2020 Annual Report
Table of Contents
Letter to Shareholders ................................................................................................................................. 3
Management Discussion & Analysis ....................................................................................................... 5
Consolidated Financial Statements ........................................................................................................ 26
Corporate Information ............................................................................................................................... 63
Mongolia Growth Group Ltd.
Mongolia Growth Group Ltd. Mongolia Growth Group Ltd. (MGG) is a leading publicly traded property invest-
ment 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MGG undertakes its own property acquisitions and repositions outdated properties, relying on in-house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,
2020 was a difficult year for most businesses and ours
was not spared. Between COVID-19 and repeated rounds
of lock-downs, many of our tenants saw their businesses
suffer. This was then compounded by travel restrictions
and a declining economy. As a property company, we are
only as successful as our tenants and when our tenants’
businesses cannot operate, we are unable to charge the
rent we are owed. Additionally, as the economy went
into lock-down, our 3rd party sales and leasing business
is particularly
effectively ground to a halt—which
frustrating as we were gaining real traction there.
Fortunately, we now have nine years of experience
operating this business despite a never-ending series
of economic crises. COVID-19 in many ways was just an
average Tuesday at our company and our staff reacted
intelligently and professionally in dealing with tenants
who would have liked to have paid rent, yet couldn’t
due to the inability to operate their businesses. We
offered various discounts to tenants and believe we have
retained the majority of tenants assuming that things
return to normal in the near future. Unfortunately, we
have zero visibility into how long this COVID-19 crisis will
last and when or even if business operations will return to
normal. As a result, our focus remains on reducing costs
in Mongolia and extending the runway on our liquidity
situation as a result of our currently elevated burn rate.
During 2020 we reported $756,283 of rental revenue and
$68,170 of other revenue, offset by $860,936 of property
operating expenses in Mongolia. For the first time in our
Corporation’s history, Mongolia produced negative cash
flow (defined as total revenue minus property operating
expenses), whereas previously, Mongolia partly offset
negative cash flow at the corporate level. As I noted
above, we have zero visibility into when or if this will
change. As a result, we’ll continue to soldier on under
impossible circumstances—with the view that it often
comes out even worse than our wildest expectations in
Mongolia. Unfortunately, due to the economic situation
in Mongolia, we experienced a $2,700,069 fair value
impairment to the portfolio and an additional $36,426
fair value impairment to our headquarters building which
we classify as Property & Equipment. During the year, we
sold 3 assets for $690,134 and a gain on sale of $106,762.
As our property revenues are largely out of our control,
let’s discuss what we’re doing to diversify this business.
Despite repeated efforts, to date, we have yet to find
a business in North America that we can acquire. This
inability is a combination of prudence on our side in
terms of purchase price and a view that public market
securities offer dramatically cheaper valuations along
ideal
with
acquisition. We remain focused on finding a business,
but until valuations are reasonable, we will not purchase
something just to keep ourselves busy. Instead, we have
focused the past half year on building out a data-analytics
service which tracks various Event-Driven strategies
called KEDM. To learn more, subscribe at http://www.
KEDM.COM
liquidity should we find an
immediate
For the past few months, KEDM has been in an extended
Beta test as we continue to onboard various data sets
and respond to reader feedback which improves our
data quality. To date, the reception to the free trial has
dramatically exceeded our expectations, both in terms of
total number of users and engagement. That said, we will
not know the future revenue possibility of this service
until we initiate a paywall and see what our conversion
rate looks like—which will likely occur during the second
quarter. Assuming that the uptake is acceptable, our plan
is to reinvest a healthy percentage of the revenue in new
hires in order to continue to build out additional data
sets and improve KEDM. While it is far too early to say
if this business will be profitable, it clearly has found an
unmet demand amongst active investors and traders. My
sincere hope is that it will generate enough cash flow to
offset our corporate overhead, even after that overhead
expands due to the increased needs of KEDM. That said,
I do not believe that KEDM will ever really move the
needle in terms of our overall business and should be
seen as a way to hopefully reduce our burn rate while we
seek out a business to launch or acquire.
Previously, the largest impediments to any diversification
of our business were our burn rate and lack of liquidity.
3
Mongolia Growth Group Ltd | to attractive growth rates. I remain convinced that our team
in Mongolia is our most valuable asset as it gives us the
optionality to move rapidly should the economy ever stabilize.
I hope that one day we will be able to prove that value to
shareholders.
Finally, I remain of the opinion that our shares are undervalued.
During 2020, the Company re-purchased 1,642,500 shares
under our Normal Course Issuer Bid at a cost of $339,688.
Sincerely,
Harris Kupperman
CEO and Chairman of the Board
I am hopeful that KEDM solves for the former and our public
security holdings appear to slowly be solving for the latter. Our
securities portfolio produced a $4,265,403 unrealized gain and
a $3,288,803 realized gain. This is primarily the result of well-
timed security purchases during the depths of the COVID-19
crisis along with the utilization of various Event-Driven
strategies. Additionally, the portfolio’s value has continued to
increase since the end of the year. 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.
Starting with this annual letter, we will be giving additional
details on any portfolio position that comprises more than 10%
of our securities portfolio. At year-end, the portfolio’s largest
exposures were an entity that owns Bitcoin, a large landowner
in Florida, a natural gas producer, a transporter of propane
and a company tied to housing and construction. While our
public securities investments have helped offset operating
losses during 2020, there are legal and tax reasons why it
is inadvisable to grow this portfolio beyond a certain point.
Instead, we see public securities as a highly liquid alternative
to owning cash as we seek out an operating business to launch
or acquire in North America. Additionally, my expectation is
that 2020 is an outlier in terms of what you should expect in
terms of our public securities portfolio’s performance—results
are unlikely to be this good in future periods.
Conceptually, as this Corporation continues to evolve, I see an
entity with a core Mongolian presence, but also the ability to
act like something of a Merchant Bank; having a strong and
liquid capital base for launching and acquiring businesses,
while using the flexibility of permanent capital to bridge the
gap between public and private markets in terms of how we
own these businesses. While this plan remains somewhat
abstract, the launch of this first internally developed data
business (however small) is the first concrete step in that
direction. I hope to have more information in subsequent
letters as we continue to refine the plan.
Returning to our overall business, 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, MGG will likely produce operating losses
(excluding potential gains from our public securities portfolio)
for the foreseeable future. As a result, we remain focused on
selling non-core property assets (particularly in office and re-
development) so that we can diversify the business, while
keeping our core portfolio and management team so that
we can pivot back to Mongolia when the economy returns
4
| Mongolia Growth Group Ltd MONGOLIA GROWTH GROUP LTD.
Management Discussion & Analysis
December 31, 2020
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, 2020 (the “MD&A”), compared with the year ended December 31,
2019. 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 5, 2021 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, 2020 and December 31, 2019 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.
5
Mongolia Growth Group Ltd |
Section 1 – Overview
Financial and Operational Overview
During 2020, the Corporation continued to focus on ensuring that occupancy remained high and outstanding rents were collected,
despite the prevailing economic weakness.
The Corporation’s rental revenue was down significantly when compared to 2019. While the Corporation managed to maintain a
high occupancy rate, with 90.6% office and 100.0% retail occupancy rates, it had to offer significant discounts to tenants affected
by closures due to Covid-19 heavily affecting revenue.
During the year, the Company sold three properties for cash consideration of $690,134 and a net gain of $106,762 (2019-
$302,959 loss). It is anticipated that the Corporation will continue to dispose of properties in future quarters in order to fund
future working capital needs, the Normal Course Issuer Bid (NCIB) program, along with funding the start-up costs or capital cost
of the acquisition of a business outside of Mongolia.
During the year, the Mongolian Tögrög decreased versus the Canadian dollar from 2,095 MNT/CAD on December 31, 2019 to
2,235 on December 31, 2020; a 6.7% decrease during the year. This depreciation led to a $1,108,206 comprehensive unrealized
loss (2019– $1,831,600 loss) during the year.
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 employees
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 the economic crisis
which is currently ongoing.
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.
Beginning in February of 2020, the Government of Mongolia undertook extra-ordinary actions to limit the spread of Covid-19.
These actions included closing borders, closing schools, reducing gatherings and drastic limitations on business operations
including the Corporation’s operations. 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. Additionally, there
is a question as to the duration of these efforts and if this will be a continued endeavour. Until the economy re-opens, the
Corporation anticipates substantial declines in rental revenues against a fixed cost structure in Mongolia and at the corporate
level. This is likely to lead to an elevated level of operating losses for the Corporation.
To date, the Corporation has experienced a low level of bad debt expense; however, it has had to issue a significant number
of discounts to tenants affected by the economic crisis. Additionally, many tenants have struggled to operate their businesses
and the Corporation anticipates that a number of tenants may exit leases prematurely over the next few quarters, leading to an
increase in vacancy and renovation expenses. The Corporation remains focused on filling leases as rapidly as possible, but cautions
shareholders that future rental rates may decline substantially from currently contracted rates. Additionally, certain tenants may
require rent discounts in order to stabilize their businesses. The Corporation intends to review each tenants’ circumstances when
determining the appropriate course of action.
Additionally, travel restrictions have made it impossible for members of senior management to travel to Mongolia and the overall
operation of the business may suffer if travel restrictions are continued for a prolonged period of time. To date, the Corporation
believes that its Mongolian staff have performed well during the crisis.
Management believes that the current economic crisis is the result of policies that have discouraged Foreign Direct Investment
(“FDI”) along with Covid-19. 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.
Property Overview
During the boom years at the beginning of this decade, multiple sizable property developments were initiated. Despite an
economic 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 re-commence development at any time.
Despite substantial new supply over the past few years, before the economy was impacted by Covid-19, well-placed office and
retail space in the city center was beginning to get absorbed with rental rates starting to increase. However, there is concern that
stalled projects will enter the market during a period of weak demand and banks may be forced to liquidate distressed property
6
| Mongolia Growth Group Ltd assets due to the IMF bailout. Management continues to monitor and evaluate the ultimate impact of Covid-19 on property
prices and the Mongolian economy. While there have been very limited transactions since the onset of Covid-19, Management is
of the opinion that property prices have declined as a result of the impacts of the global pandemic and the weakening Mongolian
economy. As a result, during 2020, the Corporation recorded a Fair Value impairment to the carrying value of its portfolio and an
impairment to its headquarters building’s carrying value, which is accounted for as Property & Equipment.
Management cautions investors that it is focused on continuing to dispose of non-core property assets when possible in order
to recycle capital.
7
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; however,
the Corporation has had to issue significant discounts to tenants most affected by the current pandemic. The Corporation is
unsure as to when or if these discounts can be rolled back as there has been substantial variability in total discounts issued as
the year progressed.
