Strictly Confidential

Development Bank of Mongolia

General Update
July 2014
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DEVELOPMENT BANK OF MONGOLIA 2
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DEVELOPMENT BANK OF MONGOLIA 3
Table of Content
Mongolia Overview
Macroeconomic Update . 5
Natural Resource Data .. 9
Banking Sector in Brief ..13
DBM Overview
Key Milestone ..15
DBM Structure ..16
Financial Highlights . 17
Key Projects ..20
Correspondent Banking.. 21
Transactions .. 22
DEVELOPMENT BANK OF MONGOLIA 4
1 MONGOLIA OVERVIEW
Mongolia Overview
DEVELOPMENT BANK OF MONGOLIA 5
One of the fastest growing economies globally
Large mineral resource base that can be leveraged for
industrialization
Attractive environment for FDI and trade
Proven fiscal track record augmented by forward looking initiatives
Strengthening financial sector
Close Proximity to the Largest Global Resource Markets Mongolias Key Advantages
Source: World Bank, National Statistical Office of Mongolia
Large land per capita, abundant natural resources, well positioned for rapid economic expansion
RUSSIA
US$2,015 143
CHINA
US$8,227 1,351
S.KOREA
US$1,130 50
JAPAN
US$5,961 128
MONGOLIA
US$10 3
Nominal GDP 2012 in USD billions
Population 2012 in millions
LEADING LAND/ CAPITA
Territory: 1.6 million sq km
Population: 2.9 million
Relatively YOUNG POPULATION
with a HIGH LITERACY rate
among emerging economies
ABUNDANCE OF
UNEXPLOITED NATURAL
RESOURCES
Located close to some of the
LARGEST global commodity
MARKETS
FLOURISHING DEMOCRACY
IN THE REGION
Tested with 7 CONSECUTIVE
SUCCESSFUL democratic
ELECTIONS
3
1
2
USD mm 2009 2010 2011 2012 2013 2014Q1
Real GDP Growth -1.3% 6.4% 17.5% 12.4% 11.7% 7.4%
Nominal GDP 4,552 6,729 7,998 10,478 11,079 2,106
Real GDP 2,723 3,327 3,516 3,972 3,718 646
GDP Per Capita 1,715 2,285 3,181 3,673 3,820 3820*
Inflation 4.2% 13.0% 8.9% 14.0% 12.5% 12.4%
Trade Balance (252) (378) (1,781) (2,354) (2,082) (9)
Export 1,885 2,899 4,817 4,384 4,272 987
Import 2,137 3,277 6,598 6,738 6,354 996
Macroeconomic Snapshot
*As of 2013YE
2,723
3,327
3,516
3,972
3,718
646
4,552
6,728
7,998
10,478
11,079
2,106
2009 2010 2011 2012 2013 2014Q1
11.7%
7.7%
5.7%
5.1%
6.5%
5.4%
1.3%
M
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One of the Fastest Growing Economies Globally
DEVELOPMENT BANK OF MONGOLIA 6
GDP Growth Comparison Emerging
Sovereigns
Source: National Statistical Office of Mongolia, National Bureau of Statistics of China, Badan Pusat Statistik of Indonesia, Department of Statistics of Malaysia, National Statistics Office of Philippines, General Statistics Office of Vietnam,
Federal State Statistics Service of Russia, Moodys Country Reports, The Ministry of Economic Development of Mongolia
Note: Exchange rate (MNT/USD) uses corresponding year end rate, 1,267.5 (2008), 1,442.8 (2009), 1,257.2 (2010), 1,396.4 (2011), 1,392.1 (2012), 1,659.3 (2013), 2013 Preliminary estimation
Real and Nominal GDP (USD mm)
Inflation Comparison Emerging
Sovereigns
12.3%
2.6%
8.1%
2.1%
4.1%
6.0%
6.5%
M
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27.7%
6.4%
31.8%
17.5%
26.4%
12.4%
25.2%
11.7%
0.5%
(1.3%)
YoY growth of Real GDP YoY growth of Nominal GDP
YoY growth of Real GDP at 2013 YoY Inflation as of Dec 2013
Mongolia continues to perform well compared to its emerging market peers,
demonstrating robust growth momentum while maintaining moderate levels of inflation
18.3%
7.4%
Attractive Environment for FDI
DEVELOPMENT BANK OF MONGOLIA 7
Growing FDI into Mongolia (USD mm) Breakdown of FDI by Industry
Source: Foreign Investments and Foreign Trade Agency of Mongolia, Moodys Country Report 2012
CAGR is calculated by using nominal GDP and total revenue in MNT during the period respectively
67.5% 68.4%
80.4%
66.3%
84.7%
69.3%
89.9%
26.1%
30.5%
17.9%
21.0%
7.1%
28.3%
9.9%
2007 2008 2009 2010 2011 2012 1H2013
Geology exploration Others
Banking and financial services Information and communication technology
Construction
623
1691
4714
4451
2140
294
-26%
171%
179%
-6%
-52%
-65%
-100%
-50%
0%
50%
100%
150%
200%
0
1000
2000
3000
4000
5000
2009 2010 2011 2012 2013 2014 Q1
FDI Growth (RHS)
In October 2013, the Parliament had made amendments to
the controversial Strategic Entities Foreign Law (SEFIL).
