arrangements are transparent and competitive. The Remuneration Policy describes the purpose,
operation and maximum potential of each remuneration element and illustrates a range of potential outcomes for
the Executive Director. There are only two components of remuneration for Irakli Gilauri; the deferred share salary
and the discretionary deferred share remuneration. There is no LTIP and salary is paid in a fixed number of shares.

The rationale is simple – this structure focuses the Executive Director and senior management on sustainable,
long-term performance of the Company by remunerating them wholly (in the case of the current Executive Director)
or predominantly (with respect to senior management) in deferred shares.

By its nature, setting all of the CEO’s remuneration in shares which are deferred by up to six years from the start of the
work year, the remuneration structure drives the CEO and senior management to mitigate reputational, behavioural
and undue strategic risks as the outcome of such would be likely to affect the share price over the years. It also helps
to avoid conflicts of interest. Further, the Executive Director’s salary and bonus is calculated by reference to a fixed
maximum number of shares. By setting a fixed number of shares (rather than a cash figure) the salary structure aligns
our Executive Director’s salary with the share price performance of the Company and ensures that the Executive
Director will not (unlike in other companies) receive a windfall gain by receiving a higher number of shares when
awarded at a lower share price.

The range of possible values is set out in the Policy voluntarily, including the impact of share price appreciation
and depreciation, to aid predictability. Further, by calculating the maximum opportunity to a fixed number of shares,
the Company and its shareholders have certainty regarding the Executive Director’s and senior managements’
remuneration.

Outcomes reward performance proportionately by reference to performance targets range (threshold, target and
outperformance) and weightings. Further, to allow appropriate adjustment, the Committee retains discretion over
the bonus. For further considerations on proportionality, see section “Chief Executive’s pay and comparators”
on pages 156 to 157.

Alignment to culture

The current Executive Director’s entire remuneration, which is comprised of deferred shares rather than cash, promotes
alignment the long-term success of the Company. Alignment with culture is supported by the inclusion of mentoring
and developing, as well as personal development, within the CEO’s performance KPIs. Further information on
alignment with the Company’s purpose and values is set out in the Annual Statement of the Chairman on page 145.

Shareholder context
The Directors’ Remuneration Policy applicable to this section of the Annual Report on Remuneration was approved by shareholders at our AGM
on 20 May 2022 (the 2022 Policy). The Directors’ Remuneration Policy received the following votes from shareholders.

Resolution

Votes for

Votes against

% Total votes cast

Votes withheld

Approval of the Directors’ Remuneration Policy

26,599,621

93.68

1,795,458

6.32

28,395,079

590

Set out below are the shareholder voting figures for the Directors’ Remuneration Report 2022 (including the Annual Statement of the Chairman
of the Remuneration Committee) presented at our 2022 AGM.

Resolution

Votes for

Votes against

% Total votes cast

Votes withheld

Approval of the Directors’ Remuneration Report

26,710,160

94.07%

1,684,919

5.93

28,359,079

590

The Remuneration Committee and its advisors
The Remuneration Committee is principally responsible to the Board for establishing a remuneration policy for the Executive Directors, the Chairman
and designated members of the executive management team that rewards fairly and responsibly, and is designed to support the Company’s strategy
and promote its long-term sustainable success. The Remuneration Committee ensures that performance-related elements of Executive Directors’
remuneration are transparent, stretching and rigorously applied. The Remuneration Committee’s full Terms of Reference are available on our website:
https://georgiacapital.ge/governance/cgf/terms.

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Directors’ remuneration
Single total figure of remuneration for the Executive Director (audited)
The table below sets out the remuneration earned by Georgia Capital PLC’s sole Executive Director, Irakli Gilauri, in respect of his employment for the
years ended 31 December 2022 and 31 December 2021. Mr Gilauri’s compensation as set out in the table below is in the form of deferred shares that
vest in tranches with a vesting and holding period of up to six years from the beginning of the work year. The values shown in the table are calculated
at a fixed share price as described in footnotes 2 and 4 to the table. The actual value of the compensation as it is received over time will fluctuate with
increases and decreases in the value of the share price as illustrated in the graph on page 156.

Cash1
salary
(US$)

Deferred
share2
salary
(US$)

–

2,730,000

Taxable3
benefits
(US$)

Pension3
benefits
(US$)

Total fixed

pay
(US$)

Discretionary
deferred4
shares
(US$)

Total variable
pay
(US$)

Single total
figure
(US$)

–

2,730,000

1,078,800

3,808,800

2,730,000

1,684,000

4,414,000

2022

2021

Notes:
1 Mr Gilauri does not receive a cash salary.
2 Deferred share salary. The figures show the Georgia Capital PLC shares underlying nil-cost options granted in respect of the relevant year. 200,000 deferred salary shares were
awarded for the work year 2022 and for the work year 2021. To discharge the UK tax and employee National Insurance contributions arising upon the grant of the salary shares,
Georgia Capital PLC and the Executive Director agreed to waive his entitlement to such number of the salary shares as needed for the payment of the Executive Director’s UK
tax and employee National Insurance contributions by the Company. Under this arrangement, the Executive Director waived his entitlement to 8,166 deferred salary shares with
respect to work year 2022 and 8,068 deferred salary shares with respect to work year 2021. The value of US$ 2,730,000 for the work years 2022 and 2021 is calculated by
reference to the share price on 12 July 2018, being the date of the Committee meeting at which the deferred share salary was determined. The share price on 12 July 2018 was
US$ 13.65 per share (the official share price of GBP 10.324 converted into US dollars using an exchange rate of 1.3223, being the official exchange rate published by the Bank
of England on the same date). Deferred share salary in respect of a work year will vest over six years (from the beginning of the work year) with 20% vesting in each of the second,
third, fourth, fifth and sixth years following the end of the work year. Mr Gilauri does not receive any remuneration with respect to his role as Chairman of the Group.

3 There are no taxable benefits or pension benefits for 2022 and 2021. Mr Gilauri has agreed for all pension contributions to be waived. Mr Gilauri was reimbursed for reasonable
business expenses, on the provision of valid receipts in line with the approved Policy. No money or other assets have been received or are receivable by Mr Gilauri in respect
of a period of more than one financial year.

4 Discretionary deferred share remuneration. The figures show the value of Georgia Capital PLC shares underlying nil-cost options granted in respect of the bonus award for the

year. For 2022, awards were granted over 120,000 shares. The value is calculated by reference to the share price on 16 December 2022, which is the last working day prior to the
date of the Remuneration Committee meeting which determined the discretionary deferred share award on 19 December 2022, being US$ 8.99 per share (the official share price
of GBP 7.40 converted into US dollars using an exchange rate of 1.2153 being the official exchange rate published by the Bank of England on the same date). For 2021, awards
were granted over 200,000 shares. The value was calculated by reference to the share price on 24 January 2022, which is the date of the Remuneration Committee meeting
which determined the discretionary deferred share award, being US$ 8.42 per share (the official share price of GBP 6.25 converted into US dollars using an exchange rate of
1.3464 being the official exchange rate published by the Bank of England on the same date). Discretionary deferred shares vest 25% in each of the second, third, fourth and fifth
years following the end of the work year and are subject to a further holding period of a year. The basis for determining Mr Gilauri’s discretionary deferred share remuneration is
set out below.
The number of shares awarded pursuant to the deferred share salary and discretionary deferred share remuneration is fixed at grant. No discretion has been exercised as a result
of share price appreciation or depreciation. Discretionary deferred shares are subject to one-year targets which are satisfied pre-grant and the Company does not operate a LTIP.
No amount of the remuneration in 2022 is attributable to share price remuneration. No amounts were recovered or withheld in 2022. No dividend equivalents have been received.

As noted in the single total figure of remuneration table above, deferred share salary is calculated on the basis of US$ 13.65 per share. This is
because we disclose using the decision date for each element of remuneration, in this case the salary figure refers to the value of the shares on
12 July 2018, being the date of the Committee meeting at which the deferred share salary was determined.

However, the share price as at the last practicable date before the publishing of this Annual Report, 17 March 2023, was US$ 9.06 per share (the
official share price of GBP 7.46 converted into US dollars using an exchange rate of 1.214, being the official exchange rate published by the Bank
of England on the same day). Therefore, when calculated using the more recent price, the single total figure of the compensation is US$ 2,899,200.

Alternative remuneration table showing the Executive Director’s 2022 and 2021 remuneration discounted for time value of
money (unaudited)
For investor information, the alternative table below sets out the share remuneration earned by Irakli Gilauri in 2022 and 2021 as per the previous
table (Single total figure of remuneration for the Executive Director) but taking into account the time value of money discounted at 15%, given that
both the salary shares and discretionary deferred shares vest over a number of years. Further, the Executive Director may forfeit the shares on
cessation of employment in certain circumstances.

Deferred
share salary

(US$)

Discretionary
deferred shares
(US$)

Total salary and
discretionary
deferred shares
remuneration
(US$)

1,590,845

669,376

2,260,221

1,590,845

1,044,998

2,635,843

The Remuneration Committee is comprised of three Independent Non-Executive Directors: Jyrki Talvitie who serves as Chairman, Neil Janin
(who joined on 17 October 2022) and Maria Chatti-Gautier. Kim Bradley (designated Non-Executive Director for workforce engagement) was
a member of the Committee until 20 December 2022. The members’ attendance during 2022 is shown in the Board and Committee meetings
attendance table on page 131.

2022

2021

In addition to the formal meetings held during the year, the Remuneration Committee participated in various discussions by videoconference outside
of these meetings. Other attendees at the Remuneration Committee meetings who provided advice or assistance to the Remuneration Committee
on remuneration matters from time to time included the CEO, the other Board members and the UK General Counsel. Attendees at the Remuneration
Committee meetings do not participate in discussions or decisions related to their own remuneration, which helps avoid conflict of interest.

The Remuneration Committee did not use remuneration consultants in 2022 (or 2023 to date). The Remuneration Committee received advice on
compliance from Baker & McKenzie LLP, the Company’s legal advisors. The Remuneration Committee is of the view that the advice received from
Baker & McKenzie LLP is objective and independent.

The following table sets out details of total remuneration for the Chairman and Chief Executive Officer, Mr Gilauri, for the years ended 31 December
2018 to 31 December 2022 and his discretionary compensation as a percentage of maximum opportunity.

Single total figure of remuneration (US$)

4,066,962

3,790,000

3,898,000

4,414,000

3,808,800

Discretionary compensation as a percentage of maximum opportunity (%)

85%

50%

80%

100%

60%

2018

2019

2020

2021

2022

Note: Maximum opportunity is 100% of total number of salary shares in accordance with the approved Policy.

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Basis for determining Mr Gilauri’s discretionary deferred share compensation in respect of 2022
Mr Gilauri’s KPIs included financial targets, strategic targets and non-quantifiable components. The financial and strategic elements largely track
the Group’s KPIs as he is expected to deliver the Group’s strategy. The non-quantifiable targets take into account factors such as leadership and
mentoring, corporate culture and personal development. The Committee’s practice is to set ambitious financial targets, and would normally expect
to award 70% of the maximum available for meeting the target, depending on the circumstances, including business and wider economic
developments during the year. For strategic and development targets, measurement is more difficult, but here again we have high expectations
of Mr Gilauri and would typically plan to award 70% of the maximum available for meeting these targets.

In accordance with the extended disclosure in last year’s Annual Report and subsequent complementary feedback from shareholders, we continue
to provide full information to better explain how the KPIs link to strategic targets and to explain the weightings. In response to investor feedback,
we have increased the weightings on the key strategic priorities. Compared to the previous year the KPIs have been updated in line with the new
strategy to allow more emphasis on deleveraging and so there is an increased weighting and focus on disciplined pursuit of investment opportunities,
and asset and capital allocation (with net capital commitment (NCC) the main metric to be measured) of 20% and reduced weightings on NAV
(to 25%) and on mentoring, succession planning and personal development (to 5%).

We also specifically link each KPI to the relevant Group priority and disclose ranges of targets for each KPI (threshold, target and maximum).
We would typically expect to award 25% for threshold, 70% for target and 100% for outperformance for each KPI, with a sliding scale between
categories. The Group is young and non-financial strategic targets are also key.

The individual KPI weightings are shown in the table below, which sets out the targets for Mr Gilauri’s 2022 KPIs as well as a summary of the
Committee’s assessment of his performance against them. In line with the Policy, the Committee retains the discretion to increase or decrease
the amount awarded. More details on performance are provided in the table on the following pages.

The Group priorities have been crossed referenced against each performance metric chosen in the below KPI table.

Group priorities:
Key new strategic priorities (as updated and announced on Investor Day in May 2022)
1. Investing in capital-light opportunities only.
2. Adapting the Capital Management Framework (including net capital commitment at the core of capital management decisions) and de-risking

by deleveraging, and progressing the share buyback and cancellation programme.

3. Putting ESG at the core of our strategy.

Continued secondary strategic priorities
4. Continued divestiture of subscale portfolio companies which do not have the potential to reach GEL 300 million equity value.
5. Institutionalising and developing portfolio.
6. Establishment of structured exit processes, engagement in the active price discovery of portfolio assets held.
7. NAV per share growth.
8. Further diversifying access to capital.
9. Portfolio companies’ strategic priorities.

Cultural priorities and foundation for the future
10. Developing management talent in GCAP and its portfolio companies.
11. Strong corporate governance, efficient management structure.
12. Culture core values: being entrepreneurial, having a learning mindset and maintaining the highest standard of ethics.

Refers
to Group
priority,
above

KPI

Financial targets

NAV per share growth

Weighting

2022 Target and range

Performance and evaluation

Threshold

Target Outperformance

12.4%

17%

Overall NAV per share growth: 4%

11%

16%

21%

Private portfolio share growth: -11.5%

25%
5% for overall

20% for private
portfolio

Weighted
result

Underperformance was mainly due to a)
WACC increases, b) underperformance of
healthcare businesses, as described in the
KPI below, and c) impact of Russia-Ukraine
war on beverages and real estate businesses.
With steady state WACCs the results would
have been significantly different: (a) 24.0% for
overall NAV per share growth; and (b) 12.5%
for private portfolio NAV per share growth.

In GBP terms the NAV per share grew by
33.2% illustrating the strong local currency
appreciation.

150

Refers
to Group
priority,
above

Weighting

2022 Target and range

Performance and evaluation

Weighted
result

5, 9

15%

Threshold

Target Outperformance

GEL mln
200

GEL mln
418

GEL mln
600

GCAP standalone net income: GEL 1.5 million 4%

KPI

Financial targets

Achieving budget of
GCAP and portfolio
companies, including
cash flow generation

GEL mln
100

GEL mln
209

GEL mln
300

GCAP standalone cash flow: GEL 139.5 million

GEL mln
1,800

GEL mln
2,009

GEL mln
2,200

Portfolio companies aggregate revenue:
GEL 1,902 million

GEL mln
180

GEL mln
220

GEL mln
260

Total aggregate net operating cash flow:
GEL 206 million

The Government decision to abruptly cancel
the use of hospitals being used as COVID
hospitals had an adverse effect on both
private portfolio revenue and GCAP net
income. GCAP cash flow was lower due to
decisions made during the year of higher
share buybacks, higher Eurobond buybacks
and cancellation of US$ 65 million Eurobonds
held in treasury (budget assumed they will
be held in treasury and counted as part of
liquidity). Additionally, liquidity was lower due
to the strategy of not participating in a Bank of
Georgia buyback programme in 2022.

When adjusting cash flow performance for
these decisions, GCAP’s cash flow would have
been GEL 405 million in 2022 and would have
translated into an award of 100%.

Between threshold and target for portions of
KPI on revenue, standalone cash flow and
aggregate cash flow, below threshold for
standalone net income.

Expense ratio

7.5%

2.3%

1.7%

Expense ratio: 2.7%.

6, 8

20%

Broaden access
to capital including
active seeking of price
discovery of assets
held (including strategic
priority of divestment
of subscale portfolio
companies)

Cash OPEX was below budget and below
2021 results thus showing excellent cost
control. However, the strong appreciation of
the local currency caused the market cap in
GEL terms to decrease substantially resulting
in an expense ratio of 2.7%.

Successful issuance of Renewables bond of
US$ 80 million for five years at 7%, at a lower
coupon than the yield on the sovereign
US$ Eurobonds at the time of the issuance,
and rollover of GRE real estate bond of
US$ 35 million for two years at 8.5% in very
challenging capital markets.

20%

Constant price discovery exercises with
successful sales of Mestiachala 1 HPP project,
Bakhvi HPP project and number of small real
estate assets (vacant lands and commercial
properties).

Outperformance achieved.

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Refers
to Group
priority,
above

KPI

Strategic targets

1, 2

Disciplined pursuit
of investment
opportunities, and asset
and capital allocation

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Weighting

2022 Target and range

Performance and evaluation

Weighted
result

Threshold

Target Outperformance

20%

30%

27%

24%

20%

Exceeded outperformance with net capital
commitment ratio of 21.1%. NCC ratio
significantly improved during 2022 as (a)
management successfully closed the sale of
80% in water utility business and received US$
180 million proceeds; (b) despite tough market
conditions, managed to refinance US$ 80 million
loan issued to renewable energy and receive
related cash proceeds back; (c) effectively
allocated cash collected in 2022 for deleveraging
purposes, including Modified Dutch Auction
for Eurobonds, where c.US$ 30 million bonds
were purchased at 88 cents on a dollar; and (d)
successfully decreased guarantee issued
to beer business by EUR 12 million.

Accordingly, NCC decreased from 30% to 21.1%
in 2022. In addition to material improvement in
NCC ratio, success included introduction and
implementation of improved risk management
component in all investment decisions.

Successful buybacks of both equity
(c.US$ 18 million buybacks in 2022 leading
to 5% NAV per share accretion) and debt
(c.US$ 87 million on secondary market in
addition to c.US$ 29 million bonds bought
during the Modified Dutch Auction).

Successful investments in education sector
to expand the existing school networks of
British Georgian Academy, Buckswood
and Green Schools.

Outperformance achieved.

Successful GHG restructuring including
elimination of holding company resulting
in significant annual cost savings of GEL
7.8 million and streamlined operations and
structure.

7.5%

Finalisation of the water utility sale transaction,
including demerger of the water utility and
renewable assets and successful refinancing
of the renewable energy business borrowing
from GCAP.

Successful de-leveraging of the beer business
on the back of operational excellence leading to
significant reduction in the guarantee required
by the banks from GCAP for the beer business.

Successful roll-out of education projects in new
campuses leading to all time high enrolment
rate as 1,000+ new learners were added in
2022 leading to 35% growth in total number of
learners.

Robust performance in P&C business, where
targeted growth in agricultural insurance line
and disciplined risk management led to 16%
growth in net income during 2022.

Outperformance achieved.

KPI

Strategic targets

Active mentoring
and development of
management including
successors

Maintain up-to-date
succession planning
process across the
GCAP and portfolio
companies

Continued personal
development

Refers
to Group
priority,
above

Weighting

2022 Target and range

Performance and evaluation

Threshold

Target Outperformance

Weighted
result

10, 12

Active mentoring of new GCAP portfolio
manager in charge of the hospitals, retail
(pharmacy), medical insurance, and clinics and
diagnostics businesses, who was previously
CFO of GHG and during the restructuring
process was elevated to GCAP Partner.

Active oversight of transition process at real
estate business and mentoring of the newly
promoted CEOs at real estate and auto
services businesses.

Rising to the challenges stemming from the
Russia-Ukraine war and continued successful
mentoring of the affected portfolio companies’
top management and taking advantage of
emerging market opportunities.

Ongoing mentoring of GCAP’s management
team. Updated succession plans for both
GCAP and portfolio companies after
unexpected departure of Nick Gamkrelidze.

Successful deployment of succession planning
at the real estate and auto service businesses,
where the CEOs were replaced in 2022 from
the Group’s internal talent pool.

Continued prioritisation of self-development
through feedback received from the Board
and co-workers, as well as continued coaching
of direct reports.

TOTAL KPI PERFORMANCE ASSESSMENT

55.5%

The Committee considered the CEO’s performance during 2022, which was an eventful year for the Group. The Committee noted that impact of
Russia-Ukraine conflict, which broke out in February 2022, forced the Company to change priorities and strategy in preparation for the negative
effects of the conflict in its region. Adjusted priorities included reducing Ukrainian/Russian risk within the Group, deleveraging, cutting costs and
securing funding for the portfolio companies.

Within this challenging environment, the Group successfully completed the sale of an 80% interest in the water utility business to a high-quality
international strategic investor for US$ 180 million. The disposal marked the completion of the full investment cycle for one of its large portfolio
businesses and created substantial value for shareholders.

The renewable energy and housing development businesses closed milestone transactions on the Georgian capital market, and validated the
Group’s superior access to capital. At the same time, the US$ 80 million green secured bond offering by its renewable energy business represented
the largest-ever corporate bond placement in Georgia.

Buybacks and cancellation of GCAP Eurobonds demonstrated strong progress on the key strategic priority of deleveraging GCAP. By the end
of 2022, the Group had repurchased US$ 116 million GCAP Eurobonds, of which US$ 65 million notes were cancelled following a Modified Dutch
Auction. These positive developments in the leverage profile, coupled with our robust balance sheet and capital allocation processes, led to a
10.8 ppts decrease in the NCC ratio in 2022. This also resulted in an upgrade in corporate credit ratings to “B1” by Moody’s and “B+” by S&P
(from “B2” and “B”, respectively).

The Committee took the stakeholder experience into account, including the US$ 25 million share buyback and cancellation programme, under which
the Group repurchased 2,252,341 shares for a total consideration of GEL 54.3 million during 2022 (US$ 18.1 million). This brings the total number of
shares bought back and cancelled to 6.4% of issued capital since the programme launched in August 2021.

As a result of the war, valuations were severely affected as portfolio company WACCs increased across the board by around 2% and peer company
multiples contracted accordingly. The significant strengthening of the local currency GEL, caused in part by the inflow of migrants and related money
inflows, also brought unexpected effects.

In March 2022, the Georgian Government without prior warning decided to end the usage of dedicated hospitals as COVID hospitals earlier than
expected, leaving the industry to deal with adjustment periods to normal usage of the hospitals of up to nine months and causing our hospitals
business to underperform against the budgets.

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7.5%

Progress towards
achieving mid-to-long-
term strategic priorities
in portfolio companies

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Overall, handling of the adverse market conditions and refocusing on minimising the effects of the Russian-Ukraine war were outstanding. Key areas
within Mr Gilauri’s control reflected outperformance of the targets. With a steady WACC (see above how WACC was affected during the year) and
without the unexpected strong performance of GEL, the total KPI performance assessment would have been over 85%.

In deciding the final bonus, the Committee also noted the following matters:
• US$ 18.1 million buyback and cancellation programme for the benefit of shareholders in 2022.
• The Group did not require Government support from UK or Georgian Governments (and had not previously).
• Employee salaries had increased more than (and bonuses decreased less than) those of the Executive Director. Average employees’ cash salaries
increased by 4.1% and share salaries increased by 20.6% year-on-year (while the CEO’s salary remained static) and employee’s average bonus was
projected to have decreased year-on-year (-16%) but the CEO’s contemplated bonus at 60% would have decreased more year-on-year (-35%).

The Remuneration Committee retains discretion to avoid formulaic outcomes and to assess the overall reasonableness of the rewards. The Committee
determined it would be unfair, in the circumstances of the war, to hold the CEO strictly to the KPIs based on pre-war assumptions, and that a small
amount of discretion of 4.5% of the maximum discretionary deferred shares opportunity (9,000 deferred shares) was appropriate in the circumstances,
awarding the CEO a bonus of discretionary deferred shares of 60% of maximum.

The Remuneration Committee determined that the Executive Director would receive only 120,000 deferred shares (which corresponds to a value
of US$ 669,376) in respect of FY22 as opposed to 200,000 deferred shares (which corresponds to a value of US$ 1,044,998) that the Executive
Director received in respect to FY21 as part of his discretionary deferred share remuneration. This represents a decrease of 80,000 deferred shares
and a 35% reduction to his bonus year-on-year. In determining the number of discretionary deferred shares to be awarded to the Executive Director,
the Remuneration Committee took into account all of the circumstances, including (but not limited to), the performance of the Executive Director,
including in respect of the adjusted priorities, and the change to the circumstances.

For his performance in financial year 2022, the Remuneration Committee determined to award Irakli Gilauri 120,000 deferred shares (60% of
maximum opportunity) which will vest over four years and are subject to a further one year holding period. The Committee did not change its
implementation of the Policy in 2022. The Committee is satisfied that the overall number of deferred discretionary shares awarded to for Mr Gilauri
for FY22 was fair and appropriate in the circumstances. As the number of deferred discretionary shares to be awarded is determined in shares and
fixed on the grant date, share price appreciation/depreciation did not impact the Remuneration Committee’s decision to increase the number of
shares to be awarded to Mr Gilauri for FY22.

Alignment with shareholders is built into the structure (by maximum bonus award being comprised of deferred shares only and the maximum awards
being calculated based on a fixed number of shares, rather than by cash value). There is no cash bonus and no LTIP.

Percentage change in remuneration of Directors and employees
The following table sets out details of the percentage change in the remuneration awarded to the Directors, compared with the average percentage
change in the per capita remuneration awarded to the employees at the holding companies’ level only (c.45 employees) on a full-time equivalent basis
as a whole, in line with the requirements in the Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report) Regulations 2019.

Given the small number of employees employed by the Georgia Capital PLC entity is less than five and the Company’s status as an investment
entity under IFRS 10, we considered comparison against the holding companies’ employees. See note 6 to the table below for a comparison of the
full-time UK employees in compliance with the requirements of the Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report)
Regulations 2019. See the single total figure of remuneration table on pages 148 to 149 for an explanation of deferred share salary, taxable benefits
and discretionary deferred remuneration of Mr. Gilauri.

From 1 April 2020 to 31 December 2020, the members of the Nomination Committee waived their fees (and only the additional fee received by the
Chairman (as Chair) on top of the normal Committee fees was retained by the Chairman), to show solidarity with the impact of COVID-19. The normal
fees were reinstated on 1 January 2021. The Audit and Valuation Committee’s responsibilities were increased from 31 December 2019 when the
Audit Committee became the Audit and Valuation Committee. To show solidarity with the impact of COVID-19 that Committee did not receive an
increase for year 2020, and instead the fees of the Chair and members were increased from 1 January 2021.

Any further year-on-year movements in Non-Executive Director fees are attributable to a number of factors including the different Committee roles
undertaken by each Non-Executive Director over the period.

Year-on-year change in pay for Directors compared to the employees
at the holding companies level as a whole

Executive
Director

Non-Executive Directors

2022

Total cash salary

Total deferred share salary

Taxable benefits

Total bonus

Average
employees

Irakli
Gilauri

David
Morrison

4.1%

20.6%

3.5%

–

-16.6%

-35.9%

–

Kim
Bradley

9.7%

–

Jyrki
Talvitie

–

Caroline
Brown

-61.3%

–

Massimo
Gesua’ sive
Salvadori

Maria
Chatti-
Gautier

–

Neil Janin

100%

–

2021

Total cash salary

Total deferred share salary

Taxable benefits

Total bonus

2020

Total cash salary

Total deferred share salary

Taxable benefits

Total bonus

Year-on-year change in pay for Directors compared to the employees
at the holding companies level as a whole

Executive
Director

Non-Executive Directors

Average
employees

Irakli
Gilauri

David
Morrison

Kim
Bradley

6.5%

-26.0%

22.7%

23.1%

–

44.2%

3.9%

–

Jyrki
Talvitie

4.7%

Caroline
Brown

Massimo
Gesua’ sive
Salvadori

5.0%

Maria
Chatti-
Gautier

36.2%

–

Year-on-year change in pay for Directors compared to the employees
at the holding companies level as a whole

Executive
Director

Non-Executive Directors

Average
employees

Irakli
Gilauri

David
Morrison

Kim
Bradley

11.0%

7.3%

–

20.0%

10.2%

-3.7%

7.2%

–

Jyrki
Talvitie

-3.6%

Caroline
Brown

Massimo
Gesua’ sive
Salvadori

-4.8%

Maria
Chatti-
Gautier

N/A

–

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Notes:
1 Kim Bradley was appointed as a member of the Audit and Valuation Committee from 20 May 2022, and stepped down as a member of the Nomination and the Remuneration

Committees on 20 December 2022.

2 Caroline Brown did not seek re-election at the 2022 AGM and therefore ceased to be a director on 20 May 2022.
3 Maria Chatti-Gautier was appointed to the Board of Directors of Georgia Capital PLC and to the Supervisory Board of JSC Georgia Capital, and the Remuneration and

Nomination Committees, on 19 March 2020.

4 Neil Janin was appointed as a member of the Board and of the Nomination and the Remuneration Committees on 17 October 2022, and as a member of the Investment

Committee on 20 December 2022.

5 On 19 March 2020, David Morrison, Caroline Brown and Massimo Gesua’ sive Salvadori stepped down as members of the Nomination Committee.
6 For the period of 1 April 2020 to 31 December 2020 the members of the Nomination Committee waived their fees, and for the Chairman of the Committee only the difference

between the level of fees for the Chair against the member’s fees was retained, to show solidarity with the impact of COVID-19.

