Altai Khangai

CEO

Mongolian Stock Exchange

Mongolian Stock Exchange:

Unlocking Mongolian Capital Market Growth Potential

1

Mongolian Stock Exchange and the London Stock Exchange Group

The Master Service Agreement

• The Master Services Agreement was signed on April, 7 2011 between the

State Property Committee (SPC), the Mongolian Stock Exchange (MSE) and

the London Stock Exchange for the purpose of implementing the MSE

Development Plan

• The Principle Objective of the Plan is to transform the MSE to a world class

Exchange Operator and Develop the Mongolian Capital Market as a whole

2

Mongolian Stock Exchange and the London Stock Exchange Group

The Master Service Agreement: Principal Objectives

• Establishment of an appropriate regulatory framework

• Implementation of new technology

• Development of a sustainable business model for the exchange

• Training of market participants and exchange employees

3

Phase1

Move to T+3 and international risk management

standardsSGF and investor protection

Q2

Q2

Development of new listing rules

Market education

Corporate governance & transparency

Phase2

Go live

02 July

Membership

rules

Remote trading via

internet

Mongolian Stock Exchange and the London Stock Exchange Group

The Master Service Agreement: High-level Project Milestones

Today

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• NEW RULES AND REGULATIONS

� Listing Rules Pending FRC approval

� Trading Rules Complete

� Membership Rules Complete

� Clearing & Settlement Rules Complete

• TRAINING

� The Academy of the London Stock Exchange has carried out a series of training programs

for regulators, market participants and other stakeholders

� The Exchange expects to launch a consultative process in the formulation of its rules

� In depth training on the new trading platform is expected to commence shortly

• A SUSTAINABLE BUSINESS MODEL FOR THE EXCHANGE

� Optimal organization structure, new roles and responsibilities

� Mid to long-term Business Development Plan adopted by the Board

Mongolian Stock Exchange and the London Stock Exchange Group

The Master Service Agreement: High-level Project Milestones

5

Mongolian Stock Exchange since the strategic partnership with the

London Stock Exchange Group: Key achievements

The Principle Objective of the Plan is to transform the MSE to a world class Exchange Operator and Develop the

Mongolian Capital Market as a whole;

The Master Services

Agreement was signed

between the State

Property Committee

(SPC), the Mongolian

Stock Exchange (MSE)

and the London Stock

Exchange Group for the

purpose of implementing

the MSE Development

Plan;

April, 7 2011

July, 2 2012

Revised market

rules and

regulations (app.10)

necessary for making

Mongolian market

highly productive,

well organized, open

and transparent.

Advanced level Capital

markets training

provided by London

Stock Exchange

Academy professionals

in Ulaanbaatar and

London.

June–September

2011

2011 - 2012

Launched the integrated

Millennium IT technology,

consisting of Millennium

Exchange, Millennium CSD,

Millennium Surveillance,

Millennium Trader programs,

produced by LSEG subsidiary

Millennium IT company.

The

System

Launch

2011 - 2012

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Millennium IT: Empowering the Exchange with state of art

technology solution

Millennium IT:

Surveillance

Millennium IT:

CSD

Millennium IT:

Exchange &

Trader

Online trading

T+3 settlement system

Trading of all types of

instruments /e.g. ETFs,

derivatives/

Market making

Order specifications /Fill

or Kill, iceberg/

Real-time calculation of

indices and market cap

many more …

Real-time market

surveillance

Millennium IT system operational in:

7

New Securities Market legal framework: Optimal climate for

investing in MSE

The new securities law is the gateway to promoting the principles of fair,

transparent and efficient market, creating a robust capital market and achieving

ambitious growth and development objectives in Mongolia .

Attractive listing Venue

1. Efficient procedure for

new listings

2. Dual listing opportunities

Attract foreign Investment

1. Provides legal framework for infrastructure

required to attract foreign investment.

a) Global custodian services

b) Investment fund framework

2. Higher free-float requirement -

a) Requirement to increase free-float over

time up to 30 percent

3. Investor protection –

a) Adequate disclosure requirement and

proper dissemination of information by

Issuers

b) Stringent licensing requirements for

regulated activities and professionals

working for regulated persons. This will

include the services of Broker/dealers,

underwriters custodians, investment

advisors.

c) “fit and proper test” for regulated persons

Improve market liquidity

1. New instruments such as

Depository Receipts both

Mongolian DR’s and Foreign

DR’s, Derivatives, asset

backed securities and other

instruments approved by

the commission.

