Individual Account Strategy | High Yield | Georgia | May 2014

GEL/US$ 1.7700


Not a bank deposit or a regulated investment product | Not insured | May lose value
2/5/2014
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Strategy Details
Inception date 1/11/2013
Base currency US$, , or GEL
Total net assets ~GEL 1 million
Target annualised return (net of all fees & expenses) US$ 12.5%/GEL 17.5%
Maximum maturity of the underlying assets
1
5 years
Management fee (% of the NAV p.a.)
2
1.5%
Performance fee (% of the annualised net return above the Hurdle Rate)
3
10%
Hurdle rate (regardless of the Base Currency) 10%
Expenses (% of the NAV)
4
<0.25%
Minimum investment US$10,000
5

Maximum investment US$250,000
Frequency of valuation reports Monthly
Minimum holding period 180 days
Redemption notice 90 days
Redemption FX rate The NBG rate as of the settlement date
6


Portfolio Construction & Limits
Maximum permissible % of the NAV
Georgian issued instruments >80%
Georgian Treasury bills <25%
US$ denominated bank deposits & CDs <25%
GEL denominated bank deposits & CDs <50%
Promissory notes issued by non-bank lenders (GEL & US$) <75%
Loans to non-bank lenders (GEL & US$) <90%
Working capital credit facilities <75%
Managed P2P lending opportunities (GEL) <75%
Preferred shares <25%
Similar instruments in Azerbaijan & Armenia <20%
Other instruments <10%
Long only, no leverage, no derivatives, no currency hedging

Top Five Holdings As of 30 April 2014
Instrument Currency Yield
7
% of NAV
Managed P2P lending GEL 104% 17%
Structured working capital facility GEL 46% 13%
Loan to a non-bank lender US$ 15% 12%
Structured working capital facility GEL 37% 9%
Structured working capital facility GEL 37% 9%
Total 60%
# of instruments held 19

Investment Team


Relevant experience
Investment Committee
Lado Gurgenidze 19 years
Goga Melikidze 9 years
Tengiz Lashkhi 7 years
Victor Meskhi 5 years
Investment Manager
Vano Barbakadze 8 years

Vano Barbakadze served, from July 2008 through June 2013, as portfolio manager at Abbey Asset
Management, a leading asset management company in Georgia, managing Aldagi Pension Fund, the
largest pension fund in Georgia by AUM.


2H 08 2009 2010 2011 2012 1H 13
Gross Returns (GEL) -16.6% 81.6% 17.1% 17.2% 15.4% 7.8%
Net Returns (GEL) -18.1% 68.8% 13.2% 13.4% 11.7% 5.9%
Gross Returns (US$) -29.0% 79.6% 11.4% 24.4% 16.4% 8.1%
Net Returns (US$) -30.3% 66.9% 7.6% 20.3% 12.6% 6.2%
AUM
8
, US$ mln 1.0 2.2 2.8 4.1 4.9 5.5
Georgian CPI 1.0% 3.0% 11.2% 2.0% -1.4% 0.3%
JPM EMBI+ -9.1% 25.9% 11.8% 9.2% 18.0% -9.4%
MSCI FM 100 -55.2% 4.2% 21.1% -22.5% 4.1% 7.2%
S&P Frontier BMI -52.4% 9.1% 18.9% -18.7% 5.4% 7.6%
FTSE Frontier 50 -51.7% 2.2% 12.6% -27.1% 12.4% 6.4%
MSCI EM -47.8% 74.5% 16.4% -20.4% 15.1% -10.9%

Contact Details

Liberty Securities Ltd
The Liberty Tower, 74 I. Chavchavadze Ave., Tbilisi 0162 Georgia
www.libertysecurities.ge

Sales
Temur Iremashvili, Director Mobile: +995 591 158 877
temur.iremashvili@libertysecurities.ge
sales@libertysecurities.ge
Skype: temur_75

Investment Manager
Vano Barbakadze Mobile: +995 591 604 040
vano.barbakadze@libertysecurities.ge
Skype: vano_barbakadze




1. Except for preferred shares
2. Annual fees charged by Liberty Securities accrued daily and paid quarterly in arrears
3. Payable annually in arrears or upon withdrawal of funds by the investor, whichever occurs earlier, if
the annualised net rate of return for the year or on the funds withdrawn, as the case may be, exceeds
the annualised Hurdle Rate
4. Annual operating expenses other than the fees charged by Liberty Securities
5. Investments less than US$10,000 or equivalent in GEL, may be accepted by Liberty Securities in its
discretion, subject to the GEL 300 administration fee charged upon inception
6. Accessible at http://www.nbg.ge/index.php?m=582&lng=eng
7. Gross annualised yield
8. As at period end


