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Lets build brighter future

CONTENTS

1.Objectives and scope of our business2.Economy outlook of Mongolia3.Development PROSPECTS of MongoliaBANK4.Our philosophy5.Legal status of the Development Bank of Mongolia6.Our activities7.Our organizational structure8.Partnership

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Provide long-term funding for priority industriesunder the industrialization policy

Assist creation of new technologies andindustries, facilitate know-how transfer

Take a lead in developing anexport oriented, innovation

and knowledge basedeconomy

Provide risk sharing mechanism to promoteforeign capital inflow and foster domestic capitalformation

Provide capital raising services for public /

private entities in domestic and internationalmarkets

Mobilize international anddomestic funds and promote

cooperation with

development financialinstitutions globally

Provide financial and capacity support to regionsunder comprehensive regional development plans

Provide long-term funding for infrastructureprojects to reduce urban-rural disparities,promote renewable energy and eco-friendlytechnologies

Support sustainableregional development and

reduce eco-systemimbalances

Build national savings from mining revenues, set

stability and emergency funds, prudently managethem prudently

Provide emergency financing in response tonatural disasters; build capacities for crisesmanagement

Provide Safety Net functionsagainst economic shocks

and natural disasters

Objectives & Scope of Our Business

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ECONOMY OUTLOOK OF MONGOLIA

Table. Macro-economic indicators of Mongolia

2011 2012 2013 2014 2015

Growth of Real GDP /percent/ 8.2 7.8 20.8 15.7 14.0

Agriculture 4.3 3.2 2.6 3.0 2.8

Industry 9.3 7.9 50.7 27.0 20.3

Service 8.9 9.3 11.1 13.2 13.3GDP per capita /thous.MNT/ 2942.2 3292.7 4113.4 5005.7 5894.1

GDP per capita /thous.USD/ 2254.6 2623.7 3357.9 4178.4 5050.7

National consumer price index, percent, from

the beginning of the year9.7 8.6 8.1 8 8.5

GDP, at 2005 constant prices /billion MNT/ 4146.49 4469.16 5396.54 6243.8 7117.9

GDP, at current prices /billion MNT/ 8290.2 9463.9 12070.9 15025.75 18059.66

1 USD in MNT exchange rates 1305.0 1255.0 1225.0 1198.0 1167.0

Population /thous. Person/ 2817.6 2874.2 2934.6 3001.7 3064

Unemployment rate 2.9 2.8 2.7 2.6 2.5

GDP /million USD/ 6352.6 7541.0 9853.8 12542.4 15475.3

Sources: Ministry of Finance

land of the ancient cultures, is now facing the

opportunities to become a new ancient miracle. With

the boom of north East Asian economy, Mongolia

transferring to an emerging market is attracting international investors.

Mongolia,

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ongolias Socia-EconomicDevelopment Priorities for 2010-2015 is about to be verified by the

Government of Mongolia. According to theconcept of this document, the development

policies of Mongolia shall focus on mainfive areas:

Priority 1. Develop responsible andecological mining sector andestablish base of heavy industry metallurgy, copper smelting, oilprocessing, chemical industry;

Priority 2. Implement industrialpolicy and develop intensifiedagriculture;

Priority 3. Develop infrastructure inorder to sustain mining andindustrialization;

Priority 4. Human development,sustainable development;

Priority 5. Improve Governance,support of private sector;

The Development Bank of Mongolia hasbeen established to create a new source offunding in addition to the Development fundof Mongolia, international loans and grantsand the government bonds; expand the

cooperation and investments from privatesectors and international investors inimplementing the development projects inprimary sectors of the economy; improve theprofitability of the projects through theestablishment of appropriate organizationalstructure, professional and efficientmanagement and utilization ofcomprehensive feasibility studies forfinancing the investments, monitoring theimplementation of projects and raising the

required funds in international markets.

Therefore, the Development Bank ofMongolia shall perform a key role toachieve above mentioned goals bydistributing mining sector revenueefficiently.

M

Development PROSPECTS of Mongolia

Bank

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After the collapse of the socialist regime,a two-tiered banking system comprisingof the BankofMongolia (central bank)and other commercial banks was createdin 1991. Currently, there are 14commercial banks in Mongolia.

Those numbers of commercial banks existonly for 2.8 million people seemMongolia is one of the most overbankedcountries in the world. On the other hand,current commercial banks are insufficientfor facilitating demand of mid-long termloans that is very crucial to promote theeconomic growth. According to statisticsof the Bank of Mongolia as of Aug 31,2010, total amount of loans ranging from500.0 million up to 1.0 billion tugrikaccounts for 11.9 % of the total loan.

As, a new financial institution inMongolia, the Development Bank ofMongolia not only fills the gaps thatcommercial banks activities cant reach,

but also creates a new marketopportunities such as syndicated loan forthem.

OUR PHILOSOPHY is not to compete, but to cooperate.