Private investors will no longer have to seek government
approval
The new law sets stable tax periods depending upon the
characteristics of the investment from 5 to 22.5 years.
DEVELOPMENT BANK OF MONGOLIA 8
Source: National Statistical Office of Mongolia, the Minister of Economic Development of Mongolia; Note: CAGR is calculated by using nominal GDP and total revenue in MNT during the period respectively
Strategically Advantageous Location for External Trade
1,885
2,899
4,817
4,384
4,272
987
2,137
3,277
6,598
6,738
6,354
996
(252)
(378)
(1,781)
(2,354)
(2,082)
(9)
2009 2010 2011 2012 2013 2014 Q1
Export Import Trade Balance
Strategic geographic location to be leveraged for transit trade
Mongolia has a strategic location between the 2
nd
and the 6
th
largest economies of the world;
Mongolia has good political and economic relations with the two
neighbors;
The strategic location can be used to the advantage of North-East
Asian countries.
Russia
24%
China
29%
Others
47%
Import
China
87%
Russia
1%
Others
12%
Export
Mongolia
Russia
China
Active trade with immediate regions
Legal environment for trade
World Trade Organization member since 1997
Bilateral trade agreements with 23 countries
Bilateral investment agreements with 44 countries
External Trade (USD mm)
Natural Resource Base That Can be Leveraged for Industrialization
DEVELOPMENT BANK OF MONGOLIA 9
1,885
2,899
4,817
4,384
4,272
63.8%
81.0%
89.2% 91.0%
81.8%
26.9%
39.0%
54.9%
42.6%
33.0%
2009 2010 2011 2012 2013
Total Export Mineral Export % of Total Export Mineral Export % of Nominal GDP
37%
19%
14%
9%
6%
2%
13% Copper
Coal
Crude Oil
Iron Ore
Gold
Zinc
Others
A High-Growth Mineral Sector driving the Exports (USD mm) Minerals Main Composition of Total Exports (2013)
Source: National Statictical Office of Mongolia, Erdenes MGL
Mongolias World Class Mineral Resources
Main Mineral Resources
Approved Resources
(2012)
Copper (thousand tons) 83,807
Coal (million tons) 18,473
Gold (tons) 2,402
Zinc (thousand tons) 1,740
Iron ore (million tons) 1,047
Uranium (thousand tons) 47.9
Rare Earth (thousand tons) 3,768
Conventional crude oil (million barrel) 2,438
Total coal exports are estimated to exceed 30 million tons at the end of 2015 once
railway infrastructure is in place and is expected to further increase to 50 million tons by
2017
Operations at the Oyu Tolgoi deposit have commenced in 2013 and exports of its
products began in July of 2013. These exports are expected to play a crucial role in total
exports of Mongolia.