Investment Objective & Philosophy
The Liberty Securities High Yield: Georgia Individual Account Strategy (the IAS) seeks to provide high total
return from current income through investment in a range of fixed-income assets situated principally in
Georgia, and mostly denominated in the local currency.
Why Georgian High Yield Strategy?
Georgia, a top reformer in the world in 2006-2011 according to the World Bank, has experienced a long period
of high economic growth rates in 2004-2012 and has evolved into an attractive low-tax jurisdiction with full
currency convertibility and attractive business climate (currently ranked by the World Bank as No. 8 in the
Ease of Doing Business global rankings and No. 22 in the WSJ-Heritage Foundation Economic Freedom Index).
Georgias economic openness, attractive location, and liberal visa and trade regime have contributed to
Georgias ongoing transformation into a regional tourism, trade and financial hub.
Due to the growing receipts from tourism and remittances, export growth and stable FDI, portfolio and donor
inflows, Georgia has been comfortably financing its current account deficit in the past decade. Its currency, the
Lari (GEL), has depreciated by less than 10% against the US$ since the beginning of 2009, and inflation is
currently at 3.4%, down from the historical high single-digits level.
The Georgian banking sector is among the most stable, dynamic and innovative in the FSU/SEE and has grown
by over 1,000% since 2003; nonetheless, the banking penetration rate remains low, with bank credit to GDP at
37% and bank credit to individuals to GDP at 17% at YE 2013.
The historically high interest rates on bank loans and deposits have decreased considerably in the past 12
months, with 12-month bank term deposits in US$ currently yielding no more than 5%-6% (compared with
8%-10% attainable in 2002-2012).
The current outstanding stock of private banking deposits in Georgia is estimated at US$500 mln, with at least
half of this amount contributed by non-resident clients. As these term deposits expire, it will be impossible to
reinvest the funds in bank term deposits at anywhere near the yield levels of 2010-2012.
The Georgian non-bank lending sector has experienced robust growth in the past five years, with the
aggregate loan book of non-bank lenders exceeding US$400 mln in 2013 (up from less than US$30 mln in
2006). The non-bank lending sector comprises over 70 microfinance companies licensed by the National Bank
of Georgia, and up to 20 other traditional and newly-established online lenders that do not require a
regulatory license. Given their lending rates that typically reach or even exceed 30% p.a. for secured loans and
60% for unsecured loans, these lenders attract funds at the rates reaching, and sometimes exceeding, 10%
p.a.

Why Liberty Securities?
Founded and managed by individuals at the forefront of the financial services sector development in Georgia
for over 10 years
Rigorous bottom-up driven investment screening process to identify the best reward-risk opportunities based
on the investment teams superior understanding of the banking and non-bank lending markets in Georgia
Investment discipline and risk controls ensuring the diversification insofar as possible within the set
boundaries of the investment strategy
Access to attractive opportunities, such as, for instance, certificates of deposit issued by Liberty Bank,
promissory notes and loans yielding over 10% in selected leading non-bank lenders, and access to the
managed P2P lending platform (eLoan.ge) owned and operated by eCapital, a Liberty Securities affiliate
Why the Individual Account Strategy?
Convenience and liquidity
Low investment minimums
Diversification



Return History NAV per notional IAS Investment Unit*

GEL US$ GEL US$

October 2013 100.0 59.9
November 2013 2.6% 1.4% 102.6 60.6
December 2013 3.7% 1.1% 106.4 61.3
January 2014 3.5% 0.9% 110.1 61.8
February 2014 1.9% 3.8% 112.3 64.2
March 2014 2.9% 3.0% 115.4 66.0
April 2014 2.7% 1.4% 118.6 66.9
Performance, since inception


GEL US$ EUR GBP
Cumulative 18.6% 11.9% 10.3% 6.7%
Annualised 37.4% 24.1% 20.8% 13.5%

Risk Metrics


GEL US$
Volatility 0.10% 0.14%
Sharpe Ratio** 0.8 0.3

NAV per notional IAS Investment Unit* (rebased)




