JSC Liberty Finance Participating Promissory Notes Series 3 | High Yield | Georgia | June 2015

GEORGIA

LIBERTY FINANCE

$/US$ 2.2483
Permissible Investments
Maximum permissible % of the NAV
Instruments issued by Georgian issuers
>80%
Georgian Treasury bills
<25%
US$, denominated bank deposits & CDs
<25%
$ denominated bank deposits & CDs
<50%
Promissory notes issued by non-bank lenders ($ & US$)
<75%
Loans to non-bank lenders (primarily $ & US$)
<90%
Working capital credit facilities
<75%
Managed P2P lending opportunities (primarily $)
<75%
Bank-issued subordinated debt and preferred shares
<25%
Similar instruments in Azerbaijan, Armenia, Ukraine, Kazakhstan & Central Asia
<20%
Other instruments
<10%
Long only, no leverage, no derivatives, no currency hedging
Top Ten Holdings
As of 30 June 2015
Instrument
Currency
Yield1
% of NAV
Loan to a non-bank lender
US$
15%
23%
Loan to a non-bank lender
US$
15%
12%
Loan to a non-bank lender
US$
16%
11%
Loan to a non-bank lender
US$
15%
7%
Managed P2P lending
$
58%
4%
$
Managed P2P lending
42%
4%
Loan to a non-bank lender
US$
14%
3%
Loan to a non-bank lender
US$
14%
3%
$
Structured working capital facility
20%
2%
$
Structured working capital facility
46%
1%
Total
96%
# of instruments held
19

LIBERTY FINANCE

HIGH YIELD

GEORGIA

LIBERTY FINANCE

HIGH YIELD

Performance History2
Last Month

YTD

0.99%

6.00%

As of 30 June 2015
Cumulative3
Annualised
40.04%
32.29%

US$

3.71%

4.83%

11.79%

Total Assets ($)

Base Interest paid and/or accrued to
PN Holders ($)

Cumulative3

9.80%

2014

Q2 2015

1,321,132

1,951,101

169,307

140,767

Investment Team & Track Record

The Team
Supervisory Board
Relevant experience
Tengiz Lashkhi, Chairman
9 years
Goga Melikidze
11 years
Temur Iremashvili
14 years
Director
Temur Iremashvili
14 years
Track Record
Since 1 November 2013, the individuals comprising the Supervisory Board of LF have been managing
the Georgia & The Caucasus High Yield Individual Account Strategy (HY IAS), which has an investment
mandate similar to that of LF, with the same list of the Permissible Investments and portfolio
construction principles, but has a significantly higher risk profile. Please see the HY IAS Factsheet at
http://bit.ly/1FK2uc3.
Georgia High Yield Individual Account Strategy (IAS)
Net Return
$
US$
Cumulative (since 1 November 2013)
56.80%
16.61%
Cumulative Annualised
34.15%
9.99%
Risk Metrics
Volatility4
Sharpe Ratio5

$
0.40%
0.15

US$
0.45%
0.01

Since June 2013, the individuals comprising the Supervisory Board of LF have been managing the
Managed Peer To Peer Lending Individual Account Strategy (MP2PL IAS), which invests in short term
unsecured consumer loans originated via eLoan.ge
Managed P2P Lending IAS Performance
Currency
Net Annualised IRR
eLoan
55.11%
$

Contact Details
Liberty Securities Ltd
The Liberty Tower, 74 I. Chavchavadze Ave., Tbilisi 0162 Georgia
www.libertysecurities.ge
Sales
Temur Iremashvili

Investment Manager
Tengiz Lashkhi

Mobile: +995 591 158 877

temur.iremashvili@libertysecurities.ge
sales@libertysecurities.ge
Skype: temur_75

Mobile: +995 591 709 280

tengiz.lashkhi@libertysecurities.ge
Skype: tengiz.lashkhi

1. Gross annualised yield

2. The performance is merely indicative and for illustrative purposes only; actual returns of the PN holders, measured at the
PN maturity date may differ from the Cumulative Annualised performance set out herein
3. Since 17 April 2014
4. Volatility represents the standard deviation of daily returns
5. The current yield (6.287%) of the 12-month Georgian Treasury Bills has been used as the risk-free rate
6. As at the period end

Investment Objective & Philosophy

JSC Liberty Finance (LF, unlisted, total assets > $ 1.8 mln) seeks to provide high total return from
current income by offering investors high-yield participating promissory notes, the proceeds of
which LF invests in a range of fixed-income assets, principally situated in Georgia and mostly
denominated in the local currency.
LF has commenced the issuance of $ and US$ denominated participating Promissory Notes
Series 3 (the PNs).
Key terms & conditions of the PNs are set out below:
Liberty Finance $ Denominated Participating Promissory Notes Series 3
Issuer
Instrument
Currency
Minimum Investment
Maximum Investment
Interest
Term*
Issue Size
Base Interest Rate*
Participating Interest**