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 of Mongolia, in order to diversify its business and is considering
adopting a Merchant Bank model. Since 2017, the Corporation spent substantial time evaluating a number of businesses, but has
not decided to move forward on any acquisition. Additionally, the Corporation has incubated a financial data product known as
KEDM.COM since the summer of 2020 and assuming that there is demand, it intends to commercialize this product during the
second quarter of 2021. While KEDM.COM is not anticipated to materially impact overall revenues, it is indicative of the direction
that the Corporation is headed as it diversifies its sources of revenue. In the meantime, the Corporation has invested its excess
capital in certain publicly traded securities. The Corporation believes that over time, it will continue to dispose of property assets
in order to 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 and future potential business acquisitions. Additionally, Management 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 along with potential start-up expenses related to any businesses started internally.
Management 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, 2020:
The following table represents properties classified as Investment Properties, as of December 31, 2020:
Office
Retail
Land and Redevelopment
Total
# of Properties
2
14
2
18
2020
Value at 31‐December‐2020
$CDN
896,266
9,415,983
4,229,987
14,542,236
# of Properties
1
17
2
20
2019
Value at 31‐December‐2019
$CDN
1,033,875
12,307,380
5,490,730
18,831,985
Property and Equipment
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
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, falls within this category.
8
The following table represents properties classified as Property and Equipment, as of December 31, 2020:
# of Properties
Value at 31‐December‐2020
# of Properties
Value at 31‐December‐2019
2020
$CDN
1,265,587
‐
‐
1,265,587
1
‐
‐
1
1
‐
‐
1
A summary of MGG’s property portfolio occupancy rates is set forth in the following table:
31 –December‐ 2020
Occupancy Rate*
31 –December‐ 2019
Occupancy Rate*
31 –December‐ 2018
Occupancy Rate*
Weighted Average**
* Occupancy rates are calculated on a per meter basis and only include properties in the rental pool. It does not include those currently listed for sale.
** Weighted Average is calculated based on total meters available for lease.
96.6%
100.0%
97.0%
96.9%
100.0%
98.8%
Demand for retail space has remained strong, despite a challenging economy. Occupancy levels for the Corporation’s office
space continues to be strong even while vacancy levels throughout the city have remained high as additional supply has
entered the market. The Corporation’s Tuguldur Center has been impacted by the closure of numerous schools that are
nearby and a resulting lower level of foot traffic, leading to reduced occupancy that has fluctuated during the year. The
Corporation has offered numerous tenant discounts in order to retain stable tenants. It is too soon to determine the ultimate
impact of Covid‐19 on Tuguludur Center and when or if rental rates can return to prior levels.
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 then prevailing market
Land and Redevelopment
Occupancy Rates
Office
Retail
Total
Office
Retail
2019
$CDN
1,389,068
‐
‐
1,389,068
94.9%
100.0%
98.1%
MONGOLIA GROWTH GROUP LTD., Q4 2020 MD&A
8
| Mongolia Growth Group Ltd
The following table represents properties classified as Investment Properties, as of December 31, 2020:
The following table represents properties classified as Investment Properties, as of December 31, 2020:
# of Properties
# of Properties
Value at 31‐December‐2020
Value at 31‐December‐2020
# of Properties
# of Properties
Value at 31‐December‐2019
Value at 31‐December‐2019
Office
Office
Retail
Retail
Land and Redevelopment
Land and Redevelopment
Total
Total
2
2
14
14
2
2
18
18
2020
2020
$CDN
$CDN
896,266
896,266
9,415,983
9,415,983
4,229,987
4,229,987
14,542,236
14,542,236
2019
2019
$CDN
$CDN
1,033,875
1,033,875
12,307,380
12,307,380
5,490,730
5,490,730
18,831,985
18,831,985
1
1
17
17
2
2
20
20
Property and Equipment
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
Properties are classified as Property and Equipment if the Corporation occupies more than 10% of the property. Properties
losses. All repairs and maintenance costs to these properties are charged to the Consolidated Statement of Operations
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
losses. All repairs and maintenance costs to these properties are charged to the Consolidated Statement of Operations during
during the period in which they occur unless eligible for capitalization. The Corporation’s headquarters, purchased in
during the period in which they occur unless eligible for capitalization. The Corporation’s headquarters, purchased in
the period in which they occur unless eligible for capitalization. The Corporation’s headquarters, purchased in October 2011, falls
October 2011, falls within this category.
October 2011, falls within this category.
within this category.
The following table represents properties classified as Property and Equipment, as of December 31, 2020:
The following table represents properties classified as Property and Equipment, as of December 31, 2020:
The following table represents properties classified as Property and Equipment, as of December 31, 2020:
Office
Office
Retail
Retail
Land and Redevelopment
Land and Redevelopment
Total
Total
# of Properties
# of Properties
1
1
‐
‐
‐
‐
1
1
2020
2020
Value at 31‐December‐2020
Value at 31‐December‐2020
$CDN
$CDN
1,265,587
1,265,587
‐
‐
‐
‐
1,265,587
1,265,587
# of Properties
# of Properties
1
1
‐
‐
‐
‐
1
1
2019
2019
Value at 31‐December‐2019
Value at 31‐December‐2019
$CDN
$CDN
1,389,068
1,389,068
‐
‐
‐
‐
1,389,068
1,389,068
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 –December‐ 2019
31 –December‐ 2019
Occupancy Rate*
Occupancy Rate*
96.9%
96.9%
100.0%
100.0%
31 –December‐ 2020
31 –December‐ 2020
Occupancy Rate*
Occupancy Rate*
96.6%
96.6%
100.0%
100.0%
Office
Office
Retail
Retail
31 –December‐ 2018
31 –December‐ 2018
Occupancy Rate*
Occupancy Rate*
94.9%
94.9%
100.0%
100.0%
Weighted Average**
Weighted Average**
97.0%
97.0%
98.8%
98.8%
98.1%
98.1%
* Occupancy rates are calculated on a per meter basis and only include properties in the rental pool. It does not include those currently listed for sale.
* Occupancy rates are calculated on a per meter basis and only include properties in the rental pool. It does not include those currently listed for sale.
* Occupancy rates are calculated on a per meter basis and only include properties in the rental pool. It does not include those currently listed for sale
** Weighted Average is calculated based on total meters available for lease.
** 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 challenging economy. Occupancy levels for the Corporation’s office
Demand for retail space has remained strong, despite a challenging economy. Occupancy levels for the Corporation’s office
Demand for retail space has remained strong, despite a challenging economy. Occupancy levels for the Corporation’s office
space continues to be strong even while vacancy levels throughout the city have remained high as additional supply has
space continues to be strong even while vacancy levels throughout the city have remained high as additional supply has
space continues to be strong even while vacancy levels throughout the city have remained high as additional supply has entered
entered the market. The Corporation’s Tuguldur Center has been impacted by the closure of numerous schools that are
the market. The Corporation’s Tuguldur Center has been impacted by the closure of numerous schools that are nearby and a
entered the market. The Corporation’s Tuguldur Center has been impacted by the closure of numerous schools that are
resulting lower level of foot traffic, leading to reduced occupancy that has fluctuated during the year. The Corporation has offered
nearby and a resulting lower level of foot traffic, leading to reduced occupancy that has fluctuated during the year. The
nearby and a resulting lower level of foot traffic, leading to reduced occupancy that has fluctuated during the year. The
numerous tenant discounts in order to retain stable tenants. It is too soon to determine the ultimate impact of Covid-19 on
Corporation has offered numerous tenant discounts in order to retain stable tenants. It is too soon to determine the ultimate
Corporation has offered numerous tenant discounts in order to retain stable tenants. It is too soon to determine the ultimate
Tuguludur Center and when or if rental rates can return to prior levels.
impact of Covid‐19 on Tuguludur Center and when or if rental rates can return to prior levels.
impact of Covid‐19 on Tuguludur Center and when or if rental rates can return to prior levels.
Leasing Schedule
Leasing Schedule
Leasing Schedule
In order to reduce the Corporation’s exposure to currency fluctuations and inflation, the Corporation targets shorter lease
In order to reduce the Corporation’s exposure to currency fluctuations and inflation, the Corporation targets shorter lease
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
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 then prevailing market
expectation that once leases expire, existing tenants are offered the first right to re‐lease the space at then prevailing market
rates.
expectation that once leases expire, existing tenants are offered the first right to re‐lease the space at then prevailing market
rates.
rates.
A summary of the Corporation’s lease signings by asset class is presented in the chart below (while these are contracted
A summary of the Corporation’s lease signings by asset class is presented in the chart below (while these are contracted rates, it
rates, it is anticipated that many tenants will pay reduced cash rates until the economic crisis concludes):
is anticipated that many tenants will pay reduced cash rates until the economic crisis concludes):
Most Recent Lease Signings
Lease Type
Lease Renewal Date
SqM
Oct‐20
Oct‐20
Oct‐20
Oct‐20
Oct‐20
Oct‐20
Nov‐20
Nov‐20
Nov‐20
Dec‐20
Dec‐20
33
31
24
90
70
22
183
360
90
113
201
MONGOLIA GROWTH GROUP LTD., Q4 2020 MD&A
MONGOLIA GROWTH GROUP LTD., Q4 2020 MD&A
Old Price Per Meter
(Mongolian Tögrög)
35,000
35,000
35,000
25,666
42,000
25,000
30,000
27,777
25,000
17,699
35,486
New Price Per Meter
(Mongolian Tögrög)
30,000
35,000
35,000
29,333
42,000
25,000
30,000
27,777
25,000
17,699
35,486
8
8
Percent
Increase (decrease)
‐14.3%
0.0%
0.0%
14.3%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Contractually Obligated Rental Revenue
9
Office Lease
Office Lease
Office Lease
Retail Lease
Office Lease
Office Lease
Office Lease
Retail Lease
Office Lease
Retail Lease
Retail Lease
90.00%
80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
2021
2022
2023
Retail
Office
Redevelopment
The weighted average remaining lease length, calculated as a percentage of monthly revenues, increased slightly during the
year to 9.2 months in December 2020 compared to 8.1 months in December 2019.
Due to the impacts of Covid‐19, Management is unable to determine current market rates as many tenants in Mongolia are
operating under some form of discount or rental holiday. It is Management’s belief that the majority of the Corporation’s
existing leases are at rates that are in‐line with prevailing market rates that existed before Covid‐19. Future changes in lease
rates are dependent on economic conditions.