7 The Audit and Valuation Committee’s responsibilities were increased from 31 December 2019; to show solidarity with the impact of COVID-19 the Committee did not receive

an increase fee for their expanded role for year 2020, but the fees of the Chair and members were instead increased from 1 January 2021.

8 The Company has less than five UK employees and the percentage changes could be considered to be distortive. Year-on-year change on a full-time basis for UK employees

from 2019 to 2020 for cash salary is 1.8%; deferred share salary is not applicable; taxable benefits is not applicable; and bonus is 30.1%. Year-on-year change on a full-time basis
for UK employees from 2020 to 2021 for cash salary is -2.7%; deferred share salary is not applicable; taxable benefits is not applicable; and bonus is -1.8%. Year-on-year change
on a full-time basis for UK employees from 2021 to 2022 for cash salary is 10.5%; deferred share salary is not applicable; taxable benefits is not applicable; and bonus is -5.3%.

Details of fixed and discretionary deferred share remuneration granted during 2022
The table below sets out details of the nil-cost options over GCAP shares which have been granted to Mr Gilauri in 2022 in respect of the 2021 work
year as reflected on a combined basis in accounts of Georgia Capital PLC and Georgia Capital JSC. Please note that the information presented in
this section relates to Mr Gilauri’s performance in the 2021 financial year. The deferred share salary and discretionary deferred share remuneration
was granted at the start of FY22 (before the 2022 AGM) and were granted under the 2019 Policy.

Number of underlying
shares and basis on
which award was made

Deferred share salary

200,000 granted pursuant to the 2019 Policy available at
https://georgiacapital.ge/governance/cgf/policies

Type of interest

Nil-cost option

Cost to Group (as
reflected in accounts)

Face value

US$ 2,730,0001

Discretionary deferred
share remuneration

200,000 (with respect to his FY21 bonus) granted pursuant
to the 2019 Policy available at
https://georgiacapital.ge/governance/cgf/policies

Nil-cost option

US$ 1,684,0002

US$ 2,730,0001
Cash payments equal to the dividends paid on the
underlying shares will be made upon vesting (if applicable).

US$ 1,684,0002
Cash payments equal to the dividends paid on the underlying
shares will be made upon vesting (if applicable).

Percentage of award
achievable if minimum
performance achieved

100% of the award will be receivable, since the award is part
of the Executive Director’s salary for 2021 and accordingly
is not subject to performance measures or targets over the
vesting period.

100% of the award will be receivable, since the award is
based on 2021 performance (and is not LTIP award) and
accordingly is not subject to performance measures or
targets over the vesting period.

Exercise price

Nil. The options form part of the Executive Director’s salary
under the Policy and so no payment is required upon
exercise. The exercise price has not changed.

Vesting period

20% in each of 2023, 2024, 2025, 2026 and 2027.

Nil. The options make up the entirety of the Executive Director’s
performance-based remuneration (with respect to his
performance in the previous financial year) so no payment is
required upon exercise. The exercise price has not changed.

25% in each of 2023, 2024, 2025 and 2026. Holding
period of a further one year on each tranche.

Performance measures None. See the 2019 Policy available at

https://georgiacapital.ge/reports/2018

See the 2019 Policy available at
https://georgiacapital.ge/reports/2018.

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1 Deferred share salary. The value is calculated as described in footnote 2 to the table of single total figure of remuneration for the Executive Director.
2 Discretionary deferred share remuneration. The value is calculated as described in footnote 4 to the table of single total figure of remuneration for the Executive Director.

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CEO pay and comparators
The Group has less than 250 UK employees and therefore is not required to disclose ratios of the CEO pay against the UK employees’ pay (and
indeed given it has less than five UK employees, to do so would be distortionary). Additionally, the delayed receipt of the Executive Director’s salary
and the bonus (in deferred shares vesting across several years) means that the time value of money and also the risk of salary and bonus not vesting
(due to malus but also in relation to shares lapsing in the event of early termination under certain circumstances) were factored in.

When formulating the Policy, we presented the overall package (without factoring in the time value of money or risk of lapse) to investors. The value
of the salary shares and the potential dollar value of the maximum bonus opportunity (when calculated using recent share prices) has decreased
since 2018; however, the US dollar figure disclosed remains as calculated at the decision date of the salary in line with IFRS and consistent with
our previous disclosures.

The Committee also considered the fact that the CEO’s salary was 35% less than the CEO salary in our predecessor company, BGEO Group PLC.

Moreover, for the renewed Policy in 2022 retained the same number of shares for salary and for the maximum opportunity as was presented to
shareholders for their approval in 2019; there has been no increase in salary nor incentive.

Single total figure of remuneration for Non-Executive Directors (audited)
The table below sets out the remuneration received by each Non-Executive Director in 2022 and 2021.

The Non-Executive Directors do not receive any variable remuneration or pension contributions.

Neil Janin

David Morrison

Massimo Gesua’ sive Salvadori

Kim Bradley

Caroline Brown

Jyrki Talvitie

Maria Chatti-Gautier

Total

Georgia Capital PLC fees (US$)

JSC Georgia Capital fees (US$)

Total fees (US$)

2022

10,953

67,890

52,341

77,768

20,261

65,481

58,911

2021

–

67,890

52,341

72,341

52,341

65,481

58,911

2022

17,140

133,736

104,609

135,646

40,494

94,973

90,885

2021

–

133,736

104,609

122,125

104,609

94,973

90,885

353,605

369,305

617,484

650,937

2022

28,094

201,626

156,950

213,414

60,755

160,454

149,796

971,089

2021

–

201,626

156,950

194,466

156,950

160,454

149,796

1,020,242

Notes:
1 Neil Janin was appointed as a member of the Board and JSC Supervisory Board, and of the Nomination Committee and Remuneration Committee, on 17 October 2022, and as

a member of the Investment Committee on 20 December 2022.

2 Kim Bradley was appointed as a member of the Audit and Valuation Committee from 20 May 2022, and stepped down as a member of the Nomination Committee and the

Remuneration Committees on 20 December 2022.

3 Caroline Brown did not seek re-election at the 2022 AGM and therefore ceased to be a director on 20 May 2022.

Payments to former Directors and for loss of office
No payments were made to former Directors or for loss of office during the year ended 31 December 2022.

Total Shareholder Return
Georgia Capital PLC has been a member of the FTSE All Share Index since its listing on 29 May 2018. The following graph compares the Total
Shareholder Return (TSR) of Georgia Capital PLC with the companies comprising the FTSE All Share Index and FTSE Small Cap Index for the period
from 29 May 2018 until 31 December 2022.

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140

120

100

156

Jun-18 Sep-18 Dec-19 Mar-20

Jun-20 Sep-20 Dec-20 Sep-21

Jun-21 Sep-21 Dec-21 Mar-22

Jun-22 Sep-22 Dec-22

Georgia Capital

FTSE All Share

FTSE Small Cap

Relative importance of spend on pay
The following table shows Georgia Capital’s actual spend on pay at the holding companies’ level only (c.45 employees in total) between 2021
and 2022. We considered comparison against these employees to be the most appropriate given the Company’s status as an investment entity
under IFRS 10.

Year ended 31 December 2021 (US$ thousands)

Year ended 31 December 2022 (US$ thousands)

Percentage change

Remuneration paid to all
employees of the Group

Distribution to shareholders

by way of buy-back

10,136

10,004

-1.3%

6,988

18,071

NMF

Notes:
1 The Company did not make any other significant distributions during 2021 or 2022. There were no dividends. The US dollar amount is calculated using an average GEL/US$

exchange rate for each of 2021 and 2022.
In August 2021 the Group recommenced its buyback programme in line with its capital allocation framework.

Share ownership requirement (audited)
Executive Directors are required to build over five years and maintain a shareholding equivalent to 200% of base salary. Mr Gilauri already holds
above this requirement as at 31 December 2022 – see table and table note 2 below. In accordance with the Policy, beneficially owned shares as
well as unvested (net of tax) and vested deferred share salary and discretionary deferred shares count towards the requirement, noting that such
unvested and vested shares are not subject to performance conditions after their grant.

Directors’ interests in shares (audited)
The following table sets forth the respective holdings of GCAP shares of each Director as at 31 December 2021 and 2022.

As at 31 December 2021

Number of
vested but
unexercised
GCAP shares
held under
option through
deferred share
salary and
discretionary
deferred share
compensation
(all nil-cost
options with no
performance
conditions)

Number of
unvested and
unexercised
GCAP shares
held under
option through
deferred share
salary and
discretionary
deferred share
compensation
(all nil-cost
options with no
performance
conditions)

Total number
of interests in
GCAP shares

Number of
GCAP shares
held directly

As at 31 December 2022

Number of
vested but
unexercised
GCAP shares
held under
option through
deferred share
salary and
discretionary
deferred share
compensation
(all nil-cost
options with no
performance
conditions)

Number of
unvested and
unexercised
GCAP shares
held under
option through
deferred share
salary and
discretionary
deferred share
compensation
(all nil-cost
options with no
performance
conditions)

Total number
of interests in
GCAP shares

–

N/A

823,192

1,935,590

1,322,320

N/A

66,368

35,383

12,585

–

101,368

35,383

12,585

–

13,739

6,860

–

6,860

–

N/A

954,221

2,276,541

N/A

101,368

35,383

12,585

–

13,739

6,860

–

Irakli Gilauri

David Morrison

Kim Bradley

Jyrki Talvitie

Caroline Brown

Massimo
Gesua’ sive Salvadori

Marie Chatti-Gautier

Neil Janin

Number of
GCAP shares
held directly

1,112,398

66,368

35,383

12,585

–

13,739

6,860

–

Notes:
1 As at 31 December 2022, Mr Gilauri’s vested and unvested shareholding was 2,276,541 GCAP shares, representing approximately 5.1% of the Company’s share capital. In

January 2023, Mr Gilauri received awards of 200,000 nil-cost options over ordinary shares in respect of deferred salary shares for the 2022 work year, out of which 8,166 were
waived by Mr Gilauri to discharge the UK tax and employee National Insurance contributions. In January 2023 Mr Gilauri exercised 331,289 nil-cost options over ordinary shares,
out of which 64,581 shares were withheld to meet tax liabilities. These will be reported in the 2023 Annual Report and Accounts and are not included in the table above, which is
at 31 December 2022. None of Mr Gilauri’s connected persons have any interest in the shares of the Company.

2 On 6 January 2022, Mr Gilauri received a grant of 200,000 nil cost options over ordinary shares in respect of deferred salary shares for the 2021 work year out of which 8,068

were waived by Mr Gilauri to discharge the UK tax and employee National Insurance contributions. On 20 January 2022, Mr Gilauri exercised options in respect of 260,903 GCAP
shares, of which 50,981 were withheld to satisfy tax liabilities. The net gain of these options was US$ 1,935,444. On 27 May 2022 Mr Gilauri received a grant of 200,000 nil cost
options over ordinary shares in respect of discretionary deferred shares for the 2021 work year pursuant to the executive equity compensation plan. As of 31 December 2022,
all vested nil-cost options of the CEO were exercised.

3 On 25 November 2022, David Morrison acquired 35,000 shares.

The Remuneration Policy focuses on base salary in deferred salary shares and discretionary compensation in discretionary deferred shares.
The long vesting periods naturally results in the Executive Director, Irakli Gilauri, building up large holdings of unvested nil-cost options. The Policy
naturally results in Mr. Gilauri and our executive management team holding a significant number of unvested shares and achieves a delay between
performance and vesting. We believe these results are consistent with the principles of the Investment Association. As at 31 December 2022,
Mr. Gilauri met the shareholding requirement.

Under the 2019 and 2022 Policies, the Group does not require Non-Executive Directors to hold a specified number of shares in GCAP.
Notwithstanding this, some Non-Executive Directors have chosen to become shareholders. The Non-Executive Directors are not awarded incentive
shares and are not remunerated in shares. Non-Executive Directors are not subject to a shareholding requirement.

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There have been no changes in the Directors’ interests in shares in the Company between the end of the financial year and the last practicable date
of 17 March 2023, with exception of Irakli Gilauri who as at 17 March 2023 holds total of 2,403,794 vested and unvested shares.

Mr Gilauri’s interests in group debt securities
On 9 March 2018, Mr Gilauri acquired an aggregate principal amount of US$ 1,000,000 notes issued by JSC Georgia Capital which are listed on the
Irish Stock Exchange.

2023 CEO KPIs
The 2023 KPIs were selected based on our strategy and ongoing key metrics. Consequently, the 2023 KPIs are as follows:
• NAV per share;
• Achieving budget of GCAP and portfolio companies, including cash flow generation;
• Expense ratio;
• Broaden access to capital including active seeking of price discovery of assets (including strategic priority of divestment of subscale portfolio

Details of Non-Executive Directors’ letters of appointment
Georgia Capital has entered into letters of appointment with each Non-Executive Director. The letters of appointment require Non-Executive
Directors to provide one month’s notice prior to termination. The letters of appointment for the majority of current Non-Executive Directors are
effective from 24 February 2018, with Maria Chatti-Gautier’s effective from her appointment on 19 March 2020 and Neil Janin’s from his appointment
on 17 October 2022. Each Non-Executive Director is put forward for election at each AGM following his or her appointment. Continuation of a
Non-Executive Director’s employment is conditional on his or her continued satisfactory performance and re-election by shareholders at each AGM.

A succession plan adopted by the Board provides for a tenure of six years on both the Georgia Capital PLC and JSC Georgia Capital Boards.
Upon the expiry of such six-year tenure, the appointment of the relevant Non-Executive Director may cease at the next upcoming AGM.

Notwithstanding the foregoing, if the Board determines that, in order to maintain the balance of appropriate skills and experience required for the
Board, it is important to retain a Non-Executive Director on the Board beyond the relevant six-year period, the Board may offer the Non-Executive
Director a letter of appointment for an additional one-year term. Such a one-year “re-appointment” may be renewed no more than two times, with
the effect that the usual six-year tenure may be extended to a maximum of nine years if circumstances were to warrant such extension.

Implementation of Remuneration Policy for 2023
Details of how the 2022 Policy will be implemented for the 2023 financial year are set out below. There will be no significant change in the way that
the 2022 Policy will be implemented in 2023 and no deviations from the procedure for the implementation of the 2022 Policy as set out in the Policy.

For Irakli Gilauri

2023 fixed pay

Total deferred share salary

200,000 Georgia Capital deferred shares underlying nil-cost options per annum pro rata.

Pension benefits

Mr Gilauri has agreed for all pension contributions to be waived. Details of the benefits received by
Executive Directors are on page 156.

companies);

• Disciplined pursuit of investment opportunities and asset & capital allocation, including NCC targets;
• Progress towards achieving mid-to-long term strategic priorities in portfolio companies;
• Professional development and mentoring of management; and
• Progress towards ESG targets.

Due to the potential impact on our commercial interests, annual bonus targets are considered commercially sensitive and appropriate detail will
therefore be disclosed in the 2023 Remuneration Report following the completion of the financial year. KPIs and targets will be reviewed and may
be revised by the Remuneration Committee and the Board as appropriate throughout the year, subject to the terms of the Policy.

Non-Executive Director remuneration
The table below shows the fee structure for Non-Executive Directors for 2023. Non-Executive Directors’ fees are determined by the Board.

Component

Purpose and link to strategy

Operation

Opportunity

Base cash fee

The fee for the Board is competitive enough to
attract and retain individuals.

Cash payment on
quarterly basis.

The Chairman receives a fee which reflects
the extra time committed and responsibility.
However, no Chairman’s fee is received when
Chairman and CEO roles are combined.

The Senior Independent Non-Executive Director
receives a higher base fee which reflects the
extra time and responsibility.

The amount of remuneration may be reviewed
from time to time by the Board. The fees may
be amended and varied if there are genuinely
unforeseen and exceptional circumstances.
Any significant increase shall be the minimum
reasonably required.

The maximum aggregate for all Non-Executive
Directors which may be paid by Georgia Capital
PLC for the PLC fees is GBP 750,000 which
is consistent with the current limit in the PLC’s
Articles of Association.

The amount of remuneration for the membership
may be reviewed from time to time by the Board.
The Chairman of the PLC does not receive any
Committee fee.

There are circumstances in which unvested deferred shares may lapse, and narrow circumstances in which such shares may vest immediately are
set out in detail in the 2022 Policy.

Cash fee for each
Committee
membership

Additional fee to compensate for additional time
spent discharging Committee duties.

Cash payment on
quarterly basis.

2023 discretionary deferred share remuneration

Deferral terms

Performance measures

The Committee will determine whether an award is merited based on an Executive Director’s achievement
of the KPIs set by the Committee for the work year and the performance of the Group during the work year.
If Mr Gilauri is awarded discretionary deferred shares with respect to the 2023 work year, the award will vest
25% in January of each of 2025, 2026, 2027 and 2028. Each tranche will be subject to a further holding
period of one year. This decision will be set out in the 2023 Directors’ Report.

Upon vesting, Mr Gilauri will receive (in addition to the vested shares) cash payments equal to the dividends
paid (if any) on the underlying shares between the beginning of the year immediately following the work year
and the vesting date.

For 2023, the Remuneration Committee has determined that the performance measures will be based on
KPIs (see below). The Remuneration Committee has considered the detail of each KPI and ensured that
measurable targets are included. The KPIs will be reviewed by the Remuneration Committee throughout
the year and by the Board as appropriate.

See notes to the 2022 Policy for malus and clawback provisions.

Summary of Directors’ Remuneration Policy
The Remuneration Policy was approved at the AGM on 20 May 2022 and took effect from that date. It is intended that approval of the Policy will
be sought at three-year intervals, unless amendments to the 2022 Policy are required, in which case further shareholder approval will be sought;
no changes are proposed for 2023. The full 2022 Policy is available at https://georgiacapital.ge/governance/cgf/policies. The tables in this
section provide a summary of the Policy.

Opportunity
The maximum number of deferred share salary shares is 200,000 per
annum for Irakli Gilauri, of which 20,000 shares per annum are for his work
as the CEO of Georgia Capital PLC and 180,000 shares per annum are for
his work as a CEO of JSC Georgia Capital and its subsidiaries.

Performance measures
N/A

Remuneration Policy table for Executive Directors

Deferred share salary

Purpose and link to strategy
To reflect the role and required duties, skills, experience and individual
contribution to the Group whilst promoting long-term value creation
and share price growth.

Operation
The level of base salary for an Executive Director is fixed in his or her
service agreement(s). Salary is comprised entirely of long-term deferred
shares (“deferred share salary”) in the form of nil-cost options annually
in respect of the work year with no cash salary.

Deferred share salary is awarded annually in the form of nil-cost options
in respect of the work year and vest over five years with 20% vesting in
each of the second, third, fourth, fifth and sixth years following the end
of the work year. At vesting the Executive Director also receives cash
payments equal to the dividends paid on the underlying shares between
the date the award was made and the vesting date.

Lapse provisions (natural malus) are built into the deferred share salary.
Extended malus and clawback provisions do not apply to the deferred
share salary as the awards attach to salary already earned.

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Discretionary deferred shares

Purpose and link to strategy
To motivate and reward an Executive Director that meets or exceeds the
KPIs set for him or her by the Remuneration Committee for the relevant
period.

Opportunity
The maximum number of discretionary deferred shares that may be
awarded in respect of the previous work year for Mr Gilauri is capped
at 200,000 shares (i.e. 100% of deferred share salary).

Performance-based remuneration is solely in the form of deferred shares
(no cash), designed to closely align the interests of an Executive Director
with shareholders, avoid inappropriate risk taking for short-term gain and
encourage long-term commitment to the Group.

Operation
Performance-based remuneration is awarded annually entirely in
the form of nil-cost options over the Group shares subject to vesting
(“discretionary deferred shares”). The Group does not award cash
bonuses. The Remuneration Committee will determine annually the
number of shares to be awarded based on the Executive Director’s
achievement of the KPIs set for the work year and the performance
of the Group during that year.

Any discretionary deferred shares are expected to be granted following
the end of the work year and vest 25% in each of the second, third,
fourth and fifth years following the end of the work year, although the
Remuneration Committee retains the discretion to determine the timing
of the award. Each tranche of vested discretionary deferred shares must
then be held for a further one year.

At vesting, the Executive Director also receives cash payments equal
to the dividends paid on the underlying shares between the beginning
of the year immediately following the work year and the vesting date.

There is no contractual right to discretionary deferred shares and the
Remuneration Committee reserves the right to award no discretionary
deferred share remuneration if the Group’s performance
is unsatisfactory.

Extended malus and clawback, in addition to lapse provisions (natural
malus) apply.

Pension

Purpose and link to strategy
The Group complies with pension requirements set by the Georgian
Government. The same arrangement applies to employees across
the Group in Georgia.

For an Executive Director (other than Mr Gilauri), the maximum opportunity
in respect of the previous work year is 100% of total salary.

Performance measures
KPIs for the Executive Director are set towards the beginning of each
work year and reflect the Executive Director’s targeted contribution to
the Group’s overall key strategic and financial objectives for the coming
work year. KPIs may also include non-tangible factors such as self-
development, mentoring and social responsibility.

If appropriate, where a strategic change or change in business
circumstances has made one or more of the KPIs an inaccurate gauge
of the Executive Director’s performance, the Remuneration Committee
may decide to base its assessment on alternative measures.

Opportunity
In line with current Georgian legislation, the Executive Director and Group
each contribute 0%-2% of total remuneration from the Group, and the
Georgian Government may contribute a further small amount (0%-2%
depending on income levels). Pension contributions will only increase
above this level if mandated by Georgian legislation or if mandated by
any other applicable legislation.

Operation
Pension provision will be in line with Georgian pension legislation, which
may change from time to time. There is no provision for the recovery or
withholding of pension payments.

Performance measures
N/A

Benefits

Purpose and link to strategy
Non-cash benefits are in line with Georgian market practice and are
designed to be sufficient to attract and retain high-calibre talent.

Operation
Benefits consist of: life insurance; health insurance; incapacity/disability
insurance; Directors’ and Officers’ liability insurance; physical examinations;
tax gross-ups and tax equalisation payments; company car and driver;
mobile phone costs; personal security arrangements (if requested by the
Executive Director); assistance with completing tax returns (where required);
relocation costs for Executive Director and close family and legal costs.

Other benefits may be provided from time to time if considered
reasonable and appropriate.

Opportunity
There is no prescribed maximum on the value of benefits payable to
an Executive Director. The maximum amount payable depends on the
cost of providing such benefits to an employee in the location at which
the Executive Director is based.

Performance measures
N/A

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Shareholding guidelines

Purpose and link to strategy
To ensure Executive Directors build and hold a significant shareholding
in the Group over the long term and to align Executive Directors’
interests with those of shareholders.

To ensure departing Executive Directors make long-term decisions
and maintain an interest in the ongoing success of the Group post-
employment.

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Operation
Executive Directors are required to build and then maintain a shareholding
equivalent to 200% of salary, such amount to be built up within a five-
year period from appointment as an Executive Director (the “Required
Shareholding”).

All beneficially owned shares, as well as unvested (net of tax) and vested
deferred share salary and discretionary deferred shares count towards
the Required Shareholding (as such awards are not subject to any
performance conditions after grant).

Executive Directors are to retain the lower of (i) the Required Shareholding,
or (ii) the shareholding at the time employment ceases, for a period
of two years from the date on which employment ceases unless the
Remuneration Committee determines otherwise.

In very exceptional circumstances, for example in the event of a serious
conflict of interest, the Remuneration Committee has the discretion to
vary or waive the Required Shareholding, but must explain any exercise
of its discretion in the Group’s next Remuneration Report. It should be
emphasised that there is no present intention to use this discretion.

Clawback and malus
Discretionary deferred shares are subject to malus, and clawback for up to two years from vesting, in the following circumstances:
• misconduct in the performance or substantial failure to perform duties;
• significant financial losses, serious failure of risk management or serious damage to the reputation of Georgia Capital PLC or JSC Georgia

Capital, caused by misconduct or gross negligence (including inaction in performance of his/her duties by the Executive Director);

• material misstatement or material errors in the Financial Statements that relates to the area of responsibility of the Executive Director or can be

attributed to their action (or inaction in performance of his/her duties);

• deliberately misleading Georgia Capital PLC or JSC Georgia Capital in relation to financial performance; and
• an award being made on the basis of erroneous or misleading data, provided that for payments based on erroneous or misleading data (other

than where such error has been caused by fraud, willful misconduct, deliberate action/inaction and/or gross negligence of the Executive Director),
malus and clawback applies to discretionary deferred remuneration awarded for the year in question.

The above provisions form part of Mr Gilauri’s service contract. Further, the Group has also amended the Executive Equity Compensation plan to
allow shares to be lapsed, including to zero, or clawed back in accordance with the provisions in the Executive Director’s contract.

For the Group’s current Executive Director, Mr Gilauri, the Group also has unusually strong malus provisions where all unvested shares (deferred
share salary and discretionary deferred shares) lapse when the service contract is terminated under certain circumstances, including for cause
such as gross misconduct, substantial and repeated failure to perform duties, fraud or conviction of a felony. This may be several years of salary
deferred shares and discretionary deferred shares. Please see the “Termination of the JSC Georgia Capital service agreement” in the Policy for
more information.

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Illustration of application of Remuneration Policy
The chart below shows an estimate of the remuneration that could be received by Mr Gilauri, the Group’s sole Executive Director and CEO,
in respect of 2022 under the proposed Policy at five different performance levels.

The 50% share price appreciation disclosure is made voluntarily by the Group (as performance measures are limited to one year) for investor
information.

Base fees continued

Operation
All fees are paid in cash on a quarterly basis. The fee of the Chairman will
be determined by the Remuneration Committee. Fees for Non-Executive
Directors will be determined by the Board.

Performance measures
N/A

The below is an extract from the 2022 Policy.

US$ 8,000,000

US$ 6,000,000

US$ 3,908,000

US$ 4,414,000

US$ 4,000,000

US$ 2,730,000

US$ 2,000,000

100%

30.2%

69.8%

38.2%

61.8%

US$ 6,621,000

34.0%

25.0%

41.0%

US$ 1,954,400

30.2%

69.8%

No share
price growth

50% share price
appreciation

50% share
price decline

Minimum

Target

Maximum

Target

Fixed share salary

Discretionary deferred
share compensation

50% share price appreciation

Notes:
1 Salary is comprised of deferred share salary and benefits. Mr Gilauri does not receive a cash salary and has waived all pension contributions. For illustration purposes, the value
of the deferred share salary payable to Mr Gilauri is US$ 2,730,000, calculated by reference to the share price of US$ 13.65 on 12 July 2018, being the date of the Remuneration
Committee meeting (the official share price of GBP 10.324 converted into US Dollars using an exchange rate of 1.3223, being the official exchange rate published by the Bank of
England on the same date) to approve the contract.

2 For the purpose of calculating the value of discretionary deferred shares for illustration in this chart a share price of US$ 8.42 per share was used which was the share price

of the most recent discretionary deferred remuneration award (ahead of the Policy implementation). The actual value of the discretionary deferred share award in respect of the
performance of the 2022 work year is reported in the 2022 Annual Report and Accounts as at latest closing share price before the Remuneration Committee meeting at which
the award is decided.

3 Minimum opportunity reflects a scenario whereby Mr Gilauri receives only fixed remuneration which is deferred share salary and benefits. No share price growth assumptions

have been made.

4 On-target opportunity reflects a scenario whereby Mr Gilauri receives fixed remuneration (as described in 1 above) and 140,000 discretionary deferred shares, being 70% of the

maximum opportunity. No share price growth assumptions have been made.

5 Maximum opportunity reflects a scenario whereby Mr Gilauri receives fixed remuneration (as described in 1 above) and discretionary deferred shares compensation award

of 100% being the number of shares granted under the deferred share salary. No share price growth assumptions have been made.

6 Maximum plus 50% share price growth reflects a scenario whereby Mr Gilauri receives fixed remuneration (as described in 1 above) and discretionary deferred shares

compensation award of 100% of the maximum opportunity and share price grows by 50%.

7 Target with 50% share price depreciation reflects a scenario whereby Mr Gilauri receives fixed remuneration (as described in 1 above) and discretionary deferred shares

compensation award of 70% of the maximum opportunity and share price depreciates by 50%.

8 For long-term incentive awards, disclosure of the value of the award in the event of a 50% share price appreciation is required by the Companies (Miscellaneous Reporting)

Regulations 2018. Such disclosure is not required for short-term incentive awards, such as those made by the Group, where performance measures are limited to one year,
nor is it required for salary compensation in the form of shares. The reason for this is that an increase in the value of the deferred shares resulting from share price appreciation
in the period through to the vesting date is not considered to constitute remuneration for the purposes of the regulations. However, the Group has decided to voluntarily disclose
information showing the value of a 50% share price appreciation.

Remuneration Policy table for Non-Executive Directors

Base fees

Purpose and link to strategy
To attract and retain high performing Non-Executive Directors with
the requisite skills, knowledge, experience, independence and other
attributes to add value to the Group.