USD 4,273
Million
Natural Resource Base That Can be Leveraged for Industrialization
(contd)
DEVELOPMENT BANK OF MONGOLIA 10
ULAANBAATAR
Erdenet
Tumurtoi
Shivee Ovoo
Tavan Tolgoi
Oyu Tolgoi
Nariin Sukhait
Baganuur
Gurvanbulag
Tsagaan Suvarga
Dornot
Mardai
Asgat
Tumurtein
Ovoo
Boroo
Burenkhaan
Silver
6.4 mln tons
Uranium
16 thousand tons
Copper, molybdenum ore
12 mln tons
Iron ore
229.3 mln tons
Gold ore
25 tons
Rare-earth elements
47.2 thousand tons
Rare-earth elements
339 thousand tons
Lignite coal
600 mln tons
Phosphorite
300 mln tons
Coal
7.4 bn tons
Copper,
molybdenum ore
10.6 mln tons of oxides;
240.1 mln tons sulphides
Zinc
7.7 mln tons
Uranium
29 thousand tons
Uranium
2.9 thousand tons
Mongolia has vast and diverse under developed mineral deposits, providing the economy with significant
long-term upside potential
Mushgia Khudag
Metallurgical coal
125.5 mln tons
Lugiin Gol
Rare-earth elements
13.5 thousand tons
Lignite coal
646.2 mln tons
Khalzan
Burgedei
Khotgor
Copper 37 mln tons
Gold 1,300 tons
Rare-earth elements
3,429.5 thousand tons
DEVELOPMENT BANK OF MONGOLIA 11
Exports of gold-copper-silver concentrate from Oyu Tolgoi have officially
commenced on 9 July 2013 with planned volumes of 300,000 tons within this
year;
The deposit is ranked as the third largest in the world by its reserves, content
of copper, gold and silver contained in concentrates;
Additional investments are planned for the significantly higher value
underground part of the deposit;
The Government of Mongolia owns 34% of the project.
Australasian Joint Ore Reserves Committee reserve estimate of 7.4 billion
tons of coking and thermal coal resources;
Expected to produce 30 millions tons per year at full capacity, counting for
majority of the 50 million tons of targeted exports by 2017;
Infrastructure: 1) Paved road constructed and operational; 2) Railway
construction underway with 12% completion rate and expected to be full
completed within 2015; 3) A 450MWt power plant project commenced at the
site.
One of the three largest deposits of metallurgical coal in the world; premium
quality, highly desired coking and thermal coal.
Oyu Tolgoi Overview Tavan Tolgoi Overview
Source: Tavan Tolgoi website, Turquoise Hill website

Natural Resource Base That Can be Leveraged for Industrialization
(contd)
DEVELOPMENT BANK OF MONGOLIA 12
Railroad
Adding to Trans Mongolia Railway, a New railway,
connecting commodities to the Chinese and
Japanese market.
Auto road
Connecting the northern border point to the south,
990 km of highway project is under development.
Gas pipeline
Conceptual level. Connect through the Pacific to Japan
Oil pipeline
Conceptual level. Connect through the Pacific to
Japan
Electricity transmission line
Conceptual level. Connect through the Pacific to
Japan
Expanding our railway network and connecting Mongolia to its immediate neighborhood via 5 transit corridors will significantly
contribute to the development of international transit traffic, trade and transportation in North-East Asia.
Source: Ministry of Roads and Transportation of Mongolia
Natural Resource Base That Can be Leveraged for Industrialization
(contd)
DEVELOPMENT BANK OF MONGOLIA 13
Source: Banks website & Mongol Bank
Banking Sector Highlights
13 commercial banks, 1 development institution, and 5 foreign
bank representative offices
Total assets of the banking sector as of Dec 31, 2013 was
MNT 20.1 trillion.
Largest 5 banks (exc. DBM) make up 88% of the total assets
in the banking sector
Fast Growing Banking Sector
DBM
14%
TDB
23%
Khan
21%
Golomt
16%
Xac
8%
State
8%
Others
10%
Asset Market Share
DBM
17%
TDB
20%
Khan
19%
Golom
t
17%
Xac
8%
State
7%
Others
12%
Loan Market Share
Due to the regulatory requirement the largest commercial
bank can lend up to around USD50 million to a single
borrower.
Although the banking sector witnessed a strong domestic
credit growth, strategically important large projects still need
long term funding at reasonable cost.
4,421
6,245
9,371
11,992
20,883
1%
21%
67%
29%
54%
0%
20%
40%
60%
80%
-
5,000
10,000
15,000
20,000
25,000
2009 2010 2011 2012 2013
Banking Sector Loan (MNT bln) Growth (RHS)
DEVELOPMENT BANK OF MONGOLIA 14
3 DBM OVERVIEW
Key Milestones
DEVELOPMENT BANK OF MONGOLIA 15
May 12, 2011
The Bank was established
by the Government.
August 30, 2011
Partnership agreement was
signed with Korea
Development Bank.
March 21, 2012
Successfully issued
USD580 million bond in
international market.
August 06, 2012
Financed 1280km paved
road system.
May 07, 2013
Provided USD83.9 million
financing for MIAT.
October 05, 2012
Provided USD100 million
financing for ETT.
November 18, 2013
Organized Inside
Mongolia campaign to
promote Mongolia.
December 31, 2012
Best Debut Bond award
from Bloomberg TV
Mongolia.