MONGOLIA GROWTH GROUP LTD., Q4 2020 MD&A
9
Mongolia Growth Group Ltd |
A summary of the Corporation’s lease signings by asset class is presented in the chart below (while these are contracted
rates, it is anticipated that many tenants will pay reduced cash rates until the economic crisis concludes):
Lease Type
Lease Renewal Date
SqM
Old Price Per Meter
(Mongolian Tögrög)
New Price Per Meter
(Mongolian Tögrög)
Increase (decrease)
Most Recent Lease Signings
Oct‐20
Oct‐20
Oct‐20
Oct‐20
Oct‐20
Oct‐20
Nov‐20
Nov‐20
Nov‐20
Dec‐20
Dec‐20
33
31
24
90
70
22
183
360
90
113
201
35,000
35,000
35,000
25,666
42,000
25,000
30,000
27,777
25,000
17,699
35,486
Contractually Obligated Rental Revenue
30,000
35,000
35,000
29,333
42,000
25,000
30,000
27,777
25,000
17,699
35,486
Percent
‐14.3%
0.0%
0.0%
14.3%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Office Lease
Office Lease
Office Lease
Retail Lease
Office Lease
Office Lease
Office Lease
Retail Lease
Office Lease
Retail Lease
Retail Lease
90.00%
80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
2021
2022
2023
Retail
Office
Redevelopment
The weighted average remaining lease length, calculated as a percentage of monthly revenues, increased slightly during the
year to 9.2 months in December 2020 compared to 8.1 months in December 2019.
The weighted average remaining lease length, calculated as a percentage of monthly revenues, increased slightly during the year
to 9.2 months in December 2020 compared to 8.1 months in December 2019.
Publicly Traded Securities
Due to the impacts of Covid-19, Management is unable to determine current market rates as many tenants in Mongolia are
operating under some form of discount or rental holiday. It is Management’s belief that the majority of the Corporation’s existing
Due to the impacts of Covid‐19, Management is unable to determine current market rates as many tenants in Mongolia are
The Corporation has invested a portion of its excess capital in marketable securities. As at December 31, 2020, the
leases are at rates that are in-line with prevailing market rates that existed before Covid-19. Future changes in lease rates are
operating under some form of discount or rental holiday. It is Management’s belief that the majority of the Corporation’s
dependent on economic conditions.
Corporation held long positions in multiple different publicly traded companies. The value of marketable securities owned
existing leases are at rates that are in‐line with prevailing market rates that existed before Covid‐19. Future changes in lease
was $10,613,444 and securities sold short was $39,223.
Publicly Traded Securities
rates are dependent on economic conditions.
The Corporation has invested a portion of its excess capital in marketable securities. As at December 31, 2020, the Corporation
The year saw a recovery in the value of the Corporation’s publicly traded securities holdings when compared to 2019. During
held long positions in multiple different publicly traded companies. The value of marketable securities owned was $10,613,444
the year, the Corporation realized gains of $3,288,803 (2019‐ loss of $358,826) from sales of public securities during the
and securities sold short was $39,223.
year, experienced unrealized gains of $4,265,403 (2019 –$454,824) and a foreign exchange loss of $45,722 (2019 – gain of
$228,761).
The year saw a recovery in the value of the Corporation’s publicly traded securities holdings when compared to 2019. During
the year, the Corporation realized gains of $3,288,803 (2019- loss of $358,826) from sales of public securities during the year,
At the end of the year, positions that were in excess of 10% of the portfolio included shares of companies and securities
experienced unrealized gains of $4,265,403 (2019 –$454,824) and a foreign exchange loss of $45,722 (2019 – gain of $228,761).
with exposure to crypto currency (Grayscale Bitcoin Trust – 91,436 shares) and real estate (St Joe Company – 56,162 shares).
At the end of the year, positions that were in excess of 10% of the portfolio included shares of companies and securities with
exposure to crypto currency (Grayscale Bitcoin Trust – 91,436 shares) and real estate (St Joe Company – 56,162 shares).
The Corporation anticipates that its public security portfolio will experience volatility beyond the normal volatility of its
The Corporation anticipates that its public security portfolio will experience volatility beyond the normal volatility of its property
property portfolio and the timing of gains and losses will be unpredictable.
portfolio and the timing of gains and losses will be unpredictable.
The Corporation’s public securities weightings as of December 31, 2020 are broken out in the following sectors;
The Corporation’s public securities weightings as of December 31, 2020 are broken out in the following sectors;
MONGOLIA GROWTH GROUP LTD., Q4 2020 MD&A
9
Long Portfolio
Industry Sector
Crypto currency
Real Estate
Natural gas
Transportation & logistics
Financials
Consumer services
Utilities
Metals and mining
Other long equities
Short Put Option Portfolio
Industry Sector
Options
Percentage
32.2%
26.2%
6.4%
6.2%
5.8%
5.1%
3.4%
3.2%
3.2%
Percentage
‐0.3%
Management considers its marketable securities holdings to be fairly liquid and can be sold should the Corporation need to
Management considers its marketable securities holdings to be fairly liquid and can be sold should the Corporation need to
increase its cash position, launch a new business or find an attractive acquisition. For tax and regulatory reasons, the Corporation
increase its cash position, launch a new business or find an attractive acquisition. For tax and regulatory reasons, the
does not intend for its public securities portfolio to ever represent a majority of the total assets. Since the end of the year, the
Corporation does not intend for its public securities portfolio to ever represent a majority of the total assets.
value of the public securities portfolio has appreciated considerably. As of March 31, 2021, the portfolio had a value in excess of
$17,000,000. In addition, during the first 2 months of 2021, the Corporation withdrew $525,000 of cash from the investment
Since the end of the year, the value of the public securities portfolio has appreciated considerably. As of March 31, 2021,
account to fund working capital needs and the Corporation’s NCIB program.
the portfolio had a value in excess of $17,000,000. In addition, during the first 3 months of 2021, the Corporation withdrew
$525,000 of cash from the investment account to fund working capital needs and the Corporation’s NCIB program.
10
MONGOLIA GROWTH GROUP LTD., Q4 2020 MD&A
10
| Mongolia Growth Group Ltd
Section 3 – Results of Operations
Section 3 – Results of Operations
Selected Annual Financial Information (CAD)
Selected Annual Financial Information (CAD)
Revenue and other income
Income
Net income (loss) 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‐ 2020
931,215
3,727,544
2,516,287
0.12
0.12
27,970,421
1,123,994
26,846,427
31,281,499
0.86
Year ended
31‐Dec‐ 2019
1,140,830
(3,250,446)
(4,257,182)
(0.10)
(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
0.05
31,017,823
1,970,518
29,047,305
33,243,999
0.87
Revenue from Investment Properties
Revenue from Investment Properties
Rental revenue from Investment Properties decreased from $1,287,353 in 2019 to $756,283 in 2020. This is primarily due to
Rental revenue from Investment Properties decreased from $1,287,353 in 2019 to $756,283 in 2020. This is primarily due to
discounts given to tenants due to Covid-19 restrictions, fewer investment properties along with the depreciation of the Mongolian
discounts given to tenants due to Covid‐19 restrictions, fewer investment properties along with the depreciation of the
Togrog.
Mongolian Togrog.
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, 2020, revenues from other sources totaled $68,170 compared to $156,436 for the year ending December
the year ending December 31, 2020, revenues from other sources totaled $68,170 compared to $156,436 for the year ending
31, 2019 as the number of real estate transactions stalled during the year.
December 31, 2019 as the number of real estate transactions stalled during the year.
Gain/loss on disposal of Investment Properties
Gain/loss on disposal of Investment Properties
During the year, the Corporation sold three properties for cash consideration of $690,134 for a gain of $106,762 (2019 – three
properties sold for a loss of $302,959).
During the year, the Corporation sold three properties for cash consideration of $690,134 for a gain of $106,762 (2019 –
three properties sold for a loss of $302,959).
Fair Value Adjustment on Investment Properties
The estimate of fair value of investment properties is a critical accounting estimate to the Corporation. An external appraiser
Fair Value Adjustment on Investment Properties
estimates the fair value of the majority of the Investment Properties annually, the remainder are appraised internally by
The estimate of fair value of investment properties is a critical accounting estimate to the Corporation. An external appraiser
Management. The fair value of investment properties is based on the nature, location and condition of the specific asset. The fair
estimates the fair value of the majority of the Investment Properties annually, the remainder are appraised internally by
value of investment properties represents an estimate of the price that would be made in an arm’s length transaction between
Management. The fair value of investment properties is based on the nature, location and condition of the specific asset.
knowledgeable, willing parties. The Corporation operates in the emerging real estate market of Mongolia, which given its current
economic and industry conditions, has an increased inherent risk given the lack of reliable and comparable market information.
The fair value of investment properties represents an estimate of the price that would be made in an arm’s length
For the year ended December 31, 2020, the Corporation recorded a valuation loss of $2,700,069 (2019 – $1,347,662 loss).
transaction between knowledgeable, willing parties. The Corporation operates in the emerging real estate market of
Management continues to evaluate the impacts of Covid-19 on property prices.
Mongolia, which given its current economic and industry conditions, has an increased inherent risk given the lack of reliable
and comparable market information. For the year ended December 31, 2020, the Corporation recorded a valuation loss of
Income Taxes
$2,700,069 (2019 – $1,347,662 loss). Management continues to evaluate the impacts of Covid‐19 on property prices.
The Corporation has subsidiaries in Mongolia that are subject to income taxes and, accordingly, has provided for current 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 sheet
decreased by $103,051 during the year (Q4 2019 - $155,606 decrease) primarily due to sale of investment properties and an
unrealized loss on the fair value of investment properties.
MONGOLIA GROWTH GROUP LTD., Q4 2020 MD&A
11
11
Mongolia Growth Group Ltd |
Unrealized short-term investment gain/loss
During the year, the Corporation had unrealized gains of $4,265,403 compared to an unrealized short-term investment gain of
$454,824 during 2019.
Realized public securities investment gain/loss
During the year, the Corporation had a realized investment gains of $3,288,803 compared to a realized investment loss of
$358,826 in 2019.
Realized foreign currency gain/loss
During the year, the Corporation had a realized foreign currency loss of $17,218 compared to a foreign currency gain of $208,195
in 2019.
Share Repurchase
During 2020, the Corporation repurchased 1,642,500 of its common shares under its Normal Course Issuer Bid (NCIB) at an
average price of $0.21 (2019-404,500, $0.30 average). As at December 31, 2020, the Corporation held 191,500 shares in Treasury
to be cancelled during the first quarter of 2021 (2019- 35,000).
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, 2020, the property operating expenses were $860,936 compared to $1,055,102 during the
same period in 2019. This decrease was primarily due to a decrease in salaries and commissions associated with the Company’s
third-party brokerage business along with fewer property assets due to disposals and a decrease in the local currency.
Corporate Expenses
Corporate expenses include senior management and board of director compensation, listing fees, professional fees, technology,
travel, investment research expenses, KEDM.COM development costs and administrative costs.
For the year ending December 31, 2020, general and administration expenses were slightly decreased from $1,067,158 in 2019
to $910,968 in 2020 as a result of less travel, fewer conferences and reduced bonuses.
