The Mongolia Equity Opportunities Fund

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The Mongolia Equity Opportunities Fund
Khan Investment Management Limited (Khan) is a specialist Cayman Island Investment Management Group,
specifically created to structure and promote the Mongolia Equity Opportunities Fund (the Fund).
Khan has created and structured the Fund in accordance with what it believes are the most important
attributes for potential investors, including fund domicile, liquidity terms, portfolio diversification and
importantly, to provide access to the local Mongolian Stock Exchange and participate in the many local Initial
Public Offerings of private and state owned enterprises slated over the coming years.
Khan has also selected all third party services providers of the Fund, including importantly the Investment
Manager, Gordian Capital Singapore Private Limited, and the chief Investment Adviser Monet LLC.
About Mongolia
Perhaps most notably known as the birth place of Genghis Khan and the Mongol Empire, Mongolia is quickly
gaining strategic importance not seen since its 13
th
century heyday.
Land locked between Russia and China, Mongolia is roughly equivalent to the size of Western Europe. It is the
least densely populated country in the world with a population of just over 3 million over 40 per cent of
which live in the capital Ulaanbaatar.
Mongolia embraced political and
economic reforms in 1990 after
abandoning its 70-year-old Soviet-
style one-party state. Democracy
and privatisation were enshrined
in a new constitution, but the
collapse of the economy after the
withdrawal of Soviet support
triggered widespread poverty and
unemployment. Recently
however, the small economy has
begun to surge following
discoveries of significant mineral
and energy resources and rising
commodity prices.



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Mongolia has expanded political and financial ties with the US, Japan and the European Union, but its main
trading partners are neighbouring Russia and China. The latter is the biggest market for Mongolian exports,
8 M
Substantial deposits of gold, copper, and above all coal have been discovered in recent years. Oyu Tolgoi, the
-copper mine is scheduled to begin production in 2013, and Tavan Tolgoi, one
s largest coal deposits, is already exporting to China. There are also immense deposits of uranium
and rare earths, as well as molybdenum, tin, tungsten, lead and zinc.
S -owned investment fund,
Temasek, believes that the value of raw
materials in the ten largest mines alone in
Mongolia could exceed USD 1.3 trillion (2010
prices), and according to emerging market
investor Marc Faber, Mongolia could be become
the Saudi Arabia of Asia (Eurasia Capital, 2011).
It should be noted however that it is difficult to
M
commodity reserves at present, as only a small
part of them have been explored in this
enormous country.

Despite vast quantities of untapped mineral and energy resources, and numerous mining projects already
underway, Mongolia currently remains significantly underdeveloped. There is immense scope for catch-up and
growth in the secondary sector, from infrastructure to property. The financial sector represents a similar
picture, as the industry is not yet prepared for the economic changes that await it. (Renaissance Capital, 2011)







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Economic Outlook
The world is thirsting for commodities and prices have been rising for over a decade. Mongolia has large raw

The outlook for real GDP growth is underpinned by the rapidly developing commodity-based economy,
dominated by large scale productions starting at Oyu Tolgoi, Tavan Tolgoi, and other mines.
From 2004 to 2008 the Mongolian economy grew by an annual average of 9%. After bottoming out at minus
1.3 per cent in 2009, real GDP growth hit 6.1 per cent in 2010 fuelled by mineral exports notably from copper
and coal. Production from Oyu Tolgoi mine is expected to start by 2013, while that from Tavan Tolgoi is
expected to be gradually scaled up and to reach full capacity by 2016. According to International Monetary
l lMl Ms GDP is expected to grow around 10 per cent this year, rise to over 20 per
cent in 2013 and continue double-digit expansion annually for the rest of the decade. (IMF, 2011)
Real GDP growth is expected to average 13 per cent over the medium term (2013 2018), taking into account
the impact on the non-mineral economy (IMF, 2011).
Growth drivers for 2011 and beyond (Eurasia Capital, 2011);
x USD 2.3 billion capital budget (over one third of
M Cu l
Mines and Rio Tinto for Oyu Tolgoi (2011)
x Strong and growing investments across the
mining sector as well as other asset classes
x Substantial increase in government
expenditures
x Positive outlook for commodity prices
x Rising export values driven by strong Chinese
demand
x Growth in personal income underpinned by
inflows of foreign capital and the expansion in
government social payments
The Mongolian economy has a bright economic future as development of the mining sector will lead to a
substantial growth in mineral GDP and will have significant knock-on effects on other sectors through a
reallocation of resources and changes in relative prices.

