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Leopard Cambodia Fund – Monthly Newsletter Issue 11 – March 2009
Welcome to the 11th Issue of the Leopard Cambodia Fund (LCF) Monthly Newsletter. May we begin by offering our thanks to all those who have invested in Cambodia through our fund during this last month. Interest in both the tremendous opportunities which Cambodia offers and in our fund as a means of accessing those opportunities has been gratifyingly high: well over 900 of you now regularly read our newsletter, 120 of you attended our Investors Forum held at the Raffles Hotel Le Royal in the autumn and individual visits to meet our team in Phnom Penh have now topped an astonishing 50-not bad for a newly emerging country in the midst of a global recession. So, gratified we are but surprised we are not, because successful investors are both pragmatic and value conscious and Cambodia offers, right now, some great value to those prepared to peer at it through the haze of global gloom. May we therefore remind you that our final close is scheduled for midnight New York time on the 2nd April so if you are still of a mind to invest in Cambodia via LCF, please remember there is little more than a week to go. Please contact our Chief Operating Officer Thomas Hugger for offering documents, subscription forms and general enquiries at: [email protected].

‘Cambodia-The Wild East’ — the ‘Asianomics’ Perspective

Many of you will be familiar with the work of Leopard Capital Partner Dr Jim Walker. Jim is the founder and managing director of Asianomics Limited, an economic research and consultancy company servicing principally the fund management industry. Prior to establishing Asianomics in December 2007 he was the chief economist at CLSA Asia-Pacific Markets. He joined CLSA in late 1991 and was repeatedly voted Asia’s best economist in the various respected polls and surveys of fund managers. Jim’s credibility comes not just from a consistent application of Austrian-school economic analysis, but from straight speaking and from an inability to sit on a fence. Jim who has just written a substantial report entitled ‘Cambodia-The Wild East’, co-authored by the eminent Cambodian-American academic Dr Sophal Ear who is a member of Leopard Cambodia’s Advisory Council. Sophal is Assistant Professor of National Security Affairs at the US Naval Postgraduate School and a leading scholar of contemporary Cambodia’s political economy. Sophal has also worked for the World Bank, the Asian Development Bank, and JPMorgan.

Whilst we would not dream of paraphrasing a report of such substance (for therein lies the road to academic disputational hell!), we can say that the authors conclude that the country merits investor’s attention and furthermore: ‘believe that the opportunities outweigh the risks, but it is not a venture for the risk averse. The response of the Cambodian government to the current international crisis will make or break the country as a direct-investment destination. So far the signs are good, but they will have to be monitored closely for backsliding’.

To request a copy of this warts and all but essentially bullish report, or to arrange a subscription to ‘Asianomics’ which we would highly recommend, please email: [email protected]
Sectoral Highlight: Microfinance Investment Opportunities in an under-banked Cambodia

  In recent years, the Cambodian banking sector has experienced dramatic growth due to annual GDP expansion of more than 10 percent and to increasing bank penetration. Bank deposits have grown from $382 million in 2000 to more than $2.5 billion today while bank loans have increased from $310 million in 2000 to more than $2.5 billion. However, Cambodia still remains relatively “unbanked” with total bank assets less than 40 percent of GDP as compared to approximately 160 percent in Korea and 80 percent in Vietnam.

Most Cambodian commercial banks have traditionally focused on the top 20% of the economic pyramid and have overlooked rural communities which comprise more than 80% of the overall population. This is where Microfinance institutions (MFIs) have stepped in with great success.