*The notional IAS Investment Units are set out for illustrative purposes only for the ease of tracking and assessing the
historical performance of the Individual Account Strategy. The NAV per notional IAS Investment Unit is calculated on a daily
basis and equals the aggregate NAV of the Individual Account Strategy divided by the total number of the notional IAS
Investment Units
**The current yield (6.895%) of the 12-month Georgian Treasury Bills used as the risk-free rate
100
104
108
112
116
120
Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14
NAV per Unit, GEL NAV per Unit, US$


Individual Account Strategy | High Yield | Georgia | May 2014




Not a bank deposit or a regulated investment product | Not insured | May lose value
2/5/2014

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Individual Account Strategy Operational Details and Key Terms & Conditions

Base Currency
Investments into the IAS can be made in GEL, US$, EUR or GBP, with the valuation reports and redemptions also denominated in the Base Currency chosen by the investor.

Investment size:
Minimum Investment: US$10,000 or equivalent in GEL, EUR or GBP (investments less than US$10,000 or equivalent in other currencies, may be accepted by Liberty Securities in its discretion)
Maximum Investment: US$250,000 or equivalent in GEL, EUR or GBP

Redemptions and Cash Distributions
The Minimum Holding Period prior to the submission of the Redemption Notice is 180 days, following which the Redemption Notice may be submitted by the investor at any time.
Redemption Notice: 90 days.
Withdrawal of the funds by the investor will occur at the effective NAV per notional IAS Investment Unit as of the withdrawal date.
The Redemption Notice Template can be accessed at http://bit.ly/1b1Hv3t.
The Management Fee and Other Expenses
Management Fee: 1.50% p.a.
Accrued on a daily basis and paid quarterly in arrears to Liberty Securities, by way of debiting the Management Fee from the investors Asset Management Account.
If funds are contributed into the investors Asset Management Account or a withdrawal of funds is made before the end of the calendar quarter, the Management Fee in respect of such
funds will be calculated and accrued daily based on the number of calendar days during the calendar quarter in question during which such funds had been invested in the investors Asset
Management Account.
Performance Fee: 10% of the annualised net return above the annualised Hurdle Rate.
Payable annually in arrears or upon withdrawal of funds by the investor, whichever occurs earlier. The Performance Fee will be calculated and debited from the investors Asset
Management Account on the last day of the calendar year or on the date of the withdrawal, as the case may be. In case the last day of the calendar year is not a business day, the
Performance Fee shall be paid on the next business day.
Hurdle Rate: 10% p.a., regardless of the Base Currency
Audit, legal and all other expenses incurred in connection with the IAS will not exceed 0.25% p.a. and will be accrued on a daily basis and debited quarterly from the investors Asset Management
Account.
If funds are contributed or withdrawn by the investor during the calendar quarter, the expenses in respect of such contributed or withdrawn funds, as the case may be, will be calculated
and accrued on a daily basis based on the number of calendar days during which such funds had been invested in the investors Asset Management Account in the given quarter.

Valuation Reports
Valuation reports will be provided to the IAS investors monthly via email.

Taxation
The following discussion summarises certain Georgian tax considerations that may be relevant to the IAS Clients. This summary is limited to Georgian taxation issues, does not purport to be
comprehensive, does not constitute tax advice or opinion, and prospective investors are strongly encouraged to consult their tax advisors and to read carefully Article 10.1 of the Investment
Management Agreement prior to investing in the IAS. No assurance is made that the considerations summarised below may not be challenged by the Revenue Service of Georgia.
Tax on Interest & Dividends
Interest is defined in Article 8.19 of the Georgian Tax Code as payments related to obligations arising from debt, including, inter alia, loans, promissory notes, deposits and securities. Interest income
received from non-financial institutions is taxed at tax rate of 5%. This tax will be withheld at the source, and, accordingly, the net amount will be credited to the IAS investors Asset Management
Account. A fiscal report will be provided to the investors annually, certifying the amounts withheld, on a pro rata basis, from all relevant investments held during the year in the Master Account.
Liberty Securities believes that the investor will thus not be liable for any additional tax on interest received. Dividends are also subject to a 5% tax withheld at the source. As the relevant tax on
both interest and dividends will be withheld at the source, Liberty Securities believes that the investor in the IAS will face no tax filing requirements in Georgia. Interest and dividend income are
excluded from the taxable income of resident and non-resident legal entities and individuals.
Tax on the Payment of Principal
The principal amount received by resident and non-resident legal entities and individuals is not included in their taxable income and, therefore, is not subject to corporate profit or personal income
taxation in Georgia to the extent that the redemption or sale price at the maturity does not exceed the original purchase price (see Taxation of Capital Gains below).
Taxation of Capital Gains
There is no separate capital gains tax in Georgia. Realised capital gains on the sale (or exchange) of assets are included in the taxable income of resident and non-resident legal entities and
individuals. Accordingly, in the event that the IAS realises any capital gains from the disposal of any assets held in the Master Account on behalf of all IAS investors, the relevant tax will be withheld
at the source on behalf of each IAS investor by Liberty Securities, which believes that no tax filing requirements in Georgia will be triggered as a result (however, the circumstances of each investor
may vary). The applicable rates are as follows:
Resident individuals 20% Non-resident individuals 10%
Resident legal entities 15% Non-resident legal entities 10%

