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Private & Confidential. 1 Speaker Introduction Private & Confidential Speaker Lee Cashell, Founder, Chairman & CEO; Formerly a private equity fund manager.

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Presentation on theme: "Private & Confidential. 1 Speaker Introduction Private & Confidential Speaker Lee Cashell, Founder, Chairman & CEO; Formerly a private equity fund manager."— Presentation transcript:

1 Private & Confidential

2 1 Speaker Introduction

3 Private & Confidential Speaker Lee Cashell, Founder, Chairman & CEO; Formerly a private equity fund manager in Hong Kong for JAFCO Investment Asia, Mr. Cashell has held various positions within the investment banking industry in Asia as an economist, financial analyst and corporate finance manager. He founded APIP in ▪Hong Kong incorporated company operating within Mongolia’s property, cement and financial services industries ▪ Established in 2002 ▪ Profitable every year since inception ▪ The leading Mongolian real estate developer ▪ Award winning development and construction companies ▪ Over 40,000 sqm of completed developments ▪ Over 30,000 sqm currently under construction ▪ Mongolia’s largest and most valuable land bank ▪ Additional strategic businesses ▪ Largest real estate agency in Mongolia ▪ Only cement producing facility in the nation’s capital ▪ A leading SME finance company and equities brokerage ▪ World class management and governance structure ▪ Simple, transparent capital structure ▪ lFRS compliant and audited by a big 4 firm ▪ Majority owned and operated by founding partners ▪ Near term plans to list on an international exchange APIP is Ideally positioned to benefit from the high growth generated by Mongolia’s mining boom

4 Private & Confidential 2 Mongolia Overview

5 Private & Confidential Overview Mining Industry accounts (Oxford Business Group) ▪22% of GDP Output ▪85% of FDI ▪94% of Export Value Coal production estimated to reach 121 million metric tons by 2020 (Earnst & Young) Mongolia owns the world’s 12 th largest copper deposits (Earnst & Young) Mining is estimated to account for 10.3% of GDP Growth Rate Expected in 2014 (World Bank) Capital: Ulaanbaatar Population: 1.3 Million

6 Private & Confidential Snapshot Investment Positives 2013/14 Developments Stable democracy Strong macroeconomic fundamentals Large natural resource reserves Large FDI inflow No cross border capital control Low tax environment Repealed unattractive foreign investment law Scrapped controversial mineral law Implemented investment friendly law Oyu Tolgoi dispute working towards a resolution New securities law in place

7 Private & Confidential Oyu Tolgoi Mine Project Investment Law Changes 2012 Strategic Entities Foreign Investment Law (SEFIL):: ▪Potentially restrict foreign capital’s access to strategic sectors, including natural resources industry ▪Acquiring majority stake in those strategic sectors now need both government and parliamentary approvals New Investment Law replaced 2012’s SEFIL: ▪Foreign state-owned business entities are required to go through government approval only In 2009, Oyu Tolgoi Investment Agreement(OTIA) was made between Rio Tinto PLC and the Mongolian Government; 5% Mining Royalty was imposed on revenue In 2011, Mongolian parliamentary members demanded a full renegotiation of the OTIA; the royalty demand was increased from 5% to 20% In 2013, instead of full renegotiation, the Mongolian government demanded changes in 22 points of dispute concerning financial matters Regulations and FDI Source: World Bank

8 Private & Confidential Comparisons * 10% for Resident Companies and 40% for Non-resident Companies * Myanmar Statistics are from PrincewaterhouseCoopers GDP Growth Rate Forecast 2014° GDP Growth Average ° Doing Business Index 2013° Corruption Perception Index 2013* FDI % of GDP 2012° Tax regime† Sovereign Ratings %The Lower the Better%VAT % Capital Gains Tax % Moody’s Mongolia B1 China Aa3 India Baa3 Indonesia Baa3 Myanmar6.9N/A182157N/A *N/A Philippines JunBaa3 Vietnam May22B1 ° World Bank * Transparency International † Ernst & Young

9 Private & Confidential Fundamentals GDP per capita doubled between 2005 and 2012, and it is expected to double again over the next five years – the fastest growth rate in Asia Much of this growth has been powered by the huge copper/gold project at Oyu Tolgoi, owned by Rio Tinto and the Government of Mongolia Huge FDI inflows began to cool in 2012 with the introduction of a controversial foreign investment law In October 2013, Parliament passed a new investment law much more open to foreign investment Sources: World Bank Source: World Bank