Opportunity
The maximum aggregate Georgia Capital PLC fees for all Non-Executive
Directors which may be paid under the PLC’s Articles of Association is
GBP 750,000. A specific maximum has not been set for the individual
base cash fee.

The Senior Independent Non-Executive Director receives a higher base
fee which reflects the extra time commitment and responsibility.

The Chairman receives a fee which reflects the extra time commitment
and responsibility. However, no Chairman’s fee is received when the
Chairman and CEO roles are combined.

Fees may be reviewed from time to time by the above, taking into
account the time commitment, responsibilities and the technical skills
required to make a valuable contribution to the Board, and by reference
to comparators, benchmarking, results of the annual review and
other guidance. The Board also reserves the right, in their discretion,
to amend and vary the fees if there are genuinely unforeseen and
exceptional circumstances which necessitate such review and in such
circumstances any significant increase shall be the minimum reasonably
required. The Board reserves the right to structure the Non-Executive
Directors’ fees differently in its absolute discretion.

Non-Executive Directors are reimbursed for reasonable business
expenses, including travel and accommodation, which are incurred
in the course of carrying out duties.

Committee fees

Purpose and link to strategy
Compensate for additional time spent discharging Committee duties.

Opportunity
The Chairman does not receive Committee fees.

Operation
Cash payment on a quarterly basis.

Performance measures
N/A

The amount of remuneration for Committee membership is reviewed
as above.

Service agreements and policy on payments for loss of office for our Directors
Mr Gilauri is the sole Executive Director of the Group. Mr Gilauri has a service contract effective 29 May 2018 with Georgia Capital PLC for an
indefinite term which is terminable by either party on not less than four months’ notice unless for cause where notice served by the Group shall
have immediate effect.

Mr Gilauri also has a service agreement with JSC Georgia Capital effective from 29 May 2018 until 31 December 2025 which is terminable by the
Executive Director on not less than three months’ notice.

For information on our policy on payments for loss of office, please see our full Policy at https://georgiacapital.ge/governance/cgf/policies.

Letters of Non-Executive Directors’ appointments
Each Non-Executive Director is required to submit himself or herself for annual re-election at the AGM. The letters of appointment for Non-Executive
Directors provide for a one-month notice period although the Group may terminate the appointment with immediate effect without notice or pay in
lieu of notice if the Non-Executive Director has committed any material breach or non-observance of his or her obligations to the Group is guilty of
fraud or dishonesty, brings the Group or him/herself into disrepute or is disqualified as acting as a Director, among other circumstances. Upon
termination, the only remuneration a Non-Executive Director is entitled to is accrued fees as at the date of termination together with reimbursement
of properly incurred expenses incurred prior to the termination date.

The service agreements and letters of appointment are available for inspection at the Company’s registered office.

Signed on behalf of the Remuneration Committee and the Board of Directors

Jyrki Talvitie
Chairman of the Remuneration Committee
23 March 2023

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NOMINATION COMMITTEE REPORT

DEVELOPING AND
RECRUITING THE
TALENT PIPELINE
FOR A UNIQUE GROUP

Jyrki Talvitie
Chairman of the
Nomination Committee

Dear Shareholders
I am pleased to present the Committee’s report for the year ended
31 December 2022.

Shareholders are aware of our intention to reduce the size of the Board,
from seven to five directors, with Kim and myself not putting ourselves
forward for re-election at the 2023 AGM. Accordingly, the Committee
is currently considering the composition of the Audit and Valuation
Committee, Remuneration Committee and the Nomination Committee
itself, following the 2023 AGM. The Committee is also considering a
replacement chair of the Investment Committee and a replacement
designated Non-Executive Director for employee engagement.

The Board has carried out a further evaluation, reported on later in this
report, and has also undertaken an exercise to identify the skills required
by the Board to deliver on the Company’s strategy. Taking these into
account, the Committee is satisfied that the size and composition of
the Board is appropriate for the Group and that it comprises the right
combination of skills, experience and knowledge. The Committee
remains satisfied that we have in place strong leaders across our
portfolio companies. Succession planning will, however, be an ongoing
priority for the Committee at both Board and senior management level.

I invite you to read more details on the above and the other activities we
have undertaken during 2022 in the following report.

Jyrki Talvitie
Chairman of the Nomination Committee
23 March 2023

The Committee’s principal responsibility is to lead the process of
appointing Directors to the Board and senior management positions.
The Committee had a particularly active year following Caroline Brown’s
departure from the Board in May and the appointment of Neil Janin with
the consequent need to review membership of the Board Committees.
In addition, the Committee considered succession plans for CEO Irakli
Gilauri and helped negotiate the successful extension of Mr Gilauri’s
current employment contract from May 2023 until 31 December 2025.
The Committee is satisfied, having considered the results of the Board
evaluation, that the composition of the Board and Committees overall
remain appropriate for the successful delivery of the Company’s strategic
and financial objectives. The Committee also concluded that the
composition of the Audit and Valuation Committee continues to be
appropriate.

Although the Board and the Committee had considered separating the
Chairman and CEO roles in 2023, following Nikoloz (Nick) Gamkrelidze’s
departure from the Group, that discussion has been postponed. We
continue to monitor the ongoing combination of the roles of Chairman
and CEO and the Committee is satisfied that this remains the best
structure for the Company for the time being.

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The role of the Nomination Committee
The role of the Nomination Committee is to help ensure the Board
comprises individuals who are best able to discharge the responsibilities
of Directors, having regard to the highest standards of governance, the
strategic direction of the Company and the Board’s Diversity Policy.

We also help to ensure that the Company appoints excellent executive
managers within our portfolio of companies, capable of successfully
executing our strategic objectives.

In summary, the key responsibilities of the Nomination Committee
include:
•

regular review of the composition of the Board and its Committees
to ensure they are appropriately constituted and balanced in terms
of diversity of gender, social and ethnic backgrounds, cognitive and
personal strengths, and balance in terms of skills, experience,
independence and knowledge;
responsibility for identifying and nominating candidates for the
approval by the Board to fill Board vacancies as and when they arise;

•

Shareholders will appreciate that finding the right candidates to join the
Company’s Board can be challenging, so it was fortuitous that earlier in
2022 Neil Janin’s tenure as Chair of Bank of Georgia Group PLC came
to an end. Mr Janin’s experience, which is detailed on page 127, is deep,
broad and, at least as it relates to Georgia, unique. The Committee
considered that given his unique experience this was an opportunity to
significantly enhance the Board’s capabilities. We carefully considered
Mr Janin’s past roles as a Director of BGEO Group PLC and Georgia
Healthcare Group PLC and was satisfied that he would be independent
in judgement and character. In addition, we considered that Neil Janin
would bring significant value to the Investment, Nomination and
Remuneration Committees and recommended that the Board appoint
him to the Committees.

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As reported last year, the Committee recommended to the Board that
Kim Bradley join the Audit and Valuation Committee with effect from
20 May 2022. Kim Bradley’s experience and the reasons for his
appointment are detailed on page 126 of this report.

• giving full consideration to succession planning for Directors,

including the Chairman and CEO and other senior management,
taking into account the challenges and opportunities facing the
Company, and the skills and expertise needed on the Board in the
future;

With the continuing service of David Morrison (Chair) and Massimo
Gesua’ sive Salvadori (see pages 126-127 for a description of their
experience and reason for appointment), the Committee continues
to consider that the financial expertise of the Audit and Valuation
Committee’s members is recent and relevant.

• keeping under review the Group’s leadership needs, both executive

and non-executive, and ensuring plans are in place for senior
management succession, with a view to ensuring the continued
ability of the Company to compete effectively in the marketplace; and
• making recommendations to the Board concerning the re-election by
shareholders of Directors under the annual re-election provisions of
the UK Corporate Governance Code (the “Code”), having due regard
to their performance and ability to continue to contribute to the Board
in the light of the knowledge, skills and experience required and their
independence, bearing in mind the need for progressive refreshing
of the Board.

The Committee undertook a review of its Terms of Reference and the
Committee is satisfied that these continue to be aligned to the Code
and best practice, and appropriate for the Company. The full Terms
of Reference of the Committee can be found on our website here:
https://georgiacapital.ge/governance/cgf/terms.

Composition and meeting attendance
The composition of the Committee and the members’ meeting
attendance for the year 2022 are set out in the Board and Committee
meeting attendance table on page 131, and the skills and experience
each member contributes can be found on pages 126-127. Up until
17 October 2022, the Committee comprised me as Chairman, Kim
Bradley, Maria Chatti-Gautier and Irakli Gilauri. On that date Neil Janin
joined the Committee following his appointment to the Board. Kim
Bradley ceased to be a member of the Committee on 20 December 2022
in view of his joining the Audit and Valuation Committee earlier in 2022.

In addition, from time-to-time members of management may be invited
to meetings to provide a fuller picture and deeper level of insight into key
issues and developments.

The Committee also reviewed the time commitment of the Non-Executive
Directors, taking into account any external directorships, length of service
as well as independence of character and integrity. When considering
this alongside the Company’s strategic direction and the required skills
and competencies required of the Board, the Committee recommends
that each Non-Executive Director and the Executive Director be elected/
re-elected at the 2023 AGM, where they have stood for re-election.

Caroline Brown did not seek re-election to the Board at the 2022 AGM
and therefore ceased to be a Director of the Company from the
conclusion of the AGM on 20 May 2022. Due to Dr Brown’s departure,
the Committee prioritised a review of the Board’s composition.

The tenure for each of the Directors is five years at the date of this report
(appointed in February 2018), except for Maria Chatti-Gautier who has
served three years (appointed in March 2020) and Neil Janin (appointed
in October 2022). As part of a wider assessment, the Committee notes
the several of the Directors (David Morrison, Kim Bradley and Neil Janin)
previously had roles as Directors of BGEO Group PLC. The business of
Georgia Capital demerged from BGEO Group PLC, into a new group
which listed in May 2018. Georgia Capital is a platform for buying,
developing and selling businesses in Georgia. Importantly therefore,
the nature of the business of Georgia Capital is substantially different
to that of BGEO Group PLC at the date of the demerger, which primarily
consisted of the regulated bank. From their previous long careers,
Mr Morrison and Mr Janin have very strong experience, knowledge and
authority to demonstrate objective judgement and provide constructive
challenge among the Board members for this Company’s business as
an investment platform. The Committee has also noted the continuing
contribution of all Board members in Board meetings and outside the
meetings. Taking all the foregoing into consideration, the Committee
determines that all Board members are independent in character and
judgement.

You can read more on the balance of the Board in the section on
“Board size, composition, tenure and independence” on page 128.

Extension of CEO contract; role of the Chairman of the Board
Early in 2022 we had considered appointing Nick Gamkrelidze, then
the CEO of Georgia Healthcare Group (GHG), to succeed Irakli Gilauri
as CEO in 2023. Following Nick’s departure from GHG, the Committee
sought to renew Irakli Gilauri’s tenure as CEO, which was due to expire
in May 2023. We were delighted when Mr Gilauri agreed to extend his
contract to 31 December 2025, and recommended that extension to the
Board. The extension will enable Georgia Capital to continue to benefit
from Mr Gilauri’s experience, knowledge of the local business
environment, his enthusiasm and commitment.

As part of the now abandoned plan to appoint Mr Gamkrelidze as CEO,
we were intending to separate the roles of CEO and Board Chair, with
Mr Gilauri assuming the latter role.

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NOMINATION COMMITTEE REPORT CONTINUED

STATEMENT OF DIRECTORS’ RESPONSIBILITIES

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Following Mr Gamkrelidze’s departure, the Committee revisited the plan
to separate the Chairman and CEO roles and decided that,
notwithstanding that this is not compliant with Provision 9 of the Code,
the continuing combination of the two roles (i.e. the current structure) best
serves our Company and recommend that it should continue at least for
2023. Mr Gilauri did not participate in these discussions. The Committee
and the Board will keep the structure under review. Shareholders have,
for the last four years, been supportive of this structure and from our
discussions with shareholders, we believe this continues to be the case.
The basis for this conclusion, and our shareholder engagement on this
matter, is set out in the Directors’ Governance Statement on page 124.

Training and Director induction
We are committed to the continuing development of our Directors in
order that they may build on their expertise and develop an even more
detailed understanding of the business and the markets in which our
investments operate. All of our Directors participated in development
sessions and presentations. This year the Directors were able to
recommence site visits following the travel restrictions necessitated by
the COVID-19 pandemic. The UK General Counsel and Group Corporate
Secretary provide briefings as appropriate on regulatory and governance
developments, including on changes in the Listing Rules and on
stakeholder views on diversity.

Inclusion and diversity
Our Board embraces diversity in all its forms and the Board understands
the importance of developing a diverse pipeline for succession to senior
management and the Board.

Each Director, upon appointment, receives a tailored induction to the
Company and its various investments over the first six months of
appointment, with the purpose of:
• building an understanding of the nature of the Company, its business

The Committee and the Board recognise the role that diversity has in
promoting balanced decision-making which aligns with our values and
strategy, and diversity of skills, background, experience, knowledge,
outlook, approach, gender, nationality and ethnicity, amongst other
factors, will be taken into consideration when seeking to appoint a
new director to the Board. Notwithstanding the foregoing, any Board
appointment will always be based on merit.

Similarly, we are clear that diversity of outlook and approach, while
inevitably being difficult to measure, may be equally important. We are
supportive of the ambition shown in recent reviews on diversity, including
the Parker Review regarding ethnic diversity. The Board is currently in
line with recommendations for UK boards, with Board member Maria
Chatti-Gautier of Syrian heritage (Middle Eastern) and so representing
an ethnically diverse background.

We support the FTSE Leaders Women’s Review regarding gender
diversity, the latter being aimed primarily at FTSE 350 companies.
The Committee will continue to examine ways in which we can become
an increasingly diverse Board. The Committee will also be working to
improve the gender balance of those in senior management positions
and their direct reports, as described in the Resources and
Responsibilities section on page 82 and in the Sustainability Report.
The Committee will continue to explore what additional steps need
to be taken to improve diversity of the Board.

On 31 December 2022, Georgia Capital, as an investment holding
company, had a total of 48 employees, of which 28 are females, and
20 are males. You can view our further gender diversity statistics on
page 85 in the Resources and Responsibilities section and in the
Sustainability Report. In terms of diversity in nationality, the Board is
currently composed of Directors from Georgia, the US, Canada, Italy,
Finland and France.

The Committee is responsible for maintaining and assessing the
effectiveness of the Company’s Diversity Policy and reviews this on an
ongoing basis. You can read more about the established diverse culture
and related activities during 2022 in the Resources and Responsibilities
section on pages 85 and in the Sustainability Report.

Succession planning and talent development
Board succession planning at the senior management level was, as
mentioned previously, an area of focus for the Committee during the
year. I have previously reported on the creation of opportunities to
develop high-performing individuals and to build diversity in senior roles
across the business. We continue to build on this initiative and have
developed a talented pool of employees within Georgia Capital that we
believe is the best way to ensure a healthy and diverse pipeline of future
leaders of the Company.

In addition, the Company pursues initiatives aimed at developing the
entrepreneurial business leaders that Georgia Capital will require as it grows.

and its markets;

• building a link with the Company’s people;
• building an understanding of the Company’s main relationships; and
• understanding the obligations and responsibilities of a Director of a

UK main market listed company.

As part of the induction programme, each Director meets members of
executive management and receives information about the role of the
Board and individual Directors, each Board Committee and the powers
delegated to these Committees. The new Director is also advised of
the legal and other duties and obligations of a Director of a listed
company.

Neil Janin received presentations on matters relevant to his role and
the organisation, and has met members of the team and the Board.

Board and Committee evaluation
The Company engaged Amandla UK Limited (Amandla) to facilitate
a review of the Board’s effectiveness, including that of the Nomination
Committee. This review was intended to look more closely at boardroom
dynamics, building on the work of Lintstock Limited as reported in our
2021 Annual Report. In particular, the Board was keen to ensure that it
was able to engage effectively on difficult strategic decisions and have
a strong and aligned vision for the business.

Amandla had previously worked with the Chairman and other senior
executives within Georgia Capital. The assessment included a series
of qualitative diagnostic interviews designed to ascertain from each
of the Board members several different components:
1. The individual strengths of each member.
2. The areas which other Board members felt there could be a greater

contribution.

3. The dynamics in the team that allowed for healthy challenge and

debate.

4. The areas that might need attention.

Each Board member was also asked to appraise their colleagues on
the Board. A plan of action was created for each member. Amandla
observed a Board meeting and concluded that the atmosphere was
healthy, and that the agenda was attended to in an orderly and prudent
manner, with priority items given enough airtime to be carefully thought
through. There was appropriate challenge and robust discussion.
Amandla also concluded that the diversity of thought and experience
met industry standards, and in terms of oversight the Board was fit for
purpose. The evaluation also noted the Board should consider whether
it would function more effectively and with more agility if it was reduced
in size. This will be considered by this Committee during 2023.

Given his role as Chairman and CEO, Irakli Gilauri’s performance was
also reviewed by the Remuneration Committee. In addition, the full Board
met to consider the Remuneration Committee’s recommendations.

166

The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and regulation.

The Directors are responsible for safeguarding the assets of the
company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.

Company law requires the directors to prepare financial statements
for each financial year. Under that law the directors have prepared
the financial statements in accordance with UK-adopted international
accounting standards.

Under company law, directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the company and of the profit or loss of the company for that
period.

In preparing the financial statements, the directors are required to:
• select suitable accounting policies and then apply them consistently;
• state whether applicable UK-adopted international accounting

standards have been followed, subject to any material departures
disclosed and explained in the financial statements;

• make judgements and accounting estimates that are reasonable and

prudent; and

• prepare the financial statements on the going concern basis unless
it is inappropriate to presume that the company will continue in
business.

•

The Directors are also responsible for keeping adequate accounting
records that are sufficient to show and explain the company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the company and enable them to ensure that the
financial statements and the Directors’ Remuneration Report comply
with the Companies Act 2006.

The Directors are responsible for the maintenance and integrity of the
company’s website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.

We confirm that to the best of our knowledge:
•

the Company financial statements, which have been prepared in
accordance with UK-adopted international accounting standards,
give a true and fair view of the assets, liabilities, financial position
and loss of the Company; and
the Annual Report, including the Strategic Report includes a fair
review of the development and performance of the business and the
position of the company, together with a description of the principal
risks and uncertainties that it faces.

We consider the Annual Report and Accounts, taken as a whole, is fair,
shareholders to assess the Company’s position and performance,
business model and strategy.

By order of the Board

Irakli Gilauri
Chairman and CEO
23 March 2023

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DIRECTORS’ REPORT

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The Directors present their Annual Report and the audited consolidated
financial statements for the year ended 31 December 2022.

Please refer to the Corporate Governance Statement for further
information on how we applied the UK Corporate Governance Code.

Strategic Report
The Strategic Report on pages 2 to 122 was approved by the Board
of Directors on 23 March 2023 and signed on its behalf by Irakli Gilauri,
Chairman and Chief Executive Officer.

Management Report
This Directors’ Report together with the Strategic Report on pages 2 to
122 form the Management Report for the basis of DTR 4.1.5 R.

Directors
The names and biographies of the current Directors of the Company
are shown on pages 126 to 127 and include their relevant experience. In
accordance with the UK Corporate Governance Code, all the Directors
will retire by rotation at the AGM and offer themselves for re-election.

The Directors’ beneficial interests in ordinary shares of Georgia Capital
as at 31 December 2022 are shown on page 156 together with any
changes in those interests between the financial year end and the date
on which this Directors’ Report was approved by the Board.

Powers of Directors
The Directors may exercise all powers of the Company subject to
applicable legislation and regulations and Georgia Capital’s Articles
of Association.

Information contained elsewhere in the Annual Report
Information required to be included in this Directors’ Report can be
found elsewhere in the Annual Report as indicated in the table below
and is incorporated into this report by reference:

Location in
Annual Report

pages 2 to 122

Information to be disclosed in accordance with the Listing
Rule 9.8.4R
The following information required to be disclosed in terms of Listing
Rule 9.8.4R is not applicable unless stated otherwise:
•

the amount of interest capitalised during the period under review
and details of any related tax relief;
information in relation to the publication of unaudited financial
information;

•

• any arrangements under which a Director has waived emoluments,
or agreed to waive any future emoluments, from the Company;
• details of any non-pre-emptive issues of equity for cash by the
Company or by any unlisted major subsidiary undertaking;
– parent participation in a placing by a listed subsidiary;
– any contract of significance in which a Director is or was

materially interested;

– any waiver of dividends by a shareholder; and

• details of any long-term incentive schemes.

Articles of Association
Georgia Capital PLC’s (the “Company”) Articles of Association may
only be amended by a special resolution at a general meeting of the
shareholders. The process for the appointment and removal of Directors
is included in the Company’s Articles of Association. The Georgia Capital
PLC Articles of Association are available on the Company’s website:
https://georgiacapital.ge/governance/cgf/articles.

Share capital and rights attaching to the shares
Details of the movements in share capital during the year are provided
in Note 8 to the consolidated financial statements on page 198 of this
Annual Report. As at the last practicable date of 17 March 2023, there
was a single class of 44,827,862 ordinary shares of 1 pence each in
issue, each with one vote. The rights and obligations attaching to the
Company’s ordinary shares are set out in its Articles of Association.
Holders of ordinary shares are entitled, subject to any applicable law
and the Company’s Articles of Association, to:
• have shareholder documents made available to them including notice

of any general meeting;

• attend, speak and exercise voting rights at general meetings, either

in person or by proxy; and

Information

Future developments

Going Concern Statement

Viability Statement

Risk management

Principal risks and uncertainties

Directors’ Governance Statement

The Board of Directors

Investment Committee report

Audit and Valuation Committee report

Remuneration Committee report

Summary of Remuneration Policy

Nomination Committee report

Related party disclosures

Greenhouse gas emissions

Employee matters

Environmental matters

Share capital

Engagement with suppliers, customers and others
in a business relationship with the Company

Information on the Group’s financial risk
management objectives and policies, and its
exposure to credit risk, foreign currency risk
and financial instruments

168

page 71

• participate in any distribution of income or capital.

pages 71 to 72

pages 68 to 72

pages 73 to 81

pages 124 to 125

pages 126 to 127

pages 137 to 138

pages 139 to 144

pages 145 to 163

page 159

pages 164 to 166

page 210

page 88

pages 85 to 86

pages 87 to 88

page 198

page 132

pages 200 to 203

The Company is permitted to make market purchases of its own shares
provided it is duly authorised by its members in a general meeting and
subject to and in accordance with section 701 of the Companies Act
2006.

Authority was given at the AGM of the Company on 20 May 2022 for
the Company to purchase up to 6,944,294 (approximately 14.99% of
Georgia Capital’s issued ordinary share capital excluding treasury
shares as at 24 March 2022). This authority will expire at the conclusion
of the Company’s AGM in 2023 or, if earlier, the close of business on
20 June 2023.

A renewal of the authority to make market purchases will be sought from
shareholders at each AGM of the Company. Purchases of ordinary
shares will be made within guidelines established from time to time by
the Board. Any purchase of ordinary shares would be made only out
of the available cash resources of the Company. Ordinary shares
purchased by the Company may be held in treasury or cancelled.

At the AGM of the Company on 20 May 2022, the Directors were given
the power a) to allot shares up to a maximum nominal amount of GBP
154,420.59 (representing 15,442,059 ordinary shares, approximately
one third of the Company’s issued share capital as at 24 March 2022),
and b) to allot equity securities up to an aggregate nominal amount of
GBP 154,420.59 in connection with an offer by way of a rights issue: (i) to
holders of shares in proportion (as nearly as may be practicable) to their
existing holdings; and (ii) to holders of other equity securities as required
by the rights of those securities or, if the Directors consider it necessary,

as permitted by the rights of those securities, such amount to be
reduced by the aggregate nominal amount of shares allotted or rights
to subscribe for or to convert any securities into shares granted under
paragraph (a), and subject to the Directors having the right to make such
exclusions or other arrangements as they may deem necessary or
expedient in relation to treasury shares, fractional entitlements, record
dates or legal, regulatory or practical problems in, or under the laws of,
any territory. These authorities will expire at the conclusion of the 2023
AGM (or, if earlier, at the close of business on 20 August 2023) and
approval will be sought at that meeting to renew a similar authority
for a further year.

The Company expects to be a cash generative business with the
opportunity for attractive capital investment to enhance its growth
prospects, both through organic investments and acquisitions. The
Board intends to pursue a capital return policy that reflects this strategy
whilst also delivering shareholders high quality, long-term dividend
growth, through share buybacks or other potential exits. However,
the Board may periodically reassess the Company’s dividend policy
and the payment of dividends (or quantum of the same) will depend on
the Group’s existing and future financial condition, results of operations,
capital requirements, investment and divestment cycles, liquidity needs
and other matters the Board considers relevant from time to time.

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In August 2021, the Board approved a buyback programme whereby
the Company would purchase up to 6,944,294 (approximately 14.99%)
of Georgia Capital’s issued ordinary share capital with a nominal value
of £0.01 each with the intention of all shares purchased pursuant to this
programme were cancelled, consequently reducing the share capital.
Under this programme, the Company has repurchased and cancelled
2,252,341 of its own shares during the financial year ended
31 December 2022. The last buyback under this programme occurred
on 1 September 2022.

None of the ordinary shares carry any special rights with regard to
control of Georgia Capital. There are no restrictions on transfers of
shares other than:
• certain restrictions which may from time to time be imposed by laws
or regulations such as those relating to insider dealing or pursuant
to the Group’s Inside Information Disclosure Policy;

• pursuant to the Company’s Securities Dealing Policy and Code,

whereby the Directors and designated employees require approval to
deal in Georgia Capital’s shares or cannot deal in certain periods; and

• where a person with an interest in the Company’s shares has been

served with a disclosure notice and has failed to provide the
Company with information concerning interests in those shares.

There are no restrictions on exercising voting rights save in situations
where Georgia Capital is legally entitled to impose such a restriction
(for example, under the Articles of Association where amounts remain
unpaid in the shares after request, or the holder is otherwise in default
of an obligation to Georgia Capital). Georgia Capital is not aware of any
arrangements between shareholders that may result in restrictions on
the transfer of securities or voting rights.

On 11 October 2022, a subsidiary of Georgia Capital PLC, JSC Georgia
Real Estate (GRE), the holding company of the Group’s housing
development and hospitality businesses, placed a US$ 35 million local
bond offering (the “Notes”). The Notes are US$-denominated with 2-year
bullet maturity and carry an 8.5% coupon. The Notes are listed on the
Georgian Stock Exchange. Similarly, Georgian Renewable Power
Operations JSC (GRPO), the holding company of the Group’s operational
renewable energy assets (previously owned by Georgia Global Utilities
JSC (GGU)), successfully closed a US$ 80 million green secured bond
offering on 12 October 2022.

Results and dividends
The Company made a loss before taxation of GEL 12,153 million.
The Company’s loss after taxation for the year was GEL 12,153 million.

The Company may by ordinary resolution declare dividends provided
that no such dividend shall exceed the amount recommended by the
Company’s Directors. The Directors may also pay such interim
dividends as appear to be justified by the profits of the Company
available for distribution.

As the Company is a holding company, Georgia Capital relies primarily
on dividends and other statutorily (if any) and contractually permissible
payments from its subsidiaries to generate the funds necessary to meet
its obligations and pay dividends to its shareholders.

AGM
The arrangements for the Company’s next AGM and details of the
resolutions to be proposed, together with explanatory notes will, be set
out in the Notice of AGM to be published on the Company’s website
(https://georgiacapital.ge/).

Equity Settled Option Plan (ESOP)
The Company operates an employee benefit trust (EBT) (the “ESOP”),
which holds ordinary shares on trust for the benefit of employees and
former employees of the Group, and their dependants, and which is
used in conjunction with the Group’s employee share schemes. Whilst
ordinary shares are held in the EBT, the voting rights in respect of these
ordinary shares are exercised by the trustees of the EBT.

In accordance with the ESOP documentation, Apex Group Fiduciary
Services Limited has waived its right to receive any dividends. This
waiver will remain in place indefinitely, unless otherwise instructed by
Georgia Capital. New shares issued in satisfaction of deferred share
compensation from the time of the Company’s listing on the London
Stock Exchange will not exceed 10% of the Company’s ordinary share
capital over any ten-year period.

Conflicts of interest
In accordance with the Companies Act 2006, the Directors have
adopted a policy and procedure for the disclosure and authorisation
(if appropriate) of conflicts of interest, and these have been followed
during 2022. The Company’s Articles of Association also contain
provisions to allow the Directors to authorise potential conflicts of interest
so that a Director is not in breach of his or her duty under company law.

Directors’ remuneration
Directors’ fees are determined by the Remuneration Committee from
time to time. The remuneration of Directors must be in accordance with
the Directors’ Remuneration Policy. A remuneration policy was put to
the shareholders for approval at the 2022 AGM and remuneration is
determined in accordance with that Policy.

The fees paid to the Non-Executive Directors in 2022 pursuant to their
letters of appointment are shown on page 156. The fees paid to our sole
Executive Director in 2022 pursuant to his service agreements with
Georgia Capital are shown on pages 148-149.

