Mongolia Growth Group Ltd. Annual Report 2019

FY2019 Annual Report · Mongolia Growth Group Ltd.

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2019 Annual Report

Table of Contents

Letter to Shareholders ................................................................................................................................. 3

Management Discussion & Analysis ........................................................................................................... 5

Consolidated Financial Statements ............................................................................................................ 27

Corporate Information ................................................................................................................................ 67

Mongolia Growth Group Ltd.

Mongolia Growth Group Ltd. (MGG) is a leading publicly traded property investment company in Ulaanbaatar,

Mongolia. MGG owns an extensive property portfolio, with an emphasis on institutional-grade commercial

assets.

MGG undertakes its own property acquisitions and repositions outdated properties, relying on in-house

services for all facets of both the investment portfolio and development side of the business. In addition,

MGG acts as a full-service third party provider for institutional clients.

Letter to Shareholders

Harris Kupperman
CEO and Chairman of the Board

Dear Shareholders,

Frustratingly, yet another year has come and passed
without any substantial progress at our business. Our
capital continues to earn sub-par (ie. negative) returns
and the vast majority of it remains stranded in Mongolia.
Despite how bleak that sounds, our team has continued to
perform admirably under difficult circumstances. During
2019, we kept our properties mostly full, had negligible
bad debt expense, dramatically increased the returns
from our 3rd party agency business and even managed
to liquidate a number of properties near year-end. That
said, I remain frustrated with our pace of progress, our
continued losses and our inability to extract capital from
Mongolia so that we can invest it somewhere else that
has positive return expectations.

Let me start by talking about what’s working. Gen and I
spent 9 years building an amazing Mongolian team that
is capable of nearly anything—unfortunately, this team
has been hamstrung by repeated cycles of economic
crisis. Despite this fact, over the past three years, they
created a 3rd party agency business that literally did
not exist previously—more importantly, our team on
the ground mostly did it on their own, through trial
and error, in a country that has never had a history of
agency brokerage. This business produced approximately
$97,000 of revenue during the second half of 2019
(14% of our revenue in Mongolia) and did it at a decent
gross margin. I am confident that this business will
continue to grow and we remain focused on investing
additional resources into this business while also trying
to add property management services. We believe
we’re uniquely equipped to offer these management
services to property owners and believe that much like
the brokerage business; once we can prove ourselves on
a handful of properties, we’ll become dominant in this
sector.

With the positives out of the way, let’s return to reality—
the Mongolian economy has continued to muddle along
lethargically. While headline numbers show a mid-
single-digit GDP growth rate, a more accurate reading
would be that economic conditions have simply stopped
getting worse—not gotten substantially better. Recent
extraordinary measures taken by the Government of

Mongolia to combat the Coronavirus have led to many of
our tenants experiencing extreme financial strain—even
beyond the worst of the crisis during 2015 and 2016.
While our bad debt expense has been minimal to date,
we are not optimistic about 2020. As always, we will
soldier on, as best as possible. Besides; by now, economic
crisis is our modus operandi. Our priorities are to protect
our capital, retain our highly-skilled Mongolia team, ring-
fence key property assets and divest non-core assets so
that we can invest in something with economic returns.
If the Mongolian Government takes actions to grow the
economy, we will be in the unique position to rapidly
pivot our attentions back to Mongolia—if not, hopefully
we will have diversified and grown this company.

During the past few years, we have focused on
extracting capital from Mongolia so that we could invest
in something else. I apologize for being somewhat
amorphous, but we still do not know what we want to
invest in—only that it needs to be a business with positive
cash flow that would stop our balance sheet from slowly
shrinking. Unfortunately, to date, we are no further along
in identifying this business. During 2019, we looked at
a number of businesses but could not come to terms
on any transaction. In a world awash with liquidity, we
refuse to overpay. If we cannot get the deal we want,
we’d prefer to let the capital remain invested in public
securities—hopefully experiencing securities gains.

In order to fund any prospective acquisition that we
may ultimately identify, we’ll need capital. While we
occasionally have gotten lucky over the past few years
on a handful of asset sales, we have rarely sold enough
assets to do much more than offset our operating cash
burn annually—which isn’t long-term sustainable. During
this summer, Gen and I, with the guidance of our board,
made the decision to dramatically reduce the offering
prices of the assets that we’d like to sell. While these
prices are below our carrying costs, we also value the
ability to move forward with diversifying this business.
During the fall of 2019, we began to aggressively market
properties at unusually attractive prices and were
able to finally increase the rate of asset sales. We are
confident that there are cash-rich buyers in Mongolia

Mongolia Growth Group Ltd |$500,000 against it so that they could earn interest beyond
the facility stand-by fee. Adding to our frustration, a year
later, when we actually wanted to use our remaining line of
credit, a line that that we had been paying for access to, the
bank refused to honor their written commitments to us. With
an expensive loan and a pointless line of credit, we chose to
repay the loan and move on.

Returning back to our overall business, my hope remains
that as we successfully monetize certain property assets in
Mongolia, we can increase the size of our public securities
portfolio and begin to actually increase book value through
future realized gains on our securities portfolio along with the
economic benefits of any business in North America that we
may start or acquire.

In summary, while we remain optimistic about Mongolia’s
long-term future, we are realistic about our own company’s
predicament. Our property business is subscale and we expect
that when combined with our corporate overhead it will likely
produce operating losses (excluding potential gains from our
public securities portfolio) for the foreseeable future. The only
viable business that we see in Mongolia is our 3rd party agency
business. While we intend to keep some of our better property
assets in hopes of a recovery in Mongolia, we remain focused
on selling non-core property assets (particularly in office and
re-development) so that we can diversify the business.

I remain of the opinion that our shares are undervalued. During
the fourth quarter, the Company re-purchased 107,500 shares
under our Normal Course Issuer Bid at a cost of $25,802.50.
However, this reduced pace of share re-purchases is primarily
related to our desire to husband cash for future acquisitions.

Sincerely,

Harris Kupperman

CEO and Chairman of the Board

and if we have to reduce our prices sufficiently to meet them,
so be it. However, as a result of our own experiences along
with reduced liquidity in the market, particularly for larger
property assets, we recognized a reduction in carrying value
of $1,347,662. While I believe that we sold these assets for
less than they were worth, I do not regret a single sale and
accept the conservative judgement of our property valuation
firm. Based on the prices that we sell future assets at, we may
experience further impairments to our portfolio’s carrying
value.

Our securities portfolio produced a $358,826 realized loss and
a $454,824 unrealized gain, along with a $228,761 foreign
exchange gain for the quarter. I would like to note that our
portfolio is invested in a highly concentrated manner and often
a handful of positions comprise the majority of the portfolio.
Therefore, I would expect the portfolio to be substantially
more volatile than an index fund and focus your attention on
realized gains—which are indicative of where investments were
underwritten compared to fair value. Unrealized gains can and
will fluctuate wildly based on movements in our holdings—
however if we purchased these investments at an attractive
enough valuation, they should eventually accrete towards fair
value and allow us to continue realizing gains. During 2019,
sizable changes in our securities portfolio relate to two E&P
companies that have continued to decline in value—one of
which we realized for a substantial loss over the course of the
year. Additional losses were realized in put spreads related to
an automotive company along with put spreads on various
equity indexes. Offsetting this, we had realized and unrealized
gains in a number of shipping equities along with other smaller
positions that do not deserve mention.

Overall, I’m unhappy with how our securities portfolio has
performed over the past eighteen months. I am a value
investor who focuses on undervalued businesses, particularly
those undergoing some sort of business inflection. Over time,
this strategy has worked well; however there are times when it
is horribly out of favor—particularly when most global equity
markets have continued marching higher, led by companies
with accelerating losses. The pockets of value that I see, are
in companies trading at low-single digit earnings multiples
and substantial discounts to net asset value—unfortunately,
these sorts of cash-generative businesses remain shunned
by the market. Naturally, this has contributed to the poor
performance of our public securities over the past eighteen
months. Like all things in life, equity markets move in cycles.
At some point in this cycle, our holdings will be in favor and
we will see the benefits of owning what we own. While I like
to bemoan our performance, after currency gains, we did
produce a positive return in 2019, though first quarter 2020
results were less kind to us.

In terms of our balance sheet, during the fourth quarter of
2019, we used the proceeds from asset sales to retire the USD
$500,000 of debt that we had with a top-4 Mongolian bank.
We originally entered into a USD $1 million line of credit with
this bank, only to learn that they expected us to draw USD

| Mongolia Growth Group LtdMONGOLIA GROWTH GROUP LTD.
Management Discussion & Analysis
December 31, 2019

The management of Mongolia Growth Group Ltd. (“MGG” or “the Corporation”) presents the Corporation’s management
discussion and analysis for the year ended December 31, 2019 (the “MD&A”), compared with the year ended December 31,
2018. As of January 1, 2011, the Corporation adopted International Financial Reporting Standards (“IFRS”). This MD&A provides
an overall discussion, followed by analyses of the performance of the Corporation’s major reportable segments. The reporting
and presentation currency in the consolidated financial statements and in this discussion and analysis is the Canadian dollar,
unless otherwise noted.

This MD&A is dated April 7, 2020 and incorporates all relevant information and considerations to that date.

The following discussion and analysis should be read in conjunction with the audited consolidated financial statements of the
Corporation for the year ended December 31, 2019 and December 31, 2018 together with all of the notes, risk factors and
information contained therein, available on SEDAR at www.sedar.com.

Non-IFRS Financial Measures

This MD&A makes reference to adjusted earnings before interest, taxes, unrealized fair value adjustments, share based payments
depreciation and amortization (“Adjusted EBITDA”). The Corporation uses Adjusted EBITDA as a measure of the performance
of its operating subsidiaries as it excludes depreciation and interest charges, which are a function of the Corporation’s specific
capital structure, and also excludes entity specific tax expense. These amounts are not performance measures as defined under
IFRS and should not be considered either in isolation of, or as a substitute for, net earnings prepared in accordance with IFRS.

Forward Looking Statements

This MD&A contains forward-looking statements relating to future events. In some cases, forward-looking statements can be
identified by words such as “anticipate”, “continue”, “estimate”, “expect”, “forecast”, “may”, “will”, “project”, “should”, “believe”,
or similar expressions. These statements represent management’s best projections but undue reliance should not be placed
upon them as they are derived from numerous assumptions. These assumptions are subject to known and unknown risks
and uncertainties, including the “Risks and Uncertainties” as discussed herein. Actual performance and financial results will
differ from any projections of future performance or results expressed or implied by such forward looking statements and the
difference may be material.

Accordingly, readers are cautioned that events or circumstances could cause results to differ materially from those predicted.
From time to time, the Corporation’s management may make estimates and have opinions that form the basis for the forward-
looking statements. The Corporation assumes no obligation to update such statements if circumstances, management’s estimates,
or opinions change.

Forward looking statements are included within the Outlook and Executive Strategy sections of this MD&A.

Mongolia Growth Group Ltd |Section 1 – Overview

During 2019, the Corporation’s rental revenues decreased by 7% when compared to 2018, which was largely a result of lower
rental rates and fewer rental properties due to disposals. Throughout 2019, rental rates were relatively stable. Despite a very
weak economy, the Corporation has been able to achieve almost full occupancy rates, with office space and retail occupancy
rates of 97% and 100% respectively at year end.

Due to a tightening in liquidity in the economy, the Corporation recorded an unrealized fair value loss of $1,347,662 on its
investment properties portfolio during the year (2018 – gain $1,892,577) as larger value assets dropped in value.

During the year, the Corporation acquired one retail property ($48,213) through a swap transaction on the sale of an office
building and 75 meters in an office building ($143,196) acquired through another swap transaction which was classified in
accounts receivable at year end as the title was received in early 2020 (2018 - nil). During this period, the Corporation sold three
investment properties for total proceeds of $2,221,346 resulting in a net loss of $302,959 on these transactions. In comparison,
during the year ended December 31, 2018, three investment properties were sold for cash consideration of $547,955 resulting
in a net gain of $38,592 on these transactions. Proceeds from the sales of assets during the year were used for working capital
purposes, the repayment of all outstanding debt (USD $500,000), the acquisition of publicly traded securities, and its Normal
Course Issuer Bid (NCIB) program. It is anticipated that the Corporation will continue to dispose of properties in future quarters
in order to fund working capital needs, future public securities purchases along with the renewed NCIB program.

During the year, the Mongolian Tögrög depreciated versus the Canadian dollar from 1,941 MNT/CAD on December 31, 2018 to
2,095 on December 31, 2019; an 8% decrease during the year. This depreciation led to a $1,831,600 other comprehensive loss
(2018– $140,375).

Economic Overview
Starting in 2012, the Mongolian government initiated a program to restrict and inhibit foreign investment. Additionally, various
government officials made statements designed to intimidate foreign investors, followed by arbitrary arrests of foreign employ-
ees and confiscations of foreign investments. These actions led to a dramatic slow-down in foreign direct investment (FDI) and an
exodus of foreign investors. The economy would have entered a crisis sooner, if not for expansionary fiscal policy and monetary
stimulus from the Central Bank of Mongolia. However, by 2014, even this stimulus was insufficient to avert an economic crisis.

Despite official statistics that tended to show moderate economic growth, the Corporation is of the opinion that the economy
had been in contraction from 2014 until mid-2018, though the rate of contraction had varied based on economic policy. During
the second half of 2018, the Corporation noticed the first green shoots in many years, though there is no way to know if the
recovery will be sustainable. Recent statements by prominent politicians that were designed to embarrass and belittle China
have resulted in China dramatically reducing imports of raw commodities. This has led to a slowing in economic activity during
recent months. Furthermore, changes to tax rates, particularly related to mining licenses has served to further dissuade foreign
investment.

During the past eight years, Mongolia has had five Prime Ministers, seven Cabinets and even more substantial turnover within
most ministries. This has led to inconsistent policy-making, arbitrary decision-making and a general focus amongst ministers for
personal gain, hurting all investors—as their tenures tend to be short.

The two recent People’s Party governments have made statements that are more supportive of foreign investment—however
these statements have rarely been backed up by actions that would actually tempt anyone to invest in Mongolia. Furthermore,
despite statements of support for foreign investment, multiple investors are waiting for government approvals for their businesses
to move forward and there has been a continued net divestment amongst most existing foreign investors.

Management believes that the current economic slowdown is the result of policies that have discouraged Foreign Direct
Investment (“FDI”). When the government takes the appropriate steps to stimulate FDI, it is expected that the economy can
return to sustainable economic growth. Management remains a believer in the long-term growth potential of Mongolia.

Beginning in February of 2020, the Government of Mongolia undertook extra-ordinary actions in order to limit the spread of
COVID-19 or other COVID-19 related impacts. These actions included closing borders, closing schools, reducing gatherings and
drastic limitations on business operations. As long-term investors in Mongolia, the Corporation welcomes these actions that keep
the people of Mongolia safe from COVID-19; however, it is anticipated that these actions will lead to a severe economic crisis.
Since the initiation of these actions, the Corporation has experienced a material reduction in rental revenues received. At this
time, there is no way to know the ultimate impact of these extra-ordinary actions upon the economy or the Corporation.

Property Overview
During the boom years at the beginning of this decade, multiple sizable property developments were initiated. Despite an eco-
nomic crisis that began in 2014, many of these developments were ultimately completed, while new projects have continually
been initiated—despite weak demand for these properties. There also remains a sizable shadow inventory of partially completed
projects that may recommence development at any time.

| Mongolia Growth Group LtdDespite substantial new supply over the past few years, well-placed office and retail space in the city-center has been absorbed
with rental rates starting to stabilize at a new lower level. However, there is concern that stalled projects will enter the market
during a period of weak demand, while banks may be forced to liquidate distressed property assets due to the IMF bailout. Due
to insufficient liquidity in the banking system and tightened monetary policies, large property assets saw a decrease in value
during the end of the year. Should liquidity start to flow back into the system, Management believes that well placed city-center
properties will be the first to recover in valuation. However, the Corporation is unsure of the ultimate impact of COVID-19 on the
economy of Mongolia.

Management cautions investors that it is focused on continuing to dispose of non-core property assets when possible in order
to recycle capital into investments in North America including the potential acquisition or initiation of an operating business
along with the purchase of publicly traded securities. Additionally, recycled capital will be used for the ongoing NCIB along with
working capital needs.

Mongolia Growth Group Ltd |Section 2 - Executing the Strategy
Core Business

During the past nine years, Management and employees have worked hard to build up the infrastructure needed to manage
MGG’s institutional property platform. This platform is unique in Mongolia and is one of the only platforms capable of managing
assets through the full cycle of ownership from acquisition through disposition and includes dedicated departments that manage
maintenance, leasing, marketing and tenant management. Management believes it has a strong team in place to manage the
business on an ongoing basis.

Due to MGG’s unique platform, the Corporation has added third party leasing and property management to its focus, in order to
leverage its existing resources. Management believes that it has excess capacity to handle these functions and has seen a sizable
increase in interest in using its brokerage operation as awareness spreads in the Ulaanbaatar market. The Corporation intends to
aggressively target this brokerage opportunity through its website at www.MGGproperties.com.

The Corporation has continued to have occupancy levels that are in excess of current market conditions and it credits its leasing
and property management teams with this success. Additionally, bad debt expense has remained below expectations, though
the outcome of COVID-19 on collections is unclear at this time.

Management believes that its current property operations are not at a sufficient scale to be cash flow positive. As such, the
Corporation is looking at various investment opportunities outside Mongolia, in order to diversify its business. During 2017,
2018 and 2019, Management spent substantial time evaluating a number of businesses, but has not decided to move forward
on any acquisition. Additionally, the Corporation has made investments in certain publicly traded securities. Management plans
to continue to dispose of property assets in order to increase its ownership of publicly traded securities and fund potential
future investments outside Mongolia. The Corporation may be forced to take on additional borrowings or issue equity in order
to finance these future investments.

The Corporation anticipates that revenues and EBITDA will decline in future quarters as properties are sold to fund working
capital needs, investments in public securities, its NCIB program and future potential business acquisitions. Additionally, the
Corporation anticipates an increase in operating expenses in future quarters, primarily as a result of an increase in payroll along
with due diligence expenses related to potential acquisitions outside of Mongolia. The Corporation expects to finance losses with
additional property sales, borrowings and potentially dilutive equity offerings.

Portfolio

Mongolia Growth Group’s properties are located in the Downtown and the Central Business District of Ulaanbaatar. Within
the financial statements, MGG classifies properties in each of the following categories; Investment Properties, Property and
Equipment, and Other Assets. Fluctuations in the values of the Corporation’s property portfolio during the year can be attributed
to changes in valuations, properties sold, and the change in value of the functional currency (Mongolian Tögrög) versus the
Canadian dollar.

Investment Properties

Investment Properties include properties held to earn rental revenue, for capital appreciation and/or for redevelopment.
Investment Properties are initially valued at fair value, which is the purchase price plus any directly attributable expenditure.
Investment Properties are subsequently valued at fair value, which reflects market conditions at the date of the statement of
financial position.
The following table represents properties classified as Investment Properties, as of December 31, 2019;
The following table represents properties classified as Investment Properties, as of December 31, 2019;

Office
Retail
Land and Redevelopment

Total

# of Properties

1
17
2

2019
Value at 31-Dec-19
$CDN
1,033,875
12,307,380
5,490,730

18,831,985

# of Properties

2
17
3

2018
Value at 31-Dec-18
$CDN
2,103,862
14,160,720
8,151,278

24,415,860

The following table represents properties classified as Property and Equipment, as of December 31, 2019;

# of Properties

2019

Value at 31-Dec-19

$CDN

1,389,068

2018

Value at 31-Dec-18

$CDN

1,723,044

A summary of MGG’s property portfolio occupancy rates is set forth in the following table;

31 –Dec- 2019

Occupancy Rate*

31 –Dec- 2018

Occupancy Rate*

31 –Dec- 2017

Occupancy Rate*

96.9%

100.0%

98.8%

94.9%

100.0%

98.1%

97.2%

100.0%

98.5%

Weighted Average**

* Occupancy rates are calculated on a per meter basis;

** Weighted Average is calculated based on total meters available for lease

Demand for retail space has remained strong, despite a difficult economy. Occupancy levels for the Corporation’s office

space continued to improve throughout the year even while vacancy levels throughout the city have remained high as

additional supply has entered the market. The Corporation’s Tuguldur Center continues to maintain strong occupancy rates

throughout the year and ended the year with average weekly occupancy of over 95% compared to much lower rates in

previous years. Management attributes its success throughout the portfolio to increased marketing initiatives, industry

leading property management and realistic price expectations.

Management believes it is easier to sell properties when there is no tenant. Therefore, vacancy may increase as the

Corporation chooses not to renew leases in order to dispose of properties. These properties are not included in the

Land and Redevelopment

Occupancy Rates

Office

Retail

Total

Office

Retail

occupancy rate.

Leasing Schedule

rates.

