Quarterly Report • May 21, 2018
Quarterly Report
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National Storage Mechanism | Additional information You don't have Javascript enabled. For full functionality this page requires javascript to be enabled. RNS Number : 6501O Bank of Georgia Group PLC 21 May 2018 Bank of Georgia Group PLC 1st quarter 2018 results Name of authorised official of issuer responsible for making notification: Natia Kalandarishvili, Head of Investor Relations and Funding www.bankofgeorgiagroup.com www.bgeo.com About Bank of Georgia Group PLC The Group: Bank of Georgia Group PLC ("Bank of Georgia Group" or the "Group" - LSE: BGEO LN) is a UK incorporated holding company, the new parent company of BGEO Group PLC, which combines a Banking Business and an Investment Business ahead of the imminent demerger on 29 May 2018. The demerger, which will result into Investment Business's separation from the Group, was approved at the 2018 Annual General Meeting on 30 April 2018. Bank of Georgia Group PLC will be the holding company of the Banking Business following the demerger completion and effective from 29 May 2018. The Banking Business comprises: a) retail banking and payment services, b) corporate investment banking and wealth management operations and c) banking operations in Belarus ("BNB"). JSC Bank of Georgia ("Bank of Georgia", "BOG" or the "Bank") is the core entity of the Group's Banking Business. The Banking Business targets to benefit from the underpenetrated banking sector in Georgia through both its retail banking and corporate investment banking services and aims to deliver on its strategy: (1) at least 20% ROAE, and (2) 15%-20% growth of its loan book. The Investment Business or Georgia Capital, which is classified as discontinued operations in the Group's consolidated financial statements (Discontinued Operations, see details on page 4) comprise stakes in Georgia Global Utilities ("Utility and Energy Business" or "GGU"), m2 Real Estate ("Real Estate Business" or "m2"), Teliani Valley ("Beverage Business" or "Teliani"), Aldagi ("Property and Casualty Insurance Business" or "Aldagi"), Georgia Healthcare Group PLC ("Healthcare Business" or "GHG") - an LSE (London Stock Exchange) premium-listed company and has a 19.9% interest in the Banking Business. Georgia's fast-growing economy provides opportunities in a number of underdeveloped local sectors and Georgia Capital targets to capture these significant growth opportunities in the Georgian corporate sector. FORWARD LOOKING STATEMENTS This announcement contains 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 Bank of Georgia Group 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: currency fluctuations, including depreciation of the Georgian Lari, and macroeconomic risk; regional tensions and instability; regulatory risk across a wide range of industries; cyber security, information systems and financial crime risk; investment business and investment business strategy risk; risks associated with the demerger and future performance; and other key factors that indicated could adversely affect our business and financial performance, which are contained elsewhere in this document and in our past and future filings and reports of the Group, including the 'Principal Risks and Uncertainties' included in BGEO Group PLC's Annual Report and Accounts 2017. No part of this document constitutes, or shall be taken to constitute, an invitation or inducement to invest in Bank of Georgia Group PLC or any other entity, including Georgia Capital PLC or any of their associated entities, and must not be relied upon in any way in connection with any investment decision. Bank of Georgia Group 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. CONTENT 4 1Q18 Results Highlights 8 Chief Executive Officer Statement 10 Financial Summary 12 Discussion of Results 12 Discussion of Banking Business Results 16 Retail Banking 20 Corporate Investment Banking 22 Discussion of Investment Business Results 24 Utility and Energy Business 28 Real Estate Business 31 Property and Casualty Insurance Business 34 Beverage Business 36 Healthcare Business 38 Selected Financial and Operating Information 46 Annex 47 1Q18 Results Conference Call Details 48 Company Information Bank of Georgia Group PLC announces the Group's first quarter 2018 consolidated results. Unless otherwise noted, numbers are for 1Q18 and comparisons are with 1Q17. The results are based on International Financial Reporting Standards ("IFRS") as adopted by the European Union, are unaudited and derived from management accounts. Bank of Georgia Group reviewed the classification of the Investment Business at 31 March 2018 in its consolidated financial statements. Management believes that the distribution of the Investment Business to its shareholders is highly probable following the approval of the demerger at the 2018 Annual General Meeting on 30 April 2018. As a result, and in line with IFRS, Bank of Georgia Group PLC classified the Investment Business as "disposal group held for distribution" in the 1Q18 consolidated balance sheet and its results of operations are reported under the "discontinued operations" line as a single amount in the 1Q18 consolidated income statement. Comparative periods have been accordingly restated to reflect reclassification of the Investment Business from "continuing operations" into "discontinued operations." Assets and liabilities held by the Investment Business are also presented separately in the consolidated balance sheet as of 31 March 2018 under "assets of disposal group held for distribution" and "liabilities of disposal group held for distribution." BANK OF GEORGIA GROUP HIGHLIGHTS Continued outstanding profitability and balance sheet growth momentum GEL thousands, except per share information 1Q18 1Q17 Change y-o-y 4Q17 Change q-o-q Group Profit 128,559 108,173 18.8% 118,809 8.2% Basic earnings per share 3.08 2.64 16.7% 3.05 1.0% Book value per share 64.91 57.08 13.7% 65.22 -0.5% Equity attributable to shareholders of the Group 2,429,515 2,174,172 11.7% 2,420,602 0.4% Total assets 15,474,490 12,571,248 23.1% 15,168,669 2.0% Banking Business Revenue 236,393 213,789 10.6% 260,312 -9.2% Cost of credit risk 38,143 48,020 -20.6% 42,428 -10.1% Profit 99,184 83,127 19.3% 107,134 -7.4% Loans to customers and finance lease receivables 7,792,108 6,470,771 20.4%1 7,741,420 0.7%1 Client deposits and notes 7,296,110 5,622,023 29.8%2 7,078,058 3.1%2 ROAE 25.9% 23.7% 27.8% Net interest margin 7.0% 7.4% 7.3% Loan yields 13.9% 14.0% 14.3% Cost of funds 4.8% 4.6% 4.8% Cost / Income 37.0% 36.0% 38.3% Cost of risk 2.1% 2.4% 2.1% Leverage (times equity) 7.4 6.8 7.3 NBG (Basel III) Tier I Capital Adequacy Ratio 12.4% n/a 12.4% Investment Business3 Revenue4 296,675 255,003 16.3% 300,572 -1.3% EBITDA4 46,136 41,702 10.6% 52,424 -12.0% Profit 29,375 25,046 17.3% 11,675 151.6% Georgian economy continues to deliver strong growth momentum § Georgian economic growth in 1Q18 accelerated to 5.2% as exports, remittances and tourism revenues grew at double digits. Annual inflation decreased to 2.8% in March 2018. The Lari strengthened against the US dollar by 6.9% during 1Q18 supported by strong external earnings and solid growth. Georgia's US dollar reserves continued to improve and stood at US$ 3.0 billion at 31 March 2018 1As of 31 March 2018, loans and finance lease receivables growth on a constant currency basis was 21.3% and 5.0% on y-o-y and q-o-q basis, respectively 2As of 31 March 2018, client deposits and notes growth on a constant currency basis was 30.9% and 8.1% on y-o-y and q-o-q basis, respectively 3Investment Business is classified as discontinued operations in Bank of Georgia Group's 1Q18 consolidated financial statements 4Includes results of GHG's operations, which is classified as discontinued operations in Group's and Georgia Capital's consolidated financial statements BANKING BUSINESS HIGHLIGHTS § The Banking Business generated a strong quarterly profit of GEL 99.2mln in 1Q18 (up 19.3% y-o-y), while quarterly ROAE reached 25.9% in 1Q18 (up 220bps y-o-y) § Bank of Georgia became the largest bank in Georgia based on its 36.2% market share of total assets at 31 March 2018, according to the data published by National Bank of Georgia § Asset quality continued to improve during 1Q18. NPLs to gross loans ratio decreased to 3.1% at 31 March 2018 (4.6% at 31 March 2017 and 3.8% at 31 December 2017). NPL coverage ratio stood at 111.4% at 31 March 2018 (102.9% at 31 December 2017 adjusted for IFRS 9 impact), while the NPL coverage ratio adjusted for discounted value of collateral stood at 147.2% at 31 March 2018 (126.9% at 31 March 2017 and 130.6% at 31 December 2017). The asset quality improvement positively impacted the cost of risk ratio, which stood at 2.1% in 1Q18 (2.4% in 1Q17 and 2.1% in 4Q17) § The Banking Business loan book growth on a constant-currency basis reached 21.3% y-o-y and 5.0% q-o-q at 31 March 2018. Retail Banking loan book share in the total loan portfolio was 69.3% at 31 March 2018 (62.6% at 31 March 2017 and 68.0% at 31 December 2017) § Retail Banking ("RB") continued to deliver strong growth across all its business lines. Retail Banking revenue reached GEL 170.7mln in 1Q18, up 20.9% y-o-y, but down 3.0% q-o-q due to seasonality. The Retail Banking net loan book reached GEL 5,155.3mln at 31 March 2018, up 32.5% y-o-y and up 2.2% q-o-q. The growth on a constant-currency basis was 33.3% y-o-y and 5.7% q-o-q. The number of Retail Banking clients reached 2.4mln at the end of 1Q18, up 7.7% from 2.2mln at the end of 1Q17 and up 1.8% from 4Q17 § Our Retail Banking product to client ratio increased to 2.2 in 1Q18 from 2.0 in 1Q17. By the end of 2017, we completed the transformation of our retail banking operations from a product-based model into a client-centric model, as well as the implementation of the client-centric model in our branches. We continue to see solid growth in sales volumes and the number of products sold to our clients in these branches, and this contributed to a 32.5% y-o-y growth in our retail loan book § Retail Banking client deposits increased to GEL 3,304.3mln at 31 March 2018, up 38.0% y-o-y and up 1.1% q-o-q. Growth on a constant-currency basis was 39.3% y-o-y and 6.4% q-o-q § Corporate Investment Banking ("CIB") continued further growth in 1Q18 after delivering on its risk de-concentration and loan portfolio repositioning targets in 2017. CIB's net loan book amounted to GEL 2,222.9mln at 31 March 2018, up 0.8% y-o-y and up 4.2% q-o-q on constant currency basis. The top 10 CIB client exposure was 10.3% at the end of 1Q18, down from 11.3% at 31 March 2017 and 10.7% at 31 December 2017 § Investment Management's Assets Under Management ("AUM") increased to GEL 1,835.9mln in 1Q18, up 18.3% y-o-y and largely flat q-o-q, reflecting higher bond issuance activity by our brokerage arm Galt & Taggart § De-dollarisation of the loan book and clients deposits continued. Loan book in local currency accounted to 41.3% of the total book at 31 March 2018, compared to 33.5% a year ago and 38.3% in the previous quarter. The dollarisation of our loan book has decreased since last year as the demand for local currency denominated loans was stronger than the demand for foreign currency denominated loans, supported by the Government's de-dollarisation initiatives implemented at the beginning of last year. Client deposits in local currency represented 33.8% of the total deposit portfolio at 31 March 2018, compared to 26.7% at 31 March 2017 and 30.5% at 31 December 2017 § Bank of Georgia continued to attract local currency funding to further support the increased demand on the local currency lending and the de-dollarisation of its loan book. In 1Q18, the Bank raised GEL 25mln financing with maturity of up to three years from a Swiss investment company Symbiotics to finance the Bank's micro, small and medium sized enterprises. Moreover, the Bank once again co-operated with Black Sea Trade and Development Bank and secured GEL 75mln, with tranches up to five years duration, to finance the Bank's SME lending § On 23 April 2018 Fitch revised the Outlook of JSC Bank of Georgia's Long-Term Issuer Default Rating (IDR) from Stable to Positive and affirmed the IDR at BB-. The revision of the Outlook to Positive reflects Fitch's view that the Bank's risk profile and financial metrics should benefit from the improving operating environment in Georgia § On 16 April 2018, International Finance Corporation named JSC Bank of Georgia as the Best Issuing Bank Partner for Women Owned Businesses in Europe and Central Asia for 2017 INVESTMENT BUSINESS HIGHLIGHTS § Georgia Capital issued inaugural international corporate bonds in March 2018. On 5 March 2018, JSC Georgia Capital priced US$ 300mln 6.125% notes due 2024 (the "Issuance"). The Issuance was the first international bond offering by a non-banking, non-state-backed company from Georgia. The proceeds from the issuance will be used to optimise the Group's capital structure ahead of the demerger and provide financing to the portfolio companies in order to take advantage of the attractive growth opportunities in Georgia § Our utility and energy business, GGU, delivered a stable performance in 1Q18. In 1Q18, GGU continued its investments in water pipeline infrastructure, leading to continued growth in the regulated asset base. As a result of the successful implementation of a number of efficiency projects, GGU was able to significantly reduce its own electricity consumption in 1Q18. GGU also continued construction works on the 50MW Mestiachala HPPs in north-western Georgia, while the 46MW Zoti HPPs are under development § In 1Q18, our real estate business, m2, sold 53 apartments with a total sales value of US$ 7.7mln reaching the highest ticket price per apartment in the history of m2, compared to 143 apartments sold with total sales value of US$ 10.1mln in 1Q17 and 165 apartments with a total sales value of US$ 14.5mln in 4Q17 § In 1Q18, m2 achieved the first milestone in its hotel development strategy and opened its first hotel in Tbilisi (the "Hotel") under the Ramada Encore brand. The Hotel has a capacity of 152 rooms and will cater for the needs of the rapidly growing market for budget travellers in Georgia. During the first incomplete month of operation in March 2018, the Hotel's occupancy rate stood at 29%. m2 has invested US$ 14mln in Hotel development, including the land § In 1Q18, m2 acquired an 8,512 square metre land plot in Telavi, Kakheti region for a total cash consideration of US$ 1.5mln (excluding VAT) to develop a hotel with approximately 130 rooms. The hotel construction will be carried out by m2's construction arm. Telavi is the largest city in eastern Georgia and one of the major tourist destinations. The acquisition is in line with m2's hotel development strategy to reach a capacity of 1,000 hotel rooms and capitalise on growing tourist inflows in the country § On 3 May 2018, m2 acquired a partly constructed lifestyle hotel in Gudauri for a total cash consideration of US$7.2 million including VAT. The Gudauri hotel is expected to add at least 134 rooms to m2's portfolio and is conveniently located on the slopes in Gudauri, a leading ski resort in the Caucasus region, with ski-in and ski-out facilities. The skeleton of the building is already finished and the remaining construction works will be carried out by m2's construction arm. m2 expects the Gudauri hotel to open its doors to its first visitors in December 2018 § Our property and casualty insurance business continued its organic growth and at 31 March 2018 Aldagi had 57,791 insured customers (up 47.2% y-o-y and up 21.2% q-o-q). The strong performance was mainly driven by developing regional markets through the launch of livestock insurance; organic growth of motor insurance business; and the introduction of card insurance sales in 1Q18. The quality of the motor insurance portfolio improved significantly, benefiting from the termination of relationships with loss making clients. The number of new insurance policies written reached 46,934 in 1Q18 (up 48.1% y-o-y and up 26.9% q-o-q) § In December 2017, the Parliament of Georgia approved Border Motor Third Party Liability Insurance (MTPL insurance for vehicles visiting Georgia either on a temporary or transit basis) through extensive cooperation with the Insurance State Supervision Service of Georgia (ISSSG). MTPL became mandatory from 1 March 2018 and the gross written premium in the first month of operations amounted to GEL 4.6mln, while 64,021 vehicles with foreign plates were insured. Aldagi's market share in Compulsory border MTPL in March 2018 was 18% § In February 2018, Georgia Capital acquired a 100% equity stake in a leading Georgian craft beer producer, Black Lion LLC (Black Lion) for the total consideration of $3.2mln. Black Lion is the largest producer of a premium class craft beer in Georgia that launched sales in the beginning of 2016 and sold approximately 300,000 litres of craft beer in 2017, primarily targeting restaurants and bars in Tbilisi § In April 2018, JSC Georgia Capital has acquired a 60% indirect controlling interest in Kindzmarauli Marani, LLC ("Kindzmarauli") through a locally established special-purpose vehicle for a total consideration of US$7.25mln (representing a cash payment for an equity stake and the buyout of an existing shareholder loan). Kindzmarauli is a producer of exquisite Georgian wines and spirits, which owns 350 hectares of vineyards in Georgia's Kakheti region. Georgia Capital will consolidate the results of Kindzmarauli's operations from the acquisition date, and expects that the acquisition will complement and strengthen its existing beverage business with an increased presence in the growing domestic and international markets for Georgian wine. With this acquisition, Georgia Capital's beverage business made a major step towards its wine business development strategy to reach a vineyard base of 1,000 hectares over the next three years and has now reached 436 hectares of vineyards. This supports the beverage business' wine production, which has been further helped by significant growth opportunities in international markets provided by Georgia's various free trade agreements, including those with China and the European Union § Our healthcare business, GHG, delivered a strong performance in 1Q18 as it continued to deliver on its strategic priorities across its healthcare services and pharmacy and distribution businesses, while the medical insurance business delivered positive EBITDA. Healthcare services EBITDA margin was 25.2% in 1Q18, compared to 25.3% in 1Q17 and 26.8% in 4Q17 reflecting the planned significant investment in new hospitals and polyclinics during 2017. The pharmacy and distribution business continued to generate a high EBITDA margin of 10.0% in 1Q18, compared to 7.8% in 1Q17 and 10.2% in 4Q17 § GHG launched the 306-bed flagship Deka Hospital in Tbilisi in March, which added GEL 1.2mln to 1Q18 revenues. Deka has a strong historic reputation and occupies a prime location in the north-east of Tbilisi. Following the completion of the renovation, the 306-bed Deka hospital serves as a flagship hospital, being the hospital of choice for high-quality elective medical care countrywide § Following the partial opening of Tbilisi Referral Hospital in April 2017, GHG launched the remaining part of the hospital in December 2017, with an additional 112 renovated beds. The Hospital has already generated a 43% occupancy rate and contributed GEL 3.7mln to 1Q18 revenues CHIEF EXECUTIVE OFFICER STATEMENT In the first quarter of 2018, the last full quarter before the Group completes its planned demerger on 29 May 2018, the Group has delivered an extremely strong performance in all areas of the business, that resulted in an 18.8% year-on-year growth in profit for the quarter, to GEL 128.6 million, and earnings per share growth of 16.7% to GEL 3.08 per share. This strength reflects continued excellence from our Banking Business as well as increased momentum and strategic delivery from our Investment Businesses, both of which continue to be supported by Georgia's strong macroeconomic performance and business outlook. From a macroeconomic perspective Georgia is going from strength to strength, with business momentum continuing to accelerate and tourism inflows into the country rising at unparalleled levels. In 1Q18, real GDP growth was at an estimated 5.2% year-on-year, with inflation remaining well contained at 2.8%. In addition, the Lari strengthened by 6.9% against the US Dollar during the first quarter. The National Bank of Georgia continues to increase Georgia's US dollar reserves and has recently been buying US Dollars, to mitigate further appreciation of the Lari. The Banking Business delivered a strong result in what is traditionally the slow quarter of the year. On a