Georgia Healthcare Group PLC Annual Report 2018 Financial Statements Notes to Consolidated Financial Statements continued (Thousands of Georgian Lari unless otherwise stated) 37. Share-based compensation continued GHG senior executive plans continued Apart from the above awards to CEO and other executives, in December 2017 the Group also awarded 222,478 shares to middle management (February 2017: 250,202 shares) with continuous employment being the only vesting condition. Fair value of the shares awarded was GEL 12.54 per share as at grant date. As at 31 December 2018 no shares have been vested. Aggregate expense recognised in 2018 year, with regard to the above awards, comprised GEL 6,135 (2017: GEL 3,858). 31 December 31 December 2018 2017 Number of shares outstanding at 1 January 1,427,175 988,968 Granted during the year 826,529 816,641 Forfeited during the year (14,213) (26,901) Vested during the year (579,215) (351,533) Number of shares outstanding at 31 December 1,660,276 1,427,175 The weighted average remaining contractual life for the share awards outstanding as at 31 December 2018 was 1.89 years (2017: 2.86 years). The weighted average fair value of shares granted during the year was GEL 12.54 (2017: GEL 11.68). 38. Capital management Capital under management consists of share capital, additional paid-in capital, retained earnings including profit or loss of the current year, revaluation and other reserves, non-controlling interests, borrowings and debt securities issued. The Group has established the following capital management objectives, policies and approach to managing the risks that affect its capital position. The capital management objectives are as follows: • To maintain the required level of stability of the Group thereby providing a degree of security to the shareholders as well as insurance policyholders of the insurance arm. • To allocate capital efficiently and support the development of business by ensuring that returns on capital employed meet the requirements of its capital providers and of its shareholders. • To maintain financial strength to support new business growth and to satisfy the requirements of the shareholders, regulators as well as insurance policyholders for the insurance arm. Some operations of the Group are subject to local regulatory requirements in Georgia. These requirements impose certain restrictive provisions for the insurance arm, such as insurance capital adequacy and the minimum insurance liquidity requirement, to minimise the risk of default and insolvency and to meet unforeseen liabilities as they arise. During the year ended 31 December 2018 and year ended 31 December 2017 the Group complied with all regulatory requirements as well as insurance capital and insurance liquidity regulations, in full. The Group’s capital management policy for its insurance business is to hold the least required amount of regulatory capital and, also, to hold sufficient liquid assets to cover statutory requirements based on the directives of ISSSA. The regulations of ISSSA require that an insurance company must hold liquid assets of at least 75% of its unearned premium reserve, net of gross insurance premiums receivable, and 100% of its loss reserves. Assets eligible for inclusion in liquid assets are: cash and cash equivalents, amounts due from credit institutions, loans issued, investment property as well as other financial assets, as defined by ISSSA. The amount of such minimum liquid assets is called the “Statutory Reserve”. The Statutory Reserve requirement for Imedi L as at 31 December 2018 equals the minimal amount of liquid assets of GEL 7,503 (2017: GEL 5,890). The insurance company is fully compliant with the requirement by holding GEL 7,546 (2017: GEL 6,687) of total eligible liquid assets. Changes in liabilities arising from financing activities Debt securities Finance lease Borrowings issued liabilities Total 1 January 2018 267,010 93,493 8,834 369,337 Proceeds from borrowings 83,241 – – 83,241 Repayment of borrowings (61,818) – – (61,818) Interest accrual/(payment) 6,205 80 (118) 6,167 Foreign exchange (gain)/loss 2,179 – (40) 2,139 31 December 2018 296,817 93,573 8,676 399,066 164