In order to reduce the Corporation’s exposure to currency fluctuations and inflation, the Corporation targets shorter lease

durations with most tenants. Management’s experience is that this practice is in line with local industry standards, with the

expectation that once leases expire, existing tenants are offered the first right to re-lease the space at the prevailing market

MONGOLIA GROWTH GROUP LTD., Q4 2019 MD&A

| Mongolia Growth Group Ltd

The following table represents properties classified as Investment Properties, as of December 31, 2019;

Land and Redevelopment

Office

Retail

Total

# of Properties

2019

Value at 31-Dec-19

2019

Value at 31-Dec-19

$CDN

1,033,875

$CDN

1,033,875

12,307,380

5,490,730

18,831,985

# of Properties

2018

Value at 31-Dec-18

2018

Value at 31-Dec-18

$CDN

2,103,862

$CDN

2,103,862

14,160,720

8,151,278

24,415,860

Property and Equipment
Property and Equipment
Properties are classified as Property and Equipment if the Corporation occupies more than 10% of the property. Properties
Properties are classified as Property and Equipment if the Corporation occupies more than 10% of the property. Properties
classified as Property and Equipment are measured at cost less accumulated depreciation, less any accumulated impairment
classified as Property and Equipment are measured at cost less accumulated depreciation, less any accumulated impairment
losses. All repairs and maintenance costs to these properties are charged to the consolidated statement of operations during
losses. All repairs and maintenance costs to these properties are charged to the consolidated statement of operations during
the period in which they occur unless eligible for capitalization. The Corporation’s headquarters, purchased in October 2011,
the period in which they occur unless eligible for capitalization. The Corporation’s headquarters, purchased in October 2011,
falls within this category.
period in which they occur unless eligible for capitalization. The Corporation’s headquarters, purchased in October 2011, falls
falls within this category.
within this category.
The following table represents properties classified as Property and Equipment, as of December 31, 2019;
The following table represents properties classified as Property and Equipment, as of December 31, 2019;
The following table represents properties classified as Property and Equipment, as of December 31, 2019;

Office
Office
Retail
Retail
Land and Redevelopment
Land and Redevelopment

Total
Total

# of Properties
# of Properties
1
1
-
-
-
-

1
1

2019
2019
Value at 31-Dec-19
Value at 31-Dec-19
$CDN
$CDN
1,389,068
1,389,068
-
-
-
-

1,389,068
1,389,068

# of Properties
# of Properties
1
1
-
-
-
-

1
1

Occupancy Rates
Occupancy Rates
Occupancy Rates
A summary of MGG’s property portfolio occupancy rates is set forth in the following table;
A summary of MGG’s property portfolio occupancy rates is set forth in the following table;
A summary of MGG’s property portfolio occupancy rates is set forth in the following table;
31 –Dec- 2018
31 –Dec- 2018
Occupancy Rate*
Occupancy Rate*
94.9%
94.9%
100.0%
100.0%

31 –Dec- 2019
31 –Dec- 2019
Occupancy Rate*
Occupancy Rate*
96.9%
96.9%
100.0%
100.0%

Office
Office
Retail
Retail

2018
2018
Value at 31-Dec-18
Value at 31-Dec-18
$CDN
$CDN
1,723,044
1,723,044
-
-
-
-

1,723,044
1,723,044

31 –Dec- 2017
31 –Dec- 2017
Occupancy Rate*
Occupancy Rate*
97.2%
97.2%
100.0%
100.0%

Weighted Average**
Weighted Average**

98.8%
98.8%

98.1%
98.1%

98.5%
98.5%

* Occupancy rates are calculated on a per meter basis;
* Occupancy rates are calculated on a per meter basis;
** Weighted Average is calculated based on total meters available for lease
* Occupancy rates are calculated on a per meter basis;
** Weighted Average is calculated based on total meters available for lease
** Weighted Average is calculated based on total meters available for lease
Demand for retail space has remained strong, despite a difficult economy. Occupancy levels for the Corporation’s office
Demand for retail space has remained strong, despite a difficult economy. Occupancy levels for the Corporation’s office
space continued to improve throughout the year even while vacancy levels throughout the city have remained high as
Demand for retail space has remained strong, despite a difficult economy. Occupancy levels for the Corporation’s office space
space continued to improve throughout the year even while vacancy levels throughout the city have remained high as
continued to improve throughout the year even while vacancy levels throughout the city have remained high as additional supply
additional supply has entered the market. The Corporation’s Tuguldur Center continues to maintain strong occupancy rates
additional supply has entered the market. The Corporation’s Tuguldur Center continues to maintain strong occupancy rates
has entered the market. The Corporation’s Tuguldur Center continues to maintain strong occupancy rates throughout the year
throughout the year and ended the year with average weekly occupancy of over 95% compared to much lower rates in
throughout the year and ended the year with average weekly occupancy of over 95% compared to much lower rates in
and ended the year with average weekly occupancy of over 95% compared to much lower rates in previous years. Management
previous years. Management attributes its success throughout the portfolio to increased marketing initiatives, industry
attributes its success throughout the portfolio to increased marketing initiatives, industry leading property management and
previous years. Management attributes its success throughout the portfolio to increased marketing initiatives, industry
leading property management and realistic price expectations.
realistic price expectations.
leading property management and realistic price expectations.
Management believes it is easier to sell properties when there is no tenant. Therefore, vacancy may increase as the Corporation
Management believes it is easier to sell properties when there is no tenant. Therefore, vacancy may increase as the
Management believes it is easier to sell properties when there is no tenant. Therefore, vacancy may increase as the
chooses not to renew leases in order to dispose of properties. These properties are not included in the occupancy rate.
Corporation chooses not to renew leases in order to dispose of properties. These properties are not included in the
Corporation chooses not to renew leases in order to dispose of properties. These properties are not included in the
occupancy rate.
Leasing Schedule
occupancy rate.
In order to reduce the Corporation’s exposure to currency fluctuations and inflation, the Corporation targets shorter lease
Leasing Schedule
Leasing Schedule
durations with most tenants. Management’s experience is that this practice is in line with local industry standards, with the
In order to reduce the Corporation’s exposure to currency fluctuations and inflation, the Corporation targets shorter lease
expectation that once leases expire, existing tenants are offered the first right to re-lease the space at the prevailing market rates.
In order to reduce the Corporation’s exposure to currency fluctuations and inflation, the Corporation targets shorter lease
durations with most tenants. Management’s experience is that this practice is in line with local industry standards, with the
durations with most tenants. Management’s experience is that this practice is in line with local industry standards, with the
expectation that once leases expire, existing tenants are offered the first right to re-lease the space at the prevailing market
expectation that once leases expire, existing tenants are offered the first right to re-lease the space at the prevailing market
rates.
rates.

Most Recent Retail Lease Signings

Lease Renewal Date

Lease Type

SqM

Office Lease
Office Lease
Office Lease
Office Lease
Office Lease
Office Lease
Retail Lease
Retail Lease
Office Lease
Office Lease
Office Lease
Office Lease
Retail Lease
Office Lease
Office Lease
Office Lease

Oct-19
Oct-19
Oct-19
Oct-19
Nov-19
Nov-19
Nov-19
Nov-19
Nov-19
Nov-19
Nov-19
Nov-19
Dec-19
Dec-19
Dec-19
Dec-19

MONGOLIA GROWTH GROUP LTD., Q4 2019 MD&A
MONGOLIA GROWTH GROUP LTD., Q4 2019 MD&A

Old Price Per Meter
(Mongolian Tögrög)
35,000
25,000
20,000
25,000
25,000
25,000
46,464
2,000
22,000
22,801
20,000
25,000
35,486
25,000
25,000
35,000

New Price Per Meter
(Mongolian Tögrög)
35,000
25,000
20,000
25,000
25,000
25,000
46,464
2,000
22,000
22,801
20,000
25,000
35,486
25,000
25,000
35,000

31
100
21
15
90
14
125
300
12
60
24
39
201
14
54
36

8
8

Percent
Increase (decrease)
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%

The weighted average remaining lease length increased to 8.1 months in December 2019 compared to 7.6 months in
The weighted average remaining lease length increased to 8.1 months in December 2019 compared to 7.6 months in December
2018, calculated as a percentage of monthly revenues.
December 2018, calculated as a percentage of monthly revenues.

Contractually Obligated Rental Revenue

120.00%

100.00%

80.00%

60.00%

40.00%

20.00%

0.00%

2020

2021

Retail

Office

Redevelopment

As noted previously, the Corporation has been able to increase rental rates during 2019 in local currency terms; however,

this increase in rental rates is only sustainable if the economy continues to recover. The Corporation believes that the

majority of its existing leases are roughly at market rates.

MONGOLIA GROWTH GROUP LTD., Q4 2019 MD&A

Mongolia Growth Group Ltd |

Lease Type

Lease Renewal Date

SqM

Old Price Per Meter

New Price Per Meter

Percent

(Mongolian Tögrög)

Increase (decrease)

Most Recent Retail Lease Signings

Office Lease

Retail Lease

Office Lease

Retail Lease

Office Lease
Office Lease
Office Lease

Oct-19

Nov-19

Dec-19

Dec-19
Dec-19
Dec-19

100

125

300

14
54
36

201

35,000

25,000

20,000

25,000

46,464

2,000

22,000

22,801

20,000

25,000

35,486

25,000
25,000
35,000

35,000

25,000

20,000

25,000

46,464

2,000

22,000

22,801

20,000

25,000

35,486

25,000
25,000
35,000

0.00%

0.00%
0.00%
0.00%

The weighted average remaining lease length increased to 8.1 months in December 2019 compared to 7.6 months in
December 2018, calculated as a percentage of monthly revenues.

Contractually Obligated Rental Revenue

120.00%

100.00%

80.00%

60.00%

40.00%

20.00%

0.00%

2020

2021

Retail

Office

Redevelopment

As noted previously, the Corporation has been able to increase rental rates during 2019 in local currency terms; however,
this increase in rental rates is only sustainable if the economy continues to recover. The Corporation believes that the
Publicly Traded Securities
majority of its existing leases are roughly at market rates.
As at December 31, 2019, the Corporation held long positions in 14 different publicly traded companies including warrants
and options with a total value of approximately $4,275,000. The Corporation had a short put option position in one publicly
traded company with a total value of approximately $23,300.

Publicly Traded Securities

As at December 31, 2019, the Corporation held long positions in 14 different publicly traded companies including warrants and
options with a total value of approximately $4,275,000. The Corporation had a short put option position in one publicly traded
company with a total value of approximately $23,300.

The Corporation realized losses of $358,826 (2018 – gain $995,716) from realized sales of public securities during the year and
a foreign exchange gain of $228,761 (2018 – loss of $147,335). At year end, the Corporation had unrealized gains on public
securities of $454,824 (2018 – loss of $608,297). The Corporation anticipates that its public security portfolio will experience
During 2019, the Corporation primarily experienced realized and unrealized losses in its holdings of two energy related
volatility beyond the normal volatility of its property portfolio and the timing of gains and losses will be unpredictable.
securities, a put spread on an automotive company and various index put option spreads. During 2019, the Corporation
primarily experienced realized and unrealized gains in investments in the shipping sector. These gains and losses were offset
by less material gains and losses on other investments, some of which were unrealized at year-end. The Corporation
primarily adheres to an investment style strongly grounded on a valuation framework that would often be classified as
“value investing.” Additionally, the Corporation seeks out “event-driven” opportunities when appropriate.

During 2019, the Corporation primarily experienced realized and unrealized losses in its holdings of two energy related securities,
a put spread on an automotive company and various index put option spreads. During 2019, the Corporation primarily experienced
realized and unrealized gains in investments in the shipping sector. These gains and losses were offset by less material gains and
losses on other investments, some of which were unrealized at year-end. The Corporation primarily adheres to an investment
style strongly grounded on a valuation framework that would often be classified as “value investing.” Additionally, the Corporation
seeks out “event-driven” opportunities when appropriate.

Over the past few years, value investing has been out of favor and many companies with low price to cash flow or low price
to book value multiples have seen their share prices continue to decline. Management believes that this is primarily
responsible for investment returns that have underwhelmed since the summer of 2018. Management cannot determine
when undervalued stocks will again appreciate but intends to continue with its rigorous valuation-based investment
strategy.

Over the past few years, value investing has been out of favor and many companies with low price to cash flow or low price to
book value multiples have seen their share prices continue to decline. Management believes that this is primarily responsible
for investment returns that have underwhelmed since the summer of 2018. Management cannot determine when undervalued
stocks will again appreciate but intends to continue with its rigorous valuation-based investment strategy.

MONGOLIA GROWTH GROUP LTD., Q4 2019 MD&A

The Corporation’s public securities as of December 31, 2019 are broken out in the following sectors;
The Corporation’s public securities as of December 31, 2019 are broken out in the following sectors;

Long Portfolio

Industry Sector
Transportation & logistics
Financials
Natural gas
Uranium
Consumer services
Metals and Mining
Electrical equipment
Options
Other long equities

Short Put Option Portfolio

Industry Sector
Options

Percentage
38.5%
25.5%
13.2%
11.2%
9.6%
7.2%
6.3%
2.9%
1.2%

Percentage
-0.6%

As at December 31, 2019, the Corporation had borrowed $586,325 using margin supplied by its broker, which is included in the
Corporation’s total Marketable Securities Portfolio value. Management considers its equity positions to be liquid and as such,
these margin borrowings were netted out of the Corporation’s marketable securities and not reflected in the Corporation’s cash
on the balance sheet.

As at December 31, 2019, the Corporation had borrowed $586,325 using margin supplied by its broker, which is included in
the Corporation’s total Marketable Securities Portfolio value. Management considers its equity positions to be liquid and as
such, these margin borrowings were netted out of the Corporation’s marketable securities and not reflected in the
Corporation’s cash on the balance sheet.

Management views investment activities in public securities to be complementary to its core property business and a potentially
attractive use for excess property sale proceeds. Management intends to increase the size of its securities portfolio over time.

Management views investment activities in public securities to be complementary to its core property business and a
potentially attractive use for excess property sale proceeds. Management intends to increase the size of its securities
portfolio over time.

Subsequent to year end, due to declines in global market indexes, the Corporation’s portfolio has experienced a decline in value.

10
Subsequent to year end, due to declines in global market indexes, the Corporation’s portfolio has experienced a decline in
value.

MONGOLIA GROWTH GROUP LTD., Q4 2019 MD&A

| Mongolia Growth Group Ltd

Section 3 – Results of Operations
Section 3 – Results of Operations
Selected Annual Financial Information (CAD)
Selected Annual Financial Information (CAD)

Total Revenue

Income
Net income attributable to equity holders of the
Corporation
Total Comprehensive income/ (loss) attributable to
equity holders of the Corporation

Basic earnings per share ("EPS") (in CAD)
Net income/ (loss)

Diluted EPS (in CAD)
Net Income/ (loss)

Balance Sheet
Total Assets
Total liabilities

Total Equity

Shares Outstanding at year end
Book Value per share

Year ended
31-Dec- 2019

1,140,830

(3,250,446)

(4,257,182)

(0.10)

26,077,221
1,407,393
24,669,828

32,767,499
0.75

Year ended
31-Dec- 2018

1,471,649

1,557,343

1,416,968

0.05

31,017,823
1,970,518
29,047,305

33,243,999
0.87

Year ended
31-Dec- 2017

1,772,242

(3,097,214)

(4,396,960)

(0.09)

29,405,831
1,649,251

27,756,580

33,696,599
0.83

Revenue from Investment Properties
Revenue from Investment Properties
For the year end December 31, 2019, rental revenue from Investment Properties were $1,287,353 versus $1,384,840 in the
For the year end December 31, 2019, rental revenue from Investment Properties were $1,287,353 versus $1,384,840 in the prior
prior year. The decrease year-over-year was attributable to a decrease in the local currency and fewer investment
year. The decrease year-over-year was attributable to a decrease in the local currency and fewer investment properties.
properties.
Gain/loss on sale of Investment Properties
Gain/loss on sale of Investment Properties
For the year end December 31, 2019, the Corporation reported a net loss of $302,959 on the sale of three investment properties
versus a gain of $38,592 in the prior year on the sale of three properties. The loss was due to a decrease in value of the proper-
For the year end December 31, 2019, the Corporation reported a net loss of $302,959 on the sale of three investment
ties throughout the year.
properties versus a gain of $38,592 in the prior year on the sale of three properties. The loss was due to a decrease in value
of the properties throughout the year.
Revenue from Other Sources
Revenue from Other Sources
Revenue from other sources consists of late fees and other income, principally the Corporation’s brokerage business. For the year
Revenue from other sources consists of late fees and other income, principally the Corporation’s brokerage business. For
ending December 31, 2019, revenues from other sources totaled $156,436 compared to $48,217 for the year ending December
31, 2018. Revenues increased due to increased traction in the Corporation’s brokerage business.
the year ending December 31, 2019, revenues from other sources totaled $156,436 compared to $48,217 for the year ending
December 31, 2018. Revenues increased due to increased traction in the Corporation’s brokerage business.
Income Taxes
Income Taxes
The Corporation has subsidiaries in Mongolia that are subject to income taxes and, accordingly, has provided for current and
The Corporation has subsidiaries in Mongolia that are subject to income taxes and, accordingly, has provided for current
deferred income taxes with respect to those subsidiaries.
and deferred income taxes with respect to those subsidiaries.
Differences between IFRS and statutory taxation regulations in Mongolia give rise to temporary differences between the carrying
amount of assets and liabilities for financial reporting purposes and their tax bases. The deferred tax liability on the balance
Differences between IFRS and statutory taxation regulations in Mongolia give rise to temporary differences between the
sheet decreased by $155,606 during the year (Q4 2018 - $235,067 increase) primarily due to sale of investment properties and
carrying amount of assets and liabilities for financial reporting purposes and their tax bases. The deferred tax liability on the
an unrealized loss on the fair value of investment properties.
balance sheet decreased by $155,606 during the year (Q4 2018 - $235,067 increase) primarily due to sale of investment
properties and an unrealized loss on the fair value of investment properties.
Fair Value Adjustment on Investment Properties
As elected under IFRS, the Corporation’s investment portfolio is subsequently measured at fair value in the Corporation’s finan-
Fair Value Adjustment on Investment Properties
cial statements. As of December 31, 2019, the Corporation had approximately 70% of its Investment Properties Portfolio valued
As elected under IFRS, the Corporation’s investment portfolio is subsequently measured at fair value in the Corporation’s
by an international valuation firm and the remaining 30% were valued by Management. For the year ended December 31, 2019,
financial statements. As of December 31, 2019, the Corporation had approximately 70% of its Investment Properties
the fair value adjustment to investment properties was a loss of $1,347,662 compared to a gain of $1,892,577 for the same pe-
riod in 2018. The Corporation currently has a standing agreement with the owner of a 42 sq. meter apartment leading it to be
included in this property’s land title. The agreement entitles the owner of the apartment to 84 sq. meters of space on the first
floor of a new building to be built on this land. In this agreement, the Corporation had an obligation to complete the construction
of a new building by the end of 2017 and the agreement has not yet been extended. The Corporation has incurred an unrealized

MONGOLIA GROWTH GROUP LTD., Q4 2019 MD&A

Mongolia Growth Group Ltd |

fair value loss of $1,436,256 (2018 - $1,711,065) in excess of the fair value adjustment calculated by the international valuation
firm and included a liability of $131,438 (2018 - $141,887) on the Corporation’s balance sheet to reflect this liability. These ad-
justments are Management’s estimate of the markets perception of the risk related to this agreement.

Unrealized public securities investment gain/loss
During the year, the Corporation had unrealized gains of $454,824 (2018 - $608,297 loss). This increase in value was primarily a
result of appreciation in the value of various investments, particularly in the shipping sector.

Realized public securities investment gain/loss
During the year, the Corporation had a realized investment loss of $358,826 compared to a realized investment gain of $995,716
in 2018. This realized investment loss was primarily a result of the Corporation realizing losses on an investment in an energy
producer, a put spread in the automobile sector and a put spread on index options, offset by other realized gains.

Share Repurchase
During the year, the Corporation repurchased 404,500 of its common shares under its Normal Course Issuer Bid (NCIB) at an
average price of $0.30 (2018-443,500, $0.29 average). As at December 31, 2019, the Corporation held 35,000 shares in Treasury
to be cancelled during the first quarter of 2020 (2018- 107,000).

Property Operating Expenses
Property Operating Expenses consist of repairs and maintenance, bad debts, utilities, salaries, as well as land and property taxes.
For the year ending December 31, 2019, the property operating expenses were $1,055,102 compared to $860,376 during the
same period in 2018, representing an increase of approximately 23%. This increase was primarily due to an increase in salaries
and commissions paid in Mongolia.

Corporate Expenses
Corporate expenses include senior management and board of director compensation, share-based expenses, listing fees, profes-
sional fees, technology, travel, investment research expenses and administrative costs.

For the year ending December 31, 2019, general and administration expenses increased to $1,067,158 from $813,973 in 2018.
This increase from the previous year is primarily attributed to commissions owed to a consulting Company not affiliated with
senior management employees as well as investment research expenses incurred for managing the Corporation’s marketable
securities portfolio.

Currency
The Mongolian Tögrög has fluctuated significantly over the past five years. The Mongolian Tögrög has depreciated 6.8%, 5.1%,
11.5% and 5.3% in 2011, 2012, 2013 and 2014 respectively versus the Canadian Dollar while appreciating 11.4% in 2015 and
depreciating 28.5% in 2016, a further 4.3% in 2017, 0.7% in 2018 and 8% in 2019. The fluctuation in the currency is reflected
in the Corporation’s financial statements, most notably in the investment property portfolio, as it is the largest item on the bal-
ance sheet. Note 8 in the financial statements discloses the foreign exchange adjustment, which flows through the investment
property classification during each period. As at December 31, 2019, the Corporation recognized a foreign exchange adjustment
loss of $1,760,121 (2018 - loss of $150,835) to its investment property portfolio due to the 8% depreciation of the local currency
during the year.