constant-currency basis, the loan book grew 21.3% year-on-year, and 5.0% during the quarter. This reflected continued strong growth in Retail Banking, where the mortgage portfolio has increased by nearly 50% over the last 12 months, and in the corporate lending portfolio, which is now delivering high quality lending growth following the completion of our three year programme to reduce concentration risk at the end of last year. Whilst individual product loan yields have continued to remain stable, the recent pick-up of EUR denominated corporate lending and strong growth in the mortgage portfolio has contributed to a 30 basis point year-on-year reduction in the net interest margin. That said, we maintained our capital efficient approach within lending which, in addition to a reduction in credit risk, improved the return on average equity in the Banking Business to 25.9% in the quarter, compared to 23.7% in the first quarter last year. Costs remain well controlled, whilst ensuring that we continue to invest in building an increasingly strong customer franchise. The Retail Banking customer franchise continues to grow strongly in all segments and the Retail Banking product to client ratio increased to 2.2, compared to 2.0 in the first quarter of last year. Asset quality continues to improve significantly. The Banking Business cost of risk ratio in the first quarter was 2.1%, in line with our medium-term cost of risk expectations. This was achieved at the same time that we continued to improve our asset quality, with non-performing lending reducing by 17.9% over the last three months, and the NPL Coverage ratio improving from 102.9% to 111.4% over the same period. The NPLs to Gross Loans ratio also reduced significantly, from 4.6% to 3.1%, over the last 12 months. The Bank's capital and funding position remains strong. The National Bank of Georgia transitioned to Basel III standards, and introduced new capital adequacy requirements in December 2017 and on the new basis, the NBG (Basel III) Total capital and Tier 1 capital adequacy ratios were 17.3% and 12.4%, respectively, at the end of the first quarter, significantly in excess of the Bank's minimum capital requirements. Bank of Georgia continues to have strong capital ratios and high levels of internal capital generation. The Group's Investment Business, Georgia Capital, is delivering its strategic priorities in each of its businesses together with strong growth and performance. Gross profit increased by 19.8% year-on-year to GEL 105.35 million, and net profit grew by 17.3% to GEL 29.4 million. In addition, the business is exploring further opportunities to expand into targeted service industries to increase the diversification and growth of its business portfolio. Within the businesses, Georgia Healthcare posted net revenues of GEL 207 million during the quarter, an increase of 11.4%, reflecting a combination of high single-digit organic growth and the recent completion and launch of its 2 major hospital renovation projects. The first quarter EBITDA was GEL 31.4 million, an increase of 25.3%. The healthcare services EBITDA margin continues to be high at 25.2% and this is expected to improve towards 30%, as the dilutive effect of the significant roll-out impact of the two major hospital renovations and the ongoing roll-out of a nationwide chain of polyclinics starts to reduce. In the pharmacy and distribution business we continued to realise significant benefits from the integration of two leading pharmacy businesses and the EBITDA margin of 10.0% in the first quarter comfortably exceeded our target of "more than 8%" margin. In our water utility and energy business, GGU, the management team continues to focus on improving energy efficiency, whilst investing in water pipeline infrastructure and growing the regulated asset base. GGU also continued construction and development works on 3 hydro power plant projects, totaling almost 100MW of planned additional capacity out of a targeted 1,000MW over the next five years. The strong execution skills of our real estate business, m2 Real Estate, continue to unlock considerable value in the real estate development business. During the first quarter of 2018, m2 sold 53 apartments with a total sales value of $7.7 million, in addition to increasing its portfolio of yielding assets. In addition, strong progress has been made in the development of m2's hotel development strategy with the opening in March 2018 of its first Ramada Encore hotel, as well as the acquisition of a number of hotel projects that put m2 firmly on track to deliver its 1,000 hotel room strategy over the next three years. The strong portfolio of new products developed by our property and casualty insurance business, Aldagi, supported 21.2% growth in insured customers over the last three months and Aldagi's position as the clear market leader in the fast-developing Georgian P&C insurance market. This strong growth was largely driven by the launch of livestock insurance, strong growth in the motor insurance business and the introduction of card insurance during the quarter. Our beverage business, Teliani, increased its revenues by 94.4% year-on-year, primarily due to the launch of beer and lemonade production in 3Q17, and continued to diversify and expand its distribution network of wine and beer businesses, whilst also exploring investments targeting an increase in its vineyard base to 1,000 hectares over the next three years, from the current 86 hectares, which we already increased to 436 hectares in April 2018. Following shareholder approval, on 30 April 2018, of the demerger of BGEO Group, this is the last quarterly report incorporating the results of both Bank of Georgia Group and Georgia Capital. The demerger is expected to be completed later this month, on 29 May 2018, when both companies will become separately listed on the premium segment of the London Stock Exchange. Over the last few years the Group has achieved remarkable growth and success in both the Banking and the Investment businesses. Leveraging on the continued success of Georgia and its expected future macroeconomic progress and strength, both businesses have exceptional customer franchises, management teams and employees that we, and the Board of Directors of both companies, expect to thrive as independent businesses that will build on their excellent track record for many years to come. Irakli Gilauri, Kaha Kiknavelidze, Chairman and CEO, Georgia Capital PLC CEO, Bank of Georgia Group PLC 5Includes results of GHG's operations, which is classified as discontinued operations in Group's and Georgia Capital's consolidated financial statements FINANCIAL SUMMARY INCOME STATEMENT Bank of Georgia Group Consolidated Banking Business6 Investment Business6 GEL thousands unless otherwise noted 1Q18 1Q17 Change y-o-y 4Q17 Change q-o-q 1Q18 1Q17 Change y-o-y 4Q17 Change q-o-q 1Q18 1Q17 Change y-o-y 4Q17 Change q-o-q Net banking interest income 181,114 160,335 13.0% 183,498 -1.3% 180,123 160,880 12.0% 183,124 -1.6% - - - - - Net fee and commission income 34,185 29,786 14.8% 36,483 -6.3% 34,511 30,193 14.3% 36,738 -6.1% - - - - - Net banking foreign currency gain 14,913 12,526 19.1% 28,139 -47.0% 16,015 19,700 -18.7% 27,464 -41.7% - - - - - Net other banking income 5,518 2,783 98.3% 12,708 -56.6% 5,744 3,016 90.5% 12,986 -55.8% - - - - - Revenue 235,730 205,430 14.7% 260,828 -9.6% 236,393 213,789 10.6% 260,312 -9.2% - - - - - Operating expenses (86,279) (76,102) 13.4% (98,612) -12.5% (87,379) (77,054) 13.4% (99,742) -12.4% - - - - - Profit from associates 319 514 -37.9% 255 25.1% 319 514 -37.9% 255 25.1% - - - - - Operating income before cost of credit risk 149,770 129,842 15.3% 162,471 -7.8% 149,333 137,249 8.8% 160,825 -7.1% - - - - - Cost of credit risk (38,143) (48,020) -20.6% (42,428) -10.1% (38,143) (48,020) -20.6% (42,428) -10.1% - - - - - Profit before non-recurring items and income tax 111,627 81,822 36.4% 120,043 -7.0% 111,190 89,229 24.6% 118,397 -6.1% - - - - - Net non-recurring items (2,948) (1,695) 73.9% (213) NMF (2,948) (1,695) 73.9% (213) NMF - - - - - Profit before income tax expense 108,679 80,127 35.6% 119,830 -9.3% 108,242 87,534 23.7% 118,184 -8.4% - - - - - Income tax expense (9,058) (4,407) 105.5% (11,050) -18.0% (9,058) (4,407) 105.5% (11,050) -18.0% - - - - - Profit from continuing operations 99,621 75,720 31.6% 108,780 -8.4% 99,184 83,127 19.3% 107,134 -7.4% - - - - - Profit from discontinued operations7 28,938 32,453 -10.8% 10,029 NMF - - - - - 29,375 25,046 17.3% 11,675 151.6% Profit 128,559 108,173 18.8% 118,809 8.2% 99,184 83,127 19.3% 107,134 -7.4% 29,375 25,046 17.3% 11,675 151.6% Earnings per share (basic) 3.08 2.64 16.7% 3.05 1.0% 2.62 2.17 20.8% 2.86 -8.3% 0.46 0.47 -2.5% 0.19 141.5% Earnings per share (diluted) 2.98 2.55 16.9% 2.90 2.8% 2.54 2.10 21.0% 2.72 -6.7% 0.44 0.45 -2.3% 0.18 145.7% BALANCE SHEET Bank of Georgia Group Consolidated Banking Business6 Investment Business 6 GEL thousands unless otherwise noted Mar-18 Mar-17 Change y-o-y Dec-17 Change q-o-q Mar-18 Mar-17 Change y-o-y Dec-17 Change q-o-q Mar-18 Mar-17 Change y-o-y Dec-17 Change q-o-q Liquid assets 4,445,452 3,606,926 23.2% 4,373,251 1.7% 4,514,326 3,398,385 32.8% 4,346,509 3.9% - 537,227 NMF 445,501 NMF Cash and cash equivalents 1,754,920 1,285,483 36.5% 1,582,435 10.9% 1,754,920 1,198,301 46.5% 1,516,401 15.7% - 359,629 NMF 374,301 NMF Amounts due from credit institutions 941,804 1,090,111 -13.6% 1,225,947 -23.2% 955,175 970,653 -1.6% 1,216,349 -21.5% - 174,248 NMF 38,141 NMF Investment securities 1,748,728 1,231,332 42.0% 1,564,869 11.7% 1,804,231 1,229,431 46.8% 1,613,759 11.8% - 3,350 NMF 33,059 NMF Loans to customers and finance lease receivables 7,727,568 6,408,711 20.6% 7,690,450 0.5% 7,792,108 6,470,771 20.4% 7,741,420 0.7% - - - - - Property and equipment 324,810 1,353,661 -76.0% 988,436 -67.1% 324,810 299,875 8.3% 322,925 0.6% - 1,053,786 NMF 661,176 NMF Assets of disposal group held for distribution 2,447,592 - NMF 1,136,417 115.4% - - - - - 3,841,004 - NMF 1,165,182 NMF Total assets 15,474,490 12,571,248 23.1% 15,168,669 2.0% 13,166,862 10,554,058 24.8% 12,907,678 2.0% 3,841,004 2,415,485 59.0% 2,763,913 39.0% Client deposits and notes 6,762,071 5,294,462 27.7% 6,712,482 0.7% 7,296,110 5,622,023 29.8% 7,078,058 3.1% - - - - - Amounts due to credit institutions 2,521,291 3,133,422 -19.5% 3,155,839 -20.1% 2,642,427 2,662,910 -0.8% 2,778,338 -4.9% - 532,572 NMF 377,501 NMF Borrowings from DFI 1,191,605 1,376,864 -13.5% 1,624,347 -26.6% 1,191,605 1,143,408 4.2% 1,297,749 -8.2% - 233,456 NMF 326,598 NMF Short-term loans from NBG 729,244 1,005,404 -27.5% 793,528 -8.1% 729,244 1,005,404 -27.5% 793,528 -8.1% - - - - - Loans and deposits from commercial banks 600,442 751,154 -20.1% 737,964 -18.6% 721,578 514,098 40.4% 687,061 5.0% - 299,116 NMF 50,903 NMF Debt securities issued 1,524,600 1,157,082 31.8% 1,709,152 -10.8% 1,569,404 827,025 89.8% 1,386,412 13.2% - 335,773 NMF 357,442 NMF Liabilities of disposal group held for distribution 1,837,869 - NMF 516,663 NMF - - - - - 1,964,463 - - 619,026 217.3% Total liabilities 12,733,920 10,153,699 25.4% 12,436,299 2.4% 11,596,833 9,198,592 26.1% 11,354,976 2.1% 1,964,463 1,353,402 45.1% 1,584,245 24.0% Total equity 2,740,570 2,417,549 13.4% 2,732,370 0.3% 1,570,029 1,355,466 15.8% 1,552,702 1.1% 1,876,541 1,062,083 76.7% 1,179,668 59.1% 6NPL Coverage Ratio adjusted for IFRS 9 was 102.9% at 31 December 2017 7Detailed Investment Business financials, which is classified as Discontinued Operations in Bank of Georgia Group's 1Q18 consolidated financial statements, are presented in Discussion of Investment Business results on page 22 BANKING BUSINESS RATIOS 1Q18 1Q17 4Q17 ROAA 3.1% 3.1% 3.4% ROAE 25.9% 23.7% 27.8% Net Interest Margin 7.0% 7.4% 7.3% Loan Yield 13.9% 14.0% 14.3% Liquid assets yield 3.6% 3.3% 3.4% Cost of Funds 4.8% 4.6% 4.8% Cost of Client Deposits and Notes 3.4% 3.5% 3.5% Cost of Amounts Due to Credit Institutions 6.9% 6.3% 6.5% Cost of Debt Securities Issued 7.7% 6.0% 7.8% Cost / Income 37.0% 36.0% 38.3% NPLs to Gross Loans to Clients 3.1% 4.6% 3.8% NPL Coverage Ratio8 111.4% 87.1% 92.7% NPL Coverage Ratio, Adjusted for discounted value of collateral 147.2% 126.9% 130.6% Cost of Risk 2.1% 2.4% 2.1% NBG (Basel III) Tier I Capital Adequacy Ratio 12.4% n/a 12.4% NBG (Basel III) Total Capital Adequacy Ratio 17.3% n/a 17.9% 8NPL Coverage Ratio adjusted for IFRS 9 was 102.9% at 31 December 2017 DISCUSSION OF RESULTS Discussion of Banking Business Results The Group's Banking Business is primarily comprised of three segments. (1) Retail Banking operations in Georgia principally provides consumer loans, mortgage loans, overdrafts, credit cards and other credit facilities, funds transfer and settlement services, and handling customers' deposits for both individuals as well as legal entities. Retail Banking targets the emerging retail, mass retail and mass affluent segments, together with small and medium enterprises and micro businesses. (2) Corporate Investment Banking comprises Corporate Banking and Investment Management operations in Georgia. Corporate Banking principally provides loans and other credit facilities, funds transfers and settlement services, trade finance services, documentary operations support and handles saving and term deposits for corporate and institutional customers. The Investment Management business principally provides private banking services to high net worth clients. (3) BNB, comprising JSC Belarusky Narodny Bank, principally provides retail and corporate banking services to clients in Belarus. REVENUE GEL thousands, unless otherwise noted 1Q18 1Q17 Change y-o-y 4Q17 Change q-o-q Banking interest income 313,553 267,121 17.4% 312,950 0.2% Banking interest expense (133,430) (106,241) 25.6% (129,826) 2.8% Net banking interest income 180,123 160,880 12.0% 183,124 -1.6% Fee and commission income 51,213 43,702 17.2% 53,739 -4.7% Fee and commission expense (16,702) (13,509) 23.6% (17,001) -1.8% Net fee and commission income 34,511 30,193 14.3% 36,738 -6.1% Net banking foreign currency gain 16,015 19,700 -18.7% 27,464 -41.7% Net other banking income 5,744 3,016 90.5% 12,986 -55.8% Revenue 236,393 213,789 10.6% 260,312 -9.2% Net Interest Margin 7.0% 7.4% 7.3% Average interest earning assets 10,413,787 8,860,417 17.5% 10,008,953 4.0% Average interest bearing liabilities 11,230,932 9,412,122 19.3% 10,824,561 3.8% Average net loans and finance lease receivables, currency blended 7,749,210 6,638,473 16.7% 7,390,896 4.8% Average net loans and finance lease receivables, GEL 3,085,905 2,035,225 51.6% 2,818,150 9.5% Average net loans and finance lease receivables, FC 4,663,305 4,603,248 1.3% 4,572,746 2.0% Average client deposits and notes, currency blended 7,038,125 5,730,360 22.8% 6,891,147 2.1% Average client deposits and notes, GEL 2,315,919 1,408,778 64.4% 2,065,806 12.1% Average client deposits and notes, FC 4,722,206 4,321,582 9.3% 4,825,341 -2.1% Average liquid assets, currency blended 4,306,271 3,514,002 22.5% 4,279,369 0.6% Average liquid assets, GEL 1,804,602 1,363,185 32.4% 1,660,337 8.7% Average liquid assets, FC 2,501,669 2,150,817 16.3% 2,619,032 -4.5% Excess liquidity (NBG) 456,999 406,213 12.5% 289,942 57.6% Liquid assets yield, currency blended 3.6% 3.3% 3.4% Liquid assets yield, GEL 7.0% 7.3% 7.1% Liquid assets yield, FC 1.2% 0.7% 1.0% Loan yield, currency blended 13.9% 14.0% 14.3% Loan yield, GEL 21.1% 22.5% 21.3% Loan yield, FC 9.1% 10.3% 10.0% Cost of Funds, currency blended 4.8% 4.6% 4.8% Cost of Funds, GEL 7.0% 6.7% 7.0% Cost of Funds, FC 3.6% 3.8% 3.7% Cost / Income 37.0% 36.0% 38.3% Performance highlights § Strong revenue of GEL 236.4mln in 1Q18 (up 10.6% y-o-y). Y-o-y revenue growth was primarily driven by an increase in net banking interest income, which resulted from strong loan book growth. Additionally, net fee and commission income increased 14.3% y-o-y contributing to increase of revenues in 1Q18 y-o-y § Net banking interest income. Our net banking interest income was up 12.0% y-o-y in 1Q18. The y-o-y increase was primarily driven by the strong growth of our Retail Banking loan book, which experienced 33.3% y-o-y constant currency growth in 1Q18 § Net banking interest expense. Our net banking interest expense was up 25.6% y-o-y in 1Q18, primarily due to the issuance of GEL 500mln Lari denominated bonds in June 2017 and increased deposit generation both in our Retail and Corporate Investment Banking operations § Our NIM was 7.0% in 1Q18. 1Q18 NIM was down 40bps y-o-y due to the 10bps y-o-y decrease in loan yield and 20bps y-o-y increase in cost of funds. On a q-o-q basis, loan yield decreased by 40bps, while cost of funds remained flat, resulting in 30bps decline in 1Q18 NIM § Loan yield. Currency blended loan yield was 13.9% in 1Q18 (down 10bps y-o-y and down 40bps q-o-q). Both local and foreign currency loan yields decreased y-o-y and q-o-q, reflecting change in product mix, impact from seasonality and higher loan related prepayment fees in 4Q17. At the same time the overall loan yield was positively impacted by a continued shift towards high-yielding local currency denominated loans in the total loan portfolio mix § Liquid assets yield. Our liquid assets yield was 3.6% (up 30bps y-o-y and up 20bps q-o-q) in 1Q18. The foreign currency denominated liquid assets yield increased by 50bps y-o-y and 20bps q-o-q in 1Q18, as a result of the Federal Open Market Committee's decisions to raise interest rates, which triggered similar increases on interest rates paid by a) The National Bank of Georgia (the "NBG") on the Bank's obligatory reserves (foreign currency only) and b) correspondent banks on deposits placed by the Bank. This increase was partially offset by decline in local currency denominated liquid assets yield, which decreased by 30bps y-o-y and by 10bps q-o-q in 1Q18 § Cost of funds. Cost of funds stood at 4.8% in 1Q18 (up 20bps y-o-y and flat q-o-q). Despite the significant increase in cost of debt securities issued following the issuance of GEL 500mln 11.0% Lari denominated notes in 2Q17 (up 170bps y-o-y in 1Q18), cost of funds remained largely flat as a result of a decrease in the cost of client deposits and notes (down 10bps y-o-y and q-o-q) § Shift to the GEL denominated loan book and client deposits continued both in Retail Banking and Corporate Investment Banking. Retail client loan book in foreign currency accounted for 46.0% of the total RB loan book at 31 March 2018 (54.2% at 31 March 2017 and 48.8% at 31 December 2017), while retail client foreign currency deposits comprised 71.0% of total RB deposits at 31 March 2018 (74.3% at 31 March 2017 and 72.1% at 31 December 2017). At 31 March 2018, 80.7% of CIB's loan book was denominated in foreign currency (82.1% at 31 March 2017 and 83.1% at 31 December 2017), while 60.2% of CIB deposits were denominated in foreign currency (69.4% at 31 March 2017 and 63.1% at 31 December 2017) § Net Loans to Customer Funds and DFI ratio. Customer funds (client deposits and notes) increased by 29.8% y-o-y and 3.1% q-o-q to GEL 7,296.1mln driven by strong deposit generation in both the Retail and Corporate Investment Banking operations. Retail banking client deposits and notes grew by 38.0% y-o-y and 1.1% q-o-q to GEL 3,304.3mln, while CIB client deposits grew by 25.0% y-o-y and 5.9% q-o-q to GEL 3,661.7mln. Our borrowings from DFIs also increased by 4.2% y-o-y to GEL 1,191.6mln. As a result, our Net Loans to Customer Funds and DFI ratio, which is closely monitored by management, remained strong at 91.8% (down from 95.6% at 31 March 2017 and 92.4% at 31 December 2017) despite the strong growth of the loan book § Net fee and commission income. Net fee and commission income performance y-o-y is mainly driven by the strong performance in our settlement operations supported by the success of our Express banking franchise § Net banking foreign currency gain. The net banking foreign currency gain was down 18.7% y-o-y in 1Q18, primarily driven by lower volatility of the GEL exchange rate during the first quarter of 2018 § Net other banking income. Net other banking income increased y-o-y to GEL 5.7mln in 1Q18, largely driven by GEL 4.4mln net gains on derivative financial instruments recorded in 1Q18. Q-o-q decrease was primarily attributable to the GEL 7.3mln revaluation gain from investment properties recorded in 4Q17 OPERATING INCOME BEFORE NON-RECURRING ITEMS; COST OF CREDIT RISK; PROFIT FOR THE PERIOD GEL thousands, unless otherwise noted 1Q18 1Q17 Change y-o-y 4Q17 Change q-o-q Salaries and other employee benefits (49,453) (44,279) 11.7% (55,789) -11.4% Administrative expenses (25,633) (22,519) 13.8% (32,245) -20.5% Banking depreciation and amortisation (11,522) (9,525) 21.0% (10,514) 9.6% Other operating expenses (771) (731) 5.5% (1,194) -35.4% Operating expenses (87,379) (77,054) 13.4% (99,742) -12.4% Profit from associate 319 514 -37.9% 255 25.1% Operating income before