10 Private & Confidential 3 Mongolian Real Estate Market

11 Private & Confidential 0% capital gains tax 2% stamp duty 10% income tax No capital controls Tax Legal and Tax Regulations Foreigners enjoy same property rights as nationals “Floating Freehold” Title MongoliaChinaKazakhstanHong KongRussia Income TaxFlat tax at 10% Variable tax from 3% to 45% 10% tax on employment income, 15% on capital gains, 20% on ‘other income’ Variable tax from 2% to 17% Flat tax at 30% Corporate Income Tax Variable tax ranging from 10% to 25% if incorporated in Mongolia, 20% otherwise Flat rate of 25% Flat rate of 20% Flat rate of 16.5% (15% for unincorporated businesses) Flat rate of 20% Property Ownership Tax Variable between 0.6% and 1.0% None Variable between 1% and 1.5% Standard rate of 15% of net assessable property value as determined by rent, minus 20%, maintenance allowance Up to 1.5% depending on cadastral value Value Added Tax10%17%12%None18% International Comparison Legal

12 Private & Confidential Rise in real estate market value Strong demand with supply side constraints Large increase in average disposable income Subsidized government mortgage policy Market Performance Asia Pacific Investment Partners Continued FDI inflow from the mining boom More than 53% of Ulaanbaatar’s citizens (approx. 750,000 people) live in the ‘ger’ districts Ulaanbaatar is expected to witness significant immigration from the 50% of Mongolians that live outside of the city Rising Demand... … Causing Prices to Increase

13 Private & Confidential Consistent GDP growth since 2001 Continuous construction despite setback in economy Bright future investor prospects with positive growth and increasing property prices Increase in construction despite slowing foreign direct investment (FDI) Construction serving real estate demand with increased immigration into Ulaanbaatar Predicted rise in FDI with newly passed investment law in Q Sources: Mongolian Properties; Invest Mongolia Domestic Growth and Foreign Investment Domestic Growth Foreign Investment

14 Private & Confidential International Comparison Ulaanbaatar Mongolia outperforms all other developed and emerging economies in terms of rental yield Average rental yields exceed 12% per annum Liquid rental market and undersupply means yields will remain high Yield Prices per square meter are lower than in many other developed and emerging economies Prime property prices start at around US$2600 Bright future investor prospects with positive growth and increasing property prices Price

15 Private & Confidential 4 Commercial Real Estate

16 Private & Confidential Commercial Real Estate Overview Source: Mongolian National Statistics Office Colliers, APIP Rise in purchasing power Arrival of more luxury retailers in Ulaanbaatar Growing retail occupancy rate, especially for high end brands such as Louis Vuitton Undervalued even compared to other frontier and emerging markets High retail space rental yields in prime locations Expected increase in asset value appreciation Domestic Growth Undervalued Retail Space

17 Private & Confidential APIP Survey More than 40 international brands have opened up exclusive franchises or wholly owned outlets in Ulaanbaatar to date, the majority in the past three years Strong mid-range brand performance suggests that Mongolian consumption patterns may be distinct from those in other rapidly growing Asian markets, including China YearRetail Brands Arriving in MongoliaNew Retail Space Occupied m2 2009Louis Vuitton, Ermenegildo Zegna Burberry, Emporio Armani, Marie Marie, Mont Blanc, Tommy Hilfiger, Pianegonda, United Colors of Benetton, L’Occitane, Victorinox, Hugo Boss 1, Tag Heuer, Guess, Ulysses Nardin Bang and Olufsen, Timberland, Hublot Mango, UGG, Versace, Pal Zileri, Vertu, KFC, Cinnabon, Round Table Pizza, Coffee Bean & Tea Leaf 1, Petit Bateau, Frey Wille, Coccinelle, Zara, Daminai, Vertu, Karen Miller N/A

18 Private & Confidential Leasing comparable data Comparable data ▪The retail landscape in Ulaanbaatar is both underdeveloped and fragmented ▪The main tenants by property are as follows: ▪Central Tower – Louis Vuitton, Burberry, L’Occitane, Hugo Boss ▪Blue Sky Hotel – Various small operators in an arcade format ▪Naran Mall – Esprit, Adidas, Swarovski, Tag Heuer, CK, Timberland The vast majority of retail stock is single floor, soviet-style shop fronts along the side of the road ▪There are relatively few international grade spaces in the city ▪Comparative data is limited and none of the global brokers maintain a permanent presence in Mongolia

19 Private & Confidential Commercial Real Estate Case Study Project completion: Summer 2014 Total plot size: 10,000 sqm Total GFA: 10,000 sqm Commercial Units: 8,000 sqm retail units, coffee shops, wine shops, bakery restaurants, Brauhaus Pub Office Space, wedding hall Residential units: 2,000 sqm 8 luxury penthouses Residential: $2600 Commercial: $2600 The Nukht Average Price (USD/sqm)