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, 8% in 2019 and 6.7% in 2020. 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 balance 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, 2020, the Corporation recognized a foreign exchange
adjustment loss of $1,151,720 (2019 - loss of $1,760,121) to its investment property portfolio due to the 6.7% depreciation of
the local currency during the year.
Operating Profit (Loss)
Operating Profit (Loss)
Overall, the Corporation reported an Adjusted EBITDA loss of $1,125,602 during 2020 (2019 – loss of $929,972).
Overall, the Corporation reported an Adjusted EBITDA loss of $1,125,602 during 2020 (2019 – loss of $929,972).
The following table reconciles net income before income tax to EBITDA and Adjusted EBITDA from operations.
The following table reconciles net income before income tax to EBITDA and Adjusted EBITDA from operations.
Net Income before Income taxes
Add Depreciation and Amortization
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
2020
$
3,625,805
68,795
(7,556,697)
2019
$
(3,315,654)
73,294
(18,793)
(3,862,097)
(3,261,153)
2,736,495
1,506,317
‐
824,864
(1,125,602)
(929,972)
Net Income
Net Income
For the year ended December 31, 2020, the Corporation had a net gain of $3,727,544 compared to a net loss of $3,250,446
For the year ended December 31, 2020, the Corporation had a net gain of $3,727,544 compared to a net loss of $3,250,446 for
for the year ended December 31, 2019. This increase versus the same period last year is primarily due to the substantial
the year ended December 31, 2019. This increase versus the same period last year is primarily due to the substantial unrealized
unrealized and realized gain on marketable securities of $4,265,403 and $3,288,803 respectively offset by an unrealized loss
on fair value adjustment on investment properties of $2,700,069 during the year (2019 – unrealized loss on fair value of
investment property of $1,347,662). Management cautions investors that the Corporation is primarily focused on increasing
shareholder value on a per share basis. This means that operationally, Management is more concerned with long‐term asset
appreciation at the expense of short‐term cash flow. Management expects this to be the case for the foreseeable future.
12
MONGOLIA GROWTH GROUP LTD., Q4 2020 MD&A
13
| Mongolia Growth Group Ltd
and realized gain on marketable securities of $4,265,403 and $3,288,803 respectively offset by an unrealized loss on fair value
adjustment on investment properties of $2,700,069 during the year (2019 – unrealized loss on fair value of investment property
of $1,347,662). Management cautions investors that the Corporation is primarily focused on increasing shareholder value on a
per share basis. This means that operationally, Management is more concerned with long-term asset appreciation at the expense
of short-term cash flow. Management expects this to be the case for the foreseeable future.
13
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, investing, financing and asset
sales. Management expects to meet all of the Corporation’s obligations through current cash and cash equivalents along
Mongolia Growth Group’s primary sources of capital are cash generated from equity issuance, investing, financing and asset
sales. Management expects to meet all of the Corporation’s obligations through current cash and cash equivalents along with
with cash flows from asset sales.
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, 2020 and 2019.
year ended December 31, 2020 and 2019.
Net change in cash related to:
Operating
Investing
Financing
Effects of exchange rates on cash
Net change in cash during the period
31‐December‐2020
$
(353,812)
1,769,219
(886,013)
95,122
624,516
For the year ending
31‐December‐2019
$
(502,836)
1,487,827
(801,197)
(191,950)
(8,156)
Overall, the Corporation had cash inflows of $624,516 during 2020 compared to cash outflows of $8,156 in 2019. The Corporation
Overall, the Corporation had cash inflows of $624,516 during 2020 compared to cash outflows of $8,156 in 2019. 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, 2020, compared to the year ended December 31, 2019, were the result of the following
components of cash flows for the year ended December 31, 2020, compared to the year ended December 31, 2019, were
factors:
the result of the following factors:
• Operating – The Corporation experienced a moderate decrease in Operating cash outflows for the year ended 2020
versus outflows for the year ended 2019 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
• Investing – The Corporation experienced an increase in Investing cash inflows for the year ended 2020 primarily due to
2020 versus outflows for the year ended 2019 due to an increase in non‐cash working capital balances.
an increase in net sales of marketable securities offset by a smaller inflow from the disposal of investment
properties.
Investing–The Corporation experienced an increase in Investing cash inflows for the year ended 2020 primarily
due to an increase in net sales of marketable securities offset by a smaller inflow from the disposal of
• Financing – Financing cash outflow during the 2020 year were slightly larger than 2019 as the Corporation had a decrease
investment properties.
in margin borrowings in 2020 offset by the receipt of a $40,000 government loan while the Corporation
repaid its bank debt in 2019.
•
•
Financing–Financing cash outflow during the 2020 year were slightly larger than 2019 as the Corporation had
To date, the Corporation has been able to meet all of its capital and other cash requirements from its internal sources of cash. As
a decrease in margin borrowings in 2020 offset by the receipt of a $40,000 government loan while the
at December 31, 2020, the Corporation had $1,361,771 (2019 - $737,255) in cash and cash equivalents. Management considers
Corporation repaid its bank debt in 2019.
its marketable securities’ holdings to be fairly liquid and can be sold should the Corporation need to increase its cash position.
Total Assets
To date, the Corporation has been able to meet all of its capital and other cash requirements from its internal sources of
cash. As at December 31, 2020, the Corporation had $1,361,771 (2019 ‐ $737,255) in cash and cash equivalents.
As of December 31, 2020, the Corporation had $12,134,944 (2019 - $5,809,586) in Current Assets out of which $1,361,771 were
Management considers its marketable securities’ holdings to be fairly liquid and can be sold should the Corporation need
held in cash and cash equivalents (2019 - $737,255) and $10,613,444 were held in marketable securities (Q4-2019 -$3,689,304).
to increase its cash position.
The increase in cash and marketable securities are due to the realized and unrealized gains in marketable securities during the
period.
Total Assets
The majority of the Corporation’s assets are classified as Non-Current Assets, mainly Investment Properties. Investment
As of December 31, 2020, the Corporation had $12,134,944 (2019 ‐ $5,809,586) in Current Assets out of which $1,361,771
Properties are carried at Fair Market Value and decreased to $14,542,236 during the year (2019 -$18,831,985) as a result of
were held in cash and cash equivalents (2019 ‐ $737,255) and $10,613,444 were held in marketable securities (Q4‐2019 ‐
properties sold during the period, fair value impairments taken and a foreign exchange adjustment loss during the period.
$3,689,304). The increase in cash and marketable securities are due to the realized and unrealized gains in marketable
Property and Equipment, which primarily consists of properties that are measured at their cost base, decreased from $1,435,650
securities during the period.
as at December 31, 2019 to $1,293,241 as at December 31, 2020 due to a fair value impairment taken on the Corporation’s
The majority of the Corporation’s assets are classified as Non‐Current Assets, mainly Investment Properties. Investment
headquarters at the end of the year and the decrease in the Mongolian Togrog exchange rate.
Properties are carried at Fair Market Value and decreased to $14,542,236 during the year (2019 ‐$18,831,985) as a result of
Total Liabilities
properties sold during the period, fair value impairments taken and a foreign exchange adjustment loss during the period.
As of December 31, 2020, the Corporation had current liabilities of $605,158 (2019 - $825,506) consisting primarily of marketable
Property and Equipment, which primarily consists of properties that are measured at their cost base, decreased from
securities sold short, payables and accrued liabilities.
$1,435,650 as at December 31, 2019 to $1,293,241 as at December 31, 2020 due to a fair value impairment taken on the
As of December 31, 2020, the non-current liabilities on the balance sheet were deferred income taxes of $478,836 (Q4 2019-
Corporation’s headquarters at the end of the year and the decrease in the Mongolian Togrog exchange rate.
$581,887) and a long term CEBA loan of $40,000 (Q4 2019-nil).
Management considers all other current cash commitments to be immaterial and operational in nature.
MONGOLIA GROWTH GROUP LTD., Q4 2020 MD&A
14
14
| Mongolia Growth Group Ltd
Total Liabilities
Total Liabilities
As of December 31, 2020, the Corporation had current liabilities of $605,158 (2019 ‐ $825,506) consisting primarily of
As of December 31, 2020, the Corporation had current liabilities of $605,158 (2019 ‐ $825,506) consisting primarily of
marketable securities sold short, payables and accrued liabilities.
marketable securities sold short, payables and accrued liabilities.
As of December 31, 2020, the non‐current liabilities on the balance sheet were deferred income taxes of $478,836 (Q4 2019‐
As of December 31, 2020, the non‐current liabilities on the balance sheet were deferred income taxes of $478,836 (Q4 2019‐
$581,887) and a long term CEBA loan of $40,000 (Q4 2019‐nil).
$581,887) and a long term CEBA loan of $40,000 (Q4 2019‐nil).
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, 2020, the Corporation held 191,500 common shares in Treasury to be cancelled during the first quarter of 2021 (2019‐35,000).
* As at December 31, 2020, the Corporation held 191,500 common shares in Treasury to be cancelled during the first quarter of 2021 (2019‐35,000).
* As at December 31, 2020, the Corporation held 191,500 common shares in Treasury to be cancelled during the first quarter of 2021 (2019-35,000).
* As at April 6, 2021, the Corporation had 30,028,499 shares outstanding, no shares held in treasury and no options outstanding.
* As at April 6, 2021, the Corporation had 30,028,499 shares outstanding, no shares held in treasury and no options outstanding.
* As at April 6, 2021, the Corporation had 30,028,499 shares outstanding, no shares held in treasury and no options outstanding.
Options Outstanding
Options Outstanding
Options Outstanding
At December 31, 2020, the Corporation had nil options that were exercisable (December 31, 2019‐1,420,000).
At December 31, 2020, the Corporation had nil options that were exercisable (December 31, 2019‐1,420,000).
At December 31, 2020, the Corporation had nil options that were exercisable (December 31, 2019-1,420,000).
The chart below shows the historical option grants and options outstanding as of December 31, 2020.
The chart below shows the historical option grants and options outstanding as of December 31, 2020.
The chart below shows the historical option grants and options outstanding as of December 31, 2020.
31‐December‐ 2020
31‐December‐ 2020
31,281,499*
31,281,499*
‐
‐
31‐December‐19
31‐December‐19
32,767,499*
32,767,499*
1,420,000
1,420,000
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
‐
‐
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
855,000
855,000
565,000
565,000
280,000
280,000
Forfeited
Forfeited
‐
‐
‐
‐
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
Cancelled
Cancelled
‐
‐
‐
‐
‐
‐
287,000
287,000
55,000
55,000
95,000
95,000
190,000
190,000
275,000
275,000
‐
‐
‐
‐
‐
‐
‐
‐
Exercised
Exercised
100,000
100,000
250,000
250,000
200,000
200,000
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
Total Options
Total Options
Outstanding
Outstanding
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
Total
Total
Exercisable
Exercisable
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
Non
Non
exercisable
exercisable
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
5,953,000
5,953,000
3,483,000
3,483,000
1,018,000
1,018,000
902,000
902,000
550,000
550,000
‐
‐
‐
‐
‐
‐
Acquisitions and Dispositions
Acquisitions and Dispositions
Acquisitions and Dispositions
During the year, the Company sold three properties for cash consideration of $690,134 and a net gain of $106,762 (2019‐
During the year, the Company sold three properties for cash consideration of $690,134 and a net gain of $106,762 (2019‐
During the year, the Company sold three properties for cash consideration of $690,134 and a net gain of $106,762 (2019-
$302,959 loss).
