MONGOL MEAT BOND

Investor Presentation
Just Agro LLC MNT 30 Billion 1 Year 16.2% BDSec Issuer: Total Value: Maturity: Annual Interest: Underwriter:

MONGOL MEAT BOND

BOND INTRODUCTION

The Issue
Type of Bond: Maturity: Number of Bonds: Nominal Bond Price: Selling Bond Price: Total Nominal Value: Type of Offering: Frequency of Offering: Annual Interest Rate: Coupon Payment: Penalty of coupon payment delay: Use of proceeds: Collateral: The issuer: Underwriter: Listing of Bonds: Registrar and Custodian: Date of FRC approval: Secured/Registered One year (12 months) 3,000,000 MNT 10,000 MNT 10,000 MNT 30,000,000,000 Partially offered with each part consists of MNT 10 billion of bonds One (1) month 16.2% (Fixed) Quarterly 0.02% per day To finance livestock purchase Real estate Just Agro LLC BDSec JSC The bonds will be listed on Mongolia Stock Exchange Securities Clearing House and Central Depository LLC July 26, 2011

MONGOL MEAT BOND

ISSUER INTRODUCTION

MONGOL MEAT BOND

FACILITIES
Bulgan Makh Market 100 cattle or 400 sheep per shift 500 tons of meat products storage at minus 20 C Selenge Makh Market 300 cattle or 1000 sheep per shift 3000 tons of meat products storage at minus 20 C Baganuur Makh Market 250 cattle or 1000 sheep per shift, 1200 tons of meat products storage at minus 20 C Dornod Makh Market 180 cattle or 500 sheep per shift 1000 tons of meat products storage at minus 20 C

Khuvsgul Makh Market 250 cattle or 1000 sheep per shift 750 tons of meat products storage at minus 20 C Bayan Ulgii Makh Market 120 cattle or 600 sheep per shift 1000 tons of meat products storage at minus 20 C

Zavkhan Makh Market 100 cattle or 600 sheep per shift 500 tons of meat products storage at minus 20 C Sukhbaatar Makh Market 100 cattle or 500 sheep per shift 750 tons of meat products storage at minus 20 C

MONGOL MEAT BOND

PRODUCTION AND CAPACITY

Processing
Slaughtering Drying Deep freezing Warehousing

Production
Carcase Deboned and sorted meat By-products Semi finished meat products Finished meat products

Sales
Export Domestic sales Wholesale State reserve sales Retail sales

28 billion MNT of capital expenditure since 2006, which is equal to 60% of the fixed assets and 55% of the total assets of the company The company has 26% of the total slaughtering capacity and 30% of the total warehousing /freezing/ capacity of the country

MONGOL MEAT BOND

CAPITAL EXPENDITURE

Capital Expenditure /in million MNT/

2006 Factories Factory renovation Factory expansion Equipments purchase & assembling Fixed assets purchase The central factory Road and other facilities 89.8 109.4 48.8 36.8 2.3 2007 1940.0 195.8 189.0 418.9 474.3 6786.1 2008 1264.9 703.7 485.5 524.0 160.3 3554.3 2009 6659.9 96.9 19.9 1138.4 12.0 71.0 2010 285.2 520.4 2105.7 4.1 340.1 Total 10,239.9 1626.2 743.2 4223.8 650.7 10,340.3 413.7 28,237.8

MONGOL MEAT BOND

PRODUCT QUALITY

Installed Hazard Analysis & Critical Control Points (HACCP5) system Acquired ISO 22000 and the necessary domestic standards 4 factories in the countryside as well as the main factory in the capital city have modern supervisory laboratories that are certified by the state agencies Products are required to go through the laboratory test at least 3 times before and after slaughtering, and finished and semi finished products

MONGOL MEAT BOND

SALES AND DISTRIBUTION

Sales /by billion MNT/
17.1 9.4 6.6 10.1 30.1

Export Sales 76%

Meat Reserve 17,78%

Retail Sales 7,22%

2007

2008

2009

2010 Export

2011*

Sales

The country export vs. Just Agro /by thous. tons/ Sales Structure 2009
Offal 2.96%Skins 2.06% Carcase 11.32% Finished Products 1.49%

Sales Structure 2010

Offal 5.04% Carcase 17.78% Skins 0.86% Finished Products 0.09%

14.6 9.4

14.9 9.9

8.4

Export 82.17%

2006
Export 76.24%

2007

2008

2009

2010

Total Meat Export

Just Agro Export

MONGOL MEAT BOND

EXPORT

Export products (tons) Beef Horse meat Mutton Dried beef Finished products Total amount