Indemnity
Subject to applicable legislation, every current and former Director or
other officer of the Company (other than any person engaged by the
Company as auditor) shall be indemnified by the Company against
(broadly) any liability in relation to the Company, other than (broadly) any
liability to the Company or a member of the Company, or any criminal
or regulatory fine. In addition, the Company has put in place Directors’
and Officers’ liability insurance.

Related party disclosures
Details of related party disclosures are set out in Note 14 to the
consolidated financial statements on page 210 of this Annual Report.

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DIRECTORS’ REPORT CONTINUED

Significant agreements
The Company is not party to any significant agreements that take
effect, alter or terminate upon a change of control of the Company.
The Company is not aware of any agreements between holders of its
ordinary shares that may result in restrictions on the transfer of its
ordinary shares or on voting rights.

Presence outside of Georgia
The Company has an office in London: see page 214.

Employee disclosures
Our disclosures relating to the number of women in senior management,
employee engagement and our policies on human rights, including
employees with a disability, are included in the section “Employee
matters” on pages 85 to 86.

Political donations
The Company did not make any political donations or expenditure
during 2022. Authority to make political donations and incur political
expenditure will be put to shareholder vote at the 2023 AGM.

Code of Conduct and Ethics
The Board has adopted a Code of Conduct and Ethics relating to the
lawful and ethical conduct of the business, supported by the Company’s
core values. The Code of Conduct and Ethics has been communicated
to all Directors and employees, all of whom are expected to observe
high standards of integrity and fair dealing in relation to customers,
staff and regulators in the communities in which the Company operates.
Our Code of Conduct and Ethics is available on our website:
https://georgiacapital.ge/governance/cgf/policies.

Independent auditors
A resolution to re-appoint PricewaterhouseCoopers LLP as auditors
of Georgia Capital will be put to shareholders at the upcoming AGM.

Major interests in shares
The table below lists shareholders with voting rights of more than 3%
as of 31 December 2022.

Shareholder

Gemsstock Ltd

JSC Georgia Capital Executive
Equity Compensation Trust

Allan Gray Ltd

Coeli Frontier Markets AB

Lazard Asset Management LLC

Source: Georgeson, Computershare

Number of
voting rights

% of voting
rights

4,781,702

10.67%

4,250,021

2,971,140

2,083,120

1,825,886

9.48%

6.63%

4.65%

4.07%

For the period 1 January 2023 up to and including 17 March 2023
(the latest practicable date for inclusion in this report), the Company
has received the following notifications pursuant to Rule 5 of the DTRs:
the JSC Georgia Capital Executive Equity Compensation Trust holds
4,195,068 number of voting rights, representing approximately 9.36%
of the Group’s issued ordinary share capital. Additionally, the Company
had received notification, on the 20 January 2023, that Mr Irakli Gilauri
directly held a total of 1,589,028 ordinary shares in the Group,
representing approximately 3.54% of the Group’s issued ordinary
share capital.

It should be noted that these holdings are likely to have changed since
the Company was notified. However, notification of any change is not
required until the next notifiable threshold is crossed. The respective
regulatory filings by shareholders are available on the Company’s
website and the LSE website.

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Post balance sheet events
Transfer from LSE Premium to LSE Standard Listing
On 17 February 2023, the Company published its shareholder circular
containing a notice of general meeting in connection with the proposed
transfer of the Company’s listing from the Premium Listing segment to
the Standard Listing segment (the “Transfer”). At the General Meeting,
held on 14 March 2023, shareholders approved the Transfer with
99.99% of votes cast in favour. Following shareholder approval of the
Transfer at the General Meeting, the Company intends to proceed with
implementing the Transfer. The Company anticipates that the effective
date of the Transfer will be 13 April 2023, being 20 business days after
the date of the General Meeting.

Expansion of Education Business
On March 3 Georgia Capital announced the expansion of K-12 education
business through two investment projects: (1) The acquisition of a new
campus in the affordable segment. With this investment, the education
business will expand from its current built capacity of 5,650 learners to
6,850 learners; (2) The signing of a binding agreement for the acquisition
of a land plot for the expansion of an operational campus in the premium
and international segment. This acquisition, once completed, will
increase the total pipeline capacity for 2025 by 350 learners, in total
from 2,410 learners to 2,760 learners.

Sale of Share in Listed Portfolio
During 1Q23 Georgia Capital sold 239,867 shares of Bank of Georgia
Group PLC for total consideration of GEL 21,226. As a result,
subsequent holding of GCAP in BoG stands at 20.2%.

Statement of disclosure of information to the auditor
We, the Directors confirm that, so far as we are aware, there is no
relevant audit information of which the Company’s auditors are unaware
and we have taken all steps that we reasonably believe should be taken
as Directors in order to make ourselves aware of any relevant audit
information and to establish that the Company’s statutory auditors
are aware of such information.

The Directors’ Report on pages 168 to 170 was approved by the Board
of Directors on 23 March 2023 and signed on its behalf:

Link Company Matters Limited
Company Secretary
23 March 2023

INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF GEORGIA CAPITAL PLC

Report on the audit of the financial statements
Opinion
In our opinion, Georgia Capital PLC’s financial statements:
• give a true and fair view of the state of the company’s affairs as at 31 December 2022 and of its loss and cash flows for the year then ended;
• have been properly prepared in accordance with UK-adopted international accounting standards; and
• have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the financial statements, included within the Annual Report, which comprise: Statement of Financial Position as at 31 December 2022;
the Statement of Profit or Loss and Comprehensive Income, the Statement of Changes in Equity and the Statement of Cash Flows for the year then
ended; and the notes to the financial statements, which include a description of the significant accounting policies.

Our opinion is consistent with our reporting to the Audit and Valuation Committee.

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Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under ISAs
(UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence
We remained independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the
UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and we have fulfilled our other ethical responsibilities in
accordance with these requirements.

To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not provided. Other than
those disclosed in Note 9, we have provided no non-audit services to the company or its controlled undertakings in the period under audit.

Our audit approach
Context
Georgia Capital PLC is a company listed on the London Stock Exchange which invests in and develops businesses within Georgia. It holds 100%
of the share capital of JSC Georgia Capital. Its primary operations are in Georgia. In planning for our audit, we met with the Audit and Valuation
Committee and members of management to discuss and understand significant changes to the business during the year, and to understand their
perspectives on associated business risks. We used this insight when forming our views regarding the business, as part of developing our audit
plan and when scoping and performing our audit procedures.

Overview
Audit scope
• The Annual Report and financial statements are prepared as an investment entity under IFRS 10. We have audited 99.9% of the investment
portfolio held by Georgia Capital PLC through JSC Georgia Capital. This represents 99.4% of the equity investments at fair value balance.
• We instructed PwC Georgia to perform audit procedures on inputs to the valuation models of the investment portfolio. We performed audit

procedures over the assumptions and methodologies applied in developing the valuation of the investment portfolio.

• We instructed PwC Georgia to perform audit procedures over special purpose financial information pertaining to 100% of the equity investments

at fair value balance.

Key audit matters
• Valuation of equity investments at fair value

Materiality
• Overall materiality: GEL 28,174,000 based on 1% of net assets.
• Performance materiality: GEL 14,087,000.

The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.

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TO THE MEMBERS OF GEORGIA CAPITAL PLC CONTINUED

Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial statements
of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditors,
including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the
engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the context of our
audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

This is not a complete list of all risks identified by our audit.

Key audit matter

How our audit addressed the key audit matter

Valuation of equity investments at fair value
The fair value of equity investments at fair value balance presented in
the Statement of Financial Position is the Company’s investment in its
subsidiary, predominantly comprised of the fair value of the investment
portfolio. The investment portfolio includes unquoted investments.

In valuing the investment portfolio, key assumptions include discount
rates, future growth projections, control premia, illiquidity discounts and
the application of weighted averages to different valuation approaches.

The inputs in the earnings multiples models include observable data,
such as earnings multiples of comparable companies to the relevant
investment, and unobservable data, such as forecast earnings for the
investments. In discounted cash flow models, unobservable inputs are
the projected cash flows of the relevant investments and the discount
rates applied.

The valuation of equity investments at fair value was identified as a key
audit matter given the valuation is inherently subjective due to, among
other factors, the individual nature of each investment and the expected
future cash flows. The significance of the estimates and judgements
involved, coupled with the fact that only a small percentage difference
in individual investment valuations, when aggregated, could result in
a material misstatement, warranted specific audit focus in this area.

We obtained an understanding of management’s processes and controls
for determining the fair value of equity investments, including understanding
management’s interactions with Kroll as management’s external experts.
We performed the following procedures over the valuation of equity
investments at fair value as at 31 December 2022:
• Held discussions with management and 3rd party valuers to challenge

their assumptions and validate inputs used;

• Validated the appropriateness of the fair valuation policies to assess

whether they are in accordance with applicable accounting
requirements;

• Tested the classification of Level 3 investments to assess whether

they were classified appropriately;

• Reviewed valuation methodologies to confirm they are in line with

Georgia Capital Valuation Policies and IFRS requirements;

• Recalculated the valuation models from their Excel formula to assess

mathematical accuracy;

• Assessed the appropriateness of any non-observable inputs or
significant estimates used in valuations, including benchmarking
against publicly available information where available, and obtained
corroborative evidence; and

• Validated ownership and other interests held through regulatory data,

sale and purchase agreements or other third party reports.

In addition, given the inherent subjectivity involved in the valuation of the
investments, and therefore the need for specialised market knowledge
when determining the most appropriate assumptions and the
technicalities of valuation methodology, we engaged our internal valuation
experts to assist us in our audit of this area. The experts performed the
following procedures on a sample of investments:
• Obtained and read the valuation reports drafted by Kroll for each asset

in the sample;

• Discussed with Kroll and management their rationale for the valuations;
• Reviewed and assessed the reasonableness of the valuation

approaches and methodologies for compliance with the relevant
industry best practice and IFRS;

• Reviewed certain key inputs and assumptions, including discount rates,
long term growth rates, terminal value assumptions and comparable
company multiples as at 31 December 2022; and

• Reported their findings to the audit team for overall considerations

and conclusions.

We considered the appropriateness and adequacy of the disclosures
around the estimation uncertainty and sensitivities on the accounting
estimates. Our testing did not identify any evidence of material
misstatement.

How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole,
taking into account the structure of the company, the accounting processes and controls, and the industry in which it operates.

Georgia Capital PLC is an investment entity as defined by IFRS 10. It recognises its 100% holding in JSC Georgia Capital under the Equity investments
at fair value account. 99.4% of this balance is comprised of equity investments held at fair value through JSC Georgia Capital. The audit work over
this balance was performed by the UK and Georgia engagement teams in conjunction with PwC UK valuation experts.

The Georgia engagement team have carried out audit procedures over certain balances included within equity investments at fair value along
with testing of inputs into the investment valuation models. The UK engagement team, together with the UK valuations experts, performed audit
procedures over the judgemental assumptions and methodologies employed in determining a fair value.

The UK engagement team held regular calls with the Georgia engagement team to understand the audit approach, findings from the results of audit
procedures and any issues arising from our work. The Senior Statutory Auditor travelled to Tbilisi, Georgia to meet with the Georgia engagement
team face to face and perform an on-site review of work performed by the Georgia engagement team. The UK engagement team also performed a
remote review of working papers through use of our audit software and were responsible for the direction, review and oversight of the audit process.

The impact of climate risk on our audit
In planning and executing our audit, we have considered the potential impacts of climate change on the Company’s business and its financial
statements, based on our knowledge of the Company’s operations and its strategy in relation to climate change.

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In 2022, the Company has continued to develop its assessment of the potential impacts of climate change as outlined in the TCFD report on pages
89-94. As part of our audit, we have obtained management’s and the Audit and Valuation Committee’s climate-related risk assessment to understand
the process of identifying climate-related risks, the determination of mitigating actions and the impact on the Company’s financial statements.

The Company has determined that the most significant risk in respect of climate change is increases in carbon pricing. As the carbon price is
expected to increase, so too will the costs of goods and supply chain distribution, potentially impacting the profitability of businesses such as
Healthcare.

We have performed our own qualitative risk assessment of the potential impact of climate change on the Company’s key account balances and
classes of transactions, namely the assumptions embedded in discounted cash flows models for growth rates, operating expenses and capital
expenditure, and have not identified any additional risks of material misstatement.

Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with
qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual
financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial
statements as a whole.

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

Overall company materiality

GEL 28,174,000

How we determined it

1% of net assets

Rationale for benchmark applied Based on the benchmarks used in the Annual Report, net assets is the primary measure used by

shareholders in assessing the performance of the Company and is a generally accepted auditing benchmark.

We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected
misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature and extent
of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our performance materiality
was 50% of overall materiality, amounting to GEL 14,087,000 for the company financial statements.

In determining the performance materiality, we considered a number of factors – the history of misstatements, risk assessment and aggregation risk
and the effectiveness of controls – and concluded that an amount at the upper end of our normal range was appropriate.

We agreed with the Audit and Valuation Committee that we would report to them misstatements identified during our audit above GEL 1,409,000
as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.

Conclusions relating to going concern
Our evaluation of the directors’ assessment of the company’s ability to continue to adopt the going concern basis of accounting included:
• Reviewing management’s going concern assessment memorandum which included a base case cash flow and stress scenario analysis covering

a three-year period to 31 December 2025.

• Holding discussions with the CFO and Head of Finance to understand economic developments in Georgia in the face of the COVID-19 pandemic
and the war in Ukraine and performing independent research on expected economic impacts of these scenarios along with predicted future
performance of the Georgian economy.

• Considering the maturity of the US$ 300 million Eurobonds issued by JSC Georgia Capital which are due in 2024 and the covenants attached
to them, and determined that there is sufficient liquid access to cash to cover the Eurobonds when due as cash available from the Company
and JSC Georgia Capital is GEL 223 million and liquid securities is GEL 830 million.

• Obtaining confirmation of the cash balances in each bank account held by the Company.
• Assessing the liquidity of the portfolio and the Company’s ability to realise any holdings if needed.
• Reviewing Board meeting minutes, and met with members of the Audit and Valuation Committee and those charged with governance to

understand their view on the future of the Company and its ability to continue as a going concern.

The Senior Statutory Auditor is based in the UK, along with the UK engagement team. As the Company’s management and operations are located
in Georgia, the UK engagement team have instructed the Georgia engagement team for JSC Georgia Capital to report to the UK on special purpose
financial information as it pertains to the equity investments at fair value balance.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively,
may cast significant doubt on the company’s ability to continue as a going concern for a period of at least twelve months from when the financial
statements are authorised for issue.

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INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF GEORGIA CAPITAL PLC CONTINUED

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In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the
financial statements is appropriate.

However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the company’s ability to continue
as a going concern.

In relation to the directors’ reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or draw attention
to in relation to the directors’ statement in the financial statements about whether the directors considered it appropriate to adopt the going concern
basis of accounting.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon. The
directors are responsible for the other information, which includes reporting based on the Task Force on Climate-related Financial Disclosures (TCFD)
recommendations. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion
or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the
other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially
misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether
there is a material misstatement of the financial statements or a material misstatement of the other information. If, based on the work we have
performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report
based on these responsibilities.

With respect to the Strategic report and Directors’ Report, we also considered whether the disclosures required by the UK Companies Act 2006
have been included.

Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and matters as
described below.

Strategic report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic report and Directors’ Report for the
year ended 31 December 2022 is consistent with the financial statements and has been prepared in accordance with applicable legal requirements.

In light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we did not identify any material
misstatements in the Strategic report and Directors’ Report.

Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006.

Corporate governance statement
The Listing Rules require us to review the directors’ statements in relation to going concern, longer-term viability and that part of the corporate
governance statement relating to the company’s compliance with the provisions of the UK Corporate Governance Code specified for our review.
Our additional responsibilities with respect to the corporate governance statement as other information are described in the Reporting on other
information section of this report.

Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance statement
is materially consistent with the financial statements and our knowledge obtained during the audit, and we have nothing material to add or draw
attention to in relation to:
• The directors’ confirmation that they have carried out a robust assessment of the emerging and principal risks;
• The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify emerging risks and an

explanation of how these are being managed or mitigated;

• The directors’ statement in the financial statements about whether they considered it appropriate to adopt the going concern basis of accounting
in preparing them, and their identification of any material uncertainties to the company’s ability to continue to do so over a period of at least twelve
months from the date of approval of the financial statements;

• The directors’ explanation as to their assessment of the company’s prospects, the period this assessment covers and why the period is

appropriate; and

• The directors’ statement as to whether they have a reasonable expectation that the company will be able to continue in operation and meet its

liabilities as they fall due over the period of its assessment, including any related disclosures drawing attention to any necessary qualifications or
assumptions.

Our review of the directors’ statement regarding the longer-term viability of the company was substantially less in scope than an audit and only
consisted of making inquiries and considering the directors’ process supporting their statement; checking that the statement is in alignment with the
relevant provisions of the UK Corporate Governance Code; and considering whether the statement is consistent with the financial statements and
our knowledge and understanding of the company and its environment obtained in the course of the audit.

174

In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance
statement is materially consistent with the financial statements and our knowledge obtained during the audit:
• The directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable, and provides the

information necessary for the members to assess the company’s position, performance, business model and strategy;

• The section of the Annual Report that describes the review of effectiveness of risk management and internal control systems; and
• The section of the Annual Report describing the work of the Audit and Valuation Committee.

We have nothing to report in respect of our responsibility to report when the directors’ statement relating to the company’s compliance with the
Code does not properly disclose a departure from a relevant provision of the Code specified under the Listing Rules for review by the auditors.

Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors’ Responsibilities, the directors are responsible for the preparation of the financial statements
in accordance with the applicable framework and for being satisfied that they give a true and fair view. The directors are also responsible for such
internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether
due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the company’s ability to continue as a going concern, disclosing,
as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the
company or to cease operations, or have no realistic alternative but to do so.

Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether
due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities,
outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of
detecting irregularities, including fraud, is detailed below.

Based on our understanding of the company and industry, we identified that the principal risks of non-compliance with laws and regulations related
to breaches of the UK regulatory principles, such as those governed by the Financial Conduct Authority, and we considered the extent to which
non-compliance might have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on
the financial statements such as Companies Act 2006 and the Listing Rules. We evaluated management’s incentives and opportunities for fraudulent
manipulation of the financial statements (including the risk of override of controls), and determined that the principal risks were related to potential
management bias in accounting estimates, in particular in relation to the valuation of the investment portfolio. Audit procedures performed by the
engagement team included:
• Discussions with management, and review of relevant meeting minutes (including those of the Board of Directors and the Audit and Valuation

Committee), including consideration of known or suspected instances of non-compliance with laws and regulations and fraud;

• Designing audit procedures to incorporate unpredictability around the nature, timing or extent of our testing;
• Challenging assumptions made by management in their significant accounting estimates, in particular in relation to the valuation of equity

investments at fair value; and
Identifying and testing journal entries, in particular any journal entries posted with unusual account combinations.

•

There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws
and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a material
misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example,
forgery or intentional misrepresentations, or through collusion.

Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques. However,
it typically involves selecting a limited number of items for testing, rather than testing complete populations. We will often seek to target particular
items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a conclusion about the
population from which the sample is selected.

A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.

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Strategic ReviewOur BusinessGovernanceAdditional InformationStrategic ReviewDiscussion of ResultsFinancial StatementsStrategic ReviewOverview

INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF GEORGIA CAPITAL PLC CONTINUED

STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2022 (THOUSANDS OF GEORGIAN LARI)

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Use of this report
This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with Chapter 3 of Part 16
of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not obtained all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the company, or returns adequate for our audit have not been received from branches not

visited by us; or

• certain disclosures of directors’ remuneration specified by law are not made; or
•

the financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records and
returns.

We have no exceptions to report arising from this responsibility.

Appointment
Following the recommendation of the Audit and Valuation Committee, we were appointed by the members on 20 May 2022 to audit the financial
statements for the year ended 31 December 2022 and subsequent financial periods. This is therefore our first year of uninterrupted engagement.

Other matter
As required by the Financial Conduct Authority Disclosure Guidance and Transparency Rule 4.1.14R, these financial statements form part of the
ESEF-prepared annual financial report filed on the National Storage Mechanism of the Financial Conduct Authority in accordance with the ESEF
Regulatory Technical Standard (‘ESEF RTS’). This auditors’ report provides no assurance over whether the annual financial report has been prepared
using the single electronic format specified in the ESEF RTS.

Allan McGrath (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
23 March 2023

Assets
Cash and cash equivalents*
Prepayments
Equity investments at fair value

Total assets

Liabilities
Other liabilities

Total liabilities

Equity
Share capital
Additional paid-in capital and merger reserve
Retained earnings

Total equity

Total liabilities and equity

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Note

31 December
2022

31 December
2021

23,361
363
2,795,060

7,200
406
2,881,373

2,818,784

2,888,979

1,393

5,357

1,473
238,311
2,577,607

1,547
238,311
2,643,764

2,817,391

2,883,622

2,818,784

2,888,979

* As at 31 December 2022 and 31 December 2021 cash and cash equivalents consist of current accounts with credit institutions.

The Company’s distributable reserves as at 31 December 2022 were GEL 1,227,852 (31 December 2021: 1,293,084).

The financial statements on page 177 to 180 were approved by the Board of Directors on 23 March 2023 and signed on its behalf by:

Irakli Gilauri
Chief Executive Officer

Georgia Capital PLC
Registered No. 10852406

The accompanying notes on pages 181 to 210 are an integral part of these financial statements.

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STATEMENT OF PROFIT OR LOSS AND COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2022 (THOUSANDS OF GEORGIAN LARI)

STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022 (THOUSANDS OF GEORGIAN LARI)

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Gains on investments at fair value
Dividend income
Transaction costs

Gross investment profit

Administrative expenses
Salaries and other employee benefits

(Loss)/profit before foreign exchange and non-recurring items

Net foreign currency loss
Non-recurring expense

(Loss)/profit before income taxes

Income tax

(Loss)/profit for the year

Other comprehensive income

Total comprehensive (loss)/income for the year

(Loss)/Earnings per share (GEL):

– basic
– diluted

Note

6
6
12

9
9

2022

925
–
–

925

(4,389)
(2,374)

(5,838)

(6,075)
(240)

2021

689,762
14,481
(2,937)

701,306

(5,512)
(2,691)

693,103

(222)
–

(12,153)

692,881

–

(12,153)

692,881

–

(12,153)

692,881

(0.2887)
(0.2887)

15.6533
15.2932

Additional
paid-in capital
and merger

reserve Treasury Shares

1 January 2022

Loss for the year
Total comprehensive loss for the year
Increase in equity arising from share-based payments (Note 10)
Cancellation of shares (Note 8)
Purchase of treasury shares (Note 8)

Share
capital

1,547

–
–
–
(74)
–

31 December 2022

1,473

238,311

1 January 2021

Profit for the year
Total comprehensive income for the year
Increase in equity arising from share-based payments (Note 10)
Cancellation of shares (Note 8)
Purchase of treasury shares (Note 8)

Share
capital

1,574

–
–
–
(27)
–

238,311

–
–
–
–
–

238,311

–
–
–
–
–

Additional
paid-in capital
and merger

reserve Treasury Shares

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Retained
earnings

Total

2,643,764

2,883,622

(12,153)
(12,153)
495
–
(54,499)

(12,153)
(12,153)
495
–
(54,573)

2,577,607

2,817,391

Retained
earnings

Total

1,972,407

2,212,292

692,881
692,881
534
–
(22,058)

692,881
692,881
534
–
(22,085)

2,643,764

2,883,622

–

–
–

74
(74)

–

–
–
–
27
(27)

–

The accompanying notes on pages 181 to 210 are an integral part of these financial statements.

31 December 2021

1,547

238,311

The accompanying notes on pages 181 to 210 are an integral part of these financial statements.

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STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2022 (THOUSANDS OF GEORGIAN LARI)

NOTES TO THE FINANCIAL STATEMENTS
GEORGIA CAPITAL PLC (THOUSANDS OF GEORGIAN LARI)

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Cash flows from operating activities

Salaries and other employee benefits paid
General, administrative and operating expenses paid
Net other expense paid

Net cash flows used in operating activities before income tax

Income tax paid

Net cash flow used in operating activities

Cash flows from investing activities
Capital redemption from subsidiary
Dividends received

Cash flows from investing activities

Cash flows from financing activities
Other purchases of treasury shares
Acquisition of treasury shares under share-based payment plan

Net cash used in financing activities

Effect of exchange rates changes on cash and cash equivalents

Net increase in cash and cash equivalents

Cash and cash equivalents, beginning of the year
Cash and cash equivalents, end of the year

The accompanying notes on pages 181 to 210 are an integral part of these financial statements.

Note

2022

2021

(1,877)
(4,780)
(3,172)

(9,829)
–

(9,829)

87,238
–

87,238

(54,326)
(247)

(54,573)

(6,675)

16,161

7,200
23,361

(2,173)
(5,442)
–

(7,615)
–

(7,615)

21,679
14,481

36,160

(21,891)
(194)

(22,085)

(115)

6,345

855
7,200

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1. Principal activities
Georgia Capital PLC (“Georgia Capital”, “GCAP” or the “Company”) is a public limited liability company incorporated and domiciled in United Kingdom
with registered number 10852406. Georgia Capital PLC holds 100% of the share capital of the JSC Georgia Capital (“JSC GCAP”), which makes
up a group of companies (the “Group”), focused on buying, building and developing businesses in Georgia. The Group currently has the following
portfolio businesses: (i) a retail (pharmacy) business, (ii) a hospitals business, (iii) an insurance business (P&C and medical insurance); (iv) a clinics
and diagnostics business, (v) a renewable energy business (hydro and wind assets), and (vi) an education business. Georgia Capital also holds other
small private businesses across different industries in Georgia; a 20% equity stake in the water utility business; and a 20.6% (2021: 19.9%) equity
stake in LSE premium-listed Bank of Georgia Group PLC (“BoG”), a leading universal bank in Georgia. The shares of Georgia Capital are admitted to
the premium listing segment of the Official List of the UK Listing Authority and admitted to trading on the London Stock Exchange PLC’s Main Market
for listed securities under the ticker CGEO, effective 29 May 2018.

Georgia Capital’s registered legal address is 42 Brook Street, London W1K 5DB, England, United Kingdom.

As at 31 December 2022 and 31 December 2021, the following shareholders owned more than 5% of the total outstanding shares* of Georgia
Capital. Other shareholders individually owned less than 5% of the outstanding shares.

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Shareholder

Gemsstock Ltd
Allan Gray Ltd
Others

Total

31 December
2022

31 December
2021

11%
7%
82%

100%

0%
6%
94%

100%

For the purposes of calculating percentage of shareholding, the denominator includes total number of issued shares which includes shares held in the trust for share-based
compensation purposes of the Group.

References to the Group are applied in these financial statements in the context of going concern assessment, segment, fair valuation and risk
management disclosures.

2. Basis of preparation
General
The financial statements have been prepared in accordance with UK-adopted International Accounting Standards and with the requirements of the
Companies Act 2006 as applicable to companies reporting under those standards.

These financial statements are prepared under the historical cost convention except for equity investments held at fair value through profit or loss (FVPL).

The financial statements are presented in thousands of Georgian Lari (GEL), except per-share amounts and unless otherwise indicated.

Investment entity status
On 31 December 2019 Georgia Capital concluded that it met the definition of investment entity as defined in IFRS 10 Consolidated Financial
Statements. As per IFRS 10 an investment entity is an entity that:
a) obtains funds from one or more investors for the purpose of providing those investor(s) with investment management services;
b) commits to its investor(s) that its business purpose is to invest funds solely for returns from capital appreciation, investment income, or both; and
c) measures and evaluates the performance of substantially all of its investments on a fair value basis.

As of 31 December 2022, the Company continues to meet the definition of investment entity. Further details on the investment entity status and
underlying significant judgements are provided in Notes 3, 4, 6 and 12.

Going concern
The Board of Directors of Georgia Capital has made an assessment of the Company’s ability to continue as a going concern and is satisfied that it has
the resources to continue in business for a period of at least 12 months from the date of approval of the financial statements, i.e. the period ending
31 March 2024. Furthermore, management is not aware of any material uncertainties that may cast significant doubt upon the Company’s ability to
continue as a going concern for the foreseeable future. Therefore, the financial statements continue to be prepared on a going concern basis.

The Directors have made an assessment of the appropriateness of the going concern basis of preparation and reviewed Georgia Capital’s liquidity
outlook for the period ending 31 March 2024.

The main source of cash inflow for GCAP PLC is capital redemption from JSC GCAP, which holds the liquid assets to support the liquidity needs
of the Company as well. As at 31 December 2022, JSC GCAP holds cash in the amount of GEL 199,771, amounts due from credit institutions in the
amount of GEL 16,278 and marketable debt securities and redeemable securities in the amount of GEL 25,445 and GEL 12,631 (refer to Note 12).
Securities are considered to be highly liquid, as they are debt instruments listed on international and local markets. On 2 February 2022 Group
received US$ 180 million (GEL 548 million) cash consideration for the disposal of its controlling interest in the water utility business. The Group
has a policy to maintain US$ 50 million liquid assets buffer at all times (Note 11).