JSC Liberty Finance

Participating Promissory Notes (Series 3)
$ (Georgian Lari)
$ 100 per PN
$ 0.5 mln
The sum of the Base Interest Rate and the Participating Interest
12 months
24 months
Up to $ 5 mln
Up to $ 5 mln
12.0% p.a.
14.0% p.a.
50% of any distributable net income accrued monthly on a pro rata basis of the $
equivalent (as of the relevant end-of-month date) aggregate principal of all the PNs
outstanding and payable together with principal within 30 calendar days from the
maturity date

Liberty Finance US$ Denominated Participating Promissory Notes Series 3

Issuer
Instrument
Currency
Minimum Investment
Maximum Investment
Interest
Term*
Issue Size
Base Interest Rate*
Participating Interest**

JSC Liberty Finance

Participating Promissory Notes (Series 3)
US$ (United States Dollar)
US$100 per PN
US$250,000
The sum of the Base Interest Rate and the Participating Interest
12 months
24 months
Up to US$5 mln
Up to US$5 mln
6% p.a.
8% p.a.
50% of any distributable net income accrued monthly on a pro rata basis of the $
equivalent (as of the relevant end-of-month date) aggregate principal of all the PNs
outstanding and payable together with principal within 30 calendar days from the
maturity date

Why Georgia High Yield?

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 lowtax jurisdiction with full currency convertibility and attractive business climate (currently ranked
by the World Bank as No. 15 in the Ease of Doing Business global rankings and ranked No. 22 in
the WSJ-Heritage Foundation Economic Freedom Index). Georgias economic growth in 2013 and
2014 amounted to 3.3% and 4.8% (preliminary), respectively.
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, although 2015 has proved to be challenging due to regional turmoil. Its
currency, the Lari ($), has depreciated by approximately 34% against the US$ since the beginning
of 2009, and inflation is currently at 4.5%
The Georgian banking sector is among the most stable, dynamic and innovative in the FSU/SEE
and has grown by over 1,500% since 2003, with total banking assets reaching US$10.4 bn as of 30
June 2015; nonetheless, the banking penetration rate remains low, with bank credit to GDP at
49% and bank credit to individuals to GDP at 23% at 31 December 2014.
The historically high interest rates on bank loans and deposits have decreased considerably in the
past 36 months, with 12-month bank term deposits in US$ currently yielding no more than 4%5% (compared with 8%-10% attainable in 2002-2012).
The Georgian non-bank lending sector has experienced robust growth in the past five years, with
the aggregate loan book of the non-bank lenders exceeding US$450 mln as of 31 December 2014
(up from less than US$30 mln in 2006). The non-bank lending sector comprises over 70
microfinance companies regulated by the National Bank of Georgia, several dozen unregulated
pawn shops and up to 20 newly-established unregulated online lenders that are currently
unregulated. Given their lending rates that typically exceed 25% p.a. for secured loans and 60%
for unsecured loans, these lenders attract funding at the rates reaching, and sometimes
exceeding, 10% p.a.
Why Liberty Finance?
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 risk-reward
opportunities based on the investment teams superior understanding of the banking and nonbank 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, instruments issued by Liberty Bank,
promissory notes and loans yielding over 10% issued by selected non-bank lenders, and access to
the managed P2P lending platform (eLoan.ge) owned and operated by eCapital, a Liberty
Securities affiliate
*The repayment of the principal and Base Interest payment will occur within 30 calendar days from the maturity date of the PNs
**20% of the annual distributable net income will be accrued monthly and paid out to the PN holders within 30 calendar days from the maturity
date of the PNs

Not a bank deposit or a regulated investment product | Not insured | May lose value
24/07/2015

JSC Liberty Finance Participating Promissory Notes Series 3 | High Yield | Georgia | June 2015
Key Terms & Conditions
The charter of JSC Liberty Finance can be accessed at http://bit.ly/1wm3Ulu

LIBERTY FINANCE

Capital Structure
65,000 Class A ordinary shares, each carrying two voting rights
40,000 Class B ordinary shares, each carrying one voting right
Other than the voting rights, all ordinary shares carry equal rights, including the economic participation rights, regardless of the class
Nominal Value $ 0.01 each, regardless of the class
Ownership structure
Liberty Securities Ltd
100.0% of Class A shares outstanding
Liberty Securities senior staff
100.0% of Class B shares outstanding

