Georgia Capital PLC

CAPTURING SUSTAINABLE

INVESTMENT OPPORTUNITIES

TO CREATE VALUE

AnnuAl RepoRt 2023

Georgia Capital PLC Annual Report 2023

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

A PLATFORM

FOR INVESTING

IN, UPSCALING AND

MONETISING LARGE

OPPORTUNITY

BUSINESSES

IN GEORGIA

Georgia Capital PLC (“Georgia Capital” or

“GCAP” or “the Company” – LSE: CGEO

LN) is a platform for buying, building and

developing businesses in Georgia and

monetising investments, as they mature.

Georgia Capital PLC holds 100% of the share

capital of JSC Georgia Capital (“JSC GCAP”),

which together are referred to as the “Group”

or “GCAP HoldCo”.

The Group’s primary business is to develop or buy

businesses, help them develop their management and

institutionalise their businesses so they can further develop

mainly on their own, either with continued oversight or

independently. The Group’s focus is typically on larger-

scale investment opportunities in Georgia, which have

the potential to reach at least GEL 300 million equity

value over three to five years from the initial investment.

As investments mature, the focus shifts to monetising

them through exits. Georgia Capital manages its portfolio

companies individually and does not focus on achieving

intergroup synergies. The Group does not have capital

commitments or a primary mandate to deploy funds or

divest assets within a specific time frame. As such, it

focuses on shareholder returns and on opportunities

which meet its investment return and growth criteria.

CHAIRMAN AND CEO STATEMENT

Read our Chairman and CEO Statement on pages 14 to 16

STRATEGY

Read about Georgia Capital Strategy on pages 18 to 19

PORTFOLIO

Read about our portfolio companies on pages 34 to 60

STRATEGIC REVIEW

Overview

2 Performance Highlights

6 Value Creation

8 2023 in Brief

14 Chairman and CEO Statement

Our Business

18 Georgia Capital Strategy

20 Market and Industry Overview

28 Capital Allocation and Managing Portfolio Companies

32 Our Management Team

34 Our Portfolio Overview

62 S172 Statement

66 Risk Management

71 Risk Overview

80 Resources and Responsibilities

Discussion of Results

94 Alternative Performance Measures

97 Reconciliation of Adjusted IFRS Measures to IFRS Figures

99 Valuation Methodology

101 Financial Review

GOVERNANCE

120 Directors’ Governance Statement

122 Board of Directors

124 Corporate Governance Framework

133 Audit and Valuation Committee Report

139 Directors’ Remuneration Report

158 Nomination Committee Report

162 Statement of Directors’ Responsibilities

163 Directors’ Report

FINANCIAL STATEMENTS

166 Independent Auditor’s Report

172 Statement of Financial Position

173 Statement of Profit or Loss and Comprehensive Income

174 Statement of Changes in Equity

175 Statement of Cash Flows

176 Notes to the Financial Statements

ADDITIONAL INFORMATION

204 Abbreviations

205 References

206 Glossary

207 Shareholder Information

For more information on

Georgia Capital visit:

georgiacapital.ge

Georgia Capital PLC Annual Report 2023

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

NAV per share (GEL)

82.94 +26.5% y-o-y

Total portfolio value (GEL million)

3,672 +14.8% y-o-y

NAV per share (GBP)

24.23 +20.4% y-o-y

Liquid assets and loans issued (GEL million)

117 -73.3% y-o-y

Net Asset Value (NAV) (GEL million)

3,379 +19.9% y-o-y

NCC

ratio

15.6% -5.5 ppts y-o-y

PRIVATE

PORTFOLIO

Value: 2,287

62.3% of the total portfolio value

LISTED AND OBSERVABLE

PORTFOLIO

Value: 1,385

37.7% of the total portfolio value

GEORGIA CAPITAL NAV OVERVIEW

PORTFOLIO BREAKDOWN (GEL MILLION)

PERFORMANCE HIGHLIGHTS

PERFORMANCE OVERVIEW (GEL MILLION)

1 The detailed value creation drivers for each business are described on pages 101-119 in the results section of this report.

2 Includes both the buybacks under the share buyback and cancellation programme and for the management trust.

3 Includes regular cash and buyback dividends.

4 One-off dividend income includes a non-recurring GEL 27 million dividends collected from the retail (pharmacy) business and GEL 29 million buyback dividend attributable to

participation in BoG’s 2022 buybacks in FY23.

Certain financial measures presented in the Strategic Review are taken from unaudited management accounts. The figures from the management accounts are Alternative

Performance Measures (APMs) and are described on page 94, and the differences from, and the reconciliation to, the IFRS audited accounts are presented on pages 97-98.

Investments

23 -173 y-o-y

Buybacks

76 -7 y-o-y

Net income

616 +614 y-o-y

OUR STRATEGY

Read about our Strategy on page 18

1 Net Capital Commitment – please see definition in glossary on page 206.

2 As presented elsewhere in this report, in December 2023, our healthcare business underwent a strategic restructuring. This restructuring resulted in the split of the hospitals

business into two distinct segments: “Large and Specialty Hospitals” and “Regional and Community Hospitals”. The Regional and Community Hospitals now include the

community clinics that were previously managed under the clinics and diagnostics business. See page 42 for more background.

681 +646 y-o-y

549

BANK OF

GEORGIA

+359 y-o-y

WATER

UTILITY

-12 y-o-y

LARGE PORTFOLIO

COMPANIES

+146 y-o-y

INVESTMENT STAGE

PORTFOLIO COMPANIES

+34 y-o-y

OTHER PORTFOLIO

COMPANIES

+119 y-o-y

553 +347 y-o-y

127 +299 y-o-y

Dividend income

236 +142 y-o-y

OF WHICH, RECURRING DIVIDEND INCOME

180 +86 y-o-y

OF WHICH, ONE-OFF DIVIDEND INCOME

56 NMF

LARGE PORTFOLIO COMPANIES

Value: 1,436; 39.1% of the total portfolio value

INVESTMENT STAGE PORTFOLIO COMPANIES

Value: 567, 15.5% of the total portfolio value

LISTED AND OBSERVABLE

PORTFOLIO

PRIVATE PORTFOLIO

TOTAL PORTFOLIO VALUE CREATION

HOSPITALS

Value: 344

9.4% of the total

BANK OF GEORGIA

Value: 1,226

33.4% of the total

INSURANCE

(P&C AND MEDICAL)

Value: 378

10.3% of the total

RETAIL (PHARMACY)

Value: 714

19.4% of the total

RENEWABLE

ENERGY

Value: 267

7.3% of the total

WATER UTILITY

Value: 159

4.3% of the total

EDUCATION

Value: 189

5.2% of the total

CLINICS AND

DIAGNOSTICS

Value: 111

3.0% of the total

OTHER

BUSINESSES

Value: 284

7.7% of the total

Georgia Capital PLC Annual Report 2023

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

2,074

1,901

1,275

484

141

1,346

573

155

+9.1%

2022 2023

Large portfolio companies

Investment stage portfolio companies

Other portfolio companies

243

248

157

149

+1.8%

2022 2023

Large portfolio companies

Investment stage portfolio companies

Other portfolio companies

206

135

-34.3%

2022 2023

310

275

-11.5%

2022 2023

PERFORMANCE HIGHLIGHTS CONTINUED

Listed and observable portfolio companies Private large portfolio companies

Bank of Georgia

Bank of Georgia Group PLC (“Bank

of Georgia” or “BoG” or “BoGG” –

LSE: BGEO LN) is a UK incorporated

holding company, comprising a) retail

banking and payment services (Retail

Banking), b) banking services for

small and medium-sized businesses

(SME Banking) and c) corporate

and investment banking operations

(Corporate and Investment Banking)

in Georgia. BoG expects to benefit

from superior growth of the Georgian

economy through both its retail

banking and corporate and investment

banking services and aims to deliver

on its strategy and key medium-term

objectives – at least 20% return on

average equity (ROAE) and c.10%

growth of its loan book. BoG targets to

maintain a 30%-50% dividend/share

buyback payout ratio through regular

and progressive semi-annual capital

distributions. BoG’s Annual Report

2023, when published, will be available

at https://bankofgeorgiagroup.com. As

of 31 December 2023, Georgia Capital

owns a 19.71% non-voting equity stake

in BoG (31 December 2022: 20.6%).

Water utility

The water utility business is a regulated

monopoly in Tbilisi and the surrounding

area, where it provides water and

wastewater services to 1.4 million

residents representing more than

one-third of Georgia’s population and

c.42,000 legal entities. The water utility

business also operates hydro power

plants (HPPs) with a total installed

capacity of 149MW. In 2022, Georgia

Capital completed the sale of an

80% equity interest in the business

to FCC Aqualia (“Aqualia”) for a cash

consideration of US$ 180 million.

As a consequence, GCAP owns a

20% interest in the business as of

31 December 2023, which remains

subject to the ongoing put/call

option structure.

Retail (pharmacy)

The retail (pharmacy) business is the

largest pharmaceuticals retailer and

wholesaler in Georgia, with a 32%

market share by 2022 revenue. The

business consists of a retail pharmacy

chain and a wholesale business that

sells pharmaceuticals and medical

supplies to hospitals and pharmacies.

The business operates a total of

412 pharmacies (of which 397 are in

Georgia and 15 are in Armenia) and 23

franchise stores. In 2023, the business

signed an agreement with its minority

shareholders to acquire a further

20.6% equity interest in the business.

As a result of this transaction, GCAP’s

ownership stake in the business

increased to 97.6% as of 31 December

2023 (31 December 2022: 77.0%).

Hospitals

The hospitals business, where GCAP

owns 100% equity, is the largest

healthcare market participant in

Georgia, comprised of seven Large

and Specialty Hospitals, providing

secondary and tertiary level healthcare

services across Georgia and 27

Regional and Community Hospitals,

providing outpatient and basic

inpatient services.

• The P&C insurance business is a

leading player in the local insurance

market with a 30% market share

in P&C insurance based on gross

premiums as of 30 September 2023.

The P&C insurance business also

offers a variety of non-P&C products

such as life insurance.

• Our medical insurance business

is one of the country’s largest

private medical insurers, with a 19%

market share based on 9M23 net

insurance premiums. The business

offers a variety of medical insurance

products primarily to Georgian

corporate and retail clients and

(selectively) to state entities.

Insurance

The insurance business comprises a)

property and casualty (P&C) insurance

business, and b) a medical insurance

business. GCAP owns a 100% stake in

the business as of 31 December 2023

(31 December 2022: 100%).

Private investment stage portfolio companies

2) Diagnostics, operating the

largest laboratory in the entire

Caucasus region – “Mega Lab”.

As of 31 December 2023, the

clinics and diagnostics business

is 100% owned by Georgia Capital

(31 December 2022: 100%).

Renewable energy

The renewable energy business

operates three wholly-owned

commissioned renewable assets:

30MW Mestiachala HPP, 20MW

Hydrolea HPPs and 21MW Qartli wind

farm. In addition, the business has a

pipeline of renewable energy projects

in varying stages of development.

The renewable energy business is

100% owned by Georgia Capital as

of 31 December 2023 (31 December

2022: 100%).

Education

Our education business currently

combines majority stakes in four private

school brands operating across seven

campuses, acquired in 2019-2023:

British-Georgian Academy and British

International School of Tbilisi (70%

stake), the leading schools in the

premium and international segments;

Buckswood International School (80%

stake), well-positioned in the midscale

segment and Green School (80%-90%

ownership), well-positioned in the

affordable segment.

Clinics and diagnostics

The clinics and diagnostics business,

where GCAP owns a 100% equity

interest, is the second largest

healthcare market participant in

Georgia after our hospitals business.

Following the strategic restructuring the

business comprises of two segments:

1) 19 polyclinics (providing outpatient

diagnostic and treatment services) and

14 lab retail points at GPC pharmacies;

PRIVATE PORTFOLIO COMPANIES’ PERFORMANCE HIGHLIGHTS (UNAUDITED)

Our 2023 performance reflects the high level of resilience of our portfolio companies, bolstered by the outstanding growth of the Georgian economy,

which has enabled Georgia Capital to deliver substantial progress and value creation in 2023.

Aggregated revenue (GEL million) Aggregated EBITDA (GEL million)

Aggregated net operating cash flow (GEL million) Aggregated cash balances of private businesses (GEL million)

1 The portfolio companies’ performance highlights include aggregated stand-alone unaudited IFRS results for our portfolio companies, which can be viewed as APMs for Georgia

Capital, since Georgia Capital does not consolidate its subsidiaries, but instead measures them at fair value under IFRS. In the Strategic Review, various stand-alone figures other

than those derived from our NAV statement for the individual portfolio companies and the discussion of their business developments are derived from their separate, individual

unaudited IFRS accounts. Private portfolio companies’ performance highlights are presented excluding the water utility business.

PORTFOLIO COMPANIES

Read more about our portfolio companies on pages 34-60

Organic transition to revenue growth strategy

Georgia Capital PLC Annual Report 2023

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

VALUE CREATION

1 The detailed Valuation Methodology is described on pages 99-100

of this report.

2 In 2022, Georgia Capital completed the sale of an 80% equity

interest in the water utility business for a cash consideration of US$

180 million. The sale valuation translates into 2.7x MOIC in US$, of

which 2.2x is realised (3.6x MOIC in GEL, of which 3.0x is realised).

PORTFOLIO

VALUE

VALUE CREATION

IN 2023

MULTIPLE OF

INVESTED CAPITAL

(MOIC) UNREALISED AT 31-DEC-23 OWNERSHIP VALUATION METHODOLOGY HIGHLIGHTS

GEL million

1,226

GEL million

549 13.8x

Bank of Georgia 19.71% London Stock Exchange (“LSE”)

Renewable energy 100%

Education 70%-90%

Clinics and diagnostics 100%

Valued externally (combination of DCF and market approaches)

Water utility 20% Pre-agreed put option multiple

Retail (pharmacy) 97.6%

Hospitals 100%

Insurance 100%

Valued externally (combination of DCF and market approaches)

GEL million

159

GEL million

4 3.7x

GEL million

1,436

GEL million

75 4.6x

GEL million

5 67

GEL million

47 1.9x

BANK OF

GEORGIA

LARGE

PORTFOLIO

COMPANIES

CLOSE TO GEL

300MLN+ IN VALUE

GEL million

284

GEL million

PRIVATE PORTFOLIO COMPANIES

LISTED AND OBSERVABLE

PORTFOLIO COMPANIES

WATER UTILITY

INVESTMENT

STAGE

PORTFOLIO

COMPANIES

WITH POTENTIAL

TO BECOME GEL

300MLN+ IN VALUE

OTHER

PORTFOLIO

COMPANIES

LIMITED POTENTIAL

TO BECOME GEL

300MLN+ IN VALUE

GEL million

3,672

GEL million

681

TOTAL

PORTFOLIO

Photo Road to Motsameta Monastery in Kutaisi, Georgia

DEFENSIVE, NON-CYCLICAL, HIGH-QUALITY ASSETS WITH STRONG AND GROWING CASH FLOW STREAMS

c.92% OF THE TOTAL PORTFOLIO IS VALUED EXTERNALLY AT 31-DEC-23

Georgia Capital PLC Annual Report 2023

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

Local

investors

US$ 83mln

55%

IFIs

US$ 67mln

45%

TOTAL ISSUE

150

US$ MILLION

23,776

19,021

-20%

Baseline

2022

Target

for 2027

Eurobond

Fully repurchased

and cancelled

New local bond

Held in GCAP treasury before cancellation

Repurchased through Tender Offer

Redeemed through “make-whole call”

106.9

16.6

176.5

300.0

150.0

KEY TERMS

2023 IN BRIEF

ISSUANCE OF US$ 150 MILLION SUSTAINABILITY-LINKED BOND

On 3 August 2023, JSC GCAP successfully issued a US$ 150 million sustainability-linked bond (SLB) on the Georgian

market. The issuance of the bonds represents the largest-ever corporate bond offering in Georgia, and the first of its

magnitude and kind in our region. The proceeds from the issuance, together with our existing liquid funds, were used

to fully redeem US$ 300 million Eurobonds. The issuance of the SLB represents a significant strategic milestone for

the Group, as it delivers on the following key objectives:

01. CONTRIBUTING TO THE DEVELOPMENT OF THE LOCAL CAPITAL MARKET

02. SUPPORTING CLIMATE-CHANGE MITIGATION

03. SUPPORTING GCAP’S DELEVERAGING STRATEGY

Annual coupon rate

8.50% (FIXED)

Semi-annual payments

Issue currency

US-DOLLAR

Maturity

5 YEARS

Callable after two years

Bond rating

BB- FROM S&P

A one-notch upgrade compared to the

Eurobond

01. CONTRIBUTING TO THE DEVELOPMENT OF THE LOCAL CAPITAL MARKET

Georgia Capital’s partner IFIs

Investor base

02. SUPPORTING CLIMATE-CHANGE MITIGATION

03. SUPPORTING GCAP’S DELEVERAGING STRATEGY

In 2023, we made significant progress on our key strategic priority of

deleveraging GCAP’s balance sheet, reducing the gross debt balance

from US$ 300 million to US$ 150 million. Alongside the SLB issuance,

GCAP initiated a Eurobond tender offer. This resulted in the repurchase

of US$ 176.5 million in Eurobonds, which, combined with the US$ 106.9

million in Eurobonds already held in GCAP’s treasury, have been fully

cancelled. Regarding the remaining US$ 16.6 million in Eurobonds,

we exercised the right of optional redemption at a “make-whole” price,

which was completed in September 2023.

The issuance attracted an unprecedented level of interest in Georgia, with total demand reaching US$ 200 million and spreading across a diverse

range of 275+ retail, corporate and institutional investors. The transaction was supported by Georgia Capital’s longstanding partner international

financial institutions (IFIs), who acquired US$ 67 million of the total issue, while the remaining US$ 83 million was allocated to local investors. Existing

Eurobond investors also participated in the local bond issuance, with holders of US$ 23 million of the Eurobond transitioning their holdings into the

local bonds.

European Bank for

Reconstruction and

Development

Asian Infrastructure

Investment Bank

International

Finance

Corporation

Asian

Development

Bank

Georgia Capital has established a SLB Framework, under which GCAP intends to decrease its greenhouse gas (GHG) emissions by 20% by 2027

compared to a 2022 baseline. Through this target, GCAP will support climate change mitigation, natural resources conservation and pollution

prevention, thereby contributing to the transition towards a more sustainable and lower carbon economy in Georgia.

• The SLB target is in line with GCAP’s overarching commitment to

reaching Net-Zero across the Group by 2050.

• GCAP’s sustainability performance target contributes to the United

Nation’s (“UN”) Sustainable Development Goals (SDGs) 7 (Affordable

and Clean Energy) and 9 (Industry, Innovation and Infrastructure).

• GCAP has obtained a second-party opinion from Sustainalytics

on its SLB Framework, affirming the alignment with the five core

components of the SLB Principles.

• Georgia Capital is committed to having external limited assurance

conducted against the SLB target on an annual basis until bond

maturity. The first limited assurance report is available in the Group’s

2023 Sustainability Report:

https://georgiacapital.ge/ir/sustainability-reports

GCAP’s sustainability performance target

Greenhouse gas emissions (tCO

Gross debt development overview (US$ million)

1 Represents GCAP’s absolute Scope 1, 2 and 3 emissions (the latter representing

the aggregated Scope 1 and 2 emissions of the portfolio companies). The 2022

GHG emissions have been retrospectively adjusted, incorporating the calculation

methodology agreed upon with our external verification provider. Specifically, GHG

emissions under the SLB framework, following the retrospective application of

the relevant methodology, amount to 23,776 tCO

e, as opposed to the previously

disclosed 22,829 tCO

e, representing an updated baseline for GHG emission

reduction targets/SPTs.

Georgia Capital PLC Annual Report 2023

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

Recurring

GEL 180 mln

One off

GEL 56 mln

DIVIDEND INCOME

236

GEL MILLION

31-Dec-19 31-Dec-20 31-Dec-21 31-Dec-22 31-Dec-23 Over the

cycle target

15.0%

15.6 %

21.1%

31.9%

39.8%

42.5%

NCC ratio NCC (US$ million)

345.7

365.9

385. 8

250.1

213.6

204.8

2018 2019 2021 2022 2023

(10)

2020

2023 IN BRIEF CONTINUED

SIGNIFICANT IMPROVEMENT IN THE NET CAPITAL

COMMITMENT RATIO

In 2023, the NCC ratio improved by 5.5 ppts y-o-y to 15.6% driven by a) a significant

decrease in gross debt, b) GEL 235.9 million dividend income from the portfolio companies

(up 2.5x y-o-y), c) a 14.8% growth in the total portfolio value, d) a GEL 17.6 million decrease

in loans issued mainly due to the loan repayments from our hospitality and auto services

businesses, and e) GEL 18.5 million decrease in GCAP’s bank guarantee on the borrowings

of the beer business, following which the guarantees issued balance was reduced to zero.

STRONG DIVIDEND INCOME IN 2023

In 2023, the Group recorded GEL 235.9 million dividend income from its portfolio companies

(up by 2.5x compared to the dividend income recorded in 2022). Robust dividend inflows,

reduced interest expenses in line with our deleveraging progress, and well-managed

operating expenses significantly increased the Group’s free cash flow in 2023.

1 One-off dividend income includes non-recurring GEL 27 million dividends collected from the retail (pharmacy) business and GEL 29 million buyback dividend attributable to

participation in BoG’s 2022 buybacks.

2 Includes regular cash and buyback dividends.

2023 free cash flow is determined by subtracting interest and operating expenses from dividend and interest income.

The 2023 free cash flow excludes US$ 22 million one-off dividends and US$ 17 million buyback dividend from the

participation in BoG’s 2023 buybacks.

NCC represents an

aggregated view of

all confirmed, agreed

and expected capital

outflows at the GCAP

HoldCo level

NCC AND NCC RATIO DEVELOPMENT OVERVIEW

GCAP’S FREE CASH FLOW DEVELOPMENT (US$ MILLION)

SOLID RECURRING DIVIDEND INCOME OF GEL 180 MILLION IN 2023, UP 92% Y-O-Y

Strong progress

on deleveraging

also resulted in

an upgrade in our

corporate credit

rating from “B+”

to “BB-” by S&P

on 26 October 2023

We are targeting to

reduce the balance

of “net debt and

guarantees issued”

close to zero over the

short to medium term

US$ million 31-Dec-22

Change

(y-o-y) 31-Dec-23

Cash and liquid funds 152.4 -73.7% 40.1

Loans issued 9.9 -65.5% 3.4

Gross debt (303.3) -49.3% (153.9)

Net debt (1) (141.0) -21.7% (110.4)

Guarantees issued (2) (6.8) NMF –

Net debt and guarantees

issued (3) = (1) + (2) (147.8) -25.3% (110.4)

Planned investments (4) (52.3) -11.1% (46.5)

of which, planned investments in renewable energy (30.1) -3.9% (28.9)

of which, planned investments in education (22.3) -20.7% (17.7 )

Announced buybacks (5) – NMF (6.7)

Contingency/liquidity buffer (6) (50.0) NMF (50.0)

Total planned investments, announced

buybacks and contingency/liquidity buffer

(7) = (4) + (5) +(6) (102.3) 0.9% (103.3)

NCC (3) + (7) (250.1) -14.6% (213.6)

Portfolio value 1,183.8 15.3% 1,365.3

NCC ratio 21.1% -5.5 ppts 15.6%

NCC OVERVIEW

1 Reflects the retrospective conversion of the loans issued to our real estate and beverages businesses into equity.

2 Assuming the application of the 15% NCC ratio target to the total portfolio value as at 31 December 2023.

Georgia Capital PLC Annual Report 2023

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

Repurchased

in 2023

US$ 18.3 mln

Repurchased

in 2024

US$ 6.7 mln

TOTAL

US$ MILLION

20192018

since demerger

2020 2021 2022 2023 2024 to date

40.239.4 47.9

47.1 44.8 43.2 42.7

Number of issued shares

1.3

2.7 2.7

3.5

5.8

7.4

7.9

Value of shares repurchased (cumulative, $US million) Number of shares repurchased (cumulative, million)

Dec-18 Dec-19 Dec-20 Dec-21 Dec-22 Dec-23

82.9

65.6

63.0

48.1

46.8

44.3

+13.4% CAGR

+26.5%

2023 IN BRIEF CONTINUED

PROGRESS ON THE SHARE BUYBACK AND CANCELLATION PROGRAMMES ANNOUNCED IN 2023

DEVELOPMENT OF GCAP’S SHARE BUYBACK PROGRAMMES SINCE DEMERGER IN 2018

Since December 2018, NAV per share (GEL) grew at 13.4% CAGR. In US$ and GBP terms, NAV per share CAGR stands

at 13.2%

7.9 million shares (US$ 87 million in value) repurchased and cancelled since demerger in 2018, representing 16.5%

of the issued share capital at its peak

NAV PER SHARE (GEL) DEVELOPMENT OVERVIEW

THE SHARE BUYBACK AND CANCELLATION PROGRAMME

IN 2023

In April 2023, Georgia Capital commenced a US$ 10 million share buyback and cancellation programme,

over a three-month period. Under the programme, 1 million shares were repurchased and cancelled.

While our share price has continued to recover, the strong growth in our NAV has meant that the discount

to our NAV per share has remained elevated, at approximately 60%. This provided an attractive opportunity

to create significant value for our shareholders through accretive tactical share buybacks. As a result,

we launched an additional US$ 15 million share buyback and cancellation programme in October 2023,

effective over a six-month period. Overall, throughout 2023, a total of 1,665,222 shares were repurchased

under the buyback programmes, amounting to a total value of US$ 18.3 million. An additional 488,642

shares with the value of US$ 6.7 million were repurchased in 1Q24 to date.

STRONG NAV PER SHARE GROWTH

NAV per share (GEL) increased by 26.5% in 2023, reflecting a) GEL 680.5 million value

creation across our portfolio companies with a positive 24.2 ppts impact, b) share buybacks

(+4.1 ppts impact) and c) GEL’s appreciation against US$, resulting in a foreign currency

gain of GEL 6.5 million on GCAP net debt (+0.2 ppts impact). The NAV per share growth

was slightly offset by management platform-related costs and net interest expense with

a negative 2.4 ppts impact in total. In GBP terms, the NAV per share growth in 2023 was

20.4%, reflecting GEL’s slight depreciation against GBP during the year.

1 Represents shares issued during Georgia Healthcare Group (“GHG”) share exchange facility.

2 Determined by taking into account the peak number of 47.9 million shares issued as of 31-Dec-20.

Georgia Capital PLC Annual Report 2023

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

CHAIRMAN AND CEO STATEMENT

Dear Fellow Shareholders,

In this, my sixth annual letter to Georgia

Capital shareholders, I want to focus on the

fundamental drivers that have led to what, in

many aspects, has been an unexpectedly strong

year against the backdrop of the ongoing global

geopolitical challenges. These fundamental

drivers – strong corporate governance; access

to management; and access to capital – have

stood us in good stead since the Company

started in 2018, and they remain the foundations

on which our NAV increased by 26.5% to GEL

82.94 (GBP 24.23) per share during 2023, and

by a compound 13.4% per annum over the

last five years. I am particularly pleased that

we achieved this level of NAV growth, as a

number of our portfolio businesses had to cope

with, and respond to, significant changes in

their specific market dynamics. I am delighted

with the resilience of Georgia Capital and

our businesses – a resilience underpinned

by our high-quality investments in a portfolio

of conservative businesses in relatively

defensive sectors.

Our aim has always been to invest in high-

quality businesses with great market positions,

high returns and the ability to deliver sustainable

earnings growth through the cycle. This aim

continued to guide us in 2023 and will continue

to do so in the future. As Georgia Capital has

evolved as an investment business during

the last few years of significant geopolitical

challenge, the Board has kept a vigilant

watch on ensuring that we maintain strong

conservative management of our portfolio

companies, and a very strong balance sheet.

The discount of our share price to our NAV per

share has remained too wide, despite our share

price increasing by 40% during 2023, and we

responded to this by buying back more of our

shares (perhaps the best investment we can be

making at the current levels of NAV discount),

and reducing leverage in the business. I will talk

more about this later.

Our strategy during 2024 is to reduce leverage

faster than our originally planned NCC ratio

target of 15% by 2025, deliver our targeted

reduction in the management expense ratio,

ensure we focus on the opportunities to

sell businesses in our “Other” portfolio, and

maintain our policy of opportunistic share

buybacks. Over time, we aim to develop into a

sustainable permanent capital vehicle, investing

mainly in capital efficient/capital-light sectors

and opportunities, in association with the

regular return of capital to shareholders. Our

ongoing development will also be supported

by Georgia’s EU candidacy status being

confirmed in December 2023. This is important

for Georgia, both politically and economically,

and significantly underpins the country’s

macroeconomic growth prospects and

attractiveness for foreign investment.

Our macroeconomic environment

Georgia is in great shape economically. From

a macroeconomic perspective, Georgia

has maintained its recent track record on

expanding in 2023, proving yet again that the

macroeconomic environment remains flexible

and resilient against exogenous shocks.

Real GDP expanded by an estimated 7.5%

in 2023, after 11.0% growth in 2022, driven

by strong foreign currency inflows building

upon strong aggregate demand. Despite

tightening financial conditions and the ongoing

substantial uncertainty in the global economy,

the medium-term outlook for Georgia remains

strong. Economic activity and macroeconomic

environment have enabled effective

adjustments in fiscal and monetary policies.

The Government balance sheet has returned

to pre-COVID levels, while the National Bank

of Georgia (“NBG”) has started to gradually

exit from its tightened monetary policy. In

December 2023, the European Council granted

candidate status to Georgia, further improving

Georgia’s economic outlook and prospects.

Surging foreign currency inflows resulted in a

significantly improved current account deficit

which narrowed to 2.6% of GDP in 9M23,

Georgia’s lowest on record. This positive shift

was supported by strong growth in the services

balance, mainly in tourism and ICT services.

The tourism sector continues to recover and

income from international travel reached US$

4.1 billion in 2023, representing 126% of 2019

levels. However, the number of international

visitors showed only a partial recovery in 2023,

standing at 80% of 2019 number, indicating

that significant further growth potential remains.

The good news is that Georgia’s tourist

infrastructure (hotels, roads, etc.) continue

to be developed throughout the country. On

the domestic side, credit expansion has also

been robust despite rising interest rates, as

the commercial bank loan portfolio grew

by 17.1% y-o-y as of December 2023 (on a

constant currency basis). Additionally, while

fiscal support has moderated, Georgia’s fiscal

stance remains expansionary, with current

expenditures growing by 10.7% and capital

expenditures expanding by 22.3% y-o-y in

2023. The Georgian Lari (GEL) has appreciated

since mid-2021, strengthening above pre-

pandemic levels against the US Dollar (US$),

and remained broadly stable in 2023.

“OUR AIM HAS ALWAYS BEEN

TO INVEST IN HIGH-QUALITY

BUSINESSES WITH GREAT

MARKET POSITIONS, HIGH

RETURNS AND THE ABILITY

TO DELIVER SUSTAINABLE

EARNINGS GROWTH THROUGH

THE CYCLE. THIS AIM

CONTINUED TO GUIDE US IN

2023 AND WILL CONTINUE TO

DO SO IN THE FUTURE.”

Irakli Gilauri

Chairman and

Chief Executive Officer

The Government projects the fiscal deficit to

have shrunk to around 2.8% of GDP in 2023,

as a result of the higher-than-expected growth,

and expects it to reduce further to 2.5% of

GDP in 2024, while general government debt is

projected to have fallen to 38.2% of GDP, way

below pre-pandemic levels, by the end of 2023.

Inflation, like elsewhere around the world, was

elevated during 2021-2022, however, it sharply

reduced in 2023 falling below the 3% target

since April 2023, with annual average inflation

standing at 2.5% in 2023. Considering this

lower inflation, the NBG started to exit from its

tightened monetary policy in 2023 and reduced

the refinancing rate by 275 bps between May

2023 and March 2024, to 8.25%.

As the length and the outcome of the war

in Ukraine remain uncertain, and the new

conflict in the Middle East creates additional

uncertainty, the medium to long-term effects

on global and regional macroeconomic

developments remain unclear. Despite

substantial uncertainty enduring, Georgia’s

medium-term growth is projected to remain

close to its potential level of 5%, according

to the International Monetary Fund (“IMF”),

positioning the country as one of the top

performers in the region. In the short run,

Georgia’s external position is strong, as foreign

currency inflows have been surging from

multiple sources, resulting in a record-low

current account deficit, and official reserve

assets reached record-high levels in 2023,

amounting to US$ 5.0 billion by the end of

December 2023, providing ample cover.

In the long run, Georgia’s EU candidacy is

expected to bring additional economic benefits.

Furthermore, the candidacy significantly

enhances Georgia’s geopolitical standing in

the region, positioning it as an important bridge

between Europe and Asia.

Delivering on our strategic priorities

This Annual Report will go into greater detail

later, but let me highlight here how we delivered

on our key strategic priorities in 2023.

Looking back, 2023 was an eventful year for

the Group.

1) At the beginning of the year, our

shareholders overwhelmingly approved

a proposal to transfer GCAP to an LSE

Standard listing, a move we believe is

more suited to the Company’s size and

strategy and will help create greater value

for shareholders.

2) We achieved significant deleveraging

progress through the successful issuance

of a US$ 150 million SLB on the Georgian

market. This issuance, combined with

GCAP’s existing liquid funds, was utilised to

fully redeem our US$ 300 million Eurobond.

3) We launched two share buyback

programmes totalling US$ 25 million,

under which 2,153,864 shares (4.8% of the

issued capital) have been repurchased from

January 2023 to date.

4) Our retail (pharmacy) business completed

the buyout of the minority shareholders to

increase GCAP’s stake to 97.6%.

5) Our hospitality business successfully

completed the sale of two operational

hotels, two under-construction properties,

and a vacant land plot for a total

consideration of US$ 38.6 million. The

proceeds from these sales were utilised

for deleveraging the hospitality business’s

balance sheet. These transactions marked

further substantial progress towards two

of our core strategic priorities: to divest,

over the next few years, subscale portfolio

companies, and to significantly reduce

leverage in the Group’s balance sheet.

Capital allocation, share buybacks

and dividends

During 2023, we allocated capital in a number

of key capital-light areas, with an investment

of GEL 22.6 million in our private portfolio

companies. This included:

• GEL 12.2 million allocated to the education

business, mainly for the acquisition of a new

campus in the affordable segment and the

development of a new campus in the mid-

scale segment; and

• GEL 6.2 million allocated to the renewable

energy business for the ongoing

development of pipeline projects.

In addition, to these investments in our private

portfolio companies, we also continued to invest

in Georgia Capital shares to take advantage

of the discount to NAV at which the shares

currently trade. During 2023, 1,665,222 shares

with a total value of GEL 47.9 million were bought

back under our buyback and cancellation

programmes, and a further 1,151,848 shares,

with a total value of GEL 28.6 million, were

repurchased for the management trust, fully

securing the shares required for the expected

management trust requirements for the next

three years. In addition, we have continued

our buyback and cancellation programme into

2024 and, in the first quarter of 2024 to date, an

additional 488,642 shares, at a cost of GEL 18.0

million, have been repurchased for cancellation.

During 2023, Georgia Capital collected

a record amount of GEL 235.9 million in

dividends (2022: GEL 93.9 million), of which

GEL 56.1 million reflected one-off dividends

during the year from Bank of Georgia and the

retail (pharmacy) business. Excluding the one-

off dividends, GEL 124.5 million was received

from Bank of Georgia, reflecting a combination

of regular cash dividends and our participation

in their share buybacks, GEL 24.2 million from

retail (pharmacy), GEL 19.9 million from our

insurance businesses (P&C insurance GEL

14.9 million; medical insurance GEL 5.0 million),

GEL 6.0 million from hospitals, and GEL 5.2

million from renewable energy businesses.

Looking forward to 2024, we currently expect

approximately GEL 180-190 million in dividends

from our portfolio companies.

Value creation

Our portfolio value increased by GEL 473.3

million, or 14.8%, to GEL 3.7 billion during the

year, particularly reflecting strong growth in the

value of our investment in Bank of Georgia.

Our listed investment – Bank of Georgia –

continued to deliver strong growth and high

profitability, with an annualised ROAE of 29.9%,

underpinned by its continued focus on digital

transformation, and delivering strong growth

in the payments business. The Bank is clearly

making significant progress, which has led to

sustainable customer franchise and revenue

generation growth. Reflecting the strong

performance, BoG’s share price increased by

52.6% in 2023, strongly supporting our NAV

growth with GEL 549.3 million value creation.

In addition, the Bank has a robust capital

distribution policy, including share buybacks

and regular dividends and, on 15 March 2024,

the Bank announced its board’s intention to

recommend a final dividend for 2023 of GEL

4.94 per ordinary share at the Bank’s 2024

Annual General Meeting. This will make a total

dividend paid in respect of the Bank’s 2023

earnings of GEL 8.00 per share. In addition, in

March 2024, the Bank announced an extension

of the buyback and cancellation programme

by an additional GEL 100 million. Overall, the

Bank’s dividend and share buyback pay-out

ratio for 2023 was 37% of total earnings.

On 19 February 2024, Bank of Georgia

announced the proposed acquisition of 100%

of Ameriabank CJSC a leading universal bank

in Armenia with an attractive franchise. The

transaction price is approximately US$ 303.6

million, which will be fully financed by the

Bank’s surplus capital at an attractive valuation

of 0.65x NAV as at 31 October 2023 and 2.6x

price to earnings (P/E) 2023. The acquisition is

expected to be EPS and ROE accretive, and

represents a significant catalyst for the Bank

and its shareholders. The Bank has confirmed

that it intends to keep the targeted pay-out ratio

unchanged in the range of 30%-50% of annual

profits, potentially enabling increased capital

distributions for the Bank’s shareholders, from

the enlarged group. We like the transaction

as Armenia’s leading banking franchise has

been acquired at attractive valuation with

immediate EPS enhancement expected. In

addition, Bank of Georgia is well-positioned to

export its superior digital banking capabilities

in the underpenetrated and growing Armenian

economy. We expect this acquisition will further

enhance shareholder value, and it has been

encouraging to see the positive stock market

reaction to the acquisition.

The value creation of the water utility business

amounted to GEL 4.0 million in 2023, reflecting

the application of the put option valuation to

GCAP’s 20% holding in the business.

Georgia Capital PLC Annual Report 2023

16 17

Georgia Capital PLC Annual Report 2023

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

The operating performance of our various

private portfolio investments was robust

against the backdrop of significant regulatory

changes and pricing dynamics in a number of

markets, and this created overall value creation

in these businesses of GEL 127.3 million.

Strong performances in the non-healthcare

portfolio companies offset the temporary

negative impact of recent regulatory changes

in the management of hospitals facilities

throughout Georgia.

The individual performances of our private

businesses are described in greater detail later

in this report.

Environmental, social and governance

We have continued to focus on reducing our

impact on the environment, with environmental,

social and governance (ESG) issues remaining

at the forefront of our thinking and business

operations. Our progress in this regard

during 2023 was excellent and, while there is

significantly more detail in this report and in

our Sustainability Report, I want to draw out

a few particularly noteworthy aspects of our

ESG commitment.

• In August 2023, we successfully issued

a US$ 150 SLB on the Georgian market.

This is the first of its magnitude and kind

in Georgia supporting our deleveraging

strategic priority, whilst also assisting both

our climate-change mitigation efforts and

the development of the local capital market.

• Under the SLB Framework, we committed

to decrease our GHG emissions by 20% by

2027, in line with our commitment to reach

Net-Zero by 2050.

• We invest in capital-light businesses and

industries that have a positive impact on

people and our planet.

• We have a strong track record on

governance issues and this track record

has continued with our move to the LSE

Standard listing, which was supported by

99.9% of our voting shareholders.

The strength of our people

Our people remain critical to our ongoing

success and we have excellent people

throughout the business, at both the holding

company level and in all of our portfolio

businesses. This is evident in the progress we

continue to make both building our businesses

to deliver sustainable profitability and growth,

and adapting to challenges and changes in

the various external environments in which

our businesses operate.

The majority of my time continues to be

focused on mentoring our talented team, and

developing new managers to ensure we have

the appropriate succession plans in place

when change is required. This has continued

to be the case over the last 12 months and, as

always, I deeply appreciate the considerable

efforts that our management teams and

employees bring to the continuing success

of Georgia Capital.

Outlook

I mentioned earlier that Georgia is in great

shape. So is Georgia Capital. At the holding

company level, we are delivering on our key

priorities and expect to further enhance our

performance in 2024 by continuing to improve

our balance sheet strength by reducing

leverage in the business, focusing on reducing

our management expense ratio, and investing

in our capital-light business opportunities and

in Georgia Capital shares via our ongoing share

buyback and cancellation programme. Bank

of Georgia is delivering sustainable strong

growth with high profitability, and a progressive

dividend and capital return policy. In addition,

we expect the Bank’s acquisition of Ameriabank

in Armenia to significantly enhance earnings for

the Bank. Our private portfolio businesses are

all well-positioned to either continue developing

profitably, or to respond to the significant

changes in their markets during 2023, to deliver

a recovery in their 2024 performance.

Geopolitically, the world continues to have

significant challenges, and we very much

focus on managing and investing with a

conservative approach and a strong balance

sheet as a result. This focus will not change.

The Georgian economy has grown particularly

strongly over the last few years, and we expect

to see further robust levels of economic growth

over the next few years, which can only be

enhanced following Georgia’s achievement

of EU candidacy status in December 2023.

Against this background, I am confident that

Georgia Capital is extremely well-positioned

to deliver consistent and sustainable NAV per

share growth.

Irakli Gilauri

Chairman and CEO

21 March 2024

The Strategic Report as set out on pages

2 to 119 was approved by the Board of

Directors on 21 March 2024 and signed

on behalf by Irakli Gilauri, Chairman and

Chief Executive Officer.

CHAIRMAN AND CEO STATEMENT CONTINUED

Photo Zhinvali Water Reservoir, Georgia

Georgia Capital PLC Annual Report 2023

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

GEORGIA CAPITAL STRATEGY

GEORGIA CAPITAL – A PLATFORM FOR

INVESTINGIN,UPSCALING ANDMONETISING

LARGEOPPORTUNITY BUSINESSES IN GEORGIA

• Developing and growing businesses to the equity value of GEL 300 million to realise

proceeds through an exit, as investments mature.

• LSE listed, with more than 90% institutional shareholder base.

• Running an efficient cost structure with no management or success fees.

GEORGIA CAPITAL STRATEGY IS BASED ON THREE

FUNDAMENTALENABLERS:

SUPERIOR ACCESS TO CAPITAL

• Only Group of its size and scale focused on investing

in and developing businesses in Georgia.

• Uniquely positioned given access to capital in a small

frontier economy:

– c.US$ 500 million raised in equity at LSE.

– Issued seven bonds totalling c.US$ 2.0 billion.

– US$ 3 billion+ raised from IFIs (EBRD, IFC, ADB, AIIB, etc.).

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

predecessor company BGEO, prior to the 2018 demerger.

ACCESS TO GOOD MANAGEMENT

• Highly experienced senior management team, which grew BGEO Group

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

• Reputation among talented managers as the “best group to work for”.

• Attracted talents have demonstrated a solid track record of successful delivery.

• Proven track record in turning around companies and growing

them efficiently.

• Proven track record in monetising investments through cash exits.

• A platform for entrepreneurs to build institutions (entrepreneurship culture):

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

no matter the attractiveness of the opportunity.

COMMITMENT TO ACHIEVING THE

HIGHEST LEVEL OF CORPORATE GOVERNANCE

• Strong Board comprised mainly of independent Directors with extensive

international experience.

• Outstanding track record in institutionalising businesses

and creating independently run/managed institutions.

• Approximately 45 employees at the holding company level.

• Highly experienced management team in each portfolio company with a strong

measure of independence.

• Aligned shareholders’ and management’s interests by share compensation:

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

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

– Salaries of the Company’s senior managers are heavily weighted

towards deferred share remuneration, and bonuses for senior

managers are paid in deferred shares rather than cash.

• High level of transparent reporting.

• Strong ESG practices.

DELEVERAGING GCAP HOLDCO BY BRINGING DOWN THE

NCC RATIO BELOW 15%.

REDUCE AND MAINTAIN PORTFOLIO COMPANIES’

LEVERAGE TO RESPECTIVE TARGETED LEVELS.

ACHIEVE ESG TARGETS AT BOTH GCAP HOLDCO AND

PORTFOLIO COMPANY LEVELS.

CONTINUED PROGRESS ON THE DIVESTMENT

OF “OTHER” PORTFOLIO COMPANIES.

• “Other” portfolio companies comprise 7.7% of the total portfolio value

and include four subscale private businesses, being the auto service,

beverages, housing development and hospitality businesses.

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

Group currently believes that most will not offer the scalable growth

potential we seek. Absent a change in that assessment, the Group

istargeting to exit “Other” assets in atwo to three-year period.

• In 2023, the hospitality business successfully concluded the sale of

two operational hotels, a vacant land plot, and two under-construction

hotels for a total consideration of US$ 39 million. These transactions

demonstrate steady progress on our strategic priorities.

ACHIEVEMENT OF OUR STRATEGIC PRIORITIES WILL

ENABLE GCAP TO GRADUALLY TRANSFORM INTO A

SUSTAINABLE PERMANENT CAPITAL VEHICLE.

• Significantly reduced leverage at the GCAP HoldCo level.

• Capacity to redeploy our existing capital without the

need for new equity share issuance/raise.

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

capital-light investments.

• Opportunity to return a significant portion of

GCAP’s cash inflows to our shareholders.

STRATEGIC PRIORITIES ANNOUNCED IN 2022

OUR LONG-TERM ASPIRATION

Photo Shaori Reservoir, Georgia

Georgia Capital PLC Annual Report 2023

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

2011

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

2023

5050

-6.3%

-4

-6

-8

-2

11.0%

10.6%

5.4%

5.2%

6.1%

3.4%

4.1%

5.1%

6.6%

7.9%

7.5%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 9M23

-10

-20

-30

9M22

6.8%

7.3%

6.1%

5.8%

10.1%

11.4%

10.7%

12.1%

7.5%

7.7%

3.7%

8.4%

6.6%

10.1%

6.2%

-9.6%

-11.9%

-11.2%

-5.5%

-10.0%

-11.6%

-12.2%

-8.0%

-6.7%

-5.8%

-12.4%

-4.5%

-10.3%

-3.2%

-2.6%

-10%

-2%

-4%

-6%

-8%

-2.8%

-2.7%

-3.0%

-2.7%

-2.3%

-2 . 1%

-9.3%

60.2%

47.6%

- 6.1%

27. 5%

38.2%

37.1%

23.4%

-2.8%

-3.0%

-2.5%

-2.3%

20%

25%

6 0%

65%

50%

55%

40%

30%

35%

45%

-2.2%

2014 2015 2016 2017 2018 2019 2020 2021 2022 2024F2023F 2025F 2027F2026F

MARKET AND INDUSTRY OVERVIEW

Macroeconomic overview and outlook

In 2023, Georgia continued to expand, proving

yet again that the macroeconomic environment

remains flexible and resilient against exogenous

shocks. In 2022, growth was predominantly

fueled by the positive impact of net exports

and investments, with investments continuing

to contribute mostly to the growth in 9M23. As

for the production side, the information and

communication (ICT) sector emerged as a

leading force for growth in both years. The ICT

sector witnessed substantial growth of 58% in

2022 (1.8% contribution in total GDP growth),

with 28% growth y-o-y in 9M23, despite the

high base of the previous year. Preliminary

estimates show annual GDP growth reaching

7.5% in 2023 after 11.0% growth in 2022, driven

by macroeconomic developments on both the

external and domestic sides.

On the external side, recent monthly data

shows that remittances are normalising,

mainly due to the remittances from Russia

declining relatively and the migration effect

fading out gradually. However, remittances

from EU countries and the US continue to

show an increasing trend with 21% and

40% y-o-y growth, respectively, in 2023.

As for foreign trade, export experienced

a moderate 9.1% annual growth in 2023,

driven by substantial increase in the export/

re-export of motor cars, surging to more than

2.1 billion dollars with 135% growth y-o-y.

High economic growth in 2023 of

7.5% following a 11.0% growth in

2022.

Georgia is favourably placed among peers

Country Country rating Fitch rating outlook

Armenia BB- Stable

Azerbaijan BB+ Positive

Czech Republic AA- Stable

Georgia BB Positive

Kazakhstan BBB Stable

Türkiye B Stable

Uzbekistan BB- Stable

Georgia’s potential to become a logistic hub

has strengthened since sanctions on Russia,

with robust demand observed from Kyrgyzstan,

Kazakhstan, Azerbaijan and Armenia. The

tourism sector continues to recover and

income from international travel reached US$

4.1 billion in 2023, representing 126% of 2019

levels, reflecting the global resumption of

travel. However, the number of international

visitors shows only a partial recovery in 2023,

standing at 80% against 2019, highlighting that

significant further growth potential remains.

On the domestic side, growth was aided by

continued credit expansion in local and foreign

currencies across both retail and business

sectors, as the commercial bank loan portfolio

grew by 17.1% y-o-y as of December 2023

(without the exchange rate effect), despite the

still tight monetary stance and globally rising

foreign currency interest rates. Additionally, while

fiscal support has moderated, the fiscal stance

remains expansionary with current expenditures

growing by 10.7% y-o-y and capital expenditures

increasing by 22.3% y-o-y in 2023, facilitated by

a 16.1% surge in fiscal revenues.

As aggregate demand strengthened, imports

also accelerated in 2023, growing by 14.5%

y-o-y with investment and consumer goods

contributing most. Trade deficit reached

US$ 9.4 billion in 2023, up by 18.3% y-o-y.

Importantly, re-exports reached a record

high of US$ 3.3 billion in 2023, accounting for

54.2% of total exports and growing by 74.5%

y-o-y, the first time ever exceeding domestic

exports since March 2023. Current account

deficit improved significantly to 2.6% of GDP,

from 3.2% in 9M22. This positive shift was

supported by strong growth in the services

balance (+36.9% y-o-y), mainly in tourism

GEORGIA’S ECONOMY CONTINUES ITS

EXPANSION, GROWING BY 7.5% IN 2023

Preliminary estimates of economic growth show the real economy expanding by 7.5%

y-o-y in 2023, following up on two consecutive years of double-digit growth. Growth has

been supported by macroeconomic developments on both the external and domestic

sides, with strong foreign currency inflows building upon strong aggregate demand.

Despite tightening financial conditions and enduring substantial uncertainty in the global

economy, the medium-term outlook for Georgia remains strong. Economic activity and

macroeconomic environment have enabled effective adjustments in fiscal and monetary

policies. Government balance sheet has improved to pre-COVID levels, while the NBG has

started to gradually exit from the tightened monetary policy.

Public finances (% of GDP)

Nominal GDP, GEL billion Real GDP growth rate, y-o-y %

1 Preliminary estimate.

Current account balance (% of nominal GDP)

Goods, net Investment income, net Current account

Services, net Current transfers, net FDI, inflows

Overall Balance (% of GDP) Total Public Debt (% of GDP) External Public Debt (% of GDP)

Real GDP growth

pandemic levels and stood at 54.3% in 4Q23.

It is noteworthy that a significant increase was

observed in wages in the first nine months

of 2023, average monthly nominal earnings

increased by 17% annually and amounted to GEL

1,792 on average in 9M23. Particularly, with the

highest salaries in ICT and financial sector with

GEL 3,796 and GEL 3,250, respectively.

The consolidated budget overall deficit was

GEL (1.9) million in 2023, with the annual

deficit (IMF modified) planned at -2.8% of

GDP, down from -3.0% in 2022. The operating

balance also improved substantially with 36%

growth y-o-y, growing from GEL 2.6 billion in

2022 to GEL 3.6 billion in 2023. Consolidated

budget revenues grew by 14% y-o-y, including

a 13.5% y-o-y growth in tax revenues. The

general Government gross debt decreased

to pre-COVID levels from 49.7% to 39.5%

of GDP by the end of 2022 and is expected

to be standing at 38.2% of GDP by the end

of 2023 as GEL has strengthened and the

economy keeps its expanding trend. The

improvement in the Government balance sheet

has thus appropriately aided disinflation on the

domestic side and reduced vulnerabilities on

the external side. The external debt service to

budget revenues ratio fell to 6.3% in 2022 from

19.4% in 2021 and a pre-crisis level of 9.6%

in 2019. In line with the Economic Liberty Act

of Georgia, which sets ceilings of 3% for the

fiscal deficit and 60% for debt while allowing

for a three-year grace period, the fiscal deficit

and debt, based on Government’s preliminary

data, are within these ceilings as of 2023. The

Ministry of Finance projects 2024 fiscal deficit

and Government debt to be 2.5% and 38.0%

of GDP, respectively.

As an established tourism destination, tourism

has been an increasingly important sector of

the Georgian economy and a major source

of FX inflows during the past few years,

significantly contributing to improving the

current account balance and driving rising

service exports. In 2023, tourism has continued

its revival trend, witnessing a 31% y-o-y

increase in the number of international visitors,

reaching 6.2 million in 2023 with recovery level

80% of 2019 level. Total tourism revenues in

2023 are reported at US$ 4.1 billion, reflecting

a 17% y-o-y growth that surpasses pre-

pandemic figures, making up 126% of 2019

level. It should be noted that, in comparison

to 2022, around 38% Russian visitors were

categorised as residents in the estimation of

tourism revenues in 2023. Their expenses

were no longer accounted for as tourism

revenues. Tourism revenues from Türkiye, Iran,

Russia, Israel and the EU surpassed 2019

levels in 2023. Particularly notable was the

substantial increase in revenues from Türkiye,

1.6 times more compared to the previous

year. Additionally, there was a noteworthy

and significant increase in visitor numbers

from Central Asian countries. Travel receipts

rebounding to over 100% of 2019 level despite

the number of travellers only recovering

to 80% suggests that significant growth

potential remains.

(+29.2% y-o-y) and ICT services (+95.7% y-o-y),

as well as a 6.4% y-o-y increase in the current

transfer’s balance. Net FDI reached US$ 1.2

billion (5.2% of GDP), and fully financed current

account deficit in 9M23. FDI reached US$ 1.6

billion in 2023, down by 24% y-o-y following

a record high FDI number in 2022 (US$ 2.1

billion, 67% y-o-y). Strong external inflows and

the reduced current account deficit supported

growth in reserves. NBG used this time to

rebuild the buffers and bought net US$ 1.3

billion throughout 2023. As a result, official

reserve assets reached record-high levels in

2023 (recorded high of US$ 5.4 billion in July

2023) and amounted to US$ 5.0 billion at the

end of December 2023, up 2.2% y-o-y.

Throughout 2022 and 2023 years “middle

corridor” has gained significant importance,

enhancing Georgia’s role to become a regional

hub. Revenue generated from the road usage

charge (RUC) reached US$ 188 million in 2023,

increased by 42% y-o-y and by 174% compared

to 2021. The number of freight vehicles paying

RUC amounted to 520 thousand in 2023, 78

thousand more compared to the last year (188

thousand more than in 2021).

The unemployment rate reached 16.4% in 2023,

the lowest since at least 2010 (most up-to-

date data begins from 2010 due to switching

to a new methodology). Moreover, the labour

force participation rate increased above pre-

Strong rebound in tourism

revenues in 2023

126% compared to 2019.

Georgia Capital PLC Annual Report 2023

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

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MARKET AND INDUSTRY OVERVIEW CONTINUED

The GEL has appreciated since mid-2021,

strengthening above pre-pandemic levels

against the US Dollar (US$) and remained

stable in 2023. Compared to the beginning of

2023, GEL has appreciated by 1.0% against

the US Dollar as of 15 March 2024. The

Georgian Lari remains above the pre-pandemic

levels on the back of strong external inflows,

ample FX liquidity, a tight monetary policy

stance, increased lending in foreign currency

and the overall positive economic growth.

Additionally, the Georgian Lari also appreciated

against the entire basket of trading partner

countries’ currencies, with the nominal effective

exchange rate up by 15% y-o-y and the real

effective exchange rate up 2.1% y-o-y by the

end of 2023.

Inflation, like elsewhere around the world, was

elevated during 2021-2022, however, it has

sharply reduced in 2023, falling below the 3%

target since April 2023, with annual average

inflation standing at 2.5% in 2023. In February

2024, headline inflation printed at 0.3%. All

major components contributed to falling

inflation in 2023, with food and transport prices

the largest contributors. Imported inflation,

which was by far the most significant driver of

increasing prices in 2022, has turned negative

in 2023, whilst inflation on locally produced

goods has begun decelerating as well. Strong

foreign currency inflow that supported the

appreciation of the Georgian Lari, has been an

important factor in the slowdown of inflation.

Continued fiscal consolidation, and a tight

monetary policy have also contributed to the

disinflation. Considering the latest inflation

trend NBG has begun a gradual exit from

tight monetary policy and reduced the policy

rate by 275 bps during May 2023 to March

2024 to 8.25%. NBG remains committed to

adjusting the policy rate depending on the

macroeconomic developments.

GEL stabilised above

pre-pandemic levels.

Inflation reduced sharply during

2023, standing at 0.3% in

February 2024.

As a result of the improved macroeconomic

environment, Fitch Ratings revised Georgia’s

sovereign credit rating outlook to positive

from stable in January 2023 and reaffirmed

the positive outlook in July 2023 and In

January 2024, citing “solid economic growth

prospects, credible macroeconomic and fiscal

policy framework and sound banking sector”.

In May 2023, a staff-level agreement was

reached on the second review for Georgia’s

three-year stand-by arrangement with the

IMF. The arrangement, worth US$ 280 million

was approved with the IMF in June 2022,

focusing on structural reforms and anchoring

macroeconomic policy. Since May 2023,

the review remains on hold as IMF staff are

examining the implications recent amendments

to NBG law will have on achieving the objectives

of the programme. They discussed these

with the authorities and acknowledged their

commitment to upholding the independence

and credibility of NBG and to continued

strong programme engagement with the

Fund. The programme is designed to maintain

macroeconomic stability and anchor policy

decisions by addressing fiscal and external

deficits, achieving the target inflation rate.

Additionally, it aims to strengthen the resilience

of the financial sector and promote agreed-

upon reforms in the governance of state-owned

enterprises, public financial management,

as well as tax and customs administrations.

Although the Government doesn’t intend to

use the allocated US$ 280 million as part of

the new arrangement (according to the IMF’s

reviews under the SBAs), the purpose of the

programme is to strengthen the agenda for

structural reforms and underscore confidence

in macroeconomic policymaking.

The IMF revised upward Georgia’s GDP growth

forecast from 4.0% (World Economic Outlook

(“WEO” – April 2023) to 6.2% in 2023 (WEO –

October 2023), while the medium-term growth

(2024-2028) projection stands at 5.1%, one

structural reforms ensures constant effort for

improving the business environment, the latest

examples being the VAT reform (adopted in

July 2020) and the new insolvency framework

(adopted in September 2020 and into force

since April 2021).

Despite challenges arising from the pandemic,

structural reforms and large infrastructure

projects to promote Georgia as a transit and

tourism hub and enhance long-term growth

are still underway. A new pension law was

adopted in 2018, enhancing long-term fiscal

sustainability, supporting capital market

development, increasing the replacement

rate, narrowing the current account deficit

and boosting potential output. A new bill on

investment funds was adopted in 2020, in line

with international practice and harmonisation

obligations with EU law, providing an up-to-

date regulatory framework for investment

activity. The Government focuses on

addressing the shortcomings in employee

benefit schemes, further cutting non-essential

expenditures, consolidating public sector

institutions, making social and healthcare

spending more targeted, privatisation schemes

and increasing capital expenditure efficiency.

Within the responsible lending framework, NBG

took macroprudential measures to decrease

household indebtedness, enhance financial

stability and strengthen regulation, supporting

the financial system’s resilience to currency

fluctuations and FX-induced credit risks. A new

important reform adopting the framework for

issuing mortgage covered bonds was adopted

by the parliament in 2022, aiming to provide

an additional source for a relatively cheap and

stable source of financing for credit institutions.

A business-friendly environment, renowned

in the region for best-in-class governance,

well-developed infrastructure, stable energy

supply, flexible labour legislation, a stable and

profitable banking sector, strategic geography

connecting European, landlocked Central Asian

and Middle East countries, and preferential

trading agreements, support Georgia to

become a regional hub economy.

The Government’s ongoing infrastructure

investments and increased spending on roads,

energy, tourism and municipal infrastructure

will also reinforce the potential. To enhance

Georgia’s competitiveness, the Government

continues to strengthen integration in existing

international systems as well as new transit

routes. Georgia is a regional energy corridor. In

November 2019, the Georgian PM, alongside

the Turkish and Azerbaijani presidents, opened

the Trans-Anatolian Pipeline, allowing natural

gas from Azerbaijan to be exported to Europe

Public debt down to 39% of GDP

by the end of 2023, below

pre-COVID levels.

through Georgia. In December 2022, leaders

of Azerbaijan, Georgia, Hungary and Romania

signed an agreement to build an underwater

electric cable in the Black Sea, further

positioning Georgia as an important player in

the EU energy policy.

Following the Russia-Ukraine conflict, and the

subsequent Western sanctions imposed on

Russia, the Government of Georgia has revived

plans to build a deep-sea port at Anaklia,

which would be located in the so-called Middle

Corridor, which connects China and the

countries of Central Asia to Europe through

Georgia and Azerbaijan. The port is expected

to be built with the co-participation of the state

and international investors.

Georgia’s business-friendly environment,

coupled with its sustainable growth prospects,

attracted FDI on average 8.4% of GDP over

the past decade. These capital flows boosted

productivity and accelerated growth. Public

infrastructure projects were also instrumental

in driving growth, as well as better realising the

country’s potential in logistics, transport and

tourism. Faced with low domestic savings, FDI

is an important source of financing growth in

Georgia, as well as a reliable source of current

account deficit funding. Total FDI amounted

to US$ 1.6 billion, down 24% y-o-y in 2023,

following a record high FDI number in 2022

(US$ 2.1 billion, 67% y-o-y). Major sectors

attracting FDI were: financial and insurance

activities (40% of the total), manufacturing (18%

of the total) and trade (7% of the total). The

share of reinvestment by foreign companies in

total FDI was 80% in 2023, more than 2019’s

47%. The increasing share of reinvestment

indicates investors trust in Georgia’s growth

model and the success of the profit tax reform

introduced in 2017. Planned investment and

infrastructure programmes, a rising number of

free trade agreements (FTAs) and a business-

supportive environment will support further FDI

inflows in the medium term.

Free trade agreements

There have been significant changes in

Georgia’s export structure and destination

markets in recent years; however, Georgia has

not yet fully tapped into international markets.

One of the biggest changes in destination

markets has been a reorientation from the

Russian market after the 2005 embargo, as

the embargo forced Georgian producers to

redirect exports to other Commonwealth of

Independent States (CIS) countries, the EU and

the Middle East. Exports to Russia picked up

again in 2013 as Russia reopened its borders

to Georgian products. Another significant

change concerns the growing importance of

China as a Georgian export market, as the

FTA effective from January 2018 has brought

a major acceleration of exports to China.

Since 2013, Georgia’s developed logistics and

transport infrastructure has helped shore up

opportunities for new re-export commodities,

including copper and pharmaceuticals.

Georgia’s potential to become a logistic hub

Inflation vs inflation target

Headline inflation

Core inflation Target

of the highest in the region. The IMF expects

headline inflation, which has fallen sharply in

2023, to be below the 3% target in 2024.

Reform-driven success

Georgia has carried out genuine economic

and structural improvements over the past

two decades. As a result, corruption has

decreased, productivity has been enhanced

and the economy has become more diversified,

supporting resilience against exogenous

shocks such as the global financial crisis and

the COVID-19 pandemic.

Georgia is ranked as a top performer in

governance and doing business indicators.

With a ranking of 7th in Ease of Doing

Business according to the latest report (World

Bank, Doing Business – 2020), Georgia

has implemented an array of reforms and is

characterised as a top-performing economy

in the region in which to start a business.

Furthermore, Georgia is ranked 1st out of

120 countries in the International Budget

Partnership’s 2021 Open Budget Index, as well

as 35th out of 184 countries by the Index of

Economic Freedom measured by the Heritage

Foundation in 2023 and 35th out of 194

countries in Trace International’s 2023 Matrix

of Business Bribery Risk. Georgia is on a par

with the European Union (EU) member states

and top in the Eastern Europe and Central Asia

Region in the 2023 Corruption Perception Index

by Transparency International.

The Economic Liberty Act, effective since

January 2014, ensures the continuation

of a credible fiscal framework for Georgia

by capping the fiscal deficit at 3% of GDP

and public debt at 60% of GDP. However,

the emergency escape clause allowed the

Government to surpass the thresholds

temporarily in order to manage the pandemic,

with the law requiring a return to the bounds

within three years. The fiscal deficit and debt,

based on Government’s preliminary data,

have now returned within these ceilings as

of 2023. The Economic Liberty Act also

requires electorates’ approval through a

nationwide referendum for imposing new

taxes and raising existing taxes, subject

to certain exceptions. Furthermore, as of

January 2017, corporate income tax for

non-banking and non-insurance corporations

is now only applicable to distributed profits;

undistributed profits, which are reinvested or

retained, are exempted. Georgia has one of

the friendliest tax regimes according to World

Bank’s Doing Business 2020 report, having

slashed the number of taxes from 21 in 2004

to just six currently. Commitment towards

Medium-term (2024-2028)

economic growth rate 5.1%,

one of the highest in the region

(IMF, October 2023).

has strengthened since sanctions on Russia,

with robust demand observed from Kyrgyzstan,

Kazakhstan, Azerbaijan and Armenia in 2023.

Importantly, re-exports reached a record high

of US$ 3.3 billion in 2023, accounting for 54.2%

of total exports and growing by 74.5% y-o-y,

first time ever exceeding domestic exports

since March 2023.

Together with established destinations,

improved access to large new markets, such

as the EU, China and Hong Kong, could

increase market penetration. There is also

scope for diversifying agricultural exports.

Georgia’s existing FTAs (with the EU, CIS,

EFTA, Türkiye, China and Hong Kong) and

the prospective FTA with India, as well as an

agreement with Israel and talks with South

Korea, offer significant upside potential for

Georgia’s exports.

The EU-Georgia Association Agreement, which

came into force in July 2016, and the related

DCFTA, effective since September 2014, have

laid the solid groundwork to improve governance,

strengthen the rule of law and provide more

economic opportunities by expanding the EU

market to Georgian goods and services. Closer

economic ties with the EU and trust in prudent

policymaking are also expected to attract foreign

investments to Georgia. Visa-free travel to the

EU, granted to Georgian passport holders in

March 2017, is another major success of the

Georgian foreign policy.

Following Ukraine’s plea to join the EU as it

battles Russia’s invasion, Georgia and Moldova

on 3 March 2022 submitted their applications to

join the EU. Georgia previously planned to apply

to join the EU in 2024. The European Council

granted a conditional European perspective to

all three countries, with Ukraine and Moldova

receiving the candidate status pre-emptively. For

Georgia, however, candidate status was made

subject to meeting a list of 12 conditions.

On 8 November 2023, the European

Commission adopted the 2023 Enlargement

Package – a set of documents explaining its

policy on EU enlargement. The final decision

was made on 14 December 2023 and the

European Council granted the status to

Georgia and called on Georgia to demonstrate

a clear commitment to EU values, continue

progress on its reform agenda and fulfil the

conditions specified in the Commission’s

report meaningfully and irreversibly. Granting

candidate status to Georgia is a significant

acknowledgment by the EU of the progress

made in recent years.

Although the specific advantages of EU

candidacy status for Georgia would depend

on the country’s specific circumstances, in

general, the attainment of EU candidacy status,

based on the other countries’ experiences

will have a positive impact in multiple ways,

specifically on economic growth, foreign

investment, and trade.

Georgia Capital PLC Annual Report 2023

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

MARKET AND INDUSTRY OVERVIEW CONTINUED

Georgia’s FTA with China, effective from

January 2018, and its FTA with Hong Kong,

effective from February 2019, have increased

opportunities to further accelerate exporting

markets and attract investors by offering

a business-friendly environment, strong

corporate governance standards and access

to a market of 2.8 billion customers. China

was the single largest destination country for

Georgian exports for 2020-2022 years.

Individual sector overview

Banking

The banking sector has been one of the most

developed and fastest-growing sectors of the

Georgian economy. The banking sector’s asset

growth rate of 16.6% (ten-year CAGR) has far

outstripped the nominal GDP growth rate for the

same period. However, despite robust progress,

there are plenty of opportunities to further tap

into growth potential, as the financial market

remains at an early stage of development. The

sector has remained resilient in the face of

challenges such as COVID-19 and the war in

Ukraine, underscoring the robustness of the

banking system.

Fitch Ratings, which downgraded the outlook

on Georgian banks to negative in April 2020,

revised the outlook to stable in March 2021,

citing reduced pressure on the banks’ credit

profiles and the banks’ “intrinsic strength”.

The agency most recently affirmed the stable

outlook in September 2023, pointing that the

“Georgian banks had solid credit metrics” and

“expects bank performance to remain healthy

in 2023-2024”. Subsequently, Fitch Ratings

revised the sovereign credit rating outlook

for Georgia to positive in January 2023 and

reaffirmed the positive outlook in January 2024,

paving way for a potential outlook upgrade for

the banking sector.

In December 2022, the parliament adopted

changes in the corporate tax model for banks

(as well as credit unions and microfinance

organisations), setting the corporate tax rate

at 20%, combining the previous 15% rate

with the 5% dividend tax rate and abolishing

the latter. Moreover, commercial banks

adopted International Financial Reporting

Standards (IFRS) from January 2023, as

laid out in NBG’s 2020-2022 supervisory

strategy, aiming to increase harmonisation

with developed countries.

In 2022, NBG began working on operationalising

a new bank recovery and resolution framework,

assisted by technical missions from the IMF.

The mission noted that Georgia has made

“considerable progress” in developing the

infrastructure necessary for an effective bank

recovery and resolution regime and identified

several priorities in cooperation with authorities.

NBG also applied for membership in the Single

Euro Payment Area (SEPA), noting that SEPA

membership will increase the credibility of

the financial sector and simplify services for

Georgian citizens.

In January 2023, a new methodology was

published for defining systemically important

commercial banks and establishing a systemic

buffer for them, aiming to further increase the

system resilience. The updated methodology

defined three banks – Bank of Georgia, TBC

Bank and Liberty Bank – as systemically

important, setting a 2.5% buffer for the former

two and 1% for the latter. The decree contains

provisions for increasing the buffers in case

The loan portfolio proved extremely resilient in

2023, despite a tightened monetary stance and

rising foreign currency rates, as credit to the

economy increased by 17.1% y-o-y (excluding

the exchange rate effect) by the end of 2023,

including a 17.0% growth in GEL loans and

a 17.3% growth in foreign currency loans.

Mortgage loans increased by 9.9% by the end

of the year, while business loans increased

by 18.1%. As for deposits, commercial bank

deposits increased by 14.5% by the end of 2023

(without the exchange rate effect), including

a 31.4% growth in GEL deposits and a 3.1%

growth in foreign currency deposits (without

Government deposits).

Deposit dollarisation was 50.7% at the end

of 2023, down from 56% at the end of 2022.

Loan dollarisation followed a similar trend,

falling below 50% for the first time in 2022 and

reaching 45.2% by the end of 2023.

Retail (pharmacy)

The pharmaceutical market in Georgia is highly

concentrated, with three major players holding

approximately 83% of the market share. The

Georgian pharmaceutical market is highly

dependent on imports. The share of number of

locally produced drugs on the market is c.14%

as opposed to only 5% in the early 2000s.

There are over 100 importers of pharmaceutical

products in Georgia, but approximately

70% of all imports are performed by three

companies: GEPHA (approximately 25%), PSP

(approximately 21%) and Aversi (approximately

23%). Domestic production is represented by

over 50 companies and is dominated by two

players, with approximately 84% of the country’s

total production volume. Pharmaceuticals

market reforms have made it possible to create a

competitive marketplace in Georgia. These have

included the introduction of parallel imports and

automatic registration of medicines recognised

by international control bodies, such as the U.S.

Food and Drug Administration and the European

Medicines Agency, as well as favourable

regimes for setting up pharmacies (0% VAT on

medicines, absence of customs duties and no

price controls).

According to management’s estimates based

on third-party data, generics account for

around three quarters of the total market

revenues, which is somewhat higher than the

EU average (c.50%). However, there is still

market opportunity for generics – in the leading

economies like Germany and the UK, generics

hold a dominant share of more than 80% (in

the reimbursed segment). The over-the-counter

(OTC) segment in Georgia prevailed over the

last decade until 2014 when a prescription

requirement was introduced for over 6,000

medicines. Currently, there is a nearly equal

split between OTC and prescription drugs.

Medicines and pharmaceutical products have a

significant contribution to trade turnover. Trade

of medicines packaged in measured doses is

a considerable source of income. Imports of

medicines were the third largest commodity

group, amounting to US$ 402 million (3.6% of

total imports), while export of medicines was

the eleventh largest export commodity group,

amounting to US$ 88 million (1.2% of total

exports) in nine months of 2023, including US$

71 million of re-exports (0.8% of total re-exports).

Also, effective from 15 January 2023, the

Ministry of Health, Labour and Social Affairs

of Georgia (the “Ministry”) implemented an

External Reference Pricing (ERP) model on

the pharmaceuticals market, related to both

prescription and non-prescription medicine.

Reference Pricing is an approach where prices

are set according to the benchmark prices for

the same or similar medicines in comparable

countries. According to the new initiative, the

Ministry introduced the maximum retail price

on targeted pharmaceutical products, in two

directions: Generic and Original drugs. The

price caps are set based on the average of

such medicine prices in the following countries:

Bulgaria, Latvia, Macedonia and Montenegro.

Currently, approximately 207 Generic drugs are

subject to the new regulation.

Hospitals and clinics and diagnostics

The Georgian healthcare industry experienced

important transformations during the last

decade. The key components of the national

healthcare reform were massive privatisation,

infrastructure upgrade, sector liberalisation,

introduction of Universal Health Care (UHC) and

wider accessibility to healthcare services as the

major outcome.

To address high private healthcare costs

and basic healthcare coverage for the entire

population, UHC was introduced in 2013

and replaced previous state-funded medical

insurance plans. New initiatives regarding the

reimbursement and differentiating coverage of

Universal Health Insurance were adopted in 2017.

In terms of health expenditure as a percentage

of GDP, Georgia achieved a level consistent

with that of major developed economies, at

approximately 8%, which is above most of its

peer emerging economies. However, there

still remains vast potential for further increase

since Georgia has one of the lowest per

capita expenditures on healthcare among the

benchmark countries. Healthcare spending

per capita is currently at a very low base

of only c.US$ 300, with annual outpatient

encounters of 3.7 per capita, significantly

lower than many comparable countries. On

average, c.65% of healthcare spending is

funded by the private sector. Notwithstanding a

significant improvement in the bed occupancy

rate, from c.30% in 2003 to c.50% currently,

there is still potential for even higher efficiency

in order to align Georgia with best practices.

The occupancy rate in Georgia is far below

EU (77%) and CIS average (83.4%) indicators.

The Georgian healthcare market has shown

solid growth in recent years. According to

management’s estimates based on third-party

data, the total healthcare market grew by a

CAGR of 9% over 2011-2023 years and was

an individual bank’s deposit concentration

exceeds specified norms.

In 2021, during the joint Financial Sector

Assessment Program conducted by the

IMF and the World Bank, recommendations

were provided to NBG. Among these

recommendations is the establishment of the

minimum requirement for own funds and eligible

liabilities (MREL) for domestic systemically

important banks (D-SIBs) within the resolution

framework of NBG. The regulation, developed

based on the framework of the European Bank

Recovery and Resolution Directive (BRRD),

sets percentages derived from the ratio of

eligible liabilities and capital instruments to total

liabilities and regulatory capital. The MREL for

systemic commercial banks is determined with

the following amount and terms: from 1 January

2024 – 10%, from 31 December 2025 – 15%

and from 31 December 2027 – 20%.

Amendments to the Organic Law of Georgia on

The National Bank of Georgia have already been

initiated, addressing an additional mechanism

to mobilise funds in advance into the resolution

fund. The creation of a fund is a part of the

resolution funding framework developed based

on the recommendations of the IMF and World

Bank, for the early identification of the bank’s

financial vulnerabilities. The accumulation in

the resolution fund, according to the legislative

project, should reach an amount pre-determined

by the law, representing 3% of bank’s insured

deposits. The fund will be filled with these

contributions between 2025 and 2033.

Dollarisation decrease is one of the priorities of

the NBG and the Government. The Financial

Stability Committee of NBG made a number

of decisions at the meeting held in October

2023 regarding to the responsible lending and

de-dollarisation policy. Starting from 1 January,

2024, individual loans below GEL 300,000 can

only be issued in foreign currency if hedging

requirements are met. Restrictions on taking

loans in foreign currency have been in place

since January 2017 in Georgia. The limit was

initially set at GEL 100,000, but increased to

GEL 200,000 from January 2019. Additionally,

the maximum maturity for the unsecured

consumer loans increased from three years to

four years starting from 1 November of 2023.

The banking sector ended 2023 with record

net profits of GEL 2.7 billion, 29.9% higher than

2022 profits. Interest income reached GEL 7.2

billion in 2023, up 26.8% y-o-y, while interest

expenses reached GEL 3.3 billion, up 17.7%

y-o-y. Non-performing loans (IMF methodology)

reached 1.48% of total loans by the end of

2023, compared to 1.51% at the end of 2022.

At the end of 2023, return on assets was 4.2%

(3.8% at the end of 2022) and ROE was 26.5%

(24.8% at the end of 2022), while the average

capital adequacy ratio was 22.1% (20.3% at

the end of 2022) and the liquid asset ratio was

20.9% (22.8% at the end of 2022).

expected to grow at 4% in 2023. Outlook for

the healthcare sector is positive as increasing

GDP and disposable income help domestic

consumption to increase, especially in elective

care, diagnostics and outpatient services.

To streamline the state funding financing in

healthcare and improve the reimbursement

process, the Georgian Government introduced

an initiative to implement a Diagnosis Related

Group (DRG) financing system. The DRG

system categorises inpatient case types

that are clinically similar and expected to

use the same or similar resources into

groups by applying various criteria (age,

sex, intervention needed, comorbidity, etc.).

The new system became effective from the

beginning of 2023. The way the DRG system

was initially implemented had a positive

impact on the business EBITDA, however

the system was modified several months into

its implementation, decreasing tariffs on a

number of services, and making the changes

profit neutral.

Property and casualty (P&C) insurance

From 2010 to 2023, the Georgian property

and casualty insurance sector grew by 387%,

with insurance revenue increasing to GEL

487 million. According to the Insurance State

Supervision Service of Georgia (“ISSSG”),

the total value of gross written premiums

increased from GEL 113 million in 2010 to

GEL 502 million in 2022; an increase of 344%.

The largest six insurance providers in Georgia

account for approximately 82% of the market.

The level of insurance market penetration in

Georgia amounts to 1.27% (of which 0.7%

is attributable to the property and casualty

insurance market) as at 31 December 2022.

This was lower than insurance penetration in

more developed countries such as the UK,

France, Switzerland and Belgium, which had

penetration rates of 10.50%, 8.70%, 6.90%,

and 5.50%, respectively, and was also lower

than penetration in neighbouring countries

such as Slovenia, Poland, Bulgaria and Türkiye,

which had penetration rates of 4.70%, 2.20%,

2.20% and 1.50%, respectively. The Georgian

retail insurance market offers ample room for

growth, as most of its potential is yet to be

unlocked. Motor insurance accounts for 55% of

the total retail insurance market in Georgia, of

which 16% represents border Mandatory Third

Party Liability (MTPL) insurance, effective from

March 2018.

Moreover, the motor insurance segment has

great potential to increase, as only 7% of

registered cars are insured on the local market.

The new law requiring local MTPL for all vehicles

registered in Georgia is expected to kick in and

significantly boost retail market penetration.

Medical insurance

Over the past decade, the private medical

insurance market expanded significantly

compared with the 2006 figure, when only

40,000 Georgian citizens (or c.1% of the total

population) had a voluntary medical insurance

Photo The view from Mountain Shkhara, Georgia

Georgia Capital PLC Annual Report 2023

26 27

Georgia Capital PLC Annual Report 2023

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

MARKET AND INDUSTRY OVERVIEW CONTINUED

package, mostly provided as part of a corporate

benefits programme. There were 722,000

private health insurance (PHI) policies in force by

the end of June 2023. The corporate segment

accounts for the major portion of the PHI

market – 71.3% of all policies are acquired by

employers, and the rest (51,500) are purchased

by self-paying individuals. In Georgia, PHI is

primarily intended to provide value-added

services in the form of more extensive coverage

or more convenience for the patient.

Renewable energy

In Georgia, electricity consumption has been

growing significantly for the last decade, in

line with GDP growth. Electricity demand

for the last decade has been growing on

average by 4.1%. The country was historically

a net exporter of electricity; however, due to

sustained consumption growth, the trend

changed and Georgia became a more

import-dependent country with ten months

of electricity deficit throughout the year. To

support the consumption growth, which is

forecasted at a minimum of 4.5% for the next

decade, the Government is promoting the

development and construction of domestic

renewable capacities through different support

mechanisms, as well as implementing reforms in

the Georgian energy market. Back in 2008, the

power generation market witnessed significant

changes to facilitate market liberalisation. All

HPPs constructed after August 2008 have

been deregulated, which served as a first step

towards the establishment of a free electricity

market. In 2014, the EU and Georgia signed an

Association Agreement and Georgia became

a full contracting party member of the Energy

Community. Further, the electricity legislation

was amended in June 2017, deregulating all

HPPs below 40MW and gradually moving the

large industrial consumers out of the regulated

pricing scheme to the free market. In the next

phase of deregulation, effective from May 2019,

big industrial customers with monthly electricity

consumption of at least 5GWh were required

to register as direct customers. Deregulation

continued in 2021 – all entities with monthly

consumption of more than 0.4GWh and with

35-110kV access lines were registered as

direct consumers. Also, since May 2022, HPPs

with a capacity of less than 65MW have been

deregulated. This process will continue in the

following years as well, further increasing the

share of the deregulated market.

At the end of December 2019, the parliament

of Georgia has adopted the new Law on

Energy and Water Supply and the Law on

Renewable Energy Sources. These pieces

of energy legislation were prepared by the

Energy Community Secretariat, taking into

account the specifics of the Georgian energy

market. In 2020 and 2021 several important

regulations were adopted to prepare Georgia’s

energy market for the reforms in coming

years. The establishment of the new energy

exchange was a step forward to the reform of

the Georgian energy sector. In December 2019,

the Georgian Energy Exchange was founded

with 50%-50% co-participation of Georgian

State Electrosystem and Electricity System

Commercial Operator. Once the new electricity

market enters into force, the Georgian Energy

Exchange will be responsible for organising

day-ahead and intraday markets through the

software services of consulting company “Nord

Pool Consulting”.

Education

The private K-12 education industry in Georgia

has been growing at a 15% CAGR over the last

decade. Based on the business’ estimation,

the market size reached GEL 375 million in

2023, driven by both increasing enrolments

and rising tuition fees. Currently, there are

c.66,000 learners in private schools in Georgia,

representing 10.5% of the total general

education market.

There is a consolidation trend that represents

an opportunity in a fragmented market. Over

the last decade, average school size has

increased by 42% and the number of schools

has decreased by 15%. Private learners are

consolidating in the four largest cities with

populations over 100,000, namely Tbilisi,

Batumi, Kutaisi and Rustavi. Based on our

estimation, the market share of the ten largest

players has increased by 4%. Tbilisi is the

largest city in Georgia with the majority share

of private learners (64% of the Georgian private

market) and Georgia Capital is the largest

player on the market with a 9% market share

in terms of learners, while the second largest

player holds 2.3%.

Management believes that the key growth

drivers will be the large gap in the quality of

public schools as compared to private schools

as well as increasing household income and

decreasing unemployment rates.

Data provided in this section was collated from

the following sources unless stated otherwise:

• Geostat

• National Bank of Georgia

• Ministry of Finance of Georgia

• Georgian National Tourism Administration

• Insurance State Supervision Service

of Georgia

• World Bank

• International Monetary Fund

• Fitch Ratings

Photo Snowy Borjomi forest, Georgia

15% 40%

NCC RATIO NAVIGATION TOOL

MEANINGFUL

BUYBACKS AND

INVESTMENTS

CAPITAL

ALLOCATIONS

TACTICAL

BUYBACKS AND

INVESTMENTS

CASH

PRESERVATION

STRATEGY

Georgia Capital PLC Annual Report 2023

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

360°

analysis

CAPITAL ALLOCATION AND MANAGING PORTFOLIO COMPANIES

Georgia Capital does not have capital commitments or a primary

mandate to deploy funds or divest assets within a specific time frame.

It focuses on shareholder returns and on opportunities that meet its

investment return and growth criteria. In line with its capital allocation

strategy, the Group emphasises capital-light, larger-scale investment

opportunities in Georgia, which have the potential to reach at least GEL

300 million equity value over three to five years and to be monetised

through exits as they mature. The Group believes that the superior

exit opportunities and improved liquidity associated with larger sized

investments will support the Group’s desire to reduce the current

discount to reported NAV per share.

Monetise

Grow businesses to equity

value of GEL 300mln+

Invest in

capital-light

large opportunities

in Georgia

• Georgia Capital invests in Georgia in sectors not requiring intensive

capital commitments.

• GCAP enables its large and capital-light portfolio companies to

explore regional growth opportunities, such as the recent expansion

of the retail (pharmacy) business into Armenia and Azerbaijan.

• In capital heavy industries, Georgia Capital seeks to manage third-

party money and/or establish partnerships.

In 2022, the Group introduced an NCC Navigation Tool, which is an

integral part of GCAP’s existing 360-degree framework and drives the

Group’s share buyback and investment decisions. NCC represents an

aggregated view of all confirmed, agreed and expected capital outflows

at the GCAP holding company level. An NCC ratio (NCC as a percentage

of the total portfolio value) between 15%-40% guides us to tactical share

buybacks/ investments, an NCC ratio below 15% would be expected

to lead to more meaningful share buybacks/investments, whilst a ratio

above 40% would lead us to implement a cash preservation strategy as

we did during the active phases of the COVID-19 pandemic.

Since its inception, GCAP has bought back 7.9 million shares with the

total value of US$ 87 million under its buyback programmes to date.

The US$ 45 million share buyback programme, which commenced

in June 2018, was completed in August 2019. Under the programme

we bought back 3,336,843 shares, of which 2,650,375 shares were

cancelled and 686,468 shares were transferred to the management

trust. In August 2019, Georgia Capital initiated a US$ 20 million share

purchase programme for the management trust. The management trust

programme has repurchased 1,550,084 shares. There was no buyback

programme in 2020 in light of the cash preservation strategy due to

COVID-19. In August 2021, Georgia Capital commenced a US$ 10

million share buyback and cancellation programme, which was extended

by an additional US$ 15 million in 2022. Under the US$ 25 million share

buyback programme, 3,075,923 shares have been repurchased and

cancelled, corresponding to GEL 76.2 million (US$ 25.0 million) in value.

In 2023, GCAP launched two buyback programmes: a US$ 10 million

programme in April 2023, under which it repurchased and cancelled

1,000,000 shares with a total value of GEL 25.4 million (US$ 10.0 million),

and a US$ 15 million buyback programme launched in October 2023,

during which 665,222 shares with a total value of GEL 22.5 million (US$

8.3 million) were repurchased in 2023.

The table below summarises GCAP’s share buybacks in 2023.

Value of

repurchased

(US$ million)

Number

of shares

repurchased

(million)

Georgia Capital share buybacks 29.2 2, 817,070

of which, programme 18.3 1,665,222

of which, management trust 10.9 1,151,848

Number of Georgia Capital shares cancelled 17.6 1,612,022

We perform 360-degree analysis each time we make

a capital allocation decision and compare:

• Investment opportunity vs. buyback opportunity

• Sale opportunity vs. buyback opportunity

GCAP share price is at the core of our investment

decision-making

360-DEGREE FRAMEWORK – A STRONG FOUNDATION FOR VALUE CREATION

Businesses operating in a frontier economy such as Georgia have limited

access to capital and management personnel. Consequently, those with

access to these limited resources can make investments in companies

which then provide an attractive risk return profile. The Directors seek

to generate value for its shareholders by: investing in opportunities in

Georgia that are currently not directly accessible to its shareholders;

changing management and governance structures; institutionalising and

scaling up the Company operations, often to benefit from consolidating

fragmented and underdeveloped markets; and unlocking value by exiting

these companies over time. The Group’s approach to investing and

managing companies entails the following principles:

Highly disciplined entry approach

The Georgian economy entered into a period of significant development

and growth approximately 15 years ago and different sectors and

businesses are therefore at early stages of formation.