December 25, 2013
Successfully issued JPY30
billion samurai bond
guaranteed by JBIC.
DBM will play a pivotal role in the development and continuous progress of Mongolias economy
DBM is the Only Policy Oriented Bank
DEVELOPMENT BANK OF MONGOLIA
16
Shareholder
Establishment
Mission
100% owned by the Government of Mongolia
The Law on Development Bank of Mongolia was
ratified by the Parliament on 1 February, 2011.
Accordingly, the Bank was established on 25
March, 2011 by the Government of Mongolia
To foster the economic and infrastructure
development of Mongolia by providing long-term
financing for policy-oriented projects consistent
with the Governments macroeconomic
development strategy
Government of Mongolia remains the sole shareholder in DBM
and has continued to support the entity through:
Governments strong capitalization commitments into the Bank
o 2011: MNT 33.0 bn (total MNT 49.7 bn)
o 2012: MNT 23.6 bn (total MNT 73.3 bn)
o 2013: MNT 50.0 bn (total MNT 123.3 bn)
o 2014Q1: MNT 40.0 bn (total MNT 163.3 bn)
Strong Support from the Government of Mongolia
Ownership & Org. Structure
Sovereign Credit Ratings
B1/negative B+/stable
B+/negative
Ministry of Finance
Government
of Mongolia
Ministry of Economic
Development
DBM
100%
ownership
Direct
supervision
Direct
supervision
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DEVELOPMENT BANK OF MONGOLIA 17
ETT
34%
Road
33%
Power Plant
12%
Construction
Material
Manufacturing
10%
Mortgage
4%
Other
7%
DBM Funding
Road
36%
Agriculture &
Light Industry
24%
Railway
23%
Infastructure
8%
Construction
6%
Other
3%
Chinggis Bond
Financial Highlights
Business Mix Financed Projects Break Down
Medium Term
Note
33%
Borriwings
67%
As of 2013YE, the funding sources are divide into medium
term note issued by DBM and the borrowings from the
Government of Mongolia (Chinggis Bond).
DBM allocates these funds to support strategically important
sectors and entities.
From Budget
63%
From Project
37%
63% of the loan will be repaid from the State Budget while
remaining 37% will be paid from the projects cash flows.
Thus, those loans that will be paid from the State budget
considered 0 percent risky in DBMs capital adequacy
calculation.
Financial Highlights
DEVELOPMENT BANK OF MONGOLIA 18
Highlights
As the economy grew at unprecedented level in the past few
years the need of development institution became crucial
Commercial banks funding are tied to customer deposits that
mature within 12 months, and borrowing cost is high for
strategically important projects
Development Bank of Mongolia enjoys full support from the
Government of Mongolia hence cheaper cost of funding with
longer maturities
Close working relationship with the Government agencies
Financial Highlights
MNT bln 2011 2012 2013 2014 Q1
Asset 77 888 3,231 4394
Loan - 494 2,180 2563
Capital 49 67 144 163
Net Income -0.6 -5.7 26.8 19.2
CAR 8.9% 18.3% 12.8% 9.5%
ROA -0.8% -0.6% 0.8% 0.5%
ROE -1.2% -8.5% 18.7% 11.8%
Asset Composition
12%
20%
67%
1%
Cash & cash
equivalents
Deposits at banks
Loans
Other assets
Liability Composition
4%
32%
64%
0%
Deposits from banks
Notes
Borrowings
Other liabilities
Financial Highlights
DEVELOPMENT BANK OF MONGOLIA 19
Asset
Total Profit/Loss
Liability
Total Capital
0.25
0.62
0.97
0.35
1.32
1.43
0.05
0.03
0.04
0.06
0.06
0.64
1.98
2.47
-
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
2011.12.31 2012.12.31 2013.12.31 2014.03.31
B
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Assets
Other assets
Loan
Cash (cash, deposit,
current account)
0.58 0.58
0.92
-
1.20
1.36
-
-
0.07
0.00
0.04
0.02
0.02
0.59
1.89
2.37
-
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
2011.12.31 2012.12.31 2013.12.31 2014.03.31
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Liabilitities
Other liabilities
Domestic short term
fund
Fund from Chinggis
bond
International bond
(0.4)
(3.5)
21.3
10.8
-0.8%
-1.0%
0.5% 0.5%
-1.2%
-8.0%
15.1% 15.1%
-24.00%
-14.00%
-4.00%
6.00%
16.00%
26.00%
36.00%
(5)
-
5
10
15
20
25
2011.12.31 2012.12.31 2013.12.31 2014.03.31
M
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Profit/loss before tax
ROA
ROE
35.6
52.7
74.5
69.2