Operating Profit (Loss)

Overall, the Corporation reported an Operating profit or an Adjusted EBITDA loss of $929,972 during 2019 (2018 – loss of
$523,313). The decrease in EBITDA over the previous year was due to lower revenues and an increase in expenses compared to
the previous year.

| Mongolia Growth Group LtdOperating Profit (Loss)
Overall, the Corporation reported an Operating profit or an Adjusted EBITDA loss of $929,972 during 2019 (2018 – loss of
$523,313). The decrease in EBITDA over the previous year was due to lower revenues and an increase in expenses compared
to the previous year.

The following table reconciles net income before income tax to Adjusted EBITDA from operations.
The following table reconciles net income before income tax to Adjusted EBITDA from operations.

Net Income before Income taxes
Add Depreciation and Amortization
Add/Subtract Interest and Investment Income/gains / Finance Expense

EBITDA
Subtract Fair Value Adjustment Gain (Add back loss) on all properties
including impairments on PPE and Other Assets
Add back reclassification of accumulated other comprehensive income on
disposal of subsidiary

Total Adjusted EBITDA

2019
$
(3,315,654)
73,294
(18,793)

2018
$
1,815,069
77,361
(324,646)

(3,261,153)

1,567,784

1,506,317

(2,091,097)

824,864

(929,972)

(523,313)

Net Income
Net Income
For the year ended December 31, 2019, the Corporation experienced a net loss of $3,250,446 compared to a net income of
For the year ended December 31, 2019, the Corporation experienced a net loss of $3,250,446 compared to a net income of
$1,557,343 for the year ended December 31, 2018. This difference is primarily attributed to the substantial unrealized loss
$1,557,343 for the year ended December 31, 2018. This difference is primarily attributed to the substantial unrealized loss on
on fair value adjustment on investment properties of $1,347,662 during the year (2018 – gain of $1,892,577), a
fair value adjustment on investment properties of $1,347,662 during the year (2018 – gain of $1,892,577), a reclassification of
reclassification of accumulated other comprehensive income on the disposal of a subsidiary (2018 – nil) as well as realized
accumulated other comprehensive income on the disposal of a subsidiary (2018 – nil) as well as realized losses on marketable
losses on marketable securities of $358,826 (2018 - $995,716 gain).
securities of $358,826 (2018 - $995,716 gain).

Management cautions investors that the Corporation is primarily focused on increasing shareholder value on a per share basis.
Management cautions investors that the Corporation is primarily focused on increasing shareholder value on a per share
This means that operationally, management is more concerned with long-term asset appreciation at the expense of short-term
basis. This means that operationally, management is more concerned with long-term asset appreciation at the expense of
profitability.
short-term profitability.

MONGOLIA GROWTH GROUP LTD., Q4 2019 MD&A

Mongolia Growth Group Ltd |

Section 4 - Financial Condition
Section 4 - Financial Condition
Cash Flow
Cash Flow
Mongolia Growth Group’s primary sources of capital are cash generated from equity issuance, financing and asset sales.
Management expects to meet all of the Corporation’s obligations through current cash and cash equivalents along with cash
Mongolia Growth Group’s primary sources of capital are cash generated from equity issuance, financing and asset sales.
flows from asset sales.
Management expects to meet all of the Corporation’s obligations through current cash and cash equivalents along with cash
flows from asset sales.
The following table provides an overview of the Corporation’s cash flows from operating, financing and investing activities
The following table provides an overview of the Corporation’s cash flows from operating, financing and investing activities for the
for the year ended December 31, 2019 and 2018.
year ended December 31, 2019 and 2018.

Net change in cash related to:
Operating
Investing
Financing
Effects of exchange rates on cash

Net change in cash during the period

31-Dec-19
$

(502,836)
1,487,827
(801,197)
(191,950)

(8,156)

For the year ending
31-Dec-18
$

(611,744)
(363,517)
(126,243)
206,144

(895,360)

Overall, the Corporation had cash outflows of $8,156 during 2019 compared to cash outflows of $895,360 in 2018. The Corporation
Overall, the Corporation had cash outflows of $8,156 during 2019 compared to cash outflows of $895,360 in 2018. The
had significant cash inflows from Investing offset by outflows from Operating and Financing. The changes in components of cash
Corporation had significant cash inflows from Investing offset by outflows from Operating and Financing. The changes in
flows for the year ended December 31, 2019, compared to the year ended December 31, 2018, were the result of the following
components of cash flows for the year ended December 31, 2019, compared to the year ended December 31, 2018, were
factors:
the result of the following factors:

• Operating–The Corporation experienced a moderate decrease in Operating cash outflows for the year ended 2019 versus
outflows for the year ended 2018 due to an increase in non-cash working capital balances.
• Operating–The Corporation experienced a moderate decrease in Operating cash outflows for the year ended
2019 versus outflows for the year ended 2018 due to an increase in non-cash working capital balances.
• Investing–The Corporation experienced significant Investing cash inflows for the year ended 2019 due to net sales of
marketable securities and by the disposal of investment properties. In comparison, 2018 saw a net purchase
Investing–The Corporation experienced significant Investing cash inflows for the year ended 2019 due to net
of marketable securities offset by a net disposal of investment properties.
sales of marketable securities and by the disposal of investment properties. In comparison, 2018 saw a net
• Financing–Financing cash outflow occurred due to the repayment of the Corporation’s bank loan combined with the
purchase of marketable securities offset by a net disposal of investment properties.
repurchase of 404,500 shares during the year versus 443,500 shares during the 2018 year.

•

To date, the Corporation has been able to meet all of its capital and other cash requirements from its internal sources of cash. As
Financing–Financing cash outflow occurred due to the repayment of the Corporation’s bank loan combined
at December 31, 2019, the Corporation had approximately $737,255 (2018 - $745,411) in cash and cash equivalents as well as
with the repurchase of 404,500 shares during the year versus 443,500 shares during the 2018 year.
$3,689,304 in marketable securities, which it considers to be liquid and available to be sold at any time should the Corporation
require cash. Due to the expectation that the Corporation’s cash position will worsen in future quarters, the Corporation is
To date, the Corporation has been able to meet all of its capital and other cash requirements from its internal sources of
focused on increasing liquidity and cash reserves in Canada through asset sales.
cash. As at December 31, 2019, the Corporation had approximately $737,255 (2018 - $745,411) in cash and cash equivalents
Total Assets
as well as $3,689,304 in marketable securities, which it considers to be liquid and available to be sold at any time should the
Corporation require cash. Due to the expectation that the Corporation’s cash position will worsen in future quarters, the
As of December 31, 2019, the Corporation had $5,809,586 (2018 - $4,809,169) in current assets out of which $737,255 (2018 -
Corporation is focused on increasing liquidity and cash reserves in Canada through asset sales.
$745,411) was held in cash. The increase in current assets is due to an increase in accounts receivable (other assets) for the sale
of a property that took place at the end of the year.
Total Assets
The majority of the Corporation’s assets are classified as Non-Current Assets, mainly Investment Properties. Investment
As of December 31, 2019, the Corporation had $5,809,586 (2018 - $4,809,169) in current assets out of which $737,255 (2018
Properties are carried at Fair Market Value and decreased during the year to $18,831,985 (2018 -$24,415,860) due to a reduction
- $745,411) was held in cash. The increase in current assets is due to an increase in accounts receivable (other assets) for
in the number of properties as well as a significant unrealized loss on fair value adjustment.
the sale of a property that took place at the end of the year.
Property and Equipment, which primarily consists of properties that are measured at their cost base, decreased from $1,792,794
in 2018 to $1,435,650 in 2019 primarily due to an impairment on the Corporation’s headquarters in line with the unrealized loss
The majority of the Corporation’s assets are classified as Non-Current Assets, mainly Investment Properties. Investment
on fair value adjustment of its Investment Properties..
Properties are carried at Fair Market Value and decreased during the year to $18,831,985 (2018 -$24,415,860) due to a
reduction in the number of properties as well as a significant unrealized loss on fair value adjustment.
Total Liabilities

As of December 31, 2019, the Corporation had current liabilities of $825,506 (2018 - $1,233,025) consisting primarily of payables
Property and Equipment, which primarily consists of properties that are measured at their cost base, decreased from
and accrued liabilities. The decrease was due to the Corporation’s loan which was classified as short term debt at the end of 2018
$1,792,794 in 2018 to $1,435,650 in 2019 primarily due to an impairment on the Corporation’s headquarters in line with
and repaid in December 2019.
the unrealized loss on fair value adjustment of its Investment Properties.
As of December 31, 2019, the only non-current liability on the balance sheet are deferred income taxes of $581,887 (Q4 2018-
$737,493).

Management considers all other current cash commitments to be immaterial and operational in nature.

MONGOLIA GROWTH GROUP LTD., Q4 2019 MD&A

| Mongolia Growth Group Ltd

Total Liabilities

As of December 31, 2019, the Corporation had current liabilities of $825,506 (2018 - $1,233,025) consisting primarily of

payables and accrued liabilities. The decrease was due to the Corporation’s loan which was classified as short term debt at

the end of 2018 and repaid in December 2019.
the end of 2018 and repaid in December 2019.

As of December 31, 2019, the only non-current liability on the balance sheet are deferred income taxes of $581,887 (Q4
As of December 31, 2019, the only non-current liability on the balance sheet are deferred income taxes of $581,887 (Q4
2018-$737,493).
2018-$737,493).

Management considers all other current cash commitments to be immaterial and operational in nature.
Management considers all other current cash commitments to be immaterial and operational in nature.
Total Equity
Total Equity
Total Equity
The equity of the Corporation consists of one class of common shares.
The equity of the Corporation consists of one class of common shares.
The equity of the Corporation consists of one class of common shares.
Outstanding
Outstanding
Common shares
Common shares
Options to buy common shares
Options to buy common shares
* As at December 31, 2019, the Corporation held 35,000 of the common shares outstanding in Treasury to be cancelled during the first quarter of 2020 (2018-107,000).
* As at December 31, 2019, the Corporation held 35,000 of the common shares outstanding in Treasury to be cancelled during the first quarter of 2020 (2018-107,000).
* As at December 31, 2019, the Corporation held 35,000 of the common shares outstanding in Treasury to be cancelled during the first quarter of 2020 (2018-107,000).
* As of April 7, 2020, the Corporation had 32,398,499 shares outstanding, no shares held in treasury, and no options outstanding.
* As of April 7, 2020, the Corporation had 32,398,499 shares outstanding, no shares held in treasury, and no options outstanding.
* As of April 7, 2020, the Corporation had 32,398,499 shares outstanding, no shares held in treasury, and no options outstanding.
Options Outstanding
Options Outstanding
Options Outstanding
At December 31, 2019, the Corporation had 1,420,000 options that were exercisable (December 31, 2018; 3,103,000).
At December 31, 2019, the Corporation had 1,420,000 options that were exercisable (December 31, 2018; 3,103,000).
At December 31, 2019, the Corporation had 1,420,000 options that were exercisable (December 31, 2018; 3,103,000).
The chart below shows the historical option grants and options outstanding as of December 31, 2019.
The chart below shows the historical option grants and options outstanding as of December 31, 2019.
The chart below shows the historical option grants and options outstanding as of December 31, 2019..

31-Dec 19
31-Dec 19
32,767,499*
32,767,499*
1,420,000
1,420,000

31-Dec-18
31-Dec-18
33,243,999*
33,243,999*
3,103,000
3,103,000

Option Price
Option Price

1.64
1.64
1.75
1.75
1.9
1.9
4.2
4.2
4.77
4.77
4.25
4.25
4.0
4.0
4.13
4.13
1.09
1.09
0.72
0.72
0.74
0.74
0.38
0.38

Total
Total

Granted
Granted

100,000
100,000
300,000
300,000
1,363,000
1,363,000
900,000
900,000
175,000
175,000
150,000
150,000
190,000
190,000
475,000
475,000
375,000
375,000
935,000
935,000
640,000
640,000
350,000
350,000

Expired
Expired

Forfeited
Forfeited

Cancelled
Cancelled

Exercised
Exercised

-
-
50,000
50,000
1,078,000
1,078,000
205,000
205,000
20,000
20,000
5,000
5,000
-
-
125,000
125,000
300,000
300,000
-
-
-
-
280,000
280,000

-
-
-
-
85,000
85,000
408,000
408,000
100,000
100,000
50,000
50,000
-
-
75,000
75,000
75,000
75,000
80,000
80,000
75,000
75,000
70,000
70,000

-
-
-
-
-
-
287,000
287,000
55,000
55,000
95,000
95,000
190,000
190,000
275,000
275,000
-
-
-
-
-
-
-
-

100,000
100,000
250,000
250,000
200,000
200,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-

Total Options
Total Options
Outstanding
Outstanding
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
855,000
855,000
565,000
565,000
-
-

Total
Total
Exercisable
Exercisable
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
855,000
855,000
565,000
565,000
-
-

Non
Non
exercisable
exercisable
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-

5,953,000
5,953,000

2,063,000
2,063,000

1,018,000
1,018,000

902,000
902,000

550,000
550,000

1,420,000
1,420,000

-
-

Acquisitions and Dispositions
Acquisitions and Dispositions
Acquisitions and Dispositions
During the year ended December 31, 2019, the Company sold three investment properties for proceeds with a value of
During the year ended December 31, 2019, the Company sold three investment properties for proceeds with a value of
During the year ended December 31, 2019, the Company sold three investment properties for proceeds with a value of
$2,221,346 resulting in a net loss of $302,959 on these transactions. One of these properties was disposed of through its
$2,221,346 resulting in a net loss of $302,959 on these transactions. One of these properties was disposed of through its
$2,221,346 resulting in a net loss of $302,959 on these transactions. One of these properties was disposed of through its interest
interest in its Endymion LLC (note 21). The proceeds received consisted of $2,029,937 in cash, and $191,409 in investment
interest in its Endymion LLC (note 21). The proceeds received consisted of $2,029,937 in cash, and $191,409 in investment
in its Endymion LLC (note 21). The proceeds received consisted of $2,029,937 in cash, and $191,409 in investment properties, of
properties, of which $1,145,568 and $143,196 respectively are classified within accounts receivable at December 31, 2019
properties, of which $1,145,568 and $143,196 respectively are classified within accounts receivable at December 31, 2019
which $1,145,568 and $143,196 respectively are classified within accounts receivable at December 31, 2019 (note 7).
(note 7).
(note 7).
In comparison, during the year ended December 31, 2018, three investment properties were sold for cash consideration of
$547,955 resulting in net gain of $38,592 on these transactions.
In comparison, during the year ended December 31, 2018, three investment properties were sold for cash consideration of
In comparison, during the year ended December 31, 2018, three investment properties were sold for cash consideration of
$547,955 resulting in net gain of $38,592 on these transactions.
Related Party Transactions
$547,955 resulting in net gain of $38,592 on these transactions.

Parties are generally considered to be related if the parties are under common control or if one party has the ability to control
Related Party Transactions
Related Party Transactions
the other party or can exercise significant influence or joint control over the other party in making financial and operational
Parties are generally considered to be related if the parties are under common control or if one party has the ability to
decisions. In considering each possible related party relationship, attention is directed to the substance of the relationship, not
Parties are generally considered to be related if the parties are under common control or if one party has the ability to
control the other party or can exercise significant influence or joint control over the other party in making financial and
merely the legal form.
control the other party or can exercise significant influence or joint control over the other party in making financial and
Key management personnel of the Corporation include all directors and executive management. The summary of
operational decisions. In considering each possible related party relationship, attention is directed to the substance of the
operational decisions. In considering each possible related party relationship, attention is directed to the substance of the
Key management personnel of the Corporation include all directors and executive management. The summary of compensation
compensation for key management personnel is as follows:
relationship, not merely the legal form.
relationship, not merely the legal form.
for key management personnel is as follows:

Related Party Transactions

Salaries and other short-term benefits to officers
Director fees
Share-based payments to directors and officers

MONGOLIA GROWTH GROUP LTD., Q4 2019 MD&A
MONGOLIA GROWTH GROUP LTD., Q4 2019 MD&A

2019
$
481,213
40,000
-

521,213

2018
$
340,439
40,000
-

15
15

380,439

As at December 31, 2019, amounts due to related parties totaled approximately $48,118, comprised of accrued directors
Off-Balance Sheet Items
fees and fees owed to management (2018 - $57,000) were included in trade payables and accrued liabilities. An amount of
As of December 31, 2019, the Corporation had no off-balance sheet items.
$20,867 is owed to the Company by a company controlled by the CEO.

Off-Balance Sheet Items
As of December 31, 2019, the Corporation had no off-balance sheet items.

Events Subsequent to Year End

•

Since January 1, 2020, the Corporation has repurchased 334,000 of its shares at an average price of $0.22/share
and cancelled 369,000 shares.

The Corporation sold 2 properties for proceeds of approximately $413,000 and a net gain of $nil

The Corporation partially suspended operations at its headquarters and reduced its agency brokerage operation in

order to reduce the potential for the spread of COVID-19. Additionally, numerous tenants have been unable to pay

contracted rents. The Corporation is actively working with tenants during this difficult environment but does not

believe that it will be able to collect a material percentage of rent that was due in the first quarter. The Corporation

is unable to determine future collection rates. Since the initiation of these actions, the Company has experienced

a material reduction in rental revenues received. It is reasonable to expect there could be a material negative

impact on the fair values of investment properties and/or marketable securities, however at this time the potential

effect cannot be quantified. At this time, there is no way to know the ultimate impact of these extra-ordinary

actions upon the economy or the Company.

• As disclosed in the Corporation’s March 16, 2020 press release, the Corporation announced that the TSX Venture

Exchange (the “Exchange”) had accepted a Notice of Intention to renew its normal course issuer bid to purchase

outstanding common shares of the Corporation on the open market in accordance with the policies of the TSXV.

Up to 2,500,000 common shares, representing up to approximately 7.7% of the 32,569,499 Common Shares as of

March 16th, 2020, of the Issuer currently issued and outstanding, or approximately 9.9% of the 25,292,549 common

shares constituting the Issuer’s current Public Float (as defined in the Policies of the Exchange).

Securities Sought

Duration

The Issuer intends to commence purchasing its common shares under the Normal Course Issuer Bid three clear

trading days following acceptance of the same by the TSX Venture Exchange (the “Exchange”) The Normal Course

Issuer Bid will terminate on the date that is one year from the date on which purchases commence.

Method of Acquisition

Purchases will be affected through the facilities of the Exchange. Purchase and payment for the common shares of

the Issuer will be made by the Issuer in accordance with Exchange requirements.

MONGOLIA GROWTH GROUP LTD., Q4 2019 MD&A

Mongolia Growth Group Ltd |

Events Subsequent to Year End

• Since January 1, 2020, the Corporation has repurchased 334,000 of its shares at an average price of $0.22/share and

cancelled 369,000 shares.

• The Corporation sold 2 properties for proceeds of approximately $413,000 and a net gain of $nil

• The Corporation partially suspended operations at its headquarters and reduced its agency brokerage operation in order
to reduce the potential for the spread of COVID-19. Additionally, numerous tenants have been unable to pay contracted
rents. The Corporation is actively working with tenants during this difficult environment but does not believe that it will
be able to collect a material percentage of rent that was due in the first quarter. The Corporation is unable to determine
future collection rates. Since the initiation of these actions, the Company has experienced a material reduction in rental
revenues received. It is reasonable to expect there could be a material negative impact on the fair values of investment
properties and/or marketable securities, however at this time the potential effect cannot be quantified. At this time,
there is no way to know the ultimate impact of these extra-ordinary actions upon the economy or the Company.

• As disclosed in the Corporation’s March 16, 2020 press release, the Corporation announced that the TSX Venture Exchange
(the “Exchange”) had accepted a Notice of Intention to renew its normal course issuer bid to purchase outstanding
common shares of the Corporation on the open market in accordance with the policies of the TSXV.

Securities Sought: Up to 2,500,000 common shares, representing up to approximately 7.7% of the 32,569,499 Common
Shares as of March 16th, 2020, of the Issuer currently issued and outstanding, or approximately 9.9% of the 25,292,549
common shares constituting the Issuer’s current Public Float (as defined in the Policies of the Exchange).

Duration: The Issuer intends to commence purchasing its common shares under the Normal Course Issuer Bid three clear
trading days following acceptance of the same by the TSX Venture Exchange (the “Exchange”) The Normal Course Issuer
Bid will terminate on the date that is one year from the date on which purchases commence.

Method of Acquisition: Purchases will be affected through the facilities of the Exchange. Purchase and payment for the
common shares of the Issuer will be made by the Issuer in accordance with Exchange requirements.

Member and Broker: The Normal Course Issuer Bid will be conducted by M Partners Inc. of 70 York Street, Suite 1560,
Toronto ON M5J 1S9; Phone: (416) 603-7381.