Access to capital and management personnel is limited and as a result,

Georgia Capital can pursue attractive investment opportunities and

acquire assets on relatively attractive terms with a view to consolidating

fragmented and underdeveloped sectors of the economy, particularly

targeting high-multiple service industries, not requiring significant capital

commitments. The Group believes that in the long run Georgia will

become a service hub of the region. Since the Group is under no time

pressure to invest, it takes a selective and opportunistic approach to

new investments. The Group’s key principle is to buy assets at affordable

prices and to remain very disciplined in this regard. To evaluate new

acquisition opportunities Georgia Capital has developed a 360-degree

analysis framework.

360-degree analysis – a strong foundation for value creation

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

new investments. The Group performs a 360-degree analysis each time

it makes a capital allocation decision and compares: a) the investment

opportunity versus buyback opportunity; and b) the sale opportunity

versus buyback opportunity. The Group intends to buy assets/companies

at a higher discount to their listed peers than GCAP’s fair value discount.

Georgia Capital is targeting to invest in opportunities which produce

greater returns than returns created by buying back GCAP shares.

IRR AND MOIC ARE THE KEY DRIVERS FOR GCAP TO

INVEST IN NEWOPPORTUNITIES

ROIC IS AT THE CORE OF DECISION-MAKING WHEN

OUR PORTFOLIO COMPANIES ARE INVESTING OR

DIVESTING ASSETS/BUSINESSES

IRR

MOIC

ROIC

• ROIC should exceed weighted average cost of capital (WACC)

for new investments.

• Portfolio companies to continue divestment of low ROICand/or

non-core assets and businesses to enhance ROIC.

GCAP ROLE – VIS-À-VIS PORTFOLIO COMPANIES

• Approval of all capital allocation decisions: equity, debt, profit reinvestment, divestment, etc.

• Strategy setting, business plan approval and monitoring.

• Human capital (CEO and CFO) allocation and KPI setting.

• Approval and monitoring of the ESG strategy.

KEY METRIC FOR REINVESTMENT DECISION-MAKING

AT PORTFOLIO COMPANIES’ LEVEL

KEY MONEY MULTIPLES AT GCAP LEVEL

Entering a new industry with a small ticket size

Another core principle of the Group’s investment philosophy is to be

mindful about the size of potential investments in new industries. Georgia

Capital typically starts with a small ticket size and tests and develops a

management track record before stepping up the investment.

Liquidity is important

In order for the strategy to succeed, GCAP must be disciplined in

unlocking the value of companies in which it invests and that it manages.

In particular, it is crucial to set an exit strategy prior to making an

investment. A low investment entry point becomes even more important

in a small frontier economy, with limited exit opportunities. The Group

aims to have two potential liquidity events for each of its assets:

• The first exit: when entering a new industry Georgia Capital intends

to develop and grow portfolio companies. GCAP’s key focus areas

at portfolio company level are the ability to grow operating cash

and to make efficient capital expenditure investments by targeting

an appropriate level of return on invested capital (ROIC). Once the

business reaches its late stage of development, GCAP expects to

pursue its first exit route, which envisages dividend flows for the

Group; and

• The second exit: as businesses mature, Georgia Capital normally

seeks to monetise its investment through appropriate exit options,

typically within five to ten years from initial investment.

The Chief Strategy Officer is responsible for overseeing the establishment

of structured exit processes for the portfolio companies, as Georgia

Capital is actively engaged in the price discovery of portfolio assets held.

Focus on cash generation

Cash generation at both Georgia Capital and portfolio company level is a

key success factor for Georgia Capital.

Focus on management development

By developing top talent in Georgia Capital, the Group can add

value for the Company’s shareholders. Investing time in growing and

developing management continues to be critical for the success of the

Group’s strategy.

Good corporate governance

The Company believes that robust corporate governance is a source

of value creation for its shareholders. The Company believes that

alignment of the interests of shareholders and management by awarding

long-term deferred share awards to the Group’s senior executives

enhances value creation.

Georgia Capital PLC Annual Report 2023

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

US$ 46.5

MILLION IN 2023

TOTAL NET INVESTMENT

IDENTIFIED FROM GCAP

OVER THE NEXT 3-5 YEARS.

TOTAL CASH AND LIQUID FUNDS

45.0

40.5

152

Dec-22 Dec-23

TOTAL CASH AND

LIQUID FUNDS

US$ MILLION

Marketable

securities

US$ 13 mln

Cash

US$ 27 mln

US$ million

-73.7%

Buyback dividend

Dividend income from listed companies

Dividend income from private companies

2022

2023

45.0

40.5

236

GEL million

+2.5x

TOTAL

US$ MILLION

46.5

Renewable

energy

US$ 28.9 mln

Education

US$ 17.7 mln

CAPITAL ALLOCATION OUTLOOK

Georgia Capital expects to allocate US$ 46.5 million net equity capital in the renewable energy and education businesses over the next three to

fiveyears.

Other than already identified greenfield projects in the renewable energy and education businesses, the Group expects to focus on acquisitions.

By driving the development of these two businesses, the Group expects to realise at least 2.0x MOIC at each investment level.

No investments are expected in the clinics and diagnostics business from GCAP.

Detailed information on the investments in these businesses are set out on pages 34-60 of this report.

STRONG BALANCE SHEET AND CASH MANAGEMENT AT GEORGIA CAPITAL CONTINUED

STRONG DIVIDEND INCOME FROM PORTFOLIO COMPANIES

IN ADDITION TO THE RECURRING DIVIDENDS, GCAP RECEIVED A ONE-OFF NON-RECURRING INFLOW OF

GEL 56 MILLION IN 2023:

• GEL 29 million from the participation in BoG’s 2022 share buybacks;

• One-off additional dividend of GEL 27 million from the retail (pharmacy) business, following the minority buyout.

CAPITAL ALLOCATION AND MANAGING PORTFOLIO COMPANIES CONTINUED

THE LAST 12-MONTH (LTM) MANAGEMENT FEE EXPENSE RATIO WAS 0.80% AT 31-DEC-23 (1.02% AS OF 31-DEC-22).

GCAP MANAGEMENT FEE EXPENSES STARTING FROM 2024

HAVE A SELF-TARGETED CAP OF 0.75% OF GEORGIA CAPITAL’S NAV.

STRONG BALANCE SHEET AND CASH MANAGEMENT AT GEORGIA CAPITAL

Cash and liquid funds balance down 73.7% y-o-y to US$ 40 million at 31 December 2023, reflecting the redemption of GCAP’s Eurobonds in the third

quarter of 2023, which was partially financed by GCAP’s existing liquid funds balance. The decrease was slightly offset by strong dividend inflows.

ROBUST DIVIDEND

INCOME IN 2023

236

GEL MILLION IN 2023

Dividends income

(GEL million) Recurring One-off Total

BOG 124.5 29.4 153.9

of which, cash dividends 80.5 – 80.5

of which, buyback dividends 44.0 29.4 73.4

Retail (Pharmacy) 24.2 26.7 50.9

Insurance business 19.9 – 19.9

of which, P&C insurance 14.9 – 14.9

of which, medical insurance 5.0 – 5.0

Hospitals business 6.0 – 6.0

Renewable energy 5.2 – 5.2

Total 179.8 56.1 235.9

PLANNED INVESTMENTS FROM GCAP IN OUR INVESTMENT STAGE PORTFOLIO COMPANIES:

Georgia Capital PLC Annual Report 2023

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Georgia Capital PLC Annual Report 2023

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Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

OUR MANAGEMENT TEAM

Georgia

Capital

Irakli Gilauri, Chairman and CEO

Irakli Gilauri formerly served as the CEO of BGEO Group from 2011 to May 2018. He joined as CFO of Bank of Georgia in 2004

and was appointed as Chairman of the Bank in September 2015, having previously served as CEO of the Bank since May

2006. Prior, he was an EBRD (European Bank for Reconstruction and Development) banker. Mr Gilauri has almost 20 years of

experience in banking, investment and finance. Over the last decade, Irakli’s leadership has been instrumental in creating major

players in a number of Georgian industries, including banking, healthcare, utilities and energy, real estate, insurance and wine.

Holds an MSc in banking from Cass Business School and a certificate in winemaking from the University of California, Davis.

Avto Namicheishvili, Deputy CEO

In addition to his Deputy CEO role at Georgia Capital, Avto also serves as a chairman of the Group’s renewable energy,

beverages, housing development and hospitality businesses. Formerly he was BGEO Group General Counsel. He was General

Counsel of the Bank of Georgia from 2007 to 2018 and has played a key role in all of the Group’s equity and debt raises on the

capital markets, and over 25 mergers and acquisitions. Prior, he was a Partner at a leading Georgian law firm. Holds LLM in an

international business law from Central European University, Hungary.

Irakli Gogia, Portfolio Manager

CEO at the hospitals business and a chairman of the Group’s retail (pharmacy) and clinics and diagnostics businesses.

Formerly Deputy CEO, Finance at GHG. Prior to that Irakli was a deputy chairman of the supervisory board of Evex Medical

Corporation and Insurance Company Imedi L. He has ten years of experience in the financial industry. Previously, served as

CFO of Insurance Company Aldagi and Liberty Consumer, prior to which he was a senior auditor at Ernst & Young and Deloitte.

Holds a Bachelor of Business Administration degree from the European School of Management in Tbilisi.

Giorgi Alpaidze, Deputy CEO, Chief Financial Officer

Formerly BGEO Group CFO. Joined BGEO as Head of Group’s Finance, Funding and Investor Relations in 2016. He has

extensive international experience in banking, accounting and finance. Previously, he was a senior manager in Ernst & Young

LLP’s Greater New York City’s assurance practice. Holds a BBA from the European School of Management in Georgia. US

Certified Public Accountant.

Ia Gabunia, Chief Strategy Officer

Formerly Investment Director at Georgia Capital. Joined BGEO as an Investment Director in 2017. Ia has over ten years of

experience in banking and investment management. Prior to joining BGEO Ia served as Head of Corporate Banking at Bank

Republic, Société Générale Group. Previously, she held numerous executive positions in leading Georgian companies. Ia holds

a BSc degree from London School of Economics and Political Science, UK.

Giorgi Ketiladze, Managing Director, Head of Investments

Formerly Investment Officer at BGEO Group. Joined BGEO in 2017. Previously, worked at Deutsche Bank in Corporate Finance

department and at KPMG consulting in Germany. Giorgi holds a master’s degree from London Business School.

Nino Vakhvakhishvili, Chief Economist

Joined Georgia Capital in 2018. Nino is an IMF Short-term Expert and a visiting lecturer at the University of Georgia. Before

joining the company, she spent over five years at the National Bank of Georgia. Holds a master’s degree in economics from ISET.

Levan Dadiani, General Counsel

Formerly Senior Group Lawyer at BGEO Group. Joined BGEO in 2012. Levan has extensive experience in commercial law,

equity investments, corporate and project financing and energy projects. Previously, he was a Partner at a leading Georgian

law firm. Holds an LLM degree in International Business Law from University of Texas at Austin, USA.

Eka Duchidze, Executive Director

Formerly served as CEO of Amber Group, a hospitality business of Georgia Capital. Previously, she was a corporate secretary

and investor relations coordinator at BGEO Group. Joined Bank of Georgia as Corporate Secretary in 2005. During the past

years, she has carried out a number of crucial roles, including Executive Assistant to CEO and Head of Internal Branding.

Recently, Eka oversaw the development of SOLO Banking and SOLO Lifestyle at Bank of Georgia. Prior, she served for eight

years at the World Bank Group of which for two years she was at the World Bank HQ in Washington DC as a Programme

Assistant in the OPIC Department.

Photo The midnight skyline of Tbilisi,

the capital of Georgia

3534

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Strategic Review

Discussion of Results Governance Financial Statements Additional Information

188

16 2

102

122

124

184

347

352

2013 2014 2015 2016 2017 2018 2019 2020 2021

257

2022 2023

514

535

36% 33% 34% 32% 30% 30% 37%

37%

35%

This includes

a final dividend

of GEL 4.94

per share, to be

recommended

for shareholders’

approval.

Payout ratio

2019 2020 2021 2022 2023

27.0%

22.0%

18.9%

10.2%

13.9%

19.8%

12.9%

4.3%

19.6%

20.0%

400

800

1200

1600

1,375

1,132

727

295

514

2020 2021 20222019 2023

29.9%32.4%25.8%13.0%26.1%

ROAE

OUR PORTFOLIO OVERVIEW

LISTED AND OBSERVABLE PORTFOLIO

Overview

Bank of Georgia Group is a banking business with an impressive

track record of delivering superior returns and maximising

shareholder value. Diversified revenue sources, a growing loan

book, robust asset quality, efficient cost performance and fee

income growth are the main drivers of Bank of Georgia Group’s

profitability. JSC Bank of Georgia, a systemically important and

leading universal Georgian bank, is the core entity of the Bank of

Georgia Group. It offers a) retail banking and payment services

(Retail Banking), b) banking services for small and medium-sized

businesses (SME Banking) and c) corporate and investment

banking operations (Corporate and Investment Banking) in

Georgia. BoG is well-positioned to benefit from the growth of

the Georgian economy through its business segments and

aims to deliver on its growth strategy with strong capital and

liquidity positions.

In Retail Banking, a prominent component of the banking

business, BoG runs a client-centric digital multi-brand offering

with the aim of reaching the entire spectrum of retail customers,

encompassing both the mass retail segment (Mass Retail)

and affluent high-net-worth individuals (Premium Banking).

Bank of Georgia is a digital banking and payments leader, with

a strong retail and corporate banking franchise in Georgia.

Focusing on customer satisfaction and enhancing its digital and

advanced analytics capabilities, BoG aims to increase customer

engagement and maintain its relevance in customers’ daily lives.

The SME Banking segment, through which BoG develops value

propositions for small and medium-sized enterprises, has shown

remarkable growth in recent years. In Corporate and Investment

Banking, given the scale, the rich portfolio of banking products

and services, and the industry and product expertise that it

possesses, BoG is a universal bank of choice and top-of-mind

advisor for Georgian corporates. In the brokerage business, under

the Corporate and Investment Banking business, BoG is focused

on profitable growth, through unlocking retail brokerage potential

and fully digitalising brokerage services.

Performance and strategy

Bank of Georgia Group delivered strong results in FY23. Excellent

top and bottom-line growth and outstanding ROAE were

supported by the strong macroeconomic environment in Georgia.

All sectors including Retail Banking, SME Banking and Corporate

and Investment Banking exhibited excellent performance. Lending

activity was robust, loan book quality remained strong and

operating income increased in FY23, the latter driven by strong

income generation across key revenue lines and supported

by the significant gains from the sale of repossessed assets.

BoG continued its focus on customer satisfaction, employee

empowerment and improving its digital banking and payments

business franchise, while maintaining a healthy cost to income

structure. As a result, Bank of Georgia Group delivered a ROAE

of 29.9% (adjusted for one-offs) in FY23, while maintaining robust

liquidity and capital positions.

On 19 February 2024, Bank of Georgia Group PLC announced

that it has reached an agreement for the proposed acquisition of

100% of Ameriabank CJSC a leading universal bank in Armenia

with an attractive franchise. The transaction price is US$ c.303.6

million, which will be fully financed by the Bank’s surplus capital at

an attractive valuation of 0.65x net asset value as at 31 October

2023 and 2.6x P/E 2023. The transaction – expected to be

EPS and ROAE accretive – represents a significant catalyst for

the Bank and its shareholders. The Bank intends to keep the

targeted pay-out ratio unchanged in the range of 30-50% of

annual profits, potentially enabling increased capital distributions

for the Bank’s shareholders. In addition, Bank of Georgia is well

positioned to export its superior digital banking capabilities in the

underpenetrated and growing Armenian economy.

On 15 March 2024, the Bank announced its board’s intention to

recommend a final dividend for 2023 of GEL 4.94 per ordinary

share at the Bank’s 2024 Annual General Meeting. This will make a

total dividend paid in respect of the Bank’s 2023 earnings of GEL

8.00 per share. In addition, in March 2024, the Bank announced

an extension of the buyback and cancellation programme by an

additional GEL 100 million. Overall, the Bank’s dividend and share

buyback pay-out ratio for 2023 was 37% of total earnings.

INVESTMENT RATIONALE

The first entity from Georgia to be listed on the Premium Listing

segment of the Main Market of the LSE (LSE: BGEO), since

February 2012.

High standards of transparency and governance.

Leading market position

in Georgia by assets (37.8%), loans (36.8%),

client deposits (39.0%) and equity (36.2%) as at 31 December 2023.

Strongest retail banking franchise: 45.3% market share in deposits

of individuals, 39.5% market share in loans to individuals as at

31 December 2023.

Digital leader in Georgian banking sector with a strong retail

banking franchise: 72.6% share of monthly active digital users

in total active individuals.

Growing market: The banking sector’s assets growth rate at 22.7%

(CAGR over 2003-2023).

Sustainable growth combined with strong capital, liquidity and

robust profitability.

Outstanding ROAE performance.

OWNERSHIP

Georgia Capital owns 19.71% of Bank of Georgia Group PLC, as of

31 December 2023. As long as Georgia Capital’s stake in BoG is

greater than 9.9%, it will exercise its voting rights in Bank of Georgia

Group in accordance with the votes cast by all other shareholders

on all shareholder votes at any general meeting.

VALUE CREATION POTENTIAL

20%+ ROAE.

Loan book growth c.10%.

Regular progressive semi-annual capital distribution with 30%-50%

dividend/share buyback payout ratio.

Significant additional growth potential of Ameriabank within Bank

of Georgia Group by using its experience and know-how in retail

products, digitalisation and payment business.

BANKING

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

2 For the purpose of payout ratio calculation, total buyback amount is divided by outstanding shares before the beginning of the programme for the respective year.

3 2019, 2022 and 2023 numbers are adjusted for one-offs.

PERFORMANCE TRACK RECORD

Profits and ROAE

GEL million

Dividend record

GEL million

Loan book growth

Total dividend paid for the year Share buyback

Loan book growth (nominal) Loan book growth (constant currency basis)

1 Market data based on standalone JSC Bank of Georgia accounts as of 31 December 2023 published by the NBG, www.nbg.gov.ge.

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Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

0.8

0.9

1.7

2.7

4.6

6.0

5.2

6.3

7.7

8.7

10.5

13.0

16.0

18.9

22.3

26.6

31.9

38.2

43.0

44.7

53.7

0.7

1.0

1.3

2.1

3.2

3.6

4.0

5.5

6.7

7.6

9.7

11.6

14.3

17.0

19.8

23.0

26.2

34.6

37. 2

44.3

50.6

1.3

1.7

2.5

4.2

7.2

8.9

8.3

10.6

12.7

14.4

17.3

20.6

25.2

30.1

34.6

39.7

47.2

56.9

60.6

70.0

80.0

2003 20052004 20072006 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 202320222021

CAGR 22.7%

6.7

5.3

4.1

3.8

3.4

2.6

2.5

2.0

1.6

1.51.5

1.4

1.2

1.0

0.5

Lithuania

Estonia

Latvia

Slovenia

Georgia

Slovakia

Poland

Türkiye

Hungary

Bosnia & Herz.

Croatia

Romania

Czech Rep.

Belarus

Moldova

May-18

Jun-18

Jul-18

Aug-18

Sep-18

Oct-18

Nov-18

Dec-18

Jan-19

Feb-19

Mar-19

Apr-19

May-19

Jun-19

Jul-19

Aug-19

Sep-19

Oct-19

Nov-19

Dec-19

Jan-20

Feb-20

Mar-20

Apr-20

May-20

Jun-20

Jul-20

Aug-20

Sep-20

Oct-20

Nov-20

Dec-20

Jan-21

Feb-21

Mar-21

Apr-21

May-21

Jun-21

Jul-21

Aug-21

Sep-21

Oct-21

Nov-21

Dec-21

Sep-22

Oct-22

Nov-22

Dec-22

Jan-22

Feb-22

Mar-22

Apr-22

May-22

Jun-22

Jul-22

Aug-22

Sep-23

Oct-23

Jan-23

Feb-23

Mar-23

Apr-23

May-23

Jun-23

Jul-23

Aug-23

GBP 39.75

as at

31-Dec-23

Nov-23

Dec-23

OUR PORTFOLIO OVERVIEW CONTINUED

LISTED AND OBSERVABLE PORTFOLIO CONTINUED

MARKET OPPORTUNITY

Banking sector assets, loans and deposits

GEL billion

One of the lowest levels of non-performing loans (NPLs) worldwide, latest 2023

(NPLs to total gross loans)

Assets Deposits Loans

Source: IMF

Source: NBG

FINANCIAL METRICS AS AT 31-DEC-23

OPERATING METRICS AS AT 31-DEC-23

Banking business loan book

(GEL million)

20,233 +20.0% y-o-y

Cost/Income

29.8% -2.2 ppts y-o-y

Deposit portfolio

(GEL million)

20,523 +12.4% y-o-y

NPL coverage adjusted

for discounted value of collateral

117.6% -11.3 ppts y-o-y

ROAE

29.9% -2.5 ppts y-o-y

Tier 1 capital adequacy ratio

20.0%

Net Interest Margin

6.5% +1.1 ppts y-o-y

Liquidity coverage ratio

125.2% -7.2 ppts y-o-y

Number of monthly active retail

customers (thousands)

1,809 +10.8% y-o-y

Number of monthly active digital

users (thousands)

1,357 +21.0% y-o-y

% of monthly active users in total

active retail individuals

75.0% +6.3 ppts y-o-y

Number of mobile and internet

banking transactions (millions)

250.9 +45.7% y-o-y

VALUATION HIGHLIGHTS

Stock price performance

GBP

Price to book (P/B)

1.19x

+0.29x y-o-y

LTM P/E

4.3x

+1.5x Y TD

Implied multiple highlights at 31-Dec-23

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

2 ROAE and Cost/Income ratios are adjusted for one-offs.

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Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

Equity value

31-Dec-21

Put option

valuation 2022

Sale of 80%

equity interest

Equity value

31-Dec-22

Equity value

31-Dec-23

Put option

valuation 2023

(558)

697

155

159

OUR PORTFOLIO OVERVIEW CONTINUED

LISTED AND OBSERVABLE PORTFOLIO CONTINUED

Overview

The water utility business is a regulated natural monopoly in Tbilisi

and the surrounding area, providing water and wastewater supply

services to approximately 1.4 million residents and approximately

42,000 legal entities. The business also operates HPPs with a

total installed capacity of 149MW. The water utility business uses

a portion of the power generated by its HPPs associated with the

water infrastructure for internal consumption at regulated electricity

tariffs to power its water distribution network, while the remaining

electricity is sold on the market. Revenues come from two main

streams (water and electricity sales), where the business benefits

from both earning fair regulatory returns on invested capital made

in upgrading the water utility network and average electricity sales

price growth due to electricity market deregulation in 2019.

In 2022, GCAP completed the sale of an 80% interest in the water

utility business for a total consideration of US$ 180 million. In

2023, the valuation assessment of the remaining 20% equity stake

in the business, where GCAP has a clear exit path through a put

and call structure at pre-agreed EBITDA multiples, reflects the

application of the put option valuation while taking into account the

revised tariffs for the 2024-2026 regulatory period, which received

approval in December 2023 by an independent regulatory

body, Georgian National Energy and Water Supply Regulatory

Commission (“GNERC”). The water supply and sanitation (WSS)

tariffs for legal entities in Tbilisi increased from GEL 6.5 to GEL 8.8

per cubic metre compared to the previous regulatory period of

2021-2023, while WSS tariffs for residential customers remained

unchanged. The return on investment (WACC) is set at 15.44%

(14.98% in the previous regulatory period). The tariff increase

in 2023 will contribute to the healthy growth of the business

revenue generation in the coming years, as well as demonstrating

the transparency of the Georgian regulatory framework and its

alignment with the EU principles. The regulatory WACC formula is

based on publicly available market variables such as the risk-free

rate, cost of debt, country risk premium and other factors.

WATER UTILITY

MAJORITY SHAREHOLDER’S

CALL OPTION

8.90x

EV/EBITDA

Exercisable on the date of

expiry of the put option in

2026 and expiring six

months thereafter.

GCAP’S PUT OPTION

8.25x

EV/EBITDA

Exercisable in 2025-2026.

GCAP and the majority shareholder have put and call options for the

minority 20% equity interest in the water utility business.

1 The detailed valuation overview and related drivers are described on pages 101-119 of this report.

PRIVATE LARGE PORTFOLIO COMPANIES

Overview

The retail (pharmacy) business is the largest pharmaceuticals

retailer and wholesaler in the country, with 32% market

share based on 2022 revenues. The business consists of a

retail pharmacy chain and a wholesale business that sells

pharmaceuticals and medical supplies to hospitals and other

pharmacies. The business operates two brands, Pharmadepot

and GPC, with a total of 412 pharmacies (of which 397 are in

Georgia, and 15 in Armenia) and 23 franchise stores (of which, two

are in Armenia and four in Azerbaijan). The business’s franchises

include brands like The Body Shop, a British company specialising

in cosmetics, skincare and perfumes, Alain Afflelou SA, a top

optical retailer in France, and Carter’s, a leading American brand

for baby and kids clothing.

Performance and strategy

The retail (pharmacy) business successfully continued the growth

of its retail segment. The ongoing expansion of the pharmacy

chain and franchise stores, along with an increased share of

para-pharmacy in total revenues, significantly contributed to the

business’s robust performance in 2023.

The business strategy aims to achieve its targeted double-

digit CAGR in EBITDA over the next five years. This will be

accomplished by concentrating on several key areas: optimisation

of its local pharmacy chains, which have seen the addition of over

100 pharmacies in the last five years; increasing sales through

e-commerce channels; and pursuing international expansion. In

accordance with its international expansion strategy, the business

expanded its GPC pharmacy chain in Armenia in 2023, adding

five new pharmacies, bringing the total to 15. Additionally, the

company increased its presence in the Azerbaijani market by

opening two new Body Shop stores, reaching a total of four in the

country. Additionally, the business aims to explore international

investment opportunities in other countries within the region.

Due to continuous expansion and growth in recent years, the

retail (pharmacy) business had reached the full capacity of its

two warehouses. To accommodate its expansion, in 2023, the

business located a new, larger and more efficient warehouse.

This resulted in securing a ten-year lease contract with favourable

terms at the beginning of the year. The new warehouse spans

a total of 16.5 thousand square meters and replaces one of the

existing two warehouses, which had a space of 5.5 thousand

square meters. The new facility will be designated for handling

para-pharmacy and non-medical inventories.

In 2023, several regulatory changes in the healthcare market had

a dampening impact on the performance of the retail (pharmacy)

business. Starting in January 2023, the Ministry of Health,

Labour, and Social Affairs of Georgia introduced an ERP model

for prescription medicines funded by the state. ERP model is

an approach where prices are set according to the benchmark

prices for the same or similar medicines in comparable countries.

According to the new initiative, the Ministry introduced the

maximum retail price on targeted pharmaceutical products, in

two directions: Generic and Original drugs. The price caps are

set based on the average of such medicine prices in the following

countries: Bulgaria, Latvia, Macedonia and Montenegro. In

August 2023, a second wave of price regulations was introduced,

extending beyond prescribed medicines to include portions of

non-prescription medicines. Subsequently, in November 2023, the

state announced a third wave of price regulations affecting both

prescription and non-prescription medicines. The new prices,

aligned with these latest regulations, took effect from January

2024. Overall, the anticipated impact of these price regulations on

the 2024-year EBITDA is estimated at GEL 8 million.

INVESTMENT RATIONALE

Largest retailer in the country with more than 400 pharmacies

and franchise stores and over two million customer interactions

per month.

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

Supported by the country’s growing macroeconomic environment.

OWNERSHIP

In 2023 the retail (pharmacy) business signed an agreement with

its minority shareholders to accelerate the acquisition of a 20.6%

equity interest in the business. As a result of this transaction,

GCAP’s ownership stake in retail (pharmacy) increased to 97.6%

as at 31 December 2023 from 77.0% as at 31 December 2022.

The transaction was in line with GCAP’s 360-degree capital

management framework and reconfirms our confidence in the

value creation potential of the retail (pharmacy) business, which has

consistently delivered outstanding results and captured significant

growth opportunities.

VALUE CREATION POTENTIAL

The largest player and purchaser of pharmacy products in the

Georgian market with a cost advantage due to the scale of

operations: higher discounts from manufacturers and elimination

of distributor margins.

High-growth potential driven by growing macroeconomic

environment, expansion of the local and international chains,

and adding highly synergetic products and services.

RETAIL (PHARMACY)

Value development overview

GEL million

In response to these regulatory challenges, the business’s

strategic focus lies in the optimisation of the chain and increasing

the para-pharmacy share of revenues, which remain unaffected by

state regulations. The para-pharmacy segment’s contribution to

total revenues has grown from approximately 30% in 2019 to 40%

in 2023.

The business targets to maintain its EBITDA margin at 9%+

supported by a double-digit CAGR in its revenues and EBITDA

over the coming five years.

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Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

2017

38.9

52.2

65.3

70.4

76.2

76.9

77.3

450.3

518.6

614.7

679.4

782.4

789.9

823.7

2018 2019 2020 2021 20232022

255

Number of pharmacies and franchise stores

271 302 316 355 384 435

2017

16.2

32.8

53.1

66.1

77.1

52.4

2018 2019 2020 2021 20232022

1,044

714

Net debt including

lease liabilities

Minority

interest

Equity

value

31-Dec-23

Enterprise

value

31-Dec-23

(8)(322)

1. 6x

2.2x

<1.5x

31-Dec-22 31-Dec-23 Target

OUR PORTFOLIO OVERVIEW CONTINUED

PRIVATE LARGE PORTFOLIO COMPANIES CONTINUED

Continued growth of para-pharmacy share in

total revenues, which carry considerably higher

profit margins and are not subject to state

regulation

Explore international investment opportunities

within the region

Operate e-commerce in Armenia and

Azerbaijan

Expand highly synergetic product and service

mix in new format GPC drugstore

FIVE-YEAR FINANCIAL TARGETSKEY FOCUS AREAS IN MEDIUM AND LONG TERM

Expanding retail footprint in Georgia

Double-digit EBITDA CAGR

Double-digit revenue CAGR

9%+ EBITDA margin

International expansion

Increase sales from e-commerce

Supporting the core

Expanding the mix of synergetic products

and services

Revenue EBITDA, excluding IFRS 16

PERFORMANCE TRACK RECORD

Revenue and EBITDA

GEL million

Operating cash flow (excl. IFRS 16)

GEL million

FINANCIAL METRICS

OPERATING METRICS

Revenue

(GEL million)

823.7 +4.3% y-o-y

Gross profit margin

29.7% +0.4 ppts y-o-y

EBITDA excluding IFRS 16

(GEL million)

77.3 +0.5% y-o-y

EBITDA margin excluding

IFRS 16

9.4% -0.3 ppts y-o-y

Operating cash flow excluding

IFRS 16 (GEL million)

52.4 -32.1% y-o-y

EBITDA to cash conversion

excluding IFRS 16

67.7% -32.5 ppts y-o-y

Free cash flow excluding IFRS 16

(GEL million)

(56.1) NMF

Dividend paid to GCAP

(GEL million)

50.9 NMF

Number of pharmacies and

franchise stores

435 +51 over 2022

Number of bills issued

(million)

31.3 +0.8% y-o-y

Average bill size

(GEL million)

19.8 +4.5% y-o-y

Same store revenue growth

0.4% +1.2 ppts y-o-y

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

1 The detailed valuation overview and related drivers are described on pages 101-119 of this report.

2 Includes the application of the minority buyout agreement.

VALUATION HIGHLIGHTS

Value development overview at 31-Dec-23

GEL million

Adjusted net debt to EBITDA

LTM EV/EBITDA

9.7x

Implied multiple highlights at 31-Dec-23

Peer companies

• NEUCA S.A. | Poland

• Sopharma Trading AD | Bulgaria

• S.C. Ropharma S.A. | Romania

• SALUS, Ljubljana, d. d. | Slovenia

• Great Tree Pharmacy Co., Ltd. | Taiwan

• Dis-Chem Pharmacies Limited | South Africa

• Clicks Group Limited | South Africa

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Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

112 .4

117.8

108.7

150

115.8

110.6

173.1

149.5

142.9

201.6

198.9

204.7

285.5

267.3

251.6

351.6

314.7

315.2

2018 2019 2020 2021 2022 2023

31.3

23.3

20.8

11. 8

40.3

31.6

43.7

35.9

34.3

73.3

70.3

54.9

80.7

56.8

46.1

2018 2019 2020 2021 2022 2023

2018 2019 2020 2021 202 2 2023

62.3

57.6

72.8

63.4

31.7

10.6

HOSPITALS BUSINESS

OUR PORTFOLIO OVERVIEW CONTINUED

PRIVATE LARGE PORTFOLIO COMPANIES CONTINUED

Overview

Our hospitals business is the single largest healthcare market

participant in Georgia accounting for around 14% of the country’s

total hospital bed capacity as of 31 December 2023. The business

operates 34 healthcare facilities in Tbilisi and major regional cities

and provides secondary or tertiary-level outpatient and inpatient

diagnostic, surgical and treatment services. In order to improve

efficiency and seize emerging opportunities stemming from new

Government regulations introduced in 2023 as detailed below,

our healthcare business underwent a strategic restructuring

in December 2023. This restructuring resulted in the split of

the hospitals business into two distinct segments: “Large and

Specialty Hospitals” (comprising 7 healthcare facilities) and

“Regional and Community Hospitals” (comprising 27 healthcare

facilities). The Regional and Community Hospitals now include

the community clinics that were previously managed under the

clinics and diagnostics business. The transition for our patients

was seamless, and business operations remained uninterrupted.

The existing hospitals’ management team has continued to

manage the Large and Specialty Hospitals business and focus

on their continued growth, while enhancing profitability margins.

A new CEO from a local competitor has joined the Regional and

Community Hospitals business to lead the team to focus on the

service and efficiency from this group of hospitals. Large and

Specialty Hospitals and Regional and Community Hospitals

represent approximately 75% and 25%, respectively, of the

consolidated hospitals business’s EBITDA.

Performance and strategy

The performance of our hospitals businesses in 2023 has

been impacted by a number of regulatory changes in the

healthcare sector.

To address the oversupply of beds and enhance the quality of

the healthcare industry in Georgia, the Government introduced

a new facility regulation, effective from September 2023. This

regulation established upgraded standards for healthcare facilities

and imposed minimum requirements for space allotted per

hospital bed. In order to adapt to the new standards, our hospitals

business initiated a number of renovation projects in all of its

facilities. This resulted in certain sections of our healthcare facilities

being temporarily closed and unable to accept patients. The

capex investment for the renovation projects amounted to GEL

11.3 million in 2023. The negative annualised impact of increased

expenses that will result from additional requirements is estimated

at GEL c.4.0 million.

Although these new regulations have slowed the previously

projected pace of post-COVID recovery, we anticipate that they

will enhance the quality of healthcare services in Georgia which,

we believe will offer an opportunity to build on the competitive

advantage of our high-quality healthcare businesses in the

medium to long term.

INVESTMENT RATIONALE

Very low base: healthcare services spending per capita only

c.US$ 300 (EU average is c.US$ 3,300).

Growing market: healthcare spending growth estimated at

8% CAGR 2018-2023.

In-depth knowledge of the local market: strong business

management team with proven track record.

OWNERSHIP

Georgia Capital owns 100% of the hospitals business as at

31 December 2023 (31 December 2022: 100%).

VALUE CREATION POTENTIAL

Increase in revenue from elective care and outpatient services,

which have higher margins and faster cash collection periods.

Extracting efficiencies and enhancing operational flexibility through

a more concentrated strategy post-restructuring.

• Elective care services, outpatient services,

oncology centre, transplantology centre and

clinical trials

• Nursing reform

• Quality education programmes

• Automation of clinical processes

• Digitalisation of clinical KPIs

• Use of statistical methods

• Inpatient

• Outpatient

• Clinical

• Employee and customer satisfaction

FIVE-YEAR FINANCIAL TARGETSKEY FOCUS AREAS IN MEDIUM AND LONG TERM

EBITDA to operating cash c.85%+

EBITDA CAGR 10%+

ROIC c.13%+

Adding new services and strategic

projects

Quality projects

Digitalisation of clinical processes

Improve key operational data

PERFORMANCE TRACK RECORD

Net revenue

GEL million

EBITDA (excl. IFRS 16)

GEL million

Operating cash flow (excl. IFRS 16)

GEL million

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

2 Total revenue excludes eliminations between the large and specialty and regional and community hospitals.

From an operational performance perspective, the business

is focusing on improving the capacity utilisation of hospitals,

increasing patient and employee satisfaction across the chain,

and driving efficiency through digitalisation of clinical processes.

These, together with the improved cash flow generation and

allocating resources to high ROIC-generating investments, will

help the business to achieve its goal to generate mid-teens CAGR

in EBITDA over the coming five years that is expected to support a

13%+ ROIC in the medium to long term.

In December 2023, the business signed an agreement to sell one

of its regional and community hospitals for a total consideration

of GEL 34.6 million at 15.2x EV/EBITDA multiple, representing a

43% premium to its pre-disposal valuation. The proceeds from this

transaction were collected in January 2024 and were utilised for

deleveraging hospitals business’s balance sheet. The sale is in line

with the business’s strategy to divest low-ROIC generating assets.

From a clinical perspective, the business continues to grow a new

generation of doctors and nurses, while building robust clinical

quality management processes. The medium-term goals remain

knowledge and expertise advancement through education and

professional development of our physicians and nurses. Quality

assurance through the introduction and improvement of various

activities and processes at hospitals remains a top priority for us

so that the business delivers better care to its patients.

Going forward, the business strategy and key focus will be on

increasing revenues from elective care and outpatient services,

which are not subject to the state funding. These services have

higher margins and considerably faster cash collection periods.

Considering that Large and Specialty Hospitals are located in

Tbilisi and major regional cities, they are strategically placed for

and have positive prospects of increasing the flow of out-of-pocket

as well as privately insured patients. Elective care and outpatient

services tend to have a considerably higher share of such patients.

Large and Specialty Hospitals Regional and Community Hospitals Large and Specialty Hospitals Regional and Community Hospitals

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Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

9,620

193

222

221

286

308

497

779

813

839

2,225

Other

Vivo Group

PSP

Ingorokva & Tbilisi Medical Institute

Ghudushauri-Chachava

Geo Hospitals

GCAP hospitals

Archimede

Gormedi

Aversi

State

14%

60%

2 016 2017 2018 2019 2020 2021 2022 2023B

10%

9% 9%

11%

13%

10%10%

681

710

760

829

964

800

946 980

343

305

329

349

841

1,680

917

883

(241)

(33)

619

344

Net debt including

lease liabilities

Minority

interest

Equity

value

31-Dec-23

Enterprise

value

31-Dec-23

3.4x

5.3x

<2.5x

31-Dec-22 31-Dec-23 Target

State healthcare spending dynamics

GEL million

Market share by number of beds

GEL million

MARKET OPPORTUNITY

State healthcare spending – Other

State healthcare spending – UHC

Healthcare spending as a % of total state spending

Source: Ministry of Finance of Georgia.

Source: based on internal estimates.

OUR PORTFOLIO OVERVIEW CONTINUED

PRIVATE LARGE PORTFOLIO COMPANIES CONTINUED

FINANCIAL METRICS

OPERATING METRICS

Large and Specialty Hospitals

OPERATING METRICS

Regional and Community Hospitals

Net revenue

(GEL million)

313.7 +0.1% y-o-y

Operating cash flow excluding

IFRS 16 (GEL million)

10.6 -66.5% y-o-y

EBITDA excluding IFRS 16

(GEL million)

46.1 -18.7% y-o-y

EBITDA to cash conversion

excluding IFRS 16

23.0% -32.9 ppts y-o-y

EBITDA margin excluding

IFRS 16

14.5% -3.3 ppts y-o-y

Free cash flow excluding IFRS 16

(GEL million)

(35.1) NMF

Net debt

(GEL million)

262.0 +37.7% y-o-y

Dividend paid to GCAP

(GEL million)

6.0 -53.8% y-o-y

Number of facilities

Number of beds

1,190

Revenue per bed

172.0

Occupancy rate

53.5% -2.0 ppts y-o-y

Number of facilities

Number of beds

1,035

Number of registered patients

(community hospitals)

229,943 -2.9% y-o-y

Occupancy rate

(regional hospitals)

49.4% +3.0 ppts y-o-y

VALUATION HIGHLIGHTS

Value development overview at 31-Dec-23

GEL million

Net debt to EBITDA

Peer companies

• Medicover AB | Sweden

• EMC Instytut Medyczny SAEMC SA | Poland

• Med Life S.A. | Romania

• Netcare Limited | South Africa

• MLP Saglik Hizmetleri A.S. | Türkiye

• Life Healthcare Group Holdings Limited | South Africa

LTM EV/EBITDA

13.8x

Implied multiple highlights at 31-Dec-23

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

1 The detailed valuation overview and related drivers are described on pages 101-119 of this report.

2 Restructuring of the healthcare businesses are applied retrospectively.

3 LTM EBITDA excludes the recently divested Batumi hospital, and net debt includes cash proceeds from the transaction.

• The largest healthcare service provider in Georgia: 14%market

share by number of hospital beds.

• Covering three-quarters of Georgia’s population.

• Country’s expenditure on healthcare as a % of GDP reached 4.0%.

• Government spending on healthcare accounts to c.10% of total

budget in 2023.

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Strategic Review

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Discussion of Results Governance Financial Statements Additional Information

18 18

2014 2015 2 016 2017 2018 2019 2020 2021 20232022

64%

51%

61%

68%

55%

88%

71%

82%

CAGR +11%

37%28% 37% 38% 34% 30% 25% 24%25% 30%

102

123

134

160

2014 2015 2016 2017 2018 2019 2020 2021 20232022

CAGR +14%

18%

Hualing

11%

22%

30%

Other

New Vision

Irao

Unison

GPIH

TBC

Insurance

Aldagi

4,781

3,578

6,364

2,756

2,881

1,396

409

281

154

134

France

Switzerland

Belgium

Germany

Slovenia

Poland

Bulgaria

Türkiye

Russia

Georgia

10.5%

6.9%

5.5%

5.9%

4.7%

2.2%

1.5%

0.9%

1.3%

8.7%

Georgian P&C

Penetration – 0.7%

Density – US$ 49

OUR PORTFOLIO OVERVIEW CONTINUED

PRIVATE LARGE PORTFOLIO COMPANIES CONTINUED

Overview

Over nearly three decades in the Georgian property and casualty

insurance market, Aldagi has achieved almost universal brand

awareness, leading positions in retail insurance services, with

the largest product portfolio and exceptional financial strength.

The company has almost doubled its retail portfolio over the last

four years, outperformed market growth, delivered an average

annual ROAE of c.31% in 2014-2023 and consistently distributed

dividends within a 50%-90% payout ratio each year since 2014.

Based on the latest available market data as at 30 September

2023, Aldagi continues to be the most profitable insurance

company in the local market with a 29% share of the insurance

industry profit and a market share of 30% based on gross

premiums written.

The current low level of insurance market penetration in Georgia

(1.3%, of which 0.7% relates to property and casualty insurance

and 0.6% to medical insurance) provides enormous potential

for growth and Aldagi is well-equipped to capture these

opportunities. The company plans to increase the P&C insurance

business profitability by strategically focusing on each of its four

main business lines set out below:

• Retail customers. The Georgian retail insurance market

offers ample room for growth, as most of its potential is yet to

be unlocked. Motor insurance accounts for 59% of the total

retail insurance market in Georgia, of which 17% third party

liability insurance (TPL) purchased at the border by foreign-

registered vehicles entering Georgia, which became mandatory

from March 2018. Moreover, the motor insurance segment has

great potential to increase, as only 7% of registered cars are

insured on the local market. A new law making TPL insurance

mandatory for all vehicles registered in Georgia is expected to

be passed in the next few years which will significantly boost

retail market penetration. Overall, Aldagi’s market share in

voluntary retail insurance stands at 38% and Aldagi expects

to grow its retail segment concentration by developing simple

products for mass retail as well as developing a unique

customer experience through exclusive premium line services.

Aldagi aims to further strengthen customer retention and its

market leadership position by continued development of its

digital insurance platform.

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

currently in its infancy. Aldagi sees significant potential to

grow this segment of the portfolio by developing tailor-made

products and providing them with established multi-channel

distribution networks and digital portals, created especially for

SME clients. A separate SME sales division was established at

the end of 2019 as a part of this strategy. As a result, Aldagi’s

SME gross revenues have grown by 61% in 2023 (from GEL

3.5 million to GEL 5.6 million).

P&C INSURANCE

INSURANCE

The insurance business comprises a) property and casualty (P&C) insurance business and b) medical insurance business. As of the

beginning of 2024, the Georgian insurance sector adopted the Estonian Taxation Model. Prior to this change, the pre-tax profit of the

insurance businesses was levied by a 15% corporate income tax. Following the enforcement of the Estonian Taxation Model, a 15%

corporate income tax will be applied to earnings distributed to individuals or non-resident legal entities. Consequently, GCAP’s insurance

businesses will no longer be subject to the corporate income tax payment, freeing up the resources for both business development and

enhanced dividend payments to GCAP.

INVESTMENT RATIONALE

Significantly underpenetrated insurance market in Georgia (0.7%

penetration in property and casualty insurance market).

Market leader with a powerful distribution network of point of sale and

sales agents.

OWNERSHIP

The P&C insurance business is 100% owned by Georgia Capital.

VALUE CREATION POTENTIAL

Compulsory border MTPL effective from 1 March 2018.

Local MTPL is expected to kick in and provide access to untapped retail

CASCO insurance market with only 5% existing penetration.

Increasing footprint in untapped MSME sector, where Aldagi’s

gross revenues have grown by 61% in 2023 (from GEL 3.5 million

to GEL 5.6 million).

Digitalisation.

Undisputed leader in providing insurance solutions to corporate clients.

1 Source: ISSSG.

Earned premiums, gross

GEL million

Profit and dividend payout ratio

2,3

GEL million

PERFORMANCE TRACK RECORD

Market share, YTD Sep-23

Gross premiums written

Insurance penetration and density

MARKET OPPORTUNITY

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

2 2018, 2020 and 2021 numbers are adjusted for non-recurring items.

3 Calculated based on net income, adjusted for non-recurring items and average equity, adjusted for preferred shares where applicable.

4 Penetration and density are stated including healthcare insurance (as of latest available data).

P&C INSURANCE

• Large corporates. Although the level of insurance penetration

within the corporate segment is relatively high compared to

retail and SME segments, a combination of favourable Georgian

macroeconomic conditions, a good investment climate, stable

economic growth and an increase in infrastructure projects will

further increase customer demand for insurance products.

• International reinsurance. The P&C insurance business

entered regional reinsurance markets of Armenia and

Azerbaijan. Aldagi became the first insurance company on the

local market to obtain an international credit rating of bb+ from

AM Best. The credit rating is expected to further support the

regional expansion of the business’s reinsurance operations.

Performance and strategy

2023 was a robust year in terms of revenue growth for the P&C

insurance business, up by 21.0%, mainly reflecting the growth in

the motor and credit insurance lines. However, loss and combined

ratios were up by 6.5 ppts and 10.3 ppts, respectively, reflecting

increased agricultural insurance claims due to an abnormal

number of hailstorms as well as increased property insurance

claims, resulting from an unprecedented landslide in one of the

regions of Georgia. This translated into an 11.0% y-o-y decrease in

the net income of the business in 2023.

Aldagi’s medium-term strategic focus remains unchanged.

The business targets to gain a strategic edge by focusing on

underwriting excellence and portfolio profitability backed by five

key pillars: 1. Strengthening customer retention; 2. Introducing

new digital insurance products; 3. Improving customer experience;

4. Advancing employee recognition; and 5. Getting ready for local

MTPL insurance launch.

As part of the strategy, Aldagi has the following financial targets

through 2024-2026:

• Market share of 25%-30%.

• ROAE of 25%-30%.

• Dividend payout of 50%-80%.

• Combined ratio of 80%-85%.

• Solvency ratio of 180%+.

• Retail concentration of 60%+.

Source: Swiss Re Institute.

Source: ISSSG.

Insurance density, US$ Insurance penetration

Profit ROAE Dividend payout ratio

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Strategic Review

Discussion of Results Governance Financial Statements Additional Information

INSURANCE

195

202

228

308

370

105

380

110

442

127

502

138

438

129

2015 2016 2017 2018 2019 2020 2021 2022 9M23

36%

38%

39%

29%

28%

29% 29%

27%

30%

CAGR 2015-2022

Market – 15%

Aldagi – 11%

YTD Sep-23

market gross premiums

GEL 438 million

Aldagi share 30%

0 0 0

228

286

31-Dec-22 31-Dec-23

10.6x

13.0x

31-Dec-22 31-Dec-23 Target

Leverage

AlphaIC GroupPSPArdi OtherGCAP’s

medical

insurance

Vienna

Insurance

Group

19%

33% 17% 6% 2% 2% 21%

OUR PORTFOLIO OVERVIEW CONTINUED

PRIVATE LARGE PORTFOLIO COMPANIES CONTINUED

FINANCIAL METRICS

OPERATING METRICS

Earned premiums, gross

(GEL million)

160.4 +19.8% y-o-y

Dividend paid to GCAP

(GEL million)

14.9 +0.9% y-o-y

Net income

(GEL million)

19.1 -11.0% y-o-y

ROAE

24.4% -5.3 ppts y-o-y

Combined ratio

89.5% +10.3 ppts y-o-y

Number of policies written

(corporate)

114,378 +34.2% y-o-y

Number of policies written

(retail)

210,984 +27.3% y-o-y

Number of claims

reported

25,920 +56.9% y-o-y

VALUATION HIGHLIGHTS

Value and LTM P/E multiple development overview

GEL million

Net debt to EBITDA

GEL million, unless otherwise noted 31-Dec-23 31-Dec-22 Change

LTM net income

22.0 21.5 0.5

Implied P/E multiple

13.0x 10.6x 2.4x

Equity fair value 285.6 228.0 57.6

LTM ROAE

24.4% 29.7% (5.3 ppts)

Peer companies

• Dhipaya Insurance | Thailand

• Zavarovalnica Triglav | Slovenia

• Pozavarovalnica Sava | Slovenia

• Aksigorta | Türkiye

• Anadolu Sigorta | Türkiye

• Bao Minh Insurance | Vietnam

• Turkiye Sigorta | Türkiye

Overview

Our medical insurance business is one of Georgia’s largest

providers of private medical insurance. The business has a wide

distribution network and offers a variety of medical insurance

products primarily to Georgian corporate and state entities and

also to retail clients.

In January 2024, our medical insurance business signed a

Memorandum of Understanding (MoU) to acquire a GEL 73 million

portfolio of medical insurance contracts and brand name from

“Ardi”, the third-largest player in the Georgian health insurance

market with a 17% market share based on 9M23 net insurance

premiums. Upon the successful completion of this transaction,

the combined market share of our medical insurance business

will make it the largest health insurer in the country.

Ardi’s portfolio is concentrated in the upscale segment category,

presenting an opportunity to further diversify our medical

insurance portfolio and achieve significant financial and strategic

synergies. The total cash outflow for this transaction is GEL 27

million, which will be fully financed by funds already available in

the medical insurance business, with no cash investment required

f ro m G CA P.

Following this acquisition, the insurance business will operate

under three brand names: Aldagi, Imedi L, and Ardi, all of which

will be managed under GCAP.

MEDICAL INSURANCE

INVESTMENT RATIONALE

Being present in the whole healthcare ecosystem for any further

potential market structural changes.

High ROAE-generating business with ample room for market

share growth.

OWNERSHIP

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

VALUE CREATION POTENTIAL

The potential to leverage the significantly increased scale to deliver

growth and extract synergies.

Market and Aldagi gross written premiums

GEL million

1 Calculated in line with the market approach.

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

3 The detailed valuation overview and related drivers are described on pages 101-119 of this report.

4 LTM net income as at 31-Dec-23 and respective implied multiple are on a pre-tax basis, due to the business valuation incorporating impact of the Estonian Taxation Model.

5 Calculated based on average equity, adjusted for preferred shares.

Competitive landscape, market share by net premium revenue

GEL million

Key focus areas in medium and long term

1 ISSSG as of 30-Sep-23.

2 PMI – private medical insurance.

MEDICAL INSURANCE

Performance and strategy

The significant growth in 2023 in earned premiums, reflects the

combined effect of an increase in the price of insurance policies

and increase in the number of insured clients within the same

period. The increase in insurance policy prices was a prevalent

trend in the Georgian insurance market, driven by increased loss

ratios following the shift in insurance policy utilisation patterns

post COVID-19 pandemic. Notably, the figures for 2023 do not

include the impact of the potential acquisition of the portfolio of

insurance contracts, which, subject to successful completion,

will be consolidated starting from 2024. Following the acquisition,

the primary focus for the medical insurance business in 2024 will

centre on deriving substantial synergies between the existing

and acquired insurance portfolios, leveraging increased scale

efficiencies and aiming to deliver profitable growth.

Market

Aldagi Market share Source: ISSSG

Equity value

LTM P/E multiple

Leveraging scale

to deliver profitable

growth

Increase

“managed

flow” through

customer-centric

process

Enhance gross

profit through

distribution

of non-PMI

products to the

book – developing

“fee business”

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Discussion of Results Governance Financial Statements Additional Information

2018

2.9

4.4

6.4

3.8

3.4

6.5

55.1

75.4

69.5

72.4

74.9

91.3

2019 2020 2021 2022 2023

2018

16.8%

14.7%

17.6%

18.1%

18.5%

16.6%

77.3%

81.4%

73.0%

79.3%

81.0%

78.2%

2019 2020 2021 2022 2023

94.1%

96.1%

90.6%

97.4%

99.5%

94.8%

Excess cash

Enterprise value

31-Dec-23

Equity value

31-Dec-23

31-Dec-22 31-Dec-23 Target

No Leverage No Leverage No Leverage

PERFORMANCE TRACK RECORD

Revenue and net profit

GEL million

Combined ratio

FINANCIAL METRICS

OPERATING METRICS

Net premiums earned

(GEL million)

91.3 +22.0% y-o-y

Loss ratio

78.2% -2.8 ppts y-o-y

Combined ratio

94.8% -4.7 ppts y-o-y

Net profit (GEL million)

6.5 +91.8% y-o-y

Dividend paid to GCAP

(GEL million)

5.0 NMF

Number of insured

169,106 +3.3% y-o-y

Renewal rate

81.8% +4.4 ppts y-o-y

OUR PORTFOLIO OVERVIEW CONTINUED

PRIVATE LARGE PORTFOLIO COMPANIES CONTINUED

OUR PORTFOLIO OVERVIEW CONTINUED

PRIVATE INVESTMENT STAGE PORTFOLIO COMPANIES

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

2 The detailed valuation overview and related drivers are described on pages 101-119 of this report.

3 LTM net income as at 31-Dec-23 and respective implied multiple are on a pre-tax basis, due to the business valuation incorporating impact of the Estonian Taxation Model.

VALUATION HIGHLIGHTS

Value development overview at 31-Dec-23

GEL million

Net debt to EBITDA

LTM ROAE (adjusted for non-recurring items)

17.2%

+7.0 ppts y-o-y

IMPLIED LTM P/E

11.0x

-4.0x y-o-y

Implied multiple highlights at 31-Dec-23

RENEWABLE ENERGY

Overview

Our renewable energy business represents a leading platform for

developing and operating HPPs and wind power plants (WPPs)

across the country. The business operates commissioned

renewable assets with 71MW installed capacity in aggregate

and with average capacity factors of more than 40%: 30MW

Mestiachala HPP, 20MW Hydrolea HPPs and 21MW Qartli WPP.

30MW Mestiachala HPP was developed and constructed by the

renewable energy business, while the latter two assets represent

successful acquisitions made by the business at the end of

2019. An 83% of the installed capacity of our power plants (all

but 12.3MW of our Hydrolea HPP) benefit from long-term power

purchase agreements (PPAs) formed with the Government-backed

entity, resulting in predictable dollar-linked cash flows, as PPAs,

as well as market sales, are denominated in US dollars. The

renewable energy business is wholly-owned by Georgia Capital.

The renewable energy business aims to capitalise on favourable

electricity market conditions in Georgia, on the back of the

ongoing gradual harmonisation of the current energy market

structure with EU directives, leading to a more liquid, competitive

and transparent market. Following the electricity market

deregulation in 2019, the Government of Georgia adopted a

new electricity market model concept in 2020, creating the path

towards launching day-ahead and intraday trading markets in the

coming years. Overall, the renewable energy business expects

planned reforms in the Georgian electricity market to have a

further positive impact on electricity sales prices.

Performance and strategy

Revenue from electricity sales remained flat (down 0.9% y-o-y)

and stood at US$ 14.4 million, reflecting the combination of a) the

scheduled rehabilitation works on two power-generating units at

Hydrolea HPPs (which were taken offline during November 2022-

June 2023 periods due to previously planned phased rehabilitation

INVESTMENT RATIONALE

Favourable supply-demand dynamics pushing the power prices up.

Georgia is on track for the harmonisation of current energy market

structure with EU directives leading to a liquid, competitive and

transparent market.

Favourable mix of merchant sales and Government PPAs, providing

high visibility and significant upsides in cash flows.

Natural cash flow hedge with fully dollarised revenues.

Inherently green projects aligned with the international best practices

of environmental and social standards.

OWNERSHIP

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

VALUE CREATION POTENTIAL

Opportunity to establish a renewable energy platform with up to

~270MW installed capacity over the medium term and capitalise on

favourable electricity market conditions.

Diversified portfolio of HPPs and WPPs with c.40%+ capacity

factors, benefiting from long-term fixed price PPAs formed with the

Government-backed entity.

Availability of competitive green funding from both international and

local financial markets.

High margins and dollar-linked cash flows.

Stable dividend provider capacity in the medium term.

works and b) a 4.6% increase in the average selling price, driven

by the export of 32.3 GWh of electricity to the Republic of

Türkiye in 2023. Operating expenses were up by 19.4% y-o-y in

FY23, reflecting electricity and transmission costs incurred due

to electricity export in the Republic of Türkiye. Consequently,

EBITDA was down by 7.1% y-o-y to US$ 10.4 million. During the

year, the business made US$ 2.0 million dividend distribution to

Georgia Capital.

The renewable energy business plans to develop 194MW installed

capacity power plants in the medium term: Zoti HPP (46MW),

Tbilisi and Kaspi WPPs (130MW) and Darchi HPP (18MW). The

business aims to establish a renewable energy platform with

growing dollar-linked cash flows and solid profitability, expected

to enable it to sponsor steadily increasing dividend payouts while

progressing against its medium-term strategic priorities:

• Robust profitability with ~80% EBITDA margin.

• ~100% EBITDA to cash-conversion rate.

Revenue

Net profit Loss ratio Expense ratio

Peer companies

• Powszechny Zakład Ubezpieczen SA | Poland

• Allianz SE | Germany

• UNIQA Insurance Group AG | Austria

• Ageas SA/NV | Belgium

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8.4

9.3

9.4

9.7

10.2

10.4

11.0

11.9

12.6

12.8

12.2

13.8

14.2

13.1

8.0

4.0

12.0

20.0

16.0

4.1% average consumption growth rate

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 20222021 2023

1.5

0.9

0.5 0.5 0.5

0.7

0.6

0.7

0.6

0.2 0.2

0.4

1.5

(0.7)

(2.2)

(2.5)

(1.8)

(2.0)

(2. 4)

(2.2)

(2.1)

(2.8) (2.8) (2.4)

(3.4)

(0.2)

(0.5)

(0.6)

(0.5)

(0.8)

(0.7)

(0.5)

(1.5) (1.5)

(1.6) (1.6)

(2.0)

(1.5)

(0.8)

0.6

(1.8)

(2.6)

(1.8)

(2. 3)

(2.4)

(2.2)

(3.0) (3.0)

(4.2)

(4.3)

(4.0)

(3.9)

(2.8)

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 20232022

(71)

170

Net debtEnterprise value

31-Dec-23

Equity value

31-Dec-23

6.4x

6.8x

<6.0x

31-Dec-22 31-Dec-23 Target

Operational

assets

US$ 78 mln

Pipeline

projects

US$ 21 mln

TOTAL VALUE

US$ MILLION

RENEWABLE ENERGY PROJECTS OVERVIEW

Commissioned/acquired projects

Installed

capacity,

Capacity

factor

PPA

expiration

PPA tariff,

US¢/kWh

Mestiachala HPP 30.0 40% 1H34 5.5

Hydrolea HPPs 20.4 70% 2H28 5.6

Qartli Wind Farm 20.7 47% 2H29 6.5

Total operating 71.1

Pipeline projects

Zoti HPP 46.0 43% TBD 5.1

Darchi HPP 18.0 60% TBD 5.7

Tbilisi Wind Farm 50.0 39% TBD TBD

Kaspi Wind Farm 80.0 38% TBD TBD

Total pipeline 194.0

Total 265.1

Note 1: Mestiachala HPP was commissioned in 1H19; Qartli Wind Farm and Hydrolea HPPs were acquired in 2H19 by GCAP.

Note 2: PPA terms for Tbilisi and Kaspi WPPs are under the discussion with the Government of Georgia.

Note 3: Only one out of three Hydrolea HPPs has an active PPA contract.

Electricity consumption (TWh)

Electricity import and export dynamics (TWh)

MARKET OPPORTUNITY

OUR PORTFOLIO OVERVIEW CONTINUED

PRIVATE INVESTMENT STAGE PORTFOLIO COMPANIES CONTINUED

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

2 The detailed valuation overview and related drivers are described on pages 101-119 of this report.

3 Implied EV/EBITDA is calculated based on normalised LTM EBITDA.

4 Investments at cost include the pipeline projects.

5 Ratio is calculated in US$ terms.

FINANCIAL METRICS

OPERATING METRICS

Revenue (US$ million)

14.4 -0.9% y-o-y

EBITDA (US$ million)

10.4 -7.1% y-o-y

EBITDA margin

71.8% -4.8 ppts y-o-y

Operating cash flow (US$ million)

9.9 -12.9% y-o-y

Dividend paid to GCAP (US$ million)

2.0 -28.6% y-o-y

Electricity generation

(kWh million)

254.0 -5.3% y-o-y

Average electricity sales

(price per US¢/mWh)

56.8 +4.6% y-o-y

VALUATION HIGHLIGHTS

US$ million, unless otherwise noted 31-Dec-23 31-Dec-22 Change

Enterprise value (EV) 169.6 154.7 14.9

EBITDA 12.0 12.2 (0.2)

Implied EV/EBITDA

multiple 12.6x 11.4x 1.2x

Investments at cost (EV)

19.5 15.1 4.4

Net debt (70.5) (71.4) 0.9

Equity fair value 99.1 83.3 15.8

Peer companies

• BCPG Public Company Limited | Thailand

• ERG S.p.A | Italy

• Polenergia S.A. | Poland

• Terna Energy Societe Anonyme | Greece

Value development overview at 31-Dec-23

US$ million

Equity fair value composition at 31-Dec-23

Net debt to EBITDA

• 22.7% of total consumption

produced by gas-fired

thermal power plants

(TPPs), 5.2% – imported.

• In 2023 weighted average

ESCO balancing price

reached 53.0 US$/MWh.

• 2023 net electricity deficit

stood at 2.8 TWh, whereas

in 2010, electricity surplus

was at 0.6 TWh.

• 2023 was an exceptional

year in terms of electricity

exports, with a record-high

export revenue of

$95.4 million.

• Renewable energy business

managed to capitalise on

the opportunity and

directly exported 32 GWh

of electricity to Türkiye.

Electricity exports Electricity imports TPP generation Deficit

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10.0%

9.9%

10.1%

10.4%

10.7%

10.2%

9.7%

10.0%

10.5%

9.7%

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023E

0.00

56.25

112.50

168.75

225.00

281.25

337.50

393.75

450.00

158

177

192

217

257

280

281

298

343

375

2.7

2.9

3.2

3.6

3.7

3.8

4.2

4.5

4.7

2.6

2014 2015 2016 2017 20 18 2019 2020 2021 2022 2023E

12%

CAGR 2014-2019

10%

CAGR 2020-2023

2020 2021 20222019 2023

15%12%10%9%9%

2000

4000

6000

8000

2,582

2,516

3,148

4,162

5,827

2020 2021 20222019 2023

92%

90%

62%

73%

80%

Overview

Georgia Capital’s education business is the largest player in

the private K-12 market in Georgia with 9% market share. Our

business is managed with a partnership model and combines

majority stakes in four private school brands operating across

seven campuses, acquired in 2019-2023: British-Georgian

Academy (the leading school in the premium segment), British

International School of Tbilisi (the leading school in the international

segment), Buckswood International School (well-positioned in the

mid-scale segment) and Green School (the leading school brand

in the affordable segment). The schools have a comprehensive

offering of academic programmes, including the Georgian National

Curriculum, the International Baccalaureate and Cambridge

International programmes. The annual tuition fees for these

programmes range from US$ 2,200 to US$ 19,300 across all four

segments and grades.

Our education business has expanded from the capacity in 2019

of 2,810 learners to 7,270 learners in 2023 through 1) expansion

of existing campuses (1,060 learner capacity), 2) acquisition of

operating schools and real estate (3,000 learner capacity) and

3) greenfield projects (400 learner capacity). Currently, there are

5,827 learners at all seven campuses.

The private education market’s revenues across kindergarten

to 12

grade in Georgia have grown at 13% CAGR over 2013-

2023. Currently, there are c.66,000 learners in private schools in

Georgia, representing 10.5% of the total general education market.

The private general education market enjoys growth in enrolments

with a CAGR of 3% over 2013-2023 and rising average tuition fees

with a CAGR of 9% over the same period.

Management expects that the private general education market

will increase by 1.5x in value in short to medium-term, driven

by factors such as the large gap in quality in public schools as

compared to private schools, growing household income and

a decreasing unemployment rate. Georgia has a relatively low

average annual spending per K-12 learner, creating further room

for growth together with globally trending demand for private K-12

education. The private education sector, previously impacted

by reduced demand during the COVID-19 pandemic, is now

experiencing a notable rebound, offering an additional boost to

market growth.

The private general education market in Georgia is currently very

fragmented with an increasing average school size and 15% fewer

schools over the last decade. Currently, Georgia Capital is the

largest player on the market with a 9% market share in terms of

learners, while the second largest player holds 2.3%. Only 5% of

private schools have 1,000+ learners, while 61% have less than

250 learners.

INVESTMENT RATIONALE

Highly fragmented general education market with

consolidation opportunity.

Market with strong growth potential.

Low dependency on the Government.

High resilience to crisis.

Predictable and sticky revenue.

Strong profitability.

Capex efficient business.

High trading multiples.

Positive ESG impact.

OWNERSHIP

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

VALUE CREATION POTENTIAL

Scaling up to the capacity of 22,000 learners through expansion

plans in existing schools, greenfield projects and M&As by 2025.

Strong organic growth at existing schools is expected to drive solid

growth in run-rate EBITDA, on top of expansion plans and M&As.

Stable dividend provider capacity in the medium term.

OUR PORTFOLIO OVERVIEW CONTINUED

PRIVATE INVESTMENT STAGE PORTFOLIO COMPANIES CONTINUED

Targets for 2025 Currently

EBITDA (GEL million) 50 14

EBITDA margin 40%+ 26%

Equity value GEL 500 million GEL 189 million

ROIC 20%+ 15%+

Built learner capacity 22,000 7, 2 70

Our business, as the leading private K-12 education institution

in Georgia, is ideally positioned to leverage the expanding and

consolidating private education market.

Performance and strategy

The business has expanded in 2023 through 1) the launch of the

new campus in the mid-scale segment with 400 learner capacity

(the campus has an eventual capacity of 1,300) and 2) the

acquisition of a new campus in the affordable segment with 1,200

learner capacity (the campus has an eventual capacity of 1,600).

All seven campuses have a combined utilisation rate of 80%

compared to 73% last year, taking into account the new capacity

addition of 1,600 learners in mid-scale and affordable segments

in 2023. We expect the utilisation rate to stabilise at 85%+ in the

following years.

The business saw significant growth in 1st grader enrolments in

the 2023-2024 academic year with 59% growth y-o-y from 551 to

873 translating into a 96% utilisation rate.

Strong intakes and ramp-up of utilisation in existing campuses,

facilitated 30% growth in revenue. However, expansion of the

business through greenfield project in midscale segment and

acquisition of new campus in affordable segment, that are in early

ramp-up period translated in lower EBITDA margin. On the other

hand, EBITDA saw growth by generating GEL 14.4 million in FY23.

Average cash collection rates remained at last year’s levels

and were in line with the schools’ cash collection policies. This

combined with enhanced revenue streams, resulted in operating

cash flow generation in the business being up 5.5% y-o-y in 2023.

The business has a strong platform to facilitate growth, strengthen

its position as the leading integrated education player and scale up

the capacity to 22,000 learners by 2025. To achieve this objective,

GCAP plans to make a new equity investment of US$ 18 million

over the next few years.

Number of learners in private K-12 market Turnover of private K-12 market

MARKET OPPORTUNITY

Number of private learners, thousands % of total number of learners Total revenue, GEL million Revenue per learner, GEL thousands

Revenue, GEL million Market share by revenue Number of learners Utilisation rate

Number of learners and utilisation rate Total revenue generated by GCAP’s education business and market share

by revenue

PERFORMANCE TRACK RECORD

EDUCATION

5756

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Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

(17)

(54)

229

189

Investment

at cost

Net

debt

Minority

interest

Enterprise

value

31-Dec-23

Equity

value

31-Dec-23

1.2x

1.4x

<2.5x

31-Dec-22 31-Dec-23 Target

FINANCIAL METRICS

OPERATING METRICS

Revenue (GEL million)

55.5 +30.3% y-o-y

EBITDA (GEL million)

14.4 +6.0% y-o-y

EBITDA margin

26.0% -6.0 ppts y-o-y

Operating cash flow (GEL million)

17.4 +5.5% y-o-y

Capacity utilisation

80.2% +6.8 ppts y-o-y

Number of learners

5,827 +40.0% y-o-y

Learner to teacher ratio

7.9x -0.8x y-o-y

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

2 The detailed valuation overview and related drivers are described on pages 101-119 of this report.

3 GCAP has different ownership stakes across schools (70%-90%).

4 LTM EBITDAs used for valuation purposes includes functional currency adjustment in schools, where applicable.

OUR PORTFOLIO OVERVIEW CONTINUED

PRIVATE INVESTMENT STAGE PORTFOLIO COMPANIES CONTINUED

Overview

Following the strategic restructuring of our healthcare businesses,

as detailed in hospitals business overview on page 42, our clinics

business currently comprises two segments: 19 polyclinics

and one diagnostic centre. Polyclinics are located in Tbilisi and

major regional cities and provide basic and full-scale outpatient

diagnostic and treatment services. The business is the leader

in the outpatient market with a 22% market share by number of

registered patients.

The diagnostics business was launched in 2018 by opening the

largest laboratory in the entire Caucasus region – “Mega Lab”. The

multi-disciplinary laboratory, equipped with the latest infrastructure

and state-of-the-art technology, covers 7,500 square metres. In

addition to basic laboratory tests, Mega Lab offers complex tests

for oncology and molecular lab, some of which have never been

available in Georgia and for which blood samples used to be sent

abroad. In July 2022, Mega Lab received the Joint Commission

International (“JCI”) accreditation. JCI, the highest healthcare

accreditation body in the US, ensures the correct management of

clinical processes. Its goal is to continuously improve the quality

and safety of patient care. Mega Lab is the first laboratory in the

Caucasus region with JCI accreditation and 38

worldwide.

Performance and strategy

The clinics business has been growing rapidly with 15%+ revenue

CAGR and 20%+ EBITDA CAGR over 2019-2023, despite a

growth slowdown during the COVID-19 pandemic in 2020.

The business has a solid track record of scaling its operations

and gaining market share through profitable growth and

margin increase.

Our diagnostics business has also been growing rapidly, with

35%+ revenue CAGR over 2019-2023. The business added two

new blood collection points in 2023 and invested in marketing

and brand image to capitalise on significantly increased brand

awareness during the COVID-19 pandemic.

INVESTMENT RATIONALE

Very low base: Georgia still lags behind most of the developed

countries in terms of the number of outpatient visits per capita – at

3.7 (c.6.0 in Europe).

Low healthcare expenditure by the population on primary healthcare:

GDP growth will result in higher expenditure on primary healthcare.

OWNERSHIP

Georgia Capital owns 100% of the clinics and diagnostics business

as at 31 December 2023 (100% as at 31 December 2022).

VALUE CREATION POTENTIAL

The single largest participant with 22% by number of registered

patients (next competitor has 11% market share) with a cost

advantage due to the scale of operations.

High-growth potential driven by the increase in patient awareness

of the importance of primary healthcare.

High-growth potential driven by market consolidation through chain

expansion, adding new services and increasing customer base.

CLINICS AND DIAGNOSTICS BUSINESS

The share of state-funded revenues in clinics is c.25%. The

business strategy is centred on acquiring patients to enhance

the utilisation of existing facilities. Additionally, considering ample

space for additional facilities, the business aims to inaugurate

new clinics annually and targets a 15%+ EBITDA CAGR over the

next three to five years. Moving forward, the clinics business will

continue to expand its base of registered customers, extend the

availability of medical and personal care services, and develop

remote channels such as a call centre, while refining the existing

app to offer greater customer convenience and an improved

user experience.

The diagnostics business will focus on increasing its utilisation

(currently at c.60%) through expansion of its retail chain, attracting

more B2B contracts and adding new services and technologies

such as next generation sequencing, while from a clinical

perspective, the business will continue to provide the highest

standards of clinical processes, and in the long term become

a platform for education through an accredited training centre,

residency programme and scientific research and studies centre.

The business targets to deliver a double-digit CAGR in revenues

and combined EBITDA of c.GEL 25-30 million over the coming

five years.

VALUATION HIGHLIGHTS

GEL million, unless otherwise noted 31-Dec-23 31-Dec-22 Change

Enterprise value (EV) 228.8 218.3 10.5

EBITDA (LTM)

13.7 12.9 0.8

Implied EV/EBITDA multiple 16.7x 16.9x (0.2x)

Net debt (16.5) (16.3) (0.2)

Investments at cost 30.5 16.3 14.2

Total equity value

of GCAP’s share 189.2 164.2 25.0

Peer companies

• SISB Public Company Limited | Thailand

• Curro Holdings Limited | South Africa

• Overseas Education Limited | Singapore

• Cairo For Investment & Real Estate

Development S.A.E | Egypt

• Cogna Educação S.A. | Brazil

• Colegios Peruanos S.A. | Peru

• ADvTECH Limited | South Africa

Value development overview 31-Dec-23

GEL million

Net debt to EBITDA

5958

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Overview

Strategic Review

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Strategic Review

Discussion of Results Governance Financial Statements Additional Information

2018

2.6

4.2

5.2

7.6

4.9

11.7

17.5

23.4

24.9

37.2

41.1

49.2

2019 2020 2021 2022 2023

2019

0.2

1.8

7.3

0.7

1.2

5.1

14.5

30.4

20.5

18.4

2020 2021 2022 2023

2018

0 0 0 0 0 0

2.5

8.2

3.9

6.9

2019 2020 2021 2022 2023

172

111

Net debt incl.

lease liabilities

Minority

interest

Enterprise value

31-Dec-23

Equity value

31-Dec-23

(58)

(3)

6.9x

3.6x

<2.5x

31-Dec-22 31-Dec-23

Target

FIVE-YEAR FINANCIAL TARGETSKEY FOCUS AREAS IN THE MEDIUM AND LONG TERM

Adding new services

Expansion of medical and personal care service presence

Expansion of retail

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

countries

EBITDA

c.GEL 30+ million

Double-digit revenue

and EBITDA CAGR

Double-digit revenue

CAGR

ROIC c.13.0%+

Double-digit revenue

CAGR

EBITDA

c.GEL 35-40+ million

ROIC c.20.0%+

Geographic expansion

Adding new polyclinics and lab retail points

Attract B2B contracts

Total number of tests performed: c.5 million annually

Developing distance channels

Best user experience

Digitalisation

Adding customer base

Increased convenience and quality, increasing number of registered

patients; increasing provider insurance companies and corporate client base

ClinicsDiagnostics

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

OUR PORTFOLIO OVERVIEW CONTINUED

PRIVATE INVESTMENT STAGE PORTFOLIO COMPANIES CONTINUED

OPERATING METRICS – CLINICS

OPERATING METRICS – DIAGNOSTICS

Number of facilities

19 +2 over 2022

Number of registered patients

405,892 +7.1% y-o-y

Number of patients

served (’000)

779 -20.6% y-o-y

Number of tests

performed (’000)

2,470 +1.8% y-o-y

Average revenue

per test (GEL)

7.5 -11.6% y-o-y

Average number of tests

per patient

3.2 +28.2% y-o-y

Peer companies

• EMC Instytut Medyczny SA | Poland

• Med Life S.A. | Romania

• Medicover AB | Sweden

• Fleury S.A. | Brazil

FINANCIAL METRICS

Net revenue

(GEL million)

61.7 +8.9% y-o-y

Operating cash flow excluding

IFRS 16 (GEL million)

6.9 +78.0% y-o-y

EBITDA excluding IFRS 16

(GEL million)

12.9 +129.9% y-o-y

EBITDA to cash conversion

excluding IFRS 16

53.5% -15.6 ppts y-o-y

EBITDA margin excluding

IFRS 16

20.8% +11.0 ppts y-o-y

Free cash flow excluding IFRS 16

(GEL million)

10.5 NMF

Net debt

(GEL million)

35.8 -7.4% y-o-y

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

2 Prior to the strategic restructuring of the healthcare businesses, the number of registered patients was 635,835.

3 The detailed valuation overview and related drivers are described on pages 101-119 of this report.

4 Restructuring of the healthcare businesses are applied retrospectively.

5 LTM EBITDA excludes the gain of GEL 2.9 million from the sale of one of the polyclinics buildings in 3Q23.

VALUATION HIGHLIGHTS

Value development overview at 31-Dec-23

GEL million

Net debt to EBITDA

Operating cash flow (excl. IFRS 16) – clinics and diagnostics

GEL million

PERFORMANCE TRACK RECORD

Net revenue and EBITDA (excl. IFRS 16) – clinics

GEL million

Net revenue and EBITDA (excl. IFRS 16) – diagnostics

GEL million

Revenue EBITDA, excluding IFRS 16 Revenue EBITDA, excluding IFRS 16

IMPLIED LTM EV/EBITDA

11.7x

6160

Georgia Capital PLC Annual Report 2023

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Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

Georgia Capital PLC Annual Report 2023

Overview

Georgia Capital’s other portfolio companies (7.7% of total portfolio value at 31 December 2023) consist of its auto service, beverages,

housing development, and hospitality businesses.

AUTO SERVICE

The Group’s auto service business includes a car services

and parts business under the Amboli brand and a periodic

technical inspection (PTI) business. Georgia Capital acquired an

80% interest in Amboli at the end of June 2019, increasing its

shareholding to 90% in February 2020. Amboli is an importer,

distributor, wholesaler and retailer of car consumables and spare

parts with a c.11% share in the target market, making it the second

largest player in a highly fragmented market. The PTI business

commenced the construction of PTI centres in the first half of

2018 and launched the PTI business in March 2019 under the

name Greenway Georgia (“GWG”). As part of the Georgia-EU

Association Agreement, Georgia commenced the implementation

of a mandatory vehicle inspection programme in several phases,

starting from January 2018. In July 2018, GWG won a state tender

to launch and operate 51 PTI lines across Georgia with a ten-year

licence. GWG is the only player on the market with support from

an international partner, Applus+, a Spanish headquartered

worldwide leader in testing, inspection and certification services

with a market presence in more than 70 countries. GWG serviced

401,806 cars (of which, 349,832 were primary checks) in 2023,

giving it a market share of 38%.

BEVERAGES

The beverages business combines three business lines: a beer

business, a distribution business and a wine business. The beer

business produces beer and lemonade and holds a ten-year

exclusive license from Heineken to produce and sell Heineken

beer brands in Georgia. The beer business had c.20% market

share in 2023. The business’s brands include Heineken, Black

Lion (the leading Georgian craft beer producer which the Group

acquired in 2018), ICY (its flagship mainstream beer brand),

Kazbegi, which was acquired in 2019, Amstel and Krusovice beer,

for which the business acquired a licence in 2019, and Kayaki

(the Group’s light beer brand). In 2019, the business received

a licence to brew commercial batches of Heineken, and locally

brewed Heineken beer has been available in stores since August

2019. Starting from the second half of 2019, the beer business

relaunched its brands and improved its product mix, which helped

it to increase its share in the beer market and allowed the business

to achieve break-even EBITDA in the second half of 2019 and

positive EBITDA in 2022 and 2023. The business also started to

export its beer and lemonade brands to the international markets.

The wine business produces and sells wine locally and exports it

to 26 countries. The wine business owns three top-class wineries

across Kakheti’s three wine-making regions and is in the top five

wine producers by vineyard base in Georgia. The vast majority of

the vineyards grow Georgia’s flagship red wine grape, Saperavi.

The wine business sold 11.6 million bottles of wine in 2023, with

approximately 85% of sales coming from exports. The business

has a market share of 8.3% in the Georgian wine export market.

HOUSING DEVELOPMENT

The Group’s housing development business is a leading real

estate developer in the Georgian real estate market, targeting

mainly mass-market customers by offering affordable, high-quality

and comfortable housing. The business is wholly owned through

Georgia Real Estate, previously known as m

. The housing

development business has five ongoing projects: m

Saburtalo,

Mtatsminda Park, Nutsubidze, Mirtskhulava and Chkondideli

(Sveti projects). In connection with the m

Saburtalo project, the

business has sold 147,428 square metres with US$ 151 million

sales value as of 31 December 2023. m

Mtatsminda Park is a

new project that commenced in 2023. As of 31 December 2023,

a total area of 5,601 square meters with a sales value of US$

10.2 million has been sold. Regarding the three other projects,

the business took on the responsibility to support the completion

of three suspended projects of the Sveti construction company,

adding 178,486 square metres of the sellable area to its inventory.

The projects are ongoing in three locations in Tbilisi and the

construction and development will continue for approximately two

years. The business started construction and sales for the Sveti

project in April 2020 and has sold 154,454 square metres with a

US$ 121.3 million sales value as of 31 December 2023.

HOSPITALITY

In 2023, the hospitality business successfully completed the

sale of two operational hotels, vacant land plots and three

under-construction hotels located in Tbilisi and Kutaisi, leaving

one operation hotel, Gudauri Lodge, with 121 rooms. The

total consideration from these transactions amounted to US$

38.6 million. The proceeds from these sales were utilised for

deleveraging the hospitality business’s balance sheet. The

business is wholly-owned through Georgia Real Estate.

OTHER PORTFOLIO COMPANIES

Photo Racha-lechkhumi, Georgia

OUR PORTFOLIO OVERVIEW CONTINUED

Georgia Capital PLC Annual Report 2023

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

S172 STATEMENT

Statement by the Directors on of their duties under Section 172 of the UK Companies Act 2006 (the “Act”)

In accordance with the requirements of section 172 of the Act, the Directors consider that, during the financial year ended 31 December 2023, they

have acted in good faith and in a manner most likely to promote the success of the Company for the benefit of its shareholders, having regard to the

likely consequences of any decision in the long term and the broader interests of other stakeholders, as required by the Act. Some examples of the

Board’s engagement with stakeholders during 2023 are set out below.

The Directors have identified the following key stakeholders as essential to the success of the Company: investors; employees; the wider community;

government and regulators; and the environment. The key stakeholders and the primary ways which the Board engages with them are set out on

pages 128 to 130. Stakeholder issues are an integral part of the Board’s decision-making process and, therefore, the Board embeds these as part of

overseeing the management of the Company and the portfolio companies. The Company endeavours to balance any conflicting shareholder needs

to ensure all are treated consistently and fairly.

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

Section 172 factor Examples Page

The likely consequences of any decision in the long term Corporate Governance Framework 124

Interests of employees Corporate Governance Framework 124

Fostering the Group’s business relationships with suppliers,

customers and others

Corporate Governance Framework 124

Impact of operations on the community and the environment Resources and Responsibilities

Sustainability Report 2023

(see separate document)

Maintaining a reputation for high standards of business conduct Resources and Responsibilities

Sustainability Report 2023

(see separate document)

Acting fairly between members of the company Georgia Capital Strategy 18

The framework detailing the authority for decision-making, where the Board delegates to management, is discussed in the Company’s Corporate

Governance Framework on pages 124-132. It mandates consideration of these stakeholder responsibility factors as a critical part of delegated authorities.

The Board engages with the relevant stakeholders directly on certain issues, and their feedback is considered when the Board discusses and makes

decisions relating to those reserved for it, such as financial and operational performance, investment and exit decisions and strategic matters. This

information is usually fed back through presentations and reports to the Board, within Committee or Board meetings. This process is described in

the Directors’ Governance Statement on pages 120 to 121.

Principal decisions

There are processes in place to capture and consider stakeholders’ views (including the matters contained in section 172 of the Act) and feed them

into Board decision-making.

Material business decisions considered by the Board include an analysis of stakeholder considerations, anticipated impact and the risk controls.

This is a rigorous process, which helps the Board to perform the duties outlined in section 172 of the Act and provides assurance to the Board that

potential impacts on stakeholders have been considered in the development of the proposal.

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

Issuance of US$ 150 million

sustainability-linked bond

In August 2023, JSC Georgia Capital issued

a US$ 150 million SLB on the Georgian

market. The proceeds from the transaction,

together with the existing liquid funds of

GCAP were fully used to redeem GCAP’s

Eurobonds. Following these transactions,

GCAP’s gross debt balance decreased from

US$ 300 million to US$ 150 million.

Key stakeholder interests were considered:

• Equity investors: Georgia Capital

has continued to make significant

progress on its core strategic priority of

deleveraging the balance sheet.

• Debt investors: The bonds created an

attractive new opportunity for debt

investors, including some Eurobond

investors who reinvested in the new

offering, as well as local investors.

• Environment: Georgia Capital has

established a SLB Framework, under

which GCAP intends to decrease

its GHG Emissions by 20% by 2027

compared to a 2022 baseline. Through

this target, GCAP will support climate

change mitigation, natural resources

conservation and pollution prevention,

thereby contributing to the transition

towards a more sustainable and lower

carbon economy in Georgia.

• Governments and regulators: the

Company devoted time and resources

to ensure regulatory compliance with

the transaction.

• Local communities: the transaction

represents the largest-ever corporate

bond offering in Georgia, and the first

of its magnitude and kind in our region,

making a valuable contribution to the

development of the local capital markets.

Expansion of the education business

In line with GCAP’s capital allocation strategy,

in March 2023, the Company announced a

further expansion of its K-12 education business

through two investment projects: (a) the

acquisition of a new campus in the affordable

segment, and (b) acquisition of a land plot for

the expansion of an operational campus in the

premium and international segment.

(a) The new campus in the affordable

segment has a capacity of 1,200 learners

and provides education to 310 learners.

Following the planned rebranding, starting

from the 2023-2024 academic year, it will

operate under the existing affordable brand

in the Group’s portfolio – Green School.

(b) The land plot is located adjacent to the

operational campus of our premium and

international school.

Key stakeholder interests considered:

• Investors: the projects are in line with

Georgia Capital’s capital allocation strategy,

targeting the expansion of the affordable

segment in the education business.

• Local communities: the new campus is

located in the Saburtalo district, one of the

densely populated urban areas in central

Tbilisi where demand for the quality

education offered by our Green School is

expected to be high. With this investment,

the education business has significantly

expanded from the previous built capacity

of 5,650 learners to 6,850 learners.

Additionally, the current management

teams of our education business are

working to make top-class educational

services accessible on a larger scale.

• Employees: the projects will bring

employment to Tbilisi.

Transfer from LSE Premium Listing to

LSE Standard Listing

In February 2023, the Company proposed a

transfer from the Premium to the Standard

Listing segment. Following the approval

of 99.99% of the voting shareholders, the

transfer to the LSE Standard Listing segment

became effective on 13 April 2023.

The Board considered that a Standard listing

was more suited to the Company’s size and

strategy and would help the Company better

achieve its strategic goals and produce

greater value for shareholders. In particular,

the Board expects that the transfer will:

• Assist in the elimination of transaction

delays and costs associated with

regulatory class tests and ensure a

more seamless execution of significant

transactions, such as disposals

of portfolio companies. This will

enable the Company to minimise its

dependency on market capitalisation

fluctuations, especially during periods of

challenging market conditions, as market

capitalisation will no longer be the main

factor in determining class tests related

transaction execution paths.

• Provide greater flexibility to execute

meaningful share buybacks, including

the ability to repurchase more than 15%

of our issued equity capital without the

requirement to make a tender offer.

In light of the above, the Board considered

that the additional flexibility described above

will assist in the successful execution of the

Group’s strategy, that the likely cost savings

are material, and that therefore a Standard

listing was more suited to the Company’s size

and strategy.