$302,959 loss).
$302,959 loss).
In comparison, during the year ended December 31, 2019, three investment properties were sold for cash and property
In comparison, during the year ended December 31, 2019, three investment properties were sold for cash and property
In comparison, during the year ended December 31, 2019, three investment properties were sold for cash and property
considerations of $2,221,346 resulting in net loss of $302,959 on these transactions.
considerations of $2,221,346 resulting in net loss of $302,959 on these transactions.
considerations of $2,221,346 resulting in net loss of $302,959 on these transactions.
Related Party Transactions
Related Party Transactions
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
Parties are generally considered to be related if the parties are under common control or if one party has the ability to
Parties are generally considered to be related if the parties are under common control or if one party has the ability to
the other party or can exercise significant influence or joint control over the other party in making financial and operational
control the other party or can exercise significant influence or joint control over the other party in making financial and
control the other party or can exercise significant influence or joint control over the other party in making financial and
decisions. In considering each possible related party relationship, attention is directed to the substance of the relationship, not
operational decisions. In considering each possible related party relationship, attention is directed to the substance of the
merely the legal form.
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 Corporation include all directors and executive management. The summary of
relationship, not merely the legal form.
Key management personnel of the Corporation include all directors and executive management. The summary of compensation
compensation for key management personnel is as follows:
for key management personnel is as follows:
Related Party Transactions
Salaries and other short‐term benefits to officers
Director fees
Total
2020
$
479,281
40,000
519,281
2019
$
481,213
40,000
521,213
Starting in 2019, certain entities affiliated with Harris Kupperman, the Corporation’s Chairman and CEO, have agreed to
Starting in 2019, certain entities affiliated with Harris Kupperman, the Corporation’s Chairman and CEO, have agreed to share
certain expenses related to the Corporation’s investments in public securities. Management expects that this will reduce MGG’s
share certain expenses related to the Corporation’s investments in public securities. Management expects that this will
investment related expenses for a similar level of research capabilities.
reduce MGG’s investment related expenses for a similar level of research capabilities.
Off-Balance Sheet Items
Off‐Balance Sheet Items
As of December 31, 2020, the Corporation had no off-balance sheet items.
As of December 31, 2020, the Corporation had no off‐balance sheet items.
MONGOLIA GROWTH GROUP LTD., Q4 2020 MD&A
MONGOLIA GROWTH GROUP LTD., Q4 2020 MD&A
15
15
COVID‐19
Beginning in February of 2020, the Government of Mongolia undertook extra‐ordinary actions in order to limit the spread
of COVID‐19. 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 also reasonable to expect
there could be a material negative impact on the fair values of investment properties in future periods; 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. In addition, there is no way to know the duration of these extra‐
15
ordinary actions that are destroying the Mongolian economy.
Events Subsequent to Year End
•
•
shares.
The Company has repurchased 1,061,500 of its shares at an average price of $0.42/share and cancelled 1,253,000
The Company sold one property for total proceeds of approximately $396,000 and a net gain of $nil.
• As disclosed in the Corporation’s March 18, 2021 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 TSX.
Up to 2,250,000 common shares, representing up to approximately 7.4% of the 30,481,499 Common Shares of the
Issuer currently issued and outstanding, or approximately 10.0% of the 22,545,249 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 2020 MD&A
16
Mongolia Growth Group Ltd |
COVID-19
Beginning in February of 2020, the Government of Mongolia undertook extra-ordinary actions in order to limit the spread
of COVID-19. 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 also reasonable to expect there
could be a material negative impact on the fair values of investment properties in future periods; 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. In addition, there is no way to know the duration of these extra-ordinary actions that are
destroying the Mongolian economy.
Events Subsequent to Year End
• The Company has repurchased 1,061,500 of its shares at an average price of $0.42/share and cancelled 1,253,000 shares.
• The Company sold one property for total proceeds of approximately $396,000 and a net gain of $nil.
• As disclosed in the Corporation’s March 18, 2021 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 TSX.
Securities Sought: Up to 2,250,000 common shares, representing up to approximately 7.4% of the 30,481,499 Common
Shares of the Issuer currently issued and outstanding, or approximately 10.0% of the 22,545,249 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: N/A
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 5, 2020, which ascribed a
value of 872,000,000 MNT (Mongolian Togrogs) to the Issuer’s material retail real estate investment assets as at
December 31, 2019;
• Report entitled “Land Valuation Report – Ulaanbaatar, Mongolia”, dated March 5, 2020, which ascribed a value
of 27,653,000,000 MNT (Mongolian Togrogs) to the Issuer’s material land investment assets as at December 31,
2019; and
• Report entitled “Office Valuation Report – Ulaanbaatar, Mongolia”, dated March 5, 2020, which ascribed an
aggregate value of 2,166,000,000 MNT (Mongolian Togrogs) to the Issuer’s material office real estate investment
assets as at December 31, 2019.
16
| Mongolia Growth Group Ltd The Valuations were prepared for internal accounting purposes and the Issuer does not have permission to share the
Valuations externally.
Previous Purchases: The Issuer has purchased 2,370,000 of its common shares at an average price of $0.30 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.
17
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 2020
182,989
5,257,076
0.17
27,970,421
32,102,372
31,281,499
Q3 2020
324,695
1,048,297
0.03
23,992,584
32,312,665
31,856,999
Q2 2020
198,393
(1,279,482)
(0.04)
23,427,206
32,455,903
32,132,499
Q1 2020
225,138
(1,298,347)
(0.04)
25,832,058
32,665,532
32,398,499
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
Revenue
Revenue
During the fourth quarter, the Corporation’s real estate subsidiary earned total revenue of $182,989 (Q4 2019 ‐$30,194) of
During the fourth quarter, the Corporation’s real estate subsidiary earned total revenue of $182,989 (Q4 2019 -$30,194) of which
rental revenue was $170,183 (Q4 2019 - $301,771). This rental income decrease is largely attributed to discounts given to tenants
which rental revenue was $170,183 (Q4 2019 ‐ $301,771). This rental income decrease is largely attributed to discounts
due to government-imposed lockdowns during the quarter. The quarterly revenue number also includes other revenue earned
given to tenants due to government‐imposed lockdowns during the quarter. The quarterly revenue number also includes
from miscellaneous sources such as late fees, brokerage fees and gains/losses from the sale of investment properties. During the
other revenue earned from miscellaneous sources such as late fees, brokerage fees and gains/losses from the sale of
fourth quarter, the Corporation did not sell any properties compared to a loss of $302,959 on the sale of investment properties
investment properties. During the fourth quarter, the Corporation did not sell any properties compared to a loss of $302,959
during the fourth quarter of 2019 which negatively affected the Corporation’s revenue.
on the sale of investment properties during the fourth quarter of 2019 which negatively affected the Corporation’s revenue.
During the quarter, the Corporation also incurred an unrealized loss on fair value adjustment on investment properties and
impairment of PP&E of $647,298 (Q4 2019 - $1,506,317).
During the quarter, the Corporation also incurred an unrealized loss on fair value adjustment on investment properties and
impairment of PP&E of $647,298 (Q4 2019 ‐ $1,506,317).
Lastly, during the quarter, the Corporation had unrealized gains of $5,012,686 and realized gains of $1,293,328 in its marketable
securities portfolio (Q4-2019 – unrealized: $461,441, realized: $477,851 loss).
Lastly, during the quarter, the Corporation had unrealized gains of $5,012,686 and realized gains of $1,293,328 in its
Expenses
marketable securities portfolio (Q4‐2019 – unrealized: $461,441, realized: $477,851 loss)
Quarterly expenses totaled $672,723 (Q4 2019 - $760,365). This decrease was due to a reduction in commissions.
Expenses
Net Income
Quarterly expenses totaled $672,723 (Q4 2019 ‐ $760,365). This decrease was due to a reduction in commissions.
During the quarter, the Corporation experienced a gain of $5,154,025 in comparison to a loss of $3,013,557 in the same quarter
Net Income
of the previous year. This difference is mainly attributed to significant gains in the marketable securities portfolio compared to a
large loss recorded during the fourth quarter of 2019.
During the quarter, the Corporation experienced a gain of $5,154,025 in comparison to a loss of $3,013,557 in the same
quarter of the previous year. This difference is mainly attributed to significant gains in the marketable securities portfolio
compared to a large loss recorded during the fourth quarter of 2019.
MONGOLIA GROWTH GROUP LTD., Q4 2020 MD&A
18
18
| 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 circumstances.
In the future, actual experience may differ from these estimates and assumptions.
The critical 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 2020, 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.
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.
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.
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
sufficient 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.
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.
19
Mongolia Growth Group Ltd | 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, 2020 and 2019, 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, 2020 and 2019, 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.
20
| Mongolia Growth Group Ltd Section 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, American or Mongolian banks.
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
participants 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, 2020.
As at December 31, 2020, the Corporation had working capital of $11,529,785 (2019- $4,984,080) 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 Corporation
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
expenses 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.
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.
21
Mongolia Growth Group Ltd | 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 2020 was a decrease of 5.3% year-over-year, while
inflation estimates were 2.3% 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
otherwise 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, 2020 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 Corporation,
returns of the Corporation may be negatively affected. In addition, the regulatory or tax environment for securities, derivatives
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 $223,693 (2019 - $131,438) is currently included in the Corporation’s balance sheet to reflect this liability. In addition, the
Corporation has recognized a $1,108,907 (2019 - $1,436,256) 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 the 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
(3.3 million dollars current carrying value). In addition, there is the potential that the 84 sq. meter liability could inhibit the sale
or development of this asset in future periods.
22
| Mongolia Growth Group Ltd PFIC Risk
The Corporation has not undertaken an analysis to determine if it is a Passive Foreign Income Company (PFIC) under United
States tax statutes, nor does it intend to. US shareholders are advised to consult with tax professionals to determine the risks and
potential penalties that could be applicable if the Corporate is determined to be a PFIC at a later date.
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
imperfect 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
Corporation 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 representation 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 economic 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 circumstances.
These factors may affect the level and volatility of securities prices and the liquidity of the Corporation’s investments. Unexpected
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.
Highly Volatile Markets
The prices of financial instruments in which the Corporation’s assets may be invested can be highly volatile and may be influenced
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 economic
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.
