wealth
management Issue 5/2009

Bank of Georgia Wealth Management
Issue Highlights: Issue 5 MAY 2009
BANK OF GEORGIA NEWS BANK OF GEORGIA SIGNS
I N T E R N AT I O N A L S WA P S A N D
DERIVATIVES ASSOCIATION MASTER
JSC Bank of Georgia reports Q1 2009 NET AGREEMENT WITH INTERNATIONAL
income of GEL 5.1 million P4-5
FINANCE CORPORATION
P3
Bank of Georgia announcement of 2009
annual general meeting of shareholders P6
GEORGIAN ECONOMY
The NBG maintains its main policy rate
(refinancing rate) unchanged at 6 percent P7
Special o
Foreign Direct Investments in Georgia, 2008 P8
Special Discounts for OneCard
Holders P9
www.wealthmanagement.ge Issue 5 May 2009 2

Bank of Georgia Wealth Management
BANK OF GEORGIA SIGNS INTERNATIONAL SWAPS AND DERIVATIVES
ASSOCIATION MASTER AGREEMENT WITH INTERNATIONAL FINANCE
CORPORATION
Bank of Georgia signed International Swaps and to fix interest rates on our long term borrowings at
Derivatives Association (ISDA) Master Agreement today`s favorable levels\", said Nicholas Enukidze,
(the \"Agreement\") with International Finance Chairman of the Supervisory Board of Bank of Georgia.
Corporation (\"IFC\"). The Agreement will help the \"Proactive risk management such as this will help protect
Bank engage for the first time in interest rate swap our future profits.”
transactions.
Snezana Stoiljkovic, IFC Director for Central and
The Agreement provides Bank of Georgia an Eastern Europe, said: \"Prudent risk management is
additional risk-management tool, allowing it to critical for banks to protect themselves during the current
hedge U.S. - dollar interest-rate risk on the Bank`s financial crisis. This agreement with Bank of Georgia
outstanding long-term borrowings. The ISDA Master shows the high-value-added services that IFC can
Agreement is the international legal documentation provide to its clients.\" The agreement is part of IFC`s
for the execution of risk-management transactions broader strategy to improve risk management capacity
within its client banks and introduce innovative products
\"Signing of this agreement with IFC will give Bank of to its clients in Central and Eastern Europe.
Georgia a powerful additional risk management tool
www.wealthmanagement.ge Issue 5 May 2009 3

