Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1697752636516.pdf (Georgia)
Investment Policy Document Presentation Goga Melikidze, Chief Investment Officer (CIO) www.pensions.ge September 2020 Investment Policy Document Determines Long-term investment strategy in accordance with the investment mandate Investment Mandate!

Law of Georgia on Funded Pensions Investment Policy!
✓ Long-term strategy of pension assets ✓ Investment objectives ✓ Risk management ✓ Investment processes ✓ Benchmark Portfolio Save for You, Save for Future 1 Investment Mandate Determines 1 2 3 4 Long-term Investment Objectives Risk Management of the Investment Portfolio Investment Requirements Eligible Investable Assets Save for You, Save for Future 2 Investment Mandate: investment objectives & risk profile 1 2 Investment portfolio shall consider generating positive real return (considering inflation) with high confidence (a probability of 95% or more) Investment portfolios according to the risk profile Eligible Portfolios Low-risk Medium-risk High-risk Cash, Cash Equivalents & Deposits Foreign Currency Fixed Income Securities Equities Other Assets Save for You, Save for Future 3 Investment Mandate: Main Requirements 3 Credit Rating Requirements Investment Instrument Limits g n i t a R t i d e r C m u m n M i i All eligible investment instruments Holding of more than 10% of the securities outstanding of a single issuer and more than 20% of single securities offering is not allowed*.
• does not apply to Georgian government securities • Securities issued by IFIs with credit rating of АА- Resident issuers of Georgia Maximum 10% of pension assets Non-resident issuers of Georgia and financial institutions Maximum 15% of pension assets in securities issued by a single issuer (group) (5% after 6th of August 2023) Sovereign Credit Rating (BB) or One Notch Below (BB-) BBB-/Baa3 Georgian licensed commercial banks (current accounts, Certificates of Deposits) A-/A3 Non-resident banks (current accounts, Certificates of Deposits) *Does not apply to Cash, Cash Equivalents & Deposits Save for You, Save for Future 4 Investment Mandate: Eligible Investable Assets 4 Financial instruments denominated in Georgian national currency: Financial instruments denominated in Foreign currency: Deposits Certificates of Deposits Government Securities Debt securities issued by international Financial Institutions Corporate debt securities Securities listed on the Georgian Stock Exchange Funds (open-ended fund instruments registered in Georgia) Deposits Certificates of Deposits Government Securities Debt securities issued by international Financial Institutions Corporate debt securities shares of enterprises or global depository receipts, traded on a recognized stock exchanges Repo, allowed by the regulator Funds (open-ended fund instruments); Save for You, Save for Future 5 Investment Mandate: Investment Not Allowed 4 Investment of Pension Assets is NOT Allowed Assets, the alienation of which is not permitted by law Real estate or other tangible assets Derivative instruments (except using for hedging purposes) In any assets of affiliated persons In other financial instruments and/or non-financial instruments determined by the National Bank Save for You, Save for Future 6 Our Strategic Investment goals Positive Real Return!
Adequate Liquidity!

Custody of the Pension Assets!