cost of credit risk 149,333 137,249 8.8% 160,825 -7.1% Impairment charge on loans to customers (41,006) (41,341) -0.8% (41,911) -2.2% Impairment charge on finance lease receivables 13 (139) NMF 492 -97.4% Impairment charge on other assets and provisions 2,850 (6,540) NMF (1,009) NMF Cost of credit risk (38,143) (48,020) -20.6% (42,428) -10.1% Profit before non-recurring items and income tax 111,190 89,229 24.6% 118,397 -6.1% Net non-recurring items (2,948) (1,695) 73.9% (213) NMF Profit before income tax 108,242 87,534 23.7% 118,184 -8.4% Income tax expense (9,058) (4,407) 105.5% (11,050) -18.0% Profit 99,184 83,127 19.3% 107,134 -7.4% § Operating expenses amounted to GEL 87.4mln in 1Q18 (up 13.4% y-o-y and down 12.4% q-o-q). Operating leverage deteriorated by 2.8 percentage points y-o-y and improved by 3.2 percentage points q-o-q in 1Q18. Higher salaries and employee benefits in 1Q18 compared to a year ago mainly reflected the strong organic growth of Retail Banking operations. At the same time, 13.8% y-o-y increase in administrative expenses in 1Q18 was primarily driven by increased personnel training costs. The 20.5% q-o-q decrease in administrative expenses reflected higher seasonal advertising and marketing activities in 4Q17 § Cost of risk ratio. The cost of risk ratio was 2.1% in 1Q18, down 30bps y-o-y and flat q-o-q. RB's 1Q18 cost of risk ratio was down 80bps y-o-y and up 80bps q-o-q, while CIB's cost of risk ratio was up 100bps y-o-y and down 190bps q-o-q § Quality of our loan book remains strong in 1Q18 as evidenced by following closely monitored metrics: GEL thousands, unless otherwise noted 1Q18 1Q17 Change y-o-y 4Q17 Change q-o-q Non-performing loans NPLs 247,335 311,940 -20.7% 301,268 -17.9% NPLs to gross loans 3.1% 4.6% 3.8% NPLs to gross loans, RB 1.3% 1.7% 1.3% NPLs to gross loans, CIB 5.3% 8.2% 7.5% NPL coverage ratio 111.4% 87.1% 92.7% NPL coverage ratio adjusted for the discounted value of collateral 147.2% 126.9% 130.6% Past due dates Retail loans - 15 days past due rate 1.2% 1.4% 0.9% Mortgage loans - 15 days past due rate 0.8% 0.9% 0.6% § BNB - the Group's banking subsidiary in Belarus - generated a profit of GEL 2.3mln in 1Q18 (up from GEL 0.7mln in 1Q17and down 36.4% q-o-q); BNB's earnings were positively impacted by decreased levels of cost of risk in 1Q18 compared to the first quarter of last year. While Belarus experienced weak macro-economic conditions in 2016 and 1Q17, the economy started to show signs of stabilisation during 2017. As a result, BNB's cost of credit risk significantly improved and was down 87.3% y-o-y in 1Q18 § BNB's loan book reached GEL 377.7mln at 31 March 2018, up 12.6% y-o-y, mostly reflecting an increase in corporate and consumer loans. Client deposits were GEL 288.3mln at 31 March 2018, up 22.2% y-o-y. This increase was primarily attributable to the agreement signed with BelSwissBank in June 2017, which allowed BNB to manage and service current and term deposit accounts and card operations of BelSwissBank's customers § BNB continues to remain strongly capitalised, with Capital Adequacy Ratios well above the requirements of its regulating Central Bank. At 31 March 2018, total CAR was 14.8%, above the 10% minimum requirement of the National Bank of the Republic of Belarus ("NBRB"), while Tier I CAR was 9.9%, above NBRB's 6% minimum requirement. Return on Average Equity ("ROAE") was 12.3% in 1Q18 (3.4% in 1Q17and 18.5% in 4Q17). Strong capitalisation and improved profitability allowed BNB to distribute dividend in the amount of GEL 1.2mln in 1Q18 (GEL 1.2mln in 2017, the first capital return to the Bank since the BNB acquisition in 2008) § As a result, the Banking Business profit totalled GEL 99.2mln in 1Q18 (up 19.3% y-o-y and down 7.4% q-o-q), while ROAE increased to 25.9% in 1Q18 (23.7% in 1Q17 and 27.8% in 4Q17) BALANCE SHEET HIGHLIGHTS GEL thousands, unless otherwise noted Mar-18 Mar-17 Change y-o-y Dec-17 Change q-o-q Liquid assets 4,514,326 3,398,385 32.8% 4,346,509 3.9% Liquid assets, GEL 1,740,858 1,298,701 34.0% 1,791,708 -2.8% Liquid assets, FC 2,773,468 2,099,684 32.1% 2,554,801 8.6% Net loans and finance lease receivables 7,792,108 6,470,771 20.4% 7,741,420 0.7% Net loans and finance lease receivables, GEL 3,215,412 2,170,530 48.1% 2,968,832 8.3% Net loans and finance lease receivables, FC 4,576,696 4,300,241 6.4% 4,772,588 -4.1% Client deposits and notes 7,296,110 5,622,023 29.8% 7,078,058 3.1% Amounts due to credit institutions 2,642,427 2,662,910 -0.8% 2,778,338 -4.9% Borrowings from DFIs 1,191,605 1,143,408 4.2% 1,297,749 -8.2% Short-term loans from central banks 729,244 1,005,404 -27.5% 793,528 -8.1% Loans and deposits from commercial banks 721,578 514,098 40.4% 687,061 5.0% Debt securities issued 1,569,404 827,025 89.8% 1,386,412 13.2% Liquidity and CAR ratios Net loans / client deposits and notes 106.8% 115.1% 109.4% Net loans / client deposits and notes + DFIs 91.8% 95.6% 92.4% Liquid assets as percent of total assets 34.3% 32.2% 33.7% Liquid assets as percent of total liabilities 38.9% 36.9% 38.3% NBG liquidity ratio 36.5% 37.4% 34.4% Excess liquidity (NBG) 456,999 406,213 12.5% 289,942 57.6% NBG (Basel III) Tier I Capital Adequacy Ratio 12.4% n/a 12.4% NBG (Basel III) Total Capital Adequacy Ratio 17.3% n/a 17.9% Our balance sheet remains highly liquid (NBG Liquidity ratio of 36.5%) and strongly capitalised (NBG Basel III Tier I ratio of 12.4%) with a well-diversified funding base (Client Deposits and notes to Total Liabilities of 62.9%). § Liquidity. Liquid assets increased to GEL 4,514.3mln at 31 March 2018, up 32.8% y-o-y and up 3.9% q-o-q, largely driven by proceeds from the GEL 500mln Lari denominated bonds in June 2017, increase in local currency bonds, which are used by the Bank as collateral for short-term borrowings from the NBG, and additional proceeds as a result of the pushdown of $350mln Eurobonds of JSC BGEO Group in March 2018. Management successfully continued to deploy excess liquidity, accumulated as a result of these proceeds. As such, the NBG liquidity ratio stood at 36.5% at 31 March 2018 (37.4% at 31 March 2017 and 34.4% at 31 December 2017), above the regulatory minimum requirement of 30.0%, while the NBG liquidity coverage ratio was 135.2% at 31 March 2018 (112.4% at 31 December 2017), above the 100% minimum requirement level § Diversified funding base. Debt securities issued grew by 89.8% y-o-y and by 13.2% q-o-q. The y-o-y increase was driven by the issuance of GEL 500mln Lari denominated bonds in June 2017, which positively contributed to GEL liquidity, allowing us to significantly reduce short-term borrowings from the NBG (down 27.5% y-o-y). On q-o-q basis, the 13.2% increase was due to above mentioned pushdown of $350mln Eurobonds from JSC BGEO Group in March 2018 § Loan book. Our net loan book and finance lease receivables reached GEL 7,792.1mln at 31 March 2018, up 20.4% y-o-y and up 0.7% q-o-q. As of 31 December 2017, retail book represented 69.3% of the total loan portfolio (62.6% at 31 March 2017 and 68.0% at 31 December 2017). While both local and foreign currency portfolios experienced y-o-y growth, the local currency loan portfolio demonstrated an outstanding increase of 48.1% y-o-y and 8.3% q-o-q, partially driven by the Government's de-dollarisation initiatives and our goal to increase the share of local currency loans in our portfolio § IFRS 9 implementation delivered - no impact on capital adequacy ratios. The Group has completed its IFRS 9 implementation programme and adopted IFRS 9, Financial Instruments from 1 January 2018. The Bank recognised the impact from IFRS 9 adoption of approximately GEL 31.5mln, gross of income tax (GEL 28.6mln, net of income tax), as a reduction to shareholders' equity at the transition date on 1 January 2018. As allowed by IFRS 9, the Group did not restate prior-period data. IFRS 9 does not have any impact on regulatory capital and capital adequacy ratios. Through-the-cycle cost of risk is expected to remain unchanged § Amendments to Capital Adequacy requirements. To transition to Basel III, National Bank of Georgia introduced new capital adequacy requirements in December 2017. According to the newly introduced methodology, at 31 March 2018 the Bank of Georgia's Basel III Tier 1 and Total Capital Adequacy ratios stood at 12.4% and 17.3%, respectively, as compared to minimum required level of 10.2% and 14.4%, respectively (12.4% and 17.9%, respectively, at 31 December 2017, above the minimum required level of 9.9% and 12.4%, respectively) § Over the last few months, the National Bank of Georgia has been working with banking sector participants to create a greater focus on lending to corporate and SME clients, and in the mortgage sector as opposed to the unsecured consumer sector. In May 2018, NBG introduced temporary limits on retail loans disbursed with no formal proof of income whilst consultations with commercial banks take place towards the introduction of Retail Lending Guidelines, expected in early 2019. As a result of these policy changes, we anticipate stronger mortgage and SME lending growth, than unsecured consumer lending Discussion of Banking Business Segment Results Retail Banking (RB) Retail Banking provides consumer loans, mortgage loans, overdrafts, credit card facilities and other credit facilities as well as funds transfer and settlement services and the handling of customer deposits for both individuals and legal entities (SME and micro businesses only). RB is itself represented by the following four sub-segments: (1) the emerging retail segment (through our Express brand), (2) retail mass market segment; (3) SME and micro businesses - "MSME" (through our Bank of Georgia brand), and (4) the mass affluent segment (through our Solo brand). GEL thousands, unless otherwise noted 1Q18 1Q17 Change y-o-y 4Q17 Change q-o-q INCOME STATEMENT HIGHLIGHTS Net banking interest income 135,327 111,511 21.4% 134,517 0.6% Net fee and commission income 26,141 22,245 17.5% 28,511 -8.3% Net banking foreign currency gain 6,111 6,492 -5.9% 8,407 -27.3% Net other banking income 3,103 982 NMF 4,531 -31.5% Revenue 170,682 141,230 20.9% 175,966 -3.0% Salaries and other employee benefits (32,112) (27,865) 15.2% (35,778) -10.2% Administrative expenses (19,541) (16,835) 16.1% (22,461) -13.0% Banking depreciation and amortisation (9,902) (7,991) 23.9% (9,020) 9.8% Other operating expenses (503) (989) -49.1% (843) -40.3% Operating expenses (62,058) (53,680) 15.6% (68,102) -8.9% Profit from associate 319 514 -37.9% 255 25.1% Operating income before cost of credit risk 108,943 88,064 23.7% 108,119 0.8% Cost of credit risk (32,783) (33,173) -1.2% (23,122) 41.8% Profit before non-recurring items and income tax 76,160 54,891 38.7% 84,997 -10.4% Net non-recurring items (1,975) (482) NMF (74) NMF Profit before income tax 74,185 54,409 36.3% 84,923 -12.6% Income tax expense (5,836) (3,592) 62.5% (7,335) -20.4% Profit 68,349 50,817 34.5% 77,588 -11.9% BALANCE SHEET HIGHLIGHTS Net loans, Currency Blended 5,155,254 3,891,063 32.5% 5,044,372 2.2% Net loans, GEL 2,782,812 1,783,345 56.0% 2,582,677 7.7% Net loans, FC 2,372,442 2,107,718 12.6% 2,461,695 -3.6% Client deposits, Currency Blended 3,304,319 2,393,754 38.0% 3,267,276 1.1% Client deposits, GEL 959,084 616,383 55.6% 910,878 5.3% Client deposits, FC 2,345,235 1,777,371 31.9% 2,356,398 -0.5% of which: Time deposits, Currency Blended 1,838,699 1,426,012 28.9% 1,829,433 0.5% Time deposits, GEL 412,140 255,955 61.0% 361,775 13.9% Time deposits, FC 1,426,559 1,170,057 21.9% 1,467,658 -2.8% Current accounts and demand deposits, Currency Blended 1,465,620 967,742 51.4% 1,437,843 1.9% Current accounts and demand deposits, GEL 546,944 360,428 51.7% 549,103 -0.4% Current accounts and demand deposits, FC 918,676 607,314 51.3% 888,740 3.4% KEY RATIOS ROAE Retail Banking 31.5% 27.8% 36.6% Net interest margin, currency blended 8.3% 8.8% 8.4% Cost of risk 2.6% 3.4% 1.8% Cost of funds, currency blended 5.8% 5.3% 5.7% Loan yield, currency blended 15.9% 15.9% 15.9% Loan yield, GEL 22.4% 24.9% 22.7% Loan yield, FC 8.5% 9.4% 8.8% Cost of deposits, currency blended 2.8% 3.0% 2.8% Cost of deposits, GEL 4.8% 4.4% 4.5% Cost of deposits, FC 2.1% 2.6% 2.2% Cost of time deposits, currency blended 4.3% 4.4% 4.2% Cost of time deposits, GEL 8.9% 8.7% 8.9% Cost of time deposits, FC 3.0% 3.6% 3.1% Current accounts and demand deposits, currency blended 1.0% 0.9% 0.9% Current accounts and demand deposits, GEL 1.7% 1.4% 1.5% Current accounts and demand deposits, FC 0.6% 0.6% 0.5% Cost / income ratio 36.4% 37.6% 38.7% Performance highlights § Retail Banking delivered another strong quarterly result across all of its segments and generated total revenues of GEL 170.7mln in 1Q18 (up 20.9% y-o-y) § RB's net banking interest income grew by 21.4% y-o-y and 0.6% q-o-q in 1Q18 on the back of the strong growth in the Retail Banking loan portfolio. Record quarterly net banking interest income also reflects the benefits from the ongoing growth of the local currency loan portfolio, which generated 13.9ppts higher yield than the foreign currency loan portfolio in 1Q18 § The Retail Banking net loan book reached GEL 5,155.3mln in 1Q18, up 32.5% y-o-y and up 2.2% q-o-q. Our local currency denominated loan book grew at a faster pace (up 56.0% y-o-y and up 7.7% q-o-q) than the foreign currency denominated loan book (up 12.6% y-o-y and down 3.6% q-o-q). As a result, the local currency denominated loan book accounted for 54.0% of the total Retail Banking loan book at 31 March 2018, up from 45.8% at 31 March 2017 and 51.2% at 31 December 2017 § The loan book growth was a product of continued strong loan origination levels delivered across all major Retail Banking segments: Retail Banking loan book by products GEL million, unless otherwise noted 1Q18 1Q17 Change y-o-y 4Q17 Change q-o-q Loan Originations Consumer loans 364.2 302.4 20.4% 383.1 -4.9% Mortgage loans 303.3 213.0 42.4% 359.3 -15.6% Micro loans 283.6 236.5 20.0% 309.5 -8.3% SME loans 130.8 118.9 10.0% 189.9 -31.1% POS loans 50.1 42.7 17.3% 79.7 -37.1% Outstanding Balance Consumer loans 1,292.1 944.0 36.9% 1,242.0 4.0% Mortgage loans 1,763.3 1,187.0 48.5% 1,706.1 3.3% Micro loans 1,077.2 872.8 23.4% 1,030.8 4.5% SME loans 598.1 463.4 29.1% 606.5 -1.4% POS loans 120.2 108.3 11.0% 130.8 -8.1% § Retail Banking client deposits increased to GEL 3,304.3mln, up 38.0% y-o-y and up 1.1% q-o-q, despite a 20bps y-o-y decrease in the cost of deposits in 1Q18. The dollarisation level of our deposits decreased to 71.0% at 31 March 2018 from 74.3% at 31 March 2017 and from 72.1% at 31 December 2017. This is in line with the current decreasing trend of cost on foreign currency denominated deposits (down 50 bps y-o-y and down 10bps q-o-q in 1Q18) and an increasing trend of cost on local currency denominated deposits (up 40bps y-o-y and up 30bps q-o-q). The spread between the cost of RB's client deposits in GEL and foreign currency widened to 2.7ppts during 1Q18 (GEL: 4.8%; FC: 2.1%) compared to 1.8ppts in 1Q17 (GEL: 4.4%; FC: 2.6%) and 2.3ppts in 4Q17 (GEL: 4.5%; FC: 2.2%). Local currency denominated deposits increased at a faster pace to GEL 959.1mln (up 55.6% y-o-y and up 5.3% q-o-q), as compared to foreign currency denominated deposits that grew to GEL 2,345.2mln (up 31.9% y-o-y and largely flat q-o-q) § Retail Banking NIM was 8.3% in 1Q18, down 50bps y-o-y and down 10bps q-o-q. The lower NIM y-o-y and q-o-q in 1Q18 was attributable to flat loan yields, while the cost of funds grew by 50bps y-o-y and 10bps q-o-q, primarily due to increased local currency funding costs § Strong y-o-y growth in Retail Banking net fee and commission income. The 17.5% y-o-y increase in fee and commission income in 1Q18 was driven by an increase in settlement operations and the strong underlying growth in Solo and MSME platforms § RB cost of risk improved y-o-y in 1Q18. RB cost of credit risk was GEL 32.8mln in 1Q18 (down 1.2% y-o-y). The cost of risk ratio was 2.6% in 1Q18, down from 3.4% in 1Q17 and up from 1.8% in 4Q17. The q-o-q increase in cost of risk is due to seasonal factors § The number of Retail Banking clients reached c.2.4mln, up 7.7% y-o-y and up 1.8% q-o-q, while the number of total cards outstanding amounted to 2,246,396, up 7.0% y-o-y and up 0.9% q-o-q § Our Retail Banking business continues to deliver strong growth as we further develop our strategy, as demonstrated by the following performance indicators: Retail Banking performance indicators Volume information in GEL thousands 1Q18 1Q17 Change y-o-y 4Q17 Change q-o-q Retail Banking Customers Number of new customers 63,621 46,270 37.5% 65,712 -3.2% Number of customers 2,356,294 2,187,499 7.7% 2,315,038 1.8% Cards Number of Cards issued 246,138 231,528 6.3% 324,974 -24.3% Number of Cards outstanding 2,246,396 2,099,488 7.0% 2,227,000 0.9% Express Pay terminals Number of Express Pay terminals 2,825 2,723 3.7% 2,842 -0.6% Number of transactions via Express Pay terminals 25,835,081 25,159,733 2.7% 27,211,578 -5.1% Volume of transactions via Express Pay terminals 1,496,169 968,802 54.4% 1,478,216 1.2% POS terminals Number of Desks 9,300 8,814 5.5% 9,934 -6.4% Number of Contracted Merchants 5,112 4,740 7.8% 5,341 -4.3% Number of POS terminals 12,571 10,774 16.7% 13,291 -5.4% Number of transactions via POS terminals 13,206,872 9,741,855 35.6% 12,874,756 2.6% Volume of transactions via POS terminals 395,099 266,105 48.5% 423,565 -6.7% Internet Banking Number of Active Users 238,618 167,769 42.2% 219,496 8.7% Number of transactions via Internet Bank 1,487,062 1,719,348 -13.5% 1,513,437 -1.7% Volume of transactions via Internet Bank 427,014 321,649 32.8% 425,930 0.3% Mobile Banking Number of Active Users 207,485 83,726 147.8% 177,243 17.1% Number of transactions via Mobile Bank 2,817,807 979,894 187.6% 2,323,573 21.3% Volume of transactions via Mobile Bank 317,381 94,371 236.3% 278,856 13.8% - Growth in the client base was due to the increased offering of cost-effective remote channels. The strong increase to 2,356,294 customers in 1Q18 (up 7.7% y-o-y and up 1.8% q-o-q) reflects the sustained growth in our client base over recent periods and was one of the drivers of the increase in our Retail Banking net fee and commission income - The number of outstanding cards increased by 7.0% y-o-y in 1Q18. The increase reflected the launch of a loyalty programme Plus+ in July 2017, which is part of RB's customer-centric approach and our efforts to increase the Mass Retail segment's product to client ratio from current 1.8 to 3.0. We had 362,472 active Plus+ cards outstanding as at 31 March 2018 - The utilisation of Express Pay terminals continued to grow in 1Q18. The 1Q18 volume of transactions increased to GEL 1,496.2mln (up 54.4% y-o-y and up 1.2% q-o-q), while the number of transactions increased by 2.7% y-o-y, but down q-o-q. The decline in number of transactions was primarily driven by the switch of customers to digital channels, such as internet and mobile bank. The fees charged to clients for transactions executed through express pay terminals amounted to GEL 5.2mln in 1Q18, largely flat y-o-y and q-o-q - Digital penetration growth. For mobile banking application, the number of transactions and the volume of transactions continue to show outstanding growth, primarily due to the introduction of our new mobile banking application in May 2017. The fully-transformed, user-friendly, multi-feature mobile banking application (mBank) continues to gain popularity. Since its launch on 29 May 2017, and over the course of the following ten months, approximately 332,387 downloads were made by the Bank's customers, while the previous application had less than 120,000 downloads since its launch. During the same period approximately 6.5 million online transactions were performed using the new application - Significant growth in loans issued and deposits opened through Internet and Mobile Bank. In 2017, we started actively offering loans and deposit products to our customers through Internet Bank. In 1Q18, 9,088 loans were issued with a total value of GEL 14.3mln, and 2,324 deposits were opened with a total value of GEL 6.5mln through Internet Bank (565 loans with total value of GEL 1.6mln and 1,762 deposits with total value of GEL 2.7mln in 1Q17). Starting from 2018, our customers are able to take a loan via mBank as well. 5,111 loans were issued with total value of GEL 6.9mln using the mobile banking application during 1Q18 § Solo, our premium banking brand, continues its strong growth momentum and investment in its lifestyle brand. The number of Solo clients reached 35,803 at 31 March 2018 (21,657 at 31 March 2017 and 32,104 at 31 December 2017), up 332.3% since its re-launch in April 2015. We are on track to achieving our target of 40,000 Solo clients by the end of 2018. We have now launched 12 Solo lounges, of which 9 are located in Tbilisi, the capital of Georgia, and 3 in major regional cities of Georgia. In 1Q18, annualised