The liquidity needs of the Group during the going concern review period mainly consist of the coupon payments on JSC GCAP Eurobonds and the
operating costs of running the holding companies and capital allocations to its portfolio companies. The liquidity outlook also assumes dividend income
from the private portfolio companies (healthcare, retail (pharmacy), renewable energy and insurance businesses) and Bank of Georgia Group PLC.
Capital allocations are assumed in relation to investment stage companies (Renewable Energy and Education).

180

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NOTES TO THE FINANCIAL STATEMENTS CONTINUED
GEORGIA CAPITAL PLC (THOUSANDS OF GEORGIAN LARI)

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2. Basis of preparation continued
Going concern continued
The Directors also considered the maturity of the Eurobonds issued by the Group, which are due in 1Q24. Over the course of 2022, the Group
repurchased US$ 116 million GCAP Eurobonds, of which, US$ 65 million notes were cancelled. As of 31 December 2022, outstanding gross balance
of Eurobonds issued are US$ 300 million, out of which, repurchased and held in treasury are US$ 51 million notes. At the reporting date the Group
has cash and liquid debt instruments of US$ 103 million and listed equity investments of US$ 307 million. The Directors remain confident that given
the strong liquidity, and the Group’s track record of proven access to capital, the Group will successfully roll-over the Eurobonds.

The Company has been increasingly assessing climate-related risk and opportunities that may be present to the Group. During the going concern
period no significant risk has been associated to the Group and portfolio companies that would materially impact their ability to generate sufficient
cash and continue as going concern.

Based on the considerations outlined above, management of Georgia Capital concluded that the going concern basis of preparation remains
appropriate for these financial statements.

Subsidiaries and associates
The total amount of investment in subsidiaries in the Company’s Statement of Financial Position as at 31 December 2022 was GEL 2,795,060 (as at
31 December 2021: GEL 2,881,373) represented by direct investment in JSC Georgia Capital. As at 31 December 2022 and 31 December 2021
investment in JSC Georgia Capital (Note 12) is measured at fair value. As at 31 December 2022 and 31 December 2021 equity investments of
JSC Georgia Capital include the following subsidiaries and associates:

Proportion of voting rights and
ordinary share capital held

Subsidiaries consolidated

31 December
2022

31 December
2021

Country of
incorporation

GCMF, LLC

100.00%

Georgia

Proportion of voting rights and
ordinary share capital held

Address

Industry

8a Petre Melikishvili
Ave, Tbilisi, 0179

Excess liquidity
management
company

Date of
incorporation

Date of
acquisition

2/5/2019

–

2. Basis of preparation continued
Subsidiaries and associates continued

Proportion of voting rights and
ordinary share capital held

Subsidiaries at fair value

31 December
2022

31 December
2021

Country of
incorporation

Address

Industry

Date of
incorporation

Date of
acquisition

m2 at Tamarashvili, LLC
(merged with m2 at
Hippodrome, LLC)
m2 at Nutsubidze, LLC
(merged with m2 at
Hippodrome, LLC)

m2 at Chavchavadze, LLC

(merged with m2 at
Hippodrome, LLC)

–

100.00%

Georgia

6 Tamarashvili St.,
Tbilisi, 0177

Real estate

21/5/2013

100.00%

Georgia 82 Shalva Nutsubidze
St., Tbilisi, Georgia

Real estate

21/5/2013

100.00%

Georgia

Optima, LLC

100.00%

Georgia

m2 Maintenance, LLC

100.00%

Georgia

m2 at Mtatsminda Park, LLC

100.00%

Georgia

Georgia Real Estate

100.00%

Georgia

Management Group, LLC
Amber Group, LLC (merged
with Georgia Real Estate
Management Group, LLC)
Kakheti Wine and Spa, LLC(2)

–

100.00%

Georgia

100.00%

Georgia

Gudauri Lodge, LLC(2)

100.00%

Georgia

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–

50 I. Chavchavadze
Ave., Tbilisi

Kazbegi St. 15,
Tbilisi Georgia
Kazbegi St. 15,
Tbilisi Georgia
10 Givi Kartozia St.,
Tbilisi
Kazbegi St. 15,
Tbilisi Georgia
Kazbegi St. 15,
Tbilisi Georgia

80 Aghmashenebeli
Ave., Tbilisi, 0102
80 Aghmashenebeli
Ave., Tbilisi, 0102
80 Aghmashenebeli
Ave., Tbilisi, 0102
80 Aghmashenebeli
Ave., Tbilisi, 0102
80 Aghmashenebeli
Ave., Tbilisi, 0102
22 Zaal Dumbadze
St., Tbilisi
Kazbegi St. 15,
Tbilisi Georgia
10 Givi Kartozia St.,
Tbilisi
29 Ilia chavchavadze
Ave., Tbilisi, 0105
Kazbegi St. 15,
Tbilisi Georgia

29 Ilia chavchavadze
Ave., Tbilisi, 0105
10 Givi Kartozia St.,
Tbilisi
10 Melikishvili Ave.,
Tbilisi
10 Melikishvili Ave.,
Tbilisi
10 Melikishvili Ave.,
Tbilisi
80 Aghmashenebeli
Ave., Tbilisi, 0102
Kazbegi street 15,
Tbilisi Georgia
Kazbegi St. 3–5,
Tbilisi Georgia
Georgia, Dusheti
region, village
Seturebi
10 Melikishvili Ave.,
Tbilisi

Real estate

5/9/2016

Real estate

3/8/2016

Real estate

20/7/2021

Real estate

31/12/2021

Hospitality

17/8/2015

Hospitality

10/12/2019

Hospitality

23/04/2018

Hospitality

24/04/2018

Hospitality

14/11/2018

Hospitality

17/4/2019

Hospitality

11/2/2019

Hospitality

16/10/2014

26/12/2017

4/10/2018

–

4/3/2010

6/8/2018

Commercial
assets
Commercial
assets
Commercial
assets
Hospitality

29/3/2011

16/12/2019

Hospitality/Real
estate
Hospitality

12/2/2014

15/12/2022

Hospitality

17/5/2017

Hospitality

17/5/2017

Hospitality

3/2/2021

Hospitality

7/11/2018

Commercial
assets
Hospitality

23/12/2020

22/8/2018

Hospitality

12/5/2019

Hospitality

8/4/2022

Subsidiaries at fair value

31 December
2022

31 December
2021

Country of
incorporation

Address

Industry

Date of
incorporation

Date of
acquisition

m2 Svaneti, LLC(2)

100.00%

Georgia

JSC Georgia Real Estate

100.00%

Georgia

m2 Group, LLC

100.00%

Georgia

m2 Development, LLC

(merged with m2 Group,
LLC)

–

100.00%

Georgia

M Square Park, LLC(1)

100.00%

Georgia

M square Park 3, LLC

100.00%

M square Park 4, LLC

100.00%

M square Park X, LLC

100.00%

–

Georgia

Optima Saburtalo, LLC(1)

100.00%

Georgia

Land, LLC(1)

100.00%

Georgia

m2 at Nutsubidze 2, LLC(1)

100.00%

Georgia

m2 at Hippodrome, LLC(1)

100.00%

Georgia

100.00%

Georgia

100.00%

Georgia

Kazbegi St. 15, Tbilisi
Georgia
Kazbegi St. 15, Tbilisi
Georgia
Kazbegi St. 15, Tbilisi
Georgia

1 Marshal Gelovani
Ave., Tbilisi
1 Marshal Gelovani
Ave., Tbilisi
1 Marshal Gelovani
Ave., Tbilisi
1 Marshal Gelovani
Ave., Tbilisi
2 Mikheil Shavishvili
St., Tbilisi
Between university
and Kavtaradze
St.,Tbilisi
Kazbegi St. 15, Tbilisi
Georgia
10 Givi Kartozia St.,
Tbilisi
14 a Moscow Ave.,
Tbilisi

13 Tamarashvili St.,
Tbilisi, 0179

Real estate

27/9/2006

Real estate

17/8/2015

Real estate

12/12/2019

Real estate

15/9/2015

Real estate

25/5/2022

Real estate

25/5/2022

Real estate

23/06/2022

Real estate

15/9/2015

Real estate

3/10/2014

Real estate

24/1/2020

Real estate

6/7/2015

Real estate

25/7/2014

Real estate

3/11/2011

100.00%

Georgia 3 Maro Makashvili St.,
Tbilisi

Real estate

24/7/2015

100.00%

Georgia

25 Kazbegi Ave.,
Tbilisi, 0160

Real estate

21/5/2013

Optima ISANI, LLC

(merged with m2 at
Hippodrome, LLC)
Tamarashvili 13, LLC
(merged with m2 at
Hippodrome, LLC)

m2 Skyline, LLC (merged
with m2 at Hippodrome,
LLC)

m2 at Kazbegi, LLC

(merged with m2 at
Hippodrome, LLC)

–

182

–

m2 Hatsvali, LLC(2)

100.00%

Georgia

m2 Resort, LLC(2)

100.00%

Georgia

m2 Mtatsminda, LLC

100.00%

Georgia

Georgia Property

100.00%

Georgia

Management Group, LLC
Vere Real Estate, LLC

100.00%

Georgia

Caucasus Autohouse, LLC

100.00%

Georgia

Georgia Hotels Management
Group, LLC (merged with
Georgia Real Estate
Management Group, LLC)

–

100.00%

Georgia

m2, LLC(3)

100.00%

Georgia

m2 Hotel Property, LLC

100.00%

–

Georgia

m2 Kutaisi, LLC(3)

100.00%

Georgia

m2 at Melikishvili, LLC(3)

100.00%

Georgia

Melikishvili Hotel Property,

100.00%

Georgia

LLC

m2 Zugdidi, LLC(3)

100.00%

Georgia

Georgia Commercial Assets,

100.00%

Georgia

LLC

Georgia Hospitality Management

100.00%

Georgia

Group, LLC
Georgia Real Estate

Management Group Gudauri,
LLC

100.00%

Georgia

Melikishvili Hotel Management,

100.00%

–

Georgia

LLC

Strategic ReviewOur BusinessGovernanceAdditional InformationStrategic ReviewDiscussion of ResultsFinancial StatementsStrategic ReviewOverview

NOTES TO THE FINANCIAL STATEMENTS CONTINUED
GEORGIA CAPITAL PLC (THOUSANDS OF GEORGIAN LARI)

2. Basis of preparation continued
Subsidiaries and associates continued

Proportion of voting rights and
ordinary share capital held

2. Basis of preparation continued
Subsidiaries and associates continued

Proportion of voting rights and
ordinary share capital held

Subsidiaries at fair value

31 December
2022

31 December
2021

Country of
incorporation

Address

Industry

Date of
incorporation

Date of
acquisition

Subsidiaries at fair value

31 December
2022

31 December
2021

Country of
incorporation

Address

Industry

2
2
0
2
t
r
o
p
e
R

a
u
n
n
A

C
L
P

a
t
i
p
a
C
a
g
r
o
e
G

JSC Georgian Renewable Power

100.00%

–

Georgia

Holding

JSC Georgian Renewable

100.00%

Georgia

Power Company(4)

JSC Zoti Hydro

100.00%

Georgia

JSC Caucasus Wind

100.00%

Georgia

Company

JSC Caucasus Solar

100.00%

Georgia

Company

Hydro S, LLC

100.00%

Georgia

Georgia Geothermal

Company, LLC

100.00%

Georgia

JSC Georgian Renewable

100.00%

–

Georgia

Power Operations

JSC Svaneti Hydro(5)

100.00%

Georgia

Qartli Wind Farm, LLC(5)

100.00%

Georgia

Hydrolea, LLC(5)

100.00%

Georgia

Geoenergy, LLC

100.00%

Georgia

Hydro Georgia, LLC

100.00%

Georgia

Darchi, LLC

100.00%

Georgia

Kasleti 2, LLC

100.00%

Georgia

GRPC Trade, LLC

100.00%

–

Georgia

JSC A Group

100.00%

Georgia

JSC Insurance Company Aldagi

100.00%

Georgia

JSC Insurance Company Tao

100.00%

Georgia

Aliance, LLC

100.00%

Georgia

Auto Way LLC

100.00%

Georgia

JSC Carfest

75.00%

Georgia

184

Renewable
Energy

10 Medea (Mzia)
Jugheli St. Tbilisi,
0179
10 Medea (Mzia)
Jugheli St. Tbilisi,
0179
10 Medea (Mzia)
Jugheli St. Tbilisi,
0179
10 Medea (Mzia)
Jugheli St. Tbilisi,
0179
10 Medea (Mzia)
Jugheli St. Tbilisi,
0179
10 Medea (Mzia)
Jugheli St. Tbilisi,
0179
10 Medea (Mzia)
Jugheli St. Tbilisi,
0179
10 Medea (Mzia)
Jugheli St. Tbilisi,
0179
10 Medea (Mzia)
Jugheli St. Tbilisi,
0179
10 Medea (Mzia)
Jugheli St. Tbilisi,
0179
10 Medea (Mzia)
Jugheli St. Tbilisi,
0179
10 Medea (Mzia)
Jugheli St. Tbilisi,
0179
10 Medea (Mzia)
Jugheli St. Tbilisi,
0179
10 Medea (Mzia)
Jugheli St. Tbilisi,
0179
10 Medea (Mzia)
Jugheli St. Tbilisi,
0179
10 Medea (Mzia)
Jugheli St. Tbilisi,
0179
1, Berbuki St.,
Saburatlo, Tbilisi
66A, David
Aghmashenebeli
Alley, Tbilisi
66A, David
Aghmashenebeli
Alley, Tbilisi
20, Chavchavadze
Ave., Floor 2,
Vake–Saburtalo,
Tbilisi
20, Chavchavadze
Ave., Vake, Tbilisi
20, Chavchavadze
Ave., Vake, Tbilisi

23/8/2022

15/9/2015

20/8/2015

14/9/2016

27/10/2016

–

JSC Greenway Georgia

100.00%

JSC GreenWash

75.00%

Georgia Healthcare Group

100.00%

Limited

JSC Georgia Healthcare

100.00%

Group (“GHG”)
JSC Insurance Company

Imedi L

100.00%

JSC GEPHA

76.98%

67.00%

JSC ABC Pharamcia

100.00%

(Armenia)

18/1/2019

10/28/2019

ABC Pharmalogistics, LLC

100.00%

16/12/2019

28/6/2022

6/12/2013

–

10/9/2012

30/12/2019

JSC Iverta

100.00%

AKG AVELIN QAN
DEGHATUN, LLC
(Armenia)

100.00%

JSC Georgian Logistics

100.00%

AZPHA LLC (Azerbaijan)

100.00%

6/7/2012

28/10/2019

Euroline LLC

100.00%

26/1/2012

28/10/2019

JSC Evex Hospitals

100.00%

EVEX-Logistics, LLC

100.00%

8/5/2012

28/10/2019

New Clinic, LLC

100.00%

Caucasus Medical Center,

99.80%

United
Kingdom
Georgia

Georgia

Armenia

Georgia 6, University St., Vake,
Tbilisi
142, Akaki Beliashvili
St., Tbilisi, Georgia
84 Brook St.,
London, W1K 5EH
142, A. Beliashvili St.,
Tbilisi
Georgia 9, Anna Politkovskaias
St. Vake-Saburtalo
District, Tbilisi
142, A. Beliashvili St.,
Tbilisi
Kievyan St. 2/8,
Erevan, Armenia
Peikrebi St. 14a,
Tbilisi, Georgia
A. Beliashvili St. 142,
Tbilisi, Georgia
Armenia 26/1 Vazgen Sargsyan
St., /Office 412/
Yerevan 0010,
Armenia
A. Beliashvili St. 142,
Tbilisi, Georgia
Azerbaijan, Baku,
Sabunchu District,
Bakikhanovi area,
131, A. Ahgaievi St.,
Apartment 43
Stanislavski St. 5,
Tbilisi, Georgia
142, A. Beliashvili St.,
Tbilisi
142, A. Beliashvili St.,
Tbilisi
142, A. Beliashvili str,
Tbilisi
23, P. Kavtaradze St.,
Tbilisi
U. Chkeidze St. 10,
Tbilisi, Georgia
Djavakhishvili St. 85,
Kutaisi, Georgia

Georgia

Azerbaijan

LLC

JSC Pediatry

JSC Kutaisi Regional
Mother and Infant
Treatment-Diagnostic
Centre

West Georgia Medical

Center, LLC

100.00%

67.00%

Georgia

NCLE Evex Learning

100.00%

Georgia

Centre

Emergency Service, LLC

85.00%

Georgia

N(NL)E Blood Center

100.00%

Georgia

JSC Evex Clinics

100.00%

Georgia

Tskaltubo Regional

Hospital, LLC

67.00%

Georgia

A Djavakhishvili St.
83A, Kutaisi,
Georgia
#83A, Javakhishvili
St., Tbilisi
#6 Building, #13/6
Lubliana St. Tbilisi,
Georgia
Javakhishvili St. N85/
Javakhishvili St.
N83A, Kutaisi,
Georgia
142, A. Beliashvili St.,
Tbilisi
16 Eristavi St.,
Tskhaltubo

18/11/2013

28/10/2019

18/11/2013

28/10/2019

13/5/2022

Various

20/9/2018

Insurance

11/8/1998

–

Insurance

22/8/2007

1/5/2015

Various

1/8/1998

30/4/2012

Various

27/12/2010

30/4/2012

Leasing

17/11/2017

–

Date of
incorporation

Date of
acquisition

9/7/2010

1/5/2012

31/8/2018

–

Vehicle
inspection
Car wash

Healthcare

27/8/2015

28/8/2015

Healthcare

29/4/2015

Insurance

22/6/2007

–

Pharmacy and
Distribution
Pharmacy and
Distribution
Pharmacy and
Distribution
Pharmacy and
Distribution
Pharmacy and
Distribution

19/10/1995

4/5/2016

28/12/2013

6/1/2017

24/2/2004

6/1/2017

17/2/2021

28/6/2019

Other

8/10/2021

Pharmacy and
Distribution

17/9/2021

–

Other

14/12/2015

24/11/2021

Healthcare

1/8/2014

Healthcare

13/2/2015

–

Healthcare

3/1/2017

20/7/2017

Healthcare

12/1/2012

11/6/2015

Healthcare

5/9/2003

6/7/2016

Healthcare

5/5/2003

29/11/2011

Healthcare

9/12/2011

29/11/2011

Other

20/12/2013

Healthcare

18/6/2013

8/5/2015

Healthcare

23/12/2021

Healthcare

1/4/2019

–

Healthcare

29/9/1999

9/12/2011

G
e
o
r
g
a
C
a
p
i
t
a

P
L
C

A
n
n
u
a

R
e
p
o
r
t
2
0
2
2

185

Strategic ReviewOur BusinessGovernanceAdditional InformationStrategic ReviewDiscussion of ResultsFinancial StatementsStrategic ReviewOverview

NOTES TO THE FINANCIAL STATEMENTS CONTINUED
GEORGIA CAPITAL PLC (THOUSANDS OF GEORGIAN LARI)

2. Basis of preparation continued
Subsidiaries and associates continued

Proportion of voting rights and
ordinary share capital held

2. Basis of preparation continued
Subsidiaries and associates continued

Proportion of voting rights and
ordinary share capital held

Subsidiaries at fair value

31 December
2022

31 December
2021

Country of
incorporation

Address

Industry

Date of
incorporation

Date of
acquisition

Subsidiaries at fair value

31 December
2022

31 December
2021

Country of
incorporation

Address

Industry

LLC Aliance Med

100.00%

JSC Polyclinic Vere

98.35%

New Dent, LLC

75.00%

JSC Mega-Lab

92.00%

LLC Patgeo-Union of

100.00%

Pathologists

Scientific-Research Center

100.00%

– Mega-Lab N(N)LE

JSC Vabaco

67.00%

Vabaco International, LLC

100.00%

–

JSC Ekimo

Dart, LLC

67.00%

100.00%

JSC Georgian Global Utilities*

20.00%

100.00%

Georgian Water and Power,

100.00%

LLC

Rustavi Water, LLC
Gardabani Sewage
Treatment, LLC

Georgian Engineering and
Management Company
(GEMC), LLC

100.00%
100.00%

100.00%

JSC Saguramo Energy

100.00%

JSC Svaneti Hydro(5)

Qartli Wind Farm, LLC(5)

–

100.00%

Georgian Energy Trading
Company (GETC), LLC

100.00%

Hydrolea, LLC(5)

Geoenergy, LLC

Hydro Georgia, LLC

Darchi, LLC

Kasleti 2, LLC

–

100.00%

Georgia

142, A. Beliashvili St.,
Tbilisi
142, A. Beliashvili St.,
Tbilisi
142, A. Beliashvili St.,
Tbilisi
Petre Kavtaradze St.
23, Tbilisi
Mukhiani, II mcr.
District, Building 22,
1a, Tbilisi
Petre Kavtaradze St.
23, Tbilisi
Bochorishvili St. 37,
Tbilisi, Georgia
A. Tsereteli Ave. 123,
Tbilisi, Georgia
A. Tsereteli Ave. 123,
Tbilisi, Georgia
A. Beliashvili St. 142,
Tbilisi, Georgia
10 Medea (Mzia)
Jugheli St., Tbilisi,
0179
10 Medea (Mzia)
Jugheli St., Tbilisi,
0179
Georgia 5, St. Nino St., Rustavi
10 Medea (Mzia)
Georgia
Jugheli St., Tbilisi,
0179
10 Medea (Mzia)
Jugheli St., Tbilisi,
0179
10 Medea (Mzia)
Jugheli St., Tbilisi,
0179
10 Medea (Mzia)
Jugheli St., Tbilisi,
0179
10 Medea (Mzia)
Jugheli St., Tbilisi,
0179
10 Medea (Mzia)
Jugheli St., Tbilisi,
0179
10 Medea (Mzia)
Jugheli St., Tbilisi,
0179
10 Medea (Mzia)
Jugheli St., Tbilisi,
0179
10 Medea (Mzia)
Jugheli St., Tbilisi,
0179
10 Medea (Mzia)
Jugheli St., Tbilisi,
0179
10 Medea (Mzia)
Jugheli St., Tbilisi,
0179

Georgia

Healthcare

7/7/2015

20/7/2017

JSC Georgian Beverages

100.00%

Georgia

Healthcare

22/11/2015

25/12/2017

Healthcare

24/12/2018

Healthcare

6/6/2017

–

JSC Georgian Beverages

92.35%

87.39%

Georgia

Holding
JSC Teliani Valley

100.00%

Georgia

Healthcare

13/1/2010

27/9/2016

Teliani Trading (Ukraine),

100.00%

Ukraine

Healthcare

25/5/2021

–

9/9/2013

28/9/2018

Software
development
Software
development
Other

30/3/2022

14/12/2021

Other

14/6/2021

–

LLC

Teliani Europe GmbH

100.00%

Germany

Georgia Logistics and

100.00%

Georgia

Distribution, LLC
Le Caucase, LLC

100.00%

Georgia

Kupa, LLC

70.00%

Georgia

Global Beer Georgia, LLC

100.00%

Georgia

75 Chavchavadze
Ave., Tbilisi

8a Petre Melikishvili
Ave, Tbilisi, 0179
3 Tbilisi Highway,
Telavi.
18/14 Khvoiki St. Kiev

Kurfürstendamm 195
10707 Berlin
2 Marshal Gelovani
St., Tbilisi
2 Marshal Gelovani
St., Tbilisi
3 Tbilisi Highway,
Telavi
Tsilkani, Mtskheta
Region, Georgia

Utilities

22/01/2020

31/12/2014

Utilities

25/06/1997

31/12/2014

Utilities
Utilities

31/08/1999
20/12/1999

31/12/2014
31/12/2014

Kindzmarauli Marani, LLC

100.00%

Alaverdi, LLC

100.00%

Global Coffee Georgia, LLC

100.00%

Georgia

56 A. Tsereteli Ave.,
Tbilisi
Chumlaki, Gurjaani
Region, Georgia
Georgia 29a Gagarini St., Tbilisi

Utilities

20/03/2011

31/12/2014

Genuine Brewing Company,

100.00%

Georgia

LLC

New Coffee Company,

100.00%

Georgia

LLC

Tskneti Highway,
16/18, app. 36
7 Kotetishvili St.,
Tbilisi, 0108

Utilities

11/12/2008

31/12/2014

Craft and Draft, LLC

100.00%

Renewable
Energy

Renewable
Energy sales

Renewable
Energy

6/12/2013

–

JSC Artisan Wine and Drinks

100.00%

10/9/2012

30/12/2019

Amboli, LLC

90.00%

Redberry, LLC

60.00%

23/4/2019

–

Redberry International, LLC

100.00%

6/7/2012

28/10/2019

Lunchoba, LLC

60.00%

Shabatoba, LLC

100.00%

26/1/2012

28/10/2019

JSC Carfest

25.00%

8/5/2012

28/10/2019

Georgia Education Group,

100.00%

LLC
Green School, LLC

90.00%

18/11/2013

28/10/2019

JSC Green School Real

100.00%

Estate

Tbilisi Green School, LLC

80.00%

18/11/2013

28/10/2019

Modern School, LLC

90.00%

Georgia

Tsilkani, Mtskheta
Region, Georgia
8a Petre Melikishvili
Ave., Tbilisi, 0179
24, Leonidze St.,
Rustavi, Georgia
Georgia 9, Tashkenti St., Tbilisi,
Georgia
Mtskheta St., 13a,
Tbilisi, Georgia
22 Nutsubidze IV
Micro–district, Tbilisi
Georgia 8 Zurab Sakandelidze
St., Tbilisi, Georgia
3, Pushkini St.,
Krtsanisi, Tbilisi
8a Petre Melikishvili
Ave., Tbilisi, 0179
8a Petre Melikishvili
Ave., Tbilisi, 0179
8a Petre Melikishvili
Ave., Tbilisi, 0179
Didube–Chughureti/
Dighomi massive IV,
Building 5A,
Apartment 35
N, Khudadovi St. 1b,
Tbilisi, Georgia

Georgia

G
e
o
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g
a
C
a
p
i
t
a

P
L
C

A
n
n
u
a

R
e
p
o
r
t
2
0
2
2

Date of
incorporation

Date of
acquisition

14/11/2016

7/2/2018

17/12/2019

–

Beer
production
and
distribution
Investment

Winery

30/6/2000

28/2/2007

Distribution

3/10/2006

31/12/2007

Distribution

15/6/2021

–

Distribution

10/1/2006

27/3/2007

Cognac
production
Oak Barrel
production
Production and
distribution of
alcohol and
non–alcohol
beverages
Winery

23/9/2006

20/3/2007

12/10/2006

20/3/2007

24/12/2014

–

18/12/2001

25/4/2018

Winery

8/4/2008

19/8/2019

Coffee
distribution
Coffee
distribution
Beer
production
and
Distribution
Beer
production
Wine
distribution
Car services

26/12/2016

–

23/9/2009

15/2/2017

7/6/2011

7/2/2018

20/2/2019

26/8/2019

–

13/8/2004

25/6/2019

Digital services

29/8/2014

1/5/2019

Digital services

13/5/2021

Catering
services
Delivery
services
Leasing

8/10/2018

2/6/2020

17/11/2017

Education

16/7/2019

Education

21/10/2019

Education

5/1/2019

–

Education

7/6/2011

22/8/2019

Education

18/8/2021

–

187

2
2
0
2
t
r
o
p
e
R

a
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n
n
A

C
L
P

a
t
i
p
a
C
a
g
r
o
e
G

186

Strategic ReviewOur BusinessGovernanceAdditional InformationStrategic ReviewDiscussion of ResultsFinancial StatementsStrategic ReviewOverview

NOTES TO THE FINANCIAL STATEMENTS CONTINUED
GEORGIA CAPITAL PLC (THOUSANDS OF GEORGIAN LARI)

2. Basis of preparation continued
Subsidiaries and associates continued

Proportion of voting rights and
ordinary share capital held

Subsidiaries at fair value

31 December
2022

31 December
2021

Country of
incorporation

Address

Industry

Date of
incorporation

Date of
acquisition

Georgian-Austrian School

100.00%

90.00%

Georgia

Pesvebi, LLC

Buckswood International
School – Tbilisi, LLC
Sakhli Tsknetshi, LLC

80.00%

Georgia

100.00%

British Georgian Academy,

70.00%

LLC
NNLE British International

School of Tbilisi

100.00%

British International School

100.00%

of Tbilisi LLC

British Georgian Academy

100.00%

– Okrokana, LLC

JSC Liberty Consumer

JSC Intertour

–

77.23%

99.94%

JSC Oncloud

100.00%

D. Tavdadebuli St. 6,
Tbilisi, Georgia
2, Dolidze St., Tbilisi

Education

27/9/1995

20/8/2021

Education

24/8/2005

29/7/2019

Georgia

Tskneti, Vake region,
Tbilisi
Georgia 17, Leo Kvachadze St.,
Tbilisi
Georgia 17, Leo Kvachadze St.,
Tbilisi
Georgia 17, Leo Kvachadze St.,
Tbilisi
Georgia 17, Leo Kvachadze St.,
Tbilisi
74a Chavchavadze
Ave., Tbilisi, 0162
49a, Chavchavadze
Ave., Tbilisi, 0162
8a Petre Melikishvili
Ave., Tbilisi, 0179

Georgia

Education

1/5/2005

–

Education

3/2/2006

23/7/2019

Education

3/2/2015

Education

5/9/2019

Education

16/9/2021

Investments

24/5/2006

–

Travel agency

29/3/1996

25/4/2006

Digital services

28/2/2020

–

Proportion of voting rights and
ordinary share capital held

31 December
2022

31 December
2021

Country of
incorporation

Address

Industry

Associates

Squadro, LLC

12.00%

N(NL)E Georgian Medical

28.60%

Tourism Council

JSC Diflex

40.00%

NPO Healthcare Association

25.00%

Complex-Med-Service, LLC

20.00%

Insurance Informational Bureau,

22.50%

LLC

Date of
incorporation

Date of
acquisition

2/3/2021

27/8/2021

16/5/2019

–

Software
service
Healthcare

Software
development
Healthcare

29/12/2016

11/12/2021

25/3/2016

–

Healthcare

18/11/2008

30/7/2021

Insurance

23/7/2008

–

Georgia

Kostava St. #74,
Tbilisi, Georgia
Georgia I-II floor, house N10, N
13, b. N1 almond
Gardens St., Tskneti,
Vake district, Tbilisi
Shalikashvili St. 8,
Tbilisi, Georgia
Vazha-Pshavela Ave.
27b, Tbilisi, Georgia
Georgia Tsinandali St. 9, Tbilisi,
Georgia
Baratashvili bridge
underground
crossing, Mtkvari
Left Bank, Old Tbilisi,
Tbilisi

Georgia

* As at 31 December 2022, following the disposal of 80% shares, GCAP holds 20% equity interest in JSC Georgian Global Utilities (2021: 100%), thus not classified as a subsidiary

at the end of the year. For details about the disposal transaction refer to Note 5.

