Mr O. OrkhonFirst Deputy CEO

August, 2011

Hong Kong

Mongolian Financial Services IndustryCoaltrans Mongolia

CHINGGIS BONDIMPACT AND SIGNIFICANCE

Randolph S. KoppaPresident,

Trade and Development Bank of Mongolia June 19, 2013

OUTLINE

• Background

• Purpose

• Update

• Impact on economy

• Market dynamics

CHINGGIS BOND PARTICULARS

• Amount: USD 1.5 billion; 0.5 in five year notes with a coupon of 4.125%; 1.0 in ten year notes with a coupon of 5.125%

• 144a/Reg S issue under a USD 5 billion GMTN

• Ten times oversubscribed

• Sovereign Deal of the year: Finance Asia

• Disbursed December 5, 2012

OTHER BOND ACTIVITY IN 2012

• March: DBM USD 580 million 5 yr at 5.75%

• March: MMC USD 600 3 yr at 8.75%

• September: TDB 300 million at 8.5% coupon (yield 8.625%)

In total, USD 3 billion of debt markets issuing from Mongolia in 2012!

PREMISES OF THE BOND

• Use of proceeds mainly for infrastructure

• Equity portion of large projects such as rail

• Expect to leverage proceeds 2 to 3 times

• Not for social or human development needs

• Not for fiscal expenditures

• Sovereign debt to GDP ratio 50% maximum

• Subject to Fiscal Stability Law

-2% structural deficit

-Mineral related revenues based on 15 yr prices

UPDATE

• Most of Bond proceeds have been allotted;

approximately 75%%.

• By end of 2013 most of these allotments willhave been disbursed.

• Meanwhile, significant portion of fundsplaced on deposit with Mongolian banks.

TRANSPORTATION NETWORK

Source: MRTCUD

PRINCIPAL USES OF BOND PROCEEDS

• Road infrastructure

- Highways from UB to provincial capitals

- Streets and related infrastructure in UB

By themselves these investments will notgenerate direct revenue, but will supportincreased commerce and housingdevelopment.

Approximately one third of bond proceeds

RAILROAD

• USD 200 million for soft costs and groundworks in a USD 1,500 million rail project from TT to Chinese border and from TT to Sainshand and further north.

• Project feasibility study has been done

• Ground works under preparation

• Equity partners and related financing now in tender phase

• Rail lines projected to have good profitability

RAIL PROJECT’S STRATEGIC IMPORTANCE

• Existing road link from TT to GashaanSukhait is costly and limited in volume.

• Rail to border will reduce coal costs $10 -15per ton.

• Rail to Sainshand will support industrial parkdevelopment.

• Rail to Northeast China will supportshipments to other Chinese ports.

• Link with Trans Siberian offers link toRussian ports

POWER

• Approximately USD 50 millionallotted for the equity in a powerplant to serve TT.

• Total cost of plant approximatelyUSD 300 million.

• Necessary to support wash plantsand to replace more expensivealternative energy such as diesel.

HOUSING INFRASTRUCTURE

• Site development in UB to provide housing to transform ger housing to housing connected with heat, power, water and sewer.

• Site development for housing in new towns.

• Approximately 10% of bond proceeds earmarked

• Revenue can be generated by selling improved sites to apartment developers

УЛААНБАÀТА

Р

ДАРХАН

ДАЛАНЗАДГАД

DORNOGOB

I

ТӨ

В

DUNDGOB

I

МАНДАЛГО

ВЬ

SUKHBAATA

R

DORNOD

KHOVD

ӨЛГИ

Й

UMNUGOB

I

ZAVKH

AN

GOBI-ALTAI

ЧОЙР

МӨРӨ

Н

БАЯНХОНГО

Р

UVURKHANG

AI

BAYANKHONGO

R

ЭРДЭНЭ

Т

ЦЭЦЭРЛЭ

Г

АРВАЙХЭ

ЭР

ARKHANG

AI

KHUVSGU

LBAYAN-

ULGII

ULAANGOM

УЛИАСТА

Й

ХОВ

Д

UVS

САЙНШАНД

GOBISUMBER

ЧОЙБАЛСАН

БАРУУН-УРТ

ӨНДӨРХАА

Н

ЗУУНМО

Д

KHENTII

SELENG

E

АЛТА

Й

75 000 household

housing in Ulaanbaatar

city

10 000 household housing

in the Central region

5 000 household

housing in the Eastern

region

5 000 household

housing in the

western region

5 000 household

housing in the

Khangai region

Size •75,000 in Ulaanbaatar•25,000 in Provinces

Investment US$ 6.2 bn

Time frame 2010-2016

HOUSING PLAN

INDUSTRIAL INFRASTRUCTURE• Approximately 10% of

bond proceeds will beonlent to companiesoperating in key sectors ofMongolia, either for exportor for import substitutionand self sufficiency infood.

• Key industries include,cashmere, wool, textiles,dairy and vegetableproduction.

IMPACT ON ECONOMY

• Considerable immediate impact in secondhalf of 2013 as road, rail and housinginfrastructure works proceed.

• The completion of the rail link to the Chineseborder from TT will have a longer termimpact and is critical to establishingMongolian coking coal’s strategiccompetitive advantage.

• Road and housing infrastructure will haveintermediate term benefits.

MARKET DYNAMICS

• Mongolia’s sovereign bond has established abenchmark for pricing other Mongolianissuers.

• Current market price reflects perceiveddelays in implementing projects, conditionsin the coking coal market, investment lawuncertainties, and, recently broader marketissues relating to the Fed QE 3 and relatedinternational market conditions.

PROSPECTS FOR FURTHER ISSUES

• Government of Mongolia has a USD 5 billion GMTN Programme.

• Debt to GDP would enable further issues, although keeping the fiscal deficit with the proscribed levels is a challenge this year.

• Consequently, further issues this year are unlikely, but could occur next year to support future critical infrastructure development.

CONCLUSION• The Chinggis Bond was a big success achieving

unprecedented demand and tight pricing for a maidenissue.

• Although it has been perceived that proceeds disbursementhas been slow, active utilization is underway.

• The direct and indirect impact of the bond should bepositive.

• Recent economic conditions here and international debtmarket conditions have affected the bonds pricing in thesecondary market.

• Nevertheless, Mongolia could be poised to reenter themarket when local and international conditions are morefavorable.

Thank you for your attention!

Juulchin Street - 7

Baga Toiruu - 12

Ulaanbaatar, Mongolia

Tel: 976-11-31 99 43

Fax: 976-11-31 24 18

Email: corrbanking@tdbm.mn

http://www.tdbm.mn

http://www.bankcard.mn

http://www.mongolianbusinessguide.com