profit per Solo client was GEL 1,583 compared to a profit of GEL 74 and GEL 67 per Express and mass retail clients, respectively. Product to client ratio for Solo segment was 5.9, compared to 3.5 and 1.8 for Express and mass retail clients, respectively. While Solo clients currently represent 1.5% of our total retail client base, they contributed 24.4% to our retail loan book, 38.2% to our retail deposits, 13.6% and 20.8% to our net retail interest income and to our net retail fee and commission income, respectively, in 1Q18. The fee and commission income from the Solo segment increased y-o-y from GEL 2.6mln in 1Q17 to GEL 4.5mln in 1Q18. Solo Club, launched in 2Q17, a membership group within Solo, which offers exclusive access to Solo products and offers ahead of other Solo clients at a higher fee, continues to increase its client base. At 31 March 2018, Solo Club had 2,852 members, up 51.5% q-o-q § MSME banking continued to deliver solid growth. The number of MSME segment clients reached 174,284 at 31 March 2018, up 33.6% y-o-y and up 5.1% q-o-q. MSME's loan portfolio was GEL 1,780.3mln at 31 March 2018 (up 33.2% y-o-y and up 2.4% q-o-q). MSME segment generated revenue of GEL 35.4mln in 1Q18 (up 28.3% y-o-y and down 3.9% q-o-q) § As a result, Retail Banking profit reached GEL 68.3mln in 1Q18 (up 34.5% y-o-y and down 11.9% q-o-q). Retail Banking continued to deliver an outstanding ROAE , which reached 31.5% in 1Q18 (27.8% in 1Q17 and 36.6% in 4Q17) Corporate Investment Banking (CIB) CIB provides (1) loans and other credit facilities to Georgia's large corporate clients and other legal entities, excluding SME and micro businesses; (2) services such as fund transfers and settlements services, currency conversion operations, trade finance services and documentary operations as well as handling savings and term deposits; (3) finance lease facilities through the Bank's leasing operations arm, the Georgian Leasing Company; (4) brokerage services through Galt & Taggart; and (5) Wealth Management private banking services to high-net-worth individuals and offers investment management products internationally through representative offices in London, Budapest, Istanbul, Tel Aviv and Limassol. GEL thousands, unless otherwise noted 1Q18 1Q17 Change y-o-y 4Q17 Change q-o-q INCOME STATEMENT HIGHLIGHTS Net banking interest income 38,232 37,949 0.7% 42,539 -10.1% Net fee and commission income 6,198 5,666 9.4% 5,859 5.8% Net banking foreign currency gain 6,644 11,429 -41.9% 15,585 -57.4% Net other banking income 2,798 2,259 23.9% 7,710 -63.7% Revenue 53,872 57,303 -6.0% 71,693 -24.9% Salaries and other employee benefits (12,595) (12,346) 2.0% (15,271) -17.5% Administrative expenses (3,459) (3,535) -2.1% (5,439) -36.4% Banking depreciation and amortisation (1,309) (1,217) 7.6% (1,316) -0.5% Other operating expenses (144) (157) -8.3% (228) -36.8% Operating expenses (17,507) (17,255) 1.5% (22,254) -21.3% Operating income before cost of credit risk 36,365 40,048 -9.2% 49,439 -26.4% Cost of credit risk (4,643) (8,699) -46.6% (18,788) -75.3% Profit before non-recurring items and income tax 31,722 31,349 1.2% 30,651 3.5% Net non-recurring items (272) (1,155) -76.5% (134) 103.0% Profit before income tax 31,450 30,194 4.2% 30,517 3.1% Income tax expense (2,444) (1,912) 27.8% (2,840) -13.9% Profit 29,006 28,282 2.6% 27,677 4.8% BALANCE SHEET HIGHLIGHTS Net loans and finance lease receivables, Currency Blended 2,222,902 2,226,884 -0.2% 2,260,107 -1.6% Net loans and finance lease receivables, GEL 429,126 398,105 7.8% 383,058 12.0% Net loans and finance lease receivables, FC 1,793,776 1,828,779 -1.9% 1,877,049 -4.4% Client deposits, Currency Blended 3,661,710 2,929,377 25.0% 3,457,331 5.9% Client deposits, GEL 1,457,437 897,239 62.4% 1,276,401 14.2% Client deposits, FC 2,204,273 2,032,138 8.5% 2,180,930 1.1% Time deposits, Currency Blended 1,351,490 1,136,852 18.9% 1,297,984 4.1% Time deposits, GEL 569,850 138,404 311.7% 470,288 21.2% Time deposits, FC 781,640 998,448 -21.7% 827,696 -5.6% Current accounts and demand deposits, Currency Blended 2,310,220 1,792,525 28.9% 2,159,347 7.0% Current accounts and demand deposits, GEL 887,587 758,835 17.0% 806,113 10.1% Current accounts and demand deposits, FC 1,422,633 1,033,690 37.6% 1,353,234 5.1% Letters of credit and guarantees, standalone 605,778 506,433 19.6% 644,750 -6.0% Assets under management 1,835,873 1,551,829 18.3% 1,857,495 -1.2% RATIOS ROAE, Corporate Investment Banking 19.7% 18.6% 18.1% Net interest margin, currency blended 3.2% 3.4% 3.5% Cost of risk 1.3% 0.3% 3.2% Cost of funds, currency blended 4.4% 5.0% 4.3% Loan yield, currency blended 9.9% 10.7% 11.2% Loan yield, GEL 12.8% 12.5% 12.3% Loan yield, FC 9.4% 10.3% 11.0% Cost of deposits, currency blended 3.9% 3.9% 4.0% Cost of deposits, GEL 6.1% 6.6% 6.6% Cost of deposits, FC 2.5% 2.9% 2.5% Cost of time deposits, currency blended 5.7% 5.6% 6.0% Cost of time deposits, GEL 7.6% 9.6% 8.0% Cost of time deposits, FC 4.6% 5.1% 4.8% Current accounts and demand deposits, currency blended 2.7% 2.8% 2.8% Current accounts and demand deposits, GEL 5.2% 6.0% 5.7% Current accounts and demand deposits, FC 1.2% 0.9% 1.2% Cost / income ratio 32.5% 30.1% 31.0% Concentration of top ten clients 10.3% 11.3% 10.7% Off-balance sheet item Performance highlights § CIB continued growth in 1Q18 after delivering on the targets of loan portfolio risk de-concentration initiatives in 3Q17. Net loan book reached GEL 2,222.9mln at 31 March 2018, up 0.8% y-o-y and up 4.2% q-o-q on a constant currency basis. The concentration of the top 10 CIB clients further decreased to 10.3% at 31 March 2018, down from 11.3% at 31 March 2017 and 10.7% at 31 December 2017 § CIB's net banking interest income was flat y-o-y and decreased by 10.1% q-o-q in 1Q18, driven by NIM of 3.2%, down 20bps y-o-y and down 30bps q-o-q. Currency blended loan yield decreased by 80bps y-o-y, which was partially offset by 60bps decrease in cost of funds. The q-o-q decrease in NIM was a result of the lower foreign currency denominated loan yields, on the back of our new EUR denominated loan origination, and higher loan related prepayment fees booked in 4Q17. These were partially offset by increases in the local currency loan yield and liquid assets yield q-o-q § CIB's net fee and commission income reached GEL 6.2mln in 1Q18, up 9.4% y-o-y and up 5.8% q-o-q. The increase was largely driven by higher placement and advisory fees generated by our brokerage arm Galt & Taggart in 1Q18 § In 1Q18, dollarisation of our CIB deposits decreased to 60.2% as at 31 March 2018 from 69.4% a year ago, which was partially due to the State Treasury of Georgia's decision to place part of their GEL funds on deposits with local commercial banks in 3Q17. Another driver of GEL denominated deposits increase was the decrease in the interest rates on foreign currency deposits (2.5% in 1Q18, down from 2.9% in 1Q17). Consequently, total deposits amounted to GEL 3,661.7mln, up 25.0% y-o-y and up 5.9% q-o-q. On a constant currency basis, total CIB deposits were up 26.0% y-o-y and up 10.6% q-o-q § Net banking foreign currency gain. CIB's net banking foreign currency gain was GEL 6.6mln in 1Q18, down 41.9% y-o-y, primarily driven by lower volatility of the GEL exchange rate during the first quarter of 2018 § Net other banking income. Net other banking income increased y-o-y to GEL 2.8mln in 1Q18. The y-o-y increase was mostly due to net gains from derivative financial instruments recorded in 1Q18. On q-o-q basis, net other banking income decreased by 63.7%, largely driven by revaluation gain of investment properties recorded in 4Q17, partially offset by higher net gains from derivative financial instruments in 1Q18 § Cost of credit risk. Cost of credit risk improved significantly to 1.3% in 1Q18 (down 190bps q-o-q), primarily driven by overall improvement in the CIB loan portfolio quality, following the successful risk de-concentration and loan portfolio repositioning initiatives last year § As a result, Corporate Investment Banking profit was GEL 29.0mln in 1Q18 (up 2.6% y-o-y and up 4.8% q-o-q) and CIB ROAE reached 19.7% in 1Q18 compared to 18.6% a year ago and 18.1% in 4Q17 Performance highlights of wealth management operations § The AUM of the Investment Management segment increased to GEL 1,835.9mln in 1Q18, up 18.3% y-o-y and largely flat q-o-q. This includes a) deposits of Wealth Management franchise clients, b) assets held at Bank of Georgia Custody, c) Galt & Taggart brokerage client assets, and d) Global certificates of deposit held by Wealth Management clients. The y-o-y increase in AUM reflected higher bond issuance activity by Galt & Taggart § Wealth Management deposits were GEL 1,057.8mln in 1Q18, up 0.9% y-o-y and up 1.8% q-o-q on a constant currency basis, growing at a compound annual growth rate (CAGR) of 11.5% over the last five-year period. The cost of deposits stood at 3.5% in 1Q18, down 60bps y-o-y and flat q-o-q. Wealth Management deposit balances were negatively impacted by clients switching from deposits to local bonds, as Galt & Taggart has offered a number of local bond issuances, yielding higher rates than deposits § We served 1,438 wealth management clients from 74 countries as of 31 March 2018, compared to 1,385 clients from 68 countries as of 31 March 2017 and 1,434 clients from 75 countries as of 31 December 2017 § Galt & Taggart, which brings under one brand corporate advisory, debt and equity capital markets research and brokerage services, continues to develop local capital markets in Georgia § During 1Q18 Galt & Taggart acted as a: - co-manager of Georgia Capital's inaugural US$ 300mln international bond issuance due in 2024, in March 2018 - lead manager for Black Sea Trade and Development Bank, facilitating a public placement of GEL 75mln local bonds in March 2018 § In February 2018 Global Finance Magazine named Galt & Taggart as the Best Investment Bank in Georgia for the fourth consecutive year Discussion of Investment Business Results The Group's investment business (the "Investment Business" or Georgia Capital 9") is primarily comprised of six portfolio investments: Utility & Energy Business (GGU), Real Estate Business (m2), Property and Casualty Insurance Business (Aldagi), Beverage Business (Teliani), Healthcare Business (GHG) and Banking Business10 (BoG). Given the expectation, in line with Georgia Capital's strategy, that it is highly probable Georgia Capital will own less than a 50% stake in its healthcare business, GHG, at the end of 201811and in line with IFRS, Georgia Capital continues to classify GHG as a "disposal group held for sale" in its 1Q18 balance sheet and GHG's results of operations are reported under the "discontinued operations" line as a single amount in the Georgia Capital's consolidated income statement. Assets and liabilities of GHG are also presented separately in the Georgia Capital's consolidated balance sheet as of 31 March 2018 under "assets of disposal group held for sale" and "liabilities of disposal group held for sale" lines. INCOME STATEMENT GEL thousands, unless otherwise noted 1Q18 1Q17 Change y-o-y 4Q17 Change q-o-q Gross utility and energy profit 20,850 17,527 19.0% 22,869 -8.8% Gross insurance profit 6,852 6,890 -0.6% 6,305 8.7% Gross real estate profit 3,937 2,589 52.1% 5,773 -31.8% Gross beverage profit 4,471 2,317 93.0% 7,109 -37.1% Other income 1,672 1,528 9.4% 2,502 -33.2% Gross profit 37,782 30,851 22.5% 44,558 -15.2% Operating expenses (21,510) (13,891) 54.8% (22,675) -5.1% Impairment charge (2,005) (104) NMF (618) NMF EBITDA 14,267 16,856 -15.4% 21,265 -32.9% Depreciation and amortisation (8,972) (5,598) 60.3% (9,056) -0.9% Net foreign currency gain (loss) 5,878 5,771 1.9% (5,797) NMF Interest income 3,934 2,532 55.4% 4,088 -3.8% Interest expense (9,524) (6,770) 40.7% (8,969) 6.2% Profit before non-recurring items and income tax 5,583 12,791 -56.4% 1,531 264.7% Net non-recurring items (156) 113 NMF (460) -66.1% Profit before income tax expense 5,427 12,904 -57.9% 1,071 406.7% Income tax expense (693) (687) 0.9% (1,666) -58.4% Profit (loss) from continuing operations 4,734 12,217 -61.3% (595) NMF Profit from discontinued operations12 24,641 12,829 92.1% 12,270 100.8% Profit 29,375 25,046 17.3% 11,675 151.6% Earnings per share (basic) 0.46 0.47 -2.5% 0.19 141.5% Earnings per share (diluted) 0.44 0.45 -2.3% 0.18 145.7% Performance highlights § As a result of stable performance across all segments, the Investment Business recorded gross profit from continuing operations of GEL 37.8mln in 1Q18 (up 22.5% y-o-y). The Investment Business gross profit, adjusted to include gross profit of the discontinued operations, was GEL 105.3mln in 1Q18 (up 19.8% y-o-y) § Operating expenses increased as a result of the organic growth of the businesses, where the most material y-o-y impact was driven by Teliani's launch of beer operations § EBITDA from continuing operations of GEL 14.3mln in 1Q18 was down 15.4% y-o-y, due mainly to the beer launch and the impairment charge for utility business driven by IFRS 9 adoption. Investment Business EBITDA, adjusted to include EBITDA of the discontinued operations, was GEL 46.1mln in 1Q18 (up 10.6% y-o-y) § Aldagi recorded gross insurance profit of GEL 6.9mln in 1Q18 (largely flat y-o-y and up 8.7% q-o-q). The strong q-o-q performance was mainly attributable to its organic growth primarily in the credit life insurance business line, as well as improved quality of the motor insurance portfolio, which benefited from the termination of relationships with loss making motor insurance clients § m2 continued its strong project execution and sales momentum in 1Q18. 53 apartments were sold with a total sales value of US$ 7.7mln in 1Q18 compared to 143 apartments sold with a total sales value of US$ 10.1mln in 1Q17 and 165 apartments with a total sales value of US$ 14.5mln in 4Q17. In 1Q18, gross real estate profit was GEL 3.9mln (up 52.1% y-o-y and down 31.8% q-o-q). Gross real estate profit decreased q-o-q as a result of business seasonality § GGU delivered significant growth of 19.0% y-o-y in gross profit driven by its strong performance in both utility and energy sales. The y-o-y increase in water supply revenue from individuals was driven by the increased tariff effective from 1 January 2018, while water supply revenue from legal entities delivered stable growth, mainly due to the enhancement of GGU's metering programme. The y-o-y increase in revenues from electric power generation and sales was attributable to higher levels of water inflow in Zhinvali reservoir and the continuous reduction of GGU's own consumption of electricity, leading to increased sales volumes to third-parties. The q-o-q decline in 1Q18 was largely attributable to water consumption seasonality § Gross beverage profit increased by 93.0% y-o-y. The growth was largely attributable to significant growth in Teliani's gross profit due to the launch of mainstream beer and lemonade production in the second half of 2017, as well as the strong performance of Teliani's wine business, where revenues reached GEL 4.6mln in 1Q18 (up 33.3% y-o-y). Additionally, Teliani's 2017 gross profit was positively impacted by the continued diversification of its distribution portfolio, whereby Teliani obtained the exclusive right to import and distribute Lavazza coffee in Georgia and added other non-alcoholic beverage distribution products in 2017. The q-o-q decrease in gross beverage profit (37.1%) was mainly attributable to seasonality of wine and sparkling wine sales § 1Q18 profit from discontinued operations13, which reflects the results of GHG's operations, increased by 22.8% on a y-o-y basis and by 33.9% on a quarterly basis. The strong performance was driven by a strong quarter in the Pharmacy and distribution and Healthcare Services businesses. As a result, GHG achieved a record EBITDA of GEL 31.4mln in 1Q18 (up 25.3% y-o-y and up 1.7% q-o-q) 9Investment Business is classified as discontinued operations within Bank of Georgia Group's 1Q18 consolidated financial statements 10Shortly after the proposed Demerger becomes effective, this stake is expected to be exchanged for a 19.9% stake in Bank of Georgia Group PLC. Following the exchange, for as long as Georgia Capital's stake in the Bank is greater than 9.9%, it will exercise its voting rights in the Bank in accordance with the votes cast by all other Bank shareholders on all shareholder votes 11The Group held 57% of GHG's equity stake as of 31 March 2018 (57% as of 31 December 2017, 64.3% as of 31 March 2017) 12Profit from discontinued operations includes GEL 7.7mln reversal of GHG's depreciation expense in line with IFRS requirements, GHG's underlying profit was GEL 16mln 13Excluding GEL 7.7mln depreciation expense reversal impact Investment Business14 Segment Result Discussion The segment results discussion is presented for Utility & Energy Business (GGU), Real Estate Business (m2), Property and Casualty Insurance Business (Aldagi), Beverage Business (Teliani)and Healthcare Business (GHG15). 14 Investment Business is classified as discontinued operations in Bank of Georgia Group's 1Q18 consolidated financial statements 15 Healthcare Business (GHG) is classified as discontinued operations in Georgia Capital's consolidated financial statements Utility & Energy Business (Georgia Global Utilities - GGU)16 Standalone results Our Utility & Energy business is operated though the Group's wholly-owned subsidiary, Georgia Global Utilities (GGU), which represents a natural water utility monopoly in Georgia, with an upside in electricity generation. GGU has two main business lines - water utility and electric power generation. In the water utility business, GGU has a natural monopoly in Tbilisi and the surrounding area, where it provides wastewater services to 1.4mln people (more than one-third of Georgia's population). GGU also operates hydro power plants with a total capacity of 149.3 MW and invests in the development of renewable energy projects in the under-supplied Georgian energy sector. The Group anticipates further growth opportunities for GGU in both of its business lines: pursuing cost efficiencies within the water utility business by targeting improving the worn-out infrastructure17 and reducing energy consumption internally to preserve the supply available for sale to third parties while also planning the construction of hydro, wind and solar power generation plants. Up to 53MW of hydro projects are currently already under construction, together with 46MW of hydro projects under development, and 100MW wind projects are at the feasibility stage and once complete, GGU expects to commence construction works. As a result, GGU expects to establish a renewable energy platform with 500MW installed capacity in the medium term, targeting 1,000MW installed capacity in a longer term. Utility & Energy Business highlights Water tariff & regulation. In December 2017, GNERC (Georgian National Energy and Water Supply Regulatory Commission), the independent body that regulates GGU's water and wastewater tariffs, has approved new tariffs for GGU for a three year regulatory period, effective from 1 January 2018. This is the first time the tariff has been set based on the new water and wastewater services tariff methodology adopted by GNERC in August 2017, which is based on international best practice and represents a hybrid method of "cost plus" and "incentive based" methodologies. Revenue is determined based on a company's Regulatory Asset Base (RAB) and compensates for investment and maintenance of new and existing regulatory assets, stimulates efficiency in the network through incentivising reduction in controllable operating expenses and delivers fair returns to investors in the utility business. The return on investment, referred to as WACC in the methodology, for the first regulatory period is set at 15.99% (up from 13.54% in 2017). As a result, new water and wastewater tariffs for individuals in Tbilisi, increased by 23.8% to GEL 3.89 (per month, per capita) for non-metered customers and to GEL 0.33 (per m3) for metered customers. New tariffs for GGU's commercial customers, all of which are metered, decreased by 0.4% to GEL 4.40 (per m3). GWP, a wholly owned subsidiary of GGU which operates the water utility business in Tbilisi, had its credit rating of BB- reaffirmed with stable outlook by Fitch in February 2018. 