(1) As of 31 December 2022 subsidiary of m2 Group, LLC (31 December 2021: subsidiary of m2 Development, LLC).
(2) As of 31 December 2022 subsidiary of Georgia Real Estate Management Group, LLC (31 December 2021: subsidiary of Amber Group, LLC).
(3) As of 31 December 2022 subsidiary of Georgia Real Estate Management Group, LLC (31 December 2021: subsidiary of Georgia Hotels Management Group, LLC).
(4) As of 31 December 2022 subsidiary of JSC Georgian Renewable Power Holding (31 December 2021: subsidiary of JSC Georgia Capital).
(5) As of 31 December 2022 subsidiary of JSC Georgian Renewable Power Operations (31 December 2021: subsidiary of JSC Georgian Global Utilities).

During 2022 JSC Georgia Capital made a capital reduction to its 100% shareholder with total cash consideration of GEL 87,238 (2021: GEL 21,679).

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3. Significant accounting policies
The following are the significant accounting policies applied by the Company in preparing its financial statements.

Fair value measurement
The Company measures investments in subsidiaries and other financial instruments, such as debt securities owned, equity investments and derivatives,
if any, at fair value at each balance sheet date. Also, fair values of financial instruments measured at amortised cost are disclosed in Note 12.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at
the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes
place either:
•
•

In the principal market for the asset or liability; or
In the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible by the Company. The fair value of an asset or a liability is measured using the
assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best
interest. A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using
the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value,
maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy,
described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
• Level 1 − Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
• Level 2 − Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
• Level 3 − Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred
between levels in the hierarchy by reassessing categorisation (based on the lowest level input that is significant to the fair value measurement as a
whole) at the end of each reporting period.

Cash and cash equivalents
Cash and cash equivalents consist of cash on hand and amounts due from credit institutions that mature within 90 days of the date of contract
origination and are free from contractual encumbrances and readily convertible to known amount of cash.

Financial assets
Initial recognition
Financial assets in the scope of IFRS 9 are classified at initial recognition, as subsequently measured at amortised cost, fair value through other
comprehensive income (OCI), and fair value through profit or loss.

The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Company’s
business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the
Company has applied the practical expedient, the Company initially measures a financial asset at its fair value plus, in the case of a financial asset
not at fair value through profit or loss, transaction costs. Trade receivables that do not contain a significant financing component or for which the
Company has applied the practical expedient are measured at the transaction price determined under IFRS 15.

In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that
are “solely payments of principal and interest (SPPI)” on the principal amount outstanding. This assessment is referred to as the SPPI test and
is performed at an instrument level.

The Company’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows.
The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both.

Date of recognition
All regular way purchases and sales of financial assets are recognised on the trade date, i.e. the date that the Company commits to purchase or
sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally
established by regulation or convention in the marketplace.

Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories under IFRS 9:
• Financial assets at amortised cost (cash and cash equivalents).
• Financial assets at fair value through OCI with recycling of cumulative gains and losses (currently the Company does not have instruments

classified under this category).

• Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon derecognition (currently the Company

does not have instruments classified under this category).

• Financial assets at fair value through profit or loss (equity investments at fair value).

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NOTES TO THE FINANCIAL STATEMENTS CONTINUED
GEORGIA CAPITAL PLC (THOUSANDS OF GEORGIAN LARI)

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3. Significant accounting policies continued
Financial assets continued
Financial assets at amortised cost
The Company measures financial assets at amortised cost if both of the following conditions are met:
• The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows; and
• The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the

principal amount outstanding.

Financial assets at amortised cost are subsequently measured using the effective interest rate (EIR) method and are subject to impairment.
Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired.

The Company’s financial assets at amortised cost includes cash and cash equivalents.

Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include financial assets designated upon initial recognition at fair value through profit or loss, or
financial assets mandatorily required to be measured at fair value. Equity investments are classified at fair value through profit or loss. Derivatives and
financial assets with cash flows that are not solely payments of principal and interest are classified and measured at fair value through profit or loss,
irrespective of the business model.

Notwithstanding the criteria for debt instruments to be classified at amortised cost or at fair value through OCI, as described above, debt instruments
may be designated at fair value through profit or loss on initial recognition if doing so eliminates, or significantly reduces, an accounting mismatch.

Financial assets at fair value through profit or loss are carried in the Statement of Financial Position at fair value with net changes in fair value
recognised in the Statement of Profit or Loss. This category includes equity investments.

Impairment of financial assets
The Company recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss.
ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Company
expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the
sale of collateral held or other credit enhancements that are integral to the contractual terms.

ECLs are recognised in three stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition,
ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit
exposures for which there has been a significant increase in credit risk since initial recognition (stage 2) or for which there is objective evidence of
impairment as at the reporting date (stage 3), a loss allowance is required for credit losses expected over the remaining life of the exposure,
irrespective of the timing of the default (a lifetime ECL).

The Company considers a financial asset in default when contractual payments are 90 days past due. However, in certain cases, the Company may
also consider a financial asset to be in default when internal or external information indicates that the Company is unlikely to receive the outstanding
contractual amounts in full before taking into account any credit enhancements held by the Company. A financial asset is written off when there is
no reasonable expectation of recovering the contractual cash flows. Subsequent recoveries of amounts previously written off decrease the charge
for impairment of financial assets in the profit or loss.

Derecognition of financial assets and liabilities
Financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e. removed
from the Company’s Statement of Financial Position) when:
• The rights to receive cash flows from the asset have expired; or
• The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full
without material delay to a third party under a “pass-through” arrangement, and either (a) the Company has transferred substantially all the risks
and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has
transferred control of the asset.

When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if,
and to what extent, it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and
rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of its continuing
involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on
a basis that reflects the rights and obligations that the Company has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the
asset and the maximum amount of consideration that the Company could be required to repay.

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3. Significant accounting policies continued
Derecognition of financial assets and liabilities continued
Financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability
are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability,
and the difference in the respective carrying amounts is recognised in the Income Statement. Modification is substantial if present value of cash flows
under new terms discounted at original effective interest rate is at least 10% different from the liability’s carrying amount right before the modification,
or there is a substantial modification to the terms identified through a qualitative assessment.

Financial liabilities
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as
derivatives designated as hedging instruments in an effective hedge, as appropriate.

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable
transaction costs.

The Company’s financial liabilities comprise accounts payable.

Offsetting
Financial assets and liabilities are offset and the net amount is reported in the Statement of Financial Position when there is a legally enforceable
right to set off the recognised amounts and there is an intention to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Provisions
Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, and it is probable that an
outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amount of obligation can
be made.

Contingencies
Contingent liabilities are not recognised in the Statement of Financial Position but are disclosed unless the possibility of any outflow in settlement is
remote. A contingent asset is not recognised in the Statement of Financial Position but disclosed when an inflow of economic benefits is probable.

Share-based payment transactions
Equity-settled transactions
The cost of equity-settled transactions with employees is measured by reference to the fair value of shares at the grant date.

The cost of equity-settled transactions is recognised together with the corresponding increase in equity, over the period in which the performance
and/or service conditions are fulfilled, ending on the date when the relevant employee is fully entitled to the award (“the vesting date”). The cumulative
expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has
expired and the Company’s best estimate of the number of equity instruments that will ultimately vest. The Income Statement charge and credit
entry to equity for the period represents the movement in cumulative expense recognised as at the beginning and end of that period. No expense
is recognised for the awards that do not ultimately vest.

Where the terms of an equity-settled award are modified, the minimum expense is recognised as if the terms had not been modified. An additional
expense is recognised for any modification which increases the total fair value of the share-based payment arrangement, or is otherwise beneficial
to the employee as measured at the date of the modification.

Where an equity-settled award is cancelled, it is treated as if it has vested on the date of cancellation, and any expense not yet recognised for the award
is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as the replacement award on the date that
it is granted, the cancelled and the new awards are treated as if they were a modification of the original award, as described in the previous paragraph.

Share capital
Share capital
Ordinary shares are classified as equity. External costs directly attributable to the issue of new shares, other than on a business combination,
are shown as a deduction from the proceeds in equity. Any excess of the fair value of consideration received over the par value of shares issued
is recognised as additional paid-in capital.

Treasury shares
Where the Company purchases Georgia Capital’s shares, the consideration paid, including any attributable transaction costs, net of income taxes,
is deducted from total equity as treasury shares until they are cancelled or reissued. Where such shares are subsequently sold or reissued, any
consideration received is included in equity. Treasury shares are stated at par value, with adjustment of premiums against retained earnings.

Dividends
Dividends are recognised as a liability and deducted from equity at the reporting date only if they are declared before or on the reporting date.
Dividends are disclosed when they are proposed before the reporting date or proposed or declared after the reporting date but before the financial
statements are authorised for issue. All expenses associated with dividend distribution are added to dividend amount and recorded directly
through equity.

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NOTES TO THE FINANCIAL STATEMENTS CONTINUED
GEORGIA CAPITAL PLC (THOUSANDS OF GEORGIAN LARI)

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3. Significant accounting policies continued
Dividends continued
Dividend income
Dividend revenue is recognised when the Company’s right to receive the payment is established. Dividend revenue is presented gross of any
non-recoverable withholding taxes, which are disclosed separately in the Statement of Comprehensive Income.

Net gain or loss on financial assets and liabilities at fair value through profit or loss
Net gains or losses on financial assets and liabilities at FVPL are changes in the fair value of equity investment at fair value, financial assets and
liabilities held for trading or designated upon initial recognition as at FVPL and exclude interest and dividend income and expenses. Interest and
dividend income and expense FVPL instruments are recognised in profit or loss at effective interest.

Taxation
The current income tax expense is calculated in accordance with the regulations in force in the respective territories in which the Company operates.

According to the UK tax legislation, UK companies pay corporation tax on all its profits. UK corporate tax rate is 19%.

Functional, presentation currencies and foreign currency translation
The financial statements are presented in Georgian Lari, which is the presentation and functional currency of GCAP PLC and JSC GCAP.
Transactions in foreign currencies are initially recorded in the functional currency, converted at the rate of exchange ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are retranslated into functional currency at functional currency rate of exchange ruling
at the reporting date. Gains and losses resulting from the translation of foreign currency transactions are recognised in the Income Statement as net
foreign currency gain (loss). Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange
rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange
rates at the date when the fair value was determined. When a gain or loss on a non-monetary item is recognised in other comprehensive income,
any exchange component of that gain or loss is recognised in other comprehensive income. Conversely, when a gain or loss on a non-monetary
item is recognised in profit or loss, any exchange component of that gain or loss is recognised in profit or loss.

Differences between the contractual exchange rate of a certain transaction and the National Bank of Georgia (NBG) exchange rate on the date
of the transaction are included in net foreign currency gain (loss). The official NBG exchange rates at 31 December 2022 and 31 December 2021
were as follows:

31 December 2022

31 December 2021

Lari to GBP

Lari to USD

Lari to EUR

3.2581

4.1737

2.7020

3.0976

2.8844

3.5040

Adoption of new or revised standards and interpretations
The following amendments became effective from 1 January 2022 and had no impact on the Company’s financial statements:
• Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards – Subsidiary as a first-time adopter.
• Amendments to IFRS 3 Business Combinations – Reference to the Conceptual Framework.
• Amendments to IFRS 9 Financial Instruments – Fees in the ‘10 per cent’ Test for Derecognition of Financial Liabilities.
• Amendments to IFRS 16 Leases – Lease Incentives.
• Amendments to IAS 16 Property, Plant and Equipment – Proceeds before Intended Use.
• Amendments to IAS 37 Provisions Contingent Liabilities and Contingent Assets – Onerous Contracts – Costs of Fulfilling a Contract.
• Amendments to IAS 41 Agriculture – Taxation in fair value measurement.

IFRS 17 Insurance Contracts.

The following standards that are issued but not yet effective are also expected to have no material impact on the Company’s financial statements:
•
• Amendments to IFRS 16 Leases – Lease Liability in a Sale and Leaseback.
• Amendments to IAS 1 Presentation of Financial Statements – Classification of Liabilities as Current or Non-current.
• Amendments to IAS 1 Presentation of Financial Statements – Disclosure of Accounting Policies.
• Amendments to IAS 1 Presentation of Financial Statements – Classification of debt with covenants.
• Amendments to IAS 8 Accounting Policies Changes in Accounting Estimates and Errors – Definition of Accounting Estimates.
• Amendments to IAS 12 Income Taxes – Deferred Tax related to Assets and Liabilities arising from a Single Transaction.

4. Significant accounting judgements and estimates
In the process of applying the Company’s accounting policies, the Management Board use their judgement and make estimates in determining
the amounts recognised in the financial statements. The most significant judgements and estimates are as follows:

Assessment of investment entity status
Entities that meet the definition of an investment entity within IFRS 10 are required to measure their subsidiaries at FVPL rather than consolidate
them. The criteria which define an investment entity are, as follows:
• An entity that obtains funds from one or more investors for the purpose of providing those investors with investment management services;
• An entity that commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment income,

or both; and

• An entity that measures and evaluates the performance of substantially all of its investments on a fair value basis.

The Group invests funds, originally obtained from its investors, in its private portfolio companies, obtains dividend inflows from its mature investments
and, once the businesses are developed, exits the investment ideally at a higher multiple (versus entry multiple) to monetise on capital appreciation
gains. The Company reports to its investors on a fair value basis. All investments are reported at fair value in the Company’s Annual Reports.

4. Significant accounting judgements and estimates continued
Assessment of investment entity status continued
Georgia Capital PLC holds a single investment in JSC Georgia Capital (an investment entity on its own), which holds a portfolio of investments;
although JSC Georgia Capital is wholly capitalised by Georgia Capital PLC, Georgia Capital PLC is funded by many investors who are unrelated
to the entity; and ownership in Georgia Capital PLC is represented by units of equity interests acquired through a capital contribution. Thus the
judgement above refers to both entities in aggregation. The Board has concluded that the Company meets the definition of an investment entity.
These conclusions will be reassessed on a continuous basis, if any of these criteria or characteristics change.

Georgia Capital met the investment entity definition on 31 December 2019. As of 31 December 2022, the Company continues to meet the definition
of investment entity. In making this assessment, the Company considered each criteria and characteristic described above as well as developments
during the year.

Fair valuation of the investment portfolio
The investment portfolio, a material asset of the Company held through 100%-owned subsidiary JSC Georgia Capital, is held at fair value. Details
of valuation methodologies used and the associated sensitivities are disclosed in Note 12. Given the importance of this area, the Board has formed
a separate Audit and Valuations Committee to review the valuations to be placed on portfolio companies, compliance with the valuation standards
and usage of appropriate judgement. The detailed valuation process is disclosed in Note 12.

5. Segment information
For management purposes, the Group is organised into the following operating segments as follows: listed and observable portfolio companies,
private large portfolio companies, private investment stage portfolio companies, private other portfolio companies, and corporate centre.

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Listed and observable portfolio companies segment
BoG – the Group has a significant investment in London Stock Exchange premium listed Bank of Georgia Group PLC.
GCAP does not hold voting rights in BOG.

Water Utility – the Group has a 20% equity stake in the water utility business, following the disposal of 80% of its shares during 2021. Water Utility
is a regulated monopoly in Tbilisi and the surrounding area, where it provides water and wastewater services.

Private portfolio companies
Large portfolio companies segment:
The large portfolio companies segment includes investments in hospitals, retail (pharmacy), and insurance businesses.

The hospitals business is the largest healthcare market participant in Georgia. The hospitals business provides secondary and tertiary level
healthcare services.

The retail (pharmacy) business consists of a retail pharmacy chain and a wholesale business that sells pharmaceuticals and medical supplies to
hospitals and other pharmacies.

The insurance business comprises a property and casualty (P&C) insurance and a medical insurance businesses, principally providing wide-scale
P&C and medical insurance services to corporate and retail clients.

Investment stage portfolio companies segment:
The investment stage portfolio companies segment includes investments into clinics, diagnostics, renewable energy and education businesses.

The clinics & diagnostics business consists of clinics, providing outpatient and basic inpatient services, polyclinics providing outpatient diagnostic
and treatment services, and the diagnostics business, operating the largest laboratory in the entire Caucasus region.

The renewable energy business principally operates three wholly-owned commissioned renewable energy assets. In addition, a pipeline of renewable
energy projects is in an advanced stage of development.

The education business combines majority stakes in four leading private schools in Tbilisi. It provides education for preschool to 12th grade (K-12).

Other portfolio companies segment:
The other portfolio companies segment includes Housing Development, Hospitality, Beverages and Auto Service businesses.

Corporate Centre comprising of Georgia Capital PLC and JSC Georgia Capital.

Management monitors the fair values of its segments separately for the purposes of making decisions about resource allocation and performance
assessment. Transactions between segments are accounted for at actual transaction prices.

In 2022, Georgia Capital revised the presentation of its segment note. Following the disposal of 80% of the water utility business’ shares, the remaining
20% equity stake in the business is presented under the listed and observable portfolio category, alongside the 20.6% (2021: 19.9%) investment in
BoG. In addition, the healthcare services business (previously included under large portfolio companies) is now split into two individual businesses
(Hospitals, and Clinics and Diagnostics) given the differences in their stage of development. The hospitals business is still presented under the large
portfolio category. Clinics and Diagnostics are presented alongside Renewable Energy and Education under the investment stage portfolio category.
The information for the year ended 31 December 2022 is presented on both the old basis and the new basis.

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NOTES TO THE FINANCIAL STATEMENTS CONTINUED
GEORGIA CAPITAL PLC (THOUSANDS OF GEORGIAN LARI)

5. Segment information continued
The following table presents the net asset value (NAV) of the Group’s operating segments at 31 December 2022 and the roll-forward from
31 December 2021 (new basis):

31
December
2021

1. Value
creation

2a. Investments
and
divestments

2b.
Buybacks

2c.
Dividends

3.
Operating
expenses

4. Liquidity
management/
FX/other

31
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2022

NAV Statement

Listed and observable portfolio

companies

BoG
Water Utility
Private portfolio companies
Large portfolio companies
Retail (Pharmacy)
Hospitals
Water Utility
Insurance (P&C and Medical)
of which, P&C Insurance
of which, Medical Insurance
Investment stage portfolio

companies

Clinics and Diagnostics
Renewable Energy
Education
Other portfolio companies

681,186
681,186
–
2,935,045
2,249,260
710,385
573,815
696,960
268,100
211,505
56,595

205,783
190,175
15,608
(171,710)
(70,728)
30,150
(127,607)
–
26,729
30,468
(3,739)

461,140

13,266

158,004
173,288
129,848
224,645

(45,826)
31,040
28,052
(114,248)

139,392
–
139,392
(501,011)
(696,960)
–
–
(696,960)
–
–
–

34,196

–
27,854
6,342
161,753

Total portfolio value

3,616,231

34,073

(361,619)

Net debt

of which, cash and liquid funds
of which, loans issued
of which, gross debt

Net other (liabilities)/assets

(711,074)
272,317
154,214
(1,137,605)
(21,535)

–
–
–
–
–

394,986
531,562
(136,576)
–
(33,367)

(83,108)
(83,108)
–
–
–

(40,898)
(40,898)
–
(52,977)
(44,783)
(16,018)
(13,015)
–
(15,750)
(14,749)
(1,001)

(8,194)

–
(8,194)
–
–

(93,875)

93,875
93,875
–
–
–

–
–
–
–
–
–
–
–
–
–
–

–

–
–
–
–

–

(21,520)
(21,520)
–
–
(18,476)

–
–
–

985,463
830,463
155,000
3,817 2,213,164
821 1,437,610
724,517
433,193
–
279,900
228,045
51,855

–
–
–
821
821
–

999

501,407

–
999
–
1,997

112,178
224,987
164,242
274,147

3,817 3,198,627

(54,064)
(381,282)
9,192
318,026
73,047

(380,905)
411,844
26,830
(819,579)
(331)

Net asset value

2,883,622

34,073

–

(83,108)

–

(39,996)

22,800 2,817,391

The following table presents the NAV of the Group’s operating segments at 31 December 2022 and the roll-forward from 31 December 2021 (old
basis):

2a. Investments
and
divestments

2b.
Buybacks

2c.
Dividends

3.
Operating
expenses

4. Liquidity
management/
FX/other

31
December
2022

NAV Statement

Listed portfolio companies
BoG
Private portfolio companies
Large portfolio companies
Healthcare Services
Retail (Pharmacy)
Water Utility
Insurance (P&C and Medical)
of which, P&C Insurance
of which, Medical Insurance
Investment stage portfolio

companies

Renewable Energy
Education
Other portfolio companies

31
December
2021

681,186
681,186
2,935,045
2,407,264
731,819
710,385
696,960
268,100
211,505
56,595

303,136
173,288
129,848
224,645

1. Value
creation

190,175
190,175
(156,102)
(100,946)
(173,433)
30,150
15,608
26,729
30,468
(3,739)

59,092
31,040
28,052
(114,248)

–
–
(361,619)
(557,568)
–
–
(557,568)
–
–
–

34,196
27,854
6,342
161,753

Total portfolio value

3,616,231

34,073

(361,619)

Net debt

of which, cash and liquid funds
of which, loans issued
of which, gross Debt
Net other (liabilities)/assets

(711,074)
272,317
154,214
(1,137,605)
(21,535)

–
–
–
–
–

394,986
531,562
(136,576)
–
(33,367)

(83,108)
(83,108)
–
–
–

(40,898)
(40,898)
(52,977)
(44,783)
(13,015)
(16,018)
–
(15,750)
(14,749)
(1,001)

(8,194)
(8,194)
–
–

(93,875)

93,875
93,875
–
–
–

–
–
–
–
–
–
–
–
–
–

–
–
–
–

–

(21,520)
(21,520)
–
–
(18,476)

–
–

830,463
830,463
3,817 2,368,164
821 1,704,788
545,371
724,517
155,000
279,900
228,045
51,855

–
–
–
821
821
–

999
999
–
1,997

389,229
224,987
164,242
274,147

3,817 3,198,627

(54,064)
(381,282)
9,192
318,026
73,047

(380,905)
411,844
26,830
(819,579)
(331)

Net asset value

2,883,622

34,073

–

(83,108)

–

(39,996)

22,800 2,817,391

–
–
–
–
–
–
–
–
–
–
–

–

–
–
–
–

–

–
–
–
–
–
–
–
–
–
–

–
–
–
–

–

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5. Segment information continued
The following table presents the NAV of the Group’s operating segments at 31 December 2021 and the roll-forward from 31 December 2020:

1. Value
Creation 2a. Investments

2b.
Buybacks

2c.
Dividends

3.
Operating
Expenses

4. Liquidity
Management/
FX/Other

31
December
2021

NAV Statement

companies

Renewable Energy
Education
Other portfolio companies

31
December
2020

531,558
531,558
2,376,130
1,858,237
571,656
552,745
471,148
262,688
197,806
64,882

164,109
164,109
592,327
583,852
171,708
169,100
221,179
21,865
28,157
(6,292)

302,964

1,632

209,902
93,062
214,929

(21,463)
23,095
6,843

Total portfolio value

2,907,688

756,436

Net debt

of which, cash and liquid funds
of which, loans issued
of which, gross debt

Net other assets/(liabilities)

(697,999)
175,289
108,983
(982,271)
2,603

–
–
–
–
–

–
–
18,296
–
–
–
–
–
–
–

17,415

3,724
13,691
881

18,296

(18,296)
(18,296)
–
–
–

–
–
–
–
–
–
–
–
–
–

–

–
–
–

–

(25,089)
(25,089)
–
–
–

(14,481)
(14,481)
(59,881)
(39,881)
(11,545)
(11,460)
–
(16,876)
(14,881)
(1,995)

(20,000)

(20,000)
–
–

(74,362)

74,362
74,362
–
–
–

–
–
–
–
–
–
–
–
–
–

–

–
–
–

–

(21,852)
(21,852)
–
–
(14,633)

–
–

681,186
681,186
8,173 2,935,045
5,056 2,407,264
731,819
710,385
696,960
268,100
211,505
56,595

–
–
4,633
423
423
–

1,125

303,136

1,125
–
1,992

173,288
129,848
224,645

8,173 3,616,231

(22,200)
87,903
45,231
(155,334)
(9,505)

(711,074)
272,317
154,214
(1,137,605)
(21,535)

Net asset value

2,212,292

756,436

–

(25,089)

–

(36,485)

(23,532) 2,883,622

1. Value creation – measures the annual shareholder return on each portfolio company for Georgia Capital. It is the aggregation of a) the change in beginning and ending fair
values, and b) dividend income during period. The net result is then adjusted to remove capital injections (if any) to arrive at the total value creation/investment return; 2a.
Investments and divestments – represents capital injections and divestments in portfolio companies made by JSC GCAP, as well as reclassification of the water utility business
into the listed and observable portfolio companies; 2b. Buybacks – represent buybacks made by GCAP PLC and JSC GCAP in order to satisfy share compensation of executives
and purchases under the buyback programme announced by GCAP PLC; 2c. Dividends – represent dividends received from portfolio companies by JSC GCAP; 3. Operating
expenses – holding company aggregated operating expenses of GCAP PLC and JSC GCAP; 4. Liquidity management/FX/other – holding company aggregated movements of
GCAP PLC and JSC GCAP related to liquidity management, foreign exchange movement, non-recurring and other.

Net debt and Net other assets/(liabilities) represent the corporate centre.