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Major mining projects
Tavan Tolgoi
Tavan Tolgoi is one of the largest undeveloped coking and thermal coal deposits in the world with total
resources estimated to be 6.4 billion tonnes according to the World Bank (IMF, 2011). The coal field has a rich
percentage of high-quality coking coal, which can be used for steelmaking, and the rest as fuel in power plants
(Baasangombo, 2011). Dai Bing, a senior analyst at www.coal.com.cn, the leading e-commerce service
platform for the coal industry in China, estimates the total value of the Tavan Tolgoi coal mine to be USD 300
billion (Juan, 2011).
Mongolia has split Tavan Tolgoi into 2 zones: central-west and
east. The government has shortlisted 6 bidders to develop the
central-western part of Tavan Tolgoi which will be developed
by a group of mining companies. Successful bidders to
develop the central-western block are expected to be
announced in July (Juan, 2011). Erdenes Tavan Tolgoi LLC (a
wholly owned subsidiary of the state owned mining company
Erdenes MGL LLC) owns the rights to mine the eastern, or
Tsenkhi block of Tavan Tolgoi, which is estimated to contain
2.2 billion tonnes of coal. It will be developed by a number of
companies working in conjunction with the government (The
UB Post, 2011).
Energy Resources LLC (a consortium of top Mongolian companies) and Erdenes Tavan Tolgoi LLC are currently
exporting close to 3 million tonnes per year, however production is expected to quickly ramp up to over 10
million tonnes per year by 2014 (IMF, 2011)
The government has announced that it will retain a 50 per cent stake hold in Erdenes Tavan Tolgoi and will
offer the balance to investors and its own citizens. Mongolian Prime Minister Sukhbaatar told an Australian
Government trade forum in Sydney in February this year that the initial public offering of part of the Tavan
Tolgoi coal deposit is scheduled to go ahead in the second half of this year (Mining Journal, 2011).
The Wall Street Journal reported on 9 February, 2011, that an IPO of Erdenes Tavan Tolgoi may value the
company at between USD 10 billion and USD 15 billion, citing people familiar with the deal (Mining Journal,
2011).
Development of the deposit, which is close to the border with China, would make Mongolia a major world coal
producer. Initially, its development will increase equipment imports, FDI, and loan inflows, but soon after it
will lead to a large increase in exports.
China consumed 3.25 billion tons of coal and imported 164.83 million tons in 2010, a growth rate of 30.99 per
cent year-on-year, according to the National Bureau of Statistics and National Development and Reform
Commission (NDRC) (Juan, 2011) C nergy resources,
including coal, highlighting the importance of the development of the nearby Tavan Tolgoi resource.
The Mongolian government is also considering proposals to build a 1,000 kilometre rail line to shuttle Tavan
Tolgoi coal to the Russian rail system and its ports in the far east of the country as this could open up access to
markets in Japan, South Korea and Taiwan, leaving Ulaanbaatar less dependent on resource hungry China (The
UB Post, 2011).
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Oyu Tolgoi undeveloped copper-gold mine
Discovered by Canadian based Ivanhoe Mines in 2001, Oyu Tolgoi is the largest undeveloped copper-gold mine
project in the world and is located in the South Gobi region of Mongolia, 550km south of the capital
Ulaanbaatar and 80kms north of the border with China where the mined copper is expected to be shipped.
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estimates indicate that Oyu Tolgoi contains approximately 81 billion pounds of copper and 46 million ounces
of gold in measured, indicated and inferred resources (Ivanhoe Mines Ltd, 2011). Production is scheduled to
begin in 2013 and to reach full capacity in 2018. Over the anticipated 45 year life of the mine, Oyu Tolgoi is
scheduled to produce 450,000 tonnes of copper per year (3% of global production) and 330,000 ounces of gold
annually, whilst employing 18,000 people.
The Mongolian Government will acquire 34% in the project and Ivanhoe Mines will retain 66% interest in the
project. Global miner Rio Tinto which joined Ivanhoe Mines as a strategic partner three years ago, presently
holds an approximate 49 per cent interest in in Ivanhoe Mines (December 2010) (Ivanhoe Mines Ltd, 2011).
The 2010 estimated cost of bringing the Oyu Tolgoi mine into production was USD 4.6 billion.













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The Mongolia Stock Exchange
The Mongolia Stock Exchange (MSE) was established in early 1991 by the government to facilitate the
privatisation of state- M Currently
dominated by resource related companies within the metals and mining sector, the MSE was the best
performing equity market globally in 2010 with the benchmark SME Top-20 Index gaining 138% (or 173.7% in
USD terms).