16 Prior to 2Q17, GGU's standalone results excluded the Group's renewable energy business results due to its absence from GGU's legal structure and insignificant size. Effective from 2Q17, we are re porting GGU results on a pro-forma basis together with renewable energy business and have retrospectively revised the comparable information accordingly. The Group owns 65% of renewable energy business 17GGU owns and operates a water supply network of around 3,150km and about 2,000km of wastewater pipelines. It also has 55 pumping stations, 101 service reservoirs with a total capacity of 305,000 m3 and a water treatment plant. Around 560 million m3 of potable water is supplied from water production/treatment facilities annually. Due to poor condition of the water supply infrastructure, GGU heavily invests in improvement of its network and replacement of the depreciated asset base over time, leading to continuous growth in the regulated asset base. Moreover, through the reduction of the water supplied to its customers and respective water losses, GGU expects to reduce its own electricity consumption, which can be sold to third parties INCOME STATEMENT Utility18 Energy18 Total GEL thousands, unless otherwise noted 1Q18 1Q17 Change y-o-y 4Q17 Change q-o-q 1Q18 1Q17 Change y-o-y 4Q17 Change q-o-q 1Q18 1Q17 Change y-o-y 4Q17 Change q-o-q Revenue from water supply to legal entities 19,088 18,336 4.1% 22,215 -14.1% - - - - - 19,088 18,336 4.1% 22,215 -14.1% Revenue from water supply to individuals 9,769 7,911 23.5% 8,529 14.5% - - - - - 9,769 7,911 23.5% 8,529 14.5% Revenue from electric power sales - - - - - 3,055 2,148 42.2% 3,892 -21.5% 2,155 1,191 80.9% 2,873 -25.0% Other income 1,325 1,160 14.2% 2,278 -41.8% 4 4 - 5 -20.0% 1,329 1,164 14.2% 2,283 -41.8% Revenue 30,182 27,407 10.1% 33,022 -8.6% 3,059 2,152 42.1% 3,897 -21.5% 32,341 28,602 13.1% 35,900 -9.9% Salaries and benefits (4,790) (3,950) 21.3% (5,155) -7.1% (346) (307) 12.7% (231) 49.8% (5,136) (4,257) 20.6% (5,386) -4.6% Electricity and transmission costs (5,722) (5,913) -3.2% (5,311) 7.7% (25) (16) 56.3% (27) -7.4% (4,847) (4,972) -2.5% (4,319) 12.2% Asset maintenance expenses (1,250) (1,066) 17.3% (1,693) -26.2% (18) (26) -30.8% (20) -10.0% (1,268) (1,092) 16.1% (1,713) -26.0% General and administrative expenses (2,519) (2,257) 11.6% (3,229) -22.0% (649) (419) 54.9% (558) 16.3% (3,168) (2,676) 18.4% (3,787) -16.3% Other operating expenses (1,630) (1,359) 19.9% (1,560) 4.5% (288) (86) NMF (483) -40.4% (1,918) (1,445) 32.7% (2,043) -6.1% Operating expenses (15,911) (14,545) 9.4% (16,948) -6.1% (1,326) (854) 55.3% (1,319) 0.5% (16,337) (14,442) 13.1% (17,248) -5.3% Provisions for doubtful receivables (1,449) 274 NMF 338 NMF - - - - - (1,449) 274 NMF 338 NMF EBITDA 12,822 13,136 -2.4% 16,412 -21.9% 1,733 1,298 33.5% 2,578 -32.8% 14,555 14,434 0.8% 18,990 -23.4% EBITDA Margin 42% 48% 50% 57% 60% 66% 45% 50% 53% Depreciation and amortisation (5,233) (4,135) 26.6% (4,469) 17.1% (884) (686) 28.9% (760) 16.3% (6,117) (4,821) 26.9% (5,229) 17.0% EBIT 7,589 9,001 -15.7% 11,943 -36.5% 849 612 38.7% 1,818 -53.3% 8,438 9,613 -12.2% 13,761 -38.7% EBIT Margin 25% 33% 36% 28% 28% 47% 26% 34% 38% Net interest expense (3,104) (2,036) 52.5% (2,975) 4.3% (192) (230) -16.5% (743) -74.2% (3,296) (2,266) 45.5% (3,718) -11.4% Net non-recurring expenses - - - (383) NMF (124) - NMF (196) -36.7% (124) - NMF (579) -78.6% Foreign exchange gain (loss) 1,786 (104) NMF (271) NMF (26) (224) -88.4% (115) -77.4% 1,760 (328) NMF (386) NMF Profit before income tax 6,271 6,861 -8.6% 8,314 -24.6% 507 158 NMF 764 -33.6% 6,778 7,019 -3.4% 9,078 -25.3% Income tax expense - - - (210) NMF - - - - - - - - (210) NMF Profit 6,271 6,861 -8.6% 8,104 -22.6% 507 158 NMF 764 -33.6% 6,778 7,019 -3.4% 8,868 -23.6% Attributable to: -Shareholders of the Group 6,271 6,861 -8.6% 8,104 -22.6% 693 316 119.3% 381 81.9% 6,964 7,177 -3.0% 8,485 -17.9% -Non-controlling interests - - - - - (186) (158) 17.7% 383 NMF (186) (158) 17.7% 383 NMF 18Utility and energy segment financials do not include inter-segment eliminations, detailed financials including inter-segment eliminations are presented on page 44 Performance highlights § GGU recorded utility revenue of GEL 30.2mln (up 10.1% y-o-y and down 8.6% q-o-q) and energy revenue of GEL 3.1mln (up 42.1% y-o-y and down 21.5% q-o-q) in 1Q18, resulting in total revenues of GEL 32.3mln (up 13.1% y-o-y and down 9.9% q-o-q) - Revenue from water supply to legal entities and individuals reached GEL 28.9mln in 1Q18 (up 9.9% y-o-y and down 6.1% q-o-q). Water supply revenue represented 95.6% of total utility revenue in 1Q18 (95.8% in 1Q17 and 93.1% in 4Q17). The q-o-q decrease in 1Q18 revenue from water supply services is attributable to water consumption seasonality, whereby sales in the fourth quarter are normally higher than in the first quarter. Revenue from legal entities is generally the largest element of GGU's total revenue and their water consumption pattern is reflected in GGU's quarterly revenues. The y-o-y increase in revenue from water supply to legal entities reflects enhanced measurement results based on GGU's metering programme (which entails the replacement of amortised or obsolete meters with advanced ultrasonic and electromagnetic meters), while y-o-y and q-o-q increase in revenue from water supply to individuals is mostly attributable to the increased residential tariff effective from 1 January 2018 - Revenue from electricity power sales amounted to GEL 3.1mln in 1Q18 (up 42.2% y-o-y and down 21.5% q-o-q). The y-o-y increase in electricity power sales reflects higher water inflows to Zhinvali reservoir and significant savings in GGU's own consumption of electricity. The q-o-q decrease in 1Q18 in revenue from electricity power sales was driven by low average electricity selling price - The significant q-o-q decrease in other income in 1Q18 was due to the absence of one-off gains recorded in 4Q17 from the upward revaluation of investment property § Consolidated operating expenses amounted to GEL 16.3mln in 1Q18 (up 13.1% y-o-y and down 5.3% q-o-q). The increase in operating expenses on a y-o-y basis is primarily driven by the expansion of the business: - Salaries and employee benefits were up 20.6% y-o-y and down 4.6% q-o-q in 1Q18. The y-o-y increase was primarily driven by the expansion of the business which started in 2Q17, while the q-o-q decrease is attributable to efficiently managing the salaries and employee benefits - Electricity and transmission costs were up 12.2% q-o-q in 1Q18, as a result of the increased electricity transmission fee (guaranteed capacity fee) effective from 1 January 2018. The y-o-y decrease in electricity and transmission costs were attributable to significant savings in own electricity consumption - General and administrative expenses were up 18.4% y-o-y in 1Q18 mainly driven by the property tax expense component, which increased due to higher asset base created through intensive capital expenditures § Consolidated provision for doubtful trade receivables was GEL 1.4mln in 1Q18 compared to reversal of GEL 0.3mln in 1Q17 and reversal of GEL 0.3mln in 4Q17 - From 1Q17 and as part of an ongoing process of reviewing its receivable provisioning methodology, GGU revisited certain estimates to enhance the method of provision estimation. Under the enhanced method GGU was able to identify its customers who were able to pay all of their monthly bills on time, i.e. who tended to have no overdue bills. This change in accounting estimate had a positive impact on the provision of doubtful receivables in 1Q17, resulting in lower receivables provision expenses in 2017. The q-o-q increase in provisions for doubtful trade receivables in 1Q18 was primarily driven by the adoption of IFRS 9 in combination with seasonally lower collection rates for legal entities (which is an industry collection rate pattern). IFRS 9 introduced a forward-looking expected credit loss (ECL) approach effective from 1 January 2018, which is intended to result in an earlier recognition of credit losses based on an ECL impairment approach compared with the previously existing incurred-loss impairment approach for financial instruments under IAS 39 § As a result of the developments described above, GGU reported utility EBITDA of GEL 12.8mln (down 2.4% y-o-y and down 21.9% q-o-q) and energy EBITDA of GEL 1.7mln in 1Q18 (up 33.5% y-o-y and down 32.8 q-o-q), translating in total EBITDA of 14.6mln (up 0.8% y-o-y and down 23.4% q-o-q) § GGU reported depreciation and amortisation expense of GEL 6.1mln (up 26.9% y-o-y and up 17.0% q-o-q) driven by the additional investments into the company's infrastructure carried out during 2017 and 1Q18 in order to upgrade the network, further reduce water losses and achieve cost efficiencies § Profit for the reporting period of 1Q18 amounted to GEL 6.3mln (down 8.6% y-o-y and down 22.6% q-o-q) for the utility business and GEL 0.5mln (3.2x higher y-o-y and down 33.6% q-o-q) for the energy business STATEMENT OF CASH FLOW GEL thousands; unless otherwise noted 1Q18 1Q17 Change y-o-y 4Q17 Change q-o-q Cash received from customers 35,743 30,582 16.9% 44,768 -20.2% Cash paid to suppliers (11,966) (11,330) 5.6% (11,387) 5.1% Cash paid to employees (3,591) (3,859) -6.9% (3,265) 10.0% Interest received 180 419 -57.0% 800 -77.5% Interest paid (861) (2,356) -63.5% (4,486) -80.8% Taxes paid (1,743) (1,757) -0.8% 2,256 NMF Restricted cash in Bank - 945 NMF (1,362) NMF Cash flow from operating activities 17,762 12,644 40.5% 27,324 -35.0% Maintenance capex (6,958) (8,832) -21.2% (3,068) 126.8% Operating cash flow after maintenance capex 10,804 3,812 NMF 24,256 -55.5% Purchase of PPE and intangible assets (47,628) (15,337) NMF (86,947) -45.2% Proceeds from PPE and investment property sale 1,100 - NMF - NMF Restricted cash in Bank 2,567 (12,249) -121.0% 5,876 -56.3% Total cash used in investing activities (43,961) (27,586) 59.4% (81,071) -45.8% Proceeds from borrowings 11,697 12,412 -5.8% 226,572 -94.8% Repayment of borrowings (2,744) (4,328) -36.6% (107,616) -97.5% Contributions under share-based payment plan - - - (2,596) NMF Dividends paid - - - (28,244) NMF Capital increase - 780 NMF 2,653 NMF Total cash flow from financing activities 8,953 8,864 1.0% 90,769 -90.1% Effect of exchange rates changes on cash (2,064) (693) NMF 5,650 -136.5% Total cash (outflow)/inflow (26,268) (15,603) 68.4% 39,604 NMF Cash balance Cash, beginning balance 70,261 32,379 117.0% 30,657 129.2% Cash, ending balance 43,993 16,776 NMF 70,261 -37.4% § GGU has an outstanding water supply receivable collection rate within the 95-99% range. During 1Q18, the collection rate for legal entities and households was 99% and 95%, respectively. Although the Georgian water utility sector has historically had low receivables collection rates, as a result of GGU's arrangement with electricity suppliers since 2011, (which allows disconnection of non-paying water customers from the electricity network) GGU's collection rates remain very strong at approximately 96%. In return, electricity suppliers receive flat monetary compensation from GGU § In 4Q17, GGU drew down less expensive funding from international financial institutions for the Utility Business in order to finance capital expenditures and refinance more expensive funding from local financial institutions totalling GEL 101.8mln. Proceeds from borrowings in 1Q18 relate to draw downs for 50MW Mestiachala HPPs project construction BALANCE SHEET GEL thousands; unless otherwise noted Mar-18 Mar-17 Change y-o-y Dec-17 Change q-o-q Cash and cash equivalents 43,993 16,776 162.2% 70,261 -37.4% Trade and other receivables 19,293 22,192 -13.1% 23,754 -18.8% Prepayments and other assets 13,645 12,858 6.1% 15,546 -12.2% Total current assets 76,931 51,826 48.4% 109,561 -29.8% Property, plant and equipment 526,342 349,967 50.4% 489,509 7.5% Investment Property 9,854 18,922 -47.9% 11,286 -12.7% Intangible assets 1,959 1,359 44.2% 2,222 -11.8% Other non-current assets 54,398 19,242 182.7% 51,908 4.8% Total non-current assets 592,553 389,490 52.1% 554,925 6.8% Total assets 669,484 441,316 51.7% 664,486 0.8% Current borrowings 5,874 22,566 -74.0% 3,832 53.3% Trade and other payables 32,641 28,391 15.0% 33,618 -2.9% Provisions for liabilities and charges 3,576 743 NMF 3,102 15.3% Other taxes payable 1,251 2,736 -54.3% 391 NMF Total current liabilities 43,342 54,436 -20.4% 40,943 5.9% Long term borrowings 311,520 91,534 NMF 308,373 1.0% Deferred income 21,139 17,817 18.6% 20,753 1.9% Total non-current liabilities 332,659 109,351 NMF 329,126 1.1% Total liabilities 376,001 163,787 129.6% 370,069 1.6% Total equity attributable to shareholders of the Group 284,959 275,107 3.6% 284,291 0.2% Non-controlling interest 8,524 2,422 NMF 10,126 -15.8% Total equity 293,483 277,529 5.7% 294,417 -0.3% Total liabilities and equity 669,484 441,316 51.7% 664,486 0.8% § The increase in property, plant and equipment is primarily due to the planned additional investments into GGU's infrastructure carried out during 2017 and 1Q18 in order to upgrade the network, further reduce water losses and achieve cost efficiencies. Additionally, approximately GEL 45.0mln of the y-o-y increase is attributable to the development and construction of renewable energy projects and approximately GEL 16.3mln of the y-o-y increase is driven by the Gardabani wastewater treatment plan rehabilitation works. Overall, 2017 and 2018 are capital-intensive years and this trend will continue until the end of 2018 § The GEL 1.4mln q-o-q decrease in investment property is attributable to the sale of a land plot (a non-core asset), while the y-o-y decrease is related to the reclassification of investment properties into property, plant and equipment § The significant y-o-y increase in other non-current assets in 1Q18 is driven by additional prepayments to suppliers in relation to the development and construction of 50MW Mestiachala HPPs § The y-o-y increase in borrowings and cash and cash equivalents at 31 March 2018 is due to additional funding obtained from international financial institutions and local banks in 4Q17 to support capital expenditure for developments of GGU's water supply network and renewable energy projects. During 2017, GGU secured long-term financing from international financial institutions (IFIs) for efficiency-related capital expenditure purposes, namely from European Investment Bank (EIB), The Netherlands Development Finance Company (FMO) and German Investment Corporation (DEG) at the GWP level (GGU's principal utility subsidiary) Real estate business (m2 Real Estate or m2) Standalone results Our Real Estate Business is operated through the Group's wholly-owned subsidiary m2, which develops residential and commercial properties and hotels in Georgia. m2's business operations are divided into two segments: a housing development and a hospitality business. m2's housing development business is comprised of: (a) a residential development arm engaged in housing development projects in Tbilisi; (b) a construction arm, BK Construction LLC, which engages in construction contracts with third-parties and generates fee income; and (c) m2's franchise platform for developing third-party land plots using its brand name in order to generate fee income. m2's hospitality business is comprised of: (a) rent-earning commercial assets, classified as investment property, with target yield of 10%; and (b) hotel developments across Georgia with a target of 1,000 rooms over the next three years. INCOME STATEMENT Housing development business19 Hospitality business19 Total GEL thousands, unless otherwise noted 1Q18 1Q17 Change y-o-y 4Q17 Change q-o-q 1Q18 1Q17 Change y-o-y 4Q17 Change q-o-q 1Q18 1Q17 Change y-o-y 4Q17 Change q-o-q Gross profit from apartment sales 2,922 1,290 126.5% 3,898 -25.0% - - - - - 2,922 1,290 126.5% 3,898 -25.0% Gross profit from operating leases - - - - - 850 816 4.2% 851 -0.1% 850 816 4.2% 851 -0.1% Gross profit from hospitality services - - - - - 67 - NMF - NMF 67 - NMF - NMF Revaluation of commercial property - 479 NMF 99 NMF - - - (618) NMF - 479 NMF (519) NMF Other income 178 11 NMF 56 NMF 9 - NMF - NMF 90 11 NMF 56 60.7% Gross profit 3,100 1,780 74.2% 4,053 -23.5% 926 816 13.5% 233 NMF 3,929 2,596 51.3% 4,286 -8.3% Operating expenses (2,255) (1,732) 30.2% (2,398) -6.0% (366) (102) NMF (297) 23.2% (2,621) (1,834) 42.9% (2,695) -2.7% EBITDA 845 48 NMF 1,655 -48.9% 560 714 -21.6% (64) NMF 1,308 762 71.7% 1,591 -17.8% Depreciation and amortization (134) (63) 112.7% (305) -56.1% (5) (3) 66.7% (10) -50.0% (139) (66) 110.6% (315) -55.9% Net foreign currency (loss) gain (297) (184) 61.4% 89 NMF (10) (10) - 5 NMF (307) (194) 58.2% 94 NMF Net interest income (expense) 99 180 -45.0% 151 -34.4% (38) (39) 2.6% (53) 28.3% 61 141 -56.7% 98 -37.8% Net non-recurring items (31) (73) -57.5% (191) -83.8% (1) (3) -66.7% (6) -83.3% (32) (76) -57.9% (197) -83.8% Profit before income tax 482 (92) NMF 1,399 -65.5% 506 659 -23.2% (128) NMF 891 567 57.1% 1,271 -29.9% Income tax (expense) - - - (468) NMF - - - (13) NMF - - - (481) NMF Profit 482 (92) NMF 931 -48.2% 506 659 -23.2% (141) NMF 891 567 57.1% 790 12.8% Performance highlights During 1Q18 housing development business recorded GEL 0.5mln profit mainly by unlocking value through real estate development. § Real estate development recorded gross profit from sales of apartments of GEL 2.9mln, which more than doubled y-o-y and was down 25.0% q-o-q. The significant y-o-y increase was largely attributable to strong project execution and sales momentum in 1Q18. During 1Q18, m2 sold a total of 53 apartments with a total sales value of US$ 7.7mln, compared to 143 apartments sold with a total sales value of US$ 10.1mln during 1Q17 and 165 apartments with a total sales value of US$ 14.5mln in 4Q17. The average selling price per apartment was higher at US$ 134,670 during 1Q18 than in either 1Q17 (US$ 67,800) or 4Q17 (US$ 86,196) since all of the projects are at the completion stage when prices tend to increase § m2 has a solid track record of selling apartments. Out of the 1,691 apartments completed to date since inception, only 11 or 0.7% remain in stock as available for sale, of which, 4 have been leased out, contributing to the profit generated by hospitality business. The four on-going projects have a total capacity of 1,202 apartments, of which, 1,049 apartments or 87.3% are sold as of 31 March 2018. A total of 164 units remain available for sale, out of a total of 2,893 apartments either already developed or under development § m2 has two upcoming projects in the residential pipeline enabling m2 to continue its strong sales momentum in response to growing demand for affordable housing. m2 plans to construct and develop affordable housing projects on Digomi land with 129,536 square meter and Kavtaradze land with 19,616 square meters, both located in Tbilisi and owned by m2. Construction and development of Digomi and Kavtaradze projects will start subject to city hall permits finalization and will last for 4 years and 2 years respectively. Both projects in total will add 3,697 apartments to m2's housing development business portfolio § In 1Q18 m2's construction arm started generating fees from its first major third-party construction agreement to construct the shell and core of a new shopping mall and business centre located in Tbilisi's Saburtalo district. In parallel, it is also serving on-going m2 projects, including residential and hotel development on Melikishvili avenue and the development of a recently acquired under construction hotel on Gergeti street 19 Housing development and hospitality business financials do not include inter-business eliminations, detailed financials including inter-business eliminations are presented on page 45 m2's yielding asset portfolio continued its robust performance in 1Q18, while it opened doors to the first hotel guests on 10 March 2018. In aggregate, hospitality business generated a GEL 0.5mln net profit. § Gross profit from operating leases increased by 4.2% y-o-y and remained flat as compared to 4Q17, supported by growing occupancy rates. m2's rent-earning assets are successfully leased out at an 90% occupancy rate and average yield of 10.3% during 1Q18 - m2 retains commercial space (ground floor) at its own residential developments (representing up to 30% of total yielding portfolio) and acquires opportunistically the commercial space (representing over 70% of total yielding portfolio). At the same time, m2 retains ownership of some of the apartments leased out to high quality strategic tenants, such as the US Embassy in Georgia, in its yielding asset portfolio § In February 2018 m2 launched its first hotel - Ramada Encore Tbilisi under an exclusive development agreement with Wyndham, which generated around GEL 0.1mln of gross profit with US$ 85 ADR and 29% occupancy rate in the first month of hotel operations. The hotel has a capacity of 152 rooms and will cater the needs of the rapidly growing market for budget travellers in Georgia. The company's investment in the hotel, including the land value, amounted to US$ 14mln § m2 continued to build ground for its targeted 1,000 hotel room portfolio. During 1Q18, m2 acquired a land plot in Telavi, Kakheti for a total cash consideration of US$ 1.5mln (excluding VAT) and plans to build a hotel with 130 rooms. On 3 May 2018 m2 made another acquisition of an under construction hotel in Gudauri with planned capacity of 134 