20 Private & Confidential Investment Opportunity: Nukht $ sqm property will cost US$325,000 Average Price (USD/sqm) Units Available Total of 28 units available 16 available units on the 1 st floor 12% Guaranteed Rental Yield for Two Years

21 Private & Confidential 5 Residential Real Estate

22 Private & Confidential Existing Demand Surpasses Market Supply ▪Quality Residential Space per capita is less than 10 sqm per person Large Increase in Demand is Expected ▪50% of Mongolians (1.5 Million) live outside Ulaanbaatar ▪Over 53% of Ulaanbaatar Citizens (750,000) still live in pre-modern housing Macroeconomic Growth will Drive Rise in Demand ▪Rise in real wages along with economic growth ▪Emergence of upper middle class fuels demand for luxury housing “Increased Market Appetite for High-end Housing” Overview

23 Private & Confidential APIP’s Current Projects Within Central Ulaanbaatar: 1.Olympic Residence 2.Park Place Residence 3.Oasis Residence APIP’s Completed Projects: 4.Mon House Residence 5.Park View Residence 6.Temple View Residence 7.Regency Residence Residential Real Estate Case Study

24 Private & Confidential Conveniently located near the State Circus, the Mon House features a lift, 24 hour security, and views of the southern mountain range 11 floors of residential apartment space with heated parking garage large enough to accommodate over 56 vehicles Children’s playground as well as close access to restaurants and cafes High quality construction – built to withstand a magnitude 8 earthquake 45% rental yield per annum 400% asset value appreciation since completion The Mon House Mon House: % Rental Yield 400% Appreciation

25 Private & Confidential Park View Residence features 31 luxurious, fully furnished rental apartments in the heart of Ulaanbaatar Spread across 7 floors of residential space Close proximity to Chinggis Khan square and many restaurants and cafes Three floors of mixed-use commercial space, including office space on the first floor 35% rental yield per annum 400% asset value appreciation since completion Park View Park View: % Rental Yield 400% Appreciation

26 Private & Confidential Units in this building have 2-3 bedrooms, 2 bathrooms, and an open plan kitchen Average unit size is 130 sqm Complex features 24 hour security, large windows, and cable/internet access Centrally located just South of Chinggis Khan Square, overlooking the monastery 18% rental yield per annum 100% asset value appreciation Temple View Temple View: % Rental Yield 100% Appreciation

27 Private & Confidential Houses 97 luxury apartments and penthouses spread across thirteen floors Three large office spaces on the second floor as well as restaurant and cafes on the first Conveniently located near the Blue Sky Tower, Central Tower, and Mongolia’s most high class retail spaces Only ten minutes from the train station and 20 from the national airport 24% rental yield per annum 300% capital appreciation since completion The Regency Residence Regency Residence: % Rental Yield 300% Appreciation

28 Private & Confidential Raised US$15 million in April 2013 on a pre-money valuation of US$140 million Successful Completion of US$12.6 million capital raising on June 3, 2014 The Nukht and the Olympic Residence are on track to be completed by summer 2014 and 2015, respectively Net Income Growth Company Growth

