Mongolian Capital MarketsMongolian Capital Marketsg pg pDayanbilguun Danzan, CEO, BDSecFebruary 17th, 2011

1

Highlights30,000.00 60% up in the first

month of 2011Key Points:-Top 20 Index 31201.19 points-Total Stock Mkt Cap 3.3 billion SGDD il A T 256k SGD

g g

20,000.00

25,000.00

Historic transactions were made

-Daily Average Turnover 256k SGD-# of Listed Companies 336-# of Brokerage Companies 46

Market up 447%

10 000 00

15,000.00

144.2 million MNT worth of securities

800 mio MNTMarket down 63.9%

5,000.00

10,000.00 securities

1.2 billion MNT worth ofCorporate Bonds

2008

2011 онThe historic market

capitalization

-2001

First Corporate Bond

1991 Privatization

1996First Government

Bond 2007

The Bull Market

The Bear Market

2010Capital Market

2005First IPO

/Hotel Mongolia/

1995Securities Secondary

Market

Capital Market Reform

1 SGD = 979.73 MNT

StructureMongolia Stock Exchange• Founded: 1991

Listed companies by sectors

• Main activity: Securities trading• Ownership: Mongolian Government• Trading Hours: 11:00AM – 12:30PM• Available products: Stock, Bond, Gov’t Bond

17%

19%

26%

28% Mining

Manufacturing

Agriculture

Financial Regulatory Committee• Founded: 2006• Main activity: Regulatory, supervisory• Directorship: 9 members appointed by the parliament• Responsibility: Issuance of new securities, special licenses

20%26%

Construction

Trade and service

Top companies by market cap

Central Depository and Clearing House• Founded: 2004• Main activity: Securities depository, clearing, settlement• Ownership: Mongolian government

Securities Clearing House and Central Depository

p y , p

Name Industry Mkt Cap

Baganuur Coal 744.6 mio SGD

Tavan Tolgoi Coal 543 mio SGD

• Settlement system : Delivery Vs. Payment• Settlement period: T+0

• Number of companies: 46

Intermediary Companies

Shivee Ovoo Coal 471.1 mio SGD

APU Beverage 256.9 mio SGD

Sharyn Gol Coal 176.8 mio SGD• Main activities: Brokerage, underwriting, advisory

Telecom Mongolia Telecom 102.6 mio SGD

1 SGD = 979.73 MNT

Statistics

• Total stock market capitalization is about 3 3 billion SGD equal to 35% of

Stock Trading (by million SGD)

63.461 6 64.280.0about 3.3 billion SGD, equal to 35% of GDP

• Yearly stock trading volume reached 64 million SGD in 2010, up 171%

1.8 1.4 0.9 0.7 2.612.9

63.461.6

23.7

64.2

0.0

20.0

40.0

60.0

• Yearly government bond trading volume reached 30.5 million SGD in 2010, first time since 2008

• # of total accounts reached 450,077, up

Gov’t Bond Trading (by million SGD)

31.4

42.6 40.430.640.0

50.0

, , p2.2% in 2010

• MSE top 20 index closed at 31,201.19 points as of Feb 15, 2011, up 574.6% YTD

0.1

22.212.7

6.9 4.6 1.5 0.00.010.020.030.0

YTD• 2 secondary public offerings introduced

in 2010• Standard companies’ (28) market cap

t f 90 6% f th t t l k t

Corporate Bond (by million SGD)

1.2

3.0 3.1 2.8 2.7

1.0 0.9 0.51 0

2.0

3.0

4.0

accounts for 90.6% of the total market cap

4

0.0 0.00.0

1.0

1 SGD = 979.73 MNT

Expected Changesp g• London Stock Exchange arrival

– Agreement: December 2010– Master plan: April 2011

• Government support– Capital markets comprehensive policy – Privatization through the stock marketPrivatization through the stock market– Government bond issuance– 10% domestic listing requirement for strategic mineral deposits

• New Securities Market and Company Laws– Investment funds/fund management– Custodian services– Corporate governance issues

• Erdenes – Tavan TolgoiErdenes Tavan Tolgoi– Every citizen and every company to participate in the capital markets– Market capitalization and liquidity growth

• Capital Markets Development Association– Development of domestic professionals– Public education

51 SGD = 979.73 MNT

Privatization

Number of state-owned companies: 22 ( h ll d ti ll d)

Total market cap breakdown

22 (wholly and partially owned)Total market value of major state owned companies:

1.3 billion SGD

State

Private

Proposed privatization methods:Through the capital marketManagement contractThrough international tender