23
Mongolia Growth Group Ltd | 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 capitalizations.
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 companies
generally have potential for rapid growth, they often involve higher risks because they may lack the management experience,
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 soundness 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, market 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
Corporation.
Currency and Exchange Rate Risks
The Corporation’s assets will be denominated in multiple currencies. The Corporation will report their results in Canadian dollars.
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
requirements, 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
24
| Mongolia Growth Group Ltd strategy to attempt to sell positions to comply with such requirements at a time when there are effectively no buyers in the
market 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
acquires 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.
Additional Information
Additional information relating to Mongolia Growth Group Ltd., including its interim financial statements, is available on SEDAR
at www.sedar.com.
25
Mongolia Growth Group Ltd | Mongolia Growth Group Ltd.
Consolidated Financial Statements
December 31, 2020
(expressed in Canadian dollars)
26
| Mongolia Growth Group Ltd Mongolia Growth Group
INDEPENDENT AUDITOR’S REPORT
Ltd.
Consolidated Financial Statements
December 31, 2016
(Expressed in Canadian dollars)
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, 2020 and 2019 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, 2020 and 2019, 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 audit 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 audit 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.
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.
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27
Mongolia Growth Group Ltd |
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.
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 5, 2021
28
Chartered Professional Accountants
| 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
2020
$
2019
$
1,361,771
10,613,444
159,729
12,134,944
14,542,236
1,293,241
15,835,477
737,255
3,689,304
1,383,027
5,809,586
18,831,985
1,435,650
20,267,635
27,970,421
26,077,221
564,542
39,223
1,393
605,158
767,732
23,340
34,434
825,506
-
581,887
Non-current liabilities
Long Term CEBA Loan (note 11)
Deferred income tax liability (note 12)
40,000
478,836
Total liabilities
Equity
Share capital (note 13)
Contributed surplus
Accumulated other comprehensive loss
Deficit
Total equity
1,123,994
1,407,393
53,165,247
6,849,976
(15,444,642)
(17,724,154)
53,504,935
6,849,976
(14,233,385)
(21,451,698)
26,846,427
24,669,828
Total equity and liabilities
27,970,421
26,077,221
Commitment and contingencies (note 17)
Subsequent events (note 23)
Approved by the Board of Directors
“Harris Kupperman” Director “James Dwyer“ Director
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 Operations
For the years ended December 31
(Expressed in Canadian dollars)
Revenue
Rental income
Other revenue
Gain (loss) on disposal of investment property (note 8)
Total revenue
Expenses
Salaries and wages
Other expenses (note 20)
Depreciation (note 9)
2020
$
756,283
68,170
106,762
2019
$
1,287,353
156,436
(302,959)
931,215
1,140,830
599,199
1,440,400
68,795
693,852
1,585,145
73,294
Total operating expenses
(2,108,394)
(2,352,291)
Interest income
Unrealized loss on fair value adjustment on
Investment properties (note 8)
Impairment of property and equipment (note 9)
Unrealized gain on short term investments (note 6)
Realized gain (loss) on short term investments (note 6)
Foreign currency gain (loss)
Finance costs
Reclassification of accumulated other comprehensive
(2,700,069)
(36,426)
4,265,403
3,288,803
(17,218)
(21)
2,512
5,617
(1,347,662)
(158,655)
454,824
(358,826)
208,195
(82,822)
income on disposal of subsidiary (note 21)
-
(824,864)
Total other income (loss)
4,802,984
(2,104,193)
Net income (loss) before income taxes
3,625,805
(3,315,654)
Income taxes (note 12)
101,739
65,208
Net income (loss) for the year
3,727,544
(3,250,446)
Net income (loss) per share (note 13)
Basic
From net income (loss) for the year
Diluted
From net income (loss) for the year
0.12
0.12
(0.10)
(0.10)
The accompanying notes are an integral part of these consolidated financial statements.
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5 | P a g e
| Mongolia Growth Group Ltd
Mongolia Growth Group Ltd.
Consolidated Statements of Comprehensive Income (Loss)
For the years ended December 31
(Expressed in Canadian dollars)
2020
$
2019
$
Net income (loss) for the year
3,727,544
(3,250,446)
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
(1,211,257)
(1,831,600)
income on disposal of subsidiary (note 21)
-
824,864
Total comprehensive income (loss)
2,516,287
(4,257,182)
The accompanying notes are an integral part of these consolidated financial statements.
6 | P a g e
31
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,
2019
Net loss for the year
Reclassification (note 21)
Other comprehensive loss
Share
capital
$
Contributed
surplus
$
Accumulated
other
comprehensive
loss
$
Deficit
$
Total
$
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)
-
-
-
(120,295)
Balance at December 31,
2019
53,504,935
6,849,976
(14,233,385) (21,451,698) 24,669,828
Share
capital
$
Contributed
surplus
$
Accumulated
other
comprehensive
loss
$
Deficit
$
Total
$
Balance at January 1,
2020
Net income for the year
Other comprehensive loss
53,504,935
-
-
53,504,935
6,849,976
-
-
6,849,976
(14,233,385)
-
(1,211,257)
(15,444,642)
(21,451,698)
3,727,544
-
(17,724,154)
24,669,828
3,727,544
(1,211,257)
27,186,115
Share repurchase
(339,688)
-
-
-
(339,688)
Balance at December
31, 2020
53,165,247
6,849,976
(15,444,642) (17,724,154)
26,846,427
The accompanying notes are an integral part of these consolidated financial statements.
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7 | P a g e
| Mongolia Growth Group Ltd
Mongolia Growth Group Ltd.
Consolidated Statements of Cash Flow
As at December 31, 2020
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 (gain) loss on disposal of investment properties (note 8)
Impairment of property and equipment (note 9)
Unrealized (gain) loss on marketable securities (note 6)
Realized (gain) loss on marketable securities (note 6)
Unrealized 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)
Decrease in margin borrowing for marketable securities
Long term CEBA loan (note 11)
Loan payment
Investing activities
Net sale of marketable securities (note 6)
Net proceeds on acquisition of property and equipment
Net proceeds on sale of investment properties
Effect of exchange rates on cash
Increase (decrease) in cash
Cash – Beginning of year
2020
$
2019
$
3,727,544 (3,250,446)
68,795
(103,051)
-
(106,762)
36,426
(4,265,403)
(3,288,803)
73,294
(155,606)
(13,806)
302,959
158,655
(454,824)
358,826
2,700,069
1,347,662
824,864
-
(1,231,185) (808,422)
877,373
305,586
(353,812) (502,836)
(339,688)
(586,325)
40,000
-
(886,013)
(120,295)
-
-
(680,902)
(801,197)
1,186,552
(705)
583,372
604,998
(1,540)
884,369
1,769,219 1,487,827
529,394
183,794
95,122
(191,950)
624,516
(8,156)
737,255
745,411
Cash – End of year
1,361,771
737,255
*Supplementary cash flow information (note 18)
The accompanying notes are an integral part of these consolidated financial statements.
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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, 2020, 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”). 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, 2020 and 2019, 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
Big Sky Capital LLC
Carrollton LLC
Biggie Industries LLC
Orpheus LLC
Zulu LLC
Crescent City
Oceanus
Principal Activity
Holding Company and Brokerage
Account
Holding Company and Real estate
operations
Holding Company and Real estate
operations
Real estate operations
Real estate operations
Real estate operations
Real estate operations
Real estate operations
Real estate operations
Ownership
December 31,
2020
100%
December 31,
2019
100%
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, 2020, 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.
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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). The functional currency of the
Company’s operating subsidiary in Barbados in the Canadian Dollar.
These consolidated financial statements were approved by the Board of Directors of the Company
for issue on April 5, 2021.
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
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Notes to the Consolidated Financial Statements
For the year ended December 31
c. Financial instruments (continued)
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 income.
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, short
term debt and long term CEBA loan 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, 2020, 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:
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Notes to the Consolidated Financial Statements
For the year ended December 31
c.
Financial instruments (continued)
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
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, 2020
and 2019, is shown below.
Marketable
securities
Marketable
securities sold short
December 31, 2020
Level 1
Level 2
Level 3
Estimated fair values
$10,613,444
$10,613,444
$39,223
$39,223
$10,574,221 $10,574,221
-
-
-
-
-
-
Marketable
securities
Marketable
Securities sold short
December 31, 2019
Level 1
Level 2
Level 3
Estimated fair values
$3,689,304
$3,689,304
$23,340
$23,340
$3,665,964 $3,665,964
-
-
-
-
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Notes to the Consolidated Financial Statements
For the year ended December 31
c.
Financial instruments (continued)
At December 31, 2020 and 2019 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.
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
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Notes to the Consolidated Financial Statements
For the year ended December 31
e. Assets held for sale (continued)
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 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.
g.
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
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Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the year ended December 31
h. Property and equipment (continued)
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.
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.
i.
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
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Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the year ended December 31
i. Income taxes (continued)
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
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.
j.
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.
l.
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.
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Notes to the Consolidated Financial Statements
For the year ended December 31
l.
Share capital and deferred share issuance costs (continued)
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
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
IFRS 16, Leases (“IFRS 16”) sets out the principles for the recognition, measurement,
presentation and disclosure of leases for both the lessee and the lessor.
From a lessee point of view, 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; therefore, the fair value
model is applied to those assets, and gains and losses on changes in fair value are recorded in
profit or loss. The payments on these leases are nominal, and are therefore exempt from
recognition as low-value leases.
The Company has also 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.
For other leases of low-value assets or short-term leases that end within 12 months of the
commencement date and which have no renewal or purchase option, the Company has
elected to apply the recognition exemptions specified in IFRS 16, allowing the Company to
continue to expense the lease payments in the period in which they are incurred. The total of
such expenses was $9,109 for the 2020 fiscal year (2019 - $10,662).
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Notes to the Consolidated Financial Statements
For the year ended December 31
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.
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
There were no accounting policy changes which impacted the Company in the December 31,
2020 fiscal year.
s.
Future Accounting Policy Changes
IAS 1, Presentation of Financial Statements (“IAS 1”) The IASB issued ‘Classification of
Liabilities as Current or Non-Current (Amendments to IAS 1)’ in January 2020, affecting the
presentation of liabilities in the statement of financial position. The narrow-scope
amendments to IAS 1 clarify that liabilities are classified as either current or non-current,
depending on the rights that exist at the end of the reporting period. Classification is
unaffected by the expectations of the entity or events after the reporting date. The
amendments also clarify what IAS 1 means when it refers to the ‘settlement’ of a liability. The
amendments must be applied retrospectively in accordance with the normal requirements of
IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors (“IAS 8”). The
amendments are effective for annual periods beginning on or after January 1, 2023 (in
accordance with ‘Classification of Liabilities as Current or Non-Current – Deferral of Effective
Date (Amendment to IAS 1) issued by the IASB in July 2020), with earlier application
permitted. The amendments have not been early adopted by the Company. The Company is
currently assessing any potential impact of this amendment.