Consideration Offered: Purchases of common shares under the Normal Course Issuer Bid will be conducted at applicable
Market Prices in accordance with Exchange requirements. Completion of purchases under the bid will be subject to
the Issuer having sufficient funds to acquire the common shares and continue to meet its working capital requirements
throughout the course of the bid. The Issuer may in the normal course of its business operations, subject to market
conditions, sell one or more of its investment properties to fund acquisitions throughout the course of the bid.

Reasons for the Normal Course Issuer Bid: The Issuer is undertaking the bid because, in the opinion of its board of
directors, the market price of its common shares, from time to time, may not fully reflect the underlying value of its
operations and future growth prospects. The Issuer believes that in such circumstances, the purchase of the common
shares of the Issuer may represent an appropriate and desirable use of the Issuer’s funds and further enhance market
stability.

Persons Acting Jointly or in Concert with the Issuer: No person is acting jointly and in concert with the Corporation in
connection with the Bid.

Valuation: After making reasonable enquiry, the Issuer is not aware of any appraisal or valuation of the Issuer’s securities
that has been prepared within the preceding two years.

In connection with the preparation of its audited financial statements for the financial year ending December 31, 2019,
the Issuer engaged CBRE Limited, an arm’s length property valuator, to prepare the following independent valuation
reports (the “Valuation”) in respect of the Issuer’s Mongolian real estate investment assets:

• report entitled “Retail Valuation Report – Ulaanbaatar, Mongolia”, dated March 13, 2018, which ascribed a value of
591,000,000 MNT (Mongolian Togrogs) to the Issuer’s material retail real estate investment assets as at December 31,
2018;

• report entitled “Land Valuation Report – Ulaanbaatar, Mongolia”, dated March 13, 2018, which ascribed a value of
30,070,000,000 MNT (Mongolian Togrogs) to the Issuer’s material land investment assets as at December 31, 2018;

• report entitled “Office Valuation Report – Ulaanbaatar, Mongolia”, dated March 13, 2018, which ascribed an aggregate
value of 3,344,000,000 MNT (Mongolian Togrogs) to the Issuer’s material office real estate investment assets as at
December 31, 2018

The Valuations were prepared for internal accounting purposes and the Issuer does not have permission to share the
Valuations externally.

| Mongolia Growth Group LtdPrevious Purchases: The Issuer has purchased 665,000 of its common shares at an average price of $0.25 within the past
12 months.

Acceptance by Insiders, Affiliates and Associates: To the knowledge of the Issuer, no director, senior officer or other
Insider of the Issuer or any associate or affiliate of the Issuer or any insider of the Issuer currently intends to sell common
shares under the Normal Course Issuer Bid. However, such sales by persons through the facilities of the Exchange may
occur if the personal circumstances of such persons change or any such person makes a decision to sell shares as market
circumstances may warrant. The benefits to any such person whose shares are purchased under the bid would be the
same as the benefits available to all other holders of the Issuer’s common shares whose shares are purchased under the
bid.

Mongolia Growth Group Ltd |Section 5 - Quarterly Information
Section 5 - Quarterly Information
Quarterly Results
Quarterly Results
The following table is a summary of select quarterly information over the previous eight quarters:
The following table is a summary of select quarterly information over the previous eight quarters:

Revenue
Net income (loss)
Income (loss) per common share
Total Assets
Weighted Average Shares (No.)
Ending Shares (No.)

Q4 2019
30,194
(3,013,557)
(0.10)
26,077,221
32,989,169
32,767,499

Q3 2019
377,605
(679,160)
(0.02)
31,942,398
33,049,028
32,891,499

Q2 2019
372,167
178,237
0.01
30,121,056
33,104,645
32,954,499

Q1 2019
360,864
264,034
0.01
30,969,616
33,113,966
33,136,999

Q4 2018
367,916
(577,451)
(0.02)
31,017,823
33,352,911
33,243,999

Q3 2018
389,934
2,279,078
0.08
31,844,685
33,412,466
33,379,499

Q2 2018
357,051
128,671
0.00
30,111,915
33,464,179
33,379,499

Q1 2018
356,748
(272,955)
(0.01)
30,142,591
33,530,605
33,476,999

Revenue
Revenue
During the fourth quarter, the Corporation’s real estate subsidiary earned total revenue of $30,194 (Q4 2018 -$367,916) of
During the fourth quarter, the Corporation’s real estate subsidiary earned total revenue of $30,194 (Q4 2018 -$367,916) of which
which rental income earned was $301,771 (Q4 2018 - $338,500). This rental income decrease is attributed to lower rental
rental income earned was $301,771 (Q4 2018 - $338,500). This rental income decrease is attributed to lower rental rates as well
rates as well as fewer investment properties. The quarterly revenue number also includes other revenue earned from
as fewer investment properties. The quarterly revenue number also includes other revenue earned from miscellaneous sources
miscellaneous sources such as late fees, advertising and from the sale of investment properties. During the fourth quarter,
such as late fees, advertising and from the sale of investment properties. During the fourth quarter, the Corporation experienced
a loss on the sale of investment properties of $302,959 (2018 – gain of $10,110), which negatively affected the Corporation’s
the Corporation experienced a loss on the sale of investment properties of $302,959 (2018 – gain of $10,110), which
revenue.
negatively affected the Corporation’s revenue.
During the 4th quarter of 2019, the Corporation also incurred an unrealized loss on fair value adjustment on investment properties
During the 4th quarter of 2019, the Corporation also incurred an unrealized loss on fair value adjustment on investment
and impairment of PP&E of $1,506,317 compared to an unrealized gain on fair value adjustment of $855,161 during Q4 2018.
properties and impairment of PP&E of $1,506,317 compared to an unrealized gain on fair value adjustment of $855,161
Expenses
during Q4 2018.
Quarterly expenses related to corporate operations totaled $438,214 (Q4 2018 - $193,871). This increase was due to commissions
Expenses
owed to a consulting Company not affiliated with senior management employees.
Quarterly expenses related to corporate operations totaled $438,214 (Q4 2018 - $193,871). This increase was due to
Net Income
commissions owed to a consulting Company not affiliated with senior management employees.
During the quarter, the Corporation experienced a loss of $3,013,557 in comparison to a loss of $577,451 in the same quarter
of the previous year. This difference is mainly attributed to the significant fair value adjustment loss recorded during the fourth
Net Income
quarter of 2019 compared to a fair value adjustment gain recorded during the fourth quarter of 2018.
During the quarter, the Corporation experienced a loss of $3,013,557 in comparison to a loss of $577,451 in the same
quarter of the previous year. This difference is mainly attributed to the significant fair value adjustment loss recorded during
the fourth quarter of 2019 compared to a fair value adjustment gain recorded during the fourth quarter of 2018.

MONGOLIA GROWTH GROUP LTD., Q4 2019 MD&A

| Mongolia Growth Group Ltd

Section 6 – Critical Estimates
Critical Accounting Estimates
The preparation of financial statements in accordance with IFRS required Management to make assumptions about the future
that affect the reported amounts of assets and liabilities. Estimates and judgments are continually evaluated based on historical
experiences and other factors, including expectations of future events that are believed to be reasonable under the circum-
stances. In the future, actual experience may differ from these estimates and assumptions.

The effect of a change in an accounting estimate is recognized prospectively by including it in net income (loss) in the period of
the change, if the change affects that period only, or in the period of the change and future periods, if the change affects both.

Significant estimates made in the preparation of the consolidated financial statements include the following:

Fair value of investment properties
Fair value of investment properties - The estimate of fair value of investment properties is the most critical accounting estimate
to the Company. An external appraiser estimates the fair value of the majority of investment properties by dollar value annually.

The remaining balance of investment properties was valued internally. The fair value of investment properties is based on the
nature, location and condition of the specific asset. The fair value of investment properties represents an estimate of the price
that would be made in an arm’s length transaction between knowledgeable, willing parties. This fair value assumes that the
Company is in possession of the property’s land and property titles where applicable. Management judges that the Company
has the appropriate titles for each of the properties classified as Investment Properties. Properties whereby Management judges
that the Company’s titles are at risk, have been impaired to reflect the level of risk estimated by Management.

Operating Environment of the Corporation
Mongolia displays many characteristics of an emerging market including relatively high inflation and interest rates. The tax and
customs legislation in Mongolia is subject to varying interpretations and frequent changes. The future economic performance of
Mongolia is tied to continuing demand from China and continuing high global prices for commodities as well as being dependent
upon the effectiveness of economic, financial and monetary measures undertaken by the Government of Mongolia together
with tax, legal, regulatory and political developments. Management is unable to predict all developments that could have an
impact on the Mongolian economy and consequently what effect, if any, they could have on the future financial position of the
Corporation.

From 2016 to 2019, the Corporation has had difficulty in converting Mongolian Tögrög to U.S. Dollars at large Mongolian banks.
This difficulty has persisted in subsequent periods, but to a lesser degree. There can be no certainty regarding the ability to
convert or wire money from Mongolia in the future.

Mongolia recently signed an agreement with the IMF. There is no certainty regarding the demands that the IMF may make upon
Mongolia for austerity or the impacts that this may have on the economy of Mongolia.

Due to the economic crisis, businesses are increasingly paying for transactions using various forms of barter such as used
equipment, apartments, vehicles, future services and livestock. To date, the Corporation has only agreed to receive barter items
in extreme circumstances and has a strong preference to avoid using barter in transactions. As the economic crisis worsens,
barter transactions may become a more substantial percentage of overall economic transactions. As a result, the Corporation
may be forced to receive barter items at a higher frequency. These barter items are often difficult to value and monetize and may
cause other difficulties for the Corporation that are impossible to predict.

Deferred Tax Assets
Deferred tax assets are recognized to the extent that it is probable that deductible temporary differences will reverse in the
foreseeable future and there will be sufficient future taxable profits against which the deductible temporary differences can be
utilized. Management reviews the carrying amount of deferred tax assets at the end of each reporting period which is reduced to
the extent that it is no longer probable that deferred tax assets recognized will be recovered, or increased to the extent that suf-
ficient future taxable profit will be available to allow all or part of a previously unrecognized deferred tax asset to be recovered.
Estimates of future taxable income are based on forecasted cash flows from operations, available tax planning opportunities and
expected timing of reversals of taxable temporary differences.

Mongolia Growth Group Ltd |Valuation of Marketable Securities

The Company recognizes marketable securities at fair value. Fair value is determined on the basis of market prices from
independent sources, if available. If there is no market price, then the fair value is determined by using valuation models with
inputs derived from observable market data where possible but where observable data is not available, judgement is required
to establish fair values.

Significant judgments made in the preparation of these consolidated financial statements include the
following areas:

Judgement is required in determining whether an asset meets the criteria for classification as assets held for sale and or as
discontinued operations in the consolidated financial statements. Criteria considered by management include the existence of
and commitment to a plan to dispose of the assets, the expected selling price of the assets, the probability of the sale being
completed within an expected timeframe of one year and the period of time any amounts have been classified within assets
held for sale. Management reviews the criteria for assets held for sale each quarter and reclassifies such assets to or from this
financial position category as appropriate. On completion of the sale, Management exercises judgement as to whether the sale
qualifies as a discontinued operation.

As at December 31, 2019 and 2018, Management has made the judgment that none of the Corporation’s assets meet the criteria
to be classified as held for sale. While this is due to a number of factors, a primary reason is that due to the conditions of the
Mongolian economy and the lack of liquidity in the market, management was unable to conclude that the sale of any significant
size asset could be considered highly probable.

Judgement is required in determining whether the Company’s Investment property and land use rights titles are at risk. As
at December 31, 2019 and 2018, Management has made the judgment that Investment Properties whereby the land title has
recently expired but is expected to be renewed in the near future should continue to be classified as Investment Properties.
Properties whereby Management judges that the Company’s titles are at risk, have been impaired to reflect the level of risk
estimated by Management.

| Mongolia Growth Group LtdSection 7 – Risk Management
Credit Risk
The Corporation’s exposure to credit risk is managed through risk management policies and procedures with emphasis on the
quality of the investment portfolio. For the year, most of the Corporation’s credit risk consisted of institutional deposits. The
majority of the funds invested are held in reputable Canadian or Mongolian banks. Recently, there have been rumors that vari-
ous commercial banks in Mongolia could fail. There is no way to tell if these rumors are accurate however, starting in early July,
the Corporation has had difficulty in converting Mongolian Tögrög into U.S. Dollars. If banks are unwilling or unable to give the
Corporation access to its U.S. Dollar deposits, the Corporation could experience severe liquidity issues.

The Corporation is exposed to credit risk as an owner of real estate in which tenants may become unable to pay contracted
rents. The Corporation mitigates this risk by carrying out due diligence on significant tenants. The Corporation’s properties
are diversified across residential and commercial classes. Historically, bad debts have not been a substantial expense for the
Corporation. Recently, the Corporation has experienced an increase in late rental payments. The Corporation believes that it will
collect all of this debt, but there is no certainty that this will occur.

Liquidity Risk
Under certain market conditions, such as during volatile markets or when trading in a security or market is otherwise impaired,
the liquidity of the Corporation’s portfolio positions may be reduced. In addition, the Corporation may from time to time hold
large positions with respect to a specific type of financial instrument, which may reduce the Corporation’s liquidity. During such
times, the Corporation may be unable to dispose of certain financial instruments, including longer-term financial instruments,
which would adversely affect its ability to rebalance its portfolio. In addition, such circumstances may force the Corporation to
dispose of financial instruments at reduced prices, thereby adversely affecting its performance. If there are other market partici-
pants seeking to dispose of similar financial instruments at the same time, the Corporation may be unable to sell such financial
instruments or prevent losses relating to such financial instruments. Furthermore, if the Corporation incurs substantial trading
losses, the need for liquidity could rise sharply while its access to liquidity could be impaired. In addition, in conjunction with a
market downturn, the Corporation’s counterparties could incur losses of their own, thereby weakening their financial condition
and increasing the Corporation’s exposure to their credit risk.

The Corporation does not believe its current maturity profile lends itself to any material liquidity risk, taking into account the
level of cash and cash equivalents, investments and marketable securities as at December 31, 2019.

As at December 31, 2019, the Corporation had working capital of $4,984,080 (2018- $3,576,144) comprised of cash and cash
equivalents, other assets, net of trade and accrued liabilities and income taxes payable. Management considers the funds on
hand to be sufficient to meet its ongoing obligations.

Market Risk
Market risk is the risk that the fair value of, or future cash flows from, the Corporation’s financial instruments will significantly
fluctuate due to changes in market prices. The value of the financial instruments can be affected by changes in interest rates,
foreign exchange rates, and equity and commodity prices. The Corporation is exposed to market risk in trading its investments
and unfavorable market conditions could result in dispositions of investments at less than favorable prices.

Property Title Risk
Mongolian law has strong protections for property assets; however, implementation of Mongolian law is often arbitrary, with
high degrees of corruption and incompetence. Additionally, laws frequently change, which can invalidate a property title. To
date, the Corporation has only had one of its property assets confiscated by the Government of Mongolia; however, the Corpo-
ration believes that there is a possibility that it will have additional assets confiscated by the Government of Mongolia or stolen
by private individuals during future periods. The Corporation is currently not aware of any individual asset that is in imminent
danger of being confiscated or stolen.

Currency Risk
The Corporation owns properties located in Mongolia and collects rental revenue in Mongolian Tögrög, and is therefore subject
to foreign currency fluctuations that may impact its financial position and results. Changes in the Mongolian Tögrög, U.S. dollar
and Canadian dollar foreign currency exchange rates impact the fair value of securities denominated in Mongolian Tögrög and in
U.S. dollars. All of the Corporation’s revenues are received in Mongolian Tögrög while approximately half of the Corporation’s ex-
penses are incurred in U.S. and Canadian Dollars. Therefore, a depreciation in the Mongolian Tögrög against the US and Canadian
Dollar will reduce EBITDA. The exchange rate continues to be volatile and there is an expectation that volatility may continue for
the foreseeable future.

Mongolia Growth Group Ltd |Economic Volatility and Uncertainty
Over the past few years, economic volatility and uncertainty around the world has contributed to dramatically restricted access
to capital and reduced capital markets activity for more speculative businesses. The Corporation’s management believes that the
Corporation has sufficient resources to carry on its business and remain a going concern.

MGG holds the majority of its assets, investments and operations in the nation of Mongolia. Mongolia is presently experiencing
drastic changes in its economy. Economic volatility and uncertainty in Mongolia could result in inflation, hyperinflation, economic
stagnation, political extremism, and other similarly detrimental scenarios which could materially harm the Corporation.

Preliminary growth estimates according to the National Statistics Office for 2019 2019 was 5,1% year-over-year, while inflation
estimates were 5.2% according to Mongol Bank. Management cautions investors that official economic numbers often deviate
materially from actual underlying economic conditions. Additionally, the Corporation is not able to accurately predict the ultimate
impact of COVID-19 on the economy of Mongolia.

Depending on the requirements of MGG’s businesses, additional funds may be required to be raised in the capital markets and
there is no guarantee that sufficient funds raised will be available to complete a financing required to augment the Corporation’s
operations.

Risks and Uncertainties
The Corporation, as part of its operations, carries financial instruments consisting of cash and cash equivalents, investments
and marketable securities, accounts receivable, and trade payables and accrued liabilities. It is Management’s opinion that the
Corporation is not exposed to significant credit, interest or currency risks arising from these financial instruments except as oth-
erwise disclosed in the notes to the Consolidated Financial Statements.

Further information related to Mongolia Growth Group Ltd. and the risks and uncertainties of MGG is filed on the System for
Electronic Document Analysis and Retrieval (“SEDAR”) and can be reviewed at www.sedar.com.

Financial Instruments
The Corporation’s financial instruments consist of cash and cash equivalents, investments and marketable securities, accounts
receivable and trade and accrued payables. The Corporation is subject to interest risk as it earns interest income from its cash
deposits. It is Management’s opinion that the Corporation is not exposed to significant credit risks arising from these financial
instruments and that the fair value of these financial instruments approximates their carrying values. Management believes that
there are material currency risks associated to certain Financial Instruments of the Corporation as they are held in Mongolian
Tögrög. For further discussion of financial instrument risks, see the Insurance and Financial Risk Management note (Note 15 on
December 31, 2019 Financial Statements).

Unless the context otherwise requires, references to the “Corporation” include the Corporation and its subsidiaries and affiliates
collectively, including Mongolia (Barbados) Corp.

Changes in Investment Strategies
The Corporation may alter its investment strategies and restrictions without prior approval by shareholders to adapt to changing
circumstances.

Possible Negative Impact of Regulation
The regulatory environment is evolving and changes to it may adversely affect the Corporation. To the extent that regulators
adopt practices of regulatory oversight that create additional compliance, transaction, disclosure or other costs for the Corpora-
tion, returns of the Corporation may be negatively affected. In addition, the regulatory or tax environment for securities, deriva-
tives and related instruments is evolving and may be subject to modification by government or judicial action that may adversely
affect the value of the investments held by the Corporation. The effect of any future regulatory or tax change on the Corporation
is impossible to predict.

Property Specific Risk
The Corporation currently has a standing agreement with the owner of a 42 sq. meter apartment which has been included in
one of the Corporation’s properties classified as land and development. The agreement entitles the owner of the apartment
to 84 sq. meters of space on the first floor of a new building to be built on this land. In this agreement, the Corporation had an
obligation to complete the construction of a new building by the end of 2017 and the agreement was not extended. A liability
of $131,438 is currently included in the Corporation’s balance sheet to reflect this liability. In addition, the Corporation has
recognized a $1,436,256 (2018 - $1,711,065) unrealized fair value loss on this property in excess of the fair value adjustment
calculated using the valuation approaches described. This adjustment is Management’s estimate of the market’s perception of
the risk related to this agreement. While the Corporation has received legal advice that it is not at a substantial risk of losing

| Mongolia Growth Group Ltdthe property in question, interpretations of Mongolian law can be varied and arbitrary. The Corporation cautions investors that
should it lose this property, it would result in a material reduction in the Corporation’s overall assets and fair value (4.3 million
dollars current carrying value). In addition, there is the potential that the 84 sq. meter liability could inhibit the sale or develop-
ment of this asset in future periods.

Use of Derivatives
The Corporation may use derivative instruments. The use of derivatives in general presents additional risks to those applicable
to trading only in the underlying assets. To the extent of the Corporation’s investment in derivatives it may take a credit risk with
respect to parties with whom it trades and may also bear the risk of settlement default. When used for hedging purposes, an im-
perfect or variable degree of correlation between price movements of the derivative instrument and the underlying investment
sought to be hedged may prevent the Corporation from achieving the intended hedge effect or expose the Corporation to the
risk of loss. In addition, derivative instruments may not be liquid at all times, so that in volatile markets the Corporation may not
be able to close out a position without incurring a loss. No assurance can be given that short sales, hedging, leverage and other
techniques and strategies utilized by the Corporation to hedge its exposure will not result in material losses.

Custody Risk and Broker or Dealer Insolvency
The Corporation does not control the custodianship of all of its assets. The Corporation’s assets will be held in one or more
accounts maintained for the Corporation by its broker or brokers. Such brokers are subject to various laws and regulations in
various jurisdictions that are designed to protect their customers in the event of their insolvency. However, the practical effect
of these laws and their application to the Corporation’s assets are subject to substantial limitations and uncertainties. Because
of the large number of entities and jurisdictions involved and the range of possible factual scenarios involving the insolvency of
a broker or any sub-custodians, agents or affiliates, it is impossible to generalize about the effect of their insolvency on the Cor-
poration and its assets. Investors should assume that the insolvency of any of the brokers or such other service providers would
result in the loss of all or a substantial portion of the Corporation’s assets held by or through such brokers and/or the delay in
the payment of withdrawal proceeds.