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TODAY

Based on Mongolias Law on

Amendment to the 2010 Budget, Law on

State and Local Government Propertys

Clause 9.5 of Article 9, Banking Laws

Clause 18.1 of Article 18, Clause 2.1.31

of the Government Action Plan for

2008-2012; the Government of

Mongolia decreed to establish the

Development Bank of Mongolia and

approve the charter of this bank as set in

its annexon 26 July, 2010.

In 10 February 2011, the State Ih Khural

(the parliament) passed the Development

Bank of Mongolia Law.

Currently, the Development Bank of

Mongolia is a state owned (government-

owned) legal entity.

TOMORROW

Under charter of the Development Bank

of Mongolia, The Development Bank

shall be a partially state owned legal

entity engaged in business activities of

providing financial services for the

development of priority sectors verified

by the Government of Mongolia, growth

of the value added export and

improvement on economic

competitiveness.

As a founder of the Development Bank

of Mongolia, the Government of

Mongolia will continue to hold its shares

until the partial privatization is achieved.

Board of Directors

The Board of Directors consists of three

independent and six permanent members.

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Our Activities

The Development Bank of Mongolia will not

compete with commercial banks in their funding

activities and will not gather deposits from

individuals and companies; it will provide long

term funding for large, technology intensive

industrial projects, thus provide conditions for

harmonious and mutually beneficial cooperation

with commercial banks. The Development Bank

of Mongolia will cooperate with commercial

banks in funding large projects through loan

syndication, assist in raising funds in internationalmarkets, and provide new financial services such

as providing guarantees to private sector.

Domestic commercial banks will be allowed to

participate in equity and become shareholders of

the bank.

Filling gap in the national banking

system and promote foreign capital

inflow through risk sharing andcooperation with foreign investors and

support young domestic industries and

business entities.

Under its law and charter, the

Development Bank shall be engaged in

activities of providing financial services

such as making mid-long term loans for

the development of priority sectors

verified by the Government, growth ofthe value added export and improvement

on economic competitiveness.

The Development bank shall not carry

out the activity of accepting deposits..

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Figure1. Business Model of the Development Bank of Mongolia

DevelopmentBank of

Mongolia

International

Capital Market

International

Organizations

Domestic

Capital Market

Government and

its funds

Commercial

Bank

/Syndicated

loan/

Customer

The establishment of the Development Bank of Mongolia will assist in exploiting the

strategically important mining deposits, accelerating economic growth through

implementation of large industrialization projects, development of processing

industry, re-structuring economy and promoting competitiveness of Mongolia in a

global arena.

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The Government Funds and the Development Bank of Mongolia

The Government of Mongolia and its funds shall be main financial sources of the Development

Bank. According to the researches, capital flow from the mining sector will increase from 2013

that tends to positively impact on the domestic economy. For financing the paid-in capital of the

bank, the Development Bank issues bond which will be purchased by the capital sources ofStabilization Fund, and Social and Health Insurance funds that are placed in Human

Development Fund (Appendix 5). By 2015, those funds seem to have potential to provide up to

1.0 billion USD financing. Regarding this issue, Human Development Fund has the chance to

become one of main financial sources of the Development Bank. It is specified in the 5.1 article

of Human Development Fund Law For the purpose of amassing, capital of the fund shall be

invested in following financial instruments. which shows the fact that Human Development

Fund can purchase the bond of the Development which composes capital sources required for its

operation.

Figure2.The Development Bank of Mongolia and the Human Development Fund

Strategic Mineral

Deposits

A license holder of a Strategic

Mineral De osit

A legal entity that owns government shares of a company that

holds a license of strategic mineral deposit

Human Development

Fund

Development Bank of

Mongolia

LoanIncome

Bond

issued by

the DBMIncome

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INVESTMENT

OPPORTUNITIES

Economic DevelopmentThe Development Bank of Mongolia, a newfinancial institution, has been established to 1)create a new source of funding in addition tothe development fund of Mongolia,international loans and grants and thegovernment bonds; 2) to expand thecooperation and investments from privatesectors and international investors inimplementing the development projects inprimary sectors of the economy; improve the

profitability of the projects through theestablishment of appropriate organizationalstructure, professional and efficientmanagement and utilization of comprehensivefeasibility studies for financing theinvestments, monitoring the implementation ofprojects and raising the required funds ininternational markets.

Economic Growth

According to the macro-economic forecastsdone by the international organizations,Mongolias GDP seems to reach to 44 trilliontugrik by 2020 which is 6 times higher thanthat of 2010. In coming years, Mongoliantugrik will appreciate against foreigncurrencies, provided that foreign currencyinflow is increased due mineral products exportincome. This favorable condition in thedomestic economy will influence positively tothe domestic industry development.

It is worthwhile to channel investments gearedtowards promoting the industry development

through the Development Bank of Mongolia.

PROJECT

EXAMPLE

TAVAN TOLGOI THERMAL POWERPLANT

Maximum 400 MW thermal power plant

with air-cooling system and dry ash

removal will supply electricity to the

Central Electricity System of Mongolias

south Gobi region.