Annual/Extraordinary General Meeting (AGM/EGM)

All AGM decisions are passed with 50% + 1 simple majority of the votes of the ordinary shares present

Governance

LIBERTY FINANCE

HIGH YIELD

GEORGIA

Director:
Makes all decisions (investments/disposals) of up to the lower of (i) $ 250K or (ii) 10% of LFs assets as of the end of the previous fiscal quarter
Supervisory Board:
Decides on all investments/disposals exceeding in size the Directors thresholds and up to the lower of (i) $ 500,000 and (ii) 20% of LFs assets as of the end of the previous fiscal quarter
Issuance of the PNs
Decides on the borrowing of the Short Term Loans (as defined below)
The creation of the provisions in accordance with the international best practices as applicable and practicable in Georgia
Simple majority decisions on all issues
AGM/EGM:
Decides on all investments/disposals exceeding the lower of (i) $ 1 mln or (ii) 33% of LFs assets as of the end of the previous fiscal quarter
Issuance of any debt instruments other than the PNs and the Short Term Loans

Investment Strategy/Permissible Investments

Investment Strategy/Permissible Investments may be changed (as to the maximum permissible limits of any instruments/securities classes, as well as with regard to the geography) solely by the
AGM; such changes may not occur more frequently than once a year.

Fees & Expenses

Investors in the PNs pay no management or performance fees of any kind. Liberty Securities may charge investors a placement fee of up to 1% at its discretion.
Annual expenses of LF, with the exception of any interest cost on the Short Term Loans, will be capped at the greater of $ 3,600 and 0.1% of the aggregate principal amount of the PNs
outstanding as at the year-end. The shareholders of LF expect to subsidise the annual expenses in 2015 and thereafter until such time when the aggregate principal amount of the PNs
outstanding exceeds $ 3.6 mln equivalent.
LF reserves the right to borrow funds, with prior approval of the Supervisory Board, from third and/or related parties for up to 30 days (the Short Term Loans) with the maximum interest rate
of 24% p.a. solely for the liquidity management purposes associated with the principal and interest repayments of the PNs.

Taxation
A presentation accessible at the following link http://bit.ly/1F3pVhE summarises certain Georgian tax considerations that may be relevant to the asset management clients of Liberty Securities that
are investors in the various individual account strategies (IAS) and other products offered and/or managed by Liberty Securities or are holders of the promissory notes issued by Liberty Finance, a
majority-owned subsidiary of Liberty Securities, or by JSC EasyMoney, a micro finance lender affiliated with Liberty Securities. The 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. No assurance is made that the considerations
summarised may not be challenged by the Revenue Service of Georgia.

LIBERTY FINANCE

HIGH YIELD

GEORGIA

The Calculation Of The Participating Interest

The distributable net income shall be equal to the interest income received or accrued from the underlying investments, less the sum of (i) Base Interest expense paid or accrued, (ii) any
provisions for the impairment of the underlying assets approved by the Supervisory Board, (iii) accrued annual expenses set at the estimated annual cap, and (iv) accrued corporate profit tax of
LF. 50% of the distributable net income so calculated shall be accrued on a monthly basis for the benefit of the PN Series 3 holders.

Statements and Disclosures

The PNs are transferable to any third party by their holders, subject to the registration of the transfer by Liberty Securities.
The PNs are not regulated by the Law of Georgia on Securities, and, therefore, may not be listed or admitted to trading on the Georgian Stock Exchange or any other organised exchange.
There may be no assurance that the over-the-counter secondary market in the PNs will develop.
The Georgian Lari is freely convertible and there are no restrictions whatsoever on the transfer abroad of either the interest income received by the PN holder or the principal amount of the PN
once it is repaid by the issuer.
LF prepares its financial statements in $.
LF does not intend to be audited by a Big Four accounting firm, but intends to publish audited annual results. Holders of the PNs with the principal amount exceeding US$100,000 (or its $
equivalent) may inspect the books and records of LF at any time at their own cost and upon reasonable notice. Liberty Securities intends to update and publish this document monthly or more
frequently if deemed necessary, but is under no obligation to do so.

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 a principal or as an agent. Liberty Securities or persons connected with Liberty Securities may provide or have provided corporate finance, brokerage 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 a
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. Further information may be available 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 review all the relevant information and factors, consider the risks
and suitability of the Instruments based on his/her own investment objectives and financial position and consult with his/her financial, legal and tax advisors. 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.

Not a bank deposit or a regulated investment product | Not insured | May lose value
24/07/2015