29 Private & Confidential IMPORTANT INFORMATION T HIS PRESENTATION HAS BEEN PREPARED AND DISTRIBUTED BY A SIA P ACIFIC I NVESTMENT P ARTNERS L IMITED (“APIP”) FOR GENERAL INFORMATION PURPOSES ONLY. N EITHER THIS PRESENTATION NOR THE INFORMATION CONTAINED HEREIN SHALL CONSTITUTE OR BE CONSTRUED AS AN OFFER OR SOLICITATION OF AN OFFER OR AN INVITATION TO SUBSCRIBE FOR TO BUY OR TO SELL ANY SECURITIES OR OTHER FINANCIAL INSTRUMENTS OR AS A PROSPECTUS, INFORMATION MEMORANDUM, ADVERTISEMENT OR FINANCIAL PROMOTION IN ANY JURISDICTION. THIS PRESENTATION SHALL NOT FORM THE BASIS FOR ANY INVESTMENT DECISION NOR SHALL IT BE CONSTRUED AS ANY REPRESENTATION, UNDERTAKING OR RECOMMENDATION BY APIP OR BY ANY OF ITS PROFESSIONAL ADVISERS, DIRECTORS, OFFICERS OR AGENTS. APIP DOES NOT REPRESENT OR WARRANT THAT THE INFORMATION CONTAINED IN THIS PRESENTATION IS COMPREHENSIVE, COMPLETE, CURRENT, VERIFIED OR ACCURATE AND ACCEPTS NO LIABILITY IN ANY JURISDICTION FOR LOSSES OR DAMAGES OF ANY KIND ( WHETHER DIRECT, INDIRECT, CONSEQUENTIAL OR OTHERWISE ) ARISING DIRECTLY OR INDIRECTLY FROM THE USE OF THIS PRESENTATION OR FROM ANY ACTIONS OR OMISSIONS IN RELIANCE ON THE INFORMATION CONTAINED HEREIN. T HIS PRESENTATION IS INTENDED FOR LIMITED CONFIDENTIAL DISTRIBUTION TO CERTAIN PROFESSIONAL, SOPHISTICATED, ACCREDITED AND / OR QUALIFIED INVESTORS, AS DEFINED IN THE JURISDICTIONS RELEVANT TO SUCH INVESTORS AND IN SUCH CIRCUMSTANCES AS MAY BE PERMITTED BY APPLICABLE LAW AND REGULATION IN EACH SUCH JURISDICTION. A NY RECIPIENT INTO WHOSE POSSESSION THIS PRESENTATION MAY COME MUST INFORM ITSELF ABOUT AND OBSERVE ANY RESTRICTIONS OF APPLICABLE LAW AND REGULATION. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING LIMITATION : HONG KONG : THIS PRESENTATION HAS NOT BEEN DELIVERED FOR REGISTRATION TO THE R EGISTRAR OF C OMPANIES IN H ONG K ONG, ITS CONTENTS HAVE NOT BEEN REVIEWED BY ANY REGULATORY AUTHORITY IN H ONG K ONG, NOR HAS THE C OMPANY BEEN AUTHORIZED BY THE H ONG K ONG S ECURITIES AND F UTURES C OMMISSION. A CCORDINGLY, THE PRESENTATION MAY NOT BE ISSUED, CIRCULATED OR DISTRIBUTED IN H ONG K ONG OTHER THAN (1) IN CIRCUMSTANCES WHICH DO NOT CONSTITUTE IT AS A “ PROSPECTUS ” AS DEFINED IN THE C OMPANIES O RDINANCE (C AP.32 OF THE L AWS OF H ONG K ONG ) AND WHICH DO NOT CONSTITUTE AN OFFER TO THE PUBLIC WITHIN THE MEANING OF THAT ORDINANCE, OR (2) TO PROFESSIONAL INVESTORS AS DEFINED IN THE S ECURITIES AND F UTURES O RDINANCE (C AP.571 OF THE L AWS OF H ONG K ONG ) AND THE S ECURITIES AND F UTURES (P ROFESSIONAL I NVESTOR ) R ULES (C AP. 571D OF THE L AWS OF H ONG K ONG ) MADE THEREUNDER. U. S. A.: T HE SECURITIES REFERRED TO IN THIS PRESENTATION HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. S ECURITIES A CT OF 1933, AS AMENDED ( THE "S ECURITIES A CT "), AND ACCORDINGLY MAY NOT BE OFFERED OR SOLD IN THE U NITED S TATES ABSENT REGISTRATION OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE S ECURITIES A CT AND IN ACCORDANCE WITH APPLICABLE U.S. STATE SECURITIES LAWS. APIP DOES NOT INTEND TO REGISTER THE OFFER AND SALE OF SUCH SECURITIES IN THE U NITED S TATES OR TO CONDUCT A PUBLIC OFFERING IN THE U NITED S TATES. T HIS PRESENTATION MAY NOT BE DISTRIBUTED ( A ) TO “U.S. PERSONS ” WITHIN THE MEANING OF R EGULATION S UNDER THE S ECURITIES A CT OR ( B ) TO PERSONS WHO ARE NOT “ ACCREDITED INVESTORS ” WITHIN THE MEANING OF R EGULATION D OF THE S ECURITIES A CT. E EA & UNITED KINGDOM : I N ANY EEA M EMBER S TATE THAT HAS IMPLEMENTED THE P ROSPECTUS