rooms for a total cash consideration of US$7.2 million including VAT. Additionally, m2 currently has two hotel projects under construction - an upscale hotel on Gergeti street in Tbilisi with an expected 100 rooms and Melikishvili hotel in Tbilisi with expected 125 rooms. The Ramada Encore in Kutaisi, which is in the design approval stage, is expected to add 121 rooms to the overall portfolio. As a result, together with the Ramada Encore Tbilisi, which has been operational since March 2018, m2 currently has approximately 760 rooms of which 152 are operational and 608 are in the pipeline As a result of the developments described above, in 1Q18 m2 reported consolidated gross profit of GEL 3.9mln (up 51.3% y-o-y and down 8.3% q-o-q) and consolidated net profit of GEL 0.9mln (up 57.1% y-o-y and up 12.8% q-o-q). BALANCE SHEET GEL thousands, unless otherwise noted Mar-18 Mar-17 Change y-o-y Dec-17 Change q-o-q Cash and cash equivalents 107,822 48,636 121.7% 34,751 NMF Prepayments 45,656 17,842 155.9% 34,932 30.7% Inventories 55,684 83,922 -33.6% 59,683 -6.7% Investment property, of which: 145,738 110,831 31.5% 150,143 -2.9% Land bank 74,452 68,789 8.2% 72,902 2.1% Commercial real estate 71,286 42,042 69.6% 77,241 -7.7% Property and equipment 51,917 9,110 NMF 49,641 4.6% Other assets 16,910 25,381 -33.4% 21,679 -21.9% Total assets 423,727 295,722 43.3% 350,829 20.8% Amounts due to credit institutions 155,078 38,912 298.5% 58,992 162.9% Debt securities issued 61,879 62,278 -0.6% 65,122 -5.0% Deferred income 33,128 53,670 -38.3% 46,660 -29.0% Other liabilities 17,531 7,657 129.0% 15,425 13.7% Total liabilities 267,616 162,517 64.7% 186,199 43.7% Share Capital 4,180 4,180 - 4,180 - Additional paid-in capital 84,356 86,227 -2.2% 82,793 1.9% Other reserves 4,299 13,469 -68.1% 14,460 -70.3% Retained earnings 53,573 29,329 82.7% 52,779 1.5% Total equity attributable to shareholders of the Group 146,408 133,205 9.9% 154,212 -5.1% Non-controlling interest 9,703 - NMF 10,418 -6.9% Total equity 156,111 133,205 17.2% 164,630 -5.2% Total liabilities and equity 423,727 295,722 43.3% 350,829 20.8% § m2 continued to have a strong, diversified and well managed balance sheet. At 31 March 2018, total assets were GEL 423.7mln (up 43.3% y-o-y and up 20.8% q-o-q), primarily comprised of 25.4% cash, 13.1% inventories (apartments in development), 34.4% investment property (land bank and commercial real estate) and 12.3% property, plant and equipment (constructed and under construction hotels). m2 borrowed US$39 mln from Georgia Capital at the end of 1Q18 to refinance some of the existing borrowings and fund the on-going developments of hotels in pipeline § m2 currently has a land bank with a total value of GEL 74.5mln on its balance sheet, for both residential and commercial purposes. We do not expect the residential land bank to grow, as in line with its asset light strategy, m2 plans to utilise its existing land plots within three to four years and, in parallel, start development of third party land plots under franchise agreements § Since its inception, m2 has unlocked US$ 19.5mln in total land value from seven completed projects, while an additional US$ 14.2mln in land value is expected to be unlocked from the four ongoing projects § Prepayments as of 31 March 2018 primarily relate to prepaid construction works for residential and hospitality projects Operating highlights § m2 has started eleven projects since its establishment in 2010, of which, seven projects have already been completed, while the construction of four projects is ongoing. m2 has completed all of its projects on or ahead of scheduled time and within budget. The four on-going projects have the following characteristics: - Kartozia Street project: the largest ever project carried out by m2, with a total of 801 apartments in a central location in Tbilisi, of which, 738 units are sold - Kazbegi Avenue II project - a mixed-use development with 303 residential apartments and a hotel with a capacity of 152 rooms. Of a total of 303 available apartments, 223 are sold - 50 Chavchavadze Avenue project - the project is located in the central part of Tbilisi with a total of 82 apartments, of which, 74 are sold - Melikishvili Avenue project - a mixed-use four-star development with a capacity of 125 hotel rooms and 16 residential apartments, of which, 14 are already sold OPERATING DATA for completed and on-going projects, as of 31 March 2018 # Project name Number of apartments Number of apartments sold Number of apartments sold as % of total Number of apartments available for sale Start date (construction) Actual / Planned Completion date (construction) Construction progress % Completed projects 1,691 1,680 99.3% 11 1 Chubinashvili Street 123 123 100.0% - Sep-10 Aug-12 100% 2 Tamarashvili Street 525 525 100.0% - May-12 Jun-14 100% 3 Kazbegi Street 295 295 100.0% - Dec-13 Feb-16 100% 4 Nutsubidze Street 221 221 100.0% - Dec-13 Sep-15 100% 5 Tamarashvili Street II 270 266 98.5% 4 Jul-14 Jun-16 100% 6 Moscow Avenue 238 238 100.0% - Sep-14 Jun-16 100% 7 Skyline 19 12 63.2% 7 Dec-15 Dec-17 100% On-going projects 1,202 1,049 87.3% 153 8 Kartozia Street 801 738 92.1% 63 Nov-15 Oct-18 84% 9 Kazbegi Street II 303 223 73.6% 80 Jun-16 Nov-18 52% 10 50 Chavchavadze Ave. 82 74 90.2% 8 Oct-16 Oct-18 84% 11 Melikishvili ave. 16 14 87.5% 2 Sep-17 May-19 11% Total 2,893 2,729 94.3% 164 FINANCIAL DATA for completed and on-going projects, as of 31 March 2018 # Project name Total Sales (US$ mln) Recognised as revenue (US$ mln) Deferred revenue (US$ mln) Deferred revenue expected to be recognised as revenue in 2018 Land value unlocked (US$) Realised & Expected IRR Completed projects 145.5 145.4 - - 19.5 1 Chubinashvili street 9.9 9.9 - - 0.9 47% 2 Tamarashvili street 48.9 48.9 - - 5.4 46% 3 Kazbegi Street 27.2 27.2 - - 3.6 165% 4 Nutsubidze Street 17.4 17.4 - - 2.2 58% 5 Tamarashvili Street II 24.3 24.3 - - 2.7 71% 6 Moscow avenue 12.3 12.3 - - 1.6 31% 7 Skyline 5.4 5.4 - - 3.1 329% On-going projects 84.6 62.3 22.3 21.9 14.2 8 Kartozia Street 51.9 41.0 10.9 10.9 5.8 60% 9 Kazbegi Street II 19.5 12.5 7.0 7.0 4.3 51% 10 50 Chavchavadze ave. 9.7 7.3 2.4 2.4 3.3 75% 11 Melikishvili ave. 3.5 1.5 2.0 1.6 0.8 101% Total 230.1 207.7 22.3 22.0 33.7 Property and Casualty Insurance Business (Aldagi or P&C) Standalone results Our Property and Casualty (P&C) insurance business is operated through Georgia Capital's wholly-owned subsidiary Aldagi, which is a leading player in the local P&C insurance market with a market share of 37.8% based on gross premiums earned in 2017. The company offers a wide range of insurance products in Georgia to corporate and retail clients, covering more than 57,000 customers through five business lines: motor, property, credit life, liability and other insurance services. Aldagi's insurance products20 are offered through its offices in Tbilisi and large cities across Georgia, a network of insurance agents, partner local banks and non-financial institutions (such as major car dealerships), insurance brokers and online portals. Property and Casualty Insurance Business highlights In line with Aldagi's strategy to grow revenue from the underpenetrated SME segment, starting from 2018, Aldagi has developed tailored insurance products for the following types of SME: small/home offices, restaurants & cafes, beauty shops, dental clinics, tourism, car rentals and stores & warehouses. These tailored insurance products are currently offered through Aldagi's direct distribution channel of sales managers and captive agents, who have managed to sell 210 insurance policies worth GEL 0.1mln of gross premiums starting from mid February 2018. By the end of 2018, SME products will also be offered through digital portals created especially for these sectors of SMEs. § Based on the latest available market data as of 31 December 2017, Aldagi continues to be the most profitable insurance company in the local market with 84.0% share of the insurance industry profit and with best combined ratio on the market § Aldagi continues to lead the market with a powerful distribution network of 286 points of sale and 517 sales agents as of 31 March 2018 § At 31 March 2018, Aldagi had 57,791 insured customers (up 47.2% y-o-y and up 21.2% q-o-q). The y-o-y increase in number of insured customers was mainly driven by tapping regional markets through launching livestock insurance, organic growth of motor insurance business line and introduction of card insurance sales in 1Q18. The number of new insurance policies written reached 46,934 in 1Q18 (up 48.1% y-o-y and up 26.9% q-o-q) Starting from 1 January 2018 Aldagi offers new insurance product - card insurance to the Public Service Hall customers. The product provides insurance for any type of legal identity document (including ID cards, passports etc.) and was introduced in continuation of exclusive memorandum with Public Service Hall in 3Q17, which allowed its customers to electronically acquire affordable insurance products for any type of property registered in the public registry. At 31 March 2018, 11,237 insurance policies have been sold, significantly increasing Aldagi's client base. INCOME STATEMENT GEL thousands, unless otherwise noted 1Q18 1Q17 Change y-o-y 4Q17 Change q-o-q Gross premiums written 18,114 18,907 -4.2% 17,962 0.8% Earned premiums, gross 19,950 18,520 7.7% 21,891 -8.9% Earned premiums, net 14,925 14,436 3.4% 16,578 -10.0% Insurance claims expenses, gross (7,520) (10,700) -29.7% (13,452) -44.1% Insurance claims expenses, net (6,092) (5,637) 8.1% (7,207) -15.5% Acquisition costs, net (1,413) (1,677) -15.7% (2,662) -46.9% Net underwriting profit 7,420 7,122 4.2% 6,709 10.6% Investment income 831 767 8.3% 814 2.1% Net fee and commission income 145 99 46.5% 142 2.1% Net investment profit 976 866 12.7% 956 2.1% Salaries and employee benefits (2,129) (1,978) 7.6% (2,258) -5.7% Selling, general and administrative expenses (928) (893) 3.9% (830) 11.8% Depreciation & Amortisation (232) (234) -0.9% (135) 71.9% Impairment charges (208) (242) -14.0% (82) 153.7% Net other operating income 199 172 15.7% 163 22.1% Operating profit 5,098 4,813 5.9% 4,523 12.7% Foreign exchange (loss) / gain (503) (425) 18.4% 452 NMF Pre-tax profit 4,595 4,388 4.7% 4,975 -7.6% Income tax expense (693) (638) 8.6% (806) -14.0% Net profit 3,902 3,750 4.1% 4,169 -6.4% 20Aldagi's P&C products principally include the following: a) motor insurance covering vehicle damage and third-party liability with 23,240 active clients and a 40% market share, b) property insurance including commercial property coverage, contractor's performance and damage risks coverage with 22,805 active clients and a 37% market share, c) credit life insurance covering loan-linked life insurance services with a group of three active clients and a 30% market share, d) liability insurance covering financial risks, employer's liability, professional indemnity, general third party liability, etc. with 1,246 active clients and a 43% market share. Aldagi's other products include agro insurance, cargo insurance, livestock insurance, bankers blanket bond insurance, and directors' and officers' liability insurance services with 13,395 active clients and a 37% market share Performance highlights § Aldagi recorded net underwriting profit of GEL 7.4mln in 1Q18 (up 4.2% y-o-y and up 10.6% q-o-q) as a result of the following: § Net earned premiums. Net premiums earned reached GEL 14.9mln in 1Q18 (up 3.4% y-o-y and down 10.0% q-o-q). The y-o-y increase in 1Q18 was supported by organic growth of credit life, livestock insurance and cargo insurance businesses lines. Net premiums earned decreased q-o-q by 10.0% partially due to seasonality factors, but also as a result of: (a) the termination of relationships with loss-making clients to improve Aldagi's loss ratio and overall bottom line; and (b) the introduction of insurance regulator supervision fees for insurance companies (effective from 1 January 2018), representing 1% of gross premiums earned or GEL 0.2mln in 1Q18. As part of the risk management exercise, Aldagi revisited its reinsurance policies and terminated a reinsurance treaty for credit life insurance products as of 1 January 2018 given the combination of low loss ratio of the business and increased ability of Aldagi to fully retain risks in this business line. As a result, net premiums earned from credit life insurance grew by 26.9% y-o-y § Net insurance claims. Net insurance claims amounted to GEL 6.1mln in 1Q18 (up 8.1% y-o-y and down 15.5% q-o-q). The y-o-y increase in net insurance claims expenses in 1Q18 was primarily driven by overall increase in loss severity and frequency in motor insurance due to a business shift towards the retail segment, which is characterised by a higher loss ratio than the corporate segment. Insurance claims expenses were also impacted by two commercial property insurance claims following separate fire incidents in Tbilisi in February and March. A q-o-q decrease of 15.5% resulted from termination of relationships with loss-making clients § Net acquisition costs were GEL 1.4mln in 1Q18 (down 15.7% y-o-y and down 46.9% q-o-q). The decrease in net acquisition costs was driven by the recognition of GEL 0.4mln profit commission on reinsurance treaties in credit life, agro insurance and liability insurance business lines. Overall, commission ratio was down by 2ppts y-o-y and down by 5.1ppts q-o-q § Aldagi's key ratios remained healthy during 1Q18 as evidenced by the following closely monitored metrics: Key Ratios 1Q18 1Q17 4Q17 Combined ratio 72.4% 72.7% 78.5% Expense ratio 31.6% 33.6% 35.0% Loss ratio 40.8% 39.1% 43.5% § Net investment profit increased to GEL 1.0mln in 1Q18 (up 12.7% y-o-y and up 2.1% q-o-q). Investment yield remained high at 10.1% in 1Q18 compared with 10.0% in 4Q17 and 9.6% in 1Q17, while interest earning investment portfolio increased to GEL 49.1mln (up 1.2% y-o-y and up 2.8% q-o-q), of which, GEL 18mln represents Aldagi's pension fund's investment portfolio § Salaries and employee benefits reached GEL 2.1mln in 1Q18 (up 7.6% y-o-y and down 5.7% q-o-q) primarily as a result of establishment of new strategic development department in 2Q17 and the increase in headcount as a result of the organic growth of the business § Aldagi's operating profit reached GEL 5.1mln in 1Q18, up 5.9% y-o-y and up 12.7% q-o-q. Aldagi's net profit was GEL 3.9mln in 1Q18 (up 4.1% y-o-y and down 6.4% q-o-q) BALANCE SHEET GEL thousands, unless otherwise noted Mar-18 Mar-17 Change y-o-y Dec-17 Change q-o-q Cash and cash equivalents 2,071 6,143 -66.3% 4,186 -50.5% Amounts due from credit institutions 29,273 27,450 6.6% 25,968 12.7% Investment securities 4,423 2,562 72.6% 4,180 5.8% Insurance premiums receivable, net 26,184 21,812 20.0% 28,491 -8.1% Ceded share of technical provisions 17,881 14,998 19.2% 20,671 -13.5% PPE and intangible assets, net 7,985 10,015 -20.3% 11,899 -32.9% Goodwill 13,051 13,051 - 13,051 - Deferred acquisition costs 2,750 1,658 65.9% 3,047 -9.7% Pension fund assets 18,838 16,721 12.7% 18,536 1.6% Other assets 9,529 4,926 93.4% 5,130 85.9% Total assets 131,985 119,336 10.6% 135,159 -2.3% Gross technical provisions 46,174 43,607 5.9% 50,272 -8.2% Other insurance liabilities 9,691 8,640 12.2% 11,147 -13.1% Current income tax liabilities 483 591 -18.3% 30 NMF Pension benefit obligations 18,836 16,721 12.6% 18,536 1.6% Derivative financial instruments - 562 NMF 130 NMF Other Liabilities 4,152 6,018 -31.0% 6,296 -34.1% Total liabilities 79,336 76,139 4.2% 86,411 -8.2% Total equity 52,649 43,197 21.9% 48,748 8.0% Total liabilities and equity 131,985 119,336 10.6% 135,159 -2.3% § Aldagi continued to have a solid balance sheet. As of 31 March 2018, total assets reached GEL 132.0mln (up 10.6% y-o-y and down 2.3% q-o-q) of which 41% is made up by investment portfolio (liquid assets), 35% of insurance and reinsurance receivables, and 24% of all other assets (property and equipment, intangible assets, goodwill and other assets). The y-o-y growth in assets was largely driven by 20.0% y-o-y increase in net insurance premiums receivable and 19.2% y-o-y increase in ceded share of technical provisions. The 8.1% decrease in gross technical provisions is a result of the partial settlement of a large claim that occurred in 4Q17 as a result of floods § Aldagi remains strongly capitalised. Insurance companies in Georgia are subject to regulatory requirements. Since 1 January 2018, Aldagi is required to maintain a solvency ratio in excess of 100%. At 31 March 2018, Aldagi's solvency ratio was 205% as compared to 180% at 31 December 2017 and 193% at 31 March 2017 Beverage business (Teliani) Standalone results Teliani is a leading beverage producer and distributor in Georgia, combining three different business lines: a wine business, a beer business and a distribution business. Teliani's wine business produces and sells wine and vodka products under Teliani brand to local market and exports to 14 countries. Teliani's wine business targets to grow its vineyard base to 1,000 hectares from 86 hectares at 31 March 2018 over the next three years. The beer business produces mainstream beer and lemonade on the local market, while also owning 10 year exclusive license to produce Heineken, Krushovice and Amstel in Georgia and sell in Georgia, Armenia and Azerbaijan. The distribution business primarily distributes Teliani's wine and beer products as well as third-party products within Georgia. Georgia Capital owns 76% of Teliani's equity stake. INCOME STATEMENT GEL thousands; unless otherwise noted 1Q18 1Q17 Change y-o-y 4Q17 Change q-o-q Wine Business 4,593 3,446 33.3% 7,164 -35.9% Beer Business 4,921 - NMF 4,736 3.9% Distribution Business 2,902 2,940 -1.3% 5,383 -46.1% Revenue 12,416 6,386 94.4% 17,283 -28.2% Wine Business (2,228) (1,831) 21.7% (3,328) -33.1% Beer Business (3,567) - NMF (3,438) 3.8% Distribution Business (2,250) (2,244) 0.3% (4,195) -46.4% COGS (8,045) (4,075) 97.4% (10,961) -26.6% Gross Profit 4,371 2,311 89.1% 6,322 -30.9% Gross Profit Margin 35.2% 36.2% 36.6% Salaries and other employee benefits (2,838) (1,094) 159.4% (2,542) 11.6% Sales and marketing expenses (1,048) (238) NMF (1,497) -30.0% General and administrative expenses (1,721) (720) 139.0% (1,577) 9.1% Distribution expenses (884) (327) 170.3% (957) -7.6% Other operating expenses (455) (88) NMF (147) NMF EBITDA (2,575) (156) NMF (398) NMF Of which, wine EBITDA 600 392 53.2% 2,233 -73.1% Of which, beer EBITDA (3,004) (561) NMF (2,775) NMF Of which, distribution EBITDA (171) 15 NMF 144 NMF Net foreign currency gain (loss) 2,174 2,096 3.7% (4,404) NMF Depreciation and amortization (2,547) (360) NMF (2,056) 23.9% Net interest income/expense (1,158) (216) NMF (1,247) -7.1% Net non-recurring items - 46 NMF (47) NMF (Loss) profit before income tax (4,106) 1,410 NMF (8,152) -49.6% (Loss) Profit (4,106) 1,410 NMF (8,152) -49.6% Performance highlights § Teliani's revenues are up 94.4% y-o-y to GEL12.4 mln in 1Q18 (down 28.2% q-o-q). The y-o-y revenue increase was mainly driven by revenue generated by the beer and lemonade businesses that were launched in 3Q17 and organic growth of the wine business, which continued to increase its exports. The q-o-q decrease in revenues of 28.2% was due to seasonal nature of beverage business sales, however, Teliani achieved a well-diversified revenue mix in 1Q18, spread across all three different business lines: wine business (37.0%); distribution business (23.4%) and beer & lemonade business (39.6 %) § In February 2018, Georgia Capital acquired a 100% equity stake in a leading Georgian craft beer producer, Black Lion LLC (Black Lion) for the total consideration of $3.2mln. Black Lion is the largest producer of a premium class craft beer in Georgia that launched sales in the beginning of 2016 and sold approximately 300,000 litres of craft beer in 2017, primarily targeting restaurants and bars in Tbilisi. Premium class craft beer complements the existing basket of beverage products offered by Teliani and further diversifies the current revenue mix, contributing GEL 0.2mln revenue since acquisition § Teliani's EBITDA of GEL 600 thousands from wine business almost doubled on a y-o-y basis and down 73% q-o-q. The y-o-y increase was mainly driven by expanding wine export sales, constituting 77% of total wine revenue. Teliani significantly benefited from active marketing campaigns in Ukraine, translating into increased export sales by GEL 0.5mln up 56.3% y-o-y. Further Teliani entered the Chinese market in the second half of 2017, contributing GEL 0.2mln into Teliani's export sales revenue in 1Q18. Recent free trade agreements with China and EU are expected to provide further opportunities for growing wine exports. The q-o-q decrease was due to seasonal nature of wine & sparkling wine sales § Teliani recorded negative GEL 3mln EBITDA in 1Q18 from beer business as compared to negative GEL 2.8mln in 4Q17 and negative GEL 0.6mln in 