2007 474.6 651 1125.6

2008 1186.6 239.7 1426.5

2009 2205.1 475.3 0.8 2681.2

2010 2559.7 1911.4 47.7 0.1 4518.9

Amount of products exported in the last 4 years

MONGOL MEAT BOND

DOMESTIC SALES

The biggest domestic market for the company Prepared by local meat producers under the order from the Ulaanbaatar City Government and the Meat Association and designed to balance supply and demand of meat and to stabilize its price that tends to get higher during the spring time Just Agro constantly supplies approximately 1/3rd of the total strategic meat reserves

Semi finished and finished products such as dumplings, smoked meat and sausages Carcase meat is the best selling product in the market although semi finished and finished products market is getting much bigger as the consumer spending grows dramatically

Just Agros Reserve Meat Preparation /by ton/

Type Beef Mutton Goat Meat Total amount 2007 350 1150 1500 2008 350 1150 1500 2009 150 1770 480 2400 2010 550 150 700 1400 2011* 150 1770 480 2400

Strategic Meat Reserve /by ton/

12000 7143 5357 7059 5385

2007

2008

2009

2010 Just Agro

2011*

Total Reserve

MONGOL MEAT BOND

MARKET

As of 2010, Mongolia has about 32.7 million livestock, of which 43.3% is sheep, 42.2% is goat, 6.7% is cow, 1.9% is horse and 0.8% is camel Agriculture sector accounts for 23.5% of the GDP

As of 2010, the domestic meat consumption reached 223,000 tons or 8.2 million livestock Mongolians are one of the 10 highest meat consuming nations behind Spain and Greenland with one person annually using 108.8kg of meat There are 36 meat processing factories operating as of today in the country and 11 of them are Just Agros subsidiaries

As of 2010, Mongolia has exported 14,800 tons of meat, which is only 7% of the domestic consumption The export has increased by 70% since 2004 Mongolian meat is believed to be the highest quality one as most of the livestock are free ranging and bound to eat the most fertile plants

MONGOL MEAT BOND

MEAT PRICE

45.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0

Meat Price vs. Inflation

Average Meat Price (MNT/Kg) 4789 2348 2500 2851 3674 3428

1173 1435

1724

2002

2003

2004

2005

2006

2007

2008

2009

2010

Average Export Meat Price (MNT/Kg)

23,300 22,000 15,100 8,400 7,800 11,700 10,900 10,300 5,000

-5.0

2006 2006 2006 2006 2006 2007 2007 2007 2007 2007 2007 2008 2008 2008 2008 2008 2008 2009 2009 2009 2009 2009 2009 2010 2010 2010
, Meat Price Inflation

2002

2003

2004

2005

2006

2007

2008

2009

2010

MONGOL MEAT BOND

FINANCIALS

Balance Sheet /in thous. MNT/

2008 Cash and cash equivalent Account receivable Related party receivable (subsidiaries) Inventory Prepaid expenses Amount of current assets Fixed assets Intangible assets Investment and others Amount of non-current assets Total assets Current ratio Asser turnover 23 949 111,9 29 369 061,9 0.96 0.26 29 302 310,2 39 615 015,2 1.04 0.26 32 591 047,2 38 167 401,5 1.01 0.47 5 419 950,0 23 945 158,0 3 953,8 10 312 705,0 29 298 751,7 3 558,4 5 576 354,3 32 587 884,2 3 163,0 5 068 403,1 8 196 365,9 128,733,3 222 813,6 2009 18 060,9 2 098 278,2 2010 6 940,5 345 816,6 1 900 000,0 3 312 597,1 2011.06 52 106,3 184 639,9 1 066 883,9 2 876 561,5 96 490,3 4 276 680,9 47 368 412,3 2 965,4 2 000,0 47 373 377,7 51 560 058,6 1.26 0.07