Investment and Trading Risks in General
All trades made by the Corporation risk the loss of capital. The Corporation may utilize trading techniques or instruments, which
can, in certain circumstances, maximize the adverse impact to which a client’s account may be subject. No guarantee or repre-
sentation is made that the Corporation’s investment program will be successful, and investment results may vary substantially
over time. Many unforeseeable events, including actions by various government agencies, and domestic and international eco-
nomic and political developments may cause sharp market fluctuations which could adversely affect the Corporation’s portfolio
and performance.

General Economic and Market Conditions
The success of the Corporation’s activities may be affected by general economic and market conditions, such as interest rates,
availability of credit, inflation rates, economic uncertainty, changes in laws, and national and international political circumstanc-
es. These factors may affect the level and volatility of securities prices and the liquidity of the Corporation’s investments. Unex-
pected volatility or illiquidity could impair the Corporation’s profitability or result in losses.

Issuer–Specific Changes
The value of an individual security or particular type of security can be more volatile than, and can perform differently from the
market as a whole.

Portfolio Turnover
The Corporation has not placed any limits on the rate of portfolio turnover and portfolio securities may be sold without regard
to the time they have been held when, in the opinion of the Corporation, investment considerations warrant such action. A high
rate of portfolio turnover involves correspondingly greater expenses than a lower rate.

Liquidity of Underlying Investments
Some of the securities in which the Corporation may invest may be thinly traded. There are no restrictions on the investment of
the Corporation in illiquid securities. It is possible that the Corporation may not be able to sell or repurchase significant portions
of such positions without facing substantially adverse prices. If the Corporation is required to transact in such securities before
its intended investment horizon, the performance of the Corporation could suffer.

Mongolia Growth Group Ltd |Highly Volatile Markets
The prices of financial instruments in which the Corporation’s assets may be invested can be highly volatile and may be influ-
enced by, among other things, specific corporate developments, interest rates, changing supply and demand relationships, trade,
fiscal, monetary and exchange control programs and policies of governments, and national and international political and eco-
nomic events and policies. The Corporation is subject to the risk of the failure of any of the exchanges on which the Corporation’s
positions trade or of their clearinghouses.

Emerging Markets
The Corporation may invest in the securities of companies which operate in some emerging markets. Operating in emerging
markets involves additional risks because companies in emerging markets may be less regulated and not subject to the same
standards, reporting practices and disclosure requirements that apply in more developed markets. In addition, some emerging
markets and legal systems may not adequately protect investor rights.

Small- to Medium- Capitalization Companies
The Corporation may invest a portion of its assets in the securities of companies with small- to medium-sized market capitaliza-
tions. While the Corporation believes these investments often provide significant potential for appreciation, those securities may
involve higher risks in some respects than do investments in securities of larger companies. For example, while smaller compa-
nies generally have potential for rapid growth, they often involve higher risks because they may lack the management experi-
ence, financial resources, product diversification, and competitive strength of larger companies. In addition, in many instances,
the frequency and volume of their trading may be substantially less than is typical of larger companies. As a result, the securities
of smaller companies may be subject to wider price fluctuations. When making large sales, the Corporation may have to sell
portfolio holdings at discounts from quoted prices or may have to make a series of small sales over an extended period of time
due to the trading volume of smaller Corporation securities.

Fixed Income Securities
The Corporation may occasionally invest in bonds or other fixed income securities of issuers, including, without limitation, bonds,
notes and debentures issued by corporations. Fixed income securities pay fixed, variable or floating rates of interest. The value of
fixed income securities in which the Corporation invests will change in response to fluctuations in interest rates. In addition, the
value of certain fixed-income securities can fluctuate in response to perceptions of credit worthiness, political stability or sound-
ness of economic policies. Fixed income securities are subject to the risk of the issuer’s inability to meet principal and interest
payments on its obligations (i.e., credit risk) and are subject to price volatility due to such factors as interest rate sensitivity, mar-
ket perception of the creditworthiness of the issuer and general market liquidity (i.e., market risk). If fixed income investments
are not held to maturity, the Corporation may suffer a loss at the time of sale of such securities.

Equity Securities
To the extent that the Corporation holds equity portfolio investments, or short positions in equities, it will be influenced by stock
market conditions in those jurisdictions where the securities held by the Corporation, are listed for trading and by changes in the
circumstances of the issuers whose securities are held by the Corporation.

Options
Selling call and put options is a highly specialized activity and entails greater than ordinary investment risk. The risk of loss when
purchasing an option is limited to the amount of the purchase price of the option, however investment in an option may be
subject to greater fluctuation than an investment in the underlying security. In the case of the sale of an uncovered option there
can be potential for an unlimited loss. To some extent this risk may be hedged by the purchase or sale of the underlying security.

Shorting
Selling a security short (“shorting”) involves borrowing a security from an existing holder and selling the security in the market
with a promise to return it at a later date. Should the security increase in value during the shorting period, losses will incur to the
Corporation. There is in theory no upper limit to how high the price of a security may go. Another risk involved in shorting is the
loss of a borrow, a situation where the lender of the security requests its return. In cases like this, the Corporation, must either
find securities to replace those borrowed or step into the market and repurchase the securities. Depending on the liquidity of
the security shorted, if there are insufficient securities available at current market prices, the Corporation, may have to bid up
the price of the security in order to cover the short position, resulting in losses to the Corporation.

Trading Costs
The Corporation may engage in a high rate of trading activity resulting in correspondingly high costs being borne by the Corpora-
tion.

| Mongolia Growth Group LtdCurrency and Exchange Rate Risks
The Corporation’s assets will be denominated in multiple currencies. The Corporation will report their results in Canadian dol-
lars. The Corporation expects to report allocations of profit and loss for income tax purposes in Canadian dollars. Changes in
currency exchange rates may affect the value of the Corporation’s portfolio and the unrealized appreciation or depreciation of
investments.

Leverage
The Corporation may use financial leverage by borrowing funds against the assets of the Corporation. Leverage increases both
the possibilities for profit and the risk of loss for the Corporation. From time to time, the credit markets are subject to periods
in which there is a severe contraction of both liquidity and available leverage. The combination of these two factors can result
in leveraged strategies being required to sell positions typically at highly disadvantageous prices in order to meet margin re-
quirements, contributing to a general decline in a wide range of different securities. Illiquidity can be particularly damaging to
leveraged strategies because of the essentially discretionary ability of dealers to raise margin requirements, requiring leveraged
strategy to attempt to sell positions to comply with such requirements at a time when there are effectively no buyers in the mar-
ket at all or at any but highly distressed prices. These market conditions have in the past resulted in major losses. Such conditions,
although unpredictable, can be expected to recur.

Future Acquisitions and Business Diversification
Management is currently evaluating future acquisitions of businesses and operating assets that are not related to investments
within Mongolia. There can be no certainty that the Corporation will acquire any business. Additionally, if the Corporation ac-
quires part or all of a business outside of Mongolia, it may dilute management’s focus on current operations within Mongolia.
Additionally, shareholders who desire a Mongolia focused investment vehicle may sell shares of the Corporation if they do not
desire investments outside of Mongolia. There can be no certainty that the Corporation can raise adequate funding to finance
an acquisition of a business outside of Mongolia or that diversification of the Corporation’s business is in the best interest of the
Corporation. Capital spent on researching businesses outside of Mongolia will increase operating expenses and operating losses
as long as such due diligence is ongoing.

Internal Controls over Financial Reporting
Changes in securities laws no longer require the Chief Executive Officer and Chief Financial Officer of junior reporting issuers
to certify that they have designed internal control over financial reporting, or caused it to be designed under their supervision,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with IFRS.

Instead, an optional form of certification has been made available to junior reporting issuers and has been used by the
Corporation’s certifying officers since December 31, 2013 annual filings. The new certification reflects what the Corporation
considers to be a more appropriate level of CEO and CFO certification given the size and nature of the Corporation’s operations.
This certification requires the certifying officers to state that: they have reviewed the interim MD&A and consolidated financial
statements; they have determined that there is no untrue statement of a material fact, or any omission of material fact required
to be stated which would make a statement or its omission misleading in light of the circumstances under which it was made
within the interim MD&A and consolidated financial statements; based on their knowledge, the interim filings, together with the
other financial information included in the interim filings, fairly present in all material respects the financial condition, results of
operations and cash flows of the Corporation as of the date and for the periods presented in the filings.

Changes in accounting policies including initial adoption
The following accounting policies were adopted during the year ended December 31, 2019:

IFRS 16 – Leases
The Company has adopted the following revised standards, along with any consequential amendments, effective January 1, 2019.

IFRS 16 replaces IAS 17 Leases and related interpretations. The core principle is that a lessee recognize assets and liabilities for
all leases with a lease term of more than 12 months. A lessee is required to recognize a right-of-use asset representing its right
to use the underlying leased asset and a lease liability representing its obligation to make lease payments. Assets and liabilities
arising from a lease are initially measured on a present value basis. The measurement includes non-cancellable lease payments
(including inflation-linked payments), and also includes payments to be made in optional periods if the lessee is reasonably
certain to exercise an option to extend the lease, or not to exercise an option to terminate the lease. The new standard is
intended to provide a faithful representation of leasing transactions, in particular those that do not currently require the lessees
to recognize an asset and liability arising from an operating lease. IFRS 16 is effective for annual periods beginning on January 1,
2019.

Mongolia Growth Group Ltd |government land leases, however the lease payments are nominal and did not qualify for recognition. There was no impact on
the Company’s consolidated financial statements from the adoption of IFRS 16.

IFRIC 23 - Uncertainty over Income Tax Treatments
New standard to clarify the accounting for uncertainties in income taxes. The interpretation provides guidance and clarifies the
application of the recognition and measurement criteria in IAS 12 “Income Taxes” when there is uncertainty over income tax
treatments. The interpretation is effective for annual periods beginning on or after January 1, 2019. There was no impact on the
Company’s consolidated financial statements from the adoption of IFRIC 23.

The Corporation is not aware of any upcoming standards or policy changes expected to have a material impact on its financial
statements.

Additional Information
Additional information relating to Mongolia Growth Group Ltd., including its interim financial statements, is available on SEDAR
at www.sedar.com.

| Mongolia Growth Group LtdMongolia Growth Group Ltd.
Consolidated Financial Statements

December 31, 2019
(expressed in Canadian dollars)

Mongolia Growth Group Ltd |Mongolia Growth Group
Ltd.
Consolidated Financial Statements
December 31, 2016
(Expressed in Canadian dollars)

INDEPENDENT AUDITOR’S REPORT

To the Shareholders of
Mongolia Growth Group Ltd.

Opinion

We have audited the accompanying consolidated financial statements of Mongolia Growth Group Ltd. (the
“Company”), which comprise the consolidated statements of financial position as at December 31, 2019 and 2018
and the consolidated statements of operations, comprehensive income (loss), changes in equity and cash flows for
the years then ended, and notes to the consolidated financial statements, including a summary of significant
accounting policies.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position
of the Company as at December 31, 2019 and 2018, and its financial performance and its cash flows for the years
then ended in accordance with International Financial Reporting Standards (“IFRS”).

Basis for Opinion

We conducted our audits in accordance with Canadian generally accepted auditing standards. Our responsibilities
under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated
Financial Statements section of our report. We are independent of the Company in accordance with the ethical
requirements that are relevant to our audit of the consolidated financial statements in Canada, and we have fulfilled
our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we
have obtained in our audits is sufficient and appropriate to provide a basis for our opinion.

Other Information

Management is responsible for the other information. The other information obtained at the date of this auditor's
report includes Management’s Discussion and Analysis.

Our opinion on the consolidated financial statements does not cover the other information and we do not express
any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with the
consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially
misstated.

We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the
work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.

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| Mongolia Growth Group Ltd

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial
Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in
accordance with IFRS, and for such internal control as management determines is necessary to enable the
preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or
error.

In preparing the consolidated financial statements, management is responsible for assessing the Company's ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless management either intends to liquidate the Company or to cease operations,
or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company's financial reporting process.

Auditor's Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Canadian generally accepted auditing standards will always detect a material misstatement when
it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of
these consolidated financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional
judgment and maintain professional skepticism throughout the audit. We also:



Identify and assess the risks of material misstatement of the consolidated financial statements, whether
due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a
material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
 Obtain an understanding of internal control relevant to the audit in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the Company's internal control.

 Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates

and related disclosures made by management.

 Conclude on the appropriateness of management's use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions
that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude
that a material uncertainty exists, we are required to draw attention in our auditor's report to the related
disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report.
However, future events or conditions may cause the Company to cease to continue as a going concern.
 Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.

 Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Company to express an opinion on the consolidated financial statements. We are
responsible for the direction, supervision and performance of the group audit. We remain solely
responsible for our audit opinion.

3 | P a g e

Mongolia Growth Group Ltd |

We communicate with those charged with governance regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.

The engagement partner on the audit resulting in this independent auditor’s report is Erez Bahar.

Vancouver, Canada

April 7, 2020

“DAVIDSON & COMPANY LLP”

Chartered Professional Accountants

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| Mongolia Growth Group Ltd

Mongolia Growth Group Ltd.
Consolidated Statements of Financial Position
As at December 31

(Expressed in Canadian dollars)

Assets

Current assets
Cash (note 5)
Marketable securities owned (note 6)
Other assets (note 7)

Non-current assets
Investment properties (note 8)
Property and equipment (note 9)

Total assets

Liabilities

Current liabilities
Trade payables and accrued liabilities (note 10)
Marketable securities sold short (note 6)
Income taxes payable
Short term debt (note 11)

Non-current liabilities
Deferred income tax liability (note 12)

Total liabilities

Equity

Share capital (note 13)
Contributed surplus
Accumulated other comprehensive loss
Deficit

Total equity

2019
$

2018
$

737,255
3,689,304
1,383,027
5,809,586

18,831,985
1,435,650
20,267,635

745,411
3,946,202
117,556
4,809,169

24,415,860
1,792,794
26,208,654

26,077,221

31,017,823

767,732
23,340
34,434
-
825,506

542,913
-
9,210
680,902
1,233,025

581,887

737,493

1,407,393

1,970,518

53,504,935
6,849,976
(14,233,385)
(21,451,698)

53,625,230
6,849,976
(13,226,649)
(18,201,252)

24,669,828

29,047,305

Total equity and liabilities

26,077,221

31,017,823

Commitment and contingencies (note 17)

Subsequent events (note 22)

Approved by the Board of Directors

“ Robert Scott ” Director “ Harris Kupperman ” Director

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Mongolia Growth Group Ltd |

Mongolia Growth Group Ltd.
Consolidated Statements of Operations
For the years ended December 31

(Expressed in Canadian dollars)

Revenue
Rental income
Gain (loss) on disposal of investment property (note 8)
Other revenue

Total revenue

Expenses
Salaries and wages
Other expenses (note 20)
Depreciation (note 9)

2019
$

2018
$

1,287,353
(302,959)
156,436

1,384,840
38,592
48,217

1,140,830

1,471,649

693,852
1,585,145
73,294

543,888
1,265,284
77,361

Total operating expenses

(2,352,291)

(1,886,533)

Interest income
Unrealized gain (loss) on fair value adjustment on
Investment properties (note 8)

5,617

21,847

(1,347,662)

1,892,577

Impairment of property and equipment (note 9)

Reversal of impairment loss of property and equipment (note 9)
Unrealized gain (loss) on marketable securities (note 6)
Realized gain (loss) on marketable securities (note 6)
Foreign currency gain (loss)
Finance costs
Reclassification of accumulated other comprehensive income on

disposal of subsidiary (note 21)

(158,655)

-
454,824
(358,826)
208,195
(82,822)

(824,864)

198,520
(608,297)
995,716
(185,790)
(84,620)

Total other income (expenses)

(2,104,193)

2,229,953

Net income (loss) before income taxes

(3,315,654)

1,815,069

Income taxes (note 12)

65,208

(257,726)

Net income (loss) for the year

(3,250,446)

1,557,343

Net income (loss) per share (note 13)
Basic

From net income (loss) for the year

Diluted

From net income (loss) for the year

(0.10)

0.05

The accompanying notes are an integral part of these consolidated financial statements.

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| Mongolia Growth Group Ltd

Mongolia Growth Group Ltd.
Consolidated Statements of Comprehensive Income (Loss)
For the years ended December 31

(Expressed in Canadian dollars)

2019
$

2018
$

Net income (loss) for the year

(3,250,446)

1,557,343

Other comprehensive loss
Items that may be subsequently reclassified to income or loss
Unrealized losses on translation of financial statement
functional

operations with Mongolian Tögrög
currency to Canadian dollar reporting currency

Items subsequently reclassified to income or loss

Reclassification of accumulated other comprehensive

(1,831,600)

(140,375)

income on disposal of subsidiary (note 21)

824,864

Total comprehensive income (loss)

(4,257,182)

1,416,968

The accompanying notes are an integral part of these consolidated financial statements.

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Mongolia Growth Group Ltd |

Mongolia Growth Group Ltd.
Consolidated Statements of Changes in Equity
For the years ended December 31

(Expressed in Canadian dollars)

Balance at January 1,
2018
Net income for the year
Other comprehensive loss

Share
capital
$

Contributed
surplus
$

Accumulated
other
comprehensive
loss
$

Deficit
$

Total
$

53,751,473
-
-
53,751,473

6,849,976
-
-
6,849,976

(13,086,274)
-
(140,345)
(13,226,649)

(19,758,595)
1,557,343
-
(18,201,252)

27,756,580
1,557,343
(140,375)
29,173,548

Share repurchase

(126,243)

Balance at December 31,
2018

53,625,230

6,849,976

(13,226,649)

(18,201,252)

29,047,305

Share
capital
$

Contributed
surplus
$

Accumulated
other
comprehensive
loss
$

Deficit
$

Total
$

Balance at January 1,
2019
Net loss for the year
Reclassification (note 21)
Other comprehensive loss

53,625,230
-
-
-
53,625,230

6,849,976
-
-
-
6,849,976

(13,226,649)
-
824,864
(1,831,600)
(14,233,385)

(18,201,252)
(3,250,446)
-
-
(21,451,698)

29,047,305
(3,250,446)
824,864
(1,831,600)
24,790,123

Share repurchase

(120,295)

Balance at December
31, 2019

53,504,935

6,849,976

(14,233,385)

(21,451,698)

24,669,828

The accompanying notes are an integral part of these consolidated financial statements.

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| Mongolia Growth Group Ltd

Mongolia Growth Group Ltd.
Consolidated Statements of Cash Flow
As at December 31, 2019

Cash provided by (used in)

Operating activities
Net income (loss) for the year
Items not affecting cash

Depreciation (note 9)
Deferred taxes
Allowance for doubtful tax receivables (note 7)
Realized loss on disposal of property and equipment
Realized (gain) loss on disposal of investment properties (note 8)
Impairment of property and equipment (note 9)
Reversal of impairment loss of property and equipment (note 9)
Unrealized (gain) loss on marketable securities (note 6)
Realized (gain) loss on marketable securities (note 6)
Unrealized (gain) loss on fair value adjustment on investment

properties (note 8)

Reclassification of accumulated other comprehensive income on

disposal of subsidiary (note 21)

Net change in non-cash working capital balances (note 18)

Financing activities
Share repurchase (note 13)
Loan payment (note 11)

Investing activities
Net sales (purchases) of marketable securities (note 6)
Net disposal (acquisition) of property and equipment
Net disposal of investment properties,
net of taxes (note 8)

Effect of exchange rates on cash

Increase (decrease) in cash

Cash – Beginning of year

2019
$

2018
$

(3,250,446)

1,557,343

73,294
(155,606)
(13,806)
-
302,959
158,655
-
(454,824)
358,826

77,361
235,067
(35,642)

511

(38,592)
-
(198,520)
608,297
(995,716)

1,347,662

(1,892,577)

824,864

-
(808,422) (682,468)

305,586
(502,836)

70,724
(611,744)

(120,295)
(680,902)
(801,197)

(126,243)
-
(126,243)

604,998
(1,540)

(889,494)
(21,978)

884,369
1,487,827

547,955
(363,517)

183,794 (1,101,504)

(191,950)

206,144

(8,156)

(895,360)

745,411

1,640,771

Cash – End of year

737,255

745,411

*Supplementary cash flow information (note 18)

The accompanying notes are an integral part of these consolidated financial statements.

9 | P a g e

Mongolia Growth Group Ltd |

Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the year ended December 31

1 Corporate information

Mongolia Growth Group Ltd. (MGG or the Company) was incorporated in Alberta on December 17,
2007, and is a real estate investment and development Company operating through the ownership
of commercial investment property assets in Ulaanbaatar, Mongolia.

The Company’s common shares were previously listed on the Canadian Securities Exchange (CSE).
On January 9, 2013, the Company filed an application for the de-listing of the common shares from
the CSE and filed an application for the listing of common shares on the TSX Venture Exchange
(TSXV). The Company is now listed on the TSXV, having the symbol YAK.

