Legislation

GOVERNMENT RESOLUTION #407 To establish a financial leasing company

dedicated towards providing and financing leasing services as a subsidiary

of the Development Bank of Mongolia(DBM) in accordance with the Law on

Financial Leasing of Mongolia.

ECONOMIC RECOVERY PROGRAM: 2016

The establishment of a financial leasing company

for the purpose of providing financing for major economic projects.

JUNE 17th, 2017“DBM LEASING” LLC established as a subsidiary of Development

Bank of Mongolia

BOARD RESOLUTION of 2017To establish a subsidiary company

of Development Bank of Mongolia

Agriculture

Health

Energy

Manufacturing

Mining Transportation

Mission

▪ Support the sustainable

economic development of

Mongolia

▪ Increase national productivity

▪ Promote export

Advantages

▪ Financial leasing options with

Low Interest rate

and Long Duration (flexible)

▪ Target strategic sectors

Target Sectors

Organizational Structure

Shareholders

Board of directors

Chief Executive Officer

Deputy Director

Administrative Committee

Administrative, Financial Management Department

Leasing DepartmentFunding DepartmentRisk Management and

Monitoring Department

Leasing Committee

Risk Committee

Secretary of Board of Directors

Internal Audit

Subsidiary of Development Bank of Mongolia

100% State Owned Entity

Financial Institution of

the manufacturers’

country

Loan Agreement

Manufacturer

Transfer of payment

Transport / Service

Financial Leasing agreement

Financial leasing operation model

Funding Amount Currency Duration Interest

Development Bank of Mongolia

1.2 billion

5.9 billion

3.5 years

3 years

5.95%

11.59%

Vnesheconombank10.0 million

8.4 million

5 years

5 years

3.6%

3.25%

Ministry of Finance 10.8 billion 10 years 2.25%

▪ Our company received long-term funding with 3-10 years ofduration in order to finance projects and programs ineconomically significates sectors to support diversifiedeconomic development.

▪ The weighted average of total funds is 4.65% of MNT.

13%

39%

48%Ministry of Finance

Development Bankof Mongolia

Vnesheconombank

Funding Structure

18.04

13.83 13.9

27.63

23.72 23.3

31.43

25.6428.32

30.3526.62 27.08

0

5

10

15

20

25

30

35

Asset Financial Leasing Portfolio Liability

2017Q4 2018Q2 2018Q4 2019Q2

Financials, million USD

0.20%

0.85%

0.4%

ROA

0.87%

6.6%

3.0%

ROE

25%

15%12%

CAR

100%

70%57%

Liquidity

4.204.23

4.36

Equity

2017Q4 2018Q4 2019Q2

27.6323.72 23.3

31.4325.64 28.3230.35

26.62 27.08

45.1

26.62

7.2

0

10

20

30

40

50

Asset

Financial Leasing

Portfolio Liability

2018Q2 2018Q4 2019Q2 Increase in equity

Capital injection outcome, million USD

• By injecting equity with 33.7 million USD / 15.0 million USD in cash and cash equivalents and 18.7 million USD through transferring existing loan from Development Bank of Mongolia to common shares/:

• Asset will increase by 46 percent;• Improvement of financial indicators;• Increase in equity solvency;• Decrease in loan pressure.

4.20 4.23 4.36

37.80Equity

Capital injection outcome, million USD

12%

83.0%

87%

16%

1% 1%

2019.06.30 Increase in equity

Equity Liability Retained earnings

$30.35 $45.1

• Healthy Debt to Equity ratio

• Clean balance

• Decrease loan concentration

• Obtain low interest and long duration credit

lines as a result of increased investor

confidence

$16.1 million43%

Agriculture

Total provided financial Leasing 37.2 million USD

$1.0 million3%

Manufacturing

$8.5 million23%

Transportation

$11.4 million31%

Mining

Implemented Projects and Programs

Financial Leasing portfolio, by equipment

g

pi

g

52%

20%

16%

11%

1%

17%

Agriculture

Mining

Transportation

Manufacturing

g

i

w

7

28%

3%

11%

13%

45%

Combine Harvester

Tractor

Plough

Hay baler

Other

835equipment

Agricultural equipment and machinery /by type/

During this program, around17% of all equipment andmachineries in agriculturalsector were renewed, andanother 36% is pending to berenewed.

Implemented Projects and Programs

“Technical innovation in the agriculture sector, introduction of advanced technologies”

47%

36%

DBM Leasing has successfully leased, with funding fromVnesheconombank of Russia, a total of 835 equipmentand machinery worth USD 20.0 million

By the second quarter of 2019, 622 equipment andmachineries have been financially leased to 310companies through Crop Development Support fund.

Implemented Projects and Programs

Agricultureg

At least 51% increase in soil removal and costreduction is expected by providing financial leasing tokey coal suppliers of Erdenet and Darkhan thermalpower plants.

Extraction of Ovoot Tolgoit coal mine has increasedby 950 thousand cubic meters as a result ofleasing Komatsu PC 3000 excavator.

Implemented Projects and Programs

Miningi

In accordance with government resolution 198, DBMLeasing LLC, the Ministry of Road and Transport, andthe Ministry of Finance co-implemented the “Supportregional public transportation” project

DBM Leasing provided 17 companies with 40 largescale buses worth USD 4.0 million.In addition, 40 SHACMAN, CIMC heavy trucks withdouble trailers were successfully leased.

Implemented Projects and Programs

Transportationw

DBM Leasing has provided USD 0.4 million of financial leasing to a projectaiming to supply the construction and infrastructure industry withinternationally standardized rebar.Successful completion of the project will result in a manufacturing plant locatedat Bornuur Soum of Tuv Province, capable of producing 15000 tons of rebar peryear which will increase domestic rebar output by 8%.

▪ Our company has also provided financial leasing of 0.9 million USD to ananimal oil processing facility to promote domestic production.

▪ Provided financial leasing worth 0.6 million USD to a potato chipsmanufacturing plant to promote import substituting production.

▪ Within the scope of the project, the potato chips manufacturing facility willhave capacity to produce 150 tonnes annually.

Implemented Projects and Programs

Manufacturing7

Project financing requests, by sector Total of 18 projects with 89.2 million USDunder research.

Projects and Programs Under Research

34.1 million US D

Mining – 38 %

5.4 million USD

Agriculture – 6% 3.7 million USD

Manufacturing – 4%

1.5 million USD

Aviation – 2%

44.4 million USDTransportation – 50 %

g

i

p

vg

47%

21%

19%

7%

6%

USA ChinaMixed South koreaBelarusia Austria

RECEIVE REQUEST/Official letter requesting a

financial lease

DOCUMENTATIONSupporting documents to

meet requirements

CONTRACTSign financial leasing

agreement and receive equipment

PAYMENTRegular monitor of payment

END OF CONTRACT Lessee has full ownership of the equipment at the end of the contract.b

Financial Leasing Process

Funding and Cooperation

Exim bank

VnesheconombankRos Exim BankVeb-LeasingIBEC

Exim BankDevelopment BankManufacturing and Trade BankICBC-LeasingExim Bank of Taiwan

Exim bank

Sumimoto Mutsui BankInternational Cooperation BankExim Bank

Huntington BankProvidentBank

Euler HermesCommerz BankBerliner Sparkasse Bank

Trade AgencyDevelopment Bank

PEKAO

SACE Insurance

Exim bank

Web site: www.dbmleasing.mnE-mail: info@dbmleasing.mntelephone: +(976)-7730-7070

Narnii Road 87, Floor 6Sukhbaatar districtUlaanbaatar, 14230, Mongolia