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JSC Bank of Georgia (BGEO)

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Wednesday 10 October, 2007

JSC Bank of Georgia

Acquisition

Bank of Georgia
                  

 JSC Bank Of Georgia Announces The Acquisition Of Universal Bank For Development
                                  & Partnership

Bank of Georgia (LSE: BGEO, GSE: GEB), the leading Georgian universal bank,
announced today that it has successfully completed the acquisition of a 98.77%
equity interest in Universal Bank of Development & Partnership ('UBDP'), a
mid-sized bank in Ukraine. The completion of the transaction followed the
approval of the National Bank of Ukraine as announced in August 2007, allowing
Bank of Georgia to increase its stake up to 100% since the acquisition of a
9.92% equity interest in UBDP in January 2007. The aggregate consideration paid
for the 98.77% equity interest comprised US$81.7 million, which translates into
a P/BV (2006A) of 2.15x, based on UBDP's 2006 Audited IFRS financial results.
Galt & Taggart Securities acted as Bank of Georgia's sole financial advisor in
connection with this transaction.

As of 30 June 2007, UBDP held market shares of approximately 0.22% by total
assets, 0.25% by gross loans, 0.21% by total deposits and 0.31% by shareholders'
equity, based on the National Bank of Ukraine data. UBDP, which is headquartered
in Kiev, currently serves approximately 20,000 retail and 2,500 corporate
clients through its 39 branches located in five oblasts of Ukraine, of which 14
operate in Kiev. UBDP is an associate member of VISA international. The bank has
a network of 31 ATMs.

Selected Financial Indicators:

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*T
UBDP Overview                              YE 2006 (IFRS, Audited)   1H 2007 (IFRS based, Unaudited)
US$ '000, unless otherwise noted
Assets                                     196,830                   208,508
Loans                                      143,650                   158,520
Total Deposits                             148,738                   154,984
Equity                                     38,547                    41,439
Net Income                                 8,522                     4,073
ROA*                                       4.3%                      3.9%
ROE*                                       22.1%                     19.7%

                                           YE 2006                   30 September 2007
Branches                                   32                        39
Employees                                  710                       750
Retail Clients                             15,000+                   20,000+
Corporate & SME Clients                    2,000+                    2,500+
*T

*Annualised for 1H 2007

'I am delighted that we have successfully completed this milestone cross-border
transaction. Given that, in addition to UBDP, we have a large and successful
broker-dealer subsidiary in Ukraine, this country has genuinely become our
second home market. UBDP has all the basic building blocks to turn into a
success story, assuming we execute well. In some ways, UBDP reminds us of Bank
of Georgia circa October 2004, when our management team commenced its
turnaround; Bank of Georgia had assets of US$158 million back then, compared to
UBDP's US$209 million, had just 54 branches (compared to UBDP's 39) serving
60,875 retail clients, less than 40,000 cards in issuance and 17 ATMs. While
skeptics may say that the Ukrainian market is highly competitive, let me point
out that it is also very fragmented, with top ten banks accounting for just 52%
of total banking sector assets, with the rest of the sector comprising over 160
small and medium-sized banks. Those who have followed closely Bank of Georgia's
progress will agree, I believe, that, we are well positioned competitively
vis-à-vis our Ukrainian peer group. It is also important to note that in Ukraine
we aspire to up to 1% in terms of market share, so we are entering this market
with highly realistic expectations. We intend to emphasise retail banking (but
will abstain from point-of-sale consumer lending) and SME coverage, tightly
integrating Galt & Taggart's platform with that of UBDP to offer an end-to-end
service proposition to Ukrainian growth companies. We will also seek to build a
private banking and asset management presence in Ukraine. We intend to enhance
UBDP's management team by seconding Sulkhan Gvalia, deputy CEO and Chief Risk
Officer to Kiev to spearhead the crucial initial phases of the integration. UBDP
will continue to operate as a standalone bank, owned and controlled by Bank of
Georgia, so no 'heavy lifting' in terms of cross-border integration of the back
office operations is intended. Dmytro Perepolkin, Group COO in Ukraine, Deborah
Fairlamb, Group Head of Wealth Management, Sergiy Lesyk, Global Head of Equities
and Dmitry Kasatkin, Global Head of Investment Banking - all of whom are
Kiev-based - will contribute significantly to the integration process,
ultimately overseen by Nicholas Enukidze, Vice Chairman. We have been pleased to
find dedicated professionals at UBDP, who are excited at the opportunity to
build and enhance the bank's franchise as part of the Bank of Georgia group, and
look forward to working closely with them.