MONGOL MEAT BOND

FINANCIALS

Balance Sheet /in thous. MNT/

2008 Account payable Other payables Related party payable (subsidiaries) Bank loan Income generated in advance Short term liabilities Long term liabilities Amount of total liabilities Owners equity Liability and owners equity Debt ratio (%) Debt-to-equity ratio (%) 5 605 889,7 16 984 335,3 22 590 225,0 6 778 836,9 29 369 061,9 76.92 333.2 9 935 750,5 24 982 391,0 34 918 141,6 4 696 873,5 39 615 015,2 88.14 74.3 602 041,6 14 892,8 4 988 955,2 2009 2 819 494,9 6 342,8 7 109 912,7 2010 1 025 513,1 21 492,0 2 469 871,8 1 900 000,0 116 170,1 5 533 047,1 28 237 845,2 33 770 892,3 4 396 509,1 38 167 401,5 88.48 76.8 2 815 000,0 127 830,0 3 372 158,0 468 187,2 3 840 345,2 47 809 713,4 51 650 058,6 7.45 0.8 2011.06 420 466,9 8 861,0

MONGOL MEAT BOND

FINANCIALS

Income Statement /in thous. MNT/

2008 Sales Revenue COGS Gross profit Operating expenses Operating income Non-operational income Net profit before tax Net profit after tax Gross margin (%) Return on equity (%) Return on assets (%) 7 669 353,8 4 992 702,5 2 649 440,4 3 283 724,1 (634 283,7) 643 262,4 8 978,6 5 529.4 34.55 0.08 0.03 2009 10 309 506,1 6 000 055,3 4 307 371,7 7 156 014,1 (2 848 642.4) 766 679,1 (2 081 963.3) (2 081 963.3) 41.78 -44.33 -5.26 2010 17 799 654,3 8 874 999,7 8 922 783,1 9 154 150,9 (231 367.7) 375 218,3 143 850.5 123 340.9 50.13 2.81 0.38 2011.06 3 675 716,4 1 712 994,7 1 962 721,7 1 874 915,5 87 806.1 (13 852,9) 73 953.2 64 042.7 53.40 0.13 0.14

MONGOL MEAT BOND

USE OF PROCEEDS

Traditionally livestock procurement season starts in June and finishes in October The company will purchase livestock directly from herders through its subsidiary factories located throughout the country Average price planned to be paid for a kilogram meat ranges between 900 MNT and 1000 MNT About 300,000 pieces of livestock are planned to be purchased in 2011, more than 7 times higher than the number of livestock purchased in 2010 but almost 27 times lower than the number livestock slaughtered per year Livestock Procurement Plan*
2009 Cow Total number of livestock to be purchased by weight /ton/ Total amount Total amount of meat to be purchased /ton/ Per ton cost of procurement /MNT/ Total procurement costs /million MNT/ Horse Sheep Goat 4621.6 3263 1346 12.6 2010 901.9 627.5 171.2 18 1718.6 2011* 5076 2800 4025 320 12,224 12,221.0 2,314 28,295.4 2012* 5647 3360 4200 320 13,530 13,527.1 2,394 32,393.8

MONGOL MEAT BOND

FINANCIAL PROJECTION
2011-2012* 2012-2013* 32,825.0 7521.4 4460.0 44,806.5

Sales (million MNT)

Export Domestic sales Other revenues Total 29,387.5 6702.6 4143.3 40,233.4

The company has projected the export price per kg meat to be 3395 MNT on average and domestic price per kg meat to be 2900 MNT on average

Earnings (million MNT)

2011-2012* Sales revenue Bonus on the strategic reserve COGS Gross profit Administration costs Depreciation costs Financing costs Operating income Non-operating income Tax expense Net profit 40,233.4 1200 30,327.5 11,105.9 1987.8 1754.3 4787 2576.6 403.6 298.1 2682.1 2012-2013* 44,806.5 1200 34,290.2 11,716.3 1977.6 2279.7 842 7020.5 403.6 702 6318.5

Due to the livestock procurement season, the companys financial /fiscal/ year starts on June 30th and ends on July 1st (unofficial) which usually makes an impact on the companys income statements that officially needs to be reported as of December 31st.

MONGOL MEAT BOND

FINANCIAL PROJECTION
2011-2012* 3,678,772,730 7,150,000,000 76, 291,270 327,272,730 935,750,210 30,000,000,000 42,168,086,940 752,987,130 25,723,063,640 2,572,306,360 3,801,858,850 1,574,607,500 317,105,900 16,843,500 810,000,000 705,000,000 (337,161,970) 35,936,610,920 839,641,110 7,071,117,130 7,071,117,130 2012-2013* 11,201,457,930 55,062,500,000 76,291,270 327,272,730 1,200,000,000 1,976,221,460 69,843,743,390 1,975,988,300 30,000,000,000 29,448,900,300 2,944,890,030 4,998,901,190 3,570,781,590 472,950,760 32,003,440 4,050,000,000 1,310,289,780 78,804,705,400 2,054,510,890 (6,906,451,120) 164,666,010