Key stakeholder interests considered:

• Investors: The transfer is in line with the

Company’s overarching strategy and

purpose, aimed at delivering long-term,

sustainable and profitable growth.

• Governments and regulators: the

Company devoted time and resources

to ensure regulatory compliance with

the transaction.

• Customers, employees, national

community and other stakeholders:

by facilitating exits, the transfer brings

greater flexibility for international

investment and industry expertise

into Georgia.

Georgia Capital share buyback and

cancellation programme

In line with the Company’s capital allocation

strategy, in April 2023, the Company

launched a US$ 10 million share buyback

and cancellation programme under which

it bought back 1,000,000 shares (US$ 10

million (GEL 25.4 million)).

Due to the Company’s robust liquidity

levels and elevated discount to NAV per

share, in October 2023, the Company

announced an additional buyback

programme of US$ 15 million.

For more details on the share buyback and

cancellation programmes, please see page

12 of this report.

Key stakeholder interests considered:

• Investors: offering immediate returns

to shareholders seeking them and

an increased share in the business to

shareholders who do not participate,

all the while balancing the Company’s

need to preserve liquidity and ensure the

sustainability of the business.

In total, since the commencement of the

buyback programmes in April and October

2023, 1,665,222 shares (3.7% of issued

capital) was repurchased in 2023. The total

value of shares amounted to GEL 47.9 million

(US$ 18.3 million).

Georgia Capital PLC Annual Report 2023

64 65

Georgia Capital PLC Annual Report 2023

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

S172 STATEMENT CONTINUED

Divestments from

subscale businesses

In 2023, the hospitality business

successfully completed the sale of

two operational hotels, vacant land

plots and three under-construction

hotels located in Tbilisi and Kutaisi. The

aggregate consideration received from

the transactions amounted to US$ 38.6

million and was utilised to deleverage the

hospitality business’s balance sheet.

Key stakeholder interests considered:

• Investors: the net debt of the business

decreased significantly.

• Employees: ensuring that the

new management continued to

provide high-quality employment

standards and job security to the

existing employees.

Strategic reorganisation across the

healthcare businesses

Following a strategic review in 2023,

the hospitals business was split into two

distinct segments: “Large and Specialty

Hospitals” and “Regional and Community

Hospitals”. The Regional and Community

Hospitals incorporate the community clinics

that were managed and presented as part of

the clinics and diagnostics business.

The Large and Specialty Hospitals and

Regional and Community Hospitals

segments represent approximately 75%

and 25%, respectively of the consolidated

hospitals business’s EBITDA.

Key stakeholder interests considered:

• Investors: restructuring of the businesses

captures emerging opportunities and

enhances operational efficiencies.

• Customers and local communities: for

patients, the transition was seamless,

and business operations continued

uninterrupted, with an enhanced focus

on both groups of hospitals formed

following the strategic restructuring.

• Employees: the existing hospitals’

management team will continue to

manage the Large and Specialty

Hospitals business and focus on their

continued growth, while enhancing

profitability margins.

• Governments and regulators: the

Company devoted time and resources

to ensure regulatory compliance with

the transaction.

The Board and its Committees monitor the

effectiveness of engagement with stakeholders

through various methods.

The Board continues to believe that the

operation of the designated Non-Executive

Director for workforce engagement has been,

and continues to be, an effective means of

engaging with the workforce, to help the Board

understand the matters that concern the

workforce and their specific interests, whilst

having regard to these in the decisions that are

made at Board level.

Similarly, the informal and formal channels

in which the Group has adopted to engage

with its investors, the local communities

and the environment, through a variety of

media platforms, have performed well and

flexibly. The Board’s Responsible Investment

Policy ensures the Group’s commitment to

conducting business in an environmentally,

socially responsible and sustainable manner,

in order to reduce the environmental harm

of the Group’s operations, while improving

social impact to enhance long-term returns

to shareholders.

The Board and Committees’ annual evaluation

process gives Directors the opportunity to

comment on the engagement mechanisms

in place with our different stakeholder groups

and invites them to make recommendations

for improvement. Through the adoption of

our Code of Conduct and Ethics we ensure

high standards of business conduct for all our

stakeholders and seek to promote a culture

where transparency and fairness are the norm.

For the coming year, the Board will continue

to ensure effective stakeholder engagement,

ensuring the frequency of interaction is

maintained and reviewed (where appropriate)

over matters that are considered material to

the Group.

Photo Dusheti forest, Georgia

Georgia Capital PLC Annual Report 2023

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

RISK MANAGEMENT

We believe that effective risk management underpins the successful delivery of our strategy.

We identify, evaluate, manage and monitor the risks that we face through an integrated control

framework supported by formal policies and procedures, clearly delegated authority levels

and comprehensive reporting. The Board confirms that our framework has been in place

throughout the year under review and to the date of approval of this Annual Report and is

integrated into both our business planning and viability assessment processes.

Overview

Our Board, supported by our Audit and Valuation Committee and

executive management, is ultimately responsible for the Group’s

risk management and internal controls with a view to maintaining

ongoing sustainability.

As an investor, Georgia Capital is in the business of taking risks in order

to achieve its targeted returns for investors and shareholders. The Board

approves the strategic objectives that determine the level and types of risk

that Georgia Capital is prepared to accept and reviews the Group’s strategic

objectives and risk appetite at least annually. We believe that, in order to

have an effective risk management framework, there needs to be a strong

risk management culture within the Group. We have worked to ensure that

managing risk is ingrained in our everyday business activities. We seek to

create an environment where there is openness and transparency in how

we make decisions and manage risks and where business managers

are accountable for the risk management and internal control processes

associated with their activities. Our culture also aims to ensure that risk

management is responsive, forward-looking and consistent. Georgia

Capital’s risk culture is built on rigorous and comprehensive investment

procedures and disciplined capital management.

Risk appetite

Our risk appetite is defined by our strategic objectives. We invest capital

and develop businesses that will have strong capital returns. Georgia

Capital applies the following investment criteria:

• Geographic focus: investing in and developing businesses in Georgia,

the country we know – a diversified, resilient, fast-growing economy

across the last decade.

• Focus on liquidity: the Group predominantly invests in capital-light,

larger-scale investment opportunities in Georgia, which have the

potential to reach at least GEL 300 million equity value over the

next three to five years. The Group believes a larger size will provide

improved liquidity and superior exit opportunities, to support the

Group’s desire to reduce the current discount to reported NAV

per share.

• Sector focus: investing mostly in fragmented and underdeveloped

markets, particularly targeting high-multiple service industries.

• Return target: combination of the ROIC, MOIC, IRR and GCAP share

price value versus investments return is the key decision-making

matrix used in the investment decision-making process:

– MOIC and IRR are determined at the Group level, as we evaluate

achievable money multiples with all acquisitions and analyse them

in combination with the expected IRR.

– ROIC is evaluated for financing projects and reinvestment at

each portfolio company level. Different yields are appropriate

for different industries. ROIC is at the core of decision-making

when the portfolio companies are investing or divesting assets

or businesses. ROIC should be more than WACC for new

investments. As part of ROIC enhancement initiatives across our

portfolio, our businesses are aiming to continue divestment of low

ROIC and/or non-core assets and businesses.

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

comes to new investments. The Group performs 360-degree

analysis each time GCAP makes a capital allocation decision

and compares: a) the investment opportunity versus buyback

opportunity; and b) the sale opportunity versus buyback

opportunity. The Group intends to buy assets/companies at

a higher discount to their listed peers than GCAP’s fair value

discount. Georgia Capital is targeting to invest in opportunities

which produce greater returns than returns offered by buying

back GCAP shares.

Capital management

Georgia Capital adopts a highly disciplined approach to managing its

capital resources as follows:

• 360-degree analysis, when evaluating capital returns, new investment

opportunities or divestments.

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

premature sales of listed portfolio investments. Georgia Capital does

not have capital commitments or a primary mandate to deploy funds

or divest assets within a specific time frame. As such, it focuses on

shareholder returns and on opportunities which meet its investment

return and growth criteria.

• The Board regularly reviews any major investment and

divestment opportunities.

Our framework and approach to risk governance

The Board is responsible for setting the right tone and encouraging

characteristics and behaviours which support a strong risk culture and

effective risk management process across the Group. The Board’s

mandate includes determining the Group’s risk appetite and risk

tolerance as well as monitoring risk exposures to ensure that the nature

and extent of the main risks we face are consistent with our overall

goals and strategic objectives. Non-executive oversight is also exercised

through the Audit and Valuation Committee which focuses on upholding

standards of integrity, financial reporting and valuation framework, risk

management systems, going concern, internal control and assurance

frameworks. The Audit and Valuation Committee’s activities are

discussed further on pages 133 to 138. The Board ensures a centralised

process-led approach to investment and the overriding priority is to

protect the Group’s long-term viability and reputation and produce

sustainable, medium to long-term cash-to-cash returns. The Board’s

activities are discussed further on pages 124 to 128.

At the Board, Committee and executive management levels, we develop

formal policies and procedures which set out the way in which risks are

systematically identified, assessed, quantified, managed and monitored.

The Board, which has oversight of the investment pipeline development

and approves new investments, significant portfolio changes and

divestments, is integral to embedding our institutional approach across

the business. It ensures consistency and compliance with Georgia

Capital’s financial and strategic requirements, cultural values and

appropriate investment behaviours. Each business participates in the

risk management process by identifying the key risks applicable to its

business. The principal risks and uncertainties faced by the Group are

identified through this process, as are the emerging risks.

On a day-to-day basis, management is responsible for the

implementation of the Group’s risk management and other internal

control policies and procedures. Based on our risk culture, managers

“own” the risks relevant to their respective function. For each risk

identified at any level of the business, the risk is measured and mitigated

(if possible) in accordance with our policies and procedures. Middle level

managers, both at each portfolio company and Georgia Capital level,

are required to report on identified risks and responses to such risks

on a consistent and frequent basis. Executive and senior management

regularly review the output from the bottom-up process by providing

independent challenge and assessing the implementation of the risk

management and internal control policies and procedures.

Our reporting process enables key risks and emerging risks to be

escalated to the appropriate level of authority and provides assurance to

the Committees and the Board. Key developments affecting our principal

risks and associated mitigating actions are reviewed quarterly (or more

often if necessary, on an ad hoc basis, outside of the regular reporting

process) by the Audit and Valuation Committee, as well as the Board.

A description of emerging and principal risks and uncertainties, including

recent trends and outlook, as well as mitigation efforts, can be found on

pages 71 to 79 of the Strategic Review.

Risk governance structure

BOARD

• Determines the Group’s risk appetite as part of strategy setting.

• Overall responsibility for maintaining a system of internal controls that ensures an effective risk management and oversight process across

the Group.

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

• Following the Annual General Meeting (AGM) held on 17 May, 2023, the Investment Committee was disbanded, and its responsibilities were

merged into those of the Board. Consequently, the Board adopted a centralised, process-led approach to investment, with the overarching

priority of safeguarding the Group’s long-term viability and reputation, and generating sustainable, medium to long-term cash-to-cash returns.

– Board evaluates risks in relation to the entire investment entity portfolio, reviews each step of the investment lifecycle, approves all

investment and divestment decisions, monitors investments against the original case, and ensures alignment with the Group’s investment

policy and risk appetite. For the private portfolio companies, it oversees management of their most material risks.

Audit and Valuation Committee Remuneration Committee Nomination Committee

• Responsible for managing financial

reporting risk and internal control and the

relationship with the external auditor.

• Reviews and challenges risk management

reports from Group Finance and

Internal Audit.

• Specific and primary responsibility for

the Valuation Policy and valuation of the

investment entity subsidiaries.

• Provides oversight and challenge of

underlying assumptions on the valuation

of the private portfolio companies (62.3%

of portfolio value at 31 December 2023).

All private large and investment stage

portfolio companies (54.6% of the total

portfolio) are valued externally by an

independent valuation company on a

semi-annual basis.

• Direct engagement with the external

auditors, who involve their specialist

valuations team.

• Reviews and recommends to the Board

the Directors’ Remuneration Policy to

ensure that remuneration is designed to

promote the long-term success of Georgia

Capital (and see that management

is appropriately rewarded for their

contribution to the Group’s performance in

the context of wider market conditions and

shareholder views).

• Approves variable compensation schemes

for our investment professionals that are

in line with market practice and enable the

Group to attract and retain the best talent.

• Ensures that remuneration is aligned with

shareholder returns.

• Responsible for ensuring that the Board

has the necessary skills, experience and

knowledge to enable the Group to deliver

its strategic objectives.

• Leads the process for appointing Directors

and senior management positions.

MANAGEMENT BOARD

The Management Board is led by the Chief Executive Officer and has:

• Delegated responsibility for management of the Group.

• Delegated responsibility for investment decisions.

• Delegated responsibility for risk management.

Georgia Capital PLC Annual Report 2023

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

Bodies implementing the risk management system

As mentioned on page 67, our Board is responsible for reviewing and

approving the Group’s system of internal control and its adequacy and

effectiveness. Controls are reviewed to ensure effective management

of strategic, financial, market and operational risks, amongst others.

Certain matters, including but not limited to the approval of major capital

expenditure, significant acquisitions or disposals and major contracts,

are reserved exclusively for the Board. The full schedule of matters

specifically reserved for the Board can be found on our website at:

https://georgiacapital.ge/governance/cgf/schedule. With

respect to other matters, the Board is often assisted by the Audit and

Valuation Committee.

The Management Board has overall responsibility for the Group’s assets,

liabilities, risk management activities, respective policies and procedures.

In order to effectively implement the risk management system, the

Management Board delegates individual risk management functions to

each of the various decision-making and execution bodies within the

Group, as described below.

Internal Audit department

The Group has an established Internal Audit department, which is

responsible for the regular review/audit of the Group’s operations,

activities, systems and processes, in order to evaluate and provide

reasonable, independent and objective assurance and consulting

services designed to add value and improve the Group’s operations.

The Group’s Internal Audit department is independent of the

Management Board. The Head of the Group’s Internal Audit department

is appointed by, and has a direct reporting line to the Chairman of the

Audit and Valuation Committee. The Group’s Internal Audit department

discusses the results of all assessments with the Group’s Management

Board and reports its findings and recommendations to the Group’s

Audit and Valuation Committee.

The purpose of the Internal Audit department is to determine whether the

Group’s risk management, internal controls and corporate governance

processes, which are designed and implemented by the Management

Board, are adequate such that:

• material risks including strategic, market, liquidity and operational

risks, are appropriately identified, measured, assessed and managed

across the Group, including its outsourced activities;

• interaction with the various internal governance groups

occurs appropriately;

• significant financial, managerial and operating information is accurate,

reliable and timely;

• the Group and its employees act with integrity and their actions are in

compliance with the policies, standards, procedures and applicable

laws and regulations;

• resources are acquired economically, used efficiently and

protected adequately;

• programmes, plans and objectives are achieved; and

• significant legislative or regulatory issues that impact the organisation

are recognised and addressed in a timely and proper manner.

In order to fulfil its function, the Group’s Internal Audit department has

unrestricted access to all the Group’s functions, records, property

and personnel.

Investment team

The Group’s investment team has formalised procedures of risk analysis.

As part of the procedures, qualitative and quantitative downside risks are

identified and measured and risk adjusted returns are assessed for the

investment opportunity.

For each capital allocation decision an independent risk team is formed

and no member of the risk team is involved in developing investment

thesis. The risk team identifies major risk areas of the proposed

investment, assesses potential impact if the risks materialise and

estimates returns based on stress test scenarios and sensitivity analysis.

The team also evaluates the fit of the investment within the Group’s

investment policy and challenges the executability of the proposed

business plan.

The risk analysis process involves desktop research as well as field

work, including interviewing sector experts and senior executives. ROIC

and equity IRR are the most common return metrics which are stressed

in the risk analysis. For every capital allocation decision, the risk team

issues a written capital allocation recommendation based on the risk

reward profile of the proposed investment.

Together with the investment thesis, the risk analysis is reviewed by the

Capital Allocation & Strategy committee, consisting of members of the

Group’s management team, which is responsible for recommending

investment decisions to the Board.

Legal department

The Legal department’s principal purpose is to ensure that the Group’s

activities conform to applicable legislation and to minimise losses from

the materialisation of legal risks. The Legal department is responsible

for the application and development of mechanisms for identifying

legal risks in the Group’s activities in a timely manner, the monitoring

and investigation of the Group’s activities in order to identify any legal

risks, the planning and implementation of all necessary actions for the

elimination of identified legal risks, participation in legal proceedings on

behalf of the Group where necessary and the investigation of possibilities

for increasing the effectiveness of the Group’s legal documentation and

its implementation in the Group’s daily activities. The Legal department

is also responsible for providing legal support to structural units of

the Group.

Finance department

The Group’s risk management system is implemented primarily by

the Finance department, which is supervised by the Chief Financial

Officer and is responsible for the Financial Risks Management function.

It implements the Group’s financial and tax risks policies by ensuring

compliance with: liquidity management thresholds; limits on possible

losses from the foreign currency risks; tax legislation; and all financial

policies and procedures set by the Management Board. The Finance

department, which reports to the Management Board, also focuses

on the Group’s relationship with the tax authorities, provides practical

advice and tax optimisation plans for the Group and assesses the entire

Group’s tax risks and exposures.

The Finance department also manages foreign currency exchange,

money market and derivatives operations and monitors compliance

with the limits set by the Management Board for these operations. The

Finance department is also responsible for the management of the long-

term and short-term liquidity and cash flow and monitors the volumes of

cash on the Group’s accounts for the purposes of sufficiency. Further,

the Finance department actively monitors performance of portfolio

companies on a regular basis and delivers daily NAV development

reports, weekly liquidity reports and monthly management reports to the

Management Board.

The Management Board reviews the performance of each portfolio

business company on a monthly basis and takes actions, as necessary.

IFRS technical accounting group

The IFRS technical accounting group, part of the Finance department,

is responsible for monitoring the Group’s compliance with relevant IFRS.

The IFRS technical accounting group is involved in the development

process of the Group’s accounting policies by leading new accounting

standards implementation projects, monitoring new IFRS developments,

and preparing an impact assessment on reporting, systems and

processes across the Group.

In order to increase the understanding of IFRS, the IFRS technical

accounting group delivers training on new IFRS standards, issues

Group accounting policies, produces general guidance memos on the

application of IFRS and memoranda on complex, one-off transactions

and also prepares quarterly reports to the Audit and Valuation

Committee summarising material transactions across the Group, with

respective financial impact.

Valuation workgroup

The Group has established a valuation workgroup, consisting of

members of the Finance department, which is responsible for the

development and oversight of fair value assessment of the Group’s

private portfolio companies at each reporting date. The workgroup

engages third-party professionals to assist with the fair value

determination of large and investment stage investments (39.1% and

15.5% of total portfolio value at 31 December 2023, respectively) in order

to provide more transparency of Georgia Capital’s portfolio valuations.

The oversight of the third-party professionals is within the scope of

the valuation workgroup. The valuation workgroup also estimates fair

values of other portfolio companies (7.7% of total portfolio value at

31 December 2023) in-house by applying an appropriate valuation

technique in compliance with IFRS 13. The workgroup reports to

the Management Board. In order to ensure compliance with IFRS 13

requirements, increase the transparency of valuation and to ensure that

a consistent approach is applied in similar facts and circumstances,

the workgroup developed a Valuation Policy and monitors compliance

across all investments. The applied valuation methodology makes use

of market-based information, is consistent with models generally used

by market participants and is applied consistently from period to period,

except where a change would result in a better estimation of fair value.

The workgroup recommends fair values of private portfolio investments

at each reporting date and prepares quarterly valuation reports for the

Management Board and the Audit and Valuation Committee, describing

valuation techniques applied and inputs used, with particular focus on

the assumptions supporting the unquoted investments, any valuation

uncertainties and the proposed disclosure in the financial statements.

The valuation workgroup applies care in exercising judgement and

making necessary estimates due to uncertainties inherent in estimating

fair value for private companies.

Internal control

Georgia Capital’s internal control over financial reporting is focused

primarily on ensuring efficient and reliable control of valuation of private

portfolio companies. With respect to internal control over financial

reporting, our financial procedures include a range of system, transactional

and management oversight controls. The board and management of each

private portfolio company is responsible for ensuring the efficiency of the

private portfolio company’s internal control structures, risk management

and financial reporting. The private portfolio companies’ boards ensure

that Georgia Capital’s Board receives information on any issues that could

affect Georgia Capital’s business or financial reporting. Our businesses

prepare detailed monthly management reports that include analyses of

their results along with comparisons, relevant strategic plans, budgets,

forecasts and prior results.

These are presented to and reviewed by executive management. Each

quarter, the CFO of the Group and other members of the Finance

department discuss financial reporting, valuations and associated

internal controls with the Audit and Valuation Committee, which reports

significant findings to the Board. The Audit and Valuation Committee

also reviews the quarterly, half-year and full-year financial statements

and corresponding press releases and provides feedback to the Board.

The external and internal auditors attend each Audit and Valuation

Committee meeting and the Audit and Valuation Committee meets

regularly both with and without management present.

Going Concern Statement

The Group’s business activities, objectives and strategy, principal risks

and uncertainties in achieving its objectives and performance are set

out on pages 2 to 119. Comprehensive going concern assessment

analysis is disclosed in Note 2 within the IFRS financial statements. The

Directors have made an assessment of the Group’s ability to continue

as a going concern and are satisfied that Georgia Capital has the

resources to continue as a going concern for a period of at least 12

months from when the financial statements are authorised for issue, i.e.

the period ending 31 March 2025. After making enquiries, the Directors

confirm that they have a reasonable expectation that the Group has

adequate resources to continue in operational existence and, therefore,

the Directors consider it appropriate to adopt the going concern basis

of accounting in preparing the financial statements.

Viability Statement

In accordance with the Corporate Governance Code, the Directors are

required to assess the prospects of the Company to meet its liabilities

by taking into account its current position and principal risks. Georgia

Capital runs an in-depth annual business planning process, involving

both the management of portfolio companies and Group management

with Board input and oversight. In line with the UK Corporate

Governance Code, the process includes a viability assessment

conducted by the Board over a three-year period beginning 1 January

2024, being the first day after the end of the financial year to which this

report relates. In determining the appropriate period over which to make

their assessment, the Directors considered: the duration of strategic

plans and financial forecasts; the diverse nature of the Group’s activities;

the evolving nature of the regulatory environment in which the Group’s

businesses operate; the inherent uncertainty surrounding future capital

allocation projections; and the Group’s objective, in line with its updated

strategy. A period of three years beyond the balance sheet date was

therefore considered the most appropriate viability period for the Group.

In order to consider the Group’s viability, the Board considered a number

of key factors, including:

• the Board’s risk appetite;

• the Group’s business model and strategy as set out on pages 8 to 32;

• the Group’s principal and emerging risks and uncertainties, principally

those related to regional instability, portfolio company strategic and

execution risk, investment risk, adverse economic conditions, the

depreciation of the Lari, lack of liquidity, and climate change-related

risk, and how these risks and uncertainties are managed, as set out

on pages 71 to 79;

• the effectiveness of our risk management framework and internal

control processes; and stress testing, as described on the next page.

The key factors above have been reviewed in the context of our current

position and strategic plan. Since there are no legal guarantees or

constructive commitments in place for Georgia Capital to fund losses

or activities at portfolio companies’ level, a stress test analysis was

prepared on a holding company level.

The viability assessment involved a risk identification process which

included recognition of the principal risks to viability (risks that could

impair the Group’s business model, future performance, solvency

or liquidity), excluding risks not sufficiently severe over the period

of assessment for the Group. The principal risks and uncertainties

identified by the Group are regional instability, regulatory, investment,

liquidity, portfolio company strategic and execution, and currency and

macroeconomic environment-related risks. Further, the Group has

identified climate change-related risk as an emerging risk.

We also identified other risks which, while not necessarily severe in

themselves, could escalate when combined with others.

For those risks considered sufficiently severe to affect our viability, we

performed stress testing for the assessment period, which involved

modelling the impact of a combination of severe and plausible risks in

separate and combined adverse scenarios. The stress test scenario

was then reviewed against the Group’s current and projected liquidity

position. The Group prepared a single reasonable worst case scenario

which assumes the inability of private portfolio companies to pay

dividends or meet any other obligations towards the holding company,

the reason for which could be economic consequences of regional

instability, GEL depreciation against the US dollar, market competition

RISK MANAGEMENT CONTINUED

Georgia Capital PLC Annual Report 2023

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

and/or operational underperformance. Supported by strong operating

performance, starting from 2021 the Bank of Georgia restored payment

of dividends to shareholders and announced a dividend policy providing

for a 30%-50% payout ratio. In 2024, BoG announced that it intends to

recommend a final dividend of GEL 4.94 per share, which together with

the interim dividend of GEL 3.06 per share paid would make a total of

GEL 8.00 per share for 2023. On that basis, the stress case scenario

includes dividend payments from the listed asset.

In 2023, the Group demonstrated its superior access to capital once

again and issued US$ 150 million SLB In Georgia, with 8.5% interest

rate, payable in August 2028. The proceeds from the transaction,

together with the existing liquid funds were fully used to redeem GCAP’s

US$ 300 million Eurobonds. Following these transactions, GCAP’s gross

debt balance decreased from US$ 300 million to US$ 150 million.

The Directors have also satisfied themselves that existing cash and

highly liquid debt and equity investment securities will be sufficient

to cover the expected cash outflows of the holding companies for

the viability assessment period. They have also collected necessary

evidence to support the statement below in terms of the effectiveness

of the Group’s risk management framework and internal control

processes in place to mitigate risk. As at 31 December 2023, Georgia

Capital holds GEL 117 million assets across cash, marketable debt

securities and loans issued to portfolio companies. Additionally, the

Group also holds GEL 1,226 million equity securities of London Stock

Exchange listed BoGG PLC as at 31 December 2023. Therefore, in a

worst-case scenario, with risks modelled to materialise simultaneously

and for a sustained period of time, the likelihood of the Group having

insufficient resources to meet its financial obligations is very low.

Based on the analysis described above, the Directors confirm that they

have a reasonable expectation that the Group will be able to continue

operations and meet its liabilities as they fall due over the three-year

period from 1 January 2024 to 31 December 2026.

RISK OVERVIEW

Understanding our risks

We continuously monitor our internal and external environment to ensure that any new principal or emerging risk is identified in a timely manner and

responded to appropriately. The Directors have carried out a robust assessment of the principal and emerging risks facing the Group, including

those that would threaten its business model, future performance, solvency or liquidity. We define our principal risks as those that have the potential

to impact the delivery of our strategic objectives materially. We also monitor risks which include new and emerging risks which may have the potential

to become principal risks but are not yet considered to be so. Emerging risks usually have large uncertain outcomes which may become certain in

the longer term (beyond one year) and which could have a material effect on the business strategy if they were to occur.

Principal risks and uncertainties

The table below describes the principal risks and uncertainties faced by the Group and their potential impact, as well as the trends and outlook

associated with these risks and the mitigating actions we take to address these risks. If any of the following risks were to occur, the Group’s

business, financial condition, results of operations or prospects could be materially affected. The risks and uncertainties described below may not

be the only ones the Group faces. The order in which the principal risks and uncertainties appear does not denote their order of priority. Additional

risks and uncertainties, including those that the Group is currently not aware of or deems immaterial, may also result in decreased revenues, incurred

expenses or other events that could result in a decline in the value of the Group’s securities.

REGIONAL INSTABILITY RISK

PRINCIPAL RISK /

UNCERTAINTY

The Georgian economy and our business may be adversely affected by regional tensions. Georgia shares borders

with Russia, Azerbaijan, Armenia and the Republic of Türkiye, and has two breakaway territories, Abkhazia and the

Tskhinvali/South Ossetia regions. In addition to strong political and geographic influences, regional countries are

highly linked to the Georgian economy, representing its significant historical trading partners.

Following a significant Russian military build-up near the Russia-Ukraine border and months of rising tensions,

Russian troops crossed the border on 24 February 2022, and the situation escalated into a war. In response to

the invasion, all G-7 countries, the EU and many other countries have announced severe economic sanctions on

Russia, including selected high-profile Russian banks, Russian entities and Russian individuals. At the start of the

war, there was a significant depreciation of the Russian Ruble against foreign currencies, although the Ruble has

since recovered but remains depreciated compared to the pre-war period. The market value of Russian securities

has also decreased significantly. As the situation grinds on, the already steep humanitarian costs and economic

losses for Ukraine, Russia and the rest of the world are likely to deepen. Casualties have mounted again since the

Ukraine counter-offensive, and as of now, no substantial progress has been made on peace talks. Ukraine and

Russia are particularly important trade partners of Georgia, and spillover risks remain. The length and outcome of

the war are clearly uncertain, but it is possible that the negative impact of the war will become more pronounced

in the medium to longer term and could continue to have a material impact on market confidence, affecting all

regional countries. Various tensions have also existed between Russia and Georgia for more than 15 years, and the

two countries also had a brief armed conflict in 2008, which led to Russia’s control of the two breakaway territories.

Finally, there has also been ongoing geopolitical tension, political instability, economic instability and military conflict

between other regional countries. Following a six-week war (September-November 2020) between Armenia

and Azerbaijan over the disputed Nagorno-Karabakh region, Azerbaijan launched a blitz offensive against the

breakaway state on 19 September 2023, resulting in a ceasefire agreement one day later, disbanding the army of

the Nagorno-Karabakh republic and dissolving the republic by 1 January 2024. Almost the entire population of the

Nagorno-Karabakh republic, estimated at around 110,000, has since fled to Armenia. While negotiations regarding

the peace treaty between Armenia and Azerbaijan continue, with the aim to normalising relations and unblocking

regional bottlenecks, skirmishes have been reported near the Armenian border before and after the Azerbaijani

September offensive.

Since 7 October 2023, following a surprise Hamas assault on Israeli territory, Israel declared a state of war and

launched a large-scale ground invasion of the Gaza strip, preceded by extensive aerial bombardment. The Hamas

attack and the subsequent armed conflict between Israel and Hamas-led militant groups have resulted in mass

casualties, as well as raising risks of drawing neighbouring countries into the war. On 22 November 2023, Israel

and Hamas agreed to a temporary ceasefire during which several prisoners were released by both sides. However,

hostilities have resumed since.

The continuation or escalation of the war, political instability, geopolitical conflict, the economic decline of Georgia’s

trading partners and any further tension with Russia, including border and territorial disputes, may have a negative

impact on the political or economic stability of Georgia, which in turn may affect our business unfavourably,

including putting adverse pressure on our business model, our revenues, our financial position and the valuations

of our listed and private portfolio companies.

RISK MANAGEMENT CONTINUED

Georgia Capital PLC Annual Report 2023

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

REGIONAL INSTABILITY RISK CONTINUED

KEY DRIVERS / TRENDS The Russian invasion of Ukraine has resulted in extraordinary economic disruption, as market confidence has

plunged, unprecedented sanctions have been imposed upon the Russian economy, food and energy prices

have surged and spillover risks have been substantially aggravated, with further economic consequences to

follow as the situation develops. While food and energy prices have relatively stabilised since the second half of

2022, markets remain highly unpredictable in light of the ongoing conflict. In July 2023, Russia announced its

unilateral decision to end the Black Sea Grain Initiative, which allowed Ukrainian exports of grain via a safe maritime

humanitarian corridor between July 2022 and July 2023, resulting in an immediate jump in wheat and grain prices

and raising risks of food shortages in developing countries, although prices have since stabilised.

The September 2023 Azerbaijan offensive in the Nagorno-Karabakh region, and the subsequent dissolution of

the breakaway Nagorno-Karabakh republic, has significantly altered the geopolitical status quo in the Caucasus.

Whilst Russian peacekeeping forces have remained in the region thus far, subject to negotiations with Azerbaijan,

the military conflict has by and large ended, with Armenia accepting Azerbaijan’s sovereignty on the region.

However, tensions are high between the two countries with respect to the current and future treatment of the

local population, which has almost entirely fled to Armenia. Moreover, skirmishes have been reported near the

Armenian-Azerbaijan border villages. Multiple meetings between the heads of state of the two countries, as well

as high-ranking government officials, have yet to result in mutually acceptable terms for a conclusive peace treaty,

although negotiations are ongoing.

The short-term resolution as well as long-term geopolitical implications of the Israel-Hamas war for the engaged

parties as well as the wider region remain highly uncertain. While Georgia’s economic exposure to Israel on a

macro level is not particularly large, Israel is an important source of remittances and tourism revenues. In 2023,

Georgia’s merchandise exports to Israel totalled US$ 21 million (0.3% of the total), while remittances from Israel

made up US$ 215 million (5.2% of the total) and tourism receipts equalled US$ 308 million (7.5% of the total).

Russia imposed economic sanctions on Georgia in 2006, and conflict between the countries escalated in 2008

when Russian forces crossed Georgian borders and recognised the independence of Abkhazia and the Tskhinvali/

South Ossetia regions. Russian troops continue to occupy the regions, and tensions between Russia and Georgia

persist. The introduction of a preferential trade regime between Georgia and the EU in 2016, the European

Parliament’s approval of a proposal on visa liberalisation for Georgia in 2017, as well as Georgia’s recent application

and subsequent receipt of the EU candidate status could potentially intensify tensions between the countries.

Russia banned direct flights in July 2019 and recommended stopping the sale of holiday packages to Georgia.

The decision was made in response to anti-Putin protests in Tbilisi, which started after a member of the Russian

parliament addressed the Georgian parliament in Russian from the speaker’s chair. In May 2023, Vladimir Putin

signed a decree abolishing the visa regime for Georgian citizens starting 15 May, 2023. In addition, the ban on

direct flights to Georgia was also lifted from 15 May, 2023. In November 2023, a Georgian citizen was murdered by

Russian forces in the occupied Tskhinvali region, further straining relationship between the two countries, with the

Georgian Government and the international community condemning the murder and demanding punishment for

those responsible.

REGIONAL INSTABILITY RISK CONTINUED

MITIGATION The Group actively monitors significant developments in the region and risks related to political instability and

the Georgian Government’s response thereto. It also develops responsive strategies and action plans of its own.

The Georgian export market shifted away from the Russian market after Russia’s 2006 embargo, and the Group

participated in that shift. In 2023, Russia accounted for 10.8% of Georgian exports, as opposed to 17.8% in 2005.

Since the beginning of the war, the migration effect from Russia, Ukraine and Belarus has altered the composition

of foreign currency inflows from remittances and international visitors. The migration effect has resulted in an 86%

y-o-y increase in remittance inflows in 2022, including a fivefold increase of up to US$ 2.1 billion from Russia.

Remittances fell by 5.7% in 2023, reflecting a 26.2% y-o-y decline from Russia, on the back of a very large base

effect, partially compensated by rising money transfers from the rest of the world. Moreover, international travel

receipts have increased substantially from the three countries. However, in 2023, similar to remittance dynamics,

revenues from the rest of the world were the driving factor behind a 17.3% y-o-y growth in travel receipts, with the

share of Russia, Ukraine and Belarus falling from 40.3% in 2022 to 29.7% in 2023. Whilst elevated foreign currency

inflows have effectively constituted rising external demand in the short run, the medium to long-term effects remain

highly uncertain, depending on the timing and terms of the eventual conclusion of the war in Ukraine. Despite this

surge in foreign currency inflows predominantly from Russia, both remittance inflows and tourism receipts remain

diversified, with the EU having emerged as the top foreign currency provider since 2019, before the Russia-Ukraine

war. This diversification has proved crucial in 2023, as inflows from the rest of the world have compensated for a

decline in inflows from Russia. As travel resumes globally, it is hoped that the rising trend of tourism revenues from

the EU will continue, as the EU share in travel receipts reached 13.3% in 2023, up from 9.5% in 2022 and close to

the pre-COVID 2019 value of 14.5%.

Merchandise exports also remain diversified, relatively insulating foreign demand from regional risks, and new

destination countries have emerged as top trading partners since 2022, such as Peru, Kazakhstan and Kyrgyzstan.

Azerbaijan and Armenia became the top destination countries for Georgian exports in 2023, accounting for

14.2% and 12.9% of total exports respectively (12.1% and 10.5% in 2022), followed by Kazakhstan with 11.5%

and Kyrgyzstan with 11.4% (4.3% and 1.7% in 2022 respectively). Russia was the largest destination country for

domestically produced Georgian exports with a 19.4% share in 2023 (14.3% in 2022), followed by the Republic of

Türkiye with 12.3% (10.7% in 2022).

While financial market turbulence and geopolitical tensions affect regional trading partners, Georgia’s preferential

trading regimes, including DCFTA with the EU and FTA with China, support the country’s resilience against

regional external shocks. Enhancing linkages with the EU market will further be supported by a new recovery

plan for Eastern Partnership countries, including ambitious investments in improved connectivity and unlocked

potential to get full benefits from the DCFTA. Following Ukraine’s plea to join the EU as it battles Russia’s invasion,

Georgia and Moldova on 3 March 2022 submitted their applications to join the EU. Georgia previously planned

to apply to join the European Union in 2024. The European Council granted a conditional European perspective

to all three countries, with Ukraine and Moldova receiving the candidate status pre-emptively and Georgia set to

receive that status as the conditions are satisfied. In November 2023, the European Commission adopted the

2023 Enlargement Package, providing a detailed assessment of the progress made towards EU accession by

the three above-mentioned countries together with Western Balkans and Türkiye, recommending that Georgia be

granted the status of a candidate country on the understanding that further progress be made in areas identified

by the assessment. In December 2023, the European Council granted Georgia the status of a candidate country.

Deepening integration with the EU promises enhanced economic security and further development opportunities

for the Georgian economy, with the Commission report noting Georgia’s strong track record in macroeconomic

policymaking, favourable institutional and regulatory framework, and “some level of preparation” to deal with

competitive pressure and market forces within the EU.

RISK OVERVIEW CONTINUED

Georgia Capital PLC Annual Report 2023

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

CURRENCY AND MACROECONOMIC ENVIRONMENT RISKS

PRINCIPAL RISK /

UNCERTAINTY

Unfavourable dynamics of major macroeconomic variables, including depreciation of the Georgian Lari against the

US Dollar, may have a material impact on the Group’s performance.

On the macro-level, the country’s free-floating exchange rate works well as a shock absorber, but on the micro-

level, currency fluctuations have affected and may continue to adversely affect the Group’s results. There is a risk

that the Group incurs material losses or loses material amounts of revenue and, consequently, deteriorates its

solvency in a specific currency or group of currencies due to the fluctuation of exchange rates. The risk is mainly

caused by significant open foreign currency positions in the balance sheets.

KEY DRIVERS / TRENDS The Group’s operations are primarily located in, and most of its revenue is sourced from Georgia. Factors such

as GDP, inflation, interest and currency exchange rates, as well as unemployment, personal income, tourist

numbers and the financial situation of companies, can have a material impact on customer demand for its

products and services.

The Lari floats freely against major currencies. After depreciating in 2020 due to capital outflows from the emerging

and frontier markets, a sudden stop in tourism revenues and shrinking merchandise exports, as well as rapidly

deteriorating expectations, the Lari reversed course and has been strengthening for the past two years, having

appreciated to higher than pre-COVID levels since mid-2022. On the back of elevated FX inflows and favourable

macro conditions, GEL/US$ appreciated by 14.6% YTD by the end of 2022 and remained stable in 2023 (up 0.5%

in 2023). The nominal and real effective exchange rates (NEER and REER, respectively) reached record-high levels

in 2023, appreciating by 14.8% and 2.1%, respectively.

Following rate cuts in 2020 to respond to the COVID-19 shock, NBG reversed the stance and raised the monetary

policy rate by 300 bps during March 2021-April 2022 to 11%, responding to high inflation, subsequent rising

inflationary expectations and increased uncertainty. On the back of supply-side bottlenecks, rising global food,

energy and commodity prices, and resumed economic activity, inflation peaked in January 2022 and has since

begun decelerating rapidly. Inflation has been below the 3% target since April 2023, reaching 0.4% in December

2023 and averaging 2.5% for the full year of 2023. Inflation has remained low in 2024, reaching 0% in January.

Considering the strong disinflation, as well as favourable dynamics regarding international food and raw material

prices, GEL appreciation and improving inflation expectations, NBG has begun a gradual exit from tight monetary

policy, cutting the policy rate by a cumulative 150 bps in 2023 and another 125 bps in 1Q24 to 8.25% as of March

2024. NBG remains committed to adjusting the policy rate depending on the macroeconomic developments.

According to preliminary Government projections, the fiscal deficit (IMF modified) fell to negative 2.8% of GDP

in 2023, and public debt fell to under 39.0% of GDP, aiding disinflation on the domestic side and reducing

vulnerabilities on the external side, as well as upholding the fiscal deficit rule stipulating a return to under negative

3.0% of GDP within three years.

Real GDP continued strong performance in 2023, growing by 7.5% y-o-y in 2023 after two years of double-digit

expansion – 10.6% in 2021 and 11.0% in 2022. With respect to economic growth in recent years, Georgia has

been among the top performers in the world according to the IMF and the World Bank. The above-mentioned

external factors as well as strong domestic demand, including investment, continued credit expansion and

moderated but still expansionary fiscal policy have all been supporting economic growth. The current account

deficit remained low at negative 2.6% of GDP in 9M23, following up on a historic low level of negative 4.5% in 2022.

FDI reached a record-high value of US$ 2.1 billion in 2022, and fell by 22.3% y-o-y in 9M23 on the back of the high

base effect, totalling US$ 1.4 billion. As a result of the improved macroeconomic environment, Fitch Ratings revised

Georgia’s sovereign credit rating outlook to positive from stable in January 2023 and reaffirmed the positive outlook

in July 2023, citing “extremely strong economic recovery, sound macro-policy and record of fiscal prudence”. A

new three-year executive stand-by arrangement worth US$ 280 million was approved by the IMF in June 2022,

focusing on structural reforms and anchoring macroeconomic policy. In July 2023, an IMF virtual visit praised

Georgia’s “prudent macroeconomic policies”, recommending remaining focused on strengthening fiscal and

foreign exchange buffers, as well as undertaking reforms to entrench economic resilience.

CURRENCY AND MACROECONOMIC ENVIRONMENT RISKS CONTINUED

MITIGATION The Georgian economy remains vulnerable to external shocks due to a mix of its historically high current account

deficit, low domestic savings rate and high level of dollarisation. After widening to negative 12.4% of GDP following

the onset of the COVID-19 pandemic, the current account deficit has since improved rapidly, reaching a record

low of negative 4.5% of GDP in 2022 and stood at negative 2.6% of GDP in 9M23. Strong external demand from

neighbour countries and rebounding tourism revenues, supplemented by soaring money transfers largely driven by

the migration effect, have been aiding the external balance sheet. Major sources of financing the current account

deficit in 2023 were remittance inflows (down 5.7% y-o-y in 2023), merchandise exports (up 9.1% y-o-y), and

tourism revenues (up 17.3% y-o-y in 2023, 126.2% of respective 2019 levels). The NBG bought a net US$ 1.8 billion

in January 2022-December 2023, taking advantage of surging FX inflows. Subsequently, official reserve assets

reached record-high levels in 2023 and amounted to US$ 5.0 billion at the end of 2023, up 2.2% y-o-y.

The Group continually monitors market conditions, reviews market changes and also performs stress and scenario

testing to test its position under adverse economic conditions, including adverse currency movements.

The currency risk management process is an integral part of the Group’s activities; currency risk is managed

through regular and frequent monitoring of the Group’s currency positions and through the timely and efficient

elaboration of responsive actions and measures. Senior management reviews the overall currency positions of

the Group several times during the year and elaborates on respective overall currency strategies; the Finance

department monitors the daily currency position for Georgia Capital HoldCo, weekly currency positions on

a portfolio company level and manages short-term liquidity of the Group across different currencies. Control

procedures involve regular monitoring and control of the currency gap and currency positions, running currency

sensitivity tests and elaborating response actions/steps based on the results of the tests.

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Georgia Capital PLC Annual Report 2023

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

REGULATORY AND LEGAL RISKS

PRINCIPAL RISK /

UNCERTAINTY

The Group owns businesses operating across a wide range of industries: banking, healthcare, retail (pharmacy)

and distribution, property and casualty insurance, medical insurance, real estate, water utility and electric power

generation, hydro and wind power, beverages, education and auto service. Many of these industries are highly

regulated. The regulatory environment continues to evolve, and we cannot predict what additional regulatory

changes will be introduced in the future or the impact they may have on our operations.

Georgia Capital and its businesses may be adversely affected by risks related to litigations arising from time to time

in the ordinary course of business.

KEY DRIVERS / TRENDS Each of our businesses is subject to different regulators and regulation. Legislation in certain industries, such as

banking, healthcare, energy, insurance and utilities is continuously evolving. Different changes, including but not

limited to governmental funding, licensing and accreditation requirements and tariff structures, may adversely affect

our businesses.

Except as disclosed on page 201, there were no governmental, legal or arbitration proceedings (including any such

proceedings which are pending or threatened of which GCAP is aware) during the 12 months preceding the date

of this document which may have, or have had in the recent past, significant effects on either GCAP and/or its

portfolio companies’ financial position or profitability.

MITIGATION Continued investment in our people and processes enable us to meet our current regulatory requirements and

means that we are well placed to respond to any future changes in regulation. Further, our investment portfolio is

well diversified, limiting exposure to particular industry-specific regulatory risks.

In line with our integrated control framework, we carefully evaluate the impact of legislative and regulatory changes

as part of our formal risk identification and assessment processes and, to the extent possible, proactively

participate in the drafting of relevant legislation. As part of this process, we engage where possible in constructive

dialogue with regulatory bodies and seek external advice on potential changes to legislation. We then develop

appropriate policies, procedures and controls as required to fulfil our compliance obligations. Our compliance

framework, at all levels, is subject to regular review by Internal Audit and external assurance providers.

Our integrated control framework also ensures the application and development of mechanisms for identifying legal

risks in the Group’s activities in a timely manner, the monitoring and investigation of the Group’s activities in order to

identify any legal risks, the planning and implementation of all necessary actions for the elimination of identified legal

risks, participation in legal proceedings on behalf of the Group where necessary and the investigation of possibilities

for increasing the effectiveness of the Group’s legal documentation and its implementation in the Group’s daily

activities. The framework also considers the engagement of the external legal advisors, when appropriate.

INVESTMENT RISK

PRINCIPAL RISK /

UNCERTAINTY

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

KEY DRIVERS / TRENDS An inappropriate investment decision might lead to poor performance. Investment risks may arise from inadequate

research and due diligence of new acquisitions and bad timing of the execution of both acquisition and divestment

decisions. The valuation of investments can be volatile in line with the market developments.

MITIGATION The Group manages investment risk with established procedures and a thorough evaluation of target acquisitions.

Investment opportunities are subject to rigorous appraisal and a multi-stage approval process. Target entry and

exit event prices are monitored and updated regularly in relation to market conditions and strategic aims. The

Group performs due diligence on each target acquisition including on financial and legal matters. Subject to an

evaluation of the due diligence results an acceptable price and funding structure is determined, and the pricing,

funding and future integration plan is presented to the Board for approval. The Board reviews and approves or

rejects proposals for development, acquisition and sale of investments and decides on all major new business

initiatives, especially those requiring a significant capital allocation. The Board focuses on both investment strategy

and exit processes, while also actively managing exit strategies in light of the prevailing market conditions.

LIQUIDITY RISK

PRINCIPAL RISK /

UNCERTAINTY

Risk that liabilities cannot be met, or new investments made, due to a lack of liquidity. Such risk can arise from

not being able to sell an investment due to lack of demand from the market, from suspension of dividends from

portfolio companies, from not holding cash or being able to raise debt.

KEY DRIVERS / TRENDS The Group predominantly invests in private portfolio businesses, potentially making the investments difficult to

monetise at any given point in time. There is a risk that the Group will not be able to meet its financial obligations

and liabilities on time due to a lack of cash or liquid assets or the inability to generate sufficient liquidity to meet

payment obligations. This may be caused by numerous factors, such as: the inability to refinance long-term

liabilities; suspended dividend inflows from the investment entity subsidiaries; excessive investments in long-term

assets and a resulting mismatch in the availability of funding to meet liabilities; or failure to comply with the creditor

covenants causing a default.

MITIGATION The liquidity management process is a regular process, where the framework is approved by the Board and is

monitored by senior management and the Chief Financial Officer. The framework models the ability of the Group

to fund under both normal conditions (Base Case) and during stressed situations. This approach is designed to

ensure that the funding framework is sufficiently flexible to ensure liquidity under a wide range of market conditions.

The Finance department monitors certain liquidity measures on a daily basis and actively analyses and manages

liquidity weekly. Senior management is involved at least once a month and the Board on a quarterly basis. Such

monitoring involves a review of the composition of the cash buffer, potential cash outflows and management’s

readiness to meet such commitments. It also serves as a tool to revisit the portfolio composition and take

necessary measures, if required.

Since the adaption of the capital management framework and introduction of the NCC navigation tool in May

2022, the Group’s primary emphasis has centred around deleveraging. This strategic approach has resulted in a

significant reduction in the Group’s liquidity risk.

As outlined on page 8, in August 2023, JSC Georgia Capital successfully issued a US$ 150 million SLB. The

proceeds from the transaction, together with existing liquid funds of GCAP, were utilised to fully redeem US$ 300

million Eurobonds. Following the cancellation and repayment of the outstanding Eurobonds, GCAP’s gross debt

balance decreased to US$ 150 million.

Overall, since the introduction of the NCC concept in 1Q22, the NCC ratio has decreased significantly, from 28.2%

at 31 March 2022 to 15.6% at 31 December 2023. Going forward, the Group targets to bring down the NCC ratio

below 15% by December 2025. The deleveraging strategy was also implemented across our private portfolio

companies, where individual leverage targets have been developed.

In October 2023, S&P updated GCAP’s issuer credit rating from “B+” to “BB-”.

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Georgia Capital PLC Annual Report 2023

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Strategic Review

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Strategic Review

Discussion of Results Governance Financial Statements Additional Information

PORTFOLIO COMPANY STRATEGIC AND EXECUTION RISKS

PRINCIPAL RISK /

UNCERTAINTY

Market conditions may adversely impact our strategy and all our businesses have their own risks specific to their

industry. Our businesses have growth and expansion strategies and we face execution risk in implementing

these strategies.

The Group will normally seek to monetise its investments, primarily through strategic sale, typically within five to ten

years from acquisition, and we face market and execution risk in connection with exits at reasonable prices.

KEY DRIVERS / TRENDS Each of our portfolio companies face its own risks. These include risks inherent to their industry, or to their industry

particularly in Georgia, and each faces significant competition. They also face the principal risks and uncertainties

referred to in this table.

Macroeconomic conditions, the financial and economic environment and other market conditions in international

capital markets may limit the Group’s ability to achieve a partial or full exit from its existing or future businesses

at reasonable prices. It may not be possible or desirable to divest, including because suitable buyers cannot be

found at the appropriate times, or because of difficulties in obtaining favourable terms or prices, or because the

Group has failed to act at the appropriate time.

MITIGATION For each business, we focus on building a strong management team and have successfully been able to do so

thus far. Management succession planning is regularly on the agenda for the Nomination Committee which reports

to the Board on this matter. The Board closely monitors the implementation of strategy, financial and operational

performance, risk management and internal control framework, and corporate governance of our businesses. We

hold management accountable for meeting targets.

For each industry in which we operate, we closely monitor industry trends, market conditions and the regulatory

environment. We have also sought, and continue to seek, advice from professionals with global experience in

relevant industries. We carry our private portfolio companies at fair value in our NAV Statement. The valuations

are audited, increasing the credibility of fair valuation and limiting the risk of mispricing the asset. In addition, the

valuation of private large and investment portfolio companies (54.6% of total portfolio value) is performed by an

independent valuation company on a semi-annual basis.

The Group has a strong track record of growth and has accessed the capital markets on multiple occasions

as part of the BGEO Group PLC, prior to the demerger in May 2018. Our acquisition history has also been

successful, and we have been able to integrate businesses due to our strong management with integration

experience. In 2022, GCAP successfully completed the water utility business disposal, which represents our most

significant monetisation event to date and marks the completion of the full investment cycle for one of our large

portfolio businesses as set out on page 12 of the Group’s 2022 Annual Report.

Emerging risks

The Group’s risks are continually reassessed and reviewed through a horizon scanning process, with escalation and reporting to the Board.

The horizon scanning process fully considers all relevant internal and external factors, and is designed to consider and capture the following risks:

current risks which have not yet fully crystallised and which the Group do not have previous known experience of against which they can be assessed,

and risks which are expected to crystallise in future periods, typically beyond one year.

Since 2021, the Group has identified climate change as an emerging risk. Since the Group’s businesses are very much dependent on such climate

elements as precipitation, wind speed and air temperature, the Group’s development will be affected by climate change. This is critical to protecting

and enhancing the value of our assets and we monitor our governance and risk management framework to ensure that sustainability-related risks

in our portfolio remain an important part of our agenda and are treated as a priority by our portfolio company management teams.

Risks and opportunities of our portfolio companies from climate change are discussed on pages 90 to 91 of this report. Our portfolio companies’

approach and the mitigants to climate risk are discussed further under Resources and Responsibilities section on pages 80 to 93 and pages 36 to

43 of the Sustainability Report.

Potential UK regulatory changes affecting UK listed companies and other UK public interest entities is identified as a possible emerging risk. This may

include changes in UK corporate governance requirements, adding additional responsibilities to our existing legal and regulatory compliance risk.

The Group has also identified cyber security as an emerging risk, due to the increasing sophistication of hackers and in turn, the likelihood of a data

security breach occurring. A cyber security incident can result in unauthorised access to, or misuse of, our information systems, technology, or data.

This could lead to leakage of sensitive information, disruption of operations and reputational damage.

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Georgia Capital PLC Annual Report 2023

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Overview

Strategic Review

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Strategic Review

Discussion of Results Governance Financial Statements Additional Information

RESOURCES AND RESPONSIBILITIES

As a Group, we are committed to a long-term

investment strategy and building effective

relationships with those businesses in which we

invest. We maintain close relationships with the

management of our private portfolio companies.

As a consequence of our involved investment

style, we actively manage our portfolio companies

in the best interests of our shareholders and other

stakeholders, fostering long-term relationships by

providing high returns on investment. Additionally,

we seek to contribute to wider society by

encouraging the continuous development of our

employees and contributing to the economic and

social welfare of local communities while taking

into account our environmental footprint. With a

portfolio of GEL 3.7 billion, we recognise that our

decisions as a Group potentially impact a broad

range of stakeholders, particularly within Georgia.

As an investment holding company with c.45

employees, Georgia Capital has a limited direct

impact on the environment and the community

in which it operates. However, we understand

that the indirect impact of our investment

undertakings is also an important consideration

for our stakeholders.

To ensure the Group’s commitment to

sustainable business practices, as an

integral component of responsible corporate

governance, we follow our Environmental

and Social Policy. The Group is committed to

conducting its business in an environmentally,

socially responsible and sustainable manner

in order to reduce the environmental impact

of its operations, while at the same time

improving social performance to enhance

long-term returns to its shareholders. Georgia

Capital is also dedicated to achieving its

strategic and investment objectives while

behaving responsibly as an employer and as an

international corporate citizen.

Task Force on Climate-related Financial

Disclosures (“TCFD”)

The Group has complied with the requirements of

LR 14.3 by including climate-related disclosures

consistent with the TCFD Recommendations and

Recommended Disclosures.

TCFD disclosures on the pages 88 to 93

present the Company’s perspective on four core

pillars of governance, strategy, risk management

and metrics and targets related to climate-

change mitigation.

INVESTING IN SOCIALLY AND

ENVIRONMENTALLY ORIENTED

INDUSTRIES

As the largest employer in the Georgian

private sector, we believe that our Group and

portfolio companies have a responsibility

to improve the future of our community by

building sustainable businesses for tomorrow.

We have a strong track record of investing and

managing our portfolio responsibly, facilitated

by operating according to our clear and proven

governance model and an extensive network of

top-quality talent.

Our approach to ESG matters is reflected in

the strategy and management principles of

our portfolio companies, all of which adhere to

sound ESG standards, as well as local policies

and regulations. We have been supportive of

investments in socially and environmentally-

oriented businesses since 2008, when our

businesses first entered the healthcare market

with the aim of modernising the healthcare

infrastructure, closing service gaps in the

country and increasing overall quality of

care. As a result, we have contributed to the

development of the Georgian healthcare

system and our society. Today our healthcare

businesses are the market leaders in the

country in each operating segment: hospitals,

accounting for 14% of the country’s total

hospital bed capacity; clinics, with 22% by

registered patients; retail (pharmacy), with

32% market share by revenue; and medical

insurance, with 19% market share based on

9M23 net insurance premiums.

Currently we invest in two key sectors that

benefit the sustainable development of

Georgia: renewable energy and education.

Through active participation in green initiatives,

our renewable energy business addresses

climate change and conserves natural

resources, contributing to Georgia’s transition

to a more sustainable and environmentally

friendly economy with reduced carbon

emissions. Going forward, the launch of the

pipeline HPPs and WPPs will enhance our

renewable energy business’s contribution to

green energy production development.

Our education business has made a significant

contribution to the country’s education system

and society. We acknowledge the importance

and the substantial positive impact of quality

education on society and are committed to

responsibly conducting our business activities

and supporting sustainable economic growth.

Despite being a small share of our total

portfolio, our subscale portfolio companies

have a substantial positive impact on ESG

matters. Our PTI business represents the

largest network of mandatory periodic technical

inspections throughout Georgia, accounting

for 38% of the existing market. The business is

directly engaged in GHG emissions and road

accidents reduction in the country.

ISSUANCE OF US$ 150 MILLION

SUSTAINABILITY-LINKED BOND

In August 2023, JSC GCAP successfully

issued a US$ 150 million SLB on the Georgian

market. The issuance of the bond represents

the largest-ever corporate bond offering in

Georgia, and the first of its magnitude and kind

in the region.

Georgia Capital has established a SLB

Framework in partnership with an international

sustainable finance advisor, HPL.LLC. Under

the framework, GCAP intends to decrease its

GHG emissions by 20% by 2027 compared

to a 2022 baseline. The SLB target is in line

with GCAP’s overarching commitment to

reaching Net-Zero at Group level by 2050 and

it contributes to the UN Global Compact’s

SDGs 7 (Affordable and Clean Energy) and 9

(Industry, Innovation and Infrastructure).

The issuance of SLB represents a significant

strategic milestone for GCAP, as it will

support climate change mitigation, natural

resources conservation and pollution

prevention, thereby contributing to the

transition towards a more sustainable and

lower-carbon economy in Georgia.

The transaction was supported by Georgia

Capital’s longstanding partner IFIs, who

approved GCAP’s SLB Framework and ESG

position after rigorous due diligence.

GCAP obtained a second-party opinion from

Sustainalytics, a leading provider of ESG research

and analysis, for its SLB Framework, affirming

the alignment with the five core components

of the SLB Principles. For details regarding the

SLB Framework please refer to page 5 in our

Sustainability Report 2023.

Under the SLB, GCAP is committed to have

external limited assurance conducted against

the SLB targets on an annual basis until

bond maturity. The first limited assurance

report can be found on pages 45 to 46 of our

Sustainability Report 2023.

For details on the issuance of the US$ 150

million SLB please refer to pages 4 to 5 of our

Sustainability Report.

ESG PRINCIPLES LIE AT THE HEART OF OUR BUSINESS

In order to effectively manage the Group’s direct and indirect impact on society and the environment,

the Board of Directors have adopted a Code of Conduct and Ethics, as well as policies that relate to

environmental and social matters, responsible investing, employees, anti-corruption and anti-bribery. We

invite you to read more about these initiatives in the sections below and in conjunction with our Sustainability

Report and the rest of the Annual Report. The non-financial information and sustainability statement

as required by section 414CB of the Companies Act 2006, which aims to provide material and relevant

information on the commitment to, management of and developments in Georgia Capital’s ESG practices

for the financial year ending 31 December 2023, is also cross referenced below.

Reporting requirement Further detail

Annual Report

page reference

Sustainability Report

page reference Relevant policies

Social matters Promoting local community Page 82 Page 7 Environmental and Social Policy

Sponsorship and charity Page 82 Page 8 Responsible Investment Policy

Promoting and enhancing a healthy lifestyle Page 82 Page 10

Sustainable procurement Page 82 Page 22

Employee matters Our employees Page 82 Pag e 11 Code of Conduct and Ethics

Talent attraction, training and development Page 83 Page 13 Responsible Investment Policy

Diversity Page 84 Page 16 Diversity Policy

Human Rights Policy Page 84 Page 23 Whistleblowing Policy

Code of Conduct and Ethics Page 84 Page 23 Human Rights Policy

Modern Slavery Page 85 Page 23 Anti-Bribery and

Anti-Corruption Policy

Environmental matters Emission disclosure and calculation

methodology

Page 85 Page 26 Environmental and Social Policy

Measures undertaken to improve the energy

efficiency

Page 87 Page 29 Responsible Investment Policy

1 Following the AGM held on 17 May, 2023, the Investment Committee was disbanded, and its responsibilities were merged into those of the Board.

Further detailed information can be found in

our Sustainability Report, a supplement to

our Annual Report which enables the Group

to provide more detailed and comprehensive

reporting of our ESG operations in alignment

with the TCFD recommendations and

recommended disclosures.

Our Sustainability Report is available on our

website: https://georgiacapital.ge/ir/

sustainability-reports.

Copies of the Company’s policies can be found

on our website: https://georgiacapital.ge/

governance/cgf/policies.

Non-Financial and Sustainability

Information Statement

The Company is required to disclose certain

information on the way we operate and

manage social and environmental challenges.

The following table summarises where you

can find further information on each of the

key areas of disclosure. Information on our

policies can be found on our website at:

https://georgiacapital.ge/governance/cgf/

policies.

GOVERNANCE

Georgia Capital recognises the importance

of maintaining sound corporate governance

practices and supports high standards of

corporate governance in delivering value to our

stakeholders. For full details of our governance

structure and processes, please see the

Corporate Governance section of this Annual

Report.

Our Responsible Investment Policy is integrated

into the investment and portfolio management

processes and procedures and is supported

by enhanced due diligence questionnaires. The

policy covers Georgia Capital’s responsible

investment approach and ongoing monitoring

of ESG reassessments of the portfolio

companies. Georgia Capital monitors the

portfolio companies’ ESG performance and

uses its resources to encourage the adoption

of ESG best practices. It is supplemented with

an Environmental and Social Policy. Through

the Responsible Investment Policy, ESG

considerations are embedded into the deal

process, from the initial investment stage to

active ownership. Details on how we implement

the Responsible Investment Policy can be

found in our Sustainability Report.

In October 2023, the Board revised the

schedule of matters reserved for the Board,

including to explicitly cover any duties

previously reserved to the Investment

Committee

, and further to make it clear

that the Board had primary responsibility for

overseeing environmental and social risks

and that the Company’s strategic direction is

regularly informed by material environmental

and social issues. Given the small size of the

Board and the importance of these matters,

including climate change, the Board believes

that it is appropriate for the whole Board to be

responsible for these issues.

For the updated schedule of matters

reserved for the Board please refer to:

https://georgiacapital.ge/governance/cgf/

schedule.

In 2023, the Company again engaged

Amandla UK Limited (“Amandla”) to conduct

an in-depth evaluation of Georgia Capital’s

Board comprising a multi-faceted approach.

The evaluation included online interviews with

the entire Board, feedback reports, individual

assessments for each Board member, in-

person group coaching, and observation of

Board meetings. Amandla concluded that

the Board is operating effectively in terms of

governance, supervision and oversight.

In 2023, Baker McKenzie organised

comprehensive ESG training sessions for our

Board members. The training covered all the

three aspects of ESG and provided an overview

of GCAP’s progress in the ESG journey, along

with future prospects.

Georgia Capital PLC Annual Report 2023

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

RESOURCES AND RESPONSIBILITIES CONTINUED

We maintain a Group-wide Code of Conduct

and Ethics for our employees and other

effective HR policies and procedures covering

matters such as:

• Staff administration, compensation

and benefits.

• Recruitment, development and training.

• Diversity and anti-nepotism.

• Succession planning, departure

and dismissal.

• Grievances and whistleblowing.

We are committed to employee engagement

and we believe that effective communication is

key. We strive to provide our employees with a

continuous flow of information, which includes

our corporate culture, the Group’s strategy and

performance, risks relating to its performance,

such as financial and economic factors, and

our policies and procedures. We provide

information in a number of ways, including via

managers, presentations, email, intranet and

regular off-site meetings. There are feedback

systems, such as employee satisfaction surveys

and a designated Non-Executive Director for

workforce engagement at the Board level, which

ensure that the opinions of our employees are

taken into account when making decisions that

are likely to affect their interests.

In 2023, we conducted our fourth employee

satisfaction survey at the holding company

level. According to the survey results, over 90%

of the participants enjoy working at Georgia

Capital, while more than 97% feel valued by the

Company for their contributions. Additionally,

90% of the employees are satisfied with

their work-life balance. Survey participants

also provided recommendations on how

the Company could be improved to create

a better workplace.

The results of the survey were fed back to

management.

Georgia Capital values the exchange of

upward, downward and peer feedback when

it comes to performance management.

Through the performance evaluation and talent

management process, several staff members

were identified and promoted in 2023.

In 2023, the Group engaged in various team-

building activities. One of the most noteworthy

events occurred in September when the

middle and upper management teams

participated in strategic meetings in Paris. In

addition to discussion sessions, the activities

included a city tour and attendance at a

Rugby World Cup championship.

SOCIAL MATTERS

Promoting local community

The Group considers the interests of its main

stakeholders, including local communities

and the broader Georgian community, when

developing strategies and processes to enhance

its operations. We adhere to our Environmental

and Social Policy, striving to contribute to society

through our business activities. This includes

the development and investment in socially-

oriented products and services, as well as the

implementation of responsible approaches

in our business operations, sponsorship and

charitable activities.

Georgia Capital and its portfolio investments

are committed to playing a positive role in our

local community, as shown in the case studies

in the Sustainability Report.

Sponsorship and charity

In 2023, the Group and its portfolio companies

spent a total of GEL 2.2 million in financing

sponsorship and charitable activities. As part

of the sponsorship and charitable activities, the

Group continues to focus on promoting and

enhancing access to education, conserving

nature, supporting people with disabilities

and special needs, and facilitating innovative

projects that focus on social good. The

sponsorship and charity activities encourage

partnerships with various foundations and

non-governmental organisations to deliver

sustainable results and bring positive change.

In doing so, we follow our undertakings in

respect of social and community matters as set

out in our Environmental and Social Policy.

In 2023, Georgia Capital continued the

sponsorship programme to support the

Caucasus Nature Fund (“CNF”), whose

purpose is nature protection in the South

Caucasus. The fund helps to support the

effective long-term management of the nature

in the biologically rich, protected territories of

Armenia, Azerbaijan and Georgia.

For more information on our portfolio

companies’ charitable activities please refer to

our Sustainability Report.

Talent attraction, training and

development

Sustained development of the Group’s

businesses requires the strengthening of

the teams, both by using the Group’s own

significant internal resources through staff

development and rotation and by attracting

external candidates. Our Recruitment Policy

and relevant control procedures ensure an

unbiased hiring process that provides equal

employment opportunities for all candidates.

All employees at Georgia Capital are engaged

under an employment contract and we do not

use zero hours contracts.

To attract young talent, we actively partner

with leading Georgian business schools and

universities, participate in job fairs and run

extensive internships locally and internationally.

Georgia Capital will continue its talent

acquisition project for its Investment Officer

positions which was launched in 2016.

To manage our employees in a way that best

supports our business strategy and their

professional growth, we seek to help them

contribute to business performance through

personal and professional development.

Total sponsorship and charitable expenditure of

the Group and portfolio companies in 2023

GEL million

Sponsorship

Charity

Promoting and enhancing a healthy

lifestyle

Georgia Capital acknowledges the importance

of a healthy lifestyle for its employees. Ensuring

the safety of the workplace and providing

healthy working conditions are amongst the

Group’s fundamental human resources (HR)

management principles. The Group pays

particular attention to preventative measures,

such as conducting regular staff training and

medical check-ups, certifying workplaces

and promoting a healthy lifestyle. Consistent

with these principles, Georgia Capital has

engaged a safety consultancy company

that provides a dedicated safety inspector.

The inspector conducted a safety audit,

offered recommendations, and conducted

staff training. Our safety consultant ensures

systematic monitoring to guarantee compliance

with globally accepted standards.

Georgia Capital is aware of the damaging

impact of stress and anxiety on the individual.

It is Company practice to hold workshops

to check on employees’ mental health and

to offer face-to-face counselling. Employees

are encouraged to express their mental

health concerns in an open manner and seek

assistance. We provide the opportunity for a

flexible work schedule and remote and hybrid

working arrangements. Respective teams at

GCAP track the workload of the employees to

identify if hiring additional staff is required.

Sustainable procurement

At Georgia Capital, we strive to exercise good

corporate citizenship and we take into account

the ESG practices of our suppliers. A large

majority of GCAP’s suppliers are professional

advisors and consultants, predominantly blue-

chip, reputable international organisations with

sound ESG policies and procedures, which,

therefore, have lower exposure to ESG-related

risks. However, our existing policies and

procedures ensure that an appropriate level

of due diligence is conducted on prospective

suppliers before they are appointed, or any

GEL 0.6 mln

GEL 1.6 mln

TOTAL

2.2

GEL MILLION

Total number and rate of GCAP’s new

employee hires and employee turnover New hires New hires rate Full turnover Turnover rate

2022 5 10% 3 6%

2023 4 9% 3 6%

expenditure is committed. The nature of due

diligence is determined on a case-by-case

basis, however, as a general rule, the procedure

safeguards the assessment of risks associated

with bribery and corruption, information and

data security, human rights and employment

practices, and other material aspects as

determined during the assessment.

Georgia Capital aims to work with suppliers

whose ESG practices are in line with our

sustainability goals.

In 2023, significant items for Georgia Capital

procurement expenditures were audit, valuation

and compliance services, as well as services

sourced from professional consultations and

investor relations services. The breakdown of

expenditures by type of suppliers is provided in

the graph.

Expenses by type of suppliers at Georgia Capital

level (FY23)

EMPLOYEE MATTERS

Our employees

Recruiting, developing, and retaining talent

are among our most important priorities. We

work towards that objective by communicating

openly with our employees, providing training

and opportunities for career advancement,

rewarding our employees fairly and encouraging

employees to give direct feedback to senior

management. We recognise the importance

of providing a supportive working environment

with a healthy work-life balance for all our

employees, both at the holding company level

and across our portfolio companies. A key factor

in our success is a cohesive and professional

team, capable of accomplishing the Group’s

objectives. We are committed to attracting

and identifying the best professionals, caring

and planning for their needs, investing in their

development and fostering their commitment.

The Group developed and implemented HR

policies and procedures which promote the key

principles, areas, approaches and methods

that are crucial for building human capital

management systems at each business level

and at Georgia Capital level in line with the

above-mentioned policies.

Legal

advisors

18%

Insurance and

other services

20%

Professional

consultations

and investor

relations services

28%

Audit, valuation

and compliance

services

34%

In recent years we created a programme for

the Investment department which helped

participants to grasp new developments in

the field and refresh their knowledge. To help

the newcomers adapt to the new working

environment, respective teams organise

comprehensive introductory and cross-

department meetings.

In addition to specific training courses, regular

workshops are held in the Company which are

linked to the more complex matters, such as

business approaches and the best practices

in related fields. Besides in-house training,

Georgia Capital provides designated training

and certification programmes for various

departments through third-party resources.

For details on how our portfolio companies

train and enable the continuous development

of their employees, please read our

Sustainability Report.

Georgia Capital PLC Annual Report 2023

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

2023

2022

Fem ale Male

2023

2022

Fem ale Male

2023

2022

Fem ale Male

5,141

4,738

14,674

14,376

2023

2022

Fem ale Male

RESOURCES AND RESPONSIBILITIES CONTINUED

company is a related party. The Compliance

Officers (the General Counsel and UK General

Counsel) have the authority to conduct periodic

compliance checks of the operations of the

Group. We are pleased to confirm that there

have been no instances of violation of the Anti-

Bribery and Anti-Corruption Policy in 2023.

Modern slavery

The Group has zero tolerance against modern

slavery and human trafficking. We believe in

doing business ethically, transparently and in

full compliance with all applicable laws and

regulations. Even though we are an investment

holding company and the risk of modern slavery

and human trafficking at our own business

operations is low, we recognise that our supply

chain could potentially pose such risks. A large

majority of GCAP’s suppliers are professional

advisors and consultants, predominantly

blue-chip, reputable international organisations

with sound ESG policies and procedures,

which therefore, have lower exposure to

ESG-related risks. Our existing policies and

procedures ensure that an appropriate level

of due diligence is conducted on prospective

suppliers before they are appointed, or any

expenditure is committed.

We note that in accordance with our

Responsible Investment Policy, we expressly

do not invest in businesses which have

activities involving forced or child labour.

Evaluation of risk is carried out at the pre-

investment or pre-engagement stage through

by due diligence and control, and with post-

investment implementation and management

of risk through monitoring and reporting

predominantly by the Legal and Finance

departments who report to the Management

Board and ultimately the Board of Directors.

ENVIRONMENTAL MATTERS

Committing to the Principles of the UN

Global Compact

Since 2022, we have become a signatory of

the UN Global Compact and have officially

expressed our commitment to its ten

Principles, which are then sub-divided into 17

SDGs. Georgia Capital introduced an initiative

to align the portfolio companies’ performance

with the UN SDGs, which required our portfolio

companies to determine relevant SDGs and

implement respective procedures to track their

progress towards the identified goals.

For the individual SDGs of our portfolio

companies please refer to page 25 in our

Sustainability Report.

Diversity

Georgia Capital is fully committed to providing

equal opportunities as an employer and

prohibits unlawful and unfair discrimination.

We believe that there are great benefits to be

gained from having a diverse workforce. We

seek to ensure that our corporate culture and

policies, particularly our HR policies, create an

inclusive work environment that helps to bring

out the best in our employees.

Georgia Capital’s Diversity Policy establishes a

commitment to eliminating unlawful and unfair

discrimination and values the differences that a

diverse workforce brings to the organisation.

The Board embraces diversity in all its

forms. In line with Georgia Capital’s Diversity

Policy, diversity of gender, social and ethnic

backgrounds, age, disability, race, religion

or belief, sex or sexual orientation, cognitive

and personal strengths and balance in terms

of skills, experience, independence and

knowledge, amongst other factors, will be

taken into consideration when seeking to make

any new appointment within the business,

whether an employee, client, supplier or

contractor. On 31 December 2023, Georgia

Capital, had a total of 47 employees, of which

27 are female, and 20 are male.

We are supportive of the ambition shown in

recent reviews on diversity, including the Parker

Review regarding ethnic diversity. The Board is

in alignment with recommendations for ethnic

minorities on UK boards. For details on the

Board diversity please refer to the page 159 of

the Nomination Committee Report. Similarly,

we endorse the FTSE Women Leaders Review,

which primarily targets FTSE 350 companies.

Emission disclosure and calculation

methodology

Reporting methodology

In preparing our emissions data, we have

used the World Resources Institute/World

Business Council for Sustainable Development

(“WRI”/”WBCSD”), Greenhouse Gas Protocol:

A Corporate Accounting and Reporting

Standard (revised edition 2016) as a reference

source. We have also used the most recent

Georgian electricity conversion factor taken

from the JRC Guidebook – “How to Develop a

Sustainable Energy and Climate Action Plan in

the Eastern Partnership Countries”, European

Commission, Ispra, 2018, JRC113659. Further

conversion factors have been taken from

the UK Government’s “Greenhouse Gas

Conversion Factors for Company Reporting

2023”. Energy consumption is disclosed in line

with the UK Government’s Streamlined Energy

and Carbon Reporting (SECR) requirements.

The emissions disclosures are also prepared

in accordance with the TCFD requirements

and the requirements of section 414 of the

Companies Act.

Overview of organisation

The operations of Georgia Capital in London

and Tbilisi itself have relatively low energy

consumption. However, we recognise the

evolving significance of emissions disclosures

in the investment community and in line with

our commitment to increasing transparency,

we voluntarily disclose emissions for JSC

Georgia Capital (intermediate Georgian holding

company) and its portfolio investments. We

have reported on all the emission sources

listed under the Companies Act 2006 (Strategic

Report and Directors’ Report) Regulations

2013 and the Companies (Directors’ Report)

and Limited Liability Partnerships (Energy and

Carbon Report) Regulations 2018 (Scopes 1

and 2).

Additionally, we have reported on those

emissions under Scope 3 that are applicable

to our businesses’ direct operations. All

reported sources fall within our financial

statements. We do not have responsibility for

any emission sources that are not included in

our financial statements.

We are committed to exploring ways to

increase female and ethnic representation

at both Board and senior management

levels. Moreover, the Board recognises the

significance of all forms of diversity and remains

steadfast in its commitment to continuous

progress in this domain.

Human Rights Policy

The Human Resources Policy is an integral part

of the employee on-boarding package at each

business level with updates communicated

electronically.

The Human Rights Policy is part of the Human

Resources Policy and covers the following:

• Equal opportunities and anti-discrimination.

• Work environment free of harassment.

• Grievance Policy.

We recognise the importance of observing

human rights and are committed to

implementing socially responsible business

practices. Our Human Rights Policy establishes

priorities and puts control procedures in place

to provide equal opportunities and prevent

discrimination or harassment on any grounds,

including disabilities. The policy applies to

all employees and includes procedures in

relation to employment processes, training

and development, procedures on recruitment

and on the continuity of employment of

employees who become disabled during

their employment.

Code of Conduct and Ethics,

and Anti-Bribery and

Anti-Corruption Policy

The Group has a Code of Conduct and

Ethics, as well as an Anti-Bribery and

GENDER DIVERSITY

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

2 Employee numbers are presented at Georgia Capital JSC and Georgia Capital PLC levels. The monthly average number of employees is 47.

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

Board of Directors at Georgia Capital PLC Management at Georgia Capital

5 9

All employees at Georgia Capital

All employees at the Group and portfolio levels

47 19,815

Anti-Corruption Policy, which are applicable

to the Group companies. As an organisation

that is fully committed to the prevention of

bribery and corruption, the Group ensures that

appropriate internal controls are in place and

operating effectively.

Anti-Bribery and Anti-Corruption Policy

enforcement processes include:

• an anonymous whistleblowing hotline;

• an internal whistleblowing process;

• disclosure of gifts or other benefits,

including hospitality offered to, or received

by, the Group’s personnel;

• voluntary disclosure of corrupt conduct;

• third-party screening to identify the level of

risk third parties might pose;

• informing the banks/partners/counterparties

about anti-corruption and anti-bribery

principles before commencement of

business relations;

• ensuring that anti-bribery and anti-

corruption clauses are incorporated in

the agreements with customers and

third parties;

• ensuring that anti-bribery and anti-

corruption matters are included in

contractual agreements with partners/

counterparties; and

• online training programme aiming to raise

awareness of corruption and bribery issues

among employees.

As part of the Group’s third-party screening

to identify the level of risk which third parties

might pose, the Group carries out due diligence

such as indirect investigations, which include

general research of the activities undertaken by

the proposed business partners, research into

their reputation and information on whether the

What we report:

The Group’s “central” operations

Our reported data is collected in respect of

the Group, including our offices and facilities in

London and Tbilisi. Data on emissions resulting

from travel is reported for business-related travel

only but excludes commuting. As we do not

have any joint ventures, sub-leased properties

or offshore emissions, these have not been

included within the reported figures.

The data has been obtained from the Group’s

locations using both invoices and site meter

readings. Our leased office in the UK operates

with only three employees and the annual

consumption is less than 5MWh (in 2023, the

UK office’s annual consumption was 3.3MWh,

and 3.5MWh for 2022), the costs of which are

included within the lease fees. The electricity

consumption of the UK office is included in the

Scope 2 emissions calculation.

The Group’s portfolio

Data from our portfolio companies’ Scope

1, 2 and 3

emissions have been aggregated

and presented as a separate line item under

Scope 3 emissions in accordance with the

Greenhouse Gas Protocol. GCAP adheres

to the control approach when determining

the GHG inventory boundaries. Under this

approach, we report the GHG emissions of

all our private investments where the Group

holds a controlling stake. Therefore, the

GHG emissions of Bank of Georgia (19.7%

shareholding as of 31 December 2023) and the

water utility business (20% interest stake as of

31 December 2023) have not been included in

the calculations.

BoG, as a UK listed company discloses Scope

1, 2 and 3 emissions in its annual filings,

available at:

https://bankofgeorgiagroup.com/reports/

annual

Georgia Capital PLC Annual Report 2023

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

RESOURCES AND RESPONSIBILITIES CONTINUED

SECR Report

This report has been produced in accordance with the UK Government’s policy on SECR. As determined by the Greenhouse Gas Protocol, the

scope and boundary of the GHG emissions herein relate to those where we have operational control, i.e. those relating to our corporate offices in

both London and Tbilisi.

GHG emissions and energy data

The following table reports upon GHG and energy data for the period December 2022 to December 2023. The prior reporting year has been

included for comparative purposes.

Energy consumption (in kilowatt hours, kWh) Prior reporting year (2022) Current reporting year (2023)

Purchased electricity 34,272 41,053

Gas combustion – –

Transpor t fuel 219,355 237,0 31

Refrigerants – –

Total energy consumption (kWh)

253,627 278,084

Emissions (per metric tonne of CO

equivalent, tCO

Total

(2022) Scope

Total

(2023) Scope

Purchased electricity 3.6 2 4.3 2

Gas combustion – 1 – 1

Transpor t

75.9 3 32.5 3

Refrigerant emissions – 2 – 2

Total gross emissions 79.5 – 36.7 –

Intensity ratio

Total

(2022)

Total

(2023)

(tCO

e per FTE) 3.08 2.39

Quantification and reporting methodology

The GHG and energy data presented above has been collated, calculated and presented using methodology following the Greenhouse Gas

Reporting Protocol, and uses the 2023 Government Emission Conversion Factors for Company Reporting.

Intensity ratio

The intensity ratio used in the table above displays total gross emissions (tCO

e) per FTE.

Our environmental activities

Measures undertaken to improve energy efficiency

Over the last periods, Georgia Capital has introduced and implemented energy-efficient solutions to further reduce energy consumption by

conducting various activities across the Group and portfolio companies. Our portfolio companies continue to implement energy-saving solutions,

such as LED lights and other energy-efficient equipment, such as boilers and heating ventilation and air conditioning systems. Our housing

development business pioneered the introduction of energy-efficient construction materials. In our education business, four of our school campuses

successfully introduced solar panels and our other educational infrastructures will follow in due course. Our beverages business reduced energy

consumption and carbon footprint through its CO

recovery plant, alongside the wastewater treatment plant. In addition, the company also

introduced the Green Fridge Policy which reduces the carbon footprint of cooling bottled and canned products. Additionally, our PTI business

adheres to green standards, exemplified by the planting of trees in every Tbilisi branch, contributing to a green space that encompasses 20% of the

total territory.

Details of environmental activities of our portfolio companies are reported in our Sustainability Report at

https://georgiacapital.ge/ir/sustainability-reports.

Summary of GHG disclosure

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

Element Description Included / Excluded

Scope 1 – Static fossil fuel Combustion of fossil fuels, e.g. natural

gas, fuel oils, diesel and petrol in stationary

equipment at owned and controlled sites

Excluded – No such processes/equipment owned or operated by the

Group.

Scope 1 – Mobile fossil

fuel

Combustion of petrol, diesel and aviation fuel

in owned/operated vehicles

Business travel has been included.

Scope 1 – Other

emissions

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

Group.

Scope 2 – Consumption

of electricity

Consumption of electricity Included – Used electricity at owned and controlled sites using the

most recent Georgia electricity conversion factor taken from the JRC

Guidebook – How to Develop a Sustainable Energy and Climate Action

Plan in the Eastern Partnership Countries, European Commission, Ispra,

2018, JRC113659. Also included are emissions of the UK office.

Scope 2 – Consumption

of thermal energy

Direct consumption of heat, steam or cooling

generated by others

Excluded – No such thermal energy supplies are consumed by the

Group.

Scope 3 Combustion of petrol, diesel and aviation fuel

in vehicles owned and operated by others

Included – Air business travel (short-haul and long-haul); information on

the class of travel is unavailable, hence, we used an “average passenger”

conversion factor, with radiative forcing.

Included – Ground transportation, including taxis, coaches, trains, etc.,

owned and operated by others.

Excluded – Emissions from staff commuting at GCAP HoldCo level.

Investments Included – Scope 1, 2 and 3

of our portfolio companies where we have a

majority stake.

Emissions

Total greenhouse gas emissions (tonnes CO

Data for the period beginning 1 January 2022 and ending 31 December 2023 2022

2023

Scope 1 66 73

Static fossil fuel (emissions fuel combustion and facility operations) – –

Mobile fossil fuel 66 73

Scope 2 4 4

emissions from electricity, heat, steam and cooling purchased for own use 4 4

Scope 3 29,057 26,723

air travel and ground transportation provided by third parties plus electricity, heat/steam, cooling provided within lease

and service agreements 78 35

investment portfolio emissions

28,979 26,688

of which, Scope 1 18,643 17,46 0

of which, Scope 2 5,064 4,993

of which, Scope 3 (voluntary disclosure) 5,272 4,234

TOTAL GREENHOUSE GAS EMISSIONS 29,127 26,800

FTEs at GCAP HoldCo level 48 47

Total greenhouse gas emissions per FTE

(GCAP HoldCo) 606.8 570.2

FTEs at GCAP HoldCo and portfolio company levels 19,114 19,815

TOTAL GREENHOUSE GAS EMISSIONS PER FTE

(GCAP HOLDCO AND PORTFOLIO COMPANY LEVELS) 1.52 1.35

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

2 The 2022 GHG emissions have been retrospectively adjusted, incorporating the calculation methodology agreed upon with our external verification provider. The total GHG

emissions for 2022 were assessed at 29,127 tCO

e, compared to the previously disclosed 28,179 tCO

e. Specifically, GHG emissions under the SLB framework, following the

retrospective application of the relevant methodology, amount to 23,776 tCO

e, as opposed to the previously disclosed 22,829 tCO

e, representing an updated baseline for GHG

emission reduction targets/SPTs.

3 Investment portfolio companies’ total Scope 1 and 2 emissions are: 23,706 tCO

e in 2022 and 22,454 tCO

e in 2023.

4 FTE (“full time employee”) is stated excluding temporary employees.

1 Scope 1 and Scope 2 consumption data is converted in kWh. For the distance (km) conversion into kWh, we used a conversion factor for an average size car.

2 Transport emissions represent 1) business travel in employee-owned vehicles where the firm is responsible for purchasing the fuel, and 2) business travel in company owned vehicles.

Georgia Capital PLC Annual Report 2023

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

RESOURCES AND RESPONSIBILITIES CONTINUED

TCFD

• Delayed Transition 1.8°C where

the temperature rise is around 2°C by

2050. Physical risks as described under

the Current Policies scenario are still

likely. Delayed transition implies that

society remains slow to act but there is

a more urgent response in the 2030s.

Consequently, transition risks, especially

those relating to regulation, occur mid-

2030s and are swiftly implemented (not

gradually or phased), for example, fuel

use and carbon pricing. Technology will

continue to evolve because R&D generally

occurs over 10-15 year horizons, while

consumer preferences and reputation may

have more of an influence.

• Net Zero 1.5°C consistent with a

temperature rise of 1.5°C, reflecting early,

planned policy action. Transition risks

will dominate this scenario in relation to

regulation, technology and products. There

is an expectation of rapid obsolescence

of fossil fuel technologies and technology

advancements that will contribute to the

transition. Consumer preferences towards

sustainable choices and reputation will drive

changes in market demand. While physical

risk profiles remain broadly similar up to

2030 they are lower than in other scenarios

after this date.

Carbon prices (including taxation measures) are

a key policy instrument for incentivising carbon

emissions reduction. There is a direct relationship

between the ambition (and stringency) of policies

and the cost of emissions. The cost of emissions

is also sensitive to the timing and implementation

of the policies, the distribution of policies across

all industrial sectors and the available technology,

for example for CO

removal.

The carbon price in Georgia is a key variable in

determining the future climate-related financial

risk for GCAP. The projected carbon price over

the short, medium and long term under the

three plausible scenarios is shown in Table 1.

Under Current Policies, there is little change

in the carbon price. However, there is a sharp

increase in the carbon price occurring in about

2030-2035 under the Delayed Transition 1.8°C

scenario. Under the Net Zero 1.5°C scenario, a

carbon price in Georgia of US$ 204/tonne by

2030 is projected.

Based on the early-stage scenario modelling

initial tables of potential climate-related

financial risks and opportunities for each

scenario were prepared.

