Unofficial translation

Annex 1of Government Resolution No. 151 of 2011

Bank Charter of the Development Bank of Mongolia

CHAPTER I
GENERAL PROVISIONS
One. Purpose
1.1. The purpose of this Charter shall be to govern relations concerning the rights and
responsibilities of the Development Bank of Mongolia (hereinafter referred to as the
Development Bank), its management and organization as well as the establishment of general
rules for the activities of the Board of Directors.
Two. Legal status
2.1. The founder or shareholder of the Development Bank shall be the Government of Mongolia
(hereinafter referred to as the Government).
2.2. The legislation of the Development Bank shall be defined by the law of the Development
Bank of Mongolia, Company Law, the State and Local Property Law and other legal acts issued
in conformity therewith.
Three. Name and address of the Development Bank
3.1. The proper name of the Development Bank shall be
() in Mongolian and Development Bank of Mongolia LLC (DBM) in English.
3.2. The address of the Development Bank shall be the place where the executive management of
the bank is located.
Four. Seal and symbol of the Development Bank
4.1. The Development Bank shall use the seal and official letterhead that are produced in
accordance with respective rules.
4.2. The Development Bank may have its own symbol.

4.3. The Board of Directors shall approve designs of the seal and symbol stated in Articles 4.1
and 4.2, their description and utilization procedures.
CHAPTER II
ACTIVITIES OF THE DEVELOPMENT BANK
Five. Development Bank activities
5.1. The Development Bank shall carry out the following activities in addition to those
stipulated by the Law on Development Bank of Mongolia:
5.1.1. sell its own securities in foreign and domestic markets to increase its funds;
5.1.2. carry out loan activities using deposits and its own funds;
5.1.3. allocate free reserves prudently and efficiently in highly liquid financial
instruments through other financial institutions;
5.1.4. sign contracts and agreements, cooperating with foreign and local banks, financial
institutions and other legal entities within the scope of the banks activities;
5.1.5. utilize free reserves to earn additional profits; and
5.1.6. carry out other financial activities that are not prohibited by the law and permitted
by the Central Bank of Mongolia and the Financial Regulatory Commission.
5.2. The Development Bank shall have the following obligations in addition to those stated in the
Law on Development Bank of Mongolia:
5.2.1. monitor implementation of the projects that received loans, guarantee and warranty
from the Development Bank;
5.2.2. carry out inspection on loan utilization and financial condition of the borrowers;
5.2.3. taking measures to remedy breaches detected during the inspection as stipulated in
Article 5.2.2 of this Charter and to inform respective parties; and
5.2.4. other duties stipulated by laws and regulations.
Six. Activities prohibited for the Development Bank

6.1. The following activities shall be prohibited for the Development Bank:
6.1.1. provide financial services such as loans, guarantees, and warranties for projects and
programs that do not meet the requirements stipulated in Article 10 of the Law on
Development Bank of Mongolia;
6.1.2. open bank accounts for individuals, entities and organizations other than legal
entities involved in financial services of the Development Bank and engaged in
investment and export activities ;

6.1.3. provide donations and assistance for individuals and legal bodies except for
providing financial assistance and support to its bank employees in accordance with laws,
regulations and internal rules of the Development Bank;
6.1.4. make transactions without the consent of the customers other than stated in the law;
and
6.1.5. make donations to political parties, unions, individuals and legal bodies.

CHAPTER III
MANAGEMENT AND ORGANIZATIONAL STRUCTURE
Seven. Chairman of the Board of Directors

7.1. The chairman of the Board of Directors (the Board) shall perform duties as to organize
activities of the Board, convene its meetings and monitor the implementation of the decisions
made by the Board.
7.2. In the temporary absence of the chairman, a member of the Board shall perform his/her
duties according to the order of the chairman of the Board.
7.3.The chairman of the Board shall perform duties within his/her powers, such as signing
contracts on behalf of the Development Bank and representing its interests without the power of
attorney.
Eight. Full powers of the Board of Directors
8.1. The chairman and members of the Board shall execute full powers stipulated in Article 18.1
of the Law on Development Bank of Mongolia.
8.2. In addition to duties stated in the Law on Development Bank of Mongolia, the chairman and
members of the Board shall perform the following duties:
8.2.1. perform his/her duties responsibly within the full powers provided by laws and
regulations;
8.2.2. place the interests of the Development Bank over ones private interests and
interests of the parties that have chosen him/her;
8.2.3. obtain no profits in a secret manner;
8.2.4. inform the Board in case of conflict of interest and avoid occurrence of such
problems; and
8.2.5. not participate in daily activities of the Development Bank.