Account Opening and Investment Subscription (by invitation only, enquiries are welcome)
An investor fills out the Account Opening Application Form, signs an Asset Management Agreement and opens an Asset Management Account with Liberty Securities. These documents can be
accessed at http://bit.ly/1b1Hv3t.
The investor wires the funds into his/her Asset Management Account and instructs Liberty Securities that the funds are earmarked for the High Yield: Georgia Individual Account Strategy.
After receiving the investors funds, Liberty Securities places the cash in the Master Account, designated specifically for the IAS purposes.
Currently, the IAS is closed for new subscriptions.
Master Account and the Safekeeping of Investments
The Master Account is an account where all investors cash earmarked for the IAS is pooled, and into which all the cash distributions from the instruments in which the IAS is invested are made.
The IAS investors funds pooled into the Master Account may only be used for the IAS purposes and are completely segregated from all other client or proprietary accounts of Liberty Securities.
Liberty Securities will keep all investments made for the IAS in a separate Liberty Securities nominee account created for the purposes of safekeeping the IAS investments.
Liberty Securities will also open accounts with any counterparty for the purposes of the IAS to hold and safekeep any cash, securities and investments associated with the IAS separately from any
of its other accounts at such counterparties.




This document has been produced by Liberty Securities Ltd (Liberty Securities). Liberty Securities and/or persons connected with it may effect or may have effected a transaction or transactions for their own account in the
securities or instruments or strategies (collectively, the Instruments) referred to in this document or any related investment before the material is published to Liberty Securities clients, may have a position in the securities
and/or any related investment and may make a purchase and/or sale, or offer to make a purchase and/or sale, of the Instruments and/or any related investment from time to time, in the open market or otherwise, in each case
either as principal or as agent. Persons connected with Liberty Securities may provide or have provided corporate finance and other services to the issuer(s) of the Instruments and may seek to do so in the future. Accordingly,
information may be available to Liberty Securities and/or persons connected with it which is not reflected in this document. This document is not, and should not be construed as an offer to sell or solicitation of an offer to buy any
securities. The information and opinions contained in this document have been compiled or arrived at by Liberty Securities from sources believed to be reliable and in good faith, but no representation or warranty, express or
implied, is made as to their accuracy, completeness or correctness. All opinions and estimates contained in this document constitute Liberty Securities judgment as of the date hereof and are subject to change without notice. The
information contained in this document is published for the assistance of the intended recipients, but is not to be relied upon as authoritative or be the basis for an investment decision. Liberty Securities accepts no liability
whatsoever for any direct or consequential loss arising from any use of this document or its contents. This document may include estimates, projections and other forward-looking statements. Due to numerous factors, actual
events may differ substantially from those presented. Liberty Securities assumes no duty to update any such statements. Any holdings of a particular Instrument discussed herein are under periodic review by the investment team
and are subject to change at any time, without notice. Nothing contained herein should be considered a recommendation or advice to purchase or sell any security. This document may not be reproduced, distributed or published
for any purpose. It is not intended for and must not be distributed to private customers. Further information may be obtained and for this purpose the intended recipients hereof should contact Liberty Securities at the address
given above. This document is not to be distributed in the United States and the United Kingdom, and in any other jurisdiction where such distribution is unlawful. An investment in the Instruments has risks, including the risk of
losing some or all of the invested capital. Performance includes reinvestment of all distributions. Past performance is not indicative of future results. Prior to investing, a prospective investor should carefully consider the risks and
suitability of the Instruments based on his/her own investment objectives and financial position. Some of the Instruments described herein may not be a regulated financial instrument and, as such, may not require the publication
of a prospectus or similar document. An investor should carefully review all the relevant information and factors and consult with his/her financial, legal and tax advisors.