M is often considered too small for
institutional investors. The total market capitalisation of over 300 Mongolian listed companies on the MSE is
only slightly more than USD 1 billion, which pales in to comparison to the USD 33 billion market capitalisation
of internationally listed companies with assets and operations in Mongolia who have sought liquidity abroad
with listings on exchanges in London, Hong Kong, Australia and Canada.
However, expected major initial public offerings (IPOs) by Mongolian State Owned Enterprises (SOEs) and large
private sector companies, coupled with possible dual listings by Mongolia-focussed international listed
companies (with a current USD 33 billion in market capitalisation) are likely to catapult the MSE into one of the
largest frontier markets globally within the next 4-5 years, resolving current low liquidity concerns and easing
the high volatility in the market.
Growth of the MSE
The Mongolian government has approved a list of more than 50 SOEs that are slated for privatisation starting
from 2011, including through IPOs. The SOEs are in the mining, mineral processing, construction material,
power distribution and generation, telecommunications and airline industries. Many will pursue a listing locally
on the MSE to serve as a vehicle for privatisation and then seek additional listings in regional or international
markets to raise capital for expansion and modernisation. There are also a number of SOEs with ownership in
strategic mineral deposits, infrastructure service providers and manufacturing entities expecting to offer
diversified exposure to a wide range of investors (Eurasia Capital, 2011).

Major SOEs to be Privatized by 2012 Industry
Thermal Power Station - III Power Generation
Shivee-Ovoo Coal Mining
Baganuur Coal Mining
Mongolia Stock Exchange Financial
Darkhan Metal Production Iron Ore Processing
Mongolia Telecom Airline
Erdenet Thermal Power Station Power Distribution
Source: Government of Mongolia
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Furthermore, a number of leading domestic private companies are expected to launch substantial capital
raisings on the MSE. The most anticipated IPO at the MSE is the offering of Erdenes Tavan Tolgoi LLC, a state
owned holding company for the Tavan Tolgoi ce. The
government is planning the company IPO by the end of 2011 or early 2012. About 30 per cent of the

MSE partnership with the London Stock Exchange
Mongolia took a historically important step to develop its capital markets when MSE and the London Stock
Exchange (LSE) signed a landmark Master Service Agreement to manage the MSE on April 7 of this year.
According to the agreement, the London bourse will appoint a management team to oversee MSE
development and privatisation. Over the next three years the LSE will assist the MSE to introduce an
integrated securities trading system, create effective legal environment and bring the infrastructure,
(Eurasia Capital, 2011).
Under LSE management, MSE should be become an effective source of capital for Mongolia companies and
widen opportunities for local and international investors with expected IPOs and increased market size.
The expectation that LSE would be able to assist in unlocking the huge potential of the Mongolia capital
markets valuation rerating, boost liquidity, improvement in corporate governance, stronger pipeline of IPOs
and equity offerings as well as dual listings by international listed companies with operations in Mongolia, is
likely to fuel MSE global outperformance over the next several years.
Currency
Growing export revenues, along with surging foreign capital inflows and expected tightening measures to fight
inflation will put upward pressure on the Mongolian Tugrik (MNT). Export revenue growth will come from
increasing export demand and rising commodity prices (Eurasia Capital, 2011).
The MNT has emerged as a new resource currency, following the crisis, and its movements have become
coal, copper and gold (Eurasia Capital,
2011).


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About the Fund
The Mongolia Equity Opportunities Fund is an open-end Cayman Island investment vehicle with monthly
dealing that provides long-only, unleveraged and un-hedged
economies.
1 l
Mongolian economy by investing in local and international listed companies, or companies soon to be listed,
with assets and operations in Mongolia.

The Fund has partnered with and appointed industry leading service providers to achieve its capital growth
objectives and position itself as the preeminent investment vehicle for investors who want to gain a diversified


Gordian Capital Singapore Private Limited, a specialist fund management group offering full service fund
management infrastructure and operational support, has been appointed as the Investment Manager of the
Fund.

Monet LLC, a leading independent investment banking firm operating in Mongolia, has been appointed as the
chief Investment Adviser to the Investment Manager.