The Cambodian microfinance sector is generally considered a model microfinance industry and is widely studied by academics and banking professionals. Five Cambodian MFIs are included in the MIX Global 100 Composite Rankings of the top 100 global MFIs. Only India has more MFIs in the index. At the end of 2008, Cambodia had 18 licensed MFIs, up from six MFIs in 2003. Microfinance loans increased by 61% in 2008 and are still expected to grow at a healthy 10 to 20% in 2009 although funding costs could rise as foreign investors scale back their emerging market investments and nonperforming loans will also likely increase as a result of slower economic growth. In 2008, the number of MFI borrowers exceeded one million, up from 970,152 in 2007: healthy growth across the board.
LCF expects consolidation in the banking sector over the coming 12 to 20 months as a result of the National Bank’s tripling of the minimum capital requirement in September 2008. Capital requirements were increased for commercial banks from KHR 50 billion ($12.5 million) to KHR 150 billion ($37.5 million) and for specialized banks from KHR 10 billion ($2.5 million) to KHR 30 billion ($7.5 million). Banks existing prior to September 2008 have until the end of 2010 to meet the new capital requirements. This combination of tremendous growth and of consolidation presents investors with several exciting opportunities and at LCF we are currently evaluating several options to invest in the sector including participating in any pre-IPO capital raising by a leading MFI, acquiring an existing MFI or merging an existing MFI with a smaller commercial bank. Leopard Capital Associate Matt Magenheim has written a report in which he delves in more detail into the rather unique history of Cambodian MFIs and into their structure and he also looks at the tremendous scope for future growth. To view this report, please click here.
SuperReturn Emerging Markets 2009, Geneva, 30 June -1 July
Leopard Capital founder Douglas Clayton and Leopard Cambodia Fund investor and LP Advisory Committee member Markus Winkler are among the featured speakers at Super Returns Emerging Markets conference in Geneva this June 30-July 1st. This year’s theme is “Private Capital, Growth Capital, & Venture Capital in Converging, Emerging and Frontier Economies”. We have arranged a 15% discount for our readers if you submit the attached form (please click here), or register at http://www.icbi-events.com/sremergingmarkets/ citing the following code: VIP: KN2220LEOPA. Hope to see you there.

In the News
  • Work has begun on a $1bn, 7 hectare development project at historic Bokor National Park which aims to transform the park’s mountain summit and restore several abandoned French colonial buildings. The Bokor Palace Hotel and Casino, developed by Cambodia’s Sokimex Group, will include a five-star hotel capable of holding up to 950 guests, a residential area, a shopping centre, an amusement park, a casino and a cable car system. Additionally, a golf course will be built at the foot of Bokor Mountain in the 140,000 hectare Government protected area.
  • Economic forecasts are being downgraded, with the latest being the Asian Development Bank indicating it will revise down it’s 2009 GDP growth forecast for Cambodia from the 4.7% it forecast in December due to a further slowdown in garment exports and in tourist arrivals. Arrivals dropped 2.2% YOY in January according to the Ministry of Tourism.
  • Bangkok Airways has reported a slight increase in its February passenger numbers to Cambodia. The Thailand-based carrier said last week that load factors were 70 percent in February, up from 67 percent in February 2008. A Bangkok Airways spokesman said that the airline plans to increase the number of flights from Phnom Penh to Bangkok from two to three flights per day which will include an Airbus 319 with business class.
  • According to the Commerce Ministry up to 15% of garment workers have been laid off over the last six months due to the slowdown in garments exports to the EU and the USA.
  • An Israeli business delegation has just visited Cambodia to explore opportunities in telecommunications and also in farming. This comes soon after the Kuwaiti and Qatari Governmental visits in which food security was first on the agenda.
  • The Electricity Authority of Cambodia will shortly invite tenders for the construction of a national electricity grid with main spines running from Phnom Penh to Battambang and Siem Reap and to Sihanoukville. Completion of the grid is scheduled for 2015.
  • A representative from the Cambodia Microfinance Association has said that whilst their members are seeing a rise in the number of late payers, the average number of late payers is still below 1% although he forecast this would rise to between 1% and 2% over the course of the coming year due to the economic slowdown.
Picture of the Month
The Leopard Capital team recently explored some of Cambodia’s pristine tropical islands. 

In this Issue
Cambodia-The Wild East
Microfinance Investment Opportunities
SuperReturn Emerging Markets 2009
In the News
Quick Links

Leopard in the News: Articles containing information and comments on both Cambodia and on the Leopard Cambodia Fund appear regularly in various publications and news outlets. To view the page in our website displaying links to these, click here.

The NAV of Leopard Cambodia Investments (BVI) Ltd as at 27 Feb 2009 is USD 1008.01 (30 Jan 2009 USD 1007.38)
Investing in LCF via a Self Invested Personal Pension Plan (SIPP): We would like to remind UK taxpayers that they can invest in LCF via a SIPP and enjoy all the tremendous tax advantages associated with SIPPs. Hornbuckle Mitchell is our SIPP provider and more information on the company can be found here:
Initial contact should be made with Hornbuckle Mitchell through their Asia SIPP expert Stephen Davis at:

Leopard Cambodia Fund
ISIN No KYG5458L1023
CUSIP No G5458L102
Valoren No 003811078
Bloomberg LEOPARD KY
Lipper ID 65096323
Leopard Cambodia Investments (BVI) Ltd.
ISIN No VGG5458M1005
CUSIP No G5458M100
Valoren No 003884357
Bloomberg LEOBVIL VI
Lipper ID 65096324