1Q17. The negative EBITDAs resulted from high marketing expenditures to compete with existing strong beer brands and obtain significant market share of Georgian beer market § Throughout 2017 Teliani actively invested in beer facilities, launching its beer & lemonade business in 3Q17. This was reflected in the y-o-y growth of depreciation and amortisation expense. The y-o-y increase in net interest expense was in line with the increased balance of borrowed funds from international financial institutions (EBRD and DEG) to finance planned capital expenditure. As borrowed funds are largely denominated in EUR, Teliani recorded gain from foreign currency driven by the appreciation of GEL against EUR in 1Q18 § As of 31 March 2018, Teliani is a market leader with 35% market share in premium hotels, restaurants and cafes and a modern trade segment based on bottled wine sales § Teliani is the third largest market player based on mainstream beer sales in the highly concentrated Georgian beer market with 13% market share by litres and holds 21% market share of the total imported beer by litres at the end of 1Q18 Healthcare business (Georgia Healthcare Group or GHG)21 Standalone results GHG is the largest integrated player in the fast-growing predominantly privately-owned Georgia Healthcare ecosystem with an aggregated value of GEL 3.5 billion. GHG is comprised of three different business lines: healthcare services business (consisting of a hospital business and polyclinics (ambulatory clinics)), pharmacy and distribution business and medical insurance business. BGEO Group owns 57.0% of GHG at 31 March 2018, with the remaining shares being held by the public (largely institutional investors). GHG's shares are listed on the London Stock Exchange. The results below refer to GHG standalone numbers and are based on GHG's reported results, which are published independently of the Group and available on GHG's web-site: ghg.com.ge INCOME STATEMENT GEL thousands; unless otherwise noted 1Q18 1Q17 Change y-o-y 4Q17 Change q-o-q Revenue, gross 207,689 186,447 11.4% 197,637 5.1% Corrections & rebates (693) (623) 11.2% (349) 98.6% Revenue, net 206,996 185,824 11.4% 197,288 4.9% Revenue from healthcare services 72,855 65,725 10.8% 68,094 7.0% Revenue from pharmacy 126,868 111,399 13.9% 121,367 4.5% Net insurance premiums earned 13,302 13,965 -4.7% 12,376 7.5% Eliminations (6,029) (5,265) 14.5% (4,549) 32.5% Costs of services (143,153) (129,746) 10.3% (134,252) 6.6% Cost of healthcare services (41,547) (37,777) 10.0% (38,227) 8.7% Cost of pharmacy (95,550) (84,408) 13.2% (90,743) 5.3% Cost of insurance services (11,894) (12,734) -6.6% (11,163) 6.5% Eliminations 5,840 5,173 12.9% 5,882 -0.7% Gross profit 63,843 56,078 13.8% 63,036 1.3% Salaries and other employee benefits (20,439) (17,728) 15.3% (20,519) -0.4% General and administrative expenses (12,637) (13,352) -5.4% (12,266) 3.0% Impairment of receivables (1,188) (1,121) 6.0% (1,133) 4.9% Other operating income 1,820 1,182 54.0% 1,761 3.4% EBITDA 31,399 25,059 25.3% 30,879 1.7% EBITDA healthcare services 18,552 16,819 10.3% 18,341 1.2% EBITDA pharmacy 12,644 8,686 45.6% 12,430 1.7% EBITDA insurance services 204 (444) NMF 108 88.9% EBITDA Margin healthcare services 25.2% 25.3% 26.8% EBITDA Margin pharmacy 10.0% 7.8% 10.2% Depreciation and amortisation22 (7,715) (5,872) 31.4% (6,967) 10.7% Net interest expense (8,563) (7,119) 20.3% (8,303) 3.1% Net gains / (losses) from foreign currencies 1,899 2,778 -31.6% (2,825) NMF Net non-recurring expense (1,006) (1,793) -43.9% (638) 57.7% Profit before income tax expense 16,014 13,054 22.7% 12,146 31.8% Income tax expense (2) (19) -89.5% (187) -98.9% Profit for the period 16,012 13,035 22.8% 11,959 33.9% Attributable to: - shareholders of GHG 10,542 8,832 19.4% 7,785 35.4% - non-controlling interests 5,470 4,203 30.1% 4,174 31.0% Performance highlights § GHG delivered gross revenue of GEL 207.7mln in 1Q18 (up 11.4% y-o-y and up 5.1% q-o-q). The q-o-q revenue increase was driven by strong growth in both healthcare services and pharmacy and distribution business as a result of the strong quarterly performance. The y-o-y revenue growth was largely attributable to the pharmacy and distribution business, which delivered record quarterly revenue of GEL 126.9 million driven by outstanding business performance and new variable sales initiatives, which led to double digit y-o-y growth of 13.9%. Healthcare services revenue was up 10.8% y-o-y, of which, 8.3% growth was organic § In 1Q18, GHG continued to focus on extracting operating efficiencies and synergies across the business lines. The gross margin in the pharmacy and distribution business continued to improve q-o-q as well as y-o-y, mainly as a result of realised previously announced procurement synergies as the largest purchaser of pharmaceuticals in Georgia. Due to the usual seasonal promotions in March 2018, the q-o-q margin was down by 50 bps. Loss ratio in GHG's medical insurance business was slightly up q-o-q in 1Q18, although it had significantly improved on a y-o-y basis. The y-o-y improvement in loss ratio in 1Q18 primarily reflected the successful implementation of new initiatives to refocus on more profitable clients starting from 2Q17. The healthcare services gross margin progressed by 50 bps y-o-y, despite the impact of the Government's changes to UHC effective from May 2017 and the dilutive effect of launching two large, flagship hospitals. This was achieved by the successful ramp-up of the recently launched hospitals, as well as the introduction of cost control measures. The gross margin decreased q-o-q due to the impact of seasonally high utility costs 21GHG is classified as a disposal group held for sale and as a discontinued operation within 1Q18 results. Refer to page 22 for additional background 22 Profit from discontinued operations in Georgia Capital's consolidated income statement is reported excluding GEL 7.7mln depreciation expense as required under IFRS § GHG reported strong EBITDA of GEL 31.4mln in 1Q18 (up 25.3% y-o-y and up 1.7% q-o-q). The EBITDA margin for healthcare services business was 25.2% in 1Q18 (25.3% in 1Q17 and 26.8% in 4Q17). Overall the margins remain suppressed due to the roll-out of new flagship hospitals and polyclinics. GHG expects further margin improvement over the course of 2018 with the gradual ramp-up of newly launched healthcare facilities. The healthcare services business was the main contributor to GHG's EBITDA, contributing 59% in total EBITDA in 1Q18, followed by pharmacy and distribution business, contributing 40% in total EBITDA during 1Q18. Pharmacy and distribution business EBITDA margin was 10.0% in 1Q18, well ahead of its target of 8%. Medical insurance business also reported positive EBITDA in 1Q18, compared to the negative GEL 0.4mln posted in 1Q17 § GHG's profit amounted to GEL 16.0mln in 1Q18 (up 22.8% y-o-y and up 33.9% q-o-q). The pharmacy and distribution business was the main driver of 1Q18 profit by contributing GEL 10.8mln, followed by the healthcare services business with GEL 5.3mln contribution § During 1Q18, GHG continued to invest in the development of its healthcare facilities. GHG spent a total of GEL 24.8mln in 1Q18 on capital expenditures, primarily on the finalising the renovation works on Regional Hospital (formerly Deka). Of this, maintenance capex was GEL 2.3mln in 1Q18 § Throughout 2017 GHG was actively engaged in sizeable development projects with significant investments in healthcare facilities. Following the launch of Regional Hospital (previously referred to as "Deka") GHG has now largely completed its major investment programme in creating high-quality care facilities with the necessary capacity to serve our patients. Going forward GHG will be shifting its focus towards the successful ramp-up of the newly launched hospitals and towards improving the utilisation and efficiency measures across its healthcare facilities, as well as Group-wide § In 1Q18 GHG launched a district polyclinic in Tbilisi and through the acquisition of polyclinics and various campaigns, it has increased the number of registered patients in Tbilisi to c.108,000 as of March 2018. As a result, GHG currently operates 17 district polyclinics and 24 express outpatient clinics (the latter are mostly integrated into GHG's pharmacies and play a facilitating role for its pharma and district polyclinic patients) § GHG's healthcare services market share based on the number of beds was 26.4% at 31 March 2018 SELECTED FINANCIAL INFORMATION INCOME STATEMENT Bank of Georgia Group Consolidated Banking Business Investment Business23 Eliminations GEL thousands, unless otherwise noted 1Q18 1Q17 Change y-o-y 4Q17 Change q-o-q 1Q18 1Q17 Change y-o-y 4Q17 Change q-o-q 1Q18 1Q17 Change y-o-y 4Q17 Change q-o-q 1Q18 1Q17 4Q17 Banking interest income 311,149 265,330 17.3% 310,589 0.2% 313,553 267,121 17.4% 312,950 0.2% - - - - - (2,404) (1,791) (2,361) Banking interest expense (130,035) (104,995) 23.8% (127,091) 2.3% (133,430) (106,241) 25.6% (129,826) 2.8% - - - - - 3,395 1,246 2,735 Net banking interest income 181,114 160,335 13.0% 183,498 -1.3% 180,123 160,880 12.0% 183,124 -1.6% - - - - - 991 (545) 374 Fee and commission income 50,673 43,150 17.4% 53,290 -4.9% 51,213 43,702 17.2% 53,739 -4.7% - - - - - (540) (552) (449) Fee and commission expense (16,488) (13,364) 23.4% (16,807) -1.9% (16,702) (13,509) 23.6% (17,001) -1.8% - - - - - 214 145 194 Net fee and commission income 34,185 29,786 14.8% 36,483 -6.3% 34,511 30,193 14.3% 36,738 -6.1% - - - - - (326) (407) (255) Net banking foreign currency gain 14,913 12,526 19.1% 28,139 -47.0% 16,015 19,700 -18.7% 27,464 -41.7% - - - - - (1,102) (7,174) 675 Net other banking income 5,518 2,783 98.3% 12,708 -56.6% 5,744 3,016 90.5% 12,986 -55.8% - - - - - (226) (233) (278) Revenue 235,730 205,430 14.7% 260,828 -9.6% 236,393 213,789 10.6% 260,312 -9.2% - - - - - (663) (8,359) 516 Salaries and other employee benefits (48,818) (43,788) 11.5% (55,144) -11.5% (49,453) (44,279) 11.7% (55,789) -11.4% - - - - - 635 491 645 Administrative expenses (25,168) (22,058) 14.1% (31,760) -20.8% (25,633) (22,519) 13.8% (32,245) -20.5% - - - - - 465 461 485 Banking depreciation and amortisation (11,522) (9,525) 21.0% (10,514) 9.6% (11,522) (9,525) 21.0% (10,514) 9.6% - - - - - - - - Other operating expenses (771) (731) 5.5% (1,194) -35.4% (771) (731) 5.5% (1,194) -35.4% - - - - - - - - Operating expenses (86,279) (76,102) 13.4% (98,612) -12.5% (87,379) (77,054) 13.4% (99,742) -12.4% - - - - - 1,100 952 1,130 Profit from associates 319 514 -37.9% 255 25.1% 319 514 -37.9% 255 25.1% - - - - - - - - Operating income before cost of credit risk 149,770 129,842 15.3% 162,471 -7.8% 149,333 137,249 8.8% 160,825 -7.1% - - - - - 437 (7,407) 1,646 Impairment charge on loans to customers (41,006) (41,341) -0.8% (41,911) -2.2% (41,006) (41,341) -0.8% (41,911) -2.2% - - - - - - - - Impairment charge on finance lease receivables 13 (139) NMF 492 -97.4% 13 (139) NMF 492 -97.4% - - - - - - - - Impairment charge on other assets and provisions 2,850 (6,540) NMF (1,009) NMF 2,850 (6,540) NMF (1,009) NMF - - - - - - - - Cost of credit risk (38,143) (48,020) -20.6% (42,428) -10.1% (38,143) (48,020) -20.6% (42,428) -10.1% - - - - - - - - Profit before non-recurring items and income tax 111,627 81,822 36.4% 120,043 -7.0% 111,190 89,229 24.6% 118,397 -6.1% - - - - - 437 (7,407) 1,646 Net non-recurring items (2,948) (1,695) 73.9% (213) NMF (2,948) (1,695) 73.9% (213) NMF - - - - - - - - Profit before income tax 108,679 80,127 35.6% 119,830 -9.3% 108,242 87,534 23.7% 118,184 -8.4% - - - - - 437 (7,407) 1,646 Income tax (expense) benefit (9,058) (4,407) 105.5% (11,050) -18.0% (9,058) (4,407) 105.5% (11,050) -18.0% - - - - - - - - Profit from continuing operations 99,621 75,720 31.6% 108,780 -8.4% 99,184 83,127 19.3% 107,134 -7.4% - - - - - 437 (7,407) 1,646 Profit from discontinued operations 28,938 32,453 -10.8% 10,029 NMF - - - - - 29,375 25,046 17.3% 11,675 151.6% (437) 7,407 (1,646) Profit 128,559 108,173 18.8% 118,809 8.2% 99,184 83,127 19.3% 107,134 -7.4% 29,375 25,046 17.3% 11,675 151.6% - - - Attributable to: - shareholders of the Group 115,952 100,431 15.5% 113,729 2.0% 98,784 82,640 19.5% 106,687 -7.4% 17,168 17,791 -3.5% 7,042 143.8% - - - - non-controlling interests 12,607 7,742 62.8% 5,080 148.2% 400 487 -17.9% 447 -10.5% 12,207 7,255 68.3% 4,633 NMF - - - Profit from continuing operations attributable to: - shareholders of the Group 99,221 75,233 31.9% 108,333 -8.4% 98,784 82,640 19.5% 106,687 -7.4% - - - - - 437 (7,407) 1,646 - non-controlling interests 400 487 -17.9% 447 -10.5% 400 487 -17.9% 447 -10.5% - - - - - - - - Profit from discontinued operations attributable to: - shareholders of the Group 16,731 25,198 -33.6% 5,396 NMF - - - - - 17,168 17,791 -3.5% 7,042 143.8% (437) 7,407 (1,646) - non-controlling interests 12,207 7,255 68.3% 4,633 NMF - - - - - 12,207 7,255 68.3% 4,633 NMF - - - Earnings per share (basic) 3.08 2.64 16.7% 3.05 1.0% - earnings per share from continuing operations 2.64 1.97 34.0% 2.91 -9.3% - earnings per share from discontinued operations 0.44 0.67 -34.3% 0.14 NMF Earnings per share (diluted) 2.98 2.55 16.9% 2.90 2.8% - earnings per share from continuing operations 2.55 1.91 33.5% 2.77 -7.9% - earnings per share from discontinued operations 0.43 0.64 -32.8% 0.13 NMF 23 Investment Business is classified as discontinued operations in Bank of Georgia Group's 1Q18 consolidated financial statements BALANCE SHEET Bank of Georgia Group Consolidated Banking Business Investment Business24 Eliminations GEL thousands, unless otherwise noted Mar-18 Mar-17 Change y-o-y Dec-17 Change q-o-q Mar-18 Mar-17 Change y-o-y Dec-17 Change q-o-q Mar-18 Mar-17 Change y-o-y Dec-17 Change q-o-q Mar-18 Mar-17 Dec-17 Cash and cash equivalents 1,754,920 1,285,483 36.5% 1,582,435 10.9% 1,754,920 1,198,301 46.5% 1,516,401 15.7% - 359,629 NMF 374,301 NMF - (272,447) (308,267) Amounts due from credit institutions 941,804 1,090,111 -13.6% 1,225,947 -23.2% 955,175 970,653 -1.6% 1,216,349 -21.5% - 174,248 NMF 38,141 NMF (13,371) (54,790) (28,543) Investment securities 1,748,728 1,231,332 42.0% 1,564,869 11.7% 1,804,231 1,229,431 46.8% 1,613,759 11.8% - 3,350 NMF 33,059 NMF (55,503) (1,449) (81,949) Loans to customers and finance lease receivables 7,727,568 6,408,711 20.6% 7,690,450 0.5% 7,792,108 6,470,771 20.4% 7,741,420 0.7% - - - - - (64,540) (62,060) (50,970) Accounts receivable and other loans 3,453 143,417 -97.6% 38,944 -91.1% 6,537 3,105 110.5% 3,572 83.0% - 140,489 NMF 35,446 NMF (3,084) (177) (74) Insurance premiums receivable - 51,595 NMF 30,573 NMF - - - - - - 53,256 NMF 30,854 NMF - (1,661) (281) Prepayments 79,600 101,297 -21.4% 149,558 -46.8% 79,600 27,355 NMF 61,501 29.4% - 74,168 NMF 88,057 NMF - (226) - Inventories 10,371 205,132 -94.9% 100,194 -89.6% 10,371 9,186 12.9% 20,086 -48.4% - 195,946 NMF 80,108 NMF - - - Investment property 218,142 285,996 -23.7% 353,565 -38.3% 218,142 154,618 41.1% 202,533 7.7% - 131,378 NMF 155,367 NMF - - (4,335) Property and equipment 324,810 1,353,661 -76.0% 988,436 -67.1% 324,810 299,875 8.3% 322,925 0.6% - 1,053,786 NMF 661,176 NMF - - 4,335 Goodwill 33,351 157,824 -78.9% 55,276 -39.7% 33,351 33,453 -0.3% 33,351 0.0% - 124,371 NMF 21,925 NMF - - - Intangible assets 57,139 63,121 -9.5% 60,980 -6.3% 57,139 42,520 34.4% 55,525 2.9% - 20,601 NMF 5,455 NMF - - - Income tax assets 13,189 11,277 17.0% 2,293 475.2% 13,189 6,986 88.8% 919 NMF - 4,291 NMF 1,374 NMF - - - Other assets 113,823 182,291 -37.6% 188,732 -39.7% 117,289 107,804 8.8% 119,337 -1.7% - 79,972 NMF 73,468 NMF (3,466) (5,485) (4,073) Assets of disposal group held for distribution 2,447,592 - NMF 1,136,417 115.4% - - - - - 3,841,004 - NMF 1,165,182 NMF (1,393,412) - (28,765) Total assets 15,474,490 12,571,248 23.1% 15,168,669 2.0% 13,166,862 10,554,058 24.8% 12,907,678 2.0% 3,841,004 2,415,485 59.0% 2,763,913 39.0% (1,533,376) (398,295) (502,922) Client deposits and notes 6,762,071 5,294,462 27.7% 6,712,482 0.7% 7,296,110 5,622,023 29.8% 7,078,058 3.1% - - - - - (534,039) (327,561) (365,576) Amounts due to credit institutions 2,521,291 3,133,422 -19.5% 3,155,839 -20.1% 2,642,427 2,662,910 -0.8% 2,778,338 -4.9% - 532,572 NMF 377,501 NMF (121,136) (62,060) - Debt securities issued 1,524,600 1,157,082 31.8% 1,709,152 -10.8% 1,569,404 827,025 89.8% 1,386,412 13.2% - 335,773 NMF 357,442 NMF (44,804) (5,716) (34,702) Accruals and deferred income 27,478 131,372 -79.1% 132,669 -79.3% 27,478 26,109 5.2% 42,207 -34.9% - 105,263 NMF 90,462 NMF - - - Insurance contracts liabilities - 71,620 NMF 46,402 NMF - - - - - - 71,620 NMF 46,402 NMF - - - Income tax liabilities 19,538 17,155 13.9% 20,959 -6.8% 19,538 15,493 26.1% 20,100 -2.8% - 1,662 NMF 859 NMF - - - Other liabilities 41,073 348,586 -88.2% 142,133 -71.1% 41,876 45,032 -7.0% 49,861 -16.0% - 306,512 NMF 92,553 NMF (803) (2,958) (281) Liabilities of disposal group held for distribution 1,837,869 - NMF 516,663 NMF - - - - - 1,964,463 - NMF 619,026 NMF (126,594) - (102,363) Total liabilities 12,733,920 10,153,699 25.4% 12,436,299 2.4% 11,596,833 9,198,592 26.1% 11,354,976 2.1% 1,964,463 1,353,402 45.1% 1,584,245 24.0% (827,376) (398,295) (502,922) Share capital 1,151 1,153 -0.2% 1,151 0.0% 1,151 1,153 -0.2% 1,151 - - - - - - - - - Additional paid-in capital 64,530 177,793 -63.7% 106,086 -39.2% - 38,474 NMF - - 64,530 139,319 -53.7% 106,086 -39.2% - - - Treasury shares (57) (40) 42.5% (66) -13.6% (57) (40) 42.5% (66) -13.6% - - - - - - - - Other reserves 101,967 55,679 83.1% 122,082 -16.5% (117,684) (54,267) 116.9% (74,046) 58.9% 797,564 109,946 NMF 196,128 NMF (577,913) - - Retained earnings 2,246,096 1,939,587 15.8% 2,180,415 3.0% 1,679,497 1,364,143 23.1% 1,618,775 3.8% 694,686 575,444 20.7% 561,640 23.7% (128,087) - - Reserves of disposal group held for distribution 15,828 - NMF 10,934 44.8% - - - - - 15,828 - NMF 10,934 44.8% - - - Total equity attributable to shareholders of the Group 2,429,515 2,174,172 11.7% 2,420,602 0.4% 1,562,907 1,349,463 15.8% 1,545,814 1.1% 1,572,608 824,709 90.7% 874,788 79.8% (706,000) - - Non-controlling interests 311,055 243,377 27.8% 311,768 -0.2% 7,122 6,003 18.6% 6,888 3.4% 303,933 237,374 28.0% 304,880 -0.3% - - - Total equity 2,740,570 2,417,549 13.4% 2,732,370 0.3% 1,570,029 1,355,466 15.8% 1,552,702 1.1% 1,876,541 1,062,083 76.7% 1,179,668 59.1% (706,000) - - Total liabilities and equity 15,474,490 12,571,248 23.1% 15,168,669 2.0% 13,166,862 10,554,058 24.8% 12,907,678 2.0% 3,841,004 2,415,485 59.0% 2,763,913 39.0% (1,533,376) (398,295) (502,922) Book value per share 64.91 57.08 13.7% 65.22 -0.5% 24 Investment Business is classified as discontinued operations in Bank of Georgia Group's 1Q18 consolidated financial statements BELARUSKY NARODNY BANK (BNB) INCOME STATEMENT, HIGHLIGHTS 1Q18 1Q17 Change y-o-y 4Q17 Change q-o-q GEL thousands, unless otherwise stated Net banking interest income 6,544 8,702 -24.8% 6,021 8.7% Net fee and commission income 2,277 2,350 -3.1% 2,421 -5.9% Net banking foreign currency gain 3,277 1,798 82.3% 3,457 -5.2% Net other banking income 117 109 7.3% 1,295 -91.0% Revenue 12,215 12,959 -5.7% 13,194 -7.4% Operating expenses (7,721) (6,401) 20.6% (8,185) -5.7% Operating income before cost of credit risk 4,494 6,558 -31.5% 5,009 -10.3% Cost of credit risk (717) (5,634) -87.3% (518) 38.4% Net non-recurring items (700) (57) NMF (5) NMF Profit before income tax 3,077 867 NMF 4,486 -31.4% Income tax expense (779) (199) NMF (875) -11.0% Profit 2,298 668 NMF 3,611 -36.4% BALANCE SHEET, HIGHLIGHTS Mar-18 Mar-17 Change y-o-y Dec-17 Mar-18 GEL thousands, unless otherwise stated Cash and cash equivalents 77,403 66,619 16.2% 104,309 -25.8% Amounts due from credit institutions 10,387 3,981 NMF 10,499 -1.1% Investment securities 40,819 95,758 -57.4% 73,415 -44.4% Loans to customers and finance lease receivables 377,680 335,538 12.6% 399,516 -5.5% Other assets 37,731 26,564 42.0% 37,096 1.7% Total assets 544,020 528,460 2.9% 624,835 -12.9% Client deposits and notes 288,337 235,877 22.2% 310,050 -7.0% Amounts due to credit institutions 144,208 193,494 -25.5% 202,492 -28.8% Debt securities issued 30,726 25,512 20.4% 28,512 7.8% Other liabilities 7,331 5,186 41.4% 4,261 72.0% Total liabilities 470,602 460,069 2.3% 545,315 -13.7% Total equity 73,418 68,391 7.4% 79,520 -7.7% Total liabilities and equity 544,020 528,460 2.9% 624,835 -12.9% BANKING BUSINESS - IMPACT OF IFRS 9 ADOPTION 31 Dec 2017 IFRS 9 impact 1 Jan 2018 GEL thousands, unless otherwise stated Cash and cash equivalents 1,516,401 (80) 1,516,321 Amounts due from credit institutions 1,216,349 (598) 1,215,751 Loans to customers and finance lease receivables 7,741,420 (30,519) 7,710,901 Other assets 119,337 3 119,340 Total assets 12,907,678 (31,194) 12,876,484 Income tax liabilities 20,100 (2,882) 17,218 Other liabilities 49,861 320 50,181 Total liabilities 11,354,976 (2,562) 11,352,414 Other reserves (74,046) 3,256 (70,790) Retained earnings 1,618,775 (31,767) 1,587,008 Non-controlling interests 6,888 (121) 6,767 Total equity 1,552,702 (28,632) 1,524,070 Total liabilities and equity 12,907,678 (31,194) 12,876,484 BANKING BUSINESS KEY RATIOS 1Q18 1Q17 4Q17 Profitability ROAA, Annualised 3.1% 3.1% 3.4% ROAE, Annualised 25.9% 23.7% 27.8% RB ROAE 31.5% 27.8% 36.6% CIB ROAE 19.7% 18.6% 18.1% Net Interest Margin, Annualised 7.0% 7.4% 7.3% RB NIM 8.3% 8.8% 8.4% CIB NIM 3.2% 3.4% 3.5% Loan Yield, Annualised 13.9% 14.0% 14.3% RB Loan Yield 15.9% 15.9% 15.9% CIB Loan Yield 9.9% 10.7% 11.2% Liquid Assets Yield, Annualised 3.6% 3.3% 3.4% Cost of Funds, Annualised 4.8% 4.6% 4.8% Cost of Client Deposits and Notes, Annualised 3.4% 3.5% 3.5% RB Cost of Client Deposits and Notes 2.8% 3.0% 2.8% CIB Cost of Client Deposits and Notes 3.9% 3.9% 4.0% Cost of Amounts Due to Credit Institutions, Annualised 6.9% 6.3% 6.5% Cost of Debt Securities Issued 7.7% 6.0% 7.8% Operating Leverage, Y-O-Y -2.8% 6.0% -2.9% Operating Leverage, Q-O-Q 3.2% 3.4% -0.2% Efficiency Cost / Income 37.0% 36.0% 38.3% RB Cost / Income 36.4% 37.6% 38.7% CIB Cost / Income 32.5% 30.1% 31.0% Liquidity NBG Liquidity Ratio 36.5% 37.4% 34.4% Liquid Assets To Total Liabilities 38.9% 36.9% 38.3% Net Loans To Client Deposits and Notes 106.8% 115.1% 109.4% Net Loans To Client Deposits and Notes + DFIs 91.8% 95.6% 92.4% Leverage (Times) 7.4 6.8 7.3 Asset Quality: NPLs (in GEL) 247,335 311,940 301,268 NPLs To Gross Loans To Clients 3.1% 4.6% 3.8% NPL Coverage Ratio 111.4% 87.1% 92.7% NPL Coverage Ratio, Adjusted for discounted value of collateral 147.2% 126.9% 130.6% Cost of Risk, Annualised 2.1% 2.4% 2.1% RB Cost of Risk 2.6% 3.4% 1.8% CIB Cost of Risk 1.3% 0.3% 3.2% Capital Adequacy: NBG (Basel III) Tier I Capital Adequacy Ratio 12.4% n/a 12.4% NBG (Basel III) Total Capital Adequacy Ratio 17.3% n/a 17.9% Selected Operating Data: Total Assets Per FTE, BOG Standalone 1,854 1,598 1,832 Number Of Active Branches, Of Which: 282 279 286 - Express Branches (including Metro) 156 130 156 - Bank of Georgia Branches 114 138 118 - Solo Lounges 12 11 12 Number Of ATMs 842 813 850 Number Of Cards Outstanding, Of Which: 2,246,396 2,099,488 2,227,000 - Debit cards 1,597,662 1,307,135 1,553,427 - Credit cards 648,734 792,353 673,573 Number Of POS Terminals 12,571 10,774 13,216 FX Rates: GEL/US$ exchange rate (period-end) 2.4144 2.4452 2.5922 GEL/GBP exchange rate (period-end) 3.3932 3.0418 3.5005 Mar-18 Mar-17 Dec-17 Full Time Employees, Group, Of Which: 26,453 24,091 25,795 Total Banking Business companies, of which: 7,102 6,605 7,045 - Full Time Employees, BOG Standalone 5,505 5,183 5,501 - Full Time Employees, BNB 708 622 702 - Full Time Employees, BB other 889 800 842 Total Investment Business25 companies, of which: 19,351 17,486 18,750 - Full Time Employees, Georgia Healthcare Group 15,482 14,510 15,070 - Full Time Employees, Aldagi 325 293 328 - Full Time Employees, GGU 2,651 2,373 2,631 - Full Time Employees, m2 232 84 156 - Full Time Employees, Other 661 226 565 Shares Outstanding Mar-18 Mar-17 Dec-17 Ordinary Shares 37,431,257 38,085,220 37,116,399 Treasury Shares 1,953,455 1,384,100 2,268,313 Total Shares Outstanding 39,384,712 39,469,320 39,384,712 25 Investment Business is classified as discontinued operations in Bank of Georgia Group's 1Q18 consolidated financial statements JSC GEORGIA CAPITAL HIGHLIGHTS INCOME STATEMENT HIGHLIGHTS 1Q18 1Q17 Change y-o-y 4Q17 Change q-o-q Stand-alone GEL thousands unless otherwise noted Dividend income - - - 28,000 NMF Interest income 3,790 - NMF 629 NMF Total Income 3,790 - NMF 28,629 -86.8% Operating expenses (374) (68) NMF (723) -48.3% Interest expense (7,570) (4,802) 57.6% (3,955) 91.4% Operating expenses (7,944) (4,870) 63.1% (4,678) 69.8% Net gains from disposal of shares in subsidiaries - 9,573 NMF - NMF Net foreign currency (loss) gain (4,636) 154 NMF 4,799 NMF (Loss) Profit (8,790) 4,857 NMF 28,750 NMF BALANCE SHEET HIGHLIGHTS Mar-18 Mar-17 Change y-o-y Dec-17 Change q-o-q Stand-alone GEL thousands unless otherwise noted Cash and cash equivalents 341,252 3,192 NMF 219,002 55.8% Debt securities owned 77,026 - NMF 45,147 70.6% Equity investments at fair value 706,000 - NMF - NMF Loans issued 248,167 - NMF 34,221 NMF Investments in subsidiaries 569,983 511,270 11.5% 561,571 1.5% Other assets 1,295 - NMF 108 NMF Total assets 1,943,723 514,462 NMF 860,049 126.0% Debt securities issued 658,006 - NMF - NMF Borrowings - 160,228 NMF 272,279 NMF Other liabilities 1,729 413 NMF 948 82.4% Total liabilities 659,735 160,641 NMF 273,227 141.5% Total equity 1,283,988 353,821 NMF 586,822 118.8% CASH FLOW HIGHLIGHTS 1Q18 4Q17 Stand-alone GEL thousands unless otherwise noted Dividends received - 28,000 Interest received 1,907 487 Interest paid (21,785) - Holding costs (312) (688) Funds used in/from operations (20,190) 27,799 Investments in subsidiaries (8,412) (11,290) Loans issued (216,646) - Purchase of treasury/debt securities (31,636) - Funds used in investing activities (256,693) (11,290) Repayment of borrowings (248,295) - Proceeds from debt securities issued 664,593 - Proceeds from borrowings - 119,029 Funds from financing activities 416,297 119,029 Net increase in cash and cash equivalents 139,414 135,538 Fx Effect (17,164) 4,714 Beginning cash 219,002 78,752 Ending cash 341,252 219,002 INVESTMENT BUSINESS HIGHLIGHTS INCOME STATEMENT 1Q18 1Q17 Change y-o-y 4Q17 Change q-o-q Consolidated GEL thousands, unless otherwise stated Utility and energy revenue 30,654 27,236 12.5% 33,286 -7.9% Cost of utility and energy (9,804) (9,709) 1.0% (10,417) -5.9% Gross utility and energy profit 20,850 17,527 19.0% 22,869 -8.8% Net insurance premiums earned 12,943 12,527 3.3% 13,512 -4.2% Net insurance claims incurred (6,091) (5,637) 8.1% (7,207) -15.5% Gross insurance profit 6,852 6,890 -0.6% 6,305 8.7% Real estate revenue 29,207 19,781 47.7% 32,982 -11.4% Cost of real estate (25,270) (17,192) 47.0% (27,209) -7.1% Gross real estate profit 3,937 2,589 52.1% 5,773 -31.8% Beverage revenue 12,516 7,145 75.2% 14,615 -14.4% Cost of beverage (8,045) (4,828) 66.6% (7,506) 7.2% Gross beverage profit 4,471 2,317 93.0% 7,109 -37.1% Other income 1,672 1,528 9.4% 2,502 -33.2% Gross profit 37,782 30,851 22.5% 44,558 -15.2% Salaries and other employee benefits (11,053) (6,259) 76.6% (10,427) 6.0% Administrative expenses (9,882) (7,456) 32.5% (11,824) -16.4% Other operating expenses (575) (176) NMF (424) 35.6% Impairment charge (2,005) (104) NMF (618) NMF EBITDA 14,267 16,856 -15.4% 21,265 -32.9% Depreciation and amortisation (8,972) (5,598) 60.3% (9,056) -0.9% Net foreign currency gain (loss) 5,878 5,771 1.9% (5,797) NMF Interest income 3,934 2,532 55.4% 4,088 -3.8% Interest expense (9,524) (6,770) 40.7% (8,969) 6.2% Net operating income before non-recurring items 5,583 12,791 -56.4% 1,531 NMF Net non-recurring items (156) 113 NMF (460) -66.1% Profit before income tax expense from continuing operations 5,427 12,904 -57.9% 1,071 NMF Income tax expense (693) (687) 0.9% (1,666) -58.4% Profit (loss) from continuing operations 4,734 12,217 -61.3% (595) NMF Profit from discontinued operations 24,641 12,829 92.1% 12,270 100.8% Profit 29,375 25,046 17.3% 11,675 151.6% Attributable to: - shareholders of the Group 17,168 17,791 -3.5% 7,042 143.8% - non-controlling interests 12,207 7,255 68.3% 4,633 163.5% BALANCE SHEET Mar-18 Mar-17 Change y-o-y Dec-17 Change q-o-q Consolidated GEL thousands, unless otherwise stated Cash and cash equivalents 528,697 359,629 47.0% 374,301 41.2% Amounts due from credit institutions 37,667 174,248 -78.4% 38,141 -1.2% Debt securities owned 45,233 2,197 NMF 31,906 41.8% Equity investments at fair value 707,153 1,153 NMF 1,153 NMF Accounts receivable 32,669 140,489 -76.7% 35,446 -7.8% Insurance premiums receivable 28,392 53,256 -46.7% 30,854 -8.0% Inventories 77,626 195,946 -60.4% 80,108 -3.1% Investment property 153,638 131,378 16.9% 155,367 -1.1% Property and equipment 700,905 1,053,786 -33.5% 661,176 6.0% Goodwill 24,275 124,371 -80.5% 21,925 10.7% Intangible assets 5,233 20,601 -74.6% 5,455 -4.1% Income tax assets 1,179 4,291 -72.5% 1,374 -14.2% Prepayments 105,803 74,168 42.7% 88,057 20.2% Other assets 189,768 79,972 137.3% 73,468 158.3% Assets of disposal group held for sale 1,202,765 - NMF 1,165,182 3.2% Total assets 3,841,003 2,415,485 59.0% 2,763,913 39.0% Accounts payable 42,012 133,720 -68.6% 46,479 -9.6% Insurance contracts liabilities 43,103 71,620 -39.8% 46,402 -7.1% Borrowings 381,070 532,572 -28.4% 377,501 0.9% Debt securities issued 732,401 335,773 118.1% 357,442 104.9% Income tax liabilities 545 1,662 -67.2% 859 -36.6% Deferred income 64,035 73,970 -13.4% 73,066 -12.4% Other liabilities 71,342 204,085 -65.0% 63,470 12.4% Liabilities of disposal group held for sale 629,955 - NMF 619,026 1.8% Total liabilities 1,964,463 1,353,402 45.1% 1,584,245 24.0% Total equity attributable to shareholders of the Group 1,572,608 824,709 90.7% 874,788 79.8% Non-controlling interests 303,932 237,374 28.0% 304,880 -0.3% Total equity 1,876,540 1,062,083 76.7% 1,179,668 59.1% Total liabilities and equity 3,841,003 2,415,485 59.0% 2,763,913 39.0% INCOME STATEMENT, GGU Utility Energy Eliminations Consolidated GEL thousands, unless otherwise noted 1Q18 1Q17 Change y-o-y 4Q17 Change q-o-q 1Q18 1Q17 Change y-o-y 4Q17 Change q-o-q 1Q18 1Q17 4Q17 1Q18 1Q17 Change y-o-y 4Q17 Change q-o-q Revenue from water supply to legal entities 19,088 18,336 4.1% 22,215 -14.1% - - - - - - - - 19,088 18,336 4.1% 22,215 -14.1% Revenue from water supply to individuals 9,769 7,911 23.5% 8,529 14.5% - - - - - - - - 9,769 7,911 23.5% 8,529 14.5% Revenue from electric power sales - - - - - 3,055 2,148 42.2% 3,892 -21.5% (900) (957) (1,019) 2,155 1,191 80.9% 2,873 -25.0% Other income 1,325 1,160 14.2% 2,278 -41.8% 4 4 - 5 -20.0% - - - 1,329 1,164 14.2% 2,283 -41.8% Revenue 30,182 27,407 10.1% 33,022 -8.6% 3,059 2,152 42.1% 3,897 -21.5% (900) (957) (1,019) 32,341 28,602 13.1% 35,900 -9.9% Salaries and benefits (4,790) (3,950) 21.3% (5,155) -7.1% (346) (307) 12.7% (231) 49.8% - - - (5,136) (4,257) 20.6% (5,386) -4.6% Electricity and transmission costs (5,722) (5,913) -3.2% (5,311) 7.7% (25) (16) 56.3% (27) -7.4% 900 957 1,019 (4,847) (4,972) -2.5% (4,319) 12.2% Assets maintenance expenses (1,250) (1,066) 17.3% (1,693) -26.2% (18) (26) -30.8% (20) -10.0% - - - (1,268) (1,092) 16.1% (1,713) -26.0% General and administrative expenses (2,519) (2,257) 11.6% (3,229) -22.0% (649) (419) 54.9% (558) 16.3% - - - (3,168) (2,676) 18.4% (3,787) -16.3% Other operating expenses (1,630) (1,359) 19.9% (1,560) 4.5% (288) (86) NMF (483) -40.4% - - - (1,918) (1,445) 32.7% (2,043) -6.1% Operating expenses (15,911) (14,545) 9.4% (16,948) -6.1% (1,326) (854) 55.3% (1,319) 0.5% 900 957 1,019 (16,337) (14,442) 13.1% (17,248) 5.3% Provisions for doubtful trade receivables (1,449) 274 NMF 338 NMF - - - - - - - - (1,449) 274 NMF 338 NMF EBITDA 12,822 13,136 -2.4% 16,412 -21.9% 1,733 1,298 33.5% 2,578 -32.8% - - - 14,555 14,434 0.8% 18,990 -23.4% EBITDA Margin 42% 48% 50% 57% 60% 66% 0% 0% 0% 45% 50% 53% Depreciation and amortisation (5,233) (4,135) 26.6% (4,469) 17.1% (884) (686) 28.9% (760) 16.3% - - - (6,117) (4,821) 26.9% (5,229) 17.0% EBIT 7,589 9,001 -15.7% 11,943 -36.5% 849 612 38.7% 1,818 -53.3% - - - 8,438 9,613 -12.2% 13,761 -38.7% EBIT Margin 25% 33% 36% 28% 28% 47% 0% 0% 0% 26% 34% 38% Net interest expense (3,104) (2,036) 52.5% (2,975) 4.3% (192) (230) -16.5% (743) -74.2% - - - (3,296) (2,266) 45.5% (3,718) -11.4% Net non-recurring expenses - - - (383) NMF (124) - NMF (196) -36.7% - - - (124) - NMF (579) -78.6% Foreign exchange (loss) gain 1,786 (104) NMF (271) NMF (26) (224) -88.4% (115) -77.4% - - - 1,760 (328) NMF (386) NMF EBT 6,271 6,861 -8.6% 8,314 -24.6% 507 158 NMF 764 -33.6% - - - 6,778 7,019 -3.4% 9,078 -25.3% Income tax expense - - - (210) NMF - - - - - - - - - - - (210) NMF Profit 6,271 6,861 -8.6% 8,104 -22.6% 507 158 NMF 764 -33.6% - - - 6,778 7,019 -3.4% 8,868 -23.6% Attributable to: - Shareholders of the Group 6,271 6,861 -8.6% 8,104 -22.6% 693 316 119.3% 381 81.9% - - - 6,964 7,177 -3.0% 8,485 -17.9% - Non-controlling interests - - - - - (186) (158) 17.7% 383 NMF - - - (186) (158) 17.7% 383 NMF INCOME STATEMENT, m2 Housing development Business Hospitality Business Eliminations Consolidated GEL thousands, unless otherwise noted 1Q18 1Q17 Change y-o-y 4Q17 Change q-o-q 1Q18 1Q17 Change y-o-y 4Q17 Change q-o-q 1Q18 1Q17 4Q17 1Q18 1Q17 Change y-o-y 4Q17 Change q-o-q Revenue from sale of apartments 27,861 18,399 51.4% 30,788 -9.5% - - - - - - - - 27,861 18,399 51.4% 30,788 -9.5% Cost of sale of apartments (24,939) (17,109) 45.8% (26,890) -7.3% - - - - - - - - (24,939) (17,109) 45.8% (26,890) -7.3% Gross profit from sale of apartments 2,922 1,290 126.5% 3,898 -25.0% - - - - - - - - 2,922 1,290 126.5% 3,898 -25.0% Revenue from operating lease - - - - - 1,001 899 11.3% 986 1.5% - - - 1,001 899 11.3% 986 1.5% Cost of operating leases - - - - - (151) (83) 81.9% (135) 11.9% - - - (151) (83) 81.9% (135) 11.9% Gross profit from operating leases - - - - - 850 816 4.2% 851 -0.1% - - - 850 816 4.2% 851 -0.1% Revenue from hospitality services - - - - - 344 - NMF - NMF - - - 344 - NMF - NMF Cost of hospitality services - - - - - (277) - NMF - NMF - - - (277) - NMF - NMF Gross profit from hospitality services - - - - - 67 - NMF - NMF - - - 67 - NMF - NMF Revaluation of commercial property - 479 NMF 99 NMF - - - (618) NMF - - - - 479 NMF (519) NMF Gross real estate profit 2,922 1,769 65.2% 3,997 -26.9% 917 816 12.4% 233 NMF - - - 3,839 2,585 48.5% 4,230 -9.2% Other income 178 11 NMF 56 NMF 9 - NMF - NMF (97) - - 90 11 NMF 56 60.7% Gross profit 3,100 1,780 74.2% 4,053 -23.5% 926 816 13.5% 233 NMF (97) - - 3,929 2,596 51.3% 4,286 -8.3% Salaries and other employee benefits (829) (396) 109.3% (939) -11.7% (318) (11) NMF (256) 24.2% - - - (1,147) (407) NMF (1,195) -4.0% Administrative expenses (1,426) (1,336) 6.7% (1,459) -2.3% (48) (91) -47.3% (41) 17.1% - - - (1,474) (1,427) 3.3% (1,500) -1.7% Operating expenses (2,255) (1,732) 30.2% (2,398) -6.0% (366) (102) NMF (297) 23.2% - - - (2,621) (1,834) 42.9% (2,695) -2.7% EBITDA 845 48 NMF 1,655 -48.9% 560 714 -21.6% (64) NMF (97) - - 1,308 762 71.7% 1,591 -17.8% Depreciation and amortization (134) (63) 112.7% (305) -56.1% (5) (3) 66.7% (10) -50.0% - - - (139) (66) 110.6% (315) -55.9% Net foreign currency (loss) gain (297) (184) 61.4% 89 NMF (10) (10) - 5 NMF - - - (307) (194) 58.2% 94 NMF Interest income 99 182 -45.6% 151 -34.4% 3 7 -57.1% (6) -150.0% - - - 102 189 -46.0% 145 -29.7% Interest expense - (2) NMF - - (41) (46) -10.9% (47) -12.8% - - - (41) (48) -14.6% (47) -12.8% Net operating income (loss) before non-recurring items 513 (19) NMF 1,590 -67.7% 507 662 -23.4% (122) NMF (97) - - 923 643 43.5% 1,468 -37.1% Net non-recurring items (31) (73) -57.5% (191) -83.8% (1) (3) -66.7% (6) -83.3% - - - (32) (76) -57.9% (197) -83.8% Profit before income tax 482 (92) NMF 1,399 -65.5% 506 659 -23.2% (128) NMF (97) - - 891 567 57.1% 1,271 -29.9% Income tax (expense) - - - (468) NMF - - - (13) NMF - - - - - - (481) NMF Profit 482 (92) NMF 931 -48.2% 506 659 -23.2% (141) NMF (97) - - 891 567 57.1% 790 12.8% Annex: In this announcement the Management uses various alternative performance measures ("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. We believe 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. Glossary 1. Return on average total assets (ROAA) equals Banking Business Profit for the period divided by monthly average total assets for the same period; 2. Return on average total equity (ROAE) equals Banking Business Profit for the period attributable to shareholders of BGEO divided by monthly average equity attributable to shareholders of BGEO for the same period; 3. Net Interest Margin (NIM) equals Net Banking Interest Income of the period divided by monthly Average Interest Earning Assets Excluding Cash for the same period; Interest Earning Assets Excluding Cash comprise: Amounts Due From Credit Institutions, Investment Securities (but excluding corporate shares) and net Loans To Customers And Finance Lease Receivables; 4. Loan Yield equals Banking Interest Income From Loans To Customers And Finance Lease Receivables divided by monthly Average Gross Loans To Customers And Finance Lease Receivables; 5. Cost of Funds equals banking interest expense of the period divided by monthly average interest bearing liabilities; interest bearing liabilities include: amounts due to credit institutions, client deposits and notes, and debt securities issued; 6. Operating Leverage equals percentage change in revenue less percentage change in operating expenses; 7. Cost / Income Ratio equals operating expenses divided by revenue; 8. NBG Liquidity Ratio equals daily average liquid assets (as defined by NBG) during the month divided by daily average liabilities (as defined by NBG) during the month; 9. Liquid assets include: cash and cash equivalents, amounts due from credit institutions and investment securities; 10. Liquidity Coverage Ratio equals high quality liquid assets (as defined by NBG) divided by net cash outflow over the next 30 days (as defined by NBG) 11. Leverage (Times) equals total liabilities divided by total equity; 12. NPL Coverage Ratio equals allowance for impairment of loans and finance lease receivables divided by NPLs; 13. NPL Coverage Ratio adjusted for discounted value of collateral equals allowance for impairment of loans and finance lease receivables divided by NPLs (discounted value of collateral is added back to allowance for impairment) 14. Cost of Risk equals impairment charge for loans to customers and finance lease receivables for the period divided by monthly average gross loans to customers and finance lease receivables over the same period; 15. NBG (Basel III) Tier I Capital Adequacy ratio equals Tier I Capital divided by total risk weighted assets, both calculated in accordance with the requirements the National Bank of Georgia instructions; 16. NBG (Basel III) Total Capital Adequacy ratio equals total capital divided by total risk weighted assets, both calculated in accordance with the requirements of the National Bank of Georgia instructions; 17. Loss ratio equals net insurance claims expense divided by net earned premiums 18. Expense ratio equals sum of acquisition costs and operating expenses divided by net earned premiums 19. Combined ratio equals sum of the loss ratio and the expense ratio 20. NMF - Not meaningful Bank of Georgia Group PLC 1Q18 Results Conference Call Details Bank of Georgia Group PLC ("Bank of Georgia Group" or the "Group") will publish its financial results for the 1st quarter 2018 at 07:00 London time on Monday, 21 May 2018. The results announcement will be available on the Group's website at www.bankofgeorgiagroup.com or www.bgeo.com. An investor/analyst conference call, organised by Bank of Georgia Group, will be held on, 21 May 2018, at 14:00 UK / 15:00 CET / 09:00 U.S Eastern Time. The duration of the call will be 60 minutes and will consist of a 15-minute update and a 45-minute Q&A session. Dial-in numbers: Pass code for replays/Conference ID: 1597205 International Dial-in: +44 (0) 2071 928000 UK: 08445718892 US: 16315107495 Austria: 019286559 Belgium: 024009874 Czech Republic: 228881424 Denmark: 32728042 Finland: 0942450806 France: 0176700794 Germany: 06924437351 Hungary: 0614088064 Ireland: 014319615 Italy: 0687502026 Luxembourg: 27860515 Netherlands: 0207143545 Norway: 23960264 Spain: 914146280 Sweden: 0850692180 Switzerland: 0315800059 30-Day replay: Pass code for replays / Conference ID: 1597205 International Dial in: +44 (0)1452550000 UK National Dial In: 08717000145 UK Local Dial In: 08443386600 USA Free Call Dial In: 1 (866) 247-4222 COMPANY INFORMATION Bank of Georgia Group PLC Registered Address 84 Brook Street London W1K 5EH United Kingdom www.bankofgeorgiagroup.com or www.BGEO.com Registered under number 10917019 in England and Wales Stock Listing London Stock Exchange PLC's Main Market for listed securities Ticker: "BGEO.LN" Contact Information Bank of Georgia Group PLC Investor Relations Telephone: +44(0)203 178 4052; +995 322 444444 (9282) E-mail: [email protected] Auditors Ernst & Young LLP 25 Churchill Place Canary Wharf London E14 5EY United Kingdom Registrar Computershare Investor Services PLC The Pavilions Bridgwater Road Bristol BS13 8AE United Kingdom Please note that Investor Centre is a free, secure online service run by our Registrar, Computershare, giving you convenient access to information on your shareholdings. Investor Centre Web Address - www.investorcentre.co.uk. Investor Centre Shareholder Helpline - +44 (0)370 873 5866 Share price information Shareholders can access both the latest and historical prices via the websites, www.bankofgeorgiagroup.com or www.BGEO.com This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com. END QRFPGUGCAUPRGBU
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