Reconciliation of IFRS financial statements to NAV:

Cash and cash equivalents
Amounts due from credit institutions
Marketable securities
Investment in redeemable securities
Prepayments
Loans issued
Other assets, net
Equity investments at fair value

Total assets

Debt securities issued
Other liabilities

Total liabilities

Net debt

of which, cash and liquid funds
of which, loans issued
of which, gross debt

Net other assets/(liabilities)

Georgia Capital
PLC

Aggregation
with JSC
Georgia
Capital*

Elimination of
double effect on
investments

Aggregated
Holding

Company Reclassifications** NAV Statement

31 December 2022

23,361
–
–
–
363
–
–
2,795,060

199,771
16,278
25,445
12,631
–
26,830
2,351
3,198,627

–
–
–
–
–
–
–
(2,795,060)

223,132
16,278
25,445
12,631
363
26,830
2,351
3,198,627

(223,132)
(16,278)
(25,445)
(12,631)
(363)
(26,830)
(2,351)
–

–
–
–
–
–
–
–
3,198,627

2,818,784

3,481,933

(2,795,060)

3,505,657

(307,030)

3,198,627

–
1,393

1,393

681,067
5,806

686,873

–
–
–
–
–

–
–

–

–
–
–
–
–

681,067
7,199

688,266

–
–
–
–
–

(681,067)
(7,199)

(688,266)

(380,905)
411,844
26,830
(819,579)
(331)

–
–

–

(380,905)
411,844
26,830
(819,579)
(331)

Total equity/NAV

2,817,391

2,795,060

(2,795,060)

2,817,391

–

2,817,391

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NOTES TO THE FINANCIAL STATEMENTS CONTINUED
GEORGIA CAPITAL PLC (THOUSANDS OF GEORGIAN LARI)

5. Segment information continued

31 December 2021

Cash and cash equivalents
Amounts due from credit institutions
Marketable securities
Investment in redeemable securities
Prepayments
Loans issued
Other assets, net
Equity investments at fair value

Total assets

Debt securities issued
Other liabilities

Total liabilities

Net debt

of which, cash and liquid funds
of which, loans issued
of which, gross debt

Net other assets/(liabilities)

Georgia Capital
PLC

Aggregation
with JSC
Georgia
Capital*

Elimination of
double effect on
investments

Aggregated
Holding

Company Reclassifications** NAV Statement

7,200
–
–
–
406
–
–
2,881,373

89,714
35,667
79,716
17,849
–
154,214
8,475
3,616,231

–
–
–
–
–
–
–
(2,881,373)

96,914
35,667
79,716
17,849
406
154,214
8,475
3,616,231

(96,914)
(35,667)
(79,716)
(17,849)
(406)
(154,214)
(8,475)
–

–
–
–
–
–
–
–
3,616,231

5. Segment information continued
The following table presents Income Statement information of the Group’s operating segments for the year ended 31 December 2022 (old basis):

Private portfolio companies

Listed
portfolio
companies

Large

Investment
stage

Corporate

Other

centre

Total

Intragroup
investment
reversal and
adjustments

Equity
changes
in JSC
GCAP

Investment
entity
total

Gains/(losses) on investments at fair value

Listed equity investments
Private investments

Dividend income
Interest income
Loss on liquid funds

149,277 (145,729)
149,277
–
(145,729)
–
44,783
40,898
–
–
–
–

50,898
–
50,898
8,194
–
–

(114,248)
–
(114,248)
–
–
–

(59,802)
–
–
149,277
– (209,079)
93,875
–
32,955
32,955
(2,717)
(2,717)

74,344
(149,277)
223,621
(93,875)
(32,955)
2,717

(13,617)
–
(13,617)
–
–
–

925
–
925
–
–
–

925

2,888,979

4,001,866

(2,881,373)

4,009,472

(393,241)

3,616,231

Gross investment profit/(loss)

190,175 (100,946)

59,092 (114,248)

30,238

64,311

(49,769)

(13,617)

–
5,357

5,357

1,095,433
25,060

1,120,493

–
–
–
–
–

–
–

–

–
–
–
–
–

1,095,433
30,417

1,125,850

–
–
–
–
–

(1,095,433)
(30,417)

(1,125,850)

(711,074)
272,317
154,214
(1,137,605)
(21,535)

–
–

–

(711,074)
272,317
154,214
(1,137,605)
(21,535)

Administrative expenses
Salaries and other employee benefits
Interest expense

Profit/(loss) before provisions, foreign
exchange and non-recurring items

Expected credit loss reversal
Net foreign currency gain
Non-recurring expense

–
–
–

(11,779)
(28,217)
(69,774)

7,390
25,843
69,774

–
–
–

(4,389)
(2,374)
–

190,175 (100,946)

59,092 (114,248)

(79,532)

(45,459)

53,238

(13,617)

(5,838)

–
–
–

380
47,170
(627)

(380)
(53,245)
387

–
–
–

–
(6,075)
(240)

Total equity/NAV

2,883,622

2,881,373

(2,881,373)

2,883,622

–

2,883,622

Profit/(loss) before income taxes

190,175 (100,946)

59,092 (114,248)

(32,609)

1,464

For detailed breakdown of JSC Georgia Capital refer to Note 12.

*
** Reclassification to aggregated balances to arrive at the NAV specific presentation, such as: aggregating cash, marketable securities, investment in redeemable shares,

repurchased GCAP bonds as cash and liquid funds, debt securities issued as gross debt and netting of other assets and liabilities.

The following table presents Income Statement information of the Group’s operating segments for the year ended 31 December 2022 (new basis):

Private portfolio companies

Gains/(losses) on investments at fair value

Listed and observable investments
Private investments

Dividend income
Interest income
Loss on liquid funds

Listed and
observable
portfolio
companies

164,885
164,885
–
40,898
–
–

Large

(115,511)
–
(115,511)
44,783
–
–

Investment
stage

Corporate

Other

centre

Total

Intragroup
investment
reversal and
adjustments

Equity
changes
in JSC
GCAP

Investment
entity
total

5,072
–
5,072
8,194
–
–

(114,248)
–
(114,248)
–
–
–

–
(59,802)
164,885
–
– (224,687)
93,875
–
32,955
32,955
(2,717)
(2,717)

74,344
(164,885)
239,229
(93,875)
(32,955)
2,717

(13,617)
–
(13,617)
–
–
–

Gross investment profit/(loss)

205,783

(70,728)

13,266 (114,248)

30,238

64,311

(49,769)

(13,617)

Administrative expenses
Salaries and other employee benefits
Interest expense

Profit/(loss) before provisions, foreign
exchange and non-recurring items

Expected credit loss reversal
Net foreign currency gain
Non-recurring expense

–
–
–

(11,779)
(28,217)
(69,774)

7,390
25,843
69,774

–
–
–

(4,389)
(2,374)
–

205,783

(70,728)

13,266 (114,248)

(79,532)

(45,459)

53,238

(13,617)

(5,838)

–
–
–

380
47,170
(627)

(380)
(53,245)
387

–
–
–

–
(6,075)
(240)

Profit/(loss) before income taxes

205,783

(70,728)

13,266 (114,248)

(32,609)

1,464

Income tax

–

Profit/(loss) for the year

205,783

(70,728)

13,266 (114,248)

(32,609)

1,464

–

(13,617)

(12,153)

–

(13,617)

(12,153)

925
–
925
–
–
–

925

Income tax

–

Profit/(loss) for the year

190,175 (100,946)

59,092 (114,248)

(32,609)

1,464

–

(13,617)

(12,153)

–

(13,617)

(12,153)

The following table presents Income Statement information of the Group’s operating segments for the year ended 31 December 2021:

Gains on investments at fair value

Listed equity Investments
Private investments

Dividend income
Interest income
Transaction costs
Loss on liquid funds

Private portfolio companies

Listed
Portfolio
Companies

149,628
149,628
–
14,481
–
–
–

Large

543,971
–
543,971
39,881
–
–
–

Investment
Stage

Corporate

Other

Center

Total

Intragroup
Investment
Reversal and
Adjustments

Equity
Changes
in JSC
GCAP

Investment
Entity
Total

(18,368)
–
(18,368)
20,000
–
–
–

6,843
–
6,843
–
–
–
–

–
–
–
–
23,140
(21,995)
(1,142)

682,074
149,628
532,446
74,362
23,140
(21,995)
(1,142)

10,681
(149,628)
160,309
(74,362)
(23,140)
19,058
1,142

(2,993)
–
(2,993)
14,481
–
–
–

689,762
–
689,762
14,481
–
(2,937)
–

Gross investment profit/(loss)

164,109 583,852

1,632

6,843

3 756,439

(66,621)

11,488

701,306

Administrative expenses
Salaries and other employee benefits
Interest expense

Profit/(loss) before provisions, foreign
exchange and non-recurring items

Expected credit loss
Net foreign currency gain
Non-recurring expense

–
–
–

(11,380)
(25,104)
(77,392)

5,868
22,413
77,392

–
–
–

(5,512)
(2,691)
–

164,109 583,852

1,632

6,843

(113,873) 642,563

39,052

11,488

693,103

–
–
–

(96)
39,711
(785)

96
(39,933)
785

–
–
–

–
(222)
–

Profit/(loss) before income taxes

164,109 583,852

1,632

6,843

(75,043) 681,393

Income tax

–

Profit/(loss) for the year

164,109 583,852

1,632

6,843

(75,043) 681,393

–

11,488

692,881

–

11,488

692,881

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2022

2021

(12,153)
42,090,389
(0.2887)

692,881
44,264,151
15.6533

(12,153)
42,090,389
(0.2887)

692,881
45,306,358
15.2932

G
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2022

(1,798)
(495)
(81)

(2,374)

2021

(2,098)
(534)
(59)

(2,691)

NOTES TO THE FINANCIAL STATEMENTS CONTINUED
GEORGIA CAPITAL PLC (THOUSANDS OF GEORGIAN LARI)

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6. Equity investments at fair value

Subsidiaries (Note 12)

Equity investments at fair value

At 1 January
Fair value gain and dividend income
Capital redemption (Note 2)*
Dividend income**

At 31 December

31 December
2022

31 December
2021

2,795,060

2,881,373

2,795,060

2,881,373

2022

2021

2,881,373
925
(87,238)
–

2,213,290
704,243
(21,679)
(14,481)

2,795,060

2,881,373

8. Equity continued
(Loss)/earnings per share

Basic (loss)/earnings per share

(Loss)/profit for the year attributable to ordinary shareholders of the parent
Weighted average number of ordinary shares outstanding during the year
(Loss)/earnings per share (GEL)

Diluted (loss)/earnings per share*

(Loss)/profit for the year attributable to ordinary shareholders of the parent
Weighted average number of diluted ordinary shares outstanding during the year
Diluted (loss)/earnings per share (GEL)

* Dilution effect arises from the Group’s share-based compensation arrangements.

* During 2022 JSC Georgia Capital made a capital reduction to its 100% shareholder with total consideration of GEL 87,238 (2021: GEL 21,679), of which cash consideration was

9. Salaries and other employee benefits, and general and administrative expenses

GEL 87,238 (2021: GEL 21,679).
In 2022 JSC Georgia Capital paid a dividend to its 100% shareholder in the amount of GEL nil (2021: GEL 14,481).

Georgia Capital PLC holds a single investment in JSC Georgia Capital (an investment entity on its own), which holds a portfolio of investments, both
meet the definition of investment entity and Georgia Capital PLC measures its investment in JSC Georgia Capital at fair value through profit or loss.
For the breakdown and detailed information regarding the equity investments at fair value, refer to Note 12.

7. Taxation
As at 31 December 2022 GCAP PLC has an unrecognised tax asset (tax loss carried forward) in the amount of GEL 6,621 (31 December 2021:
GEL 4,982). The Company does not recognise the deferred tax asset since it is not expected to be utilised in the foreseeable future, as the Company’s
income sources, fair value gains on equity investments and dividend income, are not taxable in the UK, as fair value gains are unrealised and dividend
income from controlled company is exempt from taxation under UK tax law.

The aggregate amount of temporary differences associated with investments in subsidiaries is GEL 1,351,606 (2021: GEL 1,350,681). The deferred
tax liability has not been recognised as the Company controls the timing of reversal of these temporary differences and considers it probable that
the temporary differences will not be reversed in the foreseeable future.

Applicable taxes in Georgia include corporate income tax (profit tax), individuals’ withholding taxes, property tax and value added tax, among others.
Management believes that the Company is in compliance with the tax laws affecting its operations. However, the risk remains that relevant authorities
could take differing positions with regard to interpretative issues.

8. Equity
Share capital
As at 31 December 2022 issued share capital comprised of 44,827,862 authorised common shares (31 December 2021: 47,080,203), of which
44,827,862 were fully paid (2021: 47,080,203). Each share has a nominal value of one British penny. Shares issued and outstanding as at
31 December 2022 and 31 December 2021 are described below:

1 January 2021

Cancellation of shares

31 December 2021

Cancellation of shares

31 December 2022

Number
of ordinary
shares

47,903,785

(823,582)

47,080,203

(2,252,341)

44,827,862

Amount

1,574

(27)

1,547

(74)

1,473

Treasury shares
In 2022, the Company paid cash consideration of GEL 54,573 (2021: GEL 22,085) for the acquisition of treasury shares, of which GEL 247 (2021:
GEL 194) was related to shares acquired for settlement of employee share-based payments and GEL 54,326 (2021: GEL 21,891) were other
acquisitions made by the Company, including those under the share buyback programme in 2021.

During 2022, 2,252,341 (2021: 823,582) treasury shares bought back under the buyback programme were cancelled.

Salaries and bonuses
Equity compensation plan costs
Pension costs

Salaries and other employee benefits

Refer also to the Resources and Responsibilities section on page 82-94 and the Directors’ Remuneration Report on page 145-163 in the Group’s
Annual Report 2022. For total number of employees of Georgia Capital, refer to page 86 of the Resources and Responsibilities section in the Group’s
Annual Report 2022. For Directors’ remuneration refer to page 156 of the Directors’ Remuneration Report in the Group’s Annual Report 2022. The
Annual Report figures comprise of both holding company entities: Georgia Capital PLC and JSC Georgia Capital. The figures in the table above are
for standalone Georgia Capital PLC.

General and administrative expenses

Legal and other professional services
Occupancy and rent
Communication
Other

General and administrative expenses

Auditor’s remuneration
Auditors’ remuneration is included within legal and other professional services expenses above and comprises:

Fees payable for the audit of the Company’s current year annual report

Fees payable for other services:

Audit of the Company’s subsidiaries

Total audit fees

Audit related assurance services

Other assurance services

Total audit related fees

Non-audit services:

Corporate finance services

Total other services fees

Total fees

2022

(4,074)
(113)
(14)
(188)

(4,389)

2022

1,145

382

1,527

101

1,628

2021

(5,193)
(140)
(19)
(160)

(5,512)

2021

1,414

222

1,636

282

1,091

3,009

The figures shown in the above table include audit fees of JSC GCAP and GCAP PLC and do not include other remuneration paid by portfolio
companies as it is not required by Companies Act 2006 Part 16. The presented amounts relate to fees paid to PricewaterhouseCoopers LLP (2021:
Ernst & Young LLP) and its associates.

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10. Share-based payments
Executives’ equity compensation plan
In 2018, Georgia Capital introduced Group’s Executives’ Equity Compensation Plan (EECP). Under the EECP, shares of the parent are granted to
senior executives of the Company. In July 2018, the executives signed new five-year fixed contingent share-based compensation agreements with a
total of 1,750,000 ordinary shares of Georgia Capital. The total amount of shares fixed to each executive are being awarded in five equal instalments
during the five consecutive years starting January 2019, of which each award is subject to a six-year vesting period subject to continued employment
within the Group during such vesting period. In October 2022, CEO contract maturity was extended until 31 December 2025 from May 2023,
extending fixed contingent share-based compensation with an additional 518,357 ordinary shares of Georgia Capital. The fair value of the shares
is determined at the grant date using available market quotations.

After Georgia Capital met the definition of investment entity on 31 December 2019, only the small portion of the CEO’s share-based compensation
which Georgia Capital PLC retains the obligation to settle is within scope of IFRS 2 in Georgia Capital’s financial statements.

The following table illustrates the number and weighted average prices of, and movements in, shares awards granted to the CEO of Georgia Capital
PLC during the year:

Shares outstanding at 1 January

Vested during the year
Granted during the year

Shares outstanding at 31 December

2022

91,266

(10,367)
51,836

132,735

2021

97,633

(6,367)
–

91,266

The weighted average remaining contractual life for the share awards outstanding as at 31 December 2022 was 3.3 years (2021: 2.8 years).

The weighted average fair value of shares vested was GEL 29.7 (2021: GEL 24). The weighted average fair value of shares granted was GEL 18.68
(2021: GEL nil).

Expense recognition
The share-based payment expense recognised for employee services received during 2022 and the respective increase in equity arising from
equity-settled share-based payments was GEL 495 (2021: GEL 534).

11. Risk management
Introduction
Risk is inherent in the Group’s activities but it is managed through a process of ongoing identification, measurement and monitoring, subject to risk
limits and other controls. This process of risk management is critical to the Group’s continuing profitability and each individual within the Group is
accountable for the risk exposures relating to his or her responsibilities. The Group is exposed to investment risk, credit risk, liquidity risk and market
risk. It is also subject to operational risks and insurance risk.

11. Risk management continued
Introduction continued
Risk management structure continued
Internal Audit
The Internal Audit department of Georgia Capital PLC is responsible for the annual audit of the Group’s risk management, internal control and
corporate governance processes, with the aim of reducing the levels of operational and other risks, auditing the Group’s internal control systems
and detecting any infringements or errors on the part of the Group’s departments and divisions. It examines both the adequacy of and the Group’s
compliance with those procedures. The Group’s Internal Audit department discusses the results of all assessments with management, and reports
its findings and recommendations to the Audit and Valuation Committee.

Risk measurement and reporting systems
The Group’s risks are measured using a method which reflects both the expected loss likely to arise in normal circumstances and unexpected
losses, which are an estimate of the ultimate actual loss based on different forecasting models. The models make use of probabilities derived
from historical experience, adjusted to reflect the economic environment.

Monitoring and controlling risks is primarily performed based on limits established by the Group. These limits reflect the business strategy and
market environment of the Group as well as the level of risk that the Group is willing to accept, with additional emphasis on selected industries and
countries. In addition, the Group monitors and measures the overall risk bearing capacity in relation to the aggregate risk exposure across all risks
types and activities.

Information compiled from all the businesses is examined and processed in order to analyse, control and identify early risks. This information is
presented and explained to the Management Board.

Risk mitigation
As part of its overall risk management, GCAP PLC and JSC GCAP may use derivatives and other instruments to manage exposures resulting from
changes in interest rates, foreign currencies, equity risks, credit risks, and exposures arising from forecast transactions. Risks at portfolio company
level are mitigated by instruments applicable to specific industries they operate in.

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Credit risk
Credit risk is the risk that the Company will incur a loss because its customers, clients or counterparties fail to discharge their contractual obligations.
The Group manages and controls credit risk by setting limits on the amount of risk it is willing to accept for individual counterparties and by monitoring
exposures in relation to such limits. Credit terms by debtors for various portfolio companies are managed and monitored separately, given industry
specifics in which respective entities operate.

Liquid financial instruments
Credit risk from balances with banks and financial institutions is managed by the treasury department of GCAP PLC and JSC GCAP in accordance
with the Company’s policy. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each
counterparty. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through a counterparty’s potential failure
to make payments.

The independent risk control process does not include business risks such as changes in the environment, technology and industry. They are
monitored through the Group’s strategic planning process.

The table below demonstrates the Company’s financial assets credit risk profile by external rating grades:

Risk management structure
Audit and Valuation Committee
The Audit and Valuation Committee of Georgia Capital PLC assists the Management Board of Georgia Capital in relation to the oversight of the
Group’s financial and reporting processes. It monitors the integrity of the financial statements and is responsible for governance around both the
Internal Audit function and external auditor, reporting back to the Board. It reviews the effectiveness of the policies, procedures and systems in place
related to, among other operational risks, compliance, IT and IS (including cyber-security) and assesses the effectiveness of the risk management
and internal control framework.

It is responsible for reviewing and approving half-yearly and annual valuations of the Group’s portfolio investments prepared and presented to it by the
Management Board. The Committee will ensure that the Valuation Policy complies with the obligations within any agreements in place, legislation,
regulations, guidance and other policies of the Company.

Investment Committee
The Investment Committee ensures a centralised process-led approach to investment; and the over-riding priority is to protect the Group’s long-term
viability and reputation and produce sustainable, medium to long-term cash-to-cash returns.

It oversees each step of the investment lifecycle, approves all investment, divestment and material portfolio decisions and ensures that investments
are in line with Group’s investment policy and risk appetite.

Management Board
The Management Board of Georgia Capital has overall responsibility for the Group’s asset, liability and risk management activities, policies and
procedures. The Management Board is comprised of senior managers of GCAP PLC and JSC GCAP. In order to effectively implement the risk
management system, the Board of Directors delegates individual risk management functions to the Management Board, which in turn assigns
specific functions to the various decision-making and execution bodies within the Group’s portfolio entities.

Cash and cash equivalents

Total

31 December 2022

31 December 2021

BB+ to BB-

B+ to B-

Not graded

BB+ to BB-

B+ to B-

Not graded

23,361

–

7,200

–

Liquidity risk
Liquidity risk is the risk that the Company or any of its portfolio entities will be unable to meet its payment obligations when they fall due under normal
and stress circumstances. To limit this risk, management has arranged diversified funding sources in addition to its capital, manages assets with
liquidity in mind, and monitors future cash flows and liquidity on a regular basis. This incorporates daily monitoring of expected cash flows and
liquidity needs.

In addition, Group at all times holds a US$ 50 million liquid asset buffer at the Georgian parent company level, with liquid assets defined as marketable
debt securities, cash at bank and short-term and long-term deposits with financial institutions.

The Group manages the maturities of its assets and liabilities for better matching, which helps the Group additionally mitigate the liquidity risk.
Maturities of assets and liabilities of the Company and each portfolio entity are managed separately. The major liquidity risks confronting the Group
are the daily calls on its available cash resources in respect of supplier contracts and the maturity of borrowings.

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GEORGIA CAPITAL PLC (THOUSANDS OF GEORGIAN LARI)

11. Risk management continued
Liquidity risk continued
The table below summarises the maturity profile of the Company’s financial liabilities based on contractual undiscounted repayment obligations.
Repayments, which are subject to notice, are treated as if notice were to be given immediately.

Financial liabilities

31 December 2022

Other financial liabilities

Total undiscounted financial liabilities

Financial liabilities

31 December 2021

Other financial liabilities

Total undiscounted financial liabilities

Less than
3 months

3 to 12
months

1,393

–

Less than
3 months

3 to 12
months

5,357

–

1 to 5
years

–

1 to 5
years

–

Over
5 years

–

Over
5 years

–

Total

1,393

Total

5,357

Market risk
Market risk is the risk that the value of financial instruments will fluctuate due to changes in market variables such as interest rates and foreign
exchange rates. The Group has exposure to market risks. GCAP PLC and JSC GCAP structure the levels of market risk it accepts through a market
risk policy that determines what constitutes market risk. Risks associated with changes in fair value of equity investment and its implied fair value
components are disclosed in Note 12.

Price risk
In GCAP PLC equity securities price risk arises from investment held through JSC GCAP for which price in the future is uncertain. Where non-
monetary financial instruments – for example, equity securities – are denominated in currencies other than the Georgian Lari, the price initially
expressed in foreign currency and then converted into Georgian Lari will also fluctuate because of changes in foreign exchange rates. For details
on currency risk management, refer to respective paragraph below.

If the price of our listed investment increased by 10% (2021: 10%) JSC GCAP’s profit for the year and NAV would have increased by GEL 83,046
(2021: GEL 68,118). If the price of our listed investment decreased by 10% (2021: 10%) JSC GCAP’s profit for the year and NAV would have decreased
by GEL 83,046 (2021: GEL 68,118). As a result, JSC GCAP’s NAV would have increased by 3% (2021: 2%) or decreased by 3% (2021: 2%).

Sensitivity analysis of private portfolio companies are presented in Note 12.

Currency risk
GCAP PLC and JSC GCAP are exposed to the effects of fluctuations in the prevailing foreign currency exchange rates on its financial position and
cash flows. The Group’s principal transactions are carried out in Georgian Lari and its exposure to foreign exchange risk arises primarily with respect
to US Dollar.

Operating environment
Most of the Group’s portfolio investments are concentrated in Georgia. As an emerging market, Georgia’s business and regulatory infrastructure
is less well-developed than that which would generally exist in a more mature market economy. Operations in Georgia may involve risks that are
not typically associated with those in developed markets (including the risk that the Georgian Lari is not freely convertible outside the country, and
undeveloped debt and equity markets). However, over the last few years the Georgian Government has taken a number of steps that positively affect
the overall investment climate of the country, specifically implementing the reforms necessary to create banking, judicial, taxation and regulatory
systems. This includes the adoption of a new body of legislation (including a new Tax Code and procedural laws). In the view of the Board, these
steps contribute to mitigate the risks of doing business in Georgia.

The existing tendency aimed at the overall improvement of the business environment is expected to persist. The future stability of the Georgian
economy is, however, largely dependent upon these reforms and developments and the effectiveness of economic, financial and monetary
measures undertaken by the Government. In addition, the Georgian economy is vulnerable to market downturns and economic slowdowns
elsewhere in the world.

Georgia has published climate change strategy. Georgia’s 2030 Climate Change Strategy and Action Plan (Climate Change Strategy and Action Plan
– CSAP, Climate Action Plan – CAP) are a planning and implementation mechanism for coordinated effort and planning towards meeting the
nationally determined targets for climate change mitigation.

Capital management
Management monitors the Group’s capital on a regular basis based on the Statement of NAV prepared on fair value bases, which corresponds to
equity attributable to shareholders of Georgia Capital PLC as at 31 December 2022 in the amount of GEL 2,817,391 (2021: GEL 2,883,622). The NAV
Statement breaks down NAV into its components, including fair values for the private businesses and follows changes therein, providing management
with a snapshot of the Group’s financial position at any given time. The NAV Statement provides a value of Georgia Capital that management uses as
a tool for measuring its investment performance. Management closely monitors NAV in connection with capital allocation decisions. Refer to Note 5.

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11. Risk management continued
Capital management continued
The capital management objectives are as follows:
•
•
•

to maintain the required level of stability of the Group thereby providing a degree of security to the shareholders;
to manage capital needs such that Group does not depend on potentially premature liquidation of its listed investments;
to allocate capital efficiently and support the development of business by ensuring that returns on capital employed meet the requirements
of its capital providers and of its shareholders; and
to maintain financial strength to support new business growth and to satisfy the shareholders’ requirements.

•

The Group manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the applicable
financial covenants. To maintain or adjust the capital structure, the Group may adjust the amount of outstanding equity.

12. Fair value measurements
Fair value hierarchy
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and
risks of the asset or liability. The following tables show analysis of assets and liabilities measured at fair value or for which fair values are disclosed by
level of the fair value hierarchy:

31 December 2022

Assets measured at fair value

Equity investments at fair value

31 December 2021

Assets measured at fair value

Equity investments at fair value

Level 1

Level 2

Level 3

Total

–

2,795,060

Level 1

Level 2

Level 3

Total

–

2,881,373

Valuation techniques
The following is a description of the determination of fair value for financial instruments which are recorded at fair value using valuation techniques.
These incorporate the Company’s estimate of assumptions that a market participant would make when valuing the instruments.

Assets for which fair value approximates carrying value
For financial assets and financial liabilities that are liquid or have a short-term maturity (less than three months), it is assumed that the carrying amounts
approximate to their fair value. This assumption is also applied to demand deposits, savings accounts without a specific maturity and variable rate
financial instruments.

Fixed rate financial instruments
The fair value of fixed rate financial assets and liabilities carried at amortised cost are estimated by comparing market interest rates when they were
first recognised with current market rates offered for similar financial instruments. The estimated fair value of fixed interest bearing deposits is based
on discounted cash flows using prevailing money-market interest rates for debts with similar credit risk and maturity.

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GEORGIA CAPITAL PLC (THOUSANDS OF GEORGIAN LARI)

12. Fair value measurements continued
Valuation techniques continued
Investment in subsidiaries
Equity investments at fair value include investment in subsidiary at fair value through profit or loss representing 100% interest of JSC Georgia Capital.
Georgia Capital PLC holds a single investment in JSC Georgia Capital (an investment entity on its own), which holds a portfolio of investments, both
meet the definition of investment entity and Georgia Capital PLC measures its investment in JSC Georgia Capital at fair value through profit or loss.
Investments in investment entity subsidiaries and loans issued are accounted for as financial instruments at fair value through profit and loss in
accordance with IFRS 9. Debt securities owned are measured at fair value. We determine that, in the ordinary course of business, the net asset
value of investment entity subsidiaries is considered to be the most appropriate to determine fair value. JSC Georgia Capital’s net asset value
as of 31 December 2022 and 31 December 2021 is determined as follows:

Assets
Cash and cash equivalents
Amounts due from credit institutions
Marketable securities
Investment in redeemable securities
Equity investments at fair value

Of which listed and observable investments:

BoG
Water utility

Of which private investments:

Large portfolio companies

Retail (Pharmacy)
Hospitals
P&C insurance
Medical insurance

Investment stage portfolio companies

Clinics and diagnostics
Renewable energy
Education

Other portfolio companies

Loans issued
Other assets

Total assets

Liabilities
Debt securities issued
Other liabilities

Total liabilities

Net asset value

31 December
2022

199,771
16,278
25,445
12,631
3,198,627
985,463

830,463
155,000
2,213,164

1,437,610
724,517
433,193
228,045
51,855
501,407
112,178
224,987
164,242
274,147
26,830
2,351

3,481,933

681,067
5,806

686,873

2,795,060

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12. Fair value measurements continued
Valuation techniques continued
Investment in subsidiaries continued

Assets
Cash and cash equivalents
Amounts due from credit institutions
Marketable securities
Investment in redeemable securities
Equity investments at fair value

Of which listed investments:

BoG

Of which private investments:

Large portfolio companies

Healthcare services
Retail (Pharmacy)
Water utility
P&C insurance
Medical insurance

Investment stage portfolio companies

Renewable energy
Education

Other portfolio companies

Loans issued
Other assets

Total assets

Liabilities
Debt securities issued
Other liabilities

Total liabilities

Net asset value

31 December
2022*

31 December
2021

199,771
16,278
25,445
12,631
3,198,627
830,463

830,463
2,368,164

1,704,788
545,371
724,517
155,000
228,045
51,855
389,229
224,987
164,242
274,147
26,830
2,351

89,714
35,667
79,716
17,849
3,616,231
681,186

681,186
2,935,045

2,407,264
731,819
710,385
696,960
211,505
56,595
303,136
173,288
129,848
224,645
154,214
8,475

3,481,933

4,001,866

681,067
5,806

686,873

1,095,433
25,060

1,120,493

2,795,060

2,881,373

31 December 2022 figures are presented on the old basis to be comparable with prior period numbers. Current period figures on new basis are presented in the table above.