Cash Flow Forecast (MNT)

Sales revenue Export revenue Warehousing revenue Slaughtering revenue Bonus on the strategic reserve Operating loan VAT receivable Proceeds from the bond sale Cash inflows Operating loan payment Working loan payment Bond payment Purchase VAT on purchase Additional cost on production Administration cost Sales and marketing cost Operating loan interest payment Bond interest payment Bond issuing expense Long term loan interest payment Tax expense Cash outflows Depreciation cost Net cash flow Ending cash /balance/

Again the especial livestock procurement season requires the company not to leave any product unsold in the warehouse in order to be ready for the new season.

Although financing source for livestock procurement for the season of 2012/2013 is uncertain at the moment, the company is considering to use a method of raising capital through issuing bonds.

MONGOL MEAT BOND

BOND INTRODUCTION

The main purpose of issuing bond is to increase the current production amount which has been less than 30% of the installed capacity in the last 4 years due to a lack of working capital.

After purchasing enough raw materials using capital raised through the proposed bond sale the company is able to increase use of the capacity up to 80%.

Most of the domestic banks have their own criteria not to issue loans exceeding 20% to 30% of their owners equity which is often not enough source for the company to generate working capital.

Companys real estate including 8 meat processing factories that are valued at 31.62 billion MNT will be used as collateral for repaying the bond principal. This collateral has been registered at the General Authority for State Registration.

MONGOL MEAT BOND

BOND INTEREST RATE

Government bond rate (1-year)
9.65 10.2 7.2 6 4.6 7.2 6 Time Demand
Source: Mongol Bank Source: MSE, BDSec

Bank savings rates (1-year, %)

Xas Capitron State TDB Khan Savings Golomt
6 6.45

11.7 10.95 11.2 10.5 10.8

14.00 13.00 12.00 11.00 10.00 9.00 8.00 7.00 6.00

Other rates (1-year, %)

Central bank policy Interbank loan Bank Loan Bank demand deposit Bank time deposit Government bond Just Agro bond 6.20 10.71 8.00 16.20
Source: Mongol Bank, BDSec

Average savings rate (1-year)

14.00

11.75 11.30 17.40

13.00 12.00 11.00 10.00 9.00

Source: Mongol Bank

MONGOL MEAT BOND

ECONOMIC FACTORS
Inflation (%)
25 20 15 10 5 0

GDP real growth (%)

25 20 15 10 5 0 -5

Source: NSO, F IMF forecast

Source: Mongol Bank, F Mongol Bank forecast

GDP per capita, current prices (US$)

10000 8000 6000 4000 2000 0

USD/MNT rate, annual average

1450 1400 1350 1300 1250 1200 1150 1100 1050

China

Mongolia

Sri Lanka

Vietnam
Source: IMF

2000

2002

2004

2006

2008

2010

Source: Mongol Bank

MONGOL MEAT BOND

THE OFFERING

The bonds will be issued every month starting from September 5th till November 2011 The bonds will be offered at the nominal price of MNT 10,000 in the primary market The bonds have secondary market

Corporate bond interest is TAX free for individual investors The underwriter offers significantly lower trading commission on this corporate bond issue The bonds will be traded on Mongolia Stock Exchange

Schedule of offering
2011 Month Tranche1 Tranche 2 Tranche 3 Tranche 1 - Interest payment Tranche 2 - Interest payment Tranche 3 - Interest payment Tranche 1 - Principal payment Tranche 2 - Principal payment Tranche 3 - Principal payment 9 10 billion MNT 10 billion MNT 10 billion MNT + + + + + + + + + + + + + + + 10 11 12 1 2 3 4 5 6 2012 7 8 9 10 11

MONGOL MEAT BOND

CONTACT US
Dagiijanchiv Chuluunbaatar Institutional Sales Email: dagiijanchiv@bdsec.mn Phone 976-11323411 Sainbayar Jadamba Institutional Sales Email: sainbayar@bdsec.mn Phone 976-11323411

BDSec Headquarter Zaluuchuud Avenue 27-1 8th Khoroo, Sukhbaatar District Ulaanbaatar, Mongolia Phone/Fax: 976-11313108 Email: info@bdsec.mn Munkhtulga Ganbold Head of Institutional Sales Email: mganbold@bdsec.mn Phone 976-11323411