An example, a summary table of the Delayed

Transition 1.8°C scenario is presented as

Table 2. In this example scenario, the increasing

carbon price is likely to be relevant to each

of the portfolio companies either directly or

through their supply chains.

GOVERNANCE

Board oversight

The Board is entrusted with providing oversight

of climate-related risks and opportunities, aided

by the Audit and Valuation Committee. The

Audit and Valuation Committee and the Board

have responsibility for assessing and managing

climate-related risks and opportunities in

relation to GCAP’s direct operations and to our

portfolio companies, as they affect matters

within their remit.

Current, future and emerging risks are included

within the standing item, “Discussion of

risks”, of the Audit and Valuation Committee

and Board agendas. Risks, including those

relating to climate change, are discussed, and

implications for future strategy are considered,

semi-annually, in line with the annual and semi-

annual reports.

In 2022, the Board supported the initiative of

incorporating ESG as one of the core pillars of

GCAP’s strategy. The Board also reviewed the

alignment of GCAP’s portfolio operations with

the UN SDGs and supported the enhancement

of ESG transparency. Georgia Capital submits

the climate change questionnaire to the CDP

annually for additional transparency.

The Board is responsible for the approval of

the climate-related metrics and targets that

have been established by GCAP in 2022. It is

also responsible for ensuring progress against

agreed metrics and targets.

In October 2023, the Board revised the

schedule of matters reserved for the Board,

including explicitly stating that it now covered

any duties previously reserved to the

Investment Committee, and further to make it

clear that the Board had primary responsibility

for overseeing environmental and social risks

and that the Company’s strategic direction is

regularly informed by material environmental

and social issues. Given the small size of the

Board and the importance of these matters,

including climate change, the Board believes

that it is appropriate for the whole Board to be

responsible for these issues.

Management oversight

Within the management team, the Chief

Financial Officer, supported by the finance

team, is responsible for identifying risks,

including climate change risks, in relation to the

investment portfolio and including these in the

valuation process. The Director of Investments,

supported by the Investment Officers, is

responsible for identifying specific risks and

opportunities at the initial investment stage.

The Chief Financial Officer and Director of

Investments report on monitoring of identified

financial and climate-related risks and significant

changes through their regular reports to the

Management Board. Risks are escalated to the

Audit and Valuation Committee.

The Board and management work together

to develop and review the GCAP investment

strategy and consider, among other aspects,

climate-related issues. They are also responsible

for setting a wide range of corporate policies

and objectives, among them environmental and

social policies, and for monitoring performance

against objectives and targets.

In addition, potential financial impacts under

this scenario may also arise associated with:

• acute physical events, for example, from

increased flooding or land instability

due to intense rainfall on operations or

physical assets;

• chronic physical changes to climate, such as

increased average temperatures affecting the

condition or habitability of real estate assets,

the physical condition of distribution networks,

and/or community health; and

• adaptation of operations or assets to

mitigate the effect of physical or transition

risks. In this example, transition risks

and, in particular, opportunities for the

GCAP investment strategy and portfolio

may be driven by the Georgian Nationally

Determined Contributions and the Georgian

2030 Climate Change Strategy and Action

Plan (CCSAP).

TASK FORCE ON CLIMATE-RELATED

FINANCIAL DISCLOSURES

The following section reflects Georgia Capital’s response to the TCFD recommendations.

The disclosures have been prepared in line with the all-sector guidance and, where

applicable, reflect the supplementary recommendations for the asset managers. In this

section, we present the Company’s perspective on four core pillars of governance, strategy,

risk management, and metrics and targets related to climate-change mitigation.

STRATEGY

In support of the evaluation of climate-

related risks and opportunities that may be

present, a review of GCAP’s direct operations

and a macro-level review of the portfolio

companies’ operations were completed. The

process was followed by a comprehensive

quantitative assessment, specifically on

GHG inventory management.

It is considered that indirect climate-related

risks within the portfolio companies will be

more significant than those present within the

Group’s operations. An early-stage scenario

analysis was completed as part of the process

towards understanding how the climate

impacts identified in the qualitative assessment

could present as financial risks to GCAP under

different plausible future scenarios. The findings

and potential risk implications of such findings

are provided below in the section “Scenario

analysis of plausible futures”. GCAP’s strategy

incorporates strong consideration of climate

change aspects (e.g. GCAP’s focus upon

renewable energy, 7.3% share of the portfolio

at 31 December 2023, the issuance of the SLB

in 2023, and increased focus on sustainability

both at GCAP and portfolio company levels).

Scenario analysis of plausible futures

Network for Greening the Financial System

(“NGFS”

) climate scenarios were chosen

for their relevance to the finance sector and

to allow for comparability. Climate change

scenarios for the Republic of Georgia were

explored as follows:

• Current Policies/(Business as Usual (BAU))

(policy ambition of >3°C by 2025).

• Delayed transition to net-zero (policy

ambition of 1.8°C by 2050).

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

GCAP invests over a five-to-ten-year horizon.

With this in mind, scenario outputs were

considered by GCAP in the short term (year

2027), medium term (year 2030) and long term

(year 2050). Each NGFS scenario explores

a different set of assumptions for how climate

policy, emissions and temperatures evolve.

The scenario descriptions using the REMIND-

MAgPIE 2.1-4.2 model are as follows:

• Current Policies (or BAU) where the

modelled temperature in 2050 exceeds 3°C.

This scenario is dominated by physical risks

due to the resulting climate and weather

pattern changes. Transition risks are muted

as regulators and technology are not being

driven to change beyond current plans.

Georgia will experience a reduction in the

overall volume of precipitation across the

country, including a reduction in the volume

of snowfall. Gradual snow melt will be

replaced by more intense rainfall run-off.

This will result in landscape instability and

heightened flood risk with the potential

for infrastructure to be overwhelmed.

In addition, there is an expectation of

an increasing frequency of heat waves.

It is noted that under the plausible scenarios

analysis, there will be little difference in the

physical outcomes between Current Policies

and Delayed Transition 1.8°C before 2050. But

under the Delayed Transition 1.8°C scenario,

there is significant potential for variation in near-

term policy action which will introduce great

uncertainty for businesses.

A narrative summary of qualitatively identified

macro-level risks and opportunities under the

Delayed Transition 1.8°C scenario and the

potential impact of these risks is provided in

Table 2. For each portfolio company, examples

are given which are considered to have a

potential impact on the portfolio company, if

not to the portfolio as a whole. The percentage

value of the portfolio company within the

portfolio is provided as a broad indicator of

likely weighting.

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

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

Projected carbon price

NGFS modelled scenario Year 2025 Year 2030 Year 2035 Year 2050

Current Policies 3 3 3 4

Delayed Transition 1.8°C <1 <1 224 497

Net Zero 1.5°C 148 204 272 603

Georgia Capital PLC Annual Report 2023

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

RESOURCES AND RESPONSIBILITIES CONTINUED

TCFD CONTINUED

Medical insurance

(2.5% of total portfolio)

• Risks – An increase in medical insurance

claims may arise from both acute short-

term weather conditions (flooding and, in

some regions, landslides and heatwaves)

and long-term chronic changes in weather

such as increased average temperatures,

impacting health. Failure of infrastructure

may cause longer-term ill health from

waterborne diseases. There is also a risk

that the Government introduces a policy

for insurers to maintain policy cover for the

“uninsurable”, the costs of which may not be

possible to pass on to the insured.

• Opportunities – Encouraging customers

to prepare to be resilient with respect to

climate risks, for example through premium

incentives to have healthy lifestyles, may

contribute positively to the business

reputation and customer base.

P&C insurance (7.8% of total portfolio)

• Risks – Carbon pricing is a fundamental

component of the EU’s climate change

agenda. Under the Delayed Transition

1.8°C scenario, carbon pricing is expected

to rise sharply after 2030 (medium term).

This will see a progressive rise in the

cost of carbon-intensive products and

services, logistics, distribution and any

other operations within the supply chain

associated with high-carbon emissions.

This will have implications for the cost of

insurance, which may be passed on to

the customer. Beginning with transition

risks, some lines of business may see

changes in claims patterns as Government

policy and regulation relating to carbon

emissions evolve. This might result in

fluctuating loss ratios and profitability. The

steep rise in carbon prices can lead to

reduced profitability, obsolete assets and

impairments in sectors that are difficult

to decarbonise and where additional

costs cannot be passed on to customers.

The transition will shift demand toward

low-carbon technologies and create new

opportunities for companies that provide

innovative solutions and are able to reduce

their emissions more efficiently than

competitors. Failure to manage potentially

detrimental impacts will result in damage to

a company’s reputation.

• Opportunities – Opportunities will likely

arise from energy efficiency regulation

which will force customers to upgrade their

homes and vehicles and may require new

product offerings. Commercial opportunities

are also likely to arise by creating targeted

products that address climate change and

energy transition.

Bank of Georgia (33.4 % of total

portfolio)

• Risks – Within the medium term, the

rapid implementation of climate policy and

regulation may result in sharply increasing

direct regulatory expenses in relation to fixed

assets such as the Bank’s retail outlets.

• Opportunities – In the short term, and

in mitigation, the Bank is already in the

advanced stages of implementing energy

efficiency programmes within its real

estate (retail, office and data centres). By

anticipating compliance with regulations

relating to fuel efficiency standards,

emissions-reducing regulations and

building efficiency compliance, the Bank

will minimise costs in relation to regulations.

In addition, it will lower energy expenditure

and generate a financial benefit, especially

where renewable energy is utilised.

Additionally, the Bank has adopted digital

technology to enable all forms of digital

banking, potentially further reducing the

need for fixed assets.

Since 2021, Bank of Georgia Group PLC

completes its own TCFD assessment. The

results are available publicly in Bank of Georgia

Group PLC’s Annual Report and Accounts

which can be viewed or downloaded at: https://

bankofgeorgiagroup.com/reports/annual

Renewable energy

(7.3% of total portfolio)

• Risks – In the short to medium term, the

infrastructure and transmission lines are

clearly at risk from physical risks such as

landslides, or extreme heat impacting the

integrity of lines or pipes. However, for each

of the HPPs and WPPs, the business has

taken steps to improve the resilience of

infrastructure to changes in climate.

• Opportunities – The renewable energy

business generates electricity using

renewable sources, and there are a number

of policy and Government incentives for

solar wind and hydropower generation

in Georgia as part of the Georgian 2030

CCSAP. Renewable energy sources are

considered to be the future of energy and

are valued higher than traditional electricity

generation companies.

Education (5.2% of total portfolio)

• Risks – The potential risks relate to

transition type risks, in particular energy

and air quality regulations, that may be

introduced under this scenario at short

notice in the medium term. Schools may

be expected to retrofit heating and cooling

measures/equipment to meet regulations.

In addition, energy requirements may arise

in response to air conditioner use during

prolonged heatwaves for example. These

risks are expected for all real estate.

Auto service

• Risks – Currently, vehicles on the market

and in use in Georgia are mainly diesel

and petrol-fuelled. Initially, in the short

term, there will be a gradual switch to

electric vehicles. After 2030, there will

likely be a significant increase in the use

of electric vehicles, abruptly reducing the

need for emissions checks. Additionally,

the anticipated rise of carbon pricing and

adoption of border adjustment mechanisms

after 2030 will affect Amboli’s (the auto

service business’ car services and parts

business) supply chain and trade of car

consumables and parts. There will likely be

an abrupt rise in distribution and retail costs

as a result of increases in carbon pricing.

• Opportunities – In the short to medium

term, it may be that there will be stricter

emissions requirements. This may

mean that more vehicles will need to be

emissions-checked more regularly or be

modified, causing demand at PTI centres.

Beverages

• Risks – In addition to physical risks

(reduced rain, high intensity events,

prolonged heatwaves) affecting hops

and grape production, the main identified

risk relates to regulatory transition risk. In

particular, carbon prices and border taxes

such as the EU Carbon Border Adjustment

Mechanism will adversely affect the prices

of both incoming goods and exported

products in medium term (post-2030).

Water utility (4.3% of total portfolio)

• Risks – Acute physical risks may impact

utility assets. For example, in the short

to medium term, extreme rain events

may overwhelm infrastructure, causing

damaged water treatment and sewage

treatment plants. Pipelines are also at risk

from such events, as the overall integrity is

placed under pressure. These will require

increased maintenance and repair costs.

Landslides in more remote locations could

cause further damage and may block

access in some areas.

• Opportunities – In the medium term,

decarbonisation of operations will enable

the water utility operations to limit the

cost consequences of carbon pricing and

provide an advantage over more carbon-

intensive competition.

Retail (pharmacy)

(19.4% of total portfolio)

• Risks – The principal risks arise from

physical aspects of climate change and may

impact the physical assets. Transition risks

are considered to mainly relate to carbon

pricing and the effect this will have on the

supply chain, for example, the purchase

of drugs and medicines. As the carbon

price rapidly increases post-2030 (medium

term) the prices of goods will increase.

While this will be felt across the market

and will not be unique to the portfolio,

given the leading market share, this could

result in reputational risk arising from

consumer perception.

• Opportunities – There is a regulation

opportunity for the retail (pharmacy)

business. Being an early adopter of fuel

efficiency standards, emissions-reducing

regulations and building efficiency

compliance will reduce overall running

costs in the medium term. Good energy

management and the use of renewable

energy will not only lower energy

expenditure and generate a financial benefit

but will also reduce the carbon footprint of

the operations.

Healthcare businesses – hospitals

and clinics and diagnostics

(12.4% of total portfolio)

• Risks – under the delayed transition, it is

anticipated that in the medium-term carbon

prices will remain low. After 2030, carbon

prices may rise quickly y-o-y towards 2050.

The implications of this will be financially

more severe for carbon-intensive products,

services and operations. This will result

in increased costs of purchase relating

to medical equipment and supplies,

particularly those originating out-of-country.

• Opportunities – In the short to medium

term, commitment to a low-carbon portfolio

(for example, low-carbon hospitals) could

have certain benefits. A reduction in the

portfolio’s carbon intensity will mitigate

future costs associated with increasing

carbon prices.

Table 2: Portfolio 2023: Qualitative presence of potential climate-related physical or transition risks under Delayed Transition 1.8°C

Physical risks

Transition risks

Acute Chronic

Legal/

regulation

Market Reputation

Technology/

digital

Portfolio company (% value of total portfolio) Risk Opp. Risk Opp. Risk Opp. Risk Opp. Risk Opp. Risk Opp.

Bank of Georgia

Water utility

Renewable energy

Healthcare businesses:

Hospitals and clinics and diagnostics

Retail (pharmacy)

Medical insurance

P&C insurance

Education

Auto service

Beverages (beer and wine)

Housing development and hospitality

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

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

1 Physical risks and opportunities are those that occur due to the physical manifestation of climate change – as chronic long-term climate changes or as acute episodic weather events.

2 Transition risks and opportunities are those related to the transition to a low carbon economy including legal/regulatory risks such as carbon prices, market supply and demand,

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

Housing development and hospitality

• Risks – Physical risks to property will

occur. These include deterioration of asset

integrity due to flooding or extreme heat.

In the medium term (post-2030) assets

that are not energy efficient will be hit by

energy efficiency regulation for retrofitting

and increased energy costs due to

carbon pricing.

• Opportunities – Early adoption of fuel

efficiency standards, emissions-reducing

regulations and building efficiency

compliance will reduce longer-term costs

relating to regulations including a reduction

in potential declines.

The Group’s strategy is to focus predominantly

on capital-light, larger-scale investment

opportunities in Georgia and it normally

seeks to monetise its investment through

appropriate exit options, typically within five to

ten years from initial investment. Considering

this strategic focus, the holding periods of our

investments fall in much shorter time horizons

(short to medium term) than the timeframe in

which the impacts of climate change, especially

of physical risks, may manifest themselves in

Georgia. The exposure of GCAP’s portfolio on

certain industries (presented as a percentage

of the investment in the total portfolio value)

as well as the investment holding period are

essential when defining the different time

horizons for the analysis and when assessing

the materiality of climate-related risks for

different investments.

Management takes climate change risk into

consideration when determining its investment

strategy. This is described further in the Risk

Management section on page 92. Climate

change is also reflected in the valuation

assessments of the portfolio companies, as

described in the Risk Management section on

page 92. Going forward we will be exploring

how to further incorporate climate change risk

into our portfolio valuations. This may include

an assessment of the influence of the projected

carbon price under different scenarios, on the

valuation of the portfolio. In addition, the use of

shadow carbon pricing might be reviewed.

Other identified potential risks and

opportunities are evaluated by the Investment

and Finance teams in discussion with the

portfolio companies to determine their financial

materiality (impact on financial performance

including revenues and expenditures, and

impact on the financial position, assets and

liabilities, capital and financing).

Georgia Capital PLC Annual Report 2023

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

RESOURCES AND RESPONSIBILITIES CONTINUED

TCFD CONTINUED

RISK MANAGEMENT

Climate change risk has been recognised

by GCAP as an emerging risk. The risk

management approaches for the initial

investment stage and the existing portfolio

companies are provided below.

Investment stage

The investment risk management process

includes consideration of climate-related

risks, in line with the implementation of the

Responsible Investment Policy. Procedures

for identifying, describing and managing

environmental and social risks and impacts

(including those associated with climate

change) have been incorporated into the

investment process from the initial investment,

through to the holding period.

GCAP has a staged approach to investment

appraisal which becomes progressively more

detailed. At the early stages of appraisal,

the potential investment is screened against

the GCAP Exclusion List. This list excludes

businesses that generate more than 10% of

their revenues from fossil fuels. Subsequent

appraisal stages include evaluation of the

carbon and energy emissions, as well as

business strategy and plan elements in relation

to carbon and energy management. These

plan elements will consider alignment with

the Georgian Government Climate Goals and

incorporate the shadow carbon price.

Current portfolio

Climate change, and the risks relating to

climate change, is reflected in the valuation

assessments of the portfolio companies. Equity

investments in Georgia Capital’s portfolio

companies are measured at fair values at

each reporting date in accordance with IFRS

13, Fair Value Measurement. Private large and

investment stage portfolio companies are

valued by applying a combination of an income

approach (DCF) and a market approach (listed

peer multiples and, in some cases, precedent

transactions) in line with International Private

Equity and Venture Capital Valuation (IPEV)

guidelines and methodology. Under the DCF

valuation method, fair value is estimated by

deriving the present value of the business using

reasonable assumptions of expected future cash

flows and the terminal value, and the appropriate

risk-adjusted discount rate that quantifies the

risk inherent to the business. The discount

rate is estimated with reference to the market

risk-free rate, a risk-adjusted premium and

information specific to the business or market

sector, which consequently reflects the climate

change-related considerations of the business.

Market approach valuation methodology

involves the application of a listed peer group

earnings multiple to the earnings of the business

and is appropriate for investments in established

businesses and for which the Company can

determine a group of listed companies with

similar characteristics. GCAP identifies the

peer group for each equity investment taking

into consideration points of similarity with the

investment such as industry, business model,

size of the company, economic and regulatory

factors, growth prospects (higher growth rate)

and risk profiles (including the climate change

risk). Valuation assessments of the large and

investment stage portfolio companies are

performed by an independent valuation firm

on a semi-annual basis. Climate change risk is

factored in the valuation assessments. Climate

change risk is also embedded in the valuation

of the other portfolio companies as set out in

the Valuation Methodology on page 99 of this

Annual Report.

Understanding the relationship and potential

impact of climate change and its associated

risks across different risk categories was a

priority for GCAP risk management during

2023 as climate risk continued to be integrated

into the risk management framework.

Evaluating macro-level risks:

For each of the portfolio companies, a macro-

level review has been completed within the

scenarios and time horizons (short, medium

and long). The process included among

other activities:

• review of the scenarios selection and

identified risks and opportunities with the

portfolio companies;

• application of the carbon prices to investee

emission profiles to establish the impact;

and

• further discussion with the portfolio

companies on how carbon price may be

used to influence their strategy and impact

on their business plans going forward –

including the cost of supplied materials,

ability to pass through costs and potential

capex among other aspects.

The NGFS modelling scenarios will be re-run

annually to assess changes if any, that may

occur in response to global or Republic of

Georgia commitments and policies towards

climate change.

Monitoring and reporting:

Environment (including climate) and social risks

and opportunities are managed through regular

semi-annual engagements with the portfolio

companies. Topics cover a range of aspects

under the headings of Governance, Policies,

Social, Environment, Carbon and Energy

Management, and Suppliers.

Capacity building:

Where appropriate, GCAP will support portfolio

companies in training and upskilling Investment

Managers with respect to climate change

terminology, risks and opportunities during

2024 and beyond.

METRICS AND TARGETS

In 2022, Georgia Capital committed to the

Net-Zero Initiative and expressed its willingness

to reach Net-Zero across Scope 1 and 2

emissions at both GCAP HoldCo and portfolio

company levels by 2050.

In May 2022, GCAP commenced the ESG

target-setting initiative with the goal of

setting GHG emission reduction targets.

Over a four-month period, GCAP conducted

comprehensive research on relevant ESG

standards, frameworks and guidelines, and

engaged in discussions with global experts on

different environmental platforms.

In September 2022, GCAP, with its portfolio

companies, engaged in comprehensive

individual and group workshops where the ESG

frameworks were discussed and participants

shared their progress towards setting individual

environmental targets. Some of the portfolio

companies also engaged local third-party

experts in the target-setting initiative to ensure

the effectiveness of the process.

In 2023, in parallel with the SLB issuance the

targets were revisited.

The primary driver for GCAP’s commitment

to achieving Net-Zero emissions by 2050 is

the recognition that the majority of its GHG

emissions originate from portfolio companies

and through this target, the Group can

actively promote climate change mitigation,

natural resource conservation, and pollution

prevention. This commitment reflects GCAP’s

dedication to fostering a transition toward a

more sustainable and lower-carbon economy

in Georgia. The progress toward this target

is rigorously monitored on an annual basis.

Furthermore, following the successful issuance

of a US$ 150 million SLB, the verification of

GHG emissions will be conducted regularly at

least while the bond remains outstanding.

GHG inventory

Measuring GHGs is the initial step in preventing

global warming. GCAP has collated Scope 1,

2 and limited Scope 3 GHG emissions over the

past few years.

In 2020 we focused on emissions derived from

GCAP operations (Scope 1, 2 and limited 3). We

reported on the emission sources listed under

the Companies Act 2006 (Strategic Report

and Directors’ Report) Regulations 2013 and

the Companies (Directors’ Report) and Limited

Liability Partnerships (Energy and Carbon

Report) Regulations 2018 (Scopes 1 and 2).

All sources reported in 2020 fell within our

consolidated financial statements.

Since 2021, in accordance with the

Greenhouse Gas Protocol and aligning with

TCFD recommendations, we have taken the

opportunity to present elements of the emissions

derived from our portfolio companies (outside our

consolidated financial statements). We aggregate

and present portfolio companies’ Scope 1, 2 and

3 emissions under our Scope 3 emissions.

GCAP considers that all material categories of

Scope 3 have been included in our emissions

calculation. For further details, please refer

to the emission disclosure and calculation

methodology on page 85.

GHG reduction targets

Georgia Capital commits to reducing total

Scope 1 and Scope 2 emissions by 30% by

2030 compared to the base year, 2022, and by

95% by 2050, ultimately becoming Net-Zero.

In 2023, JSC GCAP issued a US$ 150 million

SLB and established a SLB Framework, under

which GCAP committed to decrease its GHG

emissions

by 20% by 2027 compared to a

2022 baseline. The SLB target is in line with

GCAP’s overarching commitment to reaching

Net-Zero across the Group by 2050.

2022 has been chosen as a base year for two

major reasons:

• In 2022, the disposal of the majority equity

stake in the water utility business was

completed, which significantly changed the

GHG emission composition.

• The 2022 year reflects the normalisation

of economic activities compared to the

abnormal environment in 2020-2021 years

due to COVID-19-related implications.

In 2022, the full GHG inventory analysis

revealed that the portfolio companies’ GHG

emissions accounted for 99.5% of the

Group and portfolio companies’ aggregated

emissions, which were derived from the

following sources:

• Combustion of natural gas (Scope 1) – 33%

of the total GHG emissions.

• Combustion of petrol and diesel (Scope 1) –

25% of the total GHG emissions.

• Consumption of electricity (Scope 2) – 23%

of the total GHG emissions.

• Other emissions (Scope 3) – 19% of the

total GHG emissions.

GHG emissions reduction roadmaps were

developed at both the GCAP HoldCo and

portfolio businesses’ levels to support GCAP

in transferring to a low-carbon economy, and

consequently lowering its environmental footprint.

The roadmap captures the fundamental

activities to minimise any adverse impact

on the environment, whilst simultaneously

highlighting benefits for the Group and its

portfolio companies:

• c.80% of Georgian electricity is sourced from

renewable energy power, having a relatively

modest adverse impact on the environment.

• GCAP’s updated strategy of having

considerable exposure to capital-light portfolio

companies provides a chance to progressively

transition to a low-carbon economy.

1 Represents GCAP’s absolute Scope 1, 2 and 3 emissions (the latter reflecting the aggregated Scope 1 and 2 emissions of the portfolio companies).

2 Since GCAP’s portfolio is subject to regular asset rotation, the targets may be recalibrated in the future.

3 The 2022 GHG emissions have been retrospectively adjusted, incorporating the calculation methodology agreed upon with our external verification provider. Specifically, GHG

emissions under the SLB framework, following the retrospective application of the relevant methodology, amount to 23,776 tCO

e, as opposed to the previously disclosed 22,829

tCO

e, representing an updated baseline for GHG emission reduction targets/SPTs.

4 Emissions related to air travel and ground transportation provided by third parties and electricity, heat/steam, cooling provided within lease and service agreements.

Target

KPIs

Base year

2022

Target by

2030

Target by

2050

Reach Net-Zero across

Scope 1 and 2 emissions

at both GCAP HoldCo and

portfolio companies’ level

by 2050

GHG emissions reduction targets

Reduce GCAP HoldCo Scope 1 and 2 emissions

70 tCO

e 30% 95%

Reduce GCAP’s Scope 3 emissions:

* Reduce portfolio companies’ Scope 1 and 2 emissions

23,706 tCO

e 30% 95%

* Offset GCAP HoldCo’s direct Scope 3 emissions

that cannot

be avoided or reduced further, starting from 2030.

78 tCO

e Yes Yes

Georgia Capital plans to reduce its direct GHG emissions by:

• implementing Net-Zero awareness campaigns across the Group and its portfolio companies;

• organising annual ESG workshops with the portfolio companies;

• replacing the natural gas heating systems with efficient electric heating solutions;

• promoting electric vehicle deployment in order to reduce the consumption of petrol and diesel; and

• gradually transferring electricity consumption to 100% renewable energy, either by installing renewable energy

solutions at our facilities or purchasing electricity from renewable energy providers.

Georgia Capital PLC Annual Report 2023

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

ALTERNATIVE PERFORMANCE MEASURES

APMs overview

Management assesses the Group’s

performance using a variety of measures that

are not specifically defined under IFRS and

are, therefore, referred to as APMs internally

and throughout this document. Management

monitors the Group’s performance on a regular

basis based on developments in the Income

Statement and NAV Statement prepared

under the methodologies described below.

Management believes that such statements

provide an important view on Georgia Capital’s

strategy and helpful insights into management’s

decision-making. Management dedicates

time to ensuring that the Group’s APMs are

reported in a consistent and transparent

way in accordance with the European

Securities and Markets Authority (“ESMA”)

published guidelines.

Under IFRS 10, Georgia Capital PLC meets

the “investment entity” definition and does not

consolidate its portfolio companies, instead the

investments are measured at fair value.

Our Group level discussion is, therefore, based

on the IFRS 10 investment entity accounts.

The NAV Statement, as included in the notes

to the IFRS financial statements, summarises

the Group’s equity value and drivers of related

changes between the reporting periods. Georgia

Capital holds a single investment – in JSC

Georgia Capital (an investment entity on its own)

– which in turn owns a portfolio of investments,

each measured at fair value. Georgia Capital

measures its investment in JSC Georgia Capital

at fair value through profit and loss, estimated

with reference to JSC Georgia Capital’s own

portfolio value as offset against its net debt.

The Income Statement presents the Group’s

results of operations for the reporting period.

As we conduct most of our operations through

JSC Georgia Capital, through which we hold

our portfolio companies, the IFRS results

provide little transparency on the underlying

trends. To enable a comprehensive view of

the combined operations of Georgia Capital

PLC and JSC Georgia Capital (together

referred to herein as “GCAP”) as if it were one

holding company, we adjust the accounts

(“adjusted IFRS 10 Income Statement”). A full

reconciliation of the adjusted Income Statement

to the IFRS Income Statement is provided on

p a g e 97.

Additionally, for the majority of our portfolio

companies the fair value of our equity

investment is determined by the application

of a market approach (listed peer multiples

and precedent transactions) and an income

approach (DCF). Under the market approach,

listed peer group earnings multiples are applied

to the trailing 12-month (LTM) stand-alone IFRS

earnings of the relevant business. Under the

DCF valuation method, fair value is estimated

by deriving the present value of the business

using reasonable assumptions of expected

future cash flows and the terminal value, and

the appropriate risk-adjusted discount rate that

quantifies the risk inherent to the business.

As such, the stand-alone IFRS results and

developments behind IFRS earnings of our

portfolio companies are key drivers in their

valuations. Following the Group discussion, we

therefore also present unaudited IFRS financial

statements for each portfolio company and a

related brief results discussion.

Our adjusted IFRS 10 Income Statement and

the stand-alone IFRS results for our portfolio

companies may be viewed as APMs.

NAV Statement

The Group makes indirect investments in

portfolio companies, held through intermediate

Georgian holding company, JSC Georgia

Capital, which is the principal subsidiary of

Georgia Capital PLC. The application of IFRS

10 requires us to fair value the intermediate

holding company JSC Georgia Capital. This

fair value approach, applied at the intermediate

holding company level, effectively obscures the

performance of our equity capital investments

and associated transactions occurring in the

intermediate holding company. The financial

effect from the valuation of the underlying

portfolio companies are aggregated into a

single value. The breakdown of the value of

JSC Georgia Capital is presented in Note

12 within the IFRS financial statements. To

maintain transparency in our report and aid

understanding we present a NAV Statement

and respective reconciliation to the IFRS

Balance Sheet in Note 5 (Segment information)

of the IFRS financial statements. NAV disclosed

under the NAV Statement is the same as IFRS

equity value as at 31 December 2023. The

NAV Statement is simply a “look through” of

the IFRS 10 Balance Sheet to present the

underlying performance.

The NAV Statement breaks down NAV into

its components and provides roll-forward of

the related changes between the reporting

periods, including a snapshot of the Group’s

financial position at the opening and closing

dates. The NAV Statement provides a value of

Georgia Capital that management uses as a

tool for measuring its investment performance.

Management closely monitors NAV in

connection with capital allocation decisions.

The following methodology underlies the

presentation of the NAV for period-end dates:

• NAV is calculated at stand-alone GCAP

level, which represents the aggregation

of the stand-alone assets and liabilities

of Georgia Capital PLC and JSC

Georgia Capital.

• Holdings in listed and private portfolio

companies are carried based on the

following methodology:

– Listed portfolio companies are carried

at the period-end market values based

on closing share prices on respective

stock exchanges.

– Private portfolio companies are carried

at fair value based on a valuation

technique believed to be most

appropriate to that investment as

described in the Valuation Methodology

on page 99.

– NAV per share represents total NAV

divided by the number of outstanding

shares at the end of the period, i.e. the

number of issued shares at the end of

the period less unawarded shares in

GCAP’s management trust.

Management Income Statement

The Income Statement is an aggregation of

GCAP’s stand-alone Profit and Loss Statement

and fair value change of portfolio companies

during the reporting period. The following

methodology underlies the preparation of the

Income Statement:

• The top part of the Income Statement

(GCAP net operating income) represents

the aggregation of the two stand-alone

holding company accounts, which we

call GCAP (i.e. the UK holding company

Georgia Capital PLC and the Georgian

holding company JSC Georgia Capital),

the performance of which reflects the net

result of a) dividend income accrual based

on distributed or declared annual dividend

proceeds from portfolio companies during

the reporting period, b) interest income on

liquid funds and loans issued, c) interest

expenses on debt incurred at GCAP level

(which consists of the bonds issued), d)

realised/unrealised gains or losses on

liquid assets and e) expenses incurred

at GCAP level.

• Fair value change of portfolio companies

(total investment return) represents fair value

changes in the value of portfolio companies

during the reporting period, as valued in

the period-end NAV Statement. A detailed

Valuation Methodology is described on

page 99. We view fair value changes of

portfolio companies as a metric to measure

the total investment return of Georgia

Capital’s holdings, which itself reflects value

creation for shareholders.

• Following the aggregation of GCAP net

operating income and total investment

return, we arrive at management income

before foreign exchange movements for

the period.

• Below the income before foreign exchange

movements line, to arrive at management

net income, we present GCAP gains or

losses from foreign exchange movements

and other costs such as non-recurring

or transactions costs if there are any in a

reportable period.

APM summary

In October 2015, ESMA published guidelines

about the use of APMs. These are financial

measures such as key performance indicators

(KPIs) that are not defined under IFRS. In the

Strategic Review section of the Annual Report

on pages 2 to 119, Georgia Capital describes

its financial performance under the adjusted

IFRS 10 Income Statement and also discloses

the stand-alone IFRS results for the portfolio

companies, which themselves can be viewed

as APMs. A number of other measures are

used which are also APMs, since they are

derived from the management accounts. The

applicable reconciliations to the IFRS equivalent

where appropriate, is provided below and

should be read alongside the adjusted IFRS 10

Income Statement to IFRS reconciliation.

The table below lists all the APMs used within

the Annual Report.

Read more on financial performance in the

Strategic Review on pages 101 to 119.

Read more on about the use of APMs in the

Discussion of Results on pages 94 to 96.

APM Purpose Calculation Reconciliation to IFRS

NAV per share The measure of per-share value of

Georgia Capital.

NAV per share is calculated as

NAV divided by the number of

outstanding shares at the end of

the period, i.e. issued shares at the

end of the period less unawarded

shares in management trust.

N/A

GCAP net operating income A measure to reflect performance

of the stand-alone GCAP and

evaluate cash generating capacity

on a holding company level.

GCAP net operating income

reflects the net result of: a)

dividend income accrual based

on paid or declared annual

dividend proceeds from portfolio

companies to be collected during

the year; b) interest income on

liquid funds and senior loans

issued; c) interest expenses on

debt incurred at GCAP level; d)

realised/unrealised gains or losses

on liquid assets; and e) operating

expenses incurred at GCAP level.

The equivalent balance under IFRS

and respective reconciliation are

shown in the reconciliation of the

Income Statement.

Total investment return A metric to measure the value

creation power of Georgia Capital

from its investments.

Fair value change of portfolio

companies (total investment return)

represents fair value changes in

the value of portfolio companies

during the reporting period, as

valued in the period-end NAV

Statement.

The equivalent balance under IFRS

and respective reconciliation are

shown in the reconciliation of the

Income Statement.

Net income A performance metric to measure

the value creation power of

Georgia Capital during the period.

Aggregation of GCAP net

operating income and total

investment return less GCAP gains

or losses from foreign exchange

movements.

The equivalent balance under IFRS

and respective reconciliation are

shown in the reconciliation of the

Income Statement.

EBITDA Management uses EBITDA as

a tool to measure the portfolio

companies’ operational

performance and the profitability

of those companies’ operations.

The Company considers EBITDA

to be an important indicator

of representative recurring

operations.

Earnings before interest, taxes,

non-recurring items, FX gain/

losses, depreciation and

amortisation.

N/A

Georgia Capital PLC Annual Report 2023

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

APM Purpose Calculation Reconciliation to IFRS

GCAP net debt A measure of the available cash

to invest in the business and an

indicator of the financial risk at

GCAP level.

Net debt is calculated at GCAP

level as follows: cash and liquid

funds plus loans issued less

gross debt; loans issued does not

include investment type mezzanine

loans (if any).

N/A

Net capital commitment (NCC)

ratio

A metric to measure Georgia

Capital’s balance sheet leverage.

NCC ratio is calculated at the

GCAP HoldCo level by dividing

NCC by total portfolio value. NCC

represents an aggregated view

of all confirmed, agreed, and

expected capital outflows at the

GCAP holding company level.

N/A

Internal rate of return (IRR) A metric to evaluate the historical

track record of investments.

IRR for investments is calculated

based on: a) historical

contributions to the investment;

less b) dividends received; and c)

market value of the investment.

N/A

Multiple of invested capital (MOIC) A measure to evaluate Georgia

Capital’s efficiency in allocating

capital.

MOIC is calculated as follows:

a) the numerator is the cash and

non-cash inflows from dividends

and sell-downs plus fair value of

investment at reporting date; and

b) the denominator is the gross

investment amount.

N/A

Return on invested capital (ROIC) To evaluate a company’s efficiency

at allocating the capital under its

control to profitable investments.

ROIC is calculated as EBITDA

less depreciation, divided by

aggregate amount of total equity

and borrowed funds.

N/A

Return on average total equity

(ROAE)

To measure the performance of a

company based on its average

shareholders’ equity outstanding.

ROAE equals profit for the period

attributable to shareholders

divided by monthly average equity

attributable to shareholders for the

same period.

N/A

Value creation/investment return To measure the annual

shareholder return on each

portfolio company for Georgia

Capital.

Aggregation of: a) change in

beginning and ending fair values;

b) gains from realised sales (if

any); and c) dividend income

during period. The net result is

then adjusted to remove capital

injections (if any) to arrive at the

total value creation/investment

return.

N/A

GCAP’s liquid funds A measure to evaluate the

Company’s liquidity.

Includes marketable debt

securities and issued loans.

N/A

Reconciliation of adjusted Income Statement to IFRS Income Statement

The table below reconciles the adjusted Income Statement to the IFRS Income Statement. Adjustments to reconcile adjusted Income Statement

with IFRS Income Statement mainly relate to eliminations of income, expense and certain equity movement items recognised at JSC Georgia Capital,

which are subsumed within gross investment (loss)/income in IFRS Income Statement of Georgia Capital PLC.

GEL thousands, unless otherwise noted (Unaudited)

Adjusted

IFRS income

statement Adjustment

IFRS income

statement

Dividend income 235,883 (188,224) 47,6 5 9

Interest income 16,642 (16,642) –

Realised/unrealised gain/(loss) on liquid funds / Loss on Eurobond buybacks (1,574) 1,574 –

Interest expense (47,808) 47,808 –

Gross operating income/(loss) 203,143 (155,484) 47,659

Operating expenses (administrative, salaries and other employee benefits) (36,779) 36,779 –

GCAP net operating income/(loss) 166,364 (118,705) 47,659

Total investment return/gain on investments at fair value 444,632 123,719 568,351

Administrative expenses, salaries and other employee benefits – (6,563) (6,563)

Income/(loss) before foreign exchange movements and non-recurring expenses 610,996 (1,549) 609,447

Net foreign currency gain/(loss) 6,491 ( 7,4 4 6 ) (955)

Non-recurring expenses (1,898) 1,898 –

Net gains from investments measured at fair value through profit or loss – 125 125

Net income/(loss) 615,589 (6,972) 608,617

Subtotals in the “Adjustment” columns may not add up as they provide a reconciliation to the statements with different structures and subtotals.

Retail (pharmacy) – Reconciliation to IFRS (2023)

GEL thousands, unless otherwise noted (Unaudited) Before IFRS 16 IFRS 16 effects After IFRS 16

Income Statement

Gross profit 244,322 – 244,322

Operating expenses (166,979) 30,286 (136,693)

EBITDA 77,343 30,286 107,62 9

Depreciation and amortisation (8,468) (26,620) (35,088)

Net interest (expense)/income (13,545) (8,543) (22,088)

Net (losses)/gains from foreign currencies (5,342) 16 (5,326)

Net non-recurring (expense)/income (3,567) – (3,567)

Profit before income tax expense 46,421 (4,861) 41,560

Income tax (expense)/benefit (807) – (807)

Profit for the year 45,614 (4,861) 40,753

Cash flow statement

Net cash flow from operating activities 52,361 30,500 82,861

Net cash flow used in investing activities (84,130) – (84,130)

Net cash flow from financing activities 17,686 (30,500) (12,814)

Exchange (losses)/gains on cash equivalents (813) – (813)

Total cash inflow (14,896) – (14,896)

Cash balance

Cash, beginning balance 75,279 – 75,279

Cash, ending balance 60,383 – 60,383

ALTERNATIVE PERFORMANCE MEASURES CONTINUED RECONCILIATION OF ADJUSTED IFRS MEASURES TO IFRS FIGURES

Georgia Capital PLC Annual Report 2023

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

Hospitals – Reconciliation to IFRS (2023)

GEL thousands, unless otherwise noted (Unaudited) Before IFRS 16 IFRS 16 effects After IFRS 16

Income Statement

Gross profit 104,616 – 104,616

Operating expenses (58,487) 966 (57, 5 21)

EBITDA 46,129 966 47,095

Depreciation and amortisation (31,886) (2,860) (34,746)

Net interest (expense)/income (30,345) (385) (30,730)

Net (losses)/gains from foreign currencies (1,144) (52) (1,19 6)

Net non-recurring (expense)/income (19,369) – (19,369)

Profit before income tax expense (36,615) (2,331) (38,946)

Income tax benefit/(expense) – – –

Profit for the year (36,615) (2,331) (38,946)

Cash flow statement

Net cash flow from operating activities 10,621 966 11,5 87

Net cash flow used in investing activities (44,74 6) – (44,746)

Net cash flow from financing activities 22,362 (966) 21,396

Exchange (losses)/gains on cash equivalents (2,041) – (2,041)

Total cash (outflow)/inflow from continuing operations (13,804) – (13,804)

Cash balance

Cash, beginning balance 23,557 – 23,557

Cash, ending balance 9,753 – 9,753

Clinics – Reconciliation to IFRS (2023)

GEL thousands, unless otherwise noted (Unaudited) Before IFRS 16 IFRS 16 effects After IFRS 16

Income Statement

Gross profit 24,550 – 24,550

Operating expenses (12,845) 1,841 (11,0 04)

EBITDA 11,705 1,841 13,546

Depreciation and amortisation (5,147) (1,117 ) (6,264)

Net interest (expense)/income (3,095) (804) (3,899)

Net (losses)/gains from foreign currencies (170) (42) (212)

Net non-recurring expense/(income) (266) – (266)

Profit before income tax expense 3,027 (122) 2,905

Income tax benefit/(expense) – – –

Profit for the year 3,027 (122) 2,905

Cash flow statement

Net cash flow from operating activities 8,214 1,841 10,055

Net cash flow used in investing activities (194) – (194)

Net cash flow used in financing activities ( 7,6 4 9 ) (1,841) (9,490)

Exchange (losses)/gains on cash equivalents (2) – (2)

Total cash inflow/(outflow) from continuing operations 369 – 369

Cash balance

Cash, beginning balance 3,892 – 3,892

Cash, ending balance 4,261 – 4,261

Equity investments in Georgia Capital’s portfolio companies are measured at fair values at each reporting date in accordance with IFRS 13 Fair Value

Measurement. Fair value, as defined in IFRS, is the price that would be received to sell an asset in an orderly transaction between market participants

at the measurement date.

Equity investments in listed and observable portfolio companies

Equity instruments listed on an active market are valued at the price within the bid/ask spread, that is most representative of fair value at the reporting

date, which usually represents the closing bid price. The instruments are included within Level 1 of the hierarchy in JSC GCAP financial statements.

Listed and observable portfolio also includes instruments for which there is a clear exit path from the business, e.g. through a put and/or call options

at pre-agreed multiples. In such cases, pre-agreed terms are used for valuing the company.

Equity investments in private portfolio companies

Large private portfolio companies – An independent third-party valuation firm is engaged to assess fair value ranges of large private portfolio

companies at the reporting date starting from 2020. The independent valuation company has extensive relevant industry and emerging markets

experience. Valuation is performed by applying several valuation methods including an income approach based mainly on DCF and a market

approach based mainly on listed peer multiples (the DCF and listed peer multiples approaches applied are described below for the other portfolio

companies). The different valuation approaches are weighted to derive a fair value range, with the income approach being more heavily weighted

than the market approach. Management selects the most appropriate point in the provided fair value range at the reporting date.

Investment stage portfolio companies – An independent third-party valuation firm is engaged to assess fair value ranges of investment stage

private portfolio companies at the reporting date starting from 30 June 2022. The independent valuation company has extensive relevant industry

and emerging markets experience. Valuation is performed by applying several valuation methods including an income approach based mainly on

DCF and a market approach based mainly on listed peer multiples (the DCF and listed peer multiples approaches applied are substantially identical

to those described below for the other portfolio companies). The different valuation approaches are weighted to derive a fair value range, with the

income approach being more heavily weighted than the market approach. Management selects what is considered to be the most appropriate point

in the provided fair value range at the reporting date.

Other portfolio companies – Fair value assessment is performed internally using one of the valuation methods described below.

Equity investments in private portfolio companies are valued by applying an appropriate valuation method, which makes maximum use of market-

based public information, is consistent with valuation methods generally used by market participants and is applied consistently from period to

period, unless a change in valuation technique would result in a more reliable estimation of fair value. The value of an unquoted equity investment is

generally crystallised through the sale or flotation of the entire business. Therefore, the estimation of fair value is based on the assumed realisation of

the entire enterprise at the reporting date. Recognition is given to the uncertainties inherent in estimating the fair value of unquoted companies and

appropriate caution is applied in exercising judgements and in making the necessary estimates.

Listed peer group multiples

This methodology involves the application of a listed peer group earnings multiple to the earnings of the business and is appropriate for investments

in established businesses and for which the Company can determine a group of listed companies with similar characteristics. The earnings multiple

used in valuation is determined by reference to listed peer group multiples appropriate for the period of earnings calculation for the investment being

valued. Peer group is identified for each equity investment taking into consideration points of similarity with the investment such as industry, business

model, size of the company, economic and regulatory factors, growth prospects (higher growth rate) and risk profiles. Some peer-group companies’

multiples may be more heavily weighted during valuation if their characteristics are closer to those of the company being valued than others. As a

rule of thumb, LTM earnings will be used for the purposes of valuation. Earnings are adjusted where appropriate for exceptional, one-off or otherwise

adjustable items.

a. Valuation based on enterprise value

Fair value of equity investments in private companies can be determined as their enterprise value less net financial debt (gross face value of debt

less cash) appearing in the most recent financial statements. Enterprise value is obtained by multiplying measures of a company’s earnings by the

listed peer group multiple (EV/EBITDA) for the appropriate period. The measures of earnings generally used in the calculation is recurring/adjusted

EBITDA for the last 12 months (LTM EBITDA). In exceptional cases, where EBITDA is negative, peer EV/Sales (enterprise value to sales) multiple can

be applied to last 12-month recurring/adjusted sales revenue of the business (LTM sales) to estimate enterprise value.

Once the enterprise value is estimated, the following steps are taken:

• Net financial debt appearing in the most recent financial statements is subtracted from the enterprise value. If net debt exceeds enterprise value,

the value of shareholders’ equity remains at zero (assuming the debt is without recourse to Georgia Capital).

• The resulting fair value of equity is apportioned between Georgia Capital and other shareholders of the company being valued, if applicable.

• Valuation based on enterprise value using peer multiples is used for businesses within non-financial industries.

b. Equity fair value valuation

Fair value of equity investment in companies can also be determined using the price to earnings (P/E) multiple of similar listed companies. The

measure of earnings used in the calculation is recurring/adjusted net income (net income adjusted for non-recurring items and FX gains/losses) for

the last 12 months (LTM net income). The resulting fair value of equity is allocated between Georgia Capital and other shareholders of the portfolio

company, if any. Fair valuation of equity using peer multiples can be used for businesses within the financial sector (e.g. insurance companies).

Discounted cash flow

Under the DCF valuation method, fair value is estimated by deriving the present value of the business using reasonable assumptions of expected

future cash flows and the terminal value, and the appropriate risk-adjusted discount rate that quantifies the risk inherent to the business. The

discount rate is estimated with reference to the market risk-free rate, a risk adjusted premium and information specific to the business or market

sector. Under the DCF analysis unobservable inputs are used, such as estimates of probable future cash flows and an internally-developed

discounting rate of return.

VALUATION METHODOLOGYRECONCILIATION OF ADJUSTED IFRS MEASURES TO IFRS FIGURES CONTINUED

101

Georgia Capital PLC Annual Report 2023

100

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

FINANCIAL REVIEW

Financial Performance Highlights (IFRS)

GEL thousands, unless otherwise noted (Unaudited)

Georgia Capital NAV overview Dec-23 Dec-22 Change

NAV per share, GEL 82.94 65.56 26.5%

NAV per share, GBP 24.23 20.12 20.4%

NAV

3,378,512 2,817,391 19.9%

Shares outstanding

40,736,528 42,973,462 -5.2%

Liquid assets and loans issued 117,122 438,674 -73.3%

NCC ratio

15.6% 21.1% -5.5 ppts

Georgia Capital performance

FY23 FY22 Change

Total portfolio value creation 680,515 34,073 NMF

of which, listed and observable portfolio 553,255 205,783 NMF

of which, private portfolio 127,26 0 (171,710) NMF

Investments

22,588 195,949 -88.5%

Buybacks

76,477 83,108 -8.0%

Dividend income 235,883 93,875 NMF

of which, recurring dividend income

179,822 93,875 91.6%

of which, one-off dividend income

56,061 – NMF

Net income 615,589 1,464 NMF

Private portfolio companies’ performance

1,8

FY23 FY22 Change

Large portfolio companies

Revenue 1,345,682 1, 274,794 5.6%

EBITDA 149,177 156,816 -4.9%

Net operating cash flow 92,381 148,082 -37.6%

Investment stage portfolio companies

Revenue 155,280 141,488 9.7%

EBITDA 54,666 51,699 5.7%

Net operating cash flow 50,609 53,132 -4.7%

Total portfolio

Revenue 2,073,903 1,900,700 9.1%

EBITDA 247, 55 6 243,293 1.8%

Net operating cash flow 135,466 206,047 -34.3%

Key Points

• NAV per share (GEL) up 26.5% y-o-y in FY23 to GEL 82.94 (up 20.4% y-o-y to GBP 24.23 in GBP terms), reflecting strong value creation across

our portfolio companies.

• Significant improvement of 5.5 ppts y-o-y in NCC ratio (15.6% as at 31 December 2023), resulting from a substantial decrease in net debt, strong

cash generation and continued growth in portfolio value.

• GEL 235.9 million dividend income from the portfolio companies in FY23, of which recurring dividend income was GEL 179.8 million. This

represents a significant increase compared to total dividend income of GEL 93.9 million in FY22.

• 1,665,000 shares repurchased in FY23 (total bought back and cancelled now at c.4.8% of issued capital since January 2023).

1 Please read more about APMs on pages 94-96. Private portfolio companies’ performance includes aggregated stand-alone IFRS results for our portfolio companies, which can

be viewed as APMs for Georgia Capital, since Georgia Capital does not consolidate its subsidiaries and instead measures them at fair value under IFRS.

2 See page 190 for the reconciliation of NAV to IFRS financial statements as at 31 December 2023.

3 Please see definition in glossary on page 206.

4 FY22 number includes the non-cash conversion of GEL 169.9 million loans issued to our private portfolio businesses into equity.

5 Includes both the buybacks under the share buyback and cancellation programme and for the management trust.

6 Includes regular cash and buyback dividends.

7 One-off dividend income in FY23 includes a non-recurring GEL 26.7 million dividend collected from the retail (pharmacy) business and GEL 29.4 million buyback dividend

attributable to participation in BoG’s 2022 share buybacks.

8 Private portfolio companies’ performance highlights are presented excluding the water utility business. Aggregated numbers are presented on a like-for-like basis.

9 The results of our four smaller businesses included in other portfolio companies (described on page 119) are not broken out separately. Performance totals, however, include the

other portfolio companies’ results (and are therefore not the sum of large and investment stage portfolio results).

Net asset value

The net assets (NAV) methodology involves estimating the fair value of equity investment in a private portfolio company based on its book value at the

reporting date. This method is appropriate for businesses (such as real estate) whose value derives mainly from the underlying value of its assets and

where such assets are already carried at their fair values (fair values determined by professional third-party valuation companies) on the balance sheet.

Price of recent investment

The price of a recent investment resulting from an orderly transaction, generally represents fair value as of the transaction date. At subsequent

measurement dates, the price of a recent investment may be an appropriate starting point for estimating fair value. However, adequate consideration

is given to the current facts and circumstances to assess at each measurement date whether changes or events subsequent to the relevant

transaction imply a change in the investment’s fair value.

Exit price

Fair value of a private portfolio company in a sales process, where the price has been agreed but the transaction has not yet settled, is measured at

the best estimate of expected proceeds from the transaction, adjusted pro-rata to the proportion of shareholding sold.

Validation

Fair value of investments estimated using the valuation methods described above is cross-checked using several other valuation methods as follows:

• Listed peer group multiples – peer multiples such as P/E, P/B and dividend yield are applied to respective metrics of the investment being valued

depending on the industry of the company. The Company develops fair value range based on these techniques and analyses whether the fair

value estimated above falls within this range.

• DCF – DCF valuation method is used to determine fair value of equity investment. Based on DCF, the Company might make the upward or

downward adjustment to the value of the valuation target as derived from the primary valuation method. If fair value estimated using DCF analysis

significantly differs from the fair value estimate derived using the primary valuation method, the difference is examined thoroughly, and judgement

is applied in estimating fair value at the measurement date.

• In line with our strategy, from time to time, we may receive offers from interested buyers for our private portfolio companies, which would be

considered in the overall valuation assessment, where appropriate.

Valuation of equity investments in private portfolio companies

The table below summarises fair valuation of equity investments in our private portfolio companies as at 31 December 2023.

GEL thousands

Valuation performed externally

or internally Valuation method Multiple applied Fair value

Large portfolio companies Externally 1,436,231

Retail (pharmacy) Externally DCF and EV/EBITDA 9.7x 714,001

Hospitals Externally DCF and EV/EBITDA 13.8x 344,356

Insurance Externally DCF and P/E 13.0x-11.0x 377,874

Investment stage portfolio companies Externally 566,614

Renewable energy Externally DCF and EV/EBITDA 12.6x ¹ 266,627

Education Externally DCF and EV/EBITDA 16.7x 189,226

Clinics and diagnostics Externally DCF and EV/EBITDA 11.7x

110,761

Other portfolio companies Internally EV/EBITDA, NAV and DCF 284,253

1 12.6x is the blended multiple for Hydrolea HPPs, Mestiachala HPP and Qartli WPP.

2 11.7x is the blended multiple for clinics and diagnostics businesses.

VALUATION METHODOLOGY CONTINUED

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Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

Discussion of Group results

The NAV Statement summarises the Group’s IFRS equity value (which we refer to as net asset value or NAV in the NAV Statement below) at the

opening and closing dates for the full year (31 December 2022 and 31 December 2023). The NAV Statement below breaks down NAV into its

components and provides a roll-forward of the related changes between the reporting periods.

GEL thousands, unless otherwise noted

(Unaudited) Dec-22

Value

creation

2a.

Investment

and

divestments

2b.

Buyback

2c.

Dividend

Operating

expenses

Liquidity/

FX/Other Dec-23 Change %

Listed and observable portfolio

companies

Bank of Georgia 830,463 549,255 – – (153,871) – – 1,225,847 47.6 %

Water utility 155,000 4,000 – – – – – 159,000 2.6%

Total listed and observable

portfolio value 985,463 553,255 – – (153,871) – – 1,384,847 40.5%

Listed and observable portfolio

value change % 56.1% 0.0% 0.0% -15.6% 0.0% 0.0% 40.5%

Private portfolio companies

Large companies 1,437,610 74,786 – – (76,825) – 660 1,436,231 -0.1%

Retail (pharmacy) 724,517 39,397 – – (50,904) – 991 714,001 -1.5%

Hospitals 433,193 (81,526) – – (6,018) – (1,293) 344,356 -20.5%

Insurance (P&C and medical) 279,900 116,915 – – (19,903) – 962 37 7,874 35.0%

of which, P&C insurance 228,045 71,447 – – (14,888) – 962 285,566 25.2%

of which, medical insurance 51,855 45,468 – – (5,015) – – 92,308 78.0%

Investment stage companies 501,407 47,044 18,388 – (5,187) – 4,962 566,614 13.0%

Renewable energy 224,987 38,684 6,218 – (5,187) – 1,925 266,627 18.5%

Education 164,242 12,282 12,170 – – – 532 189,226 15.2%

Clinics and diagnostics 112,178 (3,922) – – – – 2,505 110 ,761 -1.3%

Other companies 274,147 5,430 32 – – – 4,644 284,253 3.7%

Total private portfolio value 2,213,164 127,260 18,420 – (82,012) – 10,266 2,287,098 3.3%

Private portfolio value change % 5.8% 0.8% 0.0% -3.7% 0.0% 0.5% 3.3%

Total portfolio value (1) 3,198,627 680,515 18,420 – (235,883) – 10,266 3,671,945 14.8%

Total portfolio value change % 21.3% 0.6% 0.0% -7.4% 0.0% 0.3% 14.8%

Net debt (2) (380,905) – (20,887) (76,190) 235,883 (21,786) (32,923) (296,808) -22.1%

of which, cash and liquid funds 411,84 4 – (20,887) ( 76,190) 235,883 (21,786) (420,954) 107,910 -73.8%

of which, loans issued 26,830 – – – – – (17,618 ) 9,212 -65.7%

of which, gross debt (819,579) – – – – – 405,649 (413,930) -49.5%

Net other assets/(liabilities) (3) (331) – 2,467 (287) – (14,993) 16,519 3,375 NMF

of which, share-based comp. – – – – – (14,993) 14,993 – –

Net asset value (1)+(2)+(3) 2,817,391 680,515 – (76,477) – (36,779) (6,138) 3,378,512 19.9%

NAV change % 24.2% 0.0% -2.7% 0.0% -1.3% -0.2% 19.9%

Shares outstanding

42,973,462 – – (2,817,070) – – 5 80,136 40,736,528 -5.2%

NAV per share, GEL 65.56 15.84 0.00 2.70 0.00 (0.85) (0.30) 82.94 26.5%

NAV per share, GEL change % 24.2% 0.0% 4.1% 0.0% -1.3% -0.5% 26.5%

NAV per share (GEL) increased by 26.5% in FY23, reflecting a) GEL 680.5 million value creation across our portfolio companies with a positive 24.2

ppts impact, b) share buybacks (+4.1 ppts impact) and c) GEL’s appreciation against US$, resulting in a foreign currency gain of GEL 6.5 million on

GCAP net debt (+0.2 ppts impact). The NAV per share growth was slightly offset by management platform-related costs and net interest expense

with a negative 2.4 ppts impact in total.

1 Please see definition in glossary on page 206.

Portfolio overview

Total portfolio value increased by GEL 473.3 million (14.8%) in FY23:

• The value of GCAP’s holding in BoG was up by GEL 395.4 million, reflecting a robust GEL 549.3 million value creation, partially offset by

GEL 153.9 million dividend income from the Bank in FY23.

• The value of the water utility business increased by GEL 4.0 million, reflecting an increase in the put option valuation to GCAP’s 20% holding in the

business which was attributed in 2Q23.

• The value of the private portfolio increased by GEL 73.9 million in FY23, mainly reflecting the net impact of a) GEL 127.3 million value creation,

b) investments of GEL 22.6 million predominantly in the investment stage businesses and c) a decrease of GEL 82.0 million due to dividends paid

to G CA P.

1) Value creation

Total portfolio value creation amounted to GEL 680.5 million in FY23.

• A 52.6% increase in BoG’s share price, supported by a 5.1% appreciation of GBP against GEL in FY23, led to a GEL 549.3 million value creation.

• GEL 4.0 million value was created in our water utility business in FY23, as described above.

• The value creation in the private portfolio amounted to GEL 127.3 million in FY23, reflecting:

– GEL 87.6 million operating performance-related increase in the value of our private assets, resulting from the continued strong performance

of our private portfolio companies, partially subdued by the performance of the hospitals business, which has been impacted by the recently

introduced government regulations as described elsewhere in this report.

– GEL 39.7 million net impact from changes in implied valuation multiples

and foreign currency exchange rates.

The table below summarises value creation drivers in our businesses in FY23:

Portfolio businesses

Operating

performance

Greenfields/

buy-outs/

exits

Multiple

change

and FX

Value creation

GEL thousands, unless otherwise noted (Unaudited) (1) (2) (3) (1)+(2)+(3)

Listed and observable portfolio 553,255

BoG 549,255

Water Utility 4,000

Private portfolio 87,558 – 39,702 127,260

Large portfolio companies (52,946) – 127,732 74,786

Retail (pharmacy) 2,267 – 37,13 0 39,397

Hospitals (154,041) – 72,515 (81,526)

Insurance (P&C and Medical) 98,828 – 18,087 116,915

of which, P&C insurance 19,503 – 51,944 71,447

of which, medical insurance 79,325 – (33,857) 45,468

Investment stage portfolio companies 54,471 – (7,427) 47,044

Renewable energy 6,754 – 31,930 38,684

Education 15,165 – (2,883) 12,282

Clinics and diagnostics 32,552 – (36 ,474) (3,922)

Other portfolio companies 86,033 – (80,603) 5,430

Total portfolio 87,558 – 39,702 680,515

FINANCIAL REVIEW CONTINUED

1 Valuation multiples implied by dividing the final valuations of the business assigned as described under “Valuation overview” by the respective trailing 12-month EBITDA or net

income, as applicable.

2 Change in the fair value attributable to the change in actual or expected earnings of the business, as well as the change in net debt.

3 Greenfields and buy-outs represent the difference between fair value and acquisition price in the first reporting period in which the business/greenfield project is no longer valued

at acquisition price/cost. Exits represent the difference between the latest reported fair value and the value of the disposed asset (or assets in the process of disposal) assessed

at a transaction price.

4 Change in the fair value attributable to the change in valuation multiples and the effect of exchange rate movement on net debt.

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Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

The enterprise value and equity value development of our businesses in FY23 is summarised in the following table:

Enterprise value Equity value

GEL thousands, unless otherwise noted

(Unaudited) 31-Dec-23 31-Dec-22 Change % 31-Dec-23 31-Dec-22 Change %

% share in

total portfolio

Listed and observable portfolio 1,384,847 985,463 40.5% 37.7%

BoG 1,225,847 830,463 47.6% 33.4%

Water utility 159,000 155,000 2.6% 4.3%

Private portfolio 3,463,259 3,310,981 4.6% 2,287,098 2,213,164 3.3% 62.3%

Large portfolio companies 2,021,278 1,875,688 7. 8% 1,436,231 1,437,610 -0.1% 39.1%

Retail (pharmacy) 1,043,800 957,686 9.0% 714,001 724,517 -1.5% 19.4%

Hospitals 618,912 653,335 -5.3% 344,356 433,193 -20.5% 9.4%

Insurance (P&C and medical) 358,566 264,667 35.5% 37 7,874 279,900 35.0% 10.3%

of which, P&C insurance 285,566 228,045 25.2% 285,566 228,045 25.2% 7.8%

of which, medical insurance 73,000 36,622 99.3% 92,308 51,855 78.0% 2.5%

Investment stage portfolio companies 856,787 816,023 5.0% 566,614 501,407 13.0% 15.5%

Renewable energy 456,236 417,9 0 3 9.2% 266,627 224,987 18.5% 7. 3%

Education

228,799 218,264 4.8% 189,226 164,242 15.2% 5.2%

Clinics and diagnostics 171,752 179,856 -4.5% 110,761 112,178 -1.3% 3.0%

Other portfolio companies 585,194 619,270 -5.5% 284,253 274,147 3.7% 7.7%

Total portfolio 3,671,945 3,198,627 14.8% 100.0%

Private large portfolio companies (39.1% of total portfolio value)

Retail (pharmacy) (19.4% of total portfolio value) – the EV of retail (pharmacy) was up by 9.0% to GEL 1.0 billion in FY23, reflecting the

continued strong outlook of the business, driven by a significant expansion and ongoing optimisation of the retail chain (the business added 40

pharmacies and 11 franchise stores in FY23), as well as the resilience of the Georgian economy. FY23 revenue was up 4.3%, reflecting a) increased

sales of higher-margin para-pharmacy products and b) the chain expansion which had a positive impact on the revenue growth. The expansion also

led to an increase in operating expenses (up 8.2% y-o-y in FY23) due to increased rent and salary costs. This translated into a 0.5% y-o-y increase

in EBITDA (excl. IFRS 16) in FY23. See page 109 for details. Consequently, LTM EBITDA (incl. IFRS 16) was up by 2.0% to GEL 107.6 million in

FY23. Net debt (incl. IFRS 16) increased by GEL 176.3 million to GEL 322.2 million as at 31 December 2023, mostly reflecting increased borrowings

that partially financed the minority buyout transaction in June 2023. As a result, fair value of GCAP’s 97.6% holding decreased by 1.5% to GEL

714.0 million in FY23. The implied LTM EV/EBITDA valuation multiple (incl. IFRS 16) increased to 9.7x as at 31 December 2023 (up from 9.1x as of

31 December 2022).

Hospitals (9.4% of total portfolio value) – The EV of the hospitals business, which now also incorporates the community clinics that were

previously managed and presented as part of the clinics and diagnostics business, stood at GEL 618.9 million in FY23. The revenue of Large and

Specialty Hospitals was up by 2.9% y-o-y in FY23, reflecting resilient underlying performance at the seven hospitals comprising the business on

the back of the diversified range of services they offer, which enabled them to partially offset the impact of the new regulations, as detailed on

page 111 of this report. These new regulations had a more pronounced impact on our Regional and Community Hospitals (FY23 revenue was

down 4.5% y-o-y), as the 27 smaller facilities in this business offer services that are relatively more limited in scope than those of our Large and

Specialty Hospitals. Consequently, the combined revenue and EBITDA (excl. IFRS 16) of the hospitals business were up by 0.1% and down 18.7%

y-o-y, respectively, in FY23. In December 2023, the business signed an agreement to sell one of its regional and community hospitals for a total

consideration of GEL 34.6 million at 15.2x EV/EBITDA multiple. The proceeds from this transaction were collected in the beginning of 2024 and

were utilised for deleveraging the balance sheet of the business. The sale is in line with our strategy to divest low-ROIC generating assets. Taking

into account the disposal, LTM EBITDA (incl. IFRS 16) stood at GEL 44.8 million in FY23, and the net debt amounted to GEL 241.1 million. As a

result, the equity value of Hospitals stood at GEL 344.4 million in FY23, translating into an implied LTM EV/EBITDA multiple (incl. IFRS 16) of 13.8x at

31 December 2023.

Insurance (P&C and medical) (10.3% of total portfolio value) – The insurance business combines: a) P&C insurance valued at GEL 285.6

million and b) medical insurance valued at GEL 92.3 million.

P&C insurance – revenue was up by 21.0% y-o-y to GEL 116.9 million in FY23, mainly reflecting the growth in the motor and credit life insurance

lines. The combined ratio increased by 10.3 ppts y-o-y in FY23, attributable to the following factors: a) a 6.5 ppts y-o-y increase in the loss ratio

mainly due to the combined effect of an unprecedented landslide in one of the regions of Georgia and increased agricultural insurance claims due

to abnormal number of hailstorms during the year, b) a 1.7 ppts increase in expense ratio driven by increased salary expenses in line with business

growth and c) a 2.1 ppts y-o-y increase in FX ratio, reflecting the impact of FX movements on the business operations. Consequently, FY23 net

income decreased by 11.0% y-o-y to GEL 19.1 million. See page 113 for details. Pre-tax LTM net income was up by 3.5% to GEL 22.0 million in FY23.

The equity value of the P&C insurance business, which also reflects the application of the recently enforced Estonian Taxation Model, was assessed

at GEL 285.6 million at 31 December 2023 (up 25.2% y-o-y), translating into an implied LTM P/E valuation multiple of 13.0x at 31 December 2023 (up

from 10.6x at 31 December 2022).

Medical insurance – revenue increased by 22.0% y-o-y to GEL 91.3 million in FY23, reflecting the increase in the price of insurance policies and the

number of insured clients primarily in the corporate client segment. The combined ratio was at 94.8% in FY23 (down 4.7 ppts y-o-y), mainly resulting

from the well-managed loss and expense ratios (down 2.8 ppts and 1.9 ppts y-o-y, respectively), reflecting the robust revenue growth. Consequently,

the net income of the medical insurance business was up 91.8% y-o-y to GEL 6.5 million in FY23. See page 114 for details. Pre-tax LTM net income

was up 2.4 times y-o-y to GEL 8.4 million in FY23. As a result, the equity value of the business, which also reflects the application of the Estonian

Taxation Model, was assessed at GEL 92.3 million at 31 December 2023 (up 78.0% y-o-y), translating into the implied LTM P/E valuation multiple of

11.0x at 31 December 2023.

1 Excluding the recently launched schools and non-operational assets, added to the equity value of the education business at cost.

Private investment stage portfolio companies (15.5% of total portfolio value)

Renewable energy (7.3% of total portfolio value) – The EV of the business was up 9.7% to US$ 169.6 million in FY23 (up 9.2% to GEL 456.2

million in GEL terms), reflecting stable prospects of the business. In US Dollar terms, FY23 revenue and EBITDA were down by 0.9% and 7.1% y-o-y,

respectively, reflecting the net impact of a) a 5.3% y-o-y decrease in electricity generation in FY23 due to the previously planned phased rehabilitation

works of two power-generating units of Hydrolea HPPs, which were taken offline during November 2022 – June 2023 periods and b) a 4.6% y-o-y

increase in the average electricity selling price in FY23, driven by exports to Türkiye the effect of which is partially offset by export-related electricity

and transmission costs reflected in operating expenses. Revenue and EBITDA in GEL terms were down 9.8% and 15.3% y-o-y in FY23, respectively.

See page 115 for details. The pipeline renewable energy projects continued to be measured at an equity investment cost (GEL 56.2 million in

aggregate as at 31 December 2023). Net debt decreased by 1.3% to US$ 70.5 million in FY23 (down 1.7% y-o-y to GEL 189.6 million in GEL terms)

due to strong cash flow generation during the quarter. As a result, the equity value of renewable energy was assessed at GEL 266.6 million in FY23

(up 18.5% y-o-y), (up 19.1% y-o-y to US$ 99.1 million in US Dollar terms). The blended EV/EBITDA implied valuation multiple of the operational assets

stood at 12.6x as at 31 December 2023, up from 11.4x at 31 December 2022.

Education (5.2% of total portfolio value) – EV of the education business was up by 4.8% to GEL 228.8 million in FY23, reflecting the strong

operating performance of the business. Revenue in FY23 increased by 30.3% y-o-y resulting from a) organic growth through strong intakes and a

ramp-up of the utilisation and b) expansion of the business, which coupled with the overall inflation, also led to a 41.8% y-o-y increase in operating

expenses. See page 116 for details. Consequently, LTM EBITDA was up by 6.3% to GEL 13.7 million in FY23. Net debt was up by 1.1% y-o-y to

GEL 16.5 million in FY23, reflecting the capex investments for the expansion projects. As a result, GCAP’s stake in the education business was

valued at GEL 189.2 million at 31 December 2023 (up 15.2% y-o-y). This translated into the implied valuation multiple of 16.7x as at 31 December

2023. The forward-looking implied multiple is estimated at 10.5x for the 2024-2025 academic year.

Clinics and diagnostics (3.0% of total portfolio value) – In FY23, the EV of the clinics and diagnostics business was GEL 171.8 million. FY23

revenue and EBITDA of the combined clinics and diagnostics business were up by 8.9% and up GEL 7.3 million y-o-y, respectively. This growth

reflects the high demand for non-COVID services and the expansion of the business. See page 117 for details. Consequently, the LTM EBITDA (incl.

IFRS 16) of the business was GEL 14.7 million and the net debt stood at GEL 58.5 million in FY23. As a result, the equity value of the business was

assessed at GEL 110.8 million, translating into an implied LTM EV/EBITDA multiple (incl. IFRS 16) of 11.7x at 31 December 2023.

Other businesses (7.7% of total portfolio value) – Of the “other” private portfolio businesses, auto service and beverages (other than wine)

are valued based on LTM EV/EBITDA. Wine and housing development are valued based on DCF and hospitality is valued based on NAV. See

performance highlights of other businesses on page 119. The portfolio value of other businesses increased by 3.7% to GEL 284.3 in FY23, mainly

driven by the strong operating performance and improved prospects of our beverages and auto service businesses.

Listed and observable portfolio companies (37.7% of total portfolio value)

BoG (33.4% of total portfolio value) – In 2023, BoG delivered an annualised ROAE of 29.9% and a 20.0% loan book growth y-o-y

(on a constant currency basis, the loan portfolio increased by 19.6% y-o-y). In FY23, BoG’s share price was up by 52.6% y-o-y to GBP 39.8 at

31 December 2023, reflecting the strong growth in BoG’s earnings. In FY23, GCAP received GEL 153.9 million dividends, including a one-off

dividend of GEL 29.4 million from the participation in the Bank’s 2022 buybacks. As a result of the developments described above, the market value

of GCAP’s equity stake in BoG increased by 47.6% to GEL 1,225.8 million. The LTM P/E valuation multiple was at 4.3x at 31 December 2023 (2.8x at

31 December 2022). BoG’s public announcement of its FY23 results is available on https://bankofgeorgiagroup.com/results/earnings.

Water utility (4.3% of total portfolio value) – In FY23, the fair value of GCAP’s 20% holding in the water utility business (where GCAP has a

clear exit path through a put and call structure at pre-agreed EBITDA multiples) increased by GEL 4.0 million to GEL 159.0 million. This reflects

the application of the put option valuation to GCAP’s holding in the business. In December 2023, the Georgian National Energy and Water Supply

Regulatory Commission (“GNERC”), the independent body that regulates the GCAP’s water utility business, approved new tariffs for water supply

and sanitation (WSS) for the 2024-2026 regulatory period. The WSS tariffs for legal entities in Tbilisi increased from GEL 6.5 to GEL 8.8 per cubic

metre compared to the previous regulatory period of 2021-2023. WSS tariffs for residential customers remained unchanged.

2) Investments

In FY23, GCAP invested GEL 22.6 million in private portfolio companies.

• GEL 12.2 million was allocated to the education business, mainly for the acquisition of the new campus in the affordable segment and the

development of a new campus in the mid-scale segment.

• GEL 6.2 million was invested in the renewable energy business for the development of the pipeline projects.

• GEL 4.2 million was invested in the auto service business.

3) Share buybacks

During FY23, 2,817,070 shares were bought back for a total consideration of GEL 76.5 million.

• 1,665,222 shares with a total value of US$ 18.3 million (GEL 47.9 million) were bought back under GCAP’s share buyback and cancellation

programmes during 2023.

• 1,151,848 shares were repurchased for the management trust for a total consideration of GEL 28.6 million, fully securing the management trust in

the form of unawarded shares for the next three years.

FINANCIAL REVIEW CONTINUED

1 Investments are made at JSC Georgia Capital level, the Georgian holding company.

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Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

4) Dividends

In FY23, Georgia Capital recorded GEL 235.9 million dividend income from its portfolio companies:

Dividend income

GEL million (Unaudited) Recurring One-off Total

BoG 124.5 29.4 153.9

of which, cash dividends 80.5 – 80.5

of which, buyback dividends 44.0 29.4 73.4

Retail (pharmacy) 24.2 26.7 50.9

Insurance 19.9 – 19.9

of which, P&C insurance 14.9 – 14.9

of which, medical insurance 5.0 – 5.0

Hospitals 6.0 – 6.0

Renewable energy 5.2 – 5.2

Total 179.8 56.1 235.9

A one-off dividend of GEL 29.4 million from BoG, represents the participation in the Bank’s 2022 buybacks in FY23. GEL 26.7 million one-off

dividend was collected from the retail (pharmacy) business, following the minority buyout transaction in 3Q23.

Net Capital Commitment overview

Below we describe the components of NCC as of 31 December 2023. NCC represents an aggregated view of all confirmed, agreed and expected

capital outflows at GCAP HoldCo level.

Components of NCC

GEL thousands, unless otherwise noted (Unaudited) 31-Dec-23 31-Dec-22 Change

Cash at banks 72,12 2 235,255 -69.3%

Liquid funds 35,788 176,589 -79.7%

of which, internationally listed debt securities 18,254 173,395 -89.5%

of which, locally listed debt securities 17,534 3 ,194 NMF

Total cash and liquid funds 107,910 411,844 -73.8%

Loans issued 9,212 26,830 -65.7%

Gross debt (413,930) (819,579) -49.5%

Net debt (1) (296,808) (380,905) -22 .1%

Guarantees issued (2) – (18,460) NMF

Net debt and guarantees issued (3)=(1)+(2) (296,808) (399,365) -25.7%

Planned investments (4) (125,14 3) (141,396) -11.5%

of which, planned investments in renewable energy (77,637 ) (81,205) -4.4%

of which, planned investments in education (47, 5 0 6) (60,191) -21.1%

Announced buybacks (5) (18,087) – NMF

Contingency/liquidity buffer (6) (134,470) (135,100) -0.5%

Total planned investments, announced buybacks and contingency/

liquidity buffer (7)=(4)+(5)+(6) (277,700) (276,496) 0.4%

Net capital commitment (3)+(7) (574,508) (675,861) -15.0%

Portfolio value 3,671,945 3,198,627 14.8%

NCC ratio 15.6% 21.1% -5.5 ppts

Cash and liquid funds. The total cash and liquid funds’ balance in FY23 decreased by 73.8%, which mostly reflects the use of funds for

redemption of GCAP’s Eurobonds in 2023.

Loans issued. Issued loans’ balance primarily refers to loans issued to our private portfolio companies and are lent at market terms. The FY23

balance was down by GEL 17.6 million, mainly reflecting the loan repayments from the hospitality and auto service businesses.

Gross debt. In US Dollar terms, the FY23 gross debt balance was down by 49.3%, representing the full redemption of US$ 300 million GCAP

Eurobonds and the issuance of US$ 150 million SLB in 2023.

Guarantees issued. The balance reflected GCAP’s guarantee on the borrowing of the beer business, which was reduced to zero in 2023, leaving

no outstanding guarantees.

Planned investments. Planned investments’ balance represents expected investments in the renewable energy and education businesses over the

next two to three years. The balance in US Dollar terms decreased by 11.1% in FY23, due to the investments made in these businesses, as described

above (the balance in GEL terms was down 11.5% in FY23).

1 Dividends are received at JSC Georgia Capital level, the Georgian holding company.

Announced buybacks. The balance of the announced buybacks at 31 December 2023 reflects the unutilised share buybacks under GCAP’s US$

15 million share buyback and cancellation programme.

Contingency/liquidity buffer. The balance reflects the cash and liquid assets in the amount of US$ 50 million, held by GCAP at all times, for

contingency/liquidity purposes. The balance remained unchanged in US$ terms as at 31 December 2023.

As a result of the movements described above, NCC was down by 15.0% y-o-y to GEL 574.5 million (US$ 213.6 million) which, together with the

14.8% increase in the portfolio value translated into a 15.6% NCC ratio as at 31 December 2023 (down by 5.5 ppts y-o-y).

Income Statement (adjusted IFRS / APM)

Net income under IFRS was GEL 608.6 million in FY23 (GEL 12.2 million net loss in FY22). The IFRS Income Statement is prepared on the Georgia

Capital PLC level and the results of all operations of the Georgian holding company JSC Georgia Capital are presented as one line item. As we

conduct almost all of our operations through JSC Georgia Capital, through which we hold all of our portfolio companies, the IFRS results provide little

transparency on the underlying trends.

Accordingly, to enable a more granular analysis of those trends, the following adjusted Income Statement presents the Group’s results of operations

for the period ending 31 December 2023 as an aggregation of (i) the results of GCAP (the two holding companies Georgia Capital PLC and JSC

Georgia Capital, taken together) and (ii) the fair value change in the value of portfolio companies during the reporting period. For details on the

methodology underlying the preparation of the adjusted Income Statement, please refer to pages 94-96 of this report. A full reconciliation of the

adjusted Income Statement to the IFRS Income Statement is provided on page 97.

GEL thousands, unless otherwise noted (Unaudited) FY23 FY22 Change

Dividend income 235,883 93,875 NMF

of which, regular dividend income 162,527 93,875 73.1%

of which, buyback dividend income 73,356 – NMF

Interest income 16,642 32,955 -49.5%

Realised/unrealised gain/(loss) on liquid funds / Gain/(Loss) on GCAP Eurobond buybacks (1,574) (2,717) -41.2%

Interest expense (47,808) (69,774) -31.5%

Gross operating income 203,143 54,339 NMF

Operating expenses (36,779) (39,996) -8.0%

GCAP net operating income 166,364 14,343 NMF

Fair value changes of portfolio companies

Listed and observable portfolio companies 399,384 164,885 NMF

of which, Bank of Georgia 395,384 149,277 NMF

of which, water utility 4,000 15,608 -74.4%

Private portfolio companies 45,248 (224,687) NMF

Large portfolio companies (2,039) (115,511) -98.2%

of which, retail (pharmacy) (11, 5 07) 14 ,132 NMF

of which, hospitals (87,5 4 4) (140,622) - 37.7%

of which, insurance (P&C and medical) 97,012 10,979 NMF

Investment stage portfolio companies 41,857 5,072 NMF

of which, renewable energy 33,497 22,846 46.6%

of which, education 12,282 28,052 -56.2%

of which, clinics and diagnostics (3,922) (45,826) -91.4%

Other businesses 5,430 (114,248) NMF

Total investment return 444,632 (59,802) NMF

Income/(loss) before foreign exchange movements and non-recurring expenses 610,996 (45,459) NMF

Net foreign currency gain 6,491 47, 55 0 -86.3%

Non-recurring expenses (1,898) (627) NMF

Net income 615,589 1,464 NMF

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108

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

The gross operating income stood at GEL 203.1 million in FY23, reflecting robust dividend income, further supported by a decrease in interest

expenses due to significant deleveraging progress in 2023.

The components of GCAP’s operating expenses are shown in the table below.

GCAP operating expenses components

GEL thousands, unless otherwise noted (Unaudited) FY23 FY22 Change

Administrative expenses

(10,909) (11,779) -7.4%

Management expenses – cash-based

(10,877) (9,741) 11.7%

Management expenses – share-based

(14,993) (18,476) -18.9%

Total operating expenses (36,779) (39,996) -8.0%

of which, fund type expense

(9,667) (11,33 4) -14.7%

of which, management fee type expenses

(27,112) (28,662) -5.4%

GCAP management fee expenses starting from 2024 have a self-targeted cap of 0.75% of Georgia Capital’s NAV. The LTM management fee

expense ratio was 0.80% at 31 December 2023 (1.02% as of 31 December 2022).

Total investment return represents the increase (decrease) in the fair value of our portfolio. Total investment return was GEL 444.6 million in FY23, mostly

reflecting the changes in the value of our portfolio companies, as described earlier in this report. We discuss valuation drivers for our businesses on

pages 104-105. The performance of each of our private large and investment stage portfolio companies is discussed on pages 109-119.

GCAP’s net foreign currency liability balance amounted to US$ 130 million (GEL 350 million) at 31 December 2023. As a result of the movements

described above, GCAP’s adjusted IFRS net income was GEL 615.6 million in FY23.

Discussion of the Statement of Cash Flows

The 2023 IFRS Statement of Cash Flows is prepared at the Georgia Capital PLC level and does not include JSC Georgia Capital’s cash flows, since

JSC Georgia Capital is measured at fair value under IFRS 10. Net cash flow used in operating activities was GEL 6.2 million in 2023 (GEL 9.8 million

in 2022), reflecting salaries and general and administrative expenses paid at the Georgia Capital PLC level. Net cash flow from investing activities was

GEL 44.3 million in 2023 (GEL 87.2 million in 2022), reflecting the net impact of purchase of redeemable securities and dividends received. Net cash

flow used in financing activities was GEL 48.0 million in 2023 (GEL 54.6 million in 2022), mainly reflecting the purchases of treasury shares. The IFRS

Statement of Cash Flows is included on page 175 of this report.

1 Includes expenses such as external audit fees, legal counsel, corporate secretary and other similar administrative costs.

2 Cash-based management expenses are cash salary and cash bonuses paid/accrued for staff and management compensation.

3 Share-based management expenses are share salary and share bonus expenses of management and staff.

4 Fund type expenses include expenses such as audit and valuation fees, fees for legal advisors, Board compensation and corporate secretary costs.

5 Management fee is the sum of cash-based and share-based operating expenses (excluding fund-type costs).

Discussion of portfolio companies’ results (stand-alone IFRS)

The following sections present the IFRS results and business development extracted from the individual portfolio company’s IFRS accounts for large

and investment stage entities, where the 2023 portfolio company’s accounts and respective IFRS numbers are unaudited. We present key IFRS

financial highlights, operating metrics and ratios along with commentary explaining the developments behind the numbers. For the majority of our

portfolio companies, the fair value of our equity investment is determined by the application of an income approach (DCF) and a market approach

(listed peer multiples and precedent transactions). Under the DCF valuation method, fair value is estimated by deriving the present value of the

business using reasonable assumptions of expected future cash flows and the terminal value, and the appropriate risk-adjusted discount rate that

quantifies the risk inherent to the business. Under the market approach, listed peer group earnings multiples are applied to the LTM stand-alone IFRS

earnings of the relevant business. As such, the stand-alone IFRS results and developments driving the IFRS earnings of our portfolio companies are

key drivers of their valuations within GCAP’s financial statements. See pages 94-100 for more background.

Large portfolio companies

Discussion of retail (pharmacy) business results

The retail (pharmacy) business, where GCAP owns a 97.6% equity interest, is the largest pharmaceuticals retailer and wholesaler in Georgia,

with a 32% market share based on the 2022 revenues. The business consists of a retail pharmacy chain and a wholesale business that sells

pharmaceuticals and medical supplies to hospitals and other pharmacies. The business operates a total of 412 pharmacies (of which 397 are in

Georgia and 15 in Armenia) and 23 franchise stores (of which, two are in Armenia and four in Azerbaijan).

FY23 performance (GEL thousands), retail (pharmacy)

(Unaudited)

Income Statement highlights FY23 FY22 Change

Revenue, net 823,692 789,893 4.3%

of which, retail 653,960 620,936 5.3%

of which, wholesale 169,732 168,957 0.5%

Gross profit 244,322 231,270 5.6%

Gross profit margin 29.7% 29.3% 0.4 ppts

Operating expenses (ex. IFRS 16) (166,979) (154,343) 8.2%

EBITDA (ex. IFRS 16) 77,343 76,927 0.5%

EBITDA margin (ex. IFRS 16) 9.4% 9.7% -0.3 ppts

Net loss/profit (ex. IFRS 16) 45,614 58,605 -22.9%

Cash flow highlights

Cash flow from operating activities (ex. IFRS 16) 52,361 77,099 -32.1%

EBITDA to cash conversion 67.7 % 100.2% -32.5 ppts

Cash flow used in investing activities

(84,130) (58,367) 44.1%

Free cash flow, (ex. IFRS 16)

(56,130) 15,016 NMF

Cash flow from financing activities (ex. IFRS 16) 17,686 3,392 NMF

Balance sheet highlights 31-Dec-23 31-Dec-22 Change

Total assets 631,218 576,060 9.6%

of which, cash and bank deposits 60,383 75,279 -19.8%

of which, securities and loans issued 2,623 22,857 -88.5%

Total liabilities 597,611 515,081 16.0%

of which, borrowings 228,261 131,547 73.5%

of which, lease liabilities 151,916 107,4 5 5 41.4%

Total equity 33,607 60,979 -44.9%

Income Statement highlights

• The y-o-y increase in retail revenues in FY23 was driven by a combination of factors:

– The expansion of the pharmacy chain and franchise stores – the business added 40 pharmacies and 11 franchise stores over the last

12 months.

– Increased focus on higher margin para-pharmacy product sales – the para-pharmacy revenue as a percentage of retail revenue increased

from 36.5% in FY22 to 39.7% in FY23.

– Overall economic growth in Georgia.

– The revenue growth was partially subdued by a) implementation of the ERP model, which sets a maximum retail price for state-financed

prescription medicines. The list of regulated products was further expanded in November 2023 (detailed in other valuation drivers

and operating highlight section below) and b) a decrease in product prices due to the appreciation of GEL against foreign currencies

(as approximately 70% of inventory purchases are denominated in foreign currencies).

– The increase in operating expenses in FY23 reflects increased rent and salary expenses in line with the substantial expansion of the pharmacy

chain and franchise stores during the year. In FY23 the business maintained the EBITDA margin (excluding IFRS 16) at 9.4%, above the

targeted threshold of 9%, and we expect the investments in the recently opened stores to deliver a substantial increase in business revenues

in the coming quarters as customer traffic gradually increases.

• The significant y-o-y increase in interest expense (excluding IFRS 16) in FY23 is due to the higher average net debt balance, as explained below.

• The developments described above translated into a 22.9% y-o-y decrease in FY23 net profit (excluding IFRS 16).