Project in brief:Investment

Project cost$184.7MM ($25.7 MM for 12MW;

$159.0 MM for 100MW), $ 360.0 MM

(300MW)

Source of proceeds30% equity ($55.4 MM); 70% debt(129.3 MM (Bankable FeasibilityStudy by Parsons Brinckerhoff)

Debt terms10 years maturity; 7% annual interest

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Annex of Government of Mongolias Decree No. 320, 2009

LIST OF PROJECTS WITH TOP PRIORITIES TO BE IMPLEMENTED FOR THE GOVERNMENT

Project nameEstimate of

cost/$ million/

Timeframe

Priority one: Developing mining sector by exploiting mineral resources deposits andsetting the foundation of heavy industry

1 Oyu Tolgoi project 4,000.0 2010-2015

2 Tavan Tolgoi project 800.0 2010-2015

3 Copper smelting factory project 1,000.0 2010-2015

4 Black metallurgy complex project 1,000.0 2011-2016

5 Coking coal industry project 700.0 2010-2015

6 Petroleum oil industry project 900.0 2011-2015

7 Chemical factory project 1,000.0 2010-2015

8 Construction materials factory projects 800.0 2010-2015

Priority two: Developing intensified agriculture and implementing industrialization policy9

Healthy food projects to make livestock healthy and increase

meat and dairy production150.0 2010-2015

10 Supporting development of irrigation fields project 50.0

11 Agricultural products and raw materials stock market project 50.0 2010-2011

12High-technology-based industrial complex and science parksproject

400.0 2010-2015

Priority three: Developing infrastructure

13 Tavan Tolgoi Power Station project 400.0 2010-2015

14New railroad project from tavan Tolgoi-Zuunbayan- SainshandChoibalsan: /920 km/

800.0 2010-2015

15 Providing Gobi region water needs from Orkhon river project 540.0 2010-201516 National satellite for communications of Mongolia project 100.0 2010-2015

17 Renewal of Ulaanbaatar city auto roads project 900.0 2010-2015

18 Building international, national and domestic auto project 1,200.0 2010-2015

19 Highway from Altanbulag Ulaanbaatar ZaminUud project 1,200.0 2010-2015

20 Ulaanbaatar 5 th energy power station project 300.0 2011-2016

21 Providing population with housing project 2,100.0 2010-2015

22 Generating electricity from waste and biomass project 200.0 2010-2015

Priority four: Providing sustainable development through humandevelopment and protecting the environment

23 Industrial training complex for Information technology project 100.0 2010-2015

24 Students town project 300.0 2010-201525 Khar khorum 13

thcentury tourism project 500.0 2010-2015

26ECO project to purify domestically and industrially polluted

water200.0 2010-2015

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ORGANZATIONAL STRUCTURE

Figure3. Organizational structure of the Development Bank of Mongolia

Supervisory

Board

The ShareholdersMeeting

Board of

Directors

Executive

Body

Risk Management Committee

Asset Liability Management Committee

Loan Analysis and Evaluation

Committee

Representative

Offices

Loan Policy and

Planning

Department

Monitoring and

Administration

Department

Risk Management

Department

Financial Intermediary

Companies

Asset and Liability

Management

Department

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PARTNERSHIPWe would welcome any suggestions of fruitful

partnership.

The Development bank of Mongolias main goals are implementationof the projects in accordance with the Government Action Plan,

Comprehensive National Development Strategy and Mongolias Socio-

Economic Development Priorities verified by the Government of

Mongolia by collaborating with the financial institutions, foreign

investors and increasing foreign capital flows into Mongolia. The

Development Bank of Mongolia needs to collaboration with foreign

development banks as well as learn from their experience. Foreign

investors are expected to hold a certain percentage of the Development

Bank Mongolia shares.

We believe that the paid-up capital should increase step by step while

international financial institutions and foreign/domestic investors will

be offered equity participation up to 49 percent of the bank capital. By

allowing international development financial institutions to partake in

it, the DBM will be able to disseminate their best experiences and the

achievements into its activities. The international management team

consisting of foreign and national professionals shall act as the

executive body of the bank and will help in human resource capacity

building.

Development Bank of Mongolia is a new development financing

institution and is currently cooperating with Korea Development Bank

and Development Bank of Japan as well as with many international

development financing organizations.

http://www.forum.mn/en/annoucement.php?aid=341&cid=5.5http://www.forum.mn/en/annoucement.php?aid=341&cid=5.5http://www.forum.mn/en/annoucement.php?aid=341&cid=5.5http://www.forum.mn/en/annoucement.php?aid=341&cid=5.5http://www.forum.mn/en/annoucement.php?aid=341&cid=5.5http://www.forum.mn/en/annoucement.php?aid=341&cid=5.5

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TSOGBAYAR Enhmaa

Officer/Secretary of the Board of DirectorsNational Development and InnovationCommittee of MongoliaTel: (976)-51-261577E-mail: tsogbayar@ndic.gov.mn