MGG has one wholly-owned subsidiary at December 31, 2019, Mongolia (Barbados) Corp.
Mongolia (Barbados) Corp. owns the wholly-owned subsidiaries MGG Properties LLC and Big Sky
Capital LLC. Big Sky Capital LLC owns the wholly-owned subsidiaries, Carrollton LLC, Biggie
Industries LLC, Orpheus LLC, Zulu LLC, Crescent City LLC and Oceanus LLC (together “the
investment property operations”). Endymion LLC, was disposed of during the year. The
investment property operations are conducted in Big Sky Capital LLC and its subsidiaries. No
active business operations occur in Oceanus LLC at this time. MGG’s marketable securities are
currently held in a brokerage account owned by Mongolia (Barbados) Corp.

At December 31, 2019 and 2018, the principal subsidiaries of the Company, their geographic
locations, and the ownership interest held by the Company, were as follows:

Name
Mongolia (Barbados)
Corp.
MGG Properties LLC

Principal Activity
Holding Company and Brokerage
Account
Holding Company and Real estate
operations
Holding Company and Real estate
operations
Carrollton LLC
Real estate operations
Biggie Industries LLC Real estate operations

Big Sky Capital LLC

Endymion LLC
Orpheus LLC
Zulu LLC
Crescent City
Oceanus

Real estate operations
Real estate operations
Real estate operations
Real estate operations
Real estate operations

Ownership

December 31,
2019
100%

December 31,
2018
100%

100%

100%
100%

-
100%
100%
100%
100%

100%

100%
100%

100%
100%
100%
100%
100%

Location
Barbados

Mongolia

Mongolia
Mongolia

Mongolia
Mongolia
Mongolia
Mongolia
Mongolia

The Company is registered in Alberta, Canada, with its Head Office at its registered and records
address at Centennial Place, East Tower, 1900, 520 - 3rd Avenue S.W. Calgary, Alberta, Canada
T2P 0R3. The Company’s Canadian headquarters are located at 100 King Street West, Suite 5600,
Toronto, Ontario, M5X 1C9, Canada. The Company’s Mongolian investment property operations
are based out of its office located at the MGG Properties Building on Seoul St. in Ulaanbaatar,
Mongolia.

At December 31, 2019, the Company is organized into two segments based on the business
operations:

 Big Sky Capital LLC and its subsidiaries own investment properties which are located in
Ulaanbaatar, Mongolia and are held for the purpose of generating rental revenue, capital
appreciation, and/or redevelopment; and

 The MGG Corporate office is located in Toronto, Canada.

10 | P a g e

| Mongolia Growth Group Ltd

Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the year ended December 31

2 Basis of presentation

The consolidated financial statements of the Company have been prepared in accordance with
International Financial Reporting Standards (IFRS), as issued by the International Accounting
Standards Board (IASB). The significant accounting policies used in the preparation of these
consolidated financial statements are summarized in note 3.

These financial statements have been prepared on a going concern basis, meaning that the
Company will continue in operation for the foreseeable future and will be able to realize assets and
discharge liabilities in the ordinary course of operations.

The consolidated financial statements, including the notes to the consolidated financial
statements, are presented in Canadian dollars ($) which is the Company’s presentation currency
and the functional currency of the parent Company. The functional currency of the Company’s
operating subsidiaries is the Mongolian National Tögrög (MNT).

These consolidated financial statements were approved by the Board of Directors of the Company
for issue on April 7, 2020.

3 Significant accounting policies

a. Basis of measurement

The consolidated financial statements have been prepared on a historical cost basis, as
modified by the revaluation of investment properties and marketable securities at fair value.

b. Basis of consolidation

These consolidated financial statements include the accounts of MGG and its wholly-owned
subsidiaries. Subsidiaries are entities controlled by MGG. Control exists when MGG is
exposed to, or has rights to, variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity. The financial statements of
the subsidiaries are prepared for the same reporting year as MGG, using consistent
accounting policies. Intercompany balances and transactions, and any unrealized income and
expenses arising from intercompany transactions, are eliminated in preparing the
consolidated financial statements. Upon the disposal of a subsidiary, amounts previously
recognized in other comprehensive income in respect of that entity, are reclassified to profit
and loss.

c. Financial instruments

Financial assets

On initial recognition, financial assets are recognized at fair value and are subsequently
classified and measured at: (i) amortized cost; (ii) fair value through other comprehensive
income (“FVOCI”); or (iii) fair value through profit or loss (“FVTPL”). The classification of
financial assets is generally based on the business model in which a financial asset is managed
and its contractual cash flow characteristics. A financial asset is measured at fair value net of
transaction costs that are directly attributable to its acquisition except for financial assets at
FVTPL where transaction costs are expensed. All financial assets not classified and measured
at amortized cost or FVOCI are measured at FVTPL. On initial recognition of an equity
instrument that is not held for trading, the Company may irrevocably elect to present
subsequent changes in the investment’s fair value in other comprehensive.

11 | P a g e

Mongolia Growth Group Ltd |

Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the year ended December 31

Financial instruments (continued)

The classification determines the method by which the financial assets are carried on the
balance sheet subsequent to inception and how changes in value are recorded. Cash and
receivables are measured at amortized cost with subsequent impairments recognized in profit
or loss and marketable securities are classified as FVTPL.

Impairment

An ‘expected credit loss’ impairment model applies which requires a loss allowance to be
recognized based on expected credit losses. The estimated present value of future cash flows
associated with the asset is determined and an impairment loss is recognized for the
difference between this amount and the carrying amount as follows: the carrying amount of
the asset is reduced to estimated present value of the future cash flows associated with the
asset, discounted at the financial asset’s original effective interest rate, either directly or
through the use of an allowance account and the resulting loss is recognized in profit or loss
for the period.

In a subsequent period, if the amount of the impairment loss related to financial assets
measured at amortized cost decreases, the previously recognized impairment loss is reversed
through profit or loss to the extent that the carrying amount of the investment at the date the
impairment is reversed does not exceed what the amortized cost would have been had the
impairment not been recognized.

Financial liabilities

Financial liabilities are designated as either: (i) fair value through profit or loss; or (ii) other
financial liabilities. All financial liabilities are classified and subsequently measured at
amortized cost except for financial liabilities at FVTPL. The classification determines the
method by which the financial liabilities are carried on the balance sheet subsequent to
inception and how changes in value are recorded. Trade payables and accrued liabilities, and
short term debt are classified as other financial liabilities and carried on the balance sheet at
amortized cost. Marketable securities sold short are carried FVTPL.

As at December 31, 2019, the Company does not have any derivative financial liabilities.

Fair value of financial instruments

Fair value is the price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date. Marketable
securities are classified as fair value through profit or loss. All financial instruments which are
measured at their amortized cost approximate their fair value due to the short term nature of
those instruments. Financial assets and liabilities recorded at fair value in the consolidated
statement of financial position are measured and classified in a hierarchy consisting of three
levels for disclosure purposes. The three levels are based on the priority of the inputs to the
respective valuation technique. The fair value hierarchy gives the highest priority to quoted
prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to
unobservable inputs (Level 3). An asset or liability’s classification within the fair value
hierarchy is based on the lowest level of significant input to its valuation. The input levels are
defined as follows:

Level 1: Unadjusted quoted prices in active markets for identical assets or
liabilities

 The Company defines active markets based on the frequency of valuation and any
restrictions or illiquidity on disposition of investments. The size of the bid/ask spread is
used as an indicator of market activity for fixed maturity securities. Fair value is based on

12 | P a g e

| Mongolia Growth Group Ltd

Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the year ended December 31

Financial instruments (continued)

market price data for identical assets obtained from the investment custodian, investment
managers or dealer markets. The Company does not adjust the quoted price for such
instruments.

Level 2: Quoted prices in markets that are not active or inputs that are
observable either directly (i.e. as prices) or indirectly (i.e. derived from prices)

 Level 2 inputs include observable market information, including quoted prices for assets
in markets that are considered less active. Fair value is based on or derived from market
price data for same or similar instruments obtained from the investment custodian,
investment managers or dealer markets.

Level 3: Unobservable inputs that are supported by little or no market activity
and are significant to the estimated fair value of the assets or liabilities

 Level 3 assets and liabilities would include financial instruments whose values are
determined using internal pricing models, discounted cash flow methodologies, or similar
techniques that are not based on observable market data, as well as assets or liabilities for
which the determination of estimated fair value requires significant management
judgement or estimation.

The Company has determined the estimated fair values of its financial instruments based
upon appropriate valuation methodologies.

The levels of the fair value inputs used in determining estimated fair value of the
Company’s financial assets at fair value through profit or loss as at December 31, 2019
and 2018, is shown below.

Marketable
securities

Marketable
securities sold short

Marketable
securities

December 31,
2019

Level 1

Level 2

Level 3

Estimated fair values

$3,689,304

$ 3,689,304

$23,340

$ 3,712,644 $ 3,712,644

December 31,
2018

Level 1

Level 2

Level 3

Estimated fair values

$3,946,202

$3,946,202 $3,946,202

At December 31, 2019 and 2018 there were no financial assets or liabilities measured and
recognized in the statement of financial position at fair value that would be categorized as
level 2 and 3 in the fair value hierarchy above.

13 | P a g e

Mongolia Growth Group Ltd |

Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the year ended December 31

d. Investment properties

Investment properties include properties held to earn rental revenue, for capital appreciation,
and/or for redevelopment. Investment properties are initially measured at fair which is most
often the purchase price plus any directly attributable expenditures. Investment properties
are subsequently measured at fair value, which reflects market conditions at the date of the
consolidated statement of financial position. Gains or losses arising from changes in the fair
value of investment properties are recognized in the consolidated statement of operations in
the year they arise. A key characteristic of an investment property is that it generates cash
flows largely independently of the other assets held by an entity.

Subsequent expenditure is included in the asset’s carrying amount only when it is probable
that future economic benefits associated with the item will flow to the Company and the cost
of the item can be measured reliably. All other repairs and maintenance costs are charged to
the consolidated statement of operations during the financial period in which they occur.

Substantially all of the Company’s income generating properties and properties under
development are investment properties.

Properties under development are measured at cost.

Certain land leases held under an operating lease are classified as investment properties when
the definition of an investment property is met. At inception these leases are recognized at the
lower of the fair value of the property and the present value of the minimum lease payments.

Some properties may be partially occupied by the Company, with the remainder being held
for rental income or capital appreciation. If that part of the property occupied by the Company
can be sold separately, the Company accounts for the portions separately. The portion that is
owner-occupied is accounted for under IAS 16, and the portion that is held for rental income,
capital appreciation or both is treated as investment property under IAS 40. When the
portions cannot be sold separately, the whole property is treated as investment property only
if an insignificant portion is owner-occupied. The Company considers the owner-occupied
portion as insignificant when the property is more than 90% held to earn rental income or
capital appreciation. In order to determine the percentage of the portions, the Company uses
the size of the property measured in square metres.

The fair value of investment properties was based on the nature, location and condition of the
specific asset. The fair value is calculated at December 31 on the majority of investment
properties by an independent, professional, qualified appraisal firm, whose appraisers hold
recognized relevant, professional qualifications and who have recent experience in the
locations and categories of the investment properties valued. The remaining investment
properties’ fair value was calculated by Management and was performed by qualified
individuals with recent experience in the locations and categories of the investment properties
valued.

e. Assets held for sale

Non-current assets, or disposal groups comprising assets and liabilities, are categorized as
held for sale at the point in time when the asset or disposal group is available for immediate
sale, Management has committed to a plan to sell and is actively locating a buyer at a sales
price that is reasonable in relation to the current fair value of the asset, and the sale is probable
and expected to be completed within a one year period. Investment properties measured
under the fair value model and held for sale continue to be measured by the guidelines of IAS

14 | P a g e

| Mongolia Growth Group Ltd

Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the year ended December 31

e. Assets held for sale (continued)

40 – Investment Property. All other assets held for sale are stated at the lower of carrying
amounts and fair value less selling costs. An asset that is subsequently reclassified as held and
in use, with the exception of investment property measured under the fair value model, is
measured at the lower of its recoverable amount and the carrying value that would have been
recognized had the asset never been classified as held for sale.

f. Revenue recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to
the Company and the revenue can be reliably measured. Revenue is measured at the fair value
of the consideration received or receivable. The Company’s specific revenue recognition
criteria are as follows:

i) Rental revenue

The Company has not transferred substantially all of the benefits and risk of ownership
of its investment properties, and therefore, the Company accounts for leases with its
tenants as operating leases. Rental revenue includes all amounts earned from tenants
related to lease agreements including property tax and operating cost recoveries.

The Company reports rental revenue on a straight-line basis, whereby the total amount
of cash to be received under a lease is recognized into earnings in equal periodic
amounts over the term of the lease.

Contingent rents are recognized as revenue in the period in which they are earned.

Amounts payable by tenants to terminate their lease prior to their contractual expiry
date (lease cancellation fees) are included in rental revenue at the time of cancellation.

Initial direct costs incurred in negotiating an operating lease are added to the carrying
amount of the leased asset. Tenant incentives and discounts are recognized as a
reduction of rental revenue on a straight-line basis over the term of the lease.

ii)

Investment income

Investment income is recorded as it accrues using the effective interest method.

Cash

Cash includes cash held at banks or on hand and demand deposits.

h. Property and equipment

On initial recognition, property and equipment are valued at cost, being the purchase price
and directly attributable cost of acquisition or construction required to bring the asset to the
location and condition necessary to be capable of operating in a manner intended by the
Company, including appropriate borrowing costs and the estimated present value of any
future unavoidable costs of dismantling and removing items.

15 | P a g e

Mongolia Growth Group Ltd |

Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the year ended December 31

h. Property and equipment (continued)

Property and equipment is subsequently measured at cost less accumulated depreciation, less
any accumulated impairment losses. All repairs and maintenance costs are charged to the
consolidated statement of operations during the period in which they occur.

Depreciation is recognized in the consolidated statement of operations and is provided on a
straight-line basis over the estimated useful life of the assets as follows:

Buildings
Furniture and fixtures
Equipment

Straight-line over 40 years
Straight-line over 5 to 10 years
Straight-line over 1 to 5 years

Impairment reviews are performed when there are indicators that the net recoverable amount
of an asset may be less than the carrying value. The net recoverable amount is determined as
the higher of an asset’s fair value less cost to dispose and value in use. Impairment is
recognized in the consolidated statement of operations, when there is objective evidence that
a loss event has occurred which has impaired future cash flows of an asset. In the event that
the value of previously impaired assets recovers, the previously recognized impairment loss is
recovered in the consolidated statement of operations at that time.

An item of property and equipment is derecognized upon disposal or when no further
economic benefits are expected from its use. Any gain or loss arising on de-recognition of the
asset (calculated as the difference between the net disposal proceeds and the carrying amount
of the asset) is included in the consolidated statement of operations in the period the asset is
derecognized.

Depreciation methods, useful lives and residual values are reviewed at each financial year end
and adjusted if appropriate.

Income taxes

Income taxes are comprised of both current and deferred taxes. Current tax and deferred tax
are recognized in the statement of operations except to the extent that it relates to items
recognized in Other Comprehensive Income (“OCI”) or directly in equity. In this case, the tax
is recognized in OCI or directly in equity respectively.

The current income tax charge is calculated on the basis of the tax laws enacted or
substantively enacted at the consolidated statement of financial position date in the countries
where the Company and its subsidiaries operate and generate taxable income and are
measured at the amount expected to be recovered from or paid to the taxation authorities for
the current and prior periods.

Deferred income tax assets and liabilities are recorded for the expected future income tax
consequences of events that have been included in the consolidated financial statements or
income tax returns. Deferred income taxes are provided for using the liability method. Under
the liability method, deferred income taxes are recognized for all significant temporary
differences between the tax and financial statement bases for assets and liabilities and for
certain carry-forward items, such as losses and tax credits not utilized from prior years.
However, if the deferred income tax arises from initial recognition of an asset or a liability in

16 | P a g e

| Mongolia Growth Group Ltd

Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the year ended December 31

i. Income taxes (continued)

a transaction other than a business combination that at the time of the transaction affects
neither accounting nor taxable income, it is not accounted for.

Recognition of deferred tax assets for unused tax losses, tax credits and deductible temporary
differences is restricted to those instances where, in the opinion of Management, it is probable
that future taxable profit will be available against which the deferred tax asset can be realized.
Deferred income tax assets and liabilities are adjusted for the effects of changes in tax laws
and rates, on the date the changes in tax laws and rates have been enacted or substantively
enacted.

Foreign exchange transactions

Foreign currency transactions are translated at the rate of exchange in effect on the dates they
occur. Gains and losses arising as a result of foreign currency transactions are recognized in
the current year consolidated statement of operations. At reporting dates, monetary items are
translated at the closing rate of exchange in effect at the consolidated statement of financial
position date.

Translation of foreign operations

For the purpose of the consolidated financial statements, the results and financial position of
the Mongolian operations are expressed in Canadian dollars, which is the functional currency
of the parent, and the presentation currency of the consolidated financial statements.

The Company translates the assets, liabilities, income and expenses of its Mongolian
operations which have a functional currency of Mongolian Tögrög, to Canadian dollars on the
following basis:

 Assets and liabilities are translated at the closing rate of exchange in effect at the



consolidated statement of financial position date.
Income and expense items are translated using the average rate for the month in which
they occur, which is considered to be a reasonable approximation of actual rates.

 Equity items are translated at their historical rates.
 The translation adjustment from the use of different rates is included as a separate

component of equity, in accumulated other comprehensive income.

k. Comprehensive income

Comprehensive income consists of net income (loss) and OCI. OCI includes changes in
unrealized gains (losses) on the translation of financial statement operations with Mongolian
Tögrög functional currency.

Share capital and deferred share issuance costs

Ordinary shares issued by the Company are classified as equity. Costs directly identifiable
with the raising of capital will be charged against the related share issue, net of any tax effect.
Costs related to shares not yet issued are recorded as deferred financing costs. These costs will
be deferred until the issuance of the shares to which the costs relate, at which time the costs

17 | P a g e

Mongolia Growth Group Ltd |

Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the year ended December 31

Share capital and deferred share issuance costs (continued)

will be charged against the related share issuance or charged to operations if the shares are
not issued.

m. Earnings (loss) per share

For both continuing and discontinued operations, the Company presents basic and diluted
earnings (loss) per share (EPS) data for its common shares. Basic EPS is calculated by dividing
the results of operations attributable to ordinary shareholders of the Company by the
weighted average number of common shares outstanding during the period. Diluted EPS is
determined by adjusting the results of operations attributable to common shareholders and
the weighted average number of common shares outstanding for the effects of all dilutive
potential common shares, which comprise share options.

n. Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided
to the chief operating decision maker. The chief operating decision maker, who is responsible
for allocating resources and assessing performance of operations, has been identified as the
Chief Executive Officer. The Company is now managed as two operating segments based on
how information is produced internally for the purpose of making operating decisions. The
segments are defined as investment property operations and corporate.

o. Leases

The Company has entered into Mongolian government land leases on some of its investment
properties. The Company, as a lessee, has determined, based on an evaluation of the terms
and conditions of the arrangements, that these land leases meet the definition of an
investment property and has classified them as such. At inception, these leases are recognized
at the lower of the fair value of the property and the present value of the minimum lease
payments.

The Company has entered into commercial and residential property leases on its investment
properties. The Company as a lessor, has determined, based on an evaluation of the terms and
conditions of the arrangements, that it retains the significant risks and rewards of ownership
of these properties and therefore accounts for these agreements as operating leases.

p. Provisions and contingent liabilities

Provisions are recognized when the Company has a present legal or constructive obligation as
a result of a past event, it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable estimate can be made of the
amount of the obligation. When the Company expects some or all of the provision to be
reimbursed, the reimbursement is recognized as a separate asset but only when the
reimbursement is virtually certain. The expense of any provision is recognized in the
consolidated statement of operations net of any reimbursement. If the effect of the time value
of money is material, provisions are discounted using a current pre-tax rate that reflects,
where appropriate, the risks specific to the liability. Where discounting is used, the increase
in the provision due to the passage of time is recognized as a borrowing cost.

18 | P a g e

| Mongolia Growth Group Ltd

Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the year ended December 31

p. Provisions and contingent liabilities (continued)

Contingent liabilities are disclosed if there is a possible future obligation as a result of a past
event, or if there is a present obligation as a result of a past event but either a payment is not
probable or the amount cannot be reasonably estimated.

q. Marketable Securities

The Company presents results from trading marketable securities on both a realized and
unrealized basis separately in profit and loss. A realized gain or loss is recorded upon transfer
of ownership of a marketable security, calculated as proceeds (net of broker fees) less its cost
which is measured on a first-in-first-out (“FIFO”) basis. Unrealized gains and losses are the
fair value adjustments to positions still held at reporting dates. Any margin borrowings are
offset to marketable securities because the Company has both the legal right and intention to
settle these positions on a net basis with the related marketable securities.

r. Current Accounting Policy Changes

IFRS 16 Leases

The Company has adopted the following revised standards, along with any consequential
amendments, effective January 1, 2019.