1 The detailed IFRS financial statements are included in a supplementary excel file, available at https://georgiacapital.ge/ir/financial-results. See reconciliation to IFRS 16 on

page 97.

2 Of which – cash outflow on capex of GEL 34.0 million in FY23 (GEL 20.9 million in FY22); cash outflow on minority acquisition; proceeds from sale of personal protective

equipment (PPE) of GEL 14.6 million in FY23 (none in FY22).

3 Calculated by deducting capex and minority acquisition from operating cash flows and adding proceeds from sale of PPE.

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Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

Cash flow and balance sheet highlights

• The net debt balance was up by GEL 131.8 million y-o-y to GEL 165.3 million as at 31 December 2023, mostly reflecting increased borrowings

that partially financed the minority buyout transaction in June 2023.

• The EBITDA-to-cash conversion ratio was at 67.7% in FY23, reflecting the business’s strategy of making advance payments to key vendors to

secure substantial supplier discounts for high-volume inventory purchases.

• GEL 50.9 million dividends were paid to GCAP in FY23.

Other valuation drivers and operating highlights

• Effective from 2023, the Government introduced two new quality regulations: i) Good Manufacturing Practice (GMP) and ii) Good Distribution

Practice (GDP). These regulations establish the minimum standards that medicine distributors must meet to ensure the quality and integrity of

medicines throughout the supply chain. Compliance with GMP and GDP ensures that medicines are consistently stored under the appropriate

conditions, including during transportation, to prevent contamination. The implementation of the new standards resulted in the closure of several

of our partner small pharmacies, leading to a reduction in revenues and gross profit. In FY23, the wholesale business revenue was affected by

GEL 21.4 million, while the effect on gross profit was GEL 5.0 million in FY23. To meet the requirements the business incurred additional capex of

GEL c.4.0 million in FY23.

• In November 2023, the state announced the third wave of price regulations under the ERP model, affecting both prescription and non-

prescription medicine. The new prices, aligned with these latest regulations, took effect from January 2024. Overall, the anticipated impact

of these price regulations on the 2024-year EBITDA is estimated at negative GEL 8.0 million. In response to these regulatory challenges, the

business’s strategic focus lies in the optimisation of the chain and increasing the share of para-pharmacy products in sales, which remain

unaffected by regulations.

• In December 2023, the Georgian National Competition Agency (the “Agency”) imposed fines on four companies in the Georgian pharmaceutical

retailers’ sector, including GCAP’s retail (pharmacy) business, for alleged anti-competitive actions related to price quotations on certain

prescription medicines funded under the state programme. The penalty amount assessed by the Agency on our retail (pharmacy) business is

GEL 20.0 million derived by utilising the single rate across all the alleged participants. We have since appealed the Agency’s decision in court and

plan to vigorously defend our position.

• The number of pharmacies and franchise stores is provided below:

(Unaudited) Dec-23 Dec-22 Change (y-o-y)

Number of pharmacies 412 372 40

of which, Georgia 397 362 35

of which, Armenia 15 10 5

Number of franchise stores 23 12 11

of which, Georgia 17 8 9

of which, Armenia 2 2 –

of which, Azerbaijan 4 2 2

• Retail (pharmacy)’s key operating performance highlights for FY23 are noted below:

Key metrics (Unaudited) FY23 FY22 Change

Same store revenue growth 0.4% -0.8% 1.2 ppts

Number of bills issued (million) 31.3 31.0 0.8%

Average bill size (GEL) 19.8 19.0 4.5%

Discussion of hospitals business results

The hospitals business, where GCAP owns a 100% equity, is the largest healthcare market participant in Georgia, comprised of seven Large and

Specialty Hospitals, providing secondary and tertiary level healthcare services across Georgia and 27 Regional and Community Hospitals, providing

outpatient and basic inpatient services.

FY23 performance (GEL thousands), hospitals

(Unaudited)

Income Statement highlights FY23 FY22 Change

Revenue, net

313,748 313,407 0.1%

Gross profit 104,616 114,460 -8.6%

Gross profit margin 32.8% 36.0% -3.2 ppts

Operating expenses (ex. IFRS 16) (58,487) ( 5 7,70 4) 1.4%

EBITDA (ex. IFRS 16) 46,129 56,756 -18.7%

EBITDA margin (ex. IFRS 16) 14.5% 17. 8% -3.3 ppts

Net (loss) (ex. IFRS 16)

(36,615) (1,566) NMF

Cash flow highlights

Cash flow used in operating activities (ex. IFRS 16) 10,621 31,730 -66.5%

EBITDA to cash conversion (ex. IFRS 16) 23.0% 55.9% -32.9 ppts

Cash flow used in investing activities

(44,746) (17,443) NMF

Free cash flow (ex. IFRS 16)

(35,069) 12,855 NMF

Cash flow from financing activities (ex. IFRS 16) 22,362 (35,786) NMF

Balance sheet highlights 31-Dec-23 31-Dec-22 Change

Total assets 707,614 680,355 4.0%

of which, cash balance and bank deposits 9,753 23,557 -58.6%

of which, securities and loans issued 9,557 14,040 -31.9%

Total liabilities 357,658 293,983 21.7%

of which, borrowings 281,352 227, 9 60 23.4%

Total equity 349,956 386,372 -9.4%

The FY23 performance of the hospitals business reflects the impact of the recently introduced facility regulation rules, implemented to address the

oversupply of beds and enhance the quality of the healthcare industry in the country. This regulation, which became effective from September 2023,

established upgraded standards for healthcare facilities and imposed minimum requirements for space allotted per hospital bed. In order to adapt

to the new standards, our hospitals business initiated a number of renovation projects in all of its facilities. This resulted in certain sections of our

healthcare facilities being temporarily closed and unable to accept patients. Most renovation works took place throughout the second half of 2023,

with most of the work being completed by the end of November. The capex investment for the renovation projects amounted to GEL 11.3 million

in 2023. The negative annualised impact of increased expenses that will result from additional requirements is estimated at GEL c.4.0 million. We

believe that this new regulation’s mandate of higher quality healthcare facilities in Georgia offers an opportunity to build on the competitive advantage

of our high-quality healthcare businesses in the medium to long term.

To capture emerging opportunities in the healthcare sector and enhance operational efficiencies, our healthcare businesses underwent strategic

restructuring. The hospitals business was split into two distinct segments: “Large and Specialty Hospitals” and “Regional and Community Hospitals”.

The Regional and Community Hospitals now also incorporate the community clinics that were previously managed and presented as part of the clinics

and diagnostics business. For our patients, the transition was seamless and business operations continued uninterrupted. A new CEO from a local

competitor joined the Regional and Community Hospitals business in December to focus on the service and efficiency from this group of hospitals.

Income Statement highlights

• In FY23, the Large and Specialty Hospitals and Regional and Community Hospitals represent approximately 65% and 35%, respectively, of the

consolidated hospitals business revenue.

Total revenue breakdown (Unaudited) FY23 FY22 Change

Total revenue, net 313,748 313,407 0.1%

of which, Large and Specialty Hospitals 204,690 198,883 2.9%

of which, Regional and Community Hospitals 110,551 115 ,768 -4.5%

of which, inter-business eliminations (1,493) (1,244) 20.0%

1 The numbers were adjusted retrospectively to account for the recent strategic reorganisation in the healthcare businesses.

2 The detailed IFRS financial statements are included in a supplementary excel file, available at https://georgiacapital.ge/ir/financial-results. See reconciliation to IFRS 16 on

page 98.

3 Net revenue – Gross revenue less corrections and rebates. Margins are calculated from gross revenue.

4 FY22 figure is adjusted for a GEL 2.7 million loss from the sale of the Traumatology Hospital.

5 Of which – capex of GEL 48.5 million in FY23 (GEL 27.6 million in FY22).

6 Operating cash flows less capex, plus net proceeds on sale of PPE.

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Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

• The FY23 revenue of Large and Specialty Hospitals was up by 2.9% y-o-y. This growth reflects the following factors:

– The resilient underlying performance of the hospitals and their ability to offer a diversified range of services, partially offsetting the impact

of the new facility regulations.

– The COVID-related inflation of 2022 revenue as the Government contracts continued through mid-March 2022.

– The absence of revenues from the Traumatology Hospital, which was divested in April 2022.

• Our Regional and Community Hospitals primarily concentrate on delivering outpatient and basic inpatient services, which are smaller and offer

services relatively more limited in scope than the services provided by our Large and Specialty Hospitals. The works and related facilities closures

mandated by the new regulations therefore had a more pronounced impact on this group of hospitals in terms of revenue growth (down 4.5%

y-o-y in FY23).

• The cost of services in the business consists mainly of salaries, materials and utilities. Trends in salary and materials costs are captured in the

direct salary and materials rates

– The direct salary rates were up 3.2 ppts y-o-y to 39.6% in FY23, mainly attributable to increased minimum salary rates for medical staff.

– The materials rate was down 0.5 ppts y-o-y to 17.2% in FY23.

– Utilities and other costs were up 4.5% in FY23, resulting from overall inflation.

• As a result of the developments described above, FY23 gross profit margin was down 3.2 ppts y-o-y.

• Operating expenses, mainly comprising administrative salaries and other employee benefits and general and administrative expenses (excl. IFRS

16), were largely flat (up 1.4% y-o-y in FY23).

• The developments described above translated into 18.7% y-o-y decrease in EBITDA (excluding IFRS 16) in FY23.

Total EBITDA (excl. IFRS 16), breakdown (Unaudited) FY23 FY22 Change

Total EBITDA (excl. IFRS 16) 46,129 56,756 -18.7%

of which, Large and Specialty Hospitals 34,339 35,915 -4.4%

of which, Regional and Community Hospitals 11,79 0 20,841 -43.4%

• Net interest expense (excluding IFRS 16) was up 36.3% y-o-y in FY23, reflecting the increased net debt balance (as described below) and

increased interest rates on the market.

• The business posted a net loss (excluding IFRS 16) of GEL 36.6 million in FY23, which reflects a GEL 18.6 million one-off costs associated with

the write-off of historic receivables due to their extremely low probability of recovery.

Cash flow and balance sheet highlights

• Net debt balance was up 37.7% y-o-y as at 31 December 2023, mainly resulting from high capex investments associated with new facility

regulation. The y-o-y increase in the net debt balance further reflects the delay in the collection of receivables from the State in 2023 due to one-

off processing delays related to the introduction of the Diagnosis Related Group (“DRG”) financing system.

• Capex investment was GEL 48.5 million in FY23, reflecting maintenance and capex related to the new facility regulation at hospitals and

renovation works in Iashvili Hospital.

• In December 2023, the business signed an agreement to sell one of its Regional and Community Hospitals for a total consideration of GEL

34.6 million at 15.2x EV/EBITDA multiple. The proceeds from this transaction were collected in January 2024 and were primarily utilised for

deleveraging hospitals business’s balance sheet. The sale is in line with the business’s strategy to divest low-ROIC generating assets.

Other valuation drivers and operating highlights

• The business key operating performance highlights for FY23 are noted below:

Key metrics (Unaudited) FY23 FY22 Change

Number of admissions (thousands) 1,46 8.1 1,640.2 -10.5%

of which, Large and Specialty Hospitals 599.9 614.7 -2.4%

of which, Regional and Community Hospitals 868.2 1,025.5 -15.3%

Occupancy rates:

Large and Specialty Hospitals 53.5% 55.5% -2.0 ppts

Regional and Community Hospitals 49.4% 46.4% 3.0 ppts

The decrease in the number of admissions in FY23 reflects the renovation works in our hospitals as described above.

1 The respective costs divided by gross revenues.

Discussion of insurance (P&C and medical) business results

The insurance business comprises a) property and casualty (P&C) insurance business and b) medical insurance business. The P&C insurance

business is a leading player in the local insurance market with a 30% market share in property and casualty insurance based on gross premiums as

of 30 September 2023. P&C also offers a variety of non-property and casualty products, such as life insurance. The medical insurance business is

one of the country’s largest private health insurers, with a 19% market share based on 9M23 net insurance premiums. Medical insurance offers a

variety of health insurance products primarily to corporate and (selectively) to state entities and also to retail clients in Georgia. GCAP owns a 100%

equity stake in both insurance businesses.

FY23 performance (GEL thousands), insurance (P&C and medical)

(Unaudited)

Income Statement highlights FY23 FY22 Change

Insurance revenue 208,243 171,540 21.4%

Net underwriting profit 53,829 51,644 4.2%

Net investment profit 14,272 9,809 45.5%

Net profit 25,626 24,866 3.1%

Cash flow highlights

Net cash flows from operating activities 33,687 42,443 -20.6%

Free cash flow 28,821 39,275 -26.6%

Balance sheet highlights 31-Dec-23 31-Dec-22 Change

Total assets 248,906 217,373 14.5%

Total equity 130,538 121,486 7.5%

• In January 2024, our medical insurance business signed a MOU to acquire the portfolio of medical insurance contracts and the brand name

from “Ardi”, the third-largest player in the health insurance market with a 17% market share based on 9M23 net insurance premiums. Upon the

successful completion of this transaction, the combined market share of our medical insurance business will make it the largest health insurer in

the country. Ardi’s portfolio is concentrated in the upscale segment category, presenting an opportunity to further diversify our health insurance

portfolio and achieve significant synergies from both financial and strategic perspectives. The total cash outflow for this transaction amounts

to GEL 27 million, which will be fully financed by the funds available in our medical insurance business, with no cash investments required from

GCAP. Following this acquisition, the insurance business will operate under three brand names: Aldagi, Imedi L and Ardi, all of which will be

managed under GCAP.

• The Georgian insurance sector has adopted the Estonian Taxation Model, which came into force at the beginning of 2024. Before this change, a

15% corporate income tax was applied to the pre-tax profit of insurance businesses. With the Estonian Taxation Model, a 15% corporate income

tax is now applied only to earnings distributed to individuals or non-resident legal entities. As a result, GCAP’s insurance businesses are no longer

subject to corporate income tax payments, freeing up resources for both business development and enhanced dividend payments to GCAP.

• In 2023, the P&C and medical insurance businesses adopted the IFRS 17 Insurance Contracts accounting standard. Comparative periods were

also retrospectively restated.

Total insurance business highlights

P&C and medical insurance had a broadly equal share in total revenues in FY23, while the FY23 combined net profit was mainly attributable to P&C

insurance (74.6% share in total net profit in FY23). The loss ratio was up by 2.5 ppts, the expense ratio was up by 0.1 and the FX ratio was up by 1.2

ppts y-o-y in FY23, translating into 3.8 ppts y-o-y increase in the combined ratio in FY23. As a result, ROAE

was 22.0% in FY23 (23.5% in FY22).

Discussion of results, P&C insurance

(Unaudited)

Income Statement highlights FY23 FY22 Change

Insurance revenue 116,912 96,648 21.0%

Net underwriting profit 37,70 0 41,011 -8.1%

Net investment profit 9,824 5,915 66.1%

Net profit 19,109 21,469 -11.0%

Cash flow highlights

Net cash flows used in operating activities 23,075 37,778 -38.9%

Free cash flow 21,258 35,575 -40.2%

Balance sheet highlights 31-Dec-23 31-Dec-22 Change

Total assets 180,206 151,795 18.7%

Total equity 92,411 86,090 7.3%

1 The detailed IFRS financial statements are included in a supplementary excel file, available at https://georgiacapital.ge/ir/financial-results.

2 Calculated based on average equity, adjusted for preferred shares.

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Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

Income Statement highlights

• The increase in FY23 insurance revenue reflects a combination of factors:

– Motor insurance revenues were up by GEL 10.9 million in FY23, mainly attributable to the growth in the retail client portfolio.

– Credit life insurance revenues were up by GEL 4.9 million in FY23, resulting from the growth of banks’ portfolios in the mortgage, consumer

loan, and other sectors.

– Revenues from other insurance lines increased by GEL 4.5 million y-o-y in FY23.

• P&C insurance’s key performance ratios for FY23 are noted below:

Key ratios (Unaudited) FY23 FY22 Change

Combined ratio 89.5% 79.2% 10.3 ppts

Expense ratio 35.8% 34.1% 1.7 ppts

Loss ratio 53.8% 47. 3% 6.5 ppts

FX ratio -0.1% -2.2% 2.1 ppts

ROAE

24.4% 29.7% -5.3 ppts

• The combined ratio increased by 10.3 ppts y-o-y in FY23.

– The FY23 loss ratio was up 6.5 ppts y-o-y, reflecting the increased number of extraordinary events that occurred during 2023:

– Increased agricultural insurance claims due to an abnormal number of hailstorms during the year resulted in a 2.9 ppts y-o-y increase

in the FY23 loss ratio. The increase additionally reflects the base effect of exceptionally low agricultural insurance claims in FY22.

– Increased property insurance claims, resulting from a) an unprecedented landslide in one of the regions of Georgia with the estimated net

loss of GEL 2.6 million (2.2 ppts impact on the FY23 loss ratio); and b) a large property insurance claim incurred in 1Q23, with an estimated

net loss of GEL 1.2 million.

– A 2.1 ppts y-o-y increase in the FX ratio in FY23 reflects the impact of foreign exchange rate movements on the business’s insurance operations.

– A 1.7 ppts y-o-y increase in FY23 expense ratio, driven by increased salary expenses in line with the business growth.

• P&C insurance’s net investment profit was up by 66.1% y-o-y in FY23, attributable to a) a higher average liquid funds balance, b) an increase in

global interest rates, and c) a reversal of market-driven losses in FY23 on investments placed in publicly traded debt securities.

Cash flow and balance sheet highlights

• P&C insurance’s solvency ratio was 171% as of 31 December 2023, significantly above the required minimum of 100%.

• A y-o-y decrease in the net cash flows from operating activities in FY23 reflects the cash outflows for the reimbursement of the abnormal amount

of claims mentioned above and the timing difference of payment of some payable balances to reinsurers.

• GEL 14.9 million dividends were paid to GCAP in FY23.

Other valuation drivers and operating highlights

• In 2023, the business expanded its operations into the regional reinsurance markets of Armenia and Azerbaijan. The expansion has positively

contributed to the operating performance of the business.

• In 2023, Aldagi became the first insurance company on the local market to obtain an international credit rating of bb+ from AM Best. The credit

rating is expected to further support the regional expansion of the business’s reinsurance operations.

Discussion of results, medical insurance

(Unaudited)

Income Statement highlights FY23 FY22 Change

Insurance revenue 91,331 74,892 22.0%

Net underwriting profit 16,129 10,633 51.7%

Net investment profit 4,448 3,894 14.2%

Net profit 6,517 3,397 91.8%

Cash flow highlights

Net cash flows from operating activities 10,612 4,665 12 7. 5%

Free cash flow 7,563 3,700 104.4%

Balance sheet highlights 31-Dec-23 31-Dec-22 Change

Total assets 68,700 65,578 4.8%

Total equity 38,127 35,396 7.7%

Income Statement highlights

• The increase in FY23 insurance revenue is due to the increase in the price of insurance policies and a 3.3% y-o-y increase in the total number of

insured clients (c.169,100 as at December 2023) mainly in the corporate client segment.

• FY23 net claims expenses stood at GEL 71.4 million (up 17.7% y-o-y), out of which:

– GEL 28.0 million (39.3% of the total) was inpatient.

– GEL 31.3 million (43.8% of the total) was outpatient; and

– GEL 12.1 million (16.9% of the total) was related to pharmaceuticals.

• FY23 combined ratio decreased by 4.7 ppts y-o-y to 94.8%, reflecting:

– Improved loss ratio, down 2.8 ppts y-o-y to 78.2% in FY23, driven by robust revenue growth.

– Improved expense ratio in FY23 (down 1.9 ppts y-o-y to 16.6%) reflecting the top-line growth of the business.

• The developments described above translated into a 91.8% y-o-y increase in the FY23 net profit.

Cash flow and balance sheet highlights

• GEL 5.0 million dividends were paid to GCAP in FY23.

• The solid operating performance of the business led to a 27.5% y-o-y increase in the net cash flows from operating activities in FY23.

Investment stage portfolio companies

Discussion of renewable energy business results

The renewable energy business operates three wholly-owned commissioned renewable assets: 30MW Mestiachala HPP, 20MW Hydrolea HPPs and

21MW Qartli wind farm. In addition, the business has a pipeline of renewable energy projects in varying stages of development. The renewable energy

business is 100% owned by Georgia Capital. As electricity sales in Georgia is a dollar business, the financial data below is presented in US Dollars.

FY23 performance (US$ thousands), renewable energy

(Unaudited)

Income Statement highlights FY23 FY22 Change

Revenue 14,449 14,583 -0.9%

of which, PPA 8,529 8,962 -4.8%

of which, non-PPA 5,920 5,621 5.3%

Operating expenses (4,068) (3,408) 19.4%

EBITDA 10,381 11,175 -7.1%

EBITDA margin 71.8% 76.6% -4.8 ppts

Net (loss)/profit (666) 933 NMF

Cash flow highlights

Cash flow from operating activities 9,877 11,344 -12.9%

Cash flow used in investing activities (3,561) 2,961 NMF

Cash flow used in financing activities (5,170) (18,255) -71.7%

Dividends paid out (2,000) (2,800) -28.6%

Balance sheet highlights 31-Dec-23 31-Dec-22 Change

Total assets 122,579 122,645 - 0.1%

of which, cash balance 10,525 9,468 11.2%

Total liabilities 83,911 84,288 -0.4%

of which, borrowings 80,935 80,570 0.5%

Total equity 38,667 38,357 0.8%

Income Statement highlights (GEL) FY23 FY22 Change

Revenue 38,065 42,221 -9.8%

EBITDA 27,357 32,311 -15.3%

Income Statement highlights

• The y-o-y decrease in FY23 revenue in US Dollar terms reflects the net impact of the following factors:

– A 5.3% y-o-y decrease in electricity generation in FY23 due to the previously planned phased rehabilitation works of two power-generating

units of Hydrolea HPPs, which were taken offline during November 2022-June 2023 periods.

– A 4.6% y-o-y increase in the average electricity selling price in FY23 (up to US$ 56.8/MWh). This reflects the export of 32.3 GWh of electricity

to the Republic of Türkiye in May-July 2023, with an average export price of US$ 68.4/MWh.

• Approximately 55% of electricity sales during FY23 were covered by long-term fixed-price power PPAs formed with a government-backed entity.

FY23

US$ thousands, unless otherwise noted (Unaudited)

Revenue from

electricity sales Change y-o-y

Electricity

generation

(MWh) Change y-o-y

30MW Mestiachala HPP 5,491 8.0% 99,697 -4.5%

20MW Hydrolea HPPs 3,366 -12.0% 68,308 -10.8%

21MW Qartli wind farm 5,592 -1.5% 86,033 -1.5%

Total 14,449 -0.9% 254,038 -5.3%

• Operating expenses were up by 19.4% y-o-y in FY23, reflecting electricity and transmission costs incurred due to electricity export in the Republic

of Türkiye.

• The developments described above led to a 7.1% y-o-y decrease in EBITDA in FY23.

1 The detailed IFRS financial statements (in both US$ and GEL) are included in a supplementary excel file, available at https://georgiacapital.ge/ir/financial-results.

FINANCIAL REVIEW CONTINUED

1 Calculated based on net income and average equity, adjusted for preferred shares.

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Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

Cash flow and balance sheet highlights

• A y-o-y decrease in the FY23 cash flow from investing activities reflects the high base effect of the following factors on 2022 numbers: a)

consideration received from the Mestiachala 1 HPP sale and b) the sale of financial securities, previously held for liquidity management purposes.

• A y-o-y decrease in the FY23 cash outflows from financing activities is attributable to the y-o-y decrease in the average gross debt balance.

• Subsequent to FY23, the business repurchased and cancelled US$ 5.1 million of its outstanding US$ 80.0 million green bonds. Consequently, the

gross debt balance of the renewable energy business now stands at US$ 74.9 million.

Discussion of education business results

Our education business currently combines majority stakes in four private school brands operating across seven campuses acquired over the period

2019-2023: British-Georgian Academy and British International School of Tbilisi (70% stake), the leading schools in the premium and international

segments; Buckswood International School (80% stake), well-positioned in the midscale segment and Green School (80%-90% ownership), well-

positioned in the affordable segment.

FY23 performance (GEL thousands), education

(Unaudited)

Income Statement highlights FY23 FY22 Change

Revenue 55,491 42,577 30.3%

Operating expenses (41,053) (28,953) 41.8%

EBITDA 14,438 13,624 6.0%

EBITDA margin 26.0% 32.0% -6.0 ppts

Net profit 13,263 11,338 17.0%

Cash flow highlights

Net cash flows used in operating activities 17,3 6 3 16,454 5.5%

Net cash flows used in investing activities (31,254) (24,079) 29.8%

Net cash flows from financing activities 15,897 5,500 NMF

Balance sheet highlights 31-Dec-23 31-Dec-22 Change

Total assets 191,723 156,320 22.6%

of which, cash 7,535 5,709 32.0%

Total liabilities 62,149 52 ,168 19.1%

of which, borrowings 27,750 21,740 27.6%

Total equity 129,574 104,152 24.4%

Income statement highlights

• The y-o-y increase in FY23 revenues was driven by a) organic growth through strong intakes and a ramp-up of the utilisation and b) expansion

of the business, as described in other valuation drivers and operating highlights section below. The revenue growth was partially subdued by the

Georgian Lari’s y-o-y appreciation against the US Dollar, as the tuition fees for our premium and international schools are denominated in US Dollar.

• Operating expenses were up by 41.8% y-o-y in FY23, mainly reflecting increased salary, catering and utility expenses, in line with the expansion of

the business and inflation.

• Consequently, EBITDA was up by 6.0% y-o-y in FY23.

• The business posted a net income of GEL 13.3 million in FY23.

Cash flow and balance sheet highlights

• Strong cash collection rates (at 77.2% as of 31 December 2023, slightly below last year’s level of 79.5%), combined with enhanced revenue

streams, led to a 5.5% y-o-y increase in operating cash flow generation of the business in FY23.

• Investing cash flows of GEL 31.3 million in FY23 mainly reflect the cash outflows for the investment projects, in line with the business

expansion strategy.

Other valuation drivers and operating highlights

• In 2023, the total learner capacity of the education business increased by 1,600 learners to 7,270 learners, reflecting a) the launch of a new

campus in the mid-scale segment and b) the acquisition of the new campus in the affordable segment during 2023.

• The total number of learners increased by 1,665 learners y-o-y to 5,827 learners at 31 December 2023.

• The utilisation rate for the total 7,270 learner capacity was up by 6.8 ppts y-o-y to 80.2% as of 31 December 2023.

– The utilisation rate for the pre-expansion 2,810 learner capacity was 100%.

– The utilisation of the newly added capacity of 4,460 learners was 67.6%.

• The number of campuses across the different segments is noted below:

(Unaudited) Dec-23 Dec-22 Change (y-o-y)

Total number of campuses 7 5 2

of which, premium and international segment 1 1 –

of which, mid-scale segment 2 1 1

of which, affordable segment 4 3 1

1 The detailed IFRS financial statements are included in a supplementary excel file, available at https://georgiacapital.ge/ir/financial-results.

Discussion of clinics and diagnostics business results

The clinics and diagnostics business, where GCAP owns a 100% equity interest, is the second largest healthcare market participant in Georgia

after our hospitals business. Following the strategic restructuring, as outlined in the hospitals business discussion section on page 111, the business

comprises two segments: 1) polyclinics, comprising 19 polyclinics (providing outpatient diagnostic and treatment services) and 14 lab retail points at

GPC pharmacies; and 2) diagnostics, operating the largest laboratory in the entire Caucasus region – “Mega Lab”.

FY23 performance (GEL thousands), clinics and diagnostics

(Unaudited)

Income Statement highlights FY23 FY22 Change

Revenue, net

61,723 56,691 8.9%

of which, clinics 49,170 41,133 19.5%

of which, diagnostics 18,435 20,477 -10.0%

of which, inter-business eliminations (5,882) (4,919) 19.6%

Gross profit 29,240 23,622 23.8%

Gross profit margin 47.2% 41.6% 5.6 ppts

Operating expenses (ex. IFRS 16) (16,345) (18,013) -9.3%

EBITDA (ex. IFRS 16) 12,895 5,609 129.9%

EBITDA margin (ex. IFRS 16) 20.8% 9.9% 10.9 ppts

Net profit/(loss) (ex. IFRS 16) 2,307 (5,187) NMF

Cash flow highlights

Cash flow from operating activities (ex. IFRS 16) 6,901 3,878 78.0%

EBITDA to cash conversion (ex. IFRS 16) 53.5% 69.1% -15.6 ppts

Cash flow used in investing activities (1,451) (8,460) -82.8%

Free cash flow (ex. IFRS 16)

10,508 (3,985) NMF

Cash flow used in financing activities (ex. IFRS 16) (5,982) 4,117 NMF

Balance sheet highlights 31-Dec-23 31-Dec-22 Change

Total assets 135,848 125,598 8.2%

of which, cash balance and bank deposits 4,500 5,033 -10.6%

of which, securities and loans issued 8,357 3,607 NMF

Total liabilities 83,901 71,908 16.7%

of which, borrowings 48,630 47,252 2.9%

Total equity 51,947 53,690 -3.2%

Discussion of results, clinics

(GEL thousands, Unaudited)

Income Statement highlights FY23 FY22 Change

Revenue, net 49,170 41,133 19.5%

Gross profit 24,550 18,990 29.3%

Gross profit margin 49.7% 46.0% 3.7 ppts

Operating expenses (ex. IFRS 16) (12,845) (14,043) -8.5%

EBITDA (ex. IFRS 16) 11,705 4,947 136.6%

EBITDA margin (ex. IFRS 16) 23.7% 12.0% 11.7 p pt s

Net profit/(loss) (ex. IFRS 16) 3,027 (4,529) NMF

Cash flow highlights

Cash flow from operating activities (ex. IFRS 16) 8,214 3,832 NMF

EBITDA to cash conversion (ex. IFRS 16) 70.2% 77.5% -7.3 p p t s

Cash flow used in investing activities

(194) (7,748) -97.5%

Free cash flow (ex. IFRS 16) 13,094 (3,256) NMF

Cash flow used in financing activities (ex. IFRS 16) (7,649) 5,454 NMF

Balance sheet highlights 31-Dec-23 31-Dec-22 Change

Total assets 105,789 95,250 11.1%

of which, cash balance and bank deposits 4,261 3,892 9.5%

of which, securities and loans issued 8,357 3,607 NMF

Total liabilities 71,840 60,782 18.2%

of which, borrowings 42,340 43,056 -1.7%

Total equity 33,949 34,468 -1.5%

1 The numbers were adjusted retrospectively to account for the recent strategic reorganisation in the healthcare businesses.

2 The detailed IFRS financial statements are included in a supplementary excel file, available at https://georgiacapital.ge/ir/financial-results. See reconciliation to IFRS 16 on

page 98.

3 Net revenue – Gross revenue less corrections and rebates. Margins are calculated from gross revenue.

4 Operating cash flows less capex.

5 Of which capex of GEL 11.2 million in FY23 (GEL 7.1 million in FY22).

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Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

Income Statement highlights

• The increase in revenue is the result of higher demand for non-COVID regular ambulatory services and the expansion of the business,

which added two new ambulatory centres in the second half of 2022 and two in 2023.

• The cost of services in the clinics business consists mainly of salaries, cost of providers, materials and utilities:

– The trend in salary cost is captured in the direct salary rate

. A significant portion of direct salaries is fixed, which on the back of increased

revenue improved by 2.0 ppts to 31.5% in FY23.

– The cost of providers mainly consists of outsourced laboratory services, which as a percentage of revenue also improved y-o-y, down

0.5 ppts to 11.6% in FY23, attributable to additional discounts from the laboratory services provider.

• As a result of the developments described above, the gross profit margins improved substantially in FY23, up 3.7 ppts y-o-y.

• Operating expenses (excl. IFRS 16) in FY23 were down by 8.5% y-o-y which mainly reflects a GEL 2.9 million gain recognised from the sale of one

of the polyclinic buildings in 3Q23.

• Business performance translated into a 23.7% EBITDA margin in FY23 (up 11.7 ppts y-o-y). Excluding the gain recognised from the disposal,

the FY23 EBITDA margin was 17.8% (up 5.8 ppts y-o-y).

• The net interest expense (excl. IFRS 16) was up 12.9% in FY23 y-o-y, reflecting a) an increased balance of net debt during the year due to

investment made for the expansion of the business and b) increased interest rates on the market.

Cash flow and balance sheet highlights

• The EBITDA to cash conversion ratio stood at 70.2% for FY23.

• In FY23, the business spent GEL 11.2 million on capex, primarily related to the expansion of the services and the polyclinics chain.

Other valuation drivers and operating highlights

• The number of admissions at our clinics is highlighted below:

(Unaudited) FY23 FY22 Change

Number of admissions (thousands) 1,640.0 1,707. 5 -4.0%

• The number of polyclinics operated by the business is provided below.

(Unaudited) Dec-23 Dec-22 Change (y-o-y)

Number of polyclinics 19 17 2

• As at 31 December 2023, the total number of registered patients in our polyclinics reached c.301,000 (c.277,000 as at 31 December 2022) in

Tbilisi and c.636,000 (c.616,000 as at 31 December 2022) in Georgia.

Discussion of results, diagnostics

(GEL thousands, Unaudited)

Income Statement highlights FY23 FY22 Change

Revenue, net 18,435 20,477 -10.0%

of which, from regular lab tests 17,910 14,417 24.2%

of which, from COVID-19 tests 525 6,060 -91.3%

Gross profit 4,690 4,632 1.3%

Gross profit margin 25.4% 22.6% 2.8 ppts

Operating expenses (ex. IFRS 16) (3,500) (3,964) -11.7%

EBITDA (ex. IFRS 16) 1,190 668 78.1%

EBITDA margin (ex. IFRS 16) 6.5% 3.3% 3.2 ppts

Net loss (ex. IFRS 16) (1,172) (652) -79.8%

Income Statement highlights

• As part of the post-COVID transition, the business has been actively broadening its client base and diversifying its range of non-COVID services.

This translated into a 24.2% y-o-y increase in revenues from regular lab tests in FY23.

• Overall, the 10.0% y-o-y decrease in the net revenue of the diagnostics business in FY23 was driven by the suspension of Government contracts

for COVID testing in March 2022 as infections slowed and became less severe. After having been the revenue driver in 2021 and the first quarter

of 2022, revenues from COVID testing decreased dramatically and were down 91.3% y-o-y in FY23.

• In FY23 gross profit was up 1.3% with 25.4% gross profit margin (up 2.8 ppts y-o-y), while in the same period, the EBITDA was up 78.1% with

6.5% EBITDA margin (up 3.2 ppts y-o-y), the latter reflecting a reduction in the operating expenses.

Other valuation drivers and operating highlights

• The key operating performance highlights for FY23 are noted below:

(Unaudited) FY23 FY22 Change

Number of non-COVID tests performed (thousands) 2,449 2,174 12.7%

Average revenue per non-COVID test (GEL) 7.3 6.6 10.2%

1 The respective costs divided by gross revenues.

Discussion of other portfolio results

The four businesses in our “other” private portfolio are auto service, beverages, housing development, and hospitality. They had a combined value of

GEL 284.3 million at 31 December 2023, which represented 7.7% of our total portfolio.

FY23 aggregated performance highlights (GEL thousands), other portfolio

(Unaudited) FY23 FY22 Change

Revenue 572,941 484,417 18.3%

EBITDA 43,714 34,778 25.7%

Net cash flows used in operating activities ( 7,525 ) 4,834 NMF

• Auto service – The auto service business includes a car services and parts business, and a periodic technical inspection (PTI) business.

– Car services and parts business – In FY23, revenue was up by 28.7% y-o-y to GEL 63.3 million, reflecting an increase in retail, corporate

and wholesale segments. Similarly, the gross profit was up by 37.4% y-o-y to GEL 16.3 million in FY23. Operating expenses were up by

45.8% y-o-y in FY23, reflecting the business growth. As a result, the business posted GEL 4.3 million EBITDA in FY23, up by 18.3% y-o-y.

– PTI business – The PTI business’s revenue was up by 24.1% y-o-y to GEL 20.8 million in FY23. Revenue growth was driven by an increase

in primary vehicle inspections during the year, further supported by the introduction of fees for secondary checks in 2023 as compared to

the preceding periods, when this service was provided free of charge. The number of total cars serviced was up by 10.9% y-o-y in FY23,

translating into an 18.4% y-o-y increase in FY23 EBITDA of GEL 10.3 million.

• Beverages – The beverages business combines three business lines: a beer business, a distribution business and a wine business.

– Beer business – The gross revenue of the beer business increased by 18.9% y-o-y to GEL 136.2 million in FY23, resulting from the strong

recovery in tourism and increased product prices due to higher demand. Sales in hectolitres were up by 8.8% y-o-y in FY23. The average

GEL price per litre (average for beer and lemonade) increased by 9.3% y-o-y in FY23. The operating expenses were down by 29.6% y-o-y in

FY23, deriving from the structural changes across beer and distribution business lines. Consequently, the EBITDA of the business increased

by 44.2% y-o-y to GEL 22.0 million in FY23.

– Distribution business – Revenue of the distribution business increased by 9.6% y-o-y to GEL 190.8 million in FY23. The gross profit margin

was up by 3.1 ppts y-o-y in FY23, reflecting the improved trade terms from the suppliers. In FY23, operating expenses were up by 45.6%

y-o-y, reflecting the business growth, increased marketing expenses and inflation. As a result, the business posted GEL 9.4 million EBITDA

in FY23, down by 1.2% y-o-y.

– Wine business – The net revenue of the wine business was up by 22.8% y-o-y to GEL 58.1 million in FY23. The increase was driven by a

37.9% increase in the number of bottles sold in FY23, attributable to significant growth in exports. The share of exports in total sales was up

by 4.1 ppts y-o-y in FY23. Operating expenses decreased by 5.7% y-o-y in FY23 due to cost savings. Consequently, EBITDA increased by

GEL 3.3 million to GEL 4.4 million in FY23.

• Real estate businesses – The combined revenue of the real estate businesses was up by 24.9% y-o-y to GEL 238.2 million in FY23. The FY23

EBITDA decreased by GEL 6.5 million y-o-y to negative GEL 7.0 million, mainly resulting from the remeasurement of the construction budgets

for ongoing residential projects at our housing development business. In FY23, the hospitality business successfully completed the sale of

two operational hotels, a vacant land plot and two under-construction hotels located in Tbilisi and Kutaisi. The total consideration from these

transactions amounts to US$ 38.6 million. The proceeds from these sales were utilised for deleveraging the hospitality business’s balance sheet.

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Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

Dear Shareholders

We present this year’s Governance Statement following a year of changes from a corporate

governance perspective, with the main update being the transfer of the Company’s listing from the

Premium Listing segment to the Standard Listing segment of the London Stock Exchange (“LSE”).

The Board reduced in size from seven to five Directors, with both Kim Bradley and Jyrki Talvitie

choosing not to stand for re-election at the 2023 AGM. On behalf of the Board, we would like to

thank Kim and Jyrki for their invaluable contribution since the demerger in 2018.

As we stated in the Circular to shareholders proposing the transfer to the Standard Listing

segment, the Board reaffirms its commitment to the highest standards of corporate governance.

The Board does not intend for there to be any material reduction in the standards of reporting

and corporate governance which GCAP maintained as a Premium listed company. The Company

continues to voluntarily comply with:

• the UK Corporate Governance Code (except for the combined Chairman and CEO structure);

• the provisions of the Listing Rules relating to pre-emption rights; and

• the requirements of Listing Rule 11 relating to related party transactions.

The provisions of the Takeover Code will also continue to apply to GCAP.

The transfer of GCAP to the Standard Listing segment, which was approved by 99.9% of voting

shareholders, will assist the Company in achieving its strategic goals and producing greater value

for shareholders. In particular, the Company is not required to comply with the super-equivalent

provisions of the Listing Rules that apply to companies with securities admitted to the Premium

Listing segment. The Board considers that certain of these super-equivalent provisions imposed

obligations on the Company that affected its ability to efficiently pursue its strategy.

The reduction in the size of the Board has enabled us to absorb the Investment Committee and

the responsibilities of that committee into matters reserved for the Board. All Directors continue

to engage directly with our portfolio companies in much the same way as they did as members

of the Investment Committee.

The Board continues to develop its approach to ESG following the implementation of

the Responsible Investment Policy. Further information is included in the Resources and

Responsibilities section on page 80. Details of our ESG activities are set out in our Sustainability

Report. The Board remains committed to the view that good ESG processes are fundamental to

the Company’s success.

As mentioned previously, the Board voluntarily continues to apply the UK Corporate Governance

Code 2018 (“the Code”) in its entirety, except for the combined roles of Chairman and CEO. This

has consistently been approved by shareholders, and the Nomination Committee and the Board

continue to monitor the appropriateness of this structure as discussed below and in the Report of

the Nomination Committee on pages 158 to 161, which shareholders are encouraged to read for

further context.

Statement of Compliance with the UK Corporate Governance Code

The Board continues to commit to high standards of corporate governance that enhance performance, reduce risks

and promote the protection of our shareholders’ interests.

The Board has overall responsibility for governance and is accountable to its shareholders. This Governance Report

describes how the Board has applied the Main Principles and complied with the relevant provisions of the Code

during 2023. The Code is publicly available on the website of the Financial Reporting Council (“FRC”) at www.frc.org.uk.

We also continue to monitor our governance framework and underlying governance structures to ensure that they

meet the needs of the business. In addition to an annual review of these structures, the Board carefully considered

the governance framework as part of the process of transferring to the Standard Listing segment of the LSE.

Throughout 2023, the Board considers that the Company has complied in full with the provisions of the Code with

the exception of provision 9, which states that the roles of Chair and Chief Executive should not be exercised by the

same individual.

The Company’s Chairman, Irakli Gilauri, also serves as the Company’s Chief Executive Officer and is not considered

by the Board to be independent. We set out below why we regard the joint Chairman and Chief Executive Officer

position to be appropriate for our Company and we also explain some of the measures we have put in place to

ensure that no one individual is able to dominate the Board’s decision-making. For more information on CEO

succession planning, please see the Nomination Committee report on pages 158 to 161.

This statement, and the reports from the Board Committees, set out how we applied the Main Principles of the Code.

The Directors’ Report also contains information required to be disclosed under the Financial Conduct Authority

(“FCA”) Listing Rules (LR) and Disclosure Guidance and Transparency Rules (DTR). To the extent necessary, certain

information is incorporated into this Governance Report by reference.

DIRECTORS’ GOVERNANCE STATEMENT

Irakli Gilauri

Chairman and Chief Executive Officer

David Morrison

Senior Independent

Non-Executive Director

Combined Chairman and CEO role

We acknowledge that our decision for the roles of Chairman and CEO

to be exercised by one individual is not compliant with provision 9 of

the Code. This matter continues to be reviewed by the Nomination

Committee and the Board at least annually as part of the Board

effectiveness evaluation exercise and, as referred to above, was

considered in some detail by the Board as part of the process relating to

the transfer of the Company to the Standard Listing segment. On page

121 you will find the results of the Board evaluation conducted since the

last Annual Report was published, which inherently considers how the

current structure of the combined Chairman/CEO role contributes to

the effectiveness of the operation of the Board and more widely to the

Company. The Board continues to believe that, at present, this structure

best serves the Company and its stakeholders. The basis for this

conclusion is summarised below.

First and foremost Georgia Capital is a holding company focused on

investing in and developing businesses, with the result that we hold and

operate a highly diversified group of companies.

• Our central Group management structure is quite small, with around

45 employees in the head office. It is principally at the level of the

central management team at which the Board provides challenge,

most importantly, on investment/divestment decisions.

• The businesses of our more than ten portfolio companies are highly

diverse. Each has its own CEO and most have an unusually strong

measure of operational independence.

• In these circumstances, at the small central office an independent

chair would be a bureaucratic overlay; and at the level of the portfolio

companies he or she would struggle to add value. The position would

also come with an additional cost that given these circumstances

and the additional considerations below the Board considers to

be unwarranted.

The Board is highly experienced and almost entirely independent.

• All Board members other than the Chairman and CEO are

Independent Non-Executive Directors. Each Non-Executive Director

approaches the Company with true independence. Most of our

decisions at the Board level and at the Nomination Committee (on

which the CEO sits) level are typically reached through consensus

– meaning that ultimately all the independent Directors and the

Chairman and CEO agree on a final position. But ultimately it is a

majority decision: the Chairman and CEO does not have a veto and is

outnumbered four to one by Independent Non-Executive Directors.

• The Independent Non-Executive Directors are experienced

businesspeople of particular high quality for a FTSE Small/MidCap

company and we would invite shareholders to consider their

biographies and note the degree of real expertise and experience

they bring to the Board. They have a diverse range of backgrounds

and nationalities, and each brings a fresh view and particular

expertise to Board discussions. The Senior Independent Non-

Executive Director, a former partner at a major US law firm, is highly

experienced in the region and is the governance lead for the Board

and the Non-Executive Directors. He also chairs the Audit and

Valuation Committee. Previous roles for the other Non-Executive

Directors (as detailed in the biographies later in this section) include:

– investment officer at a major investment fund;

– experienced non-executive director of Georgian groups listed on

the LSE; and

– extensive management consulting and private equity experience.

All the Non-Executive Directors engage directly with the team outside of

the boardroom.

• The Non-Executive Directors engage directly with senior

management and the workforce in Georgia (central team), ensuring

unfiltered channels of access. This typically occurs around the Board

meetings and often includes informal contacts in various settings.

• While the Directors delegate regular monitoring of our portfolio

companies and ongoing strategic advice to the Group Chairman and

CEO and his central team, the entire Board scrutinises, challenges

and ultimately approves or disapproves investment and divestment

proposals and initiatives, including significant add-on investment for

existing portfolio companies. It also considers the commercial terms

of major transactions (i.e. over GBP 2.5 million). As such, the Non-

Executive Directors exercise key secondary oversight of the private

portfolio businesses, engaging with the private portfolio companies’

CEOs and top management on their most important decisions.

During 2023, two quarterly meetings were held in Georgia, providing

the Non-Executive Directors with opportunities to visit facilities and

projects of the portfolio companies and meet with one or more of the

portfolio companies’ CEOs/executive management.

The Group’s NAV is set by the Audit and Valuation Committee.

• The Group’s key financial and investor communications metric is its

NAV as approved by the Audit and Valuation Committee, a committee

comprised of Independent Non-Executive Directors on which the

Chairman and CEO does not sit.

Given the structure of the Group and the key role that Irakli Gilauri plays

in it, the Board continues to believe the current combined Chairman/

CEO structure best suits the Group. As mentioned in the introduction

to this statement, this structure has been supported by a significant

majority of shareholders at each AGM since the formation of the

Company through their re-election of Irakli Gilauri. Ongoing dialogue

with our shareholders confirms that they understand and support this

approach, and this structure was also referred to in the Circular sent

to shareholders ahead of the General Meeting in March 2023, seeking

shareholder approval of the transfer to the Standard Listing segment,

which was approved by 99.9% of voting shareholders.

Irakli Gilauri

Chairman and Chief Executive Officer

21 March 2024

David Morrison

Senior Independent Non-Executive Director

21 March 2024

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BOARD OF DIRECTORS

Chairman and Chief Executive Officer

Irakli Gilauri was appointed as Chairman and CEO on

24 February 2018. He also serves as a member of the

Nomination Committee. He sits on the Supervisory

Board of JSC Georgia Capital.

Skills and experience:

Irakli Gilauri formerly served as the CEO of BGEO

Group from 2011 to May 2018. He joined as CFO

of Bank of Georgia in 2004 and was appointed as

Chairman of the Bank in September 2015, having

previously served as CEO of the Bank since May

2006. Prior, he was an EBRD banker. Mr Gilauri

has more than 20 years of experience in banking,

investment and finance. He also served from 2015 as

a Director of Georgia Healthcare Group PLC (which

delisted in 2020). Mr Gilauri is also Non-Executive

Director and Chairman of the Audit Committee of

Consilium Acquisition Corp I, LTD (SPAC).

Education:

Mr Gilauri received his undergraduate degree in

Business Studies, Economics and Finance from the

University of Limerick, Ireland, in 1998. He was later

awarded the Chevening Scholarship, granted by the

British Council, to study at the Cass Business School

of City University, London, where he obtained his MSc

in Banking and International Finance. Mr Gilauri holds

a Certificate in Winemaking from the University of

California, Davis.

Reasons for appointment:

Irakli Gilauri brings significant insight of local and

international strategic and commercial issues to the

Board and has a distinguished career in corporate

banking. Over the last decade, Mr Gilauri’s leadership

has been instrumental in creating major players in a

number of Georgian industries, including banking,

healthcare, utilities and energy, real estate, insurance

and beverages. Mr Gilauri’s local expertise and

business experience, in working previously with both

Georgia Healthcare Group PLC and BGEO Group

PLC, alongside his strong understanding of the

Georgian political, economic and cultural context,

is invaluable to the Board.

Senior Independent Non-Executive Director

David Morrison was appointed as the Senior

Independent Non-Executive Director of the Company

on 24 February 2018. He also serves as the Chairman

of the Company’s Audit and Valuation Committee and

as a member of the Remuneration Committee. He sits

on the Supervisory Board of JSC Georgia Capital.

Skills and experience:

Mr Morrison spent most of his career (28 years) at

Sullivan & Cromwell LLP where he served as Managing

Partner of the firm’s Continental European offices.

His practice focused on advising public companies

in a transactional context, including capital raisings,

IPOs, and mergers and acquisitions. The author of

several publications on securities law-related topics,

Mr Morrison was recognised as a leader of his

profession in Germany and France. Since withdrawing

from his law firm in 2008, Mr Morrison has focused

on his roles as a non-executive director on corporate

boards and his charitable work. Mr Morrison previously

served as the Senior Independent Non-Executive

Director of both BGEO Group PLC (from October 2011

until May 2018) and Georgia Healthcare Group PLC

(from September 2015 until their delisting in August

2020) and served as Chairman of the Audit Committee

(amongst other Committee roles) for both companies.

In his charitable work, Mr Morrison has focused

on conservation finance. In 2008 he became the

Founding CEO of the Caucasus Nature Fund (“CNF”),

a charitable trust dedicated to wilderness protection

in Georgia, Armenia and Azerbaijan. He now acts as

Chair of CNF’s supervisory board, and serves on the

board of or as an advisor to three other conservation

trusts he helped to create. A principal focus of his

role for all four of these charities is the investment

of a portfolio of over US$ 500 million in endowment

capital. Mr Morrison also served as Georgia’s first

Environmental Ombudsman in 2019 and 2020.

Education:

Mr Morrison received his undergraduate degree from

Yale College and his law degree from the University

of California, Los Angeles. He was also a Fulbright

scholar at the University of Frankfurt.

Reasons for appointment:

With his background as a corporate finance and

securities lawyer advising dozens of clients, including

a large number of publicly held companies, David

Morrison brings to the Board vast experience in

corporate governance and compliance as well as a

strong understanding of legal and regulatory issues.

His work since 2008 has given him extensive regional

experience, which includes in-depth knowledge of

ESG matters in Georgia. As an experienced chairman

of audit committees of Premium-listed companies,

Mr Morrison has significant direct experience of

ensuring integrity in financial reporting and adequate

risk management and internal control procedures.

This has been enhanced by his primary responsibility

as CEO or CFO of the four conservation trusts with

which he is involved, where he was responsible for

developing the accounting and controlling systems

and being the principal management counterparty

for the external auditors. With its significant focus

on financial disclosure and reporting, his career

has prepared him well for his Audit and Valuation

Committee duties.

Irakli Gilauri David Morrison Neil Janin

Independent Non-Executive Director

Neil Janin was appointed as an Independent

Non-Executive Director of the Company on

17 October 2022. He also serves as the Chairman

of the Company’s Nomination and Remuneration

Committees and sits on the Supervisory Board of

JSC Georgia Capital.

Skills and experience:

Mr Janin has extensive experience as a non-executive

director of Georgian groups that are listed on the

Premium Listing segment of the LSE. He was Chair

and Non-Executive Director of BGEO Group PLC

from October 2011 until 21 May 2018 and of Bank of

Georgia Group PLC from February 2018 until March

2022, and he served as Non-Executive Director of

Georgia Capital PLC’s (then listed) subsidiary Georgia

Healthcare Group PLC from September 2015 until

April 2018. He serves as counsel to CEOs of both

for-profit and non-profit organisations and continues to

provide consulting services to McKinsey & Company.

Mr Janin was a Director of McKinsey & Company,

based in its Paris office, for over 27 years, from

1982 until his retirement. At McKinsey & Company,

he conducted engagements in the retail, asset

management and corporate banking sectors, and

was actively involved in every aspect of organisational

practice, including design, leadership, governance,

performance enhancement and transformation.

Before joining McKinsey & Company, Mr Janin worked

for Chase Manhattan Bank (now JP Morgan Chase) in

New York and Paris, and Procter & Gamble in Toronto.

Mr Janin has practised in Europe, Asia and North

America. He is also a Director of Neil Janin Limited,

a company through which he provides his ongoing

consulting services.

Education:

Mr Janin holds an MBA from York University,

Toronto, and a joint honours degree in Economics

and Accounting from McGill University, Montreal.

Reasons for appointment:

Neil Janin has extensive experience of serving as

a non-executive director of Georgian groups that

are also listed on the LSE. His career spans Europe,

Asia and North America, across the retail, asset

management and corporate banking industries,

and all areas of organisational practice, including

governance, culture, design, leadership, performance

enhancement, change and transformation. Mr Janin

brings his considerable insight of international

strategic and commercial practices, in addition to

significant experience of governance and the Georgian

investment climate, to the Group’s future development.

Independent Non-Executive Director

Massimo Gesua’ sive Salvadori was appointed as an

Independent Non-Executive Director of the Company

on 24 February 2018. He also serves as a member of

the Audit and Valuation and Nomination Committees

and is a member of the Supervisory Board of JSC

Georgia Capital.

Skills and experience:

Dr Gesua’ sive Salvadori is an analyst covering

banking and other financial stocks globally. He

works for Lancaster Asset Management, a London-

based hedge fund, which he joined in 2011. He is

responsible for generating investment ideas and

understanding broad trends. Dr Gesua’ sive Salvadori

worked as a management consultant at the London

office of McKinsey & Company. between 2002 and

2011, specialising in financial services, and served

clients across different geographies in developed

and emerging markets as part of the banking

strategy practice.

Education:

Dr Gesua’ sive Salvadori, a native of Venice, obtained

an M.Phil. and a Ph.D from Oxford University, where

he attended St. Antony’s College. He graduated with

a B.Sc in Economics from Warwick University. He

attended the United World College of the Adriatic in

Duino. His postgraduate studies were funded through

scholarships by the Foreign and Commonwealth

Office, the Economic Research council, the

Fondazione Einaudi and the Ente Einaudi.

Reasons for appointment:

Massimo Gesua’ sive Salvadori’s background in

investment and his experience as a professional

investor with financial markets, strategic issues and

valuation techniques brings a breadth of knowledge to

and makes him an important asset to the Board and

the Nomination and Audit and Valuation Committees,

of which he is a member. His extensive experience of

valuations and value drivers are particularly valuable to

the Audit and Valuation Committee since the private

portfolio companies’ valuation is the key area of focus

in Georgia Capital’s financial accounting and reporting.

His background as a management consultant is also

valued in Board discussions.

Independent Non-Executive Director

Maria Chatti-Gautier was appointed as an

Independent Non-Executive Director of the Company

on 19 March 2020. She also serves as a member

of the Remuneration and Audit and Valuation

Committees and is a member of the Supervisory

Board of JSC Georgia Capital.

Skills and experience:

Ms Chatti-Gautier is a senior investment manager

with over 25 years of experience in private equity in

prominent financial institutions and has sat on the

board of directors of over 30 companies. She currently

serves as Senior Advisor of Trail Management, an

independent private equity investment firm that invests

in European midcap companies to develop them in

China. Ms Chatti-Gautier started her career at Chase

Manhattan Bank in Paris before joining BAII (Banque

Arabe et Internationale d’Investissement). She

spent most of her career (15 years) at Natixis Private

Equity, before moving to Oddo Private Equity. Her

activities included sourcing, analysing, managing and

monitoring a large number of investments and exits.

Through her own consulting firm, Ms Chatti-Gautier

has also advised various investment and fundraising

programmes in Europe, Lebanon and the MENA

region, including Drake Star Partners (previously

known as LDA Jupiter). Ms Chatti-Gautier currently

serves as a board member and member of the Audit

Committee of Groupe Pizzorno Environnement, a

leading French operator in the waste management

business listed on Euronext. She is also a Director

of Buffet Crampon Group, a major producer of wind

musical instruments and of Thés de La Pagode,

producer and distributor of high-end organic teas.

Education:

Ms Chatti-Gautier holds an MBA with major in Finance

from Ecole des Hautes Etudes Commerciales-HEC,

with joint MBA programmes from London Business

School and NYU Stern.

Reasons for appointment:

Maria Chatti-Gautier has extensive experience in all

types of private equity transactions with a hands-on

approach and leadership role in investment execution,

build-up and exit strategies. Ms Chatti-Gautier’s

background in private equity and understanding of

investment strategies, alongside her board experience,

makes her well suited to her role on the Board.

Massimo Gesua’ sive Salvadori Maria Chatti-Gautier

BOARD OF

DIRECTORS

COMPOSITION

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Discussion of Results Governance Financial Statements Additional Information

CORPORATE GOVERNANCE FRAMEWORK

Our governance structure Board size,

composition and independence

The Board is comprised of five Directors, four of whom are Independent

Non-Executive Directors, and one executive Chairman – Irakli Gilauri,

who also acts as the Company CEO. The responsibilities of the Board

are set out on page 125.

Director biographies can also be found here:

https://georgiacapital.ge/governance/board.

The Board of Directors considers the five-member Board well-suited

to carrying out its duties of overseeing the Company’s continuing

obligations and leading the Company’s success in an optimal and cost-

effective way. The Board is satisfied that the reduction in the number

of Directors, as reported elsewhere in this Annual Report, does not

impact appropriate standards of reporting and the quality of GCAP’s

corporate governance. Both the Audit and Valuation and Remuneration

Committees continue to have three Independent Non-Executive

Directors who have the requisite level and breadth of expertise. The

Nomination Committee comprises two Independent Non-Executive

Directors (one of which is the Committee Chair) and Mr Gilauri. As

reported earlier, the Investment Committee was disbanded during the

year, and its responsibilities were passed back to the Board.

Following the external evaluation of the Board’s effectiveness undertaken

by Amandla UK Limited (“Amandla”) in 2022, Amandla was engaged to

conduct further work with the Board in 2023. Details of this can be found

in the report of the Nomination Committee on page 158.

The Board continues to be of the view that a diversity of skills,

backgrounds, knowledge, experience, geographic location, nationalities,

age and gender is important to effectively govern the business. The

Board and its Nomination Committee work to ensure that the Board

continues to have the right balance of skills, experience, independence

and knowledge necessary to discharge its responsibilities in accordance

with the highest standards of governance.

Board appointments are made based on recommendations received

from the Nomination Committee. In making these appointments, the

Nomination Committee ensures that appointments and succession

plans are made based on merit as well as other objective criteria, whilst

ensuring the Board maintains the right balance of skills and knowledge

needed to address its specific needs. Due consideration is also given

to diversity in the wider sense, and the benefits that stem from having a

diverse Board.

Following the Company’s transfer to the LSE Standard Listing segment,

the Investment Committee was integrated into the full Board following

the 2023 AGM, and its responsibilities merged into those of the Board.

The membership of each of the other Committees was also considered

by the Nomination Committee, following which Neil Janin became Chair

of the Nomination and Remuneration Committees. Massimo Gesua’

sive Salvadori joined the Nomination Committee and Maria Chatti-

Gautier stepped down as a member of that Committee and joined the

Audit and Valuation Committee. David Morrison became a member of

the Remuneration Committee. Furthermore, Maria Chatti-Gautier was

designated as the Non-Executive Director responsible for engagement

with the workforce.

For further information about the Committees, including membership,

see the Audit and Valuation Committee report on page 133, the

Remuneration Committee report on page 139 and the Nomination

Committee report on page 158.

The Board is responsible to shareholders for creating and delivering

shareholder value over the long term through the oversight of the

Group’s operations. Our responsibilities include setting and overseeing

the execution of the Group’s strategy within a framework of effective risk

management and internal controls, demonstrating ethical leadership and

upholding best practice corporate governance.

All decisions are made through Directors exercising independent

objective judgement, and following open and rigorous challenge.

While our ultimate focus is long-term growth, the Company also

needs to deliver on short-term objectives, and we seek to ensure that

management strikes the right balance between the two.

Each Director also recognises their statutory duty to consider and

represent the Company’s various stakeholders in its deliberations and

decision-making. You can read more about how Directors had regard to

their duties under section 172 (1) of the Companies Act 2006 and how

Directors performed these duties on page 62 of the Strategic Report.

Matters reserved for the Board

In order to ensure that we meet our responsibilities, specific key

decisions have been reserved for approval by the Board. The Board

conducts an annual review of these matters; amendments were made

during the year to accommodate the disbandment of the Investment

Committee and the Board’s evolving focus on sustainability.

The key matters reserved to the Board are:

• The Group’s long-term objectives and strategy.

• Shareholder engagement and general meetings.

• Overall corporate governance arrangements including Board and

Committee composition, Committee Terms of Reference, Directors’

independence and conflicts of interest.

• Internal controls, governance and risk management frameworks.

• Changes to the corporate or capital structure of the Company.

• Annual Report and Accounts, and financial and regulatory

announcements.

• Significant changes in accounting policies or practices.

• Annual budgets and financial expenditure.

• Oversight of risk management and performance, and of

environmental and social risks.

• Allocation of capital, including dividends and buybacks, significant

investments and divestments, consideration of material environmental

and social issues in respect of potential investments.

A full formal schedule of matters specifically reserved for the

Board can be found on our website at:

https://georgiacapital.ge/governance/cgf/schedule.

In October, the Board revised the schedule of matters reserved for

the Board, including to cover any duties previously reserved to the

Investment Committee, and further to make it clear that the Board had

primary responsibility for overseeing environmental and social risks and

that the Company’s strategic direction is regularly informed by material

environmental and social issues. Given the small size of the Board and

the importance of these matters, including climate change, the Board

believes that it is appropriate for the whole Board to be responsible for

these issues.

Outside of these matters, the Board delegates authority for the day-

to-day management of the business to the CEO. The CEO delegates

aspects of his own authority, as permitted under the corporate

governance framework, to the Management Board.

Operation of the Board

We maintain a corporate calendar, which sets out rolling agenda items

that must be considered during the year. This annual schedule of items

ensures that all matters are given due consideration and are reviewed at

the appropriate point in the financial and regulatory cycle.

The Chairman receives regular input from the Non-Executive Directors

ahead of each Board meeting in order to ensure that any matters they

have raised are on the agenda to be discussed at the meeting. The

Senior Independent Non-Executive Director supports the Chairman

in his role, acts as an intermediary for other Non-Executive Directors

when necessary and liaises with the Non-Executive Directors outside

of the Board and Committee meetings. The Senior Independent

Non-Executive Director met with the Non-Executive Directors without

the Chairman present at least once during the year to appraise the

Chairman’s performance.

Each of our Non-Executive Directors occupies, and/or has previously

occupied, senior positions in a broad range of relevant associated

industries, bringing valuable external perspective to the Board’s

deliberations through their experience and insight from other sectors

enabling them to contribute significantly to decision-making. Some of

these skills include:

• Banking, investment and finance sector experience.

• Leadership knowledge.

• Understanding of local and international strategic and

commercial issues.

• Investor market knowledge.

• Experience of stakeholder engagement.

• Understanding of governance practices and regulatory framework.

• Familiarity with Georgian political, economic and cultural context.

• Experience of investment execution, exit strategies and private equity.

The relationship between Directors ensures that no individual, or

group of individuals, is able to dominate the decision-making process,

independence of thought is maintained, and no undue reliance is placed

on any individual.

At the time of this report, we have assessed the independence of each

of the Non-Executive Directors and are of the opinion that each act in

an independent and objective manner. We consider that, in line with the

Code, all of our Non-Executive Directors are independent and free from

any relationship that could impair their judgement.

Our governance structure

We understand our responsibility to shareholders and stakeholders.

We are dedicated to delivering shareholder value over the long term and

promoting the success of the Company for the benefit of all shareholders

through the management of the Group’s business. The Board is focused

on shareholder returns and on opportunities which meet its investment

return and growth criteria.

The Georgia Capital Board is assisted in fulfilling its responsibilities by

three Committees: Audit and Valuation, Remuneration, and Nomination.

The Terms of Reference are reviewed annually, approved by each

Committee and the Board, and can be found at:

https://georgiacapital.ge/governance/cgf/terms.

Our Governance structure

BOARD

CEO

Audit and Valuation

Committee

on page 133

Remuneration

Committee

on page 139

Nomination

Committee

on page 158

Executive

management

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Board activities during 2023

Details of the areas that the Board considered this year are set out below and comprise:

Strategy • Ongoing consideration and monitoring of the Company’s progress in meeting its strategic goals including

transitioning to a capital-light investment business.

• Transferring the Company’s listing on the LSE to the Standard Listing segment.

• Deleveraging the Group – issuance of a US$ 150 million SLB and reduction of the gross debt balance from

US$ 300 million to US$ 150 million.

• Approved capital allocations to and discussed the capital allocation outlook for portfolio companies.

• Reviewed Group and portfolio company performance against strategy.

• Regularly reviewed the Georgian, regional and global political and economic climate, particularly in light of the

ongoing war between Russia and Ukraine.

• Continued with share buyback and cancellation programmes totalling US$ 25 million (US$ 10 million buyback

programme announced in April 2023 and US$ 15 million programme announced in October 2023).

• Reviewed the ESG matters, TCFD reporting and ESG target-setting implementation processes.

Governance, assurance

and risk management

• Focused on high-level governance issues and developments that may affect the Company strategy.

• Received reports from different Committees.

• Reviewed Board and governance structure following the transfer of the Company to the Standard Listing

segment of the LSE.

• Conducted an externally facilitated Board evaluation looking at Board effectiveness and process.

• Considered the proxy voting agency approaches and the impact on the Company.

• Reviewed and approved governance documents, including the schedule of matters reserved for the Board,

Terms of Reference for the Audit and Valuation Committee, Remuneration Committee and Nomination

Committee and Group-level policies.

• Embedded ESG considerations into the governance framework.

Financial reporting • Received reports on the financial performance of the Group.

• On the recommendation of the Audit and Valuation Committee, reviewed and approved financial reporting

including approval of accounts, Notice of AGM, half-year and full-year announcements, and trading updates to

the market.

ESG • See separate Sustainability Report.

• External training on ESG.

Succession • Board and Committee succession planning.

• CEO succession plan.

Stakeholders • Considered and implemented s172 duties:

– Re-confirmed identity of key stakeholder groups.

– Considered how Board decisions impact the interests and priorities of each group.

– Actively engaged with different stakeholders.

Investment matters • Reviewed investment and exit strategy.

Standing items Each quarter the following topics are usually discussed in the Board meeting:

• Financial update (with formal financial results announcements and trading updates to the market typically

being approved in separate phone meetings).

• Monitoring of financial performance against budget.

• Macroeconomic developments, including a focus on both the Georgian and regional markets.

• An assessment of current and potential future risks to the Company.

• Regulatory and legislative updates, including corporate governance as appropriate.

• Updates from the Committee meetings, typically including at least an Audit and Valuation Committee report on

accounting issues and valuations and Internal Audit.

• Business updates from selected portfolio companies. The Board reviews the capital allocation pipeline and

takes action as necessary on new investments or divestments.

Board and Committee meeting attendance

Details of Board and Committee meeting attendance in 2023 are as follows:

Members Board

Audit and Valuation

Committee

Nomination

Committee

Remuneration

Committee

Irakli Gilauri 4/4 Scheduled

6/6 Ad hoc

n/a 2/2 n/a

David Morrison 4/4 Scheduled

6/6 Ad hoc

5/5 Scheduled

6/6 Ad hoc

2/2 2/2

Kim Bradley 3/3 Scheduled

2/2 Ad hoc

3/3 Scheduled

2/2 Ad hoc

n/a 1/1

Massimo Gesua’ sive Salvadori 4/4 Scheduled

6/6 Ad hoc

5/5 Scheduled

6/6 Ad hoc

n/a n/a

Neil Janin 4/4 Scheduled

6/6 Ad hoc

n/a 2/2 2/2

Jyrki Talvitie 3/3 Scheduled

2/2 Ad hoc

n/a n/a 1/1

Maria Chatti-Gautier 4/4 Scheduled

6/6 Ad hoc

2/2 Scheduled

3/3 Ad hoc

n/a 3/3

Note 1 The Investment Committee was disbanded at the conclusion of the AGM of the Company held on 17 May 2023.

Note 2 Kim Bradley and Jyrki Talvitie stepped down as members of the Board and its Committees from the conclusion of the AGM on 17 May 2023.

Note 3 Following the conclusion of the AGM of the Company held on 17 May 2023, Neil Janin (Chair) and Massimo Gesua’ sive Salvadori were appointed as members of the

Nomination Committee; Neil Janin (Chair) and David Morrison were appointed as members of the Remuneration Committee; and Maria Chatti-Gautier was appointed as

a member of the Audit and Valuation Committee.

For Board and Committee meetings, Directors’ attendance is expressed as the number of meetings attended out of the number that each Director

was eligible to attend.

Purpose, culture and values

The Board has responsibility for the overall purpose, culture, and values

of the Company, and their pursuit and development are at the core of

each Board meeting.

The Board believes that there are three features in particular that will allow

the Company to capitalise on the fast-growing Georgian economy: access

to capital, access to management and strong corporate governance. Our

culture and values are designed to strengthen all of these.

Purpose

Georgia Capital’s purpose is to provide investors with an opportunity

to invest in the historically fast-growing Georgian economy by giving

them access to attractive investments with long-term growth potential.

The Company then seeks to develop these into viable independent

businesses on which value can be realised through sale or otherwise.

By investing in Georgia to create multiple strong private companies/

institutions, we will foster Georgia’s development and help it succeed.

Culture

The Board continued to focus on developing, monitoring and assessing

corporate culture and thinking about the ways in which our culture

might serve as a long-term differentiator, both in terms of strategy and

of recruitment and retention. We are proud of the culture that we built

at Georgia Capital and recognise it is important to clearly articulate this

culture, drive it and ensure that it permeates the entire business.

Helping Georgia to succeed is at the heart of Georgia Capital.

During the year the Board looked closely at our mission, vision and

values and how we could reinforce through shaping the Company’s

long-term strategy. The Board is of the view that this will benefit all of

the Company’s stakeholders.

In order to create strong private business institutions, we will

continue with our plan to develop our leaders so that they become

future entrepreneurs of Georgia, through personal and professional

development. The Chairman and CEO met regularly with key

management personnel at Georgia Capital to share this vision and

coordinate the Group’s actions and priorities. The Chairman and CEO

and Georgia Capital’s key management personnel monitored portfolio

companies’ performance on at least a monthly basis, also reinforcing key

messages. These messages are cascaded down from the management

team to the wider employees.

Values

Being entrepreneurial:

Our current culture is entrepreneurial in nature, and this is something that

is grounded in our ability to see and seize opportunities and to develop

business strategies whilst remaining disciplined and rational. All of our

portfolio companies have been founded or substantially developed

by entrepreneurs, and this is at the core of what we do. Our objective

moving forward is to empower our people, continue to develop this spirit

and pursue the excellence of execution within our businesses.

Having a learning mindset:

We seek to develop a learning mindset as part of our wider culture and

we recognise the need to improve the ways in which we communicate,

provide feedback and help our people to develop. We approach this

by looking at ways we can mentor and coach people throughout the

organisation, and we aim to create an environment where independent

thinking and curiosity are encouraged.

Maintaining the high standard of ethics:

This has been an aspect of our culture that we have maintained since

our inception, and it is a priority of ours to ensure it stays this way. In

order to maintain high ethical standards, we will draw on principles of

transparency and accountability and seek to sustain high standards of

corporate governance.

Creating a culture relies on the participation and leadership of our

Board of Directors, as this vision can then be communicated through

executive management and onward to the wider businesses. By setting

the tone at the top, establishing the core values of the Company and

demonstrating our leadership, we are creating a culture that clearly sets

an expectation that every employee acts ethically and transparently in

all of their dealings. This, in turn, fosters an environment where business

and compliance are interlinked.

CORPORATE GOVERNANCE FRAMEWORK CONTINUED

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Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

The process for evaluating the Chairman’s performance:

In light of his role as Chairman and CEO, Irakli Gilauri’s performance was

evaluated. In addition, the full Board met to consider the Remuneration

Committee’s recommendations and Mr Gilauri’s performance as Board

Chairman. David Morrison as the Senior Independent Non-Executive

Director led the overall review. The CEO was not present during the

full Board’s discussions around his own performance. The Board also

reached consensus on his performance as Chairman as reflected in

the favourable Board self-evaluation and the decision to recommend

the maintenance of the current combined role of Chairman/CEO as

discussed above.

The Board’s objectives for 2024 are:

• monitoring the implementation of the updated strategy and

continuing to adjust as necessary, with particular focus on capital

allocation and divestments;

• addressing the uncertainties created by the Russia-Ukraine war as

regional tensions continue;

• keeping ESG at the forefront of our decision-making, and monitoring

and enhancing Key Performance Indicators relating to climate change

risks and opportunities;

• maintaining focus on succession planning;

• monitoring and assessing culture and how this aligns with our

purpose, values and strategy; and

• ensuring continued active shareholder and stakeholder engagement.

Succession planning

Board appointments and senior management

We continue to believe that effective succession planning mitigates

the risks associated with the departure or absence of well-qualified

and experienced individuals. Our aim is to ensure that the Board and

management are always well resourced with the right people in terms

of skills and experience, in order to effectively and successfully deliver

our strategy. We also recognise that continued tenure brings a depth of

Company-specific knowledge that is important to retain.

The Board’s Nomination Committee is responsible for both Director and

senior management succession planning. There is a formal, rigorous

and transparent procedure for the appointment of new Directors to the

Board, including a review of other significant commitments Directors may

have and, typically, a period of service in a Board advisory role.

More detail on the role and performance of the Nomination Committee is

on pages 158 to 161.

Non-Executive Directors’ terms of appointment

On appointment, our Non-Executive Directors are provided with a letter,

which sets out the terms and conditions of their directorship, including

the fees payable and the expected time commitment. Each Non-

Executive Director is expected to commit approximately 25-35 days per

year to the role. An additional time commitment is required to fulfil their

roles as Board Committee members and/or Board Committee Chairs,

as applicable. Having reviewed all Directors’ current time commitments,

we are confident that all Non-Executive Directors are sufficiently able

to dedicate the amount of time necessary to contribute effectively to

the Board.

The letters of appointment for our Non-Executive Directors are available

for inspection at our Company’s registered office address during normal

business hours.

Prior to accepting any external appointments, Directors are required

to seek the Board’s approval. The Board believes that the other

external directorships/positions held provide the Directors with valuable

expertise, which enhances their ability to act as a Non-Executive

Director of the Company. Despite our Non-Executive Directors holding

external directorships and other external positions, the Board believes

they still have sufficient time to devote to their duties as a Director of

the Company. In order to form a view of this, we conduct an annual

review of individual Director’s conflicts, which is recorded in the Conflicts

of Interest Register, and as part of the review we consider other

appointments held by each Director.

Stakeholder engagement

The Code reinforces and expands the requirements of the UK

Companies Act for directors to remain mindful of their duties to

consider the interests of key stakeholders. The Board understands

the importance of effective engagement with stakeholders to gain an

understanding of the issues that relate to each stakeholder and those

that impact the Company so that the Board can appropriately consider

these views and their concerns when having Board discussions, when

considering the long-term success of the Company.

The Board has structured its meeting agendas to take account of each

of the provisions in s172 of the Companies Act 2006, and focused

on long-term value generation opportunities, considering political

and macroeconomic circumstances and stakeholder considerations.

Shareholders’ considerations are sought out and incorporated into our

discussions and decisions. For example, members of the Board and

management participated in more than 500 online and physical investor

meetings. The Company was able to organise several investor road-

shows this year.

In 2023 to early 2024, the Company also wrote a new Stakeholder

Engagement Plan, which describes, informs and guides the

stakeholder engagement process of the Group. The Plan seeks to

define a technically and culturally appropriate approach to consultation

and disclosure. The goals are to ensure that adequate and timely

information is provided to stakeholders, that these groups are

given sufficient opportunity to voice their opinions and concerns,

and that these concerns influence the Group and its various

decision-making processes.

The table on pages 129 to 130 sets out our key relationships with

stakeholders and how we have engaged with them over the financial

year. The table also shows examples of how we have considered our

stakeholders when making key decisions and how this has influenced

certain decisions.

More information about how the Directors have discharged their duty

under s172 of the Companies Act 2006 is available in the Strategic

Report, on pages 62 to 64.

Key stakeholders Activities undertaken throughout year

How this stakeholder group influenced the Committee/Board agenda

and decision-making

Investors Types of engagement:

• Meetings with the Chairman and CEO

• Meetings and calls with the Advisor to the CEO

• Investor Relations team

• LSE announcements

• Investor Day

• Investor roadshows

• Corporate website with investor section

• AGM and General Meeting

• Quarterly results

• Senior Independent Non-Executive Director as

an intermediary

• Meeting with Committee Chairs and other

Non-Executive Directors

• Annual Report

• Sustainability Report

How the Board engages with investors:

We will engage with shareholders through the Company’s

forthcoming AGM to be held in May 2024 but will also

continue to communicate with shareholders on important

developments throughout the year. Our quarterly results are

supported by a combination of presentations and conference

call briefings, as was the announcement of our annual results

in February 2024.

The Company has established a comprehensive shareholder

engagement programme and encourages an open and

transparent dialogue with existing and potential shareholders.

For example, our UK General Counsel and our Company

Secretary also have an ongoing dialogue with shareholder

advisory groups and proxy voting agencies.

The Company was able to organise several investor roadshow

visits this year.

• The Board receives feedback from investors at our

Investor Days and during meetings about how they view

Georgia Capital within the wider market. Raised matters

of interest are then discussed at Board meetings.

• The Board receives feedback from investors via the

Chairman and CEO and the CFO who are in regular

contact with the Company’s major shareholders. This

feedback informs the Board’s decision-making.

• The Chairman and CEO, the CFO, the Advisor to the

CEO and the Head of Investor Relations each provide a

standing invitation to shareholders to meet and discuss

any matters they wish to raise.

• The Senior Independent Non-Executive Director acts as

an intermediary for shareholders.

• Committee Chairs also make themselves available to

answer questions from investors. The Non-Executive

Directors attend regular Investor Days and are available to

answer questions.

• The Chairman has overall responsibility for ensuring that

the Board understands the views of major shareholders.

The Board is regularly kept informed of these views by

the Chairman as well as executive management and

the Investor Relations team and, to the extent deemed

appropriate, the Company has taken active steps to

adopt different ways of working in response to feedback

received from shareholders and other stakeholders.

Informal feedback from analysts and the Company’s

corporate advisors is also shared with the Board.

• We hold regular meetings with JSC Georgia Capital’s

existing bondholders and actively engage with potential

lenders to discuss our funding strategy. The Chairman

and CEO, Senior Independent Non-Executive Director and

members of the Board make themselves available to meet

with institutional investors when requested.

• Our comprehensive investor website

https://georgiacapital.ge is updated and reviewed

on a regular basis to ensure that information, including

matters relating to sustainability, is up to date. It provides

shareholders with access to the Company’s results,

press releases, investor presentations, analyst reports,

details on our corporate governance and corporate and

social responsibility framework and our leadership, as

well as other information relevant to our shareholders. We

also ensure that shareholders can access details of the

Company’s results and other news releases through the

LSE Regulatory News Service.

• Please refer to the Resources and Responsibilities section

on page 80 of this report and the Sustainability Report for

further details on investor-led engagement activities carried

out throughout the year and the output of that engagement.

CORPORATE GOVERNANCE FRAMEWORK CONTINUED

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Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

Employees Types of engagement:

• Nominated Non-Executive Director

• Regular town halls

• Off-site and on-site meetings

• Feedback systems, e.g. employee satisfaction surveys at

our businesses

How the Board engages with employees:

The Board is encouraged to engage with employees outside

of formal channels. Workforce engagement includes both

formal and informal meetings, not only with the central staff

but also, when important strategic or capital allocation

questions arise in the portfolio companies, with the

management of those companies.

We believe that communicating with our employees is vital

and we provide information in a number of ways, including via

managers, presentations, email, intranet and regular off-site

meetings. We communicate information about our corporate

culture, the Company’s strategy and performance, risks

relating to its performance, such as financial and economic

factors, and our policies and procedures.

The Board has oversight of whistleblowing and routinely

receives reports arising from its operation.

• Employee surveys are conducted across the portfolio

companies, and this year we conducted an employee

survey at the holding company level. Since the survey,

actions have been taken on some of the most important

issues raised by employees.

• Management has been instructed to ensure that proposals

to the Board are made in line with stakeholders’ interests.

• The Nomination Committee continues to look at

succession planning and are conscious of ensuring a

diverse pipeline for the future.

• Please refer to the Resources and Responsibilities section

on page 80 of this report and the Sustainability Report for

further details on workforce engagement activities carried

out throughout the year, and the output of that engagement.

Wider community

and the

environment

Types of engagement:

• Investments to support diversified economy

• Engagement with local communities

• Education

• Corporate website

• Volunteering

How the Board engages with employees:

The Group considers the interests of its main stakeholders

when developing the strategy and the processes to improve its

operations. Investing in local businesses helps us to diversify

and modernise the Georgian economy, and this can be seen in

the development of our different portfolio companies.

Our hospitals and clinics and diagnostics businesses are

driving the modernisation and improvement of healthcare in

the country. Our renewable energy business is involved in

infrastructure programmes and ongoing structural market

reforms. Our auto service business contributes to overall

cleaner air and improved vehicle safety.

The Company believes that educating young people is

extremely important for the development of the community as

a whole. Georgia Capital is investing in schools to give more

learners access to high-quality education and facilities.

As part of our sponsorship and charitable activities, the

Group acts to conserve nature, promote and enhance access

to education and supports people with disabilities and special

needs. Our Senior Independent Non-Executive Director

volunteers as Chairman of the CNF, a charitable foundation

providing financial and technical support to Georgia’s

national parks.

• Board agendas from time to time consider governmental

issues that influence the wider Georgian market, which

can influence key investment decisions.

• Investments are made in local businesses that will be

beneficial to the Georgian economy. This is evidenced in

the Company’s Responsible Investment Policy.

• Please refer to the Resources and Responsibilities section

on page 80 of this report and the Sustainability Report for

further details on community engagement activities carried

out throughout the year, and the output of that engagement.

Directors’ responsibilities

Statements explaining the responsibilities of the Directors for preparing

the Annual Report and financial statements can be found on page 162 of

this Annual Report.

A further statement is provided confirming that the Board considers the

Annual Report, taken as a whole, is fair, balanced and understandable

and provides the information necessary for shareholders to assess the

Company’s position and performance, business model and strategy.

Division of responsibilities

The Board has adopted written statements setting out the respective

responsibilities of the Chairman, Senior Independent Non-Executive

Director and Non-Executive Directors. Biographies for the Board

members are set out on pages 122 and 123. A summary of the

responsibilities of the Directors is set out below.

Chairman

• Guardian of the Board’s decision-making process.

• Ensures the Board as a whole plays a full and constructive part in

strategic decision-making.

• Sets the Board agenda.

• Ensures the Board receives accurate, timely and clear information.

• Shapes the boardroom culture and sets clear expectations.

• Ensures a formal and rigorous evaluation of the Board takes place

each year.

• Develops the Group’s strategy and commercial objectives.

• Leads communication with stakeholders.

• As CEO, is responsible for the operational and strategic management

of the Group and for running the Group’s business.

Senior Independent Non-Executive Director

• Provides a sounding board for the Chair and serves as a trusted

intermediary for the other Directors.

• Responsibility for an orderly succession process for the Chairman.

• Available to Non-Executive Directors and shareholders if they have

concerns which normal channels fail to resolve.

• Meets with other Non-Executive Directors for an annual appraisal of

the Chairman’s performance.

Non-Executive Directors

• Provide constructive challenge and specialist advice.

• Provide strategic guidance.

• Take into account the views of shareholders and other stakeholders.

• Scrutinise the performance of management.

Internal controls and risk management

The Company has a comprehensive system of internal controls in place,

designed to ensure that risks are mitigated and that the Company’s

objectives are attained. The Board is accountable for reviewing and

approving the effectiveness of internal controls operated by the

Company, including financial, operational and compliance controls, and

risk management. The Board recognises its responsibility in respect of

the Company’s risk management process and system of internal control

and oversees the activities of the Company’s external auditors and the

Group’s risk management function (supported by the Audit and Valuation

Committee), and accordingly the Board’s reviews its internal controls and

risk management framework on an annual basis (including once in the

current year of reporting).

A review of the Company’s risk management approach is further

discussed in the Strategic Report on pages 66 to 70.

For details on the management and mitigation of each principal risk see

pages 71 to 79.

The Group’s Viability Statement is detailed on pages 69 to 70.

Please refer to pages 133 to 138 for further detail in relation to the role of

the Audit and Valuation Committee.

The Group’s governance structure for risk management is illustrated on

pages 66 to 70.

Board induction, ongoing training, professional development

and independent advice

Board members are advised by the Company Secretary and the UK

General Counsel of the legal and regulatory obligations of a Director of

a company listed on the LSE. All Directors have access to the advice

of the Company Secretary and the UK General Counsel, as well as

independent professional advice at the Company’s expense, on any

matter relating to their responsibilities. Details on induction, ongoing

training and professional development for Board members are provided

in the report of the Nomination Committee, see pages 158 to 161.

Company Secretary

The Board has appointed Link Company Matters Limited to act as

Company Secretary to Georgia Capital PLC. Link Company Matters

Limited is one of the UK’s largest professional services secretarial teams.

Re-election of Directors

All Directors are required under the Code to be elected or re-elected by

shareholders at the Company’s AGM in May 2024. The Board has set

out in its Notice of Annual General Meeting the qualifications of each

Director and support for election as applicable.

Workforce engagement

As Georgia Capital is a relatively small holding company with a diverse

number of portfolio companies, and given the relative independence

of these companies, the steps and tools used to encourage employee

engagement are developed within the companies themselves, and

shared with other portfolio companies as deemed useful, rather than

following a “top-down” approach directed by Georgia Capital. While

formal intragroup exchanges occur (e.g. head office staff and staff from

the portfolio companies coming together to celebrate the Company’s

fifth anniversary), it is the exception rather than the rule. Regular

monitoring of our portfolio companies and ongoing strategic advice is

the responsibility of the Group Chairman and CEO and his central team.

In light of the above, for workforce engagement purposes, the Board has

determined that the relevant workforce is the central team.

The Board is mindful that attracting and retaining talent in a highly

competitive sector is crucial to the success of the Group. As such,

we are keen to understand the employee voice on an ongoing basis.

GCAP has a small number of employees, which enables regular formal

and informal access to Board Directors, irrespective of seniority. Maria

Chatti-Gautier, as the Non-Executive Director responsible for leading

employee engagement, promotes informal discussions – such as over

coffee, at dinners and during walk-arounds of the office – and also hosts

more formal discussion groups. This creates channels of communication

between the Board and the workforce and allows the team to offer

their views, ensuring the Board understands employee motivations and

concerns. Constructive conversations were held on workforce matters,

morale, turnover and the engagement of senior management with the

rest of the team.

In addition, an employee satisfaction survey of head office staff was

undertaken. The overall positive results are being reviewed by Ms Chatti-

Gautier and senior management. Ms Chatti-Gautier regularly reports

back to the Board for discussion, and this feedback forms an important

part of our consideration of the Group’s culture and operations.

Furthermore, site visits and management presentations that occur in

connection with important strategic or investment decisions provide the

Board access to the management teams of the portfolio companies.

CORPORATE GOVERNANCE FRAMEWORK CONTINUED

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Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

These meetings are occasions for the Board to test firsthand how well

the Group’s culture is being transmitted.

Please refer to the Resources and Responsibilities section on page 80 of

this report and the Sustainability Report for further details on workforce

engagement activities carried out throughout the year, and the output of

that engagement.

Georgia Capital: As our people are our main asset, we invest

significantly in engaging and motivating our staff. The Company has

a small head office (c.45 people) and we encourage an open-door policy

– staff can approach management at any time with any concern.

In 2023, attendance at the office was voluntary. Distance and hybrid

working environments facilitated staff engagement through online

platforms. Regular meetings organised by the Chairman and CEO

were held with senior and middle management. Messages from these

meetings were cascaded down to all employees.