2. Easier compliance

procedures for foreign PLCs

looking to list in MSE

secondary market

3. Provision for setting up of

pensions funds

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Mongolian Stock Exchange and FTSE Group: A New Frontier Market

• The Mongolian capital market has been placed on FTSE’s Watch List for possible promotion to

Frontier market status.

• FTSE assumes a major position in global financial market and enjoys an unparalleled reputation for

provision of indices and market data that many international investors an investment funds base

on to make informed investment decisions.

• The implementation of a world standard

trading and settlement system and market

infrastructure and increased transparency in

the market had a major influence in placing

Mongolia on a Watch list for possible promotion

to Frontier market status.

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0

10

20

30

40

50

0

500

1000

1500

2000

2500

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Market Capitalization Market Cap/ GDP

Capital Markets Performance

Recorded the highest market cap

in Feb 2011 in Mongolian capital

market history, reaching USD 2.5

billion.

Market cap to GDP is app. 20%

(32% at its peak)

Market cap in 2011: +57.8%

Daily turnover in 2011: +74.5%

TOP-20 index in 2011: +47%

Mongolia placed on FTSE Frontier

Market Watch-list

Oct 2012 2011 2010

Market Cap (in USD bln) 1.23 1.62 1.03

Equity Trading Value

(in USD mln)103 78 45

Equity Trading

Volume (bln shares)131.1 122.8 64.5

Daily share turnover

(in thousand USD)510.4 311.2 178.6

No. of Members 80 76 45

No. of Listed Companies 330 332 336

TOP 20 Index 17106.9 21687.57 14759.81

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Opportunity to grow with

the fastest growing market

Mongolia’s GDP in 2011:

+17%

International standards

offered domestically

(Millennium IT technology,

revised rules & regulations,

T+3 settlement system)

Mongolian Stock Exchange – Potential listing venue

-60

-30

0

30

60

S&P 500

NASDAQ

FTSE 100

DAX

CAC 40

Nikkei 225

Hang Seng

+861.28%

60

560

1060

1560

In p

erc

enta

ge

MSE TOP-20 Index in comparison with the global indexes

TOP-20

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Mongolian Stock Exchange: A Venue of choice for

Growth-oriented companies

0

40

80

120

160

Gainers Stable Fallers

Num

ber

of

com

panie

s

Main gainers Sector 1 year returnMarket cap, in mln.

USD

Mongol Shiltgeen Restaurant, Hotel services 42,9 % 7,2

UB Hotel Restaurant, Hotel services 31,9 % 17,5

Remicon Concrete manufacturer 20,5 % 10,2

Talkh chikher Food 20 % 8,8

Suu Food 14,3 % 19,8

Tavantolgoi Mining -31,6% 303,11

APU Food 9,3% 187,6 12

MSE looking to the future: The market of choice for small to

mid-cap companies looking to maximize their growth potential

• One of the smallest exchanges with the biggest potential

• The market of choice for companies and investors looking to participate in Mongolia

growth story

• Higher visibility of MSE companies and development of liquidity through new product

initiatives including:

� The promotion of equity research

� Development of new indices

� Hosting Company Investor days

• Driving growth through following initiatives:

� Mongolian top strategic deposits

� Foreign listed companies in mining sector with assets in Mongolia

� Leading domestic companies in mining, infrastructure and consumer sectors

� State-owned enterprises planned to be privatized

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Investor conferences

Past events:

IPO Mongolia conference: organized in Ulaanbaatar on 07 March 2012

and 300 investors and 20 potential listing companies participated.

Mongolia Capital Markets Day: co-organized with London Stock

Exchange in London on 30 April and 1 May, 2012, for 250 international

investors.

Mongolia London Business Forum: co-organized with Mongolia-British

Chamber of Commerce & Mongolian Embassy in the UK in London on 30

July 2012 for 200 investors and business representatives from Mongolia

and the United Kingdom.

Upcoming events:

Economic Dialogue & Invest Mongolia, co-organized with Consulate of

Mongolia to Hong Kong and Macau SARs in Hong Kong on 26 November

2012 (aim to making this free, annual event)

Mongolia Investment Congress & Clean Coal Asia Summit, co-

organized with INBC Global, in Shanghai on 10-12 December 2012

Increasing investor awareness while attracting more companies to be listed on MSE

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THANK YOU FOR YOUR ATTENTION!

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