Bank of Georgia Wealth Management
JSC BANK OF GEORGIA REPORTS Q1 2009 NET INCOME OF GEL 5.1
MILLION
Bank of Georgia published its Q1 2009 consolidated Net loan loss provisions of GEL 35.0 million booked by
results (IFRS-based, derived from management the Bank in Q1 2009 were mostly attributed to net loan
accounts), reporting a Q1 2009 Net Income of GEL loss provisions of GEL 9.4 million booked by BG Bank,
5.1 million. reflecting challenging economic environment in Ukraine,
and the net loan provisions of the Bank`s retail loan book
In Q1 2009 the Bank`s total Operating Income in Georgia of GEL 22.8 million. The effect of the armed
increased by 4.4% y-o-y to GEL 84.6 million, (down conflict between Georgia and Russia in August 2008 (the
2.2% q-o-q), driven by 11.2% y-o-y growth of Net “Conflict”) and the slowdown of the economies in the
Interest Income to GEL 55.4 million (down 1.8% q-o- Bank`s target markets resulted in the increase of NPLs to
q) and 6.5% y-o-y decrease of Net Non-Interest
GEL 104.6 million, representing 5.1% of the consolidated
Income to GEL 29.3 million (down 3.0% q-o-q). The
gross loans as at the 31 March 2009, up from 2.1% in
main reason for the q-o-q decline of Net Non-Interest
2008. With NPL coverage ratio at 129.3%, the Bank
Income was a 41.1% q-o-q decrease of Net Foreign
remains well provisioned to absorb further deterioration
Currency Related Income to GEL 8.8 million in Q1
of the loan book quality. Loan loss reserves reached GEL
2009, which was caused by a lower volatility of
135.2 million or 6.6% of gross loan book in Q1 2009 as
Ukrainian Hryvna and Georgian Lari during Q1 2009
compared to 5.0% in Q4 2008 and 2.1% in Q1 2008.
as compared to the volatility of these currencies in
Q4 2008. Net Income from Documentary Operations
The Bank`s Consolidated Total Assets stood at GEL 3.2
of GEL 2.2 million increased 57.5% q-o-q (up by
billion, down 2.2% from 31 December 2008 and up 1.2%
54.7% y-o-y) and Net Fee and Commission Income
increased by 46.7% q-o-q during the quarter (down from Q1 2008. The Bank`s Net Loans decreased by 8.1%
12.5% y-o-y), to GEL 8.9 million. Net Other Non- q-o-q (up 5.3% y-o-y) to GEL 1,912 million, reflecting the
Interest Income, consisting of Net Insurance Income, Bank`s cautious lending policy in light of challenging
Brokerage and Investment Banking Income, Asset economic environment in its target markets and the
Management Income and Other Income, stood at Bank`s conservative approach to liquidity. Throughout
GEL 9.4 million during Q1 2009, up 19.9% q-o-q and this quarter the Bank has witnessed a system-wide
up 44.5% y-o-y, driven largely by 85.8% y-o-y growth decline in deposit base in Georgia and Ukraine. The
of Net Insurance Income to GEL 3.0 million in Q1 Bank`s Client Deposits decreased by 5.0% q-o-q to GEL
2009. Net Interest Margin (NIM) for the quarter stood 1.1 billion as of 31 March 2009, as compared to a 11.0%
at 9.26%, a decrease of 89 basis points from Q4 decline of the total client deposits in Georgia and 5.0% in
2008 NIM and an increase of 33 basis points from Q1 Ukraine since year-end 2008.
2008.
Millions, unless otherwise noted Q1 2009 Growth y-o-y
Bank of Georgia (Consolidated, Unaudited, IFRS-based) US$ GEL
Total Operating Income (Revenue) 50.7 84.6 4%
Recurring Operating Costs 26.7 44.6 0%
Normalised Net Operating Income 24.0 40.0 9%
Net Non-Recurring Operating cost (0.1) (0.2) NMF
Net Provision Expenses 21.0 35.0 370%
Net Income/(Loss) 3.0 5.1 -84%
Total Assets 1,908.2 3,186.8 1%
Net Loans 1,144.7 1,911.6 5%
Total Deposits 710.1 1,185.9 -11%
Tier I Capital Adequacy Ratio (BIS) 22.25%
Total Capital Adequacy Ratio (BIS) 31.75%
Tier I Capital Adequacy Ratio (NBG) 16.40%
Total Capital Adequacy Ratio (NBG) 17.37%
www.wealthmanagement.ge Issue 5 May 2009 4