At our regular Board and Committee meetings, interaction with a

number of GCAP holding company personnel occurs naturally as part

of the meeting where they present to the Board and/or participate in

the discussion. The designated Non-Executive Director for workforce

engagement, the Senior Independent Non-Executive Director and other

Non-Executive Directors also “walk the halls” during their visits and

engage informally with the team.

Annual General Meeting

The Notice of Annual General Meeting is circulated to all shareholders

at least 20 working days prior to such meeting. All shareholders are

invited to attend the AGM, where there is an opportunity for individual

shareholders to question the Chairman and the Chairs of the principal

Board Committees.

After the AGM, shareholders can talk informally with the Directors.

As recommended by the Code, all resolutions proposed at the 2024

AGM will be voted on separately and the voting results will be announced

to the LSE and made available on the Company’s website as soon as

practicable after the meeting. These will include all votes cast for and

against and those withheld, together with all proxies lodged prior to the

meeting. In the event that 20% or more of the votes are cast against a

resolution, an explanation will be provided in the announcement to the

LSE of the actions the Company will be taking to address shareholders’

concerns. A follow up announcement would then be made within six

months of the AGM regarding feedback received from shareholders and

the subsequent actions taken by the Company.

See page 207 for further shareholder information and page 129 for

further information on shareholder engagement.

Diversity Policy

The Board and senior leadership’s gender identity and ethnicity data

presented in accordance with Listing Rule 14.3 can be found on page 160.

For further information, please see the Company Diversity Policy, which

incorporates the Board’s Diversity Policy, at:

https://georgiacapital.ge/governance/cgf/policies.

For a breakdown of the gender diversity figures for the Company,

please refer to the Resources and Responsibilities section on page 84 of

this report.

CORPORATE GOVERNANCE FRAMEWORK CONTINUED

COMMITMENT TO

COMPREHENSIVE

AND TRANSPARENT

REPORTING

Dear Shareholders

I am pleased to present the Audit and Valuation Committee’s

(“the Committee”) report for the year ended 31 December 2023.

During the year, the Committee has kept its focus on its key

responsibilities: oversight of financial reporting matters, monitoring the

effectiveness of risk management and internal control systems, reviewing

and providing constructive challenge to the detailed investment valuation

process, and overseeing the relationship with the external auditors.

One of the Committee’s primary responsibilities is to assist the Board

in ensuring the robustness of the Group’s investment and valuation

processes including monitoring compliance with the Valuation Policy and

the fair value measurements under IFRS 13. The Committee has spent

considerable time providing independent challenge to management

when considering the specific performance and valuations of individual

investments and of the portfolio. The Committee concluded that

management’s approach was appropriate and was satisfied with the fair

value recognised throughout the year and as at 31 December 2023.

The Committee continues to review the provision of external audit

and audit-related services provided by PricewaterhouseCoopers LLP

(“PwC”). The Committee reviewed the external auditors’ independence,

and, through its evaluation of the external audit, is satisfied that the

external auditor continues to be independent and provides an effective

audit service, which is described later in this report. We are pleased to

recommend to shareholders that PwC be re-appointed as the Company’s

auditors at the forthcoming AGM.

This Group’s successful issuance of the SLB – the first of its size and

kind in Georgia – is described elsewhere in this Annual Report. The

Committee oversaw a complete tender process to secure external

verification services for the Group’s GHG emissions, which was one of

the requirements of the SLB Framework. The process concluded with

the appointment of EY.

Through the Head of Internal Audit, the Committee, along with

management, oversees the Internal Audit functions of the Group’s

portfolio businesses. The Head of Internal Audit and the Committee

continue to work together to further develop the Internal Audit function.

Other important areas of focus in 2023 included a review of dividend

income from portfolio companies, regulatory changes in the region and

the continued progress against the strategic priority of deleveraging the

Company. Although the Georgian economy has demonstrated great

resilience in 2023, tensions in the region continue to present challenges.

Kim Bradley stepped down as a member of the Board and Maria

Chatti-Gautier was appointed a member of the Committee, both with

effect from the 2023 AGM on 17 May 2023. The Committee held a

mixture of in-person and virtual meetings throughout the year. Further

details about our work are set out on the following pages.

David Morrison

Chairman of the Audit and Valuation Committee

21 March 2024

Committee membership Meeting attendance

David Morrison (Chairman) 5/5 Scheduled

6/6 Ad hoc

Maria Chatti-Gautier

2/2 Scheduled

3/3 Ad hoc

Massimo Gesua’ sive Salvadori 5/5 Scheduled

6/6 Ad hoc

AUDIT AND VALUATION COMMITTEE REPORT

David Morrison

Chairman of the Audit

and Valuation Committee

1 The number of meetings of the Committee attended by each member during the

year, together with the number of meetings they were entitled to attend.

2 Maria Chatti-Gautier joined as a member of the Committee with effect from the

17 May 2023.

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Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

AUDIT AND VALUATION COMMITTEE REPORT CONTINUED

Internal audit • Reviewed reports of internal audits, monitored action points and addressed actions arising from audit visits.

• Reviewed, approved and oversaw the implementation of the 2023 Internal Audit Plan and budget. The plan is designed

using a risk-based approach aligned with the overall strategy of the Group.

• Monitored and reviewed (i) the effectiveness of the Company’s Internal Audit function via a quality assessment report;

and (ii) implementation of the enhanced Internal Audit function agreed with Internal Audit.

• Reviewed the Group Internal Audit Charter.

• Monitored the scope and effectiveness of the Group’s Internal Audit function.

External audit • Monitored the effectiveness and performance of the external auditor.

• Oversaw the audit engagement, including the degree to which the external auditor was able to assess key accounting

and audit judgements.

• Reviewed the annual audit plan including the approach, scope, level of materiality and risk assessments and significant

audit risks.

• Reviewed the audit results report, including the results from testing key audit matters, judgements, level of errors and

underlying reasoning.

• Reviewed and confirmed the objectivity and independence of the external auditor and compliance with ethical,

professional and regulatory requirements.

• Reviewed the qualifications, expertise and resources of the external auditor.

• Agreed the terms of the external auditor’s engagement and fees.

• Approved the policy for non-audit fees.

• Recommended the re-appointment of the external auditor.

• Conducted an annual evaluation of external audit effectiveness.

• Monitored management’s responsiveness to the external auditor’s findings and recommendations.

Governance • Reviewed governance processes in place to oversee the valuation of portfolio companies.

• Reviewed and approved the Committee’s Terms of Reference.

• Reviewed and recommended to the Board for approval: the Whistleblowing, Anti-Bribery and Anti-Corruption and

Non-Audit Services Policies.

• Evaluated the effectiveness of the Committee.

• Received information and regulatory updates that could impact the work of the Committee, including briefing on IFRS

S1 and IFRS S2.

Significant accounting

and financial judgement

matters considered How the Committee addressed the matter

Portfolio company

fair value estimation

and disclosure

Reviewed quarterly valuations of the Company’s portfolio investments presented to it by management. Reviewed and

challenged assumptions and judgements applied by management and third-party valuation experts and the appropriateness

of their scope of work.

The Committee considered and challenged whether management followed appropriate valuation standards as reflected

in the Valuation Policy and used appropriate judgement. The Committee considered in discussions with the external

auditor the methods used to account for valuations. The Committee also challenged the implications relating to climate

change and global macroeconomic trends in the valuations of the Company’s portfolio investments.

Earnings and multiple assumptions: Earnings data, received from portfolio companies and closely monitored by management,

was presented at the Committee meetings. Subsequently, actual earnings might have been adjusted in management’s

proposed valuations. Any material adjustments were highlighted to the Committee for review and approval. All multiples used

by management, including those that have been adjusted, were presented to the Committee quarterly.

Assets valued using a DCF basis: For assets valued using a DCF basis, material assumptions in the DCF valuations and any

changes to these assumptions are reviewed by the Committee. Sensitivity to assumptions is also noted. Any material changes

are reviewed by the Committee and external advice is sought from time to time. The Committee reviewed and challenged

the cash flow projections, terminal values and discount rates selected by management with reference to market transactions,

WACC calculations and other public data. Any material changes are reviewed by the Committee.

As a result, the Committee was satisfied with the appropriateness of valuation methods used and the reasonableness of

assumptions and judgements applied in valuation.

Going concern

and viability

On an annual basis the Committee reviews and approves the long-term viability review prepared by management and satisfies

itself that the going concern basis for the preparation of the Group’s results remains appropriate. The long-term viability review

was based on the Group’s three-year strategic plan, including forecast investment, realisations, overheads, financing cash

flows and dividends. The Committee considered management’s assessment of the Company’s ability to continue as a going

concern and its long-term viability, taking into consideration the ongoing impact of global macroeconomic trends. The result

was the Committee’s recommendation of the Viability and Going Concern statements to the Board for approval. You can read

more about the Going Concern assessment and Viability Statement on pages 69 to 70.

Investment entity

status

The Committee continued assessing the Company’s compliance with IFRS 10 criteria for meeting investment entity status.

In making this assessment, the Committee considered each criteria and characteristic described in IFRS 10, as well as

developments during the year, and is satisfied that the Company continues to meet the definition of an investment entity as of

31 December 2023.

Introduction and key purposes and responsibilities

This report outlines the functioning and activities of the Committee

during the reporting period, including an overview of the key areas of

activity and principal topics covered at each Committee meeting.

The Committee’s role is to recommend the financial statements to

the Board and review the Group’s financial reporting and accounting

policies, including formal announcements and trading statements

relating to the Company’s financial performance, ensuring the integrity

of the Company’s published financial information, and reviewing

the judgements made by management, along with the underlying

assumptions and estimates on which they were based. In addition,

the Committee oversees the role of the Internal Audit function (internal

control environment), risk management and the relationship with

the external auditor. The Committee also received reports and held

regular discussions regarding the ongoing viability of the Company

and its liquidity status. The Committee continued to focus on the key

issues relevant to the Group’s financial reporting, and worked with

management, and PwC, to review any changes required in response to

the introduction of new accounting or regulatory guidance.

On behalf of the Board, the Committee monitors the integrity of the

valuation process. The Company is an investment entity as defined in IFRS

10 and, as a result, measures its investments in portfolio companies at fair

value (through profit or loss) instead of consolidating them.

The Chairman of the Committee reports to the Board on how it has

discharged its responsibilities at a subsequent Board meeting and

makes recommendations to the Board. Details of the Committee’s roles

and responsibilities are outlined in the Committee’s Terms of Reference

and can be found on the Company’s website at

https://georgiacapital.ge/governance/cgf/terms.

Composition and operations of the Committee

The Committee members – David Morrison (Chairman),

Massimo Gesua’ sive Salvadori, and Maria Chatti-Gautier –

are all Independent Non-Executive Directors.

For the purposes of the Code and of DTR 7.1, the Board is satisfied that all

members of the Committee have recent and relevant financial experience

and the Committee as a whole has competence relevant to the sector in

which the Company operates. Please refer to the detailed biographies

of the Committee members on pages 122 to 123, which include their

financial experience and reasons for appointment to the Board and

the Committee.

The meeting attendance of the Audit and Valuation Committee can

be seen on page 127. The Company Secretary is Secretary to the

Committee and attends all meetings. Meetings are also attended by the

Chief Financial Officer, the Head of Technical Accounting and Valuation,

the Head of Finance and the Head of Internal Audit.

In addition, representatives of PwC, the Company’s external auditor, are

invited to attend several meetings of the Committee each year. On some

occasions, invitations to attend are extended to other members of the

Board and management where necessary, to provide a deeper level of

insight into key issues and developments. The Committee also met with

the external auditor, without management present, to allow discussion of

any issues or concerns in greater detail. The external auditor confirmed

it was satisfied with the communication between all the stakeholders.

In addition, the Chair of the Committee has maintained regular dialogue

with the lead partner of the external auditor during the period.

Activities of the Committee in 2023

The table below summarises the Committee’s activity during 2023.

Area of focus Core activities

Financial reporting • Reviewed the appropriateness and disclosure of accounting policies and practices.

• Reviewed the Annual Report and Accounts content and advised the Board on whether the Annual Report and

Accounts was fair, balanced and understandable.

• Reviewed the Company’s annual and interim financial statements and quarterly accounts relating to the Company’s

financial performance, including the significant financial reporting policies and judgements contained in them and, in

particular, the valuation of portfolio companies (see below).

• Reviewed and recommended to the Board for its approval the Going Concern and Viability Statements.

• Reviewed overall presentation of APMs, evaluated clarity of reconciliations and challenged the nature of adjusting items.

• Reviewed the Company’s Sustainability Report and TCFD disclosures and referred it to the Board for approval.

Valuation • Ensured that the Valuation Policy is continuously and consistently applied and complies with IFRS 13, Fair Value

Measurement, and with the obligations within any agreements in place, legislation, regulations, guidance and other

policies of the Company.

• Reviewed quarterly valuations of the Company’s portfolio investments considering recent market developments and the

future business plans of portfolio companies prepared and presented to it by management based in part on reports by

an independent valuation firm.

• Received updates and reports from the Group’s IFRS technical accounting group and valuation workgroup.

• Considered the extent of valuation disclosure in the Company’s annual and interim reports.

Risk and control

environment

• Reviewed and assessed the effectiveness of the Company’s internal controls and risk management processes.

• Reviewed IFRS 10 requirements and ensured that the Company continues to meet the definition of investment entity.

• Reviewed the results of risk identification and assessment work performed by management.

• Reviewed the Board’s approach to assessing the Company’s long-term viability.

• Reviewed reports from the external auditor where they have looked at internal controls as part of the annual audit process.

• Reviewed the Company’s principal risks and uncertainties statement included in the Annual Report and Accounts and

supporting stress test scenarios.

• Regularly monitored the internal and external environment to ensure that any new or emerging risk is identified in a

timely manner and responded to appropriately.

• Reviewed compliance with regulatory rules and monitoring findings.

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Georgia Capital PLC Annual Report 2023

136

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

Risk management and control environment

The Committee assists the Board in fulfilling its responsibility to review

the adequacy and effectiveness of the controls over reporting and risk.

It reviews the effectiveness of the policies, procedures and systems in

place related to operational risks, compliance, information technology

(IT) and information systems (IS) and assesses the effectiveness of

the risk management and internal control framework. Where areas for

improvement are identified, the Committee ensures that there are the

correct processes in place to effectively take action to address them.

Key developments affecting our principal risks and associated mitigating

actions are reviewed by the Committee. Further information on risk

management and internal controls can be found on pages 66 to 70.

Principal risks the Group faces are set out on pages 71 to 79.

The Committee is supported by several sources of internal assurance

within the Group to discharge its responsibilities. As part of the regular

reporting from the Chief Financial Officer and the Finance team

regarding the operating performance of the portfolio companies, the

strength of the internal control environment is considered. Management

also provides updates on how risks, for example, bribery and information

security, are managed within business areas, and updates are presented

to the Board or the Committee as appropriate. Further, during the year,

the Internal Audit function continued to assist management to perform

certain risk identification and assessment activities at the private portfolio

companies, the results of which were presented and discussed at the

Committee meetings.

Internal Audit

The Head of Internal Audit has direct access to the Committee and

the opportunity to discuss matters with the Committee without other

members of management present. The Committee also monitor the

resources dedicated to Internal Audit as well as the relevant qualifications

and experience of the team.

Throughout the year, the Committee received regular reports from

Internal Audit on the progress against the approved Internal Audit Plan

and on the audits themselves, including significant findings as well as the

corrective measures recommended to management. The Committee

also reviewed and monitored management’s responsiveness to the

corrective measures and found that, in general, management agreed

to the recommendations where control deficiencies were identified,

and used them as a basis to improve processes. Implementation of the

remedial actions was reviewed by Internal Audit and reported to the

Committee. The Committee was pleased to review reports from Internal

Audit outlining actions being taken by management in the portfolio

businesses to maintain and enhance the control environment in the year

post implementation of the Group’s updated strategy last year and the

new internal audit framework. The Committee also reviewed the Head

of Internal Audit’s proposals to enhance the effectiveness of the Internal

Audit function and to raise its profile across the Group.

The processes described above ensure that the effectiveness of the

controls is reviewed on an ongoing basis, and the Committee are

pleased to report that no significant weaknesses in our risk management

processes or internal controls were identified this year.

Internal Audit effectiveness

The Committee fulfils its responsibility to review the effectiveness of the

Internal Audit department by considering progress against the agreed

plan, reviewing the outcomes of their reports and recommendations,

management’s implementation of recommendations and closure of

the audits, access to experts, the annual strategy and a management

assessment of quality in the year taking into account the need

to respond to changes in the Group’s business and the external

environment. On this basis, the Committee concluded that the Internal

Audit function is effective and respected by management, and that it

conforms to the standards set by the Institute of Internal Auditors, the

“International Standards for the Professional Practice of Internal Auditing”

(“Standards”) contained in the International Professional Practices

Framework (IPPF) issued by the Institute of Internal Auditors (“IIA”).

Adherence to the professional Standards has been self-assessed by

the Group Head of Internal Audit within the year. The Head of Internal

Audit is a Certified Internal Auditor (CIA) accredited by the Institute of

Internal Auditors. The Committee has endorsed a plan by the new Head

of Internal Audit to have an external assessment of the Internal Audit

function completed by the end of 2024, to provide assurance over the

quality and professionalism of the Group’s internal audit provision.

The Committee values the work of the Internal Audit department in

providing independent and objective assurance in meeting its corporate

governance and regulatory responsibilities.

External auditor

Oversight of the relationship between the Group and the external auditor

is one of the Committee’s key responsibilities. PwC was appointed by

the Board as the statutory auditor in 2022, following a competitive tender

process, and was re-appointed by shareholders at the 2023 AGM.

Auditor effectiveness

The Committee has an established framework for assessing the

effectiveness of the external audit process. This includes:

• considering reports from the auditor on the process they have adopted

to identify financial statements risks and key areas of audit focus;

• regular communications with the external auditor (without management

present) and management (without the external auditor present);

• a review of the final audit report, noting key areas of auditor

judgement and the reasoning behind the conclusions reached;

• a review of the annual FRC Audit Quality Inspection Report of the

external auditor;

• use of a questionnaire completed by all the necessary

stakeholders; and

• review of the audit plan.

The Committee concurred with management’s view that there had

been appropriate focus and challenge of the primary areas of audit

risk and the Committee concluded that the substantive and detailed

approach taken by the auditor was entirely appropriate and effective.

The Committee was able to see first-hand how the auditor challenged

management on their assumptions used when determining valuations at

each Committee meeting, when PwC was in attendance. PwC utilised

in-house specialisms to support its audit work of the Group and, overall,

the auditors’ risk-based approach drew on both their knowledge of the

business and the wider economic and business environment.

The Chairman engages directly with the relevant PwC audit Lead

Partner, Allan McGrath.

Auditor independence

The Committee has undertaken a formal assessment of PwC’s

independence, which included a review of a report from PwC describing

their arrangements to identify, report and manage any conflicts of

interest, and their policies and procedures for maintaining independence

and monitoring compliance with relevant requirements; and the value

of non-audit services provided by PwC. PwC have reviewed its own

independence in line with the FRC’s Ethical Standards for auditors, other

professional standards, and its own ethical guideline standards. PwC

has confirmed that they believe they remained independent throughout

the year from the date of their reappointment at the May 2023 AGM,

within the meaning of the regulations on this matter and in accordance

with their professional standards. PwC has provided the Committee

with details of the safeguards in place which include a culture of regular

training, internal accountability, and independent review controls. Having

considered the safeguards, the level of non-audit services provided

in the year and a formal statement of independence the Committee is

satisfied that the independence of the auditor has been maintained.

AUDIT AND VALUATION COMMITTEE REPORT CONTINUED

Alternative

performance

measures (APMs)

The Committee considers it important to take into account both the statutory measures and the APMs when reviewing the

financial statements. In particular, items excluded from adjusted profit before tax were reviewed by the Committee. As part

of that review, the Committee considered the prominence of APMs used by the Company in the reporting and challenged

management where appropriate. The Committee is satisfied that the requirements of DTRs and the mandatory guidelines

issued by the European Securities and Markets Authority on APMs were met and the reconciliation between the APMs and

the IFRS and presentation of these items is clear, applied consistently across years and that the level of disclosure is

appropriate. You can read more about APMs, including the applicable IFRS reconciliations, on pages 94-98 of the Annual

Report and Accounts.

Fair, balanced and

understandable

reporting

Under the UK Corporate Governance Code, the Board should establish arrangements to ensure the Annual Report presents

a fair, balanced and understandable assessment of the Group’s position and prospects. It has asked the Committee to

support it in coming to that conclusion.

In making this assessment, the Committee:

• satisfied itself that there was a robust process of review and challenge at different levels within the Group to ensure

balance and consistency;

• reviewed several drafts of the 2023 Annual Report and Accounts and directly reviewed the overall messages and tone

of the Annual Report and Accounts with the Chairman and CEO, and the CFO; and

• considered the reporting of the Group’s performance, business model and strategy, the competitive landscape in which

it operates, the significant risks it faces, the progress made against its strategic objectives and the progress made by,

and changes in fair value of, its portfolio companies during the period, both from management and the external auditor.

After consideration of all this information, we are satisfied that, when taken as a whole, the Annual Report and Accounts is fair,

balanced and understandable, and provides the information necessary for shareholders to assess the Group’s performance,

business model and strategy.

Key activity highlights

Financial reporting and valuation

The valuation of investments remains the most material area of

judgement in the financial statements and is a key audit risk for the

Group. The principal responsibility of the Committee is to consider

significant areas of complexity, judgement and estimation that have been

applied in the preparation of the financial statements. The Committee

assists in the formalisation and documentation of management’s

valuation judgements in line with the Group’s accounting policies and

industry valuation guidance from IPEV. This includes ensuring that the

Annual Report and Accounts and half-year reporting, taken as a whole,

are fair, balanced and understandable and comply with disclosure

requirements as discussed in greater detail below.

The Committee’s responsibilities include monitoring the integrity of

narrative and non-financial reporting, including sustainability and reporting

on related significant issues (a concept that has gained greater emphasis

in recent years due to additional ESG reporting through disclosure

frameworks such as TCFD).

During 2023, the Committee received detailed reports from the external

auditor in respect of the main areas of audit focus and these were, in

some instances, discussed without management present. In addition,

regular reports were received from the CFO on the financials and internal

controls and where appropriate.

As the investment portfolio is comprised of private companies, the

Committee and external auditors spent a significant amount of time

reviewing and challenging management’s valuations. The assessment

of fair value is subjective and requires the consideration of significant

and complex judgements to be made by management. In 2023, the

Committee oversaw the independent valuations, performed by third-

party valuation experts, establishing fair value ranges for all large and

investment stage private portfolio companies. The appointment of

third-party valuation experts increases the integrity of the process which

includes consideration of how other market participants approach

valuations for year-end reporting. The valuation methodology applied

by the independent experts was reviewed in detail by the Committee,

as well as key assumptions used and the most appropriate point in the

established range was selected for each business.

The Committee is responsible for the review and approval of the fair

value of investments at the end of each reporting period proposed

by Georgia Capital’s Management Board. With the external auditors,

the Committee reviewed in detail both (i) the auditors’ assessment of

the methodologies applied by the independent valuation company

for the large and investment stage private portfolio companies and by

management for “other” assets, and (ii) the basis for their independent

assessment of the valuations. The Group continued to apply its

Valuation Policy consistently across investments at the year end and the

Committee also ensured that the valuations reflected climate change,

global and regional economic trends, as well as the future business

plans of portfolio companies.

Full details on our valuation policies and procedures which are

overseen by the Committee can be found on page 69 (please see

valuation workgroup) and page 99 (please see valuation methodology).

For the value drivers within the Group’s portfolio in the year, please see

pages 104-105.

The Committee also considered whether the external valuation expert

provides meaningful additional scrutiny and challenge to the valuation

process. The Committee concluded that it was satisfied with the current

level of scrutiny and challenge by the external valuation expert, this

Committee, management and the external auditors.

Management, under the supervision of the Committee, considers the

suitability of the accounting policies which have been adopted, ensuring

that key reporting estimates and judgements were appropriate, including

the assessment of appropriateness of continuing the investment entity

accounting, and ensuring that the external auditors were afforded timely

and full access to relevant information.

Using the Committee’s own independent knowledge of the Company

and its portfolio investments, but also considering the external auditor’s

assessment of risk, the Committee has, where necessary, challenged

the actions, estimates and judgements of management in relation to

the preparation of the financial statements. When considering financial

reporting, the Committee assesses compliance with relevant accounting

standards, regulations and governance codes. In particular, the

Committee continues its robust review of going concern and viability

assessments under a number of scenarios.

139

Georgia Capital PLC Annual Report 2023

138

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

Non-Audit Services Policy

The Group’s Non-Audit Services Policy safeguards the external auditor’s

independence and objectivity. The provision of non-audit services by

our external auditors aligns with the Revised Ethical Standard. Any work

other than for audit or review of interim statements to be undertaken by

the external auditor now requires authorisation by the Committee except

in very narrow circumstances. The Group’s Non-Audit Services Policy is

available on our website at:

https://georgiacapital.ge/governance/cgf/policies.

The ratio of non-audit fees to audit fees for 2023 is 0:1. As indicated

in Note 9 to the financial statements, the total fees paid to the external

auditor for the year ended 31 December 2023 was GEL 1.5 million. In

2023, Georgia Capital paid US$ 30 thousand to PwC for services related

to the issuance of SLB. The Committee is of the view that engaging PwC

on occasions for non-audit work is likely to be the most efficient method

of having those particular services delivered to the Company and does

not consider this work would compromise the independence of the

external auditor. Where PwC has been chosen, they have demonstrated

the relevant skills and experience, making them an appropriate supplier

to undertake the work in a cost-effective and time-efficient manner, with

appropriate safeguards in place.

Governance

The Committee received regular updates from the Company Secretary

and PwC on the progress of UK audit and governance reforms

and specifically reviewed BEIS’s Response Statement following its

consultation on reforms aimed at restoring trust in audit and corporate

governance and a timetable on the key areas of significance to the

Group arising from the Response Statement. Additionally, while the

Group will not be required to comply with the FRC’s Minimum Standard

for Audit Committees which is mandatory for FTSE 350 entities, the

Committee has considered the Standard (described elsewhere in this

report), accepting that it forms part of good governance principles.

Compliance

Ensuring regulatory compliance remains a priority from the perspective

of the Committee. The Committee conducts an annual review of the

Company’s Whistleblowing and Non-Audit Services Policies and their

impact in its remit, and it is the responsibility of the Committee to ensure

that there is a robust governance framework and effective procedures

are in place.

PwC carried out fraud risk assessment and determined that there was a

low risk of fraud occurring undetected.

For the audit of the financial statements in this Annual Report, the

Company complied with the Code and mandatory audit processes,

including The Statutory Audit Services for Large Companies Market

Investigation (Mandatory Use of Competitive Tender Processes and

Audit Committee Responsibilities) Order 2014 (“CMA Order”), and the

Committee complied with the responsibility provisions set out in the

CMA Order relating to: (a) putting the audit services engagement on

tender every ten years; and (b) strengthening the accountability of the

external auditors to the Committee, including: requiring that only the

Committee is permitted to agree to the external auditors’ fees and scope

of services; influence the appointment of the audit engagement partner;

make recommendations regarding the appointment of auditors; and

authorise the auditors to carry out non-audit services. External audit

services were last tendered in 2022, resulting in the appointment of PwC

as the Group’s statutory auditor for a three-year period spanning 2022,

2023 and 2024. Currently, the Company is considering the possibility

of re-tendering for external audit services beginning with the review of

financial statements for six months ending 30 June 2025. If initiated, the

re-tender for the provision of external audit services will be launched in

the second half of 2024, and will reflect an appropriate balance of factors

such as the auditor knowledge of controls and risks, maintaining audit

quality, independence and objectivity, and providing value for money.

The Committee will ensure that the decision regarding re-tendering is in

the best interest of our shareholders.

Committee effectiveness review

An internal effectiveness review of the Committee was facilitated by

the Company Secretary. The effectiveness evaluation concluded that

the composition of the Committee was appropriate, there was the

right level of stakeholder engagement and debate (acknowledging

the technical and detailed nature of the Committee’s discussions), it

provided an effective and appropriate level of challenge and oversight of

the areas within its remit, and its Chair continued to perform effectively

with no significant concerns, noting that sufficient time is allocated at

Board meetings for the Chair to report to the Board on the work of

the Committee.

Priorities for 2024

Our priorities for 2024 include continued focus on:

• working with management to position the Group prudently in response

to the changing macroeconomic conditions, remaining cognizant of,

and ready to respond to, any new areas of emerging risk;

• monitoring compliance with the Group’s Valuation Policy,

individual portfolio company valuations and the effectiveness

of external valuations;

• monitoring the financial reporting implications of strategic actions

taken by the Group, including dispositions and acquisitions;

• ensuring continued integrity and balance in the Group’s

financial reporting;

• monitoring the control environment and its appropriate roll-out at the

various portfolio companies;

• continued development of the Internal Audit function around the

Head of Internal Audit;

• compliance with TCFD requirements and referred these matters to

the Board and other sustainability-related reporting requirements;

• following developments on the planned enactment of legislation in the

UK around audit and corporate governance reform; and

• continuing to build a good working relationship with PwC.

David Morrison

Chairman of the Audit and Valuation Committee

21 March 2024

AUDIT AND VALUATION COMMITTEE REPORT CONTINUED

INNOVATIVE ALIGNMENT

OF REMUNERATION

WITH SHAREHOLDERS’

INTERESTS AND

EXPERIENCE

Committee meetings and attendance

Neil Janin (Chairman) 2/2

David Morrison 2/2

Maria Chatti-Gautier 3/3

Neil Janin

Chairman of the Remuneration Committee

Dear Shareholders,

I am pleased to present the Directors’ Remuneration Report for the year

ended 31 December 2023.

I became Chair of the Remuneration Committee during the year, after

the May 2023 AGM when Jyrki Talvitie did not stand for re-election

after our change to a Standard listed company. I would like to thank my

predecessor Jyrki for all his work and dedication to the Committee.

I am pleased to bring the experience of several years’ membership on

the Remuneration Committees of Georgian groups that are or were also

listed on the LSE – of Georgia Healthcare Group PLC, BGEO Group PLC

and Bank of Georgia Group PLC.

At the 2023 AGM, the Directors’ Remuneration Report received 99%

approval. The Committee has been strongly encouraged by this level of

shareholder support.

Overview of remuneration structure

We believe that our Executive Director should fully share the shareholder

experience and are pleased that our shareholders strongly supported

at the 2023 AGM that our innovative shareholder-aligned approach to

remuneration should be retained.

Our Executive Director Irakli Gilauri’s salary, as well as his performance-

based remuneration, is comprised of deferred shares alone. Salary and

the maximum opportunity for the performance-based remuneration

(discretionary deferred shares) are set in a number of shares. By setting a

fixed number of shares (rather than a cash figure) our Executive Director

salary is aligned with the share price performance of the Company and

ensures that the Executive Director will not receive a windfall gain by

receiving a higher number of shares when awarded at a lower share price.

When renewed in 2022, the Remuneration Policy (the “Policy”) retained

the same number of shares for the salary and for the maximum

opportunity of the Executive Director as presented to shareholders for

their approval three years previously. Indeed, there has been no increase

in salary or incentive since 2018 when the Company listed.

The structure of the Policy follows relevant guidance including:

• Executive pension contributed by the Company will be the same

as for employees (although our Executive Director Irakli Gilauri has

waived his pension entitlement entirely).

• Shareholding guidelines with an equivalent of 200% of salary

(as compensation vests in tranches, the shareholding is built up

organically). Shareholding requirements are to be maintained for two

years’ post-employment.

• Both fixed salary and variable compensation vest over several years

and Irakli Gilauri has no cash salary and no cash bonus.

• Malus and clawback provisions are consistent with best practice.

Unusually, malus may also be triggered in certain circumstances over

the salary shares.

Our Group’s purpose is to provide investors with an opportunity to invest

in the historically fast-growing Georgian economy by giving them access

to attractive investments with long-term growth potential. Through our

structure, which remunerates our Executive Director solely in deferred

shares, he is also similarly invested in the Georgian economy and our

investment companies. Shareholder interests and experience are

strongly aligned with those of Mr Gilauri.

Our values are being entrepreneurial, having a learning mindset and

maintaining the highest standard of ethics including by setting the

tone at the top. The structure encourages the Executive Director to be

entrepreneurial and to grow the Group according to high standards (on the

basis that a short-term view negatively impacts share price in the medium

to long term), so that the value of his long-vesting remuneration increases

or decreases in line with that of the Company share price over time.

DIRECTORS’ REMUNERATION REPORT

141

Georgia Capital PLC Annual Report 2023

140

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

DIRECTORS’ REMUNERATION REPORT CONTINUED

What’s in this report

This Directors’ Remuneration Report includes the Annual Statement by the Chair of the Remuneration Committee, the Annual Report on

Remuneration and a Summary of the Director’s Remuneration Policy approved at the 2022 AGM.

The report complies with the provisions of the Companies Act 2006 and Schedule 8 of The Large and Medium-sized Companies and Groups

(Accounts and Reports) Regulations 2008. The report has been prepared in line with the recommendations of the UK Corporate Governance

Code and the requirements of the FCA Listing Rules.

The Committee retains discretion under the Policy, including to override

formulaic outcomes in accordance with the UK Corporate Governance

Code. In response to stakeholder feedback, however, we note that in

2020, we began disclosing (i) threshold, target and outperformance

targets alongside (ii) the weighting, for each key performance indicator

(KPI), and we continue that practice this year.

In line with increasing market practice, we also disclose our mechanisms

of enforcement of malus and clawback. The malus and clawback

triggers are set out in the Executive Director’s contract. Furthermore,

under the rules of the share plan, the trustee may cause shares to lapse

(malus) or to be recovered (clawback) including in accordance with the

provisions of the Executive Director’s contract. Lastly, as part of each

grant process, the Executive Director signs a confirmation that they

agree to be bound by the terms and conditions set out in the rules of the

share plan, including its malus and clawback provisions.

Similarly, the Committee also confirms that the 200% shareholding

requirement, to be built up and held for two years’ post-employment,

is included as an express provision in Irakli Gilauri’s contract, and further

that all unvested shares (his remuneration vests in tranches) are held in

the employee benefit trust (EBT).

At the most recent vote on the Directors’ Remuneration Policy, which

was the 2022 AGM, 94% of shareholders supported the Policy.

2023 performance outcomes

The Committee considered the CEO’s performance during 2023. Under

Mr Gilauri’s leadership, during 2023 there was deleveraging through the

successful issuance of a US$ 150 million sustainability-linked bond (SLB)

on the Georgian market. This issuance, combined with GCAP’s existing

liquid funds, was utilised to fully redeem our US$ 300 million Eurobond. The

Group’s retail (pharmacy) business completed the buyout of the minority

shareholders to increase GCAP’s stake to 97.6%. The hospitality business

successfully completed the sale of two operational hotels, two under-

construction properties, and a vacant land plot for a total consideration

of US$ 38.6 million and the proceeds from these sales were utilised for

deleveraging the hospitality business’s balance sheet. These transactions

marked further substantial progress towards two of our core strategic

priorities: to divest, over the next few years, subscale portfolio companies,

and to significantly reduce leverage in the Group’s balance sheet.

We noted the excellent performance of the Company over 2023 reflected

both in the results and the stakeholder experience. The share price

increased from GBP 7.30 at FY22 to GBP 10.22 at FY23. The share

buyback and cancellation programme benefitted shareholders, under

which the Group repurchased shares for a total consideration of US$

18.3 million during the year. The Committee was also pleased to note

that average employees’ cash salaries increased by 23%, share salaries

increased by 20% y-o-y and employee’s average bonus increased y-o-y

by 33%.

In accordance with his performance in financial year 2023, taking into

account the 83% performance against KPIs and the wider stakeholder

experience, the Remuneration Committee determined to award Irakli

Gilauri 160,000 deferred shares (80% of maximum opportunity) with

vesting and holding periods of up to six years from the beginning of the

work year. The Committee is satisfied that the overall number of deferred

discretionary shares awarded to Mr Gilauri for FY23 was fair and

appropriate in the circumstances.

You can read the KPI calculations and disclosures in the section “Basis

for determining Mr Gilauri’s discretionary share compensation in respect

of 2023” below.

Non-Executive Directors’ fees

The Board considered the appropriate level of fees following the changes

to the composition of the Board Committees made on 17 May 2023

after Kim Bradley and Jyrki Talvitie did not stand for re-election. The

Investment Committee’s work was absorbed into that of the Board

as explained in the Corporate Governance Statement section of this

Annual Report.

The Board reformulated the Board Committees in May 2023 as well

as the composition of the Committees, and it was noted that fees for

membership and Chair of the Nomination Committee were significantly

lower than the fees for other Committees. Under the Company’s

Remuneration Policy, the amount of remuneration for Board fees and

Committee fees may be reviewed from time to time, which may take

into account time commitment, responsibilities and technical skills.

It was, however, determined that the current fees did not reflect the

responsibilities of the Nomination Committee, particularly given the

increased stakeholder and cultural focus on Committee matters. The

Board therefore agreed a small increase of US$ 5,700 to each of the

members and Chair of the Nomination Committee with effect from

17 May 2023. The fees payable for membership of the Nomination

Committee nevertheless continue to remain lower than the total fees for

the Audit and Valuation Committee and the Remuneration Committee.

For each Non-Executive Director, their overall fees paid in 2023 took into

account the changes in Board and Committee membership during the

year as covered in the Governance section on page 150. Overall this

reflects that total fees decreased.

Remuneration Committee activities and workforce

engagement

During 2023 the Committee received insights into topics which were

the most pertinent to our investors and an overall view of remuneration

practices and investor response for the FTSE Small Cap market.

The UK General Counsel updated the Committee on guidelines of

proxy agencies and on proxy agency reports on the Company. The

Committee noted the 99% shareholder support of the 2023 Directors’

Remuneration Report.

The Committee considered benchmarking against the FTSE Small Cap

and peers, alongside possible bonus projections. It was noted that

Georgia Capital’s structure remained unusual, with no cash salary or

bonus for the Executive Director and long deferral periods for salary

shares and discretionary deferred shares, and therefore comparison

was made more difficult, especially as Georgia Capital itself is an

unusual company. The most comparable peers were the other UK

listed companies in Georgia, Bank of Georgia Group PLC and TBC

Group PLC.

The Committee determined the bonus pool on aggregate level and

rewards on individual level for senior management. The Committee

considered each manager’s performance and discussed the level of

differentiation appropriate to distinguish between individual performance.

While the portfolio companies do not form part of the workforce of the

holding companies, the Committee considered the wider workforce

policies in 2023 and employee compensation. This covered salaries

(cash, share and phantom shares), pension contributions (which is set

by Georgian legislation at 0%-2%), benefits, leave and working hours,

training and development, and number of staff by salary band. This was

covered at the holding company level and the Committee considered the

same for the main portfolio businesses including real estate, renewables,

beer, wine, distribution, healthcare, insurance and the largest schools.

Average employees’ cash salaries increased by 23% and share salaries

increased by 20% y-o-y, and employee’s average bonus increased by

33% y-o-y.

Maria Chatti-Gautier is the Company’s designated Non-Executive

Director for workforce engagement, and a member of the Remuneration

Committee. Employees were able to raise matters relating to the

workforce (including remuneration) through Ms Chatti-Gautier. Further

details on how the Board engages with its workforce can be found on

page 131 in the Corporate Governance Framework section. There are

only c.45 employees at the holding company level.

An external evaluation of the effectiveness of the Board was again

undertaken by Amandla UK Limited (“Amandla”) in 2023 which

encompassed the Remuneration Committee. The Board and its

members also underwent in-depth evaluations. Further details are set

out on page 161.

Neil Janin

Chair of the Remuneration Committee

21 March 2024

143

Georgia Capital PLC Annual Report 2023

142

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

How the Remuneration Committee addressed the factors in provision 40 of the Code

The Remuneration Committee considered the requirements of the Code in determining the remuneration structure and Policy, taking each of the

factors of provision 40 of the Code in turn:

Principle Approach

Clarity Remuneration arrangements are transparent and competitive. The Remuneration Policy describes the purpose, operation and

maximum potential of each remuneration element and illustrates a range of potential outcomes for the Executive Director. There

are only two main components of remuneration for Irakli Gilauri; the deferred share salary and the discretionary deferred share

incentive remuneration. There is no LTIP and salary is paid in a fixed number of shares

Simplicity The rationale is simple – this structure focuses the Executive Director and senior management on sustainable, long-term

performance of the Company by remunerating them wholly (in the case of the current Executive Director) or predominantly

(with respect to senior management) in deferred shares.

Risk By its nature, setting all of the CEO’s remuneration in shares which are deferred for up to six years from the start of the work

year means the remuneration structure drives the CEO and senior management to mitigate reputational, behavioural and undue

strategic risks as the outcome of such would be likely to affect the share price over the years. It also helps to avoid conflicts of

interest. Further, the Executive Director’s salary and bonus is calculated by reference to a fixed maximum number of shares.

By setting a fixed number of shares (rather than a cash figure) the salary structure aligns our Executive Director’s salary with the

share price performance of the Company and ensures that the Executive Director will not (unlike in other companies) receive a

windfall gain by receiving a higher number of shares when awarded at a lower share price.

Predictability The range of possible values is set out in the Policy voluntarily, including the impact of share price appreciation and depreciation,

to aid predictability. Further, by calculating the maximum opportunity to a fixed number of shares, the Company and its

shareholders have certainty regarding the Executive Director’s and senior management’s remuneration.

Proportionality Outcomes reward performance proportionately by reference to performance target ranges (threshold, target and

outperformance) and weightings. Further, to allow appropriate adjustment, the Committee retains discretion over the bonus.

For further considerations on proportionality, see section “Chief Executive’s pay and comparators” on pages 150 to 151.

Alignment

to culture

The current Executive Director’s entire remuneration, which is comprised of deferred shares rather than cash, promotes

alignment with the long-term success of the Company. Alignment with culture is supported by the inclusion of mentorship and

development, as well as personal development, within the CEO’s performance KPIs. Further information on alignment with the

Company’s purpose and values is set out in the Annual Statement of the Chairman on page 139.

Shareholder context

The Directors’ Remuneration Policy applicable to this section of the Annual Report on Remuneration was approved by shareholders at our AGM on

20 May 2022 (the “2022 Policy” or the “Policy”). The Policy received the following votes from shareholders.

Resolution Votes for % Votes against % Total votes cast Votes withheld

Approval of the Directors’ Remuneration Policy 26,599,621 93.68 1,795,458 6.32 28,395,079 590

Set out below are the shareholder voting figures for the Directors’ Remuneration Report (including the Annual Statement of the Chairman of the

Remuneration Committee) presented at our 17 May 2023 AGM.

Resolution Votes for % Votes against % Total votes cast Votes withheld

Approval of the Directors’ Remuneration Report 29,108,979 99.02% 286,694 0.98 29,395,673 50

The Remuneration Committee and its advisers

The Remuneration Committee is principally responsible to the Board for establishing a remuneration policy for the Executive Directors, the Chairman

and designated members of the executive management team that rewards fairly and responsibly, and is designed to support the Company’s strategy

and promote its long-term sustainable success. The Remuneration Committee ensures that performance-related elements of Executive Directors’

remuneration are transparent, stretching and rigorously applied. The Remuneration Committee’s full Terms of Reference are available on our website:

https://georgiacapital.ge/governance/cgf/terms.

From 17 May 2023, the Remuneration Committee has been comprised of three Independent Non-Executive Directors: Neil Janin, who serves as

Chairman, Maria Chatti-Gautier (designated Non-Executive Director for workforce engagement) and David Morrison. Prior to 17 May 2023, the

Remuneration Committee was comprised of Jyrki Talvitie as Chairman, Maria Chatti-Gautier and Neil Janin. The members’ attendance during

2023 is shown in the Board and Committee meetings attendance table on page 127. No other changes to the composition of the Remuneration

Committee were made in 2023.

In addition to the formal meetings held during the year, the Remuneration Committee participated in various discussions by videoconference

outside of these meetings. Other attendees at the Remuneration Committee meetings who provided advice or assistance to the Remuneration

Committee on remuneration matters from time to time included the CEO, the other Board members and the UK General Counsel. Attendees at the

Remuneration Committee meetings do not participate in discussions or decisions related to their own remuneration, which helps avoid any conflicts

of interest.

The Remuneration Committee did not use remuneration consultants in 2023 (or 2024 to date). The Remuneration Committee received advice on

compliance from Baker & McKenzie LLP, the Company’s legal advisers. The Remuneration Committee is of the view that the advice received from

Baker & McKenzie LLP is objective and independent.

Directors’ remuneration

Single total figure of remuneration for the Executive Director (audited)

The table below sets out the remuneration earned by Georgia Capital PLC’s sole Executive Director, Irakli Gilauri, in respect of his employment for the

years ended 31 December 2023 and 31 December 2022. Mr Gilauri’s compensation as set out in the table below is in the form of deferred shares

that vest in tranches with a vesting and holding period of up to six years from the beginning of the work year. The values shown in the table are

calculated at a fixed share price as described in footnotes 2 and 4 to the table. The actual value of the compensation as it is received over time will

fluctuate with increases and decreases in the value of the share price as illustrated in the graph on page 150.

The decrease in dollar equivalent for the deferred share salary between 2022 and 2023 reflects the decline in the share price between the award

date under Mr Gilauri’s original Service Agreement and his prolonged agreement signed in October 2022 (which extended the contract beyond May

2023) as described in footnote 3 to the table.

The increase in dollar equivalent for the discretionary deferred shares between 2022 and 2023 reflects both the higher percentage of the maximum

opportunity awarded for performance (60% in 2022 compared to 80% in 2023) but also the increase in share price between 2022 and 2023

award decision dates as described in footnote 4 to the table, illustrating the rationale behind the Policy of alignment between Mr Gilauri’s and the

shareholders’ experiences. The maximum discretionary opportunity remains constant at 200,000 deferred shares.

Cash salary

(US$)

Deferred share

salary

(US$)

Taxable

benefits

(US$)

Pension

benefits

(US$)

Total fixed pay

(US$)

Discretionary

deferred

(US$)

Total

variable pay

(US$)

Single

total figure

(US$)

2023 – 1,931,097 – – 1,931,097 2,038,400 2,038,400 3,969,497

2022 – 2,730,000 – – 2,730,000 1,078,800 1,078,800 3,808,800

Notes:

1 Mr Gilauri does not receive a cash salary.

2 Deferred share salary. The figures show the Georgia Capital PLC shares underlying nil-cost options granted in respect of the relevant year. 200,000 deferred salary shares

were awarded for the work year 2023 and for the work year 2022 for his role as CEO of Georgia Capital PLC (20,000 shares) and his role as CEO of JSC Georgia Capital and its

subsidiaries (180,000 shares). Deferred share salary in respect of a work year will vest over six years (from the beginning of the work year) with 20% vesting in each of the second,

third, fourth, fifth and sixth years following the end of the work year. Mr Gilauri does not receive any remuneration with respect to his role as Chairman of the Group. To discharge

the UK income tax and employee National Insurance contributions arising upon the grant of the salary shares, Georgia Capital PLC and the Executive Director agreed to waive

his entitlement to such number of the salary shares as needed for the payment of the Executive Director’s UK income tax and employee National Insurance contributions by

the Company. Under this arrangement, the Executive Director waived his entitlement to 8,601 deferred salary shares with respect to work year 2023 and 8,166 deferred salary

shares with respect to work year 2022.

Calculation of dollar value: US$ 1,931,097 value of deferred share salary in 2023 consist of 81,644 shares granted under Service Agreement ended May 2023 year and 118,356

shares under the prolonged Service Agreement signed in October 2022. The value of 81,644 shares granted for the work year 2023 and 200,000 shares granted for 2022

is calculated by reference to the share price on 12 July 2018, being the date of the Committee meeting at which the deferred share salary was determined. The share price

on 12 July 2018 was US$ 13.65 per share (the official share price of GBP 10.324 converted into US Dollars using an exchange rate of 1.322, being the official exchange rate

published by the Bank of England on the same date). The value of 118,356 shares granted for the work year 2023 under the prolonged employment agreement is calculated by

reference to the share price on the effective date of prolongation of service agreement. The share price on 24 October 2022 was US$ 6.90 (the official share price of GBP 6.10

converted into US Dollars using an exchange rate of 1.131, being the official exchange rate published by the Bank of England on the same date).

3 There are no taxable benefits or pension benefits for 2023 and 2022. Mr Gilauri has agreed for all pension contributions to be waived. Mr Gilauri was reimbursed for reasonable

business expenses, on the provision of valid receipts in line with the approved Policy. No money or other assets have been received or are receivable by Mr Gilauri in respect of a

period of more than one financial year.

4 Discretionary deferred share remuneration. The figures show the value of Georgia Capital PLC shares underlying nil-cost options granted in respect of the bonus award for the

year. For 2023, awards were granted over 160,000 shares. The value is calculated by reference to the share price on 19 December 2023, which is the last working day prior

to the date of the Remuneration Committee meeting which determined the discretionary deferred share award on 20 December 2023, being US$ 12.74 per share (the official

share price of GBP 10.000 converted into US Dollars using an exchange rate of 1.2739 being the official exchange rate published by the Bank of England on the same date). For

2022, awards were granted over 120,000 shares. The value is calculated by reference to the share price on 16 December 2022, which is the last working day prior to the date

of the Remuneration Committee meeting which determined the discretionary deferred share award on 19 December 2022, being US$ 8.99 per share (the official share price

of GBP 7.40 converted into US Dollars using an exchange rate of 1.2153 being the official exchange rate published by the Bank of England on the same date). Discretionary

deferred shares vest 25% in each of the second, third, fourth and fifth years following the end of the work year and are subject to a further holding period of a year. The basis for

determining Mr Gilauri’s discretionary deferred share remuneration is set out below.

5 The number of shares awarded pursuant to the deferred share salary and discretionary deferred share remuneration is fixed at grant. No discretion has been exercised as a

result of share price appreciation or depreciation. Discretionary deferred shares are subject to one-year targets which are satisfied pre-grant and the Company does not operate

an LTIP. No amount of the remuneration in 2023 is attributable to share price remuneration. No amounts were recovered or withheld in 2023. No dividend equivalents have been

received.

6. The Executive Director received 80,000 fewer discretionary deferred shares (120,000) in 2022 compared to 2021 (200,000).

Alternative remuneration table showing the Executive Director’s 2023 and 2022 remuneration discounted for time value of

money (unaudited)

For investor information, the alternative table below sets out the share remuneration earned by Irakli Gilauri in 2023 and 2022 as per the previous

table (Single total figure of remuneration for the Executive Director) but taking into account the time value of money discounted at 15%, given that

both the salary shares and discretionary deferred shares vest over a number of years. Further, the Executive Director may forfeit the shares on

cessation of employment in certain circumstances.

Deferred

share salary

(US$)

Discretionary

deferred shares

(US$)

Total salary and

discretionary

deferred shares

remuneration

(US$)

2023 1,125,303 1,264,643 2,389,946

2022 1,590,845 669,376 2,260,221

DIRECTORS’ REMUNERATION REPORT CONTINUED

145

Georgia Capital PLC Annual Report 2023

144

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

DIRECTORS’ REMUNERATION REPORT CONTINUED

The following table sets out details of total remuneration for the Chairman and Chief Executive Officer, Mr Gilauri, for the years ended 31 December

2018 to 31 December 2023 and his discretionary compensation as a percentage of maximum opportunity.

2018 2019 2020 2021 2022 2023

Single total figure of remuneration (US$) 4,066,962 3,790,000 3,898,000 4,414,000 3,808,800 3,969,497

Discretionary compensation as a percentage of

maximum opportunity (%) 85% 50% 80% 100% 60% 80%

Note: Maximum opportunity is 100% of total number of salary shares in accordance with the approved Policy.

Basis for determining Mr Gilauri’s discretionary deferred share compensation in respect of 2023 (audited)

Mr Gilauri’s KPIs included financial targets, strategic targets and non-quantifiable components. The financial and strategic elements largely track

the Group’s KPIs as he is expected to deliver the Group’s strategy. The non-quantifiable targets take into account factors such as leadership

and mentoring, corporate culture and personal development. The Committee’s practice is to set ambitious financial targets and would normally

expect to award 70% of the maximum available for meeting the target, depending on the circumstances, including business and wider economic

developments during the year. For strategic and development targets, measurement is more difficult, but here again we have high expectations of

Mr Gilauri and would typically plan to award 70% of the maximum available for meeting these targets.

The individual KPI weightings are shown in the table below, which sets out the targets for Mr Gilauri’s 2023 KPIs as well as a summary of the

Committee’s assessment of his performance against them. In line with the Policy, the Committee retains the discretion to increase or decrease the

amount awarded. More details on performance are provided in the table on the following pages. The maximum award of award is discretionary

deferred share compensation is 200,000 deferred shares.

We specifically link each KPI to the relevant Group priority and disclose ranges of targets for each KPI (threshold, target and maximum). We would

typically expect to award 25% for threshold, 70% for target and 100% for outperformance for each KPI, with a sliding scale between categories. In

accordance with feedback from shareholders, we continue to provide full information to better explain how the KPIs link to strategic targets and to

explain the weightings. The Group is young and non-financial strategic targets are also key. The Group priorities have been cross-referenced against

each performance metric chosen in the below KPI table.

Group priorities:

1. NAV per share growth

2. Diversifying access to capital

3. Efficient management structure

4. The right people in management and strong corporate governance

5. Deleveraging

6. Progress towards ESG targets

7. Continued divestiture of subscale portfolio companies

8. Institutionalising portfolio companies and meeting portfolio targets

9. Returning GCAP’s cash inflows to our shareholders

KPI

Refers

to Group

priority,

above Weighting 2023 Target and range Performance and evaluation

Weighted

result

Financial targets Threshold Target Outperformance

NAV per share growth 1 25%

5% for overall

10% 14.5% 19%

Overall NAV per share growth: 26.5% 5%

20% for private

portfolio

10% 16.8% 21%

Private portfolio share growth: 15.7%

NAV per share grew by 26.5% overall (4% in

2022) at an outperforming level for this key

figure for investors, and 15.7% for portfolio

share growth (-11.5% in 2022).

12%

Achieving budget of

GCAP (net income) and

portfolio companies

(total revenue), including

cash flow generation

5, 8 15%

GEL mln GEL mln GEL mln

160 379 570

GEL mln GEL mln GEL mln

(275) (225) (175)

GEL mln GEL mln GEL mln

1,800 2,233 2,400

GEL mln GEL mln GEL mln

180 230 270

GCAP standalone net income:

GEL 616 million

GCAP standalone cash flow:

GEL (126) million

Portfolio aggregate revenue:

GEL 2,074 million

Aggregate net operating cash flow:

GEL 135 million

GCAP standalone net income has grown from

GEL 1.5 million in 2022 to GEL 616 million in

2023. This strong net profit was driven by: (a)

high dividend inflow and value appreciation

in Bank of Georgia share price and value

creation in private businesses; (b) deleveraging

of GCAP’s debt; and (c) savings in operating

expenses, including from change from Premium

to Standard listing.

In 2023 GCAP refinanced US$ 150 million

Eurobonds and executed US$ 18 million share

buybacks while target assumed refinancing

of US$ 200 million Eurobonds and no share

buybacks, and standalone cash flow was

GEL (126) million adjusted for buybacks and

paydown of net debt.

Portfolio aggregate revenue increased 9%

y-o-y. However, while above threshold it was

below target, with regional and community

clinics businesses being one of the main causes

of this.

Aggregate net operating cash flow was

disappointing at GEL 135 million, as the

hospitals business underperformed and

required increased working capital.

Expense ratio 3 7. 5%

1.3% 1.03% 0.8%

Expense ratio: 0.8%, well below the target of

1.03% and at outperformance level

7.5%

147

Georgia Capital PLC Annual Report 2023

146

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

DIRECTORS’ REMUNERATION REPORT CONTINUED

KPI

Refers

to Group

priority,

above Weighting 2023 Target and range Performance and evaluation

Weighted

result

Financial targets Threshold Target Outperformance

Broaden access

to capital including

active seeking of price

discovery of assets

held (including strategic

priority of divestment

of subscale portfolio

companies)

2 20% Refinancing of the US $300 million Eurobond

ahead of schedule with local US$ 150 million

SLB, resulting in substantial de-risking of GCAP.

Divestment from the hospitality business led to

deleveraging and de-risking of the real estate

businesses and receipt of US$ 38.6 million.

In accordance with the strategy to divest

subscale portfolio companies and in particular

low return on invested capital (ROIC)

businesses, sale of real estate assets (former

headquarters of GHG) and Batumi hospital.

Actively engaged in potential monetisation on

several other businesses.

20%

Strategic targets Threshold Target Outperformance

Disciplined pursuit of

investment

opportunities, and asset

and capital allocation,

including Net Capital

Commitment (NCC)

targets

7, 9 20%

18% 16.7% 16%

NCC ratio decreased from 21.1% in 2022 to

15.6% in 2023. This was a result of increased

dividend inflows combined with an increase in

value of our portfolio companies. Given that the

medium to long-term target was 15% by 2025,

this is well ahead of schedule.

Successful buyback of US$ 18 million equity

on-market in addition to decreasing

leverage, leading to a 4.1% increase in NAV.

Investments made in businesses where GCAP’s

strategy is to have a longer-term view, notably

in retail (pharmacy) (purchased the minority

stake) and education (underperforming school

purchased and built one mid-level school), and

in insurance.

20%

Progress towards

achieving mid to long-

term strategic priorities in

portfolio companies

8 7. 5%

Ahead or well on-track in insurance, renewable

energy, education, clinics and diagnostics,

beverages, real estate and auto service

businesses to achieve mid to long-term goals.

Retail (pharmacy) is largely on-track given the

ongoing regulatory pressures from cap prices

on prescription drugs. The hospitals business is

undergoing structural changes.

5.5%

Professional

development

and mentoring of

management including

successor(s)

Progress towards ESG

targets

4, 6 5%

Major development in progress of senior

management at GCAP, stepping up to

increased roles. Strong group of individuals now

achieved, with senior management at HoldCo

and at portfolio companies ready to move into

more senior positions in portfolio companies as

needed for succession planning.

Placed the largest SLB in the region, including

all work and adjustments needed to put in place

underlying ESG structures and processes and

solidification of pathways to Net-Zero emissions.

TOTAL KPI PERFORMANCE ASSESSMENT 83%

The Committee noted the excellent performance of the Company over 2023 reflected both in the results and in the stakeholder experience. The share

price increased from GBP 7.30 at FY22 to GBP 10.22 at FY23. The share buyback and cancellation programme benefitted shareholders, under which

the Group repurchased shares for a total consideration of US$ 18.3 million during the year. The Committee was also pleased to note that average

employees’ cash salaries increased by 23%, share salaries increased by 20% y-o-y and employees’ average bonus increased y-o-y by 33%.

Under Mr Gilauri’s leadership during 2023, there was deleveraging through the successful issuance of a US$ 150 million SLB on the Georgian

market. This issuance, combined with GCAP’s existing liquid funds, was utilised to fully redeem our US$ 300 million Eurobond. The Group’s retail

(pharmacy) business completed the buyout of the minority shareholders to increase GCAP’s stake to 97.6%. The hospitality business successfully

completed the sale of two operational hotels, two under-construction properties, and a vacant land plot for a total consideration of US$ 38.6 million

and the proceeds from these sales were utilised for deleveraging the hospitality business’s balance sheet. These transactions marked further

substantial progress towards two of our core strategic priorities: to divest, over the next few years, subscale portfolio companies, and to significantly

reduce leverage in the Group’s balance sheet.

In accordance with his performance in financial year 2023, taking into account the 83% performance against KPIs and the wider stakeholder

experience, the Remuneration Committee determined to award Irakli Gilauri 160,000 deferred shares (80% of maximum opportunity) with vesting

and holding period of up to six years from the beginning of the work year. The Committee is satisfied that the overall number of deferred discretionary

shares awarded to Mr Gilauri for FY23 was fair and appropriate in the circumstances.

The Committee notes that there has not been an increase in Irakli Gilauri’s salary since the Group listed in 2018 (including when the new Policy was

approved in 2022) and that the 2018 salary reflected a decrease from the predecessor company. Similarly, the maximum bonus opportunity remains

at 200,000 deferred shares. The Committee did not change its implementation of the Policy in 2023. The monetary value increases or decreases

with the share price and alignment with shareholders is built into the structure as described extensively in this report. There is no annual cash bonus

and no LTIP. The above exercise of discretion (80% awarded compared to 83% against KPIs) represents a reduction of 6,000 shares.

Percentage change in remuneration of Directors and employees

The following table sets out details of the percentage change in the remuneration awarded to the Directors, compared with the average percentage

change in the per capita remuneration awarded to the employees at the holding companies’ level only (c.45 employees) on a full-time equivalent basis

as a whole, in line with the requirements in the Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report) Regulations 2019.

Given the small number of employees employed by the Georgia Capital PLC entity is less than five and the Company’s status as an investment

entity under IFRS 10, we considered comparison against the holding companies’ employees. See note 8 to the table below for a comparison of the

full-time UK employees in compliance with the requirements of the Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report)

Regulations 2019. See the single total figure of remuneration table on pages 142 to 143 for an explanation of deferred share salary, taxable benefits

and discretionary deferred remuneration of Mr Gilauri.

From 1 April 2020 to 31 December 2020, the members of the Nomination Committee waived their fees (and only the additional fee received by the

Chair of the Committee (as Chair) on top of the normal Committee fees was retained by the Chairman), to show solidarity with the impact of the

COVID-19 pandemic. The normal fees were reinstated in January 2021. After a review of the workload of the Nomination Committee, the fees were

increased slightly for the Nomination Committee members and Chair from May 2023. The Audit and Valuation Committee’s responsibilities were

increased from 31 December 2019 when the Audit Committee became the Audit and Valuation Committee. To show solidarity with the impact of

the COVID-19 pandemic the Audit and Valuation Committee did not receive an increase for financial year 2020, and instead the fees of the Chair and

members were increased from January 2021.

Any further y-o-y movements in Non-Executive Director fees are attributable to a number of factors including the different Committee roles

undertaken by each Non-Executive Director over the period.

For Irakli Gilauri, the change in dollar equivalent for the discretionary deferred shares between 2022 and 2023 is reflective of both the higher

percentage of the maximum opportunity awarded for performance (60% in 2022 compared to 80% in 2023) but also the increase in share price

between 2022 and 2023 resulting in a higher monetary equivalent at the decision date. The maximum discretionary opportunity remains constant at

200,000 deferred shares.

Similarly, Irakli Gilauri’s salary remained 200,000 deferred shares but the basis of calculation changed, as explained in the notes to and in the

paragraphs around the Single total figure of remuneration table earlier in this report.

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Strategic Review

Discussion of Results Governance Financial Statements Additional Information

DIRECTORS’ REMUNERATION REPORT CONTINUED

Y-o-y change in pay for Directors compared to the employees

at the holding companies level as a whole

Executive

Director

Non-Executive Directors

2023

Average

employees

Irakli

Gilauri

David

Morrison

Kim

Bradley

Jyrki

Talvitie

Massimo

Gesua’ sive

Salvadori

Maria

Chatti-

Gautier Neil Janin

Total cash salary 23.3% – 0% -64.2% - 62.1% 0% 3% NMF

Total deferred share salary 19.7% -29.3% – – – – – –

Taxable benefits 16.6% – – – – – – –

Total bonus 33.2% 89.0% – – – – – –

Y-o-y change in pay for Directors compared to the employees

at the holding companies level as a whole

Executive

Director

Non-Executive Directors

2022

Average

employees

Irakli

Gilauri

David

Morrison

Kim

Bradley

Jyrki

Talvitie

Caroline

Brown

Massimo

Gesua’ sive

Salvadori

Maria

Chatti-

Gautier Neil Janin

Total cash salary 4.1% – – 9.7% – -61.3% – – 100%

Total deferred share salary 20.6% 0% – – – – – – –

Taxable benefits 3.5% – – – – – – – –

Total bonus -16.6% -35.9% – – – – – – –

Y-o-y change in pay for Directors compared to the employees

at the holding companies level as a whole

Executive

Director

Non-Executive Directors

2021

Average

employees

Irakli

Gilauri

David

Morrison

Kim

Bradley

Jyrki

Talvitie

Caroline

Brown

Massimo

Gesua’ sive

Salvadori

Maria

Chatti-

Gautier

Total cash salary

6.5% – 3.9% 3.9% 4.7% 5.0% 5.0% 36.2%

Total deferred share salary

-26.0% 0% – – – – – –

Taxable benefits

22.7% – – – – – – –

Total bonus

23.1% 44.2% – – – – – –

Year-on-year change in pay for Directors compared to the employees

at the holding companies level as a whole

Executive

Director

Non-Executive Directors

2020

Average

employees

Irakli

Gilauri

David

Morrison

Kim

Bradley

Jyrki

Talvitie

Caroline

Brown

Massimo

Gesua’ sive

Salvadori

Maria

Chatti-

Gautier

Total cash salary

11.0% – -3.7% 7. 2% -3.6% -4.8% -4.8% N/A

Total deferred share salary

0% 0% – – – – – –

Taxable benefits

7.3% – – – – – – –

Total bonus

20.0% 10.2% – – – – – –

Notes:

1 The Investment Committee was dissolved on 17 May 2023 and its duties were absorbed by the Board. Kim Bradley and Jyrki Talvitie did not seek re-election at the 2023 AGM

and therefore ceased to be Directors on 17 May 2023. On 17 May 2023, David Morrison became a member of the Remuneration Committee, Maria Chatti-Gautier stepped down

as member of the Nomination Committee and become a member of the Audit and Valuation Committee, Massimo Gesua’ sive Salvadori became a member of the Nomination

Committee, and Neil Janin became Chair of the Remuneration Committee and Chair of the Nomination Committee. The Nomination Committee member and Chair fees were

increased after consideration of their comparative workload.

2 Kim Bradley was appointed as a member of the Audit and Valuation Committee from 20 May 2022, and stepped down as a member of the Nomination Committee and the

Remuneration Committee on 20 December 2022. Caroline Brown did not seek re-election at the 2022 AGM and therefore ceased to be a Director on 20 May 2022.

3 Neil Janin was appointed as a member of the Board of Directors of Georgia Capital PLC and to the Supervisory Board of JSC Georgia Capital, and the Nomination Committee

and the Remuneration Committee on 17 October 2022, and as a member of the Investment Committee on 20 December 2022.

4 Maria Chatti-Gautier was appointed to the Board of Directors of Georgia Capital PLC and to the Supervisory Board of JSC Georgia Capital, and the Remuneration Committee

and Nomination Committee on 19 March 2020.

5 On 19 March 2020, David Morrison, Caroline Brown and Massimo Gesua’ sive Salvadori stepped down as members of the Nomination Committee.

6 For the period of 1 April 2020 to 31 December 2020 the members of the Nomination Committee waived their fees, and for the Chairman of the Committee only the difference

between the level of fees for the Chair against the member’s fees was retained, to show solidarity with the impact of COVID-19.

7 The Audit and Valuation Committee’s responsibilities were increased from 31 December 2019; to show solidarity with the impact of the COVID-19 pandemic the Committee did

not receive an increased fee for their expanded role for year 2020, but the fees of the Chair and members were instead increased from 1 January 2021.

8 The Company has less than five UK employees and the percentage changes could be considered to be distortive. Y-o-y change on a full-time basis for UK employees from 2019

to 2020 for cash salary is 1.8%; deferred share salary is not applicable; taxable benefits is not applicable; and bonus is 30.1%. Y-o-y change on a full-time basis for UK employees

from 2020 to 2021 for cash salary is -2.7%; deferred share salary is not applicable; taxable benefits is not applicable; and bonus is -1.8%. Y-o-y change on a full-time basis for UK

employees from 2021 to 2022 for cash salary is 10.5%; deferred share salary is not applicable; taxable benefits is not applicable; and bonus is -5.3%. Y-o-y change on a full-time

basis for UK employees from 2022 to 2023 for cash salary is 3.7%; deferred share salary is not applicable; taxable benefits is not applicable; and bonus is 15.3%.

Details of fixed and discretionary deferred share remuneration granted during 2023

The table below sets out details of the nil-cost options over GCAP shares which have been granted to Mr Gilauri in 2023 in respect of the 2022 work

year as reflected on a combined basis in the accounts of Georgia Capital PLC and JSC Georgia Capital. Please note that the information presented

in this section relates to Mr Gilauri’s performance in the 2022 financial year.

Deferred share salary Discretionary deferred share remuneration

Number of underlying shares and

basis on which award was made

200,000 granted pursuant to the Policy available at

https://georgiacapital.ge/governance/cgf/policies

120,000 (with respect to his FY22 bonus) granted

pursuant to the Policy available at

https://georgiacapital.ge/governance/cgf/policies

Type of interest Nil-cost option Nil-cost option

Cost to Group (as reflected

in accounts)

US$ 2,730,000

US$ 1,078,000

Face value US$ 2,730,000

Cash payments equal to the dividends paid on the

underlying shares will be made upon vesting (if

applicable).

US$ 1,078,000

Cash payments equal to the dividends paid on the

underlying shares will be made upon vesting (if

applicable).

Percentage of award achievable if

minimum performance achieved

100% of the award will be receivable, since the award

is part of the Executive Director’s salary for 2022 and

accordingly is not subject to performance measures or

targets over the vesting period.

100% of the award will be receivable, since the award is

based on 2022 performance (and is not an LTIP award)

and accordingly is not subject to performance measures

or targets over the vesting period.

Exercise price Nil. The options form part of the Executive Director’s

salary under the Policy and so no payment is required

upon exercise. The exercise price has not changed.

Nil. The options make up the entirety of the Executive

Director’s performance-based remuneration (with

respect to his performance in the previous financial year)

so no payment is required upon exercise. The exercise

price has not changed.

Vesting period 20% in each of 2024, 2025, 2026, 2027 and 2028. 25% in each of 2024, 2025, 2026 and 2027. Holding

period of a further one year on each tranche.

Performance measures None. See the 2022 Policy available at

https://georgiacapital.ge/ir/annual-reports

See the 2022 Policy available at

https://georgiacapital.ge/ir/annual-reports

1 Deferred share salary. The value is calculated as described in footnote 2 to the table of Single total figure of remuneration for the Executive Director.

2 Discretionary deferred share remuneration. The value is calculated as described in footnote 4 to the table of Single total figure of remuneration for the Executive Director.

CEO pay and comparators

The Group has less than 250 UK employees and therefore is not required to disclose ratios of the CEO pay against the UK employees’ pay (and

indeed given it has less than five UK employees, to do so would be distortionary).

The remuneration structure is very unusual with all salary and bonus being in deferred shares (no cash) to create very strong alignment with

shareholders. It is difficult to compare our overall remuneration to others in monetary value given the time value of money and the delayed receipt of

the Executive Director’s remuneration (as the salary and bonus shares are released across several years). It is also difficult to quantify the risk of these

salary and bonus shares lapsing (due to malus but also in the event of early termination under certain circumstances). When formulating the Policy,

we presented the overall package (without factoring in the time value of money or risk of lapse) to investors.

The Committee also considered the fact that the CEO’s salary was 35% less than the CEO salary in our predecessor company, BGEO Group PLC.

The most comparable peers are the two other UK listed companies in Georgia, Bank of Georgia Group PLC and TBC Group PLC.

Moreover, the renewed Policy in 2022 retained the same number of shares for salary and for the maximum opportunity as was presented to

shareholders for their approval in 2019; there was no increase in salary nor incentive.

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Overview

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Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

DIRECTORS’ REMUNERATION REPORT CONTINUED

Single total figure of remuneration for Non-Executive Directors (audited)

The table below sets out the remuneration received by each Non-Executive Director in 2023 and 2022.

The Non-Executive Directors do not receive any variable remuneration or pension contributions.

Georgia Capital PLC fees (US$) JSC Georgia Capital fees (US$) Total fees (US$)

2023 2022 2023 2022 2023 2022

Neil Janin 62,451 10,953 87,984 17,140 150,435 28,094

David Morrison 67,89 0 67, 89 0 133,736 133,736 201,626 201,626

Massimo Gesua’ sive Salvadori 57,784 52,341 99,169 104,609 156,953 156,950

Kim Bradley 24,929 77,76 8 51,491 135,646 76,420 213,414

Jyrki Talvitie 24,819 65,481 35,998 94,973 60,817 160,454

Maria Chatti-Gautier 54,831 58,911 99,407 90,885 154,238 149,796

Total 292,704 353,605 507,785 617,48 4 800,489 971,089

Notes:

1 The Investment Committee was dissolved on 17 May 2023 and its responsibilities were absorbed by the Board.

2 Kim Bradley and Jyrki Talvitie did not seek re-election at the 2023 AGM and therefore ceased to be Directors on 17 May 2023.

3 On 17 May 2023, David Morrison became a member of the Remuneration Committee, Maria Chatti-Gautier stepped down as member of the Nomination Committee and

became a member of the Audit and Valuation Committee, Massimo Gesua’ sive Salvadori became a member of the Nomination Committee, and Neil Janin became Chair of the

Remuneration Committee and Chair of the Nomination Committee.

4 Neil Janin was appointed as a member of the Board of Directors of Georgia Capital PLC and the Supervisory Board of JSC Georgia Capital, and of the Nomination Committee

and Remuneration Committee, on 17 October 2022, and as a member of the Investment Committee on 20 December 2022.

5 Kim Bradley was appointed as a member of the Audit and Valuation Committee from 20 May 2022, and stepped down as a member of the Nomination Committee and the

Remuneration Committee on 20 December 2022.

6 The Non-Executive Directors do not receive any taxable benefits, pension benefits or variable remuneration.

Payments to former Directors and for loss of office (audited)

No payments were made to former Directors or for loss of office during the year ended 31 December 2023.

Total Shareholder Return

Georgia Capital PLC has been a member of the FTSE All Share Index since its listing on 29 May 2018. The following graph compares the Total

Shareholder Return (TSR) of Georgia Capital PLC with the companies comprising the FTSE All Share Index and FTSE Small Cap Index for the period

from 29 May 2018 until 31 December 2023.

Jun-18 Dec-18 Jun-19 Dec-19 Jun-20 Dec-20 Jun-21 Dec-21 Jun-22 Jun-23Dec-22 Dec-23

FTSE All Share Index (rebased) FTSE Small Cap Index (rebased)Georgia Capital PLC

100

120

160

140

Relative importance of spend on pay

The following table shows Georgia Capital’s actual spend on pay at the holding company’s level only (c.45 employees in total) between 2022 and

2023. We considered comparison against these employees to be the most appropriate given the Company’s status as an investment entity under

IFRS 10.

Remuneration paid to all

employees of the Group

Distribution to shareholders by

way of buyback

Year ended 31 December 2022 (US$ thousands) 10,004 18,071

Year ended 31 December 2023 (US$ thousands) 13,453 18,242

Percentage change 34.5% 0.9%

Notes:

1 There were no dividends in 2022 or 2023. The US Dollar amount is calculated using an average GEL/US$ exchange rate for each of 2022 and 2023.

2 The buyback and cancellation programmes returned value to shareholders.

3 1,665,222 shares with a total value of US$ 18.3 million (GEL 47.9 million) were bought back under GCAP’s share buyback and cancellation programmes during 2023.

Share ownership requirement (audited)

Executive Directors are required to build over five years and maintain a shareholding equivalent to 200% of base salary, which is 400,000 shares.

Mr Gilauri already holds above this requirement as at 31 December 2023 – see table and table note 2 below. In accordance with the Policy,

beneficially owned shares as well as unvested (net of tax) and vested deferred share salary and discretionary deferred shares count towards the

requirement, noting that such unvested and vested shares are not subject to performance conditions after their grant.

Directors’ interests in shares (audited)

The following table sets forth the respective holdings of GCAP shares of each Director as at 31 December 2022 and 2023.

As at 31 December 2022 As at 31 December 2023

Number of

GCAP shares

held directly

Number of

vested but

unexercised

GCAP shares

held under

option through

deferred share

salary and

discretionary

deferred share

compensation

(all nil-cost

options with no

performance

conditions)

Number of

unvested and

unexercised

GCAP shares

held under

option through

deferred share

salary and

discretionary

deferred share

compensation

(all nil-cost

options with no

performance

conditions)

Total number

of interests in

GCAP shares

Number of

GCAP shares

held directly

Number of

vested but

unexercised

GCAP shares

held under

option through

deferred share

salary and

discretionary

deferred share

compensation

(all nil-cost

options with no

performance

conditions)

Number of

unvested and

unexercised

GCAP shares

held under

option through

deferred share

salary and

discretionary

deferred share

compensation

(all nil-cost

options with no

performance

conditions)

Total number

of interests in

GCAP shares

Irakli Gilauri 1,322,320 – 954,221 2,276,541 1,589,028 – 934,766 2,523,794

David Morrison 101,368 N/A N/A 101,368 101,368 N/A N/A 101,368

Kim Bradley 35,383 N/A N/A 35,383 35,383 N/A N/A 35,383

Jyrki Talvitie 12,585 N/A N/A 12,585 12,585 N/A N/A 12,585

Massimo

Gesua’ sive Salvadori

13,739 N/A N/A 13,739 13,739 N/A N/A 13,739

Marie Chatti-Gautier 6,860 N/A N/A 6,860 6,860 N/A N/A 6,860

Neil Janin – N/A N/A – 7,000 N/A N/A 7,000

Notes:

1 As at 31 December 2023, Mr Gilauri’s vested and unvested shareholding was 2,523,794 GCAP shares, representing approximately 5.8% of the Company’s share capital. In

January 2024, Mr Gilauri received awards of 200,000 nil-cost options over ordinary shares in respect of deferred salary shares for the 2023 work year, out of which 8,601 were

waived by Mr Gilauri to discharge the UK income tax and employee National Insurance contributions. In January 2024, Mr Gilauri exercised 321,157 nil-cost options over ordinary

shares, of which 62,080 shares were withheld to meet tax liabilities. These will be reported in the 2024 Annual Report and Accounts and are not included in the table above,

which is at 31 December 2023.

2 On 6 January 2023, Mr Gilauri received awards of 200,000 nil-cost options over ordinary shares in respect of deferred salary shares for the 2022 work year, out of which 8,166

were waived by Mr Gilauri to discharge the UK income tax and employee National Insurance contributions. In January 2023 Mr Gilauri exercised 331,289 nil-cost options over

ordinary shares, out of which 64,581 shares were withheld to meet tax liabilities. In May 2023, Mr Gilauri received awards of 120,000 nil-cost options over ordinary shares in

respect of discretionary deferred shares for the 2022 work year. As of 31 December 2023, all vested nil-cost options of the CEO were exercised. None of Mr Gilauri’s connected

persons have any interest in the shares of the Company.

3 Kim Bradley and Jyrki Talvitie did not seek re-election at the 2023 AGM and therefore ceased to be Directors on 17 May 2023.

4 On 27 December 2023, Neilco EURL, a PCA of Neil Janin, sold 7,000 GCAP shares to Neil Janin at market price.

The Remuneration Policy focuses on base salary in deferred salary shares and discretionary compensation in discretionary deferred shares.

The long vesting periods naturally result in the Executive Director, Irakli Gilauri, building up large holdings of unvested nil-cost options. The Policy

naturally results in Mr Gilauri and our executive management team holding a significant number of unvested shares and achieves a delay between

performance and vesting. We believe these results are consistent with the principles of the Investment Association. As at 31 December 2023,

Mr Gilauri met the shareholding requirement.

Under the Directors’ Remuneration Policy, the Group does not require Non-Executive Directors to hold a specified number of shares in GCAP.

Notwithstanding this, some Non-Executive Directors have chosen to become shareholders. The Non-Executive Directors are not awarded incentive

shares and are not remunerated in shares. Non-Executive Directors are not subject to a shareholding requirement.

There have been no changes in the Directors’ interests in shares in the Company between the end of the financial year and the last practicable date

of 15 March 2024, with exception of Irakli Gilauri who as at 15 March 2024 holds total of 2,653,112 vested and unvested shares.

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Overview

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Strategic Review

Discussion of Results Governance Financial Statements Additional Information

DIRECTORS’ REMUNERATION REPORT CONTINUED

2024 CEO KPIs

The 2024 KPIs were selected based on our strategy and ongoing key metrics. Consequently, the 2024 KPIs are as follows:

• NAV per share;

• Achieving budget of GCAP and portfolio companies, including cash flow generation;

• Expense ratio;

• Broaden access to capital including active seeking of price discovery of assets (including strategic priority of divestment of subscale portfolio

companies);

• Disciplined pursuit of investment opportunities and asset and capital allocation, including NCC targets;

• Progress towards achieving mid to long-term strategic priorities in portfolio companies;

• Professional development and mentoring of management; and

• Progress towards ESG targets.

Due to the potential impact on our commercial interests, annual bonus targets are considered commercially sensitive and appropriate detail will

therefore be disclosed in the 2024 Remuneration Report following the completion of the financial year. KPIs and targets will be reviewed and may be

revised by the Remuneration Committee and the Board as appropriate throughout the year, subject to the terms of the Policy.

Non-Executive Director remuneration

The table below shows the fee structure for Non-Executive Directors for 2024. Non-Executive Directors’ fees are determined by the Board.

Component Purpose and link to strategy Operation Opportunity

Base cash fee The fee for the Board is competitive enough to

attract and retain individuals.

The Chairman receives a fee which reflects the

extra time committed and responsibility. However,

no Chairman’s fee is received when Chairman and

CEO roles are combined.

The Senior Independent Non-Executive Director

receives a higher base fee which reflects the extra

time and responsibility.

Cash payment on

quarterly basis.

The amount of remuneration may be reviewed

from time to time by the Board. The fees may

be amended and varied if there are genuinely

unforeseen and exceptional circumstances.

Any significant increase shall be the minimum

reasonably required.

The maximum aggregate for all Non-Executive

Directors which may be paid by Georgia Capital

PLC for the PLC fees is GBP 750,000 which

is consistent with the current limit in the PLC’s

Articles of Association.

Cash fee for each

Committee

membership

Additional fee to compensate for additional time

spent discharging Committee duties.

Cash payment on

quarterly basis.

The amount of remuneration for the membership

may be reviewed from time to time by the Board.

The Chairman of the PLC does not receive any

Committee fee.

Summary of Directors’ Remuneration Policy

The Remuneration Policy was approved at the AGM on 20 May 2022 and took effect from that date. It is intended that approval of the Policy will be

sought at three-year intervals, unless amendments to the 2022 Policy are required, in which case further shareholder approval will be sought; no

changes are proposed for 2024. The full 2022 Policy is available at https://georgiacapital.ge/governance/cgf/policies. The tables in this section

provide a summary of the Policy.

Remuneration Policy table for Executive Directors

Deferred share salary

Purpose and link to strategy

To reflect the role and required duties, skills, experience and individual

contribution to the Group whilst promoting long-term value creation and

share price growth.

Opportunity

The maximum number of deferred share salary shares is 200,000 per

annum for Irakli Gilauri, of which 20,000 shares per annum are for his work

as the CEO of Georgia Capital PLC and 180,000 shares per annum are for

his work as a CEO of JSC Georgia Capital and its subsidiaries.

Operation

The level of base salary for an Executive Director is fixed in his or her

service agreement(s). Salary is comprised entirely of long-term deferred

shares (“deferred share salary”) in the form of nil-cost options annually in

respect of the work year with no cash salary.

Deferred share salary is awarded annually in the form of nil-cost options in

respect of the work year and vest over five years with 20% vesting in each

of the second, third, fourth, fifth and sixth years following the end of the

work year. At vesting the Executive Director also receives cash payments

equal to the dividends paid on the underlying shares between the date the

award was made and the vesting date.

Lapse provisions (natural malus) are built into the deferred share salary.

Extended malus and clawback provisions do not apply to the deferred

share salary as the awards attach to salary already earned.

Performance measures

N/A

Details of Non-Executive Directors’ letters of appointment

Georgia Capital has entered into letters of appointment with each Non-Executive Director. The letters of appointment require Non-Executive

Directors to provide one month’s notice prior to termination. The letters of appointment for the majority of current Non-Executive Directors are

effective from 24 February 2018, with Maria Chatti-Gautier’s effective from her appointment on 19 March 2020 and Neil Janin’s from his appointment

on 17 October 2022. Each Non-Executive Director is put forward for election at each AGM following his or her appointment. Continuation of a Non-

Executive Director’s employment is conditional on his or her continued satisfactory performance and re-election by shareholders at each AGM.

A succession plan adopted by the Board provides for a tenure of six years on both the Georgia Capital PLC and JSC Georgia Capital Boards. Upon

the expiry of such six-year tenure, the appointment of the relevant Non-Executive Director may cease at the next upcoming AGM.

Notwithstanding the foregoing, if the Board determines that, in order to maintain the balance of appropriate skills and experience required for the

Board, it is important to retain a Non-Executive Director on the Board beyond the relevant six-year period, the Board may offer the Non-Executive

Director a letter of appointment for an additional one-year term. Such a one-year “re-appointment” may be renewed no more than two times, with the

effect that the usual six-year tenure may be extended to a maximum of nine years if circumstances were to warrant such extension.

Implementation of Remuneration Policy for 2024

Details of how the Policy will be implemented for the 2024 financial year are set out below. There will be no significant change in the way that the

2022 Policy will be implemented in 2024 and no deviations from the procedure for the implementation of the Policy as set out in the Policy.

For Irakli Gilauri

2024 fixed pay

Total deferred share salary 200,000 Georgia Capital deferred shares underlying nil-cost options per annum pro rata.

Pension benefits Mr Gilauri has agreed for all pension contributions to be waived. Details of the benefits received by

Executive Directors are on page 150.

The circumstances in which unvested deferred shares may lapse, and the narrow circumstances in which such shares may vest immediately, are set

out in detail in the 2022 Policy.

2024 discretionary deferred share remuneration

Deferral terms The Committee will determine whether an award is merited based on an Executive Director’s

achievement of the KPIs set by the Committee for the work year and the performance of the Group

during the work year. If Mr Gilauri is awarded discretionary deferred shares with respect to the 2024

work year, the award will vest 25% in January of each of 2026, 2027, 2028 and 2029. Each tranche

will be subject to a further holding period of one year. This decision will be set out in the 2024

Directors’ Report.

Upon vesting, Mr Gilauri will receive (in addition to the vested shares) cash payments equal to the

dividends paid (if any) on the underlying shares between the beginning of the year immediately

following the work year and the vesting date.

Performance measures For 2024, the Remuneration Committee has determined that the performance measures will be

based on KPIs (see below). The Remuneration Committee has considered the details of each KPI

and ensured that measurable targets are included. The KPIs will be reviewed by the Remuneration

Committee throughout the year and by the Board as appropriate.

See notes to the Policy for malus and clawback provisions.

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Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

Discretionary deferred shares

Purpose and link to strategy

To motivate and reward an Executive Director that meets or exceeds the

KPIs set for him or her by the Remuneration Committee for the relevant

period.

Performance-based remuneration is solely in the form of deferred shares

(no cash), designed to closely align the interests of an Executive Director

with shareholders, avoid inappropriate risk taking for short-term gain and

encourage long-term commitment to the Group.

Opportunity

The maximum number of discretionary deferred shares that may be

awarded in respect of the previous work year for Mr Gilauri is capped at

200,000 shares (i.e. 100% of deferred share salary).

For an Executive Director (other than Mr Gilauri), the maximum opportunity

in respect of the previous work year is 100% of total salary.

Operation

Performance-based remuneration is awarded annually entirely in the form

of nil-cost options over the Group shares subject to vesting (“discretionary

deferred shares”). The Group does not award cash bonuses. The

Remuneration Committee will determine annually the number of shares

to be awarded based on the Executive Director’s achievement of the KPIs

set for the work year and the performance of the Group during that year.

Any discretionary deferred shares are expected to be granted following

the end of the work year and vest 25% in each of the second, third,

fourth and fifth years following the end of the work year, although the

Remuneration Committee retains the discretion to determine the timing

of the award. Each tranche of vested discretionary deferred shares must

then be held for a further one year.

At vesting, the Executive Director also receives cash payments equal to

the dividends paid on the underlying shares between the beginning of the

year immediately following the work year and the vesting date.

There is no contractual right to discretionary deferred shares and the

Remuneration Committee reserves the right to award no discretionary

deferred share remuneration if the Group’s performance is unsatisfactory.

Extended malus and clawback, in addition to lapse provisions (natural

malus) apply.

Performance measures

KPIs for the Executive Director are set towards the beginning of each work

year and reflect the Executive Director’s targeted contribution to the Group’s

overall key strategic and financial objectives for the coming work year. KPIs

may also include non-tangible factors such as self-development, mentoring

and social responsibility.

If appropriate, where a strategic change or change in business

circumstances has made one or more of the KPIs an inaccurate gauge of

the Executive Director’s performance, the Remuneration Committee may

decide to base its assessment on alternative measures.

Pension

Purpose and link to strategy

The Group complies with pension requirements set by the Georgian

Government. The same arrangement applies to employees across the

Group in Georgia.