In measuring fair values of JSC Georgia Capital’s investments, following valuation methodology is applied:

Equity investments in listed and observable portfolio companies
Equity instruments listed on an active market are valued at the price within the bid/ask spread, that is most representative of fair value at the reporting
date, which usually represents the closing bid price. The instruments are included within level 1 of the hierarchy in JSC GCAP financial statements.
Listed and observable portfolio also includes instruments for which there is a clear exit path from the business, e.g. through a put and/or call options
at pre-agreed multiples. In such cases, pre-agreed terms are used for valuing the company.

Equity investments in private portfolio companies
Large portfolio companies – An independent third-party valuation firm is engaged to assess fair value ranges of large private portfolio companies
at the reporting date starting from 31 December 2020. The independent valuation company has extensive relevant industry and emerging markets
experience. Valuation is performed by applying several valuation methods including an income approach based mainly on discounted cash flow and
a market approach based mainly on listed peer multiples (the DCF and listed peer multiples approaches applied are described below for the other
portfolio companies). The different valuation approaches are weighted to derive a fair value range, with the income approach being more heavily
weighted than the market approach. Management selects what is considered to be the most appropriate point in the provided fair value range
at the reporting date.

Investment stage portfolio companies – An independent third-party valuation firm is engaged to assess fair value ranges of investment stage
private portfolio companies at the reporting date starting from 30 June 2022 (31 December 2021 – was valued internally in line with the methodology
described below for other portfolio companies). The independent valuation company has extensive relevant industry and emerging markets
experience. Valuation is performed by applying several valuation methods including an income approach based mainly on discounted cash flow and
a market approach based mainly on listed peer multiples (the DCF and listed peer multiples approaches applied are substantially identical to those
described below for the other portfolio companies). The different valuation approaches are weighted to derive a fair value range, with the income
approach being more heavily weighted than the market approach. Management selects what is considered to be the most appropriate point in
the provided fair value range at the reporting date.

Other portfolio companies – fair value assessment is performed internally as described below.

Equity investments in private portfolio companies are valued by applying an appropriate valuation method, which makes maximum use of market-
based public information, is consistent with valuation methods generally used by market participants and is applied consistently from period to
period, unless a change in valuation technique would result in a more reliable estimation of fair value.

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12. Fair value measurements continued
Valuation techniques continued
Equity investments in private portfolio companies continued
The value of an unquoted equity investment is generally crystallised through the sale or flotation of the entire business. Therefore, the estimation
of fair value is based on the assumed realisation of the entire enterprise at the reporting date. Recognition is given to the uncertainties inherent in
estimating the fair value of unquoted companies and appropriate caution is applied in exercising judgements and in making the necessary estimates.

The fair value of equity investments is determined using one of the valuation methods described below:

The earnings multiple used in valuation is determined by reference to listed peer group multiples appropriate for the period of earnings calculation
for the investment being valued. The Company identifies a peer group for each equity investment taking into consideration points of similarity with
the investment such as industry, business model, size of the company, economic and regulatory factors, growth prospects (higher growth rate) and
risk profiles. Some peer-group companies’ multiples may be more heavily weighted during valuation if their characteristics are closer to those of the
company being valued than others.

As a rule of thumb, last 12-month earnings will be used for the purposes of valuation as a generally accepted method. Earnings are adjusted where
appropriate for exceptional, one-off or non-recurring items.

Enterprise value is obtained by multiplying measures of a company’s earnings by listed peer group multiple (EV/EBITDA) for the appropriate period.
The measures of earnings generally used in the calculation is recurring EBITDA for the last 12 months (LTM EBITDA). In exceptional cases, where
EBITDA is negative, peer EV/Sales (enterprise value to sales) multiple can be applied to last 12-month recurring/adjusted sales revenue of the
business (LTM sales) to estimate enterprise value.

the value of shareholders’ equity remains at zero (assuming the debt is without recourse to Georgia Capital).

12. Fair value measurements continued
Valuation techniques continued
Equity investments in private portfolio companies continued
Validation
Fair value of investments estimated using one of the valuation methods described above is cross-checked using several other valuation methods
as follows:
• Listed peer group multiples – peer multiples such as P/E, P/B (price to book) and dividend yield are applied to the respective metrics of the

investment being valued depending on the industry of the company. The Company develops fair value range based on these techniques and
analyses whether fair value estimated above falls within this range.

• Discounted cash flow (DCF) – The discounted cash flow valuation method is used to determine fair value of equity investment. Based on DCF,

the Company might make upward or downward adjustment to the value of valuation target as derived from primary valuation method. If fair value
estimated using discounted cash flow analysis significantly differs from the fair value estimate derived using primary valuation method, the
difference is examined thoroughly, and judgement is applied in estimating fair value at the measurement date.
In line with our strategy, from time to time, we may receive offers from interested buyers for our private portfolio companies, which would be
considered in the overall valuation assessment, where appropriate.

•

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Valuation process for level 3 valuations
Georgia Capital hired third-party valuation professionals to assess fair value of the large private portfolio companies as at 31 December 2021.
Starting from 2022 third-party valuation professionals are hired to assess fair value of the investment stage private portfolio companies as well. As
of 31 December 2022 such businesses include Hospitals, P&C insurance, Retail (Pharmacy), Medical Insurance, Clinics & Diagnostics, Renewable
energy and Education. The valuation is performed by applying several valuation methods that are weighted to derive fair value range, with the income
approach being more heavily weighted than market approach. Management selects most appropriate point in the provided fair value range at the
reporting date. Fair values of investments in other private portfolio companies are assessed internally in accordance with Georgia Capital’s valuation
methodology by the Valuation Workgroup.

Georgia Capital’s Management Board proposes fair value to be placed at each reporting date to the Audit and Valuation Committee. The Audit and
Valuation Committee is responsible for the review and approval of fair values of investments at the end of each reporting period.

Description of significant unobservable inputs to level 3 valuations
The approach to valuations as of 31 December 2022 was consistent with the Company’s valuation process and policy. Management continues
to monitor the impact of the COVID-19 pandemic and the Russia-Ukraine war on the valuation of portfolio companies.

In addition, management analyses the impact of climate change on the valuations, such as by incorporation of known effects of climate risks to the
future cash flow forecasts or through adjusting peer multiples the known differences in the climate risk exposure as compared to the investment being
fair valued. As at 31 December 2022, management concluded that the effects of the climate risks are reflected in the peer multiples and discount rates
used in the valuations and that no specific adjustments are required in relation of the Group’s investment portfolio measurement and respective fair
value sensitivity disclosures.

b. Equity fair value valuation
Fair value of equity investment in companies can also be determined as using price to earnings (P/E) multiple of similar listed companies.

The following tables show descriptions of significant unobservable inputs to level 3 valuations of equity investments:

The measure of earnings used in the calculation is recurring adjusted net income (net income adjusted for non-recurring items and FX gains/losses)
for the last 12 months (LTM net income). The resulting fair value of equity is allocated between Georgia Capital and other shareholders of the portfolio
company, if any. Fair valuation of equity using peer multiples can be used for businesses within financial sector (e.g. insurance companies).

Discounted cash flow
Under the discounted cash flow (DCF) valuation method, fair value is estimated by deriving the present value of the business using reasonable
assumptions of expected future cash flows and the terminal value, and the appropriate risk-adjusted discount rate that quantifies the risk inherent
to the business. The discount rate is estimated with reference to the market risk-free rate, a risk adjusted premium and information specific to the
business or market sector. Under the discounted cash flow analysis unobservable inputs are used, such as estimates of probable future cash flows
and an internally-developed discounting rate of return.

Net asset value
The net assets methodology involves estimating fair value of an equity investment in a private portfolio company based on its book value at reporting
date. This method is appropriate for businesses (such as real estate) whose value derives mainly from the underlying value of its assets and where
such assets are already carried at their fair values (fair values determined by professional third-party valuation companies) on the balance sheet.

31 December 2022

Description

Loans issued

Equity investments at fair value

Large portfolio companies

Retail (Pharmacy)

DCF, EV/EBITDA

EV/EBITDA multiple

Hospitals

P&C insurance

Medical insurance

DCF, EV/EBITDA

EV/EBITDA multiple

DCF, P/E

P/E multiple

Investment stage portfolio companies

Clinics and diagnostics

DCF, EV/EBITDA

EV/EBITDA multiple

Renewable energy

DCF, EV/EBITDA

EV/EBITDA multiple

Education

DCF, EV/EBITDA

EV/EBITDA multiple

Other portfolio companies

Sum of the parts

EV/EBITDA multiples

Cash flow probability
NAV multiple

1,437,610

724,517

433,193

228,045

51,855

501,407

112,178

224,987

164,242

274,147

6.1x-20.9x
(9.1x)
7.5x-14.2x
(12.2x)
7.0x-37.0x
(10.7x)
10.3x-11.8x
(10.6x)

7.9x-14.2x
(16.5x)
8.1x-20.9x
(11.4x)
7.6x-39.3x
(16.9x)

2.0x-16.8x
(6.3x-10.0x)
(90%-100%)
(0.9x)

Valuation technique

Unobservable input

Range* (implied multiple**)

Fair value

DCF

Discount rate

5.5%-16.5%

26,830

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Valuation technique

Unobservable input

Range* (implied multiple**)

Fair value

DCF

Discount rate

5.5%-16%

154,214

NOTES TO THE FINANCIAL STATEMENTS CONTINUED
GEORGIA CAPITAL PLC (THOUSANDS OF GEORGIAN LARI)

12. Fair value measurements continued
Description of significant unobservable inputs to level 3 valuations continued

31 December 2021

Description

Loans Issued

Equity investments at fair value

Large portfolio companies

Healthcare services

DCF, EV/EBITDA

EV/EBITDA multiple

Retail (Pharmacy)

DCF, EV/EBITDA

EV/EBITDA multiple

Water utility

P&C insurance

Medical insurance

Exit price

DCF, P/E

N/A

P/E multiple

Investment stage portfolio companies

Renewable energy

Sum of the parts

EV/EBITDA multiple

Education

EV/EBITDA

EV/EBITDA multiple

Other portfolio companies

Sum of the parts

EV/EBITDA multiples

EV/Sales multiple
Cash flow probability
NAV multiple

2,407,264

731,819

710,385
696,960

211,505

56,595

303,136

173,288

129,848

224,645

6.9x-22.6x
(10.3x)
6.8x-19.9x
(9.3x)
N/A
8.0x-28.7x
(12.0x)
9.7x-16.6x
(15.0x)

10.1x-19.6x
(9.2x-12.5x)
7.3x-21.7x
(12.5x)

1.1x-17.1x
(4.8x-9.8x)
1.1x-2.7x
(1.9x)
(90%-100%)
(0.9x)

*
**

For equity investments at fair value the range refers to LTM multiples of listed peer group companies, prior to any adjustments.
Implied multiples are derived by dividing selected value of the company by respective LTM earnings measure.

Georgia Capital hired third-party valuation professionals to assess fair value of the large and investment stage private portfolio companies as at
31 December 2022 and 31 December 2021 including P&C insurance, Hospitals, Retail (Pharmacy), Medical Insurance, and Clinics and Diagnostics.
Starting from 30 June 2022, fair value assessment for the renewable energy and education businesses are performed by third-party valuation
professionals as well. The valuation is performed by applying several valuation methods that are weighted to derive fair value range, with the income
approach being more heavily weighted than market approach. Management selects most appropriate point in the provided fair value range at the
reporting date.

On 31 December 2021, Georgia Capital signed SPA to dispose of it’s 80% interest in the water utility business, which was previously included
within the large private portfolio companies. As at 31 December 2022 the remaining 20% interest in the water utility business was valued using the
pre-agreed put option multiple in reference to the signed contract with the buyer as GCAP has a clear exit path from the business through a put and
call structure at pre-agreed EBITDA multiples.

Comprehensive analysis was performed to determine the impact of the Russia-Ukraine war on the private portfolio valuations. During the analysis,
the impact of the war on discount rates was estimated and changes in listed peer multiples and overall movement in emerging and regional markets
were reviewed. Uncertainties surrounding the geopolitical tensions translated into an increase in discount rates and reduced listed peer multiples and
were reflected accordingly in the private portfolio companies’ valuations, where applicable.

As at 31 December 2022, several portfolio companies (Hospitals, Clinics and P&C Insurance, together “Defendants”) were engaged in litigation that
has been ongoing since 2015 with some of the former shareholders of Insurance Company Imedi L (“Claimants”) in relation to the acquisition price of
the business. Former shareholders claim that their 66% shares in Insurance Company Imedi L were sold under duress at a price below market value in
2012. Since the outset, GHG and Aldagi have vigorously defended their position that the claims are wholly without merit. The Defendants won the case
in Tbilisi City Court in 2018. The Claimants appealed against the court decision and in January 2020, Tbilisi Court of Appeals decided to return the
case back to Tbilisi City Court for further analysis of the circumstances of the case, this decision was sustained by Supreme Court in February 2022
as well. In July 2022, Tbilisi City Court partially satisfied the Claimants and ruled that claims in the amount of US$ 12.7 million principal amount plus an
annual 5% interest charge as lost income (US$ 21 million in total) should be paid. The Defendants believe that no new evidence has been submitted
and that there is no sound basis upon which to have reversed the initial ruling. The Defendants have appealed the decision and continue to vigorously
defend their position, they are confident that they will prevail; accordingly the Defendants have not made a provision for a potential liability in their
financial statements. Management shares the Defendants’ assessment of the merits of the case and considers that the probability of incurring
losses on this claim is low; accordingly, fair values of portfolio companies do not take into account a potential liability in relation to this litigation.

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12. Fair value measurements continued
Sensitivity analysis to significant changes in unobservable inputs within level 3 hierarchy
In order to determine reasonably possible alternative assumptions the Company adjusted key unobservable model inputs. The Company
adjusted the inputs used in valuation by increasing and decreasing them within a range which is considered by the Company to be reasonable.

If the interest rate for each individual loan issued to equity investments as at 31 December 2022 decreased by 1.1-3.3 percentage points (2021:
1.1-3.2 percentage points), the amount of loans issued would have decreased by GEL 150 or 0.6% (2021: GEL 2,669 or 1.7%). If the interest rates
increased by 1.1-3.3 percentage points (2021: 1.1-3.2 percentage points) then loans issued would have increased by GEL 148 or 0.6% (2021:
GEL 2,282 or 1.5%).

If the listed peer multiples used in the market approach to value unquoted investments as at 31 December 2022 decreased by 10% (2021: 10%),
value of equity investments at fair value would decrease by GEL 71 million or 2% (2021: GEL 110 million or 3%). If the multiple increased by 10%
(2021: 10%) then the equity investments at fair value would increase by GEL 71 million or 2% (2021: GEL 121 million or 3%).

If the discount rates used in the income approach to value unquoted investments decreased by 50 basis points (2021: 50 basis points), the value
of equity investments at fair value would increase by GEL 75 million or 2% (2021: GEL 90 million or 2%). If the discount rates increased by 50 basis
points (2021: 50 basis points) then the equity investments at fair value would decrease by GEL 71 million or 2% (2021: GEL 80 million or 2%). If the
discount rate decreased by 100 basis points, the value of equity investments at fair value would increase by GEL 155 million or 5% (31 December
2021: GEL 189 million or 5%). If the discount rate increased by 100 basis points then the equity investments at fair value would decrease by
GEL 138 million or 4% (31 December 2021: GEL 156 million or 4%).

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If the multiple used to value unquoted investments valued on NAV and recent transaction price basis as at 31 December 2022 decreased by 10%
(2021: 10%), value of equity investments at fair value would decrease by GEL 11 million or 0.3% (2021: GEL 7 million or 0.2%). If the multiple increased
by 10% then the equity investments at fair value would increase by GEL 11 million or 0.3% (2021: GEL 7 million or 0.2%).

As set out in the description of significant unobservable inputs to level 3 valuations the valuations have been prepared on the basis that climate
change risks are reflected in the peer multiples and discount rates. Therefore, the sensitivities noted above in respect of peer multiples and discount
rates include the risk arising from climate change.

Movements in level 3 financial instruments measured at fair value
The following tables show a reconciliation of the opening and closing amounts of level 3 financial assets which are recorded at fair value:

At 1 January
2021

Fair value
gain

Capital
redemption

Capital
increase

At
31 December
2021

Fair value
gain

Capital
redemption

Dividend
income

At
31 December
2022

Level 3 financial

assets

Equity investments at
fair value (Note 6)

2,213,290

704,243

(21,679)

(14,481)

2,881,373

925

(87,238)

–

2,795,060

13. Maturity analysis
The table below shows an analysis of assets and liabilities analysed according to when they are expected to be recovered or settled:

Cash and cash equivalents
Equity investments at fair value
Prepayments

Total assets

Other liabilities

Total liabilities

Net

31 December 2022

Less than
1 year

23,361
–
363

More than
1 year

–
2,795,060
–

Total

23,361
2,795,060
363

23,724

2,795,060

2,818,784

1,393

–

1,393

22,331

2,795,060

2,817,391

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NOTES TO THE FINANCIAL STATEMENTS CONTINUED
GEORGIA CAPITAL PLC (THOUSANDS OF GEORGIAN LARI)

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13. Maturity analysis continued

Cash and cash equivalents
Equity investments at fair value
Prepayments

Total assets

Other liabilities

Total liabilities

Net

31 December 2021

Less than
1 year

7,200
–
406

7,606

5,357

2,249

More than
1 year

–
2,881,373
–

Total

7,200
2,881,373
406

2,881,373

2,888,979

–

5,357

2,881,373

2,883,622

14. Related Party disclosures
In accordance with IAS 24 Related Party Disclosures, parties are considered to be related if one party has the ability to control the other party or
exercise significant influence over the other party in making financial or operational decisions. In considering each possible related party relationship,
attention is directed to the substance of the relationship, not merely the legal form.

Related parties may enter into transactions which unrelated parties might not, and transactions between related parties may not be effected on the
same terms, conditions and amounts as transactions between unrelated parties. All transactions with related parties disclosed below have been
conducted on an arm’s length basis.

There were no related party transactions as of 31 December 2022, other than capital redemption of GEL 87,238 (31 December 2021: 21,679),
dividend income of GEL nil from JSC GCAP (31 December 2021: 14,481) and compensation of key management personnel as disclosed below.

Compensation of key management personnel comprised the following:

Salaries and other benefits
Share-based payments compensation

Total key management compensation

2022

(1,129)
(495)

(1,624)

2021

(1,307)
(534)

(1,841)

Key management personnel do not receive cash-settled compensation, except for fixed salaries. The number of key management personnel at
31 December 2022 was 7 (2021: 7).

For the details of related party balances comprising of equity investments at fair value please, refer to Note 6.

15. Events after the reporting period

Transfer from LSE Premium to LSE Standard Listing
On 17 February 2023, the Company published its shareholder circular containing a notice of general meeting in connection with the proposed
transfer of the Company’s listing from the Premium Listing segment to the Standard Listing segment (the “Transfer”). At the General Meeting, held
on 14 March 2023, shareholders approved the Transfer with 99.99% of votes cast in favour. Following shareholder approval of the Transfer at the
General Meeting, the Company intends to proceed with implementing the Transfer. The Company anticipates that the effective date of the Transfer
will be 13 April 2023, being 20 business days after the date of the General Meeting.

Expansion of Education Business
On March 3 Georgia Capital announced the expansion of K-12 education business through two investment projects: (1) The acquisition of a new
campus in the affordable segment. With this investment, the education business will expand from its current built capacity of 5,650 learners to
6,850 learners; (2) The signing of a binding agreement for the acquisition of a land plot for the expansion of an operational campus in the premium
and international segment. This acquisition, once completed, will increase the total pipeline capacity for 2025 by 350 learners, in total from 2,410
learners to 2,760 learners.

Sale of Share in Listed Portfolio
During 1Q23 Georgia Capital sold 239,867 shares of Bank of Georgia Group PLC for total consideration of GEL 21,226. As a result, subsequent
holding of GCAP in BoG stands at 20.2%.

210

ADDITIONAL INFORMATION
ABBREVIATIONS

AGM

APM

Annual General Meeting

Alternative performance measure

BoG or BoGG

Bank of Georgia Group PLC

CAGR

Compounded annual growth rate

COVID-19

The novel coronavirus

Discounted cash flow

MoU

MTPL

NAV

NBG

NCC

Memorandum of Understanding

Mandatory third-party liability insurance

Megawatt

Net asset value

National Bank of Georgia

Net Capital Commitment

DCF

DCFTA

EBITDA

EECP

EFTA

EPS

ESMS

EUR

FCF

FDI

FRC

FTA

GBP

GDP

GEL

GGU

GHG

HPP

IAS

IASB

IFC

IMF

IPO

LTIP

LTM

LTV

MDA

MOIC

Deep and Comprehensive Free Trade Agreement

NGO

Non-governmental organisation

Earnings before interest, taxes, non-recurring
items, FX gain/losses and depreciation and
amortisation

Executives’ Equity Compensation Plan

European Free Trade Association

Earnings per share

NIM

NMF

NPLs

NTM

OECD

Net Interest Margin

Not meaningful to present

Non-performing loans

Next twelve months

Organisation for Economic Co-operation
and Development

Environmental and Social Risk Management
Procedures

OPEX

Operating expenses

Euro

Enterprise value

Ernst & Young

Free cash flow

Foreign direct investment

Financial Reporting Council

Free Trade Agreement

Great British Pound, national currency of the UK

Gross domestic product

Georgian Lari or Lari, national currency of Georgia

Georgia Global Utilities

Georgia Healthcare Group

Hydro power plant

International Accounting Standards

International Accounting Standards Board

International Finance Corporation

International Monetary Fund

Initial Public Offering

Long-Term Incentive Plan

Last 12 months

Loan to value ratio

Modified Dutch Auction

Multiple of invested capital

P&C

PLC

PPA

RAB

ROA

ROAE

ROE

ROIC

SDGs

SMEs

SOTP

TBD

TPP

TPL

TSR

Property and Casualty

Public limited company

Power Purchase Agreement

Regulatory Asset Base

Return on assets

Return on average equity

Return on equity

Return on invested capital

United Nations’ Sustainable Development Goals

Small and medium-size enterprises

Sum-of-the-parts valuation

To be determined

Thermal power plant

Third-party liability insurance

Total Shareholder Return

United Kingdom

US$/USD

United States dollar, national currency of the
United States

WACC

WPP

WSS

WWTP

y-o-y

YTD

Weighted average cost of capital

Wind power plant

Water supply and sanitation

Wastewater treatment plant

Year-on-year

Year to date

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ADDITIONAL INFORMATION
REFERENCES

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BGEO Group PLC Former parent company of Georgia Capital PLC

prior to demerger

The Board

The Board of Directors of Georgia Capital PLC

The Code

The UK Corporate Governance Code published
in 2018

The Directors

Members of Georgia Capital PLC Board of
Directors

We/Our/Us

References to “we”, “our” or “us” are primarily
references to the Group throughout this Report.
However, the Group comprises of and operates
through its subsidiaries which are legal entities
with their own relevant management and
governance structure (as set out in relevant
parts of this Report).

ADDITIONAL INFORMATION
GLOSSARY

Alternative
performance
measures (APMs)

In this Annual Report management uses various
APMs, which they believe provide additional useful
information for understanding the financial
performance of the Group. These APMs are
not defined by International Financial Reporting
Standards, and also may not be directly comparable
with other companies who use similar measures.
Management believes that these APMs provide the
best representation of our financial performance
as these measures are used by management to
evaluate our operating performance and make
day-to-day operating decisions.

Combined ratio

Equals sum of the loss ratio and the expense
ratio in the insurance business.

Demerger

EBITDA

Georgia Capital PLC emerged as a separately
listed company after demerger from its former
Parent Company BGEO Group on 29 May 2018
(the demerger).

Earnings before interest, taxes, non-recurring
items, FX gain/losses and depreciation and
amortisation; the Group has presented these
figures in this document because management
uses EBITDA as a tool to measure the portfolio
companies’ operational performance and the
profitability of these companies’ operations. The
Company considers EBITDA to be an important
indicator of representative recurring operations.

Expense ratio

Equals sum of acquisition costs and operating
expenses divided by net earned premiums in
the insurance business.

IRR

LTV

IRR for investments is calculated based on:
a) historical contributions to the investment;
b) dividends received; and c) fair value of
the investment as at 31 December 2022.

Loan to value ratio: net debt divided by the
portfolio value.

Liquid assets and
Loans issued

Liquid asset and loans issued in Georgia Capital
include cash, marketable debt securities and
issued short-term loans.

Loss ratio

Equals net insurance claims expense divided
by net earned premiums.

NAV

NCC

Net asset value, represents the net value of an
entity and is calculated as the total value of the
entity’s assets minus the total value of its liabilities.

Net Capital Commitment represents an
aggregated view of all confirmed, agreed and
expected capital outflows at the GCAP holding
company level.

NCC ratio

Equals Net Capital Commitment divided by
portfolio value.

Net investment

Gross investments less capital returns.

Number of shares
outstanding

Number of shares in issue less total unawarded
shares in JSC GCAP’s management trust.

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MOIC

Realised MOIC

ROAE

ROIC

Value creation

Multiple of invested capital is calculated as follows:
i) the numerator is the cash and non-cash inflows
from dividends and sell-downs plus fair value of
investment at reporting date, and ii) the
denominator is the gross investment amount.

Realised multiple of invested capital is calculated as
follows: i) the numerator is the cash and non-cash
inflows from dividends and sell-downs, ii) the
denominator is the gross investment amount.

Return on average total equity equals profit for
the period attributable to shareholders divided
by monthly average equity attributable to
shareholders for the same period.

Return on invested capital is calculated as EBITDA
less depreciation, divided by aggregate amount of
total equity and borrowed funds.

Value creation of each portfolio investment is
calculated as follows: we aggregate a) change
in beginning and ending fair values, b) gains from
realised sales (if any) and c) dividend income
during period. We then adjust the net result to
remove capital injections (if any) to arrive at the
total value creation/investment return.

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ADDITIONAL INFORMATION
SHAREHOLDER INFORMATION

Our website
All shareholders and potential shareholders can gain access to the
Annual Report, presentations to investors, key financial information,
regulatory news, share and dividend data, AGM documentation
and other significant information about Georgia Capital at:
https://georgiacapital.ge/.

Our registered address
Georgia Capital PLC
42 Brook Street
London W1K 5DB
United Kingdom

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Annual General Meeting
The Annual General Meeting of Georgia Capital PLC (the AGM) will be
held at the offices of Baker & McKenzie LLP, 100 New Bridge Street,
London EC4V 6JA. Details of the date, time and business to be
conducted at the AGM is contained in the Notice of AGM, which will
be mailed to shareholders who have elected to receive hard copies of
shareholder information and will be available on the Company’s website:
https://georgiacapital.ge/.

Shareholder enquiries
Georgia Capital PLC’s share register is maintained by Computershare
Investor Services PLC. Any queries about the administration of holdings
of ordinary shares, such as change of address or change of ownership,
should be directed to the address or telephone number immediately
below. Holders of ordinary shares may also check details of their
shareholding, subject to passing an identity check, by visiting the
Registrar’s website: www.investorcentre.co.uk or by calling
the Shareholder Helpline on: +44 (0) 370 873 5866.

Computershare Investor Services PLC
The Pavilions, Bridgwater Road
Bristol BS13 8AE
United Kingdom
+44 (0) 370 873 5866

Contact information
Georgia Capital PLC Investor Relations
E-mail: ir@gcap.ge

Forward-looking statements
Certain statements in this Annual Report and Accounts contain forward-
looking statements, including, but not limited to, statements concerning
expectations, projections, objectives, targets, goals, strategies, future
events, future revenues or performance, capital expenditures, financing
needs, plans or intentions relating to acquisitions, competitive strengths
and weaknesses, plans or goals relating to financial position and future
operations and development. Although Georgia Capital PLC believes
that the expectations and opinions reflected in such forward-looking
statements are reasonable, no assurance can be given that such
expectations and opinions will prove to have been correct. By their
nature, these forward-looking statements are subject to a number of
known and unknown risks, uncertainties and contingencies, and actual
results and events could differ materially from those currently being
anticipated as reflected in such statements. Important factors that could
cause actual results to differ materially from those expressed or implied
in forward-looking statements, certain of which are beyond our control,
include, among other things, those described in “principal risks and
uncertainties” included in this Annual Report and Accounts, see pages
73 to 80.

No part of this document constitutes, or shall be taken to constitute,
an invitation or inducement to invest in Georgia Capital PLC or any other
entity, and must not be relied upon in any way in connection with any
investment decision. Georgia Capital PLC and other entities undertake
no obligation to update any forward-looking statements, whether as
a result of new information, future events or otherwise, except to the
extent legally required. Nothing in this document should be construed
as a profit forecast.

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