Bank of Georgia Wealth Management
JSC BANK OF GEORGIA REPORTS Q1 2009 NET INCOME OF GEL 5.1
MILLION - Continued
On 30 December 2008 the Bank signed agreements gross loans amounted to GEL 974.0 million, down by
for a US$200 million financing package from EBRD 7.3% q-o-q and up 23.4% y-o-y. Reserve for loan losses
and IFC (“EBRD/IFC Package”), which included at the end of Q1 2009 was up 4.6% q-o-q reaching GEL
senior loan, subordinated loan and convertible 102.7 million, with reserve on RB and WM loan losses
subordinated loan. In Q1 2009 the Bank drew down representing 56.3% of total Reserve for Loan Losses on a
all of US$ 200 million from the EBRD/IFC Package. standalone basis, up from 50.8% in Q4 2008. NPLs for
During Q1 2009 the Bank repaid US$ 165.5 million of the quarter stood at GEL 87.4 million, and represented
wholesale debt financing. This included US$65 4.7% of the total gross loan book, compared to the same
million loan facility arranged by Merrill Lynch and the ratio of 3.2% in Q4 2008. The growth of the Bank of
second tranche of the syndicated loan received by Georgia`s standalone NPLs was driven by the growth of
the Bank in August 2007 in the amount of US$43.5
non-performing RB and WM loans from GEL 22.7 million
million. In addition, the Bank repurchased Loan
in Q4 2008 to GEL 46.3 million in Q1 2009 as non-
Passthrough Notes issued in June 2008 and
performing CB loans declined from GEL 41.6 million in
maturing in June 2010 (puttable in June 2009) with
Q4 2008 to GEL 41.1 million in Q1 2009. With the Q1
the face value of US$57.0 million. The remaining
2009 NPL coverage ratio at 117.4%, the Bank remains
outstanding amount of Loan Passthrough Notes at
well positioned to absorb increases in the NPLs.
the end of Q1 2009 was US$83.0 million. In April
2009 the Bank repurchased additional Loan
In Q1 2009, the Bank`s client deposits in Georgia
Passthrough Notes with the face value of US$34
decreased by GEL 66.2 million to GEL 979.0 million,
million. As a result as the date of this press release,
down 6.3% compared to Q4 2008, when the growth in
the Bank needs to repay US$ 59.9 million of
deposits was largely driven by increased spending of the
international wholesale funding obligations in 2009
Georgian government in December 2008 and
and the total of US$ 76.4 million in 2010 and 2011.
devaluation of Lari in November 2008.
Consolidated Book Value per Share on 31 March
2009 stood at GEL 22.8, a decline from GEL 23.0 as Breakdown of Standalone Total Deposits by currency
of 31 December 2008, reflecting the decline of
BNB`s book value due to the translation loss as a Bank of Georgia, Stand-alone 31-Mar-09 31-Dec-08
result of devaluation of Belarusian Ruble against GEL million GEL FC Total GEL FC Total
RB+WM 66.2 307.6 373.7 89.1 329.4 418.5
Georgian Lari by 21.1%. In Q1 2009 the Bank`s Tier I 269.0
CB 66.2 339.0 605.2 380.8 649.8
Capital Adequacy Ratio was 22.2% and Total Capital Total 132.3 646.6 979.0 358.1 710.2 1,068.3
Adequacy Ratio was 31.7% by BIS standards.
JSC Bank of Georgia (Standalone) Bank of
As of 31 March 2009 Bank of Georgia on standalone
Georgia`s banking operations in Georgia, which are basis held market share of 34.3 %, 32.2 %, 27.8 %,
provided through JSC Bank of Georgia, reported Q1 40.8% and 38.0% by total assets, gross loans, deposits,
2009 standalone Net Income of GEL 11.3 million, as shareholders` equity and regulatory capital, respectively
compared to Net Income of GEL 28.8 in Q4 2008 in Georgia.
(down 60.8% q-o-q and down 55.5% y-o-y). The
decline in profitability was mostly due to Net “We are very pleased that our efforts to reorganize our
Provision Expense on a standalone basis of GEL business and optimize our cost structure in line with the
27.0 million (in Q4 2008 loan loss provision reversal challenging market environment have started to bear
was GEL 4.5 million), including loan loss provisions fruit. Due to the Bank`s focused cost optimization drive
of GEL 22.8 million on Georgian retail loan book and our Cost/Income ratio (normalized) was reduced to
the reversal of GEL 4.8 million provisions booked in approximately 53% on the consolidated and
Q4 2008 on the Georgian corporate loan book. The approximately 42% on a standalone basis. Our capital
Net Provision Expense growth for the quarter more position remains strong and despite increased loan loss
than offset the 2.5% q-o-q growth of NNOI, which provisioning for the past three quarters, our capacity to
reached GEL 40.8 million (up 6.8% y-o-y). absorb additional provisions without a need for additional
capital remains substantial. The Bank`s liquidity position
As of 31 March 2009 Bank of Georgia`s Total Assets is also solid and the Bank has sufficient liquidity to
on a standalone basis stood at GEL 2.9 billion, down comfortably cover all of its international wholesale
2.4% q-o-q, up 6.1% y-o-y. Net Loans declined 7.2% obligations in payable in the near future. This year we will
q-o-q to GEL 1.8 billion, up by 9.7% y-o-y, as a result continue to focus on operational efficiency, loan book
of the Bank`s conservative lending policy. Corporate quality, deposit gathering and liquidity management”,
Banking (CB) gross loans stood at GEL 860.6 commented Nicholas Enukidze, Chairman of the
million, down 6.3% q-o-q, and up 4.1% y-o-y, while Supervisory Board.
Retail Banking (RB) and Wealth Management (WM)
www.wealthmanagement.ge Issue 5 May 2009 5

Bank of Georgia Wealth Management
BANK OF GEORGIA ANNOUNCEMENT OF 2009 ANNUAL GENERAL
MEETING OF SHAREHOLDERS
Management Board of JSC Bank of Georgia The agenda and recommendations, as well as place,
announces that Annual General Meeting of date and time of Annual General Meeting of
Shareholders of JSC Bank of Georgia is intended to Shareholders will be announced later in accordance with
be held in June 2009. applicable laws and with the official announcement of
Annual General Meeting of Shareholders.
According to the resolution of the Supervisory Board
of Bank of Georgia record date is May 11, 2009, as of Management Board of the JSC Bank of Georgia
17:00.
www.wealthmanagement.ge Issue 5 May 2009 6