D IRECTIVE, THIS PRESENTATION IS ONLY ADDRESSED TO AND IS ONLY DIRECTED AT QUALIFIED INVESTORS IN THAT M EMBER S TATE WITHIN THE MEANING OF THE P ROSPECTUS D IRECTIVE. I N THE U NITED K INGDOM, THIS PRESENTATION IS ONLY BEING DISTRIBUTED TO AND IS ONLY DIRECTED AT PERSONS THAT ARE ( A ) INVESTMENT PROFESSIONALS FALLING WITHIN A RTICLE 19(5) OF THE F INANCIAL S ERVICES AND M ARKETS A CT 2000 (F INANCIAL P ROMOTION ) O RDER 2005, AS AMENDED ( THE "O RDER ") OR ( B ) HIGH NET WORTH ENTITIES, AND OTHER PERSONS TO WHOM THIS PRESENTATION MAY LAWFULLY BE COMMUNICATED, FALLING WITHIN A RTICLE 49(2)( A ) TO ( D ) OF THE O RDER ( ALL SUCH PERSONS TOGETHER BEING REFERRED TO AS " RELEVANT PERSONS "). T HIS PRESENTATION MUST NOT BE ACTED ON OR RELIED ON BY PERSONS WHO ARE NOT RELEVANT PERSONS. APIP IS INCORPORATED IN H ONG K ONG AS A HOLDING COMPANY OF THE APIP GROUP OF COMPANIES INCORPORATED IN DIFFERENT JURISDICTIONS. I N VIEW OF THE NUMBER OF DIFFERENT JURISDICTIONS, THE LAWS OF WHICH MAY BE APPLICABLE TO PROSPECTIVE INVESTORS IN APIP, NO ATTEMPT IS MADE IN THIS PRESENTATION TO SUMMARIZE THE POSSIBLE LOCAL TAX CONSEQUENCES OF ANY ACQUISITION, HOLDING OR DISPOSAL OF ANY SECURITIES ISSUED BY APIP. PROSPECTIVE INVESTORS MUST CONSULT THEIR OWN PROFESSIONAL ADVISERS ON THE POSSIBLE TAX, EXCHANGE CONTROL OR OTHER CONSEQUENCES OF BUYING, HOLDING OR SELLING ANY SECURITIES ISSUED BY APIP OR ANY APIP GROUP COMPANIES UNDER APPLICABLE LAWS AND REGULATION. T HIS PRESENTATION CONTAINS FORWARD - LOOKING STATEMENTS WITH RESPECT TO FUTURE RESULTS, PERFORMANCE AND EVENTS. A LL STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL FACT ARE STATEMENTS THAT COULD BE CONSIDERED FORWARD - LOOKING STATEMENTS, AND SOME MAY BE IDENTIFIED BY THE USE OF WORDS SUCH AS " ANTICIPATE," " BELIEVE," " ESTIMATE," " EXPECT," " INTEND," " MAY," " PLAN," " PROJECT," " SHOULD " OR SIMILAR EXPRESSIONS. F ORWARD - LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE RESULTS, PERFORMANCE OR EVENTS, AND MANY FACTORS COULD CAUSE ACTUAL RESULTS, PERFORMANCE OR EVENTS TO BE MATERIALLY DIFFERENT FROM THOSE THAT MAY BE EXPRESSED OR IMPLIED BY SUCH FORWARD - LOOKING STATEMENTS, INCLUDING, AMONG OTHERS, CHANGES IN GENERAL ECONOMIC, POLITICAL AND BUSINESS CONDITIONS, CHANGES IN INVESTMENT CLIMATE, CHANGES IN CURRENCY EXCHANGE RATES AND INTEREST RATES, CHANGES IN BUSINESS STRATEGY AND VARIOUS OTHER FACTORS THAT MAY OR MAY NOT BE REFERRED TO IN THIS PRESENTATION. R ECIPIENTS MUST NOT PLACE UNDUE RELIANCE ON SUCH FORWARD - LOOKING STATEMENTS. APIP UNDERTAKES NO OBLIGATION, TO UPDATE OR REVISE THIS PRESENTATION, WHETHER AS A RESULT OF NEW INFORMATION, SUBSEQUENT EVENTS, ANTICIPATED OR UNANTICIPATED CIRCUMSTANCES OR OTHERWISE. T HE INFORMATION CONTAINED HEREIN MAY NOT BE REPRODUCED, REDISTRIBUTED OR PUBLISHED, IN WHOLE OR IN PART, FOR ANY PURPOSE WHATSOEVER WITHOUT THE WRITTEN PERMISSION OF APIP IN EACH INSTANCE. C OPYRIGHT © 2013 A SIA P ACIFIC I NVESTMENT P ARTNERS L IMITED. A LL RIGHTS RESERVED. Disclaimer

30 Private & Confidential United Kingdom Asia Pacific Investment Partners 47 Charles Street Mayfair, London W1J 5EL Mongolia Asia Pacific Investment Partners Regency Residence 16 Olympic Street Ulaanbaatar, Mongolia Hong Kong Asia Pacific Investment Partners Unit 301, 3/F Winsome House, 73 Wyndham Street, Central, Hong Kong Contact Information Lee M. Cashell, Chief Executive Officer Gema Gerelsaikhan Sales & Marketing Manager


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