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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. In
addition, the significant global uncertainty resulting from the novel coronavirus (“COVID-
19”) pandemic has reduced the availability of reliable market metrics to inform opinions,
and therefore a higher degree of judgment must be applied. Consequently, fair values are
subject to significant change.
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
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Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the year ended December 31
4 Significant accounting estimates and judgements (continued)
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
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, 2020 and 2019, 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, 2020 and 2019, 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.
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Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the year ended December 31
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
2020
$
1,006,689
218,694
13
136,388
2019
$
1,475
33,018
702,762
1,361,771
737,255
Cash is not collateralized. The carrying amount of cash approximates fair value.
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
BBB+ rated
Unrated
Total cash
2020
$
1,916
199,491
134,471
1,005,228
20,665
2019
$
2,154
31,600
700,609
-
2,892
1,361,771
737,255
The unrated balance relates to one private bank in Barbados (2019 – one) and one brokerage
company in Canada (2019 – one). The BBB+ rating relates to a brokerage company in the United
States which was previously unrated.
6 Marketable Securities
The following table shows the continuity of the Company’s brokerage account.
December 31,
2019
Unrealized (loss)
gain
Realized gain (loss)
FX gain (loss)
Interest Accrual
Net cash transferred
in (out)
(Purchases)/sales
December 31,
2020
Marketable
securities
Long
Marketable
securities
Short
Interest
Accruals
Cash
Total
(586,325)
4,275,629
(23,340)
-
3,665,964
-
-
-
-
4,265,403
3,288,803
(45,722)
-
-
-
-
-
-
-
-
1,374
4,265,403
3,288,803
(45,722)
1,373
405,000
1,186,553
-
(1,170,669)
-
(15,883)
-
-
405,000
-
1,005,228
10,613,444
(39,223)
1,374
11,580,822
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| Mongolia Growth Group Ltd
Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the year ended December 31
6 Marketable Securities (continued)
Marketable
securities
Long
Marketable
securities
Short
Interest
Accruals
Cash
December 31,
2018
Unrealized (loss)
gain
Realized gain (loss)
FX gain (loss)
Interest Accrual
Net cash transferred
in (out)
(Purchases)/sales
December 31,
2019
(221,875)
4,253,481
(85,404)
-
-
-
2,133
(605,000)
238,417
454,824
(358,826)
228,761
(2,130)
-
(300,481)
-
-
-
-
-
62,064
(586,325)
4,275,629
(23,340)
-
-
-
-
-
-
-
-
Total
3,946,202
454,824
(358,826)
228,761
3
(605,000)
-
3,665,964
Cash balances in the Company’s brokerage account are classified within cash on the statement of
financial position (Note 5). A negative cash balance represents borrowing on margin, which is
presented net against marketable securities because the Company has the legal right and intention
to close out margin balances on a net basis with the related marketable securities.
7 Other assets
Accounts receivable
Prepaid expenses
2020
$
134,869
24,860
2019
$
1 ,342,624
40,403
159,729
1,383,027
In 2019, included in accounts receivable were proceeds of $954,640 which was received during the
first week of 2020, one investment property to be transferred to the Company with a value of
$143,196 and $190,928 receivable to be paid in monthly instalments during the first eight months
of the year, for the sale of a property which was received subsequent to year end. Due to the current
pandemic, only $79,082 of the receivable was received and $111,846 is still outstanding.
Management is of the opinion that it will receive the remainder of the receivable within the
following twelve months.
8
Investment properties
Balance - beginning of year
Additions
Acquisitions
Disposals
Fair value adjustment
Foreign exchange adjustments
2020
$
2019
$
18,831,985
24,415,860
145,412
(583,372)
(2,700,069)
(1,151,720)
48,213
(2,524,305)
(1,347,662)
(1,760,121)
Balance – end of year
14,542,236
18,831,985
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Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the year ended December 31
8
Investment properties (continued)
During the twelve-month period ended December 31, 2020, the Company transferred a property
acquired through the sale of a property during the prior year from other assets to investment
properties as the Company obtained its property title during the first quarter. During the year the
Company sold three properties for total proceeds of $690,134 resulting in a net gain of $106,762
(2019 - three sold for a loss of $302,959). During the twelve-month period, the Company
recognized an unrealized fair value adjustment impairment loss of $2,700,069 on its property
portfolio (2019 – $1,347,662).
Investment properties by major category are as follows:
Office
Retail
Land and redevelopment sites
2020
$
896,266
9,415,983
4,229,987
2019
$
1,033,875
12,307,380
5,490,730
14,542,236
18,831,985
Investment properties with an aggregate fair value of $9,245,117 (2019 - $13,213,176) in addition
to the Company’s headquarters of $1,191,341 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.
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.
Due to the COVID-19 pandemic and its ongoing impact on the economy, and specifically its
unknown future impact on the real estate market, there is heightened uncertainty surrounding the
valuation of the investment properties. Consequently, there is a need to apply a higher degree of
judgment as it pertains to the forward-looking assumptions that underlie the Company’s valuation
methodologies. In addition, less weight can be ascribed to previous market evidence, for
comparative purposes, to inform opinions of value.
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| Mongolia Growth Group Ltd
Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the year ended December 31
8
Investment properties (continued)
Given this impact on the availability of reliable market metrics, fair values at December 31, 2020
may be subject to material change.
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 $223,693 (2019 - $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 $1,108,907 (2019 -$1,436,256) 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. Refer to Note 17 for additional information.
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
2020
Weighted-
average
Capitalization rate
11.0%
8.9%
9.7%
Maximum
Minimum
2019
Weighted-
average
Capitalization rate
11.25%
9.5%
9.6%
The following sensitivity table outlines the impact of a 0.25% change in the weighted average
capitalization rate on investment properties at 2020:
Change to fair value if
capitalization rate
increased 0.25%
Change to fair value if
capitalization rate
decreases 0.25%
Investment property
(56,209)
59,187
Additional valuation assumptions include the rental revenue per square meter, grade quality of the
property and comparable market data.
Investment properties of $3,455,674 (2019 - $4,308,769) have no rental revenue associated with
them at December 31, 2020.
Investment properties include land use rights held under operating leases with an aggregate fair
value of $4,229,987 (2019 – $5,490,730) at December 31, 2020.
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Mongolia Growth Group Ltd |
Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the year ended December 31
8
Investment properties (continued)
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
2020
$
769,266
158,875
-
2019
$
772,222
299,333
-
928,141
1,071,555
Direct operating expenses arising from investment properties that generated rental income during
the year was $855,822 (2019 – $1,050,283). Direct operating expenses arising from investment
properties that did not generate rental income during the year was $5,114 (2019 - $4,819).
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, 2020 was 9.2 months (8.1 months as at
December 2019), calculated as a percentage of monthly revenues.
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| 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
$
2020
Total
$
Cost
At January 1
Additions
Disposals
Impairment
Foreign exchange
adjustment
70,944
-
-
-
128,444
705
(2,858)
-
1,800,646
-
-
(36,426)
2,000,034
705
(2,858)
(36,426)
1,250
250
(30,921)
(29,421)
At December 31
72,194
126,541
1,733,299
1,932,034
Furniture and
fixtures
$
Equipment
$
Buildings
$
2020
Total
$
Accumulated
depreciation
At January 1
Depreciation
Disposals
Foreign
exchange
adjustment
45,047
6,901
-
2,453
107,759
11,525
(2,858)
411,578
50,369
-
564,384
68,795
(2,858)
254
5,765
8,472
At December 31
54,401
116,680
467,712
638,793
Net book value
at December 31
17,793
9,861
1,265,587
1,293,241
During the year ended December 31, 2020 the Company recognized an impairment on its
corporate office building of $36,426 (2019 – impairment of $158,655) which was implied by the
same valuation methodology described in note 8.
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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
$
2019
Total
$
Cost
December 31
Additions
Disposals
Reversal of
impairment
Foreign exchange
adjustment
73,702
-
-
-
135,758
1,540
(4,994)
2,110,307
-
-
2,319,767
1,540
(4,994)
-
(158,655)
(158,655)
(2,758)
(3,860)
(151,006)
(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
-
526,973
73,294
(4,994)
(28,171)
(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
10 Trade payables and accrued liabilities
Trade and accrued payables
Property commitment (note 8)
Security deposits
Unearned revenue
2020
$
232,302
223,693
88,437
20,110
2019
$
506,351
131,438
107,023
22,920
564,542
767,732
The carrying amounts above reasonably approximate fair value at the consolidated statement of
financial position date. All trade and other payables are current.
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| 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
2020
$
-
40,000
40,000
2019
$
-
-
-
During the year ended December 31, 2020, the Company qualified for a government-guaranteed
line of credit (Canada Emergency Business Account “CEBA”) of $40,000 which was interest-free
until December 31, 2020. On January 1, 2021, the line of credit converted to a 2-year, 0% interest
term loan to be repaid by December 31, 2022 at which time a 25% balance forgiveness ($10,000)
will apply if the loan is repaid by such date. The Company has the option to exercise a 3-year term
extension on the loan by December 31, 2022, if the loan is not repaid by then. At which time, the
remaining unpaid balance of the loan will bear interest at 5% interest per annum during the
extension period and must be paid in full by December 31, 2025. Funds can be used to pay non-
deferrable operating expenses include payroll.
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
Tax payable (recoverable) based on statutory tax rate
Effect of:
Permanent differences
Change in statutory, foreign tax, foreign exchange
2020
$
2019
$
3,625,805
26.5%
(3,315,654)
26.5%
961,000
(879,000)
690,000
(99,000)
rates and other
(1,157,739)
527,792
Adjustment
to prior years provision versus
statutory tax returns and expiry of non-capital
losses
Change in unrecognised deductible tax differences
48,000
(643,000)
(139,000)
524,000
Total income tax expense (recovery)
(101,739)
(65,208)
Provision for (recovery of) income taxes
Current
Deferred
1,312
(103,051)
90,398
(155,606)
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.
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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
2020
$
51,000
(478,836)
98,000
2,393,000
2,063,164
2019
$
51,000
(581,887)
98,000
3,036,000
2,603,113
Unrecognized deferred tax assets
(2,542,000)
(3,185,000)
Net deferred tax liability
(478,836)
(581,887)
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
2020
Expiry Date
Range
2019
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
194,000 No expiry date
371,000 No expiry date
9,028,000
2030 to 2040
11,458,000
2030 to 2039
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, 2018
Shares re-purchased
Treasury stock cancelled
Balance, December 31, 2019
Shares re-purchased
Treasury stock cancelled
Number of
shares
Amount
$
33,243,999
-
(476,500)
32,767,499
53,625,230
(120,295)
-
593,504,935
-
(1,486,000)
(339,688)
-
Balance, December 31, 2020
31,281,499
53,165,247
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| 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, 2020, the Company held 191,500 (2019 -35,000) shares in treasury to be
cancelled during the first quarter of 2021.