-3.8
11.5
(0.43)
(3.52)
17.00
10.83
35.16
48.69
87.73
91.54
(40)
(20)
-
20
40
60
80
100
120
140
2011.12.31 2012.12.31 2013.12.31 2014.03.31
M
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U
S
D
Current year
profit/loss
Previos year
profit/loss
Capital
Key projects Building for the Future
DEVELOPMENT BANK OF MONGOLIA 20
Sectors Description
Mining
The Bank has provided USD200m for the major coking coal project, Erdenes
Tavan Tolgoi. Another USD14m has been disbursed for a thermal coal producer
and supplier to Ulaanbaatar city
Auto road The Bank has financed the construction work of 1,800 km highway
Construction material
USD75.3m was disbursed to a major cement producer for an expansion of
capacity from 0.4 million tons per annum (tpa) to 1 million tpa
Energy
Provided USD105mm facility for Combined Heating & Power Plant # 4 and # 3 of
Ulaanbaatar City for expansion of 100MWt and 50MWt respectively. Started an
IPP project in Tavan Tolgoi, with a mezzanine facility
Railway
Initial funding of USD55m was disbursed for funding of design and survey of
1,800 km New Railway project, and construction work of TT-GS 243km rail is
expected to commence with an additional USD200m funding
Air transportation
The Bank has disbursed USD83.9m to MIAT Mongolian Airlines for the purchase
of aircraft
Engineering utility
USD16.5m has been disbursed to engineering utilities projects in Ulaanbaatar
city, including clean & sewage water distribution systems
Increasing Connectivity with Foreign Governments
DEVELOPMENT BANK OF MONGOLIA 21
DBM has signed a number of Memorandums of Understandings and Cooperation Agreements with various foreign and
international developmental agencies and financial institutions, highlighting the Development Banks additional value-add in
promoting Mongolias foreign economic relations
These agreements also allow DBM to gain valuable knowledge on international best practices from the international development
and policy bank community
U.S.A.
Export-Import Bank of the
U.S. (2012)
China
China Development Bank
(2012)
Export-Import Bank of
China (2011)
Kuwait
Kuwait Investment
Authority (2011)
Kuwait Fund for Arab
Economic Development
(2011)
International
NE Asian EXIM Banks Association -
Greater Tumen Initiative (2012)
- Export-Import Bank of China
- Export-Import Bank of Korea
- Bank of Development and Foreign
Economic Affairs, Russia
Japan
Sumitomo Mitsui Banking
Corporation (2012)
Japan Bank for
International Cooperation
(2013)
Germany
Euler Hermes (2013)
Commerzbank (2013)
Russia
Vnesheconombank (2014)
First Ever Sovereign Transaction from Mongolia
DEVELOPMENT BANK OF MONGOLIA 22
Development Bank of Mongolia Government of Mongolia Samurai bond
Ratings: B1 stable / BB- stable /- B1 stable / BB- stable / B+ stable B1 stable / BB- stable / B+ stable
Format: Reg.S 144A / Reg.S Japanese Yen Bonds Series A
Pricing Date: 14 March 2012 29 November 2012 16 December 2013
Settlement Date: 21 March 2012 5 December 2012 25 December 2013
Tenor: 5-year 5-year 10-year 10-year
Size: USD580 million USD500 million USD1 billion JPY 30 billion
Maturity: 21 March 2017 5 January 2018 5 December 2022 25 December 2023
Coupon: 5.750% 4.125% 5.125% 1.52%
Price: 100.000% 99.996% 100.000% 100.0%
Governing Law: English Law New York Law Japanese Law
Listing: Singapore Stock Exchange Singapore Stock Exchange Private Placement
Deal highlight and
achievements
The debut issuance for the DBM
The final order book was over US$6.5bn
(highest at one time) with 13x
oversubscription, more than 300 accounts
participated for DBM
The transaction saw high levels of investor
interest and was launched on the back of
strong reverse enquiries
The debut issuance for the Mongolian
sovereign
The Sovereign bonds attracted a heavily over-
subscribed combined orderbook of over
USD15bn from approximately 500 accounts
globally.
Bonds coupon was the lowest coupon
achieved by any debut EM sovereigns
The first issue of Samurai bonds by
a Mongolian institution.
The first institute with single B rating
to get JBIC Guarantee for yen-
denominated Samurai bonds.
Development Bank
of Mongolia
Ministry of
Economic
Development