IFRS 16 replaces IAS 17 Leases and related interpretations. The core principle is that a lessee
recognize assets and liabilities for all leases with a lease term of more than 12 months. A lessee
is required to recognize a right-of-use asset representing its right to use the underlying leased
asset and a lease liability representing its obligation to make lease payments. Assets and
liabilities arising from a lease are initially measured on a present value basis. The
inflation-linked
measurement
payments), and also includes payments to be made in optional periods if the lessee is
reasonably certain to exercise an option to extend the lease, or not to exercise an option to
terminate the lease. The new standard is intended to provide a faithful representation of
leasing transactions, in particular those that do not currently require the lessees to recognize
an asset and liability arising from an operating lease. IFRS 16 is effective for annual periods
beginning on January 1, 2019.

includes non-cancellable

lease payments

(including

To prepare for this standard the Company reviewed its existing agreements to determine
whether the accounting for any leases would be impacted from adopting IFRS 16. The
Company is primarily party to agreements in which it is the lessor, for which the accounting
has remained substantially unchanged. The agreements to which the Company is a lessee
relate to Mongolian government land leases, however the lease payments are nominal and did
not qualify for recognition. There was no impact on the Company’s consolidated financial
statements from the adoption of IFRS 16.

IFRIC 23 - Uncertainty over Income Tax Treatments

New standard to clarify the accounting for uncertainties in income taxes. The interpretation
provides guidance and clarifies the application of the recognition and measurement criteria
in IAS 12 “Income Taxes” when there is uncertainty over income tax treatments. The
interpretation is effective for annual periods beginning on or after January 1, 2019. There was
no impact on the Company’s consolidated financial statements from the adoption of IFRIC
23.

19 | P a g e

Mongolia Growth Group Ltd |

Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the year ended December 31

4 Significant accounting estimates and judgements

The preparation of financial statements in accordance with IFRS requires Management to make
estimates and assumptions about the future that affect the reported amounts of assets and
liabilities. Estimates and judgements are continually evaluated based on historical experiences and
other factors, including expectations of future events that are believed to be reasonable under the
circumstances. In the future, actual experience may differ from these estimates and assumptions.

The effect of a change in an accounting estimate is recognized prospectively by including it in net
income (loss) in the period of the change, if the change affects that period only, or in the period of
the change and future periods, if the change affects both.

Significant estimates made in the preparation of these consolidated financial statements include
the following areas:

 Fair value of investment properties - The estimate of fair value of investment properties
is the most critical accounting estimate to the Company. An external appraiser estimates
the fair value of the majority of investment properties by dollar value annually.

The remaining balance of investment properties was valued internally. The fair value of
investment properties is based on the nature, location and condition of the specific asset.
The fair value of investment properties represents an estimate of the price that would be
made in an arm’s length transaction between knowledgeable, willing parties. This fair
value assumes that the Company is in possession of the property’s land and property titles
where applicable. Management judges that the Company has the appropriate titles for
each of the properties classified as Investment Properties. Properties whereby
Management judges that the Company’s titles are at risk, have been impaired to reflect
the level of risk estimated by Management.

 The Company operates in the emerging real estate market of Mongolia, which given its
current economic, political and industry conditions, gives rise to an increased inherent risk
given the lack of reliable and comparable market information. The significant estimates
underlying the fair value determination are disclosed in note 8. Changes in assumptions
about these factors could materially affect the carrying value of investment properties.

 Valuation of marketable securities - The Company recognizes marketable securities at fair
value. Fair value is determined on the basis of market prices from independent sources, if
available. If there is no market price, then the fair value is determined by using valuation
models with inputs derived from observable market data where possible but where
observable data is not available, judgement is required to establish fair values.

 Operating environment of the Company - Mongolia displays many characteristics of an
emerging market including relatively high inflation and interest rates. The tax and customs
legislation in Mongolia is subject to varying interpretations and frequent changes.

 The future economic performance of Mongolia is tied to the continuing demand from
China and global prices for commodities as well as being dependent upon the effectiveness
of economic, financial and monetary measures undertaken by the Government of
Mongolia together with tax, legal, regulatory and political developments. Management is
unable to predict all developments that could have an impact on the Mongolian economy

20 | P a g e

| Mongolia Growth Group Ltd

Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the year ended December 31

4 Significant accounting estimates and judgements (continued)

and consequently what effect, if any, they could have on the future financial position of the
Company.

Significant judgements made in the preparation of these consolidated financial statements include
the following:



Judgement is required in determining whether an asset meets the criteria for classification
as assets held for sale and or as discontinued operations in the consolidated financial
statements. Criteria considered by management include the existence of and commitment
to a plan to dispose of the assets, the expected selling price of the assets, the probability of
the sale being completed within an expected time frame of one year and the period of time
any amounts have been classified within assets held for sale. The Company reviews the
criteria for assets held for sale each quarter and reclassifies such assets to or from this
financial position category as appropriate. On completion of the sale, management
exercises judgement as to whether the sale qualifies as a discontinued operation.

 As at December 31, 2019 and 2018, Management has made the judgment that none of the
Company’s assets meet the criteria to be classified as held for sale. While this is due to a
number of factors, a primary reason is that due to the conditions of the Mongolian
economy and the lack of liquidity in the market, management was unable to conclude that
the sale of any significant size asset could be considered highly probable.



Judgement is required in determining whether the Company’s Investment property and
land use rights titles are at risk. As at December 31, 2019 and 2018, Management has made
the judgment that Investment Properties whereby the land title has recently expired but is
expected to be renewed in the near future should continue to be classified as Investment
Properties. Properties whereby Management judges that the Company’s titles are at risk,
have been impaired to reflect the level of risk estimated by Management.

5 Cash

Cash at banks earns interest at floating rates based on daily bank deposit rates. The component of
cash accounts currently consists only of cash amounts held in banks or on hand.

The following table discloses the geographical location of cash:

Barbados
Canada
Mongolia

Total cash

2019
$

1,475
33,018
13
702,762

2018
$

1,483
458,787
285,141

737,255

745,411

Cash is not collateralized. The carrying amount of cash approximates fair value.

21 | P a g e

Mongolia Growth Group Ltd |

Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the year ended December 31

5 Cash (continued)

The credit quality of cash balances may be summarized based on Standard and Poor’s ratings or
equivalents of Moody’s and/or Fitch ratings. The credit quality at December 31 was as follows:

Cash on hand
A or A+ rated
B- or B+ rated
Unrated

Total cash

2019
$
2,154
31,600
700,609
2,892

2018
$
2,139
423,087
283,002
37,183

737,255

745,411

The unrated balance relates to one private bank in Barbados (2018 – one), one brokerage company
in Canada (2018 – one) and one brokerage company in the United States (2018 – one).

6 Marketable Securities

Common shares of public companies:
Fair value - beginning of the year
Net purchases / (sales)
Securities sold short
Foreign exchange gain (loss)
Unrealized gain (loss)
Realized gain (loss)
Change in margin borrowings

Fair value - end of the year
Cash transferred out of brokerage account during

the year

7 Other assets

Accounts receivable
less: Allowance for doubtful accounts
Prepaid expenses

2019
$

2018
$

3,946,202
(238,417)
23,340
228,761
454,824
(358,826)
(366,580)

2,816,624
1,109,237
-
(147,335)
(608,297)
995,716
(219,743)

3,689,304

3,946,202

605,000

2019
$

1,342,624
-
40,403

2018
$

92,280
(13,806)
39,082

1,383,027

117,556

The increase in accounts receivable is attributed to a $190,928 receivable to be paid in monthly
instalments during the first 8 months of the year, one investment property to be transferred to the
Company with a value of $143,196 for the sale of a property and proceeds of $954,640 for the sale
of an additional property which was received subsequent to year end.

22 | P a g e

| Mongolia Growth Group Ltd

Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the year ended December 31

Investment properties

Balance - beginning of year
Additions

Acquisitions
Transfer from other asset

Disposals
Fair value adjustment
Foreign exchange adjustments

2019
$

2018
$

24,415,860

22,887,521

48,213
-
(2,524,305)
(1,347,662)
(1,760,121)

-
295,960
(509,363)
1,892,577
(150,835)

Balance – end of year

18,831,985

24,415,860

During the year ended December 31, 2019, the Company sold three investment properties for
proceeds with a value of $2,221,346 resulting in a net loss of $302,959 on these transactions. One
of these properties was disposed of through its interest in its Endymion LLC (note 21). The
proceeds received consisted of $2,029,937 in cash, and $191,409 in investment properties, of
which $1,145,568 and $143,196 respectively are classified within accounts receivable at December
31, 2019 (note 7).

In comparison, during the year ended December 31, 2018, three investment properties were sold
for cash consideration of $547,955 resulting in net gain of $38,592 on these transactions.

Investment properties by major category are as follows:

Office
Retail
Land and redevelopment sites

2019
$

1,033,875
12,307,380
5,490,730

2018
$

2,103,862
14,160,720
8,151,278

18,831,985

24,415,860

Investment properties with an aggregate fair value of $13,213,176 (2018 - $14,087,466) were
valued by an external independent valuation professional who is deemed to be a qualified appraiser
who holds a recognized, relevant, professional qualification and who has recent experience in
the locations and categories of the investment properties valued. The remaining balance of
investment properties were valued internally.

The Company determined the fair value of investment properties using the income approach and
the sales comparison approach, which are generally accepted appraisal methodologies.

Under the income approach, the methodology used was the direct capitalization approach which
is based on rental income and yields. Rental incomes were based on current rent and reasonable
and supportable assumptions that represent what knowledgeable, willing parties would assume
about rental income from future rent in light of current conditions adjusted for non-recoverable
property costs. Yields were determined using data from real estate agencies, market reports and
property location among other things in determining the appropriate assumptions. Under this
method, year one income is stabilized and capped at a rate deemed appropriate for each investment
property.

23 | P a g e

Mongolia Growth Group Ltd |

Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the year ended December 31

Investment properties (continued)

The sales comparison approach analyzes all available information of sales of comparable
properties that have recently taken place or have recently been marketed and adjusts the price to
reflect differences in the property valued and sold.

The entire portfolio of investment properties has been valued using the income approach, the sales
comparison approach or a combination thereof.

The Company currently has a standing agreement with the owner of a 42 sq. meter apartment
which has been included in one of the Company’s properties classified as land and redevelopment.
The agreement entitles the owner of the apartment to 84 sq. meters of space on the first floor of a
new building to be built on this land. In this agreement, the Company had an obligation to
complete the construction of a new building by the end of fiscal 2017 and the agreement was not
extended. A liability of $131,438 is currently included in the Company’s trade payables and accrued
liabilities (note 10) to reflect this liability. In addition, the Company has recognized an unrealized
fair value loss of $1,436,256 (2018-$1,711,065) in excess of the fair value adjustment calculated
using the valuation approaches described. This adjustment is Management’s estimate of the
markets perception of the risk related to this agreement, and is included within the unrealized gain
(loss) on fair value adjustment on Investment properties within profit and loss.

Under the fair value hierarchy, the fair value of the Company's investment properties is considered
a level three, as defined in note 3.

The key valuation assumptions for commercial investment properties are as follows:

Maximum

Minimum

2019

Weighted-
average

Capitalization rate

11.25%

9.5%

9.6%

Maximum

Minimum

2018

Weighted-
average

Capitalization rate

11.0%

9.5%

10.0%

The following sensitivity table outlines the impact of a 0.25% change in the weighted average
capitalization rate on investment properties at December 31, 2019:

Change to fair value if
capitalization rate
increased 0.25%

Change to fair value if
capitalization rate
decreases 0.25%

Commercial property

(59,733)

56,697

Additional valuation assumptions include the rental revenue per square meter, grade quality of the
property and comparable market data.

24 | P a g e

| Mongolia Growth Group Ltd

Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the year ended December 31

8 Investment properties (continued)

Investment properties of $4,308,769 (2018 - $nil) have no rental revenue associated with them at
December 31, 2019.

Investment properties include land use rights held under operating leases with an aggregate fair
value of $5,490,730 (2018 – $8,151,278) at December 31, 2019.

Certain investment properties held by the Company are leased out (the Company is the lessor)
under operating leases. The future minimum lease payments under non-cancellable leases are as
follows:

Less than 1 year
Between 1 and 5 years
Beyond 5 years

2019
$

772,222
299,333
-

2018
$

1,242,141
115,976
-

1,071,555

1,358,117

Direct operating expenses arising from investment properties that generated rental income during
the year was $1,050,283 (2018 – $860,376). Direct operating expenses arising from investment
properties that did not generate rental income during the year was $4,819 (2018 - $nil).

The Company’s operating leases, in which the Company is the lessor, are structured such that the
weighted average length of the leases as at December 31, 2019 was 8.1 months (7.6 months as at
December 2018), calculated as a percentage of monthly revenues.

25 | P a g e

Mongolia Growth Group Ltd |

Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the year ended December 31

9 Property and equipment

Furniture
and fixtures
$

Equipment
$

Buildings
$

73,702
-
-
-

(2,758)

135,758
1,540
(4,994)
-

(3,860)

2,110,307
-
-
(158,655)

(151,006)

Cost

At January 1
Additions
Disposals
Impairment
Foreign exchange

adjustment

2019

Total
$

2,319,767
1,540
(4,994)
(158,655)

(157,624)

At December 31

70,944

128,444

1,800,646

2,000,034

Furniture
and fixtures
$

Equipment
$

Buildings
$

2019

Total
$

Accumulated

depreciation

At January 1
Depreciation
Disposals
Foreign

exchange

adjustment

38,507
7,000
-
(460)

101,203
13,808
(4,994)
(2,258)

387,263
52,486
-
(28,171)

526,973
73,294
(4,994)
(30,889)

At December 31

45,047

107,759

411,578

564,384

Net book value
at December 31

25,897

20,685

1,389,068

1,435,650

During the year ended December 31, 2019 the Company recognized an impairment on its corporate
office building of $158,655 (2018 – reversal of $198,520) which was implied by the same valuation
methodology described in note 8.

26 | P a g e

| Mongolia Growth Group Ltd

Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the year ended December 31

9 Property and equipment (continued)

Furniture and
fixtures
$

Equipment
$

Buildings
$

2018

Total
$

Cost

At January 1
Additions
Disposals
Reversal of

impairment
Foreign exchange

adjustment

75,227
-
(1,045)

(480)

147,208
6,076
(16,567)

1,907,537
15,902
-

2,129,972
21,978
(17,612)

198,520

(959)

(11,652)

(13,091)

At December 31

73,702

135,758

2,110,307

2,319,767

Furniture and
fixtures
$

Equipment
$

Buildings
$

Accumulated

depreciation

At January 1
Depreciation
Disposals
Foreign exchange
adjustment

32,144
7,268
(534)

(371)

107,121
14,406
(16,567)

(3,757)

335,811
55,687
-

(4,235)

2018

Total
$

475,076
77,361
(17,101)

(8,363)

At December 31

38,507

101,203

387,263

526,973

Net book value
at December 31

35,195

34,555

1,723,044

1,792,794

10 Trade payables and accrued liabilities

Trade and accrued payables
Property commitment (note 8)
Security deposit
Unearned revenue

2019
$

506,351
131,438
107,023
22,920

2018
$

231,167
141,887
129,581
40,278

767,732

542,913

The carrying amounts above reasonably approximate fair value at the consolidated statement of
financial position date. All trade and other payables are current.

27 | P a g e

Mongolia Growth Group Ltd |

Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the year ended December 31

11 Short term and long term debt

Current
Non-current

2019
$

-
-

2018
$

680,902
-

680,902

In December 2017, the Company obtained a two year USD $1,000,000 credit facility through a
commercial bank in Mongolia. The loan was secured by various property assets and guarantees
from the Company’s Mongolian subsidiaries. The Company made an initial draw of USD $500,000
in December 31, 2017 and was fully repaid in December 2019, along with all interest owed (note
18).

12 Income taxes

a) Effective tax rate

The income tax expense reflects an effective tax rate that differs from the combined tax rate
for Canadian federal and provincial corporate taxes for the following:

Net income (loss) before income taxes

Combined statutory tax rate

2019
$

2018
$

(3,315,654)
26.5%

1,815,069
26.5%

Tax payable (recoverable) based on statutory tax rate
Effect of:

Permanent differences

(879,000)

481,000

(99,000)

263,000

Change in statutory, foreign tax, foreign exchange

rates and other

527,792

(436,274)

Adjustment

to prior years provision versus
statutory tax returns and expiry of non-capital
losses

Change in unrecognised deductible tax differences

Total income tax expense (recovery)

Provision for (recovery of) income taxes

Current
Deferred

(139,000)
524,000

(65,208)

(55,000)
5,000

257,726

90,398
(155,606)

22,659
235,067

b) Deferred income taxes

Differences between IFRS and statutory taxation regulations in Mongolia give rise to
temporary differences between the carrying amount of assets and liabilities for financial
reporting purposes and their tax bases.

28 | P a g e

| Mongolia Growth Group Ltd

Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the year ended December 31

12 Income taxes (continued)

The Company did not recognize a deferred tax asset in these Consolidated Financial
Statements as there is uncertainty with regard to the recoverability of the asset for both the
Canadian and Mongolian entities.

The significant components of the Company’s deferred tax assets and liabilities are as follows:

Deferred Tax Assets (liabilities)

Property and equipment
Investment properties
Allowable capital losses
Non-capital losses available for future period

2019
$

51,000
(581,887)
98,000
3,036,000
2,603,113

2018
$

51,000
(737,493)
98,000
2,512,000
1,923,507

Unrecognized deferred tax assets

(3,185,000)

(2,661,000)

Net deferred tax liability

(581,887)

(737,493)

The significant components of the Company’s temporary differences, unused tax credits and
unused tax losses that have not been included on the consolidated statement of financial position
are as follows:

Temporary Differences

2019

Expiry Date
Range

2018

Expiry Date
Range

Property and equipment
Allowable capital losses
Non-capital losses
available for future period

194,000 No expiry date
371,000 No expiry date

11,458,000

2030 to 2039

9,480,000

2030 to 2038

Tax attributes are subject to review, and potential adjustment by tax authorities.

13 Share capital and contributed surplus

Common shares

The Company is authorized to issue an unlimited number of common and preferred shares.

The issued and outstanding common shares are as follows:

Balance, December 31, 2017
Shares re-purchased
Treasury stock cancelled
Balance, December 31, 2018

Shares re-purchased
Treasury stock cancelled

Number of
shares

33,696,599
-
(452,600)
33,243,999

Amount
$

53,751,473
(126,243)
-
53,625,230

-
(476,500)

(120,295)
-

Balance, December 31, 2019

32,767,499

53,504,935

29 | P a g e

Mongolia Growth Group Ltd |

Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the year ended December 31

13 Share capital and contributed surplus (continued)

As at December 31, 2019, the Company held 35,000 (2018 -107,000) shares in treasury to be
cancelled during the first quarter of 2020.

Stock options

The Company has established a share based payment plan (the "Plan") to encourage ownership of
its shares by key management personnel (directors and executive management), employees and
other key service providers, and to provide compensation for certain services. The Plan provides
for the issuance of stock options in an aggregate number of up to 10% of the Company’s issued and
outstanding shares, calculated from time to time and are exercisable within a maximum of ten (10)
years. The vesting period for all options is at the discretion of the directors. The exercise price will
be set by the directors at the time of grant and cannot be less than the discounted market price of
the Company’s common shares. At December 31, 2019, the Company had 1,856,750 (2018 –
221,400) common shares available for the granting of future options under the new plan. The
Company does not have any cash-settled transactions. Full details of the Company’s option plan
can be found in “Schedule C” of the Management Information Circular on the Company’s website
and filed on Sedar.

A summary of the Company’s options as at December 31 and changes during the years then ended
follows:

Weighted
average
exercise
price
$

December 31,
2018

Weighted
average
exercise
price
$

December 31,
2019

3,103,000
(1,623,000)
-
-
-
(60,000)

1,420,000

Balance, beginning

of the year
Options expired
Options cancelled
Options granted
Options exercised
Options forfeited

Balance, end of the year

Exercisable

Weighted remaining
average life (years)

1.13
1.49
-
-
-
0.72

0.73

3,103,000
-
-
-
-
-

3,103,000

0.26

1.13
-
-
-
-
-

1.13

0.77

30 | P a g e

| Mongolia Growth Group Ltd

Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the year ended December 31

13 Share capital and contributed surplus (continued)

Options outstanding December 31, 2019

Number
outstanding

Number
exercisable

Weighted
average remaining
life (years)

Weighted average
exercise price
$

855,000*
565,000*

855,000
565,000

1,420,000

0.25
0.27

0.26

0.72
0.74

0.73

*These options have expired subsequent to December 31, 2019.

Options outstanding December 31, 2018

Number
outstanding

Number
exercisable

Weighted
average remaining
life (years)

Weighted average
exercise price
$

1,043,000
300,000
915,000
565,000
280,000

3,103,000

0.17
0.94
1.25
1.27
0.21

0.77

1.90
1.09
0.72
0.74
0.38

1.13

Earnings per share

The following table summarizes the shares used in calculating earnings (loss) per share:

Weighted average number of shares - basic
Effect of dilutive stock options

2019
$

32,989,169
-

2018
$

33,352,911
-

Weighted average number of shares - diluted

32,989,169

33,352,911

Basic earnings (loss) per share are derived by dividing net income (loss) for the year by the weighted
average number of common shares outstanding for the period.

There have been no significant capital transactions from the reporting date to the date of this filing
which have had a material impact on earnings per share.