State owned companies by sector

Agriculture

Through international tender Public Private Partnership

Major companies to be privatized:Baganuur (coal)

1 2 13

91

81

Mining

Manufacturing

Trade & Service

Construction

AirlineShivee Ovoo (coal)Telecom Mongolia (communication)Darkhan Metallurgical Plant (steel)Khutul Cement (cement)

Airline

Energy

( )Mongolian Airline (airline)Mongol Post (post)

61 SGD = 979.73 MNT

Erdenes-Tavan Tolgoig

Total number of shares: 15 000 000 000 h

Amount of coal reserves by mio ton

15,000,000,000 sharesProposed allocation:

10% to citizens (free)10% to enterprises (par value)

6,000

2,0003,0004,0005,0006,0007,000

p (p )29% to international listing51% to government

Total amount of reserves:6 billi f ki l

512 564120 200

01,0002,000

Baganuur Shivee Ovoo

Sharyn Gol

Tavan Tolgoi

Erdenes Tavan Tolgoi

6 billion tons of coking coalEstimated market capitalization:

50 billion USDTotal population:

Chinese coal consumption (by billion ton)

2 2.19 2.382.62 2.72

2.963.2

2.53

3.5

Total population:2.7 million

Total number of account holders:450,077

1 1.111.42 1.61

2

00.51

1.52

71 SGD = 979.73 MNT

Government Bond

The last issue of government bond: 30 billi MNT (30 6 illi SGD)

1-year gov’t bond rates

12 75%30 billion MNT (30.6 million SGD) Maturity and annual interest:

1.5 years, 7.8%1 year, 7.5%

4.75%

7.8%

12.75%

y ,

List of gov’t projects suitable for long term gov’t bond financingName of project Amount Timing

0.14% 0.23% 0.27% 0.68% 0.97%

MNT historic performance against USD

Name of project Amount (mio USD)

Timing

Tavan Tolgoi Power Plant 400 2010-2015

New Rail Road 800 2010-20151400.00

1600.00

Water Supply of Gobi Region 540 2010-2015

Altanbulag-Ulaanbaatar-ZamiinUud Highway

1200 2010-2015

200.00

400.00

600.00

800.00

1000.00

1200.00

8

Citizens’ Housing 2100 2010-2015

1 SGD = 979.73 MNT

Potential Offerings in 2011

Coal Mining Gold Mining Direct Reduced Construction

g

gCompany

• Equity• Market cap – 234.6

million SGD

gCompany

• Equity• Necessary capital –

10.3 million SGD

Iron Company

• Equity• Necessary capital –

153.2 million SGD

Material Producer

• Equity• Necessary capital –

3.7 million SGD• Necessary capital –

20.4 million SGD • Timing – First half of

2011

• Timing - First half of 2011

• Timing – Second half of 2011

• Timing - First half of 2011

Logistics Company

Financial Company

Meat Processing Company

• Equity• Necessary capital – 2

million SGD• Timing - Timing - First

half of 2011

• Equity• Necessary capital –

20.4 million SGD• Timing - Second half of

2011

• Convertible Debt• Necessary capital –

30.6 million SGD• Timing - Timing - First

half of 2011

91 SGD = 979.73 MNT

About BDSec

• BDSec is the largest stock broker/investment bank in Mongolia

Top 3 brokers by equity transaction /2010/broker/investment bank in Mongolia

• Services to most of the stock market participants:

– 1/3rd of total domestic accounts 85.2 billion MNT

6.7 billion MNT

5.6 billion MNT

BDSecGlobal AssetEurasia

– 2/3rd of total foreign accounts– 28% of total corporate accounts

• Does more than a half of total trading volume:

MNT

Top 3 brokers by government bond – 68% of total equity transactions in 2010– 58% of total government bond transactions in

2010• Underwrote more than 60% of total new

transaction /2010/

4.5 billion MNT

BDSecUnderwrote more than 60% of total new issues on the MSE

– 8 IPOs out of 14 since 2005 – 4 SPOs out of 4 since 2008

4 bond offerings out of 12 since 2001

18 billion MNT

8 billion MNT

BDSecKhans InvestGendex

– 4 bond offerings out of 12 since 2001

101 SGD = 979.73 MNT

About BDSec

• Largest research database and local connection Total domestic accounts

27.4 %

72.6 %

BDSec

Other

connection– Provides investment advisory service to most

of the listed companies, conglomerates, banks and big private companies The research department covers 27 MSE

Total domestic accounts

Other– The research department covers 27 MSE-listed standard stocks, key markets (stock, bond, currency) and industries (resource, resource related industries, service, manufacturing, real estate)