Opportunity

In line with current Georgian legislation, the Executive Director and Group

each contribute 0%-2% of total remuneration from the Group, and the

Georgian Government may contribute a further small amount (0%-2%

depending on income levels). Pension contributions will only increase above

this level if mandated by Georgian legislation or if mandated by any other

applicable legislation.

Operation

Pension provision will be in line with Georgian pension legislation, which

may change from time to time. There is no provision for the recovery or

withholding of pension payments.

Performance measures

N/A

Benefits

Purpose and link to strategy

Non-cash benefits are in line with Georgian market practice and are

designed to be sufficient to attract and retain high-calibre talent.

Opportunity

There is no prescribed maximum on the value of benefits payable to an

Executive Director. The maximum amount payable depends on the cost

of providing such benefits to an employee in the location at which the

Executive Director is based.

Other benefits may be provided from time to time if considered reasonable

and appropriate.

Operation

Benefits consist of: life insurance; health insurance; incapacity/

disability insurance; Directors’ and Officers’ liability insurance; physical

examinations; tax gross-ups and tax equalisation payments; company

car and driver; mobile phone costs; personal security arrangements (if

requested by the Executive Director); assistance with completing tax

returns (where required); relocation costs for Executive Director and close

family; and legal costs.

Performance measures

N/A

DIRECTORS’ REMUNERATION REPORT CONTINUED

Shareholding guidelines

Purpose and link to strategy

To ensure Executive Directors build and hold a significant shareholding in

the Group over the long term and to align Executive Directors’ interests

with those of shareholders.

To ensure departing Executive Directors make long-term decisions

and maintain an interest in the ongoing success of the Group

post- employment.

Opportunity

Executive Directors are required to build and then maintain a

shareholding equivalent to 200% of salary, such amount to be built up

within a five- year period from appointment as an Executive Director

(the “Required Shareholding”).

All beneficially owned shares, as well as unvested (net of tax) and vested

deferred share salary and discretionary deferred shares count towards the

Required Shareholding (as such awards are not subject to any performance

conditions after grant).

Executive Directors are to retain the lower of (i) the Required Shareholding,

or (ii) the shareholding at the time employment ceases, for a period

of two years from the date on which employment ceases unless the

Remuneration Committee determines otherwise.

In very exceptional circumstances, for example in the event of a serious

conflict of interest, the Remuneration Committee has the discretion to

vary or waive the Required Shareholding, but must explain any exercise

of its discretion in the Group’s next Remuneration Report. It should be

emphasised that there is no present intention to use this discretion.

Clawback and malus

Discretionary deferred shares are subject to malus, and clawback for up to two years from vesting, in the following circumstances:

• misconduct in the performance or substantial failure to perform duties;

• significant financial losses, serious failure of risk management or serious damage to the reputation of Georgia Capital PLC or JSC Georgia

Capital, caused by misconduct or gross negligence (including inaction in performance of his/her duties by the Executive Director);

• material misstatement or material errors in the Financial Statements that relates to the area of responsibility of the Executive Director or can be

attributed to their action (or inaction in performance of his/her duties);

• deliberately misleading Georgia Capital PLC or JSC Georgia Capital in relation to financial performance; and

• an award being made on the basis of erroneous or misleading data, provided that for payments based on erroneous or misleading data (other

than where such error has been caused by fraud, wilful misconduct, deliberate action/inaction and/or gross negligence of the Executive Director),

malus and clawback applies to discretionary deferred remuneration awarded for the year in question.

The above provisions form part of Mr Gilauri’s service contract. Further, the Group has also amended the Executive Equity Compensation plan to

allow shares to be lapsed, including to zero, or clawed back in accordance with the provisions in the Executive Director’s contract.

For the Group’s current Executive Director, Mr Gilauri, the Group also has unusually strong malus provisions where all unvested shares (deferred

share salary and discretionary deferred shares) lapse when the service contract is terminated under certain circumstances, including for cause such

as gross misconduct, substantial and repeated failure to perform duties, fraud or conviction of a felony. This may be several years of salary deferred

shares and discretionary deferred shares. Please see “Termination of the JSC Georgia Capital service agreement” in the Policy for more information.

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156

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

Illustration of application of Remuneration Policy

The chart below shows an estimate of the remuneration that could be received by Mr Gilauri, the Group’s sole Executive Director and CEO, in

respect of 2022 under the proposed Policy at five different performance levels.

The 50% share price appreciation disclosure is made voluntarily by the Group (as performance measures are limited to one year) for investor information.

Below is an extract from the 2022 Policy.

No share

price growth

No share

price growth

No share

price growth

50% share price

appreciation

50% share

price decline

Minimum Target Maximum Target

Fixed share salary 50% share price appreciationDiscretionary deferred

share compensation

34.0%

30.2%

38.2%

25.0%

30.2%

100% 69.8% 61.8% 41.0%

69.8%

US$ 8,000,000

US$ 2,000,000

US$ 2,730,000

US$ 3,908,000

US$ 4,414,000

US$ 6,621,000

US$ 1,954,400

US$ 4,000,000

US$ 6,000,000

Notes:

1 Salary is comprised of deferred share salary and benefits. Mr Gilauri does not receive a cash salary and has waived all pension contributions. For illustration purposes, the value

of the deferred share salary payable to Mr Gilauri is US$ 2,730,000, calculated by reference to the share price of US$ 13.65 on 12 July 2018, being the date of the Remuneration

Committee meeting (the official share price of GBP 10.324 converted into US Dollars using an exchange rate of 1.3223, being the official exchange rate published by the Bank of

England on the same date) to approve the contract.

2 For the purpose of calculating the value of discretionary deferred shares for illustration in this chart a share price of US$ 8.42 per share was used which was the share price of

the most recent discretionary deferred remuneration award (ahead of the Policy implementation). The actual value of the discretionary deferred share award in respect of the

performance of the 2022 work year is reported in the 2022 Annual Report and Accounts as at latest closing share price before the Remuneration Committee meeting at which

the award is decided.

3 Minimum opportunity reflects a scenario whereby Mr Gilauri receives only fixed remuneration which is deferred share salary and benefits. No share price growth assumptions

have been made.

4 On-target opportunity reflects a scenario whereby Mr Gilauri receives fixed remuneration (as described in 1 above) and 140,000 discretionary deferred shares, being 70% of the

maximum opportunity. No share price growth assumptions have been made.

5 Maximum opportunity reflects a scenario whereby Mr Gilauri receives fixed remuneration (as described in 1 above) and discretionary deferred shares compensation award of

100% being the number of shares granted under the deferred share salary. No share price growth assumptions have been made.

6 Maximum plus 50% share price growth reflects a scenario whereby Mr Gilauri receives fixed remuneration (as described in 1 above) and discretionary deferred shares

compensation award of 100% of the maximum opportunity and share price grows by 50%.

7 Target with 50% share price depreciation reflects a scenario whereby Mr Gilauri receives fixed remuneration (as described in 1 above) and discretionary deferred shares

compensation award of 70% of the maximum opportunity and share price depreciates by 50%.

8 For long-term incentive awards, disclosure of the value of the award in the event of a 50% share price appreciation is required by the Companies (Miscellaneous Reporting)

Regulations 2018. Such disclosure is not required for short-term incentive awards, such as those made by the Group, where performance measures are limited to one year, nor

is it required for salary compensation in the form of shares. The reason for this is that an increase in the value of the deferred shares resulting from share price appreciation in

the period through to the vesting date is not considered to constitute remuneration for the purposes of the regulations. However, the Group has decided to voluntarily disclose

information showing the value of a 50% share price appreciation.

DIRECTORS’ REMUNERATION REPORT CONTINUED

Remuneration Policy table for Non-Executive Directors

Base fees

Purpose and link to strategy

To attract and retain high-performing Non-Executive Directors with the

requisite skills, knowledge, experience, independence and other attributes

to add value to the Group.

Opportunity

The maximum aggregate Georgia Capital PLC fees for all Non-Executive

Directors which may be paid under Georgia Capital PLC’s Articles of

Association is GBP 750,000. A specific maximum has not been set for the

individual base cash fee.

The Senior Independent Non-Executive Director receives a higher base fee

which reflects the extra time commitment and responsibility.

The Chairman receives a fee which reflects the extra time commitment and

responsibility. However, no Chairman’s fee is received when the Chairman

and CEO roles are combined.

Operation

All fees are paid in cash on a quarterly basis. The fee of the Chairman will

be determined by the Remuneration Committee. Fees for Non-Executive

Directors will be determined by the Board.

Fees may be reviewed from time to time by the above, taking into

account the time commitment, responsibilities and the technical skills

required to make a valuable contribution to the Board, and by reference

to comparators, benchmarking, results of the annual review and

other guidance. The Board also reserves the right, in their discretion,

to amend and vary the fees if there are genuinely unforeseen and

exceptional circumstances which necessitate such review and, in such

circumstances, any significant increase shall be the minimum reasonably

required. The Board reserves the right to structure the Non-Executive

Directors’ fees differently in its absolute discretion.

Non-Executive Directors are reimbursed for reasonable business

expenses, including travel and accommodation, which are incurred in the

course of carrying out duties.

Performance measures

N/A

Committee fees

Purpose and link to strategy

Compensate for additional time spent discharging Committee duties.

Opportunity

The Chairman does not receive Committee fees.

Operation

Cash payment on a quarterly basis.

The amount of remuneration for Committee membership is reviewed as

above.

Performance measures

N/A

Service agreements and policy on payments for loss of office for our Directors

Mr Gilauri is the sole Executive Director of the Group. Mr Gilauri has a service contract effective 29 May 2018 with Georgia Capital PLC for an

indefinite term which is terminable by either party on not less than four months’ notice unless for cause where notice served by the Group shall have

immediate effect.

Mr Gilauri also has a service agreement with JSC Georgia Capital effective from 29 May 2018 until 31 December 2025 which is terminable by the

Executive Director on not less than three months’ notice.

For information on our policy on payments for loss of office, please see our full Policy at https://georgiacapital.ge/governance/cgf/policies.

Letters of Non-Executive Directors’ appointments

Each Non-Executive Director is required to submit himself or herself for annual re-election at the AGM. The letters of appointment for Non-Executive

Directors provide for a one-month notice period although the Group may terminate the appointment with immediate effect without notice or pay in

lieu of notice if the Non-Executive Director has committed any material breach or non-observance of his or her obligations to the Group, is guilty

of fraud or dishonesty, brings the Group or him/herself into disrepute or is disqualified as acting as a Director, among other circumstances. Upon

termination, the only remuneration a Non-Executive Director is entitled to is accrued fees as at the date of termination together with reimbursement of

properly incurred expenses incurred prior to the termination date.

The service agreements and letters of appointment are available for inspection at the Company’s registered office.

Signed on behalf of the Remuneration Committee and the Board of Directors

Neil Janin

Chair of the Remuneration Committee

21 March 2024

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Georgia Capital PLC Annual Report 2023

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

DEVELOPING AND

RECRUITING THE

TALENT PIPELINE

FOR A UNIQUE GROUP

Committee membership Meeting attendance

Neil Janin (Chairman) 2/2

Massimo Gesua’ sive Salvadori

2/2

Irakli Gilauri 2/2

Neil Janin

Chairman of the Nomination Committee

Dear Shareholders

I am delighted to present the Nomination Committee’s (“the Committee”)

report for the year ended 31 December 2023, this being my first report

to you having succeeded Jyrki Talvitie to the role of Committee Chair

immediately following the AGM on 17 May 2023. I would like to thank

both Jyrki and Kim Bradley for their outstanding contribution to the

Company and as members of this Committee.

The Committee’s focus during the year was on ensuring that following

the reduction in the size of the Board, the three Board Committees were

properly and effectively constituted and that a replacement designated

Non-Executive Director for employee engagement was identified.

The Committee’s principal responsibility is to lead the process of

appointing Directors to the Board and recruiting into other senior

management positions. Having considered the results of the Board

evaluation reported on later in this report, the Committee is satisfied

that the composition of the Board and Committees overall remains

appropriate with regards to the successful delivery of the Company’s

strategic and financial objectives. The Committee also concluded

the same of the composition of the Audit and Valuation Committee

continues to be appropriate.

The Committee continues to monitor the ongoing combination of the

roles of Chairman and CEO and is satisfied that this remains the best

structure for the Company for the time being. Mr Gilauri recuses himself

from any discussion on this subject.

The Board has carried out a further evaluation, reported on later in this

report and is satisfied that the size and composition of the Board is

appropriate for the Group and that it comprises the right combination

of skills, experience and knowledge. The Committee considers that

there continues to be strong leaders across our portfolio companies.

Succession planning, aligned to the Group’s strategy, is an ongoing

priority for the Committee at both Board and senior management level.

More details on the matters above are set out later in this Report.

Neil Janin

Chairman of the Nomination Committee

21 March 2024

NOMINATION COMMITTEE REPORT

1 The number of meetings of the Committee attended by each member during the

year, together with the number of meetings they were entitled to attend.

2 Massimo Gesua’ sive Salvadori joined as a member of the Committee with effect

from 17 May 2023.

The role of the Nomination Committee

The role of the Nomination Committee is to ensure that the Board is

comprised of individuals best able to discharge the responsibilities of

Directors, having regard to the highest standards of governance, the

strategic direction of the Company and the Board’s Diversity Policy.

We also help to ensure that the Company appoints excellent executive

managers within our portfolio of companies, and who are capable of

successfully executing our strategic objectives.

In summary, the key responsibilities of the Nomination Committee include:

• regular review of the composition of the Board and its Committees

to ensure they are appropriately constituted and balanced in terms

of diversity of gender, social and ethnic backgrounds, cognitive

and personal strengths, and balance in terms of skills, experience,

independence and knowledge;

• responsibility for identifying and nominating candidates for the

approval by the Board to fill Board vacancies as and when they arise;

• giving full consideration to succession planning for Directors, including

the Chairman and CEO and other senior management, taking into

account the challenges and opportunities facing the Company, and the

skills and expertise needed on the Board in the future;

• keeping under review the Group’s leadership needs, both executive

and non-executive, and ensuring plans are in place for senior

management succession, with a view to ensuring the continued

ability of the Company to compete effectively in the marketplace; and

• making recommendations to the Board concerning the re-election by

shareholders of Directors under the annual re-election provisions of

the UK Corporate Governance Code (“the Code”), having due regard

to their performance and ability to continue to contribute to the Board

in the light of the knowledge, skills and experience required and their

independence, bearing in mind the need for progressive refreshing of

the Board.

The Committee undertook a review of its Terms of Reference, and the

Committee is satisfied that these continue to be aligned to the Code

and best practice, and appropriate for the Company. The full Terms of

Reference of the Committee can be found on our website here:

https://georgiacapital.ge/governance/cgf/terms.

Composition and meeting attendance

The composition of the Committee and the members’ meeting

attendance for the year 2023 are set out in the Board and Committee

meeting attendance table on page 127, and the skills and experience

each member contributes can be found on pages 122 to 123. Up

until 17 May 2023, the date of the Company’s most recent AGM, the

Committee was comprised of Jyrki Talvitie as Chair, Maria Chatti-Gautier,

Irakli Gilauri and myself. I succeeded Jyrki Talvitie as Committee

Chair following the 2023 AGM. At the same time Maria Chatti-Gautier

stepped down from this Committee and Massimo Gesua’ sive

Salvadori was appointed.

From time-to-time members of management may be invited to

meetings to provide a fuller picture and deeper level of insight into key

issues and developments.

The Committee also reviewed the time commitment of the Non-

Executive Directors, and considered any external directorships, length

of service as well as independence of character and integrity. Alongside

these factors the Committee took into account the Company’s strategic

direction and the required skills and competencies required of the Board

as a whole. The Committee concluded that it was happy to recommend

that each Non-Executive Director and the Executive Director be re-

elected at the 2024 AGM.

With the continuing service of David Morrison (Chair) and Massimo

Gesua’ sive Salvadori, who are now joined by Maria Chatti-Gautier (see

pages 122 to 123 for a description of their experience and reason for

appointment), the Committee considers that the financial expertise of the

Audit and Valuation Committee’s members is recent and relevant. The

changes to the composition of the Remuneration and this Committee

were also part of the Committee’s work during 2023.

The tenure for David Morrison and Massimo Gesua’ sive Salvadori is six

years as at the date of this report (appointed in February 2018), Maria

Chatti-Gautier’s tenure is four years (appointed in March 2020) and

my tenure is one year (appointed in October 2022). As part of a wider

assessment, the Committee noted that David Morrison and I previously

held roles as Directors of BGEO Group PLC. The business of Georgia

Capital demerged from BGEO Group PLC, into a new group which listed

in May 2018. Georgia Capital is a platform for buying, developing and

selling businesses in Georgia. Importantly therefore, the nature of the

business of Georgia Capital is substantially different to that of BGEO

Group PLC at the date of the demerger, which primarily consisted of the

regulated bank. I recused myself from the Committee’s consideration of

this matter but I can report that the Committee concluded that from our

previous long careers, Mr Morrison and I have very strong experience,

knowledge and authority to demonstrate objective judgement and

provide constructive challenge among the Board members for this

Company’s business as an investment platform. The Committee has

also noted the continuing contribution of all Board members in Board

meetings and outside the meetings. Taking all the foregoing into

consideration, the Committee determines that all Board members are

independent in character and judgement.

You can read more on the balance of the Board in the section on “Board

size, composition, tenure and independence” on page 124.

Role of the Chairman of the Board

The Committee keeps the current practice of combining the role of

Chairman and CEO roles and remains satisfied that, notwithstanding this

is not compliant with provision 9 of the Code, the continuing combination

of the two roles (i.e. the current structure) best serves our Company

and recommends that it should continue for the time being. Mr Gilauri

did not participate in these discussions. The Committee and the Board

will keep the structure under review. Shareholders have, for the last five

years, been supportive of this structure and from our discussions with

shareholders, we believe this continues to be the case. The basis for this

conclusion, and our shareholder engagement on this matter, is set out in

the Directors’ Governance Statement on page 120.

Inclusion and diversity

Our Board embraces diversity in all its forms and the Board understands

the importance of developing a diverse pipeline for succession to senior

management and the Board.

The Committee and the Board recognise the role that diversity plays in

promoting balanced decision-making, which aligns with our values and

strategy. Diversity of skills, background, experience, knowledge, outlook,

approach, gender, nationality and ethnicity, amongst other factors, are

taken into consideration when seeking to appoint a new director to the

Board. Above all, any Board appointment will always be based on merit.

Equally, we are clear that diversity of outlook and approach, while

inevitably difficult to measure, is a key determinant in maintaining an

effective Board. We are supportive of the ambition shown in recent

reviews on diversity, including the Parker Review regarding ethnic diversity,

and the Board is aligned with recommendations for ethnic minorities on

UK boards, with the inclusion of Board members Maria Chatti-Gautier,

of Syrian (Middle Eastern) heritage and Irakli Gilauri, an ethnic Georgian.

The Committees and individual members of the Board wish to note that,

given that the Board also consists of Massimo Gesua’ sive Salvadori, who

is Jewish and Italian, David Morrison, a US National, and Neil Janin, a

Canadian, the Board’s diversity extends beyond ethnicity alone.

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Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

It is recognised that ethnic heritage draws upon a number of factors in

tandem, and that the Group is primarily based in Georgia, where the

Georgian majority ethnic group may not always fit neatly into UK-centric

diversity metrics. Georgian (Kartuli) is the only prominent language of

the Kartvelian language family, and has its own script, and the majority

religion in Georgia is the Orthodox Church of Georgia. Georgia sits

geographically and culturally at the intersection of Europe, Asia and the

Middle East, and Georgians tend to identify themselves as a distinct

indigenous group of the Caucasus.

Diversity is a core feature of the Committee’s work and as such, is an

integral part of the Board recruitment process as described in more

detail elsewhere in this report, and is part of the search specification

agreed with external agents.

We remain committed to having a Board that is diverse in all respects

and the Committee will continue to examine ways in which we can build

on its current diversity. We support the FTSE Women Leaders Review

regarding gender diversity, and the Committee is working to improve the

gender balance of those in senior management positions and their direct

reports, as described in the Resources and Responsibilities section on

page 84 and in the Sustainability Report.

Georgia Capital recognises that it does not currently satisfy the LR 14

target, given that less than 40% of the individuals on our board are

women and no woman occupies the position of Chair, SID or CEO.

We have made a concerted effort to reduce the number of non-executive

directors on our Board and have succeeded in meaningfully reducing

the cost of the Board without compromising on its quality. Given these

recent changes, we believe it to be in our shareholders’ best interests to

proceed on further Board changes with caution. We strongly believe that

diversity targets are not just an end goal, but a continuous journey. Our

long-term ambition is to increase diversity on our Board, in all its forms,

to ensure a wider representation of both gender and the society in which

we operate. With David Morrison’s and Massimo Gesua’ sive Salvadori’s

tenures as independent directors expiring in three years, the Committee

will continue to ensure that diversity is always considered when drawing

up candidate shortlists, with the aim of increasing the representation of

women on the board, and in senior Board positions, and achieving the

targets under the UK Listing Rules.

On 31 December 2023, Georgia Capital, as an investment holding

company, had a total of 47 employees, of which 27 are females, and

20 are males. You can view our further gender diversity statistics on

page 84 in the Resources and Responsibilities section and in the

Sustainability Report.

Our gender identity and ethnicity data in accordance with LR 14.3.33R(2)

at 31 December 2023 was as follows. The data was collected through

self-reporting by the Directors and management:

Number of Board

members

Percentage

of the Board

Number of senior

positions on the Board

(CEO, CFO, SID

and Chair)

Number in

executive

management

Percentage

of executive

management

Men 4 80% 3 6 66.66%

Women 1 20% – 3 33.33%

Non-binary – – – – –

Not specified/prefer not to say – – – – –

Notes:

• The CFO is a member of management team but not a member of the Board.

• The role of the Chair and CEO is combined.

Table for reporting on ethnic background:

Number of Board

members

Percentage

of the Board

Number of senior

positions on the Board

(CEO, CFO, SID

and Chair)

Number in

executive

management

Percentage

of executive

management

White British or other White

(including minority-white groups) 3 60% 1 – –

Mixed/Multiple Ethnic Groups – – – – –

Asian/Asian British – – – – –

Black/African/Caribbean/Black British – – – – –

Other ethnic group, including Arab 2 40% 1 9 100%

Not specified/prefer not to say – – – – –

The Committee is responsible for maintaining and assessing the

effectiveness of the Company’s Diversity Policy and reviews this on an

ongoing basis. You can read more about the established diverse culture

and related activities during 2023 in the Resources and Responsibilities

section on pages 80 to 93 and in the Sustainability Report.

Succession planning and talent development

Board succession planning at the senior management level was, as

mentioned previously, an area of focus for the Committee during the

year. We have previously reported on the creation of opportunities to

develop high-performing individuals and to build diversity in senior roles

across the business. We continue to build on this initiative and have

developed a talented pool of employees within Georgia Capital that we

believe is the best way to ensure a healthy and diverse pipeline of future

leaders of the Company in line with the Group’s strategy.

In addition, the Company pursues initiatives aimed at developing the

entrepreneurial business leaders that Georgia Capital will require as

it grows.

Training and Director induction

We are committed to the continuing development of our Directors in

order that they may build on their expertise and maintain a detailed

understanding of the business and the markets in which our investments

operate. All of our Directors participated in development sessions and

presentations. The UK General Counsel and Group Corporate Secretary

provided briefings as appropriate on regulatory and governance

developments, including on changes in the Listing Rules and on

stakeholder views on diversity.

Each Director, upon appointment, receives a tailored induction to

the Company and its various investments over the first six months of

appointment, with the purpose of:

• building an understanding of the nature of the Company, its business

and its markets;

• building a link with the Company’s people;

• building an understanding of the Company’s main relationships; and

• understanding the obligations and responsibilities of a Director of a

UK main market-listed company.

As part of the induction programme, each Director meets members of

executive management and receives information about the role of the

Board and individual Directors, each Board Committee and the powers

delegated to these Committees. The new Director is also advised of the

legal and other duties and obligations of a Director of a listed company.

Board and Committee evaluation

The Company again engaged Amandla to conduct an in-depth

evaluation of Georgia Capital’s Board comprising a multi-faceted

approach. This included online interviews with the entire Board,

feedback reports, individual assessments for each Board member,

in-person group coaching and observation of Board meetings. Amandla

considers that the Board is functioning adeptly in terms of governance,

supervision and oversight. Amandla observed that the Board is

intrinsically tied to the commitment and longevity of its members,

reflecting a profound dedication to the Company’s mission. With the

transformation into a more streamlined Board, Amandla reported the

focus on maintenance of a rich diversity of experiences, a profound

respect among members, and a commitment to progressive, assertive

debate. Amandla concluded that the Board is currently operating

effectively. Its potential could be maximised by affording Board members

an uninterrupted period of collaboration and avoiding a revolving door

of further changes. The Board’s members respect one another and are

keen to steer the necessary transformations essential for creating value

in a challenging region.

The Chairmanship was described as commendable, and Amandla

commented that reduction in Board size augurs well for agile decision-

making. The Board reflects diverse thoughts and experiences in line with

industry standards. In terms of oversight, Amandla stated that the Board

is fit for purpose. Amandla had previously worked with the Chairman and

other senior executives within Georgia Capital. The assessment included

a series of qualitative diagnostic interviews designed to ascertain from

each of the Board members several different components:

1. The individual strengths of each member.

2. The areas which other Board members felt there could be a

greater contribution.

3. The dynamics in the team that allowed for healthy challenge

and debate.

4. The areas that might need attention.

Given his role as Chairman and CEO, Irakli Gilauri’s performance

was also reviewed by the Remuneration Committee and the Senior

Independent Director. In addition, the full Board met to consider the

Remuneration Committee’s recommendations.

NOMINATION COMMITTEE REPORT CONTINUED

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Georgia Capital PLC Annual Report 2023

162

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

STATEMENT OF DIRECTORS’ RESPONSIBILITIES

The Directors are responsible for preparing the Annual Report and the

financial statements in accordance with applicable laws and regulations.

Company law requires the Directors to prepare financial statements

for each financial year. Under that law, the Directors have prepared the

financial statements in accordance with the applicable UK-adopted

international accounting standards.

Under company law, the Directors must not approve the financial

statements unless they are satisfied that they give a true and fair view

of the state of affairs of the company and of the profit or loss of the

company for that period.

In preparing the financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• state whether applicable UK-adopted international accounting

standards have been followed, subject to any material departures

disclosed and explained in the financial statements;

• make judgements and accounting estimates that are reasonable and

prudent; and

• prepare the financial statements on a going concern basis unless it is

inappropriate to presume that the company will continue in business.

The Directors are responsible for safeguarding the assets of the

company and hence for taking reasonable steps for the prevention and

detection of fraud and other irregularities.

The Directors are also responsible for keeping adequate accounting

records that are sufficient to show and explain the company’s

transactions and disclose with reasonable accuracy at any time the

financial position of the company and enable them to ensure that the

financial statements and the Directors’ Remuneration Report comply

with the Companies Act 2006.

The Directors are responsible for the maintenance and integrity of the

company’s website. Legislation in the United Kingdom governing the

preparation and dissemination of financial statements may differ from

legislation in other jurisdictions.

We confirm that to the best of our knowledge:

• the Company financial statements, which have been prepared in

accordance with UK-adopted international accounting standards,

give a true and fair view of the assets, liabilities, financial position and

loss of the Company; and

• the Annual Report, including the Strategic Report includes a fair

review of the development and performance of the business and the

position of the Company, together with a description of the principal

risks and uncertainties that it faces.

We consider the Annual Report and Accounts, taken as a whole, to

be fair, balanced and understandable, and provides the information

necessary for shareholders to assess the Company’s position and

performance, business model and strategy.

By order of the Board

Irakli Gilauri

Chairman and CEO

21 March 2024

DIRECTORS’ REPORT

The Directors present their Annual Report and the audited financial

statements for the year ended 31 December 2023.

Please refer to the Corporate Governance Statement for further

information on how we applied the UK Corporate Governance Code.

Strategic Report

The Strategic Report on pages 2 to 119 was approved by the Board of

Directors on 21 March 2024 and signed on its behalf by Irakli Gilauri,

Chairman and Chief Executive Officer.

Management Report

This Directors’ Report together with the Strategic Report on pages 2 to

119 form the Management Report for the basis of DTR 4.1.8 R.

Directors

The names and biographies of the current Directors of the Company

are shown on pages 122 to 123 and include their relevant experience. In

accordance with the UK Corporate Governance Code, all Directors will

retire and stand for re-election at the AGM.

The Directors’ beneficial interests in ordinary shares of Georgia Capital

as at 31 December 2023 are shown on page 150 together with any

changes in those interests between the financial year end and the date

on which this Directors’ Report was approved by the Board.

Powers of Directors

The Directors may exercise all powers of the Company subject to applicable

legislation and regulations and Georgia Capital’s Articles of Association.

Information contained elsewhere in the Annual Report

Information required to be included in this Directors’ Report can be

found elsewhere in the Annual Report as indicated in the table below

and is incorporated into this report by reference:

Articles of Association

Georgia Capital PLC’s (the “Company”) Articles of Association may

only be amended by a special resolution at a general meeting of the

shareholders. The process for the appointment and removal of Directors

is included in the Company’s Articles of Association. The Georgia Capital

PLC Articles of Association are available on the Company’s website:

https://georgiacapital.ge/governance/cgf/articles.

Share capital and rights attaching to the shares

Details of the movements in share capital during the year are provided in

Note 8 to the financial statements on page 192 of this Annual Report. As

at the last practicable date of 15 March 2024, there was a single class of

42,673,998 ordinary shares of 1 pence each in issue, each with one vote.

The rights and obligations attaching to the Company’s ordinary shares

are set out in its Articles of Association. Holders of ordinary shares are

entitled, subject to any applicable law and the Company’s Articles of

Association, to:

• have shareholder documents made available to them including notice

of any general meetings;

• attend, speak and exercise voting rights at general meetings, either in

person or by proxy; and

• participate in any distribution of income or capital.

The Company is permitted to make market purchases of its own shares

provided it is duly authorised by its members in a general meeting and

subject to and in accordance with section 701 of the Companies Act 2006.

Authority was given at the AGM of the Company on 17 May 2023 for the

Company to purchase up to 6,719,696 shares (approximately 14.99%

of Georgia Capital’s issued ordinary share capital excluding treasury

shares as at 23 March 2023) on-market. This authority will expire at

the conclusion of the Company’s AGM in 2024 or, if earlier, the close of

business on 17 June 2024.

Information Location in Annual Report

Future developments Page s 2-119

Going Concern Statement Page 69

Viability Statement Pages 69-70

Risk management Pages 66-70

Principal risks and uncertainties Pages 71-79

Directors’ Governance Statement Pages 120-121

The Board of Directors Pages 122-123

Audit and Valuation Committee report Pages 133-138

Remuneration Committee report Pages 139-157

Summary of Remuneration Policy Page 153

Nomination Committee report Pages 158-161

Related party disclosures Page 203

Greenhouse gas emissions Page 86

Employee matters Pages 82-85

Environmental matters Pages 85-93

Share capital Page 192

Engagement with suppliers, customers and others in a business

relationship with the Company

Page 128

Information on the Group’s financial risk management objectives

and policies, and its exposure to credit risk, foreign currency risk

and financial instruments

Pages 194-197

Research and development As an investment holding company, GCAP does not engage in research

and development activities comparable with, for example, manufacturing

companies. Instead, research and development activities are carried

out separately by each of our portfolio companies. This sub-report is

therefore omitted.

165

Georgia Capital PLC Annual Report 2023

164

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

A renewal of the authority to make market purchases will be sought

from shareholders at each AGM of the Company. Purchases of ordinary

shares will be made within guidelines established from time to time

by the Board. Any purchase of ordinary shares would be made only

out of the available cash resources of the Company. Ordinary shares

purchased by the Company may be held in treasury or cancelled.

Authority was given at the AGM of the Company on 17 May 2023 for

the Company to purchase up to 15,689,751 shares (approximately 35%

of Georgia Capital’s issued ordinary share capital excluding treasury

shares as at 23 March 2023) off-market. This authority will expire at

the conclusion of the Company’s AGM in 2024 or, if earlier, the close of

business on 17 June 2024.

A renewal of the authority to make off-market purchases may be sought

from shareholders at future AGMs of the Company. Purchases of

ordinary shares will be made within guidelines established from time to

time by the Board. Any purchase of ordinary shares would be made only

out of the available cash resources of the Company. Ordinary shares

purchased by the Company may be held in treasury or cancelled.

At the AGM of the Company on 17 May 2023, the Directors were given

the power a) to allot shares up to a maximum nominal amount of GBP

149,426.20 (representing 14,942,620 ordinary shares, approximately

one third of the Company’s issued share capital as at 23 March 2023),

and b) to allot equity securities up to an aggregate nominal amount of

GBP 149,426.20 in connection with an offer by way of a rights issue: (i) to

holders of shares in proportion (as nearly as may be practicable) to their

existing holdings; and (ii) to holders of other equity securities as required

by the rights of those securities or, if the Board consider it necessary, as

permitted by the rights of those securities, such amount to be reduced by

the aggregate nominal amount of shares allotted or rights to subscribe for

or to convert any securities into shares granted under paragraph (a), and

subject to the Board having the right to make such exclusions or other

arrangements as they may deem necessary or expedient in relation to

treasury shares, fractional entitlements, record dates or legal, regulatory or

practical problems in, or under the laws of, any territory. These authorities

will expire at the conclusion of the 2024 AGM (or, if earlier, at the close of

business on 17 August 2024) and approval will be sought at that meeting

to renew a similar authority for a further year.

The Directors did not allot any shares during 2023.

In April 2023, the Board approved a buyback programme whereby the

Company purchased 1,000,000 of Georgia Capital’s issued ordinary

share capital with a total nominal value of US$ 10.0 million. All shares

purchased pursuant to this programme were cancelled on a monthly

basis, consequently reducing the share capital. The last buyback under

this programme occurred on the 20 June 2023. In October 2023, the

Board approved a new US$ 15.0 million share buyback and cancellation

programme with the intention of all shares purchased pursuant to

this programme to be cancelled on a monthly basis, consequently

reducing the share capital. Under the US$ 15 million share buyback and

cancellation programme, the Company purchased 665,222 of Georgia

Capital’s issued ordinary share capital with a total nominal value of US$

8.3 million in 2023. In the first quarter of 2024 to date 488,642 shares

have been bought back and cancelled.

The purpose of both buyback programmes was to reduce Georgia

Capital PLC’s number of outstanding ordinary shares.

Under the above programmes, the Company has repurchased 1,665,222

of its own shares during the financial year ended 31 December 2023,

representing a nominal value of US$ 18.3 million and an aggregate

consideration paid by Georgia Capital PLC of GBP 14.6 million on the UK

trading. The shares cancelled represent 3.7% of the shares in issue and

3.9% of the shares in issue, excluding treasury shares.

None of the ordinary shares carry any special rights with regard to

control of Georgia Capital. There are no restrictions on transfers of

shares other than:

• certain restrictions, which may from time to time be imposed by laws

or regulations such as those relating to insider dealing or pursuant to

the Group’s Inside Information Disclosure Policy;

• pursuant to the Company’s Securities Dealing Policy and Code,

whereby the Directors and designated employees require approval to

deal in Georgia Capital’s shares or cannot deal in certain periods; and

• where a person with an interest in the Company’s shares has

been served with a disclosure notice and has failed to provide the

Company with information concerning interests in those shares.

There are no restrictions on exercising voting rights save in situations

where Georgia Capital is legally entitled to impose such restriction (for

example, under the Articles of Association where amounts remain

unpaid in the shares after request, or the holder is otherwise in default

of an obligation to Georgia Capital). Georgia Capital is not aware of any

arrangements between shareholders that may result in restrictions on

the transfer of securities or voting rights.

In August 2023, JSC Georgia Capital issued a US$ 150 million SLB

on the Georgian market. The bonds are US$-denominated with a

five-year bullet maturity (callable after two years), carry an 8.50% fixed

coupon and were issued at par. The bonds are rated BB- by S&P, a

one-notch upgrade compared to the Eurobonds. The proceeds from the

transaction, together with the existing liquid funds of GCAP were fully

used to redeem GCAP’s Eurobonds.

Results and dividends

The Company made a profit before taxation of GEL 608.6 million. The

Company’s profit after taxation for the year was GEL 608.6 million.

The Company may by ordinary resolution declare dividends provided

that no such dividend shall exceed the amount recommended by the

Company’s Directors. The Directors may also pay such interim dividends

as appear to be justified by the profits of the Company available

for distribution.

As the Company is a holding company, Georgia Capital relies primarily

on dividends and other statutorily (if any) and contractually permissible

payments from its subsidiaries to generate the funds necessary to meet

its obligations and pay dividends to its shareholders.

The Company expects to be a cash-generative business with the

opportunity for attractive capital investment to enhance its growth

prospects, both through organic investments and acquisitions. The

Board intends to pursue a capital returns policy that reflects this strategy

whilst also delivering shareholders high-quality, long-term dividend

growth, through share buybacks or other potential exits. However, the

Board may periodically reassess the Company’s dividend policy and

the payment of dividends (or quantum of the same) will depend on the

Group’s existing and future financial condition, results of operations,

capital requirements, investment and divestment cycles, liquidity needs

and other matters the Board considers relevant from time to time.

AGM

The arrangements for the Company’s next AGM and details of the

resolutions to be proposed, together with explanatory notes will, be set

out in the Notice of AGM to be published on the Company’s website:

https://georgiacapital.ge/.

Equity Settled Option Plan (ESOP)

The Company operates an EBT (the “ESOP”), which holds ordinary

shares in trust for the benefit of employees and former employees of the

Group, and their dependents, and which is used in conjunction with the

Group’s employee share schemes. Whilst ordinary shares are held in the

EBT, the voting rights in respect of these ordinary shares are exercised

by the trustees of the EBT.

In accordance with the ESOP documentation, Apex Group Fiduciary

Services Limited has waived its right to receive any dividends. This waiver

will remain in place indefinitely, unless otherwise instructed by Georgia

Capital. New shares issued in satisfaction of deferred share compensation

from the time of the Company’s listing on the LSE will not exceed 10% of

the Company’s ordinary share capital over any ten-year period.

Conflicts of interest

In accordance with the Companies Act 2006, the Directors have

adopted a policy and procedure for disclosure and authorisation (if

appropriate) of conflicts of interest, and these have been followed during

2023. The Company’s Articles of Association also contain provisions to

allow the Directors to authorise potential conflicts of interest so that a

Director is not in breach of his or her duty under company law.

Directors’ remuneration

Directors’ fees are determined by the Remuneration Committee from

time to time. The remuneration of Directors must be in accordance with

the Directors’ Remuneration Policy. A remuneration policy was put to

the shareholders for approval at the 2023 AGM and remuneration is

determined in accordance with that Policy.

The fees paid to the Non-Executive Directors in 2023 pursuant to their

letters of appointment are shown on page 150. The fees paid to our

sole Executive Director in 2023 pursuant to his service agreements with

Georgia Capital are shown on pages 142 to 143.

Indemnity

Subject to applicable legislation, every current and former Director or other

officer of the Company (other than any person engaged by the Company

as auditor) shall be indemnified by the Company against (broadly) any

liability in relation to the Company, other than (broadly) any liability to the

Company or a member of the Company, or any criminal or regulatory fine.

In addition, the Company has put in place Directors’ and Officers’ liability

insurance. Such indemnities were in force throughout the financial period

and will remain in force as at the date of this Annual Report.

Related party disclosures

Details of related party disclosures are set out in Note 14 to the financial

statements on page 203 of this Annual Report.

Significant agreements

The Company is not party to any significant agreements that take

effect, alter or terminate upon a change of control of the Company.

The Company is not aware of any agreements between holders of

its ordinary shares that may result in restrictions on the transfer of its

ordinary shares or on voting rights.

Presence outside of Georgia

The Company has an office in London: see page 207.

Employee disclosures

Our disclosures relating to the number of women in senior management,

employee engagement and our policies on human rights, including

employees with a disability, are included in the section “Employee

matters” on pages 82 to 85.

Political donations

The Company did not make any political donations or expenditure

during 2023. Authority to make political donations and incur political

expenditure will be put to shareholder vote at the 2024 AGM.

Code of Conduct and Ethics

The Board has adopted a Code of Conduct and Ethics relating to the

lawful and ethical conduct of the business, supported by the Company’s

core values. The Code of Conduct and Ethics has been communicated

to all Directors and employees, all of whom are expected to observe

high standards of integrity and fair dealing in relation to customers,

staff and regulators in the communities in which the Company operates.

Our Code of Conduct and Ethics is available on our website:

https://georgiacapital.ge/governance/cgf/policies.

Independent auditors

A resolution to re-appoint PricewaterhouseCoopers LLP as auditors of

Georgia Capital will be put to shareholders at the upcoming AGM.

Major interests in shares

The table below lists shareholders with voting rights of more than 3% as

of 31 December 2023.

Shareholder

Number of

voting rights

% of voting

rights

Gemsstock Ltd 4,721,881 10.94%

JSC Georgia Capital Executive Equity

Compensation Trust 4,154,584 9.63%

Allan Gray Ltd 2,971,140 6.88%

Lazard Asset Management LLC 2,417,6 3 6 5.60%

Coeli Frontier Markets AB 2,133,120 4.94%

Schroder Investment Management Ltd 1,601,299 3.71%

Irakli Gilauri 1,589,028 3.54%

Eaton Vance 1,509,677 3.50%

Source: Georgeson, Computershare

For the period 1 January 2024 up to and including 15 March 2024

(the latest practicable date for inclusion in this report), the Company has

received the following notifications pursuant to Rule 5 of the DTRs:

Shareholder

Number of

voting rights

% of voting

rights

Lazard Asset Management LLC 2,191,39 0 5.08%

Irakli Gilauri 1,848,10 4 4.30%

It should be noted that these holdings are likely to have changed since the

Company was notified. However, notification of any change is not required

until the next notifiable threshold is crossed. The respective regulatory

filings by shareholders are available on the Company’s website and the

LSE website.

Post-balance sheet events

Please see Note 15 to the financial statements, for any post-balance

sheet activities.

Statement of disclosure of information to the auditor

We, the Directors confirm that, so far as we are aware, there is no

relevant audit information of which the Company’s auditors are unaware

and we have taken all steps that we reasonably believe should be taken

as Directors in order to make ourselves aware of any relevant audit

information and to establish that the Company’s statutory auditors are

aware of such information.

The Directors’ Report on pages 163 to 165 was approved by the Board

of Directors on 21 March 2024 and signed on its behalf by:

Link Company Matters Limited

Company Secretary

21 March 2024

DIRECTORS’ REPORT CONTINUED

1 Combines several accounts managed by Lazard Asset Management LLC.

2 Omits the certain accounts managed by Lazard Asset Management LLC. Considering the omitted accounts, the shareholding of Lazard Asset Management LLC would stand at

approximately 6.2% (based on the management estimate).

167

Georgia Capital PLC Annual Report 2023

166

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

Report on the audit of the financial statements

Opinion

In our opinion, Georgia Capital PLC’s financial statements:

• give a true and fair view of the state of the company’s affairs as at 31 December 2023 and of its profit and cash flows for the year then ended;

• have been properly prepared in accordance with UK-adopted international accounting standards; and

• have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the financial statements, included within the Annual Report, which comprise: Statement of Financial Position as at 31 December 2023;

the Statement of Profit or Loss and Comprehensive Income, the Statement of Changes in Equity and the Statement of Cash Flows for the year then

ended; and the notes to the financial statements, comprising material accounting policy information and other explanatory information.

Our opinion is consistent with our reporting to the Audit and Valuation Committee.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under

ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe that the audit

evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We remained independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the

UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and we have fulfilled our other ethical responsibilities in

accordance with these requirements.

To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not provided.

Other than those disclosed in note 9 – Auditors’ remuneration, we have provided no non-audit services to the company or its controlled undertakings

in the period under audit.

Our audit approach

Context

Georgia Capital PLC is a company listed on the London Stock Exchange which invests in and develops businesses within Georgia. It holds 100%

of the share capital of JSC Georgia Capital. Its primary operations are in Georgia. In planning for our audit, we met with the Audit and Valuation

Committee and members of management to discuss and understand significant changes to the business during the year, and to understand their

perspectives on associated business risks. We used this insight when forming our views regarding the business, as part of developing our audit plan

and when scoping and performing our audit procedures.

Overview

Audit scope

• The Annual Report and financial statements are prepared as an investment entity under IFRS 10. We have audited 100% of the investment

portfolio held by Georgia Capital PLC through JSC Georgia Capital. This represents 99% of the equity investments at fair value balance.

• We instructed PwC Georgia to perform audit procedures on inputs to the valuation models of the investment portfolio. We performed audit

procedures over the assumptions and methodologies applied in developing the valuation of the investment portfolio.

• We instructed PwC Georgia to perform audit procedures over valuation model inputs and other balances pertaining to the equity investments at

fair value balance.

Key audit matters

• Valuation of equity investments at fair value.

Materiality

• Overall materiality: GEL 33,785,000 (2022: 28,174,000) based on 1% of net assets.

• Performance materiality: 25,338,000 (2022: 14,086,965).

The scope of our audit

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.

INDEPENDENT AUDITORS’ REPORT

TO THE MEMBERS OF GEORGIA CAPITAL PLC

Key audit matters

Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial statements

of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditors,

including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the

engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the context of our

audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

This is not a complete list of all risks identified by our audit. The key audit matters below are consistent with last year.

Key audit matter How our audit addressed the key audit matter

Valuation of equity investments at fair value

The equity investments at fair value balance presented in the Statement

of Financial Position is the Company’s investment in its subsidiary,

predominantly comprised of the fair value of the investment portfolio.

The investment portfolio includes unquoted investments. The accounting

policy for this balance is included in note 3 to the financial statements.

The breakdown of the balance is disclosed in note 5 to the financial

statements and the value of the unquoted investments is GEL 2,287m.

In valuing the investment portfolio, key assumptions include discount

rates, future growth projections, control premia, illiquidity discounts and

the application of weighted averages to different valuation approaches.

The inputs in the earnings multiples models include observable data, such

as earnings multiples of comparable companies to the relevant investment,

and unobservable data, such as forecast earnings for the investments. In

discounted cash flow models, unobservable inputs are the project cash

flows of the relevant investments and the discount rates applied.

The valuation of equity investments at fair value was identified as a key

audit matter given the valuation is inherently subjective due to, among

other factors, the individual nature of each investment and the expected

future cash flows. The significance of the estimates and judgements

involved, coupled with the fact that only a small percentage difference

in individual investment valuations, when aggregated, could result in

a material misstatement, warranted specific audit focus in this area.

We obtained an understanding of management’s processes and

controls for determining the fair value of equity investments, including

understanding management’s interactions with Kroll as management’s

external experts. We performed the following procedures over the

valuation of equity investments at fair value as at 31 December 2023:

• We assessed the competence and capabilities of management’s

expert and verified their qualifications.

• We also assessed their independence by discussing the scope of

their work and reviewing the terms of their engagement for unusual

terms or fee arrangements.

Based on this work, we are satisfied that the valuers were independent

and competent and the scope of their work was appropriate.

• In conjunction with our auditor’s valuation experts, the engagement

team held discussions with management and 3rd party valuers to

challenge their assumptions and validate inputs used;

• Validated the appropriateness of the fair valuation policies

to assess whether they are in accordance with applicable

accounting requirements;

• Tested the classification of Level 3 investments to assess whether

they were classified appropriately;

• Reviewed valuation methodologies to confirm they are in line with

Georgia Capital Valuation Policies and IFRS requirements;

• Recalculated the valuation models from their Excel formula to assess

mathematical accuracy;

• Supported by the PwC Georgia team, assessed the appropriateness

of any unobservable inputs or significant estimates used in valuations,

including benchmarking against publicly available information where

available, and obtained corroborative evidence; and

• Validated ownership and other interests held through regulatory data,

sale and purchase agreements or other third party reports.

In addition, given the inherent subjectivity involved in the valuation

of the investments, and therefore the need for specialised market

knowledge when determining the most appropriate assumptions and

the technicalities of valuation methodology, we engaged our internal

valuation experts to assist us in our audit of this area. The experts

performed the following procedures on a sample of investments:

• Obtained and read the valuation report drafted by Kroll for each asset

in the sample;

• Discussed with Kroll and management their rationale for the valuations;

• Reviewed and assessed the reasonableness of the valuation

approaches and methodologies for compliance with the relevant

industry best practice and IFRS;

• Reviewed certain key inputs and assumptions, including discount

rates, future growth projections, control premia, illiquidity discounts

and the applicable of weighted averages as at 31 December 2023;

and

• Reported their findings to the audit team for overall considerations

and conclusions.

We considered the appropriateness and adequacy of the

disclosures around the estimation uncertainty and sensitivities on

the accounting estimates. Our testing did not identify any evidence

of material misstatement.

169

Georgia Capital PLC Annual Report 2023

168

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

How we tailored the audit scope

We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole,

taking into account the structure of the company, the accounting processes and controls, and the industry in which it operates.

Georgia Capital PLC is an investment entity as defined by IFRS 10. It recognises its 100% holding in JSC Georgia Capital under the Equity

investments at fair value account. 97% of this balance is comprised of equity investments held at fair value through JSC Georgia Capital.

The audit work over this balance was performed by the UK and Georgia engagement teams in conjunction with PwC UK valuation experts.

The Senior Statutory Auditor is based in the UK, along with the UK engagement team. As the Company’s management and operations are located

in Georgia, the UK engagement team have instructed the Georgia engagement team for JSC Georgia Capital to report to the UK on special purpose

financial information as it pertains to the equity investments at fair value balance.

The Georgia engagement team have carried out audit procedures over certain balances included within equity investments at fair value along

with testing of inputs into the investment valuation models. The UK engagement team, together with the UK valuations experts, performed audit

procedures over the judgemental assumptions and methodologies employed in determining a fair value.

The UK engagement team held regular calls with the Georgia engagement team to understand the audit approach, findings from the results of audit

procedures and any issues arising from our work. The Senior Statutory Auditor travelled to Tbilisi, Georgia to meet with the Georgia engagement

team face to face and perform an on-site review of work performed by the Georgia engagement team. The UK engagement team also performed a

remote review of working papers through use of our audit software and were responsible for the direction, review and oversight of the audit process.

The impact of climate risk on our audit

In planning and executing our audit, we have considered the potential impacts of climate change on the Company’s business and its financial

statements, based on our knowledge of the Company’s operations and its strategy in relation to climate change.

In 2023, the Company has continued to develop its assessment of the potential impacts of climate change as outlined in the TCFD report on pages

88-91. As part of our audit, we have obtained management’s and the Audit and Valuation Committee’s climate-related risk assessment to understand

the process of identifying climate-related risks, the determination of mitigating actions and the impact on the Company’s financial statements.

We have performed our own qualitative risk assessment of the potential impact of climate change on the Company’s key account balances and

classes of transactions, namely the assumptions embedded in discounted cash flows models for growth rates, operating expenses and capital

expenditure, and have not identified any additional risks of material misstatement.

We also considered the consistency of the disclosures in relation to climate change in the financial statements with the disclosures in the Task Force

on Climate-related Financial Disclosures (TCFD) section and more broadly within the Responsibility section of the Strategic Report.

Materiality

The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with

qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual

financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial

statements as a whole.

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

Overall company materiality GEL 33,785,000 (2022: 28,174,000).

How we determined it 1% of net assets

Rationale for benchmark applied Based on the benchmarks used in the Annual Report, net assets is the primary measure used by

shareholders in assessing the performance of the Company and is a generally accepted auditing benchmark.

We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected

misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature and

extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our performance

materiality was 75% (2022: 50%) of overall materiality, amounting to 25,338,000 (2022: 14,086,965) for the company financial statements.

In determining the performance materiality, we considered a number of factors – the history of misstatements, risk assessment and aggregation risk

and the effectiveness of controls – and concluded that an amount at the upper end of our normal range was appropriate.

We agreed with the Audit and Valuation Committee that we would report to them misstatements identified during our audit above 1,689,000 (2022:

GEL 1,409,000) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.

Conclusions relating to going concern

Our evaluation of the directors’ assessment of the company’s ability to continue to adopt the going concern basis of accounting included:

• Reviewing management’s going concern assessment memorandum which included a base case cash flow and severe but plausible scenario

analysis covering the period to 31 March 2025.

• Holding discussions with the CFO and Head of Finance to understand economic developments in Georgia in the face of ongoing global instability

and performing independent research on expected economic impacts of such scenarios along with predicted future performance of the

Georgian economy.

• Assessing the liquidity of the portfolio and the Company’s ability to realise any holdings if needed.

• Understanding and assessing the appropriateness of the key assumptions used in the cash flow forecasts, including assessing whether we

considered the downside sensitivities to be appropriately severe, the availability of committed finance and covenant compliance during the

forecast period.

• Corroborating key assumptions in the cash flow forecasts to other evidence including external research and historical performance, and ensuring

this was consistent with our audit work in these and other areas.

• Reviewing the disclosures in the financial statements relating to the going concern basis of preparation, and evaluating that these provided an

explanation of the Directors’ assessment that was consistent with the audit evidence we obtained; and

• Reviewing Board meeting minutes, and met with members of the Audit and Valuation Committee and those charged with governance to

understand their view on the future of the Company and its ability to continue as a going concern.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or

collectively, may cast significant doubt on the company’s ability to continue as a going concern for a period of at least twelve months from when

the financial statements are authorised for issue.

In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the

financial statements is appropriate.

However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the company’s ability to continue

as a going concern.

In relation to the directors’ reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or draw

attention to in relation to the directors’ statement in the financial statements about whether the directors considered it appropriate to adopt the going

concern basis of accounting.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Reporting on other information

The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon.

The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and, accordingly,

we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the

other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially

misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether

there is a material misstatement of the financial statements or a material misstatement of the other information. If, based on the work we have

performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report

based on these responsibilities.

With respect to the Strategic report and Directors’ Report, we also considered whether the disclosures required by the UK Companies Act 2006

have been included.

Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and matters as

described below.

Strategic report and Directors’ Report

In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic report and Directors’ Report for the

year ended 31 December 2023 is consistent with the financial statements and has been prepared in accordance with applicable legal requirements.

In light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we did not identify any material

misstatements in the Strategic report and Directors’ Report.

Directors’ Remuneration

In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006.

Corporate governance statement

ISAs (UK) require us to review the directors’ statements in relation to going concern, longer-term viability and that part of the corporate governance

statement relating to the company’s compliance with the provisions of the UK Corporate Governance Code, which the Listing Rules of the Financial

Conduct Authority specify for review by auditors of premium listed companies. Our additional responsibilities with respect to the corporate

governance statement as other information are described in the Reporting on other information section of this report.

Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance statement

is materially consistent with the financial statements and our knowledge obtained during the audit, and we have nothing material to add or draw

attention to in relation to:

• The directors’ confirmation that they have carried out a robust assessment of the emerging and principal risks;

• The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify emerging risks and an

explanation of how these are being managed or mitigated;

• The directors’ statement in the financial statements about whether they considered it appropriate to adopt the going concern basis of accounting

in preparing them, and their identification of any material uncertainties to the company’s ability to continue to do so over a period of at least twelve

months from the date of approval of the financial statements;

• The directors’ explanation as to their assessment of the company’s prospects, the period this assessment covers and why the period is

appropriate; and

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Discussion of Results Governance Financial Statements Additional Information

• The directors’ statement as to whether they have a reasonable expectation that the company will be able to continue in operation and meet its

liabilities as they fall due over the period of its assessment, including any related disclosures drawing attention to any necessary qualifications

or assumptions.

Our review of the directors’ statement regarding the longer-term viability of the company was substantially less in scope than an audit and only

consisted of making inquiries and considering the directors’ process supporting their statement; checking that the statement is in alignment with the

relevant provisions of the UK Corporate Governance Code; and considering whether the statement is consistent with the financial statements and

our knowledge and understanding of the company and its environment obtained in the course of the audit.

In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance

statement is materially consistent with the financial statements and our knowledge obtained during the audit:

• The directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable, and provides the

information necessary for the members to assess the company’s position, performance, business model and strategy;

• The section of the Annual Report that describes the review of effectiveness of risk management and internal control systems; and

• The section of the Annual Report describing the work of the Audit and Valuation Committee.

We have nothing to report in respect of our responsibility to report when the directors’ statement relating to the company’s compliance with the

Code does not properly disclose a departure from a relevant provision of the Code specified under the Listing Rules for review by the auditors.

Responsibilities for the financial statements and the audit

Responsibilities of the directors for the financial statements

As explained more fully in the Statement of Directors’ Responsibilities, the directors are responsible for the preparation of the financial statements

in accordance with the applicable framework and for being satisfied that they give a true and fair view. The directors are also responsible for such

internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether

due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the company’s ability to continue as a going concern, disclosing,

as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the

company or to cease operations, or have no realistic alternative but to do so.

Auditors’ responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether

due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a

guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise

from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic

decisions of users taken on the basis of these financial statements.

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities,

outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of

detecting irregularities, including fraud, is detailed below.

Based on our understanding of the company and industry, we identified that the principal risks of non-compliance with laws and regulations related

to breaches of the UK regulatory principles, such as the Listing Rules, and we considered the extent to which non-compliance might have a material

effect on the financial statements. We also considered those laws and regulations that have a direct impact on the financial statements such as

Companies Act 2006. We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the

risk of override of controls), and determined that the principal risks were related to potential management bias in accounting estimates, in particular in

relation to the valuation of the investment portfolio. Audit procedures performed by the engagement team included:

• Discussions with management, and review of relevant meeting minutes (including those of the Board of Directors and the Audit and Valuation

Committee), including consideration of known or suspected instances of non-compliance with laws and regulations and fraud;

• Designing audit procedures to incorporate unpredictability around the nature, timing or extent of our testing;

• Challenging assumptions made by management in their significant accounting estimates, in particular in relation to the valuation of equity

investments at fair value; and

• Identifying and testing journal entries, in particular any journal entries posted with unusual account combinations.

There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with

laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a

material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by,

for example, forgery or intentional misrepresentations, or through collusion.

Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques.

However, it typically involves selecting a limited number of items for testing, rather than testing complete populations. We will often seek to target

particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a conclusion

about the population from which the sample is selected.

A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:

www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.

Use of this report

This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with Chapter 3 of Part 16 of

the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to

any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Other required reporting

Companies Act 2006 exception reporting

Under the Companies Act 2006 we are required to report to you if, in our opinion:

• we have not obtained all the information and explanations we require for our audit; or

• adequate accounting records have not been kept by the company, or returns adequate for our audit have not been received from branches not

visited by us; or

• certain disclosures of directors’ remuneration specified by law are not made; or

• the financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records

and returns.

We have no exceptions to report arising from this responsibility.

Appointment

Following the recommendation of the Audit and Valuation Committee, we were appointed by the members on 2 May 2022 to audit the financial

statements for the year ended 31 December 2022 and subsequent financial periods. The period of total uninterrupted engagement is two years,

covering the years ended 31 December 2022 to 31 December 2023.

Other matter

As required by the Financial Conduct Authority Disclosure Guidance and Transparency Rule 4.1.14R, these financial statements form part of the

ESEF-prepared annual financial report filed on the National Storage Mechanism of the Financial Conduct Authority in accordance with the ESEF

Regulatory Technical Standard (‘ESEF RTS’). This auditors’ report provides no assurance over whether the annual financial report has been prepared

using the single electronic format specified in the ESEF RTS.

Allan McGrath (Senior Statutory Auditor)

for and on behalf of PricewaterhouseCoopers LLP

Chartered Accountants and Statutory Auditors

London

21 March 2024

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Overview

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Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

Note

31 December

2023

31 December

2022

Assets

Cash and cash equivalents* 12,319 23,361

Investment in redeemable securities 3,517 –

Prepayments 976 363

Equity investments at fair value 6 3,363,411 2,795,060

Total assets 3,380,223 2,818,784

Liabilities

Other liabilities 1,711 1,393

Total liabilities 1,711 1,393

Equity

Share capital 8 1,420 1,473

Additional paid-in capital and merger reserve 238,311 238,311

Treasury shares (2) –

Retained earnings 3,13 8,783 2, 5 77,6 07

Total equity 3,378,512 2,817,391

Total liabilities and equity 3,380,223 2,818,784

* As at 31 December 2023 and 31 December 2022 cash and cash equivalents consist of current accounts with credit institutions.

The financial statements on page 172 to 175 were approved by the Board of Directors on 21 March 2024 and signed on its behalf by:

Irakli Gilauri

Chief Executive Officer

Georgia Capital PLC

Registered No. 10852406

The accompanying notes on pages 176 to 203 are an integral part of these financial statements.

Note 2023 2022

Gains on investments at fair value 6 568,351 925

Dividend income 6 47,659 –

Gross investment profit 616,010 925

Administrative expenses 9 (4,476) (4,389)

Salaries and other employee benefits 9 (2,087) (2,374)

Profit/(loss) before foreign exchange and non-recurring items 609,447 (5,838)

Net foreign currency loss (955) (6,075)

Non-recurring expense – (240)

Net gains from investment securities measured at fair value through profit or loss 125 –

Profit/(loss) before income taxes 608,617 (12,153)

Income tax 7 – –

Profit/(loss) for the year 608,617 (12,153)

Other comprehensive income – –

Total comprehensive income/(loss) for the year 608,617 (12,153)

Earnings/(Loss) per share (GEL): 8

– basic 15.4102 (0.2887)

– diluted 14.9311 (0.2887)

The accompanying notes on pages 176 to 203 are an integral part of these financial statements.

STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2023 (THOUSANDS OF GEORGIAN LARI)

STATEMENT OF PROFIT OR LOSS AND COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2023 (THOUSANDS OF GEORGIAN LARI)

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Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

capital

Additional paid-

in capital and

merger reserve Treasury shares

Retained

earnings Total

1 January 2023 1,473 238,311 – 2,577,607 2,817,391

Profit for the year – – – 608,617 608,617

Total comprehensive income for the year – – – 608,617 608,617

Increase in equity arising from share-based payments (Note 10) – – – 541 541

Cancellation of shares (Note 8) (53) – 53 – –

Purchase of treasury shares (Note 8) – – (55) (47,982) (48,037)

31 December 2023 1,420 238,311 (2) 3,138,783 3,378,512

capital

Additional paid-

in capital and

merger reserve Treasury shares

Retained

earnings Total

1 January 2022 1,547 238,311 – 2,643,764 2,883,622

Loss for the year – – – (12,153) (12,153)

Total comprehensive loss for the year – – – (12,153) (12,153)

Increase in equity arising from share-based payments (Note 10) – – – 495 495

Cancellation of shares (Note 8) (74) – 74 – –

Purchase of treasury shares (Note 8) – – ( 74) (54,499) (54,573)

31 December 2022 1,473 238,311 – 2,57 7,6 07 2,817,391

The accompanying notes on pages 176 to 203 are an integral part of these financial statements.

Note 2023 2022

Cash flows from operating activities

Salaries and other employee benefits paid (1,546) (1,877)

General, administrative and operating expenses paid (4,685) (4,780)

Net other expense paid – (3,172)

Net cash flows used in operating activities before income tax (6,231) (9,829)

Income tax paid – –

Net cash flow used in operating activities (6,231) (9,829)

Cash flows from investing activities

Capital redemption from subsidiary 6 – 8 7,2 3 8

Purchase of redeemable securities (3,382) –

Dividends received 6 47,659 –

Cash flows from investing activities 44,277 87, 23 8

Cash flows from financing activities

Other purchases of treasury shares 8 (47,834) (54,326)

Acquisition of treasury shares under share-based payment plan 8 (203) (247)

Net cash used in financing activities (48,037) (54,573)

Effect of exchange rates changes on cash and cash equivalents (1,051) (6,675)

Net (decrease)/increase in cash and cash equivalents (11,042) 16,161

Cash and cash equivalents, beginning of the year 23,361 7, 20 0

Cash and cash equivalents, end of the year 12,319 23,361

The accompanying notes on pages 176 to 203 are an integral part of these financial statements.

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2023 (THOUSANDS OF GEORGIAN LARI)

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2023 (THOUSANDS OF GEORGIAN LARI)

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Overview

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Strategic Review

Discussion of Results Governance Financial Statements Additional Information

1. Principal Activities

Georgia Capital PLC (“Georgia Capital”, “GCAP” or the “Company”) is a public limited liability company incorporated and domiciled in United

Kingdom with registered number 10852406. Georgia Capital PLC holds 100% of the share capital of the JSC Georgia Capital (“JSC GCAP”), which

makes up a group of companies (the “Group”), focused on buying, building and developing businesses in Georgia and monetising investments as

they mature. The Group currently has the following portfolio businesses: (i) a retail (pharmacy) business, (ii) a hospitals business (consisting of a)

Large and Specialty Hospitals and b) Regional and Community Hospitals), (iii) an insurance business (P&C and medical insurance), (iv) a clinics and

diagnostics business, (v) a renewable energy business (hydro and wind assets) and (vi) an education business. Georgia Capital also holds other small

private businesses across different industries in Georgia, a 20% equity stake in the water utility business and a 19.7% (2022: 20.6%) equity stake in

LSE premium-listed Bank of Georgia Group PLC (“BoG”), a leading universal bank in Georgia. The shares of Georgia Capital are admitted to trading

on the London Stock Exchange PLC’s Main Market for listed securities under the ticker CGEO, effective 29 May 2018.

Georgia Capital’s registered legal address is 42 Brook Street, London W1K 5DB, England, United Kingdom.

As at 31 December 2023 and 31 December 2022, the following shareholders owned more than 5% of the total outstanding shares* of Georgia

Capital. Other shareholders individually owned less than 5% of the outstanding shares.

Shareholder

31 December

2023

31 December

2022

Gemsstock Ltd 11% 11%

Allan Gray Ltd 7% 7%

Lazard Asset Management LLC** 6% 4%

Others 76% 78%

Total 100% 100%

* For the purposes of calculating percentage of shareholding, the denominator includes total number of issued shares which includes shares held in the trust for share-based

compensation purposes of the Group.

** Combines several accounts managed by Lazard Asset Management LLC.

References to the Group are applied in these financial statements in the context of going concern assessment, segment, fair valuation and risk

management disclosures.

2. Basis of Preparation

General

The financial statements have been prepared in accordance with UK-adopted International Accounting Standards and with the requirements of the

Companies Act 2006 as applicable to companies reporting under those standards.

These financial statements are prepared under the historical cost convention except for equity investments held at fair value through profit or loss (FVPL).

The financial statements are presented in thousands of Georgian Lari (GEL), except per-share amounts and unless otherwise indicated.

Investment entity status

On 31 December 2019 Georgia Capital concluded that it met the definition of investment entity as defined in IFRS 10 Consolidated Financial

Statements. As per IFRS 10 an investment entity is an entity that:

a) obtains funds from one or more investors for the purpose of providing those investor(s) with investment management services;

b) commits to its investor(s) that its business purpose is to invest funds solely for returns from capital appreciation, investment income, or both; and

c) measures and evaluates the performance of substantially all of its investments on a fair value basis.

As of 31 December 2023, the Company continues to meet the definition of investment entity. Further details on the investment entity status and

underlying significant judgements are provided in Notes 3, 4, 6 and 12 respectively.

Going concern

The Board of Directors of Georgia Capital has made an assessment of the Company’s ability to continue as a going concern and is satisfied that it

has the resources to continue in business for a period of at least 12 months from the date of approval of the financial statements, i.e. the period ending

31 March 2025. Furthermore, management is not aware of any material uncertainties that may cast significant doubt upon the Company’s ability to

continue as a going concern for the foreseeable future. Therefore, the financial statements continue to be prepared on a going concernbasis.

The Directors have made an assessment of the appropriateness of the going concern basis of preparation and reviewed Georgia Capital’s liquidity

outlook for the period ending 31 March 2025.

The main source of cash inflow for GCAP PLC is capital redemption from JSC GCAP, which holds the liquid assets to support the liquidity needs

of the Company as well. As at 31 December 2023, JSC GCAP holds cash in the amount of GEL 51,138, amounts due from credit institutions in the

amount of GEL 8,678 and marketable debt securities and redeemable securities in the amount of GEL 18,203 and GEL 14,068 (refer to Note 12).

Securities are considered to be highly liquid, as they are debt instruments listed on international and local markets.

The liquidity needs of the Group during the going concern review period mainly consist of the coupon payments on JSC GCAP sustainability-linked

bonds and the operating costs of running the holding companies and capital allocations to its portfolio companies. The liquidity outlook also assumes

dividend income from the private portfolio companies (healthcare, retail (pharmacy), renewable energy, and insurance businesses) and Bank of

Georgia Group PLC. Capital allocations are assumed in relation to investment stage companies (renewable energy and education businesses).

2. Basis of Preparation continued

Going concern continued

On August 3, 2023, JSC GCAP issued US$ 150 million sustainability-linked local bonds in Georgia, with an 8.5% coupon rate, payable in August

2028. The proceeds from the transaction, together with GCAP’s existing liquid funds, were fully used to redeem GCAP’s US$ 300 million Eurobonds.

Following these transactions, GCAP’s gross debt balance decreased from US$ 300 million to US$ 150 million. In February 2024, GCAP made its first

coupon payment on the bond in the amount of US$ 6.4 million. The Directors remain confident that, given the strong liquidity and the Group’s track

record of proven access to capital, GCAP will successfully continue to service its existing bonds.

The Company has been increasingly assessing climate-related risk and opportunities that may be present to the Group. During the going concern

period no significant risk has been associated to the Group and portfolio companies that would materially impact their ability to generate sufficient

cash and continue as a going concern.

Based on the considerations outlined above, management of Georgia Capital concluded that the going concern basis of preparation remains

appropriate for these financial statements.

The Group performed stress testing for the assessment period, which involved modelling the impact of a combination of severe and plausible risks.

Based on the results of the stress tests, the directors concluded that the Group remains solvent with solid financial position and has sufficient cash

and liquid investment securities to withstand the distressed scenario.

Subsidiaries and associates

The total amount of investment in subsidiaries in the Company’s statement of financial position as at 31 December 2023 was GEL 3,363,411 (as

at 31 December 2022: 2,795,060) represented by direct investment in JSC Georgia Capital. As at 31 December 2023 and 31 December 2022,

investment in JSC Georgia Capital (Note 12) is measured at fair value. As at 31 December 2023 and 31 December 2022, equity investments of JSC

Georgia Capital include the following subsidiaries and associates:

Subsidiaries consolidated

Proportion of voting rights and

ordinary share capital held*

Country of

incorporation Address Industry

Date of

incorporation

Date of

acquisition

31 December

2023

31 December

2022

GCMF, LLC 100.00% 100.00% Georgia 8a Petre Melikishvili

avenue, Tbilisi, 0179

Excess liquidity

management

company

2/5/2019 –

Subsidiaries at fair value

Proportion of voting rights and

ordinary share capital held*

Country of

incorporation Address Industry

Date of

incorporation

Date of

acquisition

31 December

2023

31 December

2022

JSC Georgia Real Estate 100.00% 100.00% Georgia 10 Givi Kartozia street,

Tbilisi

Real estate 27/9/20 06 –

m2 group, LLC 100.00% 100.00% Georgia 10 Givi Kartozia street,

Tbilisi

Real estate 17/8/2015 –

M Square Park, LLC 100.00% 100.00% Georgia 1 Marshal Gelovani

avenue, Tbilisi

Real estate 15/9/2015 –

M square Park 3, LLC 100.00% 100.00% Georgia 1 Marshal Gelovani

avenue, Tbilisi

Real estate 25/5/2022 –

M square Park 4, LLC 100.00% 100.00% Georgia 1 Marshal Gelovani

avenue, Tbilisi

Real estate 25/5/2022 –

M square Park X, LLC 100.00% 100.00% Georgia 1 Marshal Gelovani

avenue, Tbilisi

Real estate 23/6/2022 –

Optima Saburtalo, LLC 100.00% 100.00% Georgia 10 Givi. Kartozia street,

Tbilisi

Real estate 15/9/2015 –

Land, LLC 100.00% 100.00% Georgia 10 Givi. Kartozia street,

Tbilisi

Real estate 3/10/2014 –

m2 at Nutsubidze 2, LLC 100.00% 100.00% Georgia 10 Givi Kartozia street,

Tbilisi

Real estate 24/1/2020 –

m2 at Hippodrome, LLC 100.00% 100.00% Georgia 10 Givi Kartozia street,

Tbilisi

Real estate 6/7/2015 –

Optima, LLC 100.00% 100.00% Georgia 10 Givi Kartozia street,

Tbilisi

Real estate 3/8/2016 –

m2 Maintenance, LLC 100.00% 100.00% Georgia 10 Givi Kartozia street,

Tbilisi

Real estate 20/7/2021 –

m2 at Mtatsminda Park, LLC 100.00% 100.00% Georgia 10 Givi Kartozia street,

Tbilisi

Real estate 31/12/2021 –

m2 Care Fund N(N)LE 100.00% 0.00% Georgia 10 Givi Kartozia street,

Tbilisi

Real estate 16/1/2023 –

M square Park 5, LLC 100.00% 0.00% Georgia 10 Givi Kartozia street,

Tbilisi

Real estate 11/10/2023 –

Georgia Real Estate

Management Group, LLC

100.00% 100.00% Georgia 10 Givi Kartozia street,

Tbilisi

Hospitality 17/8/2015 –

NOTES TO FINANCIAL STATEMENTS

GEORGIA CAPITAL PLC (THOUSANDS OF GEORGIAN LARI)

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Subsidiaries at fair value

Proportion of voting rights and

ordinary share capital held*

Country of

incorporation Address Industry

Date of

incorporation

Date of

acquisition

31 December

2023

31 December

2022

Kakheti Wine and Spa, LLC

(5)

0.00% 100.00% Georgia 80 Aghmashenebeli

avenue, Tbilisi, 0102

Hospitality 23/4/2018 –

Gudauri Lodge, LLC 100.00% 100.00% Georgia 80 Aghmashenebeli

avenue, Tbilisi, 0102

Hospitality 24/4/2018 –

m2 Svaneti, LLC

(6)

0.00% 100.00% Georgia 80 Aghmashenebeli

avenue, Tbilisi, 0102

Hospitality 14/11/2018 –

m2 Hatsvali, LLC

(5)

0.00% 100.00% Georgia 80 Aghmashenebeli

avenue, Tbilisi, 0102

Hospitality 17/4/2019 –

m2 Resort, LLC

(5)

0.00% 100.00% Georgia 80 Aghmashenebeli

avenue, Tbilisi, 0102

Hospitality 11/2/2019 –

m2 Mtatsminda, LLC 0.00% 100.00% Georgia 22 Zaal Dumbadze

street, Tbilisi

Hospitality 16/10/2014 26/12/2017

Georgia Property Management

Group, LLC

100.00% 100.00% Georgia 10 Givi Kartozia street,

Tbilisi

Commercial

assets

4/10/2018 –

Vere Real Estate, LLC

(5)

0.00% 100.00% Georgia 10 Givi Kartozia street,

Tbilisi

Commercial

assets

4/3/2010 6/8/2018

Caucasus Autohouse,

LLC

(5)

0.00% 100.00% Georgia 29 Ilia Chavchavadze

avenue, Tbilisi, 0105

Commercial

assets

29/3 /2011 –

m2, LLC 100.00% 100.00% Georgia 29 Ilia Chavchavadze

avenue, Tbilisi, 0105

Hospitality/

Real estate

12/2/2014 –

m2 Hotel Property, LLC

(5)

0.00% 100.00% Georgia 10 Givi Kartozia street,

Tbilisi

Hospitality 15/12/2022 –

m2 Kutaisi, LLC 100.00% 100.00% Georgia 10 Melikishvili avenue,

Tbilisi

Hospitality 17/5/2017 –

m2 at Melikishvili, LLC

(5)

0.00% 100.00% Georgia 10 Melikishvili avenue,

Tbilisi

Hospitality 17/5/2017 –

Melikishvili Hotel Property,

LLC

(5)

0.00% 100.00% Georgia 10 Melikishvili avenue,

Tbilisi

Hospitality 3/2/2021 –

m2 Zugdidi, LLC

(5)

0.00% 100.00% Georgia 80 Aghmashenebeli

avenue, Tbilisi, 0102

Hospitality 7/11/2018 –

Georgia Commercial Assets,

LLC

(5)

0.00% 100.00% Georgia 15 Kazbegi street, Tbilisi Commercial

assets

23/12/2020 –

Georgia Hospitality Management

Group, LLC

100.00% 100.00% Georgia 10 Givi Kartozia street,

Saburtalo, Tbilisi

Hospitality 22/8/2018 –

Georgia Hospitality Management

Group Gudauri, LLC

100.00% 100.00% Georgia Dusheti region, village

Seturebi

Hospitality 12/5/2019 –

Melikishvili Hotel Management,

LLC

100.00% 100.00% Georgia 10 Melikishvili avenue,

Tbilisi

Hospitality 8/4/2022 –

JSC Georgian Renewable Power

Holding

100.00% 100.00% Georgia 10 Medea (Mzia) Jugheli

street, Tbilisi, 0179

Renewable

Energy

23/8/2022 –

JSC Georgian Renewable Power

Company

100.00% 100.00% Georgia 10 Medea (Mzia) Jugheli

street, Tbilisi, 0179

Renewable

Energy

15/9/2015 –

JSC Zoti Hydro 100.00% 100.00% Georgia 10 Medea (Mzia) Jugheli

street, Tbilisi, 0179

Renewable

Energy

20/8/2015 –

JSC Caucasus Wind

Company

100.00% 100.00% Georgia 10 Medea (Mzia) Jugheli

street, Tbilisi, 0179

Renewable

Energy

14/9/2016 –

LLC Caucasus Solar

Company

100.00% 100.00% Georgia 10 Medea (Mzia) Jugheli

street, Tbilisi, 0179

Renewable

Energy

27/10/2016 –

Hydro S, LLC 100.00% 100.00% Georgia 10 Medea (Mzia) Jugheli

street, Tbilisi, 0179

Renewable

Energy

18/1/2019 10/28/2019

Georgia Geothermal

Company, LLC

100.00% 100.00% Georgia 10 Medea (Mzia) Jugheli

street, Tbilisi, 0179

Renewable

Energy

16/12/2019 –

Qartli Solar Farm, LLC 100.00% 0.00% Georgia 10 Medea (Mzia) Jugheli

street, Tbilisi, 0179

Renewable

Energy

10/3/2023 –

JSC Georgian Renewable Power

Operations

100.00% 100.00% Georgia 10 Medea (Mzia) Jugheli

street, Tbilisi, 0179

Renewable

Energy

28/6/2022 –

Svaneti Hydro, LLC 100.00% 100.00% Georgia 10 Medea (Mzia) Jugheli

street, Tbilisi, 0179

Renewable

Energy

6/12/2013 –

Qartli Wind Farm, LLC 100.00% 100.00% Georgia 10 Medea (Mzia) Jugheli

street, Tbilisi, 0179

Renewable

Energy

10/9/2012 30/12/2019

Hydrolea, LLC 100.00% 100.00% Georgia 10 Medea (Mzia) Jugheli

street, Tbilisi, 0179

Renewable

Energy

6/7/2012 28/10/2019

Geoenergy, LLC 100.00% 100.00% Georgia 10 Medea (Mzia) Jugheli

street, Tbilisi, 0179

Renewable

Energy

26/1/2012 28/10/2019

Subsidiaries at fair value

Proportion of voting rights and

ordinary share capital held*

Country of

incorporation Address Industry

Date of

incorporation

Date of

acquisition

31 December

2023

31 December

2022

Hydro Georgia, LLC 100.00% 100.00% Georgia 10 Medea (Mzia) Jugheli

street, Tbilisi, 0179

Renewable

Energy

8/5/2012 28/10/2019

Darchi, LLC 100.00% 100.00% Georgia 10 Medea (Mzia) Jugheli

street, Tbilisi, 0179

Renewable

Energy

18/11/2013 28/10/2019

Kasleti 2, LLC 100.00% 100.00% Georgia 10 Medea (Mzia) Jugheli

street, Tbilisi, 0179

Renewable

Energy

18/11/2013 28/10/2019

GRPC Trade, LLC 100.00% 100.00% Georgia 10 Medea (Mzia) Jugheli

street, Tbilisi, 0179

Renewable

Energy

13/5/2022 –

JSC A Group 100.00% 100.00% Georgia 1 Berbuki street,

Saburtalo, Tbilisi

Various 20/9/2018 –

JSC Insurance Company

Aldagi

100.00% 100.00% Georgia 66A David

Aghmashenebeli Alley,

Tbilisi

Insurance 11/8/1998 –

JSC Insurance Company

Tao

100.00% 100.00% Georgia 66A David

Aghmashenebeli Alley,

Tbilisi

Insurance 22/8/2007 1/5/2015

Aliance, LLC 100.00% 100.00% Georgia 20 Chavchavadze

avenue, floor 2, Vake-

Saburtalo, Tbilisi

Various 1/8/1998 30/4/2012

Auto Way LLC 100.00% 100.00% Georgia 20 Chavchavadze

avenue, Vake, Tbilisi

Various 27/12/2010 30/4/2012

JSC Carfest 75.00% 75.00% Georgia 20 Chavchavadze

avenue, Vake, Tbilisi

Leasing 17/11/2017 –

JSC Greenway Georgia 100.00% 100.00% Georgia 6 University street, Vake,

Tbilisi

Vehicle

Inspection

9/ 7/2010 1/5/2012

JSC GreenWash 75.00% 75.00% Georgia 6 University street, Vake,

Tbilisi

Car Wash 31/8/2018 –

Georgia Healthcare Group

Limited

0.00% 100.00% United

Kingdom

84 Brook Street,

London, W1K 5EH

Healthcare 27/8/2015 28/8/2015

JSC Georgia Healthcare Group 100.00% 100.00% Georgia 142 A. Beliashvili street,

Tbilisi

Healthcare 29/4/2015 –

JSC Insurance Company

Imedi L

100.00% 100.00% Georgia 9 Anna Politkovskaias

street, Vake-Saburtalo

District, Tbilisi

Insurance 22/6/2007 –

L Assistance LLC 100.00% 100.00% Georgia 44 Al. Kazbegi avenue,

Vake, Tbilisi

Insurance 27/10/2022

JSC GEPHA 97.56% 76.98% Georgia 142 A. Beliashvili street,

Tbilisi

Pharmacy and

Distribution

19/10/1995 4/5/2016

JSC ABC Pharamcia

(Armenia)

100.00% 100.00% Armenia Kievyan street. 2/8,

Erevan, Armenia

Pharmacy and

Distribution

28/12/2013 6/1/2017

ABC Pharmalogistics, LLC 100.00% 100.00% Georgia Peikrebi street 14a,

Tbilisi

Pharmacy and

Distribution

24/2/2004 6/1/2017

JSC Iverta 100.00% 100.00% Georgia 142 A. Beliashvili street,

Tbilisi

Pharmacy and

Distribution

17/2/2021 –

AKG AVELIN QAN

DEGHATUN, LLC

(Armenia)

100.00% 100.00% Armenia 26/1 Vazgen Sargsyan

Street, Office 412,

Yerevan 0010

Pharmacy and

Distribution

28/6/2019 –

JSC Georgian Logistics 100.00% 100.00% Georgia 142 A. Beliashvili street,

Tbilisi

Other 8/10/2021 –

AZPHA LLC (Azerbaijan) 100.00% 100.00% Azerbaijan Apartment 43, 131

A. Ahgaievi Street,

Bakikhanovi area,

Sabunchu District, Baku

Pharmacy and

Distribution

17/9/2021 –

Euroline LLC 100.00% 100.00% Georgia 5 Stanislavski street,

Tbilisi

Other 24/11/2021 14/12/2015

Vian JSC 100.00% 0.00% Georgia 142 A. Beliashvili street,

Tbilisi

Healthcare 30/11/2023 –

Vian-Logistics LLC

(1) (2)

100.00% 100.00% Georgia 142 A. Beliashvili street,

Tbilisi

Healthcare 13/2/2015 –

Caucasus Medical Center,

LLC

(2)

99.81% 99.80% Georgia 23 P. Kavtaradze street,

Tbilisi

Healthcare 12/1/2012 11/6/2015

NOTES TO FINANCIAL STATEMENTS CONTINUED

GEORGIA CAPITAL PLC (THOUSANDS OF GEORGIAN LARI)

2. Basis of Preparation continued

Subsidiaries and associates continued

2. Basis of Preparation continued

Subsidiaries and associates continued

181

Georgia Capital PLC Annual Report 2023

180

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

Subsidiaries at fair value

Proportion of voting rights and

ordinary share capital held*

Country of

incorporation Address Industry

Date of

incorporation

Date of

acquisition

31 December

2023

31 December

2022

JSC Kutaisi Regional

Mother and Infant

Treatment-Diagnostic

Centre

(2)

66.70% 67. 0 0% Georgia 85 Djavakhishvili street,

Kutaisi, Georgia

Healthcare 5/5/2003 29/11/2011

West Georgia Medical

Center, LLC

(2)

66.70% 67. 0 0% Georgia 83A A Djavakhishvili

street, Kutais

Healthcare 9/12/2011 29/11/2011

N(NL)E Blood Center

(2)

100.00% 100.00% Georgia N83A/N85 Javakhishvili

street, Kutaisi,

Healthcare 23/12/2021 –

Vian LLC 100.00% 100.00% Georgia 142 A. Beliashvili street,

Tbilisi

Healthcare 5/9/2022 –

BONO Healthcare LLC 100.00% 0.00% Georgia 142 A. Beliashvili street,

Tbilisi

Healthcare 15/6/2023 –

JSC Georgian Clinics 100.00% 0.00% Georgia 142 A. Beliashvili street,

Tbilisi

Healthcare 1/8/2014 1/8/2014

New Clinic, LLC

(3)

100.00% 100.00% Georgia 142 A. Beliashvili street,

Tbilisi

Healthcare 3/1/2017 20/7/2017

JSC Pediatry

(3)

100.00% 100.00% Georgia 10 U. Chkeidze street,

Tbilisi, Georgia

Healthcare 5/9/2003 6/7/2016

NCLE Evex Learning

Centre

(3)

100.00% 100.00% Georgia 83A, Javakhishvili street,

Tbilisi

Other 20/12/2013 20/12/2013

JSC Emergency Service

(3)

85.00% 85.00% Georgia #6 Building, 13/6

Lubliana street, Tbilisi

Healthcare 18/6/2013 8/5/2015

Georgian Clinics LLC 100.00% 0.00% Georgia 142 A. Beliashvili street,

Tbilisi

Healthcare 29/9/2023 –

JSC Evex Clinics 100.00% 100.00% Georgia 40 Vazha-Pshavela

avenue, Tbilisi

Healthcare 1/4/2019 –

Tskaltubo Regional

Hospital, LLC

66.70% 67. 0 0% Georgia 16 Eristavi street,

Tskaltubo

Healthcare 29/9/1999 9/12/2011

LLC Aliance Med 100.00% 100.00% Georgia 40 Vazha-Pshavela

avenue, Tbilisi

Healthcare 7/ 7/2015 20/7/2017

JSC Polyclinic Vere 98.35% 98.35% Georgia 40 Vazha-Pshavela

avenue, Tbilisi

Healthcare 22/11/2015 25/12/2017

New Dent, LLC 75.00% 75.00% Georgia 40 Vazha-Pshavela

avenue, Tbilisi

Healthcare 24/12/2018 –

Mkurnali 2002, LLC 100.00% 0.00% Georgia 87 Ts. Dadiani street,

Tbilisi

Healthcare 8/4/2004 1/12/2023

JSC Mega-Lab 91.98% 92.00% Georgia 23 Petre Kavtaradze

street, Tbilisi

Healthcare 6/6/2017 –

LLC Patgeo-Union of

Pathologists

100.00% 100.00% Georgia Mukhiani, II mcr. District,

Building 22, 1a, Tbilisi

Healthcare 13/1/2010 27/9/2016

Scientific- Research Center

– Mega-Lab N(N)LE

100.00% 100.00% Georgia 23 Petre Kavtaradze

street, Tbilisi

Healthcare 25/5/2021 –

JSC Vabaco 67.00% 67. 0 0% Georgia 37 Bochorishvili street,

Tbilisi

Software

Development

9/9/2013 28/9/2018

Vabaco International, LLC 100.00% 100.00% Georgia 123 A. Tsereteli avenue,

Tbilisi

Software

Development

30/3/2022 –

JSC Ekimo 100.00% 67. 0 0% Georgia 123 A. Tsereteli avenue,

Tbilisi

Other 14/12/2021 –

Ekimo App, LLC 100.00% 0.00% Georgia 24 University street,

Vake, Tbilisi

Other 5/12/2023 –

Dart, LLC 0.00% 100.00% Georgia 142 A. Beliashvili street,

Tbilisi

Other 14/6/2021 –

ITFY LLC 100.00% 0.00% Georgia 142 A. Beliashvili street,

Tbilisi

Other 1/2/2023 –

Georgian Beverages LLC 100.00% 100.00% Georgia 8a Petre Melikishvili

avenue, Tbilisi, 0179

Beer

Production

and

Distribution

14/11/2016 7/2/2018

JSC Georgian Beverages

Holding

92.35% 92.35% Georgia 8a Petre Melikishvili

avenue, Tbilisi, 0179

Investment 17/12/2019 –

JSC Teliani Valley 100.00% 100.00% Georgia 43 Tbilisi highway, Telavi Winery 30/6/2000 28/2/2007

Teliani Trading (Ukraine),

LLC

100.00% 100.00% Ukraine 18/14 Khvoiki street, Kiev Distribution 3/10/2006 31/12/2007

Subsidiaries at fair value

Proportion of voting rights and

ordinary share capital held*

Country of

incorporation Address Industry

Date of

incorporation

Date of

acquisition

31 December

2023

31 December

2022

Teliani Europe GmbH 100.00% 100.00% Germany Kurfürstendamm 195

10707 Berlin

Distribution 15/6/2021 –

Georgia Logistics and

Distribution, LLC

100.00% 100.00% Georgia 2 Marshal Gelovani

street, Tbilisi

Distribution 10/1/2006 27/3/2007

Le Caucase, LLC 100.00% 100.00% Georgia 2 Marshal Gelovani

street, Tbilisi

Cognac

Production

23/9/2006 20/3/2007

Kupa, LLC 70.00% 70.00% Georgia 3 Tbilisi highway, Telavi Oak Barrel

Production

12/10/2006 20/3/2007

Global Beer Georgia, LLC 100.00% 100.00% Georgia Tsilkani, Mtskheta

Region

Production

and

distribution of

alcohol and

non-alcohol

beverages

24/12/2014 –

Kindzmarauli Marani, LLC 100.00% 100.00% Georgia Gavazi, Kvareli district Winery 18/12/2001 25/4/2018

Alaverdi, LLC 100.00% 100.00% Georgia Chumlaki, Gurjaani

Region

Winery 8/4/2008 19/8/2019

Global Coffee Georgia, LLC 100.00% 100.00% Georgia 29a Gagarini street,

Tbilisi

Coffee

Distribution

26/12/2016 –

New Coffee Company, LLC 100.00% 100.00% Georgia Isakiani cul-de-sac 2,

Gldani-Nadzaladevi

District, Tbilisi

Coffee

Distribution

23/9/2009 15/2/2017

Genuine Brewing Company,

LLC

100.00% 100.00% Georgia Tsilkani, Mtskheta

Region

Beer

Production

and

Distribution

7/6/2011 7/2/2018

Craft and Draft, LLC 100.00% 100.00% Georgia Tsilkani, Mtskheta

Region

Beer

Production

20/2/2019 –

Artisan Wine and Drinks LLC 100.00% 100.00% Georgia 8a Petre Melikishvili

avenue, Tbilisi, 0179

Wine

distribution

26/8/2019 –

Amboli, LLC 90.00% 90.00% Georgia 142 Beliashvili street,

Didube-Chughureti

District, Tbilisi

Car Services 13/8/2004 25/6/2019

Redberry, LLC 0.00% 60.00% Georgia 9 Tashkenti Chughureti,

Tbilisi

Digital

Services

29/8/2014 1/5/2019

Redberry International, LLC 0.00% 100.00% Georgia 13a Mtskheta

Chughureti, Tbilisi

Digital

Services

13/5/2021 –

Lunchoba, LLC 0.00% 60.00% Georgia 22 Nutsubidze IV Micro-

district, Tbilisi

Catering

Services

8/10/2018 –

Shabatoba, LLC 0.00% 100.00% Georgia 8 Zurab Sakandelidze

street, Tbilisi

Delivery

Services

2/6/2020 –

JSC Carfest 0.00% 25.00% Georgia 3 Pushkini street,

Krtsanisi, Tbilisi

Leasing 17/11/2017 –

Georgia Education Group, LLC 100.00% 100.00% Georgia 8a Petre Melikishvili

avenue, Tbilisi, 0179

Education 16/7/2019 –

Contemporary School LLC 90.00% 90.00% Georgia 1b N. Khudadovi street,

Tbilisi

Education 18/8/2021 –

Green School – Didi

Dighomi, LLC

100.00% 100.00% Georgia 6 D. Tavdadebuli street,

Tbilisi

Education 27/9/1995 20/8/2021

Green School, LLC 100.00% 100.00% Georgia 8a Petre Melikishvili

avenue, Tbilisi, 0179

Education 21/10/2019 –

JSC Green School Real

Estate

100.00% 100.00% Georgia 8a Petre Melikishvili

avenue, Tbilisi, 0179

Education 5/1/2019 –

Green School – Saburtalo,

LLC

100.00% 0.00% Georgia 37 B. Zhgenti street,

Vake, Tbilisi

Education 29/6/2023 –

Green School Dighomi LLC 80.00% 80.00% Georgia Didube-Chughureti/

Dighomi massive IV,

Building 5A, Apartment

Education 7/6/2011 22/8/2019

Buckswood International

School – Tbilisi, LLC

80.00% 80.00% Georgia 152 Rustaveli street,

Tskneti, Tbilisi

Education 24/8/2005 29/ 7/2019

Sakhli Tsknetshi, LLC 100.00% 100.00% Georgia 152 Rustaveli street,

Tskneti, Tbilisi

Education 1/5/2005 –

NOTES TO FINANCIAL STATEMENTS CONTINUED

GEORGIA CAPITAL PLC (THOUSANDS OF GEORGIAN LARI)

2. Basis of Preparation continued

Subsidiaries and associates continued

2. Basis of Preparation continued

Subsidiaries and associates continued

183

Georgia Capital PLC Annual Report 2023

182

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

Subsidiaries at fair value

Proportion of voting rights and

ordinary share capital held*

Country of

incorporation Address Industry

Date of

incorporation

Date of

acquisition

31 December

2023

31 December

2022

British Georgian Academy,

LLC

70.00% 70.00% Georgia 17 Leo Kvachadze street,

Tbilisi

Education 3/2/2006 23/7/2019

NNLE British International

School of Tbilisi

100.00% 100.00% Georgia 17 Leo Kvachadze street,

Tbilisi

Education 3/2/2015 –

British International

School of Tbilisi LLC

100.00% 100.00% Georgia 17 Leo Kvachadze street,

Tbilisi

Education 5/9/2019 –

British Georgian Academy

– Okrokana, LLC

100.00% 100.00% Georgia 17 Leo Kvachadze street,

Tbilisi

Education 16/9/2021 –

Oncloud LLC 100.00% 100.00% Georgia 8a Petre Melikishvili

avenue, Tbilisi, 0179

Digital

Services

28/2/2020 –

Associates

Proportion of voting rights and

ordinary share capital held*

Country of

incorporation Address Industry

Date of

incorporation

Date of

acquisition

31 December

2023

31 December

2022

Squadro, LLC 0.00% 12.00% Georgia 74 Kostava street, Tbilisi Software

Service

2/3/2021 27/8/2021

N(NL)E Georgian Medical Tourism

Council

(3)

28.57% 28.60% Georgia I-II floor, house N10, N

13, b. N1 almond

Gardens Street, tskneti,

Vake district, Tbilisi

Healthcare 16/5/2019 –

JSC Diflex 40.00% 40.00% Georgia 8 Shalikashvili street,

Tbilisi

Software

Development

29/12/2016 12/11/2021

NPO Healthcare Association

(2)

25.00% 25.00% Georgia 27b Vazha-Pshavela

avenue, Tbilisi

Healthcare 25/3/2016 –

Complex-Med-Service, LLC

(3)

20.00% 20.00% Georgia 9 Tsinandali street, Tbilisi Healthcare 18/11/20 08 30/ 7/2021

Insurance Informational Bureau,

LLC

22.50% 22.50% Georgia Baratashvili bridge

underground crossing,

Mtkvari Left Bank, Old

Tbilisi, Tbilisi

Insurance 23/7/20 08 –

JSC Georgian Global Utilities 20.00% 20.00% Georgia 10 Medea (Mzia) Jugheli

street, Tbilisi, 0179

Utilities 22/1/2020 31/12/2014

Georgian Water and Power,

LLC

100.00% 100.00% Georgia 10 Medea (Mzia) Jugheli

street, Tbilisi, 0179

Utilities 25/6/1997 31/12/2014

Rustavi Water, LLC

(4)

0.00% 100.00% Georgia 5 St. Nino street, Rustavi Utilities 31/8/1999 31/12/2014

Gardabani Sewage

Treatment, LLC

100.00% 100.00% Georgia 10 Medea (Mzia) Jugheli

street, Tbilisi, 0179

Utilities 20/12/1999 31/12/2014

Georgian Engineering and

Management Company

(GEMC), LLC

100.00% 100.00% Georgia 10 Medea (Mzia) Jugheli

street, Tbilisi, 0179

Utilities 20/3/2011 31/12/2014

JSC Saguramo Energy 100.00% 100.00% Georgia 10 Medea (Mzia) Jugheli

street, Tbilisi, 0179

Utilities 11/12/200 8 31/12/2014

Georgian Energy Trading

Company (GETC), LLC

100.00% 100.00% Georgia 10 Medea (Mzia) Jugheli

street, Tbilisi, 0179

Renewable

Energy Sales

23/4/2019 –

* The table displays effective percentages of holding in the companies.