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, 2020, the Company had 3,128,150 (2019 –
1,856,750 ) 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:
December 31,
2020
Weighted
average
exercise
price
$
December 31,
2019
Weighted
average
exercise
price
$
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)
1,420,000
1,420,000
-
-
-
-
-
-
-
0.73
0.73
-
-
-
-
-
-
-
3,103,000
(1,623,000)
-
-
-
(60,000)
1,420,000
1,420,000
-
1.13
1.49
-
-
-
0.72
0.73
0.73
0.26
There are no options outstanding as of December 31, 2020.
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
1,420,000
0.25
0.27
0.26
0.72
0.74
0.73
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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)
Earnings per share
The following table summarizes the shares used in calculating earnings (loss) per share:
2020
2019
Weighted average number of shares - basic
Effect of dilutive stock options
32,102,372
-
32,989,169
-
Weighted average number of shares - diluted
32,102,372
32,989,169
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.
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
2020
$
2019
$
12,134,944
(605,158)
5,809,586
(825,506)
11,529,786
4,984,080
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.
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.
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| 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)
Catastrophe risk
The Company has obtained insurance on buildings and all permanent fixtures totalling
approximately $8,300,000 effective May 8th 2021 ($11,700,000 - May 7th 2020).
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 as well as its marketable securities
portfolio.
The Company’s maximum exposure to credit risk comprises the carrying values of cash, accounts
receivable, and marketable securities; in total $12,110,083 at December 31, 2020 (December 31,
2019 - $5,769,183).
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, American, 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, 2020, 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, 2020.
All financial assets and liabilities have contractual or expected maturities within 12 months,
except for the CEBA loan which has repayment terms described in Note 11. Due to the short term
nature of the Company’s financial instruments, there is no material impact due to discounting or
the time value of money to disclose.
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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
i) 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 $1,057,422 (2019 - $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.
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:
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Mongolia Growth Group Ltd.
Notes to the Consolidated Financial Statements
For the year ended December 31
16 Related party transactions (continued)
Salaries and other short-term employee benefits
Director fees
2020
$
479,281
40,000
519,281
2019
$
481,213
40,000
521,213
As at December 31, 2020, amounts due to related parties totaled approximately $45,013
comprised of accrued directors fees and fees owed to management (2019 - $48,118) were included
in trade payables and accrued liabilities. In 2019, an amount of $20,867 was 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. Management is not aware of any pending, or threatened litigation that, if resolved against
us, would have a material adverse effect on our consolidated financial position, results of
operations, or cash flows, except with regards to the matter described below:
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 in
November 2020 in an amount of approximately $508,000 in compensation for lost rental income
since the Company signed the agreement in 2013. 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, $223,693 is currently included in the Company’s trade payables and accrued liabilities
(note 10) to reflect the contractual liability to provide an apartment.
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
Changes in non-cash working capital from
operating activities
2020
$
1,064,637
(178,941)
(8,323)
2019
$
(25,230)
252,461
78,355
877,373
305,586
Non cash considerations in the form of investment properties for sale of an investment property
was classified as other assets (note 7) at December 31, 2019 and received in 2020, totalling
$145,492. Income tax paid during the year was $32,914 (2019 - $32,637).
Interest paid during the year was $21 (2019 - $82,776).
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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 gain on investment properties
Impairment of PPE
Unrealized mark to market gain
Other expenses
Depreciation
Interest income
Gain on disposal of investment property
Other revenue
Realized gain on marketable securities
Finance cost
Foreign currency gain (loss)
Investment
Property
$
756,283
(860,936)
(2,700,069)
(36,426)
-
(267,695)
(68,795)
2,443
106,762
68,170
-
-
4,281
Corporate
$
-
-
-
-
4,265,403
(910,968)
-
69
-
-
3,288,803
(21)
(21,499)
2020
Total
$
756,283
(860,936)
(2,700,069)
(36,426)
4,265,403
(1,178,662)
(68,795)
2,512
106,762
68,170
3,288,803
(21)
(17,219)
Net income (loss) before income taxes
(2,995,982) ,
6,621,787
3,625,805
Rental income
Property operating expenses
Unrealized loss on investment properties
Impairment of PPE
Unrealized mark to market gain
Other expenses
Depreciation
Interest income
loss on disposal of investment property
Other revenue
Foreign currency gain (loss)
Realized loss on marketable securities
Finance cost
Reclassification
accumulated
of
other
comprehensive income on disposal of
subsidiary
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)
-
(824,864)
Net income (loss) before income taxes
(2,563,374)
(752,280)
(3,315,654)
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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, 2020
Total assets
Property and equipment
Investment properties
Expenditures
Property and equipment
Investment properties
Total liabilities
Balance as of
December 31, 2019
Total assets
Property and equipment
Investment properties
Expenditures
Property and equipment
Investment properties
Total liabilities
Investment
Property
$
16,126,640
1,293,241
14,542,236
705
145,412
922,514
Investment
Property
$
22,329,807
1,435,650
18,831,985
1,540
48,213
981,946
Corporate
$
11,843,781
-
-
-
-
201,479
Corporate
$
3,747,414
-
-
-
-
425,447
Total
$
27,970,421
1,293,241
14,542,236
705
145,412
1,123,993
Total
$
26,077,221
1,435,650
18,831,985
1,540
48,213
1,407,393
Trade payables
and accrued
liabilities
Revenue
Property and
equipment
Investment
property
2020
$
2019
$
2020
$
2019
$
2020
$
2019
$
2020
$
2019
$
Canada
Mongolia
201,479 402,107
363,063 365,625
-
931,215
-
1,140,830
-
1,293,241
-
1,435,650 14,564,844
-
-
18,831,985
564,542 767,732
931,215 1,140,830 1,293,241 1,435,650 14,564,844 18,831,985
36 | P a g e
61
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
2020
$
22,537
49,772
25,122
69,448
771,864
18,835
10,609
77,262
70,858
127,173
-
196,920
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
1,440,400
1,585,145
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 COVID-19
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.
23 Subsequent events
Since January 1, 2021, the Company has repurchased 1,061,500 of its shares at an average price
of $0.42/share and cancelled 1,253,000 shares.
The Company sold one property for total proceeds of approximately $396,000 and a net gain
of $nil.
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| Mongolia Growth Group Ltd
Nick Cousyn
Nick Cousyn
Independent Director
Independent Director
the U.S. with extensive experience
Mr. Cousyn is a Capital Markets’ professional with 15 years of
Mr. Cousyn is a Capital Markets’ professional with 15 years of
alternatives and traditional industry experience. Before moving
alternatives and traditional industry experience. Before moving
to Mongolia, Mr. Cousyn was a licensed securities professional in
to Mongolia, Mr. Cousyn was a licensed securities professional
the U.S. with extensive experience in relationship management
in
in relationship
management and trading which spanned equities, fixed
and trading which spanned equities, fixed income, derivatives
income, derivatives and distressed debt. While based in the
and distressed debt. While based in the US, some of the firms
US, some of the firms he worked for included Deutsche Bank,
he worked for included Deutsche Bank, Banque Populaire,
Banque Populaire, Wells Fargo and First Horizon National
Wells Fargo and First Horizon National Bank. During his tenure
Bank. During his tenure in Mongolia, Mr. Cousyn has served
in Mongolia, Mr. Cousyn has served as Chief Communications
as Chief Communications Officer for Petro Matad and Chief
Officer for Petro Matad and Chief Operating Officer and head
Operating Officer and head of research for BDSec (MO:BDS),
of research for BDSec (MO:BDS), Mongolia’s largest broker and
Mongolia’s largest broker and investment bank. Mr. Cousyn
investment bank. Mr. Cousyn also served as Co-Chair of the
also served as Co-Chair of the Business Council of Mongolia
Business Council of Mongolia Capital Market Working Group and
Capital Market Working Group and was a Senior Council
was a Senior Council Member and guest lecturer at Mongolia’s
Member and guest lecturer at Mongolia’s Institute for Finance
Institute for Finance and Economics. Mr. Cousyn holds a BA in
and Economics. Mr. Cousyn holds a BA in Economics from the
Economics from the University of California at Riverside and is
University of California at Riverside and is the co-founder of
the co-founder of Terra Explorers, a London registered company
Terra Explorers, a London registered company focused on
focused on Oil Exploration and Production in Mongolia.
Oil Exploration and Production in Mongolia.
Brad Farquhar
Independent Director
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.
Mr. Farquhar is Executive Vice-President and Chief Financial
Officer of Input Capital Corp. (TSXV: INP). He previously co-
founded 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 who spent over 10 years as a senior advisor to senior
political leaders in Saskatchewan and Canada prior to going
into business. 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. He currently also serves as Executive in Residence
in Agribusiness at the University of Regina. Mr. Farquhar
is a Director of Input Capital Corp., Luxxfolio Holdings Inc.
(CSE: LUXX), Radicle Group Inc., and on the advisory board of
AgFunder.com.
Board of Directors
Board of Directors
Harris Kupperman
CEO and Chairman of Mongolia Growth Group Ltd
Harris Kupperman
CEO and Chairman of Mongolia Growth Group Ltd
Mr. Kupperman is a co-founder of Mongolia Growth Group
Mr. Kupperman is a co-founder of Mongolia Growth Group
and has been the Executive Chairman of the Corporation
and has been the Executive Chairman of the Corporation
since March 2014. Mr. Kupperman was the President and CEO
since March 2014. Mr. Kupperman was the President and
of the Corporation from February 2011 to March 2014 and
CEO of the Corporation from February 2011 to March 2014
returned as CEO in December 2014. Mr. Kupperman publishes
and returned as CEO in December 2014. Mr. Kupperman
AdventuresInCapitalism.com; a site dedicated to uncovering
publishes AdventuresInCapitalism. com; a site dedicated
unique opportunities around the world. He is currently the
to uncovering unique opportunities around the world. He is
President of Praetorian Capital Management, which manages
currently the President of Praetorian Capital Fund, a small
Praetorian Capital Fund, a small cap, event-driven hedge fund
cap, event-driven hedge fund based in Miami Beach. He
based in Florida. He graduated from Tulane University College
graduated from Tulane University College with a history
degree. Mr. Kupperman served as a Director at Aeroquest
with a history degree. Mr. Kupperman served as a Director at
International Limited (TSX:AQL) from 2010-2011.
Aeroquest International Limited (TSX:AQL) from 2010-2011.
Jim Dwyer
Jim Dwyer
Independent Director
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).
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
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.
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 |
6367
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
64
info@mongoliagrowthgroup.com | www.mongoliagrowthgroup.com
| Mongolia Growth Group Ltd