While the Ukrainian market is attractive per se, we are also mindful of our
market-leading status in Georgia and the friendly relationship between the two
countries, as this affords us additional opportunities. We look forward to
servicing Georgian diaspora in Kiev, Ukrainian visitors to Georgia and the
increasing trade flows between the two countries. The Georgian corporate sector,
which is growing rapidly, is seeking to deepen its presence in key export
markets, with Ukraine featuring prominently in this respect. In 1H 2007, Ukraine
accounted for 7% of Georgian exports and 10% of Georgian imports - we intend to
capitalise on our market-leading trade finance franchise to facilitate the trade
flows.

I would like to thank all my colleagues - old and new - as well as our advisors,
for their tireless work over the past year to make this transaction happen. We
were pleased with the constructive and principled approach of the National Bank
of Ukraine and look forward to building a relationship with our new regulator in
Ukraine. Last but not least, I would like to thank the Georgian embassy in
Ukraine and specifically Ambassador, H.E. Grigol Katamadze for his unrelenting
support.

As excited as we are about entering the Ukrainian market, we continue to look
for other attractive opportunities in our vicinity, to further expand our
footprint - carefully, without causing a management overstretch, and with our
acquisition discipline intact,' commented Lado Gurgenidze, Chairman of the
Supervisory Board.

About Bank of Georgia

Bank of Georgia, a leading universal Georgian bank with operations in Georgia
and Ukraine, is the largest bank by assets, loans, deposits and equity in
Georgia, with a 34% market share by total assets (all data according to the NBG
as of 31 August 2007). The major component of Galt & Taggart Index, the bank has
109 branches, over 595,000 retail and over 60,000 corporate current accounts as
at 30 September. The bank offers a full range of retail banking and corporate
and investment banking services to its customers across Georgia. The bank also
provides a wide range of corporate and retail insurance products through its
wholly-owned subsidiary, Aldagi BCI, as well as asset & wealth management
services.

About Universal Bank of Development & Partnership

Universal Bank of Development & Partnership is a mid-sized Ukrainian bank, with
an approximately 0.2% market share in total assets, 0.3% in gross loans, 0.2% in
client deposits and 0.3% in equity. As of 30 June, the bank had US$209 mln in
total assets. In 1H 2007 the bank earned net income of US$4 mln.

Bank of Georgia has, as of the date hereof, the following credit ratings:

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*T
Standard & Poor's          'B+/B'                         Stable
Moody's                    'B3/NP' (FC) & Ba1/P-3 (LC)    Stable
Fitch Ratings              'B+/B'                         Stable
*T

For further information, please visit www.bog.ge/ir or contact:

-0-
*T
Lado Gurgenidze               Nicholas Enukidze        Irakli Gilauri  Macca           Dmytro Perepolkin
                                                                       Ekizashvili
Chairman of the               Vice-Chairman of the     Chief           Head of         Group COO, Ukraine
Supervisory Board             Supervisory Board        Executive       Investor
                                                       Officer         Relations
+995 32 444 103               +995 32 444 800          +995 32 444 109 +995 32 444 256 +38 096 548 05 17
lgurgenidze@bog.ge            nicholas.enukidze@bog.ge igilauri@bog.ge ir@bog.ge       perepolkin@ubdp.com.ua
*T

This news report is presented for general informational purposes only and should
not be construed as an offer to sell or the solicitation of an offer to buy any
securities. Certain statements in this news report are forward-looking
statements and, as such, are based on the management's current expectations and
are subject to uncertainty and changes in circumstances.