31 | P a g e

Mongolia Growth Group Ltd |

Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the year ended December 31

14 Management of capital structure

The Company’s objective when managing capital is to ensure the Company is capitalized in a
manner which provides a strong financial position for its shareholders.

The Company’s capital structure includes equity and working capital. In managing its capital
structure, the Company considers future investment and acquisition opportunities, potential credit
available and potential issuances of new equity. The Company’s objective is to maintain a flexible
capital structure that will allow it to execute its stated business. There was no change in the
Company’s strategy or objective in managing capital since the prior year. There are no externally
imposed capital requirements at year end. Upon acquiring investment properties and operating
businesses, the Company will strive to balance its proportion of debt and equity within its capital
structure in accordance with the needs of the continuing business. The Company may, from time
to time, issue shares and adjust its spending to manage current and projected proportions as
deemed appropriate.

Current assets
Current liabilities

Working capital

2019

2018
$

5,809,586
(825,506)

4,809,169
(1,233,025)

4,984,080

3,576,144

The method used by the Company to monitor its capital is based on an assessment of the
Company’s working capital position relative to its projected obligations. At December 31, 2019, the
Company’s working capital was $4,984,080 (2018 - $3,576,144).

15 Financial risk management

The Board of Directors ensures that management has put appropriate risk management processes
in place. Through the Audit Committee, the Board oversees such risk management procedures and
controls. Management provides updates to the Audit Committee on a quarterly basis with respect
to risk management.

Catastrophe risk

Effective March 27, 2020, the Company obtained insurance on buildings and all permanent
fixtures totalling approximately $11,700,000 (March 21, 2019 - $13,500,000).

Credit risk

Credit risk is the risk of an unexpected financial loss to the Company if a third party fails to fulfill
its performance obligations under the terms of a financial instrument. The Company’s credit risk
arises principally from the Company’s cash and receivables.

32 | P a g e

| Mongolia Growth Group Ltd

Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the year ended December 31

15 Financial risk management (continued)

The following table summarizes the Company’s maximum exposure to credit risk on the
consolidated statement of financial position. The maximum credit exposure is the carrying value
of the asset, net of any allowances for loss.

Cash
Accounts receivable
less: Allowance for doubtful accounts
Marketable Securities

2019
$

737,255
1,342,624
-
3,689,304

2018
$

745,411
92,280
(13,806)
3,946,202

Maximum credit risk exposure on the consolidated

statement of financial position

5,769,183

4,770,087

The Company’s exposure to credit risk is managed through risk management policies and
procedures with emphasis on the quality of the investment portfolio. The majority of the funds
invested are held in reputable Barbadian, Canadian or Mongolian banks (note 5).

The Company is exposed to credit risk as an owner of real estate in that tenants may become unable
to pay the contracted rents. The Company mitigates this risk by carrying out appropriate credit
checks and related due diligence on the significant tenants. The Company’s properties are
diversified across commercial classes.

Liquidity risk

Liquidity risk is the risk of having insufficient cash resources to meet financial obligations without
raising funds at unfavourable rates or selling assets on a forced basis. Liquidity risk arises from the
general business activities and in the course of managing the assets and liabilities. The purpose of
liquidity management is to ensure that there is sufficient cash to meet all financial commitments
and obligations as they fall due. The liquidity requirements of the Company’s business are met
primarily by funds generated from operations, liquid investments and income and other returns
received on investments. Cash provided from these sources is used primarily for investment
property operating expenses.

As at December 31, 2019, the Company does not believe the current maturity profile of the
Company lends itself to any material liquidity risk, taking into account the level of cash and
marketable securities as at December 31, 2019.

33 | P a g e

Mongolia Growth Group Ltd |

Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the year ended December 31

15 Financial risk management (continued)

The following table summarizes the undiscounted cash flows of financial assets and liabilities by
contractual or expected maturity:

Financial Assets
Cash
Accounts receivables
less: Allowance for doubtful

accounts

One year or less
$

737,255
1,342,624

2,079,879

Financial Liabilities
Trade payables and accrued liabilities
Securities sold short

767,732
23,340

791,072

December 31, 2019

One to two
years
$

No maturity
date
$

-
-

Financial Assets
Cash
Accounts receivables
Less:Allowance for doubtful

accounts

Financial Liabilities
Trade payables and accrued liabilities
Bank Loan

One year or less

December 31, 2018

One to two
years
$

No maturity
date
$

745,411
92,280

(13,806)

823,885

542,913
680,902

1,223,815

-
-

34 | P a g e

| Mongolia Growth Group Ltd

Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the year ended December 31

15 Financial risk management (continued)

Market risk

Market risk includes interest rate risk, currency risk and other price risk.

i) Interest rate risk

Interest rate risk is the potential for financial loss arising from changes in interest rates.
Changes in interest rate levels generally impact the financial results to the extent that
reinvestment yields are different than the original yields on fixed income securities.
Changes in interest rates will affect the fair value of the fixed income securities. During
periods of rising interest rates, the market value of the existing fixed income securities will
generally decrease. During periods of declining interest rates the opposite is true. The
Company is not directly exposed to interest rate risk at December 31, 2019 and 2018.

ii) Currency risk

Currency risk represents the risk that the Company incurs losses due to exposure to foreign
currency fluctuations. The Company owns properties and carries out related business
operations in Mongolia, and is therefore subject to foreign currency fluctuations that may
impact its financial position and results.

The approximate impact of a fluctuation of 10% in the Mongolian Tögrög against the
Canadian dollar would impact the OCI of the Company by $2,614,644 (2018 - $2,460,080).

iii) Other price risk

Other price risk market fluctuation risk is where fluctuations in the value of equity
securities affect the level and timing of recognition of gains and losses on securities held,
and cause changes in realized and unrealized gains and losses. The Company’s marketable
securities are exposed to other price risk. The approximate impact of a fluctuation of 10%
in the price of the marketable securities would impact the value of the marketable securities
by $425,226.

Economic risk

Mongolian tax, currency and customs legislation is subject to varying interpretations, and changes,
which can occur frequently. Management’s interpretation of such legislation as applied to the
transactions and activity of the Company may be challenged by tax authorities.

Mongolian tax authorities may be taking a more assertive position in their interpretation of the
legislation and assessments, and it is possible that transactions and activities that have not been
challenged in the past may be challenged by tax authorities. As a result, significant additional taxes,
penalties and interest may be assessed. Fiscal periods remain open to review by the authorities in
respect of taxes for five calendar years preceding the year of review. Under certain circumstances
reviews may cover longer periods.

Mongolian tax legislation does not provide definitive guidance in certain areas, specifically in areas
such as Value added tax (VAT), corporate income tax, personal income tax and other areas. From
time to time, the Company adopts interpretations of such uncertain areas that reduce the overall
tax rate of the Company. As noted above, such tax positions may come under heightened scrutiny
as a result of recent developments in administrative and court practices. The impact of any
challenge by the tax authorities cannot be reliably estimated; however, it may be significant to the
financial position and/or the overall operations of the entity.

35 | P a g e

Mongolia Growth Group Ltd |

Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the year ended December 31

15 Financial risk management (continued)

The Company’s management believes that its interpretation of the relevant legislation is
appropriate and the Company’s tax positions will be sustained.

Management performs regular re-assessments of tax risk and its position may change in the future
as a result of the change in conditions that cannot be anticipated with sufficient certainty at
present.

16 Related party transactions

Parties are generally considered to be related if the parties are under common control or if one
party has the ability to control the other party or can exercise significant influence or joint control
over the other party in making financial and operational decisions. In considering each possible
related party relationship, attention is directed to the substance of the relationship, not merely the
legal form.

Key management personnel of the Company include all directors and executive management. The
summary of compensation for key management personnel is as follows:

Salaries and other short-term employee benefits
Director fees

2019
$

481,213
40,000

521,213

2018
$

340,439
40,000

380,439

As at December 31, 2019, amounts due to related parties totaled approximately $48,118 comprised
of accrued directors fees and fees owed to management (2018 - $57,000) were included in trade
payables and accrued liabilities. An amount of $20,867 is owed to the Company by a company
controlled by the CEO.

17 Commitments and contingencies

From time to time and in the normal course of business, claims against the Company may be
received. On the basis of Management’s assessments and professional legal advice, Management
is of the opinion that no material losses will be incurred and no provision or disclosure has been
made in these consolidated financial statements.

The Company currently has a standing agreement with the owner of a 42 sq. meter apartment
which has been included in one of the Company’s properties classified as land and redevelopment.
The agreement entitles the owner of the apartment to 84 sq. meters of space on the first floor of a
new building to be built on this land. In this agreement, the Company had an obligation to
complete the construction of a new building by the end of fiscal 2017 and the agreement was not
extended. The Company has received a demand letter from the owner of the apartment on April
24, 2019 in an amount of approximately $280,000 for lost rental income since 2013, along with
approximately $4,000 per month until the matter is settled. Management believes that the
majority of the claim is without merit and will not be successful, and therefore has not recongized
a provision with regards to this claim.

However, $131,438 is currently included in the Company’s trade payables and accrued liabilities
(note 10) to reflect the contractual liability to provide an apartment. In addition, the Company has
recognized an unrealized fair value loss of $1,436,256 (2018-$1,711,065) in the carrying value of
the related investment property, representing management’s estimate of the markets perception
of the risk related to this agreement (note 8).

36 | P a g e

| Mongolia Growth Group Ltd

Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the year ended December 31

17 Commitments and contingencies (continued)

The Company indemnifies its directors and officers against any and all claims or losses reasonably
incurred in the performance of their service to the Company to the extent permitted by law.

18 Supplementary cash flow information

Changes in non-working capital arising from

Other assets
Trade payables and accrued liabilities
Income tax payable

2019
$

(25,230)
252,461
78,355

2018
$

32,644
38,575
(495)

Changes in non-cash working capital from

operating activities

305,586

70,724

Consideration in the form of cash and investment properties for sale of investment properties were
classified as other assets (note 7) at December 31, 2019 and received subsequent to year end
totalling $1,288,764. Investment properties received as part of the consideration for the sale of
investment properties was $48,213.

During the year ended December 31, 2018, the Company reclassified $295,960 from other assets
relating to a deposit on a sale of an investment property which completed during the year ended
December 31, 2018. During the year ended December 31, 2018, long term debt of $629,448 was
reclassified to short term debt.

Income tax paid during the year was $32,637 (2018 - $34,656). Interest paid during the year was
$82,776 (2018 - $84,620).

37 | P a g e

Mongolia Growth Group Ltd |

Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the year ended December 31

19 Segment information

The Company’s operations are conducted in two reportable segments; Investment Property
Operations and Corporate. The Company reports information about its operating segments based
on the way Management organizes and reports the segments within the organization for making
operating decisions and evaluating performance. Investment Property operations consist of
commercial and residential investment property in Mongolia held for the purposes of rental
revenue, capital appreciation or redevelopment. These properties are managed by Big Sky Capital
LLC and its subsidiaries. The Company evaluates performance based on net income (loss) before
income taxes.

Rental income
Property operating expenses
Unrealized loss on investment properties
Impairment of PPE
Unrealized mark to market gain
Other expenses
Depreciation
Net investment income
loss on disposal of investment property

Other revenue
Foreign currency gain (loss)
Realized loss on marketable securities
Finance cost
Reclassification

other
comprehensive income on disposal of
subsidiary

accumulated

Investment
Property
$
1,287,353
(1,055,102)
(1,347,662)
(158,655)
-
(156,737)
(73,294)
5,489
(302,959)

156,433
(10,601)
-
(82,775)

Corporate
$
-
-
-
-
454,824
(1,067,158)
-
128
-

3
218,796
(358,826)
(47)

2019

Total
$
1,287,353
(1,055,102)
(1,347,662)
(158,655)
454,824
(1,223,895)
(73,294)
5,617
(302,959)

156,436
208,195
(358,826)
(82,822)

(824,864)

Net income (loss) before income

taxes

(2,563,374)

(752,280)

(3,315,654)

Investment
Property
$

Corporate
$

1,384,840
(860,376)
1,892,577
198,520
-
(134,823)
(77,361)
21,741
38,592
48,217
-
(84,620)
(56,185)

-
-
-
-
(608,297)
(813,973)
-
106
-
-
995,716
-
(129,605)

2018

Total
$

1,384,840
(860,376)
1,892,577
198,520
(608,297)
(948,796)
(77,361)
21,847
38,592
48,217
995,716
(84,620)
(185,790)

Rental income
Property operating expenses
Unrealized gain on investment properties
Reversal of Impairment of PPE
Unrealized mark to market loss
Other expenses
Depreciation
Net investment income
Gain on disposal of investment property
Other revenue
Realized gain on marketable securities
Finance cost
Foreign currency loss
Net income (loss) before income

taxes

2,371,122

(556,053)

1,815,069

38 | P a g e

| Mongolia Growth Group Ltd

Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the year ended December 31

19 Segment information (continued)

Balance as of
December 31, 2018

Total assets
Property and equipment
Investment properties
Expenditures

Property and equipment
Investment properties

Investment
Property
$

26,608,077
1,792,794
24,415,860

21,978
-

Corporate
$

Total
$

4,409,746
-
-

31,017,823
1,792,794
24,415,860

-
-

21,978
-

Total liabilities

1,774,396

196,122

1,970,518

Balance as of
December 31, 2019

Total assets
Property and equipment
Investment properties

Expenditures

Property and equipment
Investment properties

Investment
Property
$

22,329,807
1,435,650
18,831,985

1,540
48,213

Corporate
$

Total
$

3,747,414
-
-

26,077,221
1,435,650
18,831,985

-
-

1,540
48,213

Total liabilities

981,946

425,447

1,407,393

Trade payables
and accrued
liabilities

Revenue

Property and
equipment

Investment
property

2019
$

2018
$

2019
$

2018
$

2019
$

2018
$

2019
$

2018
$

Canada
Mongolia

402,107
365,625

196,122
346,791

-
1,140,830

-
1,471,649

-
1,435,650

-
1,792,794

-
18,831,985 24,415,860

767,732 542,193 1,140,830 1,471,649 1,435,650 1,792,794 18,831,985 24,415,860

39 | P a g e

Mongolia Growth Group Ltd |

Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the year ended December 31

20 Other expenses

Investor relations
Investment research expense
Repairs and maintenance
Office
Professional fees
Travel
Advertising
Land and property tax
Insurance
Utilities
Allowance for doubtful tax receivables
Other

21 Disposal of subsidiary

2019
$

25,808
53,194
66,858
70,633
888,056
51,626
22,832
115,250
65,889
156,489
(13,807)
82,317

2018
$

47,809
-
55,674
92,585
616,346
72,041
8,248
114,352
54,988
136,080
(35,642)
102,803

1,585,145

1,265,284

On December 26th, 2019, the Company disposed of its interest in its Endymion LLC subsidiary as
a result of the sale of one of its land packages. The Company held 100% of the shares of Endymion
LLC where the only assets and liabilities were related to the property. In connection with the sale,
the Company received consideration of $1,288,764 compared to net assets of $1,502,981 resulting
in a loss of $214,217 classified within loss on disposal of investment property in profit and loss.
Endymion LLC had $824,864 other comprehensive income and it was reclassified to profit and
loss.

22 Subsequent events

 Since January 1, 2020, the Company has repurchased 334,000 of its shares at an average price

of $0.22/share and cancelled 369,000 shares.

 The Company sold 2 properties for proceeds of approximately $413,000 and a net gain of $nil

 Beginning in February of 2020, the Government of Mongolia undertook extra-ordinary actions
in order to limit the spread of COVID-19 or other COVID-19 related impacts. These actions
included closing borders, closing schools, reducing gatherings and drastic limitations on
business operations. As long-term investors in Mongolia, the Corporation welcomes these
actions that keep the people of Mongolia safe from COVID-19; however it is anticipated that
these actions will lead to a severe economic crisis. Since the initiation of these actions, the
Company has experienced a material reduction in rental revenues received. It is reasonable to
expect there could be a material negative impact on the fair values of investment properties
and/or marketable securities, however at this time the potential effect cannot be quantified. At
this time, there is no way to know the ultimate impact of these extra-ordinary actions upon the
economy or the Company.

40 | P a g e

| Mongolia Growth Group Ltd

Nick Cousyn
Independent Director

the U.S. with extensive experience

Mr. Cousyn is a Capital Markets’ professional with 15 years of
alternatives and traditional industry experience. Before moving
to Mongolia, Mr. Cousyn was a licensed securities professional
in
in relationship
management and trading which spanned equities, fixed
income, derivatives and distressed debt. While based in the
US, some of the firms he worked for included Deutsche Bank,
Banque Populaire, Wells Fargo and First Horizon National
Bank. During his tenure in Mongolia, Mr. Cousyn has served
as Chief Communications Officer for Petro Matad and Chief
Operating Officer and head of research for BDSec (MO:BDS),
Mongolia’s largest broker and investment bank. Mr. Cousyn
also served as Co-Chair of the Business Council of Mongolia
Capital Market Working Group and was a Senior Council
Member and guest lecturer at Mongolia’s Institute for Finance
and Economics. Mr. Cousyn holds a BA in Economics from the
University of California at Riverside and is the co-founder of
Terra Explorers, a London registered company focused on
Oil Exploration and Production in Mongolia.

Brad Farquhar
Independent Director

Mr. Farquhar is Executive Vice-President and Chief
Financial Officer of Input Capital Corp. (TSXV: INP), the
world¹s first agricultural streaming company. He formerly
served in a similar capacity at Assiniboia Capital Corp.,
which built Canada’s largest farmland fund before selling
it to the Canada Pension Plan Investment Board in 2014.
Mr. Farquhar is a trained financial planner. He received a
MPA in Electoral Governance from Griffith University in
Australia, studied political science at Carleton University,
and completed a BA at Providence College. Mr. Farquhar
is a Director of Input Capital Corp, Radicle Group Inc,
Greenfield Carbon Offsetters Inc., and on the advisory
board of AgFunder.

Board of Directors

Harris Kupperman
CEO and Chairman of Mongolia Growth Group Ltd

Mr. Kupperman is a co-founder of Mongolia Growth Group
and has been the Executive Chairman of the Corporation
since March 2014. Mr. Kupperman was the President and
CEO of the Corporation from February 2011 to March 2014
and returned as CEO in December 2014. Mr. Kupperman
publishes AdventuresInCapitalism. com; a site dedicated
to uncovering unique opportunities around the world. He is
currently the President of Praetorian Capital Fund, a small
cap, event-driven hedge fund based in Miami Beach. He
graduated from Tulane University College with a history
degree. Mr. Kupperman served as a Director at Aeroquest
International Limited (TSX:AQL) from 2010-2011.

Jim Dwyer
Independent Director

Mr. Dwyer is Chairman of Mongoljin Private Capital Ltd. in
Ulaanbaatar. Jim was a New York-based investment banker
specializing in mergers and acquisitions for 30 years and
completed over 100 M&A transactions. In addition, he
founded and managed M&A departments for two major
investment banking firms: Shearson Loeb Rhoades and
UBS-North America. Mr. Dwyer first visited Mongolia in 2001
to represent the Government of Mongolia as lead investment
banker for the privatization of its largest bank, Trade &
Development Bank. Thereafter, he served as lead investment
banker for the privatization of the largest Government-owned
retail bank, Khan Bank. He co-founded the Business Council
of Mongolia (BCM) and served as Executive Director from its
formation in 2007 to 2016. He is also an independent director
of other Mongolian-based entities including Golomt Bank,
Mandal Insurance and Mongolian Mutual Finance Group.
Mr.Dwyer received a BBA from the University of Notre Dame
and an MBA from Columbia Graduate School of Business
(Columbia University).

Robert Scott
Independent Director

Mr. Scott, CPA, CA, CFA brings more than 20 years of
professional experience in accounting, corporate finance,
and merchant and commercial banking. Mr. Scott earned his
CFA in 2001, his CA designation in 1998 and has a B.Sc.
from the University of British Columbia. He is a Founder and
President of Corex Management Inc., a private company
providing accounting, administration, and corporate
compliance services to privately held and publicly traded
companies, and has served on the management teams and
boards of numerous Canadian publicly traded companies
with a strong track record of cost effectively running
operations. Mr. Scott has also listed several companies
on the TSX Venture Exchange gaining extensive IPO, RTO,
regulatory and reporting experience, and currently holds
senior management and board positions with a number
of issuers on the TSX Venture Exchange & the Canadian
Securities Exchange.

Officers

Harris Kupperman

Genevieve Walkden, MBA, CFP, CAIA

CEO and Chairman of the Board

CFO and Corporate Secretary

Auditors

Legal

Transfer Agent

Davidson & Company LLP
Vancouver, BC

Borden Ladner Gervais LLP

Computershare Investor Services

Calgary, AB

100 University Ave., 8th Floor

Farris, Vaughan, Wills & Murphy LLP

Vancouver, BC

Toronto, ON M5J 2Y1

Tel: 1 800 564 6253

www.investorcentre.com/service

Mongolia Growth Group Ltd |TSX - Venture

Canada: YAK
USA: MNGGF

MONGOLIA GROWTH GROUP Ltd.

First Canadian Place,100 King Street West,

56th Floor, Toronto, Ontario M5X 1C9, Canada

Tel: (877) 644-1186

Fax: (866) 468-9119

info@mongoliagrowthgroup.com | www.mongoliagrowthgroup.com

| Mongolia Growth Group Ltd