Diversification of Investments!
With high confidence (a probability of 95 % or more), by the end of the investment horizon, getting a positive real return on the investment (taking into account inflation) The investment process must be planned in a way to ensure that the Investment Portfolio meets its immediate cash flow obligations even under plausible but severe market dislocations Save for You, Save for Future 7 Strategic Asset Allocation For Low-risk portfolio the following Benchmark Portfolio is used The Benchmark Portfolio has the following construction principles: Deposits/Certificates of Deposits in GEL Foreign Equities It includes only whole asset classes rather than individual securities 60% 15% 25% Risk and return attributes are consistent with the Investment Policy strategic objectives It can be accessed at low cost, so exposures are readily available It reflects the current development stage of Georgian capital markets Asset Classes: Georgian Treasuries GEL Deposits/CDs Foreign Equities Georgian Treasuries Weight Index 25% 5-year Government Treasury on a rolling basis Weighted average of the market interest rates published by the National Bank of Georgia MSCI World Index 60% 15% 1 2 3 4 The Benchmark Portfolio composition and the Strategic Asset Allocation will be periodically reviewed and are likely to change, if, as and when there are significant changes in: • Investment objectives, investment horizon or risk appetite • Investment constraints set by the law and NBG’s regulations • Assumptions about the long-term risk-return equilibrium • Available investment instruments on Georgian capital markets Save for You, Save for Future 8 Investment Portfolio Formation 1 Actual Portfolio 2 Benchmark Portfolio 3 Investment Portfolio Certificate of Deposits Term Deposits Deposits/CD in GEL Foreign equity 3% 60% 15% 72% 25% Current Accounts 25% Georgian treasuries • We are not required to replicate the Benchmark Portfolio • Deviation from the benchmark portfolio based on the active investment decisions only within the risk limits Risk
 Capacity Approved Risk Appetite Current Risk Profile Temporary deviation from approved risk appetite Save for You, Save for Future 9 Investment Decision Making Process • The investment analyst monitors the portfolio on a daily basis • The risk analyst monitors the various portfolio risks, risk limits and compliance on a daily basis.
• Operations Analyst performs daily reconciliations and comparisons with all external and internal sources and counterparties 1 Investment Idea Generation 5 Investment Monitoring • Investment Office analysis investment markets/different investment instruments regularly and seek for investment opportunities • Investment office always relies on credible sources of information • Investment office analysis actual investment portfolio on a daily basis 2 Investment Idea Analysis • The investment analyst and the risk analyst collect all the necessary data and information from credible investment sources • The investment analyst prepares an investment analysis reports • The risk analyst prepares compliance and other risk reports • Investment Idea is sent for execution • Investment office always ensures several execution prices (offer) • The Chief Risk Officer reviews the investment decision independently • The Operations Department of the Investment Office executes the settlement • Operations Analyst Provides Information about Settlement to Investment Office and Chief Risk Officer • The Operations Department of Investment Office ensures all the major reconciliation and reporting 4 Settlement 3 Investment Execution • The Investment Office ensures low transaction costs and best execution principles • Upon Execution of the Transaction, the Investment Analyst shall notify the Operations Department of the Investment Office of all the details of transaction.
• The Operations Department of the Investment Office ensures the independent verification of the transaction and its compliance with the provided documentation.
Save for You, Save for Future 10 Risk Management Responsibilities Supervisory Board Investment Board Non-Investment Risk Investment Risk Operational Risk Legal, Regulatory and Compliance Risk The probability of negative deviation from expected returns, which itself is the consequence of: Probability of loss resulting from the inadequate or failed internal processes, staff and systems or from external events Probability of loss resulting from: • non-compliance with regulatory and/or statutory responsibilities • adverse interpretation of and/or unenforceability of contractual provisions and/or • changes in the laws, regulations and internal policies; • Market risk • Inflation risk • Credit risk • Counterparty risk • Liquidity risk • Valuation risk Reputational Risk Probability of loss or underperformance resulting from damaged reputation or damaged credibility Save for You, Save for Future 11 Risk Management The organizational structure of the Pension Agency operates along the “three lines of defense” model 3rd line of defense 2nd line of defense 1st line of defense Internal Audit!
Risk Oversight!

Investment Risk Management!
Internal Audit Department Chief Risk Officer Investment Office National Bank of Georgia Specialized Depository - n o N Save for You, Save for Future 12 Investment Valuation In accordance with the order of the National Bank of Georgia Adhering to the principle of fair value In accordance with the International Financial Standards (IFRS) In accordance with the Chartered Financial Analyst (CFA) Institute’s portfolio valuation principles Based on the Global Investment Performance Standards (GIPS) Method Frequency Level 1 Quoted prices Daily i y t i d u q i L Level 2 a.
Internal pricing method b.
Credible source of pricing Monthly Level 3 Third-party pricing vendor Quarterly Valuation Frequency Save for You, Save for Future 13 Responsible Investment Pension Agency encourages responsible behavior in the entities underlying our investments Integration of ESG factors into the evaluation and management of both public and private investments, usually better conforms with the Pension Agency’s investment objectives Pension Agency believes that companies managing ESG factors effectively are more likely to create value over the long term Save for You, Save for Future 14 Current Investment Statistics Annual Effective Return Accrued Return Amount Annual Effective Return 11.1% GEL Yield Curve Refinancing Rate 8.50% 8% Annual Inflation 4.80% ₾100 million NAV NAV Allocation NAV Currency Allocation რეფინანსირების განაკვეთი ₾1 Billion CD, 71% Term Deposit, 3% Current Account, 26% 100% GEL Save for You, Save for Future 15 Thank You for Your Attention!
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