1 As of 31 December 2023 renamed: Vian-Logistics (As of 31 December 2022: EVEX-Logistics, LLC).

2 As of 31 December 2023 subsidiaries of JSC Vian (31 December 2022: subsidiaries of JSC Evex Hospitals).

3 As of 31 December 2023 subsidiaries of JSC Georgia Clinics (31 December 2022: subsidiaries of JSC Evex Hospitals).

4 As of 31 December 2023 Rustavi Water, LLC merged with Georgian Water and Power, LLC.

5 As of 31 December 2023 merged with Georgia Property Management Group, LLC.

6 As of 31 December 2023 merged with Georgia Real Estate Management Group, LLC.

3. Material Accounting Policies

The following are the material accounting policies applied by the Company in preparing its financial statements.

Fair value measurement

The Company measures investments in subsidiaries and other financial instruments, such as debt securities owned, equity investments and

derivatives, if any, at fair value at each balance sheet date. Also, fair values of financial instruments measured at amortised cost are disclosed in

Note12.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at

the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes

placeeither:

• in the principal market for the asset or liability; or

• in the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible by the Company. The fair value of an asset or a liability is measured using the

assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best

interest. A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using

the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available to measure fair value,

maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy,

described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

• Level 1 − Quoted (unadjusted) market prices in active markets for identical assets or liabilities;

• Level 2 − Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable;

• Level 3 − Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have

occurred between levels in the hierarchy by reassessing categorisation (based on the lowest level input that is significant to the fair value

measurement as a whole) at the end of each reporting period.

Cash and cash equivalents

Cash and cash equivalents consist of cash on hand and amounts due from credit institutions that mature within ninety days of the date of contract

origination and are free from contractual encumbrances and readily convertible to known amount of cash.

Financial assets

Initial recognition

Financial assets in the scope of IFRS 9 are classified at initial recognition, as subsequently measured at amortised cost, fair value through other

comprehensive income (OCI), and fair value through profit or loss.

The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Company’s

business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the

Company has applied the practical expedient, the Company initially measures a financial asset at its fair value plus, in the case of a financial asset

not at fair value through profit or loss, transaction costs. Trade receivables that do not contain a significant financing component or for which the

Company has applied the practical expedient are measured at the transaction price determined under IFRS 15.

In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that

are “solely payments of principal and interest” (SPPI) on the principal amount outstanding. This assessment is referred to as the SPPI test and is

performed at an instrument level.

The Company’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The

business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both.

Date of recognition

All regular way purchases and sales of financial assets are recognised on the trade date, i.e. the date that the Company commits to purchase or

sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally

established by regulation or convention in the marketplace.

Subsequent measurement

For purposes of subsequent measurement, financial assets are classified in two categories under IFRS 9:

• Financial assets at amortised cost (cash and cash equivalents).

• Financial assets at fair value through profit or loss (equity investments at fair value).

NOTES TO FINANCIAL STATEMENTS CONTINUED

GEORGIA CAPITAL PLC (THOUSANDS OF GEORGIAN LARI)

2. Basis of Preparation continued

Subsidiaries and associates continued

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Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

3. Material Accounting Policies continued

Provisions

Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, and it is probable that an

outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amount of obligation can

bemade.

Contingencies

Contingent liabilities are not recognised in the statement of financial position but are disclosed unless the possibility of any outflow in settlement is

remote. A contingent asset is not recognised in the Statement of Financial Position but disclosed when an inflow of economic benefits is probable.

Share-based payment transactions

Equity-settled transactions

The cost of equity-settled transactions with employees is measured by reference to the fair value of shares at the grant date.

The cost of equity-settled transactions is recognised together with the corresponding increase in equity, over the period in which the performance

and/or service conditions are fulfilled, ending on the date when the relevant employee is fully entitled to the award (“the vesting date”). The cumulative

expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has

expired and the Company’s best estimate of the number of equity instruments that will ultimately vest. The income statement charge and credit

entry to equity for the period represents the movement in cumulative expense recognised as at the beginning and end of that period. No expense is

recognised for the awards that do not ultimately vest.

Where the terms of an equity-settled award are modified, the minimum expense is recognised as if the terms had not been modified. An additional

expense is recognised for any modification which increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to

the employee as measured at the date of the modification.

Where an equity-settled award is cancelled, it is treated as if it has vested on the date of cancellation, and any expense not yet recognised for the award

is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as the replacement award on the date that it

is granted, the cancelled and the new awards are treated as if they were a modification of the original award, as described in the previous paragraph.

Share capital

Ordinary shares are classified as equity. External costs directly attributable to the issue of new shares, other than on a business combination, are

shown as a deduction from the proceeds in equity. Any excess of the fair value of consideration received over the par value of shares issued is

recognised as additional paid-in capital.

Treasury shares

Where the Company purchases Georgia Capital’s shares, the consideration paid, including any attributable transaction costs, net of income taxes,

is deducted from total equity as treasury shares until they are cancelled or reissued. Where such shares are subsequently sold or reissued, any

consideration received is included in equity. Treasury shares are stated at par value, with adjustment of premiums against retained earnings.

Dividends

Dividends are recognised as a liability and deducted from equity at the reporting date only if they are declared before or on the reporting date.

Dividends are disclosed when they are proposed before the reporting date or proposed or declared after the reporting date but before the financial

statements are authorised for issue. All expenses associated with dividend distribution are added to dividend amount and recorded directly

throughequity.

Dividend income

Dividend revenue is recognised when the Company’s right to receive the payment is established. Dividend revenue is presented gross of any

non-recoverable withholding taxes, which are disclosed separately in the Statement of Comprehensive Income.

Net gain or loss on financial assets and liabilities at fair value through profit or loss

Net gains or losses on financial assets and liabilities at fair value through profit or loss (FVPL) are changes in the fair value of equity investment at fair

value, financial assets and liabilities held for trading or designated upon initial recognition as at FVPL and exclude interest and dividend income and

expenses. Interest and dividend income and expense FVPL instruments are recognised in profit or loss at effective interest.

Taxation

The current income tax expense is calculated in accordance with the regulations in force in the respective territories in which the Company operates.

According to UK tax legislation, UK companies pay corporation tax on all its profits. The UK corporate blended tax rate for 2023 is 23.5% (2022: 19%).

3. Material Accounting Policies continued

Financial assets continued

Financial assets at amortised cost

The Company measures financial assets at amortised cost if both of the following conditions are met:

• the financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows; and

• the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the

principal amount outstanding.

Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are subject to impairment. Gains and

losses are recognised in profit or loss when the asset is derecognised, modified or impaired.

The Company’s financial assets at amortised cost includes cash and cash equivalents.

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include financial assets designated upon initial recognition at fair value through profit or loss, or

financial assets mandatorily required to be measured at fair value. Equity investments are classified at fair value through profit or loss. Derivatives and

financial assets with cash flows that are not solely payments of principal and interest are classified and measured at fair value through profit or loss,

irrespective of the business model.

Notwithstanding the criteria for debt instruments to be classified at amortised cost or at fair value through OCI, as described above, debt instruments

may be designated at fair value through profit or loss on initial recognition if doing so eliminates, or significantly reduces, an accounting mismatch.

Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net changes in fair value

recognised in the Statement of Profit or Loss. This category includes equity investments.

Derecognition of financial assets and liabilities

Financial assets

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e. removed

from the Company’s Statement of Financial Position) when:

• the rights to receive cash flows from the asset have expired; or

• the Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full

without material delay to a third party under a “pass-through” arrangement, and either (a) the Company has transferred substantially all the risks

and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has

transferred control of the asset.

When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if,

and to what extent, it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and

rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of its continuing

involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a

basis that reflects the rights and obligations that the Company has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the

asset and the maximum amount of consideration that the Company could be required to repay.

Financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability

are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability,

and the difference in the respective carrying amounts is recognised in the income statement. Modification is substantial if present value of cash flows

under new terms discounted at original effective interest rate is at least 10% different from the liability’s carrying amount right before the modification,

or there is a substantial modification to the terms identified through a qualitative assessment.

Financial liabilities

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as

derivatives designated as hedging instruments in an effective hedge, as appropriate.

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable

transaction costs.

The Company’s financial liabilities comprise accounts payable.

NOTES TO FINANCIAL STATEMENTS CONTINUED

GEORGIA CAPITAL PLC (THOUSANDS OF GEORGIAN LARI)

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Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

5. Segment Information

For management purposes, the Group is organised into the following operating segments as follows: listed and observable portfolio companies,

private large portfolio companies, private investment stage portfolio companies, private other portfolio companies, and corporate centre.

Listed and observable portfolio companies segment

BoG – the Group has a significant investment in London Stock Exchange Premium listed Bank of Georgia Group PLC. GCAP does not hold voting

rights in BoG.

Water utility – the Group has a 20% equity stake in the water utility business, following the disposal of 80% of its shares during 2021. Water utility is a

regulated monopoly in Tbilisi and the surrounding area, where it provides water and wastewater services.

Private portfolio companies

Large portfolio companies segment:

The large portfolio companies are companies that are close to reaching more than a GEL 300 million equity value. This segment includes

investments in hospitals (Large and Specialty Hospitals and Regional and Community Hospitals), retail (pharmacy) and insurance businesses.

The retail (pharmacy) business consists of a retail pharmacy chain and a wholesale business that sells pharmaceuticals and medical supplies to

hospitals and other pharmacies.

The hospitals business comprises two segments: Large and Specialty Hospitals, the leading participant in Georgia’s healthcare market, offering

secondary and tertiary healthcare services; and Regional and Community Hospitals, encompassing regional hospitals and community clinics that

deliver outpatient and essential inpatient services.

The insurance business comprises property and casualty (P&C) insurance and medical insurance businesses, principally providing wide-scale

property and casualty and medical insurance services to corporate and retail clients.

Investment stage portfolio companies segment:

The investment stage portfolio companies have the potential to reach more than a GEL 300 million equity value. This segment includes investments

into clinics and diagnostics, renewable energy and education businesses.

The clinics and diagnostics business consists of polyclinics providing outpatient diagnostic and treatment services, and a diagnostics business,

operating the largest laboratory in the entire Caucasus region.

The renewable energy business principally operates three wholly-owned commissioned renewable energy assets. In addition, a pipeline of renewable

energy projects is in an advanced stage of development.

The education business combines majority stakes in four leading private schools in Tbilisi. It provides education for preschool to 12th grade (K-12).

Other portfolio companies segment:

The other portfolio companies are companies which GCAP believes to have limited potential to reach a GEL 300 million equity value. This segment

includes housing development, hospitality, beverages and auto service businesses.

Corporate centre consists of Georgia Capital PLC and JSC Georgia Capital.

Management monitors the fair values of its segments separately for the purposes of making decisions about resource allocation and performance

assessment. Transactions between segments are accounted for at actual transaction prices.

Starting from 2023, the hospitals business is split into two distinct sub-segments: Large and Specialty Hospitals and Regional and Community

Hospitals. The Regional and Community Hospitals also incorporates the community clinics that were previously managed and presented as part of

the clinics and diagnostics business. The clinics and diagnostics business, alongside the renewable energy and education businesses, is presented

under the investment stage portfolio.

3. Material Accounting Policies continued

Functional, presentation currencies and foreign currency translation

The financial statements are presented in Georgian Lari, which is the presentation and functional currency of GCAP PLC and JSC GCAP.

Transactions in foreign currencies are initially recorded in the functional currency, converted at the rate of exchange ruling at the date of the

transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated into functional currency at functional currency rate of

exchange ruling at the reporting date. Gains and losses resulting from the translation of foreign currency transactions are recognised in the Income

Statement as net foreign currency gain (loss). Non-monetary items that are measured in terms of historical cost in a foreign currency are translated

using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated

using the exchange rates at the date when the fair value was determined. When a gain or loss on a non-monetary item is recognised in other

comprehensive income, any exchange component of that gain or loss is recognised in other comprehensive income. Conversely, when a gain or loss

on a non-monetary item is recognised in profit or loss, any exchange component of that gain or loss is recognised in profit or loss.

Differences between the contractual exchange rate of a certain transaction and the National Bank of Georgia (“NBG”) exchange rate on the date

of the transaction are included in net foreign currency gain (loss). The official NBG exchange rates at 31 December 2023 and 31 December 2022

wereas follows:

GEL to GBP GEL to US$ GEL to EUR

31 December 2023 3.4228 2.6894 2.9753

31 December 2022 3.2581 2.7020 2.8844

Adoption of new or revised standards and interpretations

The following amendments became effective from 1 January 2023 and had no impact on the Company’s financial statements:

• IFRS 17 Insurance Contracts.

• Amendments to IAS 8 Accounting Policies Changes in Accounting Estimates and Errors – Definition of Accounting Estimates.

• Amendments to IAS 1 and IFRS Practice Statement 2 – Disclosure of accounting policies.

• Amendments to IAS 12 Income Taxes – Deferred Tax related to Assets and Liabilities arising from a Single Transaction.

• Amendments to IAS 12 Income Taxes – Deferred Tax Assets and Liabilities related to Pillar Two Income Taxes.

The following standards that are issued but not yet effective are also expected to have no material impact on the Company’s financial statements:

• Amendments to IFRS 16 Leases – Lease Liability in a Sale and Leaseback.

• Amendments to IAS 1 Presentation of Financial Statements – Classification of Liabilities as Current or Non-current.

• IFRS 14 – Regulatory Deferral Accounts.

• Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments – Disclosures: Supplier Finance Arrangements.

• Amendments to IFRS 10 and IAS 28 – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture.

4. Critical Accounting Judgements and Estimates

In the process of applying the Company’s accounting policies, the Management Board use their judgement and make estimates in determining the

amounts recognised in the financial statements. The most significant judgements and estimates are as follows:

Assessment of investment entity status

Entities that meet the definition of an investment entity within IFRS 10 are required to measure their subsidiaries at fair value through profit or loss

rather than consolidate them. The criteria which define an investment entity are, as follows:

• an entity that obtains funds from one or more investors for the purpose of providing those investors with investment management services;

• an entity that commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment income,

or both; and

• an entity that measures and evaluates the performance of substantially all of its investments on a fair value basis.

The Group invests funds, originally obtained from its investors, in its private portfolio companies, obtains dividend inflows from its mature investments

and once the businesses are developed, exits the investment ideally at a higher multiple (versus entry multiple) to monetise on capital appreciation

gains. The Company reports to its investors on a fair value basis. All investments are reported at fair value in the Company’s Annual Reports.

Georgia Capital PLC holds a single investment in JSC Georgia Capital (an investment entity on its own), which holds a portfolio of investments.

Although JSC Georgia Capital is wholly capitalised by Georgia Capital PLC, Georgia Capital PLC is funded by many investors who are unrelated

to the entity and ownership in Georgia Capital PLC is represented by units of equity interests acquired through a capital contribution. Thus the

judgement above refers to both entities in aggregation. The Board has concluded that the Company meets the definition of an investment entity.

These conclusions will be reassessed on a continuous basis, if any of these criteria or characteristics change.

Georgia Capital met the investment entity definition on 31 December 2019. As of 31 December 2023, the Company continues to meet the definition

of investment entity. In making this assessment, the Company considered each criteria and characteristic described above as well as developments

during the year.

Fair valuation of the investment portfolio

The investment portfolio, a material asset of the Company held through 100%-owned subsidiary JSC Georgia Capital, is held at fair value. Details of

valuation methodologies used and the associated sensitivities are disclosed in Note 12. Given the importance of this area, the Board has formed a

separate Audit and Valuation Committee to review the valuations to be placed on portfolio companies, compliance with the valuation standards and

usage of appropriate judgement. The detailed valuation process is disclosed in Note 12.

NOTES TO FINANCIAL STATEMENTS CONTINUED

GEORGIA CAPITAL PLC (THOUSANDS OF GEORGIAN LARI)

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Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

5. Segment Information continued

The following table presents the NAV of the Group’s operating segments at 31 December 2022 and the roll-forward from 31 December 2021:

NAV Statement

December

2021

1. Value

creation

2a. Investments

and divestments

2b.

Buybacks

2c.

Dividends

Operating

expenses

4. Liquidity

management/

FX/Other

December

2022

Listed and observable portfolio

companies 681,186 205,783 139,392 – (40,898) – – 985,463

BoG 681,18 6 19 0,175 – – (40,898) – – 830,463

Water utility – 15,608 139,392 – – – – 155,000

Private portfolio companies 2,935,045 (171,710) (501,011) – (52,977) – 3,817 2,213,164

Large portfolio companies 2,249,260 (70,728) (696,960) – (44,783) – 821 1,437,610

Retail (pharmacy) 710,385 30,150 – – (16,018) – – 724,517

Hospitals 573,815 (127,607) – – (13,015) – – 433,193

Water utility 696,960 – (696,960) – – – – –

Insurance (P&C and medical) 26 8,100 26,729 – – (15,750) – 821 279,900

of which, P&C insurance 211,505 30,468 – – (14,749) – 821 228,045

of which, medical insurance 56,595 (3,739) – – (1,001) – – 51,855

Investment stage portfolio

companies 461,140 13,266 34,196 – (8,194) – 999 501,407

Clinics and diagnostics 158,004 (45,826) – – – – – 112,178

Renewable energy 173,288 31,040 27,854 – (8 ,194) – 999 224,987

Education 129,848 28,052 6,342 – – – – 164,242

Other portfolio companies 224,645 (114,248) 161,753 – – – 1,997 274,147

Total portfolio value 3,616,231 34,073 (361,619) – (93,875) – 3,817 3,198,627

Net debt (711,074) – 394,986 (83,108) 93,875 (21,520) (54,064) (380,905)

of which, cash and liquid funds 272,317 – 531,562 (83,108) 93,875 (21,520) (381,282) 411,8 4 4

of which, loans issued 154,214 – (136,576) – – – 9,192 26,830

of which, gross debt (1,137,605) – – – – – 318,026 (819,579)

Net other (liabilities)/assets (21,535) – (33,367) – – (18,476) 73,047 (331)

Net asset value 2,883,622 34,073 – (83,10 8) – (39,996) 22,800 2,817,391

1 Value creation – measures the annual shareholder return on each portfolio company for Georgia Capital. It is the aggregation of a) the change in beginning and ending fair values,

and b) dividend income during period. The net result is then adjusted to remove capital injections (if any) to arrive at the total value creation/investment return; 2a. Investments

and divestments – represents capital injections and divestments in portfolio companies made by JSC GCAP; 2b. Buybacks – represent buybacks made by GCAP PLC and JSC

GCAP in order to satisfy share compensation of executives and purchases under buyback programme announced by GCAP PLC; 2c. Dividends – represent dividends received

from portfolio companies by JSC GCAP; 3. Operating expenses – holding company aggregated operating expenses of GCAP PLC and JSC GCAP; 4. Liquidity management/FX/

Other – holding company aggregated movements of GCAP PLC and JSC GCAP related to liquidity management, foreign exchange movement, non-recurring and other.

2 Net debt and Net other assets/(liabilities) represent corporate centre.

5. Segment Information continued

The following table presents the net asset value (NAV) of the Group’s operating segments at 31 December 2023 and the roll-forward from

31 December 2022:

NAV Statement

December

2022

1. Value

creation

2a. Investments

and divestments

2b.

Buybacks

2c.

Dividends

Operating

expenses

4. Liquidity

management/

FX/Other

December

2023

Listed and observable portfolio

companies 985,463 553,255 – – (153,871) – – 1,384,847

BoG 830,463 549,255 – – (153,871)* – – 1,225,847

Water utility 155,000 4,000 – – – – – 159,000

Private portfolio companies 2,213,164 127,260 18,420 – (82,012) – 10,266 2,287,098

Large portfolio companies 1,437,610 74,786 – – (76,825) – 660 1,436,231

Retail (pharmacy) 724,517 39,397 – – (50,904) – 991 714,001

Hospitals 4 3 3 ,193 (81,526) – – (6,018) – (1,293)** 344,356

Insurance (P&C and medical) 279,900 116,915 – – (19,903) – 962 377,874

of which, P&C insurance 228,045 71,447 – – (14,888) – 962 285,566

of which, medical insurance 51,855 45,468 – – (5,015) – – 92,308

Investment stage portfolio

companies 501,407 47,044 18,388 – (5,187) – 4,962 566,614

Clinics and diagnostics 112,178 (3,922) – – – – 2,505** 110,761

Renewable energy 224,987 38,684 6,218 – (5,187 ) – 1,925 266,627

Education 164,242 12,282 12,170 – – – 532 189,226

Other portfolio companies 274,147 5,430 32 – – – 4,644 284,253

Total portfolio value 3,198,627 680,515 18,420 – (235,883) – 10,266 3,671,945

Net debt (380,905) – (20,887) (76,190) 235,883 (21,786) (32,923) (296,808)

of which, cash and liquid funds 411,8 44 – (20,887) (76 ,19 0 ) 235,883 (21,786) (420,954) 107,910

of which, loans issued 26,830 – – – – – (17,618) 9,212

of which, gross debt (819,579) – – – – – 405,649 (413,930)

Net other (liabilities)/assets (331) – 2,467 (287) – (14,993) 16,519 3,375

Net asset value 2,817,391 680,515 – (76,477) – (36,779) (6,138) 3,378,512

* In segment information, dividend income includes consideration received as a result of participation in BoG buyback programme.

** Includes the transfer of community clinics from the clinics and diagnostics sub-segment to hospitals.

NOTES TO FINANCIAL STATEMENTS CONTINUED

GEORGIA CAPITAL PLC (THOUSANDS OF GEORGIAN LARI)

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Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

5. Segment Information continued

The following table presents income statement information of the Group’s operating segments for the year ended 31 December 2023:

Private portfolio companies

Listed and

observable

portfolio

companies Large

Investment

stage Other

Corporate

centre Total

Intragroup

investment

reversal and

adjustments

Equity

changes

in JSC

GCAP

Investment

entity

total

Gains/(losses) on investments at fairvalue 399,384 (2,039) 41,857 5,430 – 444,632 178,350 (54,631) 568,351

Listed and observable investments 399,384 – – – – 399,384 (399,384) – –

Private investments – (2,039) 41,857 5,430 – 45,248 577,73 4 (54,631) 568,351

Dividend income 153,871 76,825 5,187 – – 235,883 (235,883) 47,6 5 9 47,6 5 9

Interest income – – – – 16,642 16,642 (16,642) – –

Loss on liquid funds – – – – (1,574) (1,574) 1,574 – –

Gross investment profit/(loss) 553,255 74,786 47,0 4 4 5,430 15,068 695,583 (72,601) (6,972) 616,010

Administrative expenses – – – – (10,909) (10,909) 6,433 – (4,476)

Salaries and other employee benefits – – – – (25,870) (25,870) 23,783 – (2,087)

Interest expense – – – – (47,808) (47,808) 47,808 – –

Profit/(loss) before provisions, foreign

exchange and non-recurring items 553,255 74,786 47,044 5,430 (69,519) 610,996 5,423 (6,972) 609,447

Expected credit loss (charge)/reversal – – – – (75) (75) 75 – –

Net foreign currency gain/(loss) – – – – 6,566 6,566 (7, 5 21) – (955)

Non-recurring expense – – – – (1,898) (1,898) 1,898 – –

Net gains from investment securities

measured at fair value through profit or loss – – – – – – 125 – 125

Profit/(loss) before income taxes 553,255 74,786 47,044 5,430 (64,926) 615,589 – (6,972) 608,617

Income tax – – – – – – – – –

Profit/(loss) for the year 553,255 74,786 47,044 5,430 (64,926) 615,589 – (6,972) 608,617

The following table presents income statement information of the Group’s operating segments for the year ended 31 December 2022:

Private portfolio companies

Listed and

observable

portfolio

companies Large

Investment

stage Other

Corporate

centre Total

Intragroup

investment

reversal and

adjustments

Equity

changes

in JSC

GCAP

Investment

entity

total

Gains/(losses) on investments at fairvalue 164,885 (115,511) 5,072 (114,248) – (59,802) 74,34 4 (13,617) 925

Listed and observable investments 164,885 – – – – 164,885 (164,885) – –

Private investments – (115,511) 5,072 (114,24 8 ) – (224,687) 239,229 (13,617) 925

Dividend income 40,898 44,783 8,194 – – 93,875 (93,875) – –

Interest income – – – – 32,955 32,955 (32,955) – –

Loss on liquid funds – – – – (2,717) (2,717) 2,717 – –

Gross investment profit/(loss) 205,783 (70,728) 13,266 (114,24 8 ) 30,238 6 4,311 (49,769) (13,617) 925

Administrative expenses – – – – (11,779) (11,779) 7,3 9 0 – (4,389)

Salaries and other employee benefits – – – – (28,217) (28,217) 25,843 – (2,374)

Interest expense – – – – (69,774) (6 9,774) 69,774 – –

Profit/(loss) before provisions, foreign

exchange and non-recurring items 205,783 (70,728) 13,266 (114, 248) (79,532) (45,459) 53,238 (13,617) (5,838)

Expected credit loss reversal – – – – 380 380 (380) – –

Net foreign currency gain – – – – 47,170 47,170 (53,245) – (6,075)

Non-recurring expense – – – – (627) (627) 387 – (240)

Profit/(loss) before income taxes 205,783 (70,728) 13,266 (114,248) (32,609) 1,464 – (13,617) (12,153)

Income tax – – – – – – – – –

Profit/(loss) for the year 205,783 (70,728) 13,266 (114,24 8) (32,609) 1,464 – (13,617) (12,153)

5. Segment Information continued

Reconciliation of IFRS financial statements to NAV:

31 December 2023

Georgia Capital

PLC

Aggregation

with JSC

Georgia

Capital*

Elimination of

double effect on

investments

Aggregated

Holding

Company Reclassifications** NAV Statement

Cash and cash equivalents 12,319 51,138 – 63,457 (63,457) –

Amounts due from credit institutions – 8,678 – 8,678 (8,678) –

Marketable securities – 18,203 – 18,203 (18,203) –

Investment in redeemable securities 3,517 14,068 – 17,5 8 5 (17,5 8 5) –

Prepayments 976 – – 976 (976) –

Loans issued – 9,212 – 9,212 (9,212) –

Other assets, net – 5,060 – 5,060 (5,060) –

Equity investments at fair value 3,363,411 3,671,945 (3,363,411) 3,671,945 – 3,671,945

Total assets 3,380,223 3,778,304 (3,363,411) 3,795,116 (123,171) 3,671,945

Debt securities issued – 413,930 – 413,930 (413,930) –

Other liabilities 1,711 963 – 2,674 (2,674) –

Total liabilities 1,711 414,893 – 416,604 (416,604) –

Net debt – – – – (296,808) (296,808)

of which, cash and liquid funds – – – – 107,910 107,910

of which, loans issued – – – – 9,212 9,212

of which, gross debt – – – – (413,930) (413,930)

Net other assets/(liabilities) – – – – 3,375 3,375

Total equity/NAV 3,378,512 3,363,411 (3,363,411) 3,378,512 – 3,378,512

31 December 2022

Georgia Capital

PLC

Aggregation

with JSC

Georgia

Capital*

Elimination of

double effect on

investments

Aggregated

Holding

Company Reclassifications** NAV Statement

Cash and cash equivalents 23,361 199,771 – 223,132 (223,132) –

Amounts due from credit institutions – 16,278 – 16,278 (16,278) –

Marketable securities – 25,445 – 25,445 (25,445) –

Investment in redeemable securities – 12,631 – 12,631 (12,631) –

Prepayments 363 – – 363 (363) –

Loans issued – 26,830 – 26,830 (26,830) –

Other assets, net – 2,351 – 2,351 (2,351) –

Equity investments at fair value 2,795,060 3,198,627 (2,795,060) 3,198,627 – 3,198,627

Total assets 2,818,784 3,481,933 (2,795,060) 3,505,657 (307,030) 3,19 8 ,627

Debt securities issued – 681,067 – 681,067 (681,067) –

Other liabilities 1,393 5,806 – 7,19 9 ( 7,199 ) –

Total liabilities 1,393 686,873 – 688,266 (688,266) –

Net debt – – – – (380,905) (380,905)

of which, cash and liquid funds – – – – 411,844 411,8 44

of which, loans issued – – – – 26,830 26,830

of which, gross debt – – – – (819,579) (819,579)

Net other assets/(liabilities) – – – – (331) (331)

Total equity/NAV 2,817,391 2,795,060 (2,795,060) 2,817,391 – 2 , 817,391

* For detailed breakdown of JSC Georgia Capital refer to Note 12.

** Reclassification to aggregated balances to arrive at the NAV specific presentation, such as: aggregating cash, marketable securities, investment in redeemable shares,

repurchased GCAP bonds as cash and liquid funds, debt securities issued as gross debt and netting of other assets and liabilities.

NOTES TO FINANCIAL STATEMENTS CONTINUED

GEORGIA CAPITAL PLC (THOUSANDS OF GEORGIAN LARI)

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Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

8. Equity continued

Earnings/(loss) per share

2023 2022

Basic earnings/(loss) per share

Profit/(loss) for the year attributable to ordinary shareholders of the parent 608,617 (12,153)

Weighted average number of ordinary shares outstanding during the year 39,494,431 42,090,389

Earnings/(loss) per share (GEL) 15.4102 (0.2887)

Diluted earnings/(loss) per share*

Profit/(loss) for the year attributable to ordinary shareholders of the parent 608,617 (12,153)

Weighted average number of diluted ordinary shares outstanding during the year 40,761,789 42,090,389

Diluted earnings/(loss) per share (GEL) 14.9311 (0.2887)

* Dilution effect arises from the Group’s share-based compensation arrangements.

9. Salaries and Other Employee Benefits, and General and Administrative Expenses

2023 2022

Salaries and bonuses (1,480) (1,798)

Equity compensation plan costs (541) (495)

Pension costs (66) (81)

Salaries and other employee benefits (2,087) (2,374)

Refer also to the Resources and Responsibilities section on page 80-93 and the Directors’ Remuneration Report on page 139-157. For total number

of employees of Georgia Capital, refer to page 84 of the Resources and Responsibilities section. For Directors’ remuneration refer to page 150 of

the Directors’ Remuneration Report. The Annual Report figures comprise of both holding company entities: Georgia Capital PLC and JSC Georgia

Capital. The figures in the table above are for standalone Georgia Capital PLC.

General and administrative expenses

2023 2022

Legal and other professional services (4,205) (4,074)

Occupancy and rent (114) (113)

Communication (14) (14)

Other (143) (188)

General and administrative expenses (4,476) (4,389)

Auditors’ remuneration

Auditors’ remuneration is included within legal and other professional services expenses above and comprises:

2023 2022

Fees payable for the audit of the Company’s current year Annual Report 1,002 1,145

Fees payable for other services:

Audit of the Company’s subsidiaries 308 382

Total audit fees 1,310 1,527

Audit-related assurance services

Other assurance services 103 101

Corporate finance services 79 –

Total audit-related fees 182 101

Non-audit services

Total other services fees – –

Total fees 1,492 1,628

The figures shown in the above table include audit fees of JSC GCAP and GCAP PLC and do not include other remuneration paid by portfolio

companies as it is not required by Companies Act 2006 Part 16. The presented amounts relate to fees paid to PricewaterhouseCoopers LLP

and its associates.

6. Equity Investments at Fair Value

31 December

2023

31 December

2022

Subsidiaries (Note 12) 3,363,411 2,795,060

Equity investments at fair value 3,363,411 2,795,060

2023 2022

At 1 January 2,795,060 2,881,373

Fair Value gain and dividend income 616,010 925

Capital redemption* – (87, 23 8)

Dividend income** (47,659) –

At 31 December 3,363,411 2,795,060

* During 2022 JSC Georgia Capital made a capital reduction to its 100% shareholder Georgia Capital PLC with total consideration of GEL 87,238 of which cash consideration

GEL87,238.

** In 2023 JSC Georgia Capital paid a dividend to its 100% shareholder in the amount of GEL 47,659 (2022: GEL nil).

Georgia Capital PLC holds a single investment in JSC Georgia Capital (an investment entity on its own), which holds a portfolio of investments, both

meet the definition of investment entity and Georgia Capital PLC measures its investment in JSC Georgia Capital at fair value through profit or loss.

For the breakdown and detailed information regarding the equity investments at fair value, refer to Note 12.

7. Taxation

As at 31 December 2023 GCAP PLC has an unrecognised tax asset (tax loss carried forward) in the amount of GEL 8,145 (31 December 2022:

GEL6,621). The Company does not recognise the deferred tax asset since it is not expected to be utilised in the foreseeable future, as the

Company’s income sources, fair value gains on equity investments and dividend income, are not taxable in the UK, as fair value gains are unrealised

and dividend income from a controlled company is exempt from taxation under UK tax law.

The aggregate amount of temporary differences associated with investments in subsidiaries is GEL 1,919,957 (2022: GEL 1,351,606). The deferred

tax liability has not been recognised as the Company controls the timing of reversal of these temporary differences and considers it probable that the

temporary differences will not be reversed in the foreseeable future.

Applicable taxes in Georgia include corporate income tax (profit tax), individuals’ withholding taxes, property tax and value added tax, among others.

Management believes that the Company is in compliance with the tax laws affecting its operations. However, the risk remains that relevant authorities

could take differing positions with regard to interpretative issues.

8. Equity

Share capital

As at 31 December 2023 issued share capital comprised of 43,215,840 authorised common shares (31 December 2022: 44,827,862), of which

43,215,840 were fully paid (2022: 44,827,862). Each share has a nominal value of one British penny. Shares issued and outstanding as at

31 December 2023 and 31 December 2022 are described below:

Number

of ordinary

shares Amount

1 January 2022 47,080,203 1,547

Cancellation of shares (2,252,341) (74)

31 December 2022 44,827,862 1,473

Cancellation of shares (1,612,022) (53)

31 December 2023 43,215,840 1,420

Treasury shares

In 2023, the Company paid cash consideration of GEL 48,037 (2022: GEL 54,573) for acquisition of treasury shares, of which GEL 203 (2022:

GEL247) was related to shares acquired for settlement of employee share-based payments and GEL 47,834 (2022: GEL 54,326) were other

acquisitions made by the Company, including those under the share buyback programme in 2022.

During 2023, 1,665,222 (2022: 2,252,341) treasury shares bought back under the buyback programme, out of which 1,612,022 were cancelled and

53,200 are held at treasury.

NOTES TO FINANCIAL STATEMENTS CONTINUED

GEORGIA CAPITAL PLC (THOUSANDS OF GEORGIAN LARI)

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Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

10. Share-based Payments

Executives’ Equity Compensation Plan

In 2018, Georgia Capital introduced Group’s Executives’ Equity Compensation Plan (EECP). Under the EECP, shares of the parent are granted to

senior executives of the Company. In July 2018, the executives signed new five-year fixed contingent share-based compensation agreements with a

total of 1,750,000 ordinary shares of Georgia Capital. The total amount of shares fixed to each executive are being awarded in five equal instalments

during the five consecutive years starting January 2019, of which each award is subject to a six-year vesting period subject to continued employment

within the Group during such vesting period. In October 2022 CEO contract maturity was extended until 31 December 2025 from May2023,

extending fixed contingent share-based compensation with additional 518,357 ordinary shares of Georgia capital. The fair value of the shares is

determined at the grant date using available market quotations.

After Georgia Capital met the definition of investment entity on 31 December 2019, only the small portion of the CEO’s share-based compensation

which Georgia Capital PLC retains the obligation to settle is within scope of IFRS 2 in Georgia Capital’s financial statements.

The following table illustrates the number and weighted average prices of, and movements in, shares awards granted to the CEO of Georgia Capital

PLC during the year:

2023 2022

Shares outstanding at 1 January 132,735 91,266

Vested during the year (14,367) (10,367)

Granted during the year – 51,836

Shares outstanding at 31 December 118,368 132,735

The weighted average remaining contractual life for the share awards outstanding as at 31 December 2023 was 2.71 years (2022: 3.3 years).

The weighted average fair value of shares vested was GEL 33.4 (2022: GEL 29.7). The weighted average fair value of shares granted was GEL nil

(2022: GEL 18.68).

Expense recognition

The share-based payment expense recognised for employee services received during 2023 and the respective increase in equity arising from equity-

settled share-based payments was GEL 541 (2022: GEL 495).

11. Risk Management

Introduction

Risk is inherent in the Group’s activities but it is managed through a process of ongoing identification, measurement and monitoring, subject to risk

limits and other controls. This process of risk management is critical to the Group’s continuing profitability and each individual within the Group is

accountable for the risk exposures relating to his or her responsibilities. The Group is exposed to investment risk, credit risk, liquidity risk and market

risk. It is also subject to operational risks and insurance risk.

The independent risk control process does not include business risks such as changes in the environment, technology and industry. They are

monitored through the Group’s strategic planning process.

Risk management structure

Audit and Valuation Committee

The Audit and Valuation Committee of Georgia Capital PLC assists the Management Board of Georgia Capital in relation to the oversight of the

Group’s financial and reporting processes. It monitors the integrity of the financial statements and is responsible for governance around both the

Internal Audit function and external auditor, reporting back to the Board. It reviews the effectiveness of the policies, procedures and systems in place

related to, among other operational risks, compliance, IT and IS (including cyber-security) and assesses the effectiveness of the risk management

and internal control framework.

It is responsible for reviewing and approving half-yearly and annual valuations of the Group’s portfolio investments prepared and presented to it

by the Management Board. The Committee will ensure that the Valuation Policy complies with the obligations within any agreements in place,

legislation, regulations, guidance and other policies of the Company.

11. Risk Management continued

Introduction continued

Risk management structure continued

Management Board

The Management Board of Georgia Capital has overall responsibility for the Group’s asset, liability and risk management activities, policies and

procedures. The Management Board is comprised of senior managers of GCAP PLC and JSC GCAP. In order to effectively implement the risk

management system, the Board of Directors delegates individual risk management functions to the Management Board, which in turn assigns

specific functions to the various decision-making and execution bodies within the Group’s portfolio entities.

Internal Audit

The Internal Audit department of Georgia Capital PLC is responsible for the annual audit of the Group’s risk management, internal control and

corporate governance processes, with the aim of reducing the levels of operational and other risks, auditing the Group’s internal control systems

and detecting any infringements or errors on the part of the Group’s departments and divisions. It examines both the adequacy of and the Group’s

compliance with those procedures. The Group’s Internal Audit department discusses the results of all assessments with management, and reports

its findings and recommendations to the Audit and Valuation Committee.

Risk measurement and reporting systems

The Group’s risks are measured using a method which reflects both the expected loss likely to arise in normal circumstances and unexpected

losses, which are an estimate of the ultimate actual loss based on different forecasting models. The models make use of probabilities derived from

historical experience, adjusted to reflect the economic environment.

Monitoring and controlling risks is primarily performed based on limits established by the Group. These limits reflect the business strategy and

market environment of the Group as well as the level of risk that the Group is willing to accept, with additional emphasis on selected industries and

countries. In addition, the Group monitors and measures the overall risk bearing capacity in relation to the aggregate risk exposure across all risks

types and activities.

Information compiled from all the businesses is examined and processed in order to analyse, control and identify early risks. This information is

presented and explained to the Management Board.

Risk mitigation

As part of its overall risk management, GCAP PLC and JSC GCAP may use derivatives and other instruments to manage exposures resulting from

changes in interest rates, foreign currencies, equity risks, credit risks, and exposures arising from forecast transactions. Risks at portfolio company

level are mitigated by instruments applicable to specific industries they operate in.

Credit risk

Credit risk is the risk that the Company will incur a loss because its customers, clients or counterparties fail to discharge their contractual obligations.

The Group manages and controls credit risk by setting limits on the amount of risk it is willing to accept for individual counterparties and by

monitoring exposures in relation to such limits. Credit terms by debtors for various portfolio companies are managed and monitored separately, given

industry specifics in which respective entities operate.

Liquid financial instruments

Credit risk from balances with banks and financial institutions is managed by the treasury department of GCAP PLC and JSC GCAP in accordance

with the Company’s policy. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each

counterparty. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through a counterparty’s potential failure to

make payments.

The table below demonstrates the Company’s financial assets credit risk profile by external rating grades:

31 December 2023 31 December 2022

A+ to A- BB+ to BB- Not graded A+ to A- BB+ to BB- Not graded

Cash and cash equivalents 11,826 493 – 22,927 434 –

Investment in redeemable securities – – 3,517 – – –

Total 11,826 493 3,517 22,927 434 –

Liquidity risk

Liquidity risk is the risk that the Company or any of its portfolio entities will be unable to meet its payment obligations when they fall due under

normal and stress circumstances. To limit this risk, management has arranged diversified funding sources in addition to its capital, manages assets

with liquidity in mind, and monitors future cash flows and liquidity on a regular basis. This incorporates daily monitoring of expected cash flows and

liquidity needs.

The Group manages the maturities of its assets and liabilities for better matching, which helps the Group additionally mitigate the liquidity risk.

Maturities of assets and liabilities of the Company and each portfolio entity are managed separately. The major liquidity risks confronting the Group

are the daily calls on its available cash resources in respect of supplier contracts and the maturity of borrowings.

NOTES TO FINANCIAL STATEMENTS CONTINUED

GEORGIA CAPITAL PLC (THOUSANDS OF GEORGIAN LARI)

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Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

11. Risk Management continued

Capital management

Management monitors the Group’s capital on a regular basis based on statement of net asset value prepared on fair value bases, which

corresponds to equity attributable to shareholders of Georgia Capital PLC as at 31 December 2023 in the amount of GEL 3,378,512 (2022: GEL

2,817,391). The NAV Statement breaks down NAV into its components, including fair values for the private businesses and follows changes therein,

providing management with a snapshot of the Group’s financial position at any given time. The NAV Statement provides a value of Georgia Capital

that management uses as a tool for measuring its investment performance. Management closely monitors NAV in connection with capital allocation

decisions. Refer to Note 5.

The capital management objectives are as follows:

• to maintain the required level of stability of the Group thereby providing a degree of security to the shareholders;

• to manage capital needs such that Group does not depend on potentially premature liquidation of its listed investments;

• to allocate capital efficiently and support the development of business by ensuring that returns on capital employed meet the requirements of its

capital providers and of its shareholders; and

• to maintain financial strength to support new business growth and to satisfy the shareholders’ requirements.

The Group manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the applicable

financial covenants. To maintain or adjust the capital structure, the Group may adjust the amount of outstanding equity.

12. Fair Value Measurements

Fair value hierarchy

For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and

risks of the asset or liability. The following tables show analysis of assets and liabilities measured at fair value or for which fair values are disclosed by

level of the fair value hierarchy:

31 December 2023 Level 1 Level 2 Level 3 Total

Assets measured at fair value

Equity investments at fair value – – 3,363,411 3,363,411

31 December 2022 Level 1 Level 2 Level 3 Total

Assets measured at fair value

Equity investments at fair value – – 2,795,060 2,795,060

Valuation techniques

The following is a description of the determination of fair value for financial instruments which are recorded at fair value using valuation techniques.

These incorporate the Company’s estimate of assumptions that a market participant would make when valuing the instruments.

Assets for which fair value approximates carrying value

For financial assets and financial liabilities that are liquid or have a short-term maturity (less than three months), it is assumed that the carrying

amounts approximate to their fair value. This assumption is also applied to demand deposits, savings accounts without a specific maturity and

variable rate financial instruments.

Fixed rate financial instruments

The fair value of fixed rate financial assets and liabilities carried at amortised cost are estimated by comparing market interest rates when they were

first recognised with current market rates offered for similar financial instruments. The estimated fair value of fixed interest-bearing deposits is based

on discounted cash flows using prevailing money-market interest rates for debts with similar credit risk and maturity.

11. Risk Management continued

Liquidity continued

The table below summarises the maturity profile of the Company’s financial liabilities based on contractual undiscounted repayment obligations.

Repayments, which are subject to notice, are treated as if notice were to be given immediately.

Financial liabilities

31 December 2023

Less than 3

months

3 to 12

months

1 to 5

years

Over

5 years Total

Other financial liabilities 1,711 – – – 1,711

Total undiscounted financial liabilities 1,711 – – – 1,711

Financial liabilities

31 December 2022

Less than 3

months

3 to 12

months

1 to 5

years

Over

5 years Total

Other financial liabilities 1,393 – – – 1,393

Total undiscounted financial liabilities 1,393 – – – 1,393

Market risk

Market risk is the risk that the value of financial instruments will fluctuate due to changes in market variables such as interest rates and foreign

exchange rates. The Group has exposure to market risks. GCAP PLC and JSC GCAP structure the levels of market risk it accepts through a market

risk policy that determines what constitutes market risk. Risks associated with changes in fair value of equity investment and its implied fair value

components are disclosed in Note 12.

Price risk

In GCAP PLC equity securities price risk arises from publicly traded investment (BoG, valued at GEL 1,225,847) held through JSC GCAP for which

price in the future is uncertain). Where non-monetary financial instruments – for example, equity securities – are denominated in currencies other

than the Georgian Lari, the price initially expressed in foreign currency and then converted into Georgian Lari will also fluctuate because of changes

in foreign exchange rates. For details on currency risk management, refer to respective paragraph below.

If the price of our listed investment increased by 10% (2022: 10%) JSC GCAP’s profit for the year and NAV would have increased by GEL 122,584

(2022: GEL 83,046). If the price of our listed investment decreased by 10% (2022: 10%) JSC GCAP’s profit for the year and NAV would have

decreased by GEL 122,585 (2022: GEL 83,046). As a result, JSC GCAP’s NAV would have increased by 4% (2022: 3%) or decreased by 4%

(2022:3%).

Sensitivity analysis of private portfolio companies are presented in Note 12.

Currency risk

GCAP PLC and JSC GCAP are exposed to the effects of fluctuations in the prevailing foreign currency exchange rates on its financial position and

cash flows. The Group’s principal transactions are carried out in Georgian Lari and its exposure to foreign exchange risk arises primarily with respect

to US Dollar.

The currency risk management process is an integral part of the Group’s activities; currency risk is managed through regular and frequent monitoring

of the Group’s currency positions and through timely and efficient elaboration of responsive actions and measures. The Company is not directly

exposed to material currency risk.

Operating environment

Most of the Group’s portfolio investments are concentrated in Georgia. As an emerging market, Georgia’s business and regulatory infrastructure

is less well-developed than that which would generally exist in a more mature market economy. Operations in Georgia may involve risks that are

not typically associated with those in developed markets (including the risk that the Georgian Lari is not freely convertible outside the country, and

undeveloped debt and equity markets). However, over the last few years the Georgian Government has taken a number of steps that positively affect

the overall investment climate of the country, specifically implementing the reforms necessary to create banking, judicial, taxation and regulatory

systems. This includes the adoption of a new body of legislation (including a new Tax Code and procedural laws). In the view of the Board, these

steps contribute to mitigate the risks of doing business in Georgia.

The existing tendency aimed at the overall improvement of the business environment is expected to persist. The future stability of the Georgian

economy is, however, largely dependent upon these reforms and developments and the effectiveness of economic, financial and monetary

measures undertaken by the Government. In addition, the Georgian economy is vulnerable to market downturns and economic slowdowns

elsewhere in the world.

Georgia has published its climate change strategy. Georgia’s 2030 Climate Change Strategy and Action Plan (Climate Change Strategy and Action

Plan – CSAP, Climate Action Plan – CAP) are a planning and implementation mechanism for coordinated effort and planning towards meeting the

nationally determined targets for climate change mitigation.

NOTES TO FINANCIAL STATEMENTS CONTINUED

GEORGIA CAPITAL PLC (THOUSANDS OF GEORGIAN LARI)

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Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

12. Fair Value Measurements continued

Valuation techniques continued

Investment in subsidiaries

Equity investments at fair value include investment in subsidiary at fair value through profit or loss representing 100% interest of JSC Georgia Capital.

Georgia Capital PLC holds a single investment in JSC Georgia Capital (an investment entity on its own), which holds a portfolio of investments,

both meet the definition of investment entity and Georgia Capital PLC measures its investment in JSC Georgia Capital at fair value through profit or

loss. Investments in investment entity subsidiaries and loans issued are accounted for as financial instruments at fair value through profit and loss in

accordance with IFRS 9. Debt securities owned are measured at fair value. We determine that, in the ordinary course of business, the net asset value

of investment entity subsidiaries is considered to be the most appropriate to determine fair value. JSC Georgia Capital’s NAV as of 31 December

2023 and 31 December 2022 is determined as follows:

31 December

2023

31 December

2022

Assets

Cash and cash equivalents 51,138 199,771

Amounts due from credit institutions 8,678 16,278

Marketable securities 18,203 25,445

Investment in redeemable securities 14,068 12,631

Equity investments at fair value 3,671,945 3,198,627

of which listed and observable investments: 1,384,847 985,463

BoG 1,225,847 830,463

Water utility 159,000 155,000

of which private investments: 2, 2 87,0 9 8 2,213,16 4

Large portfolio companies 1,436,231 1,4 37,610

Retail (pharmacy) 714,001 724,517

Hospitals 344,356 4 33 ,193

P&C insurance 285,566 228,045

Medical insurance 92,308 51,855

Investment stage portfolio companies 566,614 501,407

Clinics and diagnostics 110 ,761 112,178

Renewable energy 266,627 224,987

Education 189,226 164,242

Other portfolio companies 284,253 274,147

Loans issued 9,212 26,830

Other assets 5,060 2,351

Total assets 3,778,304 3,481,933

Liabilities

Debt securities issued 413,930 681,067

Other liabilities 963 5,806

Total liabilities 414,893 686,873

Net asset value 3,363,411 2,795,060

In measuring fair values of JSC Georgia Capital’s investments, following valuation methodology is applied:

Equity investments in listed and observable portfolio companies

Equity instruments listed on an active market are valued at the price within the bid/ask spread, that is most representative of fair value at the reporting

date, which usually represents the closing bid price. The instruments are included within Level 1 of the hierarchy in JSC GCAP financial statements.

Listed and observable portfolio also includes instruments for which there is a clear exit path from the business, e.g. through a put and/or call options

at pre-agreed multiples. In such cases, pre-agreed terms are used for valuing the company.

Equity investments in private portfolio companies

Large portfolio companies – An independent third-party valuation firm is engaged to assess fair value ranges of large private portfolio companies

at the reporting date starting from 31 December 2020. The independent valuation company has extensive relevant industry and emerging markets

experience. Valuation is performed by applying several valuation methods including an income approach based mainly on discounted cash flow and

a market approach based mainly on listed peer multiples (the DCF and listed peer multiples approaches applied are described below for the other

portfolio companies). The different valuation approaches are weighted to derive a fair value range, with the income approach being more heavily

weighted than the market approach. Management selects what is considered to be the most appropriate point in the provided fair value range at the

reporting date.

Investment stage portfolio companies – An independent third-party valuation firm is engaged to assess fair value ranges of investment stage

private portfolio companies at the reporting date starting from 30 June 2022. The independent valuation company has extensive relevant industry

and emerging markets experience. Valuation is performed by applying several valuation methods including an income approach based mainly on

discounted cash flow and a market approach based mainly on listed peer multiples (the DCF and listed peer multiples approaches applied are

substantially identical to those described below for the other portfolio companies). The different valuation approaches are weighted to derive a fair

value range, with the income approach being more heavily weighted than the market approach. Management selects what is considered to be the

most appropriate point in the provided fair value range at the reporting date.

12. Fair Value Measurements continued

Valuation techniques continued

Equity investments in private portfolio companies continued

Other portfolio companies – fair value assessment is performed internally as described below.

Equity investments in private portfolio companies are valued by applying an appropriate valuation method, which makes maximum use of market-

based public information, is consistent with valuation methods generally used by market participants and is applied consistently from period to

period, unless a change in valuation technique would result in a more reliable estimation of fair value.

The value of an unquoted equity investment is generally crystallised through the sale or flotation of the entire business. Therefore, the estimation

of fair value is based on the assumed realisation of the entire enterprise at the reporting date. Recognition is given to the uncertainties inherent in

estimating the fair value of unquoted companies and appropriate caution is applied in exercising judgments and in making the necessary estimates.

The fair value of equity investments is determined using one of the valuation methods described below:

Listed peer group multiples

This methodology involves the application of a listed peer group earnings multiple to the earnings of the business and is appropriate for investments

in established businesses and for which the Company can determine a group of listed companies with similar characteristics.

The earnings multiple used in valuation is determined by reference to listed peer group multiples appropriate for the period of earnings calculation

for the investment being valued. The Company identifies a peer group for each equity investment taking into consideration points of similarity with

the investment such as industry, business model, size of the company, economic and regulatory factors, growth prospects (higher growth rate) and

risk profiles. Some peer-group companies’ multiples may be more heavily weighted during valuation if their characteristics are closer to those of the

company being valued than others.

As a rule of thumb, last 12-month earnings will be used for the purposes of valuation as a generally accepted method. Earnings are adjusted where

appropriate for exceptional, one-off or non-recurring items.

a. Valuation based on enterprise value

Fair value of equity investments in private companies can be determined as their enterprise value less net financial debt (gross face value of debt less

cash) appearing in the most recent Financial Statements.

Enterprise value (EV) is obtained by multiplying measures of a company’s earnings by listed peer group multiple (EV/EBITDA) for the appropriate

period. The measures of earnings generally used in the calculation is recurring EBITDA for the last 12 months (LTM EBITDA). In exceptional cases,

where EBITDA is negative, peer EV/Sales (enterprise value to sales) multiple can be applied to last 12-month recurring/adjusted sales revenue of the

business (LTM sales) to estimate enterprise value.

Once the enterprise value is estimated, the following steps are taken:

• Net financial debt appearing in the most recent financial statements is subtracted from the enterprise value. If net debt exceeds enterprise value,

the value of shareholders’ equity remains at zero (assuming the debt is without recourse to Georgia Capital).

• The resulting fair value of equity is apportioned between Georgia Capital and other shareholders of the company being valued, if applicable.

• Valuation based on enterprise value using peer multiples is used for businesses within non-financial industries.

b. Equity fair value valuation

Fair value of equity investment in companies can also be determined as using price to earnings (P/E) multiple of similar listed companies.

The measure of earnings used in the calculation is recurring adjusted net income (net income adjusted for non-recurring items and forex gains/

losses) for the last 12 months (LTM net income). The resulting fair value of equity is allocated between Georgia Capital and other shareholders of the

portfolio company, if any. Fair valuation of equity using peer multiples can be used for businesses within financial sector (e.g. insurance companies).

Discounted cash flow

Under the discounted cash flow valuation method, fair value is estimated by deriving the present value of the business using reasonable assumptions

of expected future cash flows and the terminal value, and the appropriate risk-adjusted discount rate that quantifies the risk inherent to the business.

The discount rate is estimated with reference to the market risk-free rate, a risk adjusted premium and information specific to the business or market

sector. Under the discounted cash flow analysis unobservable inputs are used, such as estimates of probable future cash flows and an internally-

developed discounting rate of return.

Net asset value

The net assets methodology involves estimating fair value of an equity investment in a private portfolio company based on its book value at reporting

date. This method is appropriate for businesses (such as real estate) whose value derives mainly from the underlying value of its assets and where

such assets are already carried at their fair values (fair values determined by professional third-party valuation companies) on the balance sheet.

Price of recent investment

The price of a recent investment resulting from an orderly transaction, generally represents fair value as of the transaction date. At subsequent

measurement dates, the price of a recent investment may be an appropriate starting point for estimating fair value. However, adequate consideration

is given to the current facts and circumstances to assess at each measurement date whether changes or events subsequent to the relevant

transaction imply a change in the investment’s fair value.

NOTES TO FINANCIAL STATEMENTS CONTINUED

GEORGIA CAPITAL PLC (THOUSANDS OF GEORGIAN LARI)

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Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

12. Fair Value Measurements continued

Valuation techniques continued

Equity investments in private portfolio companies continued

Exit price

Fair value of a private portfolio company in a sales process, where the price has been agreed but the transaction has not yet settled, is measured at

the best estimate of expected proceeds from the transaction, adjusted pro-rata to the proportion of shareholding sold.

Validation

Fair value of investments estimated using one of the valuation methods described above is cross-checked using several other valuation methods

asfollows:

• Listed peer group multiples – peer multiples such as P/E, P/B (price to book) and dividend yield are applied to the respective metrics of the

investment being valued depending on the industry of the company. The Company develops fair value range based on these techniques and

analyses whether fair value estimated above falls within this range.

• Discounted cash flow (DCF) – The DCF valuation method is used to determine fair value of equity investment. Based on DCF, the Company might

make upward or downward adjustment to the value of valuation target as derived from primary valuation method. If fair value estimated using

discounted cash flow analysis significantly differs from the fair value estimate derived using primary valuation method, the difference is examined

thoroughly, and judgement is applied in estimating fair value at the measurement date.

• In line with our strategy, from time to time, we may receive offers from interested buyers for our private portfolio companies, which would be

considered in the overall valuation assessment, where appropriate.

Valuation process for Level 3 valuations

Georgia Capital hired third-party valuation professionals to assess fair value of the large private portfolio companies as at 31 December 2021.

Starting from 2022 third-party valuation professionals are hired to assess fair value of the investment stage private portfolio companies as well. As of

31 December 2023, such businesses include hospitals (Large and Specialty Hospitals and Regional and Community Hospitals), P&C insurance, retail

(pharmacy), medical insurance, clinics and diagnostics, renewable energy and education. The valuation is performed by applying several valuation

methods that are weighted to derive fair value range, with the income approach being more heavily weighted than market approach. Management

selects most appropriate point in the provided fair value range at the reporting date. Fair values of investments in other private portfolio companies

are assessed internally in accordance with Georgia Capital’s valuation methodology by the Valuation Workgroup.

Georgia Capital’s Management Board proposes fair value to be placed at each reporting date to the Audit and Valuation Committee. Audit and

Valuation Committee is responsible for the review and approval of fair values of investments at the end of each reporting period.

Description of significant unobservable inputs to level 3 valuations

The approach to valuations as of 31 December 2023 was consistent with the Company’s valuation process and policy.

Management analyses the impact of climate change on the valuations, such as by incorporation of known effects of climate risks to the future cash

flow forecasts or through adjusting peer multiples the known differences in the climate risk exposure as compared to the investment being fair

valued. As at 31 December 2023, the management concluded that the effects of the climate risks are reflected in the peer multiples and discount

rates used in the valuations and that no specific adjustments are required in relation of the Group’s investment portfolio measurement and respective

fair value sensitivity disclosures.

The following tables show descriptions of significant unobservable inputs to level 3 valuations of equity investments:

31 December 2023

Description Valuation technique Unobservable input

Range*

[implied multiple**] Fair value

Loans issued DCF Discount rate 15.0%-16.5% 9,212

Equity investments at fair value

Large portfolio 1,436,231

Retail (pharmacy) DCF, EV/EBITDA EV/EBITDA multiple 6.3x-28.2x 714,001

[9.7x]

Hospitals DCF, EV/EBITDA EV/EBITDA multiple 7. 2 x-12.8 x 344,356

[13.8x]

P&C insurance D CF, P/E P/E multiple 4.6x-12.6x 285,566

[13.0x]

Medical insurance DCF, P/E P/E multiple 5.7x-11.6x 92,308

[11.0 x]

Investment stage 566,614

Clinics and diagnostics DCF, EV/EBITDA EV/EBITDA multiple 9.4x-12.8x 110,761

[11.7x]

Renewable energy DCF, EV/EBITDA EV/EBITDA multiple 2. 8x-17.0x 266,627

[12.6x]

Education DCF, EV/EBITDA EV/EBITDA multiple 6.1x- 42.7x 189,226

[16.7x]

Other Sum of the parts

EV/EBITDA multiples 2.1x-19.0x

284,253

[6.7x-14.6x]

Cashflow probability [90%-100%]

NAV multiple [1.0x]

12. Fair Value Measurements continued

Description of significant unobservable inputs to level 3 valuations continued

31 December 2022

Description Valuation technique Unobservable input

Range*

[implied multiple**] Fair value

Loans issued DCF Discount rate 5.5%-16.5% 26,830

Equity investments at fair value

Large portfolio 1,4 37,610

Retail (pharmacy) DCF, EV/EBITDA EV/EBITDA multiple 6.1x-20.9 x 724,517

[9.1x]

Hospitals DCF, EV/EBITDA EV/EBITDA multiple 7.5x-14.2 x 433,193

[12.2x]

P&C insurance D CF, P/E P/E multiple 7.0 x-37.0 x 228,045

[10.7x]

Medical insurance DCF, P/E P/E multiple 10.3x-11.8x 51,855

[10.6x]

Investment stage 501,407

Clinics and diagnostics DCF, EV/EBITDA EV/EBITDA multiple 7. 9x-14.2 x 112,178

[16.5x]

Renewable energy DCF, EV/EBITDA EV/EBITDA multiple 8.1x-20.9 x 224,987

[11.4x]

Education DCF, EV/EBITDA EV/EBITDA multiple 7.6x- 39 . 3x 164,242

[16.9x]

Other Sum of the parts

EV/EBITDA multiples 2.0x-16.8x 274,147

[6.3x-10.0x]

Cash flow probability [90%-100%]

NAV multiple [0.9x]

* For equity investments at fair value the range refers to LTM multiples of listed peer group companies, prior to any adjustments.

** Implied multiples are derived by dividing selected value of the company by respective LTM earnings measure.

Georgia Capital hired third-party valuation professionals to assess fair value of the large and investment stage private portfolio companies as at

31 December 2023 and 31 December 2022 including P&C insurance, hospitals (Large and Specialty Hospitals and Regional and Community

Hospitals), retail (pharmacy), medical insurance and clinics and diagnostics. Starting from 30 June 2022, fair value assessment for renewable energy

and education businesses are performed by third-party valuation professionals as well. The valuation is performed by applying several valuation

methods that are weighted to derive fair value range, with the income approach being more heavily weighted than market approach. Management

selects most appropriate point in the provided fair value range at the reporting date.

On 31 December 2021, Georgia Capital signed SPA to dispose 80% interest in the water utility business, which was previously included within

the large private portfolio companies. As at 31 December 2023 the remaining 20% interest in the water utility business was valued using the pre-

agreed put option multiple in reference to the signed contract with the buyer as GCAP has a clear exit path from the business through a put and call

structure at pre-agreed EBITDA multiples.

As at 31 December 2023, several portfolio companies (hospitals, clinics and P&C insurance, together the “Defendants”) were engaged in litigation

with the former shareholders of Insurance Company Imedi L who allege that the they sold their 66% shares in Imedi L to the Defendants under

duress at a price below market value in 2012. Since the outset, the Defendants have vigorously defended their position that the claims are wholly

without merit. The initial judgment of the First Instance Court in 2018 which was in favour of the Defendants was overruled by the Appellate Court

in 2020 and the case was returned for reconsideration to the First Instance Court. Upon reconsideration, in 2022 the First Instance Court partially

satisfied the claim and ruled that US$ 12.7 million principal amount plus an annual 5% interest charge as lost income (c.US$ 21 million in total) should

be paid by the Defendants. The Defendants appealed the decision of the First Instance Court and as of 31 December 2023 the case is at the stage

of consideration at the Appellate Court. No hearing date has been set.

The Defendants are confident that they will prevail and there have not been made a provision for a potential liability in their financial statements.

Management shares the Defendants’ assessment of the merits of the case and considers that the probability of incurring losses on this claim is low,

accordingly, fair values of portfolio companies do not take into account a potential liability in relation to this litigation.

In December 2023, the Georgian National Competition Agency (the “Agency”) imposed fines on four companies in the Georgian pharmaceutical

retailers’ sector, including GCAP’s retail (pharmacy) business, for alleged anti-competitive actions related to price quotations on certain prescription

medicines funded under the state programme. The penalty amount assessed by the Agency on our retail (pharmacy) business is GEL 20.0 million

derived by utilising the single rate across all the alleged participants. The company has appealed the Agency’s decision in court and plans to

vigorously defend its position.

NOTES TO FINANCIAL STATEMENTS CONTINUED

GEORGIA CAPITAL PLC (THOUSANDS OF GEORGIAN LARI)

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Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

12. Fair Value Measurements continued

Sensitivity analysis to significant changes in unobservable inputs within Level 3 hierarchy

In order to determine reasonably possible alternative assumptions the Company adjusted key unobservable model inputs. The Company adjusted

the inputs used in valuation by increasing and decreasing them within a range which is considered by the Company to be reasonable.

If the interest rate for each individual loan issued to equity investments as at 31 December 2023 decreased by 3.0-3.3 ppts (2022: 1.1-3.3 ppts), the

amount of loans issued would have decreased by GEL 257 or 2.8% (2022: GEL 150 or 0.6%). If the interest rates increased by 3.0-3.3 ppts (2022:

1.1-3.3 ppts) then loans issued would have increased by GEL 255 or 2.8% (2022: GEL 148 or 0.6%).

If the listed peer multiples used in the market approach to value unquoted investments as at 31 December 2023 decreased by 10% (2022: 10%),

value of equity investments at fair value would decrease by GEL 59 million or 2% (2022: GEL 71 million or 2%). If the multiple increased by 10% (2022:

10%) then the equity investments at fair value would increase by GEL 59 million or 2% (2022: GEL 71 million or 2%).

If the discount rates used in the income approach to value unquoted investments decreased by 50 bps (2022: 50 bps), the value of equity

investments at fair value would increase by GEL 82 million or 2% (2022: GEL 75 million or 2%). If the discount rates increased by 50 bps (2022: 50

bps) then the equity investments at fair value would decrease by GEL 87 million or 2% (2022: GEL 71 million or 2%). If the discount rate decreased

by 100 bps, the value of equity investments at fair value would increase by GEL 177 million or 5% (31 December 2022: GEL 155 million or 5%). If the

discount rate increased by 100 bps then the equity investments at fair value would decrease by GEL 164 million or 4% (31 December 2022: GEL 138

million or 4%).

If the multiple used to value unquoted investments valued on NAV and recent transaction price basis as at 31 December 2023 decreased by 10%

(2022: 10%), value of equity investments at fair value would decrease by GEL 10 million or 0.3% (2022: GEL 11 million or 0.3%). If the multiple

increased by 10% then the equity investments at fair value would increase by GEL 10 million or 0.3% (2022: GEL 11 million or 0.3%).

As set out in the description of significant unobservable inputs to level 3 valuations the valuations have been prepared on the basis that climate

change risks are reflected in the peer multiples and discount rates. Therefore, the sensitivities noted above in respect of peer multiples and discount

rates include the risk arising from climate change.

Movements in level 3 financial instruments measured at fair value

The following tables show a reconciliation of the opening and closing amounts of level 3 financial assets which are recorded at fair value:

At 1

January

2022

Fair value

gain

Capital

redemption

Capital

increase

At 31

December

2022

Fair value

gain

Capital

redemption

Dividend

Income

At 31

December

2023

Level 3 financial assets

Equity investments at fair value (Note 6) 2,881,373 925 ( 87,2 3 8 ) – 2,795,060 616,010 – (47,659) 3,363,411

13. Maturity Analysis

The table below shows an analysis of assets and liabilities analysed according to when they are expected to be recovered or settled:

31 December 2023

Less than

1 year

More than

1 year Total

Cash and cash equivalents 12,319 – 12,319

Investment in redeemable securities 3,517 – 3,517

Equity investments at fair value – 3,363,411 3,363,411

Prepayments 976 – 976

Total assets 16,812 3,363,411 3,380,223

Other liabilities 1,711 – 1,711

Total liabilities 1,711 – 1,711

Net 15,101 3,363,411 3,378,512

31 December 2022

Less than

1 year

More than

1 year Total

Cash and cash equivalents 23,361 – 23,361

Equity investments at fair value – 2,795,060 2,795,060

Prepayments 363 – 363

Total assets 23,724 2,795,060 2,818,784

Other liabilities 1,393 – 1,393

Total liabilities 1,393 – 1,393

Net 22,331 2,795,060 2,817,391

14. Related Party Disclosures

In accordance with IAS 24 Related Party Disclosures, parties are considered to be related if one party has the ability to control the other party or

exercise significant influence over the other party in making financial or operational decisions. In considering each possible related party relationship,

attention is directed to the substance of the relationship, not merely the legal form.

Related parties may enter into transactions which unrelated parties might not, and transactions between related parties may not be effected on the

same terms, conditions and amounts as transactions between unrelated parties. All transactions with related parties disclosed below have been

conducted on an arm’s length basis.

There were no related party transactions as of 31 December 2023 and as of 31 December 2022, other than dividend income of GEL 47,659 from

JSC GCAP in 2023 (31 December 2022: nil), capital redemption of GEL 87,238 in 2022 and compensation of key management personnel disclosed

below.

The compensation of key management personnel for the Company and its 100%-owned subsidiary, JSC GCAP, comprised the following:

2023 2022

Salaries and other benefits (2,097) (2,858)

Share-based payments compensation (9,165) (9,554)

Total key management compensation (11,262) (12,412)

Key management personnel do not receive cash-settled compensation, except for fixed salaries. The number of key management personnel at

31 December 2023 was 5 (31 December 2022: 7).

For more information regarding Groups Directors’ remuneration refer to the Directors’ Remuneration Report on page 139-157 in the Group’s Annual

Report 2023.

For the details of related party balances comprising of equity investments at fair value please, refer to Note 6.

15. Events after the Reporting Period

Acquisition of medical insurance contracts and brand name from “Ardi”

In January 2024, the medical insurance business signed a Memorandum of Understanding to acquire a GEL 73 million portfolio of medical insurance

contracts and brand name from “Ardi”. Upon the successful completion of this transaction, the combined market share of GCAP’s medical insurance

business will make it the largest health insurer in the country. The total cash outflow for this transaction is GEL 27 million, which will be fully financed

by funds already available in the medical insurance business, with no cash investment required from GCAP. Following this acquisition, the insurance

business will operate under three brand names: Aldagi, Imedi L and Ardi, all of which will be managed under GCAP.

Proposed acquisition of Ameriabank CJSC by Bank of Georgia Group PLC

On 19 February 2024, Bank of Georgia Group PLC announced that it has reached an agreement for the proposed acquisition of 100% of

Ameriabank CJSC a leading universal bank in Armenia with an attractive franchise (the “Transaction”). The Transaction price is approximately US$

303.6 million, which will be fully financed by the Bank’s surplus capital. The Transaction – expected to be EPS and ROAE accretive – represents a

significant catalyst for the Bank and its shareholders. The Bank intends to keep the targeted pay-out ratio unchanged in the range of 30%-50% of

annual profits, potentially enabling increased capital distributions for the Bank’s shareholders.

As of 15 March 2024, the share price of Bank of Georgia Group PLC has seen a significant increase, rising from GBP 39.75 to GBP 48.45 compared

to the end of 2023. This translates to a total value increase by 22% in GEL.

NOTES TO FINANCIAL STATEMENTS CONTINUED

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Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

ADDITIONAL INFORMATION

ABBREVIATIONS

ADDITIONAL INFORMATION

REFERENCES

AGM Annual General Meeting

APM Alternative performance measure

BoG or BoGG Bank of Georgia Group PLC

CAGR Compounded annual growth rate

COVID-19 The novel coronavirus

DCF Discounted cash flow

DCFTA Deep and Comprehensive Free Trade Agreement

EBITDA Earnings before interest, taxes, non-recurring

items, FX gain/losses and depreciation

and amortisation

EECP Executives’ Equity Compensation Plan

EFTA European Free Trade Association

EPS Earnings per share

ESMS Environmental and Social Risk Management

Procedures

EUR Euro

EV Enterprise value

EY Ernst & Young

FCF Free cash flow

FDI Foreign direct investment

FRC Financial Reporting Council

FTA Free Trade Agreement

GBP Great British Pound, national currency of the UK

GDP Gross domestic product

GEL Georgian Lari or Lari, national currency of Georgia

GGU Georgia Global Utilities

GHG Georgia Healthcare Group

HPP Hydro power plant

IAS International Accounting Standards

IASB International Accounting Standards Board

IFC International Finance Corporation

IMF International Monetary Fund

IPO Initial Public Offering

LTIP Long-Term Incentive Plan

LTM Last 12 months

LTV Loan to value ratio

MDA Modified Dutch Auction

MOIC Multiple of invested capital

MoU Memorandum of Understanding

MTPL Mandatory third-party liability insurance

MW Megawatt

NAV Net asset value

NBG National Bank of Georgia

NCC Net Capital Commitment

NGO Non-governmental organisation

NIM Net Interest Margin

NMF Not meaningful to present

NPLs Non-performing loans

NTM Next twelve months

OECD Organisation for Economic Co-operation

and Development

OPEX Operating expenses

P&C Property and Casualty

PLC Public limited company

PPA Power Purchase Agreement

PwC PricewaterhouseCoopers LLP

RAB Regulatory Asset Base

ROA Return on assets

ROAE Return on average equity

ROE Return on equity

ROIC Return on invested capital

SDGs United Nations’ Sustainable Development Goals

SMEs Small and medium-size enterprises

SOTP Sum-of-the-parts valuation

TBD To be determined

TPP Thermal power plant

TPL Third-party liability insurance

TSR Total Shareholder Return

UK United Kingdom

US$/USD United States dollar, national currency of the

United States

WACC Weighted average cost of capital

WPP Wind power plant

WSS Water supply and sanitation

WWTP Wastewater treatment plant

y-o-y Year-on-year

YTD Year to date

BGEO Group PLC Former parent company of Georgia Capital PLC

prior to demerger

The Board The Board of Directors of Georgia Capital PLC

The Code The UK Corporate Governance Code published

in 2018

The Directors Members of Georgia Capital PLC Board

of Directors

We/Our/Us References to “we”, “our” or “us” are primarily

references to the Group throughout this Report.

However, the Group comprises of and operates

through its subsidiaries which are legal entities

with their own relevant management and

governance structure (as set out in relevant parts

of this Report).

207

Georgia Capital PLC Annual Report 2023

206

Strategic Review

Overview

Strategic Review

Our Business

Strategic Review

Discussion of Results Governance Financial Statements Additional Information

ADDITIONAL INFORMATION

GLOSSARY

ADDITIONAL INFORMATION

SHAREHOLDER INFORMATION

Alternative

performance

measures (APMs)

In this Annual Report management uses various

APMs, which they believe provide additional

useful information for understanding the financial

performance of the Group. These APMs are

not defined by International Financial Reporting

Standards, and also may not be directly comparable

with other companies who use similar measures.

Management believes that these APMs provide the

best representation of our financial performance

as these measures are used by management to

evaluate our operating performance and make day-

to-day operating decisions.

Combined ratio Equals sum of the loss ratio and the expense

ratio in the insurance business.

Demerger Georgia Capital PLC emerged as a separately

listed company after demerger from its former

Parent Company BGEO Group on 29 May 2018

(the demerger).

EBITDA Earnings before interest, taxes, non-recurring

items, FX gain/losses and depreciation and

amortisation; the Group has presented these

figures in this document because management

uses EBITDA as a tool to measure the portfolio

companies’ operational performance and the

profitability of these companies’ operations. The

Company considers EBITDA to be an important

indicator of representative recurring operations.

Expense ratio Equals sum of acquisition costs and operating

expenses divided by net earned premiums in the

insurance business.

IRR IRR for investments is calculated based on:

a) historical contributions to the investment;

b) dividends received; and c) fair value of the

investment as at 31 December 2023.

LTV Loan to value ratio: net debt divided by the

portfolio value.

Liquid assets and

Loans issued

Liquid asset and loans issued in Georgia Capital

include cash, marketable debt securities and

issued short-term loans.

Loss ratio Equals net insurance claims expense divided by

net earned premiums.

Our website

All shareholders and potential shareholders can gain access to the

Annual Report, presentations to investors, key financial information,

regulatory news, share and dividend data, AGM documentation

and other significant information about Georgia Capital at:

https://georgiacapital.ge/.

Our registered address

Georgia Capital PLC

42 Brook Street

London

W1K 5DB

United Kingdom

Annual General Meeting

The Annual General Meeting of Georgia Capital PLC (the AGM) will be

held at the offices of Baker & McKenzie LLP, 280 Bishopsgate, London

EC2M 4RB. Details of the date, time and business to be conducted

at the AGM is contained in the Notice of AGM, which will be mailed to

shareholders who have elected to receive hard copies of shareholder

information and will be available on the Company’s website:

https://georgiacapital.ge/.

Shareholder enquiries

Georgia Capital PLC’s share register is maintained by Computershare

Investor Services PLC. Any queries about the administration of holdings

of ordinary shares, such as change of address or change of ownership,

should be directed to the address or telephone number immediately

below. Holders of ordinary shares may also check details of their

shareholding, subject to passing an identity check, by visiting the

Registrar’s website: www.investorcentre.co.uk or by calling

the Shareholder Helpline on: +44 (0) 370 873 5866.

Computershare Investor Services PLC

The Pavilions, Bridgwater Road

Bristol BS13 8AE

United Kingdom

+44 (0) 370 873 5866

Contact information

Georgia Capital PLC Investor Relations

E-mail: ir@gcap.ge

NAV Net asset value, represents the net value of an

entity and is calculated as the total value of the

entity’s assets minus the total value of its liabilities.

NCC Net Capital Commitment represents an

aggregated view of all confirmed, agreed and

expected capital outflows at the GCAP holding

company level.

NCC ratio Equals Net Capital Commitment divided by

portfolio value.

Net investment Gross investments less capital returns.

Number of shares

outstanding

Number of shares in issue less total unawarded

shares in JSC GCAP’s management trust.

MOIC Multiple of invested capital is calculated as

follows: i) the numerator is the cash and non-cash

inflows from dividends and sell-downs plus fair

value of investment at reporting date, and ii) the

denominator is the gross investment amount.

P/B multiple The price-to-book multiple, determined by dividing

the current market price of a company’s share by

its book value per share.

P/E multiple The price-to-earnings multiple, calculated by

dividing the current market price of a company’s

share by its earnings per share.

Realised MOIC Realised multiple of invested capital is calculated

as follows: i) the numerator is the cash and non-

cash inflows from dividends and sell-downs, ii) the

denominator is the gross investment amount.

ROAE Return on average total equity equals profit for

the period attributable to shareholders divided

by monthly average equity attributable to

shareholders for the same period.

ROIC Return on invested capital is calculated as EBITDA

less depreciation, divided by aggregate amount of

total equity and borrowed funds.

Value creation Value creation of each portfolio investment is

calculated as follows: we aggregate a) change in

beginning and ending fair values, b) gains from

realised sales (if any) and c) dividend income

during period. We then adjust the net result to

remove capital injections (if any) to arrive at the

total value creation/investment return.

Forward-looking statements

Certain statements in this Annual Report and Accounts contain forward-

looking statements, including, but not limited to, statements concerning

expectations, projections, objectives, targets, goals, strategies, future

events, future revenues or performance, capital expenditures, financing

needs, plans or intentions relating to acquisitions, competitive strengths

and weaknesses, plans or goals relating to financial position and future

operations and development. Although Georgia Capital PLC believes

that the expectations and opinions reflected in such forward-looking

statements are reasonable, no assurance can be given that such

expectations and opinions will prove to have been correct. By their nature,

these forward-looking statements are subject to a number of known and

unknown risks, uncertainties and contingencies, and actual results and

events could differ materially from those currently being anticipated as

reflected in such statements. Important factors that could cause actual

results to differ materially from those expressed or implied in forward-

looking statements, certain of which are beyond our control, include,

among other things, those described in “principal risks and uncertainties”

included in this Annual Report and Accounts, see pages 71 to 79.

No part of this document constitutes, or shall be taken to constitute,

an invitation or inducement to invest in Georgia Capital PLC or any other

entity, and must not be relied upon in any way in connection with any

investment decision. Georgia Capital PLC and other entities undertake

no obligation to update any forward-looking statements, whether as

a result of new information, future events or otherwise, except to the

extent legally required. Nothing in this document should be construed

as a profit forecast.

Georgia Capital PLC Annual Report 2023

208

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NOTES