8.3. The chairman and members of the Board shall be appointed for the period of 3 years and
may be re-appointed.
8.4. With the proposal of the Nomination Committee, the Shareholders meeting shall resolve
matters related to dismissing those members of the Board, who did not perform duties stipulated
in Article 8.1 of this Charter and who did not attend and vote at more than one third of the given
years regular and non-regular Board meetings without valid excuses.

Nine. General rules on the activities of the Board of Directors

9.1. The basic manner of the activities of the Board shall be the board meeting. The meeting shall
be held on regular and non-regular bases.
9.2. The regular meeting of the Board shall be held no less than once (1) a month.
9.3. In case of urgent matters to be resolved regarding the activities of the Development Bank,
the chairman of the Board shall convene a non-regular meeting based on the proposal of the
executive management.
9.4. The chairman of the Board shall determine the schedule for regular and non-regular
meetings.
9.5. No less than two third of all board members shall constitute a quorum of the Board meeting.
Decisions shall be reached by the majority vote of the members attending the meeting.
9.6. The Board meeting may be conducted in an electronic form.
9.7. The chairman of the Board shall approve the matters to be discussed at the Board meeting in
advance.
9.8. The decisions on the following matters shall be deemed valid by the overwhelming majority
vote of the members attending the meeting:
9.8.1. proposals to make amendments and changes to the Charter of the Development
Bank;
9.8.2. making decisions regarding the budget and financial matters of the Development
Bank
9.8.3. carrying out negotiations regarding large scale capital;
9.8.4. proposals to make amendments and changes to the strategy of the Development
Bank;
9.8.5. making amendments and changes to the contract signed with the executive
management of the Development Bank; and
9.8.6. other matters to be resolved by the overwhelming majority vote of the members of
BOD.
9.9. Decisions made by the Board of Directors shall take the form of resolutions.

9.10. Decisions printed on an official letterhead of the Board and signed and sealed by the
chairman of the Board shall be deemed valid.
9.11. If a member of the Board who is not able to attend the meeting due to a valid reason
submits a vote via fax or in writing not less than one (1) day prior the meeting, he/she shall be
counted as having attended the board meeting.
9.12. The operating cost of the Board shall be included in the annual budget estimations of the
Development Bank.
9.13. The Board of Directors shall approve the rules of the meeting as well as the rules regarding
the preparation and minutes of the Board meetings.

Ten. Executive Management of the Development Bank

10.1. The executive management of the Development Bank shall be performed by a team. The
Chief Executive Officer (CEO), The First Deputy CEO, and deputy CEOs shall be regarded as
the executive management of the Development Bank.
10.2. The Board shall appoint the executive management selected by an open international tender
and shall conclude the management contract.
10.3. The management contract term shall be longer than one (1) year. The Board shall decide
whether or not to extend the management contract term based on the consent of the
Shareholders meeting.
10.4. The Management contract shall include detailed provisions on the following: purpose and
objectives of the executive management, expected outcomes, work to be carried out, the amount
of remuneration and its disbursement procedures, responsibilities, rules on liability insurance,
protection of the reputation of the Development Bank, matters regarding the ethics, bribery and
non-discrimination among employees, conditions and rules to suspend and recall the competence
of the executive management, rules to release reports, news and information regarding the
activities by the executive management, and units and officials who provide the information to
relevant organizations.
10.5. If a management contract is signed with a legal entity, an authoritative official or
authorized appointee of the respective organization shall sign the agreement.
10.6. It is prohibited to include provisions in the executive management contract that bring
negative effects to the stability of the management structure and the activities of the
Development Bank as well as provisions that provide rights not granted by relevant laws and
regulations of Mongolia and the charter of the Development Bank.
10.7. In accordance with the implementation of the contractual obligations, the Board shall
approve the regulation on the activities of the executive management team members which shall
include the following:

10.7.1. regulating job interconnection and job descriptions of the CEO, the First Deputy
CEO and Deputy CEOs,
10.7.2. regulations to appoint the CEO,
10.7.3. rights, obligations and responsibilities of the CEO, the First Deputy CEO and
Deputy CEOs,
10.8. The Executive management shall resolve matters related to the activities of the
Development Bank through the principle of joint management. Decisions shall be validated by
the decree of the CEO.
10.9. The Executive management shall have the following powers in addition to those stipulated
in Articles 19.4 and 19.5 of the Law on Development Bank of Mongolia:
10.9.1. develop documents and relevant draft proposals to be approved within the powers
of the Board stated in Articles 18.1.1-18.1.4, 18.1.6, 18.1.9, 18.1.12 of the Law on
Development Bank of Mongolia ensuring the arrangements for discussing these
documents and proposals at the Board meeting and implementing the approved decisions;
10.9.2. present financial statements, expenditure and cash flow statements, clarifications,
notes, and report other information on the Development Bank to the public and take
responsibility for accuracy and objectivity of the reported information;
10.9.3. implement laws, regulations and relevant standards on accounting, financial
reporting system, external and internal audit, risk management, financial condition and
activities of the Development Bank;
10.9.4. establish management information system appropriate for operational specifics of
the Development bank and possible risks the bank might encounter;
10.9.5. determine the amount of salary, bonus, benefits, allowances and assistance to be
provided to employees within the approved limits of the number of employees and the
budget of the Development Bank;
10.9.6. develop and implement policies with regard to selecting, appointing and retraining the qualified personnel and ensuring stable working conditions;
10.9.7. approve the list of confidential documents of the Development Bank; and
10.9.8. take preventive measures against the formation of deviations in the internal
monitoring mechanism and violation of the risk management policy.
10.10. If there is a need to engage in any unplanned agreements, negotiations and activities, the
Executive management shall make decisions upon the discussion and the consent of the Board.
10.11. The Executive management shall be cognizant of the interest of the government bodies
and its business clients when carrying out its activities.
CHAPTER IV

AUDIT AND INSPECTION OF THE DEVELOPMENT BANK

Eleven. Internal Audit Unit of the Development Bank

11.1. The Board shall establish and ensure operations of the Internal Audit Unit (henceforth
referred to as Internal Audit Unit) of the Development Bank as stipulated in Article 25.1 of the
Law on Development Bank of Mongolia.
11.2. The Internal Audit Unit shall perform duties stipulated in Article 25.2 of the Law on
Development Bank of Mongolia. The Board shall approve the rules and procedures for the
activities of the Internal Audit Unit.
Twelve. Terms, Rights and Duties of the powers of the
Inspector of the Development Bank
12.1. The Board of Directors of the Development Bank shall appoint and dismiss the Inspector
and shall approve his/her work procedures.
12.2. The period for Inspectors powers shall be 3 years.
12.3. The inspector shall have the following rights in addition to those stipulated in Article 26.2
of the Law on Development Bank of Mongolia:
12.3.1. take professional support and assistance from other organizations and employees
regarding the activities of the audit and inspection,
12.3.2. if necessary, make evaluation and recommendations on projects and programs
funded by the Development bank and measures to be further taken, and deliver such
documents to the Board.
12.4. The Inspector shall take the following responsibilities:
12.4.1. refuse to be involved in the audit and inspection of an entity or organization,
where he/she has worked within the past 3 years and where a family member or a
relative (father, mother, child, sibling, son or daughter in law) works in a position, such
as a shareholder, chairman of the Board, member of the Board, CEO, Deputy CEO, chief
financial officer and other comparable positions;
12.4.2. prepare audit and inspection reports fairly and objectively;
12.4.3. carry out audit and inspection work fairly, without being influenced by the
interests of other individuals, entities and officials.
12.5. The inspector shall be responsible for all problems and their consequences resulted from a
failure to fulfill his/her duties in accordance with respective rules.

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