43 %BDS

• Most consistent and experienced– Active since the establishment of the

securities secondary market or 1995 and market leader since 2000

Total Foreign accounts

57 %BDSec

Other– ONLY listed financial institution /The most

transparent public company of the year 2007 according to MSE/

– Biggest team in the market

111 SGD = 979.73 MNT

Shareholders

M j it f BDS h h ld i t ti l i tit ti l i t• Majority of BDSec shareholders are international-institutional investors• The board of directors (9 directors) includes 2 foreign and 2 independent directors

1.8%1.8%

1.4% 0.9%  0.8% 0.76%Founders

Alexander ZwahrGerman Individual

41.819.13% 

Firebird

Exe Group

Cube capital

28%

Praetorian Offshore

Transcend Capital

Frontier Market Select Fund

12

Falcon Family

1 SGD = 979.73 MNT

Stock Performance

• BDSec went public in 2006 with MNT 1 billion IPOp• The stock price grew by 30 times from MNT 100 to MNT 3000 until we issued

1 million additional shares or 10% of the company in 2008

3000

3500

4000

4500

12,000.00

14,000.00

16,000.00

18,000.00

500

1000

1500

2000

2500

2 000 00

4,000.00

6,000.00

8,000.00

10,000.00

0

500

0.00

2,000.00

MSE TOP 20 INDEX BDSEC SHARE PRICE

131 SGD = 979.73 MNT

BDS Coal Index

• BDS Coal Index includes coal mining companies that operate in Mongolia and listed on the Mongolia Stock ExchangeMongolia Stock Exchange• The index is updated twice in a year • The member companies are required to have a market capitalization of 100 million USD and 80% of its total assets located in Mongolian territory• BDS Coal Index is calculated since January 1st 2011BDS Coal Index is calculated since January 1st, 2011

35,000.0045,000.00

Member Companies BDS Coal Index

Company Ticker Market Cap (SGD)

20,000.00

25,000.00

30,000.00

30,000.00

35,000.00

40,000.00

Company name

Ticker Market Cap (SGD)

Baganuur BAN 894,439,040

10,000.00

15,000.00

15,000.00

20,000.00

25,000.00 /1

/201

1/1

/201

1/1

/201

1/1

/201

1/1

/201

1/1

/201

1/1

/201

11/

2011

1/20

111/

2011

1/20

111/

2011

1/20

111/

2011

1/20

111/

2011

1/20

111/

2011

1/20

111/

2011

/2/2

011

/2/2

011

/3/2

011

/4/2

011

/2/2

011

/2/2

011

/2/2

011

/2/2

011

Tavan Tolgoi TTL 679, 658,078

Shivee Ovoo SHV 543,582,274

S G S G

141 SGD = 979.73 MNT

4/ 5/ 6/ 7/ 10/

11/

12/

13/0

14/0

17/0

18/0

19/0

20/0

21/0

24/0

25/0

26/0

27/0

28/0

31/0 1 / 2/ 2/ 2/ 7/ 8/ 9/ 10/

BDS Coal Index MSE Top 20 index

Sharyn Gol SHG 259,065,786

FYI: common questionsq

• Legal mattersC i l i 10%– Capital gain tax: 10%

– Tax on dividends: Free for individuals and 10% for legal entities No restriction on foreign investment– No restriction on foreign investment

– To purchase more that 33% of a company requires tender offer

• Market• Market– Trading hours: 11:00AM through 12:30PM (GMT+8)– Currency: MNT only

Regulator: FRC– Regulator: FRC– Settlement: T+0– Delivery Vs. Payment

P f di i d– Prefunding required

151 SGD = 979.73 MNT

Contact us:

BDSec Headquarter Tuv Province BranchZaluuchuud Avenue 27-18th Khoroo, Sukhbaatar DistrictUlaanbaatar, Mongolia Phone/Fax: 976-11313108

Suite 203, Government OfficeZuunmod City, Tuv ProvinceMongolia Phone: 976-99012845

Email: info@bdsec.mn

Dayanbilguun DanzanChief Executive Director

Email: branch1@bdsec.mn

Erdenet BranchMongolian People’s Party OfficeChief Executive Director

Email: bdsec@bdsec.mnPhone: 976-11321763

Munkhtulga Ganbold

Mongolian People s Party Office, Bayanundur SumOrkhon Province, Mongolia Phone: 976-99072846Email: branch2@bdsec mnMunkhtulga Ganbold

Institutional ClientsEmail: mganbold@bdsec.mnPhone 976-11323411

Email: branch2@bdsec.mn

161 SGD = 979.73 MNT