Bank of Georgia Wealth Management
THE NBG MAINTAINS ITS MAIN POLICY RATE (REFINANCING RATE)
UNCHANGED AT 6 PERCENT
Press-Release
13.05.2009
The Monetary Policy Committee (MPC) of the official exchange rate will be determined based on the
National Bank of Georgia (NBG) met on May 13, transactions recorded on the interbank foreign exchange
2009 and decided to maintain its main policy rate (the market. Implementing these measures will stimulate the
refinancing rate) unchanged at 6 percent. development of money market and reduce dollarization,
which will increase the effectiveness of the monetary
The annual rate of inflation in April has increased to transmission mechanism.
1.8 percent. The average annual inflation stands at
6.9 percent. The existing risks to inflation have not There are several positive signs of easing economic
changed noticeably since the Committee’s last downturn on the world market, which was reflected in the
meeting. Low level of inflation is likely to prevail price increases on several commodities among which
during 2009. are metals and oil products.
After the introduction of foreign exchange auctions The NBG will closely monitor current developments in the
the situation on the foreign exchange market economy and financial markets and will in due course act
stabilized and the need for the NBG interventions accordingly.
decreased, accordingly the NBG interventions fell
down. As for the future, the NBG plans to intervene The next meeting of the Monetary Policy Committee will
only through the foreign exchange auctions, and the take place on June 24, 2009.
www.wealthmanagement.ge Issue 5 May 2009 7

Bank of Georgia Wealth Management
FOREIGN DIRECT INVESTMENTS IN GEORGIA, 2008
Source: Ministry of Economy Daily Economic
Digest – May, 2009
According to the data of the State Statistics followed by Services with USD 283.2 million (18.1% of
Department, the amount of Foreign Direct total FDI), Real Estate – USD 277.8 million (17.8% of
Investments (FDI) in Georgia in 2008 amounted to total FDI), Industry – USD 207.3 million (13.3% of total
USD 1,564 million. United Arab Emirates is the FDI), Construction – USD 56.7 million (3.6% of total
Top ten investors in Georgia, 2008 USD, Million % of FDI
United Arab Emirates 306.6 19.6%
United States of America 167.9 10.7%
Turkey 164.5 10.5%
Virgin Islands (Brit.) 156.8 10%
Great Britain 148.9 9.5%
The Netherlands 135.9 8.7%
Switzerland 89.9 5.8%
Kazakhstan 65.9 4.2%
Austria 51.5 3.3%
Germany 40.6 2.6%
leading the country list with its USD 306.6 million FDI), Banking – USD 8.5 million (0.5% of total FDI),
investments in Georgia Agriculture – USD 7.8 million (0.5% of total FDI), and
other – USD 5 million (0.3% of total FDI).
Most of the funds out of the Foreign Direct
Investments were invested in transport and 81.6% of total Foreign Direct Investments were invested
communications with the total investments of USD in enterprises, amounting to USD 1,276.4 million. USD
422.7 million, 27% of the total FDI. Energy sector 279 million was invested in privatization (17.8% of total
attracted USD 294.9 million, 18.9% of total FDI, FDI) and USD 8.5 million in Banking sector (0.5% of total
FDI).
www.wealthmanagement.ge Issue 5 May 2009 8

Bank of Georgia Wealth Management
Special Discounts for OneCard Holders
10%
Discount
On Stationary Swimming Pools
Address: 176, Aghmashenebeli Ave.
Tel: 995 (32) 341219
995 (32) 356181
E-mail:info@noki.ge
Web: www.noki.ge
Birthday Party
June 26, 2009
Club24 is hosting its Birthday Party on June 26,
2009, 19:00 p.m.
In addition to superb meals and desserts, live music,
pleasant ambiance and socializing - you have a
possibility to win one of the prizes presented by
OneCard partner companies.
Please RSVP to your Private Banker or write to
info@club24.ge for receiving invitation to the Party.
Please keel your invitations with you at the party, so
that you do not miss the opportunity to win one of the
exciting prizes.
www.wealthmanagement.ge Issue 5 May 2009 9

Bank of Georgia Wealth Management
www.wealthmanagement.ge
9 Jorbenadze St. Tbilisi, 0103 Georgia
23 Chavchavadze Ave. Tbilisi, 0179 Georgia
Tel: 995 32 444 333
E-mail: wm@bog.ge
Please, send your comments/enquiries regarding the newsletter to wmnewsletter@bog.ge