The proposed launch date for the Fund is July 1, 2011.
Investment Philosophy and Approach

The Investment Adviser will initially apply a top-down screening process to identify those sectors which should
most benefit from sectoral growth trends. The Mining Sector is leading M
prospective stocks will be exploration and operational mining companies. However, as the market progresses,
additional opportunities are likely to arise in other sectors especially as more SOEs are privatized and private
companies seek additional growth capital through stock listings. Infrastructure, real estate, and services will
leverage the mining boom in the near future.
Fundamental industry and company analysis, rather than benchmarking, will form the basis of both stock
selection and portfolio construction. In the normal course of events, the Investment Adviser expects the Fund
to be fully-invested, although the Fund may however, hold cash reserves pending new IPOs. It is expected that
the Fund will hold positions for the long-term and thus have limited turnover.
As more Mongolian companies offer their shares to the public, the Investment Adviser will be well-placed to
participate in these IPOs and offer shares to its clients, including the Fund.


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The Investment Advisor Monet LLC
Monet LLC is a leading independent investment banking firm operating in Mongolia. Founded at Bats Invest in
1997, the company provides brokerage, dealing, underwriting and investment banking services for both
domestic and international clients. As a private investment banking firm, Monet LLC has a strong market
position in each of its core business areas - equity capital markets, investment banking and debt capital
markets. Monet LLC is member of both the Mongolian Stock Exchange (MSE) and Business Council of Mongolia
(BCM). With acknowledged capabilities and accolades for the best execution and advice, Monet LLC is
dedicated to creating real value
The Investment Manager Gordian Capital Singapore Private Limited
Gordian Capital Limited (Gordian) was established as a Cayman Islands corporation in April, 2004. The firm was
conceived to offer offshore structuring and fund management solutions to both Japanese and other Asian fund
managers seeking to attract capital from international investors. Gordian identifies both new and emerging
investment managers, assisting talented fund managers by providing a full service infrastructure which they
can rely upon to grow their fund business. The firm takes on the business risk and provides fund managers
with infrastructure and operational support. An experienced investment operations team handles all the
operational aspects of funds which include long only, absolute return and hedge funds, managed accounts,
limited partnerships and fund of hedge funds. Gordian marshals the operational resources needed to assist the
manager to efficiently and effectively run their strat 1 operations
are conducted through a Singapore subsidiary, Gordian Capital Singapore Private Limited, an exempted
manager under the Monetary Authority of Singapore which provides the regulatory compliant fund
management services. Gordian provides efficient and effective vehicles that meet the standard of international
institutional investors which make up their investor base of pension funds, institutional investors, Family
Offices, Fund of Funds, Manager of Managers and High Net Worth Investors. Since inception Gordian has
grown in scope and now manages and operates a number of funds each with varying strategies and structures
with total assets under management of USD250 million.
Additional Information
Please contact Khan Investment Management Ltd for further information.
contact@khan-management.com




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Works Cited
Baasangombo, M. (2011, March 31). Executive Director, Erdenes MGL LLC. (Bloomberg, Interviewer)
Eurasia Capital. (2011). Mongolia 2010 - 2020.
Eurasia Capital. (2011). Mongolian Stock Market - Capitalising on Frontier Opportunites.
IMF. (2011). IMF Executive Board Concludes 2011 Article IV Consultation, Post Program Monitoring, and Ex
Post Evaluation with Mongolia. External Relations Department.
Ivanhoe Mines Ltd. (2011). Ivanhoe Mines Ltd. Retrieved from www.ivanhoe-mines.com
Juan, D. (2011, March 24). Shenhua shortlisted in bid to develop Mongolian coalfield. China Daily.
Mining Journal. (2011). Tavan Tolgoi IPO may take place in second half. Mining Journal.
Renaissance Capital. (2011). Mongolia.
The UB Post. (2011, April 15). Foreign Firms Aim to Win Big on Mongolia Coal Mine. The Ulan Bator Post.





Disclaimer: The Information contained in this presentation is strictly for informational purposes only and
should be considered neither an offer nor a solicitation to invest in the Mongolia Equity Opportunities Fund
(the Fund) both now or in the future. The information has been obtained from or is based upon sources
believed to be reliable but is not guaranteed as to its accuracy, adequacy or completeness. Liability for errors
or omissions is expressly disclaimed. The information is provided without obligation and on the understanding
that any person or entity who acts upon it does so entirely at their own risk. No investment decisions should
be based on the information herein. Past performance of the Fund is not a guarantee of future performance.
Potential investors in funds should obtain independent legal, financial, tax, accounting and other professional
advice in respect to investing. Neither the Fund, nor KHAN INVESTMENT MANAGEMENT assumes any
responsibility to supply any corrections or updates to the information contained herein.